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 ended March 31, 2024.
Quarterly net income for the first quarter of 2024 was $6.8
million, or $0.50 per diluted common share, compared with net
income of $9.0 million, or $0.66 per diluted common share, for the
fourth quarter of 2023, and $12.4 million, or $0.91 per diluted
common share, for the quarter ended March 31, 2023. The
decrease in net income for the quarter ended March 31, 2024
was largely due to a number of unanticipated expenses incurred
during the quarter. The following non-GAAP measure is presented to
illustrate the impact of certain unanticipated expenses on net
income, which is the most directly comparable GAAP measure.
| |
Three Months Ended |
|
Non-GAAP Reconciliation of Unanticipated
Expenses |
March 31, 2024 |
|
(dollars in thousands; unaudited) |
Actual |
Unanticipated Expenses |
Adjusted |
|
Net interest income |
$ |
60,936 |
|
$ |
— |
|
$ |
60,936 |
|
| Provision for credit
losses |
|
(83,158 |
) |
|
(1,096 |
) |
|
(82,062 |
) |
| Noninterest income |
|
86,955 |
|
|
— |
|
|
86,955 |
|
| Noninterest expense(1) |
|
(56,018 |
) |
|
(1,915 |
) |
|
(54,103 |
) |
|
Income before provision for income tax |
|
8,715 |
|
|
(3,010 |
) |
|
11,725 |
|
| Provision for income tax |
|
(1,915 |
) |
|
662 |
|
|
(2,577 |
) |
| Net income |
$ |
6,800 |
|
$ |
(2,348 |
) |
$ |
9,148 |
|
(1) Detail of unanticipated noninterest expenses shown in table
above:
|
Unanticipated noninterest expense: |
|
|
Audit and accounting services |
$ |
849 |
|
Contract termination fee |
|
600 |
|
Operational loss |
|
122 |
|
Employment realignment costs |
|
343 |
| Total unanticipated
noninterest expense items |
$ |
1,915 |
Total assets increased $111.9 million, or 3.0%, during the first
quarter of 2024 to $3.87 billion, from $3.75 billion at
December 31, 2023. Total loans, net of deferred fees increased
$173.5 million, or 5.7%, during the three months ended
March 31, 2024 to $3.20 billion, compared to $3.03 billion at
December 31, 2023. Community bank loans increased $53.1
million, or 2.9%, and CCBX loans increased $120.3 million, or
10.1%. CCBX loan growth is net of $100.5 million in CCBX loans sold
during the quarter ended March 31, 2024. We continue to
monitor and actively manage the CCBX loan portfolio, and will
continue to sell CCBX loans in the coming months as we work to
strengthen the balance sheet by optimizing our CCBX portfolio
through higher quality originations, loan sales, new products and
building on our existing relationships. Deposits increased $102.6
million, or 3.1%, during the three months ended March 31,
2024. CCBX deposits grew $166.2 million, or 8.9%. Community bank
deposits decreased $63.6 million, or 4.2%, as a result of managing
our deposit rates during the quarter and letting some of our higher
rate deposits run-off. Our cost of deposits for the community bank
still increased as a result of higher rates and competitors
offering and maintaining higher deposit rate offers during the
quarter, increasing to 1.66% for the three months ended
March 31, 2024, compared to 1.57% for the three months ended
December 31, 2023.
We saw solid deposit growth in the first quarter, with deposits
increasing $102.6 million, or 3.1%, compared to December 31,
2023. Fully insured IntraFi network reciprocal deposits decreased
$3.4 million to $336.8 million as of March 31, 2024, compared
to $340.1 million as of December 31, 2023. These fully insured
reciprocal deposits allow our larger deposit customers to fully
insure their deposits through a reciprocal agreement with other
banks. 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
March 31, 2024, we had $515.1 million in cash on the balance
sheet and the capacity to borrow up to $659.5 million from Federal
Home Loan Bank and the Federal Reserve Bank discount window, and an
additional $50.0 million from a correspondent bank, with no
borrowings, except minimal amounts to test the lines, under these
facilities since the first quarter of 2022. Cash on the balance
sheet and total borrowing capacity totaled $1.17 billion, which
represented 33.9% of total deposits and exceeded our $495.6 million
in uninsured deposits as of March 31, 2024.
"In the current economic climate, banks and Banking-as-a-Service
("BaaS") providers are facing significant challenges. However, I am
pleased to share that our Company is weathering these difficulties
and continuing to grow and build for a strong future. Despite the
uncertain times, we have managed to sustain our growth trajectory,
improve our credit quality and position ourselves to be a premier
BaaS service provider in the future.
We have been proactive in adapting to these challenging
circumstances. We have implemented and are enhancing our robust
risk management practices, closely monitoring our loan portfolios
and enhancing our credit standards for CCBX loans while building
and enhancing our existing compliance AML/BSA, risk and internal
control processes. These steps are designed to mitigate potential
compliance and credit risks, safeguard the quality of our assets
and continue to grow.
Additionally, a primary initiative for us is to invest in
technology designed to increase automation and enhance operational
efficiency, productivity and cost structure, however, this requires
significant upfront expense. This includes the costs associated
with acquiring and implementing advanced technologies, addressing
risks timely when they appear, training employees, and integrating
new systems into existing infrastructure. We believe investing in
automation for the future is crucial for us to stay ahead in an
increasingly competitive landscape. By streamlining processes,
reducing labor costs, and improving overall efficiency, we expect
automation to make our business more scalable and better able to
manage expenses in the future.
This investment in technology and the challenges from the
economic environment impacted net income for the quarter ended
March 31, 2024 and we expect that this strategy will continue
to impact earnings in the short term, but we believe we are
positioning ourselves for long term success," 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 $60.9
million for the quarter ended March 31, 2024, an increase of
$1.3 million, or 2.1%, from $59.7 million for the quarter ended
December 31, 2023, and an increase of $6.4 million, or 11.8%,
from $54.5 million for the quarter ended March 31,
2023. Yield on loans receivable was 10.85% for the three
months ended March 31, 2024, compared to 10.71% for the three
months ended December 31, 2023 and 9.95% for the three months
ended March 31, 2023. Cost of deposits was 3.49%
for the three months ended March 31, 2024, compared to 3.36%
for the three months ended December 31, 2023 and 2.13% for the
three months ended March 31, 2023. The increase in net
interest income compared to December 31, 2023, was a result of
increased interest income due to an increase in average loans
receivable partially offset by an increase in cost of deposits as a
result of higher interest rates and competitive pressures. The
increase in net interest income compared to March 31, 2023 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 March 31, 2024 was $3.14 billion, compared to
$3.01 billion for the three months ended December 31, 2023,
and $2.71 billion for the three months ended March 31,
2023.
Interest and fees on loans totaled $84.6 million for the three
months ended March 31, 2024 compared to $81.2 million and
$66.4 million for the three months ended December 31, 2023 and
March 31, 2023, respectively. Total loans, net of
deferred fees increased $173.5 million, or 5.7%, during the quarter
ended March 31, 2024, which included a $120.3 million increase
in CCBX loans and an increase of $53.2 million in community bank
loans. The increase in CCBX loans includes an increase of $52.3
million, or 6.4%, in consumer and other loans and an increase of
$48.2 million, or 55.1%, 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
$100.5 million in CCBX loans during the quarter ended
March 31, 2024 to reduce credit exposure in certain loan
categories and manage credit risk. We continue to reposition
ourselves by managing CCBX credit and concentration levels in an
effort to optimize our loan portfolio and we will 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 increase in interest and fees on
loans compared to the quarter ended December 31, 2023 was
largely due to loan growth. The increase compared to the quarter
ended March 31, 2023 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 $4.8 million for the quarter ended March 31, 2024 a
decrease of $907,000 compared to December 31, 2023 due to a
decrease in average balance and an increase of $1.7 million
compared to March 31, 2023 due to an increase in average
balance and higher interest rates. The average balance
of interest earning deposits with other banks for the three months
ended March 31, 2024 was $350.9 million, compared to $413.1
million and $271.7 million for the three months ended
December 31, 2023 and March 31, 2023,
respectively. The average yield on these interest
earning deposits with other banks increased to 5.48% for the
quarter ended March 31, 2024, compared to 5.46% and 4.62% for
the quarters ended December 31, 2023 and March 31, 2023,
respectively.
Total interest expense was $29.5 million for the quarter ended
March 31, 2024, a $1.0 million increase from the quarter ended
December 31, 2023 and a $13.9 million increase from the
quarter ended March 31, 2023. Interest expense on deposits was
$28.9 million for the quarter ended March 31, 2024, compared
to $27.9 million for the quarter ended December 31, 2023 and
$15.0 million for the quarter ended March 31, 2023. Interest
expense on interest bearing deposits increased $1.0 million for the
quarter ended March 31, 2024, compared to the quarter ended
December 31, 2023, and $13.9 million compared to the quarter
ended March 31, 2023 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
$669,000 for the quarter ended March 31, 2024, compared to
$670,000 and $662,000 for the quarters ended December 31, 2023
and March 31, 2023, respectively. The $7,000 increase in
interest expense on borrowed funds from the quarter ended
March 31, 2023 is the result of an increase in interest
rates.
Total cost of deposits was 3.49% for the three months ended
March 31, 2024, compared to 3.36% for the three months ended
December 31, 2023, and 2.13%, for the three months ended
March 31, 2023. Community bank and CCBX cost of deposits were
1.66% and 4.93% respectively, for the three months ended
March 31, 2024, compared to 1.57% and 4.90%, for the three
months ended December 31, 2023, and 0.66% and 3.89% for the
three months ended March 31, 2023. The increase in cost of
deposits for the three months ended March 31, 2024 compared to
the prior periods for both segments is a result of the continued
higher interest rate environment. While we continue working to hold
down deposit costs, the higher interest rate environment has
impacted our cost of deposits and resulted in higher interest
expense on interest bearing deposits as we work to retain and grow
our community bank deposits and CCBX deposits continue to grow as a
percent of total deposits.
Net Interest Margin
Net interest margin was 6.78% for the three months ended
March 31, 2024, compared to 6.61% and 7.15% for the three
months ended December 31, 2023 and March 31, 2023,
respectively. The increase in net interest margin
compared to the three months ended December 31, 2023 was
primarily due to higher loan yields and the decrease compared to
March 31, 2023 was largely due to an increase in cost of
deposits. Increases in rates on interest bearing deposits by our
competitors and the growth in higher cost CCBX deposits contributed
to an overall increase in interest expense on interest bearing
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, December 31, 2023 and March 31, 2024 will
continue to impact net interest margin in future quarters. Interest
and fees on loans receivable increased $3.5 million, or 4.3%, to
$84.6 million for the three months ended March 31, 2024,
compared to $81.2 million for the three months ended
December 31, 2023, and increased $18.2 million, or 27.4%,
compared to $66.4 million for the three months ended March 31,
2023, due to an increase in outstanding balances and higher
interest rates. Compared to the three months ended
March 31, 2023, there was a $1.7 million increase in interest
on interest earning deposits held at other financial
institutions. These interest earning deposits earned an
average rate of 5.48% for the quarter ended March 31, 2024,
compared to 5.46% and 4.62% for the quarters ended
December 31, 2023 and March 31, 2023,
respectively. Average investment securities decreased
$34.3 million to $115.4 million compared to the three months ended
December 31, 2023 and increased $13.1 million compared to the
three months ended March 31, 2023 as a result of $100.0
million in AFS U.S. Treasury securities that matured during the
quarter ended March 31, 2024. Interest on investment
securities decreased $191,000 for the three months ended
March 31, 2024 compared to the three months ended
December 31, 2023 as a result of the maturing Treasury
securities. Interest on total investment securities increased
$481,000 compared to March 31, 2023, 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 3.52% for the quarter ended March 31,
2024, an increase of 13 basis points from the quarter ended
December 31, 2023 and an increase of 133 basis points from the
quarter ended March 31, 2023. Cost of deposits for the quarter
ended March 31, 2024 was 3.49%, compared to 3.36% for the
quarter ended December 31, 2023, and 2.13% for the quarter
ended March 31, 2023. The increased cost of funds and deposits
compared to December 31, 2023 and March 31, 2023 was due
to the increase in interest rates compared to the previous periods
and growth in higher rate CCBX deposits.
During the quarter ended March 31, 2024, total loans
receivable increased by $173.5 million, or 5.7%, to $3.20 billion,
compared to $3.03 billion for the quarter ended December 31,
2023. This increase consists of a $120.3 million
increase in CCBX loans and $53.1 million in community bank loan
growth. Total loans receivable as of March 31, 2024 increased
$362.4 million compared to March 31, 2023. This
increase includes community bank loan growth of $212.3 million and
an increase in CCBX loans of $150.1 million. During the quarter
ended March 31, 2024, $100.5 million in CCBX loans were sold
and $797,000 in loans were held for sale as of March 31, 2024,
and no loans were held for sale at December 31, 2023 or
March 31, 2023.
Total yield on loans receivable for the quarter ended
March 31, 2024 was 10.85%, compared to 10.71% for the quarter
ended December 31, 2023, and 9.95% for the quarter ended
March 31, 2023. During the quarter ended March 31, 2024,
community bank loans increased 2.9%, or $53.1 million, compared to
the quarter ended December 31, 2023, with an average yield of
6.46% and CCBX loans outstanding increased 10.1%, or $120.3
million, compared to December 31, 2023, with an average CCBX
yield of 17.34%. 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 |
| |
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
|
|
Yield onLoans (2) |
|
Cost ofDeposits (2) |
|
Yield onLoans (2) |
|
Cost ofDeposits (2) |
|
Yield onLoans (2) |
|
Cost ofDeposits (2) |
|
Community Bank |
6.46% |
|
1.66% |
|
6.32% |
|
1.57% |
|
5.97% |
|
0.66% |
| CCBX (1) |
17.34% |
|
4.93% |
|
17.36% |
|
4.90% |
|
16.09% |
|
3.89% |
| Consolidated |
10.85% |
|
3.49% |
|
10.71% |
|
3.36% |
|
9.95% |
|
2.13% |
(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 |
| |
|
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
|
(dollars in thousands, unaudited) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
|
Income / Expense |
|
Income / expense divided byaverage CCBX
loans(2) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
|
BaaS loan interest income |
|
$ |
54,569 |
|
17.34 |
% |
|
$ |
52,327 |
|
17.36 |
% |
|
$ |
42,220 |
|
16.09 |
% |
| Less:
BaaS loan expense |
|
|
24,837 |
|
7.89 |
% |
|
|
24,310 |
|
8.06 |
% |
|
|
17,554 |
|
6.69 |
% |
|
Net BaaS loan income (1) |
|
$ |
29,732 |
|
9.45 |
% |
|
$ |
28,017 |
|
9.30 |
% |
|
$ |
24,666 |
|
9.40 |
% |
| Average BaaS Loans(3) |
|
$ |
1,265,857 |
|
|
|
$ |
1,196,137 |
|
|
|
$ |
1,064,192 |
|
|
(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 0.73% for the quarter ended March 31, 2024 compared
to 0.97% and 1.58% for the quarters ended December 31, 2023
and March 31, 2023, respectively. ROA for the
quarter ended March 31, 2024, was down 0.24% and 0.84%,
respectively, as a result of lower margin compared to
December 31, 2023 and March 31, 2023. Noninterest
expenses were higher for the quarter ended March 31, 2024
compared to the quarters ended December 31, 2023 and
March 31, 2023 due to increased salaries and employee
benefits, investments in technology, and higher legal and
professional expenses. There were a number of unanticipated
expenses incurred in the quarter ended March 31, 2024 which
impacted earnings. These expenses are detailed at the beginning of
this earnings release.
The following table shows the Company’s key performance ratios
for the periods indicated.
| |
|
Three Months Ended |
|
(unaudited) |
|
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (1) |
|
0.73 |
% |
|
0.97 |
% |
|
1.13 |
% |
|
1.52 |
% |
|
1.58 |
% |
| Return on average equity
(1) |
|
9.21 |
% |
|
12.35 |
% |
|
14.60 |
% |
|
19.53 |
% |
|
19.89 |
% |
| Yield on earnings assets
(1) |
|
10.07 |
% |
|
9.77 |
% |
|
10.08 |
% |
|
10.18 |
% |
|
9.19 |
% |
| Yield on loans receivable
(1) |
|
10.85 |
% |
|
10.71 |
% |
|
10.84 |
% |
|
10.85 |
% |
|
9.95 |
% |
| Cost of funds (1) |
|
3.52 |
% |
|
3.39 |
% |
|
3.18 |
% |
|
2.77 |
% |
|
2.19 |
% |
| Cost of deposits (1) |
|
3.49 |
% |
|
3.36 |
% |
|
3.14 |
% |
|
2.72 |
% |
|
2.13 |
% |
| Net interest margin (1) |
|
6.78 |
% |
|
6.61 |
% |
|
7.10 |
% |
|
7.58 |
% |
|
7.15 |
% |
| Noninterest expense to average
assets (1) |
|
6.04 |
% |
|
5.56 |
% |
|
6.23 |
% |
|
6.11 |
% |
|
5.69 |
% |
| Noninterest income to average
assets (1) |
|
9.38 |
% |
|
6.95 |
% |
|
3.81 |
% |
|
6.90 |
% |
|
6.28 |
% |
| Efficiency ratio |
|
37.88 |
% |
|
41.58 |
% |
|
58.36 |
% |
|
42.92 |
% |
|
43.03 |
% |
| Loans receivable to deposits
(2) |
|
92.42 |
% |
|
90.05 |
% |
|
90.19 |
% |
|
96.23 |
% |
|
92.55 |
% |
(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 |
| |
March 31, |
|
December 31, |
|
March 31, |
|
(dollars in thousands; unaudited) |
|
2024 |
|
|
2023 |
|
|
2023 |
|
Deposit service charges and fees |
$ |
908 |
|
$ |
957 |
|
$ |
910 |
|
Loan referral fees |
|
168 |
|
|
— |
|
|
— |
|
Unrealized gain (loss) on equity securities, net |
|
15 |
|
|
80 |
|
|
39 |
|
Gain on sales of loans, net |
|
— |
|
|
— |
|
|
123 |
|
Other |
|
308 |
|
|
60 |
|
|
299 |
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,399 |
|
|
1,097 |
|
|
1,371 |
|
Servicing and other BaaS fees |
|
1,131 |
|
|
1,015 |
|
|
948 |
|
Transaction fees |
|
1,122 |
|
|
1,006 |
|
|
917 |
|
Interchange fees |
|
1,539 |
|
|
1,272 |
|
|
789 |
|
Reimbursement of expenses |
|
1,033 |
|
|
1,076 |
|
|
921 |
|
BaaS program income |
|
4,825 |
|
|
4,369 |
|
|
3,575 |
|
BaaS credit enhancements |
|
79,808 |
|
|
58,449 |
|
|
42,362 |
|
Baas fraud enhancements |
|
923 |
|
|
779 |
|
|
1,999 |
|
BaaS indemnification income |
|
80,731 |
|
|
59,228 |
|
|
44,361 |
|
Total BaaS income |
|
85,556 |
|
|
63,597 |
|
|
47,936 |
| Total
noninterest income |
$ |
86,955 |
|
$ |
64,694 |
|
$ |
49,307 |
Noninterest income was $87.0 million for the three months ended
March 31, 2024, an increase of $22.3 million from $64.7
million for the three months ended December 31, 2023, and an
increase of $37.6 million from $49.3 million for the three months
ended March 31, 2023. The increase in noninterest
income over the quarter ended December 31, 2023 was primarily
due to an increase of $22.0 million in total BaaS
income. The $22.0 million increase in total BaaS income
included a $21.4 million increase in BaaS credit enhancements
related to the provision for credit losses, a $144,000 increase in
BaaS fraud enhancements, and an increase of $456,000 in BaaS
program income. The increase in BaaS program income is largely due
to higher servicing and other BaaS fees, transaction fees and
interchange fees (see “Appendix B” for more information on the
accounting for BaaS allowance for credit losses and credit and
fraud enhancements). Additionally, loan referral fees increased
$168,000 and other income increased $248,000 primarily due to an
increase in bank owned life insurance earnings in comparison to
lower earnings that resulted from a policy change in the quarter
ended December 31, 2023 which depressed earnings. The $37.6
million increase in noninterest income over the quarter ended
March 31, 2023 was primarily due to a $36.4 million increase
in BaaS credit and fraud enhancements, an increase of $1.3 million
in BaaS program income, an increase of $168,000 in loan referral
fees, partially offset by a decrease of $123,000 in gain on sale of
loans.
Our CCBX segment continues to evolve, and we have 21
relationships, at varying stages, as of March 31, 2024.
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 CCBX loans during the quarters ended September 30, 2023,
December 31, 2023 and March 31, 2024 are 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. These sales resulted in a tighter interest margin
in the quarter ended March 31, 2024, as higher quality loans
yield less than higher risk loans. The size of our CCBX loan
portfolio increased during the quarter ended March 31, 2024
and we expect it to continue increasing as we work to grow the
portfolio with loans that are subject to increased underwriting
standards.
Coastal worked with One and Robinhood to launch two new lending
products in Q1 that can reach wide, established customer bases. One
launched its offering of point-of-sale installment loans through
Walmart. These loans, which can be offered with customer friendly
pricing and payment features similar to so-called "Buy Now Pay
Later" products, are fully disclosed and offered as standard credit
products, avoiding concerns raised with respect to more typical Buy
Now Pay Later offerings. Likewise, Robinhood Credit launched a new
credit card that will be marketed to Robinhood’s customers.
The following table illustrates the activity and evolution in
CCBX relationships for the periods presented.
| |
As of |
|
(unaudited) |
March 31, 2024 |
December 31, 2023 |
March 31, 2023 |
|
Active |
19 |
19 |
18 |
| Friends and family /
testing |
1 |
1 |
1 |
| Implementation /
onboarding |
1 |
1 |
1 |
| Signed letters of intent |
0 |
0 |
4 |
| Wind down - active but
preparing to exit relationship |
0 |
0 |
1 |
|
Total CCBX relationships |
21 |
21 |
25 |
The following table details noninterest expense for the periods
indicated:
Noninterest Expense
| |
|
Three Months Ended |
| |
|
March 31, |
|
December 31, |
|
March 31, |
|
(dollars in thousands; unaudited) |
|
|
2024 |
|
|
2023 |
|
|
2023 |
|
Salaries and employee benefits |
|
$ |
17,984 |
|
$ |
16,490 |
|
$ |
15,575 |
|
Legal and professional expenses |
|
|
3,672 |
|
|
2,649 |
|
|
3,062 |
|
Data processing and software licenses |
|
|
2,892 |
|
|
2,417 |
|
|
1,840 |
|
Occupancy |
|
|
1,518 |
|
|
1,340 |
|
|
1,219 |
|
Point of sale expense |
|
|
869 |
|
|
899 |
|
|
753 |
|
Director and staff expenses |
|
|
400 |
|
|
478 |
|
|
626 |
|
FDIC assessments |
|
|
683 |
|
|
665 |
|
|
595 |
|
Excise taxes |
|
|
320 |
|
|
449 |
|
|
455 |
|
Marketing |
|
|
53 |
|
|
138 |
|
|
95 |
|
Other |
|
|
1,867 |
|
|
1,089 |
|
|
890 |
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
|
30,258 |
|
|
26,614 |
|
|
25,110 |
|
BaaS loan expense |
|
|
24,837 |
|
|
24,310 |
|
|
17,554 |
|
BaaS fraud expense |
|
|
923 |
|
|
779 |
|
|
1,999 |
|
BaaS loan and fraud expense |
|
|
25,760 |
|
|
25,089 |
|
|
19,553 |
| Total
noninterest expense |
|
$ |
56,018 |
|
$ |
51,703 |
|
$ |
44,663 |
Total noninterest expense increased $4.3 million to $56.0
million for the three months ended March 31, 2024, compared to
$51.7 million for the three months ended December 31, 2023,
and increased $11.4 million from $44.7 million for the three months
ended March 31, 2023. The increase in noninterest expense for
the quarter ended March 31, 2024, as compared to the quarter
ended December 31, 2023, was primarily due to a $671,000
increase in BaaS expense (including a $144,000 increase in BaaS
fraud expense an a $527,000 increase in BaaS loan expense), a $1.5
million increase in salaries and employee benefits, a $1.0 million
increase in legal and professional expenses, which includes
$849,000 in audit and accounting service expenses that were
unanticipated, and a $778,000 increase in other expenses largely
due to exit costs associated with terminating our relationship with
a fraud/compliance vendor of $600,000 and an operational loss of
$122,000, which are detailed at the beginning of this earnings
release. 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 the three months ended
March 31, 2024 due to increased fees related to data and risk
management, building out our infrastructure and increased
consulting expenses for projects and enhanced monitoring. The $1.5
million increase in salaries and employee benefits included
$343,000 in one time expenses related to additional expense related
to retirements and our initiative to manage costs going forward
which increased expenses in this period.
The increase in noninterest expenses for the quarter ended
March 31, 2024 compared to the quarter ended March 31,
2023 were largely due to an increase of $6.2 million in BaaS
partner expense (including a $7.3 million increase in BaaS loan
expense offset by a decrease of $1.1 million in BaaS fraud
expense), $2.4 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 $977,000
increase in other expenses primarily due to unanticipated expenses
from exit costs associated with a fraud/compliance vendor of
$600,000 and an operational loss of $122,000 which are detailed at
the beginning of this earnings release, and a $1.1 million increase
in data processing and software licenses due to enhancements in
technology and a $116,000 increase in point of sale expenses which
is attributed to increased CCBX activity.
Provision for Income Taxes
The provision for income taxes was $1.9 million for the three
months ended March 31, 2024, $2.8 million for the three months
ended December 31, 2023 and $3.0 million for the first quarter
of 2023. The income tax provision was lower for the three
months ended March 31, 2024 compared to the quarter ended
December 31, 2023 and March 31, 2023 primarily due to lower net
income. 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 $111.9 million, or 3.0%, to $3.87 billion
at March 31, 2024 compared to $3.75 billion at
December 31, 2023. The increase is primarily due to
a $173.5 million increase in loans receivable combined with a
$88,000 increase in other assets and $30.6 million increase in
interest earning deposits held at other banks, partially offset by
a $99.5 million decrease in AFS securities as such securities
matured, $22.3 million increase in the allowance for credit losses
and a $29.4 million increase in the credit enhancement asset.
During the quarter ended March 31, 2024, we sold $100.5
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 by replacing loans sold with higher
credit quality originated loans with enhanced credit standards,
compared to $125.1 million sold during the quarter ended
December 31, 2023. There were $797,000 loans held for sale at
March 31, 2024 and no loans held for sale as of
December 31, 2023.
Total assets increased $414.2 million, or 12.0%, to $3.87
billion at March 31, 2024, compared to $3.45 billion at
March 31, 2023. The increase is primarily due to
loans receivable increasing $362.4 million, a $126.1 million
increase in interest earning deposits with other banks, partially
offset by an increase of $29.4 million in the credit enhancement
asset and a decrease of $51.6 million in investment securities
compared to March 31, 2023.
Loans Receivable
Total loans receivable increased $173.5 million to $3.20 billion
at March 31, 2024, from $3.03 billion at December 31,
2023, and increased $362.4 million from $2.84 billion at
March 31, 2023. The increase in loans receivable
over the quarter ended December 31, 2023 was the result of an
increase of $120.3 million in CCBX loans as we work to build back
this portfolio with new loans, subject to enhanced credit
standards, following several periods of shrinking this portfolio to
optimize our balance sheet, and a $53.1 million increase in
community bank loans. We continue to monitor and manage the CCBX
loan portfolio, and sold $100.5 million in CCBX loans during the
quarter ended March 31, 2024 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
March 31, 2023 includes CCBX loan growth of $150.1 million and
community bank loan growth of $212.3 million as of March 31,
2024.
The following table summarizes the loan portfolio at the period
indicated:
|
Consolidated |
As of March 31, 2024 |
|
As of December 31, 2023 |
|
As of March 31, 2023 |
|
(dollars in thousands; unaudited) |
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital call lines |
$ |
135,671 |
|
|
4.2 |
% |
|
$ |
87,494 |
|
|
2.9 |
% |
|
$ |
118,796 |
|
|
4.2 |
% |
|
All other commercial & industrial loans |
|
201,555 |
|
|
6.3 |
|
|
|
203,800 |
|
|
6.7 |
|
|
|
207,542 |
|
|
7.3 |
|
|
Total commercial and industrial loans: |
|
337,226 |
|
|
10.5 |
|
|
|
291,294 |
|
|
9.6 |
|
|
|
326,338 |
|
|
11.5 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development |
|
160,862 |
|
|
5.0 |
|
|
|
157,100 |
|
|
5.2 |
|
|
|
206,635 |
|
|
7.3 |
|
|
Residential real estate |
|
496,305 |
|
|
15.5 |
|
|
|
463,426 |
|
|
15.3 |
|
|
|
455,507 |
|
|
16.0 |
|
|
Commercial real estate |
|
1,342,489 |
|
|
41.9 |
|
|
|
1,303,533 |
|
|
43.0 |
|
|
|
1,102,771 |
|
|
38.8 |
|
| Consumer and other loans |
|
870,134 |
|
|
27.1 |
|
|
|
818,039 |
|
|
26.9 |
|
|
|
752,528 |
|
|
26.4 |
|
|
Gross loans receivable |
|
3,207,016 |
|
|
100.0 |
% |
|
|
3,033,392 |
|
|
100.0 |
% |
|
|
2,843,779 |
|
|
100.0 |
% |
| Net deferred origination
fees |
|
(7,462 |
) |
|
|
|
|
(7,300 |
) |
|
|
|
|
(6,575 |
) |
|
|
|
Loans receivable |
$ |
3,199,554 |
|
|
|
|
$ |
3,026,092 |
|
|
|
|
$ |
2,837,204 |
|
|
|
| Loan Yield (1) |
|
10.85 |
% |
|
|
|
|
10.71 |
% |
|
|
|
|
9.95 |
% |
|
|
(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 |
|
|
|
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
| (dollars in thousands;
unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans |
|
$ |
154,395 |
|
|
8.2 |
% |
|
$ |
149,502 |
|
|
8.2 |
% |
|
$ |
158,873 |
|
|
9.5 |
% |
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development loans |
|
|
160,862 |
|
|
8.5 |
|
|
|
157,100 |
|
|
8.5 |
|
|
|
206,635 |
|
|
12.3 |
|
|
Residential real estate loans |
|
|
231,157 |
|
|
12.2 |
|
|
|
225,391 |
|
|
12.3 |
|
|
|
206,140 |
|
|
12.3 |
|
|
Commercial real estate loans |
|
|
1,342,489 |
|
|
71.0 |
|
|
|
1,303,533 |
|
|
70.9 |
|
|
|
1,102,771 |
|
|
65.7 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer and other loans |
|
|
1,447 |
|
|
0.1 |
|
|
|
1,628 |
|
|
0.1 |
|
|
|
2,860 |
|
|
0.2 |
|
|
Gross Community Bank loans receivable |
|
|
1,890,350 |
|
|
100.0 |
% |
|
|
1,837,154 |
|
|
100.0 |
% |
|
|
1,677,279 |
|
|
100.0 |
% |
| Net deferred origination
fees |
|
|
(7,068 |
) |
|
|
|
|
(7,000 |
) |
|
|
|
|
(6,265 |
) |
|
|
|
Loans receivable |
|
$ |
1,883,282 |
|
|
|
|
$ |
1,830,154 |
|
|
|
|
$ |
1,671,014 |
|
|
|
| Loan Yield(1) |
|
|
6.46 |
% |
|
|
|
|
6.32 |
% |
|
|
|
|
5.97 |
% |
|
|
(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 |
|
|
|
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital call lines |
|
$ |
135,671 |
|
|
10.3 |
% |
|
$ |
87,494 |
|
|
7.3 |
% |
|
$ |
118,796 |
|
|
10.2 |
% |
|
All other commercial & industrial loans |
|
|
47,160 |
|
|
3.6 |
|
|
|
54,298 |
|
|
4.5 |
|
|
|
48,669 |
|
|
4.1 |
|
| Real
estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
265,148 |
|
|
20.1 |
|
|
|
238,035 |
|
|
19.9 |
|
|
|
249,367 |
|
|
21.4 |
|
|
Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
505,706 |
|
|
38.4 |
|
|
|
505,837 |
|
|
42.3 |
|
|
|
318,187 |
|
|
27.3 |
|
|
Other consumer and other loans |
|
|
362,981 |
|
|
27.6 |
|
|
|
310,574 |
|
|
26.0 |
|
|
|
431,481 |
|
|
37.0 |
|
|
Gross CCBX loans receivable |
|
|
1,316,666 |
|
|
100.0 |
% |
|
|
1,196,238 |
|
|
100.0 |
% |
|
|
1,166,500 |
|
|
100.0 |
% |
| Net
deferred origination (fees) costs |
|
|
(394 |
) |
|
|
|
|
(300 |
) |
|
|
|
|
(310 |
) |
|
|
|
Loans receivable |
|
$ |
1,316,272 |
|
|
|
|
$ |
1,195,938 |
|
|
|
|
$ |
1,166,190 |
|
|
|
| Loan Yield - CCBX (1)(2) |
|
|
17.34 |
% |
|
|
|
|
17.36 |
% |
|
|
|
|
16.09 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(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.
DepositsTotal deposits increased $102.6
million, or 3.1%, to $3.46 billion at March 31, 2024 from
$3.36 billion at December 31, 2023. The increase was due to a
$105.9 million increase in core deposits, partially offset by a
$3.2 million decrease in time deposits. Deposits in our CCBX
segment increased $166.2 million, from $1.86 billion at
December 31, 2023, to $2.03 billion at March 31, 2024 and
community bank deposits decreased $63.6 million from $1.50 billion
at December 31, 2023, to $1.43 billion at March 31, 2024.
The decrease in community bank deposits is a result of managing our
deposit rates during the quarter and letting some of our higher
rate deposits run-off. We are comfortable with our pricing
discipline and letting some of the higher rate community bank
deposits run-off because we believe that we have adequate funding
access through our CCBX deposits, and despite the generally higher
cost of deposits, these CCBX deposits are typically less costly
than raising our rates to meet competitors' rates, brokered funds
or borrowing rates. We are working to retain and grow our community
bank deposits and will continue to do so in future quarters when
interest rates are lower and customers are less rate sensitive.
CCBX deposits continue to grow as a percent of total deposits. The
deposits from our CCBX segment are predominately classified as
interest bearing demand and money market accounts. During the
quarter ended March 31, 2024, noninterest bearing deposits
decreased $51.1 million, or 8.2%, to $574.1 million from $625.2
million at December 31, 2023. Community bank noninterest
bearing deposits totaled $515.4 million or 35.9% of total community
bank deposits and CCBX noninterest bearing deposits totaled $58.7
million, or 2.9% of total CCBX deposits. In the quarter ended
March 31, 2024 compared to the quarter ended December 31,
2023, interest bearing demand and money market accounts increased
$159.4 million, savings deposits decreased $2.5 million, and time
deposits decreased $3.2 million. Included in total deposits is
$336.8 million in IntraFi network reciprocal interest bearing
demand and money market accounts as of March 31, 2024, which
provides our larger deposit customers with fully insured deposits
through a reciprocal agreement with other banks. Uninsured deposits
decreased to $495.6 million as of March 31, 2024, compared to
$558.6 million as of December 31, 2023.
Total deposits increased $367.8 million, or 11.9%, to $3.46
billion at March 31, 2024 compared to $3.10 billion at
March 31, 2023. The increase is largely the result of growth
in CCBX deposits. Noninterest bearing deposits decreased $187.7
million, or 24.6%, to $574.1 million at March 31, 2024 from
$761.8 million at March 31, 2023 as a result of customer
movement from noninterest to interest bearing accounts. Interest
bearing demand and money market accounts increased $592.5 million,
or 26.8%, to $2.80 billion at March 31, 2024, and savings
deposits decreased $25.2 million, or 25.3%, and time deposits
decreased $11.9 million, or 44.1%, in the first quarter
of 2024 compared to the first quarter of 2023. Deposits in our CCBX
segment increased $465.1 million, from $1.56 billion at
March 31, 2023, to $2.03 billion at March 31, 2024 and
community bank deposits decreased $97.4 million, from $1.53 billion
at March 31, 2023, to $1.43 billion at March 31, 2024.
The deposits from our CCBX segment are predominately classified as
interest bearing demand and money market accounts. Uninsured
deposits decreased to $495.6 million as of March 31, 2024,
compared to $768.3 million as of March 31, 2023 primarily as a
result of increased usage of our cash sweep and exchange services
to other banks for increased FDIC insurance coverage as described
below.
Additionally, as of March 31, 2024, $92.2 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.
|
Consolidated |
As of March 31, 2024 |
|
As of December 31, 2023 |
|
As of March 31, 2023 |
|
(dollars in thousands; unaudited) |
Amount |
|
Percent of
TotalDeposits |
|
Balance |
|
Percent of
TotalDeposits |
|
Balance |
|
Percent of
TotalDeposits |
|
Demand, noninterest bearing |
$ |
574,112 |
|
|
16.6 |
% |
|
$ |
625,202 |
|
|
18.6 |
% |
|
$ |
761,800 |
|
|
24.6 |
% |
| Interest bearing demand and
money market |
|
2,799,667 |
|
|
80.9 |
|
|
|
2,640,240 |
|
|
78.6 |
|
|
|
2,207,121 |
|
|
71.3 |
|
|
Savings |
|
74,085 |
|
|
2.1 |
|
|
|
76,562 |
|
|
2.3 |
|
|
|
99,241 |
|
|
3.2 |
|
|
Total core deposits |
|
3,447,864 |
|
|
99.6 |
|
|
|
3,342,004 |
|
|
99.5 |
|
|
|
3,068,162 |
|
|
99.1 |
|
|
Brokered deposits |
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
— |
|
| Time
deposits less than $100,000 |
|
7,199 |
|
|
0.2 |
|
|
|
8,109 |
|
|
0.2 |
|
|
|
11,343 |
|
|
0.4 |
|
| Time
deposits $100,000 and over |
|
7,915 |
|
|
0.2 |
|
|
|
10,249 |
|
|
0.3 |
|
|
|
15,717 |
|
|
0.5 |
|
|
Total |
$ |
3,462,979 |
|
|
100.0 |
% |
|
$ |
3,360,363 |
|
|
100.0 |
% |
|
$ |
3,095,223 |
|
|
100.0 |
% |
| Cost
of deposits (1) |
|
3.49 |
% |
|
|
|
|
3.36 |
% |
|
|
|
|
2.13 |
% |
|
|
(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 |
|
|
|
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
515,443 |
|
|
35.9 |
% |
|
$ |
561,572 |
|
|
37.5 |
% |
|
$ |
664,452 |
|
|
43.4 |
% |
|
Interest bearing demand and money market |
|
|
834,725 |
|
|
58.2 |
|
|
|
846,072 |
|
|
56.5 |
|
|
|
743,548 |
|
|
48.6 |
|
|
Savings |
|
|
68,747 |
|
|
4.8 |
|
|
|
71,598 |
|
|
4.8 |
|
|
|
96,330 |
|
|
6.3 |
|
|
Total core deposits |
|
|
1,418,915 |
|
|
98.9 |
|
|
|
1,479,242 |
|
|
98.8 |
|
|
|
1,504,330 |
|
|
98.3 |
|
|
Brokered deposits |
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
| Time
deposits less than $100,000 |
|
|
7,199 |
|
|
0.5 |
|
|
|
8,109 |
|
|
0.5 |
|
|
|
11,343 |
|
|
0.7 |
|
| Time
deposits $100,000 and over |
|
|
7,915 |
|
|
0.6 |
|
|
|
10,249 |
|
|
0.7 |
|
|
|
15,717 |
|
|
1.0 |
|
|
Total Community Bank deposits |
|
$ |
1,434,030 |
|
|
100.0 |
% |
|
$ |
1,497,601 |
|
|
100.0 |
% |
|
$ |
1,531,391 |
|
|
100.0 |
% |
| Cost
of deposits(1) |
|
|
1.66 |
% |
|
|
|
|
1.57 |
% |
|
|
|
|
0.66 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
|
CCBX |
|
As of |
|
|
|
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
58,669 |
|
|
2.9 |
% |
|
$ |
63,630 |
|
|
3.4 |
% |
|
$ |
97,348 |
|
|
6.2 |
% |
|
Interest bearing demand and money market |
|
|
1,964,942 |
|
|
96.8 |
|
|
|
1,794,168 |
|
|
96.3 |
|
|
|
1,463,573 |
|
|
93.6 |
|
|
Savings |
|
|
5,338 |
|
|
0.3 |
|
|
|
4,964 |
|
|
0.3 |
|
|
|
2,911 |
|
|
0.2 |
|
|
Total core deposits |
|
|
2,028,949 |
|
|
100.0 |
|
|
|
1,862,762 |
|
|
100.0 |
|
|
|
1,563,832 |
|
|
100.0 |
|
|
BaaS-brokered deposits |
|
|
— |
|
|
0.0 |
|
|
|
— |
|
|
0.0 |
|
|
|
— |
|
|
— |
|
|
Total CCBX deposits |
|
$ |
2,028,949 |
|
|
100.0 |
% |
|
$ |
1,862,762 |
|
|
100.0 |
% |
|
$ |
1,563,832 |
|
|
100.0 |
% |
| Cost
of deposits (1) |
|
|
4.93 |
% |
|
|
|
|
4.90 |
% |
|
|
|
|
3.89 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
Borrowings
As of March 31, 2024, the Company had the capacity to
borrow up to a total of $659.5 million from the Federal Reserve
Bank discount window and Federal Home Loan Bank, and an additional
$50.0 million from a correspondent bank, with no borrowings
outstanding on these lines as of March 31, 2024.
Shareholders’ Equity
The Company had a cash balance of $5.3 million as of
March 31, 2024, which is retained for general operating
purposes, including debt repayment, and for funding $643,000 in
commitments to bank technology funds.
Total shareholders’ equity increased $8.7 million since
December 31, 2023. The increase in shareholders’
equity was primarily due to $6.8 million in net earnings, combined
with a decrease in the unrealized loss on available-for-sale
securities of $467,000 during the three months ended March 31,
2024.
Capital Ratios
The Company and the Bank remained well capitalized at
March 31, 2024, 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) |
|
9.19 |
% |
|
8.24 |
% |
|
5.00 |
% |
| Common Equity Tier 1 Capital
(to risk-weighted assets) |
|
10.14 |
% |
|
8.98 |
% |
|
6.50 |
% |
| Tier 1 Capital (to
risk-weighted assets) |
|
10.14 |
% |
|
9.08 |
% |
|
8.00 |
% |
| Total Capital (to
risk-weighted assets) |
|
11.43 |
% |
|
11.70 |
% |
|
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
The total allowance for credit losses was $139.3 million and
4.35% of loans receivable at March 31, 2024 compared to $117.0
million and 3.86% at December 31, 2023 and $89.1 million and
3.14% at March 31, 2023. The allowance for credit loss
allocated to the CCBX portfolio was $117.9 million and 8.96% of
CCBX loans receivable at March 31, 2024, with $21.4 million of
allowance for credit loss allocated to the community bank or 1.14%
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 March 31, 2024 |
|
As of December 31, 2023 |
|
As of March 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Loans receivable |
|
$ |
1,883,282 |
|
|
$ |
1,316,272 |
|
|
$ |
3,199,554 |
|
|
$ |
1,830,154 |
|
|
$ |
1,195,938 |
|
|
$ |
3,026,092 |
|
|
$ |
1,671,014 |
|
|
$ |
1,166,190 |
|
|
$ |
2,837,204 |
|
| Allowance for credit
losses |
|
|
(21,384 |
) |
|
|
(117,874 |
) |
|
|
(139,258 |
) |
|
|
(21,595 |
) |
|
|
(95,363 |
) |
|
|
(116,958 |
) |
|
|
(20,708 |
) |
|
|
(68,415 |
) |
|
|
(89,123 |
) |
| Allowance for credit
losses to total loans receivable |
|
|
1.14 |
% |
|
|
8.96 |
% |
|
|
4.35 |
% |
|
|
1.18 |
% |
|
|
7.97 |
% |
|
|
3.86 |
% |
|
|
1.24 |
% |
|
|
5.87 |
% |
|
|
3.14 |
% |
Provision for credit losses - loans totaled $79.5 million for
the three months ended March 31, 2024, $60.7 million for the
three months ended December 31, 2023, and $43.5 million for
the three months ended March 31, 2023. Net charge-offs totaled
$57.2 million for the quarter ended March 31, 2024, compared
to $44.9 million for the quarter ended December 31, 2023 and
$32.3 million for the quarter ended March 31, 2023. Provisions
for credit losses – loans and net charge-offs increased due to an
increase in CCBX loans receivable which have a higher level of
expected losses than our community bank loans, as reflected in the
factors for allowance for credit losses . CCBX partner agreements
provide for a credit enhancement that covers the net-charge-offs on
CCBX loans and negative deposit accounts by indemnifying or
reimbursing incurred losses, except in accordance with the program
agreement for one partner where the Company was responsible for
credit losses on approximately 10% of a $317.8 million loan
portfolio. Effective April 1, 2024, the agreement changed and the
Company is responsible for 5% of the credit losses on this loan
portfolio. At March 31, 2024, our portion of this portfolio
represented $32.0 million in loans. The provision on the Company's
portion of the portfolio was $1.3 million for the three months
ended March 31, 2024 compared to $2.1 million for the three
months ended December 31, 2023 and $770,000 for the three
months ended March 31, 2023. While this portfolio of partner
loans for which we are fully responsible remains profitable, the
provision for credit losses has increased compared to the quarter
ended March 31, 2023 both from growth in the portfolio and a
higher loss rate. In response, and working with the partner, we
have strengthened our underwriting standards. Our allowance for
credit losses at March 31, 2024 was based on 5% of the balance
outstanding that the Company is now responsible for, in accordance
with the updated and signed agreement.
Net charge-offs for this $32.0 million in loans were $2.1
million for the three months ended March 31, 2024, compared to
$1.5 million for the three months ended December 31, 2023 and
$590,000 for the three months ended March 31, 2023.
The following table details net charge-offs for the community
bank and CCBX for the period indicated:
| |
|
Three Months Ended |
| |
|
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Gross charge-offs |
|
$ |
15 |
|
|
$ |
58,979 |
|
|
$ |
58,994 |
|
|
$ |
2 |
|
|
$ |
47,650 |
|
|
$ |
47,652 |
|
|
$ |
50 |
|
|
$ |
34,117 |
|
|
$ |
34,167 |
|
| Gross
recoveries |
|
|
(4 |
) |
|
|
(1,772 |
) |
|
|
(1,776 |
) |
|
|
(4 |
) |
|
|
(2,777 |
) |
|
|
(2,781 |
) |
|
|
(5 |
) |
|
|
(1,860 |
) |
|
|
(1,865 |
) |
|
Net charge-offs |
|
$ |
11 |
|
|
$ |
57,207 |
|
|
$ |
57,218 |
|
|
$ |
(2 |
) |
|
$ |
44,873 |
|
|
$ |
44,871 |
|
|
$ |
45 |
|
|
$ |
32,257 |
|
|
$ |
32,302 |
|
| Net charge-offs
to average loans (1) |
|
|
0.00 |
% |
|
|
18.18 |
% |
|
|
7.34 |
% |
|
|
0.00 |
% |
|
|
14.88 |
% |
|
|
5.92 |
% |
|
|
0.01 |
% |
|
|
12.29 |
% |
|
|
4.84 |
% |
(1) Annualized calculations shown for periods
presented.
The increase in the Company’s provision for credit losses -
loans during the quarter ended March 31, 2024, is a result of
an increase in loans receivable. During the quarter ended
March 31, 2024, a $79.7 million provision for credit losses -
loans was recorded for CCBX partner loans based on management’s
analysis, compared to the $60.5 million provision for credit losses
- loans that was recorded for CCBX for the quarter ended
December 31, 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 the quarter ended March 31, 2024, management
re-evaluated and updated its assumptions to more accurately reflect
the risk of unfunded commitments and to better reflect the loss
rate of the community bank portfolio overall. As a result,
management increased the unfunded commitment provision for the
community bank by $2.2 million. The allowance for the community
bank loan portfolio was reduced as a result of the continued strong
performance of the community bank portfolio, which primarily offset
the increase in the unfunded commitment provision.
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. 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 factors used in management’s analysis for community bank
credit losses indicated that a provision recapture of $199,000 and
was needed for the quarter ended March 31, 2024 and a
provision of $277,000 and $428,000 was needed for the quarters
ended December 31, 2023 and March 31, 2023,
respectively.
The following table details the provision expense/(recapture)
for the community bank and CCBX for the period indicated:
| |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
Community bank |
|
$ |
(199 |
) |
|
$ |
277 |
|
$ |
428 |
|
CCBX |
|
|
79,717 |
|
|
|
60,467 |
|
|
43,116 |
|
Total provision expense |
|
$ |
79,518 |
|
|
$ |
60,744 |
|
$ |
43,544 |
At March 31, 2024, our nonperforming assets were $54.9
million, or 1.42% of total assets, compared to $53.8 million, or
1.43%, of total assets, at December 31, 2023, and $31.5
million, or 0.91% of total assets, at March 31, 2023. These
ratios are impacted by CCBX loans over 90 days delinquent that are
covered by CCBX partner credit enhancements. As of March 31,
2024, $44.3 million of the $46.9 million in nonperforming CCBX
loans were covered by CCBX partner credit enhancements described
above. Nonperforming assets increased $1.0 million during the
quarter ended March 31, 2024, compared to the quarter ended
December 31, 2023, due to a $399,000 increase in CCBX loans
that are past due 90 days or more and still accruing combined with
a $628,000 increase 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 increased with the
addition of two nonaccrual loans, partially offset by two payoffs.
There were no repossessed assets or other real estate owned at
March 31, 2024. Our nonperforming loans to loans receivable
ratio was 1.71% at March 31, 2024, compared to 1.78% at
December 31, 2023, and 1.11% at March 31, 2023.
For the quarter ended March 31, 2024, there were $11,000
community bank net recoveries and $7.9 million nonperforming
community bank loans, including a multifamily loan for $6.9 million
with a $1.1 million reserve to align with purchase sale agreement
(see the unanticipated expenses table at the beginning of this
earnings release). For the quarter ended March 31, 2024 $57.2
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 following table details the Company’s nonperforming assets
for the periods indicated.
|
Consolidated |
|
|
|
|
|
|
(dollars in thousands; unaudited) |
As of March 31, 2024 |
|
As of December 31, 2023 |
|
As of March 31, 2023 |
|
Nonaccrual loans: |
|
|
|
|
|
|
Commercial and industrial loans |
$ |
— |
|
|
$ |
— |
|
|
$ |
15 |
|
| Real estate loans: |
|
|
|
|
|
|
Construction, land and land development |
|
— |
|
|
|
— |
|
|
|
66 |
|
|
Residential real estate |
|
212 |
|
|
|
170 |
|
|
|
— |
|
|
Commercial real estate |
|
7,731 |
|
|
|
7,145 |
|
|
|
6,901 |
|
|
Total nonaccrual loans |
|
7,943 |
|
|
|
7,315 |
|
|
|
6,982 |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
Commercial & industrial loans |
|
1,793 |
|
|
|
2,086 |
|
|
|
187 |
|
| Real
estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
1,796 |
|
|
|
1,115 |
|
|
|
946 |
|
|
Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
37,603 |
|
|
|
34,835 |
|
|
|
17,772 |
|
|
Other consumer and other loans |
|
5,731 |
|
|
|
8,488 |
|
|
|
5,657 |
|
|
Total accruing loans past due 90 days or more |
|
46,923 |
|
|
|
46,524 |
|
|
|
24,562 |
|
|
Total nonperforming loans |
|
54,866 |
|
|
|
53,839 |
|
|
|
31,544 |
|
| Real estate
owned |
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
$ |
54,866 |
|
|
$ |
53,839 |
|
|
$ |
31,544 |
|
| Total nonaccrual loans to
loans receivable |
|
0.25 |
% |
|
|
0.24 |
% |
|
|
0.25 |
% |
| Total nonperforming loans to
loans receivable |
|
1.71 |
% |
|
|
1.78 |
% |
|
|
1.11 |
% |
| Total nonperforming assets to
total assets |
|
1.42 |
% |
|
|
1.43 |
% |
|
|
0.91 |
% |
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) |
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
Nonaccrual loans: |
|
|
|
|
|
|
Commercial and industrial loans |
$ |
— |
|
$ |
— |
|
$ |
15 |
| Real estate: |
|
|
|
|
|
|
Construction, land and land development |
|
— |
|
|
— |
|
|
66 |
|
Residential real estate |
|
212 |
|
|
170 |
|
|
— |
|
Commercial real estate |
|
7,731 |
|
|
7,145 |
|
|
6,901 |
|
Total nonaccrual loans |
|
7,943 |
|
|
7,315 |
|
|
6,982 |
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
Total accruing loans past due 90 days or more |
|
— |
|
|
— |
|
|
— |
|
Total nonperforming loans |
|
7,943 |
|
|
7,315 |
|
|
6,982 |
| Other real estate
owned |
|
— |
|
|
— |
|
|
— |
| Repossessed
assets |
|
— |
|
|
— |
|
|
— |
| Total nonperforming
assets |
$ |
7,943 |
|
$ |
7,315 |
|
$ |
6,982 |
|
CCBX |
As of |
|
(dollars in thousands; unaudited) |
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
Nonaccrual loans |
$ |
— |
|
$ |
— |
|
$ |
— |
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
Commercial & industrial loans |
|
1,793 |
|
|
2,086 |
|
|
187 |
| Real
estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
1,796 |
|
|
1,115 |
|
|
946 |
|
Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
37,603 |
|
|
34,835 |
|
|
17,772 |
|
Other consumer and other loans |
|
5,731 |
|
|
8,488 |
|
|
5,657 |
|
Total accruing loans past due 90 days or more |
|
46,923 |
|
|
46,524 |
|
|
24,562 |
|
Total nonperforming loans |
|
46,923 |
|
|
46,524 |
|
|
24,562 |
| Other real estate
owned |
|
— |
|
|
— |
|
|
— |
| Repossessed
assets |
|
— |
|
|
— |
|
|
— |
| Total nonperforming
assets |
$ |
46,923 |
|
$ |
46,524 |
|
$ |
24,562 |
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 $3.87 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) 357-3659Joel
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 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 CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION(Dollars in thousands; unaudited) |
|
|
|
ASSETS |
| |
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
Cash and due from banks |
$ |
32,790 |
|
|
$ |
31,345 |
|
|
$ |
37,676 |
|
| Interest
earning deposits with other banks |
|
482,338 |
|
|
|
451,783 |
|
|
|
356,240 |
|
|
Investment securities, available for sale, at fair value |
|
41 |
|
|
|
99,504 |
|
|
|
97,999 |
|
|
Investment securities, held to maturity, at amortized cost |
|
50,049 |
|
|
|
50,860 |
|
|
|
3,705 |
|
| Other
investments |
|
10,583 |
|
|
|
10,227 |
|
|
|
11,346 |
|
| Loans
held for sale |
|
797 |
|
|
|
— |
|
|
|
27,292 |
|
| Loans
receivable |
|
3,199,554 |
|
|
|
3,026,092 |
|
|
|
2,837,204 |
|
|
Allowance for credit losses |
|
(139,258 |
) |
|
|
(116,958 |
) |
|
|
(89,123 |
) |
|
Total loans receivable, net |
|
3,060,296 |
|
|
|
2,909,134 |
|
|
|
2,748,081 |
|
| CCBX
credit enhancement asset |
|
137,276 |
|
|
|
107,921 |
|
|
|
76,395 |
|
| CCBX
receivable |
|
10,369 |
|
|
|
9,088 |
|
|
|
13,681 |
|
| Premises
and equipment, net |
|
22,995 |
|
|
|
22,090 |
|
|
|
18,030 |
|
|
Operating lease right-of-use assets |
|
5,756 |
|
|
|
5,932 |
|
|
|
4,812 |
|
| Accrued
interest receivable |
|
24,681 |
|
|
|
26,819 |
|
|
|
19,321 |
|
|
Bank-owned life insurance, net |
|
12,991 |
|
|
|
12,870 |
|
|
|
12,761 |
|
| Deferred
tax asset, net |
|
2,221 |
|
|
|
3,806 |
|
|
|
20,527 |
|
| Other
assets |
|
12,075 |
|
|
|
11,987 |
|
|
|
3,167 |
|
|
Total assets |
$ |
3,865,258 |
|
|
$ |
3,753,366 |
|
|
$ |
3,451,033 |
|
| |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| LIABILITIES |
|
|
|
|
|
|
Deposits |
$ |
3,462,979 |
|
|
$ |
3,360,363 |
|
|
$ |
3,095,223 |
|
|
Subordinated debt, net |
|
44,181 |
|
|
|
44,144 |
|
|
|
44,031 |
|
|
Junior subordinated debentures, net |
|
3,590 |
|
|
|
3,590 |
|
|
|
3,588 |
|
|
Deferred compensation |
|
442 |
|
|
|
479 |
|
|
|
582 |
|
|
Accrued interest payable |
|
1,061 |
|
|
|
892 |
|
|
|
874 |
|
|
Operating lease liabilities |
|
5,946 |
|
|
|
6,124 |
|
|
|
5,022 |
|
|
CCBX payable |
|
33,095 |
|
|
|
33,651 |
|
|
|
30,794 |
|
|
Other liabilities |
|
10,255 |
|
|
|
9,145 |
|
|
|
12,156 |
|
|
Total liabilities |
|
3,561,549 |
|
|
|
3,458,388 |
|
|
|
3,192,270 |
|
| |
|
|
|
|
|
| SHAREHOLDERS’ EQUITY |
|
|
|
|
|
| Common stock |
|
131,601 |
|
|
|
130,136 |
|
|
|
127,447 |
|
|
Retained earnings |
|
172,110 |
|
|
|
165,311 |
|
|
|
133,123 |
|
|
Accumulated other comprehensive loss, net of tax |
|
(2 |
) |
|
|
(469 |
) |
|
|
(1,807 |
) |
|
Total shareholders’ equity |
|
303,709 |
|
|
|
294,978 |
|
|
|
258,763 |
|
|
Total liabilities and shareholders’ equity |
$ |
3,865,258 |
|
|
$ |
3,753,366 |
|
|
$ |
3,451,033 |
|
| |
| COASTAL FINANCIAL
CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Dollars in
thousands, except per share amounts; unaudited) |
| |
| |
Three Months Ended |
| |
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
| INTEREST
AND DIVIDEND INCOME |
|
|
|
|
|
|
Interest and fees on loans |
$ |
84,621 |
|
|
$ |
81,159 |
|
|
$ |
66,431 |
|
Interest on interest earning deposits with other banks |
|
4,780 |
|
|
|
5,687 |
|
|
|
3,097 |
|
Interest on investment securities |
|
1,034 |
|
|
|
1,225 |
|
|
|
553 |
|
Dividends on other investments |
|
37 |
|
|
|
172 |
|
|
|
30 |
|
Total interest income |
|
90,472 |
|
|
|
88,243 |
|
|
|
70,111 |
| INTEREST
EXPENSE |
|
|
|
|
|
|
Interest on deposits |
|
28,867 |
|
|
|
27,916 |
|
|
|
14,958 |
|
Interest on borrowed funds |
|
669 |
|
|
|
670 |
|
|
|
662 |
|
Total interest expense |
|
29,536 |
|
|
|
28,586 |
|
|
|
15,620 |
|
Net interest income |
|
60,936 |
|
|
|
59,657 |
|
|
|
54,491 |
|
PROVISION FOR CREDIT LOSSES |
|
83,158 |
|
|
|
60,789 |
|
|
|
43,697 |
|
Net interest income/(expense) after provision for credit
losses |
|
(22,222 |
) |
|
|
(1,132 |
) |
|
|
10,794 |
|
NONINTEREST INCOME |
|
|
|
|
|
|
Deposit service charges and fees |
|
908 |
|
|
|
957 |
|
|
|
910 |
|
Loan referral fees |
|
168 |
|
|
|
— |
|
|
|
— |
|
Gain on sales of loans, net |
|
— |
|
|
|
— |
|
|
|
123 |
|
Unrealized gain (loss) on equity securities, net |
|
15 |
|
|
|
80 |
|
|
|
39 |
|
Other income |
|
308 |
|
|
|
60 |
|
|
|
299 |
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,399 |
|
|
|
1,097 |
|
|
|
1,371 |
|
Servicing and other BaaS fees |
|
1,131 |
|
|
|
1,015 |
|
|
|
948 |
|
Transaction fees |
|
1,122 |
|
|
|
1,006 |
|
|
|
917 |
|
Interchange fees |
|
1,539 |
|
|
|
1,272 |
|
|
|
789 |
|
Reimbursement of expenses |
|
1,033 |
|
|
|
1,076 |
|
|
|
921 |
|
BaaS program income |
|
4,825 |
|
|
|
4,369 |
|
|
|
3,575 |
|
BaaS credit enhancements |
|
79,808 |
|
|
|
58,449 |
|
|
|
42,362 |
|
BaaS fraud enhancements |
|
923 |
|
|
|
779 |
|
|
|
1,999 |
|
BaaS indemnification income |
|
80,731 |
|
|
|
59,228 |
|
|
|
44,361 |
|
Total noninterest income |
|
86,955 |
|
|
|
64,694 |
|
|
|
49,307 |
|
NONINTEREST EXPENSE |
|
|
|
|
|
|
Salaries and employee benefits |
|
17,984 |
|
|
|
16,490 |
|
|
|
15,575 |
|
Occupancy |
|
1,518 |
|
|
|
1,340 |
|
|
|
1,219 |
|
Data processing and software licenses |
|
2,892 |
|
|
|
2,417 |
|
|
|
1,840 |
|
Legal and professional expenses |
|
3,672 |
|
|
|
2,649 |
|
|
|
3,062 |
|
Point of sale expense |
|
869 |
|
|
|
899 |
|
|
|
753 |
|
Excise taxes |
|
320 |
|
|
|
449 |
|
|
|
455 |
|
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
683 |
|
|
|
665 |
|
|
|
595 |
|
Director and staff expenses |
|
400 |
|
|
|
478 |
|
|
|
626 |
|
Marketing |
|
53 |
|
|
|
138 |
|
|
|
95 |
|
Other expense |
|
1,867 |
|
|
|
1,089 |
|
|
|
890 |
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
30,258 |
|
|
|
26,614 |
|
|
|
25,110 |
|
BaaS loan expense |
|
24,837 |
|
|
|
24,310 |
|
|
|
17,554 |
|
BaaS fraud expense |
|
923 |
|
|
|
779 |
|
|
|
1,999 |
|
BaaS loan and fraud expense |
|
25,760 |
|
|
|
25,089 |
|
|
|
19,553 |
|
Total noninterest expense |
|
56,018 |
|
|
|
51,703 |
|
|
|
44,663 |
|
Income before provision for income taxes |
|
8,715 |
|
|
|
11,859 |
|
|
|
15,438 |
|
PROVISION FOR INCOME TAXES |
|
1,915 |
|
|
|
2,847 |
|
|
|
3,047 |
| NET
INCOME |
$ |
6,800 |
|
|
$ |
9,012 |
|
|
$ |
12,391 |
| Basic
earnings per common share |
$ |
0.51 |
|
|
$ |
0.68 |
|
|
$ |
0.94 |
| Diluted
earnings per common share |
$ |
0.50 |
|
|
$ |
0.66 |
|
|
$ |
0.91 |
| Weighted
average number of common shares outstanding: |
|
|
|
|
|
|
Basic |
|
13,340,997 |
|
|
|
13,286,828 |
|
|
|
13,196,960 |
|
Diluted |
|
13,676,917 |
|
|
|
13,676,513 |
|
|
|
13,609,491 |
| |
| COASTAL FINANCIAL
CORPORATIONAVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY(Dollars
in thousands; unaudited) |
| |
| |
For the Three Months Ended |
| |
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
|
|
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 |
$ |
350,868 |
|
|
$ |
4,780 |
|
5.48 |
% |
|
$ |
413,127 |
|
|
$ |
5,687 |
|
5.46 |
% |
|
$ |
271,700 |
|
|
$ |
3,097 |
|
4.62 |
% |
|
Investment securities, available for sale (2) |
|
64,878 |
|
|
|
349 |
|
2.16 |
|
|
|
100,204 |
|
|
|
546 |
|
2.16 |
|
|
|
100,273 |
|
|
|
535 |
|
2.16 |
|
|
Investment securities, held to maturity (2) |
|
50,490 |
|
|
|
685 |
|
5.46 |
|
|
|
49,469 |
|
|
|
679 |
|
5.45 |
|
|
|
1,955 |
|
|
|
18 |
|
3.73 |
|
|
Other investments |
|
10,262 |
|
|
|
37 |
|
1.45 |
|
|
|
11,683 |
|
|
|
172 |
|
5.84 |
|
|
|
10,633 |
|
|
|
30 |
|
1.14 |
|
|
Loans receivable (3) |
|
3,137,271 |
|
|
|
84,621 |
|
10.85 |
|
|
|
3,007,289 |
|
|
|
81,159 |
|
10.71 |
|
|
|
2,708,177 |
|
|
|
66,431 |
|
9.95 |
|
| Total
interest earning assets |
|
3,613,769 |
|
|
|
90,472 |
|
10.07 |
|
|
|
3,581,772 |
|
|
|
88,243 |
|
9.77 |
|
|
|
3,092,738 |
|
|
|
70,111 |
|
9.19 |
|
|
Noninterest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
(114,985 |
) |
|
|
|
|
|
|
(95,391 |
) |
|
|
|
|
|
|
(81,086 |
) |
|
|
|
|
|
Other noninterest earning assets |
|
229,437 |
|
|
|
|
|
|
|
204,052 |
|
|
|
|
|
|
|
172,161 |
|
|
|
|
|
|
Total assets |
$ |
3,728,221 |
|
|
|
|
|
|
$ |
3,690,433 |
|
|
|
|
|
|
$ |
3,183,813 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
2,728,884 |
|
|
$ |
28,867 |
|
4.25 |
% |
|
$ |
2,660,235 |
|
|
$ |
27,916 |
|
4.16 |
% |
|
$ |
2,070,217 |
|
|
$ |
14,958 |
|
2.93 |
% |
| FHLB
advances and other borrowings |
|
5 |
|
|
|
— |
|
— |
|
|
|
1 |
|
|
|
— |
|
— |
|
|
|
— |
|
|
|
— |
|
— |
|
|
Subordinated debt |
|
44,159 |
|
|
|
598 |
|
5.45 |
|
|
|
44,121 |
|
|
|
598 |
|
5.38 |
|
|
|
44,010 |
|
|
|
599 |
|
5.52 |
|
|
Junior subordinated debentures |
|
3,590 |
|
|
|
71 |
|
7.95 |
|
|
|
3,590 |
|
|
|
72 |
|
7.96 |
|
|
|
3,588 |
|
|
|
63 |
|
7.12 |
|
| Total
interest bearing liabilities |
|
2,776,638 |
|
|
|
29,536 |
|
4.28 |
|
|
|
2,707,947 |
|
|
|
28,586 |
|
4.19 |
|
|
|
2,117,815 |
|
|
|
15,620 |
|
2.99 |
|
|
Noninterest bearing deposits |
|
595,693 |
|
|
|
|
|
|
|
640,424 |
|
|
|
|
|
|
|
775,940 |
|
|
|
|
|
| Other
liabilities |
|
58,829 |
|
|
|
|
|
|
|
52,450 |
|
|
|
|
|
|
|
37,448 |
|
|
|
|
|
| Total
shareholders' equity |
|
297,061 |
|
|
|
|
|
|
|
289,612 |
|
|
|
|
|
|
|
252,610 |
|
|
|
|
|
| Total
liabilities and shareholders' equity |
$ |
3,728,221 |
|
|
|
|
|
|
$ |
3,690,433 |
|
|
|
|
|
|
$ |
3,183,813 |
|
|
|
|
|
| Net
interest income |
|
|
$ |
60,936 |
|
|
|
|
|
$ |
59,657 |
|
|
|
|
|
$ |
54,491 |
|
|
|
Interest rate spread |
|
|
|
|
5.79 |
% |
|
|
|
|
|
5.59 |
% |
|
|
|
|
|
6.20 |
% |
| Net
interest margin (4) |
|
|
|
|
6.78 |
% |
|
|
|
|
|
6.61 |
% |
|
|
|
|
|
7.15 |
% |
(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
CORPORATIONSELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY
SEGMENT - QUARTERLY(Dollars in thousands; unaudited) |
| |
| |
For the Three Months Ended |
| |
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
|
(dollars in thousands, unaudited) |
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2) |
$ |
1,871,414 |
|
$ |
30,052 |
|
6.46 |
% |
|
$ |
1,811,152 |
|
$ |
28,832 |
|
6.32 |
% |
|
$ |
1,643,985 |
|
$ |
24,211 |
|
5.97 |
% |
|
Total interest earning assets |
|
1,871,414 |
|
|
30,052 |
|
6.46 |
|
|
|
1,811,152 |
|
|
28,832 |
|
6.32 |
|
|
|
1,643,985 |
|
|
24,211 |
|
5.97 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
922,340 |
|
|
6,013 |
|
2.62 |
% |
|
|
951,148 |
|
|
6,090 |
|
2.54 |
% |
|
|
853,152 |
|
|
2,534 |
|
1.20 |
% |
|
Intrabank liability |
|
410,993 |
|
|
5,599 |
|
5.48 |
|
|
|
275,995 |
|
|
3,799 |
|
5.46 |
|
|
|
94,668 |
|
|
1,079 |
|
4.62 |
|
| Total
interest bearing liabilities |
|
1,333,333 |
|
|
11,612 |
|
3.50 |
|
|
|
1,227,143 |
|
|
9,889 |
|
3.20 |
|
|
|
947,820 |
|
|
3,613 |
|
1.55 |
|
|
Noninterest bearing deposits |
|
538,081 |
|
|
|
|
|
|
584,009 |
|
|
|
|
|
|
696,166 |
|
|
|
|
| Net interest income |
|
|
$ |
18,440 |
|
|
|
|
|
$ |
18,943 |
|
|
|
|
|
$ |
20,598 |
|
|
| Net interest margin(3) |
|
|
|
|
3.96 |
% |
|
|
|
|
|
4.15 |
% |
|
|
|
|
|
5.08 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2)(4) |
$ |
1,265,857 |
|
$ |
54,569 |
|
17.34 |
% |
|
$ |
1,196,137 |
|
$ |
52,327 |
|
17.36 |
% |
|
$ |
1,064,192 |
|
$ |
42,220 |
|
16.09 |
% |
|
Intrabank asset |
|
598,299 |
|
|
8,151 |
|
5.48 |
|
|
|
569,365 |
|
|
7,837 |
|
5.46 |
|
|
|
232,647 |
|
|
2,652 |
|
4.62 |
|
|
Total interest earning assets |
|
1,864,156 |
|
|
62,720 |
|
13.53 |
|
|
|
1,765,502 |
|
|
60,164 |
|
13.52 |
|
|
|
1,296,839 |
|
|
44,872 |
|
14.03 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
1,806,544 |
|
|
22,854 |
|
5.09 |
% |
|
|
1,709,087 |
|
|
21,826 |
|
5.07 |
% |
|
|
1,217,065 |
|
|
12,424 |
|
4.14 |
% |
| Total
interest bearing liabilities |
|
1,806,544 |
|
|
22,854 |
|
5.09 |
|
|
|
1,709,087 |
|
|
21,826 |
|
5.07 |
|
|
|
1,217,065 |
|
|
12,424 |
|
4.14 |
|
|
Noninterest bearing deposits |
|
57,612 |
|
|
|
|
|
|
56,415 |
|
|
|
|
|
|
79,774 |
|
|
|
|
| Net interest income |
|
|
$ |
39,866 |
|
|
|
|
|
$ |
38,338 |
|
|
|
|
|
$ |
32,448 |
|
|
| Net interest margin(3) |
|
|
|
|
8.60 |
% |
|
|
|
|
|
8.62 |
% |
|
|
|
|
|
10.15 |
% |
| Net interest margin,
net of Baas loan expense (5) |
|
|
|
|
3.24 |
% |
|
|
|
|
|
3.15 |
% |
|
|
|
|
|
4.66 |
% |
| |
For the Three Months Ended |
| |
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
|
(dollars in thousands, unaudited) |
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
| Treasury
& Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
$ |
350,868 |
|
$ |
4,780 |
|
5.48 |
% |
|
$ |
413,127 |
|
$ |
5,687 |
|
5.46 |
% |
|
$ |
271,700 |
|
$ |
3,097 |
|
4.62 |
% |
|
Investment securities, available for sale (6) |
|
64,878 |
|
|
349 |
|
2.16 |
|
|
|
100,204 |
|
|
546 |
|
2.16 |
|
|
|
100,273 |
|
|
535 |
|
2.16 |
|
|
Investment securities, held to maturity (6) |
|
50,490 |
|
|
685 |
|
5.46 |
|
|
|
49,469 |
|
|
679 |
|
5.45 |
|
|
|
1,955 |
|
|
18 |
|
3.73 |
|
|
Other investments |
|
10,262 |
|
|
37 |
|
1.45 |
|
|
|
11,683 |
|
|
172 |
|
5.84 |
|
|
|
10,633 |
|
|
30 |
|
1.15 |
|
| Total interest earning
assets |
|
476,498 |
|
|
5,851 |
|
4.94 |
% |
|
|
574,483 |
— |
|
7,084 |
|
4.89 |
% |
|
|
384,561 |
|
|
3,680 |
|
3.88 |
% |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances and borrowings |
$ |
5 |
|
$ |
— |
|
5.43 |
% |
|
|
3 |
|
|
— |
|
— |
% |
|
|
— |
|
|
— |
|
— |
% |
|
Subordinated debt |
|
44,159 |
|
|
598 |
|
5.45 |
% |
|
|
44,121 |
|
|
598 |
|
5.38 |
% |
|
|
44,010 |
|
|
599 |
|
5.52 |
% |
|
Junior subordinated debentures |
|
3,590 |
|
|
71 |
|
7.95 |
|
|
|
3,590 |
|
|
72 |
|
7.96 |
|
|
|
3,588 |
|
|
63 |
|
7.12 |
|
|
Intrabank liability, net (7) |
|
187,306 |
|
|
2,552 |
|
5.48 |
|
|
|
293,370 |
|
|
4,038 |
|
5.46 |
|
|
|
137,979 |
|
|
1,573 |
|
4.62 |
|
| Total interest bearing
liabilities |
|
235,060 |
|
|
3,221 |
|
5.51 |
|
|
|
341,084 |
|
|
4,708 |
|
5.48 |
|
|
|
185,576 |
|
|
2,235 |
|
4.89 |
|
| Net interest income |
|
|
$ |
2,630 |
|
|
|
|
|
$ |
2,376 |
|
|
|
|
|
$ |
1,445 |
|
|
| Net interest margin(3) |
|
|
|
|
2.22 |
% |
|
|
|
|
|
1.64 |
% |
|
|
|
|
|
1.52 |
% |
(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
CORPORATIONQUARTERLY STATISTICS(Dollars in thousands, except share
and per share data; unaudited) |
| |
| |
Three Months Ended |
| |
March 31,2024 |
|
December 31,2023 |
|
September 30, 2023 |
|
June 30,2023 |
|
March 31,2023 |
|
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
$ |
90,472 |
|
|
$ |
88,243 |
|
|
$ |
88,331 |
|
|
$ |
83,686 |
|
|
$ |
70,111 |
|
|
Interest expense |
|
29,536 |
|
|
|
28,586 |
|
|
|
26,102 |
|
|
|
21,336 |
|
|
|
15,620 |
|
| Net
interest income |
|
60,936 |
|
|
|
59,657 |
|
|
|
62,229 |
|
|
|
62,350 |
|
|
|
54,491 |
|
|
Provision for credit losses |
|
83,158 |
|
|
|
60,789 |
|
|
|
27,253 |
|
|
|
52,253 |
|
|
|
43,677 |
|
| Net
interest (expense)/ income after provision for credit
losses |
|
(22,222 |
) |
|
|
(1,132 |
) |
|
|
34,976 |
|
|
|
10,097 |
|
|
|
10,794 |
|
|
Noninterest income |
|
86,955 |
|
|
|
64,694 |
|
|
|
34,579 |
|
|
|
58,595 |
|
|
|
49,307 |
|
|
Noninterest expense |
|
56,018 |
|
|
|
51,703 |
|
|
|
56,501 |
|
|
|
51,910 |
|
|
|
44,663 |
|
|
Provision for income tax |
|
1,915 |
|
|
|
2,847 |
|
|
|
2,784 |
|
|
|
3,876 |
|
|
|
3,047 |
|
| Net
income |
|
6,800 |
|
|
|
9,012 |
|
|
|
10,270 |
|
|
|
12,906 |
|
|
|
12,391 |
|
| |
|
|
|
|
|
|
|
|
|
| |
As of and for the Three Month Period |
| |
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
| Cash
and cash equivalents |
$ |
515,128 |
|
|
$ |
483,128 |
|
|
$ |
474,946 |
|
|
$ |
275,060 |
|
|
$ |
393,916 |
|
|
Investment securities |
|
50,090 |
|
|
|
150,364 |
|
|
|
141,489 |
|
|
|
110,730 |
|
|
|
101,704 |
|
| Loans
held for sale |
|
797 |
|
|
|
— |
|
|
|
— |
|
|
|
35,923 |
|
|
|
27,292 |
|
| Loans
receivable |
|
3,199,554 |
|
|
|
3,026,092 |
|
|
|
2,967,035 |
|
|
|
3,007,553 |
|
|
|
2,837,204 |
|
|
Allowance for credit losses |
|
(139,258 |
) |
|
|
(116,958 |
) |
|
|
(101,085 |
) |
|
|
(110,762 |
) |
|
|
(89,123 |
) |
| Total
assets |
|
3,865,258 |
|
|
|
3,753,366 |
|
|
|
3,678,265 |
|
|
|
3,535,283 |
|
|
|
3,451,033 |
|
|
Interest bearing deposits |
|
2,888,867 |
|
|
|
2,735,161 |
|
|
|
2,637,914 |
|
|
|
2,436,980 |
|
|
|
2,333,423 |
|
|
Noninterest bearing deposits |
|
574,112 |
|
|
|
625,202 |
|
|
|
651,786 |
|
|
|
725,592 |
|
|
|
761,800 |
|
| Core
deposits (1) |
|
3,447,864 |
|
|
|
3,342,004 |
|
|
|
3,269,082 |
|
|
|
3,137,747 |
|
|
|
3,068,162 |
|
| Total
deposits |
|
3,462,979 |
|
|
|
3,360,363 |
|
|
|
3,289,700 |
|
|
|
3,162,572 |
|
|
|
3,095,223 |
|
| Total
borrowings |
|
47,771 |
|
|
|
47,734 |
|
|
|
47,695 |
|
|
|
47,658 |
|
|
|
47,619 |
|
| Total
shareholders’ equity |
|
303,709 |
|
|
|
294,978 |
|
|
|
284,450 |
|
|
|
272,662 |
|
|
|
258,763 |
|
| |
|
|
|
|
|
|
|
|
|
|
Share and Per Share Data
(2): |
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic |
$ |
0.51 |
|
|
$ |
0.68 |
|
|
$ |
0.77 |
|
|
$ |
0.97 |
|
|
$ |
0.94 |
|
|
Earnings per share – diluted |
$ |
0.50 |
|
|
$ |
0.66 |
|
|
$ |
0.75 |
|
|
$ |
0.95 |
|
|
$ |
0.91 |
|
|
Dividends per share |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Book
value per share (3) |
$ |
22.65 |
|
|
$ |
22.17 |
|
|
$ |
21.38 |
|
|
$ |
20.50 |
|
|
$ |
19.48 |
|
|
Tangible book value per share (4) |
$ |
22.65 |
|
|
$ |
22.17 |
|
|
$ |
21.38 |
|
|
$ |
20.50 |
|
|
$ |
19.48 |
|
|
Weighted avg outstanding shares – basic |
|
13,340,997 |
|
|
|
13,286,828 |
|
|
|
13,285,974 |
|
|
|
13,275,640 |
|
|
|
13,196,960 |
|
|
Weighted avg outstanding shares – diluted |
|
13,676,917 |
|
|
|
13,676,513 |
|
|
|
13,675,833 |
|
|
|
13,597,763 |
|
|
|
13,609,491 |
|
|
Shares outstanding at end of period |
|
13,407,320 |
|
|
|
13,304,339 |
|
|
|
13,302,449 |
|
|
|
13,300,809 |
|
|
|
13,281,533 |
|
| Stock
options outstanding at end of period |
|
309,069 |
|
|
|
354,969 |
|
|
|
356,359 |
|
|
|
357,999 |
|
|
|
360,119 |
|
| |
As of and for the Three Month Period |
| |
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
Credit Quality Data: |
|
|
|
|
|
|
|
|
|
|
Nonperforming assets (5) to total assets |
|
1.42 |
% |
|
|
1.43 |
% |
|
|
1.18 |
% |
|
|
0.95 |
% |
|
|
0.91 |
% |
|
Nonperforming assets (5) to loans receivable and OREO |
|
1.71 |
% |
|
|
1.78 |
% |
|
|
1.47 |
% |
|
|
1.12 |
% |
|
|
1.11 |
% |
|
Nonperforming loans (5) to total loans receivable |
|
1.71 |
% |
|
|
1.78 |
% |
|
|
1.47 |
% |
|
|
1.12 |
% |
|
|
1.11 |
% |
|
Allowance for credit losses to nonperforming loans |
|
253.8 |
% |
|
|
217.2 |
% |
|
|
232.2 |
% |
|
|
328.4 |
% |
|
|
282.5 |
% |
|
Allowance for credit losses to total loans receivable |
|
4.35 |
% |
|
|
3.86 |
% |
|
|
3.41 |
% |
|
|
3.68 |
% |
|
|
3.14 |
% |
| Gross
charge-offs |
$ |
58,994 |
|
|
$ |
47,652 |
|
|
$ |
37,879 |
|
|
$ |
32,299 |
|
|
$ |
34,167 |
|
| Gross
recoveries |
$ |
1,776 |
|
|
$ |
2,781 |
|
|
$ |
1,045 |
|
|
$ |
1,340 |
|
|
$ |
1,865 |
|
| Net
charge-offs to average loans (6) |
|
7.34 |
% |
|
|
5.92 |
% |
|
|
4.77 |
% |
|
|
4.19 |
% |
|
|
4.84 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Capital Ratios: |
|
|
|
|
|
|
|
|
|
| Company |
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital |
|
8.24 |
% |
|
|
8.10 |
% |
|
|
8.03 |
% |
|
|
8.16 |
% |
|
|
8.29 |
% |
| Common equity Tier 1
risk-based capital |
|
8.98 |
% |
|
|
9.10 |
% |
|
|
9.00 |
% |
|
|
8.36 |
% |
|
|
8.61 |
% |
| Tier 1 risk-based capital |
|
9.08 |
% |
|
|
9.20 |
% |
|
|
9.11 |
% |
|
|
8.47 |
% |
|
|
8.73 |
% |
| Total risk-based capital |
|
11.70 |
% |
|
|
11.87 |
% |
|
|
11.80 |
% |
|
|
11.12 |
% |
|
|
11.49 |
% |
| Bank |
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital |
|
9.19 |
% |
|
|
9.06 |
% |
|
|
8.99 |
% |
|
|
9.16 |
% |
|
|
9.35 |
% |
| Common equity Tier 1
risk-based capital |
|
10.14 |
% |
|
|
10.30 |
% |
|
|
10.21 |
% |
|
|
9.52 |
% |
|
|
9.76 |
% |
| Tier 1 risk-based capital |
|
10.14 |
% |
|
|
10.30 |
% |
|
|
10.21 |
% |
|
|
9.52 |
% |
|
|
9.76 |
% |
| Total risk-based capital |
|
11.43 |
% |
|
|
11.58 |
% |
|
|
11.48 |
% |
|
|
10.80 |
% |
|
|
11.03 |
% |
(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.
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.
A reconciliation showing the impact of certain non-GAAP
unanticipated expenses on net income is included in the second
paragraph of this earnings release.
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 |
|
(dollars in thousands; unaudited) |
|
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
Net BaaS loan income divided by average CCBX
loans: |
|
CCBX loan yield (GAAP)(1) |
|
|
17.34 |
% |
|
|
17.36 |
% |
|
|
16.09 |
% |
|
Total average CCBX loans receivable |
|
$ |
1,265,857 |
|
|
$ |
1,196,137 |
|
|
$ |
1,064,192 |
|
|
Interest and earned fee income on CCBX loans (GAAP) |
|
|
54,569 |
|
|
|
52,327 |
|
|
|
42,220 |
|
|
BaaS loan expense |
|
|
(24,837 |
) |
|
|
(24,310 |
) |
|
|
(17,554 |
) |
|
Net BaaS loan income |
|
$ |
29,732 |
|
|
$ |
28,017 |
|
|
$ |
24,666 |
|
|
Net BaaS loan income divided by average CCBX loans (1) |
|
|
9.45 |
% |
|
|
9.30 |
% |
|
|
9.40 |
% |
| Net
interest margin, net of BaaS loan expense: |
|
|
|
|
|
CCBX interest margin (1) |
|
|
8.60 |
% |
|
|
8.62 |
% |
|
|
10.15 |
% |
|
CCBX earning assets |
|
|
1,864,156 |
|
|
|
1,765,502 |
|
|
|
1,296,839 |
|
|
Net interest income |
|
|
39,866 |
|
|
|
38,338 |
|
|
|
32,448 |
|
|
Less: BaaS loan expense |
|
|
(24,837 |
) |
|
|
(24,310 |
) |
|
|
(17,554 |
) |
|
Net interest income, net of BaaS loan expense |
|
$ |
15,029 |
|
|
$ |
14,028 |
|
|
$ |
14,894 |
|
|
CCBX net interest margin, net of BaaS loan expense (1) |
|
|
3.24 |
% |
|
|
3.15 |
% |
|
|
4.66 |
% |
(1) Annualized calculations for periods
presented.
APPENDIX A - As
of March 31, 2024
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 $3.21 billion in outstanding loan balances. When combined
with $2.19 billion in unused commitments the total of these
categories is $5.40 billion.
Commercial real estate loans
represent the largest segment of our loans, comprising 41.9% of our
total balance of outstanding loans as of March 31, 2024.
Unused commitments to extend credit represents an additional $51.7
million, and the combined total in commercial real estate loans
represents $1.39 billion, or 25.8% 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 March 31, 2024:
|
(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 |
|
$ |
355,965 |
|
$ |
8,769 |
|
$ |
364,734 |
|
6.7 |
% |
|
$ |
3,423 |
|
104 |
|
Hotel/Motel |
|
|
169,929 |
|
|
1,673 |
|
|
171,602 |
|
3.2 |
|
|
|
6,536 |
|
26 |
|
Convenience Store |
|
|
134,175 |
|
|
985 |
|
|
135,160 |
|
2.5 |
|
|
|
2,236 |
|
60 |
| Mixed
use |
|
|
95,425 |
|
|
3,403 |
|
|
98,828 |
|
1.8 |
|
|
|
1,097 |
|
87 |
|
Warehouse |
|
|
114,512 |
|
|
3,318 |
|
|
117,830 |
|
2.2 |
|
|
|
1,909 |
|
60 |
|
Office |
|
|
124,202 |
|
|
4,106 |
|
|
128,308 |
|
2.4 |
|
|
|
1,411 |
|
88 |
|
Retail |
|
|
105,188 |
|
|
668 |
|
|
105,856 |
|
2.0 |
|
|
|
1,002 |
|
105 |
| Mini
Storage |
|
|
69,655 |
|
|
22,385 |
|
|
92,040 |
|
1.7 |
|
|
|
3,166 |
|
22 |
| Strip
Mall |
|
|
44,430 |
|
|
— |
|
|
44,430 |
|
0.8 |
|
|
|
6,347 |
|
7 |
|
Manufacturing |
|
|
35,655 |
|
|
1,512 |
|
|
37,167 |
|
0.7 |
|
|
|
1,150 |
|
31 |
| Groups
< 0.70% of total |
|
|
93,353 |
|
|
4,882 |
|
|
98,235 |
|
1.8 |
|
|
|
1,138 |
|
82 |
|
Total |
|
$ |
1,342,489 |
|
$ |
51,701 |
|
$ |
1,394,190 |
|
25.8 |
% |
|
$ |
1,998 |
|
672 |
Consumer loans comprise 27.1%
of our total balance of outstanding loans as of March 31,
2024. Unused commitments to extend credit represents an additional
$938.1 million, and the combined total in consumer and other loans
represents $1.81 billion, or 33.5% 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 March 31,
2024:
|
(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 |
|
$ |
505,706 |
|
$ |
932,956 |
|
$ |
1,438,662 |
|
26.7 |
% |
|
$ |
1.6 |
|
314,989 |
|
Installment loans |
|
|
356,202 |
|
|
174 |
|
|
356,376 |
|
6.6 |
|
|
|
1.3 |
|
280,929 |
|
Lines of credit |
|
|
5,523 |
|
|
4,501 |
|
|
10,024 |
|
0.2 |
|
|
|
0.1 |
|
108,988 |
|
Other loans |
|
|
1,256 |
|
|
— |
|
|
1,256 |
|
0.0 |
|
|
|
0.1 |
|
11,810 |
| Community
bank consumer loans |
|
Installment loans |
|
|
1,173 |
|
|
— |
|
|
1,173 |
|
0.0 |
|
|
|
61.7 |
|
19 |
|
Lines of credit |
|
|
191 |
|
|
517 |
|
|
708 |
|
0.0 |
|
|
|
5.2 |
|
37 |
|
Other loans |
|
|
83 |
|
|
— |
|
|
83 |
|
0.0 |
|
|
|
0.3 |
|
315 |
|
Total |
|
$ |
870,134 |
|
$ |
938,148 |
|
$ |
1,808,282 |
|
33.5 |
% |
|
$ |
1.2 |
|
717,087 |
(1) Total exposure on CCBX loans is subject to CCBX
partner/portfolio maximum limits.
Residential real estate loans comprise 15.5% of
our total balance of outstanding loans as of March 31, 2024.
Unused commitments to extend credit represents an additional $481.7
million, and the combined total in residential real estate loans
represents $978.0 million, or 18.1% 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 March 31, 2024:
|
(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 |
|
$ |
265,148 |
|
$ |
434,672 |
|
$ |
699,820 |
|
13.0 |
% |
|
$ |
26 |
|
10,232 |
| Community
bank residential real estate loans |
| Closed
end, secured by first liens |
|
|
198,543 |
|
|
3,220 |
|
|
201,763 |
|
3.7 |
|
|
|
609 |
|
326 |
| Home equity line of
credit |
|
|
23,449 |
|
|
43,056 |
|
|
66,505 |
|
1.2 |
|
|
|
105 |
|
223 |
| Closed
end, second liens |
|
|
9,165 |
|
|
736 |
|
|
9,901 |
|
0.2 |
|
|
|
306 |
|
30 |
|
Total |
|
$ |
496,305 |
|
$ |
481,684 |
|
$ |
977,989 |
|
18.1 |
% |
|
$ |
46 |
|
10,811 |
(1) Total exposure on CCBX loans is subject to CCBX
partner/portfolio maximum limits.
Commercial and industrial loans comprise 10.5%
of our total balance of outstanding loans as of March 31,
2024. Unused commitments to extend credit represents an additional
$628.8 million, and the combined total in commercial and industrial
loans represents $966.1 million, or 17.9% of our total outstanding
loans and loan commitments. Included in commercial and industrial
loans is $135.7 million in outstanding capital call lines, with an
additional $543.9 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 March 31, 2024:
|
(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 |
|
$ |
135,671 |
|
$ |
543,913 |
|
$ |
679,584 |
|
12.6 |
% |
|
$ |
881 |
|
154 |
|
Retail |
|
|
44,565 |
|
|
6,036 |
|
|
50,601 |
|
0.9 |
|
|
|
17 |
|
2,685 |
|
Construction/Contractor Services |
|
|
29,370 |
|
|
30,305 |
|
|
59,675 |
|
1.1 |
|
|
|
150 |
|
196 |
|
Financial Institutions |
|
|
48,648 |
|
|
— |
|
|
48,648 |
|
0.9 |
|
|
|
4,054 |
|
12 |
| Medical
/ Dental / Other Care |
|
|
20,600 |
|
|
3,602 |
|
|
24,202 |
|
0.5 |
|
|
|
981 |
|
21 |
|
Manufacturing |
|
|
7,485 |
|
|
4,894 |
|
|
12,379 |
|
0.2 |
|
|
|
183 |
|
41 |
| Groups
< 0.20% of total |
|
|
50,887 |
|
|
40,092 |
|
|
90,979 |
|
1.7 |
|
|
|
57 |
|
891 |
|
Total |
|
$ |
337,226 |
|
$ |
628,842 |
|
$ |
966,068 |
|
17.9 |
% |
|
$ |
84 |
|
4,000 |
(1) Total exposure on CCBX loans is subject to CCBX
partner/portfolio maximum limits.
Construction, land and land development loans
comprise 5.0% of our total balance of outstanding loans as of
March 31, 2024. Unused commitments to extend credit represents
an additional $91.2 million, and the combined total in
construction, land and land development loans represents $252.0
million, or 4.7% 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
March 31, 2024:
|
(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 |
|
$ |
102,099 |
|
$ |
73,803 |
|
$ |
175,902 |
|
3.3 |
% |
|
$ |
6,381 |
|
16 |
|
Undeveloped land loans |
|
|
8,190 |
|
|
4,031 |
|
|
12,221 |
|
0.2 |
|
|
|
585 |
|
14 |
|
Residential construction |
|
|
28,751 |
|
|
8,652 |
|
|
37,403 |
|
0.7 |
|
|
|
2,054 |
|
14 |
|
Developed land loans |
|
|
14,307 |
|
|
1,849 |
|
|
16,156 |
|
0.3 |
|
|
|
715 |
|
20 |
| Land
development |
|
|
7,515 |
|
|
2,846 |
|
|
10,361 |
|
0.2 |
|
|
|
626 |
|
12 |
|
Total |
|
$ |
160,862 |
|
$ |
91,181 |
|
$ |
252,043 |
|
4.7 |
% |
|
$ |
2,117 |
|
76 |
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) |
|
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
Commercial construction |
|
$ |
102,099 |
|
$ |
81,489 |
|
$ |
91,396 |
|
$ |
78,079 |
|
$ |
97,987 |
|
Residential construction |
|
|
28,751 |
|
|
34,213 |
|
|
33,971 |
|
|
35,032 |
|
|
32,268 |
|
Undeveloped land loans |
|
|
8,190 |
|
|
7,890 |
|
|
8,310 |
|
|
42,530 |
|
|
41,951 |
|
Developed land loans |
|
|
14,307 |
|
|
20,515 |
|
|
21,369 |
|
|
18,735 |
|
|
19,130 |
| Land
development |
|
|
7,515 |
|
|
12,993 |
|
|
12,640 |
|
|
12,330 |
|
|
15,299 |
|
Total |
|
$ |
160,862 |
|
$ |
157,100 |
|
$ |
167,686 |
|
$ |
186,706 |
|
$ |
206,635 |
Commitments to extend credit total
$2.19 billion, however we do not
anticipate our customers using the $2.19 billion that is showing as
available.
The following table presents outstanding commitments to extend
credit as of March 31, 2024:
|
Consolidated |
|
|
|
(dollars in thousands; unaudited) |
|
As of March 31, 2024 |
|
Commitments to extend credit: |
|
|
|
Commercial and industrial loans |
|
$ |
84,929 |
|
Commercial and industrial loans - capital call lines |
|
|
543,913 |
|
Construction – commercial real estate loans |
|
|
79,682 |
|
Construction – residential real estate loans |
|
|
11,499 |
|
Residential real estate loans |
|
|
481,684 |
|
Commercial real estate loans |
|
|
51,701 |
|
Credit cards |
|
|
932,956 |
|
Consumer and other loans |
|
|
5,192 |
| Total commitments to extend
credit |
|
$ |
2,191,556 |
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
March 31, 2024, capital call lines outstanding balance totaled
$135.7 million, and while commitments totaled $543.9 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:
|
CCBX |
|
|
|
|
|
|
|
|
|
(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 |
|
$ |
135,671 |
|
|
10.3 |
% |
$ |
543,913 |
|
$ |
350,000 |
$ |
— |
|
All other commercial & industrial loans |
|
|
47,160 |
|
|
3.6 |
|
|
12,210 |
|
|
294,132 |
|
616 |
| Real
estate loans: |
|
|
|
|
|
|
|
|
|
Home equity lines of credit (3) |
|
|
265,148 |
|
|
20.1 |
|
|
434,672 |
|
|
375,000 |
|
31,071 |
| Consumer and
other loans: |
|
|
|
|
|
|
|
Credit cards - cash secured |
|
|
78 |
|
|
|
|
— |
|
|
|
— |
|
Credit cards - unsecured |
|
|
505,628 |
|
|
|
|
932,956 |
|
|
|
24,143 |
|
Credit cards - total |
|
|
505,706 |
|
|
38.4 |
|
|
932,956 |
|
|
806,965 |
|
24,143 |
|
Installment loans - cash secured |
|
|
69,105 |
|
|
|
|
— |
|
|
|
— |
|
Installment loans - unsecured |
|
|
287,097 |
|
|
|
|
174 |
|
|
|
1,395 |
|
Installment loans - total |
|
|
356,202 |
|
|
27.1 |
|
|
174 |
|
|
989,388 |
|
1,395 |
|
Other consumer and other loans |
|
|
6,779 |
|
|
0.5 |
|
|
4,501 |
|
|
689,515 |
|
1,053 |
|
Gross CCBX loans receivable |
|
|
1,316,666 |
|
|
100.0 |
% |
|
1,928,426 |
|
$ |
3,505,000 |
$ |
58,278 |
| Net
deferred origination fees |
|
|
(394 |
) |
|
|
|
|
|
|
|
Loans receivable |
|
$ |
1,316,272 |
|
|
|
|
|
|
|
(1) Remaining commitment available, net of outstanding
balance.(2) Balances are as of April 5, 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.
APPENDIX B -As
of March 31, 2024
CCBX – BaaS Reporting Information
During the quarter ended March 31, 2024, $79.8 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 |
|
(dollars in thousands; unaudited) |
|
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
Yield on loans (1) |
|
|
17.34 |
% |
|
|
17.36 |
% |
|
|
16.09 |
% |
| BaaS
loan interest income |
|
$ |
54,569 |
|
|
$ |
52,327 |
|
|
$ |
42,220 |
|
| Less:
BaaS loan expense |
|
|
24,837 |
|
|
|
24,310 |
|
|
|
17,554 |
|
|
Net BaaS loan income (2) |
|
|
29,732 |
|
|
|
28,017 |
|
|
|
24,666 |
|
| Net
BaaS loan income divided by average BaaS loans (1)(2) |
|
|
9.45 |
% |
|
|
9.30 |
% |
|
|
9.40 |
% |
(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.
An increase in CCBX loans receivable resulted in increased
interest income on CCBX loans during the quarter ended
March 31, 2024 compared to the quarter ended December 31,
2023. The increase in CCBX loans receivable was primarily due to
growth in the CCBX loan portfolio as part of our strategy to
optimize the CCBX loan portfolio and strengthen our balance sheet
through originating higher quality new loans and 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 March 31, 2024 compared to the quarter
ended March 31, 2023.
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 |
|
(dollars in thousands; unaudited) |
|
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
Loan interest income |
|
$ |
54,569 |
|
$ |
52,327 |
|
$ |
42,220 |
|
Total BaaS interest income |
|
$ |
54,569 |
|
$ |
52,327 |
|
$ |
42,220 |
|
Interest expense |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
BaaS interest expense |
|
$ |
22,854 |
|
$ |
21,826 |
|
$ |
12,424 |
|
Total BaaS interest expense |
|
$ |
22,854 |
|
$ |
21,826 |
|
$ |
12,424 |
|
BaaS income |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
BaaS program income: |
|
|
|
|
|
|
|
Servicing and other BaaS fees |
|
$ |
1,131 |
|
$ |
1,015 |
|
$ |
948 |
|
Transaction fees |
|
|
1,122 |
|
|
1,006 |
|
|
917 |
|
Interchange fees |
|
|
1,539 |
|
|
1,272 |
|
|
789 |
|
Reimbursement of expenses |
|
|
1,033 |
|
|
1,076 |
|
|
921 |
|
BaaS program income |
|
|
4,825 |
|
|
4,369 |
|
|
3,575 |
|
BaaS indemnification income: |
|
|
|
|
|
|
| BaaS
credit enhancements |
|
|
79,808 |
|
|
58,449 |
|
|
42,362 |
| BaaS
fraud enhancements |
|
|
923 |
|
|
779 |
|
|
1,999 |
|
BaaS indemnification income |
|
|
80,731 |
|
|
59,228 |
|
|
44,361 |
| Total
noninterest BaaS income |
|
$ |
85,556 |
|
$ |
63,597 |
|
$ |
47,936 |
|
BaaS loan and fraud expense: |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2024 |
|
December 31,2023 |
|
March 31,2023 |
|
BaaS loan expense |
|
$ |
24,837 |
|
$ |
24,310 |
|
$ |
17,554 |
| BaaS
fraud expense |
|
|
923 |
|
|
779 |
|
|
1,999 |
|
Total BaaS loan and fraud expense |
|
$ |
25,760 |
|
$ |
25,089 |
|
$ |
19,553 |
Grafico Azioni Coastal Financial (NASDAQ:CCB)
Storico
Da Nov 2024 a Dic 2024
Grafico Azioni Coastal Financial (NASDAQ:CCB)
Storico
Da Dic 2023 a Dic 2024
