Coastal Financial Corporation (CCB) Q1 2025 earnings summary

Executive summary

• Net income for Q1 2025 was $9.7 million ($0.63 per diluted share), up from $6.8 million in Q1 2024 but down from $13.4 million in Q4 2024, reflecting higher expenses from onboarding new CCBX partners and technology investments.

• Total assets reached $4.34 billion, up 5.3% from December 31, 2024, driven by higher deposits and loan growth.

• CCBX (BaaS) segment continued to expand, with 25 partners, program fee income up 55.2% year-over-year, and strong growth in loans and deposits.

• Deposits increased by $205.9 million (5.7%) to $3.79 billion, with CCBX deposits up $202.9 million.

• Loan sales in CCBX totaled $744.6 million, mainly credit card receivables, providing recurring fee income and managing balance sheet risk.

Financial highlights

• Net interest income rose 22.3% year-over-year to $76.1 million, driven by higher loan balances and yields.

• Net interest margin was 7.48% (4.28% net of BaaS loan expense), up from 6.92% in Q1 2024.

• Noninterest income was $63.5 million, down 26.3% year-over-year, mainly due to lower BaaS credit and fraud enhancements.

• Noninterest expense increased 27.4% year-over-year and 6.8% sequentially to $72.0 million, mainly from higher BaaS loan/fraud expense, salaries, and technology investments.

• Allowance for credit losses rose to $183.2 million (5.21% of loans), with CCBX portfolio allowance at 9.95% of CCBX loans.

Outlook and guidance

• Management expects continued CCBX growth, with focus on larger, established partners, new product launches, and ongoing tech investment expenses into Q2 2025.

• Ongoing loan sales in CCBX to manage credit quality and partner limits, with recurring fee income expected.

• Deposit growth anticipated from new programs (e.g., T-Mobile, Robin Hood), with ability to sweep deposits for liquidity management.

• Regulatory focus on BaaS and third-party risk may increase compliance costs.

• Risk reduction efforts, including fraud and credit indemnifications, are expected to help mitigate uncertainties from fluctuating interest rates.