EX-99.1 2 ck0001437958-ex991_6.htm EX-99.1 ck0001437958-ex991_6.htm

 

Exhibit 99.1

 

COASTAL FINANCIAL CORPORATION ANNOUNCES THIRD QUARTER 2018 RESULTS

Company release: October 23, 2018

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, WA – 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.