Category: GlobeNewswire

Source: GlobeNewswire (MIL-OSI)

EVERETT, Wash., April 29, 2025 (GLOBE NEWSWIRE) — 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 March 31, 2025, including net income of $9.7 million, or $0.63 per diluted common share, compared to $13.4 million, or $0.94 per diluted common share, for the three months ended December 31, 2024 and $6.8 million, or $0.50 per diluted common share, for the three months ended March 31, 2024.

Management Discussion of the First Quarter Results

“First quarter of 2025 was impacted by elevated expenses related to the onboarding and implementation costs of several new partnerships and products within CCBX and investments in technology, however, we anticipate that the revenue and earnings from these investments will be highly valuable over the long-term,” stated CEO Eric Sprink. “We saw high quality deposit growth of $205.9 million during the first quarter, and our CCBX program fee income continued to increase, up 55.2% compared to the same period in 2024.”

Key Points for First Quarter and Our Go-Forward Strategy

• Positive Growth Trends within CCBX Continue. As of March 31, 2025 we had two partners in testing, three in implementation/onboarding, one signed LOI and have an active pipeline of new partners and new products with existing partners for the balance of 2025 and into 2026. Total BaaS program fee income was $6.3 million for the three months ended March 31, 2025, an increase of $724,000, or 13.0%, from the three months ended December 31, 2024. We remain fully indemnified against fraud and 98.8% indemnified against credit risk with our CCBX partners as of March 31, 2025.

• Investments for Growth Continues. Total noninterest expense of $72.0 million was up $4.6 million, or 6.8%, as compared to $67.4 million in the quarter ended December 31, 2024, mainly driven by higher salaries and employee benefits, legal and professional expenses and BaaS loan expense partially offset by lower BaaS fraud expense. As we increase the number of new CCBX partners and products with existing partners launching in 2025, we expect that expenses will tend to be front-loaded with a focus on compliance and operational risk before any new programs or products generate significant revenues. We remain focused on building our future revenue sources.

• Strong Deposit Growth, Off Balance Sheet Activity Update. Total deposits of $3.79 billion, an increase of $205.9 million, or 5.7%, over the quarter ended December 31, 2024, driven primarily by growth in CCBX partner programs. On April 1, 2025 we launched the T-Mobile deposit program and those deposits will be reflected in the second quarter deposit totals. During the first quarter of 2025, we sold $744.6 million of loans, the majority of which were credit card receivables. We retain a portion of the fee income on sold credit card loans. As of March 31, 2025 there were 237,024 credit cards with fee earning potential, an increase of 54,575 compared to the quarter ended December 31, 2024 and an increase of 210,723 from March 31, 2024.

First 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)	March 31, 2025				December 31, 2024				September 30, 2024				June 30, 2024				March 31, 2024
Income Statement Data:
Interest and dividend income	$	104,907			$	102,448			$	105,165			$	97,422			$	91,742
Interest expense		28,845				30,071				32,892				31,250				29,536
Net interest income		76,062				72,377				72,273				66,172				62,206
Provision for credit losses		55,781				61,867				70,257				62,325				83,158
Net interest (expense)/ income after provision for credit losses		20,281				10,510				2,016				3,847				(20,952	)
Noninterest income		63,477				74,100				78,790				69,138				86,176
Noninterest expense		71,989				67,411				64,424				57,964				56,509
Provision for income tax		2,039				3,832				2,926				3,425				1,915
Net income		9,730				13,367				13,456				11,596				6,800
	As of and for the Three Month Period
	March 31, 2025				December 31, 2024				September 30, 2024				June 30, 2024				March 31, 2024
Balance Sheet Data:
Cash and cash equivalents	$	624,302			$	452,513			$	484,026			$	487,245			$	515,128
Investment securities		46,991				47,321				48,620				49,213				50,090
Loans held for sale		42,132				20,600				7,565				—				797
Loans receivable		3,517,359				3,486,565				3,413,894				3,321,813				3,195,101
Allowance for credit losses		(183,178	)			(176,994	)			(171,674	)			(148,878	)			(139,941	)
Total assets		4,339,282				4,121,208				4,064,472				3,959,549				3,863,062
Interest bearing deposits		3,251,599				3,057,808				3,047,861				2,949,643				2,888,867
Noninterest bearing deposits		539,630				527,524				579,427				593,789				574,112
Core deposits (1)		3,321,772				3,123,434				3,190,869				3,528,339				3,447,864
Total deposits		3,791,229				3,585,332				3,627,288				3,543,432				3,462,979
Total borrowings		47,923				47,884				47,847				47,810				47,771
Total shareholders’ equity		449,917				438,704				331,930				316,693				303,709
Share and Per Share Data (2):
Earnings per share – basic	$	0.65			$	0.97			$	1.00			$	0.86			$	0.51
Earnings per share – diluted	$	0.63			$	0.94			$	0.97			$	0.84			$	0.50
Dividends per share		—				—				—				—				—
Book value per share (3)	$	29.98			$	29.37			$	24.51			$	23.54			$	22.65
Tangible book value per share (4)	$	29.98			$	29.37			$	24.51			$	23.54			$	22.65
Weighted avg outstanding shares – basic		14,962,507				13,828,605				13,447,066				13,412,667				13,340,997
Weighted avg outstanding shares – diluted		15,462,041				14,268,229				13,822,270				13,736,508				13,676,917
Shares outstanding at end of period		15,009,225				14,935,298				13,543,282				13,453,805				13,407,320
Stock options outstanding at end of period		163,932				186,354				198,370				286,119				309,069

See footnotes that follow the tables below

	As of and for the Three Month Period
	March 31, 2025				December 31, 2024				September 30, 2024				June 30, 2024				March 31, 2024
Credit Quality Data:
Nonperforming assets (5) to total assets		1.30	%			1.52	%			1.63	%			1.34	%			1.42	%
Nonperforming assets (5) to loans receivable and OREO		1.60	%			1.80	%			1.94	%			1.60	%			1.72	%
Nonperforming loans (5) to total loans receivable		1.60	%			1.80	%			1.94	%			1.60	%			1.72	%
Allowance for credit losses to nonperforming loans		325.0	%			282.5	%			257.2	%			278.6	%			254.3	%
Allowance for credit losses to total loans receivable		5.21	%			5.08	%			5.03	%			4.45	%			4.35	%
Gross charge-offs	$	53,686			$	61,585			$	53,305			$	55,207			$	58,994
Gross recoveries	$	5,486			$	5,223			$	4,516			$	2,254			$	2,036
Net charge-offs to average loans (6)		5.57	%			6.56	%			5.60	%			6.54	%			7.30	%
Capital Ratios:
Company
Tier 1 leverage capital		10.67	%			10.78	%			8.40	%			8.31	%			8.24	%
Common equity Tier 1 risk-based capital		12.13	%			12.04	%			9.24	%			9.03	%			8.98	%
Tier 1 risk-based capital		12.22	%			12.14	%			9.34	%			9.13	%			9.08	%
Total risk-based capital		14.73	%			14.67	%			11.89	%			11.70	%			11.70	%
Bank
Tier 1 leverage capital		10.57	%			10.64	%			9.29	%			9.24	%			9.19	%
Common equity Tier 1 risk-based capital		12.12	%			11.99	%			10.34	%			10.15	%			10.14	%
Tier 1 risk-based capital		12.12	%			11.99	%			10.34	%			10.15	%			10.14	%
Total risk-based capital		13.42	%			13.28	%			11.63	%			11.44	%			11.43	%

(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. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated.
(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 0.93% for the quarter ended March 31, 2025 compared to 1.30% and 0.73% for the quarters ended December 31, 2024 and March 31, 2024, respectively.  ROA for the quarter ended March 31, 2025, decreased 0.37% and increased 0.19% compared to December 31, 2024 and March 31, 2024, respectively. Noninterest expenses were higher for the quarter ended March 31, 2025 compared to the quarter ended December 31, 2024 largely due to higher salaries and employee benefits, due to annual pay increases and for new hires that contribute to our continued investments in growth, technology and risk management, legal and professional expenses and increased BaaS loan expense, which is directly related to interest earned on CCBX loans. These increases were partially offset by a decrease in BaaS fraud expense. Noninterest expenses were higher than the quarter ended March 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 Company and investments in technology and risk management.

Legal and professional fees in first quarter were elevated in multiple areas including compliance, BSA, audit, legal and projects as we prepare for new partners, and we may experience a similar level of expenses again in second quarter before returning to a more historical level in third quarter 2025.

Yield on earning assets and yield on loans receivable increased 0.07% and 0.23%, respectively, for the quarter ended March 31, 2025 compared to the quarter ended December 31, 2024. Average loans receivable as of March 31, 2025 increased $92.2 million compared to December 31, 2024 as net CCBX loans continue to grow, despite selling $744.6 million in CCBX loans during the quarter ended March 31, 2025.

The following table shows the Company’s key performance ratios for the periods indicated.  

		Three Months Ended
(unaudited)		March 31, 2025				December 31, 2024				September 30, 2024				June 30, 2024				March 31, 2024
Return on average assets (1)			0.93	%			1.30	%			1.34	%			1.21	%			0.73	%
Return on average equity (1)			8.91	%			14.90	%			16.67	%			15.22	%			9.21	%
Yield on earnings assets (1)			10.32	%			10.24	%			10.79	%			10.49	%			10.21	%
Yield on loans receivable (1)			11.33	%			11.12	%			11.44	%			11.22	%			11.01	%
Cost of funds (1)			3.11	%			3.24	%			3.62	%			3.60	%			3.52	%
Cost of deposits (1)			3.08	%			3.21	%			3.59	%			3.58	%			3.49	%
Net interest margin (1)			7.48	%			7.23	%			7.42	%			7.12	%			6.92	%
Noninterest expense to average assets (1)			6.87	%			6.54	%			6.42	%			6.05	%			6.10	%
Noninterest income to average assets (1)			6.06	%			7.19	%			7.85	%			7.22	%			9.30	%
Efficiency ratio			51.59	%			46.02	%			42.65	%			42.84	%			38.08	%
Loans receivable to deposits (2)			93.89	%			97.82	%			94.33	%			93.75	%			92.29	%

(1)	Annualized calculations shown for quarterly periods presented.
(2)	Includes loans held for sale.

Management Outlook; CEO Eric Sprink

“Looking ahead to the balance of 2025, elevated onboarding activity is expected to continue into the second quarter as our CCBX pipeline remains very robust with high quality and potentially impactful opportunities. We plan to continue to invest in and enhance our technology and risk management infrastructure to support our next phase of CCBX growth. Our risk reduction efforts, namely our fraud and credit indemnifications via our partners, continued to function as expected despite the volatile macroeconomics conditions towards the end of first quarter. These efforts, plus additional growth in noninterest income should help mitigate the uncertainties associated with fluctuating interest rates and provide a stable, recurring income source.” 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 25 relationships, at varying stages, including two partners in testing, three in implementation/onboarding, one signed LOI as of March 31, 2025.  We continue to refine the criteria for CCBX partnerships, exploring relationships with larger more established partners, with experienced management teams, existing customer bases and strong financial positions. We also will consider promising medium and smaller sized partners that align with our approach and terms including financial wherewithal and 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. We believe that a strategy of adding new partnerships and launching new products with existing partners allows us to expand and grow our customer base with a modest increase in regulatory risk given our operational history with them. Increases in partner activity/transaction counts is 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 balances, and will continue this strategy to provide an on-going and passive revenue source with no on balance sheet risk or capital requirement.

On April 1, 2025, we went live with the T-Mobile deposit program and our second quarter deposits will include those balances. As we build our deposit base, we will be able to sweep deposits off and on the balance sheet as needed. This deposit sweep capability allows us to better manage liquidity and deposit programs. At March 31, 2025 we swept off $406.3 million in deposits for FDIC insurance and liquidity purposes. We are also launching a new suite of deposit products with RobinHood, which are expected to launch in the back half of 2025. The introduction of theses products are expected to increase deposits.

The following table illustrates the activity and evolution in CCBX relationships for the periods presented.

	As of
(unaudited)	March 31, 2025		December 31, 2024		March 31, 2024
Active	19		19		19
Friends and family / testing	2		1		1
Implementation / onboarding	3		1		1
Signed letters of intent	1		3		0
Total CCBX relationships	25		24		21

CCBX loans increased $47.2 million, or 2.9%, to $1.65 billion despite selling $744.6 million in loans during the three months ended March 31, 2025. In accordance with the program agreement for one partner, effective April 1, 2024, the portion of the CCBX portfolio that we are responsible for losses on decreased from 10% to 5%. At March 31, 2025 the portion of this portfolio for which we are responsible represented $19.9 million in loans.

The following table details the CCBX loan portfolio:

CCBX		As of
		March 31, 2025								December 31, 2024								March 31, 2024
(dollars in thousands; unaudited)		Balance				% to Total				Balance				% to Total				Balance				% to Total
Commercial and industrial loans:
Capital call lines		$	133,466				8.1	%		$	109,017				6.8	%		$	135,671				10.3	%
All other commercial & industrial loans			29,702				1.8				33,961				2.1				47,160				3.6
Real estate loans:
Residential real estate loans			285,355				17.3				267,707				16.7				265,148				20.2
Consumer and other loans:
Credit cards			532,775				32.2				528,554				33.0				505,706				38.6
Other consumer and other loans			670,026				40.6				664,780				41.4				358,528				27.3
Gross CCBX loans receivable			1,651,324				100.0	%			1,604,019				100.0	%			1,312,213				100.0	%
Net deferred origination (fees) costs			(498	)							(442	)							(394	)
Loans receivable		$	1,650,826							$	1,603,577							$	1,311,819
Loan Yield – CCBX (1)(2)			16.88	%							16.81	%							17.74	%

(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.

The increase in CCBX loans in the quarter ended March 31, 2025, includes an increase of $24.4 million, or 22.4%, in capital call lines as a result of normal balance fluctuations and business activities, an increase of $17.6 million, or 6.6%, in residential real estate loans and an increase of $9.5 million or 0.8%, in other consumer and other loans. We continue to monitor and manage the CCBX loan portfolio, and sold $744.6 million in CCBX loans during the quarter ended March 31, 2025 compared to sales of $845.5 million in the quarter ended December 31, 2024. We continue to reposition ourselves by managing CCBX credit and concentration levels in an effort to optimize our loan portfolio earnings and generate off balance sheet fee income. CCBX loan yield increased 0.07% for the quarter ended March 31, 2025 compared to the quarter ended December 31, 2024.

The following chart shows the growth 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.

The following table details the CCBX deposit portfolio:

CCBX		As of
		March 31, 2025								December 31, 2024								March 31, 2024
(dollars in thousands; unaudited)		Balance				% to Total				Balance				% to Total				Balance				% to Total
Demand, noninterest bearing		$	58,416				2.6	%		$	55,686				2.7	%		$	58,669				2.9	%
Interest bearing demand and money market			2,145,608				94.6				1,958,459				94.9				1,964,942				96.8
Savings			16,625				0.7				5,710				0.3				5,338				0.3
Total core deposits			2,220,649				97.9				2,019,855				97.9				2,028,949				100.0
Other deposits			46,359				2.1				44,233				2.1				—				—
Total CCBX deposits		$	2,267,008				100.0	%		$	2,064,088				100.0	%		$	2,028,949				100.0	%
Cost of deposits (1)			4.01	%							4.19	%							4.93	%

(1)	Cost of deposits is annualized for the three months ended for each period presented.

CCBX deposits increased $202.9 million, or 9.8%, in the three months ended March 31, 2025 to $2.27 billion as a result of growth and normal balance fluctuations. This excludes the $406.3 million in CCBX deposits that were transferred off balance sheet for increased Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and sweep purposes, compared to $273.2 million for the quarter ended December 31, 2024. Amounts in excess of FDIC insurance coverage are transferred, using a third-party facilitator/vendor sweep product, to participating financial institutions.

Community Bank Performance Update

In the quarter ended March 31, 2025, the community bank saw net loans decrease $16.5 million, or 0.9%, to $1.87 billion, as a result of normal balance fluctuations.

The following table details the Community Bank loan portfolio:

Community Bank		As of
		March 31, 2025								December 31, 2024								March 31, 2024
(dollars in thousands; unaudited)		Balance				% to Total				Balance				% to Total				Balance				% to Total
Commercial and industrial loans		$	149,104				8.0	%		$	150,395				8.0	%		$	154,395				8.2	%
Real estate loans:
Construction, land and land development loans			166,551				8.9				148,198				7.8				160,862				8.5
Residential real estate loans			202,920				10.8				202,064				10.7				231,157				12.2
Commercial real estate loans			1,340,647				71.6				1,374,801				72.8				1,342,489				71.0
Consumer and other loans:
Other consumer and other loans			13,326				0.7				13,542				0.7				1,447				0.1
Gross Community Bank loans receivable			1,872,548				100.0	%			1,889,000				100.0	%			1,890,350				100.0	%
Net deferred origination fees			(6,015	)							(6,012	)							(7,068	)
Loans receivable		$	1,866,533							$	1,882,988							$	1,883,282
Loan Yield(1)			6.53	%							6.53	%							6.46	%

(1)	Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.

Community bank loans decreased $34.2 million in commercial real estate loans, $1.3 million in commercial and industrial loans and $216,000 in consumer and other loans, partially offset by an increase of $18.4 million in construction, land and land development loans, during the quarter ended March 31, 2025.

The following table details the community bank deposit portfolio:

Community Bank		As of
		March 31, 2025								December 31, 2024								March 31, 2024
(dollars in thousands; unaudited)		Balance				% to Total				Balance				% to Total				Balance				% to Total
Demand, noninterest bearing		$	481,214				31.5	%		$	471,838				31.0	%		$	515,443				35.9	%
Interest bearing demand and money market			560,416				36.8				570,625				37.5				834,725				58.2
Savings			59,493				3.9				61,116				4.0				68,747				4.8
Total core deposits			1,101,123				72.2				1,103,579				72.5				1,418,915				99.0
Other deposits			407,391				26.7				400,118				26.3				1				0.0
Time deposits less than $100,000			5,585				0.4				5,920				0.4				7,199				0.5
Time deposits $100,000 and over			10,122				0.7				11,627				0.8				7,915				0.6
Total Community Bank deposits		$	1,524,221				100.0	%		$	1,521,244				100.0	%		$	1,434,030				100.0	%
Cost of deposits(1)			1.76	%							1.86	%							1.66	%

(1)	Cost of deposits is annualized for the three months ended for each period presented.

Community bank deposits increased $3.0 million, or 0.2%, during the three months ended March 31, 2025 to $1.52 billion as result of normal balance fluctuations. The community bank segment includes noninterest bearing deposits of $481.2 million, or 31.5%, of total community bank deposits, resulting in a cost of deposits of 1.76%, which compared to 1.86% for the quarter ended December 31, 2024, largely due to the decreases in the Fed funds rate late in the third quarter and during the fourth quarter of 2024.

Net Interest Income and Margin Discussion

Net interest income was $76.1 million for the quarter ended March 31, 2025, an increase of $3.7 million, or 5.1%, from $72.4 million for the quarter ended December 31, 2024, and an increase of $13.9 million, or 22.3%, from $62.2 million for the quarter ended March 31, 2024. Net interest income compared to December 31, 2024, was higher due to an increase in average loans receivable, an increase in loan yield and a decrease in cost of funds. The increase in net interest income compared to March 31, 2024 was largely related to growth in higher yielding loans, partially offset by an increase in cost of funds relating to higher interest rates and growth in interest bearing deposits.  

Net interest margin was 7.48% for the three months ended March 31, 2025, compared to 7.23% for the three months ended December 31, 2024, largely due to higher loan yield and lower cost of deposits. 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 4.28% for the three months ended March 31, 2025, compared to 4.16% for the three months ended December 31, 2024. Net interest margin was 6.92% for the three months ended March 31, 2024. The increase in net interest margin for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was largely due to an increase in loan yield, partially offset by higher interest rates on interest bearing deposits. Interest and fees on loans receivable increased $2.6 million, or 2.7%, to $98.1 million for the three months ended March 31, 2025, compared to $95.6 million for the three months ended December 31, 2024, as a result of loan growth. Interest and fees on loans receivable increased $12.3 million, or 14.3%, compared to $85.9 million for the three months ended March 31, 2024, due to an increase in outstanding balances and higher interest rates. 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) increased 0.12% for the three months ended March 31, 2025, compared to the three months ended December 31, 2024 and increased 0.26% compared the three months ended March 31, 2024.

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)		March 31 2025				December 31 2024				March 31 2024
Net interest margin, net of BaaS loan expense:
Net interest margin (1)			7.48	%			7.23	%			6.92	%
Earning assets			4,124,065				3,980,078				3,613,769
Net interest income (GAAP)			76,062				72,377				62,206
Less: BaaS loan expense			(32,507	)			(30,720	)			(26,107	)
Net interest income, net of BaaS loan expense(2)		$	43,555			$	41,657			$	36,099
Net interest margin, net of BaaS loan expense (1)(2)			4.28	%			4.16	%			4.02	%
Loan income net of BaaS loan expense divided by average loans:
Loan yield (GAAP)(1)			11.33	%			11.12	%			11.01	%
Total average loans receivable		$	3,511,724			$	3,419,476			$	3,137,271
Interest and earned fee income on loans (GAAP)			98,147				95,575				85,891
BaaS loan expense			(32,507	)			(30,720	)			(26,107	)
Net loan income(2)		$	65,640			$	64,855			$	59,784
Loan income, net of BaaS loan expense, divided by average loans (1)(2)			7.58	%			7.55	%			7.66	%

(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 decreased $974,000 to $47.2 million compared to the three months ended December 31, 2024 and decreased $68.2 million compared to the three months ended March 31, 2024 as a result of principal paydowns and maturing securities.

Cost of funds was 3.11% for the quarter ended March 31, 2025, a decrease of 13 basis points from the quarter ended December 31, 2024 and a decrease of 42 basis points from the quarter ended March 31, 2024. Cost of deposits for the quarter ended March 31, 2025 was 3.08%, compared to 3.21% for the quarter ended December 31, 2024, and 3.49% for the quarter ended March 31, 2024. The decreased cost of funds and deposits compared to December 31, 2024 and March 31, 2024 were largely due to the recent reductions in the Fed funds rate.

The following table summarizes the average yield on loans receivable and cost of deposits:

	For the Three Months Ended
	March 31, 2025								December 31, 2024								March 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		6.53	%			1.76	%			6.53	%			1.86	%			6.46	%			1.66	%
CCBX (1)		16.88	%			4.01	%			16.81	%			4.19	%			17.74	%			4.93	%
Consolidated		11.33	%			3.08	%			11.12	%			3.21	%			11.01	%			3.49	%

(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
		March 31, 2025								December 31, 2024								March 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		$	67,855				16.88	%		$	64,532				16.81	%		$	55,839				17.74	%
Less: BaaS loan expense			32,507				8.09	%			30,720				8.00	%			26,107				8.29	%
Net BaaS loan income (1)		$	35,348				8.79	%		$	33,812				8.81	%		$	29,732				9.45	%
Average BaaS Loans(3)		$	1,630,088							$	1,527,178							$	1,265,857

(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.

Noninterest Income Discussion

Noninterest income was $63.5 million for the three months ended March 31, 2025, a decrease of $10.6 million from $74.1 million for the three months ended December 31, 2024, and a decrease of $22.7 million from $86.2 million for the three months ended March 31, 2024.  The decrease in noninterest income for the quarter ended March 31, 2025 as compared to the quarter ended December 31, 2024 was primarily due to a decrease of $10.8 million in total BaaS income.  The $10.8 million decrease in total BaaS income included an $8.4 million decrease in BaaS credit enhancements related to the provision for credit losses and a $3.1 million decrease in BaaS fraud enhancements partially offset by an increase of $724,000 in BaaS program income. The $724,000 increase in BaaS program income is largely due to higher reimbursement of CCBX partner expenses and an increase in transaction and interchange fees and servicing and other BaaS fees, (see “Appendix B” for more information on the accounting for BaaS allowance for credit losses and credit and fraud enhancements).

The $22.7 million decrease in noninterest income over the quarter ended March 31, 2024 was primarily due to a $25.1 million decrease in BaaS credit and fraud enhancements and an increase of $2.2 million in BaaS program income.

Noninterest Expense Discussion

Total noninterest expense increased $4.6 million to $72.0 million for the three months ended March 31, 2025, compared to $67.4 million for the three months ended December 31, 2024, and increased $15.5 million from $56.5 million for the three months ended March 31, 2024. The $4.6 million increase in noninterest expense for the quarter ended March 31, 2025, as compared to the quarter ended December 31, 2024, was primarily due to a $3.5 million increase in salaries and benefits, $1.9 million increase in legal and professional fees, and $1.8 million increase in BaaS loan expense, partially offset by a $3.1 million decrease in BaaS fraud expense. The salaries and benefits and legal and professional fees increases were part of our continued investments in growth, technology and risk management. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud 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.

The increase in noninterest expenses for the quarter ended March 31, 2025 compared to the quarter ended March 31, 2024 was largely due to a $6.4 million increase in BaaS loan expense, a $1.1 million increase in BaaS fraud expense, a $2.8 million increase in legal and professional expenses, a $3.5 million increase in salary and employee benefits, and a $1.3 million increase in data processing and software licenses due to enhancements in technology all of which are related to the growth of Company and investments in technology and risk management.

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 the understanding of how the increases in noninterest expense are related to expenses incurred for and reimbursed by CCBX partners:

	Three Months Ended
	March 31,				December 31,				March 31,
(dollars in thousands; unaudited)		2025				2024				2024
Total noninterest expense (GAAP)	$	71,989			$	67,411			$	56,509
Less: BaaS loan expense		32,507				30,720				26,107
Less: BaaS fraud expense		1,993				5,043				923
Less: Reimbursement of expenses (BaaS)		1,026				812				254
Noninterest expense, net of BaaS loan expense, BaaS fraud expense and reimbursement of expenses (BaaS) (1)	$	36,463			$	30,836			$	29,225

(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 $2.0 million for the three months ended March 31, 2025, $3.8 million for the three months ended December 31, 2024 and $1.9 million for the first quarter of 2024.  The income tax provision was lower for the three months ended March 31, 2025 compared to the quarter ended December 31, 2024 as a result of the deductibility of certain equity awards which reduced tax expense during the quarter ended March 31, 2025, and was higher compared to the quarter ended March 31, 2024, primarily due to higher net income compared to that quarter, partially offset by the deductibility 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 2.55% for calculating the provision for state income taxes.

Financial Condition Overview

Total assets increased $218.1 million, or 5.3%, to $4.34 billion at March 31, 2025 compared to $4.12 billion at December 31, 2024.  The increase is primarily comprised of a $171.8 million increase in cash and a $30.8 million increase in loans receivable. Total loans receivable increased to $3.52 billion at March 31, 2025, from $3.49 billion at December 31, 2024.

As of March 31, 2025, in addition to the $624.3 million in cash on hand the Company had the capacity to borrow up to a total of $662.4 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 March 31, 2025.

The Company, on a stand alone basis, had a cash balance of $45.5 million as of March 31, 2025, which is retained for general operating purposes, including debt repayment, for funding $468,000 in commitments to bank technology investment funds and $40.0 million is available to be contributed to the Bank as capital.  

Uninsured deposits were $558.8 million as of March 31, 2025, compared to $543.0 million as of December 31, 2024.

Total shareholders’ equity as of March 31, 2025 increased $11.2 million since December 31, 2024.  The increase in shareholders’ equity was primarily comprised of an increase of $1.5 million in common stock outstanding as a result of equity awards exercised during the three months ended March 31, 2025 combined with $9.7 million in net earnings.

The Company and the Bank remained well capitalized at March 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)			10.57	%			10.67	%			5.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)			12.12	%			12.13	%			6.50	%
Tier 1 Capital (to risk-weighted assets)			12.12	%			12.22	%			8.00	%
Total Capital (to risk-weighted assets)			13.42	%			14.73	%			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 total allowance for credit losses was $183.2 million and 5.21% of loans receivable at March 31, 2025 compared to $177.0 million and 5.08% at December 31, 2024 and $139.9 million and 4.38% at March 31, 2024. The allowance for credit loss allocated to the CCBX portfolio was $164.2 million and 9.95% of CCBX loans receivable at March 31, 2025, with $19.0 million of allowance for credit loss allocated to the community bank or 1.02% 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 March 31, 2025												As of December 31, 2024												As of March 31, 2024
(dollars in thousands; unaudited)		Community Bank				CCBX				Total				Community Bank				CCBX				Total				Community Bank				CCBX				Total
Loans receivable		$	1,866,533			$	1,650,826			$	3,517,359			$	1,882,988			$	1,603,577			$	3,486,565			$	1,883,282			$	1,311,819			$	3,195,101
Allowance for credit losses			(18,992	)			(164,186	)			(183,178	)			(18,924	)			(158,070	)			(176,994	)			(21,384	)			(118,557	)			(139,941	)
Allowance for credit losses to total loans receivable			1.02	%			9.95	%			5.21	%			1.00	%			9.86	%			5.08	%			1.14	%			9.04	%			4.38	%

Net charge-offs totaled $48.2 million for the quarter ended March 31, 2025, compared to $56.4 million for the quarter ended December 31, 2024 and $57.0 million for the quarter ended March 31, 2024. Net charge-offs as a percent of average loans decreased to 5.57% for the quarter ended March 31, 2025 compared to 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 $299.8 million loan portfolio. At March 31, 2025, our portion of this portfolio represented $19.9 million in loans. Net charge-offs for this $19.9 million in loans were $1.1 million for the three months ended March 31, 2025 and December 31, 2024 and $2.1 million for the three months ended March 31, 2024.

The following table details net charge-offs for the community bank and CCBX for the period indicated:

		Three Months Ended
		March 31, 2025												December 31, 2024												March 31, 2024
(dollars in thousands; unaudited)		Community Bank				CCBX				Total				Community Bank				CCBX				Total				Community Bank				CCBX				Total
Gross charge-offs		$	4			$	53,682			$	53,686			$	139			$	61,446			$	61,585			$	15			$	58,979			$	58,994
Gross recoveries			(7	)			(5,479	)			(5,486	)			(3	)			(5,220	)			(5,223	)			(4	)			(2,032	)			(2,036	)
Net charge-offs		$	(3	)		$	48,203			$	48,200			$	136			$	56,226			$	56,362			$	11			$	56,947			$	56,958
Net charge-offs to average loans (1)			0.00	%			11.99	%			5.57	%			0.03	%			14.65	%			6.56	%			0.00	%			18.09	%			7.30	%

(1)	Annualized calculations shown for periods presented.

During the quarter ended March 31, 2025, a $54.3 million provision for credit losses was recorded for CCBX partner loans, compared to the $63.7 million provision for credit losses was recorded for CCBX partner loans for the quarter ended December 31, 2024. The provision was based on management’s analysis, bringing the CCBX allowance for credit losses to $164.2 million at March 31, 2025 compared to $158.1 million at December 31, 2024. The increase in the allowance is due to the addition of new loans, partially offset by loan sales. 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 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 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.

The factors used in management’s analysis for community bank credit losses indicated that a provision of $65,000 was needed for the quarter ended March 31, 2025 compared to a provision recapture of $1.1 million and $199,000 for the quarters ended December 31, 2024 and March 31, 2024, respectively. The provision in the current period was due to a change in the mix of the community bank loan portfolio and growth in construction loans.

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)		March 31, 2025				December 31, 2024				March 31, 2024
Community bank		$	65			$	(1,071	)		$	(199	)
CCBX			54,319				63,741				79,717
Total provision expense		$	54,384			$	62,670			$	79,518

A provision for unfunded commitments of $613,000 was recorded for the quarter ended March 31, 2025 as a result of a change in the loan mix of available balance. A provision for accrued interest receivable of $784,000 was recorded for the quarter ended March 31, 2025 on CCBX loans.

At March 31, 2025, our nonperforming assets were $56.4 million, or 1.30%, of total assets, compared to $62.7 million, or 1.52%, of total assets, at December 31, 2024, and $54.9 million, or 1.42%, of total assets, at March 31, 2024. These ratios are impacted by nonperforming CCBX loans that are covered by CCBX partner credit enhancements. As of March 31, 2025, $54.1 million of the $56.2 million in nonperforming CCBX loans were covered by CCBX partner credit enhancements described above.

Nonperforming assets decreased $6.3 million during the quarter ended March 31, 2025, compared to the quarter ended December 31, 2024. This change is due to a decrease in CCBX loans 90 days or more past due and still on accrual. Community bank nonperforming loans increased $89,000 from December 31, 2024 to $189,000 as of March 31, 2025, and CCBX nonperforming loans decreased $6.4 million to $56.2 million from December 31, 2024. The decrease in CCBX nonperforming loans is due to a $7.1 million decrease in CCBX loans that are past due 90 days or more and still accruing interest partially offset by an increase of $707,000 in nonaccrual loans from December 31, 2024 to $20.2 million. Some CCBX partners have a collection practice that places certain loans on nonaccrual status to improve collectability. $16.1 million of these loans are less than 90 days past due as of March 31, 2025. As a result of the type of loans (primarily consumer loans) originated through our CCBX partners we anticipate that balances 90 days past due or more and still accruing will generally increase as those loan portfolios grow. 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 March 31, 2025. Our nonperforming loans to loans receivable ratio was 1.60% at March 31, 2025, compared to 1.80% at December 31, 2024, and 1.72% at March 31, 2024. The lower nonperforming loans to loans receivable ratio is a reflection of our on-going risk reduction efforts.

For the quarter ended March 31, 2025, there were $3,000 community bank net recoveries and $48.2 million in net charge-offs were recorded on CCBX loans. 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.

The following table details the Company’s nonperforming assets for the periods indicated.

Consolidated	As of
(dollars in thousands; unaudited)	March 31, 2025				December 31, 2024				March 31, 2024
Nonaccrual loans:
Commercial and industrial loans	$	381			$	334			$	—
Real estate loans:
Residential real estate		—				—				212
Commercial real estate		—				—				7,731
Consumer and other loans:
Credit cards		13,602				10,262				—
Other consumer and other loans		6,376				8,967				—
Total nonaccrual loans		20,359				19,563				7,943
Accruing loans past due 90 days or more:
Commercial & industrial loans		782				1,006				1,793
Real estate loans:
Residential real estate loans		2,407				2,608				1,796
Consumer and other loans:
Credit cards		27,187				34,490				37,603
Other consumer and other loans		5,632				4,989				5,731
Total accruing loans past due 90 days or more		36,008				43,093				46,923
Total nonperforming loans		56,367				62,656				54,866
Real estate owned		—				—				—
Repossessed assets		—				—				—
Total nonperforming assets	$	56,367			$	62,656			$	54,866
Total nonaccrual loans to loans receivable		0.58	%			0.56	%			0.25	%
Total nonperforming loans to loans receivable		1.60	%			1.80	%			1.72	%
Total nonperforming assets to total assets		1.30	%			1.52	%			1.42	%

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)	March 31, 2025				December 31, 2024				March 31, 2024
Nonaccrual loans:
Commercial and industrial loans:
All other commercial & industrial loans	$	192			$	234			$	—
Consumer and other loans:
Credit cards		13,602				10,262				—
Other consumer and other loans		6,376				8,967				—
Total nonaccrual loans		20,170				19,463				—
Accruing loans past due 90 days or more:
Commercial & industrial loans		782				1,006				1,793
Real estate loans:
Residential real estate loans		2,407				2,608				1,796
Consumer and other loans:
Credit cards		27,187				34,490				37,603
Other consumer and other loans		5,632				4,989				5,731
Total accruing loans past due 90 days or more		36,008				43,093				46,923
Total nonperforming loans		56,178				62,556				46,923
Other real estate owned		—				—				—
Repossessed assets		—				—				—
Total nonperforming assets	$	56,178			$	62,556			$	46,923
Total CCBX nonperforming assets to total consolidated assets		1.29	%			1.52	%			1.21	%

Community Bank	As of
(dollars in thousands; unaudited)	March 31, 2025				December 31, 2024				March 31, 2024
Nonaccrual loans:
Commercial and industrial loans	$	189			$	100			$	—
Real estate:
Residential real estate		—				—				212
Commercial real estate		—				—				7,731
Total nonaccrual loans		189				100				7,943
Accruing loans past due 90 days or more:
Total accruing loans past due 90 days or more		—				—				—
Total nonperforming loans		189				100				7,943
Other real estate owned		—				—				—
Repossessed assets		—				—				—
Total nonperforming assets	$	189			$	100			$	7,943
Total community bank nonperforming assets to total consolidated assets		0.01	%			—	%			0.21	%

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 $4.34 billion Bank provides service through 14 branches in Snohomish, Island, and King Counties, 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

Contact

Eric Sprink, Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687

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 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.

COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)

ASSETS
	March 31, 2025				December 31, 2024				September 30, 2024				June 30, 2024				March 31, 2024
Cash and due from banks	$	43,467			$	36,533			$	45,327			$	59,995			$	32,790
Interest earning deposits with other banks		580,835				415,980				438,699				427,250				482,338
Investment securities, available for sale, at fair value		34				35				38				39				41
Investment securities, held to maturity, at amortized cost		46,957				47,286				48,582				49,174				50,049
Other investments		12,589				10,800				10,757				10,664				10,583
Loans held for sale		42,132				20,600				7,565				—				797
Loans receivable		3,517,359				3,486,565				3,413,894				3,321,813				3,195,101
Allowance for credit losses		(183,178	)			(176,994	)			(171,674	)			(148,878	)			(139,941	)
Total loans receivable, net		3,334,181				3,309,571				3,242,220				3,172,935				3,055,160
CCBX credit enhancement asset		183,377				181,890				173,600				149,096				142,412
CCBX receivable		12,685				14,138				16,060				11,520				10,369
Premises and equipment, net		28,639				27,431				25,833				24,526				22,995
Lease right-of-use assets		5,117				5,219				5,427				5,635				5,756
Accrued interest receivable		21,109				21,104				22,315				21,620				22,485
Bank-owned life insurance, net		13,501				13,375				13,255				13,132				12,991
Deferred tax asset, net		3,912				3,600				3,083				2,221				2,221
Other assets		10,747				13,646				11,711				11,742				12,075
Total assets	$	4,339,282			$	4,121,208			$	4,064,472			$	3,959,549			$	3,863,062
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits	$	3,791,229			$	3,585,332			$	3,627,288			$	3,543,432			$	3,462,979
Subordinated debt, net		44,331				44,293				44,256				44,219				44,181
Junior subordinated debentures, net		3,592				3,591				3,591				3,591				3,590
Deferred compensation		310				332				369				405				442
Accrued interest payable		1,107				962				1,070				999				1,061
Lease liabilities		5,293				5,398				5,609				5,821				5,946
CCBX payable		29,391				29,171				37,839				32,539				30,899
Other liabilities		14,112				13,425				12,520				11,850				10,255
Total liabilities		3,889,365				3,682,504				3,732,542				3,642,856				3,559,353
SHAREHOLDERS’ EQUITY
Common Stock		229,659				228,177				134,769				132,989				131,601
Retained earnings		220,259				210,529				197,162				183,706				172,110
Accumulated other comprehensive loss, net of tax		(1	)			(2	)			(1	)			(2	)			(2	)
Total shareholders’ equity		449,917				438,704				331,930				316,693				303,709
Total liabilities and shareholders’ equity	$	4,339,282			$	4,121,208			$	4,064,472			$	3,959,549			$	3,863,062

COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)

	Three Months Ended
	March 31, 2025				December 31, 2024				September 30, 2024				June 30, 2024				March 31, 2024
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	98,147			$	95,575			$	99,676			$	90,879			$	85,891
Interest on interest earning deposits with other banks		6,070				6,021				4,781				5,683				4,780
Interest on investment securities		650				661				675				686				1,034
Dividends on other investments		40				191				33				174				37
Total interest income		104,907				102,448				105,165				97,422				91,742
INTEREST EXPENSE
Interest on deposits		28,185				29,404				32,083				30,578				28,867
Interest on borrowed funds		660				667				809				672				669
Total interest expense		28,845				30,071				32,892				31,250				29,536
Net interest income		76,062				72,377				72,273				66,172				62,206
PROVISION FOR CREDIT LOSSES		55,781				61,867				70,257				62,325				83,158
Net interest income/(expense) after provision for credit losses		20,281				10,510				2,016				3,847				(20,952	)
NONINTEREST INCOME
Service charges and fees		860				932				952				946				908
Loan referral fees		—				—				—				—				168
Unrealized gain (loss) on equity securities, net		16				1				2				9				15
Other income		682				473				486				257				308
Noninterest income, excluding BaaS program income and BaaS indemnification income		1,558				1,406				1,440				1,212				1,399
Servicing and other BaaS fees		1,419				1,043				1,044				1,525				1,131
Transaction and interchange fees		3,833				3,699				3,549				2,934				2,661
Reimbursement of expenses		1,026				812				565				857				254
BaaS program income		6,278				5,554				5,158				5,316				4,046
BaaS credit enhancements		53,648				62,097				70,108				60,826				79,808
BaaS fraud enhancements		1,993				5,043				2,084				1,784				923
BaaS indemnification income		55,641				67,140				72,192				62,610				80,731
Total noninterest income		63,477				74,100				78,790				69,138				86,176
NONINTEREST EXPENSE
Salaries and employee benefits		21,532				17,994				17,101				17,005				17,984
Occupancy		1,034				958				964				985				1,518
Data processing and software licenses		4,232				4,010				4,297				3,625				2,892
Legal and professional expenses		6,488				4,606				3,597				3,631				3,672
Point of sale expense		107				89				73				72				90
Excise taxes		722				778				762				(706	)			320
Federal Deposit Insurance Corporation (“FDIC”) assessments		755				750				740				690				683
Director and staff expenses		631				683				559				470				400
Marketing		50				28				67				14				53
Other expense		1,938				1,752				1,482				1,383				1,867
Noninterest expense, excluding BaaS loan and BaaS fraud expense		37,489				31,648				29,642				27,169				29,479
BaaS loan expense		32,507				30,720				32,698				29,011				26,107
BaaS fraud expense		1,993				5,043				2,084				1,784				923
BaaS loan and fraud expense		34,500				35,763				34,782				30,795				27,030
Total noninterest expense		71,989				67,411				64,424				57,964				56,509
Income before provision for income taxes		11,769				17,199				16,382				15,021				8,715
PROVISION FOR INCOME TAXES		2,039				3,832				2,926				3,425				1,915
NET INCOME	$	9,730			$	13,367			$	13,456			$	11,596			$	6,800
Basic earnings per common share	$	0.65			$	0.97			$	1.00			$	0.86			$	0.51
Diluted earnings per common share	$	0.63			$	0.94			$	0.97			$	0.84			$	0.50
Weighted average number of common shares outstanding:
Basic		14,962,507				13,828,605				13,447,066				13,412,667				13,340,997
Diluted		15,462,041				14,268,229				13,822,270				13,736,508				13,676,917

COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)

	For the Three Months Ended
	March 31, 2025												December 31, 2024												March 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	$	553,393			$	6,070				4.45	%		$	501,654			$	6,021				4.77	%		$	350,868			$	4,780				5.48	%
Investment securities, available for sale (2)		37				1				10.96				39				—				—				64,878				349				2.16
Investment securities, held to maturity (2)		47,154				649				5.58				48,126				661				5.46				50,490				685				5.46
Other investments		11,757				40				1.38				10,783				191				7.05				10,262				37				1.45
Loans receivable (3)		3,511,724				98,147				11.33				3,419,476				95,575				11.12				3,137,271				85,891				11.01
Total interest earning assets		4,124,065				104,907				10.32				3,980,078				102,448				10.24				3,613,769				91,742				10.21
Noninterest earning assets:
Allowance for credit losses		(170,542	)											(156,687	)											(114,985	)
Other noninterest earning assets		296,993												277,922												229,437
Total assets	$	4,250,516											$	4,101,313											$	3,728,221
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits	$	3,166,384			$	28,185				3.61	%		$	3,068,357			$	29,404				3.81	%		$	2,728,884			$	28,867				4.25	%
FHLB advances and other borrowings		—				1				—				—				1				—				5				—				—
Subordinated debt		44,309				598				5.47				44,272				599				5.38				44,159				598				5.45
Junior subordinated debentures		3,592				61				6.89				3,591				67				7.42				3,590				71				7.95
Total interest bearing liabilities		3,214,285				28,845				3.64				3,116,220				30,071				3.84				2,776,638				29,536				4.28
Noninterest bearing deposits		543,784												577,453												595,693
Other liabilities		49,624												50,824												58,829
Total shareholders’ equity		442,823												356,816												297,061
Total liabilities and shareholders’ equity	$	4,250,516											$	4,101,313											$	3,728,221
Net interest income					$	76,062											$	72,377											$	62,206
Interest rate spread										6.68	%											6.40	%											5.93	%
Net interest margin (4)										7.48	%											7.23	%											6.92	%

(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.

COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT – QUARTERLY
(Dollars in thousands; unaudited)

	For the Three Months Ended
	March 31, 2025											December 31, 2024											March 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)	$	1,881,636			$	30,292			6.53	%		$	1,892,298			$	31,043			6.53	%		$	1,871,414			$	30,052			6.46	%
Total interest earning assets		1,881,636				30,292			6.53				1,892,298				31,043			6.53				1,871,414				30,052			6.46
Liabilities
Interest bearing liabilities:
Interest bearing deposits		1,045,971				6,604			2.56	%			1,029,346				7,161			2.77	%			922,340				6,013			2.62	%
Intrabank liability		356,337				3,909			4.45				357,442				4,290			4.77				410,993				5,599			5.48
Total interest bearing liabilities		1,402,308				10,513			3.04				1,386,788				11,451			3.28				1,333,333				11,612			3.50
Noninterest bearing deposits		479,329											505,510											538,081
Net interest income					$	19,779										$	19,592										$	18,440
Net interest margin(3)									4.26	%										4.12	%										3.96	%
CCBX
Assets
Interest earning assets:
Loans receivable (2)(4)	$	1,630,088			$	67,855			16.88	%		$	1,527,178			$	64,532			16.81	%		$	1,265,857			$	55,839			17.74	%
Intrabank asset		554,781				6,085			4.45				583,776				7,007			4.78				598,299				8,151			5.48
Total interest earning assets		2,184,869				73,940			13.72				2,110,954				71,539			13.48				1,864,156				63,990			13.81
Liabilities
Interest bearing liabilities:
Interest bearing deposits		2,120,413				21,581			4.13	%			2,039,011				22,243			4.34	%			1,806,544				22,854			5.09	%
Total interest bearing liabilities		2,120,413				21,581			4.13				2,039,011				22,243			4.34				1,806,544				22,854			5.09
Noninterest bearing deposits		64,455											71,943											57,612
Net interest income					$	52,359										$	49,296										$	41,136
Net interest margin(3)									9.72	%										9.29	%										8.88	%
Net interest margin, net of BaaS loan expense(5)									3.68	%										3.50	%										3.24	%

	For the Three Months Ended
	March 31, 2025											December 31, 2024											March 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:
Interest earning deposits with other banks	$	553,393			$	6,070			4.45	%		$	501,654			$	6,021			4.77	%		$	350,868			$	4,780			5.48	%
Investment securities, available for sale (6)		37				1			10.96				39				—			—				64,878				349			2.16
Investment securities, held to maturity (6)		47,154				649			5.58				48,126				661			5.46				50,490				685			5.46
Other investments		11,757				40			1.38				10,783				191			7.05				10,262				37			1.45
Total interest earning assets		612,341				6,760			4.48	%			560,602				6,873			4.88	%			476,498				5,851			4.94	%
Liabilities
Interest bearing liabilities:
FHLB advances and borrowings	$	—				1			—	%		$	—				1			—	%		$	5				—			—	%
Subordinated debt		44,309				598			5.47	%			44,272				599			5.38	%			44,159				598			5.45	%
Junior subordinated debentures		3,592				61			6.89				3,591				67			7.42				3,590				71			7.95
Intrabank liability, net (7)		198,444				2,176			4.45				226,334				2,717			4.78				187,306				2,552			5.48
Total interest bearing liabilities		246,345				2,836			4.67				274,197				3,384			4.91				235,060				3,221			5.51
Net interest income					$	3,924										$	3,489										$	2,630
Net interest margin(3)									2.60	%										2.48	%										2.22	%

(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.

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 such 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 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 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 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.

Reconciliations of the GAAP and non-GAAP measures are presented below.

CCBX		As of and for the Three Months Ended
(dollars in thousands; unaudited)		March 31 2025				December 31 2024				March 31 2024
Net BaaS loan income divided by average CCBX loans:
CCBX loan yield (GAAP)(1)			16.88	%			16.81	%			17.74	%
Total average CCBX loans receivable		$	1,630,088			$	1,527,178			$	1,265,857
Interest and earned fee income on CCBX loans (GAAP)			67,855				64,532				55,839
BaaS loan expense			(32,507	)			(30,720	)			(26,107	)
Net BaaS loan income		$	35,348			$	33,812			$	29,732
Net BaaS loan income divided by average CCBX loans (1)			8.79	%			8.81	%			9.45	%
CCBX net interest margin, net of BaaS loan expense:
CCBX net interest margin (1)			9.72	%			9.29	%			8.88	%
CCBX earning assets			2,184,869				2,110,954				1,864,156
Net interest income (GAAP)			52,359				49,296				41,136
Less: BaaS loan expense			(32,507	)			(30,720	)			(26,107	)
Net interest income, net of BaaS loan expense		$	19,852			$	18,576			$	15,029
CCBX net interest margin, net of BaaS loan expense (1)			3.68	%			3.50	%			3.24	%

Consolidated		As of and for the Three Months Ended
(dollars in thousands; unaudited)		March 31 2025				December 31 2024				March 31 2024
Net interest margin, net of BaaS loan expense:
Net interest margin (1)			7.48	%			7.23	%			6.92	%
Earning assets			4,124,065				3,980,078				3,613,769
Net interest income (GAAP)			76,062				72,377				62,206
Less: BaaS loan expense			(32,507	)			(30,720	)			(26,107	)
Net interest income, net of BaaS loan expense		$	43,555			$	41,657			$	36,099
Net interest margin, net of BaaS loan expense (1)			4.28	%			4.16	%			4.02	%
Loan income net of BaaS loan expense divided by average loans:
Loan yield (GAAP)(1)			11.33	%			11.12	%			11.01	%
Total average loans receivable		$	3,511,724			$	3,419,476			$	3,137,271
Interest and earned fee income on loans (GAAP)			98,147				95,575				85,891
BaaS loan expense			(32,507	)			(30,720	)			(26,107	)
Net loan income		$	65,640			$	64,855			$	59,784
Loan income, net of BaaS loan expense, divided by average loans (1)			7.58	%			7.55	%			7.66	%

(1)	Annualized calculations for periods presented.

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 partner 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 partner. The most comparable GAAP measure is noninterest expense.

		As of and for the Three Months Ended
(dollars in thousands, unaudited)		March 31, 2025				December 31, 2024				March 31, 2024
Noninterest expense, net of reimbursement of expenses (BaaS)
Noninterest expense (GAAP)		$	71,989			$	67,411			$	56,509
Less: BaaS loan expense			32,507				30,720				26,107
Less: BaaS fraud expense			1,993				5,043				923
Less: Reimbursement of expenses			1,026				812				254
Noninterest expense, net of BaaS loan expense, BaaS fraud expense and reimbursement of expenses		$	36,463			$	30,836			$	29,225

APPENDIX A –
As of March 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 $3.52 billion in outstanding loan balances. When combined with $2.14 billion in unused commitments the total of these categories is $5.67 billion.

Commercial real estate loans represent the largest segment of our loans, comprising 38.0% of our total balance of outstanding loans as of March 31, 2025. Unused commitments to extend credit represents an additional $29.4 million, and the combined total in commercial real estate loans represents $1.37 billion, or 24.2% of our total outstanding loans and loan commitments.

The following table summarizes our loan commitment by industry for our commercial real estate portfolio as of March 31, 2025:

(dollars in thousands; unaudited)		Outstanding Balance				Available Loan Commitments				Total Outstanding Balance & Available Commitment				% of Total Loans (Outstanding Balance & Available Commitment)			Average Loan Balance				Number of Loans
Apartments		$	392,740			$	4,488			$	397,228			7.0	%		$	3,927			100
Hotel/Motel			149,859				61				149,920			2.6				6,516			23
Convenience Store			138,838				561				139,399			2.5				2,314			60
Office			121,346				7,183				128,529			2.3				1,379			88
Retail			101,118				744				101,862			1.8				972			104
Warehouse			103,813				—				103,813			1.8				1,790			58
Mixed use			91,025				5,220				96,245			1.7				1,167			78
Mini Storage			73,172				8,022				81,194			1.4				3,659			20
Strip Mall			43,678				—				43,678			0.8				6,240			7
Manufacturing			36,887				370				37,257			0.7				1,272			29
Groups < 0.70% of total			88,171				2,752				90,923			1.6				1,145			77
Total		$	1,340,647			$	29,401			$	1,370,048			24.2	%		$	2,082			644

Consumer loans comprise 34.5% of our total balance of outstanding loans as of March 31, 2025. Unused commitments to extend credit represents an additional $910.8 million, and the combined total in consumer and other loans represents $2.13 billion, or 37.5% of our total outstanding loans and loan commitments. 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 $1,000. CCBX consumer loans are underwritten to CCBX credit standards and underwriting of these loans is regularly tested, including quarterly testing for partners with portfolio balances greater than $10.0 million.

The following table summarizes our loan commitment by industry for our consumer and other loan portfolio as of March 31, 2025:

(dollars in thousands; unaudited)		Outstanding Balance				Available Loan Commitments (1)				Total Outstanding Balance & Available Commitment (1)				% of Total Loans (Outstanding Balance & Available Commitment)			Average Loan Balance				Number of Loans
CCBX consumer loans
Credit cards		$	532,775			$	868,969			$	1,401,744			24.7	%		$	1.7			314,203
Installment loans			654,844				29,027				683,871			12.1				0.8			776,669
Lines of credit			627				2				629			0.0				1.3			477
Other loans			14,555				—				14,555			0.3				0.1			185,894
Community bank consumer loans
Installment loans			1,846				3				1,849			0.0				65.9			28
Lines of credit			173				357				530			0.0				5.2			33
Other loans			11,307				12,400				23,707			0.4				34.6			327
Total		$	1,216,127			$	910,758			$	2,126,885			37.5	%		$	1.0			1,277,631

⁽¹⁾  Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.

Residential real estate loans comprise 13.9% of our total balance of outstanding loans as of March 31, 2025. Unused commitments to extend credit represents an additional $529.3 million, and the combined total in residential real estate loans represents $1.02 billion, or 18.0% of our total outstanding loans and loan commitments.

The following table summarizes our loan commitment by industry for our residential real estate loan portfolio as of March 31, 2025:

(dollars in thousands; unaudited)		Outstanding Balance				Available Loan Commitments (1)				Total Outstanding Balance & Available Commitment (1)				% of Total Loans (Outstanding Balance & Available Commitment)			Average Loan Balance				Number of Loans
CCBX residential real estate loans
Home equity line of credit		$	285,355			$	481,778			$	767,133			13.5	%		$	28			10,291
Community bank residential real estate loans
Closed end, secured by first liens			164,284				1,649				165,933			3.0				533			308
Home equity line of credit			27,931				45,016				72,947			1.3				115			242
Closed end, second liens			10,705				892				11,597			0.2				357			30
Total		$	488,275			$	529,335			$	1,017,610			18.0	%		$	45			10,871

⁽¹⁾  Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits. CCBX home equity lines of credit are limited to a $375.0 million portfolio maximum.

Commercial and industrial loans comprise 8.9% of our total balance of outstanding loans as of March 31, 2025. Unused commitments to extend credit represents an additional $601.0 million, and the combined total in commercial and industrial loans represents $913.2 million, or 16.1% of our total outstanding loans and loan commitments. Included in commercial and industrial loans is $133.5 million in outstanding capital call lines, with an additional $514.9 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.

The following table summarizes our loan commitment by industry for our commercial and industrial loan portfolio as of March 31, 2025:

(dollars in thousands; unaudited)		Outstanding Balance				Available Loan Commitments (1)				Total Outstanding Balance & Available Commitment (1)				% of Total Loans (Outstanding Balance & Available Commitment)			Average Loan Balance				Number of Loans
CCBX C&I Loans
Capital Call Lines		$	133,466			$	514,864			$	648,330			11.4	%		$	1,019			131
Retail and other loans			29,702				21,736				51,438			0.9				10			3,002
Community bank C&I Loans
Construction/Contractor Services			30,768				31,642				62,410			1.1				152			202
Financial Institutions			48,648				—				48,648			0.9				4,054			12
Medical / Dental / Other Care			6,721				2,739				9,460			0.2				517			13
Manufacturing			5,611				4,022				9,633			0.2				156			36
Groups < 0.20% of total			57,356				25,969				83,325			1.4				222			258
Total		$	312,272			$	600,972			$	913,244			16.1	%		$	85			3,654

⁽¹⁾ Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.

Construction, land and land development loans comprise 4.7% of our total balance of outstanding loans as of March 31, 2025. Unused commitments to extend credit represents an additional $72.5 million, and the combined total in construction, land and land development loans represents $239.0 million, or 4.2% 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 March 31, 2025:

(dollars in thousands; unaudited)		Outstanding Balance				Available Loan Commitments				Total Outstanding Balance & Available Commitment				% of Total Loans (Outstanding Balance & Available Commitment)			Average Loan Balance				Number of Loans
Commercial construction		$	96,716			$	41,654			$	138,370			2.4	%		$	6,908			14
Residential construction			39,375				22,253				61,628			1.1				2,316			17
Developed land loans			7,788				2				7,790			0.1				556			14
Undeveloped land loans			16,684				4,185				20,869			0.4				1,112			15
Land development			5,988				4,382				10,370			0.2				665			9
Total		$	166,551			$	72,476			$	239,027			4.2	%		$	2,414			69

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)		March 31, 2025				December 31, 2024				September 30, 2024				June 30, 2024				March 31, 2024
Commercial construction		$	96,716			$	83,216			$	97,792			$	110,372			$	102,099
Residential construction			39,375				40,940				35,822				34,652				28,751
Undeveloped land loans			16,684				8,665				8,606				8,372				8,190
Developed land loans			7,788				8,305				14,863				13,954				14,307
Land development			5,988				7,072				5,968				5,714				7,515
Total		$	166,551			$	148,198			$	163,051			$	173,064			$	160,862

Commitments to extend credit total $2.14 billion at March 31, 2025,   however we do not anticipate our customers using the $2.14 billion that is showing as available due to CCBX partner and portfolio limits.

The following table presents outstanding commitments to extend credit as of March 31, 2025:

Consolidated
(dollars in thousands; unaudited)		As of March 31, 2025
Commitments to extend credit:
Commercial and industrial loans		$	86,108
Commercial and industrial loans – capital call lines			514,864
Construction – commercial real estate loans			50,221
Construction – residential real estate loans			22,255
Residential real estate loans			529,335
Commercial real estate loans			29,401
Credit cards			868,969
Consumer and other loans			41,789
Total commitments to extend credit		$	2,142,942

We have individual CCBX partner portfolio limits with our each of our partners to manage loan concentration risk, liquidity risk, and counter-party partner risk. For example, as of March 31, 2025, capital call lines outstanding balance totaled $133.5 million and, while commitments totaled $514.9 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.

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		$	133,466			8.1	%	$	514,864			$	350,000		$	—
All other commercial & industrial loans			29,702			1.8			21,736				475,720			541
Real estate loans:
Home equity lines of credit (3)			285,355			17.3			481,778				375,000			33,436
Consumer and other loans:
Credit cards – cash secured			339						—							—
Credit cards – unsecured			532,436						868,969							27,589
Credit cards – total			532,775			32.2			868,969				850,000			27,589
Installment loans – cash secured			127,426						29,027							—
Installment loans – unsecured			527,418						—							1,175
Installment loans – total			654,844			39.7			29,027				1,814,541			1,175
Other consumer and other loans			15,182			0.9			2				4,739			419
Gross CCBX loans receivable			1,651,324			100.0	%		1,916,376				3,870,000		$	63,160
Net deferred origination fees			(498	)
Loans receivable		$	1,650,826

(1)	Remaining commitment available, net of outstanding balance.
(2)	Balances are as of April 9, 2025.
(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.

APPENDIX B –
As of March 31, 2025

CCBX – BaaS Reporting Information

During the quarter ended March 31, 2025, $53.6 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 and negative deposit accounts. 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 by indemnifying or reimbursing incurred credit and fraud losses, if our partner is unable to fulfill their contracted obligation then the bank would be exposed to additional loan and deposit losses if the cash flows on the loans were not sufficient to fund the reimbursement of loan 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 failed to determine if a write-off is appropriate. If a write-off occurs, the Bank would retain the full yield and any fee income on the loan portfolio going forward, and our BaaS loan expense would decrease once default occurred and payments to the CCBX partner were stopped.

The Bank records contractual interest earned from the borrower on CCBX partner loans in interest income, adjusted for origination costs which are paid or payable to the CCBX partner. 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)		March 31, 2025				December 31, 2024				March 31, 2024
Yield on loans (1)			16.88	%			16.81	%			17.74	%
BaaS loan interest income		$	67,855			$	64,532			$	55,839
Less: BaaS loan expense			32,507				30,720				26,107
Net BaaS loan income (2)		$	35,348			$	33,812			$	29,732
Net BaaS loan income divided by average BaaS loans (1)(2)			8.79	%			8.81	%			9.45	%

(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.

An increase in average CCBX loans receivable resulted in increased interest income on CCBX loans during the quarter ended March 31, 2025 compared to the quarter ended December 31, 2024. The increase in average CCBX loans receivable was primarily due to our strategy 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 also have lower stated rates and expected losses than some of our CCBX loans historically. Our yield on loans and our net interest margin net of BaaS loan expense slightly increased, as our CCBX portfolio is leveling out. 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 higher quality lower interest rate loans. We continue to reposition ourselves by managing 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 and deposits has resulted in increases in interest income and expense for the quarter ended March 31, 2025 compared to the quarter ended March 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)		March 31, 2025				December 31, 2024				March 31, 2024
Loan interest income		$	67,855			$	64,532			$	55,839
Total BaaS interest income		$	67,855			$	64,532			$	55,839

Interest expense		Three Months Ended
(dollars in thousands; unaudited)		March 31, 2025				December 31, 2024				March 31, 2024
BaaS interest expense		$	21,581			$	22,243			$	22,854
Total BaaS interest expense		$	21,581			$	22,243			$	22,854

BaaS income		Three Months Ended
(dollars in thousands; unaudited)		March 31, 2025				December 31, 2024				March 31, 2024
BaaS program income:
Servicing and other BaaS fees		$	1,419			$	1,043			$	1,131
Transaction and interchange fees			3,833				3,699				2,661
Reimbursement of expenses			1,026				812				254
Total BaaS program income			6,278				5,554				4,046
BaaS indemnification income:
BaaS credit enhancements			53,648				62,097				79,808
BaaS fraud enhancements			1,993				5,043				923
BaaS indemnification income			55,641				67,140				80,731
Total noninterest BaaS income		$	61,919			$	72,694			$	84,777

Servicing and other BaaS fees increased $376,000 and transaction and interchange fees increased $134,000 in the quarter ended March 31, 2025 compared to the quarter ended December 31, 2024. We expect servicing and other BaaS fees to be higher when we are bringing new partners on and then to decrease when transaction and interchange fees increase as partner activity grows and contracted minimum fees are replaced with these recurring fees when they exceed the minimum fees. Increases in BaaS reimbursement of fees offsets increases in noninterest expense from BaaS expenses covered by CCBX partners.

BaaS loan and fraud expense:		Three Months Ended
(dollars in thousands; unaudited)		March 31, 2025				December 31, 2024				March 31, 2024
BaaS loan expense		$	32,507			$	30,720			$	26,107
BaaS fraud expense			1,993				5,043				923
Total BaaS loan and fraud expense		$	34,500			$	35,763			$	27,030

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/26a7ee4c-99dc-493e-8703-90dc906581e2

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