Navigating Contradictions: Insights from the Latest SBA Loan Strategy and Financial Strength Discussion

Financial Performance and Margin Improvement:
- BayFirst Financial reported a net loss of $1.2 million in Q2 2025, primarily due to higher provision expenses and write-downs on SBA 7(a) loans, compared to $335,000 in Q1 2025.
- The net interest margin improved by 29 basis points to 4.06% in the second quarter.
- The margin improvement was driven by an increase in noninterest-bearing accounts, savings, and money market account balances, partially offset by a decrease in interest-bearing transaction account balances.

Deposit and Loan Growth:
- Deposits increased by $35.5 million or 3.1% during Q2 2025 and by 11.6% over the past year to $1.16 billion.
- Loans held for investment increased by $41 million or 3.8% during the second quarter and by 11.7% over the past year to $1.13 billion.
- The growth in deposits and loans was supported by the successful Refer Live program and community bank initiatives.

Asset Quality and Credit Challenges:
- BayFirst reported net charge-offs of $6.8 million in Q2 2025, up from $3.3 million in Q1 2025, primarily due to elevated risk in SBA 7(a) loans.
- Nonperforming assets were 1.79% of total assets at the end of June 30, 2025, down from 2.08% as of March 31, 2025.
- The credit challenges were attributed to higher interest rates, inflation, and tariff uncertainties, which particularly impacted smaller SBA loans.

Strategic Review and Cost Management:
- The company initiated a comprehensive strategic review to derisk unguaranteed SBA 7(a) balances and position for long-term growth.
- Dividend payments and Board of Director fees were suspended to offset charges and manage expenses.
- The strategic review aims to enhance shareholder value by optimizing the bank's balance sheet and operational costs.