BAFN

New in FY2025

• Risk Factor Summary Our business is subject to uncertainties and risks and our risk factors can be broadly summarized by the following: • Our ability to grow our loan portfolio, deposits gathering business, and the infrastructure needed to support it; • Possible loan defaults, devaluation of collateral, adverse political, environmental, or economic events, and competition; • Interest rates and available sources of liquidity; • Our ability to raise capital and the effects of doing so on our shareholders; • The potential that we are subject to fraud, incorrect judgments, or other bad acts of third parties; • Laws, regulations, rules, and standards to which we are subject and the government agencies with which we interact; • Recruitment, retention, development, performance, and potential bad acts of our key executives and other employees, as well as transactions with them and our directors; • Dividend and other restrictions placed on us by our outstanding preferred stock, restrictions that may be imposed by future issuances of preferred stock, and our pledging of the stock in the Bank to secure a loan; • Rapidly developing technology; • Estimates used in certain valuations, including our allowance for credit losses; and • Features of our stock, such as liquidity, dilution, the lack of preemptive rights, our SEC reporting status, and the concentration of ownership among our insiders.
• Risk Factors Related to Our Business We may need additional capital in the future, but such capital may not be available when needed.
• We may need to obtain additional debt or equity financing to meet our capital needs, absorb losses, fund future growth, or meet the requirements of our regulators.
• Our ability to maintain capital at required levels depends on many factors, including our financial performance, asset quality, loan growth, dividend policy, and the overall condition of the capital markets.
• We cannot guarantee that any needed financing will be available to us on acceptable terms or at all.
• If our financial performance is unsatisfactory, if financial market participants have an unfavorable view of the Company and its performance, or if negative economic events or disruptions in the capital markets occur, it may not be possible for us to find sources of sufficient capital for our business operations.
• If we are unable to obtain future financing, we may become subject to regulatory enforcement actions, not be able to resume paying dividends or repurchasing stock, not be able to grow, and experience other adverse effects to our business, financial condition, and results of operations.
• Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
• At December 31, 2025, our one-year interest rate sensitivity position was asset sensitive, such that a gradual increase in interest rates during the next twelve months would have a positive impact on our net interest income.
• A shutdown of the Federal government would likely result in us being temporarily unable to make USDA government guaranteed loans.
• If the Federal government experiences a shutdown, it is likely that the USDA, and other agencies which guaranty some of the loans we make, will be unable to process those loans and sell those loans.
• Changes in the laws or regulations governing our USDA government guaranteed lending activities may adversely affect our ability to operate them profitably.
• Our USDA government lending programs are subject to laws and regulations administered by government agencies such as the United States Department of Housing and Urban Development and the United States Department of Agriculture.
• The increase or decrease in unrealized losses is reflected in AOCI on the balance sheet and increases or reduces book capital, and therefore, the tangible common equity ratio.
• We have pledged 100% of the outstanding shares of the Bank’s capital stock to secure a term loan with another financial institution with a balance of $1.6 million as of December 31, 2025.
• As of December 31, 2025, BayFirst’s directors and named executive officers as a group owned approximately 14.90% of our outstanding common stock.
• In addition, the directors and named executive officers have stock options to acquire shares of common stock, which, if fully exercised within sixty days of December 31, 2025, would have resulted in them owning approximately 19.12% of our outstanding common stock.
• The terms of those shares entitle the holders to quarterly dividends of $385 thousand (subject to increase if we do not timely redeem them) and prohibit us from paying common stock dividends if we are delinquent in payment of preferred stock dividends.
• Since July 1, 2025, the Board of Directors has not declared preferred dividends for payment.
• BayFirst has outstanding debt and either BayFirst may incur additional debt.
• At December 31, 2025, BayFirst had a $1.59 million term loan and $5.96 million in subordinated notes.
• Historically, the Board of Directors has declared cash dividends, we are not required to do so and may reduce or eliminate our common stock dividend in the future.
• Furthermore, the terms of our subordinated notes and the preferred stock will prohibit us from declaring or paying any dividends on any junior series of our capital stock, including our common stock, or from repurchasing, redeeming or acquiring such junior stock, unless we have declared and paid full dividends on our outstanding preferred stock for the most recently completed dividend period.
• Since July of 2025, the Board of Directors has not declared dividends for common shareholders and preferred shareholders and has no plans to resume the declaration or payment of dividends.

Gone since FY2024

• Risk Factor Summary Our business is subject to uncertainties and risks and our risk factors can be broadly summarized by the following: • Our ability to grow the size and geographic scope of our loan generation, loan sale, and deposit gathering business, and the infrastructure needed to support it; • Possible loan defaults, devaluation of collateral, adverse political, environmental, or economic events, and competition; • Interest rates and available sources of liquidity; • Our ability to raise capital and the effects of doing so on our shareholders; • The potential that we are subject to fraud, incorrect judgments, or other bad acts of third parties; • Laws, regulations, rules, and standards to which we are subject and the government agencies with which we interact; • Recruitment, retention, development, performance, and potential bad acts of our key executives and other employees, as well as transactions with them and our directors; • Dividend and other restrictions placed on us by our outstanding preferred stock, restrictions that may be imposed by future issuances of preferred stock, and our pledging of the stock in the Bank to secure a loan; • Rapidly developing technology; • Estimates used in certain valuations, including our allowance for credit losses; and • Features of our stock, such as liquidity, dilution, the lack of preemptive rights, our SEC reporting status, and the concentration of ownership among our insiders.
• Risk Factors Related to Our Business Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
• At December 31, 2024, our one-year interest rate sensitivity position was asset sensitive, such that a gradual increase in interest rates during the next twelve months would have a positive impact on our net interest income.
• We may be unable to continue to produce the volume of loans necessary to support our SBA and other government guaranteed lending business.
• Our business strategy places a significant emphasis on SBA and other government guaranteed lending.
• In order to successfully implement this strategy, we must originate and fund a substantial dollar amount of loans.
• To do so, we must identify qualified and interested borrowers and have sufficient capital and liquidity to support and fund such loans.
• If we are not successful in implementing this strategy, our income and results of operations may be adversely affected.
• We depend on the sale of both the guaranteed and unguaranteed portions of our government guaranteed loans, but also face risks relating to the retained portions of unguaranteed loans.
• Our strategy historically has been, and may continue to be, to sell both the guaranteed balances of SBA and other government guaranteed loans, as well as a percentage of the unguaranteed portions of such loans, within legally allowable limits.
• A material portion of our net income and profitability depended, and may continue to depend, on gains on sales of the guaranteed portions of the government guaranteed loans that we originate.
• We also from time to time pursue the sales of unguaranteed portions of such loans, which provide us with additional liquidity and capital capacity to permit us to make additional loans.
• Our ability to sell both the guaranteed and unguaranteed portions of these loans is dependent upon our ability to identify purchasers with the demand and capacity to buy them, the attractiveness of the loans, our underwriting quality, and other factors.
• Our ability to continue to make new loans and hold them in our loan portfolio will be limited by our current capital and liquidity positions.
• To the extent we retain the unguaranteed portion of these loans in our portfolio, we may be required to make significant provisions to our ACL.
• Our loan origination processes present heightened opportunities for borrower or referral fraud.
• The loans we originate through our technology partners and referral sources are obtained primarily through an online application process.
• We do not generally meet with the borrowers in person.
• Our referral sources also are involved in assisting the borrowers with completing their loan applications.
• Therefore, it is difficult for us to definitively ascertain or confirm a borrower’s identity, structure, creditworthiness, or veracity in completing the loan application process.
• If a borrower or a referral source intentionally, or unintentionally, provides us with incorrect information that we rely on in underwriting a loan, we could be subject to increased credit risk for that loan.
• Such increased risk could result in increased loan losses or heightened provisions to our ACL, either of which would adversely affect our credit quality and net income.
• We may also become subject to heightened regulatory scrutiny for making loans to such borrowers and may be required to dedicate time and other resources to addressing regulatory concerns.
• Our loan referral sources operate independently from us and may take actions for which we may be held responsible.
• Our referral sources for SBA and other government guaranteed loans operate independently from us and have the initial interactions with many loan applicants and borrowers.
• As part of those interactions, our referral sources may take actions which violate laws, regulations, or our policies.
• These may include, among other things, charging impermissible fees, failing to provide or properly complete required documentation or disclosures, making false or misleading statements, or encouraging an applicant to make misrepresentations.
• In certain instances, the Bank may be held responsible by an applicant or a government agency for such actions.
• If that were to happen, the Bank may be required to pay restitution or fines, be subject to regulatory enforcement actions, or lose certain statuses with the SBA or other government agencies.
• We rely heavily on technology partners and other referral sources in our government guaranteed loan origination process.
• As part of our government guaranteed lending strategy, we use the services of technology partners and other referral sources.
• These arrangements allow us to originate loans throughout the U.S. via the internet.
• We do not have an exclusivity arrangement with any referral source.
• Therefore, we cannot be assured that we will be able to originate and close or maintain any specific level of government guaranteed loans through such sources in the future.
• In addition, our technology partners are subject to online commerce risks generally, including hacking and use of the site by persons using fraudulent credentials.
• Should we not continue to generate a substantial volume of loan business through our use of referral sources, or if they experience operational interruptions, or direct loans to other lenders, our government guaranteed lending may be materially reduced, which could reduce our net income and our asset growth.
• Our operations are growing at a rapid pace and our training programs and operational protocols may lag behind our growth.
• Our branch network and government guaranteed lending operations are expanding at a rapid pace.
• As a result, we may not be able to provide comprehensive or timely training to staff.
• We may also not develop appropriate operational protocols as we expand our products and services.

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