Executive Summary

Q2 2025 EPS was $0.71, up sequentially from $0.63 but down year over year from $0.84 as net interest income held steady, provisions declined, and noninterest income fell with lower BaaS credit enhancement recognition . Versus S&P Global consensus, EPS missed ($0.71 vs $0.84*) and revenue missed materially ($87.22M* vs $151.37M*), likely reflecting differing revenue definitions for banks and the normalization of credit enhancement income (see Estimates Context) [Values retrieved from S&P Global].
Net interest margin compressed to 7.06% (from 7.48% in Q1) on lower CCBX loan yields and a mix shift toward lower‑rate but lower‑risk capital call lines; ROA improved to 0.99% on lower provisions .
BaaS/CCBX execution advanced: program fee income ex nonrecurring grew 8.2% QoQ; deposit programs (Robinhood in production testing; Dave beta next) and two new partners in testing support medium‑term fee growth; $1.30B of CCBX loans were sold to balance risk/capital and generate off‑balance‑sheet fee income .
Management expects expense growth to moderate in 2H25 as onboarding costs subside and new programs begin generating revenue; the near‑term stock narrative hinges on margin stabilization and sustained partner ramp versus lower recognized credit enhancements .

What Went Well and What Went Wrong

What Went Well

CCBX momentum and pipeline: “We had another quarter of quality deposit growth… and our CCBX program fee income, excluding nonrecurring revenue, increased 8.2% compared to the prior quarter.” – CEO Eric Sprink .
Credit cost optics improved: Provision fell to $32.2M (from $55.8M) as CCBX performance improved and originated loans skewed higher quality, reducing historical loss factors .
Funding and liquidity: Average deposits rose 6.0% QoQ to $3.93B, CCBX deposits grew 4.1% QoQ to $2.36B (excludes $478.7M swept off‑balance sheet), and available contingent liquidity totaled ~$693M at quarter end .

What Went Wrong

Margin compression: NIM fell to 7.06% (from 7.48%) due to lower CCBX loan yield and mix shift to lower‑rate capital call lines; consolidated net interest margin net of BaaS loan expense also declined 21 bps QoQ to 4.07% .
Noninterest income decline: Total noninterest income dropped to $42.7M (from $63.5M) primarily on a $22.4M decline in BaaS credit enhancements as provisions normalized; partially offset by higher program and fraud enhancement income .
Efficiency deterioration: Efficiency ratio rose to 60.98% (from 51.59% in Q1) with onboarding/investment costs outpacing near‑term revenue recognition from new programs .

Financial Results

Metric	Q2 2024	Q4 2024	Q1 2025	Q2 2025
Net Interest Income ($M)	66.17	66.52	76.06	76.74
Noninterest Income ($M)	69.14	76.76	63.48	42.69
Total Net Revenue (NII + Noninterest) ($M)	135.31	143.27	139.54	119.43
Provision for Credit Losses ($M)	62.33	61.87	55.78	32.21
Noninterest Expense ($M)	57.96	64.21	71.99	72.83
Net Income ($M)	11.60	13.37	9.73	11.03
Diluted EPS ($)	0.84	0.94	0.63	0.71
ROA (%)	1.21	1.30	0.93	0.99
Net Interest Margin (%)	7.12	6.65	7.48	7.06

Segment and BaaS KPIs

KPI	Q2 2024	Q4 2024	Q1 2025	Q2 2025
CCBX Program Income ($M)	5.32	8.21	6.28	7.29
BaaS Credit Enhancements ($M)	60.83	62.10	53.65	31.27
BaaS Loan Expense ($M)	29.01	24.86	32.51	32.48
CCBX Deposits ($B)	2.06	2.06	2.27	2.36
CCBX Loan Yield (GAAP, %)	17.75	15.28	16.88	16.22
Consolidated NIM net of BaaS Loan Expense (%)	4.00	4.16	4.28	4.07

Notes: Total Net Revenue shown as Net Interest Income + Total Noninterest Income from company statements. CCBX loan yield excludes the impact of BaaS loan expense per company methodology .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Expense trajectory	2H 2025	None quantified	Expect expense growth to “moderate considerably” as onboarding costs subside and new programs begin to produce revenue	Qualitative “moderate”
Partner pipeline	2025–2026	N/A	Two partners in testing, two in implementation/onboarding, five LOIs; continued expansion with larger partners	Qualitative update
Deposit products	2H 2025 onward	Robinhood “expected to launch in back half 2025” (Q1)	Robinhood in production testing; Dave beta after finishing Q2 testing	Timing update
Credit risk/indemnities	Ongoing	High indemnification levels	Contracts fully indemnify fraud and ~98.8% against credit risk	Reaffirmed

No formal numeric guidance (revenue, margins, OpEx dollars, tax rate) was provided in Q2 materials .

Earnings Call Themes & Trends

Transcript for Q2 2025 was not available on the company site or wire services, so themes are drawn from the press release and investor presentation .

Topic	Previous Mentions (Q4’24 and Q1’25)	Current Period (Q2’25)	Trend
BaaS partner pipeline	24 relationships with 3 LOIs; onboarding costs front‑loaded (Q4); 25 relationships with 1 LOI; onboarding to continue into Q2 (Q1)	29 relationships: 2 testing, 2 onboarding, 5 LOIs; continued emphasis on larger, established partners	Improving pipeline breadth
Fee mix and program income	Program fees up 56.9% y/y in 2024; interchange/transaction ramp expected (Q4)	Program fee income ex nonrecurring up 8.2% QoQ; interchange growth; some nonrecurring in Q2	Growing recurring base
Credit enhancements/provisioning	Elevated CCBX provisions with indemnities offset (Q4/Q1)	Provision down sharply QoQ on improved portfolio performance; lower credit enhancement recognition	Normalizing provisions
Margin dynamics	NIM net of BaaS expense stabilized/improved modestly late 2024/early 2025	NIM compressed on mix to lower‑rate capital call lines; net of BaaS expense down 21 bps QoQ	Near‑term pressure
Deposit programs	T‑Mobile launched Apr 1; Robinhood planned for 2H25 (Q1)	Robinhood in production testing; Dave beta next; $478.7M deposits swept for FDIC/liquidity	Advancing launches, active sweeps
Capital and liquidity	Raised $98M equity in Q4; CET1 up (Q4)	Well‑capitalized; $642.7M borrowing capacity plus $50M line; cash of $719.8M	Solid buffers maintained

Management Commentary

“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… We had another quarter of quality deposit growth… and our CCBX program fee income, excluding nonrecurring revenue, increased 8.2% compared to the prior quarter.” – CEO Eric Sprink .
“As we look to the latter half of 2025 and beyond, we expect to see additional new partner engagements… invest in our technology and risk management infrastructure… The improvement in the performance of the CCBX portfolio and lower historical loss factors… are positive indicators… We anticipate [program income] growth to continue as our partner activities expand and grow.” – CEO Eric Sprink .

Q&A Highlights

The company did not publish a Q2 2025 earnings call transcript on its IR site and none was found via wire services, so Q&A specifics and any intra‑quarter guidance clarifications were not available at the time of this analysis .

Estimates Context

Metric	Q2 2025 Consensus	Q2 2025 Actual	Surprise
Primary EPS	$0.84*	$0.71*	-$0.13 (Miss)*
Revenue ($M)	$151.37M*	$87.22M*	-$64.15M (Miss)*
EPS Estimates (#)	4*	—	—
Revenue Estimates (#)	3*	—	—
Target Price (Avg)	$131.20*	$131.20*	—

Values retrieved from S&P Global. Note: S&P “Revenue” for banks may reflect a data provider definition that differs from “Net Interest Income + Noninterest Income” in company filings; consequently, SPGI actual revenue can diverge from totals computed from company statements [Values retrieved from S&P Global].

Third‑party coverage around print noted misses vs consensus, consistent with SPGI data .

Key Takeaways for Investors

Normalizing provisions are boosting earnings quality, but recognized BaaS credit enhancements fell, reducing noninterest income and elevating the efficiency ratio near term .
Margin pressure stems from mix into lower‑rate capital call lines and softer CCBX loan yields; stabilization depends on partner program monetization and interchange/transaction fee ramp in 2H25 .
CCBX pipeline breadth (29 relationships, 5 LOIs) plus deposit program rollouts (Robinhood, Dave) underpins medium‑term fee growth and deposit diversification, with heavy onboarding costs expected to moderate in 2H25 .
Balance sheet/liquidity remain strong (cash ~$720M; borrowing capacity >$690M; well‑capitalized), enabling continued program growth and selective loan sales to manage capital and credit .
Estimate resets likely: EPS and revenue misses vs SPGI suggest near‑term consensus revisions unless margin and fee momentum improve quickly; watch updates on net BaaS loan income and efficiency [Values retrieved from S&P Global] .
Trading lens: near‑term catalysts include tangible signs of NIM stabilization, interchange/transaction growth outpacing onboarding expense, and updates on large‑partner launches; sentiment near term was negative post‑print per third‑party summaries .

Citations

Company Q2 2025 press release/8‑K tables and commentary: .
Q1 2025 and Q4 2024 for trend/YoY: ; .
Investor presentation and IR links: .
Estimates (S&P Global): Values marked with an asterisk are from S&P Global.

COASTAL FINANCIAL CORP (CCB)·Q2 2025 Earnings Summary