Coastal Financial reported a second-quarter GAAP net loss of $42.1 million, or $2.76 per diluted share, driven by $68.8 million in pre-tax adjustments tied to a defined Banking-as-a-Service partner and its consumer loan portfolio. The adjustments included a $46 million valuation adjustment to a credit enhancement asset and a $22.8 million provision for credit losses related to the partner's indemnification agreement. Management said the issue appears isolated to one of more than 25 partnerships and found no evidence of impropriety, while the company pursues contractual remedies and evaluates recovery options. The affected portfolio contains about $500 million in consumer loans, with resolution potentially taking from one or two quarters to 12 to 18 months. Despite the charge, core operations grew: net interest income rose 7.2% sequentially to a record $89.4 million, loans increased 9% to approximately $4.21 billion, and BaaS program income climbed 10.3%. Coastal remained well-capitalized but announced leadership changes including CFO Brandon Soto's departure and the return of Joel Edwards as interim CFO.
Coastal Financial CorpReported $42.1M GAAP net loss due to $68.8M pre-tax adjustments from a BaaS partner charge, including valuation adjustment and credit loss provision.