Coastal Financial faces expanded securities fraud probe after 43% stock drop

Glancy Prongay Wolke & Rotter LLP continues its securities fraud probe into Coastal Financial after shares plunged 43.5 percent on July 30.

The Los Angeles-based firm said it is investigating whether Coastal Financial Corp. (NASDAQ: CCB) violated federal securities laws related to statements about the financial performance and credit quality of its CCBX banking-as-a-service segment. The investigation follows the Everett, Washington bank's second-quarter earnings report, which revealed a net loss of $42.1 million, or $2.76 per diluted share, compared with net income of $12 million, or $0.78 per diluted share a year earlier.

The loss was driven by a $68.8 million credit expense tied to a single CCBX partner relationship, according to the company. Chief Executive Officer Eric Sprink characterized the charge as specific to one portfolio company rather than a broader platform issue, but investors sold aggressively after the disclosure.

Coastal Financial shares fell $30.75 to close at $39.91 on July 30, down from $70.66 the prior session, erasing hundreds of millions of dollars in market value. The selloff ranks among the steepest one-day declines for a US banking stock this year.

At least four securities law firms — including Bleichmar Fonti & Auld LLP, Bronstein Gewirtz & Grossman LLC, and Kaplan Fox & Kilsheimer LLP — have opened investigations into whether the company adequately disclosed risks tied to its banking-as-a-service partners. The probes remain preliminary; no court has found Coastal Financial liable for wrongdoing.

The investigations center on CCBX, the bank's platform that lets fintech companies and brands offer regulated banking products to their customers. The segment has been a major growth driver for Coastal Financial, but the $68.8 million charge has raised questions about partner oversight and credit exposure across the banking-as-a-service model, which relies on third-party relationships to originate consumer loans.

Shareholders who purchased Coastal Financial securities may have legal options, the firms said. Representation is on a contingency fee basis, with no upfront costs to investors. The firms are seeking court approval for any potential fees and expenses only if they recover funds.

The company's next quarterly filing will be closely watched for additional detail on the affected CCBX partner and whether management revises its credit outlook. Any securities class action filed in federal court would need to survive a motion to dismiss before allegations are tested, and the outcome of the investigations could shape how other regional banks disclose partner-related credit risk in their banking-as-a-service businesses.

This article is for informational purposes only and does not constitute investment advice.