Investor Relations

Press Release

Coastal Financial Corporation Announces Third Quarter 2018 Results

Company Release - 10/23/2018 4:01 PM ET

2018 Third Quarter Highlights:

  • Net income totaled $2.6 million for the third quarter of 2018, or $0.22 per diluted common share, up 18.2% from $2.2 million for the second quarter of 2018.
  • Total assets were $917.0 million at September 30, 2018, up 7.8% from $850.9 million at June 30, 2018.
  • Total loans receivable grew at a rate of 17.8% annualized for the nine months ended September 30, 2018.
  • Total deposits grew at a rate of 13.5% annualized for the nine months ended September 30, 2018.
  • Noninterest bearing deposits at September 30, 2018 were 36.9% of total deposits.
  • Cost of deposits were 0.44% for the third quarter of 2018, up 0.04% from the second quarter of 2018.
  • Initial public offering of 2,577,500 shares of common stock completed, on July 18, 2018, for net proceeds of $33.2 million.

EVERETT, Wash., Oct. 23, 2018 (GLOBE NEWSWIRE) -- Coastal Financial Corporation (NASDAQ: CCB) (the “Company”) today reported unaudited financial results for the third quarter 2018.  Net income for the third quarter of 2018 was $2.6 million, or $0.22 per diluted common share, compared with net income of $2.2 million, or $0.24 per diluted share, for the second quarter of 2018.

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

Eric Sprink, President and CEO, commented, “We had a solid third quarter with record earnings of $2.6 million, record loan growth of $43.6 million, and deposit growth of $30.3 million of which $26.5 million of the growth was in noninterest bearing deposits.  The strong increases in loans and core deposits starts to leverage a portion of the $33.2 million in capital raised in our July initial public offering (IPO) and positions us well for future earnings.  We also took advantage of an opportunity to hire local and experienced staff in third quarter to open our fourteenth branch on October 9, 2018.  The new branch in Edmonds, Washington (a $975 million deposit market – based on FDIC Summary of Deposits as of June 30, 2018) positions us well for future deposit growth and to continue leveraging capital through our organic growth strategy.  In addition to growing the Bank, we continue to explore opportunities with Fintech companies with the aim of building another recurring fee income source.”

The Company had net income of $6.6 million for the nine months ended September 30, 2018, or $0.66 per diluted common share, compared to $5.1 million, or $0.55 per diluted common share for the nine months ended September 30, 2017.

Results of Operations

Net interest income was $8.8 million for the three months ended September 30, 2018, an increase of 6.0% from $8.3 million for the second quarter of 2018, and an increase of 17.3% from $7.5 million for the third quarter of 2017. Increases over the prior quarter and prior year were the result of growth in interest earning assets, primarily loans, and improvements in net interest margin. Net interest income for the nine months ended September 30, 2018 totaled $24.9 million, an increase of 15.3% compared to the same period last year. The $3.3 million increase in net interest income over the same period last year was primarily related to growth in loan balances. During the nine months ended September 30, 2018, the average balance of total loans receivable increased by $77.2 million, compared to the same period last year. The $3.5 million increase in loan interest income was partially offset by increased deposit costs of $683,000 from the growth in the average balance of our deposits of $47.2 million and an increase in the cost of deposit funds of 15 basis points, compared to the same period last year.

Net interest margin for the quarter ended September 30, 2018 decreased 13 basis points to 4.13% from 4.26% for the second quarter of 2018 and decreased one basis point from 4.14% for the third quarter of 2017. The net interest margin for the quarter ended September 30, 2018 is a normalized margin, as compared to prior quarters. The quarter ended June 30, 2018 included significant prepayment penalties and deferred fees recognized on loans paid off.  The slight decrease from the same period one year ago is primarily related to increased deposit costs over the period and a slight shift in the mix of interest earning assets of approximately 3% to more lower yielding interest bearing deposits from loans receivable. This allocation shift is a result of cash received from the IPO, which is temporary and will be gradually deployed into higher earning assets.

Net interest margin for the nine months ended September 30, 2018 increased eight basis points to 4.17% from 4.09% for the comparable period last year. The increase in net interest margin over the comparable period in the prior year was primarily due to increases in loan volume as a percent of earning assets and higher prepayment penalties and deferred fees recognized on loans paid off in the first two quarters of 2018, and to a lesser extent, increases in average loan yields.

Loan yields for the quarter ended September 30, 2018 were 5.12%, an increase of one basis point from 5.11% for the quarter ended June 30, 2018, and a ten basis point increase from 5.02% for the quarter ended September 30, 2017. Loan yields for the nine months ended September 30, 2018 were 5.10%, an increase of 12 basis points from 4.98% for the nine months ended September 30, 2017. Contractual loan yields approximated 5.02% for the three months ended September 30, 2018, 4.92% for the three months ended June 30, 2018, and 4.91% for the three months ended September 30, 2017.  The ten basis point increase in contractual loan yields, as compared to prior quarter, was from pricing new loans at higher rates and variable loans repricing with the increase in Federal Funds rate.

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

   Three months ended  Nine months ended 
  September 30, 2018 June 30, 2018 September 30, 2017  September 30, 2018 September 30, 2017 
                  
Return on average assets (1)  1.18% 1.09% 1.02%  1.07% 0.92%
Return on average shareholders’ equity (1)  10.59% 12.90% 11.75%  11.37% 10.41%
Yield on earnings assets (1)  4.62% 4.73% 4.54%  4.64% 4.48%
Yield on loans receivable (1)  5.12% 5.11% 5.02%  5.10% 4.98%
Cost of funds (1)  0.53% 0.50% 0.43%  0.50% 0.41%
Cost of deposits (1)  0.44% 0.40% 0.33%  0.40% 0.31%
Net interest margin (1)  4.13% 4.26% 4.14%  4.17% 4.09%
Noninterest expense to average assets (1)  2.99% 3.15% 3.12%  3.07% 3.02%
Efficiency ratio  63.59% 66.77% 66.50%  66.09% 67.44%
Loans receivable to deposits  96.08% 94.12% 92.55%  96.08% 92.55%
                  
(1) annualized calculations                 

Noninterest income was $1.5 million for the third quarter of 2018, an increase of $333,000 from $1.2 million for the second quarter of 2018 and an increase of $296,000 from $1.3 million for the comparable period one year ago. The increase compared to the prior quarter and to the same quarter one year ago was primarily due fees earned from wholesale banking services provided which resulted in an additional $286,000 of income during the quarter, and additional $328,000 of income compared to the same quarter last year. Additional noninterest income in the current quarter as compared to the same quarter one year ago were related to increases in existing deposit fees and the introduction of few new deposit fees. Our deposit fees are now roughly in line with peers. Sublease and lease income decreased in the third quarter 2018, as compared to the third quarter 2017, as a result of a long-term tenant electing to not renew its lease.

Noninterest income was $3.9 million for the nine months ended September 30, 2018, compared to $3.1 million for the nine months ended September 30, 2017. The increase was primarily related to wholesale banking services and increases in deposit fees. Loan referral fee income, which is earned when a borrower enters into an interest rate swap agreement with a third party also grew and totaled $453,000 for the nine months ended September 30, 2018, an increase of $177,000 from the same period last year.

Total noninterest expense for the current quarter increased 3.1% to $6.6 million from $6.4 million for the preceding quarter and increased 13.8% from $5.8 million from the comparable period one year ago. The increased expenses for the current quarter compared to the prior quarter and previous quarter one year ago were primarily due to increases in salary expenses. Full time equivalent employees increased 4% during the current quarter and increased 9% from the same quarter one year ago. Staffing increases are due to the continued organic growth initiatives, and includes increases in sales staff, including hiring new banking teams, and additional back office staffing to support the incremental increases in banking teams and for operation as a public company.  During the quarter legal and professional fees continued to be higher by $37,000 as a result of growth initiatives and credit actions, $68,000 of expenses related to hiring staff early for new Edmonds branch plus ordinary costs associated with opening a new branch, and increasing our unfunded commitment reserve by $54,000 for increased loan commitments.

Total noninterest expense for the nine months ended September 30, 2018 totaled $19.0 million, an increase of 14.5% compared to the same period last year. The increase is primarily attributable to increased salary expense from our organic growth initiatives, new wholesale banking services, and early termination of a contract for $120,000.

The provision for income taxes decreased approximately 30% for the current quarter and the nine months ended September 30, 2018, compared to the same periods last year, primarily due to the Tax Cuts and Jobs Act legislation which was signed into law on December 22, 2017. The Company used federal statutory tax rates of 21% and 34% for the nine months ended September 30, 2018, and 2017, respectively, as a basis for calculating provision for income taxes.

Balance Sheet

The Company’s total assets increased $111.2 million, or 13.8%, to $917.0 million at September 30, 2018 from $805.8 million at December 31, 2017 due to the Company’s successful IPO and organic growth initiatives.

Total loans receivable, net of allowance for loan losses, increased $86.4 million, or 13.3%, to $735.2 million at September 30, 2018 from $648.8 million at December 31, 2017.  The growth in loans receivable was due primarily to increases in commercial real estate loans of $65.1 million.

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

  As of 
  September 30, 2018  December 31, 2017  September 30, 2017 
(Dollars in thousands) Balance % to Total  Balance % to Total  Balance % to Total 
                      
Commercial and industrial loans $85,554  11.5% $88,688  13.5% $87,418  13.9%
Real estate:                     
  Construction, land and                     
  land development  62,222  8.4   41,641  6.3   41,098  6.5 
  Residential  91,995  12.3   87,031  13.3   66,962  10.6 
  Commercial real estate  502,782  67.5   437,717  66.6   433,707  68.7 
Consumer and other  2,583  0.3   2,058  0.3   1,870  0.3 
  Gross loans receivable  745,136  100.0%  657,135  100.0%  631,055  100.0%
Net deferred origination fees  (816)     (347)     (613)   
  Loans receivable $744,320     $656,788     $630,442    

Total deposits increased $71.4 million, or 10.2%, to $774.7 million at September 30, 2018 from $703.3 million at December 31, 2017.  The increase in deposits included increases in noninterest bearing deposit accounts of $43.6 million, or 18.0%.

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

  As of 
  September 30, 2018  December 31, 2017  September 30, 2017 
(Dollars in thousands) Balance % to Total  Balance % to Total  Balance % to Total 
                      
Demand, noninterest bearing $285,979  36.9% $242,358  34.5% $242,607  35.6%
NOW and money market  340,930  44.0   326,412  46.4   309,856  45.5 
Savings  49,430  6.4   43,876  6.2   45,696  6.7 
Time deposits less than $250,000  63,715  8.2   60,445  8.6   56,308  8.3 
Time deposits $250,000 and over  34,668  4.5   30,204  4.3   26,732  3.9 
  Total $774,722  100.0% $703,295  100.0% $681,199  100.0%

Total shareholders’ equity increased $39.6 million, or 60.2%, to $105.3 million at September 30, 2018 from $65.7 million at December 31, 2017.  The Company’s successful IPO in July of 2018 increased capital by $33.2 million. The remaining increase in shareholders’ equity was primarily due to net income earned during the year. The Company contributed $15.0 million of the $33.2 million to the Bank.

Capital Ratios

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

Capital Ratios:Coastal Community Bank  Coastal Financial Corporation  Financial Institution  Basel III Regulatory Guidelines 
            
Tier 1 leverage capital 11.42%  12.60%  5.00%
Tier 1 risk-based capital 12.82%  14.17%  8.00%
Common Equity Tier 1 risk-based capital 12.82%  13.72%  6.50%
Total risk-based capital 14.03%  16.65%  10.00%

Asset Quality

The allowance for loan losses was 1.22% of loans receivable at September 30, 2018. Provision for loan losses totaled $508,000 for the current quarter, $392,000 for the preceding quarter, and $65,000 for the same quarter in the prior year. Net recoveries totaled $63,000 for the quarter ended September 30, 2018 compared to net charge-offs of $7,000 for quarter ended September 30, 2017.

Provision for loan losses totaled $1.4 million for the nine months September 30, 2018 and $504,000 for the same period in the prior year. Net charge-offs totaled $307,000 for the nine months ended September 30, 2018 compared to net charge-offs of $101,000 for nine months ended September 30, 2017.

Nonperforming assets were $2.5 million, or 0.27% of total assets, at September 30, 2018, compared to $2.1 million, or 0.26% of total assets at December 31, 2017.  There were no repossessed assets or other real estate owned at September 30, 2018.

Nonperforming loans to loans receivable ratio was 0.34% at September 30, 2018, compared to 0.32% at December 31, 2017.  Classified loans were $10.1 million at September 30, 2018, an increase of $2.2 million, as compared to $7.9 million at December 31, 2017.

The following table details the Company’s nonperforming assets for the periods indicated:

   As of 
  September 30,  December 31,  September 30, 
(Dollars in thousands) 2018  2017  2017 
             
Nonaccrual loans:            
Commercial and industrial loans $1,170  $372  $454 
Real estate:            
  Construction, land and land development  -   -   - 
  Residential  74   88   150 
  Commercial real estate  -   345   580 
  Commercial real estate - troubled debt restructure  1,277   1,315   1,328 
Consumer and other loans  -   -   - 
  Total nonaccrual loans  2,521   2,120   2,512 
  Total accruing loans past due 90 days or more  -   -   - 
  Total nonperforming loans  2,521   2,120   2,512 
Other real estate owned  -   -   - 
Repossessed assets  -   -   - 
Total nonperforming assets $2,521  $2,120  $2,512 
Troubled debt restructurings, accruing  -   -   3,978 
Total nonperforming loans to loans receivable  0.34%  0.32%  0.40%
Total nonperforming assets to total assets  0.27%  0.26%  0.32%

About Coastal Financial

Coastal Financial Corporation is an Everett-based Washington State bank holding company with Coastal Community Bank (the “Bank”), a full-service commercial bank, as its sole wholly-owned banking subsidiary.  The Bank operates through its 14 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application.  More information about the Bank can be found on its website at www.coastalbank.com and its investor relations page.

Contact

Eric Sprink, President & Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687

Forward-Looking Statements

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

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

COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)

ASSETS 
  September 30,  June 30,  December 31, 
  2018  2018  2017 
Cash and due from banks $16,837  $14,217  $13,787 
Interest earning deposits with other banks  98,671   77,232   75,964 
Investment securities, available for sale, at fair value  35,749   36,013   36,927 
Investment securities, held to maturity, at amortized cost  1,290   1,304   1,409 
Other investments  3,766   3,766   3,680 
Loans receivable  744,320   700,692   656,788 
Allowance for loan losses  (9,111)  (8,540)  (8,017)
  Total loans receivable, net  735,209   692,152   648,771 
Premises and equipment, net  12,845   12,963   13,121 
Accrued interest receivable  2,299   2,290   2,274 
Bank-owned life insurance, net  6,640   6,592   6,500 
Deferred tax asset, net  2,309   2,253   2,092 
Other assets  1,414   2,140   1,228 
  Total assets $917,029  $850,922  $805,753 
             
LIABILITIES AND SHAREHOLDERS EQUITY 
LIABILITIES            
Deposits $774,722  $744,468  $703,295 
Federal Home Loan Bank (FHLB) advances  20,000   20,000   20,000 
Subordinated debt  9,961   9,957   9,950 
Junior subordinated debentures  3,581   3,580   3,579 
Deferred compensation  1,102   1,127   1,175 
Accrued interest payable  257   241   228 
Other liabilities  2,130   2,059   1,815 
  Total liabilities  811,753   781,432   740,042 
             
SHAREHOLDERS’ EQUITY            
Common stock  86,334   52,946   52,521 
Retained earnings  20,966   18,364   14,134 
Accumulated other comprehensive loss, net of tax  (2,024)  (1,820)  (944)
  Total shareholders’ equity  105,276   69,490   65,711 
  Total liabilities and shareholders’ equity $917,029  $850,922  $805,753 

COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)

  Three months ended 
 September 30, 2018 June 30, 2018 September 30, 2017 
INTEREST AND DIVIDEND INCOME         
Interest and fees on loans$9,262 $8,778 $7,908 
Interest on interest earning deposits with other banks 458  236  171 
Interest on investment securities 156  155  135 
Dividends on other investments 18  62  3 
Total interest and dividend income 9,894  9,231  8,217 
INTEREST EXPENSE         
Interest on deposits 851  712  540 
Interest on borrowed funds 195  216  192 
Total interest expense 1,046  928  732 
Net interest income 8,848  8,303  7,485 
PROVISION FOR LOAN LOSSES 508  392  65 
Net interest income after provision for loan losses 8,340  7,911  7,420 
NONINTEREST INCOME         
Deposit service charges and fees 800  771  725 
Wholesale banking service fees 328  42  - 
Loan referral fees 209  114  234 
Mortgage broker fees 52  69  80 
Sublease and lease income 10  4  56 
Gain on sale of loans -  78  18 
Other 147  135  137 
Total noninterest income 1,546  1,213  1,250 
NONINTEREST EXPENSE         
Salaries and employee benefits 4,027  3,910  3,491 
Occupancy 798  804  784 
Data processing 501  492  463 
Director and staff expenses 213  136  172 
Excise taxes 146  134  119 
Marketing 110  86  148 
Legal and professional fees 142  130  87 
Federal Deposit Insurance Corporation (FDIC) assessments 83  79  90 
Business development 81  72  68 
Other 509  511  387 
Total noninterest expense 6,610  6,354  5,809 
Income before provision for income taxes 3,276  2,770  2,861 
PROVISION FOR INCOME TAXES 674  569  957 
NET INCOME$2,602 $2,201 $1,904 
          
Basic earnings per share$0.23 $0.24 $0.21 
Diluted earnings per share$0.22 $0.24 $0.21 
Weighted average number of common shares outstanding:         
Basic 11,338,320  9,265,153  9,235,344 
Diluted 11,609,978  9,284,947  9,238,808 

COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)

       
 Nine months ended 
 September 30, 2018 September 30, 2017 
INTEREST AND DIVIDEND INCOME      
 Interest and fees on loans$26,229 $22,741 
 Interest on interest earning deposits with other banks 949  458 
 Interest on investment securities 463  385 
 Dividends on other investments 91  77 
Total interest and dividend income 27,732  23,661 
 INTEREST EXPENSE      
 Interest on deposits 2,209  1,526 
 Interest on borrowed funds 594  551 
 Total interest expense 2,803  2,077 
 Net interest income 24,929  21,584 
 PROVISION FOR LOAN LOSSES 1,401  504 
 Net interest income after provision for loan losses 23,528  21,080 
 NONINTEREST INCOME      
 Deposit service charges and fees 2,258  1,924 
 Wholesale banking service fees 370  - 
 Loan referral fees 453  276 
 Mortgage broker fees 158  195 
 Sublease and lease income 71  167 
 Gain on sale of loans 142  102 
 Other 414  437 
 Total noninterest income 3,866  3,101 
 NONINTEREST EXPENSE      
 Salaries and employee benefits 11,672  9,947 
 Occupancy 2,425  2,253 
 Data processing 1,472  1,311 
 Director and staff expenses 493  450 
 Excise taxes 404  344 
 Marketing 253  298 
 Legal and professional fees 352  281 
 Federal Deposit Insurance Corporation (FDIC) assessments 247  271 
 Business development 241  195 
 Other 1,472  1,298 
 Total noninterest expense 19,031  16,648 
 Income before provision for income taxes 8,363  7,533 
PROVISION FOR INCOME TAXES 1,717  2,440 
NET INCOME$6,646 $5,093 
       
Basic earnings per share$0.67 $0.55 
Diluted earnings per share$0.66 $0.55 
Weighted average number of common shares outstanding:      
Basic 9,956,449  9,233,421 
Diluted 10,051,415  9,236,175 

COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)

 For the Three Months Ended 
 September 30, 2018  June 30, 2018  September 30, 2017 
 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$90,301 $458  2.01% $50,750 $236  1.87% $53,959 $171  1.26%
Investment securities (1) 39,613  156  1.56   39,642  155  1.57   36,458  135  1.47 
Other Investments 3,000  18  2.38   3,200  62  7.77   3,043  3  0.39 
Loans receivable (2) 717,260  9,262  5.12   688,975  8,778  5.11   624,463  7,908  5.02 
Total interest earning assets$850,174 $9,894  4.62  $782,567 $9,231  4.73  $717,923 $8,217  4.54 
Noninterest earning assets:                             
Allowance for loan losses (8,782)        (8,522)        (7,890)      
Other noninterest earning assets 37,000         36,277         37,293       
Total assets$878,392        $810,322        $747,326       
                              
Liabilities and Shareholders Equity    
Interest bearing liabilities:                             
Interest bearing deposits$488,183 $851  0.69% $464,133 $712  0.62% $428,036 $540  0.50%
Subordinated debt 9,959  148  5.90   9,955  147  5.92   9,945  148  5.90 
Junior subordinated debentures 3,580  41  4.54   3,580  39  4.37   3,579  31  3.44 
FHLB advances and other borrowings 964  6  2.47   5,972  30  2.01   3,294  13  1.57 
Total interest bearing liabilities$502,686 $1,046  0.83  $483,640 $928  0.77  $444,854 $732  0.65 
Noninterest bearing deposits 274,549         255,615         233,896       
Other liabilities 3,650         2,610         3,557       
Total shareholders' equity 97,507         68,457         65,019       
Total liabilities and                             
  shareholders' equity$878,392        $810,322        $747,326       
Net interest income   $8,848        $8,303        $7,485    
Interest rate spread       3.79%        3.96%        3.89%
Net interest margin (3)       4.13%        4.26%        4.14%
                              
(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 Nine Months Ended 
 September 30, 2018  September 30, 2017 
 Average Interest & Yield /  Average Interest & Yield / 
 Balance Dividends Cost (4)  Balance Dividends Cost (4) 
Assets                   
Interest earning assets:                   
Interest earning deposits$69,818 $949  1.82% $56,284 $458  1.09%
Investment securities (1) 39,657  463  1.56   36,377  385  1.42 
Other Investments 3,038  91  4.00   2,875  77  3.58 
Loans receivable (2) 687,165  26,229  5.10   609,981  22,741  4.98 
Total interest earning assets$799,678 $27,732  4.64  $705,517 $23,661  4.48 
Noninterest earning assets:                   
Allowance for loan losses (8,478)        (7,811)      
Other noninterest earning assets 36,960         39,990       
Total assets$828,160        $737,696       
                    
Liabilities and Shareholders Equity                   
Interest bearing liabilities:                   
Interest bearing deposits$472,266 $2,209  0.63% $425,030 $1,526  0.48%
Subordinated debt 9,955  439  5.90   9,941  439  5.90 
Junior subordinated debentures 3,580  116  4.33   3,578  90  3.36 
FHLB advances and other borrowings 2,577  39  2.02   2,179  22  1.35 
Total interest bearing liabilities$488,378 $2,803  0.77  $440,728 $2,077  0.63 
Noninterest bearing deposits 258,586         228,507       
Other liabilities 3,038         3,069       
Total shareholders' equity 78,158         65,392       
Total liabilities and                   
  shareholders' equity$828,160        $737,696       
Net interest income   $24,929        $21,584    
Interest rate spread       3.87%        3.85%
Net interest margin (3)       4.17%        4.09%
                    
(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
QUARTERLY STATISTICS
(Dollars in thousands, except share and per share data; unaudited)

 Three Months Ended 
 September 30, June 30, March 31, December 31, September 30, 
 2018 2018 2018 2017 2017 
Income Statement Data:               
Interest and dividend income$9,894 $9,231 $8,607 $8,452 $8,217 
Interest expense 1,046  928  829  798  732 
Provision for loan losses 508  392  501  366  65 
Net interest income after               
provision for loan losses 8,340  7,911  7,277  7,288  7,420 
Noninterest income 1,546  1,213  1,107  1,053  1,250 
Noninterest expense 6,610  6,354  6,067  5,785  5,809 
Provision for income tax 674  569  474  2,213  957 
Net income 2,602  2,201  1,843  343  1,904 
Adjusted net income (1) 2,602  2,201  1,843  1,638  1,904 
                
 As of Period End or for the three month period 
 September 30, June 30, March 31, December 31, September 30, 
 2018 2018 2018 2017 2017 
Balance Sheet Data:               
Cash and cash equivalents$115,508 $91,449 $94,569 $89,751 $86,531 
Investment securities 37,039  37,317  37,338  38,336  40,201 
Loans receivable 744,320  700,692  678,515  656,788  630,442 
Allowance for loan losses (9,111) (8,540) (8,423) (8,017) (7,947)
Total assets 917,029  850,922  830,962  805,753  778,609 
Interest bearing deposits 488,743  485,019  473,268  460,937  438,592 
Noninterest bearing deposits 285,979  259,449  254,000  242,358  242,607 
Total deposits 774,722  744,468  727,268  703,295  681,199 
Total borrowings 33,542  33,537  33,534  33,529  28,526 
Total shareholders’ equity 105,276  69,490  66,927  65,711  65,558 
                
Share and Per Share Data (2)(3):               
Earnings per share – basic$0.23 $0.24 $0.20 $0.04 $0.21 
Earnings per share – diluted$0.22 $0.24 $0.20 $0.04 $0.21 
Adjusted earnings per share - diluted (4)         $0.18    
Dividends per share -  -  -  -  - 
Book value per share (5)$8.86 $7.47 $7.23 $7.10 $7.09 
Tangible book value per share (6)$8.86 $7.47 $7.23 $7.10 $7.09 
Weighted avg outstanding shares – basic 11,338,320  9,265,153  9,241,620  9,237,660  9,235,344 
Weighted avg outstanding shares – diluted 11,609,978  9,284,947  9,247,209  9,240,737  9,238,808 
Shares outstanding at end of period 11,886,473  9,298,553  9,253,303  9,248,901  9,249,006 
Stock options outstanding at end of period 682,190  707,460  768,850  668,934  669,394 
                
Credit Quality Ratios:               
Nonperforming assets to total assets 0.27% 0.24% 0.20% 0.26% 0.32%
Nonperforming assets to loans receivable               
and OREO 0.34% 0.30% 0.25% 0.32% 0.40%
Nonperforming loans to total loans receivable 0.34% 0.30% 0.25% 0.32% 0.40%
Allowance for loan losses to nonperforming loans 361.40% 412.96% 495.76% 378.16% 316.36%
Allowance for loan losses to total loans receivable 1.22% 1.22% 1.24% 1.22% 1.26%
Net charge-offs (recoveries) to average loans (7) -0.03% 0.16% 0.06% 0.18% 0.00%
                
Capital Ratios:               
Tier 1 leverage capital 12.60% 9.21% 9.07% 8.95% 9.31%
Tier 1 risk-based capital 14.17% 10.24% 10.25% 10.50% 10.75%
Common equity Tier 1 risk-based capital 13.72% 9.76% 9.75% 9.98% 10.21%
Total risk-based capital 16.65% 12.82% 12.90% 13.24% 13.54%
                
(1) Adjusted net income is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is net income. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.” 
(2) Share and per share amounts are based on total common shares outstanding, which includes common stock and nonvoting common stock. 
(3) Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018. 
(4) Adjusted earnings per share is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is earnings per share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.” 
(5) We calculate book value per share as total shareholders’ equity at the end of the relevant period divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period. 
(6) Tangible book value per share is a non-GAAP financial measure. We calculate tangible book value per share as total shareholders’ equity at the end of the relevant period, less goodwill and other intangible assets, divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated. 
(7) Annualized calculations               

Non-GAAP Financial Measures

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

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

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

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

(Dollars in thousands, except share and per share data) As of and for three Months ended December 31, 2017 
Adjusted net income:    
Net income $343 
Plus: additional income tax expense  1,295 
Adjusted net income $1,638 
Adjusted earnings per share diluted:    
Net income $343 
Plus: additional income tax expense  1,295 
Adjusted net income $1,638 
Weighted average common shares outstanding– diluted (1)  9,240,737 
Adjusted earnings per share – diluted (1) $0.18 
     
(1) Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018. 
  

Coastal_FinancialCorp_logo_PMS7474_horiz.jpg

Source: Coastal Financial Corporation