0001437958FALSE00014379582024-10-282024-10-28

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):  October 28, 2024
COASTAL FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Washington001-3858956-2392007
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
5415 Evergreen Way, Everett, Washington 98203
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code:  (425) 257-9000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) 
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common stock, no par value per shareCCBThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company    ⃞
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ⃞


Item 2.02    Results of Operations and Financial Condition
On October 28, 2024 Coastal Financial Corporation (the “Company”) issued a press release announcing its results of operations and financial condition for the fiscal quarter ended September 30, 2024 (the “Press Release”). The Press Release is “furnished” as Exhibit 99.1 to this Current Report on Form 8-K pursuant to General Instruction B.2 of Form 8-K and the information provided in Item 2.02 of this report, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section. The information provided in Item 2.02 of this report, including Exhibit 99.1, shall not be deemed incorporated by reference into any filings the Company has made or may make under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.
Item 9.01    Financial Statements and Exhibits
Exhibits
Number
Description
99.1
104Cover Page Interactive Data File (Embedded within the Inline XBRL document)


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
COASTAL FINANCIAL CORPORATION
Date: October 28, 2024
By:/s/ Joel G. Edwards
Joel G. Edwards
Executive Vice President and Chief Financial Officer


Exhibit 99.1
coastal-logoxcolorxonxdark2.jpg
COASTAL FINANCIAL CORPORATION ANNOUNCES THIRD QUARTER 2024 RESULTS
Company Release: October 28, 2024
Everett, WA – 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 September 30, 2024, including net income of $13.5 million, or $0.97 per diluted common share, compared to $11.6 million, or $0.84 per diluted common share, for the three months ended June 30, 2024. 

Management Discussion of the Quarter

“The third quarter demonstrated strong momentum across both our community bank and CCBX operating segments, despite a still challenging operating environment,” said CEO Eric Sprink. “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 Points for Third Quarter and Our Go-Forward Strategy

•Balance Sheet Well Positioned for Lower Rates. Our balance sheet stands in a modestly liability sensitive position as of September 30, 2024, with $1.95 billion of CCBX deposits that contractually reprice lower immediately upon any reduction in the Federal Funds Rate, with $1.09 billion of CCBX loans repricing in 90 days or less following such reduction. The Federal Open Market Committee recently lowered the targeted Federal Funds rate 0.50% on September 19, 2024; a reduction of 0.50% compared to June 30, 2024 and September 30, 2023. The rate decrease came late in the quarter, so the full impact of this and any subsequent rate changes will be reflected in future periods.

•Expanding Relationships with CCBX Partners. We continue to focus on expanding product offerings with existing CCBX partners. We believe that launching new products with existing partners positions us to reach a wide and established customer base with modest increase in enterprise risk. Products launched in 2024 with existing partners have gained traction and are growing the balance sheet and increasing income. The pipeline for CCBX is active, although we expect to remain selective in adding new partners to manage risk and capital.

•On-going Loan Sales. We sold $423.7 million loans in the quarter ended September 30, 2024 as part of our strategy to balance credit risk, manage partner and lending limits, protect capital levels and move credit card balances to an off balance sheet fee generating model. We are retaining a portion of the fee income for our role in processing transactions on sold credit card balances. This provides an on-going and passive revenue stream with no on balance sheet risk.

•Continued Regulatory and Compliance Infrastructure Investments Position Us Well for Next Phase of Growth. We continue to utilize co-sourced personnel as a component of our risk and compliance efforts. This flexible co-sourcing approach allows us to manage the growth of our internal team while also ensuring CCBX has the resources it needs. While we remain 100% indemnified against partner fraud losses, we were encouraged to see fraudulent activity amongst our partners remains low during the current quarter, compared to the same period last year, a positive indicator of our continued investments in our risk infrastructure.

•Reorganization and Strengthening of Talent to Accommodate Growth and Plans for the Future. We recently announced the bifurcation of the President of the Bank into two roles, appointing Brian Hamilton as President of CCBX, the Fintech and BaaS segment of the Bank, with Curt Queyrouze serving as President of the community bank and corporate credit.
1


Third 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)September 30,
2024		June 30,
2024		March 31, 2024December 31,
2023		September 30,
2023
Income Statement Data:
Interest and dividend income$105,079 $97,487 $90,472 $88,243 $88,331 
Interest expense32,892 31,250 29,536 28,586 26,102 
Net interest income72,187 66,237 60,936 59,657 62,229 
Provision for credit losses70,257 62,325 83,158 60,789 27,253 
Net interest (expense)/ income after
provision for credit losses
1,930 3,912 (22,222)(1,132)34,976 
Noninterest income80,068 69,918 86,955 64,694 34,579 
Noninterest expense65,616 58,809 56,018 51,703 56,501 
Provision for income tax2,926 3,425 1,915 2,847 2,784 
Net income13,456 11,596 6,800 9,012 10,270 
As of and for the Three Month Period
September 30,
2024		June 30,
2024		March 31,
2024		December 31,
2023		September 30,
2023
Balance Sheet Data:
Cash and cash equivalents$484,026 $487,245 $515,128 $483,128 $474,946 
Investment securities48,620 49,213 50,090 150,364 141,489 
Loans held for sale7,565 — 797 — — 
Loans receivable3,418,832 3,326,460 3,199,554 3,026,092 2,967,035 
Allowance for credit losses(170,263)(147,914)(139,258)(116,958)(101,085)
Total assets4,065,821 3,961,546 3,865,258 3,753,366 3,678,265 
Interest bearing deposits3,047,861 2,949,643 2,888,867 2,735,161 2,637,914 
Noninterest bearing deposits579,427 593,789 574,112 625,202 651,786 
Core deposits (1)
3,190,869 3,528,339 3,447,864 3,342,004 3,269,082 
Total deposits3,627,288 3,543,432 3,462,979 3,360,363 3,289,700 
Total borrowings47,847 47,810 47,771 47,734 47,695 
Total shareholders’ equity331,930 316,693 303,709 294,978 284,450 
Share and Per Share Data (2):
Earnings per share – basic$1.00 $0.86 $0.51 $0.68 $0.77 
Earnings per share – diluted$0.97 $0.84 $0.50 $0.66 $0.75 
Dividends per share—————
Book value per share (3)
$24.51 $23.54 $22.65 $22.17 $21.38 
Tangible book value per share (4)
$24.51 $23.54 $22.65 $22.17 $21.38 
Weighted avg outstanding shares – basic13,447,06613,412,66713,340,99713,286,82813,285,974
Weighted avg outstanding shares – diluted13,822,27013,736,50813,676,91713,676,51313,675,833
Shares outstanding at end of period13,543,28213,453,80513,407,32013,304,33913,302,449
Stock options outstanding at end of period198,370286,119309,069354,969356,359
See footnotes that follow the tables below
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As of and for the Three Month Period
September 30,
2024		June 30,
2024		March 31,
2024		December 31,
2023		September 30,
2023
Credit Quality Data:
Nonperforming assets (5) to total assets
1.34 %1.34 %1.42 %1.43 %1.18 %
Nonperforming assets (5) to loans receivable and OREO
1.60 %1.60 %1.71 %1.78 %1.47 %
Nonperforming loans (5) to total loans receivable
1.60 %1.60 %1.71 %1.78 %1.47 %
Allowance for credit losses to nonperforming loans311.5 %278.1 %253.8 %217.2 %232.2 %
Allowance for credit losses to total loans receivable4.98 %4.45 %4.35 %3.86 %3.41 %
Gross charge-offs$53,305 $55,207 $58,994 $47,652 $37,879 
Gross recoveries$4,069 $1,973 $1,776 $2,781 $1,045 
Net charge-offs to average loans (6)
5.65 %6.57 %7.34 %5.92 %4.77 %
Capital Ratios:
Company
Tier 1 leverage capital8.40 %8.31 %8.24 %8.10 %8.03 %
Common equity Tier 1 risk-based capital9.26 %9.03 %8.98 %9.10 %9.00 %
Tier 1 risk-based capital9.35 %9.13 %9.08 %9.20 %9.11 %
Total risk-based capital11.90 %11.70 %11.70 %11.87 %11.80 %
Bank
Tier 1 leverage capital9.29 %9.24 %9.19 %9.06 %8.99 %
Common equity Tier 1 risk-based capital10.36 %10.15 %10.14 %10.30 %10.21 %
Tier 1 risk-based capital10.36 %10.15 %10.14 %10.30 %10.21 %
Total risk-based capital11.65 %11.44 %11.43 %11.58 %11.48 %
(1)Core deposits are defined as all deposits excluding brokered and all 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 1.34% for the quarter ended September 30, 2024 compared to 1.21% and 1.13% for the quarters ended June 30, 2024 and September 30, 2023, respectively.  ROA for the quarter ended September 30, 2024, increased 0.13% and 0.21% compared to June 30, 2024 and September 30, 2023, respectively. Noninterest expenses were higher for the quarter ended September 30, 2024 compared to the quarters ended June 30, 2024 and September 30, 2023 largely due to an increase in BaaS loan expense, which is directly related to the increase in the amount of interest earned on CCBX loans.

3

The following table shows the Company’s key performance ratios for the periods indicated.  
Three Months Ended
(unaudited)September 30,
2024		June 30,
2024		March 31,
2024		December 31,
2023		September 30,
2023
Return on average assets (1)
1.34 %1.21 %0.73 %0.97 %1.13 %
Return on average equity (1)
16.67 %15.22 %9.21 %12.35 %14.60 %
Yield on earnings assets (1)
10.79 %10.49 %10.07 %9.77 %10.08 %
Yield on loans receivable (1)
11.43 %11.23 %10.85 %10.71 %10.84 %
Cost of funds (1)
3.62 %3.60 %3.52 %3.39 %3.18 %
Cost of deposits (1)
3.59 %3.58 %3.49 %3.36 %3.14 %
Net interest margin (1)
7.41 %7.13 %6.78 %6.61 %7.10 %
Noninterest expense to average assets (1)
6.54 %6.14 %6.04 %5.56 %6.23 %
Noninterest income to average assets (1)
7.98 %7.30 %9.38 %6.95 %3.81 %
Efficiency ratio43.10 %43.19 %37.88 %41.58 %58.36 %
Loans receivable to deposits (2)
94.46 %93.88 %92.42 %90.05 %90.19 %
(1)Annualized calculations shown for quarterly periods presented.
(2)Includes loans held for sale.
Management Outlook; CEO Eric Sprink

“As we look ahead to the fourth quarter and 2025, we remain laser focused on building out our technology and risk management infrastructure to more efficiently support our next phase of growth within CCBX. While the balance sheet re-mix earlier this year resulted in a short-term reduction to income, we continue to make strategic decisions which are enhancing credit quality, generating passive fee income, strengthening our talent and growing relationships with established and prospective CCBX partners all of which are expected to position Coastal to be more profitable in 2025.”

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 22 relationships, at varying stages, as of September 30, 2024.  We continue to refine the criteria for CCBX partnerships, are exiting relationships where it makes sense for us to do so and are focusing on larger more established partners, with experienced management teams, existing customer bases and strong financial positions.
We are expanding product offerings with our existing CCBX partners. We believe that launching new products with existing partners positions us to reach a wide and established customer base with a modest increase in regulatory risk given we have already vetted these partners and have operational history. Products launched earlier in the year with existing partners have gained traction and are growing the balance sheet and increasing income. We continue to sell 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. This is expected to provide an on-going and passive revenue stream with no on balance sheet risk.

4

The following table illustrates the activity and evolution in CCBX relationships for the periods presented.
As of
(unaudited)September 30, 2024June 30,
2024		September 30, 2023
Active191918
Friends and family / testing111
Implementation / onboarding111
Signed letters of intent101
Wind down - active but preparing to exit relationship001
Total CCBX relationships222122

CCBX loans increased $106.9 million, or 7.6%, despite selling $423.7 million loans during the three months ended September 30, 2024 to $1.52 billion, while we continued to enhance credit standards on new CCBX loan originations. 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 September 30, 2024 the portion of this portfolio for which we are responsible represented $19.8 million in loans.

The following table details the CCBX loan portfolio:
CCBXAs of
September 30, 2024June 30, 2024September 30, 2023
(dollars in thousands; unaudited)Balance% to TotalBalance% to TotalBalance% to Total
Commercial and industrial loans:
Capital call lines$103,924 6.8 %$109,133 7.7 %$114,174 9.6 %
All other commercial & industrial loans
36,494 2.4 41,731 3.0 58,869 5.0 
Real estate loans:
Residential real estate loans265,402 17.5 287,950 20.4 251,775 21.3 
Consumer and other loans:
Credit cards633,691 41.6 549,241 38.7 440,993 37.3 
Other consumer and other loans482,228 31.7 426,809 30.2 316,987 26.8 
Gross CCBX loans receivable1,521,739 100.0 %1,414,864 100.0 %1,182,798 100.0 %
Net deferred origination (fees) costs(447)(438)(424)
Loans receivable$1,521,292 $1,414,426 $1,182,374 
Loan Yield - CCBX (1)(2)
17.35 %17.77 %17.05 %
(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 September 30, 2024, includes an increase of $139.9 million or 14.3%, in consumer and other loans, partially offset by a $22.5 million, or 7.8%, decrease in residential real estate loans and a decrease of $5.2 million, or 4.8%, in capital call lines as a result of normal balance fluctuations and business activities. We continue to monitor and manage the CCBX loan portfolio, and sold $423.7 million in CCBX loans during the quarter ended September 30, 2024 compared to sales of $155.2 million in the quarter ended June 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.

5

Our credit card program through CCBX continues to grow in dollars and number of active cards as shown in the graph below:
chart-ba06c7f2e694493083b.jpg

The following table details the CCBX deposit portfolio:
CCBXAs of
September 30, 2024June 30, 2024September 30, 2023
(dollars in thousands; unaudited)Balance% to TotalBalance% to TotalBalance% to Total
Demand, noninterest bearing$60,655 2.9 %$62,234 3.0 %$67,782 3.9 %
Interest bearing demand and
   money market		1,991,858 94.6 1,989,105 96.7 1,679,921 95.9 
Savings5,204 0.3 5,150 0.3 4,529 0.2 
Total core deposits2,057,717 97.8 2,056,489 100.0 1,752,232 100.0 
Other deposits47,046 2.2 — 0.0 — — 
Total CCBX deposits$2,104,763 100.0 %$2,056,489 100.0 %$1,752,232 100.0 %
Cost of deposits (1)
4.82 %4.92 %4.80 %
(1)Cost of deposits is annualized for the three months ended for each period presented.

CCBX deposits increased $48.3 million, or 2.3%, in the three months ended September 30, 2024 to $2.10 billion. This excludes the $214.5 million in CCBX deposits that were transferred off balance sheet for increased Federal Deposit Insurance Corporation ("FDIC") insurance coverage purposes, compared to $117.7 million for the quarter ended June 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 September 30, 2024, the community bank saw net loans decrease $14.5 million, or 0.8%, to $1.90 billion.

6

The following table details the Community Bank loan portfolio:
Community BankAs of
September 30, 2024June 30, 2024September 30, 2023
(dollars in thousands; unaudited)Balance% to TotalBalance% to TotalBalance% to Total
Commercial and industrial loans$152,161 8.0 %$144,436 7.5 %$158,232 8.8 %
Real estate loans:
Construction, land and land development loans163,051 8.6 173,064 9.0 167,686 9.4 
Residential real estate loans212,467 11.2 229,639 12.0 225,372 12.6 
Commercial real estate loans1,362,452 71.5 1,357,979 70.8 1,237,849 69.1 
Consumer and other loans:
Other consumer and other loans14,173 0.7 14,220 0.7 2,483 0.1 
Gross Community Bank loans receivable1,904,304 100.0 %1,919,338 100.0 %1,791,622 100.0 %
Net deferred origination fees(6,764)(7,304)(6,961)
Loans receivable$1,897,540 $1,912,034 $1,784,661 
Loan Yield(1)
6.64 %6.52 %6.20 %
(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 had a $10.0 million decrease in construction, land and land development loans, partially offset by an increase of $7.7 million in commercial and industrial loans and an increase in commercial real estate loans of $4.5 million during the quarter ended September 30, 2024; consumer and other loans were flat.

The following table details the community bank deposit portfolio:
Community BankAs of
September 30, 2024June 30, 2024September 30, 2023
(dollars in thousands; unaudited)Balance% to TotalBalance% to TotalBalance% to Total
Demand, noninterest bearing$518,772 34.1 %$531,555 35.6 %$584,004 37.9 %
Interest bearing demand and
   money market		552,108 36.3 876,668 59.0 852,747 55.5 
Savings62,272 4.1 63,627 4.3 80,099 5.2 
Total core deposits1,133,152 74.5 1,471,850 98.9 1,516,850 98.6 
Other deposits373,681 24.5 1 0.0 1 0.0 
Time deposits less than $100,0006,305 0.4 6,741 0.5 8,635 0.6 
Time deposits $100,000 and over9,387 0.6 8,351 0.6 11,982 0.8 
Total Community Bank deposits$1,522,525 100.0 %$1,486,943 100.0 %$1,537,468 100.0 %
Cost of deposits(1)
1.92 %1.77 %1.31 %
(1)Cost of deposits is annualized for the three months ended for each period presented.

Community bank deposits increased $35.6 million, or 2.4%, during the three months ended September 30, 2024 to $1.52 billion. This is the second consecutive quarter of growth after allowing higher rate balances to run-off earlier in the year. The community bank segment includes noninterest bearing deposits of $518.8 million, or 34.1%, of total community bank deposits, resulting in a cost of deposits of 1.92%, which compared to 1.77% for the quarter ended June 30, 2024.
Net Interest Income and Margin Discussion
Net interest income was $72.2 million for the quarter ended September 30, 2024, an increase of $5.9 million, or 9.0%, from $66.2 million for the quarter ended June 30, 2024, and an increase of $10.0 million, or 16.0%, from $62.2 million for the quarter ended September 30, 2023. The increase in net interest income compared to June 30, 2024, was a result of increased interest income due to an increase in average loans receivable partially offset by an increase in cost of funds. The increase in net interest income compared to September 30, 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.  
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Net interest margin was 7.41% for the three months ended September 30, 2024, compared to 7.13% for the three months ended June 30, 2024, with the increase primarily due to higher loan yields. Net interest margin was 7.10% for the three months ended September 30, 2023. The increase in net interest margin for the three months ended September 30, 2024 compared to the three months ended September 30, 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 increased $8.6 million, or 9.5%, to $99.6 million for the three months ended September 30, 2024, compared to $90.9 million for the three months ended June 30, 2024, and increased $15.9 million, or 19.1%, compared to $83.7 million for the three months ended September 30, 2023, due to an increase in outstanding balances and higher interest rates. 
Average investment securities decreased $795,000 to $49.0 million compared to the three months ended June 30, 2024 and decreased $69.0 million compared to the three months ended September 30, 2023 as a result of maturing securities.
Cost of funds was 3.62% for the quarter ended September 30, 2024, an increase of 2 basis points from the quarter ended June 30, 2024 and an increase of 44 basis points from the quarter ended September 30, 2023. Cost of deposits for the quarter ended September 30, 2024 was 3.59%, compared to 3.58% for the quarter ended June 30, 2024, and 3.14% for the quarter ended September 30, 2023. The increased cost of funds and deposits compared to June 30, 2024 and September 30, 2023 was due to the continued high interest rate environment. The late September reduction in the Fed funds rate is expected to help to lower our cost of deposits in future periods.

The following table summarizes the average yield on loans receivable and cost of deposits:
For the Three Months Ended
September 30, 2024June 30, 2024September 30, 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 Bank6.64%1.92%6.52%1.77%6.20%1.31%
CCBX (1)
17.35%4.82%17.77%4.92%17.05%4.80%
Consolidated11.43%3.59%11.23%3.58%10.84%3.14%
(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 shown.

The following tables 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
September 30, 2024June 30, 2024September 30, 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$67,692 17.35 %$60,203 17.77 %$56,279 17.05 %
Less: BaaS loan expense32,612 8.36 %29,076 8.58 %23,003 6.97 %
Net BaaS loan income (1)
$35,080 8.99 %$31,127 9.19 %$33,276 10.08 %
Average BaaS Loans(3)
$1,552,443 $1,362,343 $1,309,380 
(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 $80.1 million for the three months ended September 30, 2024, an increase of $10.2 million from $69.9 million for the three months ended June 30, 2024, and an increase of $45.5 million from $34.6 million for the three months ended September 30, 2023.  The increase in noninterest income over the quarter ended June 30, 2024 was primarily
8

due to an increase of $9.9 million in total BaaS income.  The $9.9 million increase in total BaaS income included a $9.3 million increase in BaaS credit enhancements related to the provision for credit losses, a $300,000 increase in BaaS fraud enhancements, and an increase of $340,000 in BaaS program income. The increase in BaaS program income is largely due to higher servicing and other BaaS fees, transaction fees and interchange fees and our primary BaaS source for recurring fee income (see “Appendix B” for more information on the accounting for BaaS allowance for credit losses and credit and fraud enhancements). Additionally, other income increased $229,000 largely due to increased incoming ACH activity.

The $45.5 million increase in noninterest income over the quarter ended September 30, 2023 was primarily due to a $43.4 million increase in BaaS credit and fraud enhancements, and an increase of $2.0 million in BaaS program income.

Noninterest Expense Discussion
Total noninterest expense increased $6.8 million to $65.6 million for the three months ended September 30, 2024, compared to $58.8 million for the three months ended June 30, 2024, and increased $9.1 million from $56.5 million for the three months ended September 30, 2023. The increase in noninterest expense for the quarter ended September 30, 2024, as compared to the quarter ended June 30, 2024, was primarily due to a $3.8 million increase in BaaS expense (including a $300,000 increase in BaaS fraud expense and a $3.5 million increase in BaaS loan 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, partially offset by a $1.5 million increase in excise taxes (due to the recording of $1.2 million business and occupation tax credit from the State of Washington which resulted in the recognition of a net credit of $706,000 for the quarter ended June 30, 2024, compared to expense of $762,000 for the quarter ended September 30, 2024). We also recorded an increase of $587,000 in data processing and software licenses as a result of our continued investment in our infrastructure and the automation of our processes so that they are scalable and an increase of $499,000 in point of sale expenses as a result of increased partner transaction activity.

The increase in noninterest expenses for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023 was largely due to an increase of $8.8 million in BaaS partner expense (including a $9.6 million increase in BaaS loan expense partially offset by a decrease of $766,000 in BaaS fraud expense), a $1.1 million increase in data processing and software licenses due to enhancements in technology, and a $526,000 increase in occupancy expense, largely due to higher software depreciation/amortization expense, partially offset by a $986,000 decrease in salary and employee benefits largely as a result of some one-time costs that were expensed in the quarter ended September 30, 2023 for which there was no similar expense in the current quarter, and an $850,000 decrease in legal and professional expenses as a result of risk management and projects being completed.
Provision for Income Taxes
The provision for income taxes was $2.9 million for the three months ended September 30, 2024, $3.4 million for the three months ended June 30, 2024 and $2.8 million for the third quarter of 2023.  The income tax provision was lower for the three months ended September 30, 2024 compared to the quarter ended June 30, 2024 as a result of the deductibility of certain equity awards which reduced tax expense despite net income being higher and higher than the quarter ended September 30, 2023, primarily due to higher net income compared to that quarter.

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 2.62% for calculating the provision for state income taxes.
Financial Condition Overview
Total assets increased $104.3 million, or 2.6%, to $4.07 billion at September 30, 2024 compared to $3.96 billion at June 30, 2024.  The increase is primarily due to stronger loan growth partially offset by lower cash balances. Total loans receivable increased $92.4 million to $3.42 billion at September 30, 2024, from $3.33 billion at June 30, 2024.
As of September 30, 2024, the Company had the capacity to borrow up to a total of $656.3 million from the Federal Reserve Bank discount window and Federal Home Loan Bank, and an additional $50.0 million from a correspondent bank no borrowings outstanding on these lines as of September 30, 2024.
9

The Company had a cash balance of $5.9 million as of September 30, 2024, which is retained for general operating purposes, including debt repayment, and for funding $530,000 in commitments to bank technology funds.  
Uninsured deposits were $542.2 million as of September 30, 2024, compared to $532.9 million as of June 30, 2024.
Total shareholders’ equity increased $15.2 million since June 30, 2024.  The increase in shareholders’ equity was primarily due to $13.5 million in net earnings, combined with an increase of $1.8 million in common stock outstanding as a result of equity awards exercised during the three months ended September 30, 2024.
The Company and the Bank remained well capitalized at September 30, 2024, as summarized in the following table.
(unaudited)Coastal Community BankCoastal Financial Corporation
Minimum Well Capitalized Ratios under Prompt Corrective Action (1)
Tier 1 Leverage Capital (to average assets)9.29 %8.40 %5.00 %
Common Equity Tier 1 Capital (to risk-weighted assets)10.36 %9.26 %6.50 %
Tier 1 Capital (to risk-weighted assets)10.36 %9.35 %8.00 %
Total Capital (to risk-weighted assets)11.65 %11.90 %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 $170.3 million and 4.98% of loans receivable at September 30, 2024 compared to $147.9 million and 4.45% at June 30, 2024 and $101.1 million and 3.41% at September 30, 2023. The allowance for credit loss allocated to the CCBX portfolio was $150.1 million and 9.87% of CCBX loans receivable at September 30, 2024, with $20.1 million of allowance for credit loss allocated to the community bank or 1.06% 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 September 30, 2024As of June 30, 2024As of September 30, 2023
(dollars in thousands; unaudited)Community BankCCBXTotalCommunity BankCCBXTotalCommunity BankCCBXTotal
Loans receivable$1,897,540 $1,521,292 $3,418,832 $1,912,034 $1,414,426 $3,326,460 $1,784,661 $1,182,374 $2,967,035 
Allowance for
   credit losses		(20,132)(150,131)(170,263)(21,045)(126,869)(147,914)(21,316)(79,769)(101,085)
Allowance for
   credit losses to
   total loans
   receivable		1.06 %9.87 %4.98 %1.10 %8.97 %4.45 %1.19 %6.75 %3.41 %
Net charge-offs totaled $49.2 million for the quarter ended September 30, 2024, compared to $53.2 million for the quarter ended June 30, 2024 and $36.8 million for the quarter ended September 30, 2023. Net charge-offs as a percent of average loans decreased to 5.65% for the quarter ended September 30, 2024 compared to 6.57% for the quarter ended June 30, 2024, which we believe is a result of the steps we took manage our credit quality. 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 $400.8 million loan portfolio. At September 30, 2024, our portion of this portfolio represented $19.8 million in loans. Net charge-offs for this $19.8 million in loans were $1.1 million for the three months ended September 30, 2024, compared to $1.3 million for the three months ended June 30, 2024 and $579,000 for the three months ended September 30, 2023.
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The following table details net charge-offs for the community bank and CCBX for the period indicated:
Three Months Ended
September 30, 2024June 30, 2024September 30, 2023
(dollars in thousands; unaudited)Community BankCCBXTotalCommunity BankCCBXTotalCommunity BankCCBXTotal
Gross charge-offs$398 $52,907 $53,305 $2 $55,205 $55,207 $3 $37,876 $37,879 
Gross recoveries(3)(4,066)(4,069)(4)(1,969)(1,973)(3)(1,042)(1,045)
Net charge-offs$395 $48,841 $49,236 $(2)$53,236 $53,234 $— $36,834 $36,834 
Net charge-offs to
   average loans (1)
0.08 %12.52 %5.65 %0.00 %15.72 %6.57 %0.00 %11.16 %4.77 %
(1) Annualized calculations shown for periods presented.
During the quarter ended September 30, 2024, a $72.1 million provision for credit losses - loans was recorded for CCBX partner loans based on management’s analysis, compared to the $62.2 million provision for credit losses - loans that was recorded for CCBX for the quarter ended June 30, 2024. 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 $519,000 and was needed for the quarter ended September 30, 2024 compared to a provision recapture of $341,000 and provision of $664,000 for the quarters ended June 30, 2024 and September 30, 2023, respectively. The recapture in the current period was largely due to a change in remaining average lives of community bank loans.
The following table details the provision expense/(recapture) for the community bank and CCBX for the period indicated:
Three Months Ended
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
Community bank$(519)$(341)$664 
CCBX72,104 62,231 26,493 
Total provision expense$71,585 $61,890 $27,157 
At September 30, 2024, our nonperforming assets were $54.7 million, or 1.34%, of total assets, compared to $53.2 million, or 1.34%, of total assets, at June 30, 2024, and $43.5 million, or 1.18%, of total assets, at September 30, 2023. These ratios are impacted by nonperforming CCBX loans that are covered by CCBX partner credit enhancements. As of September 30, 2024, $52.0 million of the $53.6 million in nonperforming CCBX loans were covered by CCBX partner credit enhancements described above.
Nonperforming assets increased $1.5 million during the quarter ended September 30, 2024, compared to the quarter ended June 30, 2024. This change is largely due to an increase in CCBX nonaccrual loans partially offset by a decrease in community bank nonaccrual loans. CCBX nonaccrual loans increased $8.0 million as a result of a new collection practice that places certain loans on nonaccrual status to improve collectability, $5.3 million of these loans are less than 90 days past due as of September 30, 2024. CCBX loans that are past due 90 days or more and still accruing was $45.6 million for the quarter ended September 30, 2024 compared to $45.2 million for the quarter ended June 30, 2024. 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
11

repossessed assets or other real estate owned at September 30, 2024. Our nonperforming loans to loans receivable ratio was 1.60% at September 30, 2024, compared to 1.60% at June 30, 2024, and 1.47% at September 30, 2023.
For the quarter ended September 30, 2024, there were $395,000 community bank net charge-offs and $1.1 million nonperforming community bank loans. For the quarter ended September 30, 2024 $48.8 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.
ConsolidatedAs of
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
Nonaccrual loans:
Commercial and industrial loans$198 $— $2 
Real estate loans:
Construction, land and land development— — — 
Residential real estate44 213 176 
Commercial real estate831 7,731 7,145 
Consumer and other loans:
Credit cards7,987 — — 
Total nonaccrual loans9,060 7,944 7,323 
Accruing loans past due 90 days or more:
Commercial & industrial loans
1,593 1,278 1,387 
Real estate loans:
Residential real estate loans3,025 2,722 1,462 
Consumer and other loans:
Credit cards34,562 36,465 24,807 
Other consumer and other loans6,412 4,779 8,561 
Total accruing loans past due 90 days or more45,592 45,244 36,217 
Total nonperforming loans54,652 53,188 43,540 
Real estate owned— — — 
Repossessed assets— — — 
Total nonperforming assets$54,652 $53,188 $43,540 
Total nonaccrual loans to loans receivable0.27 %0.24 %0.25 %
Total nonperforming loans to loans receivable1.60 %1.60 %1.47 %
Total nonperforming assets to total assets1.34 %1.34 %1.18 %
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The following tables detail the CCBX and community bank nonperforming assets which are included in the total nonperforming assets table above.
CCBXAs of
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
Nonaccrual loans:
Consumer and other loans:
Credit cards$7,987 $— $— 
Total nonaccrual loans7,987 — — 
Accruing loans past due 90 days or more:
Commercial & industrial loans
1,593 1,278 1,387 
Real estate loans:
Residential real estate loans3,025 2,722 1,462 
Consumer and other loans:
Credit cards34,562 36,465 24,807 
Other consumer and other loans6,412 4,779 8,561 
Total accruing loans past due 90 days or more45,592 45,244 36,217 
Total nonperforming loans53,579 45,244 36,217 
Other real estate owned— — — 
Repossessed assets— — — 
Total nonperforming assets$53,579 $45,244 $36,217 
Total CCBX nonperforming assets to total consolidated assets1.32 %1.14 %0.98 %
Community BankAs of
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
Nonaccrual loans:
Commercial and industrial loans$198 $— $2 
Real estate:
Construction, land and land development— — — 
Residential real estate44 213 176 
Commercial real estate831 7,731 7,145 
Total nonaccrual loans1,073 7,944 7,323 
Accruing loans past due 90 days or more:
Total accruing loans past due 90 days or more— — — 
Total nonperforming loans1,073 7,944 7,323 
Other real estate owned— — — 
Repossessed assets— — — 
Total nonperforming assets$1,073 $7,944 $7,323 
Total community bank nonperforming assets to total consolidated assets0.03 %0.20 %0.20 %
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 $4.07 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
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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.
14

COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
ASSETS
September 30,
2024		June 30,
2024		March 31,
2024		December 31,
2023		September 30,
2023
Cash and due from banks$45,327 $59,995 $32,790 $31,345 $29,984 
Interest earning deposits with other banks
438,699 427,250 482,338 451,783 444,962 
Investment securities, available for sale,
   at fair value		38 39 41 99,504 98,939 
Investment securities, held to maturity, at
   amortized cost		48,582 49,174 50,049 50,860 42,550 
Other investments10,757 10,664 10,583 10,227 11,898 
Loans held for sale7,565 — 797 — — 
Loans receivable3,418,832 3,326,460 3,199,554 3,026,092 2,967,035 
Allowance for credit losses(170,263)(147,914)(139,258)(116,958)(101,085)
Total loans receivable, net3,248,569 3,178,546 3,060,296 2,909,134 2,865,950 
CCBX credit enhancement asset167,251 143,485 137,276 107,921 91,867 
CCBX receivable16,060 11,520 10,369 9,088 10,623 
Premises and equipment, net25,833 24,526 22,995 22,090 20,543 
Lease right-of-use assets5,427 5,635 5,756 5,932 6,126 
Accrued interest receivable23,664 23,617 24,681 26,819 23,428 
Bank-owned life insurance, net13,255 13,132 12,991 12,870 12,970 
Deferred tax asset, net3,083 2,221 2,221 3,806 4,404 
Other assets11,711 11,742 12,075 11,987 14,021 
Total assets$4,065,821 $3,961,546 $3,865,258 $3,753,366 $3,678,265 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits$3,627,288 $3,543,432 $3,462,979 $3,360,363 $3,289,700 
Subordinated debt, net44,256 44,219 44,181 44,144 44,106 
Junior subordinated debentures, net3,591 3,591 3,590 3,590 3,589 
Deferred compensation369 405 442 479 513 
Accrued interest payable1,070 999 1,061 892 1,056 
Lease liabilities5,609 5,821 5,946 6,124 6,321 
CCBX payable39,188 34,536 33,095 33,651 38,229 
Other liabilities12,520 11,850 10,255 9,145 10,301 
Total liabilities3,733,891 3,644,853 3,561,549 3,458,388 3,393,815 
SHAREHOLDERS’ EQUITY
Common Stock134,769 132,989 131,601 130,136 129,244 
Retained earnings197,162 183,706 172,110 165,311 156,299 
Accumulated other comprehensive
   loss, net of tax		(1)(2)(2)(469)(1,093)
Total shareholders’ equity331,930 316,693 303,709 294,978 284,450 
Total liabilities and
   shareholders’ equity		$4,065,821 $3,961,546 $3,865,258 $3,753,366 $3,678,265 
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COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)

Three Months Ended
September 30,
2024		June 30,
2024		March 31,
2024		December 31,
2023		September 30,
2023
INTEREST AND DIVIDEND INCOME
Interest and fees on loans$99,590 $90,944 $84,621 $81,159 $83,652 
Interest on interest earning deposits with
   other banks		4,781 5,683 4,780 5,687 3,884 
Interest on investment securities675 686 1,034 1,225 766 
Dividends on other investments33 174 37 172 29 
Total interest income105,079 97,487 90,472 88,243 88,331 
INTEREST EXPENSE
Interest on deposits32,083 30,578 28,867 27,916 25,451 
Interest on borrowed funds809 672 669 670 651 
Total interest expense32,892 31,250 29,536 28,586 26,102 
Net interest income72,187 66,237 60,936 59,657 62,229 
PROVISION FOR CREDIT LOSSES70,257 62,325 83,158 60,789 27,253 
Net interest income/(expense) after
   provision for credit losses		1,930 3,912 (22,222)(1,132)34,976 
NONINTEREST INCOME
Deposit service charges and fees952 946 908 957 998 
Loan referral fees— — 168 — 1 
Gain on sales of loans, net— — — — 107 
Unrealized gain (loss) on equity securities,
   net		2 9 15 80 5 
Other income486 257 308 60 291 
Noninterest income, excluding BaaS program income and BaaS indemnification income
1,440 1,212 1,399 1,097 1,402 
Servicing and other BaaS fees1,044 1,525 1,131 1,015 997 
Transaction fees1,696 1,309 1,122 1,006 1,036 
Interchange fees1,853 1,625 1,539 1,272 1,216 
Reimbursement of expenses1,843 1,637 1,033 1,076 1,152 
BaaS program income6,436 6,096 4,825 4,369 4,401 
BaaS credit enhancements70,108 60,826 79,808 58,449 25,926 
BaaS fraud enhancements2,084 1,784 923 779 2,850 
BaaS indemnification income72,192 62,610 80,731 59,228 28,776 
Total noninterest income80,068 69,918 86,955 64,694 34,579 
NONINTEREST EXPENSE
Salaries and employee benefits17,101 17,005 17,984 16,490 18,087 
Occupancy1,750 1,686 1,518 1,340 1,224 
Data processing and software licenses3,511 2,924 2,892 2,417 2,366 
Legal and professional expenses3,597 3,631 3,672 2,649 4,447 
Point of sale expense1,351 852 869 899 1,068 
Excise taxes762 (706)320 449 541 
Federal Deposit Insurance Corporation
   ("FDIC") assessments		740 690 683 665 694 
Director and staff expenses559 470 400 478 529 
Marketing67 14 53 138 169 
Other expense1,482 1,383 1,867 1,089 1,523 
Noninterest expense, excluding BaaS loan and BaaS fraud expense30,920 27,949 30,258 26,614 30,648 
16

BaaS loan expense32,612 29,076 24,837 24,310 23,003 
BaaS fraud expense2,084 1,784 923 779 2,850 
BaaS loan and fraud expense34,696 30,860 25,760 25,089 25,853 
Total noninterest expense65,616 58,809 56,018 51,703 56,501 
Income before provision for income
   taxes		16,382 15,021 8,715 11,859 13,054 
PROVISION FOR INCOME TAXES2,926 3,425 1,915 2,847 2,784 
NET INCOME$13,456 $11,596 $6,800 $9,012 $10,270 
Basic earnings per common share$1.00 $0.86 $0.51 $0.68 $0.77 
Diluted earnings per common share$0.97 $0.84 $0.50 $0.66 $0.75 
Weighted average number of common shares
   outstanding:
Basic13,447,06613,412,66713,340,99713,286,82813,285,974
Diluted13,822,27013,736,50813,676,91713,676,51313,675,833
17

COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
For the Three Months Ended
September 30, 2024June 30, 2024September 30, 2023
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		$350,915 $4,781 5.42 %$418,165 $5,683 5.47 %$285,596 $3,884 5.40 %
Investment securities, available for sale (2)
40 — — 43 — 3.13 100,283 543 2.15 
Investment securities, held to maturity (2)
48,945 675 5.49 49,737 686 5.55 17,703 223 5.00 
Other investments11,140 33 1.18 10,592 174 6.61 11,943 29 0.96 
Loans receivable (3)
3,464,871 99,590 11.43 3,258,042 90,944 11.23 3,062,214 83,652 10.84 
Total interest earning assets3,875,911 105,079 10.79 3,736,579 97,487 10.49 3,477,739 88,331 10.08 
Noninterest earning assets:
Allowance for credit losses(151,292)(138,472)(100,329)
Other noninterest earning assets268,903 255,205 220,750 
Total assets$3,993,522 $3,853,312 $3,598,160 
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits$2,966,527 $32,083 4.30 %$2,854,575 $30,578 4.31 %$2,515,093 $25,451 4.01 %
FHLB advances and other borrowings9,717 140 5.73 1,648 3 0.73 — — — 
Subordinated debt44,234 598 5.38 44,197 598 5.44 44,084 580 5.22 
Junior subordinated debentures3,591 71 7.87 3,590 71 7.95 3,589 71 7.85 
Total interest bearing liabilities3,024,069 32,892 4.33 2,904,010 31,250 4.33 2,562,766 26,102 4.04 
Noninterest bearing deposits588,178 584,661 698,532 
Other liabilities60,101 58,267 57,865 
Total shareholders' equity321,174 306,374 278,997 
Total liabilities and shareholders' equity$3,993,522 $3,853,312 $3,598,160 
Net interest income$72,187 $66,237 $62,229 
Interest rate spread6.46 %6.17 %6.04 %
Net interest margin (4)
7.41 %7.13 %7.10 %
(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.
18

COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT - QUARTERLY
(Dollars in thousands; unaudited)
For the Three Months Ended
September 30, 2024June 30, 2024September 30, 2023
(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)
$1,912,428 $31,898 6.64 %$1,895,699 $30,741 6.52 %$1,752,834 $27,373 6.20 %
Total interest earning
    assets		1,912,428 31,898 6.64 1,895,699 30,741 6.52 1,752,834 27,373 6.20 
Liabilities
Interest bearing liabilities:
Interest bearing
   deposits		982,280 7,264 2.94 %938,033 6,459 2.77 %920,707 5,067 2.18 %
Intrabank liability406,641 5,540 5.42 429,452 5,836 5.47 223,221 3,036 5.40 
Total interest bearing
   liabilities		1,388,921 12,804 3.67 1,367,485 12,295 3.62 1,143,928 8,103 2.81 
Noninterest bearing
   deposits		523,507 528,214 608,906 
Net interest income$19,094 $18,446 $19,270 
Net interest margin(3)
3.97 %3.91 %4.36 %
CCBX
Assets
Interest earning assets:
Loans receivable (2)(4)
$1,552,443 $67,692 17.35 %$1,362,343 $60,203 17.77 %$1,309,380 $56,279 17.05 %
Intrabank asset496,475 6,764 5.42 610,646 8,299 5.47 374,632 5,095 5.40 
Total interest earning
    assets		2,048,918 74,456 14.46 1,972,989 68,502 13.96 1,684,012 61,374 14.46 
Liabilities
Interest bearing liabilities:
Interest bearing
   deposits		1,984,247 24,819 4.98 %1,916,542 24,119 5.06 %1,594,386 20,384 5.07 %
Total interest bearing
   liabilities		1,984,247 24,819 4.98 1,916,542 24,119 5.06 1,594,386 20,384 5.07 
Noninterest bearing
   deposits		64,671 56,447 89,626 
Net interest income$49,637 $44,383 $40,990 
Net interest margin(3)
9.64 %9.05 %9.66 %
Net interest margin, net
   of Baas loan expense (5)
3.31 %3.12 %4.24 %
19

For the Three Months Ended
September 30, 2024June 30, 2024September 30, 2023
(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		$350,915 $4,781 5.42 %$418,165 $5,683 5.47 %$285,596 $3,884 5.40 %
Investment securities,
   available for sale (6)
40 — — 43 — 3.13 100,283 543 2.15 
Investment securities,
   held to maturity (6)
48,945 675 5.49 49,737 686 5.55 17,703 223 5.00 
Other investments11,140 33 1.18 10,592 174 6.61 11,943 29 0.96 
Total interest
   earning assets		411,040 5,489 5.31 %478,537 — 6,543 5.50 %415,525 4,679 4.47 %
Liabilities
Interest bearing
   liabilities:
FHLB advances
   and borrowings		$9,717 $140 5.73 %1,648 3 0.73 %— — — %
Subordinated debt44,234 598 5.38 %44,197 598 5.44 %44,084 580 5.22 %
Junior subordinated
   debentures		3,591 71 7.87 3,590 71 7.95 3,589 71 7.85 
Intrabank liability, net (7)
89,834 1,224 5.42 181,194 2,463 5.47 151,411 2,059 5.40 
Total interest
   bearing liabilities		147,376 2,033 5.49 230,629 3,135 5.47 199,084 2,710 5.40 
Net interest income$3,456 $3,408 $1,969 
Net interest margin(3)
3.34 %2.86 %1.88 %
(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.

20

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 CCBX loans and the impact of BaaS loan expense on net interest income and net interest margin.
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.
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 net interest margin.

Reconciliations of the GAAP and non-GAAP measures are presented below.
As of and for the Three Months Ended
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
Net BaaS loan income divided by average CCBX loans:
CCBX loan yield (GAAP)(1)
17.35 %17.77 %17.05 %
Total average CCBX loans receivable$1,552,443$1,362,343$1,309,380
Interest and earned fee income on CCBX loans (GAAP)67,69260,20356,279
BaaS loan expense          (32,612)          (29,076)          (23,003)
Net BaaS loan income$35,080$31,127$33,276
Net BaaS loan income divided by average CCBX loans (1)
8.99 %9.19 %10.08 %
Net interest margin, net of BaaS loan expense:
CCBX interest margin (1)
9.64 %9.05 %9.66 %
CCBX earning assets2,048,9181,972,9891,684,012
Net interest income49,63744,38340,990
Less: BaaS loan expense          (32,612)          (29,076)          (23,003)
Net interest income, net of BaaS
   loan expense
$17,025$15,307$17,987
CCBX net interest margin,
   net of BaaS loan expense (1)
3.31 %3.12 %4.24 %
(1) Annualized calculations for periods presented.


21

APPENDIX A -
As of September 30, 2024
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 $3.43 billion in outstanding loan balances. When combined with $2.29 billion in unused commitments the total of these categories is $5.72 billion.
Commercial real estate loans represent the largest segment of our loans, comprising 39.8% of our total balance of outstanding loans as of September 30, 2024. Unused commitments to extend credit represents an additional $41.5 million, and the combined total in commercial real estate loans represents $1.40 billion, or 24.6% 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 September 30, 2024:
(dollars in thousands; unaudited)Outstanding BalanceAvailable Loan CommitmentsTotal Outstanding Balance & Available Commitment
% of Total Loans
(Outstanding Balance &
Available Commitment)
Average Loan BalanceNumber of Loans
Apartments$382,498 $5,685 $388,183 6.8 %$3,714 103
Hotel/Motel155,441 189 155,630 2.7 6,758 23
Convenience Store142,366 614 142,980 2.5 2,296 62
Office123,423 8,204 131,627 2.3 1,371 90
Warehouse102,818 2,000 104,818 1.8 1,743 59
Retail107,934 620 108,554 1.9 1,018 106
Mixed use93,490 5,273 98,763 1.7 1,154 81
Mini Storage79,395 14,330 93,725 1.7 3,452 23
Strip Mall44,089 — 44,089 0.8 6,298 7
Manufacturing34,599 1,200 35,799 0.6 1,193 29
Groups < 0.70% of total96,393 3,392 99,785 1.8 1,205 80
Total$1,362,446 $41,507 $1,403,953 24.6 %$2,055 663
Consumer loans comprise 33.0% of our total balance of outstanding loans as of September 30, 2024. Unused commitments to extend credit represents an additional $1.07 billion, and the combined total in consumer and other loans represents $2.20 billion, or 38.4% 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 $900. 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.
22

The following table summarizes our loan commitment by industry for our consumer and other loan portfolio as of September 30, 2024:
(dollars in thousands; unaudited)Outstanding BalanceAvailable Loan Commitments
Total Outstanding Balance & Available Commitment (1)
% of Total Loans
(Outstanding Balance &
Available Commitment)
Average Loan BalanceNumber of Loans
CCBX consumer loans
Credit cards$633,691 $1,055,684 $1,689,375 29.5 %$1.7 369,404
Installment loans471,813 7,112 478,925 8.4 0.9 513,897
Lines of credit1,362 — 1,362 0.0 2.4 558
Other loans9,053 — 9,053 0.2 — 365,834
Community bank consumer loans
Installment loans1,291 1 1,292 0.0 51.6 25
Lines of credit194 365 559 0.0 6.1 32
Other loans12,688 3,000 15,688 0.3 32.5 390
Total$1,130,092 $1,066,162 $2,196,254 38.4 %$0.9 1,250,140
(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 September 30, 2024. Unused commitments to extend credit represents an additional $522.8 million, and the combined total in residential real estate loans represents $1.00 billion, or 17.5% 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 September 30, 2024:
(dollars in thousands; unaudited)Outstanding BalanceAvailable Loan Commitments
Total Outstanding Balance & Available Commitment (1)
% of Total Loans
(Outstanding Balance &
Available Commitment)
Average Loan BalanceNumber of Loans
CCBX residential real estate loans
Home equity line of credit$265,402 $472,385 $737,787 12.9 %$25 10,742
Community bank residential real estate loans
Closed end, secured by first liens176,066 2,961 179,027 3.1 555 317
Home equity line of credit25,427 46,515 71,942 1.3 106 239
Closed end, second liens10,974 925 11,899 0.2 366 30
Total$477,869 $522,786 $1,000,655 17.5 %$42 11,328
(1)Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.
Commercial and industrial loans comprise 8.5% of our total balance of outstanding loans as of September 30, 2024. Unused commitments to extend credit represents an additional $598.4 million, and the combined total in commercial and industrial loans represents $891.0 million, or 15.6% of our total outstanding loans and loan commitments. Included in commercial and industrial loans is $103.9 million in outstanding capital call lines, with an additional $504.6 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.
23

The following table summarizes our loan commitment by industry for our commercial and industrial loan portfolio as of September 30, 2024:
(dollars in thousands; unaudited)Outstanding BalanceAvailable Loan Commitments
Total Outstanding Balance & Available Commitment (1)
% of Total Loans
(Outstanding Balance &
Available Commitment)
Average Loan BalanceNumber of Loans
Consolidated C&I loans
Capital Call Lines$103,924 $504,561 $608,485 10.6 %$764 136
Construction/Contractor Services27,463 34,658 62,121 1.1 136 202
Financial Institutions48,648 — 48,648 0.9 4,054 12
Retail33,003 5,725 38,728 0.7 15 2,247
Manufacturing6,124 5,460 11,584 0.2 149 41
Medical / Dental / Other Care6,864 2,731 9,595 0.2 528 13
Groups < 0.20% of total66,553 45,299 111,852 2.0 58 1,143
Total$292,579 $598,434 $891,013 15.6 %$77 3,794
(1)Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.
Construction, land and land development loans comprise 4.8% of our total balance of outstanding loans as of September 30, 2024. Unused commitments to extend credit represents an additional $63.5 million, and the combined total in construction, land and land development loans represents $226.6 million, or 4.0% 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 September 30, 2024:
(dollars in thousands; unaudited)Outstanding BalanceAvailable Loan CommitmentsTotal Outstanding Balance & Available Commitment
% of Total Loans
(Outstanding Balance &
Available Commitment)
Average Loan BalanceNumber of Loans
Commercial construction$97,798 $41,521 $139,319 2.5 %$7,523 13
Residential construction35,822 16,846 52,668 0.9 1,990 18
Developed land loans14,863 723 15,586 0.3 743 20
Undeveloped land loans8,606 4,086 12,692 0.2 574 15
Land development5,968 345 6,313 0.1 597 10
Total$163,057 $63,521 $226,578 4.0 %$2,145 76
24

Exposure and risk in our construction, land and land development portfolio is in line with our average historically, compared to June 30, 2024 when the balance was elevated as indicated in the following table:
Outstanding Balance as of
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		March 31,
2024		December 31,
2023		September 30,
2023
Commercial construction$97,798 $110,372 $102,099 $81,489 $91,396 
Residential construction35,822 34,652 28,751 34,213 33,971 
Undeveloped land loans8,606 8,372 8,190 7,890 8,310 
Developed land loans14,863 13,954 14,307 20,515 21,369 
Land development5,968 5,714 7,515 12,993 12,640 
Total$163,057 $173,064 $160,862 $157,100 $167,686 
Commitments to extend credit total $2.29 billion at September 30, 2024, however we do not anticipate our customers using the $2.29 billion that is showing as available.
The following table presents outstanding commitments to extend credit as of September 30, 2024:
Consolidated
(dollars in thousands; unaudited)As of September 30, 2024
Commitments to extend credit:
Commercial and industrial loans$93,873 
Commercial and industrial loans - capital call lines504,561 
Construction – commercial real estate loans46,007 
Construction – residential real estate loans17,514 
Residential real estate loans522,786 
Commercial real estate loans41,507 
Credit cards1,055,684 
Consumer and other loans10,478 
Total commitments to extend credit$2,292,410 
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 September 30, 2024, capital call lines outstanding balance totaled $103.9 million, and while commitments totaled $504.6 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 not be required to fund the loan.
25

See the table below for CCBX portfolio maximums and related available commitments:
CCBX
(dollars in thousands; unaudited)BalancePercent of CCBX loans receivable
Available Commitments (1)
Maximum Portfolio Size
Cash Reserve/Pledge Account Amount (2)
Commercial and industrial loans:
Capital call lines$103,924 6.8 %$504,561 $350,000 $— 
All other commercial & industrial loans
36,494 2.4 16,922 285,153 675 
Real estate loans:
Home equity lines of credit (3)
265,402 17.5 472,385 375,000 35,597
Consumer and other loans:
Credit cards - cash secured180 — — 
Credit cards - unsecured633,511 1,055,684 37,065
Credit cards - total633,691 41.6 1,055,684 807,263 37,065
Installment loans - cash secured129,138 7,112 — 
Installment loans - unsecured342,675 — 2,222
Installment loans - total471,813 31.0 7,112 1,630,027 2,222
Other consumer and other loans10,415 0.7 — 7,557 383
Gross CCBX loans receivable1,521,739 100.0 %2,056,664 3,455,000 $75,942 
Net deferred origination fees(447)
Loans receivable$1,521,292 
(1) Remaining commitment available, net of outstanding balance.
(2) Balances are as of October 4, 2024.
(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.
26

APPENDIX B -
As of September 30, 2024
CCBX – BaaS Reporting Information
During the quarter ended September 30, 2024, $70.1 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 noncredit fraud losses on loans and deposits originated through partners. 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 & 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 expenseThree Months Ended
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
Yield on loans (1)
17.35 %17.77 %17.05 %
BaaS loan interest income$67,692 $60,203 $56,279 
Less: BaaS loan expense32,612 29,076 23,003 
Net BaaS loan income (2)
$35,080 $31,127 $33,276 
Net BaaS loan income divided by average BaaS loans (1)(2)
8.99 %9.19 %10.08 %
(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 September 30, 2024 compared to the quarter ended June 30, 2024. The increase in average CCBX loans receivable was primarily due to growth in the CCBX loan portfolio as part of our strategy to optimize the CCBX loan portfolio and strengthen our balance sheet through originating higher quality new loans and enhanced credit standards. Increased interest rates and growth in CCBX loans and deposits has resulted in increases in interest income and expense for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023.
27

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 incomeThree Months Ended
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
Loan interest income$67,692 $60,203 $56,279 
Total BaaS interest income$67,692 $60,203 $56,279 
Interest expenseThree Months Ended
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
BaaS interest expense$24,819 $24,119 $20,384 
Total BaaS interest expense$24,819 $24,119 $20,384 
BaaS incomeThree Months Ended
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
BaaS program income:
Servicing and other BaaS fees$1,044 $1,525 $997 
Transaction fees1,696 1,309 1,036 
Interchange fees1,853 1,625 1,216 
Reimbursement of expenses1,843 1,637 1,152 
BaaS program income6,436 6,096 4,401 
BaaS indemnification income:
BaaS credit enhancements70,108 60,826 25,926 
BaaS fraud enhancements2,084 1,784 2,850 
BaaS indemnification income72,192 62,610 28,776 
Total noninterest BaaS income$78,628 $68,706 $33,177 
Servicing and other BaaS fees decreased $481,000 in the quarter ended September 30, 2024 compared to the quarter ended June 30, 2024 while transaction fees and interchange fees increased $387,000 and $228,000, respectively. We expect servicing and other BaaS fees to decrease and transaction and interchange fees to increase as partner activity grows and contracted minimum fees are replaced with recurring fees and then exceed those minimum fees.
BaaS loan and fraud expense:Three Months Ended
(dollars in thousands; unaudited)September 30,
2024		June 30,
2024		September 30,
2023
BaaS loan expense$32,612 $29,076 $23,003 
BaaS fraud expense2,084 1,784 2,850 
Total BaaS loan and fraud expense$34,696 $30,860 $25,853 
28
v3.24.3
Cover
Oct. 28, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Oct. 28, 2024
Entity Registrant Name COASTAL FINANCIAL CORPORATION
Entity Incorporation, State or Country Code WA
Entity File Number 001-38589
Entity Tax Identification Number 56-2392007
Entity Address, Address Line One 5415 Evergreen Way
Entity Address, City or Town Everett
Entity Address, State or Province WA
Entity Address, Postal Zip Code 98203
City Area Code (425)
Local Phone Number 257-9000
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common stock, no par value per share
Trading Symbol CCB
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
Entity Central Index Key 0001437958
Amendment Flag false
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