Barchart’s Top 100 Stocks to Buy often include high-growth, money-losing businesses. Investors continue to look for the big score despite the economic black clouds.
On Monday, Coastal Financial (CCB), the Washington-based small-cap bank holding company, saw its stock jump into 18th spot in Barchart’s Top 100 Stocks to Buy. Up 14 spots yesterday, the financial stock looks like it’s got some gas left in the tank.
The Trump administration’s 25% tariffs on Mexican and Canadian imports went into effect at 12:01 a.m. on Tuesday. The markets are, understandably, freaking out. Most investors have spent most of 2025 trying to identify which sectors and stocks will be least affected by the trade war.
While financial stocks won’t be immune from the economic hit, Coastal Financial could be a relatively safe bet in the coming months should the trade war drag on for the remainder of 2025 and into 2026.
A Little About the Bank
The Coastal Community Bank opened for business in Everett, Washington, in 1997. It provides personal and business banking services through 14 branches in the greater Puget Sound area and through internet and mobile banking. According to its website, it is the largest community bank by deposit market share in Snohomish County, where Everett is located.
I’m Canadian, so I’m used to a relatively small number of large national banks, smaller regional players, and credit unions.
Community banks tend to be locally owned and operated. More importantly, they account for $4 trillion in consumer, small business, and agricultural loans. Further, they “Make roughly 60% of U.S. small-business loans under $1 million and 80% of banking industry agriculture loans,” states its website.
They’re a big deal on Main Street America. And, while the constituents they serve are likely to suffer financially from a prolonged trade war, they are closer to the front lines where small- and medium-sized businesses operate in communities all across the U.S. As a result, if any financial institution is dialed into the welfare of local companies, it is the community bank.
The bank went public in October 2018 after creating CCBX, a fintech division that sells BaaS (banking-as-a-service) tech to other fintechs and broker-dealers across the U.S. A year later, it hit $1 billion in assets. Five years later, it’s got $4.12 billion in total assets, with $3.49 billion in loans outstanding.
Coastal Financial has three reportable segments: Community Bank, CCBX, and Treasury and Administration.
To evaluate whether to buy CCB stock, you don’t need to look too closely at the third segment, which represents investments, debt, and other reporting items unrelated to the bank or CCBX. They accounted for about 5% of Coastal Financial’s net interest income in Q4 2024.
What Is Important to Evaluate Coastal Financial Stock
As mentioned in the previous section, its loan portfolio at the end of December was $3.49 billion, 15% higher than $3.03 billion a year earlier. That’s a good thing. CCBX accounts for 46% of its loan portfolio and 54% for the Community Bank. That’s also good.
Where you’ll want to pay attention are the provision for credit losses for each of the segments. In 2023, for example, Coastal Financial had total provision for credit losses of $184.0 million, with CCBX accounting for 99.3% of them.
At the end of December, nearly 75% of the CCBX loans receivables were higher-risk consumer loans such as credit cards and installment loans, as well as lines of credit and other consumer-facing loans. In contrast, the Community Bank’s consumer loans accounted for less than 1% of its loan portfolio, with commercial and residential real loans accounting for 91%, providing much greater security.
Naturally, because of the higher risk, the loan yield for CCBX loans was 15.28% in Q4 2024, more than double the Community Bank’s 6.53% loan yield. The challenge for Coastal Financial Management is to keep the growth tap on while reducing the risk of the CCBX loan portfolio.
At the end of December, Coastal Financial had $62.6 million in non-performing assets--these are loans not generating revenue--which accounted for 1.80% of its loans receivable. That changes from quarter to quarter. At the end of September, it was 1.94%, but a year ago, it was 1.78%.
These non-performing assets are entirely from its CCBX segment.
However, it has credit enhancement agreements with its loan partners that reimburse CCBX for losses incurred. For example, in the fourth quarter, CCBX’s credit and fraud indemnification income totaled $67.1 million, reducing the actual risk of these non-performing loans.
That said, if its partners were unable to fulfill their contractual obligations, Coastal Financial would have to write down all or part of its credit enhancement asset, which was valued at $181.9 million at the end of 2024.
The Bottom Line on CCB Stock
From where I sit, having only looked at its financials for the first time, Coastal Financial’s business appears exceptionally sound.
Looking at its Q4 2024 press release, the company’s net interest income after provision for credit losses was $4.6 million, considerably higher than its $1.1 million net interest expense.
While this isn’t always positive, it’s nice to see.
As I write this on Tuesday, its shares are down more than 7% due to the economic uncertainty caused by the tariffs. Despite its momentum, I wouldn’t consider buying its stock right now. It's better to wait for some indication that a 10%- 15% correction isn’t in the cards.
Long-term, however, it’s a buy.
