BayFirst Financial Corp. BAFN shares have gained 15.9% over the past month compared with the industry’s 4.6% growth. The company has outperformed other industry players, including First Bancorp FBNC and Southern First Bancshares, Inc. SFST. Shares of FBNC and SFST have rallied 9% and 9.7%, respectively, in the same time frame. BAFN benefits from a strengthened capital base, declining funding costs, a resilient Tampa Bay franchise and expanding relationship banking.
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A Key Look at BAFN’s Business Operations
BayFirst operates as a bank holding company through BayFirst National Bank, delivering a comprehensive range of community banking services across the Tampa Bay and Sarasota regions. Its business operations focus on serving consumers, small and medium-sized businesses, healthcare providers and minority-owned enterprises through a network of 12 banking centers. The bank offers personal and business deposit accounts, digital and mobile banking, treasury and cash management, merchant processing, remote deposit capture, and payment solutions alongside diversified lending products, including commercial real estate, construction, working capital, residential mortgages, consumer loans, healthcare financing, USDA and SBA 504 loans.
BayFirst’s Key Tailwinds
BayFirst’s strongest tailwind is its transformational capital raise, which significantly strengthens the balance sheet and provides flexibility to accelerate growth while resolving legacy credit issues. Management expects the additional capital to improve regulatory capital ratios, support relationship-based lending, and restore profitability without expanding beyond its core Tampa Bay and Sarasota markets.
The company continues to benefit from a resilient community banking franchise in one of Florida’s attractive growth markets. BayFirst ranks among the leading locally headquartered banks in the Tampa Bay-Sarasota region, while its branch network, treasury management services, and expanding customer relationships support stable deposit gathering and recurring fee income. Noninterest-bearing deposits also increased during the quarter, improving funding quality.
Another positive catalyst is the steady reduction in funding costs following management’s efforts to exit higher-cost promotional and brokered deposits. In the first quarter of 2026, the cost of funds declined 27 basis points sequentially, helping offset pressure on loan yields and positioning net interest income for improvement as balance sheet optimization progresses. The company is also growing treasury management relationships, which should enhance low-cost deposit generation over time.
BayFirst is also making progress in cleaning up legacy credit challenges tied to its exited SBA 7(a) lending business. Management has been actively resolving problem assets, reducing nonperforming loans, and allowing the runoff of higher-risk unguaranteed SBA balances. With fresh capital and a sharper focus on traditional community banking, credit costs are expected to normalize gradually, improving earnings quality over time.
Long-term growth is supported by management’s renewed focus on expanding relationship banking rather than specialized SBA lending. The new leadership team plans to leverage BayFirst’s established franchise, local investor base and experienced branch network to deepen commercial and consumer relationships across the Tampa Bay metropolitan area. This strategy should produce more durable loan growth, stronger core deposits, and a higher-quality earnings mix over time.
Challenges Persist for BAFN’s Business
BayFirst continues to report losses as the wind-down of its SBA 7(a) lending business has sharply reduced high-margin gain-on-sale revenues, while elevated servicing costs on the legacy SBA portfolio and higher credit provisioning continue to pressure results. Loan and deposit balances have declined due to portfolio runoff, loan sales and the exit from promotional and brokered deposits, limiting balance sheet growth. Credit quality also remains a concern, with elevated nonperforming loans, net charge-offs and ongoing stress in the unguaranteed SBA portfolio.
BayFirst’s Valuation
The company is cheaply priced compared with the industry average. Currently, BAFN is trading at 0.36X trailing 12-month price/book value, below the industry’s average of 1.9X. The metric also remains lower than that of the company’s peers, First Bancorp (1.63X) and Southern First Bancshares (1.59X).
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Conclusion
Despite ongoing pressure from legacy SBA-related credit issues, lower gain-on-sale revenue and balance sheet runoff, BayFirst’s strengthened capital position, improving funding mix, resilient community banking franchise and renewed focus on relationship-based lending position the company for a gradual recovery in profitability and sustainable long-term growth.
Strong fundamentals, coupled with BAFN’s undervaluation, present a lucrative opportunity for investors to add the stock to their portfolios.
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This article originally published on Zacks Investment Research (zacks.com).
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