10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number: 001-38589

COASTAL FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Washington	56-2392007
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5415 Evergreen Way, Everett, Washington	98203
(Address of principal executive offices)	(Zip Code)

(425) 257-9000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

_________________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, no par value per share	CCB	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and emerging growth company in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	o	Accelerated Filer	x
Non-Accelerated Filer	o	Smaller Reporting Company	o
		Emerging Growth Company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 4, 2023, there were 13,283,232 shares of the issuer’s common stock outstanding.

Table of Contents,

COASTAL FINANCIAL CORPORATION

Table of Contents

		Page No.
Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (unaudited)	4
	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2023 and 2022 (unaudited)	7
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (unaudited)	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	85
Item 4.	Controls and Procedures	86
Part II. Other Information
Item 1.	Legal Proceedings	88
Item 1A.	Risk Factors	88
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88
Item 3.	Defaults Upon Senior Securities	88
Item 4.	Mine Safety Disclosures	88
Item 5.	Other Information	88
Item 6.	Exhibits	89

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Forward-Looking Statements

This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. All forward-looking statements, expressed or implied, included herewith are expressly qualified in their entirety by the cautionary statements contained or referred to herein. The inclusion of forward-looking information in this report should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

Factors that may affect our results are disclosed in “Item 1A. Risk Factors” in Part II of this report and in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 (“Form 10-K”). Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed include, but are not limited to, the following: the difficult market conditions and unfavorable economic conditions and uncertainties associated with the coronavirus, and variants thereof (“COVID-19”) pandemic, including the emergence of variant strains of the virus, particularly in the markets in which we operate and in which our loans are concentrated, including declines in housing markets, an increase in unemployment levels and slowdowns in economic growth; our expected future financial results; the overall health of the local and national real estate market; the impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and potential impacts to macroeconomic conditions; the credit risk associated with our loan portfolio, such as possible additional credit losses and impairment of collectability of loans as a result of the COVID-19 pandemic and policies and programs implemented by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), including its automatic loan forbearance provisions and the effects on our loan portfolio from our Paycheck Protection Program (“PPP”) lending activities, specifically with our commercial real estate loans; our level of nonperforming assets and the costs associated with resolving problem loans; business and economic conditions generally and in the financial services industry, nationally and within our market area, including as a result of the COVID-19 pandemic, particularly in the markets in which we operate and in which our loans are concentrated; our ability to maintain an adequate level of allowance for credit losses; our ability to successfully manage liquidity risk; our ability to implement our growth strategy and manage costs effectively; the composition of our senior leadership team and our ability to attract and retain key personnel; our ability to raise additional capital to implement our business plan; changes in market interest rates and impacts of such changes on our profits and business; the occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents; interruptions involving our information technology and telecommunications systems or third-party servicers; our ability to maintain our reputation; increased competition in the financial services industry; regulatory guidance on commercial lending concentrations; our relationship with broker-dealers and digital financial service providers; the effectiveness of our risk management framework; the costs and obligations associated with being a publicly traded company; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us or to which we may become subject; the extensive regulatory framework that applies to us; the impact of recent and future legislative and regulatory changes and economic stimulus programs; and other changes in banking, securities and tax laws and regulations, and their application by our regulators; the impact on our operations due to epidemic illnesses, natural or man-made disasters, such as wildfires, the effects of regional or national civil unrest, and political developments that may disrupt or increase volatility in securities or otherwise affect economic conditions; the impact of benchmark interest rate reform in the U.S. and implementation of alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”), to the London Interbank Offered Rate (“LIBOR”); fluctuations in the value of the securities held in our securities portfolio; governmental monetary and fiscal policies; material weaknesses in our internal control over financial reporting; and our success at managing the risks involved in the foregoing items.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. You are cautioned not to place undue reliance on forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(dollars in thousands)

ASSETS
	March 31, 2023		December 31, 2022
Cash and due from banks	$	37,676	$	32,722
Interest earning deposits with other banks (restricted cash of $0 at March 31, 2023 and December 31, 2022)	356,240		309,417
Investment securities, available for sale, at fair value	97,999		97,317
Investment securities, held to maturity, at amortized cost	3,705		1,036
Other investments	11,346		10,555
Loans held for sale	27,292		—
Loans receivable	2,837,204		2,627,256
Allowance for credit losses	(89,123)		(74,029)
Total loans receivable, net	2,748,081		2,553,227
CCBX credit enhancement asset	76,395		53,377
CCBX receivable	13,681		10,416
Premises and equipment, net	18,030		18,213
Operating lease right-of-use assets	4,812		5,018
Accrued interest receivable	19,321		17,815
Bank-owned life insurance, net	12,761		12,667
Deferred tax asset, net	20,527		18,458
Other assets	3,167		4,229
Total assets	$	3,451,033	$	3,144,467
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits	$	3,095,223	$	2,817,521
Subordinated debt, net
Principal amount $45,000 (less unamortized debt issuance costs of $969 and $1,001) at March 31, 2023 and December 31, 2022, respectively	44,031		43,999
Junior subordinated debentures, net
Principal amount $3,609 (less unamortized debt issuance costs of $21 at March 31, 2023 and December 31, 2022)	3,588		3,588
Deferred compensation	582		616
Accrued interest payable	874		684
Operating lease liabilities	5,022		5,234
CCBX payable	30,794		20,419
Other liabilities	12,156		8,912
Total liabilities	3,192,270		2,900,973
SHAREHOLDERS’ EQUITY
Preferred stock, no par value:
Authorized: 25,000,000 shares at March 31, 2023 and December 31, 2022; issued and outstanding: zero shares at March 31, 2023 and December 31, 2022	—		—
Common stock, no par value:
Authorized: 300,000,000 shares at March 31, 2023 and December 31, 2022; 13,281,533 shares at March 31, 2023 issued and outstanding and 13,161,147 shares at December 31, 2022 issued and outstanding	127,447		125,830
Retained earnings	133,123		119,998
Accumulated other comprehensive loss, net of tax	(1,807)		(2,334)
Total shareholders’ equity	258,763		243,494
Total liabilities and shareholders’ equity	$	3,451,033	$	3,144,467

See accompanying Notes to Condensed Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(dollars in thousands, except for per share data)

	Three Months Ended March 31,
	2023		2022
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	66,431	$	29,632
Interest on interest earning deposits with other banks	3,097		402
Interest on investment securities	553		71
Dividends on other investments	30		37
Total interest income	70,111		30,142
INTEREST EXPENSE
Interest on deposits	14,958		553
Interest on borrowed funds	662		321
Total interest expense	15,620		874
Net interest income	54,491		29,268
PROVISION FOR CREDIT LOSSES - LOANS	43,544		12,942
PROVISION FOR UNFUNDED COMMITMENTS	153		—
Net interest income after provision for credit losses - loans    and unfunded commitments	10,794		16,326
NONINTEREST INCOME
Deposit service charges and fees	910		884
Loan referral fees	—		602
Gain on sales of loans, net	123		—
Mortgage broker fees	19		123
Unrealized (loss) gain on equity securities, net	39		—
Other income	280		265
Noninterest income, excluding BaaS program income and BaaS indemnification income	1,371		1,874
Servicing and other BaaS fees	948		1,169
Transaction fees	917		493
Interchange fees	789		432
Reimbursement of expenses	921		372
BaaS program income	3,575		2,466
BaaS credit enhancements	42,362		13,075
BaaS fraud enhancements	1,999		4,571
BaaS indemnification income	44,361		17,646
Total noninterest income	49,307		21,986
NONINTEREST EXPENSE
Salaries and employee benefits	15,575		11,085
Occupancy	1,219		1,136
Data processing and software licenses	1,840		1,861
Legal and professional expenses	3,062		708
Point of sale expense	753		248
Excise taxes	455		349
Federal Deposit Insurance Corporation ("FDIC") assessments	595		604
Director and staff expenses	626		344
Marketing	95		99
Other expense	890		1,120
Noninterest expense, excluding BaaS loan and BaaS fraud expense	25,110		17,554
BaaS loan expense	17,554		8,290
BaaS fraud expense	1,999		4,571
BaaS loan and fraud expense	19,553		12,861
Total noninterest expense	44,663		30,415
Income before provision for income taxes	15,438		7,897

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PROVISION FOR INCOME TAXES	3,047		1,667
NET INCOME	$	12,391	$	6,230
Basic earnings per common share	$	0.94	$	0.48
Diluted earnings per common share	$	0.91	$	0.46
Weighted average number of common shares outstanding:
Basic	13,196,960		12,898,746
Diluted	13,609,491		13,475,337

See accompanying Notes to Condensed Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(dollars in thousands)

	Three Months Ended March 31,
	2023		2022
NET INCOME	$	12,391	$	6,230
OTHER COMPREHENSIVE INCOME (LOSS), before tax
Securities available-for-sale
Unrealized holding income (loss) during the period	678		(349)
Income tax (expense) benefit related to unrealized holding gain/loss	(151)		70
OTHER COMPREHENSIVE INCOME (LOSS), net of tax	527		(279)
COMPREHENSIVE INCOME	$	12,918	$	5,951

See accompanying Notes to Condensed Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(dollars in thousands)

	Shares of Common Stock		Amount of Common Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
BALANCE, December 31, 2021	12,875,315		$	121,845	$	79,373	$	4	$	201,222
Net income	—		—		6,230		—		6,230
Vesting of restricted stock units	26,288		—		—		—		—
Exercise of stock options	26,945		208		—		—		208
Stock-based compensation	—		539		—		—		539
Other comprehensive loss, net of tax	—		—		—		(279)		(279)
BALANCE, March 31, 2022	12,928,548		$	122,592	$	85,603	$	(275)	$	207,920
BALANCE, December 31, 2022	13,161,147		$	125,830	$	119,998	$	(2,334)	$	243,494
Adjustment to retained earnings;    adoption of ASU 2016- 13	—	0	—		734		—		734
Net income	—		—		12,391		—		12,391
Vesting of restricted stock units	42,402		—		—		—		—
Exercise of stock options	77,984		567		—		—		567
Stock-based compensation	—		1,050		—		—		1,050
Other comprehensive income,    net of tax	—		—		—		527		527
BALANCE, March 31, 2023	13,281,533		$	127,447	$	133,123	$	(1,807)	$	258,763

See accompanying Notes to Condensed Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

	Three Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	12,391	$	6,230
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses - loans	43,544		12,942
Depreciation and amortization	466		419
Loss on disposition of fixed assets	—		(35)
Decrease in operating lease right-of-use assets	206		269
Decrease in operating lease liabilities	(212)		(266)
Gain on sales of loans	(123)		—
Net (discount accretion)/premium amortization on investment securities	(6)		(12)
Unrealized holding loss (gain) on equity investment	(39)		—
Stock-based compensation	1,050		539
Increase in bank-owned life insurance value	(94)		(88)
Deferred tax benefit	(2,439)		1
Net change in CCBX receivable	(3,265)		(3,610)
Net change in CCBX credit enhancement asset	(18,553)		(11,571)
Net change in CCBX payable	10,375		4,536
Net change in other assets and liabilities	3,330		(1,372)
Total adjustments	34,240		1,752
Net cash provided by operating activities	46,631		7,982
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities available for sale	—		(134,912)
Purchase of investment securities held for investment	(2,679)		—
Change in other investments, net	(752)		(1,453)
Principal paydowns of investment securities available-for-sale	2		7
Principal paydowns of investment securities held-to-maturity	9		10
Maturities and calls of investment securities available-for-sale	—		35,000
Proceeds from sales of loans held for sale	74,050		—
Purchase of loans	(47,886)		(57,268)
Increase in loans receivable, net	(295,583)		(167,010)
Purchases of premises and equipment, net	(284)		(1,300)
Net cash used by investing activities	(273,123)		(326,926)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW and money market, and savings	280,089		215,769
Net decrease in time deposits	(2,387)		(3,086)
Net repayment from long term FHLB borrowing	—		(24,999)
Proceeds from exercise of stock options	567		208
Net cash provided by financing activities	278,269		187,892
NET CHANGE IN CASH, DUE FROM BANKS AND RESTRICTED CASH	51,777		(131,052)
CASH, DUE FROM BANKS AND RESTRICTED CASH, beginning of year	342,139		813,161
CASH, DUE FROM BANKS AND RESTRICTED CASH, end of quarter	$	393,916	$	682,109
SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES
Interest paid	$	15,430	$	761
Income taxes paid	165		12
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
Fair value adjustment of securities available-for-sale, gross	$	678	$	(13)
In conjunction with ASU 2016-02 as detailed in Note 6 to the Unaudited Consolidated Financial Statements, the following assets and liabilities were recognized:
Operating lease right-of-use assets	$	69	$	—
Operating lease liabilities	$	(69)	$	—
Non-cash investing and financing activities:
Transfer from loans to loans held for sale	$	101,219	$	—
Adjustment to retained earnings - adoption of ASU 2016-13, net of deferred tax	$	(734)	$	—

See accompanying Notes to Condensed Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 - Description of Business and Summary of Significant Accounting Policies

Nature of operations - Coastal Financial Corporation (“Corporation” or “Company”) is a registered bank holding company whose wholly owned subsidiaries are Coastal Community Bank (“Bank”) and Arlington Olympic LLC (“LLC”). The Company is a Washington state corporation that was organized in 2003. The Bank was incorporated and commenced operations in 1997 and is a Washington state-chartered commercial bank that is a member bank of the Federal Reserve system. Arlington Olympic LLC was formed in 2019 and owns the Company’s Arlington branch site, which the Bank leases from the LLC.

We are headquartered in Everett, Washington, which by population is the largest city in, and the county seat of, Snohomish County. The Company’s business is conducted through three reportable segments: CCBX, the community bank and treasury & administration.  The CCBX segment provides Banking as a Service (“BaaS”) that allows our broker dealers and digital financial service partners to offer their customers banking services. Through CCBX’s partners the Company is able to offer banking services and products across the nation.The community bank segment includes all community banking activities with a primary focus on providing a wide range of banking products and services to consumers and small to medium-sized businesses, professionals, and individuals in the broader Puget Sound region in the state of Washington through its 14 branches in Snohomish, Island and King Counties, and through the Internet and its mobile banking application. The treasury & administration segment includes treasury management, overall administration and all other aspects of the Company.

The Bank’s deposits are insured in whole or in part by the Federal Deposit Insurance Corporation (“FDIC”). The community bank’s loans and deposits are primarily within the greater Puget Sound area, while CCBX loans and deposits are dependent upon the partner’s market. The Bank’s primary funding source is deposits from customers. The Bank is subject to regulation and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Washington State Department of Financial Institutions Division of Banks. The Federal Reserve also has regulatory and supervisory authority over the Company.

Financial statement presentation - The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim reporting requirements and with instructions to Form 10-Q and Article 10 of Regulation S-X, and therefore do not include all the information and notes included in the annual consolidated financial statements in conformity with GAAP. These interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual report on Form 10-K as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2023. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the entire year.

Amounts presented in the consolidated financial statements and footnote tables are rounded and presented in thousands of dollars except per-share amounts, which are presented in dollars. In the narrative footnote discussion, amounts are rounded to thousands and presented in dollars.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying consolidated financial statements have been made. These adjustments include normal and recurring accruals considered necessary for a fair and accurate presentation.

Principles of consolidation - The consolidated financial statements include the accounts of the Company, the Bank and the LLC. All significant intercompany accounts have been eliminated in consolidation.

Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that its critical accounting policies include determining the allowance for credit losses, the valuation of the Company’s deferred tax assets, and fair value of financial instruments. Actual results could differ significantly from those estimates.

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Implementation of ASU 2016-13 - On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized costs, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in certain leases. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require increases or decreases in credit losses be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believe it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis.

The Company adopted ASC 326 using the modified retrospective method. Results for the reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The day one CECL adjustment for community bank loans included a reduction of $310,000 to the community bank allowance and a reduction of $340,000 related to the community bank unfunded commitment reserve. This was offset by an increase to the CCBX allowance for $4.2 million. With the mirror image approach accounting related to the credit enhancement for CCBX partner loans, there was a CECL day one increase to the indemnification asset in the amount of $4.5 million. Net, the day one impact to retained earnings for the Bank’s transition to CECL was an increase of $954,000, excluding the impact of income taxes.

Management has separately evaluated its held-to-maturity investment securities and determined that no loss reserves were required.

Implementation of ASU 2022-02 - On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings ("TDR") and Vintage Disclosures. The ASU eliminated the accounting guidance for TDR loans by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, the ASU requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. This ASU was effective upon adoption of ASU 2016-13 and was applied on a prospective basis. During the quarter ended March 31, 2023, the Company did not have any loans that were modified to borrowers experiencing financial difficulty.

Accounting policy update –

Allowance for Credit Losses - effective January 1, 2023 with the adoption of ASU 2016-13

Loans and unfunded commitments

The allowance for credit losses ("ACL") is an estimate of the expected credit losses on financial assets measured at amortized cost. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans in the pool and whether it needs to evaluate the allowance on an individual basis. The Company must estimate expected credit losses over the loans’ contractual terms, adjusted for expected prepayments. In estimating the life of the loan, the Company cannot extend the contractual term of the loan for expected extensions, renewals, and modifications, unless the extension or renewal options are included in the contract at the reporting date and are not unconditionally cancellable by the Company. Because expected credit losses are estimated over the contractual life adjusted for estimated prepayments, determination of the life of the loan may significantly affect the ACL. The Company has chosen to segment its portfolio consistent with the manner in which it manages the risk of the type of credit.

•Community Bank Portfolio: The ACL calculation is derived from loan segments utilizing loan level information and relevant available information from internal and external sources related to past events and current conditions. In addition, the Company incorporates a reasonable and supportable forecast.

•CCBX Portfolio: The Bank calculates the ACL on loans on an aggregate basis based on each partner and product level, segmenting the risk inherent in the CCBX portfolio based on qualitative and quantitative trends in the portfolio.

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Also included in the ACL are qualitative reserves to cover losses that are expected, but in the Company’s assessment may not be adequately represented in the quantitative method. For example, factors that the Company considers include environmental business conditions, borrower’s financial condition, credit rating and the volume and severity of past due loans and non-accrual loans. Based on this analysis, the Company records a provision for loan losses to maintain the allowance at appropriate levels.

Determining the amount of the allowance is considered a critical accounting estimate, as it requires significant judgment and the use of subjective measurements, including management’s assessment of overall portfolio quality. The Company maintains the allowance at an amount the Company believes is sufficient to provide for estimated losses expected to occur in the Company’s loan portfolio at each balance sheet date, and fluctuations in the provision for credit losses may result from management’s assessment of the adequacy of the allowance. Changes in these estimates and assumptions are possible and may have a material impact on the Company’s allowance, and therefore the Company’s financial position, liquidity or results of operations. The Company has elected to exclude accrued interest receivable from the amortized cost basis in its ACL calculation as accrued interest is written off in a timely manner when deemed uncollectable.

For more information and discussion related to the allowance for credit losses on loans, see “Note 4 - Loans and Allowance for Credit Losses” in the Consolidated Financial Statements.

In addition to the ACL on loans held for investment, CECL requires a balance sheet liability for expected losses on unfunded commitments, which is recognized if both the following conditions are met: (1) the Company has a present contractual obligation to extend credit; and (2) the obligation is not unconditionally cancellable by the Company. Loan commitments may have a funded and unfunded portion, of which the liability for unfunded commitments is derived based upon the commitments to extend credit to a borrower (e.g., an estimate of expected credit losses is not established for unfunded portions of loan commitment that are unconditionally cancellable by the Company). The expected credit losses for funded portions are reported in the previously discussed ACL. The Company segments its unfunded commitment portfolio consistent with the ACL calculation, separating between unfunded lines and commitments to originate. The Company incorporates the probability of funding (i.e. estimate of utilization) for each segment and then utilizes the ACL loss rates for each segment on an aggregate basis to calculate the allowance for unfunded commitments

Available-for-sale debt securities

For available-for-sale debt securities with fair value below amortized cost, the security is considered impaired. When the Company does not intend to sell the debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, then the Company assesses the impairment for potential expected credit losses. Impairment related to a credit loss is measured using the discounted cash flow method. Credit loss recognition is limited to the fair value of the security. The impairment is recognized by establishing an ACL through provision for credit losses. Impairment related to noncredit factors is recognized in accumulated other comprehensive income, net of applicable taxes. The Company evaluates AFS security impairment on a quarterly basis.

Held-to-maturity debt securities

For held-to-maturity debt securities, expected losses are evaluated and calculated on a collective basis for those securities which share risk characteristics. The Company aggregates record level securities calculations and reports the security portfolio segments based on shared risk characteristics. The only segment included in the held-to-maturity portfolio are U.S. Agency Residential Mortgage Backed Securities which have an expected zero credit loss.

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The following table illustrates the impact of ASU 2016-13:

	January 1, 2023
	As reported under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Allowance for credit losses	$	77,881	$	74,029	$	3,852
CCBX credit enhancement asset	57,842		53,377		4,465
Deferred tax asset	18,238		18,458		(220)
Liabilities:
Unfunded commitment reserve	634		974		(340)
Shareholders' Equity:
Retained earnings	120,732		119,998		734

Subsequent Events - The Company has evaluated events and transactions subsequent to March 31, 2023 for potential recognition or disclosure.

Reclassifications - Certain amounts reported in prior quarters' consolidated financial statements may have been reclassified to conform to the current presentation with no effect on stockholders’ equity or net income.

Note 2 - Recent accounting standards

Recent Accounting Guidance Not Yet Effective

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

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Note 3 - Investment Securities

The following table summarizes the amortized cost, fair value, and allowance for credit losses and the corresponding amounts of gross unrealized gains and losses of available-for-sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held-to-maturity securities:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses
	(dollars in thousands; unaudited)
March 31, 2023
Available-for-sale
U.S. Treasury securities	$	99,974	$	—	$	(2,275)	$	97,699	$	—
U.S. Agency collateralized    mortgage obligations	52		—		(2)		50		—
U.S. Agency residential    mortgage-backed securities	—		—		—		—		—
Municipal bonds	250		—		—		250		—
Total available-for-sale    securities	100,276		—		(2,277)		97,999		—
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value		Allowance for Credit Losses
Held-to-maturity
U.S. Agency residential    mortgage-backed securities	3,705		—		(108)		3,597		—
Total held-to-maturity    securities	$	3,705	$	—	$	(108)	$	3,597	$	—
Total investment securities	$	103,981	$	—	$	(2,385)	$	101,596	$	—

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands; unaudited)
December 31, 2022
Available-for-sale
U.S. Treasury securities	$	99,967	$	—	$	(2,952)	$	97,015
U.S. Agency collateralized mortgage obligations	54		—		(3)		51
U.S. Agency residential mortgage-backed securities	1		—		—		1
Municipal bonds	250		—		—		250
Total available-for-sale securities	100,272		—		(2,955)		97,317
Held-to-maturity
U.S. Agency residential mortgage-backed securities	1,036		—		(120)		916
Total investment securities	$	101,308	$	—	$	(3,075)	$	98,233

Accrued interest on available-for-sale securities was $187,000 and $723,000 at March 31, 2023 and December 31, 2022, respectively, accrued interest on held-to-maturity securities was $14,000 and $3,000 at March 31, 2023 and December 31, 2022, respectively,. Accrued interest on securities is excluded from the balances in the preceding table of securities receivable, and is included in accrued interest receivable on the Company's consolidated balance sheets.

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The amortized cost and fair value of debt securities at March 31, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers or the underlying borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities and collateralized mortgage obligations are shown separately, since they are not due at a single maturity date.

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(dollars in thousands; unaudited)
March 31, 2023
Amounts maturing in
One year or less	$	100,224	$	97,949	$	—	$	—
	100,224		97,949		—		—
U.S. Agency residential mortgage-backed securities and collateralized mortgage obligations	52		50		3,705		3,597
	$	100,276	$	97,999	$	3,705	$	3,597

Investments in debt securities with an amortized cost of $37.8 million at March 31, 2023 and December 31, 2022, were pledged to secure public deposits and for other purposes as required or permitted by law. During the three months ended March 31, 2023, no securities matured. During the three months ended March 31, 2023, one security was purchased for $2.7 million.

There were no sales of securities during the three months ended March 31, 2023 or 2022.

There were seven securities with a $2.4 million unrealized loss as of March 31, 2023. There were six securities in an unrealized loss position as of December 31, 2022. The following table shows the investments’ gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for which an allowance for credit losses has not been recorded:

	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(dollars in thousands; unaudited)
March 31, 2023
Available-for-sale
U.S. Treasury securities	$	—	$	—	$	97,699	$	2,275	$	97,699	$	2,275
U.S. Agency collateralized mortgage obligations	—		—		50		2		50		2
Total available-for-sale securities	—		—		97,749		2,277		97,749		2,277
Held-to-maturity
U.S. Agency residential mortgage-backed securities	2,672		7		925		101		3,597		108
Total investment securities	$	2,672	$	7	$	98,674	$	2,378	$	101,346	$	2,385

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Management has evaluated the above securities and does not believe that any individual unrealized loss as of March 31, 2023, will be recognized into income. Unrealized losses have not been recognized into income because management does not intend to sell and does not expect it will be required to sell the investments. The decline is largely due to changes in market conditions and interest rates, rather than credit quality. The fair value is expected to recover as the underlying securities in the portfolio approach maturity date and market conditions improve. Management believes there is a high probability of collecting all contractual amounts due, because the majority of the securities in the portfolio are backed by government agencies or government sponsored enterprises. However, a recovery in value may not occur for some time, if at all, and may be delayed for greater than the one year time horizon or perhaps even until maturity. Based on management's analysis no allowance for credit losses was required on these securities.

Note 4 - Loans and Allowance for Credit Losses

During the quarter ended March 31, 2023, $101.2 million in CCBX loans were transferred to loans held for sale, with $73.9 million in loans sold. A portion of these loans were sold at par and a portion were sold with a gain on sale of $123,000. As of March 31, 2023 $27.3 million in residential real estate secured lines of credit loans remain in loans held for sale. At December 31, 2022, there were no loans held for sale.

The Company adopted the CECL methodology for measuring credit losses as of January 1, 2023. All disclosures as of and for the three months ended March 31, 2023 are presented in accordance with Topic 326. The Company did not recast comparative financial periods and has presented those disclosures under previously applicable GAAP.

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The composition of the loan portfolio is as follows as of the periods indicated:

	March 31,
	2023
	(dollars in thousands; unaudited)
Community Bank
Commercial and industrial loans	$	158,873
Real estate loans:
Construction, land and land development loans	206,635
Residential real estate loans	206,140
Commercial real estate loans	1,102,771
Consumer and other loans:
Other consumer and other loans	2,860
Gross Community Bank loans receivable	1,677,279
CCBX
Commercial and industrial loans:
Capital call lines	$	118,796
All other commercial & industrial loans	48,669
Real estate loans:
Residential real estate loans	249,367
Consumer and other loans:
Credit cards	318,187
Other consumer and other loans	431,481
Gross CCBX loans receivable	1,166,500
Total gross loans receivable	2,843,779
Net deferred origination fees and premiums	(6,575)
Total loans receivable	$	2,837,204

	December 31,
	2022
	(dollars in thousands; unaudited)
Commercial and industrial loans	$	312,628
Real estate loans:
Construction, land, and land development	214,055
Residential real estate	449,157
Commercial real estate	1,048,752
Consumer and other loans	608,771
Gross loans receivable	2,633,363
Net deferred origination fees and premiums	(6,107)
Loans receivable	$	2,627,256

Accrued interest on loans, which is excluded from the balances in the preceding table of loans receivable, was $18.7 million and $17.0 million at March 31, 2023 and December 31, 2022, respectively, and was included in accrued interest receivable on the Company's consolidated balance sheets.

Included in commercial and industrial loans as of March 31, 2023 and December 31, 2022, is $118.8 million and $146.0 million, respectively in capital call lines, provided to venture capital firms through one of our BaaS clients. These loans are secured by the capital call rights and are individually underwritten to the Bank’s credit standards by our BaaS client and the underwriting is reviewed and approved by the Bank on every line. Also included in commercial and

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industrial loans are Paycheck Protection Program (“PPP”) loans of $3.8 million at March 31, 2023 and $4.7 million at December 31, 2022. PPP loans are 100% guaranteed by the Small Business Administration (“SBA”).

Consumer and other loans includes overdrafts of $3.9 million and $2.7 million at March 31, 2023 and December 31, 2022, respectively. Community bank overdrafts were $1.3 million and $94,000 at March 31, 2023 and December 31, 2022, respectively and CCBX overdrafts were $2.6 million at March 31, 2023 and December 31, 2022.

The Company has pledged loans totaling $910.5 million and $220.1 million at March 31, 2023 and December 31, 2022, respectively, for borrowing lines at the FHLB and FRB.

The balance of SBA and USDA loans and participations sold and serviced for others totaled $12.6 million and $14.3 million at March 31, 2023 and December 31, 2022, respectively.

The balance of Main Street Lending Program (“MSLP”) loans including participations to others with servicing retained totaled $58.0 million at March 31, 2023 and December 31, 2022, with $3.1 million in MSLP loans on the balance sheet and included in commercial and industrial loans at March 31, 2023, and December 31, 2022.

The Company, at times, purchases individual loans through the community bank at fair value as of the acquisition date. The Company held purchased loans with remaining balances that totaled $9.4 million and $9.6 million as of March 31, 2023 and December 31, 2022, respectively. Unamortized premiums on these loans totaled $164,000 and $167,000 as of March 31, 2023 and December 31, 2022, respectively, and are amortized into interest income over the life of the loans.

The Company has purchased participation loans with remaining balances totaling $62.5 million and $63.9 million as of March 31, 2023 and December 31, 2022, respectively. These loans are included in the applicable loan category depending upon the collateral and purpose of the individual loan.

The Company purchased loans from a CCBX partner, at par, through agreements with that CCBX partner, and those loans had a remaining balance of $180.9 million as of March 31, 2023 and $157.4 million as of December 31, 2022. As of March 31, 2023, $168.2 million is included in consumer and other loans and $12.7 million is included in commercial and industrial loans, compared to $146.1 million in consumer and other loans and $11.3 million in commercial and industrial loans as of December 31, 2022.

The following is a summary of the Company’s loan portfolio segments:

Commercial and industrial loans – Commercial and industrial loans are secured by business assets including inventory, receivables and machinery and equipment of businesses located generally in the Company’s primary market area and capital calls on venture and investment funds. Also included in commercial and industrial loans are $48.7 million in unsecured CCBX partner loans. Loan types include PPP loans, revolving lines of credit, term loans, and loans secured by liquid collateral such as cash deposits or marketable securities. Also included in commercial and industrial loans are loans to other financial institutions. Risk arises primarily due to the difference between expected and actual cash flows of the borrowers. In addition, the recoverability of the Company’s investment in these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans. The fair value of the collateral securing these loans may fluctuate as market conditions change. In the case of loans secured by accounts receivable, the recovery of the Company’s investment is dependent upon the borrower’s ability to collect amounts due from its customers.

As of March 31, 2023, $118.8 million in outstanding CCBX capital call lines are included in commercial and industrial loans compared to $146.0 million at December 31, 2022. Capital call lines are provided to venture capital firms. These loans are secured by the capital call rights and are individually underwritten to the Bank’s credit standards by our CCBX partner and the underwriting is reviewed by the Bank on every line/loan.

Construction, land and land development loans – The Company originates loans for the construction of 1-4 family, multifamily, and Commercial Real Estate (“CRE”) properties in the Company’s market area. Construction loans are considered to have higher risks due to construction completion and timing risk, the ultimate repayment being sensitive to interest rate changes, government regulation of real property and the availability of long-term financing. Additionally, economic conditions may impact the Company’s ability to recover its investment in construction loans, as adverse economic conditions may negatively impact the real estate market, which could affect the borrower’s ability to complete and sell the project. Additionally, the fair value of the underlying collateral may fluctuate as market conditions change. The Company occasionally originates land loans for the purpose of facilitating the ultimate construction of a home or

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commercial building. The primary risks include the borrower’s ability to pay and the inability of the Company to recover its investment due to a material decline in the fair value of the underlying collateral.

Residential real estate loans – Residential real estate includes various types of loans for which the Company holds real property as collateral. Included in this segment are first and second lien single family loans, occasionally purchased by the Company to diversify its loan portfolio, and rental portfolios secured by one-to-four family homes. The primary risks of residential real estate loans include the borrower’s inability to pay, material decreases in the value of the collateral, and significant increases in interest rates which may make the loan unprofitable.

As of March 31, 2023, $249.4 million in loans originated through CCBX partners are included in residential real estate loans, compared to $244.6 million at December 31, 2022. These home equity lines of credit are secured by residential real estate and are accessed by using a credit card. Home equity lines of credit are classified as residential real estate per regulatory guidelines.

Commercial real estate (includes owner occupied and nonowner occupied) loans – Commercial real estate loans include various types of loans for which the Company holds real property as collateral. We make commercial mortgage loans collateralized by owner-occupied and non-owner-occupied real estate, as well as multi-family residential loans. The primary risks of commercial real estate loans include the borrower’s inability to pay, material decreases in the value of the collateralized real estate and significant increases in interest rates, which may make the real estate loan unprofitable. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.

Consumer and other loans – The community bank originates a limited number of consumer loans, generally for banking customers only, which consist primarily of lines of credit, saving account secured loans, and auto loans. CCBX originates consumer loans including credit cards, consumer term loans and secured and unsecured lines of credit. This loan category includes overdrafts. Repayment of these loans is dependent on the borrower’s ability to pay and the fair value of the underlying collateral, if any.

As of March 31, 2023, $749.7 million in CCBX loans are included in consumer and other loans compared to $607.0 million at December 31, 2022.

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Past Due and Nonaccrual Loans

The following table illustrates an age analysis of past due loans as of the dates indicated:

	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days or More Past Due and Still Accruing
	(dollars in thousands; unaudited)
March 31, 2023
Community Bank
Commercial and industrial    loans	$	—	$	—	$	—	$	158,873	$	158,873	$	—
Real estate loans:
Construction, land and    land development	—		66		66		206,569		206,635		—
Residential real estate	195		—		195		205,945		206,140		—
Commercial real estate	92		6,901		6,993		1,095,778		1,102,771		—
Consumer and other loans	3		—		3		2,857		2,860		—
Total community bank	$	290	$	6,967	$	7,257	$	1,670,022	$	1,677,279	$	—
CCBX
Commercial and industrial loans:
Capital call lines	$	—	$	—	$	—	$	118,796	$	118,796	$	—
All other commercial &    industrial loans	589		187		776		47,893		48,669		187
Real estate loans:
Residential real    estate loans	2,582		946		3,528		$	245,839	$	249,367	946
Consumer and other loans:
Credit cards	15,273		17,772		33,045		$	285,142	$	318,187	17,772
Other consumer and    other loans	19,494		5,657		25,151		406,330		431,481		5,657
Total CCBX	$	37,938	$	24,562	$	62,500	$	1,104,000	$	1,166,500	$	24,562
Total community bank    and CCBX	$	38,228	$	31,529	$	69,757	$	2,774,022	2,843,779		$	24,562
Less net deferred    origination fees and    premiums									(6,575)
Loans receivable									$	2,837,204

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	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days or More Past Due and Still Accruing
	(dollars in thousands; unaudited)
December 31, 2022
Commercial and industrial loans	$	393	$	486	$	879	$	311,749	$	312,628	$	404
Real estate loans:
Construction, land and land development	—		66		66		213,989		214,055		—
Residential real estate	1,016		876		1,892		447,265		449,157		876
Commercial real estate	95		6,901		6,996		1,041,756		1,048,752		—
Consumer and other loans	37,932		24,815		62,747		546,024		608,771		24,815
	$	39,436	$	33,144	$	72,580	$	2,560,783	$	2,633,363	$	26,095
Less net deferred origination fees and premiums									(6,107)
Loans receivable									$	2,627,256

There were $24.6 million in loans past due 90 days or more and still accruing interest as of March 31, 2023, and $26.1 million as of December 31, 2022. This is attributed to loans originated through CCBX lending partners which continue to accrue interest up to 180 days past due. As of March 31, 2023 and December 31, 2022, $23.6 million and $25.5 million, respectively, of loans past due 90 days or more are covered by credit enhancements provided by our CCBX partners that protect the Bank against credit losses.

The accrual of interest on community bank loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due or when they are 90 days past due as to either principal or interest, unless they are well secured and in the process of collection.  Installment/closed-end, and revolving/open-end consumer loans originated through CCBX lending partners will continue to accrue interest until 120 and 180 days past due, respectively and an allowance is recorded through provision expense for these expected losses. For installment/closed-end and revolving/open-end consumer loans originated through CCBX lending partners with balances outstanding beyond 120 days and 180 days past due, respectively, principal and capitalized interest outstanding is charged off against the allowance and accrued interest outstanding is reversed against interest income. These consumer loans are reported as nonperforming/substandard, 90 days or more days past due and still accruing.

When loans are placed on nonaccrual status, all accrued interest is reversed from current period earnings. Payments received on nonaccrual loans are generally applied as a reduction to the loan principal balance. If the likelihood of further loss is removed, the Company will recognize interest on a cash basis only. Loans may be returned to accruing status if the Company believes that all remaining principal and interest is fully collectible and there has been at least six months of sustained repayment performance since the loan was placed on nonaccrual.

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An analysis of nonaccrual loans by category consisted of the following at the periods indicated:

	March 31,				December 31,
	2023				2022
	Total Nonaccrual		Nonaccrual with No ACL		Total Nonaccrual
	(dollars in thousands; unaudited)
Community Bank
Commercial and industrial loans	$	15	$	—	$	113
Real estate loans:
Construction, land and land development	66		66		66
Commercial real estate	6,901		6,901		6,901
Consumer and other loans	—		—		—
Total nonaccrual loans	$	6,982	$	6,967	$	7,080

In some circumstances, the Company modifies loans in response to borrower financial difficulty, and generally provides for a temporary modification of loan repayment terms. In order for a modified loan to be considered for accrual status, the loan’s collateral coverage generally will be greater than or equal to 100% of the loan balance, the loan is current on payments, and the borrower must either prefund an interest reserve or demonstrate the ability to make payments from a verified source of cash flow for an extended period of time, usually at least six months in duration.

No loans were modified for borrowers experiencing financial difficulty in the three months ended March 31, 2023 and 2022.

Credit Quality and Credit Risk

Federal regulations require that the Company periodically evaluate the risks inherent in its loan portfolio. In addition, the Company’s regulatory agencies have authority to identify problem loans and, if appropriate, require them to be reclassified. The Company establishes loan grades for loans at the origination of the loan. Changes to community bank loan grades are considered at the time new information about the performance of a loan becomes available, including the receipt of updated financial information from the borrower and after loan reviews. For consumer loans, the Bank follows the FDIC’s Uniform Retail Credit Classification and Account Management Policy for subsequent classification in the event of payment delinquencies or default. Typically, an individual loan grade will not be changed from the prior period unless there is a specific indication of credit deterioration or improvement. Credit deterioration is evidenced by delinquency, direct communications with the borrower or other borrower information that becomes known to management. Credit improvements are evidenced by known facts regarding the borrower or the collateral property. The Company classifies some loans as Watch or Other Loans Especially Mentioned (“OLEM”). Loans classified as Watch are performing assets but have elements of risk that require more monitoring than other performing loans and are reported in the OLEM column in the following table. Loans classified as OLEM are assets that continue to perform but have shown deterioration in credit quality and require close monitoring. There are three classifications for problem loans: Substandard, Doubtful, and Loss. Substandard loans have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Revolving (open-ended loans, such as credit cards) and installment (closed end) consumer loans originated through CCBX partners continue to accrue interest until they are charged-off at 120 days past due for installment loans (primarily unsecured loans to consumers) and 180 days past due for revolving loans (primarily credit cards) and are classified as substandard. Doubtful loans have the weaknesses of loans classified as Substandard, with additional characteristics that suggest the weaknesses make collection or recovery in full after liquidation of collateral questionable on the basis of currently existing facts, conditions, and values. There is a high possibility of loss in loans classified as Doubtful. A loan classified as Loss is considered uncollectible and of such little value that continued classification of the credit as a loan is not warranted. If a loan or a portion thereof is classified as Loss, it must be charged-off, meaning the amount of the loss is charged against the allowance for credit losses, thereby reducing that reserve.

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Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. As of March 31, 2023 and December 31, 2022, based on the most recent analysis performed, the risk category of community bank loans by year of origination is as follows:

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
As of March 31, 2023
Commercial and industrial loans
Risk rating
Pass	$	7,788	$	60,221	$	15,938	$	11,172	$	15,299	$	2,414	$	38,622	$	1,370	$	152,824
Other Loan Especially Mentioned	—		—		1,763		1,411		194		—		2,618		—		5,986
Substandard	—		—		—		—		—		63		—		—		63
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial    loans - All other commercial and    industrial loans	$	7,788	$	60,221	$	17,701	$	12,583	$	15,493	$	2,477	$	41,240	$	1,370	$	158,873
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	46	$	—	$	—	$	46
Real estate loans - Construction, land and land development loans
Risk rating
Pass	$	5,338	$	77,892	$	111,263	$	3,338	$	937	$	1,665	$	663	$	—	$	201,096
Other Loan Especially Mentioned	—		—		3,148		2,325		—		—		—		—		5,473
Substandard	—		—		—		—		—		66		—		—		66
Doubtful	—		—		—		—		—		—		—		—		—
Total real estate loans -    Construction, land and land    development loans	$	5,338	$	77,892	$	114,411	$	5,663	$	937	$	1,731	$	663	$	—	$	206,635
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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Table of Contents,

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
Real estate loans - Residential real estate loans
Risk rating
Pass	$	2,208	$	45,065	$	41,615	$	36,274	$	32,820	$	27,109	$	20,960	$	—	$	206,051
Other Loan Especially Mentioned	—		—		—		43		—		46		—		—		89
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total real estate loans -    Residential real estate loans	$	2,208	$	45,065	$	41,615	$	36,317	$	32,820	$	27,155	$	20,960	$	—	$	206,140
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate loans - Commercial real estate loans
Risk rating
Pass	$	55,067	$	273,374	$	206,504	$	151,862	$	141,706	$	244,305	$	7,426	$	1,764	$	1,082,008
Other Loan Especially Mentioned	—		3,303		2,211		—		514		7,593		—		—		13,621
Substandard	—		—		—		92		6,901		—		149		—		7,142
Doubtful	—		—		—		—		—		—		—		—		—
Total real estate loans -    Commercial real estate loans	$	55,067	$	276,677	$	208,715	$	151,954	$	149,121	$	251,898	$	7,575	$	1,764	$	1,102,771
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

24

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	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
Consumer and other loans - Other consumer and other loans
Risk rating
Pass	$	1,362	$	313	$	18	$	708	$	60	$	241	$	158	$	—	$	2,860
Other Loan Especially Mentioned	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer and other    loans - Other consumer and    other loans	$	1,362	$	313	$	18	$	708	$	60	$	241	$	158	$	—	$	2,860
Current period gross write-offs	$	4	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	4
Total community bank loans
Risk rating
Pass	$	71,763	$	456,865	$	375,338	$	203,354	$	190,822	$	275,734	$	67,829	$	3,134	$	1,644,839
Other Loan Especially Mentioned	—		3,303		7,122		3,779		708		7,639		2,618		—		25,169
Substandard	—		—		—		92		6,901		129		149		—		7,271
Doubtful	—		—		—		—		—		—		—		—		—
Total community bank loans	$	71,763	$	460,168	$	382,460	$	207,225	$	198,431	$	283,502	$	70,596	$	3,134	$	1,677,279
Current period gross write-offs	$	4	$	—	$	—	$	—	$	—	$	46	$	—	$	—	$	50

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The Company considers the performance of the CCBX loan portfolio and its impact on the allowance for credit losses. For CCBX loans, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the loans in CCBX based on payment activity:

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
As of March 31, 2023
Commercial and industrial loans - Capital call lines
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	118,796	$	—	$	118,796
Nonperforming	—		—		—		—		—		—		—		—		—
Total commercial and industrial    loans - Capital call lines	$	—	$	—	$	—	$	—	$	—	$	—	$	118,796	$	—	$	118,796
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial loans - All other commercial and industrial loans
Payment performance
Performing	$	31,726	$	15,541	$	74	$	34	$	—	$	—	$	1,107	$	—	$	48,482
Nonperforming	—		151		—		—		—		—		36		—		187
Total commercial and industrial    loans - All other commercial and    industrial loans	$	31,726	$	15,692	$	74	$	34	$	—	$	—	$	1,143	$	—	$	48,669
Current period gross write-offs	$	—	$	718	$	12	$	—	$	—	$	—	$	—	$	—	$	730
Real estate loans - Residential real estate loans
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	141,079	$	107,342	$	248,421
Nonperforming	—		—		—		—		—		—		946		—		946
Total real estate loans -    Residential real estate loans	$	—	$	—	$	—	$	—	$	—	$	—	$	142,025	$	107,342	$	249,367
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	737	$	—	$	737

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	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
Consumer and other loans - Credit cards
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	300,415	$	—	$	300,415
Nonperforming	—		—		—		—		—		—		17,772		—		17,772
Total consumer and other    loans - Credit cards	$	—	$	—	$	—	$	—	$	—	$	—	$	318,187	$	—	$	318,187
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	8,481	$	—	$	8,481
Consumer and other loans - Other consumer and other loans
Payment performance
Performing	$	191,238	$	191,628	$	29,230	$	313	$	1,297	$	591	$	11,527	$	—	$	425,824
Nonperforming	—		3,413		809		—		—		18		1,417		—		5,657
Total consumer and other    loans - Other consumer and    other loans	$	191,238	$	195,041	$	30,039	$	313	$	1,297	$	609	$	12,944	$	—	$	431,481
Current period gross write-offs	$	—	$	16,723	$	5,361	$	47	$	117	$	93	$	1,828	$	—	$	24,169
Total CCBX loans
Payment performance
Performing	$	222,964	$	207,169	$	29,304	$	347	$	1,297	$	591	$	572,924	$	107,342	$	1,141,938
Nonperforming	—		3,564		809		—		—		18		20,171		—		24,562
Total CCBX loans	$	222,964	$	210,733	$	30,113	$	347	$	1,297	$	609	$	593,095	$	107,342	$	1,166,500
Current period gross write-offs	$	—	$	17,441	$	5,373	$	47	$	117	$	93	$	11,046	$	—	$	34,117

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Loans by credit quality risk rating are as follows as of the periods indicated:

	Pass		Other Loans Especially Mentioned		Sub- Standard		Doubtful		Total
	(dollars in thousands; unaudited)
December 31, 2022
Commercial and industrial loans	$	304,840	$	7,219	$	569	$	—	$	312,628
Real estate loans:
Construction, land, and land development	206,304		7,685		66		—		214,055
Residential real estate	448,185		96		876		—		449,157
Commercial real estate	1,030,650		11,201		6,901		—		1,048,752
Consumer and other loans	583,956		—		24,815		—		608,771
	$	2,573,935	$	26,201	$	33,227	$	—	2,633,363
Less net deferred origination fees									(6,107)
Loans receivable									$	2,627,256

Allowance for Credit Losses ("ACL")

On January 1, 2023, the Company adopted ASU 2016-13, which replaces the incurred loss methodology with an expected loss methodology that is referred to as ACL. See Note 1, Description of Business and Summary of Significant Accounting Policies. As a result of implementing CECL, there was a one-time adjustment to the 2023 opening allowance balance of $3.9 million.

CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing most losses. In accordance with accounting guidance, we estimate and record a provision for expected losses for these CCBX loans and reclassified negative deposit accounts. When the provision for CCBX credit losses and provision for unfunded commitments are recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements). Expected losses are recorded in the allowance for credit losses. The credit enhancement asset is relieved when credit enhancement payments and recoveries are received from the CCBX partner. CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses by absorbing incurred credit and fraud losses. If the partner is unable to fulfill their contracted obligations then the Bank could be exposed to additional credit losses. In accordance with the program agreement for one CCBX partner, the Company is responsible for credit losses on approximately 10% of a $137.4 million loan portfolio. At March 31, 2023, 10% of this portfolio represented $13.9 million in loans. The partner is responsible for credit losses on approximately 90% of this portfolio and for fraud losses on 100% of this portfolio. The Company earns 100% of the revenue on the aforementioned $13.9 million of loans.

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The following tables summarize the allocation of the ACL, as well as the activity in the ACL attributed to various segments in the loan portfolio, as of and for the three months ended March 31, 2023 and the allocation and activity of the loans and allowance for loan losses ("ALLL ") attributed to the various segments in the loan portfolio for the three months ended March 31, 2022:

	Commercial and Industrial		Construction, Land, and Land Development		Residential Real Estate		Commercial Real Estate		Consumer and Other		Unallocated		Total
	(dollars in thousands; unaudited)
Three Months Ended March 31, 2023
ACL balance, December 31, 2022	$	4,831	$	7,425	$	4,142	$	5,470	$	50,996	$	1,165	$	74,029
Impact of adopting CECL (ASC 326)	1,428		(1,589)		1,623		1,240		2,315		(1,165)		$	3,852
Provision for credit losses or (recapture)	3,165		(92)		1,958		796		37,717		—		43,544
	9,424		5,744		7,723		7,506		91,028		—		121,425
Loans charged-off	(776)		—		(737)		—		(32,654)		—		(34,167)
Recoveries of loans previously charged-off	3		—		—		—		1,862		—		1,865
Net (charge-offs) recoveries	(773)		—		(737)		—		(30,792)		—		(32,302)
ACL balance, March 31, 2023	$	8,651	$	5,744	$	6,986	$	7,506	$	60,236	$	—	$	89,123
Three Months Ended March 31, 2022
ALLL balance, December 31, 2021	$	3,221	$	6,984	$	4,598	$	6,590	$	7,092	$	147	$	28,632
Provision for loan losses or (recapture)	296		608		1,160		(1,273)		10,823		1,328		12,942
	3,517		7,592		5,758		5,317		17,915		1,475		41,574
Loans charged-off	(5)		—		—		—		(2,803)		—		(2,808)
Recoveries of loans previously charged-off	2		—		—		—		2		—		4
Net (charge-offs) recoveries	(3)		—		—		—		(2,801)		—		(2,804)
Balance, March 31, 2022	$	3,514	$	7,592	$	5,758	$	5,317	$	15,114	$	1,475	$	38,770

The following table summarizes the allocation of the allowance for loan losses attributed to various segments in the loan portfolio as of December 31, 2022.

	Commercial and Industrial		Construction, Land, and Land Development		Residential Real Estate		Commercial Real Estate		Consumer and Other		Unallocated		Total
	(dollars in thousands; unaudited)
As of December 31, 2022
ALLL amounts allocated to
Individually evaluated for impairment	$	95	$	—	$	—	$	—	$	—	$	—	$	95
Collectively evaluated for impairment	4,736		7,425		4,142		5,470		50,996		1,165		73,934
ALLL balance, December 31, 2022	$	4,831	$	7,425	$	4,142	$	5,470	$	50,996	$	1,165	$	74,029
Loans individually evaluated for impairment	$	113	$	66	$	—	$	6,901	$	—			$	7,080
Loans collectively evaluated for impairment	312,515		213,989		449,157		1,041,851		608,771				2,626,283
Loan balance, December 31, 2022	$	312,628	$	214,055	$	449,157	$	1,048,752	$	608,771			$	2,633,363

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The following table presents the collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:

	Real Estate		Business Assets		Total		ACL
	(dollars in thousands; unaudited)
March 31, 2023
Commercial and industrial loans	$	—	$	15	$	15	$	6
Real estate loans:
Construction, land and land development	66		—		66		—
Residential real estate	—		—		—		—
Commercial real estate	6,901		—		6,901		—
Total	$	6,967	$	15	$	6,982	$	6

The following table is a summary of information pertaining to impaired loans as of the period indicated. Loans originated through CCBX partners are reported using pool accounting and are not subject to impairment analysis, therefore CCBX loans are not included in this table.

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
	(dollars in thousands; unaudited)
December 31, 2022
Commercial and industrial loans	$	124	$	—	$	113	$	113	$	95
Real estate loans:
Construction, land and land development	67		66		—		66		—
Commercial real estate	6,901		6,901		—		6,901		—
Total	$	7,092	$	6,967	$	113	$	7,080	$	95

The following tables summarize the Company’s average recorded investment and interest income recognized on impaired loans by loan class for the period indicated:

	Three Months Ended
	March 31, 2022
	Average Recorded Investment		Interest Income Recognized
	(dollars in thousands; unaudited)
Commercial and industrial loans	$	148	$	—
Real estate loans:
Construction, land and land development	—		—
Residential real estate	55		—
Commercial real estate	—		—
Total	$	203	$	—

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Note 5 - Deposits

The composition of consolidated deposits consisted of the following at the periods indicated:

	March 31, 2023		December 31, 2022
	(dollars in thousands; unaudited)
Demand, noninterest bearing	$	761,800	$	775,012
NOW and money market	2,207,121		1,804,399
Savings	99,241		107,117
Total core deposits	3,068,162		2,686,528
Brokered deposits	1		101,546
Time deposits less than $250,000	19,386		21,942
Time deposits $250,000 and over	7,674		7,505
Total deposits	$	3,095,223	$	2,817,521

The following table presents the maturity distribution of time deposits as of March 31, 2023:

(dollars in thousands; unaudited)
Twelve months	$	21,548
One to two years	2,992
Two to three years	1,527
Three to four years	389
Four to five years	547
Thereafter	57
	$	27,060

Included in total deposits is $94.3 million in IntraFi network NOW and money market sweep accounts as of March 31, 2023, which provides our customers with fully insured deposits through a sweep to other financial institutions.

Note 6 - Leases

The Company has committed to rent premises used in business operations under non-cancelable operating leases and determines if an arrangement meets the definition of a lease upon inception.

Operating lease right-of-use (“ROU”) assets represent a right to use an underlying asset for the contractual lease term. Operating lease liabilities represent an obligation to make lease payments arising from the lease. An operating lease ROU asset and operating lease liability will be recognized for any new operating leases at the commencement of the new lease.

The Company’s leases do not provide an implicit interest rate, therefore the Company used its incremental collateralized borrowing rates commensurate with the underlying lease terms to determine the present value of operating lease liabilities. The weighted average discount rate as of March 31, 2023 was 3.45%.

The Company’s operating lease agreements contain both lease and non-lease components, which are generally accounted for separately. The Company’s lease agreements do not contain any residual value guarantees.

Operating leases with terms of 12 months or less are not included in ROU assets and operating lease liabilities recorded in the Company’s consolidated balance sheets. Operating lease terms include options to extend when it is reasonably certain that the Company will exercise such options, determined on a lease-by-lease basis. At March 31, 2023, lease expiration dates ranged from 11 months to 21.9 years, with additional renewal options on certain leases typically ranging from 5 to 10 years. At March 31, 2023, the weighted average remaining lease term inclusive of renewal options that the Company is reasonably certain to renew for the Company’s operating leases was 8.1 years.

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Rental expense for operating leases is recognized on a straight-line basis over the lease term and amounted to $358,000 three months ended March 31, 2023, and $346,000 for the three months ended March 31, 2022. Variable lease components, such as inflation adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

The following table presents the minimum annual lease payments under the terms of these leases, inclusive of renewal options that the Company is reasonably certain to renew, at March 31, 2023:

(dollars in thousands; unaudited)	March 31, 2023
April 1 to December 31, 2023	$	987
2024	894
2025	715
2026	719
2027	667
2028 and thereafter	1,823
Total lease payments	5,805
Less: amounts representing interest	783
Present value of lease liabilities	$	5,022

The following table presents the components of total lease expense and operating cash flows for the three months ended March 31, 2023 and 2022:

	Three Months Ended
	March 31, 2023		March 31, 2022
	(dollars in thousands; unaudited)
Lease expense:
Operating lease expense	$	321	$	320
Variable lease expense	52		41
Total lease expense (1)	$	373	$	361
Cash paid:
Cash paid reducing operating lease liabilities	$	379	$	358

(1)Included in net occupancy expense in the Condensed Consolidated Statements of Income (unaudited).

Note 7 - Stock-Based Compensation -

Stock Options and Restricted Stock

The 2018 Coastal Financial Corporation Omnibus Plan (2018 Plan) authorizes the Company to grant awards, including but not limited to, stock options, restricted stock units, and restricted stock awards, to eligible employees, directors or individuals that provide service to the Company, up to an aggregate of 500,000 shares of common stock. On May 24, 2021, the Company’s shareholders approved the First Amendment to the 2018 Plan, which increased the authorized plan shares by 600,000. The 2018 Plan replaces both the 2006 Plan and the Directors’ Stock Bonus Plan (2006 Plan). Existing awards will vest under the terms granted and no further awards will be granted under these prior plans. Shares available to be granted under the 2018 plan were 452,780 at March 31, 2023.

Stock Option Awards

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. Expected volatilities are based on historical volatility of the Company’s stock and other factors. The Company uses the vesting term and contractual life to determine the expected life. The risk-free interest rate for periods within the contractual

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life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation expense related to unvested stock option awards is reversed at date of forfeiture.

There were no new stock options granted in the three months ended March 31, 2023 and 2022.

A summary of stock option activity under the 2018 Plan and 2006 Plan during the three months ended March 31, 2023:

Options	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Outstanding at December 31, 2022	438,103	$	8.79	4.1	$	16,968
Granted	—	—
Exercised	(77,984)	7.38
Expired	—	—
Forfeited	—	—
Outstanding at March 31, 2023	360,119	$	9.10	4.2	$	9,692
Vested or expected to vest at March 31, 2023	360,119	$	9.10	4.2	$	9,692
Exercisable at March 31, 2023	174,590	$	8.65	3.9	$	4,776

The total or aggregate intrinsic value (which is the amount by which the stock price exceeds the exercise price) of options exercised during the three months ended March 31, 2023 was $2.3 million. The total or aggregate intrinsic value of options exercised during the three months ended March 31, 2022 was $1.1 million.

As of March 31, 2023, there was $982,000 of total unrecognized compensation cost related to nonvested stock options granted under the 2018 Plan and 2006 Plan. Total unrecognized compensation costs are adjusted for unvested forfeitures. The Company expects to recognize that cost over a remaining weighted-average period of approximately 4.3 years. Compensation expense recorded related to stock options was $140,000 for the three months ended March 31, 2023 and $120,000 for the three months ended March 31, 2022.

Restricted Stock Units

In the first quarter of 2023, the Company granted 73,611 restricted stock units ("RSUs") under the 2018 Plan to employees, which vest ratably over 4 years and 1,084 restricted stock units which vest ratably over 5 years.

RSUs provide for an interest in Company common stock to the recipient, the underlying stock is not issued until certain conditions are met. Vesting requirements include time-based, performance-based, or market-based conditions. Recipients of RSUs do not pay any cash consideration to the Company for the units and the holders of the restricted units do not have voting rights. The fair value of time-based and performance-based units is equal to the fair market value of the Company’s common stock on the grant date. The fair value of market-based units is estimated on the grant date using the Monte Carlo simulation model. Compensation expense is recognized over the vesting period that the awards are based. RSUs are nonparticipating securities.

As of March 31, 2023, there was $11.2 million of total unrecognized compensation cost related to nonvested RSUs. The Company expects to recognize that cost over the remaining weighted-average vesting period of approximately 4.4 years. Compensation expense recorded related to RSUs was $812,000 for the three months ended March 31, 2023 and $374,000 for the three months ended March 31, 2022.

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A summary of the Company’s nonvested RSUs at March 31, 2023 and changes during the three month period is presented below:

Nonvested shares - RSUs	Shares	Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Nonvested shares at December 31, 2022	380,151	$	28.61	$	7,187
Granted	74,695	$	43.44
Forfeited	(4,653)	$	38.88
Vested	(42,402)	$	30.01
Nonvested shares at March 31, 2023	407,791	$	31.06	$	2,017

Restricted Stock Awards

Employees

There were no new restricted stock awards granted in the three months ended March 31, 2023. The fair value of restricted stock awards is equal to the fair value of the Company’s stock at the date of grant. Compensation expense is recognized over the vesting period that the awards are based. Restricted stock awards are participating securities.

As of March 31, 2023, there was $43,000 of total unrecognized compensation cost related to nonvested restricted stock awards. The Company expects to recognize that cost over the remaining weighted-average vesting period of approximately 4.9 years. Compensation expense recorded related to restricted stock awards was $2,000 for the three months ended March 31, 2023 and March 31, 2022.

Director’s Stock Compensation

Under the 2018 Plan, eligible directors are granted stock with a total market value of $35,000, and the Board Chair is granted stock with a total market value of $55,000. Chairs of the Audit, Compensation and Non-Financial Risk Committees will receive additional stock with a market value of $2,500 for each committee chaired. Stock is granted as of each annual meeting date and will cliff vest one day prior to the next annual meeting date. During the vesting period, the grants are considered participating securities.

As of March 31, 2023, there was $54,000 of total unrecognized compensation expense related to director restricted stock awards which the Company expects to recognize over the remaining average vesting period of approximately two months. Director compensation expense recorded related to the 2018 Plan totaled $96,000 for the three months ended March 31, 2023 and $38,000 for the three months ended March 31, 2022.

A summary of the Company’s nonvested shares at March 31, 2023 and changes during the three-month period is presented below:

Nonvested shares - RSAs	Shares	Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Nonvested shares at December 31, 2022	13,396	$	32.94	$	195
Granted	—	$	—
Forfeited	—	$	—
Vested	(500)	$	17.81
Nonvested shares at March 31, 2023	12,896	$	33.52	$	32

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Note 8 - Fair Value Measurements

The following tables present estimated fair values of the Company’s financial instruments as of the period indicated, whether or not recognized or recorded in the consolidated balance sheets at the period indicated:

	March 31, 2023				Fair Value Measurements Using
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands; unaudited)
Financial assets
Cash and due from banks	$	37,676	$	37,676	$	37,676	$	—	$	—
Interest earning deposits with other banks	356,240		356,240		356,240		—		—
Investment securities	101,704		101,596		97,699		3,896		—
Other investments	11,346		11,346		—		8,774		2,572
Loans held for sale	27,292		27,292		—		27,292
Loans receivable	2,837,204		2,791,704		—		—		2,791,704
Accrued interest receivable	19,321		19,321		—		19,321		—
Financial liabilities
Deposits	$	3,095,223	3,094,407		$	—	$	3,094,407	$	—
Subordinated debt	44,031		43,674		—		43,674		—
Junior subordinated debentures	3,588		3,480		—		3,480		—
Accrued interest payable	874		874		—		874		—

	December 31, 2022				Fair Value Measurements Using
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands; unaudited)
Financial assets
Cash and due from banks	$	32,722	$	32,722	$	32,722	$	—	$	—
Interest earning deposits with other banks	309,417		309,417		309,417		—		—
Investment securities	98,353		98,233		97,015		1,218		—
Other investments	10,555		10,555		—		7,983		2,572
Loans receivable, net	2,627,256		2,580,183		—		—		2,580,183
Accrued interest receivable	17,815		17,815		—		17,815		—
Financial liabilities
Deposits	$	2,817,521	$	2,816,602	$	—	$	2,816,602	$	—
Subordinated debt	43,999		42,743		—		42,743		—
Junior subordinated debentures	3,588		3,484		—		3,484		—
Accrued interest payable	684		684		—		684		—

The Company measures and discloses certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (that is, not a forced liquidation or distressed sale). GAAP establishes a consistent framework for measuring fair value and disclosure requirements about fair value measurements. Among other things, the accounting standard requires the reporting entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s estimates for market assumptions. These two types of inputs create the following fair value hierarchy:

•Level 1 – Quoted prices in active markets for identical instruments. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A

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quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

•Level 2 – Observable inputs other than Level 1 including quoted prices in active markets for similar instruments, quoted prices in less active markets for identical or similar instruments, or other observable inputs that can be corroborated by observable market data.

•Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs from nonbinding single dealer quotes not corroborated by observable market data.

The estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize at a future date. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. In addition, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates that must be made given the absence of active secondary markets for certain financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values.

Items measured at fair value on a recurring basis – The following fair value hierarchy table presents information about the Company’s assets that are measured at fair value on a recurring basis at the dates indicated:

	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in thousands; unaudited)
March 31, 2023
Available-for-sale
U.S. Treasury securities	$	97,699	$	—	$	—	$	97,699
U.S. Agency collateralized mortgage obligations	—		50		—		50
Municipals	—		250		—		250
	$	97,699	$	300	$	—	$	97,999
December 31, 2022
Available-for-sale
U.S. Treasury securities	$	97,015	$	—	$	—	$	97,015
U.S. Agency collateralized mortgage obligations	—		51		—		51
U.S. Agency residential mortgage-backed securities	—		1		—		1
Municipals	—		250		—		250
	$	97,015	$	302	$	—	$	97,317

The following methods were used to estimate the fair value of the class of financial instruments above:

Investment securities - The fair value of securities is based on quoted market prices, pricing models, quoted prices of similar securities, independent pricing sources, and discounted cash flows.

Limitations: The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2023 and December 31, 2022. The factors used in the fair values estimates are subject to change subsequent to the dates the fair value estimates are completed, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

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Items measured at fair value on a nonrecurring basis – The following table presents financial assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy of the fair value measurements for those assets at the dates indicated:

	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in thousands; unaudited)
March 31, 2023
Equity securities	$	—	$	—	$	2,572	$	2,572
Total	$	—	$	—	$	2,572	$	2,572
December 31, 2022
Impaired loans	$	—	$	—	$	7,080	$	7,080
Equity securities	—		—		2,572		2,572
Total	$	—	$	—	$	9,652	$	9,652

The amounts disclosed above represent the fair values at the time the nonrecurring fair value measurements were made, and not necessarily the fair value as of the dates reported on.

Impaired loans - A loan is considered impaired when it is expected that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. Impairment is measured based on the fair value of the underlying collateral or the discounted cash expected future cash flows. Subsequent changes in the value of impaired loans are included within the provision for credit losses - loans in the same manner in which impairment initially was recognized or as a reduction in the provision that would otherwise be reported. Impaired loans are evaluated quarterly to determine if valuation adjustments should be recorded. The need for valuation adjustments arises when observable market prices or current appraised values of collateral indicate a shortfall in collateral value compared to current carrying values of the related loan. If the Company determines that the value of the impaired loan is less than the carrying value of the loan, the Company either establishes an impairment reserve as a specific component of the allowance for credit losses or charges off the impairment amount. These valuation adjustments are considered nonrecurring fair value adjustments.

Equity securities – The Company measures equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer, with price changes recognized in earnings.

Assets measured at fair value using significant unobservable inputs (Level 3)

The following table presents the carrying value of equity securities without readily determinable fair values, as of March 31, 2023, with adjustments recorded during the periods presented for those securities with observable price changes, if applicable. These equity securities are included in other investments on the balance sheet.

	For the Three Months Ended March 31,
(dollars in thousands; unaudited)	2023		2022
Carrying value, beginning of period	$	2,572	$	2,322
Purchases	—		350
Observable price change	—		—
Carrying value, end of period	$	2,572	$	2,672

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The following table provides a description of the valuation technique, unobservable inputs, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a nonrecurring basis at the date indicated:

(unaudited)	Valuation Technique	Unobservable Inputs	December 31, 2022 Weighted Average Rate
Impaired loans	Collateral valuations	Discount to appraised value	8.0%

Note 9 - Earnings Per Common Share

The following is a computation of basic and diluted earnings per common share at the periods indicated:

	Three Months Ended
	March 31, 2023		March 31, 2022
	(dollars in thousands, except earnings per share data; unaudited)
Net Income	$	12,391	$	6,230
Basic weighted average number common shares outstanding	13,196,960		12,898,746
Dilutive effect of equity-based awards	412,531		576,591
Diluted weighted average number common shares outstanding	13,609,491		13,475,337
Basic earnings per share	$	0.94	$	0.48
Diluted earnings per share	$	0.91	$	0.46
Antidilutive stock options and restricted stock outstanding	124,714		154,871

Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings, however the difference in the two-class method was not significant.

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Note 10 – Segment Reporting

As defined in ASC 280, Segment Reporting, an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. We evaluate performance based on an internal performance measurement accounting system, which provides line of business results. This system uses various techniques to assign balance sheet and income statement amounts to the business segments, including allocations of income and expense. A primary objective of this measurement system and related internal financial reporting practices are to produce consistent results that reflect the underlying financial impact of the segments on the Company and to provide a basis of support for strategic decision making. The accounting policies applicable to our segments are those that apply to our preparation of the accompanying Consolidated Financial Statements. Based on these criteria, we have identified three segments: the community bank, CCBX and treasury & administration. The community bank segment includes all community banking activities, with a primary focus of the community bank is on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application. We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County). The CCBX segment provides banking as a service (“BaaS”) that allows our broker-dealer and digital financial service partners to offer their customers banking services. The CCBX segment has 25 partners as of March 31, 2023. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments.

The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. The Company continues to evaluate its methodology on allocating items to the Company’s various segments to support strategic business decisions by the Company’s executive leadership. Income and expenses that are specific to a segment are directly posted to each segment. Additionally, certain indirect expenses are allocated to each segment utilizing various metrics, such as number of employees, utilization of space, and allocations based on loan and deposit balances. We have implemented a transfer pricing process that credits or charges the community bank and CCBX segments with intrabank interest income or expense for the difference in average loans and average deposits, with the treasury & administration segment as the offset for those entries.

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Summarized financial information concerning the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables for the periods indicated:

	March 31, 2023								December 31, 2022
	Community Bank		CCBX		Treasury & Administration		Total		Community Bank		CCBX		Treasury & Administration		Total
Assets	(dollars in thousands; unaudited)
Cash and Due from Banks	$	4,485	$	12,223	$	377,208	$	393,916	$	4,603	$	12,899	$	324,637	$	342,139
Intrabank assets	—		356,905		(356,905)		—		—		254,096		(254,096)		—
Securities	—		—		101,704		101,704		—		—		98,353		98,353
Loans held for sale	—		27,292		—		27,292		—		—		—		—
Total loans receivable	1,671,014		1,166,190		—		2,837,204		1,614,752		1,012,504		—		2,627,256
Allowance for credit losses	(20,708)		(68,415)		—		(89,123)		(20,636)		(53,393)		—		(74,029)
All other assets	25,652		103,403		50,985		180,040		25,508		76,111		49,129		150,748
Total assets	$	1,680,443	$	1,597,598	$	172,992	$	3,451,033	$	1,624,227	$	1,302,217	$	218,023	$	3,144,467
Liabilities
Total deposits	$	1,531,391	$	1,563,832	$	—	$	3,095,223	$	1,538,218	$	1,279,303	$	—	$	2,817,521
Total borrowings	—		—		47,619		47,619		—		—		47,587		47,587
Intrabank liabilities	143,279		—		(143,279)		—		80,392		—		(80,392)		—
All other liabilities	5,773		33,766		9,889		49,428		5,617		22,914		7,334		35,865
Total liabilities	$	1,680,443	$	1,597,598	$	(85,771)	$	3,192,270	$	1,624,227	$	1,302,217	$	(25,471)	$	2,900,973

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	Three months ended March 31, 2023								Three months ended March 31, 2022
	Community Bank		CCBX		Treasury & Administration		Total		Community Bank		CCBX		Treasury & Administration		Total
	(dollars in thousands; unaudited)
Net interest income, before    intrabank transfer	$	21,677	$	29,796	$	3,018	$	54,491	$	17,205	$	11,874	$	189	$	29,268
Interest income (expense)    intrabank transfer	(1,079)		2,652		(1,573)		—		128		198		(326)		—
Provision for credit    losses - loans	428		43,116		—		43,544		344		12,598		—		12,942
Provision for unfunded    commitments	137		16		—		153		—		—		—		—
Noninterest income (1)	1,090		48,080		137		49,307		1,556		20,343		87		21,986
Noninterest expense	9,092		28,439		7,132		44,663		7,646		18,407		4,362		30,415
Net income before income    taxes	12,031		8,957		(5,550)		15,438		10,899		1,410		(4,412)		7,897
Income taxes	2,375		1,768		(1,096)		3,047		2,301		297		(931)		1,667
Net Income	$	9,656	$	7,189	$	(4,454)	$	12,391	$	8,598	$	1,113	$	(3,481)	$	6,230
(1)For the three months ended March 31, 2023, CCBX noninterest income includes credit enhancements of $42.4 million, fraud enhancements of $2.0 million, and BaaS program income of $3.6 million. For the three months ended March 31, 2022, CCBX noninterest income includes credit enhancements of $13.1 million, fraud enhancements of $4.6 million and BaaS program income of $2.5 million.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a bank holding company that operates through our wholly owned subsidiaries, Coastal Community Bank (“Bank”) and Arlington Olympic LLC . We are headquartered in Everett, Washington, which by population is the largest city in, and the county seat of, Snohomish County. Our business is conducted through three reportable segments: The community bank CCBX and treasury & administration. The community bank segment includes all community banking activities, with a

primary focus on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application. We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County). The CCBX segment provides banking as a service (“BaaS”) that allows our broker-dealer and digital financial service partners to offer their customers banking services. The CCBX segment has 25 partners as of March 31, 2023. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments. The Bank’s deposits are insured in whole or in part by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is subject to regulation by the Federal Reserve and the Washington State Department of Financial Institutions Division of Banks. The Federal Reserve also has supervisory authority over the Company.

As of March 31, 2023, we had total assets of $3.45 billion, total loans receivable of $2.84 billion, total deposits of $3.10 billion and total shareholders’ equity of $258.8 million.

The following discussion and analysis presents our financial condition and results of operations on a consolidated basis. However, because we conduct all of our material business operations through the Bank, the discussion and analysis relate to activities primarily conducted by the Bank.

We generate most of our community bank revenue from interest on loans and CCBX revenue from BaaS fee income and interest on loans. Our primary source of funding for our loans is commercial and retail deposits from our customer relationships and from our partner deposit relationships. We place secondary reliance on wholesale funding, primarily borrowings from the Federal Home Loan Bank (“FHLB”). Less commonly used sources of funding include borrowings from the Federal Reserve System (“Federal Reserve”) discount window, draws on established federal funds lines from unaffiliated commercial banks, brokered funds, which allows us to obtain deposits from sources that do not have a relationship with the Bank and can be obtained through certificate of deposit listing services, via the internet or through other advertising methods, or a one-way buy through an insured cash sweep (“ICS”) account, which allows us to obtain funds from other institutions that have deposited funds through ICS. Our largest expenses are provision for credit losses - loans, BaaS loan expense, BaaS fraud expense, salaries and employee benefits, interest on deposits and borrowings, legal and professional expenses and data processing. Our principal lending products are commercial real estate loans, consumer loans, residential real estate, commercial and industrial loans and construction, land and land development loans.

Potential Regulatory Reforms in Response to Recent Bank Failures

The recent failures of Silicon Valley Bank, Santa Clara, California, Signature Bank, New York, New York, and First Republic Bank, San Francisco, California, in March and April of this year, may lead to regulatory changes and initiatives that could impact the Company. For example, the FDIC has stated that it plans to impose a special deposit insurance assessment on banks in order to recover losses that the FDIC's Deposit Insurance Fund (“DIF”) incurred in the receiverships of these institutions. In addition, President Biden has encouraged the federal banking agencies to adopt various reforms, including the completion of an incentive compensation rule for bank executives pursuant to Section 956 of the Dodd-Frank Act, in response to these bank failures. On April 28, 2023, the Federal Reserve and the FDIC issued reports on the potential causes of failures of Silicon Valley Bank and Signature Bank, respectively. Among the changes discussed, the Federal Reserve and the FDIC highlighted potential changes needed to supervisory approaches for banks of all sizes as well as to regulatory requirements. Currently, it is unclear what actions federal regulatory agencies will take as a result of these failures or the potential impact on our business.

Small Business Lending Data Collection Rule

On March 30, 2023, the CFPB finalized a rule under section 1071 of the Dodd-Frank Act requiring lenders to collect and report data regarding small business lending activity. The Company is evaluating the impact of the new rule.

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London Interbank Offered Rate (“LIBOR”) Transition

On December 16, 2022, the Federal Reserve Board adopted a final rule that implements the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) by identifying benchmark rates based on SOFR (Secured Overnight Financing Rate) that will replace LIBOR formerly known as the London Interbank Offered Rate, in certain financial contracts after June 30, 2023. Congress enacted the LIBOR Act, which was signed into law in March 2022, to provide a uniform, nationwide solution for so-called tough legacy contracts that do not have clear and practicable provisions for replacing LIBOR after June 30, 2023. The LIBOR Act also establishes a litigation safe harbor for lenders that select a LIBOR replacement under certain situations, including the use of a replacement rate selected by the Federal Reserve. As required by the law, the final rule identifies replacement benchmark rates based on SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts subject to the Act. These contracts include U.S. contracts that do not mature before LIBOR ends and that lack adequate "fallback" provisions that would replace LIBOR with a practicable replacement benchmark rate. For more information on the Company’s approach to LIBOR transition planning, please see the risk factors discussed in the Company’s annual report on Form 10-K for the year ended December 31, 2022.

As of March 31, 2023, we had 47 loans totaling $201.1 million that are tied to LIBOR. We have $3.6 million in floating rate junior subordinated debentures to Coastal (WA) Statutory Trust I, which was formed for the issuance of trust preferred securities. These debentures are also tied to LIBOR. The move to an alternate index may impact the rates we receive on loans and rates we pay on our junior subordinated debentures. We have identified the loans and debt instruments impacted, and we believe we will be able to use other benchmark replacements and transition protections provided by the LIBOR Act, Federal Reserve rule and relevant accounting guidance to manage through the transition away from LIBOR. We no longer issue any loans or debt tied to LIBOR.

Recent Events

In response to the recent bank failures the following section addresses deposit growth, uninsured deposits, liquidity/available borrowing lines and other key items.

•Deposits:

◦Deposits increased $277.7 million, or 9.9%, during the three months ended March 31, 2023

▪Includes $94.3 million in fully insured IntraFi network negotiable order of withdrawal ("NOW") and money market sweep deposits as of March 31, 2023, compared to $12.5 million as of December 31, 2022.

◦Deposits increased $258.0 million, or 9.09%, from March 10, 2023 to March 31, 2023.

•Uninsured Deposits:

◦Uninsured deposits of $768.3 million as of March 31, 2023, compared to $835.8 million as of December 31, 2022.

•Liquidity/Borrowings:

◦Cash and interest bearing deposits of $393.9 million, of which 89.3% is held at the Federal Reserve Bank, at March 31, 2023 compared to $342.1 million as of December 31, 2022.

◦As of March 31, 2023 we had the capacity to borrow up to $575.1 million from Federal Home Loan Bank and the Federal Reserve Bank discount window.

▪No outstanding balance as of March 31, 2023.

▪No outstanding balance during the quarter ended March 31, 2023.

•Net Interest Margin:

◦Net interest margin of 7.15% for the quarter ended March 31, 2023 compared to 6.91% for the month ended March 31, 2023.

•Cost of Deposits:

◦Cost of deposits of 2.13% for the quarter ended March 31, 2023.

◦Cost of deposits of 2.36% for the month ended March 31, 2023.

•Investment Portfolio:

◦Available-for-sale ("AFS") investments of $98.0 million, of which 99.7% are U.S. Treasuries, with a weighted average remaining duration of 11 months as of March 31, 2023.

◦Held-to-maturity ("HTM") investments of $3.7 million, of which 100% are U.S. Agency mortgage backed securities held for Community Reinvestment Act ("CRA") purposes, with a fair value of $108,000 less than carrying value as of March 31, 2023.

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Deposits increased $277.7 million, or 9.9%, during the three months ended March 31, 2023. Fully insured IntraFi network NOW and money market sweep deposits increased to $94.3 million as of March 31, 2023, compared to $12.5 million as of December 31, 2022. These fully insured sweep deposits allow our larger deposit customers to fully insure their deposits through a sweep to other financial institutions. Our liquidity position is supported by careful management of our liquid assets and liabilities as well as access to alternative sources of funds. As of March 31, 2023 we had $393.9 million in cash on the balance sheet and the capacity to borrow up to $575.1 million from Federal Home Loan Bank and the Federal Reserve Bank discount window, with no outstanding balance. Cash on the balance sheet and borrowing capacity total $969.0 million and represents 31.3% of total deposits and exceeds our $768.3 million in uninsured deposits. Our available-for-sale securities portfolio has a weighted average remaining duration of just 11 months and U.S. Treasury securities represent 99.7% of that portfolio. Unrealized losses on the available-for-sale securities portfolio were just $2.3 million, or 0.88%, of shareholders' equity as of March 31, 2023.

Results of Operations

Net Income

Comparison of the quarter ended March 31, 2023 to the comparable quarter in the prior year

Net income for the three months ended March 31, 2023 was $12.4 million, or $0.91 per diluted share, compared to $6.2 million, or $0.46 per diluted share, for the three months ended March 31, 2022. The increase in net income over the comparable period in the prior year was primarily attributable to a $40.0 million increase in interest income and $27.3 million increase in noninterest income. These were partially offset by an increase in the provision for credit losses - loans of $30.6 million, related to CCBX loan growth, and $14.2 million more in noninterest expense, also largely related to CCBX loan growth, and increases in salary expense and professional fees. The increase in noninterest income, provision expense and noninterest expense are all largely related to increased CCBX loan and deposit activity. In accordance with GAAP, we recognize as revenue (1) the reimbursement of non-credit fraud losses on CCBX customer loans and deposits and (2) the indemnification obligation, also known as credit enhancements, that our partners provide for expected credit losses related to loans they originate and unfunded commitments from such loans. CCBX customer credit losses are recognized in the allowance for loan loss and non-credit fraud loss is recognized in BaaS noninterest expense. For more information on the accounting for BaaS allowance for credit losses, reserve for unfunded commitments, credit enhancements and fraud enhancements see the section titled “CCBX – BaaS Reporting Information.”

Net Interest Income

Comparison of the quarter ended March 31, 2023 to the comparable quarter in the prior year

Net interest income for the three months ended March 31, 2023 was $54.5 million, compared to $29.3 million for the three months ended March 31, 2022, an increase of $25.2 million, or 86.2%. Yield on loans receivable was 9.95% for the three months ended March 31, 2023, compared to 6.80% for the three months ended March 31, 2022. The increase in net interest income compared to March 31, 2022 was largely related to increased yield on loans from growth in higher yielding CCBX loans and the overall increase in interest rates resulting from the Federal Open Market Committee (“FOMC”) raising rates 0.50% during the three months ended March 31, 2023, with the most recent increase during such period on March 23, 2023. This increase in interest rates impacts our existing variable rate loans as well as rates on new loans. The impact of these increases in interest rates will continue to be seen in future quarters. Average loans receivable for the three months ended March 31, 2023 was $2.71 billion, compared to $1.77 billion for the three months ended March 31, 2022.

Interest and fees on loans totaled $66.4 million for the three months ended March 31, 2023 compared to $29.6 million for the three months ended March 31, 2022. The $36.8 million increase in interest and fees on loans for the quarter ended March 31, 2023, compared to March 31, 2022, was largely due to increased yield on loans from growth in higher yielding CCBX loans combined with the overall increase in interest rates. Total loans receivable was $2.84 billion at March 31, 2023, compared to $1.96 billion at March 31, 2022. CCBX loan growth was strong during the quarter with average loans receivable of $1.06 billion for the quarter ended March 31, 2023, compared to $382.2 million for the quarter ended March 31, 2022, an increase of $682.0 million, or 178.5%. Average CCBX yield of 16.09% was earned on CCBX loans for the quarter ended March 31, 2023, compared to 12.73% for the quarter ended March 31, 2022. CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield. Also impacting the increase in loan interest is the increase in interest rates on variable rate loans resulting from the FOMC raising rates 0.50% during the three months ended March 31, 2023, with the most

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recent increase during such period on March 23, 2023. We continue to monitor the impact of these increases in interest rates.

Interest income from interest earning deposits with other banks was $3.1 million for the quarter ended March 31, 2023, an increase of $2.7 million, or 670.4%, due to higher interest rates, compared to the quarter ended March 31, 2022. The average balance of interest earning deposits invested with other banks for the three months ended March 31, 2023 was $271.7 million, compared to $843.9 million for the three months ended March 31, 2022. This decrease was a result of increased loan demand. The yield on these interest earning deposits with other banks increased 4.43%, to 4.62% compared to 0.19% at March 31, 2022. Interest income on investment securities increased $482,000 to $553,000 at March 31, 2023, compared to $71,000 at March 31, 2022. Average investment securities increased $56.5 million from $45.8 million for the three months ended March 31, 2022, to $102.2 million for the three months ended March 31, 2023, and average yield increased to 2.19% for the three months ended March 31, 2023, compared to 0.63% for the three months ended March 31, 2022.

Interest expense was $15.6 million for the quarter ended March 31, 2023, a $14.7 million increase from the quarter ended March 31, 2022. Interest expense on deposits was $15.0 million for the quarter ended March 31, 2023, compared to $553,000 for the quarter ended March 31, 2022. The $14.4 million increase in interest expense on deposits was due to an increase of $938.2 million in interest bearing deposits as well as a 2.73% increase in interest rates on deposit accounts. Interest on borrowed funds was $662,000 for the quarter ended March 31, 2023, compared to $321,000 for the quarter ended March 31, 2022. The $341,000 increase in interest expense on borrowed funds from the quarter ended March 31, 2022 is the result of a decrease in average FHLB borrowings, which were paid off in the quarter ended March 31, 2022, partially offset by an $28.6 million average balance increase in subordinated debt, which increased during the quarter ended December 31, 2022. Interest expense on interest bearing deposits increased compared to the quarter ended March 31, 2022 as a result of an increase in CCBX deposits that are tied to and reprice when the FOMC raises rates, just like our CCBX loans which also reprice when the FOMC raises interest rates. Interest expense is expected to increase as a result of the FOMC increasing rates. Additionally, as a result of the interest rate increases, in the first and second quarter of 2022 a significant portion of CCBX deposits that were not earning interest were reclassified to interest bearing deposits from noninterest bearing deposits, which also contributed to the increase in interest expense compared to March 31, 2022. These CCBX deposits were reclassified because the current interest rate exceeded the minimum interest rate set in their respective program agreements, as a result of the first and second quarter 2022 interest rate increases. We do not expect additional CCBX deposits will be reclassified as a result of future rate increases. Any additional FOMC interest rate increases will result in higher interest expense on interest bearing deposits which we expect will be offset by higher interest rates on CCBX loans and excess cash invested in the Federal Reserve Bank or other banks.

Net interest margin was 7.15% for the three months ended March 31, 2023, compared to 4.45% for the three months ended March 31, 2022. The increase in net interest margin compared to the three months ended March 31, 2022 was largely due to an increase in total loans combined with higher interest rates on new and existing variable rate loans as they reprice. Average loans increased $939.9 million compared to the three months ended March 31, 2022. Also contributing to the increase in net interest margin compared to the three months ended March 31, 2022 was interest earning deposits invested in other banks, which earned an average rate of 4.62% for the quarter ended March 31, 2023, compared to an average rate of 0.19% for the quarter ended March 31, 2022.

Cost of funds was 2.19% for the quarter ended March 31, 2023, which is an increase of 2.05% from the quarter ended March 31, 2022. Cost of deposits for the quarter ended March 31, 2023 was 2.13%, which was an 2.04% increase, from 0.09% for the quarter ended March 31, 2022. These increases were largely due to an increase in higher cost CCBX deposits and a higher interest rate environment. CCBX deposit growth and the aforementioned reclassification of CCBX noninterest bearing deposits to interest bearing deposits in the first and second quarter of 2022, that resulted from the Fed Funds rate increases, also contributed to the increase in interest expense.

Total yield on loans receivable for the quarter ended March 31, 2023 was 9.95%, compared to 6.80% for the quarter ended March 31, 2022. This increase in yield on loans receivable is primarily attributed to an increase in higher rate CCBX loans. For the quarter ended March 31, 2023, average CCBX loans increased $682.0 million, or 178.5%, with an average CCBX yield of 16.09%, compared to 12.73% at the quarter ended March 31, 2022. CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield. Average community bank loans increased $257.9 million. This increase includes a decrease in average PPP loans of $75.4 million, compared to the quarter ended March 31, 2022. Average yield on community bank loans for the three months ended March 31, 2023 was 5.97% compared to 5.16% for the three months ended March 31, 2022.

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The following tables show the average yield on loans and cost of deposits by segment and also illustrates the impact of BaaS loan expense on CCBX yield on loans:

	For the Three Months Ended
	March 31, 2023		March 31, 2022
(unaudited)	Yield on Loans (2)	Cost of Deposits (2)	Yield on Loans (2)	Cost of Deposits (2)
Community Bank	5.97%	0.66%	5.16%	0.11%
CCBX(1)	16.09%	3.89%	12.73%	0.06%
Consolidated	9.95%	2.13%	6.80%	0.09%

(1)CCBX yield on loans does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. To determine net BaaS loan income earned from CCBX loan relationships, the Company takes BaaS loan interest income and deducts BaaS loan expense to arrive at net BaaS loan income which can be compared to interest income on the Company’s community bank loans.

(2)Annualized calculations shown for periods presented.

	For the Three Months Ended
	March 31, 2023				March 31, 2022
(dollars in thousands, unaudited)	Income / Expense		Income / expense divided by average CCBX loans (2)		Income / Expense		Income / expense divided by average CCBX loans (2)
BaaS loan interest income	$	42,220	16.09	%	$	11,992	12.73	%
Less: BaaS loan expense	17,554		6.69	%	8,290		8.80	%
Net BaaS loan income (1)	$	24,666	9.40	%	$	3,702	3.93	%
Average BaaS Loans	$	1,064,192			$	382,153

(1)A reconciliation of this non-GAAP measure is set forth in the section titled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”

(2)Annualized calculations shown for periods presented.

For the three months ended March 31, 2023, net interest margin (net interest income divided by the average total interest earning assets) and net interest spread (average yield on total interest earning assets minus average cost of total interest bearing liabilities) were 7.15% and 6.20%, respectively, compared to 4.45% and 4.28%, respectively, for the three months ended March 31, 2022.

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The following table presents an analysis of the average balances of net interest income, net interest spread and net interest margin for the periods indicated. Loan costs included in interest income totaled $1.1 million and loan fees included in interest income totaled $2.7 million for the three months ended March 31, 2023 and 2022, respectively. For the three months ended March 31, 2023 and 2022, the amount of interest income not recognized on nonaccrual loans was not material.

	Average Balance Sheets For the Three Months Ended March 31,
	2023						2022
(dollars in thousands; unaudited)	Average Balance		Interest & Dividends		Yield / Cost (1)		Average Balance		Interest & Dividends		Yield / Cost (1)
Assets
Interest earning assets:
Interest earning deposits with      other banks	$	271,700	$	3,097	4.62	%	$	843,931	$	402	0.19	%
Investment securities, available for sale (2)	100,273		535		2.16		44,470		61		0.56
Investment securities, held to maturity (2)	1,955		18		3.73		1,292		10		3.14
Other investments	10,633		30		1.14		9,227		37		1.63
Loans receivable (3)	2,708,177		66,431		9.95		1,768,283		29,632		6.80
Total interest earning assets	3,092,738		70,111		9.19		2,667,203		30,142		4.58
Noninterest earning assets:
Allowance for credit losses	(81,086)						(30,668)
Other noninterest earning assets	172,161						92,401
Total assets	$	3,183,813					$	2,728,936
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits	$	2,070,217	$	14,958	2.93	%	$	1,131,984	$	553	0.20	%
FHLB advances and borrowings	—		—		0.00		24,443		69		1.14
Subordinated debt	44,010		599		5.52		24,295		230		3.84
Junior subordinated debentures	3,588		63		7.12		3,586		22		2.49
Total interest bearing liabilities	2,117,815		15,620		2.99		1,184,308		874		0.30
Noninterest bearing deposits	775,940						1,320,144
Other liabilities	37,448						16,009
Total shareholders' equity	252,610						208,475
Total liabilities and shareholders' equity	$	3,183,813					$	2,728,936
Net interest income			$	54,491					$	29,268
Interest rate spread					6.20	%					4.28	%
Net interest margin (4)					7.15	%					4.45	%

(1)Yields and costs are annualized.

(2)For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(3)Includes loans held for sale and nonaccrual loans.

(4)Net interest margin represents net interest income divided by the average total interest earning assets.

The following table presents an analysis of certain average balances, interest income and interest expense by segment:

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	For the Three Months Ended
	March 31, 2023						March 31, 2022
(dollars in thousands, unaudited)	Average Balance		Interest & Dividends		Yield / Cost (1)		Average Balance		Interest & Dividends		Yield / Cost (1)
Community Bank
Assets
Interest earning assets:
Loans receivable (2)	$	1,643,985	$	24,211	5.97	%	$	1,386,130	$	17,640	5.16	%
Intrabank asset	—		—		—		268,414		128		0.19
Total interest earning assets	1,643,985		24,211		5.97		1,654,544		17,768		4.36
Liabilities
Interest bearing liabilities:
Interest bearing deposits	853,152		2,534		1.20	%	935,784		435		0.19	%
Intrabank liability	94,668		1,079		4.62		—		—		—
Total interest bearing liabilities	947,820		3,613		1.55		935,784		435		0.19
Noninterest bearing deposits	696,166						718,760
Net interest income			$	20,598					$	17,333
Net interest margin(4)					5.08	%					4.25	%
CCBX
Assets
Interest earning assets:
Loans receivable (2)(4)	$	1,064,192	$	42,220	16.09	%	$	382,153	$	11,992	12.73	%
Intrabank asset	232,647		2,652		4.62		415,431		198		0.19
Total interest earning assets	1,296,839		44,872		14.03		797,584		12,190		6.20
Liabilities
Interest bearing liabilities:
Interest bearing deposits	1,217,065		12,424		4.14	%	196,200		118		0.24	%
Total interest bearing liabilities	1,217,065		12,424		4.14		196,200		118		0.24
Noninterest bearing deposits	79,774						601,384
Net interest income			$	32,448					$	12,072
Net interest margin(3)					10.15	%					6.14	%
Net interest margin, net of Baas loan expense (5)					4.66	%					1.92	%

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	For the Three Months Ended
	March 31, 2023						March 31, 2022
(dollars in thousands, unaudited)	Average Balance		Interest & Dividends		Yield / Cost (1)		Average Balance		Interest & Dividends		Yield / Cost (1)
Treasury & Administration
Assets
Interest earning assets:
Interest earning deposits with other banks	$	271,700	$	3,097	4.62	%	$	843,931	$	402	0.19	%
Investment securities, available for sale (6)	100,273		535		2.16		44,470		61		0.56
Investment securities, held to maturity (6)	1,955		18		3.73		1,292		10		3.14
Other investments	10,633		30		1.14		9,227		37		1.63
Intrabank asset	(232,647)		(2,652)		(4.62)		(683,845)		(326)		(0.19)
Total interest earning assets	151,914		1,028		2.74		215,075		184		0.35	%
Liabilities
Interest bearing liabilities:
FHLB advances and borrowings	$	—	$	—	—	%	24,443		69		1.14	%
Subordinated debt	44,010		599		5.52		24,295		230		3.84
Junior subordinated debentures	3,588		63		7.12		3,586		22		2.49
Intrabank liability	(94,668)		(1,079)		(4.62)		—		—		—
Total interest bearing liabilities	(47,070)		(417)		3.59		52,324		321		2.49
Net interest income			$	1,445					$	(137)
Net interest margin(3)					3.86	%					(0.26)	%

(1)Yields and costs are annualized.

(2)Includes loans held for sale and nonaccrual loans.

(3)Net interest margin represents net interest income divided by the average total interest earning assets.

(4)CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans.

(5)Net interest margin, net of BaaS loan expense includes the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans.

(6)For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

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The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. The table illustrates the $13.7 million increase in loan interest income that is attributed to an increase in loan rates and $23.1 million increase in loan interest income that is attributed to an increase in loan volume. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to volume.

	Three months ended March 31, 2023 Compared to Three months ended March 31, 2022
	Increase (Decrease) Due to				Total Increase (Decrease)
(dollars in thousands; unaudited)	Volume		Rate
Interest income:
Interest earning deposits	$	(6,523)	$	9,218	$	2,695
Investment securities, available for sale	298		176		474
Investment securities, held to maturity	6		2		8
Other Investments	4		(11)		(7)
Loans receivable	23,055		13,744		36,799
Total increase in interest income	16,840		23,129		39,969
Interest expense:
Interest bearing deposits	6,779		7,626		14,405
FHLB advances and other borrowings	(69)		—		(69)
Subordinated debt	268		101		369
Junior subordinated debentures	—		41		41
Total increase in interest expense	6,978		7,768		14,746
Increase in net interest income	$	9,862	$	15,361	$	25,223

Noninterest Income

Our primary sources of recurring noninterest income are BaaS indemnification income, Baas program income and deposit service charges and fees. Noninterest income does not include loan origination fees, which are generally recognized over the life of the related loan as an adjustment to yield using the interest or similar method.

Comparison of the quarter ended March 31, 2023 to the comparable quarter in the prior year

For the three months ended March 31, 2023, noninterest income totaled $49.3 million, an increase of $27.3 million, or 124.3%, compared to $22.0 million for the three months ended March 31, 2022.

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The following table presents, for the periods indicated, the major categories of noninterest income:

	Three Months Ended March 31,				Increase (Decrease)		Percent Change
(dollars in thousands; unaudited)	2023		2022
Deposit service charges and fees	$	910	$	884	$	26	2.9	%
Loan referral fees	—		602		(602)		(100.0)
Mortgage broker fees	19		123		(104)		(84.6)
Unrealized gain on equity securities, net	39		—		39		100.0
Gain on sales of loans, net	123		—		123		100.0
Other	280		265		15		5.7
Noninterest income, excluding BaaS program income and BaaS indemnification income	1,371		1,874		(503)		(26.8)
Servicing and other BaaS fees	948		1,169		(221)		(18.9)
Transaction fees	917		493		424		86.0
Interchange fees	789		432		357		82.6
Reimbursement of expenses	921		372		549		147.6
BaaS program income	3,575		2,466		1,109		45.0
BaaS credit enhancements	42,362		13,075		29,287		224.0
Baas fraud enhancements	1,999		4,571		(2,572)		(56.3)
BaaS indemnification income	44,361		17,646		26,715		151.4
Total BaaS income	47,936		20,112		24,143		120.0
Total noninterest income	$	49,307	$	21,986	$	27,321	124.3	%

Summary of significant noninterest income for the three months ended March 31, 2023 compared to the three months ended March 31, 2022

A description of our largest noninterest income categories are below:

BaaS Income. Our CCBX segment provides BaaS offerings that enable our broker dealer and digital financial service providers to offer their customers banking services. In exchange for providing these services, we earn fixed fees, volume-based fees and reimbursement of costs depending on the program agreement. In accordance with GAAP, we recognize the reimbursement of noncredit fraud losses on loans and deposits originated through partners and credit enhancements related to the allowance for credit losses and reserve for unfunded commitments provided by the partner as revenue in BaaS income. CCBX credit losses are recognized in the allowance for loan loss and noncredit fraud losses are expensed in noninterest expense under BaaS fraud expense. Also in accordance with GAAP, we establish a credit enhancement asset for expected future credit losses through the recognition of BaaS credit enhancement revenue at the same time we establish an allowance for those loans though a provision for credit losses - loans. For more information on the accounting for BaaS allowance for credit losses, reserve for unfunded commitments, credit enhancements and fraud enhancements see the section titled “CCBX – BaaS Reporting Information.”

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Our CCBX segment continues to evolve, and now has 25 relationships, at varying stages, as of March 31, 2023. We continue to refine the criteria for CCBX partnerships and are exiting relationships where it makes sense for both parties and are focusing more on selecting larger and more established partners, with experienced management teams, existing customer bases and strong financial positions.

The following table illustrates the activity and evolution in CCBX relationships for the periods presented.

	As of
(unaudited)	March 31, 2023	March 31, 2022
Active	18	20
Friends and family / testing	1	1
Implementation / onboarding	1	5
Signed letters of intent	4	2
Wind down - preparing to exit relationship	1	0
Total CCBX relationships	25	28

Deposit Service Charges and Fees. Deposit service charges and fees include service charges on accounts, point-of-sale fees, merchant services fees and overdraft fees. Together they constitute the largest component of our noninterest income, outside of BaaS income.

Loan Referral Fees. We earn loan referral fees when we originate a variable rate loan and the borrower enters into an interest rate swap agreement with a third party to fix the interest rate for an extended period, usually 20 or 25 years. We recognize the loan referral fee for arranging the interest rate swap. By facilitating interest rate swaps to our clients, we are able to provide them with a long-term, fixed interest rate without assuming the interest rate risk. Interest rate volatility, swap rates, and the timing of loan closings all impact the demand for long-term fixed rate swaps. The recognition of loan referral fees fluctuates in response to these market conditions and as a result we may recognize more or less, or may not recognize any, loan referral fees in some periods. Current market conditions are making interest rate swap agreements less attractive in the higher rate environment.

Mortgage Broker Fees. We earn mortgage broker fees for residential real estate loans that we broker through mortgage lenders. Mortgage broker fees fluctuate based on demand and changes in interest rates. The mortgage market has slowed down as a result of higher interest rates on mortgages.

Gain on Sales of Loans, net. Gain on sales of loans occurs when we sell certain CCBX loans to the originating partner, in accordance with partner agreements. Gain on sale of loans may also occur when we sell in the secondary market the guaranteed portion (generally 75% of the principal balance) of the SBA and U.S. Department of Agriculture (“USDA”) loans that we originate. This activity fluctuates based on SBA and USDA loan activity.

Unrealized (loss)/gain on equity securities, net. During the three months ended March 31, 2023, we recognized an unrealized gain on equity securities of $39,000, compared to March 31, 2022, when there was no unrealized holding gain or loss.

Other. This category includes a variety of other income-producing activities, credit card fee income, wire transfer fees, interest earned on bank owned life insurance (“BOLI”), and SBA and USDA servicing fees.

Noninterest Expense

Generally, noninterest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services. The largest components of noninterest expense are BaaS loan and fraud expense and salaries and employee benefits. Noninterest expense also includes operational expenses, such as legal and professional expenses, data processing and software licenses, occupancy, FDIC assessment, points of sale expense, excise taxes, director and staff expenses, marketing and other expenses.

Comparison of the quarter ended March 31, 2023 to the comparable quarter in the prior year

For the three months ended March 31, 2023, noninterest expense totaled $44.7 million, an increase of $14.2 million, or 46.8%, compared to $30.4 million for the three months ended March 31, 2022.

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The following table presents, for the periods indicated, the major categories of noninterest expense:

	Three Months Ended March 31,				Increase (Decrease)		Percent Change
(dollars in thousands; unaudited)	2023		2022
Salaries and employee benefits	$	15,575	$	11,085	$	4,490	40.5	%
Legal and professional expenses	3,062		708		2,354		332.5
Data processing and software licenses	1,840		1,861		(21)		(1.1)
Occupancy	1,219		1,136		83		7.3
FDIC assessments	595		604		(9)		(1.5)
Point of sale expense	753		248		505		203.6
Excise taxes	455		349		106		30.4
Director and staff expenses	626		344		282		82.0
Marketing	95		99		(4)		(4.0)
Other	890		1,120		(230)		(20.5)
Noninterest expense, excluding BaaS loan and BaaS fraud expense	25,110		17,554		7,556		43.0
BaaS loan expense	17,554		8,290		9,264		111.7
BaaS fraud expense	1,999		4,571		(2,572)		(56.3)
BaaS loan and fraud expense	19,553		12,861		6,692		52.0
Total noninterest expense	$	44,663	$	30,415	$	14,248	46.8	%

Comparison of the three months ended March 31, 2023 to the comparable period in the prior year

For the three months ended March 31, 2023, noninterest expense totaled $44.7 million, an increase of $14.2 million, or 46.8%, compared to $30.4 million for the three months ended March 31, 2022.

Summary of significant noninterest expense for the three months ended March 31, 2023 compared to the three months ended March 31, 2022

A description of our largest noninterest expense categories are below:

Salaries and Employee Benefits. Salaries and employee benefits are one of the largest components of noninterest expense and include payroll expense, incentive compensation costs, equity compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits continue to increase primarily due to continued hiring staff for our CCBX segment and additional staff for our ongoing banking related growth initiatives. As our CCBX activities grow, we expect to continue to add employees to support these lines of business. As of March 31, 2023, we had 461 full-time equivalent employees, compared to 401 at March 31, 2022, a 15.0% increase.

Data Processing and Software Licenses. Data processing and software licenses includes expenses related to obtaining and maintaining software required for our various functions. Data processing costs include all of our customer transaction processing and data storage, computer processing, and network costs. Data processing costs grow as we grow and add new products, customers and branches. Additionally, CCBX data processing expenses and software that aids in the reporting of CCBX activities and monitoring of transactions that helps to automate and create other efficiencies in reporting have resulted in increased expenses in the category. These expenses are expected to increase as we invest more in automated processing and as we grow product lines and our CCBX segment.

Legal and Professional Expenses. Legal and professional costs include legal, audit and accounting expenses, consulting fees, fees for recruiting and hiring employees, and IT related security expenses. These expenses fluctuate with the consulting costs related to risk management, development of contracts for CCBX customers, audit and accounting needs, and are impacted by our reporting cycle and timing of legal and professional services.

Occupancy. Occupancy expenses rent, utilities, janitorial and other maintenance expenses, property insurances and taxes. Also included is depreciation on building, leasehold, furniture, fixtures and equipment. Although our hybrid and remote

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workforce is increasing, which helps keep some occupancy expenses down, we do expect occupancy expenses to increase as we continue to grow.

FDIC Assessments. FDIC assessments are assessed to fund the DIF to insure and protect the depositors of insured banks and to resolve failed banks. The assessment rate is based on a number of factors and recalculated each quarter. As deposits increase, the FDIC assessment expense will generally increase. On October 18, 2022 the FDIC finalized an increase of 2 basis points in the initial base deposit insurance assessment rates schedules. The rise is intended to increase the reserve ratio of the Deposit Insurance Fund to 1.35%, the statutory requirement. The increase in the base rates will remain in place until the reserve ratio reaches or exceeds 2.0%. The increase takes effect in the first quarterly assessment period of 2023 and will increase the FDIC assessment expense for the Bank.

Excise Taxes. Excise taxes are assessed on Washington state income and are based on gross income. Gross income is reduced by certain allowed deductions and income attributed to other states is also removed to arrive at the taxable base. Excise taxes increased as a result of increased income subject to excise taxes.

Point of Sale Expenses. Point of sale expenses are incurred as part of the process that allows businesses to accept payment for goods or services. Generally, point of sale expense increases as point of sale activity increases, as does point of sale income which is recognized in other income.

Director and Staff Expenses. Director and staff expenses includes compensation for director service, continuing education for employees and other director and staff related expenses. As conferences and other professional events have resumed we have seen increased expenses related to employee travel, and continuing education.

Marketing. Marketing and promotion costs were flat because we are using more cost-effective advertising options; however, we expect to see advertising expenses increase as we deploy more branding and targeted advertising for the community bank and CCBX.

Other. This category includes dues and memberships, office supplies, mail services, telephone, examination fees, internal loan expenses, services charges from banks, operational losses, directors and officer’s insurance, donations and miscellaneous other expenses. Provision for unfunded commitments is only included in this category for three months ended March 31, 2022 as the expense for the three months ended March 31, 2023 is included in the provision for unfunded commitments.

BaaS loan and fraud expense. Included in BaaS loan and fraud expense is partner loan expense including overdraft balances and partner fraud expense. Partner loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. Partner fraud expense represents noncredit fraud losses on loans and deposits originated through partners. Fraud losses are recorded when incurred as losses in noninterest expense, and the reimbursement from the CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement. For more information on the accounting for BaaS loan and fraud expenses see the section titled “CCBX – BaaS Reporting Information.”

The following table presents, for the periods indicated, the BaaS loan and fraud expenses:

	Three Months Ended
(dollars in thousands; unaudited)	March 31, 2023		March 31, 2022
BaaS loan expense	$	17,554	$	8,290
BaaS fraud expense	1,999		4,571
Total BaaS loan and fraud expense	$	19,553	$	12,861

Income Tax Expense

The amount of income tax expense we incur is impacted by the amounts of our pre-tax income, tax-exempt income and other nondeductible expenses. Deferred tax assets and liabilities are reflected at current income tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce our deferred tax assets to the amount expected to be realized. The Company is subject

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to various state taxes that are assessed as CCBX activities and employees expand into other states, which has increased the overall tax rate used in calculating the provision for income taxes in the current and future periods. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, implements a new 15% corporate alternative minimum tax for certain large corporations, a 1% excise tax on stock buybacks, and several tax incentives to promote clean energy and climate initiatives. These provisions were effective beginning January 1, 2023. Based on its current analysis of the provisions, we do not expect this legislation to have a material impact on our consolidated financial statements.

Comparison of the quarter ended March 31, 2023 to the comparable quarter in the prior year

For the three months ended March 31, 2023, income tax expense totaled $3.0 million, compared to $1.7 million for the three months ended March 31, 2022. The $1.4 million increase in income tax expense is the result of higher net income, combined with the addition of various state taxes that are being assessed as CCBX activities and employees expanding into other states, which has increased the overall tax rate used in calculating the provision for income taxes in the current and future periods. The effective tax rate was 19.7% for the three months ended March 31, 2023, compared to 21.1% for the three months ended March 31, 2022. The effective tax rate was lower for the three months ended March 31, 2023 due to tax benefits that resulted from the exercise and deductibility of equity awards.

Segment Information

As defined in ASC 280, Segment Reporting, an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. We evaluate performance based on an internal performance measurement accounting system, which provides line of business results. This system uses various techniques to assign balance sheet and income statement amounts to the business segments, including allocations of income and expense. A primary objective of this measurement system and related internal financial reporting practices are to produce consistent results that reflect the underlying financial impact of the segments on the Company and to provide a basis of support for strategic decision making. The accounting policies applicable to our segments are those that apply to our preparation of the accompanying Consolidated Financial Statements. Based on these criteria, we have identified three segments: the community bank, CCBX and treasury & administration. The primary focus of the community bank is on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application. We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County). The CCBX segment provides banking as a service (“BaaS”) that allows our broker-dealer and digital financial service partners to offer their customers banking services. The CCBX segment has 25 partners as of March 31, 2023. The treasury & administration segment includes treasury management, overall administration and all other aspects of the Company.

The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. The Company continues to evaluate its methodology on allocating items to the Company’s various segments to support strategic business decisions by the Company’s executive leadership. Income and expenses that are specific to a segment are directly posted to each segment. Additionally, certain indirect expenses are allocated to each segment utilizing various metrics, such as number of employees, utilization of space, and allocations based on loan and deposit balances. We have implemented a transfer pricing process that credits or charges the community bank and CCBX segments with intrabank interest income or expense for the difference in average loans and average deposits, with the treasury & administration segment as the offset for those entries. The accounting policies of the segments are the same as those described in “Note 1 – Description of Business and Summary of Significant Accounting Policies” in the accompanying notes to the consolidated financial statements included elsewhere in this report.

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The following table presents summary financial information for each segment for the periods indicated:

	March 31, 2023								December 31, 2022
(dollars in thousands; unaudited)	Community Bank		CCBX		Treasury & Administration		Total		Community Bank		CCBX		Treasury & Administration		Total
Assets
Cash and Due from Banks	$	4,485	$	12,223	$	377,208	$	393,916	$	4,603	$	12,899	$	324,637	$	342,139
Intrabank asset	—		356,905		(356,905)		—		—		254,096		(254,096)		—
Securities	—		—		101,704		101,704		—		—		98,353		98,353
Loans held for sale	—		27,292		—		27,292		—		—		—		—
Total loans receivable	1,671,014		1,166,190		—		2,837,204		1,614,752		1,012,504		—		2,627,256
Allowance for credit losses	(20,708)		(68,415)		—		(89,123)		(20,636)		(53,393)		—		(74,029)
All other assets	25,652		103,403		50,985		180,040		25,508		76,111		49,129		150,748
Total assets	$	1,680,443	$	1,597,598	$	172,992	$	3,451,033	$	1,624,227	$	1,302,217	$	218,023	$	3,144,467
Liabilities
Total deposits	$	1,531,391	$	1,563,832	$	—	$	3,095,223	$	1,538,218	$	1,279,303	$	—	$	2,817,521
Total borrowings	—		—		47,619		47,619		—		—		47,587		47,587
Intrabank liability	143,279		—		(143,279)		—		80,392		—		(80,392)		—
All other liabilities	5,773		33,766		9,889		49,428		5,617		22,914		7,334		35,865
Total liabilities	$	1,680,443	$	1,597,598	$	(85,771)	$	3,192,270	$	1,624,227	$	1,302,217	$	(25,471)	$	2,900,973

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Community bank total assets as of March 31, 2023 increased $56.2 million, or 3.5%, to $1.68 billion, compared to $1.62 billion as of December 31, 2022. Loans receivable net of deferred fees for the community bank segment increased $56.3 million, or 3.5%, to $1.67 billion as of March 31, 2023, compared to $1.61 billion as of December 31, 2022. The increase in community bank loans receivable is the result of gross loan growth of $56.5 million, which includes $908,000 in PPP loan forgiveness and paydowns during the three months ended March 31, 2023. Total community bank deposits decreased $6.8 million, or 0.4%, to $1.53 billion, as of March 31, 2023, compared to $1.54 billion as of December 31, 2022. The slight decrease in community bank deposits was a result of pricing disciplines as some customer sought higher rate products elsewhere. Our cost of deposits for the community bank was 0.66% for the three months ended March 31, 2023.

CCBX total assets as of March 31, 2023 increased $295.4 million, or 22.7%, to $1.60 billion, compared to $1.30 billion as of December 31, 2022. During the three months ended March 31, 2023, $101.2 million in CCBX loans were transferred to loans held for sale, with $73.9 million in loans sold and $27.3 million remaining in loans held for sale as of March 31, 2023; we had no loans held for sale as of December 31, 2022. Total CCBX loans receivable increased $153.7 million, or 15.2%, to $1.17 billion as of March 31, 2023, compared to $1.01 billion as of December 31, 2022. The increase in loans receivable is the result of increased activity with CCBX partners. CCBX allowance for credit losses increased to $68.4 million as of March 31, 2023, compared to $53.4 million as of December 31, 2022 as a result of CCBX loan growth and portfolio mix. Total CCBX deposits increased $284.5 million, or 22.2%, to $1.56 billion, compared to $1.28 billion as of December 31, 2022 as a result of growth within the CCBX relationships. This does not include an additional $36.9 million in CCBX deposits that are transferred off the balance sheet as of March 31, 2023.

Treasury & administration total assets as of March 31, 2023 decreased $45.0 million, or 20.7%, to $173.0 million, compared to $218.0 million as of December 31, 2022. Total securities increased $3.4 million, or 3.4%, to $101.7 million as of March 31, 2023, compared to $98.4 million as of December 31, 2022. Total borrowings were $47.6 million as of March 31, 2023 and December 31, 2022.

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The following tables present summary financial information for each segment for the periods indicated:

	Three months ended March 31, 2023								Three months ended March 31, 2022
	Community Bank		CCBX		Treasury & Administration		Total		Community Bank		CCBX		Treasury & Administration		Total
	(dollars in thousands; unaudited)
Net interest income, before    intrabank transfer	$	21,677	$	29,796	$	3,018	$	54,491	$	17,205	$	11,874	$	189	$	29,268
Interest income (expense)    intrabank transfer	(1,079)		2,652		(1,573)		—		128		198		(326)		—
Provision for credit    losses - loans	428		43,116		—		43,544		344		12,598		—		12,942
Provision for unfunded    commitments	137		16		—		153		—		—		—		—
Noninterest income (1)	1,090		48,080		137		49,307		1,556		20,343		87		21,986
Noninterest expense	9,092		28,439		7,132		44,663		7,646		18,407		4,362		30,415
Net income before income    taxes	12,031		8,957		(5,550)		15,438		10,899		1,410		(4,412)		7,897
Income taxes	2,375		1,768		(1,096)		3,047		2,301		297		(931)		1,667
Net Income	$	9,656	$	7,189	$	(4,454)	$	12,391	$	8,598	$	1,113	$	(3,481)	$	6,230

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Comparison of the quarter ended March 31, 2023 to the comparable quarter in the prior year

Net interest income before intrabank interest expense for the community bank was $21.7 million for the quarter ended March 31, 2023, an increase of $4.5 million, or 26.0%, compared to $17.2 million for the quarter ended March 31, 2022. The increase in net interest income is largely due to increased yield on loans resulting from loan growth and higher interest rates. As a result of the community bank having higher average loans than deposits for the quarter ended March 31, 2023 compared to the quarter ended March 31, 2022, intrabank interest expense for the community bank was $1.1 million for the quarter ended March 31, 2023, compared to intrabank interest income of $128,000 for the quarter ended March 31, 2022. Provision for credit losses - loans for the community bank was $428,000 for the quarter ended March 31, 2023, compared to a provision of $344,000 for the quarter ended March 31, 2022. Net charge-offs to average loans for the community bank segment have remained consistently low and was 0.01% for the quarter ended March 31, 2023 and 0.00% for the quarter ended March 31, 2022. Noninterest income for the community bank was $1.1 million, for the quarter ended March 31, 2023, a decrease of $466,000, or 29.9%, compared to $1.6 million for the quarter ended March 31, 2022 and primarily due to a $602,000 decrease in loan referral fees. Noninterest expenses for the community bank increased $1.4 million, or 18.9%, to $9.1 million as of March 31, 2023, compared to $7.6 million as of March 31, 2022. The increase in noninterest expense is largely due to increased salaries and employee benefits as a result of growth, higher software licenses maintenance and subscription costs related to new reporting software that helps monitor and assess risk and to automate and create efficiencies in reporting, and other expense increases related to growth.

Net interest income before intrabank interest income for CCBX was $29.8 million for the quarter ended March 31, 2023, an increase of $17.9 million, or 150.9%, compared to $11.9 million for the quarter ended March 31, 2022. The increase in net interest income is due to loan growth and higher interest rates from active CCBX relationships. As a result of having higher average deposits than loans for the quarter ended March 31, 2023 compared to the quarter ended March 31, 2022 intrabank interest income for CCBX was $2.7 million for the quarter ended March 31, 2023, compared to $198,000 for the quarter ended March 31, 2022. Provision for credit losses - loans was $43.1 million as a result of loan origination growth and charge-offs from CCBX loans for the quarter ended March 31, 2023, compared to $12.6 million for the quarter ended March 31, 2022. The $43.1 million provision on CCBX loans includes $42.3 million for partner loans with credit enhancement on them and $770,000 on CCBX loans that the Company is responsible for. In accordance with the program agreement and for true lender purposes for that CCBX partner only, the Company is responsible for credit losses on approximately 10% of a $137.4 million loan portfolio, or $13.9 million in partner loans at March 31, 2023. Noninterest income for CCBX was $48.1 million for the quarter ended March 31, 2023, an increase of $27.7 million, or 136.3%, compared to $20.3 million for the quarter ended March 31, 2022, due to an increase of $29.3 million in BaaS credit enhancements to establish a credit enhancement asset for future credit losses due from our CCBX partners, $2.6 million decrease in BaaS fraud enhancements and $1.1 million in BaaS program income, which was the result of increased relationships with broker dealers and digital financial service providers. Noninterest expenses for CCBX increased $10.0 million, or 54.5%, to $28.4 million as of March 31, 2023, compared to $18.4 million as of March 31, 2022. The increase in noninterest expense is largely due to an increase in BaaS loan expense, BaaS fraud expense from increased CCBX loan originations and increased salaries and benefits, for the quarter ended March 31, 2023, compared to the quarter ended March 31, 2022. For more information on the accounting for BaaS income and expenses see the section titled “CCBX – BaaS Reporting Information.”

Net interest income before intrabank interest expense for treasury & administration was $3.0 million for the quarter ended March 31, 2023, an increase of $2.8 million, or 1496.9%, compared to $189,000 for the quarter ended March 31, 2022, as a result of increased interest rates. Noninterest income increased $50,000, or 57.5%, to $137,000 for the quarter ended March 31, 2023, compared to $87,000 for the quarter ended March 31, 2022. Noninterest expense increased $2.8 million, or 63.5%, to $7.1 million for the quarter ended March 31, 2023, compared to $4.4 million for the quarter ended March 31, 2022, largely as a result of increased salaries and employee benefits as a result of growth.

Financial Condition

Our total assets increased $306.6 million, or 9.7%, to $3.45 billion at March 31, 2023 from $3.14 billion at December 31, 2022. The increase is primarily the result of $209.9 million increase in loans receivable during the three months ended March 31, 2023.

Loans Held For Sale

During the quarter ended March 31, 2023, $101.2 million in CCBX loans were transferred to loans held for sale, with $73.9 million in loans sold. A portion of these loans were sold at par and a portion were sold with a gain on sale of $123,000. As

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of March 31, 2023 $27.3 million in residential real estate secured lines of credit loans remain in loans held for sale. At December 31, 2022, there were no loans held for sale.

Loan Portfolio

Our primary source of income is derived through interest earned on loans. A substantial portion of our loan portfolio consists of commercial real estate loans and commercial and industrial loans in the Puget Sound region. Our consumer and other loans also represent a significant portion of our loan portfolio with the growth of our CCBX segment. Our loan portfolio represents the highest yielding component of our earning assets.

As of March 31, 2023, loans receivable totaled $2.84 billion, an increase of $209.9 million, or 8.0%, compared to December 31, 2022. Total loans receivable is net of $6.6 million in net deferred origination fees, $63,000 of which is attributed to PPP loans. The increase includes CCBX loan growth of $153.7 million, or 15.2%, and community bank loan growth of $56.5 million, or 3.5%, which includes a $0.9 million, or 19.3%, reduction in PPP loans due to forgiveness and principal paydowns.

Loans as a percentage of deposits were 92.5% as of March 31, 2023, compared to 93.2% as of December 31, 2022. We remain focused on serving our communities and markets by growing loans and funding those loans with customer deposits.

The following table summarizes our loan portfolio by type of loan as of the dates indicated:

	As of March 31, 2023					As of December 31, 2022
(dollars in thousands; unaudited)	Amount			Percent		Amount			Percent
Commercial and industrial loans:
PPP loans	$	3,791		0.1	%	$	4,699		0.2	%
Capital call lines	118,796			4.2		146,029			5.5
All other commercial & industrial loans	203,751			7.2		161,900			6.1
Total commercial and industrial loans:	326,338			11.5		312,628			11.8
Real estate loans:
Construction, land and land development	206,635			7.3		214,055			8.1
Residential real estate	455,507			16.0		449,157			17.1
Commercial real estate	1,102,771			38.8		1,048,752			39.8
Consumer and other loans	752,528			26.4		608,771			23.2
Gross loans receivable	2,843,779			100.0	%	2,633,363			100.0	%
Net deferred origination fees - PPP loans	(63)					(82)
Net deferred origination fees - all other loans	(6,512)					(6,025)
Loans receivable	$	2,837,204				$	2,627,256
Loan Yield (1)	9.95		%			9.33		%

(1)Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.

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The following tables detail the loans by segment which are included in the total loan portfolio table above:

Community Bank	As of
	March 31, 2023					December 31, 2022
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total
Commercial and industrial loans:
PPP loans	$	3,791		0.2	%	$	4,699		0.3	%
All other commercial & industrial loans	155,082			9.3		146,982			9.1
Real estate loans:
Construction, land and land development loans	206,635			12.3		214,055			13.2
Residential real estate loans	206,140			12.3		204,581			12.6
Commercial real estate loans	1,102,771			65.7		1,048,752			64.7
Consumer and other loans:
Other consumer and other loans	2,860			0.2		1,725			0.1
Gross Community Bank loans receivable	1,677,279			100.0	%	1,620,794			100.0	%
Net deferred origination fees	(6,265)					(6,042)
Loans receivable	$	1,671,014				$	1,614,752
Loan Yield(1)	5.97		%			5.70		%

(1)Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.

CCBX	As of
	March 31, 2023					December 31, 2022
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total
Commercial and industrial loans:
Capital call lines	$	118,796		10.2	%	$	146,029		14.4	%
All other commercial & industrial loans	48,669			4.1		14,918			1.5
Real estate loans:
Residential real estate loans	249,367			21.4		244,576			24.2
Consumer and other loans:
Credit cards	318,187			27.3		279,644			27.6
Other consumer and other loans	431,481			37.0		327,402			32.3
Gross CCBX loans receivable	1,166,500			100.0	%	1,012,569			100.0	%
Net deferred origination fees	(310)					(65)
Loans receivable	$	1,166,190				$	1,012,504
Loan Yield - CCBX (1)(2)	16.09		%			15.20		%

(1)CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. To determine net BaaS loan income earned from CCBX loan relationships, the Company takes BaaS loan interest income and deducts BaaS loan expense to arrive at net BaaS loan income which can be compared to interest income on the Company’s community bank loans. Net BaaS loan income is a non-GAAP measure. See the reconciliation of non-GAAP measures set forth in the section titled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for the impact of BaaS loan expense on CCBX yield.

(2)Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.

Commercial and Industrial Loans. Commercial and industrial loans increased $13.7 million, or 4.4%, to $326.3 million as of March 31, 2023, from $312.6 million as of December 31, 2022. The increase in commercial and industrial loans receivable over December 31, 2022 was due to a $41.9 million increase in other commercial and industrial loans partially offset by $908,000 in forgiven and repaid PPP loans and a decrease of $27.2 million in capital call lines. Included in the commercial and industrial loan balance is $118.8 million and $146.0 million in capital call lines resulting from relationships with our CCBX partners as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023, there were $48.7 million in CCBX other commercial loans, compared to $14.9 million at December 31, 2022.

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Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and effectively. These loans are primarily made based on the borrower’s ability to service the debt from income. Most commercial and industrial loans are secured by the assets being financed or other business assets, such as accounts receivable, inventory or equipment, and we generally obtain personal guarantees on these loans. Commercial and industrial loans includes $48.6 million and $45.1 million in loans to financial institutions as of March 31, 2023 and December 31, 2022, respectively.

Also included in commercial and industrial loans is $3.8 million and $4.7 million in PPP loans as of March 31, 2023, and December 31, 2022, respectively. The impact of PPP loans on the Company’s financial statements has significantly lessened as nearly all of the PPP loans have been paid off and/or forgiven.

Construction, Land and Land Development Loans. Construction, land and land development loans decreased $7.4 million, or 3.5%, to $206.6 million as of March 31, 2023, from $214.1 million as of December 31, 2022. The decrease is attributed to the completion of a few construction and development projects.

Unfunded loan commitments for construction, land and land development loans were $180.5 million at March 31, 2023, compared to $142.5 million at December 31, 2022. Although we have seen a strong commercial and residential real estate market in the Puget Sound region thus far in 2023, the economic environment is continuously changing with the recent bank failures, inflation, higher interest rates, global unrest, the war in Ukraine, mid-term elections and trade issues that have resulted in some economic uncertainty and slowing in construction lending.

Construction, land and land development loans are comprised of loans to fund construction, land acquisition and land development construction. The properties securing these loans are primarily located in the Puget Sound region and are comprised of both residential and commercial properties, including owner occupied properties and investor properties. As of March 31, 2023, construction, land and land development loans included $98.0 million in commercial construction loans, $42.0 million in undeveloped land loans, $32.3 million in residential construction loans and $34.4 million in other construction, land and land development loans, compared to $100.7 million in commercial construction loans, $44.6 million in undeveloped land loans, $32.9 million in residential construction loans and $35.9 million in other construction, land and land development loans as of December 31, 2022.

Residential Real Estate Loans. Our one-to-four family residential real estate loans increased $6.4 million, or 1.4%, to $455.5 million as of March 31, 2023, from $449.2 million as of December 31, 2022 largely due to an increase of $4.8 million in CCBX loans.

As of March 31, 2023, there were $249.4 million in CCBX home equity loans included in residential real estate, compared to $244.6 million at December 31, 2022, as a result of increased activity. These home equity lines of credit are secured by residential real estate and are accessed by using a credit card.

We have purchased residential mortgages originated through other financial institutions to hold for investment with the intent to diversify our residential mortgage loan portfolio, meet certain regulatory requirements and increase our interest income. We last purchased residential mortgage loans in 2018. As of March 31, 2023 and December 31, 2022, we held $9.4 million in purchased residential real estate mortgage loans. These loans purchased typically have a fixed rate with a term of 15 to 30 years and are collateralized by one-to-four family residential real estate. We have a defined set of credit guidelines that we use when evaluating these loans. Although purchased loans were originated and underwritten by another institution, our mortgage, credit, and compliance departments conduct an independent review of each underlying loan that includes re-underwriting each of these loans to our credit and compliance standards.

Like our commercial real estate loans, our residential real estate loans are secured by real estate, the value of which may fluctuate significantly over a short period of time as a result of market conditions in the area in which the real estate is located. Adverse developments affecting real estate values in our market areas could therefore increase the credit risk associated with these loans, impair the value of property pledged as collateral on loans, and affect our ability to sell the collateral upon foreclosure without a loss or additional losses.

Commercial Real Estate Loans. Commercial real estate loans increased $54.0 million, or 5.2%, to $1.10 billion as of March 31, 2023, from $1.05 billion as of December 31, 2022.

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These increases, which occurred across the various segments of our portfolio, were due to our commitment to grow the portfolio in the Puget Sound region. We actively seek commercial real estate loans in our markets and our lenders are experienced in competing for these loans and managing these relationships.

We make commercial mortgage loans collateralized by owner-occupied and non-owner-occupied real estate, as well as multi-family residential loans. The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as manufacturing and processing facilities, business parks, warehouses, retail centers, convenience stores, hotels and motels, low rise office buildings, mixed-use residential and commercial, and other properties. We originate both fixed- and adjustable-rate loans with terms up to 20 years. Fixed-rate loans typically amortize over a 10 to 25 year period with balloon payments due at the end of five to ten years. Adjustable-rate loans are generally based on the prime rate and adjust with the prime rate or are based on term equivalent FHLB rates. At March 31, 2023, approximately 31.7% of the commercial real estate loan portfolio consisted of fixed rate loans. Commercial real estate loans represented 38.8% of our loan portfolio at March 31, 2023 and are historically our largest source of revenue. As of March 31, 2023, we held $42.2 million in purchased commercial real estate loans, compared to $42.4 million at December 31, 2022. Our credit administration team has substantial experience in underwriting, managing, monitoring and working out commercial real estate loans, and remains diligent in communicating and proactively working with borrowers to help mitigate potential credit deterioration.

Consumer and Other. Consumer and other loans increased $143.8 million, or 23.6%, to $752.5 million, from $608.8 million as of December 31, 2022, as a result of growth in CCBX loans originated through our partners.

CCBX consumer loans totaled $749.7 million as of March 31, 2023, compared to $607.0 million at December 31, 2022. CCBX consumer loans include installment loans, credit cards, lines of credit and other loans. Our community bank consumer and other loans totaled $2.9 million as of March 31, 2023, compared to $1.7 million at December 31, 2022 and are comprised of personal lines of credit, automobile, boat, and recreational vehicle loans, and secured term loans.

Industry Exposure and Categories of Loans

We have a diversified loan portfolio, representing a wide variety of industries. Our major categories of loans are commercial real estate, consumer and other loans, residential real estate, commercial and industrial, and construction, land and land development loans. Together they represent $2.84 billion in outstanding loan balances. When combined with $2.36 billion in unused commitments the total of these categories is $5.20 billion. However, total exposure on CCBX loans is subject to portfolio and partner maximum limits. See "Material Cash Requirements and Capital Resources" for maximum limits on CCBX loans by category.

The following table summarizes our community bank loan commitments by industry for our commercial real estate portfolio as of March 31, 2023:

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(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Outstanding Balance & Available Commitment		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
Community bank commercial real estate loans
Apartments	$	264,439	$	6,231	$	270,670	5.2	%	$	3,040	87
Hotel/Motel	148,869		2,931		151,800		2.9		6,203		24
Office	99,407		3,258		102,665		2.0		1,058		94
Convenience Store	95,885		2,586		98,471		1.9		1,844		52
Retail	85,679		1,162		86,841		1.7		921		93
Mixed use	85,624		3,670		89,294		1.7		1,007		85
Warehouse	83,366		1,290		84,656		1.6		1,516		55
Mini Storage	50,643		917		51,560		1.0		2,814		18
Strip Mall	45,801		—		45,801		0.9		5,725		8
Manufacturing	37,558		800		38,358		0.7		1,138		33
Groups < 0.70% of total	105,500		3,947		109,447		2.1		1,256		84
Total	$	1,102,771	$	26,792	$	1,129,563	21.7	%	$	1,742	633

As illustrated in the table below, our CCBX partners originate a large number of mostly smaller dollar loans, resulting in an average consumer loan of just $1,600.

The following table summarizes our loan commitments by category for our consumer and other loan portfolio as of March 31, 2023:

(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Outstanding Balance & Available Commitment (1)		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
CCBX consumer loans
Installment loans	$	425,280	$	—	$	425,280	8.2	%	$	1.9	225,180
Credit cards	318,187		944,758		1,262,945		24.3		1.5		219,417
Lines of credit	3,605		361		3,966		0.1		0.3		12,553
Other loans	2,596		—		2,596		0.1		0.2		16,389
Community bank consumer loans
Other loans	1,408		—		1,408		0.0		5.8		241
Installment loans	1,294		—		1,294		0.0		51.8		25
Lines of credit	158		619		777		0.0		3.4		47
Total	$	752,528	$	945,738	$	1,698,266	32.7	%	$	1.6	473,852

(1)Total exposure on CCBX capital call lines is subject to a portfolio maximum limit of $350.0 million. See "Material Cash Requirements and Capital Resources" for maximum limits on CCBX loans by category.

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The following table summarizes our loan commitments by category for our residential real estate portfolio as of March 31, 2023:

(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Exposure (1)		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
CCBX residential real estate loans
Home equity line of credit	$	249,367	$	359,215	$	608,582	11.7	%	$	26	9,495
Community bank residential real estate loans
Closed end, secured by first liens	178,206		4,748		182,954		3.5		600		297
Home equity line of credit	19,318		43,565		62,883		1.2		91		213
Closed end, second liens	8,616		1,016		9,632		0.2		331		26
Total	$	455,507	$	408,544	$	864,051	16.6	%	$	45	10,031

(1)Total exposure on CCBX loans is subject to portfolio maximum limits. See "Material Cash Requirements and Capital Resources" for maximum limits on CCBX loans by category.

The following table summarizes our loan commitments by industry for our commercial and industrial loan portfolio as of March 31, 2023:

(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Outstanding Balance & Available Commitment (1)		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
Capital Call Lines	$	118,796	$	716,609	$	835,405	16.1	%	$	707	168
Retail	49,329		6,174		55,503		1.1		24		2,026
Financial Institutions	48,649		—		48,649		0.9		4,054		12
Construction/Contractor Services	22,019		30,785		52,804		1.0		120		183
Medical / Dental / Other Care	20,758		5,848		26,606		0.5		769		27
Manufacturing	11,622		5,416		17,038		0.3		208		56
Groups < 0.30% of total	55,165		30,251		85,416		1.6		175		315
Total	$	326,338	$	795,083	$	1,121,421	21.5	%	$	117	2,787

(1)Total exposure on CCBX loans is subject to portfolio maximum limits. See "Material Cash Requirements and Capital Resources" for maximum limits on CCBX loans by category.

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The following table details our community bank loan commitments by category for our construction, land and land development loan portfolio as of March 31, 2023:

(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Outstanding Balance & Available Commitment		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
Community bank construction, land and land development loans
Commercial construction	$	97,987	$	141,667	$	239,654	4.6	%	$	4,260	23
Residential construction	32,268		21,988		54,256		1.0		978		33
Undeveloped land loans	41,951		9,718		51,669		1.0		2,997		14
Developed land loans	19,130		3,732		22,862		0.4		660		29
Land development	15,299		3,392		18,691		0.4		805		19
Total	$	206,635	$	180,497	$	387,132	7.4	%	$	1,751	118

Nonperforming Assets

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by applicable regulations. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. In general, we place loans on nonaccrual status when they become 90 days past due. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. Installment (closed end) consumer loans and revolving (open-ended loans, such as credit cards) originated through CCBX partners continue to accrue interest until they are charged-off at 120 days past due for installment loans (primarily unsecured loans to consumers) and 180 days past due for revolving loans (primarily credit cards). These consumer loans are reported out as nonperforming/substandard loans, 90+ days past due and still accruing. As a result of the type of loans (primarily consumer loans) originated through our CCBX partners, we anticipate that balances 90 days past due or more and still accruing will increase as those loans grow. When loans are placed on nonaccrual status, all unpaid accrued interest is reversed from income and all interest accruals are stopped. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal balance. Loans are returned to accrual status if we believe that all remaining principal and interest is fully collectible and there has been at least six months of sustained repayment performance since the loan was placed on nonaccrual status. We define nonperforming loans as loans on nonaccrual status and accruing loans 90 days or more past due. Nonperforming assets also include other real estate owned and repossessed assets.

We believe our lending practices and active approach to managing nonperforming assets has resulted in sound asset quality and timely resolution of problem assets. We have procedures in place to assist us in maintaining the overall credit quality of our loan portfolio. We have established underwriting guidelines, concentration limits and we also monitor our delinquency levels for any negative or adverse trends. We actively manage problem assets to reduce our risk for loss.

We had $31.5 million in nonperforming assets as of March 31, 2023, compared to $33.2 million as of December 31, 2022. This includes $24.6 million in CCBX loans more than 90 days past due and still accruing interest as of March 31, 2023, compared to $26.1 million at December 31, 2022. All of our nonperforming assets were nonperforming loans as of March 31, 2023 and December 31, 2022. Our nonperforming loans to loans receivable ratio was 1.11% at March 31, 2023, compared to 1.26% at December 31, 2022. The decrease in nonperforming assets was due to a $1.5 million decrease in CCBX partner loans that are 90 days or more past due and still accruing interest. Community bank nonaccrual loans decreased $98,000 during the three months ended March 31, 2023 due to principal reductions/charge-offs.

Our community bank credit quality remains strong, as demonstrated by the low level of community bank charge-offs and nonperforming loan balance for the three months ended March 31, 2023. CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses, when accruing

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consumer loans originated through CCBX partners are charged-off at 120 days past due for installment loans (primarily unsecured loans to consumers) and 180 days past due for revolving loans (primarily credit cards).

The following table presents information regarding nonperforming assets at the dates indicated:

(dollars in thousands; unaudited)	As of March 31, 2023			As of December 31, 2022
Nonaccrual loans:
Commercial and industrial loans	$	15		$	113
Real estate loans:
Construction, land and land development	66			66
Commercial real estate	6,901			6,901
Total nonaccrual loans	6,982			7,080
Accruing loans past due 90 days or more:
Commercial & industrial loans	187			404
Real estate loans:
Residential real estate loans	946			876
Consumer and other loans:
Credit cards	17,772			10,570
Other consumer and other loans	5,657			14,245
Total accruing loans past due 90 days or more	24,562			26,095
Total nonperforming loans	31,544			33,175
Real estate owned	—			—
Repossessed assets	—			—
Modified loans for borrowers experiencing financial difficulty, accruing	—			—
Total nonperforming assets	$	31,544		$	33,175
Total nonaccrual loans to loans receivable	0.25		%	0.27		%
Total nonperforming loans to loans receivable	1.11		%	1.26		%
Total nonperforming assets to total assets	0.91		%	1.06		%

The following tables detail nonperforming assets by segment which are included in the total nonperforming assets table above:

Community Bank	As of
(dollars in thousands; unaudited)	March 31, 2023		December 31, 2022
Nonaccrual loans:
Commercial and industrial loans	$	15	$	113
Real estate:
Construction, land and land development	66		66
Commercial real estate	6,901		6,901
Total nonaccrual loans	6,982		7,080
Accruing loans past due 90 days or more:
Total accruing loans past due 90 days or more	—		—
Total nonperforming loans	6,982		7,080
Other real estate owned	—		—
Repossessed assets	—		—
Total nonperforming assets	$	6,982	$	7,080

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CCBX	As of
(dollars in thousands; unaudited)	March 31, 2023		December 31, 2022
Nonaccrual loans	$	—	$	—
Accruing loans past due 90 days or more:
Commercial & industrial loans	187		404
Real estate loans:
Residential real estate loans	946		876
Consumer and other loans:
Credit cards	17,772		10,570
Other consumer and other loans	5,657		14,245
Total accruing loans past due 90 days or more	24,562		26,095
Total nonperforming loans	24,562		26,095
Other real estate owned	—		—
Repossessed assets	—		—
Total nonperforming assets	$	24,562	$	26,095

Allowance for credit losses

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans in the pool and whether it needs to evaluate the allowance on an individual basis. The Bank must estimate expected credit losses over the loans’ contractual terms, adjusted for expected prepayments. In estimating the life of the loan, the Bank cannot extend the contractual term of the loan for expected extensions, renewals, and modifications, unless the extension or renewal options are included in the contract at the reporting date and are not unconditionally cancellable by the Bank. Because expected credit losses are estimated over the contractual life adjusted for estimated prepayments, determination of the life of the loan may significantly affect the ACL. The Company has chosen to segment its portfolio consistent with the manner in which it manages the risk of the type of credit.

•Community Bank Portfolio: The ACL calculation is derived for loan segments utilizing loan level information and relevant information from internal and external sources related to past events and current conditions. In addition, the Company incorporates a reasonable and supportable forecast.

•CCBX Portfolio: The Bank calculates the ACL on loans on an aggregate basis based on each partner and product level, segmenting the risk inherent in the CCBX portfolio based on qualitative and quantitative trends in the portfolio.

Also included in the ACL are qualitative reserves to cover losses that are expected, but in the Company’s assessment may not be adequately represented in the quantitative method. For example, factors that the Company considers include environmental business conditions, borrower’s financial condition, credit rating and the volume and severity of past due loans and non-accrual loans. Based on this analysis, the Company records a provision for loan losses to maintain the allowance at appropriate levels.

As of March 31, 2023, the allowance for credit losses totaled $89.1 million, or 3.14% of total loans. As of December 31, 2022, the allowance for loan losses totaled $74.0 million, or 2.82% of total loans. Effective January 1, 2023 the Company implemented the CECL allowance model which calculates reserves over the life of the loan and is largely driven by portfolio characteristics, economic outlook, and other key methodology assumptions versus the incurred loss model, which is what we were previously using. As a result of implementing CECL, there was a one-time adjustment to the 2023 opening allowance balance of $3.9 million. The day one CECL adjustment for community bank loans included a reduction of $310,000 to the community bank allowance driven by the reversal of the unallocated balance and a reduction of $340,000 related to the community bank unfunded commitment reserve also driven by the reversal of the unallocated balance. This was offset by an increase to the CCBX allowance for $4.2 million. With the mirror image approach accounting related to the contingent credit enhancement asset for CCBX partner loans, there was a CECL day one increase to the indemnification asset in the amount of $4.5 million. Net, the day one impact to retained earnings for the Bank’s transition to CECL was an increase of $954,000, excluding the impact of income taxes.

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The increase in the Company’s allowance for credit losses for the quarter ended March 31, 2023 compared to December 31, 2022, is largely related to the provision for CCBX partner loans. During the three months ended March 31, 2023, a $43.1 million provision for credit losses - loans was recorded for CCBX partner loans based on management’s analysis. The factors used in management’s analysis for community bank credit losses indicated that a provision for credit losses - loans of $428,000 was needed for the three months ended March 31, 2023. The economic environment is continuously changing with the recent bank failures, inflation, higher interest rates, global unrest, the war in Ukraine, mid-term elections and trade issues that have resulted in some economic uncertainty. As described above, CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses.

Agreements with our CCBX partners provide for a credit enhancement provided by the partner which protects the Bank by absorbing incurred losses. In accordance with accounting guidance, we estimate and record a provision for expected losses for these CCBX loans and negative deposit accounts. When the provision for credit losses - loans and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements) in recognition of the CCBX partner's legal commitment to cover losses. The credit enhancement asset is relieved as credit enhancement payments and recoveries are received from the CCBX partner. Agreements with our CCBX partners also provide protection to the Bank from fraud by absorbing incurred fraud losses. Fraud losses are recorded when incurred as losses in noninterest expense, and the enhancement received from the CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement. CCBX partners also pledge a cash reserve account at the Bank which the Bank can collect from when losses occur that is then replenished by the partner on a regular interval. Although agreements with our CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses by absorbing incurred credit and fraud losses, if our partner is unable to fulfill their contracted obligations to replenish their cash reserve account then the Bank would be exposed to additional loan and deposit losses, as a result of this counterparty risk. If a CCBX partner does not replenish their cash reserve account then the Bank can declare the agreement in default, take over servicing and cease paying the partner for servicing the loan and providing credit enhancements. The Bank would write-off any remaining credit enhancement asset from the CCBX partner but would retain the full yield on the loan portfolio going forward, and BaaS loan expense would decrease once default occurred and payments to the CCBX partner were stopped.

The following table presents, as of and for the periods indicated, net charge-off information by segment:

	Three Months Ended
	March 31, 2023									March 31, 2022
(dollars in thousands; unaudited)	Community Bank			CCBX			Total			Community Bank			CCBX			Total
Gross charge-offs	$	50		$	34,117		$	34,167		$	4		$	2,804		$	2,808
Gross recoveries	(5)			(1,860)			(1,865)			(4)			—			(4)
Net charge-offs	$	45		$	32,257		$	32,302		$	—		$	2,804		$	2,804
Net charge-offs to average loans (1)	0.01		%	12.29		%	4.84		%	0.00		%	2.98		%	0.64		%

(1)Annualized calculations shown for periods presented.

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The following table presents, as of and for the periods indicated, an analysis of the allowance for credit losses and other related data:

	As of or for the Three Months Ended March 31,
(dollars in thousands; unaudited)	2023			2022
Allowance at beginning of period	$	74,029		$	28,632
Impact of adopting CECL (ASC 326)	3,852			—
Provision for credit losses	43,544			12,942
Charge-offs:
Commercial and industrial loans	776			5
Residential real estate	737			—
Consumer and other	32,654			2,803
Total charge-offs	34,167			2,808
Recoveries:
Commercial and industrial loans	3			2
Consumer and other	1,862			2
Total recoveries	1,865			4
Net charge-offs	32,302			2,804
Allowance at end of period	$	89,123		$	38,770
Allowance for credit losses to nonaccrual loans	1276.47		%	21070.65		%
Allowance to nonperforming loans	282.54		%	1653.30		%
Allowance to loans receivable	3.14		%	1.97		%

(1)Annualized calculations shown for periods presented.

The allowance for credit losses to nonaccrual loans ratio decreased as of March 31, 2023, compared to March 31, 2022 as a result of an increase of $6.8 million in nonaccrual community bank loans, combined with an increase of $50.4 million in the allowance for credit losses. The increase in the allowance for credit losses for the three March 31, 2023 compared to the three March 31, 2022, is largely related to the increase in the allowance for loans originated through our CCBX partners. CCBX partner agreements provide for, and the Company has collected in full, credit enhancements that cover the $32.3 million in net charge-offs on CCBX loans for the three March 31, 2023. At March 31, 2023, the allowance for credit losses for CCBX partner loans totaled $68.4 million, compared to $18.1 million at March 31, 2022.

The following table presents the loans receivable and allowance for credit losses by segment for the periods indicated:

	As of March 31, 2023									As of December 31, 2022
(dollars in thousands; unaudited)	Community Bank			CCBX			Total			Community Bank			CCBX			Total
Loans receivable	$	1,671,014		$	1,166,190		$	2,837,204		$	1,614,752		$	1,012,504		$	2,627,256
Allowance for credit losses	(20,708)			(68,415)			(89,123)			(20,636)			(53,393)			(74,029)
Allowance for credit losses to     total loans receivable	1.24		%	5.87		%	3.14		%	1.28		%	5.27		%	2.82		%

Although we believe that we have established our allowance for credit losses in accordance with GAAP and that the allowance for credit losses was adequate to provide for expected losses in the portfolio at all times shown above, future provisions for credit losses will be subject to ongoing evaluations of the risks in our loan portfolio. We have not seen an increase in community bank credit losses due to COVID-19 as originally anticipated, as evidenced by the low level of charge-offs and nonperforming loans, however, the economic environment is continuously changing with the recent bank failures, inflation, higher interest rates, global unrest, the war in Ukraine, mid-term elections and trade issues that have resulted in some economic uncertainty. If economic conditions worsen then Washington state and Puget Sound region may experience a more severe economic downturn, and our asset quality could deteriorate, which may require material additional provisions for credit losses.

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Securities

We use our securities portfolio primarily as a source of liquidity and collateral that can be readily sold or pledged for public deposits or other business purposes. At March 31, 2023, 96.1% of our investment portfolio consisted of U.S. Treasury securities. The remainder of our securities portfolio was invested in municipal bonds, U.S. Agency collateralized mortgage obligations and U.S. Agency residential mortgage-backed securities. Because we target a loan-to-deposit ratio in the range of 90% to 100%, we prioritize liquidity over the earnings of our securities portfolio. At March 31, 2023, our loan-to-deposit ratio was 92.5% due to our significant growth in both loans and deposits. Our securities portfolio represented less than 5% of assets. To the extent our securities represent more than 5% of assets, absent an immediate need for liquidity, we anticipate investing excess funds to provide a higher return.

As of March 31, 2023, the amortized cost of our investment securities totaled $104.0 million, an increase of $2.7 million, or 2.6%, compared to $101.3 million as of December 31, 2022. The increase in the securities portfolio was due to the purchase of one security for $2.7 million during the three months ended March 31, 2023. This security was purchased for CRA purposes and placed in our held-to-maturity portfolio. The existing securities in our held-to-maturity portfolio were purchased for and are being held for CRA purposes.

Our investment portfolio consists of securities classified as available-for-sale and, to a lesser amount, held-to-maturity. The carrying values of our investment securities classified as available-for-sale are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity. As of March 31, 2023, our available-for-sale portfolio has an unrealized loss of $2.3 million, compared to an unrealized loss of $3.0 million as of December 31, 2022.

The following table summarizes the amortized cost and estimated fair value of our investment securities as of the dates shown:

	As of March 31, 2023				As of December 31, 2022
(dollars in thousands; unaudited)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities available-for-sale:
U.S. Treasury securities	$	99,974	$	97,699	$	99,967	$	97,015
U.S. Agency collateralized mortgage obligations	52		50		54		51
U.S. Agency residential mortgage-backed securities	—		—		1		1
Municipal bonds	250		250		250		250
Total available-for-sale securities	100,276		97,999		100,272		97,317
Securities held-to-maturity:
U.S. Agency residential mortgage-backed securities	3,705		3,597		1,036		916
Total held-to-maturity securities	3,705		3,597		1,036		916
Total investment securities	$	103,981	$	101,596	$	101,308	$	98,233

We held a $2.2 million equity interest in a financial technology company as of March 31, 2023 and December 31, 2022, which consists of common stock and preferred shares.

Additionally, we held a $350,000 equity interest in a technology company of March 31, 2023 and December 31, 2022.

We invest in investment funds that are designed to help accelerate technology adoption at banks and have invested in three separate funds. These funds are carried at fair value as reported by the funds. During the three months ended March 31, 2023, we contributed $123,000 with investment funds designed to help accelerate technology adoption at banks, and recognized gains of $39,000, resulting in an equity interest of $617,000 at March 31, 2023. The Company has committed up to $820,000 in capital for these investment funds, however, the Company is not obligated to fund these commitments prior to a capital call.

Deposits

We offer a variety of deposit products that have a wide range of interest rates and terms, including demand, money market, savings, and time accounts as well as IntraFi network sweep deposits. Sweep deposits enable us to provide an FDIC

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insured deposit option to customers that have balances in excess of the FDIC insurance limit. This service trades our customers’ funds as certificates of deposit or interest bearing demand deposits in increments under the FDIC insured amount to other participating financial institutions and in exchange we receive time deposit or interest bearing demand investments from participating financial institutions in a reciprocal agreement. We rely primarily on competitive pricing policies, convenient locations, electronic delivery channels (internet and mobile), and personalized service to attract new deposits and retain existing deposits. Additionally, we offer deposit products through our CCBX segment. CCBX deposits are generally classified as interest bearing negotiable order of withdrawal (“NOW”) and money market accounts. CCBX deposit products allow us to offer a broader range of partner specific products, which include products designed to reach specific under-served or under-banked populations served by our CCBX partners.

Total deposits as of March 31, 2023 were $3.10 billion, an increase of $277.7 million, or 9.9%, compared to $2.82 billion as of December 31, 2022. The increase in deposits was largely in core deposits, which increased $381.6 million to $3.07 billion from $2.69 billion at December 31, 2022. We define core deposits as all deposits except time deposits and brokered deposits. The $381.6 million increase in core deposits is also largely from growth in the CCBX segment, which accounted for $386.1 million of the increase, partially offset by a decrease of $4.4 million in community bank deposits. The slight decrease in community bank deposits was a result of pricing disciplines as some customer sought higher rate products elsewhere. Our cost of deposits for the community bank was 0.66% for the three months ended March 31, 2023. BaaS-brokered deposits are now classified as NOW accounts due to a change in the relationship agreement with one of our partners; these deposits increased $173.9 million to $275.4 million as of March 31, 2023. These deposits increased as a result of sweeping them back on the balance sheet. Additionally, as of March 31, 2023 we have access to $36.9 million in CCBX customer deposits that are currently being transferred from the Bank’s balance sheet to other financial institutions on a daily basis. The Bank could retain these deposits for liquidity and funding purposes if needed. If a portion of these deposits are retained, they would be classified as NOW accounts.

Included in total deposits is $1.56 billion in CCBX deposits, an increase of $284.5 million, or 22.2%, compared to $1.28 billion as of December 31, 2022. CCBX customer deposit relationships include deposits with CCBX end customers, operating and non-operating deposit accounts. The deposits from our CCBX segment are generally classified as interest bearing NOW and money market accounts.

Total noninterest bearing deposits as of March 31, 2023 were $761.8 million, a decrease of $13.2 million, or 1.7%, compared to $775.0 million as of December 31, 2022. Noninterest bearing deposits represent 24.6% and 27.5% of total deposits for March 31, 2023 and December 31, 2022, respectively.

Total interest bearing account balances, excluding time deposits, as of March 31, 2023 were $2.31 billion, an increase of $293.3 million, or 14.6%, compared to $2.01 billion as of December 31, 2022. The $293.3 million increase is the due in part to former BaaS-brokered deposits now being classified as NOW accounts in the first quarter of 2023 due to a change in the relationship agreement with one of our partners, combined with CCBX growth in interest bearing deposits and a community bank increase in interest bearing deposits of $25.3 million. Included in total deposits is $94.3 million in IntraFi network NOW and money market sweep accounts as of March 31, 2023, which provides our customers with fully insured deposits through a sweep to other financial institutions.

Total time deposit balances as of March 31, 2023 were $27.1 million, a decrease of $2.4 million, or 8.1%, from $29.4 million as of December 31, 2022. The decrease is due to the strong increase in core deposits, and our focus on core deposits and letting higher rate deposits run off as they mature. We have seen competitors increase rates on time deposits, and we have not globally matched their rates in response as we focus on growing and retaining less costly core deposits.

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The following table sets forth deposit balances at the dates indicated:

	As of March 31, 2023					As of December 31, 2022
(dollars in thousands; unaudited)	Amount			Percent of Total Deposits		Amount			Percent of Total Deposits
Demand, noninterest bearing	$	761,800		24.6	%	$	775,012		27.5	%
NOW and money market	2,207,121			71.3		1,804,399			64.0
Savings	99,241			3.2		107,117			3.8
Total core deposits	3,068,162			99.1		2,686,528			95.3
Brokered deposits	1			—		101,546			3.6
Time deposits less than $100,000	11,343			0.4		12,596			0.5
Time deposits $100,000 and over	15,717			0.5		16,851			0.6
Total	$	3,095,223		100.0	%	$	2,817,521		100.0	%
Cost of deposits (1)	2.13		%			1.56		%

(1)Cost of deposits is annualized for the three months ended for each period presented.

The following tables detail the deposits for the segments which are included in the total deposit portfolio table above:

Community Bank	As of
	March 31, 2023					December 31, 2022
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total
Demand, noninterest bearing	$	664,452		43.4	%	$	694,179		45.2	%
NOW and money market	743,548			48.6		709,490			46.1
Savings	96,330			6.3		105,101			6.8
Total core deposits	1,504,330			98.3		1,508,770			98.1
Brokered deposits	1			0.0		1			0.0
Time deposits less than $100,000	11,343			0.7		12,596			0.8
Time deposits $100,000 and over	15,717			1.0		16,851			1.1
Total Community Bank deposits	$	1,531,391		100.0	%	$	1,538,218		100.0	%
Cost of deposits(1)	0.66		%			0.37		%

(1)Cost of deposits is annualized for the three months ended for each period presented.

CCBX	As of
	March 31, 2023					December 31, 2022
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total
Demand, noninterest bearing	$	97,348		6.2	%	$	80,833		6.3	%
NOW and money market	1,463,573			93.6		1,094,909			85.6
Savings	2,911			0.2		2,016			0.2
Total core deposits	1,563,832			100.0		1,177,758			92.1
BaaS-brokered deposits	—			—		101,545			7.9
Total CCBX deposits	$	1,563,832		100.0	%	$	1,279,303		100.0	%
Cost of deposits (1)	3.89		%			3.13		%

(1)Cost of deposits is annualized for the three months ended for each period presented.

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The following table sets forth the Company’s time deposits of $100,000 or more by time remaining until maturity as of the dates indicated:

(dollars in thousands; unaudited)	As of March 31, 2023		As of December 31, 2022
Maturity Period:
Three months or less	$	3,657	$	4,067
Over three through six months	2,708		2,957
Over six through twelve months	6,827		5,892
Over twelve months	2,525		3,935
Total	$	15,717	$	16,851
Weighted average maturity (in years)	0.83		0.76

Average deposits for the three months ended March 31, 2023 were $2.85 billion, an increase of 16.1% compared to $2.45 billion for the three months ended March 31, 2022. The increase in average deposits was primarily due to an increase in core deposits, primarily in interest rate bearing deposits. We expect deposits to increase with continued growth in our primary market areas, the increase in commercial lending relationships for which we also seek deposit balances and the results of business development efforts by branch managers, treasury service personnel and lenders.

The average rate paid on total deposits was 2.13% for the three months ended March 31, 2023, compared to 0.09% for the three months ended March 31, 2022. The average rate paid on NOW and money market accounts increased 2.92% for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The average rate paid on time deposits of less than $100,000 decreased 0.12% for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The average rate paid on time deposits greater than $100,000 decreased 2.06% for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The average rate paid on time deposits greater than $100,000 was higher in the quarter ended March 31, 2022 due to the recognition of additional interest expense of $130,000 during the quarter to correct interest on CDs from a previous period; there was no such adjustment in the quarter ended March 31, 2023. The average rate paid on savings increased 0.11% for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The average rate paid on BaaS brokered deposits increased 3.73% for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The overall higher average rate paid on interest bearing accounts in the three months ended March 31, 2023 compared to the three months ended March 31, 2022 is due to the recent interest rate increases by the FOMC. Increased Fed Funds rates along with competition are expected to continue to impact future cost of deposits and our pricing strategies.

The following table presents the average balances and average rates paid on deposits for the periods indicated:

	For the Three Months Ended March 31,
	2023				2022
(dollars in thousands; unaudited)	Average Balance		Average Rate(1)		Average Balance		Average Rate(1)
Demand, noninterest bearing	$	775,940	0.00	%	$	1,320,144	0.00	%
NOW and money market	1,833,035		3.06		917,075		0.14
Savings	103,893		0.14		104,209		0.03
BaaS-brokered deposits	105,315		4.08		68,819		0.35
Time deposits less than $100,000	11,838		0.21		14,844		0.33
Time deposits $100,000 and over	16,136		0.25		27,037		2.31
Total deposits	$	2,846,157	2.13	%	$	2,452,128	0.09	%

(1)Annualized calculations shown for periods presented.

The ratio of average noninterest bearing deposits to average total deposits for the three months ended March 31, 2023 was 27.3% and compared to 53.8% for the three months ended March 31, 2022.

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Uninsured Deposits

The FDIC insures our deposits up to $250,000 per depositor, per insured bank for each account ownership category. Deposits that exceed insurance limits are uninsured. At March 31, 2023, deposits totaled $3.10 billion, of which total estimated uninsured deposits were $768.3 million, or 24.8% of total deposits, compared to $835.8 million, or 29.7% of total deposits as of December 31, 2022. At March 31, 2022, deposits totaled $2.58 billion, of which total estimated uninsured deposits were $850.1 million, or 33.0% of total deposits. The Bank is using sweep deposits to provide our customers with fully insured deposits.

Uninsured time deposits totaled $2.7 million as of March 31, 2023. The table below shows the estimated uninsured time deposits, by account, for the maturity periods indicated:

(dollars in thousands; unaudited)	As of March 31, 2023
Maturity Period:
Three months or less	$	314
Over three through six months	691
Over six through twelve months	1,491
Over twelve months	178
Total	$	2,674

Borrowings

We have the ability to utilize short-term to long-term borrowings to supplement deposits to fund our lending and investment activities, each of which is discussed below.

Federal Reserve Bank Line of Credit. The Federal Reserve allows us to borrow against our line of credit through a borrower in custody agreement utilizing the discount window, which is collateralized by certain loans. As of March 31, 2023 and March 31, 2022, total borrowing capacity of $465.3 million and $23.6 million, respectively, was available under this arrangement. As of March 31, 2023 and 2022, Federal Reserve advances totaled zero.

Federal Home Loan Bank Advances. The FHLB allows us to borrow against our line of credit, which is collateralized by certain loans. As of March 31, 2023 and March 31, 2022, we had borrowing capacity of $109.8 million and $98.3 million, respectively, with the FHLB. As of March 31, 2023 and 2022, FHLB advances totaled zero.

The table below provides details on the FHLB advance borrowings for the periods indicated:

	As of and For the Three Months Ended March 31,
(dollars in thousands; unaudited)	2023			2022
Maximum amount outstanding at any month-end during period:	$	—		$	24,999
Average outstanding balance during period:	$	—		$	24,443
Weighted average interest rate during period:	0.00		%	1.13		%
Balance outstanding at end of period:	$	—		$	—
Weighted average interest rate at end of period:	0.00		%	N/A

Junior Subordinated Debentures. In 2004, we issued $3.6 million in junior subordinated debentures to Coastal (WA) Statutory Trust I (the “Trust”), of which we own all of the outstanding common securities. The Trust used the proceeds from the issuance of its underlying common securities and preferred securities to purchase the debentures issued by the Company. These debentures are the Trust’s only assets and the interest payments from the debentures finance the distributions paid on the preferred securities. The debentures bear interest at a rate per annum equal to the 3-month LIBOR plus 2.10%. The effective rate as of March 31, 2023 and December 31, 2022 was 6.97% and 6.87%, respectively. We generally have the right to defer payment of interest on the debentures at any time or from time to time for a period not exceeding five years provided that no extension period may extend beyond the stated maturity of the debentures. During any such extension period, distributions on the Trust’s preferred securities will also be deferred, and our ability to pay

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dividends on our common stock will be restricted. The Trust’s preferred securities are mandatorily redeemable upon maturity of the debentures, or upon earlier redemption as provided in the indenture, subject to Federal Reserve approval. If the debentures are redeemed prior to maturity, the redemption price will be the principal amount and any accrued but unpaid interest. We unconditionally guarantee payment of accrued and unpaid distributions required to be paid on the Trust securities subject to certain exceptions, the redemption price with respect to any Trust securities called for redemption and amounts due if the Trust is liquidated or terminated.

Subordinated Debt. In August 2021, the Company issued a subordinated note in the amount of $25.0 million. The note matures on September 1, 2031, and bears interest at the rate of 3.375% per year for five years and, thereafter, reprices quarterly beginning September 1, 2026, at a rate equal to the three-month SOFR plus 2.76%. The five-year 3.375% interest period ends on September 1, 2026. We may redeem the subordinated note, in whole or in part, without premium or penalty, in principal redemption multiples of $1,000, after August 18, 2026, subject to any required regulatory approvals. Proceeds were used to repay $10.0 million in existing 5.65% interest subordinated debt on August 9, 2021 and $11.5 million was contributed to the Bank as capital during the quarter ended September 30, 2021.

In November 2022, the Company issued subordinated notes in the aggregate amount of $20.0 million. The notes mature on November 1, 2032, and bear interest at the rate of 7.00% per year for five years and, thereafter, reprices quarterly beginning November 1, 2027, at a rate equal to the three-month SOFR plus 2.9%. The five-year 7.00% interest period ends on November 1, 2027. We may redeem the subordinated notes, in whole or in part, without premium or penalty, in principal redemption multiples of $1,000, after November 1, 2027, subject to any required regulatory approvals.

Liquidity and Capital Resources

Liquidity Management

Liquidity refers to our capacity to meet our cash obligations at a reasonable cost. Our cash obligations require us to have cash flow that is adequate to fund loan growth and maintain on-balance sheet liquidity while meeting present and future obligations of deposit withdrawals, borrowing maturities and other contractual cash obligations. In managing our cash flows, management regularly confronts situations that can give rise to increased liquidity risk. These include funding mismatches, market constraints in accessing sources of funds and the ability to convert assets into cash. Changes in economic conditions or exposure to credit, market, and operational, legal and reputational risks also could affect the Bank’s liquidity risk profile and are considered in the assessment of liquidity management. Deposits obtained through our CCBX segment are a significant source of liquidity for us. If a relationship with a large CCBX partner terminates, the exit of those deposits could have an adverse impact on liquidity. Partner program agreements govern the relationship and are valid for a given period of time. Prior to exiting, the partner would need to provide us adequate notice as stipulated in the agreement that they were not going to renew the program agreement and intend to move the deposits. The movement to an alternate BaaS provider is cumbersome and would be over a period of time, which would allow us the opportunity to put alternate liquidity in place; those options are more fully discussed below. As of March 31, 2023, we have 1 partner with deposits that are in excess of 10% of total deposits and represent 26% of total deposits.

We continually monitor our liquidity position to ensure that our assets and liabilities are managed in a manner to meet all reasonably foreseeable short-term, long-term and strategic liquidity demands. Management has established a comprehensive process for identifying, measuring, monitoring and controlling liquidity risk. Because of its critical importance to the viability of the Bank, liquidity risk management is fully integrated into our risk management processes. Critical elements of our liquidity risk management include: effective corporate governance consisting of oversight by the board of directors and active involvement by management; appropriate strategies, policies, procedures, and limits used to manage and mitigate liquidity risk; comprehensive liquidity risk measurement and monitoring systems that are commensurate with the complexity of our business activities; active management of intraday liquidity and collateral; an appropriately diverse mix of existing and potential future funding sources; adequate levels of readily available cash, deposits and highly liquid marketable securities free of legal, regulatory, or operational impediments, that can be used to meet liquidity needs in stressful situations; contingency funding policies and plans that sufficiently address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes sufficient to determine the adequacy of the Bank’s liquidity risk management process. Unlike many industrial companies, substantially all of our assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, other operating expenses do reflect general levels of inflation.

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Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our liquidity requirements are met primarily through our deposits, FHLB advances and the principal and interest payments we receive on loans and investment securities. Cash on hand, cash at third-party banks, investments available-for-sale and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are routinely available to us include funds from retail, commercial, and BaaS deposits, advances from the FHLB and proceeds from the sale of loans. Less commonly used sources of funding include borrowings from the Federal Reserve discount window, draws on established federal funds lines from unaffiliated commercial banks, funds from online rate services, brokered deposits, a one-way buy through an ICS account, and the issuance of debt or equity securities. Additionally, the Bank, as of March 31, 2023, has access to $36.9 million in CCBX customer deposits that are currently being transferred from the Bank’s balance sheet to other financial institutions on a daily basis. The Bank could retain these deposits for liquidity and funding purposes if needed. We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary and are closely monitoring liquidity in this uncertain economic environment.

The Company is a corporation separate and apart from our Bank and, therefore, must provide for its own liquidity, including liquidity required to meet its debt service requirements on its subordinated note and junior subordinated debentures. The Company’s main source of cash flow has been through equity and debt offerings. The Company has consistently retained a portion of the funds from equity and debt offerings so that is has sufficient funds for its operating and debt costs. During the three months ended March 31, 2023, the Company contributed $15.0 million to the Bank. The Company currently holds $7.7 million in cash for debt servicing and operating purposes. In addition, the Bank can declare and pay dividends to the Company to meet the Company’s debt and operating expenses. There are statutory and regulatory limitations that affect the ability of the Bank to pay dividends to the Company. We believe that these limitations will not impact the ability of the Bank to pay dividends to the Company to meet ongoing operating needs.

For contingency purposes, the Company maintains a minimum level of cash to fund one year’s projected operating cash flow needs and the Bank established a minimum liquidity ratio of 5% of assets. Both of these minimum liquidity levels are on-balance sheet sources. Per policy and the Bank’s liquidity contingency plan, in event of a liquidity emergency the Bank can utilize wholesale funds in an amount up to 30% of assets. Since the Bank uses only a small portion of its borrowing or wholesale funding capacity, the Bank has access to funds if needed in a liquidity emergency.

Capital Adequacy

Capital management consists of providing equity and other instruments that qualify as regulatory capital to support current and future operations. Banking regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum capital levels relative to the amount and types of assets they hold. We are subject to regulatory capital requirements at the bank level. Because the Company’s consolidated assets exceeded $3.0 billion as of September 30, 2022, the Company is no longer eligible for the Federal Reserve’s Small Bank Holding Company Policy Statement and will be evaluated relative to the capital adequacy standards established by the Federal Reserve going forward. The Company was not in excess of $3.0 billion as of June 30, 2022, and accordingly prepared and filed financial reports with the Federal Reserve as a small bank holding company. Currently, the Federal Reserve assesses the capital position of the Company based on these reports by reviewing its debt-to-equity ratio and its capacity to serve as a source of strength to the Bank.

As of March 31, 2023, and December 31, 2022, the Company and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank was classified as “well capitalized” for purposes of the Federal Reserve’s prompt corrective action regulations. As we deploy our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings. However, we expect to monitor and control our growth in order to remain in compliance with all regulatory capital standards applicable to us. In addition, the Company maintains an effective registration statement on Form S-3 with the Securities and Exchange Commission that would allow the Company to raise additional capital in an amount up to $115.5 million. The Company raised $34.5 million in December 2021. The Company, through a private placement, raised $25.0 million in subordinated debt in 2021 and repaid $10.0 million of subordinated debt with the proceeds and used the remainder for general corporate purposes. On November 1, 2022 the Company, through a private placement, raised $20.0 million of subordinated debt with the proceeds to be used for general corporate purposes.

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The following table presents the Company’s and the Bank’s regulatory capital ratios as of the dates presented, as well as the regulatory capital ratios that are required by Federal Reserve regulations to maintain “well-capitalized” status:

	Actual				Minimum Required for Capital Adequacy Purposes				Required to be Well Capitalized Under the Prompt Corrective Action Provisions
(dollars in thousands; unaudited)	Amount		Ratio		Amount		Ratio		Amount	Ratio
March 31, 2023
Tier 1 Leverage Capital    (to average assets)
Company	$	264,000	8.29	%	$	127,350	4.00	%	N/A	N/A
Bank Only	297,477		9.35	%	127,233		4.00	%	159,041	5.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Company	260,500		8.61	%	136,084		4.50	%	N/A	N/A
Bank Only	297,477		9.76	%	137,110		4.50	%	198,047	6.50	%
Tier 1 Capital (to risk-weighted assets)
Company	264,000		8.73	%	181,445		6.00	%	N/A	N/A
Bank Only	297,477		9.76	%	182,813		6.00	%	243,751	8.00	%
Total Capital (to risk-weighted assets)
Company	347,444		11.49	%	241,926		8.00	%	N/A	N/A
Bank Only	336,201		11.03	%	243,751		8.00	%	304,688	10.00	%
December 31, 2022
Tier 1 Leverage Capital    (to average assets)
Company	$	249,250	7.97	%	$	125,141	4.00	%	N/A	N/A
Bank Only	267,699		8.56	%	125,025		4.00	%	156,281	5.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Company	245,750		8.92	%	124,027		4.50	%	N/A	N/A
Bank Only	267,699		9.73	%	123,822		4.50	%	178,854	6.50	%
Tier 1 Capital (to risk-weighted assets)
Company	249,250		9.04	%	165,370		6.00	%	N/A	N/A
Bank Only	267,699		9.73	%	165,096		6.00	%	220,128	8.00	%
Total Capital (to risk-weighted assets)
Company	329,203		11.94	%	220,493		8.00	%	N/A	N/A
Bank Only	302,595		11.00	%	220,128		8.00	%	275,160	10.00	%

(1)Presents the minimum capital adequacy requirements that apply to the Bank (excluding the capital conservation buffer) and the Company.

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Material Cash Requirements and Capital Resources

The following table provides the material cash requirements from known contractual and other obligations as of as of March 31, 2023:

			Payments Due by Period
(dollars in thousands; unaudited)	Total		Less than 1 Year		Over 1 year		Other (1)
Cash requirements
Time Deposits	$	27,060	$	21,548	$	5,512	$	—
Subordinated notes	45,000		—		45,000		—
Junior subordinated debentures	3,609		—		3,609		—
Deferred compensation plans	891		175		716		—
Operating leases	5,805		987		4,818		—
Non-maturity deposits	3,068,163		—		—		3,068,163
Equity investment commitment	820		820		—		—

(1)Represents the undefined maturity of non-maturing deposits, including noninterest bearing demand deposits, interest bearing demand deposits, money market accounts, savings accounts and brokered deposits, which can generally be withdrawn on demand.

We maintain sufficient cash and cash equivalents and investment securities to meet short-term cash requirements and the levels of these assets are dependent on our operating, investing and financing activities during any given period. Cash on hand, cash at third-party banks, investments available-for-sale and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are routinely available to us include funds from retail, commercial, and BaaS deposits, advances from the FHLB and proceeds from the sale of loans. Less commonly used sources of funding include borrowings from the Federal Reserve discount window, draws on established federal funds lines from unaffiliated commercial banks, funds from online rate services, brokered funds, a one-way buy through an ICS account, and the issuance of debt or equity securities.

In the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and standby and commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in our consolidated balance sheets.

Our commitments associated with outstanding commitments to extend credit and standby and commercial letters of credit are summarized in the following table. Since commitments associated with commitments to extend credit and letters of credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.

As of March 31, 2023 we had $2.4 billion in commitments to extend credit, compared to $2.2 billion as of December 31, 2022. The $156.5 million increase is largely attributed to an increase of $152.2 million in consumer and other loan commitments, related to CCBX consumer loans, $56.1 million decrease in commercial and industrial capital call line commitments, $40.2 million increase in commercial construction loans and $33.8 million increase in residential real estate commitments, related to CCBX loans.

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The following table presents commitments associated with outstanding commitments to extend credit, standby and commercial letters of credit and equity investment commitments as of the periods indicated:

(dollars in thousands; unaudited)	As of March 31, 2023		As of December 31, 2022
Commitments to extend credit:
Commercial and industrial loans	$	78,473	$	81,568
Commercial and industrial loans - capital call lines	716,610		772,732
Construction – commercial real estate loans	149,867		109,715
Construction – residential real estate loans	30,631		32,827
Residential real estate loans	408,544		374,735
Commercial real estate loans	26,792		35,024
Consumer and other loans	945,738		793,563
Total commitments to extend credit	$	2,356,655	$	2,200,164
Standby letters of credit	$	2,374	$	3,064
Equity investment commitment	$	820	$	988

We have portfolio limits with our each of our partners to manage loan concentration risk, liquidity risk, and counter-party partner risk. For example, as of March 31, 2023, capital call lines outstanding balance totaled $118.8 million, and while commitments totaled $716.6 million the commitments are cancelable, and are also limited to a maximum of $350.0 million by agreement with the partner.

The following table shows the CCBX maximum portfolio sizes by loan category as of March 31, 2023.

(dollars in thousands; unaudited)	Type of Lending	Maximum Portfolio Size
Commercial and industrial loans:
Capital call lines	Business - Venture Capital	$	350,000
All other commercial & industrial loans	Business - Small Business	102,209
Real estate loans:
Home equity lines of credit	Home Equity - Secured Credit Cards	300,000
Consumer and other loans:
Credit cards	Credit Cards - Primarily Consumer	500,762
Installment loans	Consumer	1,166,761
Other consumer and other loans	Consumer - Secured Credit Builder & Unsecured consumer	185,269
		$	2,605,001
Total Existing Portfolio Size		$	1,166,190

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by us, upon extension of credit, is based on management’s credit evaluation of the customer. As of March 31, 2023, $1.66 billion in commitments to extend credit are unconditionally cancelable, compared to $1.57 billion at December 31, 2022. The increase in unconditionally cancelable commitments is attributed to growth in CCBX loans. Commitments that are unconditionally cancelable allow us to better manage loan growth, credit concentrations and liquidity. We also limit CCBX partners to a maximum aggregate customer loan balance originated and held on our balance sheet, as shown in the table above.

Standby and commercial letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer, we have rights to the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and/or marketable securities. Our credit risk associated with issuing letters of credit is essentially the same as the risk involved in extending loan facilities to our customers.

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We believe that we will be able to meet our long-term cash requirements as they come due. Adequate cash levels are generated through profitability, repayments from loans and securities, deposit gathering activity, access to borrowing sources and periodic loan sales.

Critical Accounting Policies

Our accounting policies are integral to understanding our results of operations. Our accounting policies are described in greater detail in “Note 1 - Description of Business and Summary of Significant Accounting Policies” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” of our Form 10-K. We have procedures and processes in place to facilitate making these judgments. Actual results in these areas could differ from management’s estimates. There have been no significant changes concerning our critical accounting policies as described in our Form 10-K except as indicated in Note 1 of the condensed consolidated financial statements included elsewhere in this report.

Selected Financial Data

The following table shows the Company’s key performance ratios for the periods indicated.

	Three Months Ended
(unaudited)	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Return on average assets (1)	1.58	%	1.66	%	1.45	%	1.41	%	0.93	%
Return on average equity (1)	19.89	%	21.86	%	19.36	%	18.86	%	12.12	%
Yield on earnings assets (1)	9.19	%	8.47	%	7.38	%	5.94	%	4.58	%
Yield on loans receivable (1)	9.95	%	9.33	%	8.46	%	7.34	%	6.80	%
Cost of funds (1)	2.19	%	1.61	%	0.85	%	0.29	%	0.14	%
Cost of deposits (1)	2.13	%	1.56	%	0.82	%	0.25	%	0.09	%
Net interest margin (1)	7.15	%	6.96	%	6.58	%	5.66	%	4.45	%
Noninterest expense to average assets (1)	5.69	%	5.97	%	6.66	%	5.29	%	4.52	%
Noninterest income to average assets (1)	6.28	%	5.43	%	4.48	%	3.53	%	3.27	%
Efficiency ratio	43.03	%	48.94	%	61.12	%	58.38	%	59.34	%
Loans receivable to deposits (2)	92.55	%	93.25	%	89.92	%	86.54	%	76.24	%

(1)Annualized calculations shown for periods presented.

(2)Including loans held for sale.

CCBX – BaaS Reporting Information

During the three months ended March 31, 2023, $42.4 million was recognized in noninterest income BaaS credit enhancements related to the establishment of a credit enhancement asset for future credit losses indemnified by our strategic partners and reserve for unfunded commitments for CCBX partner loans and deposits. Agreements with our CCBX partners provide for a credit enhancement provided by the partner which protects the Bank by absorbing incurred losses on accounts originated through the partner. In accordance with accounting guidance, we estimate and record a provision for expected losses on these CCBX loans and deposit overdrafts. When the provision for credit losses - loans and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through the recognition of noninterest income (BaaS credit enhancements) in recognition of the CCBX partner’s indemnification obligation and legal commitment to cover losses. Incurred credit losses are recorded in the allowance for credit losses, and as the credit enhancement payments are received from the CCBX partner, the credit enhancement asset is relieved. Agreements with our CCBX partners also provide protection to the Bank from fraud by absorbing incurred fraud losses. Fraud losses are recorded when incurred as losses in noninterest expense, and the recovery received from the CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement. CCBX partners also pledge cash reserves in a restricted deposit account at the Bank which the Bank can collect from when losses occur that is then replenished by the partner on a regular interval. Although agreements with our CCBX partners provide for enhancements that provide protection to the Bank from credit and fraud losses by absorbing incurred credit and fraud losses, if our partner is unable to fulfill its contracted obligations beyond its cash reserve account then the Bank would be

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exposed to additional loan and deposit losses, as a result of this counterparty risk. If a CCBX partner does not adequately replenish their cash reserve account then the Bank can declare the agreement in default, take over servicing and cease paying the partner for servicing the loan and providing credit enhancements. The Bank would write-off any remaining credit and fraud enhancement asset from the CCBX partner but would retain the full yield on the loan going forward, and BaaS loan expense would decrease once default occurred and payments to the CCBX partner were stopped.

For CCBX partner loans the Bank records contractual interest earned from the borrower on loans in interest income, adjusted for origination costs which are paid or payable to the CCBX partner. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. To determine net BaaS loan income earned from CCBX loan relationships, the Bank takes BaaS loan interest income and deducts BaaS loan expense to arrive at net BaaS loan income which can then be compared to interest income on the Company’s community bank loans.

The following table illustrates how CCBX partner loan income and expenses are recorded in the financial statements:

Loan income and related loan expense	Three Months Ended
(dollars in thousands; unaudited)	March 31, 2023			March 31, 2022
BaaS loan interest income	$	42,220		$	11,992
Less: BaaS loan expense	17,554			8,290
Net BaaS loan income (1)	24,666			3,702
Net BaaS loan income divided by average BaaS loans (1)	9.40		%	3.93		%
Yield on loans (2)	16.09		%	12.73		%

(1)A reconciliation of this non-GAAP measure is set forth in the section titled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”

(2)Annualized calculations shown for periods presented.

The increased activity of CCBX partners has resulted in increases in direct fees, expenses and interest for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The following tables are a summary of the direct fees, expenses and interest components of BaaS for the periods indicated and are not inclusive of all income and expense related to BaaS.

Interest income	Three Months Ended
(dollars in thousands; unaudited)	March 31, 2023		March 31, 2022
Loan interest income	$	42,220	$	11,992
Total BaaS interest income	$	42,220	$	11,992

Interest expense	Three Months Ended
(dollars in thousands; unaudited)	March 31, 2023		March 31, 2022
BaaS interest expense	$	12,424	$	118
Total BaaS interest expense	$	12,424	$	118

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	Three Months Ended
(dollars in thousands; unaudited)	March 31, 2023		March 31, 2022
BaaS program income:
Servicing and other BaaS fees	$	948	$	1,169
Transaction fees	917		493
Interchange fees	789		432
Reimbursement of expenses	921		372
BaaS program income	3,575		2,466
BaaS indemnification income:
BaaS credit enhancements	42,362		13,075
BaaS fraud enhancements	1,999		4,571
BaaS indemnification income	44,361		17,646
Total BaaS income	$	47,936	$	20,112

	Three Months Ended
(dollars in thousands; unaudited)	March 31, 2023		March 31, 2022
BaaS loan expense	$	17,554	$	8,290
BaaS fraud expense	1,999		4,571
Total BaaS loan and fraud expense	$	19,553	$	12,861

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.

The following non-GAAP measure is presented to illustrate the impact of BaaS loan expense on net loan income and yield on CCBX loans.

Net BaaS loan income divided by average CCBX loans is a non-GAAP measure that includes the impact BaaS loan expense on net BaaS loan income and the yield on CCBX loans. The most directly comparable GAAP measure is yield on CCBX loans.

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Reconciliations of the GAAP and non-GAAP measures are presented in the following table.

	As of and for the Three Months Ended
(dollars in thousands; unaudited)	March 31, 2023			March 31, 2022
Net BaaS loan income divided by average CCBX loans:
CCBX loan yield (GAAP)(1)	16.09		%	12.73		%
Total average CCBX loans receivable	$	1,064,192		$	382,153
Interest and earned fee income on CCBX loans (GAAP)	42,220			11,992
Less: BaaS loan expense	(17,554)			(8,290)
Net BaaS loan income	$	24,666		$	3,702
Net BaaS loan income divided by average CCBX loans (1)	9.40		%	3.93		%

(1) Annualized calculations for periods presented.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

Quantitative and Qualitative Disclosures about Market Risk

As a financial institution, our primary component of market risk is interest rate volatility. Our asset liability and funds management policy provides management with the guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We have historically managed our sensitivity position within our established guidelines.

Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest earning assets and interest bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential for economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a decrease in current fair market values. Our objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income. The Federal Open Market Committee raised interest rates 0.25% in mid-March 2022, 1.25% in the second quarter of 2022, 1.50% in the third quarter of 2022, 1.25% in the fourth quarter of 2022, and 0.50% in the first quarter 2023 with a potential for further increases expected in the future. The impact of this and any future increases will impact financial results.

We manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. We do not enter into instruments such as leveraged derivatives, financial options, financial future contracts or forward delivery contracts for the purpose of reducing interest rate risk. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.

Our exposure to interest rate risk is managed by the Asset Liability Committee (“ALCO”), of the Bank and reviewed by the Asset Liability and Investment Committee of our board of directors in accordance with policies approved by our board of directors. ALCO formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, ALCO considers the impact on earnings and capital on the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, ALCO reviews liquidity, cash flows, maturities of deposits and consumer and commercial deposit activity. Management employs various methodologies to manage interest rate risk including an analysis of relationships between interest earning assets and interest bearing liabilities and interest rate simulations using a model. The Asset Liability and Investment Committee of our board of directors meets regularly to review the Bank’s interest rate risk profile, liquidity position, including contingent liquidity, and investment portfolio.

We use interest rate risk simulation models to test interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics. Contractual maturities and re-pricing opportunities of loans are incorporated in the model, as are prepayment assumptions, maturity data and call options within the investment portfolio. Average life of non-maturity deposit accounts are based on historical decay rates and assumptions and are incorporated into the model. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies. To help ensure the accuracy of the model, we perform a quarterly back test against our actual results.

On a quarterly basis, we run multiple simulations under two different premises of which one is a static balance sheet and the other is a dynamic growth balance sheet. The static balance sheet approach produces results that show the interest risk currently inherent in our balance sheet at that point in time. The dynamic balance sheet includes our projected growth levels going forward and produces results that shows how net income, net interest income, and interest risk change based on our projected growth. These simulations test the impact on net interest income and fair value of equity from changes in market interest rates under various scenarios. Under the static and dynamic approaches, rates are shocked instantaneously and ramped over a 12-month horizon assuming parallel yield curve shifts. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. Non-parallel simulations are also conducted and involve analysis of interest income and expense under various changes in the shape of the yield curve including a forward curve, flat curve, steepening curve, and an inverted curve. Our internal policy regarding internal rate risk simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated net income at risk for the

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subsequent one- and two-year period should not decline by more than 10% for a 100 basis point shift, 15% for a 200 basis point shift, 20% for a 300 basis point shift, and 25% for a 400 basis point shift.

The following tables summarize the simulated change in net interest income over a 12-month horizon as of the dates indicated:

(unaudited)
Change in Market Interest Rates	Twelve Month Projection As of March 31, 2023	Twelve Month Projection As of December 31, 2022
Static Balance Sheet and Rate Shifts
+400 basis points	14.6%	15.2%
+300 basis points	10.9%	11.4%
+200 basis points	7.3%	7.6%
+100 basis points	3.7%	3.8%
-100 basis points	(3.9)%	(4.1)%
-200 basis points	(7.9)%	(8.5)%
-300 basis points	(12.0)%	(13.0)%
Dynamic Balance Sheet and Rate Shifts
+400 basis points	16.2%	17.6%
+300 basis points	12.1%	13.2%
+200 basis points	8.1%	8.8%
+100 basis points	4.1%	4.4%
-100 basis points	(4.2)%	(4.6)%
-200 basis points	(8.6)%	(9.5)%
-300 basis points	(13.1)%	(14.5)%

The results illustrate that the Company is asset sensitive and generally performs better in an increasing interest rate environment. As the Company’s composition has shifted overtime due to the growth of the CCBX segment to more variable/adjustable in nature, our interest rate risk profile has migrated, reducing exposure to interest rate risk. For the community bank, the drivers are primarily due to behavior of demand, money market and savings deposits during such rate fluctuations. We have found that, historically, offering rates on these community bank deposits change more slowly than changes in short-term market rates. For the CCBX segment, the offering rates on the loan portfolio are modeled using partner contractual net yields which adjust with market shifts. For this CCBX portfolio, the offering rates on both the loans and the deposits nearly fully reprice with changes in market rates. The assumptions incorporated into the simulation model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact that fluctuations in market interest rates have on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions, the shape of the interest yield curve, and the application and timing of various assumptions and strategies.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Company's Chief Executive Officer and the Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the SEC (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

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Change in Internal Control over Financial Reporting. There were no changes in the Company’s internal control over financial reporting occurred during the three months ended March 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are a party to various litigation matters incidental to the conduct of our business. We do not believe that any currently pending legal proceedings will have a material adverse effect on our business, financial condition or earnings.

Item 1A. Risk Factors

For information regarding the Company’s risk factors, see “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which are incorporated by reference herein. As of March 31, 2023, the risk factors of the Company have not changed materially from those disclosed in the Form 10-K other than set out below.

A failure or the perceived risk of a failure to raise the statutory debt limit of the United States could have an adverse effect on our business, financial condition and results of operations.

The inability of U.S. lawmakers to pass legislation to raise the U.S. government’s debt limit of $31.4 trillion has increased the possibility of a default by the U.S. government on its debt obligations, which could have an adverse impact on financial markets, interest rates and economic conditions in the United States and worldwide. The U.S. government reached its debt limit of $31.4 trillion in January 2023. Since then, the U.S. Department of Treasury implemented extraordinary measures to prevent default.

It is unclear if Congress and the President will reach an agreement to increase the U.S. government’s debt limit in a timely manner. The political stalemate over legislation to fund U.S. government operations and raise the U.S. government’s debt limit may increase the possibility of a default by the U.S. government on its debt obligations and related credit-rating downgrades. This creates uncertainty in the U.S. financial markets and domestic political conditions which could have an adverse impact on our business, financial condition and results of operations. If the United States is unable to increase the U.S. government’s debt limit in a timely manner, U.S. federal government could shut down for a period of time and the United States could default or delay on payment of its obligations or both, which could have an adverse impact on financial markets and economic conditions in the United States and worldwide and an adverse effect on our business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of the Company’s equity securities during the three months ended March 31, 2023.

The Company did not repurchase any of its equity securities during the three months ended March 31, 2023 and does not have any authorized share repurchase programs.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter months ended March 31, 2023, formatted in inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statement of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements. Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
104	Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101 filed herewith)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			COASTAL FINANCIAL CORPORATION
Dated:	May 9, 2023	By:	/s/ Eric M. Sprink
			Eric M. Sprink
			Chief Executive Officer
			(Principal Executive Officer)
Dated:	May 9, 2023	By:	/s/ Joel G. Edwards
			Joel G. Edwards
			Executive Vice President and
			Chief Financial Officer
			(Principal Financial Officer)

90

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric M. Sprink, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Coastal Financial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 9, 2023	By:	/s/ Eric M. Sprink
		Eric M. Sprink
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joel G. Edwards, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Coastal Financial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 9, 2023	By:	/s/ Joel G. Edwards
		Joel G. Edwards
		Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Coastal Financial Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 9, 2023	By:	/s/ Eric M. Sprink
		Eric M. Sprink
		Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Coastal Financial Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 9, 2023	By:	/s/ Joel G. Edwards
		Joel G. Edwards
		Executive Vice President and Financial Officer

XML

Cover - shares	3 Months Ended
	Mar. 31, 2023	May 04, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-38589
Entity Registrant Name	COASTAL FINANCIAL CORPORATION
Entity Incorporation, State or Country Code	WA
Entity Tax Identification Number	56-2392007
Entity Address, Address Line One	5415 Evergreen Way
Entity Address, City or Town	Everett
Entity Address, State or Province	WA
Entity Address, Postal Zip Code	98203
City Area Code	425
Local Phone Number	257-9000
Title of 12(b) Security	Common Stock, no par value per share
Trading Symbol	CCB
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		13,283,232
Entity Central Index Key	0001437958
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Filer Category	Accelerated Filer

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
ASSETS
Cash and due from banks	$ 37,676	$ 32,722
Interest earning deposits with other banks (restricted cash of $0 at March 31, 2023 and December 31, 2022)	356,240	309,417
Investment securities, available for sale, at fair value	97,999	97,317
Investment securities, held to maturity, at amortized cost	3,705	1,036
Other investments	11,346	10,555
Loans held for sale	27,292	0
Loans receivable, post-adoption	2,837,204	2,627,256
Total loans receivable, pre-adoption		2,627,256
Allowance for loan losses, pre-adoption		(74,029)
Allowance for loan losses, post-adoption	(89,123)	(74,029)
Total loans receivable, net	2,748,081	2,553,227
CCBX credit enhancement asset	76,395	53,377
CCBX receivable	13,681	10,416
Premises and equipment, net	18,030	18,213
Operating lease right-of-use assets	4,812	5,018
Accrued interest receivable	19,321	17,815
Bank-owned life insurance, net	12,761	12,667
Deferred tax asset, net	20,527	18,458
Other assets	3,167	4,229
Total assets	3,451,033	3,144,467
LIABILITIES
Deposits	3,095,223	2,817,521
Principal amount $45,000 (less unamortized debt issuance costs of $969 and $1,001) at March 31, 2023 and December 31, 2022, respectively	44,031	43,999
Principal amount $3,609 (less unamortized debt issuance costs of $21 at March 31, 2023 and December 31, 2022)	3,588	3,588
Deferred compensation	582	616
Accrued interest payable	874	684
Operating lease liabilities	5,022	5,234
CCBX payable	30,794	20,419
Other liabilities	12,156	8,912
Total liabilities	3,192,270	2,900,973
SHAREHOLDERS’ EQUITY
Authorized: 25,000,000 shares at March 31, 2023 and December 31, 2022; issued and outstanding: zero shares at March 31, 2023 and December 31, 2022	0	0
Authorized: 300,000,000 shares at March 31, 2023 and December 31, 2022; 13,281,533 shares at March 31, 2023 issued and outstanding and 13,161,147 shares at December 31, 2022 issued and outstanding	127,447	125,830
Retained earnings	133,123	119,998
Accumulated other comprehensive loss, net of tax	(1,807)	(2,334)
Total shareholders’ equity	258,763	243,494
Total liabilities and shareholders’ equity	$ 3,451,033	$ 3,144,467

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Restricted cash	$ 0	$ 0
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	25,000,000	25,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, no par value	$ 0	$ 0
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Voting Common Stock
Common stock, shares, issued (in shares)	13,281,533	13,161,147
Common stock, shares, outstanding (in shares)	13,281,533	13,161,147
Subordinated Debt
Principal amount	$ 45,000	$ 45,000
Unamortized debt issuance cost	969	1,001
Junior Subordinated Debentures
Principal amount	3,609	3,609
Unamortized debt issuance cost	$ 21	$ 21

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$ 66,431	$ 29,632
Interest on interest earning deposits with other banks	3,097	402
Interest on investment securities	553	71
Dividends on other investments	30	37
Total interest income	70,111	30,142
INTEREST EXPENSE
Interest on deposits	14,958	553
Interest on borrowed funds	662	321
Total interest expense	15,620	874
Net interest income	54,491	29,268
Provision for loan losses, post-adoption	43,544	12,942
Provision for loan losses, pre-adoption		12,942
PROVISION FOR UNFUNDED COMMITMENTS	153
Net interest income after provision for credit losses - loans and unfunded commitments	10,794	16,326
NONINTEREST INCOME
Deposit service charges and fees	910	884
Loan referral fees	0	602
Gain on sales of loans, net	123	0
Mortgage broker fees	19	123
Unrealized (loss) gain on equity securities, net	39	0
Other income	280	265
Noninterest income, excluding BaaS program income and BaaS indemnification income	1,371	1,874
Total noninterest income	49,307	21,986
NONINTEREST EXPENSE
Salaries and employee benefits	15,575	11,085
Occupancy	1,219	1,136
Data processing and software licenses	1,840	1,861
Legal and professional expenses	3,062	708
Point of sale expense	753	248
Excise taxes	455	349
Federal Deposit Insurance Corporation ("FDIC") assessments	595	604
Director and staff expenses	626	344
Marketing	95	99
Other expense	890	1,120
Noninterest expense, excluding BaaS loan and BaaS fraud expense	25,110	17,554
BaaS loan and fraud expense	19,553	12,861
Total noninterest expense	44,663	30,415
Income before provision for income taxes	15,438	7,897
PROVISION FOR INCOME TAXES	3,047	1,667
NET INCOME	$ 12,391	$ 6,230
Basic earnings per common share (in usd per share)	$ 0.94	$ 0.48
Diluted earnings per common share (in usd per share)	$ 0.91	$ 0.46
Weighted average number of common shares outstanding:
Basic (in shares)	13,196,960	12,898,746
Diluted (in shares)	13,609,491	13,475,337
BaaS program income
NONINTEREST INCOME
Noninterest income	$ 3,575	$ 2,466
BaaS indemnification income
NONINTEREST INCOME
Noninterest income	44,361	17,646
Servicing and other BaaS fees | BaaS program income
NONINTEREST INCOME
Noninterest income	948	1,169
Transaction fees | BaaS program income
NONINTEREST INCOME
Noninterest income	917	493
Interchange fees | BaaS program income
NONINTEREST INCOME
Noninterest income	789	432
Reimbursement of expenses | BaaS program income
NONINTEREST INCOME
Noninterest income	921	372
BaaS credit enhancements | BaaS indemnification income
NONINTEREST INCOME
Noninterest income	42,362	13,075
BaaS fraud enhancements | BaaS indemnification income
NONINTEREST INCOME
Noninterest income	1,999	4,571
BaaS loan expense
NONINTEREST EXPENSE
BaaS loan and fraud expense	17,554	8,290
BaaS fraud expense
NONINTEREST EXPENSE
BaaS loan and fraud expense	$ 1,999	$ 4,571

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
NET INCOME	$ 12,391	$ 6,230
Securities available-for-sale
Unrealized holding income (loss) during the period	678	(349)
Income tax (expense) benefit related to unrealized holding gain/loss	(151)	70
OTHER COMPREHENSIVE INCOME (LOSS), net of tax	527	(279)
COMPREHENSIVE INCOME	$ 12,918	$ 5,951

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands	Total	Revision of Prior Period, Accounting Standards Update, Adjustment	Common Stock	Retained Earnings	Retained Earnings Revision of Prior Period, Accounting Standards Update, Adjustment	Accumulated Other Comprehensive Income (Loss)
Beginning balance (in shares) at Dec. 31, 2021			12,875,315
Beginning balance at Dec. 31, 2021	$ 201,222		$ 121,845	$ 79,373		$ 4
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	6,230			6,230
Vesting of restricted stock units (in shares)			26,288
Exercise of stock options (in shares)			26,945
Exercise of stock options	208		$ 208
Stock-based compensation	539		$ 539
Other comprehensive income (loss), net of tax	(279)					(279)
Ending balance (in shares) at Mar. 31, 2022			12,928,548
Ending balance at Mar. 31, 2022	207,920		$ 122,592	85,603		(275)
Beginning balance (in shares) at Dec. 31, 2021			12,875,315
Beginning balance at Dec. 31, 2021	201,222		$ 121,845	79,373		4
Ending balance (in shares) at Dec. 31, 2022			13,161,147
Ending balance at Dec. 31, 2022	$ 243,494	$ 734	$ 125,830	119,998	$ 734	(2,334)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Accounting Standards Update [Extensible Enumeration]	Accounting Standards Update 2016-13
Net Income	$ 12,391			12,391
Vesting of restricted stock units (in shares)			42,402
Exercise of stock options (in shares)			77,984
Exercise of stock options	567		$ 567
Stock-based compensation	1,050		$ 1,050
Other comprehensive income (loss), net of tax	527					527
Ending balance (in shares) at Mar. 31, 2023			13,281,533
Ending balance at Mar. 31, 2023	$ 258,763		$ 127,447	$ 133,123		$ (1,807)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 12,391	$ 6,230
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses, post-adoption	43,544	12,942
Provision for loan losses, pre-adoption		12,942
Depreciation and amortization	466	419
Loss on disposition of fixed assets	0	(35)
Decrease in operating lease right-of-use assets	206	269
Decrease in operating lease liabilities	(212)	(266)
Gain on sales of loans	(123)	0
Net (discount accretion)/premium amortization on investment securities	(6)	(12)
Unrealized holding loss (gain) on equity investment	(39)	0
Stock-based compensation	1,050	539
Increase in bank-owned life insurance value	(94)	(88)
Deferred tax benefit	(2,439)	1
Net change in CCBX receivable	(3,265)	(3,610)
Net change in CCBX credit enhancement asset	(18,553)	(11,571)
Net change in CCBX payable	10,375	4,536
Net change in other assets and liabilities	3,330	(1,372)
Total adjustments	34,240	1,752
Net cash provided by operating activities	46,631	7,982
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities available for sale	0	(134,912)
Purchase of investment securities held for investment	(2,679)	0
Change in other investments, net	(752)	(1,453)
Principal paydowns of investment securities available-for-sale	2	7
Principal paydowns of investment securities held-to-maturity	9	10
Maturities and calls of investment securities available-for-sale	0	35,000
Proceeds from sales of loans held for sale	74,050	0
Purchase of loans	(47,886)	(57,268)
Increase in loans receivable, net	(295,583)	(167,010)
Purchases of premises and equipment, net	(284)	(1,300)
Net cash used by investing activities	(273,123)	(326,926)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW and money market, and savings	280,089	215,769
Net decrease in time deposits	(2,387)	(3,086)
Net repayment from long term FHLB borrowing	0	(24,999)
Proceeds from exercise of stock options	567	208
Net cash provided by financing activities	278,269	187,892
NET CHANGE IN CASH, DUE FROM BANKS AND RESTRICTED CASH	51,777	(131,052)
CASH, DUE FROM BANKS AND RESTRICTED CASH, beginning of year	342,139	813,161
CASH, DUE FROM BANKS AND RESTRICTED CASH, end of quarter	393,916	682,109
SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES
Interest paid	15,430	761
Income taxes paid	165	12
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
Fair value adjustment of securities available-for-sale, gross	678	(13)
Operating lease right-of-use assets	69	0
Operating lease liabilities	(69)	0
Transfer from loans to loans held for sale	101,219	0
Adjustment to retained earnings - adoption of ASU 2016-13, net of deferred tax	(258,763)	(207,920)
Retained Earnings
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
Adjustment to retained earnings - adoption of ASU 2016-13, net of deferred tax	$ (133,123)	$ (85,603)

XML

Description of Business and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Description of Business and Summary of Significant Accounting Policies

Description of Business and Summary of Significant Accounting Policies

Nature of operations - Coastal Financial Corporation (“Corporation” or “Company”) is a registered bank holding company whose wholly owned subsidiaries are Coastal Community Bank (“Bank”) and Arlington Olympic LLC (“LLC”). The Company is a Washington state corporation that was organized in 2003. The Bank was incorporated and commenced operations in 1997 and is a Washington state-chartered commercial bank that is a member bank of the Federal Reserve system. Arlington Olympic LLC was formed in 2019 and owns the Company’s Arlington branch site, which the Bank leases from the LLC.

We are headquartered in Everett, Washington, which by population is the largest city in, and the county seat of, Snohomish County. The Company’s business is conducted through three reportable segments: CCBX, the community bank and treasury & administration.  The CCBX segment provides Banking as a Service (“BaaS”) that allows our broker dealers and digital financial service partners to offer their customers banking services. Through CCBX’s partners the Company is able to offer banking services and products across the nation.The community bank segment includes all community banking activities with a primary focus on providing a wide range of banking products and services to consumers and small to medium-sized businesses, professionals, and individuals in the broader Puget Sound region in the state of Washington through its 14 branches in Snohomish, Island and King Counties, and through the Internet and its mobile banking application. The treasury & administration segment includes treasury management, overall administration and all other aspects of the Company.

The Bank’s deposits are insured in whole or in part by the Federal Deposit Insurance Corporation (“FDIC”). The community bank’s loans and deposits are primarily within the greater Puget Sound area, while CCBX loans and deposits are dependent upon the partner’s market. The Bank’s primary funding source is deposits from customers. The Bank is subject to regulation and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Washington State Department of Financial Institutions Division of Banks. The Federal Reserve also has regulatory and supervisory authority over the Company.

Financial statement presentation - The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim reporting requirements and with instructions to Form 10-Q and Article 10 of Regulation S-X, and therefore do not include all the information and notes included in the annual consolidated financial statements in conformity with GAAP. These interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual report on Form 10-K as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2023. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the entire year.

Amounts presented in the consolidated financial statements and footnote tables are rounded and presented in thousands of dollars except per-share amounts, which are presented in dollars. In the narrative footnote discussion, amounts are rounded to thousands and presented in dollars.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying consolidated financial statements have been made. These adjustments include normal and recurring accruals considered necessary for a fair and accurate presentation.

Principles of consolidation - The consolidated financial statements include the accounts of the Company, the Bank and the LLC. All significant intercompany accounts have been eliminated in consolidation.

Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that its critical accounting policies include determining the allowance for credit losses, the valuation of the Company’s deferred tax assets, and fair value of financial instruments. Actual results could differ significantly from those estimates.

Implementation of ASU 2016-13 - On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized costs, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in certain leases. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require increases or decreases in credit losses be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believe it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis.

The Company adopted ASC 326 using the modified retrospective method. Results for the reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The day one CECL adjustment for community bank loans included a reduction of $310,000 to the community bank allowance and a reduction of $340,000 related to the community bank unfunded commitment reserve. This was offset by an increase to the CCBX allowance for $4.2 million. With the mirror image approach accounting related to the credit enhancement for CCBX partner loans, there was a CECL day one increase to the indemnification asset in the amount of $4.5 million. Net, the day one impact to retained earnings for the Bank’s transition to CECL was an increase of $954,000, excluding the impact of income taxes.

Management has separately evaluated its held-to-maturity investment securities and determined that no loss reserves were required.

Implementation of ASU 2022-02 - On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings ("TDR") and Vintage Disclosures. The ASU eliminated the accounting guidance for TDR loans by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, the ASU requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. This ASU was effective upon adoption of ASU 2016-13 and was applied on a prospective basis. During the quarter ended March 31, 2023, the Company did not have any loans that were modified to borrowers experiencing financial difficulty.

Accounting policy update –

Allowance for Credit Losses - effective January 1, 2023 with the adoption of ASU 2016-13

Loans and unfunded commitments

The allowance for credit losses ("ACL") is an estimate of the expected credit losses on financial assets measured at amortized cost. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans in the pool and whether it needs to evaluate the allowance on an individual basis. The Company must estimate expected credit losses over the loans’ contractual terms, adjusted for expected prepayments. In estimating the life of the loan, the Company cannot extend the contractual term of the loan for expected extensions, renewals, and modifications, unless the extension or renewal options are included in the contract at the reporting date and are not unconditionally cancellable by the Company. Because expected credit losses are estimated over the contractual life adjusted for estimated prepayments, determination of the life of the loan may significantly affect the ACL. The Company has chosen to segment its portfolio consistent with the manner in which it manages the risk of the type of credit.

•Community Bank Portfolio: The ACL calculation is derived from loan segments utilizing loan level information and relevant available information from internal and external sources related to past events and current conditions. In addition, the Company incorporates a reasonable and supportable forecast.

•CCBX Portfolio: The Bank calculates the ACL on loans on an aggregate basis based on each partner and product level, segmenting the risk inherent in the CCBX portfolio based on qualitative and quantitative trends in the portfolio.

Also included in the ACL are qualitative reserves to cover losses that are expected, but in the Company’s assessment may not be adequately represented in the quantitative method. For example, factors that the Company considers include environmental business conditions, borrower’s financial condition, credit rating and the volume and severity of past due loans and non-accrual loans. Based on this analysis, the Company records a provision for loan losses to maintain the allowance at appropriate levels.

Determining the amount of the allowance is considered a critical accounting estimate, as it requires significant judgment and the use of subjective measurements, including management’s assessment of overall portfolio quality. The Company maintains the allowance at an amount the Company believes is sufficient to provide for estimated losses expected to occur in the Company’s loan portfolio at each balance sheet date, and fluctuations in the provision for credit losses may result from management’s assessment of the adequacy of the allowance. Changes in these estimates and assumptions are possible and may have a material impact on the Company’s allowance, and therefore the Company’s financial position, liquidity or results of operations. The Company has elected to exclude accrued interest receivable from the amortized cost basis in its ACL calculation as accrued interest is written off in a timely manner when deemed uncollectable.

For more information and discussion related to the allowance for credit losses on loans, see “Note 4 - Loans and Allowance for Credit Losses” in the Consolidated Financial Statements.

In addition to the ACL on loans held for investment, CECL requires a balance sheet liability for expected losses on unfunded commitments, which is recognized if both the following conditions are met: (1) the Company has a present contractual obligation to extend credit; and (2) the obligation is not unconditionally cancellable by the Company. Loan commitments may have a funded and unfunded portion, of which the liability for unfunded commitments is derived based upon the commitments to extend credit to a borrower (e.g., an estimate of expected credit losses is not established for unfunded portions of loan commitment that are unconditionally cancellable by the Company). The expected credit losses for funded portions are reported in the previously discussed ACL. The Company segments its unfunded commitment portfolio consistent with the ACL calculation, separating between unfunded lines and commitments to originate. The Company incorporates the probability of funding (i.e. estimate of utilization) for each segment and then utilizes the ACL loss rates for each segment on an aggregate basis to calculate the allowance for unfunded commitments

Available-for-sale debt securities

For available-for-sale debt securities with fair value below amortized cost, the security is considered impaired. When the Company does not intend to sell the debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, then the Company assesses the impairment for potential expected credit losses. Impairment related to a credit loss is measured using the discounted cash flow method. Credit loss recognition is limited to the fair value of the security. The impairment is recognized by establishing an ACL through provision for credit losses. Impairment related to noncredit factors is recognized in accumulated other comprehensive income, net of applicable taxes. The Company evaluates AFS security impairment on a quarterly basis.

Held-to-maturity debt securities

For held-to-maturity debt securities, expected losses are evaluated and calculated on a collective basis for those securities which share risk characteristics. The Company aggregates record level securities calculations and reports the security portfolio segments based on shared risk characteristics. The only segment included in the held-to-maturity portfolio are U.S. Agency Residential Mortgage Backed Securities which have an expected zero credit loss.

The following table illustrates the impact of ASU 2016-13:

	January 1, 2023
	As reported under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Allowance for credit losses	$	77,881	$	74,029	$	3,852
CCBX credit enhancement asset	57,842		53,377		4,465
Deferred tax asset	18,238		18,458		(220)
Liabilities:
Unfunded commitment reserve	634		974		(340)
Shareholders' Equity:
Retained earnings	120,732		119,998		734

Subsequent Events - The Company has evaluated events and transactions subsequent to March 31, 2023 for potential recognition or disclosure.

Reclassifications - Certain amounts reported in prior quarters' consolidated financial statements may have been reclassified to conform to the current presentation with no effect on stockholders’ equity or net income.

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Recent accounting standards

3 Months Ended

Mar. 31, 2023

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recent accounting standards

Recent accounting standards

Recent Accounting Guidance Not Yet Effective

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

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Investment Securities

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities

The following table summarizes the amortized cost, fair value, and allowance for credit losses and the corresponding amounts of gross unrealized gains and losses of available-for-sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held-to-maturity securities:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses
	(dollars in thousands; unaudited)
March 31, 2023
Available-for-sale
U.S. Treasury securities	$	99,974	$	—	$	(2,275)	$	97,699	$	—
U.S. Agency collateralized    mortgage obligations	52		—		(2)		50		—
U.S. Agency residential    mortgage-backed securities	—		—		—		—		—
Municipal bonds	250		—		—		250		—
Total available-for-sale    securities	100,276		—		(2,277)		97,999		—
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value		Allowance for Credit Losses
Held-to-maturity
U.S. Agency residential    mortgage-backed securities	3,705		—		(108)		3,597		—
Total held-to-maturity    securities	$	3,705	$	—	$	(108)	$	3,597	$	—
Total investment securities	$	103,981	$	—	$	(2,385)	$	101,596	$	—

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands; unaudited)
December 31, 2022
Available-for-sale
U.S. Treasury securities	$	99,967	$	—	$	(2,952)	$	97,015
U.S. Agency collateralized mortgage obligations	54		—		(3)		51
U.S. Agency residential mortgage-backed securities	1		—		—		1
Municipal bonds	250		—		—		250
Total available-for-sale securities	100,272		—		(2,955)		97,317
Held-to-maturity
U.S. Agency residential mortgage-backed securities	1,036		—		(120)		916
Total investment securities	$	101,308	$	—	$	(3,075)	$	98,233

Accrued interest on available-for-sale securities was $187,000 and $723,000 at March 31, 2023 and December 31, 2022, respectively, accrued interest on held-to-maturity securities was $14,000 and $3,000 at March 31, 2023 and December 31, 2022, respectively,. Accrued interest on securities is excluded from the balances in the preceding table of securities receivable, and is included in accrued interest receivable on the Company's consolidated balance sheets.

The amortized cost and fair value of debt securities at March 31, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers or the underlying borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities and collateralized mortgage obligations are shown separately, since they are not due at a single maturity date.

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(dollars in thousands; unaudited)
March 31, 2023
Amounts maturing in
One year or less	$	100,224	$	97,949	$	—	$	—
	100,224		97,949		—		—
U.S. Agency residential mortgage-backed securities and collateralized mortgage obligations	52		50		3,705		3,597
	$	100,276	$	97,999	$	3,705	$	3,597

Investments in debt securities with an amortized cost of $37.8 million at March 31, 2023 and December 31, 2022, were pledged to secure public deposits and for other purposes as required or permitted by law. During the three months ended March 31, 2023, no securities matured. During the three months ended March 31, 2023, one security was purchased for $2.7 million.

There were no sales of securities during the three months ended March 31, 2023 or 2022.

There were seven securities with a $2.4 million unrealized loss as of March 31, 2023. There were six securities in an unrealized loss position as of December 31, 2022. The following table shows the investments’ gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for which an allowance for credit losses has not been recorded:

	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(dollars in thousands; unaudited)
March 31, 2023
Available-for-sale
U.S. Treasury securities	$	—	$	—	$	97,699	$	2,275	$	97,699	$	2,275
U.S. Agency collateralized mortgage obligations	—		—		50		2		50		2
Total available-for-sale securities	—		—		97,749		2,277		97,749		2,277
Held-to-maturity
U.S. Agency residential mortgage-backed securities	2,672		7		925		101		3,597		108
Total investment securities	$	2,672	$	7	$	98,674	$	2,378	$	101,346	$	2,385

Management has evaluated the above securities and does not believe that any individual unrealized loss as of March 31, 2023, will be recognized into income. Unrealized losses have not been recognized into income because management does not intend to sell and does not expect it will be required to sell the investments. The decline is largely due to changes in market conditions and interest rates, rather than credit quality. The fair value is expected to recover as the underlying securities in the portfolio approach maturity date and market conditions improve. Management believes there is a high probability of collecting all contractual amounts due, because the majority of the securities in the portfolio are backed by government agencies or government sponsored enterprises. However, a recovery in value may not occur for some time, if at all, and may be delayed for greater than the one year time horizon or perhaps even until maturity. Based on management's analysis no allowance for credit losses was required on these securities.

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Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Loans and Allowance for Credit Losses

Loans and Allowance for Credit Losses

During the quarter ended March 31, 2023, $101.2 million in CCBX loans were transferred to loans held for sale, with $73.9 million in loans sold. A portion of these loans were sold at par and a portion were sold with a gain on sale of $123,000. As of March 31, 2023 $27.3 million in residential real estate secured lines of credit loans remain in loans held for sale. At December 31, 2022, there were no loans held for sale.

The Company adopted the CECL methodology for measuring credit losses as of January 1, 2023. All disclosures as of and for the three months ended March 31, 2023 are presented in accordance with Topic 326. The Company did not recast comparative financial periods and has presented those disclosures under previously applicable GAAP.

The composition of the loan portfolio is as follows as of the periods indicated:

	March 31,
	2023
	(dollars in thousands; unaudited)
Community Bank
Commercial and industrial loans	$	158,873
Real estate loans:
Construction, land and land development loans	206,635
Residential real estate loans	206,140
Commercial real estate loans	1,102,771
Consumer and other loans:
Other consumer and other loans	2,860
Gross Community Bank loans receivable	1,677,279
CCBX
Commercial and industrial loans:
Capital call lines	$	118,796
All other commercial & industrial loans	48,669
Real estate loans:
Residential real estate loans	249,367
Consumer and other loans:
Credit cards	318,187
Other consumer and other loans	431,481
Gross CCBX loans receivable	1,166,500
Total gross loans receivable	2,843,779
Net deferred origination fees and premiums	(6,575)
Total loans receivable	$	2,837,204

	December 31,
	2022
	(dollars in thousands; unaudited)
Commercial and industrial loans	$	312,628
Real estate loans:
Construction, land, and land development	214,055
Residential real estate	449,157
Commercial real estate	1,048,752
Consumer and other loans	608,771
Gross loans receivable	2,633,363
Net deferred origination fees and premiums	(6,107)
Loans receivable	$	2,627,256

Accrued interest on loans, which is excluded from the balances in the preceding table of loans receivable, was $18.7 million and $17.0 million at March 31, 2023 and December 31, 2022, respectively, and was included in accrued interest receivable on the Company's consolidated balance sheets.

Included in commercial and industrial loans as of March 31, 2023 and December 31, 2022, is $118.8 million and $146.0 million, respectively in capital call lines, provided to venture capital firms through one of our BaaS clients. These loans are secured by the capital call rights and are individually underwritten to the Bank’s credit standards by our BaaS client and the underwriting is reviewed and approved by the Bank on every line. Also included in commercial and

industrial loans are Paycheck Protection Program (“PPP”) loans of $3.8 million at March 31, 2023 and $4.7 million at December 31, 2022. PPP loans are 100% guaranteed by the Small Business Administration (“SBA”).

Consumer and other loans includes overdrafts of $3.9 million and $2.7 million at March 31, 2023 and December 31, 2022, respectively. Community bank overdrafts were $1.3 million and $94,000 at March 31, 2023 and December 31, 2022, respectively and CCBX overdrafts were $2.6 million at March 31, 2023 and December 31, 2022.

The Company has pledged loans totaling $910.5 million and $220.1 million at March 31, 2023 and December 31, 2022, respectively, for borrowing lines at the FHLB and FRB.

The balance of SBA and USDA loans and participations sold and serviced for others totaled $12.6 million and $14.3 million at March 31, 2023 and December 31, 2022, respectively.

The balance of Main Street Lending Program (“MSLP”) loans including participations to others with servicing retained totaled $58.0 million at March 31, 2023 and December 31, 2022, with $3.1 million in MSLP loans on the balance sheet and included in commercial and industrial loans at March 31, 2023, and December 31, 2022.

The Company, at times, purchases individual loans through the community bank at fair value as of the acquisition date. The Company held purchased loans with remaining balances that totaled $9.4 million and $9.6 million as of March 31, 2023 and December 31, 2022, respectively. Unamortized premiums on these loans totaled $164,000 and $167,000 as of March 31, 2023 and December 31, 2022, respectively, and are amortized into interest income over the life of the loans.

The Company has purchased participation loans with remaining balances totaling $62.5 million and $63.9 million as of March 31, 2023 and December 31, 2022, respectively. These loans are included in the applicable loan category depending upon the collateral and purpose of the individual loan.

The Company purchased loans from a CCBX partner, at par, through agreements with that CCBX partner, and those loans had a remaining balance of $180.9 million as of March 31, 2023 and $157.4 million as of December 31, 2022. As of March 31, 2023, $168.2 million is included in consumer and other loans and $12.7 million is included in commercial and industrial loans, compared to $146.1 million in consumer and other loans and $11.3 million in commercial and industrial loans as of December 31, 2022.

The following is a summary of the Company’s loan portfolio segments:

Commercial and industrial loans – Commercial and industrial loans are secured by business assets including inventory, receivables and machinery and equipment of businesses located generally in the Company’s primary market area and capital calls on venture and investment funds. Also included in commercial and industrial loans are $48.7 million in unsecured CCBX partner loans. Loan types include PPP loans, revolving lines of credit, term loans, and loans secured by liquid collateral such as cash deposits or marketable securities. Also included in commercial and industrial loans are loans to other financial institutions. Risk arises primarily due to the difference between expected and actual cash flows of the borrowers. In addition, the recoverability of the Company’s investment in these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans. The fair value of the collateral securing these loans may fluctuate as market conditions change. In the case of loans secured by accounts receivable, the recovery of the Company’s investment is dependent upon the borrower’s ability to collect amounts due from its customers.

As of March 31, 2023, $118.8 million in outstanding CCBX capital call lines are included in commercial and industrial loans compared to $146.0 million at December 31, 2022. Capital call lines are provided to venture capital firms. These loans are secured by the capital call rights and are individually underwritten to the Bank’s credit standards by our CCBX partner and the underwriting is reviewed by the Bank on every line/loan.

Construction, land and land development loans – The Company originates loans for the construction of 1-4 family, multifamily, and Commercial Real Estate (“CRE”) properties in the Company’s market area. Construction loans are considered to have higher risks due to construction completion and timing risk, the ultimate repayment being sensitive to interest rate changes, government regulation of real property and the availability of long-term financing. Additionally, economic conditions may impact the Company’s ability to recover its investment in construction loans, as adverse economic conditions may negatively impact the real estate market, which could affect the borrower’s ability to complete and sell the project. Additionally, the fair value of the underlying collateral may fluctuate as market conditions change. The Company occasionally originates land loans for the purpose of facilitating the ultimate construction of a home or

commercial building. The primary risks include the borrower’s ability to pay and the inability of the Company to recover its investment due to a material decline in the fair value of the underlying collateral.

Residential real estate loans – Residential real estate includes various types of loans for which the Company holds real property as collateral. Included in this segment are first and second lien single family loans, occasionally purchased by the Company to diversify its loan portfolio, and rental portfolios secured by one-to-four family homes. The primary risks of residential real estate loans include the borrower’s inability to pay, material decreases in the value of the collateral, and significant increases in interest rates which may make the loan unprofitable.

As of March 31, 2023, $249.4 million in loans originated through CCBX partners are included in residential real estate loans, compared to $244.6 million at December 31, 2022. These home equity lines of credit are secured by residential real estate and are accessed by using a credit card. Home equity lines of credit are classified as residential real estate per regulatory guidelines.

Commercial real estate (includes owner occupied and nonowner occupied) loans – Commercial real estate loans include various types of loans for which the Company holds real property as collateral. We make commercial mortgage loans collateralized by owner-occupied and non-owner-occupied real estate, as well as multi-family residential loans. The primary risks of commercial real estate loans include the borrower’s inability to pay, material decreases in the value of the collateralized real estate and significant increases in interest rates, which may make the real estate loan unprofitable. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.

Consumer and other loans – The community bank originates a limited number of consumer loans, generally for banking customers only, which consist primarily of lines of credit, saving account secured loans, and auto loans. CCBX originates consumer loans including credit cards, consumer term loans and secured and unsecured lines of credit. This loan category includes overdrafts. Repayment of these loans is dependent on the borrower’s ability to pay and the fair value of the underlying collateral, if any.

As of March 31, 2023, $749.7 million in CCBX loans are included in consumer and other loans compared to $607.0 million at December 31, 2022.

Past Due and Nonaccrual Loans

The following table illustrates an age analysis of past due loans as of the dates indicated:

	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days or More Past Due and Still Accruing
	(dollars in thousands; unaudited)
March 31, 2023
Community Bank
Commercial and industrial    loans	$	—	$	—	$	—	$	158,873	$	158,873	$	—
Real estate loans:
Construction, land and    land development	—		66		66		206,569		206,635		—
Residential real estate	195		—		195		205,945		206,140		—
Commercial real estate	92		6,901		6,993		1,095,778		1,102,771		—
Consumer and other loans	3		—		3		2,857		2,860		—
Total community bank	$	290	$	6,967	$	7,257	$	1,670,022	$	1,677,279	$	—
CCBX
Commercial and industrial loans:
Capital call lines	$	—	$	—	$	—	$	118,796	$	118,796	$	—
All other commercial &    industrial loans	589		187		776		47,893		48,669		187
Real estate loans:
Residential real    estate loans	2,582		946		3,528		$	245,839	$	249,367	946
Consumer and other loans:
Credit cards	15,273		17,772		33,045		$	285,142	$	318,187	17,772
Other consumer and    other loans	19,494		5,657		25,151		406,330		431,481		5,657
Total CCBX	$	37,938	$	24,562	$	62,500	$	1,104,000	$	1,166,500	$	24,562
Total community bank    and CCBX	$	38,228	$	31,529	$	69,757	$	2,774,022	2,843,779		$	24,562
Less net deferred    origination fees and    premiums									(6,575)
Loans receivable									$	2,837,204

	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days or More Past Due and Still Accruing
	(dollars in thousands; unaudited)
December 31, 2022
Commercial and industrial loans	$	393	$	486	$	879	$	311,749	$	312,628	$	404
Real estate loans:
Construction, land and land development	—		66		66		213,989		214,055		—
Residential real estate	1,016		876		1,892		447,265		449,157		876
Commercial real estate	95		6,901		6,996		1,041,756		1,048,752		—
Consumer and other loans	37,932		24,815		62,747		546,024		608,771		24,815
	$	39,436	$	33,144	$	72,580	$	2,560,783	$	2,633,363	$	26,095
Less net deferred origination fees and premiums									(6,107)
Loans receivable									$	2,627,256

There were $24.6 million in loans past due 90 days or more and still accruing interest as of March 31, 2023, and $26.1 million as of December 31, 2022. This is attributed to loans originated through CCBX lending partners which continue to accrue interest up to 180 days past due. As of March 31, 2023 and December 31, 2022, $23.6 million and $25.5 million, respectively, of loans past due 90 days or more are covered by credit enhancements provided by our CCBX partners that protect the Bank against credit losses.

The accrual of interest on community bank loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due or when they are 90 days past due as to either principal or interest, unless they are well secured and in the process of collection.  Installment/closed-end, and revolving/open-end consumer loans originated through CCBX lending partners will continue to accrue interest until 120 and 180 days past due, respectively and an allowance is recorded through provision expense for these expected losses. For installment/closed-end and revolving/open-end consumer loans originated through CCBX lending partners with balances outstanding beyond 120 days and 180 days past due, respectively, principal and capitalized interest outstanding is charged off against the allowance and accrued interest outstanding is reversed against interest income. These consumer loans are reported as nonperforming/substandard, 90 days or more days past due and still accruing.

When loans are placed on nonaccrual status, all accrued interest is reversed from current period earnings. Payments received on nonaccrual loans are generally applied as a reduction to the loan principal balance. If the likelihood of further loss is removed, the Company will recognize interest on a cash basis only. Loans may be returned to accruing status if the Company believes that all remaining principal and interest is fully collectible and there has been at least six months of sustained repayment performance since the loan was placed on nonaccrual.

An analysis of nonaccrual loans by category consisted of the following at the periods indicated:

	March 31,				December 31,
	2023				2022
	Total Nonaccrual		Nonaccrual with No ACL		Total Nonaccrual
	(dollars in thousands; unaudited)
Community Bank
Commercial and industrial loans	$	15	$	—	$	113
Real estate loans:
Construction, land and land development	66		66		66
Commercial real estate	6,901		6,901		6,901
Consumer and other loans	—		—		—
Total nonaccrual loans	$	6,982	$	6,967	$	7,080

In some circumstances, the Company modifies loans in response to borrower financial difficulty, and generally provides for a temporary modification of loan repayment terms. In order for a modified loan to be considered for accrual status, the loan’s collateral coverage generally will be greater than or equal to 100% of the loan balance, the loan is current on payments, and the borrower must either prefund an interest reserve or demonstrate the ability to make payments from a verified source of cash flow for an extended period of time, usually at least six months in duration.

No loans were modified for borrowers experiencing financial difficulty in the three months ended March 31, 2023 and 2022.

Credit Quality and Credit Risk

Federal regulations require that the Company periodically evaluate the risks inherent in its loan portfolio. In addition, the Company’s regulatory agencies have authority to identify problem loans and, if appropriate, require them to be reclassified. The Company establishes loan grades for loans at the origination of the loan. Changes to community bank loan grades are considered at the time new information about the performance of a loan becomes available, including the receipt of updated financial information from the borrower and after loan reviews. For consumer loans, the Bank follows the FDIC’s Uniform Retail Credit Classification and Account Management Policy for subsequent classification in the event of payment delinquencies or default. Typically, an individual loan grade will not be changed from the prior period unless there is a specific indication of credit deterioration or improvement. Credit deterioration is evidenced by delinquency, direct communications with the borrower or other borrower information that becomes known to management. Credit improvements are evidenced by known facts regarding the borrower or the collateral property. The Company classifies some loans as Watch or Other Loans Especially Mentioned (“OLEM”). Loans classified as Watch are performing assets but have elements of risk that require more monitoring than other performing loans and are reported in the OLEM column in the following table. Loans classified as OLEM are assets that continue to perform but have shown deterioration in credit quality and require close monitoring. There are three classifications for problem loans: Substandard, Doubtful, and Loss. Substandard loans have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Revolving (open-ended loans, such as credit cards) and installment (closed end) consumer loans originated through CCBX partners continue to accrue interest until they are charged-off at 120 days past due for installment loans (primarily unsecured loans to consumers) and 180 days past due for revolving loans (primarily credit cards) and are classified as substandard. Doubtful loans have the weaknesses of loans classified as Substandard, with additional characteristics that suggest the weaknesses make collection or recovery in full after liquidation of collateral questionable on the basis of currently existing facts, conditions, and values. There is a high possibility of loss in loans classified as Doubtful. A loan classified as Loss is considered uncollectible and of such little value that continued classification of the credit as a loan is not warranted. If a loan or a portion thereof is classified as Loss, it must be charged-off, meaning the amount of the loss is charged against the allowance for credit losses, thereby reducing that reserve.

Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. As of March 31, 2023 and December 31, 2022, based on the most recent analysis performed, the risk category of community bank loans by year of origination is as follows:

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
As of March 31, 2023
Commercial and industrial loans
Risk rating
Pass	$	7,788	$	60,221	$	15,938	$	11,172	$	15,299	$	2,414	$	38,622	$	1,370	$	152,824
Other Loan Especially Mentioned	—		—		1,763		1,411		194		—		2,618		—		5,986
Substandard	—		—		—		—		—		63		—		—		63
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial    loans - All other commercial and    industrial loans	$	7,788	$	60,221	$	17,701	$	12,583	$	15,493	$	2,477	$	41,240	$	1,370	$	158,873
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	46	$	—	$	—	$	46
Real estate loans - Construction, land and land development loans
Risk rating
Pass	$	5,338	$	77,892	$	111,263	$	3,338	$	937	$	1,665	$	663	$	—	$	201,096
Other Loan Especially Mentioned	—		—		3,148		2,325		—		—		—		—		5,473
Substandard	—		—		—		—		—		66		—		—		66
Doubtful	—		—		—		—		—		—		—		—		—
Total real estate loans -    Construction, land and land    development loans	$	5,338	$	77,892	$	114,411	$	5,663	$	937	$	1,731	$	663	$	—	$	206,635
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
Real estate loans - Residential real estate loans
Risk rating
Pass	$	2,208	$	45,065	$	41,615	$	36,274	$	32,820	$	27,109	$	20,960	$	—	$	206,051
Other Loan Especially Mentioned	—		—		—		43		—		46		—		—		89
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total real estate loans -    Residential real estate loans	$	2,208	$	45,065	$	41,615	$	36,317	$	32,820	$	27,155	$	20,960	$	—	$	206,140
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate loans - Commercial real estate loans
Risk rating
Pass	$	55,067	$	273,374	$	206,504	$	151,862	$	141,706	$	244,305	$	7,426	$	1,764	$	1,082,008
Other Loan Especially Mentioned	—		3,303		2,211		—		514		7,593		—		—		13,621
Substandard	—		—		—		92		6,901		—		149		—		7,142
Doubtful	—		—		—		—		—		—		—		—		—
Total real estate loans -    Commercial real estate loans	$	55,067	$	276,677	$	208,715	$	151,954	$	149,121	$	251,898	$	7,575	$	1,764	$	1,102,771
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
Consumer and other loans - Other consumer and other loans
Risk rating
Pass	$	1,362	$	313	$	18	$	708	$	60	$	241	$	158	$	—	$	2,860
Other Loan Especially Mentioned	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer and other    loans - Other consumer and    other loans	$	1,362	$	313	$	18	$	708	$	60	$	241	$	158	$	—	$	2,860
Current period gross write-offs	$	4	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	4
Total community bank loans
Risk rating
Pass	$	71,763	$	456,865	$	375,338	$	203,354	$	190,822	$	275,734	$	67,829	$	3,134	$	1,644,839
Other Loan Especially Mentioned	—		3,303		7,122		3,779		708		7,639		2,618		—		25,169
Substandard	—		—		—		92		6,901		129		149		—		7,271
Doubtful	—		—		—		—		—		—		—		—		—
Total community bank loans	$	71,763	$	460,168	$	382,460	$	207,225	$	198,431	$	283,502	$	70,596	$	3,134	$	1,677,279
Current period gross write-offs	$	4	$	—	$	—	$	—	$	—	$	46	$	—	$	—	$	50

The Company considers the performance of the CCBX loan portfolio and its impact on the allowance for credit losses. For CCBX loans, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the loans in CCBX based on payment activity:

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
As of March 31, 2023
Commercial and industrial loans - Capital call lines
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	118,796	$	—	$	118,796
Nonperforming	—		—		—		—		—		—		—		—		—
Total commercial and industrial    loans - Capital call lines	$	—	$	—	$	—	$	—	$	—	$	—	$	118,796	$	—	$	118,796
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial loans - All other commercial and industrial loans
Payment performance
Performing	$	31,726	$	15,541	$	74	$	34	$	—	$	—	$	1,107	$	—	$	48,482
Nonperforming	—		151		—		—		—		—		36		—		187
Total commercial and industrial    loans - All other commercial and    industrial loans	$	31,726	$	15,692	$	74	$	34	$	—	$	—	$	1,143	$	—	$	48,669
Current period gross write-offs	$	—	$	718	$	12	$	—	$	—	$	—	$	—	$	—	$	730
Real estate loans - Residential real estate loans
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	141,079	$	107,342	$	248,421
Nonperforming	—		—		—		—		—		—		946		—		946
Total real estate loans -    Residential real estate loans	$	—	$	—	$	—	$	—	$	—	$	—	$	142,025	$	107,342	$	249,367
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	737	$	—	$	737

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
Consumer and other loans - Credit cards
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	300,415	$	—	$	300,415
Nonperforming	—		—		—		—		—		—		17,772		—		17,772
Total consumer and other    loans - Credit cards	$	—	$	—	$	—	$	—	$	—	$	—	$	318,187	$	—	$	318,187
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	8,481	$	—	$	8,481
Consumer and other loans - Other consumer and other loans
Payment performance
Performing	$	191,238	$	191,628	$	29,230	$	313	$	1,297	$	591	$	11,527	$	—	$	425,824
Nonperforming	—		3,413		809		—		—		18		1,417		—		5,657
Total consumer and other    loans - Other consumer and    other loans	$	191,238	$	195,041	$	30,039	$	313	$	1,297	$	609	$	12,944	$	—	$	431,481
Current period gross write-offs	$	—	$	16,723	$	5,361	$	47	$	117	$	93	$	1,828	$	—	$	24,169
Total CCBX loans
Payment performance
Performing	$	222,964	$	207,169	$	29,304	$	347	$	1,297	$	591	$	572,924	$	107,342	$	1,141,938
Nonperforming	—		3,564		809		—		—		18		20,171		—		24,562
Total CCBX loans	$	222,964	$	210,733	$	30,113	$	347	$	1,297	$	609	$	593,095	$	107,342	$	1,166,500
Current period gross write-offs	$	—	$	17,441	$	5,373	$	47	$	117	$	93	$	11,046	$	—	$	34,117

Loans by credit quality risk rating are as follows as of the periods indicated:

	Pass		Other Loans Especially Mentioned		Sub- Standard		Doubtful		Total
	(dollars in thousands; unaudited)
December 31, 2022
Commercial and industrial loans	$	304,840	$	7,219	$	569	$	—	$	312,628
Real estate loans:
Construction, land, and land development	206,304		7,685		66		—		214,055
Residential real estate	448,185		96		876		—		449,157
Commercial real estate	1,030,650		11,201		6,901		—		1,048,752
Consumer and other loans	583,956		—		24,815		—		608,771
	$	2,573,935	$	26,201	$	33,227	$	—	2,633,363
Less net deferred origination fees									(6,107)
Loans receivable									$	2,627,256

Allowance for Credit Losses ("ACL")

On January 1, 2023, the Company adopted ASU 2016-13, which replaces the incurred loss methodology with an expected loss methodology that is referred to as ACL. See Note 1, Description of Business and Summary of Significant Accounting Policies. As a result of implementing CECL, there was a one-time adjustment to the 2023 opening allowance balance of $3.9 million.

CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing most losses. In accordance with accounting guidance, we estimate and record a provision for expected losses for these CCBX loans and reclassified negative deposit accounts. When the provision for CCBX credit losses and provision for unfunded commitments are recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements). Expected losses are recorded in the allowance for credit losses. The credit enhancement asset is relieved when credit enhancement payments and recoveries are received from the CCBX partner. CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses by absorbing incurred credit and fraud losses. If the partner is unable to fulfill their contracted obligations then the Bank could be exposed to additional credit losses. In accordance with the program agreement for one CCBX partner, the Company is responsible for credit losses on approximately 10% of a $137.4 million loan portfolio. At March 31, 2023, 10% of this portfolio represented $13.9 million in loans. The partner is responsible for credit losses on approximately 90% of this portfolio and for fraud losses on 100% of this portfolio. The Company earns 100% of the revenue on the aforementioned $13.9 million of loans.

The following tables summarize the allocation of the ACL, as well as the activity in the ACL attributed to various segments in the loan portfolio, as of and for the three months ended March 31, 2023 and the allocation and activity of the loans and allowance for loan losses ("ALLL ") attributed to the various segments in the loan portfolio for the three months ended March 31, 2022:

	Commercial and Industrial		Construction, Land, and Land Development		Residential Real Estate		Commercial Real Estate		Consumer and Other		Unallocated		Total
	(dollars in thousands; unaudited)
Three Months Ended March 31, 2023
ACL balance, December 31, 2022	$	4,831	$	7,425	$	4,142	$	5,470	$	50,996	$	1,165	$	74,029
Impact of adopting CECL (ASC 326)	1,428		(1,589)		1,623		1,240		2,315		(1,165)		$	3,852
Provision for credit losses or (recapture)	3,165		(92)		1,958		796		37,717		—		43,544
	9,424		5,744		7,723		7,506		91,028		—		121,425
Loans charged-off	(776)		—		(737)		—		(32,654)		—		(34,167)
Recoveries of loans previously charged-off	3		—		—		—		1,862		—		1,865
Net (charge-offs) recoveries	(773)		—		(737)		—		(30,792)		—		(32,302)
ACL balance, March 31, 2023	$	8,651	$	5,744	$	6,986	$	7,506	$	60,236	$	—	$	89,123
Three Months Ended March 31, 2022
ALLL balance, December 31, 2021	$	3,221	$	6,984	$	4,598	$	6,590	$	7,092	$	147	$	28,632
Provision for loan losses or (recapture)	296		608		1,160		(1,273)		10,823		1,328		12,942
	3,517		7,592		5,758		5,317		17,915		1,475		41,574
Loans charged-off	(5)		—		—		—		(2,803)		—		(2,808)
Recoveries of loans previously charged-off	2		—		—		—		2		—		4
Net (charge-offs) recoveries	(3)		—		—		—		(2,801)		—		(2,804)
Balance, March 31, 2022	$	3,514	$	7,592	$	5,758	$	5,317	$	15,114	$	1,475	$	38,770

The following table summarizes the allocation of the allowance for loan losses attributed to various segments in the loan portfolio as of December 31, 2022.

	Commercial and Industrial		Construction, Land, and Land Development		Residential Real Estate		Commercial Real Estate		Consumer and Other		Unallocated		Total
	(dollars in thousands; unaudited)
As of December 31, 2022
ALLL amounts allocated to
Individually evaluated for impairment	$	95	$	—	$	—	$	—	$	—	$	—	$	95
Collectively evaluated for impairment	4,736		7,425		4,142		5,470		50,996		1,165		73,934
ALLL balance, December 31, 2022	$	4,831	$	7,425	$	4,142	$	5,470	$	50,996	$	1,165	$	74,029
Loans individually evaluated for impairment	$	113	$	66	$	—	$	6,901	$	—			$	7,080
Loans collectively evaluated for impairment	312,515		213,989		449,157		1,041,851		608,771				2,626,283
Loan balance, December 31, 2022	$	312,628	$	214,055	$	449,157	$	1,048,752	$	608,771			$	2,633,363

The following table presents the collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:

	Real Estate		Business Assets		Total		ACL
	(dollars in thousands; unaudited)
March 31, 2023
Commercial and industrial loans	$	—	$	15	$	15	$	6
Real estate loans:
Construction, land and land development	66		—		66		—
Residential real estate	—		—		—		—
Commercial real estate	6,901		—		6,901		—
Total	$	6,967	$	15	$	6,982	$	6

The following table is a summary of information pertaining to impaired loans as of the period indicated. Loans originated through CCBX partners are reported using pool accounting and are not subject to impairment analysis, therefore CCBX loans are not included in this table.

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
	(dollars in thousands; unaudited)
December 31, 2022
Commercial and industrial loans	$	124	$	—	$	113	$	113	$	95
Real estate loans:
Construction, land and land development	67		66		—		66		—
Commercial real estate	6,901		6,901		—		6,901		—
Total	$	7,092	$	6,967	$	113	$	7,080	$	95

The following tables summarize the Company’s average recorded investment and interest income recognized on impaired loans by loan class for the period indicated:

	Three Months Ended
	March 31, 2022
	Average Recorded Investment		Interest Income Recognized
	(dollars in thousands; unaudited)
Commercial and industrial loans	$	148	$	—
Real estate loans:
Construction, land and land development	—		—
Residential real estate	55		—
Commercial real estate	—		—
Total	$	203	$	—

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Deposits

3 Months Ended

Mar. 31, 2023

Deposits [Abstract]

Deposits

Deposits

The composition of consolidated deposits consisted of the following at the periods indicated:

	March 31, 2023		December 31, 2022
	(dollars in thousands; unaudited)
Demand, noninterest bearing	$	761,800	$	775,012
NOW and money market	2,207,121		1,804,399
Savings	99,241		107,117
Total core deposits	3,068,162		2,686,528
Brokered deposits	1		101,546
Time deposits less than $250,000	19,386		21,942
Time deposits $250,000 and over	7,674		7,505
Total deposits	$	3,095,223	$	2,817,521

The following table presents the maturity distribution of time deposits as of March 31, 2023:

(dollars in thousands; unaudited)
Twelve months	$	21,548
One to two years	2,992
Two to three years	1,527
Three to four years	389
Four to five years	547
Thereafter	57
	$	27,060

Included in total deposits is $94.3 million in IntraFi network NOW and money market sweep accounts as of March 31, 2023, which provides our customers with fully insured deposits through a sweep to other financial institutions.

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Leases

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Leases

The Company has committed to rent premises used in business operations under non-cancelable operating leases and determines if an arrangement meets the definition of a lease upon inception.

Operating lease right-of-use (“ROU”) assets represent a right to use an underlying asset for the contractual lease term. Operating lease liabilities represent an obligation to make lease payments arising from the lease. An operating lease ROU asset and operating lease liability will be recognized for any new operating leases at the commencement of the new lease.

The Company’s leases do not provide an implicit interest rate, therefore the Company used its incremental collateralized borrowing rates commensurate with the underlying lease terms to determine the present value of operating lease liabilities. The weighted average discount rate as of March 31, 2023 was 3.45%.

The Company’s operating lease agreements contain both lease and non-lease components, which are generally accounted for separately. The Company’s lease agreements do not contain any residual value guarantees.

Operating leases with terms of 12 months or less are not included in ROU assets and operating lease liabilities recorded in the Company’s consolidated balance sheets. Operating lease terms include options to extend when it is reasonably certain that the Company will exercise such options, determined on a lease-by-lease basis. At March 31, 2023, lease expiration dates ranged from 11 months to 21.9 years, with additional renewal options on certain leases typically ranging from 5 to 10 years. At March 31, 2023, the weighted average remaining lease term inclusive of renewal options that the Company is reasonably certain to renew for the Company’s operating leases was 8.1 years.

Rental expense for operating leases is recognized on a straight-line basis over the lease term and amounted to $358,000 three months ended March 31, 2023, and $346,000 for the three months ended March 31, 2022. Variable lease components, such as inflation adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

The following table presents the minimum annual lease payments under the terms of these leases, inclusive of renewal options that the Company is reasonably certain to renew, at March 31, 2023:

(dollars in thousands; unaudited)	March 31, 2023
April 1 to December 31, 2023	$	987
2024	894
2025	715
2026	719
2027	667
2028 and thereafter	1,823
Total lease payments	5,805
Less: amounts representing interest	783
Present value of lease liabilities	$	5,022

The following table presents the components of total lease expense and operating cash flows for the three months ended March 31, 2023 and 2022:

	Three Months Ended
	March 31, 2023		March 31, 2022
	(dollars in thousands; unaudited)
Lease expense:
Operating lease expense	$	321	$	320
Variable lease expense	52		41
Total lease expense (1)	$	373	$	361
Cash paid:
Cash paid reducing operating lease liabilities	$	379	$	358

(1)Included in net occupancy expense in the Condensed Consolidated Statements of Income (unaudited).

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation -

Stock Options and Restricted Stock

The 2018 Coastal Financial Corporation Omnibus Plan (2018 Plan) authorizes the Company to grant awards, including but not limited to, stock options, restricted stock units, and restricted stock awards, to eligible employees, directors or individuals that provide service to the Company, up to an aggregate of 500,000 shares of common stock. On May 24, 2021, the Company’s shareholders approved the First Amendment to the 2018 Plan, which increased the authorized plan shares by 600,000. The 2018 Plan replaces both the 2006 Plan and the Directors’ Stock Bonus Plan (2006 Plan). Existing awards will vest under the terms granted and no further awards will be granted under these prior plans. Shares available to be granted under the 2018 plan were 452,780 at March 31, 2023.

Stock Option Awards

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. Expected volatilities are based on historical volatility of the Company’s stock and other factors. The Company uses the vesting term and contractual life to determine the expected life. The risk-free interest rate for periods within the contractual

life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation expense related to unvested stock option awards is reversed at date of forfeiture.

There were no new stock options granted in the three months ended March 31, 2023 and 2022.

A summary of stock option activity under the 2018 Plan and 2006 Plan during the three months ended March 31, 2023:

Options	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Outstanding at December 31, 2022	438,103	$	8.79	4.1	$	16,968
Granted	—	—
Exercised	(77,984)	7.38
Expired	—	—
Forfeited	—	—
Outstanding at March 31, 2023	360,119	$	9.10	4.2	$	9,692
Vested or expected to vest at March 31, 2023	360,119	$	9.10	4.2	$	9,692
Exercisable at March 31, 2023	174,590	$	8.65	3.9	$	4,776

The total or aggregate intrinsic value (which is the amount by which the stock price exceeds the exercise price) of options exercised during the three months ended March 31, 2023 was $2.3 million. The total or aggregate intrinsic value of options exercised during the three months ended March 31, 2022 was $1.1 million.

As of March 31, 2023, there was $982,000 of total unrecognized compensation cost related to nonvested stock options granted under the 2018 Plan and 2006 Plan. Total unrecognized compensation costs are adjusted for unvested forfeitures. The Company expects to recognize that cost over a remaining weighted-average period of approximately 4.3 years. Compensation expense recorded related to stock options was $140,000 for the three months ended March 31, 2023 and $120,000 for the three months ended March 31, 2022.

Restricted Stock Units

In the first quarter of 2023, the Company granted 73,611 restricted stock units ("RSUs") under the 2018 Plan to employees, which vest ratably over 4 years and 1,084 restricted stock units which vest ratably over 5 years.

RSUs provide for an interest in Company common stock to the recipient, the underlying stock is not issued until certain conditions are met. Vesting requirements include time-based, performance-based, or market-based conditions. Recipients of RSUs do not pay any cash consideration to the Company for the units and the holders of the restricted units do not have voting rights. The fair value of time-based and performance-based units is equal to the fair market value of the Company’s common stock on the grant date. The fair value of market-based units is estimated on the grant date using the Monte Carlo simulation model. Compensation expense is recognized over the vesting period that the awards are based. RSUs are nonparticipating securities.

As of March 31, 2023, there was $11.2 million of total unrecognized compensation cost related to nonvested RSUs. The Company expects to recognize that cost over the remaining weighted-average vesting period of approximately 4.4 years. Compensation expense recorded related to RSUs was $812,000 for the three months ended March 31, 2023 and $374,000 for the three months ended March 31, 2022.

A summary of the Company’s nonvested RSUs at March 31, 2023 and changes during the three month period is presented below:

Nonvested shares - RSUs	Shares	Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Nonvested shares at December 31, 2022	380,151	$	28.61	$	7,187
Granted	74,695	$	43.44
Forfeited	(4,653)	$	38.88
Vested	(42,402)	$	30.01
Nonvested shares at March 31, 2023	407,791	$	31.06	$	2,017

Restricted Stock Awards

Employees

There were no new restricted stock awards granted in the three months ended March 31, 2023. The fair value of restricted stock awards is equal to the fair value of the Company’s stock at the date of grant. Compensation expense is recognized over the vesting period that the awards are based. Restricted stock awards are participating securities.

As of March 31, 2023, there was $43,000 of total unrecognized compensation cost related to nonvested restricted stock awards. The Company expects to recognize that cost over the remaining weighted-average vesting period of approximately 4.9 years. Compensation expense recorded related to restricted stock awards was $2,000 for the three months ended March 31, 2023 and March 31, 2022.

Director’s Stock Compensation

Under the 2018 Plan, eligible directors are granted stock with a total market value of $35,000, and the Board Chair is granted stock with a total market value of $55,000. Chairs of the Audit, Compensation and Non-Financial Risk Committees will receive additional stock with a market value of $2,500 for each committee chaired. Stock is granted as of each annual meeting date and will cliff vest one day prior to the next annual meeting date. During the vesting period, the grants are considered participating securities.

As of March 31, 2023, there was $54,000 of total unrecognized compensation expense related to director restricted stock awards which the Company expects to recognize over the remaining average vesting period of approximately two months. Director compensation expense recorded related to the 2018 Plan totaled $96,000 for the three months ended March 31, 2023 and $38,000 for the three months ended March 31, 2022.

A summary of the Company’s nonvested shares at March 31, 2023 and changes during the three-month period is presented below:

Nonvested shares - RSAs	Shares	Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Nonvested shares at December 31, 2022	13,396	$	32.94	$	195
Granted	—	$	—
Forfeited	—	$	—
Vested	(500)	$	17.81
Nonvested shares at March 31, 2023	12,896	$	33.52	$	32

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Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The following tables present estimated fair values of the Company’s financial instruments as of the period indicated, whether or not recognized or recorded in the consolidated balance sheets at the period indicated:

	March 31, 2023				Fair Value Measurements Using
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands; unaudited)
Financial assets
Cash and due from banks	$	37,676	$	37,676	$	37,676	$	—	$	—
Interest earning deposits with other banks	356,240		356,240		356,240		—		—
Investment securities	101,704		101,596		97,699		3,896		—
Other investments	11,346		11,346		—		8,774		2,572
Loans held for sale	27,292		27,292		—		27,292
Loans receivable	2,837,204		2,791,704		—		—		2,791,704
Accrued interest receivable	19,321		19,321		—		19,321		—
Financial liabilities
Deposits	$	3,095,223	3,094,407		$	—	$	3,094,407	$	—
Subordinated debt	44,031		43,674		—		43,674		—
Junior subordinated debentures	3,588		3,480		—		3,480		—
Accrued interest payable	874		874		—		874		—

	December 31, 2022				Fair Value Measurements Using
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands; unaudited)
Financial assets
Cash and due from banks	$	32,722	$	32,722	$	32,722	$	—	$	—
Interest earning deposits with other banks	309,417		309,417		309,417		—		—
Investment securities	98,353		98,233		97,015		1,218		—
Other investments	10,555		10,555		—		7,983		2,572
Loans receivable, net	2,627,256		2,580,183		—		—		2,580,183
Accrued interest receivable	17,815		17,815		—		17,815		—
Financial liabilities
Deposits	$	2,817,521	$	2,816,602	$	—	$	2,816,602	$	—
Subordinated debt	43,999		42,743		—		42,743		—
Junior subordinated debentures	3,588		3,484		—		3,484		—
Accrued interest payable	684		684		—		684		—

The Company measures and discloses certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (that is, not a forced liquidation or distressed sale). GAAP establishes a consistent framework for measuring fair value and disclosure requirements about fair value measurements. Among other things, the accounting standard requires the reporting entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s estimates for market assumptions. These two types of inputs create the following fair value hierarchy:

•Level 1 – Quoted prices in active markets for identical instruments. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A

quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

•Level 2 – Observable inputs other than Level 1 including quoted prices in active markets for similar instruments, quoted prices in less active markets for identical or similar instruments, or other observable inputs that can be corroborated by observable market data.

•Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs from nonbinding single dealer quotes not corroborated by observable market data.

The estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize at a future date. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. In addition, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates that must be made given the absence of active secondary markets for certain financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values.

Items measured at fair value on a recurring basis – The following fair value hierarchy table presents information about the Company’s assets that are measured at fair value on a recurring basis at the dates indicated:

	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in thousands; unaudited)
March 31, 2023
Available-for-sale
U.S. Treasury securities	$	97,699	$	—	$	—	$	97,699
U.S. Agency collateralized mortgage obligations	—		50		—		50
Municipals	—		250		—		250
	$	97,699	$	300	$	—	$	97,999
December 31, 2022
Available-for-sale
U.S. Treasury securities	$	97,015	$	—	$	—	$	97,015
U.S. Agency collateralized mortgage obligations	—		51		—		51
U.S. Agency residential mortgage-backed securities	—		1		—		1
Municipals	—		250		—		250
	$	97,015	$	302	$	—	$	97,317

The following methods were used to estimate the fair value of the class of financial instruments above:

Investment securities - The fair value of securities is based on quoted market prices, pricing models, quoted prices of similar securities, independent pricing sources, and discounted cash flows.

Limitations: The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2023 and December 31, 2022. The factors used in the fair values estimates are subject to change subsequent to the dates the fair value estimates are completed, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

Items measured at fair value on a nonrecurring basis – The following table presents financial assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy of the fair value measurements for those assets at the dates indicated:

	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in thousands; unaudited)
March 31, 2023
Equity securities	$	—	$	—	$	2,572	$	2,572
Total	$	—	$	—	$	2,572	$	2,572
December 31, 2022
Impaired loans	$	—	$	—	$	7,080	$	7,080
Equity securities	—		—		2,572		2,572
Total	$	—	$	—	$	9,652	$	9,652

The amounts disclosed above represent the fair values at the time the nonrecurring fair value measurements were made, and not necessarily the fair value as of the dates reported on.

Impaired loans - A loan is considered impaired when it is expected that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. Impairment is measured based on the fair value of the underlying collateral or the discounted cash expected future cash flows. Subsequent changes in the value of impaired loans are included within the provision for credit losses - loans in the same manner in which impairment initially was recognized or as a reduction in the provision that would otherwise be reported. Impaired loans are evaluated quarterly to determine if valuation adjustments should be recorded. The need for valuation adjustments arises when observable market prices or current appraised values of collateral indicate a shortfall in collateral value compared to current carrying values of the related loan. If the Company determines that the value of the impaired loan is less than the carrying value of the loan, the Company either establishes an impairment reserve as a specific component of the allowance for credit losses or charges off the impairment amount. These valuation adjustments are considered nonrecurring fair value adjustments.

Equity securities – The Company measures equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer, with price changes recognized in earnings.

Assets measured at fair value using significant unobservable inputs (Level 3)

The following table presents the carrying value of equity securities without readily determinable fair values, as of March 31, 2023, with adjustments recorded during the periods presented for those securities with observable price changes, if applicable. These equity securities are included in other investments on the balance sheet.

	For the Three Months Ended March 31,
(dollars in thousands; unaudited)	2023		2022
Carrying value, beginning of period	$	2,572	$	2,322
Purchases	—		350
Observable price change	—		—
Carrying value, end of period	$	2,572	$	2,672

The following table provides a description of the valuation technique, unobservable inputs, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a nonrecurring basis at the date indicated:

(unaudited)	Valuation Technique	Unobservable Inputs	December 31, 2022 Weighted Average Rate
Impaired loans	Collateral valuations	Discount to appraised value	8.0%

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

The following is a computation of basic and diluted earnings per common share at the periods indicated:

	Three Months Ended
	March 31, 2023		March 31, 2022
	(dollars in thousands, except earnings per share data; unaudited)
Net Income	$	12,391	$	6,230
Basic weighted average number common shares outstanding	13,196,960		12,898,746
Dilutive effect of equity-based awards	412,531		576,591
Diluted weighted average number common shares outstanding	13,609,491		13,475,337
Basic earnings per share	$	0.94	$	0.48
Diluted earnings per share	$	0.91	$	0.46
Antidilutive stock options and restricted stock outstanding	124,714		154,871

Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings, however the difference in the two-class method was not significant.

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Segment Reporting

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

As defined in ASC 280, Segment Reporting, an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. We evaluate performance based on an internal performance measurement accounting system, which provides line of business results. This system uses various techniques to assign balance sheet and income statement amounts to the business segments, including allocations of income and expense. A primary objective of this measurement system and related internal financial reporting practices are to produce consistent results that reflect the underlying financial impact of the segments on the Company and to provide a basis of support for strategic decision making. The accounting policies applicable to our segments are those that apply to our preparation of the accompanying Consolidated Financial Statements. Based on these criteria, we have identified three segments: the community bank, CCBX and treasury & administration. The community bank segment includes all community banking activities, with a primary focus of the community bank is on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application. We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties (one in King County and one in Island County). The CCBX segment provides banking as a service (“BaaS”) that allows our broker-dealer and digital financial service partners to offer their customers banking services. The CCBX segment has 25 partners as of March 31, 2023. The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments.

The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. The Company continues to evaluate its methodology on allocating items to the Company’s various segments to support strategic business decisions by the Company’s executive leadership. Income and expenses that are specific to a segment are directly posted to each segment. Additionally, certain indirect expenses are allocated to each segment utilizing various metrics, such as number of employees, utilization of space, and allocations based on loan and deposit balances. We have implemented a transfer pricing process that credits or charges the community bank and CCBX segments with intrabank interest income or expense for the difference in average loans and average deposits, with the treasury & administration segment as the offset for those entries.

Summarized financial information concerning the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables for the periods indicated:

	March 31, 2023								December 31, 2022
	Community Bank		CCBX		Treasury & Administration		Total		Community Bank		CCBX		Treasury & Administration		Total
Assets	(dollars in thousands; unaudited)
Cash and Due from Banks	$	4,485	$	12,223	$	377,208	$	393,916	$	4,603	$	12,899	$	324,637	$	342,139
Intrabank assets	—		356,905		(356,905)		—		—		254,096		(254,096)		—
Securities	—		—		101,704		101,704		—		—		98,353		98,353
Loans held for sale	—		27,292		—		27,292		—		—		—		—
Total loans receivable	1,671,014		1,166,190		—		2,837,204		1,614,752		1,012,504		—		2,627,256
Allowance for credit losses	(20,708)		(68,415)		—		(89,123)		(20,636)		(53,393)		—		(74,029)
All other assets	25,652		103,403		50,985		180,040		25,508		76,111		49,129		150,748
Total assets	$	1,680,443	$	1,597,598	$	172,992	$	3,451,033	$	1,624,227	$	1,302,217	$	218,023	$	3,144,467
Liabilities
Total deposits	$	1,531,391	$	1,563,832	$	—	$	3,095,223	$	1,538,218	$	1,279,303	$	—	$	2,817,521
Total borrowings	—		—		47,619		47,619		—		—		47,587		47,587
Intrabank liabilities	143,279		—		(143,279)		—		80,392		—		(80,392)		—
All other liabilities	5,773		33,766		9,889		49,428		5,617		22,914		7,334		35,865
Total liabilities	$	1,680,443	$	1,597,598	$	(85,771)	$	3,192,270	$	1,624,227	$	1,302,217	$	(25,471)	$	2,900,973

	Three months ended March 31, 2023								Three months ended March 31, 2022
	Community Bank		CCBX		Treasury & Administration		Total		Community Bank		CCBX		Treasury & Administration		Total
	(dollars in thousands; unaudited)
Net interest income, before    intrabank transfer	$	21,677	$	29,796	$	3,018	$	54,491	$	17,205	$	11,874	$	189	$	29,268
Interest income (expense)    intrabank transfer	(1,079)		2,652		(1,573)		—		128		198		(326)		—
Provision for credit    losses - loans	428		43,116		—		43,544		344		12,598		—		12,942
Provision for unfunded    commitments	137		16		—		153		—		—		—		—
Noninterest income (1)	1,090		48,080		137		49,307		1,556		20,343		87		21,986
Noninterest expense	9,092		28,439		7,132		44,663		7,646		18,407		4,362		30,415
Net income before income    taxes	12,031		8,957		(5,550)		15,438		10,899		1,410		(4,412)		7,897
Income taxes	2,375		1,768		(1,096)		3,047		2,301		297		(931)		1,667
Net Income	$	9,656	$	7,189	$	(4,454)	$	12,391	$	8,598	$	1,113	$	(3,481)	$	6,230
(1)For the three months ended March 31, 2023, CCBX noninterest income includes credit enhancements of $42.4 million, fraud enhancements of $2.0 million, and BaaS program income of $3.6 million. For the three months ended March 31, 2022, CCBX noninterest income includes credit enhancements of $13.1 million, fraud enhancements of $4.6 million and BaaS program income of $2.5 million.

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Description of Business and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Nature of operations

Nature of operations - Coastal Financial Corporation (“Corporation” or “Company”) is a registered bank holding company whose wholly owned subsidiaries are Coastal Community Bank (“Bank”) and Arlington Olympic LLC (“LLC”). The Company is a Washington state corporation that was organized in 2003. The Bank was incorporated and commenced operations in 1997 and is a Washington state-chartered commercial bank that is a member bank of the Federal Reserve system. Arlington Olympic LLC was formed in 2019 and owns the Company’s Arlington branch site, which the Bank leases from the LLC.

We are headquartered in Everett, Washington, which by population is the largest city in, and the county seat of, Snohomish County. The Company’s business is conducted through three reportable segments: CCBX, the community bank and treasury & administration.  The CCBX segment provides Banking as a Service (“BaaS”) that allows our broker dealers and digital financial service partners to offer their customers banking services. Through CCBX’s partners the Company is able to offer banking services and products across the nation.The community bank segment includes all community banking activities with a primary focus on providing a wide range of banking products and services to consumers and small to medium-sized businesses, professionals, and individuals in the broader Puget Sound region in the state of Washington through its 14 branches in Snohomish, Island and King Counties, and through the Internet and its mobile banking application. The treasury & administration segment includes treasury management, overall administration and all other aspects of the Company.

The Bank’s deposits are insured in whole or in part by the Federal Deposit Insurance Corporation (“FDIC”). The community bank’s loans and deposits are primarily within the greater Puget Sound area, while CCBX loans and deposits are dependent upon the partner’s market. The Bank’s primary funding source is deposits from customers. The Bank is subject to regulation and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Washington State Department of Financial Institutions Division of Banks. The Federal Reserve also has regulatory and supervisory authority over the Company.

Financial statement presentation

Financial statement presentation - The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim reporting requirements and with instructions to Form 10-Q and Article 10 of Regulation S-X, and therefore do not include all the information and notes included in the annual consolidated financial statements in conformity with GAAP. These interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual report on Form 10-K as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2023. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the entire year.

Amounts presented in the consolidated financial statements and footnote tables are rounded and presented in thousands of dollars except per-share amounts, which are presented in dollars. In the narrative footnote discussion, amounts are rounded to thousands and presented in dollars.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying consolidated financial statements have been made. These adjustments include normal and recurring accruals considered necessary for a fair and accurate presentation.

Principles of consolidation

Principles of consolidation - The consolidated financial statements include the accounts of the Company, the Bank and the LLC. All significant intercompany accounts have been eliminated in consolidation.

Estimates

Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that its critical accounting policies include determining the allowance for credit losses, the valuation of the Company’s deferred tax assets, and fair value of financial instruments. Actual results could differ significantly from those estimates.

Implementation of ASUs

Implementation of ASU 2016-13 - On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized costs, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in certain leases. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require increases or decreases in credit losses be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believe it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis.

The Company adopted ASC 326 using the modified retrospective method. Results for the reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The day one CECL adjustment for community bank loans included a reduction of $310,000 to the community bank allowance and a reduction of $340,000 related to the community bank unfunded commitment reserve. This was offset by an increase to the CCBX allowance for $4.2 million. With the mirror image approach accounting related to the credit enhancement for CCBX partner loans, there was a CECL day one increase to the indemnification asset in the amount of $4.5 million. Net, the day one impact to retained earnings for the Bank’s transition to CECL was an increase of $954,000, excluding the impact of income taxes.

Management has separately evaluated its held-to-maturity investment securities and determined that no loss reserves were required.

Implementation of ASU 2022-02 - On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings ("TDR") and Vintage Disclosures. The ASU eliminated the accounting guidance for TDR loans by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, the ASU requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. This ASU was effective upon adoption of ASU 2016-13 and was applied on a prospective basis. During the quarter ended March 31, 2023, the Company did not have any loans that were modified to borrowers experiencing financial difficulty.

Accounting policy update –

Allowance for Credit Losses - effective January 1, 2023 with the adoption of ASU 2016-13

Loans and unfunded commitments

The allowance for credit losses ("ACL") is an estimate of the expected credit losses on financial assets measured at amortized cost. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans in the pool and whether it needs to evaluate the allowance on an individual basis. The Company must estimate expected credit losses over the loans’ contractual terms, adjusted for expected prepayments. In estimating the life of the loan, the Company cannot extend the contractual term of the loan for expected extensions, renewals, and modifications, unless the extension or renewal options are included in the contract at the reporting date and are not unconditionally cancellable by the Company. Because expected credit losses are estimated over the contractual life adjusted for estimated prepayments, determination of the life of the loan may significantly affect the ACL. The Company has chosen to segment its portfolio consistent with the manner in which it manages the risk of the type of credit.

•Community Bank Portfolio: The ACL calculation is derived from loan segments utilizing loan level information and relevant available information from internal and external sources related to past events and current conditions. In addition, the Company incorporates a reasonable and supportable forecast.

•CCBX Portfolio: The Bank calculates the ACL on loans on an aggregate basis based on each partner and product level, segmenting the risk inherent in the CCBX portfolio based on qualitative and quantitative trends in the portfolio.

Also included in the ACL are qualitative reserves to cover losses that are expected, but in the Company’s assessment may not be adequately represented in the quantitative method. For example, factors that the Company considers include environmental business conditions, borrower’s financial condition, credit rating and the volume and severity of past due loans and non-accrual loans. Based on this analysis, the Company records a provision for loan losses to maintain the allowance at appropriate levels.

Determining the amount of the allowance is considered a critical accounting estimate, as it requires significant judgment and the use of subjective measurements, including management’s assessment of overall portfolio quality. The Company maintains the allowance at an amount the Company believes is sufficient to provide for estimated losses expected to occur in the Company’s loan portfolio at each balance sheet date, and fluctuations in the provision for credit losses may result from management’s assessment of the adequacy of the allowance. Changes in these estimates and assumptions are possible and may have a material impact on the Company’s allowance, and therefore the Company’s financial position, liquidity or results of operations. The Company has elected to exclude accrued interest receivable from the amortized cost basis in its ACL calculation as accrued interest is written off in a timely manner when deemed uncollectable.

For more information and discussion related to the allowance for credit losses on loans, see “Note 4 - Loans and Allowance for Credit Losses” in the Consolidated Financial Statements.

In addition to the ACL on loans held for investment, CECL requires a balance sheet liability for expected losses on unfunded commitments, which is recognized if both the following conditions are met: (1) the Company has a present contractual obligation to extend credit; and (2) the obligation is not unconditionally cancellable by the Company. Loan commitments may have a funded and unfunded portion, of which the liability for unfunded commitments is derived based upon the commitments to extend credit to a borrower (e.g., an estimate of expected credit losses is not established for unfunded portions of loan commitment that are unconditionally cancellable by the Company). The expected credit losses for funded portions are reported in the previously discussed ACL. The Company segments its unfunded commitment portfolio consistent with the ACL calculation, separating between unfunded lines and commitments to originate. The Company incorporates the probability of funding (i.e. estimate of utilization) for each segment and then utilizes the ACL loss rates for each segment on an aggregate basis to calculate the allowance for unfunded commitments

Available-for-sale debt securities

For available-for-sale debt securities with fair value below amortized cost, the security is considered impaired. When the Company does not intend to sell the debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, then the Company assesses the impairment for potential expected credit losses. Impairment related to a credit loss is measured using the discounted cash flow method. Credit loss recognition is limited to the fair value of the security. The impairment is recognized by establishing an ACL through provision for credit losses. Impairment related to noncredit factors is recognized in accumulated other comprehensive income, net of applicable taxes. The Company evaluates AFS security impairment on a quarterly basis.

Held-to-maturity debt securities

For held-to-maturity debt securities, expected losses are evaluated and calculated on a collective basis for those securities which share risk characteristics. The Company aggregates record level securities calculations and reports the security portfolio segments based on shared risk characteristics. The only segment included in the held-to-maturity portfolio are U.S. Agency Residential Mortgage Backed Securities which have an expected zero credit loss.

The following table illustrates the impact of ASU 2016-13:

	January 1, 2023
	As reported under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Allowance for credit losses	$	77,881	$	74,029	$	3,852
CCBX credit enhancement asset	57,842		53,377		4,465
Deferred tax asset	18,238		18,458		(220)
Liabilities:
Unfunded commitment reserve	634		974		(340)
Shareholders' Equity:
Retained earnings	120,732		119,998		734

Subsequent Events

Subsequent Events - The Company has evaluated events and transactions subsequent to March 31, 2023 for potential recognition or disclosure.

Reclassifications

Reclassifications - Certain amounts reported in prior quarters' consolidated financial statements may have been reclassified to conform to the current presentation with no effect on stockholders’ equity or net income.

Recent Accounting Guidance Not Yet Effective

Recent Accounting Guidance Not Yet Effective

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

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Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Summary of Accounting Standards Update

The following table illustrates the impact of ASU 2016-13:

	January 1, 2023
	As reported under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Allowance for credit losses	$	77,881	$	74,029	$	3,852
CCBX credit enhancement asset	57,842		53,377		4,465
Deferred tax asset	18,238		18,458		(220)
Liabilities:
Unfunded commitment reserve	634		974		(340)
Shareholders' Equity:
Retained earnings	120,732		119,998		734

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Amortized Cost and Fair Values of Investments in Debt Securities

The following table summarizes the amortized cost, fair value, and allowance for credit losses and the corresponding amounts of gross unrealized gains and losses of available-for-sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held-to-maturity securities:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses
	(dollars in thousands; unaudited)
March 31, 2023
Available-for-sale
U.S. Treasury securities	$	99,974	$	—	$	(2,275)	$	97,699	$	—
U.S. Agency collateralized    mortgage obligations	52		—		(2)		50		—
U.S. Agency residential    mortgage-backed securities	—		—		—		—		—
Municipal bonds	250		—		—		250		—
Total available-for-sale    securities	100,276		—		(2,277)		97,999		—
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value		Allowance for Credit Losses
Held-to-maturity
U.S. Agency residential    mortgage-backed securities	3,705		—		(108)		3,597		—
Total held-to-maturity    securities	$	3,705	$	—	$	(108)	$	3,597	$	—
Total investment securities	$	103,981	$	—	$	(2,385)	$	101,596	$	—

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands; unaudited)
December 31, 2022
Available-for-sale
U.S. Treasury securities	$	99,967	$	—	$	(2,952)	$	97,015
U.S. Agency collateralized mortgage obligations	54		—		(3)		51
U.S. Agency residential mortgage-backed securities	1		—		—		1
Municipal bonds	250		—		—		250
Total available-for-sale securities	100,272		—		(2,955)		97,317
Held-to-maturity
U.S. Agency residential mortgage-backed securities	1,036		—		(120)		916
Total investment securities	$	101,308	$	—	$	(3,075)	$	98,233

Amortized Cost and Fair Value of Debt Securities by Contractual Maturity

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(dollars in thousands; unaudited)
March 31, 2023
Amounts maturing in
One year or less	$	100,224	$	97,949	$	—	$	—
	100,224		97,949		—		—
U.S. Agency residential mortgage-backed securities and collateralized mortgage obligations	52		50		3,705		3,597
	$	100,276	$	97,999	$	3,705	$	3,597

Summary of Investment Securities Continuous Unrealized Loss Position

The following table shows the investments’ gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for which an allowance for credit losses has not been recorded:

	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(dollars in thousands; unaudited)
March 31, 2023
Available-for-sale
U.S. Treasury securities	$	—	$	—	$	97,699	$	2,275	$	97,699	$	2,275
U.S. Agency collateralized mortgage obligations	—		—		50		2		50		2
Total available-for-sale securities	—		—		97,749		2,277		97,749		2,277
Held-to-maturity
U.S. Agency residential mortgage-backed securities	2,672		7		925		101		3,597		108
Total investment securities	$	2,672	$	7	$	98,674	$	2,378	$	101,346	$	2,385

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Loans and Allowance for Credit Losses (Tables)

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Composition of Loan Portfolio

The composition of the loan portfolio is as follows as of the periods indicated:

	March 31,
	2023
	(dollars in thousands; unaudited)
Community Bank
Commercial and industrial loans	$	158,873
Real estate loans:
Construction, land and land development loans	206,635
Residential real estate loans	206,140
Commercial real estate loans	1,102,771
Consumer and other loans:
Other consumer and other loans	2,860
Gross Community Bank loans receivable	1,677,279
CCBX
Commercial and industrial loans:
Capital call lines	$	118,796
All other commercial & industrial loans	48,669
Real estate loans:
Residential real estate loans	249,367
Consumer and other loans:
Credit cards	318,187
Other consumer and other loans	431,481
Gross CCBX loans receivable	1,166,500
Total gross loans receivable	2,843,779
Net deferred origination fees and premiums	(6,575)
Total loans receivable	$	2,837,204

	December 31,
	2022
	(dollars in thousands; unaudited)
Commercial and industrial loans	$	312,628
Real estate loans:
Construction, land, and land development	214,055
Residential real estate	449,157
Commercial real estate	1,048,752
Consumer and other loans	608,771
Gross loans receivable	2,633,363
Net deferred origination fees and premiums	(6,107)
Loans receivable	$	2,627,256

Summary of an Age Analysis of Past Due Loans

The following table illustrates an age analysis of past due loans as of the dates indicated:

	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days or More Past Due and Still Accruing
	(dollars in thousands; unaudited)
March 31, 2023
Community Bank
Commercial and industrial    loans	$	—	$	—	$	—	$	158,873	$	158,873	$	—
Real estate loans:
Construction, land and    land development	—		66		66		206,569		206,635		—
Residential real estate	195		—		195		205,945		206,140		—
Commercial real estate	92		6,901		6,993		1,095,778		1,102,771		—
Consumer and other loans	3		—		3		2,857		2,860		—
Total community bank	$	290	$	6,967	$	7,257	$	1,670,022	$	1,677,279	$	—
CCBX
Commercial and industrial loans:
Capital call lines	$	—	$	—	$	—	$	118,796	$	118,796	$	—
All other commercial &    industrial loans	589		187		776		47,893		48,669		187
Real estate loans:
Residential real    estate loans	2,582		946		3,528		$	245,839	$	249,367	946
Consumer and other loans:
Credit cards	15,273		17,772		33,045		$	285,142	$	318,187	17,772
Other consumer and    other loans	19,494		5,657		25,151		406,330		431,481		5,657
Total CCBX	$	37,938	$	24,562	$	62,500	$	1,104,000	$	1,166,500	$	24,562
Total community bank    and CCBX	$	38,228	$	31,529	$	69,757	$	2,774,022	2,843,779		$	24,562
Less net deferred    origination fees and    premiums									(6,575)
Loans receivable									$	2,837,204

	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days or More Past Due and Still Accruing
	(dollars in thousands; unaudited)
December 31, 2022
Commercial and industrial loans	$	393	$	486	$	879	$	311,749	$	312,628	$	404
Real estate loans:
Construction, land and land development	—		66		66		213,989		214,055		—
Residential real estate	1,016		876		1,892		447,265		449,157		876
Commercial real estate	95		6,901		6,996		1,041,756		1,048,752		—
Consumer and other loans	37,932		24,815		62,747		546,024		608,771		24,815
	$	39,436	$	33,144	$	72,580	$	2,560,783	$	2,633,363	$	26,095
Less net deferred origination fees and premiums									(6,107)
Loans receivable									$	2,627,256

Analysis of Nonaccrual Loans by Category

An analysis of nonaccrual loans by category consisted of the following at the periods indicated:

	March 31,				December 31,
	2023				2022
	Total Nonaccrual		Nonaccrual with No ACL		Total Nonaccrual
	(dollars in thousands; unaudited)
Community Bank
Commercial and industrial loans	$	15	$	—	$	113
Real estate loans:
Construction, land and land development	66		66		66
Commercial real estate	6,901		6,901		6,901
Consumer and other loans	—		—		—
Total nonaccrual loans	$	6,982	$	6,967	$	7,080

Summary of Loans by Credit Quality Risk Rating

As of March 31, 2023 and December 31, 2022, based on the most recent analysis performed, the risk category of community bank loans by year of origination is as follows:

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
As of March 31, 2023
Commercial and industrial loans
Risk rating
Pass	$	7,788	$	60,221	$	15,938	$	11,172	$	15,299	$	2,414	$	38,622	$	1,370	$	152,824
Other Loan Especially Mentioned	—		—		1,763		1,411		194		—		2,618		—		5,986
Substandard	—		—		—		—		—		63		—		—		63
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial    loans - All other commercial and    industrial loans	$	7,788	$	60,221	$	17,701	$	12,583	$	15,493	$	2,477	$	41,240	$	1,370	$	158,873
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	46	$	—	$	—	$	46
Real estate loans - Construction, land and land development loans
Risk rating
Pass	$	5,338	$	77,892	$	111,263	$	3,338	$	937	$	1,665	$	663	$	—	$	201,096
Other Loan Especially Mentioned	—		—		3,148		2,325		—		—		—		—		5,473
Substandard	—		—		—		—		—		66		—		—		66
Doubtful	—		—		—		—		—		—		—		—		—
Total real estate loans -    Construction, land and land    development loans	$	5,338	$	77,892	$	114,411	$	5,663	$	937	$	1,731	$	663	$	—	$	206,635
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
Real estate loans - Residential real estate loans
Risk rating
Pass	$	2,208	$	45,065	$	41,615	$	36,274	$	32,820	$	27,109	$	20,960	$	—	$	206,051
Other Loan Especially Mentioned	—		—		—		43		—		46		—		—		89
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total real estate loans -    Residential real estate loans	$	2,208	$	45,065	$	41,615	$	36,317	$	32,820	$	27,155	$	20,960	$	—	$	206,140
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate loans - Commercial real estate loans
Risk rating
Pass	$	55,067	$	273,374	$	206,504	$	151,862	$	141,706	$	244,305	$	7,426	$	1,764	$	1,082,008
Other Loan Especially Mentioned	—		3,303		2,211		—		514		7,593		—		—		13,621
Substandard	—		—		—		92		6,901		—		149		—		7,142
Doubtful	—		—		—		—		—		—		—		—		—
Total real estate loans -    Commercial real estate loans	$	55,067	$	276,677	$	208,715	$	151,954	$	149,121	$	251,898	$	7,575	$	1,764	$	1,102,771
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
Consumer and other loans - Other consumer and other loans
Risk rating
Pass	$	1,362	$	313	$	18	$	708	$	60	$	241	$	158	$	—	$	2,860
Other Loan Especially Mentioned	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer and other    loans - Other consumer and    other loans	$	1,362	$	313	$	18	$	708	$	60	$	241	$	158	$	—	$	2,860
Current period gross write-offs	$	4	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	4
Total community bank loans
Risk rating
Pass	$	71,763	$	456,865	$	375,338	$	203,354	$	190,822	$	275,734	$	67,829	$	3,134	$	1,644,839
Other Loan Especially Mentioned	—		3,303		7,122		3,779		708		7,639		2,618		—		25,169
Substandard	—		—		—		92		6,901		129		149		—		7,271
Doubtful	—		—		—		—		—		—		—		—		—
Total community bank loans	$	71,763	$	460,168	$	382,460	$	207,225	$	198,431	$	283,502	$	70,596	$	3,134	$	1,677,279
Current period gross write-offs	$	4	$	—	$	—	$	—	$	—	$	46	$	—	$	—	$	50

The following table presents the loans in CCBX based on payment activity:

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
As of March 31, 2023
Commercial and industrial loans - Capital call lines
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	118,796	$	—	$	118,796
Nonperforming	—		—		—		—		—		—		—		—		—
Total commercial and industrial    loans - Capital call lines	$	—	$	—	$	—	$	—	$	—	$	—	$	118,796	$	—	$	118,796
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial loans - All other commercial and industrial loans
Payment performance
Performing	$	31,726	$	15,541	$	74	$	34	$	—	$	—	$	1,107	$	—	$	48,482
Nonperforming	—		151		—		—		—		—		36		—		187
Total commercial and industrial    loans - All other commercial and    industrial loans	$	31,726	$	15,692	$	74	$	34	$	—	$	—	$	1,143	$	—	$	48,669
Current period gross write-offs	$	—	$	718	$	12	$	—	$	—	$	—	$	—	$	—	$	730
Real estate loans - Residential real estate loans
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	141,079	$	107,342	$	248,421
Nonperforming	—		—		—		—		—		—		946		—		946
Total real estate loans -    Residential real estate loans	$	—	$	—	$	—	$	—	$	—	$	—	$	142,025	$	107,342	$	249,367
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	737	$	—	$	737

	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted To Term		Total
	(dollars in thousands; unaudited)
Consumer and other loans - Credit cards
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	300,415	$	—	$	300,415
Nonperforming	—		—		—		—		—		—		17,772		—		17,772
Total consumer and other    loans - Credit cards	$	—	$	—	$	—	$	—	$	—	$	—	$	318,187	$	—	$	318,187
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	8,481	$	—	$	8,481
Consumer and other loans - Other consumer and other loans
Payment performance
Performing	$	191,238	$	191,628	$	29,230	$	313	$	1,297	$	591	$	11,527	$	—	$	425,824
Nonperforming	—		3,413		809		—		—		18		1,417		—		5,657
Total consumer and other    loans - Other consumer and    other loans	$	191,238	$	195,041	$	30,039	$	313	$	1,297	$	609	$	12,944	$	—	$	431,481
Current period gross write-offs	$	—	$	16,723	$	5,361	$	47	$	117	$	93	$	1,828	$	—	$	24,169
Total CCBX loans
Payment performance
Performing	$	222,964	$	207,169	$	29,304	$	347	$	1,297	$	591	$	572,924	$	107,342	$	1,141,938
Nonperforming	—		3,564		809		—		—		18		20,171		—		24,562
Total CCBX loans	$	222,964	$	210,733	$	30,113	$	347	$	1,297	$	609	$	593,095	$	107,342	$	1,166,500
Current period gross write-offs	$	—	$	17,441	$	5,373	$	47	$	117	$	93	$	11,046	$	—	$	34,117

Loans by credit quality risk rating are as follows as of the periods indicated:

	Pass		Other Loans Especially Mentioned		Sub- Standard		Doubtful		Total
	(dollars in thousands; unaudited)
December 31, 2022
Commercial and industrial loans	$	304,840	$	7,219	$	569	$	—	$	312,628
Real estate loans:
Construction, land, and land development	206,304		7,685		66		—		214,055
Residential real estate	448,185		96		876		—		449,157
Commercial real estate	1,030,650		11,201		6,901		—		1,048,752
Consumer and other loans	583,956		—		24,815		—		608,771
	$	2,573,935	$	26,201	$	33,227	$	—	2,633,363
Less net deferred origination fees									(6,107)
Loans receivable									$	2,627,256

Summary of Allocation of Allowance for Loan Loss as well as Activity in Allowance for Loan Loss Attributed to Various Segments in Loan

The following tables summarize the allocation of the ACL, as well as the activity in the ACL attributed to various segments in the loan portfolio, as of and for the three months ended March 31, 2023 and the allocation and activity of the loans and allowance for loan losses ("ALLL ") attributed to the various segments in the loan portfolio for the three months ended March 31, 2022:

	Commercial and Industrial		Construction, Land, and Land Development		Residential Real Estate		Commercial Real Estate		Consumer and Other		Unallocated		Total
	(dollars in thousands; unaudited)
Three Months Ended March 31, 2023
ACL balance, December 31, 2022	$	4,831	$	7,425	$	4,142	$	5,470	$	50,996	$	1,165	$	74,029
Impact of adopting CECL (ASC 326)	1,428		(1,589)		1,623		1,240		2,315		(1,165)		$	3,852
Provision for credit losses or (recapture)	3,165		(92)		1,958		796		37,717		—		43,544
	9,424		5,744		7,723		7,506		91,028		—		121,425
Loans charged-off	(776)		—		(737)		—		(32,654)		—		(34,167)
Recoveries of loans previously charged-off	3		—		—		—		1,862		—		1,865
Net (charge-offs) recoveries	(773)		—		(737)		—		(30,792)		—		(32,302)
ACL balance, March 31, 2023	$	8,651	$	5,744	$	6,986	$	7,506	$	60,236	$	—	$	89,123
Three Months Ended March 31, 2022
ALLL balance, December 31, 2021	$	3,221	$	6,984	$	4,598	$	6,590	$	7,092	$	147	$	28,632
Provision for loan losses or (recapture)	296		608		1,160		(1,273)		10,823		1,328		12,942
	3,517		7,592		5,758		5,317		17,915		1,475		41,574
Loans charged-off	(5)		—		—		—		(2,803)		—		(2,808)
Recoveries of loans previously charged-off	2		—		—		—		2		—		4
Net (charge-offs) recoveries	(3)		—		—		—		(2,801)		—		(2,804)
Balance, March 31, 2022	$	3,514	$	7,592	$	5,758	$	5,317	$	15,114	$	1,475	$	38,770

The following table summarizes the allocation of the allowance for loan losses attributed to various segments in the loan portfolio as of December 31, 2022.

	Commercial and Industrial		Construction, Land, and Land Development		Residential Real Estate		Commercial Real Estate		Consumer and Other		Unallocated		Total
	(dollars in thousands; unaudited)
As of December 31, 2022
ALLL amounts allocated to
Individually evaluated for impairment	$	95	$	—	$	—	$	—	$	—	$	—	$	95
Collectively evaluated for impairment	4,736		7,425		4,142		5,470		50,996		1,165		73,934
ALLL balance, December 31, 2022	$	4,831	$	7,425	$	4,142	$	5,470	$	50,996	$	1,165	$	74,029
Loans individually evaluated for impairment	$	113	$	66	$	—	$	6,901	$	—			$	7,080
Loans collectively evaluated for impairment	312,515		213,989		449,157		1,041,851		608,771				2,626,283
Loan balance, December 31, 2022	$	312,628	$	214,055	$	449,157	$	1,048,752	$	608,771			$	2,633,363

The following table presents the collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:

	Real Estate		Business Assets		Total		ACL
	(dollars in thousands; unaudited)
March 31, 2023
Commercial and industrial loans	$	—	$	15	$	15	$	6
Real estate loans:
Construction, land and land development	66		—		66		—
Residential real estate	—		—		—		—
Commercial real estate	6,901		—		6,901		—
Total	$	6,967	$	15	$	6,982	$	6

Summary of Information Pertaining to Impaired Loans

The following table is a summary of information pertaining to impaired loans as of the period indicated. Loans originated through CCBX partners are reported using pool accounting and are not subject to impairment analysis, therefore CCBX loans are not included in this table.

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
	(dollars in thousands; unaudited)
December 31, 2022
Commercial and industrial loans	$	124	$	—	$	113	$	113	$	95
Real estate loans:
Construction, land and land development	67		66		—		66		—
Commercial real estate	6,901		6,901		—		6,901		—
Total	$	7,092	$	6,967	$	113	$	7,080	$	95

Summary of Average Recorded Investment and Interest Income Recognized on Impaired Loans

The following tables summarize the Company’s average recorded investment and interest income recognized on impaired loans by loan class for the period indicated:

	Three Months Ended
	March 31, 2022
	Average Recorded Investment		Interest Income Recognized
	(dollars in thousands; unaudited)
Commercial and industrial loans	$	148	$	—
Real estate loans:
Construction, land and land development	—		—
Residential real estate	55		—
Commercial real estate	—		—
Total	$	203	$	—

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Deposits (Tables)

3 Months Ended

Mar. 31, 2023

Deposits [Abstract]

Composition of Consolidated Deposits

The composition of consolidated deposits consisted of the following at the periods indicated:

	March 31, 2023		December 31, 2022
	(dollars in thousands; unaudited)
Demand, noninterest bearing	$	761,800	$	775,012
NOW and money market	2,207,121		1,804,399
Savings	99,241		107,117
Total core deposits	3,068,162		2,686,528
Brokered deposits	1		101,546
Time deposits less than $250,000	19,386		21,942
Time deposits $250,000 and over	7,674		7,505
Total deposits	$	3,095,223	$	2,817,521

Schedule of Maturity Distribution of Time Deposits

The following table presents the maturity distribution of time deposits as of March 31, 2023:

(dollars in thousands; unaudited)
Twelve months	$	21,548
One to two years	2,992
Two to three years	1,527
Three to four years	389
Four to five years	547
Thereafter	57
	$	27,060

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Summary of Minimum Annual Lease Payments under Lease Terms

The following table presents the minimum annual lease payments under the terms of these leases, inclusive of renewal options that the Company is reasonably certain to renew, at March 31, 2023:

(dollars in thousands; unaudited)	March 31, 2023
April 1 to December 31, 2023	$	987
2024	894
2025	715
2026	719
2027	667
2028 and thereafter	1,823
Total lease payments	5,805
Less: amounts representing interest	783
Present value of lease liabilities	$	5,022

Summary of Components of Total Lease Expense and Operating Cash Flows

The following table presents the components of total lease expense and operating cash flows for the three months ended March 31, 2023 and 2022:

	Three Months Ended
	March 31, 2023		March 31, 2022
	(dollars in thousands; unaudited)
Lease expense:
Operating lease expense	$	321	$	320
Variable lease expense	52		41
Total lease expense (1)	$	373	$	361
Cash paid:
Cash paid reducing operating lease liabilities	$	379	$	358

(1)Included in net occupancy expense in the Condensed Consolidated Statements of Income (unaudited).

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Stock Option Activity

A summary of stock option activity under the 2018 Plan and 2006 Plan during the three months ended March 31, 2023:

Options	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Outstanding at December 31, 2022	438,103	$	8.79	4.1	$	16,968
Granted	—	—
Exercised	(77,984)	7.38
Expired	—	—
Forfeited	—	—
Outstanding at March 31, 2023	360,119	$	9.10	4.2	$	9,692
Vested or expected to vest at March 31, 2023	360,119	$	9.10	4.2	$	9,692
Exercisable at March 31, 2023	174,590	$	8.65	3.9	$	4,776

Summary of Nonvested RSUs

A summary of the Company’s nonvested RSUs at March 31, 2023 and changes during the three month period is presented below:

Nonvested shares - RSUs	Shares	Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Nonvested shares at December 31, 2022	380,151	$	28.61	$	7,187
Granted	74,695	$	43.44
Forfeited	(4,653)	$	38.88
Vested	(42,402)	$	30.01
Nonvested shares at March 31, 2023	407,791	$	31.06	$	2,017

A summary of the Company’s nonvested shares at March 31, 2023 and changes during the three-month period is presented below:

Nonvested shares - RSAs	Shares	Weighted- Average Grant Date Fair Value		Total or Aggregate Intrinsic Value
	(dollars in thousands, except per share amounts; unaudited)
Nonvested shares at December 31, 2022	13,396	$	32.94	$	195
Granted	—	$	—
Forfeited	—	$	—
Vested	(500)	$	17.81
Nonvested shares at March 31, 2023	12,896	$	33.52	$	32

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Summary of Estimated Fair Values of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments as of the period indicated, whether or not recognized or recorded in the consolidated balance sheets at the period indicated:

	March 31, 2023				Fair Value Measurements Using
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands; unaudited)
Financial assets
Cash and due from banks	$	37,676	$	37,676	$	37,676	$	—	$	—
Interest earning deposits with other banks	356,240		356,240		356,240		—		—
Investment securities	101,704		101,596		97,699		3,896		—
Other investments	11,346		11,346		—		8,774		2,572
Loans held for sale	27,292		27,292		—		27,292
Loans receivable	2,837,204		2,791,704		—		—		2,791,704
Accrued interest receivable	19,321		19,321		—		19,321		—
Financial liabilities
Deposits	$	3,095,223	3,094,407		$	—	$	3,094,407	$	—
Subordinated debt	44,031		43,674		—		43,674		—
Junior subordinated debentures	3,588		3,480		—		3,480		—
Accrued interest payable	874		874		—		874		—

	December 31, 2022				Fair Value Measurements Using
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands; unaudited)
Financial assets
Cash and due from banks	$	32,722	$	32,722	$	32,722	$	—	$	—
Interest earning deposits with other banks	309,417		309,417		309,417		—		—
Investment securities	98,353		98,233		97,015		1,218		—
Other investments	10,555		10,555		—		7,983		2,572
Loans receivable, net	2,627,256		2,580,183		—		—		2,580,183
Accrued interest receivable	17,815		17,815		—		17,815		—
Financial liabilities
Deposits	$	2,817,521	$	2,816,602	$	—	$	2,816,602	$	—
Subordinated debt	43,999		42,743		—		42,743		—
Junior subordinated debentures	3,588		3,484		—		3,484		—
Accrued interest payable	684		684		—		684		—

Summary of Assets Measured at Fair Value on Recurring Basis

Items measured at fair value on a recurring basis – The following fair value hierarchy table presents information about the Company’s assets that are measured at fair value on a recurring basis at the dates indicated:

	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in thousands; unaudited)
March 31, 2023
Available-for-sale
U.S. Treasury securities	$	97,699	$	—	$	—	$	97,699
U.S. Agency collateralized mortgage obligations	—		50		—		50
Municipals	—		250		—		250
	$	97,699	$	300	$	—	$	97,999
December 31, 2022
Available-for-sale
U.S. Treasury securities	$	97,015	$	—	$	—	$	97,015
U.S. Agency collateralized mortgage obligations	—		51		—		51
U.S. Agency residential mortgage-backed securities	—		1		—		1
Municipals	—		250		—		250
	$	97,015	$	302	$	—	$	97,317

Summary of Financial Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

Items measured at fair value on a nonrecurring basis – The following table presents financial assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy of the fair value measurements for those assets at the dates indicated:

	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in thousands; unaudited)
March 31, 2023
Equity securities	$	—	$	—	$	2,572	$	2,572
Total	$	—	$	—	$	2,572	$	2,572
December 31, 2022
Impaired loans	$	—	$	—	$	7,080	$	7,080
Equity securities	—		—		2,572		2,572
Total	$	—	$	—	$	9,652	$	9,652

Summary of Carrying Value of Equity Securities Without Readily Determinable Fair Values

The following table presents the carrying value of equity securities without readily determinable fair values, as of March 31, 2023, with adjustments recorded during the periods presented for those securities with observable price changes, if applicable. These equity securities are included in other investments on the balance sheet.

	For the Three Months Ended March 31,
(dollars in thousands; unaudited)	2023		2022
Carrying value, beginning of period	$	2,572	$	2,322
Purchases	—		350
Observable price change	—		—
Carrying value, end of period	$	2,572	$	2,672

Summary of Assets and Liabilities Classified as Level 3 and Measured at Fair Value on Nonrecurring Basis

The following table provides a description of the valuation technique, unobservable inputs, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a nonrecurring basis at the date indicated:

(unaudited)	Valuation Technique	Unobservable Inputs	December 31, 2022 Weighted Average Rate
Impaired loans	Collateral valuations	Discount to appraised value	8.0%

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Schedule of Computation of Basic and Diluted Earnings Per Common Share

The following is a computation of basic and diluted earnings per common share at the periods indicated:

	Three Months Ended
	March 31, 2023		March 31, 2022
	(dollars in thousands, except earnings per share data; unaudited)
Net Income	$	12,391	$	6,230
Basic weighted average number common shares outstanding	13,196,960		12,898,746
Dilutive effect of equity-based awards	412,531		576,591
Diluted weighted average number common shares outstanding	13,609,491		13,475,337
Basic earnings per share	$	0.94	$	0.48
Diluted earnings per share	$	0.91	$	0.46
Antidilutive stock options and restricted stock outstanding	124,714		154,871

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Summary of Financial Information of Reportable Segments and Reconciliation to Consolidated Financial Results

Summarized financial information concerning the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables for the periods indicated:

	March 31, 2023								December 31, 2022
	Community Bank		CCBX		Treasury & Administration		Total		Community Bank		CCBX		Treasury & Administration		Total
Assets	(dollars in thousands; unaudited)
Cash and Due from Banks	$	4,485	$	12,223	$	377,208	$	393,916	$	4,603	$	12,899	$	324,637	$	342,139
Intrabank assets	—		356,905		(356,905)		—		—		254,096		(254,096)		—
Securities	—		—		101,704		101,704		—		—		98,353		98,353
Loans held for sale	—		27,292		—		27,292		—		—		—		—
Total loans receivable	1,671,014		1,166,190		—		2,837,204		1,614,752		1,012,504		—		2,627,256
Allowance for credit losses	(20,708)		(68,415)		—		(89,123)		(20,636)		(53,393)		—		(74,029)
All other assets	25,652		103,403		50,985		180,040		25,508		76,111		49,129		150,748
Total assets	$	1,680,443	$	1,597,598	$	172,992	$	3,451,033	$	1,624,227	$	1,302,217	$	218,023	$	3,144,467
Liabilities
Total deposits	$	1,531,391	$	1,563,832	$	—	$	3,095,223	$	1,538,218	$	1,279,303	$	—	$	2,817,521
Total borrowings	—		—		47,619		47,619		—		—		47,587		47,587
Intrabank liabilities	143,279		—		(143,279)		—		80,392		—		(80,392)		—
All other liabilities	5,773		33,766		9,889		49,428		5,617		22,914		7,334		35,865
Total liabilities	$	1,680,443	$	1,597,598	$	(85,771)	$	3,192,270	$	1,624,227	$	1,302,217	$	(25,471)	$	2,900,973

	Three months ended March 31, 2023								Three months ended March 31, 2022
	Community Bank		CCBX		Treasury & Administration		Total		Community Bank		CCBX		Treasury & Administration		Total
	(dollars in thousands; unaudited)
Net interest income, before    intrabank transfer	$	21,677	$	29,796	$	3,018	$	54,491	$	17,205	$	11,874	$	189	$	29,268
Interest income (expense)    intrabank transfer	(1,079)		2,652		(1,573)		—		128		198		(326)		—
Provision for credit    losses - loans	428		43,116		—		43,544		344		12,598		—		12,942
Provision for unfunded    commitments	137		16		—		153		—		—		—		—
Noninterest income (1)	1,090		48,080		137		49,307		1,556		20,343		87		21,986
Noninterest expense	9,092		28,439		7,132		44,663		7,646		18,407		4,362		30,415
Net income before income    taxes	12,031		8,957		(5,550)		15,438		10,899		1,410		(4,412)		7,897
Income taxes	2,375		1,768		(1,096)		3,047		2,301		297		(931)		1,667
Net Income	$	9,656	$	7,189	$	(4,454)	$	12,391	$	8,598	$	1,113	$	(3,481)	$	6,230
(1)For the three months ended March 31, 2023, CCBX noninterest income includes credit enhancements of $42.4 million, fraud enhancements of $2.0 million, and BaaS program income of $3.6 million. For the three months ended March 31, 2022, CCBX noninterest income includes credit enhancements of $13.1 million, fraud enhancements of $4.6 million and BaaS program income of $2.5 million.

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Description of Business and Summary of Significant Accounting Policies - Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) segment branch	Jan. 01, 2023 USD ($)	Dec. 31, 2022 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of reportable segments | segment	3
Number of branches | branch	14
Increase (reduction) in allowance	$ 89,123		$ 74,029	$ 38,770	$ 28,632
Impact related to adoption of CECL	258,763		243,494	207,920	201,222
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Impact related to adoption of CECL	$ 133,123		119,998	$ 85,603	$ 79,373
Accounting Standards Update 2016-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase (reduction) in allowance		$ (310)	$ 3,852
Unfunded commitment reserve, reduction		340
Accounting Standards Update 2016-13 | CCBX
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase (reduction) in allowance		4,200
Increase in indemnification asset		4,500
Accounting Standards Update 2016-13 | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Impact related to adoption of CECL		$ 954

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Description of Business and Summary of Significant Accounting Policies - Summary of Accounting Standards Update (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jan. 01, 2023	Dec. 31, 2022
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
CCBX credit enhancement asset	$ 76,395		$ 53,377
Deferred tax asset, net	20,527		18,458
Retained earnings	$ 133,123		119,998
Accounting Standards Update 2016-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Financing Receivable, Allowance for Credit Loss, Excluding Accrued Interest, Current		$ 77,881
CCBX credit enhancement asset		57,842
Deferred tax asset, net		18,238
Unfunded commitment reserve		634
Retained earnings		120,732
Accounting Standards Update 2016-13 | Pre-ASC 326 Adoption
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Financing Receivable, Allowance for Credit Loss, Excluding Accrued Interest, Current			74,029
CCBX credit enhancement asset			53,377
Deferred tax asset, net			18,458
Unfunded commitment reserve			974
Retained earnings			$ 119,998
Accounting Standards Update 2016-13 | Impact of ASC 326 Adoption
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Financing Receivable, Allowance for Credit Loss, Excluding Accrued Interest, Current		3,852
CCBX credit enhancement asset		4,465
Deferred tax asset, net		(220)
Unfunded commitment reserve		(340)
Retained earnings		$ 734

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Investments Securities - Amortized Cost and Fair Values of Investments in Debt Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Available-for-sale
Amortized Cost	$ 100,276	$ 100,272
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(2,277)	(2,955)
Fair Value	97,999	97,317
Allowance for Credit Losses	0
Debt Securities, Held-to-maturity, Fair Value to Amortized Cost [Abstract]
Amortized Cost	3,705
Gross Unrealized Gains	0
Gross Unrealized Losses	(108)
Fair Value	3,597
Allowance for Credit Losses	0
Amortized Cost	103,981	101,308
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(2,385)	(3,075)
Fair Value	101,596	98,233
Allowance for Credit Losses	0
U.S. Treasury securities
Available-for-sale
Amortized Cost	99,974	99,967
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(2,275)	(2,952)
Fair Value	97,699	97,015
Allowance for Credit Losses	0
U.S. Agency collateralized mortgage obligations
Available-for-sale
Amortized Cost	52	54
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(2)	(3)
Fair Value	50	51
Allowance for Credit Losses	0
U.S. Agency residential mortgage-backed securities
Available-for-sale
Amortized Cost	0	1
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	0	1
Allowance for Credit Losses	0
Debt Securities, Held-to-maturity, Fair Value to Amortized Cost [Abstract]
Amortized Cost	3,705	1,036
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(108)	(120)
Fair Value	3,597	916
Allowance for Credit Losses	0
Municipal bonds
Available-for-sale
Amortized Cost	250	250
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	250	$ 250
Allowance for Credit Losses	$ 0

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Investments Securities - Amortized Cost and Fair Value of Debt Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Amortized Cost
One year or less	$ 100,224
Total AFS Debt Securities	100,224
Amortized Cost	100,276	$ 100,272
Fair Value
One year or less	97,949
Total AFS Debt Securities	97,949
Fair Value	97,999	$ 97,317
Amortized Cost
One year or less	0
Total HTM Debt Securities	0
Amortized Cost	3,705
Fair Value
One year or less	0
Total HTM Debt Securities	0
Fair Value	3,597
U.S. Agency residential mortgage-backed securities and collateralized mortgage obligations
Amortized Cost
Without single maturity date	52
Fair Value
Without single maturity date	50
Amortized Cost
Without single maturity date	3,705
Fair Value
Without single maturity	$ 3,597

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Investments Securities - Additional Information (Details)	3 Months Ended
	Mar. 31, 2023 USD ($) security investment	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($) investment
Net Investment Income [Line Items]
Available-for-sale securities, accrued interest	$ 187,000		$ 723,000
Held-to-maturity securities, accrued interest	14,000		3,000
Investments in debt securities with amortized cost pledged to secure public deposits	37,800,000		$ 37,800,000
Purchase of securities	0	$ 134,912,000
Sale of securities	$ 0	$ 0
Number of securities in unrealized loss position | investment	7		6
Gross unrealized losses for investment securities	$ 2,385,000
Maturity of time horizon	1 year
U.S. Treasury Bills
Net Investment Income [Line Items]
Matured of securities	$ 0
Number of securities purchased | security	1
Purchase of securities	$ 2,700,000

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Investments Securities - Summary of Investment Securities Continuous Unrealized Loss Position (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Debt Securities, Available-for-Sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Available-for-sale, Less Than 12 Months, Fair Value	$ 0
Available-for-sale, Less Than 12 Months, Gross Unrealized Losses	0
Available-for-sale, 12 Months or Greater, Fair Value	97,749
Available-for-sale, 12 Months or Greater, Gross Unrealized Losses	2,277
Available-for-Sale, Total Fair Value	97,749
Available-for-Sale, Total Gross Unrealized Losses	2,277
Debt Securities, Held-to-Maturity, Unrealized Loss Position, Accumulated Loss [Abstract]
Total investment securities, Less Than 12 Months, Fair Value	2,672
Total investment securities, Less Than 12 Months, Gross Unrealized Losses	7
Total investment securities, 12 Months or Greater, Fair Value	98,674
Total investment securities, 12 Months or Greater, Gross Unrealized Losses	2,378
Total investment securities, Total Fair Value	101,346
Total investment securities, Total Gross Unrealized Losses	2,385
U.S. Treasury securities
Debt Securities, Available-for-Sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Available-for-sale, Less Than 12 Months, Fair Value	0
Available-for-sale, Less Than 12 Months, Gross Unrealized Losses	0
Available-for-sale, 12 Months or Greater, Fair Value	97,699
Available-for-sale, 12 Months or Greater, Gross Unrealized Losses	2,275
Available-for-Sale, Total Fair Value	97,699
Available-for-Sale, Total Gross Unrealized Losses	2,275
U.S. Agency collateralized mortgage obligations
Debt Securities, Available-for-Sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Available-for-sale, Less Than 12 Months, Fair Value	0
Available-for-sale, Less Than 12 Months, Gross Unrealized Losses	0
Available-for-sale, 12 Months or Greater, Fair Value	50
Available-for-sale, 12 Months or Greater, Gross Unrealized Losses	2
Available-for-Sale, Total Fair Value	50
Available-for-Sale, Total Gross Unrealized Losses	2
U.S. Agency residential mortgage-backed securities
Debt Securities, Held-to-Maturity, Unrealized Loss Position, Accumulated Loss [Abstract]
Held-to-maturity, Less Than 12 Months, Fair Value	2,672
Held-to-maturity, Less Than 12 Months, Gross Unrealized Losses	7
Held-to-maturity, 12 Months or Greater, Fair Value	925
Held-to-maturity, 12 Months or Greater, Gross Unrealized Losses	101
Held-to-Maturity, Total Fair Value	3,597
Held-to-Maturity, Total Gross Unrealized Losses	$ 108

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Loans and Allowance for Credit Losses - Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) loan	Mar. 31, 2022 USD ($) loan	Jan. 01, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Financing Receivable, Allowance for Credit Loss [Line Items]
Transfer from loans to loans held for sale	$ 101,219	$ 0
Gain on sales of loans, net	123	$ 0
Loans held for sale	27,292			$ 0
Accrued interest on loans	18,700			17,000
Pledged loans	2,748,081			2,553,227
Balance of SBA and USDA loans and participations sold and serviced	12,600			14,300
Balance of main street lending program loans and participations serviced	58,000			58,000
Purchased loans	9,400			9,600
Unamortized premium	164			167
Purchased participation loans	62,500			63,900
90 Days or More Past Due and Still Accruing	$ 24,562			26,095
Threshold period for past due loans (in days)	90 days
Accounts receivable, noncurrent, 90 days or more past due, still accruing				26,100
Number of loans restructured as troubled debt restructurings | loan	0	0
Allowance for loan losses, post-adoption	$ 89,123	$ 38,770		74,029	$ 28,632
Loans receivable, post-adoption	2,837,204			2,627,256
Accounting Standards Update 2016-13
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for loan losses, post-adoption			$ (310)	3,852
CCBX
Financing Receivable, Allowance for Credit Loss [Line Items]
Accounts receivable, noncurrent, 90 days or more past due, amount covered by credit enhancements	$ 23,600			25,500
Company's responsibility for credit losses (in percent)	10.00%
Loans receivable, post-adoption	$ 137,400
Amount of loans that company is responsible for credit loss	$ 13,900
Partner's responsibility for credit losses (in percent)	90.00%
Partner's responsibility for fraud losses (in percentage)	100.00%
Percentage of revenue earned by company on loans they are responsible for credit losses	100.00%
Minimum
Financing Receivable, Allowance for Credit Loss [Line Items]
Sustained repayment performance period of loan placed on nonaccrual	6 months
Percentage of collateral coverage to loan balance	100.00%
Loan repayment extended period of time	6 months
Asset Pledged as Collateral
Financing Receivable, Allowance for Credit Loss [Line Items]
Pledged loans	$ 910,500			220,100
Commercial and industrial loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Capital call lines, provided to venture capital firms	118,800			146,000
Balance of main street lending program loans and participations serviced	3,100			3,100
Allowance for loan losses, post-adoption	8,651	3,514		4,831	3,221
Loans receivable, post-adoption	158,873
Commercial and industrial loans | Accounting Standards Update 2016-13
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for loan losses, post-adoption				1,428
Consumer and other loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Overdrafts included in loans	3,900			2,700
90 Days or More Past Due and Still Accruing				24,815
Allowance for loan losses, post-adoption	60,236	$ 15,114		50,996	$ 7,092
Loans receivable, post-adoption	2,860
Consumer and other loans | Accounting Standards Update 2016-13
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for loan losses, post-adoption				2,315
Community Bank
Financing Receivable, Allowance for Credit Loss [Line Items]
Overdrafts included in loans	1,300			94
CCBX
Financing Receivable, Allowance for Credit Loss [Line Items]
Overdrafts included in loans	$ 2,600
Threshold period for past due loans (in days)	180 days
Consumer Portfolio Segment | Installment/Closed-End Consumer Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Threshold period for past due loans (in days)	120 days
Threshold period for past due loans, charge off (in days)	120 days
Consumer Portfolio Segment | Revolving/Open-End Consumer Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Threshold period for past due loans (in days)	180 days
Threshold period for past due loans, charge off (in days)	180 days
CCBX Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Transfer from loans to loans held for sale	$ 101,200
Proceeds from sales of loans held for sale	73,900
Gain on sales of loans, net	123
Loans held for sale	27,300			0
Consumer and other loans	749,700			607,000
Commercial and industrial loans	12,700			11,300
Residential real estate loans	249,400			244,600
CCBX Loans | Consumer Loan
Financing Receivable, Allowance for Credit Loss [Line Items]
Purchased loans	180,900			157,400
Consumer and other loans	168,200			146,100
Unsecured CCBX Partner Loan
Financing Receivable, Allowance for Credit Loss [Line Items]
Commercial and industrial loans	48,700
CARES Act Paycheck Protection Program | Commercial and industrial loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Balance of SBA and USDA loans and participations serviced	$ 3,800			4,700
Small Business Administration | Commercial and industrial loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Percentage of unsecured, guaranteed and loan	100.00%
Capital call lines
Financing Receivable, Allowance for Credit Loss [Line Items]
Commercial and industrial loans	$ 118,800			$ 146,000

XML

Loans and Allowance for Credit Losses - Composition of Loan Portfolio (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	$ 2,843,779	$ 2,633,363
Net deferred origination fees and premiums	(6,575)	(6,107)
Loans receivable	2,837,204	2,627,256
Commercial and industrial loans
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable		312,628
Construction, land, and land development
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable		214,055
Real Estate Portfolio Segment | Residential real estate
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable		449,157
Loans receivable	206,140
Real Estate Portfolio Segment | Commercial real estate
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable		1,048,752
Loans receivable	1,102,771
Consumer and other loans
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable		$ 608,771
Loans receivable	2,860
Community Bank
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	1,677,279
Community Bank | Commercial and industrial loans
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	158,873
Community Bank | Construction, land, and land development
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	206,635
Community Bank | Real Estate Portfolio Segment | Residential real estate
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	206,140
Community Bank | Real Estate Portfolio Segment | Commercial real estate
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	1,102,771
Community Bank | Consumer and other loans
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	2,860
CCBX
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	1,166,500
CCBX | Commercial and industrial loans | Capital call lines
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	118,796
CCBX | Commercial and industrial loans | All other commercial & industrial loans
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	48,669
CCBX | Real Estate Portfolio Segment | Residential real estate
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	249,367
CCBX | Consumer and other loans
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	431,481
CCBX | Consumer and other loans | Credit Card
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Gross loans receivable	$ 318,187

XML

Loans and Allowance for Credit Losses - Summary of an Age Analysis of Past Due Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	$ 2,843,779	$ 2,633,363
90 Days or More Past Due and Still Accruing	24,562	26,095
Net deferred origination fees and premiums	(6,575)	(6,107)
Loans receivable, post-adoption	2,837,204	2,627,256
Total loans receivable, pre-adoption		2,627,256
30-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	38,228	39,436
90 Days or More Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	31,529	33,144
Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	69,757	72,580
Current
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	2,774,022	2,560,783
Commercial and industrial loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		312,628
90 Days or More Past Due and Still Accruing		404
Commercial and industrial loans | 30-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		393
Commercial and industrial loans | 90 Days or More Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		486
Commercial and industrial loans | Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		879
Commercial and industrial loans | Current
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		311,749
Construction, land, and land development
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		214,055
90 Days or More Past Due and Still Accruing		0
Construction, land, and land development | 30-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		0
Construction, land, and land development | 90 Days or More Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		66
Construction, land, and land development | Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		66
Construction, land, and land development | Current
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		213,989
Real Estate Portfolio Segment | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		449,157
90 Days or More Past Due and Still Accruing		876
Loans receivable, post-adoption	206,140
Real Estate Portfolio Segment | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		1,048,752
90 Days or More Past Due and Still Accruing		0
Loans receivable, post-adoption	1,102,771
Real Estate Portfolio Segment | 30-89 Days Past Due | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		1,016
Real Estate Portfolio Segment | 30-89 Days Past Due | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		95
Real Estate Portfolio Segment | 90 Days or More Past Due | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		876
Real Estate Portfolio Segment | 90 Days or More Past Due | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		6,901
Real Estate Portfolio Segment | Total Past Due | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		1,892
Real Estate Portfolio Segment | Total Past Due | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		6,996
Real Estate Portfolio Segment | Current | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		447,265
Real Estate Portfolio Segment | Current | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		1,041,756
Consumer and other loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		608,771
90 Days or More Past Due and Still Accruing		24,815
Loans receivable, post-adoption	2,860
Consumer and other loans | 30-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		37,932
Consumer and other loans | 90 Days or More Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		24,815
Consumer and other loans | Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		62,747
Consumer and other loans | Current
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable		$ 546,024
Community Bank
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	1,677,279
90 Days or More Past Due and Still Accruing	0
Community Bank | 30-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	290
Community Bank | 90 Days or More Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	6,967
Community Bank | Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	7,257
Community Bank | Current
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	1,670,022
Community Bank | Commercial and industrial loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	158,873
90 Days or More Past Due and Still Accruing	0
Community Bank | Commercial and industrial loans | 30-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	0
Community Bank | Commercial and industrial loans | 90 Days or More Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	0
Community Bank | Commercial and industrial loans | Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	0
Community Bank | Commercial and industrial loans | Current
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	158,873
Community Bank | Construction, land, and land development
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	206,635
90 Days or More Past Due and Still Accruing	0
Community Bank | Construction, land, and land development | 30-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	0
Community Bank | Construction, land, and land development | 90 Days or More Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	66
Community Bank | Construction, land, and land development | Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	66
Community Bank | Construction, land, and land development | Current
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	206,569
Community Bank | Real Estate Portfolio Segment | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	206,140
90 Days or More Past Due and Still Accruing	0
Community Bank | Real Estate Portfolio Segment | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	1,102,771
90 Days or More Past Due and Still Accruing	0
Community Bank | Real Estate Portfolio Segment | 30-89 Days Past Due | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	195
Community Bank | Real Estate Portfolio Segment | 30-89 Days Past Due | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	92
Community Bank | Real Estate Portfolio Segment | 90 Days or More Past Due | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	0
Community Bank | Real Estate Portfolio Segment | 90 Days or More Past Due | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	6,901
Community Bank | Real Estate Portfolio Segment | Total Past Due | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	195
Community Bank | Real Estate Portfolio Segment | Total Past Due | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	6,993
Community Bank | Real Estate Portfolio Segment | Current | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	205,945
Community Bank | Real Estate Portfolio Segment | Current | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	1,095,778
Community Bank | Consumer and other loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	2,860
90 Days or More Past Due and Still Accruing	0
Community Bank | Consumer and other loans | 30-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	3
Community Bank | Consumer and other loans | 90 Days or More Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	0
Community Bank | Consumer and other loans | Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	3
Community Bank | Consumer and other loans | Current
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	2,857
CCBX
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	1,166,500
90 Days or More Past Due and Still Accruing	24,562
CCBX | 30-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	37,938
CCBX | 90 Days or More Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	24,562
CCBX | Total Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	62,500
CCBX | Current
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	1,104,000
CCBX | Commercial and industrial loans | Capital call lines
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	118,796
90 Days or More Past Due and Still Accruing	0
CCBX | Commercial and industrial loans | CCBX Other Commercial and Industrial Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	48,669
90 Days or More Past Due and Still Accruing	187
CCBX | Commercial and industrial loans | 30-89 Days Past Due | Capital call lines
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	0
CCBX | Commercial and industrial loans | 30-89 Days Past Due | CCBX Other Commercial and Industrial Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	589
CCBX | Commercial and industrial loans | 90 Days or More Past Due | Capital call lines
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	0
CCBX | Commercial and industrial loans | 90 Days or More Past Due | CCBX Other Commercial and Industrial Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	187
CCBX | Commercial and industrial loans | Total Past Due | Capital call lines
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	0
CCBX | Commercial and industrial loans | Total Past Due | CCBX Other Commercial and Industrial Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	776
CCBX | Commercial and industrial loans | Current | Capital call lines
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	118,796
CCBX | Commercial and industrial loans | Current | CCBX Other Commercial and Industrial Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	47,893
CCBX | Real Estate Portfolio Segment | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	249,367
90 Days or More Past Due and Still Accruing	946
CCBX | Real Estate Portfolio Segment | 30-89 Days Past Due | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	2,582
CCBX | Real Estate Portfolio Segment | 90 Days or More Past Due | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	946
CCBX | Real Estate Portfolio Segment | Total Past Due | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	3,528
CCBX | Real Estate Portfolio Segment | Current | Residential real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	245,839
CCBX | Consumer and other loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	431,481
CCBX | Consumer and other loans | Credit Card
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	318,187
90 Days or More Past Due and Still Accruing	17,772
CCBX | Consumer and other loans | Other Consumer and Other Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	431,481
90 Days or More Past Due and Still Accruing	5,657
CCBX | Consumer and other loans | 30-89 Days Past Due | Credit Card
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	15,273
CCBX | Consumer and other loans | 30-89 Days Past Due | Other Consumer and Other Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	19,494
CCBX | Consumer and other loans | 90 Days or More Past Due | Credit Card
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	17,772
CCBX | Consumer and other loans | 90 Days or More Past Due | Other Consumer and Other Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	5,657
CCBX | Consumer and other loans | Total Past Due | Credit Card
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	33,045
CCBX | Consumer and other loans | Total Past Due | Other Consumer and Other Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	25,151
CCBX | Consumer and other loans | Current | Credit Card
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	285,142
CCBX | Consumer and other loans | Current | Other Consumer and Other Loans
Financing Receivable Recorded Investment Past Due [Line Items]
Gross loans receivable	$ 406,330

XML

Loans and Allowance for Credit Losses - Analysis of Nonaccrual Loans by Category (Details) - Community Bank - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financing Receivable Recorded Investment Past Due [Line Items]
Total nonaccrual loans	$ 6,982	$ 7,080
Nonaccrual with No ACL	6,967
Commercial and industrial loans
Financing Receivable Recorded Investment Past Due [Line Items]
Total nonaccrual loans	15	113
Nonaccrual with No ACL	0
Real Estate Portfolio Segment | Construction, land, and land development
Financing Receivable Recorded Investment Past Due [Line Items]
Total nonaccrual loans	66	66
Nonaccrual with No ACL	66
Real Estate Portfolio Segment | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total nonaccrual loans	6,901	6,901
Nonaccrual with No ACL	6,901
Consumer and other loans
Financing Receivable Recorded Investment Past Due [Line Items]
Total nonaccrual loans	0	$ 0
Nonaccrual with No ACL	$ 0

XML

Loans and Allowance for Credit Losses - Summary of Risk Category of Loans by Class of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financing Receivable, Credit Quality Indicator [Line Items]
Loans receivable	$ 2,837,204	$ 2,627,256
Total Community Bank Loans Portfolio Segment
Financing Receivable, Credit Quality Indicator [Line Items]
2023	71,763
2023, current period gross write-offs	4
2022	460,168
2022, current period gross write-offs	0
2021	382,460
2021, current period gross write-offs	0
2020	207,225
2020, current period gross write-offs	0
2019	198,431
2019, current period gross write-offs	0
Prior	283,502
Prior, current period gross write-offs	46
Revolving Loans Amortized Cost Basis	70,596
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	3,134
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	1,677,279
Total, current period gross write-offs	50
Total Community Bank Loans Portfolio Segment | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
2023	71,763
2022	456,865
2021	375,338
2020	203,354
2019	190,822
Prior	275,734
Revolving Loans Amortized Cost Basis	67,829
Revolving Loans Converted To Term	3,134
Loans receivable	1,644,839
Total Community Bank Loans Portfolio Segment | Other Loan Especially Mentioned
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	3,303
2021	7,122
2020	3,779
2019	708
Prior	7,639
Revolving Loans Amortized Cost Basis	2,618
Revolving Loans Converted To Term	0
Loans receivable	25,169
Total Community Bank Loans Portfolio Segment | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	92
2019	6,901
Prior	129
Revolving Loans Amortized Cost Basis	149
Revolving Loans Converted To Term	0
Loans receivable	7,271
Total Community Bank Loans Portfolio Segment | Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Revolving Loans Converted To Term	0
Loans receivable	0
Commercial and industrial loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	7,788
2023, current period gross write-offs	0
2022	60,221
2022, current period gross write-offs	0
2021	17,701
2021, current period gross write-offs	0
2020	12,583
2020, current period gross write-offs	0
2019	15,493
2019, current period gross write-offs	0
Prior	2,477
Prior, current period gross write-offs	46
Revolving Loans Amortized Cost Basis	41,240
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	1,370
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	158,873
Total, current period gross write-offs	46
Commercial and industrial loans | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
2023	7,788
2022	60,221
2021	15,938
2020	11,172
2019	15,299
Prior	2,414
Revolving Loans Amortized Cost Basis	38,622
Revolving Loans Converted To Term	1,370
Loans receivable	152,824
Commercial and industrial loans | Other Loan Especially Mentioned
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	1,763
2020	1,411
2019	194
Prior	0
Revolving Loans Amortized Cost Basis	2,618
Loans receivable	5,986
Commercial and industrial loans | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	63
Revolving Loans Amortized Cost Basis	0
Loans receivable	63
Commercial and industrial loans | Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Loans receivable	0
Real Estate Portfolio Segment | Construction, land, and land development
Financing Receivable, Credit Quality Indicator [Line Items]
2023	5,338
2023, current period gross write-offs	0
2022	77,892
2022, current period gross write-offs	0
2021	114,411
2021, current period gross write-offs	0
2020	5,663
2020, current period gross write-offs	0
2019	937
2019, current period gross write-offs	0
Prior	1,731
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	663
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	0
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	206,635
Total, current period gross write-offs	0
Real Estate Portfolio Segment | Construction, land, and land development | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
2023	5,338
2022	77,892
2021	111,263
2020	3,338
2019	937
Prior	1,665
Revolving Loans Amortized Cost Basis	663
Loans receivable	201,096
Real Estate Portfolio Segment | Construction, land, and land development | Other Loan Especially Mentioned
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	3,148
2020	2,325
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Loans receivable	5,473
Real Estate Portfolio Segment | Construction, land, and land development | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	66
Revolving Loans Amortized Cost Basis	0
Loans receivable	66
Real Estate Portfolio Segment | Construction, land, and land development | Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Loans receivable	0
Real Estate Portfolio Segment | Residential real estate
Financing Receivable, Credit Quality Indicator [Line Items]
2023	2,208
2023, current period gross write-offs	0
2022	45,065
2022, current period gross write-offs	0
2021	41,615
2021, current period gross write-offs	0
2020	36,317
2020, current period gross write-offs	0
2019	32,820
2019, current period gross write-offs	0
Prior	27,155
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	20,960
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	0
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	206,140
Total, current period gross write-offs	0
Real Estate Portfolio Segment | Residential real estate | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
2023	2,208
2022	45,065
2021	41,615
2020	36,274
2019	32,820
Prior	27,109
Revolving Loans Amortized Cost Basis	20,960
Loans receivable	206,051
Real Estate Portfolio Segment | Residential real estate | Other Loan Especially Mentioned
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	43
2019	0
Prior	46
Revolving Loans Amortized Cost Basis	0
Loans receivable	89
Real Estate Portfolio Segment | Residential real estate | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Loans receivable	0
Real Estate Portfolio Segment | Residential real estate | Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Loans receivable	0
Real Estate Portfolio Segment | Commercial real estate
Financing Receivable, Credit Quality Indicator [Line Items]
2023	55,067
2023, current period gross write-offs	0
2022	276,677
2022, current period gross write-offs	0
2021	208,715
2021, current period gross write-offs	0
2020	151,954
2020, current period gross write-offs	0
2019	149,121
2019, current period gross write-offs	0
Prior	251,898
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	7,575
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	1,764
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	1,102,771
Total, current period gross write-offs	0
Real Estate Portfolio Segment | Commercial real estate | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
2023	55,067
2022	273,374
2021	206,504
2020	151,862
2019	141,706
Prior	244,305
Revolving Loans Amortized Cost Basis	7,426
Revolving Loans Converted To Term	1,764
Loans receivable	1,082,008
Real Estate Portfolio Segment | Commercial real estate | Other Loan Especially Mentioned
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	3,303
2021	2,211
2020	0
2019	514
Prior	7,593
Revolving Loans Amortized Cost Basis	0
Loans receivable	13,621
Real Estate Portfolio Segment | Commercial real estate | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	92
2019	6,901
Prior	0
Revolving Loans Amortized Cost Basis	149
Loans receivable	7,142
Real Estate Portfolio Segment | Commercial real estate | Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Loans receivable	0
Consumer and other loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	1,362
2023, current period gross write-offs	4
2022	313
2022, current period gross write-offs	0
2021	18
2021, current period gross write-offs	0
2020	708
2020, current period gross write-offs	0
2019	60
2019, current period gross write-offs	0
Prior	241
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	158
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	0
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	2,860
Total, current period gross write-offs	4
Consumer and other loans | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
2023	1,362
2022	313
2021	18
2020	708
2019	60
Prior	241
Revolving Loans Amortized Cost Basis	158
Loans receivable	2,860
Consumer and other loans | Other Loan Especially Mentioned
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Loans receivable	0
Consumer and other loans | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Loans receivable	0
Consumer and other loans | Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Loans receivable	$ 0

XML

Loans and Allowance for Credit Losses - Summary of Amortized Cost of CCBX Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financing Receivable, Credit Quality Indicator [Line Items]
Loans receivable	$ 2,837,204	$ 2,627,256
Total CCBX Loans | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	222,964
2023, current period gross write-offs	0
2022	210,733
2022, current period gross write-offs	17,441
2021	30,113
2021, current period gross write-offs	5,373
2020	347
2020, current period gross write-offs	47
2019	1,297
2019, current period gross write-offs	117
Prior	609
Prior, current period gross write-offs	93
Revolving Loans Amortized Cost Basis	593,095
Revolving Loans Amortized Cost Basis, current period gross write-offs	11,046
Revolving Loans Converted To Term	107,342
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	1,166,500
Total, current period gross write-offs	34,117
Commercial and industrial loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	7,788
2023, current period gross write-offs	0
2022	60,221
2022, current period gross write-offs	0
2021	17,701
2021, current period gross write-offs	0
2020	12,583
2020, current period gross write-offs	0
2019	15,493
2019, current period gross write-offs	0
Prior	2,477
Prior, current period gross write-offs	46
Revolving Loans Amortized Cost Basis	41,240
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	1,370
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	158,873
Total, current period gross write-offs	46
Commercial and industrial loans | Capital call lines | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2023, current period gross write-offs	0
2022	0
2022, current period gross write-offs	0
2021	0
2021, current period gross write-offs	0
2020	0
2020, current period gross write-offs	0
2019	0
2019, current period gross write-offs	0
Prior	0
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	118,796
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	0
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	118,796
Total, current period gross write-offs	0
Commercial and industrial loans | CCBX Other Commercial and Industrial Loans | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	31,726
2023, current period gross write-offs	0
2022	15,692
2022, current period gross write-offs	718
2021	74
2021, current period gross write-offs	12
2020	34
2020, current period gross write-offs	0
2019	0
2019, current period gross write-offs	0
Prior	0
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	1,143
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	0
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	48,669
Total, current period gross write-offs	730
Real Estate Portfolio Segment | Residential real estate
Financing Receivable, Credit Quality Indicator [Line Items]
2023	2,208
2023, current period gross write-offs	0
2022	45,065
2022, current period gross write-offs	0
2021	41,615
2021, current period gross write-offs	0
2020	36,317
2020, current period gross write-offs	0
2019	32,820
2019, current period gross write-offs	0
Prior	27,155
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	20,960
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	0
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	206,140
Total, current period gross write-offs	0
Real Estate Portfolio Segment | Residential real estate | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2023, current period gross write-offs	0
2022	0
2022, current period gross write-offs	0
2021	0
2021, current period gross write-offs	0
2020	0
2020, current period gross write-offs	0
2019	0
2019, current period gross write-offs	0
Prior	0
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	142,025
Revolving Loans Amortized Cost Basis, current period gross write-offs	737
Revolving Loans Converted To Term	107,342
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	249,367
Total, current period gross write-offs	737
Consumer and other loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	1,362
2023, current period gross write-offs	4
2022	313
2022, current period gross write-offs	0
2021	18
2021, current period gross write-offs	0
2020	708
2020, current period gross write-offs	0
2019	60
2019, current period gross write-offs	0
Prior	241
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	158
Revolving Loans Amortized Cost Basis, current period gross write-offs	0
Revolving Loans Converted To Term	0
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	2,860
Total, current period gross write-offs	4
Consumer and other loans | Credit Card | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2023, current period gross write-offs	0
2022	0
2022, current period gross write-offs	0
2021	0
2021, current period gross write-offs	0
2020	0
2020, current period gross write-offs	0
2019	0
2019, current period gross write-offs	0
Prior	0
Prior, current period gross write-offs	0
Revolving Loans Amortized Cost Basis	318,187
Revolving Loans Amortized Cost Basis, current period gross write-offs	8,481
Revolving Loans Converted To Term	0
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	318,187
Total, current period gross write-offs	8,481
Consumer and other loans | Other Consumer and Other Loans | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	191,238
2023, current period gross write-offs	0
2022	195,041
2022, current period gross write-offs	16,723
2021	30,039
2021, current period gross write-offs	5,361
2020	313
2020, current period gross write-offs	47
2019	1,297
2019, current period gross write-offs	117
Prior	609
Prior, current period gross write-offs	93
Revolving Loans Amortized Cost Basis	12,944
Revolving Loans Amortized Cost Basis, current period gross write-offs	1,828
Revolving Loans Converted To Term	0
Revolving Loans Converted To Term, current period gross write-offs	0
Loans receivable	431,481
Total, current period gross write-offs	24,169
Performing Financial Instruments | Total CCBX Loans | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	222,964
2022	207,169
2021	29,304
2020	347
2019	1,297
Prior	591
Revolving Loans Amortized Cost Basis	572,924
Revolving Loans Converted To Term	107,342
Loans receivable	1,141,938
Performing Financial Instruments | Commercial and industrial loans | Capital call lines | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	118,796
Revolving Loans Converted To Term	0
Loans receivable	118,796
Performing Financial Instruments | Commercial and industrial loans | CCBX Other Commercial and Industrial Loans | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	31,726
2022	15,541
2021	74
2020	34
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	1,107
Revolving Loans Converted To Term	0
Loans receivable	48,482
Performing Financial Instruments | Real Estate Portfolio Segment | Residential real estate | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	141,079
Revolving Loans Converted To Term	107,342
Loans receivable	248,421
Performing Financial Instruments | Consumer and other loans | Credit Card | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	300,415
Revolving Loans Converted To Term	0
Loans receivable	300,415
Performing Financial Instruments | Consumer and other loans | Other Consumer and Other Loans | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	191,238
2022	191,628
2021	29,230
2020	313
2019	1,297
Prior	591
Revolving Loans Amortized Cost Basis	11,527
Revolving Loans Converted To Term	0
Loans receivable	425,824
Nonperforming Financial Instruments | Total CCBX Loans | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	3,564
2021	809
2020	0
2019	0
Prior	18
Revolving Loans Amortized Cost Basis	20,171
Revolving Loans Converted To Term	0
Loans receivable	24,562
Nonperforming Financial Instruments | Commercial and industrial loans | Capital call lines | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	0
Revolving Loans Converted To Term	0
Loans receivable	0
Nonperforming Financial Instruments | Commercial and industrial loans | CCBX Other Commercial and Industrial Loans | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	151
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	36
Revolving Loans Converted To Term	0
Loans receivable	187
Nonperforming Financial Instruments | Real Estate Portfolio Segment | Residential real estate | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	946
Revolving Loans Converted To Term	0
Loans receivable	946
Nonperforming Financial Instruments | Consumer and other loans | Credit Card | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	0
2021	0
2020	0
2019	0
Prior	0
Revolving Loans Amortized Cost Basis	17,772
Revolving Loans Converted To Term	0
Loans receivable	17,772
Nonperforming Financial Instruments | Consumer and other loans | Other Consumer and Other Loans | CCBX Loans
Financing Receivable, Credit Quality Indicator [Line Items]
2023	0
2022	3,413
2021	809
2020	0
2019	0
Prior	18
Revolving Loans Amortized Cost Basis	1,417
Revolving Loans Converted To Term	0
Loans receivable	$ 5,657

XML

Loans and Allowance for Credit Losses - Summary of Loans by Credit Quality Risk Rating (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable	$ 2,843,779	$ 2,633,363
Net deferred origination fees and premiums	(6,575)	(6,107)
Loans receivable	2,837,204	2,627,256
Commercial and industrial loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		312,628
Loans receivable	158,873
Construction, land, and land development
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		214,055
Real Estate Portfolio Segment | Residential real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		449,157
Loans receivable	206,140
Real Estate Portfolio Segment | Commercial real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		1,048,752
Loans receivable	1,102,771
Consumer and other loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		608,771
Loans receivable	2,860
Pass
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		2,573,935
Pass | Commercial and industrial loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		304,840
Loans receivable	152,824
Pass | Construction, land, and land development
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		206,304
Pass | Real Estate Portfolio Segment | Residential real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		448,185
Loans receivable	206,051
Pass | Real Estate Portfolio Segment | Commercial real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		1,030,650
Loans receivable	1,082,008
Pass | Consumer and other loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		583,956
Loans receivable	2,860
Other Loans Especially Mentioned
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		26,201
Other Loans Especially Mentioned | Commercial and industrial loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		7,219
Other Loans Especially Mentioned | Construction, land, and land development
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		7,685
Other Loans Especially Mentioned | Real Estate Portfolio Segment | Residential real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		96
Other Loans Especially Mentioned | Real Estate Portfolio Segment | Commercial real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		11,201
Other Loans Especially Mentioned | Consumer and other loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		0
Sub- Standard
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		33,227
Sub- Standard | Commercial and industrial loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		569
Loans receivable	63
Sub- Standard | Construction, land, and land development
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		66
Sub- Standard | Real Estate Portfolio Segment | Residential real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		876
Loans receivable	0
Sub- Standard | Real Estate Portfolio Segment | Commercial real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		6,901
Loans receivable	7,142
Sub- Standard | Consumer and other loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		24,815
Loans receivable	0
Doubtful
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		0
Doubtful | Commercial and industrial loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		0
Loans receivable	0
Doubtful | Construction, land, and land development
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		0
Doubtful | Real Estate Portfolio Segment | Residential real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		0
Loans receivable	0
Doubtful | Real Estate Portfolio Segment | Commercial real estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		0
Loans receivable	0
Doubtful | Consumer and other loans
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable		$ 0
Loans receivable	0
Other Loan Especially Mentioned | Commercial and industrial loans
Loans And Leases Receivable Disclosure [Line Items]
Loans receivable	5,986
Other Loan Especially Mentioned | Real Estate Portfolio Segment | Residential real estate
Loans And Leases Receivable Disclosure [Line Items]
Loans receivable	89
Other Loan Especially Mentioned | Real Estate Portfolio Segment | Commercial real estate
Loans And Leases Receivable Disclosure [Line Items]
Loans receivable	13,621
Other Loan Especially Mentioned | Consumer and other loans
Loans And Leases Receivable Disclosure [Line Items]
Loans receivable	$ 0

XML

Loans and Allowance for Credit Losses - Summary of Allocation of Allowance for Loan Loss as well as Activity in Allowance for Loan Loss Attributed to Various Segments in Loan (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Jan. 01, 2023	Dec. 31, 2022
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	$ 74,029	$ 28,632
Provision for credit losses or (recapture)	43,544	12,942
Loans receivable allowance including provision losses or (recapture)	121,425	41,574
Loans charged-off	(34,167)	(2,808)
Recoveries of loans previously charged-off	1,865	4
Net (charge-offs) recoveries	(32,302)	(2,804)
Ending ALLL Balance	89,123	38,770
Allowances
Individually evaluated for impairment				$ 95
Collectively evaluated for impairment				73,934
ALLL balance, December 31, 2022	89,123	38,770		74,029
Loans
Loans individually evaluated for impairment				7,080
Loans collectively evaluated for impairment				2,626,283
Ending Loan Balance	2,843,779			2,633,363
Accounting Standards Update 2016-13
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	3,852
Allowances
ALLL balance, December 31, 2022			$ (310)	3,852
Commercial and industrial loans
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	4,831	3,221
Provision for credit losses or (recapture)	3,165	296
Loans receivable allowance including provision losses or (recapture)	9,424	3,517
Loans charged-off	(776)	(5)
Recoveries of loans previously charged-off	3	2
Net (charge-offs) recoveries	(773)	(3)
Ending ALLL Balance	8,651	3,514
Allowances
Individually evaluated for impairment				95
Collectively evaluated for impairment				4,736
ALLL balance, December 31, 2022	8,651	3,514		4,831
Loans
Loans individually evaluated for impairment				113
Loans collectively evaluated for impairment				312,515
Ending Loan Balance				312,628
Commercial and industrial loans | Accounting Standards Update 2016-13
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	1,428
Allowances
ALLL balance, December 31, 2022				1,428
Construction, land, and land development
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	7,425	6,984
Provision for credit losses or (recapture)	(92)	608
Loans receivable allowance including provision losses or (recapture)	5,744	7,592
Loans charged-off	0	0
Recoveries of loans previously charged-off	0	0
Net (charge-offs) recoveries	0	0
Ending ALLL Balance	5,744	7,592
Allowances
Individually evaluated for impairment				0
Collectively evaluated for impairment				7,425
ALLL balance, December 31, 2022	5,744	7,592		7,425
Loans
Loans individually evaluated for impairment				66
Loans collectively evaluated for impairment				213,989
Ending Loan Balance				214,055
Construction, land, and land development | Accounting Standards Update 2016-13
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	(1,589)
Allowances
ALLL balance, December 31, 2022				(1,589)
Real Estate Portfolio Segment | Residential real estate
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	4,142	4,598
Provision for credit losses or (recapture)	1,958	1,160
Loans receivable allowance including provision losses or (recapture)	7,723	5,758
Loans charged-off	(737)	0
Recoveries of loans previously charged-off	0	0
Net (charge-offs) recoveries	(737)	0
Ending ALLL Balance	6,986	5,758
Allowances
Individually evaluated for impairment				0
Collectively evaluated for impairment				4,142
ALLL balance, December 31, 2022	6,986	5,758		4,142
Loans
Loans individually evaluated for impairment				0
Loans collectively evaluated for impairment				449,157
Ending Loan Balance				449,157
Real Estate Portfolio Segment | Residential real estate | Accounting Standards Update 2016-13
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	1,623
Allowances
ALLL balance, December 31, 2022				1,623
Real Estate Portfolio Segment | Commercial real estate
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	5,470	6,590
Provision for credit losses or (recapture)	796	(1,273)
Loans receivable allowance including provision losses or (recapture)	7,506	5,317
Loans charged-off	0	0
Recoveries of loans previously charged-off	0	0
Net (charge-offs) recoveries	0	0
Ending ALLL Balance	7,506	5,317
Allowances
Individually evaluated for impairment				0
Collectively evaluated for impairment				5,470
ALLL balance, December 31, 2022	7,506	5,317		5,470
Loans
Loans individually evaluated for impairment				6,901
Loans collectively evaluated for impairment				1,041,851
Ending Loan Balance				1,048,752
Real Estate Portfolio Segment | Commercial real estate | Accounting Standards Update 2016-13
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	1,240
Allowances
ALLL balance, December 31, 2022				1,240
Consumer and other loans
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	50,996	7,092
Provision for credit losses or (recapture)	37,717	10,823
Loans receivable allowance including provision losses or (recapture)	91,028	17,915
Loans charged-off	(32,654)	(2,803)
Recoveries of loans previously charged-off	1,862	2
Net (charge-offs) recoveries	(30,792)	(2,801)
Ending ALLL Balance	60,236	15,114
Allowances
Individually evaluated for impairment				0
Collectively evaluated for impairment				50,996
ALLL balance, December 31, 2022	60,236	15,114		50,996
Loans
Loans individually evaluated for impairment				0
Loans collectively evaluated for impairment				608,771
Ending Loan Balance				608,771
Consumer and other loans | Accounting Standards Update 2016-13
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	2,315
Allowances
ALLL balance, December 31, 2022				2,315
Unallocated
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	1,165	147
Provision for credit losses or (recapture)	0	1,328
Loans receivable allowance including provision losses or (recapture)	0	1,475
Loans charged-off	0	0
Recoveries of loans previously charged-off	0	0
Net (charge-offs) recoveries	0	0
Ending ALLL Balance	0	1,475
Allowances
Individually evaluated for impairment				0
Collectively evaluated for impairment				1,165
ALLL balance, December 31, 2022	0	$ 1,475		1,165
Unallocated | Accounting Standards Update 2016-13
Loans And Leases Receivable Disclosure [Line Items]
ALLL beginning balance	$ (1,165)
Allowances
ALLL balance, December 31, 2022				$ (1,165)

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Loans and Allowance for Credit Losses - Summary of Collateral Dependent Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment		$ 7,080
Allowance for loan losses, post-adoption	$ 89,123	74,029	$ 38,770	$ 28,632
Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	6,982
Allowance for loan losses, post-adoption	6
Real Estate | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	6,967
Business Assets | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	15
Commercial and industrial loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment		113
Allowance for loan losses, post-adoption	8,651	4,831	3,514	3,221
Commercial and industrial loans | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	15
Allowance for loan losses, post-adoption	6
Commercial and industrial loans | Real Estate | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	0
Commercial and industrial loans | Business Assets | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	15
Real Estate Portfolio Segment | Construction, land, and land development | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	66
Allowance for loan losses, post-adoption	0
Real Estate Portfolio Segment | Construction, land, and land development | Real Estate | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	66
Real Estate Portfolio Segment | Construction, land, and land development | Business Assets | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	0
Real Estate Portfolio Segment | Residential real estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment		0
Allowance for loan losses, post-adoption	6,986	4,142	5,758	4,598
Real Estate Portfolio Segment | Residential real estate | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	0
Allowance for loan losses, post-adoption	0
Real Estate Portfolio Segment | Residential real estate | Real Estate | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	0
Real Estate Portfolio Segment | Residential real estate | Business Assets | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	0
Real Estate Portfolio Segment | Commercial real estate
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment		6,901
Allowance for loan losses, post-adoption	7,506	$ 5,470	$ 5,317	$ 6,590
Real Estate Portfolio Segment | Commercial real estate | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	6,901
Allowance for loan losses, post-adoption	0
Real Estate Portfolio Segment | Commercial real estate | Real Estate | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	6,901
Real Estate Portfolio Segment | Commercial real estate | Business Assets | Collateral Dependent Loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Loans individually evaluated for impairment	$ 0

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Loans and Allowance for Credit Losses - Summary of Information Pertaining to Impaired Loans (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Financing Receivable Impaired [Line Items]
Unpaid Contractual Principal Balance	$ 7,092
Recorded Investment With No Allowance	6,967
Recorded Investment With Allowance	113
Total Recorded Investment	7,080
Related Allowance	95
Commercial and industrial loans
Financing Receivable Impaired [Line Items]
Unpaid Contractual Principal Balance	124
Recorded Investment With No Allowance	0
Recorded Investment With Allowance	113
Total Recorded Investment	113
Related Allowance	95
Construction, land, and land development
Financing Receivable Impaired [Line Items]
Unpaid Contractual Principal Balance	67
Recorded Investment With No Allowance	66
Recorded Investment With Allowance	0
Total Recorded Investment	66
Related Allowance	0
Real Estate Portfolio Segment | Commercial real estate
Financing Receivable Impaired [Line Items]
Unpaid Contractual Principal Balance	6,901
Recorded Investment With No Allowance	6,901
Recorded Investment With Allowance	0
Total Recorded Investment	6,901
Related Allowance	$ 0

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Loans and Allowance for Credit Losses - Summary of Average Recorded Investment and Interest Income Recognized on Impaired Loans (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Financing Receivable Impaired [Line Items]
Average Recorded Investment	$ 203
Interest Income Recognized	0
Commercial and industrial loans
Financing Receivable Impaired [Line Items]
Average Recorded Investment	148
Interest Income Recognized	0
Construction, land, and land development
Financing Receivable Impaired [Line Items]
Average Recorded Investment	0
Interest Income Recognized	0
Real Estate Portfolio Segment | Residential real estate
Financing Receivable Impaired [Line Items]
Average Recorded Investment	55
Interest Income Recognized	0
Real Estate Portfolio Segment | Commercial real estate
Financing Receivable Impaired [Line Items]
Average Recorded Investment	0
Interest Income Recognized	$ 0

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Deposits - Composition of Consolidated Deposits (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Deposits [Abstract]
Demand, noninterest bearing	$ 761,800	$ 775,012
NOW and money market	2,207,121	1,804,399
Savings	99,241	107,117
Total core deposits	3,068,162	2,686,528
Brokered deposits	1	101,546
Time deposits less than $250,000	19,386	21,942
Time deposits $250,000 and over	7,674	7,505
Total deposits	$ 3,095,223	$ 2,817,521

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Deposits - Schedule of Maturity Distribution of Time Deposits (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Time Deposits, Fiscal Year Maturity [Abstract]
Twelve months	$ 21,548
One to two years	2,992
Two to three years	1,527
Three to four years	389
Four to five years	547
Thereafter	57
Total time deposits	$ 27,060

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Deposits - Additional Information (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Deposit Liability [Line Items]
Deposits	$ 3,095,223	$ 2,817,521
Reciprocal NOW and Money Market Accounts
Deposit Liability [Line Items]
Deposits	$ 94,300

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Leases - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Lessee Lease Description [Line Items]
Weighted average discount rate	3.45%
Operating leases weighted-average remaining lease term	8 years 1 month 6 days
Operating lease rental expense	$ 358	$ 346
Minimum
Lessee Lease Description [Line Items]
Operating leases lease term	11 months
Lessee, operating lease, renewal term	5 years
Maximum
Lessee Lease Description [Line Items]
Operating leases lease term	21 years 10 months 24 days
Lessee, operating lease, renewal term	10 years

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Leases - Summary of Minimum Annual Lease Payments under Lease Terms (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
April 1 to December 31, 2023	$ 987
2024	894
2025	715
2026	719
2027	667
2028 and thereafter	1,823
Total lease payments	5,805
Less: amounts representing interest	783
Operating lease liabilities	$ 5,022	$ 5,234

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Leases - Summary of Components of Total Lease Expense and Operating Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Lease expense:
Operating lease expense	$ 321	$ 320
Variable lease expense	52	41
Total lease expense	373	361
Cash paid:
Cash paid reducing operating lease liabilities	$ 379	$ 358

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Stock-Based Compensation - Additional Information (Details) - USD ($)		3 Months Ended		12 Months Ended
	May 24, 2021	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted in period (in shares)		0
Total intrinsic or aggregate value of options exercise price		$ 2,300,000	$ 1,100,000
Total unrecognized compensation cost related to nonvested stock options granted		982,000
Stock-based compensation		$ 1,050,000	539,000
Stock Option Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to nonvested stock options/ RSA granted, weighted-average period		4 years 3 months 18 days
Stock-based compensation		$ 140,000	120,000
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation cost related to nonvested stock options granted		$ 11,200,000
Unrecognized compensation cost related to nonvested stock options/ RSA granted, weighted-average period		4 years 4 months 24 days
Stock-based compensation		$ 812,000	374,000
Granted (in shares)		74,695,000
Restricted Stock Units (RSUs) | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)		1,084
Award vesting period		5 years
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted in period (in shares)		0
Unrecognized compensation cost related to nonvested stock options/ RSA granted, weighted-average period		4 years 10 months 24 days
Stock-based compensation		$ 2,000	$ 2,000
Total unrecognized compensation cost related to nonvested restricted stock awards		$ 43,000
2018 Omnibus Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate shares of common stock authorized (in shares)	600,000
Shares available to be granted (in shares)		452,780
Stock options granted in period (in shares)		0	0
2018 Omnibus Incentive Plan | Restricted Stock Units (RSUs) | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)		73,611
Award vesting period		4 years
2018 Omnibus Incentive Plan | Restricted Stock | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Market value of shares grants per year		$ 35,000
2018 Omnibus Incentive Plan | Restricted Stock | Board Chair
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Market value of shares grants per year		55,000
2018 Omnibus Incentive Plan | Restricted Stock | Committee Chairs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Market value of shares grants per year		$ 2,500
2006 Plan and the Directors' Stock Bonus Plan (2006 Plan)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate shares of common stock authorized (in shares)				0
Directors Stock Compensation Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to nonvested stock options/ RSA granted, weighted-average period		2 months
Directors Stock Compensation Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation		$ 96,000	$ 38,000
Granted (in shares)		0
Directors Stock Compensation Plan | Restricted Stock | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation cost related to nonvested stock options granted		$ 54,000
Maximum | 2018 Omnibus Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate shares of common stock authorized (in shares)				500,000

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Stock-Based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Shares
Granted (in shares)	0
Weighted- Average Exercise Price
Granted (in dollars per share)	$ 0
2018 Omnibus Incentive Plan
Shares
Outstanding, beginning of period (in shares)	438,103
Granted (in shares)	0	0
Exercised (in shares)	(77,984)
Expired (in shares)	0
Forfeited or expired (in shares)	0
Outstanding, end of period (in shares)	360,119		438,103
Vested or expected to vest, end of period (in shares)	360,119
Exercisable, end of period (in shares)	174,590
Weighted- Average Exercise Price
Outstanding, beginning of period (in dollars per share)	$ 8.79
Exercised (in dollars per share)	7.38
Expired (in dollars per share)	0
Forfeited or expired (in dollars per share)	0
Outstanding, end of period (in dollars per share)	9.10		$ 8.79
Vested or expected to vest, end of period (in dollars per share)	9.10
Exercisable, end of period (in dollars per share)	$ 8.65
Additional Disclosures
Weighted average remaining contractual term, outstanding, beginning of period	4 years 2 months 12 days		4 years 1 month 6 days
Weighted average remaining contractual term, outstanding, beginning of period	4 years 2 months 12 days		4 years 1 month 6 days
Weighted average remaining contractual term, vested or expected to vest, end of period	4 years 2 months 12 days
Weighted average remaining contractual term, exercisable, end of period	3 years 10 months 24 days
Aggregate intrinsic value, outstanding, beginning of period (in dollars)	$ 16,968
Aggregate intrinsic value, outstanding, end of period (in dollars)	9,692		$ 16,968
Aggregate intrinsic value, vested or expected to vest, end of period (in dollars)	9,692
Aggregate intrinsic value, exercisable, end of period (in dollars)	$ 4,776

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Stock-Based Compensation - Summary of Nonvested Shares (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Restricted Stock Units (RSUs)
Shares
Outstanding, beginning of period (in shares)	380,151,000
Granted (in shares)	74,695,000
Forfeited (in shares)	(4,653,000)
Vested (in shares)	(42,402,000)
Outstanding, end of period (in shares)	407,791,000
Weighted- Average Grant Date Fair Value
Outstanding, beginning of period (in dollars per share)	$ 28.61
Granted (in dollars per share)	43.44
Forfeited (in dollars per share)	38.88
Vested (in dollars per share)	30.01
Outstanding, end of period (in dollars per share)	$ 31.06
Total or Aggregate intrinsic value, end of period (in dollars)	$ 2,017	$ 7,187
Restricted Stock | Directors Stock Compensation Plan
Shares
Outstanding, beginning of period (in shares)	13,396,000
Granted (in shares)	0
Forfeited (in shares)	0
Vested (in shares)	(500,000)
Outstanding, end of period (in shares)	12,896,000
Weighted- Average Grant Date Fair Value
Outstanding, beginning of period (in dollars per share)	$ 32.94
Granted (in dollars per share)	0
Forfeited (in dollars per share)	0
Vested (in dollars per share)	17.81
Outstanding, end of period (in dollars per share)	$ 33.52
Total or Aggregate intrinsic value, end of period (in dollars)	$ 32	$ 195

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Fair Value Measurements - Summary of Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Carrying Value
Financial assets
Cash and due from banks	$ 37,676	$ 32,722
Interest earning deposits with other banks	356,240	309,417
Investment securities	101,704	98,353
Other investments	11,346	10,555
Loans held for sale	27,292
Loans receivable	2,837,204	2,627,256
Accrued interest receivable	19,321	17,815
Financial liabilities
Deposits	3,095,223	2,817,521
Subordinated debt	44,031	43,999
Junior subordinated debentures	3,588	3,588
Accrued interest payable	874	684
Estimated Fair Value
Financial assets
Cash and due from banks	37,676	32,722
Interest earning deposits with other banks	356,240	309,417
Investment securities	101,596	98,233
Other investments	11,346	10,555
Loans held for sale	27,292
Loans receivable	2,791,704	2,580,183
Accrued interest receivable	19,321	17,815
Financial liabilities
Deposits	3,094,407	2,816,602
Subordinated debt	43,674	42,743
Junior subordinated debentures	3,480	3,484
Accrued interest payable	874	684
Estimated Fair Value | Level 1
Financial assets
Cash and due from banks	37,676	32,722
Interest earning deposits with other banks	356,240	309,417
Investment securities	97,699	97,015
Other investments	0	0
Loans held for sale	0
Loans receivable	0	0
Accrued interest receivable	0	0
Financial liabilities
Deposits	0	0
Subordinated debt	0	0
Junior subordinated debentures	0	0
Accrued interest payable	0	0
Estimated Fair Value | Level 2
Financial assets
Cash and due from banks	0	0
Interest earning deposits with other banks	0	0
Investment securities	3,896	1,218
Other investments	8,774	7,983
Loans held for sale	27,292
Loans receivable	0	0
Accrued interest receivable	19,321	17,815
Financial liabilities
Deposits	3,094,407	2,816,602
Subordinated debt	43,674	42,743
Junior subordinated debentures	3,480	3,484
Accrued interest payable	874	684
Estimated Fair Value | Level 3
Financial assets
Cash and due from banks	0	0
Interest earning deposits with other banks	0	0
Investment securities	0	0
Other investments	2,572	2,572
Loans held for sale
Loans receivable	2,791,704	2,580,183
Accrued interest receivable	0	0
Financial liabilities
Deposits	0	0
Subordinated debt	0	0
Junior subordinated debentures	0	0
Accrued interest payable	$ 0	$ 0

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Fair Value Measurements - Summary of Assets Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	$ 97,999	$ 97,317
Estimated Fair Value | Recurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	97,999	97,317
Estimated Fair Value | Recurring | U.S. Treasury securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	97,699	97,015
Estimated Fair Value | Recurring | U.S. Agency collateralized mortgage obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	50	51
Estimated Fair Value | Recurring | U.S. Agency residential mortgage-backed securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value		1
Estimated Fair Value | Recurring | Municipals
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	250	250
Estimated Fair Value | Recurring | Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	97,699	97,015
Estimated Fair Value | Recurring | Level 1 | U.S. Treasury securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	97,699	97,015
Estimated Fair Value | Recurring | Level 1 | U.S. Agency collateralized mortgage obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	0	0
Estimated Fair Value | Recurring | Level 1 | U.S. Agency residential mortgage-backed securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value		0
Estimated Fair Value | Recurring | Level 1 | Municipals
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	0	0
Estimated Fair Value | Recurring | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	300	302
Estimated Fair Value | Recurring | Level 2 | U.S. Treasury securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	0	0
Estimated Fair Value | Recurring | Level 2 | U.S. Agency collateralized mortgage obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	50	51
Estimated Fair Value | Recurring | Level 2 | U.S. Agency residential mortgage-backed securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value		1
Estimated Fair Value | Recurring | Level 2 | Municipals
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	250	250
Estimated Fair Value | Recurring | Level 3
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	0	0
Estimated Fair Value | Recurring | Level 3 | U.S. Treasury securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	0	0
Estimated Fair Value | Recurring | Level 3 | U.S. Agency collateralized mortgage obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	0	0
Estimated Fair Value | Recurring | Level 3 | U.S. Agency residential mortgage-backed securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value		0
Estimated Fair Value | Recurring | Level 3 | Municipals
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	$ 0	$ 0

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Fair Value Measurements - Summary of Financial Assets and Liabilities Measured at Fair Value on Nonrecurring Basis (Details) - Nonrecurring - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value	$ 2,572	$ 9,652
Impaired loans
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value		7,080
Equity securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value	2,572	2,572
Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value	0	0
Level 1 | Impaired loans
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value		0
Level 1 | Equity securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value	0	0
Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value	0	0
Level 2 | Impaired loans
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value		0
Level 2 | Equity securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value	0	0
Level 3
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value	2,572	9,652
Level 3 | Impaired loans
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value		7,080
Level 3 | Equity securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Fair Value	$ 2,572	$ 2,572

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Fair Value Measurements - Summary of Carrying Value of Equity Securities Without Readily Determinable Fair Values (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Purchases	$ 0	$ 350
Level 3
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Carrying value, beginning of period	2,572	2,322
Observable price change	0	0
Carrying value, end of period	$ 2,572	$ 2,672

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Fair Value Measurements - Summary of Assets and Liabilities Classified as Level 3 and Measured at Fair Value on Nonrecurring Basis (Details)	12 Months Ended
	Dec. 31, 2022
Level 3 | Measurement Input, Discount Rate | Valuation, Market Approach
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans, measurement input	8.00%

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Earnings Per Common Share - Schedule of Computation of Basic and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Net Income (Loss) Available to Common Stockholders, Diluted [Abstract]
Net Income	$ 12,391	$ 6,230
Basic weighted average number common shares outstanding (in shares)	13,196,960	12,898,746
Dilutive effect of equity-based awards (in shares)	412,531	576,591
Diluted weighted average number common shares outstanding (in shares)	13,609,491	13,475,337
Basic earnings per share (in usd per share)	$ 0.94	$ 0.48
Diluted earnings per share (in usd per share)	$ 0.91	$ 0.46
Stock Options and Restricted Stock
Net Income (Loss) Available to Common Stockholders, Diluted [Abstract]
Antidilutive stock options and restricted stock outstanding (in shares)	124,714	154,871

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Segment Reporting - Additional Information (Details)	3 Months Ended
	Mar. 31, 2023 segment location partner
Segment Reporting Information [Line Items]
Number of operating segments | segment	3
Number of reportable segments | segment	3
Number of Full-Service Banking Locations	14
CCBX
Segment Reporting Information [Line Items]
Number of Partners | partner	25
Snohomish County
Segment Reporting Information [Line Items]
Number of Full-Service Banking Locations	12
King County
Segment Reporting Information [Line Items]
Number of Full-Service Banking Locations	1
Island County
Segment Reporting Information [Line Items]
Number of Full-Service Banking Locations	1

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Segment Reporting - Summary of Financial Information of Reportable Segments and Reconciliation to Consolidated Financial Results (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Dec. 31, 2021
ASSETS
Cash and Due from Banks	$ 37,676		$ 32,722
Loans held for sale	27,292		0
Total loans receivable, post-adoption	2,837,204		2,627,256
Total loans receivable, pre-adoption			2,627,256
Allowance for loan losses, post-adoption	(89,123)	$ (38,770)	(74,029)	$ (28,632)
Allowance for loan losses, pre-adoption			(74,029)
Other assets	3,167		4,229
Total assets	3,451,033		3,144,467
LIABILITIES
Deposits	3,095,223		2,817,521
Other liabilities	12,156		8,912
Total liabilities	3,192,270		2,900,973
Net interest income, before intrabank transfer	54,491	29,268
Provision for loan losses, post-adoption	43,544	12,942
Provision for loan losses, pre-adoption		12,942
Provision for unfunded commitments	153
Noninterest income	49,307	21,986
Noninterest expense	44,663	30,415
Net income before income taxes	15,438	7,897
Income taxes	3,047	1,667
NET INCOME	12,391	6,230
CCBX | Credit Enhancements
LIABILITIES
Revenue not from contracts with customer	42,400	13,100
CCBX | Fraud Enhancements
LIABILITIES
Revenue not from contracts with customer	2,000	4,600
CCBX | BaaS Program Income
LIABILITIES
Revenue from contract with customer	3,600	2,500
Operating Segments
ASSETS
Cash and Due from Banks	393,916		342,139
Intrabank assets	0		0
Securities	101,704		98,353
Loans held for sale	27,292
Total loans receivable, post-adoption	2,837,204
Total loans receivable, pre-adoption			2,627,256
Allowance for loan losses, post-adoption	(89,123)
Allowance for loan losses, pre-adoption			(74,029)
Other assets	180,040		150,748
Total assets	3,451,033		3,144,467
LIABILITIES
Deposits	3,095,223		2,817,521
Other Borrowings	47,619		47,587
Intrabank liabilities	0		0
Other liabilities	49,428		35,865
Total liabilities	3,192,270		2,900,973
Net interest income, before intrabank transfer	54,491	29,268
Interest income (expense) intrabank transfer	0	0
Provision for loan losses, post-adoption	43,544
Provision for loan losses, pre-adoption		12,942
Provision for unfunded commitments	153	0
Noninterest income	49,307	21,986
Noninterest expense	44,663	30,415
Net income before income taxes	15,438	7,897
Income taxes	3,047	1,667
NET INCOME	12,391	6,230
Operating Segments | Community Bank
ASSETS
Cash and Due from Banks	4,485		4,603
Intrabank assets	0		0
Securities	0		0
Loans held for sale	0
Total loans receivable, post-adoption	1,671,014
Total loans receivable, pre-adoption			1,614,752
Allowance for loan losses, post-adoption	(20,708)
Allowance for loan losses, pre-adoption			(20,636)
Other assets	25,652		25,508
Total assets	1,680,443		1,624,227
LIABILITIES
Deposits	1,531,391		1,538,218
Other Borrowings	0		0
Intrabank liabilities	143,279		80,392
Other liabilities	5,773		5,617
Total liabilities	1,680,443		1,624,227
Net interest income, before intrabank transfer	21,677	17,205
Interest income (expense) intrabank transfer	(1,079)	128
Provision for loan losses, post-adoption	428
Provision for loan losses, pre-adoption		344
Provision for unfunded commitments	137	0
Noninterest income	1,090	1,556
Noninterest expense	9,092	7,646
Net income before income taxes	12,031	10,899
Income taxes	2,375	2,301
NET INCOME	9,656	8,598
Operating Segments | CCBX
ASSETS
Cash and Due from Banks	12,223		12,899
Intrabank assets	356,905		254,096
Securities	0		0
Loans held for sale	27,292
Total loans receivable, post-adoption	1,166,190
Total loans receivable, pre-adoption			1,012,504
Allowance for loan losses, post-adoption	(68,415)
Allowance for loan losses, pre-adoption			(53,393)
Other assets	103,403		76,111
Total assets	1,597,598		1,302,217
LIABILITIES
Deposits	1,563,832		1,279,303
Other Borrowings	0		0
Intrabank liabilities	0		0
Other liabilities	33,766		22,914
Total liabilities	1,597,598		1,302,217
Net interest income, before intrabank transfer	29,796	11,874
Interest income (expense) intrabank transfer	2,652	198
Provision for loan losses, post-adoption	43,116
Provision for loan losses, pre-adoption		12,598
Provision for unfunded commitments	16	0
Noninterest income	48,080	20,343
Noninterest expense	28,439	18,407
Net income before income taxes	8,957	1,410
Income taxes	1,768	297
NET INCOME	7,189	1,113
Operating Segments | Treasury & Administration
ASSETS
Cash and Due from Banks	377,208		324,637
Intrabank assets	(356,905)		(254,096)
Securities	101,704		98,353
Loans held for sale	0
Total loans receivable, post-adoption	0
Total loans receivable, pre-adoption			0
Allowance for loan losses, post-adoption	0
Allowance for loan losses, pre-adoption			0
Other assets	50,985		49,129
Total assets	172,992		218,023
LIABILITIES
Deposits	0		0
Other Borrowings	47,619		47,587
Intrabank liabilities	(143,279)		(80,392)
Other liabilities	9,889		7,334
Total liabilities	(85,771)		$ (25,471)
Net interest income, before intrabank transfer	3,018	189
Interest income (expense) intrabank transfer	(1,573)	(326)
Provision for loan losses, post-adoption	0
Provision for loan losses, pre-adoption		0
Provision for unfunded commitments	0	0
Noninterest income	137	87
Noninterest expense	7,132	4,362
Net income before income taxes	(5,550)	(4,412)
Income taxes	(1,096)	(931)
NET INCOME	$ (4,454)	$ (3,481)