Coastal Financial Corp.: Q3 FY2026 earnings call

What management said about Q3 FY2026, from the documents filed with the SEC on 29 October 2026: press release. Guidance figures: 1 new. The quarter’s numbers.

Read the filing

Key takeaways

• Net income returned to profit: Net income was $13.8 million, or $0.89 per diluted share, after a net loss of $42.1 million in the second quarter. ROA was 1.01%. Source
• Second-quarter credit items did not recur: Noninterest expense fell $56.3 million, mainly because the second quarter's $46.0 million credit enhancement receivable valuation adjustment did not recur. Source
• Partner credit performance stabilizing: Management said loan performance was generally consistent with its June 30 expectations, though charge-offs were modestly higher than projected. Source
• Provision was $46.0 million: Provision for credit losses was $46.0 million, down from $92.2 million. About $3.1 million of additional provision was not offset by credit enhancement income. Source
• Bluevine balances on and off balance sheet: The Bank held $452.4 million of Bluevine deposits on its balance sheet and swept $1.85 billion off-balance sheet to other banks. Source
• Permanent CFO search in final stages: The search for a permanent chief financial officer is ongoing and in its final stages, with Joel Edwards serving as interim CFO. Source

“The third quarter better reflects the underlying earnings power of Coastal’s business, following a challenging second quarter for our shareholders.”

Eric Sprink, Chief Executive Officer of Coastal

Guidance

What changed from last quarter

• New guidance: Management began a noninterest expense savings target of up to $20.0 million annualized, to be achieved over four to six quarters. Source
• New: Bluevine agreed to be acquired by Valley National Bancorp, subject to regulatory and other approvals. Source
• New: Joel Edwards returned as interim Chief Financial Officer after Brandon Soto's departure in August 2026. Source
• Ended: Brian Hamilton stepped down as President of Coastal and remains on the Board and as an advisor. Source
• New: Chief Executive Officer Eric Sprink agreed to a nearly 43% reduction in base salary, from $874,000 to $500,000. Source

Results and earnings drivers

• Net income returned to profit: Net income was $13.8 million, or $0.89 per diluted share, after a net loss of $42.1 million in the second quarter. ROA was 1.01%. Source
• Second-quarter credit items did not recur: Noninterest expense fell $56.3 million, mainly because the second quarter's $46.0 million credit enhancement receivable valuation adjustment did not recur. Source
• Noninterest income fell on lower credit enhancement: Noninterest income was $61.0 million, down $27.7 million from the second quarter, mainly on a $29.0 million decrease in credit enhancement income. Source
• BaaS program fee income rose: BaaS program income was $14.1 million, up $2.1 million from the second quarter and $6.3 million from a year earlier. Source
• Net interest income slipped sequentially: Net interest income was $88.3 million, down $1.1 million from the second quarter, with net interest margin at 6.59% compared with 7.27%. Source

CCBX and community bank segments

• CCBX loans fell slightly on sales: CCBX loans decreased $18.9 million, or 0.8%, to $2.21 billion, after the company sold $5.99 billion of loans in the quarter. Source
• CCBX on-balance sheet deposits declined: CCBX deposits on the balance sheet fell $246.2 million to $3.04 billion, which management attributed to increased off-balance sheet sweeps. Source
• Community bank loans held steady: Community bank net loans decreased $3.9 million, or 0.2%, to $1.98 billion, with commercial real estate down $28.1 million and construction up $27.2 million. Source
• Community bank deposits grew: Community bank deposits rose $63.2 million, or 4.0%, to $1.64 billion, and the cost of deposits was 1.54%, up from 1.46% in the second quarter. Source

“Beyond this relationship, we returned to profitability with net income of $13.8 million and diluted earnings per share of $0.89, and our ROA was 1.01%.”

Eric Sprink, Chief Executive Officer of Coastal

Partner credit and provisions

• Partner credit performance stabilizing: Management said loan performance was generally consistent with its June 30 expectations, though charge-offs were modestly higher than projected. Source
• Provision was $46.0 million: Provision for credit losses was $46.0 million, down from $92.2 million. About $3.1 million of additional provision was not offset by credit enhancement income. Source
• Specific allowance and valuation allowance held: The $22.8 million specific allowance was unchanged, and the valuation allowance on the credit enhancement asset eased to $45.6 million. Source
• Nonperforming assets declined $14.7 million: Nonperforming assets were $60.5 million, or 1.15% of total assets, down $14.7 million, with improvement in both the community bank and CCBX portfolios. Source
• Net charge-offs lower as a rate: Net charge-offs were $49.9 million, or 4.43% of average loans, compared with 4.90% in the second quarter. Source

Costs and expense plan

• Expense initiatives launched: Management launched targeted initiatives to lower noninterest expense, including vendor reviews, legacy system replacement and AI-enabled productivity. Source
• Data processing costs fell: Data processing and software license expense fell $5.9 million, reflecting no repeat of $4.4 million second-quarter accelerated depreciation, and salaries fell $1.6 million. Source
• Legal and FDIC costs rose: Legal and professional fees rose $1.6 million, partly related to The Partner, and FDIC assessments rose $440,000 on a second-quarter true-up and higher rate. Source

“Management continues to closely monitor the Partner's credit performance and its ability to satisfy its contractual obligations and will update its estimates as additional information becomes available.”

Coastal Financial Corp., press release

Capital, liquidity and funding

• Capital ratios remain above well-capitalized levels: Company CET1 ratio was 11.47%, up from 10.86%, and Tier 1 leverage was 8.81%, both above well-capitalized levels. Source
• Cash and borrowing capacity retained: The company held $803.6 million of cash and equivalents and $827.4 million of contingent borrowing capacity, with no borrowings outstanding. Source
• Parent contributed capital to the Bank: The parent company contributed $25.0 million of capital to the Bank during the quarter. Source
• Uninsured deposits declined: Uninsured deposits were estimated at $899.6 million, down from $1.35 billion, and may fluctuate with partner balances and sweep use. Source

Bluevine relationship and deposits

• Bluevine balances on and off balance sheet: The Bank held $452.4 million of Bluevine deposits on its balance sheet and swept $1.85 billion off-balance sheet to other banks. Source
• Funding replacement expected: The company expects to replace related on-balance sheet funding through existing sweep capabilities and other funding sources. Source
• Bluevine loans on balance sheet: The Bank held $3.0 million of Bluevine originated loans and a $6.8 million commercial loan to Bluevine at quarter-end. Source

Partners, cards and loan sales

• Eight programs expanding products: Eight active partner programs were in various stages of expanding into additional products such as lines of credit and asset-backed cards. Source
• Off-balance sheet cards up sharply: Off-balance sheet credit cards with fee earning potential reached 1.3 million, up 452,984 from the second quarter. Source
• Partner pipeline status: One partner was in testing, two in implementation or onboarding, and three had signed letters of intent. Source
• Loan sales totaled $5.99 billion: Loan sales were $5.99 billion, including $4.69 billion of credit card receivables sold under existing forward flow arrangements. Source
• Sweep fee income rose: Off-balance sheet swept deposits were $6.29 billion, and related noninterest income was $1.4 million, up from $1.2 million. Source

People and leadership

• Permanent CFO search in final stages: The search for a permanent chief financial officer is ongoing and in its final stages, with Joel Edwards serving as interim CFO. Source
• Hamilton to stay on board: Brian Hamilton, who stepped down as President, will remain on the Board and as an advisor to support continuity across CCBX. Source
• CEO base salary reduced: The CEO voluntarily agreed to cut base salary by nearly 43%, from $874,000 to $500,000, as part of expense discipline. Source

Coming up, as management said on 29 October 2026

• Bluevine deal expected to close: Valley expects the Bluevine transaction to close in the second quarter of 2027, when the relationship is expected to terminate. Source
• Rate increase to feed into funding costs: The 0.25% Fed funds increase effective September 17, 2026 will affect cost of funds and deposits in future periods. Source
• New partnerships and launches expected: New partnerships and product launches are expected for the remainder of 2026. Source

Risks management discussed

• Financial: Management monitors counterparty risk with CCBX partners, since the Bank could incur additional credit losses if a partner cannot meet its contractual obligations. Source
• Regulatory: Expansion of CCBX activities and employees into more states has added state tax jurisdictions and raised the overall tax rate used for the provision. Source

Earlier plans management reported on

• Not stated: Management said it has launched initiatives to lower noninterest expense and expects further progress as technology modernization matures. Source
• Not stated: Management said its updated assessment substantially supported the loss estimates set at June 30, 2026. Source

Other quarters

• Q2 FY2026 earnings call
• Q1 FY2026 earnings call
• Q4 FY2025 earnings call
• Q3 FY2025 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.