The Bank Slate


Coastal in Wash. gains momentum in its BaaS business

Coastal Financial in Everett, Wash., is gaining momentum with its Banking-as-a-Service platform.

The $2.8 billion-asset company said total loans in its BaaS division increased by 49% in the first quarter from a quarter earlier, to roughly $515 million. Deposits rose by 26% to $900 million. 

Coastal gained seven new relationships over the 12-month period that ended on March 31. 

The business “continues to grow, providing additional fee and interest income,” Eric Sprink, Coastal’s president and CEO, said in a Wednesday press release. “We are pleased with how this segment of the company compliments the community bank services that our bank was built upon.” 

The BaaS platform is helping expand Coastal’s net interest margin, which widened by 50 basis points during the first quarter, to 4.55%. 

The gross yield on BaaS loans – which excludes the impact of BaaS loan expense – was 12.73%, compared to 3.6% for other loans made by the bank. The cost of deposits for the BaaS division was 0.06% compared to 0.11% for the rest of the bank. 

Coastal said about $690 million on BaaS-related noninterest deposits were reclassed to interest-bearing after the Federal Reserve raised rates in mid-March. 

Coastal said 20 of its relationships are active, one is in friends-and-family testing and five are in the onboarding and implementation phase. Two have signed letters of intent. 

“We are more selective in our new … relationships and are focused on only selecting the relationships which are well-capitalized, are already established, and have experienced management teams,” the company said. 

Coastal recorded a $12.6 million loan-loss provision in the first quarter for its BaaS operations, increasing the allowance to $18.1 million on March 31. Agreements provide various protections for Coastal in the event of loan losses.

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