Core Insights - BayFirst Financial Corp. experienced a significant decline in share price, dropping 10.8% following a negative earnings report for Q3 2025, contrasting with a minor decline of 0.4% in the S&P 500 index during the same period [1] - The company reported a net loss of $4.66 per share for Q3 2025, a stark contrast to a net income of 18 cents per share in the same quarter the previous year, primarily due to increased provisions for credit losses and one-time charges related to exiting the SBA 7(a) lending operations [2][3] - Total revenues increased by 19.4% year-over-year to $11.3 million, up from $9.4 million, driven by net interest income [2] Financial Performance - The net interest margin (NIM) improved to 3.61%, an increase of 27 basis points from 3.34% in the same period last year [4] - Noninterest income turned negative at $1 million, down from $12.3 million in Q3 2024, largely due to a $5.1 million fair value adjustment on held-for-sale loans [4] - Noninterest expenses surged to $25.2 million from $17.1 million in the prior year's third quarter, influenced by a $7.3 million restructuring charge [5] Management Commentary - CEO Thomas Zernick characterized the quarter as a period of "significant strategic transformation," emphasizing the exit from the SBA 7(a) lending business as a key move to derisk the balance sheet and refocus on core community banking [6] - Management aims for a targeted return to profitability in 2026, with a projected return on assets of 40-70 basis points [6] Strategic Developments - The company incurred a $5.1 million loss on held-for-sale SBA loans sold to Banesco USA, representing 97% of their balances, with expectations to sell additional SBA loan balances in future quarters [7] - BayFirst is shifting its focus towards consumer and residential mortgage lending in the Tampa Bay region [7] Performance Influencers - The net loss was significantly impacted by a $7.3 million restructuring expense and a $10.9 million provision for credit losses, which was more than triple the $3.1 million recorded in Q3 2024 [8] - Asset quality metrics worsened, with nonperforming assets rising to 1.97% of total assets from 1.38% a year ago, and the allowance for credit losses to loans held for investment increasing to 2.61% from 1.48% [9] Future Guidance - Management reaffirmed its goal of returning to profitability post-restructuring, targeting a return on assets of 40-70 basis points by 2026 [10] - Plans to resolve outstanding regulatory issues and strengthen credit administration are in place, with a potential agreement with the OCC expected in Q4 [11] Other Developments - The strategic exit from the SBA 7(a) lending business was formalized with a definitive agreement to sell a substantial portion of its SBA loan portfolio to Banesco USA [12] - The company terminated a previously announced $2 million stock repurchase program and acknowledged workforce reductions, with full-time equivalent employees decreasing from 300 to 237 [13]

Financial Data and Key Metrics Changes - The company reported a net loss of $18.9 million in Q3 2025, compared to a net loss of $1.2 million in Q2 2025 [6] - A restructuring charge of $7.3 million was recorded during the quarter, contributing to the net loss [7] - Net interest income decreased to $11.3 million, down $1 million from Q2 2025, but up $9.4 million from the same quarter last year [10] - The net interest margin fell by 45 basis points to 3.61% in Q3 2025 [9] - Total deposit balances increased by $7.7 million, or 0.7%, during Q3 2025, reaching $1.17 billion [8] Business Line Data and Key Metrics Changes - The company is exiting the SBA 7(a) lending business, which had previously contributed to revenue but also brought material risk leading to operating losses [3] - Loans held for investment decreased by $127.1 million, or 11.3%, during Q3 2025 [8] - Non-interest income was negative $1 million for Q3 2025, a significant decrease from $10.8 million in Q2 2025, primarily due to the exit from SBA 7(a) lending [11] Market Data and Key Metrics Changes - The company reported that more than 84% of its deposits were insured by the FDIC as of September 30, 2025 [9] - The allowance for credit losses increased to 2.61% of total loans held for investment at amortized cost as of September 30, 2025, compared to 1.65% in June 2025 [13] Company Strategy and Development Direction - The company is focused on de-risking its balance sheet and positioning itself for long-term sustainable growth and enhanced shareholder value [2] - The strategy includes a shift towards community banking, emphasizing relationships with local individuals and businesses [4] - The company aims to return to profitability with a target of a positive return on assets of 40 to 70 basis points in 2026 [5] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that profitability has not met expectations but expressed confidence in building a stronger organization [4] - The company expects to improve asset quality and reduce non-performing loans without significant additional provisions for credit losses [16] - Management remains optimistic about future market opportunities and operational capabilities [5] Other Important Information - The company is undergoing significant leadership changes, including the retirement of the Sarasota market leader and the appointment of new leaders in key roles [17] - The restructuring efforts are aimed at enhancing operational efficiency and aligning the organization with community banking demands [19] Q&A Session Summary Question: How much of the SBA 7(a) loans did the company hold back? - The company anticipates holding back about $167 million of unguaranteed SBA 7(a) loan balances post-closing of the transaction with Banesco USA [23] Question: What kind of reserve or allowance was applied to the SBA 7(a) loans sold? - The portfolio sale was priced at a 3% discount, and the increase in the allowance for credit losses primarily relates to the unguaranteed balances going forward [25] Question: Is the company still originating SBA loans? - The company is exiting the SBA lending business and will focus on Tampa Bay-based commercial loans and consumer lending after the closing date [33] Question: What treasury management products has the company enhanced? - The company has improved its treasury management services, including the addition of lockbox services and a new software product designed for mid-market businesses [34] Question: How much of the loan portfolio was reviewed in the third quarter? - Approximately $70 million of the portfolio was reviewed by a third party, with a targeted review of about 8% to 10% of the total portfolio [41]

Group 1 - NewtekOne, Inc. is considered one of the most undervalued financial stocks by Wall Street analysts [1] - The company secured a $90 million term loan facility and a $5 million revolving line of credit from Goldman Sachs Alternatives [1][2] - The financing will be used to repay approximately $30 million of outstanding term debt and close a $10 million undrawn line of credit [1][2] Group 2 - The remaining funds from the financing are intended for general corporate purposes, including providing loans, repaying unsecured senior debt, and supporting growth initiatives [2] - NewtekOne operates Newtek Bank, N.A. and offers services such as SBA 7(a) lending, commercial real estate financing, electronic payment processing, payroll solutions, and insurance products [2]