CCB
COASTAL FINANCIAL CORPORATION ANNOUNCES FOURTH QUARTER AND YEAR END 2021 RESULTS
Company Release: January 27, 2022
Fourth Quarter 2021 Highlights:
•
Non-PPP loan growth of $186.8 million, or 12.9%, for three months ended December 31, 2021, compared to the three months ended September 30, 2021.
o
CCBX loans increased $156.5 million, or 82.3%,
o
Community bank loans increased $30.3 million, or 2.4%, excluding PPP loans
o
PPP loans decreased $155.5 million, or 58.2%
•
Deposit growth of $140.2 million, or 6.3%, to $2.36 billion for the three months ended December 31, 2021, compared to $2.22 billion for the three months ended September 30, 2021.
o
CCBX deposit growth of $109.1 million, or 18.0%
▪
Additional $252.4 million in CCBX deposits transferred off balance sheet
o
Community bank deposit growth of $31.2 million, or 1.9%
•
Successful public offering of common stock closed on December 17, 2021, with gross proceeds of $34.5 million, accretive to book value.
•
Net income increased $606,000, or 9.1%, to $7.3 million for the quarter ended December 31, 2021, or $0.57 per diluted common share, compared to $6.7 million, or $0.54 per common diluted share, for the quarter ended September 30, 2021.
2021 Highlights:
•
Total assets increased $869.4 million, or 49.2%, to $2.64 billion for the year ended December 31, 2021, compared to $1.77 billion at December 31, 2020.
•
Total deposits increased $942.5 million, or 66.3%, to $2.36 billion for the year ended December 31, 2021, compared to $1.42 billion at December 31, 2020.
o
CCBX deposits increased $647.6 million during the year ended December 31, 2021.
•
Loan growth of $195.6 million, or 12.6%, to $1.74 billion for the year ended December 31, 2021, compared to $1.55 billion for the year ended December 31, 2020.
o
CCBX loans increased $281.0 million, or 428.2%
o
Community bank loans increased $168.2 million, or 15.0%, excluding PPP loans
o
PPP loans decreased $254.0 million, or 69.4%
o
Net deferred fees on loan receivable decreased $429,000, or 4.7%
•
Net income increased $11.9 million, or 78.3%, to $27.0 million for the year ended December 31, 2021, or $2.16 per diluted common share, compared to $15.1 million, or $1.24 per diluted common share, for the year ended December 31, 2020.
•
CCBX relationships increased by 13, or 86.7%, to 28 relationships as of December 31, 2021, compared to 15 relationships as of December 31, 2020.
Everett, WA - Coastal Financial Corporation (Nasdaq: CCB) (the "Company"), the holding company for Coastal Community Bank (the "Bank"), today reported unaudited financial results for the quarter and year ended December 31, 2021. Net income for the fourth quarter of 2021 was $7.3 million, or $0.57per diluted common share, compared with net income of $6.7
1
million, or $0.54per diluted common share, for thethird quarter of 2021, and $4.7 million, or $0.38 per diluted common share, for the quarter ended December 31, 2020.
Total assets increased $183.9 million, or 7.5%, during the fourth quarter of 2021 to $2.64 billion, compared to $2.45 billion at September 30, 2021. Deposit growth was strong, increasing $140.2 million, or 6.3%, during the three months ended December 31, 2021. Non-PPP loan growth of $186.8 million, or 12.9%, for the three months ended December 31, 2021. Even with PPP loans decreasing $155.5 million, or 58.2% as a result of PPP loan forgiveness and repayments, total loans receivable increased $37.1 million during the three months ended December 31, 2021.
"We had tremendous interest and success with our public offering of common stock during the fourth quarter of 2021. The offering closed on December 17, 2021, with gross proceeds of $34.5 million, before deducting underwriting discounts and offering expenses. These proceeds will help support investment and growth opportunities for the Company and Bank. Revenue was robust in 2021, with total revenue of $107.6 million for the year ended December 31, 2021, compared to $65.6 million for the year ended December 31, 2020. Total revenue excluding BaaS credit enhancements, BaaS fraud recovery and reimbursement of expenses* increased $31.0 million, or 47.7%, to $96.0 million during the year ended December 31, 2021, compared to $65.0 million for the year ended December 31, 2020. Our CCBX division, which provides Banking as a Service ("BaaS"), had significant relationship growth in 2021, with 28 relationships at December 31, 2021, an increase of 13 relationships compared to December 31, 2020. CCBX generates additional fee and interest income, and expenses, for the Company by providing BaaS to broker dealers and digital financial service providers who offer their clients these banking services. We are very pleased with the deposit growth in CCBX during the year, which increased $647.6 million, or 942.8%, to $716.3 million of as of December 31, 2021, not including an additional $252.4 million in CCBX deposits that are transferred off the balance sheet as of December 31, 2021. CCBX loans also increased dramatically during 2021, to $346.6 million as of December 31, 2021, compared to $65.6 million as of December 31, 2020, an increase of $281.0 million, or 428.2%. " stated Eric Sprink, the President and CEO of the Company and the Bank.
Results of Operations
* A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
Net interest income was $24.7 million for the quarter ended December 31, 2021, an increase of $5.9 million, or 31.4%, from $18.8 million for the quarter ended September 30, 2021, and an increase of $7.8 million, or 45.9%, from $16.9 million for the quarter ended December 31, 2020. Yield on loans receivable was 5.92% for the three months ended December 31, 2021, compared to 4.57% for the three months ended September 30, 2021 and 4.64% for the three months ended December 31, 2020. The increase in net interest income compared to September 30, 2021 and December 31, 2020, was largely related to net deferred fee income recognized on forgiven or repaid PPP loans as well as increased yield on loans resulting from loan growth and a decrease in lower yielding PPP loans. Average loans receivable for the three months ended December 31, 2021 and September 30, 2021, was $1.68 billion, compared to $1.53 billion for the three months ended December 31, 2020.
Interest and fees on loans totaled $25.1 million for the three months ended December 31, 2021 compared to $19.4 million and $17.9 million for the three months ended September 30, 2021 and December 31, 2020, respectively. Net non-PPP loan growth of $186.8 million, or 12.9%, during the quarter ended December 31, 2021, offset a decrease of $155.5 million in PPP loans that were forgiven or repaid, which resulted in the recognition of $5.8 million in net deferred fees on PPP loans. Capital call lines increased $41.4 million, or 25.7%, during the quarter ended December 31, 2021. These loans bear a lower rate of interest, but have less credit risk due to the way the loans are structured compared to other commercial loans. The increase in interest and fees on loans for the quarter ended December 31, 2021, compared to December 31, 2020, was largely due to $5.8 million in net deferred fees recognized on forgiven or repaid PPP loans during the quarter ended December 31, 2021, compared to $2.8 million during the quarter ended December 31, 2020.
As of December 31, 2021, there were $111.8 million in PPP loans, compared to $267.3 million as of September 30, 2021, and $365.8 million as of December 31, 2020. In the three months ended December 31, 2021, a total of $155.5 million in PPP loans were forgiven or repaid. Net deferred fees recognized on PPP loans contributed $5.8 million for the three months
2
ended December 31, 2021, compared to $2.9 million for the three months ended September 30, 2021, and $2.8 million for the three months ended December 31, 2020.
As of December 31, 2021, $3.6 million in net deferred fees on PPP loans remains to be recognized in interest income in future periods along with interest earned on loans. Net deferred fees on PPP loans are earned over the life of the loan, as a yield adjustment in interest income. Forgiveness of principal, early paydowns and payoffs on PPP loans will increase interest income earned in those periods from the recognition of PPP deferred fees. PPP loans in rounds one and two were originated in 2020, and were predominately two year loans, with $4.3 million of these loans remaining at December 31, 2021. PPP loans in round three were originated in 2021 and are all five-year loans, with $107.5 million of these loans remaining at December 31, 2021.
Interest income from interest earning deposits with other banks was $294,000 at December 31, 2021, an increase of $124,000 and $218,000 due to higher balances compared to September 30, 2021, and December 31, 2020, respectively. The average balance of interest earning deposits with other banks for the three months ended December 31, 2021 was $751.8 million, compared to $419.7 million and $166.7 million for the three months ended September 30, 2021 and December 31, 2020, respectively.
Interest expense was $843,000 for the quarter ended December 31, 2021, a $42,000 increase from the quarter ended September 30, 2021 and a $322,000 decrease from the quarter ended December 31, 2020. Interest expense on borrowed funds was $327,000 for the quarter ended December 31, 2021, compared to $278,000 and $407,000 for the quarters ended September 30, 2021 and December 31, 2020, respectively. Interest expense on borrowed funds increased $49,000 compared to the three months ended September 30, 2021as a result of an increase in subordinated debt outstanding. Although the increase in subordinated debt occurred during the quarter ended September 30, 2021, the increased balance occurred midway through the quarter, therefore the three months ended December 31, 2021 reflects the increase in expense for a full quarter. The $80,000 decrease in interest expense on borrowed funds from the quarter ended December 31, 2020 is the result of a decrease in average PPPLF borrowings, which were paid off in full as of June 30, 2021, partially offset by an increase in subordinated debt interest expense as a result of the increased outstanding balance. Interest expense on interest bearing deposits decreased despite an increase of $42.3 million and $153.8 million in average interest bearing deposits for the quarter ended December 31, 2021 over the quarters ended September 30, 2021 and December 31, 2020, respectively, as a result of management lowering deposit interest rates and a continued low interest rate environment. This contributed to improved cost of deposits for the three months ended December 31, 2021, which decreased 15.0% and 58.7% when compared to the three months ended September 30, 2021 and December 31, 2020, respectively.
Net interest margin was 3.95% for the three months ended December 31, 2021, compared to 3.48% and 3.89% for the three months ended September 30, 2021 and December 31, 2020, respectively. The increase in net interest margin compared to the three months ended September 30, 2021, was largely a result of $5.8 million in net deferred fees recognized on PPP loans compared to $2.9 million for the three months ended September 30, 2021. Contributing to the decrease in net interest margin compared to the three months ended December 31, 2020, was $751.8 million in average interest earning deposits as of December 31, 2021, a $585.1 million increase compared to the quarter ended December 31, 2020. These interest earning deposits earned an average rate of 16 basis points for the quarter ended December 31, 2021.
Cost of funds decreased two basis points in the quarter ended December 31, 2021 to 0.14%, compared to the quarter ended September 30, 2021 and decreased 15 basis points from the quarter ended December 31, 2020. Cost of deposits for the quarter ended December 31, 2021 was 0.09%, a decrease of one basis point, from 0.10% for the quarter ended September 30, 2021, and a 13 basis point decrease, from 0.22% for the quarter ended December 31, 2020, largely due to an increase in noninterest bearing deposits and a lower rate environment. Deposit growth from CCBX in noninterest bearing and low interest bearing accounts contributed to the reduced cost of funds in conjunction with rate reductions on our community bank deposits. Noninterest bearing deposits increased $59.5 million, or 4.6%, and $763.6 million, or 128.9%, compared to the quarters ended September 30, 2021, and December 31, 2020, respectively. Market conditions for deposits continued to be competitive during the quarter ended December 31, 2021; however, we have been able to keep our cost of deposits down by increasing low interest bearing and noninterest bearing deposits and allowing high cost deposits to run-off when appropriate, lowering deposit rates and replacing them with lower cost core deposits.
3
During the quarter ended December 31, 2021, total loans receivable increased by $37.1 million, to $1.74 billion, compared to $1.71 billion for the quarter ended September 30, 2021. Non-PPP loansincreased $186.8 million, or 12.9%, for the quarter ended December 31, 2021, compared to the quarter ended September 30, 2021. PPP loans decreased $155.5 million as a result of forgiveness and repayments and totaled $111.8 million as of December 31, 2021 compared to $267.3 million as of September 30, 2021.
Total yield on loans receivable for the quarter ended December 31, 2021 was 5.92%, compared to 4.57% for the quarter ended September 30, 2021, and 4.64% for the quarter ended December 31, 2020. This increase in yield on loans receivable is attributed to an increase in deferred fees recognized on PPP loans forgiven and repaid and a decrease in the outstanding balance of PPP loans that have a stated rate of 1.0% which is combined with the recognition of net deferred fees on PPP loans that are forgiven or repaid. Additionally, new non-PPP loans bear a higher average interest rate than the stated 1.0% PPP loans they are replacing.
Yield on loans receivable, excluding earned fees* approximated 4.37% for the quarter ended December 31, 2021, compared to 3.74% for the quarter ended September 30, 2021, and 3.66% for the quarter ended December 31, 2020 and were higher primarily due to the decline in PPP loans which have a 1.0% stated rate. Net deferred fees recognized on loans were $6.6 million (includes $5.8 million on PPP loans), $3.5 million (includes $2.9 million on PPP loans) and $3.8 million (includes $2.8 million on PPP loans) for the quarters ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively.
Return on average assets ("ROA") was 1.14% for the quarter ended December 31, 2021 compared to 1.21% and 1.04% for the quarters ended September 30, 2021 and December 31, 2020, respectively. ROA for the quarter ended December 31, 2021 was impacted by increased demand deposits and cash on the balance sheet, which are lower yielding earning assets and produce a lower loan to deposit ratio. ROA for the quarter ended December 31, 2020 was impacted by increased provision for loan losses, which reduced earnings, due to the economic uncertainties of the COVID-19 pandemic and loan growth.
The PPP loans originated in the first and second rounds during 2020 and in the third round in 2021 have had a significant impact on our financial statements. As the PPP loans continue to paydown they will impact our results in the future. Any estimated adjusted ratios that exclude the impact of this activity are non-GAAP measures. For more information about non-GAAP financial measures, please see the end of this earnings release.
The table below summarizes information about total PPP loans originated in 2020 and 2021.
Total PPP Loan Origination
Round 1 & 2
2020
Round 3
2021
Total
(Dollars in thousands; unaudited)
Loans Originated
$
452,846
$
311,012
$
763,858
Deferred fees, net
12,933
13,334
$
26,267
Outstanding loans and deferred fees as of December 31, 2021
Loans outstanding
$
4,306
$
107,507
$
111,813
Deferred fees, net
36
3,597
$
3,633
* A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
4
As of December 31, 2021 there was $111.8 million in PPP loans, this includes $4.3 million from round 1 & 2 and $107.5 million from round 3. The table below summarizes key information about the remaining PPP loans originated in 2020 and 2021 as of the period indicated:
Outstanding PPP Loans
Original Loan Size
As of and for the Three Months Ended December 31, 2021
$0.00 -
$50,000.00
$50,0000.01 -
$150,000.00
$150,000.01 -
$350,000.00
$350,000.01 -
$2,000,000.00
> 2,000,000.01
Totals
(Dollars in thousands; unaudited)
Principal outstanding:
Round 1 & 2
$
302
$
459
$
342
$
1,501
$
1,702
$
4,306
Round 3
6,925
10,751
32,061
57,770
-
107,507
Total principal outstanding
7,227
11,210
32,403
59,271
1,702
111,813
Net deferred fees outstanding
Round 1 & 2
$
4
$
5
$
5
$
11
$
11
$
36
Round 3
575
380
1,257
1,384
-
3,596
Total net deferred fees
outstanding
$
579
$
385
$
1,262
$
1,395
$
11
$
3,632
Number of loans:
Round 1 & 2
14
8
4
5
3
34
Round 3
381
116
140
73
-
710
Total loan count
395
124
144
78
3
744
Percent of total
53.1
%
16.7
%
19.3
%
10.5
%
0.4
%
100.0
%
Forgiveness/Payoffs/Paydowns in Three Months Ended December 31, 2021
Dollars
$
17,549
$
30,346
$
29,476
$
68,048
$
10,046
$
155,465
Deferred fee recognized
1,519
1,169
1280
1,769
47
5,784
5
The following table shows the Company's key performance ratios for the periods indicated. The table also includes ratios that were adjusted by removing the impact of the PPP loans as described above. The adjusted ratios are non-GAAP measures. For more information about non-GAAP financial measures, see the end of this earnings release.
Three Months Ended
Year ended
(unaudited)
December31,
2021
September30,
2021
June 30,
2021
March31,
2021
December31,
2020
December31,
2021
December31,
2020
Return on average assets (1)
1.14
%
1.21
%
1.36
%
1.28
%
1.04
%
1.24
%
0.98
%
Return on average equity (1)
16.80
%
16.77
%
18.60
%
16.84
%
13.36
%
17.24
%
11.44
%
Yield on earnings assets (1)
4.09
%
3.63
%
3.89
%
3.99
%
4.16
%
3.90
%
4.21
%
Yield on loans receivable (1)
5.92
%
4.57
%
4.44
%
4.51
%
4.64
%
4.86
%
4.64
%
Yield on loans receivable,
excluding PPP loans (1)(2)
4.98
%
4.53
%
4.65
%
4.78
%
5.00
%
4.77
%
4.99
%
Yield on loans receivable,
excluding earned
fees (1)(2)
4.37
%
3.74
%
3.46
%
3.53
%
3.66
%
3.78
%
3.96
%
Yield on loans receivable,
excluding earned fees on
all loans and interest on PPP
loans, as adjusted (1)(2)
4.78
%
4.36
%
4.42
%
4.52
%
4.65
%
4.55
%
4.80
%
Cost of funds (1)
0.14
%
0.16
%
0.20
%
0.24
%
0.29
%
0.18
%
0.40
%
Cost of deposits (1)
0.09
%
0.10
%
0.14
%
0.17
%
0.22
%
0.12
%
0.35
%
Net interest margin (1)
3.95
%
3.48
%
3.70
%
3.76
%
3.89
%
3.73
%
3.83
%
Noninterest expense to average
assets (1)
3.29
%
2.91
%
2.65
%
2.62
%
2.35
%
2.90
%
2.47
%
Efficiency ratio
54.08
%
64.68
%
58.69
%
60.85
%
55.26
%
58.82
%
58.14
%
Loans receivable to deposits
73.73
%
76.71
%
92.03
%
105.68
%
108.85
%
73.73
%
108.85
%
(1) Annualized calculations shown for quarterly periods presented.
(2) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
Noninterest income was $14.2 million for the three months ended December 31, 2021, an increase of $8.1 million from $6.1 million for the three months ended September 30, 2021, and an increase of $12.2 million from $2.0 million for the three months ended December 31, 2020. The increase in noninterest income over the quarter ended September 30, 2021 was due to an increase of $9.1 million in BaaS fees - credit enhancements related to the allowance for loan losses and reserve for unfunded commitments, $913,000 in BaaS fees - fraud recovery, and an increase of $385,000 in other BaaS fees (see "Appendix B" for more information on the accounting for BaaS allowance for loan losses, reserve for unfunded commitments, credit enhancements and fraud recovery), partially offset by the absence of a $1.5 million unrealized holding gain on an equity investment that occurred during the quarter ended September 30, 2021, and a $723,000 decrease in loan referral fees. The $12.2 million increase in noninterest income over the quarter ended December 31, 2020 was primarily due to a $11.9 million increase in BaaS fees ($9.1 million related to credit enhancements, $1.2 million related to fraud recovery and $1.6 million in other BaaS fees), $224,000 more in other income primarily due to an increase of $121,000 in SBA servicing fees, partially offset by the absence of a $400,000 unrealized loss on an equity investment that occurred during the quarter ended December 31, 2020 and a $423,000 decrease in loan referral fees. Interchange income from BaaS partners for the quarter ended December 31, 2021 was $368,000, compared to $188,000 and $10,000, as of September 30, 2021 and December 31, 2020, respectively.
Our CCBX division continues to grow, and now has 28 relationships, at varying stages, as of December 31, 2021, compared to 26 CCBX relationships at September 30, 2021 and 15 CCBX relationships at December 31, 2020, respectively. As of December 31, 2021, we had 19 active CCBX relationships, one relationship in friends and family/testing, five relationships in onboarding/implementation, three signed letters of intent and we believe we have a strong pipeline of potential new CCBX relationships.
6
The following table illustrates the activity and growth in CCBX for the periods presented:
As of
December 31, 2021
September 30, 2021
December 31, 2020
Active
19
16
6
Friends and family / testing
1
-
2
Implementation / onboarding
5
7
3
Signed letters of intent
3
3
4
Total CCBX relationships
28
26
15
Total noninterest expense increased to $21.1 million for the three months ended December 31, 2021, compared to $16.1 million for the three months ended September 30, 2021 and $10.5 million for the three months ended December 31, 2020. Increase in noninterest expense for the quarter ended December 31, 2021, as compared to the quarter ended September 30, 2021, was primarily due to a $2.9 million increase in BaaS expense, $1.9 million of which is related to partner loan expense and $912,000 of which is related to partner fraud expense. Partner loan expense represents the amount paid or payable to partners for credit enhancement and servicing CCBX loans. Partner fraud expense represents non-credit fraud losses on partner's customer loan and deposit accounts. Also contributing to the increase in noninterest expense compared to September 30, 2021 is a $609,000 increase in other expenses, which includes a $293,000 higher reserve for unfunded commitment expense, a $168,000 increase in operational losses, and a $118,000 increase in donations. The increase in donations was largely due to community-based contributions. Salaries and employee benefits also increased $580,000 compared to September 30, 2021, which is related to the hiring in CCBX and additional staff for our ongoing growth initiatives. In the fourth quarter of 2021 compared to the third quarter of 2021, Federal Deposit Insurance Corporation ("FDIC") assessments increased $412,000, software license, maintenance and subscription expenses increased $166,000 and legal and professional fees increased $155,000. The increase in FDIC assessments is largely the result of an increase in deposits combined with other factors that impact the FDIC assessment calculation compared to the quarter ended September 30, 2021. The increase in software license, maintenance and subscription expenses increased as a result of implementing software that aids in the reporting of CCBX activities and monitoring of transactions that helps to automate and create other efficiencies in reporting. The increase in legal and professional expenses is associated with CCBX division expenses and higher costs associated with legal and accounting work related to financial reporting.
The increased noninterest expenses for the quarter ended December 31, 2021 compared to the quarter ended December 31, 2020 were largely due to a $4.1 million increase in salary and employee benefits related to hiring staff for CCBX and additional staff for our ongoing banking growth initiatives, an increase of $3.5 million in BaaS partner expense ($2.3 million of which is related to partner loan expense and $1.2 million of which is related to partner fraud expense), and a $854,000 increase in other expense (which includes a $318,000 increase in unfunded commitment expense, a $154,000 increase in donations, largely due to community-based contributions, and a $139,000 increase in operational losses). Also contributing to the increase in expenses compared to December 31, 2020 is a $582,000 increase in FDIC assessments, a $581,000 increase in software licenses, maintenance and subscriptions, and a $367,000 increase in legal and professional fees. The increase in FDIC assessments is largely the result of an increase in deposits combined with other factors that impact the FDIC assessment calculation compared to the quarter ended December 31, 2020. The increase in software license, maintenance and subscription expenses increased as a result of implementing software that aids in the reporting of CCBX activities and monitoring of transactions that helps to automate and create other efficiencies in reporting. The increase in legal and professional expenses is associated with CCBX division expenses and higher costs associated with legal and accounting work related to financial reporting.
The provision for income taxes was $1.7 million for the three months ended December 31, 2021, $1.9 million for the three months ended September 30, 2021 and $1.2 million for the fourth quarter of 2020. The Company is subject to various state taxes that are assessed as CCBX activities 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 0.9% for calculating the provision for state taxes.
7
Financial Condition
Total assets increased $183.9 million, or 7.5%, to $2.64 billion at December 31, 2021 compared to $2.45 billion at September 30, 2021. Interest earning deposits with other banks increased $160.7 million, primarily a result of increased CCBX deposits during the quarter ended December 31, 2021. Loans receivable increased $37.1 million even after experiencing $155.5 million in PPP loan forgiveness and paydowns during the quarter ended December 31, 2021. Total assets increased $869.4 million, or 49.2%, at December 31, 2021, compared to $1.77 billion at December 31, 2020. Interest earning deposits with other banks including the Federal Reserve increased $654.5 million primarily from increased deposits, and loans receivable increased $195.6 million, compared to December 31, 2020.
Total loans receivable increased $37.1 million to $1.74 billion at December 31, 2021, from $1.71 billion at September 30, 2021, and increased $195.6 million from $1.55 billion at December 31, 2020. The increase in loans receivable over the quarter ended September 30, 2021 was the result of $186.8 million in non-PPP loan growth partially offset by $155.5 million in PPP loan forgiveness and paydowns. The $186.8 million increase in non-PPP loans includes CCBX loan growth of $156.5 million, and community bank loan growth of $30.3 million, excluding PPP loans, for the three months ended December 31, 2021. The Company is developing two segments, both of which are included in the Bank: CCBX and the community bank. The CCBX segment includes our BaaS activities and the community bank segment includes all other banking activities. CCBX loans totaled $346.6 million at December 31, 2021 compared to $190.1 million at September 30, 2021 and $65.6 million at December 31, 2020. Total loans receivable as of December 31, 2021 is net of $8.8 million in net deferred origination fees, $3.6 million of which is attributed to PPP loans. Deferred fees on PPP loans are earned over the life of the loan. Loans that were originated in 2020 are primarily two year loans with some being 5 year loans with $4.3 million of these loans remaining as of December 31, 2021, and all PPP loans originated in 2021 have five year maturities, with $107.5 million of these loans remaining as of December 31, 2021. Along with an increase in loans receivable as of December 31, 2021 compared to September 30, 2021, unused commitments also increased during the same period, with the unused commitments on capital call lines increasing $68.6 million to $416.0 million at December 31, 2021 compared to $347.4 million at September 30, 2021, which should translate into future loan growth as the commitments are utilized. The increase in loans receivable over the quarter ended December 31, 2020 includes growth of $449.2 million in non-PPP loans, partially offset by a $254.0 million decrease in PPP loans as of December 31, 2021. Non-PPP loan growth consists of $137.3 million in capital call lines, $60.7 million in commercial real estate loans, $89.2 million in construction, land and land development loans, $60.5 million in residential real estate loans, and a decrease of $3.4 million in other commercial and industrial loans. Consumer loans increased $91.7 million over the quarter ended September 30, 2021 and $105.0 million over the quarter ended December 31, 2020, primarily due to growth in CCBX.
8
The following table summarizes the loan portfolio at the periods indicated.
As of
December 31, 2021
September 30, 2021
December 31, 2020
(Dollars in thousands; unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Commercial and industrial loans:
PPP loans
$
111,813
6.4
%
$
267,278
15.5
%
$
365,842
23.5
%
Capital call lines
202,882
11.5
161,457
9.4
65,559
4.2
All other commercial &
industrial loans
104,365
6.0
108,120
6.3
107,799
6.9
Real estate loans:
Construction, land and
land development loans
183,594
10.5
158,710
9.2
94,423
6.1
Residential real estate loans
204,389
11.7
170,167
9.9
143,869
9.2
Commercial real estate loans
835,587
47.7
837,342
48.7
774,925
49.8
Consumer and other loans
108,871
6.2
17,140
1.0
3,916
0.3
Gross loans receivable
1,751,501
100.0
%
1,720,214
100.0
%
1,556,333
100.0
%
Net deferred origination fees -
PPP loans
(3,633
)
(9,417
)
(5,803
)
Net deferred origination fees -
Other loans
(5,133
)
(5,115
)
(3,392
)
Loans receivable
$
1,742,735
$
1,705,682
$
1,547,138
Please see Appendix A for additional loan portfolio detail regarding industry concentrations.
The following table details the CCBX loans which are included in the total loan portfolio table above.
As of
December 31, 2021
September 30, 2021
December 31, 2020
(Dollars in thousands; unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Commercial and industrial loans:
Capital call lines
$
202,882
58.6
%
$
161,457
84.9
%
$
65,559
99.9
%
Real estate loans:
Residential real estate loans
36,887
10.6
14,039
7.4
$
-
0.0
%
Consumer and other loans:
Credit cards
11,429
3.3
1,711
0.9
9
0.0
Other consumer and other loans
95,408
27.5
12,937
6.8
58
0.1
Gross CCBX loans receivable
346,606
100.0
%
190,144
100.0
%
65,626
100.0
%
Total deposits increased $140.2 million, or 6.3%, to $2.36 billion at December 31, 2021 from $2.22 billion at September 30, 2021. The increase was due primarily to a $101.1 million increase in core deposits, which is primarily the result of growth in CCBX partners and expanding and growing banking relationships with new customers. Deposits in our CCBX division increased $109.1 million, from $607.2 million at September 30, 2021, to $716.3 million at December 31, 2021. The deposits from our CCBX division are predominately classified as noninterest bearing, or NOW and money market accounts, but a portion of such CCBX deposits may be classified as brokered deposits as a result of the relationship agreement. Currently, the majority of CCBX deposits are noninterest bearing, however, as the Federal Reserve Open Market Committee raises interest rates, a majority of these accounts will bear interest and be reclassified to interest bearing deposits once rates exceed the minimum interest rate set in their respective program agreements and begin to earn interest. During the quarter ended December 31, 2021, noninterest bearing deposits increased $59.5 million, or 4.6%, to $1.36 billion from $1.30 billion at September 30, 2021. Included in the increase in noninterest bearing deposits is an increase in CCBX division deposits of $62.7million for the quarter ended December 31, 2021. In the fourth quarter of 2021 compared to the third quarter of 2021, NOW and money market accounts increased $33.9 million, and savings accounts increased $7.8 million. BaaS-brokered
9
deposits increased $42.4 million, or 149.2%,while time deposits decreased $3.2 million, or 6.9%in the fourth quarter of 2021 compared to the third quarter of 2021.
Total deposits increased $942.5 million, or 66.3%, to $2.36 billion at December 31, 2021 compared to $1.42 billion at December 31, 2020. Noninterest bearing deposits increased $763.6 million, or 128.9%, to $1.36 billion at December 31, 2021 from $592.3 million at December 31, 2020. NOW and money market accounts increased $131.4 million, or 20.0%, to $789.7 million at December 31, 2021, and savings accounts increased $26.3 million, or 33.9%, and BaaS-brokered deposits increased $37.3 million, or 111.3% while time deposits decreased $16.2 million, or 27.1%, in the fourth quarter of 2021 compared to the fourth quarter of 2020. The overall increase in deposits was achieved despite a decrease of $25.6 million in total deposits due to the sale of our Freeland branch which included deposits as compared to December 31, 2020 deposits which included Freeland branch deposits. Additionally, as of December 31, 2021 we have access to $252.4 million in CCBX customer deposits that are currently being transferred off the Bank's balance sheet to other financial institutions on a daily basis. The Bank could retain these deposits for liquidity and funding purposes if needed. If a portion of these deposits are retained, they would be classified as brokered deposits, however if the entire available balance is retained, they would be non-brokered deposits. 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 at the periods indicated.
As of
December 31, 2021
September 30, 2021
December 31, 2020
(Dollars in thousands, unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Demand, noninterest bearing
$
1,355,908
57.4
%
$
1,296,443
58.3
%
$
592,261
41.7
%
NOW and money market
789,709
33.4
755,810
34.0
658,323
46.3
Savings
103,956
4.4
96,192
4.3
77,611
5.4
Total core deposits
2,249,573
95.2
2,148,445
96.6
1,328,195
93.4
BaaS-brokered deposits
70,757
3.0
28,396
1.3
33,482
2.4
Time deposits less than $250,000
31,057
1.3
32,937
1.5
41,145
2.9
Time deposits $250,000 and over
12,400
0.5
13,762
0.6
18,485
1.3
Total deposits
$
2,363,787
100.0
%
$
2,223,540
100.0
%
$
1,421,307
100.0
%
The following table details the CCBX deposits which are included in the total deposit portfolio table above.
As of
December 31, 2021
September 30, 2021
December 31, 2020
(Dollars in thousands, unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Demand, noninterest bearing
$
636,675
88.9
%
$
573,985
94.5
%
$
30,144
43.9
%
Interest bearing
8,827
1.2
4,837
0.8
5,062
7.4
Total core deposits
645,502
90.1
578,822
95.3
35,206
51.3
BaaS-brokered deposits
70,756
9.9
28,395
4.7
33,481
48.7
Total CCBX deposits
$
716,258
100.0
%
$
607,217
100.0
%
$
68,687
100.0
%
The Federal Home Loan Bank ("FHLB") allows us to borrow against our line of credit, which is collateralized by certain loans. As of December 31, 2021, we borrowed a total of $25.0 million in FHLB term advances. This includes a $10.0 million advance that matures in March of 2023 and $15.0 million advance that matures in March 2025. These advances provide an alternative and stable source of funding for loan demand. Although there are no immediate plans to borrow additional funds, additional FHLB borrowing capacity of $76.3 million was available under this arrangement as of December 31, 2021.
During the quarter ended December 31, 2021, the Company completed a public offering of 851,853 shares of its common stock at a price to the public of $40.50 per share. Gross proceeds from the offering of $34.5 million, before deducting underwriting discounts and offering expenses, will be used for general corporate purposes, including, without limitation, to
10
support investment opportunities and the Bank's growth. A total of $15.0 million of those proceeds was contributed to the Bank, and the balance of the amount was retained in cash at the Company level.
Total shareholders' equity increased $40.1 million since September 30, 2021. The increase in shareholders' equity was primarily due to proceeds from the public offering described above and $7.3 million in net earnings for the three months ended December 31, 2021.
Capital Ratios
The Company and the Bank remain well capitalized at December 31, 2021, as summarized in the following table.
Capital Ratios:
Coastal Community Bank
Coastal Financial Corporation
Financial Institution Basel III Regulatory Guidelines
(unaudited)
Tier 1 leverage capital
7.96
%
8.07
%
5.00
%
Adjusted Tier 1 leverage capital ratio, excluding PPP loans (1)
8.60
%
8.70
%
5.00
%
Common Equity Tier 1 risk-based capital
11.12
%
11.06
%
6.50
%
Tier 1 risk-based capital
11.12
%
11.26
%
8.00
%
Total risk-based capital
12.38
%
13.89
%
10.00
%
(1) A reconciliation of the non-GAAP measure is set forth at the end of this earnings release.
Asset Quality
The total allowance for loan losses was $28.6 million and 1.64% of loans receivable at December 31, 2021 compared to $20.2 million and 1.19% at September 30, 2021 and $19.3 million and 1.25% at December 31, 2020. The allowance for loan loss allocated to the CCBX portfolio was $8.0 million and 2.30% of CCBX loan receivable at December 31, 2021, with $20.7 million of allowance for loan loss allocated to the community bank or 1.48% of total community bank loans receivable. At December 31, 2021, there was $111.8 million in PPP loans, which are 100% guaranteed by the SBA. Adjusted allowance for loan losses to loans receivable, excluding PPP loans* was 1.75% for the quarter ended December 31, 2021.
The following table details the allocation of the allowance for loan loss as of the period indicated:
As of
December 31, 2021
(Dollars in thousands)
Community Bank
CCBX
Total
Loans receivable
$
1,396,061
$
346,674
$
1,742,735
Allowance for loan losses
(20,670
)
(7,962
)
(28,632
)
Allowance for loan losses to total loans receivable
1.48
%
2.30
%
1.64
%
* A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
Provision for loan losses totaled $8.9 million for the three months ended December 31, 2021, $255,000 for the three months ended September 30, 2021, and $2.6 million for the three months ended December 31, 2020. Net charge-offs totaled $532,000 for the quarter ended December 31, 2021, compared to net recoveries of $1,000 for the quarter ended September 30, 2021 and net charge-offs of $384,000 for the quarter ended December 31, 2020.
11
The following table details net charge-offs for the core bank and CCBX for the period indicated:
Three Months Ended
December 31, 2021
(Dollars in thousands)
Community Bank
CCBX
Total
Gross charge-offs
$
215
$
364
$
579
Gross recoveries
(47
)
-
(47
)
Net charge-offs
$
168
$
364
$
532
The increase in the Company's provision for loan losses during the quarter ended December 31, 2021, is largely related to the provision for CCBX partner loans. Beginning with and during the quarter ended December 31, 2021, a $8.3 million provision for loan losses was recorded for CCBX partner loans based on management's analysis. The factors used in management's analysis for community bank loan losses indicated that a provision for loan losses of $243,000 and $255,000 was needed for the quarters ended December 31, 2021 and September 30, 2021, respectively. The economic environment is continuously changing and has shown some signs of improvement, with the United States implementing stimulus packages, ongoing vaccination of its population and increased re-opening of economic activities, tempered by increased inflation, and a rise in new COVID-19 variants that have resulted in some economic uncertainty. The Company is not required to implement the provisions of the Current Expected Credit Loss accounting standard until January 1, 2023 and continues to account for the allowance for credit losses under the incurred loss model.
The following table details the provision expense for the community bank and CCBX for the period indicated:
Three Months Ended
(Dollars in thousands)
December 31, 2021
Community bank
$
243
CCBX
8,699
Total provision expense
$
8,942
At December 31, 2021, our nonperforming assets were $1.7 million, or 0.07% of total assets, compared to $740,000, or 0.03%, of total assets, at September 30, 2021, and $712,000, or 0.04% of total assets, at December 31, 2020. Nonperforming assets increased $987,000 during the quarter ended December 31, 2021, compared to the quarter ended September 30, 2021, due to an increase of $1.4 million in CCBX loans that are past due 90 days or more and still accruing interest partially offset by a decrease of $396,000 in nonaccrual loans. There were no repossessed assets or other real estate owned at December 31, 2021. Our nonperforming loans to loans receivable ratio was 0.10% at December 31, 2021, compared to 0.04% at September 30, 2021, and 0.05% at December 31, 2020.
For the quarter ended December 31, 2021, we have not seen a significant change in our credit quality metrics, as demonstrated by the low level of community bank charge-offs and nonperforming loans. The long-term economic impact of the COVID-19 pandemic, political gridlock, and trade issues remains unknown; however, the Company remains diligent in its efforts to communicate and proactively work with borrowers to help mitigate potential credit deterioration. For the quarter ended December 31, 2021 $364,000 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 loan losses. Agreements with our CCBX loan partners provide for a credit enhancement against losses.
12
The following table details the Company's nonperforming assets for the periods indicated.
As of
December 31,
September 30,
December 31,
(Dollars in thousands, unaudited)
2021
2021
2020
Nonaccrual loans:
Commercial and industrial loans
$
166
$
561
$
537
Real estate:
Construction, land and land development
-
-
-
Residential real estate
55
56
175
Commercial real estate
-
-
-
Total nonaccrual loans
221
617
712
Accruing loans past due 90 days or more:
Total accruing loans past due 90 days or more
1,506
123
-
Total nonperforming loans
1,727
740
712
Other real estate owned
-
-
-
Repossessed assets
-
-
-
Total nonperforming assets
$
1,727
$
740
$
712
Troubled debt restructurings, accruing
-
-
-
Total nonperforming loans to loans receivable
0.10
%
0.04
%
0.05
%
Total nonperforming assets to total assets
0.07
%
0.03
%
0.04
%
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 $2.64 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 and digital financial service providers through its CCBX Division. To learn more about Coastal visit www.coastalbank.com.
Contact
Eric Sprink, President & Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management's expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believes," "can," "could," "may," "predicts," "potential," "should," "will," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "intends" and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of or reference to forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the risks and uncertainties discussed under "Risk Factors" in our Annual Report on Form 10-K for the most recent period filed, 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.
13
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.
14
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
ASSETS
December 31,
September 30,
December 31,
2021
2021
2020
Cash and due from banks
$
14,496
$
31,722
$
18,965
Interest earning deposits with other banks
798,665
638,003
144,152
Investment securities, available for sale, at fair value
35,327
32,838
20,399
Investment securities, held to maturity, at amortized cost
1,296
2,086
2,848
Other investments
8,478
8,349
6,059
Loans receivable
1,742,735
1,705,682
1,547,138
Allowance for loan losses
(28,632
)
(20,222
)
(19,262
)
Total loans receivable, net
1,714,103
1,685,460
1,527,876
Premises and equipment, net
17,219
17,231
17,108
Operating lease right-of-use assets
6,105
6,372
7,120
Accrued interest receivable
8,105
7,549
8,616
Bank-owned life insurance, net
12,254
12,166
7,082
Deferred tax asset, net
6,818
3,807
3,799
Other assets
12,651
5,985
2,098
Total assets
$
2,635,517
$
2,451,568
$
1,766,122
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
$
2,363,787
$
2,223,540
$
1,421,307
Federal Home Loan Bank advances
24,999
24,999
24,999
Paycheck Protection Program Liquidity Facility
-
-
153,716
Subordinated debt, net
24,288
24,269
9,993
Junior subordinated debentures, net
3,586
3,586
3,584
Deferred compensation
744
774
863
Accrued interest payable
357
147
531
Operating lease liabilities
6,320
6,583
7,323
Other liabilities
10,214
6,584
3,589
Total liabilities
2,434,295
2,290,482
1,625,905
SHAREHOLDERS' EQUITY
Common stock
121,845
88,997
87,815
Retained earnings
79,373
72,083
52,368
Accumulated other comprehensive income, net of tax
4
6
34
Total shareholders' equity
201,222
161,086
140,217
Total liabilities and shareholders' equity
$
2,635,517
$
2,451,568
$
1,766,122
15
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
Three Months Ended
December 31,
September 30,
December 31,
2021
2021
2020
INTEREST AND DIVIDEND INCOME
Interest and fees on loans
$
25,134
$
19,383
$
17,885
Interest on interest earning deposits with other banks
294
170
76
Interest on investment securities
3
24
31
Dividends on other investments
115
31
106
Total interest and dividend income
25,546
19,608
18,098
INTEREST EXPENSE
Interest on deposits
516
523
758
Interest on borrowed funds
327
278
407
Total interest expense
843
801
1,165
Net interest income
24,703
18,807
16,933
PROVISION FOR LOAN LOSSES
8,942
255
2,600
Net interest income after provision for loan losses
15,761
18,552
14,333
NONINTEREST INCOME
BaaS fees
12,649
2,286
735
Unrealized holding (loss) gain on equity securities, net
(3
)
1,472
(400
)
Deposit service charges and fees
930
956
867
Loan referral fees
-
723
423
Gain on sales of loans, net
29
206
35
Mortgage broker fees
218
187
216
Other income
397
302
173
Total noninterest income
14,220
6,132
2,049
NONINTEREST EXPENSE
Salaries and employee benefits
10,541
9,961
6,433
Occupancy
1,043
1,037
1,026
Software licenses, maintenance and subscriptions
983
817
402
Legal and professional fees
951
796
584
Data processing
767
761
599
BaaS expense
3,577
715
103
Excise taxes
435
407
301
Federal Deposit Insurance Corporation assessments
812
400
230
Director and staff expenses
393
274
187
Marketing
107
130
37
Other expense
1,441
832
587
Total noninterest expense
21,050
16,130
10,489
Income before provision for income taxes
8,931
8,554
5,893
PROVISION FOR INCOME TAXES
1,641
1,870
1,232
NET INCOME
$
7,290
$
6,684
$
4,661
Basic earnings per common share
$
0.60
$
0.56
$
0.39
Diluted earnings per common share
$
0.57
$
0.54
$
0.38
Weighted average number of common shares outstanding:
Basic
12,144,452
11,999,899
11,936,289
Diluted
12,701,464
12,456,674
12,280,191
16
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
Year ended
December 31,
December 31,
2021
2020
INTEREST AND DIVIDEND INCOME
Interest and fees on loans
$
82,112
$
61,910
Interest on interest earning deposits with other banks
608
663
Interest on investment securities
79
230
Dividends on other investments
284
235
Total interest and dividend income
83,083
63,038
INTEREST EXPENSE
Interest on deposits
2,327
4,288
Interest on borrowed funds
1,319
1,364
Total interest expense
3,646
5,652
Net interest income
79,437
57,386
PROVISION FOR LOAN LOSSES
9,915
8,308
Net interest income after provision for loan losses
69,522
49,078
NONINTEREST INCOME
BaaS fees
17,307
2,365
Unrealized holding gain (loss) on equity securities, net
1,469
(400
)
Deposit service charges and fees
3,698
3,091
Loan referral fees
2,126
1,726
Gain on sales of loans, net
396
82
Mortgage broker fees
920
655
Gain on sale of branch
1,263
-
Other
939
663
Total noninterest income
28,118
8,182
NONINTEREST EXPENSE
Salaries and employee benefits
37,101
23,302
Occupancy
4,128
3,977
Software licenses, maintenance and subscriptions
2,827
1,320
Legal and professional fees
3,133
1,762
Data processing
2,959
2,348
BaaS expense
4,481
294
Excise taxes
1,589
1,057
Federal Deposit Insurance Corporation assessments
1,632
522
Director and staff expenses
1,205
800
Marketing
451
317
Other
3,757
2,420
Total noninterest expense
63,263
38,119
Income before provision for income taxes
34,377
19,141
PROVISION FOR INCOME TAXES
7,372
3,995
NET INCOME
$
27,005
$
15,146
Basic earnings per common share
$
2.25
$
1.27
Diluted earnings per common share
$
2.16
$
1.24
Weighted average number of common shares outstanding:
Basic
12,022,954
11,920,735
Diluted
12,521,426
12,209,371
17
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY
(Dollars in thousands; unaudited)
December 31, 2021
September 30, 2021
December 31, 2020
Average
Interest &
Yield /
Average
Interest &
Yield /
Average
Interest &
Yield /
Balance
Dividends
Cost (4)
Balance
Dividends
Cost (4)
Balance
Dividends
Cost (4)
Assets
Interest earning assets:
Interest earning deposits
$
751,805
$
294
0.16
%
$
419,715
$
170
0.16
%
$
166,744
$
76
0.18
%
Investment securities (1)
37,024
3
0.03
33,788
24
0.28
23,730
31
0.52
Other investments
8,411
115
5.42
6,859
31
1.79
6,124
106
6.89
Loans receivable (2)
1,683,310
25,134
5.92
1,681,069
19,383
4.57
1,533,533
17,885
4.64
Total interest earning assets
2,480,550
25,546
4.09
2,141,431
19,608
3.63
1,730,131
18,098
4.16
Noninterest earning assets:
Allowance for loan losses
(20,242
)
(20,102
)
(17,767
)
Other noninterest earning assets
76,343
77,221
62,359
Total assets
$
2,536,651
$
2,198,550
$
1,774,723
Liabilities and Shareholders' Equity
Interest bearing liabilities:
Interest bearing deposits
$
962,128
$
516
0.21
%
$
919,792
$
523
0.23
%
$
808,351
$
758
0.37
%
Subordinated debt, net
24,276
234
3.82
17,073
185
4.30
9,991
148
5.89
Junior subordinated debentures, net
3,586
21
2.32
3,586
21
2.32
3,584
22
2.44
PPPLF borrowings
-
-
0.00
-
-
0.00
188,222
166
0.35
FHLB advances and other borrowings
25,000
72
1.14
24,999
72
1.14
25,001
71
1.13
Total interest bearing liabilities
1,014,990
843
0.33
965,450
801
0.33
1,035,149
1,165
0.45
Noninterest bearing deposits
1,336,161
1,061,311
588,764
Other liabilities
13,308
13,705
11,968
Total shareholders' equity
172,192
158,084
138,842
Total liabilities and
shareholders' equity
$
2,536,651
$
2,198,550
$
1,774,723
Net interest income
$
24,703
$
18,807
$
16,933
Interest rate spread
3.76
%
3.30
%
3.71
%
Net interest margin (3)
3.95
%
3.48
%
3.89
%
(1) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted
for amortization of premiums and accretion of discounts.
(2) Includes nonaccrual loans.
(3) Net interest margin represents net interest income divided by the average total interest earning assets.
(4) Yields and costs are annualized.
18
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES - YEAR-TO-DATE
(Dollars in thousands; unaudited)
For the Year Ended
December 31, 2021
December 31, 2020
Average
Interest &
Yield /
Average
Interest &
Yield /
Balance
Dividends
Cost
Balance
Dividends
Cost
Assets
Interest earning assets:
Interest earning deposits
$
402,081
$
608
0.15
%
$
133,951
$
663
0.49
%
Investment securities (1)
30,045
79
0.26
24,120
230
0.95
Other Investments
7,052
284
4.03
5,608
235
4.19
Loans receivable (2)
1,688,925
82,112
4.86
1,333,028
61,910
4.64
Total interest earning assets
2,128,103
83,083
3.90
$
1,496,707
$
63,038
4.21
Noninterest earning assets:
Allowance for loan losses
(19,870
)
(14,686
)
Other noninterest earning assets
74,088
58,970
Total assets
$
2,182,321
$
1,540,991
Liabilities and Shareholders' Equity
Interest bearing liabilities:
Interest bearing deposits
$
910,106
$
2,327
0.26
%
$
724,279
$
4,288
0.59
%
Subordinated debt, net
15,379
711
4.62
9,986
589
5.90
Junior subordinated debentures, net
3,585
84
2.34
3,584
105
2.93
PPPLF borrowings
68,699
240
0.35
124,068
435
0.35
FHLB advances and other borrowings
24,999
284
1.14
20,736
235
1.13
Total interest bearing liabilities
1,022,768
3,646
0.36
$
882,653
$
5,652
0.64
Noninterest bearing deposits
989,945
513,550
Other liabilities
12,926
12,445
Total shareholders' equity
156,682
132,343
Total liabilities and
shareholders' equity
$
2,182,321
$
1,540,991
Net interest income
$
79,437
$
57,386
Interest rate spread
3.54
%
3.57
%
Net interest margin (3)
3.73
%
3.83
%
(1) For presentation in this table, average balances and the corresponding average rates for investment securities
are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes nonaccrual loans.
(3) Net interest margin represents net interest income divided by the average total interest earning assets.
19
COASTAL FINANCIAL CORPORATION
QUARTERLY STATISTICS
(Dollars in thousands, except share and per share data; unaudited)
Three Months Ended
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Income Statement Data:
Interest and dividend income
$
25,546
$
19,608
$
19,571
$
18,358
$
18,098
Interest expense
843
801
959
1,043
1,165
Net interest income
24,703
18,807
18,612
17,315
16,933
Provision for loan losses
8,942
255
361
357
2,600
Net interest income after
provision for loan losses
15,761
18,552
18,251
16,958
14,333
Noninterest income
14,220
6,132
4,782
2,984
2,049
Noninterest expense
21,050
16,130
13,731
12,352
10,489
Provision for income tax
1,641
1,870
2,289
1,572
1,232
Net income
7,290
6,684
7,013
6,018
4,661
As of and for the Three Month Period
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Balance Sheet Data:
Cash and cash equivalents
$
813,161
$
669,725
$
282,889
$
204,314
$
163,117
Investment securities
36,623
34,924
27,442
22,893
23,247
Loans receivable
1,742,735
1,705,682
1,658,149
1,766,723
1,547,138
Allowance for loan losses
(28,632
)
(20,222
)
(19,966
)
(19,610
)
(19,262
)
Total assets
2,635,517
2,451,568
2,007,138
2,029,359
1,766,122
Interest bearing deposits
1,007,879
927,097
913,782
903,025
829,046
Noninterest bearing deposits
1,355,908
1,296,443
887,896
768,690
592,261
Core deposits (1)
2,249,573
2,148,445
1,724,134
1,590,850
1,328,195
Total deposits
2,363,787
2,223,540
1,801,678
1,671,715
1,421,307
Total borrowings
52,873
52,854
38,584
197,099
192,292
Total shareholders' equity
201,222
161,086
154,100
146,739
140,217
Share and Per Share Data (2):
Earnings per share - basic
$
0.60
$
0.56
$
0.59
$
0.50
$
0.39
Earnings per share - diluted
$
0.57
$
0.54
$
0.56
$
0.49
$
0.38
Dividends per share
-
-
-
-
-
Book value per share (3)
$
15.63
$
13.41
$
12.83
$
12.24
$
11.73
Tangible book value per share (4)
$
15.63
$
13.41
$
12.83
$
12.24
$
11.73
Weighted avg outstanding shares - basic
12,144,452
11,999,899
11,984,927
11,960,772
11,936,289
Weighted avg outstanding shares - diluted
12,701,464
12,456,674
12,459,467
12,393,493
12,280,191
Shares outstanding at end of period
12,875,315
12,012,107
12,007,669
11,988,636
11,954,327
Stock options outstanding at end of period
694,519
710,182
714,620
728,492
749,397
See footnotes on following page
20
As of and for the Three Month Period
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Credit Quality Data:
Nonperforming assets (5) to total assets
0.07
%
0.03
%
0.03
%
0.03
%
0.04
%
Nonperforming assets (5) to loans receivable and OREO
0.10
%
0.04
%
0.04
%
0.04
%
0.05
%
Nonperforming loans (5) to total loans receivable
0.10
%
0.04
%
0.04
%
0.04
%
0.05
%
Allowance for loan losses to nonperforming loans
1657.9
%
2732.7
%
3081.2
%
2966.7
%
2705.3
%
Allowance for loan losses to total loans receivable
1.64
%
1.19
%
1.20
%
1.11
%
1.25
%
Allowance for loan losses to loans receivable, as adjusted (6)
1.75
%
1.40
%
1.57
%
1.59
%
1.62
%
Gross charge-offs
$
579
$
31
$
12
$
18
$
386
Gross recoveries
$
47
$
32
$
7
$
9
$
2
Net charge-offs to average loans (7)
0.13
%
0.00
%
0.00
%
0.00
%
0.10
%
Capital Ratios (8):
Tier 1 leverage capital
8.07
%
7.48
%
8.00
%
8.62
%
9.05
%
Common equity Tier 1 risk-based capital
11.06
%
9.94
%
10.92
%
10.89
%
11.27
%
Tier 1 risk-based capital
11.26
%
10.15
%
11.16
%
11.15
%
11.55
%
Total risk-based capital
13.89
%
12.95
%
13.12
%
13.15
%
13.61
%
(1) Core deposits are defined as all deposits excluding brokered and all time deposits.
(2) Share and per share amounts are based on total common shares outstanding.
(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) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
(7) Annualized calculations.
(8) Capital ratios are for the Company, Coastal Financial Corporation.
21
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, BaaS fraud recovery and reimbursement of expenses on revenue.
Revenue excluding BaaS credit enhancements, BaaS fraud recovery and reimbursement of expenses is a non-GAAP measure that excludes the impact of BaaS credit enhancements, BaaS fraud recovery and reimbursement of expenses 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
Years Ended
(Dollars in thousands, unaudited)
December31,
2021
September 30,
2021
December31,
2020
December31,
2021
December31,
2020
Revenue excluding BaaS credit enhancements, BaaS fraud recovery and reimbursement of expenses:
Total net interest income
$
24,703
$
18,807
$
16,933
$
79,437
$
57,386
Total noninterest income
14,220
6,132
2,049
28,118
8,182
Total Revenue
$
38,923
$
24,939
$
18,982
$
107,555
$
65,568
Less: BaaS credit enhancements
(9,076
)
(10
)
-
(9,086
)
-
Less: Baas fraud recovery
(1,209
)
(296
)
-
(1,505
)
-
Less: Reimbursement of expenses
(295
)
(333
)
(158
)
(1,004
)
(593
)
Total revenue excluding BaaS credit
enhancements, BaaS fraud
recovery and reimbursement of
expenses
$
28,343
$
24,300
$
18,824
$
95,960
$
64,975
22
The following non-GAAP measure is presented to illustrate the impact of loan fees on contractual loan yield.
Yield on loans receivable, excluding earned fees is a non-GAAP measure that excludes the impact of earned loan fees on the contractual interest rate yield. The most directly comparable GAAP measure is yield on loans.
Reconciliations of the GAAP and non-GAAP measures are presented below.
As of and for the Three Months Ended
As of and for the
Years Ended
(Dollars in thousands, unaudited)
December 31,
2021
September 30,
2021
June 30,
2021
March31,
2021
December31,
2020
December31,
2021
December31,
2020
Yield on loans receivable, excluding earned fees :
Total average loans
receivable
$
1,683,310
$
1,681,069
$
1,750,825
$
1,640,108
$
1,533,533
$
1,688,925
$
1,333,028
Interest and earned fee
income on loans
25,134
19,383
19,365
18,230
17,885
82,112
61,910
Less: earned fee income on
all loans
(6,572
)
(3,533
)
(4,274
)
(3,974
)
(3,765
)
(18,354
)
(9,065
)
Adjusted interest income
on loans
$
18,562
$
15,850
$
15,091
$
14,256
$
14,120
$
63,758
$
52,845
Yield on loans receivable
5.92
%
4.57
%
4.44
%
4.51
%
4.64
%
4.86
%
4.64
%
Yield on loans
receivable, excluding
earned fees:
4.37
%
3.74
%
3.46
%
3.53
%
3.66
%
3.78
%
3.96
%
Yield on loans
receivable, excluding
earned fees on all loans
and interest on PPP
loans (1):
4.78
%
4.36
%
4.42
%
4.52
%
4.65
%
4.56
%
4.80
%
(1) Non-GAAP measure - see next table of "Non-GAAP Financial Measures" for more information.
The following non-GAAP financial measures are presented to illustrate and identify the impact of PPP loans on loans receivable related measures. By removing these items and showing what the results would have been without them, we are providing investors with the information to better compare results with periods that did not have these items. These measures include the following:
Adjusted allowance for loan losses to loans receivable is a non-GAAP measure that excludes the impact of PPP loans on balance sheet. The most directly comparable GAAP measure is allowance for loan losses to loans receivable.
Yield on loans receivable, excluding PPP loans is a non-GAAP measure that excludes the impact of PPP loans on balance sheet and income statement. The most directly comparable GAAP measure is yield on loans.
Yield on loans receivable, excluding earned fees on all loans and interest on PPP loans is a non-GAAP measure that excludes the impact of earned fees and PPP loans on the balance sheet and income statement. The most directly comparable GAAP measure is yield on loans.
Adjusted Tier 1 leverage capital ratio, excluding PPP loans is a non-GAAP measure that excludes the impact of PPP loans on balance sheet. The most directly comparable GAAP measure is Tier 1 leverage capital ratio.
23
Reconciliations of the GAAP and non-GAAP measures are presented below.
As of and for the Three Months Ended
As of and for the Year Ended
(Dollars in thousands, unaudited)
December
31,
2021
September
30,
2021
December
31,
2020
December
31,
2021
December
31,
2020
Adjusted allowance for loan losses to loans receivable, excluding PPP loans:
Total loans, net of deferred fees
$
1,742,735
$
1,705,682
$
1,547,138
$
1,742,735
$
1,547,138
Less: PPP loans
(111,813
)
(267,278
)
(365,842
)
(111,813
)
(365,842
)
Less: net deferred fees on
PPP loans
3,633
9,417
5,803
3,633
5,803
Adjusted loans, net of
deferred fees
$
1,634,554
$
1,447,821
$
1,187,099
$
1,634,554
$
1,187,099
Allowance for loan losses
$
(28,632
)
$
(20,222
)
$
(19,262
)
$
(28,632
)
$
(19,262
)
Allowance for loan losses to
loans receivable
1.64
%
1.19
%
1.25
%
1.64
%
1.25
%
Adjusted allowance for loan
losses to loans receivable,
excluding PPP loans
1.75
%
1.40
%
1.62
%
1.75
%
1.62
%
Yield on loans receivable, excluding PPP loans:
Total average loans receivable
$
1,683,310
$
1,681,069
$
1,533,533
$
1,688,925
$
1,333,028
Less: average PPP loans
(186,267
)
(322,595
)
(424,290
)
(372,842
)
(302,685
)
Plus: average deferred fees on
PPP loans
6,370
11,639
7,385
4,306
6,432
Adjusted total average loans
receivable
$
1,503,413
$
1,370,113
$
1,116,628
$
1,320,389
$
1,036,775
Interest income on loans
$
25,134
$
19,383
$
17,885
$
82,112
$
61,910
Less: interest and deferred fee
income recognized on
PPP loans
(6,245
)
(3,744
)
(3,847
)
(19,188
)
(10,172
)
Adjusted interest income on loans
$
18,889
$
15,639
$
14,038
$
62,924
$
51,738
Yield on loans receivable
5.92
%
4.57
%
4.64
%
4.86
%
4.64
%
Yield on loans receivable,
excluding PPP loans:
4.98
%
4.53
%
5.00
%
4.77
%
4.99
%
Yield on loans receivable, excluding earned fees on all loans and interest on PPP loans:
Total average loans receivable
$
1,683,310
$
1,681,069
$
1,533,533
$
1,688,925
$
1,333,028
Less: average PPP loans
(186,267
)
(322,595
)
(424,290
)
(372,842
)
(302,685
)
Plus: average deferred fees on
PPP loans
$
6,370
$
11,639
$
7,385
$
4,306
$
6,432
Adjusted total average loans
receivable
$
1,503,413
$
1,370,113
$
1,116,628
$
1,320,389
$
1,036,775
Interest and earned fee income
on loans
$
25,134
$
19,383
$
17,885
$
82,112
$
61,910
Less: earned fee income on
all loans
$
(6,572
)
$
(3,533
)
$
(3,762
)
$
(18,353
)
$
(9,065
)
Less: interest income on
PPP loans
(461
)
(796
)
(1,064
)
(3,683
)
(3,030
)
Adjusted interest income on loans
$
18,101
$
15,054
$
13,059
$
60,076
$
49,815
Yield on loans receivable
5.92
%
4.57
%
4.64
%
4.86
%
4.64
%
Yield on loans receivable,
excluding earned fees on
all loans (1):
4.37
%
3.74
%
3.66
%
3.78
%
3.96
%
Yield on loans receivable,
excluding earned fees on
all loans and interest on
PPP loans:
4.78
%
4.36
%
4.65
%
4.55
%
4.80
%
(1) Non-GAAP measure - see previous table of "Non-GAAP Financial Measures" for more information.
24
(Dollars in thousands, unaudited)
As of
December 31, 2021
As of
September 30, 2021
As of
December 31, 2020
Adjusted Tier 1 leverage capital ratio, excluding PPP loans:
Company:
Tier 1 capital
$
204,585
$
164,437
$
143,532
Average assets for the leverage capital ratio
$
2,536,512
$
2,198,406
$
1,586,350
Less: Average PPP loans
(186,267
)
(322,595
)
(424,290
)
Plus: Average PPPLF borrowings
-
-
188,222
Adjusted average assets for the leverage capital ratio
$
2,350,245
$
1,875,811
$
1,350,282
Tier 1 leverage capital ratio
8.07
%
7.48
%
9.05
%
Adjusted Tier 1 leverage capital ratio, excluding PPP loans
8.70
%
8.77
%
10.63
%
Bank:
Tier 1 capital
$
201,783
$
178,857
$
147,262
Average assets for the leverage capital ratio
$
2,533,749
$
2,197,276
$
1,585,514
Less: Average PPP loans
(186,267
)
(322,595
)
(424,290
)
Plus: Average PPPLF borrowings
-
-
188,222
Adjusted average assets for the leverage capital ratio
$
2,347,482
$
1,874,681
$
1,349,446
Tier 1 leverage capital ratio
7.96
%
8.14
%
9.29
%
Adjusted Tier 1 leverage capital ratio, excluding PPP loans
8.60
%
9.54
%
10.91
%
25
APPENDIX A -
As of December 31, 2021
Industry Concentration
We have a diversified loan portfolio, representing a wide variety of industries. Three of our largest categories of our loans are commercial real estate, commercial and industrial, and construction, land and land development loans. Together they represent $1.33 billion in outstanding loan balances, or 80.9% of total gross loans outstanding, excluding PPP loans of $111.8 million. When combined with $909.6 million in unused commitments the total of these three categories is $1.97 billion, or 77.3% of total outstanding loans and loan commitments.
Commercial real estate loans represent the largest segment of our loans, comprising 51.0% of our total balance of outstanding loans, excluding PPP loans, as of December 31, 2021. Unused commitments to extend credit represents an additional $23.2 million, the combined total exposure in commercial real estate loans represents $858.8 million, or 33.8% of our total outstanding loans and loan commitments, excluding PPP loans.
The following table summarizes our exposure by industry for our commercial real estate portfolio as of December 31, 2021:
(Dollars in thousands, unaudited)
Outstanding Balance
Available Loan Commitments
Total Exposure
% of Total Loans
(Outstanding Balance & Available Commitment)
Average Loan Balance
Number of Loans
Apartments
$
155,079
$
3,827
$
158,906
6.2
%
$
2,096
74
Hotel/Motel
115,878
228
116,106
4.6
4,457
26
Office
91,370
3,623
94,993
3.7
942
97
Warehouse
76,453
4,085
80,538
3.2
1,499
51
Convenience Store
79,249
1,093
80,342
3.2
1,843
43
Mixed use
70,713
3,894
74,607
2.9
852
83
Retail
68,886
2,582
71,468
2.8
840
82
Manufacturing
36,855
600
37,455
1.5
1,152
32
Mini Storage
35,041
204
35,245
1.4
2,336
15
Groups < 1.4% of total
106,063
3,112
109,175
4.3
1,326
80
Total
$
835,587
$
23,248
$
858,835
33.8
%
$
1,433
583
26
Commercial and industrial loans comprise 18.7% of our total balance of outstanding loans, excluding PPP loans, as of December 31, 2021. Unused commitments to extend credit represents an additional $486.8 million, the combined total exposure in commercial and industrial loans represents $794.1 million, or 31.2% of our total outstanding loans and loan commitments, excluding PPP loans.
The following table summarizes our exposure by industry, excluding PPP loans, for our commercial and industrial loan portfolio as of December 31, 2021:
(Dollars in thousands, unaudited)
Outstanding Balance
Available Loan Commitments
Total Exposure
% of Total Loans
(Outstanding Balance & Available Commitment)
Average Loan Balance
Number of Loans
Capital Call Lines
$
202,882
$
415,956
$
618,838
24.3
%
$
1,649
123
Construction/Contractor
Services
16,475
33,810
50,285
2.0
102
161
Financial Institutions
20,150
-
20,150
0.8
3,358
6
Manufacturing
13,369
4,857
18,226
0.7
243
55
Medical / Dental /
Other Care
12,203
4,045
16,248
0.6
200
61
Family and Social Services
7,175
2,490
9,665
0.4
478
15
Groups < 0.40% of total
34,993
25,646
60,639
2.4
124
282
Total
$
307,247
$
486,804
$
794,051
31.2
%
$
437
703
Construction, land and land development loans comprise 11.2% of our total balance of outstanding loans, excluding PPP loans, as of December 31, 2021. Unused commitments to extend credit represents an additional $134.3 million, the combined total exposure in construction, land and land development loans represents $317.9 million, or 12.5% of our total outstanding loans and loan commitments, excluding PPP loans.
The following table details our exposure for our construction, land and land development portfolio as of December 31, 2021:
(Dollars in thousands, unaudited)
Outstanding Balance
Available Loan Commitments
Total Exposure
% of Total Loans
(Outstanding Balance & Available Commitment)
Average Loan Balance
Number of Loans
Commercial construction
$
82,816
$
100,302
$
183,118
7.2
%
$
2,958
28
Residential construction
28,865
19,638
48,503
1.9
722
40
Undeveloped land loans
37,817
3,440
41,257
1.6
2,701
14
Developed land loans
20,457
7,836
28,293
1.1
568
36
Land development
13,639
3,069
16,708
0.7
758
18
Total
$
183,594
$
134,285
$
317,879
12.5
%
$
1,350
136
27
APPENDIX B -
As of December 31, 2021
CCBX - BaaS Reporting Information
Beginning with and during the quarter ended December 31, 2021, $8.7 million was recorded in BaaS fees - credit enhancements related to the provision for loan losses and reserve for unfunded commitments for CCBX partner loans. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses. In accordance with accounting guidance, we estimate and record a provision for probable losses for these CCBX loans. When the provision for loan losses and provision for unfunded commitments is recorded, a recovery receivable is also recorded on the balance sheet through noninterest income (BaaS fees -credit enhancement). Incurred losses are recorded in the allowance for loan losses, and as the credit enhancement recoveries are received from the CCBX partner, the recovery receivable is relieved. Agreements with our CCBX partners also provide protection to the Bank from fraud by absorbing incurred fraud losses. Fraud losses are recorded when incurred as losses in noninterest expense, and the recovery received from the CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement.
The following table illustrates the impact of the of the CCBX provision for loan losses, unfunded commitments expense and fraud losses on the income statement for the period indicated:
Three Months Ended
Income Statement
December 31,
Noninterest income:
BaaS fees - credit enhancement - CCBX partner loans
$
9,076
BaaS fees - fraud recovery - CCBX partner loans
1,209
Total noninterest income:
10,285
Provision for loan losses:
Provision for loan losses - CCBX partner loans
8,699
Noninterest expense:
BaaS expense - fraud expense - CCBX partner loans
1,209
Unfunded commitment expense - CCBX partner loans
377
Total provision for loan losses and noninterest expense:
10,285
Net income statement impact
$
-
The following table illustrates the impact of the of the CCBX allowance for loan losses, reserve for unfunded commitments and recovery receivable on the balance sheet for the period indicated:
As of
(Dollars in thousands, unaudited)
December 31, 2021
Balance sheet
Assets:
Allowance for loan losses - CCBX partner loans
$
(8,335
)
Recovery receivable - CCBX partner loans
8,712
Total assets:
377
Liabilities:
Reserve for unfunded commitments - CCBX partner loans
377
Total liabilities:
377
Net balance sheet impact
$
-
For CCBX partner loans the Bank records contractual interest earned from the borrower in BaaS loan interest income, less a small loan origination cost which is paid or payable to the partner. BaaS loan expense represents the amount paid or payable to partners for credit enhancement and servicing CCBX loans.
28
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
Year Ended
December 31,
Increase
December 31,
Increase
(Dollars in thousands)
2021
2020
(Decrease)
2021
2020
(Decrease)
BaaS loan interest income
$
3,771
$
284
$
3,487
$
6,532
$
731
$
5,801
Less: BaaS loan expense
2,368
103
2,265
2,976
294
2,682
Net BaaS loan income
1,403
181
1,222
3,556
437
3,119
The following tables are a summary of the direct fees, expenses and interest components of BaaS for the periods indicated and are not inclusive of all income and expense related to BaaS.
Interest income
Three Months Ended
Year Ended
December 31,
Increase
December 31,
Increase
(Dollars in thousands)
2021
2020
(Decrease)
2021
2020
(Decrease)
Loan interest income
$
3,771
$
284
$
3,487
$
6,532
$
731
$
5,801
Total BaaS interest income
$
3,771
$
284
$
3,487
$
6,532
$
731
$
5,801
Interest expense
Three Months
Year Ended
December 31,
Increase
December 31,
Increase
(Dollars in thousands)
2021
2020
(Decrease)
2021
2020
(Decrease)
BaaS interest expense
$
34
$
23
$
11
$
99
$
178
$
(79
)
Total BaaS interest expense
$
34
$
23
$
11
$
99
$
178
$
(79
)
Noninterest income
Three Months Ended
Year Ended
December 31,
Increase
December 31,
Increase
(Dollars in thousands)
2021
2020
(Decrease)
2021
2020
(Decrease)
Program income:
Servicing and other BaaS fees
$
1,701
$
567
$
1,134
$
5,011
$
1,758
$
3,253
Interchange
368
10
358
701
14
687
Total program income
2,069
577
1,492
5,712
1,772
3,940
Reimbursements and guarantees:
Credit enhancement recovery
9,076
-
9,076
9,086
-
9,086
Fraud recovery
1,209
-
1,209
1,505
-
1,505
Reimbursement of expenses
295
158
137
1,004
593
411
Total reimbursements and guarantees
10,580
158
10,422
11,595
593
11,002
Total BaaS fees
$
12,649
$
735
$
11,914
$
17,307
$
2,365
$
14,942
Noninterest expense
Three Months Ended
Year Ended
December 31,
Increase
December 31,
Increase
(Dollars in thousands)
2021
2020
(Decrease)
2021
2020
(Decrease)
BaaS loan expense
$
2,368
$
103
$
2,265
$
2,976
$
294
$
2,682
BaaS fraud expense
1,209
-
1,209
1,505
-
1,505
Total BaaS expense
$
3,577
$
103
$
3,474
$
4,481
$
294
$
4,187
29
Disclaimer
Coastal Financial Corp. published this content on 27 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 January 2022 18:07:02 UTC.