Strategic Insights into Banking & Fintech

BayFirst in Fla. selling SBA portfolio, expects OCC action

BayFirst Financial in St. Petersburg, Fla., plans to get out of Small Business Administration lending.

The $1.3 billion-asset company said in a press release that it will sell about $103 million of SBA 7(a) loan balances to the $5.2 billion-asset Banesco USA. The loans will be sold at 97% of their retained balances; Banesco USA will assume servicing.

Banesco USA will also buy, at book value, the servicing rights tied to the loans. The sales are expected to close in the fourth quarter.

“Management and the board initiated a comprehensive strategic review aimed at derisking SBA 7(a) balances on the balance sheet and positioning the company for long-term growth and enhanced shareholder value,” Thomas Zernick, BayFirst’s CEO, said in the release.

The company also warned that its expects an enforcement action from the Office of the Comptroller of the Currency tied to credit administration, strategic planning, and capital preservation.

“We take our regulatory obligations very seriously and are fully committed to meeting the highest operational standards,” CEO Thomas Zernick said in the release. “Management has already taken significant steps to address credit quality issues, and we are dedicating substantial resources to strengthen our credit administration.”

The company also disclosed in a regulatory filing that a third-party marketing service provider was the victim of a cybersecurity incident. The vendor confirmed in late October that certain customer information — including names, dates of birth, and Social Security or tax identification numbers — had been accessed without authorization, BayFirst said in the filing.

The breach was limited to the third party’s systems, and BayFirst’s own environment was unaffected. The provider immediately launched a probe, engaged cybersecurity experts, and notified law enforcement to contain and assess the event.

BayFirst said there is no evidence of misuse or attempted misuse of the exposed data, adding that impacted customers are being notified.

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