Coastal Financial returned to profitability in the third quarter, reporting net income of $13.8 million, or 89 cents per diluted share, after a $42.1 million loss in the prior quarter. The Everett, Washington-based bank holding company said growth in its banking-as-a-service business helped drive the results, while a review of a previously troubled relationship largely supported estimates it had made at the end of June.
Key details
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Earnings rebounded from the second quarter. Coastal earned $13.8 million in the three months ended Sept. 30, compared with a loss of $42.1 million in the quarter ended June 30. A year earlier, it earned $13.6 million, or 88 cents per diluted share. Third-quarter diluted earnings were 89 cents per share.
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The company revisited a relationship tied to its prior-quarter results. The review included loan performance, expected credit losses and whether amounts owed under a partner indemnification arrangement would be collectible. Management said the review substantially supported the estimates established at June 30. The announcement did not identify the relationship in this discussion.
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Banking-as-a-service fees increased. CCBX program fee income was $14.1 million, up $2.1 million, or 17.6%, from the second quarter and up $6.3 million, or 79.6%, from a year earlier. Coastal attributed the growth to activity across its partner portfolio.
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Partner activity and product expansion remain part of the growth pipeline. At quarter-end, one partner was testing, two were in implementation or onboarding, and three had signed letters of intent. Eight active programs were at different stages of expanding into additional products. Coastal said it expected further partnership opportunities and product launches during the rest of 2026.
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Credit card accounts on partner programs grew substantially. Coastal reported 1.3 million off-balance-sheet credit card accounts, approximately 236% more than at the end of the third quarter of 2025.
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A Bluevine acquisition is expected to end that banking relationship. Bluevine has agreed to be acquired by Valley National Bancorp, subject to regulatory and other customary approvals. Valley expects the deal to close in the second quarter of 2027; Coastal said its relationship with Bluevine is expected to terminate when the acquisition closes.
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The community bank added deposits. Deposits rose $63.2 million, or 4.0%, during the quarter to $1.64 billion. The cost of deposits was 1.54%.
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Coastal reported a 1.01% return on assets and described its capital position as strong. Management also cited strong cash reserves and a strong pipeline, but the announcement provided no specific capital or cash figures in the material presented here.
Plain-English implications
The quarter marks a return to earnings after a steep second-quarter loss, while the company’s BaaS fees and partner-related account base continued to grow. The expected end of the Bluevine relationship is a defined change to Coastal’s partner portfolio, with the timing tied to the anticipated 2027 acquisition closing.