The bank attributed the loss to valuation and credit-loss provisions tied to a $500M consumer loan portfolio from a BaaS partner.
Coastal Financial (NASDAQ:CCB) reported a second-quarter GAAP net loss of $42.1 million, or $2.76 per diluted share, following $68.8 million in pre-tax accounting adjustments. The adjustments included a $46 million valuation reduction on a credit enhancement asset and a $22.8 million provision for credit losses related to a Banking-as-a-Service partner’s indemnification agreement.
The company also recorded $4.4 million in accelerated amortization on capitalized software due to shortened asset lifespans. The affected portfolio consists of approximately $500 million in consumer loans, with the partner remaining contractually liable for covered losses. Management revised its assessment of the partner’s financial condition and portfolio performance during the quarter.
Coastal engaged third-party advisers to review loan-level data, which found no evidence of misconduct by the partner or its customers. The company continues to pursue contractual remedies under the indemnification agreement.