BayFirst Finally Has a Clean Quarter — and Almost Nobody Showed Up to Ask About It
The loss is the good news
BayFirst's second quarter was an extinction-level event for the income statement: a $32.7 million net loss, driven by $43.8 million of one-time charges tied to the asset resolution plan. The third quarter is the first period in a year that reads like a bank rather than a cleanup site. Net loss fell to $677,000. Provision for credit losses was a negative $69,000, against $29 million in Q2 and $11.2 million a year ago. Net charge-offs were $3.2 million, or 1.52% of average loans annualized, down from 2.08% in Q2 and 2.14% in Q1. Non-performing loans excluding government guarantees fell to $13.4 million, or 1.56% of loans held for investment, down 16 basis points sequentially and 14 basis points year over year.
Asked directly whether anything in the quarter was one-time in nature, Al Rogers was flat: “In the third quarter, there was nothing that was non-recurring.” — Alfred Rogers, President and CEO · 2026-10-30 That matters because the prior quarter was nothing but non-recurring. The unguaranteed SBA 7(a) book — the thing that nearly broke this bank — is down to $132.4 million from $142 million at June 30 and $171.6 million at year-end 2025, a roughly $10 million-per-quarter bleed that management expects to continue at close to $40 million a year.
These borrowers within the portfolio has become quite seasoned and they've weathered the storm of high interest rates, inflation, expensive fuel costs, so on and so forth.
That single sentence is a neat summary of the macro cycle that gutted this portfolio — the same impact of high rates and high fuel costs that dominated market conversation in 2026Q2. Reserve coverage remains brutal: total allowance just over $41.5 million, and as Rogers put it, “over $30 million of that is against the unguaranteed portfolio” — Alfred Rogers, President and CEO · 2026-10-30 — roughly 23% of that $132 million. Prior-quarter disclosure split it finer: BOLT at $60 million and a 33% reserve, Flash at $29 million and 25%. Nothing in the Q3 numbers suggests that posture has loosened.
The margin sentence rebuts itself
Here is the most interesting two-sentence stretch of the call. Scott McKim, announcing the headline number: net interest margin "improved to 4.07%," a 59 basis point increase from the reported Q2 figure. Then, in the same breath: “The normalized net interest margin for Q2, excluding one-time impacts related to the asset resolution plan was also 4.70%.” — Scott McKim, Chief Financial Officer · 2026-10-30
Both cannot be an improvement. Against the reported prior quarter, 4.07% is a big step up; against the normalized prior quarter the CFO just volunteered, it is a 63 basis point step down. And on the August call, McKim described the core number this way: “I mentioned on the net interest margin really on a core basis was 4.07%.” — Scott McKim, Chief Financial Officer · 2026-08-14 In other words, the company has now reported "4.07%" as both the core Q2 margin and the improved Q3 margin. It may well be a rounding coincidence, but the framing invites the reader to upgrade a number that may not have upgraded at all.
The supporting detail is more honest than the headline. Net interest income of $10.6 million rose $1.2 million sequentially but was still down $700,000 year over year. And the book that generated it was smaller: “our average loan balances in the third quarter were actually down $17 million from the second quarter” — Scott McKim, Chief Financial Officer · 2026-10-30, because the quarter's originations landed in September. The earnings from that late-quarter growth are entirely forward-looking — which is exactly the same promise made in August, when the CFO conceded that “core earnings in the second quarter was just below breakeven” — Scott McKim, Chief Financial Officer · 2026-08-14.
So we're really -- the core earnings power that we're starting with is kind of 0 right now, right?
That was Julienne Cassarino in August. The Q3 loss of $677,000 is, in substance, the same number.
Capital is fixed; the remaining work is mix
The genuinely new thing this quarter is structural, not operational. Shareholders approved a charter amendment raising authorized common from 50 million to 100 million shares and converted all 4,000 Series D and 4,000 Series E mandatorily convertible preferred into 22,856,000 common shares, retiring both classes. Series A and B were fully redeemed, which is why common equity fell $11.4 million to $104.5 million even as capital ratios improved. The conversion option on the Series C preferred expires this quarter; the board has voted to redeem and expects holders to convert at tangible book.
The rights offering closed September 30 and raised over $14 million at $3.50 — the number management previewed in August as 4.1 million shares. Tier 1 leverage rose to 8.79% from 8.30%, total capital to risk-weighted assets to 12.44% from 9.08% a year ago, on-balance-sheet liquidity to 13.5%, with 79% of deposits FDIC-insured and zero wholesale borrowings. Tangible book per share fell to $3.64 from $4.82 — the cost of the conversion — leaving the stock at roughly 0.2x book, down more than 80% over five years.
Deposits are the swing factor. Total deposits rose $25.3 million, or 2.6%, to $1.01 billion — but are down $157.3 million, or 13%, year over year, and the deposit base peaked at $1.2 billion at year-end 2025. Management is explicit that this was engineered: high-rate, non-relationship money was told to leave. In August, McKim admitted the franchise is still transitioning — “There's still some brokered in there that's going to run off” — Scott McKim, Chief Financial Officer · 2026-08-14 — and now the language is all about deposit mix: shifting from higher-cost transactional accounts into relationships that value service. With “6 of our 12 banking center locations having been open for 5 years or less” — Robin Oliver, Chief Operating Officer · 2026-10-30, the banking center network is a young, under-earning asset that has to be filled.
None of this is company-unique. Deposit scarcity and repricing sit at the very top of the market's agenda this quarter — core deposits and total deposits are among the highest-momentum themes in the global keyword set, and reporters this week from regional banks to European incumbents were all on cost of deposits and their ability to grow deposits. BayFirst is riding the wave, not creating it.
What management stopped saying
The keyword archaeology is the sharpest tell. Last quarter, the company's top keyword by a mile was the asset resolution plan. This quarter it does not appear in the top 30 at all — even though Robin Oliver opened her remarks with it. Meanwhile the biggest decliners in the company's own vocabulary are cost of funds, broker deposits, and the lending business it has exited. What replaced them at the top is plumbing: investment at amortized cost, net loan growth, Series A and D, total deposits, loan balances. The vocabulary has migrated from crisis management to balance-sheet administration — appropriate, but it tells you the narrative energy is gone.
The Q&A confirms it. One analyst asked questions. Ross Haberman spent them on non-recurring items, the $10 million quarterly SBA runoff, and reserve coverage — then thanked the team and hung up. Compare that to August, when three analysts interrogated the reserve buckets and the core earnings base. A micro-cap bank that has just finished recapitalizing itself has become invisible again.
The tape tells the same story with more drama. Shares roughly doubled over eleven weeks into a September 18 peak of $9.24, precisely as the preferred conversion and the rights offering were being digested — then gave back 37% in five weeks. Full history: down 66%, and 82% below the 2021 high of $32.50. The re-rating happened; part of it has already been returned. At a $23.8 million market cap, the entire thesis now rests on whether a 4.07% margin over $1 billion of deposits can produce the positive earnings Rogers keeps promising is coming "in the short-term" — and whether the market gives this one another look.