COASTAL FINANCIAL CORP

CCB

Business Summary

Coastal Financial Corporation (CCB) operates as a bank holding company through its wholly-owned subsidiaries, Coastal Community Bank (the "Bank") and Arlington Olympic LLC. The Company is headquartered in Everett, Washington, and conducts its business through three reportable segments: the community bank, CCBX, and treasury & administration. The community bank segment focuses on providing banking products and services to consumers and small to medium-sized businesses in the broader Puget Sound region of Washington, operating 14 full-service banking locations, with 12 in Snohomish County and one each in King County and Island County. The CCBX segment offers banking as a service ("BaaS") to digital financial service partners, enabling them to provide banking services to their customers. As of December 31, 2025, the CCBX segment had 28 partners ¹. The treasury & administration segment encompasses investments, debt, and other reporting items not specific to the other two segments. As of December 31, 2025, CCB reported total assets of $4.74 billion ², total loans receivable of $3.75 billion ³, total deposits of $4.14 billion ⁴, and total shareholders' equity of $491.0 million ⁵.

CCB's core business model revolves around generating revenue primarily from interest on loans and BaaS fee income. The Company's main funding sources are commercial and retail deposits from both community bank customers and CCBX partner relationships, with secondary reliance on wholesale funding, predominantly from the Federal Home Loan Bank (FHLB). Less frequently utilized funding sources include Federal Reserve discount window borrowings, federal funds lines, brokered funds, and one-way buy through insured cash sweep (ICS) accounts. The largest expenses include provision for credit losses on loans, interest on deposits and borrowings, BaaS loan expense, salaries and employee benefits, BaaS fraud expense, legal and professional expenses, data processing and software licenses, and occupancy expense.

The community bank segment provides a wide range of banking products and services, including commercial and industrial loans, commercial real estate loans (owner-occupied, non-owner occupied, and multi-family), construction and development loans, residential real estate loans, and consumer loans. As of December 31, 2025, community bank loans receivable stood at $1.94 billion ⁶, representing 51.7% of total loans. The segment's deposits totaled $1.59 billion ⁷ as of the same date.

The CCBX segment provides BaaS, allowing digital financial service partners to offer banking services to their clients. This segment's loan portfolio primarily consists of consumer and business lending, with installment loans and credit cards being the largest categories. As of December 31, 2025, CCBX loans receivable totaled $1.81 billion ⁸, accounting for 48.3% of total loans. CCBX deposits reached $2.56 billion ⁹ as of December 31, 2025. The segment's revenue is derived from fixed fees, volume-based fees, and reimbursement of costs, depending on the program agreement. Credit and fraud enhancements from CCBX partners protect the Bank by indemnifying or reimbursing incurred losses.

For the fiscal year ended December 31, 2025, CCB reported net income of $47.0 million ¹⁰, or $3.06 per diluted share ¹¹. This compares to net income of $45.2 million ¹², or $3.26 per diluted share ¹³, for the year ended December 31, 2024. Net interest income increased by $37.0 million ¹⁴, or 13.6% ¹⁵, to $310.1 million ¹⁶ in 2025 from $273.0 million ¹⁷ in 2024. The net interest margin for 2025 was 7.14% ¹⁸, a slight decrease from 7.18% ¹⁹ in 2024. Total noninterest income for 2025 was $231.6 million ²⁰, a decrease of $76.6 million ²¹, or 24.9% ²², from $308.2 million ²³ in 2024. Total noninterest expense increased by $41.5 million ²⁴, or 16.8% ²⁵, to $287.8 million ²⁶ in 2025 from $246.3 million ²⁷ in 2024. The provision for credit losses on loans decreased to $189.4 million ²⁸ in 2025 from $275.7 million ²⁹ in 2024. The Company's efficiency ratio was 53.13% ³⁰ at December 31, 2025, compared to 42.38% ³¹ at December 31, 2024.

Year-over-year, net income increased by $1.8 million ³², while diluted EPS decreased by $0.20 ³³ due to an increase in outstanding shares from a capital raise in December 2024. Net interest income grew by $37.0 million ¹⁴, driven by a $25.6 million ³⁴ increase in interest and fees on loans and a $7.7 million ³⁵ increase in interest income from interest-earning deposits with other banks, partially offset by a $4.2 million ³⁶ decrease in total interest expense. CCBX average loans receivable grew by $302.4 million ³⁷, or 21.2% ³⁸, while community bank average loans receivable decreased by $8.5 million ³⁹, or 0.4% ⁴⁰. Noninterest income decreased primarily due to an $85.2 million ⁴¹ decrease in BaaS credit enhancements and a $1.8 million ⁴² decrease in BaaS fraud enhancements, partially offset by a $9.4 million ⁴³ increase in BaaS program income. Noninterest expenses increased across several categories, including salaries and employee benefits by $15.8 million ⁴⁴, legal and professional expenses by $4.7 million ⁴⁵, and data processing and software licenses by $8.0 million ⁴⁶.

During the year ended December 31, 2025, CCB transferred $6.69 billion ⁴⁷ in CCBX loans to loans held for sale, with $6.64 billion ⁴⁸ in loans sold, including $5.14 billion ⁴⁹ in new activity on previously sold credit card receivables. The Company also acquired GreenFi assets during the quarter ended December 31, 2025 ⁵⁰. Management implemented a comprehensive remediation plan to address previously identified material weaknesses in internal control over financial reporting related to accounting and financial reporting for information provided by BaaS partners, concluding these weaknesses were remediated as of December 31, 2025 ⁵¹.

Business Outlook

Management's specific forward-looking statements and guidance ranges for the upcoming period are not explicitly provided in the filing. However, the Company's strategic priorities and anticipated trends can be inferred from the discussion.

The Company's growth strategy includes the expansion of its CCBX segment and organic growth of its community bank. For the CCBX segment, the Company continues to refine its criteria for partnerships, focusing on larger, established partners with strong management, customer bases, and finances, while also considering promising smaller partners that fit its approach and terms. The Company will continue to exit partnerships where it makes sense to do so ⁵². The CCBX segment had 28 partners as of December 31, 2025, including one signed letter of intent ¹. The Company expects to continue to sell CCBX loans as part of its strategy to optimize its CCBX portfolio, manage growth, credit quality, portfolio, and partner limits. It retains a portion of the transaction processing fee income on sold credit card receivables, which is expected to provide an ongoing and recurring revenue stream without additional on-balance sheet risk ⁵³.

Operationally, the Company anticipates some continued growth in the number of employees to support CCBX activities and technology investments, but is also working to automate processes to reduce or slow future hiring growth ⁵⁴. Data processing and software expenses are expected to increase as the Company invests more in automated processing and as it grows product lines and the CCBX segment ⁵⁵. Marketing and promotion costs are also expected to increase as the Company expands its marketing plan ⁵⁶. The Company continues to invest in its infrastructure and the automation of its processes to ensure scalability ⁵⁷.

Regarding capital allocation, the Company is taking advantage of the immediate deductibility of R&D expenditures, which has positively impacted the tax provision and resulted in a deferred tax liability as of December 31, 2025 ⁵⁸. The Company has committed up to $1.1 million ⁵⁹ in capital for technology-focused equity funds, but is not obligated to fund these commitments prior to a capital call ⁶⁰. The Company has not historically declared or paid dividends on its common stock and does not intend to do so in the near-term, anticipating that all future earnings will be retained to support operations and finance business growth and development ⁶¹.

Management explicitly flagged several structural headwinds and execution risks. The BaaS strategy faces increasing competition from a growing number of financial institutions and technology-enabled banking platforms. Additionally, some current or prospective partners may seek to reduce reliance on third-party banking relationships by obtaining their own bank charters, which could reduce demand for CCB's BaaS services, terminate existing partnerships, and adversely affect deposit, fee income, or other revenue growth ⁶². Competition in the BaaS market may also increase operating and compliance costs, reduce pricing flexibility, or limit revenue growth ⁶³. The Company is also subject to potential business risk from actions by regulators related to CCBX relationships, including restrictions on the businesses served or the number of relationships the Company can hold, which could reduce demand for services, future revenue, and limit growth ⁶⁴.

Geographic, regulatory, and macro factors identified as constraints include the evolving regulatory and supervisory framework applicable to AI, which may limit the Company's ability to deploy or expand AI-enabled tools or incur additional compliance, governance, or operational costs ⁶⁵. The Company is subject to additional state and local taxes and related reporting requirements as CCBX operations and employees expand into new states, which may have an adverse impact on its business ⁶⁶. Changes in U.S. trade policies, including tariffs and retaliatory tariffs, may increase costs for customers, disrupt supply chains, reduce demand for products, or compress operating margins, thereby impacting customers' financial performance and liquidity, increasing credit risk, and reducing demand for banking services ⁶⁷. The global economic environment is characterized by heightened uncertainty, with uneven growth, persistent inflationary pressures, elevated interest rates, and uncertain fiscal and monetary policy paths. Geopolitical developments, including conflicts in Russia-Ukraine and the Middle East, contribute to uncertainty in global financial markets, supply chains, and commodity prices ⁶⁸.

Risk Factors

The most material risks disclosed in the filing include interest rate risk, where fluctuations in interest rates, particularly a flattening yield curve or sustained elevated rates, could compress net interest income and increase borrower default potential ⁶⁹. Credit risk is significant, especially with the commercial real estate loan portfolio totaling $1.29 billion ⁷⁰ and commercial and industrial loans at $454.1 million ⁷¹, which are susceptible to economic downturns and property value declines. The allowance for credit losses may prove insufficient, particularly with the higher expected losses in the CCBX portfolio, and if CCBX partners fail to fulfill credit enhancement obligations, the Bank would be exposed to additional losses ⁷². Operational risks are substantial, stemming from reliance on information technology and third-party service providers, with potential for system failures, security breaches, and cybersecurity threats, including ransomware and malware attacks, which could disrupt operations, damage reputation, and incur financial liabilities ⁷³. The Company also faces compliance and regulatory risks, particularly in its CCBX segment, where partners' non-compliance with servicing policies or lending laws could lead to liability or enforcement actions ⁷⁴. Regulatory scrutiny of commercial real estate concentrations, where total non-owner-occupied commercial real estate loans represent 170.9% ⁷⁵ of the Bank's total risk-based capital, could lead to restrictions on growth and adversely affect earnings ⁷⁶. Furthermore, the Company previously identified material weaknesses in internal control over financial reporting related to accounting and financial reporting for information provided by BaaS partners, which, despite remediation, highlight ongoing control effectiveness risks ⁷⁷.

Management Priorities

Management's overall tone is one of strategic growth and adaptation, particularly emphasizing the expansion of the CCBX segment and continuous investment in technology and risk management infrastructure. They explicitly state that net income is up, but net income per diluted share is down as a result of the capital raise in December 2024 that increased the number of shares outstanding ⁷⁸. Management highlights the importance of refining CCBX partnership criteria, focusing on larger, established partners while also considering promising smaller ones, and the ongoing strategy to optimize the CCBX portfolio through loan sales to manage growth, credit quality, and partner limits ⁷⁹. They anticipate continued growth in employee numbers to support CCBX and technology investments, alongside efforts to automate processes to slow future hiring growth ⁸⁰. Key strategic priorities include investing in infrastructure and process automation for scalability, managing CCBX credit and concentration levels, and retaining a portion of transaction processing fee income on sold credit card receivables for ongoing revenue without balance sheet risk ⁸¹.

View Source Annual Report on SEC.gov ↗

References

[1] Item 1, Business — Our Company
[2] Item 1, Business — Our Company
[3] Item 1, Business — Our Company
[4] Item 1, Business — Our Company
[5] Item 1, Business — Our Company
[6] Item 7, MD&A — Segment Information
[7] Item 7, MD&A — Segment Information
[8] Item 7, MD&A — Segment Information
[9] Item 7, MD&A — Segment Information
[10] Item 7, MD&A — Net Income
[11] Item 7, MD&A — Net Income
[12] Item 7, MD&A — Net Income
[13] Item 7, MD&A — Net Income
[14] Item 7, MD&A — Net Income
[15] Item 7, MD&A — Net Interest Income
[16] Item 7, MD&A — Net Interest Income
[17] Item 7, MD&A — Net Interest Income
[18] Item 7, MD&A — Net Interest Income
[19] Item 7, MD&A — Net Interest Income
[20] Item 7, MD&A — Noninterest Income
[21] Item 7, MD&A — Noninterest Income
[22] Item 7, MD&A — Noninterest Income
[23] Item 7, MD&A — Noninterest Income
[24] Item 7, MD&A — Noninterest Expense
[25] Item 7, MD&A — Noninterest Expense
[26] Item 7, MD&A — Noninterest Expense
[27] Item 7, MD&A — Noninterest Expense
[28] Item 7, MD&A — Provision for Credit Losses
[29] Item 7, MD&A — Provision for Credit Losses
[30] Item 7, MD&A — Operating Efficiency
[31] Item 7, MD&A — Operating Efficiency
[32] Item 7, MD&A — Net Income
[33] Item 7, MD&A — Net Income
[34] Item 7, MD&A — Net Interest Income
[35] Item 7, MD&A — Net Interest Income
[36] Item 7, MD&A — Net Interest Income
[37] Item 7, MD&A — Net Interest Income
[38] Item 7, MD&A — Net Interest Income
[39] Item 7, MD&A — Net Interest Income
[40] Item 7, MD&A — Net Interest Income
[41] Item 7, MD&A — Noninterest Income
[42] Item 7, MD&A — Noninterest Income
[43] Item 7, MD&A — Noninterest Income
[44] Item 7, MD&A — Noninterest Expense
[45] Item 7, MD&A — Noninterest Expense
[46] Item 7, MD&A — Noninterest Expense
[47] Item 7, MD&A — Loans Held For Sale
[48] Item 7, MD&A — Loans Held For Sale
[49] Item 7, MD&A — Loans Held For Sale
[50] Item 1, Business — Our Markets
[51] Item 1A, Risk Factors — We previously identified material weaknesses in our internal control over financial reporting, and any failure to maintain effective internal controls in the future could adversely affect our business, financial condition, and results of operations.
[52] Item 1, Business — CCBX segment (BaaS)
[53] Item 7, MD&A — Loans Held For Sale
[54] Item 7, MD&A — Salaries and Employee Benefits
[55] Item 7, MD&A — Data Processing and Software Licenses
[56] Item 7, MD&A — Marketing
[57] Item 7, MD&A — Community Bank
[58] Item 7, MD&A — Income Tax Expense
[59] Item 1, Business — Investments
[60] Item 1, Business — Investments
[61] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[62] Item 1A, Risk Factors — Our banking-as-a-service (“BaaS”) strategy faces increasing competition, including from institutions and partners that may no longer require a third-party bank.
[63] Item 1A, Risk Factors — Our banking-as-a-service (“BaaS”) strategy faces increasing competition, including from institutions and partners that may no longer require a third-party bank.
[64] Item 1A, Risk Factors — We may be subject to potential business risk from actions by our regulators related to CCBX relationships.
[65] Item 1A, Risk Factors — Risks Related to Artificial Intelligence and Emerging Technologies
[66] Item 1A, Risk Factors — We are subject to additional state and local taxes as a result of CCBX operations.
[67] Item 1A, Risk Factors — Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition and results of operations.
[68] Item 1A, Risk Factors — National and global economic and other conditions could adversely affect our future results of operations or market price of our stock.
[69] Item 1A, Risk Factors — We are subject to interest rate risk, and fluctuations in interest rates may adversely affect our earnings.
[70] Item 1A, Risk Factors — Our commercial real estate lending activities expose us to increased lending risks and related credit losses.
[71] Item 1A, Risk Factors — Our commercial business lending activities expose us to additional lending risks.
[72] Item 1A, Risk Factors — Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio.
[73] Item 1A, Risk Factors — We are dependent on our information technology and telecommunications systems and third-party service providers; systems failures, interruptions, security breaches and cybersecurity threats could have an adverse effect on our business, financial condition and results of operations.
[74] Item 1A, Risk Factors — We originate and purchase loans through our CCBX partners, which exposes us to increased lending and compliance risks.
[75] Item 1A, Risk Factors — Imposition of limits by the bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings.
[76] Item 1A, Risk Factors — Imposition of limits by the bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings.
[77] Item 1A, Risk Factors — We previously identified material weaknesses in our internal control over financial reporting, and any failure to maintain effective internal controls in the future could adversely affect our business, financial condition, and results of operations.
[78] Item 7, MD&A — Net Income
[79] Item 7, MD&A — CCBX
[80] Item 7, MD&A — Salaries and Employee Benefits
[81] Item 7, MD&A — Loans Held For Sale

Analysis on 5/20/2026

Recent Material Events

2026-07-30Material Event

Coastal Financial Corporation appointed Christopher D. Adams as Executive Chair of the Board on July 29, 2026. Mr. Adams, a non-employee director since 2016 and partner at Adams & Duncan, Inc., entered into a five-year employment agreement with an initial annual base salary of $750,000. Concurrently, Thomas Lane was appointed Lead Independent Director. The Board also approved amendments to the Amended and Restated Bylaws to define the authority and duties of the Executive Chairperson and Lead Independent Director roles. Coastal Financial Corporation operates in the banking industry as a financial holding company.

View filing ↗

2026-07-30Material Event

Coastal Financial Corporation filed an 8-K to furnish its Second Quarter 2026 Investor Presentation. The company reported a net loss of $42.1 million, or $(2.76) per share, driven by a $22.8 million specific provision for credit losses and a $46.0 million valuation adjustment to a credit enhancement asset related to one non-public partner. Total loans receivable grew 9.0% quarter-over-quarter to $4.21 billion, while total deposits decreased 3.6% to $4.86 billion due to increased off-balance sheet sweep arrangements totaling $4.26 billion. The company also recorded $4.4 million in amortization of capitalized software. Coastal Financial Corporation operates as a community bank and provides Banking-as-a-Service (BaaS) solutions.

View filing ↗

2026-07-30Material Event

Coastal Financial Corporation reported a net loss of $42.1 million, or $(2.76) per diluted share, for the quarter ended June 30, 2026, compared to net income of $12.0 million in the prior quarter. The loss was primarily driven by a $68.8 million credit expense related to a single Banking-as-a-Service (BaaS) partner relationship, comprising a $22.8 million provision for credit losses and a $46.0 million valuation adjustment to a credit enhancement asset. Despite this charge, the company achieved record net interest income of $89.4 million and reported loan growth of 9.0%. The company also announced that Christopher D. Adams has been appointed Executive Chairman. Coastal Financial Corporation operates as a financial holding company with community banking and Banking-as-a-Service segments.

View filing ↗

2026-07-23Material Event

Coastal Financial Corporation will report its second quarter 2026 financial results pre-market on July 30, 2026, and will host an earnings call at 8:00 a.m. ET on the same day. Coastal Financial Corporation is a bank holding company that provides community-focused banking and banking as a service segment.

View filing ↗

2026-07-22Material Event

Coastal Financial Corporation announced that Brandon Soto will step down as Executive Vice President and Chief Financial Officer on August 15, 2026, to become CEO of a privately held fintech banking subsidiary. Joel Edwards, a former CFO of the company and Coastal Community Bank, has been appointed Interim Chief Financial Officer effective August 15, 2026, with a monthly base salary of $100,000. The company will conduct a search for a permanent CFO. Coastal Financial Corporation is a bank holding company providing community banking and banking-as-a-service through its subsidiaries.

View filing ↗