Coastal Community Bank is in the middle of what CEO Eric Sprink terms a “growth spurt,” onboarding nine new banking-as-a-service partners and handling some major new initiatives that existing clients are launching.
The Everett, Washington-based bank, a subsidiary of Coastal Financial Corp., has gone through similar expansionary phases in the eight years since it entered the partnership-banking space, but none quite as big as this one, according to Sprink.
Sprink said that his $4.5 billion-asset company began readying itself for the heavy lifting late in 2024 by hiring new associates, upgrading its technology stack and bolstering its capital with a $98 million equity raise.
“When we went to the market in December to raise our capital, we said, `This will be one of those growth spurts. We do need some extra capital to do it,” Sprink said. “We needed to hire and build infrastructure.”
Those preparations came at a cost during the second quarter. Operating expenses jumped 36% year over year, totaling $78 million in the quarter, which crimped bottom-line earnings when they were announced last week.
Increased spending on software, data processing and especially personnel drove the increase. Coastal added 60 employees between September 2024 and June 2025, Sprink said.
Coastal reported quarterly net income totaling $11 million, down from $11.6 million for the same three months in 2024. But the bank is confident that its strategy will generate gains entering the second half of the year.
Coastal Financial
“These are the right partners,” Sprink said. “We think we’re winning the right business.”
Hovde analyst Brett Rabatin wrote in a July 30 research note that Coastal’s “profitability improvement for the second quarter was slower than expected.” But Rabatin added that the company was still a “name to own” in the BaaS market, “given the compliance architecture and anticipated revenue growth of recent sizable partner adds.”
Coastal appears to have gotten an early payoff Wednesday, when neobank Dave announced that the bank will act as the primary funding partner for its fast-growing ExtraCash short-term loan product.
Dave’s ExtraCash advances are paid into a borrower’s bank account. Coastal has agreed to hold $225 million in ExtraCash receivables on its balance sheet before ultimately selling them to Dave.
The arrangement generates interest and fee income for Coastal. For Dave, it frees balance-sheet capacity and provides a substantially lower-cost funding source.
“So, an awesome sort of win-win there for us and Coastal,” Dave Chief Financial Officer Kyle Beelman said on a conference call with analysts.
Coastal was founded in 1997 as a traditional community bank serving Washington’s Puget Sound region, where it still operates 14 branches. It signed its first fintech partner in 2017, making it a relatively early entrant to the BaaS space.
Since then, Coastal has experienced some setbacks, including an
In addition to Dave, Coastal’s 20 active partners include some of the biggest names in the digital financial services universe, including T-Mobile, Robinhood, Greenwood, Aven and LendingPoint. Sprink attributed Coastal’s success to a flexible approach to BaaS.
“We said, `We’re going to let our partners build their own tech stack. We’ll [adapt] our technology to what they build,” he said. “We love the innovation and allowing our partners to really determine how they want to give a customer experience to the consumer or small business.”
The strength of Costa’s client list reflects a strategy aimed at attracting business from “larger, more established companies with experienced management teams,” according to Sprink. “We started migrating [to bigger partners] about three years ago,” the CEO said.
For now, Sprink said he doesn’t forsee any difficulties expanding the list, due to what he described as a shortage of active partner banks. “I actually believe there’s not enough banks doing partner banking,” he said.
Sprink said he views the BaaS sector’s recent problems, as well as the regulatory response that followed in 2023 and 2024, as a necessary corrective phase that has imparted important lessons and provided a stronger compliance roadmap.
“More of the lessons have been documented, and more of the rules have been written,” Sprink said. “Banks want to be safe and sound. They do. Now, they have the rules to follow, and you’re in a vibrant economy that’s leaning into digital adoption and innovation. It’s a great confluence of things that are occurring.”