second quarter 2026
Filed Jul 30, 2026Results Reflect Record Net Interest Income and Continued BaaS Growth, Offset by Credit Expenses Taken on Single Partner Relationship
Record net interest income and higher BaaS program fee income were offset by a net loss driven primarily by credit expenses related to a single CCBX partner relationship.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Interest and dividend incomeGAAP | $ 118,554 (Dollars in thousands) | – | – |
| Interest expenseGAAP | 29,187 (Dollars in thousands) | – | – |
| Net interest incomeGAAP | 89,367 (Dollars in thousands) | – | – |
| Provision for credit lossesGAAP | 92,157 (Dollars in thousands) | – | – |
| Net interest (loss) income after provision for credit lossesGAAP | (2,790) (Dollars in thousands) | – | – |
| Noninterest incomeGAAP | 88,707 (Dollars in thousands) | – | – |
| Noninterest expenseGAAP | 141,111 (Dollars in thousands) | – | – |
| (Benefit) provision for income taxGAAP | (13,089) (Dollars in thousands) | – | – |
| Net (loss) incomeGAAP | $ (42,105) (Dollars in thousands) | – | – |
| Net lossGAAP | $42.1 million | – | – |
| (Loss) earnings per share – basicGAAP | $ (2.76) | – | – |
| (Loss) earnings per share – dilutedGAAP | $ (2.76) | – | – |
| Weighted avg outstanding shares – basicother | 15,243,357 | – | – |
| Weighted avg outstanding shares – dilutedother | 15,243,357 | – | – |
| Book value per shareGAAP | $ 30.33 | – | – |
| Tangible book value per sharenon-GAAP | $ 30.05 | – | – |
| Return on average assets (ROA)other | (3.32)% | – | – |
| Loans receivableGAAP | 4,208,270 (Dollars in thousands) | 9.0% | – |
| Allowance for credit lossesGAAP | (213,724) (Dollars in thousands) | – | – |
| Total assetsGAAP | 5,456,152 (Dollars in thousands) | – | – |
| Total depositsGAAP | 4,861,898 (Dollars in thousands) | – | – |
| Total shareholders’ equityGAAP | $ 463,447 (Dollars in thousands) | – | – |
| Nonperforming assets to total assetsother | 1.38 % | – | – |
| Nonperforming loans to total loans receivableother | 1.79 % | – | – |
| Allowance for credit losses to nonperforming loansother | 284.2 % | – | – |
| Allowance for credit losses to total loans receivableother | 5.08 % | – | – |
| Gross charge-offsother | $ 58,218 (Dollars in thousands) | – | – |
| Gross recoveriesother | $ 7,583 (Dollars in thousands) | – | – |
| Net charge-offs to average loansother | 4.90 % | – | – |
| Company Tier 1 leverage capitalother | 9.11 % | – | – |
| Company common equity Tier 1 risk-based capitalother | 10.86 % | – | – |
| Company Tier 1 risk-based capitalother | 10.94 % | – | – |
| Company total risk-based capitalother | 13.30 % | – | – |
| Bank Tier 1 leverage capitalother | 9.12 % | – | – |
| Bank common equity Tier 1 risk-based capitalother | 10.97 % | – | – |
| Bank Tier 1 risk-based capitalother | 10.97 % | – | – |
| Bank total risk-based capitalother | 12.27 % | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| CCBXExpanded product offerings with existing partners and continued momentum across diversified revenue streams. | $12.0 million | $1.1 million, or 10.3% | – |
What drove it
- Net interest income was described as record.
- Management cited solid loan growth of 9.0%.
- Total BaaS program fee income was $12.0 million, an increase of $1.1 million, or 10.3%, from the three months ended March 31, 2026.
- There were 881,659 off-balance sheet credit cards with fee earning potential, an increase of 214,636, or 32.18%, compared to the quarter ended March 31, 2026 and an increase of 567,832, or 180.94%, from June 30, 2025.
- As of June 30, 2026, CCBX had one partner in testing, one in implementation/onboarding, and three signed letters of intent (LOIs).
Concerns
- The net loss was primarily attributable to a $68.8 million credit expense related to a single, isolated CCBX partner relationship.
- Significant items included a $22.8 million provision for credit losses and a $46.0 million valuation adjustment to the credit enhancement asset, both related to one partner and not expected to be fully collected under its indemnification arrangement.
- The Company recorded $4.4 million of capitalized software amortization due to shortened useful lives associated with technology modernization.
- The quarter’s charges reduced capital ratios by approximately one percentage point.
- ROA was impacted by charges related to one partner relationship, including a valuation adjustment to the related credit enhancement asset and an increase in the provision for credit losses.
What to watch
- New partnership opportunities and product launches expected for the remainder of 2026.
- Progression of the partner in testing, the partner in implementation/onboarding, and the three signed LOIs.
- CCBX product expansion with existing partners and new-partner onboarding toward launch and active status.
- Technology modernization initiatives intended to improve operational efficiency, enhance the partner experience, and support long-term scalability.
- Capital and liquidity following the charges that reduced capital ratios by approximately one percentage point.
Balance sheet and cash flow
- Cash and cash equivalents were $ 1,008,448 (Dollars in thousands) at June 30, 2026, compared to $ 1,495,467 (Dollars in thousands) at March 31, 2026 and $ 719,759 (Dollars in thousands) at June 30, 2025.
- Investment securities were 45,246 (Dollars in thousands), compared to 46,169 (Dollars in thousands) at March 31, 2026 and 45,577 (Dollars in thousands) at June 30, 2025.
- Loans held for sale were 107,838 (Dollars in thousands), compared to 124,039 (Dollars in thousands) at March 31, 2026 and 60,474 (Dollars in thousands) at June 30, 2025.
- Interest bearing deposits were 4,249,420 (Dollars in thousands), noninterest bearing deposits were 612,478 (Dollars in thousands), and core deposits were 4,850,783 (Dollars in thousands).
- Total borrowings were 48,112 (Dollars in thousands), compared to 48,074 (Dollars in thousands) at March 31, 2026 and 47,960 (Dollars in thousands) at June 30, 2025.
- The Company swept off $4.26 billion in deposits for FDIC insurance and liquidity purposes and generated $1.2 million in noninterest income, an increase of $467,000, or 65.8%, from $710,000 in the quarter ended March 31, 2026 and an increase of $820,000, or 229.7% from $357,000 in the quarter ended June 30, 2025.
- The Company sold $4.56 billion of loans, including $3.68 billion of additional credit card receivables originated through ongoing cardholder spend and revolving activity and sold under existing forward flow arrangements, compared to $3.28 billion of sold loans, including $2.63 billion sold under the same forward flow arrangements, in the quarter ended March 31, 2026.
- The Company retained $1.01 billion of cash and cash equivalents and $1.12 billion of additional contingent borrowing capacity, with no borrowings outstanding as of June 30, 2026.
Analysis
Coastal reported a net loss of $42.1 million, or $(2.76) per diluted common share, after reporting net income of $12.0 million, or $0.78 per diluted common share, in the three months ended March 31, 2026 and net income of $11.0 million, or $0.71 per diluted common share, in the three months ended June 30, 2025. The release attributes the loss primarily to a $68.8 million credit expense related to one isolated CCBX partner relationship. The reported $22.8 million provision for credit losses and $46.0 million valuation adjustment to the credit enhancement asset were both related to that partner.
Core earnings trends remained constructive before those charges. Net interest income was $89,367 (Dollars in thousands), compared with $83,357 (Dollars in thousands) in the prior quarter and $76,737 (Dollars in thousands) in the prior-year quarter. Loans receivable were 4,208,270 (Dollars in thousands), and management cited loan growth of 9.0%. Noninterest income was 88,707 (Dollars in thousands), compared with 66,077 (Dollars in thousands) in the prior quarter, while BaaS program fee income was $12.0 million, up $1.1 million, or 10.3%, from the quarter ended March 31, 2026.
The CCBX platform expanded its fee-generating activity. Coastal reported 881,659 off-balance sheet credit cards with fee earning potential, with increases of 214,636, or 32.18%, from the March 31, 2026 quarter and 567,832, or 180.94%, from June 30, 2025. It also sold $4.56 billion of loans during the quarter, including $3.68 billion of additional credit card receivables under existing forward flow arrangements. The active CCBX pipeline included one partner in testing, one in implementation/onboarding, and three signed LOIs.
Expenses reflected the partner-related valuation adjustment and technology costs. Noninterest expense was 141,111 (Dollars in thousands), compared with 83,452 (Dollars in thousands) in the prior quarter and 72,832 (Dollars in thousands) in the prior-year quarter. Coastal also recorded $4.4 million of capitalized software amortization due to shortened useful lives associated with technology modernization. ROA was (3.32)%, compared with 0.98% in the prior quarter and 0.99% in the prior-year quarter.
Capital ratios remained above levels required to be considered well capitalized, although the quarter’s charges reduced capital ratios by approximately one percentage point. The Company common equity Tier 1 ratio was 10.86%, the Tier 1 leverage ratio was 9.11%, and the total risk-based capital ratio was 13.30%. Coastal reported $1.01 billion of cash and cash equivalents, $1.12 billion of additional contingent borrowing capacity, and no borrowings outstanding as of June 30, 2026. The release provided no quantified financial guidance, but management expects new partnership opportunities and product launches for the remainder of 2026.
Management, verbatim
Our second quarter results reflect continued performance of our core franchise, which was offset by decisive action we took on a single non-public company partner relationship. Based on our assessment, we recorded the potential impact fully and in accordance with our credit protection framework. We believe this is an isolated issue pertaining to one partner and does not reflect a change in our view of our broader partner portfolio or BaaS model. We remain focused on disciplined and sustainable growth by partnering with organizations that align with our long-term strategy, thoughtfully expanding our product offerings, and continuing to build a resilient BaaS platform designed to deliver value for all stakeholders.
Eric Sprink, CEO
Despite these credit expenses, we delivered solid loan growth of 9.0%, increased BaaS program income, and continued to deepen relationships with our established partners while advancing new products that support our strategy.
Eric Sprink, CEO
Our technology modernization initiatives continue to strengthen the CCBX platform, improving operational efficiency, enhancing the partner experience and supporting long-term scalability.
Brian Hamilton, CCBX President
Not in the filing
stated, not guessed- Full filing text after the incomplete ROA discussion was not provided.
- Quantified forward revenue, expense, tax-rate, margin, earnings, capital, or other financial guidance.
- Previous-release outlook and prior-guidance comparison.
- Operating cash flow.
- Free cash flow.
- Gross margin.
- Operating income.
- Community bank segment revenue and segment profitability.
- CCBX segment revenue beyond reported BaaS program fee income.
- Share repurchases or dividend payments.
- Non-GAAP earnings, non-GAAP EPS, or non-GAAP operating income.
- Detailed debt composition or reconciliation of total borrowings to the statement of no borrowings outstanding.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.