2018 Third Quarter Highlights:
- Net income totaled $2.6 million for the third quarter of 2018, or $0.22 per diluted common share, up 18.2% from $2.2 million for the second quarter of 2018.
- Total assets were $917.0 million at September 30, 2018, up 7.8% from $850.9 million at June 30, 2018.
- Total loans receivable grew at a rate of 17.8% annualized for the nine months ended September 30, 2018.
- Total deposits grew at a rate of 13.5% annualized for the nine months ended September 30, 2018.
- Noninterest bearing deposits at September 30, 2018 were 36.9% of total deposits.
- Cost of deposits were 0.44% for the third quarter of 2018, up 0.04% from the second quarter of 2018.
- Initial public offering of 2,577,500 shares of common stock completed, on July 18, 2018, for net proceeds of $33.2 million.
EVERETT, Wash., Oct. 23, 2018 (GLOBE NEWSWIRE) -- Coastal Financial Corporation (NASDAQ: CCB) (the “Company”) today reported unaudited financial results for the third quarter 2018. Net income for the third quarter of 2018 was $2.6 million, or $0.22 per diluted common share, compared with net income of $2.2 million, or $0.24 per diluted share, for the second quarter of 2018.
On July 18, 2018, the Company closed its initial public offering of 2,577,500 shares of common stock, including the exercise of the over-allotment of 427,500 shares, for net proceeds of $33.2 million after deducting underwriting discounts, commissions, and estimated offering expenses.
Eric Sprink, President and CEO, commented, “We had a solid third quarter with record earnings of $2.6 million, record loan growth of $43.6 million, and deposit growth of $30.3 million of which $26.5 million of the growth was in noninterest bearing deposits. The strong increases in loans and core deposits starts to leverage a portion of the $33.2 million in capital raised in our July initial public offering (IPO) and positions us well for future earnings. We also took advantage of an opportunity to hire local and experienced staff in third quarter to open our fourteenth branch on October 9, 2018. The new branch in Edmonds, Washington (a $975 million deposit market – based on FDIC Summary of Deposits as of June 30, 2018) positions us well for future deposit growth and to continue leveraging capital through our organic growth strategy. In addition to growing the Bank, we continue to explore opportunities with Fintech companies with the aim of building another recurring fee income source.”
The Company had net income of $6.6 million for the nine months ended September 30, 2018, or $0.66 per diluted common share, compared to $5.1 million, or $0.55 per diluted common share for the nine months ended September 30, 2017.
Results of Operations
Net interest income was $8.8 million for the three months ended September 30, 2018, an increase of 6.0% from $8.3 million for the second quarter of 2018, and an increase of 17.3% from $7.5 million for the third quarter of 2017. Increases over the prior quarter and prior year were the result of growth in interest earning assets, primarily loans, and improvements in net interest margin. Net interest income for the nine months ended September 30, 2018 totaled $24.9 million, an increase of 15.3% compared to the same period last year. The $3.3 million increase in net interest income over the same period last year was primarily related to growth in loan balances. During the nine months ended September 30, 2018, the average balance of total loans receivable increased by $77.2 million, compared to the same period last year. The $3.5 million increase in loan interest income was partially offset by increased deposit costs of $683,000 from the growth in the average balance of our deposits of $47.2 million and an increase in the cost of deposit funds of 15 basis points, compared to the same period last year.
Net interest margin for the quarter ended September 30, 2018 decreased 13 basis points to 4.13% from 4.26% for the second quarter of 2018 and decreased one basis point from 4.14% for the third quarter of 2017. The net interest margin for the quarter ended September 30, 2018 is a normalized margin, as compared to prior quarters. The quarter ended June 30, 2018 included significant prepayment penalties and deferred fees recognized on loans paid off. The slight decrease from the same period one year ago is primarily related to increased deposit costs over the period and a slight shift in the mix of interest earning assets of approximately 3% to more lower yielding interest bearing deposits from loans receivable. This allocation shift is a result of cash received from the IPO, which is temporary and will be gradually deployed into higher earning assets.
Net interest margin for the nine months ended September 30, 2018 increased eight basis points to 4.17% from 4.09% for the comparable period last year. The increase in net interest margin over the comparable period in the prior year was primarily due to increases in loan volume as a percent of earning assets and higher prepayment penalties and deferred fees recognized on loans paid off in the first two quarters of 2018, and to a lesser extent, increases in average loan yields.
Loan yields for the quarter ended September 30, 2018 were 5.12%, an increase of one basis point from 5.11% for the quarter ended June 30, 2018, and a ten basis point increase from 5.02% for the quarter ended September 30, 2017. Loan yields for the nine months ended September 30, 2018 were 5.10%, an increase of 12 basis points from 4.98% for the nine months ended September 30, 2017. Contractual loan yields approximated 5.02% for the three months ended September 30, 2018, 4.92% for the three months ended June 30, 2018, and 4.91% for the three months ended September 30, 2017. The ten basis point increase in contractual loan yields, as compared to prior quarter, was from pricing new loans at higher rates and variable loans repricing with the increase in Federal Funds rate.
The following table shows the Company’s key performance ratios for the periods indicated.
| Three months ended | Nine months ended | ||||||||||||||||
| September 30, 2018 | June 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||
| Return on average assets (1) | 1.18 | % | 1.09 | % | 1.02 | % | 1.07 | % | 0.92 | % | |||||||
| Return on average shareholders’ equity (1) | 10.59 | % | 12.90 | % | 11.75 | % | 11.37 | % | 10.41 | % | |||||||
| Yield on earnings assets (1) | 4.62 | % | 4.73 | % | 4.54 | % | 4.64 | % | 4.48 | % | |||||||
| Yield on loans receivable (1) | 5.12 | % | 5.11 | % | 5.02 | % | 5.10 | % | 4.98 | % | |||||||
| Cost of funds (1) | 0.53 | % | 0.50 | % | 0.43 | % | 0.50 | % | 0.41 | % | |||||||
| Cost of deposits (1) | 0.44 | % | 0.40 | % | 0.33 | % | 0.40 | % | 0.31 | % | |||||||
| Net interest margin (1) | 4.13 | % | 4.26 | % | 4.14 | % | 4.17 | % | 4.09 | % | |||||||
| Noninterest expense to average assets (1) | 2.99 | % | 3.15 | % | 3.12 | % | 3.07 | % | 3.02 | % | |||||||
| Efficiency ratio | 63.59 | % | 66.77 | % | 66.50 | % | 66.09 | % | 67.44 | % | |||||||
| Loans receivable to deposits | 96.08 | % | 94.12 | % | 92.55 | % | 96.08 | % | 92.55 | % | |||||||
| (1) annualized calculations | |||||||||||||||||
Noninterest income was $1.5 million for the third quarter of 2018, an increase of $333,000 from $1.2 million for the second quarter of 2018 and an increase of $296,000 from $1.3 million for the comparable period one year ago. The increase compared to the prior quarter and to the same quarter one year ago was primarily due fees earned from wholesale banking services provided which resulted in an additional $286,000 of income during the quarter, and additional $328,000 of income compared to the same quarter last year. Additional noninterest income in the current quarter as compared to the same quarter one year ago were related to increases in existing deposit fees and the introduction of few new deposit fees. Our deposit fees are now roughly in line with peers. Sublease and lease income decreased in the third quarter 2018, as compared to the third quarter 2017, as a result of a long-term tenant electing to not renew its lease.
Noninterest income was $3.9 million for the nine months ended September 30, 2018, compared to $3.1 million for the nine months ended September 30, 2017. The increase was primarily related to wholesale banking services and increases in deposit fees. Loan referral fee income, which is earned when a borrower enters into an interest rate swap agreement with a third party also grew and totaled $453,000 for the nine months ended September 30, 2018, an increase of $177,000 from the same period last year.
Total noninterest expense for the current quarter increased 3.1% to $6.6 million from $6.4 million for the preceding quarter and increased 13.8% from $5.8 million from the comparable period one year ago. The increased expenses for the current quarter compared to the prior quarter and previous quarter one year ago were primarily due to increases in salary expenses. Full time equivalent employees increased 4% during the current quarter and increased 9% from the same quarter one year ago. Staffing increases are due to the continued organic growth initiatives, and includes increases in sales staff, including hiring new banking teams, and additional back office staffing to support the incremental increases in banking teams and for operation as a public company. During the quarter legal and professional fees continued to be higher by $37,000 as a result of growth initiatives and credit actions, $68,000 of expenses related to hiring staff early for new Edmonds branch plus ordinary costs associated with opening a new branch, and increasing our unfunded commitment reserve by $54,000 for increased loan commitments.
Total noninterest expense for the nine months ended September 30, 2018 totaled $19.0 million, an increase of 14.5% compared to the same period last year. The increase is primarily attributable to increased salary expense from our organic growth initiatives, new wholesale banking services, and early termination of a contract for $120,000.
The provision for income taxes decreased approximately 30% for the current quarter and the nine months ended September 30, 2018, compared to the same periods last year, primarily due to the Tax Cuts and Jobs Act legislation which was signed into law on December 22, 2017. The Company used federal statutory tax rates of 21% and 34% for the nine months ended September 30, 2018, and 2017, respectively, as a basis for calculating provision for income taxes.
Balance Sheet
The Company’s total assets increased $111.2 million, or 13.8%, to $917.0 million at September 30, 2018 from $805.8 million at December 31, 2017 due to the Company’s successful IPO and organic growth initiatives.
Total loans receivable, net of allowance for loan losses, increased $86.4 million, or 13.3%, to $735.2 million at September 30, 2018 from $648.8 million at December 31, 2017. The growth in loans receivable was due primarily to increases in commercial real estate loans of $65.1 million.
The following table summarizes the loan portfolio at the periods indicated.
| As of | |||||||||||||||||||||
| September 30, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||||||
| (Dollars in thousands) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Commercial and industrial loans | $ | 85,554 | 11.5 | % | $ | 88,688 | 13.5 | % | $ | 87,418 | 13.9 | % | |||||||||
| Real estate: | |||||||||||||||||||||
| Construction, land and | |||||||||||||||||||||
| land development | 62,222 | 8.4 | 41,641 | 6.3 | 41,098 | 6.5 | |||||||||||||||
| Residential | 91,995 | 12.3 | 87,031 | 13.3 | 66,962 | 10.6 | |||||||||||||||
| Commercial real estate | 502,782 | 67.5 | 437,717 | 66.6 | 433,707 | 68.7 | |||||||||||||||
| Consumer and other | 2,583 | 0.3 | 2,058 | 0.3 | 1,870 | 0.3 | |||||||||||||||
| Gross loans receivable | 745,136 | 100.0 | % | 657,135 | 100.0 | % | 631,055 | 100.0 | % | ||||||||||||
| Net deferred origination fees | (816 | ) | (347 | ) | (613 | ) | |||||||||||||||
| Loans receivable | $ | 744,320 | $ | 656,788 | $ | 630,442 | |||||||||||||||
Total deposits increased $71.4 million, or 10.2%, to $774.7 million at September 30, 2018 from $703.3 million at December 31, 2017. The increase in deposits included increases in noninterest bearing deposit accounts of $43.6 million, or 18.0%.
The following table summarizes the deposit portfolio at the periods indicated.
| As of | |||||||||||||||||||||
| September 30, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||||||
| (Dollars in thousands) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Demand, noninterest bearing | $ | 285,979 | 36.9 | % | $ | 242,358 | 34.5 | % | $ | 242,607 | 35.6 | % | |||||||||
| NOW and money market | 340,930 | 44.0 | 326,412 | 46.4 | 309,856 | 45.5 | |||||||||||||||
| Savings | 49,430 | 6.4 | 43,876 | 6.2 | 45,696 | 6.7 | |||||||||||||||
| Time deposits less than $250,000 | 63,715 | 8.2 | 60,445 | 8.6 | 56,308 | 8.3 | |||||||||||||||
| Time deposits $250,000 and over | 34,668 | 4.5 | 30,204 | 4.3 | 26,732 | 3.9 | |||||||||||||||
| Total | $ | 774,722 | 100.0 | % | $ | 703,295 | 100.0 | % | $ | 681,199 | 100.0 | % | |||||||||
Total shareholders’ equity increased $39.6 million, or 60.2%, to $105.3 million at September 30, 2018 from $65.7 million at December 31, 2017. The Company’s successful IPO in July of 2018 increased capital by $33.2 million. The remaining increase in shareholders’ equity was primarily due to net income earned during the year. The Company contributed $15.0 million of the $33.2 million to the Bank.
Capital Ratios
The Company and the Bank remain well capitalized at September 30, 2018, as summarized in the following table.
| Capital Ratios: | Coastal Community Bank | Coastal Financial Corporation | Financial Institution Basel III Regulatory Guidelines | ||||||||
| Tier 1 leverage capital | 11.42 | % | 12.60 | % | 5.00 | % | |||||
| Tier 1 risk-based capital | 12.82 | % | 14.17 | % | 8.00 | % | |||||
| Common Equity Tier 1 risk-based capital | 12.82 | % | 13.72 | % | 6.50 | % | |||||
| Total risk-based capital | 14.03 | % | 16.65 | % | 10.00 | % | |||||
Asset Quality
The allowance for loan losses was 1.22% of loans receivable at September 30, 2018. Provision for loan losses totaled $508,000 for the current quarter, $392,000 for the preceding quarter, and $65,000 for the same quarter in the prior year. Net recoveries totaled $63,000 for the quarter ended September 30, 2018 compared to net charge-offs of $7,000 for quarter ended September 30, 2017.
Provision for loan losses totaled $1.4 million for the nine months September 30, 2018 and $504,000 for the same period in the prior year. Net charge-offs totaled $307,000 for the nine months ended September 30, 2018 compared to net charge-offs of $101,000 for nine months ended September 30, 2017.
Nonperforming assets were $2.5 million, or 0.27% of total assets, at September 30, 2018, compared to $2.1 million, or 0.26% of total assets at December 31, 2017. There were no repossessed assets or other real estate owned at September 30, 2018.
Nonperforming loans to loans receivable ratio was 0.34% at September 30, 2018, compared to 0.32% at December 31, 2017. Classified loans were $10.1 million at September 30, 2018, an increase of $2.2 million, as compared to $7.9 million at December 31, 2017.
The following table details the Company’s nonperforming assets for the periods indicated:
| As of | ||||||||||||
| September 30, | December 31, | September 30, | ||||||||||
| (Dollars in thousands) | 2018 | 2017 | 2017 | |||||||||
| Nonaccrual loans: | ||||||||||||
| Commercial and industrial loans | $ | 1,170 | $ | 372 | $ | 454 | ||||||
| Real estate: | ||||||||||||
| Construction, land and land development | - | - | - | |||||||||
| Residential | 74 | 88 | 150 | |||||||||
| Commercial real estate | - | 345 | 580 | |||||||||
| Commercial real estate - troubled debt restructure | 1,277 | 1,315 | 1,328 | |||||||||
| Consumer and other loans | - | - | - | |||||||||
| Total nonaccrual loans | 2,521 | 2,120 | 2,512 | |||||||||
| Total accruing loans past due 90 days or more | - | - | - | |||||||||
| Total nonperforming loans | 2,521 | 2,120 | 2,512 | |||||||||
| Other real estate owned | - | - | - | |||||||||
| Repossessed assets | - | - | - | |||||||||
| Total nonperforming assets | $ | 2,521 | $ | 2,120 | $ | 2,512 | ||||||
| Troubled debt restructurings, accruing | - | - | 3,978 | |||||||||
| Total nonperforming loans to loans receivable | 0.34 | % | 0.32 | % | 0.40 | % | ||||||
| Total nonperforming assets to total assets | 0.27 | % | 0.26 | % | 0.32 | % | ||||||
About Coastal Financial
Coastal Financial Corporation is an Everett-based Washington State bank holding company with Coastal Community Bank (the “Bank”), a full-service commercial bank, as its sole wholly-owned banking subsidiary. The Bank operates through its 14 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application. More information about the Bank can be found on its website at www.coastalbank.com and its investor relations page.
Contact
Eric Sprink, President & Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements. 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. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release 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. Our actual results could differ materially from those anticipated in such forward-looking statements.
Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update 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 or circumstances, except as required by law.
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
| ASSETS | ||||||||||||
| September 30, | June 30, | December 31, | ||||||||||
| 2018 | 2018 | 2017 | ||||||||||
| Cash and due from banks | $ | 16,837 | $ | 14,217 | $ | 13,787 | ||||||
| Interest earning deposits with other banks | 98,671 | 77,232 | 75,964 | |||||||||
| Investment securities, available for sale, at fair value | 35,749 | 36,013 | 36,927 | |||||||||
| Investment securities, held to maturity, at amortized cost | 1,290 | 1,304 | 1,409 | |||||||||
| Other investments | 3,766 | 3,766 | 3,680 | |||||||||
| Loans receivable | 744,320 | 700,692 | 656,788 | |||||||||
| Allowance for loan losses | (9,111 | ) | (8,540 | ) | (8,017 | ) | ||||||
| Total loans receivable, net | 735,209 | 692,152 | 648,771 | |||||||||
| Premises and equipment, net | 12,845 | 12,963 | 13,121 | |||||||||
| Accrued interest receivable | 2,299 | 2,290 | 2,274 | |||||||||
| Bank-owned life insurance, net | 6,640 | 6,592 | 6,500 | |||||||||
| Deferred tax asset, net | 2,309 | 2,253 | 2,092 | |||||||||
| Other assets | 1,414 | 2,140 | 1,228 | |||||||||
| Total assets | $ | 917,029 | $ | 850,922 | $ | 805,753 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| LIABILITIES | ||||||||||||
| Deposits | $ | 774,722 | $ | 744,468 | $ | 703,295 | ||||||
| Federal Home Loan Bank (FHLB) advances | 20,000 | 20,000 | 20,000 | |||||||||
| Subordinated debt | 9,961 | 9,957 | 9,950 | |||||||||
| Junior subordinated debentures | 3,581 | 3,580 | 3,579 | |||||||||
| Deferred compensation | 1,102 | 1,127 | 1,175 | |||||||||
| Accrued interest payable | 257 | 241 | 228 | |||||||||
| Other liabilities | 2,130 | 2,059 | 1,815 | |||||||||
| Total liabilities | 811,753 | 781,432 | 740,042 | |||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Common stock | 86,334 | 52,946 | 52,521 | |||||||||
| Retained earnings | 20,966 | 18,364 | 14,134 | |||||||||
| Accumulated other comprehensive loss, net of tax | (2,024 | ) | (1,820 | ) | (944 | ) | ||||||
| Total shareholders’ equity | 105,276 | 69,490 | 65,711 | |||||||||
| Total liabilities and shareholders’ equity | $ | 917,029 | $ | 850,922 | $ | 805,753 | ||||||
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| Three months ended | |||||||||
| September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||
| INTEREST AND DIVIDEND INCOME | |||||||||
| Interest and fees on loans | $ | 9,262 | $ | 8,778 | $ | 7,908 | |||
| Interest on interest earning deposits with other banks | 458 | 236 | 171 | ||||||
| Interest on investment securities | 156 | 155 | 135 | ||||||
| Dividends on other investments | 18 | 62 | 3 | ||||||
| Total interest and dividend income | 9,894 | 9,231 | 8,217 | ||||||
| INTEREST EXPENSE | |||||||||
| Interest on deposits | 851 | 712 | 540 | ||||||
| Interest on borrowed funds | 195 | 216 | 192 | ||||||
| Total interest expense | 1,046 | 928 | 732 | ||||||
| Net interest income | 8,848 | 8,303 | 7,485 | ||||||
| PROVISION FOR LOAN LOSSES | 508 | 392 | 65 | ||||||
| Net interest income after provision for loan losses | 8,340 | 7,911 | 7,420 | ||||||
| NONINTEREST INCOME | |||||||||
| Deposit service charges and fees | 800 | 771 | 725 | ||||||
| Wholesale banking service fees | 328 | 42 | - | ||||||
| Loan referral fees | 209 | 114 | 234 | ||||||
| Mortgage broker fees | 52 | 69 | 80 | ||||||
| Sublease and lease income | 10 | 4 | 56 | ||||||
| Gain on sale of loans | - | 78 | 18 | ||||||
| Other | 147 | 135 | 137 | ||||||
| Total noninterest income | 1,546 | 1,213 | 1,250 | ||||||
| NONINTEREST EXPENSE | |||||||||
| Salaries and employee benefits | 4,027 | 3,910 | 3,491 | ||||||
| Occupancy | 798 | 804 | 784 | ||||||
| Data processing | 501 | 492 | 463 | ||||||
| Director and staff expenses | 213 | 136 | 172 | ||||||
| Excise taxes | 146 | 134 | 119 | ||||||
| Marketing | 110 | 86 | 148 | ||||||
| Legal and professional fees | 142 | 130 | 87 | ||||||
| Federal Deposit Insurance Corporation (FDIC) assessments | 83 | 79 | 90 | ||||||
| Business development | 81 | 72 | 68 | ||||||
| Other | 509 | 511 | 387 | ||||||
| Total noninterest expense | 6,610 | 6,354 | 5,809 | ||||||
| Income before provision for income taxes | 3,276 | 2,770 | 2,861 | ||||||
| PROVISION FOR INCOME TAXES | 674 | 569 | 957 | ||||||
| NET INCOME | $ | 2,602 | $ | 2,201 | $ | 1,904 | |||
| Basic earnings per share | $ | 0.23 | $ | 0.24 | $ | 0.21 | |||
| Diluted earnings per share | $ | 0.22 | $ | 0.24 | $ | 0.21 | |||
| Weighted average number of common shares outstanding: | |||||||||
| Basic | 11,338,320 | 9,265,153 | 9,235,344 | ||||||
| Diluted | 11,609,978 | 9,284,947 | 9,238,808 | ||||||
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| Nine months ended | ||||||
| September 30, 2018 | September 30, 2017 | |||||
| INTEREST AND DIVIDEND INCOME | ||||||
| Interest and fees on loans | $ | 26,229 | $ | 22,741 | ||
| Interest on interest earning deposits with other banks | 949 | 458 | ||||
| Interest on investment securities | 463 | 385 | ||||
| Dividends on other investments | 91 | 77 | ||||
| Total interest and dividend income | 27,732 | 23,661 | ||||
| INTEREST EXPENSE | ||||||
| Interest on deposits | 2,209 | 1,526 | ||||
| Interest on borrowed funds | 594 | 551 | ||||
| Total interest expense | 2,803 | 2,077 | ||||
| Net interest income | 24,929 | 21,584 | ||||
| PROVISION FOR LOAN LOSSES | 1,401 | 504 | ||||
| Net interest income after provision for loan losses | 23,528 | 21,080 | ||||
| NONINTEREST INCOME | ||||||
| Deposit service charges and fees | 2,258 | 1,924 | ||||
| Wholesale banking service fees | 370 | - | ||||
| Loan referral fees | 453 | 276 | ||||
| Mortgage broker fees | 158 | 195 | ||||
| Sublease and lease income | 71 | 167 | ||||
| Gain on sale of loans | 142 | 102 | ||||
| Other | 414 | 437 | ||||
| Total noninterest income | 3,866 | 3,101 | ||||
| NONINTEREST EXPENSE | ||||||
| Salaries and employee benefits | 11,672 | 9,947 | ||||
| Occupancy | 2,425 | 2,253 | ||||
| Data processing | 1,472 | 1,311 | ||||
| Director and staff expenses | 493 | 450 | ||||
| Excise taxes | 404 | 344 | ||||
| Marketing | 253 | 298 | ||||
| Legal and professional fees | 352 | 281 | ||||
| Federal Deposit Insurance Corporation (FDIC) assessments | 247 | 271 | ||||
| Business development | 241 | 195 | ||||
| Other | 1,472 | 1,298 | ||||
| Total noninterest expense | 19,031 | 16,648 | ||||
| Income before provision for income taxes | 8,363 | 7,533 | ||||
| PROVISION FOR INCOME TAXES | 1,717 | 2,440 | ||||
| NET INCOME | $ | 6,646 | $ | 5,093 | ||
| Basic earnings per share | $ | 0.67 | $ | 0.55 | ||
| Diluted earnings per share | $ | 0.66 | $ | 0.55 | ||
| Weighted average number of common shares outstanding: | ||||||
| Basic | 9,956,449 | 9,233,421 | ||||
| Diluted | 10,051,415 | 9,236,175 | ||||
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
| For the Three Months Ended | |||||||||||||||||||||||||||||
| September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||||||||||||||||||||||
| Average | Interest & | Yield / | Average | Interest & | Yield / | Average | Interest & | Yield / | |||||||||||||||||||||
| Balance | Dividends | Cost (4) | Balance | Dividends | Cost (4) | Balance | Dividends | Cost (4) | |||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||||||||
| Interest earning deposits | $ | 90,301 | $ | 458 | 2.01 | % | $ | 50,750 | $ | 236 | 1.87 | % | $ | 53,959 | $ | 171 | 1.26 | % | |||||||||||
| Investment securities (1) | 39,613 | 156 | 1.56 | 39,642 | 155 | 1.57 | 36,458 | 135 | 1.47 | ||||||||||||||||||||
| Other Investments | 3,000 | 18 | 2.38 | 3,200 | 62 | 7.77 | 3,043 | 3 | 0.39 | ||||||||||||||||||||
| Loans receivable (2) | 717,260 | 9,262 | 5.12 | 688,975 | 8,778 | 5.11 | 624,463 | 7,908 | 5.02 | ||||||||||||||||||||
| Total interest earning assets | $ | 850,174 | $ | 9,894 | 4.62 | $ | 782,567 | $ | 9,231 | 4.73 | $ | 717,923 | $ | 8,217 | 4.54 | ||||||||||||||
| Noninterest earning assets: | |||||||||||||||||||||||||||||
| Allowance for loan losses | (8,782 | ) | (8,522 | ) | (7,890 | ) | |||||||||||||||||||||||
| Other noninterest earning assets | 37,000 | 36,277 | 37,293 | ||||||||||||||||||||||||||
| Total assets | $ | 878,392 | $ | 810,322 | $ | 747,326 | |||||||||||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||||||||
| Interest bearing deposits | $ | 488,183 | $ | 851 | 0.69 | % | $ | 464,133 | $ | 712 | 0.62 | % | $ | 428,036 | $ | 540 | 0.50 | % | |||||||||||
| Subordinated debt | 9,959 | 148 | 5.90 | 9,955 | 147 | 5.92 | 9,945 | 148 | 5.90 | ||||||||||||||||||||
| Junior subordinated debentures | 3,580 | 41 | 4.54 | 3,580 | 39 | 4.37 | 3,579 | 31 | 3.44 | ||||||||||||||||||||
| FHLB advances and other borrowings | 964 | 6 | 2.47 | 5,972 | 30 | 2.01 | 3,294 | 13 | 1.57 | ||||||||||||||||||||
| Total interest bearing liabilities | $ | 502,686 | $ | 1,046 | 0.83 | $ | 483,640 | $ | 928 | 0.77 | $ | 444,854 | $ | 732 | 0.65 | ||||||||||||||
| Noninterest bearing deposits | 274,549 | 255,615 | 233,896 | ||||||||||||||||||||||||||
| Other liabilities | 3,650 | 2,610 | 3,557 | ||||||||||||||||||||||||||
| Total shareholders' equity | 97,507 | 68,457 | 65,019 | ||||||||||||||||||||||||||
| Total liabilities and | |||||||||||||||||||||||||||||
| shareholders' equity | $ | 878,392 | $ | 810,322 | $ | 747,326 | |||||||||||||||||||||||
| Net interest income | $ | 8,848 | $ | 8,303 | $ | 7,485 | |||||||||||||||||||||||
| Interest rate spread | 3.79 | % | 3.96 | % | 3.89 | % | |||||||||||||||||||||||
| Net interest margin (3) | 4.13 | % | 4.26 | % | 4.14 | % | |||||||||||||||||||||||
| (1) 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. | |||||||||||||||||||||||||||||
| (2) Includes nonaccrual loans | |||||||||||||||||||||||||||||
| (3) Net interest margin represents net interest income divided by the average total interest earning assets | |||||||||||||||||||||||||||||
| (4) Yields and costs are annualized | |||||||||||||||||||||||||||||
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE
(Dollars in thousands; unaudited)
| For the Nine Months Ended | |||||||||||||||||||
| September 30, 2018 | September 30, 2017 | ||||||||||||||||||
| Average | Interest & | Yield / | Average | Interest & | Yield / | ||||||||||||||
| Balance | Dividends | Cost (4) | Balance | Dividends | Cost (4) | ||||||||||||||
| Assets | |||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||
| Interest earning deposits | $ | 69,818 | $ | 949 | 1.82 | % | $ | 56,284 | $ | 458 | 1.09 | % | |||||||
| Investment securities (1) | 39,657 | 463 | 1.56 | 36,377 | 385 | 1.42 | |||||||||||||
| Other Investments | 3,038 | 91 | 4.00 | 2,875 | 77 | 3.58 | |||||||||||||
| Loans receivable (2) | 687,165 | 26,229 | 5.10 | 609,981 | 22,741 | 4.98 | |||||||||||||
| Total interest earning assets | $ | 799,678 | $ | 27,732 | 4.64 | $ | 705,517 | $ | 23,661 | 4.48 | |||||||||
| Noninterest earning assets: | |||||||||||||||||||
| Allowance for loan losses | (8,478 | ) | (7,811 | ) | |||||||||||||||
| Other noninterest earning assets | 36,960 | 39,990 | |||||||||||||||||
| Total assets | $ | 828,160 | $ | 737,696 | |||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||
| Interest bearing deposits | $ | 472,266 | $ | 2,209 | 0.63 | % | $ | 425,030 | $ | 1,526 | 0.48 | % | |||||||
| Subordinated debt | 9,955 | 439 | 5.90 | 9,941 | 439 | 5.90 | |||||||||||||
| Junior subordinated debentures | 3,580 | 116 | 4.33 | 3,578 | 90 | 3.36 | |||||||||||||
| FHLB advances and other borrowings | 2,577 | 39 | 2.02 | 2,179 | 22 | 1.35 | |||||||||||||
| Total interest bearing liabilities | $ | 488,378 | $ | 2,803 | 0.77 | $ | 440,728 | $ | 2,077 | 0.63 | |||||||||
| Noninterest bearing deposits | 258,586 | 228,507 | |||||||||||||||||
| Other liabilities | 3,038 | 3,069 | |||||||||||||||||
| Total shareholders' equity | 78,158 | 65,392 | |||||||||||||||||
| Total liabilities and | |||||||||||||||||||
| shareholders' equity | $ | 828,160 | $ | 737,696 | |||||||||||||||
| Net interest income | $ | 24,929 | $ | 21,584 | |||||||||||||||
| Interest rate spread | 3.87 | % | 3.85 | % | |||||||||||||||
| Net interest margin (3) | 4.17 | % | 4.09 | % | |||||||||||||||
| (1) 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. | |||||||||||||||||||
| (2) Includes nonaccrual loans | |||||||||||||||||||
| (3) Net interest margin represents net interest income divided by the average total interest earning assets | |||||||||||||||||||
| (4) Yields and costs are annualized | |||||||||||||||||||
COASTAL FINANCIAL CORPORATION
QUARTERLY STATISTICS
(Dollars in thousands, except share and per share data; unaudited)
| Three Months Ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2018 | 2018 | 2018 | 2017 | 2017 | |||||||||||
| Income Statement Data: | |||||||||||||||
| Interest and dividend income | $ | 9,894 | $ | 9,231 | $ | 8,607 | $ | 8,452 | $ | 8,217 | |||||
| Interest expense | 1,046 | 928 | 829 | 798 | 732 | ||||||||||
| Provision for loan losses | 508 | 392 | 501 | 366 | 65 | ||||||||||
| Net interest income after | |||||||||||||||
| provision for loan losses | 8,340 | 7,911 | 7,277 | 7,288 | 7,420 | ||||||||||
| Noninterest income | 1,546 | 1,213 | 1,107 | 1,053 | 1,250 | ||||||||||
| Noninterest expense | 6,610 | 6,354 | 6,067 | 5,785 | 5,809 | ||||||||||
| Provision for income tax | 674 | 569 | 474 | 2,213 | 957 | ||||||||||
| Net income | 2,602 | 2,201 | 1,843 | 343 | 1,904 | ||||||||||
| Adjusted net income (1) | 2,602 | 2,201 | 1,843 | 1,638 | 1,904 | ||||||||||
| As of Period End or for the three month period | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2018 | 2018 | 2018 | 2017 | 2017 | |||||||||||
| Balance Sheet Data: | |||||||||||||||
| Cash and cash equivalents | $ | 115,508 | $ | 91,449 | $ | 94,569 | $ | 89,751 | $ | 86,531 | |||||
| Investment securities | 37,039 | 37,317 | 37,338 | 38,336 | 40,201 | ||||||||||
| Loans receivable | 744,320 | 700,692 | 678,515 | 656,788 | 630,442 | ||||||||||
| Allowance for loan losses | (9,111 | ) | (8,540 | ) | (8,423 | ) | (8,017 | ) | (7,947 | ) | |||||
| Total assets | 917,029 | 850,922 | 830,962 | 805,753 | 778,609 | ||||||||||
| Interest bearing deposits | 488,743 | 485,019 | 473,268 | 460,937 | 438,592 | ||||||||||
| Noninterest bearing deposits | 285,979 | 259,449 | 254,000 | 242,358 | 242,607 | ||||||||||
| Total deposits | 774,722 | 744,468 | 727,268 | 703,295 | 681,199 | ||||||||||
| Total borrowings | 33,542 | 33,537 | 33,534 | 33,529 | 28,526 | ||||||||||
| Total shareholders’ equity | 105,276 | 69,490 | 66,927 | 65,711 | 65,558 | ||||||||||
| Share and Per Share Data (2)(3): | |||||||||||||||
| Earnings per share – basic | $ | 0.23 | $ | 0.24 | $ | 0.20 | $ | 0.04 | $ | 0.21 | |||||
| Earnings per share – diluted | $ | 0.22 | $ | 0.24 | $ | 0.20 | $ | 0.04 | $ | 0.21 | |||||
| Adjusted earnings per share - diluted (4) | $ | 0.18 | |||||||||||||
| Dividends per share | - | - | - | - | - | ||||||||||
| Book value per share (5) | $ | 8.86 | $ | 7.47 | $ | 7.23 | $ | 7.10 | $ | 7.09 | |||||
| Tangible book value per share (6) | $ | 8.86 | $ | 7.47 | $ | 7.23 | $ | 7.10 | $ | 7.09 | |||||
| Weighted avg outstanding shares – basic | 11,338,320 | 9,265,153 | 9,241,620 | 9,237,660 | 9,235,344 | ||||||||||
| Weighted avg outstanding shares – diluted | 11,609,978 | 9,284,947 | 9,247,209 | 9,240,737 | 9,238,808 | ||||||||||
| Shares outstanding at end of period | 11,886,473 | 9,298,553 | 9,253,303 | 9,248,901 | 9,249,006 | ||||||||||
| Stock options outstanding at end of period | 682,190 | 707,460 | 768,850 | 668,934 | 669,394 | ||||||||||
| Credit Quality Ratios: | |||||||||||||||
| Nonperforming assets to total assets | 0.27 | % | 0.24 | % | 0.20 | % | 0.26 | % | 0.32 | % | |||||
| Nonperforming assets to loans receivable | |||||||||||||||
| and OREO | 0.34 | % | 0.30 | % | 0.25 | % | 0.32 | % | 0.40 | % | |||||
| Nonperforming loans to total loans receivable | 0.34 | % | 0.30 | % | 0.25 | % | 0.32 | % | 0.40 | % | |||||
| Allowance for loan losses to nonperforming loans | 361.40 | % | 412.96 | % | 495.76 | % | 378.16 | % | 316.36 | % | |||||
| Allowance for loan losses to total loans receivable | 1.22 | % | 1.22 | % | 1.24 | % | 1.22 | % | 1.26 | % | |||||
| Net charge-offs (recoveries) to average loans (7) | -0.03 | % | 0.16 | % | 0.06 | % | 0.18 | % | 0.00 | % | |||||
| Capital Ratios: | |||||||||||||||
| Tier 1 leverage capital | 12.60 | % | 9.21 | % | 9.07 | % | 8.95 | % | 9.31 | % | |||||
| Tier 1 risk-based capital | 14.17 | % | 10.24 | % | 10.25 | % | 10.50 | % | 10.75 | % | |||||
| Common equity Tier 1 risk-based capital | 13.72 | % | 9.76 | % | 9.75 | % | 9.98 | % | 10.21 | % | |||||
| Total risk-based capital | 16.65 | % | 12.82 | % | 12.90 | % | 13.24 | % | 13.54 | % | |||||
| (1) Adjusted net income is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is net income. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.” | |||||||||||||||
| (2) Share and per share amounts are based on total common shares outstanding, which includes common stock and nonvoting common stock. | |||||||||||||||
| (3) Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018. | |||||||||||||||
| (4) Adjusted earnings per share is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is earnings per share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.” | |||||||||||||||
| (5) We calculate book value per share as total shareholders’ equity at the end of the relevant period divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period. | |||||||||||||||
| (6) Tangible book value per share is a non-GAAP financial measure. We calculate tangible book value per share as total shareholders’ equity at the end of the relevant period, less goodwill and other intangible assets, divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated. | |||||||||||||||
| (7) Annualized calculations | |||||||||||||||
Non-GAAP Financial Measures
This earnings release contains certain non-GAAP (“Generally Accepted Accounting Principles”) financial measures in addition to results presented in accordance with GAAP. These measures include the following:
“Adjusted net income” is a non-GAAP measure defined as net income increased by the additional income tax expense that resulted from the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act. The most directly comparable GAAP measure is net income.
“Adjusted earnings per share” is a non-GAAP measure defined as net income, plus additional income tax expense, divided by weighted average outstanding shares (diluted). The most directly comparable GAAP measure is earnings per share.
The Company also presented comparable earnings information using GAAP financial measures. Reconciliations of the GAAP and non-GAAP measures are presented below.
| (Dollars in thousands, except share and per share data) | As of and for three Months ended December 31, 2017 | |||
| Adjusted net income: | ||||
| Net income | $ | 343 | ||
| Plus: additional income tax expense | 1,295 | |||
| Adjusted net income | $ | 1,638 | ||
| Adjusted earnings per share – diluted: | ||||
| Net income | $ | 343 | ||
| Plus: additional income tax expense | 1,295 | |||
| Adjusted net income | $ | 1,638 | ||
| Weighted average common shares outstanding– diluted (1) | 9,240,737 | |||
| Adjusted earnings per share – diluted (1) | $ | 0.18 | ||
| (1) Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018. | ||||