Coastal Financial Corporation — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net income was $13.8 million ($0.89 per diluted share) for the quarter ended September 30, 2026, compared to a net loss of $42.1 million ($2.76 per diluted share) in the second quarter of 2026 and net income of $13.6 million ($0.88 per diluted share) in the third quarter of 2025.
• Return on average assets (ROA) was 1.01% for the quarter, compared to (3.32)% in the second quarter and 1.19% in the third quarter of 2025.
• Net interest income was $88.3 million, a decrease of 1.2% from the second quarter and an increase of 13.4% from the third quarter of 2025.
• Net interest margin was 6.59% for the quarter, down from 7.27% in the second quarter and 7.00% in the third quarter of 2025.
• Noninterest income was $61.0 million, a decrease of $27.7 million from the second quarter and $5.7 million from the third quarter of 2025.
• Noninterest expense decreased $56.3 million to $84.8 million in the third quarter, compared to $141.1 million in the second quarter and $70.2 million in the third quarter of 2025.
• Provision for credit losses was $46.0 million for the quarter, down from $92.2 million in the second quarter and $56.6 million in the third quarter of 2025.
• Total assets were $5.28 billion at September 30, 2026, a decrease of 3.3% from $5.46 billion at June 30, 2026.
• Total deposits were $4.68 billion at September 30, 2026, a decrease of 3.8% from $4.86 billion at June 30, 2026.
• Total shareholders' equity increased $14.8 million to $478.3 million at September 30, 2026.
• Cash and cash equivalents were $803.6 million at September 30, 2026.
• Nonperforming assets decreased $14.7 million quarter-over-quarter to $60.5 million (1.15% of total assets) at September 30, 2026.
• Net charge-offs were $49.9 million for the quarter, or 4.43% of average loans, compared to 4.90% in the second quarter and 5.37% in the third quarter of 2025.
• Allowance for credit losses was $208.1 million (4.97% of loans receivable) at September 30, 2026.

Guidance and Future Outlook:

• Management expects to achieve up to $20.0 million in potential annualized noninterest expense savings over the next 4–6 quarters.
• New partnership opportunities and product launches are expected for the remainder of 2026.
• The Bluevine relationship is expected to terminate in the second quarter of 2027 upon the closing of its acquisition by Valley National Bancorp; Coastal expects to replace related on-balance sheet funding through existing sweep capabilities and does not anticipate a material adverse effect on liquidity.
• Management anticipates continued growth in noninterest income as existing products scale and new offerings are introduced.
• The company expects to continue moving deposits on and off the balance sheet to manage liquidity and FDIC insurance coverage.

Business Segments and Product Lines:

• CCBX Segment:
  • BaaS program fee income grew to $14.1 million, an increase of 17.6% from the second quarter and 79.6% from the third quarter of 2025.
  • Off-balance sheet credit card accounts reached 1.3 million, an increase of 236% from the third quarter of 2025.
  • CCBX loans decreased $18.9 million to $2.21 billion, driven by the sale of $5.99 billion in loans during the quarter.
  • CCBX deposits reported on the balance sheet decreased $246.2 million to $3.04 billion, primarily due to increased use of off-balance sheet sweep arrangements; off-balance sheet swept deposits increased to $6.29 billion.
  • Active CCBX relationships totaled 31, including 21 active, 1 in testing, 2 in implementation, 3 with signed letters of intent, and 4 winding down.
  • CCBX active debit cards increased by 1.8 million (20.0%) quarter-over-quarter.
  • Net BaaS loan income divided by average CCBX loans was 7.02% for the quarter.
• Community Bank Segment:
  • Deposits grew $63.2 million (4.0%) to $1.64 billion in the quarter at a cost of deposits of 1.54%.
  • Net loans decreased $3.9 million (0.2%) to $1.98 billion.
  • Commercial real estate loans decreased $28.1 million, while construction, land, and land development loans increased $27.2 million.
• Other:
  • The company sold $5.99 billion of loans during the quarter, including $4.69 billion of additional credit card receivables.
  • Noninterest income from sweep arrangements was $1.4 million, up 16.4% from the second quarter.

Market and Competitive Landscape:

• The company operates a community-focused bank segment and an industry-leading banking as a service (BaaS) segment (CCBX).
• The company maintains a diversified partner portfolio, with eight active partner programs in various stages of expanding into additional products.
• The company faces counterparty risk associated with CCBX partners, specifically regarding the collectability of indemnification arrangements.
• The company is subject to additional state tax jurisdictions as CCBX activities expand, increasing the overall tax rate used in calculations.

Risks and Challenges:

• Partner Credit Performance: A specific provision of $22.8 million was recorded in the second quarter for credit losses not expected to be fully recovered under "The Partner's" indemnification arrangement; this provision remained unchanged in the third quarter.
• Bluevine Acquisition: The acquisition of Bluevine by Valley National Bancorp will result in the termination of the Bluevine relationship in Q2 2027, requiring the transition of associated deposits.
• Expense Discipline: The company is actively managing operating expenses to achieve efficiency, having identified $20.0 million in potential annualized savings.
• Valuation Adjustments: A $46.0 million credit enhancement receivable valuation adjustment was recorded in the second quarter related to "The Partner," which did not recur in the third quarter.
• Unrealized Losses: Noninterest income was reduced by $477,000 in unrealized gains on equity securities due to a $565,000 downward valuation adjustment on a strategic equity investment.
• Forward-Looking Risks: Risks include the ability to manage counterparty risk, conflicts in the Middle East, and changes in U.S. trade policies.

Management Commentary and Tone:

• CEO Eric Sprink stated the third quarter "better reflects the underlying earnings power of Coastal's business" following a challenging second quarter.
• Management expressed confidence in the business fundamentals, citing solid fee income growth, robust partner activity, and continued capital strength.
• CEO Eric Sprink voluntarily agreed to a nearly 43% reduction in his base salary from $874,000 to $500,000 effective immediately.
• Management noted that the results of their updated assessment of "The Partner" substantially supported the loss estimates established in the second quarter.
• The tone regarding the Bluevine relationship is that the company is well-positioned to replace funding and does not expect a material adverse effect on liquidity.

Analyst Questions and Answers:

• No analyst questions and answers section is included in the provided press release text.

Other Key Points:

• Leadership Changes: Joel Edwards returned as interim Chief Financial Officer following the departure of Brandon Soto in August 2026; the search for a permanent CFO is in its final stages. Brian Hamilton stepped down as President of Coastal but remains on the Board of Directors and as an advisor.
• Capital Ratios: The Company remained well capitalized with a Common Equity Tier 1 ratio of 11.47%, a Tier 1 leverage ratio of 8.81%, and a Total risk-based capital ratio of 13.82% at September 30, 2026.
• Capital Contribution: The Company contributed $25.0 million of capital to the Bank during the quarter to support its capital position.
• Borrowing Capacity: The Company had $827.4 million in additional contingent borrowing capacity, including $621.4 million from the Federal Reserve Bank discount window and Federal Home Loan Bank, plus $206.0 million from banker's banks, with no borrowings outstanding.
• Uninsured Deposits: Estimated at $899.6 million as of September 30, 2026, down from $1.35 billion at June 30, 2026.
• Dividends: No dividends were declared for the quarter.