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
March 31, 2023.
Quarterly net income for the first quarter of 2023
was $12.4 million, or $0.91 per diluted common share, compared with
net income of $13.1 million, or $0.96 per diluted common share, for
the fourth quarter of 2022, and $6.2 million, or $0.46 per diluted
common share, for the quarter ended March 31, 2022.
Total assets increased $306.6 million, or 9.7%, during the first
quarter of 2023 to $3.45 billion, from $3.14 billion at
December 31, 2022. Loan growth of $209.9 million, or 8.0%,
during the three months ended March 31, 2023 to $2.84 billion,
compared to $2.63 billion at December 31, 2022. Loan growth
included CCBX loan growth of $153.7 million, or 15.2%, and an
increase of $56.3 million, or 3.5% in community bank loans, which
is net of $908,000 in PPP loan forgiveness/repayments. Deposits
increased $277.7 million, or 9.9%, during the three months ended
March 31, 2023 and included CCBX deposit growth of $284.5
million, or 22.2%, and a decrease in community bank deposits of
$6.8 million, or 0.4%. The slight decrease in community bank
deposits was a result of pricing disciplines as some customers
sought higher rate products. Our cost of deposits for the community
bank was 0.66% for the three months ended March 31, 2023,
compared to 0.37% for the three months ended December 31,
2022.
“The disruption from the bank failures in the first quarter of
2023 was unsettling to the broader financial services industry, but
Coastal remains on solid footing with a diversified, stable deposit
base. Deposits increased $277.7 million, or 9.9%,
during the three months ended March 31, 2023. Fully insured
IntraFi network sweep deposits increased to $94.3 million as of
March 31, 2023, compared to $12.5 million as of
December 31, 2022. These fully
insured sweep deposits allow our larger deposit customers
to fully insure their deposits through a sweep to other banks. Our
liquidity position is supported by careful management of our liquid
assets and liabilities as well as access to alternative sources of
funds. As of March 31, 2023 we had $393.9 million in cash on
the balance sheet and the capacity to borrow up to $575.1 million
from Federal Home Loan Bank and the Federal Reserve Bank discount
window, which we did not draw down at any point in the first
quarter of 2023. Cash on the balance sheet and borrowing capacity
totaled $969.0 million, which represented 31.3% of total deposits
and exceeded our $768.3 million in uninsured deposits as of
March 31, 2023. Our AFS securities portfolio has a weighted
average remaining duration of just 11 months and U.S. Treasury
securities represent 99.7% of that portfolio. Unrealized losses on
the AFS securities portfolio were just $2.3 million, or 0.88%, of
shareholders’ equity as of March 31, 2023, which we expect to
accrete back into equity at approximately $500,000 a quarter for
the next three quarters.
As we move forward in the year, we are well equipped to handle
the challenges that may come from this uncertain economic
environment. In addition to our well-established community bank
base, which includes our 14 branch network and strong local
economy, we also have three rings of defense to mitigate credit and
counterparty risk with our CCBX partners: (1) well-funded partner
cash reserve accounts, (2) partners we believe have the underlying
financial strength to replenish and maintain cash reserve balances,
and (3) if cash reserves are not replenished then we receive full
economic benefit and retention of all interest and fee revenue from
the loans. As we continue to evolve and explore new opportunities
for growth, our commitment to the safety and soundness of the
Company and the Bank continues to be our top priority,” stated Eric
Sprink, the CEO of the Company and the Bank.
Highlights in Light of Recent Banking
Events:
- Deposits:
- Deposits increased
$277.7 million, or
9.9%, to $3.10
billion during the three months ended
March 31, 2023
- Includes $94.3 million
in fully insured IntraFi network negotiable orders of
withdrawal (“NOW”) and money market sweep deposits as of
March 31, 2023, compared to $12.5
million as of December 31,
2022.
- Deposits increased $258.0
million, or
9.09%, from March 10,
2023, the date Silicon Valley Bank was put into
receivership, to March 31,
2023.
- Reduction in Uninsured Deposits:
- Uninsured deposits of $768.3
million, or 24.8%
of total deposits as of March 31,
2023, compared to $835.8
million, or 29.7%
of total deposits as of December 31,
2022.
- Coastal has a lower percent
of uninsured deposits than every bank over $10.0 billion in
assets as of December 31,
20221.
- Liquidity/Borrowings:
- Cash and interest bearing deposits of
$393.9 million, of which
89.3% is held at the Federal Reserve Bank,
at March 31, 2023 compared
to $342.1 million as of
December 31, 2022.
- As of March 31, 2023
we had the capacity to borrow up to $575.1
million from Federal Home Loan Bank and the
Federal Reserve Bank discount window.
- We had no outstanding borrowings under these facilities
as of March 31,
2023.
- We had no outstanding borrowings under these facilities
during the quarter ended March 31,
2023.
- Net Interest Margin:
- Net interest margin of 7.15%
for the quarter ended March 31,
2023 compared to 6.91%
for the month ended
March 31, 2023.
- Cost of Deposits:
- Cost of deposits of 2.13%
for the quarter ended March 31,
2023,
- Cost of deposits of 2.36%
for the month ended
March 31, 2023.
- Investment Portfolio:
- Available for sale (“AFS”) investments of
$98.0 million, compared to
$97.3 million as of
December 31, 2022, of which
99.7% are U.S. Treasuries, with a weighted
average remaining duration of 11 months
as of March 31,
2023.
- Held to maturity (“HTM”) investments of
$3.7 million, of which
100% are U.S. Agency mortgage backed
securities held for CRA purposes, with a fair value of
$108,000 less than the carrying value as
of March 31,
2023.
1 Source: S&P Global Market Intelligence as of December 31,
2022
Results of Operations Overview
Beginning in 2023, the Company changed the structure for how it
reports segment activity. The Company has one main subsidiary, the
Bank which consists of three segments: CCBX, the community bank and
treasury & administration. The CCBX segment includes our BaaS
activities, the community bank segment includes all community
banking activities and treasury & administration includes
treasury management, overall administration and all other aspects
of the Company. Net interest income was $54.5 million for the
quarter ended March 31, 2023, an increase of $1.1 million, or
2.0%, from $53.4 million for the quarter ended December 31,
2022, and an increase of $25.2 million, or 86.2%, from $29.3
million for the quarter ended March 31, 2022. Yield on loans
receivable was 9.95% for the three months ended March 31,
2023, compared to 9.33% for the three months ended
December 31, 2022 and 6.80% for the three months ended
March 31, 2022. The increase in net interest income compared
to December 31, 2022 and March 31, 2022, 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
March 31, 2023 was $2.71 billion, compared to $2.60 billion
for the three months ended December 31, 2022, and $1.77
billion for the three months ended March 31, 2022.
Interest and fees on loans totaled $66.4 million for the three
months ended March 31, 2023 compared to $61.2 million and
$29.6 million for the three months ended December 31, 2022 and
March 31, 2022, respectively. Loan growth of $209.9 million,
or 8.0%, during the quarter ended March 31, 2023 included a
$153.7 million increase in CCBX loans of which capital call lines
form a part. Capital call lines decreased $27.2 million, or 18.6%,
during the quarter ended March 31, 2023, compared to the
quarter ended December 31, 2022 as a result of normal balance
fluctuations and business activities. 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
March 31, 2023, compared to December 31, 2022 and
March 31, 2022, 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 two
times during the quarter for a total increase of 0.50%, interest
rates on our existing variable rate loans were 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 0.25% on March 23, 2023.
Interest income from interest earning deposits with other banks
was $3.1 million at March 31, 2023 and December 31, 2022,
and an increase of $2.7 million compared to March 31, 2022 due
to an increase in interest rates. The average balance of interest
earning deposits with other banks for the three months ended
March 31, 2023 was $271.7 million, compared to $329.4 million
and $843.9 million for the three months ended December 31,
2022 and March 31, 2022, respectively. Interest earning
deposits with other banks decreased as a result of increased loan
demand compared to the three months ended December 31, 2022
and March 31, 2022. Additionally, the average yield on these
interest earning deposits with other banks increased to 4.62% for
the quarter ended March 31, 2023, compared to 3.73% and 0.19%
for the quarters ended December 31, 2022 and March 31,
2022, respectively.
Interest expense was $15.6 million for the quarter ended
March 31, 2023, a $3.9 million increase from the quarter ended
December 31, 2022 and a $14.7 million increase from the
quarter ended March 31, 2022. Interest expense on deposits was
$15.0 million for the quarter ended March 31, 2023, compared
to $553,000 for the quarter ended March 31, 2022. Interest
expense on borrowed funds was $662,000 for the quarter ended
March 31, 2023, compared to $537,000 and $321,000 for the
quarters ended December 31, 2022 and March 31, 2022,
respectively. Interest expense on borrowed funds increased $125,000
compared to the three months ended December 31, 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 $341,000 increase in interest expense on borrowed funds
from the quarter ended March 31, 2022 is the result of an
increase in subordinated debt and 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 $3.9
million for the quarter ended March 31, 2023, compared to the
quarter ended December 31, 2022, and $14.4 million compared to
the quarter ended March 31, 2022 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, in the first and second quarter of 2022 a
significant portion of CCBX deposits that were not earning interest
were reclassified to interest bearing deposits from noninterest
bearing deposits, which also contributed to the increase in
interest expense compared to March 31, 2022. 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 2.13% for the three months ended
March 31, 2023, compared to 1.56% for the three months ended
December 31, 2022, and 0.09%, for the three months ended
March 31, 2022. Community bank and CCBX cost of deposits were
0.66% and 3.89% respectively, for the three months ended
March 31, 2023, compared to 0.37% and 3.13%, for the three
months ended December 31, 2022, and 0.11% and 0.06% for the
three months ended March 31, 2022. The increase in cost of
deposits for the three months ended March 31, 2023 compared to
the prior periods for both segments is a result of increased
interest rates and increased CCBX deposits. 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 FOMC 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 7.15% for the three months ended
March 31, 2023, compared to 6.96% and 4.45% for the three
months ended December 31, 2022 and March 31, 2022,
respectively. The increase in net interest margin compared to the
three months ended December 31, 2022 and March 31, 2022,
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 $209.9 million and $873.0
million, compared to December 31, 2022 and March 31,
2022, 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
$5.2 million, or 8.5%, to $66.4 million for the three months ended
March 31, 2023, compared to $61.2 million for the three months
ended December 31, 2022, and $29.6 million for the three
months ended March 31, 2022. Also contributing to the increase
in net interest margin compared to the three months ended
March 31, 2022, was a $2.7 million increase in interest on
interest earning deposits. These interest earning deposits earned
an average rate of 4.62% for the quarter ended March 31, 2023,
compared to 3.73% and 0.19% for the quarters ended
December 31, 2022 and March 31, 2022, respectively.
Average investment securities increased $724,000 to $102.2 million
for the three months ended March 31, 2023 compared to the
three months ended December 31, 2022, and increased $56.5
million compared to the three months ended March 31, 2022.
Interest on investment securities decreased $4,000 for the three
months ended March 31, 2023 compared to the three months ended
December 31, 2022. Interest on investment securities increased
$482,000 compared to March 31, 2022, 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 2.19% for the quarter ended March 31,
2023, an increase of 58 basis points from the quarter ended
December 31, 2022 and an increase of 205 basis points from the
quarter ended March 31, 2022. Cost of deposits for the quarter
ended March 31, 2023 was 2.13%, compared to 1.56% for the
quarter ended December 31, 2022, and 0.09% for the quarter
ended March 31, 2022. The increased cost of funds and deposits
compared to December 31, 2022 and March 31, 2022 was
largely due to the increase in interest rates compared to the
previous periods and growth in higher cost CCBX deposits compared
to March 31, 2022.
During the quarter ended March 31, 2023, total loans
receivable increased by $209.9 million, or 8.0%, to $2.84 billion,
compared to $2.63 billion for the quarter ended December 31,
2022. The increase consists of $153.7 million in CCBX loan growth
and $56.3 million in community bank loan growth. Community bank
loan growth is net of $0.9 million in PPP loan
forgiveness/repayments. Total loans receivable grew $873.0 million
as of March 31, 2023, compared to the quarter ended
March 31, 2022. This increase includes CCBX loan growth of
$650.8 million and community bank loan growth of $222.2 million.
Community bank loan growth is net of $43.7 million in PPP loan
forgiveness/repayments as of March 31, 2023 compared to
March 31, 2022. During the quarter ended March 31, 2023,
$101.2 million in CCBX loans were transferred into loans held for
sale, with $73.9 million in loans sold during the quarter and $27.3
million remaining in loans held for sale as of March 31, 2023;
compared to zero held for sale as of December 31,
2022.
Total yield on loans receivable for the quarter ended
March 31, 2023 was 9.95%, compared to 9.33% for the quarter
ended December 31, 2022, and 6.80% for the quarter ended
March 31, 2022. 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
March 31, 2023, CCBX loans outstanding increased 15.2%, or
$153.7 million, compared to December 31, 2022, with an average
CCBX yield of 16.09% and community bank loans increased 3.5%, or
$56.3 million, December 31, 2022, with an average yield of
5.97%. 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.
The following table summarizes the average yield on loans
receivable and cost of deposits for our community bank and CCBX
segments for the periods indicated:
| |
For the Three Months Ended |
| |
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
|
Yield onLoans (2) |
|
Cost ofDeposits (2) |
|
Yield onLoans (2) |
|
Cost ofDeposits (2) |
|
Yield onLoans (2) |
|
Cost ofDeposits (2) |
| Community Bank |
5.97% |
|
0.66% |
|
5.70% |
|
0.37% |
|
5.16% |
|
0.11% |
| CCBX (1) |
16.09% |
|
3.89% |
|
15.20% |
|
3.13% |
|
12.73% |
|
0.06% |
| Consolidated |
9.95% |
|
2.13% |
|
9.33% |
|
1.56% |
|
6.80% |
|
0.09% |
| |
|
|
|
|
|
|
|
|
|
|
|
(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.(2) Annualized calculations for
periods shown.
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 |
| |
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
(dollars in thousands, unaudited) |
|
Income /Expense |
|
Income /expense dividedby averageCCBX loans
(2) |
|
Income /Expense |
|
Income /expense dividedby averageCCBX
loans(2) |
|
Income /Expense |
|
Income /expense dividedby averageCCBX loans
(2) |
|
BaaS loan interest income |
|
$ |
42,220 |
|
16.09 |
% |
|
$ |
38,086 |
|
15.20 |
% |
|
$ |
11,992 |
|
12.73 |
% |
| Less: BaaS loan expense |
|
|
17,554 |
|
6.69 |
% |
|
|
17,215 |
|
6.87 |
% |
|
|
8,290 |
|
8.80 |
% |
|
Net BaaS loan income (1) |
|
$ |
24,666 |
|
9.40 |
% |
|
$ |
20,871 |
|
8.33 |
% |
|
$ |
3,702 |
|
3.93 |
% |
| Average BaaS Loans |
|
$ |
1,064,192 |
|
|
|
$ |
994,080 |
|
|
|
$ |
382,153 |
|
|
(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 1.58% for the quarter ended
March 31, 2023 compared to 1.66% and 0.93% for the quarters
ended December 31, 2022 and March 31, 2022,
respectively. ROA for the quarter ended March 31,
2023, was impacted by an increase in deposits, loans and overall
higher interest rates on interest earning assets, compared to the
quarters ended December 31, 2022 and March 31, 2022.
The following table shows the Company’s key performance ratios
for the periods indicated.
| |
|
Three Months Ended |
|
(unaudited) |
|
March 31,2023 |
|
December 31,2022 |
|
September 30,2022 |
|
June 30,2022 |
|
March 31,2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (1) |
|
1.58 |
% |
|
1.66 |
% |
|
1.45 |
% |
|
1.41 |
% |
|
0.93 |
% |
| Return on average equity
(1) |
|
19.89 |
% |
|
21.86 |
% |
|
19.36 |
% |
|
18.86 |
% |
|
12.12 |
% |
| Yield on earnings assets
(1) |
|
9.19 |
% |
|
8.47 |
% |
|
7.38 |
% |
|
5.94 |
% |
|
4.58 |
% |
| Yield on loans receivable
(1) |
|
9.95 |
% |
|
9.33 |
% |
|
8.46 |
% |
|
7.34 |
% |
|
6.80 |
% |
| Cost of funds (1) |
|
2.19 |
% |
|
1.61 |
% |
|
0.85 |
% |
|
0.29 |
% |
|
0.14 |
% |
| Cost of deposits (1) |
|
2.13 |
% |
|
1.56 |
% |
|
0.82 |
% |
|
0.25 |
% |
|
0.09 |
% |
| Net interest margin (1) |
|
7.15 |
% |
|
6.96 |
% |
|
6.58 |
% |
|
5.66 |
% |
|
4.45 |
% |
| Noninterest expense to average
assets (1) |
|
5.69 |
% |
|
5.97 |
% |
|
6.66 |
% |
|
5.29 |
% |
|
4.52 |
% |
| Noninterest income to average
assets (1) |
|
6.28 |
% |
|
5.43 |
% |
|
4.48 |
% |
|
3.53 |
% |
|
3.27 |
% |
| Efficiency ratio |
|
43.03 |
% |
|
48.94 |
% |
|
61.12 |
% |
|
58.38 |
% |
|
59.34 |
% |
| Loans receivable to deposits
(2) |
|
92.55 |
% |
|
93.25 |
% |
|
89.92 |
% |
|
86.54 |
% |
|
76.24 |
% |
(1) Annualized calculations shown for quarterly
periods presented.(2) Includes loans held for sale.
Noninterest Income
The following table details noninterest income for the periods
indicated:
| |
Three Months Ended |
| |
March 31, |
|
December 31, |
|
March 31, |
|
(dollars in thousands; unaudited) |
2023 |
|
2022 |
|
2022 |
|
Deposit service charges and fees |
$ |
910 |
|
$ |
946 |
|
|
$ |
884 |
|
Gain on sales of loans, net |
|
123 |
|
|
— |
|
|
|
— |
|
Loan referral fees |
|
— |
|
|
— |
|
|
|
602 |
|
Unrealized gain on equity securities, net |
|
39 |
|
|
(18 |
) |
|
|
— |
|
Mortgage broker fees |
|
19 |
|
|
25 |
|
|
|
123 |
|
Other |
|
280 |
|
|
273 |
|
|
|
265 |
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,371 |
|
|
1,226 |
|
|
|
1,874 |
|
Servicing and other BaaS fees |
|
948 |
|
|
1,001 |
|
|
|
1,169 |
|
Transaction fees |
|
917 |
|
|
964 |
|
|
|
493 |
|
Interchange fees |
|
789 |
|
|
785 |
|
|
|
432 |
|
Reimbursement of expenses |
|
921 |
|
|
857 |
|
|
|
372 |
|
BaaS program income |
|
3,575 |
|
|
3,607 |
|
|
|
2,466 |
|
BaaS credit enhancements |
|
42,362 |
|
|
31,164 |
|
|
|
13,075 |
|
Baas fraud enhancements |
|
1,999 |
|
|
6,818 |
|
|
|
4,571 |
|
BaaS indemnification income |
|
44,361 |
|
|
37,982 |
|
|
|
17,646 |
|
Total BaaS income |
|
47,936 |
|
|
41,589 |
|
|
|
20,112 |
| Total noninterest income |
$ |
49,307 |
|
$ |
42,815 |
|
|
$ |
21,986 |
| |
|
|
|
|
|
|
|
|
|
Noninterest income was $49.3 million for the three months ended
March 31, 2023, an increase of $6.5 million from $42.8 million
for the three months ended December 31, 2022, and an increase
of $27.3 million from $22.0 million for the three months ended
March 31, 2022. The increase in noninterest income over the
quarter ended December 31, 2022 was primarily due to an
increase of $6.3 million in total BaaS income. The $6.3 million
increase in total BaaS income included a $11.2 million increase in
BaaS credit enhancements related to the allowance for credit losses
and reserve for unfunded commitments, a $4.8 million decrease in
BaaS fraud enhancements, and a decrease of $32,000 in BaaS program
income. The decrease in BaaS program income is a result of
seasonality and lower implementation fees (see “Appendix B” for
more information on the accounting for BaaS allowance for credit
losses, reserve for unfunded commitments and credit and fraud
enhancements). The $27.3 million increase in noninterest income
over the quarter ended March 31, 2022 was primarily due to a
$27.8 million increase in BaaS income. The $27.8 million increase
in BaaS income included a $29.3 million increase in BaaS credit
enhancements, a $2.6 million decrease in BaaS fraud enhancements
and a $1.1 million increase in BaaS program income.
Our CCBX segment continues to evolve, and we now have 25
relationships, at varying stages, as of March 31, 2023. 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 March 31, 2023, two partners wound down their CCBX
programs; these programs were not material in terms of income and
sources of funds or loans.
| |
As of |
|
(unaudited) |
March 31, 2023 |
December 31, 2022 |
March 31, 2022 |
|
Active |
18 |
19 |
20 |
| Friends and family /
testing |
1 |
1 |
1 |
| Implementation /
onboarding |
1 |
0 |
5 |
| Signed letters of intent |
4 |
5 |
2 |
| Wind down - preparing to exit
relationship |
1 |
2 |
0 |
|
Total CCBX relationships |
25 |
27 |
28 |
|
|
|
|
|
The following table details noninterest expense for the periods
indicated:
Noninterest Expense
| |
|
Three Months Ended |
| |
|
March 31, |
|
December 31, |
|
March 31, |
|
(dollars in thousands; unaudited) |
|
2023 |
|
2022 |
|
2022 |
|
Salaries and employee benefits |
|
$ |
15,575 |
|
$ |
14,399 |
|
$ |
11,085 |
|
Legal and professional expenses |
|
|
3,062 |
|
|
2,799 |
|
|
708 |
|
Data processing and software licenses |
|
|
1,840 |
|
|
1,768 |
|
|
1,861 |
|
Occupancy |
|
|
1,219 |
|
|
1,182 |
|
|
1,136 |
|
Point of sale expense |
|
|
753 |
|
|
710 |
|
|
248 |
|
Director and staff expenses |
|
|
626 |
|
|
515 |
|
|
344 |
|
FDIC assessments |
|
|
595 |
|
|
550 |
|
|
604 |
|
Excise taxes |
|
|
455 |
|
|
702 |
|
|
349 |
|
Marketing |
|
|
95 |
|
|
109 |
|
|
99 |
|
Other |
|
|
890 |
|
|
335 |
|
|
1,120 |
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
|
25,110 |
|
|
23,069 |
|
|
17,554 |
|
BaaS loan expense |
|
|
17,554 |
|
|
17,215 |
|
|
8,290 |
|
BaaS fraud expense |
|
|
1,999 |
|
|
6,819 |
|
|
4,571 |
|
BaaS loan and fraud expense |
|
|
19,553 |
|
|
24,034 |
|
|
12,861 |
| Total noninterest expense |
|
$ |
44,663 |
|
$ |
47,103 |
|
$ |
30,415 |
| |
|
|
|
|
|
|
|
|
|
Total noninterest expense decreased $2.4 million to $44.7
million for the three months ended March 31, 2023, compared to
$47.1 million for the three months ended December 31, 2022 and
increased $14.3 million from $30.4 million for the three months
ended March 31, 2022. The decrease in noninterest expense for
the quarter ended March 31, 2023, as compared to the quarter
ended December 31, 2022, was primarily due to a $4.5 million
decrease in BaaS expense (of which $4.8 million is related to a
decrease in partner fraud expense partially offset by an increase
of $339,000 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 during which the loss occurs, and a
portion is estimated based on historical or other information from
our partners.
The increase in noninterest expenses for the quarter ended
March 31, 2023 compared to the quarter ended March 31,
2022 were largely due to an increase of $6.7 million in BaaS
partner expense (increase of $9.3 million of which is related to
partner loan expense and a decrease of $2.6 million of which is
related to partner fraud expense), $4.5 million increase in salary
and employee benefits related to hiring staff for CCBX and
additional staff for our ongoing growth initiatives and $2.4
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 $505,000 increase in point of sale expenses which is
attributed to increased CCBX activity.
Provision for Income Taxes
The provision for income taxes was $3.0 million for the three
months ended March 31, 2023, $2.4 million for the three months
ended December 31, 2022 and $1.7 million for the first quarter
of 2023. The provision for income taxes was higher for the three
months ended March 31, 2023 due to fewer favorable tax
deductions related to the exercise of equity awards compared to
December 31, 2022. The Company is subject to various state
taxes that are assessed as CCBX activities and employees expand
into other states, which has increased the overall tax rate used in
calculating the provision for income taxes in the current and
future periods. The Company uses a federal statutory tax rate of
21.0% as a basis for calculating provision for federal income taxes
and 2.62% for calculating the provision for state taxes. The
effective tax rate was lower for the three months ended
March 31, 2023 due to tax benefits that resulted from the
exercise and deductibility of equity awards.
Financial Condition Overview
Total assets increased $306.6 million, or 9.7%, to $3.45 billion
at March 31, 2023 compared to $3.14 billion at
December 31, 2022. The increase is primarily due to loans
receivable increasing $209.9 million during the quarter ended
March 31, 2023 coupled with a $46.8 million increase in
interest earning deposits with other banks. Additionally, there
were $27.3 million in loans held for sale at March 31, 2023,
compared to zero at December 31, 2022.
Total assets increased $617.3 million, or 21.8%, at
March 31, 2023, compared to $2.83 billion at March 31,
2022. The increase is primarily due to loans receivable increasing
$873.0 million, and a decrease of $34.5 million in investment
securities and a $293.2 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 March 31, 2022.
Loans Receivable
Total loans receivable increased $209.9 million to $2.84 billion
at March 31, 2023, from $2.63 billion at December 31,
2022, and increased $873.0 million from $1.96 billion at
March 31, 2022. The increase in loans receivable
over the quarter ended December 31, 2022 was the result of
$153.7 million in CCBX loan growth and $56.3 million in community
bank loan growth. Community bank loan growth is net of $908,000 in
PPP loan forgiveness/repayments compared to the quarter ended
December 31, 2022. The change in loans receivable over the
quarter ended March 31, 2022 includes CCBX loan growth of
$650.8 million and $222.2 million in community bank loan growth as
of March 31, 2023. Community bank loan growth is
net of $43.7 million in PPP loan forgiveness and paydowns since
March 31, 2022.
The following table summarizes the loan portfolio at the period
indicated:
|
|
As of March 31, 2023 |
|
December 31, 2022 |
|
As of March 31, 2022 |
|
(dollars in thousands; unaudited) |
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
| Commercial and industrial
loans: |
|
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
$ |
3,791 |
|
|
0.1 |
% |
|
$ |
4,699 |
|
|
0.2 |
% |
|
$ |
47,467 |
|
|
2.4 |
% |
|
Capital call lines |
|
118,796 |
|
|
4.2 |
|
|
|
146,029 |
|
|
5.5 |
|
|
|
218,675 |
|
|
11.1 |
|
|
All other commercial & industrial loans |
|
203,751 |
|
|
7.2 |
|
|
|
161,900 |
|
|
6.1 |
|
|
|
128,181 |
|
|
6.5 |
|
|
Total commercial and industrial loans: |
|
326,338 |
|
|
11.5 |
|
|
|
312,628 |
|
|
11.8 |
|
|
|
394,323 |
|
|
20.0 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development |
|
206,635 |
|
|
7.3 |
|
|
|
214,055 |
|
|
8.1 |
|
|
|
208,108 |
|
|
10.6 |
|
|
Residential real estate |
|
455,507 |
|
|
16.0 |
|
|
|
449,157 |
|
|
17.1 |
|
|
|
268,716 |
|
|
13.6 |
|
|
Commercial real estate |
|
1,102,771 |
|
|
38.8 |
|
|
|
1,048,752 |
|
|
39.8 |
|
|
|
889,483 |
|
|
45.1 |
|
| Consumer and other loans |
|
752,528 |
|
|
26.4 |
|
|
|
608,771 |
|
|
23.2 |
|
|
|
210,343 |
|
|
10.7 |
|
|
Gross loans receivable |
|
2,843,779 |
|
|
100.0 |
% |
|
|
2,633,363 |
|
|
100.0 |
% |
|
|
1,970,973 |
|
|
100.0 |
% |
| Net deferred origination fees
- PPP loans |
|
(63 |
) |
|
|
|
|
(82 |
) |
|
|
|
|
(1,365 |
) |
|
|
| Net deferred origination fees
- all other loans |
|
(6,512 |
) |
|
|
|
|
(6,025 |
) |
|
|
|
|
(5,399 |
) |
|
|
|
Loans receivable |
$ |
2,837,204 |
|
|
|
|
$ |
2,627,256 |
|
|
|
|
$ |
1,964,209 |
|
|
|
| Loan Yield (1) |
|
9.95 |
% |
|
|
|
|
9.33 |
% |
|
|
|
|
6.80 |
% |
|
|
(1) Loan yield is annualized for the three months
ended for each period presented and includes loans held for sale
and nonaccrual loans.
Please see Appendix A for additional loan portfolio detail
regarding industry concentrations.
The following tables detail the community bank and CCBX loans
which are included in the total loan portfolio table above.
|
Community Bank |
|
As of |
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
|
$ |
3,791 |
|
|
0.2 |
% |
|
$ |
4,699 |
|
|
0.3 |
% |
|
$ |
47,467 |
|
|
3.3 |
% |
|
All other commercial & industrial loans |
|
|
155,082 |
|
|
9.3 |
|
|
|
146,982 |
|
|
9.1 |
|
|
|
124,160 |
|
|
8.5 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development loans |
|
|
206,635 |
|
|
12.3 |
|
|
|
214,055 |
|
|
13.2 |
|
|
|
208,108 |
|
|
14.3 |
|
|
Residential real estate loans |
|
|
206,140 |
|
|
12.3 |
|
|
|
204,581 |
|
|
12.6 |
|
|
|
184,485 |
|
|
12.7 |
|
|
Commercial real estate loans |
|
|
1,102,771 |
|
|
65.7 |
|
|
|
1,048,752 |
|
|
64.7 |
|
|
|
889,483 |
|
|
61.1 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer and other loans |
|
|
2,860 |
|
|
0.2 |
|
|
|
1,725 |
|
|
0.1 |
|
|
|
1,959 |
|
|
0.1 |
|
|
Gross Community Bank loans receivable |
|
|
1,677,279 |
|
|
100.0 |
% |
|
|
1,620,794 |
|
|
100.0 |
% |
|
|
1,455,662 |
|
|
100.0 |
% |
| Net deferred origination
fees |
|
|
(6,265 |
) |
|
|
|
|
(6,042 |
) |
|
|
|
|
(6,842 |
) |
|
|
|
Loans receivable |
|
$ |
1,671,014 |
|
|
|
|
$ |
1,614,752 |
|
|
|
|
$ |
1,448,820 |
|
|
|
| Loan Yield(1) |
|
|
5.97 |
% |
|
|
|
|
5.70 |
% |
|
|
|
|
5.16 |
% |
|
|
(1) Loan yield is annualized for the three months
ended for each period presented and includes loans held for sale
and nonaccrual loans.
|
CCBX |
|
As of |
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital call lines |
|
$ |
118,796 |
|
|
10.2 |
% |
|
$ |
146,029 |
|
|
14.4 |
% |
|
$ |
218,675 |
|
|
42.5 |
% |
|
All other commercial & industrial loans |
|
|
48,669 |
|
|
4.1 |
|
|
|
14,918 |
|
|
1.5 |
|
|
|
4,021 |
|
|
0.8 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
249,367 |
|
|
21.4 |
|
|
|
244,576 |
|
|
24.2 |
|
|
|
84,231 |
|
|
16.3 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
318,187 |
|
|
27.3 |
|
|
|
279,644 |
|
|
27.6 |
|
|
|
55,090 |
|
|
10.7 |
|
|
Other consumer and other loans |
|
|
431,481 |
|
|
37.0 |
|
|
|
327,402 |
|
|
32.3 |
|
|
|
153,294 |
|
|
29.7 |
|
|
Gross CCBX loans receivable |
|
|
1,166,500 |
|
|
100.0 |
% |
|
|
1,012,569 |
|
|
100.0 |
% |
|
|
515,311 |
|
|
100.0 |
% |
| Net deferred origination
fees |
|
|
(310 |
) |
|
|
|
|
(65 |
) |
|
|
|
|
78 |
|
|
|
|
Loans receivable |
|
$ |
1,166,190 |
|
|
|
|
$ |
1,012,504 |
|
|
|
|
$ |
515,389 |
|
|
|
| Loan Yield - CCBX (1)(2) |
|
|
16.09 |
% |
|
|
|
|
15.20 |
% |
|
|
|
|
12.73 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(1) CCBX yield does not include the impact of BaaS
loan expense. BaaS loan expense represents the amount
paid or payable to partners for credit enhancements and servicing
CCBX loans. See reconciliation of the non-GAAP measures at the end
of this earnings release for the impact of BaaS loan expense on
CCBX loan yield.(2) Loan yield is annualized for the
three months ended for each period presented and includes loans
held for sale and nonaccrual loans.
Deposits
Total deposits increased $277.7 million, or 9.9%, to $3.10
billion at March 31, 2023 from $2.82 billion at
December 31, 2022. The increase was due to a $381.6 million
increase in core deposits, combined with a $2.4 million decrease in
time deposits and includes BaaS-brokered deposits that are now
classified as NOW accounts due to a change in the relationship
agreement with one of our partners; these deposits increased to
$275.4 million as of March 31, 2023 compared to $101.5 million
as of December 31, 2022. Deposits in our CCBX segment
increased $284.5 million, from $1.28 billion at December 31,
2022, to $1.56 billion at March 31, 2023 and community bank
deposits decreased $6.8 million to $1.53 billion at March 31,
2023. The deposits from our CCBX segment are predominately
classified as interest bearing, or NOW and money market accounts.
During the quarter ended March 31, 2023, noninterest bearing
deposits decreased $13.2 million, or 1.7%, to $761.8 million from
$775.0 million at December 31, 2022. In the quarter ended
March 31, 2023 compared to the quarter ended December 31,
2022, NOW and money market accounts increased $402.7 million,
savings deposits decreased $7.9 million, and time deposits
decreased $2.4 million. Included in total deposits is $94.3 million
in IntraFi network NOW and money market sweep accounts as of
March 31, 2023, which provides our customers with fully
insured deposits through a sweep to other banks. Uninsured deposits
decreased to $768.3 million as of March 31, 2023, compared to
$835.8 million as of December 31, 2022.
Total deposits increased $518.8 million, or 20.1%, to $3.10
billion at March 31, 2023 compared to $2.58 billion at
March 31, 2022. The increase is largely the result of growth
in CCBX deposits. Noninterest bearing deposits decreased $76.2
million, or 9.1%, to $761.8 million at March 31, 2023 from
$838.0 million at March 31, 2022. NOW and money market
accounts increased $690.6 million, or 45.5%, to $2.21 billion at
March 31, 2023, and savings accounts decreased $7.1 million,
or 6.7%, and time deposits decreased $13.3 million, or 33.0%, in
the first quarter of 2023 compared to the first quarter of 2022 and
includes BaaS-brokered deposits that are now classified as NOW
accounts due to a change in the relationship agreement with one of
our partners; these deposits increased to $275.4 million as of
March 31, 2023, compared to $75.1 million as of March 31,
2022. These deposits increased as a result of sweeping them back on
the balance sheet. Additionally, as of March 31, 2023 we have
access to $36.9 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
NOW accounts. 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 March 31, 2023 |
|
As of December 31, 2022 |
|
As of March 31, 2022 |
|
(dollars in thousands; unaudited) |
Amount |
|
Percent of
TotalDeposits |
|
Balance |
|
Percent of
TotalDeposits |
|
Balance |
|
Percent of
TotalDeposits |
|
Demand, noninterest bearing |
$ |
761,800 |
|
|
24.6 |
% |
|
$ |
775,012 |
|
|
27.5 |
% |
|
$ |
838,044 |
|
|
32.5 |
% |
| NOW and money market |
|
2,207,121 |
|
|
71.3 |
|
|
|
1,804,399 |
|
|
64.0 |
|
|
|
1,516,546 |
|
|
58.9 |
|
| Savings |
|
99,241 |
|
|
3.2 |
|
|
|
107,117 |
|
|
3.8 |
|
|
|
106,364 |
|
|
4.1 |
|
|
Total core deposits |
|
3,068,162 |
|
|
99.1 |
|
|
|
2,686,528 |
|
|
95.3 |
|
|
|
2,460,954 |
|
|
95.5 |
|
| Brokered deposits |
|
1 |
|
|
— |
|
|
|
101,546 |
|
|
3.6 |
|
|
|
75,145 |
|
|
2.9 |
|
| Time deposits less than
$100,000 |
|
11,343 |
|
|
0.4 |
|
|
|
12,596 |
|
|
0.5 |
|
|
|
14,856 |
|
|
0.6 |
|
| Time deposits $100,000 and
over |
|
15,717 |
|
|
0.5 |
|
|
|
16,851 |
|
|
0.6 |
|
|
|
25,515 |
|
|
1.0 |
|
|
Total |
$ |
3,095,223 |
|
|
100.0 |
% |
|
$ |
2,817,521 |
|
|
100.0 |
% |
|
$ |
2,576,470 |
|
|
100.0 |
% |
| Cost of deposits (1) |
|
2.13 |
% |
|
|
|
|
1.56 |
% |
|
|
|
|
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 |
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
664,452 |
|
|
43.4 |
% |
|
$ |
694,179 |
|
|
45.2 |
% |
|
$ |
724,723 |
|
|
43.2 |
% |
| NOW and money market |
|
|
743,548 |
|
|
48.6 |
|
|
|
709,490 |
|
|
46.1 |
|
|
|
805,858 |
|
|
48.1 |
|
| Savings |
|
|
96,330 |
|
|
6.3 |
|
|
|
105,101 |
|
|
6.8 |
|
|
|
106,050 |
|
|
6.3 |
|
|
Total core deposits |
|
|
1,504,330 |
|
|
98.3 |
|
|
|
1,508,770 |
|
|
98.1 |
|
|
|
1,636,631 |
|
|
97.6 |
|
| Brokered deposits |
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
|
|
2 |
|
|
0.0 |
|
| Time deposits less than
$100,000 |
|
|
11,343 |
|
|
0.7 |
|
|
|
12,596 |
|
|
0.8 |
|
|
|
14,856 |
|
|
0.9 |
|
| Time deposits $100,000 and
over |
|
|
15,717 |
|
|
1.0 |
|
|
|
16,851 |
|
|
1.1 |
|
|
|
25,515 |
|
|
1.5 |
|
|
Total Community Bank deposits |
|
$ |
1,531,391 |
|
|
100.0 |
% |
|
$ |
1,538,218 |
|
|
100.0 |
% |
|
$ |
1,677,004 |
|
|
100.0 |
% |
| Cost of deposits(1) |
|
|
0.66 |
% |
|
|
|
|
0.37 |
% |
|
|
|
|
0.11 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
|
CCBX |
|
As of |
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
97,348 |
|
|
6.2 |
% |
|
$ |
80,833 |
|
|
6.3 |
% |
|
$ |
113,321 |
|
|
12.6 |
% |
| NOW and money market |
|
|
1,463,573 |
|
|
93.6 |
|
|
|
1,094,909 |
|
|
85.6 |
|
|
|
710,688 |
|
|
79.0 |
|
| Savings |
|
|
2,911 |
|
|
0.2 |
|
|
|
2,016 |
|
|
0.2 |
|
|
|
314 |
|
|
— |
|
|
Total core deposits |
|
|
1,563,832 |
|
|
100.0 |
|
|
|
1,177,758 |
|
|
92.1 |
|
|
|
824,323 |
|
|
91.6 |
|
| BaaS-brokered deposits |
|
|
— |
|
|
— |
|
|
|
101,545 |
|
|
7.9 |
|
|
|
75,143 |
|
|
8.4 |
|
|
Total CCBX deposits |
|
$ |
1,563,832 |
|
|
100.0 |
% |
|
$ |
1,279,303 |
|
|
100.0 |
% |
|
$ |
899,466 |
|
|
100.0 |
% |
| Cost of deposits (1) |
|
|
3.89 |
% |
|
|
|
|
3.13 |
% |
|
|
|
|
0.06 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
Borrowings
As of March 31, 2023 the Company has the capacity to borrow
up to a total of $575.1 million from the Federal Reserve Bank
discount window and Federal Home Loan Bank, with no borrowings
outstanding as of March 31, 2023.
Shareholders’ Equity
During the three months ended March 31, 2023, the Company
contributed $15.0 million in capital to the Bank. The
Company had a cash balance of $7.7 million as of March 31,
2023, which is retained for general operating purposes, including
debt repayment, and for funding $820,000 in commitments to bank
technology funds.
Total shareholders’ equity increased $15.3 million since
December 31, 2022. The increase in shareholders’
equity was primarily due to $12.4 million in net earnings, $954,000
net credit adjustment to retained earnings from implementing CECL
on January 1, 2023 and $567,000 increase from stock options being
exercised during the three months ended March 31, 2023.
Capital Ratios
The Company and the Bank remained well capitalized at
March 31, 2023, as summarized in the following table.
|
(unaudited) |
|
Coastal Community Bank |
|
Coastal Financial Corporation |
|
Minimum Well Capitalized Ratios under Prompt Corrective
Action (1) |
|
Tier 1 leverage capital |
|
9.35 |
% |
|
8.29 |
% |
|
5.00 |
% |
| Common Equity Tier 1
risk-based capital |
|
9.76 |
% |
|
8.61 |
% |
|
6.50 |
% |
| Tier 1 risk-based capital |
|
9.76 |
% |
|
8.73 |
% |
|
8.00 |
% |
| Total risk-based capital |
|
11.03 |
% |
|
11.49 |
% |
|
10.00 |
% |
(1) Presents the minimum capital ratios for an insured
depository institution, such as the Bank, to be considered well
capitalized under the Prompt Corrective Action framework. The
minimum requirements for the Company to be considered well
capitalized under Regulation Y include to maintain, on a
consolidated basis, a total risk-based capital ratio of 10.0
percent or greater and a tier 1 risk-based capital ratio of 6.0
percent or greater.
Asset Quality
Effective January 1, 2023 the Company implemented the CECL
allowance model which calculates reserves over the life of the loan
and is largely driven by portfolio characteristics, economic
outlook, and other key methodology assumptions versus the incurred
loss model, which is what we were previously using. As a result of
implementing CECL, there was a one-time adjustment to the 2023
opening allowance balance of $3.9 million. The day 1 CECL
adjustment for community bank loans included a reduction of
$310,000 to the community bank allowance driven by the reversal of
the unallocated balance and a reduction of $340,000 related to the
community bank unfunded commitment reserve also driven by the
reversal of the unallocated balance. This was offset by an increase
to the CCBX allowance for $4.2 million. With the mirror image
approach accounting related to the contingent receivable for CCBX
partner loans, there was a CECL day 1 increase to the
indemnification asset in the amount of $4.5 million. Net, the day 1
impact to retained earnings for the Bank’s transition to CECL was
an increase of $954,000, excluding the impact of income taxes.
The total allowance for credit losses was $89.1 million and
3.14% of loans receivable at March 31, 2023 compared to $74.0
million and 2.82% at December 31, 2022 and $38.8 million and
1.97% at March 31, 2022. The allowance for credit loss
allocated to the CCBX portfolio was $68.4 million and 5.87% of CCBX
loans receivable at March 31, 2023, with $20.7 million of
allowance for credit loss allocated to the community bank or 1.24%
of total community bank loans receivable.
The following table details the allocation of the allowance for
credit loss as of the period indicated:
| |
|
As of March 31, 2023 |
|
As of December 31, 2022 |
|
As of March 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Loans receivable |
|
$ |
1,671,014 |
|
|
$ |
1,166,190 |
|
|
$ |
2,837,204 |
|
|
$ |
1,614,751 |
|
|
$ |
1,012,505 |
|
|
$ |
2,627,256 |
|
|
$ |
1,448,820 |
|
|
$ |
515,389 |
|
|
$ |
1,964,209 |
|
| Allowance for credit
losses |
|
|
(20,708 |
) |
|
|
(68,415 |
) |
|
|
(89,123 |
) |
|
|
(20,636 |
) |
|
|
(53,393 |
) |
|
|
(74,029 |
) |
|
|
(20,643 |
) |
|
|
(18,127 |
) |
|
|
(38,770 |
) |
| Allowance for credit losses
tototal loan receivable |
|
|
1.24 |
% |
|
|
5.87 |
% |
|
|
3.14 |
% |
|
|
1.28 |
% |
|
|
5.27 |
% |
|
|
2.82 |
% |
|
|
1.42 |
% |
|
|
3.52 |
% |
|
|
1.97 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses - loans totaled $43.5 million for
the three months ended March 31, 2023, $33.6 million for the
three months ended December 31, 2022, and $12.9 million for
the three months ended March 31, 2022. Net charge-offs totaled
$32.3 million for the quarter ended March 31, 2023, compared
to $18.9 million for the quarter ended December 31, 2022 and
$2.8 million for the quarter ended March 31, 2022. 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
$137.4 million loan portfolio. At March 31, 2023, our 10% of
this portfolio represented $13.9 million in loans.
The following table details net charge-offs for the core bank
and CCBX for the period indicated:
| |
|
Three Months Ended |
| |
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Gross charge-offs |
|
$ |
50 |
|
|
$ |
34,117 |
|
|
$ |
34,167 |
|
|
$ |
10 |
|
|
$ |
18,876 |
|
|
$ |
18,886 |
|
|
$ |
4 |
|
|
$ |
2,804 |
|
|
$ |
2,808 |
|
| Gross recoveries |
|
|
(5 |
) |
|
|
(1,860 |
) |
|
|
(1,865 |
) |
|
|
(3 |
) |
|
|
(30 |
) |
|
|
(33 |
) |
|
|
(4 |
) |
|
|
— |
|
|
|
(4 |
) |
|
Net charge-offs |
|
$ |
45 |
|
|
$ |
32,257 |
|
|
$ |
32,302 |
|
|
$ |
7 |
|
|
$ |
18,846 |
|
|
$ |
18,853 |
|
|
$ |
— |
|
|
$ |
2,804 |
|
|
$ |
2,804 |
|
| Net charge-offs to average
loans (1) |
|
|
0.01 |
% |
|
|
12.29 |
% |
|
|
4.84 |
% |
|
|
0.00 |
% |
|
|
7.52 |
% |
|
|
2.87 |
% |
|
|
0.00 |
% |
|
|
2.98 |
% |
|
|
0.64 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in the Company’s provision for credit losses -
loans during the quarter ended March 31, 2023, is largely
related to the provision for loan growth in CCBX partner loans.
During the quarter ended March 31, 2023, a $43.1 million
provision for credit losses - loans was recorded for CCBX partner
loans based on management’s analysis, compared to the $33.1 million
provision for credit losses - loans that was recorded for CCBX for
the quarter ended December 31, 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 credit 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
expected losses for these CCBX loans and reclassified negative
deposit accounts. When the provision for CCBX credit losses and
provision for unfunded commitments is recorded, a credit
enhancement asset is also recorded on the balance sheet through
noninterest income (BaaS credit enhancements). Expected losses are
recorded in the allowance for credit losses. The credit enhancement
asset is relieved when credit enhancement recoveries are received
from the CCBX partner. CCBX partners provide for credit
enhancements that provide protection to the Bank from credit and
fraud losses by absorbing incurred credit and fraud losses. If our
partner is unable to fulfill their contracted obligations then the
bank could be exposed to additional credit losses. Management
regularly evaluates and manages this counterparty risk. The Company
is responsible for credit losses on approximately 10% of a $137.4
million CCBX loan portfolio. At March 31, 2023, 10% of this
portfolio represented $13.9 million in loans. The factors used in
management’s analysis for community bank credit losses indicated
that a provision of $428,000 and $504,000 was needed for the
quarters ended March 31, 2023 and December 31, 2022,
respectively.
The following table details the provision expense for the
community bank and CCBX for the period indicated:
| |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
Community bank |
|
$ |
428 |
|
$ |
504 |
|
$ |
344 |
| CCBX |
|
|
43,116 |
|
|
33,096 |
|
|
12,598 |
|
Total provision expense |
|
$ |
43,544 |
|
$ |
33,600 |
|
$ |
12,942 |
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2023, our nonperforming assets were $31.5
million, or 0.91% of total assets, compared to $33.2 million, or
1.06%, of total assets, at December 31, 2022, and $2.3
million, or 0.08% of total assets, at March 31, 2022. These
ratios are impacted by 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 decreased $1.6 million during the
quarter ended March 31, 2023, compared to the quarter ended
December 31, 2022, due to $1.5 million less in CCBX loans that
are past due 90 days or more and still accruing combined with
$98,000 less 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 decreased as a result of
nonaccrual principal reductions/charge-offs. There were no
repossessed assets or other real estate owned at March 31,
2023. Our nonperforming loans to loans receivable ratio was 1.11%
at March 31, 2023, compared to 1.26% at December 31,
2022, and 0.12% at March 31, 2022.
For the quarter ended March 31, 2023, there were $45,000 of
community bank net charge-offs and $7.0 million of nonperforming
community bank loans. The $6.9 million nonaccrual balance in
commercial real estate loans shown below consists of one loan that
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 March 31, 2023, $32.3 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 credit losses. The
Company is responsible for credit losses on approximately 10% of a
$137.4 million loan portfolio. At March 31, 2023, 10% of this
portfolio represented $13.9 million in loans.
The following table details the Company’s nonperforming assets
for the periods indicated.
|
(dollars in thousands; unaudited) |
As of March 31, 2023 |
|
As of December 31, 2022 |
|
As of March 31, 2022 |
|
Nonaccrual loans: |
|
|
|
|
|
|
Commercial and industrial loans |
$ |
15 |
|
|
$ |
113 |
|
|
$ |
130 |
|
| Real estate loans: |
|
|
|
|
|
|
Construction, land and land development |
|
66 |
|
|
|
66 |
|
|
|
— |
|
|
Residential real estate |
|
— |
|
|
|
— |
|
|
|
54 |
|
|
Commercial real estate |
|
6,901 |
|
|
|
6,901 |
|
|
|
— |
|
|
Total nonaccrual loans |
|
6,982 |
|
|
|
7,080 |
|
|
|
184 |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
| Commercial & industrial
loans |
|
187 |
|
|
|
404 |
|
|
|
22 |
|
| Real estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
946 |
|
|
|
876 |
|
|
|
40 |
|
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
17,772 |
|
|
|
10,570 |
|
|
|
708 |
|
|
Other consumer and other loans |
|
5,657 |
|
|
|
14,245 |
|
|
|
1,391 |
|
|
Total accruing loans past due 90 days or more |
|
24,562 |
|
|
|
26,095 |
|
|
|
2,161 |
|
|
Total nonperforming loans |
|
31,544 |
|
|
|
33,175 |
|
|
|
2,345 |
|
|
Real estate owned |
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
| Modified loans for
borrowers experiencing financial difficulty, accruing |
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
$ |
31,544 |
|
|
$ |
33,175 |
|
|
$ |
2,345 |
|
| Total nonaccrual loans to
loans receivable |
|
0.25 |
% |
|
|
0.27 |
% |
|
|
0.01 |
% |
| Total nonperforming loans to
loans receivable |
|
1.11 |
% |
|
|
1.26 |
% |
|
|
0.12 |
% |
| Total nonperforming assets to
total assets |
|
0.91 |
% |
|
|
1.06 |
% |
|
|
0.08 |
% |
The following tables detail the community bank and CCBX
nonperforming assets which are included in the total nonperforming
assets table above.
|
Community Bank |
As of |
|
(dollars in thousands; unaudited) |
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
|
Nonaccrual loans: |
|
|
|
|
|
|
Commercial and industrial loans |
$ |
15 |
|
$ |
113 |
|
$ |
130 |
| Real estate: |
|
|
|
|
|
|
Construction, land and land development |
|
66 |
|
|
66 |
|
|
— |
|
Residential real estate |
|
— |
|
|
— |
|
|
54 |
|
Commercial real estate |
|
6,901 |
|
|
6,901 |
|
|
— |
|
Total nonaccrual loans |
|
6,982 |
|
|
7,080 |
|
|
184 |
| |
|
|
|
|
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
Total accruing loans past due 90 days or more |
|
— |
|
|
— |
|
|
— |
|
Total nonperforming loans |
|
6,982 |
|
|
7,080 |
|
|
184 |
| Other real estate
owned |
|
— |
|
|
— |
|
|
— |
| Repossessed
assets |
|
— |
|
|
— |
|
|
— |
| Total nonperforming
assets |
$ |
6,982 |
|
$ |
7,080 |
|
$ |
184 |
|
CCBX |
As of |
|
(dollars in thousands; unaudited) |
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
|
Nonaccrual loans |
$ |
— |
|
$ |
— |
|
$ |
— |
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
| Commercial & industrial
loans |
|
187 |
|
|
404 |
|
|
22 |
| Real estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
946 |
|
|
876 |
|
|
40 |
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
17,772 |
|
|
10,570 |
|
|
708 |
|
Other consumer and other loans |
|
5,657 |
|
|
14,245 |
|
|
1,391 |
|
Total accruing loans past due 90 days or more |
|
24,562 |
|
|
26,095 |
|
|
2,161 |
|
Total nonperforming loans |
|
24,562 |
|
|
26,095 |
|
|
2,161 |
| Other real estate
owned |
|
— |
|
|
— |
|
|
— |
| Repossessed
assets |
|
— |
|
|
— |
|
|
— |
| Total nonperforming
assets |
$ |
24,562 |
|
$ |
26,095 |
|
$ |
2,161 |
| |
|
|
|
|
|
|
|
|
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 $3.45 billion Bank provides service
through 14 branches in Snohomish, Island, and King Counties, the
Internet and its mobile banking application. The Bank provides
banking as a service to broker-dealers, digital financial service
providers, companies and brands that want to provide financial
services to their customers through the Bank’s CCBX
segment. To learn more about the Company visit
www.coastalbank.com.
CCB-ER
Contact
Eric Sprink, Chief Executive Officer, (425) 357-3659Joel
Edwards, Executive Vice President & Chief Financial Officer,
(425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect our current views
with respect to, among other things, future events and our
financial performance. Any statements about our management’s
expectations, beliefs, plans, predictions, forecasts, objectives,
assumptions or future events or performance are not historical
facts and may be forward-looking. These statements are often, but
not always, made through the use of words or phrases such as
“anticipate,” “believes,” “can,” “could,” “may,” “predicts,”
“potential,” “should,” “will,” “estimate,” “plans,” “projects,”
“continuing,” “ongoing,” “expects,” “intends” and similar words or
phrases. Any or all of the forward-looking statements in this
earnings release may turn out to be inaccurate. The inclusion of or
reference to forward-looking information in this earnings release
should not be regarded as a representation by us or any other
person that the future plans, estimates or expectations
contemplated by us will be achieved. We have based these
forward-looking statements largely on our current expectations and
projections about future events and financial trends that we
believe may affect our financial condition, results of operations,
business strategy and financial needs. Our actual results could
differ materially from those anticipated in such forward-looking
statements as a result of risks, uncertainties and assumptions that
are difficult to predict. Factors that could cause actual results
to differ materially from those in the forward-looking statements
include, without limitation, the risks and uncertainties discussed
under “Risk Factors” in our Annual Report on Form 10-K for the most
recent period filed, 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 CORPORATIONCONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION(Dollars in thousands;
unaudited) |
|
ASSETS |
| |
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
|
Cash and due from banks |
$ |
37,676 |
|
|
$ |
32,722 |
|
|
$ |
32,705 |
|
| Interest earning deposits with
other banks |
|
356,240 |
|
|
|
309,417 |
|
|
|
649,404 |
|
| Investment securities,
available for sale, at fair value |
|
97,999 |
|
|
|
97,317 |
|
|
|
134,891 |
|
| Investment securities, held to
maturity, at amortized cost |
|
3,705 |
|
|
|
1,036 |
|
|
|
1,286 |
|
| Other investments |
|
11,346 |
|
|
|
10,555 |
|
|
|
9,931 |
|
| Loans held for sale |
|
27,292 |
|
|
|
— |
|
|
|
— |
|
| Loans receivable |
|
2,837,204 |
|
|
|
2,627,256 |
|
|
|
1,964,209 |
|
| Allowance for credit
losses |
|
(89,123 |
) |
|
|
(74,029 |
) |
|
|
(38,770 |
) |
|
Total loans receivable, net |
|
2,748,081 |
|
|
|
2,553,227 |
|
|
|
1,925,439 |
|
| CCBX credit enhancement
asset |
|
76,395 |
|
|
|
53,377 |
|
|
|
20,283 |
|
| CCBX receivable |
|
13,681 |
|
|
|
10,416 |
|
|
|
4,875 |
|
| Premises and equipment,
net |
|
18,030 |
|
|
|
18,213 |
|
|
|
18,135 |
|
| Operating lease right-of-use
assets |
|
4,812 |
|
|
|
5,018 |
|
|
|
5,836 |
|
| Accrued interest
receivable |
|
19,321 |
|
|
|
17,815 |
|
|
|
8,824 |
|
| Bank-owned life insurance,
net |
|
12,761 |
|
|
|
12,667 |
|
|
|
12,342 |
|
| Deferred tax asset, net |
|
20,527 |
|
|
|
18,458 |
|
|
|
6,892 |
|
| Other assets |
|
3,167 |
|
|
|
4,229 |
|
|
|
2,907 |
|
|
Total assets |
$ |
3,451,033 |
|
|
$ |
3,144,467 |
|
|
$ |
2,833,750 |
|
| |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| LIABILITIES |
|
|
|
|
|
|
Deposits |
$ |
3,095,223 |
|
|
$ |
2,817,521 |
|
|
$ |
2,576,470 |
|
|
Subordinated debt, net |
|
44,031 |
|
|
|
43,999 |
|
|
|
24,306 |
|
|
Junior subordinated debentures, net |
|
3,588 |
|
|
|
3,588 |
|
|
|
3,587 |
|
|
Deferred compensation |
|
582 |
|
|
|
616 |
|
|
|
712 |
|
|
Accrued interest payable |
|
874 |
|
|
|
684 |
|
|
|
149 |
|
|
Operating lease liabilities |
|
5,022 |
|
|
|
5,234 |
|
|
|
6,054 |
|
|
CCBX payable |
|
30,794 |
|
|
|
20,419 |
|
|
|
5,284 |
|
|
Other liabilities |
|
12,156 |
|
|
|
8,912 |
|
|
|
9,268 |
|
|
Total liabilities |
|
3,192,270 |
|
|
|
2,900,973 |
|
|
|
2,625,830 |
|
| |
|
|
|
|
|
| SHAREHOLDERS’ EQUITY |
|
|
|
|
|
| Common stock |
|
127,447 |
|
|
|
125,830 |
|
|
|
122,592 |
|
|
Retained earnings |
|
133,123 |
|
|
|
119,998 |
|
|
|
85,603 |
|
|
Accumulated other comprehensive (loss) income, net of tax |
|
(1,807 |
) |
|
|
(2,334 |
) |
|
|
(275 |
) |
|
Total shareholders’ equity |
|
258,763 |
|
|
|
243,494 |
|
|
|
207,920 |
|
|
Total liabilities and shareholders’ equity |
$ |
3,451,033 |
|
|
$ |
3,144,467 |
|
|
$ |
2,833,750 |
|
| COASTAL
FINANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
INCOME(Dollars in thousands, except per share amounts;
unaudited) |
| |
Three Months Ended |
| |
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
| INTEREST
AND DIVIDEND INCOME |
|
|
|
|
|
|
Interest and fees on loans |
$ |
66,431 |
|
$ |
61,226 |
|
|
$ |
29,632 |
|
Interest on interest earning deposits with other banks |
|
3,097 |
|
|
3,097 |
|
|
|
402 |
|
Interest on investment securities |
|
553 |
|
|
557 |
|
|
|
71 |
|
Dividends on other investments |
|
30 |
|
|
150 |
|
|
|
37 |
|
Total interest income |
|
70,111 |
|
|
65,030 |
|
|
|
30,142 |
| INTEREST
EXPENSE |
|
|
|
|
|
|
Interest on deposits |
|
14,958 |
|
|
11,061 |
|
|
|
553 |
|
Interest on borrowed funds |
|
662 |
|
|
537 |
|
|
|
321 |
|
Total interest expense |
|
15,620 |
|
|
11,598 |
|
|
|
874 |
|
Net interest income |
|
54,491 |
|
|
53,432 |
|
|
|
29,268 |
|
PROVISION FOR CREDIT LOSSES - LOANS |
|
43,544 |
|
|
33,600 |
|
|
|
12,942 |
|
PROVISION FOR UNFUNDED COMMITMENTS |
|
153 |
|
|
— |
|
|
|
— |
|
Net interest income after provision for credit losses - loans and
unfunded commitments |
|
10,794 |
|
|
19,832 |
|
|
|
16,326 |
|
NONINTEREST INCOME |
|
|
|
|
|
|
Deposit service charges and fees |
|
910 |
|
|
946 |
|
|
|
884 |
|
Loan referral fees |
|
— |
|
|
— |
|
|
|
602 |
|
Gain on sales of loans, net |
|
123 |
|
|
— |
|
|
|
— |
|
Mortgage broker fees |
|
19 |
|
|
25 |
|
|
|
123 |
|
Unrealized (loss) gain on equity securities, net |
|
39 |
|
|
(18 |
) |
|
|
— |
|
Other income |
|
280 |
|
|
273 |
|
|
|
265 |
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,371 |
|
|
1,226 |
|
|
|
1,874 |
|
Servicing and other BaaS fees |
|
948 |
|
|
1,001 |
|
|
|
1,169 |
|
Transaction fees |
|
917 |
|
|
964 |
|
|
|
493 |
|
Interchange fees |
|
789 |
|
|
785 |
|
|
|
432 |
|
Reimbursement of expenses |
|
921 |
|
|
857 |
|
|
|
372 |
|
BaaS program income |
|
3,575 |
|
|
3,607 |
|
|
|
2,466 |
|
BaaS credit enhancements |
|
42,362 |
|
|
31,164 |
|
|
|
13,075 |
|
BaaS fraud enhancements |
|
1,999 |
|
|
6,818 |
|
|
|
4,571 |
|
BaaS indemnification income |
|
44,361 |
|
|
37,982 |
|
|
|
17,646 |
|
Total noninterest income |
|
49,307 |
|
|
42,815 |
|
|
|
21,986 |
|
NONINTEREST EXPENSE |
|
|
|
|
|
|
Salaries and employee benefits |
|
15,575 |
|
|
14,399 |
|
|
|
11,085 |
|
Occupancy |
|
1,219 |
|
|
1,182 |
|
|
|
1,136 |
|
Data processing and software licenses |
|
1,840 |
|
|
1,768 |
|
|
|
1,861 |
|
Legal and professional expenses |
|
3,062 |
|
|
2,799 |
|
|
|
708 |
|
Point of sale expense |
|
753 |
|
|
710 |
|
|
|
248 |
|
Excise taxes |
|
455 |
|
|
702 |
|
|
|
349 |
|
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
595 |
|
|
550 |
|
|
|
604 |
|
Director and staff expenses |
|
626 |
|
|
515 |
|
|
|
344 |
|
Marketing |
|
95 |
|
|
109 |
|
|
|
99 |
|
Other expense |
|
890 |
|
|
335 |
|
|
|
1,120 |
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
25,110 |
|
|
23,069 |
|
|
|
17,554 |
|
BaaS loan expense |
|
17,554 |
|
|
17,215 |
|
|
|
8,290 |
|
BaaS fraud expense |
|
1,999 |
|
|
6,819 |
|
|
|
4,571 |
|
BaaS loan and fraud expense |
|
19,553 |
|
|
24,034 |
|
|
|
12,861 |
|
Total noninterest expense |
|
44,663 |
|
|
47,103 |
|
|
|
30,415 |
|
Income before provision for income taxes |
|
15,438 |
|
|
15,544 |
|
|
|
7,897 |
|
PROVISION FOR INCOME TAXES |
|
3,047 |
|
|
2,426 |
|
|
|
1,667 |
| NET
INCOME |
$ |
12,391 |
|
$ |
13,118 |
|
|
$ |
6,230 |
| Basic
earnings per common share |
$ |
0.94 |
|
$ |
1.01 |
|
|
$ |
0.48 |
| Diluted
earnings per common share |
$ |
0.91 |
|
$ |
0.96 |
|
|
$ |
0.46 |
| Weighted
average number of common shares outstanding: |
|
|
|
|
|
|
Basic |
|
13,196,960 |
|
|
13,030,726 |
|
|
|
12,898,746 |
|
Diluted |
|
13,609,491 |
|
|
13,603,978 |
|
|
|
13,475,337 |
| COASTAL
FINANCIAL CORPORATIONAVERAGE BALANCES, YIELDS, AND RATES –
QUARTERLY(Dollars in thousands; unaudited) |
| |
For the Three Months Ended |
| |
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
|
Average Balance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
Average Balance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
Average Balance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
$ |
271,700 |
|
|
$ |
3,097 |
|
4.62 |
% |
|
$ |
329,354 |
|
|
$ |
3,097 |
|
3.73 |
% |
|
$ |
843,931 |
|
|
$ |
402 |
|
0.19 |
% |
|
Investment securities, available for sale (2) |
|
100,273 |
|
|
|
535 |
|
2.16 |
|
|
|
100,269 |
|
|
|
550 |
|
2.18 |
|
|
|
44,470 |
|
|
|
61 |
|
0.56 |
|
|
Investment securities, held to maturity (2) |
|
1,955 |
|
|
|
18 |
|
3.73 |
|
|
|
1,235 |
|
|
|
7 |
|
2.25 |
|
|
|
1,292 |
|
|
|
10 |
|
3.14 |
|
|
Other investments |
|
10,633 |
|
|
|
30 |
|
1.14 |
|
|
|
10,592 |
|
|
|
150 |
|
5.62 |
|
|
|
9,227 |
|
|
|
37 |
|
1.63 |
|
|
Loans receivable (3) |
|
2,708,177 |
|
|
|
66,431 |
|
9.95 |
|
|
|
2,603,962 |
|
|
|
61,226 |
|
9.33 |
|
|
|
1,768,283 |
|
|
|
29,632 |
|
6.80 |
|
| Total
interest earning assets |
|
3,092,738 |
|
|
|
70,111 |
|
9.19 |
|
|
|
3,045,412 |
|
|
|
65,030 |
|
8.47 |
|
|
|
2,667,203 |
|
|
|
30,142 |
|
4.58 |
|
|
Noninterest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
(81,086 |
) |
|
|
|
|
|
|
(58,440 |
) |
|
|
|
|
|
|
(30,668 |
) |
|
|
|
|
|
Other noninterest earning assets |
|
172,161 |
|
|
|
|
|
|
|
141,624 |
|
|
|
|
|
|
|
92,401 |
|
|
|
|
|
|
Total assets |
$ |
3,183,813 |
|
|
|
|
|
|
$ |
3,128,596 |
|
|
|
|
|
|
$ |
2,728,936 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
2,070,217 |
|
|
$ |
14,958 |
|
2.93 |
% |
|
$ |
2,006,679 |
|
|
$ |
11,061 |
|
2.19 |
% |
|
$ |
1,131,984 |
|
|
$ |
553 |
|
0.20 |
% |
| FHLB
advances and borrowings |
|
— |
|
|
|
— |
|
— |
|
|
|
5 |
|
|
|
— |
|
— |
|
|
|
24,443 |
|
|
|
69 |
|
1.14 |
|
|
Subordinated debt |
|
44,010 |
|
|
|
599 |
|
5.52 |
|
|
|
37,455 |
|
|
|
484 |
|
5.13 |
|
|
|
24,295 |
|
|
|
230 |
|
3.84 |
|
|
Junior subordinated debentures |
|
3,588 |
|
|
|
63 |
|
7.12 |
|
|
|
3,588 |
|
|
|
53 |
|
5.86 |
|
|
|
3,586 |
|
|
|
22 |
|
2.49 |
|
| Total
interest bearing liabilities |
|
2,117,815 |
|
|
|
15,620 |
|
2.99 |
|
|
|
2,047,727 |
|
|
|
11,598 |
|
2.25 |
|
|
|
1,184,308 |
|
|
|
874 |
|
0.30 |
|
|
Noninterest bearing deposits |
|
775,940 |
|
|
|
|
|
|
|
807,794 |
|
|
|
|
|
|
|
1,320,144 |
|
|
|
|
|
| Other
liabilities |
|
37,448 |
|
|
|
|
|
|
|
34,944 |
|
|
|
|
|
|
|
16,009 |
|
|
|
|
|
| Total
shareholders’ equity |
|
252,610 |
|
|
|
|
|
|
|
238,131 |
|
|
|
|
|
|
|
208,475 |
|
|
|
|
|
| Total
liabilities and shareholders’ equity |
$ |
3,183,813 |
|
|
|
|
|
|
$ |
3,128,596 |
|
|
|
|
|
|
$ |
2,728,936 |
|
|
|
|
|
| Net
interest income |
|
|
$ |
54,491 |
|
|
|
|
|
$ |
53,432 |
|
|
|
|
|
$ |
29,268 |
|
|
|
Interest rate spread |
|
|
|
|
6.20 |
% |
|
|
|
|
|
6.22 |
% |
|
|
|
|
|
4.28 |
% |
| Net
interest margin (4) |
|
|
|
|
7.15 |
% |
|
|
|
|
|
6.96 |
% |
|
|
|
|
|
4.45 |
% |
(1) Yields and costs are
annualized.(2) For presentation in this table, average
balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of
discounts.(3) Includes loans held for sale and
nonaccrual loans.(4) Net interest margin represents net
interest income divided by the average total interest earning
assets.
| COASTAL
FINANCIAL CORPORATIONSELECTED AVERAGE BALANCES, YIELDS, AND RATES –
BY SEGMENT - QUARTERLY(Dollars in thousands;
unaudited) |
| |
For the Three Months Ended |
| |
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
(dollars in thousands, unaudited) |
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2) |
$ |
1,643,985 |
|
$ |
24,211 |
|
5.97 |
% |
|
$ |
1,609,882 |
|
$ |
23,140 |
|
5.70 |
% |
|
$ |
1,386,130 |
|
$ |
17,640 |
|
5.16 |
% |
|
Intrabank asset |
|
— |
|
|
— |
|
— |
|
|
|
— |
|
|
— |
|
— |
|
|
|
268,414 |
|
|
128 |
|
0.19 |
|
|
Total interest earning assets |
|
1,643,985 |
|
|
24,211 |
|
5.97 |
|
|
|
1,609,882 |
|
|
23,140 |
|
5.70 |
|
|
|
1,654,544 |
|
|
17,768 |
|
4.36 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
853,152 |
|
|
2,534 |
|
1.20 |
% |
|
|
864,001 |
|
|
1,502 |
|
0.69 |
% |
|
|
935,784 |
|
|
435 |
|
0.19 |
% |
|
Intrabank liability |
|
94,668 |
|
|
1,079 |
|
4.62 |
|
|
|
8,069 |
|
|
76 |
|
3.73 |
|
|
|
— |
|
|
— |
|
— |
|
| Total
interest bearing liabilities |
|
947,820 |
|
|
3,613 |
|
1.55 |
|
|
|
872,070 |
|
|
1,578 |
|
0.72 |
|
|
|
935,784 |
|
|
435 |
|
0.19 |
|
|
Noninterest bearing deposits |
|
696,166 |
|
|
|
|
|
|
737,812 |
|
|
|
|
|
|
718,760 |
|
|
|
|
| Net interest income |
|
|
$ |
20,598 |
|
|
|
|
|
$ |
21,562 |
|
|
|
|
|
$ |
17,333 |
|
|
| Net interest margin(4) |
|
|
|
|
5.08 |
% |
|
|
|
|
|
5.31 |
% |
|
|
|
|
|
4.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2)(4) |
$ |
1,064,192 |
|
$ |
42,220 |
|
16.09 |
% |
|
$ |
994,080 |
|
$ |
38,086 |
|
15.20 |
% |
|
$ |
382,153 |
|
$ |
11,992 |
|
12.73 |
% |
|
Intrabank asset |
|
232,647 |
|
|
2,652 |
|
4.62 |
|
|
|
218,580 |
|
|
2,056 |
|
3.73 |
|
|
|
415,431 |
|
|
198 |
|
0.19 |
|
|
Total interest earning assets |
|
1,296,839 |
|
|
44,872 |
|
14.03 |
|
|
|
1,212,660 |
|
|
40,142 |
|
13.13 |
|
|
|
797,584 |
|
|
12,190 |
|
6.20 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
1,217,065 |
|
|
12,424 |
|
4.14 |
% |
|
|
1,142,678 |
|
|
9,559 |
|
3.32 |
% |
|
|
196,200 |
|
|
118 |
|
0.24 |
% |
| Total
interest bearing liabilities |
|
1,217,065 |
|
|
12,424 |
|
4.14 |
|
|
|
1,142,678 |
|
|
9,559 |
|
3.32 |
|
|
|
196,200 |
|
|
118 |
|
0.24 |
|
|
Noninterest bearing deposits |
|
79,774 |
|
|
|
|
|
|
69,982 |
|
|
|
|
|
|
601,384 |
|
|
|
|
| Net interest income |
|
|
$ |
32,448 |
|
|
|
|
|
$ |
30,583 |
|
|
|
|
|
$ |
12,072 |
|
|
| Net interest margin(3) |
|
|
|
|
10.15 |
% |
|
|
|
|
|
10.01 |
% |
|
|
|
|
|
6.14 |
% |
| Net interest margin, net of
Baas loan expense (5) |
|
|
|
|
4.66 |
% |
|
|
|
|
|
4.37 |
% |
|
|
|
|
|
1.92 |
% |
| |
For the Three Months Ended |
| |
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
(dollars in thousands, unaudited) |
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
| Treasury
& Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
$ |
271,700 |
|
|
$ |
3,097 |
|
|
4.62 |
% |
|
$ |
329,354 |
|
|
$ |
3,097 |
|
|
3.73 |
% |
|
$ |
843,931 |
|
|
$ |
402 |
|
|
0.19 |
% |
|
Investment securities, available for sale (6) |
|
100,273 |
|
|
|
535 |
|
|
2.16 |
|
|
|
100,269 |
|
|
|
550 |
|
|
2.18 |
|
|
|
44,470 |
|
|
|
61 |
|
|
0.56 |
|
|
Investment securities, held to maturity (6) |
|
1,955 |
|
|
|
18 |
|
|
3.73 |
|
|
|
1,235 |
|
|
|
7 |
|
|
2.25 |
|
|
|
1,292 |
|
|
|
10 |
|
|
3.14 |
|
|
Other investments |
|
10,633 |
|
|
|
30 |
|
|
1.14 |
|
|
|
10,592 |
|
|
|
150 |
|
|
5.62 |
|
|
|
9,227 |
|
|
|
37 |
|
|
1.63 |
|
|
Intrabank asset |
|
(232,647 |
) |
|
|
(2,652 |
) |
|
(4.62 |
) |
|
|
(218,580 |
) |
|
|
(2,056 |
) |
|
(3.73 |
) |
|
|
(683,845 |
) |
|
|
(326 |
) |
|
(0.19 |
) |
| Total interest earning
assets |
|
151,914 |
|
|
|
1,028 |
|
|
2.74 |
|
|
|
222,870 |
|
— |
|
1,748 |
|
|
3.11 |
% |
|
|
215,075 |
|
|
|
184 |
|
|
0.35 |
% |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances and borrowings |
$ |
— |
|
|
$ |
— |
|
|
— |
% |
|
|
5 |
|
|
|
— |
|
|
— |
% |
|
|
24,443 |
|
|
|
69 |
|
|
1.14 |
% |
|
Subordinated debt |
|
44,010 |
|
|
|
599 |
|
|
5.52 |
|
|
|
37,455 |
|
|
|
484 |
|
|
5.13 |
|
|
|
24,295 |
|
|
|
230 |
|
|
3.84 |
|
|
Junior subordinated debentures |
|
3,588 |
|
|
|
63 |
|
|
7.12 |
|
|
|
3,588 |
|
|
|
53 |
|
|
5.86 |
|
|
|
3,586 |
|
|
|
22 |
|
|
2.49 |
|
|
Intrabank liability |
|
(94,668 |
) |
|
|
(1,079 |
) |
|
(4.62 |
) |
|
|
(8,069 |
) |
|
|
(76 |
) |
|
(3.73 |
) |
|
|
— |
|
|
|
— |
|
|
— |
|
| Total interest bearing
liabilities |
|
(47,070 |
) |
|
|
(417 |
) |
|
3.59 |
|
|
|
32,979 |
|
|
|
461 |
|
|
5.55 |
|
|
|
52,324 |
|
|
|
321 |
|
|
2.49 |
|
| Net interest income |
|
|
$ |
1,445 |
|
|
|
|
|
|
$ |
1,287 |
|
|
|
|
|
|
$ |
(137 |
) |
|
|
| Net interest margin(3) |
|
|
|
|
3.86 |
% |
|
|
|
|
|
2.29 |
% |
|
|
|
|
|
(0.26) % |
(1) Yields and costs are
annualized.(2) Includes loans held for sale and
nonaccrual loans.(3) Net interest margin
represents net interest income divided by the average total
interest earning assets.(4) CCBX yield does not
include the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit
enhancements, fraud enhancements and servicing CCBX
loans.(5) Net interest margin, net of BaaS loan
expense includes the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit
enhancements, fraud enhancements and servicing CCBX
loans.(6) For presentation in this table, average
balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
| COASTAL
FINANCIAL CORPORATIONQUARTERLY STATISTICS(Dollars in thousands,
except share and per share data; unaudited) |
| |
Three Months Ended |
| |
March 31,2023 |
|
December 31,2022 |
|
September 30,2022 |
|
June 30,2022 |
|
March 31,2022 |
|
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
$ |
70,111 |
|
|
$ |
65,030 |
|
|
$ |
55,179 |
|
|
$ |
41,819 |
|
|
$ |
30,142 |
|
|
Interest expense |
|
15,620 |
|
|
|
11,598 |
|
|
|
5,990 |
|
|
|
1,933 |
|
|
|
874 |
|
| Net
interest income |
|
54,491 |
|
|
|
53,432 |
|
|
|
49,189 |
|
|
|
39,886 |
|
|
|
29,268 |
|
|
Provision for credit losses - loans |
|
43,544 |
|
|
|
33,600 |
|
|
|
18,428 |
|
|
|
14,094 |
|
|
|
12,942 |
|
|
Provision for unfunded commitments |
|
153 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Net
interest income after provision for credit losses - loans and
unfunded commitments |
|
10,794 |
|
|
|
19,832 |
|
|
|
30,761 |
|
|
|
25,792 |
|
|
|
16,326 |
|
|
Noninterest income |
|
49,307 |
|
|
|
42,815 |
|
|
|
34,391 |
|
|
|
25,492 |
|
|
|
21,986 |
|
|
Noninterest expense |
|
44,663 |
|
|
|
47,103 |
|
|
|
51,087 |
|
|
|
38,169 |
|
|
|
30,415 |
|
|
Provision for income tax |
|
3,047 |
|
|
|
2,426 |
|
|
|
2,964 |
|
|
|
2,939 |
|
|
|
1,667 |
|
| Net
income |
|
12,391 |
|
|
|
13,118 |
|
|
|
11,101 |
|
|
|
10,176 |
|
|
|
6,230 |
|
| |
|
|
|
|
|
|
|
|
|
| |
As of and for the Three Month Period |
| |
March 31,2023 |
|
December 31,2022 |
|
September 30,2022 |
|
June 30,2022 |
|
March 31,2022 |
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
| Cash
and cash equivalents |
$ |
393,916 |
|
|
$ |
342,139 |
|
|
$ |
410,728 |
|
|
$ |
405,689 |
|
|
$ |
682,109 |
|
|
Investment securities |
|
101,704 |
|
|
|
98,353 |
|
|
|
98,871 |
|
|
|
109,821 |
|
|
|
136,177 |
|
| Loans
held for sale |
|
27,292 |
|
|
|
— |
|
|
|
43,314 |
|
|
|
60,000 |
|
|
|
— |
|
| Loans
receivable |
|
2,837,204 |
|
|
|
2,627,256 |
|
|
|
2,507,889 |
|
|
|
2,334,354 |
|
|
|
1,964,209 |
|
|
Allowance for credit losses |
|
(89,123 |
) |
|
|
(74,029 |
) |
|
|
(59,282 |
) |
|
|
(49,358 |
) |
|
|
(38,770 |
) |
| Total
assets |
|
3,451,033 |
|
|
|
3,144,467 |
|
|
|
3,133,741 |
|
|
|
2,969,722 |
|
|
|
2,833,750 |
|
|
Interest bearing deposits |
|
2,333,423 |
|
|
|
2,042,509 |
|
|
|
2,023,849 |
|
|
|
1,879,253 |
|
|
|
1,738,426 |
|
|
Noninterest bearing deposits |
|
761,800 |
|
|
|
775,012 |
|
|
|
813,217 |
|
|
|
818,052 |
|
|
|
838,044 |
|
| Core
deposits (1) |
|
3,068,162 |
|
|
|
2,686,528 |
|
|
|
2,727,830 |
|
|
|
2,584,831 |
|
|
|
2,460,954 |
|
| Total
deposits |
|
3,095,223 |
|
|
|
2,817,521 |
|
|
|
2,837,066 |
|
|
|
2,697,305 |
|
|
|
2,576,470 |
|
| Total
borrowings |
|
47,619 |
|
|
|
47,587 |
|
|
|
27,931 |
|
|
|
27,911 |
|
|
|
27,893 |
|
| Total
shareholders’ equity |
|
258,763 |
|
|
|
243,494 |
|
|
|
228,733 |
|
|
|
217,661 |
|
|
|
207,920 |
|
| |
|
|
|
|
|
|
|
|
|
|
Share and Per Share Data
(2): |
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic |
$ |
0.94 |
|
|
$ |
1.01 |
|
|
$ |
0.86 |
|
|
$ |
0.79 |
|
|
$ |
0.48 |
|
|
Earnings per share – diluted |
$ |
0.91 |
|
|
$ |
0.96 |
|
|
$ |
0.82 |
|
|
$ |
0.76 |
|
|
$ |
0.46 |
|
|
Dividends per share |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Book
value per share (3) |
$ |
19.48 |
|
|
$ |
18.50 |
|
|
$ |
17.66 |
|
|
$ |
16.81 |
|
|
$ |
16.08 |
|
|
Tangible book value per share (4) |
$ |
19.48 |
|
|
$ |
18.50 |
|
|
$ |
17.66 |
|
|
$ |
16.81 |
|
|
$ |
16.08 |
|
|
Weighted avg outstanding shares – basic |
|
13,196,960 |
|
|
|
13,030,726 |
|
|
|
12,938,200 |
|
|
|
12,928,061 |
|
|
|
12,898,746 |
|
|
Weighted avg outstanding shares – diluted |
|
13,609,491 |
|
|
|
13,603,978 |
|
|
|
13,536,823 |
|
|
|
13,442,013 |
|
|
|
13,475,337 |
|
|
Shares outstanding at end of period |
|
13,281,533 |
|
|
|
13,161,147 |
|
|
|
12,954,573 |
|
|
|
12,948,623 |
|
|
|
12,928,548 |
|
| Stock
options outstanding at end of period |
|
360,119 |
|
|
|
438,103 |
|
|
|
644,334 |
|
|
|
655,844 |
|
|
|
666,774 |
|
See footnotes on following page
| |
As of and for the Three Month Period |
| |
March 31,2023 |
|
December 31,2022 |
|
September 30,2022 |
|
June 30,2022 |
|
March 31,2022 |
| Credit Quality
Data: |
|
|
|
|
|
|
|
|
|
|
Nonperforming assets (5) to total assets |
|
0.91 |
% |
|
|
1.06 |
% |
|
|
0.73 |
% |
|
|
0.09 |
% |
|
|
0.08 |
% |
| Nonperforming assets (5) to
loans receivable and OREO |
|
1.11 |
% |
|
|
1.26 |
% |
|
|
0.91 |
% |
|
|
0.11 |
% |
|
|
0.12 |
% |
| Nonperforming loans (5) to
total loans receivable |
|
1.11 |
% |
|
|
1.26 |
% |
|
|
0.91 |
% |
|
|
0.11 |
% |
|
|
0.12 |
% |
| Allowance for credit losses to
nonperforming loans |
|
282.5 |
% |
|
|
224.4 |
% |
|
|
259.1 |
% |
|
|
849.4 |
% |
|
|
1,653.3 |
% |
| Allowance for credit losses to
total loans receivable |
|
3.14 |
% |
|
|
2.82 |
% |
|
|
2.36 |
% |
|
|
2.11 |
% |
|
|
1.97 |
% |
| Gross charge-offs |
$ |
34,167 |
|
|
$ |
18,886 |
|
|
$ |
8,513 |
|
|
$ |
3,542 |
|
|
$ |
2,808 |
|
| Gross recoveries |
$ |
1,865 |
|
|
$ |
33 |
|
|
$ |
9 |
|
|
$ |
36 |
|
|
$ |
4 |
|
| Net charge-offs to average
loans (6) |
|
4.84 |
% |
|
|
2.87 |
% |
|
|
1.38 |
% |
|
|
0.64 |
% |
|
|
0.64 |
% |
| |
|
|
|
|
|
|
|
|
|
| Capital
Ratios (7): |
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital |
|
8.29 |
% |
|
|
7.97 |
% |
|
|
7.70 |
% |
|
|
7.68 |
% |
|
|
7.75 |
% |
| Common equity Tier 1
risk-based capital |
|
8.61 |
% |
|
|
8.92 |
% |
|
|
8.49 |
% |
|
|
8.51 |
% |
|
|
9.71 |
% |
| Tier 1 risk-based capital |
|
8.73 |
% |
|
|
9.04 |
% |
|
|
8.62 |
% |
|
|
8.65 |
% |
|
|
9.88 |
% |
| Total risk-based capital |
|
11.49 |
% |
|
|
11.94 |
% |
|
|
10.80 |
% |
|
|
10.88 |
% |
|
|
12.30 |
% |
(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 |
|
(dollars in thousands, unaudited) |
|
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
| Revenue
excluding BaaS credit enhancements and BaaS fraud
enhancements: |
|
Total net interest income |
|
$ |
54,491 |
|
|
$ |
53,432 |
|
|
$ |
29,268 |
|
|
Total noninterest income |
|
|
49,307 |
|
|
|
42,815 |
|
|
|
21,986 |
|
|
Total Revenue |
|
$ |
103,798 |
|
|
$ |
96,247 |
|
|
$ |
51,254 |
|
| Less: BaaS credit
enhancements |
|
|
(42,362 |
) |
|
|
(31,164 |
) |
|
|
(13,075 |
) |
|
Less: BaaS fraud enhancements |
|
|
(1,999 |
) |
|
|
(6,818 |
) |
|
|
(4,571 |
) |
|
Total revenue excluding BaaS credit enhancements and BaaS fraud
enhancements |
|
$ |
59,437 |
|
|
$ |
58,265 |
|
|
$ |
33,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following non-GAAP measure is presented to illustrate the
impact of BaaS loan expense on net loan income and yield on CCBX
loans.
Net BaaS loan income divided by average CCBX loans is a non-GAAP
measure that includes the impact BaaS loan expense on net BaaS loan
income and the yield on CCBX loans. The most directly comparable
GAAP measure is yield on CCBX loans.
The following non-GAAP measure is presented to illustrate the
impact of BaaS loan expense on net interest income and net interest
margin.
Net interest income net of BaaS loan expense is a non-GAAP
measure that includes the impact BaaS loan expense on net interest
income. The most directly comparable GAAP measure is net interest
income.
Net interest margin, net of BaaS loan expense is a non-GAAP
measure that includes the impact of BaaS loan expense on net
interest rate margin. The most directly comparable GAAP measure is
net interest margin.
Reconciliations of the GAAP and non-GAAP measures are presented
below.
| |
|
As of and for the Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
| Net BaaS
loan income divided by average CCBX loans: |
|
CCBX loan yield (GAAP)(1) |
|
|
16.09 |
% |
|
|
15.20 |
% |
|
|
12.73 |
% |
|
Total average CCBX loans receivable |
|
$ |
1,064,192 |
|
|
$ |
994,080 |
|
|
$ |
382,153 |
|
|
Interest and earned fee income on CCBX loans (GAAP) |
|
|
42,220 |
|
|
|
38,086 |
|
|
|
11,992 |
|
|
Less: BaaS loan expense |
|
|
(17,554 |
) |
|
|
(17,215 |
) |
|
|
(8,290 |
) |
|
Net BaaS loan income |
|
$ |
24,666 |
|
|
$ |
20,871 |
|
|
$ |
3,702 |
|
|
Net BaaS loan income divided by average CCBX loans (1) |
|
|
9.40 |
% |
|
|
8.33 |
% |
|
|
3.93 |
% |
| Net
interest margin, net of BaaS loan expense: |
|
|
|
|
|
CCBX interest margin (1) |
|
|
10.15 |
% |
|
|
10.01 |
% |
|
|
6.14 |
% |
|
CCBX earning assets |
|
|
1,296,839 |
|
|
|
1,212,660 |
|
|
|
797,584 |
|
|
Net interest income |
|
|
32,448 |
|
|
|
30,583 |
|
|
|
12,072 |
|
|
Less: BaaS loan expense |
|
|
(17,554 |
) |
|
|
(17,215 |
) |
|
|
(8,290 |
) |
|
Net interest income, net of BaaS loan expense |
|
$ |
14,894 |
|
|
$ |
13,368 |
|
|
$ |
3,782 |
|
|
Net interest margin, net of BaaS loan expense (1) |
|
|
4.66 |
% |
|
|
4.37 |
% |
|
|
1.92 |
% |
(1) Annualized calculations for periods
presented.
APPENDIX A - As
of March 31, 2023
Industry Concentration
We have a diversified loan portfolio,
representing a wide variety of industries. Our major categories of
loans are commercial real estate, consumer and other loans,
residential real estate, commercial and industrial, and
construction, land and land development loans. Together they
represent $2.84 billion in outstanding loan balances. When combined
with $2.36 billion in unused commitments the total of these
categories is $5.20 billion.
Commercial real estate loans
represent the largest segment of our loans, comprising 38.8% of our
total balance of outstanding loans as of March 31, 2023.
Unused commitments to extend credit represents an additional $26.8
million, and the combined total in commercial real estate loans
represents $1.13 billion, or 21.7% of our total outstanding loans
and loan commitments.
The following table summarizes our loan
commitment by industry for our commercial real estate portfolio as
of March 31, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Apartments |
|
$ |
264,439 |
|
$ |
6,231 |
|
$ |
270,670 |
|
5.2 |
% |
|
$ |
3,040 |
|
87 |
|
Hotel/Motel |
|
|
148,869 |
|
|
2,931 |
|
|
151,800 |
|
2.9 |
|
|
|
6,203 |
|
24 |
|
Office |
|
|
99,407 |
|
|
3,258 |
|
|
102,665 |
|
2.0 |
|
|
|
1,058 |
|
94 |
|
Convenience Store |
|
|
95,885 |
|
|
2,586 |
|
|
98,471 |
|
1.9 |
|
|
|
1,844 |
|
52 |
|
Retail |
|
|
85,679 |
|
|
1,162 |
|
|
86,841 |
|
1.7 |
|
|
|
921 |
|
93 |
| Mixed
use |
|
|
85,624 |
|
|
3,670 |
|
|
89,294 |
|
1.7 |
|
|
|
1,007 |
|
85 |
|
Warehouse |
|
|
83,366 |
|
|
1,290 |
|
|
84,656 |
|
1.6 |
|
|
|
1,516 |
|
55 |
| Mini
Storage |
|
|
50,643 |
|
|
917 |
|
|
51,560 |
|
1.0 |
|
|
|
2,814 |
|
18 |
| Strip
Mall |
|
|
45,801 |
|
|
— |
|
|
45,801 |
|
0.9 |
|
|
|
5,725 |
|
8 |
|
Manufacturing |
|
|
37,558 |
|
|
800 |
|
|
38,358 |
|
0.7 |
|
|
|
1,138 |
|
33 |
| Groups
< 0.70% of total |
|
|
105,500 |
|
|
3,947 |
|
|
109,447 |
|
2.1 |
|
|
|
1,256 |
|
84 |
|
Total |
|
$ |
1,102,771 |
|
$ |
26,792 |
|
$ |
1,129,563 |
|
21.7 |
% |
|
$ |
1,742 |
|
633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans comprise 26.4% of our total
balance of outstanding loans as of March 31, 2023. Unused
commitments to extend credit represents an additional $945.7
million, and the combined total in consumer and other loans
represents $1.70 billion, or 32.7% 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 $1,600. CCBX consumer
loans are underwritten to CCBX credit standards and underwriting of
these loans is regularly tested.
The following table summarizes our loan commitment by industry
for our consumer and other loan portfolio as of March 31,
2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment (1) |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
| CCBX
consumer loans |
|
Installment loans |
|
$ |
425,280 |
|
$ |
— |
|
$ |
425,280 |
|
8.2 |
% |
|
$ |
1.9 |
|
225,180 |
|
Credit cards |
|
|
318,187 |
|
|
944,758 |
|
|
1,262,945 |
|
24.3 |
|
|
|
1.5 |
|
219,417 |
|
Lines of credit |
|
|
3,605 |
|
|
361 |
|
|
3,966 |
|
0.1 |
|
|
|
0.3 |
|
12,553 |
|
Other loans |
|
|
2,596 |
|
|
— |
|
|
2,596 |
|
0.1 |
|
|
|
0.2 |
|
16,389 |
| Community
bank consumer loans |
|
Other loans |
|
|
1,408 |
|
|
— |
|
|
1,408 |
|
0.0 |
|
|
|
5.8 |
|
241 |
|
Installment loans |
|
|
1,294 |
|
|
— |
|
|
1,294 |
|
0.0 |
|
|
|
51.8 |
|
25 |
|
Lines of credit |
|
|
158 |
|
|
619 |
|
|
777 |
|
0.0 |
|
|
|
3.4 |
|
47 |
|
Total |
|
$ |
752,528 |
|
$ |
945,738 |
|
$ |
1,698,266 |
|
32.7 |
% |
|
$ |
1.6 |
|
473,852 |
(1) Total exposure on CCBX loans is subject to
portfolio maximum limits - see table below.
Residential real estate loans comprise 16.0% of
our total balance of outstanding loans as of March 31, 2023.
Unused commitments to extend credit represents an additional $408.5
million, and the combined total in residential real estate loans
represents $864.1 million, or 16.6% of our total outstanding loans
and loan commitments.
The following table summarizes our loan
commitment by industry for our residential real estate loan
portfolio as of March 31, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment (1) |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
| CCBX
residential real estate loans |
|
Home equity line of credit |
|
$ |
249,367 |
|
$ |
359,215 |
|
$ |
608,582 |
|
11.7 |
% |
|
$ |
26 |
|
9,495 |
| Community
bank residential real estate loans |
| Closed end, secured by first
liens |
|
|
178,206 |
|
|
4,748 |
|
|
182,954 |
|
3.5 |
|
|
|
600 |
|
297 |
| Home equity line of
credit |
|
|
19,318 |
|
|
43,565 |
|
|
62,883 |
|
1.2 |
|
|
|
91 |
|
213 |
| Closed end, second liens |
|
|
8,616 |
|
|
1,016 |
|
|
9,632 |
|
0.2 |
|
|
|
331 |
|
26 |
|
Total |
|
$ |
455,507 |
|
$ |
408,544 |
|
$ |
864,051 |
|
16.6 |
% |
|
$ |
45 |
|
10,031 |
(1) Total exposure on CCBX loans is subject to
portfolio maximum limits - see table below.
Commercial and industrial loans comprise 11.5%
of our total balance of outstanding loans as of March 31,
2023. Unused commitments to extend credit represents an additional
$795.1 million, and the combined total in commercial and industrial
loans represents $1.12 billion, or 21.5% of our total outstanding
loans and loan commitments. Included in commercial and industrial
loans is $118.8 million in outstanding capital call lines, with an
additional $716.6 million in available loan commitments which is
limited to a $350.0 million portfolio maximum. Capital call lines
are provided to venture capital firms through one of our CCBX BaaS
clients. These loans are secured by the capital call rights and are
individually underwritten to the Bank’s credit standards and the
underwriting is reviewed by the Bank on every line.
The following table summarizes our loan
commitment by industry for our commercial and industrial loan
portfolio as of March 31, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment (1) |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Capital Call Lines |
|
$ |
118,796 |
|
$ |
716,609 |
|
$ |
835,405 |
|
16.1 |
% |
|
$ |
707 |
|
168 |
| Retail |
|
|
49,329 |
|
|
6,174 |
|
|
55,503 |
|
1.1 |
|
|
|
24 |
|
2,026 |
| Financial Institutions |
|
|
48,649 |
|
|
— |
|
|
48,649 |
|
0.9 |
|
|
|
4,054 |
|
12 |
| Construction/Contractor
Services |
|
|
22,019 |
|
|
30,785 |
|
|
52,804 |
|
1.0 |
|
|
|
120 |
|
183 |
| Medical / Dental / Other
Care |
|
|
20,758 |
|
|
5,848 |
|
|
26,606 |
|
0.5 |
|
|
|
769 |
|
27 |
| Manufacturing |
|
|
11,622 |
|
|
5,416 |
|
|
17,038 |
|
0.3 |
|
|
|
208 |
|
56 |
| Groups < 0.30% of
total |
|
|
55,165 |
|
|
30,251 |
|
|
85,416 |
|
1.6 |
|
|
|
175 |
|
315 |
|
Total |
|
$ |
326,338 |
|
$ |
795,083 |
|
$ |
1,121,421 |
|
21.5 |
% |
|
$ |
117 |
|
2,787 |
(1) Total exposure on CCBX loans is subject to
portfolio maximum limits -see table below.
Construction, land and land development loans
comprise 7.3% of our total balance of outstanding loans as of
March 31, 2023. Unused commitments to extend credit represents
an additional $180.5 million, and the combined total in
construction, land and land development loans represents $387.1
million, or 7.4% of our total outstanding loans and loan
commitments.
The following table details our loan commitment
for our construction, land and land development portfolio as of
March 31, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Commercial construction |
|
$ |
97,987 |
|
$ |
141,667 |
|
$ |
239,654 |
|
4.6 |
% |
|
$ |
4,260 |
|
23 |
|
Residential construction |
|
|
32,268 |
|
|
21,988 |
|
|
54,256 |
|
1.0 |
|
|
|
978 |
|
33 |
|
Undeveloped land loans |
|
|
41,951 |
|
|
9,718 |
|
|
51,669 |
|
1.0 |
|
|
|
2,997 |
|
14 |
|
Developed land loans |
|
|
19,130 |
|
|
3,732 |
|
|
22,862 |
|
0.4 |
|
|
|
660 |
|
29 |
| Land
development |
|
|
15,299 |
|
|
3,392 |
|
|
18,691 |
|
0.4 |
|
|
|
805 |
|
19 |
|
Total |
|
$ |
206,635 |
|
$ |
180,497 |
|
$ |
387,132 |
|
7.4 |
% |
|
$ |
1,751 |
|
118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have portfolio limits with our each of our
partners to manage loan concentration risk, liquidity risk, and
counter-party partner risk. For example, as of March 31, 2023,
capital call lines outstanding balance totaled $118.8 million, and
while commitments totaled $716.6 million the commitments are
limited to a maximum of $350.0 million by agreement with the
partner.
The following table shows the CCBX maximum
portfolio sizes by loan category as of March 31, 2023.
|
(dollars in thousands; unaudited) |
Type of Lending |
Maximum Portfolio Size |
|
Commercial and industrial loans: |
|
|
|
Capital call lines |
Business - Venture Capital |
$ |
350,000 |
|
All other commercial & industrial loans |
Business - Small Business |
|
102,209 |
| Real
estate loans: |
|
|
|
Home equity lines of credit |
Home Equity - Secured Credit
Cards |
|
300,000 |
|
Consumer and other loans: |
|
|
|
Credit cards |
Credit Cards - Primarily
Consumer |
|
500,762 |
|
Installment loans |
Consumer |
|
1,166,761 |
|
Other consumer and other loans |
Consumer - Secured Credit
Builder & Unsecured consumer |
|
185,269 |
|
|
|
$ |
2,605,001 |
|
|
|
|
|
APPENDIX B -As
of March 31, 2023
CCBX – BaaS Reporting Information
During the quarter ended March 31, 2023, $42.4 million was
recorded in BaaS credit enhancements related to the provision for
credit losses - loans and reserve for unfunded commitments for CCBX
partner loans and negative deposit accounts. Agreements with our
CCBX partners provide for a credit enhancement provided by the
partner which protects the Bank by absorbing incurred losses. In
accordance with accounting guidance, we estimate and record a
provision for expected losses for these CCBX loans and negative
deposit accounts. When the provision for credit losses - loans and
provision for unfunded commitments is recorded, a credit
enhancement asset is also recorded on the balance sheet through
noninterest income (BaaS credit enhancements) in recognition of the
CCBX partner legal commitment to cover losses. The credit
enhancement asset is relieved as credit enhancement payments and
recoveries are received from the CCBX partner or taken from the
partner’s cash reserve account. Agreements with our CCBX partners
also provide protection to the Bank from fraud by 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 credit
enhancement asset from the CCBX partner but would retain the full
yield and any fee income 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 (A reconciliation of the
non-GAAP measures are set forth in the preceding section of this
earnings release.) which can be compared to interest income on the
Company’s community bank loans.
The following table illustrates how CCBX partner loan income and
expenses are recorded in the financial statements:
|
Loan income and related loan expense |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
|
Yield on loans (2) |
|
|
16.09 |
% |
|
|
15.20 |
% |
|
|
12.73 |
% |
| BaaS
loan interest income |
|
$ |
42,220 |
|
|
$ |
38,086 |
|
|
$ |
11,992 |
|
| Less:
BaaS loan expense |
|
|
17,554 |
|
|
|
17,215 |
|
|
|
8,290 |
|
|
Net BaaS loan income (1) |
|
|
24,666 |
|
|
|
20,871 |
|
|
|
3,702 |
|
| Net
BaaS loan income divided by average BaaS loans (1) |
|
|
9.40 |
% |
|
|
8.33 |
% |
|
|
3.93 |
% |
(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.
Increased interest rates and growth in CCBX loans and deposits
has resulted in increases in interest income and expense for the
quarter ended March 31, 2023 compared to the quarters ended
December 31, 2022 and March 31, 2022. The following
tables are a summary of the interest components, direct fees, and
expenses of BaaS for the periods indicated and are not inclusive of
all income and expense related to BaaS.
|
Interest income |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
|
Loan interest income |
|
$ |
42,220 |
|
$ |
38,086 |
|
$ |
11,992 |
|
Total BaaS interest income |
|
$ |
42,220 |
|
$ |
38,086 |
|
$ |
11,992 |
|
Interest expense |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
|
BaaS interest expense |
|
$ |
12,424 |
|
$ |
9,559 |
|
$ |
118 |
|
Total BaaS interest expense |
|
$ |
12,424 |
|
$ |
9,559 |
|
$ |
118 |
|
BaaS income |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
|
BaaS program income: |
|
|
|
|
|
|
|
Servicing and other BaaS fees |
|
$ |
948 |
|
$ |
1,001 |
|
$ |
1,169 |
|
Transaction fees |
|
|
917 |
|
|
964 |
|
|
493 |
|
Interchange fees |
|
|
789 |
|
|
785 |
|
|
432 |
|
Reimbursement of expenses |
|
|
921 |
|
|
857 |
|
|
372 |
|
BaaS program income |
|
|
3,575 |
|
|
3,607 |
|
|
2,466 |
|
BaaS indemnification income: |
|
|
|
|
|
|
| BaaS
credit enhancements |
|
|
42,362 |
|
|
31,164 |
|
|
13,075 |
| BaaS
fraud enhancements |
|
|
1,999 |
|
|
6,818 |
|
|
4,571 |
|
BaaS indemnification income |
|
|
44,361 |
|
|
37,982 |
|
|
17,646 |
| Total
BaaS income |
|
$ |
47,936 |
|
$ |
41,589 |
|
$ |
20,112 |
|
BaaS loan and fraud expense |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
March 31,2023 |
|
December 31,2022 |
|
March 31,2022 |
|
BaaS loan expense |
|
$ |
17,554 |
|
$ |
17,215 |
|
$ |
8,290 |
| BaaS
fraud expense |
|
|
1,999 |
|
|
6,819 |
|
|
4,571 |
|
Total BaaS loan and fraud expense |
|
$ |
19,553 |
|
$ |
24,034 |
|
$ |
12,861 |
Coastal Financial (NASDAQ:CCB)
Gráfica de Acción Histórica
De Nov 2024 a Dic 2024
Coastal Financial (NASDAQ:CCB)
Gráfica de Acción Histórica
De Dic 2023 a Dic 2024
