CoastalSouth Reports Loan Growth and Deposit Increase

The Tip Desk · October 27, 2026 · 3 min read

Diluted earnings reached $0.71 a share as gain-on-sale income from government-guaranteed loans lifted noninterest income 51.2% to $3.3 million.

CoastalSouth Bancshares (COSO), the Atlanta holding company for Coastal States Bank, reported net income of $8.8 million, or $0.71 a share, for the third quarter of 2026, up from $7.3 million, or $0.59 a share, in the second quarter.

The increase followed a second-quarter step-up from $6.3 million, or $0.51 a share, in the first quarter. Return on average assets was 1.45% and return on average equity was 12.88%.

Loans held for investment were the operating engine. Production of $248.2 million, defined as original commitment including unfunded balances, added $81.6 million to LHFI, or 19.0% annualized, after $181.6 million of production and a $78.1 million, 19.3% annualized increase in the second quarter. Gross LHFI were $1.79 billion at September 30. President and Chief Executive Officer Stephen R. Stone said the majority of production continued to come from the community bank, with specialty lines also contributing.

Net interest income rose $862 thousand, or 4.2%, to $21.5 million. Net interest margin expanded 4 basis points to 3.70% from 3.66%, after a 7 basis-point increase in the second quarter. The yield on average interest-earning assets was 5.99%. Total cost of funds was 2.51%. Deposit costs were 2.48%. Interest-bearing deposit cost rose 2 basis points to 2.97%, which the company attributed to repricing amid market expectations of Federal Reserve hikes.

Noninterest income totaled $3.3 million, up 51.2% from $2.2 million, primarily on a $1.3 million increase in gain on sale of government guaranteed loans, which reached $1.56 million from $307 thousand. Noninterest expense was $13.7 million, up 2.5%, led by $299 thousand higher salaries and employee benefits. The efficiency ratio improved to 55.16% from 58.49%. The effective tax rate was 24.2%, versus 17.0% in the second quarter, primarily from a $641 thousand reduction in a deferred tax asset related to state taxes.

Total deposits increased $53.1 million to $2.10 billion, reversing a $9.5 million decrease in the second quarter. Core deposits declined about $20.0 million, which the company said was primarily seasonal outflows associated with property-management clients. Noninterest-bearing deposits were $340.4 million, or 16.2% of total deposits. Brokered certificates of deposit were $257.0 million at September 30.

Credit costs reversed. The company recorded a $429 thousand recovery for credit losses after a $658 thousand provision in the second quarter, citing changes in the economic forecast and loan mix, offset by new loan production. Annualized net charge-offs to average LHFI were 0.01%. The allowance for credit losses on LHFI was 1.10% of total LHFI and 130.13% of nonperforming loans. Nonperforming assets were $15.1 million, or 0.62% of total assets, at September 30, down from $18.3 million, or 0.79% of total assets, at December 31, 2025, after a $4.2 million paydown of a nonaccrual senior housing loan. Adjusted nonperforming assets to total assets were 0.45%.

Book value per share decreased $0.15, or 2.65% annualized, to $22.32. Accumulated other comprehensive loss increased $8.3 million on unrealized losses in available-for-sale securities. Tangible book value per common share declined $0.16, or 2.88% annualized, to $21.90. Total shareholders’ equity to total assets was 10.81%.

The board declared a $0.06 quarterly dividend, up from $0.05 in the second quarter, payable November 24, 2026. Under a share-repurchase program launched May 1, 2026, the company bought 285,715 shares in the third quarter at a weighted-average $27.10, after 48,491 shares at $25.48 in the second quarter.

Stone said the company remains focused on building client relationships, maintaining disciplined underwriting, and investing in bankers across the footprint as it heads into the fourth quarter.