COASTAL FINANCIAL CORP

Previous wording

We are a bank holding company that operates through our wholly owned subsidiaries, Coastal Community Bank (“Bank”) and Arlington Olympic LLC. We are headquartered in Everett, Washington, which by population is the largest city in, and the county seat of, Snohomish County, which has an estimated population in 2025 of over 853,000. Our business is conducted through three reportable segments: The community bank, CCBX and treasury & administration. The community bank segment includes all community banking activities, with a primary focus on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application. 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). The CCBX segment provides banking as a service (“BaaS”) that allows digital financial service providers, companies and brands to offer their customers banking services. The CCBX segment has 29 partners as of June 30, 2025. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments. The Bank’s deposits are insured in whole or in part by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is subject to regulation by the Federal Reserve and the Washington State Department of Financial Institutions Division of Banks. The Federal Reserve also has supervisory authority over the Company.

Current wording

We are a bank holding company that operates through our wholly owned subsidiaries, Coastal Community Bank (“Bank”) and Arlington Olympic LLC. We are headquartered in Everett, Washington, which by population is the largest city in, and the county seat of, Snohomish County, which has an estimated population in 2025 of over 853,000. Our business is conducted through three reportable segments: The community bank, CCBX and treasury & administration. The community bank segment includes all community banking activities, with a primary focus on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application. 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). The CCBX segment provides banking as a service (“BaaS”) that allows digital financial service providers, companies and brands to offer their customers banking services. The CCBX segment has 29 partners as of September 30, 2025, one of which is a broker-dealer. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments. The Bank’s deposits are insured in whole or in part by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is subject to regulation by the Federal Reserve and the Washington State Department of Financial Institutions Division of Banks. The Federal Reserve also has supervisory authority over the Company.

Previous wording

As of June 30, 2025, we had total assets of $4.48 billion, total loans receivable of $3.54 billion, total deposits of $3.91 billion and total shareholders’ equity of $461.7 million.

Current wording

As of September 30, 2025, we had total assets of $4.55 billion, total loans receivable of $3.70 billion, total deposits of $3.97 billion and total shareholders’ equity of $475.3 million.

Previous wording

We generate most of our community bank revenue from interest on loans and CCBX revenue from BaaS fee income and interest on loans. Our primary source of funding for our loans is commercial and retail deposits from our customer relationships and from our partner deposit relationships. We place secondary reliance on wholesale funding, primarily borrowings from the Federal Home Loan Bank (“FHLB”). Less commonly used sources of funding include borrowings from the Federal Reserve System (“Federal Reserve”) discount window, draws on established federal funds lines from unaffiliated commercial banks, brokered funds, which allows us to obtain deposits from sources that do not have a relationship with the Bank and can be obtained through certificate of deposit listing services, via the internet or through other advertising methods, or a one-way buy through an insured cash sweep (“ICS”) account, which allows us to obtain funds from other institutions that have deposited funds through ICS. Our largest expenses are provision for credit losses - loans, interest on deposits and borrowings, BaaS loan expense, salaries and employee benefits, BaaS fraud expense, legal and professional expenses, data processing and software licenses and occupancy expense. 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.

Current wording

We generate most of our community bank revenue from interest on loans and CCBX revenue from BaaS fee income and interest on loans. Our primary source of funding for our loans is commercial and retail deposits from our customer relationships and from our partner deposit relationships. We place secondary reliance on wholesale funding, primarily borrowings from the Federal Home Loan Bank (“FHLB”). Less commonly used sources of funding include borrowings from the Federal Reserve System (“Federal Reserve”) discount window, draws on established federal funds lines from unaffiliated commercial banks, brokered funds, which allows us to obtain deposits from sources that do not have a relationship with the Bank and can be obtained through certificate of deposit listing services, via the internet or through other advertising methods, or a one-way buy through an insured cash sweep (“ICS”) account, which allows us to obtain funds from other institutions that have deposited funds through ICS. Our largest expenses are provision for credit losses - loans, interest on deposits and borrowings, BaaS loan expense, and salaries and employee benefits. 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.

Previous wording

Total loans, net of deferred fees, increased $23.0 million, or 0.7%, during the three months ended June 30, 2025 to $3.54 billion, compared to $3.52 billion at March 31, 2025. Community bank loans decreased $6.5 million, or 0.3%, and CCBX loans increased $29.5 million, or 1.8%. CCBX loan growth is net of $1.30 billion in CCBX loans sold during the quarter ended June 30, 2025. We continue to monitor and manage the CCBX loan portfolio, and will continue to sell CCBX loans to the originating partner in the coming months as part of our strategy to optimize our CCBX portfolio, manage growth, credit quality, portfolio and partner limits. At the same time we will be focused on increasing our efficiency and using technology to reduce future expense growth. Deposits increased $122.3 million, or 3.2% to $3.91 billion as of June 30, 2025 compared to $3.79 billion as of March 31, 2025. Our liquidity position is supported by diligent management of our liquid assets and liabilities as well as maintaining access to alternative sources of funds. As of June 30, 2025 we had $719.8 million in cash on the balance sheet and the capacity to borrow up to $642.7 million from Federal Home Loan Bank and the Federal Reserve Bank discount window. Cash on the balance sheet and borrowing capacity total $1.36 billion and represented 34.8% of total deposits and exceeded our $579.9 million in uninsured deposits as of June 30, 2025. Our AFS securities portfolio of $33,000 has a weighted average remaining maturity of 2.5 years. Unrealized losses on the AFS securities portfolio were $1,000, or less than 1.0%, of shareholders' equity as of June 30, 2025.

Current wording

Total loans, net of deferred fees, increased $163.5 million, or 4.6%, during the three months ended September 30, 2025 to $3.70 billion, compared to $3.54 billion at June 30, 2025. Community bank loans increased $39.6 million, or 2.1%, and CCBX loans increased $123.9 million, or 7.4%. CCBX loan growth is net of $1.62 billion in CCBX loans sold during the quarter ended September 30, 2025. We continue to monitor and manage the CCBX loan portfolio, and will continue to sell CCBX loans to the originating partner in the coming months as part of our strategy to optimize our CCBX portfolio, manage growth, credit quality, portfolio and partner limits. At the same time we will be focused on increasing our efficiency and using technology to reduce future expense growth. Deposits increased $59.0 million, or 1.5% to $3.97 billion as of September 30, 2025 compared to $3.91 billion as of June 30, 2025. Our liquidity position is supported by diligent management of our liquid assets and liabilities as well as maintaining access to alternative sources of funds. As of September 30, 2025 we had $642.3 million in cash on the balance sheet and the capacity to borrow up to $657.1 million from Federal Home Loan Bank and the Federal Reserve Bank discount window. Cash on the balance sheet and borrowing capacity total $1.30 billion and represented 32.7% of total deposits and exceeded our $617.9 million in uninsured deposits as of September 30, 2025. Our AFS securities portfolio of $31,000 has a weighted average remaining maturity of 2.8 years. Unrealized losses on the AFS securities portfolio were $1,000, or less than 1.0%, of shareholders' equity as of September 30, 2025.

Previous wording

Our CCBX segment continues to evolve, and we have 29 relationships, at varying stages, as of June 30, 2025. We continue to refine the criteria for CCBX partnerships, exploring relationships with larger more established partners, with experienced management teams, existing customer bases and strong financial positions. We also will consider promising medium and smaller sized partners that align with our approach and terms including financial wherewithal and will continue to exit relationships where it makes sense for us to do so.

Current wording

Our CCBX segment continues to evolve, and we have 29 relationships, at varying stages, as of September 30, 2025. We continue to refine the criteria for CCBX partnerships, by focusing on larger, established partners with strong management, customer bases, and finances, while also considering promising smaller partners that fit our approach and terms and will continue to exit relationships where it makes sense for us to do so.

Previous wording

As we explore relationships with new partners we continue to expand our product offerings with existing CCBX partners. As we become more proficient in the BaaS space we aim to cultivate new relationships that align with our long-term goals. We believe that a strategy of adding new partnerships and launching new products with existing partners allows us to expand and grow our customer base with a modest increase in regulatory risk given our operational history with them. Increases in partner activity/transaction counts is positively impacting noninterest income and we expect this trend to continue as current products grow and new products are introduced. We plan to continue selling loans as part of our strategy to balance partner and lending limits, and manage the loan portfolio and credit quality. We retain a portion of the future fee income for our role in processing transactions on sold credit card balances, and will continue this strategy to provide an on-going and recurring revenue source with no on balance sheet risk or capital requirement.

Current wording

While we explore relationships with new partners we continue to expand our product offerings with existing CCBX partners. As we become more proficient in the BaaS space we aim to cultivate new relationships that align with our long-term goals. We believe that a strategy of adding new partnerships and launching new products with existing partners allows us to expand and grow our customer base with a modest increase in regulatory risk given our operational history with them. Increases in partner activity/transaction counts are positively impacting noninterest income and we expect this trend to continue as current products grow and new products are introduced. We plan to continue selling loans as part of our strategy to balance partner and lending limits, and manage the loan portfolio and credit quality. We retain a portion of the fee income for our role in processing new transactions on previously sold credit card receivables, which continues to grow and is expected to provide increased and on-going revenue with no on balance sheet risk or capital requirement.

Previous wording

As we build our deposit base, we will be better able to sweep deposits off and on the balance sheet as needed. This deposit sweep capability allows us to better manage liquidity and deposit programs. At June 30, 2025 we swept off $478.7 million in deposits for FDIC insurance and primarily liquidity purposes. Robinhood has entered the production testing phase for its suite of deposit products, signaling continued momentum in our strategic partnership pipeline. Dave finalized production testing in Q2 and is poised to initiate its beta launch, expanding our footprint in digital banking solutions. The introduction of theses products are expected to diversify and grow deposits.

Current wording

As we build our deposit base, we will be better able to sweep deposits off and on the balance sheet as needed. This deposit sweep capability allows us to better manage liquidity and deposit programs. At September 30, 2025 we swept off $672.3 million in deposits for FDIC insurance and primarily liquidity purposes, and generated $311,000 in noninterest income during the quarter ended September 30, 2025. As we look ahead, six existing partner programs are being expanded to include new products such as lines of credit, deposit programs and credit cards. Robinhood's deposit program is in testing and is expected to ramp up in the fourth quarter of 2025. The expansion of these and other partner initiatives is expected to drive higher partner revenue in upcoming periods.

Previous wording

Net income for the three months ended June 30, 2025 was $11.0 million, or $0.71 per diluted share, compared to $11.6 million, or $0.84 per diluted share, for the three months ended June 30, 2024. The decrease in net income over the comparable period in the prior year was primarily attributable to a $14.9 million increase in noninterest expenses partially offset by $10.4 million increase in interest income due to an increase in average loans receivable, an increase in BaaS program income of $2.0 million, which includes $504,000 in nonrecurring revenue, and a decrease in interest expense on deposits of $178,000 combined with other less significant changes.

Current wording

Net income for the three months ended September 30, 2025 was $13.6 million, or $0.88 per diluted share, compared to $13.5 million, or $0.97 per diluted share, for the three months ended September 30, 2024. The increase in net income over the comparable period in the prior year was primarily attributable to a $3.9 million increase in interest income due to an increase in average loans receivable, an increase in BaaS program income of $2.4 million and a decrease in interest expense of $1.8 million, partially offset by a $5.7 million increase in noninterest expenses combined with other less significant changes.

Previous wording

Additionally, BaaS credit enhancement income decreased $29.6 million, which is directly related to and offsets the decrease in provision for credit losses of $30.1 million for the quarter ended June 30, 2025. The lower provision is due to improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors. In accordance with GAAP, we recognize as revenue (1) the right to be indemnified or reimbursed for fraud losses on CCBX customer loans and deposits and (2) the right to be indemnified for credit losses by our partners for expected credit losses related to loans they originate and unfunded commitments from such loans. CCBX customer credit losses are recognized in the allowance for credit loss and fraud loss is recognized in BaaS noninterest expense. For more information on the accounting for BaaS allowance for credit losses, reserve for unfunded commitments, credit enhancements and fraud enhancements see the section titled“CCBX – BaaS Reporting Information.”

Current wording

Additionally, BaaS credit enhancement income decreased $14.7 million, which is directly related to and offsets the decrease in provision for credit losses of $13.7 million for the quarter ended September 30, 2025. The lower provision is due to improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors. In accordance with GAAP, we recognize as revenue (1) the right to be indemnified or reimbursed for fraud losses on CCBX customer loans and deposits and (2) the right to be indemnified for credit losses by our partners for expected credit losses related to loans they originate and unfunded commitments from such loans. CCBX customer credit losses are recognized in the allowance for credit loss and fraud loss is recognized in BaaS noninterest expense. For more information on the accounting for BaaS allowance for credit losses, reserve for unfunded commitments, credit enhancements and fraud enhancements see the section titled“CCBX – BaaS Reporting Information.”

Previous wording

Net income for the six months ended June 30, 2025 was $20.8 million, or $1.36 per diluted share, compared to $18.4 million, or $1.34 per diluted share, for the six months ended June 30, 2024. The increase in net income over the comparable period in the prior year was primarily attributable to an increase of $24.4 million in net interest income, resulting in an increase of $14.5 million in net interest income adjusted for BaaS loan expense. The increase in interest income and BaaS loan expense is largely related to growth in CCBX loans. The increase is partially offset by an $8.0 million increase in salaries and employee benefits, a $4.9 million increase in legal and professional expenses and a $3.0 million increase in data processing and software licenses all related to growth and investments in technology.

Current wording

Net income for the nine months ended September 30, 2025 was $34.4 million, or $2.24 per diluted share, compared to $31.9 million, or $2.32 per diluted share, for the nine months ended September 30, 2024. Net income is up, however net income per diluted share is down as a result of the capital raise in December 2024 that increased the number of shares outstanding. The increase in net income over the comparable period in the prior year was primarily attributable to an increase of $30.0 million in net interest income, partially offset by an increase of $10.0 million in BaaS loan expense. The increase in interest income and BaaS loan expense is largely related to growth in CCBX loans. Also contributing to the variance is an increase in BaaS program income of $6.6 million. The increase is partially offset by an $11.1 million increase in salaries and employee benefits, a $5.6 million increase in legal and professional expenses and a $4.4 million increase in data processing and software licenses all related to growth and investments in technology. Additionally, there was an increase in the provision for income taxes of $1.4 million as a result of higher net income and an increase in effective tax rate resulting from an increase in state taxes.

Previous wording

Other variances for the six months ended June 30, 2025 to the comparable period in the prior year include a decrease in the provision for credit losses - loans of $57.5 million which is largely related to and offset by a decrease in BaaS credit enhancement income of $55.7 million, which are related to improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors, combined with other less significant changes.

Current wording

Other variances for the nine months ended September 30, 2025 to the comparable period in the prior year include a decrease in the provision for credit losses - loans of $71.2 million which is largely related to and offset by a decrease in BaaS credit enhancement income of $70.4 million, which are related to improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors, combined with other less significant changes.

Previous wording

Net interest income for the three months ended June 30, 2025 was $76.7 million, compared to $66.2 million for the three months ended June 30, 2024, an increase of $10.6 million, or 16.0%. The increase in net interest income compared to the quarter ended June 30, 2024 was largely related to growth in loans receivable. The average balance of CCBX loans were $326.1 million more for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Total average loans receivable for the three months ended June 30, 2025 was $3.57 billion, compared to $3.26 billion for the three months ended June 30, 2024. The FOMC last lowered the targeted Federal Funds rate by 0.25% on December 19, 2024; a reduction of 1.00% compared to June 30, 2024.

Current wording

Net interest income for the three months ended September 30, 2025 was $77.9 million, compared to $72.3 million for the three months ended September 30, 2024, an increase of $5.6 million, or 7.8%. The increase in net interest income compared to the quarter ended September 30, 2024 was primarily related to an increase in interest earning deposits with other banks and growth in loans receivable. The average balance of CCBX loans were $212.5 million more for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Total average loans receivable for the three months ended September 30, 2025 was $3.64 billion, compared to $3.46 billion for the three months ended September 30, 2024. The FOMC last lowered the targeted Federal Funds rate by 0.25% on September 18, 2025; a reduction of 0.75% compared to September 30, 2024.

Previous wording

Total interest and fees on loans totaled $98.9 million for the three months ended June 30, 2025 compared to $90.9 million for the three months ended June 30, 2024. The $8.0 million increase in interest and fees on loans for the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, was largely due to growth in loans, primarily from CCBX. Total loans receivable was $3.54 billion at June 30, 2025, compared to $3.32 billion at June 30, 2024. CCBX average loans receivable was $1.69 billion for the quarter ended June 30, 2025, compared to $1.36 billion for the quarter ended June 30, 2024, an increase of $326.1 million, or 23.9%. Average CCBX yield of 16.22% was earned on CCBX loans for the quarter ended June 30, 2025, compared to 17.75% for the quarter ended June 30, 2024. The lower loan yield is the result of lower rates compared to the prior year period as well as a change in the loan mix. Lower rate capital call lines were $90.5 million higher compared to June 30, 2024. These loans bear a lower rate of interest, but have less credit risk due to the way the loans are structured compared to other commercial loans. CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield.

Current wording

Total interest and fees on loans were $100.4 million for the three months ended September 30, 2025 compared to $99.7 million for the three months ended September 30, 2024. The $691,000 increase in interest and fees on loans for the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, was largely due to growth in loans, primarily from CCBX. Total loans receivable was $3.70 billion at September 30, 2025, compared to $3.41 billion at September 30, 2024. CCBX average loans receivable was $1.76 billion for the quarter ended September 30, 2025, compared to $1.55 billion for the quarter ended September 30, 2024, an increase of $212.5 million, or 13.7%. Average CCBX yield of 15.65% was earned on CCBX loans for the quarter ended September 30, 2025, compared to 17.37% for the quarter ended September 30, 2024. The lower loan yield is the result of lower rates compared to the prior year period as well as a change in the loan mix. Lower rate capital call lines were $73.6 million higher compared to September 30, 2024. These loans earn a lower rate of interest, but have less credit risk due to the way the loans are structured compared to other commercial loans. Additionally, new CCBX loans tend to have lower stated interest rates compared to the prior year period as a result of our ongoing strategy to optimize the CCBX loan portfolio and strengthen our balance sheet by originating higher quality loans with enhanced credit standards. CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield.

Previous wording

Interest income from interest earning deposits with other banks was $8.1 million for the quarter ended June 30, 2025, an increase of $2.4 million, or 42.3%, primarily due to an increase in balances compared to the quarter ended June 30, 2024. The average balance of interest earning deposits invested with other banks for the three months ended June 30, 2025 was $729.7 million, compared to $418.2 million for the three months ended June 30, 2024. The yield on these interest earning deposits with other banks decreased 1.03%, in line with the 1.0% reduction in Fed funds, to 4.44% compared to 5.47% at June 30, 2024. Interest income on investment securities decreased $60,000 to $626,000 at June 30, 2025, compared to $686,000 at June 30, 2024. Average investment securities decreased $3.5 million from $49.8 million for the three months ended June 30, 2024, to $46.3 million for the three months ended June 30, 2025, as a result of principal paydowns. Average yield on investment securities decreased to 5.42% for the three months ended June 30, 2025, compared to 5.54% for the three months ended June 30, 2024.

Current wording

Interest income from interest earning deposits with other banks was $8.0 million for the quarter ended September 30, 2025, an increase of $3.2 million, or 67.5%, primarily due to an increase in balances compared to the quarter ended September 30, 2024. The average balance of interest earning deposits invested with other banks for the three months ended September 30, 2025 was $719.2 million, compared to $350.9 million for the three months ended September 30, 2024. The yield on these interest earning deposits with other banks decreased 1.00%, which is in line with the reduction in Fed funds compared to the prior year period, to 4.42% compared to 5.42% at September 30, 2024. Interest income on investment securities decreased $59,000 to $616,000 at September 30, 2025, compared to $675,000 at September 30, 2024. Average investment securities decreased $3.9 million from $49.0 million for the three months ended September 30, 2024, to $45.1 million for the three months ended September 30, 2025, as a result of principal paydowns. Average yield on investment securities decreased to 5.42% for the three months ended September 30, 2025, compared to 5.48% for the three months ended September 30, 2024.

Previous wording

Interest expense was $31.1 million for the quarter ended June 30, 2025, a $190,000 decrease from the quarter ended June 30, 2024. Interest expense on deposits was $30.4 million for the quarter ended June 30, 2025, compared to $30.6 million for the quarter ended June 30, 2024. The $178,000 decrease in interest expense on deposits was largely due to lower interest rates despite an increase of $515.0 million in average interest bearing deposits compared to the quarter ended June 30, 2024. Interest on borrowed funds was $660,000 for the quarter ended June 30, 2025, compared to $672,000 for the quarter ended June 30, 2024.

Current wording

Interest expense was $31.1 million for the quarter ended September 30, 2025, a $1.8 million decrease from the quarter ended September 30, 2024. Interest expense on deposits was $30.5 million for the quarter ended September 30, 2025, compared to $32.1 million for the quarter ended September 30, 2024. The $1.6 million decrease in interest expense on deposits was largely due to lower interest rates despite an increase of $428.1 million in average interest bearing deposits compared to the quarter ended September 30, 2024. Interest on borrowed funds was $660,000 for the quarter ended September 30, 2025, compared to $809,000 for the quarter ended September 30, 2024.

Previous wording

Cost of funds was 3.13% for the quarter ended June 30, 2025, which is a decrease of 0.47% from the quarter ended June 30, 2024. Cost of deposits for the quarter ended June 30, 2025 was 3.10%, which was a 0.48% decrease, from 3.58% for the quarter ended June 30, 2024. These decreases were largely due to lower interest rates.

Current wording

Cost of funds was 3.07% for the quarter ended September 30, 2025, which is a decrease of 0.55% from the quarter ended September 30, 2024. Cost of deposits for the quarter ended September 30, 2025 was 3.04%, which was a 0.56% decrease, from 3.59% for the quarter ended September 30, 2024. These decreases were largely due to lower interest rates.

Previous wording

Net interest margin was 7.06% for the three months ended June 30, 2025, compared to 7.12% for the three months ended June 30, 2024. The decrease in net interest margin compared to the three months ended June 30, 2024 was largely due to a decrease in loan yield partially offset by a decrease in cost of deposits.

Current wording

Net interest margin was 7.00% for the three months ended September 30, 2025, compared to 7.42% for the three months ended September 30, 2024. The decrease in net interest margin compared to the three months ended September 30, 2024 was largely due to a decrease in loan yield partially offset by a decrease in cost of deposits.

Previous wording

Total yield on loans receivable for the quarter ended June 30, 2025 was 11.11%, compared to 11.22% for the quarter ended June 30, 2024. This decrease in yield on loans receivable is the result of lower rates compared to the prior year period as well as a change in the loan mix. Lower rate capital call lines were $90.5 million higher compared to June 30, 2024. The composition of the loan portfolio is shifting with CCBX average loans increasing to 47.3% of the total loan portfolio for the quarter ended June 30, 2025, compared to 41.8% for the quarter ended June 30, 2024, and the average community bank loans decreasing to 52.7% of the loan portfolio for the quarter ended June 30, 2025, compared to 58.2% for the quarter ended June 30, 2024. For the quarter ended June 30, 2025, average CCBX loans increased $326.1 million, or 23.9%, with an average CCBX yield of 16.22%, compared to 17.75% at the quarter ended June 30, 2024. CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield. Average community bank loans decreased $16.4 million, or 0.9% due to normal balance fluctuations. Average yield on community bank loans for the three months ended June 30, 2025 was 6.53% compared to 6.52% for the three months ended June 30, 2024.

Current wording

Total yield on loans receivable for the quarter ended September 30, 2025 was 10.95%, compared to 11.44% for the quarter ended September 30, 2024. This decrease in yield on loans receivable is the result of lower rates compared to the prior year period as well as a change in the loan mix. Lower rate capital call lines were $73.6 million higher compared to September 30, 2024. The composition of the loan portfolio is shifting with CCBX average loans increasing to 48.5% of the total loan portfolio for the quarter ended September 30, 2025, compared to 44.8% for the quarter ended September 30, 2024, and the average community bank loans decreasing to 51.5% of the loan portfolio for the quarter ended September 30, 2025, compared to 55.2% for the quarter ended September 30, 2024. For the quarter ended September 30, 2025, average CCBX loans increased $212.5 million, or 13.7%, with an average CCBX yield of 15.65%, compared to 17.37% at the quarter ended September 30, 2024. CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield. Average community bank loans decreased $40.8 million, or 2.1% due to normal balance fluctuations. Average yield on community bank loans for the three months ended September 30, 2025 was 6.51% compared to 6.64% for the three months ended September 30, 2024.

Previous wording

For the three months ended June 30, 2025, net interest margin (net interest income divided by the average total interest earning assets) and net interest spread (average yield on total interest earning assets minus average cost of total interest bearing liabilities) were 7.06% and 6.27%, respectively, compared to 7.12% and 6.16%, respectively, for the three months ended June 30, 2024.

Current wording

For the three months ended September 30, 2025, net interest margin (net interest income divided by the average total interest earning assets) and net interest spread (average yield on total interest earning assets minus average cost of total interest bearing liabilities) were 7.00% and 6.21%, respectively, compared to 7.42% and 6.47%, respectively, for the three months ended September 30, 2024.

Previous wording

The following table presents an analysis of the average balances of net interest income, net interest spread and net interest margin for the periods indicated. Loan costs, net of fees included in interest income totaled $2.1 million and $2.3 million for the three months ended June 30, 2025 and 2024, respectively. For the three months ended June 30, 2025 and 2024, the amount of interest income not recognized on nonaccrual loans was not material.

Current wording

The following table presents an analysis of the average balances of net interest income, net interest spread and net interest margin for the periods indicated. Loan fees, net of costs included in interest income totaled $2.6 million and $2.3 million for the three months ended September 30, 2025 and 2024, respectively. For the three months ended September 30, 2025 and 2024, the amount of interest income not recognized on nonaccrual loans was not material.

Previous wording

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. The table illustrates the increase in loan interest income that is attributed to an $8.8 million increase in loan volume and the $845,000 that is attributed to a decrease in loan rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to volume.

Current wording

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. The table illustrates the increase in loan interest income which is attributed to an $5.0 million increase in loan volume partially offset by a $4.3 million decrease in loan rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to volume.

Previous wording

Net interest income for the six months ended June 30, 2025, was $152.8 million, compared to $128.4 million for the six months ended June 30, 2024, an increase of $24.4 million, or 19.0%. The increase in net interest income compared to the six months ended June 30, 2024 was largely related to growth in CCBX loans and a decrease in interest expense as a result of lower interest rates.

Current wording

Net interest income for the nine months ended September 30, 2025, was $230.7 million, compared to $200.7 million for the nine months ended September 30, 2024, an increase of $30.0 million, or 15.0%. The increase in net interest income compared to the nine months ended September 30, 2024 was largely related to growth in CCBX loans and a decrease in interest expense as a result of lower interest rates.

Previous wording

Interest and fees on loans totaled $197.0 million for the six months ended June 30, 2025 compared to $176.8 million for the six months ended June 30, 2024. The $20.2 million increase in interest and fees on loans for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was largely due to growth in CCBX loans. Total average loans receivable for the six months ended June 30, 2025 was $3.54 billion, compared to $3.20 billion for the six months ended June 30, 2024.

Current wording

Interest and fees on loans totaled $297.4 million for the nine months ended September 30, 2025 compared to $276.4 million for the nine months ended September 30, 2024. The $20.9 million increase in interest and fees on loans for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was largely due to growth in CCBX loans. Total average loans receivable for the nine months ended September 30, 2025 was $3.57 billion, compared to $3.29 billion for the nine months ended September 30, 2024.

Previous wording

CCBX average loans receivable grew to $1.66 billion for the six months ended June 30, 2025, compared to $1.31 billion for the six months ended June 30, 2024, an increase of $345.4 million, or 26.3%. Average CCBX yield of 16.54% was earned on CCBX loans for the six months ended June 30, 2025, compared to 17.75% for the six months ended June 30, 2024. This decrease in yield on loans receivable is the result of lower rates compared to the prior year period as well as a change in the loan mix. Lower rate capital call lines were $90.5 million higher compared to June 30, 2024. CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield.

Current wording

CCBX average loans receivable grew to $1.70 billion for the nine months ended September 30, 2025, compared to $1.39 billion for the nine months ended September 30, 2024, an increase of $300.9 million, or 21.6%. Average CCBX yield of 16.23% was earned on CCBX loans for the nine months ended September 30, 2025, compared to 17.61% for the nine months ended September 30, 2024. This decrease in yield on loans receivable is the result of lower rates compared to the prior year period as well as a change in the loan mix. Lower rate capital call lines were $73.6 million higher compared to September 30, 2024. CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield.

Previous wording

Community bank average loans receivable was $1.88 billion for the six months ended June 30, 2025, a decrease of $3.1 million, or 0.2%, compared to the prior year period. Average yield of 6.53% was earned on community bank loans for the six months ended June 30, 2025, compared to 6.49% for the six months ended June 30, 2024.

Current wording

Community bank average loans receivable was $1.88 billion for the nine months ended September 30, 2025, a decrease of $15.8 million, or 0.8%, compared to the prior year period. Average yield of 6.52% was earned on community bank loans for the nine months ended September 30, 2025, compared to 6.54% for the nine months ended September 30, 2024.

Previous wording

Interest income from interest earning deposits with other banks was $14.2 million for the six months ended June 30, 2025, an increase of $3.7 million due to an increase in balances, compared to the six months ended June 30, 2024. The average balance of interest earning deposits invested with other banks for the six months ended June 30, 2025 was $642.0 million, compared to $384.5 million for the six months ended June 30, 2024. Interest income on investment securities decreased $444,000 to $1.3 million, with a yield of 5.51% at June 30, 2025, compared to $1.7 million, and a yield of 4.19%, at June 30, 2024. Average investment securities decreased $35.8 million from $82.6 million for the six months ended June 30, 2024 to $46.7 million for the six months ended June 30, 2025 as a result of maturing securities and principal paydowns.

Current wording

Interest income from interest earning deposits with other banks was $22.2 million for the nine months ended September 30, 2025, an increase of $6.9 million due to an increase in balances, compared to the nine months ended September 30, 2024. The average balance of interest earning deposits invested with other banks for the nine months ended September 30, 2025 was $668.0 million, compared to $373.2 million for the nine months ended September 30, 2024. Interest income on investment securities decreased $503,000 to $1.9 million at September 30, 2025, compared to $2.4 million at September 30, 2024. Average investment securities decreased $25.1 million from $71.3 million for the nine months ended September 30, 2024 to $46.2 million for the nine months ended September 30, 2025 as a result of maturing securities and principal paydowns.

Previous wording

Interest expense was $59.9 million for the six months ended June 30, 2025, an $881,000 decrease from the six months ended June 30, 2024. Interest expense on deposits was $58.6 million for the six months ended June 30, 2025, compared to $59.4 million for the six months ended June 30, 2024. The $860,000 decrease in interest expense on deposits was due to a decrease in interest rates despite an increase in average interest bearing deposits of $476.8 million. Interest on borrowed funds was $1.3 million for the six months ended June 30, 2025 and $21,000 less than the six months ended June 30, 2024 as a result of a decrease in interest rates on the junior subordinated debt, which decreased 1.11%, to 6.85% for the six months ended June 30, 2025 compared to 7.95% for the six months ended June 30, 2024.

Current wording

Interest expense was $91.0 million for the nine months ended September 30, 2025, a $2.6 million decrease from the nine months ended September 30, 2024. Interest expense on deposits was $89.1 million for the nine months ended September 30, 2025, compared to $91.5 million for the nine months ended September 30, 2024. The $2.5 million decrease in interest expense on deposits was due to a decrease in interest rates despite an increase in average interest bearing deposits of $460.6 million. Interest on borrowed funds was $2.0 million for the nine months ended September 30, 2025 and $170,000 less than the nine months ended September 30, 2024 as a result of a decrease in interest rates on the junior subordinated debt, which decreased 1.08%, to 6.81% for the nine months ended September 30, 2025 compared to 7.89% for the nine months ended September 30, 2024.

Previous wording

Net interest margin was 7.27% for the six months ended June 30, 2025, compared to 7.02% for the six months ended June 30, 2024. The increase in net interest margin compared to the six months ended June 30, 2024 was largely a result of a decrease of 0.44% for cost of deposits combined with an increase of 0.10% for yield on loans. Interest bearing deposits increased an average of $476.8 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, and these deposits were tied to a lower Fed Funds rate for all six months of 2025.

Current wording

Net interest margin was 7.17% for the nine months ended September 30, 2025, compared to 7.16% for the nine months ended September 30, 2024. The slight increase in net interest margin compared to the nine months ended September 30, 2024 was largely a result of a decrease of 0.11% for yield on loans partially offset by a decrease of 0.48% for cost of deposits. Interest bearing deposits increased an average of $460.6 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, many of which were impacted by a lower Fed Funds rate for all nine months of 2025.

Previous wording

Cost of funds was 3.12% for the six months ended June 30, 2025, compared to 3.56% for the six months ended June 30, 2024. Cost of deposits for the six months ended June 30, 2025 was 3.09%, which was a 0.44% decrease, from 3.53% for the six months ended June 30, 2024. These decreases were largely due lower interest rates compared to the prior year period.

Current wording

Cost of funds was 3.10% for the nine months ended September 30, 2025, compared to 3.58% for the nine months ended September 30, 2024. Cost of deposits for the nine months ended September 30, 2025 was 3.07%, which was a 0.48% decrease, from 3.55% for the nine months ended September 30, 2024. These decreases were largely due lower interest rates compared to the prior year period.

Previous wording

Total yield on loans receivable for the six months ended June 30, 2025 was 11.22%, compared to 11.12% for the six months ended June 30, 2024. This increase in yield on loans receivable is primarily attributed to an increase in higher rate CCBX loans. For the six months ended June 30, 2025, average CCBX loans increased $345.4 million, or 26.3%. There was a decrease in average community bank loans of $3.1 million, or 0.2%, compared to the six months ended June 30, 2024. Average yield on community bank loans for the six months ended June 30, 2025 was 6.53%. compared to 6.49% for the six months ended June 30, 2024.

Current wording

Total yield on loans receivable for the nine months ended September 30, 2025 was 11.13%, compared to 11.23% for the nine months ended September 30, 2024. This decrease in yield on loans receivable is primarily attributed to lower interest rates and a change in loan mix. For the nine months ended September 30, 2025, average CCBX loans increased $300.9 million, or 21.6%. There was a decrease in average community bank loans of $15.8 million, or 0.8%, compared to the nine months ended September 30, 2024. Average yield on community bank loans for the nine months ended September 30, 2025 was 6.52%. compared to 6.54% for the nine months ended September 30, 2024.

Previous wording

For the six months ended June 30, 2025, net interest margin (net interest income divided by the average total interest earning assets) and net interest spread (average yield on total interest earning assets minus average cost of total interest bearing liabilities) were 7.27% and 6.47%, respectively, compared to 7.02% and 6.05%, respectively, for the six months ended June 30, 2024.

Current wording

For the nine months ended September 30, 2025, net interest margin (net interest income divided by the average total interest earning assets) and net interest spread (average yield on total interest earning assets minus average cost of total interest bearing liabilities) were 7.17% and 6.38%, respectively, compared to 7.16% and 6.19%, respectively, for the nine months ended September 30, 2024.

Previous wording

The following table presents an analysis of the average balances of net interest income, net interest spread and net interest margin for the periods indicated. Loan costs, net of loan fees, included in interest income totaled $4.2 million for both the six months ended June 30, 2025 and 2024. For the six months ended June 30, 2025 and 2024, the amount of interest income not recognized on nonaccrual loans was not material.

Current wording

The following table presents an analysis of the average balances of net interest income, net interest spread and net interest margin for the periods indicated. Loan fees, net of loan costs, included in interest income totaled $6.8 million and $6.5 million for the nine months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025 and 2024, the amount of interest income not recognized on nonaccrual loans was not material.

Previous wording

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. The table illustrates that the largest change is in loans receivable and consists of a $1.7 million increase in loan interest income that is attributed to an increase in loan rates and $18.6 million increase in loan interest income that is attributed to an increase in loan volume. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to volume.

Current wording

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. The table illustrates that the largest change is in loans receivable and consists of a $23.5 million increase in loan interest income attributed to an increase in loan volume partially offset by a decrease of $2.5 million in loan interest income attributed to a decrease in loan rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to volume.

Previous wording

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. Gross loans, excluding loans held for sale, totaled $3.54 billion at June 30, 2025. The allowance for credit losses as a percentage of loans was 4.65% at June 30, 2025, compared to 4.48% at June 30, 2024.

Current wording

The macro economic environment is continuously changing, primarily due to the pace of economic growth, inflation, changing interest rates, global trade tensions, the U.S. government shutdown, 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. Gross loans, excluding loans held for sale, totaled $3.70 billion at September 30, 2025. The allowance for credit losses as a percentage of loans was 4.69% at September 30, 2025, compared to 5.03% at September 30, 2024.

Previous wording

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. We believe that this alignment of interests ensures that CCBX partners are motivated to implement robust risk management practices and maintain the overall health of the portfolio. In accordance with accounting guidance, we estimate and record a provision for expected losses for these CCBX loans, reclassified negative deposit accounts, and accrued interest receivable on CCBX loans. When the provision for credit losses - loans and provision for unfunded commitments are recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements) in recognition of the CCBX partner's legal commitment to indemnify or reimburse losses. The credit enhancement asset is relieved as credit enhancement payments are received from the CCBX partner or taken from the partner's cash reserve account.

Current wording

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. We believe that this alignment of interests ensures that CCBX partners are motivated to implement robust risk management practices and maintain the overall health of the portfolio. In accordance with accounting guidance, we estimate and record a provision for expected losses for these CCBX loans, reclassified negative deposit accounts, and accrued interest receivable on CCBX loans. When the provision for credit losses - loans and provision for unfunded commitments are recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements) in recognition of the CCBX partner's legal commitment to indemnify or reimburse losses that are incurred over the life of the loan. The credit enhancement asset is relieved as credit enhancement payments are received from the CCBX partner or taken from the partner's cash reserve account.

Previous wording

The provision for credit losses for the three months ended June 30, 2025 was $32.2 million, compared to $62.3 million for the three months ended June 30, 2024. This includes a provision for credit losses - loans for the three months ended June 30, 2025 of $30.9 million, compared to $61.9 million for the three months ended June 30, 2024. The decrease in the Company’s provision for credit losses - loans during the quarter ended June 30, 2025, is largely related to improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors. As we continue to originate higher quality loans, these become a greater proportion of the CCBX portfolio, resulting in an improvement in expected losses and lower provision. During the quarter ended June 30, 2025, a $31.0 million provision for credit losses - loans was recorded for CCBX partner loans based on management’s analysis. The factors used in management’s analysis for community bank credit losses indicated that a provision recapture for credit losses - loans of $47,000 was needed for the quarter ended June 30, 2025, largely due to a change in loan mix. Additionally, a provision for unfunded commitments of $1.5 million was recorded for the quarter ended June 30, 2025, primarily as a result of a change in the loan mix of available balance, compared to $435,000 for the three months ended June 30, 2024. A provision recapture for accrued interest receivable of $182,000 was recorded for the quarter ended June 30, 2025 on CCBX loans, compared to zero for the quarter ended June 30, 2024.

Current wording

The provision for credit losses for the three months ended September 30, 2025 was $56.6 million, compared to $70.3 million for the three months ended September 30, 2024. This includes a provision for credit losses - loans for the three months ended September 30, 2025 of $58.3 million, compared to $71.6 million for the three months ended September 30, 2024. The decrease in the Company’s provision for credit losses - loans during the quarter ended September 30, 2025, is largely related to improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors. As we continue to originate higher quality loans, these higher quality loans become a greater proportion of the CCBX portfolio, resulting in an improvement in expected losses and lower provision. During the quarter ended September 30, 2025, a $58.8 million provision for credit losses - loans was recorded for CCBX partner loans. The factors used in management’s analysis for community bank credit losses indicated that a provision recapture for credit losses - loans of $583,000 was needed for the quarter ended September 30, 2025, largely due to updated prepayment speeds, partially offset by a slight increase in economic uncertainty, and loan mix of the community bank portfolio. Additionally, a provision recapture for unfunded commitments of $1.7 million was recorded for the quarter ended September 30, 2025, primarily as a result of a change in the loan mix of available balance, compared to a $1.3 million recapture for the three months ended September 30, 2024. No provision for accrued interest receivable was recorded for the quarter ended September 30, 2025 and September 30, 2024 on CCBX loans.

Previous wording

Net charge-offs for the quarter ended June 30, 2025 totaled $49.3 million, or 5.54% of total average loans, compared to $53.0 million, or 6.54% of total average loans, for the quarter ended June 30, 2024. Net charge-offs as a percent of loans were down in 2025 compared to 2024, primarily due to our on-going efforts to improve the credit quality of CCBX loans. However, in general, loans originated through CCBX partners have a higher level of expected losses than our community bank loans as reflected in the factors for allowance for credit losses. In accordance with GAAP, CCBX losses are recorded as charge-offs, but CCBX partner agreements provide for a credit enhancement that indemnifies or reimburses the Bank for net-charge-offs on CCBX loans, negative deposit accounts, and accrued interest receivable on CCBX loans except in accordance with the program agreement for one partner where the Company was responsible for credit losses on approximately 5% of a $296.3 million loan portfolio; prior to April 1, 2024, the Company was responsible for 10% of that portfolio. At June 30, 2025, our portion of this portfolio represented $19.8 million in loans. For the three months ended June 30, 2025, $49.3 million of net charge-offs were recognized for CCBX loans and $9,000 net charge-offs were recognized on community bank loans. For the three months ended June 30, 2024, $53.0 million of net charge-offs were recognized on CCBX loans and $2,000 net recoveries were recognized for community bank loans.

Current wording

Net charge-offs for the quarter ended September 30, 2025 totaled $49.2 million, or 5.37% of total average loans, compared to $48.8 million, or 5.60% of total average loans, for the quarter ended September 30, 2024. Net charge-offs as a percent of loans were down in 2025 compared to 2024, primarily due to our on-going efforts to improve the credit quality of CCBX loans. However, in general, loans originated through CCBX partners have a higher level of expected losses than our community bank loans as reflected in the factors for allowance for credit losses. In accordance with GAAP, CCBX losses are recorded as charge-offs, but CCBX partner agreements provide for a credit enhancement that indemnifies or reimburses the Bank for net-charge-offs on CCBX loans, negative deposit accounts, and accrued interest receivable on CCBX loans except in accordance with the program agreement for one partner where the Company was responsible for credit losses on approximately 5% of a $297.4 million loan portfolio; prior to April 1, 2024, the Company was responsible for 10% of that portfolio. At September 30, 2025, our portion of this portfolio represented $20.7 million in loans. For the three months ended September 30, 2025, $49.2 million of net charge-offs were recognized for CCBX loans and $1,000 net recoveries were recognized on community bank loans. For the three months ended September 30, 2024, $48.4 million of net charge-offs were recognized on CCBX loans and $395,000 net charge-offs were recognized for community bank loans.

Previous wording

The provision for credit losses - loans for the six months ended June 30, 2025 was $85.3 million, compared to $141.4 million for the six months ended June 30, 2024. The decrease in the Company’s provision for credit losses - loans during the quarter ended June 30, 2025, is largely related to improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors. During the six months ended June 30, 2025, an $85.3 million provision for credit losses - loans was recorded for loans originated through CCBX partners based on management’s analysis. The factors used in management’s analysis for community bank credit losses indicated that a provision of $18,000 was needed for the six months ended June 30, 2025, due to a change in outstanding balances.

Current wording

The provision for credit losses - loans for the nine months ended September 30, 2025 was $143.6 million, compared to $213.0 million for the nine months ended September 30, 2024. The decrease in the Company’s provision for credit losses - loans during the quarter ended September 30, 2025, is largely related to improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors. During the nine months ended September 30, 2025, a $144.1 million provision for credit losses - loans was recorded for loans originated through CCBX partners based on management’s analysis. The factors used in management’s analysis for community bank credit losses indicated that a provision recapture of $565,000 was needed for the nine months ended September 30, 2025, due to a change in loan mix and updated prepayment speeds, partially offset by a slight increase in economic uncertainty.

Previous wording

Net charge-offs for the six months ended June 30, 2025 totaled $97.5 million, or 5.55% of total average loans, as compared to net charge-offs of $109.9 million, or 6.91% of total average loans, for the six months ended June 30, 2024. Net charge-offs decreased in the first six months of 2025 compared to the same period of 2024 as a result of the improvement in the the performance of loans originated through CCBX partners and our focus on originating higher quality CCBX loans. In accordance with GAAP, CCBX losses are recorded as charge-offs, but CCBX partner agreements provide for a credit enhancement that indemnifies, and CCBX partners reimburse the Bank for net-charge-offs on CCBX loans, negative deposit accounts, and accrued interest receivable on CCBX loans, except in accordance with the program agreement for one partner where the Company is responsible for credit losses on approximately 5% of a $296.3 million loan portfolio. At June 30, 2025, our portion of this portfolio represented $19.8 million in loans. For the six months ended June 30, 2025, $97.5 million of net charge-offs were recognized for CCBX loans and $6,000 of net charge-offs recognized for community bank loans. For the six months ended June 30, 2024, $109.9 million of net charge-offs were recognized for CCBX and $9,000 of net charge-offs were recognized for community bank loans.

Current wording

Net charge-offs for the nine months ended September 30, 2025 totaled $146.8 million, or 5.49% of total average loans, as compared to net charge-offs of $158.7 million, or 6.45% of total average loans, for the nine months ended September 30, 2024. Net charge-offs decreased in the first nine months of 2025 compared to the same period of 2024 as a result of the improvement in the performance of loans originated through CCBX partners and our focus on originating higher quality CCBX loans. In accordance with GAAP, CCBX loan losses are recorded as charge-offs, but CCBX partner agreements provide for a credit enhancement that indemnifies the Bank, and CCBX partners reimburse the Bank for net-charge-offs on CCBX loans, negative deposit accounts, and accrued interest receivable on CCBX loans, except in accordance with the program agreement for one partner where the Company is responsible for credit losses on approximately 5% of a $297.4 million loan portfolio. At September 30, 2025, our portion of this portfolio represented $20.7 million in loans. For the nine months ended September 30, 2025, $146.8 million of net charge-offs were recognized for CCBX loans and $5,000 of net charge-offs recognized for community bank loans. For the nine months ended September 30, 2024, $158.3 million of net charge-offs were recognized for CCBX and $404,000 of net charge-offs were recognized for community bank loans.

Previous wording

For the six months ended June 30, 2025, noninterest income totaled $106.2 million, a decrease of $49.1 million, or 31.6%, compared to $155.3 million for the six months ended June 30, 2024. The decrease is largely attributed to lower BaaS indemnification income which is related to lower provision for credit losses on CCBX loans. The $3.3 million increase in transaction and interchange fees includes $504,000 in nonrecurring revenue.

Current wording

For the three months ended September 30, 2025, noninterest income totaled $66.8 million, a decrease of $12.0 million, or 15.2%, compared to $78.8 million for the three months ended September 30, 2024. The decrease is primarily attributed to lower BaaS indemnification income which is related to lower provision for credit losses on CCBX loans based on improved credit quality, partially offset by an increase in BaaS program income.