2019 Highlights:
- Net income totaled $13.2 million for the year ended December 31, 2019, or $1.08 per diluted common share, up 36.1% from $9.7 million or $0.91 per diluted common share for year ended December 31, 2018.
- Total assets were $1.13 billion at December 31, 2019, up 18.5% from $952.1 million at December 31, 2018.
- Total loans receivable grew at a rate of 22.3% during the year ended December 31, 2019.
- Total deposits increased 20.5% during the year ended December 31, 2019 to $968.0 million, compared to $803.6 million at December 31, 2018.
- Total core deposits increased 23.9% during the year ended December 31, 2019, and were 89.1% of total deposits, compared to 86.6% at December 31, 2018.
EVERETT, Wash., Jan. 27, 2020 (GLOBE NEWSWIRE) -- Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), the holding company for Coastal Community Bank (the “Bank”), today reported unaudited financial results for the quarter and year ended December 31, 2019. Net income for the fourth quarter of 2019 was $3.6 million, or $0.30 per diluted common share, compared with net income of $3.5 million, or $0.29 per diluted common share, for the third quarter of 2019.
The Company had net income of $13.2 million for the year ended December 31, 2019, or $1.08 per diluted common share, compared to $9.7 million, or $0.91 per diluted common share for the year ended December 31, 2018.
“We are pleased to announce that we finished 2019 strong with a 36.1% increase in net income, a 22.3% increase in total loans receivable and a 20.5% increase in deposits, as compared to the year ended December 31, 2018. The Company’s return on average equity was 11.66% for the fourth quarter of 2019,” stated Eric Sprink, the President and CEO of the Bank and the Company.
“We remain focused on growing and managing the Bank, while investing, growing, and innovating our way to an enhanced future that combines our strong Bank with additional sources of fee income and a path to stronger and more viable digital Bank in the future.
Today, we are formally introducing our CCBX Division which provides Banking as a Service (“BaaS”) enabling broker dealers and digital financial service providers to offer their clients banking services. The “X” is indicative of the technology services that our partners provide.
As we build out CCBX, we will do our best to cover related costs with new revenues from CCBX customers. Currently, we are in the process of working with five fintech partners, and maintaining a robust pipeline as we look forward. CCBX will be supported by staff we hired late in 2019 to build the infrastructure, and additional hires in 2020 as we expect to add new partners and execute new contracts.
Just like any complex banking product, BaaS does not come without risks. We recently announced the hiring of a dedicated Chief Risk Officer and a Data Scientist Architect with a PhD in Artificial Intelligence to further enhance the program. These hires are investments in our future and necessary to perform the services safely and soundly and to manage the risks associated with this line of business. We also recently announced that we are building an integrated compliance and reporting system to monitor and address these risks in partnership with Neocova.
Although we carefully underwrite and complete extensive due diligence of each partner, we know that all of partners may not be successful, and like any new business some might fail. Through ongoing monitoring of each relationship, we believe that we will be able to minimize any impact, but recognize that income streams may diminish should a partner fail. In addition, we are very cognizant of both our compliance responsibility and the True Lender Doctrine, and should any of our partners offer lending products, the Bank will be the True Lender and engage with the relationships accordingly.
“The investments we are making today are not for immediate returns but for longer-term returns that we believe will build value for shareholders while benefiting our customers, employees, and communities we serve,” continued Sprink. “We are pleased to provide this update and look forward to sharing more news about our CCBX division as it grows.”
Beginning with the fourth quarter 2019, we have changed references made to “wholesale” and "wholesale banking services" to "BaaS" and “BaaS fees” in our earnings release, financial statements and other information we make publicly available (other than our regulatory reports). We have revised prior period financial statements to make this conforming change.
Results of Operations
Net interest income was $11.3 million for the quarter ended December 31, 2019, an increase of 5.6% from $10.7 million for the quarter ended September 30, 2019 and an increase of 14.6% from $9.9 million for the quarter ended December 31, 2018. The increase compared to the prior quarter and prior year’s fourth quarter is related to increased interest income resulting from our loan growth.
Net interest income for the year ended December 31, 2019 totaled $42.0 million, an increase of 20.7% compared to $34.8 million for the fiscal year 2018. The $7.2 million increase in net interest income over the same period last year was primarily related to loan growth. During the year ended December 31, 2019, the average balance of total loans receivable increased by $138.2 million, compared to the same period last year. Increased interest income was partially offset by increased deposit costs from the growth in the balance of our interest bearing deposits of $86.6 million and an increase in the cost of deposits of 23 basis points, compared to the fiscal year 2018.
Net interest margin for the quarter ended December 31, 2019 decreased three basis points to 4.26% as compared to 4.29% for the quarter ended September 30, 2019 and was 4.43% for the quarter ended December 31, 2018. The decrease over the prior quarter was due to lower interest rates on interest earning deposits invested in other financial institutions. The decrease in net interest margin compared to the fourth quarter in the prior year is primarily due to an increase in cost of deposits, which increased 16 basis points to 0.63% for the quarter ended December 31, 2019, compared to 0.47% for the quarter ended December 31, 2018, and 0.64% for the quarter ended September 30, 2019.
Net interest margin for the year ended December 31, 2019 was 4.23% compared to 4.24% for the comparable period last year. Higher loans receivable, increased average loan yields and increased average interest earning deposits during the year ended December 31, 2019 helped to offset the 23 basis point increase in cost of deposits, resulting in a just a one basis point net decrease in net interest margin over the year ended December 31, 2018.
During the quarter ended December 31, 2019 the average balance of total loans receivable increased by $45.7 million, compared to the quarter ended September 30, 2019, and increased by $152.3 million, compared to the same quarter one year ago. Total loan yield for the quarter ended December 31, 2019 was 5.36%, which was the same as the quarter ended September 30, 2019, and compares to 5.39% for the quarter ended December 31, 2018.
Contractual loan yields approximated 5.15% for the quarter ended December 31, 2019, compared to 5.24% for the quarter ended September 30, 2019, and 5.15% for the quarter ended December 31, 2018. The Federal Open Market Committee (FOMC) lowered rates twice in the third quarter of 2019, resulting in lower rates on new and renewing loans in the fourth quarter of 2019. Although we have rate floors in place for certain existing loans, the rate reductions by FOMC and any future rate adjustments will have a corresponding impact on loan yields and subsequently the net interest margin in future periods.
Deposit costs for the quarter ended December 31, 2019 were 0.63%, a decrease of one basis point from 0.64% for the quarter ended September 30, 2019, and a 16 basis point increase from the quarter ended December 31, 2018. Market conditions for deposits continue to be competitive, and deposit costs have not declined meaningfully along with the rate reductions by the FOMC, as of yet. Historically, there tends to be a lag in customer deposit rates being adjusted up or down in response to rate changes by the FOMC.
The following table shows the Company’s key performance ratios for the periods indicated. The table also includes ratios that were adjusted by removing the impact of the previously disclosed atypical BaaS-brokered deposits for the quarters ended June 30, 2019 and March 31, 2019. The BaaS-brokered deposits normalized in the third quarter of 2019, therefore no adjustments were made to the performance ratios for the quarter or year ended December 31, 2019. The adjusted ratios are non-GAAP measures. For more information about non-GAAP financial measures, see the end of this earnings release.
| Three months ended | Year ended | ||||||||||||||||||||||
| December 31, 2019 | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||||||
| Return on average assets (1) | 1.31 | % | 1.35 | % | 1.31 | % | 1.14 | % | 1.33 | % | 1.28 | % | 1.14 | % | |||||||||
| Return on average assets, as adjusted (1,2) | N/A | N/A | 1.34 | % | 1.20 | % | N/A | N/A | N/A | ||||||||||||||
| Return on average equity (1) | 11.66 | % | 11.72 | % | 11.45 | % | 10.25 | % | 11.31 | % | 11.29 | % | 11.40 | % | |||||||||
| Pre-tax, pre-provision return on average assets (1,3) | 1.95 | % | 1.95 | % | 1.87 | % | 1.66 | % | 1.87 | % | 1.86 | % | 1.66 | % | |||||||||
| Yield on earnings assets (1) | 4.90 | % | 4.94 | % | 4.92 | % | 4.82 | % | 4.93 | % | 4.90 | % | 4.72 | % | |||||||||
| Yield on loans receivable (1) | 5.36 | % | 5.36 | % | 5.39 | % | 5.40 | % | 5.39 | % | 5.38 | % | 5.18 | % | |||||||||
| Loan yield excluding fees (1) | 5.15 | % | 5.24 | % | 5.23 | % | 5.22 | % | 5.15 | % | 5.21 | % | 5.00 | % | |||||||||
| Cost of funds (1) | 0.70 | % | 0.72 | % | 0.74 | % | 0.76 | % | 0.56 | % | 0.73 | % | 0.52 | % | |||||||||
| Cost of funds, as adjusted (1,4) | N/A | N/A | 0.71 | % | 0.61 | % | N/A | N/A | N/A | ||||||||||||||
| Cost of deposits (1) | 0.63 | % | 0.64 | % | 0.66 | % | 0.68 | % | 0.47 | % | 0.65 | % | 0.42 | % | |||||||||
| Cost of deposits, as adjusted (1,5) | N/A | N/A | 0.63 | % | 0.52 | % | N/A | N/A | N/A | ||||||||||||||
| Net interest margin (1) | 4.26 | % | 4.29 | % | 4.24 | % | 4.13 | % | 4.43 | % | 4.23 | % | 4.24 | % | |||||||||
| Net interest margin, as adjusted (1,6) | N/A | N/A | 4.38 | % | 4.48 | % | N/A | N/A | N/A | ||||||||||||||
| Noninterest expense to average assets (1) | 2.90 | % | 2.98 | % | 3.06 | % | 3.12 | % | 3.12 | % | 3.01 | % | 3.09 | % | |||||||||
| Noninterest expense to average assets, as adjusted (1,7) | N/A | N/A | 3.12 | % | 3.37 | % | N/A | N/A | N/A | ||||||||||||||
| Efficiency ratio | 59.86 | % | 60.46 | % | 62.05 | % | 65.20 | % | 62.54 | % | 61.79 | % | 65.08 | % | |||||||||
| Loans receivable to deposits | 97.02 | % | 94.78 | % | 97.39 | % | 81.01 | % | 95.56 | % | 97.02 | % | 95.56 | % | |||||||||
| Loans receivable to deposits, as adjusted (8) | N/A | N/A | N/A | 97.44 | % | N/A | N/A | N/A | |||||||||||||||
| (1) Annualized calculations shown for quarterly periods presented. | |||||||||||||||||||||||
| (2) For quarters ended June 30, 2019 and March 31, 2019, adjusted return on average assets is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is return on average assets. See page 16 for more information. Immaterial impact for years ended December 31, 2019 and 2018. | |||||||||||||||||||||||
| (3) Pre-tax, pre-provision return on average assets is a non-GAAP measure that excludes the impact provision and income tax expense from return on average assets. The most directly comparable GAAP measure is return on average assets. | |||||||||||||||||||||||
| (4) For quarters ended June 30, 2019 and March 31, 2019, adjusted cost of funds is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is cost of funds. See page 16 for more information. Immaterial impact for years ended December 31, 2019 and 2018. | |||||||||||||||||||||||
| (5) For quarters ended June 30, 2019 and March 31, 2019, adjusted cost of deposits is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is cost of deposits. See page 16 for more information. Immaterial impact for years ended December 31, 2019 and 2018. | |||||||||||||||||||||||
| (6) For quarters ended June 30, 2019 and March 31, 2019, adjusted net interest margin is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is net interest margin. See page 16 for more information. Immaterial impact for years ended December 31, 2019 and 2018. | |||||||||||||||||||||||
| (7) For quarters ended June 30, 2019 and March 31, 2019, adjusted noninterest expense to average assets is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is noninterest expense to average assets. See page 16 for more information. Immaterial impact for years ended December 31, 2019 and 2018. | |||||||||||||||||||||||
| (8) For quarter ended March 31, 2019, adjusted loans receivable to deposits is a non-GAAP measure that excludes BaaS-brokered deposits on balance sheet. The most directly comparable GAAP measure is loans receivable to deposits. See page 16 for more information. Immaterial impact for years ended December 31, 2019 and 2018. | |||||||||||||||||||||||
Noninterest income was $2.1 million for the fourth quarter of 2019, a decrease of $29,000 from the third quarter of 2019, and an increase of $458,000 from $1.6 million for the comparable period one year ago. A $332,000 increase in loan referral fees and $200,000 increase in BaaS fees was partially offset by $369,000 lower gain on sale of loans and $171,000 less on realized net gain on sale of securities when compared to the quarter ended September 30, 2019. The $458,000 increase over the quarter ended December 31, 2018 was largely due to a $317,000 increase in fees earned from BaaS fees, a $167,000 increase in loan referral fees and $122,000 lower gain on sale of loans.
Noninterest income was $8.3 million for the year ended December 31, 2019, compared to $5.5 million for the year ended December 31, 2018. The increase is primarily related to an increase in BaaS fees of $1.4 million and an additional $820,000 in loan referral fee income, which is earned when we originate a variable rate loan and arrange for the borrower to enter into an interest rate swap agreement with a third party to fix the interest rate for an extended period. Increases in mortgage broker income of $232,000, gain on sales of loans of $226,000 and a realized net gain on sale of securities of $171,000 also contributed to the increase.
Total noninterest expense for the current quarter was $8.0 million compared to $7.7 million for the preceding quarter and increased 11.6% from $7.2 million from the comparable period one year ago. Noninterest expense variances for the quarter ended December 31, 2019 as compared to the quarter ended September 30, 2019 include a $88,000 increase in occupancy expense related to higher depreciation expense, maintenance and repairs, and utilities. Other expenses increased by $119,000 largely due to a $62,000 increase in software license expense and $87,000 more in bank examination fees. The increased expenses for the current quarter compared to the comparable quarter one year ago were largely due to increases in salary expenses. Full time equivalent employees at December 31, 2019 totaled 201, which was up 4.7% from the prior quarter and increased 9.8% from the quarter ended December 31, 2018. Staffing increases compared to the prior year are due to organic growth initiatives, and include increases in sales staff, hiring new banking teams, and staff for the Edmonds location opened in October 2018, plus additional back office staffing to support the incremental increases in banking teams, and to grow our BaaS CCBX division. Other expenses increased $190,000 as a result of $77,000 more in subscription and software license expense and $105,000 more in bank examination fees.
Total noninterest expense for the year ended December 31, 2019 was $31.1 million, an increase of $4.8 million or 18.5% compared to the same period last year. The increase is primarily attributable to $2.9 million in increased salary expense, as discussed above, an increase of $461,000 in occupancy expenses from our Edmonds branch opened in October 2018, higher rent expense for other locations, and increases in depreciation. In addition, we had an increase of $426,000 in legal and professional fees, largely due to expenses related to being a public company, and our BaaS activities through CCBX operations.
The provision for income taxes was $28,000 more this quarter compared to the third quarter of 2019, and $123,000 more than the fourth quarter of 2018, as a result of increased taxable income. The provision for income taxes was $920,000 more for the year ended December 31, 2019 compared to the year ended December 31, 2018 as a result of increased taxable income. The Company uses a federal statutory tax rate of 21% as a basis for calculating provision for income taxes.
Balance Sheet
The Company’s total assets increased $176.4 million, or 18.5% to $1.13 billion at December 31, 2019 from $952.1 million at December 31, 2018. The primary cause of the increase was a $169.1 million in increased net loans receivable. Additionally, the Company implemented the new lease accounting standard, which brought operating leases onto the balance sheet on January 1, 2019, and increased assets and liabilities $8.5 million and $8.7 million, respectively, as of December 31, 2019. In the quarter ended December 31, 2019 total assets increased $38.5 million, or 3.5% to $1.13 billion at December 31, 2019 from $1.09 billion at September 30, 2019. The increase was attributed to an increase in net loans receivable of $64.4 million partially offset by a decrease of $20.0 million in interest earning deposits with other banks.
Total loans receivable, net of allowance for loan losses, increased $169.1 million, or 22.3%, to $927.6 million at December 31, 2019, from $758.5 million at December 31, 2018 and $64.4 million or 7.5% from $863.2 million at September 30, 2019. The growth in net loans receivable over the previous year end was due primarily to increases in commercial real estate loans of $97.4 million, $33.0 million in construction, land and land development loans, $21.0 million in commercial and industrial loans and $20.3 million in residential real estate loans. As a percent of total loans, all categories remained consistent with December 31, 2018, and we have been able to maintain this allocation by growing all areas of our portfolio. The increase over the quarter ended September 30, 2019 was due to increases in commercial real estate of $34.8 million, $14.2 million in residential real estate and $10.1 million in construction, land and land development loans
The following table summarizes the loan portfolio at the periods indicated.
| As of | |||||||||||||||||||||
| December 31, 2019 | September 30, 2019 | December 31, 2018 | |||||||||||||||||||
| (Dollars in thousands) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Commercial and industrial loans | $ | 111,401 | 11.8 | % | $ | 105,634 | 12.1 | % | $ | 90,390 | 11.8 | % | |||||||||
| Real estate: | |||||||||||||||||||||
| Construction, land and land development | 97,034 | 10.3 | 86,919 | 9.9 | 64,045 | 8.3 | |||||||||||||||
| Residential | 115,011 | 12.2 | 100,818 | 11.5 | 94,745 | 12.3 | |||||||||||||||
| Commercial real estate | 613,398 | 65.2 | 578,607 | 66.1 | 515,959 | 67.1 | |||||||||||||||
| Consumer and other | 4,214 | 0.5 | 3,720 | 0.4 | 3,584 | 0.5 | |||||||||||||||
| Gross loans receivable | 941,058 | 100.0 | % | 875,698 | 100.0 | % | 768,723 | 100.0 | % | ||||||||||||
| Net deferred origination fees | (1,955 | ) | (1,586 | ) | (824 | ) | |||||||||||||||
| Loans receivable | $ | 939,103 | $ | 874,112 | $ | 767,899 | |||||||||||||||
Total deposits increased $164.3 million, or 20.5%, to $968.0 million at December 31, 2019 from $803.6 million at December 31, 2018. The increase is largely due to a $166.5 million increase in core deposits. During the year ended December 31, 2019 noninterest bearing deposits increased $77.7 million, or 26.5%, to $371.2 million from $293.5 million at December 31, 2018. NOW and money market accounts increased $88.0 million, savings accounts were static, BaaS-brokered deposits increased $13.1 million and time deposits decreased $15.2 million. Total deposits increased $45.7 million or 5.0% compared to September 30, 2019. This increase was largely due to an increase in noninterest bearing deposits of $22.2 million and $21.6 million increase in NOW and money market accounts. Our efforts to grow noninterest bearing and other core deposits is evidenced by the steady increase in these categories when compared to total deposits.
The following table summarizes the deposit portfolio at the periods indicated and breaks out BaaS-brokered deposits.
| As of | |||||||||||||||||||||
| December 31, 2019 | September 30, 2019 | December 31, 2018 | |||||||||||||||||||
| (Dollars in thousands) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Demand, noninterest bearing | $ | 371,243 | 38.4 | % | $ | 349,087 | 37.9 | % | $ | 293,525 | 36.5 | % | |||||||||
| NOW and money market | 437,908 | 45.2 | 416,315 | 45.1 | 349,952 | 43.6 | |||||||||||||||
| Savings | 53,365 | 5.5 | 52,191 | 5.7 | 52,572 | 6.5 | |||||||||||||||
| Total core deposits | 862,516 | 89.1 | 817,593 | 88.7 | 696,049 | 86.6 | |||||||||||||||
| BaaS brokered deposits | 23,586 | 2.4 | 13,340 | 1.4 | 10,521 | 1.3 | |||||||||||||||
| Time deposits less than $250,000 | 51,644 | 5.4 | 58,369 | 6.3 | 62,272 | 7.8 | |||||||||||||||
| Time deposits $250,000 and over | 30,213 | 3.1 | 32,947 | 3.6 | 34,772 | 4.3 | |||||||||||||||
| Total deposits | $ | 967,959 | 100.0 | % | $ | 922,249 | 100.0 | % | $ | 803,614 | 100.0 | % | |||||||||
Total shareholders’ equity increased $15.0 million since December 31, 2018. The increase in shareholders’ equity was primarily due to $13.2 million in net earnings during the year and a $1.3 million increase in additional other comprehensive income. During the third quarter of 2019, we sold $30.0 million of longer-term Treasury bonds (6-year average life) and replaced them with shorter-term Treasury bonds (less than 1-year average life) and certificates of deposit with one year maturities. As a result, our exposure to declines in the value of our available for sale investment portfolio has decreased.
Capital Ratios
The Company and the Bank remain well capitalized at December 31, 2019, as summarized in the following table.
| Capital Ratios: | Coastal Community Bank | Coastal Financial Corporation | Financial Institution Basel III Regulatory Guidelines | ||||||||
| Tier 1 leverage capital | 11.22 | % | 11.64 | % | 5.00 | % | |||||
| Tier 1 risk-based capital | 12.44 | % | 12.74 | % | 8.00 | % | |||||
| Common Equity Tier 1 risk-based capital | 12.44 | % | 13.10 | % | 6.50 | % | |||||
| Total risk-based capital | 13.64 | % | 15.35 | % | 10.00 | % | |||||
Asset Quality
The allowance for loan losses was 1.22% of loans receivable at December 31, 2019 compared to 1.25% at September 30, 2019 and 1.23% at December 31, 2018. Provision for loan losses totaled $820,000 for the current quarter, $637,000 for the preceding quarter, and $425,000 for the same quarter in the prior year. Net charge-offs totaled $238,000 for the quarter ended December 31, 2019, compared to net charge-offs of $192,000 for the quarter ended September 30, 2019 and $129,000 net charge-offs for the quarter ended December 31, 2018. Net charge-offs totaled $481,000 for the year ended December 31, 2019, compared to $436,000 in net charge-offs for the year ended December 31, 2018.
At December 31, 2019 our nonperforming assets were $1.0 million, or 0.09% of total assets, compared to $1.3 million or 0.12% of total assets at September 30, 2019, and $1.8 million, or 0.19% of total assets at December 31, 2018. There were no repossessed assets or other real estate owned at December 31, 2019.
Our nonperforming loans to loans receivable ratio was 0.11% at December 31, 2019, compared to 0.24% at December 31, 2018. Commercial and industrial nonaccrual loans totaled $965,000 at quarter end, and consisted of six lending relationships. During the fourth quarter charge-offs totaled $230,000 on nonperforming loans. Principal reductions along with the aforementioned charge-offs resulted in an overall decrease in our ratios of nonperforming loans and nonperforming assets to total assets compared to December 31, 2018. No additional loans were moved to nonperforming status in the fourth quarter.
Credit quality has remained stable throughout 2019 as demonstrated by the low level of charge-offs and declining nonperforming loan balance.
The following table details the Company’s nonperforming assets for the periods indicated.
| As of | ||||||||||
| December 31, | September 30, | December 31, | ||||||||
| (Dollars in thousands) | 2019 | 2019 | 2018 | |||||||
| Nonaccrual loans: | ||||||||||
| Commercial and industrial loans | $ | 965 | $ | 1,233 | $ | 493 | ||||
| Real estate: | ||||||||||
| Residential | 65 | 67 | 72 | |||||||
| Commercial real estate - troubled debt restructure | - | - | 1,261 | |||||||
| Total nonaccrual loans | 1,030 | 1,300 | 1,826 | |||||||
| Total accruing loans past due 90 days or more | - | - | - | |||||||
| Total nonperforming loans | 1,030 | 1,300 | 1,826 | |||||||
| Other real estate owned | - | - | - | |||||||
| Repossessed assets | - | - | - | |||||||
| Total nonperforming assets | $ | 1,030 | $ | 1,300 | $ | 1,826 | ||||
| Troubled debt restructurings, accruing | - | - | - | |||||||
| Total nonperforming loans to loans receivable | 0.11 | % | 0.15 | % | 0.24 | % | ||||
| Total nonperforming assets to total assets | 0.09 | % | 0.12 | % | 0.19 | % | ||||
About Coastal Financial
Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), is an Everett, Washington based bank holding company with Coastal Community Bank (the “Bank”), a full-service commercial bank, as its sole wholly-owned banking subsidiary. The $1 billion community bank that the Bank operates provides service through 14 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application. The Bank provides select partners with BaaS through its CCBX Division. To learn more about Coastal visit www.coastalbank.com.
Contact
Eric Sprink, President & Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of or reference to forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the risks and uncertainties discussed under “Risk Factors” in our Annual Report on Form 10-K for the most recent period filed, and in any of our subsequent filings with the Securities and Exchange Commission.
If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. You are cautioned not to place undue reliance on forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law.
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
| ASSETS | ||||||||||||
| December 31 | September 30, | December 31, | ||||||||||
| 2019 | 2019 | 2018 | ||||||||||
| Cash and due from banks | $ | 16,555 | $ | 22,060 | $ | 16,315 | ||||||
| Interest earning deposits with other banks | 111,259 | 131,287 | 109,467 | |||||||||
| Investment securities, available for sale, at fair value | 28,360 | 28,319 | 36,660 | |||||||||
| Investment securities, held to maturity, at amortized cost | 4,350 | 4,377 | 1,262 | |||||||||
| Other investments | 4,505 | 4,405 | 3,766 | |||||||||
| Loans receivable | 939,103 | 874,112 | 767,899 | |||||||||
| Allowance for loan losses | (11,470 | ) | (10,888 | ) | (9,407 | ) | ||||||
| Total loans receivable, net | 927,633 | 863,224 | 758,492 | |||||||||
| Premises and equipment, net | 13,108 | 13,167 | 13,167 | |||||||||
| Operating lease right-of-use assets | 8,493 | 9,205 | - | |||||||||
| Accrued interest receivable | 2,980 | 2,629 | 2,526 | |||||||||
| Bank-owned life insurance, net | 6,882 | 6,832 | 6,688 | |||||||||
| Deferred tax asset, net | 2,743 | 2,206 | 2,518 | |||||||||
| Other assets | 1,658 | 2,349 | 1,249 | |||||||||
| Total assets | $ | 1,128,526 | $ | 1,090,060 | $ | 952,110 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| LIABILITIES | ||||||||||||
| Deposits | $ | 967,959 | $ | 922,249 | $ | 803,614 | ||||||
| Federal Home Loan Bank (FHLB) advances | 10,000 | 20,000 | 20,000 | |||||||||
| Subordinated debt, net | 9,979 | 9,975 | 9,965 | |||||||||
| Junior subordinated debentures, net | 3,583 | 3,582 | 3,581 | |||||||||
| Deferred compensation | 974 | 1,000 | 1,078 | |||||||||
| Accrued interest payable | 308 | 303 | 279 | |||||||||
| Operating lease liabilities | 8,679 | 9,386 | - | |||||||||
| Other liabilities | 2,871 | 3,143 | 4,437 | |||||||||
| Total liabilities | 1,004,353 | 969,638 | 842,954 | |||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Common stock | 86,983 | 86,866 | 86,431 | |||||||||
| Retained earnings | 37,222 | 33,614 | 24,021 | |||||||||
| Accumulated other comprehensive loss, net of tax | (32 | ) | (58 | ) | (1,296 | ) | ||||||
| Total shareholders’ equity | 124,173 | 120,422 | 109,156 | |||||||||
| Total liabilities and shareholders’ equity | $ | 1,128,526 | $ | 1,090,060 | $ | 952,110 | ||||||
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| Three months ended | |||||||||
| December 31, | September 30, | December 31, | |||||||
| 2019 | 2019 | 2018 | |||||||
| INTEREST AND DIVIDEND INCOME | |||||||||
| Interest and fees on loans | $ | 12,323 | $ | 11,691 | $ | 10,308 | |||
| Interest on interest earning deposits with other banks | 477 | 486 | 483 | ||||||
| Interest on investment securities | 154 | 168 | 155 | ||||||
| Dividends on other investments | 80 | 10 | 65 | ||||||
| Total interest and dividend income | 13,034 | 12,355 | 11,011 | ||||||
| INTEREST EXPENSE | |||||||||
| Interest on deposits | 1,511 | 1,435 | 932 | ||||||
| Interest on borrowed funds | 192 | 193 | 191 | ||||||
| Total interest expense | 1,703 | 1,628 | 1,123 | ||||||
| Net interest income | 11,331 | 10,727 | 9,888 | ||||||
| PROVISION FOR LOAN LOSSES | 820 | 637 | 425 | ||||||
| Net interest income after provision for loan losses | 10,511 | 10,090 | 9,463 | ||||||
| NONINTEREST INCOME | |||||||||
| Deposit service charges and fees | 805 | 795 | 803 | ||||||
| BaaS fees | 656 | 456 | 339 | ||||||
| Loan referral fees | 332 | - | 165 | ||||||
| Mortgage broker fees | 111 | 140 | 57 | ||||||
| Sublease and lease income | 27 | 16 | 10 | ||||||
| Gain on sales of loans, net | - | 369 | 122 | ||||||
| Gain on sales of securities, net | - | 171 | - | ||||||
| Other | 128 | 141 | 105 | ||||||
| Total noninterest income | 2,059 | 2,088 | 1,601 | ||||||
| NONINTEREST EXPENSE | |||||||||
| Salaries and employee benefits | 4,901 | 4,971 | 4,354 | ||||||
| Occupancy | 972 | 884 | 889 | ||||||
| Data processing | 544 | 509 | 499 | ||||||
| Director and staff expenses | 302 | 241 | 208 | ||||||
| Excise taxes | 190 | 184 | 155 | ||||||
| Marketing | 93 | 98 | 120 | ||||||
| Legal and professional fees | 231 | 170 | 325 | ||||||
| Federal Deposit Insurance Corporation (FDIC) assessments | (21 | ) | (4 | ) | 48 | ||||
| Business development | 111 | 122 | 85 | ||||||
| Other | 692 | 573 | 502 | ||||||
| Total noninterest expense | 8,015 | 7,748 | 7,185 | ||||||
| Income before provision for income taxes | 4,555 | 4,430 | 3,879 | ||||||
| PROVISION FOR INCOME TAXES | 947 | 919 | 824 | ||||||
| NET INCOME | $ | 3,608 | $ | 3,511 | $ | 3,055 | |||
| Basic earnings per common share | $ | 0.30 | $ | 0.30 | $ | 0.26 | |||
| Diluted earnings per common share | $ | 0.30 | $ | 0.29 | $ | 0.25 | |||
| Weighted average number of common shares outstanding: | |||||||||
| Basic | 11,903,750 | 11,901,873 | 11,877,261 | ||||||
| Diluted | 12,213,512 | 12,188,507 | 12,166,250 | ||||||
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| Year ended | ||||||
| December 31, | December 31, | |||||
| 2019 | 2018 | |||||
| INTEREST AND DIVIDEND INCOME | ||||||
| Interest and fees on loans | $ | 45,350 | $ | 36,537 | ||
| Interest on interest earning deposits with other banks | 2,423 | 1,432 | ||||
| Interest on investment securities | 635 | 618 | ||||
| Dividends on other investments | 179 | 156 | ||||
| Total interest and dividend income | 48,587 | 38,743 | ||||
| INTEREST EXPENSE | ||||||
| Interest on deposits | 5,802 | 3,141 | ||||
| Interest on borrowed funds | 774 | 785 | ||||
| Total interest expense | 6,576 | 3,926 | ||||
| Net interest income | 42,011 | 34,817 | ||||
| PROVISION FOR LOAN LOSSES | 2,544 | 1,826 | ||||
| Net interest income after provision for loan losses | 39,467 | 32,991 | ||||
| NONINTEREST INCOME | ||||||
| Deposit service charges and fees | 3,107 | 3,061 | ||||
| BaaS fees | 2,060 | 709 | ||||
| Loan referral fees | 1,438 | 618 | ||||
| Mortgage broker fees | 447 | 215 | ||||
| Sublease and lease income | 58 | 81 | ||||
| Gain on sales of loans, net | 490 | 264 | ||||
| Gain on sales of securities, net | 171 | - | ||||
| Other | 487 | 519 | ||||
| Total noninterest income | 8,258 | 5,467 | ||||
| NONINTEREST EXPENSE | ||||||
| Salaries and employee benefits | 18,959 | 16,026 | ||||
| Occupancy | 3,775 | 3,314 | ||||
| Data processing | 2,081 | 1,971 | ||||
| Director and staff expenses | 1,000 | 701 | ||||
| Excise taxes | 719 | 559 | ||||
| Marketing | 393 | 373 | ||||
| Legal and professional fees | 1,103 | 677 | ||||
| Federal Deposit Insurance Corporation (FDIC) assessments | 184 | 295 | ||||
| Business development | 431 | 326 | ||||
| Other | 2,418 | 1,974 | ||||
| Total noninterest expense | 31,063 | 26,216 | ||||
| Income before provision for income taxes | 16,662 | 12,242 | ||||
| PROVISION FOR INCOME TAXES | 3,461 | 2,541 | ||||
| NET INCOME | $ | 13,201 | $ | 9,701 | ||
| Basic earnings per common share | $ | 1.11 | $ | 0.93 | ||
| Diluted earnings per common share | $ | 1.08 | $ | 0.91 | ||
| Weighted average number of common shares outstanding: | ||||||
| Basic | 11,896,258 | 10,440,740 | ||||
| Diluted | 12,196,120 | 10,608,764 | ||||
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
| For the Three Months Ended | |||||||||||||||||||||||||||||
| December 31, 2019 | September 30, 2019 | December 31, 2018 | |||||||||||||||||||||||||||
| Average | Interest & | Yield / | Average | Interest & | Yield / | Average | Interest & | Yield / | |||||||||||||||||||||
| Balance | Dividends | Cost (4) | Balance | Dividends | Cost (4) | Balance | Dividends | Cost (4) | |||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||||||||
| Interest earning deposits | $ | 106,985 | $ | 477 | 1.77 | % | $ | 85,406 | $ | 486 | 2.26 | % | $ | 83,751 | $ | 483 | 2.29 | % | |||||||||||
| Investment securities (1) | 32,871 | 154 | 1.86 | 36,974 | 168 | 1.80 | 39,590 | 155 | 1.55 | ||||||||||||||||||||
| Other Investments | 3,743 | 80 | 8.48 | 3,621 | 10 | 1.10 | 2,974 | 65 | 8.67 | ||||||||||||||||||||
| Loans receivable (2) | 911,373 | 12,323 | 5.36 | 865,674 | 11,691 | 5.36 | 759,084 | 10,308 | 5.39 | ||||||||||||||||||||
| Total interest earning assets | 1,054,972 | 13,034 | 4.90 | 991,675 | 12,355 | 4.94 | $ | 885,399 | $ | 11,011 | 4.93 | ||||||||||||||||||
| Noninterest earning assets: | |||||||||||||||||||||||||||||
| Allowance for loan losses | (11,002 | ) | (10,548 | ) | (9,191 | ) | |||||||||||||||||||||||
| Other noninterest earning assets | 51,373 | 50,842 | 37,155 | ||||||||||||||||||||||||||
| Total assets | $ | 1,095,343 | $ | 1,031,969 | $ | 913,363 | |||||||||||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||||||||
| Interest bearing deposits | $ | 585,277 | $ | 1,511 | 1.02 | % | $ | 555,665 | $ | 1,435 | 1.02 | % | $ | 495,931 | $ | 932 | 0.75 | % | |||||||||||
| Subordinated debt, net | 9,977 | 148 | 5.89 | 9,973 | 148 | 5.89 | 9,962 | 148 | 5.89 | ||||||||||||||||||||
| Junior subordinated debentures, net | 3,583 | 39 | 4.32 | 3,582 | 42 | 4.65 | 3,581 | 42 | 4.65 | ||||||||||||||||||||
| FHLB advances and other borrowings | 893 | 5 | 2.22 | 539 | 3 | 2.21 | 295 | 1 | 1.34 | ||||||||||||||||||||
| Total interest bearing liabilities | 599,730 | 1,703 | 1.13 | 569,759 | 1,628 | 1.13 | $ | 509,769 | $ | 1,123 | 0.87 | ||||||||||||||||||
| Noninterest bearing deposits | 360,030 | 330,553 | 292,866 | ||||||||||||||||||||||||||
| Other liabilities | 12,869 | 12,756 | 3,529 | ||||||||||||||||||||||||||
| Total shareholders' equity | 122,714 | 118,901 | 107,199 | ||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,095,343 | $ | 1,031,969 | $ | 913,363 | |||||||||||||||||||||||
| Net interest income | $ | 11,331 | $ | 10,727 | $ | 9,888 | |||||||||||||||||||||||
| Interest rate spread | 3.77 | % | 3.81 | % | 4.06 | % | |||||||||||||||||||||||
| Net interest margin (3) | 4.26 | % | 4.29 | % | 4.43 | % | |||||||||||||||||||||||
| (1) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts. | |||||||||||||||||||||||||||||
| (2) Includes nonaccrual loans. | |||||||||||||||||||||||||||||
| (3) Net interest margin represents net interest income divided by the average total interest earning assets. | |||||||||||||||||||||||||||||
| (4) Yields and costs are annualized. | |||||||||||||||||||||||||||||
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE
(Dollars in thousands; unaudited)
| For the Year Ended | |||||||||||||||||||
| December 31, 2019 | December 31, 2018 | ||||||||||||||||||
| Average | Interest & | Yield / | Average | Interest & | Yield / | ||||||||||||||
| Balance | Dividends | Cost | Balance | Dividends | Cost | ||||||||||||||
| Assets | |||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||
| Interest earning deposits | $ | 107,916 | $ | 2,423 | 2.25 | % | $ | 73,330 | $ | 1,432 | 1.95 | % | |||||||
| Investment securities (1) | 37,368 | 635 | 1.70 | 39,640 | 618 | 1.56 | |||||||||||||
| Other Investments | 3,545 | 179 | 5.05 | 3,022 | 156 | 5.16 | |||||||||||||
| Loans receivable (2) | 843,450 | 45,350 | 5.38 | 705,292 | 36,537 | 5.18 | |||||||||||||
| Total interest earning assets | $ | 992,279 | $ | 48,587 | 4.90 | $ | 821,284 | $ | 38,743 | 4.72 | |||||||||
| Noninterest earning assets: | |||||||||||||||||||
| Allowance for loan losses | (10,304 | ) | (8,657 | ) | |||||||||||||||
| Other noninterest earning assets | 49,998 | 36,631 | |||||||||||||||||
| Total assets | $ | 1,031,973 | $ | 849,258 | |||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||
| Interest bearing deposits | $ | 565,713 | $ | 5,802 | 1.03 | % | $ | 478,231 | $ | 3,141 | 0.66 | % | |||||||
| Subordinated debt, net | 9,971 | 587 | 5.89 | 9,957 | 587 | 5.90 | |||||||||||||
| Junior subordinated debentures, net | 3,582 | 168 | 4.69 | 3,580 | 157 | 4.39 | |||||||||||||
| FHLB advances and other borrowings | 819 | 19 | 2.32 | 2,010 | 41 | 2.04 | |||||||||||||
| Total interest bearing liabilities | $ | 580,085 | $ | 6,576 | 1.13 | $ | 493,778 | $ | 3,926 | 0.80 | |||||||||
| Noninterest bearing deposits | 322,064 | 267,227 | |||||||||||||||||
| Other liabilities | 12,944 | 3,154 | |||||||||||||||||
| Total shareholders' equity | 116,880 | 85,099 | |||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,031,973 | $ | 849,258 | |||||||||||||||
| Net interest income | $ | 42,011 | $ | 34,817 | |||||||||||||||
| Interest rate spread | 3.76 | % | 3.92 | % | |||||||||||||||
| Net interest margin (3) | 4.23 | % | 4.24 | % | |||||||||||||||
| (1) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts. | |||||||||||||||||||
| (2) Includes nonaccrual loans. | |||||||||||||||||||
| (3) Net interest margin represents net interest income divided by the average total interest earning assets. | |||||||||||||||||||
COASTAL FINANCIAL CORPORATION
QUARTERLY STATISTICS
(Dollars in thousands, except share and per share data; unaudited)
| Three Months Ended | |||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| 2019 | 2019 | 2019 | 2019 | 2018 | |||||||||||
| Income Statement Data: | |||||||||||||||
| Interest and dividend income | $ | 13,034 | $ | 12,355 | $ | 11,804 | $ | 11,394 | $ | 11,011 | |||||
| Interest expense | 1,703 | 1,628 | 1,618 | 1,627 | 1,123 | ||||||||||
| Net interest income | 11,331 | 10,727 | 10,186 | 9,767 | 9,888 | ||||||||||
| Provision for loan losses | 820 | 637 | 547 | 540 | 425 | ||||||||||
| Net interest income after provision for loan losses | 10,511 | 10,090 | 9,639 | 9,227 | 9,463 | ||||||||||
| Noninterest income | 2,059 | 2,088 | 2,132 | 1,984 | 1,601 | ||||||||||
| Noninterest expense | 8,015 | 7,748 | 7,643 | 7,662 | 7,185 | ||||||||||
| Net income - pre-tax, pre-provision | 5,375 | 5,067 | 4,675 | 4,089 | 4,304 | ||||||||||
| Provision for income tax | 947 | 919 | 854 | 741 | 824 | ||||||||||
| Net income | 3,608 | 3,511 | 3,274 | 2,808 | 3,055 | ||||||||||
| As of Period End or for the Three Month Period | |||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| 2019 | 2019 | 2019 | 2019 | 2018 | |||||||||||
| Balance Sheet Data: | |||||||||||||||
| Cash and cash equivalents | $ | 127,814 | $ | 153,347 | $ | 113,470 | $ | 257,659 | $ | 125,782 | |||||
| Investment securities | 32,710 | 32,696 | 42,381 | 38,217 | 37,922 | ||||||||||
| Loans receivable | 939,103 | 874,112 | 845,443 | 791,072 | 767,899 | ||||||||||
| Allowance for loan losses | (11,470 | ) | (10,888 | ) | (10,443 | ) | (9,915 | ) | (9,407 | ) | |||||
| Total assets | 1,128,526 | 1,090,060 | 1,031,024 | 1,116,090 | 952,110 | ||||||||||
| Interest bearing deposits | 596,716 | 573,162 | 552,254 | 680,249 | 510,089 | ||||||||||
| Noninterest bearing deposits | 371,243 | 349,087 | 315,890 | 296,247 | 293,525 | ||||||||||
| Core deposits (1) | 862,516 | 817,593 | 754,768 | 716,623 | 696,049 | ||||||||||
| Total deposits | 967,959 | 922,249 | 868,144 | 976,496 | 803,614 | ||||||||||
| Total borrowings | 23,562 | 33,557 | 33,554 | 13,549 | 33,546 | ||||||||||
| Total shareholders’ equity | 124,173 | 120,422 | 116,591 | 112,365 | 109,156 | ||||||||||
| Share and Per Share Data (2): | |||||||||||||||
| Earnings per share – basic | $ | 0.30 | $ | 0.30 | $ | 0.28 | $ | 0.24 | $ | 0.26 | |||||
| Earnings per share – diluted | $ | 0.30 | $ | 0.29 | $ | 0.27 | $ | 0.23 | $ | 0.25 | |||||
| Dividends per share | - | - | - | - | - | ||||||||||
| Book value per share (3) | $ | 10.42 | $ | 10.11 | $ | 9.79 | $ | 9.44 | $ | 9.18 | |||||
| Tangible book value per share (4) | $ | 10.42 | $ | 10.11 | $ | 9.79 | $ | 9.44 | $ | 9.18 | |||||
| Weighted avg outstanding shares – basic | 11,903,750 | 11,901,873 | 11,895,026 | 11,884,107 | 11,877,261 | ||||||||||
| Weighted avg outstanding shares – diluted | 12,213,512 | 12,188,507 | 12,202,197 | 12,183,234 | 12,166,250 | ||||||||||
| Shares outstanding at end of period | 11,913,885 | 11,912,115 | 11,908,185 | 11,902,715 | 11,893,203 | ||||||||||
| Stock options outstanding at end of period | 784,217 | 786,257 | 791,267 | 804,117 | 688,312 | ||||||||||
| As of Period End or for the Three Month Period | |||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| 2019 | 2019 | 2019 | 2019 | 2018 | |||||||||||
| Credit Quality Data: | |||||||||||||||
| Nonperforming assets to total assets | 0.09 | % | 0.12 | % | 0.16 | % | 0.12 | % | 0.19 | % | |||||
| Nonperforming assets to loans receivable and OREO | 0.11 | % | 0.15 | % | 0.19 | % | 0.17 | % | 0.24 | % | |||||
| Nonperforming loans to total loans receivable | 0.11 | % | 0.15 | % | 0.19 | % | 0.17 | % | 0.24 | % | |||||
| Allowance for loan losses to nonperforming loans | 1113.6 | % | 837.5 | % | 633.7 | % | 754.6 | % | 515.2 | % | |||||
| Allowance for loan losses to total loans receivable | 1.22 | % | 1.25 | % | 1.24 | % | 1.25 | % | 1.23 | % | |||||
| Gross charge-offs | $ | 242 | $ | 196 | $ | 22 | $ | 34 | $ | 134 | |||||
| Gross recoveries | $ | 4 | $ | 4 | $ | 3 | $ | 2 | $ | 5 | |||||
| Net charge-offs to average loans (5) | 0.10 | % | 0.09 | % | 0.01 | % | 0.02 | % | 0.07 | % | |||||
| Capital Ratios (6): | |||||||||||||||
| Tier 1 leverage capital | 11.64 | % | 12.00 | % | 11.99 | % | 11.57 | % | 12.46 | % | |||||
| Tier 1 risk-based capital | 12.74 | % | 13.40 | % | 12.99 | % | 13.66 | % | 14.13 | % | |||||
| Common equity Tier 1 risk-based capital | 13.10 | % | 13.02 | % | 13.37 | % | 13.24 | % | 13.70 | % | |||||
| Total risk-based capital | 15.35 | % | 15.70 | % | 15.70 | % | 16.06 | % | 16.58 | % | |||||
| (1) Core deposits are defined as all deposits excluding BaaS-brokered and time deposits. | |||||||||||||||
| (2) Share and per share amounts are based on total common shares outstanding, which includes common stock and nonvoting common stock. | |||||||||||||||
| (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, which includes common stock and nonvoting common stock, 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, which includes common stock and nonvoting common stock, at the end of each period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated. | |||||||||||||||
| (5) Annualized calculations. | |||||||||||||||
| (6) Capital ratios are for the Company, Coastal Financial Corporation. | |||||||||||||||
Non-GAAP Financial Measures
This earnings release contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP. These non-GAAP financial measures are presented to illustrate the impact of temporary high rate BaaS deposits on the balance sheet. By removing these temporary deposits to show what the results would have been without them we are providing the investors with the information to better compare results with periods that did not have these temporary deposits. These measures include the following:
“Adjusted return on average assets” is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is return on average assets.
“Adjusted cost of funds” is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is cost of funds.
“Adjusted cost of deposits” is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is cost of deposits.
“Adjusted net interest margin” is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is net interest margin.
“Adjusted noninterest expense to average assets” is a non-GAAP measure that excludes the temporary impact of holding high rate BaaS deposits on balance sheet. The most directly comparable GAAP measure is noninterest expense to average assets.
“Adjusted loans receivable to deposits” is a non-GAAP measure that excludes BaaS-brokered deposits on balance sheet. The most directly comparable GAAP measure is loans receivable to deposits.
The Company also presented comparable earnings information using GAAP financial measures. Reconciliations of the GAAP and non-GAAP measures are presented below.
| As of and for the Three Months Ended | ||||||||
| (Dollars in thousands) | June 30, 2019 | March 31, 2019 | ||||||
| Adjusted return on average assets: | ||||||||
| Total average assets | $ | 1,002,436 | $ | 997,069 | ||||
| Less: average BaaS-brokered deposits | 20,252 | 74,116 | ||||||
| Adjusted total average deposits and borrowings | $ | 982,184 | $ | 922,953 | ||||
| Total net income | $ | 3,274 | $ | 2,808 | ||||
| Less: fees earned on servicing BaaS-brokered deposits | 36 | 78 | ||||||
| Adjusted net income | $ | 3,238 | $ | 2,730 | ||||
| Adjusted return on average assets: | 1.34 | % | 1.20 | % | ||||
| Adjusted cost of funds: | ||||||||
| Total average deposits and borrowings | $ | 874,610 | $ | 872,979 | ||||
| Less: average BaaS-brokered deposits | 20,252 | 74,116 | ||||||
| Adjusted total average deposits and borrowings | $ | 854,358 | $ | 798,863 | ||||
| Total interest expense | $ | 1,618 | $ | 1,627 | ||||
| Less: interest expense on BaaS-brokered deposits | 116 | 435 | ||||||
| Adjusted interest expense | $ | 1,502 | $ | 1,192 | ||||
| Adjusted cost of funds: | 0.71 | % | 0.61 | % | ||||
| Adjusted cost on deposits: | ||||||||
| Total average deposits | $ | 859,516 | $ | 859,135 | ||||
| Less: average BaaS-brokered deposits | 20,252 | 74,116 | ||||||
| Adjusted total average deposits | $ | 839,264 | $ | 785,019 | ||||
| Interest expense on deposits | $ | 1,420 | $ | 1,436 | ||||
| Less: interest expense on BaaS-brokered deposits | 116 | 435 | ||||||
| Adjusted interest expense on interest bearing deposits | $ | 1,304 | $ | 1,001 | ||||
| Adjusted cost of deposits: | 0.63 | % | 0.52 | % | ||||
| Adjusted net interest margin: | ||||||||
| Total average interest earning assets | $ | 962,867 | $ | 958,547 | ||||
| Less: average BaaS-brokered deposits held in cash | 20,252 | 74,116 | ||||||
| Adjusted total average interest earning assets | $ | 942,615 | $ | 884,431 | ||||
| Total net interest income | $ | 10,186 | $ | 9,767 | ||||
| Less: interest income earned BaaS-brokered deposits held in cash | 116 | 435 | ||||||
| Plus: interest expense on BaaS-brokered deposits | 116 | 435 | ||||||
| Adjusted net interest income | 10,186 | 9,767 | ||||||
| Adjusted net interest margin: | 4.38 | % | 4.48 | % | ||||
| Adjusted noninterest expense to average assets: | ||||||||
| Total average assets | $ | 1,002,436 | $ | 997,069 | ||||
| Less: average BaaS-brokered deposits | 20,252 | 74,116 | ||||||
| Adjusted total average assets | $ | 982,184 | $ | 922,953 | ||||
| Total noninterest expense | $ | 7,643 | $ | 7,662 | ||||
| Adjusted noninterest expense to average assets: | 3.12 | % | 3.37 | % | ||||
| As of and for the Three Months Ended | ||||||||
| (Dollars in thousands) | June 30, 2019 | March 31, 2019 | ||||||
| Adjusted loans receivable to deposits (1): | ||||||||
| Total loans receivable | n/a | $ | 791,072 | |||||
| Total deposits | n/a | 976,496 | ||||||
| Less: BaaS-brokered deposits | n/a | 164,604 | ||||||
| Total deposits, less BaaS-brokered deposits | n/a | $ | 811,892 | |||||
| Adjusted loans receivable to deposits: | n/a | 97.44 | % | |||||
| (1) Adjusted loans receivable to deposits is only presented for periods that include atypically large BaaS-brokered deposits as of the end of the period presented. | ||||||||