EVERETT, Wash., Jan. 28, 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 with an industry leading banking as a service ("BaaS") segment, today reported unaudited financial results for the quarter ended December 31, 2024, including net income of $13.4 million, or $0.94 per diluted common share, compared to $13.5 million, or $0.97 per diluted common share, for the three months ended September 30, 2024 and $45.2 million, or $3.26 per diluted common share, for the year ended December 31, 2024, compared to $44.6 million, or $3.27 per diluted common share for the year ended December 31, 2023.

Management Discussion of the Quarter and Full-year Results

"2024 was highlighted by the completion of our $98.0 million capital raise during the fourth quarter, which we will utilize to support growth of the Bank including in our CCBX segment," said CEO Eric Sprink. "We saw high quality net loan growth of $67.7 million despite selling $845.5 million in loans during the fourth quarter, and our CCBX program fee income continued to increase which was up 56.9% for full-year 2024 relative to the prior year. We continue to invest heavily in CCBX to support future growth, and we are pleased to have three letters of intent ("LOI") signed going into 2025 with an active pipeline."

Key Points for Fourth Quarter and Our Go-Forward Strategy

Completed Capital Raise Allows CCBX Growth to Continue. During the fourth quarter of 2024, we completed a $98.0 million common equity raise, which was priced at $71.00/share. Proceeds will be used for general corporate purposes and to support growth of the Bank including in our CCBX segment. As of December 31, 2024 we had three signed LOIs and continue to have an active pipeline for 2025. The growth in common-equity tier 1 and total risk-based capital to 12.04% and 14.67%, respectively, includes the benefit of the capital raise.
Strong Annual Growth in CCBX Program Fees. Total BaaS program fee income was $25.6 million for the year ended December 31, 2024, an increase of $9.3 million, or 56.9%, from the year ended December 31, 2023, and is representative of growth in partner transaction activity and expanded product offerings within our CCBX operating segment. Trends in CCBX noninterest income were also positive during the quarter, with total program fees of $8.2 million for the three months ended December 31, 2024, an increase of $1.8 million, or 27.6%, from the three months ended September 30, 2024.
Investments for Growth Continues. Total non-interest expense of $64.2 million was down $1.4 million, or 2.1%, as compared to $65.6 million in the third quarter of 2024, mainly driven by lower BaaS loan expense, partially offset by higher salaries and employee benefits, point of sale expense, and legal and professional expenses. As we increase the number of new CCBX partners and programs launching in 2025, we expect that expenses will tend to be front-loaded with a focus on compliance and operational risk before any new program reaches significant revenues.
Off Balance Sheet Activity Update. During the fourth quarter of 2024, we sold $845.5 million of loans, the majority of which were credit card receivables, and swept $273.2 million of deposits off balance-sheet. We are able to retain a portion of the fee income on these sold credit card loans. As of December 31, 2024 there were 182,449 credit cards with fee earning potential, an increase of 101,023 compared to the quarter ended September 30, 2024 and an increase of 172,400 from December 31, 2023.
Continued Monitoring of CCBX Risk. We remain fully indemnified against fraud and 98.7% indemnified against credit risk with our CCBX partners as of year-end of 2024.

Fourth Quarter 2024 Financial Highlights

The tables below outline some of our key operating metrics.

	Three Months Ended
(Dollars in thousands, except share and per share data; unaudited)	December 31, 2024			September 30, 2024			June 30, 2024			March 31, 2024			December 31, 2023
Income Statement Data:
Interest and dividend income	$	96,587		$	105,079		$	97,487		$	90,472		$	88,243
Interest expense		30,071			32,892			31,250			29,536			28,586
Net interest income		66,516			72,187			66,237			60,936			59,657
Provision for credit losses		61,867			70,257			62,325			83,158			60,789
Net interest (expense)/ income after provision for credit losses		4,649			1,930			3,912			(22,222	)		(1,132	)
Noninterest income		76,756			80,068			69,918			86,955			64,694
Noninterest expense		64,206			65,616			58,809			56,018			51,703
Provision for income tax		3,832			2,926			3,425			1,915			2,847
Net income		13,367			13,456			11,596			6,800			9,012

	As of and for the Three Month Period
	December 31, 2024			September 30, 2024			June 30, 2024			March 31, 2024			December 31, 2023
Balance Sheet Data:
Cash and cash equivalents	$	452,513		$	484,026		$	487,245		$	515,128		$	483,128
Investment securities		47,321			48,620			49,213			50,090			150,364
Loans held for sale		20,600			7,565			—			797			—
Loans receivable		3,486,565			3,418,832			3,326,460			3,199,554			3,026,092
Allowance for credit losses		(176,994	)		(170,263	)		(147,914	)		(139,258	)		(116,958	)
Total assets		4,121,208			4,065,821			3,961,546			3,865,258			3,753,366
Interest bearing deposits		3,057,808			3,047,861			2,949,643			2,888,867			2,735,161
Noninterest bearing deposits		527,524			579,427			593,789			574,112			625,202
Core deposits ⁽¹⁾		3,123,434			3,190,869			3,528,339			3,447,864			3,342,004
Total deposits		3,585,332			3,627,288			3,543,432			3,462,979			3,360,363
Total borrowings		47,884			47,847			47,810			47,771			47,734
Total shareholders' equity		438,704			331,930			316,693			303,709			294,978

Share and Per Share Data ⁽²⁾:
Earnings per share – basic	$	0.97		$	1.00		$	0.86		$	0.51		$	0.68
Earnings per share – diluted	$	0.94		$	0.97		$	0.84		$	0.50		$	0.66
Dividends per share		—			—			—			—			—
Book value per share ⁽³⁾	$	29.37		$	24.51		$	23.54		$	22.65		$	22.17
Tangible book value per share ⁽⁴⁾	$	29.37		$	24.51		$	23.54		$	22.65		$	22.17
Weighted avg outstanding shares – basic		13,828,605			13,447,066			13,412,667			13,340,997			13,286,828
Weighted avg outstanding shares – diluted		14,268,229			13,822,270			13,736,508			13,676,917			13,676,513
Shares outstanding at end of period		14,935,298			13,543,282			13,453,805			13,407,320			13,304,339
Stock options outstanding at end of period		186,354			198,370			286,119			309,069			354,969

See footnotes that follow the tables below

	As of and for the Three Month Period
	December 31, 2024			September 30, 2024			June 30, 2024			March 31, 2024			December 31, 2023
Credit Quality Data:
Nonperforming assets ⁽⁵⁾ to total assets		1.52	%		1.63	%		1.34	%		1.42	%		1.43	%
Nonperforming assets⁽⁵⁾to loans receivable and OREO		1.80	%		1.94	%		1.60	%		1.71	%		1.78	%
Nonperforming loans ⁽⁵⁾ to total loans receivable		1.80	%		1.94	%		1.60	%		1.71	%		1.78	%
Allowance for credit losses to nonperforming loans		282.5	%		256.5	%		278.1	%		253.8	%		217.2	%
Allowance for credit losses to total loans receivable		5.08	%		4.98	%		4.45	%		4.35	%		3.86	%
Gross charge-offs	$	61,585		$	53,305		$	55,207		$	58,994		$	47,652
Gross recoveries	$	5,646		$	4,069		$	1,973		$	1,776		$	2,781
Net charge-offs to average loans ⁽⁶⁾		6.51	%		5.65	%		6.57	%		7.34	%		5.92	%

Capital Ratios:
Company
Tier 1 leverage capital		10.78	%		8.40	%		8.31	%		8.24	%		8.10	%
Common equity Tier 1 risk-based capital		12.04	%		9.24	%		9.03	%		8.98	%		9.10	%
Tier 1 risk-based capital		12.14	%		9.34	%		9.13	%		9.08	%		9.20	%
Total risk-based capital		14.67	%		11.89	%		11.70	%		11.70	%		11.87	%
Bank
Tier 1 leverage capital		10.64	%		9.29	%		9.24	%		9.19	%		9.06	%
Common equity Tier 1 risk-based capital		11.99	%		10.34	%		10.15	%		10.14	%		10.30	%
Tier 1 risk-based capital		11.99	%		10.34	%		10.15	%		10.14	%		10.30	%
Total risk-based capital		13.28	%		11.63	%		11.44	%		11.43	%		11.58	%

⁽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 1.30% for the quarter ended December 31, 2024 compared to 1.34% and 0.97% for the quarters ended September 30, 2024 and December 31, 2023, respectively. ROA for the quarter ended December 31, 2024, decreased 0.04% and increased 0.33% compared to September 30, 2024 and December 31, 2023, respectively. Noninterest expenses were lower for the quarter ended December 31, 2024 compared to the quarter ended September 30, 2024 largely due to a decrease in BaaS loan expense, which is directly related to the amount of interest earned on CCBX loans, and higher than the quarter ended December 31, 2023 largely due to an increase in salaries and employee benefits, data processing and software licenses, legal and professional expenses and point of sale expenses, all of which are related to the growth of Company and investments in technology and risk management.

Yield on earning assets and yield on loans receivable decreased 1.14% and 0.99%, respectively, for the quarter ended December 31, 2024 compared to the quarter ended September 30, 2024. This decrease is due to a combination of factors. We continue to refine our credit approach with partners, widening the scope of loans that we are moving to nonaccrual, which decreased loan interest income in the quarter ended December 31, 2024 as compared to prior quarters. Average loans receivable as of December 31, 2024 decreased $45.4 million compared to September 30, 2024 as we continue to sell CCBX loans as part of our on-going strategy to manage the loan portfolio and credit quality. New loans are being booked with enhanced credit standards, which typically results in a lower interest rate than some of the higher risk loans that have paid off or we have chosen to sell.

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

	Three Months Ended					Twelve Months Ended
(unaudited)	December 31, 2024	September 30, 2024	June 30, 2024	March 31, 2024	December 31, 2023	December 31, 2024	December 31, 2023

Return on average assets ⁽¹⁾	1.30%	1.34%	1.21%	0.73%	0.97%	1.15%	1.28%
Return on average equity ⁽¹⁾	14.90%	16.67%	15.22%	9.21%	12.35%	14.11%	16.41%
Yield on earnings assets ⁽¹⁾	9.65%	10.79%	10.49%	10.07%	9.77%	10.25%	9.82%
Yield on loans receivable⁽¹⁾	10.44%	11.43%	11.23%	10.85%	10.71%	10.99%	10.60%
Cost of funds⁽¹⁾	3.24%	3.62%	3.60%	3.52%	3.39%	3.49%	2.91%
Cost of deposits ⁽¹⁾	3.21%	3.59%	3.58%	3.49%	3.36%	3.46%	2.87%
Net interest margin ⁽¹⁾	6.65%	7.41%	7.13%	6.78%	6.61%	6.99%	7.10%
Noninterest expense to average assets ⁽¹⁾	6.23%	6.54%	6.14%	6.04%	5.56%	6.24%	5.90%
Noninterest income to average assets⁽¹⁾	7.45%	7.98%	7.30%	9.38%	6.95%	8.00%	5.97%
Efficiency ratio	44.81%	43.10%	43.19%	37.88%	41.58%	42.21%	45.92%
Loans receivable to deposits ⁽²⁾	97.82%	94.46%	93.88%	92.42%	90.05%	97.8%	90.1%

⁽¹⁾Annualized calculations shown for quarterly periods presented.

⁽²⁾Includes loans held for sale.

Management Outlook; CEO Eric Sprink

"As we look forward to 2025, our strategy involves selectively expanding our current base of CCBX partners while continuing to invest in and enhance our technology and risk management infrastructure. This will enable us to support the next phase of growth within CCBX more efficiently. Additionally, we are focused on growing noninterest income through increased transaction activity and new product offerings with our established partners. We plan to continue selling credit card loans while retaining a portion of the fee income for our role in processing transactions, which offers an additional source of noninterest income without adding on-balance-sheet risk. We believe that by increasing noninterest income, we can mitigate the uncertainties associated with fluctuating interest rates and provide a more stable income stream in the future." 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 24 relationships, at varying stages, including three signed letters of intent as of December 31, 2024. 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 and will continue to exit relationships where it makes sense for us to do so.

As we explore relationships with new partners we plan to continue expanding product offerings with our 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 positions us to reach a wide and established customer base with a modest increase in regulatory risk given that we have already vetted existing partners and have an operational history. Increases in partner activity/transaction counts is positively impacting noninterest income and we expect that trend to continue as products launched earlier in the year gain traction. 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 plan to continue this strategy to provide an on-going and passive revenue stream with no on balance sheet risk.

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

	As of
(unaudited)	December 31, 2024	September 30, 2024	December 31, 2023
Active	19	19	19
Friends and family / testing	1	1	1
Implementation / onboarding	1	1	1
Signed letters of intent	3	1	0
Wind down - active but preparing to exit relationship	0	0	0
Total CCBX relationships	24	22	21

CCBX loans increased $82.3 million, or 5.4%, to $1.60 billion despite selling $845.5 million loans during the three months ended December 31, 2024. 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 December 31, 2024 the portion of this portfolio for which we are responsible represented $20.6 million in loans.

The following table details the CCBX loan portfolio:

CCBX	As of
	December 31, 2024					September 30, 2024					December 31, 2023
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total		Balance			% to Total
Commercial and industrial loans:
Capital call lines	$	109,017		6.8	%	$	103,924		6.8	%	$	87,494		7.3	%
All other commercial & industrial loans		33,961		2.1			36,494		2.4			54,298		4.5
Real estate loans:
Residential real estate loans		267,707		16.7			265,402		17.5			238,035		19.9
Consumer and other loans:
Credit cards		528,554		33.0			633,691		41.6			505,837		42.3
Other consumer and other loans		664,780		41.4			482,228		31.7			310,574		26.0
Gross CCBX loans receivable		1,604,019		100.0	%		1,521,739		100.0	%		1,196,238		100.0	%
Net deferred origination (fees) costs		(442	)				(447	)				(300	)
Loans receivable	$	1,603,577				$	1,521,292				$	1,195,938
Loan Yield - CCBX ⁽¹⁾⁽²⁾		15.28	%				17.35	%				17.36	%

⁽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 December 31, 2024, includes an increase of $77.4 million or 6.9%, in consumer and other loans, an increase of $5.1 million, or 4.9%, in capital call lines as a result of normal balance fluctuations and business activities, and an increase of $2.3 million, or 0.9%, in residential real estate loans. We continue to monitor and manage the CCBX loan portfolio, and sold $845.5 million in CCBX loans during the quarter ended December 31, 2024 compared to sales of $423.7 million in the quarter ended September 30, 2024. We continue to reposition ourselves by managing CCBX credit and concentration levels in an effort to optimize our loan portfolio and generate off balance sheet fee income.

CCBX loan yield decreased 2.06% for the quarter ended December 31, 2024 compared to the quarter ended September 30, 2024 as a result of our widening the scope of loans that we are moving to nonaccrual, which decreased loan interest income in the quarter ended December 31, 2024. Also contributing to the decrease are lower interest rates on new CCBX loans, which are replacing higher risk and higher rate loans that have paid off or were sold as part of our strategy to manage the loan portfolio and credit quality. The recent decrease in the Fed funds interest rate further contributed to the change.

The following chart show the growth in credit card accounts that we are able to generate fee income from. 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, but that we are still able to generate fee income on.

CCBX Credit Cards

The following table details the CCBX deposit portfolio:

CCBX	As of
	December 31, 2024					September 30, 2024					December 31, 2023
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total		Balance			% to Total
Demand, noninterest bearing	$	55,686		2.7	%	$	60,655		2.9	%	$	63,630		3.4	%
Interest bearing demand and money market		1,958,459		94.9			1,991,858		94.6			1,794,168		96.3
Savings		5,710		0.3			5,204		0.3			4,964		0.3
Total core deposits		2,019,855		97.9			2,057,717		97.8			1,862,762		100.0
Other deposits		44,233		2.1			47,046		2.2			—		—
Total CCBX deposits	$	2,064,088		100.0	%	$	2,104,763		100.0	%	$	1,862,762		100.0	%
Cost of deposits ⁽¹⁾		4.19	%				4.82	%				4.90	%

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

CCBX deposits decreased $40.7 million, or 1.9%, in the three months ended December 31, 2024 to $2.06 billion as a result of normal balance fluctuations. This excludes the $273.2 million in CCBX deposits that were transferred off balance sheet for increased Federal Deposit Insurance Corporation ("FDIC") insurance coverage and sweep purposes, compared to $214.5 million for the quarter ended September 30, 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 December 31, 2024, the community bank saw net loans decrease $14.6 million, or 0.8%, to $1.88 billion.

The following table details the Community Bank loan portfolio:

Community Bank	As of
	December 31, 2024					September 30, 2024					December 31, 2023
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total		Balance			% to Total
Commercial and industrial loans	$	150,395		8.0	%	$	152,161		8.0	%	$	149,502		8.2	%
Real estate loans:
Construction, land and land development loans		148,198		7.8			163,051		8.6			157,100		8.5
Residential real estate loans		202,064		10.7			212,467		11.2			225,391		12.3
Commercial real estate loans		1,374,801		72.8			1,362,452		71.5			1,303,533		70.9
Consumer and other loans:
Other consumer and other loans		13,542		0.7			14,173		0.7			1,628		0.1
Gross Community Bank loans receivable		1,889,000		100.0	%		1,904,304		100.0	%		1,837,154		100.0	%
Net deferred origination fees		(6,012	)				(6,764	)				(7,000	)
Loans receivable	$	1,882,988				$	1,897,540				$	1,830,154
Loan Yield⁽¹⁾		6.53	%				6.64	%				6.32	%

⁽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 $14.9 million in construction, land and land development loans, decreased $1.8 million in commercial and industrial loans and decreased $631,000 in consumer and other loans, and were partially offset by an increase in commercial real estate loans of $12.3 million during the quarter ended December 31, 2024.

The following table details the community bank deposit portfolio:

Community Bank	As of
	December 31, 2024					September 30, 2024					December 31, 2023
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total		Balance			% to Total
Demand, noninterest bearing	$	471,838		31.0	%	$	518,772		34.1	%	$	561,572		37.5	%
Interest bearing demand and money market		570,625		37.5			552,108		36.3			846,072		56.5
Savings		61,116		4.0			62,272		4.1			71,598		4.8
Total core deposits		1,103,579		72.5			1,133,152		74.5			1,479,242		98.8
Other deposits		400,118		26.3			373,681		24.5			1		0.0
Time deposits less than $100,000		5,920		0.4			6,305		0.4			8,109		0.5
Time deposits $100,000 and over		11,627		0.8			9,387		0.6			10,249		0.7
Total Community Bank deposits	$	1,521,244		100.0	%	$	1,522,525		100.0	%	$	1,497,601		100.0	%
Cost of deposits⁽¹⁾		1.86	%				1.92	%				1.57	%

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

Community bank deposits decreased $1.3 million, or 0.1%, during the three months ended December 31, 2024 to $1.52 billion as result of normal balance fluctuations. The community bank segment includes noninterest bearing deposits of $471.8 million, or 31.0%, of total community bank deposits, resulting in a cost of deposits of 1.86%, which compared to 1.92% for the quarter ended September 30, 2024, largely due to the decreases in the Fed funds rate late in the third quarter and during the fourth quarter of 2024. The cost of community bank deposits are projected to decline further as the Fed funds rate had a decrease of 0.25%, which occurred in December 2024 and the full quarterly effect of that decrease will not be recognized until the first quarter of 2025.

Net Interest Income and Margin Discussion

Net interest income was $66.5 million for the quarter ended December 31, 2024, a decrease of $5.7 million, or 7.9%, from $72.2 million for the quarter ended September 30, 2024, and an increase of $6.9 million, or 11.5%, from $59.7 million for the quarter ended December 31, 2023. The decrease in net interest income compared to September 30, 2024, was a result of a decrease in average loans receivable as a result of selling $845.5 million in CCBX loans during the quarter ended December 31, 2024, the recent decrease in the Fed funds interest rate, and continued enhancements to our partner credit practices that resulted in a reduction of interest income on loans. The increase in net interest income compared to December 31, 2023 was largely related to increased yield on loans resulting from higher interest rates and 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 6.65% for the three months ended December 31, 2024, compared to 7.41% for the three months ended September 30, 2024, largely due to lower loan yield. 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 4.16% for the three months ended December 31, 2024, compared to 4.06% for the three months ended September 30, 2024. Net interest margin was 6.61% for the three months ended December 31, 2023. The increase in net interest margin for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 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 decreased $9.9 million, or 9.9%, to $89.7 million for the three months ended December 31, 2024, compared to $99.6 million for the three months ended September 30, 2024, as a result of loan sales and a decrease in the Fed funds interest rate. Additionally, as we continue to refine our credit approach with partners, we are widening the scope of loans that we are moving to nonaccrual which decreased interest income in the quarter ended December 31, 2024 and lowered loan yield and net interest margin; however this also decreased BaaS loan expense (which is in noninterest expense) resulting in no impact to net income. Interest and fees on loans receivable increased $8.6 million, or 10.5%, compared to $81.2 million for the three months ended December 31, 2023, 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 0.10% for the three months ended December 31, 2024, compared to the three months ended September 30, 2024 and increased 0.25% compared the three months ended December 31, 2023.

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									As of and for the Twelve Months Ended
(dollars in thousands; unaudited)	December 31 2024			September 30 2024			December 31 2023			December 31 2024			December 31 2023
Net interest margin, net of BaaS loan expense:
Net interest margin ⁽¹⁾		6.65	%		7.41	%		6.61	%		6.99	%		7.10	%
Earning assets		3,980,078			3,875,911			3,581,772			3,802,275			3,364,406
Net interest income (GAAP)		66,516			72,187			59,657			265,876			238,727
Less: BaaS loan expense		(24,859	)		(32,612	)		(24,310	)		(111,384	)		(86,900	)
Net interest income, net of BaaS loan expense⁽²⁾	$	41,657		$	39,575		$	35,347		$	154,492		$	151,827
Net interest margin, net of BaaS loan expense ⁽¹⁾⁽²⁾		4.16	%		4.06	%		3.92	%		4.06	%		4.51	%
Loan income net of BaaS loan expense divided by average loans:
Loan yield (GAAP)⁽¹⁾		10.44	%		11.43	%		10.71	%		10.99	%		10.60	%
Total average loans receivable	$	3,419,476		$	3,464,871		$	3,007,289		$	3,320,582		$	2,936,908
Interest and earned fee income on loans (GAAP)		89,714			99,590			81,159			364,869			311,441
BaaS loan expense		(24,859	)		(32,612	)		(24,310	)		(111,384	)		(86,900	)
Net loan income⁽²⁾	$	64,855		$	66,978		$	56,849		$	253,485		$	224,541
Loan income, net of BaaS loan expense, divided by average loans ⁽¹⁾⁽²⁾		7.55	%		7.69	%		7.50	%		7.63	%		7.65	%

⁽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 $820,000 to $48.2 million compared to the three months ended September 30, 2024 and decreased $101.5 million compared to the three months ended December 31, 2023 as a result of principal paydowns and maturing securities.

Cost of funds was 3.24% for the quarter ended December 31, 2024, a decrease of 38 basis points from the quarter ended September 30, 2024 and a decrease of 16 basis points from the quarter ended December 31, 2023. Cost of deposits for the quarter ended December 31, 2024 was 3.21%, compared to 3.59% for the quarter ended September 30, 2024, and 3.36% for the quarter ended December 31, 2023. The decreased cost of funds and deposits compared to September 30, 2024 and December 31, 2023 was 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
	December 31, 2024		September 30, 2024		December 31, 2023
	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%	1.86%	6.64%	1.92%	6.32%	1.57%
CCBX ⁽¹⁾	15.28%	4.19%	17.35%	4.82%	17.36%	4.90%
Consolidated	10.44%	3.21%	11.43%	3.59%	10.71%	3.36%

⁽¹⁾Annualized calculations for periods shown 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 shown.

The following table illustrates how BaaS loan interest income is affected by BaaS loan expense resulting in net BaaS loan income and the associated yield:

	For the Three Months Ended
	December 31, 2024			September 30, 2024				December 31, 2023
(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	$	58,671	15.28%	$	67,692	17.35	%	$	52,327	17.36%
Less: BaaS loan expense		24,859	6.48%		32,612	8.36	%		24,310	8.06%
Net BaaS loan income⁽¹⁾	$	33,812	8.81%	$	35,080	8.99	%	$	28,017	9.30%
Average BaaS Loans⁽³⁾	$	1,527,178		$	1,552,443			$	1,196,137

⁽¹⁾A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.

⁽²⁾ Annualized calculations shown for quarterly periods presented.

⁽³⁾Includes loans held for sale.

Noninterest Income Discussion

Noninterest income was $76.8 million for the three months ended December 31, 2024, a decrease of $3.3 million from $80.1 million for the three months ended September 30, 2024, and an increase of $12.1 million from $64.7 million for the three months ended December 31, 2023. The decrease in noninterest income for the quarter ended December 31, 2024 as compared to the quarter ended September 30, 2024 was primarily due to a decrease of $3.3 million in total BaaS income. The $3.3 million decrease in total BaaS income included an $8.0 million decrease in BaaS credit enhancements related to the provision for credit losses, partially offset by a a $3.0 million increase in BaaS fraud enhancements and an increase of $1.8 million in BaaS program income. The $1.8 million increase in BaaS program income is largely due to higher reimbursement of expenses as well as an increase in transaction fees and interchange fees, our primary BaaS source for recurring fee income, as well as higher reimbursement of expenses (see "Appendix B" for more information on the accounting for BaaS allowance for credit losses and credit and fraud enhancements).

The $12.1 million increase in noninterest income over the quarter ended December 31, 2023 was primarily due to a $7.9 million increase in BaaS credit and fraud enhancements and an increase of $3.8 million in BaaS program income.

Noninterest Expense Discussion

Total noninterest expense decreased $1.4 million to $64.2 million for the three months ended December 31, 2024, compared to $65.6 million for the three months ended September 30, 2024, and increased $12.5 million from $51.7 million for the three months ended December 31, 2023. The decrease in noninterest expense for the quarter ended December 31, 2024, as compared to the quarter ended September 30, 2024, was primarily due to a $4.8 million decrease in BaaS expense from a $7.8 million decrease in BaaS loan expense, partially offset by a $3.0 million increase in BaaS fraud expense. 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. Other variances that partially offset the net decrease in noninterest expense include an increase of $1.4 million in point of sale expenses as a result of increased partner transaction activity, an increase of $893,000 in salaries and employee benefits and an increase of $1.0 million in legal and professional fees as part of our continued investments in technology and risk management.

The increase in noninterest expenses for the quarter ended December 31, 2024 compared to the quarter ended December 31, 2023 was largely due to an increase of $4.8 million in BaaS partner expense primarily from a $4.3 million increase in BaaS fraud expense, a $549,000 increase in BaaS loan expense, a $2.0 million increase in legal and professional expenses, a $1.8 million increase in point of sale expenses, a $1.5 million increase in salary and employee benefits, and a $1.2 million increase in data processing and software licenses due to enhancements in technology.

Certain noninterest expenses are reimbursed by our CCBX partners. In accordance with GAAP we recognize all expenses in noninterest expense and all 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
	December 31,		September 30,		December 31,
(dollars in thousands; unaudited)	2024		2024		2023
Total noninterest expense (GAAP)	$	64,206	$	65,616	$	51,703
Less: BaaS loan expense		24,859		32,612		24,310
Less: BaaS fraud expense		5,043		2,084		779
Less: Reimbursement of expenses (Baas)		3,468		1,843		1,076
Noninterest expense, net of Baas loan expense, BaaS fraud expense and reimbursement of expenses (BaaS)⁽¹⁾	$	30,836	$	29,077	$	25,538

⁽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 $3.8 million for the three months ended December 31, 2024, $2.9 million for the three months ended September 30, 2024 and $2.8 million for the fourth quarter of 2023. The income tax provision was higher for the three months ended December 31, 2024 compared to the quarter ended September 30, 2024 as a result of the deductibility of certain equity awards which reduced tax expense during the quarter ended September 30, 2024 compared to the quarter ended December 31, 2024 despite net income being higher fairly even, and higher than the quarter ended December 31, 2023, 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 2.63% for calculating the provision for state income taxes.

Financial Condition Overview

Total assets increased $55.4 million, or 1.4%, to $4.12 billion at December 31, 2024 compared to $4.07 billion at September 30, 2024. The increase is primarily due to stronger loan growth, partially offset by lower cash balances. Total loans receivable increased $67.7 million to $3.49 billion at December 31, 2024, from $3.42 billion at September 30, 2024.

As of December 31, 2024, the Company had the capacity to borrow up to a total of $642.1 million from the Federal Reserve Bank discount window and Federal Home Loan Bank, and an additional $50.0 million from a correspondent bank. There were no borrowings outstanding on these lines as of December 31, 2024.

The Company completed a $98.0 million capital raise during the quarter ended December 31, 2024. After contributing $50.0 million to the Bank, the Company had a cash balance of $47.7 million as of December 31, 2024, which is retained for general operating purposes, including debt repayment, and for funding $480,000 in commitments to bank technology investment funds.

Uninsured deposits were $543.0 million as of December 31, 2024, compared to $542.2 million as of September 30, 2024.

Total shareholders' equity as of December 31, 2024 increased $106.8 million since September 30, 2024. The increase in shareholders' equity was primarily due to an increase of $93.4 million in common stock outstanding as a result of the aforementioned capital raise and, to a lessor extent, equity awards exercised during the three months ended December 31, 2024 combined with $13.4 million in net earnings.

The Company and the Bank remained well capitalized at December 31, 2024, 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)	10.64%	10.78%	5.00%
Common Equity Tier 1 Capital (to risk-weighted assets)	11.99%	12.04%	6.50%
Tier 1 Capital (to risk-weighted assets)	11.99%	12.14%	8.00%
Total Capital (to risk-weighted assets)	13.28%	14.67%	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 $177.0 million and 5.08% of loans receivable at December 31, 2024 compared to $170.3 million and 4.98% at September 30, 2024 and $117.0 million and 3.86% at December 31, 2023. The allowance for credit loss allocated to the CCBX portfolio was $158.1 million and 9.86% of CCBX loans receivable at December 31, 2024, with $18.9 million of allowance for credit loss allocated to the community bank or 1.00% of total community bank loans receivable.

The following table details the allocation of the allowance for credit loss as of the period indicated:

	As of December 31, 2024									As of September 30, 2024									As of December 31, 2023
(dollars in thousands; unaudited)	Community Bank			CCBX			Total			Community Bank			CCBX			Total			Community Bank			CCBX			Total
Loans receivable	$	1,882,988		$	1,603,577		$	3,486,565		$	1,897,540		$	1,521,292		$	3,418,832		$	1,830,154		$	1,195,938		$	3,026,092
Allowance for credit losses		(18,924	)		(158,070	)		(176,994	)		(20,132	)		(150,131	)		(170,263	)		(21,595	)		(95,363	)		(116,958	)
Allowance for credit losses to total loans receivable		1.00	%		9.86	%		5.08	%		1.06	%		9.87	%		4.98	%		1.18	%		7.97	%		3.86	%

Net charge-offs totaled $55.9 million for the quarter ended December 31, 2024, compared to $49.2 million for the quarter ended September 30, 2024 and $44.9 million for the quarter ended December 31, 2023. Net charge-offs as a percent of average loans increased to 6.51% for the quarter ended December 31, 2024 compared to 5.65% for the quarter ended September 30, 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 $324.6 million loan portfolio. At December 31, 2024, our portion of this portfolio represented $20.6 million in loans. Net charge-offs for this $20.6 million in loans were $1.1 million for the three months ended December 31, 2024, compared to $1.1 million for the three months ended September 30, 2024 and $1.5 million for the three months ended December 31, 2023.

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

	Three Months Ended
	December 31, 2024									September 30, 2024									December 31, 2023
(dollars in thousands; unaudited)	Community Bank			CCBX			Total			Community Bank			CCBX			Total			Community Bank			CCBX			Total
Gross charge-offs	$	139		$	61,446		$	61,585		$	398		$	52,907		$	53,305		$	2		$	47,650		$	47,652
Gross recoveries		(3	)		(5,643	)		(5,646	)		(3	)		(4,066	)		(4,069	)		(4	)		(2,777	)		(2,781	)
Net charge-offs	$	136		$	55,803		$	55,939		$	395		$	48,841		$	49,236		$	(2	)	$	44,873		$	44,871
Net charge-offs to average loans ⁽¹⁾		0.03	%		14.54	%		6.51	%		0.08	%		12.52	%		5.65	%		0.00	%		14.88	%		5.92	%

⁽¹⁾Annualized calculations shown for periods presented.

During the quarter ended December 31, 2024, a $63.7 million provision for credit losses was recorded for CCBX partner loans, compared to the $72.1 million provision for credit losses was recorded for CCBX partner loans for the quarter ended September 30, 2024, the provision was based on management's analysis, bringing the CCBX allowance for credit losses to $158.1 million at December 31, 2024 compared to $150.1 million at September 30, 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 recapture of $1.1 million and was needed for the quarter ended December 31, 2024 compared to a provision recapture of $519,000 and provision of $277,000 for the quarters ended September 30, 2024 and December 31, 2023, respectively. The recapture in the current period was due to the decrease in the community bank loan portfolio combined with an improvement in the forward look, which is driven by the future projected unemployment and GDP curves, which flattened since last quarter, lessening the impact of this factor.

The following table details the provision expense/(recapture) for the community bank and CCBX for the period indicated:

	Three Months Ended
(dollars in thousands; unaudited)	December 31, 2024			September 30, 2024			December 31, 2023
Community bank	$	(1,071	)	$	(519	)	$	277
CCBX		63,741			72,104			60,467
Total provision expense	$	62,670		$	71,585		$	60,744

A recapture for unfunded commitments of $803,000 was recorded for the quarter ended December 31, 2024 as a result of a decrease in the overall available balance combined with an improvement in the reserve rates.

At December 31, 2024, our nonperforming assets were $62.7 million, or 1.52%, of total assets, compared to $66.4 million, or 1.63%, of total assets, at September 30, 2024, and $53.8 million, or 1.43%, of total assets, at December 31, 2023. These ratios are impacted by nonperforming CCBX loans that are covered by CCBX partner credit enhancements. As of December 31, 2024, $60.8 million of the $62.6 million in nonperforming CCBX loans were covered by CCBX partner credit enhancements described above.

Nonperforming assets decreased $3.7 million during the quarter ended December 31, 2024, compared to the quarter ended September 30, 2024. This change is due to a decrease in CCBX and community bank nonaccrual loans. Community bank nonperforming loans decreased $1.0 million from September 30, 2024 to $100,000 as of December 31, 2024, and CCBX nonperforming loans decreased $2.7 million to $62.6 million from September 30, 2024. The decrease in CCBX nonperforming loans is due to an decrease of $570,000 in nonaccrual loans from September 30, 2024 to $19.5 million. Some CCBX partners have a collection practice that places certain loans on nonaccrual status to improve collectability. $17.2 million of these loans are less than 90 days past due as of December 31, 2024. Additionally, there was a $2.2 million decrease in CCBX loans that are past due 90 days or more and still accruing interest. As a result of the type of loans (primarily consumer loans) originated through our CCBX partners we 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 December 31, 2024. Our nonperforming loans to loans receivable ratio was 1.80% at December 31, 2024, compared to 1.94% at September 30, 2024, and 1.78% at December 31, 2023.

For the quarter ended December 31, 2024, there were $136,000 community bank net charge-offs and $55.8 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)	December 31, 2024			September 30, 2024			December 31, 2023
Nonaccrual loans:
Commercial and industrial loans	$	334		$	531		$	—
Real estate loans:
Residential real estate		—			44			170
Commercial real estate		—			831			7,145
Consumer and other loans:
Credit cards		10,262			7,987			—
Other consumer and other loans		8,967			11,713			—
Total nonaccrual loans		19,563			21,106			7,315
Accruing loans past due 90 days or more:
Commercial & industrial loans		1,006			1,566			2,086
Real estate loans:
Residential real estate loans		2,608			3,025			1,115
Consumer and other loans:
Credit cards		34,490			34,562			34,835
Other consumer and other loans		4,989			6,111			8,488
Total accruing loans past due 90 days or more		43,093			45,264			46,524
Total nonperforming loans		62,656			66,370			53,839
Real estate owned		—			—			—
Repossessed assets		—			—			—
Total nonperforming assets	$	62,656		$	66,370		$	53,839
Total nonaccrual loans to loans receivable		0.56	%		0.62	%		0.24	%
Total nonperforming loans to loans receivable		1.80	%		1.94	%		1.78	%
Total nonperforming assets to total assets		1.52	%		1.63	%		1.43	%

The following tables detail the CCBX and community bank nonperforming assets which are included in the total nonperforming assets table above.

CCBX	As of
(dollars in thousands; unaudited)	December 31, 2024			September 30, 2024			December 31, 2023
Nonaccrual loans:
Commercial and industrial loans:
All other commercial & industrial loans	$	234		$	333		$	—
Consumer and other loans:
Credit cards		10,262			7,987			—
Other consumer and other loans		8,967			11,713			—
Total nonaccrual loans		19,463			20,033			—
Accruing loans past due 90 days or more:
Commercial & industrial loans		1,006			1,566			2,086
Real estate loans:
Residential real estate loans		2,608			3,025			1,115
Consumer and other loans:
Credit cards		34,490			34,562			34,835
Other consumer and other loans		4,989			6,111			8,488
Total accruing loans past due 90 days or more		43,093			45,264			46,524
Total nonperforming loans		62,556			65,297			46,524
Other real estate owned		—			—			—
Repossessed assets		—			—			—
Total nonperforming assets	$	62,556		$	65,297		$	46,524
Total CCBX nonperforming assets to total consolidated assets		1.52	%		1.61	%		1.24	%

Community Bank	As of
(dollars in thousands; unaudited)	December 31, 2024		September 30, 2024			December 31, 2023
Nonaccrual loans:
Commercial and industrial loans	$	100	$	198		$	—
Real estate:
Residential real estate		—		44			170
Commercial real estate		—		831			7,145
Total nonaccrual loans		100		1,073			7,315
Accruing loans past due 90 days or more:
Total accruing loans past due 90 days or more		—		—			—
Total nonperforming loans		100		1,073			7,315
Other real estate owned		—		—			—
Repossessed assets		—		—			—
Total nonperforming assets	$	100	$	1,073		$	7,315
Total community bank nonperforming assets to total consolidated assets	< 0.01%			0.03	%		0.19	%

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 $4.12 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 broker-dealers, 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 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
	December 31, 2024			September 30, 2024			June 30, 2024			March 31, 2024			December 31, 2023
Cash and due from banks	$	36,533		$	45,327		$	59,995		$	32,790		$	31,345
Interest earning deposits with other banks		415,980			438,699			427,250			482,338			451,783
Investment securities, available for sale, at fair value		35			38			39			41			99,504
Investment securities, held to maturity, at amortized cost		47,286			48,582			49,174			50,049			50,860
Other investments		10,800			10,757			10,664			10,583			10,227
Loans held for sale		20,600			7,565			—			797			—
Loans receivable		3,486,565			3,418,832			3,326,460			3,199,554			3,026,092
Allowance for credit losses		(176,994	)		(170,263	)		(147,914	)		(139,258	)		(116,958	)
Total loans receivable, net		3,309,571			3,248,569			3,178,546			3,060,296			2,909,134
CCBX credit enhancement asset		181,890			167,251			143,485			137,276			107,921
CCBX receivable		14,138			16,060			11,520			10,369			9,088
Premises and equipment, net		27,431			25,833			24,526			22,995			22,090
Lease right-of-use assets		5,219			5,427			5,635			5,756			5,932
Accrued interest receivable		21,104			23,664			23,617			24,681			26,819
Bank-owned life insurance, net		13,375			13,255			13,132			12,991			12,870
Deferred tax asset, net		3,600			3,083			2,221			2,221			3,806
Other assets		13,646			11,711			11,742			12,075			11,987
Total assets	$	4,121,208		$	4,065,821		$	3,961,546		$	3,865,258		$	3,753,366

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits	$	3,585,332		$	3,627,288		$	3,543,432		$	3,462,979		$	3,360,363
Subordinated debt, net		44,293			44,256			44,219			44,181			44,144
Junior subordinated debentures, net		3,591			3,591			3,591			3,590			3,590
Deferred compensation		332			369			405			442			479
Accrued interest payable		962			1,070			999			1,061			892
Lease liabilities		5,398			5,609			5,821			5,946			6,124
CCBX payable		29,171			39,188			34,536			33,095			33,651
Other liabilities		13,425			12,520			11,850			10,255			9,145
Total liabilities		3,682,504			3,733,891			3,644,853			3,561,549			3,458,388
SHAREHOLDERS' EQUITY
Common Stock		228,177			134,769			132,989			131,601			130,136
Retained earnings		210,529			197,162			183,706			172,110			165,311
Accumulated other comprehensive loss, net of tax		(2	)		(1	)		(2	)		(2	)		(469	)
Total shareholders' equity		438,704			331,930			316,693			303,709			294,978
Total liabilities and shareholders' equity	$	4,121,208		$	4,065,821		$	3,961,546		$	3,865,258		$	3,753,366

COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts; unaudited)

	Three Months Ended
	December 31, 2024		September 30, 2024		June 30, 2024			March 31, 2024			December 31, 2023
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	89,714	$	99,590	$	90,944		$	84,621		$	81,159
Interest on interest earning deposits with other banks		6,021		4,781		5,683			4,780			5,687
Interest on investment securities		661		675		686			1,034			1,225
Dividends on other investments		191		33		174			37			172
Total interest income		96,587		105,079		97,487			90,472			88,243
INTEREST EXPENSE
Interest on deposits		29,404		32,083		30,578			28,867			27,916
Interest on borrowed funds		667		809		672			669			670
Total interest expense		30,071		32,892		31,250			29,536			28,586
Net interest income		66,516		72,187		66,237			60,936			59,657
PROVISION FOR CREDIT LOSSES		61,867		70,257		62,325			83,158			60,789
Net interest income/(expense) after provision for credit losses		4,649		1,930		3,912			(22,222	)		(1,132	)
NONINTEREST INCOME
Service charges and fees		932		952		946			908			957
Loan referral fees		—		—		—			168			—
Unrealized gain (loss) on equity securities, net		1		2		9			15			80
Other income		473		486		257			308			60
Noninterest income, excluding BaaS program income and BaaS indemnification income		1,406		1,440		1,212			1,399			1,097
Servicing and other BaaS fees		1,043		1,044		1,525			1,131			1,015
Transaction fees		1,783		1,696		1,309			1,122			1,006
Interchange fees		1,916		1,853		1,625			1,539			1,272
Reimbursement of expenses		3,468		1,843		1,637			1,033			1,076
BaaS program income		8,210		6,436		6,096			4,825			4,369
BaaS credit enhancements		62,097		70,108		60,826			79,808			58,449
BaaS fraud enhancements		5,043		2,084		1,784			923			779
BaaS indemnification income		67,140		72,192		62,610			80,731			59,228
Total noninterest income		76,756		80,068		69,918			86,955			64,694
NONINTEREST EXPENSE
Salaries and employee benefits		17,994		17,101		17,005			17,984			16,490
Occupancy		958		964		985			1,029			976
Data processing and software licenses		4,010		4,297		3,625			3,381			2,781
Legal and professional expenses		4,606		3,597		3,631			3,672			2,649
Point of sale expense		2,745		1,351		852			869			899
Excise taxes		778		762		(706	)		320			449
Federal Deposit Insurance Corporation ("FDIC") assessments		750		740		690			683			665
Director and staff expenses		683		559		470			400			478
Marketing		28		67		14			53			138
Other expense		1,752		1,482		1,383			1,867			1,089
Noninterest expense, excluding BaaS loan and BaaS fraud expense		34,304		30,920

Coastal Financial Corporation Announces Fourth Quarter 2024 Results