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BayFirst Incurs Q4 Loss Amid SBA Exit and Credit Headwinds
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Shares of BayFirst Financial Corp. (BAFN - Free Report) have declined 2.2% since the company reported its earnings for the quarter ended Dec. 31, 2025. This compares to the S&P 500 index’s 0.2% growth over the same time frame. Over the past month, the stock has declined 16.8% compared with the S&P 500’s 1.5% increase.
BayFirst incurred a net loss of 69 cents per share for the fourth quarter of 2025, which marked a reversal from the net income of $2.11 per share in the year-ago quarter.
Net interest income rose 4.7% year over year to $11.2 million from $10.7 million in the fourth quarter of 2024, while noninterest income plummeted to a negative $0.1 million from a strong $22.3 million in the year-ago period, primarily due to reduced gains on SBA 7(a) loan sales and the absence of a one-time $11.6 million gain from branch property sales in 2024.
BayFirst incurred a net loss of $2.5 million against a net income of $9.8 million in the year-ago quarter.
BayFirst Financial Corp. Price, Consensus and EPS Surprise
BayFirst's net interest margin (NIM) stood at 3.58% in the fourth quarter, down slightly from 3.60% a year ago. The decline reflected lower loan yields and the impact of higher-cost funding, though management noted efforts are underway to reduce high-cost deposits and improve pricing efficiency.
Total deposits rose by $12.5 million, or 1.1%, during the quarter and by $40.7 million (3.6%) year over year to reach $1.2 billion. Time deposits and interest-bearing transaction accounts drove the growth, partly offset by declines in noninterest-bearing and savings accounts. Approximately 85% of deposits were FDIC insured as of year-end.
Loan activity contracted during the quarter. Loans held for investment decreased $102.7 million (9.6%) year over year. The sale of $96.6 million in SBA 7(a) loans to Banesco USA marked a significant step in the company’s plan to derisk its balance sheet. Despite these headwinds, BayFirst originated $26.3 million in new loans during the quarter.
Management Commentary
CEO Thomas Zernick emphasized the company’s progress on strategic restructuring, particularly the exit from the SBA 7(a) lending business and headcount reductions, which declined to 144 employees from 299 at the end of 2024. Zernick stated that BayFirst is now better positioned for long-term, sustainable growth with a leaner cost structure and enhanced capital ratios.
CFO Scott McKim highlighted a stable liquidity position, with the bank’s on-balance sheet liquidity ratio exceeding 18% at year-end, up from 9.2% a year ago. Management expects this liquidity cushion to aid in reducing the cost of funds and improving net interest margins over time.
Factors Influencing the Headline Numbers
The company’s return to a narrower loss was driven largely by a $13.3 million reduction in noninterest expense, primarily from lower compensation and the absence of the $7.3 million restructuring charges recorded in the third quarter. Provision for credit losses also dropped to $2 million from $4.5 million year over year.
Nonetheless, elevated net charge-offs, $4.6 million in the fourth quarter, up from $3.4 million in the year-ago quarter, remain a concern, primarily driven by unguaranteed SBA 7(a) loans, which accounted for $4.1 million of the charge-offs. The ratio of net charge-offs to average loans rose to 1.95% from 1.34% in the prior-year quarter.
Noninterest income turned negative, dragged down by minimal gains on SBA loan sales and a $1.9 million loss in fair value of government-guaranteed loans. Year-over-year declines in this segment reflect the strategic wind-down of the SBA business, signaling a shift in revenue composition going forward.
Full-Year Update
For the year ended Dec. 31, 2025, BayFirst incurred a net loss of $22.9 million, $5.93 per per share, against a net income of $12.6 million, $2.68 per share, in 2024. This was due to a $42.1 million decline in noninterest income and a $9.9 million increase in credit loss provisions
Net interest income rose 20.4% year over year to $45.8 million, supported by higher loan interest income and lower deposit costs.
Other Developments
A key development during the quarter was the completed sale of $96.6 million in SBA 7(a) loans to Banesco USA. This transaction aligned with BayFirst’s announced exit from the SBA 7(a) lending business and marked a major milestone in its derisking initiative. Banesco USA has assumed servicing of the sold loans and was engaged as subservicer for the remaining SBA 7(a) portfolio.
In addition to the loan sale, BayFirst implemented substantial cost-cutting measures, including a near 52% reduction in full-time equivalent employees. The company also saw 69% growth in treasury management revenues year over year, suggesting some success in pivoting to core banking functions.
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BayFirst Incurs Q4 Loss Amid SBA Exit and Credit Headwinds
Shares of BayFirst Financial Corp. (BAFN - Free Report) have declined 2.2% since the company reported its earnings for the quarter ended Dec. 31, 2025. This compares to the S&P 500 index’s 0.2% growth over the same time frame. Over the past month, the stock has declined 16.8% compared with the S&P 500’s 1.5% increase.
BayFirst incurred a net loss of 69 cents per share for the fourth quarter of 2025, which marked a reversal from the net income of $2.11 per share in the year-ago quarter.
Net interest income rose 4.7% year over year to $11.2 million from $10.7 million in the fourth quarter of 2024, while noninterest income plummeted to a negative $0.1 million from a strong $22.3 million in the year-ago period, primarily due to reduced gains on SBA 7(a) loan sales and the absence of a one-time $11.6 million gain from branch property sales in 2024.
BayFirst incurred a net loss of $2.5 million against a net income of $9.8 million in the year-ago 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 (NIM) stood at 3.58% in the fourth quarter, down slightly from 3.60% a year ago. The decline reflected lower loan yields and the impact of higher-cost funding, though management noted efforts are underway to reduce high-cost deposits and improve pricing efficiency.
Total deposits rose by $12.5 million, or 1.1%, during the quarter and by $40.7 million (3.6%) year over year to reach $1.2 billion. Time deposits and interest-bearing transaction accounts drove the growth, partly offset by declines in noninterest-bearing and savings accounts. Approximately 85% of deposits were FDIC insured as of year-end.
Loan activity contracted during the quarter. Loans held for investment decreased $102.7 million (9.6%) year over year. The sale of $96.6 million in SBA 7(a) loans to Banesco USA marked a significant step in the company’s plan to derisk its balance sheet. Despite these headwinds, BayFirst originated $26.3 million in new loans during the quarter.
Management Commentary
CEO Thomas Zernick emphasized the company’s progress on strategic restructuring, particularly the exit from the SBA 7(a) lending business and headcount reductions, which declined to 144 employees from 299 at the end of 2024. Zernick stated that BayFirst is now better positioned for long-term, sustainable growth with a leaner cost structure and enhanced capital ratios.
CFO Scott McKim highlighted a stable liquidity position, with the bank’s on-balance sheet liquidity ratio exceeding 18% at year-end, up from 9.2% a year ago. Management expects this liquidity cushion to aid in reducing the cost of funds and improving net interest margins over time.
Factors Influencing the Headline Numbers
The company’s return to a narrower loss was driven largely by a $13.3 million reduction in noninterest expense, primarily from lower compensation and the absence of the $7.3 million restructuring charges recorded in the third quarter. Provision for credit losses also dropped to $2 million from $4.5 million year over year.
Nonetheless, elevated net charge-offs, $4.6 million in the fourth quarter, up from $3.4 million in the year-ago quarter, remain a concern, primarily driven by unguaranteed SBA 7(a) loans, which accounted for $4.1 million of the charge-offs. The ratio of net charge-offs to average loans rose to 1.95% from 1.34% in the prior-year quarter.
Noninterest income turned negative, dragged down by minimal gains on SBA loan sales and a $1.9 million loss in fair value of government-guaranteed loans. Year-over-year declines in this segment reflect the strategic wind-down of the SBA business, signaling a shift in revenue composition going forward.
Full-Year Update
For the year ended Dec. 31, 2025, BayFirst incurred a net loss of $22.9 million, $5.93 per per share, against a net income of $12.6 million, $2.68 per share, in 2024. This was due to a $42.1 million decline in noninterest income and a $9.9 million increase in credit loss provisions
Net interest income rose 20.4% year over year to $45.8 million, supported by higher loan interest income and lower deposit costs.
Other Developments
A key development during the quarter was the completed sale of $96.6 million in SBA 7(a) loans to Banesco USA. This transaction aligned with BayFirst’s announced exit from the SBA 7(a) lending business and marked a major milestone in its derisking initiative. Banesco USA has assumed servicing of the sold loans and was engaged as subservicer for the remaining SBA 7(a) portfolio.
In addition to the loan sale, BayFirst implemented substantial cost-cutting measures, including a near 52% reduction in full-time equivalent employees. The company also saw 69% growth in treasury management revenues year over year, suggesting some success in pivoting to core banking functions.