Fourth Quarter
2022 Highlights:
- Quarterly net income
of $13.1 million, or
$0.96 per diluted common share, for the
three months ended December 31,
2022, compared to $11.1
million, or $0.82
per diluted common share for the three months
ended September 30,
2022.
- Total assets increased
$10.7 million, or
0.3%, to $3.14
billion for the quarter ended
December 31, 2022, compared
to $3.13 billion at
September 30, 2022.
- Loan growth of $119.4
million, or
4.8%, to $2.63
billion for the three months ended
December 31, 2022.
- CCBX loans increased
$96.9 million, or
10.6%, to $1.0
billion.
- Community bank loans increased $22.4
million, or
1.4%, to $1.61
billion.
- PPP loans decreased
$1.1 million, or
18.9%, to $4.7
million.
- Deposits decreased $19.5
million, or
0.7%, to $2.82
billion for the three months ended
December 31, 2022.
- CCBX deposit growth of $77.0
million, or
6.4%, to $1.28
billion.
- Additional $225.0 million
in CCBX deposits transferred off balance
sheet.
- Community bank deposits
decreased $96.6 million,
or 5.9%, to
$1.54 billion and community bank cost of
deposits was 0.37%.
- Total revenue increased $12.7 million, or 15.2%, for
the three months ended December 31, 2022, compared to
September 30, 2022.
- Total revenue excluding BaaS credit enhancements and
BaaS fraud
enhancements(*)
increased $4.3 million,
or 8.0%, to
$58.3 million for the three months
ended December 31, 2022.
- On November 1, 2022 the Company completed its private
placement of $20.0 million
in fixed-to-floating rate subordinated notes due November
1, 2032; the intention is to use net proceeds from the offering for
general corporate purposes.
2022 Highlights:
- Total assets increased $509.0
million, or
19.3%, to $3.14
billion for the year ended
December 31, 2022, compared
to $2.64 billion at
December 31, 2021.
- Total deposits increased $453.7
million, or
19.2%, to $2.82
billion for the year ended
December 31, 2022, compared
to $2.36 billion at
December 31, 2021.
- CCBX deposits increased $563.0
million, or
78.6%, during the year ended
December 31, 2022.
- Community bank deposits decreased
$109.3 million, or
6.6%, during the year ended
December 31, 2022
- Loan growth of $884.5
million, or
50.8%, to $2.63
billion for the year ended
December 31, 2022, compared
to $1.74 billion for the year
ended December 31,
2021.
- CCBX loans increased $665.8
million, or
192.1%.
- Community bank loans increased $218.7
million, or
15.7%.
- PPP loans decreased $107.1
million, or
95.8%, to $4.7
million.
- Net income increased $13.6
million, or
50.4%, to $40.6
million for the year ended
December 31, 2022, or
$3.01 per diluted common share, compared
to $27.0 million, or
$2.16 per diluted common share, for the
year ended December 31,
2021.
- Total revenue increased
$57.3 million, or
147.3% for the year ended
December 31, 2022, compared to the
year ended December 31,
2021.
- Total revenue excluding BaaS credit enhancements and
BaaS fraud
enhancements(*)
increased $29.6 million,
or 103.5%, to
$190.5 million for the year ended
December 31, 2022, compared
to $97.0 million for the year
ended December 31,
2021.
- Loan losses (net charge-offs) for the year
ended December 31,
2022:
- Community bank: $32,000.
- Holding Company:
$350,000.
- CCBX: $33.3 million;
$33.1 million covered by credit enhancements.
EVERETT, Wash., Jan. 27, 2023 (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 December31, 2022.
Quarterly net income for the fourth quarter of 2022 was $13.1
million, or $0.96 per diluted common share, compared with net
income of $11.1 million, or $0.82 per diluted common share, for the
third quarter of 2022, and $7.3 million, or $0.57 per diluted
common share, for the quarter ended December 31,
2021.
Total assets increased $10.7 million, or 0.3%, during the fourth
quarter of 2022 to $3.14 billion, from $3.13 billion at September
30, 2022. Loan growth of $119.4 million, or 4.8%, during the three
months ended December 31, 2022 to $2.63 billion, compared to
$2.51 billion at September 30, 2022 . Loan growth included CCBX
loan growth of $96.9 million, or 10.6%, and an increase of $22.4
million, or 1.4% in community bank loans, which is net of $1.1
million in PPP loan forgiveness/repayments. Deposits decreased
$19.5 million, or 0.7%, during the three months ended
December 31, 2022 and included CCBX deposit growth of $77.0
million, or 6.4%, and a decrease in community bank deposits of
$96.6 million, or 5.9%.
“Loans increased $119.4 million, or 4.8%, in the three months
ended December 31, 2022, with $96.9 million of that growth in
our CCBX segment, which provides Banking as a Service (“BaaS”). Our
CCBX segment has grown to $1.0 billion in loans receivable, or
38.5% of total loans receivable, and our community bank loans have
grown to $1.6 billion in loans receivable, as of December 31,
2022. Additionally, we sold excess loans back to our partners to
help partners manage credit and interest rate risk. During the
quarter ended December 31, 2022 we allowed some community bank
deposits to run off in order to manage our our deposit costs,
resulting in deposits decreasing $19.5 million, or 0.7%, during the
three months ended December 31, 2022. Community bank cost of
deposits was 0.37% for the quarter ended December 31, 2022.
For the quarter ended December 31, 2022 we had net income of
$13.1 million, an increase of $2.0 million, or 18.2%, over the
quarter ended September 30, 2022.
“We are so proud to have recently received the Everett Herald
Readers Choice Best of Snohomish County in three categories; Best
Place to Work, Best Mortgage, and Best Bank. This recognition
reflects our strong commitment to our community bank roots. We are
also pleased that Coastal World, www.coastalworld.com, an immersive
3D web platform that promotes, educates and informs visitors about
digital banking solutions through our fintech partners is garnering
recognition, and was awarded site of the day and site of the month
from three major outlets and was nominated as site of the year as
well,” 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
$53.4 million for the quarter ended December 31, 2022, an
increase of $4.2 million, or 8.6%, from $49.2 million for the
quarter ended September 30, 2022, and an increase of $28.7 million,
or 116.3%, from $24.7 million for the quarter ended
December 31, 2021. Yield on loans receivable was 9.33% for the
three months ended December 31, 2022, compared to 8.46% for
the three months ended September 30, 2022 and 5.92% for the three
months ended December 31, 2021. The increase in net interest
income compared to September 30, 2022 and December 31, 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 December 31, 2022 was $2.60 billion, compared to
$2.45 billion for the three months ended September 30, 2022, and
$1.68 billion for the three months ended December 31,
2021.
Interest and fees on loans totaled $61.2 million for the three
months ended December 31, 2022 compared to $52.3 million and
$25.1 million for the three months ended September 30, 2022 and
December 31, 2021, respectively. Loan growth of $119.4
million, or 4.8%, during the quarter ended December 31, 2022
included $96.9 million increase in CCBX loans; this includes
capital call lines, which decreased $28.3 million, or 16.2%, during
the quarter ended December 31, 2022, compared to 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 December 31,
2022, compared to September 30, 2022 and December 31, 2021,
was largely due to growth in higher yielding loans and increased
interest rates. As a result of the Federal Open Market Committee
(“FOMC”) raising the target Federal Funds rate 4.25% 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 the target
Federal Funds rate 0.50% on December 14, 2022.
Interest income from interest earning deposits with other banks
was $3.1 million at December 31, 2022, an increase of $824,000
compared to September 30, 2022, and an increase of $2.8 million
compared to December 31, 2021 due to an increase in interest
rates. The average balance of interest earning deposits with other
banks for the three months ended December 31, 2022 was $329.4
million, compared to $397.6 million and $751.8 million for the
three months ended September 30, 2022 and December 31, 2021,
respectively. Interest earning deposits with other banks decreased
as a result of increased loan demand and decreased deposits
compared to the three months ended September 30, 2022. Interest
earning deposits with other banks decreased as a result of
increased loan demand compared to the three months ended
December 31, 2021. Additionally, the average yield on these
interest earning deposits with other banks increased to 3.73% for
the quarter ended December 31, 2022, compared to 2.27% and
0.16% for the quarters ended September 30, 2022 and
December 31, 2021, respectively.
Interest expense was $11.6 million for the quarter ended
December 31, 2022, a $5.3 million increase from the quarter
ended September 30, 2022 and a $10.8 million increase from the
quarter ended December 31, 2021. Interest expense on borrowed
funds was $537,000 for the quarter ended December 31, 2022,
compared to $273,000 and $327,000 for the quarters ended September
30, 2022 and December 31, 2021, respectively. Interest expense
on borrowed funds increased $264,000 compared to the three months
ended September 30, 2022, as a result of an increase of $20.0
million in subordinated debt, which closed on November 1, 2022,
combined with the increase in interest rates. The $210,000 increase
in interest expense on borrowed funds from the quarter ended
December 31, 2021 is the result of an increase in interest
rates partially offset by 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 $5.3
million for the quarter ended December 31, 2022, compared to
the quarter ended September 30, 2022, and $10.5 million compared to
the quarter ended December 31, 2021 as a result an increase in
CCBX deposits that are tied to and reprice when the FOMC raises
rates, just like our CCBX loans which also reprice when the FOMC
raises interest 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 December 31, 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 1.56% for the three months ended
December 31, 2022, 0.82% for the three months ended September
30, 2022, and 0.09%, for the three months ended December 31,
2021. Community bank and CCBX cost of deposits were 0.37% and 3.13%
respectively, for the three months ended December 31, 2022,
compared to 0.16% and 1.79%, for the three months ended September
30, 2022, and 0.12% and 0.02% for the three months ended
December 31, 2021. The increase in cost of deposits for the
three months ended December 31, 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 6.96% for the three months ended
December 31, 2022, compared to 6.58% and 3.95% for the three
months ended September 30, 2022 and December 31, 2021,
respectively. The increase in net interest margin compared to the
three months ended September 30, 2022 and December 31, 2021,
was largely a result of increased volume and an increase in higher
interest rates on new loans and on existing variable rate loans as
they reprice. Loans receivable increased $119.4 million and $884.5
million, compared to September 30, 2022 and December 31, 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 $8.9
million, or 17.0%, to $61.2 million for the three months ended
December 31, 2022, compared to $52.3 million for the three
months ended September 30, 2022, and $25.1 million for the three
months ended December 31, 2021. Also contributing to the
increase in net interest margin compared to the three months ended
September 30, 2022 and December 31, 2021, was $824,000 and
$2.8 million increase in interest on interest earning deposits,
respectively. These interest earning deposits earned an average
rate of 3.73% for the quarter ended December 31, 2022,
compared to 2.27% and 0.16% for the quarters ended September 30,
2022 and December 31, 2021, respectively. Average investment
securities decreased $2.2 million to $101.5 million for the three
months ended December 31, 2022 compared to the three months
ended September 30, 2022, and increased $64.5 million compared to
the three months ended December 31, 2021. Interest on
investment securities increased $3,000 for the three months ended
December 31, 2022 compared to the three months ended September
30, 2022. Investment securities increased $554,000 compared to
December 31, 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 1.61% for the quarter ended December 31,
2022, an increase of 76 basis points from the quarter ended
September 30, 2022 and an increase of 147 basis points from the
quarter ended December 31, 2021. Cost of deposits for the
quarter ended December 31, 2022 was 1.56%, compared to 0.82%
for the quarter ended September 30, 2022, and 0.09% for the quarter
ended December 31, 2021. The increased cost of funds and
deposits compared to September 30, 2022 and December 31, 2021
was largely due to the increase in interest rates compared to the
previous periods and growth in deposits compared to
December 31, 2021.
During the quarter ended December 31, 2022, total loans
receivable increased by $119.4 million, or 4.8%, to $2.63 billion,
compared to $2.51 billion for the quarter ended September 30, 2022.
The increase consists of $96.9 million in CCBX loan growth and
$22.4 million in community bank loan growth. Community bank loan
growth is net of $1.1 million in PPP loan
forgiveness/repayments. Total loans receivable grew $884.5
million as of December 31, 2022, compared to the quarter ended
December 31, 2021. This increase includes CCBX loan growth of
$665.8 million and community bank loan growth of $218.7 million.
Community bank loan growth is net of $107.1 million in PPP loan
forgiveness/repayments as of December 31, 2022 compared to
December 31, 2021. During the quarter ended December 31,
2022, $24.4 million in CCBX loans were transferred into loans held
for sale, with $67.7 million in loans sold during the quarter and
no loans remaining in loans held for sale as of December 31,
2022; compared to $43.3 million held for sale as of September 30,
2022.
Total yield on loans receivable for the quarter ended
December 31, 2022 was 9.33%, compared 8.46% for the quarter
ended September 30, 2022, and 5.92% for the quarter ended
December 31, 2021. This increase in yield on loans receivable
is a combination of an overall increase in interest rates,
repricing of variable rate loans as well as additional volume in
higher rate consumer loans from CCBX partners. During the quarter
ended December 31, 2022, CCBX loans outstanding increased
10.6%, or $96.9 million, compared to September 30, 2022, with an
average CCBX yield of 15.20% and community bank loans increased
1.4%, or $22.4 million, September 30, 2022, with an average yield
of 5.70%. 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 8.33% for the quarter ended December 31,
2022 and was impacted by the $28.3 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 Twelve Months Ended |
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 2021 |
|
December 31, 2022 |
|
December 31, 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 |
5.70 |
% |
|
0.37 |
% |
|
5.31 |
% |
|
0.16 |
% |
|
5.89 |
% |
|
0.12 |
% |
|
5.32 |
% |
|
0.18 |
% |
|
4.90 |
% |
|
0.14 |
% |
CCBX (1) |
15.20 |
% |
|
3.13 |
% |
|
13.96 |
% |
|
1.79 |
% |
|
6.13 |
% |
|
0.02 |
% |
|
13.85 |
% |
|
1.57 |
% |
|
4.46 |
% |
|
0.03 |
% |
Consolidated |
9.33 |
% |
|
1.56 |
% |
|
8.46 |
% |
|
0.82 |
% |
|
5.92 |
% |
|
0.09 |
% |
|
8.12 |
% |
|
0.71 |
% |
|
4.86 |
% |
|
0.12 |
% |
(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 |
|
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 2021 |
(dollars in thousands, unaudited) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
|
Income / Expense |
|
Income / expense divided by
average CCBX
loans(2) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
BaaS loan interest income |
|
$ |
38,086 |
|
15.20 |
% |
|
$ |
31,449 |
|
13.96 |
% |
|
$ |
3,771 |
|
6.13 |
% |
Less: BaaS loan expense |
|
|
17,215 |
|
6.87 |
% |
|
|
15,560 |
|
6.91 |
% |
|
|
2,368 |
|
3.85 |
% |
Net BaaS loan income (1) |
|
$ |
20,871 |
|
8.33 |
% |
|
$ |
15,889 |
|
7.05 |
% |
|
$ |
1,403 |
|
2.28 |
% |
Average BaaS Loans |
|
$ |
994,080 |
|
|
|
$ |
893,655 |
|
|
|
$ |
244,038 |
|
|
|
|
For the Twelve Months Ended |
|
|
December 31, 2022 |
|
December 31, 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 |
|
$ |
102,808 |
|
13.85 |
% |
|
$ |
6,532 |
|
4.46 |
% |
Less: BaaS loan expense |
|
|
53,294 |
|
7.18 |
% |
|
|
2,976 |
|
2.03 |
% |
Net BaaS loan income (1) |
|
$ |
49,514 |
|
6.67 |
% |
|
$ |
3,556 |
|
2.43 |
% |
Average BaaS Loans |
|
$ |
742,392 |
|
|
|
$ |
146,304 |
|
|
(1) A reconciliation of the non-GAAP measures are set
forth at the end of this earnings release.
(2) Annualized calculations shown for quarterly periods
presented.
The following table illustrates the net BaaS loan income spread
for the periods indicated:
|
|
For the Three Months Ended |
(unaudited) |
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 2021 |
Net BaaS loan income (1)(2) |
|
8.33 |
% |
|
7.05 |
% |
|
2.28 |
% |
CCBX cost of
deposits(2) |
|
3.13 |
% |
|
1.79 |
% |
|
0.02 |
% |
Net BaaS loan income interest rate spread (1) |
|
5.20 |
% |
|
5.26 |
% |
|
2.26 |
% |
|
|
For the Twelve Months Ended |
(unaudited) |
|
December 31, 2022 |
|
December 31, 2021 |
Net BaaS loan income (1) |
|
6.67 |
% |
|
2.43 |
% |
CCBX cost of deposits |
|
1.57 |
% |
|
0.03 |
% |
Net BaaS loan income interest rate spread (1) |
|
5.10 |
% |
|
2.40 |
% |
(1) A reconciliation of the non-GAAP measures are set
forth at the end of this earnings release.
(2) Annualized calculations shown for quarterly periods
presented.
Key Performance Ratios
Return on average assets (“ROA”) was 1.66% for the quarter ended
December 31, 2022 compared to 1.45% and 1.14% for the quarters
ended September 30, 2022 and December 31, 2021, respectively.
ROA for the quarter ended December 31, 2022, was impacted by
an increase in loan volume and overall higher interest rates on
interest earning assets, compared to the quarters ended September
30, 2022 and December 31, 2021.
The following table shows the Company’s key performance ratios
for the periods indicated.
|
|
Three Months Ended |
|
Twelve Months Ended |
(unaudited) |
|
December 31,
2022 |
|
September 30,
2022 |
|
June 30,
2022 |
|
March 31,
2022 |
|
December 31,
2021 |
|
December 31,
2022 |
|
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (1) |
|
1.66 |
% |
|
1.45 |
% |
|
1.41 |
% |
|
0.93 |
% |
|
1.14 |
% |
|
1.38 |
% |
|
1.24 |
% |
Return on average equity
(1) |
|
21.86 |
% |
|
19.36 |
% |
|
18.86 |
% |
|
12.12 |
% |
|
16.80 |
% |
|
18.24 |
% |
|
17.24 |
% |
Yield on earnings assets
(1) |
|
8.47 |
% |
|
7.38 |
% |
|
5.94 |
% |
|
4.58 |
% |
|
4.09 |
% |
|
6.68 |
% |
|
3.90 |
% |
Yield on loans receivable
(1) |
|
9.33 |
% |
|
8.46 |
% |
|
7.34 |
% |
|
6.80 |
% |
|
5.92 |
% |
|
8.12 |
% |
|
4.86 |
% |
Cost of funds
(1) |
|
1.61 |
% |
|
0.85 |
% |
|
0.29 |
% |
|
0.14 |
% |
|
0.14 |
% |
|
0.75 |
% |
|
0.18 |
% |
Cost of deposits
(1) |
|
1.56 |
% |
|
0.82 |
% |
|
0.25 |
% |
|
0.09 |
% |
|
0.09 |
% |
|
0.71 |
% |
|
0.12 |
% |
Net interest margin
(1) |
|
6.96 |
% |
|
6.58 |
% |
|
5.66 |
% |
|
4.45 |
% |
|
3.95 |
% |
|
5.97 |
% |
|
3.73 |
% |
Noninterest expense to average
assets (1) |
|
5.97 |
% |
|
6.66 |
% |
|
5.29 |
% |
|
4.52 |
% |
|
3.29 |
% |
|
5.65 |
% |
|
2.90 |
% |
Noninterest income to average
assets (1) |
|
5.43 |
% |
|
4.48 |
% |
|
3.53 |
% |
|
3.27 |
% |
|
2.22 |
% |
|
4.23 |
% |
|
1.29 |
% |
Efficiency ratio |
|
48.94 |
% |
|
61.12 |
% |
|
58.38 |
% |
|
59.34 |
% |
|
54.08 |
% |
|
56.26 |
% |
|
58.82 |
% |
Loans receivable to deposits
(2) |
|
93.25 |
% |
|
89.92 |
% |
|
86.54 |
% |
|
76.24 |
% |
|
73.73 |
% |
|
93.25 |
% |
|
73.73 |
% |
(1) Annualized calculations shown for quarterly
periods presented.
(2) Includes loans held for sale.
The following table details noninterest income for the periods
indicated:
Noninterest Income
|
Three Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
(dollars in thousands; unaudited) |
|
2022 |
|
|
|
2022 |
|
|
|
2021 |
|
Deposit service charges and fees |
$ |
946 |
|
|
$ |
986 |
|
|
$ |
930 |
|
Mortgage broker fees |
|
25 |
|
|
|
24 |
|
|
|
218 |
|
Unrealized (loss) gain on equity securities, net |
|
(18 |
) |
|
|
(133 |
) |
|
|
(3 |
) |
Gain on sales of loans, net |
|
— |
|
|
|
— |
|
|
|
29 |
|
Other |
|
273 |
|
|
|
236 |
|
|
|
397 |
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,226 |
|
|
|
1,113 |
|
|
|
1,571 |
|
Servicing and other BaaS fees |
|
1,001 |
|
|
|
1,079 |
|
|
|
1,421 |
|
Transaction fees |
|
964 |
|
|
|
940 |
|
|
|
280 |
|
Interchange fees |
|
785 |
|
|
|
738 |
|
|
|
368 |
|
Reimbursement of expenses |
|
857 |
|
|
|
885 |
|
|
|
295 |
|
BaaS program income |
|
3,607 |
|
|
|
3,642 |
|
|
|
2,364 |
|
BaaS credit enhancements |
|
31,164 |
|
|
|
17,928 |
|
|
|
9,076 |
|
Baas fraud enhancements |
|
6,818 |
|
|
|
11,708 |
|
|
|
1,209 |
|
BaaS indemnification income |
|
37,982 |
|
|
|
29,636 |
|
|
|
10,285 |
|
Total noninterest income |
$ |
42,815 |
|
|
$ |
34,391 |
|
|
$ |
14,220 |
|
Noninterest income was $42.8 million for the three months ended
December 31, 2022, an increase of $8.4 million from $34.4
million for the three months ended September 30, 2022, and an
increase of $28.6 million from $14.2 million for the three months
ended December 31, 2021. The increase in noninterest income
over the quarter ended September 30, 2022 was primarily due to an
increase of $8.3 million in BaaS income. The $8.3 million increase
in BaaS income included a $13.2 million increase in BaaS credit
enhancements related to the allowance for loan losses and reserve
for unfunded commitments, a $4.9 million decrease in BaaS fraud
enhancements, and a decrease of $35,000 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 $28.6 million increase in
noninterest income over the quarter ended December 31, 2021
was primarily due to a $28.9 million increase in BaaS income. The
$28.9 million increase in BaaS income included a $22.1 million
increase in BaaS credit enhancements, a $5.6 million increase in
BaaS fraud enhancements and a $1.2 million increase in other BaaS
program income.
Our CCBX segment continues to evolve, and we now have 27
relationships, at varying stages, as of December 31, 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, existing customer bases and
strong financial positions.
The following table illustrates the activity and evolution in
CCBX relationships for the periods presented. During the quarter
ended December 31, 2022, a couple partners wound down their
CCBX programs; these programs were not material in terms of income
and sources of funds or loans.
|
As of |
(unaudited) |
December 31,
2022 |
September 30,
2022 |
December 31,
2021 |
Active |
19 |
19 |
19 |
Friends and family /
testing |
1 |
2 |
1 |
Implementation /
onboarding |
0 |
0 |
5 |
Signed letters of intent |
5 |
5 |
3 |
Wind down - preparing to exit
relationship |
2 |
3 |
0 |
Total CCBX relationships |
27 |
29 |
28 |
Noninterest Expense
The following table details noninterest expense for the periods
indicated:
|
|
Three Months Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
(dollars in thousands; unaudited) |
|
|
2022 |
|
|
2022 |
|
|
2021 |
Salaries and employee benefits |
|
$ |
14,399 |
|
$ |
14,506 |
|
$ |
10,541 |
Legal and professional fees |
|
|
2,799 |
|
|
2,251 |
|
|
951 |
Data processing and software licenses |
|
|
1,768 |
|
|
1,670 |
|
|
1,494 |
Occupancy |
|
|
1,182 |
|
|
1,147 |
|
|
1,043 |
Point of sale expense |
|
|
710 |
|
|
742 |
|
|
195 |
FDIC assessments |
|
|
550 |
|
|
850 |
|
|
812 |
Director and staff expenses |
|
|
515 |
|
|
475 |
|
|
393 |
Marketing |
|
|
109 |
|
|
69 |
|
|
107 |
Excise taxes |
|
|
702 |
|
|
588 |
|
|
435 |
Other |
|
|
335 |
|
|
1,522 |
|
|
1,502 |
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
|
23,069 |
|
|
23,820 |
|
|
17,473 |
BaaS loan expense |
|
|
17,215 |
|
|
15,560 |
|
|
2,368 |
BaaS fraud expense |
|
|
6,819 |
|
|
11,707 |
|
|
1,209 |
BaaS loan and fraud expense |
|
|
24,034 |
|
|
27,267 |
|
|
3,577 |
Total noninterest expense |
|
$ |
47,103 |
|
$ |
51,087 |
|
$ |
21,050 |
Total noninterest expense decreased to $47.1 million for the
three months ended December 31, 2022, compared to $51.1
million for the three months ended September 30, 2022 and increased
from $21.1 million for the three months ended December 31,
2021. The decrease in noninterest expense for the quarter ended
December 31, 2022, as compared to the quarter ended September
30, 2022, was primarily due to a $3.2 million decrease in BaaS
expense (of which $4.9 million is related to a decrease in partner
fraud expense partially offset by an increase of $1.7 million in
partner loan 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 partners. Also contributing to the decrease in
noninterest expense compared to September 30, 2022 is a $1.2
million decrease in other expenses, which is related to reduction
in the unfunded commitment reserve of $1.1 million.
The increase in noninterest expenses for the quarter ended
December 31, 2022 compared to the quarter ended
December 31, 2021 were largely due to an increase of $20.5
million in BaaS partner expense ($14.8 million of which is related
to partner loan expense and $5.6 million of which is related to
partner fraud expense), $3.9 million increase in salary and
employee benefits related to hiring staff for CCBX and additional
staff for our ongoing growth initiatives and $1.8 million increase
in legal and professional fees due to increased fees related to
data and risk management, and increased consulting expenses for
projects and enhanced monitoring. Additionally, there was a
$515,000 increase in point of sale expenses which is attributed to
increased CCBX activity. Partially offsetting the increase in
noninterest expense compared to December 31, 2021 is a $1.2
million decrease in other expenses, which is related to reduction
in the unfunded commitment reserve of $1.5 million.
The provision for income taxes was $2.4 million for the three
months ended December 31, 2022, $3.0 million for the three
months ended September 30, 2022 and $1.6 million for the fourth
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 effective tax rate was lower for the three
months ended December 31, 2022 due to an update in the state
apportionment of the revenues in the states in which we operate
combined with tax benefits that resulted from the exercise of stock
awards. The Company uses a federal statutory tax rate of 21.0% as a
basis for calculating provision for federal income taxes and 2.62%
for calculating the provision for state taxes.
Financial Condition Overview
Total assets increased $10.7 million, or 0.3%, to $3.14 billion
at December 31, 2022 compared to $3.13 billion at September
30, 2022. The increase is primarily due to loans receivable
increasing $119.4 million during the quarter ended
December 31, 2022. Partially offsetting the increase in loans
for the quarter ended December 31, 2022 was a $63.8 million
decrease in interest earning deposits with other banks, resulting
from increased loan demand and decreased customer deposits.
Additionally, there were no loans held for sale at
December 31, 2022, a decrease of $43.3 million, compared to
the quarter ended September 30, 2022.
Total assets increased $509.0 million, or 19.3%, at
December 31, 2022, compared to $2.64 billion at
December 31, 2021. The increase is primarily due to loans
receivable increasing $884.5 million, and an increase of $61.7
million in investment securities. Partially offsetting the increase
is a $489.2 million decrease in interest earning deposits with
other banks, resulting from increased loan demand and funds being
shifted from interest earning deposits with other banks to loans,
compared to December 31, 2021.
Loans Receivable
Total loans receivable increased $119.4 million to $2.63 billion
at December 31, 2022, from $2.51 billion at September 30,
2022, and increased $884.5 million from $1.74 billion at
December 31, 2021. The increase in loans receivable over the
quarter ended September 30, 2022 was the result of $96.9 million in
CCBX loan growth and $22.4 million in community bank loan growth.
Community bank loan growth is net of $1.1 million in PPP loan
forgiveness/repayments compared to the quarter ended September 30,
2022. The change in loans receivable over the quarter ended
December 31, 2021 includes CCBX loan growth of $665.8 million
and $218.7 million in community bank loan growth as of
December 31, 2022. Community bank loan growth is net of $107.1
million in PPP loan forgiveness and paydowns since
December 31, 2021.
The following table summarizes the loan portfolio at the period
indicated:
|
As of December 31, 2022 |
|
As of September 30, 2022 |
|
As of December 31, 2021 |
(dollars in thousands; unaudited) |
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
Commercial and industrial
loans: |
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
$ |
4,699 |
|
|
0.2 |
% |
|
$ |
5,794 |
|
|
0.2 |
% |
|
$ |
111,813 |
|
|
6.4 |
% |
Capital call lines |
|
146,029 |
|
|
5.5 |
|
|
|
174,311 |
|
|
6.9 |
|
|
|
202,882 |
|
|
11.5 |
|
All other commercial & industrial loans |
|
161,900 |
|
|
6.1 |
|
|
|
159,823 |
|
|
6.4 |
|
|
|
104,365 |
|
|
6.0 |
|
Total commercial and industrial loans: |
|
312,628 |
|
|
11.8 |
|
|
|
339,928 |
|
|
13.5 |
|
|
|
419,060 |
|
|
23.9 |
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development |
|
214,055 |
|
|
8.1 |
|
|
|
224,188 |
|
|
8.9 |
|
|
|
183,594 |
|
|
10.5 |
|
Residential real estate |
|
449,157 |
|
|
17.1 |
|
|
|
402,781 |
|
|
16.0 |
|
|
|
204,389 |
|
|
11.7 |
|
Commercial real estate |
|
1,048,752 |
|
|
39.8 |
|
|
|
1,024,067 |
|
|
40.7 |
|
|
|
835,587 |
|
|
47.7 |
|
Consumer and other loans |
|
608,771 |
|
|
23.2 |
|
|
|
523,536 |
|
|
20.9 |
|
|
|
108,871 |
|
|
6.2 |
|
Gross loans receivable |
|
2,633,363 |
|
|
100.0 |
% |
|
|
2,514,500 |
|
|
100.0 |
% |
|
|
1,751,501 |
|
|
100.0 |
% |
Net deferred origination fees
- PPP loans |
|
(82 |
) |
|
|
|
|
(111 |
) |
|
|
|
|
(3,633 |
) |
|
|
Net deferred origination fees
- all other loans |
|
(6,025 |
) |
|
|
|
|
(6,500 |
) |
|
|
|
|
(5,133 |
) |
|
|
Loans receivable |
$ |
2,627,256 |
|
|
|
|
$ |
2,507,889 |
|
|
|
|
$ |
1,742,735 |
|
|
|
Loan Yield (1) |
|
9.33 |
% |
|
|
|
|
8.46 |
% |
|
|
|
|
5.92 |
% |
|
|
(1) Loan yield is annualized for the three
months ended for each period presented and includes loans held for
sale and nonaccrual loans.
Please see Appendix A for additional loan portfolio detail
regarding industry concentrations.
The following tables detail the community bank and CCBX loans
which are included in the total loan portfolio table above.
Community Bank |
|
As of |
|
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 2021 |
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
|
$ |
4,699 |
|
|
0.3 |
% |
|
$ |
5,794 |
|
|
0.4 |
% |
|
$ |
111,813 |
|
|
8.0 |
% |
All other commercial & industrial loans |
|
|
146,982 |
|
|
9.1 |
|
|
|
143,808 |
|
|
9.0 |
|
|
|
104,365 |
|
|
7.4 |
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development loans |
|
|
214,055 |
|
|
13.2 |
|
|
|
224,188 |
|
|
14.0 |
|
|
|
183,594 |
|
|
13.1 |
|
Residential real estate loans |
|
|
204,581 |
|
|
12.6 |
|
|
|
198,871 |
|
|
12.5 |
|
|
|
167,502 |
|
|
11.9 |
|
Commercial real estate loans |
|
|
1,048,752 |
|
|
64.7 |
|
|
|
1,024,067 |
|
|
64.0 |
|
|
|
835,587 |
|
|
59.5 |
|
Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer and other loans |
|
|
1,725 |
|
|
0.1 |
|
|
|
2,220 |
|
|
0.1 |
|
|
|
2,034 |
|
|
0.1 |
|
Gross Community Bank loans receivable |
|
|
1,620,794 |
|
|
100.0 |
% |
|
|
1,598,948 |
|
|
100.0 |
% |
|
|
1,404,895 |
|
|
100.0 |
% |
Net deferred origination
fees |
|
|
(6,042 |
) |
|
|
|
|
(6,628 |
) |
|
|
|
|
(8,835 |
) |
|
|
Loans receivable |
|
$ |
1,614,752 |
|
|
|
|
$ |
1,592,320 |
|
|
|
|
$ |
1,396,060 |
|
|
|
Loan Yield(1) |
|
|
5.70 |
% |
|
|
|
|
5.31 |
% |
|
|
|
|
5.89 |
% |
|
|
(1) Loan yield is annualized for the three
months ended for each period presented and includes loans held for
sale and nonaccrual loans.
CCBX |
|
As of |
|
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 2021 |
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital call lines |
|
$ |
146,029 |
|
|
14.4 |
% |
|
$ |
174,311 |
|
|
19.0 |
% |
|
$ |
202,882 |
|
|
58.6 |
% |
All other commercial & industrial loans |
|
|
14,918 |
|
|
1.5 |
|
|
|
16,015 |
|
|
1.8 |
|
|
|
— |
|
|
0.0 |
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
244,576 |
|
|
24.2 |
|
|
|
203,910 |
|
|
22.3 |
|
|
|
36,887 |
|
|
10.6 |
|
Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
279,644 |
|
|
27.6 |
|
|
|
216,995 |
|
|
23.7 |
|
|
|
11,429 |
|
|
3.3 |
|
Other consumer and other loans |
|
|
327,402 |
|
|
32.3 |
|
|
|
304,321 |
|
|
33.2 |
|
|
|
95,408 |
|
|
27.5 |
|
Gross CCBX loans receivable |
|
|
1,012,569 |
|
|
100.0 |
% |
|
|
915,552 |
|
|
100.0 |
% |
|
|
346,606 |
|
|
100.0 |
% |
Net deferred origination
(fees) costs |
|
|
(65 |
) |
|
|
|
|
17 |
|
|
|
|
|
69 |
|
|
|
Loans receivable |
|
$ |
1,012,504 |
|
|
|
|
$ |
915,569 |
|
|
|
|
$ |
346,675 |
|
|
|
Loan Yield - CCBX
(1)(2) |
|
|
15.20 |
% |
|
|
|
|
13.96 |
% |
|
|
|
|
6.13 |
% |
|
|
(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 decreased $19.5 million, or 0.7%, to $2.82
billion at December 31, 2022 from $2.84 billion at September
30, 2022. The decrease was due to a $41.3 million decrease in core
deposits, combined with a $4.4 million decrease in time deposits,
partially offset by a $26.2 million increase in BaaS-brokered
deposits. We believe our decrease in deposits is primarily the
result of significantly higher deposit rates being offered by
competitors and depositors investing in the market. Deposits in our
CCBX segment increased $77.0 million, from $1.20 billion at
September 30, 2022, to $1.28 billion at December 31, 2022 and
community bank deposits decreased $96.6 million to $1.54 billion at
December 31, 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 December 31, 2022,
noninterest bearing deposits decreased $38.2 million, or 4.7%, to
$775.0 million from $813.2 million at September 30, 2022. In the
quarter ended December 31, 2022 compared to the quarter ended
September 30, 2022, NOW and money market accounts decreased $2.7
million, savings deposits decreased $391,000, and time deposits
decreased $4.4 million. Partially offsetting those decreases is an
increase of $26.2 million in BaaS-brokered deposits.
Total deposits increased $453.7 million, or 19.2%, to $2.82
billion at December 31, 2022 compared to $2.36 billion at
December 31, 2021. The increase is largely the result of
growth in CCBX deposits. Noninterest bearing deposits decreased
$580.9 million, or 42.8%, to $775.0 million at December 31,
2022 from $1.4 billion at December 31, 2021. NOW and money
market accounts increased $1.01 billion, or 128.5%, to $1.80
billion at December 31, 2022, and savings accounts increased
$3.2 million, or 3.0%, and BaaS-brokered deposits increased $30.8
million, or 43.5% while time deposits decreased $14.0 million, or
32.2%, in the fourth quarter of 2022 compared to the fourth quarter
of 2021. Additionally, as of December 31, 2022 we have access
to $225.0 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 December 31, 2022 |
|
As of September 30, 2022 |
|
As of December 31, 2021 |
(dollars in thousands; unaudited) |
Amount |
|
Percent of
Total
Deposits |
|
Balance |
|
Percent of
Total
Deposits |
|
Balance |
|
Percent of
Total
Deposits |
Demand, noninterest bearing |
$ |
775,012 |
|
|
27.5 |
% |
|
$ |
813,217 |
|
|
28.7 |
% |
|
$ |
1,355,908 |
|
|
57.4 |
% |
NOW and money market |
|
1,804,399 |
|
|
64.0 |
|
|
|
1,807,105 |
|
|
63.7 |
|
|
|
789,709 |
|
|
33.4 |
|
Savings |
|
107,117 |
|
|
3.8 |
|
|
|
107,508 |
|
|
3.8 |
|
|
|
103,956 |
|
|
4.4 |
|
Total core deposits |
|
2,686,528 |
|
|
95.3 |
|
|
|
2,727,830 |
|
|
96.2 |
|
|
|
2,249,573 |
|
|
95.2 |
|
BaaS-brokered deposits |
|
101,546 |
|
|
3.6 |
|
|
|
75,363 |
|
|
2.6 |
|
|
|
70,757 |
|
|
3.0 |
|
Time deposits less than
$100,000 |
|
12,596 |
|
|
0.5 |
|
|
|
13,296 |
|
|
0.5 |
|
|
|
14,961 |
|
|
0.6 |
|
Time deposits $100,000 and
over |
|
16,851 |
|
|
0.6 |
|
|
|
20,577 |
|
|
0.7 |
|
|
|
28,496 |
|
|
1.2 |
|
Total |
$ |
2,817,521 |
|
|
100.0 |
% |
|
$ |
2,837,066 |
|
|
100.0 |
% |
|
$ |
2,363,787 |
|
|
100.0 |
% |
Cost of Deposits
(1) |
|
1.56 |
% |
|
|
|
|
0.82 |
% |
|
|
|
|
0.09 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
The following tables detail the community bank and CCBX deposits
which are included in the total deposit portfolio table above.
Community Bank |
|
As of |
|
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 2021 |
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
Demand, noninterest bearing |
|
$ |
694,179 |
|
|
45.2 |
% |
|
$ |
746,516 |
|
|
45.7 |
% |
|
$ |
719,233 |
|
|
43.7 |
% |
NOW and money market |
|
|
709,490 |
|
|
46.1 |
|
|
|
748,347 |
|
|
45.8 |
|
|
|
780,884 |
|
|
47.4 |
|
Savings |
|
|
105,101 |
|
|
6.8 |
|
|
|
106,059 |
|
|
6.4 |
|
|
|
103,954 |
|
|
6.3 |
|
Total core deposits |
|
|
1,508,770 |
|
|
98.1 |
|
|
|
1,600,922 |
|
|
97.9 |
|
|
|
1,604,071 |
|
|
97.4 |
|
Brokered deposits |
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
Time deposits less than
$100,000 |
|
|
12,596 |
|
|
0.8 |
|
|
|
13,296 |
|
|
0.8 |
|
|
|
14,961 |
|
|
0.9 |
|
Time deposits $100,000 and
over |
|
|
16,851 |
|
|
1.1 |
|
|
|
20,577 |
|
|
1.3 |
|
|
|
28,496 |
|
|
1.7 |
|
Total Community Bank deposits |
|
$ |
1,538,218 |
|
|
100.0 |
% |
|
$ |
1,634,796 |
|
|
100.0 |
% |
|
$ |
1,647,529 |
|
|
100.0 |
% |
Cost of
deposits(1) |
|
|
0.37 |
% |
|
|
|
|
0.16 |
% |
|
|
|
|
0.12 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
CCBX |
|
As of |
|
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 2021 |
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
Demand, noninterest bearing |
|
$ |
80,833 |
|
|
6.3 |
% |
|
$ |
66,701 |
|
|
5.5 |
% |
|
$ |
636,675 |
|
|
88.9 |
% |
NOW and money market |
|
|
1,094,909 |
|
|
85.6 |
|
|
|
1,058,758 |
|
|
88.1 |
|
|
|
8,825 |
|
|
1.2 |
|
Savings |
|
|
2,016 |
|
|
0.2 |
|
|
|
1,449 |
|
|
0.1 |
|
|
|
2 |
|
|
— |
|
Total core deposits |
|
|
1,177,758 |
|
|
92.1 |
|
|
|
1,126,908 |
|
|
93.7 |
|
|
|
645,502 |
|
|
90.1 |
|
BaaS-brokered deposits |
|
|
101,545 |
|
|
7.9 |
|
|
|
75,362 |
|
|
6.3 |
|
|
|
70,756 |
|
|
9.9 |
|
Total CCBX deposits |
|
$ |
1,279,303 |
|
|
100.0 |
% |
|
$ |
1,202,270 |
|
|
100.0 |
% |
|
$ |
716,258 |
|
|
100.0 |
% |
Cost of deposits
(1) |
|
|
3.13 |
% |
|
|
|
|
1.79 |
% |
|
|
|
|
0.02 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
Borrowings
On November 1, 2022, the Company completed its private placement
of $20.0 million in fixed-to-floating rate subordinated notes
due November 1, 2032 (the “Notes”). The Notes bear interest at a
fixed annual rate of 7.00% for the first five years and will reset
quarterly thereafter to the then-current three-month Secured
Overnight Financing Rate ("SOFR") plus 290 basis points. The
Company may redeem the Notes, in whole or in part, on any interest
payment date on or after November 1, 2027, or at any time, in whole
but not in part, upon certain other specified events prior to the
Notes’ maturity on November 1, 2032.
Shareholders’ Equity
During the twelve months ended December 31, 2022, the
Company contributed $21.0 million in capital to the Bank. The
Company has a cash balance of $22.9 million as of December 31,
2022, which is retained for general operating purposes, including
debt repayment, and for funding $988,000 in commitments to bank
technology funds.
Total shareholders’ equity increased $14.8 million since
September 30, 2022. The increase in shareholders’ equity was
primarily due to $13.1 million in net earnings and $1.2 million
increase from stock options being exercised for the three months
ended December 31, 2022.
Capital Ratios
The Company and the Bank remain well capitalized at
December 31, 2022, as summarized in the following table.
(unaudited) |
|
Coastal
Community
Bank |
|
Coastal
Financial
Corporation |
|
Financial
Institution
Basel III
Regulatory
Guidelines |
Tier 1 leverage capital |
|
8.56 |
% |
|
7.97 |
% |
|
5.00 |
% |
Common Equity Tier 1
risk-based capital |
|
9.77 |
% |
|
8.95 |
% |
|
6.50 |
% |
Tier 1 risk-based capital |
|
9.77 |
% |
|
9.08 |
% |
|
8.00 |
% |
Total risk-based capital |
|
11.04 |
% |
|
11.99 |
% |
|
10.00 |
% |
Asset Quality
The total allowance for loan losses was $74.0 million and 2.82%
of loans receivable at December 31, 2022 compared to $59.3
million and 2.36% at September 30, 2022 and $28.6 million and 1.64%
at December 31, 2021. The allowance for loan loss allocated to
the CCBX portfolio was $53.4 million and 5.27% of CCBX loans
receivable at December 31, 2022, with $20.6 million of
allowance for loan loss allocated to the community bank or 1.28% 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 December 31, 2022 |
|
As of September 30, 2022 |
|
As of December 31, 2021 |
(dollars in thousands; unaudited) |
|
Community
Bank |
|
CCBX |
|
Total |
|
Community
Bank |
|
CCBX |
|
Total |
|
Community
Bank |
|
CCBX |
|
Total |
Loans receivable |
|
$ |
1,614,751 |
|
|
$ |
1,012,505 |
|
|
$ |
2,627,256 |
|
|
$ |
1,592,320 |
|
|
$ |
915,569 |
|
|
$ |
2,507,889 |
|
|
$ |
1,396,060 |
|
|
$ |
346,675 |
|
|
$ |
1,742,735 |
|
Allowance for loan losses |
|
|
(20,636 |
) |
|
|
(53,393 |
) |
|
|
(74,029 |
) |
|
|
(20,139 |
) |
|
|
(39,143 |
) |
|
|
(59,282 |
) |
|
|
(20,299 |
) |
|
|
(8,333 |
) |
|
|
(28,632 |
) |
Allowance for loan losses to
total loans receivable |
|
|
1.28 |
% |
|
|
5.27 |
% |
|
|
2.82 |
% |
|
|
1.26 |
% |
|
|
4.28 |
% |
|
|
2.36 |
% |
|
|
1.45 |
% |
|
|
2.40 |
% |
|
|
1.64 |
% |
Provision for loan losses totaled $33.6 million for the three
months ended December 31, 2022, $18.4 million for the three
months ended September 30, 2022, and $8.9 million for the three
months ended December 31, 2021. Net charge-offs totaled $18.9
million for the quarter ended December 31, 2022, compared to
$8.5 million for the quarter ended September 30, 2022 and $532,000
for the quarter ended December 31, 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, except in accordance with
the program agreement for one partner where the Company is
responsible for credit losses on approximately 10% of a $114.5
million loan portfolio. At December 31, 2022, 10% of this
portfolio represented $11.5 million in loans.
The following table details net charge-offs for the core bank
and CCBX for the period indicated:
|
|
Three Months Ended |
|
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 2021 |
(dollars in thousands; unaudited) |
|
Community
Bank |
|
CCBX |
|
Total |
|
Community
Bank |
|
CCBX |
|
Total |
|
Community
Bank |
|
CCBX |
|
Total |
Gross charge-offs |
|
$ |
10 |
|
|
$ |
18,876 |
|
|
$ |
18,886 |
|
|
$ |
411 |
|
|
$ |
8,102 |
|
|
$ |
8,513 |
|
|
$ |
215 |
|
|
$ |
364 |
|
|
$ |
579 |
|
Gross recoveries |
|
|
(3 |
) |
|
|
(30 |
) |
|
|
(33 |
) |
|
|
(3 |
) |
|
|
(6 |
) |
|
|
(9 |
) |
|
|
(47 |
) |
|
|
— |
|
|
|
(47 |
) |
Net charge-offs |
|
$ |
7 |
|
|
$ |
18,846 |
|
|
$ |
18,853 |
|
|
$ |
408 |
|
|
$ |
8,096 |
|
|
$ |
8,504 |
|
|
$ |
168 |
|
|
$ |
364 |
|
|
$ |
532 |
|
Net charge-offs to average
loans (1) |
|
|
— |
% |
|
|
7.52 |
% |
|
|
2.87 |
% |
|
|
0.10 |
% |
|
|
3.59 |
% |
|
|
1.38 |
% |
|
|
0.05 |
% |
|
|
0.59 |
% |
|
|
0.13 |
% |
The increase in the Company’s provision for loan losses during
the quarter ended December 31, 2022, is largely related to the
provision for loan growth in CCBX partner loans. During the quarter
ended December 31, 2022, a $33.1 million provision for loan
losses was recorded for CCBX partner loans based on management’s
analysis, compared to the $18.7 million provision for loan losses
that was recorded for CCBX for the quarter ended September 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 provision of $504,000 and
recapture/adjustment for loan losses of $238,000 was needed for the
quarters ended December 31, 2022 and September 30, 2022,
respectively. In accordance with the program agreement and for this
CCBX partner only, the Company is responsible for credit losses on
approximately 10% of a $114.5 million loan portfolio. At
December 31, 2022, 10% of this portfolio represented $11.5
million in loans. The partner is responsible for credit losses on
approximately 90% of this portfolio and for fraud losses on 100% of
this portfolio. The Company earns 100% of the revenue on the
aforementioned $11.5 million of loans. The economic environment is
continuously changing, due to increased inflation, global unrest,
the war in Ukraine, political environment, trade issues that may
impact the provision and therefore the allowance. The Company is
not required to implement the provisions of the Current Expected
Credit Loss ("CECL") accounting standard until January 1, 2023 and
continues to account for the allowance for credit losses under the
incurred loss model. The Company is on track with its migration and
adoption plan for CECL.
The following table details the provision expense for the
community bank and CCBX for the period indicated:
|
|
Three Months Ended |
|
Twelve Months Ended |
(dollars in thousands; unaudited) |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
|
December 31,
2022 |
|
December 31,
2021 |
Community bank |
|
$ |
504 |
|
$ |
(238 |
) |
|
$ |
243 |
|
$ |
719 |
|
$ |
1,275 |
CCBX |
|
|
33,096 |
|
|
18,666 |
|
|
|
8,699 |
|
|
78,345 |
|
|
8,640 |
Total provision expense |
|
$ |
33,600 |
|
$ |
18,428 |
|
|
$ |
8,942 |
|
$ |
79,064 |
|
$ |
9,915 |
At December 31, 2022, our nonperforming assets were $33.2
million, or 1.06% of total assets, compared to $22.9 million, or
0.73%, of total assets, at September 30, 2022, and $1.7 million, or
0.07% of total assets, at December 31, 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 $10.3 million during
the quarter ended December 31, 2022, compared to the quarter
ended September 30, 2022, due to the addition of $10.3 million in
CCBX loans that are past due 90 days or more and still accruing
combined with $19,000 more in community bank nonaccrual loans. As a
result of the type of loans (primarily consumer loans) originated
through our CCBX partners we anticipate that balances 90 days past
due or more and still accruing will increase as those loans grow.
Installment/closed-end and revolving/open-end consumer loans
originated through CCBX lending partners will continue to accrue
interest until 120 and 180 days past due, respectively and are
reported as substandard, 90 days or more days past due and still
accruing. Community bank nonaccrual loans increased with the
addition of one new nonaccrual loan partially offset by other
nonaccrual principal reductions/charge-offs. There were no
repossessed assets or other real estate owned at December 31,
2022. Our nonperforming loans to loans receivable ratio was 1.26%
at December 31, 2022, compared to 0.91% at September 30, 2022,
and 0.10% at December 31, 2021.
For the quarter ended December 31, 2022, there were $7,000
of community bank net charge-offs and $7.1 million of nonperforming
community bank loans. The $6.9 million nonaccrual balance in
commercial real estate loans shown below consists of one loan, is
well secured with an original loan to value of 62%, and an updated
loan to value of 75% as of January 2023. Management anticipates
this loan being resolved in the first half of 2023. For the quarter
ended December 31, 2022, $18.8 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. In accordance with the
program agreement and for this CCBX partner only, the Company is
responsible for credit losses on approximately 10% of a $114.5
million loan portfolio. At December 31, 2022, 10% of this
portfolio represented $11.5 million in loans. The partner is
responsible for credit losses on approximately 90% of this
portfolio and for fraud losses on 100% of this portfolio.
The following table details the Company’s nonperforming assets
for the periods indicated.
(dollars in thousands; unaudited) |
As of December
31, 2022 |
|
As of September
30, 2022 |
|
As of December
31, 2021 |
Nonaccrual loans: |
|
|
|
|
|
Commercial and industrial loans |
$ |
113 |
|
|
$ |
94 |
|
|
$ |
166 |
|
Real estate loans: |
|
|
|
|
|
Construction, land and land development |
|
66 |
|
|
|
66 |
|
|
|
— |
|
Residential real estate |
|
— |
|
|
|
— |
|
|
|
55 |
|
Commercial real estate |
|
6,901 |
|
|
|
6,901 |
|
|
|
— |
|
Total nonaccrual loans |
|
7,080 |
|
|
|
7,061 |
|
|
|
221 |
|
Accruing loans past
due 90 days or more: |
|
|
|
|
|
Commercial & industrial
loans |
|
404 |
|
|
|
138 |
|
|
|
— |
|
Real estate loans: |
|
|
|
|
|
Residential real estate loans |
|
876 |
|
|
|
638 |
|
|
|
39 |
|
Consumer and other loans: |
|
|
|
|
|
Credit cards |
|
10,570 |
|
|
|
4,777 |
|
|
|
155 |
|
Other consumer and other loans |
|
14,245 |
|
|
|
10,268 |
|
|
|
1,312 |
|
Total accruing loans past due 90 days or more |
|
26,095 |
|
|
|
15,821 |
|
|
|
1,506 |
|
Total nonperforming loans |
|
33,175 |
|
|
|
22,882 |
|
|
|
1,727 |
|
Real estate owned |
|
— |
|
|
|
— |
|
|
|
— |
|
Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
Troubled debt
restructurings, accruing |
|
— |
|
|
|
— |
|
|
|
— |
|
Total nonperforming
assets |
$ |
33,175 |
|
|
$ |
22,882 |
|
|
$ |
1,727 |
|
Total nonaccrual loans to
loans receivable |
|
0.27 |
% |
|
|
0.28 |
% |
|
|
0.01 |
% |
Total nonperforming loans to
loans receivable |
|
1.26 |
% |
|
|
0.91 |
% |
|
|
0.10 |
% |
Total nonperforming assets to
total assets |
|
1.06 |
% |
|
|
0.73 |
% |
|
|
0.07 |
% |
The following tables detail the community bank and CCBX
nonperforming assets which are included in the total nonperforming
assets table above.
Community Bank |
As of |
(dollars in thousands; unaudited) |
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
Nonaccrual loans: |
|
|
|
|
|
Commercial and industrial loans |
$ |
113 |
|
$ |
94 |
|
$ |
166 |
Real estate: |
|
|
|
|
|
Construction, land and land development |
|
66 |
|
|
66 |
|
|
— |
Residential real estate |
|
— |
|
|
— |
|
|
55 |
Commercial real estate |
|
6,901 |
|
|
6,901 |
|
|
— |
Total nonaccrual loans |
|
7,080 |
|
|
7,061 |
|
|
221 |
|
|
|
|
|
|
— |
Accruing loans past
due 90 days or more: |
|
|
|
|
|
Total accruing loans past due 90 days or more |
|
— |
|
|
— |
|
|
— |
Total nonperforming loans |
|
7,080 |
|
|
7,061 |
|
|
221 |
Other real estate
owned |
|
— |
|
|
— |
|
|
— |
Repossessed
assets |
|
— |
|
|
— |
|
|
— |
Total nonperforming
assets |
$ |
7,080 |
|
$ |
7,061 |
|
$ |
221 |
CCBX |
As of |
(dollars in thousands; unaudited) |
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
Nonaccrual loans |
$ |
— |
|
$ |
— |
|
$ |
— |
Accruing loans past
due 90 days or more: |
|
|
|
|
|
Commercial & industrial
loans |
|
404 |
|
|
138 |
|
|
— |
Real estate loans: |
|
|
|
|
|
Residential real estate loans |
|
876 |
|
|
638 |
|
|
39 |
Consumer and other loans: |
|
|
|
|
|
Credit cards |
|
10,570 |
|
|
4,777 |
|
|
155 |
Other consumer and other loans |
|
14,245 |
|
|
10,268 |
|
|
1,312 |
Total accruing loans past due 90 days or more |
|
26,095 |
|
|
15,821 |
|
|
1,506 |
Total nonperforming loans |
|
26,095 |
|
|
15,821 |
|
|
1,506 |
Other real estate
owned |
|
— |
|
|
— |
|
|
— |
Repossessed
assets |
|
— |
|
|
— |
|
|
— |
Total nonperforming
assets |
$ |
26,095 |
|
$ |
15,821 |
|
$ |
1,506 |
* A reconciliation of the non-GAAP measures are set
forth at the end of this earnings release.
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 $3.14 billion Bank provides service
through 14 branches in Snohomish, Island, and King Counties, the
Internet and its mobile banking application. The Bank provides
banking as a service to broker-dealers, digital financial service
providers, companies and brands that want to provide financial
services to their customers through the Bank's CCBX segment. To
learn more about the Company visit www.coastalbank.com.
CCB-ER
Contact
Eric Sprink, Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial
Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect our current views
with respect to, among other things, future events and our
financial performance. Any statements about our management’s
expectations, beliefs, plans, predictions, forecasts, objectives,
assumptions or future events or performance are not historical
facts and may be forward-looking. These statements are often, but
not always, made through the use of words or phrases such as
“anticipate,” “believes,” “can,” “could,” “may,” “predicts,”
“potential,” “should,” “will,” “estimate,” “plans,” “projects,”
“continuing,” “ongoing,” “expects,” “intends” and similar words or
phrases. Any or all of the forward-looking statements in this
earnings release may turn out to be inaccurate. The inclusion of or
reference to forward-looking information in this earnings release
should not be regarded as a representation by us or any other
person that the future plans, estimates or expectations
contemplated by us will be achieved. We have based these
forward-looking statements largely on our current expectations and
projections about future events and financial trends that we
believe may affect our financial condition, results of operations,
business strategy and financial needs. Our actual results could
differ materially from those anticipated in such forward-looking
statements as a result of risks, uncertainties and assumptions that
are difficult to predict. Factors that could cause actual results
to differ materially from those in the forward-looking statements
include, without limitation, the risks and uncertainties discussed
under “Risk Factors” in our Annual Report on Form 10-K for the most
recent period filed, our Quarterly Report on Form 10-Q for the most
recent quarter, and in any of our subsequent filings with the
Securities and Exchange Commission.
If one or more events related to these or other risks or
uncertainties materialize, or if our underlying assumptions prove
to be incorrect, actual results may differ materially from what we
anticipate. You are cautioned not to place undue reliance on
forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made, and we undertake no
obligation to update or revise any forward-looking statement to
reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated
events, except as required by law.
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
ASSETS |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
Cash and due from banks |
$ |
32,722 |
|
|
$ |
37,482 |
|
|
$ |
14,496 |
|
Interest earning deposits with
other banks |
|
309,417 |
|
|
|
373,246 |
|
|
|
798,665 |
|
Investment securities,
available for sale, at fair value |
|
97,317 |
|
|
|
97,621 |
|
|
|
35,327 |
|
Investment securities, held to
maturity, at amortized cost |
|
1,036 |
|
|
|
1,250 |
|
|
|
1,296 |
|
Other investments |
|
10,555 |
|
|
|
10,581 |
|
|
|
8,478 |
|
Loans held for sale |
|
— |
|
|
|
43,314 |
|
|
|
— |
|
Loans receivable |
|
2,627,256 |
|
|
|
2,507,889 |
|
|
|
1,742,735 |
|
Allowance for loan losses |
|
(74,029 |
) |
|
|
(59,282 |
) |
|
|
(28,632 |
) |
Total loans receivable, net |
|
2,553,227 |
|
|
|
2,448,607 |
|
|
|
1,714,103 |
|
CCBX credit enhancement
asset |
|
53,377 |
|
|
|
48,228 |
|
|
|
8,712 |
|
CCBX receivable |
|
10,416 |
|
|
|
6,145 |
|
|
|
1,266 |
|
Premises and equipment,
net |
|
18,213 |
|
|
|
18,467 |
|
|
|
17,219 |
|
Operating lease right-of-use
assets |
|
5,018 |
|
|
|
5,293 |
|
|
|
6,105 |
|
Accrued interest
receivable |
|
17,815 |
|
|
|
13,114 |
|
|
|
8,105 |
|
Bank-owned life insurance,
net |
|
12,667 |
|
|
|
12,576 |
|
|
|
12,254 |
|
Deferred tax asset, net |
|
18,458 |
|
|
|
13,997 |
|
|
|
6,818 |
|
Other assets |
|
4,229 |
|
|
|
3,820 |
|
|
|
2,673 |
|
Total assets |
$ |
3,144,467 |
|
|
$ |
3,133,741 |
|
|
$ |
2,635,517 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
LIABILITIES |
|
|
|
|
|
Deposits |
$ |
2,817,521 |
|
|
$ |
2,837,066 |
|
|
$ |
2,363,787 |
|
Federal Home Loan Bank ("FHLB") advances |
|
— |
|
|
|
— |
|
|
|
24,999 |
|
Subordinated debt, net |
|
43,999 |
|
|
|
24,343 |
|
|
|
24,288 |
|
Junior subordinated debentures, net |
|
3,588 |
|
|
|
3,588 |
|
|
|
3,586 |
|
Deferred compensation |
|
616 |
|
|
|
648 |
|
|
|
744 |
|
Accrued interest payable |
|
684 |
|
|
|
153 |
|
|
|
357 |
|
Operating lease liabilities |
|
5,234 |
|
|
|
5,514 |
|
|
|
6,320 |
|
Other liabilities |
|
29,331 |
|
|
|
33,696 |
|
|
|
10,214 |
|
Total liabilities |
|
2,900,973 |
|
|
|
2,905,008 |
|
|
|
2,434,295 |
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Common stock |
|
125,830 |
|
|
|
123,944 |
|
|
|
121,845 |
|
Retained earnings |
|
119,998 |
|
|
|
106,880 |
|
|
|
79,373 |
|
Accumulated other comprehensive (loss) income, net of tax |
|
(2,334 |
) |
|
|
(2,091 |
) |
|
|
4 |
|
Total shareholders’ equity |
|
243,494 |
|
|
|
228,733 |
|
|
|
201,222 |
|
Total liabilities and shareholders’ equity |
$ |
3,144,467 |
|
|
$ |
3,133,741 |
|
|
$ |
2,635,517 |
|
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
|
Three Months Ended |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
INTEREST AND DIVIDEND
INCOME |
|
|
|
|
|
Interest and fees on loans |
$ |
61,226 |
|
|
$ |
52,328 |
|
|
$ |
25,134 |
|
Interest on interest earning deposits with other banks |
|
3,097 |
|
|
|
2,273 |
|
|
|
294 |
|
Interest on investment securities |
|
557 |
|
|
|
554 |
|
|
|
3 |
|
Dividends on other investments |
|
150 |
|
|
|
24 |
|
|
|
115 |
|
Total interest income |
|
65,030 |
|
|
|
55,179 |
|
|
|
25,546 |
|
INTEREST EXPENSE |
|
|
|
|
|
Interest on deposits |
|
11,061 |
|
|
|
5,717 |
|
|
|
516 |
|
Interest on borrowed funds |
|
537 |
|
|
|
273 |
|
|
|
327 |
|
Total interest expense |
|
11,598 |
|
|
|
5,990 |
|
|
|
843 |
|
Net interest income |
|
53,432 |
|
|
|
49,189 |
|
|
|
24,703 |
|
PROVISION FOR LOAN LOSSES |
|
33,600 |
|
|
|
18,428 |
|
|
|
8,942 |
|
Net interest income after provision for loan losses |
|
19,832 |
|
|
|
30,761 |
|
|
|
15,761 |
|
NONINTEREST INCOME |
|
|
|
|
|
Deposit service charges and fees |
|
946 |
|
|
|
986 |
|
|
|
930 |
|
Gain on sales of loans, net |
|
— |
|
|
|
— |
|
|
|
29 |
|
Mortgage broker fees |
|
25 |
|
|
|
24 |
|
|
|
218 |
|
Unrealized (loss) gain on equity securities, net |
|
(18 |
) |
|
|
(133 |
) |
|
|
(3 |
) |
Other income |
|
273 |
|
|
|
236 |
|
|
|
397 |
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,226 |
|
|
|
1,113 |
|
|
|
1,571 |
|
Servicing and other BaaS fees |
|
1,001 |
|
|
|
1,079 |
|
|
|
1,421 |
|
Transaction fees |
|
964 |
|
|
|
940 |
|
|
|
280 |
|
Interchange fees |
|
785 |
|
|
|
738 |
|
|
|
368 |
|
Reimbursement of expenses |
|
857 |
|
|
|
885 |
|
|
|
295 |
|
BaaS program income |
|
3,607 |
|
|
|
3,642 |
|
|
|
2,364 |
|
BaaS credit enhancements |
|
31,164 |
|
|
|
17,928 |
|
|
|
9,076 |
|
BaaS fraud enhancements |
|
6,818 |
|
|
|
11,708 |
|
|
|
1,209 |
|
BaaS indemnification income |
|
37,982 |
|
|
|
29,636 |
|
|
|
10,285 |
|
Total noninterest income |
|
42,815 |
|
|
|
34,391 |
|
|
|
14,220 |
|
NONINTEREST EXPENSE |
|
|
|
|
|
Salaries and employee benefits |
|
14,399 |
|
|
|
14,506 |
|
|
|
10,541 |
|
Occupancy |
|
1,182 |
|
|
|
1,147 |
|
|
|
1,043 |
|
Data processing and software licenses |
|
1,768 |
|
|
|
1,670 |
|
|
|
1,494 |
|
Legal and professional fees |
|
2,799 |
|
|
|
2,251 |
|
|
|
951 |
|
Point of sale expense |
|
710 |
|
|
|
742 |
|
|
|
195 |
|
Excise taxes |
|
702 |
|
|
|
588 |
|
|
|
435 |
|
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
550 |
|
|
|
850 |
|
|
|
812 |
|
Director and staff expenses |
|
515 |
|
|
|
475 |
|
|
|
393 |
|
Marketing |
|
109 |
|
|
|
69 |
|
|
|
107 |
|
Other expense |
|
335 |
|
|
|
1,522 |
|
|
|
1,502 |
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
23,069 |
|
|
|
23,820 |
|
|
|
17,473 |
|
BaaS loan expense |
|
17,215 |
|
|
|
15,560 |
|
|
|
2,368 |
|
BaaS fraud expense |
|
6,819 |
|
|
|
11,707 |
|
|
|
1,209 |
|
BaaS loan and fraud expense |
|
24,034 |
|
|
|
27,267 |
|
|
|
3,577 |
|
Total noninterest expense |
|
47,103 |
|
|
|
51,087 |
|
|
|
21,050 |
|
Income before provision for income taxes |
|
15,544 |
|
|
|
14,065 |
|
|
|
8,931 |
|
PROVISION FOR INCOME
TAXES |
|
2,426 |
|
|
|
2,964 |
|
|
|
1,641 |
|
NET INCOME |
$ |
13,118 |
|
|
$ |
11,101 |
|
|
$ |
7,290 |
|
Basic earnings per common
share |
$ |
1.01 |
|
|
$ |
0.86 |
|
|
$ |
0.60 |
|
Diluted earnings per common
share |
$ |
0.96 |
|
|
$ |
0.82 |
|
|
$ |
0.57 |
|
Weighted average number of
common shares outstanding: |
|
|
|
|
|
Basic |
|
13,030,726 |
|
|
|
12,938,200 |
|
|
|
12,144,452 |
|
Diluted |
|
13,603,978 |
|
|
|
13,536,823 |
|
|
|
12,701,464 |
|
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
|
Twelve Months Ended |
|
December 31,
2022 |
|
December 31,
2021 |
INTEREST AND DIVIDEND
INCOME |
|
|
|
Interest and fees on loans |
$ |
183,352 |
|
|
$ |
82,112 |
Interest on interest earning deposits with other banks |
|
6,728 |
|
|
|
608 |
Interest on investment securities |
|
1,745 |
|
|
|
79 |
Dividends on other investments |
|
345 |
|
|
|
284 |
Total interest income |
|
192,170 |
|
|
|
83,083 |
INTEREST EXPENSE |
|
|
|
Interest on deposits |
|
19,004 |
|
|
|
2,327 |
Interest on borrowed funds |
|
1,391 |
|
|
|
1,319 |
Total interest expense |
|
20,395 |
|
|
|
3,646 |
Net interest income |
|
171,775 |
|
|
|
79,437 |
PROVISION FOR LOAN LOSSES |
|
79,064 |
|
|
|
9,915 |
Net interest income after provision for loan losses |
|
92,711 |
|
|
|
69,522 |
NONINTEREST INCOME |
|
|
|
Deposit service charges and fees |
|
3,804 |
|
|
|
3,698 |
Loan referral fees |
|
810 |
|
|
|
2,126 |
Gain on sales of loans, net |
|
— |
|
|
|
396 |
Mortgage broker fees |
|
257 |
|
|
|
920 |
Unrealized (loss) gain on equity securities, net |
|
(153 |
) |
|
|
1,469 |
Gain on sale of bank branch including deposits and loans, net |
|
— |
|
|
|
1,263 |
Other income |
|
1,087 |
|
|
|
939 |
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
5,805 |
|
|
|
10,811 |
Servicing and other BaaS fees |
|
4,408 |
|
|
|
4,467 |
Transaction fees |
|
3,211 |
|
|
|
544 |
Interchange fees |
|
2,583 |
|
|
|
701 |
Reimbursement of expenses |
|
2,732 |
|
|
|
1,004 |
BaaS program income |
|
12,934 |
|
|
|
6,716 |
BaaS credit enhancements |
|
76,374 |
|
|
|
9,086 |
BaaS fraud enhancements |
|
29,571 |
|
|
|
1,505 |
BaaS indemnification income |
|
105,945 |
|
|
|
10,591 |
Total noninterest income |
|
124,684 |
|
|
|
28,118 |
NONINTEREST EXPENSE |
|
|
|
Salaries and employee benefits |
|
52,228 |
|
|
|
37,101 |
Occupancy |
|
4,548 |
|
|
|
4,128 |
Data processing and software licenses |
|
6,487 |
|
|
|
4,951 |
Legal and professional fees |
|
6,760 |
|
|
|
3,133 |
Point of sale expense |
|
2,109 |
|
|
|
671 |
Excise taxes |
|
2,204 |
|
|
|
1,589 |
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
2,859 |
|
|
|
1,632 |
Director and staff expenses |
|
1,711 |
|
|
|
1,205 |
Marketing |
|
351 |
|
|
|
451 |
Other expense |
|
4,652 |
|
|
|
3,921 |
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
83,909 |
|
|
|
58,782 |
BaaS loan expense |
|
53,294 |
|
|
|
2,976 |
BaaS fraud expense |
|
29,571 |
|
|
|
1,505 |
BaaS loan and fraud expense |
|
82,865 |
|
|
|
4,481 |
Total noninterest expense |
|
166,774 |
|
|
|
63,263 |
Income before provision for income taxes |
|
50,621 |
|
|
|
34,377 |
PROVISION FOR INCOME
TAXES |
|
9,996 |
|
|
|
7,372 |
NET INCOME |
$ |
40,625 |
|
|
$ |
27,005 |
Basic earnings per common
share |
$ |
3.14 |
|
|
$ |
2.25 |
Diluted earnings per common
share |
$ |
3.01 |
|
|
$ |
2.16 |
Weighted average number of
common shares outstanding: |
|
|
|
Basic |
|
12,949,266 |
|
|
|
12,022,954 |
Diluted |
|
13,514,952 |
|
|
|
12,521,426 |
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
|
For the Three Months Ended |
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 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 |
$ |
329,354 |
|
|
$ |
3,097 |
|
3.73 |
% |
|
$ |
397,621 |
|
|
$ |
2,273 |
|
2.27 |
% |
|
$ |
751,805 |
|
|
$ |
294 |
|
|
0.16 |
% |
Investment securities, available for sale (2) |
|
100,269 |
|
|
|
550 |
|
2.18 |
|
|
|
102,438 |
|
|
|
545 |
|
2.11 |
|
|
|
35,517 |
|
|
|
5 |
|
|
0.06 |
|
Investment securities, held to maturity (2) |
|
1,235 |
|
|
|
7 |
|
2.25 |
|
|
|
1,257 |
|
|
|
9 |
|
2.84 |
|
|
|
1,507 |
|
|
|
(2 |
) |
|
(0.53 |
) |
Other investments |
|
10,592 |
|
|
|
150 |
|
5.62 |
|
|
|
10,520 |
|
|
|
24 |
|
0.91 |
|
|
|
8,411 |
|
|
|
115 |
|
|
5.42 |
|
Loans receivable (3) |
|
2,603,962 |
|
|
|
61,226 |
|
9.33 |
|
|
|
2,452,815 |
|
|
|
52,328 |
|
8.46 |
|
|
|
1,683,310 |
|
|
|
25,134 |
|
|
5.92 |
|
Total interest earning
assets |
|
3,045,412 |
|
|
|
65,030 |
|
8.47 |
|
|
|
2,964,651 |
|
|
|
55,179 |
|
7.38 |
|
|
|
2,480,550 |
|
|
|
25,546 |
|
|
4.09 |
|
Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
(58,440 |
) |
|
|
|
|
|
|
(51,259 |
) |
|
|
|
|
|
|
(20,242 |
) |
|
|
|
|
Other noninterest earning assets |
|
141,624 |
|
|
|
|
|
|
|
128,816 |
|
|
|
|
|
|
|
76,343 |
|
|
|
|
|
Total assets |
$ |
3,128,596 |
|
|
|
|
|
|
$ |
3,042,208 |
|
|
|
|
|
|
$ |
2,536,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
2,006,679 |
|
|
$ |
11,061 |
|
2.19 |
% |
|
$ |
1,953,170 |
|
|
$ |
5,717 |
|
1.16 |
% |
|
$ |
962,128 |
|
|
$ |
516 |
|
|
0.21 |
% |
FHLB advances and
borrowings |
|
5 |
|
|
|
— |
|
— |
|
|
|
— |
|
|
|
— |
|
— |
|
|
|
25,000 |
|
|
|
72 |
|
|
1.14 |
|
Subordinated debt |
|
37,455 |
|
|
|
484 |
|
5.13 |
|
|
|
24,331 |
|
|
|
234 |
|
3.82 |
|
|
|
24,276 |
|
|
|
234 |
|
|
3.82 |
|
Junior subordinated
debentures |
|
3,588 |
|
|
|
53 |
|
5.86 |
|
|
|
3,587 |
|
|
|
39 |
|
4.31 |
|
|
|
3,586 |
|
|
|
21 |
|
|
2.32 |
|
Total interest bearing
liabilities |
|
2,047,727 |
|
|
|
11,598 |
|
2.25 |
|
|
|
1,981,088 |
|
|
|
5,990 |
|
1.20 |
|
|
|
1,014,990 |
|
|
|
843 |
|
|
0.33 |
|
Noninterest bearing
deposits |
|
807,794 |
|
|
|
|
|
|
|
807,952 |
|
|
|
|
|
|
|
1,336,161 |
|
|
|
|
|
Other liabilities |
|
34,944 |
|
|
|
|
|
|
|
25,662 |
|
|
|
|
|
|
|
13,308 |
|
|
|
|
|
Total shareholders'
equity |
|
238,131 |
|
|
|
|
|
|
|
227,506 |
|
|
|
|
|
|
|
172,192 |
|
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
3,128,596 |
|
|
|
|
|
|
$ |
3,042,208 |
|
|
|
|
|
|
$ |
2,536,651 |
|
|
|
|
|
Net interest income |
|
|
$ |
53,432 |
|
|
|
|
|
$ |
49,189 |
|
|
|
|
|
$ |
24,703 |
|
|
|
Interest rate spread |
|
|
|
|
6.22 |
% |
|
|
|
|
|
6.18 |
% |
|
|
|
|
|
3.76 |
% |
Net interest margin
(4) |
|
|
|
|
6.96 |
% |
|
|
|
|
|
6.58 |
% |
|
|
|
|
|
3.95 |
% |
(1) |
Yields and costs are annualized. |
(2) |
For presentation in this table,
average balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts. |
(3) |
Includes loans held for sale and
nonaccrual loans. |
(4) |
Net interest margin represents
net interest income divided by the average total interest earning
assets. |
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT -
QUARTERLY
(Dollars in thousands; unaudited)
|
For the Three Months Ended |
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 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) |
$ |
1,609,882 |
|
$ |
23,140 |
|
5.70 |
% |
|
$ |
1,559,160 |
|
$ |
20,879 |
|
5.31 |
% |
|
$ |
1,439,272 |
|
$ |
21,363 |
|
5.89 |
% |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
864,001 |
|
|
1,502 |
|
0.69 |
|
|
|
901,339 |
|
|
642 |
|
0.28 |
|
|
|
920,125 |
|
|
482 |
|
0.21 |
|
Noninterest bearing deposits |
|
737,812 |
|
|
|
|
|
|
735,038 |
|
|
|
|
|
|
715,267 |
|
|
|
|
Total deposits |
|
1,601,813 |
|
|
1,502 |
|
0.37 |
|
|
|
1,636,377 |
|
|
642 |
|
0.16 |
|
|
|
1,635,392 |
|
|
482 |
|
0.12 |
|
Interest rate spread |
|
|
|
|
5.33 |
% |
|
|
|
|
|
5.16 |
% |
|
|
|
|
|
5.77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2)(3) |
$ |
994,080 |
|
$ |
38,086 |
|
15.20 |
% |
|
$ |
893,655 |
|
$ |
31,449 |
|
13.96 |
% |
|
$ |
244,038 |
|
$ |
3,771 |
|
6.13 |
% |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
1,142,678 |
|
|
9,559 |
|
3.32 |
|
|
|
1,051,831 |
|
|
5,075 |
|
1.91 |
|
|
|
42,003 |
|
|
34 |
|
0.32 |
|
Noninterest bearing deposits |
|
69,982 |
|
|
|
|
|
|
72,914 |
|
|
|
|
|
|
620,894 |
|
|
|
|
Total deposits |
|
1,212,660 |
|
|
9,559 |
|
3.13 |
|
|
|
1,124,745 |
|
|
5,075 |
|
1.79 |
|
|
|
662,897 |
|
|
34 |
|
0.02 |
|
Interest rate spread |
|
|
|
|
12.07 |
% |
|
|
|
|
|
12.17 |
% |
|
|
|
|
|
6.11 |
% |
Net Baas loan income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest rate spread
(4) |
|
|
|
|
5.20 |
% |
|
|
|
|
|
5.26 |
% |
|
|
|
|
|
2.26 |
% |
(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. |
(4) |
A reconciliation of non-GAAP
measures are set forth at the end of this earnings release. |
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE
(Dollars in thousands; unaudited)
|
For the Twelve Months Ended |
|
December 31, 2022 |
|
December 31, 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 |
$ |
515,967 |
|
|
$ |
6,728 |
|
1.30 |
% |
|
$ |
402,081 |
|
|
$ |
608 |
|
0.15 |
% |
Investment securities, available for sale (2) |
|
91,970 |
|
|
|
1,710 |
|
1.86 |
|
|
|
27,908 |
|
|
|
49 |
|
0.18 |
|
Investment securities, held to maturity (2) |
|
1,266 |
|
|
|
35 |
|
2.76 |
|
|
|
2,137 |
|
|
|
30 |
|
1.40 |
|
Other investments |
|
10,146 |
|
|
|
345 |
|
3.40 |
|
|
|
7,052 |
|
|
|
284 |
|
4.03 |
|
Loans receivable (3) |
|
2,257,787 |
|
|
|
183,352 |
|
8.12 |
|
|
|
1,688,925 |
|
|
|
82,112 |
|
4.86 |
|
Total interest earning
assets |
|
2,877,136 |
|
|
|
192,170 |
|
6.68 |
|
|
|
2,128,103 |
|
|
|
83,083 |
|
3.90 |
|
Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
(46,769 |
) |
|
|
|
|
|
|
(19,870 |
) |
|
|
|
|
Other noninterest earning assets |
|
119,817 |
|
|
|
|
|
|
|
74,088 |
|
|
|
|
|
Total assets |
$ |
2,950,184 |
|
|
|
|
|
|
$ |
2,182,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
1,724,020 |
|
|
$ |
19,004 |
|
1.10 |
% |
|
$ |
910,106 |
|
|
$ |
2,327 |
|
0.26 |
% |
PPPLF borrowings |
|
— |
|
|
|
— |
|
0.00 |
|
|
|
68,699 |
|
|
|
240 |
|
0.35 |
|
FHLB advances and
borrowings |
|
6,029 |
|
|
|
69 |
|
1.14 |
|
|
|
24,999 |
|
|
|
284 |
|
1.14 |
|
Subordinated debt |
|
27,626 |
|
|
|
1,179 |
|
4.27 |
|
|
|
15,379 |
|
|
|
711 |
|
4.62 |
|
Junior subordinated
debentures |
|
3,587 |
|
|
|
143 |
|
3.99 |
|
|
|
3,585 |
|
|
|
84 |
|
2.34 |
|
Total interest bearing
liabilities |
|
1,761,262 |
|
|
|
20,395 |
|
1.16 |
|
|
|
1,022,768 |
|
|
|
3,646 |
|
0.36 |
|
Noninterest bearing
deposits |
|
942,087 |
|
|
|
|
|
|
|
989,945 |
|
|
|
|
|
Other liabilities |
|
24,097 |
|
|
|
|
|
|
|
12,926 |
|
|
|
|
|
Total shareholders'
equity |
|
222,738 |
|
|
|
|
|
|
|
156,682 |
|
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
2,950,184 |
|
|
|
|
|
|
$ |
2,182,321 |
|
|
|
|
|
Net interest income |
|
|
$ |
171,775 |
|
|
|
|
|
$ |
79,437 |
|
|
Interest rate spread |
|
|
|
|
5.52 |
% |
|
|
|
|
|
3.54 |
% |
Net interest margin
(4) |
|
|
|
|
5.97 |
% |
|
|
|
|
|
3.73 |
% |
(1) |
Yields and costs are annualized. |
(2) |
For presentation in this table,
average balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts. |
(3) |
Includes loans held for sale and
nonaccrual loans. |
(4) |
Net interest margin represents
net interest income divided by the average total interest earning
assets. |
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT –
YEAR-TO-DATE
(Dollars in thousands; unaudited)
|
|
For the Twelve Months Ended |
|
|
December 31, 2022 |
|
December 31, 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) |
|
$ |
1,515,395 |
|
$ |
80,544 |
|
5.32 |
% |
|
$ |
1,542,621 |
|
$ |
75,580 |
|
4.90 |
% |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
905,447 |
|
|
2,896 |
|
0.32 |
|
|
|
877,389 |
|
|
2,228 |
|
0.25 |
|
Noninterest bearing deposits |
|
|
733,104 |
|
|
|
|
|
|
674,509 |
|
|
|
|
Total deposits |
|
$ |
1,638,551 |
|
$ |
2,896 |
|
0.18 |
|
|
$ |
1,551,898 |
|
$ |
2,228 |
|
0.14 |
|
Interest rate spread |
|
|
|
|
|
5.14 |
% |
|
|
|
|
|
4.76 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2)(3) |
|
$ |
742,392 |
|
$ |
102,808 |
|
13.85 |
% |
|
$ |
146,304 |
|
$ |
6,532 |
|
4.46 |
% |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
818,573 |
|
|
16,108 |
|
1.97 |
|
|
|
32,717 |
|
|
99 |
|
0.30 |
|
Noninterest bearing deposits |
|
|
208,983 |
|
|
|
|
|
|
315,436 |
|
|
|
|
Total deposits |
|
$ |
1,027,556 |
|
$ |
16,108 |
|
1.57 |
|
|
$ |
348,153 |
|
$ |
99 |
|
0.03 |
|
Interest rate spread |
|
|
|
|
|
12.28 |
% |
|
|
|
|
|
4.43 |
% |
Net BaaS loan income interest
rate spread (4) |
|
|
|
|
|
5.10 |
% |
|
|
|
|
|
2.40 |
% |
(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. |
(4) |
A reconciliation of non-GAAP
measures are set forth at the end of this earnings release. |
COASTAL FINANCIAL CORPORATION
QUARTERLY STATISTICS
(Dollars in thousands, except share and per share data;
unaudited)
|
Three Months Ended |
|
December 31,
2022 |
|
September 30,
2022 |
|
June 30,
2022 |
|
March 31,
2022 |
|
December 31,
2021 |
Income Statement
Data: |
|
|
|
|
|
|
|
|
|
Interest and dividend income |
$ |
65,030 |
|
|
$ |
55,179 |
|
|
$ |
41,819 |
|
|
$ |
30,142 |
|
|
$ |
25,546 |
|
Interest expense |
|
11,598 |
|
|
|
5,990 |
|
|
|
1,933 |
|
|
|
874 |
|
|
|
843 |
|
Net interest income |
|
53,432 |
|
|
|
49,189 |
|
|
|
39,886 |
|
|
|
29,268 |
|
|
|
24,703 |
|
Provision for loan losses |
|
33,600 |
|
|
|
18,428 |
|
|
|
14,094 |
|
|
|
12,942 |
|
|
|
8,942 |
|
Net interest income after
provision for loan losses |
|
19,832 |
|
|
|
30,761 |
|
|
|
25,792 |
|
|
|
16,326 |
|
|
|
15,761 |
|
Noninterest income |
|
42,815 |
|
|
|
34,391 |
|
|
|
25,492 |
|
|
|
21,986 |
|
|
|
14,220 |
|
Noninterest expense |
|
47,103 |
|
|
|
51,087 |
|
|
|
38,169 |
|
|
|
30,415 |
|
|
|
21,050 |
|
Provision for income tax |
|
2,426 |
|
|
|
2,964 |
|
|
|
2,939 |
|
|
|
1,667 |
|
|
|
1,641 |
|
Net income |
|
13,118 |
|
|
|
11,101 |
|
|
|
10,176 |
|
|
|
6,230 |
|
|
|
7,290 |
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Three Month Period |
|
December 31,
2022 |
|
September 30,
2022 |
|
June 30,
2022 |
|
March 31,
2022 |
|
December 31,
2021 |
Balance Sheet
Data: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
342,139 |
|
|
$ |
410,728 |
|
|
$ |
405,689 |
|
|
$ |
682,109 |
|
|
$ |
813,161 |
|
Investment securities |
|
98,353 |
|
|
|
98,871 |
|
|
|
109,821 |
|
|
|
136,177 |
|
|
|
36,623 |
|
Loans held for sale |
|
— |
|
|
|
43,314 |
|
|
|
60,000 |
|
|
|
— |
|
|
|
— |
|
Loans receivable |
|
2,627,256 |
|
|
|
2,507,889 |
|
|
|
2,334,354 |
|
|
|
1,964,209 |
|
|
|
1,742,735 |
|
Allowance for loan losses |
|
(74,029 |
) |
|
|
(59,282 |
) |
|
|
(49,358 |
) |
|
|
(38,770 |
) |
|
|
(28,632 |
) |
Total assets |
|
3,144,467 |
|
|
|
3,133,741 |
|
|
|
2,969,722 |
|
|
|
2,833,750 |
|
|
|
2,635,517 |
|
Interest bearing deposits |
|
2,042,509 |
|
|
|
2,023,849 |
|
|
|
1,879,253 |
|
|
|
1,738,426 |
|
|
|
1,007,879 |
|
Noninterest bearing
deposits |
|
775,012 |
|
|
|
813,217 |
|
|
|
818,052 |
|
|
|
838,044 |
|
|
|
1,355,908 |
|
Core deposits
(1) |
|
2,686,528 |
|
|
|
2,727,830 |
|
|
|
2,584,831 |
|
|
|
2,460,954 |
|
|
|
2,249,573 |
|
Total deposits |
|
2,817,521 |
|
|
|
2,837,066 |
|
|
|
2,697,305 |
|
|
|
2,576,470 |
|
|
|
2,363,787 |
|
Total borrowings |
|
47,587 |
|
|
|
27,931 |
|
|
|
27,911 |
|
|
|
27,893 |
|
|
|
52,873 |
|
Total shareholders’
equity |
|
243,494 |
|
|
|
228,733 |
|
|
|
217,661 |
|
|
|
207,920 |
|
|
|
201,222 |
|
|
|
|
|
|
|
|
|
|
|
Share and Per Share
Data
(2): |
|
|
|
|
|
|
|
|
|
Earnings per share –
basic |
$ |
1.01 |
|
|
$ |
0.86 |
|
|
$ |
0.79 |
|
|
$ |
0.48 |
|
|
$ |
0.60 |
|
Earnings per share –
diluted |
$ |
0.96 |
|
|
$ |
0.82 |
|
|
$ |
0.76 |
|
|
$ |
0.46 |
|
|
$ |
0.57 |
|
Dividends per share |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Book value per share
(3) |
$ |
18.50 |
|
|
$ |
17.66 |
|
|
$ |
16.81 |
|
|
$ |
16.08 |
|
|
$ |
15.63 |
|
Tangible book value per share
(4) |
$ |
18.50 |
|
|
$ |
17.66 |
|
|
$ |
16.81 |
|
|
$ |
16.08 |
|
|
$ |
15.63 |
|
Weighted avg outstanding
shares – basic |
|
13,030,726 |
|
|
|
12,938,200 |
|
|
|
12,928,061 |
|
|
|
12,898,746 |
|
|
|
12,144,452 |
|
Weighted avg outstanding
shares – diluted |
|
13,603,978 |
|
|
|
13,536,823 |
|
|
|
13,442,013 |
|
|
|
13,475,337 |
|
|
|
12,701,464 |
|
Shares outstanding at end of
period |
|
13,161,147 |
|
|
|
12,954,573 |
|
|
|
12,948,623 |
|
|
|
12,928,548 |
|
|
|
12,875,315 |
|
Stock options outstanding at
end of period |
|
438,103 |
|
|
|
644,334 |
|
|
|
655,844 |
|
|
|
666,774 |
|
|
|
694,519 |
|
See footnotes on following page
|
As of and for the Three Month Period |
|
December 31,
2022 |
|
September 30,
2022 |
|
June 30,
2022 |
|
March 31,
2022 |
|
December 31,
2021 |
Credit Quality
Data: |
|
|
|
|
|
|
|
|
|
Nonperforming assets (5) to total assets |
|
1.06 |
% |
|
|
0.73 |
% |
|
|
0.09 |
% |
|
|
0.08 |
% |
|
|
0.07 |
% |
Nonperforming assets
(5) to loans receivable and OREO |
|
1.26 |
% |
|
|
0.91 |
% |
|
|
0.11 |
% |
|
|
0.12 |
% |
|
|
0.10 |
% |
Nonperforming loans
(5) to total loans receivable |
|
1.26 |
% |
|
|
0.91 |
% |
|
|
0.11 |
% |
|
|
0.12 |
% |
|
|
0.10 |
% |
Allowance for loan losses to
nonperforming loans |
|
224.4 |
% |
|
|
259.1 |
% |
|
|
849.4 |
% |
|
|
1653.3 |
% |
|
|
1657.9 |
% |
Allowance for loan losses to
total loans receivable |
|
2.82 |
% |
|
|
2.36 |
% |
|
|
2.11 |
% |
|
|
1.97 |
% |
|
|
1.64 |
% |
Gross charge-offs |
$ |
18,886 |
|
|
$ |
8,513 |
|
|
$ |
3,542 |
|
|
$ |
2,808 |
|
|
$ |
579 |
|
Gross recoveries |
$ |
33 |
|
|
$ |
9 |
|
|
$ |
36 |
|
|
$ |
4 |
|
|
$ |
47 |
|
Net charge-offs to average
loans (6) |
|
2.87 |
% |
|
|
1.38 |
% |
|
|
0.64 |
% |
|
|
0.64 |
% |
|
|
0.13 |
% |
|
|
|
|
|
|
|
|
|
|
Capital
Ratios
(7): |
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital |
|
7.97 |
% |
|
|
7.70 |
% |
|
|
7.68 |
% |
|
|
7.75 |
% |
|
|
8.07 |
% |
Common equity Tier 1
risk-based capital |
|
8.95 |
% |
|
|
8.49 |
% |
|
|
8.51 |
% |
|
|
9.71 |
% |
|
|
11.06 |
% |
Tier 1 risk-based capital |
|
9.08 |
% |
|
|
8.62 |
% |
|
|
8.65 |
% |
|
|
9.88 |
% |
|
|
11.26 |
% |
Total risk-based capital |
|
11.99 |
% |
|
|
10.80 |
% |
|
|
10.88 |
% |
|
|
12.30 |
% |
|
|
13.89 |
% |
(1) |
Core deposits are defined as all deposits excluding brokered and
all time deposits. |
(2) |
Share and per share amounts are
based on total actual or average common shares outstanding, as
applicable. |
(3) |
We calculate book value per share
as total shareholders’ equity at the end of the relevant period
divided by the outstanding number of our common shares at the end
of each period. |
(4) |
Tangible book value per share is
a non-GAAP financial measure. We calculate tangible book value per
share as total shareholders’ equity at the end of the relevant
period, less goodwill and other intangible assets, divided by the
outstanding number of our common shares at the end of each period.
The most directly comparable GAAP financial measure is book value
per share. We had no goodwill or other intangible assets as of any
of the dates indicated. As a result, tangible book value per share
is the same as book value per share as of each of the dates
indicated. |
(5) |
Nonperforming assets and
nonperforming loans include loans 90+ days past due and accruing
interest. |
(6) |
Annualized calculations. |
(7) |
Capital ratios are for the
Company, Coastal Financial Corporation. |
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to provide
meaningful supplemental information regarding the Company’s
operational performance and to enhance investors’ overall
understanding of such financial performance.
However, these non-GAAP financial measures are supplemental and
are not a substitute for an analysis based on GAAP measures. As
other companies may use different calculations for these adjusted
measures, this presentation may not be comparable to other
similarly titled adjusted measures reported by other companies.
The following non-GAAP 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 Twelve Months Ended |
(dollars in thousands,
unaudited) |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
|
December 31,
2022 |
|
December 31,
2021 |
Revenue
excluding BaaS credit enhancements and BaaS fraud
enhancements: |
Total net interest income |
|
$ |
53,432 |
|
|
$ |
49,189 |
|
|
$ |
24,703 |
|
|
$ |
171,775 |
|
|
$ |
79,437 |
|
Total noninterest income |
|
|
42,815 |
|
|
|
34,391 |
|
|
|
14,220 |
|
|
|
124,684 |
|
|
|
28,118 |
|
Total Revenue |
|
$ |
96,247 |
|
|
$ |
83,580 |
|
|
$ |
38,923 |
|
|
$ |
296,459 |
|
|
$ |
107,555 |
|
Less: BaaS credit enhancements |
|
|
(31,164 |
) |
|
|
(17,928 |
) |
|
|
(9,076 |
) |
|
|
(76,374 |
) |
|
|
(9,086 |
) |
Less: BaaS fraud enhancements |
|
|
(6,818 |
) |
|
|
(11,708 |
) |
|
|
(1,209 |
) |
|
|
(29,571 |
) |
|
|
(1,505 |
) |
Total revenue excluding BaaS credit enhancements and BaaS fraud
enhancements |
|
$ |
58,265 |
|
|
$ |
53,944 |
|
|
$ |
28,638 |
|
|
$ |
190,514 |
|
|
$ |
96,964 |
|
The following non-GAAP measure is presented to illustrate the
impact of BaaS loan expense on net loan income, yield on CCBX loans
and interest rate spread.
Net BaaS loan income divided by average CCBX loans is a non-GAAP
measure that includes the impact BaaS loan expense on net BaaS loan
income and the yield on CCBX loans. The most directly comparable
GAAP measure is yield on CCBX loans.
Net BaaS loan interest income interest rate spread is a non-GAAP
measure that includes the impact of BaaS loan expense on interest
rate spread. The most directly comparable GAAP measure is interest
rate spread.
Reconciliations of the GAAP and non-GAAP measures are presented
below.
|
|
As of and for the Three Months Ended |
|
As of and for the Twelve Months Ended |
(dollars in thousands; unaudited) |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
|
December 31,
2022 |
|
December 31,
2021 |
Net BaaS
loan income divided by average CCBX loans: |
|
|
|
|
CCBX loan yield (GAAP) |
|
|
15.20 |
% |
|
|
13.96 |
% |
|
|
6.13 |
% |
|
|
13.85 |
% |
|
|
4.46 |
% |
Total average CCBX loans receivable |
|
$ |
994,080 |
|
|
$ |
893,655 |
|
|
$ |
244,038 |
|
|
$ |
742,392 |
|
|
$ |
146,304 |
|
Interest and earned fee income on CCBX loans (GAAP) |
|
|
38,086 |
|
|
|
31,449 |
|
|
|
3,771 |
|
|
|
102,808 |
|
|
|
6,532 |
|
Less: loan expense on CCBX loans |
|
|
(17,215 |
) |
|
|
(15,560 |
) |
|
|
(2,368 |
) |
|
|
(53,294 |
) |
|
|
(2,976 |
) |
Net BaaS loan income |
|
$ |
20,871 |
|
|
$ |
15,889 |
|
|
$ |
1,403 |
|
|
$ |
49,514 |
|
|
$ |
3,556 |
|
Net BaaS loan income divided by average CCBX loans |
|
|
8.33 |
% |
|
|
7.05 |
% |
|
|
2.28 |
% |
|
|
6.67 |
% |
|
|
2.43 |
% |
Net BaaS loan income
interest rate spread: |
|
|
|
|
|
|
|
|
|
|
CCBX interest rate spread (GAAP) |
|
|
12.07 |
% |
|
|
12.17 |
% |
|
|
6.11 |
% |
|
|
12.28 |
% |
|
|
4.43 |
% |
Net BaaS loan income divided by average CCBX loans |
|
|
8.33 |
% |
|
|
7.05 |
% |
|
|
2.28 |
% |
|
|
6.67 |
% |
|
|
2.43 |
% |
CCBX cost of funds |
|
|
3.13 |
% |
|
|
1.79 |
% |
|
|
0.02 |
% |
|
|
1.57 |
% |
|
|
0.03 |
% |
Net BaaS loan income interest rate spread |
|
|
5.20 |
% |
|
|
5.26 |
% |
|
|
2.26 |
% |
|
|
5.10 |
% |
|
|
2.40 |
% |
APPENDIX A -
As of December 31, 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 $2.63 billion in outstanding loan balances. When combined
with $2.29 billion in unused commitments the total of these
categories is $4.92 billion.
Commercial real estate loans
represent the largest segment of our loans, comprising 39.8% of our
total balance of outstanding loans as of December 31, 2022.
Unused commitments to extend credit represents an additional $35.8
million, and the combined total exposure in commercial real estate
loans represents $1.08 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
December 31, 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 |
|
$ |
215,371 |
|
$ |
5,912 |
|
$ |
221,283 |
|
4.5 |
% |
|
$ |
2,564 |
|
84 |
Hotel/Motel |
|
|
160,938 |
|
|
4,101 |
|
|
165,039 |
|
3.4 |
|
|
|
5,961 |
|
27 |
Office |
|
|
101,205 |
|
|
3,744 |
|
|
104,949 |
|
2.1 |
|
|
|
1,043 |
|
97 |
Retail |
|
|
82,257 |
|
|
4,116 |
|
|
86,373 |
|
1.8 |
|
|
|
904 |
|
91 |
Convenience Store |
|
|
91,075 |
|
|
4,336 |
|
|
95,411 |
|
1.9 |
|
|
|
1,786 |
|
51 |
Mixed use |
|
|
83,640 |
|
|
4,632 |
|
|
88,272 |
|
1.8 |
|
|
|
950 |
|
88 |
Warehouse |
|
|
77,716 |
|
|
1,862 |
|
|
79,578 |
|
1.6 |
|
|
|
1,439 |
|
54 |
Manufacturing |
|
|
38,694 |
|
|
1,780 |
|
|
40,474 |
|
0.8 |
|
|
|
1,138 |
|
34 |
Strip Mall |
|
|
45,873 |
|
|
— |
|
|
45,873 |
|
0.9 |
|
|
|
5,734 |
|
8 |
Mini Storage |
|
|
47,380 |
|
|
1,287 |
|
|
48,667 |
|
1.0 |
|
|
|
2,961 |
|
16 |
Groups < 0.70% of
total |
|
|
104,603 |
|
|
4,005 |
|
|
108,608 |
|
2.2 |
|
|
|
1,260 |
|
83 |
Total |
|
$ |
1,048,752 |
|
$ |
35,775 |
|
$ |
1,084,527 |
|
22.0 |
% |
|
$ |
1,657 |
|
633 |
Consumer loans comprise 23.2% of our total
balance of outstanding loans as of December 31, 2022. Unused
commitments to extend credit represents an additional $812.2
million, and the combined total exposure in consumer and other
loans represents $1.42 billion, or 28.9% 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 $1,400. 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 December 31, 2022:
(dollars in thousands; unaudited) |
|
Outstanding
Balance |
|
Available Loan
Commitments |
|
Total Exposure
(1) |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan
Balance |
|
Number of
Loans |
CCBX
consumer loans |
Installment loans |
|
$ |
320,017 |
|
$ |
— |
|
$ |
320,017 |
|
6.5 |
% |
|
$ |
1.5 |
|
211,547 |
Credit cards |
|
|
279,644 |
|
|
810,419 |
|
|
1,090,063 |
|
22.1 |
|
|
|
1.5 |
|
189,642 |
Lines of credit |
|
|
4,822 |
|
|
689 |
|
|
5,511 |
|
0.1 |
|
|
|
0.3 |
|
14,349 |
Other loans |
|
|
2,563 |
|
|
— |
|
|
2,563 |
|
0.1 |
|
|
|
0.1 |
|
17,987 |
Community
bank consumer loans |
Lines of credit |
|
|
162 |
|
|
1,116 |
|
|
1,278 |
|
0.0 |
|
|
|
3.4 |
|
47 |
Installment loans |
|
|
1,351 |
|
|
— |
|
|
1,351 |
|
0.1 |
|
|
|
42.2 |
|
32 |
Other loans |
|
|
212 |
|
|
— |
|
|
212 |
|
0.0 |
|
|
|
0.6 |
|
332 |
Total |
|
$ |
608,771 |
|
$ |
812,224 |
|
$ |
1,420,995 |
|
28.9 |
% |
|
$ |
1.4 |
|
433,936 |
(1) Total exposure on CCBX loans is subject to
portfolio maximum limits.
Residential real estate loans comprise 17.1% of
our total balance of outstanding loans as of December 31,
2022. Unused commitments to extend credit represents an additional
$442.2 million, and the combined total exposure in residential real
estate loans represents $891.4 million, or 18.1% 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
December 31, 2022:
(dollars in thousands; unaudited) |
|
Outstanding
Balance |
|
Available Loan
Commitments |
|
Total
Exposure(1) |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan
Balance |
|
Number of
Loans |
CCBX
residential real estate loans |
Home equity line of credit |
|
$ |
244,576 |
|
$ |
396,652 |
|
$ |
641,228 |
|
13.0 |
% |
|
$ |
28 |
|
8,607 |
Community
bank residential real estate loans |
Closed end, secured by first
liens |
|
|
178,901 |
|
|
4,625 |
|
|
183,526 |
|
3.7 |
|
|
|
604 |
|
296 |
Home equity line of
credit |
|
|
15,853 |
|
|
39,005 |
|
|
54,858 |
|
1.2 |
|
|
|
79 |
|
200 |
Closed end, second liens |
|
|
9,827 |
|
|
1,912 |
|
|
11,739 |
|
0.2 |
|
|
|
351 |
|
28 |
Total |
|
$ |
449,157 |
|
$ |
442,194 |
|
$ |
891,351 |
|
18.1 |
% |
|
$ |
49 |
|
9,131 |
(1) Total exposure on CCBX loans is subject to
portfolio maximum limits.
Commercial and industrial loans
comprise 11.8% of our total balance of outstanding loans as of
December 31, 2022. Unused commitments to extend credit
represents an additional $856.6 million, and the combined total
exposure in commercial and industrial loans represents $1.17
billion, or 23.8% of our total outstanding loans and loan
commitments. Included in commercial and industrial loans is $146.0
million in outstanding capital call lines, with an additional
$772.7 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
December 31, 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 (1) |
|
$ |
146,029 |
|
$ |
772,732 |
|
$ |
918,761 |
|
18.7 |
% |
|
$ |
859 |
|
170 |
Construction/Contractor
Services |
|
|
20,714 |
|
|
32,508 |
|
|
53,222 |
|
1.1 |
|
|
|
114 |
|
181 |
Financial Institutions |
|
|
45,149 |
|
|
— |
|
|
45,149 |
|
0.9 |
|
|
|
4,104 |
|
11 |
Manufacturing |
|
|
13,341 |
|
|
4,854 |
|
|
18,195 |
|
0.4 |
|
|
|
222 |
|
60 |
Medical / Dental / Other
Care |
|
|
21,790 |
|
|
2,464 |
|
|
24,254 |
|
0.5 |
|
|
|
726 |
|
30 |
Retail |
|
|
15,991 |
|
|
6,245 |
|
|
22,236 |
|
0.4 |
|
|
|
26 |
|
623 |
Groups < 0.30% of
total |
|
|
49,614 |
|
|
37,811 |
|
|
87,425 |
|
1.8 |
|
|
|
163 |
|
305 |
Total |
|
$ |
312,628 |
|
$ |
856,614 |
|
$ |
1,169,242 |
|
23.8 |
% |
|
$ |
227 |
|
1,380 |
(1) Total exposure on CCBX loans is subject to
portfolio maximum limits.
Construction, land and land development loans
comprise 8.1% of our total balance of outstanding loans as of
December 31, 2022. Unused commitments to extend credit
represents an additional $142.5 million, and the combined total
exposure in construction, land and land development loans
represents $356.6 million, or 7.2% of our total outstanding loans
and loan commitments.
The following table details our exposure for our
construction, land and land development portfolio as of
December 31, 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 |
|
$ |
100,714 |
|
$ |
100,647 |
|
$ |
201,361 |
|
4.1 |
% |
|
$ |
4,196 |
|
24 |
Residential construction |
|
|
32,879 |
|
|
26,708 |
|
|
59,587 |
|
1.2 |
|
|
|
865 |
|
38 |
Undeveloped land loans |
|
|
44,578 |
|
|
7,653 |
|
|
52,231 |
|
1.1 |
|
|
|
2,972 |
|
15 |
Developed land loans |
|
|
20,167 |
|
|
4,315 |
|
|
24,482 |
|
0.5 |
|
|
|
672 |
|
30 |
Land development |
|
|
15,717 |
|
|
3,219 |
|
|
18,936 |
|
0.3 |
|
|
|
827 |
|
19 |
Total |
|
$ |
214,055 |
|
$ |
142,542 |
|
$ |
356,597 |
|
7.2 |
% |
|
$ |
1,699 |
|
126 |
APPENDIX B -
As of December 31, 2022
CCBX – BaaS Reporting Information
During the quarter ended December 31, 2022, $31.2 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. Partner fraud includes noncredit
fraud losses on loans and deposits originated through partners.
Fraud losses are recorded when incurred as losses in noninterest
expense, and the enhancement received from the CCBX partner is
recorded in noninterest income, resulting in a net impact of zero
to the income statement. CCBX partners also pledge a cash reserve
account at the Bank which the Bank can collect from when losses
occur that is then replenished by the partner on a regular
interval. Although agreements with our CCBX partners provide for
credit enhancements that provide protection to the Bank from credit
and fraud losses by 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,
the Bank takes BaaS loan interest income and deducts BaaS loan
expense to arrive at Net BaaS loan
income(1) which can be compared to
interest income on the Company’s community bank loans.
The following table illustrates how CCBX partner loan income and
expenses are recorded in the financial statements:
Loan income and related loan expense |
|
Three Months Ended |
|
Twelve Months Ended |
(dollars in thousands; unaudited) |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
|
December 31,
2022 |
|
December 31,
2021 |
Yield on loans (2) |
|
|
15.20 |
% |
|
|
13.96 |
% |
|
|
6.13 |
% |
|
|
13.85 |
% |
|
|
4.46 |
% |
BaaS loan interest income |
|
$ |
38,086 |
|
|
$ |
31,449 |
|
|
$ |
3,771 |
|
|
$ |
102,808 |
|
|
$ |
6,532 |
|
Less: BaaS loan expense |
|
|
17,215 |
|
|
|
15,560 |
|
|
|
2,368 |
|
|
|
53,294 |
|
|
|
2,976 |
|
Net BaaS loan income (1) |
|
|
20,871 |
|
|
|
15,889 |
|
|
|
1,403 |
|
|
|
49,514 |
|
|
|
3,556 |
|
Net BaaS loan income divided
by average BaaS loans (1) |
|
|
8.33 |
% |
|
|
7.05 |
% |
|
|
2.28 |
% |
|
|
6.67 |
% |
|
|
2.43 |
% |
(1) A reconciliation of the non-GAAP measures are set forth in
the preceding section of this earnings release.
(2) Annualized calculation for quarterly periods shown.
The addition of new CCBX partners and increased activity has
resulted in increases in interest, direct fees and expenses for the
quarter ended December 31, 2022 compared to the quarters ended
September 30, 2022 and December 31, 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 |
|
Twelve Months Ended |
(dollars in thousands; unaudited) |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
|
December 31,
2022 |
|
December 31,
2021 |
Loan interest income |
|
$ |
38,086 |
|
$ |
31,449 |
|
$ |
3,771 |
|
$ |
102,808 |
|
$ |
6,532 |
Total BaaS interest income |
|
$ |
38,086 |
|
$ |
31,449 |
|
$ |
3,771 |
|
$ |
102,808 |
|
$ |
6,532 |
Interest expense |
|
Three Months Ended |
|
Twelve Months Ended |
(dollars in thousands; unaudited) |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
|
December 31,
2022 |
|
December 31,
2021 |
BaaS interest expense |
|
$ |
9,559 |
|
$ |
5,075 |
|
$ |
34 |
|
$ |
16,108 |
|
$ |
99 |
Total BaaS interest expense |
|
$ |
9,559 |
|
$ |
5,075 |
|
$ |
34 |
|
$ |
16,108 |
|
$ |
99 |
BaaS income |
|
Three Months Ended |
|
Twelve Months Ended |
(dollars in thousands; unaudited) |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
|
December 31,
2022 |
|
December 31,
2021 |
Program income: |
|
|
|
|
|
|
|
|
|
|
Servicing and other BaaS fees |
|
$ |
1,001 |
|
$ |
1,079 |
|
$ |
1,421 |
|
$ |
4,408 |
|
$ |
4,467 |
Transaction fees |
|
|
964 |
|
|
940 |
|
|
280 |
|
|
3,211 |
|
|
544 |
Interchange fees |
|
|
785 |
|
|
738 |
|
|
368 |
|
|
2,583 |
|
|
701 |
Reimbursement of expenses |
|
|
857 |
|
|
885 |
|
|
295 |
|
|
2,732 |
|
|
1,004 |
Program income |
|
|
3,607 |
|
|
3,642 |
|
|
2,364 |
|
|
12,934 |
|
|
6,716 |
Indemnification
income: |
|
|
|
|
|
|
|
|
|
|
Credit enhancements |
|
|
31,164 |
|
|
17,928 |
|
|
9,076 |
|
|
76,374 |
|
|
9,086 |
Fraud enhancements |
|
|
6,818 |
|
|
11,708 |
|
|
1,209 |
|
|
29,571 |
|
|
1,505 |
Indemnification income |
|
|
37,982 |
|
|
29,636 |
|
|
10,285 |
|
|
105,945 |
|
|
10,591 |
Total BaaS income |
|
$ |
41,589 |
|
$ |
33,278 |
|
$ |
12,649 |
|
$ |
118,879 |
|
$ |
17,307 |
BaaS loan and fraud expense |
|
Three Months Ended |
|
Twelve Months Ended |
(dollars in thousands; unaudited) |
|
December 31,
2022 |
|
September 30,
2022 |
|
December 31,
2021 |
|
December 31,
2022 |
|
December 31,
2021 |
BaaS loan expense |
|
$ |
17,215 |
|
$ |
15,560 |
|
$ |
2,368 |
|
$ |
53,294 |
|
$ |
2,976 |
BaaS fraud expense |
|
|
6,819 |
|
|
11,707 |
|
|
1,209 |
|
|
29,571 |
|
|
1,505 |
Total BaaS loan and fraud expense |
|
$ |
24,034 |
|
$ |
27,267 |
|
$ |
3,577 |
|
$ |
82,865 |
|
$ |
4,481 |
(1) A reconciliation of
the non-GAAP measures are set forth in the preceding section of
this earnings release.
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