Third Quarter
2023 Highlights:
- Net income of
$10.3 million, or
$0.75 per diluted common share, for the
three months ended September 30,
2023, compared to $12.9
million, or $0.95
per diluted common share for the three months
ended June 30,
2023.
- Return on average assets ("ROA") of
1.13% for the three months ended
September 30, 2023.
- Return on average equity ("ROE") of
14.60% for the three months ended
September 30, 2023.
- Total assets increased
$145.0 million, or
4.1%, to $3.68
billion for the quarter ended
September 30, 2023, compared
to $3.54 billion at
June 30, 2023.
- Total loans, net of deferred fees
decreased $40.5 million,
or 1.3%, to
$2.97 billion for the quarter
ended September 30, 2023 as
management sold loans as part of our strategy to reduce risk,
optimize the CCBX loan portfolio and strengthen
the balance sheet through enhanced credit
standards.
- Community bank loans increased $71.6
million, or
4.2%, to $1.78
billion.
- CCBX loans decreased
$112.1 million, or
8.7%, to $1.18
billion.
- $320.9 million in CCBX loans were
sold.
- Deposits increased
$127.1 million, or
4.0%, to $3.29
billion for the quarter ended
September 30, 2023.
- CCBX deposit growth of $99.1
million, or
6.0%, to $1.75
billion.
- CCBX deposit growth is net of an additional $51.9
million in CCBX deposits that were transferred off
balance sheet for increased FDIC insurance coverage.
- Community bank deposits
increased $28.0 million,
or 1.9%, to
$1.54 billion.
- Includes noninterest bearing deposits of
$584.0 million or
38.0% of total community bank
deposits
- Community bank cost of deposits was
1.31%.
- Uninsured deposits of $599.0
million, or 18.2%
of total deposits as of September 30,
2023, compared to $632.1
million, or 20.0%
of total deposits as of June 30,
2023.
- Liquidity/Borrowings as of
September 30, 2023:
- Capacity to borrow up to $577.9
million from Federal Home Loan Bank and the
Federal Reserve Bank discount window with no borrowings taken under
these facilities since the first quarter of 2022.
- Investment Portfolio as of
September 30, 2023 :
- Available for sale ("AFS") investments of
$98.9 million, compared to $98.2 million
as of June 30, 2023, of
which 99.7% are U.S. Treasuries,
with a weighted average remaining duration of 5
months as of September 30,
2023.
- Held to maturity ("HTM") investments of
$42.6 million, of which
100% are U.S. Agency mortgage backed
securities held for CRA purposes. The carrying value of the HTM
investments is $1.7 million more
than the fair value, the weighted average remaining life
is 18.6 years as of
September 30, 2023 and the weighted
average yield is 5.00% for the
quarter ended September 30,
2023.
EVERETT, Wash., Oct. 27, 2023 (GLOBE NEWSWIRE) -- Coastal
Financial Corporation (Nasdaq: CCB) (the “Company”, "Coastal",
"we", "our", or "us"), the holding company for Coastal Community
Bank (the “Bank”), today reported unaudited financial results for
the quarter ended September 30, 2023.
Quarterly net income for the third quarter of 2023 was $10.3
million, or $0.75 per diluted common share, compared with net
income of $12.9 million, or $0.95 per diluted common share, for the
second quarter of 2023, and $11.1 million, or $0.82 per diluted
common share, for the quarter ended September 30,
2022.
Total assets increased $145.0 million, or 4.1%, during the third
quarter of 2023 to $3.68 billion, from $3.54 billion at
June 30, 2023. Total loans, net of deferred fees decreased
$40.5 million, or 1.3%, during the three months ended
September 30, 2023 to $2.97 billion, compared to $3.01 billion
at June 30, 2023. Community bank loans increased $71.6
million, or 4.2%, and offset a $112.1 million decrease in CCBX
loans. We continue to monitor and manage the CCBX loan portfolio,
and sold $320.9 million in CCBX loans during the quarter ended
September 30, 2023. We intentionally reduced the CCBX other
consumer and other loans portfolio in an effort to strengthen our
balance sheet. We currently expect to sell additional loans in the
coming months as we continue working to optimize our CCBX portfolio
through new partners, products and building on our existing
relationships. Deposits increased $127.1 million, or 4.0%, during
the three months ended September 30, 2023. CCBX deposits grew
$99.1 million, or 6.0%. Community bank deposits increased $28.0
million, or 1.9%. Our cost of deposits for the community bank was
1.31% for the three months ended September 30, 2023, compared
to 0.98% for the three months ended June 30, 2023.
We saw solid deposit growth in the third quarter, with deposits
increasing $127.1 million, or 4.0%, compared to June 30, 2023.
Fully insured IntraFi network reciprocal deposits increased $56.1
million to $296.4 million as of September 30, 2023, compared
to $240.3 million as of June 30, 2023. These fully insured
reciprocal deposits allow our larger deposit customers to fully
insure their deposits through a reciprocal agreement with other
banks. Loans receivable was deliberately decreased $40.5 million,
or 1.3%, during the three months ended September 30, 2023 as
part of our plan to optimize and strengthen the balance sheet. We
continue to monitor our liquidity position through diligent
management of our liquid assets and liabilities as well as
maintaining access to alternative sources of funds. As of
September 30, 2023, we had $474.9 million in cash on the
balance sheet and the capacity to borrow up to $577.9 million from
Federal Home Loan Bank and the Federal Reserve Bank discount
window,with no borrowings taken under these facilities since the
first quarter of 2022. Cash on the balance sheet and borrowing
capacity totaled $1.05 billion, which represented 32.0% of total
deposits and exceeded our $599.0 million in uninsured deposits as
of September 30, 2023.
"At Coastal we pride ourselves on being proactive in how we
serve our customers, manage risk and position the Bank for
shareholders. We continue to focus on our BaaS business by
concentrating on working with larger partners and optimizing our
CCBX loan portfolio so we can grow and advance our presence in the
BaaS space. Over the last two years we have deliberately reduced
the number of partners that we work with, focusing on larger
partners and companies. We are being more intentional in our
selection of products and partnerships that best serve our
customers and shareholders in order to achieve our long term
profitability objective. We only want to work with the best and
quite frankly, our expertise and strength has attracted a more
established partner set which we are leaning into. During the
quarter ended September 30, 2023 we started the process of
optimizing our CCBX loan portfolio by selling higher yielding loans
that have a greater potential for credit deterioration. As we work
to optimize our CCBX loan portfolio through enhanced credit
standards, we expect lower earnings in the short term with lower
loan yields and compressed margins but we continue to focus on
strengthening the portfolio with new loans that we believe will
provide for long term stability and profitability. For us to
continue to grow and succeed, we cannot be static. We can always be
better. We will continue to look for opportunities to grow our
Company and will focus on the long term, holding down deposits
costs when possible and managing expense through efficient use of
technology. We will work to do all that while keeping our un-Bankey
community bank mentality and feel," stated Eric Sprink, the CEO of
the Company and the Bank.
Results of Operations Overview
The Company has one main subsidiary, the Bank which consists of
three segments: CCBX, the community bank and treasury &
administration. The CCBX segment includes our BaaS activities, the
community bank segment includes all community banking activities,
and the treasury & administration segment includes treasury
management, overall administration and all other aspects of the
Company. Net interest income was $62.2 million for the
quarter ended September 30, 2023, a decrease of $121,000, or
0.2%, from $62.4 million for the quarter ended June 30, 2023,
and an increase of $13.0 million, or 26.5%, from $49.2 million for
the quarter ended September 30, 2022. Yield on
loans receivable was 10.84% for the three months ended
September 30, 2023, compared to 10.85% for the three months
ended June 30, 2023 and 8.46% for the three months ended
September 30, 2022. Cost of deposits was 3.14% for
the three months ended September 30, 2023, compared to 2.72%
for the three months ended June 30, 2023 and 0.82% for the
three months ended September 30, 2022. The decrease in net
interest income compared to June 30, 2023, was a result of
increased interest expense due to an increase in average interest
bearing deposits and an increase in cost of deposits as a result of
higher interest rates. The increase in net interest income compared
to September 30, 2022 was largely related to increased yield
on loans resulting from higher interest rates and growth in higher
yielding loans, primarily from CCBX. Total average loans receivable
for the three months ended September 30, 2023 was $3.06
billion, compared to $2.97 billion for the three months ended
June 30, 2023, and $2.45 billion for the three months ended
September 30, 2022.
Interest and fees on loans totaled $83.7 million for the three
months ended September 30, 2023 compared to $80.2 million and
$52.3 million for the three months ended June 30, 2023 and
September 30, 2022, respectively. Total loans, net
of deferred fees decreased $40.5 million, or 1.3%, during the
quarter ended September 30, 2023, which included a $112.1
million decrease in CCBX loans partially offset by an increase of
$72.3 million in community bank loans. The decrease in CCBX loans
includes a decrease of $87.0 million, or 10.3%, in consumer and
other loans and a decrease of $24.3 million, or 17.5%, in capital
call lines as a result of normal balance fluctuations and business
activities. We continue to monitor and manage the CCBX loan
portfolio, and sold $320.9 million in CCBX loans during the quarter
ended September 30, 2023. We repositioned ourselves by
reducing our CCBX consumer installment loans in an effort to
optimize our loan portfolio and we will work to continue growing
the CCBX portfolio in future quarters with loans that have lower
potential risk of credit deterioration and are more aligned with
our long term objectives. The increase in interest and fees on
loans for the quarter ended September 30, 2023, compared to
June 30, 2023 and September 30, 2022, was largely due to
growth in higher yielding loans and increased interest
rates. As a result of the Federal Open Market Committee
(“FOMC”) raising the target Federal Funds rate 0.25% during the
quarter, interest rates on our existing variable rate loans were
affected, as are the rates on new loans. The FOMC last raised the
target Federal Funds rate 0.25% on July 26, 2023. We continue
to monitor the impact of these increases in interest rates.
Interest income from interest earning deposits with other banks
was $3.9 million for the quarter ended September 30, 2023 an
increase of $1.2 million compared to June 30, 2023 and an
increase of $1.6 million compared to September 30, 2022
primarily due to an increase in interest rates. The
average balance of interest earning deposits with other banks for
the three months ended September 30, 2023 was $285.6 million,
compared to $211.4 million and $397.6 million for the three months
ended June 30, 2023 and September 30, 2022,
respectively. The average yield on these interest
earning deposits with other banks increased to 5.40% for the
quarter ended September 30, 2023, compared to 5.08% and 2.27%
for the quarters ended June 30, 2023 and September 30,
2022, respectively.
Total interest expense was $26.1 million for the quarter ended
September 30, 2023, a $4.8 million increase from the quarter
ended June 30, 2023 and a $20.1 million increase from the
quarter ended September 30, 2022. Interest expense on deposits
was $25.5 million for the quarter ended September 30, 2023,
compared to $20.7 million for the quarter ended June 30, 2023
and $5.7 million for the quarter ended September 30, 2022.
Interest expense on interest bearing deposits increased $4.8
million for the quarter ended September 30, 2023, compared to
the quarter ended June 30, 2023, and $19.7 million compared to
the quarter ended September 30, 2022 as a result an increase
in CCBX deposits that are tied to, and reprice when the FOMC raises
rates. Similarly, most of our CCBX loans also reprice when the FOMC
raises interest rates. Interest expense on borrowed funds was
$651,000 for the quarter ended September 30, 2023, compared to
$661,000 and $273,000 for the quarters ended June 30, 2023 and
September 30, 2022, respectively. The $378,000 increase in
interest expense on borrowed funds from the quarter ended
September 30, 2022 is the result of an increase of $19.8
million in subordinated debt and an increase in interest rates.
Total cost of deposits was 3.14% for the three months ended
September 30, 2023, compared to 2.72% for the three months
ended June 30, 2023, and 0.82%, for the three months ended
September 30, 2022. Community bank and CCBX cost of deposits
were 1.31% and 4.80% respectively, for the three months ended
September 30, 2023, compared to 0.98% and 4.42%, for the three
months ended June 30, 2023, and 0.16% and 1.79% for the three
months ended September 30, 2022. The increase in cost of
deposits for the three months ended September 30, 2023
compared to the prior periods for both segments is a result of
increased interest rates. While we continue working to hold down
deposit costs, any additional FOMC interest rate increases will
increase our cost of deposits and result in higher interest expense
on interest bearing deposits.
Net Interest Margin
Net interest margin was 7.10% for the three months ended
September 30, 2023, compared to 7.58% and 6.58% for the three
months ended June 30, 2023 and September 30, 2022,
respectively. The decrease in net interest margin
compared to the three months ended June 30, 2023 was largely
due to an increase in cost of deposits and selling higher yielding
consumer loans. Higher interest rates on interest bearing deposits
compressed net interest margin as a result of our decision to
increase our rates to rival our competitors raising rates and CCBX
deposit pricing being tied to the Fed Funds rate. Additionally, the
actions we took in an effort to strengthen the balance sheet by
selling higher risk and higher yielding loans during the quarter
ended September 30, 2023 will continue to impact net interest
margin in future quarters. The increase in net interest margin
compared to the three months ended September 30, 2022 was
largely a result of increased volume and an increase in higher
interest rates on new loans and on existing variable rate loans as
they reprice. Loans receivable decreased $40.5 million
and increased $459.1 million, compared to June 30, 2023 and
September 30, 2022, respectively. Additionally, the
Fed Funds interest rate increases have resulted in existing,
variable rate loans repricing to higher interest
rates. Interest and fees on loans receivable increased
$3.5 million, or 4.3%, to $83.7 million for the three months ended
September 30, 2023, compared to $80.2 million for the three
months ended June 30, 2023, and $52.3 million for the three
months ended September 30, 2022. Also contributing
to the increase in net interest margin compared to the three months
ended September 30, 2022, was a $1.6 million increase in
interest on interest earning deposits. These interest
earning deposits earned an average rate of 5.40% for the quarter
ended September 30, 2023, compared to 5.08% and 2.27% for the
quarters ended June 30, 2023 and September 30, 2022,
respectively. Average investment securities increased
$7.7 million to $118.0 million due to the purchase of $30.1 million
in securities during the three months ended September 30, 2023
compared to the three months ended June 30, 2023, and
increased $14.3 million compared to the three months ended
September 30, 2022. Interest on investment securities
increased $113,000 for the three months ended September 30,
2023 compared to the three months ended June 30, 2023 as a
result of the increase in average outstanding balance coupled with
increased yield, which also positively impacted net interest
margin. Interest on investment securities increased $212,000
compared to September 30, 2022, as a result of increased
yield. These increases in interest income were partially
offset by increases in interest expense on interest bearing
deposits, as previously discussed.
Cost of funds was 3.18% for the quarter ended September 30,
2023, an increase of 41 basis points from the quarter ended
June 30, 2023 and an increase of 233 basis points from the
quarter ended September 30, 2022. Cost of deposits for the
quarter ended September 30, 2023 was 3.14%, compared to 2.72%
for the quarter ended June 30, 2023, and 0.82% for the quarter
ended September 30, 2022. The increased cost of funds and
deposits compared to June 30, 2023 and September 30, 2022
was due to the increase in interest rates compared to the previous
periods and growth in higher cost CCBX deposits compared to
September 30, 2022.
During the quarter ended September 30, 2023, total loans
receivable decreased by $40.5 million, or 1.3%, to $2.97 billion,
compared to $3.01 billion for the quarter ended June 30,
2023. This decrease consists of a $112.1 million
decrease in CCBX loans partially offset by $71.6 million in
community bank loan growth. CCBX loans were sold in an effort to
strengthen the loan portfolio and we will work to continue growing
the CCBX portfolio with enhanced credit standards and lower
potential for future credit deterioration. Total loans receivable
as of September 30, 2023 increased $459.1 million compared to
September 30, 2022. This increase includes
community bank loan growth of $192.3 million and an increase in
CCBX loans of $266.8 million. During the quarter ended
September 30, 2023, $320.9 million in loans were sold during
the quarter and no loans were held for sale as of
September 30, 2023; compared to $35.9 million in loans held
for sale as of June 30, 2023.
Total yield on loans receivable for the quarter ended
September 30, 2023 was 10.84%, compared to 10.85% for the
quarter ended June 30, 2023, and 8.46% for the quarter ended
September 30, 2022. This slight decrease in yield on loans
receivable compared to the quarter ended June 30, 2023 is a
combination of an overall increase in interest rates, repricing of
variable rate loans as well as change in mix of CCBX partner
loans. During the quarter ended September 30, 2023,
community bank loans increased 4.2%, or $71.6 million, compared to
the quarter ended June 30, 2023, with an average yield of
6.20% and CCBX loans outstanding decreased 8.7%, or $112.1 million,
compared to June 30, 2023, with an average CCBX yield of
17.05%. The yield on CCBX loans does not include the impact of BaaS
loan expense. BaaS loan expense represents the amount
paid or payable to partners for credit enhancements, fraud
enhancements and originating & servicing CCBX
loans.
The following table summarizes the average yield on loans
receivable and cost of deposits for our community bank and CCBX
segments for the periods indicated:
| |
For the Three Months Ended |
|
For the Nine Months Ended |
| |
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
| |
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
Community
Bank |
6.20 |
% |
|
1.31 |
% |
|
6.28 |
% |
|
0.98 |
% |
|
5.31 |
% |
|
0.16 |
% |
|
6.15 |
% |
|
0.99 |
% |
|
5.17 |
% |
|
0.11 |
% |
| CCBX (1) |
17.05 |
% |
|
4.80 |
% |
|
16.95 |
% |
|
4.42 |
% |
|
13.96 |
% |
|
1.79 |
% |
|
16.74 |
% |
|
4.41 |
% |
|
13.16 |
% |
|
0.91 |
% |
| Consolidated |
10.84 |
% |
|
3.14 |
% |
|
10.85 |
% |
|
2.72 |
% |
|
8.46 |
% |
|
0.82 |
% |
|
10.57 |
% |
|
2.69 |
% |
|
7.63 |
% |
|
0.41 |
% |
(1) CCBX yield on loans does not include
the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit and
fraud enhancements and originating & servicing CCBX loans. To
determine Net BaaS loan income earned from CCBX loan
relationships, the Company takes BaaS loan interest income and
deducts BaaS loan expense to arrive at Net BaaS loan income which
can be compared to interest income on the Company’s community bank
loans. See reconciliation of the non-GAAP measures at the end of
this earnings release for the impact of BaaS loan expense on CCBX
loan yield.
(2) Annualized calculations for periods
shown.
The following tables illustrates how BaaS loan interest income
is affected by BaaS loan expense resulting in net BaaS loan income
and the associated yield:
| |
|
For the Three Months Ended |
| |
|
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands, unaudited) |
|
Income /
Expense |
|
Income /
expense divided
by average
CCBX loans(2) |
|
Income /
Expense |
|
Income/ expense
divided by
average CCBX
loans(2) |
|
Income /
Expense |
|
Income /
expense divided
by average
CCBX loans(2) |
|
BaaS loan interest income |
|
$ |
56,279 |
|
17.05 |
% |
|
$ |
53,632 |
|
16.95 |
% |
|
$ |
31,449 |
|
13.96 |
% |
| Less: BaaS loan expense |
|
|
23,003 |
|
6.97 |
% |
|
|
22,033 |
|
6.96 |
% |
|
|
15,560 |
|
6.91 |
% |
|
Net BaaS loan income(1) |
|
$ |
33,276 |
|
10.08 |
% |
|
$ |
31,599 |
|
9.99 |
% |
|
$ |
15,889 |
|
7.05 |
% |
| Average BaaS
Loans(3) |
|
$ |
1,309,380 |
|
|
|
$ |
1,269,406 |
|
|
|
$ |
893,655 |
|
|
| |
|
For the Nine Months Ended |
| |
|
September 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands; unaudited) |
|
Income /
Expense |
|
Income / expense
divided by
average CCBX
loans(2) |
|
Income /
Expense |
|
Income / expense
divided by
average CCBX
loans(2) |
|
BaaS loan interest income |
|
$ |
152,131 |
|
16.74 |
% |
|
$ |
64,721 |
|
13.16 |
% |
| Less: BaaS loan expense |
|
|
62,590 |
|
6.89 |
% |
|
|
36,079 |
|
7.34 |
% |
|
Net BaaS loan income(1) |
|
$ |
89,541 |
|
9.85 |
% |
|
$ |
28,642 |
|
5.82 |
% |
| Average BaaS
Loans(3) |
|
$ |
1,215,224 |
|
|
|
$ |
657,574 |
|
|
(1) A reconciliation of the non-GAAP measures are set
forth at the end of this earnings release.
(2) Annualized calculations shown for quarterly periods
presented.
(3) Includes loans held for sale.
Key Performance Ratios
ROA was 1.13% for the quarter ended September 30, 2023
compared to 1.52% and 1.45% for the quarters ended June 30,
2023 and September 30, 2022, respectively. ROA for
the quarter ended September 30, 2023, was down 0.39% and
0.32%, respectively, as a result of lower margin and higher
expenses compared to June 30, 2023 and September 30,
2022.
The following table shows the Company’s key performance ratios
for the periods indicated.
| |
|
Three Months Ended |
|
Nine Months Ended |
|
(unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
|
September 30,
2022 |
|
September 30,
2023 |
|
September 30,
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets(1) |
|
1.13 |
% |
|
1.52 |
% |
|
1.58 |
% |
|
1.66 |
% |
|
1.45 |
% |
|
1.40 |
% |
|
1.27 |
% |
|
Return on average equity(1) |
|
14.60 |
% |
|
19.53 |
% |
|
19.89 |
% |
|
21.86 |
% |
|
19.36 |
% |
|
17.90 |
% |
|
16.90 |
% |
|
Yield on earnings assets(1) |
|
10.08 |
% |
|
10.18 |
% |
|
9.19 |
% |
|
8.47 |
% |
|
7.38 |
% |
|
9.84 |
% |
|
6.03 |
% |
|
Yield on loans receivable(1) |
|
10.84 |
% |
|
10.85 |
% |
|
9.95 |
% |
|
9.33 |
% |
|
8.46 |
% |
|
10.57 |
% |
|
7.63 |
% |
|
Cost of funds(1) |
|
3.18 |
% |
|
2.77 |
% |
|
2.19 |
% |
|
1.61 |
% |
|
0.85 |
% |
|
2.73 |
% |
|
0.44 |
% |
|
Cost of deposits(1) |
|
3.14 |
% |
|
2.72 |
% |
|
2.13 |
% |
|
1.56 |
% |
|
0.82 |
% |
|
2.69 |
% |
|
0.41 |
% |
|
Net interest margin(1) |
|
7.10 |
% |
|
7.58 |
% |
|
7.15 |
% |
|
6.96 |
% |
|
6.58 |
% |
|
7.27 |
% |
|
5.61 |
% |
|
Noninterest expense to average assets(1) |
|
6.23 |
% |
|
6.11 |
% |
|
5.69 |
% |
|
5.97 |
% |
|
6.66 |
% |
|
6.02 |
% |
|
5.54 |
% |
|
Noninterest income to average assets(1) |
|
3.81 |
% |
|
6.90 |
% |
|
6.28 |
% |
|
5.43 |
% |
|
4.48 |
% |
|
5.61 |
% |
|
3.79 |
% |
|
Efficiency ratio |
|
58.36 |
% |
|
42.92 |
% |
|
43.03 |
% |
|
48.94 |
% |
|
61.12 |
% |
|
47.60 |
% |
|
59.77 |
% |
|
Loans receivable to deposits(2) |
|
90.19 |
% |
|
96.23 |
% |
|
92.55 |
% |
|
93.25 |
% |
|
89.92 |
% |
|
90.19 |
% |
|
89.92 |
% |
(1) Annualized calculations shown for
quarterly periods presented.
(2) Includes loans held for sale.
Noninterest Income
The following table details noninterest income for the periods
indicated:
| |
Three Months Ended |
| |
September 30, |
|
June 30, |
|
September 30, |
|
(dollars in thousands; unaudited) |
|
2023 |
|
|
2023 |
|
|
2022 |
|
|
Deposit service charges and fees |
$ |
998 |
|
$ |
989 |
|
$ |
986 |
|
|
Loan referral fees |
|
1 |
|
|
682 |
|
|
— |
|
|
Unrealized gain on equity securities, net |
|
5 |
|
|
155 |
|
|
(133 |
) |
|
Gain on sales of loans, net |
|
107 |
|
|
23 |
|
|
— |
|
|
Other |
|
291 |
|
|
234 |
|
|
260 |
|
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,402 |
|
|
2,083 |
|
|
1,113 |
|
|
Servicing and other BaaS fees |
|
997 |
|
|
895 |
|
|
1,079 |
|
|
Transaction fees |
|
1,036 |
|
|
1,052 |
|
|
940 |
|
|
Interchange fees |
|
1,216 |
|
|
975 |
|
|
738 |
|
|
Reimbursement of expenses |
|
1,152 |
|
|
1,026 |
|
|
885 |
|
|
BaaS program income |
|
4,401 |
|
|
3,948 |
|
|
3,642 |
|
|
BaaS credit enhancements |
|
25,926 |
|
|
51,027 |
|
|
17,928 |
|
|
Baas fraud enhancements |
|
2,850 |
|
|
1,537 |
|
|
11,708 |
|
|
BaaS indemnification income |
|
28,776 |
|
|
52,564 |
|
|
29,636 |
|
|
Total BaaS income |
|
33,177 |
|
|
56,512 |
|
|
33,278 |
|
| Total noninterest income |
$ |
34,579 |
|
$ |
58,595 |
|
$ |
34,391 |
|
Noninterest income was $34.6 million for the three months ended
September 30, 2023, a decrease of $24.0 million from $58.6
million for the three months ended June 30, 2023, and an
increase of $188,000 from $34.4 million for the three months ended
September 30, 2022. The decrease in noninterest
income over the quarter ended June 30, 2023 was primarily due
to a decrease of $23.3 million in total BaaS income. The $23.3
million decrease in total BaaS income included a $25.1 million
decrease in BaaS credit enhancements related to the allowance for
credit losses, a $1.3 million increase in BaaS fraud enhancements,
and an increase of $453,000 in BaaS program income. The increase in
BaaS program income is largely the result of higher transaction and
interchange fees (see “Appendix B” for more information on the
accounting for BaaS allowance for credit losses and credit and
fraud enhancements). The $188,000 increase in noninterest income
over the quarter ended September 30, 2022 was primarily due to
a $138,000 increase in gain on sale of equity securities and
$107,000 increase in gain on sale of loans partially offset by a
$101,000 decrease in BaaS income. The $101,000 decrease in BaaS
income included a $8.0 million increase in BaaS credit
enhancements, a $8.9 million decrease in BaaS fraud enhancements
and a $759,000 increase in BaaS program income. The decrease in
BaaS credit enhancement compared to the prior period is a result of
lower CCBX loan balances increased underwriting standards and
change in mix of CCBX loans.
Our CCBX segment continues to evolve, and we now have 22
relationships, at varying stages, as of September 30,
2023. We continue to refine the criteria for CCBX
partnerships and are exiting relationships where it makes sense and
are focusing on larger more established partners, with experienced
management teams, existing customer bases and strong financial
positions. The sale of $320.9 million in CCBX loans during the
quarter ended September 30, 2023 is part of our strategy to
strengthen the balance sheet and lower the overall potential credit
risk in our loan portfolio. We expect net interest margin will
tighten as higher quality loans yield less than higher risk loans
and we also expect the size of our CCBX loan portfolio will be
smaller than in previous quarters while we work to grow the
portfolio with loans that are subject to increased underwriting
standards. We expect this process to take 2 to 3 quarters. At the
same time we will be focused on increasing our efficiency and using
technology to reduce future expense growth.
The following table illustrates the activity and evolution in
CCBX relationships for the periods presented.
| |
As of |
|
(unaudited) |
September 30,
2023 |
June 30,
2023 |
September 30,
2022 |
|
Active |
18 |
18 |
19 |
| Friends and family /
testing |
1 |
1 |
2 |
| Implementation /
onboarding |
1 |
1 |
0 |
| Signed letters of intent |
1 |
1 |
5 |
| Wind down - preparing to exit
relationship |
1 |
1 |
3 |
|
Total CCBX relationships |
22 |
22 |
29 |
The following table details noninterest expense for the periods
indicated:
Noninterest Expense
| |
|
Three Months Ended |
|
|
|
September 30, |
|
June 30, |
|
September 30, |
|
(dollars in thousands; unaudited) |
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
Salaries and employee benefits |
|
$ |
18,087 |
|
$ |
16,309 |
|
$ |
14,506 |
|
Legal and professional expenses |
|
|
4,447 |
|
|
4,645 |
|
|
2,251 |
|
Data processing and software licenses |
|
|
2,366 |
|
|
1,972 |
|
|
1,670 |
|
Occupancy |
|
|
1,224 |
|
|
1,143 |
|
|
1,147 |
|
Point of sale expense |
|
|
1,068 |
|
|
814 |
|
|
742 |
|
Director and staff expenses |
|
|
529 |
|
|
519 |
|
|
475 |
|
FDIC assessments |
|
|
694 |
|
|
570 |
|
|
850 |
|
Excise taxes |
|
|
541 |
|
|
531 |
|
|
588 |
|
Marketing |
|
|
169 |
|
|
115 |
|
|
69 |
|
Other |
|
|
1,523 |
|
|
1,722 |
|
|
1,522 |
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
|
30,648 |
|
|
28,340 |
|
|
23,820 |
|
BaaS loan expense |
|
|
23,003 |
|
|
22,033 |
|
|
15,560 |
|
BaaS fraud expense |
|
|
2,850 |
|
|
1,537 |
|
|
11,707 |
|
BaaS loan and fraud expense |
|
|
25,853 |
|
|
23,570 |
|
|
27,267 |
| Total noninterest expense |
|
$ |
56,501 |
|
$ |
51,910 |
|
$ |
51,087 |
Total noninterest expense increased $4.6 million to $56.5
million for the three months ended September 30, 2023,
compared to $51.9 million for the three months ended June 30,
2023 and increased $5.4 million from $51.1 million for the three
months ended September 30, 2022. The increase in noninterest
expense for the quarter ended September 30, 2023, as compared
to the quarter ended June 30, 2023, was primarily due to a
$2.3 million increase in BaaS expense (of which $1.0 million is
related to an increase in BaaS loan expense and $1.3 million is due
to an increase in BaaS fraud expense) and a $1.8 million increase
in salaries and employee benefits. BaaS loan expense represents the
amount paid or payable to partners for credit enhancements, fraud
enhancements, and originating & servicing CCBX loans. BaaS
fraud expense represents non-credit fraud losses on partner’s
customer loan and deposit accounts. A portion of this expense is
realized during the quarter during which the loss occurs, and a
portion is estimated based on historical or other information from
our partners. The $1.8 million increase in salaries and
employee benefits is related to the full quarter effect of hiring
staff for our ongoing growth initiatives. Salaries and benefits
included one time expenses of $494,000 as part of our initiative to
manage costs going forward. Additionally, data processing and
software licenses increased $394,000 as a result of enhancements in
technology.
The increase in noninterest expenses for the quarter ended
September 30, 2023 compared to the quarter ended
September 30, 2022 were largely due to a decrease of $1.4
million in BaaS partner expense (of which $7.4 million is related
to an increase in BaaS loan expense offset by a decrease of $8.9
million in BaaS fraud expense), $3.6 million increase in salary and
employee benefits related to hiring staff for CCBX and additional
staff for our ongoing growth initiatives and $2.2 million increase
in legal and professional fees due to increased fees related to
data and risk management, building out our infrastructure and
increased consulting expenses for projects and enhanced monitoring.
We anticipate that our legal and professional fees will decline as
projects have been completed and initiatives are achieved, with
legal and professional fees leveling off to approximate first
quarter 2023 levels staring in fourth quarter 2023. Additionally,
there was a $696,000 increase in data processing and software
licenses due to enhancements in technology and a $326,000 increase
in point of sale expenses which is attributed to increased CCBX
activity.
Provision for Income Taxes
The provision for income taxes was $2.8 million for the three
months ended September 30, 2023, $3.9 million for the three
months ended June 30, 2023 and $3.0 million for the third
quarter of 2022. The provision for income taxes was lower for the
three months ended September 30, 2023 compared to
June 30, 2023 as a result of lower taxable income. The Company
is subject to various state taxes that are assessed as CCBX
activities and employees expand into other states, which has
increased the overall tax rate used in calculating the provision
for income taxes in the current and future periods. The Company
uses a federal statutory tax rate of 21.0% as a basis for
calculating provision for federal income taxes and 2.62% for
calculating the provision for state taxes.
Financial Condition Overview
Total assets increased $145.0 million, or 4.1%, to $3.68 billion
at September 30, 2023 compared to $3.54 billion at
June 30, 2023. The increase is primarily due to $199.7 million
increase in interest earning deposits with other banks partially
offset by loans receivable decreasing $40.5 million. We
deliberately decreased loans as part of our strategy to optimize
our CCBX portfolio and strengthen the balance sheet through
enhanced credit standards. Additionally, there were no loans held
for sale at September 30, 2023, compared to $35.9 million at
June 30, 2023.
Total assets increased $546.5 million, or 17.4%, at
September 30, 2023, compared to $3.13 billion at
September 30, 2022. The increase is primarily due
to loans receivable increasing $459.1 million, and an increase of
$42.6 million in investment securities and a $71.7 million increase
in interest earning deposits with other banks compared to
September 30, 2022.
Loans Receivable
Total loans receivable decreased $40.5 million to $2.97 billion
at September 30, 2023, from $3.01 billion at June 30,
2023, and increased $459.1 million from $2.51 billion at
September 30, 2022. The decrease in loans receivable over the
quarter ended June 30, 2023 was the result of a decease of
$112.1 million in CCBX loans from loan sales to optimize our CCBX
loan portfolio and a $71.6 million increase in community bank
loans. We continue to monitor and manage the CCBX loan portfolio,
and sold $320.9 million in CCBX loans during the quarter ended
September 30, 2023. CCBX other consumer and other loans were
reduced by $148.4 million to $317.0 million at September 30,
2023 from $465.4 million at June 30, 2023 as part of our
optimizing strategy to strengthen the balance sheet. The change in
loans receivable over the quarter ended September 30, 2022
includes CCBX loan growth of $266.8 million and community bank loan
growth of $192.3 million as of September 30,
2023.
The following table summarizes the loan portfolio at the period
indicated:
|
|
As of September 30, 2023 |
|
As of June 30, 2023 |
|
As of September 30, 2022 |
|
(dollars in thousands; unaudited) |
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
$ |
3,310 |
|
|
0.1 |
% |
|
$ |
3,595 |
|
|
0.1 |
% |
|
$ |
5,794 |
|
|
0.2 |
% |
|
Capital call lines |
|
114,174 |
|
|
3.8 |
|
|
|
138,428 |
|
|
4.6 |
|
|
|
174,311 |
|
|
6.9 |
|
|
All other commercial & industrial loans |
|
213,791 |
|
|
7.2 |
|
|
|
211,806 |
|
|
7.0 |
|
|
|
159,823 |
|
|
6.4 |
|
|
Total commercial and industrial loans: |
|
331,275 |
|
|
11.1 |
|
|
|
353,829 |
|
|
11.7 |
|
|
|
339,928 |
|
|
13.5 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development |
|
167,686 |
|
|
5.6 |
|
|
|
186,706 |
|
|
6.2 |
|
|
|
224,188 |
|
|
8.9 |
|
|
Residential real estate |
|
477,147 |
|
|
16.1 |
|
|
|
463,179 |
|
|
15.4 |
|
|
|
402,781 |
|
|
16.0 |
|
|
Commercial real estate |
|
1,237,849 |
|
|
41.6 |
|
|
|
1,164,088 |
|
|
38.6 |
|
|
|
1,024,067 |
|
|
40.7 |
|
| Consumer and other loans |
|
760,463 |
|
|
25.6 |
|
|
|
846,459 |
|
|
28.1 |
|
|
|
523,536 |
|
|
20.9 |
|
|
Gross loans receivable |
|
2,974,420 |
|
|
100.0 |
% |
|
|
3,014,261 |
|
|
100.0 |
% |
|
|
2,514,500 |
|
|
100.0 |
% |
| Net deferred origination fees
- PPP loans |
|
(52 |
) |
|
|
|
|
(60 |
) |
|
|
|
|
(111 |
) |
|
|
| Net deferred origination fees
- all other loans |
|
(7,333 |
) |
|
|
|
|
(6,648 |
) |
|
|
|
|
(6,500 |
) |
|
|
|
Loans receivable |
$ |
2,967,035 |
|
|
|
|
$ |
3,007,553 |
|
|
|
|
$ |
2,507,889 |
|
|
|
| Loan Yield(1) |
|
10.84 |
% |
|
|
|
|
10.85 |
% |
|
|
|
|
8.46 |
% |
|
|
(1) Loan yield is annualized for the three
months ended for each period presented and includes loans held for
sale and nonaccrual loans.
Please see Appendix A for additional loan portfolio detail
regarding industry concentrations.
The following tables detail the community bank and CCBX loans
which are included in the total loan portfolio table above.
|
Community Bank |
|
As of |
|
|
|
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
PPP loans |
|
$ |
3,310 |
|
|
0.2 |
% |
|
$ |
3,595 |
|
|
0.2 |
% |
|
$ |
5,794 |
|
|
0.4 |
% |
|
All other commercial & industrial loans |
|
|
154,922 |
|
|
8.6 |
|
|
|
151,483 |
|
|
8.8 |
|
|
|
143,808 |
|
|
9.0 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development loans |
|
|
167,686 |
|
|
9.4 |
|
|
|
186,706 |
|
|
10.9 |
|
|
|
224,188 |
|
|
14.0 |
|
|
Residential real estate loans |
|
|
225,372 |
|
|
12.6 |
|
|
|
211,966 |
|
|
12.3 |
|
|
|
198,871 |
|
|
12.5 |
|
|
Commercial real estate loans |
|
|
1,237,849 |
|
|
69.1 |
|
|
|
1,164,088 |
|
|
67.7 |
|
|
|
1,024,067 |
|
|
64.0 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer and other loans |
|
|
2,483 |
|
|
0.1 |
|
|
|
1,457 |
|
|
0.1 |
|
|
|
2,220 |
|
|
0.1 |
|
|
Gross Community Bank loans receivable |
|
|
1,791,622 |
|
|
100.0 |
% |
|
|
1,719,295 |
|
|
100.0 |
% |
|
|
1,598,948 |
|
|
100.0 |
% |
| Net deferred origination
fees |
|
|
(6,961 |
) |
|
|
|
|
(6,261 |
) |
|
|
|
|
(6,628 |
) |
|
|
|
Loans receivable |
|
$ |
1,784,661 |
|
|
|
|
$ |
1,713,034 |
|
|
|
|
$ |
1,592,320 |
|
|
|
| Loan Yield(1) |
|
|
6.20 |
% |
|
|
|
|
6.28 |
% |
|
|
|
|
5.31 |
% |
|
|
(1) Loan yield is annualized for the three
months ended for each period presented and includes loans held for
sale and nonaccrual loans.
|
CCBX |
|
As of |
|
|
|
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital call lines |
|
$ |
114,174 |
|
|
9.6 |
% |
|
$ |
138,428 |
|
|
10.7 |
% |
|
$ |
174,311 |
|
|
19.0 |
% |
|
All other commercial & industrial loans |
|
|
58,869 |
|
|
5.0 |
|
|
|
60,323 |
|
|
4.7 |
|
|
|
16,015 |
|
|
1.8 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
251,775 |
|
|
21.3 |
|
|
|
251,213 |
|
|
19.4 |
|
|
|
203,910 |
|
|
22.3 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
440,993 |
|
|
37.3 |
|
|
|
379,642 |
|
|
29.3 |
|
|
|
216,995 |
|
|
23.7 |
|
|
Other consumer and other loans |
|
|
316,987 |
|
|
26.8 |
|
|
|
465,360 |
|
|
35.9 |
|
|
|
304,321 |
|
|
33.2 |
|
|
Gross CCBX loans receivable |
|
|
1,182,798 |
|
|
100.0 |
% |
|
|
1,294,966 |
|
|
100.0 |
% |
|
|
915,552 |
|
|
100.0 |
% |
| Net deferred origination
(fees) costs |
|
|
(424 |
) |
|
|
|
|
(447 |
) |
|
|
|
|
17 |
|
|
|
|
Loans receivable |
|
$ |
1,182,374 |
|
|
|
|
$ |
1,294,519 |
|
|
|
|
$ |
915,569 |
|
|
|
| Loan Yield -
CCBX(1)(2) |
|
|
17.05 |
% |
|
|
|
|
16.95 |
% |
|
|
|
|
13.96 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(1) CCBX yield does not
include the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit
enhancements and originating & servicing CCBX loans. See
reconciliation of the non-GAAP measures at the end of this earnings
release for the impact of BaaS loan expense on CCBX loan yield.
(2) Loan yield is annualized for the three
months ended for each period presented and includes loans held for
sale and nonaccrual loans.
Deposits
Total deposits increased $127.1 million, or 4.0%, to $3.29
billion at September 30, 2023 from $3.16 billion at
June 30, 2023. The increase was due to a $131.3 million
increase in core deposits, partially offset by a $4.2 million
decrease in time deposits. Deposits in our CCBX segment increased
$99.1 million, from $1.65 billion at June 30, 2023, to $1.75
billion at September 30, 2023 and community bank deposits
increased $28.0 million from $1.51 billion at June 30, 2023,
to $1.54 billion at September 30, 2023. The deposits from our
CCBX segment are predominately classified as interest bearing, or
NOW and money market accounts. During the quarter ended
September 30, 2023, noninterest bearing deposits decreased
$73.8 million, or 10.2%, to $651.8 million from $725.6 million at
June 30, 2023. Community bank noninterest bearing deposits
totaled $584.0 million or 38.0% of total community bank deposits
and CCBX noninterest bearing deposits totaled $67.8 million, or
3.9% of total CCBX deposits. In the quarter ended
September 30, 2023 compared to the quarter ended June 30,
2023, NOW and money market accounts increased $209.5 million,
savings deposits decreased $4.4 million, and time deposits
decreased $4.2 million. Included in total deposits is $296.4
million in IntraFi network reciprocal NOW and money market accounts
as of September 30, 2023, which provides our larger deposit
customers with fully insured deposits through a reciprocal
agreement with other banks. Uninsured deposits decreased to $599.0
million as of September 30, 2023, compared to $632.1 million
as of June 30, 2023.
Total deposits increased $452.6 million, or 16.0%, to $3.29
billion at September 30, 2023 compared to $2.84 billion at
September 30, 2022. The increase is largely the result of
growth in CCBX deposits. Noninterest bearing deposits decreased
$161.4 million, or 19.9%, to $651.8 million at September 30,
2023 from $813.2 million at September 30, 2022 as a result of
customer movement from noninterest to interest bearing accounts.
NOW and money market accounts increased $725.6 million, or 40.2%,
to $2.53 billion at September 30, 2023, and savings deposits
decreased $22.9 million, or 21.3%, and time deposits
decreased $13.3 million, or 39.1%, in the third quarter of
2023 compared to the third quarter of 2022 and includes
BaaS-brokered deposits that are now classified as NOW accounts
included in core deposits due to a change in the relationship
agreement with one of our partners and these deposits increased to
$269.2 million as of September 30, 2023, compared to $75.4
million as of September 30, 2022. Deposits in our CCBX segment
increased $550.0 million, from $1.20 billion at September 30,
2022, to $1.75 billion at September 30, 2023 and community
bank deposits decreased $97.3 million, from $1.63 billion at
September 30, 2022, to $1.54 billion at September 30,
2023. The deposits from our CCBX segment are predominately
classified as interest bearing, or NOW and money market accounts.
Uninsured deposits decreased to $599.0 million as of
September 30, 2023, compared to $867.7 million as of
September 30, 2022.
Additionally, as of September 30, 2023 $51.9 million in
CCBX customer deposits were transferred off the Bank’s balance
sheet to other financial institutions on a daily basis for
additional FDIC insurance coverage. Efforts to retain and grow core
deposits are evidenced by the high ratios in these categories when
compared to total deposits.
The following table summarizes the deposit portfolio for the
periods indicated.
|
|
As of September 30, 2023 |
|
As of June 30, 2023 |
|
As of September 30, 2022 |
|
(dollars in thousands; unaudited) |
Amount |
|
Percent of
Total
Deposits |
|
Balance |
|
Percent of
Total
Deposits |
|
Balance |
|
Percent of
Total
Deposits |
|
Demand, noninterest bearing |
$ |
651,786 |
|
|
19.8 |
% |
|
$ |
725,592 |
|
|
22.9 |
% |
|
$ |
813,217 |
|
|
28.7 |
% |
| NOW and money market |
|
2,532,668 |
|
|
77.0 |
|
|
|
2,323,164 |
|
|
73.5 |
|
|
|
1,807,105 |
|
|
63.7 |
|
| Savings |
|
84,628 |
|
|
2.6 |
|
|
|
88,991 |
|
|
2.8 |
|
|
|
107,508 |
|
|
3.8 |
|
|
Total core deposits |
|
3,269,082 |
|
|
99.4 |
|
|
|
3,137,747 |
|
|
99.2 |
|
|
|
2,727,830 |
|
|
96.2 |
|
| Brokered deposits |
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
|
|
75,363 |
|
|
2.6 |
|
| Time deposits less than
$100,000 |
|
8,635 |
|
|
0.2 |
|
|
|
9,741 |
|
|
0.3 |
|
|
|
13,296 |
|
|
0.5 |
|
| Time deposits $100,000 and
over |
|
11,982 |
|
|
0.4 |
|
|
|
15,083 |
|
|
0.5 |
|
|
|
20,577 |
|
|
0.7 |
|
|
Total |
$ |
3,289,700 |
|
|
100.0 |
% |
|
$ |
3,162,572 |
|
|
100.0 |
% |
|
$ |
2,837,066 |
|
|
100.0 |
% |
| Cost of
deposits(1) |
|
3.14 |
% |
|
|
|
|
2.72 |
% |
|
|
|
|
0.82 |
% |
|
|
(1) Cost of deposits is annualized for the
three months ended for each period presented.
The following tables detail the community bank and CCBX deposits
which are included in the total deposit portfolio table above.
|
Community Bank |
|
As of |
|
|
|
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
584,004 |
|
|
38.0 |
% |
|
$ |
621,012 |
|
|
41.1 |
% |
|
$ |
746,516 |
|
|
45.6 |
% |
| NOW and money market |
|
|
852,747 |
|
|
55.5 |
|
|
|
778,475 |
|
|
51.6 |
|
|
|
748,347 |
|
|
45.8 |
|
| Savings |
|
|
80,099 |
|
|
5.2 |
|
|
|
85,146 |
|
|
5.7 |
|
|
|
106,059 |
|
|
6.5 |
|
|
Total core deposits |
|
|
1,516,850 |
|
|
98.7 |
|
|
|
1,484,633 |
|
|
98.4 |
|
|
|
1,600,922 |
|
|
97.9 |
|
| Brokered deposits |
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
| Time deposits less than
$100,000 |
|
|
8,635 |
|
|
0.5 |
|
|
|
9,741 |
|
|
0.6 |
|
|
|
13,296 |
|
|
0.8 |
|
| Time deposits $100,000 and
over |
|
|
11,982 |
|
|
0.8 |
|
|
|
15,083 |
|
|
1.0 |
|
|
|
20,577 |
|
|
1.3 |
|
|
Total Community Bank deposits |
|
$ |
1,537,468 |
|
|
100.0 |
% |
|
$ |
1,509,458 |
|
|
100.0 |
% |
|
$ |
1,634,796 |
|
|
100.0 |
% |
| Cost of
deposits(1) |
|
|
1.31 |
% |
|
|
|
|
0.98 |
% |
|
|
|
|
0.16 |
% |
|
|
(1) Cost of deposits is annualized for the
three months ended for each period presented.
|
CCBX |
|
As of |
|
|
|
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
67,782 |
|
|
3.9 |
% |
|
$ |
104,580 |
|
|
6.3 |
% |
|
$ |
66,701 |
|
|
5.5 |
% |
| NOW and money market |
|
|
1,679,921 |
|
|
95.9 |
|
|
|
1,544,689 |
|
|
93.5 |
|
|
|
1,058,758 |
|
|
88.1 |
|
| Savings |
|
|
4,529 |
|
|
0.2 |
|
|
|
3,845 |
|
|
0.2 |
|
|
|
1,449 |
|
|
0.1 |
|
|
Total core deposits |
|
|
1,752,232 |
|
|
100.0 |
|
|
|
1,653,114 |
|
|
100.0 |
|
|
|
1,126,908 |
|
|
93.7 |
|
| BaaS-brokered deposits |
|
|
— |
|
|
0.0 |
|
|
|
— |
|
|
0.0 |
|
|
|
75,362 |
|
|
6.3 |
|
|
Total CCBX deposits |
|
$ |
1,752,232 |
|
|
100.0 |
% |
|
$ |
1,653,114 |
|
|
100.0 |
% |
|
$ |
1,202,270 |
|
|
100.0 |
% |
| Cost of
deposits(1) |
|
|
4.80 |
% |
|
|
|
|
4.42 |
% |
|
|
|
|
1.79 |
% |
|
|
(1) Cost of deposits is annualized for the
three months ended for each period presented.
Borrowings
As of September 30, 2023 the Company had the capacity to
borrow up to a total of $577.9 million from the Federal Reserve
Bank discount window and Federal Home Loan Bank, with no borrowings
outstanding on these lines as of September 30, 2023.
Shareholders’ Equity
During the nine months ended September 30, 2023, the
Company contributed $15.0 million in capital to the
Bank. The Company had a cash balance of $6.5 million as
of September 30, 2023, which is retained for general operating
purposes, including debt repayment, and for funding $713,000 in
commitments to bank technology funds.
Total shareholders’ equity increased $11.8 million since
June 30, 2023. The increase in shareholders’ equity
was primarily due to $10.3 million in net earnings, a $918,000
increase from the amortization of equity awards, combined with a
decrease in the unrealized loss on available-for-sale securities of
$589,000 during the three months ended September 30, 2023.
Capital Ratios
The Company and the Bank remained well capitalized at
September 30, 2023, as summarized in the following table.
|
(unaudited) |
|
Coastal
Community
Bank |
|
Coastal
Financial
Corporation |
|
Minimum Well
Capitalized
Ratios under
Prompt
Corrective
Action(1) |
|
Tier 1 Leverage Capital (to average assets) |
|
8.99 |
% |
|
8.03 |
% |
|
5.00 |
% |
| Common Equity Tier 1 Capital
(to risk-weighted assets) |
|
10.20 |
% |
|
8.99 |
% |
|
6.50 |
% |
| Tier 1 Capital (to
risk-weighted assets) |
|
10.20 |
% |
|
9.10 |
% |
|
8.00 |
% |
| Total Capital (to
risk-weighted assets) |
|
11.47 |
% |
|
11.79 |
% |
|
10.00 |
% |
(1) Presents the minimum capital ratios for an
insured depository institution, such as the Bank, to be considered
well capitalized under the Prompt Corrective Action framework. The
minimum requirements for the Company to be considered well
capitalized under Regulation Y include to maintain, on a
consolidated basis, a total risk-based capital ratio of 10.0
percent or greater and a tier 1 risk-based capital ratio of 6.0
percent or greater.
Asset Quality
Effective January 1, 2023 the Company implemented the CECL
allowance model which calculates reserves over the life of the loan
and is largely driven by portfolio characteristics, economic
outlook, and other key methodology assumptions versus the incurred
loss model, which is what we were previously using. As a result of
implementing CECL, there was a one-time adjustment to the 2023
opening allowance balance of $3.9 million. The day 1 CECL
adjustment for community bank loans included a reduction of
$310,000 to the community bank allowance driven by the reversal of
the unallocated balance and a reduction of $340,000 related to the
community bank unfunded commitment reserve also driven by the
reversal of the unallocated balance. This was offset by an increase
to the CCBX allowance for $4.2 million. With the mirror image
approach accounting related to the contingent receivable for CCBX
partner loans, there was a CECL day 1 increase to the
indemnification asset in the amount of $4.5 million. Net, the day 1
impact to retained earnings for the Bank’s transition to CECL was
an increase of $954,000, excluding the impact of income taxes.
The total allowance for credit losses was $101.1 million and
3.41% of loans receivable at September 30, 2023 compared to
$110.8 million and 3.68% at June 30, 2023 and $59.3 million
and 2.36% at September 30, 2022. The allowance for credit loss
allocated to the CCBX portfolio was $79.8 million and 6.75% of CCBX
loans receivable at September 30, 2023, with $21.3 million of
allowance for credit loss allocated to the community bank or 1.19%
of total community bank loans receivable.
The following table details the allocation of the allowance for
credit loss as of the period indicated:
| |
|
As of September 30, 2023 |
|
As of June 30, 2023 |
|
As of September 30, 2022 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Loans receivable |
|
$ |
1,784,661 |
|
|
$ |
1,182,374 |
|
|
$ |
2,967,035 |
|
|
$ |
1,713,034 |
|
|
$ |
1,294,519 |
|
|
$ |
3,007,553 |
|
|
$ |
1,592,320 |
|
|
$ |
915,569 |
|
|
$ |
2,507,889 |
|
Allowance for
credit losses |
|
|
(21,316 |
) |
|
|
(79,769 |
) |
|
|
(101,085 |
) |
|
|
(20,653 |
) |
|
|
(90,109 |
) |
|
|
(110,762 |
) |
|
|
(20,139 |
) |
|
|
(39,143 |
) |
|
|
(59,282 |
) |
Allowance for
credit losses to
total loans
receivable |
|
|
1.19 |
% |
|
|
6.75 |
% |
|
|
3.41 |
% |
|
|
1.21 |
% |
|
|
6.96 |
% |
|
|
3.68 |
% |
|
|
1.26 |
% |
|
|
4.28 |
% |
|
|
2.36 |
% |
Provision for credit losses - loans totaled $27.2 million for
the three months ended September 30, 2023, $52.6 million for
the three months ended June 30, 2023, and $18.4 million for
the three months ended September 30, 2022. Net charge-offs
totaled $36.8 million for the quarter ended September 30,
2023, compared to $31.0 million for the quarter ended June 30,
2023 and $8.5 million for the quarter ended September 30,
2022. Net charge-offs increased primarily due to CCBX partner
loans. CCBX partner agreements provide for a credit enhancement
that covers the net-charge-offs on CCBX loans and negative deposit
accounts, except in accordance with the program agreement for one
partner where the Company is responsible for credit losses on
approximately 10% of a $231.9 million loan portfolio. At
September 30, 2023, our portion of this portfolio represented
$23.2 million in loans.
The following table details net charge-offs for the core bank
and CCBX for the period indicated:
| |
|
Three Months Ended |
| |
|
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Gross charge-offs |
|
$ |
3 |
|
|
$ |
37,023 |
|
|
$ |
37,026 |
|
|
$ |
9 |
|
|
$ |
32,290 |
|
|
$ |
32,299 |
|
|
$ |
411 |
|
|
$ |
8,102 |
|
|
$ |
8,513 |
|
| Gross recoveries |
|
|
(3 |
) |
|
|
(189 |
) |
|
|
(192 |
) |
|
|
— |
|
|
|
(1,340 |
) |
|
|
(1,340 |
) |
|
|
(3 |
) |
|
|
(6 |
) |
|
|
(9 |
) |
|
Net charge-offs |
|
$ |
— |
|
|
$ |
36,834 |
|
|
$ |
36,834 |
|
|
$ |
9 |
|
|
$ |
30,950 |
|
|
$ |
30,959 |
|
|
$ |
408 |
|
|
$ |
8,096 |
|
|
$ |
8,504 |
|
Net charge-offs to
average loans(1) |
|
|
0.00 |
% |
|
|
11.16 |
% |
|
|
4.77 |
% |
|
|
0.00 |
% |
|
|
9.78 |
% |
|
|
4.19 |
% |
|
|
0.10 |
% |
|
|
3.59 |
% |
|
|
1.38 |
% |
(1) Annualized calculations shown for
periods presented.
The decrease in the Company’s provision for credit losses -
loans during the quarter ended September 30, 2023, is a result
of a decrease in CCBX loans receivable. During the quarter ended
September 30, 2023, a $26.5 million provision for credit
losses - loans was recorded for CCBX partner loans based on
management’s analysis, compared to the $52.6 million provision for
credit losses - loans that was recorded for CCBX for the quarter
ended June 30, 2023, as a result of a decrease in CCBX loans
receivable. CCBX loans have a higher level of expected losses than
our community bank loans, which is reflected in the factors for the
allowance for credit losses. Agreements with our CCBX partners
provide for a credit enhancement which protects the Bank by
indemnifying or reimbursing incurred losses. In accordance with
accounting guidance, we estimate and record a provision for
expected losses for these CCBX loans and reclassified negative
deposit accounts. When the provision for CCBX credit losses and
provision for unfunded commitments is recorded, a credit
enhancement asset is also recorded on the balance sheet through
noninterest income (BaaS credit enhancements). Expected losses are
recorded in the allowance for credit losses. The credit enhancement
asset is relieved when credit enhancement recoveries are received
from the CCBX partner. CCBX partners provide for credit
enhancements that provide protection to the Bank from credit and
fraud losses by indemnifying or reimbursing incurred credit and
fraud losses. If our partner is unable to fulfill their contracted
obligations then the bank could be exposed to additional credit
losses. Management regularly evaluates and manages this
counterparty risk. The Company is responsible for credit losses on
approximately 10% of a $231.9 million CCBX loan portfolio. At
September 30, 2023, 10% of this portfolio represented $23.2
million in loans. The factors used in management’s analysis for
community bank credit losses indicated that a provision of $664,000
and was needed for the quarter ended September 30, 2023 and a
small adjustment (recapture) of $47,000 and $238,000 was needed for
the quarters ended June 30, 2023 and September 30, 2022,
respectively.
The following table details the provision expense for the
community bank and CCBX for the period indicated:
| |
|
Three Months Ended |
|
Nine Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
September 30,
2023 |
|
September 30,
2022 |
|
Community bank |
|
$ |
664 |
|
$ |
(47 |
) |
|
$ |
(238 |
) |
|
$ |
1,045 |
|
$ |
214 |
| CCBX |
|
|
26,493 |
|
|
52,645 |
|
|
|
18,666 |
|
|
|
122,254 |
|
|
45,250 |
|
Total provision expense |
|
$ |
27,157 |
|
$ |
52,598 |
|
|
$ |
18,428 |
|
|
$ |
123,299 |
|
$ |
45,464 |
At September 30, 2023, our nonperforming assets were $43.5
million, or 1.18% of total assets, compared to $33.7 million, or
0.95%, of total assets, at June 30, 2023, and $22.9 million,
or 0.73% of total assets, at September 30, 2022. These ratios
are impacted by CCBX loans over 90 days delinquent that are covered
by CCBX partner credit enhancements. As of September 30, 2023,
$34.7 million of the $36.2 million in nonperforming CCBX loans were
covered by CCBX partner credit enhancements. Agreements with our
CCBX partners provide for a credit enhancement which protects the
Bank by indemnifying or reimbursing incurred losses. Under the
agreement, CCBX partners will indemnify or reimburse the Bank for
its loss/charge-off on these loans. Nonperforming assets increased
$9.8 million during the quarter ended September 30, 2023,
compared to the quarter ended June 30, 2023, due to a $9.9
million increase in CCBX loans that are past due 90 days or more
and still accruing combined with a $76,000 decrease in community
bank nonaccrual loans. As a result of the type of loans (primarily
consumer loans) originated through our CCBX partners we anticipate
that balances 90 days past due or more and still accruing will
increase as those loan portfolios grow. Installment/closed-end and
revolving/open-end consumer loans originated through CCBX lending
partners will continue to accrue interest until 120 and 180 days
past due, respectively and are reported as substandard, 90 days or
more days past due and still accruing. Community bank nonaccrual
loans decreased due to principal reductions. There were no
repossessed assets or other real estate owned at September 30,
2023. Our nonperforming loans to loans receivable ratio was 1.47%
at September 30, 2023, compared to 1.12% at June 30,
2023, and 0.91% at September 30, 2022.
For the quarter ended September 30, 2023, there were zero
community bank net charge-offs and $7.3 million nonperforming
community bank loans, including a multifamily loan for $6.9 million
which we believe is currently well secured. For the quarter ended
September 30, 2023, $36.8 million in net charge-offs were
recorded on CCBX loans. These loans have a higher level of expected
losses than our community bank loans, which is reflected in the
factors for the allowance for credit losses. The Company is
responsible for credit losses on approximately 10% of a $231.9
million loan portfolio. At September 30, 2023, our portion of
this portfolio represented $23.2 million in loans.
The following table details the Company’s nonperforming assets
for the periods indicated.
|
(dollars in thousands; unaudited) |
As of September
30, 2023 |
|
As of June 30,
2023 |
|
As of September
30, 2022 |
|
Nonaccrual loans: |
|
|
|
|
|
|
Commercial and industrial loans |
$ |
2 |
|
|
$ |
5 |
|
|
$ |
94 |
|
| Real estate loans: |
|
|
|
|
|
|
Construction, land and land development |
|
— |
|
|
|
66 |
|
|
|
66 |
|
|
Residential real estate |
|
176 |
|
|
|
186 |
|
|
|
— |
|
|
Commercial real estate |
|
7,145 |
|
|
|
7,142 |
|
|
|
6,901 |
|
|
Total nonaccrual loans |
|
7,323 |
|
|
|
7,399 |
|
|
|
7,061 |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
| Commercial & industrial
loans |
|
1,387 |
|
|
|
808 |
|
|
|
138 |
|
| Real estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
1,462 |
|
|
|
1,722 |
|
|
|
638 |
|
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
24,807 |
|
|
|
18,306 |
|
|
|
4,777 |
|
|
Other consumer and other loans |
|
8,561 |
|
|
|
5,492 |
|
|
|
10,268 |
|
|
Total accruing loans past due 90 days or more |
|
36,217 |
|
|
|
26,328 |
|
|
|
15,821 |
|
|
Total nonperforming loans |
|
43,540 |
|
|
|
33,727 |
|
|
|
22,882 |
|
|
Real estate owned |
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
| Modified loans for
borrowers experiencing financial difficulty |
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
$ |
43,540 |
|
|
$ |
33,727 |
|
|
$ |
22,882 |
|
| Total nonaccrual loans to
loans receivable |
|
0.25 |
% |
|
|
0.25 |
% |
|
|
0.28 |
% |
| Total nonperforming loans to
loans receivable |
|
1.47 |
% |
|
|
1.12 |
% |
|
|
0.91 |
% |
| Total nonperforming assets to
total assets |
|
1.18 |
% |
|
|
0.95 |
% |
|
|
0.73 |
% |
The following tables detail the community bank and CCBX
nonperforming assets which are included in the total nonperforming
assets table above.
|
Community Bank |
As of |
|
(dollars in thousands; unaudited) |
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
Nonaccrual loans: |
|
|
|
|
|
| Commercial and industrial
loans |
$ |
2 |
|
$ |
5 |
|
$ |
94 |
| Real estate: |
|
|
|
|
|
|
Construction, land and land development |
|
— |
|
|
66 |
|
|
66 |
|
Residential real estate |
|
176 |
|
|
186 |
|
|
— |
|
Commercial real estate |
|
7,145 |
|
|
7,142 |
|
|
6,901 |
|
Total nonaccrual loans |
|
7,323 |
|
|
7,399 |
|
|
7,061 |
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
Total accruing loans past due 90 days or more |
|
— |
|
|
— |
|
|
— |
|
Total nonperforming loans |
|
7,323 |
|
|
7,399 |
|
|
7,061 |
| Other real estate
owned |
|
— |
|
|
— |
|
|
— |
| Repossessed
assets |
|
— |
|
|
— |
|
|
— |
| Total nonperforming
assets |
$ |
7,323 |
|
$ |
7,399 |
|
$ |
7,061 |
|
CCBX |
As of |
|
(dollars in thousands; unaudited) |
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
Nonaccrual loans |
$ |
— |
|
$ |
— |
|
$ |
— |
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
| Commercial & industrial
loans |
|
1,387 |
|
|
808 |
|
|
138 |
| Real estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
1,462 |
|
|
1,722 |
|
|
638 |
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
24,807 |
|
|
18,306 |
|
|
4,777 |
|
Other consumer and other loans |
|
8,561 |
|
|
5,492 |
|
|
10,268 |
|
Total accruing loans past due 90 days or more |
|
36,217 |
|
|
26,328 |
|
|
15,821 |
|
Total nonperforming loans |
|
36,217 |
|
|
26,328 |
|
|
15,821 |
| Other real estate
owned |
|
— |
|
|
— |
|
|
— |
| Repossessed
assets |
|
— |
|
|
— |
|
|
— |
| Total nonperforming
assets |
$ |
36,217 |
|
$ |
26,328 |
|
$ |
15,821 |
About Coastal Financial
Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), is
an Everett, Washington based bank holding company whose wholly
owned subsidiaries are Coastal Community Bank (“Bank”) and
Arlington Olympic LLC. The $3.68 billion Bank provides
service through 14 branches in Snohomish, Island, and King
Counties, the Internet and its mobile banking application. The Bank
provides banking as a service to broker-dealers, digital financial
service providers, companies and brands that want to provide
financial services to their customers through the Bank's CCBX
segment. To learn more about the Company visit
www.coastalbank.com.
CCB-ER
Contact
Eric Sprink, Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial
Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect our current views
with respect to, among other things, future events and our
financial performance. Any statements about our management’s
expectations, beliefs, plans, predictions, forecasts, objectives,
assumptions or future events or performance are not historical
facts and may be forward-looking. These statements are often, but
not always, made through the use of words or phrases such as
“anticipate,” “believes,” “can,” “could,” “may,” “predicts,”
“potential,” “should,” “will,” “estimate,” “plans,” “projects,”
“continuing,” “ongoing,” “expects,” “intends” and similar words or
phrases. Any or all of the forward-looking statements in this
earnings release may turn out to be inaccurate. The inclusion of or
reference to forward-looking information in this earnings release
should not be regarded as a representation by us or any other
person that the future plans, estimates or expectations
contemplated by us will be achieved. We have based these
forward-looking statements largely on our current expectations and
projections about future events and financial trends that we
believe may affect our financial condition, results of operations,
business strategy and financial needs. Our actual results could
differ materially from those anticipated in such forward-looking
statements as a result of risks, uncertainties and assumptions that
are difficult to predict. Factors that could cause actual results
to differ materially from those in the forward-looking statements
include, without limitation, the risks and uncertainties discussed
under “Risk Factors” in our Annual Report on Form 10-K for the most
recent period filed, our Quarterly Report on Form 10-Q for the most
recent quarter, and in any of our subsequent filings with the
Securities and Exchange Commission.
If one or more events related to these or other risks or
uncertainties materialize, or if our underlying assumptions prove
to be incorrect, actual results may differ materially from what we
anticipate. You are cautioned not to place undue reliance on
forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made, and we undertake no
obligation to update or revise any forward-looking statement to
reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated
events, except as required by law.
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
|
ASSETS |
| |
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
| Cash and due from banks |
$ |
29,984 |
|
|
$ |
29,783 |
|
|
$ |
37,482 |
|
| Interest earning deposits with
other banks |
|
444,962 |
|
|
|
245,277 |
|
|
|
373,246 |
|
| Investment securities, available
for sale, at fair value |
|
98,939 |
|
|
|
98,167 |
|
|
|
97,621 |
|
| Investment securities, held to
maturity, at amortized cost |
|
42,550 |
|
|
|
12,563 |
|
|
|
1,250 |
|
| Other investments |
|
11,898 |
|
|
|
12,037 |
|
|
|
10,581 |
|
| Loans held for sale |
|
— |
|
|
|
35,923 |
|
|
|
43,314 |
|
| Loans receivable |
|
2,967,035 |
|
|
|
3,007,553 |
|
|
|
2,507,889 |
|
| Allowance for credit losses |
|
(101,085 |
) |
|
|
(110,762 |
) |
|
|
(59,282 |
) |
|
Total loans receivable, net |
|
2,865,950 |
|
|
|
2,896,791 |
|
|
|
2,448,607 |
|
| CCBX credit enhancement
asset |
|
91,867 |
|
|
|
96,928 |
|
|
|
48,228 |
|
| CCBX receivable |
|
13,847 |
|
|
|
19,113 |
|
|
|
6,145 |
|
| Premises and equipment, net |
|
20,543 |
|
|
|
18,903 |
|
|
|
18,467 |
|
| Operating lease right-of-use
assets |
|
6,126 |
|
|
|
6,216 |
|
|
|
5,293 |
|
| Accrued interest receivable |
|
22,208 |
|
|
|
21,581 |
|
|
|
13,114 |
|
| Bank-owned life insurance,
net |
|
12,970 |
|
|
|
12,873 |
|
|
|
12,576 |
|
| Deferred tax asset, net |
|
4,404 |
|
|
|
25,764 |
|
|
|
13,997 |
|
| Other assets |
|
14,020 |
|
|
|
3,364 |
|
|
|
3,820 |
|
|
Total assets |
$ |
3,680,268 |
|
|
$ |
3,535,283 |
|
|
$ |
3,133,741 |
|
| |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| LIABILITIES |
|
|
|
|
|
|
Deposits |
$ |
3,289,700 |
|
|
$ |
3,162,572 |
|
|
$ |
2,837,066 |
|
|
Subordinated debt, net |
|
44,106 |
|
|
|
44,069 |
|
|
|
24,343 |
|
|
Junior subordinated debentures, net |
|
3,589 |
|
|
|
3,589 |
|
|
|
3,588 |
|
|
Deferred compensation |
|
513 |
|
|
|
547 |
|
|
|
648 |
|
|
Accrued interest payable |
|
1,056 |
|
|
|
766 |
|
|
|
153 |
|
|
Operating lease liabilities |
|
6,321 |
|
|
|
6,413 |
|
|
|
5,514 |
|
|
CCBX payable |
|
40,233 |
|
|
|
27,714 |
|
|
|
15,191 |
|
|
Other liabilities |
|
10,300 |
|
|
|
16,951 |
|
|
|
18,505 |
|
|
Total liabilities |
|
3,395,818 |
|
|
|
3,262,621 |
|
|
|
2,905,008 |
|
| |
|
|
|
|
|
| SHAREHOLDERS’ EQUITY |
|
|
|
|
|
| Common stock |
|
129,244 |
|
|
|
128,315 |
|
|
|
123,944 |
|
|
Retained earnings |
|
156,299 |
|
|
|
146,029 |
|
|
|
106,880 |
|
|
Accumulated other comprehensive loss, net of tax |
|
(1,093 |
) |
|
|
(1,682 |
) |
|
|
(2,091 |
) |
|
Total shareholders’ equity |
|
284,450 |
|
|
|
272,662 |
|
|
|
228,733 |
|
|
Total liabilities and shareholders’ equity |
$ |
3,680,268 |
|
|
$ |
3,535,283 |
|
|
$ |
3,133,741 |
|
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| |
Three Months Ended |
| |
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
| INTEREST AND DIVIDEND INCOME |
|
|
|
|
|
|
Interest and fees on loans |
$ |
83,652 |
|
$ |
80,199 |
|
|
$ |
52,328 |
|
|
Interest on interest earning deposits with other banks |
|
3,884 |
|
|
2,678 |
|
|
|
2,273 |
|
|
Interest on investment securities |
|
766 |
|
|
653 |
|
|
|
554 |
|
|
Dividends on other investments |
|
29 |
|
|
156 |
|
|
|
24 |
|
|
Total interest income |
|
88,331 |
|
|
83,686 |
|
|
|
55,179 |
|
| INTEREST EXPENSE |
|
|
|
|
|
|
Interest on deposits |
|
25,451 |
|
|
20,675 |
|
|
|
5,717 |
|
|
Interest on borrowed funds |
|
651 |
|
|
661 |
|
|
|
273 |
|
|
Total interest expense |
|
26,102 |
|
|
21,336 |
|
|
|
5,990 |
|
|
Net interest income |
|
62,229 |
|
|
62,350 |
|
|
|
49,189 |
|
| PROVISION FOR CREDIT LOSSES -
LOANS |
|
27,157 |
|
|
52,598 |
|
|
|
18,428 |
|
| PROVISION (RECAPTURE) FOR
UNFUNDED COMMITMENTS |
|
96 |
|
|
(345 |
) |
|
|
— |
|
Net interest income after provision for credit losses - loans
and unfunded commitments |
|
34,976 |
|
|
10,097 |
|
|
|
30,761 |
|
| NONINTEREST INCOME |
|
|
|
|
|
|
Deposit service charges and fees |
|
998 |
|
|
989 |
|
|
|
986 |
|
|
Loan referral fees |
|
1 |
|
|
682 |
|
|
|
— |
|
|
Gain on sales of loans, net |
|
107 |
|
|
23 |
|
|
|
— |
|
|
Unrealized (loss) gain on equity securities, net |
|
5 |
|
|
155 |
|
|
|
(133 |
) |
|
Other income |
|
291 |
|
|
234 |
|
|
|
260 |
|
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,402 |
|
|
2,083 |
|
|
|
1,113 |
|
|
Servicing and other BaaS fees |
|
997 |
|
|
895 |
|
|
|
1,079 |
|
|
Transaction fees |
|
1,036 |
|
|
1,052 |
|
|
|
940 |
|
|
Interchange fees |
|
1,216 |
|
|
975 |
|
|
|
738 |
|
|
Reimbursement of expenses |
|
1,152 |
|
|
1,026 |
|
|
|
885 |
|
|
BaaS program income |
|
4,401 |
|
|
3,948 |
|
|
|
3,642 |
|
|
BaaS credit enhancements |
|
25,926 |
|
|
51,027 |
|
|
|
17,928 |
|
|
BaaS fraud enhancements |
|
2,850 |
|
|
1,537 |
|
|
|
11,708 |
|
|
BaaS indemnification income |
|
28,776 |
|
|
52,564 |
|
|
|
29,636 |
|
|
Total noninterest income |
|
34,579 |
|
|
58,595 |
|
|
|
34,391 |
|
| NONINTEREST EXPENSE |
|
|
|
|
|
|
Salaries and employee benefits |
|
18,087 |
|
|
16,309 |
|
|
|
14,506 |
|
|
Occupancy |
|
1,224 |
|
|
1,143 |
|
|
|
1,147 |
|
|
Data processing and software licenses |
|
2,366 |
|
|
1,972 |
|
|
|
1,670 |
|
|
Legal and professional expenses |
|
4,447 |
|
|
4,645 |
|
|
|
2,251 |
|
|
Point of sale expense |
|
1,068 |
|
|
814 |
|
|
|
742 |
|
|
Excise taxes |
|
541 |
|
|
531 |
|
|
|
588 |
|
|
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
694 |
|
|
570 |
|
|
|
850 |
|
|
Director and staff expenses |
|
529 |
|
|
519 |
|
|
|
475 |
|
|
Marketing |
|
169 |
|
|
115 |
|
|
|
69 |
|
|
Other expense |
|
1,523 |
|
|
1,722 |
|
|
|
1,522 |
|
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
30,648 |
|
|
28,340 |
|
|
|
23,820 |
|
|
BaaS loan expense |
|
23,003 |
|
|
22,033 |
|
|
|
15,560 |
|
|
BaaS fraud expense |
|
2,850 |
|
|
1,537 |
|
|
|
11,707 |
|
|
BaaS loan and fraud expense |
|
25,853 |
|
|
23,570 |
|
|
|
27,267 |
|
|
Total noninterest expense |
|
56,501 |
|
|
51,910 |
|
|
|
51,087 |
|
|
Income before provision for income taxes |
|
13,054 |
|
|
16,782 |
|
|
|
14,065 |
|
| PROVISION FOR INCOME TAXES |
|
2,784 |
|
|
3,876 |
|
|
|
2,964 |
|
| NET INCOME |
$ |
10,270 |
|
$ |
12,906 |
|
|
$ |
11,101 |
|
| Basic earnings per common
share |
$ |
0.77 |
|
$ |
0.97 |
|
|
$ |
0.86 |
|
| Diluted earnings per common
share |
$ |
0.75 |
|
$ |
0.95 |
|
|
$ |
0.82 |
|
| Weighted average number of common
shares outstanding: |
|
|
|
|
|
|
Basic |
|
13,285,974 |
|
|
13,275,640 |
|
|
|
12,938,200 |
|
|
Diluted |
|
13,675,833 |
|
|
13,597,763 |
|
|
|
13,536,823 |
|
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| |
Nine Months Ended |
| |
September 30,
2023 |
|
September 30,
2022 |
| INTEREST AND DIVIDEND INCOME |
|
|
|
|
Interest and fees on loans |
$ |
230,282 |
|
|
$ |
122,126 |
|
|
Interest on interest earning deposits with other banks |
|
9,659 |
|
|
|
3,631 |
|
|
Interest on investment securities |
|
1,972 |
|
|
|
1,188 |
|
|
Dividends on other investments |
|
215 |
|
|
|
195 |
|
|
Total interest income |
|
242,128 |
|
|
|
127,140 |
|
| INTEREST EXPENSE |
|
|
|
|
Interest on deposits |
|
61,084 |
|
|
|
7,943 |
|
|
Interest on borrowed funds |
|
1,974 |
|
|
|
854 |
|
|
Total interest expense |
|
63,058 |
|
|
|
8,797 |
|
|
Net interest income |
|
179,070 |
|
|
|
118,343 |
|
| PROVISION FOR CREDIT LOSSES -
LOANS |
|
123,299 |
|
|
|
45,464 |
|
| PROVISION (RECAPTURE) FOR
UNFUNDED COMMITMENTS |
|
(96 |
) |
|
|
— |
|
Net interest income after provision for credit losses - loans
and unfunded commitments |
|
55,867 |
|
|
|
72,879 |
|
| NONINTEREST INCOME |
|
|
|
|
Deposit service charges and fees |
|
2,897 |
|
|
|
2,858 |
|
|
Loan referral fees |
|
683 |
|
|
|
810 |
|
|
Gain on sales of loans, net |
|
253 |
|
|
|
— |
|
|
Unrealized (loss) gain on equity securities, net |
|
199 |
|
|
|
(135 |
) |
|
Other income |
|
824 |
|
|
|
1,046 |
|
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
4,856 |
|
|
|
4,579 |
|
|
Servicing and other BaaS fees |
|
2,840 |
|
|
|
3,407 |
|
|
Transaction fees |
|
3,005 |
|
|
|
2,247 |
|
|
Interchange fees |
|
2,980 |
|
|
|
1,798 |
|
|
Reimbursement of expenses |
|
3,099 |
|
|
|
1,875 |
|
|
BaaS program income |
|
11,924 |
|
|
|
9,327 |
|
|
BaaS credit enhancements |
|
119,315 |
|
|
|
45,210 |
|
|
BaaS fraud enhancements |
|
6,386 |
|
|
|
22,753 |
|
|
BaaS indemnification income |
|
125,701 |
|
|
|
67,963 |
|
|
Total noninterest income |
|
142,481 |
|
|
|
81,869 |
|
| NONINTEREST EXPENSE |
|
|
|
|
Salaries and employee benefits |
|
49,971 |
|
|
|
37,829 |
|
|
Occupancy |
|
3,586 |
|
|
|
3,366 |
|
|
Data processing and software licenses |
|
6,178 |
|
|
|
4,719 |
|
|
Legal and professional expenses |
|
12,154 |
|
|
|
3,961 |
|
|
Point of sale expense |
|
2,635 |
|
|
|
1,399 |
|
|
Excise taxes |
|
1,527 |
|
|
|
1,501 |
|
|
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
1,859 |
|
|
|
2,309 |
|
|
Director and staff expenses |
|
1,674 |
|
|
|
1,196 |
|
|
Marketing |
|
379 |
|
|
|
242 |
|
|
Other expense |
|
4,135 |
|
|
|
4,318 |
|
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
84,098 |
|
|
|
60,840 |
|
|
BaaS loan expense |
|
62,590 |
|
|
|
36,079 |
|
|
BaaS fraud expense |
|
6,386 |
|
|
|
22,752 |
|
|
BaaS loan and fraud expense |
|
68,976 |
|
|
|
58,831 |
|
|
Total noninterest expense |
|
153,074 |
|
|
|
119,671 |
|
|
Income before provision for income taxes |
|
45,274 |
|
|
|
35,077 |
|
| PROVISION FOR INCOME TAXES |
|
9,707 |
|
|
|
7,570 |
|
| NET INCOME |
$ |
35,567 |
|
|
$ |
27,507 |
|
| Basic earnings per common
share |
$ |
2.68 |
|
|
$ |
2.13 |
|
| Diluted earnings per common
share |
$ |
2.61 |
|
|
$ |
2.04 |
|
| Weighted average number of common
shares outstanding: |
|
|
|
|
Basic |
|
13,253,184 |
|
|
|
12,921,814 |
|
|
Diluted |
|
13,627,939 |
|
|
|
13,484,950 |
|
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
| |
For the Three Months Ended |
| |
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with
other banks |
$ |
285,596 |
|
|
$ |
3,884 |
|
5.40 |
% |
|
$ |
211,369 |
|
|
$ |
2,678 |
|
5.08 |
% |
|
$ |
397,621 |
|
|
$ |
2,273 |
|
2.27 |
% |
|
Investment securities, available for sale(2) |
|
100,283 |
|
|
|
543 |
|
2.15 |
|
|
|
100,278 |
|
|
|
534 |
|
2.14 |
|
|
|
102,438 |
|
|
|
545 |
|
2.11 |
|
|
Investment securities, held to maturity(2) |
|
17,703 |
|
|
|
223 |
|
5.00 |
|
|
|
10,047 |
|
|
|
119 |
|
4.75 |
|
|
|
1,257 |
|
|
|
9 |
|
2.84 |
|
|
Other investments |
|
11,943 |
|
|
|
29 |
|
0.96 |
|
|
|
11,773 |
|
|
|
156 |
|
5.31 |
|
|
|
10,520 |
|
|
|
24 |
|
0.91 |
|
|
Loans receivable(3) |
|
3,062,214 |
|
|
|
83,652 |
|
10.84 |
|
|
|
2,965,287 |
|
|
|
80,199 |
|
10.85 |
|
|
|
2,452,815 |
|
|
|
52,328 |
|
8.46 |
|
| Total interest earning
assets |
|
3,477,739 |
|
|
|
88,331 |
|
10.08 |
|
|
|
3,298,754 |
|
|
|
83,686 |
|
10.18 |
|
|
|
2,964,651 |
|
|
|
55,179 |
|
7.38 |
|
| Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
(100,329 |
) |
|
|
|
|
|
|
(87,713 |
) |
|
|
|
|
|
|
(51,259 |
) |
|
|
|
|
|
Other noninterest earning assets |
|
220,750 |
|
|
|
|
|
|
|
194,747 |
|
|
|
|
|
|
|
128,816 |
|
|
|
|
|
|
Total assets |
$ |
3,598,160 |
|
|
|
|
|
|
$ |
3,405,788 |
|
|
|
|
|
|
$ |
3,042,208 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
2,515,093 |
|
|
$ |
25,451 |
|
4.01 |
% |
|
$ |
2,326,702 |
|
|
$ |
20,675 |
|
3.56 |
% |
|
$ |
1,953,170 |
|
|
$ |
5,717 |
|
1.16 |
% |
| Subordinated debt |
|
44,084 |
|
|
|
580 |
|
5.22 |
|
|
|
44,047 |
|
|
|
596 |
|
5.43 |
|
|
|
24,331 |
|
|
|
234 |
|
3.82 |
|
| Junior subordinated
debentures |
|
3,589 |
|
|
|
71 |
|
7.85 |
|
|
|
3,589 |
|
|
|
65 |
|
7.26 |
|
|
|
3,587 |
|
|
|
39 |
|
4.31 |
|
| Total interest bearing
liabilities |
|
2,562,766 |
|
|
|
26,102 |
|
4.04 |
|
|
|
2,374,338 |
|
|
|
21,336 |
|
3.60 |
|
|
|
1,981,088 |
|
|
|
5,990 |
|
1.20 |
|
| Noninterest bearing
deposits |
|
698,532 |
|
|
|
|
|
|
|
717,256 |
|
|
|
|
|
|
|
807,952 |
|
|
|
|
|
| Other liabilities |
|
57,865 |
|
|
|
|
|
|
|
49,085 |
|
|
|
|
|
|
|
25,662 |
|
|
|
|
|
| Total shareholders'
equity |
|
278,997 |
|
|
|
|
|
|
|
265,109 |
|
|
|
|
|
|
|
227,506 |
|
|
|
|
|
| Total liabilities and
shareholders' equity |
$ |
3,598,160 |
|
|
|
|
|
|
$ |
3,405,788 |
|
|
|
|
|
|
$ |
3,042,208 |
|
|
|
|
|
| Net interest income |
|
|
$ |
62,229 |
|
|
|
|
|
$ |
62,350 |
|
|
|
|
|
$ |
49,189 |
|
|
| Interest rate spread |
|
|
|
|
6.04 |
% |
|
|
|
|
|
6.58 |
% |
|
|
|
|
|
6.18 |
% |
| Net interest
margin(4) |
|
|
|
|
7.10 |
% |
|
|
|
|
|
7.58 |
% |
|
|
|
|
|
6.58 |
% |
(1) Yields and costs are annualized.
(2) For presentation in this table, average
balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
(3) Includes loans held for sale and
nonaccrual loans.
(4) Net interest margin represents net
interest income divided by the average total interest earning
assets.
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT -
QUARTERLY
(Dollars in thousands; unaudited)
| |
For the Three Months Ended |
| |
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands, unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(2) |
$ |
1,752,834 |
|
$ |
27,373 |
|
6.20 |
% |
|
$ |
1,695,881 |
|
$ |
26,567 |
|
6.28 |
% |
|
$ |
1,559,160 |
|
$ |
20,879 |
|
5.31 |
% |
|
Intrabank asset |
|
— |
|
|
— |
|
— |
|
|
|
— |
|
|
— |
|
— |
|
|
|
77,217 |
|
|
441 |
|
2.27 |
|
Total interest earning
assets |
|
1,752,834 |
|
|
27,373 |
|
6.20 |
|
|
|
1,695,881 |
|
|
26,567 |
|
6.28 |
|
|
|
1,636,377 |
|
|
21,320 |
|
5.17 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing
deposits |
|
920,707 |
|
|
5,067 |
|
2.18 |
% |
|
|
875,760 |
|
|
3,663 |
|
1.68 |
% |
|
|
901,339 |
|
|
642 |
|
0.28 |
% |
|
Intrabank liability |
|
223,221 |
|
|
3,036 |
|
5.40 |
|
|
|
196,552 |
|
|
2,490 |
|
5.08 |
|
|
|
— |
|
|
— |
|
— |
|
Total interest bearing
liabilities |
|
1,143,928 |
|
|
8,103 |
|
2.81 |
|
|
|
1,072,312 |
|
|
6,153 |
|
2.30 |
|
|
|
901,339 |
|
|
642 |
|
0.28 |
|
Noninterest bearing
deposits |
|
608,906 |
|
|
|
|
|
|
623,570 |
|
|
|
|
|
|
735,038 |
|
|
|
|
| Net interest income |
|
|
$ |
19,270 |
|
|
|
|
|
$ |
20,414 |
|
|
|
|
|
$ |
20,678 |
|
|
| Net interest
margin(3) |
|
|
|
|
4.36 |
% |
|
|
|
|
|
4.83 |
% |
|
|
|
|
|
5.01 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(2)(4) |
$ |
1,309,380 |
|
$ |
56,279 |
|
17.05 |
% |
|
$ |
1,269,406 |
|
$ |
53,632 |
|
16.95 |
% |
|
$ |
893,655 |
|
$ |
31,449 |
|
13.96 |
% |
|
Intrabank asset |
|
374,632 |
|
|
5,095 |
|
5.40 |
|
|
|
275,222 |
|
|
3,487 |
|
5.08 |
|
|
|
231,090 |
|
|
1,321 |
|
2.27 |
|
Total interest earning
assets |
|
1,684,012 |
|
|
61,374 |
|
14.46 |
|
|
|
1,544,628 |
|
|
57,119 |
|
14.83 |
|
|
|
1,124,745 |
|
|
32,770 |
|
11.56 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing
deposits |
|
1,594,386 |
|
|
20,384 |
|
5.07 |
% |
|
|
1,450,942 |
|
|
17,012 |
|
4.70 |
% |
|
|
1,051,831 |
|
|
5,075 |
|
1.91 |
% |
Total interest bearing
liabilities |
|
1,594,386 |
|
|
20,384 |
|
5.07 |
|
|
|
1,450,942 |
|
|
17,012 |
|
4.70 |
|
|
|
1,051,831 |
|
|
5,075 |
|
1.91 |
|
Noninterest bearing
deposits |
|
89,626 |
|
|
|
|
|
|
93,686 |
|
|
|
|
|
|
72,914 |
|
|
|
|
| Net interest income |
|
|
$ |
40,990 |
|
|
|
|
|
$ |
40,107 |
|
|
|
|
|
$ |
27,695 |
|
|
| Net interest
margin(3) |
|
|
|
|
9.66 |
% |
|
|
|
|
|
10.41 |
% |
|
|
|
|
|
9.77 |
% |
Net interest margin, net
of Baas loan expense(5) |
|
|
|
|
4.24 |
% |
|
|
|
|
|
4.69 |
% |
|
|
|
|
|
4.28 |
% |
| |
For the Three Months Ended |
| |
September 30, 2023 |
|
June 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands, unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
| Treasury
& Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning
deposits with
other banks |
$ |
285,596 |
|
$ |
3,884 |
|
5.40 |
% |
|
$ |
211,369 |
|
$ |
2,678 |
|
5.08 |
% |
|
$ |
397,621 |
|
$ |
2,273 |
|
2.27 |
% |
Investment securities,
available for sale(6) |
|
100,283 |
|
|
543 |
|
2.15 |
|
|
|
100,278 |
|
|
534 |
|
2.14 |
|
|
|
102,438 |
|
|
545 |
|
2.11 |
|
Investment securities,
held to maturity(6) |
|
17,703 |
|
|
223 |
|
5.00 |
|
|
|
10,047 |
|
|
119 |
|
4.75 |
|
|
|
1,257 |
|
|
9 |
|
2.84 |
|
|
Other investments |
|
11,943 |
|
|
29 |
|
0.96 |
|
|
|
11,773 |
|
|
156 |
|
5.31 |
|
|
|
10,520 |
|
|
24 |
|
0.91 |
|
Total interest
earning assets |
|
415,525 |
|
|
4,679 |
|
4.47 |
% |
|
|
333,467 |
— |
|
3,487 |
|
4.19 |
% |
|
|
511,836 |
|
|
2,851 |
|
2.21 |
% |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated debt |
|
44,084 |
|
|
580 |
|
5.22 |
% |
|
|
44,047 |
|
|
596 |
|
5.43 |
% |
|
|
24,331 |
|
|
234 |
|
3.82 |
% |
Junior subordinated
debentures |
|
3,589 |
|
|
71 |
|
7.85 |
|
|
|
3,589 |
|
|
65 |
|
7.26 |
|
|
|
3,587 |
|
|
39 |
|
4.31 |
|
|
Intrabank liability, net(7) |
|
151,411 |
|
|
2,059 |
|
5.40 |
|
|
|
78,670 |
|
|
997 |
|
5.08 |
|
|
|
308,307 |
|
|
1,762 |
|
2.27 |
|
Total interest
bearing liabilities |
|
199,084 |
|
|
2,710 |
|
5.40 |
|
|
|
126,306 |
|
|
1,658 |
|
5.27 |
|
|
|
336,225 |
|
|
2,035 |
|
2.40 |
|
| Net interest income |
|
|
$ |
1,969 |
|
|
|
|
|
$ |
1,829 |
|
|
|
|
|
$ |
816 |
|
|
| Net interest
margin(3) |
|
|
|
|
1.88 |
% |
|
|
|
|
|
2.20 |
% |
|
|
|
|
|
0.63 |
% |
(1) Yields and costs are
annualized.
(2) Includes loans held for sale and
nonaccrual loans.
(3) Net interest margin represents net
interest income divided by the average total interest earning
assets.
(4) CCBX yield does
not include the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit
enhancements, fraud enhancements and originating & servicing
CCBX loans. See reconciliation of the non-GAAP measures at the end
of this earnings release for the impact of BaaS loan expense on
CCBX loan yield.
(5) Net interest
margin, net of BaaS loan expense includes the impact of BaaS loan
expense. BaaS loan expense represents the amount paid or payable to
partners for credit enhancements, fraud enhancements, originating
& servicing CCBX loans. See reconciliation of the non-GAAP
measures at the end of this earnings release.
(6) For presentation in this table,
average balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
(7) Intrabank assets and liabilities
are consolidated for period calculations and presented as intrabank
asset, net or intrabank liability, net in the table above.
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE
(Dollars in thousands; unaudited)
| |
For the Nine Months Ended |
| |
September 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands; unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with
other banks |
$ |
256,272 |
|
|
$ |
9,659 |
|
5.04 |
% |
|
$ |
578,855 |
|
|
$ |
3,631 |
|
0.84 |
% |
|
Investment securities, available for sale(2) |
|
100,278 |
|
|
|
1,612 |
|
2.15 |
|
|
|
89,173 |
|
|
|
1,160 |
|
1.74 |
|
|
Investment securities, held to maturity(2) |
|
9,959 |
|
|
|
360 |
|
4.83 |
|
|
|
1,276 |
|
|
|
28 |
|
2.93 |
|
|
Other investments |
|
11,455 |
|
|
|
215 |
|
2.51 |
|
|
|
9,996 |
|
|
|
195 |
|
2.61 |
|
|
Loans receivable(3) |
|
2,913,189 |
|
|
|
230,282 |
|
10.57 |
|
|
|
2,141,127 |
|
|
|
122,126 |
|
7.63 |
|
| Total interest earning
assets |
|
3,291,153 |
|
|
|
242,128 |
|
9.84 |
|
|
|
2,820,427 |
|
|
|
127,140 |
|
6.03 |
|
| Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
(89,780 |
) |
|
|
|
|
|
|
(42,836 |
) |
|
|
|
|
|
Other noninterest earning assets |
|
196,065 |
|
|
|
|
|
|
|
112,468 |
|
|
|
|
|
|
Total assets |
$ |
3,397,438 |
|
|
|
|
|
|
$ |
2,890,059 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
2,305,634 |
|
|
$ |
61,084 |
|
3.54 |
% |
|
$ |
1,628,765 |
|
|
$ |
7,943 |
|
0.65 |
% |
| FHLB advances and
borrowings |
|
— |
|
|
|
— |
|
— |
|
|
|
8,058 |
|
|
|
69 |
|
1.14 |
|
| Subordinated debt |
|
44,047 |
|
|
|
1,775 |
|
5.39 |
|
|
|
24,313 |
|
|
|
695 |
|
3.82 |
|
| Junior subordinated
debentures |
|
3,589 |
|
|
|
199 |
|
7.41 |
|
|
|
3,587 |
|
|
|
90 |
|
3.35 |
|
| Total interest bearing
liabilities |
|
2,353,270 |
|
|
|
63,058 |
|
3.58 |
|
|
|
1,664,723 |
|
|
|
8,797 |
|
0.71 |
|
| Noninterest bearing
deposits |
|
730,292 |
|
|
|
|
|
|
|
987,343 |
|
|
|
|
|
| Other liabilities |
|
48,206 |
|
|
|
|
|
|
|
20,442 |
|
|
|
|
|
| Total shareholders'
equity |
|
265,670 |
|
|
|
|
|
|
|
217,551 |
|
|
|
|
|
| Total liabilities and
shareholders' equity |
$ |
3,397,438 |
|
|
|
|
|
|
$ |
2,890,059 |
|
|
|
|
|
| Net interest income |
|
|
$ |
179,070 |
|
|
|
|
|
$ |
118,343 |
|
|
| Interest rate spread |
|
|
|
|
6.26 |
% |
|
|
|
|
|
5.32 |
% |
| Net interest
margin(4) |
|
|
|
|
7.27 |
% |
|
|
|
|
|
5.61 |
% |
(1) Yields and costs are annualized.
(2) For presentation in this table, average
balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
(3) Includes loans held for sale and
nonaccrual loans.
(4) Net interest margin represents net
interest income divided by the average total interest earning
assets.
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT –
YEAR-TO-DATE
(Dollars in thousands; unaudited)
| |
|
For the Nine Months Ended |
| |
|
September 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands; unaudited) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(2) |
|
$ |
1,697,965 |
|
$ |
78,151 |
|
6.15 |
% |
|
$ |
1,483,553 |
|
$ |
57,405 |
|
5.17 |
% |
|
Intrabank asset |
|
|
— |
|
|
— |
|
— |
|
|
|
167,379 |
|
|
872 |
|
0.70 |
|
| Total interest earning
assets |
|
|
1,697,965 |
|
|
78,151 |
|
6.15 |
|
|
|
1,650,932 |
|
|
58,277 |
|
4.72 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
883,454 |
|
|
11,264 |
|
1.70 |
% |
|
|
919,415 |
|
|
1,394 |
|
0.20 |
% |
|
Intrabank liability |
|
|
171,950 |
|
|
6,605 |
|
5.14 |
|
|
|
— |
|
|
— |
|
— |
|
| Total interest bearing
liabilities |
|
|
1,055,404 |
|
|
17,869 |
|
2.26 |
|
|
|
919,415 |
|
|
1,394 |
|
0.20 |
|
| Noninterest bearing
deposits |
|
|
642,561 |
|
|
|
|
|
|
731,517 |
|
|
|
|
| Net interest income |
|
|
|
$ |
60,282 |
|
|
|
|
|
$ |
56,883 |
|
|
| Net interest
margin(3) |
|
|
|
|
|
4.75 |
% |
|
|
|
|
|
4.61 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(2)(4) |
|
$ |
1,215,224 |
|
$ |
152,131 |
|
16.74 |
% |
|
$ |
657,574 |
|
$ |
64,721 |
|
13.16 |
% |
|
Intrabank asset |
|
|
294,687 |
|
|
11,234 |
|
5.10 |
|
|
|
307,602 |
|
|
2,051 |
|
0.89 |
|
| Total interest earning
assets |
|
|
1,509,911 |
|
|
163,365 |
|
14.47 |
|
|
|
965,176 |
|
|
66,772 |
|
9.25 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
1,422,180 |
|
|
49,820 |
|
4.68 |
% |
|
|
709,350 |
|
|
6,549 |
|
1.23 |
% |
| Total interest bearing
liabilities |
|
|
1,422,180 |
|
|
49,820 |
|
4.68 |
|
|
|
709,350 |
|
|
6,549 |
|
1.23 |
|
| Noninterest bearing
deposits |
|
|
87,731 |
|
|
|
|
|
|
255,826 |
|
|
|
|
| Net interest income |
|
|
|
$ |
113,545 |
|
|
|
|
|
$ |
60,223 |
|
|
| Net interest
margin(3) |
|
|
|
|
|
10.05 |
% |
|
|
|
|
|
8.34 |
% |
Net interest margin, net
of
Baas loan expense(5) |
|
|
|
|
|
4.51 |
% |
|
|
|
|
|
3.34 |
% |
| |
|
For the Nine Months Ended |
| |
|
September 30, 2023 |
|
September 30, 2022 |
|
(dollars in thousands; unaudited) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost(1) |
|
Treasury & Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with
other banks |
|
$ |
256,272 |
|
$ |
9,659 |
|
5.04 |
% |
|
$ |
578,855 |
|
$ |
3,631 |
|
0.84 |
% |
Investment securities, available for
sale(6) |
|
|
100,278 |
|
|
1,612 |
|
2.15 |
|
|
|
89,173 |
|
|
1,160 |
|
1.74 |
|
Investment securities, held to
maturity(6) |
|
|
9,959 |
|
|
360 |
|
4.83 |
|
|
|
1,276 |
|
|
28 |
|
2.93 |
|
|
Other investments |
|
|
11,455 |
|
|
215 |
|
2.51 |
|
|
|
9,996 |
|
|
195 |
|
2.61 |
|
| Total interest earning
assets |
|
|
377,964 |
|
|
11,846 |
|
4.19 |
|
|
|
679,300 |
|
|
5,014 |
|
0.99 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances and borrowings |
|
|
— |
|
|
— |
|
— |
% |
|
|
8,058 |
|
|
69 |
|
1.14 |
% |
|
Subordinated debt |
|
|
44,047 |
|
|
1,775 |
|
5.39 |
|
|
|
24,313 |
|
|
695 |
|
3.82 |
|
|
Junior subordinated debentures |
|
|
3,589 |
|
|
199 |
|
7.41 |
|
|
|
3,587 |
|
|
90 |
|
3.35 |
|
|
Intrabank liability, net(7) |
|
|
122,737 |
|
|
4,629 |
|
5.04 |
|
|
|
474,981 |
|
|
2,923 |
|
0.82 |
|
| Total interest bearing
liabilities |
|
|
170,373 |
|
|
6,603 |
|
5.18 |
|
|
|
510,939 |
|
|
3,777 |
|
0.99 |
|
| Net interest income |
|
|
|
$ |
5,243 |
|
|
|
|
|
$ |
1,237 |
|
|
| Net interest
margin(3) |
|
|
|
|
|
1.85 |
% |
|
|
|
|
|
0.24 |
% |
(1) Yields and costs are
annualized.
(2) Includes loans held for sale and
nonaccrual loans.
(3) Net interest margin represents net
interest income divided by the average total interest earning
assets.
(4) CCBX yield does
not include the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit
enhancements, fraud enhancements and originating & servicing
CCBX loans. See reconciliation of the non-GAAP measures at the end
of this earnings release for the impact of BaaS loan expense on
CCBX loan yield.
(5) Net interest
margin, net of BaaS loan expense includes the impact of BaaS loan
expense. BaaS loan expense represents the amount paid or payable to
partners for credit enhancements, fraud enhancements, originating
& servicing CCBX loans. See reconciliation of the non-GAAP
measures at the end of this earnings release.
(6) For presentation in this table,
average balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
(7) Intrabank assets and liabilities
are consolidated for period calculations and presented as intrabank
asset, net or intrabank liability, net in the table above.
COASTAL FINANCIAL CORPORATION
QUARTERLY STATISTICS
(Dollars in thousands, except share and per share data;
unaudited)
| |
Three Months Ended |
| |
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
|
September 30,
2022 |
| Income Statement
Data: |
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
$ |
88,331 |
|
|
$ |
83,686 |
|
|
$ |
70,111 |
|
|
$ |
65,030 |
|
|
$ |
55,179 |
|
| Interest expense |
|
26,102 |
|
|
|
21,336 |
|
|
|
15,620 |
|
|
|
11,598 |
|
|
|
5,990 |
|
| Net interest income |
|
62,229 |
|
|
|
62,350 |
|
|
|
54,491 |
|
|
|
53,432 |
|
|
|
49,189 |
|
| Provision for credit losses -
loans |
|
27,157 |
|
|
|
52,598 |
|
|
|
43,544 |
|
|
|
33,600 |
|
|
|
18,428 |
|
| Provision (recovery) for
unfunded commitments |
|
96 |
|
|
|
(345 |
) |
|
|
153 |
|
|
|
— |
|
|
|
— |
|
Net interest income after
provision for credit losses - loans and
unfunded commitments |
|
34,976 |
|
|
|
10,097 |
|
|
|
10,794 |
|
|
|
19,832 |
|
|
|
30,761 |
|
| Noninterest income |
|
34,579 |
|
|
|
58,595 |
|
|
|
49,307 |
|
|
|
42,815 |
|
|
|
34,391 |
|
| Noninterest expense |
|
56,501 |
|
|
|
51,910 |
|
|
|
44,663 |
|
|
|
47,103 |
|
|
|
51,087 |
|
| Provision for income tax |
|
2,784 |
|
|
|
3,876 |
|
|
|
3,047 |
|
|
|
2,426 |
|
|
|
2,964 |
|
| Net income |
|
10,270 |
|
|
|
12,906 |
|
|
|
12,391 |
|
|
|
13,118 |
|
|
|
11,101 |
|
| |
|
|
|
|
|
|
|
|
|
| |
As of and for the Three Month Period |
| |
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
|
September 30,
2022 |
| Balance Sheet
Data: |
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
$ |
474,946 |
|
|
$ |
275,060 |
|
|
$ |
393,916 |
|
|
$ |
342,139 |
|
|
$ |
410,728 |
|
| Investment securities |
|
141,489 |
|
|
|
110,730 |
|
|
|
101,704 |
|
|
|
98,353 |
|
|
|
98,871 |
|
| Loans held for sale |
|
— |
|
|
|
35,923 |
|
|
|
27,292 |
|
|
|
— |
|
|
|
43,314 |
|
| Loans receivable |
|
2,967,035 |
|
|
|
3,007,553 |
|
|
|
2,837,204 |
|
|
|
2,627,256 |
|
|
|
2,507,889 |
|
| Allowance for credit
losses |
|
(101,085 |
) |
|
|
(110,762 |
) |
|
|
(89,123 |
) |
|
|
(74,029 |
) |
|
|
(59,282 |
) |
| Total assets |
|
3,680,268 |
|
|
|
3,535,283 |
|
|
|
3,451,033 |
|
|
|
3,144,467 |
|
|
|
3,133,741 |
|
| Interest bearing deposits |
|
2,637,914 |
|
|
|
2,436,980 |
|
|
|
2,333,423 |
|
|
|
2,042,509 |
|
|
|
2,023,849 |
|
| Noninterest bearing
deposits |
|
651,786 |
|
|
|
725,592 |
|
|
|
761,800 |
|
|
|
775,012 |
|
|
|
813,217 |
|
| Core
deposits(1) |
|
3,269,082 |
|
|
|
3,137,747 |
|
|
|
3,068,162 |
|
|
|
2,686,528 |
|
|
|
2,727,830 |
|
| Total deposits |
|
3,289,700 |
|
|
|
3,162,572 |
|
|
|
3,095,223 |
|
|
|
2,817,521 |
|
|
|
2,837,066 |
|
| Total borrowings |
|
47,695 |
|
|
|
47,658 |
|
|
|
47,619 |
|
|
|
47,587 |
|
|
|
27,931 |
|
| Total shareholders’
equity |
|
284,450 |
|
|
|
272,662 |
|
|
|
258,763 |
|
|
|
243,494 |
|
|
|
228,733 |
|
| |
|
|
|
|
|
|
|
|
|
| Share and Per Share
Data(2): |
|
|
|
|
|
|
|
|
|
| Earnings per share –
basic |
$ |
0.77 |
|
|
$ |
0.97 |
|
|
$ |
0.94 |
|
|
$ |
1.01 |
|
|
$ |
0.86 |
|
| Earnings per share –
diluted |
$ |
0.75 |
|
|
$ |
0.95 |
|
|
$ |
0.91 |
|
|
$ |
0.96 |
|
|
$ |
0.82 |
|
| Dividends per share |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Book value per
share(3) |
$ |
21.38 |
|
|
$ |
20.50 |
|
|
$ |
19.48 |
|
|
$ |
18.50 |
|
|
$ |
17.66 |
|
| Tangible book value per
share(4) |
$ |
21.38 |
|
|
$ |
20.50 |
|
|
$ |
19.48 |
|
|
$ |
18.50 |
|
|
$ |
17.66 |
|
| Weighted avg outstanding
shares – basic |
|
13,285,974 |
|
|
|
13,275,640 |
|
|
|
13,196,960 |
|
|
|
13,030,726 |
|
|
|
12,938,200 |
|
| Weighted avg outstanding
shares – diluted |
|
13,675,833 |
|
|
|
13,597,763 |
|
|
|
13,609,491 |
|
|
|
13,603,978 |
|
|
|
13,536,823 |
|
| Shares outstanding at end of
period |
|
13,302,449 |
|
|
|
13,300,809 |
|
|
|
13,281,533 |
|
|
|
13,161,147 |
|
|
|
12,954,573 |
|
| Stock options outstanding at
end of period |
|
356,359 |
|
|
|
357,999 |
|
|
|
360,119 |
|
|
|
438,103 |
|
|
|
644,334 |
|
| |
As of and for the Three Month Period |
| |
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
|
September 30,
2022 |
| Credit Quality
Data: |
|
|
|
|
|
|
|
|
|
|
Nonperforming assets(5)to total assets |
|
1.18 |
% |
|
|
0.95 |
% |
|
|
0.91 |
% |
|
|
1.06 |
% |
|
|
0.73 |
% |
| Nonperforming
assets(5)to loans receivable and OREO |
|
1.47 |
% |
|
|
1.12 |
% |
|
|
1.11 |
% |
|
|
1.26 |
% |
|
|
0.91 |
% |
| Nonperforming
loans(5)to total loans receivable |
|
1.47 |
% |
|
|
1.12 |
% |
|
|
1.11 |
% |
|
|
1.26 |
% |
|
|
0.91 |
% |
| Allowance for credit losses to
nonperforming loans |
|
232.2 |
% |
|
|
328.4 |
% |
|
|
282.5 |
% |
|
|
224.4 |
% |
|
|
259.1 |
% |
| Allowance for credit losses to
total loans receivable |
|
3.41 |
% |
|
|
3.68 |
% |
|
|
3.14 |
% |
|
|
2.82 |
% |
|
|
2.36 |
% |
| Gross charge-offs |
$ |
37,026 |
|
|
$ |
32,299 |
|
|
$ |
34,167 |
|
|
$ |
18,886 |
|
|
$ |
8,513 |
|
| Gross recoveries |
$ |
192 |
|
|
$ |
1,340 |
|
|
$ |
1,865 |
|
|
$ |
33 |
|
|
$ |
9 |
|
| Net charge-offs to average
loans(6) |
|
4.77 |
% |
|
|
4.19 |
% |
|
|
4.84 |
% |
|
|
2.87 |
% |
|
|
1.38 |
% |
| |
|
|
|
|
|
|
|
|
|
| Capital
Ratios(7): |
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital |
|
8.03 |
% |
|
|
8.16 |
% |
|
|
8.29 |
% |
|
|
7.97 |
% |
|
|
7.70 |
% |
| Common equity Tier 1
risk-based capital |
|
8.99 |
% |
|
|
8.36 |
% |
|
|
8.61 |
% |
|
|
8.92 |
% |
|
|
8.49 |
% |
| Tier 1 risk-based capital |
|
9.10 |
% |
|
|
8.47 |
% |
|
|
8.73 |
% |
|
|
9.04 |
% |
|
|
8.62 |
% |
| Total risk-based capital |
|
11.79 |
% |
|
|
11.12 |
% |
|
|
11.49 |
% |
|
|
11.94 |
% |
|
|
10.80 |
% |
(1) Core deposits are defined as all
deposits excluding brokered and all time deposits.
(2) Share and per share amounts are based on
total actual or average common shares outstanding, as
applicable.
(3) We calculate book value per share as
total shareholders’ equity at the end of the relevant period
divided by the outstanding number of our common shares at the end
of each period.
(4) Tangible book value per share is a
non-GAAP financial measure. We calculate tangible book value per
share as total shareholders’ equity at the end of the relevant
period, less goodwill and other intangible assets, divided by the
outstanding number of our common shares at the end of each period.
The most directly comparable GAAP financial measure is book value
per share. We had no goodwill or other intangible assets as of any
of the dates indicated. As a result, tangible book value per share
is the same as book value per share as of each of the dates
indicated.
(5) Nonperforming assets and nonperforming
loans include loans 90+ days past due and accruing interest.
(6) Annualized calculations.
(7) Capital ratios are for the Company,
Coastal Financial Corporation.
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to provide
meaningful supplemental information regarding the Company’s
operational performance and to enhance investors’ overall
understanding of such financial performance.
However, these non-GAAP financial measures are supplemental and
are not a substitute for an analysis based on GAAP measures. As
other companies may use different calculations for these adjusted
measures, this presentation may not be comparable to other
similarly titled adjusted measures reported by other companies.
The following non-GAAP measure is presented to illustrate the
impact of BaaS credit enhancements and BaaS fraud enhancements on
total revenue.
Revenue excluding BaaS credit enhancements and BaaS fraud
enhancements is a non-GAAP measure that excludes the impact of BaaS
credit enhancements and BaaS fraud enhancements on revenue. The
most directly comparable GAAP measure is revenue.
Reconciliations of the GAAP and non-GAAP measures are presented
below.
| |
|
As of and for the Three Months Ended |
|
As of and for the Nine Months Ended |
|
(dollars in thousands, unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
September 30,
2023 |
|
September 30,
2022 |
| Revenue
excluding BaaS credit enhancements and BaaS fraud
enhancements: |
|
|
|
|
|
Total net interest income |
|
$ |
62,229 |
|
|
$ |
62,350 |
|
|
$ |
49,189 |
|
|
$ |
179,070 |
|
|
$ |
118,343 |
|
|
Total noninterest income |
|
|
34,579 |
|
|
|
58,595 |
|
|
|
34,391 |
|
|
|
142,481 |
|
|
|
81,869 |
|
|
Total Revenue |
|
$ |
96,808 |
|
|
$ |
120,945 |
|
|
$ |
83,580 |
|
|
$ |
321,551 |
|
|
$ |
200,212 |
|
| Less: BaaS credit
enhancements |
|
|
(25,926 |
) |
|
|
(51,027 |
) |
|
|
(17,928 |
) |
|
|
(119,315 |
) |
|
|
(45,210 |
) |
|
Less: BaaS fraud enhancements |
|
|
(2,850 |
) |
|
|
(1,537 |
) |
|
|
(11,708 |
) |
|
|
(6,386 |
) |
|
|
(22,753 |
) |
|
Total revenue excluding BaaS credit enhancements and BaaS fraud
enhancements |
|
$ |
68,032 |
|
|
$ |
68,381 |
|
|
$ |
53,944 |
|
|
$ |
195,850 |
|
|
$ |
132,249 |
|
The following non-GAAP measure is presented to illustrate the
impact of BaaS loan expense on net loan income and yield on CCBX
loans.
Net BaaS loan income divided by average CCBX loans is a non-GAAP
measure that includes the impact BaaS loan expense on net BaaS loan
income and the yield on CCBX loans. The most directly comparable
GAAP measure is yield on CCBX loans.
The following non-GAAP measure is presented to illustrate the
impact of BaaS loan expense on net interest income and net interest
margin.
Net interest income net of BaaS loan expense is a non-GAAP
measure that includes the impact BaaS loan expense on net interest
income. The most directly comparable GAAP measure is net interest
income.
Net interest margin, net of BaaS loan expense is a non-GAAP
measure that includes the impact of BaaS loan expense on net
interest rate margin. The most directly comparable GAAP measure is
net interest margin.
Reconciliations of the GAAP and non-GAAP measures are presented
below.
| |
|
As of and for the Three Months Ended |
|
As of and for the Nine Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
September 30,
2023 |
|
September 30,
2022 |
|
Net BaaS loan income divided by average CCBX
loans: |
|
|
|
|
|
CCBX loan yield (GAAP)(1) |
|
|
17.05 |
% |
|
|
16.95 |
% |
|
|
13.96 |
% |
|
|
16.74 |
% |
|
|
13.16 |
% |
|
Total average CCBX loans receivable |
|
$ |
1,309,380 |
|
|
$ |
1,269,406 |
|
|
$ |
893,655 |
|
|
$ |
1,215,224 |
|
|
$ |
657,574 |
|
|
Interest and earned fee income on CCBX loans (GAAP) |
|
|
56,279 |
|
|
|
53,632 |
|
|
|
31,449 |
|
|
|
152,131 |
|
|
|
64,721 |
|
|
BaaS loan expense |
|
|
(23,003 |
) |
|
|
(22,033 |
) |
|
|
(15,560 |
) |
|
|
(62,590 |
) |
|
|
(36,079 |
) |
|
Net BaaS loan income |
|
$ |
33,276 |
|
|
$ |
31,599 |
|
|
$ |
15,889 |
|
|
$ |
89,541 |
|
|
$ |
28,642 |
|
|
Net BaaS loan income divided by average CCBX
loans(1) |
|
|
10.08 |
% |
|
|
9.99 |
% |
|
|
7.05 |
% |
|
|
9.85 |
% |
|
|
5.82 |
% |
| Net
interest margin, net of BaaS loan expense: |
|
|
|
|
|
|
|
|
|
CCBX interest margin(1) |
|
|
9.66 |
% |
|
|
10.41 |
% |
|
|
9.77 |
% |
|
|
10.05 |
% |
|
|
8.34 |
% |
|
CCBX earning assets |
|
|
1,684,012 |
|
|
|
1,544,628 |
|
|
|
1,124,745 |
|
|
|
1,509,911 |
|
|
|
965,176 |
|
|
Net interest income |
|
|
40,990 |
|
|
|
40,107 |
|
|
|
27,695 |
|
|
|
113,545 |
|
|
|
60,223 |
|
|
Less: BaaS loan expense |
|
|
(23,003 |
) |
|
|
(22,033 |
) |
|
|
(15,560 |
) |
|
|
(62,590 |
) |
|
|
(36,079 |
) |
Net interest income, net of BaaS
loan expense |
|
$ |
17,987 |
|
|
$ |
18,074 |
|
|
$ |
12,135 |
|
|
$ |
50,955 |
|
|
$ |
24,144 |
|
Net interest margin,
net of BaaS loan expense(1) |
|
|
4.24 |
% |
|
|
4.69 |
% |
|
|
4.28 |
% |
|
|
4.51 |
% |
|
|
3.34 |
% |
(1) Annualized calculations for
periods presented.
APPENDIX A -
As of September 30, 2023
Industry Concentration
We have a diversified loan portfolio,
representing a wide variety of industries. Our major categories of
loans are commercial real estate, consumer and other loans,
residential real estate, commercial and industrial, and
construction, land and land development loans. Together they
represent $2.97 billion in outstanding loan balances. When combined
with $2.35 billion in unused commitments the total of these
categories is $5.33 billion.
Commercial real estate loans
represent the largest segment of our loans, comprising 41.6% of our
total balance of outstanding loans as of September 30, 2023.
Unused commitments to extend credit represents an additional $31.8
million, and the combined total in commercial real estate loans
represents $1.27 billion, or 23.8% of our total outstanding loans
and loan commitments.
The following table summarizes our loan
commitment by industry for our commercial real estate portfolio as
of September 30, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available
Loan Commitments |
|
Total
Outstanding
Balance &
Available Commitment |
|
% of Total
Loans
(Outstanding
Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Apartments |
|
$ |
333,685 |
|
$ |
10,653 |
|
$ |
344,338 |
|
6.5 |
% |
|
$ |
3,178 |
|
105 |
| Hotel/Motel |
|
|
164,501 |
|
|
1,328 |
|
|
165,829 |
|
3.1 |
|
|
|
6,327 |
|
26 |
| Convenience Store |
|
|
118,821 |
|
|
1,286 |
|
|
120,107 |
|
2.2 |
|
|
|
2,085 |
|
57 |
| Mixed use |
|
|
90,423 |
|
|
2,666 |
|
|
93,089 |
|
1.7 |
|
|
|
1,064 |
|
85 |
| Warehouse |
|
|
108,568 |
|
|
2,203 |
|
|
110,771 |
|
2.1 |
|
|
|
1,939 |
|
56 |
| Office |
|
|
85,214 |
|
|
3,469 |
|
|
88,683 |
|
1.7 |
|
|
|
926 |
|
92 |
| Retail |
|
|
96,287 |
|
|
675 |
|
|
96,962 |
|
1.8 |
|
|
|
953 |
|
101 |
| Mini Storage |
|
|
60,387 |
|
|
2,942 |
|
|
63,329 |
|
1.2 |
|
|
|
3,019 |
|
20 |
| Strip Mall |
|
|
45,657 |
|
|
— |
|
|
45,657 |
|
0.9 |
|
|
|
5,707 |
|
8 |
| Manufacturing |
|
|
38,038 |
|
|
1,800 |
|
|
39,838 |
|
0.7 |
|
|
|
1,153 |
|
33 |
| Groups < 0.70% of total |
|
|
96,268 |
|
|
4,772 |
|
|
101,040 |
|
1.9 |
|
|
|
1,174 |
|
82 |
|
Total |
|
$ |
1,237,849 |
|
$ |
31,794 |
|
$ |
1,269,643 |
|
23.8 |
% |
|
$ |
1,861 |
|
665 |
Consumer loans comprise 25.6% of our total
balance of outstanding loans as of September 30, 2023. Unused
commitments to extend credit represents an additional $1.00
billion, and the combined total in consumer and other loans
represents $1.76 billion, or 33.1% of our total outstanding loans
and loan commitments. As illustrated in the table below, our CCBX
partners bring in a large number of mostly smaller dollar loans,
resulting in an average consumer loan balance of just $1,400. CCBX
consumer loans are underwritten to CCBX credit standards and
underwriting of these loans is regularly tested.
The following table summarizes our loan commitment by industry
for our consumer and other loan portfolio as of September 30,
2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total
Outstanding
Balance &
Available Commitment(1) |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
| CCBX
consumer loans |
|
Credit cards |
|
$ |
440,993 |
|
$ |
1,000,320 |
|
$ |
1,441,313 |
|
27.1 |
% |
|
$ |
1.6 |
|
279,714 |
|
Installment loans |
|
|
310,719 |
|
|
— |
|
|
310,719 |
|
5.8 |
|
|
|
1.5 |
|
213,011 |
|
Lines of credit |
|
|
3,934 |
|
|
1,689 |
|
|
5,623 |
|
0.1 |
|
|
|
0.1 |
|
39,614 |
|
Other loans |
|
|
2,334 |
|
|
— |
|
|
2,334 |
|
0.1 |
|
|
|
0.1 |
|
17,577 |
| Community
bank consumer loans |
|
Installment loans |
|
|
1,232 |
|
|
— |
|
|
1,232 |
|
0.0 |
|
|
|
51.3 |
|
24 |
|
Lines of credit |
|
|
150 |
|
|
573 |
|
|
723 |
|
0.0 |
|
|
|
3.7 |
|
41 |
|
Other loans |
|
|
1,101 |
|
|
— |
|
|
1,101 |
|
0.0 |
|
|
|
3.6 |
|
309 |
|
Total |
|
$ |
760,463 |
|
$ |
1,002,582 |
|
$ |
1,763,045 |
|
33.1 |
% |
|
$ |
1.4 |
|
550,290 |
(1) Total exposure on CCBX loans is
subject to portfolio maximum limits
Residential real estate loans comprise 16.1% of
our total balance of outstanding loans as of September 30,
2023. Unused commitments to extend credit represents an additional
$477.2 million, and the combined total in residential real estate
loans represents $954.4 million, or 17.9% of our total outstanding
loans and loan commitments.
The following table summarizes our loan
commitment by industry for our residential real estate loan
portfolio as of September 30, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total
Outstanding
Balance &
Available Commitment(1) |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
| CCBX
residential real estate loans |
| Home equity line of
credit |
|
$ |
251,775 |
|
$ |
429,893 |
|
$ |
681,668 |
|
12.8 |
% |
|
$ |
24 |
|
10,384 |
| Community
bank residential real estate loans |
| Closed end, secured by first
liens |
|
|
194,696 |
|
|
3,740 |
|
|
198,436 |
|
3.7 |
|
|
|
620 |
|
314 |
| Home equity line of
credit |
|
|
21,342 |
|
|
41,943 |
|
|
63,285 |
|
1.2 |
|
|
|
100 |
|
214 |
| Closed end, second liens |
|
|
9,334 |
|
|
1,667 |
|
|
11,001 |
|
0.2 |
|
|
|
301 |
|
31 |
|
Total |
|
$ |
477,147 |
|
$ |
477,243 |
|
$ |
954,390 |
|
17.9 |
% |
|
$ |
44 |
|
10,943 |
(1) Total exposure on CCBX loans is
subject to portfolio maximum limits.
Commercial and industrial loans comprise 11.1%
of our total balance of outstanding loans as of September 30,
2023. Unused commitments to extend credit represents an additional
$706.5 million, and the combined total in commercial and industrial
loans represents $1.04 billion, or 19.5% of our total outstanding
loans and loan commitments. Included in commercial and industrial
loans is $114.2 million in outstanding capital call lines, with an
additional $630.7 million in available loan commitments which is
limited to a $350.0 million portfolio maximum. Capital call lines
are provided to venture capital firms through one of our CCBX BaaS
clients. These loans are secured by the capital call rights and are
individually underwritten to the Bank’s credit standards and the
underwriting is reviewed by the Bank on every line.
The following table summarizes our loan
commitment by industry for our commercial and industrial loan
portfolio as of September 30, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total
Outstanding
Balance &
Available Commitment(1) |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Capital Call Lines |
|
$ |
114,174 |
|
$ |
630,668 |
|
$ |
744,842 |
|
14.0 |
% |
|
$ |
723 |
|
158 |
| Retail |
|
|
58,586 |
|
|
6,131 |
|
|
64,717 |
|
1.2 |
|
|
|
19 |
|
3,063 |
| Construction/Contractor
Services |
|
|
24,988 |
|
|
25,743 |
|
|
50,731 |
|
1.0 |
|
|
|
134 |
|
186 |
| Financial Institutions |
|
|
48,648 |
|
|
— |
|
|
48,648 |
|
0.9 |
|
|
|
4,054 |
|
12 |
| Medical / Dental / Other
Care |
|
|
19,249 |
|
|
8,045 |
|
|
27,294 |
|
0.5 |
|
|
|
802 |
|
24 |
| Manufacturing |
|
|
8,479 |
|
|
5,093 |
|
|
13,572 |
|
0.3 |
|
|
|
193 |
|
44 |
| Groups < 0.30% of total |
|
|
57,151 |
|
|
30,776 |
|
|
87,927 |
|
1.6 |
|
|
|
107 |
|
534 |
|
Total |
|
$ |
331,275 |
|
$ |
706,456 |
|
$ |
1,037,731 |
|
19.5 |
% |
|
$ |
82 |
|
4,021 |
(1) Total exposure on CCBX loans is
subject to portfolio maximum limits.
Construction, land and land development loans
comprise 5.6% of our total balance of outstanding loans as of
September 30, 2023. Unused commitments to extend credit
represents an additional $133.7 million, and the combined total in
construction, land and land development loans represents $301.4
million, or 5.7% of our total outstanding loans and loan
commitments.
The following table details our loan commitment
for our construction, land and land development portfolio as of
September 30, 2023:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total
Outstanding
Balance &
Available Commitment |
|
% of Total Loans
(Outstanding Balance &
Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Commercial construction |
|
$ |
91,396 |
|
$ |
106,144 |
|
$ |
197,540 |
|
3.7 |
% |
|
$ |
5,376 |
|
17 |
| Undeveloped land loans |
|
|
8,310 |
|
|
6,281 |
|
|
14,591 |
|
0.3 |
|
|
|
554 |
|
15 |
| Residential construction |
|
|
33,971 |
|
|
13,095 |
|
|
47,066 |
|
0.9 |
|
|
|
1,415 |
|
24 |
| Developed land loans |
|
|
21,369 |
|
|
3,732 |
|
|
25,101 |
|
0.5 |
|
|
|
763 |
|
28 |
| Land development |
|
|
12,640 |
|
|
4,443 |
|
|
17,083 |
|
0.3 |
|
|
|
843 |
|
15 |
|
Total |
|
$ |
167,686 |
|
$ |
133,695 |
|
$ |
301,381 |
|
5.7 |
% |
|
$ |
1,694 |
|
99 |
Exposure and and risk in our construction, land
and land development portfolio is lower in the current period
compared to previous periods as demonstrated by the declining
outstanding balance for the periods indicated in the following
table:
| |
|
Outstanding Balance as of |
| (dollars in thousands;
unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
March 31,
2023 |
|
December 31,
2022 |
|
September 30,
2022 |
|
Commercial construction |
|
$ |
91,396 |
|
$ |
78,079 |
` |
$ |
97,987 |
|
$ |
100,714 |
|
$ |
109,874 |
| Residential construction |
|
|
33,971 |
|
|
35,032 |
|
|
32,268 |
|
|
32,879 |
|
|
38,795 |
| Undeveloped land loans |
|
|
8,310 |
|
|
42,530 |
|
|
41,951 |
|
|
44,578 |
|
|
41,373 |
| Developed land loans |
|
|
21,369 |
|
|
18,735 |
|
|
19,130 |
|
|
20,167 |
|
|
19,436 |
| Land development |
|
|
12,640 |
|
|
12,330 |
|
|
15,299 |
|
|
15,717 |
|
|
14,710 |
|
Total |
|
$ |
167,686 |
|
$ |
186,706 |
|
$ |
206,635 |
|
$ |
214,055 |
|
$ |
224,188 |
We have portfolio limits with our each of our
partners to manage loan concentration risk, liquidity risk, and
counter-party partner risk. For example, as of September 30,
2023, capital call lines outstanding balance totaled $114.2
million, and while commitments totaled $630.7 million the
commitments are limited to a maximum of $350.0 million by agreement
with the partner.
APPENDIX B -
As of September 30, 2023
CCBX – BaaS Reporting Information
During the quarter ended September 30, 2023, $25.9 million
was recorded in BaaS credit enhancements related to the provision
for credit losses - loans and reserve for unfunded commitments for
CCBX partner loans and negative deposit accounts. Agreements with
our CCBX partners provide for a credit enhancement provided by the
partner which protects the Bank by indemnifying or reimbursing
incurred losses. In accordance with accounting guidance, we
estimate and record a provision for expected losses for these CCBX
loans, unfunded commitments and negative deposit accounts. When the
provision for credit losses - loans and provision for unfunded
commitments is recorded, a credit enhancement asset is also
recorded on the balance sheet through noninterest income (BaaS
credit enhancements) in recognition of the CCBX partner legal
commitment to indemnify or reimburse losses. The credit enhancement
asset is relieved as credit enhancement payments and recoveries are
received from the CCBX partner or taken from the partner's cash
reserve account. Agreements with our CCBX partners also provide
protection to the Bank from fraud by indemnifying or reimbursing
incurred fraud losses. BaaS fraud includes noncredit fraud losses
on loans and deposits originated through partners. Fraud losses are
recorded when incurred as losses in noninterest expense, and the
enhancement received from the CCBX partner is recorded in
noninterest income, resulting in a net impact of zero to the income
statement. CCBX partners also pledge a cash reserve account at the
Bank which the Bank can collect from when losses occur that is then
replenished by the partner on a regular interval. Although
agreements with our CCBX partners provide for credit enhancements
that provide protection to the Bank from credit and fraud losses by
indemnifying or reimbursing incurred credit and fraud losses, if
our partner is unable to fulfill their contracted obligations to
replenish their cash reserve account then the bank would be exposed
to additional loan and deposit losses, as a result of this
counterparty risk. If a CCBX partner does not replenish their cash
reserve account then the Bank can declare the agreement in default,
take over servicing and cease paying the partner for servicing the
loan and providing credit and fraud enhancements. The Bank would
write-off any remaining credit enhancement asset from the CCBX
partner not covered by the cash pledge account but would retain the
full yield and any fee income on the loan going forward, and BaaS
loan expense for that CCBX partner would cease once default
occurred and payments to the CCBX partner were stopped.
For CCBX partner loans the Bank records contractual interest
earned from the borrower on loans in interest income, adjusted for
origination costs which are paid or payable to the CCBX partner.
BaaS loan expense represents the amount paid or payable to partners
for credit and fraud enhancements and originating & servicing
CCBX loans. To determine net revenue (Net BaaS loan income) earned
from CCBX loan relationships, the Bank takes BaaS loan interest
income and deducts BaaS loan expense to arrive at Net BaaS loan
income (A reconciliation of the non-GAAP measures are set forth
in the preceding section of this earnings release.) which can
be compared to interest income on the Company’s community bank
loans.
The following table illustrates how CCBX partner loan income and
expenses are recorded in the financial statements:
|
Loan income and related loan expense |
|
Three Months Ended |
|
Nine Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
September 30,
2023 |
|
September 30,
2022 |
|
Yield on loans(1) |
|
|
17.05 |
% |
|
|
16.95 |
% |
|
|
13.96 |
% |
|
|
16.74 |
% |
|
|
13.16 |
% |
| BaaS loan interest income |
|
$ |
56,279 |
|
|
$ |
53,632 |
|
|
$ |
31,449 |
|
|
$ |
152,131 |
|
|
$ |
64,721 |
|
| Less: BaaS loan expense |
|
|
23,003 |
|
|
|
22,033 |
|
|
|
15,560 |
|
|
|
62,590 |
|
|
|
36,079 |
|
|
Net BaaS loan income(2) |
|
|
33,276 |
|
|
|
31,599 |
|
|
|
15,889 |
|
|
|
89,541 |
|
|
|
28,642 |
|
| Net BaaS loan income divided
by average BaaS loans(1)(2) |
|
|
10.08 |
% |
|
|
9.99 |
% |
|
|
7.05 |
% |
|
|
9.85 |
% |
|
|
5.82 |
% |
(1) Annualized calculation for quarterly periods shown.
(2) A reconciliation of the non-GAAP measures are set forth in the
preceding section of this earnings release.
Increased interest rates and growth in CCBX loans and deposits
has resulted in increases in interest income and expense for the
quarter ended September 30, 2023 compared to the quarters
ended June 30, 2023 and September 30, 2022. The following
tables are a summary of the interest components, direct fees, and
expenses of BaaS for the periods indicated and are not inclusive of
all income and expense related to BaaS.
|
Interest income |
|
Three Months Ended |
|
Nine Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
September 30,
2023 |
|
September 30,
2022 |
|
Loan interest income |
|
$ |
56,279 |
|
$ |
53,632 |
|
$ |
31,449 |
|
$ |
152,131 |
|
$ |
64,721 |
|
Total BaaS interest income |
|
$ |
56,279 |
|
$ |
53,632 |
|
$ |
31,449 |
|
$ |
152,131 |
|
$ |
64,721 |
|
Interest expense |
|
Three Months Ended |
|
Nine Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
September 30,
2023 |
|
September 30,
2022 |
|
BaaS interest expense |
|
$ |
20,384 |
|
$ |
17,012 |
|
$ |
5,075 |
|
$ |
49,820 |
|
$ |
6,549 |
|
Total BaaS interest expense |
|
$ |
20,384 |
|
$ |
17,012 |
|
$ |
5,075 |
|
$ |
49,820 |
|
$ |
6,549 |
|
BaaS income |
|
Three Months Ended |
|
Nine Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
September 30,
2023 |
|
September 30,
2022 |
|
BaaS program income: |
|
|
|
|
|
|
|
|
|
|
|
Servicing and other BaaS fees |
|
$ |
997 |
|
$ |
895 |
|
$ |
1,079 |
|
$ |
2,840 |
|
$ |
3,407 |
| Transaction fees |
|
|
1,036 |
|
|
1,052 |
|
|
940 |
|
|
3,005 |
|
|
2,247 |
| Interchange fees |
|
|
1,216 |
|
|
975 |
|
|
738 |
|
|
2,980 |
|
|
1,798 |
| Reimbursement of expenses |
|
|
1,152 |
|
|
1,026 |
|
|
885 |
|
|
3,099 |
|
|
1,875 |
|
BaaS program income |
|
|
4,401 |
|
|
3,948 |
|
|
3,642 |
|
|
11,924 |
|
|
9,327 |
| BaaS indemnification
income: |
|
|
|
|
|
|
|
|
|
|
| BaaS credit enhancements |
|
|
25,926 |
|
|
51,027 |
|
|
17,928 |
|
|
119,315 |
|
|
45,210 |
| BaaS fraud enhancements |
|
|
2,850 |
|
|
1,537 |
|
|
11,708 |
|
|
6,386 |
|
|
22,753 |
|
BaaS indemnification income |
|
|
28,776 |
|
|
52,564 |
|
|
29,636 |
|
|
125,701 |
|
|
67,963 |
| Total BaaS income |
|
$ |
33,177 |
|
$ |
56,512 |
|
$ |
33,278 |
|
$ |
137,625 |
|
$ |
77,290 |
|
BaaS loan and fraud expense: |
|
Three Months Ended |
|
Nine Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,
2023 |
|
June 30,
2023 |
|
September 30,
2022 |
|
September 30,
2023 |
|
September 30,
2022 |
|
BaaS loan expense |
|
$ |
23,003 |
|
$ |
22,033 |
|
$ |
15,560 |
|
$ |
62,590 |
|
$ |
36,079 |
| BaaS fraud expense |
|
|
2,850 |
|
|
1,537 |
|
|
11,707 |
|
|
6,386 |
|
|
22,752 |
|
Total BaaS loan and fraud expense |
|
$ |
25,853 |
|
$ |
23,570 |
|
$ |
27,267 |
|
$ |
68,976 |
|
$ |
58,831 |
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