COASTAL FINANCIAL CORP

Previous wording

We are a bank holding company that operates through our wholly owned subsidiaries, Coastal Community Bank (“Bank”) and Arlington Olympic LLC. We are headquartered in Everett, Washington, which by population is the largest city in, and the county seat of, Snohomish County. Our business is conducted through three reportable segments: The community bank, CCBX and treasury & administration. The community bank segment includes all community banking activities, with a primary focus on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application. We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County). The CCBX segment provides banking as a service (“BaaS”) that allows digital financial service providers, companies and brands to offer their customers banking services. The CCBX segment has 30 partners as of June 30, 2026. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments. The Bank’s deposits are insured in whole or in part by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is subject to regulation by the Federal Reserve and the Washington State Department of Financial Institutions Division of Banks. The Federal Reserve also has supervisory authority over the Company.

Current wording

We are a bank holding company that operates through our wholly owned subsidiaries, Coastal Community Bank (“Bank”) and Arlington Olympic LLC. We are headquartered in Everett, Washington, which by population is the largest city in, and the county seat of, Snohomish County. Our business is conducted through three reportable segments: The community bank, CCBX and treasury & administration. The community bank segment includes all community banking activities, with a primary focus on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application. We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County). The CCBX segment provides banking as a service (“BaaS”) that allows digital financial service providers, companies and brands to offer their customers banking services. The CCBX segment has 31 partners as of September 30, 2026. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments. The Bank’s deposits are insured in whole or in part by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is subject to regulation by the Federal Reserve and the Washington State Department of Financial Institutions Division of Banks. The Federal Reserve also has supervisory authority over the Company.

Previous wording

As of June 30, 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.

Current wording

As of September 30, 2026, we had total assets of $5.28 billion, total loans receivable of $4.19 billion, total deposits of $4.68 billion and total shareholders’ equity of $478.3 million.

Previous wording

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

Current wording

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

Previous wording

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 wording

BaaS credit enhancement income decreased $13.6 million, primarily due to loan growth, changes in the composition of the CCBX loan portfolio and an increase in weighted average life of loans. This increase corresponds to a $10.6 million decrease 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 one partner's expected credit losses not expected to be fully collected under that partner's indemnification arrangement. For more information on the accounting for BaaS allowance for credit losses, reserve for unfunded commitments, credit enhancements and fraud enhancements see the section titled“CCBX – BaaS Reporting Information.”

Previous wording

Net 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 wording

Net loss for the nine months ended September 30, 2026 was $16.3 million, or $(1.07) per diluted share, compared to net income of $34.4 million, or $2.24 per diluted share, for the nine months ended September 30, 2025. The $50.6 million decrease in net income over the comparable period in the prior year was primarily attributable to a $46.0 million credit enhancement receivable valuation allowance related to the assessment of collectability of a CCBX partner recorded during the second quarter of 2026, a $45.0 million increase in the provision for credit losses related an increase in loans receivable combined with the establishment of a $22.8 million specific reserve during the second quarter of 2026 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. Other unfavorable variances included an increase of $15.2 million in BaaS loan expense, a $13.9 million increase in data processing and software licenses, a $5.8 million increase in salaries and employee benefits and a $5.2 million increase in legal and professional expenses, all due to continued investments in growth, technology and risk management. Favorable variances partially offsetting these increased expenses were an increase of $30.3 million in net interest income and an increase in BaaS program income of $15.2 million.

Previous 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.

Current wording

Net interest income for the three months ended September 30, 2026 was $88.3 million, compared to $77.9 million for the three months ended September 30, 2025, an increase of $10.4 million, or 13.4%. The increase in net interest income compared to the quarter ended September 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 primarily to lower interest rates. The average balance of loans was $837.9 million higher, and average interest earning deposits with other banks was $56.4 million higher for the three months ended September 30, 2026, compared to the three months ended September 30, 2025.

Previous 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.

Current wording

Total interest and fees on loans were $113.1 million for the three months ended September 30, 2026, compared to $100.4 million for the three months ended September 30, 2025. The $12.7 million increase in interest and fees on loans for the quarter ended September 30, 2026, compared to the quarter ended September 30, 2025, was largely due to growth in loans, primarily from CCBX. Total loans receivable was $4.19 billion at September 30, 2026, compared to $3.70 billion at September 30, 2025. CCBX average loans receivable was $2.48 billion for the quarter ended September 30, 2026, compared to $1.76 billion for the quarter ended September 30, 2025, an increase of $715.6 million, or 40.5%. Average CCBX yield of 12.73% was earned on CCBX loans for the quarter ended September 30, 2026, compared to 15.65% for the quarter ended September 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 recently raised the targeted federal funds rate by 0.25% on September 17, 2026; however, even with the recent increase, the current rate is still 0.25% lower than at September 30, 2025. Additionally, capital call lines were $32.2 million higher compared to September 30, 2025. Capital call lines earn a lower rate of interest and have less credit risk due to the way they 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 $1.99 billion at September 30, 2026, compared to $1.87 billion at September 30, 2025, an increase of $122.3 million, or 6.5%. An average community bank yield of 6.66% was earned on community bank loans for the quarter ended September 30, 2026, compared to 6.51% for the quarter ended September 30, 2025.

Previous 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.

Current wording

Interest income from interest earning deposits with other banks was $7.3 million for the quarter ended September 30, 2026, a decrease of $721,000, or 9.0%, primarily due to a decrease in interest rates compared to the quarter ended September 30, 2025. The average balance of interest earning deposits invested with other banks for the three months ended September 30, 2026 was $775.6 million, compared to $719.2 million for the three months ended September 30, 2025. The yield on these interest earning deposits with other banks decreased 0.69%, which is in line with the reduction in Fed funds compared to the prior year period, to 3.73% compared to 4.42% at September 30, 2025. Interest income on investment securities decreased $7,000 to $609,000 at September 30, 2026, compared to $616,000 at September 30, 2025. Average investment securities decreased $26,000 from $45.1 million for the three months ended September 30, 2025 to $45.0 million for the three months ended September 30, 2026, as a result of principal paydowns. Average yield on investment securities decreased to 5.36% for the three months ended September 30, 2026, compared to 5.42% for the three months ended September 30, 2025.

Previous 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.

Current wording

Interest expense was $32.9 million for the quarter ended September 30, 2026, a $1.8 million increase from the quarter ended September 30, 2025. Interest expense on deposits was $30.9 million for the quarter ended September 30, 2026, compared to $30.5 million for the quarter ended September 30, 2025. The $465,000 increase in interest expense on deposits was largely due an increase of $683.4 million in average interest bearing deposits compared to the quarter ended September 30, 2025. Interest on borrowed funds was $2.0 million for the quarter ended September 30, 2026, compared to $660,000 for the quarter ended September 30, 2025 primarily due to higher average borrowings resulting from enhancements in the Company's liquidity management and funding strategy.

Previous 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.

Current wording

Cost of funds was 2.67% for the quarter ended September 30, 2026, which was a decrease of 0.40% from 3.07% for the quarter ended September 30, 2025. Cost of deposits for the quarter ended September 30, 2026 was 2.61%, which was a 0.43% decrease from 3.04% for the quarter ended September 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 7.27% 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.

Current wording

Net interest margin was 6.59% for the three months ended September 30, 2026, compared to 7.00% for the three months ended September 30, 2025. The decrease in net interest margin compared to the three months ended September 30, 2025 was largely due to a decrease in yield on interest earning assets, partially offset by a decrease in cost of funds.

Previous 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.

Current wording

Total yield on loans receivable for the quarter ended September 30, 2026 was 10.03%, compared to 10.95% for the quarter ended September 30, 2025. This decrease in yield on loans receivable is due to lower rate CCBX products growing faster than higher rate CCBX products resulting in a change of mix and lower yield. Lower rate CCBX capital call lines were $32.2 million higher compared to September 30, 2025. The composition of the loan portfolio is shifting with CCBX average loans increasing to 55.4% of the total loan portfolio for the quarter ended September 30, 2026, compared to 48.5% for the quarter ended September 30, 2025, and the average community bank loans decreasing to 44.6% of the loan portfolio for the quarter ended September 30, 2026, compared to 51.5% for the quarter ended September 30, 2025. For the quarter ended September 30, 2026, average CCBX loans increased $715.6 million, or 40.5%, with an average CCBX yield of 12.73%, compared to 15.65% at the quarter ended September 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 $122.3 million, or 6.5%, due to growth and normal balance fluctuations. Average yield on community bank loans for the three months ended September 30, 2026 was 6.66%, compared to 6.51% for the three months ended September 30, 2025.

Previous 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.

Current wording

For the three months ended September 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 6.59% and 5.99%, respectively, compared to 7.00% and 6.21%, respectively, for the three months ended September 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 $2.7 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.

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 $2.5 million and $2.6 million for the three months ended September 30, 2026 and 2025, respectively. For the each of the three months ended September 30, 2026 and 2025, the amount of interest income not recognized on nonaccrual loans was not material.

Previous wording

(7)Intrabank assets and liabilities are consolidated for period calculations and presented as intrabank asset, net or intrabank liability, net in the tables above.

Current wording

(7)Intrabank assets and liabilities are consolidated for period calculations and presented as intrabank asset, net of intrabank liability, net in the tables above.

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 $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.

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 $21.2 million increase in loan volume, partially offset by an $8.5 million decrease in loan rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to volume.

Previous wording

Net interest income for the six months ended June 30, 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 wording

Net interest income for the nine months ended September 30, 2026, was $261.0 million, compared to $230.7 million for the nine months ended September 30, 2025, an increase of $30.3 million, or 13.1%. The increase in net interest income compared to the nine months ended September 30, 2025 was largely related to growth in CCBX loans and a decrease in interest expense as a result of lower interest rates.

Previous wording

Interest and fees on loans totaled $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 wording

Interest and fees on loans totaled $327.1 million for the nine months ended September 30, 2026, compared to $297.4 million for the nine months ended September 30, 2025. The $29.7 million increase in interest and fees on loans for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was largely due to growth in CCBX loans, partially offset by a decrease in interest rates. Total average loans receivable for the nine months ended September 30, 2026 was $4.17 billion, compared to $3.57 billion for the nine months ended September 30, 2025.

Previous wording

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 wording

CCBX average loans receivable grew to $2.19 billion for the nine months ended September 30, 2026, compared to $1.70 billion for the nine months ended September 30, 2025, an increase of $496.3 million, or 29.3%. Average CCBX yield of 13.99% was earned on CCBX loans for the nine months ended September 30, 2026, compared to 16.23% for the nine months ended September 30, 2025. This decrease in yield on loans receivable is due to lower rate CCBX products growing faster than higher rate CCBX products resulting in a change of mix and lower yield. For example, lower rate capital call lines were $32.2 million higher compared to September 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.

Previous wording

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 wording

Community bank average loans receivable was $1.98 billion for the nine months ended September 30, 2026, an increase of $100.6 million, or 5.4%, compared to the prior year period. Average yield of 6.60% was earned on community bank loans for the nine months ended September 30, 2026, compared to 6.52% for the nine months ended September 30, 2025.

Previous wording

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 wording

Interest income from interest earning deposits with other banks was $22.0 million for the nine months ended September 30, 2026, a decrease of $141,000 due to a decrease in interest rates partially offset by an increase in balances, compared to the nine months ended September 30, 2025. The average balance of interest earning deposits invested with other banks for the nine months ended September 30, 2026 was $794.6 million, compared to $668.0 million for the nine months ended September 30, 2025. Interest income on investment securities decreased $49,000 to $1.8 million at September 30, 2026, compared to $1.9 million at September 30, 2025. Average investment securities decreased $85,000 from $46.2 million for the nine months ended September 30, 2025 to $46.1 million for the nine months ended September 30, 2026 as a result of principal paydowns.

Previous wording

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 wording

Interest expense was $90.4 million for the nine months ended September 30, 2026, a $623,000 decrease from the nine months ended September 30, 2025. Interest expense on deposits was $86.6 million for the nine months ended September 30, 2026, compared to $89.1 million for the nine months ended September 30, 2025. The $2.4 million decrease in interest expense on deposits was due to a decrease in interest rates despite an increase in average interest bearing deposits of $580.5 million. Interest on borrowed funds was $3.8 million for the nine months ended September 30, 2026 and $1.8 million more than the nine months ended September 30, 2025 as a result of a higher average borrowings resulting from enhancements in the Company's liquidity management and funding strategy.

Previous wording

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 wording

Net interest margin was 6.94% for the nine months ended September 30, 2026, compared to 7.17% for the nine months ended September 30, 2025. The decrease in net interest margin compared to the nine months ended September 30, 2025 was largely a result of a decrease of 0.64% for yield on loans, partially offset by a decrease of 0.49% for cost of deposits. Average interest bearing deposits increased $580.5 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, and while the average rate paid on those deposits declined, the benefit from lower rates on the net interest margin was largely offset by the higher average deposit balances.

Previous wording

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 wording

Cost of funds was 2.63% for the nine months ended September 30, 2026, compared to 3.10% for the nine months ended September 30, 2025. Cost of deposits for the nine months ended September 30, 2026 was 2.58%, which was a 0.49% decrease from 3.07% for the nine months ended September 30, 2025. These decreases were largely due to lower interest rates compared to the prior year period.

Previous wording

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 wording

Total yield on loans receivable for the nine months ended September 30, 2026 was 10.49%, compared to 11.13% for the nine months ended September 30, 2025. This decrease in yield on loans receivable is primarily attributed to lower interest rates and a change in loan mix. For the nine months ended September 30, 2026, average CCBX loans increased $496.3 million, or 29.3%. There was an increase in average community bank loans of $100.6 million, or 5.4%, compared to the nine months ended September 30, 2025. Average yield on community bank loans for the nine months ended September 30, 2026 was 6.60%. compared to 6.52% for the nine months ended September 30, 2025.

Previous wording

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 wording

For the nine months ended September 30, 2026, net interest margin and net interest spread were 6.94% and 6.33%, respectively, compared to 7.17% and 6.39%, respectively, for the nine months ended September 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 $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 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 $7.8 million and $6.8 million for the nine months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026 and 2025, the amount of interest income not recognized on nonaccrual loans was not material.

Previous wording

(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 wording

(7)Intrabank assets and liabilities are consolidated for period calculations and presented as intrabank assets, net of intrabank liabilities, net in the table above.

Previous wording

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. The table illustrates that the largest change is in loans receivable and consists of a $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 wording

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. The table illustrates that the largest change is in loans receivable and consists of a $46.8 million increase in loan interest income attributed to an increase in loan volume, partially offset by a decrease of $17.1 million in loan interest income attributed to a decrease in loan rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to volume.

Previous wording

The macro economic environment is continuously changing, primarily due to the pace of economic growth, inflation, changing interest rates, global trade tensions, tariffs, unemployment, global unrest, the war in Ukraine, conflicts in the Middle East, political uncertainty, natural disasters and trade issues that may impact the provision and therefore the allowance. Gross loans, excluding loans held for sale, totaled $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.

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 $4.19 billion at September 30, 2026. The allowance for credit losses as a percentage of loans was 4.97% at September 30, 2026, compared to 4.69% at September 30, 2025.

Previous wording

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 wording

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 expenses associated with establishing a valuation allowance on the credit enhancement asset, whereby the bank may be unable to record the full indemnification amount in credit enhancement revenue or experience increased credit losses to the extent a partner is unable to fulfill its contractual obligations.

Previous 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.

Current wording

The provision for credit losses for the three months ended September 30, 2026 was $46.0 million, compared to $56.6 million for the three months ended September 30, 2025. This includes a provision for credit losses on loans for the three months ended September 30, 2026 of $44.3 million, compared to $58.3 million for the three months ended September 30, 2025. The decrease in the provision for credit losses compared to the prior year quarter was primarily driven by changes in the composition of the loan portfolio. The factors used in management’s analysis for community bank credit losses indicated that a provision for credit losses on loans of $372,000 was needed for the quarter ended September 30, 2026, largely due to a change in prepayment speeds and changes in the overall mix of the portfolio.

Previous wording

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 wording

A provision for unfunded commitments of $1.4 million was recorded for the quarter ended September 30, 2026, primarily as a result of a change in the loan mix of available balance, compared to a $1.7 million provision for the three months ended September 30, 2025. A $319,000 provision for accrued interest receivable on CCBX loans was recorded for the quarter ended September 30, 2026, compared to $0 provision recapture for the three months ended September 30, 2025.

Previous 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.

Current wording

Net charge-offs for the quarter ended September 30, 2026 totaled $49.9 million, or 4.43% of total average loans, compared to $49.2 million, or 5.37% of total average loans, for the quarter ended September 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, loan 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 agreement, the Company retains ownership of approximately 5% of a $167.5 million loan portfolio and retains the credit losses provision for that portfolio; the loans sold were not part of the Company's credit-loss-retained portion. These sales during the quarter temporarily increased its retained share to approximately 15% of the $167.5 million portfolio, or $25.1 million in loans at September 30, 2026, which compares to the balance at June 30, 2026 of $23.4 million, before the loan sales occurred. For the three months ended September 30, 2026, $49.9 million of net charge-offs were recognized for CCBX loans and $1,000 were recognized on community bank loans. For the three months ended September 30, 2025, $49.2 million of net charge-offs were recognized on CCBX loans and $1,000 in net recoveries were recognized for community bank loans.

Previous wording

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 wording

The provision for credit losses on loans for the nine months ended September 30, 2026 was $188.7 million, compared to $143.6 million for the nine months ended September 30, 2025. The increase in the Company’s provision for credit losses on loans during the quarter ended September 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 during the second quarter of 2026 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, which remained unchanged in the current quarter. During the nine months ended September 30, 2026, a $190.8 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 $2.1 million was needed for the nine months ended September 30, 2026.

Previous wording

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 wording

Net charge-offs for the nine months ended September 30, 2026 totaled $150.1 million, or 4.81% of total average loans, as compared to net charge-offs of $146.8 million, or 5.49% of total average loans, for the nine months ended September 30, 2025. Net charge-offs as a percent of average total loans decreased in the first nine 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 $167.5 million loan portfolio and retains the credit losses provision for that portfolio; the loans sold were not part of the Company's credit-loss-retained portion. These sales during the quarter temporarily increased its retained share to approximately 15% of the $167.5 million portfolio at September 30, 2026. For the nine months ended September 30, 2026, $150.1 million of net charge-offs were recognized for CCBX loans and $54,000 of net charge-offs were recognized for community bank loans. For the nine months ended September 30, 2025, $146.8 million of net charge-offs were recognized for CCBX and $5,000 of net charge-offs were recognized for community bank loans.

Previous wording

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 wording

For the nine months ended September 30, 2026, noninterest income totaled $215.8 million, an increase of $42.9 million, or 24.8%, compared to $172.9 million for the nine months ended September 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 $15.2 million in BaaS program income also contributed to the year over year increase.

Previous 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

Current wording

Summary of significant noninterest income for the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025

Previous wording

BaaS Income. Our CCBX segment provides BaaS offerings that enable our digital financial service providers to offer their customers banking services. In exchange for providing these services, we earn fixed fees, volume-based fees and reimbursement of costs depending on the program agreement. Servicing and other BaaS fees are typically higher with new partners who have minimum contractual fees. Transaction and interchange fees increase as partner activity increases. As a result, we generally expect servicing and other fees to decrease and transaction and interchange fees to increase as partner activity grows and contracted minimum fees are replaced with recurring fees which then exceed the minimum contractual fees. Increases in BaaS reimbursement of fees offsets increases in noninterest expense from BaaS expenses covered by CCBX partners. In accordance with GAAP, we recognize the reimbursement of noncredit fraud losses on loans and deposits originated through partners and credit enhancements related to the allowance for credit losses and reserve for unfunded commitments provided by the partner as revenue in BaaS income. CCBX credit losses are recognized in the allowance for credit losses on loans, and fraud losses are expensed in noninterest expense under BaaS fraud expense. Also in accordance with GAAP, we establish a credit enhancement asset for expected future credit losses through the recognition of BaaS credit enhancement revenue at the same time we establish an allowance for those loans though a provision for credit losses on loans. For more information on the accounting for BaaS allowance for credit losses, reserve for unfunded commitments, credit enhancements and fraud enhancements see the section titled “CCBX – BaaS Reporting Information.”

Current wording

BaaS Income. Our CCBX segment provides BaaS offerings that enable our digital financial service providers to offer their customers banking services. In exchange for providing these services, we earn fixed fees, volume-based fees and reimbursement of costs depending on the program agreement. Servicing and other BaaS fees are typically higher with new partners who have minimum contractual fees. Transaction and interchange fees increase as partner activity increases. As a result, we generally expect servicing and other fees to decrease and transaction and interchange fees to increase as partner activity grows and contracted minimum fees are replaced with recurring fees which then exceed the minimum contractual fees. Increases in BaaS reimbursement of fees offsets increases in noninterest expense from BaaS expenses covered by CCBX partners. In accordance with GAAP, we recognize the reimbursement of noncredit fraud losses on loans and deposits originated through partners and credit enhancements related to the allowance for credit losses and reserve for unfunded commitments provided by the partner as revenue in BaaS income. CCBX credit losses are recognized in the allowance for credit losses on loans, and fraud losses are expensed in noninterest expense under BaaS fraud expense. Also in accordance with GAAP, we establish a credit enhancement asset for expected future credit losses through the recognition of BaaS credit enhancement revenue at the same time we establish an allowance for those loans though a provision for credit losses on loans based on an assessment of collectability. If we determine that a credit enhancement asset cannot be recognized for part or all of a provision for credit losses booked, due to collection not being probable, credit enhancement revenue will not be recognized for that portion of the CCBX provision for credit losses. For more information on the accounting for BaaS allowance for credit losses, reserve for unfunded commitments, credit enhancements and fraud enhancements see the section titled “CCBX – BaaS Reporting Information.”

Previous wording

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.

Current wording

The increase was primarily due to an increase of $22.9 million in BaaS credit enhancements related to the allowance for credit losses, an increase of $15.2 million in total BaaS fee program income, which was the result of increased partner activity, and an increase of $4.6 million in BaaS fraud enhancements.