COASTAL FINANCIAL CORP
For the period ended Jun 30, 2026. Filed Aug 7, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 7, 2026
CCB$42.72-1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0001437958-26-000039
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-07.
0001437958-26-000061
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 250 previous paragraphs and 289 current paragraphs.
133 unchanged; 98 reworded; 33 added; 18 removed; 1 previous and 25 current paragraphs rearranged.
Tables are not compared: 50 previous and 62 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (33)
Current report
Net loss for the three months ended June 30, 2026 was $42.1 million, or $(2.76) per diluted share, compared to net income of $11.0 million, or $0.71 per diluted share, for the three months ended June 30, 2025. The decrease in net income over the comparable period in the prior year was primarily attributable to a $68.8 million credit expense related to a single, isolated CCBX partner relationship, which included a $46.0 million credit enhancement receivable valuation adjustment and a $20.5 million increase in the provision for credit losses due primarily to the establishment of a $22.8 million specific provision related to one partner relationship for credit losses not expected to be fully collected under the partner's indemnification arrangement following an individual assessment of collectability. Data processing and software licenses were $8.8 million higher due to $4.4 million of capitalized software amortization due to shortened useful lives associated with technology modernization as well as continued investments in growth, technology and risk management. Those expenses were partially offset by a $10.8 million increase in interest income due to an increase in average loans receivable, an increase in BaaS program income of $4.4 million and a decrease in interest expense of $1.9 million.
Current report
BaaS credit enhancement income increased $39.5 million, primarily due to loan growth and changes in the composition of the CCBX loan portfolio. This increase corresponds to a $59.9 million increase in the provision for credit losses associated with expected credit losses covered under partners' credit enhancement arrangements, with the difference between the two primarily attributable to a specific reserve for one partner's expected credit losses not expected to be fully collected under that partner's indemnification arrangement, as discussed above. 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 report
Net loss for the six months ended June 30, 2026 was $30.1 million, or $(1.98) per diluted share, compared to net income of $20.8 million, or $1.36 per diluted share, for the six months ended June 30, 2025. The decrease in net income over the comparable period in the prior year was primarily attributable to a $46.0 million credit enhancement receivable valuation adjustment related to the assessment of collectability of a CCBX partner, a $55.6 million increase in the provision for credit losses related an increase in loans receivable combined with the establishment of a specific reserve related to one partner relationship for credit losses not expected to be fully collected under the partner's indemnification arrangement following an individual assessment of collectability. Also contributing to the variance was an increase of $12.4 million in BaaS loan expense, an $11.6 million increase in data processing and software licenses, a $3.8 million increase in salaries and employee benefits and a $1.3 million increase in legal and professional expenses, all due to continued investments in growth, technology and risk management. Partially offsetting these expense was an increase of $19.9 million in net interest income and an increase in BaaS program income of $9.0 million.
Current report
Net interest income for the six months ended June 30, 2026, was $172.7 million, compared to $152.8 million for the six months ended June 30, 2025, an increase of $19.9 million, or 13.0%. The increase in net interest income compared to the six months ended June 30, 2025 was largely related to growth in CCBX loans and a decrease in interest expense as a result of lower interest rates.
Current report
Interest and fees on loans totaled $214.0 million for the six months ended June 30, 2026 compared to $197.0 million for the six months ended June 30, 2025. The $17.0 million increase in interest and fees on loans for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was largely due to growth in CCBX loans, partially offset by a decrease in interest rates. Total average loans receivable for the six months ended June 30, 2026 was $4.01 billion, compared to $3.54 billion for the six months ended June 30, 2025.
Current report
CCBX average loans receivable grew to $2.04 billion for the six months ended June 30, 2026, compared to $1.66 billion for the six months ended June 30, 2025, an increase of $384.8 million, or 23.2%. Average CCBX yield of 14.77% was earned on CCBX loans for the six months ended June 30, 2026, compared to 16.54% for the six months ended June 30, 2025. 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 $5.2 million higher compared to June 30, 2025. 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 report
Community bank average loans receivable was $1.97 billion for the six months ended June 30, 2026, an increase of $89.5 million, or 4.8%, compared to the prior year period. Average yield of 6.58% was earned on community bank loans for the six months ended June 30, 2026, compared to 6.53% for the six months ended June 30, 2025.
Current report
Interest income from interest earning deposits with other banks was $14.7 million for the six months ended June 30, 2026, an increase of $580,000 due to an increase in balances, partially offset by a decrease in interest rates, compared to the six months ended June 30, 2025. The average balance of interest earning deposits invested with other banks for the six months ended June 30, 2026 was $804.2 million, compared to $642.0 million for the six months ended June 30, 2025. Interest income on investment securities decreased $42,000 to $1.2 million at June 30, 2026, compared to $1.3 million at June 30, 2025. Average investment securities decreased $114,000 from $46.7 million for the six months ended June 30, 2025 to $46.6 million for the six months ended June 30, 2026 as a result of principal paydowns.
Current report
Interest expense was $57.5 million for the six months ended June 30, 2026, a $2.4 million decrease from the six months ended June 30, 2025. Interest expense on deposits was $55.7 million for the six months ended June 30, 2026, compared to $58.6 million for the six months ended June 30, 2025. The $2.9 million decrease in interest expense on deposits was due to a decrease in interest rates despite an increase in average interest bearing deposits of $528.2 million. Interest on borrowed funds was $1.8 million for the six months ended June 30, 2026 and $478,000 more than the six months ended June 30, 2025 as a result of a higher average borrowings resulting from changes in the Company's liquidity management and funding strategy.
Current report
Net interest margin was 7.14% for the six months ended June 30, 2026, compared to 7.27% for the six months ended June 30, 2025. The decrease in net interest margin compared to the six months ended June 30, 2025 was largely a result of a decrease of 0.47% for yield on loans, partially offset by a decrease of 0.52% for cost of deposits. Average interest bearing deposits increased $528.2 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, and while the average rate paid on those deposits declined, the benefit of the lower rates to the overall net interest margin was largely offset by the higher average deposit balances.
Current report
Cost of funds was 2.61% for the six months ended June 30, 2026, compared to 3.12% for the six months ended June 30, 2025. Cost of deposits for the six months ended June 30, 2026 was 2.57%, which was a 0.52% decrease, from 3.09% for the six months ended June 30, 2025. These decreases were largely due to lower interest rates compared to the prior year period.
Current report
Total yield on loans receivable for the six months ended June 30, 2026 was 10.75%, compared to 11.22% for the six months ended June 30, 2025. This decrease in yield on loans receivable is primarily attributed to lower interest rates and a change in loan mix. For the six months ended June 30, 2026, average CCBX loans increased $384.8 million, or 23.2%. There was an increase in average community bank loans of $89.5 million, or 4.8%, compared to the six months ended June 30, 2025. Average yield on community bank loans for the six months ended June 30, 2026 was 6.58%. compared to 6.53% for the six months ended June 30, 2025.
Current report
For the six months ended June 30, 2026, net interest margin and net interest spread were 7.14% and 6.51%, respectively, compared to 7.27% and 6.47%, respectively, for the six months ended June 30, 2025.
Current report
Agreements with our CCBX partners provide for a credit enhancement under which the partner indemnifies or reimburses the Bank for covered losses. As a result, while the Company records an allowance for expected credit losses on CCBX loans in accordance with U.S. GAAP, the related credit risk is substantially mitigated through the partners' contractual indemnification obligations. When provision expense is recognized for CCBX credit losses and unfunded commitments that are subject to partner indemnification, we also record a credit enhancement asset through noninterest income (BaaS credit enhancements) representing amounts contractually due under the applicable partner agreements. We evaluate the collectability of the credit enhancement asset each reporting period and record a valuation adjustment when collection of all or a portion of the asset is no longer considered probable. 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. Management regularly evaluates and manages counterparty risk associated with its CCBX partners, as the Bank could incur additional credit losses to the extent a partner is unable to fulfill its contractual obligations.
Current report
The provision for credit losses on loans for the six months ended June 30, 2026 was $143.3 million, compared to $85.3 million for the six months ended June 30, 2025. The increase in the Company’s provision for credit losses on loans during the quarter ended June 30, 2026, is largely related to loan growth, changes in the composition of the loan portfolio, and the establishment of a $22.8 million specific provision related to one partner relationship for credit losses not expected to be fully collected under the partner's indemnification arrangement following an individual assessment of collectability. During the six months ended June 30, 2026, a $146.9 million provision for credit losses on 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 $3.6 million was needed for the six months ended June 30, 2026, due to a decrease in weighted average life of the CRE portfolio and an improvement in the overall mix of the portfolio.
Current report
Net charge-offs for the six months ended June 30, 2026 totaled $100.2 million, or 5.03% of total average loans, as compared to net charge-offs of $97.5 million, or 5.55% of total average loans, for the six months ended June 30, 2025. Net charge-offs as a percent of average total loans decreased in the first six months of 2026 compared to the same period of 2025 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, under one partner program, the Company retains ownership of approximately 5% of a $350.8 million loan portfolio and retains the credit losses provision for that portfolio. At June 30, 2026, our portion of this portfolio represented $23.4 million in loans. For the six months ended June 30, 2026, $100.2 million of net charge-offs were recognized for CCBX loans and $53,000 of net charge-offs recognized for community bank loans. For the six months ended June 30, 2025, $97.5 million of net charge-offs were recognized for CCBX and $6,000 of net charge-offs were recognized for community bank loans.
Current report
For the three months ended June 30, 2026, noninterest income totaled $88.7 million, an increase of $46.0 million, or 107.8%, compared to $42.7 million for the three months ended June 30, 2025. The increase is primarily attributed to higher BaaS indemnification income which is related to the provision for credit losses on CCBX loans. A $4.4 million increase in BaaS program income also contributed to the increase in noninterest income.
Current report
For the six months ended June 30, 2026, noninterest income totaled $154.8 million, an increase of $48.6 million, or 45.8%, compared to $106.2 million for the six months ended June 30, 2025. The increase is largely attributed to higher BaaS indemnification income, which is related to the provision for credit losses on CCBX loans. An increase of $9.0 million in BaaS program income also contributed to the year over year increase.
Current report
For the six months ended June 30, 2026, noninterest expense totaled $224.6 million, an increase of $79.7 million, or 55.1%, compared to $144.8 million for the six months ended June 30, 2025. The was largely due to a $46.0 million credit enhancement receivable valuation adjustment related to the assessment of collectability of a CCBX partner. Also contributing was an $11.6 million increase in data processing and software licenses, a $3.8 million increase in salaries and employee benefits and a $1.3 million increase in legal and professional expenses all of which are related to the growth of the Company and investments in technology and risk management. BaaS loan expense increased $12.4 million, which is related to loan activity.
Current report
For the three months ended June 30, 2026, we recognized an income tax benefit of $13.1 million, compared to income tax expense of $3.4 million for the three months ended June 30, 2025. The change was primarily due to the pre-tax net loss during the current period compared to pre-tax net income in the prior year period. Also impacting income tax expense is the deductibility of certain equity awards. The effective tax rate was 23.7% for the three months ended June 30, 2026, compared to 23.3% for the three months ended June 30, 2025. During a loss period, the effective tax rate represents the income tax benefit as a percentage of pretax loss. The effective tax rate varies from period to period primarily due to the tax effects of stock-based compensation awards, which depend on employee exercise and vesting activity and the Company's stock price at the time of the related transactions.
Current report
For the six months ended June 30, 2026 we recognized an income tax benefit $10.5 million, compared to income tax expense of $5.4 million for the six months ended June 30, 2025. The change is primarily due to a pre-tax loss in the current period. Our effective tax rates for the six months ended June 30, 2026 and 2025 were 25.9% and 20.6%, respectively. During a loss period, the effective tax rate represents the income tax benefit as a percentage of pretax loss. The increase in the effective tax rate compared to the prior year period was primarily due to a higher blended state tax rate following changes in California tax law in June 2025 and the impact of discrete tax effects related to stock-based compensation, which vary based on employee exercise and vesting activity and the Company's stock price.
Current report
Net interest income for the community bank was $45.5 million for the six months ended June 30, 2026, an increase of $5.7 million, or 14.2%, compared to $39.8 million for the six months ended June 30, 2025. The increase in net interest income is due to the community bank having higher average loans than deposits for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, resulting in intrabank interest expense for the community bank of $7.6 million for the six months ended June 30, 2026, compared to intrabank interest expense of $7.7 million for the six months ended June 30, 2025, partially offset by higher interest income on loans due to loan growth and lower interest expense on deposit accounts due to lower interest rates. There was a provision recapture for credit losses on loans for the community bank of $2.9 million for the six months ended June 30, 2026, compared to a provision for credit losses of $291,000 for the six months ended June 30, 2025. The provision recapture in the current period was due to a decrease in weighted average life of the construction, land and land development portfolio and an improvement in the overall mix of the portfolio. Net charge-offs to average loans for the community bank segment have remained consistently low and were 0.01% and 0.00% for the six months ended June 30, 2026 and June 30, 2025, respectively. Noninterest income for the community bank was $2.1 million for the six months ended June 30, 2026, an increase of $27,000, or 1.3%, compared to $2.1 million for the six months ended June 30, 2025. Noninterest expenses for the community bank increased $352,000, or 1.5%, to $23.3 million as of June 30, 2026, compared to $23.0 million as of June 30, 2025. The increase in noninterest expenses is largely due to higher salaries and employee benefits, data processing and software licenses and legal and professional expenses all of which are related to the growth of Company and investments in technology and risk management.
Current report
CCBX
Current report
Net interest income for CCBX was $119.4 million for the six months ended June 30, 2026, an increase of $14.6 million, or 13.9%, compared to $104.8 million for the six months ended June 30, 2025. The increase in net interest income is due to loan growth from active CCBX relationships. During the six months ended June 30, 2026, we sold $7.84 billion in CCBX loans as part of our strategy to optimize our CCBX portfolio, manage growth, credit quality, portfolio and partner limits. We are retaining a portion of the transaction processing fee income on sold credit card receivables which provides on-going and recurring income without balance sheet risk. As a result of having higher average deposits than loans, but lower interest rates, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 intrabank interest income for CCBX was $14.1 million for the six months ended June 30, 2026, compared to $13.9 million for the six months ended June 30, 2025. Provision for credit losses was $146.4 million for the six months ended June 30, 2026, compared to $87.7 million for the six months ended June 30, 2025. The increase in the provision for credit losses compared to the prior quarter was primarily driven by loan growth, changes in the composition of the loan portfolio and the establishment of a $22.8 million specific provision related to one partner relationship for credit losses not expected to be fully collected under the partner's indemnification arrangement following an individual assessment of collectability. Noninterest income for CCBX was $151.8 million for the six months ended June 30, 2026, an increase of $48.1 million, or 46.4%, compared to $103.6 million for the six months ended June 30, 2025, due to an increase of $36.6 million in BaaS credit enhancements related to the allowance for credit losses, a $9.0 million increase in total BaaS program income, which was the result of increased activity with our CCBX partners and $2.6 million increase in BaaS fraud enhancements. Noninterest expenses for CCBX increased $85.8 million, or 85.4%, to $186.2 million as of June 30, 2026, compared to $100.5 million as of June 30, 2025. The increase in noninterest expense was largely due to a $46.0 million credit enhancement receivable valuation adjustment related to the assessment of collectability for one CCBX partner. Additionally, growth from active CCBX relationships resulting in an increase in BaaS loan expense and increased salaries and benefits, data processing and software licenses and legal and professional expenses all of which are related to the growth of Company and investments in technology and risk management, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. For more information on the accounting for BaaS income and expenses see the section titled “CCBX – BaaS Reporting Information.”
Current report
Net interest income for treasury & administration was $7.9 million for the six months ended June 30, 2026, a decrease of $270,000, or 3.3%, compared to $8.2 million for the six months ended June 30, 2025. Noninterest income increased $469,000, or 110.9%, to $892,000 for the six months ended June 30, 2026, compared to $423,000 for the six months ended June 30, 2025. Noninterest expense decreased $6.4 million, or 29.8%, to $15.0 million for the six months ended June 30, 2026, compared to $21.4 million for the six months ended June 30, 2025, largely as a result of increased salaries and employee benefits and legal and professional expenses as more of these expenses have been directly expensed to the other segments.
Current report
Negative deposit account balances are reclassified as loans for financial reporting purposes and are included in the Company's allowance for credit losses under its CECL methodology. Because these balances do not accrue interest, they are not included in nonaccrual loans. Management monitors the aging, collectability and expected credit losses associated with these balances as part of its ongoing credit risk management process. At June 30, 2026, a reclassified negative deposit account for one partner outstanding for more than 90 days totaled $22.8 million.
Current report
Agreements with our CCBX partners provide a credit enhancement under which the partner indemnifies or reimburses the Bank for covered credit losses on loans, unfunded commitments and negative deposit accounts. In accordance with U.S. GAAP, we estimate expected credit losses on these exposures and record the related provision for credit losses and reserve for unfunded commitments. Concurrently, a credit enhancement asset is recognized through noninterest income (BaaS credit enhancements) representing the expected reimbursement from the partner. The collectability of the credit enhancement asset is evaluated each reporting period and a valuation adjustment is recorded when collection of all or a portion of the asset is no longer considered probable. As of June 30, 2026, a $46.0 million valuation adjustment was recorded against a portion of the credit enhancement asset related to one CCBX partner following an assessment of the collectability of amounts due under the applicable indemnification arrangement. 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.
Current report
The allowance for credit losses increased $44.2 million as of June 30, 2026 compared to December 31, 2025 primarily reflecting loan growth and establishment of the aforementioned specific reserve. Agreements with our CCBX partners provide for a credit enhancement under which the partner indemnifies or reimburses the Bank for covered losses. As a result, while the Company records an allowance for expected credit losses on CCBX loans in accordance with U.S. GAAP, the related credit risk is substantially mitigated through the partners' contractual indemnification obligations. At June 30, 2026, the allowance for credit losses for CCBX partner loans totaled $198.0 million, compared to $151.3 million at December 31, 2025.
Current report
The average rate paid on total deposits was 2.57% for the three months ended June 30, 2026, compared to 3.10% for the three months ended June 30, 2025 due to lower interest rates.
Current report
The average rate paid on total deposits was 2.57% for the six months ended June 30, 2026, compared to 3.09% for the six months ended June 30, 2025. The overall lower average rate paid on interest bearing accounts in the six months ended June 30, 2026 compared to the six months ended June 30, 2025 is due to a lower interest rate environment.
Current report
Other liabilities increased $19.6 million to $42.8 million as of June 30, 2026, due to an increase in accrued expenses.
Current report
As of June 30, 2026, commitments associated with sold credit card receivables subject to receivable sale agreements totaled $6.15 billion, compared to $4.17 billion as of December 31, 2025. While we retain the customer account relationship, receivables generated under these programs are periodically sold to BaaS partners pursuant to the applicable receivable sale agreements and remain subject to the Company's established partner and portfolio limits.
Current report
We establish portfolio limits with each CCBX partner to manage loan concentration, liquidity and counterparty risk. These limits include maximum aggregate customer loan balances that may be originated and retained on the Company's balance sheet and, where applicable, contractual limits on unfunded commitments. Accordingly, we have not experienced, and do not expect, utilization of the full amount of available credit commitments at any point in time, including commitments associated with credit card programs, receivable sale programs and other lending products. For example, as of June 30, 2026, capital call lines outstanding balance totaled $204.8 million. Although total commitments were $591.0 million, the commitments are cancelable, and are also limited to a maximum of $350.0 million under the applicable partner agreements. These limits remain applicable to all partner programs, including those operating under receivable sale arrangements, and are designed to manage concentrations by partner and loan type while supporting prudent liquidity and credit risk management.
Removed paragraphs (18)
Previous report
Net income for the three months ended March 31, 2026 was $12.0 million, or $0.78 per diluted share, compared to $9.7 million, or $0.63 per diluted share, for the three months ended March 31, 2025. The increase in net income over the comparable period in the prior year was primarily attributable to a $6.8 million increase in interest income due to an increase in average loans receivable and interest earning deposits with other banks, an increase in BaaS program income of $4.6 million and a decrease in interest expense of $521,000, partially offset by a $11.5 million increase in noninterest expenses combined with other less significant changes.
Previous report
Additionally, BaaS credit enhancement income decreased $2.9 million, which is directly related to and offsets the decrease in provision for credit losses of $4.4 million for the quarter ended March 31, 2026. The lower provision is due to improvement in the performance of the CCBX portfolio, change in loan mix, 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 report
(2)Annualized calculations shown for periods presented.
Previous report
(2)Annualized calculations shown for periods presented.
Previous report
(1)Yields and costs are annualized.
Previous report
(1)Yields and costs are annualized.
Previous report
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 and reclassified negative deposit accounts. When the provision for credit losses on 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.
Previous report
For the three months ended March 31, 2026, noninterest income totaled $66.1 million, an increase of $2.6 million, or 4.1%, compared to $63.5 million for the three months ended March 31, 2025. 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.
Previous report
For the three months ended March 31, 2026, income tax expense totaled $2.6 million, an increase of $526,000 compared to the three months ended March 31, 2025. The $526,000 increase in income tax expense is the result of higher net income as well as an increase in state income tax rates. Also impacting income tax expense is the deductibility of certain equity awards. The effective tax rate was 17.6% for the three months ended March 31, 2026, compared to 17.3% for the three months ended March 31, 2025. The effective tax rate was higher for the three months ended March 31, 2026, due to the impact of stock equity award deductions which fluctuate based on employee driven equity award activity, vesting terms and stock price. Additionally, the state rate increased in the quarter ended June 30, 2025 primarily as a result of a change in California's tax laws.
Previous report
Community Bank
Previous report
Treasury & Administration
Previous report
Community Bank
Previous report
Treasury & Administration
Previous report
As of March 31, 2026, $60.9 million of the $62.8 million in nonperforming CCBX loans were covered by CCBX partner credit enhancements. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank 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.
Previous report
The allowance for credit losses increased $2.9 million as of March 31, 2026 compared to December 31, 2025 largely due to lower loss historical rates and a change in loan mix. 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. 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. Net charge-offs on CCBX loans for the three months ended March 31, 2026 that were covered by credit enhancements were $48.6 million. At March 31, 2026, the allowance for credit losses for CCBX partner loans totaled $154.3 million, compared to $151.3 million at December 31, 2025.
Previous report
The average rate paid on total deposits was 2.56% for the three months ended March 31, 2026, compared to 3.08% for the three months ended March 31, 2025. The average rate paid on interest bearing demand and money market accounts decreased 0.77% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The average rate paid on other deposits decreased 3.38% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The average rate paid on time deposits of less than $250,000 decreased 0.24% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The average rate paid on time deposits greater than $250,000 decreased 0.65% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The average rate paid on savings increased 2.30% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 as a result of an increase in CCBX savings deposit products. The overall lower average rate of 2.56% paid on interest bearing accounts in the three months ended March 31, 2026 compared to 3.08% for the three months ended March 31, 2025 is due to lower interest rates.
Previous report
Deferred tax liability, net increased to $803,000 as of March 31, 2026, largely due to the impact of the OBBBA, which permits the immediate expense of R&D costs for tax purposes.
Previous report
We have portfolio limits with each of our partners to manage loan concentration risk, liquidity risk and counter-party partner risk. For example, as of March 31, 2026, capital call lines outstanding balance totaled $176.4 million, and while commitments totaled $573.8 million the commitments are cancelable, and are also limited to a maximum of $350.0 million by agreement with the partner. These limits allow us to manage portfolio concentrations with partners and by loan type.
Reworded paragraphs (98)
Previous wording
As of March 31, 2026, we had total assets of $5.66 billion, total loans receivable of $3.86 billion, total deposits of $5.04 billion and total shareholders’ equity of $503.8 million.
Current wording
As of June 30, 2026, we had total assets of $5.46 billion, total loans receivable of $4.21 billion, total deposits of $4.86 billion and total shareholders’ equity of $463.4 million.
Previous wording
Net interest income for the three months ended March 31, 2026 was $83.4 million, compared to $76.1 million for the three months ended March 31, 2025, an increase of $7.3 million, or 9.6%. The increase in net interest income compared to the quarter ended March 31, 2025 was primarily related to an increase in interest earning deposits with other banks and growth in loans receivable. The average balance of loans was $366.9 million more and average interest earning deposits with other banks was $338.1 million higher for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Current wording
Net interest income for the three months ended June 30, 2026 was $89.4 million, compared to $76.7 million for the three months ended June 30, 2025, an increase of $12.6 million, or 16.4%. The increase in net interest income compared to the quarter ended June 30, 2025 was primarily related to growth in loans receivable, partially offset by a decrease in loan yield and a decrease in interest from interest earning deposits with other banks due to lower interest rates. The average balance of loans was $580.6 million higher and average interest earning deposits with other banks was $11.8 million lower for the three months ended June 30, 2026, compared to the three months ended June 30, 2025.
Previous wording
Total interest and fees on loans were $102.9 million for the three months ended March 31, 2026 compared to $98.1 million for the three months ended March 31, 2025. The $4.7 million increase in interest and fees on loans for the quarter ended March 31, 2026, compared to the quarter ended March 31, 2025, was largely due to growth in loans, primarily from CCBX. Total loans receivable was $3.86 billion at March 31, 2026, compared to $3.52 billion at March 31, 2025. CCBX average loans receivable was $1.92 billion for the quarter ended March 31, 2026, compared to $1.63 billion for the quarter ended March 31, 2025, an increase of $292.5 million, or 17.9%. Average CCBX yield of 15.01% was earned on CCBX loans for the quarter ended March 31, 2026, compared to 16.88% for the quarter ended March 31, 2025. 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. The Federal Open Market Committee ("FOMC") of the Federal Reserve last lowered the targeted federal funds rate by 0.25% on December 11, 2025; a reduction of 0.75% compared to March 31, 2025. Additionally, lower rate capital call lines were $42.9 million higher compared to March 31, 2025. 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. 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 $111.1 million for the three months ended June 30, 2026, compared to $98.9 million for the three months ended June 30, 2025. The $12.2 million increase in interest and fees on loans for the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, was largely due to growth in loans, primarily from CCBX. Total loans receivable was $4.21 billion at June 30, 2026, compared to $3.54 billion at June 30, 2025. CCBX average loans receivable was $2.16 billion for the quarter ended June 30, 2026, compared to $1.69 billion for the quarter ended June 30, 2025, an increase of $476.1 million, or 28.2%. Average CCBX yield of 14.56% was earned on CCBX loans for the quarter ended June 30, 2026, compared to 16.22% for the quarter ended June 30, 2025. 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. The Federal Open Market Committee ("FOMC") of the Federal Reserve last lowered the targeted federal funds rate by 0.25% on December 11, 2025, a reduction of 0.75% compared to June 30, 2025. Additionally, lower rate capital call lines were $5.2 million higher compared to June 30, 2025. 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. 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. Community bank average loans receivable was $1.98 billion at June 30, 2026, compared to $1.88 billion at June 30, 2025, an increase of $104.4 million, or 5.6%. An average community bank yield of 6.57% was earned on community bank loans for the quarter ended June 30, 2026, compared to 6.53% for the quarter ended June 30, 2025.
Previous wording
Interest income from interest earning deposits with other banks was $8.1 million for the quarter ended March 31, 2026, an increase of $2.1 million, or 33.9%, primarily due to an increase in balances compared to the quarter ended March 31, 2025. The average balance of interest earning deposits invested with other banks for the three months ended March 31, 2026 was $891.5 million, compared to $553.4 million for the three months ended March 31, 2025. The yield on these interest earning deposits with other banks decreased 0.75%, which is in line with the reduction in Fed funds compared to the prior year period, to 3.70% compared to 4.45% at March 31, 2025. Interest income on investment securities decreased $28,000 to $622,000 at March 31, 2026, compared to $650,000 at March 31, 2025. Average investment securities increased $259,000 from $47.2 million for the three months ended March 31, 2025, to $47.5 million for the three months ended March 31, 2026, as a result of investments purchased for CRA purposes, partially offset by principal paydowns. Average yield on investment securities decreased to 5.32% for the three months ended March 31, 2026, compared to 5.59% for the three months ended March 31, 2025.
Current wording
Interest income from interest earning deposits with other banks was $6.6 million for the quarter ended June 30, 2026, a decrease of $1.5 million, or 18.3%, primarily due to a decrease in interest rates compared to the quarter ended June 30, 2025. The average balance of interest earning deposits invested with other banks for the three months ended June 30, 2026 was $717.9 million, compared to $729.7 million for the three months ended June 30, 2025. The yield on these interest earning deposits with other banks decreased 0.75%, which is in line with the reduction in Fed funds compared to the prior year period, to 3.69% compared to 4.44% at June 30, 2025. Interest income on investment securities decreased $14,000 to $612,000 at June 30, 2026, compared to $626,000 at June 30, 2025. Average investment securities decreased $482,000 from $46.3 million for the three months ended June 30, 2025 to $45.8 million for the three months ended June 30, 2026, as a result of principal paydowns. Average yield on investment securities decreased to 5.36% for the three months ended June 30, 2026, compared to 5.42% for the three months ended June 30, 2025.
Previous wording
Interest expense was $28.3 million for the quarter ended March 31, 2026, a $521,000 decrease from the quarter ended March 31, 2025. Interest expense on deposits was $27.7 million for the quarter ended March 31, 2026, compared to $28.2 million for the quarter ended March 31, 2025. The $515,000 decrease in interest expense on deposits was largely due to lower interest rates despite an increase of $631.9 million in average interest bearing deposits compared to the quarter ended March 31, 2025. Interest on borrowed funds was $654,000 for the quarter ended March 31, 2026, compared to $660,000 for the quarter ended March 31, 2025.
Current wording
Interest expense was $29.2 million for the quarter ended June 30, 2026, a $1.9 million decrease from the quarter ended June 30, 2025. Interest expense on deposits was $28.0 million for the quarter ended June 30, 2026, compared to $30.4 million for the quarter ended June 30, 2025. The $2.4 million decrease in interest expense on deposits was largely due to lower interest rates despite an increase of $411.5 million in average interest bearing deposits compared to the quarter ended June 30, 2025. Interest on borrowed funds was $1.1 million for the quarter ended June 30, 2026, compared to $660,000 for the quarter ended June 30, 2025 primarily due to higher average borrowings resulting from changes in the Company's liquidity management and funding strategy.
Previous wording
Cost of funds was 2.59% for the quarter ended March 31, 2026, which was a decrease of 0.52% from 3.11% for the quarter ended March 31, 2025. Cost of deposits for the quarter ended March 31, 2026 was 2.56%, which was a 0.52% decrease from 3.08% for the quarter ended March 31, 2025. These decreases were largely due to lower interest rates.
Current wording
Cost of funds was 2.62% for the quarter ended June 30, 2026, which was a decrease of 0.51% from 3.13% for the quarter ended June 30, 2025. Cost of deposits for the quarter ended June 30, 2026 was 2.57%, which was a 0.53% decrease from 3.10% for the quarter ended June 30, 2025. These decreases were largely due to lower interest rates combined with changes in liquidity management and funding strategy.
Previous wording
Net interest margin was 7.00% for the three months ended March 31, 2026, compared to 7.48% for the three months ended March 31, 2025. The decrease in net interest margin compared to the three months ended March 31, 2025 was largely due to a decrease in loan yield, partially offset by a decrease in cost of deposits.
Current wording
Net interest margin was 7.27% for the three months ended June 30, 2026, compared to 7.06% for the three months ended June 30, 2025. The increase in net interest margin compared to the three months ended June 30, 2025 was largely due to a decrease in cost of funds, partially offset by a decrease in loan yield.
Previous wording
Total yield on loans receivable for the quarter ended March 31, 2026 was 10.76%, compared to 11.33% for the quarter ended March 31, 2025. 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 CCBX capital call lines were $42.9 million higher compared to March 31, 2025. The composition of the loan portfolio is shifting with CCBX average loans increasing to 49.6% of the total loan portfolio for the quarter ended March 31, 2026, compared to 46.4% for the quarter ended March 31, 2025, and the average community bank loans decreasing to 50.4% of the loan portfolio for the quarter ended March 31, 2026, compared to 53.6% for the quarter ended March 31, 2025. For the quarter ended March 31, 2026, average CCBX loans increased $292.5 million, or 17.9%, with an average CCBX yield of 15.01%, compared to 16.88% at the quarter ended March 31, 2025. 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 increased $74.4 million, or 4.0% due to growth and normal balance fluctuations. Average yield on community bank loans for the three months ended March 31, 2026 was 6.58% compared to 6.53% for the three months ended March 31, 2025.
Current wording
Total yield on loans receivable for the quarter ended June 30, 2026 was 10.74%, compared to 11.11% for the quarter ended June 30, 2025. 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 CCBX capital call lines were $5.2 million higher compared to June 30, 2025. The composition of the loan portfolio is shifting with CCBX average loans increasing to 52.2% of the total loan portfolio for the quarter ended June 30, 2026, compared to 47.3% for the quarter ended June 30, 2025, and the average community bank loans decreasing to 47.8% of the loan portfolio for the quarter ended June 30, 2026, compared to 52.7% for the quarter ended June 30, 2025. For the quarter ended June 30, 2026, average CCBX loans increased $476.1 million, or 28.2%, with an average CCBX yield of 14.56%, compared to 16.22% at the quarter ended June 30, 2025. This reflects a lower rate environment as well as our ongoing strategy to grow a more diversified CCBX loan portfolio with a greater proportion of lower-risk loan products and improved portfolio credit quality, which results in lower average yields. 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 increased $104.4 million, or 5.6% due to growth and normal balance fluctuations. Average yield on community bank loans for the three months ended June 30, 2026 was 6.57%, compared to 6.53% for the three months ended June 30, 2025.
Previous wording
For the three months ended March 31, 2026, 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 6.39%, respectively, compared to 7.48% and 6.68%, respectively, for the three months ended March 31, 2025.
Current wording
For the three months ended June 30, 2026, 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 6.63%, respectively, compared to 7.06% and 6.27%, respectively, for the three months ended June 30, 2025.
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 fees, net of loan costs included in interest income totaled $2.5 million and $2.1 million for the three months ended March 31, 2026 and 2025, respectively. For the each of the three months ended March 31, 2026 and 2025, 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 $2.7 million and $2.1 million for the three months ended June 30, 2026 and 2025, respectively. For the each of the three months ended June 30, 2026 and 2025, 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 which is attributed to a $9.9 million increase in loan volume, partially offset by a $3.4 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.
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 a $15.5 million increase in loan volume, partially offset by a $3.3 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
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 $3.86 billion at March 31, 2026. The allowance for credit losses as a percentage of loans was 4.47% at March 31, 2026, compared to 5.21% at March 31, 2025.
Current 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 $4.21 billion at June 30, 2026. The allowance for credit losses as a percentage of loans was 5.08% at June 30, 2026, compared to 4.65% at June 30, 2025.
Previous wording
The provision for credit losses for the three months ended March 31, 2026 was $51.4 million, compared to $55.8 million for the three months ended March 31, 2025. This includes a provision for credit losses on loans for the three months ended March 31, 2026 of $52.5 million, compared to $54.4 million for the three months ended March 31, 2025. The decrease in the Company’s provision for credit losses on loans during the quarter ended March 31, 2026 is largely related to improvement in the performance of the CCBX portfolio and changes in the composition of CCBX loan originations. The current mix of originations includes a greater proportion of loans with attributes that have historically demonstrated lower loss experience, which contributed to lower expected losses and a lower provision during the period. During the quarter ended March 31, 2026, a $52.6 million provision for credit losses on 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 on loans of $1.4 million was needed for the quarter ended March 31, 2026, largely due to improved economic outlook, partially offset by a change in the loan mix of the community bank portfolio. Additionally, a provision recapture for unfunded commitments of $1.3 million was recorded for the quarter ended March 31, 2026, primarily as a result of a change in the loan mix of available balance, compared to a $613,000 provision for the three months ended March 31, 2025. An $11,000 provision for accrued interest receivable on CCBX loans was recorded for the quarter ended March 31, 2026, compared to $784,000 for the three months ended March 31, 2025 and a $252,000 provision for other receivables was recorded for the quarter ended March 31, 2026 and there was no such provision for the quarter ended March 31, 2025.
Current wording
The provision for credit losses for the three months ended June 30, 2026 was $92.2 million, compared to $32.2 million for the three months ended June 30, 2025. This includes a provision for credit losses on loans for the three months ended June 30, 2026 of $91.9 million, compared to $30.9 million for the three months ended June 30, 2025. The increase in the provision for credit losses compared to the prior year quarter was primarily driven by loan growth, changes in the composition of the loan portfolio and the establishment of a $22.8 million specific provision related to one partner relationship for credit losses not expected to be fully collected under the partner's indemnification arrangement following an individual assessment of collectability. During the quarter ended June 30, 2026, a $94.3 million provision for credit losses on 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 on loans of $2.2 million was needed for the quarter ended June 30, 2026, largely due to a decrease in weighted average life of the CRE portfolio and an improvement in the overall mix of the portfolio.
Previous wording
The following table shows the provision expense for loans by segment for the periods indicated:
Current wording
The following table shows the provision expense (recapture) for loans by segment for the periods indicated:
Previous wording
Net charge-offs for the quarter ended March 31, 2026 totaled $49.6 million, or 5.18% of total average loans, compared to $48.2 million, or 5.57% of total average loans, for the quarter ended March 31, 2025. Net charge-offs as a percent of loans were down in 2026 compared to 2025, 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 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 $324.0 million loan portfolio. At March 31, 2026, our portion of this portfolio represented $22.0 million in loans. For the three months ended March 31, 2026, $49.6 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 March 31, 2025, $48.2 million of net charge-offs were recognized on CCBX loans and $3,000 net recoveries were recognized for community bank loans.
Current wording
Net charge-offs for the quarter ended June 30, 2026 totaled $50.6 million, or 4.90% of total average loans, compared to $49.3 million, or 5.54% of total average loans, for the quarter ended June 30, 2025. Net charge-offs as a percent of loans were down in 2026 compared to 2025, 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 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 under one partner program, the Company retains ownership of approximately 5% of a $350.8 million loan portfolio and retains the credit losses provision for that portfolio. At June 30, 2026, our portion of this portfolio represented $23.4 million in loans. For the three months ended June 30, 2026, $50.6 million of net charge-offs were recognized for CCBX loans and $54,000 were recognized on community bank loans. For the three months ended June 30, 2025, $49.3 million of net charge-offs were recognized on CCBX loans and $9,000 were recognized for community bank loans.
Previous wording
Summary of significant noninterest income for the three months ended March 31, 2026 compared to the three months ended March 31, 2025
Current wording
Summary of significant noninterest income for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025
Previous wording
For the three months ended March 31, 2026, we earned $64.7 million in BaaS fees, which was an increase of $2.8 million, or 4.5%, over the three months ended March 31, 2025, when we earned $61.9 million in BaaS fees. The increase was primarily due to an increase of $4.6 million in total BaaS fee program income, which was the result of increased partner activity, and an increase of $1.1 million in BaaS fraud enhancements, partially offset by a decrease of $2.9 million in BaaS credit enhancements related to the allowance for credit losses.
Current wording
For the six months ended June 30, 2026, we earned $151.7 million in BaaS fees, which was an increase of $48.1 million, or 46.4%, over the six months ended June 30, 2025, when we earned $103.6 million in BaaS fees. The increase was primarily due to an increase of $9.0 million in total BaaS fee program income, which was the result of increased partner activity, and an increase of $2.6 million in BaaS fraud enhancements. Also contributing was an increase of $36.6 million in BaaS credit enhancements related to the allowance for credit losses.
Previous wording
Service charges and fees were $850,000 for the three months ended March 31, 2026, a decrease of $10,000, or 1.2%, from the comparable quarter in the prior year.
Current wording
Service charges and fees were $1.9 million for the six months ended June 30, 2026, an increase of $93,000, or 5.2%, from the comparable quarter in the prior year.
Previous wording
Unrealized gain on equity securities, net. During the three months ended March 31, 2026, we recognized an unrealized net gain on equity securities of $126,000 compared to the three months ended March 31, 2025, when there was an unrealized gain of $16,000 recognized. We hold $4.4 million in total equity funds and investments, $3.5 million of which is in equity securities of entities that are focused on providing products to the BaaS and financial services space.
Current wording
Unrealized loss on equity securities, net. During the six months ended June 30, 2026, we recognized an unrealized net gain on equity securities of $101,000 compared to the six months ended June 30, 2025, when there was a net unrealized loss of $423,000 recognized. We hold $4.5 million in total equity funds and investments, $4.1 million of which is in equity securities of entities that are focused on providing products to the BaaS and financial services space.
Previous wording
Generally, noninterest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services. The largest components of noninterest expense are BaaS loan and fraud expense combined and salaries and employee benefits. 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.
Current wording
Generally, noninterest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services. The largest components of noninterest expense are credit enhancement receivable valuation adjustment, BaaS loan and fraud expense combined, salaries and employee benefits and data processing and software licenses. Noninterest expense also includes operational expenses, such as legal and professional expenses, occupancy, point of sale expenses, FDIC assessments, director and staff expenses, excise taxes, marketing and other expenses.
Previous wording
The $11.5 million increase in noninterest expenses for the quarter ended March 31, 2026 compared to the quarter ended March 31, 2025 was largely due to a $4.4 million increase in BaaS loan expense, a $3.4 million increase in data processing and software licenses, a $1.6 million increase in salary and employee benefits, and a $514,000 increase in legal and professional expenses. These increases are largely due to growth and enhancements in technology all of which are related to the growth of the Company and investments in technology and risk management.
Current wording
The $68.3 million increase in noninterest expenses for the quarter ended June 30, 2026 compared to the quarter ended June 30, 2025 was largely due to a was primarily due to a $46.0 million credit enhancement receivable valuation adjustment related to the assessment of collectability of a CCBX partner, an $8.8 million increase in data processing and software licenses and a $2.2 million increase in salary and employee benefits. These increases are largely due to the growth of the Company and investments in technology and risk management. BaaS loan expense increased $7.9 million, which is related to increased CCBX loan activity.
Previous wording
Summary of significant noninterest expense for the three months ended March 31, 2026 compared to the three months ended March 31, 2025
Current wording
Summary of significant noninterest expense for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025
Previous wording
Salaries and Employee Benefits. Salaries and employee benefits are one of the largest components of noninterest expense and include payroll expense, incentive compensation costs, equity compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $23.1 million for the three months ended March 31, 2026, an increase of $1.6 million, or 7.4%, compared to $21.5 million for the three months ended March 31, 2025. Salaries and employee benefits expense continues to increase, primarily due to hiring staff for our CCBX segment and additional staff for our ongoing growth initiatives. 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.
Current wording
Salaries and Employee Benefits. Salaries and employee benefits are one of the largest components of noninterest expense and include payroll expense, incentive compensation costs, equity compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $23.6 million and $46.8 million for the three and six months ended June 30, 2026, respectively, compared to $21.5 million and $43.0 million for the three and six months ended June 30, 2025, respectively. Salaries and employee benefits expense continues to increase, primarily due to hiring staff for our CCBX segment and additional staff for our ongoing growth initiatives. 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.
Previous wording
Data Processing and Software Licenses. Data processing and software licenses include expenses related to obtaining and maintaining software required for our various functions and additional investments in software development and the amortization of those costs. Capitalized software totaled $16.8 million as of March 31, 2026, compared to $15.7 million as of March 31, 2025. Data processing costs include all of our customer transaction processing and data storage, computer processing, and network costs. Data processing costs grow as we grow and add new products, customers and branches and enhance technology. Additionally, CCBX data processing expenses and software that aids in the reporting of CCBX activities and monitoring of transactions that helps to automate and create other efficiencies in reporting have resulted in increased expenses in the category. These expenses are expected to increase as we invest more in automated processing and as we grow product lines and our CCBX segment. Amortization of capitalized software totaled $1.3 million for the three months ended March 31, 2026, compared to $1.2 million for the three months ended March 31, 2025. Data processing costs were $7.6 million for the three months ended March 31, 2026, compared to $4.2 million for the three months ended March 31, 2025, an increase of $3.4 million, or 80.6%.
Current wording
Data Processing and Software Licenses. Data processing and software licenses include expenses related to obtaining and maintaining software required for our various functions and additional investments in software development and the amortization of those costs. Data processing costs include all of our customer transaction processing and data storage, computer processing, and network costs. Data processing costs grow as we grow and add new products, customers and branches and enhance technology. Additionally, CCBX data processing expenses and software that aids in the reporting of CCBX activities and monitoring of transactions that helps to automate and create other efficiencies in reporting have resulted in increased expenses in the category. These expenses are expected to increase as we invest more in automated processing and as we grow product lines and our CCBX segment. Amortization of capitalized software totaled $5.9 million and $7.2 million for the three and six months ended June 30, 2026, respectively, compared to $1.3 million and $2.5 million for the three and six months ended June 30, 2025, respectively and included a $4.4 million impact in the current period from revising the estimated useful life of certain software assets to reflect their abandonment as they are replaced with the technology modernization initiatives. Data processing costs were $14.3 million and $22.0 million for the three and six months ended June 30, 2026, respectively, compared to $5.5 million and $10.4 million for the three and six months ended June 30, 2025, respectively.
Previous wording
Legal and Professional Expenses. Legal and professional costs include legal, audit and accounting expenses, consulting fees, and fees for recruiting and hiring employees. These expenses fluctuate with the development of contracts and products for CCBX partners, audit and accounting needs, and are impacted by our reporting cycle and timing of legal and professional services. The expenses also reflect the costs associated with our infrastructure enhancement projects to improve our processing, automate processes, reduce compliance costs and enhance our data management. Legal and professional expenses were $7.0 million for the three months ended March 31, 2026 compared to $6.5 million for the three months ended March 31, 2025, an increase of $514,000, or 7.9%.
Current wording
Legal and Professional Expenses. Legal and professional costs include legal, audit and accounting expenses, consulting fees, and fees for recruiting and hiring employees. These expenses fluctuate with the development of contracts and products for CCBX partners, audit and accounting needs, and are impacted by our reporting cycle and timing of legal and professional services. The expenses also reflect the costs associated with our infrastructure enhancement projects to improve our processing, automate processes, reduce compliance costs and enhance our data management. Legal and professional expenses were $6.2 million and $13.2 million for the three and six months ended June 30, 2026, respectively, compared to $6.0 million and $11.9 million for the three and six months ended June 30, 2025, respectively.
Previous wording
Excise Taxes. Excise taxes are assessed on Washington state income and are based on gross income. Gross income is reduced by certain allowed deductions and income attributed to other states is also removed to arrive at the taxable base. Excise taxes increased primarily as a result of increased income subject to excise taxes. CCBX income is sourced to the state where the partner does business, and the majority of partners are located outside the state of Washington.
Current wording
Excise Taxes. Excise taxes are assessed on Washington state income and are based on gross income. Gross income is reduced by certain allowed deductions and income attributed to other states is also removed to arrive at the taxable base. Excise taxes increased primarily as a result of a rate increase combined with increased income subject to excise taxes. CCBX income is sourced to the state where the partner does business, and the majority of partners are located outside the state of Washington. Excise taxes were $988,000 and $2.2 million for the three and six months ended June 30, 2026, respectively, compared to $681,000 and $1.4 million for the three and six months ended June 30, 2025, respectively.
Previous wording
Occupancy. Occupancy expenses were $859,000 for the three months ended March 31, 2026, compared to $1.0 million for the three months ended March 31, 2025, a decrease of $175,000, or 16.9%. This category includes building, leasehold, furniture, fixtures and equipment depreciation totaling $153,000 for the three months ended March 31, 2026 and $350,000 for the three months ended March 31, 2025. Occupancy expenses include rent, utilities, janitorial and other maintenance expenses, property insurances and taxes. Also included is depreciation on building, leasehold, furniture, fixtures and equipment. Our hybrid and remote workforce has increased, which helps keep some occupancy expenses down, however we do expect occupancy expenses to increase as we continue to grow.
Current wording
Occupancy. Occupancy expenses were $890,000 and $1.7 million for the three and six months ended June 30, 2026, respectively, compared to $915,000 and $1.9 million for the three and six months ended June 30, 2025, respectively. This category includes building, leasehold, furniture, fixtures and equipment depreciation totaling $274,000 and $428,000 for the three and six months ended June 30, 2026, respectively, and $346,000 and $696,000 for the three and six months ended June 30, 2025, respectively. Occupancy expenses include rent, utilities, janitorial and other maintenance expenses, property insurances and taxes. Also included is depreciation on building, leasehold, furniture, fixtures and equipment. Our hybrid and remote workforce has increased, which helps keep some occupancy expenses down, however we do expect occupancy expenses to increase as we continue to grow.
Previous wording
Director and Staff Expenses. Director and staff expenses includes compensation for director service, continuing education for employees and other director and staff related expenses. Expenses will fluctuate depending upon conferences and other professional events that are attended by employees as well as expenses related to employee travel and continuing education. Director and staff expenses were $668,000 for the three months ended March 31, 2026 compared to $631,000 for the three months ended March 31, 2025, an increase of $37,000, or 5.9%.
Current wording
Director and Staff Expenses. Director and staff expenses includes compensation for director service, continuing education for employees and other director and staff related expenses. Expenses will fluctuate depending upon conferences and other professional events that are attended by employees as well as expenses related to employee travel and continuing education. Director and staff expenses were $718,000 and $1.4 million for the three and six months ended June 30, 2026, respectively, compared to $612,000 and $1.2 million for the three and six months ended June 30, 2025, respectively.
Previous wording
Marketing. Marketing and promotion costs were $38,000 for the three months ended March 31, 2026, compared to $50,000 for the three months ended March 31, 2025, a decrease of $12,000, or 24.0%. Marketing and promotion costs will vary depending upon the deployment of branding and targeted advertising for the community bank and CCBX. We expect costs to increase as we expand our marketing plan.
Current wording
Marketing. Marketing and promotion costs were $6,000 and $44,000 for the three and six months ended June 30, 2026, respectively, compared to $50,000 and $100,000 for the three and six months ended June 30, 2025, respectively. Marketing and promotion costs will vary depending upon the deployment of branding and targeted advertising for the community bank and CCBX. We expect costs to increase as we expand our marketing plan.
Previous wording
The following table presents, for the periods indicated, the BaaS loan and fraud expenses:
Current wording
The following table presents the BaaS loan and fraud expenses for the periods indicated:
Previous wording
On July 4, 2025, H.R. 1, the “One Big Beautiful Bill Act, (the "OBBBA") was signed into law. The OBBBA includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The OBBBA also made certain changes to the deductibility of the cost of meals and charitable contributions that are effective for tax years beginning after December 31, 2025. The Company is taking advantage of the immediate deductibility of R&D expenditures, which has positively impacted the tax provision and resulted in a deferred tax liability.
Current wording
On July 4, 2025, H.R. 1, the “One Big Beautiful Bill Act, (the "OBBBA") was signed into law. The OBBBA includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The OBBBA also made certain changes to the deductibility of the cost of meals and charitable contributions that are effective for tax years beginning after December 31, 2025. The Company is taking advantage of the immediate deductibility of R&D expenditures, which has positively impacted the tax provision.
Previous wording
The Company’s reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. The Company continues to evaluate its methodology on allocating items to the Company’s various segments to support strategic business decisions by the Company’s executive leadership. The difference in total loans receivable and total deposits in the community bank and CCBX segments is recorded on the balance sheet of each segment as an intrabank asset or intrabank liability, with the treasury & administration segment as the offset to those entries. Income and expenses that are specific to a segment are directly posted to each segment. Additionally, certain indirect expenses are allocated to each segment utilizing various metrics, such as number of employees, utilization of space, and allocations based on loan and deposit balances. We have implemented a transfer pricing process that credits or charges the community bank and CCBX segments with intrabank interest income or expense for the difference in average loans and average deposits, with the treasury & administration segment as the offset for those entries. The accounting policies of the segments are the same as those described in “Note 1 – Description of Business and Summary of Significant Accounting Policies” in the accompanying notes to the consolidated financial statements included in the Company's most recently filed 10-K report.
Current wording
The difference in total loans receivable and total deposits in the community bank and CCBX segments is recorded on the balance sheet of each segment as an intrabank asset or intrabank liability, with the treasury & administration segment as the offset to those entries. Income and expenses that are specific to a segment are directly posted to each segment. Additionally, certain indirect expenses are allocated to each segment utilizing various metrics, such as number of employees, utilization of space, and allocations based on loan and deposit balances. We have implemented a transfer pricing process that credits or charges the community bank and CCBX segments with intrabank interest income or expense for the difference in average loans and average deposits, with the treasury & administration segment as the offset for those entries. The accounting policies of the segments are the same as those described in “Note 1 – Description of Business and Summary of Significant Accounting Policies” in the accompanying notes to the consolidated financial statements included in the Company's most recently filed 10-K report.
Previous wording
Community bank total assets as of March 31, 2026 increased $33.3 million, or 1.7%, to $1.99 billion, compared to $1.96 billion as of December 31, 2025. Loans receivable net of deferred fees for the community bank segment increased $33.3 million, or 1.7%, to $1.98 billion as of March 31, 2026, compared to $1.94 billion as of December 31, 2025. The increase in community bank loans receivable is the result of loan growth and normal balance fluctuations. Total community bank deposits decreased $13.4 million, or 0.85%, as of March 31, 2026, compared to $1.59 billion as of December 31, 2025. Our cost of deposits for the community bank was 1.46% for the three months ended March 31, 2026.
Current wording
Community bank total assets as of June 30, 2026 increased $41.1 million, or 2.1%, to $2.00 billion, compared to $1.96 billion as of December 31, 2025. Loans receivable net of deferred fees for the community bank segment increased $40.5 million, or 2.1%, to $1.98 billion as of June 30, 2026, compared to $1.94 billion as of December 31, 2025. The increase in community bank loans receivable is the result of loan growth and normal balance fluctuations. Total community bank deposits decreased $12.2 million, or 0.77%, to $1.57 billion as of June 30, 2026, compared to $1.59 billion as of December 31, 2025. Our cost of deposits for the community bank was 1.46% for the six months ended June 30, 2026.
Previous wording
CCBX total assets as of March 31, 2026 increased $917.1 million, or 35.3%, to $3.51 billion, compared to $2.60 billion as of December 31, 2025. During the three months ended March 31, 2026, $3.33 billion in CCBX loans were transferred to loans held for sale, with $3.28 billion in loans sold and $124.0 million loans remaining in loans held for sale as of March 31, 2026, compared to $71.2 million at December 31, 2025. We continue to reposition ourselves by managing CCBX credit and concentration levels in an effort to optimize our loan portfolio earnings and generate off balance sheet fee income. We retain a portion of the fee income for our role in processing transactions on sold credit card balances. This is expected to provide an on-going and recurring revenue stream without the additional on balance sheet risk. Total CCBX loans receivable increased $76.6 million, or 4.2%, to $1.88 billion as of March 31, 2026, compared to $1.81 billion as of December 31, 2025. The increase in loans receivable is the result of increased activity with CCBX partners, net of $3.28 billion in loan sales. As a result of an increase in the difference of average deposits compared to average loans the intrabank asset increased $784.3 million to $1.42 billion as of March 31, 2026, compared to $633.6 million as of December 31, 2025. The increase is attributed to an increase in deposits as a result of onboarding a new partner for which we provide correspondent services. Management expects balances associated with this relationship to decline during the second quarter of 2026 and then normalize. The allowance for credit losses increased to $154.3 million as of March 31, 2026, compared to $151.3 million as of December 31, 2025. The increase in the allowance is due to loan growth; however, an improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans helped moderate the level of increase. CCBX partner agreements provide for credit enhancements that cover $48.6 million, or 97.9%, of the charge-offs on CCBX loans for the three months ended March 31, 2026. CCBX partners bear most of the responsibility for credit losses incurred which consequently gives them a vested interest 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. Total CCBX deposits increased $910.4 million, or 35.6%, to $3.47 billion, compared to $2.56 billion as of December 31, 2025, primarily as a result of growth within the CCBX relationships and the addition of new partners. Total CCBX deposits exclude an additional $2.81 billion that were swept off balance sheet to provide for increased FDIC insurance coverage to certain customers, compared to $843.6 million as of December 31, 2025.
Current wording
CCBX total assets as of June 30, 2026 increased $745.8 million, or 28.7%, to $3.34 billion, compared to $2.60 billion as of December 31, 2025. During the six months ended June 30, 2026, $7.84 billion in CCBX loans were sold and $107.8 million loans remaining in loans held for sale as of June 30, 2026, compared to $71.2 million at December 31, 2025. We continue to manage CCBX credit and concentration levels in an effort to optimize our loan portfolio earnings and generate off balance sheet fee income. We retain a portion of the fee income for our role in processing transactions on sold credit card balances. This is expected to provide an on-going and recurring revenue stream without the additional on balance sheet risk. Total CCBX loans receivable increased $418.2 million, or 23.1%, to $2.23 billion as of June 30, 2026, compared to $1.81 billion as of December 31, 2025. The increase in loans receivable is the result of increased activity with CCBX partners, net of $7.84 billion in loan sales. As a result of an increase in the difference of average deposits compared to average loans the intrabank asset increased $356.3 million to $989.9 million as of June 30, 2026, compared to $633.6 million as of December 31, 2025. The increase is attributed to an increase in deposits from both new and existing partners. The allowance for credit losses increased to $198.0 million as of June 30, 2026, compared to $151.3 million as of December 31, 2025. The increase in the allowance for credit losses compared to December 31, 2025 was primarily driven by loan growth, changes in the composition of the loan portfolio and the establishment of a $22.8 million specific provision related to one partner relationship for credit losses not expected to be fully collected under the partner's indemnification arrangement following an individual assessment of collectability.Total CCBX deposits increased $729.9 million, or 28.5%, to $3.29 billion, compared to $2.56 billion as of December 31, 2025, primarily as a result of growth within the CCBX relationships and the addition of new partners. Total CCBX deposits exclude an additional $4.26 billion that were swept off balance sheet to provide for increased FDIC insurance coverage to certain customers, compared to $843.6 million as of December 31, 2025.
Previous wording
Treasury & administration total assets as of March 31, 2026 decreased $28.0 million, or 15.0%, to $158.7 million, compared to $186.7 million as of December 31, 2025, primarily due to a decrease in the intrabank asset, partially offset by an increase in cash and due from banks. Total securities decreased $2.1 million, or 4.3%, to $46.2 million as of March 31, 2026, compared to $48.2 million as of December 31, 2025, primarily as a result of principal repayments on securities. Total borrowings were $48.1 million as of both March 31, 2026 and December 31, 2025.
Current wording
Treasury & administration total assets as of June 30, 2026 decreased $72.1 million, or 38.6%, to $114.5 million, compared to $186.7 million as of December 31, 2025, primarily due to a decrease in the intrabank asset, partially offset by an increase in cash and due from banks. Total securities decreased $3.0 million, or 6.2%, to $45.2 million as of June 30, 2026, compared to $48.2 million as of December 31, 2025, primarily as a result of principal repayments on securities. Total borrowings were $48.1 million and $48.0 million as of June 30, 2026 and December 31, 2025, respectively.
Previous wording
Net interest income for the community bank was $22.5 million for the quarter ended March 31, 2026, an increase of $2.8 million, or 13.9%, compared to $19.8 million for the quarter ended March 31, 2025. As a result of the community bank having higher average loans than deposits the community bank's intrabank expense allocation was $3.6 million for the quarter ended March 31, 2026, compared to intrabank interest expense of $3.9 million for the quarter ended March 31, 2025, which positively impacted net interest income for the current quarter. The decrease compared to the previous year period is due to a lower intrabank liability and lower interest rates. There was a provision recapture for credit losses on loans for the community bank of $542,000 for the quarter ended March 31, 2026, compared to a provision of $507,000 for the quarter ended March 31, 2025; the recapture in the current period was largely due to a change in the loan mix for the community bank. Net charge-offs to average loans for the community bank segment was 0.00% for the quarters ended March 31, 2026 and 2025. Noninterest income for the community bank was $932,000, for the quarter ended March 31, 2026, a decrease of $84,000, or 8.3%, compared to the quarter ended March 31, 2025. Noninterest expenses for the community bank increased $1.0 million, or 9.9%, to $11.4 million as of March 31, 2026, compared to $10.4 million as of March 31, 2025. The increase in noninterest expense is largely due to higher legal and professional expenses and salaries and employee benefits which are related to the growth of Company and investments in risk management.
Current wording
Net interest income for the community bank was $22.9 million for the quarter ended June 30, 2026, an increase of $2.9 million, or 14.5%, compared to $20.0 million for the quarter ended June 30, 2025. As a result of the community bank having higher average loans than deposits the community bank's intrabank expense allocation was $3.9 million for the quarter ended June 30, 2026, compared to intrabank interest expense of $3.8 million for the quarter ended June 30, 2025. The increase compared to the previous year period is due to a higher intrabank liability partially offset by lower interest rates. There was a provision recapture for credit losses on loans for the community bank of $2.3 million for the quarter ended June 30, 2026, compared to a recapture of $216,000 for the quarter ended June 30, 2025; the provision recapture in the current period was due to a decrease in weighted average life of the construction, land and land development portfolio and an improvement in the overall mix of the portfolio. Net charge-offs to average loans for the community bank segment were 0.01% and 0.00% for the quarters ended June 30, 2026 and 2025. Noninterest income for the community bank was $1.2 million for the quarter ended June 30, 2026, an increase of $113,000, or 10.4%, compared to the quarter ended June 30, 2025. Noninterest expenses for the community bank decreased $655,000, or 5.2%, to $12.0 million as of June 30, 2026, compared to $12.6 million as of June 30, 2025.
Previous wording
Net interest income for CCBX was $57.2 million for the quarter ended March 31, 2026, an increase of $4.9 million, or 9.3%, compared to $52.4 million for the quarter ended March 31, 2025. The increase in net interest income is primarily due to loan growth from active CCBX relationships. During the quarter ended March 31, 2026 we sold $3.28 billion in CCBX loans as part of our strategy to optimize our CCBX portfolio and manage growth, credit quality, portfolio and partner limits. We are retaining a portion of the transaction processing fee income on sold credit card balances which provides an on-going and recurring income without balance sheet risk. As a result of CCBX having higher average deposits than loans the amount allocated to intrabank interest income for CCBX was $8.2 million and $6.1 million for the quarters ended March 31, 2026 and 2025, respectively. Provision for credit losses on loans was $51.9 million for the quarter ended March 31, 2026, compared to $55.3 million for the quarter ended March 31, 2025. The decrease in the provision is due to an improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors. CCBX partner agreements provide for credit enhancements that cover $48.6 million, or 97.9% of total gross charge-offs on CCBX loans for the quarter ended March 31, 2026. The $52.6 million provision on CCBX loans includes $51.6 million for partner loans with credit enhancement on them and $918,000 on CCBX loans that the Company is responsible for. In accordance with the program agreement, the Company was responsible for credit losses on approximately 5% of a $324.0 million loan portfolio, or $22.0 million in partner loans at March 31, 2026. Noninterest income for CCBX was $64.7 million for the quarter ended March 31, 2026, an increase of $2.8 million, or 4.5%, compared to $61.9 million for the quarter ended March 31, 2025, largely due to a decrease of $2.9 million in BaaS credit enhancements to establish a credit enhancement asset for future credit losses due from our CCBX partners - which is directly related to the provision for credit losses, partially offset by a $4.6 million increase in BaaS program income, which was the result of increased activity with our CCBX partners. Noninterest expenses for CCBX increased $16.1 million, or 33.2%, to $64.7 million as of March 31, 2026, compared to $48.6 million as of March 31, 2025. The increase in noninterest expense is largely due to an increase in salaries and employee benefits, data processing and software licenses and legal and professional expenses, which are related to the growth of Company and investments in technology and risk management. BaaS loan expense increased $4.4 million compared to the prior year period and is related to the increase in interest income on loans and recent program agreement and pricing changes that reflect a strategic shift toward enhanced partner economics and more sus…
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Current wording
Net interest income for CCBX was $62.2 million for the quarter ended June 30, 2026, an increase of $9.7 million, or 18.5%, compared to $52.5 million for the quarter ended June 30, 2025. The increase in net interest income is primarily due to loan growth from active CCBX relationships. During the quarter ended June 30, 2026 we sold $4.56 billion in CCBX loans as part of our strategy to optimize our CCBX portfolio and manage growth, credit quality, portfolio and partner limits. We are retaining a portion of the transaction processing fee income on sold credit card balances which provides an on-going and recurring income without balance sheet risk. As a result of CCBX having higher average deposits than loans the amount allocated to intrabank interest income for CCBX was $6.0 million and $7.8 million for the quarters ended June 30, 2026 and 2025, respectively. Provision for credit losses on loans was $94.5 million for the quarter ended June 30, 2026, compared to $32.4 million for the quarter ended June 30, 2025. The increase in the provision for credit losses compared to the prior quarter was primarily driven by loan growth, changes in the composition of the loan portfolio and the establishment of a $22.8 million specific provision related to one partner relationship for credit losses not expected to be fully collected under the partner's indemnification arrangement following an individual assessment of collectability. Under one partner program, the Company retains ownership of approximately 5% of a $350.8 million loan portfolio and retains the credit losses provision for that portfolio.This equates to $23.4 million in partner loans at June 30, 2026. Noninterest income for CCBX was $87.0 million for the quarter ended June 30, 2026, an increase of $45.3 million, or 108.6%, compared to $41.7 million for the quarter ended June 30, 2025, largely due to an increase of $39.5 million in BaaS credit enhancements to establish a credit enhancement asset for future credit losses due from our CCBX partners - which is directly related to the provision for credit losses, a $4.4 million increase in BaaS program income, which was the result of increased activity with our CCBX partners. Noninterest expenses for CCBX increased $69.6 million, or 134.3%, to $121.5 million as of June 30, 2026, compared to $51.9 million as of June 30, 2025. The increase in noninterest expenses was primarily due to a $46.0 million credit enhancement receivable valuation adjustment related to the assessment of collectability for one CCBX partner. Also contributing is an increase in salaries and employee benefits, data processing and software licenses and legal and professional expenses, which are related to the growth of Company and investments in technology and risk management. BaaS loan expense increased $7.9 million compared to the prior year period and is related to the increase in interest income on loans and recent program agreement and pricing changes that reflect a strategic shift …
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Previous wording
Net interest income for treasury & administration was $3.6 million for the quarter ended March 31, 2026, a decrease of $315,000, or 8.0%, compared to $3.9 million for the quarter ended March 31, 2025, primarily as a result of an increase in intrabank interest expense, partially offset by higher interest from interest earning deposits with other banks and to a lesser degree lower interest expense. Noninterest income was $426,000 for the quarter ended March 31, 2026, compared to $542,000 for the quarter ended March 31, 2025. Noninterest expense was $7.3 million for the quarter ended March 31, 2026, and $13.0 million for the quarter ended March 31, 2025, largely due to a decrease in salaries and employee benefits and legal and professional expenses as more of these expenses have been directly expensed to the other segments.
Current wording
Net interest income for treasury & administration was $4.3 million for the quarter ended June 30, 2026, an increase of $45,000, or 1.1%, compared to $4.2 million for the quarter ended June 30, 2025, primarily as a result of a decrease in intrabank interest expense, partially offset by lower interest from interest earning deposits with other banks and to a lesser degree higher interest expense. Noninterest income was $466,000 for the quarter ended June 30, 2026, compared to $(117,000) for the quarter ended June 30, 2025. Noninterest expense was $7.7 million for the quarter ended June 30, 2026, and $8.4 million for the quarter ended June 30, 2025, largely due to a decrease in salaries and employee benefits and legal and professional expenses as more of these expenses have been directly expensed to the other segments.
Previous wording
Our total assets increased $922.4 million, or 19.5%, to $5.66 billion at March 31, 2026 from $4.74 billion at December 31, 2025. The increase is primarily comprised of a $109.8 million increase in loans receivable and a $740.0 million increase in interest earning deposits with other banks.
Current wording
Our total assets increased $714.7 million, or 15.1%, to $5.46 billion at June 30, 2026 from $4.74 billion at December 31, 2025. The increase is primarily comprised of a $458.7 million increase in loans receivable and a $257.6 million increase in interest earning deposits with other banks.
Previous wording
During the three months ended March 31, 2026, $3.33 billion in CCBX loans were transferred to loans held for sale, with $3.28 billion in loans sold, $2.63 billion of which is new activity on previously sold credit card receivables. As of March 31, 2026 there were $124.0 million in loans held for sale and $71.2 million as of December 31, 2025. We will continue to sell loans back to the originating partner as part of our strategy to optimize our CCBX portfolio, manage growth, credit quality, portfolio and partner limits. Additionally, 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.
Current wording
During the six months ended June 30, 2026, $7.84 billion in CCBX loans were sold, $6.31 billion of which is new activity on previously sold credit card receivables. As of June 30, 2026 there were $107.8 million in total loans held for sale and $71.2 million as of December 31, 2025. These loans were sold back to partners at par. The Company sells CCBX loans to manage loan portfolio size by partner and by loan category. Additionally, 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.
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Current report — wording carried from elsewhere
The following tables show the average yield on loans and cost of deposits by segment and also illustrates the impact of BaaS loan expense on CCBX yield on loans:
Current report — wording carried from elsewhere
(1)CCBX yield on loans 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. To determine net BaaS loan income earned from CCBX loan relationships, the Company takes BaaS loan interest income and deducts BaaS loan expense to arrive at net BaaS loan income which can be compared to interest income on the Company’s community bank loans. A reconciliation of this non-GAAP measure is set forth in the section titled“GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”
Current report — wording carried from elsewhere
(1)A reconciliation of this non-GAAP measure is set forth in the section titled“GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”
Current report — wording carried from elsewhere
(3)Includes loans held for sale.
Current report — wording carried from elsewhere
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 $5.2 million and $4.2 million for the six months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026 and 2025, the amount of interest income not recognized on nonaccrual loans was not material.
Current report — wording carried from elsewhere
(2)For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
Current report — wording carried from elsewhere
(3)Includes loans held for sale and nonaccrual loans.
Current report — wording carried from elsewhere
(4)Net interest margin represents net interest income divided by the average total interest earning assets.
Current report — wording carried from elsewhere
The following table presents an analysis of certain average balances, interest income and interest expense by segment:
Current report — wording carried from elsewhere
(2)Includes loans held for sale and nonaccrual loans.
Current report — wording carried from elsewhere
(3)Net interest margin represents net interest income divided by the average total interest earning assets.
Current report — wording carried from elsewhere
(4)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. See the section titled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of the impact of BaaS loan expense on CCBX loan yield.
Current report — wording carried from elsewhere
(5)Net interest margin, net of BaaS loan expense includes 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. A reconciliation of this non-GAAP measure is set forth in the section titled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”
Current report — wording carried from elsewhere
(6)For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
Current report — wording carried from elsewhere
(7)Intrabank assets and liabilities are consolidated for period calculations and presented as intrabank asset, net or intrabank liability, net in the table above.
Current report — wording carried from elsewhere
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 $25.3 million increase in loan interest income attributed to an increase in loan volume, partially offset by a decrease of $8.3 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.
Current report — wording carried from elsewhere
A provision for unfunded commitments of $213,000 was recorded for the quarter ended June 30, 2026, primarily as a result of a change in the loan mix of available balance, compared to a $1.5 million provision for the three months ended June 30, 2025. A $12,000 provision for accrued interest receivable on CCBX loans was recorded for the quarter ended June 30, 2026, compared to $182,000 provision recapture for the three months ended June 30, 2025.
Current report — wording carried from elsewhere
The following table shows the provision expense (recapture) by segment for the periods indicated:
Current report — wording carried from elsewhere
The following table presents, for the periods indicated, the major categories of noninterest income:
Current report — wording carried from elsewhere
The following table presents, for the periods indicated, the major categories of noninterest expense:
Current report — wording carried from elsewhere
The Company’s reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. The Company continues to evaluate its methodology on allocating items to the Company’s various segments to support strategic business decisions by the Company’s executive leadership.
Current report — wording carried from elsewhere
Additionally, as of June 30, 2026 there was $4.26 billion in CCBX deposits that were swept off balance sheet for increased FDIC insurance coverage and liquidity purposes. Amounts in excess of FDIC insurance coverage are swept off-balance sheet, using a third-party facilitator/vendor sweep product, to participating financial institutions. These swept deposits generated fee income of $1.2 million for the quarter ended June 30, 2026.
Current report — wording carried from elsewhere
December 31, 2025, respectively. Uninsured deposits totaled $1.35 billion at June 30, 2026 and $641.3 million at December 31, 2025. The increase in uninsured deposits is largely due to the timing of new partner deposits participating in sweep and reciprocal deposit networks.
Current report — wording carried from elsewhere
We evaluate each customer’s creditworthiness on a case-by-case basis. 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 June 30, 2026, $1.80 billion in commitments to extend credit for on-balance sheet loans are unconditionally cancelable, compared to $1.42 billion at December 31, 2025. The increase in unconditionally cancelable commitments reflects growth and changes in the composition of the CCBX loan portfolio and provides additional flexibility to manage loan growth, concentrations and liquidity.
Current report — wording carried from elsewhere
CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement. CCBX partners bear most of the responsibility for credit and fraud losses incurred which consequently gives them a vested interest 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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We maintain sufficient cash and cash equivalents and investment securities to meet short-term cash requirements and the levels of these assets are dependent on our operating, investing and financing activities during any given period. Cash on hand, cash at third-party banks, investments available-for-sale and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are routinely available to us include funds from retail, commercial, and BaaS deposits, advances from the FHLB and proceeds from the sale of loans. Less commonly used sources of funding include borrowings from the Federal Reserve discount window, draws on established federal funds lines from unaffiliated commercial banks, funds from online rate services, brokered funds, a one-way buy through an ICS account, and the issuance of debt or equity securities.