Coastal Financial Corp., with assets totaling $4.1 billion and headquartered in Everett, Washington, had to revise its financial reports for the entire year of 2023 and for the first three quarters of 2024. The company identified a weakness in its financial reporting related to discrepancies in how interest income and expenses were handled compared to its banking partners for services.

The issue led Coastal to adjust its earnings for 2023 and the quarterly reports for the periods ending on March 31, June 30, and September 30 in 2024. Although the revisions did not impact the bottom-line results, they are considered a reputational setback for Coastal, as noted by an analyst.

Coastal is recognized for its active involvement in providing embedded banking services to approximately twenty fintech firms. Despite initial concerns raised by analyst Brett Rabatin, who monitors Coastal for Hovde, the adjustments to revenue and expenses did not alter his positive outlook on the company, predicting a significant rise in Coastal's stock value. Rabatin emphasized that the issues were self-reported by management.

While a Coastal spokesperson was not available for immediate comment, the disclosure of the financial weakness came following a series of positive announcements from Coastal. Notably, Coastal sealed a deal as the sponsor for neobank Dave and its ExtraCash advance program. Moreover, Coastal was selected by T-Mobile in February to act as a sponsor for T-Mobile MONEY checking accounts, and had successfully completed a $98 million equity raise in December 2024.

The discrepancies in financial reporting between Coastal and its banking partners primarily revolved around the reimbursement of expenses for interchange fees. The BaaS partners were categorizing these expenses into noninterest income and noninterest expense categories, instead of reporting them with a net figure as part of noninterest expenses. Consequently, the revisions involved decreases in revenue that were offset by corresponding reductions in expenses.