Third Quarter
2022 Highlights:
- Second consecutive quarter of
record net income. Quarterly net income of $11.1
million, or $0.82
per diluted common share, for the three months
ended September 30, 2022,
compared to $10.2 million,
or $0.76 per diluted common share
for the three months ended June 30,
2022.
- Total assets increased
$164.0 million, or
5.5%, to $3.13
billion for the quarter ended
September 30, 2022, compared
to $2.97 billion at
June 30, 2022.
- Loan growth of $173.5
million, or
7.4%, to $2.51
billion for the three months ended
September 30, 2022.
- CCBX loans increased
$111.6 million, or
13.9%, to $915.6
million.
- Community bank loans increased $61.9
million, or
4.0%, to $1.59
billion.
- PPP loans decreased
$10.6 million, or
64.7%, to $5.8
million.
- CCBX loans held for sale
decreased $16.7 million
as of September 30,
2022, to $43.3
million
- Deposit growth of $139.8
million, or
5.2%, to $2.84
billion for the three months ended
September 30, 2022.
- CCBX deposit growth of $136.2
million, or
12.8%, to $1.20
billion.
- Additional $266.7 million
in CCBX deposits transferred off balance
sheet
- Community bank deposits
increased $3.6 million,
or 0.2%, to
$1.63 billion and community bank cost of
deposits was 0.16%.
- Total revenue increased
$18.2 million, or
27.8% for the three months ended
September 30, 2022, compared
to June 30, 2022.
- Total revenue excluding BaaS credit enhancements and
BaaS fraud
enhancements(1)
increased $9.2 million,
or 20.7%, to
$53.9 million for the three months
ended September 30,
2022.
EVERETT, Wash., Oct. 27, 2022 (GLOBE NEWSWIRE) -- Coastal
Financial Corporation (Nasdaq: CCB) (the “Company”), the holding
company for Coastal Community Bank (the “Bank”), today reported
unaudited financial results for the quarter ended
September 30, 2022. Record quarterly net income for
the third quarter of 2022 was $11.1 million, or $0.82 per diluted
common share, compared with net income of $10.2 million, or $0.76
per diluted common share, for the second quarter of 2022, and $6.7
million, or $0.54 per diluted common share, for the quarter ended
September 30, 2021.
Total assets increased $164.0 million, or 5.5%, during the third
quarter of 2022 to $3.13 billion, from $2.97 billion at June 30,
2022. Loan growth of $173.5 million, or 7.4%, for the three months
ended September 30, 2022 to $2.51 billion. Loan growth
included CCBX loan growth of $111.6 million, or 13.9%, and an
increase of $61.9 million, or 4.0% in community bank loans, which
is net of $10.6 million in PPP loan forgiveness/repayments.
Deposits grew $139.8 million, or 5.2%, during the three months
ended September 30, 2022 and included CCBX deposit growth of
$136.2 million, or 12.8%, and an increase of $3.6 million, or 0.2%,
in community bank deposits.
_____________________
1 A reconciliation of the non-GAAP measures are set
forth at the end of this earnings release.
“Loans increased $173.5 million, or 7.4%, in the three months
ended September 30, 2022, with $111.6 million of that growth
in our CCBX segment, which provides Banking as a Service (“BaaS”).
Our CCBX segment has grown to $915.6 million in loans, or 36.5% of
total loans receivable, excluding $43.3 million in loans held for
sale and our community bank loans have grown to $1.6 billion in
loans receivable, as of September 30,
2022. Additionally, deposits grew $139.8 million, or
5.2%, during the three months ended September 30, 2022.
“We achieved record net income for the second consecutive
quarter. For the quarter ended September 30, 2022 we had net
income of $11.1 million, an increase of $925,000, or 9.1%, over the
quarter ended June 30, 2022. Additionally, the Bank was
recently named to the Piper Sandler Bank & Thrift Sm-All Stars
Class of 2022 and was one of just two banks to receive the award
for the fourth consecutive year. The recognition as a top
performing bank is a huge honor and accomplishment and is
reflective of the strong commitment our team has to our customers,
communities and shareholders”, 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
two segments: CCBX and the community bank. The CCBX
segment includes our BaaS activities and the community bank segment
includes all other banking activities. Net interest
income was $49.2 million for the quarter ended September 30,
2022, an increase of $9.3 million, or 23.3%, from $39.9 million for
the quarter ended June 30, 2022, and an increase of $30.4 million,
or 161.5%, from $18.8 million for the quarter ended
September 30, 2021. Yield on loans receivable was
8.46% for the three months ended September 30, 2022, compared
to 7.34% for the three months ended June 30, 2022 and 4.57% for the
three months ended September 30, 2021. The increase
in net interest income compared to June 30, 2022 and
September 30, 2021, was largely related to increased yield on
loans resulting from higher interest rates and growth in higher
yielding loans, primarily from CCBX. Total average loans
receivable for the three months ended September 30, 2022 was
$2.45 billion, compared to $2.19 billion for the three months ended
June 30, 2022, and $1.68 billion for the three months ended
September 30, 2021.
Interest and fees on loans totaled $52.3 million for the three
months ended September 30, 2022 compared to $40.2 million and
$19.4 million for the three months ended June 30, 2022 and
September 30, 2021, respectively. Loan growth of
$173.5 million, or 7.4%, during the quarter ended
September 30, 2022 included $111.6 million increase in CCBX
loans; this includes capital call lines, which decreased $50.6
million, or 22.5%, during the quarter ended September 30,
2022. Capital call lines bear a lower rate of interest,
but have less credit risk due to the way the loans are structured
compared to other commercial loans. The increase in
interest and fees on loans for the quarter ended September 30,
2022, compared to June 30, 2022 and September 30, 2021, was
largely due to growth in higher yielding loans. As a
result of the Federal Open Market Committee (“FOMC”) raising rates
3.0% in 2022, interest rates on our existing variable rate loans
are affected, as are the rates on new loans. We continue to monitor
the impact of these increases in interest rates. The FOMC last
raised rates 0.75% on September 21, 2022.
Interest income from interest earning deposits with other banks
was $2.3 million at September 30, 2022, an increase of $1.3
million compared to June 30, 2022, and an increase of $2.1 million
compared to September 30, 2021 due to an increase in interest
rates. The average balance of interest earning deposits
with other banks for the three months ended September 30, 2022
was $397.6 million, compared to $499.9 million and $419.7 million
for the three months ended June 30, 2022 and September 30,
2021, respectively. Interest earning deposits with other
banks decreased as a result of increased loan
demand. Those deposits were used to fund higher yielding
loans receivable. Additionally, the average yield on
these interest earning deposits with other banks increased to 2.27%
for the quarter ended September 30, 2022, compared to 0.77%
and 0.16% for the quarters ended June 30, 2022 and
September 30, 2021, respectively.
Interest expense was $6.0 million for the quarter ended
September 30, 2022, a $4.0 million increase from the quarter
ended June 30, 2022 and a $5.2 million increase from the quarter
ended September 30, 2021. Interest expense on borrowed funds
was $273,000 for the quarter ended September 30, 2022,
compared to $260,000 and $278,000 for the quarters ended June 30,
2022 and September 30, 2021, respectively. Interest expense on
borrowed funds increased $13,000 compared to the three months ended
June 30, 2022, as a result of the increase in interest rates. The
$5,000 decrease in interest expense on borrowed funds from the
quarter ended September 30, 2021 is the result of a decrease
in Federal Home Loan Bank borrowings, which were paid off in the
first quarter of 2022. Interest expense on interest bearing
deposits increased $4.0 million for the quarter ended
September 30, 2022, compared to the quarter ended June 30,
2022, and $5.2 million compared to the quarter ended
September 30, 2021 as a result an increase in CCBX deposits
that are tied to and reprice when the FOMC raises
rates. Additionally, as a result of the interest rate
increases, a significant portion of CCBX deposits that were not
earning interest were reclassified to interest bearing deposits
from noninterest bearing deposits during the first and second
quarters of 2022, which also contributed to the increase in
interest expense compared to September 30, 2021. These
CCBX deposits were reclassified because the current interest rate
exceeded the minimum interest rate set in their respective program
agreements, as a result of the first and second quarter 2022
interest rate increases. We do not expect additional CCBX deposits
will be reclassified as a result of future rate increases.
Total cost of deposits was 0.82% for the three months ended
September 30, 2022, 0.25% for the three months ended June 30,
2022, and 0.10%, for the three months ended September 30,
2021. Community bank and CCBX cost of deposits were 0.16% and 1.79%
respectively, for the three months ended September 30, 2022,
compared to 0.08% and 0.56%, for the three months ended June 30,
2022, and 0.13% and 0.02% for the three months ended
September 30, 2021. The increase in cost of deposits for the
three months ended September 30, 2022 compared to the prior
periods for both segments is a result of increased interest rates.
Also impacting CCBX cost of deposits was the reclassification of
deposits from noninterest bearing to interest bearing in the first
two quarters of 2022. Any additional interest rate increases will
increase our cost of deposits and result in higher interest expense
on interest bearing deposits.
Net Interest Margin
Net interest margin was 6.58% for the three months ended
September 30, 2022, compared to 5.66% and 3.48% for the three
months ended June 30, 2022 and September 30, 2021,
respectively. The increase in net interest margin
compared to the three months ended June 30, 2022 and
September 30, 2021, was largely a result of an increase in
higher rate loans. Loans receivable increased $173.5
million and $802.2 million, compared to June 30, 2022 and
September 30, 2021, respectively. Additionally, the
Fed Funds interest rate increases have resulted in existing,
variable rate loans repricing to higher interest
rates. Interest on loans receivable increased $12.2
million, or 30.3%, to $52.3 million for the three months ended
September 30, 2022, compared to $40.2 million for the three
months ended June 30, 2022, and $19.4 million for the three months
ended September 30, 2021. Also contributing to the
increase in net interest margin compared to the three months ended
June 30, 2022 and September 30, 2021, was $1.3 million and
$2.1 million increase in interest on interest earning deposits,
respectively. These interest earning deposits earned an
average rate of 2.27% for the quarter ended September 30,
2022, compared to 0.77% and 0.16% for the quarters ended June 30,
2022 and September 30, 2021, respectively. Average
investment securities decreased $17.6 million to $103.7 million for
the three months ended September 30, 2022 compared to the
three months ended June 30, 2022, and increased $69.9 million
compared to the three months ended September 30, 2021.
Interest on investment securities decreased $9,000 for the three
months ended September 30, 2022 compared to the three months
ended June 30, 2022 due to lower average outstanding balance on
investments and increased $530,000 compared to September 30,
2021, as a result of the increase in average outstanding balance
coupled with increased yield, which also positively impacted net
interest margin. These increases in interest income were
partially offset by increases in interest expense on interest
bearing deposits, as previously discussed.
Cost of funds was 0.85% for the quarter ended September 30,
2022, an increase of 56 basis points from the quarter ended June
30, 2022 and an increase of 69 basis points from the quarter ended
September 30, 2021. Cost of deposits for the quarter ended
September 30, 2022 was 0.82%, compared to 0.25% for the
quarter ended June 30, 2022, and 0.10% for the quarter ended
September 30, 2021. The increased cost of funds and deposits
compared to June 30, 2022 and September 30, 2021 was largely
due to the increase in interest rates compared to the previous
periods. Noninterest bearing deposits of $813.2 million for the
quarter ended September 30, 2022 decreased $4.8 million, or
0.59%, compared to the quarter ended June 30, 2022, and decreased
$483.2 million, or 37.3%, compared to the quarter ended
September 30, 2021 due to the aforementioned reclassification
of CCBX noninterest bearing deposits to interest bearing
deposits.
During the quarter ended September 30, 2022, total loans
receivable increased by $173.5 million, or 7.4%, to $2.51 billion,
compared to $2.33 billion for the quarter ended June 30,
2022. The increase consists of $111.6 million in CCBX
loan growth and $61.9 million in community bank loan growth.
Community bank loan growth includes a decrease of $10.6 million in
PPP loans from forgiveness and repayments. Total loans
receivable grew $802.2 million as of September 30, 2022,
compared to the quarter ended September 30,
2021. This increase includes CCBX loan growth of $725.4
million and community bank loan growth of $76.9 million. Community
bank loan growth is net of $261.5 million in PPP loan
forgiveness/repayments, as of September 30, 2022, compared
September 30, 2021. During the quarter ended
September 30, 2022, $48.1 million in CCBX loans were
transferred into loans held for sale, with $64.8 million in loans
sold during the quarter and $43.3 million remaining in loans held
for sale as of September 30, 2022; compared to $60.0 million
held for sale as of June 30, 2022.
Total yield on loans receivable for the quarter ended
September 30, 2022 was 8.46%, compared 7.34% for the quarter
ended June 30, 2022, and 4.57% for the quarter ended
September 30, 2021. This increase in yield on loans receivable
is a combination of an overall increase in interest rates as well
as additional volume in higher rate consumer loans from CCBX
partners. During the quarter ended September 30,
2022, CCBX loans outstanding increased 13.9%, or $111.6 million,
with an average CCBX yield of 13.96% and community bank loans
increased 4.0%, or $61.9 million, with an average yield of
5.31%. 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 servicing CCBX
loans. Net BaaS loan income divided by average CCBX
loans outstanding was 7.05% for the quarter ended
September 30, 2022 and was impacted by the $50.6 million
decline in capital call lines during the quarter that are priced at
prime minus 0.50%.
The following table summarizes the average yield on loans
receivable and cost of deposits for each segment for the periods
indicated:
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
|
September 30, 2022 |
|
September 30, 2021 |
|
Yield on
Loans |
|
Cost of
Deposits |
|
Yield on
Loans |
|
Cost of
Deposits |
|
Yield on
Loans |
|
Cost of
Deposits |
|
Yield on
Loans |
|
Cost of
Deposits |
|
Yield on
Loans |
|
Cost of
Deposits |
Community Bank |
5.31 |
% |
|
0.16 |
% |
|
5.04 |
% |
|
0.08 |
% |
|
4.67 |
% |
|
0.13 |
% |
|
5.17 |
% |
|
0.11 |
% |
|
4.60 |
% |
|
0.15 |
% |
CCBX (1) |
13.96 |
% |
|
1.79 |
% |
|
12.35 |
% |
|
0.56 |
% |
|
3.65 |
% |
|
0.02 |
% |
|
13.16 |
% |
|
0.91 |
% |
|
3.26 |
% |
|
0.04 |
% |
Consolidated |
8.46 |
% |
|
0.82 |
% |
|
7.34 |
% |
|
0.25 |
% |
|
4.57 |
% |
|
0.10 |
% |
|
7.63 |
% |
|
0.41 |
% |
|
4.51 |
% |
|
0.14 |
% |
(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 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.
The following tables illustrates how BaaS loan interest income
is affected by BaaS loan interest expense resulting in net BaaS
loan income and the associated yield:
|
|
For the Three Months Ended |
|
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
(dollars in thousands, unaudited) |
|
Income / Expense |
|
Income / expense divided by
average CCBX loans |
|
Income / Expense |
|
Income / expense divided by
average CCBX loans |
|
Income / Expense |
|
Income / expense divided by
average CCBX loans |
BaaS loan interest income |
|
$ |
31,449 |
|
13.96 |
% |
|
$ |
21,281 |
|
12.35 |
% |
|
$ |
1,471 |
|
3.65 |
% |
Less: BaaS loan expense |
|
|
15,560 |
|
6.91 |
% |
|
|
12,229 |
|
7.10 |
% |
|
|
419 |
|
1.04 |
% |
Net BaaS loan income (1) |
|
$ |
15,889 |
|
7.05 |
% |
|
$ |
9,052 |
|
5.25 |
% |
|
$ |
1,052 |
|
2.61 |
% |
Average BaaS Loans |
|
$ |
893,655 |
|
|
|
$ |
691,294 |
|
|
|
$ |
160,022 |
|
|
|
|
For the Nine Months Ended |
|
|
September 30, 2022 |
|
September 30, 2021 |
(dollars in thousands; unaudited) |
|
Income / Expense |
|
Income / expense divided by average CCBX
loans |
|
Income / Expense |
|
Income / expense divided by average CCBX
loans |
BaaS loan interest income |
|
$ |
64,721 |
|
13.16 |
% |
|
$ |
2,761 |
|
3.26 |
% |
Less: BaaS loan expense |
|
|
36,079 |
|
7.34 |
% |
|
|
609 |
|
0.72 |
% |
Net BaaS loan income (1) |
|
$ |
28,642 |
|
5.82 |
% |
|
$ |
2,152 |
|
2.54 |
% |
Average BaaS Loans |
|
$ |
657,574 |
|
|
|
$ |
113,369 |
|
|
(1) A reconciliation of the non-GAAP measures are set forth at
the end of this earnings release.
______
Key Performance Ratios
Return on average assets (“ROA”) was 1.45% for the quarter ended
September 30, 2022 compared to 1.41% and 1.21% for the
quarters ended June 30, 2022 and September 30, 2021,
respectively. ROA for the quarter ended
September 30, 2022, was impacted by an increase in loan volume
and overall higher interest rates on interest earning assets,
compared to the quarters ended June 30, 2022 and September 30,
2021.
The following table shows the Company’s key performance ratios
for the periods indicated.
|
|
Three Months Ended |
|
Nine Months Ended |
(unaudited) |
|
September 30,
2022 |
|
June 30,
2022 |
|
March 31,
2022 |
|
December 31,
2021 |
|
September 30,
2021 |
|
September 30,
2022 |
|
September 30,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (1) |
|
1.45 |
% |
|
1.41 |
% |
|
0.93 |
% |
|
1.14 |
% |
|
1.21 |
% |
|
1.18 |
% |
|
1.28 |
% |
Return on average equity (1) |
|
19.36 |
% |
|
18.86 |
% |
|
12.12 |
% |
|
16.80 |
% |
|
16.77 |
% |
|
16.90 |
% |
|
17.40 |
% |
Yield on earnings assets (1) |
|
7.38 |
% |
|
5.94 |
% |
|
4.58 |
% |
|
4.09 |
% |
|
3.63 |
% |
|
6.03 |
% |
|
3.83 |
% |
Yield on loans receivable (1) |
|
8.46 |
% |
|
7.34 |
% |
|
6.80 |
% |
|
5.92 |
% |
|
4.57 |
% |
|
7.63 |
% |
|
4.51 |
% |
Cost of funds (1) |
|
0.85 |
% |
|
0.29 |
% |
|
0.14 |
% |
|
0.14 |
% |
|
0.16 |
% |
|
0.44 |
% |
|
0.20 |
% |
Cost of deposits (1) |
|
0.82 |
% |
|
0.25 |
% |
|
0.09 |
% |
|
0.09 |
% |
|
0.10 |
% |
|
0.41 |
% |
|
0.14 |
% |
Net interest margin (1) |
|
6.58 |
% |
|
5.66 |
% |
|
4.45 |
% |
|
3.95 |
% |
|
3.48 |
% |
|
5.61 |
% |
|
3.64 |
% |
Noninterest expense to average assets (1) |
|
6.66 |
% |
|
5.29 |
% |
|
4.52 |
% |
|
3.29 |
% |
|
2.91 |
% |
|
5.54 |
% |
|
2.74 |
% |
Noninterest income to average assets (1) |
|
4.48 |
% |
|
3.53 |
% |
|
3.27 |
% |
|
2.22 |
% |
|
1.11 |
% |
|
3.79 |
% |
|
0.90 |
% |
Efficiency ratio |
|
61.12 |
% |
|
58.38 |
% |
|
59.34 |
% |
|
54.08 |
% |
|
64.68 |
% |
|
59.77 |
% |
|
61.51 |
% |
Loans receivable to deposits (2) |
|
89.92 |
% |
|
86.54 |
% |
|
76.24 |
% |
|
73.73 |
% |
|
76.71 |
% |
|
89.92 |
% |
|
76.71 |
% |
(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 |
|
September 30, |
|
June 30, |
|
September 30, |
(dollars in thousands; unaudited) |
2022 |
|
2022 |
|
2021 |
Deposit service charges and fees |
$ |
986 |
|
|
$ |
988 |
|
|
$ |
956 |
|
Mortgage broker fees |
|
24 |
|
|
|
85 |
|
|
|
187 |
|
Loan referral fees |
|
— |
|
|
|
208 |
|
|
|
723 |
|
Unrealized (loss) gain on equity securities, net |
|
(133 |
) |
|
|
(2 |
) |
|
|
1,472 |
|
Gain on sales of loans, net |
|
— |
|
|
|
— |
|
|
|
206 |
|
Other |
|
236 |
|
|
|
313 |
|
|
|
302 |
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,113 |
|
|
|
1,592 |
|
|
|
3,846 |
|
Servicing and other BaaS fees |
|
1,079 |
|
|
|
1,159 |
|
|
|
1,313 |
|
Transaction fees |
|
940 |
|
|
|
814 |
|
|
|
146 |
|
Interchange fees |
|
738 |
|
|
|
628 |
|
|
|
188 |
|
Reimbursement of expenses |
|
885 |
|
|
|
618 |
|
|
|
333 |
|
BaaS program income |
|
3,642 |
|
|
|
3,219 |
|
|
|
1,980 |
|
BaaS credit enhancements |
|
17,928 |
|
|
|
14,207 |
|
|
|
10 |
|
Baas fraud enhancements |
|
11,708 |
|
|
|
6,474 |
|
|
|
296 |
|
BaaS indemnification income |
|
29,636 |
|
|
|
20,681 |
|
|
|
306 |
|
Total noninterest income |
$ |
34,391 |
|
|
$ |
25,492 |
|
|
$ |
6,132 |
|
Noninterest income was $34.4 million for the three months ended
September 30, 2022, an increase of $8.9 million from $25.5
million for the three months ended June 30, 2022, and an increase
of $28.3 million from $6.1 million for the three months ended
September 30, 2021. The increase in noninterest
income over the quarter ended June 30, 2022 was primarily due to an
increase of $9.4 million in BaaS income partially offset by a
$208,000 decrease in loan referral fees. The $9.4
million increase in BaaS income included a $3.7 million increase in
BaaS credit enhancements related to the allowance for loan losses
and reserve for unfunded commitments, $5.2 million increase in BaaS
fraud enhancements, and an increase of $423,000 in BaaS program
income (see “Appendix B” for more information on the accounting for
BaaS allowance for loan losses, reserve for unfunded commitments
and credit and fraud enhancements). The $28.3 million increase in
noninterest income over the quarter ended September 30, 2021
was primarily due to a $31.0 million increase in BaaS income
partially offset by a decrease of $1.6 million in unrealized gain
on equity securities and a decrease of $723,000 in loan referral
fees. The $31.0 million increase in BaaS income included a $17.9
million increase in BaaS credit enhancements, $11.4 million
increase in BaaS fraud enhancements and $1.7 million increase in
other BaaS program income. BaaS program income is steadily growing,
with an increase of 13.1% compared to the quarter ended June 30,
2022, and an increase of 83.9% compared to the quarter ended
September 30, 2021.
Our CCBX segment continues to evolve, and we now have 29
relationships, at varying stages, as of September 30,
2022. We continue to refine the criteria for CCBX
partnerships and are exiting relationships where it makes sense for
both parties and are focusing more on selecting larger and more
established partners, with experienced management teams.
The following table illustrates the activity and evolution in
CCBX relationships for the periods presented. During the quarter
ended September 30, 2022 a few partners wound down their CCBX
programs; these programs were not material in terms of income and
sources of funds.
|
As of |
(unaudited) |
September 30, 2022 |
June 30, 2022 |
September 30, 2021 |
Active |
19 |
23 |
16 |
Friends and family /
testing |
2 |
2 |
0 |
Implementation /
onboarding |
0 |
0 |
7 |
Signed letters of intent |
5 |
4 |
3 |
Wind down - preparing to exit
relationship |
3 |
0 |
0 |
Total CCBX relationships |
29 |
29 |
26 |
Noninterest Expense
The following table details noninterest expense for the periods
indicated:
|
|
Three Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
(dollars in thousands; unaudited) |
|
2022 |
|
2022 |
|
2021 |
Salaries and employee benefits |
|
$ |
14,506 |
|
$ |
12,238 |
|
$ |
9,961 |
Legal and professional fees |
|
|
2,251 |
|
|
1,002 |
|
|
796 |
Data processing and software licenses |
|
|
1,670 |
|
|
1,546 |
|
|
1,333 |
Occupancy |
|
|
1,147 |
|
|
1,083 |
|
|
1,037 |
FDIC assessments |
|
|
850 |
|
|
855 |
|
|
400 |
Point of sale expense |
|
|
742 |
|
|
409 |
|
|
212 |
Excise taxes |
|
|
588 |
|
|
564 |
|
|
407 |
Director and staff expenses |
|
|
475 |
|
|
377 |
|
|
274 |
Marketing |
|
|
69 |
|
|
74 |
|
|
130 |
Other |
|
|
1,522 |
|
|
1,318 |
|
|
865 |
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
|
23,820 |
|
|
19,466 |
|
|
15,415 |
BaaS loan expense |
|
|
15,560 |
|
|
12,229 |
|
|
419 |
BaaS fraud expense |
|
|
11,707 |
|
|
6,474 |
|
|
296 |
BaaS loan and fraud expense |
|
|
27,267 |
|
|
18,703 |
|
|
715 |
Total noninterest expense |
|
$ |
51,087 |
|
$ |
38,169 |
|
$ |
16,130 |
Total noninterest expense increased to $51.1 million for the
three months ended September 30, 2022, compared to $38.2
million for the three months ended June 30, 2022 and $16.1 million
for the three months ended September 30, 2021. The increase in
noninterest expense for the quarter ended September 30, 2022,
as compared to the quarter ended June 30, 2022, was primarily due
to a $8.6 million increase in BaaS expense ($3.3 million of which
is related to partner loan expense and $5.2 million of which is
related to partner fraud expense). Partner loan expense
represents the amount paid or payable to partners for credit
enhancements, fraud enhancements, and servicing CCBX loans. Partner
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, and a portion is estimated based on
historical or other information from our partner. Also
contributing to the increase in noninterest expense compared to
June 30, 2022 is a $2.3 million increase in salaries and employee
benefits which is related to hiring in CCBX and additional staff
for our ongoing growth initiatives. In the quarter ended
September 30, 2022 compared to the quarter ended June 30,
2022, legal and professional fees increased $1.2 million, point of
sale expenses increased $333,000 and data processing
and software license expense increased $124,000 The
increase in legal and professional expenses is due to increased
fees related to building our regulatory compliance infrastructure,
our data management capabilities, and risk management, and
increased consulting expenses. The increase in point of sale
expenses is primarily a result of increased activity in CCBX; CCBX
BaaS program income in noninterest income also increased as a
result of this activity. Data processing and software license fees
are expected to increase as we invest in software related to CCBX,
information technology and risk management.
The increased noninterest expenses for the quarter ended
September 30, 2022 compared to the quarter ended
September 30, 2021 were largely due to an increase of $26.6
million in BaaS partner expense ($15.1 million of which is related
to partner loan expense and $11.4 million of which is related to
partner fraud expense), $4.5 million increase in salary and
employee benefits related to hiring staff for CCBX and additional
staff for our ongoing growth initiatives and $1.5 million increase
in legal and professional fees due to increased fees related to
data and risk management, and increased regulatory consulting
expenses. Additionally, there was a $530,000 increase in point of
sale expenses, $450,000 increase in FDIC assessments and $337,000
increase in data processing and software licenses. The
increase in point of sale expenses is attributed to increased CCBX
activity; CCBX BaaS program income in noninterest income also
increased as a result of this activity. The increase in FDIC
assessments is largely the result of an increase in assets combined
with other factors that impact the FDIC assessment calculation
compared to the quarter ended September 30,
2021. The increase in data processing and software
licenses expenses was a result of implementing software to monitor
and assist in the reporting of CCBX activities and monitoring of
transactions to automate and improve efficiency.
The provision for income taxes was $3.0 million for the three
months ended September 30, 2022, $2.9 million for the three
months ended June 30, 2022 and $1.9 million for the third quarter
of 2021. 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 1.0% for calculating the provision for state taxes.
Financial Condition Overview
Total assets increased $164.0 million, or 5.5%, to $3.13 billion
at September 30, 2022 compared to $2.97 billion at June 30,
2022. The increase is primarily due to loans receivable
increasing $173.5 million during the quarter ended
September 30, 2022. Loans held for sale decreased
$16.7 million, to $43.3 million during the quarter ended
September 30, 2022. Also contributing to the
increase in assets for the quarter ended September 30, 2022
was a $8.3 million increase in interest earning deposits with other
banks, as a result of higher deposit totals. Total
assets increased $682.2 million, or 27.8%, at September 30,
2022, compared to $2.45 billion at September 30,
2021. The increase is primarily due to loans receivable
increasing $802.2 million, and an increase of $64.8 million in
investment securities. Partially offsetting the increase
is a $264.8 million decrease in interest earning deposits with
other banks, resulting from increased loan demand, compared to
September 30, 2021.
Loans Receivable
Total loans receivable increased $173.5 million to $2.51 billion
at September 30, 2022, from $2.33 billion at June 30, 2022,
and increased $802.2 million from $1.71 billion at
September 30, 2021. The increase in loans
receivable over the quarter ended June 30, 2022 was the result of
$111.6 million in CCBX loan growth and $61.9 million in community
bank loan growth. Community bank loan growth includes $10.6 million
in PPP loan forgiveness and paydowns for the quarter ended
September 30, 2022. The change in loans receivable over
the quarter ended September 30, 2021 includes CCBX loan growth
of $725.4 million and $76.9 million in community bank loan growth
as of September 30, 2022. Community bank loan
growth is net of $261.5 million in PPP loan forgiveness and
paydowns since September 30, 2021.
The following table summarizes the loan portfolio at the period
indicated:
|
As of September 30, 2022 |
|
As of June 30, 2022 |
|
As of September 30, 2021 |
(dollars in thousands; unaudited) |
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
Commercial and industrial
loans: |
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
$ |
5,794 |
|
|
0.2 |
% |
|
$ |
16,398 |
|
|
0.7 |
% |
|
$ |
267,278 |
|
|
15.5 |
% |
Capital call lines |
|
174,311 |
|
|
6.9 |
|
|
|
224,930 |
|
|
9.6 |
|
|
|
161,457 |
|
|
9.4 |
|
All other commercial & industrial loans |
|
159,823 |
|
|
6.4 |
|
|
|
160,636 |
|
|
6.9 |
|
|
|
108,120 |
|
|
6.3 |
|
Total commercial and industrial loans: |
|
339,928 |
|
|
13.5 |
|
|
|
401,964 |
|
|
17.2 |
|
|
|
536,855 |
|
|
31.2 |
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development |
|
224,188 |
|
|
8.9 |
|
|
|
225,512 |
|
|
9.6 |
|
|
|
158,710 |
|
|
9.2 |
|
Residential real estate |
|
402,781 |
|
|
16.0 |
|
|
|
326,661 |
|
|
14.0 |
|
|
|
170,167 |
|
|
9.9 |
|
Commercial real estate |
|
1,024,067 |
|
|
40.7 |
|
|
|
956,320 |
|
|
40.8 |
|
|
|
837,342 |
|
|
48.7 |
|
Consumer and other loans |
|
523,536 |
|
|
20.9 |
|
|
|
430,083 |
|
|
18.4 |
|
|
|
17,140 |
|
|
1.0 |
|
Gross loans receivable |
|
2,514,500 |
|
|
100.0 |
% |
|
|
2,340,540 |
|
|
100.0 |
% |
|
|
1,720,214 |
|
|
100.0 |
% |
Net deferred origination fees
- PPP loans |
|
(111 |
) |
|
|
|
|
(396 |
) |
|
|
|
|
(9,417 |
) |
|
|
Net deferred origination fees
- all other loans |
|
(6,500 |
) |
|
|
|
|
(5,790 |
) |
|
|
|
|
(5,115 |
) |
|
|
Loans receivable |
$ |
2,507,889 |
|
|
|
|
$ |
2,334,354 |
|
|
|
|
$ |
1,705,682 |
|
|
|
Loan Yield (1) |
|
8.46 |
% |
|
|
|
|
7.34 |
% |
|
|
|
|
4.57 |
% |
|
|
(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 |
|
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
|
$ |
5,794 |
|
|
0.4 |
% |
|
$ |
16,398 |
|
|
1.1 |
% |
|
$ |
267,278 |
|
|
17.5 |
% |
All other commercial & industrial loans |
|
|
143,808 |
|
|
9.0 |
|
|
|
142,569 |
|
|
9.3 |
|
|
|
108,120 |
|
|
7.1 |
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development loans |
|
|
224,188 |
|
|
14.0 |
|
|
|
225,512 |
|
|
14.7 |
|
|
|
158,710 |
|
|
10.4 |
|
Residential real estate loans |
|
|
198,871 |
|
|
12.5 |
|
|
|
193,518 |
|
|
12.6 |
|
|
|
156,128 |
|
|
10.2 |
|
Commercial real estate loans |
|
|
1,024,067 |
|
|
64.0 |
|
|
|
956,320 |
|
|
62.2 |
|
|
|
837,342 |
|
|
54.7 |
|
Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer and other loans |
|
|
2,220 |
|
|
0.1 |
|
|
|
2,325 |
|
|
0.1 |
|
|
|
2,492 |
|
|
0.1 |
|
Gross Community Bank loans receivable |
|
|
1,598,948 |
|
|
100.0 |
% |
|
|
1,536,642 |
|
|
100.0 |
% |
|
|
1,530,070 |
|
|
100.0 |
% |
Net deferred origination
fees |
|
|
(6,628 |
) |
|
|
|
|
(6,240 |
) |
|
|
|
|
(14,602 |
) |
|
|
Loans receivable |
|
$ |
1,592,320 |
|
|
|
|
$ |
1,530,402 |
|
|
|
|
$ |
1,515,468 |
|
|
|
Loan Yield(1) |
|
|
5.31 |
% |
|
|
|
|
5.04 |
% |
|
|
|
|
4.67 |
% |
|
|
(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 |
|
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital call lines |
|
$ |
174,311 |
|
|
19.0 |
% |
|
$ |
224,930 |
|
|
28.0 |
% |
|
$ |
161,457 |
|
|
84.9 |
% |
All other commercial & industrial loans |
|
|
16,015 |
|
|
1.8 |
|
|
|
18,067 |
|
|
2.2 |
|
|
|
— |
|
|
0.0 |
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
203,910 |
|
|
22.3 |
|
|
|
133,143 |
|
|
16.5 |
|
|
|
14,039 |
|
|
7.4 |
|
Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
216,995 |
|
|
23.7 |
|
|
|
139,501 |
|
|
17.4 |
|
|
|
1,711 |
|
|
0.9 |
|
Other consumer and other loans |
|
|
304,321 |
|
|
33.2 |
|
|
|
288,257 |
|
|
35.9 |
|
|
|
12,937 |
|
|
6.8 |
|
Gross CCBX loans receivable |
|
|
915,552 |
|
|
100.0 |
% |
|
|
803,898 |
|
|
100.0 |
% |
|
|
190,144 |
|
|
100.0 |
% |
Net deferred origination
costs |
|
|
17 |
|
|
|
|
|
54 |
|
|
|
|
|
70 |
|
|
|
Loans receivable |
|
$ |
915,569 |
|
|
|
|
$ |
803,952 |
|
|
|
|
$ |
190,214 |
|
|
|
Loan Yield -
CCBX(1)(2) |
|
|
13.96 |
% |
|
|
|
|
12.35 |
% |
|
|
|
|
3.65 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 servicing
CCBX loans. See reconciliation of the non-GAAP measures at the end
of this earnings release for the impact of BaaS loan expense on
CCBX loan yield.
(2) Loan yield is annualized for the three months ended
for each period presented and includes loans held for sale and
nonaccrual loans.
Deposits
Total deposits increased $139.8 million, or 5.2%, to $2.84
billion at September 30, 2022 from $2.70 billion at June 30,
2022. The increase was due to a $143.0 million increase in core
deposits, partially offset by a $2.6 million decrease in time
deposits. Our increase in deposits is primarily the result of
growth in CCBX. Deposits in our CCBX segment increased $136.2
million, from $1.07 billion at June 30, 2022, to $1.20 billion at
September 30, 2022 and community bank deposits increased $3.6
million to $1.63 billion at September 30, 2022. The deposits
from our CCBX segment are predominately classified as interest
bearing, or NOW and money market accounts, but a portion of such
CCBX deposits may be classified as brokered deposits as a result of
the relationship agreement. During the quarter ended
September 30, 2022, noninterest bearing deposits decreased
$4.8 million, or 0.6%, to $813.2 million from $818.1 million at
June 30, 2022. In the quarter ended September 30, 2022
compared to the quarter ended June 30, 2022, NOW and money market
accounts increased $146.8 million and savings deposits increased
$1.0 million. Partially offsetting those increases is a decrease of
$638,000 in BaaS-brokered deposits and a decrease of $2.6 million
in time deposits.
Total deposits increased $613.5 million, or 27.6%, to $2.84
billion at September 30, 2022 compared to $2.22 billion at
September 30, 2021. The increase in deposits is largely the
result of growth in CCBX and is also due to expanding and growing
banking relationships with community bank customers. Noninterest
bearing deposits decreased $483.2 million, or 37.3%, to $813.2
million at September 30, 2022 from $1.3 billion at
September 30, 2021. NOW and money market accounts increased
$1.05 billion, or 139.1%, to $1.81 billion at September 30,
2022, and savings accounts increased $11.3 million, or 11.8%, and
BaaS-brokered deposits increased $47.0 million, or 165.4% while
time deposits decreased $12.8 million, or 27.5%, in the
third quarter of 2022 compared to the third quarter of 2021.
Additionally, as of September 30, 2022 we have access to
$266.7 million in CCBX customer deposits that are currently being
transferred off the Bank’s balance sheet to other financial
institutions on a daily basis. The Bank could retain these deposits
for liquidity and funding purposes if needed. If a portion of these
deposits are retained, they would be classified as brokered
deposits, however if the entire available balance is retained, they
would be non-brokered deposits. Efforts to retain and grow core
deposits are evidenced by the high ratios in these categories when
compared to total deposits.
The following table summarizes the deposit portfolio for the
periods indicated.
|
As of September 30, 2022 |
|
As of June 30, 2022 |
|
As of September 30, 2021 |
(dollars in thousands; unaudited) |
Amount |
|
Percent of
Total
Deposits |
|
Balance |
|
Percent of
Total
Deposits |
|
Balance |
|
Percent of
Total
Deposits |
Demand, noninterest bearing |
$ |
813,217 |
|
|
28.7 |
% |
|
$ |
818,052 |
|
|
30.3 |
% |
|
$ |
1,296,443 |
|
|
58.3 |
% |
NOW and money market |
|
1,807,105 |
|
|
63.7 |
|
|
|
1,660,315 |
|
|
61.6 |
|
|
|
755,810 |
|
|
34.0 |
|
Savings |
|
107,508 |
|
|
3.8 |
|
|
|
106,464 |
|
|
3.9 |
|
|
|
96,192 |
|
|
4.3 |
|
Total core deposits |
|
2,727,830 |
|
|
96.2 |
|
|
|
2,584,831 |
|
|
95.8 |
|
|
|
2,148,445 |
|
|
96.6 |
|
BaaS-brokered deposits |
|
75,363 |
|
|
2.6 |
|
|
|
76,001 |
|
|
2.8 |
|
|
|
28,396 |
|
|
1.3 |
|
Time deposits less than
$100,000 |
|
13,296 |
|
|
0.5 |
|
|
|
14,009 |
|
|
0.5 |
|
|
|
15,701 |
|
|
0.7 |
|
Time deposits $100,000 and
over |
|
20,577 |
|
|
0.7 |
|
|
|
22,464 |
|
|
0.8 |
|
|
|
30,998 |
|
|
1.4 |
|
Total |
$ |
2,837,066 |
|
|
100.0 |
% |
|
$ |
2,697,305 |
|
|
100.0 |
% |
|
$ |
2,223,540 |
|
|
100.0 |
% |
Cost of
Deposits(1) |
|
0.82 |
% |
|
|
|
|
0.25 |
% |
|
|
|
|
0.10 |
% |
|
|
(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 |
|
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
Demand, noninterest bearing |
|
$ |
746,516 |
|
|
45.7 |
% |
|
$ |
729,436 |
|
|
44.7 |
% |
|
$ |
722,458 |
|
|
44.7 |
% |
NOW and money market |
|
|
748,347 |
|
|
45.8 |
|
|
|
759,704 |
|
|
46.6 |
|
|
|
750,973 |
|
|
46.5 |
|
Savings |
|
|
106,059 |
|
|
6.5 |
|
|
|
105,576 |
|
|
6.5 |
|
|
|
96,192 |
|
|
6.0 |
|
Total core deposits |
|
|
1,600,922 |
|
|
97.9 |
|
|
|
1,594,716 |
|
|
97.8 |
|
|
|
1,569,623 |
|
|
97.1 |
|
Brokered deposits |
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
Time deposits less than
$100,000 |
|
|
13,296 |
|
|
0.8 |
|
|
|
14,009 |
|
|
0.9 |
|
|
|
15,701 |
|
|
1.0 |
|
Time deposits $100,000 and
over |
|
|
20,577 |
|
|
1.3 |
|
|
|
22,464 |
|
|
1.4 |
|
|
|
30,998 |
|
|
1.9 |
|
Total Community Bank deposits |
|
$ |
1,634,796 |
|
|
100.0 |
% |
|
$ |
1,631,190 |
|
|
100.0 |
% |
|
$ |
1,616,323 |
|
|
100.0 |
% |
Cost of
deposits(1) |
|
|
0.16 |
% |
|
|
|
|
0.08 |
% |
|
|
|
|
0.13 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
CCBX |
|
As of |
|
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
Demand, noninterest bearing |
|
$ |
66,701 |
|
|
5.5 |
% |
|
$ |
88,616 |
|
|
8.3 |
% |
|
$ |
573,985 |
|
|
94.5 |
% |
NOW and money market |
|
|
1,058,758 |
|
|
88.1 |
|
|
|
900,611 |
|
|
84.5 |
|
|
|
4,837 |
|
|
0.8 |
|
Savings |
|
|
1,449 |
|
|
0.1 |
|
|
|
888 |
|
|
0.1 |
|
|
|
— |
|
|
— |
|
Total core deposits |
|
|
1,126,908 |
|
|
93.7 |
|
|
|
990,115 |
|
|
92.9 |
|
|
|
578,822 |
|
|
95.3 |
|
BaaS-brokered deposits |
|
|
75,362 |
|
|
6.3 |
|
|
|
76,000 |
|
|
7.1 |
|
|
|
28,395 |
|
|
4.7 |
|
Total CCBX deposits |
|
$ |
1,202,270 |
|
|
100.0 |
% |
|
$ |
1,066,115 |
|
|
100.0 |
% |
|
$ |
607,217 |
|
|
100.0 |
% |
Cost of
deposits(1) |
|
|
1.79 |
% |
|
|
|
|
0.56 |
% |
|
|
|
|
0.02 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
Shareholders’ Equity
During the nine months ended September 30, 2022, the
Company contributed $21.0 million in capital to the
Bank. The Company has a cash balance of $2.0 million as
of September 30, 2022, which is retained for general operating
purposes, including debt repayment, and for funding $1.0 million in
commitments to bank technology funds.
Total shareholders’ equity increased $11.1 million since June
30, 2022. The increase in shareholders’ equity was
primarily due to $11.1 million in net earnings for the three months
ended September 30, 2022. The accrual of equity awards and
exercises equally offset the $747,000 decrease in accumulated other
comprehensive income, related to the market adjustment on available
for sale securities.
Capital Ratios
The Company and the Bank remain well capitalized at
September 30, 2022, as summarized in the following table.
(unaudited) |
|
Coastal Community Bank |
|
Coastal Financial Corporation |
|
Financial Institution Basel III
Regulatory Guidelines |
Tier 1 leverage capital |
|
8.34 |
% |
|
7.70 |
% |
|
5.00 |
% |
Common Equity Tier 1
risk-based capital |
|
9.34 |
% |
|
8.49 |
% |
|
6.50 |
% |
Tier 1 risk-based capital |
|
9.34 |
% |
|
8.62 |
% |
|
8.00 |
% |
Total risk-based capital |
|
10.60 |
% |
|
10.80 |
% |
|
10.00 |
% |
Asset Quality
The total allowance for loan losses was $59.3 million and 2.36%
of loans receivable at September 30, 2022 compared to $49.4
million and 2.11% at June 30, 2022 and $20.2 million and 1.19% at
September 30, 2021. The allowance for loan loss allocated to
the CCBX portfolio was $39.1 million and 4.28% of CCBX loans
receivable at September 30, 2022, with $20.1 million of
allowance for loan loss allocated to the community bank or 1.26% of
total community bank loans receivable.
The following table details the allocation of the allowance for
loan loss as of the period indicated:
|
|
As of September 30, 2022 |
|
As of June 30, 2022 |
|
As of September 30, 2021 |
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
Loans receivable |
|
$ |
1,592,320 |
|
|
$ |
915,569 |
|
|
$ |
2,507,889 |
|
|
$ |
1,530,402 |
|
|
$ |
803,952 |
|
|
$ |
2,334,354 |
|
|
$ |
1,515,468 |
|
|
$ |
190,214 |
|
|
$ |
1,705,682 |
|
Allowance for loan losses |
|
|
(20,139 |
) |
|
|
(39,143 |
) |
|
|
(59,282 |
) |
|
|
(20,785 |
) |
|
|
(28,573 |
) |
|
|
(49,358 |
) |
|
|
(20,070 |
) |
|
|
(152 |
) |
|
|
(20,222 |
) |
Allowance for loan losses to
total loans receivable |
|
|
1.26 |
% |
|
|
4.28 |
% |
|
|
2.36 |
% |
|
|
1.36 |
% |
|
|
3.55 |
% |
|
|
2.11 |
% |
|
|
1.32 |
% |
|
|
0.08 |
% |
|
|
1.19 |
% |
Provision for loan losses totaled $18.4 million for the three
months ended September 30, 2022, $14.1 million for the three
months ended June 30, 2022, and $255,000 for the three months ended
September 30, 2021. Net charge-offs totaled $8.5 million for
the quarter ended September 30, 2022, compared to $3.5 million
for the quarter ended June 30, 2022 and $(1,000) for the quarter
ended September 30, 2021. Net charge-offs increased due to
CCBX partner loans and the reclassification and charge-off of
negative deposit accounts. CCBX partner agreements provide for a
credit enhancement that covers the net-charge-offs on CCBX loans
and negative deposit accounts.
The following table details net charge-offs for the core bank
and CCBX for the period indicated:
|
|
Three Months Ended |
|
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
Gross charge-offs |
|
$ |
411 |
|
|
$ |
8,102 |
|
|
$ |
8,513 |
|
|
$ |
3 |
|
|
$ |
3,539 |
|
|
$ |
3,542 |
|
|
$ |
14 |
|
|
$ |
17 |
|
|
$ |
31 |
|
Gross recoveries |
|
|
(3 |
) |
|
|
(6 |
) |
|
|
(9 |
) |
|
|
(36 |
) |
|
|
— |
|
|
|
(36 |
) |
|
|
(24 |
) |
|
|
(8 |
) |
|
|
(32 |
) |
Net charge-offs |
|
$ |
408 |
|
|
$ |
8,096 |
|
|
$ |
8,504 |
|
|
$ |
(33 |
) |
|
$ |
3,539 |
|
|
$ |
3,506 |
|
|
$ |
(10 |
) |
|
$ |
9 |
|
|
$ |
(1 |
) |
Net charge-offs to average
loans |
|
|
0.10 |
% |
|
|
3.59 |
% |
|
|
1.38 |
% |
|
(0.01 |
)% |
|
|
2.05 |
% |
|
|
0.64 |
% |
|
|
0.00 |
% |
|
|
0.02 |
% |
|
|
0.00 |
% |
The increase in the Company’s provision for loan losses during
the quarter ended September 30, 2022, is largely related to
the provision for CCBX partner loans. During the quarter ended
September 30, 2022, a $18.7 million provision for loan losses
was recorded for CCBX partner loans based on management’s analysis,
compared to the $14.0 million provision for loan losses that was
recorded for CCBX for the quarter ended June 30, 2022. CCBX loans
have a higher level of expected losses than our community bank
loans, which is reflected in the factors for the allowance for loan
losses. Agreements with our CCBX partners provide for a credit
enhancement which protects the Bank by absorbing incurred losses.
In accordance with accounting guidance, we estimate and record a
provision for probable losses for these CCBX loans and reclassified
negative deposit accounts. When the provision for CCBX loan losses
and provision for unfunded commitments is recorded, a receivable is
also recorded on the balance sheet through noninterest income (BaaS
credit enhancements). Incurred losses are recorded in the allowance
for loan losses. The receivable is relieved when credit enhancement
recoveries are received from the CCBX partner. Although agreements
with our CCBX partners provide for credit enhancements that provide
protection to the Bank from credit and fraud losses by absorbing
incurred credit and fraud losses, if our partner is unable to
fulfill their contracted obligations then the bank would be exposed
to additional loan losses, as a result of this counterparty risk.
The factors used in management’s analysis for community bank loan
losses indicated that a recapture/adjustment for loan losses of
$238,000 and provision of $109,000 was needed for the quarters
ended September 30, 2022 and June 30, 2022, respectively. The
community bank recapture/adjustment was the result of transferring
a portion of the allowance from the community bank segment to the
CCBX segment. In accordance with the program agreement, in the
quarter ended September 30, 2022, the Company was responsible for
losses on $7.8 million from one CCBX partner for which there is no
credit enhancement . CCBX partners indemnify the Bank for loan
losses/charge-offs on loans they originate, other than the
aforementioned $7.8 million. The economic environment is
continuously changing, due to increased inflation, global unrest,
the war in Ukraine, upcoming midterm elections, trade issues that
have may impact the provision and therefore the allowance. The
Company is not required to implement the provisions of the Current
Expected Credit Loss accounting standard until January 1, 2023 and
continues to account for the allowance for credit losses under the
incurred loss model.
The following table details the provision expense for the
community bank and CCBX for the period indicated:
|
|
Three Months Ended |
|
Nine Months Ended |
(dollars in thousands; unaudited) |
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
|
September 30, 2022 |
|
September 30, 2021 |
Community bank |
|
$ |
(238 |
) |
|
$ |
109 |
|
$ |
192 |
|
$ |
214 |
|
$ |
877 |
CCBX |
|
|
18,666 |
|
|
|
13,985 |
|
|
63 |
|
|
45,250 |
|
|
96 |
Total provision expense |
|
$ |
18,428 |
|
|
$ |
14,094 |
|
$ |
255 |
|
$ |
45,464 |
|
$ |
973 |
At September 30, 2022, our nonperforming assets were $22.9
million, or 0.73% of total assets, compared to $5.8 million, or
0.20%, of total assets, at June 30, 2022, and $740,000, or 0.03% of
total assets, at September 30, 2021. These ratios are impacted
by the increase in CCBX loans over 90 days delinquent that are
covered by CCBX partner credit enhancements. Agreements with our
CCBX partners provide for a credit enhancement which protects the
Bank by absorbing incurred losses. Under the agreement, the CCBX
partner will reimburse the Bank for its loss/charge-off on these
loans. Nonperforming assets increased $17.1 million during the
quarter ended September 30, 2022, compared to the quarter
ended June 30, 2022, due to the addition of $10.2 million in CCBX
loans that are past due 90 days or more and still accruing combined
with $6.8 million more in community bank nonaccrual loans.
Community bank nonaccrual loans increased with the addition of one
new nonaccrual loan partially offset by other nonaccrual principal
reductions/charge-offs. There were no repossessed assets or other
real estate owned at September 30, 2022. Our nonperforming
loans to loans receivable ratio was 0.91% at September 30,
2022, compared to 0.25% at June 30, 2022, and 0.04% at
September 30, 2021.
For the quarter ended September 30, 2022, we have seen a
slight change in our community bank credit quality metrics, as
demonstrated by the $408,000 of community bank net charge-offs and
$7.1 million of nonperforming community bank loans. For the quarter
ended September 30, 2022, $8.1 million in net charge-offs were
recorded on CCBX loans. These loans have a higher level of expected
losses than our community bank loans, which is reflected in the
factors for the allowance for loan losses. Agreements with our CCBX
loan and deposit partners provide for a credit enhancement against
loan and fraud losses.
The following table details the Company’s nonperforming assets
for the periods indicated.
(dollars in thousands; unaudited) |
As of September 30, 2022 |
|
As of June 30, 2022 |
|
As of September 30, 2021 |
Nonaccrual loans: |
|
|
|
|
|
Commercial and industrial loans |
$ |
94 |
|
|
$ |
111 |
|
|
$ |
561 |
|
Real estate loans: |
|
|
|
|
|
Construction, land and land development |
|
66 |
|
|
|
67 |
|
|
|
— |
|
Residential real estate |
|
— |
|
|
|
53 |
|
|
|
56 |
|
Commercial real estate |
|
6,901 |
|
|
|
— |
|
|
|
— |
|
Total nonaccrual loans |
|
7,061 |
|
|
|
231 |
|
|
|
617 |
|
Accruing loans past
due 90 days or more: |
|
|
|
|
|
Commercial & industrial
loans |
|
138 |
|
|
|
10 |
|
|
|
— |
|
Real estate loans: |
|
|
|
|
|
Residential real estate loans |
|
638 |
|
|
|
123 |
|
|
|
1 |
|
Consumer and other loans: |
|
|
|
|
|
Credit cards |
|
4,777 |
|
|
|
1,283 |
|
|
|
94 |
|
Other consumer and other loans |
|
10,268 |
|
|
|
4,164 |
|
|
|
28 |
|
Total accruing loans past due 90 days or more |
|
15,821 |
|
|
|
5,580 |
|
|
|
123 |
|
Total nonperforming loans |
|
22,882 |
|
|
|
5,811 |
|
|
|
740 |
|
Real estate owned |
|
— |
|
|
|
— |
|
|
|
— |
|
Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
Troubled debt
restructurings, accruing |
|
— |
|
|
|
— |
|
|
|
— |
|
Total nonperforming
assets |
$ |
22,882 |
|
|
$ |
5,811 |
|
|
$ |
740 |
|
Total nonaccrual loans to
loans receivable |
|
0.28 |
% |
|
|
0.01 |
% |
|
|
0.04 |
% |
Total nonperforming loans to
loans receivable |
|
0.91 |
% |
|
|
0.25 |
% |
|
|
0.04 |
% |
Total nonperforming assets to
total assets |
|
0.73 |
% |
|
|
0.20 |
% |
|
|
0.03 |
% |
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) |
September 30,
2022 |
|
June 30, 2022 |
|
September 30,
2021 |
Nonaccrual loans: |
|
|
|
|
|
Commercial and industrial loans |
$ |
94 |
|
$ |
111 |
|
$ |
561 |
Real estate: |
|
|
|
|
|
Construction, land and land development |
|
66 |
|
|
67 |
|
|
— |
Residential real estate |
|
— |
|
|
53 |
|
|
56 |
Commercial real estate |
|
6,901 |
|
|
— |
|
|
— |
Total nonaccrual loans |
|
7,061 |
|
|
231 |
|
|
617 |
|
|
|
|
|
|
— |
Accruing loans past
due 90 days or more: |
|
|
|
|
|
Total accruing loans past due 90 days or more |
|
— |
|
|
— |
|
|
— |
Total nonperforming loans |
|
7,061 |
|
|
231 |
|
|
617 |
Other real estate
owned |
|
— |
|
|
— |
|
|
— |
Repossessed
assets |
|
— |
|
|
— |
|
|
— |
Total nonperforming
assets |
$ |
7,061 |
|
$ |
231 |
|
$ |
617 |
CCBX |
As of |
(dollars in thousands; unaudited) |
September 30,
2022 |
|
June 30, 2022 |
|
September 30,
2021 |
Nonaccrual loans |
$ |
— |
|
$ |
— |
|
$ |
— |
Accruing loans past
due 90 days or more: |
|
|
|
|
|
Commercial & industrial
loans |
|
138 |
|
|
10 |
|
|
— |
Real estate loans: |
|
|
|
|
|
Residential real estate loans |
|
638 |
|
|
123 |
|
|
1 |
Consumer and other loans: |
|
|
|
|
|
Credit cards |
|
4,777 |
|
|
1,283 |
|
|
94 |
Other consumer and other loans |
|
10,268 |
|
|
4,164 |
|
|
28 |
Total accruing loans past due 90 days or more |
|
15,821 |
|
|
5,580 |
|
|
123 |
Total nonperforming loans |
|
15,821 |
|
|
5,580 |
|
|
123 |
Other real estate
owned |
|
— |
|
|
— |
|
|
— |
Repossessed
assets |
|
— |
|
|
— |
|
|
— |
Total nonperforming
assets |
$ |
15,821 |
|
$ |
5,580 |
|
$ |
123 |
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 $3.13 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 and digital financial service providers through its
CCBX segment. To learn more about the Company visit
www.coastalbank.com.
CCB-ER
Contact
Eric Sprink, Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial
Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect our current views
with respect to, among other things, future events and our
financial performance. Any statements about our management’s
expectations, beliefs, plans, predictions, forecasts, objectives,
assumptions or future events or performance are not historical
facts and may be forward-looking. These statements are often, but
not always, made through the use of words or phrases such as
“anticipate,” “believes,” “can,” “could,” “may,” “predicts,”
“potential,” “should,” “will,” “estimate,” “plans,” “projects,”
“continuing,” “ongoing,” “expects,” “intends” and similar words or
phrases. Any or all of the forward-looking statements in this
earnings release may turn out to be inaccurate. The inclusion of or
reference to forward-looking information in this earnings release
should not be regarded as a representation by us or any other
person that the future plans, estimates or expectations
contemplated by us will be achieved. We have based these
forward-looking statements largely on our current expectations and
projections about future events and financial trends that we
believe may affect our financial condition, results of operations,
business strategy and financial needs. Our actual results could
differ materially from those anticipated in such forward-looking
statements as a result of risks, uncertainties and assumptions that
are difficult to predict. Factors that could cause actual results
to differ materially from those in the forward-looking statements
include, without limitation, the risks and uncertainties discussed
under “Risk Factors” in our Annual Report on Form 10-K for the most
recent period filed, our Quarterly Report on Form 10-Q for the most
recent quarter, and in any of our subsequent filings with the
Securities and Exchange Commission.
If one or more events related to these or other risks or
uncertainties materialize, or if our underlying assumptions prove
to be incorrect, actual results may differ materially from what we
anticipate. You are cautioned not to place undue reliance on
forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made, and we undertake no
obligation to update or revise any forward-looking statement to
reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated
events, except as required by law.
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
ASSETS |
|
September 30,
2022 |
|
June 30,
2022 |
|
September 30,
2021 |
Cash and due from banks |
$ |
37,482 |
|
|
$ |
40,750 |
|
|
$ |
31,722 |
|
Interest earning deposits with
other banks |
|
373,246 |
|
|
|
364,939 |
|
|
|
638,003 |
|
Investment securities,
available for sale, at fair value |
|
97,621 |
|
|
|
108,560 |
|
|
|
32,838 |
|
Investment securities, held to
maturity, at amortized cost |
|
1,250 |
|
|
|
1,261 |
|
|
|
2,086 |
|
Other investments |
|
10,581 |
|
|
|
10,379 |
|
|
|
8,349 |
|
Loans held for sale, at
par |
|
43,314 |
|
|
|
60,000 |
|
|
|
— |
|
Loans receivable |
|
2,507,889 |
|
|
|
2,334,354 |
|
|
|
1,705,682 |
|
Allowance for loan losses |
|
(59,282 |
) |
|
|
(49,358 |
) |
|
|
(20,222 |
) |
Total loans receivable, net |
|
2,448,607 |
|
|
|
2,284,996 |
|
|
|
1,685,460 |
|
Premises and equipment,
net |
|
18,467 |
|
|
|
18,670 |
|
|
|
17,231 |
|
Operating lease right-of-use
assets |
|
5,293 |
|
|
|
5,565 |
|
|
|
6,372 |
|
Accrued interest
receivable |
|
13,114 |
|
|
|
12,430 |
|
|
|
7,549 |
|
Bank-owned life insurance,
net |
|
12,576 |
|
|
|
12,485 |
|
|
|
12,166 |
|
Deferred tax asset, net |
|
13,997 |
|
|
|
11,709 |
|
|
|
3,807 |
|
Other assets |
|
58,193 |
|
|
|
37,978 |
|
|
|
5,985 |
|
Total assets |
$ |
3,133,741 |
|
|
$ |
2,969,722 |
|
|
$ |
2,451,568 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
LIABILITIES |
|
|
|
|
|
Deposits |
$ |
2,837,066 |
|
|
$ |
2,697,305 |
|
|
$ |
2,223,540 |
|
Federal Home Loan Bank ("FHLB") advances |
|
— |
|
|
|
— |
|
|
|
24,999 |
|
Subordinated debt |
|
24,343 |
|
|
|
24,324 |
|
|
|
24,269 |
|
Junior subordinated debentures |
|
3,588 |
|
|
|
3,587 |
|
|
|
3,586 |
|
Deferred compensation |
|
648 |
|
|
|
680 |
|
|
|
774 |
|
Accrued interest payable |
|
153 |
|
|
|
330 |
|
|
|
147 |
|
Operating lease liabilities |
|
5,514 |
|
|
|
5,786 |
|
|
|
6,583 |
|
Other liabilities |
|
33,696 |
|
|
|
20,049 |
|
|
|
6,584 |
|
Total liabilities |
|
2,905,008 |
|
|
|
2,752,061 |
|
|
|
2,290,482 |
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Common stock |
|
123,944 |
|
|
|
123,226 |
|
|
|
88,997 |
|
Retained earnings |
|
106,880 |
|
|
|
95,779 |
|
|
|
72,083 |
|
Accumulated other comprehensive (loss) income, net of tax |
|
(2,091 |
) |
|
|
(1,344 |
) |
|
|
6 |
|
Total shareholders’ equity |
|
228,733 |
|
|
|
217,661 |
|
|
|
161,086 |
|
Total liabilities and shareholders’ equity |
$ |
3,133,741 |
|
|
$ |
2,969,722 |
|
|
$ |
2,451,568 |
|
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
|
Three Months Ended |
|
September 30,
2022 |
|
June 30,
2022 |
|
September 30,
2021 |
INTEREST AND DIVIDEND
INCOME |
|
|
|
|
|
Interest and fees on loans |
$ |
52,328 |
|
|
$ |
40,166 |
|
|
$ |
19,383 |
Interest on interest earning deposits with other banks |
|
2,273 |
|
|
|
956 |
|
|
|
170 |
Interest on investment securities |
|
554 |
|
|
|
563 |
|
|
|
24 |
Dividends on other investments |
|
24 |
|
|
|
134 |
|
|
|
31 |
Total interest income |
|
55,179 |
|
|
|
41,819 |
|
|
|
19,608 |
INTEREST EXPENSE |
|
|
|
|
|
Interest on deposits |
|
5,717 |
|
|
|
1,673 |
|
|
|
523 |
Interest on borrowed funds |
|
273 |
|
|
|
260 |
|
|
|
278 |
Total interest expense |
|
5,990 |
|
|
|
1,933 |
|
|
|
801 |
Net interest income |
|
49,189 |
|
|
|
39,886 |
|
|
|
18,807 |
PROVISION FOR LOAN LOSSES |
|
18,428 |
|
|
|
14,094 |
|
|
|
255 |
Net interest income after provision for loan losses |
|
30,761 |
|
|
|
25,792 |
|
|
|
18,552 |
NONINTEREST INCOME |
|
|
|
|
|
Deposit service charges and fees |
|
986 |
|
|
|
988 |
|
|
|
956 |
Loan referral fees |
|
— |
|
|
|
208 |
|
|
|
723 |
Gain on sales of loans, net |
|
— |
|
|
|
— |
|
|
|
206 |
Mortgage broker fees |
|
24 |
|
|
|
85 |
|
|
|
187 |
Unrealized (loss) gain on equity securities, net |
|
(133 |
) |
|
|
(2 |
) |
|
|
1,472 |
Other income |
|
236 |
|
|
|
313 |
|
|
|
302 |
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,113 |
|
|
|
1,592 |
|
|
|
3,846 |
Servicing and other BaaS fees |
|
1,079 |
|
|
|
1,159 |
|
|
|
1,313 |
Transaction fees |
|
940 |
|
|
|
814 |
|
|
|
146 |
Interchange fees |
|
738 |
|
|
|
628 |
|
|
|
188 |
Reimbursement of expenses |
|
885 |
|
|
|
618 |
|
|
|
333 |
BaaS program income |
|
3,642 |
|
|
|
3,219 |
|
|
|
1,980 |
BaaS credit enhancements |
|
17,928 |
|
|
|
14,207 |
|
|
|
10 |
BaaS fraud enhancements |
|
11,708 |
|
|
|
6,474 |
|
|
|
296 |
BaaS indemnification income |
|
29,636 |
|
|
|
20,681 |
|
|
|
306 |
Total noninterest income |
|
34,391 |
|
|
|
25,492 |
|
|
|
6,132 |
NONINTEREST EXPENSE |
|
|
|
|
|
Salaries and employee benefits |
|
14,506 |
|
|
|
12,238 |
|
|
|
9,961 |
Occupancy |
|
1,147 |
|
|
|
1,083 |
|
|
|
1,037 |
Data processing and software licenses |
|
1,670 |
|
|
|
1,546 |
|
|
|
1,333 |
Legal and professional fees |
|
2,251 |
|
|
|
1,002 |
|
|
|
796 |
Point of sale expense |
|
742 |
|
|
|
409 |
|
|
|
212 |
Excise taxes |
|
588 |
|
|
|
564 |
|
|
|
407 |
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
850 |
|
|
|
855 |
|
|
|
400 |
Director and staff expenses |
|
475 |
|
|
|
377 |
|
|
|
274 |
Marketing |
|
69 |
|
|
|
74 |
|
|
|
130 |
Other expense |
|
1,522 |
|
|
|
1,318 |
|
|
|
865 |
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
23,820 |
|
|
|
19,466 |
|
|
|
15,415 |
BaaS loan expense |
|
15,560 |
|
|
|
12,229 |
|
|
|
419 |
BaaS fraud expense |
|
11,707 |
|
|
|
6,474 |
|
|
|
296 |
BaaS loan and fraud expense |
|
27,267 |
|
|
|
18,703 |
|
|
|
715 |
Total noninterest expense |
|
51,087 |
|
|
|
38,169 |
|
|
|
16,130 |
Income before provision for income taxes |
|
14,065 |
|
|
|
13,115 |
|
|
|
8,554 |
PROVISION FOR INCOME
TAXES |
|
2,964 |
|
|
|
2,939 |
|
|
|
1,870 |
NET INCOME |
$ |
11,101 |
|
|
$ |
10,176 |
|
|
$ |
6,684 |
Basic earnings per common
share |
$ |
0.86 |
|
|
$ |
0.79 |
|
|
$ |
0.56 |
Diluted earnings per common
share |
$ |
0.82 |
|
|
$ |
0.76 |
|
|
$ |
0.54 |
Weighted average number of
common shares outstanding: |
|
|
|
|
|
Basic |
|
12,938,200 |
|
|
|
12,928,061 |
|
|
|
11,999,899 |
Diluted |
|
13,536,823 |
|
|
|
13,442,013 |
|
|
|
12,456,674 |
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
|
Nine Months Ended |
|
September 30,
2022 |
|
September 30,
2021 |
INTEREST AND DIVIDEND
INCOME |
|
|
|
Interest and fees on loans |
$ |
122,126 |
|
|
$ |
56,978 |
Interest on interest earning deposits with other banks |
|
3,631 |
|
|
|
314 |
Interest on investment securities |
|
1,188 |
|
|
|
76 |
Dividends on other investments |
|
195 |
|
|
|
169 |
Total interest income |
|
127,140 |
|
|
|
57,537 |
INTEREST EXPENSE |
|
|
|
Interest on deposits |
|
7,943 |
|
|
|
1,811 |
Interest on borrowed funds |
|
854 |
|
|
|
992 |
Total interest expense |
|
8,797 |
|
|
|
2,803 |
Net interest income |
|
118,343 |
|
|
|
54,734 |
PROVISION FOR LOAN LOSSES |
|
45,464 |
|
|
|
973 |
Net interest income after provision for loan losses |
|
72,879 |
|
|
|
53,761 |
NONINTEREST INCOME |
|
|
|
Deposit service charges and fees |
|
2,858 |
|
|
|
2,768 |
Loan referral fees |
|
810 |
|
|
|
2,126 |
Gain on sales of loans, net |
|
— |
|
|
|
367 |
Mortgage broker fees |
|
232 |
|
|
|
702 |
Unrealized (loss) gain on equity securities, net |
|
(135 |
) |
|
|
1,472 |
Gain on sale of bank branch including deposits and loans, net |
|
— |
|
|
|
1,263 |
Other income |
|
814 |
|
|
|
542 |
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
4,579 |
|
|
|
9,240 |
Servicing and other BaaS fees |
|
3,407 |
|
|
|
3,046 |
Transaction fees |
|
2,247 |
|
|
|
264 |
Interchange fees |
|
1,798 |
|
|
|
333 |
Reimbursement of expenses |
|
1,875 |
|
|
|
709 |
BaaS program income |
|
9,327 |
|
|
|
4,352 |
BaaS credit enhancements |
|
45,210 |
|
|
|
10 |
BaaS fraud enhancements |
|
22,753 |
|
|
|
296 |
BaaS indemnification income |
|
67,963 |
|
|
|
306 |
Total noninterest income |
|
81,869 |
|
|
|
13,898 |
NONINTEREST EXPENSE |
|
|
|
Salaries and employee benefits |
|
37,829 |
|
|
|
26,560 |
Occupancy |
|
3,366 |
|
|
|
3,085 |
Data processing and software licenses |
|
4,719 |
|
|
|
3,457 |
Legal and professional fees |
|
3,961 |
|
|
|
2,182 |
Point of sale expense |
|
1,399 |
|
|
|
475 |
Excise taxes |
|
1,501 |
|
|
|
1,154 |
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
2,309 |
|
|
|
820 |
Director and staff expenses |
|
1,196 |
|
|
|
812 |
Marketing |
|
242 |
|
|
|
344 |
Other expense |
|
4,318 |
|
|
|
2,419 |
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
60,840 |
|
|
|
41,308 |
BaaS loan expense |
|
36,079 |
|
|
|
609 |
BaaS fraud expense |
|
22,752 |
|
|
|
296 |
BaaS loan and fraud expense |
|
58,831 |
|
|
|
905 |
Total noninterest expense |
|
119,671 |
|
|
|
42,213 |
Income before provision for income taxes |
|
35,077 |
|
|
|
25,446 |
PROVISION FOR INCOME
TAXES |
|
7,570 |
|
|
|
5,731 |
NET INCOME |
$ |
27,507 |
|
|
$ |
19,715 |
Basic earnings per common
share |
$ |
2.13 |
|
|
$ |
1.65 |
Diluted earnings per common
share |
$ |
2.04 |
|
|
$ |
1.58 |
Weighted average number of
common shares outstanding: |
|
|
|
Basic |
|
12,921,814 |
|
|
|
11,982,009 |
Diluted |
|
13,484,950 |
|
|
|
12,465,346 |
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
|
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 |
$ |
397,621 |
|
|
$ |
2,273 |
|
2.27 |
% |
|
$ |
499,918 |
|
|
$ |
956 |
|
0.77 |
% |
|
$ |
419,715 |
|
|
$ |
170 |
|
0.16 |
% |
Investment securities, available for sale(2) |
|
102,438 |
|
|
|
545 |
|
2.11 |
|
|
|
119,975 |
|
|
|
554 |
|
1.85 |
|
|
|
31,693 |
|
|
|
9 |
|
0.11 |
|
Investment securities, held to maturity(2) |
|
1,257 |
|
|
|
9 |
|
2.84 |
|
|
|
1,280 |
|
|
|
9 |
|
2.82 |
|
|
|
2,095 |
|
|
|
15 |
|
2.84 |
|
Other investments |
|
10,520 |
|
|
|
24 |
|
0.91 |
|
|
|
10,225 |
|
|
|
134 |
|
5.26 |
|
|
|
6,859 |
|
|
|
31 |
|
1.79 |
|
Loans receivable(3) |
|
2,452,815 |
|
|
|
52,328 |
|
8.46 |
|
|
|
2,194,761 |
|
|
|
40,166 |
|
7.34 |
|
|
|
1,681,069 |
|
|
|
19,383 |
|
4.57 |
|
Total interest earning
assets |
|
2,964,651 |
|
|
|
55,179 |
|
7.38 |
|
|
|
2,826,159 |
|
|
|
41,819 |
|
5.94 |
|
|
|
2,141,431 |
|
|
|
19,608 |
|
3.63 |
|
Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
(51,259 |
) |
|
|
|
|
|
|
(46,354 |
) |
|
|
|
|
|
|
(20,102 |
) |
|
|
|
|
Other noninterest earning assets |
|
128,816 |
|
|
|
|
|
|
|
115,788 |
|
|
|
|
|
|
|
77,221 |
|
|
|
|
|
Total assets |
$ |
3,042,208 |
|
|
|
|
|
|
$ |
2,895,593 |
|
|
|
|
|
|
$ |
2,198,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
1,953,170 |
|
|
$ |
5,717 |
|
1.16 |
% |
|
$ |
1,792,119 |
|
|
$ |
1,673 |
|
0.37 |
% |
|
$ |
919,792 |
|
|
$ |
523 |
|
0.23 |
% |
FHLB advances and
borrowings |
|
— |
|
|
|
— |
|
— |
|
|
|
— |
|
|
|
— |
|
— |
|
|
|
24,999 |
|
|
|
72 |
|
1.14 |
|
Subordinated debt |
|
24,331 |
|
|
|
234 |
|
3.82 |
|
|
|
24,313 |
|
|
|
231 |
|
3.81 |
|
|
|
17,073 |
|
|
|
185 |
|
4.30 |
|
Junior subordinated
debentures |
|
3,587 |
|
|
|
39 |
|
4.31 |
|
|
|
3,587 |
|
|
|
29 |
|
3.24 |
|
|
|
3,586 |
|
|
|
21 |
|
2.32 |
|
Total interest bearing
liabilities |
|
1,981,088 |
|
|
|
5,990 |
|
1.20 |
|
|
|
1,820,019 |
|
|
|
1,933 |
|
0.43 |
|
|
|
965,450 |
|
|
|
801 |
|
0.33 |
|
Noninterest bearing
deposits |
|
807,952 |
|
|
|
|
|
|
|
839,562 |
|
|
|
|
|
|
|
1,061,311 |
|
|
|
|
|
Other liabilities |
|
25,662 |
|
|
|
|
|
|
|
19,550 |
|
|
|
|
|
|
|
13,705 |
|
|
|
|
|
Total shareholders'
equity |
|
227,506 |
|
|
|
|
|
|
|
216,462 |
|
|
|
|
|
|
|
158,084 |
|
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
3,042,208 |
|
|
|
|
|
|
$ |
2,895,593 |
|
|
|
|
|
|
$ |
2,198,550 |
|
|
|
|
|
Net interest income |
|
|
$ |
49,189 |
|
|
|
|
|
$ |
39,886 |
|
|
|
|
|
$ |
18,807 |
|
|
Interest rate spread |
|
|
|
|
6.18 |
% |
|
|
|
|
|
5.51 |
% |
|
|
|
|
|
3.30 |
% |
Net interest
margin(4) |
|
|
|
|
6.58 |
% |
|
|
|
|
|
5.66 |
% |
|
|
|
|
|
3.48 |
% |
(1) Yields and costs are annualized.
(2) For presentation in this table, average balances and
the corresponding average rates for investment securities are based
upon historical cost, adjusted for amortization of premiums and
accretion of discounts.
(3) Includes loans held for sale and nonaccrual
loans.
(4) Net interest margin represents net interest income
divided by the average total interest earning assets.
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT -
QUARTERLY
(Dollars in thousands; unaudited)
|
For the Three Months Ended |
|
September 30, 2022 |
|
June 30, 2022 |
|
September 30, 2021 |
(dollars in thousands, unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(2) |
$ |
1,559,160 |
|
$ |
20,879 |
|
5.31 |
% |
|
$ |
1,503,467 |
|
$ |
18,885 |
|
5.04 |
% |
|
$ |
1,521,047 |
|
$ |
17,912 |
|
4.67 |
% |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
901,339 |
|
|
642 |
|
0.28 |
|
|
|
921,499 |
|
|
317 |
|
0.14 |
|
|
|
888,485 |
|
|
500 |
|
0.22 |
|
Noninterest bearing deposits |
|
735,038 |
|
|
|
|
|
|
740,575 |
|
|
|
|
|
|
696,906 |
|
|
|
|
Total deposits |
|
1,636,377 |
|
|
642 |
|
0.16 |
|
|
|
1,662,074 |
|
|
317 |
|
0.08 |
|
|
|
1,585,391 |
|
|
500 |
|
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(2)(3) |
$ |
893,655 |
|
$ |
31,449 |
|
13.96 |
% |
|
$ |
691,294 |
|
$ |
21,281 |
|
12.35 |
% |
|
$ |
160,022 |
|
$ |
1,471 |
|
3.65 |
% |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
1,051,831 |
|
|
5,075 |
|
1.91 |
|
|
|
870,620 |
|
|
1,356 |
|
0.62 |
|
|
|
31,307 |
|
|
23 |
|
0.29 |
|
Noninterest bearing deposits |
|
72,914 |
|
|
|
|
|
|
98,987 |
|
|
|
|
|
|
364,405 |
|
|
|
|
Total deposits |
|
1,124,745 |
|
|
5,075 |
|
1.79 |
|
1.79 |
|
969,607 |
|
|
1,356 |
|
0.56 |
|
|
|
395,712 |
|
|
23 |
|
0.02 |
|
(1) Yields and costs are annualized.
(2) Includes loans held for sale and nonaccrual
loans.
(3) 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
servicing CCBX loans.
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE
(Dollars in thousands; unaudited)
|
For the Nine Months Ended |
|
September 30, 2022 |
|
September 30, 2021 |
(dollars in thousands; unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
Assets |
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits |
$ |
578,855 |
|
|
$ |
3,631 |
|
0.84 |
% |
|
$ |
284,225 |
|
|
$ |
314 |
|
0.15 |
% |
Investment securities, available for sale(2) |
|
89,173 |
|
|
|
1,160 |
|
1.74 |
|
|
|
25,344 |
|
|
|
45 |
|
0.24 |
|
Investment securities, held to maturity(2) |
|
1,276 |
|
|
|
28 |
|
2.93 |
|
|
|
2,349 |
|
|
|
31 |
|
1.76 |
|
Other investments |
|
9,996 |
|
|
|
195 |
|
2.61 |
|
|
|
6,594 |
|
|
|
169 |
|
3.43 |
|
Loans receivable(3) |
|
2,141,127 |
|
|
|
122,126 |
|
7.63 |
|
|
|
1,690,817 |
|
|
|
56,978 |
|
4.51 |
|
Total interest earning
assets |
|
2,820,427 |
|
|
|
127,140 |
|
6.03 |
|
|
|
2,009,329 |
|
|
|
57,537 |
|
3.83 |
|
Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
(42,836 |
) |
|
|
|
|
|
|
(19,744 |
) |
|
|
|
|
Other noninterest earning assets |
|
112,468 |
|
|
|
|
|
|
|
73,328 |
|
|
|
|
|
Total assets |
$ |
2,890,059 |
|
|
|
|
|
|
$ |
2,062,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
1,628,765 |
|
|
$ |
7,943 |
|
0.65 |
% |
|
$ |
892,574 |
|
|
$ |
1,811 |
|
0.27 |
% |
PPPLF borrowings |
|
— |
|
|
|
— |
|
0.00 |
|
|
|
91,850 |
|
|
|
240 |
|
0.35 |
|
FHLB advances and
borrowings |
|
8,058 |
|
|
|
69 |
|
1.14 |
|
|
|
24,999 |
|
|
|
212 |
|
1.13 |
|
Subordinated debt |
|
24,313 |
|
|
|
695 |
|
3.82 |
|
|
|
12,381 |
|
|
|
477 |
|
5.15 |
|
Junior subordinated
debentures |
|
3,587 |
|
|
|
90 |
|
3.35 |
|
|
|
3,585 |
|
|
|
63 |
|
2.35 |
|
Total interest bearing
liabilities |
|
1,664,723 |
|
|
|
8,797 |
|
0.71 |
|
|
|
1,025,389 |
|
|
|
2,803 |
|
0.37 |
|
Noninterest bearing
deposits |
|
987,343 |
|
|
|
|
|
|
|
873,271 |
|
|
|
|
|
Other liabilities |
|
20,442 |
|
|
|
|
|
|
|
12,798 |
|
|
|
|
|
Total shareholders'
equity |
|
217,551 |
|
|
|
|
|
|
|
151,455 |
|
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
2,890,059 |
|
|
|
|
|
|
$ |
2,062,913 |
|
|
|
|
|
Net interest income |
|
|
$ |
118,343 |
|
|
|
|
|
$ |
54,734 |
|
|
Interest rate spread |
|
|
|
|
5.32 |
% |
|
|
|
|
|
3.46 |
% |
Net interest
margin(4) |
|
|
|
|
5.61 |
% |
|
|
|
|
|
3.64 |
% |
(1) Yields and costs are annualized.
(2) For presentation in this table, average balances and
the corresponding average rates for investment securities are based
upon historical cost, adjusted for amortization of premiums and
accretion of discounts.
(3) Includes loans held for sale and nonaccrual
loans.
(4) Net interest margin represents net interest income
divided by the average total interest earning assets.
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT –
YEAR-TO-DATE
(Dollars in thousands; unaudited)
|
|
For the Nine Months Ended |
|
|
September 30, 2022 |
|
September 30, 2021 |
(dollars in thousands; unaudited) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(2) |
|
$ |
1,483,553 |
|
$ |
57,405 |
|
5.17 |
% |
|
$ |
1,577,448 |
|
$ |
54,217 |
|
4.60 |
% |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
919,415 |
|
|
1,394 |
|
0.20 |
|
|
|
862,986 |
|
|
1,746 |
|
0.27 |
|
Noninterest bearing deposits |
|
|
731,517 |
|
|
|
|
|
|
660,773 |
|
|
|
|
Total deposits |
|
$ |
1,650,932 |
|
$ |
1,394 |
|
0.11 |
|
|
$ |
1,523,759 |
|
$ |
1,746 |
|
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(2)(3) |
|
$ |
657,574 |
|
$ |
64,721 |
|
13.16 |
% |
|
$ |
113,369 |
|
$ |
2,761 |
|
3.26 |
% |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
709,350 |
|
|
6,549 |
|
1.23 |
|
|
|
29,588 |
|
|
65 |
|
0.29 |
|
Noninterest bearing deposits |
|
|
255,826 |
|
|
|
|
|
|
212,498 |
|
|
|
|
Total deposits |
|
$ |
965,176 |
|
$ |
6,549 |
|
0.91 |
|
|
$ |
242,086 |
|
$ |
65 |
|
0.04 |
|
(1) Yields and costs are annualized.
(2) Includes loans held for sale and nonaccrual
loans.
(3) 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 servicing CCBX loans.
COASTAL FINANCIAL CORPORATION
QUARTERLY STATISTICS
(Dollars in thousands, except share and per share data;
unaudited)
|
Three Months Ended |
|
September 30,
2022 |
|
June 30,
2022 |
|
March 31,
2022 |
|
December 31,
2021 |
|
September 30,
2021 |
Income Statement
Data: |
|
|
|
|
|
|
|
|
|
Interest and dividend income |
$ |
55,179 |
|
|
$ |
41,819 |
|
|
$ |
30,142 |
|
|
$ |
25,546 |
|
|
$ |
19,608 |
|
Interest expense |
|
5,990 |
|
|
|
1,933 |
|
|
|
874 |
|
|
|
843 |
|
|
|
801 |
|
Net interest income |
|
49,189 |
|
|
|
39,886 |
|
|
|
29,268 |
|
|
|
24,703 |
|
|
|
18,807 |
|
Provision for loan losses |
|
18,428 |
|
|
|
14,094 |
|
|
|
12,942 |
|
|
|
8,942 |
|
|
|
255 |
|
Net interest income after
provision for loan losses |
|
30,761 |
|
|
|
25,792 |
|
|
|
16,326 |
|
|
|
15,761 |
|
|
|
18,552 |
|
Noninterest income |
|
34,391 |
|
|
|
25,492 |
|
|
|
21,986 |
|
|
|
14,220 |
|
|
|
6,132 |
|
Noninterest expense |
|
51,087 |
|
|
|
38,169 |
|
|
|
30,415 |
|
|
|
21,050 |
|
|
|
16,130 |
|
Provision for income tax |
|
2,964 |
|
|
|
2,939 |
|
|
|
1,667 |
|
|
|
1,641 |
|
|
|
1,870 |
|
Net income |
|
11,101 |
|
|
|
10,176 |
|
|
|
6,230 |
|
|
|
7,290 |
|
|
|
6,684 |
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Three Month Period |
|
September 30,
2022 |
|
June 30,
2022 |
|
March 31,
2022 |
|
December 31,
2021 |
|
September 30,
2021 |
Balance Sheet
Data: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
410,728 |
|
|
$ |
405,689 |
|
|
$ |
682,109 |
|
|
$ |
813,161 |
|
|
$ |
669,725 |
|
Investment securities |
|
98,871 |
|
|
|
109,821 |
|
|
|
136,177 |
|
|
|
36,623 |
|
|
|
34,924 |
|
Loans held for sale |
|
43,314 |
|
|
|
60,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loans receivable |
|
2,507,889 |
|
|
|
2,334,354 |
|
|
|
1,964,209 |
|
|
|
1,742,735 |
|
|
|
1,705,682 |
|
Allowance for loan losses |
|
(59,282 |
) |
|
|
(49,358 |
) |
|
|
(38,770 |
) |
|
|
(28,632 |
) |
|
|
(20,222 |
) |
Total assets |
|
3,133,741 |
|
|
|
2,969,722 |
|
|
|
2,833,750 |
|
|
|
2,635,517 |
|
|
|
2,451,568 |
|
Interest bearing deposits |
|
2,023,849 |
|
|
|
1,879,253 |
|
|
|
1,738,426 |
|
|
|
1,007,879 |
|
|
|
927,097 |
|
Noninterest bearing
deposits |
|
813,217 |
|
|
|
818,052 |
|
|
|
838,044 |
|
|
|
1,355,908 |
|
|
|
1,296,443 |
|
Core deposits (1) |
|
2,727,830 |
|
|
|
2,584,831 |
|
|
|
2,460,954 |
|
|
|
2,249,573 |
|
|
|
2,148,445 |
|
Total deposits |
|
2,837,066 |
|
|
|
2,697,305 |
|
|
|
2,576,470 |
|
|
|
2,363,787 |
|
|
|
2,223,540 |
|
Total borrowings |
|
27,931 |
|
|
|
27,911 |
|
|
|
27,893 |
|
|
|
52,873 |
|
|
|
52,854 |
|
Total shareholders’
equity |
|
228,733 |
|
|
|
217,661 |
|
|
|
207,920 |
|
|
|
201,222 |
|
|
|
161,086 |
|
|
|
|
|
|
|
|
|
|
|
Share and Per Share
Data (2): |
|
|
|
|
|
|
|
|
|
Earnings per share –
basic |
$ |
0.86 |
|
|
$ |
0.79 |
|
|
$ |
0.48 |
|
|
$ |
0.60 |
|
|
$ |
0.56 |
|
Earnings per share –
diluted |
$ |
0.82 |
|
|
$ |
0.76 |
|
|
$ |
0.46 |
|
|
$ |
0.57 |
|
|
$ |
0.54 |
|
Dividends per share |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Book value per share (3) |
$ |
17.66 |
|
|
$ |
16.81 |
|
|
$ |
16.08 |
|
|
$ |
15.63 |
|
|
$ |
13.41 |
|
Tangible book value per share
(4) |
$ |
17.66 |
|
|
$ |
16.81 |
|
|
$ |
16.08 |
|
|
$ |
15.63 |
|
|
$ |
13.41 |
|
Weighted avg outstanding
shares – basic |
|
12,938,200 |
|
|
|
12,928,061 |
|
|
|
12,898,746 |
|
|
|
12,144,452 |
|
|
|
11,999,899 |
|
Weighted avg outstanding
shares – diluted |
|
13,536,823 |
|
|
|
13,442,013 |
|
|
|
13,475,337 |
|
|
|
12,701,464 |
|
|
|
12,456,674 |
|
Shares outstanding at end of
period |
|
12,954,573 |
|
|
|
12,948,623 |
|
|
|
12,928,548 |
|
|
|
12,875,315 |
|
|
|
12,012,107 |
|
Stock options outstanding at
end of period |
|
644,334 |
|
|
|
655,844 |
|
|
|
666,774 |
|
|
|
694,519 |
|
|
|
710,182 |
|
See footnotes on following page
|
As of and for the Three Month Period |
|
September 30,
2022 |
|
June 30,
2022 |
|
March 31,
2022 |
|
December 31,
2021 |
|
September 30,
2021 |
Credit Quality
Data: |
|
|
|
|
|
|
|
|
|
Nonperforming assets (5) to total assets |
|
0.73 |
% |
|
|
0.09 |
% |
|
|
0.08 |
% |
|
|
0.07 |
% |
|
|
0.03 |
% |
Nonperforming assets (5) to
loans receivable and OREO |
|
0.91 |
% |
|
|
0.11 |
% |
|
|
0.12 |
% |
|
|
0.10 |
% |
|
|
0.04 |
% |
Nonperforming loans (5) to
total loans receivable |
|
0.91 |
% |
|
|
0.11 |
% |
|
|
0.12 |
% |
|
|
0.10 |
% |
|
|
0.04 |
% |
Allowance for loan losses to
nonperforming loans |
|
259.1 |
% |
|
|
849.4 |
% |
|
|
1653.3 |
% |
|
|
1657.9 |
% |
|
|
2732.7 |
% |
Allowance for loan losses to
total loans receivable |
|
2.36 |
% |
|
|
2.11 |
% |
|
|
1.97 |
% |
|
|
1.64 |
% |
|
|
1.19 |
% |
Gross charge-offs |
$ |
8,513 |
|
|
$ |
3,542 |
|
|
$ |
2808 |
|
|
$ |
579 |
|
|
$ |
31 |
|
Gross recoveries |
$ |
9 |
|
|
$ |
36 |
|
|
$ |
4 |
|
|
$ |
47 |
|
|
$ |
32 |
|
Net charge-offs to average
loans (6) |
|
1.38 |
% |
|
|
0.64 |
% |
|
|
0.64 |
% |
|
|
0.13 |
% |
|
|
0.00 |
% |
Credit enhancement income
(7) |
$ |
8,102 |
|
|
$ |
3,539 |
|
|
$ |
2804 |
|
|
$ |
363 |
|
|
$ |
18 |
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios
(8): |
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital |
|
7.70 |
% |
|
|
7.68 |
% |
|
|
7.75 |
% |
|
|
8.07 |
% |
|
|
7.48 |
% |
Common equity Tier 1
risk-based capital |
|
8.49 |
% |
|
|
8.51 |
% |
|
|
9.71 |
% |
|
|
11.06 |
% |
|
|
9.94 |
% |
Tier 1 risk-based capital |
|
8.62 |
% |
|
|
8.65 |
% |
|
|
9.88 |
% |
|
|
11.26 |
% |
|
|
10.15 |
% |
Total risk-based capital |
|
10.80 |
% |
|
|
10.88 |
% |
|
|
12.30 |
% |
|
|
13.89 |
% |
|
|
12.95 |
% |
(1) Core deposits are defined as all deposits
excluding brokered and all time deposits.
(2) Share and per share amounts are based on total
actual or average common shares outstanding, as applicable.
(3) We calculate book value per share as total
shareholders’ equity at the end of the relevant period divided by
the outstanding number of our common shares at the end of each
period.
(4) Tangible book value per share is a non-GAAP
financial measure. We calculate tangible book value per share as
total shareholders’ equity at the end of the relevant period, less
goodwill and other intangible assets, divided by the outstanding
number of our common shares at the end of each period. The most
directly comparable GAAP financial measure is book value per share.
We had no goodwill or other intangible assets as of any of the
dates indicated. As a result, tangible book value per share is the
same as book value per share as of each of the dates indicated.
(5) Nonperforming assets and nonperforming loans include
loans 90+ days past due and accruing interest.
(6) Annualized calculations.
(7) Agreements with our CCBX partners provide for a
credit enhancement which protects the Bank by absorbing incurred
losses. In accordance with accounting guidance, we estimate and
record a provision for probable losses for these CCBX loans. When
the provision for loan losses and provision for unfunded
commitments is recorded, a receivable is also recorded on the
balance sheet through noninterest income (BaaS credit
enhancements). This is the amount of CCBX incurred losses that were
recorded and are covered by the partner’s credit enhancements.
(8) Capital ratios are for the Company, Coastal
Financial Corporation.
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to provide
meaningful supplemental information regarding the Company’s
operational performance and to enhance investors’ overall
understanding of such financial performance.
However, these non-GAAP financial measures are supplemental and
are not a substitute for an analysis based on GAAP measures. As
other companies may use different calculations for these adjusted
measures, this presentation may not be comparable to other
similarly titled adjusted measures reported by other companies.
The following non-GAAP measure is presented to illustrate the
impact of BaaS credit enhancements and BaaS fraud enhancements on
total revenue.
Revenue excluding BaaS credit enhancements and BaaS fraud
enhancements is a non-GAAP measure that excludes the impact of BaaS
credit enhancements and BaaS fraud enhancements on revenue. The
most directly comparable GAAP measure is revenue.
Reconciliations of the GAAP and non-GAAP measures are presented
below.
|
|
As of and for the Three Months Ended |
|
As of and for the Nine Months Ended |
(Dollars in thousands,
unaudited) |
|
September 30,
2022 |
|
June 30, 2022 |
|
September 30,
2021 |
|
September 30,
2022 |
|
September 30,
2021 |
Revenue
excluding BaaS credit enhancements and BaaS fraud
enhancements: |
Total net interest income |
|
$ |
49,189 |
|
|
$ |
39,886 |
|
|
$ |
18,807 |
|
|
$ |
118,343 |
|
|
$ |
54,734 |
|
Total noninterest income |
|
|
34,391 |
|
|
|
25,492 |
|
|
|
6,132 |
|
|
|
81,869 |
|
|
|
13,898 |
|
Total Revenue |
|
$ |
83,580 |
|
|
$ |
65,378 |
|
|
$ |
24,939 |
|
|
$ |
200,212 |
|
|
$ |
68,632 |
|
Less: BaaS credit enhancements |
|
|
(17,928 |
) |
|
|
(14,207 |
) |
|
|
(10 |
) |
|
|
(45,210 |
) |
|
|
(10 |
) |
Less: BaaS fraud enhancements |
|
|
(11,708 |
) |
|
|
(6,474 |
) |
|
|
(296 |
) |
|
|
(22,753 |
) |
|
|
(296 |
) |
Total revenue excluding BaaS credit enhancements and BaaS fraud
enhancements |
|
$ |
53,944 |
|
|
$ |
44,697 |
|
|
$ |
24,633 |
|
|
$ |
132,249 |
|
|
$ |
68,326 |
|
The following non-GAAP measure is presented to illustrate the
impact of BaaS loan expense on net loan income and yield on CCBX
loans.
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.
Reconciliations of the GAAP and non-GAAP measures are presented
below.
|
|
As of and for the Three Months Ended |
|
As of and for the Nine Months Ended |
(dollars in thousands; unaudited) |
|
September 30,
2022 |
|
June 30, 2022 |
|
September 30,
2021 |
|
September 30,
2022 |
|
September 30,
2021 |
Net BaaS loan income divided by average CCBX
loans: |
|
|
|
|
Total average CCBX loans receivable |
|
$ |
893,655 |
|
|
$ |
691,294 |
|
|
$ |
160,022 |
|
|
$ |
657,574 |
|
|
$ |
113,369 |
|
Interest and earned fee income on CCBX loans |
|
|
31,449 |
|
|
|
21,281 |
|
|
|
1,471 |
|
|
|
64,721 |
|
|
|
2,761 |
|
Less: loan expense on CCBX loans |
|
|
(15,560 |
) |
|
|
(12,229 |
) |
|
|
(419 |
) |
|
|
(36,079 |
) |
|
|
(609 |
) |
Net BaaS loan income |
|
$ |
15,889 |
|
|
$ |
9,052 |
|
|
$ |
1,052 |
|
|
$ |
28,642 |
|
|
$ |
2,152 |
|
Net BaaS loan income divided by average CCBX loans |
|
|
7.05 |
% |
|
|
5.25 |
% |
|
|
2.61 |
% |
|
|
5.82 |
% |
|
|
2.54 |
% |
CCBX loan yield |
|
|
13.96 |
% |
|
|
12.35 |
% |
|
|
3.65 |
% |
|
|
13.16 |
% |
|
|
3.26 |
% |
APPENDIX A -
As of September 30, 2022
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 $2.51 billion in outstanding loan balances. When combined
with $2.32 billion in unused commitments the total of these
categories is $4.83 billion.
Commercial real estate loans
represent the largest segment of our loans, comprising 40.7% of our
total balance of outstanding loans as of September 30, 2022.
Unused commitments to extend credit represents an additional $37.2
million, and the combined total exposure in commercial real estate
loans represents $1.06 billion, or 22.0% of our total outstanding
loans and loan commitments.
The following table summarizes our exposure by
industry for our commercial real estate portfolio as of
September 30, 2022:
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Exposure |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
Apartments |
|
$ |
208,509 |
|
$ |
5,658 |
|
$ |
214,167 |
|
4.4 |
% |
|
$ |
2,644 |
|
81 |
Hotel/Motel |
|
|
165,233 |
|
|
4,880 |
|
|
170,113 |
|
3.5 |
|
|
|
6,075 |
|
28 |
Office |
|
|
100,224 |
|
|
3,522 |
|
|
103,746 |
|
2.1 |
|
|
|
1,048 |
|
99 |
Retail |
|
|
116,648 |
|
|
3,631 |
|
|
120,279 |
|
2.5 |
|
|
|
1,215 |
|
99 |
Convenience Store |
|
|
81,286 |
|
|
4,336 |
|
|
85,622 |
|
1.8 |
|
|
|
2,088 |
|
41 |
Mixed use |
|
|
84,255 |
|
|
4,681 |
|
|
88,936 |
|
1.8 |
|
|
|
988 |
|
90 |
Warehouse |
|
|
74,382 |
|
|
1,766 |
|
|
76,148 |
|
1.6 |
|
|
|
1,410 |
|
54 |
Manufacturing |
|
|
40,634 |
|
|
1,765 |
|
|
42,399 |
|
0.9 |
|
|
|
1,211 |
|
35 |
Mini Storage |
|
|
46,989 |
|
|
1,810 |
|
|
48,799 |
|
1.0 |
|
|
|
3,050 |
|
16 |
Groups < 0.70% of total |
|
|
105,907 |
|
|
5,148 |
|
|
111,055 |
|
2.3 |
|
|
|
1,354 |
|
82 |
Total |
|
$ |
1,024,067 |
|
$ |
37,197 |
|
$ |
1,061,264 |
|
22.0 |
% |
|
$ |
1,698 |
|
625 |
Consumer loans comprise 20.9% of our total
balance of outstanding loans as of September 30, 2022. Unused
commitments to extend credit represents an additional $802.6
million, and the combined total exposure in consumer and other
loans represents $1.3 billion, or 27.4% 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 of just $1,200. CCBX
consumer loans are underwritten to CCBX credit standards and
underwriting of these loans is regularly tested.
The following table summarizes our exposure by industry for our
consumer and other loan portfolio as of September 30,
2022:
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Exposure |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
CCBX
consumer loans |
Installment loans |
|
$ |
294,907 |
|
$ |
— |
|
$ |
294,907 |
|
6.1 |
% |
|
$ |
1.5 |
|
196,058 |
Credit cards |
|
|
216,995 |
|
|
800,914 |
|
|
1,017,909 |
|
21.1 |
|
|
|
1.3 |
|
162,170 |
Lines of credit |
|
|
6,104 |
|
|
559 |
|
|
6,663 |
|
0.1 |
|
|
|
0.2 |
|
30,481 |
Other loans |
|
|
3,310 |
|
|
— |
|
|
3,310 |
|
0.1 |
|
|
|
0.2 |
|
16,854 |
Community
bank consumer loans |
Lines of credit |
|
|
155 |
|
|
397 |
|
|
552 |
|
0.0 |
|
|
|
3.7 |
|
42 |
Installment loans |
|
|
1,408 |
|
|
716 |
|
|
2,124 |
|
0.0 |
|
|
|
33.5 |
|
42 |
Other loans |
|
|
657 |
|
|
— |
|
|
657 |
|
0.0 |
|
|
|
1.9 |
|
339 |
Total |
|
$ |
523,536 |
|
$ |
802,586 |
|
$ |
1,326,122 |
|
27.4 |
% |
|
$ |
1.2 |
|
405,986 |
Residential real estate loans comprise 16.0% of
our total balance of outstanding loans as of September 30,
2022. Unused commitments to extend credit represents an additional
$476.6 million, and the combined total exposure in residential real
estate loans represents $879.4 million, or 18.2% of our total
outstanding loans and loan commitments.
The following table summarizes our exposure by
industry for our commercial and industrial loan portfolio as of
September 30, 2022:
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Exposure |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
CCBX
residential real estate loans |
Home equity line of credit |
|
$ |
203,910 |
|
$ |
436,346 |
|
$ |
640,256 |
|
13.2 |
% |
|
$ |
23 |
|
8,836 |
Community
bank residential real estate loans |
Closed end, secured by first
liens |
|
|
173,890 |
|
|
4,389 |
|
|
178,279 |
|
3.7 |
|
|
|
610 |
|
285 |
Home equity line of
credit |
|
|
15,750 |
|
|
33,945 |
|
|
49,695 |
|
1.0 |
|
|
|
85 |
|
186 |
Closed end, second liens |
|
|
9,231 |
|
|
1,912 |
|
|
11,143 |
|
0.2 |
|
|
|
330 |
|
28 |
Total |
|
$ |
402,781 |
|
$ |
476,592 |
|
$ |
879,373 |
|
18.2 |
% |
|
$ |
43 |
|
9,335 |
Commercial and industrial loans
comprise 13.5% of our total balance of outstanding loans as of
September 30, 2022. Unused commitments to extend credit
represents an additional $839.7 million, and the combined total
exposure in commercial and industrial loans represents $1.18
billion, or 24.4% of our total outstanding loans and loan
commitments. Included in commercial and industrial loans is $174.3
million in outstanding capital call lines, with an additional
$760.2 million in available loan commitments, which is 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 line.
The following table summarizes our exposure by
industry for our commercial and industrial loan portfolio as of
September 30, 2022:
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Exposure |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
Capital Call Lines |
|
$ |
174,311 |
|
$ |
760,192 |
|
$ |
934,503 |
|
19.3 |
% |
|
$ |
1,019 |
|
171 |
Construction/Contractor
Services |
|
|
23,737 |
|
|
31,764 |
|
|
55,501 |
|
1.1 |
|
|
|
129 |
|
184 |
Financial Institutions |
|
|
35,150 |
|
|
— |
|
|
35,150 |
|
0.7 |
|
|
|
3,906 |
|
9 |
Manufacturing |
|
|
14,530 |
|
|
5,477 |
|
|
20,007 |
|
0.4 |
|
|
|
382 |
|
38 |
Medical / Dental / Other
Care |
|
|
21,408 |
|
|
4,833 |
|
|
26,241 |
|
0.5 |
|
|
|
335 |
|
64 |
Retail |
|
|
17,054 |
|
|
5,792 |
|
|
22,846 |
|
0.5 |
|
|
|
25 |
|
676 |
Groups < 0.30% of total |
|
|
53,738 |
|
|
31,660 |
|
|
85,398 |
|
1.8 |
|
|
|
177 |
|
303 |
Total |
|
$ |
339,928 |
|
$ |
839,718 |
|
$ |
1,179,646 |
|
24.4 |
% |
|
$ |
235 |
|
1,445 |
Construction, land and land development loans
comprise 8.9% of our total balance of outstanding loans as of
September 30, 2022. Unused commitments to extend credit
represents an additional $163.0 million, and the combined total
exposure in construction, land and land development loans
represents $387.2 million, or 8.0% of our total outstanding loans
and loan commitments.
The following table details our exposure for our
construction, land and land development portfolio as of
September 30, 2022:
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Exposure |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
Commercial construction |
|
$ |
109,874 |
|
$ |
116,147 |
|
$ |
226,021 |
|
4.7 |
% |
|
$ |
3,789 |
|
29 |
Residential construction |
|
|
38,795 |
|
|
31,170 |
|
|
69,965 |
|
1.4 |
|
|
|
970 |
|
40 |
Undeveloped land loans |
|
|
41,373 |
|
|
4,068 |
|
|
45,441 |
|
0.9 |
|
|
|
3,183 |
|
13 |
Developed land loans |
|
|
19,436 |
|
|
6,130 |
|
|
25,566 |
|
0.5 |
|
|
|
607 |
|
32 |
Land development |
|
|
14,710 |
|
|
5,485 |
|
|
20,195 |
|
0.4 |
|
|
|
774 |
|
19 |
Total |
|
$ |
224,188 |
|
$ |
163,000 |
|
$ |
387,188 |
|
8.0 |
% |
|
$ |
1,686 |
|
133 |
APPENDIX B -
As of September 30, 2022
CCBX – BaaS Reporting Information
During the quarter ended September 30, 2022, $17.9 million
was recorded in BaaS credit enhancements related to the provision
for loan losses 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 absorbing incurred losses. In
accordance with accounting guidance, we estimate and record a
provision for probable losses for these CCBX loans and negative
deposit accounts. When the provision for loan losses and provision
for unfunded commitments is recorded, a receivable is also recorded
on the balance sheet through noninterest income (BaaS credit
enhancements) in recognition of the CCBX partner legal commitment
to cover losses. The receivable is relieved as credit enhancement
recoveries are received from the CCBX partner. Agreements with our
CCBX partners also provide protection to the Bank from fraud by
absorbing incurred fraud losses. 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 absorbing
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, 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 enhancements. The Bank would write-off any remaining
receivable from the CCBX partner but would retain the full yield on
the loan going forward, and BaaS loan expense would decrease 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 enhancements and servicing CCBX loans. To determine net
revenue (Net BaaS loan income) earned from CCBX loan relationships,
one 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.
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 |
|
Nine Months Ended |
(dollars in thousands; unaudited) |
|
September 30,
2022 |
|
June 30,
2022 |
|
September 30,
2021 |
|
September 30,
2022 |
|
September 30,
2021 |
BaaS loan interest income |
|
$ |
31,449 |
|
|
$ |
21,281 |
|
|
$ |
1,471 |
|
|
$ |
64,721 |
|
|
$ |
2,761 |
|
Less: BaaS loan expense |
|
|
15,560 |
|
|
|
12,229 |
|
|
|
419 |
|
|
|
36,079 |
|
|
|
609 |
|
Net BaaS loan income(1) |
|
|
15,889 |
|
|
|
9,052 |
|
|
|
1,052 |
|
|
|
28,642 |
|
|
|
2,152 |
|
Net BaaS loan income divided
by average BaaS loans(1) |
|
|
7.05 |
% |
|
|
5.25 |
% |
|
|
2.61 |
% |
|
|
5.82 |
% |
|
|
2.54 |
% |
Yield on loans |
|
|
13.96 |
% |
|
|
12.35 |
% |
|
|
3.65 |
% |
|
|
13.16 |
% |
|
|
3.26 |
% |
(1) A reconciliation of the non-GAAP measures are set forth at
the end of this earnings release.
The addition of new CCBX partners and increased activity has
resulted in increases in interest, direct fees and expenses for the
quarter ended September 30, 2022 compared to the quarters
ended June 30, 2022 and September 30, 2021. 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 |
|
Nine Months Ended |
(dollars in thousands; unaudited) |
|
September 30,
2022 |
|
June 30,
2022 |
|
September 30,
2021 |
|
September 30,
2022 |
|
September 30,
2021 |
Loan interest income |
|
$ |
31,449 |
|
$ |
21,281 |
|
$ |
1,471 |
|
$ |
64,721 |
|
$ |
2,761 |
Total BaaS interest income |
|
$ |
31,449 |
|
$ |
21,281 |
|
$ |
1,471 |
|
$ |
64,721 |
|
$ |
2,761 |
Interest expense |
|
Three Months Ended |
|
Nine Months Ended |
(dollars in thousands; unaudited) |
|
September 30,
2022 |
|
June 30,
2022 |
|
September 30,
2021 |
|
September 30,
2022 |
|
September 30,
2021 |
BaaS interest expense |
|
$ |
5,075 |
|
$ |
1,356 |
|
$ |
23 |
|
$ |
6,549 |
|
$ |
65 |
Total BaaS interest expense |
|
$ |
5,075 |
|
$ |
1,356 |
|
$ |
23 |
|
$ |
6,549 |
|
$ |
65 |
BaaS income |
|
Three Months Ended |
|
Nine Months Ended |
(dollars in thousands; unaudited) |
|
September 30,
2022 |
|
June 30,
2022 |
|
September 30,
2021 |
|
September 30,
2022 |
|
September 30,
2021 |
Program income: |
|
|
|
|
|
|
|
|
|
|
Servicing and other BaaS fees |
|
$ |
1,079 |
|
$ |
1,159 |
|
$ |
1,313 |
|
$ |
3,407 |
|
$ |
3,046 |
Transaction fees |
|
|
940 |
|
|
814 |
|
|
146 |
|
|
2,247 |
|
|
264 |
Interchange fees |
|
|
738 |
|
|
628 |
|
|
188 |
|
|
1,798 |
|
|
333 |
Reimbursement of expenses |
|
|
885 |
|
|
618 |
|
|
333 |
|
|
1,875 |
|
|
709 |
Program income |
|
|
3,642 |
|
|
3,219 |
|
|
1,980 |
|
|
9,327 |
|
|
4,352 |
Indemnification
income: |
|
|
|
|
|
|
|
|
|
|
Credit enhancements |
|
|
17,928 |
|
|
14,207 |
|
|
10 |
|
|
45,210 |
|
|
10 |
Fraud enhancements |
|
|
11,708 |
|
|
6,474 |
|
|
296 |
|
|
22,753 |
|
|
296 |
Indemnification income |
|
|
29,636 |
|
|
20,681 |
|
|
306 |
|
|
67,963 |
|
|
306 |
Total BaaS income |
|
$ |
33,278 |
|
$ |
23,900 |
|
$ |
2,286 |
|
$ |
77,290 |
|
$ |
4,658 |
BaaS loan and fraud expense |
|
Three Months Ended |
|
Nine Months Ended |
(dollars in thousands; unaudited) |
|
September 30,
2022 |
|
June 30,
2022 |
|
September 30,
2021 |
|
September 30,
2022 |
|
September 30,
2021 |
BaaS loan expense |
|
$ |
15,560 |
|
$ |
12,229 |
|
$ |
419 |
|
$ |
36,079 |
|
$ |
609 |
BaaS fraud expense |
|
|
11,707 |
|
|
6,474 |
|
|
296 |
|
|
22,752 |
|
|
296 |
Total BaaS loan and fraud expense |
|
$ |
27,267 |
|
$ |
18,703 |
|
$ |
715 |
|
$ |
58,831 |
|
$ |
905 |
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