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COASTAL FINANCIAL CORP

COASTAL FINANCIAL CORPCCB決算レポート

Nasdaq · 金融 · 国有商業銀行

Fidelity National Financial, Inc., is an American provider of title insurance and settlement services to the real estate and mortgage industries. A Fortune 500 company, Fidelity National Financial generated approximately $8.469 billion in annual revenue in 2019 from its title and real estate-related operations. The company was the first instance of an attorney licensed by a Native American Tribe being certified as "authorized house counsel" in the state of Florida.

What changed in COASTAL FINANCIAL CORP's 10-K — 2024 vs 2025

Top changes in COASTAL FINANCIAL CORP's 2025 10-K

495 paragraphs added · 615 removed · 407 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

296 edited+40 added−159 removed147 unchanged
BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements, and servicing CCBX loans.
BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements, and servicing CCBX loans.
BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans.
BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans.
Because expected credit losses are estimated over the contractual life adjusted for estimated prepayments, determination of the life of the loan may significantly affect the ACL.
Because expected credit losses are estimated over the contractual life adjusted for estimated prepayments, determination of the life of the loan may significantly affect the ACL.
In addition, the Company incorporates a reasonable and supportable forecast. • CCBX Portfolio: The Bank calculates the ACL on loans on an aggregate basis based on each partner and product level, segmenting the risk inherent in the CCBX portfolio based on qualitative and quantitative trends in the portfolio.
In addition, the Company incorporates a reasonable and supportable forecast. • CCBX Portfolio: The Bank calculates the ACL on loans on an aggregate basis based on each partner and product level, segmenting the risk inherent in the CCBX portfolio based on qualitative and quantitative trends in the portfolio.
Also included in the ACL are qualitative reserves to cover losses that are expected, but in the Company’s assessment may not be adequately represented in the quantitative method. For example, factors that the Company considers include environmental business conditions, borrower’s financial condition, credit rating and the volume and severity of past due loans and nonaccrual loans.
Also included in the ACL are qualitative reserves to cover losses that are expected, but in the Company’s assessment may not be adequately represented in the quantitative method. For example, factors that the Company considers include environmental business conditions, borrower’s financial condition, credit rating and the volume and severity of past due loans and nonaccrual loans.
The board of directors adopted a policy requiring management take various actions, in its discretion, to return the liquidity ratio 10% or greater within 10 business days of the liquidity ratio being below 10% before the Bank’s liquidity contingency funding plan would be invoked.
The board of directors adopted a policy requiring management take various actions, in its discretion, to return the liquidity ratio to 10% or greater within 10 business days of the liquidity ratio being below 10% before the Bank’s liquidity contingency funding plan would be invoked.
When the provision for credit losses - loans and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements) in recognition of the CCBX partner legal commitment to indemnify or reimburse losses.
When the provision for credit losses - loans and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements) in recognition of the CCBX partner legal commitment to indemnify or reimburse losses.
The credit enhancement asset is relieved as credit enhancement payments and recoveries are received from the CCBX partner or taken from the partner's cash reserve account. Agreements with our CCBX partners also provide protection to the Bank from fraud by indemnifying or reimbursing incurred fraud losses. BaaS fraud includes noncredit fraud losses on loans and deposits originated through partners.
The credit enhancement asset is relieved as credit enhancement payments and recoveries are received from the CCBX partner or taken from the partner's cash reserve account. Agreements with our CCBX partners also provide protection to the Bank from fraud by indemnifying or reimbursing incurred fraud losses. BaaS fraud includes noncredit fraud losses on loans and deposits originated through partners.
Deposits We offer a variety of deposit products that have a wide range of interest rates and terms, including demand, money market, savings, and time accounts as well as IntraFi network sweep deposits. Sweep deposits enable us to provide an FDIC insured deposit option to customers that have balances in excess of the FDIC insurance limit.
Deposits We offer a variety of deposit products that have a wide range of interest rates and terms, including demand, money market, savings, and time accounts as well as network sweep deposits. Sweep deposits enable us to provide an FDIC insured deposit option to customers that have balances in excess of the FDIC insurance limit.
As of December 31, 2024, and December 31, 2023, Federal Reserve borrowings against our line of credit totaled zero. Additional loans were pledged during 2023 to significantly increase the borrowing capacity of the Bank in the event of a liquidity crisis. Federal Home Loan Bank Advances.
As of December 31, 2025, and December 31, 2024, Federal Reserve borrowings against our line of credit totaled zero. Additional loans were pledged during 2023 to significantly increase the borrowing capacity of the Bank in the event of a liquidity crisis. Federal Home Loan Bank Advances.
These consumer loans are reported out as substandard loans, 90+ days past due and still accruing. As a result of the type of loans (primarily consumer loans) originated through our CCBX partners, we anticipate that balances 90 days past due or more and still accruing will increase as those loans grow.
These consumer loans are reported as substandard loans, 90+ days past due and still accruing. As a result of the type of loans (primarily consumer loans) originated through our CCBX partners, we anticipate that balances 90 days past due or more and still accruing will increase as those loans grow.
In accordance with accounting guidance, we estimate and record a provision for probable losses for these CCBX loans. When the provision for credit losses - loans and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancement).
In accordance with accounting guidance, we estimate and record a provision for probable losses for CCBX loans. When the provision for credit losses - loans and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancement).
Our CCBX segment provides BaaS offerings that enable our broker dealer and digital financial service providers to offer their customers banking services. In exchange for providing these services, we earn fixed fees, volume-based fees and reimbursement of costs depending on the program agreement. Servicing and other BaaS fees are typically higher with new partners who have minimum contractual fees.
Our CCBX segment provides BaaS offerings that enable our digital financial service providers to offer their customers banking services. In exchange for providing these services, we earn fixed fees, volume-based fees and reimbursement of costs depending on the program agreement. Servicing and other BaaS fees are typically higher with new partners who have minimum contractual fees.
Recent Pronouncements For a discussion of the expected impact of accounting pronouncements recently adopted and accounting pronouncements recently issued but not yet adopted by us as of December 31, 2024, see “ Note 2 – Recent Accounting Standards ” in the accompanying notes to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Recent Pronouncements For a discussion of the expected impact of accounting pronouncements recently adopted and accounting pronouncements recently issued but not yet adopted by us as of December 31, 2025, see “ Note 2 – Recent Accounting Standards ” in the accompanying notes to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
GAAP requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession. 120 Table of Contents Unlike many industrial companies, substantially all of our assets and liabilities are monetary in nature.
GAAP requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession. 112 Table of Contents Unlike many industrial companies, substantially all of our assets and liabilities are monetary in nature.
Results of Operations The following discussion is intended to assist in understanding the financial condition and results of operations of the Company as of and for the year ended December 31, 2024. The information contained in this section should be read together with the December 31, 2024 audited Consolidated Financial Statements and the accompanying Notes included in Item 8.
Results of Operations The following discussion is intended to assist in understanding the financial condition and results of operations of the Company as of and for the year ended December 31, 2025. The information contained in this section should be read together with the December 31, 2025 audited Consolidated Financial Statements and the accompanying Notes included in Item 8.
Adequate cash levels are generated through profitability, repayments from loans and securities, deposit gathering activity, access to borrowing sources and periodic loan sales. 114 Table of Contents Selected Financial Information The following table shows the Company’s key performance ratios for the periods indicated.
Adequate cash levels are generated through profitability, repayments from loans and securities, deposit gathering activity, access to borrowing sources and periodic loan sales. 106 Table of Contents Selected Financial Information The following table shows the Company’s key performance ratios for the periods indicated.
The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures. As of December 31, 2024 More than Ten Years Total (dollars in thousands) Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield Securities available-for-sale: U.S.
The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures. As of December 31, 2025 More than Ten Years Total (dollars in thousands) Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield Securities available-for-sale: U.S.
Agreements with our CCBX partners provide for a credit enhancement which protects the Bank 96 Table of Contents by indemnifying or reimbursing incurred losses. Under the agreement, the CCBX partner will indemnify or reimburse the Bank for its loss/charge-off on these loans.
Agreements with our CCBX partners provide for a credit enhancement which protects the Bank 88 Table of Contents by indemnifying or reimbursing incurred losses. Under the agreement, the CCBX partner will indemnify or reimburse the Bank for its loss/charge-off on these loans.
We actively seek commercial real estate loans in our markets and our lenders are experienced in competing for these loans and managing these relationships. 89 Table of Contents We make commercial mortgage loans collateralized by owner-occupied and non-owner-occupied real estate, as well as multi-family residential loans.
We actively seek commercial real estate loans in our markets and our lenders are experienced in competing for these loans and managing these relationships. 81 Table of Contents We make commercial mortgage loans collateralized by owner-occupied and non-owner-occupied real estate, as well as multi-family residential loans.
As of December 31, 2024 and 2023, we did not own securities of any one issuer, other than the U.S. Government and its agencies, for which aggregate adjusted cost exceeded 10.0% of consolidated shareholders’ equity.
As of December 31, 2025 and 2024, we did not own securities of any one issuer, other than the U.S. Government and its agencies, for which aggregate adjusted cost exceeded 10.0% of consolidated shareholders’ equity.
Incurred losses are recorded in the allowance for credit losses, the credit enhancement asset is relieved when credit enhancement recoveries are received from the CCBX partner. Many agreements with our CCBX partners also provide protection to the Bank from fraud by absorbing incurred fraud losses.
Incurred losses are recorded in the allowance for credit losses, and the credit enhancement asset is relieved when credit enhancement payments and recoveries are received from the CCBX partner. Many agreements with our CCBX partners also provide protection to the Bank from fraud by absorbing incurred fraud losses.
However, total exposure on CCBX loans is subject to portfolio and partner maximum limits and adjusted for those limits, unused commitments are limited to $750.8 million . See " Material Cash Requirements and Capital Resources " for maximum limits on CCBX loans by category.
However, total exposure on CCBX loans is subject to portfolio and partner maximum limits and adjusted for those limits, unused commitments are limited to $560.8 million . See " Material Cash Requirements and Capital Resources " for maximum limits on CCBX loans by category.
Noninterest expense also includes operational expenses, such as legal and professional expenses, data processing and software licenses, occupancy, point of sale expense, FDIC assessment, director and staff expenses, excise taxes, marketing and other expenses.
Noninterest expense also includes operational expenses, such as legal and professional expenses, data processing and software licenses, occupancy, point of sale expenses, FDIC assessments, director and staff expenses, excise taxes, marketing and other expenses.
As described above, CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses. Agreements with our CCBX partners provide for a credit enhancement provided by the partner which protects the Bank by indemnifying or reimbursing incurred losses.
As described above, CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses. 89 Table of Contents Agreements with our CCBX partners provide for a credit enhancement provided by the partner which protects the Bank by indemnifying or reimbursing incurred losses.
Since commitments associated with commitments to extend credit and letters of credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements. As of December 31, 2024 we had $1.96 billion in commitments to extend credit, compared to $2.34 billion as of December 31, 2023.
Since commitments associated with commitments to extend credit and letters of credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements. As of December 31, 2025 we had $2.31 billion in commitments to extend credit, compared to $1.96 billion as of December 31, 2024.
Item 1. Business - Concentrations of Credit Risk section. If our partners are unable to fulfill their 57 Table of Contents contracted obligations then the Bank would be exposed to additional credit losses as a result of this counterparty risk. Management regularly evaluates and manages this counterparty risk.
Item 1. Business - Concentrations of Credit Risk section. If our partners are unable to fulfill their contracted obligations then the Bank would be exposed to additional credit losses as a result of this counterparty risk. Management regularly evaluates and manages this counterparty risk.
Fraud losses are recorded when incurred as losses in noninterest expense, and the enhancement received from the CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement. 97 Table of Contents The credit enhancement asset is an amount due from CCBX partners related to losses in the loan portfolio.
Fraud losses are recorded when incurred as losses in noninterest expense, and the enhancement received from the CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement. The credit enhancement asset is an amount due from CCBX partners related to losses in the loan portfolio.
The most directly comparable GAAP measure is net interest income. 117 Table of Contents Net interest margin, net of BaaS loan expense is a non-GAAP measure that includes the impact of BaaS loan expense on net interest rate margin. The most directly comparable GAAP measure is net interest margin.
The most directly comparable GAAP measure is net interest income. 109 Table of Contents Net interest margin, net of BaaS loan expense is a non-GAAP measure that includes the impact of BaaS loan expense on net interest rate margin. The most directly comparable GAAP measure is net interest margin.
Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.
Because performance obligations are satisfied as services are 57 Table of Contents rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.
As our CCBX activities grow, and we invest more in technology we expect some continued growth in number of employees to support these lines of business but we are also working to automate our processes to reduce and/or slow future growth in hiring.
As our CCBX activities grow and we invest more in technology, we expect some continued growth in number of employees to support these lines of business but are also working to automate our processes to reduce and/or slow future growth in hiring. Legal and Professional Expenses .
We have seen competitors increase rates on time deposits, and we have not globally matched their rates in response as we focus on growing and retaining less costly core deposits. The following table sets forth deposit balances at the dates indicated.
We have seen competitors increase rates on time deposits, and have not globally matched their rates in response as we focus on growing and retaining less costly core deposits. 96 Table of Contents The following table sets forth deposit balances at the dates indicated.
ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings.
ALCO meets 110 Table of Contents regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings.
The recording of BaaS income and expense is dependent upon the contractual agreement with each partner, however in accordance with accounting guidance the recording of certain components of BaaS income are consistent across agreements. Agreements with many of our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses.
The recording of BaaS income and expense is in accordance with accounting guidance, and is dependent upon the contractual agreement with each partner with certain components of BaaS income being consistent across agreements. Agreements with many of our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred credit and fraud losses.
The amount of collateral obtained, if considered necessary by us, upon extension of credit, is based on management’s credit evaluation of the customer. As of December 31, 2024, $1.30 billion in commitments to extend credit are unconditionally cancelable, compared to $1.63 billion at December 31, 2023. The increase in unconditionally cancelable commitments is attributed to growth in CCBX loans.
The amount of collateral obtained, if considered necessary by us, upon extension of credit, is based on management’s credit evaluation of the customer. As of December 31, 2025, $1.42 billion in commitments to extend credit are unconditionally cancelable, compared to $1.30 billion at December 31, 2024. The increase in unconditionally cancelable commitments is attributed to growth in CCBX loans.
Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.
Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of 56 Table of Contents operations.
Gross proceeds from the offering of $98.0 million, before deducting underwriting discounts and offering expenses, will be used for general corporate purposes, including, without limitation, to support investment opportunities and the Bank’s growth.
Gross proceeds from the offering of $98.0 million, before deducting underwriting discounts and offering expenses, is used for general corporate purposes, including, without limitation, to support investment opportunities and the Bank’s growth.
Beginning with rate adjustments subsequent to June 30, 2023, the rate is based off three-month CME Term SOFR plus a spread adjustment of 0.26% and margin of 2.10%. The effective rate as of December 31, 2024 and 2023, was 6.72% and 7.75%, respectively.
Beginning with rate adjustments subsequent to June 30, 2023, the rate is based off three-month CME Term SOFR plus a spread adjustment of 0.26% and margin of 2.10%. The effective rate as of December 31, 2025 and 2024, was 6.08% and 6.72%, respectively.
In determining the 118 Table of Contents appropriate level of interest rate risk, ALCO considers the impact on earnings and capital on the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors.
In determining the appropriate level of interest rate risk, ALCO considers the impact on earnings and capital on the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors.
Valuation allowances are established when necessary to reduce our deferred tax assets to the amount expected to be realized. The Company is subject to various state taxes that are assessed as CCBX activities and employees expand into other states, which has increased the overall tax rate used in calculating the provision for income taxes in the current and future periods.
Valuation allowances are established when necessary to reduce our deferred tax assets to the amount expected to be realized. The Company is subject to various state taxes that are assessed as CCBX activities and employees expand into new states, which increases the overall tax rate used in calculating the provision for income taxes in the current and future periods.
Federal Reserve Bank Line of Credit. The Federal Reserve allows us to borrow against our line of credit through a borrower in custody agreement utilizing the discount window, which is collateralized by certain loans. As of December 31, 2024, and December 31, 2023, total borrowing capacity of $468.7 million and $435.5 million, respectively, was available under this arrangement.
Federal Reserve Bank Line of Credit. The Federal Reserve allows us to borrow against our line of credit through a borrower in custody agreement utilizing the discount window, which is collateralized by certain loans. As of December 31, 2025, and December 31, 2024, total borrowing capacity of $416.7 million and $468.7 million, respectively, was available under this arrangement.
New loans are being booked with enhanced credit standards, which typically results in a lower interest rate than some of the higher risk loans that have paid off or that we have chosen to sell. CCBX consumer loans totaled $1.19 billion as of December 31, 2024, compared to $811.9 million at December 31, 2023.
New loans are being booked with enhanced credit standards, which typically results in a lower interest rate than some of the higher risk loans that have paid off or that we have chosen to sell. CCBX consumer loans totaled $1.31 billion as of December 31, 2025, compared to $1.19 billion at December 31, 2024.
Our community bank consumer and other loans totaled $13.5 million as of December 31, 2024, compared to $1.6 million at December 31, 2023 and are comprised of personal lines of credit, automobile, boat, and recreational vehicle loans, and secured term loans. Contractual Maturity Ranges .
Our community bank consumer and other loans totaled $14.1 million as of December 31, 2025, compared to $13.5 million at December 31, 2024 and are comprised of personal lines of credit, automobile, boat, and recreational vehicle loans, and secured term loans. Contractual Maturity Ranges .
Additional loans were pledged during 2023 to significantly increase the borrowing capacity of the Bank in the event of a liquidity crisis. The Bank had the ability and capacity to borrow up to $642.1 million from FHLB and the FRB discount window at December 31, 2024.
Additional loans were pledged during 2023 to significantly increase the borrowing capacity of the Bank in the event of a liquidity crisis. The Bank had the ability and capacity to borrow up to $642.2 million from FHLB and the FRB discount window at December 31, 2025.
If a mutually agreeable funding plan is not achieved then the Bank could declare the agreement in default, take over servicing and cease paying the partner for servicing the loan and providing credit enhancements. The Bank would evaluate any remaining credit enhancement asset from the CCBX partner in the event the partner failed to determine if a write-off is appropriate.
If a mutually agreeable funding plan is not agreed to, the Bank could declare the agreement in default, take over servicing and cease paying the partner for servicing the loan and providing credit enhancements. The Bank would evaluate any remaining credit enhancement asset from the CCBX partner in the event the partner defaulted to determine if a write-off is appropriate.
Agreements with our CCBX partners provide for a credit enhancement provided by the partner which protects the Bank by indemnifying or reimbursing incurred losses. CCBX partners bear most of the responsibility for credit losses incurred which consequently gives them vested interests in the performance of the portfolio.
Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by indemnifying or reimbursing incurred losses. CCBX partners bear most of the responsibility for credit losses incurred which consequently gives them a vested interest in the performance of the portfolio.
A total of $50.0 million of those proceeds were contributed to the Bank in 2024, and the balance of the amount was retained in cash at the Company level. The Company currently holds $47.7 million in cash for debt servicing and operating purposes.
A total of $50.0 million of those proceeds were contributed to the Bank in 2024, and the balance of the amount was retained in cash at the Company level. The Company currently holds $42.3 million in cash for debt servicing and operating purposes.
Government agency securities. As of December 31, 2024, we did not hold any Fannie Mae or Freddie Mac preferred stock, collateralized debt obligations, collateralized loan obligations, structured investment vehicles, private label collateralized mortgage obligations, subprime, or second lien elements in our investment portfolio.
Agency collateralized mortgage obligations are U.S. Government agency securities. As of December 31, 2025, we did not hold any Fannie Mae or Freddie Mac preferred stock, collateralized debt obligations, collateralized loan obligations, structured investment vehicles, private label collateralized mortgage obligations, subprime, or second lien elements in our investment portfolio.
As of December 31, 2024, we held $20.1 million in purchased commercial real estate loans, compared to $43.0 million at December 31, 2023. Our credit administration team has substantial experience in underwriting, managing, monitoring and working out commercial real estate loans, and remains diligent in communicating and proactively working with borrowers to help mitigate potential credit deterioration.
As of December 31, 2025, we held $15.5 million in purchased commercial real estate loans, compared to $20.1 million at December 31, 2024. Our credit administration team has substantial experience in underwriting, managing, monitoring and working out commercial real estate loans, and remains diligent in communicating and proactively working with borrowers to help mitigate potential credit deterioration.
Restricted equity securities totaled $7.3 million as of December 31, 2024 and $6.8 million as of December 31, 2023 The increase was attributable to the amount of FHLB stock that we are required to hold. Federal Reserve and FHLB stock are carried at par and do not have a readily determinable fair value.
Restricted equity securities totaled $9.2 million as of December 31, 2025 and $7.3 million as of December 31, 2024 The increase was attributable to the amount of FHLB stock that we are required to hold. Federal Reserve and FHLB stock are carried at par and do not have a readily determinable fair value.
Net charge-offs to average loans for the community bank segment have remained consistently low and were 0.03% and 0.00% for the year ended December 31, 2024, and 2023, respectively.
Net charge-offs to average loans for the community bank segment have remained consistently low and was 0.00% and 0.03% for the year ended December 31, 2025 and December 31, 2024, respectively.
This method will be applied until the investments do not qualify for the measurement election 101 Table of Contents (e.g., if the investment has a readily determinable fair value).
This method will be applied until the investments do not qualify for the measurement election (e.g., if the investment has a readily determinable fair value).
CCBX consumer loans include cash secured and unsecured consumer loans, loan products designed to help consumers build credit, lines of credit, credit cards, other loans and overdrafts. Consumer credit cards are open-ended and have interest rates ranging from 7.75% to the maximum rate allowable by state.
CCBX consumer loans include cash secured and unsecured consumer loans, loan products designed to help consumers build credit, lines of credit, credit cards, other loans and overdrafts. Consumer credit cards are open-ended and have interest rates ranging from a promotional rate of 0.00% to the maximum rate allowable by state.
The FHLB allows us to borrow against our line of credit, which is collateralized by certain loans. As of December 31, 2024 and December 31, 2023, we had borrowing capacity of $173.3 million and $204.6 million, respectively, with the FHLB. As of December 31, 2024 and 2023, FHLB advances totaled zero.
The FHLB allows us to borrow against our line of credit, which is collateralized by certain loans. As of December 31, 2025 and December 31, 2024, we had borrowing capacity of $225.4 million and $173.3 million, respectively, with the FHLB. As of December 31, 2025 and 2024, FHLB advances totaled zero.
Management’s Discussion and Analysis of Financial Condition and Operations—Financial Condition—Allowance for Credit Losses.” 69 Table of Contents The economic environment is continuously changing, due to the pace of economic growth, inflation, changing interest rates, unemployment, global unrest, the war in Ukraine, conflicts in the Middle East, the political environment, natural disasters, and trade issues that may impact the provision and therefore the allowance.
Management’s Discussion and Analysis of Financial Condition and Operations—Financial Condition—Allowance for Credit Losses.” The macro economic environment is continuously changing, primarily due to the pace of economic growth, inflation, changing interest rates, global trade tensions, tariffs, unemployment, global unrest, the war in Ukraine, conflicts in the Middle East, political uncertainty, natural disasters, and trade issues that may impact the provision and therefore the allowance.
We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary and are closely monitoring liquidity in this uncertain economic environment. The Company has pledged loans and securities totaling $957.9 million and $1.03 billion at December 31, 2024 and December 31, 2023, respectively, for borrowing lines at the FHLB and FRB.
We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary and are closely monitoring liquidity in this uncertain macro economic environment. The Company has pledged loans and securities totaling $939.8 million and $957.9 million at December 31, 2025 and December 31, 2024, respectively, for borrowing lines at the FHLB and FRB.
Included in total deposits is $414.0 million in IntraFi network interest bearing demand and money market sweep accounts as of December 31, 2024, which provides our customers with fully insured deposits through a sweep and exchange of deposits with other financial institutions.
Included in total deposits is $460.3 million in IntraFi network interest bearing demand and money market sweep accounts as of December 31, 2025, which provides our customers with fully insured deposits through a sweep and exchange of deposits with other financial institutions.
In addition, the Company maintains an effective registration statement on Form S-3 with the Securities and Exchange Commission which allows the Company to raise additional capital in an amount up to $102.0 million. The Company raised $98.0 million in December 2024 and $34.5 million in December 2021.
In addition, the Company maintains an effective registration statement on 102 Table of Contents Form S-3 with the Securities and Exchange Commission which allows the Company to raise additional capital in an amount up to $102.0 million. The Company raised $98.0 million in December 2024.
The Company will reassess at each reporting period whether the equity investments without a readily determinable fair value qualifies to be measured at cost minus impairment. • The Company had a $2.2 million equity interest in a specialized bank technology company as of December 31, 2024 and December 31, 2023 . • The Company had a $350,000 equity interest in a technology company as of the years ended December 31, 2024 and December 31, 2023. • The Company had a $47,000 and $50,000 equity interest in a technology company as of the years ended December 31, 2024, and December 31, 2023, respectively.
The Company will reassess at each reporting period whether the equity investments without a readily determinable fair value qualifies to be measured at cost minus impairment. • The Company had a $1.8 million and $2.2 million equity interest in a specialized bank technology company as of the quarters ended December 31, 2025, and December 31, 2024, respectively. • The Company had a $350,000 equity interest in a technology company as of the quarters ended December 31, 2025, and December 31, 2024. • The Company had a $42,000 and $47,000 equity interest in a technology company as of the quarters ended December 31, 2025, and December 31, 2024, respectively.
Agency collateralized mortgage obligations $ 37 3.091 % $ 37 3.091 % Total available-for-sale 37 3.091 % 37 3.091 % Securities held to maturity: U.S.
Agency collateralized mortgage obligations $ 30 3.268 % $ 30 3.268 % Total available-for-sale 30 3.268 % 30 3.091 % Securities held to maturity: U.S.
Although agreements with our CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses by indemnifying or reimbursing incurred credit and fraud losses, if our partner is unable to fulfill their contracted obligations then the Bank would be exposed to additional loan and deposit losses if the cash flows on the loans were not sufficient to fund the reimbursement of loan losses, as a result of this counterparty risk.
Although agreements with our CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses, if our partner is unable to fulfill their contractual obligation and if the cash flows on the loans were not sufficient to fund the reimbursement of loan losses, then the Bank would be exposed to additional loan and deposit losses as a result of this counterparty risk.
Twelve Months Ended December 31, 2024 December 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020 Return on average assets 1.15 % 1.28 % 1.38 % 1.24 % 0.98 % Return on average equity 14.11 % 16.41 % 18.24 % 17.24 % 11.44 % Yield on earnings assets 10.44 % 9.61 % 6.68 % 3.90 % 4.21 % Yield on loans receivable 11.20 % 10.36 % 8.12 % 4.86 % 4.64 % Cost of funds 3.49 % 2.91 % 0.75 % 0.18 % 0.40 % Cost of deposits 3.46 % 2.87 % 0.71 % 0.12 % 0.35 % Net interest margin 7.18 % 6.88 % 5.97 % 3.73 % 3.83 % Noninterest expense to average assets 6.28 % 5.61 % 5.65 % 2.90 % 2.47 % Noninterest income to average assets 7.86 % 5.88 % 4.23 % 1.29 % 0.53 % Efficiency ratio 42.38 % 44.66 % 56.26 % 58.82 % 58.14 % Loans receivable to deposits (1) 97.8 % 89.9 % 93.2 % 73.7 % 108.9 % (1) Including loans held for sale CCBX – BaaS Reporting Information During the twelve months ended months ended December 31, 2024, $62.1 million was recognized in noninterest income BaaS credit enhancements related to the establishment of a credit enhancement asset for credit losses indemnified by our strategic partners and reserved for unfunded commitments for CCBX partner loans and deposits.
Year Ended December 31, 2025 December 31, 2024 December 31, 2023 December 31, 2022 December 31, 2021 Return on average assets 1.05 % 1.15 % 1.28 % 1.38 % 1.24 % Return on average equity 10.17 % 14.11 % 16.41 % 18.24 % 17.24 % Yield on earnings assets 9.89 % 10.44 % 9.61 % 6.68 % 3.90 % Yield on loans receivable 11.00 % 11.20 % 10.36 % 8.12 % 4.86 % Cost of funds 3.02 % 3.49 % 2.91 % 0.75 % 0.18 % Cost of deposits 2.99 % 3.46 % 2.87 % 0.71 % 0.12 % Net interest margin 7.14 % 7.18 % 6.88 % 5.97 % 3.73 % Noninterest expense to average assets 6.43 % 6.28 % 5.61 % 5.65 % 2.90 % Noninterest income to average assets 5.18 % 7.86 % 5.88 % 4.23 % 1.29 % Efficiency ratio 53.13 % 42.38 % 44.66 % 56.26 % 58.82 % Loans receivable to deposits (1) 92.2 % 97.8 % 89.9 % 93.2 % 73.7 % (1) Including loans held for sale CCBX – BaaS Reporting Information During the year ended December 31, 2025, $47.3 million was recognized in noninterest income BaaS credit enhancements related to the establishment of a credit enhancement asset for credit losses indemnified by our strategic partners and reserved for unfunded commitments for CCBX loans and deposits.
In accordance with GAAP, CCBX losses are recorded as charge-offs, but CCBX partner agreements provide for a 70 Table of Contents credit enhancement that indemnifies and as a result CCBX partners reimburse the Bank for net-charge-offs on CCBX loans and negative deposit accounts, except in accordance with the program agreement for one partner where the Company is responsible for credit losses on approximately 5% of a $324.6 million loan portfolio.
In accordance with GAAP, CCBX losses are recorded as charge-offs, but CCBX partner agreements provide for a credit enhancement that indemnifies the Bank from incurred losses, and as a result CCBX partners reimburse the Bank for net-charge-offs on CCBX loans and negative deposit accounts, except in accordance with the program agreement for one partner where the Company is responsible for credit losses on approximately 5% of a $321.3 million loan portfolio.
Average yield of 6.54% was earned on community bank loans for the year ended December 31, 2024, compared to 6.20% for the year ended December 31, 2023.
Average yield of 6.52% was earned on community bank loans for the year ended December 31, 2025, compared to 6.54% for the year ended December 31, 2024.
The following table shows the activity in equity fund investments held at fair value for the dates shown: For the Twelve Months Ended December 31, (dollars in thousands) 2024 2023 2022 Carrying value, beginning of period $ 809 $ 456 $ 160 Purchases/capital calls/capital returns, net 72 75 349 Net change recognized in earnings 29 278 (53) Carrying value, end of period $ 910 $ 809 $ 456 102 Table of Contents The following table sets forth the amortized cost of held to maturity securities and the fair value of available for sale securities, maturities and approximated weighted average yield based on estimated annual income divided by the average amortized cost of our securities portfolio as of the dates indicated.
The following table shows the activity in equity fund investments held at fair value for the dates shown: Year Ended December 31, (dollars in thousands) 2025 2024 2023 Carrying value, beginning of period $ 910 $ 809 $ 456 Purchases/capital calls/capital returns, net 556 72 75 Net change recognized in earnings 34 29 278 Carrying value, end of period $ 1,500 $ 910 $ 809 The following table sets forth the amortized cost of held to maturity securities and the fair value of available for sale securities, maturities and approximated weighted average yield based on estimated annual income divided by the average amortized cost of our securities portfolio as of the dates indicated.
The following table summarizes the amortized cost and estimated fair value of certain of our investment securities as of the dates shown: As of December 31, 2024 2023 (dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Securities available-for-sale: U.S. Treasury securities $ — $ — $ 99,996 $ 99,461 U.S.
The following table summarizes the amortized cost and estimated fair value of certain of our investment securities as of the dates shown: As of December 31, 2025 2024 (dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Securities available-for-sale: U.S.
Based on this analysis, the Company records a provision for credit losses - loans to maintain the allowance at appropriate levels. As of December 31, 2024, the allowance for credit losses totaled $177.0 million, or 5.08% of total loans. As of December 31, 2023, the allowance for credit losses totaled $117.4 million, or 3.88% of total loans.
Based on this analysis, the Company records a provision for credit losses - loans to maintain the allowance at appropriate levels. As of December 31, 2025, the allowance for credit losses totaled $169.5 million, or 4.52% of total loans. As of December 31, 2024, the allowance for credit losses totaled $177.0 million, or 5.08% of total loans.
If a write-off occurs, the Bank would retain the full yield and any fee income on the loan portfolio going forward, and our BaaS loan expense would decrease once default occurred and payments to the CCBX partner were stopped. 115 Table of Contents For CCBX partner loans the Bank records contractual interest earned from the borrower on loans in interest income, adjusted for origination costs which are paid or payable to the CCBX partner.
If a write-off occurs, the Bank would stop payments to the CCBX partner and retain the full yield and any fee income on the loan portfolio going forward, decreasing our BaaS loan expense. 107 Table of Contents For CCBX loans the Bank records contractual interest earned from the borrower on loans in interest income, adjusted for origination costs which are paid or payable to the CCBX partner.
As of December 31, 2024, and December 31, 2023, the Company and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank was classified as “well capitalized” for purposes of the Federal Reserve’s prompt corrective action regulations.
As of December 31, 2025, and December 31, 2024, the Company and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank was classified as "well capitalized" for purposes of the Federal Reserve's prompt corrective action regulations.
At December 31, 2024, our portion of this portfolio represented $20.6 million in loans. Provision expense on these loans was $6.0 million and $5.1 million for the years ended December 31, 2024 and 2023, respectively, with net charge-offs of $5.6 million in 2024 and $3.6 million in 2023.
At December 31, 2025, our portion of this portfolio represented $22.1 million in loans. Provision expense on these loans was $4.9 million and $6.0 million for the years ended December 31, 2025 and 2024, respectively, with net charge-offs of $4.6 million in 2025 and $5.6 million in 2024.
We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County).
We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County). We also have a loan production office which is located in King county.
For short-term consumer loans, both secured and unsecured options are available and typically have fully-amortizing terms ranging from three months to five years. Interest rates can be fixed or variable and range from 3.99% to the maximum allowable rate by state.
For short-term consumer loans, both secured and unsecured options are available and typically have fully-amortizing terms ranging from two months to six years. Interest rates can be fixed or variable up to the maximum allowable rate by state.
At December 31, 2024, our securities portfolio was invested in U.S. Agency collateralized mortgage obligations and U.S. Agency residential mortgage-backed securities. Because we target a loan-to-deposit ratio in the range of 90% to 100%, we prioritize liquidity over the earnings of our securities portfolio.
At December 31, 2025, our securities portfolio was invested in U.S. Agency collateralized mortgage obligations and U.S. Agency residential mortgage-backed securities for Community Reinvestment Act ("CRA") purposes. Because we target a loan-to-deposit ratio in the range of 90% to 100%, we prioritize liquidity over the earnings of our securities portfolio.
Deposits obtained through our CCBX segment are a significant source of liquidity for us. If a relationship with a large CCBX partner terminates, the exit of those deposits could have an adverse impact on liquidity. Partner program agreements govern the relationship and are valid for a given period of time.
If a relationship with a large CCBX partner terminates, the exit of those deposits could have an adverse impact on liquidity. Partner program agreements govern the relationship and are valid for a given period of time.
For example, as of December 31, 2024, capital call lines outstanding balance totaled $109.0 million, and while commitments totaled $550.9 million the commitments are cancelable, and are also limited to a maximum of $350.0 million by agreement with the partner. The following table shows the CCBX maximum portfolio sizes by loan category as of December 31, 2024.
For example, as of December 31, 2025, capital call lines outstanding balance totaled $210.5 million, and while commitments totaled $519.1 million the commitments are cancelable, and are also limited to a maximum of $350.0 million by agreement with the partner. The following table shows the CCBX maximum portfolio sizes by loan category as of December 31, 2025.
See the reconciliation of non-GAAP measures set forth in the section titled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for the impact of BaaS loan expense on CCBX yield. (2) See Note 23, Restatement of Prior Period Financial Statements Commercial and Industrial Loans .
See the reconciliation of non-GAAP measures set forth in the section titled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for the impact of BaaS loan expense on CCBX yield. Commercial and Industrial Loans .
During the year ended December 31, 2024, we recognized an unrealized gain on equity securities of $27,000, compared to the year ended December 31, 2023, when we recognized a $279,000 unrealized holding loss on equity securities. We hold $3.1 million in equity securities focused on entities providing products to the BaaS and financial services space.
During the year ended December 31, 2025, we recognized an unrealized loss on equity securities of $414,000, compared to the year ended December 31, 2024, when we recognized a $27,000 unrealized holding gain on equity securities. We hold $3.3 million in equity securities focused on entities providing products to the BaaS and financial services space. 68 Table of Contents Other.
The $67.8 million increase in interest and fees on loans for the year ended December 31, 2024, compared to the year ended December 31, 2023, was largely due to growth in CCBX and community bank loans.
The $25.6 million increase in interest and fees on loans for the year ended December 31, 2025, compared to the year ended December 31, 2024, was largely due to growth in CCBX and community bank loans.
As of December 31, 2024, our AFS portfolio had an unrealized loss of $2,000, compared to an unrealized loss of $537,000 as of December 31, 2023.
As of December 31, 2025 our AFS portfolio had an unrealized loss of $1,000 compared to an unrealized loss of $2,000 as of December 31, 2024.
The table below shows the estimated uninsured time deposits, by account, for the maturity periods indicated: (dollars in thousands) As of December 31, 2024 Maturity Period: Three months or less $ 1,070 Over three through six months 1,046 Over six through twelve months 762 Over twelve months 167 Total $ 3,045 Borrowings We have the ability to utilize short-term to long-term borrowings to supplement deposits to fund our lending and investment activities, each of which is discussed below.
The table below shows the estimated uninsured time deposits, by account, for the maturity periods indicated: (dollars in thousands) As of December 31, 2025 Maturity Period: Three months or less $ 1,309 Over three through six months 23 Over six through twelve months 66 Over twelve months 160 Total $ 1,558 Borrowings We have the ability to utilize short-term to long-term borrowings to supplement deposits to fund our lending and investment activities, each of which is discussed below.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our governing documents include provisions that: • empower our board of directors, without shareholder approval, to issue preferred stock, the terms of which, including voting power, are to be set by our board of directors; • establish a classified board of directors, with directors of each class serving a three-year term; 43 Table of Contents • provide that directors may be removed from office without cause only by vote of 80% of the outstanding shares then entitled to vote; • eliminate cumulative voting in elections of directors; • permit our board of directors to alter, amend or repeal our bylaws or to adopt new bylaws; • require the request of holders of at least one-third of the outstanding shares of our capital stock entitled to vote at a meeting to call a special shareholders’ meeting; • require shareholders that wish to bring business before annual meetings of shareholders, or to nominate candidates for election as directors at our annual meeting of shareholders, to provide timely notice of their intent in writing; • require that certain business combination transactions with a significant shareholder be approved by holders of two-thirds of the shares held by persons other than the significant shareholder; and • enable our board of directors to increase, between annual meetings, the number of persons serving as directors and to fill the vacancies created as a result of the increase by a majority vote of the directors present at a meeting of directors.
Our governing documents include provisions that: • empower our board of directors, without shareholder approval, to issue preferred stock, the terms of which, including voting power, are to be set by our board of directors; • establish a classified board of directors, with directors of each class serving a three-year term; • provide that directors may be removed from office without cause only by vote of 80% of the outstanding shares then entitled to vote; • eliminate cumulative voting in elections of directors; • permit our board of directors to alter, amend or repeal our bylaws or to adopt new bylaws; • require the request of holders of at least one-third of the outstanding shares of our capital stock entitled to vote at a meeting to call a special shareholders’ meeting; • require shareholders that wish to bring business before annual meetings of shareholders, or to nominate candidates for election as directors at our annual meeting of shareholders, to provide timely notice of their intent in writing; • require that certain business combination transactions with a significant shareholder be approved by holders of two-thirds of the shares held by persons other than the significant shareholder; and • enable our board of directors to increase, between annual meetings, the number of persons serving as directors and to fill the vacancies created as a result of the increase by a majority vote of the directors present at a meeting of directors.
A deterioration of the economy in the market areas we serve could result in the following consequences, any of which would have an adverse impact, which could be material, on our business, financial condition, and results of operations: • high short-term interest rates may cause deposits to decline and deposit costs to increase as depositors seek higher returns on their deposits; • loan delinquencies may increase; • problem assets and foreclosures may increase; 35 Table of Contents • collateral for loans made may decline in value, in turn reducing customers’ borrowing power, reducing the value of assets and collateral associated with existing loans; • certain securities within our investment portfolio could become other than temporarily impaired, requiring a write-down through earnings to fair value, thereby reducing equity; • CCBX partners may experience financial difficulties or fail, our BaaS revenue may decrease, and credit losses could increase if the partner cannot fulfill its credit enhancement obligations; • low-cost or noninterest bearing deposits may decrease; and • demand for our loan and other products and services may decrease.
A deterioration of the economy in the market areas we serve could result in the following consequences, any of which would have an adverse impact, which could be material, on our business, financial condition, and results of operations: • high short-term interest rates may cause deposits to decline and deposit costs to increase as depositors seek higher returns on their deposits; • loan delinquencies may increase; • problem assets and foreclosures may increase; • collateral for loans made may decline in value, in turn reducing customers’ borrowing power, reducing the value of assets and collateral associated with existing loans; • certain securities within our investment portfolio could become other than temporarily impaired, requiring a write-down through earnings to fair value, thereby reducing equity; • CCBX partners may experience financial difficulties or fail, our BaaS revenue may decrease, and credit losses could increase if the partner cannot fulfill its credit enhancement obligations; • low-cost or noninterest bearing deposits may decrease; and • demand for our loan and other products and services may decrease.
Outside of the PPP, the SBA’s 7(a) Loan Program is the SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes. Generally, we sell the guaranteed portion of our non-PPP SBA 7(a) loans in the secondary market.
The SBA’s 7(a) Loan Program is the SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes. Generally, we sell the guaranteed portion of our non-PPP SBA 7(a) loans in the secondary market.
While we have implemented a vendor management program with the third-party service providers, to help ensure third party relationships are effectively managed by providing risk-focused controls and processes that are designed to monitor our vendors’ compliance with relevant laws, regulations, and industry standards, we may not be able to ensure that all of our clients, suppliers, counterparties, broker dealers and financial providers in CCBX, and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means.
While we have implemented a vendor management program with the third-party service providers, to help ensure third party relationships are effectively managed by providing risk-focused controls and processes that are designed to monitor our vendors’ compliance with relevant laws, regulations, and industry standards, we may not be able to ensure that all of our clients, suppliers, counterparties and financial providers in CCBX, and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means.
The occurrence of any of these natural disasters. epidemic illnesses, effects of climate change or other major catastrophes could negatively impact our performance by disrupting our operations or the operations of our customers, which could adversely affect our business, financial condition, results of operations.
The occurrence of any of these natural disasters, epidemic illnesses, effects of climate change or other major catastrophes could negatively impact our performance by disrupting our operations or the operations of our customers, which could adversely affect our business, financial condition and results of operations.
Many of the agreements with our CCBX partners provide for a credit enhancement which helps protect the Bank by absorbing incurred losses. CCBX credit enhancements are free-standing and are accounted separately from the allowance for credit loss.
Many of the agreements with our CCBX partners provide for a credit enhancement which helps protect the Bank by absorbing incurred losses. CCBX credit enhancements are free-standing and are accounted for separately from the allowance for credit losses.
We have entered into agreements with BaaS partners, which includes broker dealers and digital financial service providers, pursuant to which we will provide certain banking services for the BaaS partner customers, including serving as the issuing bank for debit cards issued to their customers and establishing one or more settlement accounts for the purpose of settling customer transactions in the cash management account program.
We have entered into agreements with BaaS partners, which includes digital financial service providers, pursuant to which we will provide certain banking services for the BaaS partner customers, including serving as the issuing bank for debit cards issued to their customers and establishing one or more settlement accounts for the purpose of settling customer transactions in the cash management account program.
The Dodd-Frank Act, which imposed significant regulatory and compliance changes on financial institutions, is an example of this type of federal law. Any future legislative changes, including as a result of the new administration, could have a material impact on our profitability, the value of assets held for investment or the value of collateral for loans.
The Dodd-Frank Act, which imposed significant regulatory and compliance changes on financial institutions, is an example of this type of federal law. Any future legislative changes, including as a result of the current administration, could have a material impact on our profitability, the value of assets held for investment or the value of collateral for loans.
If any of these valuations are inaccurate, our financial statements may not reflect the correct value of our OREO, and our allowance for credit losses may not reflect accurate loan impairments. This could adversely affect our business, financial condition and results of operations. As of December 31, 2024, we did not hold any OREO or repossessed property and equipment.
If any of these valuations are inaccurate, our financial statements may not reflect the correct value of our OREO, and our allowance for credit losses may not reflect accurate loan impairments. This could adversely affect our business, financial condition and results of operations. As of December 31, 2025, we did not hold any OREO or repossessed property and equipment.
Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other malicious code and cyber-attacks that could have an impact on information security. Any such breach or attacks could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.
Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other malicious code and cyberattacks that could have an impact on information security. Any such breach or attacks could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.
Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, 35 Table of Contents investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
Risks Related to Our Industry Regulation of the financial services industry is intense, and we may be adversely affected by changes in laws and regulations, including as a result of the new administration. We are subject to extensive government regulation, supervision and examination at both the federal and state level.
Risks Related to Our Industry Regulation of the financial services industry is intense, and we may be adversely affected by changes in laws and regulations, including as a result of the current administration. We are subject to extensive government regulation, supervision and examination at both the federal and state level.
In addition, any default by the U.S. Government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could adversely affect our business, financial condition and results of operations.
In addition, any default by the U.S. Government on its obligations could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could adversely affect our business, financial condition and results of operations.
Moreover, if loans that are collateralized by commercial real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan, which could cause us to increase our provision for credit losses and would adversely affect our business, financial condition and results of operations.
Moreover, if loans that are collateralized by commercial real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of 29 Table of Contents principal and interest that we anticipated at the time we originated the loan, which could cause us to increase our provision for credit losses and would adversely affect our business, financial condition and results of operations.
While we believe that our allowance for credit losses was adequate at December 31, 2024, there is no assurance that it will be sufficient to cover future credit losses, especially if there is a significant deterioration in economic conditions.
While we believe that our allowance for credit losses was adequate at December 31, 2025, there is no assurance that it will be sufficient to cover future credit losses, especially if there is a significant deterioration in economic conditions.
Our systems and our third-party service providers’ systems have been, and will likely continue to be, subject to advanced computer viruses or other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, social engineering, hacking and other cyber-attacks.
Our systems and our third-party service providers’ systems have been, and will likely continue to be, subject to advanced computer viruses or other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, social engineering, hacking and other cyberattacks.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.
Additionally, the SEC enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity 45 Table of Contents risk management, strategy and governance.
Additionally, the SEC enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance.
If personal, confidential or proprietary information of customers or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under personal information laws 44 Table of Contents and regulations.
If personal, confidential or proprietary information of customers or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under personal information laws and regulations.
Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our business, financial condition and earnings.
Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our business, financial condition and results of operations.
Further, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making. 40 Table of Contents We depend on the accuracy and completeness of information provided to us by our borrowers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.
Further, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making. We depend on the accuracy and completeness of information provided to us by our borrowers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.
The added recordkeeping burden as well as additional expense that could result from the expansion of CCBX into new regions may have an adverse impact on our business, financial condition and results of operations. 39 Table of Contents Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition, and results of operations.
The added recordkeeping burden as well as additional expense that could result from the expansion of CCBX into new regions may have an adverse impact on our business, financial condition and results of operations. Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition and results of operations.
Accordingly, any such business expansion can be expected to negatively impact our earnings for some period of time until certain economies of scale are 42 Table of Contents reached. Our expenses could be further increased if we encounter delays in modernizing existing facilities, opening new branches or deploying new services.
Accordingly, any such business expansion can be expected to negatively impact our earnings for some period of time until certain economies of scale are reached. Our expenses could be further increased if we encounter delays in modernizing existing facilities, opening new branches or deploying new services.
There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by the Treasury Department’s Office of Foreign Assets Control. In order to comply with regulations, guidelines and examination procedures in this area, we have dedicated significant resources to our anti-money laundering program.
There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by the Treasury Department’s Office of Foreign Assets Control. 46 Table of Contents In order to comply with regulations, guidelines and examination procedures in this area, we have dedicated significant resources to our anti-money laundering program.
While we seek to reduce problem assets through loan workouts, restructurings and otherwise, decreases in the value of the underlying collateral, or in these borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect our business, financial condition and results of operations.
While we seek to reduce problem assets through loan workouts, 34 Table of Contents restructurings and otherwise, decreases in the value of the underlying collateral, or in these borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect our business, financial condition and results of operations.
Such regulation, supervision and examination govern the activities in which we may engage, and are intended primarily for the protection of the deposit insurance fund and the Bank’s depositors, rather than for shareholders. 46 Table of Contents Compliance with applicable laws and regulations can be difficult and costly, and changes to laws and regulations can impose additional compliance costs.
Such regulation, supervision and examination govern the activities in which we may engage, and are intended primarily for the protection of the deposit insurance fund and the Bank’s depositors, rather than for shareholders. Compliance with applicable laws and regulations can be difficult and costly, and changes to laws and regulations can impose additional compliance costs.
A successful regulatory challenge to an institution’s performance under fair lending laws or regulations, or other consumer lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on 48 Table of Contents entering new business lines.
A successful regulatory challenge to an institution’s performance under fair lending laws or regulations, or other consumer lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines.
In addition, the success of a small and medium-sized business often depends on the management skills, talents and efforts of a small group of people, and the death, disability or resignation of one or more of these people could have an adverse effect on the business and its ability to 33 Table of Contents repay its loan.
In addition, the success of a small and medium-sized business often depends on the management skills, talents and efforts of a small group of people, and the death, disability or resignation of one or more of these people could have an adverse effect on the business and its ability to repay its loan.
The volume of new or modified laws and regulations has increased in recent years and, in addition, some individual municipalities have begun to enact laws that restrict loan servicing activities, including delaying or temporarily preventing foreclosures or forcing the modification of certain mortgages.
The volume of new or modified laws and regulations has increased in recent years and, in addition, some individual 47 Table of Contents municipalities have begun to enact laws that restrict loan servicing activities, including delaying or temporarily preventing foreclosures or forcing the modification of certain mortgages.
If a CCBX lending partner is unable to fulfill its contractual obligations with the Bank, then the Bank would be exposed to additional credit losses as a result of this counterparty risk and would have to absorb any credit losses associated with any CCBX partner that cannot fulfill its contractual obligations.
If a CCBX lending partner is unable to fulfill its 32 Table of Contents contractual obligations with the Bank, then the Bank would be exposed to additional credit losses as a result of this counterparty risk and would have to absorb any credit losses associated with any CCBX partner that cannot fulfill its contractual obligations.
In determining whether to approve a proposed acquisition, federal banking regulators will consider, among other factors, the effect of the 47 Table of Contents acquisition on competition, our financial condition, our future prospects, and the impact of the proposal on U.S. financial stability.
In determining whether to approve a proposed acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, our financial condition, our future prospects, and the impact of the proposal on U.S. financial stability.
While we have established policies and procedures to prevent or limit the impact of cyber-attacks, there can be no assurance that such events will not occur or will be adequately addressed if they do.
While we have established policies and procedures to prevent or limit the impact of cyberattacks, there can be no assurance that such events will not occur or will be adequately addressed if they do.
Further, declines in real estate values and sales volumes and elevated unemployment levels may result in higher loan delinquencies, increases in our nonperforming and classified assets and a decline in demand for our products and services. These events may cause us to incur losses and may adversely affect our financial condition and earnings.
Further, declines in real estate values and sales volumes and elevated unemployment levels may result in higher loan delinquencies, increases in our nonperforming and classified assets and a decline in demand for our products and services. These events may cause us to incur losses and may adversely affect our financial condition and results of operations.
When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a 36 Table of Contents customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA.
When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA.
Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial condition.
Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our 44 Table of Contents financial condition.
In addition, the Company incorporates a reasonable and supportable forecast. 34 Table of Contents • CCBX Portfolio: The Bank calculates the ACL on loans on an aggregate basis based on each partner and product level, segmenting the risk inherent in the CCBX portfolio based on qualitative and quantitative trends in the portfolio.
In addition, the Company incorporates a reasonable and supportable forecast. • CCBX Portfolio: The Bank calculates the ACL on loans on an aggregate basis based on each partner and product level, segmenting the risk inherent in the CCBX portfolio based on qualitative and quantitative trends in the portfolio.
If our borrowers are unable to repay their loans, our business, financial condition and earnings could be adversely affected. We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.
If our borrowers are unable to repay their loans, our business, financial condition and results of operations could be adversely affected. We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.
Our partners provide fraud and credit enhancements on many of our CCBX loans, but if they are unable to fulfill their contracted obligations then the Bank would be exposed to writing off all or a part of the credit enhancement asset and to additional credit losses as a result of this counterparty risk.
Our partners provide fraud and credit enhancements on many of our CCBX loans, but if they are unable to fulfill their contracted obligations, the Bank could be exposed to writing off all or a portion of the related credit enhancement asset and to additional credit losses as a result of this counterparty risk.
These laws could delay or prevent an acquisition. We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect our business, financial condition and earnings.
These laws could delay or prevent an acquisition. 42 Table of Contents We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect our business, financial condition and results of operations.
We have increased our focus on commercial business lending in recent years and intend to continue to focus on this type of lending in the future. Our concentration of residential mortgage loans exposes us to increased lending risks . At December 31, 2024, $469.8 million, or 13.4%, of our loan portfolio was secured by one-to-four family real estate.
We have increased our focus on commercial business lending in recent years and intend to continue to focus on this type of lending in the future. Our concentration of residential mortgage loans exposes us to increased lending risks . At December 31, 2025, $466.4 million, or 12.4%, of our loan portfolio was secured by one-to-four family real estate.
A decline in residential real estate values as a result of a downturn in the Puget Sound housing market could reduce the value of the real estate collateral securing these types of loans. As of December 31, 2024, $137.1 million of our residential mortgage loans made through the community bank were made to investors.
A decline in residential real estate values as a result of a downturn in the Puget Sound housing market could reduce the value of the real estate collateral securing these types of loans. As of December 31, 2025, $167.3 million of our residential mortgage loans made through the community bank were made to investors.
While we attempt to invest a significant majority of our total assets in loans (our loan-to-asset ratio was 85.1% as of December 31, 2024), we invest a percentage of our total assets (1.1% as of December 31, 2024) in investment securities with the primary objectives of providing a source of liquidity and meeting pledging requirements.
While we attempt to invest a significant majority of our total assets in loans (our loan-to-asset ratio was 80.6% as of December 31, 2025), we invest a percentage of our total assets (1.0% as of December 31, 2025) in investment securities with the primary objectives of providing a source of liquidity and meeting pledging requirements.
As of December 31, 2024, $267.7 million of our residential mortgage loans were made through CCBX partners and are located in different regions across the U.S. A decline in residential real estate values across the U.S. would reduce the value of this residential real estate collateral.
As of December 31, 2025, $264.1 million of our residential mortgage loans were made through CCBX partners and are located in different regions across the U.S. A decline in residential real estate values across the U.S. would reduce the value of this residential real estate collateral.
These loans may behave more like multi-family loans than individual 1-4 family loans that are occupied by their owners. Our origination of construction loans exposes us to increased lending risks. At December 31, 2024, $148.2 million, or 4.2% of our total loans was construction, land and land development loans.
These loans may behave more like multi-family loans than individual 1-4 family loans that are occupied by their owners. Our origination of construction loans exposes us to increased lending risks. At December 31, 2025, $222.1 million, or 5.9%, of our total loans was construction, land and land development loans.
Our total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, totaled $1.1 billion and represented 184.2% and 269.2% of its capital, at December 31, 2024 and 2023, respectively.
Our total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, totaled $1.13 billion and represented 170.9% and 184.2% of its capital, at December 31, 2025 and 2024, respectively.
Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income. Our commercial real estate lending activities expose us to increased lending risks and related credit losses. At December 31, 2024, our commercial real estate loan portfolio totaled $1.37 billion, or 39.4% of our total loan portfolio.
Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income. Our commercial real estate lending activities expose us to increased lending risks and related credit losses. At December 31, 2025, our commercial real estate loan portfolio totaled $1.29 billion, or 34.2% of our total loan portfolio.
We derive a percentage of our deposits, total assets and income from deposit accounts generated through our BaaS relationships. Deposit accounts acquired through these relationships totaled $2.06 billion, or 57.6% of total deposits at December 31, 2024. We provide oversight over these relationships, which must meet all internal and regulatory requirements.
We derive a percentage of our deposits, total assets and income from deposit accounts generated through our BaaS relationships. Deposit accounts acquired through these relationships totaled $2.56 billion, or 61.7% of total deposits at December 31, 2025. We provide oversight over these relationships, which must meet all internal and regulatory requirements.
From time to time, the U.S. Government may introduce new tax laws and regulations, or interpretations of existing income tax laws could change, causing an adverse effect on our business, financial condition and results of operations.
Government may introduce new tax laws and regulations, or interpretations of existing income tax laws could change, causing an adverse effect on our business, financial condition and results of operations.
The outstanding balance of the Bank’s regulatory CRE portfolio has increased by 5.1%, 16.8%, and 30.9%, for the years ended December 31, 2024, 2023, and 2022 respectively. 37 Table of Contents In December 2015, the federal banking regulators released a new statement on prudent risk management for commercial real estate lending, referred to herein as the 2015 Statement.
The outstanding balance of the Bank’s regulatory CRE portfolio has decreased by 0.4%, and increased by 5.1%, and 16.8%, for the years ended December 31, 2025, 2024, and 2023 respectively. In December 2015, the federal banking regulators released a statement on prudent risk management for commercial real estate lending, referred to herein as the 2015 Statement.
As the speed, frequency, volume, interconnectivity and complexity of transactions within our CCBX segment continues to increase, it becomes more challenging to effectively maintain systems and mitigate risks such as: • errors made by us or external parties doing business with the community bank and CCBX, whether inadvertent or malicious; and • isolated or seemingly insignificant errors or losses, which migrate to other systems or grow in number, to become larger issues or losses.
As the speed, frequency, volume, interconnectivity and complexity of transactions within our CCBX segment continues to increase, it becomes more challenging to effectively maintain systems and mitigate risks such as: • errors made by us or external parties doing business with the community bank and CCBX, whether inadvertent or malicious, and • isolated or seemingly insignificant errors or losses, which migrate to other systems or grow in number, to become larger issues or losses. 40 Table of Contents We may be subject to potential business risk from actions by our regulators related to CCBX relationships.
At December 31, 2024, $1.60 billion, or 45.9% of our total loans were originated or purchased through CCBX partners. Our partners underwrite these loans in compliance with our credit standards and policies. Our CCBX partners service $1.49 billion of these loans.
At December 31, 2025, $1.81 billion, or 48.1%, of our total loans were originated or purchased through CCBX partners. Our partners underwrite these loans in compliance with our credit standards and policies. Our CCBX partners service $1.60 billion of these loans.
We, our customers, and other financial institutions with which we interact, are subject to increasingly frequent, continuous attempts, including ransomware and malware attacks, to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored organizations.
We, our customers, and other financial institutions with which we interact, are subject to increasingly frequent and continuous attempts, including ransomware and malware attacks, to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored 43 Table of Contents organizations, all of which are heightened as a result of advances in AI.
As of December 31, 2024, the balance of SBA loans sold and serviced was $4.1 million, resulting in $104,000 in servicing income for the year ended December 31, 2024. Our SBA lending program is dependent upon the U.S. federal government.
As of December 31, 2025, the balance of SBA loans sold and serviced was $2.5 million, 33 Table of Contents resulting in $17,000 in servicing income for the year ended December 31, 2025. Our SBA lending program is dependent upon the U.S. federal government.
As of December 31, 2024, the fair value of our available for sale investment securities portfolio was $35,000, which included a net unrealized loss of $2,000, and the fair value of our held to maturity investment securities was $46.7 million, which included a net unrealized loss of $581,000.
As of December 31, 2025, the fair value of our available for sale investment securities portfolio was $29,000, which included a net unrealized loss of $1,000, and the fair value of our held to maturity investment securities was $48.7 million, which included a net unrealized loss of $496,000.
Furthermore, despite these actions on our part, the value of the property as collateral will generally be substantially reduced or we may elect not to foreclose on the property and, as a result, we may suffer a loss upon collection of the loan.
Furthermore, despite these actions on our part, the value of the property as collateral will generally be substantially reduced or we may elect not to foreclose on the property and, as a result, we may suffer a loss upon collection of the loan. Any significant environmental liabilities could adversely affect our business, financial condition and results of operations.
Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control, are difficult to predict and could have an adverse effect on our business, financial condition and results of operations. We are subject to certain risks in connection with growing through mergers and acquisitions.
Changes in these policies, which are influenced by evolving macroeconomic conditions and other factors outside our control, are difficult to predict and could have a material adverse effect on our business, financial condition, results of operations, and the market price of our common stock. We are subject to certain risks in connection with growing through mergers and acquisitions.
Thus, any borrowing by a bank holding company for the purpose of making a capital injection to a subsidiary bank often becomes more difficult and expensive relative to other corporate borrowings. 49 Table of Contents We could be adversely affected by the soundness of other financial institutions.
Thus, any borrowing by a bank holding company for the purpose of making a capital injection to a subsidiary bank often becomes more difficult and expensive relative to other corporate borrowings. We could be adversely affected by the soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships.
This is particularly the case where activities of customers or those parties are beyond our security and control systems, including through the use of the internet, cloud computing services and personal smart phones and other mobile devices or services. 41 Table of Contents If that party experiences a breach of its own systems or misappropriates that data, this could result in a variety of negative outcomes for us and our customers, including: • losses from fraudulent transactions, as well as potential liability for losses that exceed thresholds established in consumer protection laws and regulations, • increased operational costs to remediate the consequences of the external party’s security breach, • negative impact on future revenues; and • harm to reputation arising from the perception that our systems may not be secure.
If that party experiences a breach of its own systems or misappropriates that data, this could result in a variety of negative outcomes for us and our customers, including: • losses from fraudulent transactions, as well as potential liability for losses that exceed thresholds established in consumer protection laws and regulations, • increased operational costs to remediate the consequences of the external party’s security breach, • negative impact on future revenues, and • harm to reputation arising from the perception that our systems may not be secure.
Although we have not recognized an impairment related to our investment portfolio as of December 31, 2024, changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, among other factors, may cause us to recognize losses in future periods, which could have an adverse effect on our business, financial condition and results of operations.
Although we have not recognized an impairment related to our investment portfolio as of December 31, 2025, changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, among other factors, may cause us to recognize losses in future periods, which could have an adverse effect on our business, financial condition and results of operations. 39 Table of Contents The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate.
Regulatory restrictions placed on the parties served in the Company’s CCBX segment could result in reduced demand for services, reduced future revenue in the CCBX segment, or loss of current relationships.
Our regulators could impose restrictions on the businesses served in our CCBX segment or restrict the number of different relationships the Company can hold. Regulatory restrictions placed on the parties served in the Company’s CCBX segment could result in reduced demand for services, reduced future revenue in the CCBX segment, or loss of current relationships.
However, other factors not discussed below or elsewhere in this Annual Report on Form 10-K could adversely affect our business, financial condition, results of operations or cash flows and our access to liquidity. Therefore, the risk factors below should not be considered a complete list of potential risks we may face.
However, other factors not discussed below or elsewhere in this Annual Report on Form 10-K could adversely affect our business, financial condition, results of operations or cash flows and our access to liquidity.
Additionally, financial weaknesses at our BaaS partners could cause us to record greater expenses or losses or suffer reputational harm. Significant changes to the size, structure, powers and operations of the federal government may cause economic disruptions that could, in turn, adversely impact our business, results of operations and financial condition.
Additionally, financial weaknesses at our BaaS partners could cause us to record greater expenses or losses or suffer reputational harm. Significant changes in federal government policies, priorities, and operations could cause economic disruption and adversely affect our business, results of operation, and financial condition.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, evaluating the effectiveness of our internal controls and disclosing any changes or material weaknesses identified through such evaluation.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and disclosure controls and procedures, evaluating their effectiveness, and disclosing any material weaknesses identified.
Any such losses could adversely affect our business, financial condition and results of operations. Additionally, we may be adversely affected by the soundness of other financial institutions even when we do not have direct or indirect relationships with those institutions.
Additionally, we may be adversely affected by the soundness of other financial institutions even when we do not have direct or indirect relationships with those institutions.
Any such losses could adversely affect our business, financial condition and results of operations. General Risk Factors We have identified material weaknesses in our internal control over financial reporting. Such material weaknesses could adversely affect our results of operations and financial condition.
Any such losses could adversely affect our business, financial condition and results of operations. 48 Table of Contents General Risk Factors We previously identified material weaknesses in our internal control over financial reporting, and any failure to maintain effective internal controls in the future could adversely affect our business, financial condition, and results of operations.
Many factors impact interest rates, including governmental monetary policies, inflation, recession, changes in unemployment, the money supply and international economic weakness and disorder and instability in domestic and foreign financial markets.
Many factors impact interest rates, including governmental monetary policies, inflation, recession, changes in unemployment, the money supply and international economic weakness and disorder and instability in domestic and foreign financial markets. Loans and deposits in our CCBX segment are more sensitive to interest rate changes than our community bank segment.
As a community bank, our reputation within the communities we serve, including the BaaS space, is critical to our success. We believe we have set ourselves apart from our competitors by building strong personal and professional relationships with our customers and being active members of the communities we serve.
We believe we have set ourselves apart from our competitors by building strong personal and professional relationships with our customers and being active members of the communities we serve.
Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks and other institutional clients.
We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client.
Risks Related to Credit Matters We are subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings. The majority of our banking assets and liabilities are monetary in nature and subject to risk from changes in interest rates.
The majority of our banking assets and liabilities are monetary in nature and subject to risk from changes in interest rates.
These home equity lines of credit are secured by residential real estate and are accessed by using a credit card. As of December 31, 2024, $202.1 million of our residential mortgage loans were made through the community bank, and 79.0% are secured by property in Washington State, and a significant majority of that is located in the Puget Sound region.
As of December 31, 2025, $202.3 million of our residential mortgage loans were made through the community bank, and 83.3% are secured by property in Washington State, and a significant majority of that is located in the Puget 30 Table of Contents Sound region.
The ability to keep pace with technological change is important, and the failure to do so, due to cost, proficiency or otherwise, could have an adverse impact on our business, financial condition and results of operations. 51 Table of Contents Negative public opinion regarding our company or failure to maintain our reputation in the communities we serve could adversely affect our business, financial condition and results of operations and prevent us from growing our business.
The ability to keep pace with technological change is important, and the failure to do so, due to cost, proficiency or otherwise, could have an adverse impact on our business, financial condition and results of operations.
Any material weakness in our internal control system, a breakdown in our internal control system, improper operation of our systems or improper employee actions could result in material financial loss to us, the imposition of regulatory action, and damage to our reputation.
Any material weakness in our internal control system, a breakdown in our internal control system, improper operation of our systems or improper employee actions could result in material financial loss to us, the imposition of regulatory action, and damage to our reputation. 38 Table of Contents We are dependent on the use of data and modeling in our management’s decision-making, and faulty data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future.
The FDIC utilized all of these powers during the financial crisis for the purpose of restoring the reserve ratios of the Deposit Insurance Fund, and more recently increased assessment rates to address extraordinary growth in the amount of insured deposits resulting from the COVID-19 pandemic.
The FDIC utilized all of these powers during the financial crisis for the purpose of restoring the reserve ratios of the Deposit Insurance Fund, and more recently increased assessment rates to address extraordinary growth in the amount of insured deposits resulting from the COVID-19 pandemic. 45 Table of Contents Any future special assessments, increases in assessment rates or premiums, or required prepayments in FDIC insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could adversely affect our business, financial condition and results of operations.
Increasing the relative ease of obtaining a license to operate a money service business within the state of Washington may encourage financial technology, or fintech, companies to offer services in the state, thereby increasing competition for such services.
Increasing the relative ease of obtaining a license to operate a money service business within the state of Washington may encourage financial technology, or fintech, companies to offer services in the state, thereby increasing competition for such services. 41 Table of Contents We rely heavily on our executive management team and other key employees, and we could be adversely affected by the unexpected loss of their services.
In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. In addition, in a low interest rate environment, loan customers often pursue long-term fixed rate credits, which could adversely affect our earnings and net interest margin if rates increase.
In addition, in a low interest rate environment, loan customers often pursue long-term fixed rate credits, which could adversely affect our earnings and net interest margin if rates increase. Changes in interest rates also can affect the value of loans, securities and other assets.
Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when our collateral cannot be foreclosed upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due.
In addition, our credit risk may be exacerbated when our collateral cannot be foreclosed upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due. Any such losses could adversely affect our business, financial condition and results of operations.
Over time we anticipate that this will increase sensitivity to both increasing and decreasing interest rates. Interest rates remain significantly higher following the historically low levels during the COVID-19 pandemic. While rates have decreased some in 2024, competitive pressures on the deposit cost of funds remains.
Over time we anticipate that this will increase sensitivity to both increasing and decreasing interest rates. Interest rates remain elevated relative to the historically low levels experienced during the COVID-19 pandemic.
Risk Factors Summary Our business is subject to numerous material risks and uncertainties, including those described in Part I Item 1A. “Risk Factors” in this Annual Report on Form 10-K. You should carefully consider these material risks and uncertainties when investing in our common stock.
Therefore, the risk factors below should not be considered a complete list of potential risks we may face. 27 Table of Contents Risk Factors Summary Our business is subject to numerous material risks and uncertainties, including those described in Part I Item 1A. “Risk Factors” in this Annual Report on Form 10-K.
Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.
Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans. As of December 31, 2025, the balance of owned SBA loans and SBA loans net of the sold portion was $5.2 million, which are guaranteed.
We make commercial business loans in our market area to a variety of professionals, sole proprietorships, partnerships and corporations.
Our commercial business lending activities expose us to additional lending risks. As of December 31, 2025, commercial and industrial loans totaled $454.1 million and represented 12.1% of total loans. We make commercial business loans in our market area to a variety of professionals, sole proprietorships, partnerships and corporations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Executive Management is responsible for managing the Information Security Program’s operations for identifying and assessing external and internal risks to the security, confidentiality, and integrity of nonpublic information that could result in the unauthorized disclosure, misuse, alteration, destruction or other compromise of such information.
Executive Management is responsible for managing the Information Security Program’s operations for identifying, assessing and mitigating external and internal risks to the security, confidentiality and integrity of nonpublic information that could result in the unauthorized disclosure, misuse, alteration, destruction or other compromise of such information.
Risk Factors,” including the risk factors titled “— We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect our business, financial condition and earnings” and “— We are dependent on our information technology and telecommunications systems and third-party service providers; systems failures, interruptions, security breaches and cybersecurity threats could have an adverse effect on our business, financial condition and results of operations.” As noted above, we are a regulated financial institution and are subject to financial privacy laws and to oversight by federal banking agencies.
Risk Factors,” including the risk factors titled “— We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect our business, financial condition and results of operations” and “— We are dependent on our information technology and telecommunications systems and third-party service providers; systems failures, interruptions, security breaches and cybersecurity threats could have an adverse effect on our business, financial condition and results of operations.” As noted above, we are a regulated financial institution and are subject to financial privacy laws and to oversight by federal banking agencies.
Cybersecurity is an integral subset of information security and the Information Security Program is designed to protect the Company from cybersecurity attacks, breaches, incidents and resulting consequences. As part of the Information Security Program, the Company has implemented preventative controls to minimize data loss, exposure and misuse.
Cybersecurity is an integral subset of information security and the 50 Table of Contents Information Security Program is designed to protect the Company from cybersecurity attacks, breaches, incidents and resulting consequences. As part of the Information Security Program, the Company has implemented preventative controls to minimize data loss, exposure and misuse.
For additional information on these laws and oversight, see “Item 1. Business—Regulation and Supervision.”
For additional information on these laws and oversight, see “Item 1. Business—Regulation and Supervision.” 51 Table of Contents
Removed
Coastal’s Information Security Officer (“ISO”) is designated by the Board and is responsible for implementing and monitoring the Information Security Program. The ISO is a Senior Vice President and has served in such role since 2010. The ISO has over 38-years of combined financial institution experience, which includes compliance, BSA, operations, physical security and information security.
Added
Coastal’s Chief Information Security Officer (“CISO”) is designated by the Board and is responsible for implementing and monitoring the Information Security Program. The CISO is an Executive Vice President who joined Coastal in this role in May 2025 with a background in security leadership at both fintech companies and large enterprises.
Removed
The ISO provides an annual report to the Board on the overall status of the Information Security Program and information technology incidents as necessary.
Added
Furthermore, the Technology Committee is a standing committee of the Board that has general responsibility to oversee the Bank’s strategies related to technology, innovation, data privacy, information security, cybersecurity and third-party technology.
Removed
The SVP of Technology also has responsibility for cybersecurity matters and reports to the Management Risk Committee, which consists of members of senior management. 52 Table of Contents The Technology Subcommittee of the Management Risk Committee focuses on three pillars: Technology Strategy, InfoSec/Cyber, and Data.
Added
The CISO provides Information Security Program updates and current Key Risk and Performance Indicator (KRI/KPI) metrics to both the Technology Committee and the Board throughout the year, as well as an Annual Information Security report pursuant to the requirements of the Gramm-Leach-Bliley Act (GLBA) and other related frameworks.

Item 2. Properties

Properties — owned and leased real estate

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Item 2. Properties Our corporate headquarters is located at 5415 Evergreen Way, Everett, WA 98203. In addition to our corporate headquarters, which includes our Evergreen branch, we operated 13 other branch offices as of December 31, 2024 for our community bank and CCBX segments.
Item 2. Properties Our corporate headquarters is located at 5415 Evergreen Way, Everett, WA 98203. In addition to our corporate headquarters, which includes our Evergreen branch, we operated 13 other branch offices as of December 31, 2025 for our community bank and CCBX segments.
The leases, excluding renewal periods, on our branch offices expire in 2024 through 2044. We believe that these facilities and additional or alternative space available to us are adequate to meet our needs for the foreseeable future.
The leases, excluding renewal periods, on our branch offices expire in 2026 through 2044. We believe that these facilities and additional or alternative space available to us are adequate to meet our needs for the foreseeable future.
Twelve of our branches are located in Snohomish County and two of our branches are located in neighboring counties (one in King County and one in Island County). We own our corporate headquarters and five of our other branch offices and lease the remainder of our branch offices.
Twelve of our branches are located in Snohomish County and two of our branches are located in neighboring counties (one in King County and one in Island County), and we have one loan production office in King County. We own our corporate headquarters and five of our other branch offices and lease the remainder of our branch offices.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 103 of the SEC’s Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions unless we reasonably believe the monetary sanctions will not equal or exceed a threshold which we determine is reasonably designed to result in disclosure of any such proceeding that is material to our business or financial condition.
Item 103 of the SEC’s Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions unless we reasonably believe the monetary sanctions will not equal or exceed a threshold which we determine is reasonably designed to result in disclosure of any such proceeding that is material to our business, financial condition and results of operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The Bank is not obligated to pay us dividends. 54 Table of Contents Securities Authorized for Issuance under Equity Compensation Plan For information regarding securities authorized for issuance under the Company’s equity compensation plans, see subparagraph (d) in Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters” of this Form 10-K , which is incorporated herein by reference.
The Bank is not obligated to pay us dividends. 53 Table of Contents Securities Authorized for Issuance under Equity Compensation Plan For information regarding securities authorized for issuance under the Company’s equity compensation plans, see subparagraph (d) in Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters” of this Form 10-K, which is incorporated herein by reference.
Total return includes appreciation or depreciation in market value of the Company’s common stock as well as actual cash and stock dividends paid to common shareholders. The graph assumes the value of the investment in Company’s common stock and each index was $100 on December 31, 2019, and all dividends were reinvested.
Total return includes appreciation or depreciation in market value of the Company’s common stock as well as actual cash and stock dividends paid to common shareholders. The graph assumes the value of the investment in Company’s common stock and each index was $100 on December 31, 2020, and all dividends were reinvested.
Performance Graph The following graph shows the five-year comparison of the total return to shareholders of the Company’s common stock as compared to the total returns of the S&P United States SmallCap Banks (Industry Group) Index and S&P 600 Small Cap during the five-year period beginning December 31, 2019 and ending December 31, 2024.
Performance Graph The following graph shows the five-year comparison of the total return to shareholders of the Company’s common stock as compared to the total returns of the S&P United States SmallCap Banks (Industry Group) Index and S&P 600 Small Cap during the five-year period beginning December 31, 2020 and ended December 31, 2025.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Holders of Common Stock and Dividends The Company’s common stock, no par value per share, is traded on the Nasdaq Global Select Market under the symbol “CCB.” On March 5, 2025, there were 259 holders of record of the Company’s common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Holders of Common Stock and Dividends The Company’s common stock, no par value per share, is traded on the Nasdaq Global Select Market under the symbol “CCB.” On February 20, 2026, there were 228 holders of record of the Company’s common stock.
Purchases of Equity Securities The Company did not purchase any shares of its common stock during the year ended December 31, 2024. 55 Table of Contents
Purchases of Equity Securities The Company did not purchase any shares of its common stock during the year ended December 31, 2025. 54 Table of Contents
We neither make nor endorse any predictions as to stock performance. 2019 2020 2021 2022 2023 2024 Coastal Financial Corporation 100.00 127.50 307.35 288.52 269.64 515.54 S&P 600 Small Cap 100.00 111.29 141.13 118.41 137.42 149.37 S&P United States SmallCap Banks (Industry Group) Index 100.00 90.82 126.43 111.47 112.03 132.44 Source: S&P Global Market Intelligence The information set forth under the heading “Performance Graph” shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that such information to be treated as soliciting material or specifically to be incorporated by reference into a filing under the Securities Act of 1933, as amended, or the Exchange Act.
We neither make nor endorse any predictions as to stock performance. 2020 2021 2022 2023 2024 2025 Coastal Financial Corporation 100.00 241.05 226.29 211.48 404.33 545.67 S&P 600 Small Cap 100.00 126.82 106.40 123.48 134.22 142.30 S&P United States SmallCap Banks (Industry Group) Index 100.00 139.21 122.74 123.35 145.82 160.37 Source: S&P Global Market Intelligence The information set forth under the heading “Performance Graph” shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that such information to be treated as soliciting material or specifically to be incorporated by reference into a filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Average balances are influenced by internal considerations such as the types of products we offer and the amount of risk that we are willing to assume as well as external influences such as economic conditions, competition for loans and deposits, and interest rates.
Average balances are influenced by internal considerations such as the types of products we offer and the amount of risk that we are willing to assume as well as external influences 55 Table of Contents such as economic conditions, competition for loans and deposits, and interest rates.
We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County).
We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County) and have one loan production office in King County.
The CCBX segment provides banking as a service (“BaaS”) that allows our broker-dealer and digital financial service partners to offer their customers banking services. The CCBX segment had 24 partners as of December 31, 2024. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments.
The CCBX segment provides banking as a service (“BaaS”) that allows our digital financial service partners to offer their customers banking services. The CCBX segment had 28 partners as of December 31, 2025. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments.
As of December 31, 2024, we had total assets of $4.12 billion, total loans receivable of $3.49 billion, total deposits of $3.59 billion and total shareholders’ equity of $438.7 million. The following discussion and analysis presents our financial condition and results of operations on a consolidated basis.
As of December 31, 2025, we had total assets of $4.74 billion, total loans receivable of $3.75 billion, total deposits of $4.14 billion and total shareholders’ equity of $491.0 million. The following discussion and analysis presents our financial condition and results of operations on a consolidated basis.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview This discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview This discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Form 10-K. We are a bank holding company that operates through our wholly owned subsidiaries, Coastal Community Bank (“Bank”) and Arlington Olympic LLC.
Our principal lending products are commercial real estate loans, consumer loans, residential real estate, commercial and industrial loans and construction, land and land development loans. Brokered Deposits Rulemaking On July 30, 2024, the Board of Directors of the FDIC approved a proposed rule that would amend the FDIC’s regulations governing the classification and treatment of brokered deposits.
Our principal lending products are commercial real estate loans, consumer loans, residential real estate, commercial and industrial loans and construction, land and land development loans.
Removed
The Company restated its financial statements for the year ended December 31, 2023 and the quarters ended March 31, June 30, and September 30, 2023 and 2024 for misstatements between the balance sheet, income statement and statement of cash flows that were determined to be material to previously issued financial statements.
Removed
See “Note 23, Restatement of Prior Period Financial Statements” in Item 8 of this Form 10-K, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our consolidated financial statements. We are a bank holding company that operates through our wholly owned subsidiaries, Coastal Community Bank (“Bank”) and Arlington Olympic LLC.
Removed
The proposal would, among other changes, broaden the definition of deposit broker to include agents that place or facilitate the placement of third-party deposits at 56 Table of Contents only one insured depository institution and narrow the exception to the definition of deposit broker for agents whose primary purpose is not the placement of funds with depository institutions.
Removed
While the Company is evaluating the potential impact of the proposed rule, if the rule is finalized as proposed, the Bank may be required to classify a greater amount of its deposits obtained with the involvement of third parties, such as CCBX partners, as brokered deposits.
Removed
An increase in the amount of brokered deposits on the Bank’s balance sheet could, among other consequences, increase the Bank’s deposit insurance assessment costs. Recordkeeping for Custodial Accounts On September 17, 2024, the FDIC issued a proposed rule that would impose recordkeeping and other compliance requirements on custodial deposit accounts with transactional features.
Removed
Under the proposed rule, FDIC-insured banks maintaining such custodial deposit accounts would be required to maintain updated and accurate account records identifying the beneficial owners of those deposits, the balance attributable to each beneficial owner, and the ownership category in which the deposited funds are held.
Removed
While we are evaluating the potential impact of the proposed rule, if the rule is finalized as proposed, it could increase the costs of operating BaaS arrangements such as the partnerships in our CCBX segment.
Removed
Third Party Risk Management Guidance On July 25, 2024, the Federal Reserve, FDIC, and Office of the Comptroller of the Currency released a joint statement discussing potential risks related to arrangements between banks and third parties to deliver bank deposit products and services to end users, as well as examples of effective practices for the management of those risks.
Removed
Additionally, the agencies issued a request for information and comment on the nature of banks’ relationships with financial technology companies and effective risk management practices for those relationships. The agencies also indicated that they are considering whether additional steps, such as enhancements to supervisory guidance, could help ensure that banks effectively manage risks associated with these various types of arrangements.
Removed
These developments suggest that the agencies are increasing their focus on third-party deposit arrangements and may expect financial institutions involved in these arrangements, such as us, to change their risk management and compliance practices, which may increase the costs of operating a BaaS business.

Other CCB 10-K year-over-year comparisons