BayFirst Posts $12.4 Million SBA Small Loan Program Quarterly Loss — Announces OCC Action Coming Soon

November 4, 2025

Bob Coleman
Founder & Publisher, Coleman Report

SBA Hot Topic Tuesday: BayFirst Posts $12.4 Million SBA Small Loan Program Quarterly Loss — Announces OCC Action Coming Soon

More details are emerging about BayFirst Financial Corp’s decision to shut down its SBA 7(a) lending program after posting significant losses tied to its small-loan operation.

Through August 31, BayFirst ranked as the nation’s 20th largest SBA 7(a) lender, originating 1,940 loans totaling $332 million. The bank was known as an aggressive 7(a) working capital loan lender. The loan program, called BOLT, made it one of the most active small business loan lenders in the country.

In Friday’s earnings call CEO Thomas Zernick said BayFirst posted a net loss of $18.9 million for the 3rd quarter. The total included a $12.4 million one-time charge related to winding down its SBA business. The key transaction was a $5.1 million loss from selling the bank’s 7(a) loan portfolio to Banesco USA taking a haircut of 97 cents on the dollar.

Look for another shoe to drop as the bank expects additional actions from the OCC in the fourth quarter focusing on credit administration, strategic planning, and capital preservation.

In August, BayFirst announced the closure of its SBA loan department and a reduction in force of 51 positions—26 within SBA and 25 across other areas of the bank—a move expected to save $6 million annually.

Select quotes from the earnings call:

Thomas Zernick, CEO, BayFirst Financial Corp:

At the start of the year, management and the board initiated a comprehensive strategic review of the bank’s business model to chart a new path forward that holds true to our mission as a community bank. Today, we are reporting on the culmination of our work to de-risk the balance sheet and position our community bank for long-term sustainable growth and enhanced shareholder value.

For over a decade, the bank’s SBA 7(a) business has provided revenue to help build our 12-branch network, which drives tremendous franchise value.

At the same time, this line of business outgrew our community bank model, and as reflected in this year’s results, brought material risk that led to operating losses. In September, we reported BayFirst would exit SBA 7(a) lending and that we had signed a definitive agreement to sell a large portion of our SBA 7(a) portfolio to Banesco USA. Furthermore, the majority of our SBA 7(a) staff would be offered positions with Banesco USA’s SBA lending team. I should note that we expect to close this transaction later in the quarter, however, the current federal government shutdown has generated some delays. While managing this transition, the BayFirst team continues to prioritize our community banking mission by delivering excellent service to our customers across the Tampa Bay and Sarasota markets.

Our focus remains firmly on what matters most.

Being the premier community bank in Tampa Bay means building real relationships with local individuals, families, and small businesses through reliable checking and savings accounts.

Scott McKim, CFO, BayFirst Financial Corp:

The portfolio sale that we previously announced was at a 3% discount, so 97%. The increase in our allowance for credit losses that we are talking about today reflects an increase really primarily related to the unguaranteed balances going forward. We’re not anticipating adding additional allowance for credit losses to the allowance for credit losses for those remaining balances at the end of this year or in the future.

Our anticipation is, and I stress this is a forecast, that at the end of December, post-closing the transaction, the bank would still have about $167 million of unguaranteed SBA 7(a) loan balances. We are still working on selling the remainder of that portfolio. The transaction that we announced previously was the amount of balances that Banesco USA wished to buy.

We continue to look for other parties to try to market and sell that portfolio down.