A proposed securities class action accuses Coastal Financial Corporation (Nasdaq: CCB) of misleading investors about credit risks in its CCBX business as the company reported a $42.1 million quarterly loss tied mainly to one partner.
Allegheny County Employees’ Retirement System filed the case Oct. 2 in the U.S. District Court for the Western District of Washington. The complaint names Coastal, Chief Executive Officer Eric M. Sprink, Interim Chief Financial Officer Joel Edwards and former Chief Financial Officer Brandon Soto as defendants.
The lawsuit seeks to represent people who bought or otherwise acquired Coastal common shares between Oct. 28, 2024, and July 29, 2026. The complaint alleges the company’s disclosures gave investors an inaccurate picture of credit quality, risk controls and partner protections in CCBX, its banking-as-a-service segment. It brings claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
The complaint describes a partner loan portfolio of about $500 million, nearly 23% of CCBX loans, as materially deteriorated. It also alleges Coastal’s credit monitoring and risk management were inadequate and that its statements about partner indemnification did not disclose the exposure. The allegations have not been adjudicated.
Coastal said that as of March 31, 2025, it was “fully indemnified against fraud and 98.8% indemnified against credit risk” through its CCBX partners. The complaint challenges the company’s statements about those protections and its credit monitoring.
For the quarter ended June 30, Coastal reported a $42.1 million net loss, or $2.76 per diluted share. Its July 30 results release said the loss was primarily attributable to a $68.8 million credit expense tied to one partner. That figure included a $22.8 million provision for credit losses and a $46 million valuation adjustment to a credit-enhancement asset. Coastal said it did not expect to recover either amount in full under the partner indemnification arrangement after assessing collectability.
“We believe this is an isolated issue pertaining to one partner,” Sprink said in the results release.
The complaint says CCB shares fell $30.75, or 43.5%, to close at $39.91 on July 30. It estimates the decline reduced the company’s market capitalization by about $470 million.
Hagens Berman’s Oct. 16 investor notice lists Dec. 1 as the deadline for investors seeking appointment as lead plaintiff.
