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BayFirst Financial Corp. (BAFN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered a sharp headline EPS increase to $2.11 on $9.8M net income, driven by a one-time pre-tax gain of $11.6M ($8.7M after-tax) from a sale-leaseback of two branches; excluding this gain, net income was ~$1.1M, essentially flat quarter-over-quarter .
  • Core trends improved: net interest margin expanded 26 bps to 3.60%, net interest income rose $1.2M sequentially, and noninterest expense fell $1.7M QoQ, while deposits grew $31.0M QoQ to $1.14B and loans held for investment rose $24.1M QoQ to $1.07B .
  • Government-guaranteed loan originations recovered sequentially ($107.8M, +14% QoQ) with Bolt originations at $64.9M, but remained below prior-year levels; management suspended fair value accounting on new gov’t-guaranteed loans to align reporting with peers going forward .
  • Board authorized a $2.0M share repurchase program and declared a $0.08 Q1 2025 dividend; capital ratios improved QoQ, and liquidity remained strong with no borrowings outstanding at year-end .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 3.60% (+26 bps QoQ), aided primarily by a $1.0M decrease in deposit interest cost; net interest income rose to $10.7M (+13% QoQ) .
  • Operating efficiency improved: noninterest expense decreased to $15.3M from $17.1M QoQ, driven by lower compensation and loan origination/collection expenses .
  • Government-guaranteed originations rebounded sequentially to $107.8M; CEO emphasized “strong fourth quarter 2024 results, highlighted by quarterly net interest margin expansion and improved operating efficiencies” .

What Went Wrong

  • Credit costs increased: provision for credit losses rose to $4.5M (from $3.1M QoQ), net charge-offs rose to $3.37M, and nonperforming assets increased to 1.50% of total assets .
  • Government-guaranteed loan fair value gains fell (-$3.5M QoQ) due to the decision not to measure newly originated loans at fair value in Q4, pressuring noninterest income ex-sale-leaseback .
  • Year-over-year government-guaranteed originations remained below Q4 2023 levels ($107.8M vs. $144.9M), and nonperforming loans (ex-guaranteed balances) rose YoY, reflecting borrower stress in a higher rate environment .

Financial Results

Consolidated Results vs prior year and prior quarter

MetricQ4 2023Q3 2024Q4 2024
Net Interest Income ($USD Millions)$8.88 $9.45 $10.65
Noninterest Income ($USD Millions)$14.69 $12.27 $22.28
Total Revenue from Continuing Ops ($USD Millions)$23.57 (NII+NII) $21.72 (NII+NII) $32.93 (NII+NII)
Provision for Credit Losses ($USD Millions)$2.74 $3.12 $4.55
Noninterest Expense ($USD Millions)$18.47 $17.06 $15.33
Net Income ($USD Millions)$1.66 $1.14 $9.78
Diluted EPS ($USD)$0.32 $0.18 $2.11
Net Interest Margin (%)3.48% 3.34% 3.60%

Notes:

  • Q4 2024 includes a pre-tax gain of $11.6M ($8.7M after-tax) on a sale-leaseback of two branches, materially boosting noninterest income and EPS; excluding the gain, net income was ~$1.1M (near Q3 levels) .

KPIs

KPIQ4 2023Q3 2024Q4 2024
ROAA (annualized) (%)0.60% 0.37% 3.07%
ROAE (annualized) (%)6.37% 3.48% 42.71%
Tangible Book Value per Share ($)$20.60 $20.86 $22.95
Noninterest Income / Total Revenue (%)62.33% 56.50% 49.94%
Nonperforming Assets / Total Assets (%)0.92% 1.38% 1.50%
ACL / Total Loans HFI at Amortized Cost (%)1.64% 1.48% 1.54%

Segment and Production Detail

Government-Guaranteed Originations ($USD Thousands)Q4 2023Q3 2024Q4 2024
SBA 7(a)$33,115 N/A (not disclosed)$23,447
SBA 504$482 N/A (not disclosed)$1,982
USDA$9,080 N/A (not disclosed)$17,450
Bolt (≤$150K)$102,264 $65,200 $64,905
Total$144,941 $94,400 $107,784

Other balance sheet trends:

  • Loans held for investment: $1.07B at 12/31/24 (+$24.1M QoQ; +$150.8M YoY) .
  • Deposits: $1.14B at 12/31/24 (+$31.0M QoQ; +$158.1M YoY), ~74% FDIC insured .
  • Total assets: $1.29B at 12/31/24 (+$43.2M QoQ; +$170.5M YoY) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per common share ($)Q1 2025$0.08 (Q4 2024 declared Oct 22) $0.08 declared Jan 28, payable Mar 15, 2025 Maintained
Share Repurchase Program ($)2025None (prior 2023 program expired 12/31/23) Up to $2.0M authorized Jan 28, 2025 (through 12/31/25 or completion) Introduced
Revenue / EPS / Margin Guidance2025Not providedNot providedMaintained (no formal guidance)
OpEx / OI&E / Tax Rate Guidance2025Not providedNot providedMaintained (no formal guidance)

Earnings Call Themes & Trends

TopicQ2 2024 (Previous Mentions)Q3 2024 (Previous Mentions)Q4 2024 (Current Period)Trend
Technology initiativesEmphasized leveraging technology to reduce headcount/incentives, renegotiate vendors; net interest margin +1 bp QoQ Efficiency focus continued; margin impacted by one-time item PowerLOS upgrade; workflow automation tool with AI; lockbox solution for healthcare/HOAs Strengthening tech stack and automation
Rate/macro impact on borrowersBegan express modification program; provision down QoQ; net charge-offs down QoQ 400 SBA borrowers offered modifications; NPA/total assets rose to 1.38% ~500 SBA loans modified; pace slowing; NPA/total assets up to 1.50%; higher net charge-offs Elevated credit stress, stabilizing modification pace
Government-guaranteed origination$98.7M total; Bolt $71.5M $94.4M total; Bolt $65.2M; demand softer, tighter underwriting $107.8M total; Bolt $64.9M; suspended fair value accounting on new originations Sequential recovery; accounting shift
Deposits and liquidity+$35.1M QoQ deposits; ~81% insured +$69.8M QoQ deposits; ~78% insured +$31.0M QoQ deposits; ~74% insured; no borrowings outstanding EOY Healthy, high insured mix
Capital actions——$2.0M buyback authorized; $0.08 dividend declared; capital ratios improved QoQ Shareholder returns introduced

Management Commentary

  • CEO: “We reported strong fourth quarter 2024 results, highlighted by quarterly net interest margin expansion and improved operating efficiencies… As a result of [the sale-leaseback], we recorded an after-tax gain… of $8.7 million” .
  • CFO: “We suspended the use of fair value measurements on newly originated government-guaranteed loans… more and more going to look like other institutions in the space” .
  • COO: “Approximately 500 SBA 7(a) loans have been modified to lower payments… pace of new modifications has slowed considerably and is expected to represent a lesser emphasis in 2025 with rates stabilizing” .

Q&A Highlights

  • Sale-leaseback details: Branches sold were Countryside (opened 2018) and Seminole (original branch, 1999); lease escalators ~1–2% annually .
  • Buybacks: Analyst pressed for larger repurchase given valuation; CEO emphasized capital needs to support strong loan production (~$700M originations in 2024) and the priority to align accounting treatment; $2.0M program may be revisited as earnings continue .
  • SBA gain-on-sale premiums: Bolt loans’ gross premiums typically ~12–14%; stable over last 6–12 months .
  • Asset sensitivity and underwriting: Majority of SBA/C&I loans are variable tied to prime; home equity lines also variable; underwriting and stress testing support borrower capacity, but higher rates are driving small-loan credit losses .
  • Hurricane impact: Credit impact immaterial; collateral properly insured; temporary deferrals used where needed .

Estimates Context

  • We attempted to retrieve S&P Global consensus estimates for Q4 2024 EPS and revenue; data was unavailable at the time due to access limits. As a result, we cannot provide a formal beat/miss assessment versus Wall Street consensus for Q4 2024. Values would normally be retrieved from S&P Global.

Where estimates may adjust:

  • The one-time sale-leaseback gain elevated reported EPS; ex-gain earnings (~$1.1M) and suspended fair value accounting could lower run-rate noninterest income in future periods, potentially prompting revisions to EPS and noninterest income expectations .
  • NIM expansion (+26 bps QoQ) and lower deposit costs underpin constructive net interest income trajectory; deposit mix and insured share remain favorable .

Key Takeaways for Investors

  • Reported Q4 EPS was primarily driven by a one-time gain; ex-gain profitability was flat QoQ—focus on normalized run-rate earnings going forward .
  • Structural positives: expanding NIM, disciplined deposit cost management, and operating expense reductions improved core trends .
  • Credit remains the swing factor: provision and net charge-offs increased, and NPA ratios rose; modification efforts help, but small-loan SBA exposures remain sensitive to higher rates .
  • Accounting shift (suspending fair value on new gov’t-guaranteed loans) should reduce earnings volatility and improve comparability with peers—watch noninterest income composition changes .
  • Government-guaranteed originations recovered sequentially; Bolt program premiums remain supportive, but tighter underwriting caps volume (vs. prior year) .
  • Capital actions (dividend, $2.0M buyback) and improved capital ratios provide flexibility; management balancing shareholder returns with loan growth needs .
  • Near-term trading lens: expect attention on credit metrics and NIM trajectory; medium-term thesis hinges on disciplined growth in core banking and government-guaranteed lending with technology-driven efficiency gains .