Earnings

Coastal Restores Profit After Partner Credit Loss

The Tip Desk · November 10, 2026 · 4 min read

Net income was $13.8 million, or $0.89 a share, as BaaS fee income reached $14.1 million and the efficiency ratio improved to 56.82%.

Coastal Financial Corporation (CCB), the holding company for Coastal Community Bank and its banking-as-a-service franchise CCBX, returned to profitability in the third quarter after a $42.1 million second-quarter loss tied to a single partner. Net income was $13.8 million, or $0.89 a share, versus a $42.1 million loss, or $(2.76) a share, in the three months ended June 30, 2026. Return on average assets recovered to 1.01% from (3.32)%.

Chief Executive Officer Eric Sprink said the quarter better reflected the company’s underlying earnings power after a review of the affected relationship that substantially supported the estimates set at June 30. Beyond that relationship, the company said it returned to profitability.

BaaS program fee income accelerated to $14.1 million, up $2.1 million, or 17.6%, from the second quarter, after a $1.1 million, or 10.3%, increase in the second quarter from the first. Off-balance-sheet credit cards stood at 1.3 million, up 452,984, or 51.38%, from June 30, and 236.34% from September 30, 2025. CCBX active debit cards increased 1.8 million, or 20.0%, quarter over quarter.

The provision for credit losses fell to $46.0 million from $92.2 million in the second quarter. The $22.8 million specific allowance related to the partner remained unchanged, and the valuation allowance against the credit-enhancement asset decreased modestly to $45.6 million from $46.0 million. Management said loan-portfolio performance remained generally consistent with the June 30 assessment, although actual charge-offs were modestly higher than previously projected; about $3.1 million of additional provision was not offset by credit-enhancement income because collection of that portion was not considered probable. Net charge-offs to average loans declined to 4.43% from 4.90%. Nonperforming assets to total assets fell to 1.15% from 1.38%.

Net interest income declined to $88.3 million from $89.4 million in the second quarter. Net interest margin compressed 68 bps to 6.59% from 7.27%; yield on earning assets fell 0.60% versus the second quarter. Average loans receivable increased $326.1 million versus June 30.

Noninterest expense fell $56.3 million to $84.8 million from $141.1 million, primarily the absence of the second quarter’s $46.0 million credit-enhancement valuation adjustment, a $5.9 million drop in data processing and software licenses, a $4.7 million drop in BaaS loan expense and a $1.6 million drop in salaries. The efficiency ratio improved to 56.82% from 79.24%.

CCBX loans decreased $18.9 million, or 0.8%, to $2.21 billion after $5.99 billion of loan sales, including $4.69 billion of sold credit-card receivables. CCBX loan yield fell 1.83% to 12.73% from 14.56% on mix and sales. On-balance-sheet CCBX deposits decreased $246.2 million, or 7.5%, to $3.04 billion as sweeps rose to $6.29 billion from $4.26 billion; CCBX deposit cost was 3.17%. The company said the deposit decline reflected increased use of off-balance-sheet sweeps and did not reflect a decline in underlying partner activity.

Community-bank deposits grew $63.2 million, or 4.0%, to $1.64 billion at a cost of 1.54%. Total deposits were $4.68 billion versus $4.86 billion at June 30.

Bluevine, Inc. has entered a definitive agreement to be acquired by Valley National Bancorp, subject to regulatory approvals. Valley has indicated it expects the transaction to close in the second quarter of 2027, at which time the Bluevine relationship is expected to terminate, with associated deposits anticipated to transition out. At September 30, the bank held $452.4 million in Bluevine deposits and swept $1.85 billion off-balance-sheet. Coastal said it expects to replace related on-balance-sheet funding through existing sweep capabilities and other sources and does not expect a material adverse effect on liquidity.

Company common equity Tier 1 capital rose to 11.47% from 10.86% at June 30. Cash and cash equivalents were $803.6 million. The company identified up to $20.0 million in potential annualized savings in noninterest expenses and said it expects to gradually achieve those savings over the next 4–6 quarters.

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