Coastal Financial slides 3.5% on mixed Q4, EPS misses estimates
Banking-as-a-Service segment deposits surge 7.7% but efficiency ratio and ROA decline
Coastal Financial Corporation shares fell 3.5% to $100.95 on Thursday after the regional bank reported mixed fourth-quarter 2025 results, with earnings per share falling short of analyst expectations despite strong performance in its Banking-as-a-Service segment.
The Everett, Washington-based bank reported diluted earnings per share of $0.82 for the quarter, below analyst estimates that ranged from $1.03 to $1.19. Net income declined 6% year-over-year to $12.6 million, down from $13.4 million in the prior year's fourth quarter, according to analyst research from MarketBeat.
Revenue totaled $166.6 million, comprised of $107.9 million in interest and dividend income and $58.7 million in noninterest income. Some analysts, including Zacks Investment Research, reported revenue at $143.27 million against a consensus estimate of $149.7 million, reflecting differing measurement methodologies.
The company's CCBX BaaS segment emerged as a bright spot, with deposits surging 7.7% quarter-over-quarter to $2.56 billion. Program fee income increased 10.7% to $8.4 million, driven in part by Robinhood's deposit program launch. The segment's net interest margin improved to 3.59% from 3.38% in the third quarter, while the cost of deposits declined to 3.52% from 3.90%.
"We expect continued growth as existing programs scale, new products are introduced, and we leverage our operating history in the BaaS space for disciplined, sustainable expansion," Chief Executive Officer Eric Sprink said in the earnings announcement.
Consolidated net interest margin improved modestly to 7.03% from 7.00% in the third quarter, and total deposits grew 4.3% to $4.14 billion. However, key profitability metrics deteriorated. Return on average assets declined to 1.09% from 1.19% in the third quarter and 1.30% in the year-ago period. The efficiency ratio worsened to 52.75% from 48.50% in the prior quarter, attributed in part to changes in credit enhancement on CCBX loans.
The company also incurred $2.5 million in restructuring costs during the quarter. Noninterest expenses rose as Coastal invests in artificial intelligence capabilities and evaluates opportunities in digital assets and digital deposit solutions, Sprink noted.
Prior to the earnings release, analysts maintained a generally positive outlook on the stock. MarketBeat data showed a consensus "Buy" rating with an average 12-month price target of $125.17, though Zacks assigned a Sell rating citing unfavorable trends in earnings estimate revisions.
Investor sentiment heading into the report was tempered by insider selling activity. Sprink sold 12,402 shares in late January, while Chief Financial Officer Joel Edwards sold 1,300 shares on January 28, according to insider transaction reports.
Looking ahead, management indicated they plan to continue selling loans to balance partner and lending limits while managing credit quality. Increases in partner activity and transaction counts are expected to positively impact noninterest income, the company said.
Coastal Financial operates as a banking holding company through its subsidiary, Coastal Community Bank, serving small and medium-sized enterprises and individuals in the Puget Sound region. The stock has a 52-week range of $76.11 to $120.05 and currently trades at approximately 34.5 times trailing earnings.