The Bank Slate


BayFirst in Fla. stops lending to certain sectors, ends small-dollar SBA product

BayFirst Financial in St. Petersburg, Fla., is being more cautious with its Small Business Administation lending.

The $1.1 billion-asset BayFirst stopped lending to the transportation and marketing/advertising sectors and began to limit exposure to hotels and restaurants, CEO Thomas Zernick said during a conference call to discuss quarterly earnings.

Those industries “present higher risk or have performed below expectations,” Robin Oliver, BayFirst’s president and chief operating officer, added.

BayFirst also discontinued its FlashCap SBA small-dollar loan program in January after experiencing higher-than-expected credit losses. FlashCap provided working capital loans of $350,000 or less under the SBA’s 7(a) program.

The company said the unguaranteed portion of the FlashCap portfolio was $49 million as of March 31. It has a $3.5 million allowance set up for credit losses in that portfolio.

BayFirst also made “credit enhancements” to its Bolt SBA loan program, which makes loans of $150,000 or less and had lower loss rates compared to the FlashCap program, Oliver said.

“We have also added resources to our loan workout and loss mitigation teams and implemented new technology whereby we can text payment reminders to certain borrowers as yet another touch point to get in front of them,” Oliver said.

The FlashCap program was a big reason why net charge-offs were nearly double those of a year earlier, at $3.7 million. The company said the most problematic loans were originated before 2020 when rates were significantly lower; rising rates have challenged some borrowers.

Another cause for higher net charge-offs is an unsecured consumer loan portfolio BayFirst bought from a third party in 2022. Those balances are slowly being paid down.

Net income was flat from a year earlier, at $700,000.

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