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Section 1: 8-K (8-K)

ck0001437958-8k_20190426.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):  April 26, 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 April 26, 2019, Coastal Financial Corporation issued a press release announcing its results of operations and financial condition for the quarter ended March 31, 2019. 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 April 26, 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: April 26, 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 FIRST QUARTER 2019 RESULTS

Company release: April 26, 2019

Quarter One 2019 Highlights:

 

Net income totaled $2.8 million for the quarter ended March 31, 2019, or $0.23 per diluted common share, up from $1.8 million, or $0.20 per diluted common share, for the quarter ended March 31, 2018.  

 

Total loans receivable grew at an annualized rate of 12.1% for the quarter ended March 31, 2019 and increased 16.6% from March 31, 2018.

 

Total core deposits grew at an annualized rate of 11.8% for the quarter ended March 31, 2019 and increased 12.4% since March 31, 2018.  

Everett, WA – Coastal Financial Corporation (NASDAQ: CCB) (the “Company”), the holding company for Coastal Community Bank (the “Bank”), today reported unaudited financial results for the quarter ended March 31, 2019.  Net income for the first quarter of 2019 was $2.8 million, or $0.23 per diluted common share, compared with net income of $ 3.1 million, or $0.25 per diluted common share, for the fourth quarter of 2018.  

Eric Sprink, President and CEO, commented, “We got off to a good start in first quarter with earnings of $2.8 million, loan growth of $23.2 million, and core deposit growth of $20.6 million. The continued organic growth in core deposits and loans puts us in a good position for further growth in earnings. Overall, the first quarter 2019 was a solid quarter with good organic growth from our core community bank.”

In October 2018, the Bank agreed to retain deposits from a wholesale banking services client on a temporary basis.    These deposits come through a wholesale banking relationship and not from the end customer so they are classified as brokered deposits in accordance with regulatory guidance.  Throughout the remainder of this earnings release, these deposits are referred to as Wholesale-Brokered Deposits.

At March 31, 2019, Wholesale-Brokered Deposits totaled $164.6 million compared to $10.5 million at December 31, 2018.  The Bank invested the cash from Wholesale-Brokered Deposits into overnight funds.  Cash and cash equivalents at March 31, 2019 totaled $257.6 million compared to $125.8 million at December 31, 2018.  On April 9, 2019, the wholesale banking customer transferred $157.1 million in temporary Wholesale-Brokered Deposits from the Bank to their deposit provider, which brought the remaining balance to below $6 million. This temporary increase in Wholesale-Brokered Deposits was atypical, the result of an accommodation for a wholesale banking services customer, and is not expected to occur again.

The increase of Wholesale-Brokered Deposits during the quarter ended March 31, 2019 most significantly affected the following balance sheet items: cash and cash equivalents, total assets, deposits, and total liabilities.  Cost of deposits, cost of funds, net interest margin, and net income were the most significantly impacted income statement items due to the temporary increase in Wholesale-Brokered Deposits.  We will explain the impact of the temporary increase in Wholesale-Brokered Deposits throughout this earning release so users of this financial information can compare first quarter’s results with prior quarter’s results, with and without the impact of retaining these temporary balances.

1

 


The Bank’s definition of core deposits excludes all brokered and time deposits.  The Bank remains focused on growing core deposits through its branches and lending relationships with customers.  

Results of Operations

Net interest income was $9.8 million for the quarter ended March 31, 2019, a slight decrease from $9.9 million or 1.2% compared to the quarter ended December 31, 2018, and an increase of 25.6% from $7.8 million for the first quarter of 2018.  The decrease compared to prior quarter is primarily related to the number of days outstanding during the periods. The increase from the prior year’s first quarter is a result of higher yielding and increased interest earning asset balances.

Net interest margin for the quarter ended March 31, 2019 decreased 30 basis points to 4.13% from 4.43% for the quarter ended December 31, 2018, and was one basis point higher than the first quarter of 2018 margin. The impact of holding the Wholesale-Brokered Deposits during the quarter significantly increased lower yielding assets and costs of deposits. The net interest margin would have been 4.48% for the quarter ended March 31, 2019, excluding the impact of temporary Wholesale-Brokered Deposits, a five basis point increase over the prior quarter, as loan yields outpaced deposit costs. Adjusted net interest margin of 4.48% for the quarter ended March 31, 2019 was a 36 basis point increase over same quarter one year ago. The increase in net interest margin over the prior year is a result of loan growth and loan pricing increasing at a rate greater than core deposits costs.  

During the quarter ended March 31, 2019, the average balance of total loans receivable increased by $23.3 million, compared to the quarter ended December 31, 2018, and increased by $127.8 million, compared to the same quarter one year ago. Total loan yields for the quarter ended March 31, 2019 were 5.40%, an increase of one basis point from 5.39% for the quarter ended December 31, 2018, and a 33 basis point increase from 5.07% for the quarter ended March 31, 2018. Yields for the quarter ended December 31, 2018 included significant prepayment penalties and early recognition of deferred fees.

Contractual loan yields approximated 5.22% for the three months ended March 31, 2019, 5.15% for the three months ended December 31, 2018, and 4.88% for the three months ended March 31, 2018. The increase in contractual loan yields, as compared to prior periods, was from pricing new loans at higher rates and variable loans repricing with the increase in the prime rate and changes in the composition of the loan portfolio.

Deposit costs for the quarter ended March 31, 2019 were 0.68%, an increase of 21 basis points from 0.47% for the quarter ended December 31, 2018, and 31 basis point increase from the quarter ended March 31, 2018.  Wholesale-Brokered Deposits averaged $74.1 million for the quarter ended March 31, 2019 compared to $698,000 for the quarter ended December 31, 2018.  This temporary increase resulted in an atypical increase in interest expense.  Without the increase in Wholesale-Brokered Deposits, cost of deposits would have approximated 0.52% for the quarter ended March 31, 2019.  These deposit balances decreased significantly on April 9, 2019, therefore we expect the overall costs of deposits incurred in the first quarter 2019 to decrease on a going forward basis.  Market conditions in 2019 may result in continued pressure to increase rates on deposit accounts, which will increase the cost of deposits in the future.

The following table shows the Company’s key performance ratios for the periods indicated.  The table also includes ratios that were adjusted by removing the impact of the Wholesale-Brokered Deposits so current quarter’s results

2

 


could more easily be compared to prior quarters.  These adjusted ratios are non-GAAP measures.  For more information about non-GAAP financial measures, see page 12.

 

Three months ended

 

 

 

March 31,   2019

 

December 31, 2018

 

September 30, 2018

 

June 30,  2018

 

March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

 

1.14

%

 

1.33

%

 

1.18

%

 

1.09

%

 

0.93

%

Return on average assets, as adjusted (1,2)

 

 

1.20

%

 

1.33

%

 

1.18

%

 

1.09

%

 

0.93

%

Return on average equity (1)

 

 

10.25

%

 

11.31

%

 

10.59

%

 

12.90

%

 

11.09

%

Yield on earnings assets (1)

 

 

4.82

%

 

4.93

%

 

4.62

%

 

4.73

%

 

4.56

%

Yield on loans receivable (1)

 

 

5.40

%

 

5.39

%

 

5.12

%

 

5.11

%

 

5.07

%

Loan yield excluding fees (1)

 

 

5.22

%

 

5.15

%

 

5.02

%

 

4.92

%

 

4.88

%

Cost of funds (1)

 

 

0.76

%

 

0.56

%

 

0.53

%

 

0.50

%

 

0.46

%

Cost of funds, as adjusted (1,3)

 

 

0.61

%

 

0.56

%

 

0.53

%

 

0.50

%

 

0.46

%

Cost of deposits (1)

 

 

0.68

%

 

0.47

%

 

0.44

%

 

0.40

%

 

0.37

%

Cost of deposits, as adjusted (1,4)

 

 

0.52

%

 

0.47

%

 

0.44

%

 

0.40

%

 

0.37

%

Net interest margin (1)

 

 

4.13

%

 

4.43

%

 

4.13

%

 

4.26

%

 

4.12

%

Net interest margin, as adjusted (1,5)

 

 

4.48

%

 

4.43

%

 

4.13

%

 

4.26

%

 

4.12

%

Noninterest expense to average assets (1)

 

 

3.12

%

 

3.12

%

 

2.99

%

 

3.15

%

 

3.07

%

Noninterest expense to average assets, as adjusted (1,6)

 

 

3.37

%

 

3.12

%

 

2.99

%

 

3.15

%

 

3.07

%

Efficiency ratio

 

 

65.20

%

 

62.54

%

 

63.59

%

 

66.77

%

 

68.28

%

Loans receivable to deposits

 

 

81.01

%

 

95.56

%

 

96.08

%

 

94.12

%

 

93.30

%

Loans receivable to deposits, as adjusted (7)

 

 

97.44

%

 

95.56

%

 

96.08

%

 

94.12

%

 

93.30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized calculations shown for quarterly periods presented.

 

(2) Adjusted return on average assets is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is return on average assets.

 

(3) Adjusted cost of funds is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is cost of funds.

 

(4) Adjusted cost of deposits is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is cost of deposits.

 

(5) Adjusted net interest margin is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is net interest margin.

 

(6) Adjusted noninterest expense to average assets is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is noninterest expense to average assets.

 

(7) Adjusted loans receivable to deposits is a non-GAAP measure that excludes wholesale-brokered deposits on balance sheet. The most directly comparable GAAP measure is loans receivable to deposits.

 

 

Noninterest income was $2.0 million for the first quarter of 2019, an increase of $383,000 from $1.6 million for the fourth quarter of 2018, and an increase of $877,000 from $1.1 million for the comparable period one year ago. The increase compared to the prior quarter was primarily the result of $468,000 more in loan referral fees and $107,000 in increased wholesale banking service fees; these increases were partially offset by a decline in the income on sale of loans of $133,000 and a $59,000 decrease in other categories.  The $877,000 increase over the quarter ended March 31, 2018 was largely due to an increase of $503,000 in loan referral fees and fees earned from wholesale banking services that provided an additional $446,000 of income, offset by a $72,000 decrease in other categories.

Total noninterest expense for the current quarter increased 6.6% to $7.7 million from $7.2 million for the preceding quarter and increased 26.3% from $6.1 million from the comparable period one year ago. The increased expenses for the current quarter compared to the prior quarter and the previous quarter one year ago were primarily due to increases in salary expenses. Full time equivalent employees at March 31, 2019 was 179, which was down 2% from the prior quarter and increased 13% from the quarter ended March 31, 2018. Staffing increases compared to the prior year are due to continued organic growth initiatives, and include increases in sales staff, including hiring new banking teams, staff for the Edmonds location opened in October 2018, and additional back office staffing to support the incremental increases in banking teams, wholesale banking activities and for operation as a public

3

 


company.  Legal and professional fees increased by $84,000 and $329,000 over the fourth quarter of 2018 and the first quarter of 2018, respectively, as a result of growth initiatives, credit actions, and operating as a public company.  Occupancy expense increased $105,000 over the fourth quarter of 2018 as a result of increases in rent expense, depreciation on fixed assets placed in service during the quarter and higher maintenance and repair costs. Occupancy expense increased $171,000 over the first quarter of 2018 largely as a result of expenses related to the Edmonds branch as well as the aforementioned increases in rent, depreciation and maintenance and repair. A change in the Director compensation plan contributed to the increase in director and staff expenses over the quarter ended March 31, 2018.

The provision for income taxes was $83,000 less this quarter compared to the fourth quarter of 2018 as a result of decreased taxable income, and was $267,000 more than the first quarter of 2018 as a result of increased taxable income.  The Company uses a federal statutory tax rate of 21% as a basis for calculating provision for income taxes.

Balance Sheet

The Company’s total assets increased $164.0 million, or 17.2%, to $1.1 billion at March 31, 2019 from $952.1 million at December 31, 2018.  The primary cause of the increase was the $154.1 million increase in Wholesale-Brokered Deposits, which increased interest earning deposits with other banks.  The $285.1 million, or 34.3% increase in total assets from $831.0 million at March 31, 2018 was due to the $155.5 million increase in interest earning deposits with other banks from the Wholesale-Brokered Deposit increase of $164.6 million and organic growth initiatives, which included the opening of the Edmonds branch in the fourth quarter of 2018, and the increase in cash from the successful initial public offering.  Additionally, the Company implemented the new lease accounting standard, which brought operating leases onto the balance sheet on January 1, 2019, and increased assets and liabilities $9.3 million and $9.5 million, respectively, as of March 31, 2019.  

Total loans receivable, net of allowance for loan losses, increased $22.7 million, or 3.0%, to $781.2 million at March 31, 2019 from $758.5 million at December 31, 2018 and $111.1 or 16.6% from $670.1 million at March 31, 2018.  The growth in loans receivable was due primarily to increases in commercial real estate loans of $19.9 million over the quarter ended December 31, 2018 and an increase of $82.0 million in commercial real estate and $20.7 million in construction, land and land development loans over the quarter ended March 31, 2018.

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

 

As of

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

March 31, 2018

 

(Dollars in thousands)

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

 

$

92,248

 

 

11.6

%

 

$

90,390

 

 

11.8

%

 

$

86,719

 

 

12.8

%

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Construction, land and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       land development

 

 

65,686

 

 

8.3

 

 

 

64,045

 

 

8.3

 

 

 

44,970

 

 

6.6

%

   Residential

 

 

94,743

 

 

12.0

 

 

 

94,745

 

 

12.3

 

 

 

90,624

 

 

13.4

%

   Commercial real estate

 

 

535,896

 

 

67.6

 

 

 

515,959

 

 

67.1

 

 

 

453,927

 

 

66.9

%

Consumer and other

 

 

3,583

 

 

0.5

 

 

 

3,584

 

 

0.5

 

 

 

2,558

 

 

0.3

%

      Gross loans receivable

 

 

792,156

 

 

100.0

%

 

 

768,723

 

 

100.0

%

 

 

678,798

 

 

100.0

%

Net deferred origination fees

 

 

(1,084

)

 

 

 

 

 

(824

)

 

 

 

 

 

(283

)

 

 

 

      Loans receivable

 

$

791,072

 

 

 

 

 

$

767,899

 

 

 

 

 

$

678,515

 

 

 

 

 

Total deposits increased $172.9 million, or 21.5%, to $976.5 million at March 31, 2019 from $803.6 million at December 31, 2018.  The increase is largely due to the temporary increase in Wholesale-Brokered Deposits.  These deposits are included in the NOW and money market category and totaled $164.6 million at quarter end.  As planned, these deposits decreased on April 9, 2019, with $157.1 million in temporary Wholesale-Brokered Deposits transferred out of the Bank.  Noninterest bearing deposits increased $2.7 million during the quarter ended March 31, 2019. Total deposits increased $249.2 million since the quarter ended March 31, 2018.  In addition to the temporary

4

 


increase of $164.6 million in Wholesale-Brokered Deposits, noninterest bearing deposit accounts increased $42.2 million or 16.6%, savings deposits increased $4.3 million or 9.0% and time deposits increased $5.8 million or 6.5% since March 31, 2018.  

The following table summarizes the deposit portfolio at the periods indicated and breaks out Wholesale-Brokered Deposits.

 

As of

 

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

March 31, 2018

 

 

(Dollars in thousands)

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand, noninterest bearing

 

$

296,247

 

 

30.3

%

 

$

293,525

 

 

36.5

%

 

$

254,000

 

 

34.9

%

 

NOW and money market

 

 

368,130

 

 

37.7

 

 

 

349,952

 

 

43.6

 

 

 

335,823

 

 

46.2

%

 

Savings

 

 

52,246

 

 

5.4

 

 

 

52,572

 

 

6.5

 

 

 

47,945

 

 

6.6

%

 

      Total core deposits

 

 

716,623

 

 

 

 

 

 

696,049

 

 

 

 

 

 

637,768

 

 

 

 

 

Wholesale brokered deposits

 

 

164,604

 

 

16.9

 

 

 

10,521

 

 

1.3

 

 

 

-

 

 

0.0

%

 

Time deposits less than $250,000

 

 

60,728

 

 

6.2

 

 

 

62,272

 

 

7.8

 

 

 

59,946

 

 

8.2

%

 

Time deposits $250,000 and over

 

 

34,541

 

 

3.5

 

 

 

34,772

 

 

4.3

 

 

 

29,554

 

 

4.1

%

 

      Total deposits

 

$

976,496

 

 

100.0

%

 

$

803,614

 

 

100.0

%

 

$

727,268

 

 

100.0

%

 

 

Total shareholders’ equity increased $45.4 million or 67.9% since March 31, 2018.  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 earnings in the last twelve months. 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 March 31, 2019, as summarized in the following table.

Capital Ratios:

Coastal Community Bank

 

 

Coastal Financial Corporation

 

 

Financial Institution  Basel III Regulatory Guidelines

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

10.70

%

 

 

11.57

%

 

 

5.00

%

Tier 1 risk-based capital

 

12.62

%

 

 

13.66

%

 

 

8.00

%

Common Equity Tier 1 risk-based capital

 

12.62

%

 

 

13.24

%

 

 

6.50

%

Total risk-based capital

 

13.84

%

 

 

16.06

%

 

 

10.00

%

 

Asset Quality

The allowance for loan losses was 1.25% of loans receivable at March 31, 2019.  Provision for loan losses totaled $540,000 for the current quarter, $425,000 for the preceding quarter, and $501,000 for the same quarter in the prior year. Net charge-offs totaled $32,000 for the quarter ended March 31, 2019 compared to $129,000 for the quarter ended December 31, 2018 and $95,000 for the quarter ended March 31, 2018.

At March 31, 2019 our nonperforming assets were $1.3 million, or 0.12% of total assets, compared to $1.8 million or 0.19% of total assets at December 31, 2018, and $1.7 million, or 0.20% of total assets at March 31, 2018.  There were no repossessed assets or other real estate owned at March 31, 2019.

Nonperforming loans to loans receivable ratio was 0.17% at March 31, 2019, compared to 0.24% at December 31, 2018.  

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

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

March 31,

 

(Dollars in thousands)

 

2019

 

 

2018

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

 

$

493

 

 

$

493

 

 

 

$

396

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

   Construction, land and land development

 

 

-

 

 

 

-

 

 

 

 

-

 

   Residential

 

 

71

 

 

 

72

 

 

 

 

-

 

   Commercial real estate

 

 

-

 

 

 

-

 

 

 

 

-

 

   Commercial real estate - troubled debt restructure

 

 

-

 

 

 

1,261

 

 

 

 

1,303

 

Consumer and other loans

 

 

2

 

 

 

-

 

 

 

 

-

 

         Total nonaccrual loans

 

 

566

 

 

 

1,826

 

 

 

 

1,699

 

         Total accruing loans past due 90 days or more

 

 

748

 

 

 

-

 

 

 

 

-

 

         Total nonperforming loans

 

 

1,314

 

 

 

1,826

 

 

 

 

1,699

 

Other real estate owned

 

 

-

 

 

 

-

 

 

 

 

-

 

Repossessed assets

 

 

-

 

 

 

-

 

 

 

 

-

 

Total nonperforming assets

 

$

1,314

 

 

$

1,826

 

 

 

$

1,699

 

Troubled debt restructurings, accruing

 

 

-

 

 

 

-

 

 

 

 

-

 

Total nonperforming loans to loans receivable

 

 

0.17

%

 

 

0.24

%

 

 

 

0.25

%

Total nonperforming assets to total assets

 

 

0.12

%

 

 

0.19

%

 

 

 

0.20

%

 

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

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

2018

 

Cash and due from banks

 

$

21,176

 

 

$

16,315

 

 

$

13,589

 

Interest earning deposits with other banks

 

 

236,483

 

 

 

109,467

 

 

 

80,980

 

Investment securities, available for sale, at fair value

 

 

36,970

 

 

 

36,660

 

 

 

36,015

 

Investment securities, held to maturity, at amortized cost

 

 

1,247

 

 

 

1,262

 

 

 

1,323

 

Other investments

 

 

3,600

 

 

 

3,766

 

 

 

3,766

 

Loans receivable

 

 

791,072

 

 

 

767,899

 

 

 

678,515

 

Allowance for loan losses

 

 

(9,915

)

 

 

(9,407

)

 

 

(8,423

)

     Total loans receivable, net

 

 

781,157

 

 

 

758,492

 

 

 

670,092

 

Premises and equipment, net

 

 

13,017

 

 

 

13,167

 

 

 

13,000

 

Operating lease right-of-use assets

 

 

9,305

 

 

 

-

 

 

 

-

 

Accrued interest receivable

 

 

2,505

 

 

 

2,526

 

 

 

1,968

 

Bank-owned life insurance, net

 

 

6,735

 

 

 

6,688

 

 

 

6,546

 

Deferred tax asset, net

 

 

2,496

 

 

 

2,518

 

 

 

2,277

 

Other assets

 

 

1,399

 

 

 

1,249

 

 

 

1,406

 

     Total assets

 

$

1,116,090

 

 

$

952,110

 

 

$

830,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

976,496

 

 

$

803,614

 

 

$

727,268

 

Federal Home Loan Bank (FHLB) advances

 

 

-

 

 

 

20,000

 

 

 

20,000

 

Subordinated debt, net

 

 

9,968

 

 

 

9,965

 

 

 

9,954

 

Junior subordinated debentures, net

 

 

3,581

 

 

 

3,581

 

 

 

3,580

 

Deferred compensation

 

 

1,052

 

 

 

1,078

 

 

 

1,151

 

Accrued interest payable

 

 

343

 

 

 

279

 

 

 

229

 

Operating lease liabilities

 

 

9,471

 

 

 

-

 

 

 

-

 

Other liabilities

 

 

2,814

 

 

 

4,437

 

 

 

1,853

 

     Total liabilities

 

 

1,003,725

 

 

 

842,954

 

 

 

764,035

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

86,579

 

 

 

86,431

 

 

 

52,592

 

Retained earnings

 

 

26,829

 

 

 

24,021

 

 

 

16,163

 

Accumulated other comprehensive loss, net of tax

 

 

(1,043

)

 

 

(1,296

)

 

 

(1,828

)

     Total shareholders’ equity

 

 

112,365

 

 

 

109,156

 

 

 

66,927

 

     Total liabilities and shareholders’ equity

 

$

1,116,090

 

 

$

952,110

 

 

$

830,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 


 

 

COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 

Three months ended

 

 

March 31, 2019

 

December 31, 2018

 

March 31, 2018

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$

10,419

 

$

10,308

 

$

8,189

 

Interest on interest earning deposits with other banks

 

808

 

 

483

 

 

255

 

Interest on investment securities

 

153

 

 

155

 

 

152

 

Dividends on other investments

 

14

 

 

65

 

 

11

 

Total interest and dividend income

 

11,394

 

 

11,011

 

 

8,607

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Interest on deposits

 

1,436

 

 

932

 

 

646

 

Interest on borrowed funds

 

191

 

 

191

 

 

183

 

Total interest expense

 

1,627

 

 

1,123

 

 

829

 

Net interest income

 

9,767

 

 

9,888

 

 

7,778

 

PROVISION FOR LOAN LOSSES

 

540

 

 

425

 

 

501

 

Net interest income after provision for loan losses

 

9,227

 

 

9,463

 

 

7,277

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

Deposit service charges and fees

 

726

 

 

803

 

 

687

 

Wholesale banking service fees

 

446

 

 

339

 

 

-

 

Loan referral fees

 

633

 

 

165

 

 

130

 

Mortgage broker fees

 

85

 

 

57

 

 

37

 

Sublease and lease income

 

10

 

 

10

 

 

57

 

(Loss) gain on sale of loans

 

(11

)

 

122

 

 

64

 

Other

 

95

 

 

105

 

 

132

 

Total noninterest income

 

1,984

 

 

1,601

 

 

1,107

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

4,558

 

 

4,354

 

 

3,735

 

Occupancy

 

994

 

 

889

 

 

823

 

Data processing

 

529

 

 

499

 

 

479

 

Director and staff expenses

 

240

 

 

208

 

 

144

 

Excise taxes

 

165

 

 

155

 

 

124

 

Marketing

 

94

 

 

120

 

 

57

 

Legal and professional fees

 

409

 

 

325

 

 

80

 

Federal Deposit Insurance Corporation (FDIC) assessments

 

75

 

 

48

 

 

85

 

Business development

 

102

 

 

85

 

 

88

 

Other

 

496

 

 

502

 

 

452

 

Total noninterest expense

 

7,662

 

 

7,185

 

 

6,067

 

Income before provision for income taxes

 

3,549

 

 

3,879

 

 

2,317

 

PROVISION FOR INCOME TAXES

 

741

 

 

824

 

 

474

 

NET INCOME

$

2,808

 

$

3,055

 

$

1,843

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.24

 

$

0.26

 

$

0.20

 

Diluted earnings per share

$

0.23

 

$

0.25

 

$

0.20

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

11,884,107

 

 

11,877,261

 

 

9,242,839

 

Diluted

 

12,183,234

 

 

12,166,250

 

 

9,248,428

 

 

 

 

 

 

 

 

 

 

 

 

9

 


 

 

COASTAL FINANCIAL CORPORATION

AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY

(Dollars in thousands; unaudited)

 

For the Three Months Ended

 

March 31, 2019

 

 

December 31, 2018

 

 

March 31, 2018

 

 

 

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

$

133,458

 

$

808

 

 

2.46

%

 

$

83,751

 

$

483

 

 

2.29

%

 

$

68,160

 

$

255

 

 

1.52

%

 

Investment securities (1)

 

39,552

 

 

153

 

 

1.57

 

 

 

39,590

 

 

155

 

 

1.55

 

 

 

39,717

 

 

152

 

 

1.55

 

 

Other Investments

 

3,150

 

 

14

 

 

1.80

 

 

 

2,974

 

 

65

 

 

8.67

 

 

 

2,912

 

 

11

 

 

1.53

 

 

Loans receivable (2)

 

782,387

 

 

10,419

 

 

5.40

 

 

 

759,084

 

 

10,308

 

 

5.39

 

 

 

654,570

 

 

8,189

 

 

5.07

 

 

Total interest earning assets

$

958,547

 

$

11,394

 

 

4.82

 

 

$

885,399

 

$

11,011

 

 

4.93

 

 

$

765,359

 

$

8,607

 

 

4.56

 

 

Noninterest earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

(9,623

)

 

 

 

 

 

 

 

 

(9,191

)

 

 

 

 

 

 

 

 

(8,121

)

 

 

 

 

 

 

 

Other noninterest earning assets

 

48,145