BayFirst Financial Corp. closed a $94.6 million sale of SBA 7(a) loans to Banesco USA on December 15, 2025, completing a divestiture that began with a September 29, 2025 agreement. The transaction removes a large portion of BayFirst’s government‑guaranteed loan portfolio and transfers servicing rights to Banesco, which will assume responsibility for the remaining balances.
The sale lifts BayFirst’s pro‑forma total capital ratio to 10.1 % and its tier 1 leverage ratio to 6.8 %, improving the bank’s capital position and providing a buffer for future growth. The improvement comes after the bank recorded $7.3 million in restructuring charges and $10.9 million in credit‑loss provisions during the quarter, reflecting the cost of exiting the SBA business and the higher risk profile of the remaining portfolio.
Strategically, BayFirst is moving away from SBA lending to focus on community banking, including commercial and industrial lending, consumer loans, residential mortgages, and treasury management services. The sale eliminates a revenue source that generated $16.5 million in gains on the sale of government‑guaranteed loans in the first nine months of 2025, so the bank must replace that income through its new product mix while managing credit risk and capital adequacy.
In the third quarter, BayFirst reported a net loss of $18.9 million, a sharp decline from the $1.2 million net loss in Q2 2025 and a reversal from the $1.1 million net income in Q3 2024. Noninterest income fell to a negative $1 million from $12.3 million in Q3 2024, largely due to a $5.1 million fair‑value adjustment on held‑for‑sale loans and a drop in government‑guaranteed loan fair‑value gains. Credit‑loss provisions rose to $10.9 million, more than triple the $3.1 million recorded in Q3 2024, underscoring the bank’s heightened risk exposure after the divestiture.
Segment analysis shows that community banking remains the core driver, but the exit from SBA lending has reduced the overall loan portfolio size. BayFirst’s commercial and industrial lending, consumer loans, and residential mortgage segments continue to generate steady revenue, while treasury management services provide a stable fee income stream. The bank’s brokered deposits, which have been a high‑cost funding source, are expected to decline as the bank shifts toward low‑cost, relationship‑based deposits in the Tampa Bay region.
CEO Thomas G. Zernick emphasized that the sale is a decisive step toward a stronger future, highlighting the bank’s commitment to a community‑bank mission and the importance of stable, low‑cost funding. He noted that the strategic pivot will allow BayFirst to focus on relationship‑driven banking and to build a more resilient balance sheet.
Market reaction to the Q3 earnings release was negative, with the stock falling 10.8 % since the earnings announcement. Investors cited the material net loss, the one‑time restructuring charges, and the strategic shift away from SBA lending as key drivers of the decline. A “Hold” rating from one analyst reflects uncertainty about the bank’s ability to replace the lost revenue and the impact of the higher credit‑loss provisions.
Looking forward, BayFirst plans to close an additional $4.5 million of loan balances with Banesco before year‑end, further reducing its SBA exposure. The bank’s guidance remains cautious, with management focusing on cost discipline and the gradual replacement of SBA revenue through its core community‑bank product mix. The strategic pivot is expected to strengthen the bank’s capital position and reduce reliance on high‑cost brokered deposits, positioning BayFirst for long‑term stability in a competitive regional banking landscape.
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