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Section 1: 8-K (8-K)

ck0001437958-8k_20190726.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):  July 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))

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, no par value per share

 

CCB

 

The Nasdaq Stock Market LLC

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

Emerging growth company  

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

 

 

 

 

 

 

 

 

 

 


 

Item 2.02

Results of Operations and Financial Condition

 

On July 26, 2019, Coastal Financial Corporation issued a press release announcing its results of operations and financial condition for the quarter ended June 30, 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 July 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: July 29, 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 SECOND QUARTER 2019 RESULTS

Company release: July 26, 2019

Quarter Two 2019 Highlights:

 

Net income totaled $3.3 million for the quarter ended June 30, 2019, or $0.27 per diluted common share, up from $2.2 million, or $0.24 per diluted common share, for the quarter ended June 30, 2018.  

 

Total assets were $1.0 billion at June 30, 2019, up 8.3% from $952.1 million at December 31, 2018.

 

Total loans receivable grew at an annualized rate of 20.2% for the six months ended June 30, 2019 and increased 10.1% from December 31, 2018.

 

Total core deposits grew at an annualized rate of 16.9% for the six months ended June 30, 2019 and increased 8.4% since December 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 June 30, 2019.  Net income for the second quarter of 2019 was $3.3 million, or $0.27 per diluted common share, compared with net income of $2.8 million, or $0.23 per diluted common share, for the first quarter of 2019.  

The Company had net income of $6.1 million for the six months ended June 30, 2019, or $0.50 per diluted common share, compared to $4.0 million, or $0.44 per diluted common share for the six months ended June 30, 2018.

Eric Sprink, President and CEO, commented, “We got off to a solid start in first quarter and in the second quarter we backed that up with earnings of $3.3 million, loan growth of $54.4 million, and core deposit growth of $38.1 million.  Overall, I am pleased with the strong organic loan and core deposit growth plus the solid earnings from our community bank.”

The Company’s first and second quarter 2019 results were impacted by a temporary, atypically large balance held in a deposit account by a wholesale banking services client, which is not expected to occur again.  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.

The large amount of wholesale-brokered deposits, which were primarily held during the quarter ended March 31, 2019 and through April 9, 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.  Although the bulk of the atypical wholesale-brokered deposits were transferred out on April 9, 2019, the impact of these atypical balances will continue to be seen in the year to date results of the Company for the remainder of 2019.  

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.  

 

 

1

 


Results of Operations

Net interest income was $10.2 million for the quarter ended June 30, 2019, an increase of 4.3% from $9.8 million for the quarter ended March 31, 2019 and an increase of 22.7% from $8.3 million from the quarter ended June 30, 2018.   The increase compared to prior quarter is related to increased interest income resulting from our strong loan growth and higher loan balances and a decrease in interest expense on interest bearing accounts which is a result of the wholesale-brokered deposits normalizing early in the second quarter. The increase from the prior year’s second quarter is a result of higher yielding and increased interest earning asset balances.

Net interest income for the six months ended June 30, 2019 totaled $20.0 million, an increase of 24.1% compared to $16.1 million for the same period last year. The $3.9 million increase in net interest income over the same period last year was primarily related to growth in higher yielding loan balances. During the six months ended June 30, 2019, the average balance of total loans receivable increased by $125.8 million, compared to the same period last year. Increased interest income was partially offset by increased deposit costs from the growth in the balance of our interest bearing deposits of $96.7 million and an increase in the cost of deposits of 29 basis points, compared to the same period last year. Without the impact of holding the temporary wholesale-brokered deposits, the cost of deposits would have been 57 basis points for the six months ended June 30, 2019, an increase of 19 basis points over the six-month period ended June 30, 2018.

Net interest margin for the quarter ended June 30, 2019 increased 11 basis points to 4.24% as compared to 4.13% for the quarter ended March 31, 2019 and 4.26% for the quarter ended June 30, 2018. The increase over the prior quarter was due to growth in interest earning assets.  Interest earning deposits decreased as a result of the atypical wholesale-brokered deposits being transferred out in April 2019, however higher yielding loans receivable increased during the second quarter.  The decrease in net interest margin compared to the prior year is primarily a result of increased deposit costs.  

Net interest margin for the six months ended June 30, 2019 was 4.19% and equaled the comparable period last year. Higher loans receivable and increased average loan yields in the period ended June 30, 2019 were offset by an increase in deposit costs, therefore the net interest margin was unchanged from the six months ended June 30, 2018.  

During the quarter ended June 30, 2019 the average balance of total loans receivable increased $30.3 million, compared to the quarter ended March 31, 2019, and increased by $123.7 million, compared to the same quarter one year ago. Total loan yield for the quarter ended June 30, 2019 was 5.39%, a decrease of one basis point from 5.40% for the quarter ended March 31, 2019, and a 28 basis point increase from 5.11% for the quarter ended June 30, 2018.

Contractual loan yields approximated 5.23% for the three months ended June 30, 2019, compared to 5.22% for the three months ended March 31, 2019, and 4.92% for the three months ended June 30, 2018. The increase in contractual loan yields, as compared to last year, was from pricing new loans at higher rates and variable loans repricing with the increase in the prime rate and to a lesser extent changes in the composition of the loan portfolio.

Deposit costs for the quarter ended June 30, 2019 were 0.66%, a decrease of two basis points from 0.68% for the quarter ended March 31, 2019, and a 26 basis point increase from the quarter ended June 30, 2018.  Wholesale-brokered deposits averaged $20.3 million for the quarter ended June 30, 2019 compared to $74.1 million for the quarter ended March 31, 2019.  This temporary increase resulted in an atypical increase in interest expense.  Without the increase in wholesale-brokered deposits, cost of deposits would have approximated 0.63% and 0.52% for the quarters ended June 30, 2019 and March 31, 2019, respectively.  Despite the significant decrease in wholesale-brokered deposit balances, market conditions and pressure to increase rates has increased the overall cost of deposits.  

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 atypical wholesale-brokered deposits for the quarters ended June 30, 2019 and March 31, 2019 and the six months ended June 30, 2019, so each period could more easily be

2

 


compared.  These adjusted ratios are non-GAAP measures.  For more information about non-GAAP financial measures, see the end of this earnings release.

 

Three months ended

 

 

Six months ended

 

 

 

June 30,

2019

 

March 31, 2019

 

December 31, 2018

 

September 30, 2018

 

June 30,

2018

 

 

June 30, 2019

 

June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

 

1.31

%

 

1.14

%

 

1.33

%

 

1.18

%

 

1.09

%

 

 

1.23

%

 

1.02

%

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

 

 

1.34

%

 

1.20

%

 

1.33

%

 

1.18

%

 

1.09

%

 

 

1.26

%

 

1.02

%

Return on average equity (1)

 

 

11.45

%

 

10.25

%

 

11.31

%

 

10.59

%

 

12.90

%

 

 

10.86

%

 

12.07

%

Pre-tax, pre-provision return on average assets (1,3)

 

 

1.87

%

 

1.66

%

 

1.87

%

 

1.71

%

 

1.57

%

 

 

1.77

%

 

1.50

%

Yield on earnings assets (1)

 

 

4.92

%

 

4.82

%

 

4.93

%

 

4.62

%

 

4.73

%

 

 

4.87

%

 

4.65

%

Yield on loans receivable (1)

 

 

5.39

%

 

5.40

%

 

5.39

%

 

5.12

%

 

5.11

%

 

 

5.39

%

 

5.09

%

Loan yield excluding fees (1)

 

 

5.23

%

 

5.22

%

 

5.15

%

 

5.02

%

 

4.92

%

 

 

5.23

%

 

4.90

%

Cost of funds (1)

 

 

0.74

%

 

0.76

%

 

0.56

%

 

0.53

%

 

0.50

%

 

 

0.75

%

 

0.48

%

Cost of funds, as adjusted (1,4)

 

 

0.71

%

 

0.61

%

 

0.56

%

 

0.53

%

 

0.50

%

 

 

0.66

%

 

0.48

%

Cost of deposits (1)

 

 

0.66

%

 

0.68

%

 

0.47

%

 

0.44

%

 

0.40

%

 

 

0.67

%

 

0.38

%

Cost of deposits, as adjusted (1,5)

 

 

0.63

%

 

0.52

%

 

0.47

%

 

0.44

%

 

0.40

%

 

 

0.57

%

 

0.38

%

Net interest margin (1)

 

 

4.24

%

 

4.13

%

 

4.43

%

 

4.13

%

 

4.26

%

 

 

4.19

%

 

4.19

%

Net interest margin, as adjusted (1,6)

 

 

4.38

%

 

4.48

%

 

4.43

%

 

4.13

%

 

4.26

%

 

 

4.40

%

 

4.19

%

Noninterest expense to average assets (1)

 

 

3.06

%

 

3.12

%

 

3.12

%

 

2.99

%

 

3.15

%

 

 

3.09

%

 

3.12

%

Noninterest expense to average assets, as adjusted (1,7)

 

 

3.12

%

 

3.37

%

 

3.12

%

 

2.99

%

 

3.15

%

 

 

3.24

%

 

3.12

%

Efficiency ratio

 

 

62.05

%

 

65.20

%

 

62.54

%

 

63.59

%

 

66.77

%

 

 

63.59

%

 

67.50

%

Loans receivable to deposits

 

 

97.39

%

 

81.01

%

 

95.56

%

 

96.08

%

 

94.12

%

 

 

97.39

%

 

94.12

%

Loans receivable to deposits, as adjusted (8)

 

 

97.39

%

 

97.44

%

 

95.56

%

 

96.08

%

 

94.12

%

 

 

97.39

%

 

94.12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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) Pre-tax, pre-provision return on average assets is a non-GAAP measure that excludes the impact provision and income tax expense from return on average assets.  The most directly comparable GAAP measure is return on average assets.

 

(4) 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.

 

(5) 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.

 

(6) 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.

 

(7) 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.

 

(8) 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 $2.1 million for the second quarter of 2019, an increase of $148,000 from $2.0 million for the first quarter of 2019, and an increase of $919,000 from $1.2 million for the comparable period one year ago. The increase compared to the prior quarter was primarily the result of $143,000 more in the income on sale of loans, $56,000 in additional wholesale banking service fees, and $55,000 more in deposit service charges and fees; these increases were partially offset by a decline in loan referral fees of $160,000.  The $919,000 increase over the quarter ended June 30, 2018 was largely due to fees earned from wholesale banking services that provided an additional $460,000 of income and an increase of $359,000 in loan referral fees.

3

 


Noninterest income was $4.1 million for the six months ended June 30, 2019, compared to $2.3 million for the six months ended June 30, 2018. The increase is primarily related to increased wholesale banking service fees of $906,000 and loan referral fee income, which is earned when a borrower enters into an interest rate swap agreement with a third party, totaled $1.1 million for the six months ended June 30, 2019, an increase of $862,000 from the same period last year.

Total noninterest expense for the current quarter decreased to $7.6 million from $7.7 million for the preceding quarter and increased 20.3% from $6.4 million from the comparable period one year ago. The decrease in expense from the quarter ended March 31, 2019 was largely due to a $116,000 reduction in legal and accounting fees.  Expenses from operating as a public company are higher in the first quarter as a result of the increased reporting that is done for year-end.  Other noninterest expense in the current quarter was $161,000 higher than the preceding quarter due to an $19,000 increase in service charges from the Federal Reserve Bank, which is related to the temporary increase in wholesale brokered deposits at the end of the first quarter of 2019, and therefore is not expected to continue at that level.  Other accounts that contributed to the increase in other noninterest expense during the quarter ended June 30, 2019 include subscription costs, bank examination expense, and operational losses, combined with some nonrecurring filing fees.  The increased expenses for the current quarter compared to the comparable quarter one year ago were largely due to increases in salary expenses. Full time equivalent employees at June 30, 2019 was 187, which was up 4.5% from the prior quarter and increased 10.0% from the quarter ended June 30, 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 company.  Legal and professional fees increased by $163,000 over the second quarter of 2018, as a result of growth initiatives, credit actions, and operating as a public company.  Occupancy expense decreased $64,000 over the first quarter of 2019 and increased $126,000 over the second quarter of 2018.  Occupancy expense for the first quarter of 2019 was higher than the current quarter due to higher maintenance and repair costs.  Occupancy expense for the quarter ended June 30, 2019 was higher than the quarter ended June 30, 2018 largely as a result of expenses related to the opening of the Edmonds branch as well as the aforementioned increases in rent, implementation of the new lease accounting standard, and increases in depreciation and maintenance and repair. An increase in fees paid to directors and overall cost of increased staffing contributed to the $81,000 increase in director and staff expenses over the quarter ended June 30, 2018.

Total noninterest expense for the six months ended June 30, 2019 was $15.3 million, an increase of $2.9 million or 23.2% compared to the same period last year.  The increase is primarily attributable to $1.4 million in increased salary expense, as discussed above, an increase of $492,000 in legal and professional fees, largely due to expenses related to being a public company, and our wholesale banking activities, and an increase of $297,000 in occupancy expenses related to the addition of our Edmonds branch in October 2018.

The provision for income taxes was $113,000 more this quarter compared to the first quarter of 2019, and $285,000 more than the second quarter of 2018, as a result of increased taxable income.  The provision for income taxes was $552,000 more for the six months ended June 30, 2019 compared to the six months ended June 30, 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 $78.9 million, or 8.3%, to $1.0 billion at June 30, 2019 from $952.1 million at December 31, 2018.  The primary cause of the increase was the $77.5 million in increased loans receivable. 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 $8.9 million and $9.1 million, respectively, as of June 30, 2019.  Total assets decreased 7.6% or $85.1 million from March 31, 2019 due to the $150.4 million decrease in wholesale-brokered deposits, which also decreased interest earning deposits with other banks.   As planned, these temporary funds were transferred out early in the second quarter.  This decrease was partially offset by a $54.4 million increase in loans receivable.     

4

 


Total loans receivable, net of allowance for loan losses, increased $76.5 million, or 10.1%, to $835.0 million at June 30, 2019, from $758.5 million at December 31, 2018 and $142.8 million or 20.6% from $692.2 million at June 30, 2018.  The growth in loans receivable was due primarily to increases in commercial real estate loans of $41.7 million and $20.6 million in construction, land and land development loans over the quarter ended December 31, 2018 and an increase of $83.4 million in commercial real estate loans and $38.3 million in construction, land and land development loans over the quarter ended June 30, 2018.

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

 

As of

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

June 30, 2018

 

(Dollars in thousands)

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

 

$

101,110

 

 

11.9

%

 

$

90,390

 

 

11.8

%

 

$

89,284

 

 

12.7

%

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Construction, land and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       land development

 

 

84,666

 

 

10.0

 

 

 

64,045

 

 

8.3

 

 

 

46,356

 

 

6.6

 

   Residential

 

 

100,446

 

 

11.9

 

 

 

94,745

 

 

12.3

 

 

 

88,422

 

 

12.6

 

   Commercial real estate

 

 

557,692

 

 

65.8

 

 

 

515,959

 

 

67.1

 

 

 

474,330

 

 

67.7

 

Consumer and other

 

 

2,893

 

 

0.4

 

 

 

3,584

 

 

0.5

 

 

 

2,670

 

 

0.4

 

      Gross loans receivable

 

 

846,807

 

 

100.0

%

 

 

768,723

 

 

100.0

%

 

 

701,062

 

 

100.0

%

Net deferred origination fees

 

 

(1,364

)

 

 

 

 

 

(824

)

 

 

 

 

 

(370

)

 

 

 

      Loans receivable

 

$

845,443

 

 

 

 

 

$

767,899

 

 

 

 

 

$

700,692

 

 

 

 

 

Total deposits increased $64.5 million, or 8.0%, to $868.1 million at June 30, 2019 from $803.6 million at December 31, 2018.  The increase is largely due to a $58.7 million increase in core deposits.  During the six months ended June 30, 2019 noninterest bearing deposits increased $22.4 million, NOW and money market accounts increased $37.8 million, savings accounts decreased $1.5 million, wholesale-brokered deposits increased $3.6 million and time deposits increased $2.2 million.  Total deposits increased $123.7 million or 16.6% compared to June 30, 2018.  

At June 30, 2019, wholesale-brokered deposits totaled $14.2 million compared to $164.6 million at March 31, 2019.  The Bank invested the cash from wholesale-brokered deposits into overnight funds.  Cash and cash equivalents at June 30, 2019 totaled $113.5 million compared to $257.7 million at March 31, 2019.  On April 9, 2019, the wholesale banking customer transferred $157.1 million in temporary wholesale-brokered deposits from the Bank to their deposit provider. 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.  Going forward, we expect wholesale-brokered deposits to average 1.0% - 3.0% of total deposits, based on current balance requirements and activity.

 

 

 

 

 

 

 

 

5

 


The following table summarizes the deposit portfolio at the periods indicated and breaks out wholesale-brokered deposits.

 

 

As of

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

June 30, 2018

 

(Dollars in thousands)

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

Balance

 

% to Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand, noninterest bearing

 

$

315,890

 

 

36.4

%

 

$

293,525

 

 

36.5

%

 

$

259,449

 

 

34.9

%

NOW and money market

 

 

387,758

 

 

44.7

 

 

 

349,952

 

 

43.6

 

 

 

336,666

 

 

45.2

 

Savings

 

 

51,120

 

 

5.9

 

 

 

52,572

 

 

6.5

 

 

 

48,509

 

 

6.5

 

      Total core deposits

 

 

754,768

 

 

87.0

 

 

 

696,049

 

 

86.6

 

 

 

644,624

 

 

86.6

 

Wholesale brokered deposits

 

 

14,166

 

 

1.6

 

 

 

10,521

 

 

1.3

 

 

 

 

 

0.0

 

Time deposits less than $250,000

 

 

62,303

 

 

7.2

 

 

 

62,272

 

 

7.8

 

 

 

65,393

 

 

8.8

 

Time deposits $250,000 and over

 

 

36,907

 

 

4.2

 

 

 

34,772

 

 

4.3

 

 

 

34,451

 

 

4.6

 

      Total deposits

 

$

868,144

 

 

100.0

%

 

$

803,614

 

 

100.0

%

 

$

744,468

 

 

100.0

%

 

Total shareholders’ equity increased $7.4 million since December 31, 2018.  The increase in shareholders’ equity was primarily due to $6.1 million net earnings in the last six months and a $1.1 million increase in additional other comprehensive income as a result of an increase in the value of our available for sale investment portfolio.

Capital Ratios

The Company and the Bank remain well capitalized at June 30, 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

 

11.00

%

 

 

11.99

%

 

 

5.00

%

Tier 1 risk-based capital

 

12.27

%

 

 

12.99

%

 

 

8.00

%

Common Equity Tier 1 risk-based capital

 

12.27

%

 

 

13.37

%

 

 

6.50

%

Total risk-based capital

 

13.48

%

 

 

15.70

%

 

 

10.00

%

 

Asset Quality

The allowance for loan losses was 1.24% of loans receivable at June 30, 2019 compared to 1.23% at December 31, 2018.  Provision for loan losses totaled $547,000 for the current quarter, $540,000 for the preceding quarter, and $392,000 for the same quarter in the prior year. Net charge-offs totaled $19,000 for the quarter ended June 30, 2019, compared to $32,000 for the quarter ended March 31, 2019 and $275,000 for the quarter ended June 30, 2018.

At June 30, 2019 our nonperforming assets were $1.6 million, or 0.16% of total assets, compared to $1.8 million or 0.19% of total assets at December 31, 2018, and $2.1 million, or 0.24% of total assets at June 30, 2018.  There were no repossessed assets or other real estate owned at June 30, 2019.

Nonperforming loans to loans receivable ratio was 0.19% at June 30, 2019, compared to 0.24% at December 31, 2018.  Commercial and industrial nonaccrual loans total $1.6 million at quarter end, and consist of five lending relationships.  A $1.3 million nonaccrual commercial real estate loan, also categorized as a troubled debt restructuring, was paid off during the second quarter of 2019, resulting in an overall decrease of nonperforming loans and nonperforming assets to total assets compared to December 31, 2018.

6

 


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

 

As of

 

 

 

June 30,

 

 

December 31,

 

 

June 30,

 

(Dollars in thousands)

 

2019

 

 

2018

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

 

$

1,579

 

 

$

493

 

 

$

703

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

   Construction, land and land development

 

 

-

 

 

 

-

 

 

 

-

 

   Residential

 

 

69

 

 

 

72

 

 

 

75

 

   Commercial real estate

 

 

-

 

 

 

-

 

 

 

-

 

   Commercial real estate - troubled debt restructure

 

 

-

 

 

 

1,261

 

 

 

1,290

 

Consumer and other loans

 

 

-

 

 

 

-

 

 

 

-

 

         Total nonaccrual loans

 

 

1,648

 

 

 

1,826

 

 

 

2,068

 

         Total accruing loans past due 90 days or more

 

 

-

 

 

 

-

 

 

 

-

 

         Total nonperforming loans

 

 

1,648

 

 

 

1,826

 

 

 

2,068

 

Other real estate owned

 

 

-

 

 

 

-

 

 

 

-

 

Repossessed assets

 

 

-

 

 

 

-

 

 

 

-

 

Total nonperforming assets

 

$

1,648

 

 

$

1,826

 

 

$

2,068

 

Troubled debt restructurings, accruing

 

 

-

 

 

 

-

 

 

 

-

 

Total nonperforming loans to loans receivable

 

 

0.19

%

 

 

0.24

%

 

 

0.30

%

Total nonperforming assets to total assets

 

 

0.16

%

 

 

0.19

%

 

 

0.24

%

 

About Coastal Financial

Coastal Financial Corporation (NASDAQ: CCB) (the “Company”), is an Everett, Washington based 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.  To learn more about Coastal Community Bank visit www.coastalbank.com .

Contact

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

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

 

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.

 

7

 


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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 


COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands; unaudited)

 

ASSETS

 

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2019

 

 

2018

 

Cash and due from banks

 

$

18,735

 

 

$

21,176

 

 

$

16,315

 

Interest earning deposits with other banks

 

 

94,735

 

 

 

236,483

 

 

 

109,467

 

Investment securities, available for sale, at fair value

 

 

37,978

 

 

 

36,970

 

 

 

36,660

 

Investment securities, held to maturity, at amortized cost

 

 

4,403

 

 

 

1,247

 

 

 

1,262

 

Other investments

 

 

4,400

 

 

 

3,600

 

 

 

3,766

 

Loans receivable

 

 

845,443

 

 

 

791,072

 

 

 

767,899

 

Allowance for loan losses

 

 

(10,443

)

 

 

(9,915

)

 

 

(9,407

)

     Total loans receivable, net

 

 

835,000

 

 

 

781,157

 

 

 

758,492

 

Premises and equipment, net

 

 

12,933

 

 

 

13,017

 

 

 

13,167

 

Operating lease right-of-use assets

 

 

8,922

 

 

 

9,305

 

 

 

-

 

Accrued interest receivable

 

 

2,884

 

 

 

2,505

 

 

 

2,526

 

Bank-owned life insurance, net

 

 

6,783

 

 

 

6,735

 

 

 

6,688

 

Deferred tax asset, net

 

 

2,255

 

 

 

2,496

 

 

 

2,518

 

Other assets

 

 

1,996

 

 

 

1,399

 

 

 

1,249

 

     Total assets

 

$

1,031,024

 

 

$

1,116,090

 

 

$

952,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

868,144

 

 

$

976,496

 

 

$

803,614

 

Federal Home Loan Bank (FHLB) advances

 

 

20,000

 

 

 

-

 

 

 

20,000

 

Subordinated debt, net

 

 

9,972

 

 

 

9,968

 

 

 

9,965

 

Junior subordinated debentures, net

 

 

3,582

 

 

 

3,581

 

 

 

3,581

 

Deferred compensation

 

 

1,026

 

 

 

1,052

 

 

 

1,078

 

Accrued interest payable

 

 

298

 

 

 

343

 

 

 

279

 

Operating lease liabilities

 

 

9,098

 

 

 

9,471

 

 

 

-

 

Other liabilities

 

 

2,312

 

 

 

2,814

 

 

 

4,437

 

     Total liabilities

 

 

914,432

 

 

 

1,003,725

 

 

 

842,954

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

86,730

 

 

 

86,579

 

 

 

86,431

 

Retained earnings

 

 

30,104

 

 

 

26,829

 

 

 

24,021

 

Accumulated other comprehensive loss, net of tax

 

 

(242

)

 

 

(1,043

)

 

 

(1,296

)

     Total shareholders’ equity

 

 

116,592

 

 

 

112,365

 

 

 

109,156

 

     Total liabilities and shareholders’ equity

 

$

1,031,024

 

 

$

1,116,090

 

 

$

952,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 


COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 

Three months ended

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$

10,917

 

$

10,419

 

$

8,778

 

Interest on interest earning deposits with other banks

 

652

 

 

808

 

 

236

 

Interest on investment securities

 

160

 

 

153

 

 

155

 

Dividends on other investments

 

75

 

 

14

 

 

62

 

Total interest and dividend income

 

11,804

 

 

11,394

 

 

9,231

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Interest on deposits

 

1,420

 

 

1,436

 

 

712

 

Interest on borrowed funds

 

198

 

 

191

 

 

216

 

Total interest expense

 

1,618

 

 

1,627

 

 

928

 

Net interest income

 

10,186

 

 

9,767

 

 

8,303

 

PROVISION FOR LOAN LOSSES

 

547

 

 

540

 

 

392

 

Net interest income after provision for loan losses

 

9,639

 

 

9,227

 

 

7,911

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

Deposit service charges and fees

 

781

 

 

726

 

 

771

 

Wholesale banking service fees

 

502

 

 

446

 

 

42

 

Loan referral fees

 

473

 

 

633

 

 

114

 

Mortgage broker fees

 

111

 

 

85

 

 

69

 

Sublease and lease income

 

10

 

 

10

 

 

4

 

Gain (loss) on sale of loans

 

132

 

 

(11

)

 

78

 

Other

 

123

 

 

95

 

 

135

 

Total noninterest income

 

2,132

 

 

1,984

 

 

1,213

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

4,529

 

 

4,558

 

 

3,910

 

Occupancy

 

930

 

 

994

 

 

804

 

Data processing

 

499

 

 

529

 

 

492

 

Director and staff expenses

 

217

 

 

240

 

 

136

 

Excise taxes

 

180

 

 

165

 

 

134

 

Marketing

 

108

 

 

94

 

 

86

 

Legal and professional fees

 

293

 

 

409

 

 

130

 

Federal Deposit Insurance Corporation (FDIC) assessments

 

134

 

 

75

 

 

79

 

Business development

 

96

 

 

102

 

 

72

 

Other

 

657

 

 

496

 

 

511

 

Total noninterest expense

 

7,643

 

 

7,662

 

 

6,354

 

Income before provision for income taxes

 

4,128

 

 

3,549

 

 

2,770

 

PROVISION FOR INCOME TAXES

 

854

 

 

741

 

 

569

 

NET INCOME

$

3,274

 

$

2,808

 

$

2,201

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.28

 

$

0.24

 

$

0.24

 

Diluted earnings per share

$

0.27

 

$

0.23

 

$

0.24

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

11,895,026

 

 

11,884,107

 

 

9,265,153

 

Diluted

 

12,202,197

 

 

12,183,234

 

 

9,284,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 


COASTAL FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

 

 

 

 

 

Six months ended

 

 

June 30, 2019

 

June 30, 2018

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

Interest and fees on loans

$

21,336

 

$

16,967

 

Interest on interest earning deposits with other banks

 

1,460

 

 

491

 

Interest on investment securities

 

313

 

 

307

 

Dividends on other investments

 

89

 

 

73

 

Total interest and dividend income

 

23,198

 

 

17,838

 

INTEREST EXPENSE

 

 

 

 

 

 

Interest on deposits

 

2,856

 

 

1,358

 

Interest on borrowed funds

 

389

 

 

399

 

Total interest expense

 

3,245

 

 

1,757

 

Net interest income

 

19,953

 

 

16,081

 

PROVISION FOR LOAN LOSSES

 

1,087

 

 

893

 

Net interest income after provision for loan losses

 

18,866

 

 

15,188

 

NONINTEREST INCOME

 

 

 

 

 

 

Deposit service charges and fees

 

1,507

 

 

1,458

 

Wholesale banking service fees

 

948

 

 

42

 

Loan referral fees

 

1,106

 

 

244

 

Mortgage broker fees

 

196