Shares of BayFirst Financial Corp. (BAFN) have declined 10.8% since the company reported its earnings for the quarter ended Sept. 30, 2025. This compares to the S&P 500 index’s 0.4% decline over the same time frame. Over the past month, the stock has gained 16.8% compared with the S&P 500’s 2.1% growth, reflecting investor concern following a materially negative earnings surprise and strategic shift in the business model.BayFirst incurred a net loss of $4.66 per share for the third quarter of 2025 against a ...

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Financial Data and Key Metrics Changes - The company reported a net loss of $18.9 million in Q3 2025, compared to a net loss of $1.2 million in Q2 2025 [6] - A restructuring charge of $7.3 million was recorded during the quarter, contributing to the net loss [7] - Net interest income decreased to $11.3 million, down $1 million from Q2 2025, but up $9.4 million from the same quarter last year [10] - The net interest margin fell by 45 basis points to 3.61% in Q3 2025 [9] - Total deposit balances increased by $7.7 million, or 0.7%, during Q3 2025, reaching $1.17 billion [8] Business Line Data and Key Metrics Changes - The company is exiting the SBA 7(a) lending business, which had previously contributed to revenue but also brought material risk leading to operating losses [3] - Loans held for investment decreased by $127.1 million, or 11.3%, during Q3 2025 [8] - Non-interest income was negative $1 million for Q3 2025, a significant decrease from $10.8 million in Q2 2025, primarily due to the exit from SBA 7(a) lending [11] Market Data and Key Metrics Changes - The company reported that more than 84% of its deposits were insured by the FDIC as of September 30, 2025 [9] - The allowance for credit losses increased to 2.61% of total loans held for investment at amortized cost as of September 30, 2025, compared to 1.65% in June 2025 [13] Company Strategy and Development Direction - The company is focused on de-risking its balance sheet and positioning itself for long-term sustainable growth and enhanced shareholder value [2] - The strategy includes a shift towards community banking, emphasizing relationships with local individuals and businesses [4] - The company aims to return to profitability with a target of a positive return on assets of 40 to 70 basis points in 2026 [5] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that profitability has not met expectations but expressed confidence in building a stronger organization [4] - The company expects to improve asset quality and reduce non-performing loans without significant additional provisions for credit losses [16] - Management remains optimistic about future market opportunities and operational capabilities [5] Other Important Information - The company is undergoing significant leadership changes, including the retirement of the Sarasota market leader and the appointment of new leaders in key roles [17] - The restructuring efforts are aimed at enhancing operational efficiency and aligning the organization with community banking demands [19] Q&A Session Summary Question: How much of the SBA 7(a) loans did the company hold back? - The company anticipates holding back about $167 million of unguaranteed SBA 7(a) loan balances post-closing of the transaction with Banesco USA [23] Question: What kind of reserve or allowance was applied to the SBA 7(a) loans sold? - The portfolio sale was priced at a 3% discount, and the increase in the allowance for credit losses primarily relates to the unguaranteed balances going forward [25] Question: Is the company still originating SBA loans? - The company is exiting the SBA lending business and will focus on Tampa Bay-based commercial loans and consumer lending after the closing date [33] Question: What treasury management products has the company enhanced? - The company has improved its treasury management services, including the addition of lockbox services and a new software product designed for mid-market businesses [34] Question: How much of the loan portfolio was reviewed in the third quarter? - Approximately $70 million of the portfolio was reviewed by a third party, with a targeted review of about 8% to 10% of the total portfolio [41]

Financial Performance - BayFirst Financial Corp reported a net loss attributable to common shareholders of $19287 thousand for the three months ended September 30, 2025 [18] - The company's net loss from continuing operations for the three months ended September 30, 2025, was $18902 thousand [18] - For the nine months ended September 30, 2025, BayFirst Financial Corp experienced a net loss attributable to common shareholders of $21630 thousand [19] - Return on average assets was (562)% for the quarter ended September 30, 2025, compared to 037% for the same period last year [20] - Net interest margin decreased to 361% for Q3 2025 [23] Balance Sheet and Loan Portfolio - Total assets reached $135 billion as of September 30, 2025, representing a 47% growth since December 31, 2020 [7] - Total loan production for the quarter was $75 million [13] - Total loans (held for sale and held for investment) grew by $50 million over the last twelve months [13] - Total deposits increased by $8 million for the quarter and $59 million over the last twelve months [16] - Noninterest bearing transactions accounted for 90% of the deposit portfolio [15]

Core Insights - BayFirst Financial Corp. reported a significant net loss of $18.9 million, or $4.66 per share, for Q3 2025, compared to a net loss of $1.2 million in Q2 2025, primarily due to higher provision expenses and one-time charges related to restructuring [1][8][29] Financial Performance - The net interest margin decreased to 3.61% in Q3 2025 from 4.06% in Q2 2025, but increased from 3.34% in Q3 2024 [7][10] - Net interest income from continuing operations was $11.3 million in Q3 2025, down from $12.3 million in Q2 2025, but up from $9.4 million in Q3 2024 [10][11] - Noninterest income was negative $1.0 million in Q3 2025, a significant decrease from $10.8 million in Q2 2025 and $12.3 million in Q3 2024 [14][17] Strategic Initiatives - The company is undergoing a strategic transformation, including exiting the SBA 7(a) lending business and selling a portion of its loan portfolio to Banesco USA for 97% of the retained loans' balances, resulting in a net loss of $5.1 million [3][29] - Management is focused on derisking the balance sheet and enhancing long-term growth and shareholder value, with plans to close the SBA loan sale in Q4 2025 [3][4] Asset Quality - The provision for credit losses in Q3 2025 was $10.9 million, up from $7.3 million in Q2 2025 and $3.1 million in Q3 2024 [24] - The allowance for credit losses on loans was 2.61% of total loans held for investment as of September 30, 2025, compared to 1.65% in Q2 2025 and 1.48% in Q3 2024 [25] Balance Sheet Highlights - Total assets increased by $2.1 million, or 0.2%, to $1.35 billion in Q3 2025, driven by an increase in cash and cash equivalents [20] - Loans held for investment decreased by $127.1 million, or 11.3%, during Q3 2025, primarily due to the transfer of loans to held for sale [21] - Total deposits increased by $7.7 million, or 0.7%, during Q3 2025, totaling $1.17 billion [22] Capital and Liquidity - The Tier 1 leverage ratio was 6.64% as of September 30, 2025, down from 8.11% in Q2 2025 [27] - The bank's liquidity position remains strong, with an on-balance sheet liquidity ratio of 11.31% as of September 30, 2025 [28]

Company Overview - BayFirst Financial Corp. is a registered bank holding company based in St. Petersburg, Florida, which commenced operations on September 1, 2000 [3] - The primary source of income is derived from its wholly owned subsidiary, BayFirst National Bank, which began operations on February 12, 1999 [3] - The Bank operates twelve full-service banking offices throughout the Tampa Bay-Sarasota region, offering a broad range of commercial and consumer banking services [3] - As of June 30, 2025, BayFirst Financial Corp. had total assets of $1.34 billion [3] Recent Developments - BayFirst Financial Corp. will report its third quarter results after the market close on Thursday, October 30, 2025 [1] - Management will host a conference call on Friday, October 31, 2025, at 9:00 a.m. ET to discuss the results, which will also be broadcast live via the internet [1][2] - The Bank was the 8th largest SBA 7(a) lender by number of units originated and 18th largest by dollar volume nationwide as of the SBA's quarter ended June 30, 2025 [3]

Core Viewpoint - BayFirst Financial Corp. plans to exit the SBA 7(a) lending business and sell $103 million of SBA 7(a) loan balances to Banesco USA, marking a strategic move to derisk its balance sheet and enhance long-term growth and shareholder value [1][2]. Company Overview - BayFirst Financial Corp. is a registered bank holding company based in St. Petersburg, Florida, with total assets of $1.34 billion as of June 30, 2025. It operates twelve full-service banking offices in the Tampa Bay-Sarasota region, offering a range of commercial and consumer banking services [5]. - Banesco USA, an independent Florida state-chartered bank founded in 2006, has $5.2 billion in assets as of June 30, 2025, and operates six branches across South Florida and Puerto Rico. The bank focuses on serving small and middle-market businesses, as well as professionals, with personalized financial services [6]. Transaction Details - BayFirst has signed a definitive agreement to sell $103 million in SBA 7(a) loans to Banesco USA at 97% of retained balances. Banesco USA will assume servicing of these loans and purchase servicing rights for book value [2][3]. - The transaction is expected to close in the fourth quarter of 2025, with the majority of BayFirst's current SBA lending staff being offered positions with Banesco USA [2][3]. Strategic Implications - The exit from the SBA 7(a) lending business allows BayFirst to focus on its community bank mission, enhancing its portfolio of stable checking and savings products, and creating opportunities for deposit growth and fee income [3]. - Banesco USA aims to leverage the acquisition of BayFirst's SBA lending team and loan portfolio to establish a nationwide SBA lending platform, enhancing its capabilities to serve small and mid-size companies across Florida and nationally [4].

Core Viewpoint - BayFirst Financial Corp. has been downgraded from Outperform to Neutral due to near-term profitability concerns and elevated risks, despite showing resilience and strategic progress in various areas [1] Group 1: Positive Takeaways - Total assets reached $1.3 billion as of Q2 2025, marking a 47% increase since December 2020 [2] - Deposits increased by $121.4 million year over year, with 80% of the deposit base being insured, indicating strong customer trust [2] - The bank has a diversified loan portfolio with Q2 loan production at $157 million and loans held for investment growing by $41 million [3] - BayFirst ranks 8 nationally in SBA 7(a) loan originations, enhancing its competitive position [3] - The bank has implemented advanced technology platforms, improving operational efficiency and creating new revenue streams [4] Group 2: Challenges Persist - BayFirst reported a net loss of $1.2 million in Q2 2025, a decline from a net income of $0.9 million in the same quarter last year [5] - Credit loss provisions increased to $7.3 million, more than double from the previous year, impacting earnings [5] - Nonperforming loans rose to 1.37% of total loans, up from 0.87% a year earlier, indicating rising credit risk [6] - The net interest margin improved to 4.06%, but the cost of funds remains high at 3.75% due to deposit pricing pressures [7] - The Tier 1 capital ratio decreased to 8.11% from 8.73% a year ago, suggesting tighter cushions against potential credit shocks [7] Group 3: Outlook - The downgrade to Neutral reflects cautious earnings visibility, with solid growth in deposits and lending but persistent net losses and rising credit costs [8] - Long-term investors may find the community banking franchise and focus on innovation compelling, but current profitability challenges may lead to sideways trading until earnings recovery is demonstrated [9]

Core Viewpoint - BayFirst Financial Corp. has discontinued its Bolt loan program as part of a strategic review aimed at long-term growth and enhancing shareholder value [1][2] Group 1: Strategic Changes - The Bolt loan program, an SBA 7(a) loan product for small businesses, has been terminated to reduce risk associated with unguaranteed loans [2] - A reduction in force has been announced, affecting 51 positions, which represents 17% of the workforce, resulting in annual cost savings of $6 million [2] - The company plans to record restructuring charges in the third quarter related to the exit from the Bolt loan program and is seeking to sell the associated loan balances and origination platform [2] Group 2: Financial Position - As of June 30, 2025, BayFirst Financial Corp. reported total assets of $1.34 billion [4] - The company was the 8th largest SBA 7(a) lender by number of units originated and the 18th largest by dollar volume nationwide as of the same date [4] Group 3: Future Focus - The leadership team is committed to innovation and resilience, aiming to build a premier community banking franchise and capitalize on strengths in the Florida markets [3] - The company operates twelve banking centers in the Tampa Bay area, positioning itself to efficiently grow and gain market share [3]

Core Insights - BayFirst Financial Corp. has faced a significant stock decline of 14.9% since its earnings report for Q2 2025, contrasting with a 2.4% decline in the S&P 500 index during the same period [1] - The company reported a net loss of $1.2 million in Q2 2025, a downturn from a net income of $0.9 million in the same quarter of the previous year, with a loss of 39 cents per share compared to earnings of 12 cents per share a year ago [2] Financial Performance - Total interest income increased by 10.2% to $22.5 million, primarily due to higher loan interest income rising to $21.5 million from $19.4 million, while total interest expense decreased by 9.7% to $10.2 million [3] - Noninterest income rose to $10.8 million from $8.8 million in the previous quarter, driven by gains on the sale of government-guaranteed loans, but non-interest expenses increased to $17.5 million from $16.6 million [5] Loan Portfolio and Asset Quality - The loan portfolio grew to $1.13 billion from $1 billion a year ago, with the allowance for credit losses increasing to $17 million, indicating a cautious approach to potential defaults [4] - Nonperforming loans, excluding government-guaranteed balances, improved slightly to 1.37% of total loans from 1.47% in the previous quarter, although overall nonperforming loans remained elevated at 2.09% [4] Management Insights - Management highlighted challenges from rising interest rates and competitive pressures, with provisions for credit losses increasing to $7.3 million from $3 million a year ago, reflecting a cautious stance amid economic uncertainties [6] - The company aims to expand its loan portfolio while maintaining stringent credit standards to mitigate risks [6] Capital Position - BayFirst Financial's total shareholders' equity increased to $108.2 million from $101 million a year ago, with a tangible book value per common share of $22.30, down from $22.95 at the end of 2024 [7] - The return on average common equity was negative at 6.8%, compared to a positive 42.7% at the end of 2024, indicating the impact of the challenging environment on profitability [7] Operational Developments - The company continues to operate with 12 banking center offices and a workforce of 300 full-time equivalent employees, focusing on strategic growth initiatives [8]