A Pennsylvania public-employee pension fund has brought a proposed securities class action against Coastal Financial Corporation and three senior executives, claiming the bank holding company concealed a sharp deterioration in credit quality at one fintech partner until the resulting charge wiped out roughly $470 million in shareholder value.
The complaint, filed October 2, 2026, in the US District Court for the Western District of Washington, was lodged by the Allegheny County Employees’ Retirement System through the firm Grant & Eisenhofer.
Named defendants include chief executive Eric M. Sprink, current chief financial officer Joel Edwards, and former chief financial officer Brandon Soto.
The case, captioned Allegheny County Employees’ Retirement System v. Coastal Financial Corporation et al., No. 2:26-cv-03746, seeks to represent purchasers of Coastal common stock (Nasdaq: CCB) between October 28, 2024, and July 29, 2026.
Coastal, based in Everett, Washington, operates through its subsidiary Coastal Community Bank, which reported about $4.48 billion in assets.
Alongside conventional banking, the company runs CCBX, a banking-as-a-service platform that supplies the regulated banking charter and infrastructure for digital brands and fintech partners.
By June 30, 2026, the complaint states, CCBX loans stood near $2.23 billion spread across 22 active relationships.
According to the filing, company statements during the class period repeatedly portrayed CCBX expansion as carefully controlled.
Leadership is quoted emphasizing disciplined, sustainable growth and an intentional focus on credit quality as portfolios matured.
Investors were also told the bank remained fully protected against fraud losses and 98.8 percent protected against credit risk through partner indemnification arrangements.
The suit alleges those assurances omitted a material problem: the loan book of a single CCBX partner, amounting to approximately $500 million and nearly 23 percent of all CCBX loans, had deteriorated substantially.
That exposure, the plaintiffs contend, left Coastal vulnerable to large losses despite the contractual protections that had been highlighted.
The alleged concealment ended on July 30, 2026, when Coastal reported a GAAP net loss of $42.1 million for the second quarter.
The shortfall was driven chiefly by a $68.8 million credit expense tied to that one relationship.
Roughly $46 million reflected a write-down in the value of a related credit-enhancement asset, while $22.8 million was a provision against the partner’s indemnification obligations.
On the same day the company held its first earnings call and described the period as containing significant and unusual items that required a direct explanation.
Shares fell $30.75, or 43.5 percent, closing at $39.91 and eliminating approximately $470 million of market capitalization, the complaint says.
The pleading further asserts that two of the individual defendants sold substantial holdings while the challenged statements were outstanding—approximately $12 million by the chief executive and about $3.8 million by a former chief financial officer.
It also notes that the chief risk officer resigned in September 2025 and that one defendant left the CFO role in August 2026, less than ten months after assuming it and only days before the credit charge was disclosed.
The claims are brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Investors seeking appointment as lead plaintiff must move the court by December 1, 2026. The allegations remain untested; no court has ruled on their merits.