Core Points - BayFirst Financial Corp. reported a net loss of $1.2 million, or $(0.39) per share, for Q2 2025, compared to a net loss of $0.3 million, or $(0.17) per share, in Q1 2025 [1][8][32] - The company is undergoing a strategic review to derisk unguaranteed SBA 7(a) balances and enhance long-term growth and shareholder value [2][4] - The net interest margin increased to 4.06% in Q2 2025, up 29 basis points from Q1 2025 and 63 basis points from Q2 2024 [6][10] Financial Performance - Net interest income for Q2 2025 was $12.3 million, an increase from $11.0 million in Q1 2025 and $9.2 million in Q2 2024 [10][11] - Noninterest income was $10.8 million in Q2 2025, up from $8.8 million in Q1 2025 but down from $11.7 million in Q2 2024 [14][17] - The company recorded a provision for credit losses of $7.3 million in Q2 2025, compared to $4.4 million in Q1 2025 and $3.0 million in Q2 2024 [23][24] Loan and Deposit Growth - Loans held for investment increased by $41.0 million, or 3.8%, during Q2 2025, totaling $1.13 billion [15][21] - Deposits rose by $35.5 million, or 3.1%, during Q2 2025, reaching $1.16 billion [22][39] - The company originated $106.4 million in new government guaranteed loans in Q2 2025, slightly up from $106.3 million in Q1 2025 [6][7] Asset Quality - Net charge-offs for Q2 2025 were $6.8 million, an increase from $3.3 million in Q1 2025 [25][32] - The ratio of allowance for credit losses (ACL) to total loans held for investment was 1.65% as of June 30, 2025, up from 1.61% as of March 31, 2025 [24][26] Capital and Liquidity - The company's total assets increased by $51.9 million, or 4.0%, during Q2 2025, totaling $1.34 billion [20][39] - The Tier 1 leverage ratio was 8.11% as of June 30, 2025, down from 8.56% as of March 31, 2025 [26][27] - The bank's liquidity position remains strong, with an on-balance sheet liquidity ratio of 8.28% as of June 30, 2025 [27]

Financial Data and Key Metrics Changes - Total revenues increased by 5% year on year to 7,400,000,000 pesos, reflecting growth across operations, particularly in Puerto Rico and Colombia [7][8] - Consolidated EBITDA rose slightly by 2% year on year, reaching 5,000,000 pesos, with Puerto Rico and Colombia posting double-digit growth [12] - The adjusted EBITDA margin, excluding construction revenue, stood at nearly 68%, down from 69% in the same quarter last year [12] Business Line Data and Key Metrics Changes - Mexico, accounting for 72% of total revenues, posted a low single-digit increase of 0.7% in revenues, with growth in both aeronautical and non-aeronautical revenues [8] - Puerto Rico contributed 17.7% of total revenues with high teens growth, while Colombia, accounting for 12% of total revenues, posted 15.4% growth [8][9] - Commercial revenue per passenger reached nearly 140 pesos, representing mid-single-digit year-on-year growth, with Colombia leading at a 22% increase [10] Market Data and Key Metrics Changes - Passenger traffic remained largely flat year on year at 17,700,000, with Puerto Rico showing 3% growth, while Mexico reported a decline of nearly 2% [4][5] - International travel in Mexico saw declines from all regions, with Europe down 4.7%, the US down 5.3%, and South America down 2.7% [5] - A significant portion of the decline in international traffic, approximately 38%, is attributed to the new airport in Tulum [5] Company Strategy and Development Direction - The company continues to invest in infrastructure and expand commercial offerings, having opened 47 new commercial spaces over the last twelve months [9] - The strategy includes modernization and expansion projects at Mexican airports, with ongoing work at Lincoln Airport and taxiway hotels in Puerto Rico [15] - The company remains focused on long-term growth potential despite current market uncertainties [6][16] Management's Comments on Operating Environment and Future Outlook - Management expects traffic in Mexico to gradually stabilize over the next year as operational issues related to aircraft are resolved [6] - The company does not anticipate a material impact from potential US Department of Transportation restrictions on Mexican carriers [6] - Management expressed confidence that travel-related disruptions are typically temporary and that the company is well-positioned to mitigate risks [16] Other Important Information - The company closed the quarter with nearly 20,000,000,000 pesos in cash and cash equivalents, up 30% year on year [13] - A foreign exchange loss of 1,200,000,000 pesos negatively impacted the bottom line, contrasting with a gain of 942,000,000 pesos in the same quarter last year [13] Q&A Session Summary Question: What drove the sequential decline in non-air revenues? - Management indicated that exchange rates played a significant role, along with a slight difference in passenger mix and issues at Terminal 2 [20][22] Question: What impact could lifted capacity restrictions in Mexico City have? - Management noted that an increase in operations at Mexico City Airport could benefit overall passenger traffic, but expressed doubts about significant changes occurring soon [21][24] Question: What is the current traffic situation at Tulum Airport? - Most traffic at Tulum is still primarily commercial flights from the US, with some domestic traffic [27][30] Question: What is the outlook for traffic growth in the second half of the year? - Management expects some normalization in traffic, with potential single-digit growth anticipated compared to the second half of 2024 [34][36] Question: What is the rationale behind the new debt? - The new debt is related to tax expenses at Cancun Airport, ensuring sufficient cash for future dividend payments [60][61] Question: What are the dynamics of international traffic in Puerto Rico and Colombia? - Growth in Puerto Rico is driven by events and concerts, while Colombia's growth is primarily linked to travel from the US [84]