Segment Reporting

9 Months Ended

Sep. 30, 2025

As defined in ASC 280, Segment Reporting, an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. We evaluate performance based on classifications within accounting and reporting systems, which provides line of business results. This system uses various techniques to assign balance sheet and income statement amounts to the business segments, including allocations of income and expense. A primary objective of this measurement system and related internal financial reporting practices are to produce consistent results that reflect the underlying financial impact of the segments on the Company and to provide a basis of support for strategic decision making. The accounting policies applicable to our segments are those that apply to our preparation of the accompanying Consolidated Financial Statements. Based on these criteria, we have identified three segments: the community bank, CCBX, and treasury & administration. The Executive Leadership Team, which includes the CEO, Presidents, CFO and other key executive members, which the Company has designated as the CODMs, evaluates the financial performance of the Company’s segments by evaluating interest income and expense, noninterest income and significant expenses. The community bank segment includes all community banking activities. A primary focus of the community bank is 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). We also have a loan production office which is located in King county. The CCBX segment provides BaaS that allows digital financial service providers, companies and brands to offer their customers banking services. The CCBX segment has 29 partners as of September 30, 2025. The treasury & administration

segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments.

The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, 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. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in 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. 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.

Summarized financial information concerning the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables for the periods indicated:


	September 30, 2025								December 31, 2024
	Community Bank		CCBX		Treasury & Administration		Consolidated		Community Bank		CCBX		Treasury & Administration		Consolidated
Assets	(dollars in thousands; unaudited)
Cash and Due from Banks	$	5,050	$	127	$	637,081	$	642,258	$	4,510	$	10,894	$	437,109	$	452,513
Intrabank assets	—		500,653		(500,653)		—		—		411,768		(411,768)		—
Securities	—		—		43,942		43,942		—		—		47,321		47,321
Loans held for sale	—		42,894		—		42,894		—		20,600		—		20,600
Total loans receivable	1,899,673		1,804,175		—		3,703,848		1,882,988		1,603,577		—		3,486,565
Allowance for credit losses	(18,354)		(155,459)		—		(173,813)		(18,924)		(158,070)		—		(176,994)
All other assets	29,662		219,971		44,314		293,947		28,272		211,039		51,892		291,203
Total assets	$	1,916,031	$	2,412,361	$	224,684	$	4,553,076	$	1,896,846	$	2,099,808	$	124,554	$	4,121,208
Liabilities
Total deposits	$	1,597,601	$	2,374,962	$	—	$	3,972,563	$	1,521,244	$	2,064,088	$	—	$	3,585,332
Total borrowings	—		—		47,999		47,999		—		—		47,884		47,884
Intrabank liabilities	312,962		—		(312,962)		—		367,540		—		(367,540)		—
All other liabilities	5,468		37,399		14,370		57,237		8,062		35,720		5,506		49,288
Total liabilities	$	1,916,031	$	2,412,361	$	(250,593)	$	4,077,799	$	1,896,846	$	2,099,808	$	(314,150)	$	3,682,504


	Three months ended September 30, 2025								Three months ended September 30, 2024
	Community Bank		CCBX		Treasury & Administration		Consolidated		Community Bank		CCBX		Treasury & Administration		Consolidated
	(dollars in thousands; unaudited)
INTEREST INCOME AND EXPENSE
Interest income	$	30,724	$	69,643	$	8,660	$	109,027	$	31,898	$	67,778	$	5,489	$	105,165
Interest (expense) income intrabank transfer	(3,028)		6,768		(3,740)		—		(5,540)		6,764		(1,224)		—
Interest expense	7,136		23,330		660		31,126		7,264		24,819		809		32,892
Net interest income	20,560		53,081		4,260		77,901		19,094		49,723		3,456		72,273
Provision/(Recapture) for credit losses	(107)		56,705		—		56,598		(1,767)		72,024		—		70,257

Net interest income/(expense) after provision for credit losses - loans and unfunded commitments	20,667		(3,624)		4,260		21,303		20,861		(22,301)		3,456		2,016
NONINTEREST INCOME
Deposit service charges and fees	871		32		—		903		939		13		—		952
Other income	134		316		331		781		156		1		331		488
BaaS program income	—		7,554		—		7,554		—		5,158		—		5,158
BaaS indemnification income	—		57,539		—		57,539		—		72,192		—		72,192
Noninterest income	1,005		65,441		331		66,777		1,095		77,364		331		78,790
NONINTEREST EXPENSE
Salaries and employee benefits	7,023		9,334		3,789		20,146		6,130		6,990		3,940		17,060
Occupancy	801		84		67		952		838		78		48		964
Data processing and software licenses	1,204		4,047		863		6,114		1,391		1,481		1,786		4,658
Legal and professional expenses	399		1,754		1,804		3,957		28		2,039		1,210		3,277
Other expense	1,500		1,573		963		4,036		960		1,321		1,402		3,683
BaaS loan expense	—		32,840		—		32,840		—		32,698		—		32,698
BaaS fraud expense	—		2,127		—		2,127		—		2,084		—		2,084
Total noninterest expense	10,927		51,759		7,486		70,172		9,347		46,691		8,386		64,424
Net income/(loss) before income taxes	10,745		10,058		(2,895)		17,908		12,609		8,372		(4,599)		16,382
Income taxes	2,085		2,834		(603)		4,316		2,041		1,747		(862)		2,926
Net income/(loss)	$	8,660	$	7,224	$	(2,292)	$	13,592	$	10,568	$	6,625	$	(3,737)	$	13,456


	Nine Months Ended September 30, 2025								Nine Months Ended September 30, 2024
	Community Bank		CCBX		Treasury & Administration		Consolidated		Community Bank		CCBX		Treasury & Administration		Consolidated
	(dollars in thousands; unaudited)
INTEREST INCOME AND EXPENSE
Interest income	$	91,619	$	205,762	$	24,350	$	321,731	$	92,692	$	183,754	$	17,883	$	294,329
Interest income (expense) intrabank transfer	(10,729)		20,678		(9,949)		—		(16,975)		23,214		(6,239)		—
Interest expense	20,523		68,528		1,980		91,031		19,736		71,792		2,150		93,678
Net interest income	60,367		157,912		12,421		230,700		55,981		135,176		9,494		200,651
Provision/(Recapture) for credit losses	184		144,406		—		144,590		165		215,575		—		215,740

Net interest income/(expense) after provision for credit losses - loans and unfunded commitments	60,183		13,506		12,421		86,110		55,816		(80,399)		9,494		(15,089)
NONINTEREST INCOME
Service charges and fees	2,644		32		—		2,676		2,770		36		—		2,806
Other income	464		673		756		1,893		570		72		603		1,245
BaaS program income	—		21,126		—		21,126		—		14,521		—		14,521
BaaS indemnification income	—		147,252		—		147,252		—		215,533		—		215,533
Noninterest income	3,108		169,083		756		172,947		3,340		230,162		603		234,105
NONINTEREST EXPENSE
Salaries and employee benefits	21,189		26,075		15,765		63,029		18,171		21,388		12,414		51,973
Occupancy	2,449		243		209		2,901		2,564		255		159		2,978
Data processing and software licenses	4,587		9,629		2,321		16,537		3,554		3,474		5,085		12,113
Legal and professional expenses	1,143		6,800		7,864		15,807		55		5,992		4,160		10,207
Other expense	4,540		4,724		2,701		11,965		2,893		3,154		2,973		9,020
BaaS loan expense	—		97,830		—		97,830		—		87,816		—		87,816
BaaS fraud expense	—		6,924		—		6,924		—		4,791		—		4,791
Total noninterest expense	33,908		152,225		28,860		214,993		27,237		126,870		24,791		178,898
Net income before income taxes	29,383		30,364		(15,683)		44,064		31,919		22,893		(14,694)		40,118
Income taxes	5,809		7,583		(3,679)		9,714		6,176		5,452		(3,362)		8,266
Net Income	$	23,574	$	22,781	$	(12,004)	$	34,350	25,743		17,441		(11,332)		31,852

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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+ Details

COASTAL FINANCIAL CORP 10-Q