BAFN Stock Slides 15% on Q2 Loss, Interest Income Up Y/Y

Shares of BayFirst Financial Corp. BAFN have experienced a significant decline of 14.9% since the company reported its earnings for the quarter ended June 30, 2025. This performance starkly contrasts with the S&P 500 index, which saw a more modest decline of 2.4% over the same period. Over the past month, BAFN's stock has decreased by 10.5%, while the S&P 500 has increased by 0.4%. This disparity highlights the challenges faced by BayFirst Financial in the current market environment.

In the second quarter of 2025, BayFirst Financial incurred a loss of 39 cents against earnings of 12 cents per share in the prior year. 

The company incurred a net loss of $1.2 million, a significant downturn from the net income of $0.9 million recorded in the same quarter of the previous year.

Total interest income increased by 10.2% to $22.5 million, driven by higher loan interest income, which rose to $21.5 million from $19.4 million. There was a 9.7% decrease in total interest expense, which reached $10.2 million.

BayFirst Financial Corp. Price, Consensus and EPS Surprise

BayFirst Financial Corp. price-consensus-eps-surprise-chart | BayFirst Financial Corp. Quote

Loan Portfolio and Asset Quality

BayFirst Financial's loan portfolio showed growth, with total loans held for investment increasing to $1.13 billion from $1 billion a year ago. The allowance for credit losses also rose to $17 million, reflecting a cautious approach to potential loan defaults. Nonperforming loans, excluding government-guaranteed balances, accounted for 1.37% of total loans, a slight improvement from 1.47% in the previous quarter. However, the overall nonperforming loans as a percentage of total loans remained elevated at 2.09%.

Operational Efficiency and Expenses

The company's noninterest income totaled $10.8 million, up from $8.8 million in the previous quarter, driven by gains on the sale of government-guaranteed loans. However, non-interest expenses increased to $17.5 million from $16.6 million, with notable rises in salaries, benefits, and data processing costs. The efficiency ratio, a measure of operational efficiency, deteriorated, reflecting the increased cost pressures.

Management Insights and Strategic Focus

Management commentary highlighted the challenges posed by rising interest rates and competitive pressures in the banking sector. The increase in provision for credit losses to $7.3 million from $3 million a year ago underscores the cautious stance taken by the management in light of potential economic uncertainties. The company remains focused on expanding its loan portfolio while maintaining stringent credit standards to mitigate risks.

Capital Position and Shareholders' Equity

BayFirst Financial's capital position remained stable, with total shareholders' equity at $108.2 million, up from $101 million a year ago. The tangible book value per common share stood at $22.30, reflecting a slight decrease from $22.95 at the end of 2024. The company's return on average common equity was negative at 6.8%, compared to a positive 42.7% at 2024-end, indicating the impact of the current challenging environment on profitability.

Other Developments

BayFirst Financial continues to operate with 12 banking center offices and a workforce of 300 full-time equivalent employees, maintaining its operational footprint while focusing on strategic growth initiatives.

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This article originally published on Zacks Investment Research (zacks.com).

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