Date of Report (Date of earliest event reported):
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February 9, 2018
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Coastway Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
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Maryland
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001-36263
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46-4149994
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(State or other jurisdiction of
incorporation or organization)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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One Coastway Blvd., Warwick, Rhode Island
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02886
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code: (401) 330-1600
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[ ] |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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[ ] |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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[ ] |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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[ ] |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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(a)
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Financial Statements of Businesses Acquired. Not applicable.
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(b)
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Pro Forma Financial Information. Not applicable.
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(c)
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Shell Company Transactions. Not applicable.
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(d)
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Exhibits.
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Press release issued by the Company on February 9, 2018 announcing its financial results at and for the three months and year ended December 31, 2017.
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COASTWAY BANCORP, INC.
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(Registrant)
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Date: February 9, 2018
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By:
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/s/ Jeanette Fritz |
Jeanette Fritz
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Executive Vice President and Chief Financial Officer
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• |
Fourth quarter 2017 net interest income increased $453,000, or 9.6%, to $5.2 million compared to the fourth quarter 2016. The increase in net interest income was primarily a result of a $895,000 increase in loan interest income due to growth in average loans of $62.5 million from the fourth quarter of 2016 to the fourth quarter of 2017. The average yield on loans increased to 4.10% for the fourth quarter of 2017 as compared to 3.93% for the fourth quarter of 2016. Deposit interest expense increased $162,000 in the fourth quarter of 2016 primarily due to a $23.3 million increase in average certificates of deposit coupled with an 11 basis points increase in the average cost of certificates of deposit from 1.46% for the fourth quarter of 2016 to 1.57% for the fourth quarter of 2017. Interest expense on borrowed funds increased $366,000 for the fourth quarter of 2017 due to an increase in the average cost of borrowed funds to 1.33% in the fourth quarter of 2017 from 54 basis points in the fourth quarter of 2016, as well as an increase of $23.1 million in the average balance of borrowed funds for the fourth quarter of 2017. The cost of borrowed funds increased due to the increase in short-term interest rates.
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• |
The interest rate spread was 2.89% for the fourth quarter of 2017, a 12 basis points decrease from 3.01% for the fourth quarter of 2016, primarily due to the increase in the average cost of interest-bearing liabilities of 32 basis points, partially offset by the 19 basis points increase in the average yield on interest-earning assets.
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• |
Non-interest income, which is comprised primarily of customer service fees and net gains on sales of loans and other mortgage banking income, increased $126,000 for the fourth quarter of 2017 to $1.8 million compared to the fourth quarter of 2016 primarily as a result of an increase in net gains on sales of loans and other mortgage banking income of $90,000.
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• |
Fourth quarter 2017 non-interest expenses increased $685,000, or 13.5%, to $5.7 million compared with the 2016 fourth quarter. The increase in non-interest expenses for the fourth quarter of 2017 was primarily related to the $558,000 increase in salaries and employee benefits expense due to $253,000 of termination benefits, merit increases, an increase in full-time equivalent employees (FTEs), an increase of $49,000 in supplemental executive retirement expense, a $41,000 increase in employee health insurance, an increase in ESOP expense of $25,000, and an increase in stock-based compensation of $12,000 due to the 2017 grant of equity awards.
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• |
The fourth quarter 2017 provision for loan losses was $122,000 as compared to a provision of $132,000 for the 2016 fourth quarter. The provisions for loan losses were primarily due to loan growth coupled with losses on certain impaired loans. Non-performing loans as a percentage of total loans at December 31, 2017 were 0.77% compared to 0.89% at December 31, 2016.
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• |
Net interest income for 2017 increased $1.3 million, or 6.9% to $19.7 million compared to 2016 net interest income of $18.4 million. The increase in net interest income was primarily due to the $10.8 million increase in average net interest-earning assets to $141.4 million for 2017, principally due to loan growth.
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• |
The interest rate spread decreased 21 basis points to 2.95% for 2017 from 3.16% for 2016. The net interest margin for the year ended December 31, 2017 was 3.16%, a fifteen basis points decrease from 3.31% for the year ended December 31, 2016. Our spread and margin were impacted by the $45.6 million increase in average certificates of deposit and the 63 basis points increase in the average funding cost of borrowed funds utilized to grow average loans by $49.7 million during 2017 at an 11 basis points higher average yield than 2016.
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• |
The decrease in non-interest income was primarily the result of a decrease of $668,000 in net gains on sales of loans and other mortgage banking income. This decrease was due to a loss in the fair value of mortgage derivatives, commitments to sell and loans held for sale of $682,000 recorded during the year ended December 31, 2017, while an increase of $143,000 was recorded during the year ended December 31, 2016 as a component of net gains on sales of loans and other mortgage banking income. Gains on sale of residential mortgage loans were $4.3 million and $4.1 million for the years ended December 31, 2017 and 2016, respectively. Proceeds from residential mortgage loans sold during the year ended December 31, 2017 amounted to $228.3 million as compared to $219.0 million during the year ended December 31, 2016. Customer service fees increased $195,000, or 5.9% to $3.5 million for the year ended December 31, 2017 from $3.3 million for the year ended December 31, 2016.
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• |
The provision for loan losses for 2017 was $435,000 compared to a provision of $475,000 for 2016. We recorded net charge-offs of $8,000 for the year ended December 31, 2017 as compared to $176,000 for the year ended December 31, 2016. Non-performing loans as a percentage of total loans at December 31, 2017 were 0.77% compared to 0.89% at December 31, 2016.
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• |
Non-interest expenses for 2017 increased $1.6 million, or 8.0%, to $21.7 million from $20.1 million in 2016. The increase in non-interest expenses for 2017 was primarily due to an increase of $1.4 million, or 12.7% in salaries and employee benefits expenses for the year ended December 31, 2017 as compared to the year ended December 31, 2016 due to general merit increases, an increase in FTEs, an increase of supplemental executive retirement expense of $197,000, an increase of $138,000 in employee health insurance, an increase of $99,000 in ESOP expense due to an appreciation in our average stock price, an increase of $55,000 in stock based compensation, and a $67,000 increase in compensation cost related to the nonqualified deferred compensation supplemental retirement plan, as well as $253,000 of termination benefits related to three employees. FTEs increased from 144 at December 31, 2016 to 148 FTEs at December 31, 2017. Occupancy expense increased $119,000, or 3.8% from $3.1 million for the year ended December 31, 2016 to $3.2 million for the year ended December 31, 2017, primarily due to an increase in depreciation expense.
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• |
Total assets increased $94.7 million, or 14.7%, to $738.9 million at December 31, 2017 compared to December 31, 2016, primarily due to an increase of $89.4 million in loans, net and an increase in cash and cash equivalents of $9.9 million.
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Total deposits at year-end 2017 increased $29.6 million, or 6.6% to $477.0 million from $447.3 million at December 31, 2016. Borrowed funds increased $60.4 million, or 49.8% during 2017.
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• |
The Bank's average interest-earning assets to average interest-bearing liabilities were 129.31% for 2017, compared to 130.64% for 2016.
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Stockholders' equity was $71.3 million at December 31, 2017, compared to $68.6 million at the end of 2016. The increase in stockholders' equity was primarily due to net income of $2.6 million, stock-based compensation of $144,100 and ESOP shares allocated of $305,000 in 2017, partially offset by stock repurchases of $333,000.
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Selected Financial Condition Data:
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||||||||
December 31,
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December 31,
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|||||||
2017
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2016
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|||||||
(Dollars in thousands)
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||||||||
Total assets
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$
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738,905
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$
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644,191
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Cash and cash equivalents
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54,569
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44,658
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Loans, net
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614,593
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525,215
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Deposits
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476,956
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447,314
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Borrowed funds
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181,675
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121,250
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||||||
Stockholders' equity
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71,345
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68,572
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Selected Operating Data:
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||||||||||||||||
Three months ended
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Year ended
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|||||||||||||||
December 31,
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December 31,
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|||||||||||||||
2017
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2016
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2017
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2016
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(Dollars in thousands, except per share amounts)
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||||||||||||||||
Interest income
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$
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6,525
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$
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5,544
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$
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24,189
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$
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21,225
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||||||||
Interest expense
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1,333
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805
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4,474
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2,786
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||||||||||||
Net interest income
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5,192
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4,739
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19,715
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18,439
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||||||||||||
Provision for loan losses
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122
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132
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435
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475
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||||||||||||
Net interest income after provision for loan losses
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5,070
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4,607
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19,280
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17,964
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Total non-interest income
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1,802
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1,676
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7,538
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7,945
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Total non-interest expense
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5,768
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5,083
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21,747
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20,139
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Income before income taxes
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1,104
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1,200
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5,071
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5,770
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||||||||||||
Income tax expense
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876
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479
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2,479
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2,281
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Net income
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$
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228
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$
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721
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$
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2,592
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$
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3,489
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Basic earnings per share
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$
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0.06
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$
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0.18
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$
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0.65
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$
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0.82
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Diluted earnings per share
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$
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0.06
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$
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0.18
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$
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0.64
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$
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0.82
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Selected Financial Ratios:
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Three months ended
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Year ended
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December 31,
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December 31,
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|||||||||||||||
2017(1)
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2016(1)
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2017
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2016
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(Unaudited)
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||||||||||||||||
Return on average assets
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0.13
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%
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0.45
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%
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0.39
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%
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0.58
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%
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Return on average equity
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1.27
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%
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4.16
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%
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3.72
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%
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5.04
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%
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Average interest-earning assets to average interest-bearing liabilities
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127.36
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%
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129.95
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%
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129.31
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%
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130.64
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%
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Interest rate spread
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2.89
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%
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3.01
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%
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2.95
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%
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3.16
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%
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Net interest margin
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3.11
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%
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3.18
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%
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3.16
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%
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3.31
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%
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Efficiency ratio
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82.47
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%
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79.24
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%
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79.80
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%
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76.33
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%
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December 31,
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December 31,
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|||||||
2017
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2016
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|||||||
(Unaudited)
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||||||||
Asset Quality Ratios:
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Non-performing loans as a percent of total loans
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0.77
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%
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0.89
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%
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Non-performing assets as a percent of total assets
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1.21
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%
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0.79
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%
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Allowance for loan losses as a percent of total loans
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0.48
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%
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0.48
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%
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Allowance for loan losses as a percent of non-performing loans
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61.66
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%
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53.58
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%
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Per share and Stock Market Data:
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Diluted earnings per common share
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$
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0.64
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$
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0.82
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Book value per share
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16.26
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15.57
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Closing Market price
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21.20
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15.65
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Price to book ratio
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1.30
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x
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1.01
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x
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