COASTAL FINANCIAL CORP (CCB) stock intrinsic value fair value estimate & owner earnings analysis

Coastal Financial is the holding company for Coastal Community Bank, a community bank in the Puget Sound region of Washington that has, since about 2021, also become a large Banking-as-a-Service (BaaS) provider through its CCBX division. CCBX lends and holds deposits on behalf of fintech partners across the United States, mostly installment loans and credit cards. Partners fund credit-loss reserves and pay credit-enhancement fees, so most credit losses on partner loans are passed back to the partners: in 2025 the bank recorded about $190 million of provision on partner loans, matched by credit enhancement income, and settled about $217 million of losses with partners while retaining only about $1 million net. How we measured earnings. We measure what the business earns for owners after all real costs. Reported operating cash flow adds back the large credit-loss provision as if it were non-cash, but for a lender those losses are real and are realised later through loans. We therefore deducted the provision, and also removed swings in partner receivables, credit enhancement assets and other working capital, and deducted stock compensation ($8.6 million in 2025). Growth capex is small and we deducted all capex. The result agrees with net income plus depreciation and deferred tax less capex. Owner earnings per diluted share were about $2.10 (2022), $3.96 (2023, flattered by a $13.9 million deferred tax add-back), $2.85 (2024) and $3.22 (2025). We anchor on the median of 2022-2025, about $3.04 per share, because the partner-lending business transformed the company from 2022; earlier years describe a small community bank earning about $1 per share. Recent results and what changed. The first half of 2026 is a net loss of about $30 million: roughly a $12 million profit in the first quarter and a $42 million loss in the second, with provision of $92 million and non-interest expense of $141 million in that quarter, both much higher than the first quarter. The filings we have for the period contain only summary figures, and we could not establish the cause. We have not lowered the earnings level on one quarter, but we assume 2026 is weak and that recovery is gradual, and we weight this uncertainty heavily in the margin-of-safety price. Growth reconciliation. Owner earnings per share grew about 13% in 2025. We credit no growth beyond returning to the anchor. Growth from new partners, higher loan volumes or share gains is not secured and is left out. Base case: about $26 per share. Owner earnings of roughly $1.00 in 2026, $2.30 in 2027, then flat at about $3.00 for the rest of the decade, followed by a gradual fade to zero over ten further years. The deposit franchise (about $5 billion of liabilities and a decade of profitable operation) supports the persistence, but we do not credit indefinite earnings because partner contracts and regulation can change. Bear case: about $8 per share. 2026 is a loss of about $1.50 per share, followed by $0.50 and then $1.50 a year, roughly the size of the pre-partner bank scaled to today, fading over five years after ten. This reflects concentration in fintech partners, regulatory scrutiny of the BaaS model and the unexplained 2026 loss. Bull case: about $39 per share. The 2026 loss proves a one-off, earnings return to $3.50 by 2027 and grow about 5% a year through 2036, in line with what growing deposits and loans have supported, then fade over ten years. What would make us wrong. If the second-quarter loss reflects losses the partners did not cover, or the loss of major partners, the bear case is nearer. If it was a discrete item, value is nearer the base or bull. The margin-of-safety price is around $12 per share, well below the base value because of the high complexity, leverage inherent in a bank and the open question about 2026 earnings.