BayFirst Incurs Loss in Q1 as Loan Sales Decline, Stock Down 6%

Shares of BayFirst Financial Corp. BAFN have declined 5.8% since the company reported its earnings for the quarter ended March 31, 2025. This compares unfavorably to the S&P 500 index’s 2.8% growth over the same period. Over the past month, BAFN stock has retreated 10.4%, significantly underperforming the S&P 500’s 1.2% loss, as investors digested a mixed financial update weighed by asset quality deterioration and a bottom-line loss.

BayFirst incurred a net loss of 17 cents per share in the first quarter of 2025 against a net income of 11 cents per share in the same quarter of 2024. This swing to loss was attributed to weaker noninterest income, elevated credit costs and declining contributions from the sale of government-guaranteed loans. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Notably, revenues from net interest income improved to $11 million, up 26.4% from $8.7 million a year earlier, while noninterest income fell 38.5% year over year to $8.8 million. The decline in revenue from guaranteed loan sales and lower fair value gains further pressured results.

The company incurred a net loss of $0.3 million, reversing a net income of $0.8 million in the prior-year quarter.

BayFirst Financial Corp. Price, Consensus and EPS Surprise

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

Other Key Business Metrics

BayFirst’s net interest margin expanded to 3.77%, up from 3.42% in the first quarter of 2024 and 3.60% in the fourth quarter of 2024, supported by a favorable shift in deposit mix. Noninterest-bearing checking accounts grew by $4.5 million during the quarter, while higher-cost time deposits declined by $17.1 million. However, overall deposits declined 1.3% sequentially to $1.1 billion. Loans held for investment increased 1.7% from the prior quarter and 16% year over year, reaching $1.1 billion, driven by strength in commercial real estate and consumer loan origination. Originations under the SBA 7(a) Bolt loan program totaled $60.5 million across 481 loans during the quarter.

Credit quality metrics were mixed. While net charge-offs declined to $3.3 million from $3.7 million a year ago, nonperforming assets rose to 2.08% of total assets, compared to 0.97% in the year-ago quarter. The provision for credit losses was $4.4 million, flat sequentially but slightly up from $4.1 million in the first quarter of 2024.

Management Commentary

CEO Thomas G. Zernick noted that economic headwinds — including high interest rates, inflation, and policy uncertainty — continued to pressure borrowers, contributing to elevated net charge-offs and provisions. He emphasized BayFirst’s focus on bolstering recurring revenues through core net interest income while shifting away from reliance on gains from the sale of government-guaranteed loans. Management highlighted success in expanding its community banking footprint through low-cost deposit growth and conventional loan originations in the Tampa Bay region.

Zernick also stated that management is exploring strategies to de-risk unguaranteed SBA loan balances, including potential portfolio sales, while reinforcing underwriting discipline on new SBA 7(a) originations.

Factors Influencing Headline Numbers

The most significant factor influencing the year-over-year earnings decline was a reduction in government-guaranteed loan-related revenues. Gain on sale of these loans fell by $0.8 million, and fair value gains declined by $4.1 million. Additionally, government-guaranteed loan packaging fees declined $0.7 million year over year. A sequential comparison to the fourth quarter of 2024 also reflects the absence of an $11.6 million one-time gain from a sale-leaseback transaction, which inflated prior-quarter noninterest income.

Higher occupancy and data processing expenses contributed to a modest $0.5 million increase in noninterest expense from the prior quarter. However, year-over-year expenses declined by $2 million, aided by lower compensation and professional services costs.

Other Developments

During the quarter, BayFirst’s board authorized a share repurchase program allowing up to $2 million in buybacks through the end of 2025. As of March 31, 2025, the company had repurchased $0.3 million in common shares. Additionally, the board declared a second-quarter dividend of 8 cents per common share,  maintaining its consistent quarterly payout since 2016.

BayFirst continues to emphasize its standing in the SBA lending space, ranking as the 10th largest SBA 7(a) lender by loan units and 19th by dollar volume nationwide for the SBA’s quarter ended March 31, 2025.

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

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