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CST: 23/07/2019 15:02:05   

Coastal Financial Corporation Announces Fourth Quarter and Year End 2018 Results

178 Days ago

2018 Highlights:

  • Net income totaled $9.7 million for the year ended December 31, 2018, or $0.91 per diluted common share, up 79.6% from $5.4 million, or $0.59 per diluted common share, for the year ended December 31, 2017. 
  • Total assets were $952.1 million at December 31, 2018, up 3.8% from $917.0 million at September 30, 2018 and 18.2% from $805.8 million at December 31, 2017.
  • Total loans receivable grew at a rate of 16.9% for the twelve months ended December 31, 2018.
  • Total deposits grew at a rate of 14.3% for the twelve months ended December 31, 2018.
  • Noninterest bearing deposits at December 31, 2018 were 36.5% of total deposits.
  • Cost of deposits were 0.42% for the year ending December 31, 2018, up 0.03% from the third quarter of 2018 and 0.10% from the year ending December 31, 2017.
  • 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., Jan. 25, 2019 (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, 2018.  Net income for the fourth quarter of 2018 was $3.1 million, or $0.25 per diluted common share, compared with net income of $2.6 million, or $0.22 per diluted common share, for the third quarter of 2018.  For the year ending December 31, 2018 net income was $9.7 million or $0.91 per diluted common share, compared with net income of $5.4 million or $0.59 per diluted common share for the year ending December 31, 2017.  On December 22, 2017 the Tax Cuts and Jobs Act was signed into law and, among other things, reduced the federal corporate tax rate to 21% from the previous maximum of 35% for tax years effective January 1, 2018.  In compliance with generally accepted accounting principles (“GAAP”), the Company revalued its net deferred tax assets at the new, lower rate which resulted in additional incremental tax expense of $1.3 million in 2017.  Without that additional tax expense (non-GAAP), net income would have been $1.6 million or $0.18 per common diluted share and $6.7 million or $0.73 per diluted common share, respectively, for the quarter and year ended December 31, 2017. 

On July 18, 2018, the Company completed 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 strong fourth quarter with earnings of $3.1 million, loan growth of $23.6 million, and core deposit growth of $19.7 million.  The solid organic growth in core deposits and loans helped leverage our capital and put us in a good position for future growth and earnings.  Overall, 2018 was a defining year with strong deposit, loan and earnings growth plus a successful initial public offering, a new full service branch and the Company’s continued work on developing robust wholesale banking services.”

Results of Operations

Net interest income was $9.9 million for the three months ended December 31, 2018, an increase of 12.5% from $8.8 million for the third quarter of 2018, and an increase of 28.6% from $7.7 million for the fourth quarter of 2017. Increases over the prior quarter and prior year period were the result of growth in interest earning assets, primarily loans, and improvements in net interest margin. Net interest income for the year ended December 31, 2018 totaled $34.8 million, an increase of 19.2% compared to 2017. The $5.6 million increase in net interest income over the same period last year was primarily related to growth in loan balances. During the year ended December 31, 2018, the average balance of total loans receivable increased by $86.8 million, compared to 2017. The $5.8 million increase in loan interest income was partially offset by increased deposit costs of $1.0 million.  The growth in the average balance of our interest bearing deposits grew $46.6 million and cost of deposit funds increased 10 basis points, compared to 2017.

Net interest margin for the quarter ended December 31, 2018 increased 30 basis points to 4.43% from 4.13% for the third quarter of 2018 and increased 39 basis points from 4.04% for the fourth quarter of 2017. The net interest margin for the quarter ended December 31, 2018 is higher than the comparative quarters, largely as a result of atypical prepayment penalties and deferred fees recognized on loans paid off.  These atypical penalties and fees increased the net interest margin for the quarter ended December 31, 2018. 

Net interest margin for the twelve months ended December 31, 2018 increased 16 basis points to 4.24% from 4.08% for the year ended December 31, 2017. The increase in net interest margin over the prior year was largely due to higher prepayment penalties and deferred fees recognized on loans paid off. Additionally, the composition of the loan portfolio changed slightly to loans that earn higher fees at a quicker rate, and there were increases in average loan yields overall. The increase in loan yields were off-set in part by higher deposit costs resulting from the growth in deposits and increase in cost of funds.  Higher, atypical prepayment penalties and deferred fees recognized on loans paid off increased the net interest margin by approximately five basis points for the year ended December 31, 2018.

Loan yields for the quarter ended December 31, 2018 were 5.39%, an increase of 27 basis points from 5.12% for the quarter ended September 31, 2018, and a 44 basis point increase from 4.95% for the quarter ended December 31, 2017. Loan yields for the year ended December 31, 2018 were 5.18%, an increase of 20 basis points from 4.98% for the year ended December 31, 2017.  Atypical deferred fees and higher prepayment penalties on loans paid off increased loan yields by approximately 12 basis points and five basis points for the quarter and year ended December 31, 2018, respectively.  Without those atypical fees, loan yields are estimated to be 5.27% for the quarter ended December 31, 2018 and 5.13% for the year ended December 31, 2018.

Contractual loan yields approximated 5.15% for the three months ended December 31, 2018, 5.02% for the three months ended September 31, 2018, and 4.90% for the three months ended December 31, 2017.  The 13 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 the prime rate.

Deposit costs for the quarter ended December 31, 2018 were 0.47%, an increase of three basis points from 0.44% for the quarter ended September 30, 2018 and a 12 basis point increase from the quarter ended December 31, 2017.  Deposit costs for the year ended December 31, 2018 were 0.42%, an increase of ten basis points from 0.32% for the year ended December 31, 2017.  Market conditions in 2019 may result in pressure to increase rates on deposit accounts, which would impact the cost of deposits going forward.

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

         
    Three months ended   Year ended
    December 31,
2018

  September 30,
2018

  December 31,
2017

  December 31,
2018

  December 31,
2017
                               
Return on average assets (1)   1.33 %   1.18 %   0.17 %   1.14 %   0.73 %
Return on average shareholders’ equity (1)   11.31 %   10.59 %   2.04 %   11.40 %   8.27 %
Yield on earnings assets (1)   4.93 %   4.62 %   4.46 %   4.72 %   4.48 %
Yield on loans receivable (1)   5.39 %   5.12 %   4.95 %   5.18 %   4.98 %
Loan yield excluding fees (1)   5.15 %   5.02 %   4.90 %   5.00 %   4.89 %
Cost of funds (1)   0.56 %   0.53 %   0.44 %   0.52 %   0.42 %
Cost of deposits (1)   0.47 %   0.44 %   0.35 %   0.42 %   0.32 %
Net interest margin (1)   4.43 %   4.13 %   4.04 %   4.24 %   4.08 %
Noninterest expense to average assets (1)   3.12 %   2.99 %   2.93 %   3.09 %   3.00 %
Efficiency ratio   62.54 %   63.59 %   66.44 %   65.08 %   67.18 %
Loans receivable to deposits   95.56 %   96.08 %   93.39 %   95.56 %   93.39 %
               
(1) Annualized calculations shown for quarterly periods presented.
               

Noninterest income was $1.6 million for the fourth quarter of 2018, an increase of $55,000 from $1.5 million for the third quarter of 2018 and an increase of $548,000 from $1.1 million for the comparable period one year ago. The increase compared to the prior quarter was primarily the result of $122,000 related to the gain on sale of the guaranteed portion of SBA loans.  The increase over the quarter ended December 31, 2017 was largely due to fees earned from wholesale banking services which provided an additional $339,000 of income combined with the aforementioned $122,000 from the gain on sale of loans. 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 certain new deposit fees. Sublease and lease income decreased in the fourth quarter 2018, as compared to the fourth quarter 2017, as a result of a long-term tenant not renewing their lease.

Noninterest income was $5.5 million for the year ended December 31, 2018, compared to $4.2 million for the year ended December 31, 2017. The increase was primarily related to $709,000 in wholesale banking services, $444,000 from increases in deposit fees and $162,000 in higher gain on sale of loans. Loan referral fee income, which is earned when a borrower enters into an interest rate swap agreement with a third party, totaled $618,000 for the twelve months ended December 31, 2018, an increase of $179,000 from the same period last year.  Sublease and lease income decreased $141,000 for the twelve months ended December 31, 2018.

Total noninterest expense for the current quarter increased 9.1% to $7.2 million from $6.6 million for the preceding quarter and increased 24.1% 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 17% from the year ended December 31, 2017. Staffing increases are due to the continued organic growth initiatives, and include increases in sales staff, including hiring new banking teams, staff for the newly opened Edmonds location, and additional back office staffing to support the incremental increases in banking teams, wholesale banking activities and for operation as a public company.  During the quarter our legal and professional fees increased by $183,000 as a result of growth initiatives, credit actions, and operating as a public company.  Occupancy expense increased $91,000, largely as a result of the new Edmonds branch.  Partially offsetting these higher expenses was a reduction in our FDIC assessment, which was $35,000 less than the previous quarter as a result of the FDIC lowering assessment rates.

Total noninterest expense for the year ended December 31, 2018 totaled $26.2 million, an increase of 17.0% compared to the last year. The increase was primarily attributable to increased salary expense from our organic growth initiatives, new wholesale banking services, and early termination of a contract for $120,000.  Occupancy expense increased $277,000 over last year, largely due to the opening of the Edmonds branch and a full year of operations of the Woodinville branch.  Legal and professional expenses increased $322,000 as a result of growth initiatives, credit actions, and operating as a public company.

The provision for income taxes was $150,000 higher this quarter compared to the third quarter of 2018 as a result of increased taxable income.  Despite increased earnings, the provision was $1.4 million less in the current quarter over the same period last year primarily due to the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017.  As a result of the reduction in the federal corporate tax rates in 2017, the Company had to revalue its net deferred tax assets at the new, lower tax rate, resulting in $1.3 million in additional tax expense in the fourth quarter of 2017.  The Company used federal statutory tax rates of 21% and 34% for the twelve months ended December 31, 2018, and 2017, respectively, as a basis for calculating provision for income taxes.

Balance Sheet

The Company’s total assets increased $146.3 million, or 18.2%, to $952.1 million at December 31, 2018 from $805.8 million at December 31, 2017 due to the Company’s successful initial public offering and organic growth initiatives, which included the opening of the Edmonds branch in the fourth quarter of 2018.

Total loans receivable, net of allowance for loan losses, increased $109.7 million, or 16.9%, to $758.5 million at December 31, 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 $78.2 million.

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

 
    As of  
    December 31, 2018   September 30, 2018   December 31, 2017
(Dollars in thousands)   Balance
  % to
Total
  Balance
  % to
Total
  Balance
  % to
Total
                                           
Commercial and industrial loans   $ 90,390     11.8 %   $ 85,554     11.5 %   $ 88,688     13.5 %
Real estate:                  
Construction, land and                  
land development     64,045     8.3       62,222     8.4       41,641     6.3  
Residential     94,745     12.3       91,995     12.3       87,031     13.3  
Commercial real estate     515,959     67.1       502,782     67.5       437,717     66.6  
Consumer and other     3,584     0.5       2,583     0.3       2,058     0.3  
Gross loans receivable     768,723     100.0 %     745,136     100.0 %     657,135     100.0 %
Net deferred origination fees     (824 )         (816 )         (347 )    
Loans receivable   $ 767,899         $ 744,320         $ 656,788      
                   

Total deposits increased $100.3 million, or 14.3%, to $803.6 million at December 31, 2018 from $703.3 million at December 31, 2017.  The increase in deposits included increases in noninterest bearing deposit accounts of $51.2 million, or 21.1%, and increases in interest bearing NOW and money market accounts of $34.0 million or 10.4%. Savings deposits increased $8.7 million or 19.8% and time deposits increased $6.4 million or 7.1% in 2018.  Our NOW and money market accounts included $10.5 million of deposits from our wholesale banking services.  Deposits from wholesale banking services are primarily temporary in nature and the $10.5 million of these deposits will largely run-off within the next six months.

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

    As of  
    December 31, 2018   September 30, 2018   December 31, 2017
(Dollars in thousands)   Balance
  % to
Total
  Balance
  % to
Total
  Balance
  % to
Total
                                   
Demand, noninterest bearing   $ 293,525   36.5 %   $ 285,979   36.9 %   $ 242,358   34.5 %
NOW and money market     360,472   44.9       340,930   44.0       326,412   46.4  
Savings     52,573   6.5       49,430   6.4       43,876   6.2  
Time deposits less than $250,000     62,272   7.8       63,715   8.2       60,445   8.6  
Time deposits $250,000 and over     34,772   4.3       34,668   4.5       30,204   4.3  
Total   $ 803,614   100.0 %   $ 774,722   100.0 %   $ 703,295   100.0 %
                   

Total shareholders’ equity increased $43.4 million, or 66.1%, to $109.2 million at December 31, 2018 from $65.7 million at December 31, 2017.  The Company’s successful initial public offering 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 raised in its initial public offering to the Bank during 2018.

Capital Ratios

The Company and the Bank remain well capitalized at December 31, 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 11.35 %   12.46 %   5.00 %
Tier 1 risk-based capital 12.84 %   14.13 %   8.00 %
Common Equity Tier 1 risk-based capital 12.84 %   13.70 %   6.50 %
Total risk-based capital 14.05 %   16.58 %   10.00 %
           

Asset Quality

The allowance for loan losses was 1.23% of loans receivable at December 31, 2018. Provision for loan losses totaled $425,000 for the current quarter, $508,000 for the preceding quarter, and $366,000 for the same quarter in the prior year. Net charge-offs totaled $129,000 for the quarter ended December 31, 2018 compared to net charge-offs of $295,000 for quarter ended December 31, 2017.

Provision for loan losses totaled $1.8 million for the twelve months December 31, 2018 and $870,000 for the year ended December 31, 2017. Net charge-offs totaled $437,000 for the twelve months ended December 31, 2018 compared to net charge-offs of $397,000 for twelve months ended December 31, 2017.

Our nonperforming assets were $1.8 million, or 0.19% of total assets, at December 31, 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 December 31, 2018.

Nonperforming loans to loans receivable ratio was 0.24% at December 31, 2018, compared to 0.32% at December 31, 2017. 

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

     
    As of  
    December 31,   September 30,   December 31,
(Dollars in thousands)   2018   2018   2017
             
Nonaccrual loans:            
Commercial and industrial loans   $ 493     $ 1,170     $ 372  
Real estate:            
Construction, land and land development     -       -       -  
Residential     72       74       88  
Commercial real estate     -       -       345  
Commercial real estate - troubled debt restructure     1,261       1,277       1,315  
Consumer and other loans     -       -       -  
Total nonaccrual loans     1,826       2,521       2,120  
Total accruing loans past due 90 days or more     -       -       -  
Total nonperforming loans     1,826       2,521       2,120  
Other real estate owned       -       -       -  
Repossessed assets     -       -       -  
Total nonperforming assets   $ 1,826     $ 2,521     $ 2,120  
Troubled debt restructurings, accruing     -       -       -  
Total nonperforming loans to loans receivable     0.24 %     0.34 %     0.32 %
Total nonperforming assets to total assets     0.19 %     0.27 %     0.26 %
             

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
    December 31,   September 30,   December 31,
     2018     2018     2017 
Cash and due from banks   $ 16,315     $ 16,837     $ 13,787  
Interest earning deposits with other banks     109,467       98,671       75,964  
Investment securities, available for sale, at fair value     36,660       35,749       36,927  
Investment securities, held to maturity, at amortized cost     1,262       1,290       1,409  
Other investments     3,766       3,766       3,680  
Loans receivable     767,899       744,320       656,788  
Allowance for loan losses     (9,407 )     (9,111 )     (8,017 )
Total loans receivable, net     758,492       735,209       648,771  
Premises and equipment, net     13,167       12,845       13,121  
Accrued interest receivable     2,526       2,299       2,274  
Bank-owned life insurance, net     6,688       6,640       6,500  
Deferred tax asset, net     2,518       2,309       2,092  
Other assets     1,249       1,414       1,228  
Total assets   $ 952,110     $ 917,029     $ 805,753  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES            
Deposits   $ 803,614     $ 774,722     $ 703,295  
Federal Home Loan Bank (FHLB) advances     20,000       20,000       20,000  
Subordinated debt     9,965       9,961       9,950  
Junior subordinated debentures     3,581       3,581       3,579  
Deferred compensation     1,078       1,102       1,175  
Accrued interest payable     279       257       228  
Other liabilities     4,437       2,130       1,815  
Total liabilities     842,954       811,753       740,042  
             
SHAREHOLDERS’ EQUITY            
Common stock     86,431       86,334       52,521  
Retained earnings     24,021       20,966       14,134  
Accumulated other comprehensive loss, net of tax     (1,296 )     (2,024 )     (944 )
Total shareholders’ equity     109,156       105,276       65,711  
Total liabilities and shareholders’ equity   $ 952,110     $ 917,029     $ 805,753  
             


 
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
       
  Three months ended
  December 31, 2018
  September 30, 2018
  December 31, 2017
INTEREST AND DIVIDEND INCOME              
Interest and fees on loans $ 10,308   $ 9,262   $ 8,034
Interest on interest earning deposits with other banks   483     458     208
Interest on investment securities   155     156     149
Dividends on other investments   65     18     61
Total interest and dividend income   11,011     9,894     8,452
INTEREST EXPENSE      
Interest on deposits   932     851     613
Interest on borrowed funds   191     195     185
Total interest expense   1,123     1,046     798
Net interest income   9,888     8,848     7,654
PROVISION FOR LOAN LOSSES   425     508     366
Net interest income after provision for loan losses   9,463     8,340     7,288
NONINTEREST INCOME      
Deposit service charges and fees   803     800     693
Wholesale banking service fees   339     328     -
Loan referral fees   165     209     163
Mortgage broker fees   57     52     60
Sublease and lease income   10     10     55
Gain on sale of loans   122     -     -
Other   105     147     82
Total noninterest income   1,601     1,546     1,053
NONINTEREST EXPENSE      
Salaries and employee benefits   4,354     4,027     3,436
Occupancy   889     798     784
Data processing   499     501     466
Director and staff expenses   208     213     111
Excise taxes   155     146     115
Marketing   120     110     148
Legal and professional fees   325     142     74
Federal Deposit Insurance Corporation (FDIC) assessments   48     83     60
Business development   85     81     99
Other   502     509     492
Total noninterest expense   7,185     6,610     5,785
Income before provision for income taxes   3,879     3,276     2,556
PROVISION FOR INCOME TAXES   824     674     2,213
NET INCOME $ 3,055   $ 2,602   $ 343
                 
Basic earnings per share $ 0.26   $ 0.23   $ 0.04
Diluted earnings per share $ 0.25   $ 0.22   $ 0.04
Weighted average number of common shares outstanding:      
Basic   11,877,261     11,338,320     9,237,660
Diluted   12,166,250     11,609,978     9,244,448
       


 
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
     
  Year ended
  December 31, 2018
  December 31, 2017
INTEREST AND DIVIDEND INCOME        
Interest and fees on loans $ 36,537   $ 30,775
Interest on interest earning deposits with other banks   1,432     666
Interest on investment securities   618     534
Dividends on other investments   156     138
Total interest and dividend income   38,743     32,113
INTEREST EXPENSE    
Interest on deposits   3,141     2,139
Interest on borrowed funds   785     736
Total interest expense   3,926     2,875
Net interest income   34,817     29,238
PROVISION FOR LOAN LOSSES   1,826     870
Net interest income after provision for loan losses   32,991     28,368
NONINTEREST INCOME    
Deposit service charges and fees   3,061     2,617
Wholesale banking service fees   709     -
Loan referral fees   618     439
Mortgage broker fees   215     255
Sublease and lease income   81     222
Gain on sale of loans   264     102
Other   519     519
Total noninterest income   5,467     4,154
NONINTEREST EXPENSE    
Salaries and employee benefits   16,026     13,383
Occupancy   3,314     3,037
Data processing   1,971     1,777
Director and staff expenses   701     561
Excise taxes   559     459
Marketing   373     446
Legal and professional fees   677     355
Federal Deposit Insurance Corporation (FDIC) assessments   295     331
Business development   326     294
Other   1,974     1,790
Total noninterest expense   26,216     22,433
Income before provision for income taxes   12,242     10,089
PROVISION FOR INCOME TAXES   2,541     4,653
NET INCOME $ 9,701   $ 5,436
         
Basic earnings per share $ 0.93   $ 0.59
Diluted earnings per share $ 0.91   $ 0.59
Weighted average number of common shares outstanding:    
Basic   10,440,740     9,234,490
Diluted   10,608,764     9,237,666
     


 
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
                       
  For the Three Months Ended
  December 31, 2018   September 30, 2018   December 31, 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 $   83,751     $   483   2.29 %   $   90,301     $   458     2.01 %   $   64,751     $   208   1.27 %
Investment securities (1)     39,590         155   1.55         39,613         156     1.56         40,625         149   1.46  
Other Investments     2,974         65   8.67         3,000         18     2.38         2,919         61   8.29  
Loans receivable (2)     759,084         10,308   5.39         717,260         9,262     5.12         643,591         8,034   4.95  
Total interest earning assets $   885,399     $   11,011   4.93     $   850,174     $   9,894     4.62     $   751,886     $   8,452   4.46  
Noninterest earning assets:                                                            
Allowance for loan losses     (9,191 )             (8,782 )             (7,960 )      
Other noninterest earning assets     37,155               37,000               38,380        
Total assets $   913,363           $   878,392           $   782,306        
                                                             
Liabilities and Shareholders’ Equity
Interest bearing liabilities:                      
Interest bearing deposits $   495,931     $   932   0.75 %   $   488,183     $   851     0.69 %   $   451,205     $   613   0.54 %
Subordinated debt     9,962         148   5.89         9,959         148     5.90         9,948         148   5.90  
Junior subordinated debentures     3,581         42   4.65         3,580         41     4.54         3,579         32   3.55  
FHLB advances and other borrowings     295         1   1.34         964         6     2.47         1,119         5   1.77  
Total interest bearing liabilities $   509,769     $   1,123   0.87     $   502,686     $   1,046     0.83     $   465,851     $   798   0.68  
Noninterest bearing deposits      292,866                   274,549                     246,545            
Other liabilities     3,529               3,650               3,216        
Total shareholders' equity     107,199               97,507               66,694        
Total liabilities and                                         
  shareholders' equity $   913,363           $   878,392           $   782,306        
Net interest income         $   9,888               $   8,848                 $   7,654    
Interest rate spread         4.06 %             3.79 %           3.78 %
Net interest margin (3)     4.43 %       4.13 %       4.04 %
                       
(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, 2018   December 31, 2017
  Average
  Interest &
  Yield /   Average
  Interest &
  Yield /
  Balance
  Dividends
  Cost   Balance
  Dividends
  Cost
Assets                                  
Interest earning assets:              
Interest earning deposits $   73,330     $   1,432   1.95 %   $   58,418     $   666   1.14 %
Investment securities (1)     39,640         618   1.56         37,448         534   1.43  
Other Investments     3,022         156   5.16         2,886         138   4.78  
Loans receivable (2)     705,292         36,537   5.18         618,452         30,775   4.98  
Total interest earning assets $   821,284     $   38,743   4.72     $   717,204     $   32,113   4.48  
Noninterest earning assets:                                      
Allowance for loan losses     (8,657 )             (7,849 )      
Other noninterest earning assets     36,631               39,585        
Total assets $   849,258           $   748,940        
                                 
Liabilities and Shareholders’ Equity            
Interest bearing liabilities:              
Interest bearing deposits $   478,231     $   3,141   0.66 %   $   431,628     $   2,139   0.50 %
Subordinated debt     9,957         587   5.90         9,943         587   5.90  
Junior subordinated debentures     3,580         157   4.39         3,578         122   3.41  
FHLB advances and other borrowings     2,010         41   2.04         1,911         27   1.41  
Total interest bearing liabilities $   493,778     $   3,926   0.80     $   447,060     $   2,875   0.64  
Noninterest bearing deposits      267,227                   233,054            
Other liabilities     3,154               3,106        
Total shareholders' equity     85,099               65,720        
Total liabilities and                           
  shareholders' equity $   849,258           $   748,940        
Net interest income         $   34,817               $   29,238    
Interest rate spread         3.92 %           3.83 %
Net interest margin (3)     4.24 %       4.08 %
               
(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,  
  December 31,  
  2018   2018   2017
Income Statement Data:                      
Interest and dividend income $ 11,011     $ 9,894     $ 8,452  
Interest expense   1,123       1,046       798  
Provision for loan losses   425       508       366  
Net interest income after      
provision for loan losses   9,463       8,340       7,288  
Noninterest income   1,601       1,546       1,053  
Noninterest expense   7,185       6,610       5,785  
Net income - pre-tax, pre-provision   4,304       3,784       2,922  
Provision for income tax   824       674       2,213  
Net income   3,055       2,602       343  
Adjusted net income (1)   3,055       2,602       1,638  
       
  As of Period End or for the Three Month Period
  December 31,  
  September 30,  
  December 31,  
  2018   2018   2017
Balance Sheet Data:                      
Cash and cash equivalents $ 125,782     $ 115,508     $ 89,751  
Investment securities   37,922       37,039       38,336  
Loans receivable   767,899       744,320       656,788  
Allowance for loan losses   (9,407 )     (9,111 )     (8,017 )
Total assets   952,110       917,029       805,753  
Interest bearing deposits   510,089       488,743       460,937  
Noninterest bearing deposits   293,525       285,979       242,358  
Core deposits (2)   696,049       676,339       612,646  
Total deposits   803,614       774,722       703,295  
Total borrowings   33,546       33,542       33,529  
Total shareholders’ equity   109,156       105,276       65,711  
       
Share and Per Share Data (3)(4):      
Earnings per share – basic $ 0.26     $ 0.23     $ 0.04  
Earnings per share – diluted $ 0.25     $ 0.22     $ 0.04  
Adjusted earnings per share - diluted (5)     $ 0.18  
Dividends per share   -       -       -  
Book value per share (6) $ 9.18     $ 8.86     $ 7.10  
Tangible book value per share (7) $ 9.18     $ 8.86     $ 7.10  
Weighted avg outstanding shares – basic   11,877,261       11,338,320       9,237,660  
Weighted avg outstanding shares – diluted   12,166,250       11,609,978       9,244,448  
Shares outstanding at end of period   11,893,203       11,886,473       9,248,901  
Stock options outstanding at end of period   688,312       682,190       668,936  
       
Credit Quality Data:      
Nonperforming assets to total assets   0.19 %     0.27 %     0.26 %
Nonperforming assets to loans receivable and OREO   0.24 %     0.34 %     0.32 %
Nonperforming loans to total loans receivable   0.24 %     0.34 %     0.32 %
Allowance for loan losses to nonperforming loans   515.2 %     361.40 %     378.16 %
Allowance for loan losses to total loans receivable   1.23 %     1.22 %     1.22 %
Gross charge-offs $ 134     $ 6     $ 299  
Gross recoveries $ 5     $ 69     $ 4  
Net charge-offs (recoveries) to average loans (8)   0.07 %     -0.03 %     0.18 %
       
Capital Ratios:      
Tier 1 leverage capital   12.46 %     12.60 %     8.95 %
Tier 1 risk-based capital   14.13 %     14.17 %     10.50 %
Common equity Tier 1 risk-based capital   13.70 %     13.72 %     9.98 %
Total risk-based capital   16.58 %     16.65 %     13.24 %
       
(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) Core deposits are defined as all deposits excluding brokered wholesale and time deposits.
(3) Share and per share amounts are based on total common shares outstanding, which includes common stock and nonvoting common stock.
(4) 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.
(5) 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.”
(6) 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.
(7) 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.
(8) Annualized calculations.      
       

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP 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.

   
  As of and For
  Quarter ended Year ended
(Dollars in thousands, except share and per share data)   December 31, 2017   December 31, 2017
Adjusted net income:      
Net income $ 343   $ 5,436
Plus: additional income tax expense   1,295     1,295
Adjusted net income $ 1,638   $ 6,731
Adjusted earnings per share – diluted:      
Net income $ 343   $ 5,436
Plus: additional income tax expense   1,295     1,295
Adjusted net income $ 1,638   $ 6,731
Weighted average common shares outstanding– diluted (1)   9,244,448     9,237,666
Adjusted earnings per share – diluted (1) $ 0.18   $ 0.73
       
(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.
       

 

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