EX-99.1 2 d605904dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

COASTAL FINANCIAL CORPORATION ANNOUNCES SECOND QUARTER 2018 RESULTS

Company release: August 21, 2018

2018 Second Quarter Highlights:

 

   

Net income totaled $2.2 million for the second quarter of 2018, or $0.24 per diluted common share, up 22.2% from $1.8 million for the first quarter of 2018.

 

   

Total assets were $850.9 million at June 30, 2018, up 2.4% from $831.0 million at March 31, 2018.

 

   

Total loans receivable, net increased 3.3% from March 31, 2018 and 6.7% from December 31, 2017.

 

   

Total deposits increased 2.4% from March 31, 2018 and increased 5.9% from December 31, 2017.

 

   

Noninterest bearing deposits at June 30, 2018 were 34.9% of total deposits.

 

   

Cost of deposits were 0.40% for the second quarter of 2018, up only 0.03% from the first quarter of 2018.

 

   

Initial public offering of 2,577,500 shares of common stock completed, subsequent to quarter end, on July 18, 2018, for net proceeds of $33.2 million.

Everett, WA – Coastal Financial Corporation (NASDAQ: CCB) (the “Company”) today reported unaudited financial results for the second quarter 2018. Net income for the second quarter of 2018 was $2.2 million, or $0.24 per diluted common share, compared with net income of $1.8 million, or $0.20 per diluted share, for the first quarter of 2018.

On July 18, 2018, the Company closed its initial public offering of 2,577,500 shares of common stock, including the exercise of the over-allotment of 427,500 shares, for net proceeds of $33.2 million after deducting underwriting discounts, commissions, and estimated offering expenses.

Eric Sprink, President and CEO, commented, “We are pleased with our second quarter financial performance, especially our deposit and loan growth. Historically, the second quarter has been a tougher quarter to grow deposits due to customers withdrawing funds to pay taxes. However, for the three months ended June 30, 2018 deposit growth on an annualized basis was 9.5% and loan growth was 13.1%. We believe that the loan and deposit growth, combined with the increase in net interest margin, positions us well for continued growth in earnings.”

In addition, our initial public offering, which was completed on July 20, 2018, was priced at $14.50 a share (which was near the top of the offering range), and net proceeds were $33.2 million after expenses. We intend to use the net proceeds from this offering to support our growth, organically or through mergers and acquisitions, and for general corporate purposes.”

The Company had net income of $4.0 million for the six months ended June 30, 2018, or $0.44 per diluted common share, compared to $3.2 million, or $0.35 per diluted common share for the six months ended June 30, 2017.

Results of Operations

Net interest income was $8.3 million for the three months ended June 30, 2018, an increase of 6.4% from $7.8 million for the first quarter of 2018, and an increase of 15.3% from $7.2 million for the second quarter of 2017. Increases over the prior quarter and prior year were the result of growth in interest earning assets, primarily loans, and improvements in net interest margin.

 

1


Net interest income for the six months ended June 30, 2018 totaled $16.1 million, an increase of 14.2% compared to the same period last year. The $2.0 million increase in net interest income over the same period last year was primarily related to growth in loan balances. During the six months ended June 30, 2018, the average balance of total loans receivable increased by $69.2 million, compared to the same period last year. This increase was partially offset by increased deposit costs from the growth in the balance of our deposits of $40.7 million and an increase in the cost of deposit funds of 12 basis points, compared to the same period last year.

Net interest margin for the quarter ended June 30, 2018 increased 14 basis points to 4.26% from 4.12% for the first quarter of 2018 and from 4.12% for the second quarter of 2017. The increase in net interest over the comparable period in the prior year was primarily due to increases in loan volume as a percent of earning assets and higher prepayment penalties and deferred fees recognized on loans paid off, and to a lesser extent, increases in average loan yields. The average loan receivable balance for the three months ended June 30, 2018 was $689.0 million, an increase of 5.3% compared to the prior quarter of 2018 and an increase of 13.5% from the same quarter one year ago.

Net interest margin for the six months ended June 30, 2018 increased 12 basis points to 4.19% from 4.07% for the comparable period last year. The increase in net interest over the comparable period in the prior year was primarily due to increases in loan volume as a percent of earning assets and higher prepayment penalties and deferred fees recognized on loans paid off in the first two quarters of 2018, and to a lesser extent, increases in average loan yields.

Loan yields for the quarter ended June 30, 2018 were 5.11%, an increase of four basis points from 5.07% for the quarter ended March 31, 2018, and a 12 basis point increase from 4.99% for the quarter ended June 30, 2017. Loan yields for the six months ended June 30, 2018 were 5.09%, an increase of 13 basis points from 4.96% for the six months ended June 30, 2017. Prepayment penalties and deferred fees recognized on loans paid off in both the current quarter and previous quarter were each 0.09% higher than the quarter ended June 30, 2017. Contractual loan yields approximated 4.92% for the three months ended June 30, 2018, 4.88% for the three months ended March 31, 2018, and 4.89% for the three months ended June 30, 2017.

The following table shows the Company’s key performance ratios for the periods indicated.

 

     Three months ended     Six months ended  
     June 30, 2018     March 31,
2018
    June 30, 2017     June 30,
2018
    June 30,
2017
 

Return on average assets (1)

     1.09     0.93     1.03     1.02     0.88

Return on average shareholders’ equity (1)

     12.90     11.09     12.00     12.07     9.81

Yield on earnings assets (1)

     4.73     4.56     4.51     4.65     4.45

Yield on loans receivable (1)

     5.11     5.07     4.99     5.09     4.96

Cost of funds (1)

     0.50     0.46     0.41     0.48     0.41

Cost of deposits (1)

     0.40     0.37     0.30     0.38     0.31

Net interest margin (1)

     4.26     4.12     4.12     4.19     4.07

Noninterest expense to average assets (1)

     3.15     3.07     3.32     3.12     2.98

Efficiency ratio

     66.77     68.28     66.27     67.50     67.96

Loans receivable to deposits

     94.12     93.30     97.25     94.12     97.25

 

(1)

annualized calculations

Noninterest income was $1.2 million for the second quarter of 2018, an increase of $106,000 from $1.1 million for the first quarter of 2018 and an increase of $193,000 from $1.0 million for the comparable period one year ago. The increase compared to the prior quarter was primarily due to newly assessed point of sale/ATM fees and increased activity in merchant services, which resulted in an additional $84,000 of income during the quarter. The increase in noninterest income compared to the same quarter one year ago was primarily related to increases in existing deposit fees and the introduction of new deposit fees to bring those fees in line with the industry. Sublease and lease income decreased in the second quarter 2018, as compared to both first quarter 2018 and second quarter 2017, as a result of a long-term tenant electing to not renew their lease.

 

2


Noninterest income was $2.3 million for the six months ended June 30, 2018, compared to $1.9 million for the six months ended June 30, 2017. The increase is primarily related to newly assessed deposit fees, as discussed above. Loan referral fee income, which is earned when a borrower enters into an interest rate swap agreement with a third party, totaled $244,000 for the six months ended June 30, 2018, an increase of $202,000 from the same period last year.

Total noninterest expense for the current quarter increased 4.9% to $6.4 million from $6.1 million for the preceding quarter and increased 16.4% from $5.5 million from the comparable period one year ago. The increased expenses for the current quarter compared to the prior quarter and previous quarter one year ago were primarily due to increases in salary expenses. Full time equivalent employees increased 7% during the current quarter and increased 14% from the same quarter one year ago. Staffing increases are due to the continued organic growth initiatives, and includes increases in sales staff, including hiring new banking teams, and additional back office staffing to support the incremental increases in banking teams and for operation as a public company.

Total noninterest expense for the six months ended June 30, 2018 totaled $12.4 million, an increase of 14.8% compared to the same period last year. The increase is primarily attributable to increased salary expense, as discussed above and the addition of our Woodinville branch in October 2017.

The provision for income taxes decreased 33.3% for the current quarter and the six months ended June 30, 2018, compared to the same periods last year, primarily due to the Tax Cuts and Jobs Act legislation which was signed into law on December 22, 2017. The Company began using the lower tax rate of 21.0% for the current fiscal year.

Balance Sheet

The Company’s total assets increased $45.1 million, or 5.6%, to $850.9 million at June 30, 2018 from $805.8 million at December 31, 2017 due to the Company’s organic growth initiatives.

Total loans receivable, net of allowance for loan losses, increased $43.4 million, or 6.7%, to $692.2 million at June 30, 2018 from $648.8 million at December 31, 2017. The growth in loans receivable was due primarily to increases in commercial real estate loans of $36.6 million.

The following table summarizes the loan portfolio at the periods indicated.

 

     As of  
     June 30, 2018     December 31, 2017     June 30, 2017  
(Dollars in thousands)    Balance     % to
Total
    Balance     % to
Total
    Balance     % to
Total
 

Commercial and industrial loans

   $ 89,284       12.7   $ 88,688       13.5   $ 84,792       13.6

Real estate:

            

Construction, land and land development

     46,356       6.6       41,641       6.3       45,626       7.3  

Residential

     88,422       12.6       87,031       13.3       69,478       11.1  

Commercial real estate

     474,330       67.7       437,717       66.6       422,156       67.7  

Consumer and other

     2,670       0.4       2,058       0.3       1,795       0.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross loans receivable

     701,062       100.0     657,135       100.0     623,847       100.0

Net deferred origination fees

     (370       (347       (597  
  

 

 

     

 

 

     

 

 

   

Loans receivable

   $ 700,692       $ 656,788       $ 623,250    

Total deposits increased $41.2 million, or 5.9%, to $744.5 million at June 30, 2018 from $703.3 million at December 31, 2017. The increase in deposits included increases in non-interest bearing deposit accounts of $17.1 million, or 7.1%, and total time deposits of $9.2 million, or 10.1%.

 

3


The following table shows the Company’s deposit composition for the periods indicated.

 

     As of  
     June 30, 2018     December 31, 2017     June 30, 2017  
(Dollars in thousands)    Balance      % to
Total
    Balance      % to
Total
    Balance      % to
Total
 

Demand, non-interest bearing

   $ 259,449        34.9   $ 242,358        34.5   $ 219,872        34.3

Now and money market

     336,666        45.2       326,412        46.4       305,984        47.8  

Savings

     48,509        6.5       43,876        6.2       43,152        6.7  

Time deposits less than $250,000

     65,393        8.8       60,445        8.6       51,899        8.1  

Time deposits $250,000 and over

     34,451        4.6       30,204        4.3       19,996        3.1  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 744,468        100.0   $ 703,295        100.0   $ 640,903        100.0

Total shareholders’ equity increased $3.8 million, or 5.8%, to $69.5 million at June 30, 2018 from $65.7 million at December 31, 2017. The increase in shareholders’ equity was primarily due to net income earned during the year.

Capital Ratios

The Company and the Bank remain well capitalized at June 30, 2018, as summarized in the following table.

 

Capital Ratios:    Coastal
Community
Bank
    Coastal
Financial
Corporation
    Financial
Institution
Basel III
Regulatory
Guidelines
 

Tier 1 leverage capital

     10.18     9.21     5.00

Tier 1 risk-based capital

     11.30     10.24     8.00

Common Equity Tier 1 risk-based capital

     11.30     9.76     6.50

Total risk-based capital

     12.50     12.82     10.00

Asset Quality

The allowance for loan losses was 1.22% of loans receivable at June 30, 2018, compared to 1.22% at December 31, 2017. Provision for loan losses totaled $392,000 for the current quarter, $501,000 for the preceding quarter, and there was no provision for the same quarter in the prior year. Net charge-offs totaled $370,000 for the six months ended June 30, 2018 compared to net charge-offs of $94,000 for six months ended June 30, 2017.

Non-performing assets were $2.1 million, or 0.24% of total assets, at June 30, 2018, compared to $2.1 million, or 0.26% of total assets at December 31, 2017. There were no repossessed assets or other real estate owned at June 30, 2018.

Non-performing loans to loans receivable ratio was 0.30% at June 30, 2018, compared to 0.32% at December 31, 2017. Classified loans were $8.6 million at June 30, 2018, an increase of $700,000, as compared to $7.9 million at December 31, 2017.

 

4


The following table details the Company’s non-performing assets for the periods indicated.

 

     As of  
(Dollars in thousands)    June 30,
2018
    December 31,
2017
    June 30,
2017
 

Non-accrual loans:

      

Commercial and industrial loans

   $ 703     $ 372     $ 284  

Real estate:

      

Construction, land and land development

     —         —         —    

Residential

     75       88       151  

Commercial real estate

     —         345       579  

Commercial real estate - troubled debt restructure

     1,290       1,315       1,340  

Consumer and other loans

     —         —         —    
  

 

 

   

 

 

   

 

 

 

Total non-accrual loans

     2,068       2,120       2,354  

Total accruing loans past due 90 days or more

     —         —         —    
  

 

 

   

 

 

   

 

 

 

Total non-performing loans

     2,068       2,120       2,354  

Other real estate owned

     —         —         —    

Repossessed assets

     —         —         —    
  

 

 

   

 

 

   

 

 

 

Total non-performing assets

   $ 2,068     $ 2,120     $ 2,354  

Troubled debt restructurings, accruing

     —         —         3,999  

Total non-performing loans to loans receivable

     0.30     0.32     0.38

Total non-performing assets to total assets

     0.24     0.26     0.32

About Coastal Financial

Coastal Financial Corporation is an Everett-based Washington State bank holding company with Coastal Community Bank (the “Bank”), a full-service commercial bank, as its sole wholly-owned banking subsidiary. The Bank operates through its 13 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application. More information about the Bank can be found on its website at www.coastalbank.com and its investor relations page.

Contact

Eric Sprink, President & Chief Executive Officer, (425) 357-3659

Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687

Forward-Looking Statements

This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.

 

5


Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law.

COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands; unaudited)

 

     June 30,
2018
    March 31,
2018
    December 31,
2017
 
ASSETS       

Cash and due from banks

   $ 14,217     $ 13,589     $ 13,787  

Interest-bearing deposits with other banks

     77,232       80,980       75,964  

Investment securities, available for sale, at fair value

     36,013       36,015       36,927  

Investment securities, held to maturity, at amortized cost

     1,304       1,323       1,409  

Other investments

     3,766       3,766       3,680  

Loans receivable

     700,692       678,515       656,788  

Allowance for loan losses

     (8,540     (8,423     (8,017
  

 

 

   

 

 

   

 

 

 

Total loans receivable, net

     692,152       670,092       648,771  

Premises and equipment, net

     12,963       13,000       13,121  

Accrued interest receivable

     2,290       1,968       2,274  

Bank-owned life insurance, net

     6,592       6,546       6,500  

Deferred tax asset, net

     2,253       2,277       2,092  

Other assets

     2,140       1,406       1,228  
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 850,922     $ 830,962     $ 805,753  
  

 

 

   

 

 

   

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY       

LIABILITIES

      

Deposits

   $ 744,468     $ 727,268     $ 703,295  

Federal Home Loan Bank (FHLB) advances

     20,000       20,000       20,000  

Subordinated debt

     9,957       9,954       9,950  

Junior subordinated debentures

     3,580       3,580       3,579  

Deferred compensation

     1,127       1,151       1,175  

Accrued interest payable

     241       229       228  

Other liabilities

     2,059       1,853       1,815  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     781,432       764,035       740,042  

SHAREHOLDERS’ EQUITY

      

Common stock

     52,946       52,592       52,521  

Retained earnings

     18,364       16,163       14,134  

Accumulated other comprehensive loss, net of tax

     (1,820     (1,828     (944
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     69,490       66,927       65,711  
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 850,922     $ 830,962     $ 805,753  
  

 

 

   

 

 

   

 

 

 

 

6


COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts; unaudited)

 

     Three months ended  
     June 30, 2018      March 31, 2018      June 30, 2017  

INTEREST AND DIVIDEND INCOME

        

Interest and fees on loans

   $ 8,778      $ 8,189      $ 7,557  

Interest on interest-bearing deposits with other banks

     236        255        149  

Interest on investment securities

     155        152        132  

Dividends on other investments

     62        11        63  
  

 

 

    

 

 

    

 

 

 

Total interest and dividend income

     9,231        8,607        7,901  

INTEREST EXPENSE

        

Interest on deposits

     712        646        492  

Interest on borrowed funds

     216        183        185  
  

 

 

    

 

 

    

 

 

 

Total interest expense

     928        829        677  
  

 

 

    

 

 

    

 

 

 

Net interest income

     8,303        7,778        7,224  

PROVISION FOR LOAN LOSSES

     392        501        —    
  

 

 

    

 

 

    

 

 

 

Net interest income after provision for loan losses

     7,911        7,277        7,224  

NONINTEREST INCOME

        

Deposit service charges and fees

     771        687        651  

Loan referral fees

     114        130        42  

Mortgage broker fees

     69        37        74  

Sublease and lease income

     4        57        55  

Gain on sale of loans

     78        64        58  

Other

     177        132        140  
  

 

 

    

 

 

    

 

 

 

Total noninterest income

     1,213        1,107        1,020  

NONINTEREST EXPENSE

        

Salaries and employee benefits

     3,910        3,735        3,174  

Occupancy

     804        823        740  

Data processing

     492        479        447  

Director and staff expenses

     136        144        137  

Excise taxes

     134        124        112  

Marketing

     86        57        83  

Legal and professional fees

     130        80        104  

Federal Deposit Insurance Corporation (FDIC) assessments

     79        85        78  

Business development

     72        88        60  

Other

     511        452        528  
  

 

 

    

 

 

    

 

 

 

Total noninterest expense

     6,354        6,067        5,463  
  

 

 

    

 

 

    

 

 

 

Income before provision for income taxes

     2,770        2,317        2,781  

PROVISION FOR INCOME TAXES

     569        474        905  
  

 

 

    

 

 

    

 

 

 

NET INCOME

   $ 2,201      $ 1,843      $ 1,876  
  

 

 

    

 

 

    

 

 

 

Basic and diluted earnings per share

   $ 0.24      $ 0.20      $ 0.20  

Weighted average number of common shares outstanding:

        

Basic

     9,263,302        9,242,839        9,233,738  

Diluted

     9,282,816        9,248,428        9,236,815  

 

7


COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts; unaudited)

 

     Six months ended  
     June 30, 2018      June 30, 2017  

INTEREST AND DIVIDEND INCOME

     

Interest and fees on loans

   $ 16,967      $ 14,833  

Interest on interest-bearing deposits with other banks

     491        287  

Interest on investment securities

     307        250  

Dividends on other investments

     73        74  
  

 

 

    

 

 

 

Total interest and dividend income

     17,838        15,444  

INTEREST EXPENSE

     

Interest on deposits

     1,358        986  

Interest on borrowed funds

     399        359  
  

 

 

    

 

 

 

Total interest expense

     1,757        1,345  
  

 

 

    

 

 

 

Net interest income

     16,081        14,099  

PROVISION FOR LOAN LOSSES

     893        439  
  

 

 

    

 

 

 

Net interest income after provision for loan losses

     15,188        13,660  

NONINTEREST INCOME

     

Deposit service charges and fees

     1,458        1,199  

Loan referral fees

     244        42  

Mortgage broker fees

     106        115  

Sublease and lease income

     61        111  

Gain on sale of loans

     142        84  

Other

     309        300  
  

 

 

    

 

 

 

Total noninterest income

     2,320        1,851  

NONINTEREST EXPENSE

     

Salaries and employee benefits

     7,645        6,456  

Occupancy

     1,627        1,469  

Data processing

     971        848  

Director and staff expenses

     280        278  

Excise taxes

     258        225  

Marketing

     143        150  

Legal and professional fees

     210        194  

Federal Deposit Insurance Corporation (FDIC) assessments

     164        181  

Business development

     160        127  

Other

     963        911  
  

 

 

    

 

 

 

Total noninterest expense

     12,421        10,839  
  

 

 

    

 

 

 

Income before provision for income taxes

     5,087        4,672  

PROVISION FOR INCOME TAXES

     1,043        1,483  
  

 

 

    

 

 

 

NET INCOME

   $ 4,044      $ 3,189  
  

 

 

    

 

 

 

Basic and diluted earnings per share

   $ 0.44      $ 0.35  

Weighted average number of common shares outstanding:

     

Basic

     9,253,095        9,232,444  

Diluted

     9,265,647        9,235,521  

 

8


COASTAL FINANCIAL CORPORATION

AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY

(Dollars in thousands; unaudited)

 

     For the Three Months Ended  
     June 30, 2018     March 31, 2018     June 30, 2017  
     Average
Balance
    Interest &
Dividends
     Yield /
Cost (4)
    Average
Balance
    Interest &
Dividends
     Yield /
Cost (4)
    Average
Balance
    Interest &
Dividends
     Yield /
Cost (4)
 

Assets

                     

Interest earning assets:

                     

Interest-bearing deposits

   $ 50,750     $ 236        1.87   $ 68,160     $ 255        1.52   $ 56,240     $ 149        1.06

Investment securities (1)

     39,642       155        1.57       39,717       152        1.55       36,288       132        1.46  

Other Investments

     3,200       62        7.77       2,912       11        1.53       2,975       63        8.49  

Loans receivable (2)

     688,975       8,778        5.11       654,570       8,189        5.07       607,197       7,557        4.99  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Total interest earning assets

   $ 782,567     $ 9,231        4.73     $ 765,359     $ 8,607        4.56     $ 702,700     $ 7,901        4.51  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Noninterest earning assets:

                     

Allowance for loan losses

     (8,522          (8,121          (7,861     

Other noninterest earning assets

     36,277            36,077            38,094       
  

 

 

        

 

 

        

 

 

      

Total assets

   $ 810,322          $ 793,315          $ 732,933       
  

 

 

        

 

 

        

 

 

      

Liabilities and Shareholders’ Equity

 

                  

Interest bearing liabilities:

                     

Interest-bearing deposits

   $ 464,133     $ 712        0.62   $ 464,219     $ 646        0.56   $ 422,166     $ 492        0.47

Subordinated debt

     9,955       147        5.92       9,952       144        5.87       9,941       148        5.97  

Junior subordinated debentures

     3,580       39        4.37       3,579       35        3.97       3,578       30        3.36  

FHLB advances and other borrowings

     5,972       30        2.01       793       4        2.05       2,544       7        1.10  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Total interest-bearing liabilities

   $ 483,640     $ 928        0.77     $ 478,543     $ 829        0.70     $ 438,229     $ 677        0.62  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Non-interest bearing deposits

     255,615            245,273            229,084       

Other liabilities

     2,610            2,845            2,889       

Total shareholders’ equity

     68,457            66,654            62,731       
  

 

 

        

 

 

        

 

 

      

Total liabilities and shareholders’ equity

   $ 810,322          $ 793,315          $ 732,933       
  

 

 

        

 

 

        

 

 

      

Net interest income

     $ 8,303          $ 7,778          $ 7,224     
    

 

 

        

 

 

        

 

 

    

Interest rate spread

          3.96          3.86          3.89

Net interest margin (3)

          4.26          4.12          4.12

 

(1)

For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(2)

Includes nonaccrual loans

(3)

Net interest margin represents net interest income divided by the average total interest-earning assets

(4)

Yields and rates are annualized

 

9


COASTAL FINANCIAL CORPORATION

AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE

(Dollars in thousands; unaudited)

 

     For the Six Months Ended  
     June 30, 2018     June 30, 2017  
     Average
Balance
    Interest &
Dividends
     Yield /
Cost (4)
    Average
Balance
    Interest &
Dividends
     Yield /
Cost (4)
 

Assets

              

Interest earning assets:

              

Interest-bearing deposits

   $ 59,407     $ 491        1.67   $ 57,466     $ 287        1.01

Investment securities (1)

     39,679       307        1.56       36,336       250        1.39  

Other Investments

     3,057       73        4.82       2,790       74        5.35  

Loans receivable (2)

     671,867       16,967        5.09       602,619       14,833        4.96  
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest earning assets

   $ 774,010     $ 17,838        4.65     $ 699,211     $ 15,444        4.45  
  

 

 

   

 

 

      

 

 

   

 

 

    

Noninterest earning assets:

              

Allowance for loan losses

     (8,323          (7,771     

Other noninterest earning assets

     36,178            41,361       
  

 

 

        

 

 

      

Total assets

   $ 801,865          $ 732,801       
  

 

 

        

 

 

      

Liabilities and Shareholders’ Equity

 

           

Interest bearing liabilities:

              

Interest-bearing deposits

   $ 464,176     $ 1,358        0.59   $ 423,501     $ 986        0.47

Subordinated debt

     9,954       291        5.90       9,940       291        5.90  

Junior subordinated debentures

     3,580       74        4.17       3,578       58        3.27  

FHLB advances and other borrowings

     3,397       34        2.02       1,611       10        1.25  
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest-bearing liabilities

   $ 481,107     $ 1,757        0.74     $ 438,630     $ 1,345        0.62  
  

 

 

   

 

 

      

 

 

   

 

 

    

Non-interest bearing deposits

     250,473            225,769       

Other liabilities

     2,724            2,820       

Total shareholders’ equity

     67,561            65,582       
  

 

 

        

 

 

      

Total liabilities and shareholders’ equity

   $ 801,865          $ 732,801       
  

 

 

        

 

 

      

Net interest income

     $ 16,081          $ 14,099     
    

 

 

        

 

 

    

Interest rate spread

          3.91          3.84

Net interest margin (3)

          4.19          4.07

 

(1)

For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(2)

Includes nonaccrual loans

(3)

Net interest margin represents net interest income divided by the average total interest-earning assets

(4)

Yields and rates are annualized

 

10


COASTAL FINANCIAL CORPORATION

QUARTERLY STATISTICS

(Dollars in thousands, except per share amounts; unaudited)

 

     Three Months Ended  
     June 30,     March 31,     December 31,     September 30,     June 30,  
     2018     2018     2017     2017     2017  

Income Statement Data:

          

Interest and dividend income

   $ 9,231     $ 8,607     $ 8,452     $ 8,217     $ 7,901  

Interest expense

     928       829       798       732       677  

Provision for loan losses

     392       501       366       65       —    

Net interest income after provision for loan losses

     7,911       7,277       7,288       7,420       7,224  

Noninterest income

     1,213       1,107       1,053       1,250       1,020  

Noninterest expense

     6,354       6,067       5,785       5,809       5,463  

Provision for income tax

     569       474       2,213       957       905  

Net income

     2,201       1,843       343       1,904       1,876  

Adjusted net income (1)

     2,201       1,843       1,638       1,904       1,876  
     As of Period End or for the three month period  
     June 30,     March 31,     December 31,     September 30,     June 30,  
     2018     2018     2017     2017     2017  

Balance Sheet Data:

          

Cash and cash-equivalents

   $ 91,449     $ 94,569     $ 89,751     $ 86,531     $ 58,198  

Investment securities

     37,317       37,338       38,336       40,201       35,280  

Loans receivable

     700,692       678,515       656,788       630,442       623,250  

Allowance for loan losses

     (8,540     (8,423     (8,017     (7,947     (7,889

Total assets

     850,922       830,962       805,753       778,609       738,049  

Interest-bearing deposits

     485,019       473,268       460,937       438,592       421,031  

Noninterest-bearing deposits

     259,449       254,000       242,358       242,607       219,872  

Total deposits

     744,468       727,268       703,295       681,199       640,903  

Total borrowings

     33,537       33,534       33,529       28,526       30,521  

Total shareholders’ equity

     69,490       66,927       65,711       65,558       63,600  

Share and Per Share Data (2)(3):

          

Earnings per share – basic

   $ 0.24     $ 0.20     $ 0.04     $ 0.21     $ 0.20  

Earnings per share – diluted

   $ 0.24     $ 0.20     $ 0.04     $ 0.21     $ 0.20  

Adjusted earnings per share - diluted (4)

       $ 0.18      

Dividends per share

     —         —         —         —         —    

Book value per share (5)

   $ 7.47     $ 7.23     $ 7.10     $ 7.09     $ 6.88  

Tangible book value per share (6)

   $ 7.47     $ 7.23     $ 7.10     $ 7.09     $ 6.88  

Weighted avg outstanding shares – basic

     9,263,302       9,242,766       9,237,660       9,235,344       9,233,738  

Weighted avg outstanding shares – diluted

     9,282,816       9,248,365       9,240,737       9,238,421       9,236,815  

Shares outstanding at end of period

     9,298,553       9,253,303       9,248,901       9,249,006       9,245,546  

Credit Quality Ratios:

          

Nonperforming assets to total assets

     0.24     0.20     0.26     0.32     0.32

Nonperforming assets to loans receivable and OREO

     0.30     0.25     0.32     0.40     0.38

Nonperforming loans to total loans receivable

     0.30     0.25     0.32     0.40     0.38

Allowance for loan losses to nonperforming loans

     412.96     495.76     378.16     316.49     335.13

Allowance for loan losses to total loans receivable

     1.22     1.24     1.22     1.26     1.27

Net charge-offs (recoveries) to average loans (7)

     0.16     0.06     0.18     0.01     -0.06

Capital Ratios:

          

Tier 1 leverage capital

     9.21     9.07     8.95     9.31     9.22

Tier 1 risk-based capital

     10.24     10.25     10.50     10.75     10.43

Common equity Tier 1 risk-based capital

     9.76     9.75     9.98     10.21     9.89

Total risk-based capital

     12.82     12.90     13.24     13.54     13.21

 

11


(1)

Adjusted net income is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is net income. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.”

(2)

Share and per share amounts are based on total common shares outstanding, which includes common stock and nonvoting common stock.

(3)

Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018.

(4)

Adjusted earnings per share is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is earnings per share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.”

(5)

We calculate book value per share as total shareholders’ equity at the end of the relevant period divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period.

(6)

Tangible book value per share is a non-GAAP financial measure. We calculate tangible book value per share as total shareholders’ equity at the end of the relevant period, less goodwill and other intangible assets, divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated.

(7)

Annualized calculations

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP (“Generally Accepted Accounting Principles”) financial measures in addition to results presented in accordance with GAAP. These measures include the following:

“Adjusted net income” is a non-GAAP measure defined as net income increased by the additional income tax expense that resulted from the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act. The most directly comparable GAAP measure is net income.

“Adjusted earnings per share” is a non-GAAP measure defined as net income, plus additional income tax expense, divided by weighted average outstanding shares (diluted). The most directly comparable GAAP measure is earnings per share.

The Company also presented comparable earnings information using GAAP financial measures. Reconciliations of the GAAP and non-GAAP measures are presented below.

 

(Dollars in thousands, except share and per share data)    As of and for three
Months ended
December 31, 2017
 

Adjusted net income:

  

Net income

   $ 343  

Plus: additional income tax expense

     1,295  
  

 

 

 

Adjusted net income

   $ 1,638  

Adjusted earnings per share – diluted:

  

Net income

   $ 343  

Plus: additional income tax expense

     1,295  
  

 

 

 

Adjusted net income

   $ 1,638  

Weighted average common shares outstanding– diluted (1)

     9,240,737  

Adjusted earnings per share – diluted (1)

   $ 0.18  

 

(1)

Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018.

 

12