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Section 1: 8-K (8-K)

ck0001437958-8k_20190125.DOCX.htm

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

CURRENT REPORT

 

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

 

Date of Report (Date of earliest event reported):  January 25, 2019

 

COASTAL FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Washington

001-38589

56-2392007

(State or other jurisdiction

of incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

     

5415 Evergreen Way, Everett, Washington 98203

(Address of principal executive offices, including zip code)

 

Registrant’s telephone number, including area code:  (425) 257-9000

 

Not Applicable

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

 

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

 

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

 

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

 

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

 

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company  

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

 

 

 

 

 

 

 

 

 

 


 

Item 2.02

Results of Operations and Financial Condition

 

On January 25, 2019, Coastal Financial Corporation issued a press release announcing its results of operations and financial condition for the quarter and year ended December 31, 2018. A copy of the press release is included as Exhibit 99.1 to this report and is furnished herewith.

 

Item 9.01   Financial Statements and Exhibits

 

Exhibits

 

NumberDescription

 

99.1Press Release dated January 25, 2019

 

 

  


 


 

SIGNATURES

 

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

 

 

 

 

COASTAL FINANCIAL CORPORATION

 

 

 

 

Date: January 25, 2019

 

By:

/s/ Joel G. Edwards

 

 

 

Joel G. Edwards

 

 

 

Executive Vice President and Chief Financial Officer

 

 

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

ck0001437958-ex991_6.htm

Exhibit 99.1

 

COASTAL FINANCIAL CORPORATION ANNOUNCES FOURTH QUARTER AND YEAR END 2018 RESULTS

Company release: January 25, 2019

2018 Highlights:

 

Net income totaled $9.7 million for the year ended December 31, 2018, or $0.91 per diluted common share, up 79.6% from $5.4 million, or $0.59 per diluted common share, for the year ended December 31, 2017.  

 

Total assets were $952.1 million at December 31, 2018, up 3.8% from $917.0 million at September 30, 2018 and 18.2% from $805.8 million at December 31, 2017.

 

Total loans receivable grew at a rate of 16.9% for the twelve months ended December 31, 2018.

 

Total deposits grew at a rate of 14.3% for the twelve months ended December 31, 2018.

 

Noninterest bearing deposits at December 31, 2018 were 36.5% of total deposits.

 

Cost of deposits were 0.42% for the year ending December 31, 2018, up 0.03% from the third quarter of 2018 and 0.10% from the year ending December 31, 2017.

 

Initial public offering of 2,577,500 shares of common stock completed, on July 18, 2018, for net proceeds of $33.2 million.

Everett, WA – Coastal Financial Corporation (NASDAQ: CCB) (the “Company”), the holding company for Coastal Community Bank (the “Bank”), today reported unaudited financial results for the quarter and year ended December 31, 2018.  Net income for the fourth quarter of 2018 was $3.1 million, or $0.25 per diluted common share, compared with net income of $2.6 million, or $0.22 per diluted common share, for the third quarter of 2018.  For the year ending December 31, 2018 net income was $9.7 million or $0.91 per diluted common share, compared with net income of $5.4 million or $0.59 per diluted common share for the year ending December 31, 2017.  On December 22, 2017 the Tax Cuts and Jobs Act was signed into law and, among other things, reduced the federal corporate tax rate to 21% from the previous maximum of 35% for tax years effective January 1, 2018.  In compliance with generally accepted accounting principles (“GAAP”), the Company revalued its net deferred tax assets at the new, lower rate which resulted in additional incremental tax expense of $1.3 million in 2017.  Without that additional tax expense (non-GAAP), net income would have been $1.6 million or $0.18 per common diluted share and $6.7 million or $0.73 per diluted common share, respectively, for the quarter and year ended December 31, 2017.  

On July 18, 2018, the Company completed its initial public offering of 2,577,500 shares of common stock, including the exercise of the over-allotment of 427,500 shares, for net proceeds of $33.2 million after deducting underwriting discounts, commissions, and estimated offering expenses.

Eric Sprink, President and CEO, commented, “We had a strong fourth quarter with earnings of $3.1 million, loan growth of $23.6 million, and core deposit growth of $19.7 million.  The solid organic growth in core deposits and loans helped leverage our capital and put us in a good position for future growth and earnings.  Overall, 2018 was a defining year with strong deposit, loan and earnings growth plus a successful initial public offering, a new full service branch and the Company’s continued work on developing robust wholesale banking services.”

Results of Operations

Net interest income was $9.9 million for the three months ended December 31, 2018, an increase of 12.5% from $8.8 million for the third quarter of 2018, and an increase of 28.6% from $7.7 million for the fourth quarter of 2017.

1

 


Increases over the prior quarter and prior year period were the result of growth in interest earning assets, primarily loans, and improvements in net interest margin. Net interest income for the year ended December 31, 2018 totaled $34.8 million, an increase of 19.2% compared to 2017. The $5.6 million increase in net interest income over the same period last year was primarily related to growth in loan balances. During the year ended December 31, 2018, the average balance of total loans receivable increased by $86.8 million, compared to 2017. The $5.8 million increase in loan interest income was partially offset by increased deposit costs of $1.0 million.  The growth in the average balance of our interest bearing deposits grew $46.6 million and cost of deposit funds increased 10 basis points, compared to 2017.

Net interest margin for the quarter ended December 31, 2018 increased 30 basis points to 4.43% from 4.13% for the third quarter of 2018 and increased 39 basis points from 4.04% for the fourth quarter of 2017. The net interest margin for the quarter ended December 31, 2018 is higher than the comparative quarters, largely as a result of atypical prepayment penalties and deferred fees recognized on loans paid off.  These atypical penalties and fees increased the net interest margin for the quarter ended December 31, 2018.  

Net interest margin for the twelve months ended December 31, 2018 increased 16 basis points to 4.24% from 4.08% for the year ended December 31, 2017. The increase in net interest margin over the prior year was largely due to higher prepayment penalties and deferred fees recognized on loans paid off. Additionally, the composition of the loan portfolio changed slightly to loans that earn higher fees at a quicker rate, and there were increases in average loan yields overall. The increase in loan yields were off-set in part by higher deposit costs resulting from the growth in deposits and increase in cost of funds.  Higher, atypical prepayment penalties and deferred fees recognized on loans paid off increased the net interest margin by approximately five basis points for the year ended December 31, 2018.

Loan yields for the quarter ended December 31, 2018 were 5.39%, an increase of 27 basis points from 5.12% for the quarter ended September 31, 2018, and a 44 basis point increase from 4.95% for the quarter ended December 31, 2017. Loan yields for the year ended December 31, 2018 were 5.18%, an increase of 20 basis points from 4.98% for the year ended December 31, 2017. Atypical deferred fees and higher prepayment penalties on loans paid off increased loan yields by approximately 12 basis points and five basis points for the quarter and year ended December 31, 2018, respectively.  Without those atypical fees, loan yields are estimated to be 5.27% for the quarter ended December 31, 2018 and 5.13% for the year ended December 31, 2018.

Contractual loan yields approximated 5.15% for the three months ended December 31, 2018, 5.02% for the three months ended September 31, 2018, and 4.90% for the three months ended December 31, 2017.  The 13 basis point increase in contractual loan yields, as compared to prior quarter, was from pricing new loans at higher rates and variable loans repricing with the increase in the prime rate.

Deposit costs for the quarter ended December 31, 2018 were 0.47%, an increase of three basis points from 0.44% for the quarter ended September 30, 2018 and a 12 basis point increase from the quarter ended December 31, 2017.  Deposit costs for the year ended December 31, 2018 were 0.42%, an increase of ten basis points from 0.32% for the year ended December 31, 2017.  Market conditions in 2019 may result in pressure to increase rates on deposit accounts, which would impact the cost of deposits going forward.

 

 

 

 

 

 

 

2

 


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

 

Three months ended

 

 

Year ended

 

 

 

December 31, 2018

 

September 30, 2018

 

December 31, 2017

 

 

December 31, 2018

 

December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

 

1.33

%

 

1.18

%

 

0.17

%

 

 

1.14

%

 

0.73

%

Return on average shareholders’ equity (1)

 

 

11.31

%

 

10.59

%

 

2.04

%

 

 

11.40

%

 

8.27

%

Yield on earnings assets (1)

 

 

4.93

%

 

4.62

%

 

4.46

%

 

 

4.72

%

 

4.48

%

Yield on loans receivable (1)

 

 

5.39

%

 

5.12

%

 

4.95

%

 

 

5.18

%

 

4.98

%

Loan yield excluding fees (1)

 

 

5.15

%

 

5.02

%

 

4.90

%

 

 

5.00

%

 

4.89

%

Cost of funds (1)

 

 

0.56

%

 

0.53

%

 

0.44

%

 

 

0.52

%

 

0.42

%

Cost of deposits (1)

 

 

0.47

%

 

0.44

%

 

0.35

%

 

 

0.42

%

 

0.32

%

Net interest margin (1)

 

 

4.43

%

 

4.13

%

 

4.04

%

 

 

4.24

%

 

4.08

%

Noninterest expense to average assets (1)

 

 

3.12

%

 

2.99

%

 

2.93

%

 

 

3.09

%

 

3.00

%

Efficiency ratio

 

 

62.54

%

 

63.59

%

 

66.44

%

 

 

65.08

%

 

67.18

%

Loans receivable to deposits

 

 

95.56

%

 

96.08

%

 

93.39

%

 

 

95.56

%

 

93.39

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized calculations shown for quarterly periods presented.

 

 

Noninterest income was $1.6 million for the fourth quarter of 2018, an increase of $55,000 from $1.5 million for the third quarter of 2018 and an increase of $548,000 from $1.1 million for the comparable period one year ago. The increase compared to the prior quarter was primarily the result of $122,000 related to the gain on sale of the guaranteed portion of SBA loans.  The increase over the quarter ended December 31, 2017 was largely due to fees earned from wholesale banking services which provided an additional $339,000 of income combined with the aforementioned $122,000 from the gain on sale of loans. Additional noninterest income in the current quarter as compared to the same quarter one year ago were related to increases in existing deposit fees and the introduction of certain new deposit fees. Sublease and lease income decreased in the fourth quarter 2018, as compared to the fourth quarter 2017, as a result of a long-term tenant not renewing their lease.

Noninterest income was $5.5 million for the year ended December 31, 2018, compared to $4.2 million for the year ended December 31, 2017. The increase was primarily related to $709,000 in wholesale banking services, $444,000 from increases in deposit fees and $162,000 in higher gain on sale of loans. Loan referral fee income, which is earned when a borrower enters into an interest rate swap agreement with a third party, totaled $618,000 for the twelve months ended December 31, 2018, an increase of $179,000 from the same period last year.  Sublease and lease income decreased $141,000 for the twelve months ended December 31, 2018.

Total noninterest expense for the current quarter increased 9.1% to $7.2 million from $6.6 million for the preceding quarter and increased 24.1% from $5.8 million from the comparable period one year ago. The increased expenses for the current quarter compared to the prior quarter and previous quarter one year ago were primarily due to increases in salary expenses. Full time equivalent employees increased 4% during the current quarter and increased 17% from the year ended December 31, 2017. Staffing increases are due to the continued organic growth initiatives, and include increases in sales staff, including hiring new banking teams, staff for the newly opened Edmonds location, and additional back office staffing to support the incremental increases in banking teams, wholesale banking activities and for operation as a public company.  During the quarter our legal and professional fees increased by $183,000 as a result of growth initiatives, credit actions, and operating as a public company.  Occupancy expense increased $91,000, largely as a result of the new Edmonds branch. Partially offsetting these higher expenses was a reduction in our FDIC assessment, which was $35,000 less than the previous quarter as a result of the FDIC lowering assessment rates.

Total noninterest expense for the year ended December 31, 2018 totaled $26.2 million, an increase of 17.0% compared to the last year. The increase was primarily attributable to increased salary expense from our organic growth initiatives, new wholesale banking services, and early termination of a contract for $120,000.  Occupancy expense increased $277,000 over last year, largely due to the opening of the Edmonds branch and a full year of

3

 


operations of the Woodinville branch.  Legal and professional expenses increased $322,000 as a result of growth initiatives, credit actions, and operating as a public company.

The provision for income taxes was $150,000 higher this quarter compared to the third quarter of 2018 as a result of increased taxable income.  Despite increased earnings, the provision was $1.4 million less in the current quarter over the same period last year primarily due to the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017.  As a result of the reduction in the federal corporate tax rates in 2017, the Company had to revalue its net deferred tax assets at the new, lower tax rate, resulting in $1.3 million in additional tax expense in the fourth quarter of 2017.  The Company used federal statutory tax rates of 21% and 34% for the twelve months ended December 31, 2018, and 2017, respectively, as a basis for calculating provision for income taxes.

Balance Sheet

The Company’s total assets increased $146.3 million, or 18.2%, to $952.1 million at December 31, 2018 from $805.8 million at December 31, 2017 due to the Company’s successful initial public offering and organic growth initiatives, which included the opening of the Edmonds branch in the fourth quarter of 2018.

Total loans receivable, net of allowance for loan losses, increased $109.7 million, or 16.9%, to $758.5 million at December 31, 2018 from $648.8 million at December 31, 2017.  The growth in loans receivable was due primarily to increases in commercial real estate loans of $78.2 million.

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

 

As of

 

 

December 31, 2018

 

 

September 30, 2018

 

 

December 31, 2017

 

 

(Dollars in thousands)

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

 

$

90,390

 

 

11.8

%

 

$

85,554

 

 

11.5

%

 

$

88,688

 

 

13.5

%

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Construction, land and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       land development

 

 

64,045

 

 

8.3

 

 

 

62,222

 

 

8.4

 

 

 

41,641

 

 

6.3

 

 

   Residential

 

 

94,745

 

 

12.3

 

 

 

91,995

 

 

12.3

 

 

 

87,031

 

 

13.3

 

 

   Commercial real estate

 

 

515,959

 

 

67.1

 

 

 

502,782

 

 

67.5

 

 

 

437,717

 

 

66.6

 

 

Consumer and other

 

 

3,584

 

 

0.5

 

 

 

2,583

 

 

0.3

 

 

 

2,058

 

 

0.3

 

 

      Gross loans receivable

 

 

768,723

 

 

100.0

%

 

 

745,136

 

 

100.0

%

 

 

657,135

 

 

100.0

%

 

Net deferred origination fees

 

 

(824

)

 

 

 

 

 

(816

)

 

 

 

 

 

(347

)

 

 

 

 

      Loans receivable

 

$

767,899

 

 

 

 

 

$

744,320

 

 

 

 

 

$

656,788

 

 

 

 

 

 

Total deposits increased $100.3 million, or 14.3%, to $803.6 million at December 31, 2018 from $703.3 million at December 31, 2017.  The increase in deposits included increases in noninterest bearing deposit accounts of $51.2 million, or 21.1%, and increases in interest bearing NOW and money market accounts of $34.0 million or 10.4%. Savings deposits increased $8.7 million or 19.8% and time deposits increased $6.4 million or 7.1% in 2018.  Our NOW and money market accounts included $10.5 million of deposits from our wholesale banking services.  Deposits from wholesale banking services are primarily temporary in nature and the $10.5 million of these deposits will largely run-off within the next six months.

 

 

 

 

 

4

 


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

 

As of

 

 

December 31, 2018

 

 

September 30, 2018

 

 

December 31, 2017

 

 

(Dollars in thousands)

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand, noninterest bearing

 

$

293,525

 

 

36.5

%

 

$

285,979

 

 

36.9

%

 

$

242,358

 

 

34.5

%

 

NOW and money market

 

 

360,472

 

 

44.9

 

 

 

340,930

 

 

44.0

 

 

 

326,412

 

 

46.4

 

 

Savings

 

 

52,573

 

 

6.5

 

 

 

49,430

 

 

6.4

 

 

 

43,876

 

 

6.2

 

 

Time deposits less than $250,000

 

 

62,272

 

 

7.8

 

 

 

63,715

 

 

8.2

 

 

 

60,445

 

 

8.6

 

 

Time deposits $250,000 and over

 

 

34,772

 

 

4.3

 

 

 

34,668

 

 

4.5

 

 

 

30,204

 

 

4.3

 

 

      Total

 

$

803,614

 

 

100.0

%

 

$

774,722

 

 

100.0

%

 

$

703,295

 

 

100.0

%

 

 

Total shareholders’ equity increased $43.4 million, or 66.1%, to $109.2 million at December 31, 2018 from $65.7 million at December 31, 2017.  The Company’s successful initial public offering in July of 2018 increased capital by $33.2 million. The remaining increase in shareholders’ equity was primarily due to net income earned during the year. The Company contributed $15.0 million of the $33.2 million raised in its initial public offering to the Bank during 2018.

Capital Ratios

The Company and the Bank remain well capitalized at December 31, 2018, as summarized in the following table.

Capital Ratios:

Coastal Community Bank

 

 

Coastal Financial Corporation

 

 

Financial Institution  Basel III Regulatory Guidelines

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

11.35

%

 

 

12.46

%

 

 

5.00

%

Tier 1 risk-based capital

 

12.84

%

 

 

14.13

%

 

 

8.00

%

Common Equity Tier 1 risk-based capital

 

12.84

%

 

 

13.70

%

 

 

6.50

%

Total risk-based capital

 

14.05

%

 

 

16.58

%

 

 

10.00

%

 

 

Asset Quality

The allowance for loan losses was 1.23% of loans receivable at December 31, 2018. Provision for loan losses totaled $425,000 for the current quarter, $508,000 for the preceding quarter, and $366,000 for the same quarter in the prior year. Net charge-offs totaled $129,000 for the quarter ended December 31, 2018 compared to net charge-offs of $295,000 for quarter ended December 31, 2017.

Provision for loan losses totaled $1.8 million for the twelve months December 31, 2018 and $870,000 for the year ended December 31, 2017. Net charge-offs totaled $437,000 for the twelve months ended December 31, 2018 compared to net charge-offs of $397,000 for twelve months ended December 31, 2017.

Our nonperforming assets were $1.8 million, or 0.19% of total assets, at December 31, 2018, compared to $2.1 million, or 0.26% of total assets at December 31, 2017.  There were no repossessed assets or other real estate owned at December 31, 2018.

Nonperforming loans to loans receivable ratio was 0.24% at December 31, 2018, compared to 0.32% at December 31, 2017.  

 

5

 


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

 

As of

 

 

 

December 31,

 

 

September 30,

 

 

December 31,

 

(Dollars in thousands)

 

2018

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

 

$

493

 

 

$

1,170

 

 

$

372

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

   Construction, land and land development

 

 

-

 

 

 

-

 

 

 

-

 

   Residential

 

 

72

 

 

 

74

 

 

 

88

 

   Commercial real estate

 

 

-

 

 

 

-

 

 

 

345

 

   Commercial real estate - troubled debt restructure

 

 

1,261

 

 

 

1,277

 

 

 

1,315

 

Consumer and other loans

 

 

-

 

 

 

-

 

 

 

-

 

         Total nonaccrual loans

 

 

1,826

 

 

 

2,521

 

 

 

2,120

 

         Total accruing loans past due 90 days or more

 

 

-

 

 

 

-

 

 

 

-

 

         Total nonperforming loans

 

 

1,826

 

 

 

2,521

 

 

 

2,120

 

Other real estate owned

 

 

-

 

 

 

-

 

 

 

-

 

Repossessed assets

 

 

-

 

 

 

-

 

 

 

-

 

Total nonperforming assets

 

$

1,826

 

 

$

2,521

 

 

$

2,120

 

Troubled debt restructurings, accruing

 

 

-

 

 

 

-

 

 

 

-

 

Total nonperforming loans to loans receivable

 

 

0.24

%

 

 

0.34

%

 

 

0.32

%

Total nonperforming assets to total assets

 

 

0.19

%

 

 

0.27

%

 

 

0.26

%

 

About Coastal Financial

Coastal Financial Corporation is an Everett-based Washington State bank holding company with Coastal Community Bank (the “Bank”), a full-service commercial bank, as its sole wholly-owned banking subsidiary.  The Bank operates through its 14 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application.  More information about the Bank can be found on its website at www.coastalbank.com and its investor relations page.

Contact

Eric Sprink, President & Chief Executive Officer, (425) 357-3659

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

 

Forward-Looking Statements

This earnings release contains forward-looking statements. 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 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.

 

6

 


Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission.  These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update 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 or circumstances, except as required by law.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 


COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands; unaudited)

 

ASSETS

 

 

 

December 31,

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2018

 

 

2017

 

Cash and due from banks

 

$

16,315

 

 

$

16,837

 

 

$

13,787

 

Interest earning deposits with other banks

 

 

109,467

 

 

 

98,671

 

 

 

75,964

 

Investment securities, available for sale, at fair value

 

 

36,660

 

 

 

35,749

 

 

 

36,927

 

Investment securities, held to maturity, at amortized cost

 

 

1,262

 

 

 

1,290

 

 

 

1,409

 

Other investments

 

 

3,766

 

 

 

3,766

 

 

 

3,680

 

Loans receivable

 

 

767,899

 

 

 

744,320

 

 

 

656,788

 

Allowance for loan losses

 

 

(9,407

)

 

 

(9,111

)

 

 

(8,017

)

     Total loans receivable, net

 

 

758,492

 

 

 

735,209

 

 

 

648,771

 

Premises and equipment, net

 

 

13,167

 

 

 

12,845

 

 

 

13,121

 

Accrued interest receivable

 

 

2,526

 

 

 

2,299

 

 

 

2,274

 

Bank-owned life insurance, net

 

 

6,688

 

 

 

6,640

 

 

 

6,500

 

Deferred tax asset, net

 

 

2,518

 

 

 

2,309

 

 

 

2,092

 

Other assets

 

 

1,249

 

 

 

1,414

 

 

 

1,228

 

     Total assets

 

$

952,110

 

 

$

917,029

 

 

$

805,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

803,614

 

 

$

774,722

 

 

$

703,295

 

Federal Home Loan Bank (FHLB) advances

 

 

20,000

 

 

 

20,000

 

 

 

20,000

 

Subordinated debt

 

 

9,965

 

 

 

9,961

 

 

 

9,950

 

Junior subordinated debentures

 

 

3,581

 

 

 

3,581

 

 

 

3,579

 

Deferred compensation

 

 

1,078

 

 

 

1,102

 

 

 

1,175

 

Accrued interest payable

 

 

279

 

 

 

257

 

 

 

228

 

Other liabilities

 

 

4,437

 

 

 

2,130

 

 

 

1,815

 

     Total liabilities

 

 

842,954

 

 

 

811,753

 

 

 

740,042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

86,431

 

 

 

86,334

 

 

 

52,521

 

Retained earnings

 

 

24,021

 

 

 

20,966

 

 

 

14,134

 

Accumulated other comprehensive loss, net of tax

 

 

(1,296

)

 

 

(2,024

)

 

 

(944

)

     Total shareholders’ equity

 

 

109,156

 

 

 

105,276

 

 

 

65,711

 

     Total liabilities and shareholders’ equity

 

$

952,110

 

 

$

917,029

 

 

$

805,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 


COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 

Three months ended

 

 

December 31, 2018

 

September 30, 2018

 

December 31, 2017

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$

10,308

 

$

9,262

 

$

8,034

 

Interest on interest earning deposits with other banks

 

483

 

 

458

 

 

208

 

Interest on investment securities

 

155

 

 

156

 

 

149

 

Dividends on other investments

 

65

 

 

18

 

 

61

 

Total interest and dividend income

 

11,011

 

 

9,894

 

 

8,452

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Interest on deposits

 

932

 

 

851

 

 

613

 

Interest on borrowed funds

 

191

 

 

195

 

 

185

 

Total interest expense

 

1,123

 

 

1,046

 

 

798

 

Net interest income

 

9,888

 

 

8,848

 

 

7,654

 

PROVISION FOR LOAN LOSSES

 

425

 

 

508

 

 

366

 

Net interest income after provision for loan losses

 

9,463

 

 

8,340

 

 

7,288

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

Deposit service charges and fees

 

803

 

 

800

 

 

693

 

Wholesale banking service fees

 

339

 

 

328

 

 

-

 

Loan referral fees

 

165

 

 

209

 

 

163

 

Mortgage broker fees

 

57

 

 

52

 

 

60

 

Sublease and lease income

 

10

 

 

10

 

 

55

 

Gain on sale of loans

 

122

 

 

-

 

 

-

 

Other

 

105

 

 

147

 

 

82

 

Total noninterest income

 

1,601

 

 

1,546

 

 

1,053

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

4,354

 

 

4,027

 

 

3,436

 

Occupancy

 

889

 

 

798

 

 

784

 

Data processing

 

499

 

 

501

 

 

466

 

Director and staff expenses

 

208

 

 

213

 

 

111

 

Excise taxes

 

155

 

 

146

 

 

115

 

Marketing

 

120

 

 

110

 

 

148

 

Legal and professional fees

 

325

 

 

142

 

 

74

 

Federal Deposit Insurance Corporation (FDIC) assessments

 

48

 

 

83

 

 

60

 

Business development

 

85

 

 

81

 

 

99

 

Other

 

502

 

 

509

 

 

492

 

Total noninterest expense

 

7,185

 

 

6,610

 

 

5,785

 

Income before provision for income taxes

 

3,879

 

 

3,276

 

 

2,556

 

PROVISION FOR INCOME TAXES

 

824

 

 

674

 

 

2,213

 

NET INCOME

$

3,055

 

$

2,602

 

$

343

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.26

 

$

0.23

 

$

0.04

 

Diluted earnings per share

$

0.25

 

$

0.22

 

$

0.04

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

11,877,261

 

 

11,338,320

 

 

9,237,660

 

Diluted

 

12,166,250

 

 

11,609,978

 

 

9,244,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 


COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

 

 

 

 

Year ended

 

 

December 31, 2018

 

December 31, 2017

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

Interest and fees on loans

$

36,537

 

$

30,775

 

Interest on interest earning deposits with other banks

 

1,432

 

 

666

 

Interest on investment securities

 

618

 

 

534

 

Dividends on other investments

 

156

 

 

138

 

Total interest and dividend income

 

38,743

 

 

32,113

 

INTEREST EXPENSE

 

 

 

 

 

 

Interest on deposits

 

3,141

 

 

2,139

 

Interest on borrowed funds

 

785

 

 

736

 

Total interest expense

 

3,926

 

 

2,875

 

Net interest income

 

34,817

 

 

29,238

 

PROVISION FOR LOAN LOSSES

 

1,826

 

 

870

 

Net interest income after provision for loan losses

 

32,991

 

 

28,368

 

NONINTEREST INCOME

 

 

 

 

 

 

Deposit service charges and fees

 

3,061

 

 

2,617

 

Wholesale banking service fees

 

709

 

 

-

 

Loan referral fees

 

618

 

 

439

 

Mortgage broker fees

 

215

 

 

255

 

Sublease and lease income

 

81

 

 

222

 

Gain on sale of loans

 

264

 

 

102

 

Other

 

519

 

 

519

 

Total noninterest income

 

5,467

 

 

4,154

 

NONINTEREST EXPENSE

 

 

 

 

 

 

Salaries and employee benefits

 

16,026

 

 

13,383

 

Occupancy

 

3,314

 

 

3,037

 

Data processing

 

1,971

 

 

1,777

 

Director and staff expenses

 

701

 

 

561

 

Excise taxes

 

559

 

 

459

 

Marketing

 

373

 

 

446

 

Legal and professional fees

 

677

 

 

355

 

Federal Deposit Insurance Corporation (FDIC) assessments

 

295

 

 

331

 

Business development

 

326

 

 

294

 

Other

 

1,974

 

 

1,790

 

Total noninterest expense

 

26,216

 

 

22,433

 

Income before provision for income taxes

 

12,242

 

 

10,089

 

PROVISION FOR INCOME TAXES

 

2,541

 

 

4,653

 

NET INCOME

$

9,701

 

$

5,436

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.93

 

$

0.59

 

Diluted earnings per share

$

0.91

 

$

0.59

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

Basic

 

10,440,740

 

 

9,234,490

 

Diluted

 

10,608,764

 

 

9,237,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 


COASTAL FINANCIAL CORPORATION

AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY

(Dollars in thousands; unaudited)

 

For the Three Months Ended

 

 

December 31, 2018

 

 

September 30, 2018

 

 

December 31, 2017

 

 

Average

 

Interest &

 

Yield /

 

 

Average

 

Interest &

 

Yield /

 

 

Average

 

Interest &

 

Yield /

 

 

Balance

 

Dividends

 

Cost (4)

 

 

Balance

 

Dividends

 

Cost (4)

 

 

Balance

 

Dividends

 

Cost (4)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest earning deposits

$

83,751

 

$

483

 

 

2.29

%

 

$

90,301

 

$

458

 

 

2.01

%

 

$

64,751

 

$

208

 

 

1.27

%

Investment securities (1)

 

39,590

 

 

155

 

 

1.55

 

 

 

39,613