## Coastal Financial Corporation Reports Strong Third Quarter Earnings Driven by Banking as a Service (BaaS) Growth
EVERETT, Wash., Oct. 28, 2024 (GLOBE NEWSWIRE)
– Coastal Financial Corporation CCB (the “Company”, “Coastal”, “we”, “our”, or “us”), the holding company for Coastal Community Bank (the “Bank”), reported unaudited financial results for the quarter ended September 30, 2024. The company achieved net income of $13.5 million, or $0.97 per diluted common share, representing a significant increase from the $11.6 million, or $0.84 per diluted common share, recorded in the previous quarter.Strong Performance Across Operating Segments
Coastal’s success in the third quarter was driven by robust performance across both its community bank and CCBX (Banking as a Service) operating segments. The company achieved impressive net loan growth of $92.4 million despite selling $423.7 million in loans. This strategic move to balance credit risk and manage partner and lending limits showcases Coastal’s commitment to prudent financial management.
CEO Eric Sprink
commented, “The third quarter demonstrated strong momentum across both our community bank and CCBX operating segments, despite a still challenging operating environment. We saw high-quality net loan growth of $92.4 million despite selling $423.7 million in loans. We are implementing strategies to increase fee income and we continue to build out and invest in an infrastructure that is scalable, and that we believe will enable us to be innovative leaders in financial services.”Key Highlights from the Third Quarter:
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Balance Sheet Well Positioned for Lower Rates:
Coastal’s balance sheet remains strong, demonstrating modest liability sensitivity as of September 30, 2024. This strategic positioning leverages $1.95 billion of CCBX deposits that contractually reprice lower upon any reduction in the Federal Funds Rate, coupled with $1.09 billion of CCBX loans repricing within 90 days following such a reduction. The recent Federal Open Market Committee’s 0.50% reduction to the targeted Federal Funds rate on September 19, 2024, will have a full impact on Coastal’s future periods.*
Expanding Relationships with CCBX Partners:
Coastal continues to focus on expanding product offerings with existing CCBX partners. The company believes that launching new products with established partners allows for reaching a wider customer base with minimal increase in enterprise risk. These product launches have demonstrated positive traction, growing the balance sheet and increasing income. While maintaining a selective approach to adding new partners, Coastal prioritizes managing risk and capital effectively.*
On-going Loan Sales:
Coastal’s strategy to balance credit risk and generate fee income involves ongoing loan sales. The company sold $423.7 million in loans during the quarter ended September 30, 2024, retaining a portion of the fee income to manage transactions on sold credit card balances. This strategy provides a passive revenue stream without on-balance sheet risk.*
Investing in Regulatory and Compliance Infrastructure:
Coastal’s continued investment in regulatory and compliance infrastructure positions the company well for future growth. Utilizing a flexible co-sourcing approach, Coastal can manage the growth of its internal team while ensuring CCBX has the necessary resources. The company remains 100% indemnified against partner fraud losses and is encouraged by the low levels of fraudulent activity observed during the current quarter, a testament to the effectiveness of its risk infrastructure investments.*
Reorganization and Talent Strengthening:
To accommodate growth and future plans, Coastal has recently announced the bifurcation of the President of the Bank into two distinct roles. Brian Hamilton has been appointed President of CCBX, the Fintech and BaaS segment, while Curt Queyrouze will serve as President of the community bank and corporate credit.CCBX Performance Update
Coastal’s CCBX segment continues to evolve, with 22 relationships at various stages as of September 30, 2024. The company is refining its CCBX partnership criteria, exiting relationships when appropriate, and focusing on larger, established partners with experienced management teams, existing customer bases, and strong financial positions. The success of CCBX is evident in the increase of $106.9 million, or 7.6%, in CCBX loans despite selling $423.7 million in loans during the three months ended September 30, 2024. CCBX loans reached $1.52 billion during this period, while the company continues to enhance credit standards on new CCBX loan originations.
Community Bank Performance Update
The community bank experienced a slight decrease of $14.5 million, or 0.8%, in net loans during the quarter ended September 30, 2024, reaching $1.90 billion. This decrease was primarily attributed to a $10.0 million reduction in construction, land, and land development loans, partially offset by an increase in commercial and industrial loans and commercial real estate loans.
Looking Ahead
As Coastal looks toward the fourth quarter and 2025, the company remains dedicated to building out its technology and risk management infrastructure to efficiently support its next phase of growth within CCBX. While the balance sheet adjustments earlier this year led to a short-term reduction in income, Coastal’s strategic decisions are enhancing credit quality, generating passive fee income, strengthening its talent pool, and fostering growth in relationships with existing and prospective CCBX partners. These efforts are expected to position Coastal for increased profitability in 2025.
About Coastal Financial Corporation
Coastal Financial Corporation CCB (the “Company”), based in Everett, Washington, is a bank holding company with wholly owned subsidiaries including Coastal Community Bank (“Bank”) and Arlington Olympic LLC. The $4.07 billion Bank provides services through 14 branches in Snohomish, Island, and King Counties, along with online and mobile banking. The Bank’s CCBX segment offers banking as a service to broker-dealers, digital financial service providers, and companies looking to provide financial services to their customers through the Bank’s platform. To learn more about the Company, visit www.coastalbank.com.
