BayFirst Incurs Q4 Loss Amid SBA Exit and Credit Headwinds

Core Insights - BayFirst Financial Corp. reported a net loss of $2.5 million for Q4 2025, a significant decline from a net income of $9.8 million in the same quarter of the previous year [2] - The company's stock has decreased by 2.2% since the earnings report, contrasting with a 0.2% increase in the S&P 500 index during the same period [1] Financial Performance - Net interest income increased by 4.7% year-over-year to $11.2 million, while noninterest income fell to a negative $0.1 million from $22.3 million in the previous year [2] - For the full year 2025, BayFirst incurred a net loss of $22.9 million, or $5.93 per share, compared to a net income of $12.6 million, or $2.68 per share, in 2024 [11] Key Business Metrics - The net interest margin (NIM) for Q4 was 3.58%, slightly down from 3.60% a year ago, attributed to lower loan yields and higher-cost funding [3] - Total deposits rose by $12.5 million (1.1%) during the quarter and by $40.7 million (3.6%) year-over-year, reaching $1.2 billion [4] Loan Activity - Loans held for investment decreased by $102.7 million (9.6%) year-over-year, with a notable sale of $96.6 million in SBA 7(a) loans to Banesco USA [5] - Despite the contraction, BayFirst originated $26.3 million in new loans during the quarter [5] Management Commentary - CEO Thomas Zernick highlighted the company's strategic restructuring, including exiting the SBA 7(a) lending business and reducing headcount from 299 to 144 employees [6] - CFO Scott McKim noted a stable liquidity position, with the liquidity ratio exceeding 18% at year-end, up from 9.2% a year ago [7] Expense Management - A reduction in noninterest expense by $13.3 million contributed to a narrower loss, primarily due to lower compensation and the absence of restructuring charges [8] - Elevated net charge-offs of $4.6 million in Q4, up from $3.4 million in the previous year, remain a concern [9] Strategic Developments - The completed sale of $96.6 million in SBA 7(a) loans to Banesco USA marks a significant step in the company's derisking initiative [12] - BayFirst implemented substantial cost-cutting measures, including a nearly 52% reduction in full-time equivalent employees, and saw a 69% growth in treasury management revenues year-over-year [13]