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BayFirst Financial Corp. (BAFN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered mixed results: net interest margin expanded to 4.06% (+29 bps QoQ; +63 bps YoY) but elevated credit costs drove a net loss of $1.2M and diluted EPS of $(0.39) .
  • Management suspended common and preferred dividends and board fees to offset credit impacts; a strategic review is underway to de-risk unguaranteed SBA 7(a) balances and reposition for community banking-led growth .
  • Government-guaranteed loan originations were stable at $106.4M, but gain on sale decreased QoQ due to SBA SOP processing delays, partially offset by fair value gains recognized on newly originated loans measured at FV .
  • Subsequent event: BayFirst discontinued the Bolt SBA 7(a) small-loan program and initiated a 17% workforce reduction (~51 roles), expecting a Q3 restructuring charge and pursuing a sale of Bolt balances and platform; dividend suspension reiterated .
  • Street estimates were not available via S&P Global for EPS/Revenue; coverage appears limited. Use actuals and trajectory for revisions discussions (values unavailable via S&P Global).

What Went Well and What Went Wrong

What Went Well

  • Net interest margin rose to 4.06% on improved deposit mix and lower funding costs; management expects margins near “four-handle” to be relatively stable absent rate shocks .
  • Community bank growth momentum: loans held for investment +$41.0M QoQ (+3.8%), deposits +$35.5M QoQ (+3.1%), with ~80% of deposits FDIC-insured .
  • Management quote: “We expanded our net interest margin and kept controllable operating expenses in check during the second quarter… reflecting the continued strength in our community banking operations.” .

What Went Wrong

  • Provision for credit losses increased to $7.3M (vs $4.4M in Q1), driven by net charge-offs and FV write-downs on SBA 7(a) small-balance (Bolt) loans; annualized NCOs rose to 2.60% of average loans .
  • Noninterest expense rose $1.7M QoQ, primarily on loan origination and collection expenses tied to loans measured at fair value .
  • Operational friction from the SBA SOP update extended processing times, reducing guaranteed balances available for sale and pressuring gain-on-sale revenue in the quarter .

Financial Results

Summary vs Prior Year and Quarter

Metric (USD)Q2 2024Q1 2025Q2 2025
Interest Income ($MM)20.43 20.69 22.51
Interest Expense ($MM)11.25 9.69 10.16
Net Interest Income ($MM)9.18 11.00 12.35
Noninterest Income ($MM)11.65 8.75 10.80
Total Revenue from Continuing Ops ($MM)20.84 19.75 23.14
Provision for Credit Losses ($MM)3.00 4.40 7.26
Noninterest Expense ($MM)16.61 15.81 17.53
Net Income (Loss) ($MM)0.87 (0.34) (1.24)
Diluted EPS ($)0.12 (0.17) (0.39)
Net Interest Margin (%)3.43% 3.77% 4.06%

Balance Sheet and Credit KPIs

KPIQ2 2024Q1 2025Q2 2025
Total Assets ($MM)1,217.9 1,292.0 1,343.9
Loans HFI, net ($MM)1,008.3 1,084.8 1,125.8
Deposits ($MM)1,042.4 1,128.3 1,163.8
Tangible Book Value/Share ($)20.54 22.77 22.30
Net Charge-offs ($MM)3.26 3.30 6.80
Annualized NCO Ratio (%)1.45% 1.28% 2.60%
ACL / Loans HFI (%)1.50% 1.61% 1.65%
NPL / Loans HFI (%)1.34% 2.42% 2.09%
NPA / Total Assets (%)1.28% 2.08% 1.79%

Segment Activity: Government-Guaranteed Loan Originations

Originations ($000s)Q2 2024Q1 2025Q2 2025
SBA 7(a)24,624 22,912 38,441
SBA 5042,593 1,388 —
USDA— 21,550 —
Bolt (SBA 7(a) ≤$150k)71,459 60,473 67,922
Total98,676 106,323 106,363

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common DividendOngoing$0.08/share declared Apr 22, 2025 (payable Jun 15) Suspended by Board Lowered
Preferred DividendsOngoingOngoing quarterly payments ($0.386M in Q2) Suspended by Board Lowered
Board FeesOngoingStandard compensationDirectors will forgo board fees Lowered
Bolt ProgramOngoingActive; strong premiums Discontinued; workforce reduction; platform/balances for sale; Q3 restructuring charge expected Lowered / Exit
Net Interest MarginNear-termTarget to reach ~4% in 2025 (achieved Q2) Management expects stability around ~4% barring rate changes Maintained (qualitative)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Net Interest MarginQ4: NIM +26 bps to 3.60% on lower deposit costs ; Q1: NIM 3.77% (+17 bps) NIM 4.06% (+29 bps QoQ), expected to remain near 4% Improving and stabilizing
Deposit Costs/MixQ4: cost reduction and mix benefits ; Q1: time deposits ran off, core grew Deposit cost down to ~3.33% (from 3.78% in Q4); focus on checking/savings Lower cost funding gaining
SBA SOP/ProcessingQ4: FV election paused; no new FV originations ; Q1: mostly sales; one USDA FV booked SBA SOP update delayed processing/sales; booked loans at FV to recognize period gains Operational friction offset by FV gains
Credit Quality (Bolt)Q4/Q1: elevated provisions/NPLs; small-balance concentration risks Higher provisions/NCOs tied to Bolt; strategic review underway Deterioration, de-risking initiated
Capital & LiquidityQ4: well-capitalized ratios; liquidity robust ; Q1: liquidity strong, FHLB usage initiated CET1 9.98%, T1 leverage 8.11%; liquidity sources ample; FHLB borrowings $40M Adequate, modestly lower ratios
Strategy ShiftQ4/Q1: community banking focus, recurring NII, tech leverage Dividends suspension, Bolt exit, risk reduction; community bank-first emphasis Accelerating pivot

Management Commentary

  • “Management and the Board initiated a comprehensive strategic review aimed at derisking unguaranteed SBA 7(a) balances… and positioning the company for long-term growth and enhanced shareholder value.”
  • “We expanded our net interest margin and kept controllable operating expenses in check… reflecting the continued strength in our community banking operations.”
  • “This will provide for a stronger balance sheet to take advantage of community banking opportunities… the Board has voted to suspend common and preferred stock dividend payments and board of director fees.”
  • “Loans held for investment increased by $41.0 million… Deposits increased $35.5 million… approximately 80% of total deposits were insured by the FDIC.”
  • Subsequent: “The Bank has discontinued its Bolt loan program… reduction in force of 26 Bolt positions and 25 positions in other areas… will save $6 million in annual costs… expects to record a restructuring charge in the third quarter.”

Q&A Highlights

  • Rate sensitivity/NIM: Bank is broadly asset-sensitive; a 25 bp Fed cut could cause temporary NIM compression, but margin should be relatively stable by next quarter .
  • Capital: Bank remains well-capitalized; management continues to evaluate options with the Board but no imminent actions disclosed .
  • SBA pipeline/gain-on-sale: SOP changes extended processing times, reducing balances available for sale; combined gain-on-sale and fair-value gains were not “down dramatically,” with premiums relatively stable (small-loan ~13%, core ~10%) .
  • Credit concentration: >90% of losses tied to SBA; majority concentrated in small-loan program; no geographic concentration; NAICS-level exclusions (e.g., transportation) implemented to reduce risk .
  • Bolt trajectory: Volumes have been pulled back; underwriting tightened in April; program under strategic review and subsequently discontinued (post-quarter) .

Estimates Context

  • Wall Street consensus estimates for Q2 2025 EPS and Revenue via S&P Global were unavailable or insufficiently populated for BAFN; coverage appears limited (values unavailable via S&P Global).
  • In absence of consensus, we anchor on reported actuals and trajectory; estimate models should reflect: higher provision/NCO assumptions for SBA small-balance exposures, lower gain-on-sale near term given SOP friction, and stable NIM near 4% on improved deposit mix .

Key Takeaways for Investors

  • The pivot is real: dividend suspension, Bolt program exit, and strategic review signal a decisive shift toward a lower-risk, community-bank-led earnings model; watch for Q3 restructuring charge and any portfolio/platform sale updates as catalysts .
  • NIM tailwind vs credit headwind: margin expansion to 4.06% and deposit cost relief support NII, but elevated provisions/NCOs on small-balance SBA loans weigh on earnings; net outcome hinges on pace of credit normalization .
  • Liquidity and capital are adequate to execute the transition, though capital ratios ticked down; monitoring CET1/Tier 1 leverage and potential capital actions is prudent .
  • Gain-on-sale dynamics: SOP-induced timing issues should normalize; premiums appear stable, but mix shift away from Bolt reduces credit drag and may lower near-term volume-driven gains .
  • Asset quality focus: underwriting tightened; NAICS exclusions and collections ramped; de-risking should lower volatility over time—track NPL/NCO trajectory and ACL adequacy each quarter .
  • Trading lens: near-term volatility around strategic announcements (Bolt exit monetization, restructuring charges) and credit updates; medium-term thesis anchored in stable NIM, core deposit growth, and community banking loan expansion .

Appendix: KPIs and Capital Ratios

Capital Ratios (Bank-level)Q2 2024Q1 2025Q2 2025
CET1 / RWA (%)10.54% 10.47% 9.98%
Total Capital / RWA (%)11.79% 11.73% 11.23%
Tier 1 Leverage (%)8.73% 8.56% 8.11%
Liquidity SnapshotQ1 2025Q2 2025
On-balance liquidity ratio (%)8.04% 8.28%
FHLB borrowings ($MM)20.0 40.0
Gov’t-Guaranteed Loan Sales (Q)Q1 2025Q2 2025
Balances sold ($MM)72.5 66.8
FV gain (loss) ($MM)(0.76) 2.44

All cited data are from BayFirst’s 8-K press release and investor materials and the Q2 2025 earnings call transcript as referenced above.