Everett, WA – Coastal Financial Corporation (Nasdaq: CCB) (the “Company”, "Coastal", "we", "our", or "us"), the holding company for Coastal Community Bank (the “Bank”), through which it operates a community-focused bank segment ("community bank") with an industry leading banking as a service ("BaaS") segment ("CCBX"), today reported unaudited financial results for the quarter ended December 31, 2025, including net income of $12.6 million, or $0.82 per diluted common share, compared to $13.6 million, or $0.88 per diluted common share, for the three months ended September 30, 2025 and $13.4 million, or $0.94 per diluted common share, for the three months ended December 31, 2024, and $47.0 million, or $3.06 per diluted common share, for the year ended December 31, 2025 compared to $45.2 million, or $3.26 per diluted common share, for the year ended December 31, 2024.
Management Discussion of the Fourth Quarter Results
"During the fourth quarter of 2025, loans receivable increased by $45.7 million, representing a 1.2% rise, alongside another period of solid deposit growth totaling $171.6 million, or 4.3%. Our CCBX segment continued to progress during the quarter as we executed on a dual strategy of expanding product offerings with existing partners while selectively onboarding new relationships aligned with our long-term objectives. Looking ahead, we expect continued growth as existing programs scale, new products are introduced, and we leverage our growing operating history in the BaaS space to support disciplined, sustainable expansion,” stated CEO Eric Sprink.
“We are making steady progress in deploying artificial intelligence across the organization, with several use cases already implemented to improve efficiency, risk management, and the customer experience, and a roadmap focused on responsibly scaling these capabilities. In parallel, we are evaluating opportunities in digital assets and digital deposit solutions, where we believe our platform and regulatory framework position us well for future innovation and growth,” stated CCBX President Brian Hamilton.
Key Points for Fourth Quarter and Our Go-Forward Strategy
•CCBX Partner and Product Expansion. As of December 31, 2025 we had two partners in testing, five in implementation/onboarding, and one signed letter of intent (LOI). Our active pipeline positions us for continued growth, with new partnership opportunities and product launches expected for 2026. Total BaaS program fee income was $8.4 million for the three months ended December 31, 2025, an increase of $811,000, or 10.7%, from the three months ended September 30, 2025. We continue to have contracts with our partners that fully indemnify us against fraud and 98.8% against credit risk on CCBX loan partner balances as of December 31, 2025.
•GreenFi Acquisition. During the quarter ended December 31, 2025, we acquired the GreenFi brand of climate-focused consumer financial services. We continue to evaluate strategic alternatives related to GreenFi, while maintaining the existing operating partnership with Mission Financial Partners to ensure continuity of service and a consistent customer experience. This approach reflects our broader strategy of regularly assessing opportunities to optimize our portfolio and align resources with long-term priorities.
•Positive On- and Off-Balance Sheet Trends Continue. Average deposits were $4.03 billion, an increase of $61.1 million, or 1.5%, over the quarter ended September 30, 2025, driven primarily by growth in deposits associated with CCBX partner programs. During the fourth quarter of 2025, we sold $2.98 billion of loans, including $2.26 billion of additional credit card receivables originated through ongoing cardholder spend and revolving activity and sold under existing forward flow arrangements, compared to $1.62 billion of sold loans in the quarter ended September 30, 2025, including $1.37 billion sold under the same arrangements. We retain a
1
portion of the fee income on sold credit card loans. As of December 31, 2025 there were 550,977 off-balance sheet credit cards with fee earning potential, an increase of 154,165 compared to the quarter ended September 30, 2025 and an increase of 368,528 from December 31, 2024.
Fourth Quarter 2025 Financial Highlights
The tables below outline some of our key operating metrics.
Three Months Ended
(Dollars in thousands, except share and per share data; unaudited)
December 31, 2025
September 30, 2025
June 30, 2025
March 31, 2025
December 31, 2024
Income Statement Data:
Interest and dividend income
$
107,886
$
109,027
$
107,797
$
104,907
$
102,448
Interest expense
28,521
31,126
31,060
28,845
30,071
Net interest income
79,365
77,901
76,737
76,062
72,377
Provision for credit losses
48,041
56,598
32,211
55,781
61,867
Net interest income after
provision for credit losses
31,324
21,303
44,526
20,281
10,510
Noninterest income
58,661
66,777
42,693
63,477
74,100
Noninterest expense
72,804
70,172
72,832
71,989
67,411
Provision for income tax
4,538
4,316
3,359
2,039
3,832
Net income
$
12,643
$
13,592
$
11,028
$
9,730
$
13,367
As of and for the Three Month Period
December 31, 2025
September 30, 2025
June 30, 2025
March 31, 2025
December 31, 2024
Balance Sheet Data:
Cash and cash equivalents
$
736,970
$
642,258
$
719,759
$
624,302
$
452,513
Investment securities
48,247
43,942
45,577
46,991
47,321
Loans held for sale
71,216
42,894
60,474
42,132
20,600
Loans receivable
3,749,531
3,703,848
3,540,330
3,517,359
3,486,565
Allowance for credit losses
(169,530)
(173,813)
(164,794)
(183,178)
(176,994)
Total assets
4,741,437
4,553,076
4,480,559
4,339,282
4,121,208
Interest bearing deposits
3,564,583
3,408,160
3,358,216
3,251,599
3,057,808
Noninterest bearing deposits
579,616
564,403
555,355
539,630
527,524
Core deposits (1)
4,131,911
3,959,360
3,441,624
3,321,772
3,123,434
Total deposits
4,144,199
3,972,563
3,913,571
3,791,229
3,585,332
Total borrowings
48,036
47,999
47,960
47,923
47,884
Total shareholders’ equity
$
490,959
$
475,277
$
461,709
$
449,917
$
438,704
Share and Per Share Data (2):
Earnings per share – basic
$
0.84
$
0.90
$
0.73
$
0.65
$
0.97
Earnings per share – diluted
$
0.82
$
0.88
$
0.71
$
0.63
$
0.94
Dividends per share
—
—
—
—
—
Book value per share (3)
$
32.43
$
31.45
$
30.59
$
29.98
$
29.37
Tangible book value per share (4)
$
32.13
$
31.45
$
30.59
$
29.98
$
29.37
Weighted avg outstanding shares – basic
15,116,005
15,093,274
15,033,296
14,962,507
13,828,605
Weighted avg outstanding shares – diluted
15,455,856
15,443,987
15,447,923
15,462,041
14,268,229
Shares outstanding at end of period
15,140,192
15,112,000
15,093,036
15,009,225
14,935,298
Stock options outstanding at end of period
118,881
122,206
126,654
163,932
186,354
See footnotes that follow the tables below
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As of and for the Three Month Period
December 31, 2025
September 30, 2025
June 30, 2025
March 31, 2025
December 31, 2024
Credit Quality Data:
Nonperforming assets (5) to total assets
1.35
%
1.31
%
1.36
%
1.30
%
1.52
%
Nonperforming assets (5) to loans receivable and OREO
1.71
%
1.61
%
1.72
%
1.60
%
1.80
%
Nonperforming loans (5) to total loans receivable
1.71
%
1.61
%
1.72
%
1.60
%
1.80
%
Allowance for credit losses to nonperforming loans
264.4
%
290.8
%
270.7
%
325.0
%
282.5
%
Allowance for credit losses to total loans receivable
4.52
%
4.69
%
4.65
%
5.21
%
5.08
%
Gross charge-offs
$
55,189
$
54,534
$
53,780
$
53,686
$
61,585
Gross recoveries
$
5,114
$
5,289
$
4,467
$
5,486
$
5,223
Net charge-offs to average loans (6)
5.31
%
5.37
%
5.54
%
5.57
%
6.56
%
Capital Ratios:
Company
Tier 1 leverage capital
10.62
%
10.54
%
10.39
%
10.67
%
10.78
%
Common equity Tier 1 risk-based capital
12.43
%
12.33
%
12.32
%
12.13
%
12.04
%
Tier 1 risk-based capital
12.52
%
12.42
%
12.41
%
12.22
%
12.14
%
Total risk-based capital
14.95
%
14.88
%
14.90
%
14.73
%
14.67
%
Bank
Tier 1 leverage capital
10.60
%
10.49
%
10.33
%
10.57
%
10.64
%
Common equity Tier 1 risk-based capital
12.50
%
12.37
%
12.36
%
12.12
%
11.99
%
Tier 1 risk-based capital
12.50
%
12.37
%
12.36
%
12.12
%
11.99
%
Total risk-based capital
13.79
%
13.66
%
13.65
%
13.42
%
13.28
%
(1)Core deposits are defined as all deposits excluding brokered and time deposits.
(2)Share and per share amounts are based on total actual or average common shares outstanding, as applicable.
(3)We calculate book value per share as total shareholders’ equity at the end of the relevant period divided by the outstanding number of our common shares at the end of each period.
(4)Tangible book value per share is a non-GAAP financial measure. We calculate tangible book value per share as total shareholders’ equity at the end of the relevant period, less goodwill and other intangible assets, divided by the outstanding number of our common shares at the end of each period. The most directly comparable GAAP financial measure is book value per share. See reconciliation of the non-GAAP measures at the end of this earnings release for the impact of intangible assets on book value.
(5)Nonperforming assets and nonperforming loans include loans 90+ days past due and accruing interest.
(6)Annualized calculations.
Key Performance Ratios
Return on average assets ("ROA") was 1.09% for the quarter ended December 31, 2025 compared to 1.19% and 1.30% for the quarters ended September 30, 2025 and December 31, 2024, respectively. ROA for the quarter ended December 31, 2025 decreased 0.10% and 0.21% compared to September 30, 2025 and December 31, 2024, respectively. ROA was 1.05% for the year ended December 31, 2025 compared to 1.15% for the year ended December 31, 2024, a decrease of 0.10%. Noninterest expenses were higher for the quarter ended December 31, 2025 compared to the quarter ended September 30, 2025 driven primarily by higher salaries and employee benefits. Salaries and employee benefits was $2.6 million higher for the quarter ended December 31, 2025 and includes $2.5 million in employee restructuring costs that are not expected to continue in future periods, along with $700,000 in other expenses related to a settlement of an employment-related matter. Noninterest expenses were higher than the quarter ended December 31, 2024 due primarily to an increase in salaries and employee benefits, data processing and software licenses and legal and professional expenses, all of which are related to the growth of the Company and investments in technology and risk management.
Yield on earning assets and yield on loans receivable decreased 0.25% and 0.32%, respectively, for the quarter ended December 31, 2025 compared to the quarter ended September 30, 2025, largely due to a change in loan mix and reduced Fed funds interest rate. Average loans receivable as of December 31, 2025 increased $103.5 million compared to
3
September 30, 2025 as net CCBX loans continue to grow, despite selling $2.98 billion in CCBX loans during the quarter ended December 31, 2025.
The quarter over quarter volatility in the efficiency ratio and noninterest income to average asset performance metrics were driven by changes in the credit enhancement on CCBX loans, which is included within noninterest income, due to changes in CCBX provision expense. These items have a neutral impact to net income, but they impact the abovementioned metrics quarter over quarter due to changes in reported noninterest income.
The following table shows the Company’s key performance ratios for the periods indicated.
Three Months Ended
(unaudited)
December 31, 2025
September 30, 2025
June 30, 2025
March 31, 2025
December 31, 2024
Return on average assets (1)
1.09
%
1.19
%
0.99
%
0.93
%
1.30
%
Return on average equity (1)
10.41
%
11.52
%
9.72
%
8.91
%
14.90
%
Yield on earnings assets (1)
9.55
%
9.80
%
9.92
%
10.32
%
10.24
%
Yield on loans receivable (1)
10.63
%
10.95
%
11.11
%
11.33
%
11.12
%
Cost of funds (1)
2.77
%
3.07
%
3.13
%
3.11
%
3.24
%
Cost of deposits (1)
2.74
%
3.04
%
3.10
%
3.08
%
3.21
%
Net interest margin (1)
7.03
%
7.00
%
7.06
%
7.48
%
7.23
%
Noninterest expense to average assets (1)
6.25
%
6.13
%
6.52
%
6.87
%
6.54
%
Noninterest income to average assets (1)
5.04
%
5.83
%
3.82
%
6.06
%
7.19
%
Efficiency ratio
52.75
%
48.50
%
60.98
%
51.59
%
46.02
%
Loans receivable to deposits (2)
92.20
%
94.32
%
92.01
%
93.89
%
97.82
%
(1)Annualized calculations shown for quarterly periods presented.
(2)Includes loans held for sale.
Management Outlook; CEO Eric Sprink
“As the banking landscape continues to evolve, including the development of new bank charters and alternative models that could change how banking services are delivered, we remain confident in the strength of our platform and relationships. Our continued investment in technology is critical to supporting the delivery of scalable, compliant, and differentiated solutions for our partners and customers. We are focused on both establishing new and deepening existing customer relationships through product expansion, and we are encouraged by the early performance of products launched last quarter, which have gained traction and contributed to CCBX deposit growth. We believe these results underscore the value of our strategy and our ability to execute in a dynamic environment.” said CEO Eric Sprink.
Coastal Financial Corporation Overview
The Company has one main subsidiary, the Bank, which consists of three segments: CCBX, the community bank and treasury & administration. The CCBX segment includes all of our BaaS activities, the community bank segment includes all community banking activities and the treasury & administration segment includes treasury management, overall administration and all other aspects of the Company.
CCBX Performance Update
Our CCBX segment continues to evolve, and we have 28 relationships, at varying stages, including two partners in testing, five in implementation/onboarding, one signed LOI and one winding down as of December 31, 2025. We continue to refine the criteria for CCBX partnerships, by focusing on larger, established partners with strong management, customer bases, and finances, while also considering promising smaller partners that fit our approach and terms. During the quarter ended December 31, 2025 we exited our partnership with Albert, and we will continue to exit relationships where it makes sense for us to do so.
While we explore relationships with new partners we continue to expand our product offerings with existing CCBX partners. As we become more proficient in the BaaS space we aim to cultivate new relationships that align with our long-term goals. A dual strategy of onboarding new partners and expanding products with existing partners drives growth,
4
while our operating history with existing partners helps limit incremental regulatory risk. Increases in partner activity/transaction counts are positively impacting noninterest income, and we expect this trend to continue as current products grow and new products are introduced. We plan to continue selling loans as part of our strategy to balance partner and lending limits, and manage the loan portfolio and credit quality. We retain a portion of the fee income for our role in processing transactions on sold credit card loans, which continues to grow and is expected to provide increased and ongoing revenue with no on balance sheet risk or capital requirement.
As we grow our deposit base, we expect to sweep deposits off and on the balance sheet, subject to applicable agreements, which enhances our ability to manage liquidity and deposit programs. This deposit sweep capability allows us to better manage liquidity and deposit programs. At December 31, 2025 we swept off $843.6 million in deposits for FDIC insurance and liquidity purposes, and generated $540,000 in noninterest income during the quarter ended December 31, 2025. During the quarter ended December 31, 2025, seven partner programs were in various stages of expansion to include additional products, such as lines of credit, deposit programs, credit cards, and other lending products. Robinhood's deposit program has successfully launched during the fourth quarter and, as a result, has positively impacted CCBX deposit growth during the quarter ended December 31, 2025. The expansion of these and other partner initiatives is expected to drive higher partner revenue in upcoming periods.
The following table illustrates the activity and evolution in CCBX relationships for the periods presented.
As of
(unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
Active
19
20
19
Friends and family / testing
2
2
1
Implementation / onboarding
5
4
1
Signed letters of intent
1
2
3
Wind down - active but preparing to exit relationship
1
1
0
Total CCBX relationships
28
29
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CCBX loans increased $3.4 million, or 0.2%, to $1.81 billion despite selling $2.98 billion in loans during the three months ended December 31, 2025, $2.26 billion of which was new activity on previously sold credit card loans.
The following table details the CCBX loan portfolio:
CCBX
As of
December 31, 2025
September 30, 2025
December 31, 2024
(dollars in thousands; unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Commercial and industrial loans:
Capital call lines
$
210,480
11.6
%
$
177,530
9.8
%
$
109,017
6.8
%
All other commercial & industrial loans
19,166
1.1
22,710
1.3
33,961
2.1
Real estate loans:
Residential real estate loans
264,059
14.6
374,129
20.7
267,707
16.7
Consumer and other loans:
Credit cards
622,681
34.4
563,324
31.2
528,554
33.0
Other consumer and other loans
691,708
38.3
667,062
37.0
664,780
41.4
Gross CCBX loans receivable
1,808,094
100.0
%
1,804,755
100.0
%
1,604,019
100.0
%
Net deferred origination fees
(542)
(579)
(442)
Loans receivable
$
1,807,552
$
1,804,176
$
1,603,577
Loan Yield - CCBX (1)(2)
14.89
%
15.65
%
16.81
%
(1)CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements and originating & servicing CCBX loans. See reconciliation of the non-GAAP measures at the end of this earnings release for the impact of BaaS loan expense on CCBX loan yield.
(2)Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.
5
The increase in CCBX loans in the quarter ended December 31, 2025, includes an increase of $84.0 million, or 6.8%, in consumer and other loans, and an increase of $33.0 million, or 18.6%, in capital call lines as a result of normal balance fluctuations and business activities, partially offset by a decrease of $110.1 million, or 29.4%, in residential real estate loans. The decrease was driven by loan sales executed during the quarter in connection with our ongoing management of the CCBX loan portfolio. We sold $2.98 billion in CCBX loans during the quarter ended December 31, 2025 compared to sales of $1.62 billion in the quarter ended September 30, 2025. We continue to manage CCBX credit and concentration levels in an effort to optimize our loan portfolio earnings and generate off-balance sheet fee income. CCBX loan yield decreased 0.76% for the quarter ended December 31, 2025 compared to the quarter ended September 30, 2025 largely due to a change in overall mix of loans compared to the quarter ended September 30, 2025. Changes to partner agreements and pricing implemented during the quarter are expected to result in marginally lower loan yields in the near term. These actions reflect a strategic shift toward enhanced partner economics and more sustainable, risk-adjusted returns over time.
6
The following charts show the growth and quarter over quarter changes in credit card accounts that generate fee income. This includes accounts with balances, which are included in our loan totals, and accounts that have been sold and have no corresponding balance in our loan totals, and that generate fee income.
7
The following chart shows the growth in active CCBX debit cards, which are sources of interchange income.
The following table details the CCBX deposit portfolio:
CCBX
As of
December 31, 2025
September 30, 2025
December 31, 2024
(dollars in thousands; unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Demand, noninterest bearing
$
86,648
3.4
%
$
64,681
2.7
%
$
55,686
2.7
%
Interest bearing demand and money market
2,425,881
94.8
2,300,113
96.9
1,958,459
94.9
Savings
45,311
1.8
10,168
0.4
5,710
0.3
Total core deposits
2,557,840
100.0
2,374,962
100.0
2,019,855
97.9
Other deposits
—
0.0
—
0.0
44,233
2.1
Total CCBX deposits
$
2,557,840
100.0
%
$
2,374,962
100.0
%
$
2,064,088
100.0
%
Cost of deposits (1)
3.52
%
3.90
%
4.19
%
(1)Cost of deposits is annualized for the three months ended for each period presented.
CCBX deposits increased $182.9 million, or 7.7%, in the three months ended December 31, 2025 to $2.56 billion as a result of deposit growth and normal balance fluctuations. Robinhood's deposit product successfully launched during the fourth quarter and, as a result, has contributed to the increase in CCBX deposits. The increase excludes the $843.6 million in CCBX deposits that were transferred off-balance sheet for increased Federal Deposit Insurance Corporation ("FDIC") insurance coverage and sweep purposes, compared to $672.3 million for the quarter ended September 30, 2025. Amounts in excess of FDIC insurance coverage are transferred, using a third-party facilitator/vendor sweep product, to participating financial institutions. These swept deposits generated fee income of $540,000 for the quarter ended December 31, 2025.
Community Bank Performance Update
In the quarter ended December 31, 2025, the community bank saw net loans increase $42.3 million, or 2.2%, to $1.94 billion, as a result of loan growth and normal balance fluctuations.
8
The following table details the community bank loan portfolio:
Community Bank
As of
December 31, 2025
September 30, 2025
December 31, 2024
(dollars in thousands; unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Commercial and industrial loans
$
224,439
11.5
%
$
170,847
9.0
%
$
150,395
8.0
%
Real estate loans:
Construction, land and land development loans
222,075
11.4
218,061
11.4
148,198
7.8
Residential real estate loans
202,293
10.4
202,979
10.7
202,064
10.7
Commercial real estate loans
1,285,856
66.0
1,300,335
68.2
1,374,801
72.8
Consumer and other loans:
Other consumer and other loans
14,072
0.7
14,181
0.7
13,542
0.7
Gross community bank loans receivable
1,948,735
100.0
%
1,906,403
100.0
%
1,889,000
100.0
%
Net deferred origination fees
(6,756)
(6,731)
(6,012)
Loans receivable
$
1,941,979
$
1,899,672
$
1,882,988
Loan Yield(1)
6.52
%
6.51
%
6.53
%
(1)Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.
The increase in community bank loans consisted of an increase of $53.6 million in commercial and industrial loans, and an increase of $4.0 million in construction, land and land development loans, partially offset by a decrease of $14.5 million in commercial real estate loans, $686,000 in residential real estate loans and $109,000 in consumer and other loans during the quarter ended December 31, 2025.
The following table details the community bank deposit portfolio:
Community Bank
As of
December 31, 2025
September 30, 2025
December 31, 2024
(dollars in thousands; unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Demand, noninterest bearing
$
492,968
31.1
%
$
499,722
31.3
%
$
471,838
31.0
%
Interest bearing demand and money market
1,024,798
64.6
1,025,929
64.2
570,625
37.5
Savings
56,305
3.5
58,747
3.7
61,116
4.0
Total core deposits
1,574,071
99.2
1,584,398
99.2
1,103,579
72.5
Other deposits
1
0.0
1
0.0
400,118
26.3
Time deposits less than $100,000
4,415
0.3
4,834
0.3
5,920
0.4
Time deposits $100,000 and over
7,872
0.5
8,368
0.5
11,627
0.8
Total community bank deposits
$
1,586,359
100.0
%
$
1,597,601
100.0
%
$
1,521,244
100.0
%
Cost of deposits(1)
1.56
%
1.77
%
1.86
%
(1)Cost of deposits is annualized for the three months ended for each period presented.
Community bank deposits decreased $11.2 million, or 0.7%, during the three months ended December 31, 2025 to $1.59 billion as a result of normal balance fluctuations. The community bank segment includes noninterest bearing deposits of $493.0 million, or 31.1%, of total community bank deposits, resulting in a cost of deposits of 1.56%, compared to 1.77% for the quarter ended September 30, 2025 as a result of lower interest rates.
9
Net Interest Income and Margin Discussion
Net interest income was $79.4 million for the quarter ended December 31, 2025, an increase of $1.5 million, or 1.9%, from $77.9 million for the quarter ended September 30, 2025, and an increase of $6.9 million, or 9.5%, from $72.4 million for the quarter ended December 31, 2024. Net interest income compared to September 30, 2025 and December 31, 2024 was higher due to higher interest on loans primarily due to an increase in average loans receivable coupled with a reduced cost of funds as a result of lower interest rates.
Net interest margin was 7.03% for the three months ended December 31, 2025, compared to 7.00% for the three months ended September 30, 2025, due primarily to lower cost of funds resulting from the decreases in the Fed funds rate. Net interest margin was 7.23% for the three months ended December 31, 2024. The decrease in net interest margin for the three months ended December 31, 2025 compared to the three months ended December 31, 2024 was primarily due to a decrease in loan yields. Net interest margin, net of BaaS loan expense, (a reconciliation of the non-GAAP measures are set forth in the Non-GAAP Financial Measures section of this earnings release) was 4.26% for the three months ended December 31, 2025, compared to 4.05% for the three months ended September 30, 2025, and 4.16% for the three months ended December 31, 2024.
Interest and fees on loans receivable decreased $161,000, or 0.2%, to $100.2 million for the three months ended December 31, 2025, compared to $100.4 million for the three months ended September 30, 2025, as a result of lower interest rates related to the decrease in the Fed funds interest rate. Interest and fees on loans receivable increased $4.6 million, or 4.8%, compared to $95.6 million for the three months ended December 31, 2024, due to loan growth.
The following tables illustrate how net interest margin and loan yield is affected by BaaS loan expense:
Consolidated
As of and for the Three Months Ended
(dollars in thousands; unaudited)
December 31 2025
September 30 2025
December 31 2024
Net interest margin, net of BaaS loan expense:
Net interest margin (1)
7.03
%
7.00
%
7.23
%
Earning assets
4,482,007
4,413,529
3,980,078
Net interest income (GAAP)
79,365
77,901
72,377
Less: BaaS loan expense
(31,256)
(32,840)
(30,720)
Net interest income, net of BaaS loan expense(2)
$
48,109
$
45,061
$
41,657
Net interest margin, net of BaaS loan expense (1)(2)
4.26
%
4.05
%
4.16
%
Loan income net of BaaS loan expense divided by average loans:
Loan yield (GAAP)(1)
10.63
%
10.95
%
11.12
%
Total average loans receivable
$
3,740,073
$
3,636,545
$
3,419,476
Interest and earned fee income on loans (GAAP)
100,206
100,367
95,575
BaaS loan expense
(31,256)
(32,840)
(30,720)
Net loan income(2)
$
68,950
$
67,527
$
64,855
Loan income, net of BaaS loan expense, divided by average loans (1)(2)
7.31
%
7.37
%
7.55
%
(1) Annualized calculations shown for periods presented.
(2) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
Average investment securities increased $1.4 million to $46.5 million compared to the three months ended September 30, 2025 as a result of held-to-maturity mortgage backed securities purchased for CRA purposes, and decreased $1.7 million compared to the three months ended December 31, 2024 as a result of maturities and principal paydowns.
Cost of funds was 2.77% for the quarter ended December 31, 2025, a decrease of 30 basis points from the quarter ended September 30, 2025 and a decrease of 47 basis points from the quarter ended December 31, 2024. Cost of deposits for the quarter ended December 31, 2025 was 2.74%, compared to 3.04% for the quarter ended September 30, 2025, and 3.21% for the quarter ended December 31, 2024. The decreased cost of funds and deposits compared to September 30, 2025 and December 31, 2024 were largely due to the reductions in the Fed funds rate in 2025.
10
The following table summarizes the average yield on loans receivable and cost of deposits:
For the Three Months Ended
December 31, 2025
September 30, 2025
December 31, 2024
Yield on
Loans (2)
Cost of
Deposits (2)
Yield on
Loans (2)
Cost of
Deposits (2)
Yield on
Loans (2)
Cost of
Deposits (2)
Community Bank
6.52%
1.56%
6.51%
1.77%
6.53%
1.86%
CCBX (1)
14.89%
3.52%
15.65%
3.90%
16.81%
4.19%
Consolidated
10.63%
2.74%
10.95%
3.04%
11.12%
3.21%
(1)CCBX yield on loans does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit and fraud enhancements and originating & servicing CCBX loans. To determine Net BaaS loan income earned from CCBX loan relationships, the Company takes BaaS loan interest income and deducts BaaS loan expense to arrive at Net BaaS loan income, which can be compared to interest income on the Company’s community bank loans. See reconciliation of the non-GAAP measures at the end of this earnings release for the impact of BaaS loan expense on CCBX loan yield.
(2)Annualized calculations for periods presented.
The following table illustrates how BaaS loan interest income is affected by BaaS loan expense resulting in net BaaS loan income and the associated yield:
For the Three Months Ended
December 31, 2025
September 30, 2025
December 31, 2024
(dollars in thousands, unaudited)
Income / Expense
Income / expense divided by average CCBX loans (2)
Income / Expense
Income / expense divided by average CCBX loans(2)
Income / Expense
Income / expense divided by average CCBX loans (2)
BaaS loan interest income
$
68,846
14.89
%
$
69,643
15.65
%
$
64,532
16.81
%
Less: BaaS loan expense
31,256
6.76
%
32,840
7.38
%
30,720
8.00
%
Net BaaS loan income (1)
$
37,590
8.13
%
$
36,803
8.27
%
$
33,812
8.81
%
Average BaaS Loans(3)
$
1,833,904
$
1,764,957
$
1,527,178
(1) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
(2) Annualized calculations shown for the periods presented.
(3) Includes loans held for sale.
11
Noninterest Income Discussion
Noninterest income was $58.7 million for the three months ended December 31, 2025, a decrease of $8.1 million from $66.8 million for the three months ended September 30, 2025, and a decrease of $15.4 million from $74.1 million for the three months ended December 31, 2024. The decrease in noninterest income for the quarter ended December 31, 2025 as compared to the quarter ended September 30, 2025 was primarily due to a $8.1 million decrease in BaaS credit enhancements related to the decrease in provision for credit losses based upon an analysis of the CCBX loan portfolio and a $1.0 million decrease in BaaS fraud enhancements, partially offset by an increase of $811,000 in BaaS program income (see “Appendix B” for more information on the accounting for BaaS allowance for credit losses and credit and fraud enhancements).
The $15.4 million decrease in noninterest income over the quarter ended December 31, 2024 was primarily due to a $18.7 million decrease in BaaS credit and fraud enhancements due to improvement in the performance of the CCBX loan portfolio, partially offset by an increase of $2.8 million in BaaS program income.
Noninterest Expense Discussion
Total noninterest expense increased $2.6 million to $72.8 million for the three months ended December 31, 2025, compared to $70.2 million for the three months ended September 30, 2025, and increased $5.4 million from $67.4 million for the three months ended December 31, 2024. The $2.6 million increase in noninterest expense for the quarter ended December 31, 2025, as compared to the quarter ended September 30, 2025, was primarily due to a $2.6 million increase in salaries and employee benefits, an $864,000 increase in data processing and software licenses, a $750,000 increase in other expenses, and a $490,000 increase in legal and professional fees, partially offset by a $1.6 million decrease in BaaS loan expense, and a $1.0 million decrease in BaaS fraud expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements and originating & servicing CCBX loans. BaaS fraud expense represents non-credit fraud losses on partner’s customer loan and deposit accounts. A portion of this expense is realized during the quarter in which the loss occurs, and a portion is estimated based on historical or other information from our partners. During the three months ended September 30, 2025 there was a large credit to salaries and employee benefits due to the forfeiture of equity awards which resulted in lower expenses when compared to the three months ended December 31, 2025. The quarter-over-quarter variance was also driven by $2.5 million of employee restructuring costs related to organizational changes, including severance and other termination-related expenses. These costs included approximately $2.1 million of non-recurring stock-based compensation associated with accelerated vesting and modification-date fair value adjustments of equity awards in connection with employee departures. The $750,000 increase in other expenses was primarily due to the recognition of a payable related to the settlement of an employment-related matter during the quarter. Excluding these items, operating expense trends were more aligned with management expectations. Data processing and software license costs increased due to continued investments in growth, technology, and risk management. The increase in legal and professional fees is subject to variability that is impacted by new CCBX partners and product launches.
The $5.4 million increase in noninterest expenses for the quarter ended December 31, 2025 compared to the quarter ended December 31, 2024 was largely due to a $4.8 million increase in salary and employee benefits and a $2.9 million increase in data processing and software licenses due to enhancements and investments in technology, and a $536,000 increase in BaaS loan expense, partially offset by a $4.0 million decrease in BaaS fraud expense.
Certain noninterest expenses are reimbursed by our CCBX partners. In accordance with GAAP we recognize all expenses in noninterest expense and the reimbursement of expenses from our CCBX partner in noninterest income. The following table reflects the portion of noninterest expenses that are reimbursed by partners to assist in understanding how the increases in noninterest expense are related to expenses incurred and reimbursed by CCBX partners:
Three Months Ended
December 31,
September 30,
December 31,
(dollars in thousands; unaudited)
2025
2025
2024
Total noninterest expense (GAAP)
$
72,804
$
70,172
$
67,411
Less: BaaS loan expense
31,256
32,840
30,720
Less: BaaS fraud expense
1,090
2,127
5,043
Less: Reimbursement of expenses (BaaS)
1,868
1,412
812
Noninterest expense, net of BaaS loan expense, BaaS fraud expense
and reimbursement of expenses (BaaS) (1)
$
38,590
$
33,793
$
30,836
12
(1) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
Provision for Income Taxes
The provision for income taxes was $4.5 million for the three months ended December 31, 2025, $4.3 million for the three months ended September 30, 2025 and $3.8 million for the fourth quarter of 2024. Despite lower net income, the income tax provision was higher for the three months ended December 31, 2025 compared to the quarters ended September 30, 2025 and December 31, 2024 as a result of the acceleration and revaluation of certain equity awards.
The Company is subject to various state taxes that are assessed as CCBX activities and employees expand into other states, which has increased the overall tax rate used in calculating the provision for income taxes in the current and future periods. The Company uses a federal statutory tax rate of 21.0% as a basis for calculating provision for federal income taxes and 5.14% for calculating the provision for state income taxes. The state rate increased in the quarter ended June 30, 2025 primarily as a result of a change in California's tax laws.
Financial Condition Overview
Total assets increased $188.4 million, or 4.1%, to $4.74 billion at December 31, 2025 compared to $4.55 billion at September 30, 2025. The increase is primarily comprised of a $95.4 million increase in interest earning deposits with other banks, a $45.7 million increase in loans receivable, and a $28.3 million increase in loans held for sale.
As of December 31, 2025, in addition to the $737.0 million in cash on hand the Company had the capacity to borrow up to a total of $642.2 million from the Federal Reserve Bank discount window and Federal Home Loan Bank, plus an additional $50.0 million from a correspondent bank. There were no borrowings outstanding on these lines as of December 31, 2025.
The Company, on a stand alone basis, had a cash balance of $42.3 million as of December 31, 2025, a portion of which is retained for general operating purposes, including debt repayment, for funding $1.1 million in commitments to bank technology investment funds, with the remaining cash available to be contributed to the Bank as capital.
Uninsured deposits were $641.3 million as of December 31, 2025, compared to $617.9 million as of September 30, 2025.
Total shareholders’ equity as of December 31, 2025 increased $15.7 million since September 30, 2025. The increase in shareholders’ equity was primarily comprised of $12.6 million in net earnings combined with an increase of $3.0 million in common stock outstanding as a result of equity awards vested and exercised during the three months ended December 31, 2025.
The Company and the Bank remained well capitalized at December 31, 2025, as summarized in the following table.
(unaudited)
Coastal Community Bank
Coastal Financial Corporation
Minimum Well Capitalized Ratios under Prompt Corrective Action (1)
Tier 1 Leverage Capital (to average assets)
10.60
%
10.62
%
5.00
%
Common Equity Tier 1 Capital (to risk-weighted assets)
12.50
%
12.43
%
6.50
%
Tier 1 Capital (to risk-weighted assets)
12.50
%
12.52
%
8.00
%
Total Capital (to risk-weighted assets)
13.79
%
14.95
%
10.00
%
(1) Presents the minimum capital ratios for an insured depository institution, such as the Bank, to be considered well capitalized under the Prompt Corrective Action framework. The minimum requirements for the Company to be considered well capitalized under Regulation Y include to maintain, on a consolidated basis, a total risk-based capital ratio of 10.0 percent or greater and a tier 1 risk-based capital ratio of 6.0 percent or greater.
Asset Quality
The allowance for credit losses was $169.5 million and 4.52% of loans receivable at December 31, 2025 compared to $173.8 million and 4.69% at September 30, 2025 and $177.0 million and 5.08% at December 31, 2024. The allowance for credit loss allocated to the CCBX portfolio was $151.3 million and 8.37% of CCBX loans receivable at December 31,
13
2025, with $18.2 million of allowance for credit loss allocated to the community bank or 0.94% of total community bank loans receivable.
The following table details the allocation of the allowance for credit loss as of the period indicated:
As of December 31, 2025
As of September 30, 2025
As of December 31, 2024
(dollars in thousands; unaudited)
Community Bank
CCBX
Total
Community Bank
CCBX
Total
Community Bank
CCBX
Total
Loans receivable
$
1,941,979
$
1,807,552
$
3,749,531
$
1,899,673
$
1,804,175
$
3,703,848
$
1,882,988
$
1,603,577
$
3,486,565
Allowance for credit losses
(18,231)
(151,299)
(169,530)
(18,354)
(155,459)
(173,813)
(18,924)
(158,070)
(176,994)
Allowance for credit losses to total loans receivable
0.94
%
8.37
%
4.52
%
0.97
%
8.62
%
4.69
%
1.00
%
9.86
%
5.08
%
Net charge-offs totaled $50.1 million for the quarter ended December 31, 2025, compared to $49.2 million for the quarter ended September 30, 2025 and $56.4 million for the quarter ended December 31, 2024. Net charge-offs as a percent of average loans decreased to 5.31% for the quarter ended December 31, 2025 compared to 5.37% for the quarter ended September 30, 2025, and 6.56% for the quarter ended December 31, 2024. CCBX partner agreements provide for a credit enhancement that covers the net charge-offs on CCBX loans and negative deposit accounts by indemnifying or reimbursing incurred losses, except in accordance with the program agreement for one partner where the Company was responsible for credit losses on approximately 5% of a $321.3 million loan portfolio. At December 31, 2025, our portion of this portfolio represented $22.1 million in loans. Net charge-offs for this $22.1 million in loans were $1.2 million for the three months ended December 31, 2025, $1.0 million for the three months ended September 30, 2025 and $1.1 million for the three months ended December 31, 2024.
The following table details net charge-offs for the community bank and CCBX for the period indicated:
Three Months Ended
December 31, 2025
September 30, 2025
December 31, 2024
(dollars in thousands; unaudited)
Community Bank
CCBX
Total
Community Bank
CCBX
Total
Community Bank
CCBX
Total
Gross charge-offs
$
24
$
55,165
$
55,189
$
18
$
54,516
$
54,534
$
139
$
61,446
$
61,585
Gross recoveries
(2)
(5,112)
(5,114)
(19)
(5,270)
(5,289)
(3)
(5,220)
(5,223)
Net charge-offs (recoveries)
$
22
$
50,053
$
50,075
$
(1)
$
49,246
$
49,245
$
136
$
56,226
$
56,362
Net charge-offs to
average loans (1)
0.00
%
10.83
%
5.31
%
0.00
%
11.07
%
5.37
%
0.03
%
14.65
%
6.56
%
(1) Annualized calculations shown for periods presented.
During the quarter ended December 31, 2025, a $45.9 million provision for credit losses was recorded for CCBX partner loans, compared to $58.8 million for the quarter ended September 30, 2025. The decrease in the provision was largely due to a change in the mix of loans, bringing the CCBX allowance for credit losses to $151.3 million at December 31, 2025 compared to $155.5 million at September 30, 2025. As we continue to originate higher quality loans, these become a greater proportion of the CCBX portfolio, resulting in an improvement in expected losses and a reduced allowance for credit losses to loans receivable ratio. In general, CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses. Agreements with our CCBX partners provide for a credit enhancement which indemnifies the Bank and through partner reimbursements for incurred losses.
In accordance with accounting guidance, we estimate and record a provision for expected losses for these CCBX loans and reclassified negative deposit accounts. When the provision for CCBX credit losses and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements). Expected losses are recorded in the allowance for credit losses. The credit enhancement asset is relieved when credit enhancement recoveries are received from the CCBX partner. If our partner is unable to fulfill their contracted obligations then the Bank could be exposed to additional credit losses. Management regularly evaluates and manages this counterparty risk with our CCBX partners.
14
The factors used in management’s analysis for community bank credit losses indicated that a provision recapture of $101,000 was needed for the quarter ended December 31, 2025 compared to a provision recapture of $583,000 and a provision recapture of $1.1 for the quarters ended September 30, 2025 and December 31, 2024, respectively. The provision recapture in the current period was due to an improvement in the overall economic outlook, partially offset by a marginal increase in the overall portfolio historical loss rates.
The following table details the provision expense/(recapture) for the community bank and CCBX for the period indicated:
Three Months Ended
(dollars in thousands; unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
Community bank
$
(101)
$
(583)
$
(1,071)
CCBX
45,893
58,847
63,741
Total provision expense
$
45,792
$
58,264
$
62,670
A provision for unfunded commitments of $2.2 million was recorded for the quarter ended December 31, 2025 primarily driven by an increase in the available commitment for CCBX loans partially offset by a decline in remaining weighted average life of the unfunded construction & land portfolio. A $14,000 provision for accrued interest receivable was recorded for the quarter ended December 31, 2025 on CCBX loans.
At December 31, 2025, our nonperforming assets were $64.1 million, or 1.35%, of total assets, compared to $59.8 million, or 1.31%, of total assets, at September 30, 2025, and $62.7 million, or 1.52%, of total assets, at December 31, 2024. These ratios are impacted by nonperforming CCBX loans that are covered by CCBX partner credit enhancements. As of December 31, 2025, $55.7 million of the $57.6 million in nonperforming CCBX loans were covered by CCBX partner credit enhancements described above. Additionally, certain CCBX partners employ collection practices that place specific loans on nonaccrual status to enhance collectability. As of December 31, 2025, $20.3 million of these loans are less than 90 days past due.
Nonperforming assets increased $4.3 million during the quarter ended December 31, 2025, compared to the quarter ended September 30, 2025. Community bank nonperforming loans increased $2.3 million from September 30, 2025 to $6.5 million as of December 31, 2025 with the addition of $4.3 million in nonaccrual loans partially offset by a $1.7 million payoff and other principal paydowns. CCBX nonperforming loans increased $2.0 million to $57.6 million from September 30, 2025. The increase in CCBX nonperforming loans is due to an increase of $1.8 million in nonaccrual loans from September 30, 2025 to $24.4 million, combined with a $220,000 increase in CCBX loans that are past due 90 days or more and still accruing interest. As a result of the type of loans (primarily consumer loans) originated through our CCBX partners we would typically anticipate that balances 90 days past due or more and still accruing will generally increase as those loan portfolios grow, however, the ratio of CCBX loans 90+ days past due and still accruing to total CCBX loans receivable increased 0.01% compared to September 30, 2025, which we believe is a positive performance indicator for the CCBX portfolio. Installment/closed-end and revolving/open-end consumer loans originated through CCBX lending partners will continue to accrue interest until 120 and 180 days past due, respectively and are reported as substandard, 90 days or more days past due and still accruing. There were no repossessed assets or other real estate owned at December 31, 2025. Our nonperforming loans to loans receivable ratio was 1.71% at December 31, 2025, compared to 1.61% at September 30, 2025, and 1.80% at December 31, 2024.
For the quarter ended December 31, 2025, there were $22,000 in community bank net charge-offs and $50.1 million in CCBX net charge-offs. These CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses.
15
The following table details the Company’s nonperforming assets for the periods indicated.
Consolidated
As of
(dollars in thousands; unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
Nonaccrual loans:
Commercial and industrial loans
$
2,278
$
2,297
$
334
Real estate loans:
Construction, land and land development
—
1,697
—
Residential real estate
38
—
—
Commercial real estate
4,344
348
—
Consumer and other loans:
Credit cards
21,433
19,677
10,262
Other consumer and other loans
2,875
2,820
8,967
Total nonaccrual loans
30,968
26,839
19,563
Accruing loans past due 90 days or more:
Commercial & industrial loans
654
910
1,006
Real estate loans:
Residential real estate loans
1,961
1,575
2,608
Consumer and other loans:
Credit cards
22,536
22,626
34,490
Other consumer and other loans
7,993
7,813
4,989
Total accruing loans past due 90 days or more
33,144
32,924
43,093
Total nonperforming loans
64,112
59,763
62,656
Real estate owned
—
—
—
Repossessed assets
—
—
—
Total nonperforming assets
$
64,112
$
59,763
$
62,656
Total nonaccrual loans to loans receivable
0.83
%
0.72
%
0.56
%
Total nonperforming loans to loans receivable
1.71
%
1.61
%
1.80
%
Total nonperforming assets to total assets
1.35
%
1.31
%
1.52
%
16
The following tables detail the CCBX and community bank nonperforming assets, which are included in the total nonperforming assets table above.
CCBX
As of
(dollars in thousands; unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
Nonaccrual loans:
Commercial and industrial loans:
All other commercial & industrial loans
$
127
$
157
$
234
Consumer and other loans:
Credit cards
21,433
19,677
10,262
Other consumer and other loans
2,875
2,820
8,967
Total nonaccrual loans
24,435
22,654
19,463
Accruing loans past due 90 days or more:
Commercial & industrial loans
654
910
1,006
Real estate loans:
Residential real estate loans
1,961
1,575
2,608
Consumer and other loans:
Credit cards
22,536
22,626
34,490
Other consumer and other loans
7,993
7,813
4,989
Total accruing loans past due 90 days or more
33,144
32,924
43,093
Total nonperforming loans
57,579
55,578
62,556
Other real estate owned
—
—
—
Repossessed assets
—
—
—
Total nonperforming assets
$
57,579
$
55,578
$
62,556
Total CCBX nonperforming assets to total consolidated assets
1.21
%
1.22
%
1.52
%
Community Bank
As of
(dollars in thousands; unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
Nonaccrual loans:
Commercial and industrial loans
$
2,151
$
2,140
$
100
Real estate:
Construction, land and land development
—
1,697
—
Residential real estate
38
—
—
Commercial real estate
4,344
348
—
Total nonaccrual loans
6,533
4,185
100
Accruing loans past due 90 days or more:
Total accruing loans past due 90 days or more
—
—
—
Total nonperforming loans
6,533
4,185
100
Other real estate owned
—
—
—
Repossessed assets
—
—
—
Total nonperforming assets
$
6,533
$
4,185
$
100
Total community bank nonperforming assets to total consolidated assets
0.14
%
0.09
%
—
%
About Coastal Financial
Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), is an Everett, Washington based bank holding company whose wholly owned subsidiaries are Coastal Community Bank (“Bank”) and Arlington Olympic LLC. The $4.74 billion Bank provides service through 14 full-service branches in Snohomish, Island and King Counties, one loan production office in King County, the Internet and its mobile banking application. The Bank provides banking as a service to digital financial service providers, companies and brands that want to provide financial services to their customers through the Bank's CCBX segment. To learn more about the Company visit www.coastalbank.com.
CCB-ER
17
Contact
Eric Sprink, Chief Executive Officer, esprink@coastalbank.com
Brandon J. Soto, Executive Vice President & Chief Financial Officer, bsoto@coastalbank.com
Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of or reference to forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the risk that the prolonged U.S. government shutdown, 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 and those other risks and uncertainties discussed under “Risk Factors” in our Annual Report on Form 10-K for the most recent period filed and in any of our subsequent filings with the Securities and Exchange Commission.
If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. You are cautioned not to place undue reliance on forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law.
18
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
ASSETS
December 31, 2025
September 30, 2025
June 30, 2025
March 31, 2025
December 31, 2024
Cash and due from banks
$
34,241
$
34,928
$
29,546
$
43,467
$
36,533
Interest earning deposits with other banks
702,729
607,330
690,213
580,835
415,980
Investment securities, available-for-sale, at fair value
29
31
33
34
35
Investment securities, held-to-maturity, at amortized cost
48,218
43,911
45,544
46,957
47,286
Other investments
12,837
12,778
12,521
12,589
10,800
Loans held for sale
71,216
42,894
60,474
42,132
20,600
Loans receivable
3,749,531
3,703,848
3,540,330
3,517,359
3,486,565
Allowance for credit losses
(169,530)
(173,813)
(164,794)
(183,178)
(176,994)
Total loans receivable, net
3,580,001
3,530,035
3,375,536
3,334,181
3,309,571
CCBX credit enhancement asset
177,657
177,741
167,779
183,377
181,890
CCBX receivable
23,047
16,260
13,009
12,685
14,138
Premises and equipment, net
29,325
29,114
29,052
28,639
27,431
Lease right-of-use assets
4,821
4,788
4,891
5,117
5,219
Accrued interest receivable
18,613
20,493
20,849
21,109
21,104
Bank-owned life insurance, net
13,910
13,777
13,648
13,501
13,375
Deferred tax asset, net
—
—
3,829
3,912
3,600
Intangible assets, net
4,536
—
—
—
—
Other assets
20,257
18,996
13,635
10,747
13,646
Total assets
$
4,741,437
$
4,553,076
$
4,480,559
$
4,339,282
$
4,121,208
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits
$
4,144,199
$
3,972,563
$
3,913,571
$
3,791,229
$
3,585,332
Subordinated debt, net
44,443
44,406
44,368
44,331
44,293
Junior subordinated debentures, net
3,593
3,593
3,592
3,592
3,591
Deferred compensation
267
281
295
310
332
Accrued interest payable
1,435
1,106
954
1,107
962
Lease liabilities
4,984
4,956
5,063
5,293
5,398
CCBX payable
27,492
31,221
32,939
29,391
29,171
Deferred tax liability, net
853
799
—
—
—
Other liabilities
23,212
18,874
18,068
14,112
13,425
Total liabilities
4,250,478
4,077,799
4,018,850
3,889,365
3,682,504
SHAREHOLDERS’ EQUITY
Common Stock
233,438
230,399
230,423
229,659
228,177
Retained earnings
257,522
244,879
231,287
220,259
210,529
Accumulated other comprehensive loss, net of tax
(1)
(1)
(1)
(1)
(2)
Total shareholders’ equity
490,959
475,277
461,709
449,917
438,704
Total liabilities and shareholders’ equity
$
4,741,437
$
4,553,076
$
4,480,559
$
4,339,282
$
4,121,208
19
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
Three Months Ended
December 31, 2025
September 30, 2025
June 30, 2025
March 31, 2025
December 31, 2024
INTEREST AND DIVIDEND INCOME
Interest and fees on loans
$
100,206
$
100,367
$
98,867
$
98,147
$
95,575
Interest on interest earning deposits with other banks
6,810
8,007
8,085
6,070
6,021
Interest on investment securities
635
616
626
650
661
Dividends on other investments
235
37
219
40
191
Total interest income
107,886
109,027
107,797
104,907
102,448
INTEREST EXPENSE
Interest on deposits
27,863
30,466
30,400
28,185
29,404
Interest on borrowed funds
658
660
660
660
667
Total interest expense
28,521
31,126
31,060
28,845
30,071
Net interest income
79,365
77,901
76,737
76,062
72,377
PROVISION FOR CREDIT LOSSES
48,041
56,598
32,211
55,781
61,867
Net interest income after provision for credit losses
31,324
21,303
44,526
20,281
10,510
NONINTEREST INCOME
Service charges and fees
882
903
913
860
932
Unrealized gain (loss) on equity securities, net
—
9
(439)
16
1
Other income
999
772
853
682
473
Noninterest income, excluding BaaS program income and BaaS indemnification income
1,881
1,684
1,327
1,558
1,406
Servicing and other BaaS fees
1,573
1,264
1,539
1,419
1,043
Transaction and interchange fees
4,924
4,878
5,109
3,833
3,699
Reimbursement of expenses
1,868
1,412
646
1,026
812
BaaS program income
8,365
7,554
7,294
6,278
5,554
BaaS credit enhancements
47,325
55,412
31,268
53,648
62,097
BaaS fraud enhancements
1,090
2,127
2,804
1,993
5,043
BaaS indemnification income
48,415
57,539
34,072
55,641
67,140
Total noninterest income
58,661
66,777
42,693
63,477
74,100
NONINTEREST EXPENSE
Salaries and employee benefits
22,745
20,146
21,401
21,482
17,955
Occupancy
1,091
952
915
1,034
958
Data processing and software licenses
6,978
6,114
5,541
4,882
4,049
Legal and professional expenses
4,447
3,957
5,962
5,888
4,606
Point of sale expense
105
69
69
107
89
Excise taxes
756
696
681
722
778
Federal Deposit Insurance Corporation ("FDIC") assessments
817
815
790
755
750
Director and staff expenses
870
544
612
631
683
Marketing
259
272
50
50
28
Other expense
2,390
1,640
1,524
1,938
1,752
Noninterest expense, excluding BaaS loan and BaaS fraud expense
40,458
35,205
37,545
37,489
31,648
20
BaaS loan expense
31,256
32,840
32,483
32,507
30,720
BaaS fraud expense
1,090
2,127
2,804
1,993
5,043
BaaS loan and fraud expense
32,346
34,967
35,287
34,500
35,763
Total noninterest expense
72,804
70,172
72,832
71,989
67,411
Income before provision for income taxes
17,181
17,908
14,387
11,769
17,199
PROVISION FOR INCOME TAXES
4,538
4,316
3,359
2,039
3,832
NET INCOME
$
12,643
$
13,592
$
11,028
$
9,730
$
13,367
Basic earnings per common share
$
0.84
$
0.90
$
0.73
$
0.65
$
0.97
Diluted earnings per common share
$
0.82
$
0.88
$
0.71
$
0.63
$
0.94
Weighted average number of common shares outstanding:
Basic
15,116,005
15,093,274
15,033,296
14,962,507
13,828,605
Diluted
15,455,856
15,443,987
15,447,923
15,462,041
14,268,229
21
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
For the Three Months Ended
December 31, 2025
September 30, 2025
December 31, 2024
Average Balance
Interest & Dividends
Yield /
Cost (1)
Average Balance
Interest & Dividends
Yield /
Cost (1)
Average Balance
Interest & Dividends
Yield /
Cost (1)
Assets
Interest earning assets:
Interest earning deposits with other banks
$
682,663
$
6,810
3.96
%
$
719,191
$
8,007
4.42
%
$
501,654
$
6,021
4.77
%
Investment securities, available-for-sale (2)
31
—
—
33
—
—
39
—
—
Investment securities, held-to-maturity (2)
46,431
635
5.43
45,030
616
5.43
48,126
661
5.46
Other investments
12,809
235
7.28
12,730
37
1.15
10,783
191
7.05
Loans receivable (3)
3,740,073
100,206
10.63
3,636,545
100,367
10.95
3,419,476
95,575
11.12
Total interest earning assets
4,482,007
107,886
9.55
4,413,529
109,027
9.80
3,980,078
102,448
10.24
Noninterest earning assets:
Allowance for credit losses
(168,725)
(158,525)
(156,687)
Other noninterest earning assets
305,068
286,002
277,922
Total assets
$
4,618,350
$
4,541,006
$
4,101,313
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits
$
3,443,247
$
27,863
3.21
%
$
3,394,664
$
30,466
3.56
%
$
3,068,357
$
29,404
3.81
%
FHLB advances and other borrowings
—
—
—
—
—
—
—
1
—
Subordinated debt
44,420
599
5.35
44,383
598
5.35
44,272
599
5.38
Junior subordinated debentures
3,593
59
6.51
3,592
62
6.85
3,591
67
7.42
Total interest bearing liabilities
3,491,260
28,521
3.24
3,442,639
31,126
3.59
3,116,220
30,071
3.84
Noninterest bearing deposits
590,340
577,820
577,453
Other liabilities
55,075
52,447
50,824
Total shareholders' equity
481,675
468,100
356,816
Total liabilities and shareholders' equity
$
4,618,350
$
4,541,006
$
4,101,313
Net interest income
$
79,365
$
77,901
$
72,377
Interest rate spread
6.31
%
6.21
%
6.40
%
Net interest margin (4)
7.03
%
7.00
%
7.23
%
(1)Yields and costs are annualized.
(2)For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(3)Includes loans held for sale and nonaccrual loans.
(4)Net interest margin represents net interest income divided by the average total interest earning assets.
22
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT - QUARTERLY
(Dollars in thousands; unaudited)
For the Three Months Ended
December 31, 2025
September 30, 2025
December 31, 2024
(dollars in thousands, unaudited)
Average Balance
Interest & Dividends
Yield /
Cost (1)
Average Balance
Interest & Dividends
Yield /
Cost (1)
Average Balance
Interest & Dividends
Yield /
Cost (1)
Community Bank
Assets
Interest earning assets:
Loans receivable (2)
$
1,905,430
$
31,337
6.52
%
$
1,871,588
$
30,724
6.51
%
$
1,892,298
$
31,043
6.53
%
Total interest earning assets
1,905,430
31,337
6.52
1,871,588
30,724
6.51
1,892,298
31,043
6.53
Liabilities
Interest bearing liabilities:
Interest bearing deposits
1,091,322
6,282
2.28
%
1,096,883
7,136
2.58
%
1,029,346
7,161
2.77
%
Intrabank liability
306,684
3,059
3.96
271,961
3,028
4.42
357,442
4,290
4.77
Total interest bearing liabilities
1,398,006
9,341
2.65
1,368,844
10,164
2.95
1,386,788
11,451
3.28
Noninterest bearing deposits
507,424
502,744
505,510
Net interest income
$
21,996
$
20,560
$
19,592
Net interest margin(3)
4.58
%
4.36
%
4.12
%
CCBX
Assets
Interest earning assets:
Loans receivable (2)(4)
$
1,833,904
$
68,846
14.89
%
$
1,764,957
$
69,643
15.65
%
$
1,527,178
$
64,532
16.81
%
Intrabank asset
600,937
5,995
3.96
607,900
6,768
4.42
583,776
7,007
4.78
Total interest earning assets
2,434,841
74,841
12.19
2,372,857
76,411
12.78
2,110,954
71,539
13.48
Liabilities
Interest bearing liabilities:
Interest bearing deposits
2,351,925
21,581
3.64
%
2,297,781
23,330
4.03
%
2,039,011
22,243
4.34
%
Total interest bearing liabilities
2,351,925
21,581
3.64
2,297,781
23,330
4.03
2,039,011
22,243
4.34
Noninterest bearing deposits
82,916
75,076
71,943
Net interest income
$
53,260
$
53,081
$
49,296
Net interest margin(3)
8.68
%
8.88
%
9.29
%
Net interest margin, net
of BaaS loan expense(5)
3.59
%
3.38
%
3.50
%
23
For the Three Months Ended
December 31, 2025
September 30, 2025
December 31, 2024
(dollars in thousands, unaudited)
Average Balance
Interest & Dividends
Yield /
Cost (1)
Average Balance
Interest & Dividends
Yield /
Cost (1)
Average Balance
Interest & Dividends
Yield /
Cost (1)
Treasury & Administration
Assets
Interest earning assets:
Loans receivable(2)
$
739
$
23
12.35
%
$
—
$
—
—
%
$
—
$
—
—
%
Interest earning deposits with other banks
682,663
6,810
3.96
719,191
8,007
4.42
501,654
6,021
4.77
Investment securities,
available-for-sale (6)
31
—
—
33
—
—
39
—
—
Investment securities,
held-to-maturity (6)
46,431
635
5.43
45,030
616
5.43
48,126
661
5.46
Other investments
12,809
235
7.28
12,730
37
1.15
10,783
191
7.05
Total interest earning assets
742,673
7,703
4.11
%
776,984
—
8,660
4.42
%
560,602
6,873
4.88
%
Liabilities
Interest bearing liabilities:
FHLB advances and borrowings
$
—
—
—
%
$
—
—
—
%
$
—
1
—
%
Subordinated debt
44,420
599
5.35
44,383
598
5.35
44,272
599
5.38
Junior subordinated debentures
3,593
59
6.51
3,592
62
6.85
3,591
67
7.42
Intrabank liability, net (7)
294,253
2,936
3.96
335,939
3,740
4.42
226,334
2,717
4.78
Total interest bearing liabilities
342,266
3,594
4.17
383,914
4,400
4.55
274,197
3,384
4.91
Net interest income
$
4,109
$
4,260
$
3,489
Net interest margin(3)
2.20
%
2.18
%
2.48
%
(1)Yields and costs are annualized.
(2)Includes loans held for sale and nonaccrual loans.
(3)Net interest margin represents net interest income divided by the average total interest earning assets.
(4)CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and originating & servicing CCBX loans. See reconciliation of the non-GAAP measures at the end of this earnings release for the impact of BaaS loan expense on CCBX loan yield.
(5)Net interest margin, net of BaaS loan expense, includes the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements, originating & servicing CCBX loans. See reconciliation of the non-GAAP measures at the end of this earnings release.
(6)For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(7)Intrabank assets and liabilities are consolidated for period calculations and presented as intrabank asset, net or intrabank liability, net in the table above.
24
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of financial performance.
However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.
The following non-GAAP measures are presented to illustrate the impact of BaaS loan expense on net loan income and yield on loans and CCBX loans and the impact of BaaS loan expense on net interest income and net interest margin.
Loan income, net of BaaS loan expense, divided by average loans, is a non-GAAP measure that includes the impact of BaaS loan expense on loan income and the yield on loans. The most directly comparable GAAP measure is yield on loans.
Net BaaS loan income divided by average CCBX loans is a non-GAAP measure that includes the impact of BaaS loan expense on net BaaS loan income and the yield on CCBX loans. The most directly comparable GAAP measure is yield on CCBX loans.
Net interest income, net of BaaS loan expense, is a non-GAAP measure that includes the impact of BaaS loan expense on net interest income. The most directly comparable GAAP measure is net interest income.
CCBX net interest margin, net of BaaS loan expense, is a non-GAAP measure that includes the impact of BaaS loan expense on net interest rate margin. The most directly comparable GAAP measure is CCBX net interest margin.
25
Reconciliations of the GAAP and non-GAAP measures are presented below.
CCBX
As of and for the Three Months Ended
(dollars in thousands; unaudited)
December 31 2025
September 30 2025
December 31 2024
Net BaaS loan income divided by average CCBX loans:
CCBX loan yield (GAAP)(1)
14.89
%
15.65
%
16.81
%
Total average CCBX loans receivable
$
1,833,904
$
1,764,957
$
1,527,178
Interest and earned fee income on CCBX loans (GAAP)
68,846
69,643
64,532
BaaS loan expense
(31,256)
(32,840)
(30,720)
Net BaaS loan income
$
37,590
$
36,803
$
33,812
Net BaaS loan income divided by average CCBX loans (1)
8.13
%
8.27
%
8.81
%
CCBX net interest margin, net of BaaS loan expense:
CCBX net interest margin (1)
8.68
%
8.88
%
9.29
%
CCBX earning assets
2,434,841
2,372,857
2,110,954
Net interest income (GAAP)
53,260
53,081
49,296
Less: BaaS loan expense
(31,256)
(32,840)
(30,720)
Net interest income, net of BaaS
loan expense
$
22,004
$
20,241
$
18,576
CCBX net interest margin, net of BaaS loan expense (1)
3.59
%
3.38
%
3.50
%
Consolidated
As of and for the Three Months Ended
(dollars in thousands; unaudited)
December 31 2025
September 30 2025
December 31 2024
Net interest margin, net of BaaS loan expense:
Net interest margin (1)
7.03
%
7.00
%
7.23
%
Earning assets
4,482,007
4,413,529
3,980,078
Net interest income (GAAP)
79,365
77,901
72,377
Less: BaaS loan expense
(31,256)
(32,840)
(30,720)
Net interest income, net of BaaS loan expense
$
48,109
$
45,061
$
41,657
Net interest margin, net of BaaS loan expense (1)
4.26
%
4.05
%
4.16
%
Loan income net of BaaS loan expense divided by average loans:
Loan yield (GAAP)(1)
10.63
%
10.95
%
11.12
%
Total average loans receivable
$
3,740,073
$
3,636,545
$
3,419,476
Interest and earned fee income on loans (GAAP)
100,206
100,367
95,575
BaaS loan expense
(31,256)
(32,840)
(30,720)
Net loan income
$
68,950
$
67,527
$
64,855
Loan income, net of BaaS loan expense, divided by average loans (1)
7.31
%
7.37
%
7.55
%
(1) Annualized calculations for periods presented.
26
The following non-GAAP measure is presented to illustrate the impact of BaaS loan expense, BaaS fraud expense and reimbursement of expenses (BaaS) on noninterest expense. Certain noninterest expenses are reimbursed by our CCBX partners. In accordance with GAAP we recognize all expenses in noninterest expense and the reimbursement of expenses from our CCBX partners in noninterest income. This non-GAAP measure shows the portion of noninterest expenses that are reimbursed by partners to assist the understanding of how the increases in noninterest expense are related to expenses incurred for and reimbursed by CCBX partners. The most comparable GAAP measure is noninterest expense.
As of and for the Three Months Ended
(dollars in thousands, unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
Noninterest expense, net of BaaS loan expense, BaaS fraud expense and reimbursement of expenses (BaaS)
Noninterest expense (GAAP)
$
72,804
$
70,172
$
67,411
Less: BaaS loan expense
31,256
32,840
30,720
Less: BaaS fraud expense
1,090
2,127
5,043
Less: Reimbursement of expenses
1,868
1,412
812
Noninterest expense, net of BaaS loan expense, BaaS fraud expense and reimbursement of expenses
$
38,590
$
33,793
$
30,836
The following non-GAAP measure is presented to illustrate the impact of intangible assets on book value per share. We calculate tangible book value per share as total shareholders’ equity at the end of the relevant period, less goodwill and other intangible assets, divided by the outstanding number of our common shares at the end of each period. The most directly comparable GAAP financial measure is book value per share.
As of
(dollars in thousands, except per share information, unaudited)
December 31, 2025
September 30, 2025
June 30, 2025
March 31, 2025
December 31, 2024
Tangible book value per share
Book value (GAAP)
$
32.43
$
31.45
$
30.59
$
29.98
$
29.37
Total shareholders' equity
490,959
475,277
461,709
449,917
438,704
Less: Intangible assets
4,536
—
—
—
—
Tangible book value
$
486,423
$
475,277
$
461,709
$
449,917
$
438,704
Common shares outstanding
15,140,192
15,112,000
15,093,036
15,009,225
14,935,298
Tangible book value per share
$
32.13
$
31.45
$
30.59
$
29.98
$
29.37
27
APPENDIX A
As of December 31, 2025
Industry Concentration
We have a diversified loan portfolio, representing a wide variety of industries. Our major categories of loans are commercial real estate, consumer and other loans, residential real estate, commercial and industrial, and construction, land and land development loans. Together they represent $3.76 billion in outstanding loan balances. When combined with $2.31 billion in unused commitments the total of these categories is $6.06 billion.
Commercial real estate loans represent the largest segment of our loans, comprising 34.2% of our total balance of outstanding loans as of December 31, 2025. Unused commitments to extend credit represents an additional $28.1 million, and the combined total in commercial real estate loans represents $1.31 billion, or 21.7% of our total outstanding loans and loan commitments.
The following table summarizes our loan commitments by industry for our commercial real estate portfolio as of December 31, 2025:
(dollars in thousands; unaudited)
Outstanding Balance
Available Loan Commitments
Total Outstanding Balance & Available Commitments
% of Total Loans
(Outstanding Balance &
Available Commitments)
Average Loan Balance
Number of Loans
Apartments
$
366,509
$
5,691
$
372,200
6.1
%
$
3,899
94
Hotel/Motel
161,105
1,454
162,559
2.7
6,713
24
Convenience Store
135,981
3,345
139,326
2.3
2,229
61
Warehouse
100,956
247
101,203
1.7
1,836
55
Retail
100,036
851
100,887
1.7
1,031
97
Mixed use
87,704
6,591
94,295
1.6
1,020
86
Office
85,237
3,522
88,759
1.5
991
86
Mini Storage
79,827
303
80,130
1.3
3,991
20
Strip Mall
43,029
—
43,029
0.7
6,147
7
Manufacturing
32,353
1,195
33,548
0.6
1,294
25
Groups < 0.60% of total
93,119
4,909
98,028
1.5
1,225
76
Total
$
1,285,856
$
28,108
$
1,313,964
21.7
%
$
2,038
631
Consumer loans comprise 35.4% of our total balance of outstanding loans as of December 31, 2025. Unused commitments to extend credit represents an additional $887.8 million, and the combined total in consumer and other loans represents $2.22 billion, or 36.5% of our total outstanding loans and loan commitments. The $887.8 million in commitments is subject to CCBX partner/portfolio maximum limits. As illustrated in the table below, our CCBX partners bring in a large number of mostly smaller dollar loans, resulting in an average consumer loan balance of just $800. CCBX consumer loans are underwritten to CCBX credit standards, and underwriting of these loans is regularly tested, including quarterly testing for partners with the largest exposures.
28
The following table summarizes our loan commitments by industry for our consumer and other loan portfolio as of December 31, 2025:
(dollars in thousands; unaudited)
Outstanding Balance
Available Loan Commitments (1)
Total Outstanding Balance & Available Commitments (1)
% of Total Loans
(Outstanding Balance &
Available Commitments)
Average Loan Balance
Number of Loans
CCBX consumer loans
Credit cards
$
622,682
$
819,495
$
1,442,177
23.8
%
$
1.4
435,236
Installment loans
664,838
45,115
709,953
11.7
0.8
864,638
Lines of credit
10,027
9,635
19,662
0.3
0.1
89,736
Other loans
16,842
—
16,842
0.3
0.1
252,381
Community bank consumer loans
Installment loans
3,010
4
3,014
0.0
111.5
27
Lines of credit
140
409
549
0.0
4.5
31
Other loans
10,922
13,138
24,060
0.4
28.6
382
Total
$
1,328,461
$
887,796
$
2,216,257
36.5
%
$
0.8
1,642,431
(1)Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.
Residential real estate loans comprise 12.4% of our total balance of outstanding loans as of December 31, 2025. Unused commitments to extend credit represents an additional $684.5 million, which is subject to partner/portfolio maximum limits, and the combined total in residential real estate loans represents $1.15 billion, or 19.0% of our total outstanding loans and loan commitments.
The following table summarizes our loan commitments by industry for our residential real estate loan portfolio as of December 31, 2025:
(dollars in thousands; unaudited)
Outstanding Balance
Available Loan Commitments (1)
Total Outstanding Balance & Available Commitments (1)
% of Total Loans
(Outstanding Balance &
Available Commitments)
Average Loan Balance
Number of Loans
CCBX residential real estate loans
Home equity lines of credit
$
264,059
$
631,973
$
896,032
14.8
%
$
25
10,451
Community bank residential real estate loans
Closed end, secured by first liens
164,351
529
164,880
2.7
293
293
Home equity lines of credit
28,294
50,302
78,596
1.3
257
257
Closed end, second liens
9,648
1,681
11,329
0.2
28
28
Total
$
466,352
$
684,485
$
1,150,837
19.0
%
$
42
11,029
(1)Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.
Commercial and industrial loans comprise 12.1% of our total balance of outstanding loans as of December 31, 2025. Unused commitments to extend credit represents an additional $609.4 million, and the combined total in commercial and industrial loans represents $1.06 billion, or 17.5% of our total outstanding loans and loan commitments. Included in commercial and industrial loans is $210.5 million in outstanding capital call lines, with an additional $519.1 million in available loan commitments which is limited to a $350.0 million portfolio maximum. Capital call lines are provided to venture capital firms through one of our CCBX BaaS clients. These loans are secured by the capital call rights and are individually underwritten to the Bank’s credit standards, and the underwriting is reviewed by the Bank on every capital call line.
29
The following table summarizes our loan commitment by industry for our commercial and industrial loan portfolio as of December 31, 2025:
(dollars in thousands; unaudited)
Outstanding Balance
Available Loan Commitments (1)
Total Outstanding Balance & Available Commitments (1)
% of Total Loans
(Outstanding Balance &
Available Commitments)
Average Loan Balance
Number of Loans
CCBX C&I loans
Capital call lines
$
210,480
$
519,135
$
729,615
12.0
%
$
1,697
124
Retail and other loans
19,166
23,859
43,025
0.7
8
2,490
Community bank C&I loans
Financial institutions
92,017
—
92,017
1.5
4,183
22
Construction/Contractor services
31,196
31,728
62,924
1.1
173
180
Manufacturing
4,435
4,113
8,548
0.1
120
37
Maintenance and repair
7,751
278
8,029
0.1
646
12
Medical / Dental / Other care
4,855
760
5,615
0.1
486
10
Groups < 0.20% of total
84,185
29,543
113,728
1.9
390
216
Total
$
454,085
$
609,416
$
1,063,501
17.5
%
$
147
3,091
(1) Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.
Construction, land and land development loans comprise 5.9% of our total balance of outstanding loans as of December 31, 2025. Unused commitments to extend credit represent an additional $98.2 million, and the combined total in construction, land and land development loans represents $320.3 million, or 5.3% of our total outstanding loans and loan commitments.
The following table details our loan commitment for our construction, land and land development portfolio as of December 31, 2025:
(dollars in thousands; unaudited)
Outstanding Balance
Available Loan Commitments
Total Outstanding Balance & Available Commitments
% of Total Loans
(Outstanding Balance &
Available Commitments)
Average Loan Balance
Number of Loans
Commercial construction
$
124,894
$
50,467
$
175,361
2.9
%
$
8,326
15
Residential construction
37,395
39,676
77,071
1.3
1,558
24
Developed land loans
20,559
420
20,979
0.3
1,285
16
Undeveloped land loans
20,704
—
20,704
0.4
1,380
15
Land development
18,523
7,675
26,198
0.4
2,058
9
Total
$
222,075
$
98,238
$
320,313
5.3
%
$
2,811
79
30
Exposure and risk in our construction, land and land development portfolio increased compared to recent periods as indicated in the following table:
Outstanding Balance as of
(dollars in thousands; unaudited)
December 31, 2025
September 30, 2025
June 30, 2025
March 31, 2025
December 31, 2024
Commercial construction
$
124,894
$
124,240
$
104,078
$
96,716
$
83,216
Residential construction
37,395
35,929
39,831
39,375
40,940
Undeveloped land loans
20,704
20,584
20,067
16,684
8,665
Developed land loans
20,559
22,756
22,875
7,788
8,305
Land development
18,523
14,552
7,299
5,988
7,072
Total
$
222,075
$
218,061
$
194,150
$
166,551
$
148,198
Commitments to extend credit total $2.31 billion at December 31, 2025, however we do not anticipate our customers using the $2.31 billion that is showing as available due to CCBX partner and portfolio limits.
The following table presents outstanding commitments to extend credit as of December 31, 2025:
Consolidated
(dollars in thousands; unaudited)
As of December 31, 2025 (1)
Commitments to extend credit:
Credit cards
$
819,495
Residential real estate loans
684,485
Commercial and industrial loans – capital call lines
519,135
Commercial and industrial loans
90,281
Construction – commercial real estate loans
58,562
Consumer and other loans
68,302
Construction – residential real estate loans
39,676
Commercial real estate loans
28,108
Total commitments to extend credit
$
2,308,044
(1)Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.
We have individual CCBX partner portfolio limits with each of our partners to manage loan concentration risk, liquidity risk and counter-party partner risk. For example, as of December 31, 2025, capital call lines outstanding balance totaled $210.5 million and, while commitments to underlying customers totaled $519.1 million, the commitments are limited to a maximum of $350.0 million by agreement with the partner. If a CCBX partner goes over their individual limit, it would be a breach of their contract and the Bank may impose penalties and would have the choice to fund or not fund the loan.
31
See the table below for CCBX portfolio maximums and related available commitments:
CCBX
(dollars in thousands; unaudited)
Balance
Percent of CCBX Loans Receivable
Available Commitments (1)
Maximum Portfolio Size
Cash Reserve/Pledge Account Amount (2)
Commercial and industrial loans:
Capital call lines
$
210,480
11.6
%
$
519,135
$
350,000
$
—
All other commercial & industrial loans
19,166
1.1
23,859
515,589
786
Real estate loans:
Home equity lines of credit (3)
264,059
14.6
631,973
400,000
28,701
Consumer and other loans:
Credit cards - cash secured
56
—
—
Credit cards - unsecured
622,626
819,495
41,408
Credit cards - total
622,682
34.4
819,495
900,000
41,408
Installment loans - cash secured
162,072
45,115
—
Installment loans - unsecured
502,766
—
(3,954)
Installment loans - total
664,838
36.8
45,115
1,740,813
(3,954)
Other consumer and other loans
26,869
1.5
9,635
478,598
214
Gross CCBX loans receivable
1,808,094
100.0
%
$
2,049,212
$
4,385,000
$
67,155
Net deferred origination fees
(542)
Loans receivable
$
1,807,552
(1) Remaining commitment available, net of outstanding balance.
(2) Balances are as of January 8, 2026.
(3) These home equity lines of credit are secured by residential real estate and are accessed by using a credit card, but are classified as 1-4 family residential properties per regulatory guidelines.
32
APPENDIX B
As of December 31, 2025
CCBX – BaaS Reporting Information
During the quarter ended December 31, 2025, $47.3 million was recorded in BaaS credit enhancements related to the provision for credit losses - loans and reserve for unfunded commitments for CCBX partner loans and negative deposit accounts. Agreements with our CCBX partners provide for a credit enhancement provided by the partner which protects the Bank by indemnifying or reimbursing incurred losses. In accordance with accounting guidance, we estimate and record a provision for expected losses for these CCBX loans, unfunded commitments, negative deposit accounts and accrued interest receivable on CCBX partner loans. When the provision for credit losses - loans and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements) in recognition of the CCBX partner legal commitment to indemnify or reimburse losses. The credit enhancement asset is relieved as credit enhancement payments and recoveries are received from the CCBX partner or taken from the partner's cash reserve account. Agreements with our CCBX partners also provide protection to the Bank from fraud by indemnifying or reimbursing incurred fraud losses. BaaS fraud includes non-credit fraud losses on loans and deposits originated through partners. Generally fraud losses related to loans are comprised primarily of first payment defaults. Fraud losses are recorded when incurred as losses in noninterest expense, and the enhancement received from the CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement. Many CCBX partners also pledge a cash reserve account at the Bank, which the Bank can collect from when losses occur that is then replenished by the partner on a regular interval. Although agreements with our CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses if our partner is unable to fulfill their contractual obligation and if the cash flows on the loans were not sufficient to fund the reimbursement of loan losses, then the Bank would be exposed to additional loan and deposit losses as a result of this counterparty risk. If a CCBX partner does not replenish their cash reserve account, the Bank may consider an alternative plan for funding the cash reserve. This may involve the possibility of adjusting the funding amounts or timelines to better align with the partner's specific situation. If a mutually agreeable funding plan is not agreed to, the Bank could declare the agreement in default, take over servicing and cease paying the partner for servicing the loan and providing credit enhancements. The Bank would evaluate any remaining credit enhancement asset from the CCBX partner in the event the partner defaulted to determine if a write-off is appropriate. If a write-off occurs, the Bank would stop payments to the CCBX partner and retain the full yield and any fee income on the loan portfolio going forward, decreasing our BaaS loan expense.
The Bank records contractual interest earned from the borrowers on CCBX partner loans in interest income, adjusted for origination costs, which are paid or payable to the CCBX partners. BaaS loan expense represents the amount paid or payable to partners for credit and fraud enhancements and originating and servicing CCBX loans. To determine net revenue (Net BaaS loan income) earned from CCBX loan relationships, the Bank takes BaaS loan interest income and deducts BaaS loan expense to arrive at Net BaaS loan income (a reconciliation of the non-GAAP measures are set forth in the preceding section of this earnings release) which can be compared to interest income on the Company’s community bank loans.
The following table illustrates how CCBX partner loan income and expenses are recorded in the financial statements:
Loan income and related loan expense
Three Months Ended
(dollars in thousands; unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
Yield on loans (1)
14.89
%
15.65
%
16.81
%
BaaS loan interest income
$
68,846
$
69,643
$
64,532
Less: BaaS loan expense
31,256
32,840
30,720
Net BaaS loan income (2)
$
37,590
$
36,803
$
33,812
Net BaaS loan income divided by average BaaS loans (1)(2)
8.13
%
8.27
%
8.81
%
(1) Annualized calculation for quarterly periods shown.
(2) A reconciliation of the non-GAAP measures are set forth in the preceding section of this earnings release.
Despite an increase in average CCBX loans receivable, a change in loan mix and lower interest rates resulted in decreased interest income on CCBX loans during the quarter ended December 31, 2025 compared to the quarter ended September 30, 2025. Our strategy is to optimize the CCBX loan portfolio and strengthen our balance sheet through originating higher quality new loans with enhanced credit standards. These higher quality loans tend to have lower stated rates and expected losses than some of our CCBX loans historically. Current loan sales and new loan growth are at more similar interest rates compared to prior periods when we were selling loans with higher risk and higher interest rates and replacing them with
33
higher quality lower interest rate loans. We continue to manage CCBX credit and concentration levels in an effort to optimize our loan portfolio and also generate off-balance sheet fee income. Growth in CCBX loans has resulted in an increase in interest income for the quarter ended December 31, 2025 compared to the quarter ended December 31, 2024.
The following tables are a summary of the interest components, direct fees and expenses of BaaS for the periods indicated and are not inclusive of all income and expense related to BaaS.
Interest income
Three Months Ended
(dollars in thousands; unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
BaaS loan interest income
$
68,846
$
69,643
$
64,532
Total BaaS loan interest income
$
68,846
$
69,643
$
64,532
Interest expense
Three Months Ended
(dollars in thousands; unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
BaaS interest expense
$
21,581
$
23,330
$
22,243
Total BaaS interest expense
$
21,581
$
23,330
$
22,243
BaaS income
Three Months Ended
(dollars in thousands; unaudited)
December 31, 2025
September 30, 2025
December 31, 2024
BaaS program income:
Servicing and other BaaS fees
$
1,573
$
1,264
$
1,043
Transaction and interchange fees
4,924
4,878
3,699
Reimbursement of expenses
1,868
1,412
812
Total BaaS program income
8,365
7,554
5,554
BaaS indemnification income:
BaaS credit enhancements
47,325
55,412
62,097
BaaS fraud enhancements
1,090
2,127
5,043
BaaS indemnification income
48,415
57,539
67,140
Total noninterest BaaS income
$
56,780
$
65,093
$
72,694
Servicing and other BaaS fees increased $309,000, and transaction and interchange fees increased $46,000 in the quarter ended December 31, 2025 compared to the quarter ended September 30, 2025. We expect servicing and other BaaS fees to be higher when bringing on new partners and then to decrease when transaction and interchange fees increase as partner activity grows and these recurring fees exceed contracted minimum fees. Increases in BaaS reimbursement of fees offset increases in noninterest expense from BaaS expenses covered by CCBX partners.
