BayFirst Financial Corp.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

NOTE 1 -BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include BayFirst Financial Corp. and its wholly owned subsidiary, BayFirst National Bank (“the Bank”), together referred to as “the Company”.

These unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles followed within the financial services industry for interim financial information and Article 8 of Regulation S-X. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to these rules and regulations. The consolidated balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements of BayFirst Financial Corp. for that date.

The Company currently operatesone business segment. In the third quarter of 2022, the Company discontinued the Bank’s nationwide residential mortgage loan segment. The operations of this segment are reported as discontinued operations.

In the opinion of management, all adjustments, consisting of normal and recurring items, considered necessary for a fair presentation of the consolidated financial statements for the interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to current year presentation. These reclassifications did not have a material effect on previously reported net income, shareholders’ equity, or cash flows.

Operating results for the six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2024.

The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2024 in the Company’s Annual Report filed on Form 10-K. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period.

Use of Estimates: To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The most significant estimates relate to the ACL, government guaranteed loan servicing rights, and fair value of government guaranteed loans HFI.

Emerging Growth Company Status: The Company is expected to remain an "emerging growth company," as defined in the JOBS Act, through December 31, 2026. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period when complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period, which means these financial statements, as well as financial statements they file in the future for as long as the Company remains an emerging growth company, will be subject to all new or revised accounting standards generally applicable to private companies.

Contingencies: Due to the nature of their activities, the Company is at times engaged in various legal proceedings that arise in the course of normal business, some of which were outstanding as of June 30, 2025. Although the ultimate outcome of all claims and lawsuits outstanding as of June 30, 2025 cannot be ascertained at this time, it is the opinion of management that these matters, when resolved, will not have a material adverse effect on the Company’s results of operations or financial condition.

New Accounting Standards Not Yet Adopted:

In October 2023, the FASB issued ASU No. 2023-06 “Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”). ASU 2023-06 amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company does not believe this standard will have a material impact on its Consolidated Financial Statements.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures ("ASU 2023-09"). This ASU was issued to enhance the transparency and decision usefulness of income tax disclosures. The ASU addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Retrospective application in all prior periods is permitted. The amendments in this standard will be effective for the Company for annual periods beginning after December 15, 2025. The Company is currently assessing the impact of this standard and does not expect it to have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Disaggregation of Income Statement Expenses Disclosure (“ASU 2024-03”). This ASU was issued to improve the disclosures about public business entity’s expenses and address investor’s requests for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions. The amendments in this standard will be effective for the Company for the fiscal year ended December 31, 2027 and subsequent interim periods. The amendments should be applied either prospectively to the financial statements issued for reporting periods after the effective date of this update or retrospectively to any and all prior periods presented in the financial statements. We are currently evaluating the impact these changes may have on the Company’s consolidated financial statements.

NOTE 2 –DISCONTINUED OPERATIONS

During the third quarter of 2022, the Company discontinued the Bank’s nationwide residential mortgage loan production operations. The decision was based on a number of strategic priorities and other factors, including the precipitous decline in mortgage volumes and the uncertain outlook for mortgage lending over future periods. As a result of these actions, the Company classified the operations of the residential mortgage lending division as discontinued under ASC 205-20. There were no assets or liabilities at June 30, 2025 and December 31, 2024 or operating results for the current period.

The following presents operating results of the discontinued operations of the residential mortgage lending division for the three and six months ended June 30, 2024:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

NOTE 3 –INVESTMENT SECURITIES

The amortized costs, gross unrealized gains and losses, and estimated fair values of investment securities available for sale and investment securities held to maturity at June 30, 2025 and December 31, 2024 as well as the ACL for investment securities held to maturity at June 30, 2025 and December 31, 2024 are summarized as follows:

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BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

The amortized cost and fair value of investment securities as of June 30, 2025 are shown in the table below by contractual maturity. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

No ACL for investment securities AFS was needed at June 30, 2025 or December 31, 2024. Declines in the fair value of the AFS investment portfolio are believed by management to be unrelated to credit losses. When evaluating an investment for credit loss, management considers, among other things, the financial condition of the issuer through the review of credit ratings and, if necessary, corporate financial statements; adverse conditions specifically related to the security such as past due principal or interest; underlying assets that collateralize the debt security; other economic conditions and demographics; and the intent and ability of the Company to hold the investment until the loss position is recovered. Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for similar investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. At June 30, 2025, the Company did not intend to sell and believed it was not likely to be required to sell the available for sale securities that were in a loss position prior to full recovery.

As of June 30, 2025, there were no past due principal and interest payments associated with the HTM securities. The Company monitors the credit quality of debt securities held to maturity quarterly through the use of credit ratings. However, the corporate bonds that are held to maturity have no credit rating and the corporate bonds in an unrealized loss position at June 30, 2025 are not material to the financial statements. There was an ACL of $9 on corporate bonds HTM at June 30, 2025 and $12 at December 31, 2024, which was calculated based on applying the long-term historical credit loss rate for similarly rated securities.

The following table presents the activity in the ACL for investment securities HTM by major security type for the three and six months ended June 30, 2025 and June 30, 2024:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

The following table summarizes investment securities with unrealized losses at June 30, 2025 aggregated by security type and length of time in a continuous unrealized loss position:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

The following table summarizes investment securities with unrealized losses at December 31, 2024 aggregated by security type and length of time in a continuous unrealized loss position:

No investment securities were pledged as of June 30, 2025 or December 31, 2024, and there were no sales of investment securities for the three or six months ended June 30, 2025 or June 30, 2024.

NOTE 4 –LOANS

Loans HFI, excluding loans measured at fair value, at June 30, 2025 and December 31, 2024 were as follows:

(1) The Company allocates the retained portion of loans sold based on relative fair value of the retained portion and the sold portion, which results in a discount on the retained portion.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

NOTE 5 -ALLOWANCE FOR CREDIT LOSSES

The following schedules present the activity in the ACL by loan segment for the three and six months ended June 30, 2025 and June 30, 2024:

The ACL represents management’s best estimate of future lifetime expected losses on its HFI loan portfolio. The Company calculates its ACL by estimating expected credit losses on a collective basis for loans that share similar risk characteristics. Loans that do not share similar risk characteristics with other loans are evaluated for credit losses on an individual basis. The Company uses a combination of modeled and non-modeled approaches that incorporates current and future economic conditions to estimate lifetime expected losses on a collective basis. Individually evaluated loans are evaluated for impairment and a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the rate implicit in the original loan agreement or at the fair value of collateral adjusted for selling costs as appropriate if repayment is expected solely from the collateral.

The Company uses reasonable and supportable forecasts that are developed with internal and external data. These are updated quarterly by management and utilize data from the FOMC’s median forecasts of change in national GDP and of national unemployment. The FOMC’s forecast of GDP and unemployment for the next calendar year is used in conjunction

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

with the most recent 4 quarters of historical data from FRED (Federal Reserve Economic Data) to determine changes in certain qualitative factors used in calculating loss rates.

See Note 1 and Note 5 of the Notes to Consolidated Financial Statements for further discussion of the Company’s ACL methodology in the December 31, 2024 Form 10-K.

The Company maintains a separate ACL for its off-balance sheet unfunded loan commitments. The ACL on unfunded loan commitments is based on estimates of probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity and loss rates as determined for pooled funded loans. As of June 30, 2025 and December 31, 2024, the ACL for unfunded commitments recorded in other liabilities was $554 and $516, respectively.

The following table presents the activity in the ACL for unfunded commitments for the three andsix months ended June 30, 2025 and June 30, 2024:

The following tables present the principal balance of nonaccrual loans and loans past due over 89 days still on accrual by loan segment at June 30, 2025 and December 31, 2024. In the following tables, the principal balance does not include the government guaranteed balance or loans measured at fair value.

(1) Excludes loans measured at fair value. See Note 6. Fair Value for additional information.

A financial asset is considered collateral dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

credit quality indicators like appraised value. The following tables present the principal balance, including government guaranteed balances, of individually analyzed collateral dependent loans by loan portfolio segment as of June 30, 2025 and December 31, 2024:

.

The following table presents the aging of the principal balance of past due loans HFI at amortized cost at June 30, 2025 by loan segment:

The following table presents the aging of the principal balance of past due loans HFI at amortized cost at December 31, 2024 by loan segment:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

Modifications to Borrowers Experiencing Financial Difficulty

For the three and six months ended June 30, 2025 and the year ended December 31, 2024, there were no loan modifications to borrowers experiencing financial difficulty and no loan modifications that subsequently defaulted during the period.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

Credit Quality Indicators

Internal risk-rating grades are assigned to loans by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the resulting ratings, as well as other statistics and factors such as delinquency, to track the migration performance of the portfolio balances. This analysis is performed at least annually. The Bank uses the following definitions for its risk ratings:

Pass – Loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.

Special Mention –These credits have potential weaknesses that may, if not checked or corrected, weaken the asset, or inadequately protect the Company’s position at some future date. These assets pose elevated risk, but their weakness does not yet justify a “Substandard” classification.

Substandard –These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful –These loans have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

The table below sets forth principal balance for the commercial loan portfolio disaggregated by loan segment based on internally assigned risk ratings at June 30, 2025 and gross write offs for the six months ended June 30, 2025:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

The table below sets forth principal balance for the commercial loan portfolio disaggregated by loan segment based on internally assigned risk ratings at December 31, 2024 and gross write offs for the year ended December 31, 2024:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

The Company considers the performance of the loan portfolio to determine its impact on the ACL. For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan by payment activity. The following table presents the principal balance at June 30, 2025 of residential and consumer loans based on payment activity as well as gross write offs for the six months ended June 30, 2025.

The following table presents the principal balance at December 31, 2024 of residential and consumer loans based on payment activity as well as gross write offs for the year ended December 31, 2024.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

NOTE 6 –FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment Securities Available for Sale: The fair values of investment securities available for sale are determined by matrix pricing, which is a mathematical technique used to value debt securities without relying exclusively on quoted prices for the specific investment securities, but rather by relying on the investment securities’ relationship to other benchmark quoted investment securities (Level 2). Management obtains the fair values of investment securities available for sale on a monthly basis from a third party pricing service.

Government Guaranteed Loans HFI, at Fair Value: The Company has elected to account for certain government guaranteed loans HFI at fair value. Fair value is calculated based on the present value of estimated future payments (Level 3). The valuation model uses interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future payments. Whenever available, the present value is validated against available market data.

Individually Evaluated Loans: Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the ACL. Loans are considered collateral dependent when the Company has determined that foreclosure of the collateral is probable or when a borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of collateral. A collateral dependent loan’s ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. Fair value of the loan’s collateral is determined by appraisals, independent valuation, or management’s estimation of fair value which is then adjusted for the cost related to liquidation of the collateral. Collateral dependent loans are generally classified as Level 3 based on management’s judgment and estimation.

Other Real Estate Owned: Other real estate owned assets are recorded at fair value less estimated costs to sell upon the transfer of a loan to other real estate owned and, subsequently, continue to be measured and carried at fair value. The fair value of other real estate owned is based on recent real estate appraisals which are generally updated annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales, cost, and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by either the Company or the Company's appraisal services vendor. Once received, management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Management compares the best-efforts price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraised value to arrive at fair value.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

Repossessed Assets: Repossessed assets arerecorded at fair value less estimated costs to sell upon the transfer of a loan to repossessed assets. The fair value of a repossessed asset, upon initial recognition, is estimated using a market approach or based on observable market data, such as a current appraisal, recent sale price of similar assets, or assumptions specific to the individual property or equipment, such as management applied discounts used to further reduce values to a net realizable value when observable inputs become stale.

Assets measured at fair value on a recurring basis at June 30, 2025 are summarized below. There were no liabilities carried at fair value on a recurring basis at June 30, 2025.

Assets measured at fair value on a recurring basis at December 31, 2024 are summarized below. There were no liabilities carried at fair value on a recurring basis at December 31, 2024.

There were no transfers between levels for assets and liabilities recorded at fair value on a recurring basis during the reported periods.

Financial Instruments Recorded Using Fair Value Option

The Company elected the fair value option for certain of its government guaranteed loans HFI as the Company believed that fair value was the best indicator of the resolution of those loans at that time. Depending on market conditions and liquidity needs of the Company, management determines whether it is advantageous to hold or sell government guaranteed loans on a loan-by-loan basis. The portion of these loans guaranteed by the government are generally readily marketable in the secondary market and the portion of the loans that are not guaranteed may be sold periodically to other third party financial institutions. Interest income on these loans is recorded based on the contractual term of the loan and in accordance with the Company’s policy on other loans HFI.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of HFI government guaranteed loans measured at fair value at June 30, 2025 and December 31, 2024.

(1) The nonaccrual and 90 days or more past due loan balances do not include the portion of government guaranteed loan balances.

The total amount of net gains and losses from changes in fair value and interest income included in earnings for the six months ended June 30, 2025 and June 30, 2024 for government guaranteed loans HFI, at fair value, were as follows:

Changes in fair value for government guaranteed loans HFI, at fair value, were included in Government guaranteed loans fair value gain (loss), net on the Consolidated Statements of Income.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

The table below presents a reconciliation of government guaranteed loans HFI, at fair value, which were valued on a recurring basis and used significant unobservable inputs (Level 3) for the six months ended June 30, 2025 and June 30, 2024:

The Company’s valuation of government guaranteed loans HFI, at fair value, was supported by an analysis prepared by an independent third party and approved by management. The approach to determine fair value involved several steps: 1) identifying each loan’s unique characteristics, including balance, payment type, term, coupon, age, and principal and interest payment; 2) projecting these loan level characteristics for the life of each loan; and 3) performing discounted cash flow modeling.

The following table provides information about the valuation techniques and unobservable inputs used in the valuation of government guaranteed loans HFI that fall within Level 3 of the fair value hierarchy at June 30, 2025 and December 31, 2024:

The significant unobservable inputs impacting the fair value measurement of government guaranteed loans HFI, at fair value, include discount rates and conditional prepayment rates. Increases in discount rates or prepayment rates would result in a lower fair value measurement. Although the prepayment rate and discount rate are not directly interrelated, they generally move in opposite directions. The discount rates and conditional prepayment rates were weighted by the relative principal balance outstanding of these loans.

Assets measured at fair value on a nonrecurring basis (Level 3) at June 30, 2025 are summarized below:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

Assets measured at fair value on a nonrecurring basis (Level 3) at December 31, 2024 are summarized below:

Fair Value of Financial Instruments

The carrying values and estimated fair values of financial instruments not carried at fair value, at June 30, 2025 and December 31, 2024 are as follows:

NOTE 7 –GOVERNMENT GUARANTEED LOAN SERVICING ACTIVITIES

At June 30, 2025 and December 31, 2024, the principal balance of government guaranteed loans, excluding PPP loans, retained by the Company was $439,931 and $425,963, respectively, of which $152,666 and $148,543 represented the guaranteed portion of the loans. Loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The unpaid principal balances of government guaranteed loans serviced for others requiring recognition of a servicing asset were $1,064,852 and $1,056,665 at June 30, 2025 and December 31, 2024, respectively.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

Activity for government guaranteed loan servicing rights for the three and six months ended June 30, 2025 and June 30, 2024 follows:

The fair value of government guaranteed loan servicing rights was $19,499 and $19,473 at June 30, 2025 and December 31, 2024, respectively. Fair value was determined using a weighted average discount rate of 14.25% and a weighted average prepayment speed of 12.23% at June 30, 2025. Fair value was determined using a weighted average discount rate of 14.63% and a weighted average prepayment speed of 11.97% at December 31, 2024. The government guaranteed loan servicing rights are amortized over the life of a loan on a loan-by-loan basis.

The following table presents the components of net gain on sale of government guaranteed loans for the three and six months ended June 30, 2025 and June 30, 2024:

NOTE 8 –LEASES

On December 23, 2024, the Bank agreed to a sale-leaseback transaction with Mountainseed Real Estate Services, LLC (the “Buyer”), pursuant to which the Bank sold to the Buyertwo properties owned and operated as branch locations (the “Properties”) for an aggregate purchase price of$15,000, including customary closing adjustments. On December 31, 2024, the Bank also entered into triple net lease agreements (the “Lease Agreements”) with the Buyer under which the Bank leases each of the Properties, and pursuant to which the Bank is responsible for the insurance, real estate taxes, and maintenance and repairs for each of the properties. Each of the Lease Agreements became effective upon the closing and have an initial term of 15 years. The Bank’s obligations under the Lease Agreements are guaranteed by BayFirst Financial Corp.

As the rate implicit in the leases generally is not readily determinable for our operating leases, the discount rates used to determine the present value of our lease liability are based on our incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. Our incremental borrowing rate for a lease is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

For the three andsix months ended June 30, 2025 and June 30, 2024, the components of total lease cost and supplemental information related to operating leases were as follows:

(1)There wereno lease costs reported as discontinued operations for the three and six months ended June 30, 2025 and $61 for the three and six months ended June 30, 2024.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

At June 30, 2025, the weighted average discount rate of operating leases was 6.96% and the weighted average remaining life of operating leases was 12.99 years.

The future minimum lease payments for operating leases, subsequent to June 30, 2025, as recorded on the balance sheet, are summarized as follows:

NOTE 9 –OTHER BORROWINGS

At June 30, 2025, the Company had $40,000 of borrowings at 4.57% from the FHLB andno borrowings from the FRB. There wereno borrowings from the FHLB or FRB at December 31, 2024.

The Bank is a member of the FHLB of Atlanta, which provides short- and long-term funding collateralized by mortgage-related assets to its members. FHLB short-term borrowings bear interest at variable rates set by the FHLB. Any advances that the Bank were to obtain would be secured by a blanket lien on $370,588 of real estate-related loans as of June 30, 2025. Based on this collateral and the Bank's holdings of FHLB stock, the Bank was eligible to borrow up to $155,540 from the FHLB at June 30, 2025.

In addition, the Bank has a secured line of credit with the Federal Reserve Bank of Atlanta which was secured by $78,995 of commercial loans as of June 30, 2025. FRB short-term borrowings bear interest at variable rates based on the FOMC's target range for the federal funds rate. Based on this collateral, the Bank was eligible to borrow up to $55,786 from the FRB at June 30, 2025.

The Company has $6,000 of Subordinated Debentures (the “Debentures”) that mature June 30, 2031 and are redeemable after 5 years which is June 30, 2026. The Debentures carry interest at a fixed rate of 4.50% per annum for the initial 5 years of term and carry interest at a floating rate for the final 5 years of term after June 30, 2026. Under the debt agreements, the floating rates are based on a SOFR benchmark plus 3.78% per annum. The balance of Subordinated Debentures outstanding at the Company, net of offering costs, amounted to $5,959 and $5,956 at June 30, 2025 and December 31, 2024, respectively.

The Company has a term note with quarterly principal and interest payments with interest at Prime (7.50% at June 30, 2025). The note matures on March 10, 2029 and the balance of the note was $1,707 and $1,934 at June 30, 2025 and December 31, 2024, respectively. The note is secured by 100% of the stock of the Bank and requires the Company to comply with certain loan covenants during the term of the note. As of June 30, 2025, the Company was in compliance with all financial debt covenants.

NOTE 10 –STOCK-BASED COMPENSATION

The Equity Plan governs the Company’s restricted stock grants and stock options. Total compensation cost charged against income related to the Equity Plan was $150 and $172 for the six months ended June 30, 2025 and June 30, 2024, respectively.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

Restricted Stock

The Company awarded shares of restricted common stock to certain employees and directors for which compensation expense is recognized ratably over the vesting period of the awards based on the fair value of the stock at issue date.

A summary of changes in the Company’s nonvested restricted shares for the six months ended June 30, 2025 and June 30, 2024 follows:

At June 30, 2025, there was $475 of total unrecognized compensation cost related to nonvested restricted shares granted under the Equity Plan that is expected to be recognized over a weighted average period of 1.2 years. The total fair value of shares vested during the six months ended June 30, 2025 and June 30, 2024 was $370 and $359, respectively.

Stock Options

The Equity Plan permits the grant of stock options to the Company’s employees and directors for up to 15% of the total number of shares of Company common stock issued and outstanding, up to 1,500,000 shares. Option awards are

granted with an exercise price equal to the market price of the Company’s common stock at the date of grant. The market price of the Company’s common stock is the closing sales price of the Common Stock on Nasdaq on the date of the grant. Those option awards generally have a vesting period of 5 years for employees and 3 years for directors and have 10-year contractual terms.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatility is based on an average of historical volatility of peer financial institutions. The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

A summary of the activity in the Equity Plan for the six months ended June 30, 2025 and June 30, 2024 follows:

There wereno options granted during the six months ended June 30, 2025 or June 30, 2024. Total unrecognized compensation cost related to nonvested stock options granted under the Equity Plan was $1 at June 30, 2025. This cost is expected to be recognized over a weighted average period of 0.04 years.

NOTE 11 –OTHER BENEFIT PLANS

The Company has established a stock dividend reinvestment and stock purchase plan. Under the DRIP, eligible shareholders can voluntarily purchase stock with their dividend or can make additional stock purchases. For the six months ended June 30, 2025 and June 30, 2024, there wereno shares issued.

All employees and Directors are eligible to participate in the NSPP. Expense recognized in relation to the NSPP for the six months ended June 30, 2025 and June 30, 2024 was $9 and $13, respectively.

The Company has a Salary Continuation Agreement (the “Agreement”) with the Company’s retired CEO. In accordance with the Agreement, the executive will receive an annual benefit of $25 fortwenty years following separation of service. The liability recorded for the Agreement was $309 and $327 at June 30, 2025 and December 31, 2024, respectively, and the related expense for the six months ended June 30, 2025 was $7 and the related expense for the six months ended June 30, 2024 was $8. Payments began in July 2024 as a result of the retirement of the CEO on December 31, 2023.

The Company has a 401(k) plan that covers all employees subject to certain age and service requirements. The Company contributes 3% of each employee’s salary each pay period as a safe harbor contribution. The Company may also match employee contributions each year at the discretion of the Board of Directors. There was no match of contributions in 2024. Expense recognized in relation to the 401(k) plan was $494 and $533 for the six months ended June 30, 2025 and June 30, 2024, respectively.

The Company has an ESOP for eligible employees. Each year, the Company’s Board of Directors may approve a discretionary percentage of employees’ salaries to be contributed to the ESOP for eligible employees. In 2021, the ESOP trust acquired 14,154 shares of the Company’s stock. As this is a leveraged plan, unallocated shares are distributed to employees annually. There were 5,662 unallocated shares with a fair value of $79 and 8,493 unallocated shares with a fair value of $99 remaining as of June 30, 2025 and June 30, 2024, respectively. The ESOP trust’s outstanding loan, which is secured by the unallocated shares, bears a fixed interest rate equal to the Prime Rate as of the note date, which was 3.25%. The note requires an annual payment of principal and interest through December 2026. The Company’s ESOP, which is internally leveraged, does not report the loan receivable extended to the ESOP as an asset and does not report the ESOP debt due to the Company.

The discontinuation of the nationwide residential lending division during 2022 triggered a partial plan termination and all affected employees were 100% vested in the Company’s contributions into the ESOP. As a result of the exit of affected

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

participants from the plan, the plan acquired 23,383 shares of the Company’s stock. As this is a leveraged plan, unallocated shares are distributed to employees annually. There were 14,030 unallocated shares with a fair value of $196 and 18,706 unallocated shares with a fair value of $217 remaining as of June 30, 2025 and June 30, 2024, respectively. The ESOP trust was issued afive year loan bearing an interest rate equal to the Prime Rate as of the note date, which was 8.25% and adjusts annually as of the first day of each succeeding calendar year to reflect the Prime Rate as of the first business day of the calendar year. The note requires an annual payment of principal and interest through December 2027. The Company’s ESOP, which is internally leveraged, does not report the loan receivable extended to the ESOP as an asset and does not report the ESOP debt due to the Company.

The Board did not approve any contributions in 2024. There was $60 of expense related to the ESOP for the six months ended June 30, 2025 and $108 expense for the six months ended June 30, 2024.

NOTE 12 –REGULATORY MATTERS

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes that the Bank met all capital adequacy requirements to which it was subject at June 30, 2025 and December 31, 2024.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At June 30, 2025 and December 31, 2024, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s classification.

In February 2019, the federal bank regulatory agencies issued a final rule that revised certain capital regulations under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and included a transition option that allows banking organizations to phase in, over a three year period, the day one adverse effects of adoption on their regulatory capital ratios (three year transition option). In connection with the adoption of ASC 326 on January 1, 2023, the Company recognized an after-tax cumulative effect reduction to retained earnings. The Company elected to adopt the three year transition option and the deferral has been applied in capital ratios presented below. Actual and required capital amounts and ratios for the Bank are presented below at June 30, 2025:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

Actual and required capital amounts and ratios for the Bank are presented below at December 31, 2024:

Dividend Restrictions

Banking regulations limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits of the Bank for that year combined with the retained net profits for the preceding two years.

NOTE 13 –LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, and letters of credit, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies that are used for loans are used to make such commitments, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance sheet risk at June 30, 2025 and December 31, 2024 were as follows:

All unused lines of credit at June 30, 2025 and December 31, 2024 were variable rate lines of credit and the majority of unfunded loan commitments at June 30, 2025 and December 31, 2024 were commitments to fund variable rate loans. Unfunded loan commitments are generally entered into for periods of 90 days or less.

The Company maintains an ACL for its off-balance sheet loan commitments which is calculated by loan type using estimated line utilization rates based on peer historical usage. Loss rates for outstanding loans are applied to the estimated utilization rates to calculate the ACL for off-balance sheet loan commitments. At June 30, 2025 and December 31, 2024, ACL for off-balance sheet loan commitments totaled $554 and $516, respectively.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

NOTE 14 –EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per common share for the three and six months ended June 30, 2025 and June 30, 2024:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Dollars in thousands, except per share data)

The following securities outstanding at June 30, 2025 and June 30, 2024 have been excluded from the calculation of weighted average shares outstanding as their effect on the calculation of earnings (loss) per share are antidilutive:

NOTE 15 -SEGMENT INFORMATION

The Company’s revenue is primarily derived from the business of banking. The Company’s financial performance is monitored on a consolidated basis by senior management, who are considered to be the Bank’s Chief Operating Decision Maker (“CODM”). Senior management includes the following officers of the Company: Chief Executive Officer; President, Chief Operating Officer; and Executive Vice President, Chief Financial Officer.

All of the Company’s financial results are similar and considered by management to be aggregated intoone reportable operating segment. While the Company has assigned certain management responsibilities by branch location or department, the Company’s CODM evaluates financial performance on a Company-wide basis. The majority of the Company’s revenue is from the business of banking, and the Company’s branch locations have similar economic characteristics, products, services and customers. Accordingly, all of the Company’s operations are considered by the CODM to be aggregated inone reportable operating segment.

Financial performance is measured monthly and the primary measures of performance are net income, net interest income, noninterest income, and significant operating expenses detailed below, as compared to the budget when assessing the Company’s segment. The allocation of resources throughout the Company is based on consolidated profitability. The presentation of financial performance is consistent with amounts and financial statement line items shown in the Company’s consolidated balance sheets and consolidated statements of income. Additionally, the Company’s significant expenses are adequately segmented by category and amount in the consolidated statements of income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include compensation, occupancy and equipment, data processing, professional services, and loan origination and collection expenses.

NOTE 16 –SUBSEQUENT EVENTS

The Company has evaluated subsequent events for recognition and disclosure through August 11, 2025, which is the date the financial statements were available to be issued. The Company determined that an August 4, 2025 event met the definition of a non-recognized subsequent event in accordance with ASC Topic 855, Subsequent Events. On that date, the Company announced that as part of a comprehensive strategic review aimed at positioning the Company for long-term growth and enhanced shareholder value, the Bank has discontinued its Bolt loan program, effective immediately. The Bolt loan program was an SBA 7(a) loan designed to provide small balance loans to small businesses, typically used for working capital. Accordingly, a reduction in force of 26 Bolt positions and 25 positions in other areas of the Bank was executed, which will save $6,000 in annual costs. Combined this represents 17% of the workforce. The Company expects to record a restructuring charge in the third quarter related to the exit of the Bolt loan program and will also seek offers to sell the Bolt loan balances and Bolt loan origination platform to an unaffiliated third party. To offset these impacts, the Board has suspended dividend payments, and Directors will forgo board fees.