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BayFirst Financial Corp. (BAFN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 result: net loss of $0.3M and diluted EPS of $-0.17 as elevated credit costs and fair-value markdowns offset net interest margin expansion to 3.77% .
  • Noninterest income fell sharply due to absence of prior quarter’s $11.6M sale-leaseback gain and lower gains/mark-to-market on government-guaranteed loans; net interest income rose modestly QoQ as deposit costs declined .
  • Management is initiating a strategic review to de-risk the balance sheet, pausing fair-value measurement of SBA 7(a) loans and exploring sales of unguaranteed SBA balances; core deposit mix improved as checking grew and high-cost time deposits ran off .
  • Capital/liquidity remained sound: CET1 10.47%, Total Risk-Based Capital 11.73%, on-balance sheet liquidity 8.04%; $2.0M buyback authorized and $0.08 dividend declared (maintained) .
  • Stock reaction catalysts: credit normalization pace (NCOs/NPL trajectory), execution on de-risking (sale of unguaranteed SBA balances), and sustained NIM improvement through deposit remixing .

What Went Well and What Went Wrong

  • What Went Well

    • Net interest margin expanded 17 bps QoQ to 3.77% on lower deposit costs and checking growth; “fueling this improvement was growth in…checking account balances…while we allowed some runoff in high rate CDs and promotional priced money market balances” .
    • Community bank loan growth: loans held for investment increased ~$18.3M QoQ (+1.7%); community bank loans up 4% QoQ, while government-guaranteed balances fell 2% .
    • Strategic focus on recurring net interest income and core deposits; management emphasized de-risking and strengthening SBA underwriting (enhanced parameters since March 2024 and additional credit leadership hires) .

  • What Went Wrong

    • Elevated credit costs: provision $4.4M, net charge-offs $3.3M; NPLs/total loans rose to 2.42% and NPAs/total assets to 2.08% (vs 1.50% in Q4 2024) .
    • Noninterest income declined to $8.8M (vs $22.3M in Q4 2024 and $14.3M in Q1 2024) on lower gain-on-sale/fair-value gains and packaging fees amid tighter credit and softer borrower demand .
    • Government-guaranteed loan originations were $106.3M, slightly below internal targets and down vs $130.6M in Q1 2024; fair-value markdowns on retained unguaranteed SBA balances weighed on results .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Revenue from Continuing Ops ($USD Millions)$23.01 (NII $8.74 + Noninterest $14.27) $32.93 (NII $10.65 + Noninterest $22.28) $19.75 (NII $11.00 + Noninterest $8.75)
Net Interest Income ($USD Millions)$8.74 $10.65 $11.00
Noninterest Income ($USD Millions)$14.27 $22.28 $8.75
Provision for Credit Losses ($USD Millions)$4.06 $4.55 $4.40
Net Income (Loss) ($USD Millions)$0.82 $9.78 $(0.34)
Diluted EPS ($USD)$0.11 $2.11 $-0.17
Net Interest Margin (%)3.42% 3.60% 3.77%

Segment/KPI detail

Government-Guaranteed Loan Originations ($USD Millions)Q1 2024Q4 2024Q1 2025
SBA 7(a)$29.97 $23.45 $22.91
SBA 504$2.42 $1.98 $1.39
USDA$0.00 $17.45 $21.55
Bolt (SBA 7(a) ≤$150K)$98.17 $64.91 $60.47
Total$130.56 $107.78 $106.32
KPIsQ1 2024Q4 2024Q1 2025
Loans Held for Investment ($USD Millions)$934.87 $1,066.56 $1,084.82
Total Deposits ($USD Millions)$1,007.32 $1,143.23 $1,128.27
ROAA (%)0.29% 3.07% -0.10%
ROATCE (%)2.06% 4.93% -3.00%
NPA / Total Assets (%)0.97% 1.50% 2.08%
ACL / Total Loans (%)1.62% 1.54% 1.61%
Noninterest Income / Total Revenue (%)62.01% 49.94% 44.31%
Tangible Book Value per Share ($)$20.45 $22.95 $22.77

Notes: Management cited NPAs/total assets at 1.94% in the call, while the press release/investor tables show 2.08%; we anchor to filed release and note the discrepancy .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per common shareQ2 2025$0.08 $0.08 Maintained
Share repurchase authorization2025 programNone disclosed prior to 1/28/2025 Up to $2.0M; $0.335M repurchased to date Raised

No formal quantitative revenue/EPS/margin guidance was provided for Q2/FY25 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
Credit normalization (SBA small loans)Express modification program launched Q2’24; ~400 loans modified by Q3; ~500 by Q4; NCOs improved in Q3, then rose in Q4; asset sensitivity acknowledged 581 borrowers offered modifications; provision $4.4M; NCOs $3.3M; NPL/NPAs higher; added CCO and Director of Credit Admin; strengthened Bolt underwriting Diligent risk management; losses elevated but stabilization efforts ongoing
Deposit remixing/NIMQ4: NIM +26 bps QoQ to 3.60% via deposit cost actions; 74% insured deposits at year-end NIM 3.77% (+17 bps); checking +$4.5M; time deposits -$17.1M; ~81% insured Positive margin trajectory with continued remix
Fair value accountingQ4: suspended fair-value measurement for new SBA loans; sale-leaseback gain $11.6M Continued pause; Q1 fair-value loss $0.755M (unguaranteed SBA markdowns offset by USDA gain) Transitioning away from FV; residual impacts tapering
Technology initiativesPowerLOS upgrade, lockbox and workflow automation with AI features Technology-focused platform, Mulesoft API, automation for Bolt/PowerLOS; expansion of treasury services (lockbox) Ongoing digitization to scale origination/treasury
Macro/tariffsHurricanes (Q3) impacts and insured collateral CEO cited inflation, high rates, and tariff policy uncertainty pressuring SMEs and loan demand Macro headwinds constraining origination and credit

Management Commentary

  • “Part of our strategic plan is to grow recurring revenue through net interest income…focusing on growing our low-cost deposit account base to fund our rapidly expanding conventional commercial and consumer loan portfolios.” – CEO Thomas Zernick .
  • “Notably, there is a $755,000 loss on government-guaranteed loans measured at fair value…$1.2M markdowns on retained unguaranteed SBA 7(a) balances offset by $458,000 gain on a USDA loan.” – CFO Scott McKim .
  • “We further strengthened our analysis of bank statements…enhanced credit parameters in March 2024…much lower early default rate for loans originated after that date.” – President/COO Robin Oliver .
  • “Leadership and the Board is initiating a comprehensive strategic review aimed at derisking the balance sheet and positioning the company for long-term growth.” – CEO Thomas Zernick .

Q&A Highlights

  • Q1 2025 call had no analyst questions; prepared remarks emphasized NIM improvement, deposit remix, and de-risking (fair-value pause, SBA strategy) .
  • Context from prior quarter Q&A: discussion of sale-leaseback terms and rising lease expense, buyback sizing vs. loan growth needs, SBA gain-on-sale margins stability (12–14% gross premiums on Bolt), and preferred stock redemption mechanics .

Estimates Context

  • Wall Street consensus (S&P Global) for BAFN quarterly EPS/revenue was not available; coverage appears limited, and no usable period-specific estimates were returned. As a result, comparisons vs. consensus could not be made [Values retrieved from S&P Global].

Key Takeaways for Investors

  • Credit remains the swing factor: elevated provision ($4.4M) and NCOs ($3.3M) alongside rising NPLs/NPAs; watch for impact of strengthened underwriting and modification programs on loss content and ACL sufficiency .
  • Margin tailwinds from deposit remixing are intact; NIM rose to 3.77% with checking growth and time-deposit runoff, suggesting potential earnings leverage as credit stabilizes .
  • Government-guaranteed originations are resilient but below targets; Bolt volumes remain sizable ($60.5M) though tighter credit and macro softness weigh on gain-on-sale/fair-value income .
  • Transition away from fair-value accounting reduces earnings volatility; residual FV markdowns should diminish, clarifying core performance (net interest + fee income) .
  • Capital/liquidity provide flexibility (CET1 10.47%, Total RBC 11.73%, liquidity 8.04%); buyback authorization ($2.0M) and dividend ($0.08) signal confidence while preserving growth capacity .
  • Near-term trading lens: stock likely sensitive to credit datapoints (NPA/NCO trends) and de-risking execution (sale of unguaranteed SBA balances), with positive optionality from sustained NIM expansion and community bank growth .
  • Medium-term thesis: deposit-led franchise growth in Tampa Bay and technology-enabled origination (PowerLOS/Mulesoft) can underpin recurring NII, while strategic de-risking and credit upgrades re-rate earnings quality .