BayFirst Financial Corp. (BAFN): 5 FORCES Analysis [Nov-2025 Updated]

You're assessing BayFirst Financial Corp. (BAFN) right after its major pivot from national SBA lending to a pure-play community bank in Tampa Bay, and frankly, the Q3 2025 results-including a $18.9 million net loss and a tight 3.61% NIM-tell us the competitive landscape is tough. Before making any investment calls, you need a clear picture of the forces at play: how much leverage do depositors have with $235.9 million in brokered deposits, and what does the threat from local rivals mean for a bank with only $1.35 billion in assets? Let's break down Porter's Five Forces to map out the near-term risks and opportunities in this new, localized battleground.

BayFirst Financial Corp. (BAFN) - Porter's Five Forces: Bargaining power of suppliers

When we look at the suppliers for BayFirst Financial Corp. (BAFN), we are primarily talking about sources of funding and critical operational technology. The power these suppliers hold directly impacts BAFN's cost structure and operational flexibility. Right now, given the recent financial results, this power dynamic is under close scrutiny.

The reliance on certain funding sources definitely tips the scale toward the supplier. For instance, the use of brokered deposits, which are essentially funds sourced from brokers rather than directly from local customers, increases cost sensitivity. At the end of the third quarter of 2025, BayFirst Financial Corp. had $235.9 million in brokered deposits. This figure is up from $186.7 million at the end of the second quarter of 2025, showing an increased reliance on this potentially more expensive, rate-sensitive funding channel, which hands power to those brokers.

However, BayFirst Financial Corp. does have ways to diversify and slightly mitigate this supplier power. Access to secured borrowings from the Federal Home Loan Bank (FHLB) provides a crucial alternative funding backstop. As of September 30, 2025, the company reported having $146 million of unused, available borrowing capacity at the FHLB based on pledged loans. This diversification helps, as it means the bank isn't solely dependent on the deposit market or brokered sources to meet liquidity needs.

The technology side presents a different kind of supplier leverage. Core processors and key FinTech partners are sticky suppliers. If you're a bank like BayFirst Financial Corp., ripping out a core processing system is a massive, multi-year, multi-million-dollar headache. This high switching cost means these technology vendors have significant leverage over pricing and service terms.

To put the funding environment in context, you have to look at the bottom line. The capital markets-the sources for raising equity or debt-definitely hold leverage, especially when a bank is showing weakness. BayFirst Financial Corp. reported a net loss of $18.9 million for the third quarter of 2025. When you are posting losses of that magnitude, any potential new debt or equity provider knows they are taking on more risk, and they will price their capital accordingly, increasing their bargaining power.

Here's a quick look at the key funding supplier metrics as of Q3 2025:

The overall supplier landscape for BayFirst Financial Corp. is characterized by a few critical dependencies. We can summarize the key pressure points from suppliers:

• Brokered deposit providers command higher rates.
• Core technology vendors benefit from high exit barriers.
• Capital providers gain leverage due to recent losses.
• FHLB access provides a necessary, but not unlimited, offset.
• Total deposits stand at $1.17 billion, providing a stable base.

Finance: draft a sensitivity analysis on deposit costs assuming brokered deposits rise by 50 basis points next quarter.

BayFirst Financial Corp. (BAFN) - Porter's Five Forces: Bargaining power of customers

You're looking at BayFirst Financial Corp. (BAFN) right now, and the power held by its customers-both on the funding and lending sides-is a major factor in its strategy. Honestly, the customer base for deposits holds significant leverage, primarily because of deposit insurance rules and the ease of moving money.

Retail depositors have low switching costs and 84% of deposits are FDIC insured as of September 30, 2025, increasing their rate sensitivity. When a large chunk of your funding base is protected up to the federal limit, those customers are more willing to shop around for a better yield, especially when rates are high. We saw evidence of this shift in the third quarter of 2025; savings and money market account balances dropped by $13.7 million during that period, suggesting depositors were moving funds out of those lower-yielding accounts. The total deposit base stood at $1.17 billion at the end of Q3 2025.

Here's a quick look at the deposit structure that customers control as of September 30, 2025, which shows where the rate pressure is most acute:

The bank's new focus on the highly competitive Tampa Bay market means commercial and residential loan customers have many local options. BayFirst National Bank operates twelve full-service banking offices throughout the Tampa Bay-Sarasota region, and its strategic pivot is now centered on this local footprint, emphasizing conventional community bank loans. When you are doubling down on a specific geographic area, you are directly facing off against every other regional and local player for those commercial and residential relationships, so pricing and service have to be spot-on. You can't hide behind a national niche anymore.

Customers can easily access higher-yield savings products from national or online-only banks, defintely increasing their power. This is the core risk for BayFirst's funding side. The ability for depositors to move funds digitally to an online-only bank offering a significantly higher Annual Percentage Yield (APY) means BayFirst must price its savings products competitively or risk seeing those balances erode. The $13.7 million reduction in savings and money market balances in Q3 2025 is a concrete example of this power in action, as customers likely chased better returns elsewhere.

Small business borrowers, BayFirst's core target, can choose from regional banks, credit unions, and non-bank lenders. This force is particularly relevant given BayFirst's recent strategic overhaul. The bank announced its exit from the SBA 7(a) lending business entirely, selling a large portion of that portfolio to Banesco USA. While the bank was previously the 8th largest SBA 7(a) lender by units originated nationwide as of June 30, 2025, this exit means their core small business customer base now has to look to the remaining regional banks, local credit unions, and specialized non-bank lenders for that specific type of government-guaranteed financing. For the conventional commercial and industrial (C&I) loans they are focusing on, the local competition remains fierce across the Tampa Bay area. Finance: review the Q4 2025 deposit beta projections against the top three regional competitors by Friday.

BayFirst Financial Corp. (BAFN) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive rivalry force for BayFirst Financial Corp. (BAFN) right now, and it's a classic regional banking story, complicated by a major strategic pivot. The intensity here is definitely high, especially as BayFirst Financial Corp. focuses back on its core market.

BayFirst Financial Corp. operates its community banking business with 12 full-service banking offices throughout the Tampa Bay-Sarasota region. This local footprint puts BayFirst Financial Corp. in direct, daily competition with much larger regional banks that have deeper pockets and broader product suites in this vibrant, fast-growing area. The rivalry is inherently high because the basic products-checking accounts, standard commercial loans, and consumer lending-are largely commoditized. Customers often choose based on relationship, service quality, or simply the closest branch, making price competition a constant factor.

A significant recent development that alters the rivalry landscape is the strategic exit from national SBA 7(a) lending. BayFirst Financial Corp. announced a definitive agreement in September 2025 to sell $103 million in SBA 7(a) loan balances to Banesco USA. This move, expected to close in the fourth quarter of 2025, effectively reduces the direct competitive rivalry BayFirst Financial Corp. faced with other national specialty lenders in that specific segment. The bank is sharpening its focus on its community banking operation, which means the rivalry pressure shifts more intensely toward local deposit gathering and relationship-based lending within its established geographic footprint.

The pressure from this competitive environment is clearly reflected in the bank's profitability metrics. The Net Interest Margin (NIM) was 3.61% in the third quarter of 2025. This figure represents a compression of 45 basis points from the 4.06% reported in the second quarter of 2025, indicating that the cost of funds is rising faster than asset yields, or that the mix of earning assets is shifting toward lower-yielding assets in a high-rate environment. To be fair, this is a tough environment for any bank competing for deposits.

Here's a quick look at how key metrics related to this competitive focus have shifted:

The competition for core funding is evident in the deposit growth, which increased by $7.7 million (or 0.7%) in Q3 2025, reaching $1.17 billion. This growth is vital for funding the community bank portfolio, which is now the primary focus.

The strategic shift itself highlights areas of past rivalry pressure:

• Reduced reliance on gains from the sale of government-guaranteed loans.
• Discontinuance of the national Bolt loan program in August 2025.
• Sale of $103 million in SBA 7(a) loans at 97% of retained balances.
• Focusing resources on relationship-driven banking across the Tampa Bay region.

The intensity of rivalry in the core market means BayFirst Financial Corp. must execute flawlessly on its relationship-driven approach to grow deposits and fee income sources like treasury management services. Finance: draft updated competitive positioning statement for the community banking segment by Friday.

BayFirst Financial Corp. (BAFN) - Porter's Five Forces: Threat of substitutes

Non-bank FinTech lenders offer faster, often cheaper, consumer and small business loans, substituting traditional bank credit. For instance, in the personal loan space, the average interest rate was cited at 12.33%, which is significantly lower than the average credit card rate of 21.76%, making debt consolidation loans an attractive alternative for consumers looking to lower monthly payments. Leading FinTech platforms are showing strong growth; one reported transaction growth of 45% year-over-year in its first quarter of fiscal year 2025. This segment is expected to see accelerating lending activity in 2025, supported by a projected lower interest rate environment.

Credit unions and mutual banks in the Tampa Bay area offer highly competitive deposit and loan rates, appealing to local customers. For example, as of late 2025, Tampa Bay Federal Credit Union advertised a Rewards Checking APY up to 1.00% on balances up to $5,000.00, and a new auto loan APR as low as 5.14%. Earlier in 2025, this same credit union offered a 9-month Certificate of Deposit (CD) rate of 4.85%, and a jumbo 1-year CD at 4.75%. BayFirst Financial Corp. held total deposits of $1.17 billion as of September 30, 2025, making these local, rate-competitive alternatives a direct threat for deposit retention.

Money market funds and Treasury bills are direct substitutes for BayFirst's $1.17 billion in deposits. These investment vehicles compete directly for cash balances seeking yield and safety. The Federal Reserve's Funds Target rate was reduced to a range of 4.0-4.25% on September 17, 2025. Despite this, money fund yields remained attractive relative to some bank deposit products. For context, the U.S. money market fund industry assets reached $7 trillion in 2024.

Online-only banks and payment platforms substitute for basic transaction and deposit services. The shift is pronounced: over 76% of people in the US now use online or mobile banking. Mobile banking is the primary access method for 55% of US consumers. The expected US mobile banking transaction volume for 2025 is projected to hit $796.68 billion, indicating a massive volume of activity bypassing traditional branch-based transaction processing. Furthermore, digital wallets like PayPal are used by about 60% of consumers at least once per month. These platforms compete on convenience and low-to-no fee structures, which is a major draw when BayFirst Financial Corp. is focused on restructuring its core business.

• Digital banking platform market expected to grow 10.9% from 2024 to 2025.
• Over 76% of US population uses online or mobile banking.
• Digital wallets used monthly by about 60% of consumers.
• FinTech companies have cut operational costs by 20% to 40% using technology.
• The digital banking platform market is projected to reach $8.12 billion in 2025.

BayFirst Financial Corp. (BAFN) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers to entry for BayFirst Financial Corp. (BAFN) in late 2025, and honestly, the hurdles are quite high, though not insurmountable for every type of competitor. The traditional path to banking is definitely expensive and slow, but new players, especially FinTechs, are finding clever ways around the toughest parts.

High regulatory capital requirements and the cost of obtaining a national bank charter create a significant barrier to entry. Regulators, while showing some willingness to grant de novo (new) bank charters as of October 2025, maintain very strict expectations from day one. For example, a conditionally approved national bank charter applicant can face requirements like maintaining a minimum 12% Tier 1 leverage ratio during its initial, enhanced scrutiny period. This upfront capital commitment immediately filters out less-funded operations.

The bank's relatively small size ($1.35 billion in total assets as of September 30, 2025) means it is vulnerable to new, well-capitalized digital banks. While BAFN is a national bank subsidiary, its asset base is modest compared to the giants that can absorb initial losses or fund aggressive growth campaigns. A new entrant with significant venture capital backing could target BAFN's specific markets or product lines with much deeper pockets.

Establishing a local, relationship-driven community banking presence in a mature market like Tampa Bay is slow and expensive. BayFirst National Bank, for instance, currently operates twelve full-service banking offices throughout the Tampa Bay-Sarasota region. Replicating this physical footprint, plus the necessary local relationships and brand trust, requires substantial time and investment in a market that still shows strong fundamentals, like the continued opening of new branches by established players such as PNC Bank in downtown St. Pete.

FinTech companies can enter the market segment-by-segment without facing the full regulatory burden of a bank. These firms are strategically pursuing state-level trust charters as a more attainable foothold, aiming to perform bank-like activities with potentially less stringent supervision, regulation, or capital requirements than a full national bank. This approach allows them to bypass the most onerous aspects of the traditional chartering process while still accessing critical functions, which definitely changes the competitive dynamic.

Here's a quick look at some of the structural barriers and competitive dynamics:

The key takeaway here is that while the regulatory moat protects against a flood of direct bank competitors, the threat from specialized, lightly-regulated FinTechs operating adjacent to traditional banking is very real. You need to watch where they are trying to bridge that regulatory gap.

The pressures from potential new entrants can be summarized by looking at the types of barriers they face or bypass:

• High initial capital needed for a national charter.
• Strict regulatory oversight post-approval.
• Slow, expensive process for physical build-out.
• FinTechs using trust charters for regulatory arbitrage.
• Regulators' caution regarding digital assets in banking.

Finance: draft analysis of FinTech partnership vs. organic growth by next Tuesday.