Fourth Quarter 2023
Highlights:
- Net income of
$9.0 million, or
$0.66 per diluted common share, for the
three months ended December 31,
2023, compared to $10.3
million, or $0.75
per diluted common share for the three months
ended September 30,
2023.
- Return on average assets ("ROA") of
0.97% for the three months ended
December 31, 2023.
- Return on average equity ("ROE") of
12.35% for the three months ended
December 31, 2023.
- Total assets increased
$75.1 million, or
2.0%, to $3.75
billion for the quarter ended
December 31, 2023, compared
to $3.68 billion at
September 30, 2023.
- Total loans, net of deferred fees
increased $59.1 million,
or 2.0%, to
$3.03 billion for the quarter
ended December 31,
2023.
- Community bank loans
increased $45.5 million,
or 2.5%, to
$1.83 billion.
- CCBX loans increased
$13.6 million, or
1.1%, to $1.20
billion.
- $125.1 million in CCBX loans were sold as management
continued to sell loans as part of our strategy to reduce risk,
optimize the CCBX loan portfolio and strengthen our balance sheet
through enhanced credit standards.
- Deposits increased
$70.7 million, or
2.1%, to $3.36
billion for the quarter ended
December 31, 2023.
- CCBX deposit growth of $110.5
million, or
6.3%, to $1.86
billion.
- CCBX deposit growth is net of an additional
$69.4 million in CCBX deposits that were
transferred off balance sheet for increased FDIC insurance coverage
purposes.
- Community bank deposits
decreased $39.9 million,
or 2.6%, to
$1.50 billion as a result of our decision
to not increase our deposit rates during the quarter and let higher
rate deposits run-off.
- Includes noninterest bearing deposits of
$561.6 million or
37.5% of total community bank
deposits.
- Community bank cost of deposits was
1.57% compared to
1.31% for the quarter ended
September 30, 2023.
- Average deposits increased
by $5.5 million compared
to the quarter ended September 30,
2023.
- Uninsured deposits of $558.6
million, or 16.6%
of total deposits as of December 31,
2023, compared to $599.0
million, or 18.2%
of total deposits as of September 30,
2023.
- Liquidity/Borrowings as of
December 31, 2023:
- Capacity to borrow up to $640.1
million from Federal Home Loan Bank and the
Federal Reserve Bank discount window with only minimal borrowings,
taken once to test the lines, under these facilities since the
first quarter of 2022.
- Investment Portfolio as of
December 31, 2023:
- Available for sale ("AFS") investments of
$99.5 million, compared to
$98.9 million as of
September 30, 2023, of which
99.9% are U.S. Treasuries, with a weighted
average remaining life of 2 months
as of December 31,
2023.
- Held to maturity ("HTM") investments of
$50.9 million, of which
100% are U.S. Agency mortgage backed
securities held for CRA purposes. The market value
of the HTM investments is $180,000 more than the carrying
value, the weighted average remaining life
is 17.7 years as of
December 31, 2023 and the weighted
average yield is 5.45% for the
quarter ended December 31,
2023.
2023 Highlights:
- Net income of
$44.6 million, or
$3.27 per diluted common share, for the
year ended December 31,
2023, compared to $40.6
million, or $3.01
per diluted common share for the year ended
December 31, 2022.
- Total assets increased
$608.9 million, or
19.4%, to $3.75
billion for the year ended
December 31, 2023, compared
to $3.14 billion at
December 31, 2022.
- Total loans, net of deferred fees increased $398.8
million, or 15.2%, to $3.03 billion for the year ended
December 31, 2023, compared to $2.63 billion as of
December 31, 2022.
- Community bank loans increased $215.4 million, or
13.3%, during the year ended December 31, 2023.
- CCBX loans increased $183.4 million, or 18.1%, during
the year ended December 31, 2023.
- Deposits:
- Deposits increased
$542.8 million, or
19.3%, to $3.36
billion during the year ended
December 31, 2023, compared
to $2.82 billion at
December 31, 2022.
- Includes $340.1 million
in fully insured IntraFi network negotiable orders of
withdrawal ("NOW") and money market reciprocal deposits as
of December 31, 2023 to
provide FDIC deposit insurance coverage and peace of mind to larger
deposit customers.
- Community bank deposits
decreased $40.6 million,
or 2.6%, during the year
ended December 31, 2023 as a
result of not increasing our deposit rates this quarter and letting
higher rate deposits run-off.
- CCBX deposits increased
$583.5 million, or
45.6%, during the year ended
December 31, 2023.
EVERETT, Wash., Jan. 30, 2024 (GLOBE NEWSWIRE) -- Coastal
Financial Corporation (Nasdaq: CCB) (the “Company”, "Coastal",
"we", "our", or "us"), the holding company for Coastal Community
Bank (the “Bank”), today reported unaudited financial results for
the quarter and fiscal year ended December 31, 2023.
Quarterly net income for the fourth quarter of 2023 was $9.0
million, or $0.66 per diluted common share, compared with net
income of $10.3 million, or $0.75 per diluted common share, for the
third quarter of 2023, and $13.1 million, or $0.96 per diluted
common share, for the quarter ended December 31,
2022.
Total assets increased $75.1 million, or 2.0%, during the fourth
quarter of 2023 to $3.75 billion, from $3.68 billion at
September 30, 2023. Total loans, net of deferred fees
increased $59.1 million, or 2.0%, during the three months ended
December 31, 2023 to $3.03 billion, compared to $2.97 billion
at September 30, 2023. Community bank loans increased $45.5
million, or 2.5%, and CCBX loans increased $13.6 million, or 1.1%.
We continue to monitor and manage the CCBX loan portfolio, and sold
$125.1 million in CCBX loans during the quarter ended
December 31, 2023. During the quarter ended September 30, 2023
we intentionally reduced the CCBX loan portfolio to strengthen our
balance sheet and reduce risk by selling loans or letting such
loans mature. We currently expect to sell additional loans in the
coming months as we continue working to optimize our CCBX portfolio
through new partners, products and building on our existing
relationships. Deposits increased $70.7 million, or 2.1%, during
the three months ended December 31, 2023. CCBX deposits grew
$110.5 million, or 6.3%. Community bank deposits decreased $39.9
million, or 2.6%, as a result of not increasing our deposit rates
during the quarter and letting higher rate deposits run-off. Our
cost of deposits for the community bank was 1.57% for the three
months ended December 31, 2023, compared to 1.31% for the
three months ended September 30, 2023.
We saw solid deposit growth in the fourth quarter, with deposits
increasing $70.7 million, or 2.1%, compared to September 30,
2023. Fully insured IntraFi network reciprocal deposits increased
$43.8 million to $340.1 million as of December 31, 2023,
compared to $296.4 million as of September 30, 2023. These
fully insured reciprocal deposits allow our larger deposit
customers to fully insure their deposits through a reciprocal
agreement with other banks. Loans receivable increased $59.1
million, or 2.0%, during the three months ended December 31,
2023. The increase is net of $125.1 million in CCBX loans that were
sold during the quarter ended December 31, 2023. We continue
to monitor our liquidity position through diligent management of
our liquid assets and liabilities as well as maintaining access to
alternative sources of funds. As of December 31, 2023, we had
$483.1 million in cash on the balance sheet and the capacity to
borrow up to $640.1 million from Federal Home Loan Bank and the
Federal Reserve Bank discount window, with no borrowings, except
minimal amounts required to test the lines, taken under these
facilities since the first quarter of 2022. Cash on the balance
sheet and borrowing capacity totaled $1.12 billion, which
represented 33.4% of total deposits and exceeded our $558.6 million
in uninsured deposits as of December 31, 2023.
"We saw a lot of changes is 2023, with increases in interest
rates, bank failures, and other economic challenges. We were able
to meet those challenges by being flexible and adjusting our
strategy to meet the changing environment. During this turbulent
time we were able to reduce uninsured deposits by providing
additional FDIC deposit insurance coverage through reciprocal
deposits, bringing peace of mind to customers, maintain adequate
liquidity and borrowing capacity and still grow both loans and
deposits.
"Credit quality was a top priority, and during the quarter ended
September 30, 2023 we started the process of optimizing our CCBX
loan portfolio by selling higher yielding loans that have a higher
potential for credit deterioration or letting such loans mature. As
a result of this strategy we are seeing pressure on our margin, but
we are on track with repositioning our portfolio and results are in
line with our expectations.
"As we look forward to 2024, our focus will be on reducing costs
through automation and by leveraging the gains in efficiencies
afforded to us in the systems and technology that we continue
investing in. We have made progress on reducing expenses in the
three months ended December 31, 2023 and will keep working to
manage expenses going forward. We will continue our strategy of
focusing on larger partners and companies, selecting partnerships
that align with our long term profitability and growth objectives.
Additionally, we will continue working to optimize our CCBX loan
portfolio and manage credit risk. We will work to achieve this by
continuing to sell higher yielding loans that have a higher
potential for credit deterioration or letting such loans mature,
while simultaneously working to strengthen the CCBX portfolio with
new loans that meet enhanced credit standards.
"We expect that this strategy will result in lower earnings in
the short term with lower loan yields and compressed margins, but
will provide for long term stability and profitability," stated
Eric Sprink, the CEO of the Company and the Bank.
Results of Operations Overview
The Company has one main subsidiary, the Bank which consists of
three segments: CCBX, the community bank and treasury &
administration. The CCBX segment includes our BaaS
activities, the community bank segment includes all community
banking activities, and the treasury & administration segment
includes treasury management, overall administration and all other
aspects of the Company. Net interest income was $59.7
million for the quarter ended December 31, 2023, a decrease of
$2.6 million, or 4.1%, from $62.2 million for the quarter ended
September 30, 2023, and an increase of $6.2 million, or 11.7%,
from $53.4 million for the quarter ended December 31,
2022. Yield on loans receivable was 10.71% for the three
months ended December 31, 2023, compared to 10.84% for the
three months ended September 30, 2023 and 9.33% for the three
months ended December 31, 2022. Cost of deposits
was 3.36% for the three months ended December 31, 2023,
compared to 3.14% for the three months ended September 30,
2023 and 1.56% for the three months ended December 31, 2022.
The decrease in net interest income compared to September 30,
2023, was a result of increased interest expense due to an increase
in average interest bearing deposits and an increase in cost of
deposits as a result of higher interest rates. Additionally,
interest and fees on loans decreased as a result of selling higher
yielding CCBX loans that have a higher potential for credit
deterioration. The increase in net interest income compared to
December 31, 2022 was largely related to increased yield on
loans resulting from higher interest rates and growth in higher
yielding loans. Total average loans receivable for the
three months ended December 31, 2023 was $3.01 billion,
compared to $3.06 billion for the three months ended
September 30, 2023, and $2.60 billion for the three months
ended December 31, 2022.
Interest and fees on loans totaled $81.2 million for the three
months ended December 31, 2023 compared to $83.7 million and
$61.2 million for the three months ended September 30, 2023
and December 31, 2022, respectively. Total loans,
net of deferred fees increased $59.1 million, or 2.0%, during the
quarter ended December 31, 2023, which included a $13.6
million increase in CCBX loans and an increase of $45.5 million in
community bank loans. The increase in CCBX loans includes an
increase of $58.4 million, or 7.7%, in consumer and other loans and
a decrease of $26.7 million, or 23.4%, in capital call lines as a
result of normal balance fluctuations and business
activities. We continue to monitor and manage the CCBX
loan portfolio, and sold $125.1 million in CCBX loans during the
quarter ended December 31, 2023 to reduce credit exposure in
certain loan categories and manage credit risk. We continue to
reposition ourselves by reducing our CCBX loans in an effort to
optimize our loan portfolio and we will work to continue growing
the CCBX portfolio in future quarters with loans that have lower
potential risk of credit deterioration and are more aligned with
our long term objectives. The decrease in interest and fees on
loans for the quarter ended December 31, 2023, compared to
September 30, 2023 was largely due to the sale of higher
yielding CCBX loans. The increase in interest and fees on loans
compared to the quarter ended December 31, 2022, was largely
due to growth in higher yielding loans and increased interest
rates. The FOMC has increased rates 1.00% since December
31, 2022 and last raised the target Federal Funds rate 0.25% on
July 26, 2023.
Interest income from interest earning deposits with other banks
was $5.7 million for the quarter ended December 31, 2023 an
increase of $1.8 million compared to September 30, 2023 and an
increase of $2.6 million compared to December 31, 2022 due to
an increase in interest rates and average deposit
balance. The average balance of interest earning
deposits with other banks for the three months ended
December 31, 2023 was $413.1 million, compared to $285.6
million and $329.4 million for the three months ended
September 30, 2023 and December 31, 2022,
respectively. The average yield on these interest
earning deposits with other banks increased to 5.46% for the
quarter ended December 31, 2023, compared to 5.40% and 3.73%
for the quarters ended September 30, 2023 and
December 31, 2022, respectively.
Total interest expense was $28.6 million for the quarter ended
December 31, 2023, a $2.5 million increase from the quarter
ended September 30, 2023 and a $17.0 million increase from the
quarter ended December 31, 2022. Interest expense on deposits
was $27.9 million for the quarter ended December 31, 2023,
compared to $25.5 million for the quarter ended September 30,
2023 and $11.1 million for the quarter ended December 31,
2022. Interest expense on interest bearing deposits increased $2.5
million for the quarter ended December 31, 2023, compared to
the quarter ended September 30, 2023, and $16.9 million
compared to the quarter ended December 31, 2022 as a result of
an increase in CCBX deposits that are tied to, and reprice when the
FOMC raises rates. Similarly, most of our CCBX loans also reprice
when the FOMC raises interest rates. Interest expense on
borrowed funds was $670,000 for the quarter ended December 31,
2023, compared to $651,000 and $537,000 for the quarters ended
September 30, 2023 and December 31, 2022, respectively.
The $133,000 increase in interest expense on borrowed funds from
the quarter ended December 31, 2022 is the result of an
increase in interest rates.
Total cost of deposits was 3.36% for the three months ended
December 31, 2023, compared to 3.14% for the three months
ended September 30, 2023, and 1.56%, for the three months
ended December 31, 2022. Community bank and CCBX cost of
deposits were 1.57% and 4.90% respectively, for the three months
ended December 31, 2023, compared to 1.31% and 4.80%, for the
three months ended September 30, 2023, and 0.37% and 3.13% for
the three months ended December 31, 2022. The increase in cost
of deposits for the three months ended December 31, 2023
compared to the prior periods for both segments is a result of
increased interest rates. While we continue working to hold down
deposit costs, the 1.00% increase in FOMC interest rates in 2023
has impacted our cost of deposits and resulted in higher interest
expense on interest bearing deposits.
Net Interest Margin
Net interest margin was 6.61% for the three months ended
December 31, 2023, compared to 7.10% and 6.96% for the three
months ended September 30, 2023 and December 31, 2022,
respectively. The decrease in net interest margin
compared to the three months ended September 30, 2023 and
December 31, 2022 was largely due to an increase in cost of
deposits and selling higher yielding consumer loans. Higher
interest rates on interest bearing deposits compressed net interest
margin as a result of our competitors promoting higher deposit
rates and growth in primarily higher cost CCBX deposits.
Additionally, the actions we took in an effort to strengthen our
balance sheet by selling higher risk and higher yielding loans or
letting such loans mature during the quarters ended
September 30, 2023 and December 31, 2023 will continue to
impact net interest margin in future quarters. Interest and fees on
loans receivable decreased $2.5 million, or 3.0%, to $81.2 million
for the three months ended December 31, 2023, compared to
$83.7 million for the three months ended September 30, 2023,
as a result of selling higher risk and higher yielding loans or
letting such loans mature and increased $19.9 million, or 32.6%,
compared to $61.2 million for the three months ended
December 31, 2022, due to an increase in outstanding balances
and higher interest rates. Also contributing to the
increase in net interest margin compared to the three months ended
December 31, 2022, was a $2.6 million increase in interest on
interest earning deposits. These interest earning
deposits earned an average rate of 5.46% for the quarter ended
December 31, 2023, compared to 5.40% and 3.73% for the
quarters ended September 30, 2023 and December 31, 2022,
respectively. Average investment securities increased
$31.7 million to $149.7 million compared to the three months ended
September 30, 2023 and increased $48.2 million compared to the
three months ended December 31, 2022 due to the purchase of
$50.2 million in securities in 2023 with $8.6 million of the
purchases occurring during the three months ended December 31,
2023. Interest on investment securities increased $459,000 for the
three months ended December 31, 2023 compared to the three
months ended September 30, 2023 as a result of the increase in
average outstanding balance coupled with increased yield, which
positively impacted net interest margin. Interest on investment
securities increased $668,000 compared to December 31, 2022,
as a result of increased yield and outstanding
balance. These increases in interest income were
partially offset by increases in interest expense on interest
bearing deposits, as previously discussed.
Cost of funds was 3.39% for the quarter ended December 31,
2023, an increase of 21 basis points from the quarter ended
September 30, 2023 and an increase of 178 basis points from
the quarter ended December 31, 2022. Cost of deposits for the
quarter ended December 31, 2023 was 3.36%, compared to 3.14%
for the quarter ended September 30, 2023, and 1.56% for the
quarter ended December 31, 2022. The increased cost of funds
and deposits compared to September 30, 2023 and
December 31, 2022 was due to the increase in interest rates
compared to the previous periods and growth in higher rate CCBX
deposits.
During the quarter ended December 31, 2023, total loans
receivable increased by $59.1 million, or 2.0%, to $3.03 billion,
compared to $2.97 billion for the quarter ended September 30,
2023. This increase consists of a $13.6 million increase
in CCBX loans and $45.5 million in community bank loan growth.
Total loans receivable as of December 31, 2023 increased
$398.8 million compared to December 31, 2022. This
increase includes community bank loan growth of $215.4 million and
an increase in CCBX loans of $183.4 million. During the quarter
ended December 31, 2023, $125.1 million in loans were sold and
no loans were held for sale as of December 31, 2023,
September 30, 2023 or December 31, 2022.
Total yield on loans receivable for the quarter ended
December 31, 2023 was 10.71%, compared to 10.84% for the
quarter ended September 30, 2023, and 9.33% for the quarter
ended December 31, 2022. This decrease in yield on loans
receivable compared to the quarter ended September 30, 2023 is
largely the result of selling higher risk and higher yielding CCBX
loans or letting such loans mature and increasing lower risk and
therefore lower yielding loans as we work to optimize our credit
risk profile and loan portfolio. During the quarter ended
December 31, 2023, community bank loans increased 2.5%, or
$45.5 million, compared to the quarter ended September 30,
2023, with an average yield of 6.32% and CCBX loans outstanding
increased 1.1%, or $13.6 million, compared to September 30,
2023, with an average CCBX yield of 17.36%. The yield on CCBX loans
does not include the impact of BaaS loan expense. BaaS
loan expense represents the amount paid or payable to partners for
credit enhancements, fraud enhancements and originating &
servicing CCBX loans.
The following table summarizes the average yield on loans
receivable and cost of deposits for our community bank and CCBX
segments for the periods indicated:
| |
For the Three Months Ended |
|
For the Twelve Months Ended |
| |
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
December 31, 2023 |
|
December 31, 2022 |
|
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
| Community Bank |
6.32% |
|
1.57% |
|
6.20% |
|
1.31% |
|
5.70% |
|
0.37% |
|
6.20% |
|
1.14% |
|
5.32% |
|
0.18% |
| CCBX (1) |
17.36% |
|
4.90% |
|
17.05% |
|
4.80% |
|
15.20% |
|
3.13% |
|
16.89% |
|
4.55% |
|
13.85% |
|
1.57% |
| Consolidated |
10.71% |
|
3.36% |
|
10.84% |
|
3.14% |
|
9.33% |
|
1.56% |
|
10.60% |
|
2.87% |
|
8.12% |
|
0.71% |
(1) CCBX yield on loans does not include the impact
of BaaS loan expense. BaaS loan expense represents the
amount paid or payable to partners for credit and fraud
enhancements and originating & servicing CCBX
loans. To determine Net BaaS loan income earned
from CCBX loan relationships, the Company takes BaaS loan interest
income and deducts BaaS loan expense to arrive at Net BaaS loan
income which can be compared to interest income on the Company’s
community bank loans. See reconciliation of the non-GAAP measures
at the end of this earnings release for the impact of BaaS loan
expense on CCBX loan yield.
(2) Annualized calculations for periods shown.
The following tables illustrates how BaaS loan interest income
is affected by BaaS loan expense resulting in net BaaS loan income
and the associated yield:
| |
|
For the Three Months Ended |
| |
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
(dollars in thousands, unaudited) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
|
Income / Expense |
|
Income / expense divided by
average CCBX loans(2) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
|
BaaS loan interest income |
|
$ |
52,327 |
|
17.36 |
% |
|
$ |
56,279 |
|
17.05 |
% |
|
$ |
38,086 |
|
15.20 |
% |
| Less: BaaS loan expense |
|
|
24,310 |
|
8.06 |
% |
|
|
23,003 |
|
6.97 |
% |
|
|
17,215 |
|
6.87 |
% |
|
Net BaaS loan income (1) |
|
$ |
28,017 |
|
9.30 |
% |
|
$ |
33,276 |
|
10.08 |
% |
|
$ |
20,871 |
|
8.33 |
% |
| Average BaaS
Loans(3) |
|
$ |
1,196,137 |
|
|
|
$ |
1,309,380 |
|
|
|
$ |
994,080 |
|
|
| |
|
For the Twelve Months Ended |
| |
|
December 31, 2023 |
|
December 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
|
BaaS loan interest income |
|
$ |
204,458 |
|
16.89 |
% |
|
$ |
102,808 |
|
13.85 |
% |
| Less: BaaS loan expense |
|
|
86,900 |
|
7.18 |
% |
|
|
53,294 |
|
7.18 |
% |
|
Net BaaS loan income (1) |
|
$ |
117,558 |
|
9.71 |
% |
|
$ |
49,514 |
|
6.67 |
% |
| Average BaaS
Loans(3) |
|
$ |
1,210,413 |
|
|
|
$ |
742,392 |
|
|
(1) A reconciliation of the non-GAAP measures are set
forth at the end of this earnings release.
(2) Annualized calculations shown for quarterly periods
presented.
(3) Includes loans held for sale.
Key Performance Ratios
ROA was 0.97% for the quarter ended December 31, 2023
compared to 1.13% and 1.66% for the quarters ended
September 30, 2023 and December 31, 2022,
respectively. ROA for the quarter ended
December 31, 2023, was down 0.16% and 0.69%, respectively, as
a result of lower margin compared to September 30, 2023 and
December 31, 2022. Noninterest expenses were lower for the
quarter ended December 31, 2023 compared to the quarter ended
September 30, 2023, but higher compared to the quarter ended
December 31, 2022.
The following table shows the Company’s key performance ratios
for the periods indicated.
| |
|
Three Months Ended |
|
Twelve Months Ended |
|
(unaudited) |
|
December 31,
2023 |
|
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
|
December 31,
2023 |
|
December 31,
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (1) |
|
0.97 |
% |
|
1.13 |
% |
|
1.52 |
% |
|
1.58 |
% |
|
1.66 |
% |
|
1.28 |
% |
|
1.38 |
% |
| Return on average equity
(1) |
|
12.35 |
% |
|
14.60 |
% |
|
19.53 |
% |
|
19.89 |
% |
|
21.86 |
% |
|
16.41 |
% |
|
18.24 |
% |
| Yield on earnings assets
(1) |
|
9.77 |
% |
|
10.08 |
% |
|
10.18 |
% |
|
9.19 |
% |
|
8.47 |
% |
|
9.82 |
% |
|
6.68 |
% |
| Yield on loans receivable
(1) |
|
10.71 |
% |
|
10.84 |
% |
|
10.85 |
% |
|
9.95 |
% |
|
9.33 |
% |
|
10.60 |
% |
|
8.12 |
% |
| Cost of funds
(1) |
|
3.39 |
% |
|
3.18 |
% |
|
2.77 |
% |
|
2.19 |
% |
|
1.61 |
% |
|
2.91 |
% |
|
0.75 |
% |
| Cost of deposits
(1) |
|
3.36 |
% |
|
3.14 |
% |
|
2.72 |
% |
|
2.13 |
% |
|
1.56 |
% |
|
2.87 |
% |
|
0.71 |
% |
| Net interest margin
(1) |
|
6.61 |
% |
|
7.10 |
% |
|
7.58 |
% |
|
7.15 |
% |
|
6.96 |
% |
|
7.10 |
% |
|
5.97 |
% |
| Noninterest expense to average
assets (1) |
|
5.56 |
% |
|
6.23 |
% |
|
6.11 |
% |
|
5.69 |
% |
|
5.97 |
% |
|
5.90 |
% |
|
5.65 |
% |
| Noninterest income to average
assets (1) |
|
6.95 |
% |
|
3.81 |
% |
|
6.90 |
% |
|
6.28 |
% |
|
5.43 |
% |
|
5.97 |
% |
|
4.23 |
% |
| Efficiency ratio |
|
41.58 |
% |
|
58.36 |
% |
|
42.92 |
% |
|
43.03 |
% |
|
48.94 |
% |
|
45.92 |
% |
|
56.26 |
% |
| Loans receivable to deposits
(2) |
|
90.05 |
% |
|
90.19 |
% |
|
96.23 |
% |
|
92.55 |
% |
|
93.25 |
% |
|
90.05 |
% |
|
93.25 |
% |
(1) Annualized calculations shown for quarterly
periods presented.
(2) Includes loans held for sale.
Noninterest Income
The following table details noninterest income for the periods
indicated:
| |
Three Months Ended |
| |
December 31, |
|
September 30, |
|
December 31, |
|
(dollars in thousands; unaudited) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Deposit service charges and fees |
$ |
957 |
|
|
$ |
998 |
|
|
$ |
946 |
|
|
Loan referral fees |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
Unrealized gain (loss) on equity securities, net |
|
80 |
|
|
|
5 |
|
|
|
(18 |
) |
|
Gain on sales of loans, net |
|
— |
|
|
|
107 |
|
|
|
— |
|
|
Other |
|
60 |
|
|
|
291 |
|
|
|
298 |
|
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,097 |
|
|
|
1,402 |
|
|
|
1,226 |
|
|
Servicing and other BaaS fees |
|
1,015 |
|
|
|
997 |
|
|
|
1,001 |
|
|
Transaction fees |
|
1,006 |
|
|
|
1,036 |
|
|
|
964 |
|
|
Interchange fees |
|
1,272 |
|
|
|
1,216 |
|
|
|
785 |
|
|
Reimbursement of expenses |
|
1,076 |
|
|
|
1,152 |
|
|
|
857 |
|
|
BaaS program income |
|
4,369 |
|
|
|
4,401 |
|
|
|
3,607 |
|
|
BaaS credit enhancements |
|
58,449 |
|
|
|
25,926 |
|
|
|
31,164 |
|
|
Baas fraud enhancements |
|
779 |
|
|
|
2,850 |
|
|
|
6,818 |
|
|
BaaS indemnification income |
|
59,228 |
|
|
|
28,776 |
|
|
|
37,982 |
|
|
Total BaaS income |
|
63,597 |
|
|
|
33,177 |
|
|
|
41,589 |
|
| Total noninterest income |
$ |
64,694 |
|
|
$ |
34,579 |
|
|
$ |
42,815 |
|
Noninterest income was $64.7 million for the three months ended
December 31, 2023, an increase of $30.1 million from $34.6
million for the three months ended September 30, 2023, and an
increase of $21.9 million from $42.8 million for the three months
ended December 31, 2022. The increase in
noninterest income over the quarter ended September 30, 2023
was primarily due to an increase of $30.4 million in total BaaS
income. The $30.4 million increase in total BaaS income
included a $32.5 million increase in BaaS credit enhancements
related to the allowance for credit losses, offset by a $2.1
million decrease in BaaS fraud enhancements, and a decrease of
$32,000 in BaaS program income. The decrease in BaaS program income
is largely the result of lower reimbursement for expenses (see
“Appendix B” for more information on the accounting for BaaS
allowance for credit losses and credit and fraud enhancements).
Additionally, other income decreased $231,000 primarily due to the
one-time cost of converting an existing BOLI policy to one that
will yield higher returns in the future, which reduced BOLI
earnings by $212,000 in the quarter ended December 31, 2023.
The $21.9 million increase in noninterest income over the quarter
ended December 31, 2022 was primarily due to a $21.2 million
increase in BaaS credit and fraud enhancements, an increase of
$762,000 in BaaS program income, a decrease of $238,000 in other
income due to the aforementioned $212,000 one-time cost of
converting a BOLI policy to one that will yield higher returns in
the future, a $98,000 increase in unrealized gain on sale of equity
securities and other minor changes.
Our CCBX segment continues to evolve, and we now have 21
relationships, at varying stages, as of December 31,
2023. We continue to refine the criteria for CCBX
partnerships and are exiting relationships where it makes sense and
are focusing on larger more established partners, with experienced
management teams, existing customer bases and strong financial
positions. The sale of $125.1 million in CCBX loans during the
quarter ended December 31, 2023 and $320.9 million sold during
the quarter ended September 30, 2023 is part of our strategy to
strengthen the balance sheet, reduce credit exposure in certain
loan categories and lower the overall potential credit risk in our
loan portfolio. We expect net interest margin will tighten as
higher quality loans yield less than higher risk loans and we also
expect the size of our CCBX loan portfolio will be about the same
as the previous quarter while we work to grow the portfolio with
loans that are subject to increased underwriting standards. We
expect this process to take two quarters. At the same time we will
be focused on increasing our efficiency and using technology to
reduce future expense growth.
The following table illustrates the activity and evolution in
CCBX relationships for the periods presented.
| |
As of |
|
(unaudited) |
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
Active |
19 |
|
18 |
|
19 |
| Friends and family /
testing |
1 |
|
1 |
|
1 |
| Implementation /
onboarding |
1 |
|
1 |
|
0 |
| Signed letters of intent |
0 |
|
1 |
|
5 |
| Wind down - preparing to exit
relationship |
0 |
|
1 |
|
2 |
|
Total CCBX relationships |
21 |
|
22 |
|
27 |
The following table details noninterest expense for the periods
indicated:
Noninterest Expense
| |
|
Three Months Ended |
| |
|
December 31, |
|
September 30, |
|
December 31, |
|
(dollars in thousands; unaudited) |
|
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Salaries and employee benefits |
|
$ |
16,490 |
|
|
$ |
18,087 |
|
|
$ |
14,399 |
|
|
Legal and professional expenses |
|
|
2,649 |
|
|
|
4,447 |
|
|
|
2,799 |
|
|
Data processing and software licenses |
|
|
2,417 |
|
|
|
2,366 |
|
|
|
1,768 |
|
|
Occupancy |
|
|
1,340 |
|
|
|
1,224 |
|
|
|
1,182 |
|
|
Point of sale expense |
|
|
899 |
|
|
|
1,068 |
|
|
|
710 |
|
|
Director and staff expenses |
|
|
478 |
|
|
|
529 |
|
|
|
515 |
|
|
FDIC assessments |
|
|
665 |
|
|
|
694 |
|
|
|
550 |
|
|
Excise taxes |
|
|
449 |
|
|
|
541 |
|
|
|
702 |
|
|
Marketing |
|
|
138 |
|
|
|
169 |
|
|
|
109 |
|
|
Other |
|
|
1,089 |
|
|
|
1,523 |
|
|
|
335 |
|
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
|
26,614 |
|
|
|
30,648 |
|
|
|
23,069 |
|
|
BaaS loan expense |
|
|
24,310 |
|
|
|
23,003 |
|
|
|
17,215 |
|
|
BaaS fraud expense |
|
|
779 |
|
|
|
2,850 |
|
|
|
6,819 |
|
|
BaaS loan and fraud expense |
|
|
25,089 |
|
|
|
25,853 |
|
|
|
24,034 |
|
| Total noninterest expense |
|
$ |
51,703 |
|
|
$ |
56,501 |
|
|
$ |
47,103 |
|
Total noninterest expense decreased $4.8 million to $51.7 million
for the three months ended December 31, 2023, compared to
$56.5 million for the three months ended September 30, 2023,
and increased $4.6 million from $47.1 million for the three months
ended December 31, 2022. The decrease in noninterest expense
for the quarter ended December 31, 2023, as compared to the
quarter ended September 30, 2023, was primarily due to a
$764,000 decrease in BaaS expense (including a $2.1 million
decrease in BaaS fraud expense offset by a $1.3 million increase in
BaaS loan expense), a $1.8 million decrease in legal and
professional expenses and a $1.6 million decrease in salaries and
employee benefits. BaaS loan expense represents the amount paid or
payable to partners for credit enhancements, fraud enhancements,
and originating & servicing CCBX loans. BaaS fraud expense
represents non-credit fraud losses on partner’s customer loan and
deposit accounts. A portion of this expense is realized during the
quarter during which the loss occurs, and a portion is estimated
based on historical or other information from our partners.
Legal and professional fees were higher in recent periods due to
increased fees related to data and risk management, building out
our infrastructure and increased consulting expenses for projects
and enhanced monitoring. The $1.8 million decrease in this category
was a result of projects being completed and initiatives achieved.
Included in legal and professional fees are consulting fees related
to services for BSA and money laundering monitoring. Expenses
related to these contracted services were $1.7 million for the
quarter ended December 31, 2023, however we have entered into
a new agreement for these services and expect these costs to be
$1.4 million a quarter going forward, which will further reduce
expenses in this category. The $1.6 million decrease in salaries
and employee benefits was related to our expense reduction efforts
and lower bonus expense. Salaries and benefits included one time
expenses of $494,000 during the quarter ended September 30, 2023 as
part of our initiative to manage costs going forward which
increased expenses in that period.
The increase in noninterest expenses for the quarter ended
December 31, 2023 compared to the quarter ended
December 31, 2022 were largely due to an increase of $1.1
million in BaaS partner expense (including a $7.1 million increase
in BaaS loan expense offset by a decrease of $6.0 million in BaaS
fraud expense), $2.1 million increase in salary and employee
benefits related to hiring staff for CCBX and additional staff for
our ongoing growth initiatives. Additionally, there was a $754,000
increase in other expenses primarily due to the $1.1 million
recapture of the unfunded commitment reserve in the quarter ended
December 31, 2022, for which there was no similar activity in
the current quarter, and a $649,000 increase in data processing and
software licenses due to enhancements in technology and a $189,000
increase in point of sale expenses which is attributed to increased
CCBX activity.
Provision for Income Taxes
The provision for income taxes was $2.8 million for the three
months ended December 31, 2023, $2.8 million for the three
months ended September 30, 2023 and $2.4 million for the
fourth quarter of 2022. The provision for income tax was
higher, relative to net income, as a result of less deductible
items, lower net income, and slightly higher provision for CCBX
loans without credit enhancement for the three months ended
December 31, 2023 compared to September 30, 2023. The
Company is subject to various state taxes that are assessed as CCBX
activities and employees expand into other states, which has
increased the overall tax rate used in calculating the provision
for income taxes in the current and future periods. The Company
uses a federal statutory tax rate of 21.0% as a basis for
calculating provision for federal income taxes and 2.62% for
calculating the provision for state taxes.
Financial Condition Overview
Total assets increased $75.1 million, or 2.0%, to $3.75 billion
at December 31, 2023 compared to $3.68 billion at
September 30, 2023. The increase is primarily due
to a $59.1 million increase in loans receivable combined with a
$16.1 million increase in the credit enhancement asset, an $8.3
million increase in held to maturity investments as a result of
purchases, and a $6.8 million increase in interest earning deposits
with other banks. During the quarter ended December 31, 2023,
we sold $125.1 million in CCBX loans as part of our strategy to
optimize our CCBX portfolio, reduce credit exposure in certain loan
categories and strengthen the balance sheet through enhanced credit
standards, compared to $320.9 million sold during the quarter ended
September 30, 2023. There were no loans held for sale at
December 31, 2023 and September 30, 2023.
Total assets increased $608.9 million, or 19.4%, to $3.75
billion at December 31, 2023, compared to $3.14 billion at
December 31, 2022. The increase is primarily due to
loans receivable increasing $398.8 million, an increase of $54.5
million in the credit enhancement asset and an increase of $52.0
million in investment securities and a $142.4 million increase in
interest earning deposits with other banks compared to
December 31, 2022.
Loans Receivable
Total loans receivable increased $59.1 million to $3.03 billion
at December 31, 2023, from $2.97 billion at September 30,
2023, and increased $398.8 million from $2.63 billion at
December 31, 2022. The increase in loans receivable
over the quarter ended September 30, 2023 was the result of an
increase of $13.6 million in CCBX loans and a $45.5 million
increase in community bank loans. We continue to monitor and manage
the CCBX loan portfolio, and sold $125.1 million in CCBX loans
during the quarter ended December 31, 2023 as part of our plan
to optimize and strengthen the balance sheet and reduce and manage
credit risk. The change in loans receivable over the quarter ended
December 31, 2022 includes CCBX loan growth of $183.4 million
and community bank loan growth of $215.4 million as of
December 31, 2023.
The following table summarizes the loan portfolio at the period
indicated:
|
|
As of December 31, 2023 |
|
As of September 30, 2023 |
|
As of December 31, 2022 |
|
(dollars in thousands; unaudited) |
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
$ |
3,033 |
|
|
0.1 |
% |
|
$ |
3,310 |
|
|
0.1 |
% |
|
$ |
4,699 |
|
|
0.2 |
% |
|
Capital call lines |
|
87,494 |
|
|
2.9 |
|
|
|
114,174 |
|
|
3.8 |
|
|
|
146,029 |
|
|
5.5 |
|
|
All other commercial & industrial loans |
|
200,767 |
|
|
6.6 |
|
|
|
213,791 |
|
|
7.2 |
|
|
|
161,900 |
|
|
6.1 |
|
|
Total commercial and industrial loans: |
|
291,294 |
|
|
9.6 |
|
|
|
331,275 |
|
|
11.1 |
|
|
|
312,628 |
|
|
11.8 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development |
|
157,100 |
|
|
5.2 |
|
|
|
167,686 |
|
|
5.6 |
|
|
|
214,055 |
|
|
8.1 |
|
|
Residential real estate |
|
463,426 |
|
|
15.3 |
|
|
|
477,147 |
|
|
16.1 |
|
|
|
449,157 |
|
|
17.1 |
|
|
Commercial real estate |
|
1,303,533 |
|
|
43.0 |
|
|
|
1,237,849 |
|
|
41.6 |
|
|
|
1,048,752 |
|
|
39.8 |
|
| Consumer and other loans |
|
818,039 |
|
|
26.9 |
|
|
|
760,463 |
|
|
25.6 |
|
|
|
608,771 |
|
|
23.2 |
|
|
Gross loans receivable |
|
3,033,392 |
|
|
100.0 |
% |
|
|
2,974,420 |
|
|
100.0 |
% |
|
|
2,633,363 |
|
|
100.0 |
% |
| Net deferred origination fees
- PPP loans |
|
(47 |
) |
|
|
|
|
(52 |
) |
|
|
|
|
(82 |
) |
|
|
| Net deferred origination fees
- all other loans |
|
(7,253 |
) |
|
|
|
|
(7,333 |
) |
|
|
|
|
(6,025 |
) |
|
|
|
Loans receivable |
$ |
3,026,092 |
|
|
|
|
$ |
2,967,035 |
|
|
|
|
$ |
2,627,256 |
|
|
|
| Loan Yield (1) |
|
10.71 |
% |
|
|
|
|
10.84 |
% |
|
|
|
|
9.33 |
% |
|
|
(1) Loan yield is annualized for the three months
ended for each period presented and includes loans held for sale
and nonaccrual loans.
Please see Appendix A for additional loan portfolio detail
regarding industry concentrations.
The following tables detail the community bank and CCBX loans
which are included in the total loan portfolio table above.
|
Community Bank |
|
As of |
|
|
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
|
$ |
3,033 |
|
|
0.2 |
% |
|
$ |
3,310 |
|
|
0.2 |
% |
|
$ |
4,699 |
|
|
0.3 |
% |
|
All other commercial & industrial loans |
|
|
146,469 |
|
|
8.0 |
|
|
|
154,922 |
|
|
8.6 |
|
|
|
146,982 |
|
|
9.1 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development loans |
|
|
157,100 |
|
|
8.5 |
|
|
|
167,686 |
|
|
9.4 |
|
|
|
214,055 |
|
|
13.2 |
|
|
Residential real estate loans |
|
|
225,391 |
|
|
12.3 |
|
|
|
225,372 |
|
|
12.6 |
|
|
|
204,581 |
|
|
12.6 |
|
|
Commercial real estate loans |
|
|
1,303,533 |
|
|
70.9 |
|
|
|
1,237,849 |
|
|
69.1 |
|
|
|
1,048,752 |
|
|
64.7 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer and other loans |
|
|
1,628 |
|
|
0.1 |
|
|
|
2,483 |
|
|
0.1 |
|
|
|
1,725 |
|
|
0.1 |
|
|
Gross Community Bank loans receivable |
|
|
1,837,154 |
|
|
100.0 |
% |
|
|
1,791,622 |
|
|
100.0 |
% |
|
|
1,620,794 |
|
|
100.0 |
% |
| Net deferred origination
fees |
|
|
(7,000 |
) |
|
|
|
|
(6,961 |
) |
|
|
|
|
(6,042 |
) |
|
|
|
Loans receivable |
|
$ |
1,830,154 |
|
|
|
|
$ |
1,784,661 |
|
|
|
|
$ |
1,614,752 |
|
|
|
| Loan Yield(1) |
|
|
6.32 |
% |
|
|
|
|
6.20 |
% |
|
|
|
|
5.70 |
% |
|
|
(1) Loan yield is annualized for the three months
ended for each period presented and includes loans held for sale
and nonaccrual loans.
|
CCBX |
|
As of |
|
|
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital call lines |
|
$ |
87,494 |
|
|
7.3 |
% |
|
$ |
114,174 |
|
|
9.6 |
% |
|
$ |
146,029 |
|
|
14.4 |
% |
|
All other commercial & industrial loans |
|
|
54,298 |
|
|
4.5 |
|
|
|
58,869 |
|
|
5.0 |
|
|
|
14,918 |
|
|
1.5 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
238,035 |
|
|
19.9 |
|
|
|
251,775 |
|
|
21.3 |
|
|
|
244,576 |
|
|
24.2 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
505,837 |
|
|
42.3 |
|
|
|
440,993 |
|
|
37.3 |
|
|
|
279,644 |
|
|
27.6 |
|
|
Other consumer and other loans |
|
|
310,574 |
|
|
26.0 |
|
|
|
316,987 |
|
|
26.8 |
|
|
|
327,402 |
|
|
32.3 |
|
|
Gross CCBX loans receivable |
|
|
1,196,238 |
|
|
100.0 |
% |
|
|
1,182,798 |
|
|
100.0 |
% |
|
|
1,012,569 |
|
|
100.0 |
% |
| Net deferred origination
(fees) costs |
|
|
(300 |
) |
|
|
|
|
(424 |
) |
|
|
|
|
(65 |
) |
|
|
|
Loans receivable |
|
$ |
1,195,938 |
|
|
|
|
$ |
1,182,374 |
|
|
|
|
$ |
1,012,504 |
|
|
|
| Loan Yield - CCBX
(1)(2) |
|
|
17.36 |
% |
|
|
|
|
17.05 |
% |
|
|
|
|
15.20 |
% |
|
|
(1) CCBX yield does not include the impact of BaaS
loan expense. BaaS loan expense represents the amount
paid or payable to partners for credit enhancements and originating
& servicing CCBX loans. See reconciliation of the non-GAAP
measures at the end of this earnings release for the impact of BaaS
loan expense on CCBX loan yield.
(2) Loan yield is annualized for the three months ended
for each period presented and includes loans held for sale and
nonaccrual loans.
Deposits
Total deposits increased $70.7 million, or 2.1%, to $3.36 billion
at December 31, 2023 from $3.29 billion at September 30,
2023. The increase was due to a $72.9 million increase in core
deposits, partially offset by a $2.3 million decrease in time
deposits. Deposits in our CCBX segment increased $110.5 million,
from $1.75 billion at September 30, 2023, to $1.86 billion at
December 31, 2023 and community bank deposits decreased $39.9
million from $1.54 billion at September 30, 2023, to $1.50
billion at December 31, 2023. The decrease in community bank
deposits is a result of not increasing our deposit rates during the
quarter and letting higher interest rate deposits run-off. We are
comfortable with our pricing discipline and letting the higher rate
community bank deposits run-off because we have adequate funding
access through our CCBX deposits, and despite the generally higher
cost of deposits, these CCBX deposits are less costly than raising
our rates to meet competitors' rates, brokered funds or borrowing
rates. We intend to build our community bank deposits back up when
rates are lower and customers are less rate sensitive. The deposits
from our CCBX segment are predominately classified as interest
bearing, or NOW and money market accounts. During the quarter ended
December 31, 2023, noninterest bearing deposits decreased
$26.6 million, or 4.1%, to $625.2 million from $651.8 million at
September 30, 2023. Community bank noninterest bearing
deposits totaled $561.6 million or 37.5% of total community bank
deposits and CCBX noninterest bearing deposits totaled $63.6
million, or 3.4% of total CCBX deposits. In the quarter ended
December 31, 2023 compared to the quarter ended
September 30, 2023, NOW and money market accounts increased
$107.6 million, savings deposits decreased $8.1 million, and time
deposits decreased $2.3 million. Included in total deposits is
$340.1 million in IntraFi network reciprocal NOW and money market
accounts as of December 31, 2023, which provides our larger
deposit customers with fully insured deposits through a reciprocal
agreement with other banks. Uninsured deposits decreased to $558.6
million as of December 31, 2023, compared to $599.0 million as
of September 30, 2023.
Total deposits increased $542.8 million, or 19.3%, to $3.36
billion at December 31, 2023 compared to $2.82 billion at
December 31, 2022. The increase is largely the result of
growth in CCBX deposits. Noninterest bearing deposits decreased
$149.8 million, or 19.3%, to $625.2 million at December 31,
2023 from $775.0 million at December 31, 2022 as a result of
customer movement from noninterest to interest bearing accounts.
NOW and money market accounts increased $835.8 million, or 46.3%,
to $2.64 billion at December 31, 2023, and savings deposits
decreased $30.6 million, or 28.5%, and time deposits
decreased $11.1 million, or 37.7%, in the fourth quarter of
2023 compared to the fourth quarter of 2022 and includes
BaaS-brokered deposits that are now classified as NOW accounts
included in core deposits due to a change in the relationship
agreement with one of our partners and these deposits increased to
$254.7 million as of December 31, 2023, compared to $101.5
million as of December 31, 2022. Deposits in our CCBX segment
increased $583.5 million, from $1.28 billion at December 31,
2022, to $1.86 billion at December 31, 2023 and community bank
deposits decreased $40.6 million, from $1.54 billion at
December 31, 2022, to $1.50 billion at December 31, 2023.
The deposits from our CCBX segment are predominately classified as
interest bearing, or NOW and money market accounts. Uninsured
deposits decreased to $558.6 million as of December 31, 2023,
compared to $835.8 million as of December 31, 2022.
Additionally, as of December 31, 2023, $69.4 million in
CCBX customer deposits were transferred off the Bank’s balance
sheet to other financial institutions on a daily basis for
additional FDIC insurance coverage. Efforts to retain and grow core
deposits are evidenced by the high ratios in these categories when
compared to total deposits.
The following table summarizes the deposit portfolio for the
periods indicated.
| |
As of December 31, 2023 |
|
As of September 30, 2023 |
|
As of December 31, 2022 |
|
(dollars in thousands; unaudited) |
Amount |
|
Percent of
Total
Deposits |
|
Balance |
|
Percent of
Total
Deposits |
|
Balance |
|
Percent of
Total
Deposits |
|
Demand, noninterest bearing |
$ |
625,202 |
|
|
18.6 |
% |
|
$ |
651,786 |
|
|
19.8 |
% |
|
$ |
775,012 |
|
|
27.5 |
% |
| NOW and money market |
|
2,640,240 |
|
|
78.6 |
|
|
|
2,532,668 |
|
|
77.0 |
|
|
|
1,804,399 |
|
|
64.0 |
|
| Savings |
|
76,562 |
|
|
2.3 |
|
|
|
84,628 |
|
|
2.6 |
|
|
|
107,117 |
|
|
3.8 |
|
|
Total core deposits |
|
3,342,004 |
|
|
99.5 |
|
|
|
3,269,082 |
|
|
99.4 |
|
|
|
2,686,528 |
|
|
95.3 |
|
| Brokered deposits |
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
|
|
101,546 |
|
|
3.6 |
|
| Time deposits less than
$100,000 |
|
8,109 |
|
|
0.2 |
|
|
|
8,635 |
|
|
0.2 |
|
|
|
12,596 |
|
|
0.5 |
|
| Time deposits $100,000 and
over |
|
10,249 |
|
|
0.3 |
|
|
|
11,982 |
|
|
0.4 |
|
|
|
16,851 |
|
|
0.6 |
|
|
Total |
$ |
3,360,363 |
|
|
100.0 |
% |
|
$ |
3,289,700 |
|
|
100.0 |
% |
|
$ |
2,817,521 |
|
|
100.0 |
% |
| Cost of deposits
(1) |
|
3.36 |
% |
|
|
|
|
3.14 |
% |
|
|
|
|
1.56 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
The following tables detail the community bank and CCBX deposits
which are included in the total deposit portfolio table above.
|
Community Bank |
|
As of |
|
|
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
561,572 |
|
|
37.5 |
% |
|
$ |
584,004 |
|
|
38.0 |
% |
|
$ |
694,179 |
|
|
45.2 |
% |
| NOW and money market |
|
|
846,072 |
|
|
56.5 |
|
|
|
852,747 |
|
|
55.5 |
|
|
|
709,490 |
|
|
46.1 |
|
| Savings |
|
|
71,598 |
|
|
4.8 |
|
|
|
80,099 |
|
|
5.2 |
|
|
|
105,101 |
|
|
6.8 |
|
|
Total core deposits |
|
|
1,479,242 |
|
|
98.8 |
|
|
|
1,516,850 |
|
|
98.7 |
|
|
|
1,508,770 |
|
|
98.1 |
|
| Brokered deposits |
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
| Time deposits less than
$100,000 |
|
|
8,109 |
|
|
0.5 |
|
|
|
8,635 |
|
|
0.5 |
|
|
|
12,596 |
|
|
0.8 |
|
| Time deposits $100,000 and
over |
|
|
10,249 |
|
|
0.7 |
|
|
|
11,982 |
|
|
0.8 |
|
|
|
16,851 |
|
|
1.1 |
|
|
Total Community Bank deposits |
|
$ |
1,497,601 |
|
|
100.0 |
% |
|
$ |
1,537,468 |
|
|
100.0 |
% |
|
$ |
1,538,218 |
|
|
100.0 |
% |
| Cost of
deposits(1) |
|
|
1.57 |
% |
|
|
|
|
1.31 |
% |
|
|
|
|
0.37 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
|
CCBX |
|
As of |
|
|
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
63,630 |
|
|
3.4 |
% |
|
$ |
67,782 |
|
|
3.9 |
% |
|
$ |
80,833 |
|
|
6.3 |
% |
| NOW and money market |
|
|
1,794,168 |
|
|
96.3 |
|
|
|
1,679,921 |
|
|
95.9 |
|
|
|
1,094,909 |
|
|
85.6 |
|
| Savings |
|
|
4,964 |
|
|
0.3 |
|
|
|
4,529 |
|
|
0.2 |
|
|
|
2,016 |
|
|
0.2 |
|
|
Total core deposits |
|
|
1,862,762 |
|
|
100.0 |
|
|
|
1,752,232 |
|
|
100.0 |
|
|
|
1,177,758 |
|
|
92.1 |
|
| BaaS-brokered deposits |
|
|
— |
|
|
0.0 |
|
|
|
— |
|
|
0.0 |
|
|
|
101,545 |
|
|
7.9 |
|
|
Total CCBX deposits |
|
$ |
1,862,762 |
|
|
100.0 |
% |
|
$ |
1,752,232 |
|
|
100.0 |
% |
|
$ |
1,279,303 |
|
|
100.0 |
% |
| Cost of deposits
(1) |
|
|
4.90 |
% |
|
|
|
|
4.80 |
% |
|
|
|
|
3.13 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
Borrowings
As of December 31, 2023, the Company had the capacity to
borrow up to a total of $640.1 million from the Federal Reserve
Bank discount window and Federal Home Loan Bank, with no borrowings
outstanding on these lines as of December 31, 2023.
Shareholders’ Equity
During the twelve months ended December 31, 2023, the
Company contributed $15.0 million in capital to the
Bank. The Company had a cash balance of $5.5 million as
of December 31, 2023, which is retained for general operating
purposes, including debt repayment, and for funding $653,000 in
commitments to bank technology funds.
Total shareholders’ equity increased $10.5 million since
September 30, 2023. The increase in shareholders’
equity was primarily due to $9.0 million in net earnings, an
$874,000 increase from the amortization of equity awards, combined
with a decrease in the unrealized loss on available-for-sale
securities of $624,000 during the three months ended
December 31, 2023.
Capital Ratios
The Company and the Bank remained well capitalized at
December 31, 2023, as summarized in the following table.
|
(unaudited) |
|
Coastal Community Bank |
|
Coastal Financial Corporation |
|
Minimum Well Capitalized Ratios under Prompt Corrective
Action (1) |
|
Tier 1 Leverage Capital (to average assets) |
|
9.06 |
% |
|
8.10 |
% |
|
5.00 |
% |
| Common Equity Tier 1 Capital
(to risk-weighted assets) |
|
10.30 |
% |
|
9.10 |
% |
|
6.50 |
% |
| Tier 1 Capital (to
risk-weighted assets) |
|
10.30 |
% |
|
9.20 |
% |
|
8.00 |
% |
| Total Capital (to
risk-weighted assets) |
|
11.58 |
% |
|
11.87 |
% |
|
10.00 |
% |
(1) Presents the minimum capital ratios for an
insured depository institution, such as the Bank, to be considered
well capitalized under the Prompt Corrective Action framework. The
minimum requirements for the Company to be considered well
capitalized under Regulation Y include to maintain, on a
consolidated basis, a total risk-based capital ratio of 10.0
percent or greater and a tier 1 risk-based capital ratio of 6.0
percent or greater.
Asset Quality
Effective January 1, 2023 the Company implemented the CECL
allowance model which calculates reserves over the life of the loan
and is largely driven by portfolio characteristics, economic
outlook, and other key methodology assumptions versus the incurred
loss model, which is what we were previously using. As a result of
implementing CECL, there was a one-time adjustment to the 2023
opening allowance balance of $3.9 million. The day 1 CECL
adjustment for community bank loans included a reduction of
$310,000 to the community bank allowance driven by the reversal of
the unallocated balance and a reduction of $340,000 related to the
community bank unfunded commitment reserve also driven by the
reversal of the unallocated balance. This was offset by an increase
to the CCBX allowance for $4.2 million. With the mirror image
approach accounting related to the contingent receivable for CCBX
partner loans, there was a CECL day 1 increase to the
indemnification asset in the amount of $4.5 million. Net, the day 1
impact to retained earnings for the Bank’s transition to CECL was
an increase of $954,000, excluding the impact of income taxes.
The total allowance for credit losses was $117.0 million and
3.86% of loans receivable at December 31, 2023 compared to
$101.1 million and 3.41% at September 30, 2023 and $74.0
million and 2.82% at December 31, 2022. The allowance for
credit loss allocated to the CCBX portfolio was $95.4 million and
7.97% of CCBX loans receivable at December 31, 2023, with
$21.6 million of allowance for credit loss allocated to the
community bank or 1.18% of total community bank loans
receivable.
The following table details the allocation of the allowance for
credit loss as of the period indicated:
| |
|
As of December 31, 2023 |
|
As of September 30, 2023 |
|
As of December 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Loans receivable |
|
$ |
1,830,154 |
|
|
$ |
1,195,938 |
|
|
$ |
3,026,092 |
|
|
$ |
1,784,661 |
|
|
$ |
1,182,374 |
|
|
$ |
2,967,035 |
|
|
$ |
1,614,752 |
|
|
$ |
1,012,504 |
|
|
$ |
2,627,256 |
|
| Allowance for credit
losses |
|
|
(21,595 |
) |
|
|
(95,363 |
) |
|
|
(116,958 |
) |
|
|
(21,316 |
) |
|
|
(79,769 |
) |
|
|
(101,085 |
) |
|
|
(20,636 |
) |
|
|
(53,393 |
) |
|
|
(74,029 |
) |
| Allowance for credit
losses to total loans receivable |
|
|
1.18 |
% |
|
|
7.97 |
% |
|
|
3.86 |
% |
|
|
1.19 |
% |
|
|
6.75 |
% |
|
|
3.41 |
% |
|
|
1.28 |
% |
|
|
5.27 |
% |
|
|
2.82 |
% |
Provision for credit losses - loans totaled $60.7 million for the
three months ended December 31, 2023, $27.2 million for the
three months ended September 30, 2023, and $33.6 million for
the three months ended December 31, 2022. Net charge-offs
totaled $44.9 million for the quarter ended December 31, 2023,
compared to $36.8 million for the quarter ended September 30,
2023 and $18.9 million for the quarter ended December 31,
2022. Net charge-offs increased due to CCBX loans. CCBX partner
agreements provide for a credit enhancement that covers the
net-charge-offs on CCBX loans and negative deposit accounts, except
in accordance with the program agreement for one partner where the
Company is responsible for credit losses on approximately 10% of a
$288.1 million loan portfolio. At December 31, 2023, our
portion of this portfolio represented $29.1 million in loans. The
provision on this $29.1 million in loans was $2.1 million for the
three months ended December 31, 2023 compared to $664,000 for
the three months ended September 30, 2023 and $783,000 for the
three months ended December 31, 2022. This $29.1 million
portfolio of partner loans with full loss responsibility remains
profitable but the provision has increased both from growth in the
portfolio and a higher loss rate. In response, and working with the
partner, we have increased our underwriting standards.
Net charge-offs for this $29.1 million in loans were $1.5
million for the three months ended December 31, 2023, compared
to $579,000 for the three months ended September 30, 2023 and
$216,000 for the three months ended December 31, 2022.
The following table details net charge-offs for the community
bank and CCBX for the period indicated:
| |
|
Three Months Ended |
| |
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Gross charge-offs |
|
$ |
2 |
|
|
$ |
47,650 |
|
|
$ |
47,652 |
|
|
$ |
3 |
|
|
$ |
37,876 |
|
|
$ |
37,879 |
|
|
$ |
10 |
|
|
$ |
18,876 |
|
|
$ |
18,886 |
|
| Gross recoveries |
|
|
(4 |
) |
|
|
(2,777 |
) |
|
|
(2,781 |
) |
|
|
(3 |
) |
|
|
(1,042 |
) |
|
|
(1,045 |
) |
|
|
(3 |
) |
|
|
(30 |
) |
|
|
(33 |
) |
|
Net charge-offs |
|
$ |
(2 |
) |
|
$ |
44,873 |
|
|
$ |
44,871 |
|
|
$ |
— |
|
|
$ |
36,834 |
|
|
$ |
36,834 |
|
|
$ |
7 |
|
|
$ |
18,846 |
|
|
$ |
18,853 |
|
| Net charge-offs
to average loans (1) |
|
|
0.00 |
% |
|
|
14.88 |
% |
|
|
5.92 |
% |
|
|
0.00 |
% |
|
|
11.16 |
% |
|
|
4.77 |
% |
|
|
0.00 |
% |
|
|
7.52 |
% |
|
|
2.87 |
% |
(1) Annualized calculations shown for
periods presented.
The increase in the Company’s provision for credit losses -
loans during the quarter ended December 31, 2023, is a result
of an increase in loans receivable. During the quarter ended
December 31, 2023, a $60.5 million provision for credit losses
- loans was recorded for CCBX partner loans based on management’s
analysis, compared to the $26.5 million provision for credit losses
- loans that was recorded for CCBX for the quarter ended
September 30, 2023, as a result of an increase in CCBX loans
receivable. CCBX loans have a higher level of expected losses than
our community bank loans, which is reflected in the factors for the
allowance for credit losses. Agreements with our CCBX partners
provide for a credit enhancement which protects the Bank by
indemnifying or reimbursing incurred losses.
In accordance with accounting guidance, we estimate and record a
provision for expected losses for these CCBX loans and reclassified
negative deposit accounts. When the provision for CCBX credit
losses and provision for unfunded commitments is recorded, a credit
enhancement asset is also recorded on the balance sheet through
noninterest income (BaaS credit enhancements). Expected losses are
recorded in the allowance for credit losses. The credit enhancement
asset is relieved when credit enhancement recoveries are received
from the CCBX partner. CCBX partners provide for credit
enhancements that provide protection to the Bank from credit and
fraud losses by indemnifying or reimbursing incurred credit and
fraud losses. If our partner is unable to fulfill their contracted
obligations then the Bank could be exposed to additional credit
losses. Management regularly evaluates and manages this
counterparty risk. The Company is responsible for credit losses on
approximately 10% of a $288.1 million CCBX loan portfolio. At
December 31, 2023, 10% of this portfolio represented $29.1
million in loans.
The factors used in management’s analysis for community bank
credit losses indicated that a provision of $277,000 and was needed
for the quarter ended December 31, 2023 and a provision of
$664,000 and $504,000 was needed for the quarters ended
September 30, 2023 and December 31, 2022,
respectively.
The following table details the provision expense for the
community bank and CCBX for the period indicated:
| |
|
Three Months Ended |
|
Twelve Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
December 31, 2023 |
|
December 31, 2022 |
|
Community bank |
|
$ |
277 |
|
|
$ |
664 |
|
|
$ |
504 |
|
|
$ |
1,322 |
|
|
$ |
719 |
|
| CCBX |
|
|
60,467 |
|
|
|
26,493 |
|
|
|
33,096 |
|
|
|
182,721 |
|
|
|
78,345 |
|
|
Total provision expense |
|
$ |
60,744 |
|
|
$ |
27,157 |
|
|
$ |
33,600 |
|
|
$ |
184,043 |
|
|
$ |
79,064 |
|
At December 31, 2023, our nonperforming assets were $53.8
million, or 1.43% of total assets, compared to $43.5 million, or
1.18%, of total assets, at September 30, 2023, and $33.2
million, or 1.06% of total assets, at December 31, 2022. These
ratios are impacted by CCBX loans over 90 days delinquent that are
covered by CCBX partner credit enhancements. As of
December 31, 2023, $44.3 million of the $46.5 million in
nonperforming CCBX loans were covered by CCBX partner credit
enhancements. Agreements with our CCBX partners provide for a
credit enhancement which protects the Bank by indemnifying or
reimbursing incurred losses. Under the agreement, CCBX partners
will indemnify or reimburse the Bank for its loss/charge-off on
these loans. Nonperforming assets increased $10.3 million during
the quarter ended December 31, 2023, compared to the quarter
ended September 30, 2023, due to a $10.3 million increase in
CCBX loans that are past due 90 days or more and still accruing
combined with a $8,000 decrease in community bank nonaccrual loans.
As a result of the type of loans (primarily consumer loans)
originated through our CCBX partners we anticipate that balances 90
days past due or more and still accruing will increase as those
loan portfolios grow. Installment/closed-end and revolving/open-end
consumer loans originated through CCBX lending partners will
continue to accrue interest until 120 and 180 days past due,
respectively and are reported as substandard, 90 days or more days
past due and still accruing. Community bank nonaccrual loans
decreased due to principal reductions. There were no repossessed
assets or other real estate owned at December 31, 2023. Our
nonperforming loans to loans receivable ratio was 1.78% at
December 31, 2023, compared to 1.47% at September 30,
2023, and 1.26% at December 31, 2022.
For the quarter ended December 31, 2023, there were $2,000
community bank net recoveries and $7.3 million nonperforming
community bank loans, including a multifamily loan for $6.9 million
which we believe is currently well secured. For the quarter ended
December 31, 2023 $44.9 million in net charge-offs were
recorded on CCBX loans. These CCBX loans have a higher level of
expected losses than our community bank loans, which is reflected
in the factors for the allowance for credit losses. The Company is
responsible for credit losses on approximately 10% of a $288.1
million loan portfolio. At December 31, 2023, our portion of
this portfolio represented $29.1 million in loans.
The following table details the Company’s nonperforming assets
for the periods indicated.
|
(dollars in thousands; unaudited) |
As of December 31, 2023 |
|
As of September 30, 2023 |
|
As of December 31, 2022 |
|
Nonaccrual loans: |
|
|
|
|
|
|
Commercial and industrial loans |
$ |
— |
|
|
$ |
2 |
|
|
$ |
113 |
|
| Real estate loans: |
|
|
|
|
|
|
Construction, land and land development |
|
— |
|
|
|
— |
|
|
|
66 |
|
|
Residential real estate |
|
170 |
|
|
|
176 |
|
|
|
— |
|
|
Commercial real estate |
|
7,145 |
|
|
|
7,145 |
|
|
|
6,901 |
|
|
Total nonaccrual loans |
|
7,315 |
|
|
|
7,323 |
|
|
|
7,080 |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
| Commercial & industrial
loans |
|
2,086 |
|
|
|
1,387 |
|
|
|
404 |
|
| Real estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
1,115 |
|
|
|
1,462 |
|
|
|
876 |
|
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
34,835 |
|
|
|
24,807 |
|
|
|
10,570 |
|
|
Other consumer and other loans |
|
8,488 |
|
|
|
8,561 |
|
|
|
14,245 |
|
|
Total accruing loans past due 90 days or more |
|
46,524 |
|
|
|
36,217 |
|
|
|
26,095 |
|
|
Total nonperforming loans |
|
53,839 |
|
|
|
43,540 |
|
|
|
33,175 |
|
|
Real estate owned |
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
| Modified loans for
borrowers experiencing financial difficulty |
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
$ |
53,839 |
|
|
$ |
43,540 |
|
|
$ |
33,175 |
|
| Total nonaccrual loans to
loans receivable |
|
0.24 |
% |
|
|
0.25 |
% |
|
|
0.27 |
% |
| Total nonperforming loans to
loans receivable |
|
1.78 |
% |
|
|
1.47 |
% |
|
|
1.26 |
% |
| Total nonperforming assets to
total assets |
|
1.43 |
% |
|
|
1.18 |
% |
|
|
1.06 |
% |
The following tables detail the community bank and CCBX
nonperforming assets which are included in the total nonperforming
assets table above.
|
Community Bank |
As of |
|
(dollars in thousands; unaudited) |
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
Nonaccrual loans: |
|
|
|
|
|
|
Commercial and industrial loans |
$ |
— |
|
|
$ |
2 |
|
|
$ |
113 |
|
| Real estate: |
|
|
|
|
|
|
Construction, land and land development |
|
— |
|
|
|
— |
|
|
|
66 |
|
|
Residential real estate |
|
170 |
|
|
|
176 |
|
|
|
— |
|
|
Commercial real estate |
|
7,145 |
|
|
|
7,145 |
|
|
|
6,901 |
|
|
Total nonaccrual loans |
|
7,315 |
|
|
|
7,323 |
|
|
|
7,080 |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
Total accruing loans past due 90 days or more |
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total nonperforming loans |
|
7,315 |
|
|
|
7,323 |
|
|
|
7,080 |
|
| Other real estate
owned |
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
$ |
7,315 |
|
|
$ |
7,323 |
|
|
$ |
7,080 |
|
|
CCBX |
As of |
|
(dollars in thousands; unaudited) |
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
Nonaccrual loans |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
| Commercial & industrial
loans |
|
2,086 |
|
|
|
1,387 |
|
|
|
404 |
|
| Real estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
1,115 |
|
|
|
1,462 |
|
|
|
876 |
|
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
34,835 |
|
|
|
24,807 |
|
|
|
10,570 |
|
|
Other consumer and other loans |
|
8,488 |
|
|
|
8,561 |
|
|
|
14,245 |
|
|
Total accruing loans past due 90 days or more |
|
46,524 |
|
|
|
36,217 |
|
|
|
26,095 |
|
|
Total nonperforming loans |
|
46,524 |
|
|
|
36,217 |
|
|
|
26,095 |
|
| Other real estate
owned |
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
$ |
46,524 |
|
|
$ |
36,217 |
|
|
$ |
26,095 |
|
About Coastal Financial
Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), is
an Everett, Washington based bank holding company whose wholly
owned subsidiaries are Coastal Community Bank (“Bank”) and
Arlington Olympic LLC. The $3.75 billion Bank provides
service through 14 branches in Snohomish, Island, and King
Counties, the Internet and its mobile banking
application. The Bank provides banking as a service to
broker-dealers, digital financial service providers, companies and
brands that want to provide financial services to their customers
through the Bank's CCBX segment. To learn more about the
Company visit www.coastalbank.com.
CCB-ER
Contact
Eric Sprink, 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 within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect our current views
with respect to, among other things, future events and our
financial performance. Any statements about our management’s
expectations, beliefs, plans, predictions, forecasts, objectives,
assumptions or future events or performance are not historical
facts and may be forward-looking. These statements are often, but
not always, made through the use of words or phrases such as
“anticipate,” “believes,” “can,” “could,” “may,” “predicts,”
“potential,” “should,” “will,” “estimate,” “plans,” “projects,”
“continuing,” “ongoing,” “expects,” “intends” and similar words or
phrases. Any or all of the forward-looking statements in this
earnings release may turn out to be inaccurate. The inclusion of or
reference to 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 as a result of risks, uncertainties and assumptions that
are difficult to predict. Factors that could cause actual results
to differ materially from those in the forward-looking statements
include, without limitation, the risks and uncertainties discussed
under “Risk Factors” in our Annual Report on Form 10-K for the most
recent period filed, our Quarterly Report on Form 10-Q for the most
recent quarter, and in any of our subsequent filings with the
Securities and Exchange Commission.
If one or more events related to these or other risks or
uncertainties materialize, or if our underlying assumptions prove
to be incorrect, actual results may differ materially from what we
anticipate. You are cautioned not to place undue reliance on
forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made, and we undertake no
obligation to update or revise any forward-looking statement to
reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated
events, except as required by law.
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
|
ASSETS |
| |
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
Cash and due from banks |
$ |
31,345 |
|
|
$ |
29,984 |
|
|
$ |
32,722 |
|
| Interest earning deposits with
other banks |
|
451,783 |
|
|
|
444,962 |
|
|
|
309,417 |
|
| Investment securities,
available for sale, at fair value |
|
99,504 |
|
|
|
98,939 |
|
|
|
97,317 |
|
| Investment securities, held to
maturity, at amortized cost |
|
50,860 |
|
|
|
42,550 |
|
|
|
1,036 |
|
| Other investments |
|
10,227 |
|
|
|
11,898 |
|
|
|
10,555 |
|
| Loans receivable |
|
3,026,092 |
|
|
|
2,967,035 |
|
|
|
2,627,256 |
|
| Allowance for credit
losses |
|
(116,958 |
) |
|
|
(101,085 |
) |
|
|
(74,029 |
) |
|
Total loans receivable, net |
|
2,909,134 |
|
|
|
2,865,950 |
|
|
|
2,553,227 |
|
| CCBX credit enhancement
asset |
|
107,921 |
|
|
|
91,867 |
|
|
|
53,377 |
|
| CCBX receivable |
|
9,088 |
|
|
|
10,623 |
|
|
|
10,416 |
|
| Premises and equipment,
net |
|
22,090 |
|
|
|
20,543 |
|
|
|
18,213 |
|
| Operating lease right-of-use
assets |
|
5,932 |
|
|
|
6,126 |
|
|
|
5,018 |
|
| Accrued interest
receivable |
|
26,819 |
|
|
|
23,428 |
|
|
|
17,815 |
|
| Bank-owned life insurance,
net |
|
12,870 |
|
|
|
12,970 |
|
|
|
12,667 |
|
| Deferred tax asset, net |
|
3,806 |
|
|
|
4,404 |
|
|
|
18,458 |
|
| Other assets |
|
11,987 |
|
|
|
14,021 |
|
|
|
4,229 |
|
|
Total assets |
$ |
3,753,366 |
|
|
$ |
3,678,265 |
|
|
$ |
3,144,467 |
|
| |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| LIABILITIES |
|
|
|
|
|
|
Deposits |
$ |
3,360,363 |
|
|
$ |
3,289,700 |
|
|
$ |
2,817,521 |
|
|
Subordinated debt, net |
|
44,144 |
|
|
|
44,106 |
|
|
|
43,999 |
|
|
Junior subordinated debentures, net |
|
3,590 |
|
|
|
3,589 |
|
|
|
3,588 |
|
|
Deferred compensation |
|
479 |
|
|
|
513 |
|
|
|
616 |
|
|
Accrued interest payable |
|
892 |
|
|
|
1,056 |
|
|
|
684 |
|
|
Operating lease liabilities |
|
6,124 |
|
|
|
6,321 |
|
|
|
5,234 |
|
|
CCBX payable |
|
33,651 |
|
|
|
38,229 |
|
|
|
20,419 |
|
|
Other liabilities |
|
9,145 |
|
|
|
10,301 |
|
|
|
8,912 |
|
|
Total liabilities |
|
3,458,388 |
|
|
|
3,393,815 |
|
|
|
2,900,973 |
|
| |
|
|
|
|
|
| SHAREHOLDERS’ EQUITY |
|
|
|
|
|
| Common stock |
|
130,137 |
|
|
|
129,244 |
|
|
|
125,830 |
|
|
Retained earnings |
|
165,310 |
|
|
|
156,299 |
|
|
|
119,998 |
|
|
Accumulated other comprehensive loss, net of tax |
|
(469 |
) |
|
|
(1,093 |
) |
|
|
(2,334 |
) |
|
Total shareholders’ equity |
|
294,978 |
|
|
|
284,450 |
|
|
|
243,494 |
|
|
Total liabilities and shareholders’ equity |
$ |
3,753,366 |
|
|
$ |
3,678,265 |
|
|
$ |
3,144,467 |
|
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| |
Three Months Ended |
| |
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
| INTEREST AND DIVIDEND
INCOME |
|
|
|
|
|
|
Interest and fees on loans |
$ |
81,159 |
|
|
$ |
83,652 |
|
|
$ |
61,226 |
|
|
Interest on interest earning deposits with other banks |
|
5,687 |
|
|
|
3,884 |
|
|
|
3,097 |
|
|
Interest on investment securities |
|
1,225 |
|
|
|
766 |
|
|
|
557 |
|
|
Dividends on other investments |
|
172 |
|
|
|
29 |
|
|
|
150 |
|
|
Total interest income |
|
88,243 |
|
|
|
88,331 |
|
|
|
65,030 |
|
| INTEREST EXPENSE |
|
|
|
|
|
|
Interest on deposits |
|
27,916 |
|
|
|
25,451 |
|
|
|
11,061 |
|
|
Interest on borrowed funds |
|
670 |
|
|
|
651 |
|
|
|
537 |
|
|
Total interest expense |
|
28,586 |
|
|
|
26,102 |
|
|
|
11,598 |
|
|
Net interest income |
|
59,657 |
|
|
|
62,229 |
|
|
|
53,432 |
|
| PROVISION FOR CREDIT LOSSES -
LOANS |
|
60,744 |
|
|
|
27,157 |
|
|
|
33,600 |
|
| PROVISION (RECAPTURE) FOR
UNFUNDED COMMITMENTS |
|
45 |
|
|
|
96 |
|
|
|
— |
|
|
Net interest income after provision for credit losses -
loans and unfunded commitments |
|
(1,132 |
) |
|
|
34,976 |
|
|
|
19,832 |
|
| NONINTEREST INCOME |
|
|
|
|
|
|
Deposit service charges and fees |
|
957 |
|
|
|
998 |
|
|
|
946 |
|
|
Loan referral fees |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
Gain on sales of loans, net |
|
— |
|
|
|
107 |
|
|
|
— |
|
|
Unrealized (loss) gain on equity securities, net |
|
80 |
|
|
|
5 |
|
|
|
(18 |
) |
|
Other income |
|
60 |
|
|
|
291 |
|
|
|
298 |
|
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,097 |
|
|
|
1,402 |
|
|
|
1,226 |
|
|
Servicing and other BaaS fees |
|
1,015 |
|
|
|
997 |
|
|
|
1,001 |
|
|
Transaction fees |
|
1,006 |
|
|
|
1,036 |
|
|
|
964 |
|
|
Interchange fees |
|
1,272 |
|
|
|
1,216 |
|
|
|
785 |
|
|
Reimbursement of expenses |
|
1,076 |
|
|
|
1,152 |
|
|
|
857 |
|
|
BaaS program income |
|
4,369 |
|
|
|
4,401 |
|
|
|
3,607 |
|
|
BaaS credit enhancements |
|
58,449 |
|
|
|
25,926 |
|
|
|
31,164 |
|
|
BaaS fraud enhancements |
|
779 |
|
|
|
2,850 |
|
|
|
6,818 |
|
|
BaaS indemnification income |
|
59,228 |
|
|
|
28,776 |
|
|
|
37,982 |
|
|
Total noninterest income |
|
64,694 |
|
|
|
34,579 |
|
|
|
42,815 |
|
| NONINTEREST EXPENSE |
|
|
|
|
|
|
Salaries and employee benefits |
|
16,490 |
|
|
|
18,087 |
|
|
|
14,399 |
|
|
Occupancy |
|
1,340 |
|
|
|
1,224 |
|
|
|
1,182 |
|
|
Data processing and software licenses |
|
2,417 |
|
|
|
2,366 |
|
|
|
1,768 |
|
|
Legal and professional expenses |
|
2,649 |
|
|
|
4,447 |
|
|
|
2,799 |
|
|
Point of sale expense |
|
899 |
|
|
|
1,068 |
|
|
|
710 |
|
|
Excise taxes |
|
449 |
|
|
|
541 |
|
|
|
702 |
|
|
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
665 |
|
|
|
694 |
|
|
|
550 |
|
|
Director and staff expenses |
|
478 |
|
|
|
529 |
|
|
|
515 |
|
|
Marketing |
|
138 |
|
|
|
169 |
|
|
|
109 |
|
|
Other expense |
|
1,089 |
|
|
|
1,523 |
|
|
|
335 |
|
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
26,614 |
|
|
|
30,648 |
|
|
|
23,069 |
|
|
BaaS loan expense |
|
24,310 |
|
|
|
23,003 |
|
|
|
17,215 |
|
|
BaaS fraud expense |
|
779 |
|
|
|
2,850 |
|
|
|
6,819 |
|
|
BaaS loan and fraud expense |
|
25,089 |
|
|
|
25,853 |
|
|
|
24,034 |
|
|
Total noninterest expense |
|
51,703 |
|
|
|
56,501 |
|
|
|
47,103 |
|
|
Income before provision for income taxes |
|
11,859 |
|
|
|
13,054 |
|
|
|
15,544 |
|
| PROVISION FOR INCOME
TAXES |
|
2,847 |
|
|
|
2,784 |
|
|
|
2,426 |
|
| NET INCOME |
$ |
9,012 |
|
|
$ |
10,270 |
|
|
$ |
13,118 |
|
| Basic earnings per common
share |
$ |
0.68 |
|
|
$ |
0.77 |
|
|
$ |
1.01 |
|
| Diluted earnings per common
share |
$ |
0.66 |
|
|
$ |
0.75 |
|
|
$ |
0.96 |
|
| Weighted average number of
common shares outstanding: |
|
|
|
|
|
|
Basic |
|
13,286,828 |
|
|
|
13,285,974 |
|
|
|
13,030,726 |
|
|
Diluted |
|
13,676,513 |
|
|
|
13,675,833 |
|
|
|
13,603,978 |
|
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| |
Twelve Months Ended |
| |
December 31,
2023 |
|
December 31,
2022 |
| INTEREST AND DIVIDEND
INCOME |
|
|
|
|
Interest and fees on loans |
$ |
311,441 |
|
|
$ |
183,352 |
|
|
Interest on interest earning deposits with other banks |
|
15,346 |
|
|
|
6,728 |
|
|
Interest on investment securities |
|
3,197 |
|
|
|
1,745 |
|
|
Dividends on other investments |
|
387 |
|
|
|
345 |
|
|
Total interest income |
|
330,371 |
|
|
|
192,170 |
|
| INTEREST EXPENSE |
|
|
|
|
Interest on deposits |
|
89,000 |
|
|
|
19,004 |
|
|
Interest on borrowed funds |
|
2,644 |
|
|
|
1,391 |
|
|
Total interest expense |
|
91,644 |
|
|
|
20,395 |
|
|
Net interest income |
|
238,727 |
|
|
|
171,775 |
|
| PROVISION FOR CREDIT LOSSES -
LOANS |
|
184,043 |
|
|
|
79,064 |
|
| PROVISION (RECAPTURE) FOR
UNFUNDED COMMITMENTS |
|
(51 |
) |
|
|
— |
|
|
Net interest income after provision for credit losses -
loans and unfunded commitments |
|
54,735 |
|
|
|
92,711 |
|
| NONINTEREST INCOME |
|
|
|
|
Deposit service charges and fees |
|
3,854 |
|
|
|
3,804 |
|
|
Loan referral fees |
|
683 |
|
|
|
810 |
|
|
Gain on sales of loans, net |
|
253 |
|
|
|
— |
|
|
Unrealized (loss) gain on equity securities, net |
|
279 |
|
|
|
(153 |
) |
|
Other income |
|
884 |
|
|
|
1,344 |
|
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
5,953 |
|
|
|
5,805 |
|
|
Servicing and other BaaS fees |
|
3,855 |
|
|
|
4,408 |
|
|
Transaction fees |
|
4,011 |
|
|
|
3,211 |
|
|
Interchange fees |
|
4,252 |
|
|
|
2,583 |
|
|
Reimbursement of expenses |
|
4,175 |
|
|
|
2,732 |
|
|
BaaS program income |
|
16,293 |
|
|
|
12,934 |
|
|
BaaS credit enhancements |
|
177,764 |
|
|
|
76,374 |
|
|
BaaS fraud enhancements |
|
7,165 |
|
|
|
29,571 |
|
|
BaaS indemnification income |
|
184,929 |
|
|
|
105,945 |
|
|
Total noninterest income |
|
207,175 |
|
|
|
124,684 |
|
| NONINTEREST EXPENSE |
|
|
|
|
Salaries and employee benefits |
|
66,461 |
|
|
|
52,228 |
|
|
Occupancy |
|
4,926 |
|
|
|
4,548 |
|
|
Data processing and software licenses |
|
8,595 |
|
|
|
6,487 |
|
|
Legal and professional expenses |
|
14,803 |
|
|
|
6,760 |
|
|
Point of sale expense |
|
3,534 |
|
|
|
2,109 |
|
|
Excise taxes |
|
1,976 |
|
|
|
2,204 |
|
|
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
2,524 |
|
|
|
2,859 |
|
|
Director and staff expenses |
|
2,152 |
|
|
|
1,711 |
|
|
Marketing |
|
517 |
|
|
|
351 |
|
|
Other expense |
|
5,224 |
|
|
|
4,652 |
|
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
110,712 |
|
|
|
83,909 |
|
|
BaaS loan expense |
|
86,900 |
|
|
|
53,294 |
|
|
BaaS fraud expense |
|
7,165 |
|
|
|
29,571 |
|
|
BaaS loan and fraud expense |
|
94,065 |
|
|
|
82,865 |
|
|
Total noninterest expense |
|
204,777 |
|
|
|
166,774 |
|
|
Income before provision for income taxes |
|
57,133 |
|
|
|
50,621 |
|
| PROVISION FOR INCOME
TAXES |
|
12,554 |
|
|
|
9,996 |
|
| NET INCOME |
$ |
44,579 |
|
|
$ |
40,625 |
|
| Basic earnings per common
share |
$ |
3.36 |
|
|
$ |
3.14 |
|
| Diluted earnings per common
share |
$ |
3.27 |
|
|
$ |
3.01 |
|
| Weighted average number of
common shares outstanding: |
|
|
|
|
Basic |
|
13,261,664 |
|
|
|
12,949,266 |
|
|
Diluted |
|
13,640,182 |
|
|
|
13,514,952 |
|
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
| |
For the Three Months Ended |
| |
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
$ |
413,127 |
|
|
$ |
5,687 |
|
5.46 |
% |
|
$ |
285,596 |
|
|
$ |
3,884 |
|
5.40 |
% |
|
$ |
329,354 |
|
|
$ |
3,097 |
|
3.73 |
% |
|
Investment securities, available for sale (2) |
|
100,204 |
|
|
|
546 |
|
2.16 |
|
|
|
100,283 |
|
|
|
543 |
|
2.15 |
|
|
|
100,269 |
|
|
|
550 |
|
2.18 |
|
|
Investment securities, held to maturity (2) |
|
49,469 |
|
|
|
679 |
|
5.45 |
|
|
|
17,703 |
|
|
|
223 |
|
5.00 |
|
|
|
1,235 |
|
|
|
7 |
|
2.25 |
|
|
Other investments |
|
11,683 |
|
|
|
172 |
|
5.84 |
|
|
|
11,943 |
|
|
|
29 |
|
0.96 |
|
|
|
10,592 |
|
|
|
150 |
|
5.62 |
|
|
Loans receivable (3) |
|
3,007,289 |
|
|
|
81,159 |
|
10.71 |
|
|
|
3,062,214 |
|
|
|
83,652 |
|
10.84 |
|
|
|
2,603,962 |
|
|
|
61,226 |
|
9.33 |
|
| Total interest earning
assets |
|
3,581,772 |
|
|
|
88,243 |
|
9.77 |
|
|
|
3,477,739 |
|
|
|
88,331 |
|
10.08 |
|
|
|
3,045,412 |
|
|
|
65,030 |
|
8.47 |
|
| Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
(95,391 |
) |
|
|
|
|
|
|
(100,329 |
) |
|
|
|
|
|
|
(58,440 |
) |
|
|
|
|
|
Other noninterest earning assets |
|
204,052 |
|
|
|
|
|
|
|
220,750 |
|
|
|
|
|
|
|
141,624 |
|
|
|
|
|
|
Total assets |
$ |
3,690,433 |
|
|
|
|
|
|
$ |
3,598,160 |
|
|
|
|
|
|
$ |
3,128,596 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
2,660,235 |
|
|
$ |
27,916 |
|
4.16 |
% |
|
$ |
2,515,093 |
|
|
$ |
25,451 |
|
4.01 |
% |
|
$ |
2,006,679 |
|
|
$ |
11,061 |
|
2.19 |
% |
| FHLB advances and
borrowings |
|
1 |
|
|
|
— |
|
— |
|
|
|
— |
|
|
|
— |
|
— |
|
|
|
5 |
|
|
|
— |
|
— |
|
| Subordinated debt |
|
44,121 |
|
|
|
598 |
|
5.38 |
|
|
|
44,084 |
|
|
|
580 |
|
5.22 |
|
|
|
37,455 |
|
|
|
484 |
|
5.13 |
|
| Junior subordinated
debentures |
|
3,590 |
|
|
|
72 |
|
7.96 |
|
|
|
3,589 |
|
|
|
71 |
|
7.85 |
|
|
|
3,588 |
|
|
|
53 |
|
5.86 |
|
| Total interest bearing
liabilities |
|
2,707,947 |
|
|
|
28,586 |
|
4.19 |
|
|
|
2,562,766 |
|
|
|
26,102 |
|
4.04 |
|
|
|
2,047,727 |
|
|
|
11,598 |
|
2.25 |
|
| Noninterest bearing
deposits |
|
640,424 |
|
|
|
|
|
|
|
698,532 |
|
|
|
|
|
|
|
807,794 |
|
|
|
|
|
| Other liabilities |
|
52,450 |
|
|
|
|
|
|
|
57,865 |
|
|
|
|
|
|
|
34,944 |
|
|
|
|
|
| Total shareholders'
equity |
|
289,612 |
|
|
|
|
|
|
|
278,997 |
|
|
|
|
|
|
|
238,131 |
|
|
|
|
|
| Total liabilities and
shareholders' equity |
$ |
3,690,433 |
|
|
|
|
|
|
$ |
3,598,160 |
|
|
|
|
|
|
$ |
3,128,596 |
|
|
|
|
|
| Net interest income |
|
|
$ |
59,657 |
|
|
|
|
|
$ |
62,229 |
|
|
|
|
|
$ |
53,432 |
|
|
| Interest rate spread |
|
|
|
|
5.59 |
% |
|
|
|
|
|
6.04 |
% |
|
|
|
|
|
6.22 |
% |
| Net interest margin
(4) |
|
|
|
|
6.61 |
% |
|
|
|
|
|
7.10 |
% |
|
|
|
|
|
6.96 |
% |
(1) Yields and costs are annualized.
(2) For presentation in this table, average balances and
the corresponding average rates for investment securities are based
upon historical cost, adjusted for amortization of premiums and
accretion of discounts.
(3) Includes loans held for sale and nonaccrual
loans.
(4) Net interest margin represents net interest income
divided by the average total interest earning assets.
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT -
QUARTERLY
(Dollars in thousands; unaudited)
| |
For the Three Months Ended |
| |
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
(dollars in thousands, unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2) |
$ |
1,811,152 |
|
$ |
28,832 |
|
6.32 |
% |
|
$ |
1,752,834 |
|
$ |
27,373 |
|
6.20 |
% |
|
$ |
1,609,882 |
|
$ |
23,140 |
|
5.70 |
% |
|
Total interest earning assets |
|
1,811,152 |
|
|
28,832 |
|
6.32 |
|
|
|
1,752,834 |
|
|
27,373 |
|
6.20 |
|
|
|
1,609,882 |
|
|
23,140 |
|
5.70 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
951,148 |
|
|
6,090 |
|
2.54 |
% |
|
|
920,707 |
|
|
5,067 |
|
2.18 |
% |
|
|
864,001 |
|
|
1,502 |
|
0.69 |
% |
|
Intrabank liability |
|
275,995 |
|
|
3,799 |
|
5.46 |
|
|
|
223,221 |
|
|
3,036 |
|
5.40 |
|
|
|
8,069 |
|
|
76 |
|
3.74 |
|
| Total interest
bearing liabilities |
|
1,227,143 |
|
|
9,889 |
|
3.20 |
|
|
|
1,143,928 |
|
|
8,103 |
|
2.81 |
|
|
|
872,070 |
|
|
1,578 |
|
0.72 |
|
| Noninterest
bearing deposits |
|
584,009 |
|
|
|
|
|
|
608,906 |
|
|
|
|
|
|
737,812 |
|
|
|
|
| Net interest income |
|
|
$ |
18,943 |
|
|
|
|
|
$ |
19,270 |
|
|
|
|
|
$ |
21,562 |
|
|
| Net interest
margin(3) |
|
|
|
|
4.15 |
% |
|
|
|
|
|
4.36 |
% |
|
|
|
|
|
5.31 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2)(4) |
$ |
1,196,137 |
|
$ |
52,327 |
|
17.36 |
% |
|
$ |
1,309,380 |
|
$ |
56,279 |
|
17.05 |
% |
|
$ |
994,080 |
|
$ |
38,086 |
|
15.20 |
% |
|
Intrabank asset |
|
569,365 |
|
|
7,837 |
|
5.46 |
|
|
|
374,632 |
|
|
5,095 |
|
5.40 |
|
|
|
218,581 |
|
|
2,055 |
|
3.73 |
|
|
Total interest earning assets |
|
1,765,502 |
|
|
60,164 |
|
13.52 |
|
|
|
1,684,012 |
|
|
61,374 |
|
14.46 |
|
|
|
1,212,661 |
|
|
40,141 |
|
13.13 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
1,709,087 |
|
|
21,826 |
|
5.07 |
% |
|
|
1,594,386 |
|
|
20,384 |
|
5.07 |
% |
|
|
1,142,678 |
|
|
9,559 |
|
3.32 |
% |
| Total interest bearing
liabilities |
|
1,709,087 |
|
|
21,826 |
|
5.07 |
|
|
|
1,594,386 |
|
|
20,384 |
|
5.07 |
|
|
|
1,142,678 |
|
|
9,559 |
|
3.32 |
|
| Noninterest
bearing deposits |
|
56,415 |
|
|
|
|
|
|
89,626 |
|
|
|
|
|
|
69,982 |
|
|
|
|
| Net interest income |
|
|
$ |
38,338 |
|
|
|
|
|
$ |
40,990 |
|
|
|
|
|
$ |
30,582 |
|
|
| Net interest
margin(3) |
|
|
|
|
8.62 |
% |
|
|
|
|
|
9.66 |
% |
|
|
|
|
|
10.01 |
% |
| Net interest margin,
net of Baas loan expense (5) |
|
|
|
|
3.15 |
% |
|
|
|
|
|
4.24 |
% |
|
|
|
|
|
4.37 |
% |
| |
For the Three Months Ended |
| |
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
(dollars in thousands, unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
| Treasury
& Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
$ |
413,127 |
|
$ |
5,687 |
|
5.46 |
% |
|
$ |
285,596 |
|
$ |
3,884 |
|
5.40 |
% |
|
$ |
329,354 |
|
$ |
3,097 |
|
3.73 |
% |
|
Investment securities, available for sale (6) |
|
100,204 |
|
|
546 |
|
2.16 |
|
|
|
100,283 |
|
|
543 |
|
2.15 |
|
|
|
100,269 |
|
|
550 |
|
2.18 |
|
|
Investment securities, held to maturity (6) |
|
49,469 |
|
|
679 |
|
5.45 |
|
|
|
17,703 |
|
|
223 |
|
5.00 |
|
|
|
1,235 |
|
|
7 |
|
2.25 |
|
|
Other investments |
|
11,683 |
|
|
172 |
|
5.84 |
|
|
|
11,943 |
|
|
29 |
|
0.96 |
|
|
|
10,592 |
|
|
150 |
|
5.62 |
|
| Total interest earning
assets |
|
574,483 |
|
|
7,084 |
|
4.89 |
% |
|
|
415,525 |
|
|
4,679 |
|
4.47 |
% |
|
|
441,450 |
|
|
3,804 |
|
3.42 |
% |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances and borrowings |
$ |
3 |
|
$ |
— |
|
— |
% |
|
|
— |
|
|
— |
|
— |
% |
|
|
5 |
|
|
— |
|
— |
% |
|
Subordinated debt |
|
44,121 |
|
|
598 |
|
5.38 |
% |
|
|
44,084 |
|
|
580 |
|
5.22 |
% |
|
|
37,455 |
|
|
484 |
|
5.13 |
% |
|
Junior subordinated debentures |
|
3,590 |
|
|
72 |
|
7.96 |
|
|
|
3,589 |
|
|
71 |
|
7.85 |
|
|
|
3,588 |
|
|
53 |
|
5.86 |
|
|
Intrabank liability, net (7) |
|
293,370 |
|
|
4,038 |
|
5.46 |
|
|
|
151,411 |
|
|
2,059 |
|
5.40 |
|
|
|
210,511 |
|
|
1,979 |
|
3.73 |
|
| Total interest bearing
liabilities |
|
341,084 |
|
|
4,708 |
|
5.48 |
|
|
|
199,084 |
|
|
2,710 |
|
5.40 |
|
|
|
251,559 |
|
|
2,516 |
|
3.97 |
|
| Net interest income |
|
|
$ |
2,376 |
|
|
|
|
|
$ |
1,969 |
|
|
|
|
|
$ |
1,288 |
|
|
| Net interest
margin(3) |
|
|
|
|
1.64 |
% |
|
|
|
|
|
1.88 |
% |
|
|
|
|
|
1.16 |
% |
(1) Yields and costs are annualized.
(2) Includes loans held for sale and nonaccrual
loans.
(3) Net interest margin represents net interest income
divided by the average total interest earning assets.
(4) CCBX yield does not include the impact of BaaS
loan expense. BaaS loan expense represents the amount paid or
payable to partners for credit enhancements, fraud enhancements and
originating & servicing CCBX loans. See reconciliation of the
non-GAAP measures at the end of this earnings release for the
impact of BaaS loan expense on CCBX loan yield.
(5) Net interest margin, net of BaaS loan expense
includes the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit
enhancements, fraud enhancements, originating & servicing CCBX
loans. See reconciliation of the non-GAAP measures at the end of
this earnings release.
(6) For presentation in this table, average
balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
(7) Intrabank assets and liabilities are
consolidated for period calculations and presented as intrabank
asset, net or intrabank liability, net in the table above.
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE
(Dollars in thousands; unaudited)
| |
For the Twelve Months Ended |
| |
December 31, 2023 |
|
December 31, 2022 |
|
(dollars in thousands; unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
$ |
295,808 |
|
|
$ |
15,346 |
|
5.19 |
% |
|
$ |
515,967 |
|
|
$ |
6,728 |
|
1.30 |
% |
|
Investment securities, available for sale (2) |
|
100,260 |
|
|
|
2,158 |
|
2.15 |
|
|
|
91,970 |
|
|
|
1,710 |
|
1.86 |
|
|
Investment securities, held to maturity (2) |
|
19,918 |
|
|
|
1,039 |
|
5.22 |
|
|
|
1,266 |
|
|
|
35 |
|
2.76 |
|
|
Other investments |
|
11,512 |
|
|
|
387 |
|
3.36 |
|
|
|
10,146 |
|
|
|
345 |
|
3.40 |
|
|
Loans receivable (3) |
|
2,936,908 |
|
|
|
311,441 |
|
10.60 |
|
|
|
2,257,787 |
|
|
|
183,352 |
|
8.12 |
|
| Total interest earning
assets |
|
3,364,406 |
|
|
|
330,371 |
|
9.82 |
|
|
|
2,877,136 |
|
|
|
192,170 |
|
6.68 |
|
| Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
(91,194 |
) |
|
|
|
|
|
|
(46,769 |
) |
|
|
|
|
|
Other noninterest earning assets |
|
198,071 |
|
|
|
|
|
|
|
119,817 |
|
|
|
|
|
|
Total assets |
$ |
3,471,283 |
|
|
|
|
|
|
$ |
2,950,184 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
2,395,012 |
|
|
$ |
89,000 |
|
3.72 |
% |
|
$ |
1,724,020 |
|
|
$ |
19,004 |
|
1.10 |
% |
| FHLB advances and
borrowings |
|
— |
|
|
|
— |
|
— |
|
|
|
6,029 |
|
|
|
69 |
|
1.14 |
|
| Subordinated debt |
|
44,066 |
|
|
|
2,373 |
|
5.39 |
|
|
|
27,626 |
|
|
|
1,179 |
|
4.27 |
|
| Junior subordinated
debentures |
|
3,589 |
|
|
|
271 |
|
7.55 |
|
|
|
3,587 |
|
|
|
143 |
|
3.99 |
|
| Total interest bearing
liabilities |
|
2,442,667 |
|
|
|
91,644 |
|
3.75 |
|
|
|
1,761,262 |
|
|
|
20,395 |
|
1.16 |
|
| Noninterest bearing
deposits |
|
707,641 |
|
|
|
|
|
|
|
942,087 |
|
|
|
|
|
| Other liabilities |
|
49,271 |
|
|
|
|
|
|
|
24,097 |
|
|
|
|
|
| Total shareholders'
equity |
|
271,704 |
|
|
|
|
|
|
|
222,738 |
|
|
|
|
|
| Total liabilities and
shareholders' equity |
$ |
3,471,283 |
|
|
|
|
|
|
$ |
2,950,184 |
|
|
|
|
|
| Net interest income |
|
|
$ |
238,727 |
|
|
|
|
|
$ |
171,775 |
|
|
| Interest rate spread |
|
|
|
|
6.07 |
% |
|
|
|
|
|
5.52 |
% |
| Net interest margin
(4) |
|
|
|
|
7.10 |
% |
|
|
|
|
|
5.97 |
% |
(1) Yields and costs are annualized.
(2) For presentation in this table, average balances and
the corresponding average rates for investment securities are based
upon historical cost, adjusted for amortization of premiums and
accretion of discounts.
(3) Includes loans held for sale and nonaccrual
loans.
(4) Net interest margin represents net interest income
divided by the average total interest earning assets.
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT –
YEAR-TO-DATE
(Dollars in thousands; unaudited)
| |
|
For the Twelve Months Ended |
| |
|
December 31, 2023 |
|
December 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2) |
|
$ |
1,726,495 |
|
$ |
106,983 |
|
6.20 |
% |
|
$ |
1,515,395 |
|
$ |
80,544 |
|
5.32 |
% |
|
Intrabank asset |
|
|
— |
|
|
— |
|
— |
|
|
|
123,156 |
|
|
796 |
|
0.65 |
|
| Total interest earning
assets |
|
|
1,726,495 |
|
|
106,983 |
|
6.20 |
|
|
|
1,638,551 |
|
|
81,340 |
|
4.96 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
900,516 |
|
|
17,354 |
|
1.93 |
% |
|
|
905,447 |
|
|
2,896 |
|
0.32 |
% |
|
Intrabank liability |
|
|
198,176 |
|
|
10,404 |
|
5.25 |
|
|
|
— |
|
|
— |
|
— |
|
| Total interest bearing
liabilities |
|
|
1,098,692 |
|
|
27,758 |
|
2.53 |
|
|
|
905,447 |
|
|
2,896 |
|
0.32 |
|
| Noninterest bearing
deposits |
|
|
627,803 |
|
|
|
|
|
|
733,104 |
|
|
|
|
| Net interest income |
|
|
|
$ |
79,225 |
|
|
|
|
|
$ |
78,444 |
|
|
| Net interest
margin(3) |
|
|
|
|
|
4.59 |
% |
|
|
|
|
|
4.79 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2)(4) |
|
$ |
1,210,413 |
|
$ |
204,458 |
|
16.89 |
% |
|
$ |
742,392 |
|
$ |
102,808 |
|
13.85 |
% |
|
Intrabank asset |
|
|
363,921 |
|
|
19,071 |
|
5.24 |
|
|
|
285,164 |
|
|
4,106 |
|
1.44 |
|
| Total interest earning
assets |
|
|
1,574,334 |
|
|
223,529 |
|
14.20 |
|
|
|
1,027,556 |
|
|
106,914 |
|
10.40 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
1,494,496 |
|
|
71,646 |
|
4.79 |
% |
|
|
818,573 |
|
|
16,108 |
|
1.97 |
% |
| Total interest bearing
liabilities |
|
|
1,494,496 |
|
|
71,646 |
|
4.79 |
|
|
|
818,573 |
|
|
16,108 |
|
1.97 |
|
| Noninterest bearing
deposits |
|
|
79,838 |
|
|
|
|
|
|
208,983 |
|
|
|
|
| Net interest income |
|
|
|
$ |
151,883 |
|
|
|
|
|
$ |
90,806 |
|
|
| Net interest
margin(3) |
|
|
|
|
|
9.65 |
% |
|
|
|
|
|
8.84 |
% |
| Net interest margin, net
of Baas loan expense (5) |
|
|
|
|
|
4.13 |
% |
|
|
|
|
|
3.65 |
% |
| |
|
For the Twelve Months Ended |
| |
|
December 31, 2023 |
|
December 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Treasury & Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
|
$ |
295,808 |
|
$ |
15,346 |
|
5.19 |
% |
|
$ |
515,967 |
|
$ |
6,728 |
|
1.30 |
% |
|
Investment securities, available for sale (6) |
|
|
100,260 |
|
|
2,158 |
|
2.15 |
|
|
|
91,970 |
|
|
1,710 |
|
1.86 |
|
|
Investment securities, held to maturity (6) |
|
|
19,918 |
|
|
1,039 |
|
5.22 |
|
|
|
1,266 |
|
|
35 |
|
2.76 |
|
|
Other investments |
|
|
11,512 |
|
|
387 |
|
3.36 |
|
|
|
10,146 |
|
|
345 |
|
3.40 |
|
| Total interest earning
assets |
|
|
427,498 |
|
|
18,930 |
|
4.43 |
|
|
|
619,349 |
|
|
8,818 |
|
1.42 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances and borrowings |
|
|
— |
|
|
— |
|
— |
% |
|
|
6,029 |
|
|
69 |
|
1.14 |
% |
|
Subordinated debt |
|
|
44,066 |
|
|
2,373 |
|
5.39 |
|
|
|
27,626 |
|
|
1,179 |
|
4.27 |
|
|
Junior subordinated debentures |
|
|
3,589 |
|
|
271 |
|
7.55 |
|
|
|
3,587 |
|
|
143 |
|
3.99 |
|
|
Intrabank liability, net (7) |
|
|
165,745 |
|
|
8,667 |
|
5.23 |
|
|
|
408,320 |
|
|
4,902 |
|
1.20 |
|
| Total interest bearing
liabilities |
|
|
213,400 |
|
|
11,311 |
|
5.30 |
|
|
|
445,562 |
|
|
6,293 |
|
1.41 |
|
| Net interest income |
|
|
|
$ |
7,619 |
|
|
|
|
|
$ |
2,525 |
|
|
| Net interest
margin(3) |
|
|
|
|
|
1.78 |
% |
|
|
|
|
|
0.41 |
% |
(1) Yields and costs are annualized.
(2) Includes loans held for sale and nonaccrual
loans.
(3) Net interest margin represents net interest income
divided by the average total interest earning assets.
(4) CCBX yield does not include the impact of BaaS loan
expense. BaaS loan expense represents the amount paid or payable to
partners for credit enhancements, fraud enhancements and
originating & servicing CCBX loans. See reconciliation of the
non-GAAP measures at the end of this earnings release for the
impact of BaaS loan expense on CCBX loan yield.
(5) Net interest margin, net of BaaS loan expense
includes the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit
enhancements, fraud enhancements, originating & servicing CCBX
loans. See reconciliation of the non-GAAP measures at the end of
this earnings release.
(6) For presentation in this table, average balances and
the corresponding average rates for investment securities are based
upon historical cost, adjusted for amortization of premiums and
accretion of discounts.
(7) Intrabank assets and liabilities are consolidated
for period calculations and presented as intrabank asset, net or
intrabank liability, net in the table above.
COASTAL FINANCIAL CORPORATION
QUARTERLY STATISTICS
(Dollars in thousands, except share and per share data;
unaudited)
| |
Three Months Ended |
| |
December 31,
2023 |
|
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
| Income Statement
Data: |
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
$ |
88,243 |
|
|
$ |
88,331 |
|
|
$ |
83,686 |
|
|
$ |
70,111 |
|
|
$ |
65,030 |
|
| Interest expense |
|
28,586 |
|
|
|
26,102 |
|
|
|
21,336 |
|
|
|
15,620 |
|
|
|
11,598 |
|
| Net interest income |
|
59,657 |
|
|
|
62,229 |
|
|
|
62,350 |
|
|
|
54,491 |
|
|
|
53,432 |
|
| Provision for credit losses -
loans |
|
60,744 |
|
|
|
27,157 |
|
|
|
52,598 |
|
|
|
43,544 |
|
|
|
33,600 |
|
| Provision (recovery) for
unfunded commitments |
|
45 |
|
|
|
96 |
|
|
|
(345 |
) |
|
|
153 |
|
|
|
— |
|
| Net interest income
after provision for credit losses - loans and unfunded
commitments |
|
(1,132 |
) |
|
|
34,976 |
|
|
|
10,097 |
|
|
|
10,794 |
|
|
|
19,832 |
|
| Noninterest income |
|
64,694 |
|
|
|
34,579 |
|
|
|
58,595 |
|
|
|
49,307 |
|
|
|
42,815 |
|
| Noninterest expense |
|
51,703 |
|
|
|
56,501 |
|
|
|
51,910 |
|
|
|
44,663 |
|
|
|
47,103 |
|
| Provision for income tax |
|
2,847 |
|
|
|
2,784 |
|
|
|
3,876 |
|
|
|
3,047 |
|
|
|
2,426 |
|
| Net income |
|
9,012 |
|
|
|
10,270 |
|
|
|
12,906 |
|
|
|
12,391 |
|
|
|
13,118 |
|
| |
|
|
|
|
|
|
|
|
|
| |
As of and for the Three Month Period |
| |
December 31,
2023 |
|
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
| Balance Sheet
Data: |
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
$ |
483,128 |
|
|
$ |
474,946 |
|
|
$ |
275,060 |
|
|
$ |
393,916 |
|
|
$ |
342,139 |
|
| Investment securities |
|
150,364 |
|
|
|
141,489 |
|
|
|
110,730 |
|
|
|
101,704 |
|
|
|
98,353 |
|
| Loans held for sale |
|
— |
|
|
|
— |
|
|
|
35,923 |
|
|
|
27,292 |
|
|
|
— |
|
| Loans receivable |
|
3,026,092 |
|
|
|
2,967,035 |
|
|
|
3,007,553 |
|
|
|
2,837,204 |
|
|
|
2,627,256 |
|
| Allowance for credit
losses |
|
(116,958 |
) |
|
|
(101,085 |
) |
|
|
(110,762 |
) |
|
|
(89,123 |
) |
|
|
(74,029 |
) |
| Total assets |
|
3,753,366 |
|
|
|
3,678,265 |
|
|
|
3,535,283 |
|
|
|
3,451,033 |
|
|
|
3,144,467 |
|
| Interest bearing deposits |
|
2,735,161 |
|
|
|
2,637,914 |
|
|
|
2,436,980 |
|
|
|
2,333,423 |
|
|
|
2,042,509 |
|
| Noninterest bearing
deposits |
|
625,202 |
|
|
|
651,786 |
|
|
|
725,592 |
|
|
|
761,800 |
|
|
|
775,012 |
|
| Core deposits
(1) |
|
3,342,004 |
|
|
|
3,269,082 |
|
|
|
3,137,747 |
|
|
|
3,068,162 |
|
|
|
2,686,528 |
|
| Total deposits |
|
3,360,363 |
|
|
|
3,289,700 |
|
|
|
3,162,572 |
|
|
|
3,095,223 |
|
|
|
2,817,521 |
|
| Total borrowings |
|
47,734 |
|
|
|
47,695 |
|
|
|
47,658 |
|
|
|
47,619 |
|
|
|
47,587 |
|
| Total shareholders’
equity |
|
294,978 |
|
|
|
284,450 |
|
|
|
272,662 |
|
|
|
258,763 |
|
|
|
243,494 |
|
| |
|
|
|
|
|
|
|
|
|
| Share and Per Share
Data
(2): |
|
|
|
|
|
|
|
|
|
| Earnings per share –
basic |
$ |
0.68 |
|
|
$ |
0.77 |
|
|
$ |
0.97 |
|
|
$ |
0.94 |
|
|
$ |
1.01 |
|
| Earnings per share –
diluted |
$ |
0.66 |
|
|
$ |
0.75 |
|
|
$ |
0.95 |
|
|
$ |
0.91 |
|
|
$ |
0.96 |
|
| Dividends per share |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Book value per share
(3) |
$ |
22.17 |
|
|
$ |
21.38 |
|
|
$ |
20.50 |
|
|
$ |
19.48 |
|
|
$ |
18.50 |
|
| Tangible book value per share
(4) |
$ |
22.17 |
|
|
$ |
21.38 |
|
|
$ |
20.50 |
|
|
$ |
19.48 |
|
|
$ |
18.50 |
|
| Weighted avg outstanding
shares – basic |
|
13,286,828 |
|
|
|
13,285,974 |
|
|
|
13,275,640 |
|
|
|
13,196,960 |
|
|
|
13,030,726 |
|
| Weighted avg outstanding
shares – diluted |
|
13,676,513 |
|
|
|
13,675,833 |
|
|
|
13,597,763 |
|
|
|
13,609,491 |
|
|
|
13,603,978 |
|
| Shares outstanding at end of
period |
|
13,304,339 |
|
|
|
13,302,449 |
|
|
|
13,300,809 |
|
|
|
13,281,533 |
|
|
|
13,161,147 |
|
| Stock options outstanding at
end of period |
|
354,969 |
|
|
|
356,359 |
|
|
|
357,999 |
|
|
|
360,119 |
|
|
|
438,103 |
|
See footnotes on following page
| |
As of and for the Three Month Period |
| |
December 31,
2023 |
|
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
| Credit Quality
Data: |
|
|
|
|
|
|
|
|
|
|
Nonperforming assets (5) to total assets |
|
1.43 |
% |
|
|
1.18 |
% |
|
|
0.95 |
% |
|
|
0.91 |
% |
|
|
1.06 |
% |
| Nonperforming assets
(5) to loans receivable and OREO |
|
1.78 |
% |
|
|
1.47 |
% |
|
|
1.12 |
% |
|
|
1.11 |
% |
|
|
1.26 |
% |
| Nonperforming loans
(5) to total loans receivable |
|
1.78 |
% |
|
|
1.47 |
% |
|
|
1.12 |
% |
|
|
1.11 |
% |
|
|
1.26 |
% |
| Allowance for credit losses to
nonperforming loans |
|
217.2 |
% |
|
|
232.2 |
% |
|
|
328.4 |
% |
|
|
282.5 |
% |
|
|
224.4 |
% |
| Allowance for credit losses to
total loans receivable |
|
3.86 |
% |
|
|
3.41 |
% |
|
|
3.68 |
% |
|
|
3.14 |
% |
|
|
2.82 |
% |
| Gross charge-offs |
$ |
47,652 |
|
|
$ |
37,879 |
|
|
$ |
32,299 |
|
|
$ |
34,167 |
|
|
$ |
18,886 |
|
| Gross recoveries |
$ |
2,781 |
|
|
$ |
1,045 |
|
|
$ |
1,340 |
|
|
$ |
1,865 |
|
|
$ |
33 |
|
| Net charge-offs to average
loans (6) |
|
5.92 |
% |
|
|
4.77 |
% |
|
|
4.19 |
% |
|
|
4.84 |
% |
|
|
2.87 |
% |
| |
|
|
|
|
|
|
|
|
|
| Capital
Ratios
(7): |
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital |
|
8.10 |
% |
|
|
8.03 |
% |
|
|
8.16 |
% |
|
|
8.29 |
% |
|
|
7.97 |
% |
| Common equity Tier 1
risk-based capital |
|
9.10 |
% |
|
|
9.00 |
% |
|
|
8.36 |
% |
|
|
8.61 |
% |
|
|
8.92 |
% |
| Tier 1 risk-based capital |
|
9.20 |
% |
|
|
9.11 |
% |
|
|
8.47 |
% |
|
|
8.73 |
% |
|
|
9.04 |
% |
| Total risk-based capital |
|
11.87 |
% |
|
|
11.80 |
% |
|
|
11.12 |
% |
|
|
11.49 |
% |
|
|
11.94 |
% |
(1) Core deposits are defined as all deposits
excluding brokered and all time deposits.
(2) Share and per share amounts are based on total
actual or average common shares outstanding, as applicable.
(3) 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 at the end of each
period.
(4) 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 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.
(5) Nonperforming assets and nonperforming loans include
loans 90+ days past due and accruing interest.
(6) Annualized calculations.
(7) Capital ratios are for the Company, Coastal
Financial Corporation.
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to provide
meaningful supplemental information regarding the Company’s
operational performance and to enhance investors’ overall
understanding of such financial performance.
However, these non-GAAP financial measures are supplemental and
are not a substitute for an analysis based on GAAP measures. As
other companies may use different calculations for these adjusted
measures, this presentation may not be comparable to other
similarly titled adjusted measures reported by other companies.
The following non-GAAP measures are presented to illustrate the
impact of BaaS loan expense on net loan income and yield on CCBX
loans and the impact of BaaS loan expense on net interest income
and net interest margin.
Net BaaS loan income divided by average CCBX loans is a non-GAAP
measure that includes the impact BaaS loan expense on net BaaS loan
income and the yield on CCBX loans. The most directly comparable
GAAP measure is yield on CCBX loans.
Net interest income net of BaaS loan expense is a non-GAAP
measure that includes the impact BaaS loan expense on net interest
income. The most directly comparable GAAP measure is net interest
income.
Net interest margin, net of BaaS loan expense is a non-GAAP
measure that includes the impact of BaaS loan expense on net
interest rate margin. The most directly comparable GAAP measure is
net interest margin.
Reconciliations of the GAAP and non-GAAP measures are presented
below.
| |
|
As of and for the Three Months Ended |
|
As of and for the Twelve Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
December 31,
2023 |
|
December 31,
2022 |
| Net BaaS
loan income divided by average CCBX loans: |
|
|
|
|
|
CCBX loan yield (GAAP)(1) |
|
|
17.36 |
% |
|
|
17.05 |
% |
|
|
15.20 |
% |
|
|
16.89 |
% |
|
|
13.85 |
% |
|
Total average CCBX loans receivable |
|
$ |
1,196,137 |
|
|
$ |
1,309,380 |
|
|
$ |
994,080 |
|
|
$ |
1,210,413 |
|
|
$ |
742,392 |
|
|
Interest and earned fee income on CCBX loans (GAAP) |
|
|
52,327 |
|
|
|
56,279 |
|
|
|
38,086 |
|
|
|
204,458 |
|
|
|
102,808 |
|
|
BaaS loan expense |
|
|
(24,310 |
) |
|
|
(23,003 |
) |
|
|
(17,215 |
) |
|
|
(86,900 |
) |
|
|
(53,294 |
) |
|
Net BaaS loan income |
|
$ |
28,017 |
|
|
$ |
33,276 |
|
|
$ |
20,871 |
|
|
$ |
117,558 |
|
|
$ |
49,514 |
|
|
Net BaaS loan income divided by average CCBX loans
(1) |
|
|
9.30 |
% |
|
|
10.08 |
% |
|
|
8.33 |
% |
|
|
9.71 |
% |
|
|
6.67 |
% |
| Net
interest margin, net of BaaS loan expense: |
|
|
|
|
|
|
|
|
|
CCBX interest margin (1) |
|
|
8.62 |
% |
|
|
9.66 |
% |
|
|
10.01 |
% |
|
|
9.65 |
% |
|
|
8.84 |
% |
|
CCBX earning assets |
|
|
1,765,502 |
|
|
|
1,684,012 |
|
|
|
1,212,661 |
|
|
|
1,574,334 |
|
|
|
1,027,556 |
|
|
Net interest income |
|
|
38,338 |
|
|
|
40,990 |
|
|
|
30,582 |
|
|
|
151,883 |
|
|
|
90,806 |
|
|
Less: BaaS loan expense |
|
|
(24,310 |
) |
|
|
(23,003 |
) |
|
|
(17,215 |
) |
|
|
(86,900 |
) |
|
|
(53,294 |
) |
|
Net interest income, net of BaaS loan expense |
|
$ |
14,028 |
|
|
$ |
17,987 |
|
|
$ |
13,367 |
|
|
$ |
64,983 |
|
|
$ |
37,512 |
|
|
Net interest margin, net of BaaS loan expense
(1) |
|
|
3.15 |
% |
|
|
4.24 |
% |
|
|
4.37 |
% |
|
|
4.13 |
% |
|
|
3.65 |
% |
(1) Annualized calculations for
periods presented.
APPENDIX A -
As of December 31, 2023
Industry Concentration
We have a diversified loan portfolio,
representing a wide variety of industries. Our major categories of
loans are commercial real estate, consumer and other loans,
residential real estate, commercial and industrial, and
construction, land and land development loans. Together they
represent $3.03 billion in outstanding loan balances. When combined
with $2.34 billion in unused commitments the total of these
categories is $5.38 billion.
Commercial real estate loans
represent the largest segment of our loans, comprising 43.0% of our
total balance of outstanding loans as of December 31, 2023.
Unused commitments to extend credit represents an additional $54.3
million, and the combined total in commercial real estate loans
represents $1.36 billion, or 25.2% of our total outstanding loans
and loan commitments.
The following table summarizes our loan
commitment by industry for our commercial real estate portfolio as
of December 31, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Apartments |
|
$ |
356,046 |
|
$ |
10,783 |
|
$ |
366,829 |
|
6.8 |
% |
|
$ |
3,359 |
|
106 |
| Hotel/Motel |
|
|
172,437 |
|
|
2,345 |
|
|
174,782 |
|
3.2 |
|
|
|
6,387 |
|
27 |
| Convenience Store |
|
|
132,007 |
|
|
1,086 |
|
|
133,093 |
|
2.5 |
|
|
|
2,164 |
|
61 |
| Mixed use |
|
|
93,850 |
|
|
3,475 |
|
|
97,325 |
|
1.8 |
|
|
|
1,079 |
|
87 |
| Warehouse |
|
|
114,572 |
|
|
2,166 |
|
|
116,738 |
|
2.2 |
|
|
|
1,975 |
|
58 |
| Office |
|
|
89,007 |
|
|
3,447 |
|
|
92,454 |
|
1.7 |
|
|
|
989 |
|
90 |
| Retail |
|
|
101,688 |
|
|
719 |
|
|
102,407 |
|
1.9 |
|
|
|
987 |
|
103 |
| Mini Storage |
|
|
65,731 |
|
|
23,979 |
|
|
89,710 |
|
1.7 |
|
|
|
3,130 |
|
21 |
| Strip Mall |
|
|
44,590 |
|
|
— |
|
|
44,590 |
|
0.8 |
|
|
|
6,370 |
|
7 |
| Manufacturing |
|
|
37,946 |
|
|
1,514 |
|
|
39,460 |
|
0.7 |
|
|
|
1,186 |
|
32 |
| Groups < 0.70% of
total |
|
|
95,659 |
|
|
4,775 |
|
|
100,434 |
|
1.9 |
|
|
|
1,139 |
|
84 |
|
Total |
|
$ |
1,303,533 |
|
$ |
54,289 |
|
$ |
1,357,822 |
|
25.2 |
% |
|
$ |
1,928 |
|
676 |
Consumer loans comprise 26.9% of our total balance of
outstanding loans as of December 31, 2023. Unused commitments
to extend credit represents an additional $1.02 billion, and the
combined total in consumer and other loans represents $1.83
billion, or 34.1% of our total outstanding loans and loan
commitments. As illustrated in the table below, our CCBX partners
bring in a large number of mostly smaller dollar loans, resulting
in an average consumer loan balance of just $1,200. CCBX consumer
loans are underwritten to CCBX credit standards and underwriting of
these loans is regularly tested, including quarterly testing for
partners with portfolio balances greater than $10.0 million.
The following table summarizes our loan commitment by industry
for our consumer and other loan portfolio as of December 31,
2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available Commitment
(1) |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
| CCBX
consumer loans |
|
Credit cards |
|
$ |
505,837 |
|
$ |
1,014,959 |
|
$ |
1,520,796 |
|
28.3 |
% |
|
$ |
1.6 |
|
308,955 |
|
Installment loans |
|
|
302,241 |
|
|
134 |
|
|
302,375 |
|
5.6 |
|
|
|
1.1 |
|
266,203 |
|
Lines of credit |
|
|
5,788 |
|
|
63 |
|
|
5,851 |
|
0.1 |
|
|
|
0.1 |
|
102,805 |
|
Other loans |
|
|
2,545 |
|
|
— |
|
|
2,545 |
|
0.1 |
|
|
|
0.2 |
|
10,993 |
| Community
bank consumer loans |
|
Installment loans |
|
|
1,151 |
|
|
— |
|
|
1,151 |
|
0.0 |
|
|
|
57.6 |
|
20 |
|
Lines of credit |
|
|
147 |
|
|
582 |
|
|
729 |
|
0.0 |
|
|
|
3.5 |
|
42 |
|
Other loans |
|
|
330 |
|
|
— |
|
|
330 |
|
0.0 |
|
|
|
1.1 |
|
314 |
|
Total |
|
$ |
818,039 |
|
$ |
1,015,738 |
|
$ |
1,833,777 |
|
34.1 |
% |
|
$ |
1.2 |
|
689,332 |
(1) Total exposure on CCBX loans is subject to CCBX
partner/portfolio maximum limits.
Residential real estate loans comprise 15.3% of
our total balance of outstanding loans as of December 31,
2023. Unused commitments to extend credit represents an additional
$465.9 million, and the combined total in residential real estate
loans represents $929.3 million, or 17.3% of our total outstanding
loans and loan commitments.
The following table summarizes our loan
commitment by industry for our residential real estate loan
portfolio as of December 31, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available Commitment
(1) |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
| CCBX
residential real estate loans |
|
Home equity line of credit |
|
$ |
238,035 |
|
$ |
418,761 |
|
$ |
656,796 |
|
12.2 |
% |
|
$ |
24 |
|
9,792 |
| Community
bank residential real estate loans |
| Closed end, secured by first
liens |
|
|
192,805 |
|
|
3,268 |
|
|
196,073 |
|
3.7 |
|
|
|
610 |
|
316 |
| Home equity line of
credit |
|
|
23,049 |
|
|
42,048 |
|
|
65,097 |
|
1.2 |
|
|
|
106 |
|
217 |
| Closed end, second liens |
|
|
9,537 |
|
|
1,810 |
|
|
11,347 |
|
0.2 |
|
|
|
281 |
|
34 |
|
Total |
|
$ |
463,426 |
|
$ |
465,887 |
|
$ |
929,313 |
|
17.3 |
% |
|
$ |
45 |
|
10,359 |
(1) Total exposure on CCBX loans is subject to CCBX
partner/portfolio maximum limits.
Commercial and industrial loans comprise 9.6%
of our total balance of outstanding loans as of December 31,
2023. Unused commitments to extend credit represents an additional
$695.0 million, and the combined total in commercial and industrial
loans represents $986.3 million, or 18.3% of our total outstanding
loans and loan commitments. Included in commercial and industrial
loans is $87.5 million in outstanding capital call lines, with an
additional $608.8 million in available loan commitments which is
limited to a $350.0 million portfolio maximum. Capital call lines
are provided to venture capital firms through one of our CCBX BaaS
clients. These loans are secured by the capital call rights and are
individually underwritten to the Bank’s credit standards and the
underwriting is reviewed by the Bank on every capital call
line.
The following table summarizes our loan
commitment by industry for our commercial and industrial loan
portfolio as of December 31, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available Commitment
(1) |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Capital Call Lines |
|
$ |
87,494 |
|
$ |
608,837 |
|
$ |
696,331 |
|
12.9 |
% |
|
$ |
537 |
|
163 |
| Retail |
|
|
52,208 |
|
|
1,842 |
|
|
54,050 |
|
1.0 |
|
|
|
18 |
|
2,887 |
| Construction/Contractor
Services |
|
|
24,360 |
|
|
31,020 |
|
|
55,380 |
|
1.0 |
|
|
|
129 |
|
189 |
| Financial Institutions |
|
|
48,648 |
|
|
— |
|
|
48,648 |
|
0.9 |
|
|
|
4,054 |
|
12 |
| Medical / Dental / Other
Care |
|
|
20,732 |
|
|
3,852 |
|
|
24,584 |
|
0.5 |
|
|
|
942 |
|
22 |
| Manufacturing |
|
|
8,022 |
|
|
3,967 |
|
|
11,989 |
|
0.2 |
|
|
|
187 |
|
43 |
| Groups < 0.20% of
total |
|
|
49,830 |
|
|
45,453 |
|
|
95,283 |
|
1.8 |
|
|
|
67 |
|
744 |
|
Total |
|
$ |
291,294 |
|
$ |
694,971 |
|
$ |
986,265 |
|
18.3 |
% |
|
$ |
72 |
|
4,060 |
(1) Total exposure on CCBX loans is
subject to CCBX partner/portfolio maximum limits.
We have individual CCBX partner portfolio limits
with our each of our partners to manage loan concentration risk,
liquidity risk, and counter-party partner risk. For example, as of
December 31, 2023, capital call lines outstanding balance
totaled $87.5 million, and while commitments totaled $608.8 million
the commitments are limited to a maximum of $350.0 million by
agreement with the partner. If a CCBX partner goes over their
individual limit, it would be a breach of their contract and the
Bank may impose penalties. See the table below for CCBX portfolio
maximums and related available commitments:
|
(dollars in thousands; unaudited) |
|
Balance |
|
Percent of CCBX loans receivable |
Available Commitments (1) |
|
Maximum Portfolio Size |
Cash Reserve/Pledge Account Amount
(2) |
| Commercial and
industrial loans: |
|
|
|
|
|
|
|
Capital call lines |
|
$ |
87,494 |
|
|
7.3 |
% |
$ |
608,837 |
|
$ |
350,000 |
$ |
— |
|
All other commercial & industrial loans |
|
|
54,298 |
|
|
4.5 |
|
|
9,144 |
|
|
305,905 |
|
2,426 |
| Real estate loans: |
|
|
|
|
|
|
|
|
|
Home equity lines of credit (3) |
|
|
238,035 |
|
|
19.9 |
|
|
418,761 |
|
|
375,000 |
|
28,043 |
| Consumer and other
loans: |
|
|
|
|
|
|
|
Credit cards - cash secured |
|
|
43 |
|
|
|
|
— |
|
|
|
— |
|
Credit cards - unsecured |
|
|
505,794 |
|
|
|
|
1,014,959 |
|
|
|
27,704 |
|
Credit cards - total |
|
|
505,837 |
|
|
42.3 |
|
|
1,014,959 |
|
|
756,614 |
|
27,704 |
|
Installment loans - cash secured |
|
|
68,856 |
|
|
|
|
— |
|
|
|
— |
|
Installment loans - unsecured |
|
|
233,385 |
|
|
|
|
134 |
|
|
|
8,960 |
|
Installment loans - total |
|
|
302,241 |
|
|
25.3 |
|
|
134 |
|
|
933,374 |
|
8,960 |
|
Other consumer and other loans |
|
|
8,333 |
|
|
0.7 |
|
|
63 |
|
|
709,108 |
|
820 |
|
Gross CCBX loans receivable |
|
|
1,196,238 |
|
|
100.0 |
% |
|
2,051,898 |
|
|
3,430,001 |
$ |
67,953 |
| Net deferred origination
fees |
|
|
(300 |
) |
|
|
|
|
|
|
|
Loans receivable |
|
$ |
1,195,938 |
|
|
|
|
|
|
|
(1) Remaining commitment available, net of outstanding
balance.
(2) Balances are as of January 9, 2024.
(3) These home equity lines of credit are secured by residential
real estate and are accessed by using a credit card, but are
classified as 1-4 family residential properties per regulatory
guidelines.
Construction, land and land development loans
comprise 5.2% of our total balance of outstanding loans as of
December 31, 2023. Unused commitments to extend credit
represents an additional $113.5 million, and the combined total in
construction, land and land development loans represents $270.6
million, or 5.0% of our total outstanding loans and loan
commitments.
The following table details our loan commitment for our
construction, land and land development portfolio as of
December 31, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Commercial construction |
|
$ |
81,489 |
|
$ |
85,584 |
|
$ |
167,073 |
|
3.1 |
% |
|
$ |
5,433 |
|
15 |
| Undeveloped land loans |
|
|
7,890 |
|
|
4,391 |
|
|
12,281 |
|
0.2 |
|
|
|
564 |
|
14 |
| Residential construction |
|
|
34,213 |
|
|
16,687 |
|
|
50,900 |
|
1.0 |
|
|
|
1,711 |
|
20 |
| Developed land loans |
|
|
20,515 |
|
|
2,734 |
|
|
23,249 |
|
0.4 |
|
|
|
789 |
|
26 |
| Land development |
|
|
12,993 |
|
|
4,138 |
|
|
17,131 |
|
0.3 |
|
|
|
866 |
|
15 |
|
Total |
|
$ |
157,100 |
|
$ |
113,534 |
|
$ |
270,634 |
|
5.0 |
% |
|
$ |
1,746 |
|
90 |
Exposure and risk in our construction, land and land development
portfolio is lower in the current period compared to previous
periods as demonstrated by the declining outstanding balance for
the periods indicated in the following table:
| |
|
Outstanding Balance as of |
| (dollars in thousands;
unaudited) |
|
December 31,
2023 |
|
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
|
Commercial construction |
|
$ |
81,489 |
|
$ |
91,396 |
|
$ |
78,079 |
|
$ |
97,987 |
|
$ |
100,714 |
| Residential construction |
|
|
34,213 |
|
|
33,971 |
|
|
35,032 |
|
|
32,268 |
|
|
32,879 |
| Undeveloped land loans |
|
|
7,890 |
|
|
8,310 |
|
|
42,530 |
|
|
41,951 |
|
|
44,578 |
| Developed land loans |
|
|
20,515 |
|
|
21,369 |
|
|
18,735 |
|
|
19,130 |
|
|
20,167 |
| Land development |
|
|
12,993 |
|
|
12,640 |
|
|
12,330 |
|
|
15,299 |
|
|
15,717 |
|
Total |
|
$ |
157,100 |
|
$ |
167,686 |
|
$ |
186,706 |
|
$ |
206,635 |
|
$ |
214,055 |
APPENDIX B -
As of December 31, 2023
CCBX – BaaS Reporting Information
During the quarter ended December 31, 2023, $58.4 million
was recorded in BaaS credit enhancements related to the provision
for credit losses - loans and reserve for unfunded commitments for
CCBX partner loans and negative deposit accounts. Agreements with
our CCBX partners provide for a credit enhancement provided by the
partner which protects the Bank by indemnifying or reimbursing
incurred losses. In accordance with accounting guidance, we
estimate and record a provision for expected losses for these CCBX
loans, unfunded commitments and negative deposit accounts. When the
provision for credit losses - loans and provision for unfunded
commitments is recorded, a credit enhancement asset is also
recorded on the balance sheet through noninterest income (BaaS
credit enhancements) in recognition of the CCBX partner legal
commitment to indemnify or reimburse losses. The credit enhancement
asset is relieved as credit enhancement payments and recoveries are
received from the CCBX partner or taken from the partner's cash
reserve account. Agreements with our CCBX partners also provide
protection to the Bank from fraud by indemnifying or reimbursing
incurred fraud losses. BaaS fraud includes noncredit fraud losses
on loans and deposits originated through partners. Fraud losses are
recorded when incurred as losses in noninterest expense, and the
enhancement received from the CCBX partner is recorded in
noninterest income, resulting in a net impact of zero to the income
statement. CCBX partners also pledge a cash reserve account at the
Bank which the Bank can collect from when losses occur that is then
replenished by the partner on a regular interval. Although
agreements with our CCBX partners provide for credit enhancements
that provide protection to the Bank from credit and fraud losses by
indemnifying or reimbursing incurred credit and fraud losses, if
our partner is unable to fulfill their contracted obligations to
replenish their cash reserve account then the bank would be exposed
to additional loan and deposit losses if the cash flows on the
loans were not sufficient to fund the reimbursement of loan losses,
as a result of this counterparty risk. If a CCBX partner does not
replenish their cash reserve account then the Bank can declare the
agreement in default, take over servicing and cease paying the
partner for servicing the loan and providing credit and fraud
enhancements. The Bank would write-off any remaining credit
enhancement asset from the CCBX partner not covered by the cash
pledge account but would retain the full yield and any fee income
on the loan going forward, and BaaS loan expense for that CCBX
partner would cease once default occurred and payments to the CCBX
partner were stopped.
For CCBX partner loans the Bank records contractual interest
earned from the borrower on loans in interest income, adjusted for
origination costs which are paid or payable to the CCBX partner.
BaaS loan expense represents the amount paid or payable to partners
for credit and fraud enhancements and originating & servicing
CCBX loans. To determine net revenue (Net BaaS loan income) earned
from CCBX loan relationships, the Bank takes BaaS loan interest
income and deducts BaaS loan expense to arrive at Net BaaS loan
income (A reconciliation of the non-GAAP measures are set forth
in the preceding section of this earnings release.) which can
be compared to interest income on the Company’s community bank
loans.
The following table illustrates how CCBX partner loan income and
expenses are recorded in the financial statements:
|
Loan income and related loan expense |
|
Three Months Ended |
|
Twelve Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
December 31,
2023 |
|
December 31,
2022 |
|
Yield on loans (1) |
|
|
17.36 |
% |
|
|
17.05 |
% |
|
|
15.20 |
% |
|
|
16.89 |
% |
|
|
13.85 |
% |
| BaaS loan interest income |
|
$ |
52,327 |
|
|
$ |
56,279 |
|
|
$ |
38,086 |
|
|
$ |
204,458 |
|
|
$ |
102,808 |
|
| Less: BaaS loan expense |
|
|
24,310 |
|
|
|
23,003 |
|
|
|
17,215 |
|
|
|
86,900 |
|
|
|
53,294 |
|
|
Net BaaS loan income (2) |
|
|
28,017 |
|
|
|
33,276 |
|
|
|
20,871 |
|
|
|
117,558 |
|
|
|
49,514 |
|
| Net BaaS loan income divided
by average BaaS loans (1)(2) |
|
|
9.30 |
% |
|
|
10.08 |
% |
|
|
8.33 |
% |
|
|
9.71 |
% |
|
|
6.67 |
% |
(1) Annualized calculation for quarterly periods shown.
(2) A reconciliation of the non-GAAP measures are set forth in the
preceding section of this earnings release.
A decrease in CCBX loans receivable resulted in decreased
interest income on CCBX loans during the quarter ended
December 31, 2023 compared to the quarter ended
September 30, 2023. The decrease in CCBX loans receivable was
primarily due to the sale of CCBX loans as part of our strategy to
reduce risk, optimize the CCBX loan portfolio and strengthen our
balance sheet through enhanced credit standards. Increased interest
rates and growth in CCBX loans and deposits has resulted in
increases in interest income and expense for the quarter ended
December 31, 2023 compared to the quarter ended
December 31, 2022.
The following tables are a summary of the interest components,
direct fees, and expenses of BaaS for the periods indicated and are
not inclusive of all income and expense related to BaaS.
|
Interest income |
|
Three Months Ended |
|
Twelve Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
December 31,
2023 |
|
December 31,
2022 |
|
Loan interest income |
|
$ |
52,327 |
|
$ |
56,279 |
|
$ |
38,086 |
|
$ |
204,458 |
|
$ |
102,808 |
|
Total BaaS interest income |
|
$ |
52,327 |
|
$ |
56,279 |
|
$ |
38,086 |
|
$ |
204,458 |
|
$ |
102,808 |
|
Interest expense |
|
Three Months Ended |
|
Twelve Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
December 31,
2023 |
|
December 31,
2022 |
|
BaaS interest expense |
|
$ |
21,826 |
|
$ |
20,384 |
|
$ |
9,559 |
|
$ |
71,646 |
|
$ |
16,108 |
|
Total BaaS interest expense |
|
$ |
21,826 |
|
$ |
20,384 |
|
$ |
9,559 |
|
$ |
71,646 |
|
$ |
16,108 |
|
BaaS income |
|
Three Months Ended |
|
Twelve Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
December 31,
2023 |
|
December 31,
2022 |
|
BaaS program income: |
|
|
|
|
|
|
|
|
|
|
|
Servicing and other BaaS fees |
|
$ |
1,015 |
|
$ |
997 |
|
$ |
1,001 |
|
$ |
3,855 |
|
$ |
4,408 |
| Transaction fees |
|
|
1,006 |
|
|
1,036 |
|
|
964 |
|
|
4,011 |
|
|
3,211 |
| Interchange fees |
|
|
1,272 |
|
|
1,216 |
|
|
785 |
|
|
4,252 |
|
|
2,583 |
| Reimbursement of expenses |
|
|
1,076 |
|
|
1,152 |
|
|
857 |
|
|
4,175 |
|
|
2,732 |
|
BaaS program income |
|
|
4,369 |
|
|
4,401 |
|
|
3,607 |
|
|
16,293 |
|
|
12,934 |
| BaaS indemnification
income: |
|
|
|
|
|
|
|
|
|
|
| BaaS credit enhancements |
|
|
58,449 |
|
|
25,926 |
|
|
31,164 |
|
|
177,764 |
|
|
76,374 |
| BaaS fraud enhancements |
|
|
779 |
|
|
2,850 |
|
|
6,818 |
|
|
7,165 |
|
|
29,571 |
|
BaaS indemnification income |
|
|
59,228 |
|
|
28,776 |
|
|
37,982 |
|
|
184,929 |
|
|
105,945 |
| Total BaaS income |
|
$ |
63,597 |
|
$ |
33,177 |
|
$ |
41,589 |
|
$ |
201,222 |
|
$ |
118,879 |
|
BaaS loan and fraud expense: |
|
Three Months Ended |
|
Twelve Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2023 |
|
September 30,
2023 |
|
December 31,
2022 |
|
December 31,
2023 |
|
December 31,
2022 |
|
BaaS loan expense |
|
$ |
24,310 |
|
$ |
23,003 |
|
$ |
17,215 |
|
$ |
86,900 |
|
$ |
53,294 |
| BaaS fraud expense |
|
|
779 |
|
|
2,850 |
|
|
6,819 |
|
|
7,165 |
|
|
29,571 |
|
Total BaaS loan and fraud expense |
|
$ |
25,089 |
|
$ |
25,853 |
|
$ |
24,034 |
|
$ |
94,065 |
|
$ |
82,865 |
Grafico Azioni Coastal Financial (NASDAQ:CCB)
Storico
Da Dic 2024 a Gen 2025
Grafico Azioni Coastal Financial (NASDAQ:CCB)
Storico
Da Gen 2024 a Gen 2025
