From the start of the fourth quarter to date, we have generated approximately $380 million in free cash from two primary sources: $130 million from bulk portfolio sales and $250 million from portfolio runoff and other asset management resolutions. Overall, our liquidity projections anticipate generating an additional $500 million in free cash flow by year-end from two primary sources. First, we expect to generate $250 million from portfolio runoff consistent with our 36% trailing twelve-month repayment rate ...

Financial Data and Key Metrics Changes - The company reported a GAAP loss from continuing operations of $1.46 per common share for the fourth quarter, with distributable earnings reflecting a loss of $0.43 per common share, and $0.09 per common share when excluding realized losses on asset sales [14] - Book value per share declined 14% to $8.79 from $10.28 in the prior quarter, primarily due to an increase in combined valuation allowance and CECL reserves totaling $173 million [14][15] - The recurring revenue decreased to $41.5 million from $47.3 million in the prior quarter, attributed to a reduction in gain on sale revenue from lower SBA 7(a) and USDA loan sales [15] Business Line Data and Key Metrics Changes - The company is targeting a 25% reduction in operating costs to align with a simplified CRE investment strategy, increasing capital allocation to capital-light small business lending operations from 10% to 20% [9] - The company generated approximately $380 million in free cash from portfolio sales and asset management resolutions, with expectations to generate an additional $500 million by year-end [6][7] - The negative earnings drag from sub and non-performing loans is approximately $0.08 per share, with cash outflows of $13 million per quarter [7] Market Data and Key Metrics Changes - The occupancy rate for the hotel component of the Ritz property increased by 6.5% year-over-year, with ADR rising by 5% to $492 and RevPAR reaching $210 [10] - The company remains a top five lender in the SBA market despite a 50% decline in originations due to last year's government shutdown, with originations in the quarter totaling $84 million [11] Company Strategy and Development Direction - The company is focused on a comprehensive balance sheet repositioning strategy with three key priorities: strengthening liquidity, selling underperforming CRE assets, and positioning for sustainable future growth [4] - The repositioning plan includes aggressive asset management and a streamlined CRE origination business with a lower-cost structure [4][5] - The company is committed to enhancing liquidity and strengthening its platform while increasing reliance on external managers to expand investment capacity [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing the liquidity plan and achieving stabilization in key assets, particularly the Ritz property [20] - The company anticipates continued pressure on book value but expects a more attractive portfolio with a competitive earnings profile post-repositioning [8] - Management highlighted the importance of strategic asset management decisions to not extend loans, focusing instead on short-term resolutions [22] Other Important Information - The company has successfully retired its 5.75% February senior unsecured note upon maturity [8] - The Ritz property represents 16% of year-end stockholders' equity, with significant progress made in its stabilization plan [9][10] Q&A Session Summary Question: Thoughts on keeping the Portland asset and accelerating the time frame - Management indicated strong progress in the stabilization plan and would likely lean towards holding the asset until stabilization is achieved [19][20] Question: Increase in nonaccruals and underlying performance - Management clarified that the increase in nonaccruals is due to strategic decisions rather than negative credit migration, focusing on short-term resolutions [22][23] Question: Anticipation of needing to reverse previously accrued interest - Management confirmed that accrued interest for loans identified for sale was reversed in the fourth quarter, with a reduction of approximately $53 million [28] Question: Sales price of loans sold in February relative to par - Loans sold in February were priced in the high nineties, with carrying and UPB values being closely aligned [40] Question: Other monetization strategies being considered - Management acknowledged the potential for selling non-core assets but emphasized commitment to the SBA business as a high ROE segment [48][49]

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]

Financial Data and Key Metrics Changes - The company reported a net loss of $2.5 million in Q4 2025, an improvement from a net loss of $18.9 million in Q3 2025, which included a restructuring charge of $7.3 million and additional provision expense of $8.1 million [7] - Loans held for investment decreased by $34.8 million, or 3.5%, during Q4 2025, ending at $963.9 million, with total loans held for investment decreasing by $102.7 million, or 9.6%, over the past year [7] - Deposits increased by $12.5 million, or 1.1%, during Q4 2025, and increased by $40.7 million, or 3.6%, over the past year, ending at $1.18 billion [8] Business Line Data and Key Metrics Changes - Treasury Management revenues grew by 69% compared to Q4 2024, indicating strong performance in this segment [3] - Non-interest income was negative $104,000 for Q4 2025, which is an improvement of $900,000 compared to Q3 2024, but a decrease from $22.3 million in Q4 2024 [10] Market Data and Key Metrics Changes - The company's liquidity ratio was over 18% at year-end, supporting efforts to reduce high-cost deposits and improve the bank's cost of funds [5] - 85% of the bank's deposits were insured by the FDIC on December 31, 2025, providing a stable foundation for future growth [3] Company Strategy and Development Direction - The company has exited the SBA 7(a) lending business and is focusing on community banking, aiming to be the premier community bank in Tampa Bay [2][3] - The strategic plan for 2026 emphasizes fortifying the balance sheet and maintaining a culture of disciplined risk management to drive sustainable revenue growth [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in the legacy SBA 7(a) business but expressed confidence in the community bank metrics, which appear strong outside of this segment [5] - The company expects a lessening impact from additional charge-offs over time as it continues to manage credit risk and improve asset quality [4][18] Other Important Information - The provision for credit losses was $2 million in Q4 2025, down from $10.9 million in Q3 2025 and $4.5 million in Q4 2024 [12] - Total annualized net charge-offs as a percentage of average loans held for investment were 1.95% for Q4 2025, up from 1.24% in Q3 2025 [14] Q&A Session Summary Question: What is the specific allowance against the $171 million of unguaranteed government loans, and what has been the recent default experience? - The $171.6 million represents all SBA 7(a) unguaranteed balances, with about 13% of the balances within the allowance for credit losses, indicating a lower default rate [25] Question: What did the unguaranteed portion peak at? - The unguaranteed portion was about $50.5 million higher at the end of Q3 2025 [28] Question: Can you discuss the growth in deposits and the reduction in deposit costs? - The growth in deposits is attributed to strong relationships with customers, and the overall cost of funds has decreased by approximately 13 basis points sequentially [35][36]

Financial Data and Key Metrics Changes - The company reported a net loss of $2.5 million in Q4 2025, an improvement from a net loss of $18.9 million in Q3 2025, which included a restructuring charge of $7.3 million and additional provision expense of $8.1 million [7] - Loans held for investment decreased by $34.8 million, or 3.5%, in Q4 2025, ending at $963.9 million, with a total annual decrease of $102.7 million, or 9.6% [7] - Deposits increased by $12.5 million, or 1.1%, in Q4 2025, totaling $1.18 billion, with a year-over-year increase of $40.7 million, or 3.6% [8] - Shareholders' equity at quarter end was $87.6 million, down $23.4 million from the end of 2024, and tangible book value decreased to $17.22 per share from $17.90 per share in Q3 2025 [9] Business Line Data and Key Metrics Changes - The bank's net interest margin remained stable at 3.58%, down 3 basis points from Q3 2025, with net interest income of $11.2 million in Q4 2025, a decrease of about $100,000 from Q3 2025 but an increase of $500,000 from the same quarter last year [9] - Treasury management revenues grew by 69% compared to Q4 2024, indicating strong performance in this business line [3] Market Data and Key Metrics Changes - The company reported that 85% of its deposits were insured by the FDIC as of December 31, 2025, providing a strong safety net for depositors [8] - The liquidity ratio was over 18% at year-end, supporting efforts to reduce high-cost deposits and improve the bank's cost of funds [5] Company Strategy and Development Direction - The company has exited the SBA 7(a) lending business and is focusing on becoming the premier community bank in the Tampa Bay area, emphasizing organic growth in deposits and community engagement [2][3] - The strategic plan for 2026 includes fortifying the balance sheet and maintaining a culture of disciplined risk management to drive sustainable revenue growth [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in the legacy SBA 7(a) business but expressed confidence in the bank's ability to manage future risks and improve asset quality [4][19] - The focus on credit risk management is a priority, with efforts to reduce non-performing and classified loans expected to improve in the coming quarters [19] Other Important Information - The provision for credit losses was $2 million in Q4 2025, significantly lower than $10.9 million in Q3 2025 and $4.5 million in Q4 2024 [12] - Non-interest income was negative $104,000 in Q4 2025, an improvement from the previous quarter but a decrease from $22.3 million in Q4 2024, primarily due to reduced gains from the sale of SBA loans [10] Q&A Session Summary Question: What is the specific allowance against the $171 million of unguaranteed government loans, and what's been the recent default experience? - The company indicated that approximately 13% of the $171.6 million in unguaranteed balances is covered by the allowance for credit losses, with a default rate lower than that [25] Question: What was the peak of the unguaranteed portion before the loan sale? - The unguaranteed portion was about $50.5 million higher at the end of Q3 2025 [28] Question: Can you discuss the growth in deposits and the reduction in deposit costs? - The growth in deposits is attributed to strong relationships with customers and effective management of deposit costs, with a reduction of nearly 13 basis points sequentially [35][36]

Financial Data and Key Metrics Changes - For 2025, the company reported net income before taxes of approximately $80 million, representing a 16.4% increase, while total revenue reached $284 million, up 10.6% from $257 million in 2024 [5][24] - The EPS for Q4 was $0.65, with a full-year basic EPS of $2.21 and diluted EPS of $2.18, reflecting increases of 12% and 11% over 2024 results [8][24] - Tangible book value grew significantly, ending 2025 at $12.19 compared to approximately $6.92 at the beginning of the year [9][14] Business Line Data and Key Metrics Changes - The alternative loan program (ALP) has shown strong performance, with a focus on long-term loans that provide lower monthly payments and flexibility for clients [4][15] - The efficiency ratio at the holding company improved from 63.2% to 58.3%, while the bank's efficiency ratio is approximately 47% [12][24] - Non-performing loans (NPLs) declined for two consecutive quarters, from 7.3% to 6.9% in Q4 2025 [10][22] Market Data and Key Metrics Changes - The company opened 9,000 new depository accounts and reached a total of 34,000 active depository accounts [3] - Business deposits increased by $34 million in Q4 and $164 million for the year, while consumer deposits grew by $167 million in Q4 and $293 million for the year [11] - The held-for-investment portfolio increased by approximately 44% in 2025, with unguaranteed portions of SBA 7(a) loans comprising roughly 60% of the portfolio [25][26] Company Strategy and Development Direction - The company aims to serve independent business owners and small to medium-sized businesses (SMBs), focusing on providing better loan products with longer amortization periods and no fees [4][5] - The strategic acquisition of National Bank of New York City in January 2023 has significantly expanded the company's asset base, now approximately $1.4 billion to $1.5 billion [6][9] - The company is enhancing its technology and operational infrastructure to support growth and improve customer service, aiming to create a frictionless banking experience [29] Management's Comments on Operating Environment and Future Outlook - Management noted a K-shaped economy, with businesses serving the lower end struggling while those serving the middle and upper markets are performing well [60] - The company expects to see improved business confidence and spending, particularly in technology investments, which could drive growth in 2026 [60] - Management expressed optimism about the future, highlighting the potential for continued growth in deposits and loan originations, particularly in the ALP segment [10][24] Other Important Information - The company has initiated the offering of life insurance to business lending clients, with 25% of borrowers purchasing life insurance through the Newtek Agency [11] - The company has maintained healthy capital ratios while experiencing balance sheet growth and profitability [24][25] Q&A Session Summary Question: What drove the increase in deposit account openings? - Management attributed the 50% increase in deposit account openings to the frictionless digital access for both business and consumer deposits, along with strong margins and competitive rates [38][39] Question: What are the trends in non-interest income and expectations for next year? - Management expects the 7(a) business to pick up, citing recent changes in SBA regulations that may benefit their lending volumes [43][44] Question: How are SBA loans performing compared to competitors? - Management indicated that their charge-off rates are in line with industry averages, while their margins are significantly better than those of larger competitors [88]

Financial Data and Key Metrics Changes - For 2025, the company reported net income before taxes of approximately $80 million, representing a 16.4% increase, while total revenue reached $284 million, up 10.6% from $257 million in 2024 [5][24] - The earnings per share (EPS) for Q4 was $0.65, with the annual EPS for 2025 at $2.21 basic and $2.18 diluted, reflecting increases of 12% and 11% respectively over 2024 [8][24] - Tangible book value grew significantly, ending 2025 at $12.19 compared to approximately $6.92 at the beginning of the year [9][14] Business Line Data and Key Metrics Changes - The alternative loan program (ALP) has shown strong performance, with a significant increase in loan originations and a focus on long-term loans with lower monthly payments [10][15] - The efficiency ratio at the holding company improved from 63.2% to 58.3%, indicating better operational efficiency as assets grew by 33% [12][26] - The payments business contributed approximately $16.8 million of adjusted EBITDA in 2025, with expectations of $17.9 million in 2026 [19] Market Data and Key Metrics Changes - The company opened 9,000 new depository accounts and reached a total of 34,000 active depository accounts, indicating strong market penetration [3][11] - Business deposits increased by $34 million in Q4 and $164 million for the year, while consumer deposits grew by $167 million in Q4 and $293 million for the year [11][12] Company Strategy and Development Direction - The company aims to serve independent business owners and small to medium-sized businesses (SMBs), focusing on providing better loan products with longer amortization periods and lower interest rates [4][5] - The strategic acquisition of National Bank of New York City in January 2023 has significantly expanded the company's asset base and operational capabilities [6][9] - The company is leveraging technology to create a frictionless banking experience, integrating services such as payroll and insurance with banking products [29][30] Management's Comments on Operating Environment and Future Outlook - Management noted a K-shaped economic recovery, with businesses serving the lower end of the market facing challenges, while those serving the middle and upper markets are performing well [60] - The company expects to see continued growth in SBA loan originations and is well-positioned to adapt to changes in the lending environment [44][46] - Management expressed optimism about the future, highlighting the potential for productivity improvements and inflation stabilization in 2026 [60] Other Important Information - The company has initiated the offering of life insurance to business lending clients, with 25% of borrowers purchasing life insurance through the Newtek Agency [12] - The efficiency ratio at the bank is approximately 47%, indicating strong operational performance [12] Q&A Session Summary Question: What drove the increase in deposit account openings? - Management attributed the 50% increase in deposit account openings to the frictionless digital access for both business and consumer deposits, along with competitive rates and no fees [38][41] Question: What are the trends in non-interest income and expectations for next year? - Management expects the 7(a) business to pick up, citing recent changes in SBA regulations that may benefit their lending volumes [43][44] Question: How are SBA loans performing compared to competitors? - Management indicated that their charge-off rates are in line with industry averages, while their margins are significantly better than larger competitors [88]

Financial Data and Key Metrics Changes - For 2025, the company reported net income before taxes of approximately $80 million, representing a 16.4% increase, while total revenue reached $284 million, up 10.6% from $257 million in 2024 [5][12] - The earnings per share (EPS) for Q4 was $0.65, with the annual EPS for 2025 at $2.21 basic and $2.18 diluted, reflecting increases of 12% and 11% respectively over 2024 [8][9] - Tangible book value grew significantly, ending 2025 at $12.19 compared to approximately $6.92 at the beginning of the year [9][13] Business Line Data and Key Metrics Changes - The alternative loan program (ALP) has shown strong performance, with a total of $820 million in originations and low levels of non-performing loans (NPLs) at $27.6 million [10][16] - The payments business contributed approximately $16.8 million of adjusted EBITDA in 2025, with expectations of $17.9 million in 2026 [19] - The insurance agency generated $740 million in pre-tax income for 2025, projected to increase to $1.6 million in 2026 [19] Market Data and Key Metrics Changes - The company opened 9,000 new depository accounts and reached a total of 34,000 active depository accounts, indicating strong market penetration [3][11] - Business deposits increased by $34 million in Q4 and $164 million for the year, while consumer deposits grew by $167 million in Q4 and $293 million for the year [11][12] Company Strategy and Development Direction - The company focuses on serving independent business owners and small to medium-sized businesses (SMBs), emphasizing the underserved nature of this demographic [5][7] - The strategic acquisition of the National Bank of New York City in January 2023 has significantly expanded the company's asset base, now approximately $2.4 billion to $2.5 billion [6][12] - The company aims to leverage technology to provide a frictionless banking experience, enhancing customer service and operational efficiency [28][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing a strong start to 2026 and the successful closing of a major securitization deal [9][10] - The operating environment is characterized as K-shaped, with varying performance across different market segments, but overall business confidence is reported as good [40][41] - The company anticipates continued growth in SBA loan originations and expects to benefit from changes in SBA regulations that may favor its business model [36][38] Other Important Information - The efficiency ratio at the holding company improved from 63.2% to 58.3%, with assets up 33% [12][25] - The company has maintained healthy capital ratios while managing the runoff of its non-bank lending subsidiary, NSBF, which is expected to continue to decline in losses [12][22] Q&A Session Summary Question: What drove the increase in deposit account openings? - Management attributed the increase to the frictionless digital access for both business and consumer deposits, along with strong margins and stable deposit rates [33][34] Question: What are the expectations for non-interest income trends? - Management expects the 7(a) business to pick up again, despite recent disruptions in the SBA world [36][37] Question: How is the company positioned in the SBA loan market? - Management believes their underwriting and business services create better long-term customer relationships, resulting in performance that meets industry averages [53][54]

Core Viewpoint - NewtekOne, Inc. reported strong financial results for the year ended December 31, 2025, with significant growth in earnings per share, total revenue, and improvements in efficiency ratios, indicating a robust operational performance and a solid capital position going into 2026 [1][6][8]. Financial Highlights - Basic and diluted earnings per share (EPS) for 2025 were $2.21 and $2.18, respectively, compared to $1.97 and $1.96 for 2024, reflecting a year-over-year increase of approximately 12.1% [6][24]. - Total revenue for 2025 was $284.8 million, up 10.6% from $257.6 million in 2024 [6][24]. - Net income before taxes for 2025 was approximately $80.0 million, an increase of 16.4% from $68.7 million in 2024 [6][24]. - Pre-provision net revenue (PPNR) for 2025 was approximately $118.7 million, a 25.1% increase from $94.9 million in 2024 [6][24]. - The efficiency ratio improved to 58.3% for 2025 from 63.2% in 2024, indicating better operational efficiency [6][24]. Balance Sheet Highlights - Book value per common share at the end of 2025 was $12.19, up 15.9% year-over-year and 4.0% quarter-over-quarter [6]. - Tangible book value per common share was $11.68, reflecting a 24.4% increase year-over-year and a 4.1% increase quarter-over-quarter [6]. - Total assets increased to $2.74 billion as of December 31, 2025, compared to $2.06 billion at the end of 2024 [20]. Loan Originations and Deposits - The company originated $363 million in Alternative Loan Program (ALP) loans for 2025, up from $270 million in 2024 [7]. - SBA 7(a) loans originated in 2025 totaled $768 million, down from $943 million in 2024 [7]. - Commercial deposits at Newtek Bank increased by $164 million, or 70% year-over-year, while core consumer deposits grew by $293 million, or 40% [7]. Operational Developments - Newtek Bank opened over 9,000 deposit accounts in 4Q25, surpassing its previous quarterly record by approximately 50% [7]. - The company successfully closed a $295 million securitization backed by ALP loans, which was ten times oversubscribed [8][10]. - The company aims to diversify its loan portfolio in 2026 and beyond, leveraging its technology-enabled platform to enhance service delivery [8].

Financial Data and Key Metrics Changes - The company reported net income of $20.7 million or $2.47 per diluted share for the quarter, with year-to-date net income of $43.3 million or $5.14 per diluted share [13] - Return on average assets was 1.87% for the quarter and 2% year to date, while return on average equity was 15.6% for the quarter and 16.6% year to date [13] - Net interest margin (NIM) for the quarter was 4.49%, down from 4.59% in the linked quarter, resulting in net interest income of $48.8 million for the quarter [14][15] Business Line Data and Key Metrics Changes - The company originated $252 million of loans in the national lending division, with a record quarter for originated loans [8][19] - The company purchased 152 loans in five transactions with a total balance of $576 million at a purchase price of $533 million, achieving a weighted average yield to maturity of 10.8% [19] - SBA loan originations were $39.8 million, with $25 million sold for a gain of $2.1 million [9][15] Market Data and Key Metrics Changes - The company experienced significant loan volume, with total loans on the balance sheet reaching $4.4 billion, up from $3.7 billion as of September 30th [13] - The allowance for credit losses increased from $46.7 million to $63.8 million, reflecting a coverage ratio increase from 1.24% to 1.47% [16] - The company noted that the current pipeline for loans is as full as it has ever been, with expectations of increased loan activity driven by M&A [19] Company Strategy and Development Direction - The company aims to grow its deposit base in Maine, which is seen as a less expensive and stickier source of funding compared to brokered deposits [31] - The company is focusing on expanding its small balance insured business loan program, which has seen significant demand [45] - The management is strategically investing in people and technology to set the bank up for long-term success while maintaining disciplined expense management [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the SBA program was impacted by a government shutdown, but they expect a rebound in loan originations and sales moving forward [10][12] - The company anticipates a lift in net interest margin due to the downward liability repricing expected over the next two quarters [29] - Management expressed optimism about the loan growth trajectory, with expectations of significant net interest income in subsequent quarters due to a higher loan book [11][12] Other Important Information - The company reported a decrease in non-interest expense from $21.9 million to $20.8 million, attributed to lower professional fees and reduced loan acquisition costs [17] - The company has a strong capital position with a Tier 1 leverage ratio of 12.2% and a tangible book value of $62.65 per share [17] Q&A Session Summary Question: Did the company buy back stock in the fourth quarter? - The CFO clarified that the decrease in share count was due to stock compensation activity and cancellation of shares to cover taxes, with no stock buybacks [27] Question: What is the expectation for net interest margin going forward? - The CFO indicated that a lift in net interest margin is anticipated due to downward liability repricing [29] Question: How does the company view the funding mix as it grows? - Management stated that brokered deposits will likely continue to be a main source of growth, while also focusing on growing deposits in Maine [31] Question: What percentage of purchase loans does the company typically retain at maturity? - Management did not have the exact number but indicated that they try to retain many loans, especially when rates are higher [33] Question: Will there be a catch-up in SBA gain on sale income next quarter? - The CFO clarified that they expect an increase in SBA loan volume and gain on sale income next quarter, estimating around $20 million a month [40]