Coastal Financial (CCB)

Banking services provider Coastal Financial (NASDAQ:CCB) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 23.3% year on year to $138 million. Its non-GAAP profit of $0.82 per share was 19.3% below analysts’ consensus estimates.

Company Overview

Pioneering the intersection of traditional banking and financial technology in the Pacific Northwest, Coastal Financial (NASDAQ:CCB) operates as a bank holding company that provides traditional banking services and Banking-as-a-Service (BaaS) solutions to consumers and businesses.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Coastal Financial competes with regional banks in the Pacific Northwest like Columbia Banking System (NASDAQ: COLB) and Heritage Financial (NASDAQ: HFWA) in its community banking segment. In its Banking-as-a-Service segment, it faces competition from other BaaS providers like The Bancorp (NASDAQ: TBBK), Evolve Bank & Trust, and Cross River Bank.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Thankfully, Coastal Financial’s 47.4% annualized revenue growth over the last five years was incredible. Its growth surpassed the average banking company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Coastal Financial’s annualized revenue growth of 15% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Coastal Financial reported robust year-on-year revenue growth of 23.3%, and its $138 million of revenue topped Wall Street estimates by 4.2%.

Net interest income made up 70.6% of the company’s total revenue during the last five years, meaning lending operations are Coastal Financial’s largest source of revenue.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

The underlying profitability of top-line growth determines the actual bottom-line impact. Banking institutions measure this dynamic using the efficiency ratio, which is calculated by dividing non-interest expenses like personnel, facilities, technology, and marketing by total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Coastal Financial’s efficiency ratio has swelled by 6.1 percentage points, going from 61.4% to 53.5%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

Coastal Financial’s efficiency ratio came in at 52.8% this quarter, beating analysts’ expectations by 230 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Coastal Financial to rein in some of its expenses as it anticipates an efficiency ratio of 50.4%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Coastal Financial’s EPS grew at an astounding 19.6% compounded annual growth rate over the last five years. However, this performance was lower than its 47.4% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Coastal Financial, its two-year annual EPS declines of 3.6% mark a reversal from its (seemingly) healthy five-year trend. These shorter-term results weren’t ideal, but given it was successful in other measures of financial health, we’re hopeful Coastal Financial can return to earnings growth in the future.

In Q4, Coastal Financial reported adjusted EPS of $0.82, down from $0.94 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Coastal Financial’s full-year EPS of $3.04 to grow 97.4%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Coastal Financial’s TBVPS grew at an incredible 22.3% annual clip over the last five years. TBVPS growth has recently decelerated a bit to 20.4% annual growth over the last two years (from $22.17 to $32.13 per share).

Over the next 12 months, Consensus estimates call for Coastal Financial’s TBVPS to grow by 19.9% to $38.53, top-notch growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Coastal Financial has averaged a Tier 1 capital ratio of 11.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Coastal Financial has averaged an ROE of 15.2%, impressive for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Coastal Financial has a strong competitive moat.

We enjoyed seeing Coastal Financial beat analysts’ revenue expectations this quarter. On the other hand, its net interest income missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $100.96 immediately after reporting.

Updated: January 30, 2026 at 1:18 PM EST

Are you wondering whether to buy Coastal Financial or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Coastal Financial is truly a cream-of-the-crop banking company. First of all, the company’s revenue growth was exceptional over the last five years. On top of that, its net interest income growth was exceptional over the last five years, and its estimated net interest income growth for the next 12 months is great.

Coastal Financial’s P/B ratio based on the next 12 months is 2.6x. You get what you pay for, and in this particular situation, Coastal Financial’s higher valuation multiple is justified. We think it’s one of the best businesses in our coverage and deserves a spot in your portfolio.

Wall Street analysts have a consensus one-year price target of $138 on the company (compared to the current share price of $95.47), implying they see 44.6% upside in buying Coastal Financial in the short term.