EVERETT, Wash., July 29, 2025 (GLOBE NEWSWIRE) -- 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 segment ("community bank") with an industry leading banking as a service ("BaaS") segment ("CCBX"), today reported unaudited financial results for the quarter ended June 30, 2025, including net income of $11.0 million, or $0.71 per diluted common share, compared to $9.7 million, or $0.63 per diluted common share, for the three months ended March 31, 2025 and $11.6 million, or $0.84 per diluted common share, for the three months ended June 30, 2024.
Management Discussion of the Second Quarter Results
“Second quarter of 2025 saw a lower provision for credit losses as a result of an improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors. Noninterest expenses were fairly flat compared to last quarter related to continued onboarding and implementation costs for partnerships and products within CCBX and investments in technology. We believe these investments are important to the long-term success and scalability of the Company,” stated CEO Eric Sprink. “We had another quarter of quality deposit growth of $122.3 million during the second quarter, and our CCBX program fee income, excluding nonrecurring revenue, increased 8.2% compared to the prior quarter.”
Key Points for Second Quarter and Our Go-Forward Strategy
- CCBX Making Progress on Launching New Programs. As of June 30, 2025 we had two partners in testing, two in implementation/onboarding, five signed letters of intent (LOI) and we have an active pipeline of new partners along with new products with existing partners for the balance of 2025 and into 2026. Total BaaS program fee income was $6.8 million, excluding $504,000 in nonrecurring revenue, for the three months ended June 30, 2025, an increase of $512,000, or 8.2%, from the three months ended March 31, 2025. We continue to have contracts with our partners that fully indemnify us against fraud and 98.8% against credit risk as of June 30, 2025.
- Continued Investments in Future Growth. Total noninterest expense of $72.8 million was up $843,000, or 1.2%, as compared to $72.0 million in the quarter ended March 31, 2025, mainly driven by higher data processing and software costs partially offset by lower legal and professional expenses. With the increase in new CCBX partners and the launch of products with existing partners in 2025, we expect that expenses will be predominantly incurred at the outset, emphasizing compliance and operational risk management. This will occur before the new programs or products start to produce revenue. As a result, we believe expense growth should moderate considerably in the second half of 2025, with new programs or products starting to produce revenue to offset the initial up-front expenses.
- Favorable Trends On, and Off Balance Sheet. Average deposits were $3.93 billion, an increase of $221.6 million, or 6.0%, over the quarter ended March 31, 2025, driven primarily by growth in CCBX partner programs and the addition of a new deposit partner. During the second quarter of 2025, we sold $1.30 billion of loans, the majority of which were credit card receivables. We retain a portion of the fee income on sold credit card loans. As of June 30, 2025 there were 313,827 off balance sheet credit cards with fee earning potential, an increase of 76,803 compared to the quarter ended March 31, 2025 and an increase of 286,146 from June 30, 2024.
Second Quarter 2025 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) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | ||||||||||||||
| Income Statement Data: | |||||||||||||||||||
| Interest and dividend income | $ | 107,797 | $ | 104,907 | $ | 102,448 | $ | 105,165 | $ | 97,422 | |||||||||
| Interest expense | 31,060 | 28,845 | 30,071 | 32,892 | 31,250 | ||||||||||||||
| Net interest income | 76,737 | 76,062 | 72,377 | 72,273 | 66,172 | ||||||||||||||
| Provision for credit losses | 32,211 | 55,781 | 61,867 | 70,257 | 62,325 | ||||||||||||||
| Net interest income after provision for credit losses | 44,526 | 20,281 | 10,510 | 2,016 | 3,847 | ||||||||||||||
| Noninterest income | 42,693 | 63,477 | 74,100 | 78,790 | 69,138 | ||||||||||||||
| Noninterest expense | 72,832 | 71,989 | 67,411 | 64,424 | 57,964 | ||||||||||||||
| Provision for income tax | 3,359 | 2,039 | 3,832 | 2,926 | 3,425 | ||||||||||||||
| Net income | $ | 11,028 | $ | 9,730 | $ | 13,367 | $ | 13,456 | $ | 11,596 | |||||||||
| As of and for the Three Month Period | |||||||||||||||||||
| June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | |||||||||||||||
| Balance Sheet Data: | |||||||||||||||||||
| Cash and cash equivalents | $ | 719,759 | $ | 624,302 | $ | 452,513 | $ | 484,026 | $ | 487,245 | |||||||||
| Investment securities | 45,577 | 46,991 | 47,321 | 48,620 | 49,213 | ||||||||||||||
| Loans held for sale | 60,474 | 42,132 | 20,600 | 7,565 | — | ||||||||||||||
| Loans receivable | 3,540,330 | 3,517,359 | 3,486,565 | 3,413,894 | 3,321,813 | ||||||||||||||
| Allowance for credit losses | (164,794 | ) | (183,178 | ) | (176,994 | ) | (171,674 | ) | (148,878 | ) | |||||||||
| Total assets | 4,480,559 | 4,339,282 | 4,121,208 | 4,064,472 | 3,959,549 | ||||||||||||||
| Interest bearing deposits | 3,358,216 | 3,251,599 | 3,057,808 | 3,047,861 | 2,949,643 | ||||||||||||||
| Noninterest bearing deposits | 555,355 | 539,630 | 527,524 | 579,427 | 593,789 | ||||||||||||||
| Core deposits (1) | 3,441,624 | 3,321,772 | 3,123,434 | 3,190,869 | 3,528,339 | ||||||||||||||
| Total deposits | 3,913,571 | 3,791,229 | 3,585,332 | 3,627,288 | 3,543,432 | ||||||||||||||
| Total borrowings | 47,960 | 47,923 | 47,884 | 47,847 | 47,810 | ||||||||||||||
| Total shareholders’ equity | $ | 461,709 | $ | 449,917 | $ | 438,704 | $ | 331,930 | $ | 316,693 | |||||||||
| Share and Per Share Data (2): | |||||||||||||||||||
| Earnings per share – basic | $ | 0.73 | $ | 0.65 | $ | 0.97 | $ | 1.00 | $ | 0.86 | |||||||||
| Earnings per share – diluted | $ | 0.71 | $ | 0.63 | $ | 0.94 | $ | 0.97 | $ | 0.84 | |||||||||
| Dividends per share | — | — | — | — | — | ||||||||||||||
| Book value per share (3) | $ | 30.59 | $ | 29.98 | $ | 29.37 | $ | 24.51 | $ | 23.54 | |||||||||
| Tangible book value per share (4) | $ | 30.59 | $ | 29.98 | $ | 29.37 | $ | 24.51 | $ | 23.54 | |||||||||
| Weighted avg outstanding shares – basic | 15,033,296 | 14,962,507 | 13,828,605 | 13,447,066 | 13,412,667 | ||||||||||||||
| Weighted avg outstanding shares – diluted | 15,447,923 | 15,462,041 | 14,268,229 | 13,822,270 | 13,736,508 | ||||||||||||||
| Shares outstanding at end of period | 15,093,036 | 15,009,225 | 14,935,298 | 13,543,282 | 13,453,805 | ||||||||||||||
| Stock options outstanding at end of period | 126,654 | 163,932 | 186,354 | 198,370 | 286,119 | ||||||||||||||
See footnotes that follow the tables below
| As of and for the Three Month Period | |||||||||||||||||||
| June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | |||||||||||||||
| Credit Quality Data: | |||||||||||||||||||
| Nonperforming assets (5) to total assets | 1.36 | % | 1.30 | % | 1.52 | % | 1.63 | % | 1.34 | % | |||||||||
| Nonperforming assets (5) to loans receivable and OREO | 1.72 | % | 1.60 | % | 1.80 | % | 1.94 | % | 1.60 | % | |||||||||
| Nonperforming loans (5) to total loans receivable | 1.72 | % | 1.60 | % | 1.80 | % | 1.94 | % | 1.60 | % | |||||||||
| Allowance for credit losses to nonperforming loans | 270.7 | % | 325.0 | % | 282.5 | % | 258.7 | % | 279.9 | % | |||||||||
| Allowance for credit losses to total loans receivable | 4.65 | % | 5.21 | % | 5.08 | % | 5.03 | % | 4.48 | % | |||||||||
| Gross charge-offs | $ | 53,780 | $ | 53,686 | $ | 61,585 | $ | 53,305 | $ | 55,207 | |||||||||
| Gross recoveries | $ | 4,467 | $ | 5,486 | $ | 5,223 | $ | 4,516 | $ | 2,254 | |||||||||
| Net charge-offs to average loans (6) | 5.54 | % | 5.57 | % | 6.56 | % | 5.60 | % | 6.54 | % | |||||||||
| Capital Ratios: | |||||||||||||||||||
| Company | |||||||||||||||||||
| Tier 1 leverage capital | 10.39 | % | 10.67 | % | 10.78 | % | 8.40 | % | 8.31 | % | |||||||||
| Common equity Tier 1 risk-based capital | 12.32 | % | 12.13 | % | 12.04 | % | 9.24 | % | 9.03 | % | |||||||||
| Tier 1 risk-based capital | 12.41 | % | 12.22 | % | 12.14 | % | 9.34 | % | 9.13 | % | |||||||||
| Total risk-based capital | 14.90 | % | 14.73 | % | 14.67 | % | 11.89 | % | 11.70 | % | |||||||||
| Bank | |||||||||||||||||||
| Tier 1 leverage capital | 10.33 | % | 10.57 | % | 10.64 | % | 9.29 | % | 9.24 | % | |||||||||
| Common equity Tier 1 risk-based capital | 12.36 | % | 12.12 | % | 11.99 | % | 10.34 | % | 10.15 | % | |||||||||
| Tier 1 risk-based capital | 12.36 | % | 12.12 | % | 11.99 | % | 10.34 | % | 10.15 | % | |||||||||
| Total risk-based capital | 13.65 | % | 13.42 | % | 13.28 | % | 11.63 | % | 11.44 | % | |||||||||
| (1) Core deposits are defined as all deposits excluding brokered and 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 0.99% for the quarter ended June 30, 2025 compared to 0.93% and 1.21% for the quarters ended March 31, 2025 and June 30, 2024, respectively. ROA for the quarter ended June 30, 2025, increased 0.06% and decreased 0.22% compared to March 31, 2025 and June 30, 2024, respectively. Noninterest expenses were slightly higher for the quarter ended June 30, 2025 compared to the quarter ended March 31, 2025 due to continued investments in growth, technology and risk management, partially offset by a decrease in legal and professional expenses. Noninterest expenses were higher than the quarter ended June 30, 2024 due primarily to an increase in salaries and employee benefits, data processing and software licenses and legal and professional expenses, all of which are related to the growth of Company and investments in technology and risk management.
Yield on earning assets and yield on loans receivable decreased 0.40% and 0.22%, respectively, for the quarter ended June 30, 2025 compared to the quarter ended March 31, 2025, largely due to a decrease in CCBX loan yield. Lower rate capital call lines increased $66.2 million, or 49.6%, compared to the quarter ended March 31, 2025. These loans bear a lower rate of interest, but have less credit risk due to the way the loans are structured compared to other commercial loans. Average loans receivable as of June 30, 2025 increased $56.1 million compared to March 31, 2025 as net CCBX loans continue to grow, despite selling $1.30 billion in CCBX loans during the quarter ended June 30, 2025.
The quarter over quarter volatility in the efficiency ratio and noninterest income to average asset performance metrics was driven by a higher-quality CCBX loan-mix from a credit quality perspective, which effectively reduced the credit enhancement required within non-interest income due to lower net-charge off activity as a percent of total loans which lowered our provision expense. These items have a neutral impact to net income although impacted the quarter-to-quarter metrics due to lower reported noninterest income. Additionally, results for the three months ended June 30, 2025 also included a net $439,000 loss on equity securities due to the re-valuation of a privately held equity stake, which CCB reviews quarterly. Management doesn’t believe the write-down is indicative of longer-term concerns of the portfolio company’s health at this time.
The following table shows the Company’s key performance ratios for the periods indicated.
| Three Months Ended | |||||||||||||||
| (unaudited) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | ||||||||||
| Return on average assets (1) | 0.99 | % | 0.93 | % | 1.30 | % | 1.34 | % | 1.21 | % | |||||
| Return on average equity (1) | 9.72 | % | 8.91 | % | 14.90 | % | 16.67 | % | 15.22 | % | |||||
| Yield on earnings assets (1) | 9.92 | % | 10.32 | % | 10.24 | % | 10.79 | % | 10.49 | % | |||||
| Yield on loans receivable (1) | 11.11 | % | 11.33 | % | 11.12 | % | 11.44 | % | 11.22 | % | |||||
| Cost of funds (1) | 3.13 | % | 3.11 | % | 3.24 | % | 3.62 | % | 3.60 | % | |||||
| Cost of deposits (1) | 3.10 | % | 3.08 | % | 3.21 | % | 3.59 | % | 3.58 | % | |||||
| Net interest margin (1) | 7.06 | % | 7.48 | % | 7.23 | % | 7.42 | % | 7.12 | % | |||||
| Noninterest expense to average assets (1) | 6.52 | % | 6.87 | % | 6.54 | % | 6.42 | % | 6.05 | % | |||||
| Noninterest income to average assets (1) | 3.82 | % | 6.06 | % | 7.19 | % | 7.85 | % | 7.22 | % | |||||
| Efficiency ratio | 60.98 | % | 51.59 | % | 46.02 | % | 42.65 | % | 42.84 | % | |||||
| Loans receivable to deposits (2) | 92.01 | % | 93.89 | % | 97.82 | % | 94.33 | % | 93.75 | % | |||||
| (1) Annualized calculations shown for quarterly periods presented. | |||||||||||||||
| (2) Includes loans held for sale. | |||||||||||||||
Management Outlook; CEO Eric Sprink
“As we look to the latter half of 2025 and beyond, we expect to see additional new partner engagements, given that our CCBX pipeline remains strong with high-quality opportunities. We are committed to continuing to invest in our technology and risk management infrastructure to support our growth in the BaaS sector which is expected to produce future efficiencies, automation and cost reductions as we grow. The improvement in the performance of the CCBX portfolio and lower historical loss factors within the CCBX portfolio are positive indicators that our risk reduction and credit improvement efforts are proving effective, alongside the fraud and credit indemnifications provided by our partners. Additionally, we saw an increase of $512,000, or 8.2%, from the three months ended March 31, 2025 in BaaS program income, excluding nonrecurring revenue, namely in transaction and interchange income. We anticipate this growth to continue in future periods as our partner activities expand and grow.” said CEO Eric Sprink.
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 29 relationships, at varying stages, including two partners in testing, two in implementation/onboarding, and five signed LOI as of June 30, 2025. We continue to refine the criteria for CCBX partnerships, exploring relationships with larger and more established partners, with experienced management teams, existing customer bases and strong financial positions. We also will consider promising medium and smaller sized partners that align with our approach and terms including financial wherewithal and will continue to exit relationships where it makes sense for us to do so.
While we explore relationships with new partners we continue to expand our product offerings with existing CCBX partners. As we become more proficient in the BaaS space we aim to cultivate new relationships that align with our long-term goals. We believe that a strategy of adding new partnerships and launching new products with existing partners allows us to expand and grow our customer base with a modest increase in regulatory risk given our operational history with them. Increases in partner activity/transaction counts is positively impacting noninterest income and we expect this trend to continue as current products grow and new products are introduced. We plan to continue selling 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 loans, and will continue this strategy to provide an on-going revenue source with no on balance sheet risk or capital requirement.
As we build our deposit base, we will be able to sweep deposits off and on the balance sheet as needed. This deposit sweep capability allows us to better manage liquidity and deposit programs. At June 30, 2025 we swept off $478.7 million in deposits for FDIC insurance and liquidity purposes. Robinhood has entered the production testing phase for its suite of deposit products, signaling continued momentum in our strategic partnership pipeline. Dave finalized production testing in Q2 and is poised to initiate its beta launch, expanding our footprint in digital banking solutions. The introduction of theses products are expected to diversify and grow deposits.
The following table illustrates the activity and evolution in CCBX relationships for the periods presented.
| As of | |||
| (unaudited) | June 30, 2025 | March 31, 2025 | June 30, 2024 |
| Active | 20 | 19 | 19 |
| Friends and family / testing | 2 | 2 | 1 |
| Implementation / onboarding | 2 | 3 | 1 |
| Signed letters of intent | 5 | 1 | 0 |
| Total CCBX relationships | 29 | 25 | 21 |
CCBX loans increased $29.5 million, or 1.8%, to $1.68 billion despite selling $1.30 billion in loans during the three months ended June 30, 2025. In accordance with the program agreement for one partner, we are responsible for losses on 5% of that portfolio. At June 30, 2025 the portion of that portfolio for which we are responsible represented $19.8 million in loans.
The following table details the CCBX loan portfolio:
| CCBX | As of | ||||||||||||||||||||
| June 30, 2025 | March 31, 2025 | June 30, 2024 | |||||||||||||||||||
| (dollars in thousands; unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Commercial and industrial loans: | |||||||||||||||||||||
| Capital call lines | $ | 199,675 | 11.9 | % | $ | 133,466 | 8.1 | % | $ | 109,133 | 7.7 | % | |||||||||
| All other commercial & industrial loans | 26,142 | 1.6 | 29,702 | 1.8 | 41,757 | 3.0 | |||||||||||||||
| Real estate loans: | |||||||||||||||||||||
| Residential real estate loans | 234,786 | 14.0 | 285,355 | 17.3 | 287,950 | 20.4 | |||||||||||||||
| Consumer and other loans: | |||||||||||||||||||||
| Credit cards | 533,925 | 31.8 | 532,775 | 32.2 | 549,241 | 39.0 | |||||||||||||||
| Other consumer and other loans | 686,321 | 40.7 | 670,026 | 40.6 | 422,136 | 29.9 | |||||||||||||||
| Gross CCBX loans receivable | 1,680,849 | 100.0 | % | 1,651,324 | 100.0 | % | 1,410,217 | 100.0 | % | ||||||||||||
| Net deferred origination (fees) costs | (569 | ) | (498 | ) | (438 | ) | |||||||||||||||
| Loans receivable | $ | 1,680,280 | $ | 1,650,826 | $ | 1,409,779 | |||||||||||||||
| Loan Yield - CCBX (1)(2) | 16.22 | % | 16.88 | % | 17.75 | % | |||||||||||||||
| (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 June 30, 2025, includes an increase of $66.2 million, or 49.6%, in capital call lines as a result of normal balance fluctuations and business activities, a decrease of $50.6 million, or 17.7%, in residential real estate loans and an increase of $17.4 million or 1.5%, in other consumer and other loans. We continue to monitor and manage the CCBX loan portfolio, and sold $1.30 billion in CCBX loans during the quarter ended June 30, 2025 compared to sales of $744.6 million in the quarter ended March 31, 2025. We continue to reposition ourselves by managing CCBX credit and concentration levels in an effort to optimize our loan portfolio earnings and generate off balance sheet fee income. CCBX loan yield decreased 0.67% for the quarter ended June 30, 2025 compared to the quarter ended March 31, 2025 as a result of an increase in lower rate capital call lines and overall mix of loans compared to the quarter ended March 31, 2025, these loans bear a lower rate of interest, but have less credit risk due to the way the loans are structured compared to other commercial loans.
The following chart shows the growth in credit card accounts that generate fee income. This includes accounts with balances, which are included in our loan totals, and accounts that have been sold and have no corresponding balance in our loan totals, and that generate fee income.
The following chart shows the growth in active CCBX debit cards which are sources of interchange income.
The following table details the CCBX deposit portfolio:
| CCBX | As of | ||||||||||||||||||||
| June 30, 2025 | March 31, 2025 | June 30, 2024 | |||||||||||||||||||
| (dollars in thousands; unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Demand, noninterest bearing | $ | 60,448 | 2.6 | % | $ | 58,416 | 2.6 | % | $ | 62,234 | 3.0 | % | |||||||||
| Interest bearing demand and money market | 2,231,159 | 94.5 | 2,145,608 | 94.6 | 1,989,105 | 96.7 | |||||||||||||||
| Savings | 51,523 | 2.2 | 16,625 | 0.7 | 5,150 | 0.3 | |||||||||||||||
| Total core deposits | 2,343,130 | 99.3 | 2,220,649 | 97.9 | 2,056,489 | 100.0 | |||||||||||||||
| Other deposits | 17,013 | 0.7 | 46,359 | 2.1 | — | — | |||||||||||||||
| Total CCBX deposits | $ | 2,360,143 | 100.0 | % | $ | 2,267,008 | 100.0 | % | $ | 2,056,489 | 100.0 | % | |||||||||
| Cost of deposits (1) | 3.96 | % | 4.01 | % | 4.92 | % | |||||||||||||||
| (1) Cost of deposits is annualized for the three months ended for each period presented. | |||||||||||||||||||||
CCBX deposits increased $93.1 million, or 4.1%, in the three months ended June 30, 2025 to $2.36 billion as a result of growth and normal balance fluctuations. This excludes the $478.7 million in CCBX deposits that were transferred off balance sheet for increased Federal Deposit Insurance Corporation ("FDIC") insurance coverage and sweep purposes, compared to $406.3 million for the quarter ended March 31, 2025. 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 June 30, 2025, the community bank saw net loans decrease $6.5 million, or 0.3%, to $1.86 billion, as a result of normal balance fluctuations.
The following table details the Community Bank loan portfolio:
| Community Bank | As of | ||||||||||||||||||||
| June 30, 2025 | March 31, 2025 | June 30, 2024 | |||||||||||||||||||
| (dollars in thousands; unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Commercial and industrial loans | $ | 149,926 | 8.0 | % | $ | 149,104 | 8.0 | % | $ | 144,436 | 7.5 | % | |||||||||
| Real estate loans: | |||||||||||||||||||||
| Construction, land and land development loans | 194,150 | 10.4 | 166,551 | 8.9 | 173,064 | 9.0 | |||||||||||||||
| Residential real estate loans | 198,844 | 10.7 | 202,920 | 10.8 | 229,639 | 12.0 | |||||||||||||||
| Commercial real estate loans | 1,310,882 | 70.2 | 1,340,647 | 71.6 | 1,357,979 | 70.8 | |||||||||||||||
| Consumer and other loans: | |||||||||||||||||||||
| Other consumer and other loans | 12,230 | 0.7 | 13,326 | 0.7 | 14,220 | 0.7 | |||||||||||||||
| Gross Community Bank loans receivable | 1,866,032 | 100.0 | % | 1,872,548 | 100.0 | % | 1,919,338 | 100.0 | % | ||||||||||||
| Net deferred origination fees | (5,982 | ) | (6,015 | ) | (7,304 | ) | |||||||||||||||
| Loans receivable | $ | 1,860,050 | $ | 1,866,533 | $ | 1,912,034 | |||||||||||||||
| Loan Yield(1) | 6.53 | % | 6.53 | % | 6.52 | % | |||||||||||||||
| (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 loan categories decreased $29.8 million in commercial real estate loans and $1.1 million in consumer and other loans, partially offset by an increase of $27.6 million in construction, land and land development loans and $822,000 in commercial and industrial loans, during the quarter ended June 30, 2025.
The following table details the community bank deposit portfolio:
| Community Bank | As of | ||||||||||||||||||||
| June 30, 2025 | March 31, 2025 | June 30, 2024 | |||||||||||||||||||
| (dollars in thousands; unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Demand, noninterest bearing | $ | 494,907 | 31.9 | % | $ | 481,214 | 31.5 | % | $ | 531,555 | 35.7 | % | |||||||||
| Interest bearing demand and money market | 545,655 | 35.1 | 560,416 | 36.8 | 876,668 | 59.0 | |||||||||||||||
| Savings | 57,933 | 3.7 | 59,493 | 3.9 | 63,627 | 4.3 | |||||||||||||||
| Total core deposits | 1,098,495 | 70.7 | 1,101,123 | 72.2 | 1,471,850 | 99.0 | |||||||||||||||
| Other deposits | 440,975 | 28.4 | 407,391 | 26.7 | 1 | 0.0 | |||||||||||||||
| Time deposits less than $100,000 | 5,299 | 0.3 | 5,585 | 0.4 | 6,741 | 0.5 | |||||||||||||||
| Time deposits $100,000 and over | 8,659 | 0.6 | 10,122 | 0.7 | 8,351 | 0.5 | |||||||||||||||
| Total Community Bank deposits | $ | 1,553,428 | 100.0 | % | $ | 1,524,221 | 100.0 | % | $ | 1,486,943 | 100.0 | % | |||||||||
| Cost of deposits(1) | 1.77 | % | 1.76 | % | 1.77 | % | |||||||||||||||
| (1) Cost of deposits is annualized for the three months ended for each period presented. | |||||||||||||||||||||
Community bank deposits increased $29.2 million, or 1.9%, during the three months ended June 30, 2025 to $1.55 billion. The community bank segment includes noninterest bearing deposits of $494.9 million, or 31.9%, of total community bank deposits, resulting in a cost of deposits of 1.77%, which compared to 1.76% for the quarter ended March 31, 2025.
Net Interest Income and Margin Discussion
Net interest income was $76.7 million for the quarter ended June 30, 2025, an increase of $675,000, or 0.9%, from $76.1 million for the quarter ended March 31, 2025, and an increase of $10.6 million, or 16.0%, from $66.2 million for the quarter ended June 30, 2024. Net interest income compared to March 31, 2025, was higher due to an increase in average loans receivable. The increase in net interest income compared to June 30, 2024 was largely related to growth in loans receivable and a reduction in cost of funds as a result of lower interest rates.
Net interest margin was 7.06% for the three months ended June 30, 2025, compared to 7.48% for the three months ended March 31, 2025, due primarily to a decrease in loan yield. Net interest margin, net of BaaS loan expense, (a reconciliation of the non-GAAP measures are set forth in the Non-GAAP Financial Measures section of this earnings release) was 4.07% for the three months ended June 30, 2025, compared to 4.28% for the three months ended March 31, 2025. Net interest margin was 7.12% for the three months ended June 30, 2024. The decrease in net interest margin for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was largely due to a decrease in loan yield, partially offset by lower cost of funds. The $66.2 million of growth in lower rate capital call lines and overall mix of loans contributed to the decrease in net interest margin for the three months ended June 30, 2025. Capital call lines grew 49.6% quarter-over-quarter to $199.7 million, or 11.9% of total CCBX loans versus 8.1% in the prior quarter. These loans carry a lower interest rate, but also lower credit costs.
Interest and fees on loans receivable increased $720,000, or 0.7%, to $98.9 million for the three months ended June 30, 2025, compared to $98.1 million for the three months ended March 31, 2025, as a result of loan growth. Interest and fees on loans receivable increased $8.0 million, or 8.8%, compared to $90.9 million for the three months ended June 30, 2024, due to an increase in outstanding balances. Net interest margin, net of BaaS loan expense (a reconciliation of the non-GAAP measures are set forth in the Non-GAAP Financial Measures section of this earnings release) decreased 0.21% for the three months ended June 30, 2025, compared to the three months ended March 31, 2025 and increased 0.07% compared the three months ended June 30, 2024.
The following tables illustrate how net interest margin and loan yield is affected by BaaS loan expense:
| Consolidated | As of and for the Three Months Ended | |||||||||||
| (dollars in thousands; unaudited) | June 30 2025 | March 31 2025 | June 30 2024 | |||||||||
| Net interest margin, net of BaaS loan expense: | ||||||||||||
| Net interest margin (1) | 7.06 | % | 7.48 | % | 7.12 | % | ||||||
| Earning assets | 4,356,591 | 4,124,065 | 3,736,579 | |||||||||
| Net interest income (GAAP) | 76,737 | 76,062 | 66,172 | |||||||||
| Less: BaaS loan expense | (32,483 | ) | (32,507 | ) | (29,011 | ) | ||||||
| Net interest income, net of BaaS loan expense(2) | $ | 44,254 | $ | 43,555 | $ | 37,161 | ||||||
| Net interest margin, net of BaaS loan expense (1)(2) | 4.07 | % | 4.28 | % | 4.00 | % | ||||||
| Loan income net of BaaS loan expense divided by average loans: | ||||||||||||
| Loan yield (GAAP)(1) | 11.11 | % | 11.33 | % | 11.22 | % | ||||||
| Total average loans receivable | $ | 3,567,823 | $ | 3,511,724 | $ | 3,258,042 | ||||||
| Interest and earned fee income on loans (GAAP) | 98,867 | 98,147 | 90,879 | |||||||||
| BaaS loan expense | (32,483 | ) | (32,507 | ) | (29,011 | ) | ||||||
| Net loan income(2) | $ | 66,384 | $ | 65,640 | $ | 61,868 | ||||||
| Loan income, net of BaaS loan expense, divided by average loans (1)(2) | 7.46 | % | 7.58 | % | 7.64 | % | ||||||
| (1) Annualized calculations shown for periods presented. | ||||||||||||
| (2) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release. | ||||||||||||
Average investment securities decreased $900,000 to $46.3 million compared to the three months ended March 31, 2025 and decreased $3.5 million compared to the three months ended June 30, 2024 as a result of principal paydowns.
Cost of funds was 3.13% for the quarter ended June 30, 2025, an increase of 2 basis points from the quarter ended March 31, 2025 and a decrease of 47 basis points from the quarter ended June 30, 2024. Cost of deposits for the quarter ended June 30, 2025 was 3.10%, compared to 3.08% for the quarter ended March 31, 2025, and 3.58% for the quarter ended June 30, 2024. The decreased cost of funds and deposits compared to June 30, 2024 were largely due to the reductions in the Fed funds rate in 2024.
The following table
