Coastal Financial Corporation Q1 2025 Earnings

Coastal Financial Corporation (Nasdaq: CCB) reported Q1 2025 net income of $9.7 million ($0.63 per diluted share), down from $13.4 million in Q4 2024 but up from $6.8 million in Q1 2024. The decline from the previous quarter was due to elevated onboarding and technology investment costs, while the year-over-year improvement reflects growing revenues from CCBX (Banking-as-a-Service).

Key highlights:
- CCBX fee income reached $6.3 million in Q1 2025, a 13% increase from Q4 and 55% higher than Q1 2024.
- Total deposits rose to $3.79 billion, up $205.9 million from Q4 2024. The T-Mobile deposit program launched April 1 and is expected to boost Q2 deposits.
- Loan sales of $744.6 million were completed, mainly of credit card receivables. Fee income from servicing continues.
- Net interest income grew 5.1% quarter-over-quarter to $76.1 million. Net interest margin increased to 7.48% from 7.23%.
- CCBX loan yield remained high at 16.88%, though after deducting BaaS loan expenses, the effective yield was 8.79%.
- Total noninterest income was $63.5 million, down from $74.1 million in Q4, primarily due to a $10.8 million drop in credit and fraud enhancement reimbursements.
- Noninterest expense increased to $72.0 million, driven by growth-related hiring and legal/professional fees.
- Asset quality improved: nonperforming loans declined to 1.60% of total loans (from 1.80% in Q4), and 98.8% of CCBX loan credit risk remains indemnified.

Segment performance:
- CCBX deposits grew 9.8% to $2.27 billion.
- CCBX loans increased $47.2 million despite large loan sales.
- Community bank loans declined slightly to $1.87 billion due to normal fluctuations, while deposits remained steady at $1.52 billion.

Outlook:
Management expects continued elevated expenses into Q2 due to new partner onboarding and tech investments. The T-Mobile and upcoming Robinhood partnerships are expected to drive deposit and fee income growth in the second half of 2025. Strong indemnification and rising recurring fee income are expected to support performance amid uncertain macro conditions.