Coastal Financial Corporation is the Everett, Washington-based holding company for Coastal Community Bank that operates a community-focused bank segment with an industry leading banking as a service (BaaS) segment through the CCBX platform, and the company is in the middle of a fiscal second quarter that demonstrates the kind of BaaS-credit-isolation pivot the community bank cohort has been waiting for. Q2 2026 net loss of $42.1 million, or $2.76 per diluted common share, was a clean swing from the Q1 2026 net income of $12.0 million, or $0.78 per diluted common share, and the prior-year quarter's net income of $11.0 million, or $0.71 per diluted common share. The Q2 2026 net loss is primarily attributable to a $68.8 million credit expense related to a single, isolated CCBX partner relationship, with the credit expense including a $22.8 million provision for credit losses and a $46.0 million valuation adjustment to the credit enhancement asset. The combination of the record Q2 2026 net interest income of $89.4 million, the 9.0 percent loan growth, the $12.0 million of Q2 2026 BaaS program fee income (up 10.3 percent quarter over quarter), the $4.26 billion of swept off-balance sheet deposits for FDIC insurance and liquidity purposes, and the decisive action on the single CCBX partner is the cleanest single-sentence read on what the BaaS-focused community bank business model is producing, and the combination is the source of the operating profile the equity offers the buy-side.
The numbers tell the story with the kind of operational detail the BaaS-focused community bank equity has been waiting for. The Q2 2026 net interest income of $89.4 million was 16.5 percent above the prior-year quarter's $76.7 million, with the growth reflecting the 9.0 percent loan growth and the BaaS platform expansion. The H1 2026 net interest income of $172.7 million was 13.0 percent above the prior-year period's $152.8 million. The Q2 2026 provision for credit losses of $92.2 million was 186.1 percent above the prior-year quarter's $32.2 million, with the increase reflecting the $68.8 million credit expense on the single CCBX partner. The H1 2026 provision for credit losses of $143.6 million was 63.1 percent above the prior-year period's $88.0 million.
The Q2 2026 net interest income after provision for credit losses of -$2.8 million was a clean swing from the prior-year quarter's $44.5 million, and the H1 2026 net interest income after provision for credit losses of $29.2 million was 55.0 percent below the prior-year period's $64.8 million. The Q2 2026 noninterest income dynamics included the $12.0 million of BaaS program fee income (up 10.3 percent quarter over quarter), the service charges and fees of $1.0 million, and the other noninterest income components.
The Q2 2026 total deposits of $4,861.9 million were 17.3 percent above the prior year-end's $4,144.2 million, and the Q2 2026 total loans receivable, net of $3,994.5 million were 11.6 percent above the prior year-end's $3,580.0 million. The Q2 2026 total assets of $5,456.2 million were 15.1 percent above the prior year-end's $4,741.4 million. The Q2 2026 reciprocal deposit accounts of $618.8 million were 34.4 percent above the prior year-end's $460.3 million.
The Q2 2026 credit enhancement asset of $154.3 million, the Q2 2026 CCBX receivable of $28.1 million, the Q2 2026 bank-owned life insurance of $14.2 million, and the broader balance sheet items reflect the typical BaaS-focused community bank structure. The Q2 2026 $4.26 billion of swept off-balance sheet deposits for FDIC insurance and liquidity purposes is the cleanest single read on the BaaS platform scale the company is producing.
The Q2 2026 capital structure actions include the $1.2 million in net income from the swept deposits, the technology modernization initiatives including the $4.4 million of capitalized software amortization due to shortened useful lives, and the broader infrastructure investment the company is producing. The CEO commentary in the most recent earnings release described the company as having "decisive action we took on a single non-public company partner relationship" and as remaining "focused on disciplined and sustainable growth by partnering with organizations that align with our long-term strategy."
The question the next four quarters resolve is whether the company can recover from the Q2 2026 credit expense and resume the BaaS platform growth trajectory, and whether the swept deposits and the BaaS program income can continue to grow. A Q3 2026 print that shows the BaaS platform continuing to grow and the credit expense not recurring would confirm the operating profile is sustainable. A Q3 2026 print that shows the BaaS platform slowing or the credit expense recurring would force the market to reprice the equity for a more modest terminal value.