Coastal Financial Corporation Announces First Quarter 2023 Results

Coastal Financial Corporation
Coastal Financial Corporation

First Quarter 2023 Highlights:

  • Quarterly net income of $12.4 million, or $0.91 per diluted common share, for the three months ended March 31, 2023, compared to $13.1 million, or $0.96 per diluted common share for the three months ended December 31, 2022.

  • Total assets increased $306.6 million, or 9.7%, to $3.45 billion for the quarter ended March 31, 2023, compared to $3.14 billion at December 31, 2022.

  • Loan growth of $209.9 million, or 8.0%, to $2.84 billion for the three months ended March 31, 2023.

    • CCBX loans increased $153.7 million, or 15.2%, to $1.17 billion.

    • Community bank loans increased $56.3 million, or 3.5%, to $1.67 billion.

      • PPP loans decreased $0.9 million, or 19.3%, to $3.8 million.

  • Deposits increased $277.7 million, or 9.9%, to $3.10 billion as of March 31, 2023.

    • CCBX deposit growth of $284.5 million, or 22.2%, to $1.56 billion.

      • Additional $36.9 million in CCBX deposits transferred off balance sheet.

    • Community bank deposits decreased $6.8 million, or 0.4%, to $1.53 billion and community bank cost of deposits was 0.66%.

  • Total revenue increased $7.6 million, or 7.8%, for the three months ended March 31, 2023, compared to the three months ended December 31, 2022

  • Total revenue excluding BaaS credit enhancements and BaaS fraud enhancements increased $1.2 million, or 2.0%, to $59.4 million for the three months ended March 31, 2023, compared to the three months ended December 31, 2022. (A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.)

EVERETT, Wash., April 27, 2023 (GLOBE NEWSWIRE) -- Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), the holding company for Coastal Community Bank (the “Bank”), today reported unaudited financial results for the quarter ended March 31, 2023.

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Quarterly net income for the first quarter of 2023 was $12.4 million, or $0.91 per diluted common share, compared with net income of $13.1 million, or $0.96 per diluted common share, for the fourth quarter of 2022, and $6.2 million, or $0.46 per diluted common share, for the quarter ended March 31, 2022.

Total assets increased $306.6 million, or 9.7%, during the first quarter of 2023 to $3.45 billion, from $3.14 billion at December 31, 2022. Loan growth of $209.9 million, or 8.0%, during the three months ended March 31, 2023 to $2.84 billion, compared to $2.63 billion at December 31, 2022. Loan growth included CCBX loan growth of $153.7 million, or 15.2%, and an increase of $56.3 million, or 3.5% in community bank loans, which is net of $908,000 in PPP loan forgiveness/repayments. Deposits increased $277.7 million, or 9.9%, during the three months ended March 31, 2023 and included CCBX deposit growth of $284.5 million, or 22.2%, and a decrease in community bank deposits of $6.8 million, or 0.4%. The slight decrease in community bank deposits was a result of pricing disciplines as some customers sought higher rate products. Our cost of deposits for the community bank was 0.66% for the three months ended March 31, 2023, compared to 0.37% for the three months ended December 31, 2022.

“The disruption from the bank failures in the first quarter of 2023 was unsettling to the broader financial services industry, but Coastal remains on solid footing with a diversified, stable deposit base. Deposits increased $277.7 million, or 9.9%, during the three months ended March 31, 2023. Fully insured IntraFi network sweep deposits increased to $94.3 million as of March 31, 2023, compared to $12.5 million as of December 31, 2022. These fully insured sweep deposits allow our larger deposit customers to fully insure their deposits through a sweep to other banks. Our liquidity position is supported by careful management of our liquid assets and liabilities as well as access to alternative sources of funds. As of March 31, 2023 we had $393.9 million in cash on the balance sheet and the capacity to borrow up to $575.1 million from Federal Home Loan Bank and the Federal Reserve Bank discount window, which we did not draw down at any point in the first quarter of 2023. Cash on the balance sheet and borrowing capacity totaled $969.0 million, which represented 31.3% of total deposits and exceeded our $768.3 million in uninsured deposits as of March 31, 2023. Our AFS securities portfolio has a weighted average remaining duration of just 11 months and U.S. Treasury securities represent 99.7% of that portfolio. Unrealized losses on the AFS securities portfolio were just $2.3 million, or 0.88%, of shareholders’ equity as of March 31, 2023, which we expect to accrete back into equity at approximately $500,000 a quarter for the next three quarters.

As we move forward in the year, we are well equipped to handle the challenges that may come from this uncertain economic environment. In addition to our well-established community bank base, which includes our 14 branch network and strong local economy, we also have three rings of defense to mitigate credit and counterparty risk with our CCBX partners: (1) well-funded partner cash reserve accounts, (2) partners we believe have the underlying financial strength to replenish and maintain cash reserve balances, and (3) if cash reserves are not replenished then we receive full economic benefit and retention of all interest and fee revenue from the loans. As we continue to evolve and explore new opportunities for growth, our commitment to the safety and soundness of the Company and the Bank continues to be our top priority,” stated Eric Sprink, the CEO of the Company and the Bank.

Highlights in Light of Recent Banking Events:

  • Deposits:

    • Deposits increased $277.7 million, or 9.9%, to $3.10 billion during the three months ended March 31, 2023

      • Includes $94.3 million in fully insured IntraFi network negotiable orders of withdrawal (“NOW”) and money market sweep deposits as of March 31, 2023, compared to $12.5 million as of December 31, 2022.

    • Deposits increased $258.0 million, or 9.09%, from March 10, 2023, the date Silicon Valley Bank was put into receivership, to March 31, 2023.

  • Reduction in Uninsured Deposits:

    • Uninsured deposits of $768.3 million, or 24.8% of total deposits as of March 31, 2023, compared to $835.8 million, or 29.7% of total deposits as of December 31, 2022.

    • Coastal has a lower percent of uninsured deposits than every bank over $10.0 billion in assets as of December 31, 20221.

  • Liquidity/Borrowings:

    • Cash and interest bearing deposits of $393.9 million, of which 89.3% is held at the Federal Reserve Bank, at March 31, 2023 compared to $342.1 million as of December 31, 2022.

    • As of March 31, 2023 we had the capacity to borrow up to $575.1 million from Federal Home Loan Bank and the Federal Reserve Bank discount window.

      • We had no outstanding borrowings under these facilities as of March 31, 2023.

      • We had no outstanding borrowings under these facilities during the quarter ended March 31, 2023.

  • Net Interest Margin:

    • Net interest margin of 7.15% for the quarter ended March 31, 2023 compared to 6.91% for the month ended March 31, 2023.

  • Cost of Deposits:

    • Cost of deposits of 2.13% for the quarter ended March 31, 2023,

    • Cost of deposits of 2.36% for the month ended March 31, 2023.

  • Investment Portfolio:

    • Available for sale (“AFS”) investments of $98.0 million, compared to $97.3 million as of December 31, 2022, of which 99.7% are U.S. Treasuries, with a weighted average remaining duration of 11 months as of March 31, 2023.

    • Held to maturity (“HTM”) investments of $3.7 million, of which 100% are U.S. Agency mortgage backed securities held for CRA purposes, with a fair value of $108,000 less than the carrying value as of March 31, 2023.

1 Source: S&P Global Market Intelligence as of December 31, 2022

Results of Operations Overview

Beginning in 2023, the Company changed the structure for how it reports segment activity. The Company has one main subsidiary, the Bank which consists of three segments: CCBX, the community bank and treasury & administration. The CCBX segment includes our BaaS activities, the community bank segment includes all community banking activities and treasury & administration includes treasury management, overall administration and all other aspects of the Company. Net interest income was $54.5 million for the quarter ended March 31, 2023, an increase of $1.1 million, or 2.0%, from $53.4 million for the quarter ended December 31, 2022, and an increase of $25.2 million, or 86.2%, from $29.3 million for the quarter ended March 31, 2022. Yield on loans receivable was 9.95% for the three months ended March 31, 2023, compared to 9.33% for the three months ended December 31, 2022 and 6.80% for the three months ended March 31, 2022. The increase in net interest income compared to December 31, 2022 and March 31, 2022, was largely related to increased yield on loans resulting from higher interest rates and growth in higher yielding loans, primarily from CCBX. Total average loans receivable for the three months ended March 31, 2023 was $2.71 billion, compared to $2.60 billion for the three months ended December 31, 2022, and $1.77 billion for the three months ended March 31, 2022.

Interest and fees on loans totaled $66.4 million for the three months ended March 31, 2023 compared to $61.2 million and $29.6 million for the three months ended December 31, 2022 and March 31, 2022, respectively. Loan growth of $209.9 million, or 8.0%, during the quarter ended March 31, 2023 included a $153.7 million increase in CCBX loans of which capital call lines form a part. Capital call lines decreased $27.2 million, or 18.6%, during the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022 as a result of normal balance fluctuations and business activities. Capital call lines bear a lower rate of interest, but have less credit risk due to the way the loans are structured compared to other commercial loans. The increase in interest and fees on loans for the quarter ended March 31, 2023, compared to December 31, 2022 and March 31, 2022, was largely due to growth in higher yielding loans and increased interest rates. As a result of the Federal Open Market Committee (“FOMC”) raising the target Federal Funds rate two times during the quarter for a total increase of 0.50%, interest rates on our existing variable rate loans were affected, as are the rates on new loans. We continue to monitor the impact of these increases in interest rates. The FOMC last raised the target Federal Funds rate 0.25% on March 23, 2023.

Interest income from interest earning deposits with other banks was $3.1 million at March 31, 2023 and December 31, 2022, and an increase of $2.7 million compared to March 31, 2022 due to an increase in interest rates. The average balance of interest earning deposits with other banks for the three months ended March 31, 2023 was $271.7 million, compared to $329.4 million and $843.9 million for the three months ended December 31, 2022 and March 31, 2022, respectively. Interest earning deposits with other banks decreased as a result of increased loan demand compared to the three months ended December 31, 2022 and March 31, 2022. Additionally, the average yield on these interest earning deposits with other banks increased to 4.62% for the quarter ended March 31, 2023, compared to 3.73% and 0.19% for the quarters ended December 31, 2022 and March 31, 2022, respectively.

Interest expense was $15.6 million for the quarter ended March 31, 2023, a $3.9 million increase from the quarter ended December 31, 2022 and a $14.7 million increase from the quarter ended March 31, 2022. Interest expense on deposits was $15.0 million for the quarter ended March 31, 2023, compared to $553,000 for the quarter ended March 31, 2022. Interest expense on borrowed funds was $662,000 for the quarter ended March 31, 2023, compared to $537,000 and $321,000 for the quarters ended December 31, 2022 and March 31, 2022, respectively. Interest expense on borrowed funds increased $125,000 compared to the three months ended December 31, 2022, as a result of an increase of $20.0 million in subordinated debt, which closed on November 1, 2022, combined with the increase in interest rates. The $341,000 increase in interest expense on borrowed funds from the quarter ended March 31, 2022 is the result of an increase in subordinated debt and increase in interest rates partially offset by a decrease in Federal Home Loan Bank borrowings, which were paid off in the first quarter of 2022. Interest expense on interest bearing deposits increased $3.9 million for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, and $14.4 million compared to the quarter ended March 31, 2022 as a result an increase in CCBX deposits that are tied to and reprice when the FOMC raises rates, just like our CCBX loans which also reprice when the FOMC raises interest rates. Additionally, as a result of the interest rate increases, in the first and second quarter of 2022 a significant portion of CCBX deposits that were not earning interest were reclassified to interest bearing deposits from noninterest bearing deposits, which also contributed to the increase in interest expense compared to March 31, 2022. These CCBX deposits were reclassified because the current interest rate exceeded the minimum interest rate set in their respective program agreements, as a result of the first and second quarter 2022 interest rate increases. We do not expect additional CCBX deposits will be reclassified as a result of future rate increases.

Total cost of deposits was 2.13% for the three months ended March 31, 2023, compared to 1.56% for the three months ended December 31, 2022, and 0.09%, for the three months ended March 31, 2022. Community bank and CCBX cost of deposits were 0.66% and 3.89% respectively, for the three months ended March 31, 2023, compared to 0.37% and 3.13%, for the three months ended December 31, 2022, and 0.11% and 0.06% for the three months ended March 31, 2022. The increase in cost of deposits for the three months ended March 31, 2023 compared to the prior periods for both segments is a result of increased interest rates and increased CCBX deposits. Also impacting CCBX cost of deposits was the reclassification of deposits from noninterest bearing to interest bearing in the first two quarters of 2022. Any additional FOMC interest rate increases will increase our cost of deposits and result in higher interest expense on interest bearing deposits.

Net Interest Margin

Net interest margin was 7.15% for the three months ended March 31, 2023, compared to 6.96% and 4.45% for the three months ended December 31, 2022 and March 31, 2022, respectively. The increase in net interest margin compared to the three months ended December 31, 2022 and March 31, 2022, was largely a result of increased volume and an increase in higher interest rates on new loans and on existing variable rate loans as they reprice. Loans receivable increased $209.9 million and $873.0 million, compared to December 31, 2022 and March 31, 2022, respectively. Additionally, the Fed Funds interest rate increases have resulted in existing, variable rate loans repricing to higher interest rates. Interest on loans receivable increased $5.2 million, or 8.5%, to $66.4 million for the three months ended March 31, 2023, compared to $61.2 million for the three months ended December 31, 2022, and $29.6 million for the three months ended March 31, 2022. Also contributing to the increase in net interest margin compared to the three months ended March 31, 2022, was a $2.7 million increase in interest on interest earning deposits. These interest earning deposits earned an average rate of 4.62% for the quarter ended March 31, 2023, compared to 3.73% and 0.19% for the quarters ended December 31, 2022 and March 31, 2022, respectively. Average investment securities increased $724,000 to $102.2 million for the three months ended March 31, 2023 compared to the three months ended December 31, 2022, and increased $56.5 million compared to the three months ended March 31, 2022. Interest on investment securities decreased $4,000 for the three months ended March 31, 2023 compared to the three months ended December 31, 2022. Interest on investment securities increased $482,000 compared to March 31, 2022, as a result of the increase in average outstanding balance coupled with increased yield, which also positively impacted net interest margin. These increases in interest income were partially offset by increases in interest expense on interest bearing deposits, as previously discussed.

Cost of funds was 2.19% for the quarter ended March 31, 2023, an increase of 58 basis points from the quarter ended December 31, 2022 and an increase of 205 basis points from the quarter ended March 31, 2022. Cost of deposits for the quarter ended March 31, 2023 was 2.13%, compared to 1.56% for the quarter ended December 31, 2022, and 0.09% for the quarter ended March 31, 2022. The increased cost of funds and deposits compared to December 31, 2022 and March 31, 2022 was largely due to the increase in interest rates compared to the previous periods and growth in higher cost CCBX deposits compared to March 31, 2022.

During the quarter ended March 31, 2023, total loans receivable increased by $209.9 million, or 8.0%, to $2.84 billion, compared to $2.63 billion for the quarter ended December 31, 2022. The increase consists of $153.7 million in CCBX loan growth and $56.3 million in community bank loan growth. Community bank loan growth is net of $0.9 million in PPP loan forgiveness/repayments. Total loans receivable grew $873.0 million as of March 31, 2023, compared to the quarter ended March 31, 2022. This increase includes CCBX loan growth of $650.8 million and community bank loan growth of $222.2 million. Community bank loan growth is net of $43.7 million in PPP loan forgiveness/repayments as of March 31, 2023 compared to March 31, 2022. During the quarter ended March 31, 2023, $101.2 million in CCBX loans were transferred into loans held for sale, with $73.9 million in loans sold during the quarter and $27.3 million remaining in loans held for sale as of March 31, 2023; compared to zero held for sale as of December 31, 2022.

Total yield on loans receivable for the quarter ended March 31, 2023 was 9.95%, compared to 9.33% for the quarter ended December 31, 2022, and 6.80% for the quarter ended March 31, 2022. This increase in yield on loans receivable is a combination of an overall increase in interest rates, repricing of variable rate loans as well as additional volume in higher rate consumer loans from CCBX partners. During the quarter ended March 31, 2023, CCBX loans outstanding increased 15.2%, or $153.7 million, compared to December 31, 2022, with an average CCBX yield of 16.09% and community bank loans increased 3.5%, or $56.3 million, December 31, 2022, with an average yield of 5.97%. The yield on CCBX loans does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans.

The following table summarizes the average yield on loans receivable and cost of deposits for our community bank and CCBX segments for the periods indicated:

 

For the Three Months Ended

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

 

Yield on
Loans (2)

 

Cost of
Deposits (2)

 

Yield on
Loans (2)

 

Cost of
Deposits (2)

 

Yield on
Loans (2)

 

Cost of
Deposits (2)

Community Bank

5.97%

 

0.66%

 

5.70%

 

0.37%

 

5.16%

 

0.11%

CCBX (1)

16.09%

 

3.89%

 

15.20%

 

3.13%

 

12.73%

 

0.06%

Consolidated

9.95%

 

2.13%

 

9.33%

 

1.56%

 

6.80%

 

0.09%

 

 

 

 

 

 

 

 

 

 

 

 

(1)  CCBX yield on loans does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit and fraud enhancements and servicing CCBX loans. To determine Net BaaS loan income earned from CCBX loan relationships, the Company takes BaaS loan interest income and deducts BaaS loan expense to arrive at Net BaaS loan income which can be compared to interest income on the Company’s community bank loans.
(2)  Annualized calculations for periods shown.

The following tables illustrates how BaaS loan interest income is affected by BaaS loan interest expense resulting in net BaaS loan income and the associated yield:

 

 

For the Three Months Ended

 

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

(dollars in thousands, unaudited)

 

Income /
Expense

 

Income /
expense divided
by average
CCBX loans
(2)

 

Income /
Expense

 

Income /
expense divided
by 
average
CCBX loans
(2)

 

Income /
Expense

 

Income /
expense divided
by average
CCBX loans
(2)

BaaS loan interest income

 

$

42,220

 

16.09

%

 

$

38,086

 

15.20

%

 

$

11,992

 

12.73

%

Less: BaaS loan expense

 

 

17,554

 

6.69

%

 

 

17,215

 

6.87

%

 

 

8,290

 

8.80

%

Net BaaS loan income (1)

 

$

24,666

 

9.40

%

 

$

20,871

 

8.33

%

 

$

3,702

 

3.93

%

Average BaaS Loans

 

$

1,064,192

 

 

 

$

994,080

 

 

 

$

382,153

 

 

(1) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
(2) Annualized calculations shown for quarterly periods presented.

Key Performance Ratios

Return on average assets (“ROA”) was 1.58% for the quarter ended March 31, 2023 compared to 1.66% and 0.93% for the quarters ended December 31, 2022 and March 31, 2022, respectively.  ROA for the quarter ended March 31, 2023, was impacted by an increase in deposits, loans and overall higher interest rates on interest earning assets, compared to the quarters ended December 31, 2022 and March 31, 2022.

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

 

 

Three Months Ended

(unaudited)

 

March 31,
2023

 

December 31,
2022

 

September 30,
2022

 

June 30,
2022

 

March 31,
2022

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

1.58

%

 

1.66

%

 

1.45

%

 

1.41

%

 

0.93

%

Return on average equity (1)

 

19.89

%

 

21.86

%

 

19.36

%

 

18.86

%

 

12.12

%

Yield on earnings assets (1)

 

9.19

%

 

8.47

%

 

7.38

%

 

5.94

%

 

4.58

%

Yield on loans receivable (1)

 

9.95

%

 

9.33

%

 

8.46

%

 

7.34

%

 

6.80

%

Cost of funds (1)

 

2.19

%

 

1.61

%

 

0.85

%

 

0.29

%

 

0.14

%

Cost of deposits (1)

 

2.13

%

 

1.56

%

 

0.82

%

 

0.25

%

 

0.09

%

Net interest margin (1)

 

7.15

%

 

6.96

%

 

6.58

%

 

5.66

%

 

4.45

%

Noninterest expense to average assets (1)

 

5.69

%

 

5.97

%

 

6.66

%

 

5.29

%

 

4.52

%

Noninterest income to average assets (1)

 

6.28

%

 

5.43

%

 

4.48

%

 

3.53

%

 

3.27

%

Efficiency ratio

 

43.03

%

 

48.94

%

 

61.12

%

 

58.38

%

 

59.34

%

Loans receivable to deposits (2)

 

92.55

%

 

93.25

%

 

89.92

%

 

86.54

%

 

76.24

%

(1)  Annualized calculations shown for quarterly periods presented.
(2)  Includes loans held for sale.

Noninterest Income

The following table details noninterest income for the periods indicated:

 

Three Months Ended

 

March 31,

 

December 31,

 

March 31,

(dollars in thousands; unaudited)

2023

 

2022

 

2022

Deposit service charges and fees

$

910

 

$

946

 

 

$

884

Gain on sales of loans, net

 

123

 

 

 

 

 

Loan referral fees

 

 

 

 

 

 

602

Unrealized gain on equity securities, net

 

39

 

 

(18

)

 

 

Mortgage broker fees

 

19

 

 

25

 

 

 

123

Other

 

280

 

 

273

 

 

 

265

Noninterest income, excluding BaaS program income and BaaS indemnification income

 

1,371

 

 

1,226

 

 

 

1,874

Servicing and other BaaS fees

 

948

 

 

1,001

 

 

 

1,169

Transaction fees

 

917

 

 

964

 

 

 

493

Interchange fees

 

789

 

 

785

 

 

 

432

Reimbursement of expenses

 

921

 

 

857

 

 

 

372

BaaS program income

 

3,575

 

 

3,607

 

 

 

2,466

BaaS credit enhancements

 

42,362

 

 

31,164

 

 

 

13,075

Baas fraud enhancements

 

1,999

 

 

6,818

 

 

 

4,571

BaaS indemnification income

 

44,361

 

 

37,982

 

 

 

17,646

Total BaaS income

 

47,936

 

 

41,589

 

 

 

20,112

Total noninterest income

$

49,307

 

$

42,815

 

 

$

21,986

 

 

 

 

 

 

 

 

 

 

Noninterest income was $49.3 million for the three months ended March 31, 2023, an increase of $6.5 million from $42.8 million for the three months ended December 31, 2022, and an increase of $27.3 million from $22.0 million for the three months ended March 31, 2022. The increase in noninterest income over the quarter ended December 31, 2022 was primarily due to an increase of $6.3 million in total BaaS income. The $6.3 million increase in total BaaS income included a $11.2 million increase in BaaS credit enhancements related to the allowance for credit losses and reserve for unfunded commitments, a $4.8 million decrease in BaaS fraud enhancements, and a decrease of $32,000 in BaaS program income. The decrease in BaaS program income is a result of seasonality and lower implementation fees (see “Appendix B” for more information on the accounting for BaaS allowance for credit losses, reserve for unfunded commitments and credit and fraud enhancements). The $27.3 million increase in noninterest income over the quarter ended March 31, 2022 was primarily due to a $27.8 million increase in BaaS income. The $27.8 million increase in BaaS income included a $29.3 million increase in BaaS credit enhancements, a $2.6 million decrease in BaaS fraud enhancements and a $1.1 million increase in BaaS program income.

Our CCBX segment continues to evolve, and we now have 25 relationships, at varying stages, as of March 31, 2023. We continue to refine the criteria for CCBX partnerships and are exiting relationships where it makes sense for both parties and are focusing more on selecting larger and more established partners, with experienced management teams, existing customer bases and strong financial positions.

The following table illustrates the activity and evolution in CCBX relationships for the periods presented. During the quarter ended March 31, 2023, two partners wound down their CCBX programs; these programs were not material in terms of income and sources of funds or loans.

 

As of

(unaudited)

March 31, 2023

December 31, 2022

March 31, 2022

Active

18

19

20

Friends and family / testing

1

1

1

Implementation / onboarding

1

0

5

Signed letters of intent

4

5

2

Wind down - preparing to exit relationship

1

2

0

Total CCBX relationships

25

27

28

 

 

 

 

The following table details noninterest expense for the periods indicated:

Noninterest Expense

 

 

Three Months Ended

 

 

March 31,

 

December 31,

 

March 31,

(dollars in thousands; unaudited)

 

2023

 

2022

 

2022

Salaries and employee benefits

 

$

15,575

 

$

14,399

 

$

11,085

Legal and professional expenses

 

 

3,062

 

 

2,799

 

 

708

Data processing and software licenses

 

 

1,840

 

 

1,768

 

 

1,861

Occupancy

 

 

1,219

 

 

1,182

 

 

1,136

Point of sale expense

 

 

753

 

 

710

 

 

248

Director and staff expenses

 

 

626

 

 

515

 

 

344

FDIC assessments

 

 

595

 

 

550

 

 

604

Excise taxes

 

 

455

 

 

702

 

 

349

Marketing

 

 

95

 

 

109

 

 

99

Other

 

 

890

 

 

335

 

 

1,120

Noninterest expense, excluding BaaS loan and BaaS fraud expense

 

 

25,110

 

 

23,069

 

 

17,554

BaaS loan expense

 

 

17,554

 

 

17,215

 

 

8,290

BaaS fraud expense

 

 

1,999

 

 

6,819

 

 

4,571

BaaS loan and fraud expense

 

 

19,553

 

 

24,034

 

 

12,861

Total noninterest expense

 

$

44,663

 

$

47,103

 

$

30,415

 

 

 

 

 

 

 

 

 

 

Total noninterest expense decreased $2.4 million to $44.7 million for the three months ended March 31, 2023, compared to $47.1 million for the three months ended December 31, 2022 and increased $14.3 million from $30.4 million for the three months ended March 31, 2022. The decrease in noninterest expense for the quarter ended March 31, 2023, as compared to the quarter ended December 31, 2022, was primarily due to a $4.5 million decrease in BaaS expense (of which $4.8 million is related to a decrease in partner fraud expense partially offset by an increase of $339,000 in partner loan expense). Partner loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements, and servicing CCBX loans. Partner fraud expense represents non-credit fraud losses on partner’s customer loan and deposit accounts. A portion of this expense is realized during the quarter during which the loss occurs, and a portion is estimated based on historical or other information from our partners.

The increase in noninterest expenses for the quarter ended March 31, 2023 compared to the quarter ended March 31, 2022 were largely due to an increase of $6.7 million in BaaS partner expense (increase of $9.3 million of which is related to partner loan expense and a decrease of $2.6 million of which is related to partner fraud expense), $4.5 million increase in salary and employee benefits related to hiring staff for CCBX and additional staff for our ongoing growth initiatives and $2.4 million increase in legal and professional fees due to increased fees related to data and risk management, and increased consulting expenses for projects and enhanced monitoring. Additionally, there was a $505,000 increase in point of sale expenses which is attributed to increased CCBX activity.

Provision for Income Taxes

The provision for income taxes was $3.0 million for the three months ended March 31, 2023, $2.4 million for the three months ended December 31, 2022 and $1.7 million for the first quarter of 2023. The provision for income taxes was higher for the three months ended March 31, 2023 due to fewer favorable tax deductions related to the exercise of equity awards compared to December 31, 2022. The Company is subject to various state taxes that are assessed as CCBX activities and employees expand into other states, which has increased the overall tax rate used in calculating the provision for income taxes in the current and future periods. The Company uses a federal statutory tax rate of 21.0% as a basis for calculating provision for federal income taxes and 2.62% for calculating the provision for state taxes. The effective tax rate was lower for the three months ended March 31, 2023 due to tax benefits that resulted from the exercise and deductibility of equity awards.

Financial Condition Overview

Total assets increased $306.6 million, or 9.7%, to $3.45 billion at March 31, 2023 compared to $3.14 billion at December 31, 2022. The increase is primarily due to loans receivable increasing $209.9 million during the quarter ended March 31, 2023 coupled with a $46.8 million increase in interest earning deposits with other banks. Additionally, there were $27.3 million in loans held for sale at March 31, 2023, compared to zero at December 31, 2022.

Total assets increased $617.3 million, or 21.8%, at March 31, 2023, compared to $2.83 billion at March 31, 2022. The increase is primarily due to loans receivable increasing $873.0 million, and a decrease of $34.5 million in investment securities and a $293.2 million decrease in interest earning deposits with other banks, resulting from increased loan demand and funds being shifted from interest earning deposits with other banks to loans, compared to March 31, 2022.

Loans Receivable

Total loans receivable increased $209.9 million to $2.84 billion at March 31, 2023, from $2.63 billion at December 31, 2022, and increased $873.0 million from $1.96 billion at March 31, 2022.  The increase in loans receivable over the quarter ended December 31, 2022 was the result of $153.7 million in CCBX loan growth and $56.3 million in community bank loan growth. Community bank loan growth is net of $908,000 in PPP loan forgiveness/repayments compared to the quarter ended December 31, 2022. The change in loans receivable over the quarter ended March 31, 2022 includes CCBX loan growth of $650.8 million and $222.2 million in community bank loan growth as of March 31, 2023.  Community bank loan growth is net of $43.7 million in PPP loan forgiveness and paydowns since March 31, 2022.

The following table summarizes the loan portfolio at the period indicated:

 

As of March 31, 2023

 

December 31, 2022

 

As of March 31, 2022

(dollars in thousands; unaudited)

Amount

 

Percent

 

Amount

 

Percent

 

Amount

 

Percent

Commercial and industrial loans:

 

 

 

 

 

 

 

 

 

 

 

PPP loans

$

3,791

 

 

0.1

%

 

$

4,699

 

 

0.2

%

 

$

47,467

 

 

2.4

%

Capital call lines

 

118,796

 

 

4.2

 

 

 

146,029

 

 

5.5

 

 

 

218,675

 

 

11.1

 

All other commercial & industrial loans

 

203,751

 

 

7.2

 

 

 

161,900

 

 

6.1

 

 

 

128,181

 

 

6.5

 

Total commercial and industrial loans:

 

326,338

 

 

11.5

 

 

 

312,628

 

 

11.8

 

 

 

394,323

 

 

20.0

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

Construction, land and land development

 

206,635

 

 

7.3

 

 

 

214,055

 

 

8.1

 

 

 

208,108

 

 

10.6

 

Residential real estate

 

455,507

 

 

16.0

 

 

 

449,157

 

 

17.1

 

 

 

268,716

 

 

13.6

 

Commercial real estate

 

1,102,771

 

 

38.8

 

 

 

1,048,752

 

 

39.8

 

 

 

889,483

 

 

45.1

 

Consumer and other loans

 

752,528

 

 

26.4

 

 

 

608,771

 

 

23.2

 

 

 

210,343

 

 

10.7

 

Gross loans receivable

 

2,843,779

 

 

100.0

%

 

 

2,633,363

 

 

100.0

%

 

 

1,970,973

 

 

100.0

%

Net deferred origination fees - PPP loans

 

(63

)

 

 

 

 

(82

)

 

 

 

 

(1,365

)

 

 

Net deferred origination fees - all other loans

 

(6,512

)

 

 

 

 

(6,025

)

 

 

 

 

(5,399

)

 

 

Loans receivable

$

2,837,204

 

 

 

 

$

2,627,256

 

 

 

 

$

1,964,209

 

 

 

Loan Yield (1)

 

9.95

%

 

 

 

 

9.33

%

 

 

 

 

6.80

%

 

 

(1)  Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.

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

The following tables detail the community bank and CCBX loans which are included in the total loan portfolio table above.

Community Bank

 

As of

 

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

(dollars in thousands; unaudited)

 

Balance

 

% to Total

 

Balance

 

% to Total

 

Balance

 

% to Total

Commercial and industrial loans:

 

 

 

 

 

 

 

 

 

 

 

 

PPP loans

 

$

3,791

 

 

0.2

%

 

$

4,699

 

 

0.3

%

 

$

47,467

 

 

3.3

%

All other commercial & industrial loans

 

 

155,082

 

 

9.3

 

 

 

146,982

 

 

9.1

 

 

 

124,160

 

 

8.5

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land and land development loans

 

 

206,635

 

 

12.3

 

 

 

214,055

 

 

13.2

 

 

 

208,108

 

 

14.3

 

Residential real estate loans

 

 

206,140

 

 

12.3

 

 

 

204,581

 

 

12.6

 

 

 

184,485

 

 

12.7

 

Commercial real estate loans

 

 

1,102,771

 

 

65.7

 

 

 

1,048,752

 

 

64.7

 

 

 

889,483

 

 

61.1

 

Consumer and other loans:

 

 

 

 

 

 

 

 

 

 

 

 

Other consumer and other loans

 

 

2,860

 

 

0.2

 

 

 

1,725

 

 

0.1

 

 

 

1,959

 

 

0.1

 

Gross Community Bank loans receivable

 

 

1,677,279

 

 

100.0

%

 

 

1,620,794

 

 

100.0

%

 

 

1,455,662

 

 

100.0

%

Net deferred origination fees

 

 

(6,265

)

 

 

 

 

(6,042

)

 

 

 

 

(6,842

)

 

 

Loans receivable

 

$

1,671,014

 

 

 

 

$

1,614,752

 

 

 

 

$

1,448,820

 

 

 

Loan Yield(1)

 

 

5.97

%

 

 

 

 

5.70

%

 

 

 

 

5.16

%

 

 

(1)  Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.

CCBX

 

As of

 

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

(dollars in thousands; unaudited)

 

Balance

 

% to Total

 

Balance

 

% to Total

 

Balance

 

% to Total

Commercial and industrial loans:

 

 

 

 

 

 

 

 

 

 

 

 

Capital call lines

 

$

118,796

 

 

10.2

%

 

$

146,029

 

 

14.4

%

 

$

218,675

 

 

42.5

%

All other commercial & industrial loans

 

 

48,669

 

 

4.1

 

 

 

14,918

 

 

1.5

 

 

 

4,021

 

 

0.8

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate loans

 

 

249,367

 

 

21.4

 

 

 

244,576

 

 

24.2

 

 

 

84,231

 

 

16.3

 

Consumer and other loans:

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards

 

 

318,187

 

 

27.3

 

 

 

279,644

 

 

27.6

 

 

 

55,090

 

 

10.7

 

Other consumer and other loans

 

 

431,481

 

 

37.0

 

 

 

327,402

 

 

32.3

 

 

 

153,294

 

 

29.7

 

Gross CCBX loans receivable

 

 

1,166,500

 

 

100.0

%

 

 

1,012,569

 

 

100.0

%

 

 

515,311

 

 

100.0

%

Net deferred origination fees

 

 

(310

)

 

 

 

 

(65

)

 

 

 

 

78

 

 

 

Loans receivable

 

$

1,166,190

 

 

 

 

$

1,012,504

 

 

 

 

$

515,389

 

 

 

Loan Yield - CCBX (1)(2)

 

 

16.09

%

 

 

 

 

15.20

%

 

 

 

 

12.73

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  CCBX yield does not include the impact of BaaS loan expense.  BaaS loan expense represents the amount paid or payable to partners for credit enhancements and servicing CCBX loans. See reconciliation of the non-GAAP measures at the end of this earnings release for the impact of BaaS loan expense on CCBX loan yield.
(2)  Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.

Deposits

Total deposits increased $277.7 million, or 9.9%, to $3.10 billion at March 31, 2023 from $2.82 billion at December 31, 2022. The increase was due to a $381.6 million increase in core deposits, combined with a $2.4 million decrease in time deposits and includes BaaS-brokered deposits that are now classified as NOW accounts due to a change in the relationship agreement with one of our partners; these deposits increased to $275.4 million as of March 31, 2023 compared to $101.5 million as of December 31, 2022. Deposits in our CCBX segment increased $284.5 million, from $1.28 billion at December 31, 2022, to $1.56 billion at March 31, 2023 and community bank deposits decreased $6.8 million to $1.53 billion at March 31, 2023. The deposits from our CCBX segment are predominately classified as interest bearing, or NOW and money market accounts. During the quarter ended March 31, 2023, noninterest bearing deposits decreased $13.2 million, or 1.7%, to $761.8 million from $775.0 million at December 31, 2022. In the quarter ended March 31, 2023 compared to the quarter ended December 31, 2022, NOW and money market accounts increased $402.7 million, savings deposits decreased $7.9 million, and time deposits decreased $2.4 million. Included in total deposits is $94.3 million in IntraFi network NOW and money market sweep accounts as of March 31, 2023, which provides our customers with fully insured deposits through a sweep to other banks. Uninsured deposits decreased to $768.3 million as of March 31, 2023, compared to $835.8 million as of December 31, 2022.

Total deposits increased $518.8 million, or 20.1%, to $3.10 billion at March 31, 2023 compared to $2.58 billion at March 31, 2022. The increase is largely the result of growth in CCBX deposits. Noninterest bearing deposits decreased $76.2 million, or 9.1%, to $761.8 million at March 31, 2023 from $838.0 million at March 31, 2022. NOW and money market accounts increased $690.6 million, or 45.5%, to $2.21 billion at March 31, 2023, and savings accounts decreased $7.1 million, or 6.7%, and time deposits decreased $13.3 million, or 33.0%, in the first quarter of 2023 compared to the first quarter of 2022 and includes BaaS-brokered deposits that are now classified as NOW accounts due to a change in the relationship agreement with one of our partners; these deposits increased to $275.4 million as of March 31, 2023, compared to $75.1 million as of March 31, 2022. These deposits increased as a result of sweeping them back on the balance sheet. Additionally, as of March 31, 2023 we have access to $36.9 million in CCBX customer deposits that are currently being transferred off the Bank’s balance sheet to other financial institutions on a daily basis. The Bank could retain these deposits for liquidity and funding purposes if needed. If a portion of these deposits are retained, they would be classified as NOW accounts. Efforts to retain and grow core deposits are evidenced by the high ratios in these categories when compared to total deposits.

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

 

As of March 31, 2023

 

As of December 31, 2022

 

As of March 31, 2022

(dollars in thousands; unaudited)

Amount

 

Percent of
Total
Deposits

 

Balance

 

Percent of
Total
Deposits

 

Balance

 

Percent of
Total
Deposits

Demand, noninterest bearing

$

761,800

 

 

24.6

%

 

$

775,012

 

 

27.5

%

 

$

838,044

 

 

32.5

%

NOW and money market

 

2,207,121

 

 

71.3

 

 

 

1,804,399

 

 

64.0

 

 

 

1,516,546

 

 

58.9

 

Savings

 

99,241

 

 

3.2

 

 

 

107,117

 

 

3.8

 

 

 

106,364

 

 

4.1

 

Total core deposits

 

3,068,162

 

 

99.1

 

 

 

2,686,528

 

 

95.3

 

 

 

2,460,954

 

 

95.5

 

Brokered deposits

 

1

 

 

 

 

 

101,546

 

 

3.6

 

 

 

75,145

 

 

2.9

 

Time deposits less than $100,000

 

11,343

 

 

0.4

 

 

 

12,596

 

 

0.5

 

 

 

14,856

 

 

0.6

 

Time deposits $100,000 and over

 

15,717

 

 

0.5

 

 

 

16,851

 

 

0.6

 

 

 

25,515

 

 

1.0

 

Total

$

3,095,223

 

 

100.0

%

 

$

2,817,521

 

 

100.0

%

 

$

2,576,470

 

 

100.0

%

Cost of deposits (1)

 

2.13

%

 

 

 

 

1.56

%

 

 

 

 

0.09

%

 

 

(1)  Cost of deposits is annualized for the three months ended for each period presented.

The following tables detail the community bank and CCBX deposits which are included in the total deposit portfolio table above.

Community Bank

 

As of

 

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

(dollars in thousands; unaudited)

 

Balance

 

% to Total

 

Balance

 

% to Total

 

Balance

 

% to Total

Demand, noninterest bearing

 

$

664,452

 

 

43.4

%

 

$

694,179

 

 

45.2

%

 

$

724,723

 

 

43.2

%

NOW and money market

 

 

743,548

 

 

48.6

 

 

 

709,490

 

 

46.1

 

 

 

805,858

 

 

48.1

 

Savings

 

 

96,330

 

 

6.3

 

 

 

105,101

 

 

6.8

 

 

 

106,050

 

 

6.3

 

Total core deposits

 

 

1,504,330

 

 

98.3

 

 

 

1,508,770

 

 

98.1

 

 

 

1,636,631

 

 

97.6

 

Brokered deposits

 

 

1

 

 

0.0

 

 

 

1

 

 

0.0

 

 

 

2

 

 

0.0

 

Time deposits less than $100,000

 

 

11,343

 

 

0.7

 

 

 

12,596

 

 

0.8

 

 

 

14,856

 

 

0.9

 

Time deposits $100,000 and over

 

 

15,717

 

 

1.0

 

 

 

16,851

 

 

1.1

 

 

 

25,515

 

 

1.5

 

Total Community Bank deposits

 

$

1,531,391

 

 

100.0

%

 

$

1,538,218

 

 

100.0

%

 

$

1,677,004

 

 

100.0

%

Cost of deposits(1)

 

 

0.66

%

 

 

 

 

0.37

%

 

 

 

 

0.11

%

 

 

(1)  Cost of deposits is annualized for the three months ended for each period presented.

CCBX

 

As of

 

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

(dollars in thousands; unaudited)

 

Balance

 

% to Total

 

Balance

 

% to Total

 

Balance

 

% to Total

Demand, noninterest bearing

 

$

97,348

 

 

6.2

%

 

$

80,833

 

 

6.3

%

 

$

113,321

 

 

12.6

%

NOW and money market

 

 

1,463,573

 

 

93.6

 

 

 

1,094,909

 

 

85.6

 

 

 

710,688

 

 

79.0

 

Savings

 

 

2,911

 

 

0.2

 

 

 

2,016

 

 

0.2

 

 

 

314

 

 

 

Total core deposits

 

 

1,563,832

 

 

100.0

 

 

 

1,177,758

 

 

92.1

 

 

 

824,323

 

 

91.6

 

BaaS-brokered deposits

 

 

 

 

 

 

 

101,545

 

 

7.9

 

 

 

75,143

 

 

8.4

 

Total CCBX deposits

 

$

1,563,832

 

 

100.0

%

 

$

1,279,303

 

 

100.0

%

 

$

899,466

 

 

100.0

%

Cost of deposits (1)

 

 

3.89

%

 

 

 

 

3.13

%

 

 

 

 

0.06

%

 

 

(1)  Cost of deposits is annualized for the three months ended for each period presented.

Borrowings

As of March 31, 2023 the Company has the capacity to borrow up to a total of $575.1 million from the Federal Reserve Bank discount window and Federal Home Loan Bank, with no borrowings outstanding as of March 31, 2023.

Shareholders’ Equity

During the three months ended March 31, 2023, the Company contributed $15.0 million in capital to the Bank.  The Company had a cash balance of $7.7 million as of March 31, 2023, which is retained for general operating purposes, including debt repayment, and for funding $820,000 in commitments to bank technology funds.

Total shareholders’ equity increased $15.3 million since December 31, 2022.  The increase in shareholders’ equity was primarily due to $12.4 million in net earnings, $954,000 net credit adjustment to retained earnings from implementing CECL on January 1, 2023 and $567,000 increase from stock options being exercised during the three months ended March 31, 2023.

Capital Ratios

The Company and the Bank remained well capitalized at March 31, 2023, as summarized in the following table.

(unaudited)

 

Coastal Community Bank

 

Coastal Financial Corporation

 

Minimum Well Capitalized Ratios under Prompt Corrective Action (1)

Tier 1 leverage capital

 

9.35

%

 

8.29

%

 

5.00

%

Common Equity Tier 1 risk-based capital

 

9.76

%

 

8.61

%

 

6.50

%

Tier 1 risk-based capital

 

9.76

%

 

8.73

%

 

8.00

%

Total risk-based capital

 

11.03

%

 

11.49

%

 

10.00

%

(1) Presents the minimum capital ratios for an insured depository institution, such as the Bank, to be considered well capitalized under the Prompt Corrective Action framework. The minimum requirements for the Company to be considered well capitalized under Regulation Y include to maintain, on a consolidated basis, a total risk-based capital ratio of 10.0 percent or greater and a tier 1 risk-based capital ratio of 6.0 percent or greater.

Asset Quality

Effective January 1, 2023 the Company implemented the CECL allowance model which calculates reserves over the life of the loan and is largely driven by portfolio characteristics, economic outlook, and other key methodology assumptions versus the incurred loss model, which is what we were previously using. As a result of implementing CECL, there was a one-time adjustment to the 2023 opening allowance balance of $3.9 million. The day 1 CECL adjustment for community bank loans included a reduction of $310,000 to the community bank allowance driven by the reversal of the unallocated balance and a reduction of $340,000 related to the community bank unfunded commitment reserve also driven by the reversal of the unallocated balance. This was offset by an increase to the CCBX allowance for $4.2 million. With the mirror image approach accounting related to the contingent receivable for CCBX partner loans, there was a CECL day 1 increase to the indemnification asset in the amount of $4.5 million. Net, the day 1 impact to retained earnings for the Bank’s transition to CECL was an increase of $954,000, excluding the impact of income taxes.

The total allowance for credit losses was $89.1 million and 3.14% of loans receivable at March 31, 2023 compared to $74.0 million and 2.82% at December 31, 2022 and $38.8 million and 1.97% at March 31, 2022. The allowance for credit loss allocated to the CCBX portfolio was $68.4 million and 5.87% of CCBX loans receivable at March 31, 2023, with $20.7 million of allowance for credit loss allocated to the community bank or 1.24% of total community bank loans receivable.

The following table details the allocation of the allowance for credit loss as of the period indicated:

 

 

As of March 31, 2023

 

As of December 31, 2022

 

As of March 31, 2022

(dollars in thousands; unaudited)

 

Community Bank

 

CCBX

 

Total

 

Community Bank

 

CCBX

 

Total

 

Community Bank

 

CCBX

 

Total

Loans receivable

 

$

1,671,014

 

 

$

1,166,190

 

 

$

2,837,204

 

 

$

1,614,751

 

 

$

1,012,505

 

 

$

2,627,256

 

 

$

1,448,820

 

 

$

515,389

 

 

$

1,964,209

 

Allowance for credit losses

 

 

(20,708

)

 

 

(68,415

)

 

 

(89,123

)

 

 

(20,636

)

 

 

(53,393

)

 

 

(74,029

)

 

 

(20,643

)

 

 

(18,127

)

 

 

(38,770

)

Allowance for credit losses to
total loan receivable

 

 

1.24

%

 

 

5.87

%

 

 

3.14

%

 

 

1.28

%

 

 

5.27

%

 

 

2.82

%

 

 

1.42

%

 

 

3.52

%

 

 

1.97

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses - loans totaled $43.5 million for the three months ended March 31, 2023, $33.6 million for the three months ended December 31, 2022, and $12.9 million for the three months ended March 31, 2022. Net charge-offs totaled $32.3 million for the quarter ended March 31, 2023, compared to $18.9 million for the quarter ended December 31, 2022 and $2.8 million for the quarter ended March 31, 2022. Net charge-offs increased due to CCBX partner loans and the reclassification and charge-off of negative deposit accounts. CCBX partner agreements provide for a credit enhancement that covers the net-charge-offs on CCBX loans and negative deposit accounts, except in accordance with the program agreement for one partner where the Company is responsible for credit losses on approximately 10% of a $137.4 million loan portfolio. At March 31, 2023, our 10% of this portfolio represented $13.9 million in loans.

The following table details net charge-offs for the core bank and CCBX for the period indicated:

 

 

Three Months Ended

 

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

(dollars in thousands; unaudited)

 

Community Bank

 

CCBX

 

Total

 

Community Bank

 

CCBX

 

Total

 

Community Bank

 

CCBX

 

Total

Gross charge-offs

 

$

50

 

 

$

34,117

 

 

$

34,167

 

 

$

10

 

 

$

18,876

 

 

$

18,886

 

 

$

4

 

 

$

2,804

 

 

$

2,808

 

Gross recoveries

 

 

(5

)

 

 

(1,860

)

 

 

(1,865

)

 

 

(3

)

 

 

(30

)

 

 

(33

)

 

 

(4

)

 

 

 

 

 

(4

)

Net charge-offs

 

$

45

 

 

$

32,257

 

 

$

32,302

 

 

$

7

 

 

$

18,846

 

 

$

18,853

 

 

$

 

 

$

2,804

 

 

$

2,804

 

Net charge-offs to average loans (1)

 

 

0.01

%

 

 

12.29

%

 

 

4.84

%

 

 

0.00

%

 

 

7.52

%

 

 

2.87

%

 

 

0.00

%

 

 

2.98

%

 

 

0.64

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The increase in the Company’s provision for credit losses - loans during the quarter ended March 31, 2023, is largely related to the provision for loan growth in CCBX partner loans. During the quarter ended March 31, 2023, a $43.1 million provision for credit losses - loans was recorded for CCBX partner loans based on management’s analysis, compared to the $33.1 million provision for credit losses - loans that was recorded for CCBX for the quarter ended December 31, 2022. CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses. In accordance with accounting guidance, we estimate and record a provision for expected losses for these CCBX loans and reclassified negative deposit accounts. When the provision for CCBX credit losses and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements). Expected losses are recorded in the allowance for credit losses. The credit enhancement asset is relieved when credit enhancement recoveries are received from the CCBX partner. CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses by absorbing incurred credit and fraud losses. If our partner is unable to fulfill their contracted obligations then the bank could be exposed to additional credit losses. Management regularly evaluates and manages this counterparty risk. The Company is responsible for credit losses on approximately 10% of a $137.4 million CCBX loan portfolio. At March 31, 2023, 10% of this portfolio represented $13.9 million in loans. The factors used in management’s analysis for community bank credit losses indicated that a provision of $428,000 and $504,000 was needed for the quarters ended March 31, 2023 and December 31, 2022, respectively.

The following table details the provision expense for the community bank and CCBX for the period indicated:

 

 

Three Months Ended

(dollars in thousands; unaudited)

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

Community bank

 

$

428

 

$

504

 

$

344

CCBX

 

 

43,116

 

 

33,096

 

 

12,598

Total provision expense

 

$

43,544

 

$

33,600

 

$

12,942

 

 

 

 

 

 

 

 

 

 

At March 31, 2023, our nonperforming assets were $31.5 million, or 0.91% of total assets, compared to $33.2 million, or 1.06%, of total assets, at December 31, 2022, and $2.3 million, or 0.08% of total assets, at March 31, 2022. These ratios are impacted by CCBX loans over 90 days delinquent that are covered by CCBX partner credit enhancements. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses. Under the agreement, the CCBX partner will reimburse the Bank for its loss/charge-off on these loans. Nonperforming assets decreased $1.6 million during the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, due to $1.5 million less in CCBX loans that are past due 90 days or more and still accruing combined with $98,000 less in community bank nonaccrual loans. As a result of the type of loans (primarily consumer loans) originated through our CCBX partners we anticipate that balances 90 days past due or more and still accruing will increase as those loans grow. Installment/closed-end and revolving/open-end consumer loans originated through CCBX lending partners will continue to accrue interest until 120 and 180 days past due, respectively and are reported as substandard, 90 days or more days past due and still accruing. Community bank nonaccrual loans decreased as a result of nonaccrual principal reductions/charge-offs. There were no repossessed assets or other real estate owned at March 31, 2023. Our nonperforming loans to loans receivable ratio was 1.11% at March 31, 2023, compared to 1.26% at December 31, 2022, and 0.12% at March 31, 2022.

For the quarter ended March 31, 2023, there were $45,000 of community bank net charge-offs and $7.0 million of nonperforming community bank loans. The $6.9 million nonaccrual balance in commercial real estate loans shown below consists of one loan that is well secured with an original loan to value of 62%, and an updated loan to value of 75% as of January 2023. Management anticipates this loan being resolved in the first half of 2023. For the quarter ended March 31, 2023, $32.3 million in net charge-offs were recorded on CCBX loans. These loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses. The Company is responsible for credit losses on approximately 10% of a $137.4 million loan portfolio. At March 31, 2023, 10% of this portfolio represented $13.9 million in loans.

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

(dollars in thousands; unaudited)

As of March 31, 2023

 

As of December 31, 2022

 

As of March 31, 2022

Nonaccrual loans:

 

 

 

 

 

Commercial and industrial loans

$

15

 

 

$

113

 

 

$

130

 

Real estate loans:

 

 

 

 

 

Construction, land and land development

 

66

 

 

 

66

 

 

 

 

Residential real estate

 

 

 

 

 

 

 

54

 

Commercial real estate

 

6,901

 

 

 

6,901

 

 

 

 

Total nonaccrual loans

 

6,982

 

 

 

7,080

 

 

 

184

 

Accruing loans past due 90 days or more:

 

 

 

 

 

Commercial & industrial loans

 

187

 

 

 

404

 

 

 

22

 

Real estate loans:

 

 

 

 

 

Residential real estate loans

 

946

 

 

 

876

 

 

 

40

 

Consumer and other loans:

 

 

 

 

 

Credit cards

 

17,772

 

 

 

10,570

 

 

 

708

 

Other consumer and other loans

 

5,657

 

 

 

14,245

 

 

 

1,391

 

Total accruing loans past due 90 days or more

 

24,562

 

 

 

26,095

 

 

 

2,161

 

Total nonperforming loans

 

31,544

 

 

 

33,175

 

 

 

2,345

 

Real estate owned

 

 

 

 

 

 

 

 

Repossessed assets

 

 

 

 

 

 

 

 

Modified loans for borrowers experiencing financial difficulty, accruing

 

 

 

 

 

 

 

 

Total nonperforming assets

$

31,544

 

 

$

33,175

 

 

$

2,345

 

Total nonaccrual loans to loans receivable

 

0.25

%

 

 

0.27

%

 

 

0.01

%

Total nonperforming loans to loans receivable

 

1.11

%

 

 

1.26

%

 

 

0.12

%

Total nonperforming assets to total assets

 

0.91

%

 

 

1.06

%

 

 

0.08

%

The following tables detail the community bank and CCBX nonperforming assets which are included in the total nonperforming assets table above.

Community Bank

As of

(dollars in thousands; unaudited)

March 31,
2023

 

December 31,
2022

 

March 31,
2022

Nonaccrual loans:

 

 

 

 

 

Commercial and industrial loans

$

15

 

$

113

 

$

130

Real estate:

 

 

 

 

 

Construction, land and land development

 

66

 

 

66

 

 

Residential real estate

 

 

 

 

 

54

Commercial real estate

 

6,901

 

 

6,901

 

 

Total nonaccrual loans

 

6,982

 

 

7,080

 

 

184

 

 

 

 

 

 

Accruing loans past due 90 days or more:

 

 

 

 

 

Total accruing loans past due 90 days or more

 

 

 

 

 

Total nonperforming loans

 

6,982

 

 

7,080

 

 

184

Other real estate owned

 

 

 

 

 

Repossessed assets

 

 

 

 

 

Total nonperforming assets

$

6,982

 

$

7,080

 

$

184


CCBX

As of

(dollars in thousands; unaudited)

March 31,
2023

 

December 31,
2022

 

March 31,
2022

Nonaccrual loans

$

 

$

 

$

Accruing loans past due 90 days or more:

 

 

 

 

 

Commercial & industrial loans

 

187

 

 

404

 

 

22

Real estate loans:

 

 

 

 

 

Residential real estate loans

 

946

 

 

876

 

 

40

Consumer and other loans:

 

 

 

 

 

Credit cards

 

17,772

 

 

10,570

 

 

708

Other consumer and other loans

 

5,657

 

 

14,245

 

 

1,391

Total accruing loans past due 90 days or more

 

24,562

 

 

26,095

 

 

2,161

Total nonperforming loans

 

24,562

 

 

26,095

 

 

2,161

Other real estate owned

 

 

 

 

 

Repossessed assets

 

 

 

 

 

Total nonperforming assets

$

24,562

 

$

26,095

 

$

2,161

 

 

 

 

 

 

 

 

 

About Coastal Financial

Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), is an Everett, Washington based bank holding company whose wholly owned subsidiaries are Coastal Community Bank (“Bank”) and Arlington Olympic LLC. The $3.45 billion Bank provides service through 14 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application. The Bank provides banking as a service to broker-dealers, digital financial service providers, companies and brands that want to provide financial services to their customers through the Bank’s CCBX segment.  To learn more about the Company visit www.coastalbank.com.

CCB-ER

Contact

Eric Sprink, Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of or reference to forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the risks and uncertainties discussed under “Risk Factors” in our Annual Report on Form 10-K for the most recent period filed, our Quarterly Report on Form 10-Q for the most recent quarter, and in any of our subsequent filings with the Securities and Exchange Commission.

If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. You are cautioned not to place undue reliance on forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law.

COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)

ASSETS

 

March 31,
2023

 

December 31,
2022

 

March 31,
2022

Cash and due from banks

$

37,676

 

 

$

32,722

 

 

$

32,705

 

Interest earning deposits with other banks

 

356,240

 

 

 

309,417

 

 

 

649,404

 

Investment securities, available for sale, at fair value

 

97,999

 

 

 

97,317

 

 

 

134,891

 

Investment securities, held to maturity, at amortized cost

 

3,705

 

 

 

1,036

 

 

 

1,286

 

Other investments

 

11,346

 

 

 

10,555

 

 

 

9,931

 

Loans held for sale

 

27,292

 

 

 

 

 

 

 

Loans receivable

 

2,837,204

 

 

 

2,627,256

 

 

 

1,964,209

 

Allowance for credit losses

 

(89,123

)

 

 

(74,029

)

 

 

(38,770

)

Total loans receivable, net

 

2,748,081

 

 

 

2,553,227

 

 

 

1,925,439

 

CCBX credit enhancement asset

 

76,395

 

 

 

53,377

 

 

 

20,283

 

CCBX receivable

 

13,681

 

 

 

10,416

 

 

 

4,875

 

Premises and equipment, net

 

18,030

 

 

 

18,213

 

 

 

18,135

 

Operating lease right-of-use assets

 

4,812

 

 

 

5,018

 

 

 

5,836

 

Accrued interest receivable

 

19,321

 

 

 

17,815

 

 

 

8,824

 

Bank-owned life insurance, net

 

12,761

 

 

 

12,667

 

 

 

12,342

 

Deferred tax asset, net

 

20,527

 

 

 

18,458

 

 

 

6,892

 

Other assets

 

3,167

 

 

 

4,229

 

 

 

2,907

 

Total assets

$

3,451,033

 

 

$

3,144,467

 

 

$

2,833,750

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES

 

 

 

 

 

Deposits

$

3,095,223

 

 

$

2,817,521

 

 

$

2,576,470

 

Subordinated debt, net

 

44,031

 

 

 

43,999

 

 

 

24,306

 

Junior subordinated debentures, net

 

3,588

 

 

 

3,588

 

 

 

3,587

 

Deferred compensation

 

582

 

 

 

616

 

 

 

712

 

Accrued interest payable

 

874

 

 

 

684

 

 

 

149

 

Operating lease liabilities

 

5,022

 

 

 

5,234

 

 

 

6,054

 

CCBX payable

 

30,794

 

 

 

20,419

 

 

 

5,284

 

Other liabilities

 

12,156

 

 

 

8,912

 

 

 

9,268

 

Total liabilities

 

3,192,270

 

 

 

2,900,973

 

 

 

2,625,830

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

Common stock

 

127,447

 

 

 

125,830

 

 

 

122,592

 

Retained earnings

 

133,123

 

 

 

119,998

 

 

 

85,603

 

Accumulated other comprehensive (loss) income, net of tax

 

(1,807

)

 

 

(2,334

)

 

 

(275

)

Total shareholders’ equity

 

258,763

 

 

 

243,494

 

 

 

207,920

 

Total liabilities and shareholders’ equity

$

3,451,033

 

 

$

3,144,467

 

 

$

2,833,750

 


COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)

 

Three Months Ended

 

March 31,
2023

 

December 31,
2022

 

March 31,
2022

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

Interest and fees on loans

$

66,431

 

$

61,226

 

 

$

29,632

Interest on interest earning deposits with other banks

 

3,097

 

 

3,097

 

 

 

402

Interest on investment securities

 

553

 

 

557

 

 

 

71

Dividends on other investments

 

30

 

 

150

 

 

 

37

Total interest income

 

70,111

 

 

65,030

 

 

 

30,142

INTEREST EXPENSE

 

 

 

 

 

Interest on deposits

 

14,958

 

 

11,061

 

 

 

553

Interest on borrowed funds

 

662

 

 

537

 

 

 

321

Total interest expense

 

15,620

 

 

11,598

 

 

 

874

Net interest income

 

54,491

 

 

53,432

 

 

 

29,268

PROVISION FOR CREDIT LOSSES - LOANS

 

43,544

 

 

33,600

 

 

 

12,942

PROVISION FOR UNFUNDED COMMITMENTS

 

153

 

 

 

 

 

Net interest income after provision for credit losses - loans and unfunded commitments

 

10,794

 

 

19,832

 

 

 

16,326

NONINTEREST INCOME

 

 

 

 

 

Deposit service charges and fees

 

910

 

 

946

 

 

 

884

Loan referral fees

 

 

 

 

 

 

602

Gain on sales of loans, net

 

123

 

 

 

 

 

Mortgage broker fees

 

19

 

 

25

 

 

 

123

Unrealized (loss) gain on equity securities, net

 

39

 

 

(18

)

 

 

Other income

 

280

 

 

273

 

 

 

265

Noninterest income, excluding BaaS program income and BaaS indemnification income

 

1,371

 

 

1,226

 

 

 

1,874

Servicing and other BaaS fees

 

948

 

 

1,001

 

 

 

1,169

Transaction fees

 

917

 

 

964

 

 

 

493

Interchange fees

 

789

 

 

785

 

 

 

432

Reimbursement of expenses

 

921

 

 

857

 

 

 

372

BaaS program income

 

3,575

 

 

3,607

 

 

 

2,466

BaaS credit enhancements

 

42,362

 

 

31,164

 

 

 

13,075

BaaS fraud enhancements

 

1,999

 

 

6,818

 

 

 

4,571

BaaS indemnification income

 

44,361

 

 

37,982

 

 

 

17,646

Total noninterest income

 

49,307

 

 

42,815

 

 

 

21,986

NONINTEREST EXPENSE

 

 

 

 

 

Salaries and employee benefits

 

15,575

 

 

14,399

 

 

 

11,085

Occupancy

 

1,219

 

 

1,182

 

 

 

1,136

Data processing and software licenses

 

1,840

 

 

1,768

 

 

 

1,861

Legal and professional expenses

 

3,062

 

 

2,799

 

 

 

708

Point of sale expense

 

753

 

 

710

 

 

 

248

Excise taxes

 

455

 

 

702

 

 

 

349

Federal Deposit Insurance Corporation ("FDIC") assessments

 

595

 

 

550

 

 

 

604

Director and staff expenses

 

626

 

 

515

 

 

 

344

Marketing

 

95

 

 

109

 

 

 

99

Other expense

 

890

 

 

335

 

 

 

1,120

Noninterest expense, excluding BaaS loan and BaaS fraud expense

 

25,110

 

 

23,069

 

 

 

17,554

BaaS loan expense

 

17,554

 

 

17,215

 

 

 

8,290

BaaS fraud expense

 

1,999

 

 

6,819

 

 

 

4,571

BaaS loan and fraud expense

 

19,553

 

 

24,034

 

 

 

12,861

Total noninterest expense

 

44,663

 

 

47,103

 

 

 

30,415

Income before provision for income taxes

 

15,438

 

 

15,544

 

 

 

7,897

PROVISION FOR INCOME TAXES

 

3,047

 

 

2,426

 

 

 

1,667

NET INCOME

$

12,391

 

$

13,118

 

 

$

6,230

Basic earnings per common share

$

0.94

 

$

1.01

 

 

$

0.48

Diluted earnings per common share

$

0.91

 

$

0.96

 

 

$

0.46

Weighted average number of common shares outstanding:

 

 

 

 

 

Basic

 

13,196,960

 

 

13,030,726

 

 

 

12,898,746

Diluted

 

13,609,491

 

 

13,603,978

 

 

 

13,475,337


COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)

 

For the Three Months Ended

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

 

Average
Balance

 

Interest &
Dividends

 

Yield /
Cost (1)

 

Average
Balance

 

Interest &
Dividends

 

Yield /
Cost (1)

 

Average
Balance

 

Interest &
Dividends

 

Yield /
Cost (1)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest earning deposits with other banks

$

271,700

 

 

$

3,097

 

4.62

%

 

$

329,354

 

 

$

3,097

 

3.73

%

 

$

843,931

 

 

$

402

 

0.19

%

Investment securities, available for sale (2)

 

100,273

 

 

 

535

 

2.16

 

 

 

100,269

 

 

 

550

 

2.18

 

 

 

44,470

 

 

 

61

 

0.56

 

Investment securities, held to maturity (2)

 

1,955

 

 

 

18

 

3.73

 

 

 

1,235

 

 

 

7

 

2.25

 

 

 

1,292

 

 

 

10

 

3.14

 

Other investments

 

10,633

 

 

 

30

 

1.14

 

 

 

10,592

 

 

 

150

 

5.62

 

 

 

9,227

 

 

 

37

 

1.63

 

Loans receivable (3)

 

2,708,177

 

 

 

66,431

 

9.95

 

 

 

2,603,962

 

 

 

61,226

 

9.33

 

 

 

1,768,283

 

 

 

29,632

 

6.80

 

Total interest earning assets

 

3,092,738

 

 

 

70,111

 

9.19

 

 

 

3,045,412

 

 

 

65,030

 

8.47

 

 

 

2,667,203

 

 

 

30,142

 

4.58

 

Noninterest earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

(81,086

)

 

 

 

 

 

 

(58,440

)

 

 

 

 

 

 

(30,668

)

 

 

 

 

Other noninterest earning assets

 

172,161

 

 

 

 

 

 

 

141,624

 

 

 

 

 

 

 

92,401

 

 

 

 

 

Total assets

$

3,183,813

 

 

 

 

 

 

$

3,128,596

 

 

 

 

 

 

$

2,728,936

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing deposits

$

2,070,217

 

 

$

14,958

 

2.93

%

 

$

2,006,679

 

 

$

11,061

 

2.19

%

 

$

1,131,984

 

 

$

553

 

0.20

%

FHLB advances and borrowings

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

24,443

 

 

 

69

 

1.14

 

Subordinated debt

 

44,010

 

 

 

599

 

5.52

 

 

 

37,455

 

 

 

484

 

5.13

 

 

 

24,295

 

 

 

230

 

3.84

 

Junior subordinated debentures

 

3,588

 

 

 

63

 

7.12

 

 

 

3,588

 

 

 

53

 

5.86

 

 

 

3,586

 

 

 

22

 

2.49

 

Total interest bearing liabilities

 

2,117,815

 

 

 

15,620

 

2.99

 

 

 

2,047,727

 

 

 

11,598

 

2.25

 

 

 

1,184,308

 

 

 

874

 

0.30

 

Noninterest bearing deposits

 

775,940

 

 

 

 

 

 

 

807,794

 

 

 

 

 

 

 

1,320,144

 

 

 

 

 

Other liabilities

 

37,448

 

 

 

 

 

 

 

34,944

 

 

 

 

 

 

 

16,009

 

 

 

 

 

Total shareholders’ equity

 

252,610

 

 

 

 

 

 

 

238,131

 

 

 

 

 

 

 

208,475

 

 

 

 

 

Total liabilities and shareholders’ equity

$

3,183,813

 

 

 

 

 

 

$

3,128,596

 

 

 

 

 

 

$

2,728,936

 

 

 

 

 

Net interest income

 

 

$

54,491

 

 

 

 

 

$

53,432

 

 

 

 

 

$

29,268

 

 

Interest rate spread

 

 

 

 

6.20

%

 

 

 

 

 

6.22

%

 

 

 

 

 

4.28

%

Net interest margin (4)

 

 

 

 

7.15

%

 

 

 

 

 

6.96

%

 

 

 

 

 

4.45

%

(1)  Yields and costs are annualized.
(2)  For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(3)  Includes loans held for sale and nonaccrual loans.
(4)  Net interest margin represents net interest income divided by the average total interest earning assets.


COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT - QUARTERLY
(Dollars in thousands; unaudited)

 

For the Three Months Ended

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

(dollars in thousands, unaudited)

Average
Balance

 

Interest &
Dividends

 

Yield /
Cost (1)

 

Average
Balance

 

Interest &
Dividends

 

Yield /
Cost (1)

 

Average
Balance

 

Interest &
Dividends

 

Yield /
Cost (1)

Community Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable (2)

$

1,643,985

 

$

24,211

 

5.97

%

 

$

1,609,882

 

$

23,140

 

5.70

%

 

$

1,386,130

 

$

17,640

 

5.16

%

Intrabank asset

 

 

 

 

 

 

 

 

 

 

 

 

 

268,414

 

 

128

 

0.19

 

Total interest earning assets

 

1,643,985

 

 

24,211

 

5.97

 

 

 

1,609,882

 

 

23,140

 

5.70

 

 

 

1,654,544

 

 

17,768

 

4.36

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing deposits

 

853,152

 

 

2,534

 

1.20

%

 

 

864,001

 

 

1,502