Expanding Liquidity and Leading with Strategic Capital Management
For many financial institutions, maintaining a nimble and flexible balance sheet is key to unlocking future growth. At Coastal, while assets have grown rapidly, deposit growth lagged behind. This dynamic tied up capital and made it difficult to fund new opportunities. The story wasn’t about credit quality issues or external regulatory pressure, it was about the pursuit of greater balance sheet agility to act on fresh growth initiatives.
Coastal recognized the need for a strategic solution. Rather than wait for deposits to catch up or compromise on asset quality, the team decided to tap into the value of their newly originated, high-performing commercial real estate (CRE) loans. The approach? Sell these loans at market rates to create space for future growth, using capital management as a proactive tool rather than a reactive measure.
Growth Outpacing Deposits
A healthy lending environment is a sign of strength for any bank, but when loan originations surge ahead of deposit inflows, it can constrict options for funding new initiatives. For Coastal, this meant that as more CRE loans were added to the balance sheet, fewer resources were available to deploy toward promising ventures. With asset quality solid and regulatory standing secure, the need for enhanced balance sheet flexibility became an urgent, strategic priority.
Market-Rate CRE Loan Sales
Coastal’s executive team identified three pools of recently originated CRE loans, each well-underwritten, performing at market rates, and positioned for full-value sale with no discount required. The total value of these transactions reached $34.35 million, distributed across three separate portfolios: $16.5 million, $13.5 million, and $4.35 million.
What set these deals apart was their structure. Each was executed as a 99.9% participation sale with servicing retained. This innovative approach allowed Coastal to achieve the liquidity benefits of a whole loan sale while preserving vital customer relationships. Unlike traditional loan sales, which often require banks to relinquish client servicing and engagement, Coastal’s hybrid structure ensured continuity and trust—a rare but highly effective strategy in the world of community banking.
Connecting with the Right Partner Through Capstack
To bring these deals to market, Coastal leveraged the Capstack Technologies platform, a modern marketplace designed to streamline bank-to-bank transactions. It was through Capstack that Coastal found its ideal counterpart: Northwest Bank, a $1.5 billion institution based in Idaho. Northwest Bank possessed strong liquidity but limited access to high-quality CRE origination opportunities in the Pacific Northwest. The synergy was immediate—Coastal needed liquidity, Northwest needed assets to deploy capital efficiently.
With Capstack’s platform, the entire process unfolded seamlessly. Both banks were able to negotiate directly, discussing underwriting questions, setting pricing, determining structure, and finalizing documentation within a transparent, secure environment. Traditional complications like broker involvement and endless email threads were eliminated, replaced by a streamlined digital interface that empowered both institutions to maintain full control over the transaction.
Results That Speak for Themselves
- $34+ million in liquidity: Coastal secured the exact capital buffer it needed to pursue new growth initiatives, without sacrificing asset quality or key client relationships.
- Uncompromised customer relationships: By retaining servicing, Coastal ensured uninterrupted service for borrowers—maintaining the trust and connection that defines community banking.
- Rapid transaction turnaround: All three trades were completed in less than six weeks, far outpacing the three to six months typical of standard community bank loan sales.
- Full control and transparency: The direct negotiation process enabled both parties to tailor the terms, pricing, and documentation to their precise needs, with no outside brokers or intermediaries.
A New Role in the Marketplace
The story didn’t end with this initial round of sales. By early 2025, Coastal had achieved the balance sheet flexibility necessary to pursue a range of new growth initiatives. The transactions were more than just a one-time play and signaled an enduring shift in Coastal’s approach to capital management.
Perhaps the biggest validation came when Coastal returned to the Capstack platform as a buyer. Having experienced the platform’s efficiency and transparency as a seller, the bank now uses Capstack for acquisitions, transforming into an active participant on both sides of the marketplace. This versatility positions Coastal to take advantage of emerging opportunities, whether selling assets to unlock liquidity or purchasing them to support strategic growth.
Redefining the Loan Sale Process
Traditional bank loan sales are often slow, mired in broker negotiations, documentation delays, and complex back-and-forth between institutions. The process can take anywhere from three to six months, with limited control over pricing and structure. Coastal’s experience with Capstack upended these expectations with three clean trades, completed in under six weeks, with clear market pricing that reflected true asset quality.
This accelerated timeline proved invaluable, freeing up capital in time to pursue critical initiatives and demonstrating that with the right tools and partners, banks can move as quickly and confidently as their larger peers.