0001564590-21-020822.txt : 20210427 0001564590-21-020822.hdr.sgml : 20210427 20210427144814 ACCESSION NUMBER: 0001564590-21-020822 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20210427 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20210427 DATE AS OF CHANGE: 20210427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COASTAL FINANCIAL CORP CENTRAL INDEX KEY: 0001437958 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 000000000 STATE OF INCORPORATION: WA FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-38589 FILM NUMBER: 21858326 BUSINESS ADDRESS: STREET 1: 2817 COLBY AVENUE CITY: EVERETT STATE: WA ZIP: 98201 BUSINESS PHONE: 425-257-1652 MAIL ADDRESS: STREET 1: 2817 COLBY AVENUE CITY: EVERETT STATE: WA ZIP: 98201 8-K 1 ck1437958-8k_20210427.htm 8-K ck1437958-8k_20210427.DOCX.htm
false 0001437958 0001437958 2021-04-27 2021-04-27

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  April 27, 2021

 

COASTAL FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Washington

001-38589

56-2392007

(State or other jurisdiction

of incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

     

5415 Evergreen Way, Everett, Washington 98203

(Address of principal executive offices, including zip code)

 

Registrant’s telephone number, including area code:  (425257-9000

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, no par value per share

 

CCB

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 

 

 

 

 

 

 

 


 

 

Item 2.02

Results of Operations and Financial Condition

 

On April 27, 2021, Coastal Financial Corporation (the “Company”) issued a press release announcing its results of operations and financial condition for the fiscal quarter ended March 31, 2021 (the “Press Release”). The Press Release is “furnished” as Exhibit 99.1 to this Current Report on Form 8-K pursuant to General Instruction B.2 of Form 8-K and the information provided in Item 2.02 of this report, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section. The information provided in Item 2.02 of this report, including Exhibit 99.1, shall not be deemed incorporated by reference into any filings the Company has made or may make under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.

 

Item 9.01   Financial Statements and Exhibits

 

Exhibits

 

NumberDescription

 

99.1Press Release, dated April 27, 2021

104Cover Page Interactive Data File (Embedded within the Inline XBRL document)

 

  


 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

COASTAL FINANCIAL CORPORATION

 

 

 

 

Date: April 27, 2021

 

By:

/s/ Joel G. Edwards

 

 

 

Joel G. Edwards

 

 

 

Executive Vice President and Chief Financial Officer

 

 

 

 

 

EX-99.1 2 ck1437958-ex991_6.htm EX-99.1 ck1437958-ex991_6.htm

Exhibit 99.1

 

COASTAL FINANCIAL CORPORATION ANNOUNCES FIRST QUARTER 2021 RESULTS

Company Release: April 27, 2021

First Quarter 2021 Highlights:

 

Net income totaled $6.0 million for the quarter ended March 31, 2021, or $0.49 per diluted common share, an increase of 29.1% from $4.7 million, or $0.38 per diluted common share, for the quarter ended December 31, 2020.

 

Basic earnings per share increased 28.2%, and diluted earnings per share increased 27.9%, for the quarter ended March 31, 2021, compared to the quarter ended December 31, 2020.

 

Total assets grew $263.2 million, or 14.9%, to $2.03 billion for the quarter ended March 31, 2021, compared to $1.77 billion at December 31, 2020.  

 

Total loans receivable, including $543.8 million in Paycheck Protection Program (“PPP”) loans, grew $219.6 million, or 14.2%, to $1.77 billion for the quarter ended March 31, 2021, compared to $1.55 billion at December 31, 2020.

 

Total deposits increased $250.4 million, or 17.6%, to $1.67 billion for the quarter ended March 31, 2021, compared to $1.42 billion at December 31, 2020.  

 

Originated $283.6 million in PPP loans in the three months ended March 31, 2021.

 

CCBX relationships increased to 21 at March 31, 2021, compared to 15 at 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 ended March 31, 2021.  Net income for the first quarter of 2021 was $6.0 million, or $0.49 per diluted common share, compared with net income of $4.7 million, or $0.38 per diluted common share, for the fourth quarter of 2020, and $2.7 million, or $0.22 per diluted common share, for the quarter ended March 31, 2020.  

“We are pleased to announce that we are ending the first quarter of 2021 with total assets of $2.03 billion, an increase of $263.2 million compared to December 31, 2020.  Loan and deposit growth was strong, with loans increasing $219.6 million and deposits increasing $250.4 million during the three months ended March 31, 2021.  Core deposits increased $262.7 million and represent 95.2% of our total deposits.  Additionally, it was recently announced that we received the Raymond James Community Bankers Cup for a second year in a row, which is a huge honor, especially looking at the challenges we faced this past year.

“As a preferred Small Business Administration (“SBA”) lender, we continued to work with the SBA to provide financial assistance to existing and new small business customers via the third round of  PPP loans as provided in the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which opened for applications on January 19, 2021.  Since that time, through March 31, 2021, we have funded $283.6 million, representing 2,368 new and existing customers, in this latest round of PPP loans, consisting of $23.6 million in new PPP applications for first draws and $260.0 million in a second draw for small businesses that previously received PPP funds.  

“We have ambitious goals and are implementing a plan that employs our three-prong strategy for success and growth.  Our community bank, CCBX division, which provides Banking as a Service (“BaaS”) and CCDB division, our digital banking division, each play an integral role in future success of our Company.  Our CCBX division continues to develop and grow, with a total of 21 CCBX relationships as of March 31, 2021, an increase of 14 relationships compared to March 31, 2020.  CCBX generates additional fee and interest income for the Company by providing BaaS enabling broker dealers and digital

1

 


financial service providers to offer their clients banking services, including loans.   CCDB, our digital banking division, is our newest division and we look forward to introducing our digital bank accounts later this year or early next year in connection with our previously announced collaboration with Google,” stated Eric Sprink, the President and CEO of the Company and the Bank.

Results of Operations

Net interest income was $17.3 million for the quarter ended March 31, 2021, an increase of $382,000, or 2.3%, from $16.9 million for the quarter ended December 31, 2020, and an increase of $6.0 million, or 52.4%, from $11.4 million for the quarter ended March 31, 2020.  The increase compared to the prior quarters ended December 31, 2020 and March 31, 2020 is largely related to increased interest income resulting from loan growth.  This loan growth included $543.8 million in PPP loans as of March 31, 2021, which contributed $3.2 million in net deferred PPP fees recognized, compared to $2.8 million for the quarter ended December 31, 2020, an increase of $425,000, or 15.3%.  There were no PPP loans as of March 31, 2020, so no deferred fee income was recognized in that quarter.  A total of $283.6 million in PPP loans were generated in the three months ended March 31, 2021 while $105.6 million in PPP loans were forgiven or repaid during the same period.

As of March 31, 2021, $14.3 million in net deferred fees on PPP loans remains to be recognized in interest income along with interest 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 round one and two were originated in 2020, and were predominately two year loans.  PPP loans in round three are being originated in 2021 and are five year loans.   The fees recognized on PPP loans originated in 2021 will be recognized over the longer term until forgiven or paid off.

Our yield on loans receivable was 4.51% for the three months ended March 31, 2021, compared to 4.64% for the three months ended December 31, 2020, and 5.25% for the three months ended March 31, 2020.  The decrease in yield on loans receivable compared to the quarters ended December 31, 2020 and March 31, 2020 is largely the result of the lower, 1.0% interest rate that PPP loans earn.   During the quarter ended March 31, 2021, we added $283.6 million in new PPP loans.  The decrease in yield on loans receivable compared to the quarter ended March 31, 2020 is attributed to the lower rate that PPP loans earn and the downward repricing of our variable rate loans in the low interest rate environment maintained by the Federal Reserve Open Market Committee, which lowered the Fed funds rate in the first quarter of 2020.  

Non-PPP loan growth was $50.1 million, or 4.2%, for the quarter ended March 31, 2021, compared to the quarter ended December 31, 2020, which includes CCBX loan growth of $37.4 million for the quarter ended March 31, 2021.  The average interest rate on new loans was approximately 2.00%, compared to an average interest rate of approximately 4.26% for the quarter ended December 31, 2020.  The decrease in average interest rate compared to the prior year’s fourth quarter is due to the $283.6 million in 1.0% interest rate PPP loans that were added during the quarter ended March 31, 2021.  During the three months ended March 31, 2021, most of our loan focus was on generating PPP loans.  Interest and fees on loans was $18.2 million for the three months ended March 31, 2021, compared to $17.9 million for the three months ended December 31, 2020 and $12.6 million for the three months ended March 31, 2020.  The increase in the interest and fees on loans for the quarter ended March 31, 2021, compared to the quarters ended December 31, 2020 and March 31, 2020, respectively, is due to increased loan balances and recognition of $2.8 million in PPP deferred fees on PPP loans that were forgiven and paid off. Interest income from interest earning deposits with other banks decreased $6,000, and $288,000 from December 31, 2020 and March 31, 2020, respectively, to $70,000 for the three months ended March 31, 2021, compared to $76,000 and $358,000 the three months ended December 31, 2020 and March 31, 2020, respectively, as a result of lower interest rates.  

Interest expense was $1.0 million for the quarter ended March 31, 2021, a $122,000 decrease from the quarter ended December 31, 2020 and a $713,000 decrease from the quarter ended March 31, 2020.  The interest expense decreased despite an increase in average interest bearing deposits for the quarter ended March 31, 2021 of $47.8 million and $228.1 million, over the quarter ended December 31, 2020 and March 31, 2020, respectively, as a result of lower interest rates. Interest expense on borrowed funds was $383,000 for the quarter ended March 31, 2021, compared to $407,000 and $202,000 for the quarters ended December 31, 2020 and March 31, 2020, respectively.  The decrease from the quarter ended December 31, 2020 is the result of a decrease in average Paycheck Protection Program Liquidity Facility (“PPPLF”) borrowings due to paydowns on PPP loans; the increase from the quarter ended March 31, 2020 was primarily the result of the PPPLF borrowings obtained to provide liquidity to fund the PPP loans.  

2

 


Net interest margin decreased for the three months ended March 31, 2021 to 3.76%, compared to 3.89% and 4.15% for the three months ended December 31, 2020 and March 31, 2020, respectively.  The net interest margin will likely fluctuate over the near term as round one and two PPP loans originated in 2020 are forgiven and round three PPP loans continue to be originated.  The decrease in net interest margin from the quarters ended December 31, 2020 and March 31, 2020 was largely a result of the low interest rate on PPP loans and lower interest rates on all other loans, especially our variable rate loans.  Gross PPP loans averaged $475.9 million in for the quarter ended March 31, 2021, and have a contractual interest rate of 1.0%, and yield approximately 3.69% after considering the amortization of deferred PPP loan fees, for the quarter ended March 31, 2021.  Cost of funds decreased five basis points in the quarter ended March 31, 2021 to 0.24%, compared to the quarter ended December 31, 2020 and decreased 46 basis points from the quarter ended March 31, 2020. Deposits into noninterest bearing and low interest bearing accounts by new and existing customers contributed to the reduced cost of funds.  In addition, the low Fed Funds rate has decreased market rates paid on deposits.  

During the quarter ended March 31, 2021, the average balance of total loans receivable increased by $106.6 million, to $1.64 billion, compared to $1.53 billion for the quarter ended December 31, 2020, as a result of loan growth.  New loans in the first quarter of 2021 had an average interest rate of approximately 2.00%, compared to approximately 4.26% for the quarter ended December 31, 2020.  Non-PPP loans grew by $50.1 million, or 4.2%, during the quarter ended March 31, 2021.  PPP loans totaled $543.8 million as of March 31, 2021, which is an increase of $178.0 million compared to December 31, 2020.  During the quarter ended March 31, 2021, the average balance of total loans receivable increased by $673.5 million, compared to $966.6 million for the quarter ended March 31, 2020, due to the aforementioned PPP loans combined with overall growth in the loan portfolio. Non-PPP loans grew by $232.0 million, or 23.1%, from $1.01 billion, when compared to the quarter ended March 31, 2020.  Total yield on loans receivable for the quarter ended March 31, 2021 was 4.51%, compared to 4.64% for the quarter ended December 31, 2020, and 5.25% for the quarter ended March 31, 2020. The reduction in yield on loans receivable compared to the quarters ended December 31, 2020 and March 31, 2020 was a result of the lower 1.00% rate on PPP loans and the downward repricing of our variable rate loans in the low interest rate environment.  PPP loans reduced the yield on loans receivable* by 27 basis points for the quarter ended March 31, 2021.

 

Contractual yield on loans receivable, excluding earned fees* approximated 3.53% for the quarter ended March 31, 2021, compared to 3.66% for the quarter ended December 31, 2020, and 5.08% for the quarter ended March 31, 2020. During the quarter ended March 31, 2021, the average balance of PPP loans was $475.9 million.  These loans bear a contractual rate of 1.0%, which negatively impacted the average contractual yield on loans.  Excluding PPP loans and their related earned  fees and interest, the contractual yield on loans receivable was 4.52%*.  Also contributing to the reduction in contractual yield is the current low-rate environment, which has resulted in lower rates on our variable rate loans and on new and renewing loans.  Although we have rate floors in place for $410.4 million, or 23.0%, in existing loans, the lowered rates may have a corresponding impact on yield on loans receivables and the net interest margin in future periods.

Cost of deposits for the quarter ended March 31, 2021 was 0.17%, a decrease of five basis points from 0.22% for the quarter ended December 31, 2020, and a 47 basis point decrease from 0.64% for the quarter ended March 31, 2020.  Deposit growth in new and existing noninterest bearing and low interest bearing accounts contributed to the reduced cost of funds in conjunction with rate reductions on deposits.  We continue to gain new customer relationships from the PPP loans originated to noncustomers that move their deposit relationships to the Bank.  Market conditions for deposits continued to be competitive during the quarter ended March 31, 2021; however, we have been able to keep cost of deposit down by increasing low interest bearing and noninterest bearing deposits and permitting high cost deposits run-off when appropriate, such as when we are able to replace them with lower cost core deposits.

Return on average assets (“ROA”) was 1.28% for the quarter ended March 31, 2021 compared to 1.04% and 0.96% for the quarters ended December 31, 2020 and March 31, 2020, respectively.  ROA was impacted in the quarters ended December 31, 2020 and March 31, 2020 by increased provision for loan losses due to the economic uncertainties of the COVID-19 pandemic and loan growth. Pre-tax, pre-provision ROA* was 1.69% for the quarter ended March 31, 2021, compared to 1.90% for the quarter ended December 31, 2020, and 1.77% for the quarter ended March 31, 2020.

 

 

* A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.

3

 


 

During the first quarter of 2021, significant focus was placed on helping the small businesses in our communities through the third round of PPP loans.  The current PPP loan program is currently scheduled to end on May 31, 2021.  We will continue to accept and process PPP loans for the duration of the program.  The PPP loans originated in the first and second rounds during 2020 and from the third round originated in 2021 have had a significant impact on our financial statements.  These PPP loans along with any additional PPP loans that fund through the end of the program will continue to impact our results in the future.  During the quarter ended March 31, 2021 we continued to receive forgiveness payments from the SBA.  Throughout this earnings release, we will address the impact, to the extent possible, of these loans including borrowings received through PPPLF to help fund these loans and to aid in liquidity, in addition to earnings and expenses related to these activities.  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 key information regarding the PPP loans originated in 2020 as of the period indicated:  

 

 

Round 1 and 2 - Originated in 2020

 

 

 

Original Loan Size

 

 

 

As of March 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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Existing customer

 

$

4,506

 

$

10,141

 

$

10,382

 

$

32,375

 

$

52,299

 

$

109,703

 

New customer

 

 

11,132

 

 

15,352

 

 

22,820

 

 

40,151

 

 

61,052

 

 

150,507

 

Total principal outstanding

 

 

15,638

 

 

25,493

 

 

33,202

 

 

72,526

 

 

113,351

 

 

260,210

 

Deferred fees outstanding

 

 

(450

)

 

(636

)

 

(791

)

 

(978

)

 

(515

)

 

(3,370

)

Deferred costs outstanding

 

 

247

 

 

85

 

 

60

 

 

44

 

 

14

 

 

450

 

Net deferred fees

 

$

(203

)

$

(551

)

$

(731

)

$

(934

)

$

(501

)

$

(2,920

)

Total principal, net of deferred

    fees

 

$

15,435

 

$

24,942

 

$

32,471

 

$

71,592

 

$

112,850

 

$

257,290

 

Number of loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Existing customer

 

 

214

 

 

112

 

 

47

 

 

42

 

 

13

 

 

428

 

New customer

 

 

615

 

 

177

 

 

106

 

 

55

 

 

19

 

 

972

 

Total loan count

 

 

829

 

 

289

 

 

153

 

 

97

 

 

32

 

 

1,400

 

Percent of total

 

 

59.3

%

 

20.6

%

 

10.9

%

 

6.9

%

 

2.3

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forgiveness/Payoffs/Paydowns in Quarter Ended March 31, 2021, net

 

 

 

 

 

 

 

 

 

 

Dollars

 

$

12,083

 

$

27,446

 

$

18,215

 

$

47,886

 

$

-

 

$

105,630

 

Deferred fee recognized

 

 

155

 

 

817

 

 

689

 

 

1,040

 

 

113

 

 

2,814

 

4

 


 

 

The table below summarizes key information regarding the PPP loans originated in 2021 as of the period indicated:  

 

 

Round 3 - Originated in 2021

 

 

 

Original Loan Size

 

 

 

As of March 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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Existing customer

 

$

14,872

 

$

36,882

 

$

43,811

 

$

111,178

 

$

2,956

 

$

209,699

 

New customer

 

 

11,006

 

 

14,263

 

 

20,111

 

 

28,538

 

 

-

 

 

73,918

 

Total principal outstanding

 

 

25,878

 

 

51,145

 

 

63,922

 

 

139,716

 

 

2,956

 

 

283,617

 

Deferred fees outstanding

 

 

(3,143

)

 

(2,479

)

 

(3,099

)

 

(4,056

)

 

(29

)

 

(12,806

)

Deferred costs outstanding

 

 

800

 

 

362

 

 

173

 

 

110

 

 

1

 

 

1,446

 

Net deferred fees

 

$

(2,343

)

$

(2,117

)

$

(2,926

)

$

(3,946

)

$

(28

)

$

(11,360

)

Number of loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Existing customer

 

 

707

 

 

399

 

 

190

 

 

141

 

 

1

 

 

1,438

 

New customer

 

 

633

 

 

163

 

 

89

 

 

45

 

 

-

 

 

930

 

Total loan count

 

 

1,340

 

 

562

 

 

279

 

 

186

 

 

1

 

 

2,368

 

Percent of total

 

 

56.6

%

 

23.7

%

 

11.8

%

 

7.9

%

 

0.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First or Second Draw

 

 

 

 

 

 

 

 

 

 

First Draw

 

$

7,456

 

$

5,930

 

$

1,983

 

$

5,264

 

$

2,956

 

$

23,589

 

Second Draw

 

 

18,422

 

 

45,215

 

 

61,939

 

 

134,452

 

 

-

 

 

260,028

 

 

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

 

(unaudited)

 

March 31,

2021

 

December 31,

2020

 

September 30,

2020

 

June 30,

2020

 

March 31,

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

 

1.28

%

 

1.04

%

 

0.95

%

 

0.96

%

 

0.96

%

Return on average equity (1)

 

 

16.84

%

 

13.36

%

 

12.14

%

 

11.37

%

 

8.66

%

Pre-tax, pre-provision return

     on average assets (1)(2)

 

 

1.69

%

 

1.90

%

 

1.72

%

 

1.72

%

 

1.77

%

Yield on earnings assets (1)

 

 

3.99

%

 

4.16

%

 

3.93

%

 

4.16

%

 

4.79

%

Yield on loans receivable (1)

 

 

4.51

%

 

4.64

%

 

4.33

%

 

4.57

%

 

5.25

%

Yield on loans receivable,

     excluding PPP loans (1)(2)

 

 

4.78

%

 

5.00

%

 

4.78

%

 

4.94

%

n/a

 

Contractual yield on loans

     receivable, excluding earned

     fees (1)(2)

 

 

3.53

%

 

3.66

%

 

3.61

%

 

3.91

%

 

5.08

%

Contractual yield on loans

     receivable, excluding earned

     fees and interest on PPP loans,

     as adjusted (1)(2)

 

 

4.52

%

 

4.65

%

 

4.69

%

 

4.84

%

n/a

 

Cost of funds (1)

 

 

0.24

%

 

0.29

%

 

0.33

%

 

0.41

%

 

0.70

%

Cost of deposits (1)

 

 

0.17

%

 

0.22

%

 

0.27

%

 

0.35

%

 

0.64

%

Net interest margin (1)

 

 

3.76

%

 

3.89

%

 

3.62

%

 

3.78

%

 

4.15

%

Noninterest expense to average

     assets (1)

 

 

2.62

%

 

2.35

%

 

2.26

%

 

2.34

%

 

3.18

%

Efficiency ratio

 

 

60.85

%

 

55.26

%

 

56.73

%

 

57.66

%

 

64.26

%

Loans receivable to deposits

 

 

105.68

%

 

108.85

%

 

110.98

%

 

110.77

%

 

100.01

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 $3.0 million in the first quarter of 2021, an increase of $935,000 from $2.0 million at the fourth quarter of 2020, and an increase of $313,000 from $2.7 million in the first quarter of 2020.  The increase in noninterest income over the quarter ended December 31, 2020 was due to a $213,000 increase in BaaS fees, a $174,000 increase in loan referral fees that are earned when we originate a variable rate loan and arrange for the borrower to enter into an interest rate swap agreement with a third party to fix the interest rate for an extended period, and an increase of $410,000 in other income. The increase in other income was primarily due to the revaluation and write-down of an equity interest of $400,000 recorded in other income in December 2020, which had reduced other income for the quarter ended December 31, 2020.  The $313,000 increase over the quarter ended March 31, 2020 was primarily due to a $369,000 increase in BaaS fees, $140,000 increase in deposit service charges and fees, $130,000 increase in gain on sale of loans, and a $100,000 increase in mortgage broker fees, partially offset by $456,000 decrease in loan referral fees.  

Our CCBX division continues to grow, and consists of 21 relationships, at varying stages, as of March 31, 2021, compared to 15 CCBX relationships at December 31, 2020 and seven CCBX relationships as of March 31, 2020, respectively.  As of March 31, 2021, we had ten active CCBX relationships, five relationships in onboarding/implementation, six signed letters of intent and a solid pipeline of potential new CCBX relationships.  The following table illustrates the activity and growth in CCBX for the periods presented:

6

 


 

As of

 

March 31, 2021

December 31, 2020

March 31, 2020

Active

10

6

2

Friends and family

-

2

-

Implementation / onboarding

5

3

3

Signed letters of intent

6

4

2

      Total CCBX relationships

21

15

7

 

Total noninterest expense for the first quarter of 2021 increased to $12.4 million compared to $10.5 million for the preceding quarter and compared to $9.0 million for the first quarter of 2020. Increase in noninterest expense for the quarter ended March 31, 2021, as compared to the quarter ended December 31, 2020, was due to a $1.3 million increase in salaries and employee benefits which is related to the hiring in our CCBX and CCDB divisions and additional staff for our ongoing banking growth initiatives and includes bonus expense which was $1.2 million higher compared to $687,000 for the three months ended December 31, 2020, due to incentives paid to employees that have been involved in the production and support of PPP loans during the three months ended March 31, 2021.  The increase in salary expense was offset by an increase in deferred loan costs of $992,000, primarily from originating PPP loans, which is recorded as a salary offset, thereby reducing salary expense, for the quarter ended March 31, 2021, compared to the quarter ended December 31, 2020.  Other expenses increased $203,000 in the first quarter of 2021 compared to the prior year’s fourth quarter largely due to an $82,000 increase in software license, maintenance and subscription expenses, which is expected to increase as we invest more in automated processing and as we grow product lines and our CCBX and CCDB divisions, and $41,000 increase in the provision for unfunded commitments.  In addition, in the first quarter of 2021 compared to the prior year’s fourth quarter, legal and professional fees increased $176,000 due to CCBX division expenses and higher costs associated with legal and accounting work related to financial reporting related to our growth.

The increased noninterest expenses for the quarter ended March 31, 2021 compared to the first quarter in 2020 were largely due to a $2.0 million increase in salary expenses related to hiring staff for our CCBX and CCDB divisions, additional staff for our ongoing banking growth initiatives and bonus incentive expense which was $1.4 million higher than the three months ended March 31, 2020, due to incentives paid to employees involved in the production and support of PPP loans originated in the first quarter of 2021.  The increase in salary expense was reduced as a result of an increase in deferred loan costs recorded as salary offsets, primarily from originating PPP loans, which was $1.2 million higher compared to $438,000, thereby lowering salary expense, for the quarter ended March 31, 2021, compared to the quarter ended March 31, 2020.  Other expenses increased $441,000 in the first quarter of 2021 compared to the quarter ended March 31, 2020, largely due to a $213,000 increase in software license, maintenance and subscription expenses and $115,000 increase in the provision for unfunded commitments.  In addition, in the first quarter of 2021 compared to the first quarter of 2020, legal and professional fees increased $437,000 and Federal Deposit Insurance Corporation (“FDIC”) assessments increased $125,000. 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 increase in FDIC assessments is primarily the result of a credit issued to the Bank for assessments in the quarter ended March 31, 2020, which reduced the expenses in 2020, combined with an increase in deposits compared to the quarter ended March 31, 2020.

The provision for income taxes was $1.6 million at March 31, 2021, a $340,000 increase compared to $1.2 million for the fourth quarter of 2020 and a $858,000 increase compared to $714,000 for the first quarter of 2020, both as a result of increased taxable income.  The Company uses a federal statutory tax rate of 21% as a basis for calculating provision for income taxes.

Financial Condition

Total assets increased $263.2 million, or 14.9%, to $2.03 billion at March 31, 2021 compared to $1.77 billion at December 31, 2020.  The primary cause of the increase was $219.6 million in increased loans receivable, which includes $283.6 in new PPP loans, offset by $105.6 million in forgiveness, payoffs or principal paydowns on PPP loans originated in 2020, together with overall growth in the loan portfolio, combined with a $43.3 million increase in interest earning deposits with other banks.  Total assets increased $845.3 million, or 71.4% at March 31, 2021, compared to $1.18 billion at March 31, 2020.  This increase was largely the result of a $761.5 million increase in loans receivable, which includes $543.8 million in PPP loans as of March 31, 2021, combined with a $72.4 million increase in interest earning deposits with other banks.

7

 


Total loans receivable increased $219.6 million to $1.77 billion at March 31, 2021, from $1.55 billion at December 31, 2020, and increased $761.5 million from $1.01 billion at March 31, 2020.  The growth in loans receivable over the quarter ended December 31, 2020 was due to a net increase of $178.0 million in PPP loans, which includes $283.6 million in new PPP loans originated during 2021 in the third round of the program net of $105.6 million in forgiveness/payoffs or principal paydowns on PPP loans from the first two rounds of the program.  Also contributing to the increase in loans receivable was non-PPP loan growth of $50.1 million, consisting of CCBX loan growth of $37.4 million, and core banking loan growth, which excludes PPP loans and CCBX loans, of $12.7 million during the three months ended March 31, 2021.  Total loans receivable is net of $18.3 million in net deferred origination fees, $14.3 million of which is attributed to PPP loans and $11.4 million is attributed it loans originated in the three months ended March 31, 2021.  Deferred fees on PPP loans are earned over the life of the loan, with a maximum maturity of five years for loans originated in 2020 and all PPP loans originated in 2021 have five year maturities.  The increase in loans receivable over the quarter ended March 31, 2020 was due to a $543.8 million increase in PPP loans, and $233.9 million increase in non-PPP loans consisting of $150.1 million increase in commercial real estate loans, $79.8 million in other commercial and industrial loans and $18.6 million in residential real estate loans.

The second round of the PPP loans closed on August 8, 2020, and since that time we have been accepting applications from customers for loan forgiveness on PPP loans originated in 2020.  As of March 31, 2021, we have received $105.6 million in forgiveness payments or principal paydowns.  We expect that the pace of forgiveness will continue throughout 2021 until the loans are forgiven or paid off through maturity.  Forgiveness of principal, early paydowns and payoffs on PPP loans will increase interest income earned in those periods from the recognition of deferred PPP loan fees.  Customers with two-year loans are also able to request that their PPP loan be extended to a five year maturity, which we anticipate to be an option for customers not eligible for forgiveness.

The third round of PPP loans opened to applicants on January 19, 2021.  Once again, we will continue to accept and process applications for both existing and new customers, for the duration of the program which runs through May 30, 2021.  As of March 31, 2021, we have originated loans for $283.6 million, representing 2,368 new and existing customers, in the third round of the PPP program.  

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

 

 

As of

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

March 31, 2020

 

(Dollars in thousands; unaudited)

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   PPP loans

 

$

543,827

 

 

30.5

%

 

$

365,842

 

 

23.5

%

 

$

-

 

 

0.0

%

   All other commercial &

     industrial loans

 

 

202,447

 

 

11.2

 

 

 

173,358

 

 

11.1

 

 

 

122,667

 

 

12.2

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Construction, land and

     land development loans

 

 

104,596

 

 

5.9

 

 

 

94,423

 

 

6.1

 

 

 

119,668

 

 

11.9

 

   Residential real estate loans

 

 

136,417

 

 

7.7

 

 

 

143,869

 

 

9.2

 

 

 

117,821

 

 

11.7

 

   Commercial real estate loans

 

 

793,633

 

 

44.5

 

 

 

774,925

 

 

49.8

 

 

 

643,488

 

 

63.9

 

Consumer and other loans

 

 

4,114

 

 

0.2

 

 

 

3,916

 

 

0.3

 

 

 

3,695

 

 

0.3

 

      Gross loans receivable

 

 

1,785,034

 

 

100.0

%

 

 

1,556,333

 

 

100.0

%

 

 

1,007,339

 

 

100.0

%

Net deferred origination fees -

     PPP loans

 

 

(14,279

)

 

 

 

 

 

(5,803

)

 

 

 

 

 

-

 

 

 

 

Net deferred origination fees -

     Other loans

 

 

(4,032

)

 

 

 

 

 

(3,392

)

 

 

 

 

 

(2,159

)

 

 

 

      Loans receivable

 

$

1,766,723

 

 

 

 

 

$

1,547,138

 

 

 

 

 

$

1,005,180

 

 

 

 

 

Please see Appendix A for additional loan portfolio detail regarding industry concentrations.

Total deposits increased $250.4 million, or 17.6%, to $1.67 billion at March 31, 2021 from $1.42 billion at December 31, 2020.  The increase is largely due to a $262.7 million increase in core deposits, which is the result of expanding and growing

8

 


banking relationships with new customers, including deposit relationships from PPP loans made to noncustomers, who moved their banking relationship to the Bank.  Additionally, deposits in our CCBX division increased $70.4 million, from $68.7 million at December 31, 2020, to $139.1 million at March 31, 2021.  The deposits from our CCBX division are included in noninterest bearing, NOW and money market and brokered deposit totals.  During the quarter ended March 31, 2021, noninterest bearing deposits increased $176.4 million, or 29.8%, to $768.7 million from $592.3 million at December 31, 2020.  Included in the increase in noninterest bearing deposits is an increase in CCBX division deposits of $79.6 million for the quarter ended March 31, 2021.  In the first quarter of 2021 compared to the quarter ended December 31, 2020, NOW and money market accounts increased $69.9 million, and savings accounts increased $16.3 million, or 21.0%.  BaaS-brokered deposits decreased $7.9 million, or 23.5%, and time deposits decreased $4.4 million, or 7.3%.  Total deposits increased $666.7 million, or 66.3%, to $1.67 billion at March 31, 2021 compared to $1.01 billion at March 31, 2020.  Noninterest bearing deposits increased $423.2 million, or 122.5%, to $768.7 million at March 31, 2021 from $345.5 million at March 31, 2020.  NOW and money market accounts increased $236.2 million, or 48.0%, to $728.2 million at March 31, 2021, and savings accounts increased $39.1 million, or 71.2% and BaaS-brokered deposits increased $1.7 million, or 7.1% while time deposits decreased $33.5 million, or 37.7%.  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

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

March 31, 2020

 

(Dollars in thousands, unaudited)

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand, noninterest bearing

 

$

768,690

 

 

46.0

%

 

$

592,261

 

 

41.7

%

 

$

345,503

 

 

34.4

%

NOW and money market

 

 

728,243

 

 

43.6

 

 

 

658,323

 

 

46.3

 

 

 

492,054

 

 

49.0

 

Savings

 

 

93,917

 

 

5.6

 

 

 

77,611

 

 

5.4

 

 

 

54,851

 

 

5.4

 

      Total core deposits

 

 

1,590,850

 

 

95.2

 

 

 

1,328,195

 

 

93.4

 

 

 

892,408

 

 

88.8

 

BaaS-brokered deposits

 

 

25,597

 

 

1.5

 

 

 

33,482

 

 

2.4

 

 

 

23,904

 

 

2.4

 

Time deposits less than $250,000

 

 

38,986

 

 

2.3

 

 

 

41,145

 

 

2.9

 

 

 

58,366

 

 

5.8

 

Time deposits $250,000 and over

 

 

16,282

 

 

1.0

 

 

 

18,485

 

 

1.3

 

 

 

30,384

 

 

3.0

 

      Total deposits

 

$

1,671,715

 

 

100.0

%

 

$

1,421,307

 

 

100.0

%

 

$

1,005,062

 

 

100.0

%

 

To support and promote the effectiveness of the SBA PPP loan program, the Federal Reserve is supplying liquidity to participating financial institutions through non-recourse term financing secured by PPP loans to small businesses. The PPPLF extends low cost borrowings at a 0.35% interest rate, to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value. Borrowings are required to be paid down as the pledged PPP loans are paid down.  As of March 31, 2021, there was $158.5 million in outstanding PPPLF advances and pledged PPP loans, compared to $153.7 million at December 31, 2020.  The PPPLF program is currently available for new borrowings until June 30, 2021.

The Federal Home Loan Bank (“FHLB”) allows us to borrow against our line of credit, which is collateralized by certain loans. As of March 31, 2021, we borrowed a total of $25.0 million in FHLB term advances.  This includes a $10.0 million advance with a remaining term of 2.0 years and $15.0 million advance with a remaining term of 4.0 years.  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 $76.0 million was available under this arrangement as of March 31, 2021.

Total shareholders’ equity increased $6.5 million since December 31, 2020.  The increase in shareholders’ equity was primarily due to $6.0 million in net earnings for the three months ended March 31, 2021.  

Capital Ratios

The Company and the Bank remain well capitalized at March 31, 2021, as summarized in the following table.  

9

 


Capital Ratios:

Coastal Community Bank

 

 

Coastal Financial Corporation

 

 

Financial Institution Basel III Regulatory Guidelines

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

8.84

%

 

 

8.62

%

 

 

5.00

%

Adjusted Tier 1 leverage capital ratio, excluding PPP loans (1)

 

10.72

%

 

 

10.45

%

 

 

5.00

%

Common Equity Tier 1 risk-based capital

 

11.45

%

 

 

10.89

%

 

 

6.50

%

Tier 1 risk-based capital

 

11.45

%

 

 

11.15

%

 

 

8.00

%

Total risk-based capital

 

12.70

%

 

 

13.15

%

 

 

10.00

%

(1)  A reconciliation of the non-GAAP measure is set forth at the end of this earnings release.

 

Asset Quality

The allowance for loan losses was $19.6 million and 1.11% of loans receivable at March 31, 2021 compared to $19.3 million and 1.25% at December 31, 2020 and $12.9 million and 1.29% at March 31, 2020.  At March 31, 2021, there was $543.8 million in PPP loans, which are 100% guaranteed by the SBA.  Excluding PPP loans, the allowance for loan losses to loans receivable* would be 1.59% for the quarter ended March 31, 2021.  Provision for loan losses totaled $357,000 for the three months ended March 31, 2021, $2.6 million for the three months ended December 31, 2020, and $1.6 million for the three months ended March 31, 2020. Net charge-offs totaled $9,000 for the quarter ended March 31, 2021, compared to $384,000 for the quarter ended December 31, 2020 and $123,000 for the quarter ended March 31, 2020. Net charge-offs for the quarter ended March 31, 2021 included a net charge-off of $9,000 for a non-performing commercial and industrial loan.

The Company’s increased provision for loan losses during the quarters ended December 31, 2020 and March 31, 2020, is related to an increase in qualitative factors related to the economic uncertainties caused by the COVID-19 pandemic and loan growth. The qualitative and economic factors used in management’s analysis of the provision for loan losses indicated an increased provision was not required for the quarter ended March 31, 2021.  The expected loan losses have not materialized as originally anticipated in 2020, as evidenced by the low level of charge-offs and nonperforming loans.  The economic environment is continuously changing and has shown signs of improvement, with United States implementing $1.9 trillion in stimulus package, ongoing vaccination of its population and increased re-opening of business activities. The Company is not required to implement the provisions of the Current Expected Credit Loss accounting standard until January 1, 2023 and will continue to account for the allowance for credit losses under the incurred loss model.  

 

 

* A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.

At March 31, 2021, our nonperforming assets were $661,000, or 0.03% of total assets, compared to $712,000, or 0.04%, of total assets at December 31, 2020, and $763,000, or 0.06%, of total assets at March 31, 2020.  Nonperforming assets decreased $51,000 during the quarter ended March 31, 2021, compared to the quarter ended December 31, 2020, with a partial charge-off of one loan ($9,000), the addition of one loan ($133,000) and principal paydowns and pay-offs on other loans.

Management is continuing to actively monitor the loan portfolio to identify borrowers experiencing difficulties with repayment and are proactively working with them to reduce potential losses through the prudent use of PPP loans, deferrals, and modifications in accordance with regulatory guidelines.  There were no repossessed assets or other real estate owned at March 31, 2021.  Our nonperforming loans to loans receivable ratio was 0.04% at March 31, 2021, compared to 0.05% at December 31, 2020, and 0.08% at March 31, 2020.  

For the quarter ended March 31, 2021, we have not seen a significant change in our credit quality metrics, as demonstrated by the low level of charge-offs and nonperforming loans.  The long-term economic impact of the COVID-19 pandemic, political gridlock, and trade issues is unknown; however, the Company remains diligent in its efforts to communicate and proactively work with borrowers to help mitigate potential credit deterioration.  

Pursuant to federal guidance, the Company deferred and/or modified payments on loans to assist customers financially during the COVID-19 pandemic and economic shutdown. A total of $241.6 million in loans were deferred and/or modified under this guidance since the guidelines were issued.  For the quarter ended March 31, 2021, three loans, or $13.3 million

10

 


remained on deferred and/or modified status.  The purpose of this program is to provide cash flow relief for small business customers as they navigate through the uncertainties of the COVID-19 pandemic.  The Company’s deferral program has been successful as evidenced by customers’ ability to migrate from deferral to active status and resume making payments as planned.  

The table below illustrates the status of all loans that were deferred and/or modified under this guidance since the guidelines were issued:

 

 

COVID-19 Deferrals

 

 

 

As of March 31, 2021

 

 

 

Amount

 

Number  of loans

 

 

 

(Dollars in thousands; unaudited)

 

Successfully resumed payments

 

$

211,351

 

 

217

 

Closed - paid off

 

 

13,247

 

 

27

 

Pending first payment

 

 

3,660

 

 

2

 

Currently deferred

 

 

13,296

 

 

3

 

Total

 

$

241,554

 

 

249

 

 

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

 

 

 

 

 

As of

 

 

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

(Dollars in thousands, unaudited)

 

2021

 

2020

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans:

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

 

$

488

 

$

537

 

$

699

 

Real estate:

 

 

 

 

 

 

 

 

 

 

   Residential real estate

 

 

173

 

 

175

 

 

64

 

         Total nonaccrual loans

 

 

661

 

 

712

 

 

763

 

 

 

 

 

 

 

 

 

 

 

 

Accruing loans past due 90 days or more:

 

 

 

 

 

 

 

 

 

 

         Total accruing loans past due 90 days or more

 

 

-

 

 

-

 

 

-

 

         Total nonperforming loans

 

 

661

 

 

712

 

 

763

 

Other real estate owned

 

 

-

 

 

-

 

 

-

 

Repossessed assets

 

 

-

 

 

-

 

 

-

 

Total nonperforming assets

 

$

661

 

$

712

 

$

763

 

Troubled debt restructurings, accruing

 

 

-

 

 

-

 

 

-

 

Total nonperforming loans to loans receivable

 

 

0.04

%

 

0.05

%

 

0.08

%

Total nonperforming assets to total assets

 

 

0.03

%

 

0.04

%

 

0.06

%

 

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 $2.0 billion community bank that the Bank operates provides service through 15 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.  In 2021, the Bank expects to introduce CCDB, its digital bank division in collaboration with Google.  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

11

 


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.

12

 


COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands; unaudited)

 

ASSETS

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

2020

 

Cash and due from banks

 

$

16,842

 

 

$

18,965

 

 

$

14,124

 

Interest earning deposits with other banks

 

 

187,472

 

 

 

144,152

 

 

 

115,112

 

Investment securities, available for sale, at fair value

 

 

20,378

 

 

 

20,399

 

 

 

15,469

 

Investment securities, held to maturity, at amortized cost

 

 

2,515

 

 

 

2,848

 

 

 

4,290

 

Other investments

 

 

6,829

 

 

 

6,059

 

 

 

5,723

 

Loans receivable

 

 

1,766,723

 

 

 

1,547,138

 

 

 

1,005,180

 

Allowance for loan losses

 

 

(19,610

)

 

 

(19,262

)

 

 

(12,925

)

     Total loans receivable, net

 

 

1,747,113

 

 

 

1,527,876

 

 

 

992,255

 

Premises and equipment, net

 

 

17,194

 

 

 

17,108

 

 

 

14,195

 

Operating lease right-of-use assets

 

 

6,900

 

 

 

7,120

 

 

 

8,228

 

Accrued interest receivable

 

 

8,597

 

 

 

8,616

 

 

 

3,014

 

Bank-owned life insurance, net

 

 

7,133

 

 

 

7,082

 

 

 

6,931

 

Deferred tax asset, net

 

 

3,802

 

 

 

3,799

 

 

 

2,735

 

Other assets

 

 

4,584

 

 

 

2,098

 

 

 

1,995

 

     Total assets

 

$

2,029,359

 

 

$

1,766,122

 

 

$

1,184,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

1,671,715

 

 

$

1,421,307

 

 

$

1,005,062

 

Federal Home Loan Bank advances

 

 

24,999

 

 

 

24,999

 

 

 

24,999

 

Paycheck Protection Program Liquidity Facility

 

 

158,519

 

 

 

153,716

 

 

 

-

 

Subordinated debt, net

 

 

9,996

 

 

 

9,993

 

 

 

9,982

 

Junior subordinated debentures, net

 

 

3,585

 

 

 

3,584

 

 

 

3,583

 

Deferred compensation

 

 

833

 

 

 

863

 

 

 

947

 

Accrued interest payable

 

 

538

 

 

 

531

 

 

 

310

 

Operating lease liabilities

 

 

7,105

 

 

 

7,323

 

 

 

8,419

 

Other liabilities

 

 

5,330

 

 

 

3,589

 

 

 

3,603

 

     Total liabilities

 

 

1,882,620

 

 

 

1,625,905

 

 

 

1,056,905

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

88,329

 

 

 

87,815

 

 

 

87,166

 

Retained earnings

 

 

58,386

 

 

 

52,368

 

 

 

39,946

 

Accumulated other comprehensive income (loss), net of tax

 

 

24

 

 

 

34

 

 

 

54

 

     Total shareholders’ equity

 

 

146,739

 

 

 

140,217

 

 

 

127,166

 

     Total liabilities and shareholders’ equity

 

$

2,029,359

 

 

$

1,766,122

 

 

$

1,184,071

 

13

 


 

COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts; unaudited)

 

 

Three Months Ended

 

 

March 31,

 

December 31,

 

March 31,

 

 

2021

 

2020

 

2020

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$

18,230

 

$

17,885

 

$

12,627

 

Interest on interest earning deposits with other banks

 

70

 

 

76

 

 

358

 

Interest on investment securities

 

28

 

 

31

 

 

119

 

Dividends on other investments

 

30

 

 

106

 

 

16

 

Total interest and dividend income

 

18,358

 

 

18,098

 

 

13,120

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Interest on deposits

 

660

 

 

758

 

 

1,554

 

Interest on borrowed funds

 

383

 

 

407

 

 

202

 

Total interest expense

 

1,043

 

 

1,165

 

 

1,756

 

Net interest income

 

17,315

 

 

16,933

 

 

11,364

 

PROVISION FOR LOAN LOSSES

 

357

 

 

2,600

 

 

1,578

 

Net interest income after provision for loan losses

 

16,958

 

 

14,333

 

 

9,786

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

Deposit service charges and fees

 

863

 

 

867

 

 

723

 

BaaS fees

 

948

 

 

735

 

 

579

 

Loan referral fees

 

597

 

 

423

 

 

1,053

 

Mortgage broker fees

 

262

 

 

216

 

 

162

 

Sublease and lease income

 

32

 

 

31

 

 

30

 

Gain on sales of loans, net

 

130

 

 

35

 

 

-

 

Other income (loss)

 

152

 

 

(258

)

 

124

 

Total noninterest income

 

2,984

 

 

2,049

 

 

2,671

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

7,686

 

 

6,433

 

 

5,683

 

Occupancy

 

1,058

 

 

1,026

 

 

927

 

Data processing

 

697

 

 

599

 

 

551

 

Director and staff expenses

 

220

 

 

187

 

 

270

 

Excise taxes

 

359

 

 

301

 

 

203

 

Marketing

 

82

 

 

37

 

 

112

 

Legal and professional fees

 

760

 

 

584

 

 

323

 

Federal Deposit Insurance Corporation assessments

 

195

 

 

230

 

 

70

 

Business development

 

99

 

 

99

 

 

125

 

Other expense

 

1,196

 

 

993

 

 

755

 

Total noninterest expense

 

12,352

 

 

10,489

 

 

9,019

 

Income before provision for income taxes

 

7,590

 

 

5,893

 

 

3,438

 

PROVISION FOR INCOME TAXES

 

1,572

 

 

1,232

 

 

714

 

NET INCOME

$

6,018

 

$

4,661

 

$

2,724

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.50

 

$

0.39

 

$

0.23

 

Diluted earnings per common share

$

0.49

 

$

0.38

 

$

0.22

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

11,980,092

 

 

11,936,289

 

 

11,909,248

 

Diluted

 

12,392,000

 

 

12,280,191

 

 

12,208,175

 

14

 


 

COASTAL FINANCIAL CORPORATION

AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY

(Dollars in thousands; unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

March 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

$

195,308

 

$

70

 

 

0.15

%

 

$

166,744

 

$

76

 

 

0.18

%

 

$

103,372

 

$

358

 

 

1.39

%

Investment securities (1)

 

24,185

 

 

28

 

 

0.47

 

 

 

23,730

 

 

31

 

 

0.52

 

 

 

27,041

 

 

119

 

 

1.77

 

Other investments

 

6,080

 

 

30

 

 

2.00

 

 

 

6,124

 

 

106

 

 

6.89

 

 

 

4,507

 

 

16

 

 

1.43

 

Loans receivable (2)

 

1,640,108

 

 

18,230

 

 

4.51

 

 

 

1,533,533

 

 

17,885

 

 

4.64

 

 

 

966,602

 

 

12,627

 

 

5.25

 

Total interest earning assets

 

1,865,681

 

 

18,358

 

 

3.99

 

 

 

1,730,131

 

 

18,098

 

 

4.16

 

 

 

1,101,522

 

 

13,120

 

 

4.79

 

Noninterest earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

(19,391

)

 

 

 

 

 

 

 

 

(17,767

)

 

 

 

 

 

 

 

 

(11,665

)

 

 

 

 

 

 

Other noninterest earning assets

 

65,912

 

 

 

 

 

 

 

 

 

62,359

 

 

 

 

 

 

 

 

 

51,596

 

 

 

 

 

 

 

Total assets

$

1,912,202

 

 

 

 

 

 

 

 

$

1,774,723

 

 

 

 

 

 

 

 

$

1,141,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing deposits

$

856,111

 

$

660

 

 

0.31

%

 

$

808,351

 

$

758

 

 

0.37

%

 

$

628,037

 

$

1,554

 

 

1.00

%

Subordinated debt, net

 

9,994

 

 

145

 

 

5.88

 

 

 

9,991

 

 

148

 

 

5.89

 

 

 

9,980

 

 

146

 

 

5.88

 

Junior subordinated debentures, net

 

3,585

 

 

21

 

 

2.38

 

 

 

3,584

 

 

22

 

 

2.44

 

 

 

3,583

 

 

35

 

 

3.93

 

PPPLF borrowings

 

170,376

 

 

147

 

 

0.35

 

 

 

188,222

 

 

166

 

 

0.35

 

 

 

-

 

 

-

 

 

0.00

 

FHLB advances and other borrowings

 

24,999

 

 

70

 

 

1.14

 

 

 

25,001

 

 

71

 

 

1.13

 

 

 

7,851

 

 

21

 

 

1.08

 

Total interest bearing liabilities

 

1,065,065

 

 

1,043

 

 

0.40

 

 

 

1,035,149

 

 

1,165

 

 

0.45

 

 

 

649,451

 

 

1,756

 

 

1.09

 

Noninterest bearing deposits

 

690,465

 

 

 

 

 

 

 

 

 

588,764

 

 

 

 

 

 

 

 

 

352,930

 

 

 

 

 

 

 

Other liabilities

 

11,778

 

 

 

 

 

 

 

 

 

11,968

 

 

 

 

 

 

 

 

 

12,542

 

 

 

 

 

 

 

Total shareholders' equity

 

144,894

 

 

 

 

 

 

 

 

 

138,842

 

 

 

 

 

 

 

 

 

126,530

 

 

 

 

 

 

 

Total liabilities and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    shareholders' equity

$

1,912,202

 

 

 

 

 

 

 

 

$

1,774,723

 

 

 

 

 

 

 

 

$

1,141,453

 

 

 

 

 

 

 

Net interest income

 

 

 

$

17,315

 

 

 

 

 

 

 

 

$

16,933

 

 

 

 

 

 

 

 

$

11,364

 

 

 

 

Interest rate spread

 

 

 

 

 

 

 

3.59

%

 

 

 

 

 

 

 

 

3.71

%

 

 

 

 

 

 

 

 

3.70

%

Net interest margin (3)

 

 

 

 

 

 

 

3.76

%

 

 

 

 

 

 

 

 

3.89

%

 

 

 

 

 

 

 

 

4.15

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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.

 

15

 


 

COASTAL FINANCIAL CORPORATION

QUARTERLY STATISTICS

(Dollars in thousands, except share and per share data; unaudited)

 

Three Months Ended

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

 

2021

 

2020

 

2020

 

2020

 

2020

 

Income Statement Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income

$

18,358

 

$

18,098

 

$

16,394

 

$

15,426

 

$

13,120

 

Interest expense

 

1,043

 

 

1,165

 

 

1,298

 

 

1,433

 

 

1,756

 

Net interest income

 

17,315

 

 

16,933

 

 

15,096

 

 

13,993

 

 

11,364

 

Provision for loan losses

 

357

 

 

2,600

 

 

2,200

 

 

1,930

 

 

1,578

 

Net interest income after

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

provision for loan losses

 

16,958

 

 

14,333

 

 

12,896

 

 

12,063

 

 

9,786

 

Noninterest income

 

2,984

 

 

2,049

 

 

1,942

 

 

1,520

 

 

2,671

 

Noninterest expense

 

12,352

 

 

10,489

 

 

9,666

 

 

8,945

 

 

9,019

 

Net income - pre-tax, pre-provision (1)

 

7,947

 

 

8,493

 

 

7,372

 

 

6,568

 

 

5,016

 

Provision for income tax

 

1,572

 

 

1,232

 

 

1,082

 

 

967

 

 

714

 

Net income

 

6,018

 

 

4,661

 

 

4,090

 

 

3,671

 

 

2,724

 

 

As of and for the Three Month Period

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

 

2021

 

2020

 

2020

 

2020

 

2020

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

204,314

 

$

163,117

 

$

182,170

 

$

174,176

 

$

129,236

 

Investment securities

 

22,893

 

 

23,247

 

 

23,782

 

 

24,318

 

 

19,759

 

Loans receivable

 

1,766,723

 

 

1,547,138

 

 

1,509,389

 

 

1,447,144

 

 

1,005,180

 

Allowance for loan losses

 

(19,610

)

 

(19,262

)

 

(17,046

)

 

(14,847

)

 

(12,925

)

Total assets

 

2,029,359

 

 

1,766,122

 

 

1,749,619

 

 

1,678,956

 

 

1,184,071

 

Interest bearing deposits

 

903,025

 

 

829,046

 

 

789,347

 

 

742,633

 

 

659,559

 

Noninterest bearing deposits

 

768,690

 

 

592,261

 

 

570,664

 

 

563,794

 

 

345,503

 

Core deposits (2)

 

1,590,850

 

 

1,328,195

 

 

1,270,249

 

 

1,212,215

 

 

892,408

 

Total deposits

 

1,671,715

 

 

1,421,307

 

 

1,360,011

 

 

1,306,427

 

 

1,005,062

 

Total borrowings

 

197,099

 

 

192,292

 

 

241,167

 

 

228,725

 

 

38,564

 

Total shareholders’ equity

 

146,739

 

 

140,217

 

 

135,232

 

 

130,977

 

 

127,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share and Per Share Data (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – basic

$

0.50

 

$

0.39

 

$

0.34

 

$

0.31

 

$

0.23

 

Earnings per share – diluted

$

0.49

 

$

0.38

 

$

0.34

 

$

0.30

 

$

0.22

 

Dividends per share

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Book value per share (4)

$

12.24

 

$

11.73

 

$

11.34

 

$

10.98

 

$

10.66

 

Tangible book value per share (5)

$

12.24

 

$

11.73

 

$

11.34

 

$

10.98

 

$

10.66

 

Weighted avg outstanding shares – basic

 

11,980,092

 

 

11,936,289

 

 

11,919,850

 

 

11,917,394

 

 

11,909,248

 

Weighted avg outstanding shares – diluted

 

12,392,000

 

 

12,280,191

 

 

12,181,272

 

 

12,190,284

 

 

12,208,175

 

Shares outstanding at end of period

 

11,988,636

 

 

11,954,327

 

 

11,930,243

 

 

11,926,263

 

 

11,929,413

 

Stock options outstanding at end of period

 

728,492

 

 

749,397

 

 

769,607

 

 

774,587

 

 

774,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See footnotes on following page

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the Three Month Period

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

 

2021

 

2020

 

2020

 

2020

 

2020

 

Credit Quality Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonperforming assets to total assets

 

0.03

%

 

0.04

%

 

0.26

%

 

0.26

%

 

0.06

%

Nonperforming assets to loans receivable and OREO

 

0.04

%

 

0.05

%

 

0.30

%

 

0.31

%

 

0.08

%

Nonperforming loans to total loans receivable

 

0.04

%

 

0.05

%

 

0.30

%

 

0.31

%

 

0.08

%

Allowance for loan losses to nonperforming loans

 

2966.7

%

 

2705.3

%

 

380.7

%

 

334.8

%

 

1694.0

%

Allowance for loan losses to total loans receivable

 

1.11

%

 

1.25

%

 

1.13

%

 

1.03

%

 

1.29

%

Allowance for loan losses to loans receivable, as adjusted (1)

 

1.59

%

 

1.62

%

 

1.60

%

 

1.46

%

n/a

 

Gross charge-offs

$

18

 

$

386

 

$

2

 

$

13

 

$

124

 

Gross recoveries

$

9

 

$

2

 

$

1

 

$

5

 

$

1

 

Net charge-offs to average loans (6)

 

0.00

%

 

0.10

%

 

0.00

%

 

0.00

%

 

0.05

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Ratios (7):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

8.62

%

 

9.05

%

 

9.20

%

 

9.38

%

 

11.43

%

Common equity Tier 1 risk-based capital

 

10.89

%

 

11.27

%

 

12.14

%

 

12.34

%

 

12.10

%

Tier 1 risk-based capital

 

11.15

%

 

11.55

%

 

12.45

%

 

12.67

%

 

12.43

%

Total risk-based capital

 

13.15

%

 

13.61

%

 

14.61

%

 

14.88

%

 

14.65

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.

 

(2) Core deposits are defined as all deposits excluding BaaS-brokered and all time deposits.

 

(3) Share and per share amounts are based on total common shares outstanding.

 

(4) 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.

 

(5) 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.

 

(6) Annualized calculations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7) Capital ratios are for the Company, Coastal Financial Corporation.

 

17

 


 

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 measures are presented to illustrate the impact of provision for loan losses and provision for income taxes on net income and return on average assets.

 

Pre-tax, pre-provision net income is a non-GAAP measure that excludes the impact of provision for loan losses and provision for income taxes from net income.  The most directly comparable GAAP measure is net income.  

 

Pre-tax, pre-provision return on average assets is a non-GAAP measure that excludes the impact of provision for loan losses and provision for income taxes from return on average assets.  The most directly comparable GAAP measure is return on average assets.

Reconciliations of the GAAP and non-GAAP measures are presented below.

 

 

 

As of and for the Three Months Ended

 

 

(Dollars in thousands, unaudited)

 

March 31,

2021

 

December 31,

2020

 

September 30,

2020

 

June 30,

2020

 

March 31,

2020

 

Pre-tax, pre-provision net income and pre-tax, pre-provision return on average assets:

 

Total average assets

 

$

1,912,202

 

$

1,774,723

 

$

1,704,874

 

$

1,538,546

 

$

1,141,453

 

Total net income

 

 

6,018

 

 

4,661

 

 

4,090

 

 

3,671

 

 

2,724

 

Plus:  provision for loan

     losses

 

 

357

 

 

2,600

 

 

2,200

 

 

1,930

 

 

1,578

 

Plus:  provision for

     income taxes

 

 

1,572

 

 

1,232

 

 

1,082

 

 

967

 

 

714

 

Pre-tax, pre-provision net income

 

$

7,947

 

$

8,493

 

$

7,372

 

$

6,568

 

$

5,016

 

Return on average assets

 

 

1.28

%

 

1.04

%

 

0.95

%

 

0.96

%

 

0.96

%

Pre-tax, pre-provision

     return on average assets:

 

 

1.69

%

 

1.90

%

 

1.72

%

 

1.72

%

 

1.77

%

The following non-GAAP measure is presented to illustrate the impact of loan fees on contractual loan yield.  

 

Contractual 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

 

(Dollars in thousands, unaudited)

 

March 31,

2021

 

December 31,

2020

 

September 30,

2020

 

June 30,

2020

 

March 31,

2020

 

Contractual yield on loans receivable, excluding earned fees :

 

Total average loans receivable

 

$

1,640,108

 

$

1,533,533

 

$

1,493,024

 

$

1,334,991

 

$

966,602

 

Interest and earned fee income on loans

 

 

18,230

 

 

17,885

 

 

16,244

 

 

15,154

 

 

12,627

 

Less: earned fee income on all loans

 

 

(3,974

)

 

(3,765

)

 

(2,692

)

 

(2,182

)

 

(429

)

Adjusted interest income on loans

 

$

14,256

 

$

14,120

 

$

13,552

 

$

12,972

 

$

12,198

 

Yield on loans receivable

 

 

4.51

%

 

4.64

%

 

4.33

%

 

4.57

%

 

5.25

%

Contractual yield on loans

     receivable, excluding earned fees:

 

 

3.53

%

 

3.66

%

 

3.61

%

 

3.91

%

 

5.08

%

Contractual yield on loans

     receivable, excluding earned fees

     and interest on PPP loans (1):

 

 

4.52

%

 

4.65

%

 

4.69

%

 

4.84

%

n/a

 

(1) Non-GAAP measure - see next table of "Non-GAAP Financial Measures" for more information.

 

18

 


 

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 significant 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 significant 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.

Contractual yield on loans receivable, excluding earned fees and interest on PPP loans is a non-GAAP measure that excludes the impact of PPP loans on balance sheet. The most directly comparable GAAP measure is contractual 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.

Reconciliations of the GAAP and non-GAAP measures are presented below.

 

 

 

Three Months Ended

 

(Dollars in thousands, unaudited)

 

March 31, 2021

 

December 31, 2020

 

Adjusted allowance for loan losses to loans receivable:

 

 

 

 

 

 

 

Total loans, net of deferred fees

 

$

1,766,723

 

$

1,547,138

 

Less: PPP loans

 

 

(543,827

)

 

(365,842

)

Less: net deferred fees on PPP loans

 

 

14,279

 

 

5,803

 

Adjusted loans, net of deferred fees

 

$

1,237,175

 

$

1,187,099

 

Allowance for loan losses

 

$

(19,610

)

$

(19,262

)

Allowance for loan losses to loans receivable

 

 

1.11

%

 

1.25

%

Adjusted allowance for loan losses to loans receivable

 

 

1.59

%

 

1.62

%

Yield on loans receivable, excluding PPP loans:

 

 

 

 

 

 

 

Total average loans receivable

 

$

1,640,108

 

$

1,533,533

 

Less: average PPP loans

 

 

(475,941

)

 

(424,290

)

Plus: average deferred fees on PPP loans

 

 

10,788

 

 

7,385

 

Adjusted total average loans receivable

 

$

1,174,955

 

$

1,116,628

 

Interest income on loans

 

$

18,230

 

$

17,885

 

Less: interest and deferred fee income

     recognized on PPP loans

 

 

(4,378

)

 

(3,847

)

Adjusted interest income on loans

 

$

13,852

 

$

14,038

 

Yield on loans receivable

 

 

4.51

%

 

4.64

%

Yield on loans receivable, excluding PPP loans:

 

 

4.78

%

 

5.00

%

Contractual yield on loans receivable, excluding earned fees and interest on PPP loans:

 

Total average loans receivable

 

$

1,640,108

 

$

1,533,533

 

Less: average PPP loans

 

 

(475,941

)

 

(424,290

)

Plus: average deferred fees on PPP loans

 

$

10,788

 

$

7,385

 

Adjusted total average loans receivable

 

$

1,174,955

 

$

1,116,628

 

Interest and earned fee income on loans

 

$

18,230

 

$

17,885

 

Less: earned fee income on all loans

 

$

(3,974

)

$

(3,762

)

Less: interest income on PPP loans

 

 

(1,169

)

 

(1,064

)

Adjusted interest income on loans

 

$

13,086

 

$

13,059

 

Yield on loans receivable

 

 

4.51

%

 

4.64

%

Contractual yield on loans receivable,

     excluding earned fees (1):

 

 

4.52

%

 

4.65

%

Contractual yield on loans receivable,

     excluding earned fees and interest on PPP loans:

 

 

4.52

%

 

4.65

%

(1) Non-GAAP measure - see previous table of "Non-GAAP Financial Measures" for more information.

 

 

 

19

 


 

(Dollars in thousands, unaudited)

 

As of

March 31, 2021

 

As of

December 31, 2020

 

Adjusted Tier 1 leverage capital ratio, excluding PPP loans:

 

Company:

 

 

 

 

 

 

 

Tier 1 capital

 

$

150,055

 

$

143,532

 

Average assets for the leverage capital ratio

 

$

1,741,666

 

$

1,586,350

 

Less:  Average PPP loans

 

 

(475,941

)

 

(424,290

)

Plus:  Average PPPLF borrowings

 

 

170,376

 

 

188,222

 

Adjusted average assets for the leverage capital ratio

 

$

1,436,101

 

$

1,350,282

 

Tier 1 leverage capital ratio

 

 

8.62

%

 

9.05

%

Adjusted Tier 1 leverage capital ratio, excluding PPP loans

 

 

10.45

%

 

10.63

%

Bank:

 

 

 

 

 

 

 

Tier 1 capital

 

$

153,844

 

$

147,262

 

Average assets for the leverage capital ratio

 

$

1,740,660

 

$

1,585,514

 

Less:  Average PPP loans

 

 

(475,941

)

 

(424,290

)

Plus:  Average PPPLF borrowings

 

 

170,376

 

 

188,222

 

Adjusted average assets for the leverage capital ratio

 

$

1,435,095

 

$

1,349,446

 

Tier 1 leverage capital ratio

 

 

8.84

%

 

9.29

%

Adjusted Tier 1 leverage capital ratio, excluding PPP loans

 

 

10.72

%

 

10.91

%

20

 


 

APPENDIX A -

As of March 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 $1.10 billion in outstanding loan balances, or 88.7% of total gross loans outstanding, excluding PPP loans of $543.8 million.  When combined with $393.5 million in unused commitments the total of these three categories is $1.49 billion, or 90.2% of total outstanding loans and loan commitments.

Commercial real estate loans represent the largest segment of our loans, comprising 63.9% of our total balance of outstanding loans, excluding PPP loans, as of March 31, 2021.  Unused commitments to extend credit represents an additional $23.2 million, the combined total exposure in commercial real estate loans represents $816.9 million, or 49.3% 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 March 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

 

$

119,556

 

 

$

3,316

 

 

$

122,872

 

 

 

7.4

%

 

$

1,616

 

 

 

74

 

Hotel/Motel

 

 

115,093

 

 

 

228

 

 

 

115,321

 

 

 

7.0

 

 

 

4,427

 

 

 

26

 

Office

 

 

89,949

 

 

 

3,202

 

 

 

93,151

 

 

 

5.6

 

 

 

967

 

 

 

93

 

Retail

 

 

79,874

 

 

 

2,530

 

 

 

82,404

 

 

 

5.0

 

 

 

974

 

 

 

82

 

Convenience Store

 

 

75,215

 

 

 

5,317

 

 

 

80,532

 

 

 

4.9

 

 

 

1,749

 

 

 

43

 

Mixed use

 

 

71,527

 

 

 

2,200

 

 

 

73,727

 

 

 

4.5

 

 

 

786

 

 

 

91

 

Warehouse

 

 

69,920

 

 

 

1,853

 

 

 

71,773

 

 

 

4.3

 

 

 

1,488

 

 

 

47

 

Mini Storage

 

 

40,998

 

 

 

215

 

 

 

41,213

 

 

 

2.5

 

 

 

2,733

 

 

 

15

 

Manufacturing

 

 

36,124

 

 

 

200

 

 

 

36,324

 

 

 

2.2

 

 

 

1,095

 

 

 

33

 

Groups < 2.0% of total

 

 

95,377

 

 

 

4,170

 

 

 

99,547

 

 

 

6.0

 

 

 

1,223

 

 

 

78

 

Total

 

$

793,633

 

 

$

23,231

 

 

$

816,864

 

 

 

49.3

%

 

$

1,364

 

 

 

582

 

 

21

 


 

Commercial and industrial loans comprise 16.3% of our total balance of outstanding loans, excluding PPP loans, as of March 31, 2021.  Unused commitments to extend credit represents an additional $239.7 million, the combined total exposure in commercial and industrial loans represents $442.1 million, or 26.7% 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 March 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

 

$

102,195

 

 

$

174,805

 

 

$

277,000

 

 

 

16.7

%

 

$

1,503

 

 

 

68

 

Construction/Contractor

     Services

 

 

14,255

 

 

 

24,684

 

 

 

38,939

 

 

 

2.4

 

 

 

94

 

 

 

151

 

Financial Institutions

 

 

16,150

 

 

 

-

 

 

 

16,150

 

 

 

1.0

 

 

 

3,230

 

 

 

5

 

Manufacturing

 

 

11,501

 

 

 

4,459

 

 

 

15,960

 

 

 

1.0

 

 

 

186

 

 

 

62

 

Medical / Dental /

     Other Care

 

 

8,347

 

 

 

7,188

 

 

 

15,535

 

 

 

0.9

 

 

 

149

 

 

 

56

 

Retail

 

 

8,686

 

 

 

4,010

 

 

 

12,696

 

 

 

0.8

 

 

 

334

 

 

 

26

 

Family and Social Services

 

 

9,237

 

 

 

3,283

 

 

 

12,520

 

 

 

0.8

 

 

 

660

 

 

 

14

 

Groups < 0.80% of total

 

 

32,076

 

 

 

21,222

 

 

 

53,298

 

 

 

3.2

 

 

 

113

 

 

 

283

 

Total

 

$

202,447

 

 

$

239,651

 

 

$

442,098

 

 

 

26.7

%

 

$

304

 

 

 

665

 

 

Construction, land and land development loans comprise 8.4% of our total balance of outstanding loans, excluding PPP loans, as of March 31, 2021.  Unused commitments to extend credit represents an additional $130.6 million, the combined total exposure in construction, land and land development loans represents $235.2 million, or 14.2% 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 March 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

 

$

51,516

 

 

$

106,086

 

 

$

157,602

 

 

 

9.5

%

 

$

1,662

 

 

 

31

 

Residential construction

 

 

22,223

 

 

 

20,028

 

 

 

42,251

 

 

 

2.6

 

 

 

966

 

 

 

23

 

Land development

 

 

12,948

 

 

 

2,408

 

 

 

15,356

 

 

 

0.9

 

 

 

1,079

 

 

 

12

 

Developed land loans

 

 

11,863

 

 

 

1,927

 

 

 

13,790

 

 

 

0.8

 

 

 

409

 

 

 

29

 

Undeveloped land loans

 

 

6,046

 

 

 

122

 

 

 

6,168

 

 

 

0.4

 

 

 

378

 

 

 

16

 

Total

 

$

104,596

 

 

$

130,571

 

 

$

235,167

 

 

 

14.2

%

 

$

942

 

 

 

111

 

 

 

 

 

 

 

 

 

22

 

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Document and Entity Information
Apr. 27, 2021
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Apr. 27, 2021
Entity Registrant Name COASTAL FINANCIAL CORP
Entity Central Index Key 0001437958
Entity Emerging Growth Company true
Entity Ex Transition Period true
Entity File Number 001-38589
Entity Incorporation State Country Code WA
Entity Tax Identification Number 56-2392007
Entity Address Address Line1 5415 Evergreen Way
Entity Address City Or Town Everett
Entity Address State Or Province WA
Entity Address Postal Zip Code 98203
City Area Code 425
Local Phone Number 257-9000
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Title of 12(b) Security Common stock, no par value per share
Trading Symbol CCB
Name of each exchange on which registered NASDAQ
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