COASTAL FINANCIAL CORPCCB
COASTAL FINANCIAL CORP Income Taxes Disclosure
Income Taxes
Income taxes paid were as follows:
| (dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Cash taxes paid, net of refunds | |||||||||||||||||
| Federal | $ | 5,871 | $ | 9,750 | $ | 6,000 | |||||||||||
| State | |||||||||||||||||
California (1) | 1,300 | 525 | — | ||||||||||||||
| Other domestic | 460 | (355) | 412 | ||||||||||||||
| Foreign | — | — | — | ||||||||||||||
| Total tax expense | $ | 7,631 | $ | 9,920 | $ | 6,412 | |||||||||||
(1) The amount of income taxes paid during 2023 does not meet the 5% disaggregation threshold.
Pretax income is entirely related to domestic activities. The Company did not have any foreign operations.
The components of the income tax for the Company consisted of the following at December 31:
| (dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current tax expense (benefit) | |||||||||||||||||
| Federal | $ | 7,744 | $ | 10,486 | $ | (1,365) | |||||||||||
| State | 2,055 | 1,474 | 40 | ||||||||||||||
| Total current tax expense (benefit) | 9,799 | 11,960 | (1,325) | ||||||||||||||
| Deferred tax expense | |||||||||||||||||
| Federal | 3,862 | 50 | 12,313 | ||||||||||||||
| State | 591 | 88 | 1,566 | ||||||||||||||
| Total deferred tax expense | 4,453 | 138 | 13,879 | ||||||||||||||
| Total tax expense | $ | 14,252 | $ | 12,098 | $ | 12,554 | |||||||||||
At December 31, 2025 the current net income tax receivable was $4.9 million, and at December 31, 2024 the net income tax receivable was $7.1 million.
A reconciliation of the income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate to the income before income taxes is as follows for the year ended December 31:
(dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||||||||||||||
| Federal income tax at statutory rate | $ | 12,861 | 21.0 | % | $ | 12,037 | 21.0 | % | $ | 11,998 | 21.0 | % | |||||||||||||||||||||||
| Effect of: | |||||||||||||||||||||||||||||||||||
State income taxes, net of federal income tax effect (1) | 2,091 | 3.4 | 1,284 | 2.2 | 1,275 | 2.2 | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Excess executive compensation | 1,695 | 2.8 | 167 | 0.3 | 145 | 0.3 | |||||||||||||||||||||||||||||
| Effect of tax-exempt interest income | (65) | (0.1) | (71) | (0.1) | (77) | (0.1) | |||||||||||||||||||||||||||||
| Bank owned life insurance earnings | (108) | (0.2) | (102) | (0.2) | (39) | (0.1) | |||||||||||||||||||||||||||||
| Other | 34 | 0.1 | 33 | 0.1 | 41 | 0.1 | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | (2,016) | (3.3) | (993) | (1.7) | (728) | (1.3) | |||||||||||||||||||||||||||||
| Other | (240) | (0.4) | (257) | (0.5) | (61) | (0.1) | |||||||||||||||||||||||||||||
| Total tax (benefit) expense | $ | 14,252 | 23.3 | % | $ | 12,098 | 21.1 | % | $ | 12,554 | 22.0 | % | |||||||||||||||||||||||
(1) For the year ended December 31, 2025, state taxes in California made up the majority (greater than 50%) of the tax effect in this category. For the years ended December 31, 2024 and 2023, state taxes in California and Georgia made up the majority (greater than 50%) of the tax effect in this category.
The Company did not record or accrue any interest and penalties related to income taxes for the years ended December 31, 2025, 2024 or 2023. The Company and Bank have entered into a tax allocation agreement, which provides that income taxes shall be allocated between the parties on a monthly basis. The intent of this agreement is that each member of the consolidated group will incur no greater tax liability than it would have incurred on a stand-alone basis.
The net deferred tax asset consists of the following temporary differences and carryforward items at December 31:
| (dollars in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses | $ | 41,602 | $ | 40,734 | |||||||
| Lease liability | 1,219 | 1,245 | |||||||||
| Accrued expenses | 799 | 582 | |||||||||
| Deferred compensation | 65 | 76 | |||||||||
| Stock based compensation | 1,132 | 1,220 | |||||||||
| Section 174 costs | — | 801 | |||||||||
| Other | 2,448 | 829 | |||||||||
| Total deferred tax assets | 47,265 | 45,487 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right of use asset | (1,179) | (1,203) | |||||||||
| Depreciation and amortization | (284) | (365) | |||||||||
| Credit enhancement recovery | (43,196) | (40,101) | |||||||||
| Section 174 costs | (3,299) | — | |||||||||
| Other | (160) | (218) | |||||||||
| Total deferred tax liabilities | (48,118) | (41,887) | |||||||||
| Net deferred tax (liability) asset | $ | (853) | $ | 3,600 | |||||||
The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. The realization of deferred income tax assets is regularly assessed and a valuation allowance is recorded if it is “more likely than not” that all or a portion of the deferred tax asset will not be realized. “More likely than not” is defined as greater than a 50% chance. All available evidence, both positive and negative is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. Based upon its analysis of available evidence, including recent profitability, management has determined that it is “more likely than not” that the Company’s deferred income tax assets as of December 31, 2025 will be fully realized and therefore no valuation allowance was recorded. CCBX partners reimburse the Bank for credit losses on loans covered by credit enhancements, therefore the credit enhancement recovery deferred tax liability partially offsets the allowance for credit losses deferred tax asset.
At December 31, 2025, the Company had no federal net operating loss carryforwards or tax credit carryforwards. The Company files federal and various state income tax returns. Federal tax returns for the 2022 tax year and later are open for examination. The total amount of unrecognized tax benefits, including interest and penalties, at December 31, 2025 was not material. The amount of tax benefits that would impact the effective rate, if recognized, is not expected to be material. The Company does not anticipate any significant changes with respect to unrecognized tax benefits within the next 12 months.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 12, 2021 | |
| 2019 | Mar 12, 2020 | |
| 2018 | Mar 28, 2019 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.