EVERETT, Wash., Jan. 28, 2025 (GLOBE NEWSWIRE) --
Coastal Financial Corporation (Nasdaq: CCB) (the “Company”,
"Coastal", "we", "our", or "us"), the holding company for Coastal
Community Bank (the “Bank”), through which it operates a
community-focused bank with an industry leading banking as a
service ("BaaS") segment, today reported unaudited financial
results for the quarter ended December 31, 2024, including net
income of $13.4 million, or $0.94 per diluted common share,
compared to $13.5 million, or $0.97 per diluted common share, for
the three months ended September 30, 2024 and $45.2 million,
or $3.26 per diluted common share, for the year ended
December 31, 2024, compared to $44.6 million, or $3.27 per
diluted common share for the year ended December 31, 2023.
Management Discussion of the Quarter and Full-year
Results
“2024 was highlighted by the completion of our $98.0 million
capital raise during the fourth quarter, which we will utilize to
support growth of the Bank including in our CCBX segment,” said CEO
Eric Sprink. “We saw high quality net loan growth of $67.7 million
despite selling $845.5 million in loans during the fourth quarter,
and our CCBX program fee income continued to increase which was up
56.9% for full-year 2024 relative to the prior year. We continue to
invest heavily in CCBX to support future growth, and we are pleased
to have three letters of intent ("LOI") signed going into 2025 with
an active pipeline.”
Key Points for Fourth Quarter and Our Go-Forward
Strategy
- Completed Capital Raise Allows CCBX Growth to
Continue. During the fourth quarter of 2024, we completed
a $98.0 million common equity raise, which was priced at
$71.00/share. Proceeds will be used for general corporate purposes
and to support growth of the Bank including in our CCBX segment. As
of December 31, 2024 we had three signed LOIs and continue to
have an active pipeline for 2025. The growth in common-equity tier
1 and total risk-based capital to 12.04% and 14.67%, respectively,
includes the benefit of the capital raise.
- Strong Annual Growth in CCBX Program Fees.
Total BaaS program fee income was $25.6 million for the year ended
December 31, 2024, an increase of $9.3 million, or 56.9%, from
the year ended December 31, 2023, and is representative of
growth in partner transaction activity and expanded product
offerings within our CCBX operating segment. Trends in CCBX
noninterest income were also positive during the quarter, with
total program fees of $8.2 million for the three months ended
December 31, 2024, an increase of $1.8 million, or 27.6%, from
the three months ended September 30, 2024.
- Investments for Growth Continues. Total
non-interest expense of $64.2 million was down $1.4 million, or
2.1%, as compared to $65.6 million in the third quarter of 2024,
mainly driven by lower BaaS loan expense, partially offset by
higher salaries and employee benefits, point of sale expense, and
legal and professional expenses. As we increase the number of new
CCBX partners and programs launching in 2025, we expect that
expenses will tend to be front-loaded with a focus on compliance
and operational risk before any new program reaches significant
revenues.
- Off Balance Sheet Activity Update. During the
fourth quarter of 2024, we sold $845.5 million of loans, the
majority of which were credit card receivables, and swept $273.2
million of deposits off balance-sheet. We are able to retain a
portion of the fee income on these sold credit card loans. As of
December 31, 2024 there were 182,449 credit cards with fee
earning potential, an increase of 101,023 compared to the quarter
ended September 30, 2024 and an increase of 172,400 from
December 31, 2023.
- Continued Monitoring of CCBX Risk. We remain
fully indemnified against fraud and 98.7% indemnified against
credit risk with our CCBX partners as of year-end of 2024.
Fourth Quarter 2024 Financial
Highlights
The tables below outline some of our key operating metrics.
| |
Three Months Ended |
| (Dollars in thousands,
except share and per share data; unaudited) |
December 31,
2024 |
|
September 30,
2024 |
|
June 30,
2024 |
|
March 31,
2024 |
|
December 31,
2023 |
| Income Statement
Data: |
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
$ |
96,587 |
|
|
$ |
105,079 |
|
|
$ |
97,487 |
|
|
$ |
90,472 |
|
|
$ |
88,243 |
|
| Interest expense |
|
30,071 |
|
|
|
32,892 |
|
|
|
31,250 |
|
|
|
29,536 |
|
|
|
28,586 |
|
| Net interest income |
|
66,516 |
|
|
|
72,187 |
|
|
|
66,237 |
|
|
|
60,936 |
|
|
|
59,657 |
|
| Provision for credit
losses |
|
61,867 |
|
|
|
70,257 |
|
|
|
62,325 |
|
|
|
83,158 |
|
|
|
60,789 |
|
| Net interest (expense)/ income
after provision for credit losses |
|
4,649 |
|
|
|
1,930 |
|
|
|
3,912 |
|
|
|
(22,222 |
) |
|
|
(1,132 |
) |
| Noninterest income |
|
76,756 |
|
|
|
80,068 |
|
|
|
69,918 |
|
|
|
86,955 |
|
|
|
64,694 |
|
| Noninterest expense |
|
64,206 |
|
|
|
65,616 |
|
|
|
58,809 |
|
|
|
56,018 |
|
|
|
51,703 |
|
| Provision for income tax |
|
3,832 |
|
|
|
2,926 |
|
|
|
3,425 |
|
|
|
1,915 |
|
|
|
2,847 |
|
| Net income |
|
13,367 |
|
|
|
13,456 |
|
|
|
11,596 |
|
|
|
6,800 |
|
|
|
9,012 |
|
| |
|
|
|
|
|
|
|
|
|
| |
As of and for the Three Month Period |
| |
December 31,
2024 |
|
September 30,
2024 |
|
June 30,
2024 |
|
March 31,
2024 |
|
December 31,
2023 |
| Balance Sheet
Data: |
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
$ |
452,513 |
|
|
$ |
484,026 |
|
|
$ |
487,245 |
|
|
$ |
515,128 |
|
|
$ |
483,128 |
|
| Investment securities |
|
47,321 |
|
|
|
48,620 |
|
|
|
49,213 |
|
|
|
50,090 |
|
|
|
150,364 |
|
| Loans held for sale |
|
20,600 |
|
|
|
7,565 |
|
|
|
— |
|
|
|
797 |
|
|
|
— |
|
| Loans receivable |
|
3,486,565 |
|
|
|
3,418,832 |
|
|
|
3,326,460 |
|
|
|
3,199,554 |
|
|
|
3,026,092 |
|
| Allowance for credit
losses |
|
(176,994 |
) |
|
|
(170,263 |
) |
|
|
(147,914 |
) |
|
|
(139,258 |
) |
|
|
(116,958 |
) |
| Total assets |
|
4,121,208 |
|
|
|
4,065,821 |
|
|
|
3,961,546 |
|
|
|
3,865,258 |
|
|
|
3,753,366 |
|
| Interest bearing deposits |
|
3,057,808 |
|
|
|
3,047,861 |
|
|
|
2,949,643 |
|
|
|
2,888,867 |
|
|
|
2,735,161 |
|
| Noninterest bearing
deposits |
|
527,524 |
|
|
|
579,427 |
|
|
|
593,789 |
|
|
|
574,112 |
|
|
|
625,202 |
|
| Core deposits
(1) |
|
3,123,434 |
|
|
|
3,190,869 |
|
|
|
3,528,339 |
|
|
|
3,447,864 |
|
|
|
3,342,004 |
|
| Total deposits |
|
3,585,332 |
|
|
|
3,627,288 |
|
|
|
3,543,432 |
|
|
|
3,462,979 |
|
|
|
3,360,363 |
|
| Total borrowings |
|
47,884 |
|
|
|
47,847 |
|
|
|
47,810 |
|
|
|
47,771 |
|
|
|
47,734 |
|
| Total shareholders’
equity |
|
438,704 |
|
|
|
331,930 |
|
|
|
316,693 |
|
|
|
303,709 |
|
|
|
294,978 |
|
| |
|
|
|
|
|
|
|
|
|
| Share and Per Share
Data
(2): |
|
|
|
|
|
|
|
|
|
| Earnings per share –
basic |
$ |
0.97 |
|
|
$ |
1.00 |
|
|
$ |
0.86 |
|
|
$ |
0.51 |
|
|
$ |
0.68 |
|
| Earnings per share –
diluted |
$ |
0.94 |
|
|
$ |
0.97 |
|
|
$ |
0.84 |
|
|
$ |
0.50 |
|
|
$ |
0.66 |
|
| Dividends per share |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Book value per share
(3) |
$ |
29.37 |
|
|
$ |
24.51 |
|
|
$ |
23.54 |
|
|
$ |
22.65 |
|
|
$ |
22.17 |
|
| Tangible book value per share
(4) |
$ |
29.37 |
|
|
$ |
24.51 |
|
|
$ |
23.54 |
|
|
$ |
22.65 |
|
|
$ |
22.17 |
|
| Weighted avg outstanding
shares – basic |
|
13,828,605 |
|
|
|
13,447,066 |
|
|
|
13,412,667 |
|
|
|
13,340,997 |
|
|
|
13,286,828 |
|
| Weighted avg outstanding
shares – diluted |
|
14,268,229 |
|
|
|
13,822,270 |
|
|
|
13,736,508 |
|
|
|
13,676,917 |
|
|
|
13,676,513 |
|
| Shares outstanding at end of
period |
|
14,935,298 |
|
|
|
13,543,282 |
|
|
|
13,453,805 |
|
|
|
13,407,320 |
|
|
|
13,304,339 |
|
| Stock options outstanding at
end of period |
|
186,354 |
|
|
|
198,370 |
|
|
|
286,119 |
|
|
|
309,069 |
|
|
|
354,969 |
|
See footnotes that follow the tables below
| |
As of and for the Three Month Period |
| |
December 31,
2024 |
|
September 30,
2024 |
|
June 30,
2024 |
|
March 31,
2024 |
|
December 31,
2023 |
| Credit Quality
Data: |
|
|
|
|
|
|
|
|
|
|
Nonperforming assets (5) to total assets |
|
1.52 |
% |
|
|
1.63 |
% |
|
|
1.34 |
% |
|
|
1.42 |
% |
|
|
1.43 |
% |
|
Nonperforming assets (5) to loans receivable and
OREO |
|
1.80 |
% |
|
|
1.94 |
% |
|
|
1.60 |
% |
|
|
1.71 |
% |
|
|
1.78 |
% |
|
Nonperforming loans (5) to total loans receivable |
|
1.80 |
% |
|
|
1.94 |
% |
|
|
1.60 |
% |
|
|
1.71 |
% |
|
|
1.78 |
% |
|
Allowance for credit losses to nonperforming loans |
|
282.5 |
% |
|
|
256.5 |
% |
|
|
278.1 |
% |
|
|
253.8 |
% |
|
|
217.2 |
% |
|
Allowance for credit losses to total loans receivable |
|
5.08 |
% |
|
|
4.98 |
% |
|
|
4.45 |
% |
|
|
4.35 |
% |
|
|
3.86 |
% |
| Gross charge-offs |
$ |
61,585 |
|
|
$ |
53,305 |
|
|
$ |
55,207 |
|
|
$ |
58,994 |
|
|
$ |
47,652 |
|
| Gross recoveries |
$ |
5,646 |
|
|
$ |
4,069 |
|
|
$ |
1,973 |
|
|
$ |
1,776 |
|
|
$ |
2,781 |
|
| Net charge-offs to average
loans (6) |
|
6.51 |
% |
|
|
5.65 |
% |
|
|
6.57 |
% |
|
|
7.34 |
% |
|
|
5.92 |
% |
| |
|
|
|
|
|
|
|
|
|
| Capital
Ratios: |
|
|
|
|
|
|
|
|
|
| Company |
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital |
|
10.78 |
% |
|
|
8.40 |
% |
|
|
8.31 |
% |
|
|
8.24 |
% |
|
|
8.10 |
% |
| Common equity Tier 1
risk-based capital |
|
12.04 |
% |
|
|
9.24 |
% |
|
|
9.03 |
% |
|
|
8.98 |
% |
|
|
9.10 |
% |
| Tier 1 risk-based capital |
|
12.14 |
% |
|
|
9.34 |
% |
|
|
9.13 |
% |
|
|
9.08 |
% |
|
|
9.20 |
% |
| Total risk-based capital |
|
14.67 |
% |
|
|
11.89 |
% |
|
|
11.70 |
% |
|
|
11.70 |
% |
|
|
11.87 |
% |
| Bank |
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital |
|
10.64 |
% |
|
|
9.29 |
% |
|
|
9.24 |
% |
|
|
9.19 |
% |
|
|
9.06 |
% |
| Common equity Tier 1
risk-based capital |
|
11.99 |
% |
|
|
10.34 |
% |
|
|
10.15 |
% |
|
|
10.14 |
% |
|
|
10.30 |
% |
| Tier 1 risk-based capital |
|
11.99 |
% |
|
|
10.34 |
% |
|
|
10.15 |
% |
|
|
10.14 |
% |
|
|
10.30 |
% |
| Total risk-based capital |
|
13.28 |
% |
|
|
11.63 |
% |
|
|
11.44 |
% |
|
|
11.43 |
% |
|
|
11.58 |
% |
(1) Core deposits are defined as all deposits
excluding brokered and time deposits.
(2) Share and per share amounts are based on total
actual or average common shares outstanding, as applicable.
(3) We calculate book value per share as total
shareholders’ equity at the end of the relevant period divided by
the outstanding number of our common shares at the end of each
period.
(4) Tangible book value per share is a non-GAAP
financial measure. We calculate tangible book value per share as
total shareholders’ equity at the end of the relevant period, less
goodwill and other intangible assets, divided by the outstanding
number of our common shares at the end of each period. The most
directly comparable GAAP financial measure is book value per share.
We had no goodwill or other intangible assets as of any of the
dates indicated. As a result, tangible book value per share is the
same as book value per share as of each of the dates indicated.
(5) Nonperforming assets and nonperforming loans
include loans 90+ days past due and accruing interest.
(6) Annualized calculations.
Key Performance Ratios
Return on average assets ("ROA") was 1.30% for the quarter ended
December 31, 2024 compared to 1.34% and 0.97% for the quarters
ended September 30, 2024 and December 31, 2023,
respectively. ROA for the quarter ended
December 31, 2024, decreased 0.04% and increased 0.33%
compared to September 30, 2024 and December 31, 2023,
respectively. Noninterest expenses were lower for the quarter ended
December 31, 2024 compared to the quarter ended
September 30, 2024 largely due to a decrease in BaaS loan
expense, which is directly related to the amount of interest earned
on CCBX loans, and higher than the quarter ended December 31,
2023 largely due to an increase in salaries and employee benefits,
data processing and software licenses, legal and professional
expenses and point of sale expenses, all of which are related to
the growth of Company and investments in technology and risk
management.
Yield on earning assets and yield on loans receivable decreased
1.14% and 0.99%, respectively, for the quarter ended
December 31, 2024 compared to the quarter ended
September 30, 2024. This decrease is due to a combination of
factors. We continue to refine our credit approach with partners,
widening the scope of loans that we are moving to nonaccrual, which
decreased loan interest income in the quarter ended
December 31, 2024 as compared to prior quarters. Average loans
receivable as of December 31, 2024 decreased $45.4 million
compared to September 30, 2024 as we continue to sell CCBX
loans as part of our on-going strategy to manage the loan portfolio
and credit quality. New loans are being booked with enhanced credit
standards, which typically results in a lower interest rate than
some of the higher risk loans that have paid off or we have chosen
to sell.
The following table shows the Company’s key performance ratios
for the periods indicated.
| |
|
Three Months Ended |
|
Twelve Months Ended |
|
(unaudited) |
|
December 31,
2024 |
|
September 30,
2024 |
|
June 30,
2024 |
|
March 31,
2024 |
|
December 31,
2023 |
|
December 31,
2024 |
|
December 31,
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (1) |
|
1.30% |
|
1.34% |
|
1.21% |
|
0.73% |
|
0.97% |
|
1.15% |
|
1.28% |
|
Return on average equity (1) |
|
14.90% |
|
16.67% |
|
15.22% |
|
9.21% |
|
12.35% |
|
14.11% |
|
16.41% |
|
Yield on earnings assets (1) |
|
9.65% |
|
10.79% |
|
10.49% |
|
10.07% |
|
9.77% |
|
10.25% |
|
9.82% |
|
Yield on loans receivable (1) |
|
10.44% |
|
11.43% |
|
11.23% |
|
10.85% |
|
10.71% |
|
10.99% |
|
10.60% |
|
Cost of funds (1) |
|
3.24% |
|
3.62% |
|
3.60% |
|
3.52% |
|
3.39% |
|
3.49% |
|
2.91% |
|
Cost of deposits (1) |
|
3.21% |
|
3.59% |
|
3.58% |
|
3.49% |
|
3.36% |
|
3.46% |
|
2.87% |
|
Net interest margin (1) |
|
6.65% |
|
7.41% |
|
7.13% |
|
6.78% |
|
6.61% |
|
6.99% |
|
7.10% |
|
Noninterest expense to average assets (1) |
|
6.23% |
|
6.54% |
|
6.14% |
|
6.04% |
|
5.56% |
|
6.24% |
|
5.90% |
|
Noninterest income to average assets (1) |
|
7.45% |
|
7.98% |
|
7.30% |
|
9.38% |
|
6.95% |
|
8.00% |
|
5.97% |
|
Efficiency ratio |
|
44.81% |
|
43.10% |
|
43.19% |
|
37.88% |
|
41.58% |
|
42.21% |
|
45.92% |
|
Loans receivable to deposits (2) |
|
97.82% |
|
94.46% |
|
93.88% |
|
92.42% |
|
90.05% |
|
97.8% |
|
90.1% |
(1) Annualized calculations shown for quarterly
periods presented.
(2) Includes loans held for sale.
Management Outlook; CEO Eric Sprink
“As we look forward to 2025, our strategy involves selectively
expanding our current base of CCBX partners while continuing to
invest in and enhance our technology and risk management
infrastructure. This will enable us to support the next phase of
growth within CCBX more efficiently. Additionally, we are focused
on growing noninterest income through increased transaction
activity and new product offerings with our established partners.
We plan to continue selling credit card loans while retaining a
portion of the fee income for our role in processing transactions,
which offers an additional source of noninterest income without
adding on-balance-sheet risk. We believe that by increasing
noninterest income, we can mitigate the uncertainties associated
with fluctuating interest rates and provide a more stable income
stream in the future.” said CEO Eric Sprink.
Coastal Financial Corporation
Overview
The Company has one main subsidiary, the Bank which consists of
three segments: CCBX, the community bank and treasury &
administration. The CCBX segment includes all of our
BaaS activities, the community bank segment includes all community
banking activities, and the treasury & administration segment
includes treasury management, overall administration and all other
aspects of the Company.
CCBX Performance Update
Our CCBX segment continues to evolve, and we have 24
relationships, at varying stages, including three signed letters of
intent as of December 31, 2024. We continue to refine
the criteria for CCBX partnerships, exploring relationships with
larger more established partners, with experienced management
teams, existing customer bases and strong financial positions and
will continue to exit relationships where it makes sense for us to
do so.
As we explore relationships with new partners we plan to
continue expanding product offerings with our existing CCBX
partners. As we become more proficient in the BaaS space we aim to
cultivate new relationships that align with our long-term goals. We
believe that a strategy of adding new partnerships and launching
new products with existing partners positions us to reach a wide
and established customer base with a modest increase in regulatory
risk given that we have already vetted existing partners and have
an operational history. Increases in partner activity/transaction
counts is positively impacting noninterest income and we expect
that trend to continue as products launched earlier in the year
gain traction. We plan to continue selling loans as part of our
strategy to balance partner and lending limits, and manage the loan
portfolio and credit quality. We retain a portion of the fee income
for our role in processing transactions on sold credit card
balances, and plan to continue this strategy to provide an on-going
and passive revenue stream with no on balance sheet risk.
The following table illustrates the activity and evolution in
CCBX relationships for the periods presented.
| |
As of |
|
(unaudited) |
December 31,
2024 |
September 30,
2024 |
December 31,
2023 |
|
Active |
19 |
19 |
19 |
| Friends and family /
testing |
1 |
1 |
1 |
| Implementation /
onboarding |
1 |
1 |
1 |
| Signed letters of intent |
3 |
1 |
0 |
| Wind down - active but
preparing to exit relationship |
0 |
0 |
0 |
|
Total CCBX relationships |
24 |
22 |
21 |
|
|
|
|
|
CCBX loans increased $82.3 million, or 5.4%, to $1.60 billion
despite selling $845.5 million loans during the three months ended
December 31, 2024. In accordance with the program agreement
for one partner, effective April 1, 2024, the portion of the CCBX
portfolio that we are responsible for losses on decreased from 10%
to 5%. At December 31, 2024 the portion of this portfolio for
which we are responsible represented $20.6 million in loans.
The following table details the CCBX loan portfolio:
|
CCBX |
|
As of |
|
|
|
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital call lines |
|
$ |
109,017 |
|
|
6.8 |
% |
|
$ |
103,924 |
|
|
6.8 |
% |
|
$ |
87,494 |
|
|
7.3 |
% |
|
All other commercial & industrial loans |
|
|
33,961 |
|
|
2.1 |
|
|
|
36,494 |
|
|
2.4 |
|
|
|
54,298 |
|
|
4.5 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
267,707 |
|
|
16.7 |
|
|
|
265,402 |
|
|
17.5 |
|
|
|
238,035 |
|
|
19.9 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
528,554 |
|
|
33.0 |
|
|
|
633,691 |
|
|
41.6 |
|
|
|
505,837 |
|
|
42.3 |
|
|
Other consumer and other loans |
|
|
664,780 |
|
|
41.4 |
|
|
|
482,228 |
|
|
31.7 |
|
|
|
310,574 |
|
|
26.0 |
|
|
Gross CCBX loans receivable |
|
|
1,604,019 |
|
|
100.0 |
% |
|
|
1,521,739 |
|
|
100.0 |
% |
|
|
1,196,238 |
|
|
100.0 |
% |
| Net deferred origination
(fees) costs |
|
|
(442 |
) |
|
|
|
|
(447 |
) |
|
|
|
|
(300 |
) |
|
|
|
Loans receivable |
|
$ |
1,603,577 |
|
|
|
|
$ |
1,521,292 |
|
|
|
|
$ |
1,195,938 |
|
|
|
| Loan Yield - CCBX
(1)(2) |
|
|
15.28 |
% |
|
|
|
|
17.35 |
% |
|
|
|
|
17.36 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(1) CCBX yield does not include the impact of
BaaS loan expense. BaaS loan expense represents the
amount paid or payable to partners for credit enhancements and
originating & servicing CCBX loans. See reconciliation of the
non-GAAP measures at the end of this earnings release for the
impact of BaaS loan expense on CCBX loan yield.
(2) Loan yield is annualized for the three months
ended for each period presented and includes loans held for sale
and nonaccrual loans.
The increase in CCBX loans in the quarter ended
December 31, 2024, includes an increase of $77.4 million or
6.9%, in consumer and other loans, an increase of $5.1 million, or
4.9%, in capital call lines as a result of normal balance
fluctuations and business activities, and an increase of $2.3
million, or 0.9%, in residential real estate loans. We continue to
monitor and manage the CCBX loan portfolio, and sold $845.5 million
in CCBX loans during the quarter ended December 31, 2024
compared to sales of $423.7 million in the quarter ended
September 30, 2024. We continue to reposition ourselves by
managing CCBX credit and concentration levels in an effort to
optimize our loan portfolio and generate off balance sheet fee
income.
CCBX loan yield decreased 2.06% for the quarter ended
December 31, 2024 compared to the quarter ended
September 30, 2024 as a result of our widening the scope of
loans that we are moving to nonaccrual, which decreased loan
interest income in the quarter ended December 31, 2024. Also
contributing to the decrease are lower interest rates on new CCBX
loans, which are replacing higher risk and higher rate loans that
have paid off or were sold as part of our strategy to manage the
loan portfolio and credit quality. The recent decrease in the Fed
funds interest rate further contributed to the change.
The following chart show the growth in credit card accounts that
we are able to generate fee income from. This includes accounts
with balances, which are included in our loan totals, and accounts
that have been sold and have no corresponding balance in our loan
totals, but that we are still able to generate fee income on.
The following table details the CCBX deposit portfolio:
|
CCBX |
|
As of |
|
|
|
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
55,686 |
|
|
2.7 |
% |
|
$ |
60,655 |
|
|
2.9 |
% |
|
$ |
63,630 |
|
|
3.4 |
% |
Interest bearing demand
and
money market |
|
|
1,958,459 |
|
|
94.9 |
|
|
|
1,991,858 |
|
|
94.6 |
|
|
|
1,794,168 |
|
|
96.3 |
|
| Savings |
|
|
5,710 |
|
|
0.3 |
|
|
|
5,204 |
|
|
0.3 |
|
|
|
4,964 |
|
|
0.3 |
|
|
Total core deposits |
|
|
2,019,855 |
|
|
97.9 |
|
|
|
2,057,717 |
|
|
97.8 |
|
|
|
1,862,762 |
|
|
100.0 |
|
| Other deposits |
|
|
44,233 |
|
|
2.1 |
|
|
|
47,046 |
|
|
2.2 |
|
|
|
— |
|
|
— |
|
|
Total CCBX deposits |
|
$ |
2,064,088 |
|
|
100.0 |
% |
|
$ |
2,104,763 |
|
|
100.0 |
% |
|
$ |
1,862,762 |
|
|
100.0 |
% |
| Cost of deposits
(1) |
|
|
4.19 |
% |
|
|
|
|
4.82 |
% |
|
|
|
|
4.90 |
% |
|
|
(1) Cost of deposits is annualized for the
three months ended for each period presented.
CCBX deposits decreased $40.7 million, or 1.9%, in the three months
ended December 31, 2024 to $2.06 billion as a result of normal
balance fluctuations. This excludes the $273.2 million in CCBX
deposits that were transferred off balance sheet for increased
Federal Deposit Insurance Corporation ("FDIC") insurance coverage
and sweep purposes, compared to $214.5 million for the quarter
ended September 30, 2024. Amounts in excess of FDIC insurance
coverage are transferred, using a third party facilitator/vendor
sweep product, to participating financial institutions.
Community Bank Performance Update
In the quarter ended December 31, 2024, the community bank
saw net loans decrease $14.6 million, or 0.8%, to $1.88
billion.
The following table details the Community Bank loan
portfolio:
|
Community Bank |
|
As of |
|
|
|
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
| (dollars in thousands;
unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans |
|
$ |
150,395 |
|
|
8.0 |
% |
|
$ |
152,161 |
|
|
8.0 |
% |
|
$ |
149,502 |
|
|
8.2 |
% |
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development loans |
|
|
148,198 |
|
|
7.8 |
|
|
|
163,051 |
|
|
8.6 |
|
|
|
157,100 |
|
|
8.5 |
|
|
Residential real estate loans |
|
|
202,064 |
|
|
10.7 |
|
|
|
212,467 |
|
|
11.2 |
|
|
|
225,391 |
|
|
12.3 |
|
|
Commercial real estate loans |
|
|
1,374,801 |
|
|
72.8 |
|
|
|
1,362,452 |
|
|
71.5 |
|
|
|
1,303,533 |
|
|
70.9 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer and other loans |
|
|
13,542 |
|
|
0.7 |
|
|
|
14,173 |
|
|
0.7 |
|
|
|
1,628 |
|
|
0.1 |
|
|
Gross Community Bank loans receivable |
|
|
1,889,000 |
|
|
100.0 |
% |
|
|
1,904,304 |
|
|
100.0 |
% |
|
|
1,837,154 |
|
|
100.0 |
% |
| Net deferred origination
fees |
|
|
(6,012 |
) |
|
|
|
|
(6,764 |
) |
|
|
|
|
(7,000 |
) |
|
|
|
Loans receivable |
|
$ |
1,882,988 |
|
|
|
|
$ |
1,897,540 |
|
|
|
|
$ |
1,830,154 |
|
|
|
| Loan Yield(1) |
|
|
6.53 |
% |
|
|
|
|
6.64 |
% |
|
|
|
|
6.32 |
% |
|
|
(1) Loan yield is annualized for the three
months ended for each period presented and includes loans held for
sale and nonaccrual loans.
Community bank loans decreased $14.9 million in construction, land
and land development loans, decreased $1.8 million in commercial
and industrial loans and decreased $631,000 in consumer and other
loans, and were partially offset by an increase in commercial real
estate loans of $12.3 million during the quarter ended
December 31, 2024.
The following table details the community bank deposit
portfolio:
|
Community Bank |
|
As of |
|
|
|
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
471,838 |
|
|
31.0 |
% |
|
$ |
518,772 |
|
|
34.1 |
% |
|
$ |
561,572 |
|
|
37.5 |
% |
| Interest bearing demand
and money market |
|
|
570,625 |
|
|
37.5 |
|
|
|
552,108 |
|
|
36.3 |
|
|
|
846,072 |
|
|
56.5 |
|
| Savings |
|
|
61,116 |
|
|
4.0 |
|
|
|
62,272 |
|
|
4.1 |
|
|
|
71,598 |
|
|
4.8 |
|
|
Total core deposits |
|
|
1,103,579 |
|
|
72.5 |
|
|
|
1,133,152 |
|
|
74.5 |
|
|
|
1,479,242 |
|
|
98.8 |
|
| Other deposits |
|
|
400,118 |
|
|
26.3 |
|
|
|
373,681 |
|
|
24.5 |
|
|
|
1 |
|
|
0.0 |
|
| Time deposits less than
$100,000 |
|
|
5,920 |
|
|
0.4 |
|
|
|
6,305 |
|
|
0.4 |
|
|
|
8,109 |
|
|
0.5 |
|
| Time deposits $100,000 and
over |
|
|
11,627 |
|
|
0.8 |
|
|
|
9,387 |
|
|
0.6 |
|
|
|
10,249 |
|
|
0.7 |
|
|
Total Community Bank deposits |
|
$ |
1,521,244 |
|
|
100.0 |
% |
|
$ |
1,522,525 |
|
|
100.0 |
% |
|
$ |
1,497,601 |
|
|
100.0 |
% |
| Cost of
deposits(1) |
|
|
1.86 |
% |
|
|
|
|
1.92 |
% |
|
|
|
|
1.57 |
% |
|
|
(1) Cost of deposits is annualized for the three
months ended for each period presented.
Community bank deposits decreased $1.3 million, or 0.1%, during the
three months ended December 31, 2024 to $1.52 billion as
result of normal balance fluctuations. The community bank segment
includes noninterest bearing deposits of $471.8 million, or 31.0%,
of total community bank deposits, resulting in a cost of deposits
of 1.86%, which compared to 1.92% for the quarter ended
September 30, 2024, largely due to the decreases in the Fed
funds rate late in the third quarter and during the fourth quarter
of 2024. The cost of community bank deposits are projected to
decline further as the Fed funds rate had a decrease of 0.25%,
which occurred in December 2024 and the full quarterly effect of
that decrease will not be recognized until the first quarter of
2025.
Net Interest Income and Margin
Discussion
Net interest income was $66.5 million for the quarter ended
December 31, 2024, a decrease of $5.7 million, or 7.9%, from
$72.2 million for the quarter ended September 30, 2024, and an
increase of $6.9 million, or 11.5%, from $59.7 million for the
quarter ended December 31, 2023. The decrease in net
interest income compared to September 30, 2024, was a result
of a decrease in average loans receivable as a result of selling
$845.5 million in CCBX loans during the quarter ended
December 31, 2024, the recent decrease in the Fed funds
interest rate, and continued enhancements to our partner credit
practices that resulted in a reduction of interest income on loans.
The increase in net interest income compared to December 31,
2023 was largely related to increased yield on loans resulting from
higher interest rates and growth in higher yielding loans,
partially offset by an increase in cost of funds relating to higher
interest rates and growth in interest bearing
deposits.
Net interest margin was 6.65% for the three months ended
December 31, 2024, compared to 7.41% for the three months
ended September 30, 2024, largely due to lower loan yield. Net
interest margin, net of BaaS loan expense, (A reconciliation of
the non-GAAP measures are set forth in the Non-GAAP Financial
Measures section of this earnings release.) was 4.16% for the
three months ended December 31, 2024, compared to 4.06% for
the three months ended September 30, 2024. Net interest margin
was 6.61% for the three months ended December 31, 2023. The
increase in net interest margin for the three months ended
December 31, 2024 compared to the three months ended
December 31, 2023 was largely due to an increase in loan
yield, partially offset by higher interest rates on interest
bearing deposits. Interest and fees on loans receivable decreased
$9.9 million, or 9.9%, to $89.7 million for the three months ended
December 31, 2024, compared to $99.6 million for the three
months ended September 30, 2024, as a result of loan sales and
a decrease in the Fed funds interest rate. Additionally, as we
continue to refine our credit approach with partners, we are
widening the scope of loans that we are moving to nonaccrual which
decreased interest income in the quarter ended December 31,
2024 and lowered loan yield and net interest margin; however this
also decreased BaaS loan expense (which is in noninterest expense)
resulting in no impact to net income. Interest and fees on loans
receivable increased $8.6 million, or 10.5%, compared to $81.2
million for the three months ended December 31, 2023, due to
an increase in outstanding balances and higher interest rates. Net
interest margin, net of Baas loan expense (A reconciliation of
the non-GAAP measures are set forth in the Non-GAAP Financial
Measures section of this earnings release.) increased 0.10%
for the three months ended December 31, 2024, compared to the
three months ended September 30, 2024 and increased 0.25%
compared the three months ended December 31, 2023.
The following tables illustrate how net interest margin and loan
yield is affected by BaaS loan expense:
|
Consolidated |
|
As of and for the Three Months Ended |
As of and for the Twelve
Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31
2024 |
|
September 30
2024 |
|
December 31
2023 |
December 31
2024 |
|
December 31
2023 |
| Net
interest margin, net of BaaS loan expense: |
|
|
|
|
|
|
|
|
Net interest margin (1) |
|
|
6.65 |
% |
|
|
7.41 |
% |
|
|
6.61 |
% |
|
6.99 |
% |
|
|
7.10 |
% |
|
Earning assets |
|
|
3,980,078 |
|
|
|
3,875,911 |
|
|
|
3,581,772 |
|
|
3,802,275 |
|
|
|
3,364,406 |
|
|
Net interest income (GAAP) |
|
|
66,516 |
|
|
|
72,187 |
|
|
|
59,657 |
|
|
265,876 |
|
|
|
238,727 |
|
|
Less: BaaS loan expense |
|
|
(24,859 |
) |
|
|
(32,612 |
) |
|
|
(24,310 |
) |
|
(111,384 |
) |
|
|
(86,900 |
) |
|
Net interest income, net of BaaS loan expense(2) |
|
$ |
41,657 |
|
|
$ |
39,575 |
|
|
$ |
35,347 |
|
$ |
154,492 |
|
|
$ |
151,827 |
|
|
Net interest margin, net of BaaS loan expense
(1)(2) |
|
|
4.16 |
% |
|
|
4.06 |
% |
|
|
3.92 |
% |
|
4.06 |
% |
|
|
4.51 |
% |
|
Loan income net of BaaS loan expense divided by average
loans: |
|
|
|
|
|
Loan yield (GAAP)(1) |
|
|
10.44 |
% |
|
|
11.43 |
% |
|
|
10.71 |
% |
|
10.99 |
% |
|
|
10.60 |
% |
|
Total average loans receivable |
|
$ |
3,419,476 |
|
|
$ |
3,464,871 |
|
|
$ |
3,007,289 |
|
$ |
3,320,582 |
|
|
$ |
2,936,908 |
|
|
Interest and earned fee income on loans (GAAP) |
|
|
89,714 |
|
|
|
99,590 |
|
|
|
81,159 |
|
|
364,869 |
|
|
|
311,441 |
|
|
BaaS loan expense |
|
|
(24,859 |
) |
|
|
(32,612 |
) |
|
|
(24,310 |
) |
|
(111,384 |
) |
|
|
(86,900 |
) |
|
Net loan income(2) |
|
$ |
64,855 |
|
|
$ |
66,978 |
|
|
$ |
56,849 |
|
$ |
253,485 |
|
|
$ |
224,541 |
|
|
Loan income, net of BaaS loan expense, divided by average loans
(1)(2) |
|
|
7.55 |
% |
|
|
7.69 |
% |
|
|
7.50 |
% |
|
7.63 |
% |
|
|
7.65 |
% |
(1) Annualized calculations shown for
periods presented.
(2) A reconciliation of the non-GAAP measures are set
forth at the end of this earnings release.
Average investment securities decreased $820,000 to $48.2
million compared to the three months ended September 30, 2024
and decreased $101.5 million compared to the three months ended
December 31, 2023 as a result of principal paydowns and
maturing securities.
Cost of funds was 3.24% for the quarter ended December 31,
2024, a decrease of 38 basis points from the quarter ended
September 30, 2024 and a decrease of 16 basis points from the
quarter ended December 31, 2023. Cost of deposits for the
quarter ended December 31, 2024 was 3.21%, compared to 3.59%
for the quarter ended September 30, 2024, and 3.36% for the
quarter ended December 31, 2023. The decreased cost of funds
and deposits compared to September 30, 2024 and
December 31, 2023 was largely due to the recent reductions in
the Fed funds rate.
The following table summarizes the average yield
on loans receivable and cost of deposits:
| |
For the Three Months Ended |
| |
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
|
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
|
Yield on
Loans (2) |
|
Cost of
Deposits (2) |
| Community Bank |
6.53% |
|
1.86% |
|
6.64% |
|
1.92% |
|
6.32% |
|
1.57% |
| CCBX (1) |
15.28% |
|
4.19% |
|
17.35% |
|
4.82% |
|
17.36% |
|
4.90% |
| Consolidated |
10.44% |
|
3.21% |
|
11.43% |
|
3.59% |
|
10.71% |
|
3.36% |
(1) Annualized calculations for periods shown
for credit and fraud enhancements and originating & servicing
CCBX loans. To determine Net BaaS loan income
earned from CCBX loan relationships, the Company takes BaaS loan
interest income and deducts BaaS loan expense to arrive at Net BaaS
loan income which can be compared to interest income on the
Company’s community bank loans. See reconciliation of the non-GAAP
measures at the end of this earnings release for the impact of BaaS
loan expense on CCBX loan yield.
(2) Annualized calculations for periods shown.
The following table illustrates how BaaS loan interest income is
affected by BaaS loan expense resulting in net BaaS loan income and
the associated yield:
| |
|
For the Three Months Ended |
| |
|
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
|
(dollars in thousands, unaudited) |
|
Income /
Expense |
|
Income /
expense divided
by average
CCBX loans (2) |
|
Income /
Expense |
|
Income /
expense divided
by average
CCBX loans(2) |
|
Income /
Expense |
|
Income /
expense divided
by average
CCBX loans (2) |
|
BaaS loan interest income |
|
$ |
58,671 |
|
15.28% |
|
$ |
67,692 |
|
17.35 |
% |
|
$ |
52,327 |
|
17.36% |
| Less: BaaS loan expense |
|
|
24,859 |
|
6.48% |
|
|
32,612 |
|
8.36 |
% |
|
|
24,310 |
|
8.06% |
|
Net BaaS loan income (1) |
|
$ |
33,812 |
|
8.81% |
|
$ |
35,080 |
|
8.99 |
% |
|
$ |
28,017 |
|
9.30% |
| Average BaaS
Loans(3) |
|
$ |
1,527,178 |
|
|
|
$ |
1,552,443 |
|
|
|
$ |
1,196,137 |
|
|
(1) A reconciliation of the non-GAAP measures are set
forth at the end of this earnings release.
(2) Annualized calculations shown for quarterly periods
presented.
(3) Includes loans held for sale.
Noninterest Income Discussion
Noninterest income was $76.8 million for the three months ended
December 31, 2024, a decrease of $3.3 million from $80.1
million for the three months ended September 30, 2024, and an
increase of $12.1 million from $64.7 million for the three months
ended December 31, 2023. The decrease in noninterest income
for the quarter ended December 31, 2024 as compared to the
quarter ended September 30, 2024 was primarily due to a
decrease of $3.3 million in total BaaS income. The $3.3 million
decrease in total BaaS income included an $8.0 million decrease in
BaaS credit enhancements related to the provision for credit
losses, partially offset by a a $3.0 million increase in BaaS fraud
enhancements and an increase of $1.8 million in BaaS program
income. The $1.8 million increase in BaaS program income is largely
due to higher reimbursement of expenses as well as an increase in
transaction fees and interchange fees, our primary BaaS source for
recurring fee income, as well as higher reimbursement of expenses
(see “Appendix B” for more information on the accounting for BaaS
allowance for credit losses and credit and fraud enhancements).
The $12.1 million increase in noninterest income over the
quarter ended December 31, 2023 was primarily due to a $7.9
million increase in BaaS credit and fraud enhancements and an
increase of $3.8 million in BaaS program income.
Noninterest Expense Discussion
Total noninterest expense decreased $1.4 million to $64.2 million
for the three months ended December 31, 2024, compared to
$65.6 million for the three months ended September 30, 2024,
and increased $12.5 million from $51.7 million for the three months
ended December 31, 2023. The decrease in noninterest expense
for the quarter ended December 31, 2024, as compared to the
quarter ended September 30, 2024, was primarily due to a $4.8
million decrease in BaaS expense from a $7.8 million decrease in
BaaS loan expense, partially offset by a $3.0 million increase in
BaaS fraud expense. BaaS loan expense represents the amount paid or
payable to partners for credit enhancements, fraud enhancements,
and originating & servicing CCBX loans. BaaS fraud expense
represents non-credit fraud losses on partner’s customer loan and
deposit accounts. A portion of this expense is realized during the
quarter in which the loss occurs, and a portion is estimated based
on historical or other information from our partners. Other
variances that partially offset the net decrease in noninterest
expense include an increase of $1.4 million in point of sale
expenses as a result of increased partner transaction activity, an
increase of $893,000 in salaries and employee benefits and an
increase of $1.0 million in legal and professional fees as part of
our continued investments in technology and risk management.
The increase in noninterest expenses for the quarter ended
December 31, 2024 compared to the quarter ended
December 31, 2023 was largely due to an increase of $4.8
million in BaaS partner expense primarily from a $4.3 million
increase in BaaS fraud expense, a $549,000 increase in BaaS loan
expense, a $2.0 million increase in legal and professional
expenses, a $1.8 million increase in point of sale expenses, a $1.5
million increase in salary and employee benefits, and a $1.2
million increase in data processing and software licenses due to
enhancements in technology.
Certain noninterest expenses are reimbursed by our CCBX
partners. In accordance with GAAP we recognize all expenses in
noninterest expense and all reimbursement of expenses from our CCBX
partner in noninterest income. The following table reflects the
portion of noninterest expenses that are reimbursed by partners to
assist the understanding of how the increases in noninterest
expense are related to expenses incurred for and reimbursed by CCBX
partners:
|
|
|
Three Months Ended |
| |
|
December 31, |
|
September 30, |
|
December 31, |
| (dollars in thousands;
unaudited) |
|
2024 |
|
2024 |
|
2023 |
|
Total noninterest expense (GAAP) |
|
$ |
64,206 |
|
$ |
65,616 |
|
$ |
51,703 |
|
Less: BaaS loan expense |
|
|
24,859 |
|
|
32,612 |
|
|
24,310 |
|
Less: BaaS fraud expense |
|
|
5,043 |
|
|
2,084 |
|
|
779 |
|
Less: Reimbursement of expenses (Baas) |
|
|
3,468 |
|
|
1,843 |
|
|
1,076 |
| Noninterest expense, net of
Baas loan expense, BaaS fraud expense and reimbursement of
expenses (BaaS) (1) |
|
$ |
30,836 |
|
$ |
29,077 |
|
$ |
25,538 |
(1) A reconciliation of the non-GAAP measures are set
forth at the end of this earnings release.
Provision for Income Taxes
The provision for income taxes was $3.8 million for the three
months ended December 31, 2024, $2.9 million for the three
months ended September 30, 2024 and $2.8 million for the
fourth quarter of 2023. The income tax provision was higher
for the three months ended December 31, 2024 compared to the
quarter ended September 30, 2024 as a result of the
deductibility of certain equity awards which reduced tax expense
during the quarter ended September 30, 2024 compared to the
quarter ended December 31, 2024 despite net income being
higher fairly even, and higher than the quarter ended
December 31, 2023, primarily due to higher net income compared
to that quarter, partially offset by the deductibility of certain
equity awards.
The Company is subject to various state taxes that are assessed
as CCBX activities and employees expand into other states, which
has increased the overall tax rate used in calculating the
provision for income taxes in the current and future periods. The
Company uses a federal statutory tax rate of 21.0% as a basis for
calculating provision for federal income taxes and 2.63% for
calculating the provision for state income taxes.
Financial Condition Overview
Total assets increased $55.4 million, or 1.4%, to $4.12 billion
at December 31, 2024 compared to $4.07 billion at
September 30, 2024. The increase is primarily due
to stronger loan growth, partially offset by lower cash balances.
Total loans receivable increased $67.7 million to $3.49 billion at
December 31, 2024, from $3.42 billion at September 30,
2024.
As of December 31, 2024, the Company had the capacity to
borrow up to a total of $642.1 million from the Federal Reserve
Bank discount window and Federal Home Loan Bank, and an additional
$50.0 million from a correspondent bank. There were no borrowings
outstanding on these lines as of December 31, 2024.
The Company completed a $98.0 million capital raise during the
quarter ended December 31, 2024. After contributing $50.0
million to the Bank, the Company had a cash balance of $47.7
million as of December 31, 2024, which is retained for general
operating purposes, including debt repayment, and for funding
$480,000 in commitments to bank technology investment
funds.
Uninsured deposits were $543.0 million as of December 31,
2024, compared to $542.2 million as of September 30, 2024.
Total shareholders’ equity as of December 31, 2024
increased $106.8 million since September 30,
2024. The increase in shareholders’ equity was primarily
due to an increase of $93.4 million in common stock outstanding as
a result of the aforementioned capital raise and, to a lessor
extent, equity awards exercised during the three months ended
December 31, 2024 combined with $13.4 million in net
earnings.
The Company and the Bank remained well capitalized at
December 31, 2024, as summarized in the following table.
|
(unaudited) |
|
Coastal Community
Bank |
|
Coastal Financial
Corporation |
|
Minimum Well
Capitalized Ratios
under Prompt
Corrective Action (1) |
|
Tier 1 Leverage Capital (to average assets) |
|
10.64% |
|
10.78% |
|
5.00% |
| Common Equity Tier 1 Capital
(to risk-weighted assets) |
|
11.99% |
|
12.04% |
|
6.50% |
| Tier 1 Capital (to
risk-weighted assets) |
|
11.99% |
|
12.14% |
|
8.00% |
| Total Capital (to
risk-weighted assets) |
|
13.28% |
|
14.67% |
|
10.00% |
(1) Presents the minimum capital ratios for an
insured depository institution, such as the Bank, to be considered
well capitalized under the Prompt Corrective Action framework. The
minimum requirements for the Company to be considered well
capitalized under Regulation Y include to maintain, on a
consolidated basis, a total risk-based capital ratio of 10.0
percent or greater and a tier 1 risk-based capital ratio of 6.0
percent or greater.
Asset Quality
The total allowance for credit losses was $177.0 million and
5.08% of loans receivable at December 31, 2024 compared to
$170.3 million and 4.98% at September 30, 2024 and $117.0
million and 3.86% at December 31, 2023. The allowance for
credit loss allocated to the CCBX portfolio was $158.1 million and
9.86% of CCBX loans receivable at December 31, 2024, with
$18.9 million of allowance for credit loss allocated to the
community bank or 1.00% of total community bank loans
receivable.
The following table details the allocation of the allowance for
credit loss as of the period indicated:
| |
|
As of December 31, 2024 |
|
As of September 30, 2024 |
|
As of December 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Community
Bank |
|
CCBX |
|
Total |
|
Community
Bank |
|
CCBX |
|
Total |
|
Community
Bank |
|
CCBX |
|
Total |
|
Loans receivable |
|
$ |
1,882,988 |
|
|
$ |
1,603,577 |
|
|
$ |
3,486,565 |
|
|
$ |
1,897,540 |
|
|
$ |
1,521,292 |
|
|
$ |
3,418,832 |
|
|
$ |
1,830,154 |
|
|
$ |
1,195,938 |
|
|
$ |
3,026,092 |
|
| Allowance for credit
losses |
|
|
(18,924 |
) |
|
|
(158,070 |
) |
|
|
(176,994 |
) |
|
|
(20,132 |
) |
|
|
(150,131 |
) |
|
|
(170,263 |
) |
|
|
(21,595 |
) |
|
|
(95,363 |
) |
|
|
(116,958 |
) |
| Allowance for credit
losses to total loans receivable |
|
|
1.00 |
% |
|
|
9.86 |
% |
|
|
5.08 |
% |
|
|
1.06 |
% |
|
|
9.87 |
% |
|
|
4.98 |
% |
|
|
1.18 |
% |
|
|
7.97 |
% |
|
|
3.86 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs totaled $55.9 million for the quarter ended
December 31, 2024, compared to $49.2 million for the quarter
ended September 30, 2024 and $44.9 million for the quarter
ended December 31, 2023. Net charge-offs as a percent of
average loans increased to 6.51% for the quarter ended
December 31, 2024 compared to 5.65% for the quarter ended
September 30, 2024. CCBX partner agreements provide for a
credit enhancement that covers the net-charge-offs on CCBX loans
and negative deposit accounts by indemnifying or reimbursing
incurred losses, except in accordance with the program agreement
for one partner where the Company was responsible for credit losses
on approximately 5% of a $324.6 million loan portfolio. At
December 31, 2024, our portion of this portfolio represented
$20.6 million in loans. Net charge-offs for this $20.6 million in
loans were $1.1 million for the three months ended
December 31, 2024, compared to $1.1 million for the three
months ended September 30, 2024 and $1.5 million for the three
months ended December 31, 2023.
The following table details net charge-offs for the community
bank and CCBX for the period indicated:
| |
|
Three Months Ended |
| |
|
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
|
(dollars in thousands; unaudited) |
|
Community
Bank |
|
CCBX |
|
Total |
|
Community
Bank |
|
CCBX |
|
Total |
|
Community
Bank |
|
CCBX |
|
Total |
|
Gross charge-offs |
|
$ |
139 |
|
|
$ |
61,446 |
|
|
$ |
61,585 |
|
|
$ |
398 |
|
|
$ |
52,907 |
|
|
$ |
53,305 |
|
|
$ |
2 |
|
|
$ |
47,650 |
|
|
$ |
47,652 |
|
| Gross recoveries |
|
|
(3 |
) |
|
|
(5,643 |
) |
|
|
(5,646 |
) |
|
|
(3 |
) |
|
|
(4,066 |
) |
|
|
(4,069 |
) |
|
|
(4 |
) |
|
|
(2,777 |
) |
|
|
(2,781 |
) |
|
Net charge-offs |
|
$ |
136 |
|
|
$ |
55,803 |
|
|
$ |
55,939 |
|
|
$ |
395 |
|
|
$ |
48,841 |
|
|
$ |
49,236 |
|
|
$ |
(2 |
) |
|
$ |
44,873 |
|
|
$ |
44,871 |
|
| Net charge-offs
to average loans (1) |
|
|
0.03 |
% |
|
|
14.54 |
% |
|
|
6.51 |
% |
|
|
0.08 |
% |
|
|
12.52 |
% |
|
|
5.65 |
% |
|
|
0.00 |
% |
|
|
14.88 |
% |
|
|
5.92 |
% |
(1) Annualized calculations shown for
periods presented.
During the quarter ended December 31, 2024, a $63.7 million
provision for credit losses was recorded for CCBX partner loans,
compared to the $72.1 million provision for credit losses was
recorded for CCBX partner loans for the quarter ended
September 30, 2024, the provision was based on management's
analysis, bringing the CCBX allowance for credit losses to $158.1
million at December 31, 2024 compared to $150.1 million at
September 30, 2024. The increase in the allowance is due to
the addition of new loans, partially offset by loan sales. CCBX
loans have a higher level of expected losses than our community
bank loans, which is reflected in the factors for the allowance for
credit losses. Agreements with our CCBX partners provide for a
credit enhancement which protects the Bank by indemnifying or
reimbursing incurred losses.
In accordance with accounting guidance, we estimate and record a
provision for expected losses for these CCBX loans and reclassified
negative deposit accounts. When the provision for CCBX credit
losses and provision for unfunded commitments is recorded, a credit
enhancement asset is also recorded on the balance sheet through
noninterest income (BaaS credit enhancements). Expected losses are
recorded in the allowance for credit losses. The credit enhancement
asset is relieved when credit enhancement recoveries are received
from the CCBX partner. If our partner is unable to fulfill their
contracted obligations then the Bank could be exposed to additional
credit losses. Management regularly evaluates and manages this
counterparty risk.
The factors used in management’s analysis for community bank
credit losses indicated that a provision recapture of $1.1 million
and was needed for the quarter ended December 31, 2024
compared to a provision recapture of $519,000 and provision of
$277,000 for the quarters ended September 30, 2024 and
December 31, 2023, respectively. The recapture in the current
period was due to the decrease in the community bank loan portfolio
combined with an improvement in the forward look, which is driven
by the future projected unemployment and GDP curves, which
flattened since last quarter, lessening the impact of this
factor.
The following table details the provision expense/(recapture)
for the community bank and CCBX for the period indicated:
| |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
Community bank |
|
$ |
(1,071 |
) |
|
$ |
(519 |
) |
|
$ |
277 |
| CCBX |
|
|
63,741 |
|
|
|
72,104 |
|
|
|
60,467 |
|
Total provision expense |
|
$ |
62,670 |
|
|
$ |
71,585 |
|
|
$ |
60,744 |
A recapture for unfunded commitments of $803,000 was recorded for
the quarter ended December 31, 2024 as a result of a decrease
in the overall available balance combined with an improvement in
the reserve rates.
At December 31, 2024, our nonperforming assets were $62.7
million, or 1.52%, of total assets, compared to $66.4 million, or
1.63%, of total assets, at September 30, 2024, and $53.8
million, or 1.43%, of total assets, at December 31, 2023.
These ratios are impacted by nonperforming CCBX loans that are
covered by CCBX partner credit enhancements. As of
December 31, 2024, $60.8 million of the $62.6 million in
nonperforming CCBX loans were covered by CCBX partner credit
enhancements described above.
Nonperforming assets decreased $3.7 million during the quarter
ended December 31, 2024, compared to the quarter ended
September 30, 2024. This change is due to a decrease in CCBX
and community bank nonaccrual loans. Community bank nonperforming
loans decreased $1.0 million from September 30, 2024 to
$100,000 as of December 31, 2024, and CCBX nonperforming loans
decreased $2.7 million to $62.6 million from September 30,
2024. The decrease in CCBX nonperforming loans is due to an
decrease of $570,000 in nonaccrual loans from September 30,
2024 to $19.5 million. Some CCBX partners have a collection
practice that places certain loans on nonaccrual status to improve
collectability. $17.2 million of these loans are less than 90 days
past due as of December 31, 2024. Additionally, there was a
$2.2 million decrease in CCBX loans that are past due 90 days or
more and still accruing interest. As a result of the type of loans
(primarily consumer loans) originated through our CCBX partners we
anticipate that balances 90 days past due or more and still
accruing will generally increase as those loan portfolios grow.
Installment/closed-end and revolving/open-end consumer loans
originated through CCBX lending partners will continue to accrue
interest until 120 and 180 days past due, respectively and are
reported as substandard, 90 days or more days past due and still
accruing. There were no repossessed assets or other real estate
owned at December 31, 2024. Our nonperforming loans to loans
receivable ratio was 1.80% at December 31, 2024, compared to
1.94% at September 30, 2024, and 1.78% at December 31,
2023.
For the quarter ended December 31, 2024, there were
$136,000 community bank net charge-offs and $55.8 million in net
charge-offs were recorded on CCBX loans. These CCBX loans have a
higher level of expected losses than our community bank loans,
which is reflected in the factors for the allowance for credit
losses.
The following table details the Company’s nonperforming assets
for the periods indicated.
|
Consolidated |
As of |
|
(dollars in thousands; unaudited) |
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
Nonaccrual loans: |
|
|
|
|
|
|
Commercial and industrial loans |
$ |
334 |
|
|
$ |
531 |
|
|
$ |
— |
|
| Real estate loans: |
|
|
|
|
|
|
Residential real estate |
|
— |
|
|
|
44 |
|
|
|
170 |
|
|
Commercial real estate |
|
— |
|
|
|
831 |
|
|
|
7,145 |
|
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
10,262 |
|
|
|
7,987 |
|
|
|
— |
|
|
Other consumer and other loans |
|
8,967 |
|
|
|
11,713 |
|
|
|
— |
|
|
Total nonaccrual loans |
|
19,563 |
|
|
|
21,106 |
|
|
|
7,315 |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
| Commercial & industrial
loans |
|
1,006 |
|
|
|
1,566 |
|
|
|
2,086 |
|
| Real estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
2,608 |
|
|
|
3,025 |
|
|
|
1,115 |
|
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
34,490 |
|
|
|
34,562 |
|
|
|
34,835 |
|
|
Other consumer and other loans |
|
4,989 |
|
|
|
6,111 |
|
|
|
8,488 |
|
|
Total accruing loans past due 90 days or more |
|
43,093 |
|
|
|
45,264 |
|
|
|
46,524 |
|
|
Total nonperforming loans |
|
62,656 |
|
|
|
66,370 |
|
|
|
53,839 |
|
| Real estate
owned |
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
$ |
62,656 |
|
|
$ |
66,370 |
|
|
$ |
53,839 |
|
| Total nonaccrual loans to
loans receivable |
|
0.56 |
% |
|
|
0.62 |
% |
|
|
0.24 |
% |
| Total nonperforming loans to
loans receivable |
|
1.80 |
% |
|
|
1.94 |
% |
|
|
1.78 |
% |
| Total nonperforming assets to
total assets |
|
1.52 |
% |
|
|
1.63 |
% |
|
|
1.43 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
The following tables detail the CCBX and community bank
nonperforming assets which are included in the total nonperforming
assets table above.
|
CCBX |
As of |
|
(dollars in thousands; unaudited) |
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
Nonaccrual loans: |
|
|
|
|
|
| Commercial and industrial
loans: |
|
|
|
|
|
|
All other commercial & industrial loans |
$ |
234 |
|
|
$ |
333 |
|
|
$ |
— |
|
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
10,262 |
|
|
|
7,987 |
|
|
|
— |
|
|
Other consumer and other loans |
|
8,967 |
|
|
|
11,713 |
|
|
|
— |
|
|
Total nonaccrual loans |
|
19,463 |
|
|
|
20,033 |
|
|
|
— |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
| Commercial & industrial
loans |
|
1,006 |
|
|
|
1,566 |
|
|
|
2,086 |
|
| Real estate loans: |
|
|
|
|
|
|
Residential real estate loans |
|
2,608 |
|
|
|
3,025 |
|
|
|
1,115 |
|
| Consumer and other loans: |
|
|
|
|
|
|
Credit cards |
|
34,490 |
|
|
|
34,562 |
|
|
|
34,835 |
|
|
Other consumer and other loans |
|
4,989 |
|
|
|
6,111 |
|
|
|
8,488 |
|
|
Total accruing loans past due 90 days or more |
|
43,093 |
|
|
|
45,264 |
|
|
|
46,524 |
|
|
Total nonperforming loans |
|
62,556 |
|
|
|
65,297 |
|
|
|
46,524 |
|
| Other real estate
owned |
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
$ |
62,556 |
|
|
$ |
65,297 |
|
|
$ |
46,524 |
|
| Total CCBX nonperforming
assets to total consolidated assets |
|
1.52 |
% |
|
|
1.61 |
% |
|
|
1.24 |
% |
|
Community Bank |
As of |
|
(dollars in thousands; unaudited) |
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
Nonaccrual loans: |
|
|
|
|
|
|
Commercial and industrial loans |
$ |
100 |
|
$ |
198 |
|
|
$ |
— |
|
| Real estate: |
|
|
|
|
|
|
Residential real estate |
|
— |
|
|
44 |
|
|
|
170 |
|
|
Commercial real estate |
|
— |
|
|
831 |
|
|
|
7,145 |
|
|
Total nonaccrual loans |
|
100 |
|
|
1,073 |
|
|
|
7,315 |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
Total accruing loans past due 90 days or more |
|
— |
|
|
— |
|
|
|
— |
|
|
Total nonperforming loans |
|
100 |
|
|
1,073 |
|
|
|
7,315 |
|
| Other real estate
owned |
|
— |
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
— |
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
$ |
100 |
|
$ |
1,073 |
|
|
$ |
7,315 |
|
| Total community bank
nonperforming assets to total consolidated assets |
< 0.01% |
|
|
0.03 |
% |
|
|
0.19 |
% |
| |
|
|
|
|
|
|
|
|
|
About Coastal Financial
Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), is
an Everett, Washington based bank holding company whose wholly
owned subsidiaries are Coastal Community Bank (“Bank”) and
Arlington Olympic LLC. The $4.12 billion Bank provides
service through 14 branches in Snohomish, Island, and King
Counties, the Internet and its mobile banking
application. The Bank provides banking as a service to
broker-dealers, digital financial service providers, companies and
brands that want to provide financial services to their customers
through the Bank's CCBX segment. To learn more about the
Company visit www.coastalbank.com.
CCB-ER
Contact
Eric Sprink, Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial
Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect our current views
with respect to, among other things, future events and our
financial performance. Any statements about our management’s
expectations, beliefs, plans, predictions, forecasts, objectives,
assumptions or future events or performance are not historical
facts and may be forward-looking. These statements are often, but
not always, made through the use of words or phrases such as
“anticipate,” “believes,” “can,” “could,” “may,” “predicts,”
“potential,” “should,” “will,” “estimate,” “plans,” “projects,”
“continuing,” “ongoing,” “expects,” “intends” and similar words or
phrases. Any or all of the forward-looking statements in this
earnings release may turn out to be inaccurate. The inclusion of or
reference to forward-looking information in this earnings release
should not be regarded as a representation by us or any other
person that the future plans, estimates or expectations
contemplated by us will be achieved. We have based these
forward-looking statements largely on our current expectations and
projections about future events and financial trends that we
believe may affect our financial condition, results of operations,
business strategy and financial needs. Our actual results could
differ materially from those anticipated in such forward-looking
statements as a result of risks, uncertainties and assumptions that
are difficult to predict. Factors that could cause actual results
to differ materially from those in the forward-looking statements
include, without limitation, the risks and uncertainties discussed
under “Risk Factors” in our Annual Report on Form 10-K for the most
recent period filed and in any of our subsequent filings with the
Securities and Exchange Commission.
If one or more events related to these or other risks or
uncertainties materialize, or if our underlying assumptions prove
to be incorrect, actual results may differ materially from what we
anticipate. You are cautioned not to place undue reliance on
forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made, and we undertake no
obligation to update or revise any forward-looking statement to
reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated
events, except as required by law.
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
|
ASSETS |
| |
December 31,
2024 |
|
September 30,
2024 |
|
June 30,
2024 |
|
March 31,
2024 |
|
December 31,
2023 |
| Cash and due from banks |
$ |
36,533 |
|
|
$ |
45,327 |
|
|
$ |
59,995 |
|
|
$ |
32,790 |
|
|
$ |
31,345 |
|
|
Interest earning deposits with other banks |
|
415,980 |
|
|
|
438,699 |
|
|
|
427,250 |
|
|
|
482,338 |
|
|
|
451,783 |
|
| Investment securities, available
for sale, at fair value |
|
35 |
|
|
|
38 |
|
|
|
39 |
|
|
|
41 |
|
|
|
99,504 |
|
| Investment securities, held to
maturity, at amortized cost |
|
47,286 |
|
|
|
48,582 |
|
|
|
49,174 |
|
|
|
50,049 |
|
|
|
50,860 |
|
| Other investments |
|
10,800 |
|
|
|
10,757 |
|
|
|
10,664 |
|
|
|
10,583 |
|
|
|
10,227 |
|
| Loans held for sale |
|
20,600 |
|
|
|
7,565 |
|
|
|
— |
|
|
|
797 |
|
|
|
— |
|
|
Loans receivable |
|
3,486,565 |
|
|
|
3,418,832 |
|
|
|
3,326,460 |
|
|
|
3,199,554 |
|
|
|
3,026,092 |
|
|
Allowance for credit losses |
|
(176,994 |
) |
|
|
(170,263 |
) |
|
|
(147,914 |
) |
|
|
(139,258 |
) |
|
|
(116,958 |
) |
|
Total loans receivable, net |
|
3,309,571 |
|
|
|
3,248,569 |
|
|
|
3,178,546 |
|
|
|
3,060,296 |
|
|
|
2,909,134 |
|
| CCBX credit enhancement
asset |
|
181,890 |
|
|
|
167,251 |
|
|
|
143,485 |
|
|
|
137,276 |
|
|
|
107,921 |
|
| CCBX receivable |
|
14,138 |
|
|
|
16,060 |
|
|
|
11,520 |
|
|
|
10,369 |
|
|
|
9,088 |
|
| Premises and equipment, net |
|
27,431 |
|
|
|
25,833 |
|
|
|
24,526 |
|
|
|
22,995 |
|
|
|
22,090 |
|
| Lease right-of-use assets |
|
5,219 |
|
|
|
5,427 |
|
|
|
5,635 |
|
|
|
5,756 |
|
|
|
5,932 |
|
| Accrued interest receivable |
|
21,104 |
|
|
|
23,664 |
|
|
|
23,617 |
|
|
|
24,681 |
|
|
|
26,819 |
|
| Bank-owned life insurance,
net |
|
13,375 |
|
|
|
13,255 |
|
|
|
13,132 |
|
|
|
12,991 |
|
|
|
12,870 |
|
| Deferred tax asset, net |
|
3,600 |
|
|
|
3,083 |
|
|
|
2,221 |
|
|
|
2,221 |
|
|
|
3,806 |
|
| Other assets |
|
13,646 |
|
|
|
11,711 |
|
|
|
11,742 |
|
|
|
12,075 |
|
|
|
11,987 |
|
|
Total assets |
$ |
4,121,208 |
|
|
$ |
4,065,821 |
|
|
$ |
3,961,546 |
|
|
$ |
3,865,258 |
|
|
$ |
3,753,366 |
|
| |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| LIABILITIES |
|
|
|
|
|
|
|
|
|
|
Deposits |
$ |
3,585,332 |
|
|
$ |
3,627,288 |
|
|
$ |
3,543,432 |
|
|
$ |
3,462,979 |
|
|
$ |
3,360,363 |
|
|
Subordinated debt, net |
|
44,293 |
|
|
|
44,256 |
|
|
|
44,219 |
|
|
|
44,181 |
|
|
|
44,144 |
|
|
Junior subordinated debentures, net |
|
3,591 |
|
|
|
3,591 |
|
|
|
3,591 |
|
|
|
3,590 |
|
|
|
3,590 |
|
|
Deferred compensation |
|
332 |
|
|
|
369 |
|
|
|
405 |
|
|
|
442 |
|
|
|
479 |
|
|
Accrued interest payable |
|
962 |
|
|
|
1,070 |
|
|
|
999 |
|
|
|
1,061 |
|
|
|
892 |
|
|
Lease liabilities |
|
5,398 |
|
|
|
5,609 |
|
|
|
5,821 |
|
|
|
5,946 |
|
|
|
6,124 |
|
|
CCBX payable |
|
29,171 |
|
|
|
39,188 |
|
|
|
34,536 |
|
|
|
33,095 |
|
|
|
33,651 |
|
|
Other liabilities |
|
13,425 |
|
|
|
12,520 |
|
|
|
11,850 |
|
|
|
10,255 |
|
|
|
9,145 |
|
|
Total liabilities |
|
3,682,504 |
|
|
|
3,733,891 |
|
|
|
3,644,853 |
|
|
|
3,561,549 |
|
|
|
3,458,388 |
|
| SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
228,177 |
|
|
|
134,769 |
|
|
|
132,989 |
|
|
|
131,601 |
|
|
|
130,136 |
|
|
Retained earnings |
|
210,529 |
|
|
|
197,162 |
|
|
|
183,706 |
|
|
|
172,110 |
|
|
|
165,311 |
|
|
Accumulated other comprehensive loss, net of tax |
|
(2 |
) |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(469 |
) |
|
Total shareholders’ equity |
|
438,704 |
|
|
|
331,930 |
|
|
|
316,693 |
|
|
|
303,709 |
|
|
|
294,978 |
|
|
Total liabilities and shareholders’ equity |
$ |
4,121,208 |
|
|
$ |
4,065,821 |
|
|
$ |
3,961,546 |
|
|
$ |
3,865,258 |
|
|
$ |
3,753,366 |
|
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
|
|
Three Months Ended |
| |
December 31,
2024 |
|
September 30,
2024 |
|
June 30,
2024 |
|
March 31,
2024 |
|
December 31,
2023 |
| INTEREST AND DIVIDEND INCOME |
|
|
|
|
|
|
|
|
|
|
Interest and fees on loans |
$ |
89,714 |
|
$ |
99,590 |
|
$ |
90,944 |
|
|
$ |
84,621 |
|
|
$ |
81,159 |
|
|
Interest on interest earning deposits with other banks |
|
6,021 |
|
|
4,781 |
|
|
5,683 |
|
|
|
4,780 |
|
|
|
5,687 |
|
|
Interest on investment securities |
|
661 |
|
|
675 |
|
|
686 |
|
|
|
1,034 |
|
|
|
1,225 |
|
|
Dividends on other investments |
|
191 |
|
|
33 |
|
|
174 |
|
|
|
37 |
|
|
|
172 |
|
|
Total interest income |
|
96,587 |
|
|
105,079 |
|
|
97,487 |
|
|
|
90,472 |
|
|
|
88,243 |
|
| INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
Interest on deposits |
|
29,404 |
|
|
32,083 |
|
|
30,578 |
|
|
|
28,867 |
|
|
|
27,916 |
|
|
Interest on borrowed funds |
|
667 |
|
|
809 |
|
|
672 |
|
|
|
669 |
|
|
|
670 |
|
|
Total interest expense |
|
30,071 |
|
|
32,892 |
|
|
31,250 |
|
|
|
29,536 |
|
|
|
28,586 |
|
|
Net interest income |
|
66,516 |
|
|
72,187 |
|
|
66,237 |
|
|
|
60,936 |
|
|
|
59,657 |
|
| PROVISION FOR CREDIT LOSSES |
|
61,867 |
|
|
70,257 |
|
|
62,325 |
|
|
|
83,158 |
|
|
|
60,789 |
|
|
Net interest income/(expense) after provision for credit
losses |
|
4,649 |
|
|
1,930 |
|
|
3,912 |
|
|
|
(22,222 |
) |
|
|
(1,132 |
) |
| NONINTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
Service charges and fees |
|
932 |
|
|
952 |
|
|
946 |
|
|
|
908 |
|
|
|
957 |
|
|
Loan referral fees |
|
— |
|
|
— |
|
|
— |
|
|
|
168 |
|
|
|
— |
|
|
Unrealized gain (loss) on equity securities, net |
|
1 |
|
|
2 |
|
|
9 |
|
|
|
15 |
|
|
|
80 |
|
|
Other income |
|
473 |
|
|
486 |
|
|
257 |
|
|
|
308 |
|
|
|
60 |
|
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
1,406 |
|
|
1,440 |
|
|
1,212 |
|
|
|
1,399 |
|
|
|
1,097 |
|
|
Servicing and other BaaS fees |
|
1,043 |
|
|
1,044 |
|
|
1,525 |
|
|
|
1,131 |
|
|
|
1,015 |
|
|
Transaction fees |
|
1,783 |
|
|
1,696 |
|
|
1,309 |
|
|
|
1,122 |
|
|
|
1,006 |
|
|
Interchange fees |
|
1,916 |
|
|
1,853 |
|
|
1,625 |
|
|
|
1,539 |
|
|
|
1,272 |
|
|
Reimbursement of expenses |
|
3,468 |
|
|
1,843 |
|
|
1,637 |
|
|
|
1,033 |
|
|
|
1,076 |
|
|
BaaS program income |
|
8,210 |
|
|
6,436 |
|
|
6,096 |
|
|
|
4,825 |
|
|
|
4,369 |
|
|
BaaS credit enhancements |
|
62,097 |
|
|
70,108 |
|
|
60,826 |
|
|
|
79,808 |
|
|
|
58,449 |
|
|
BaaS fraud enhancements |
|
5,043 |
|
|
2,084 |
|
|
1,784 |
|
|
|
923 |
|
|
|
779 |
|
|
BaaS indemnification income |
|
67,140 |
|
|
72,192 |
|
|
62,610 |
|
|
|
80,731 |
|
|
|
59,228 |
|
|
Total noninterest income |
|
76,756 |
|
|
80,068 |
|
|
69,918 |
|
|
|
86,955 |
|
|
|
64,694 |
|
| NONINTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
17,994 |
|
|
17,101 |
|
|
17,005 |
|
|
|
17,984 |
|
|
|
16,490 |
|
|
Occupancy |
|
958 |
|
|
964 |
|
|
985 |
|
|
|
1,029 |
|
|
|
976 |
|
|
Data processing and software licenses |
|
4,010 |
|
|
4,297 |
|
|
3,625 |
|
|
|
3,381 |
|
|
|
2,781 |
|
|
Legal and professional expenses |
|
4,606 |
|
|
3,597 |
|
|
3,631 |
|
|
|
3,672 |
|
|
|
2,649 |
|
|
Point of sale expense |
|
2,745 |
|
|
1,351 |
|
|
852 |
|
|
|
869 |
|
|
|
899 |
|
|
Excise taxes |
|
778 |
|
|
762 |
|
|
(706 |
) |
|
|
320 |
|
|
|
449 |
|
|
Federal Deposit Insurance Corporation ("FDIC")
assessments |
|
750 |
|
|
740 |
|
|
690 |
|
|
|
683 |
|
|
|
665 |
|
|
Director and staff expenses |
|
683 |
|
|
559 |
|
|
470 |
|
|
|
400 |
|
|
|
478 |
|
|
Marketing |
|
28 |
|
|
67 |
|
|
14 |
|
|
|
53 |
|
|
|
138 |
|
|
Other expense |
|
1,752 |
|
|
1,482 |
|
|
1,383 |
|
|
|
1,867 |
|
|
|
1,089 |
|
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
34,304 |
|
|
30,920 |
|
|
27,949 |
|
|
|
30,258 |
|
|
|
26,614 |
|
|
BaaS loan expense |
|
24,859 |
|
|
32,612 |
|
|
29,076 |
|
|
|
24,837 |
|
|
|
24,310 |
|
|
BaaS fraud expense |
|
5,043 |
|
|
2,084 |
|
|
1,784 |
|
|
|
923 |
|
|
|
779 |
|
|
BaaS loan and fraud expense |
|
29,902 |
|
|
34,696 |
|
|
30,860 |
|
|
|
25,760 |
|
|
|
25,089 |
|
|
Total noninterest expense |
|
64,206 |
|
|
65,616 |
|
|
58,809 |
|
|
|
56,018 |
|
|
|
51,703 |
|
|
Income before provision for income taxes |
|
17,199 |
|
|
16,382 |
|
|
15,021 |
|
|
|
8,715 |
|
|
|
11,859 |
|
| PROVISION FOR INCOME TAXES |
|
3,832 |
|
|
2,926 |
|
|
3,425 |
|
|
|
1,915 |
|
|
|
2,847 |
|
| NET INCOME |
$ |
13,367 |
|
$ |
13,456 |
|
$ |
11,596 |
|
|
$ |
6,800 |
|
|
$ |
9,012 |
|
| Basic earnings per common
share |
$ |
0.97 |
|
$ |
1.00 |
|
$ |
0.86 |
|
|
$ |
0.51 |
|
|
$ |
0.68 |
|
| Diluted earnings per common
share |
$ |
0.94 |
|
$ |
0.97 |
|
$ |
0.84 |
|
|
$ |
0.50 |
|
|
$ |
0.66 |
|
| Weighted average number of common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
13,828,605 |
|
|
13,447,066 |
|
|
13,412,667 |
|
|
|
13,340,997 |
|
|
|
13,286,828 |
|
|
Diluted |
|
14,268,229 |
|
|
13,822,270 |
|
|
13,736,508 |
|
|
|
13,676,917 |
|
|
|
13,676,513 |
|
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
| |
For the Three Months Ended |
| |
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
|
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
$ |
501,654 |
|
|
$ |
6,021 |
|
4.77 |
% |
|
$ |
350,915 |
|
|
$ |
4,781 |
|
5.42 |
% |
|
$ |
413,127 |
|
|
$ |
5,687 |
|
5.46 |
% |
|
Investment securities, available for sale (2) |
|
39 |
|
|
|
— |
|
— |
|
|
|
40 |
|
|
|
— |
|
— |
|
|
|
100,204 |
|
|
|
546 |
|
2.16 |
|
|
Investment securities, held to maturity (2) |
|
48,126 |
|
|
|
661 |
|
5.46 |
|
|
|
48,945 |
|
|
|
675 |
|
5.49 |
|
|
|
49,469 |
|
|
|
679 |
|
5.45 |
|
|
Other investments |
|
10,783 |
|
|
|
191 |
|
7.05 |
|
|
|
11,140 |
|
|
|
33 |
|
1.18 |
|
|
|
11,683 |
|
|
|
172 |
|
5.84 |
|
|
Loans receivable (3) |
|
3,419,476 |
|
|
|
89,714 |
|
10.44 |
|
|
|
3,464,871 |
|
|
|
99,590 |
|
11.43 |
|
|
|
3,007,289 |
|
|
|
81,159 |
|
10.71 |
|
| Total interest earning
assets |
|
3,980,078 |
|
|
|
96,587 |
|
9.65 |
|
|
|
3,875,911 |
|
|
|
105,079 |
|
10.79 |
|
|
|
3,581,772 |
|
|
|
88,243 |
|
9.77 |
|
| Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
(156,687 |
) |
|
|
|
|
|
|
(151,292 |
) |
|
|
|
|
|
|
(95,391 |
) |
|
|
|
|
|
Other noninterest earning assets |
|
277,922 |
|
|
|
|
|
|
|
268,903 |
|
|
|
|
|
|
|
204,052 |
|
|
|
|
|
|
Total assets |
$ |
4,101,313 |
|
|
|
|
|
|
$ |
3,993,522 |
|
|
|
|
|
|
$ |
3,690,433 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
$ |
3,068,357 |
|
|
$ |
29,404 |
|
3.81 |
% |
|
$ |
2,966,527 |
|
|
$ |
32,083 |
|
4.30 |
% |
|
$ |
2,660,235 |
|
|
$ |
27,916 |
|
4.16 |
% |
| FHLB advances and other
borrowings |
|
— |
|
|
|
1 |
|
— |
|
|
|
9,717 |
|
|
|
140 |
|
5.73 |
|
|
|
3 |
|
|
|
— |
|
— |
|
| Subordinated debt |
|
44,272 |
|
|
|
599 |
|
5.38 |
|
|
|
44,234 |
|
|
|
598 |
|
5.38 |
|
|
|
44,121 |
|
|
|
598 |
|
5.38 |
|
| Junior subordinated
debentures |
|
3,591 |
|
|
|
67 |
|
7.42 |
|
|
|
3,591 |
|
|
|
71 |
|
7.87 |
|
|
|
3,590 |
|
|
|
72 |
|
7.96 |
|
| Total interest bearing
liabilities |
|
3,116,220 |
|
|
|
30,071 |
|
3.84 |
|
|
|
3,024,069 |
|
|
|
32,892 |
|
4.33 |
|
|
|
2,707,949 |
|
|
|
28,586 |
|
4.19 |
|
| Noninterest bearing
deposits |
|
577,453 |
|
|
|
|
|
|
|
588,178 |
|
|
|
|
|
|
|
640,424 |
|
|
|
|
|
| Other liabilities |
|
50,824 |
|
|
|
|
|
|
|
60,101 |
|
|
|
|
|
|
|
52,450 |
|
|
|
|
|
| Total shareholders'
equity |
|
356,816 |
|
|
|
|
|
|
|
321,174 |
|
|
|
|
|
|
|
289,612 |
|
|
|
|
|
| Total liabilities and
shareholders' equity |
$ |
4,101,313 |
|
|
|
|
|
|
$ |
3,993,522 |
|
|
|
|
|
|
$ |
3,690,435 |
|
|
|
|
|
| Net interest income |
|
|
$ |
66,516 |
|
|
|
|
|
$ |
72,187 |
|
|
|
|
|
$ |
59,657 |
|
|
| Interest rate spread |
|
|
|
|
5.82 |
% |
|
|
|
|
|
6.46 |
% |
|
|
|
|
|
5.59 |
% |
| Net interest margin
(4) |
|
|
|
|
6.65 |
% |
|
|
|
|
|
7.41 |
% |
|
|
|
|
|
6.61 |
% |
(1) Yields and costs are annualized.
(2) For presentation in this table, average
balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
(3) Includes loans held for sale and nonaccrual
loans.
(4) Net interest margin represents net interest
income divided by the average total interest earning assets.
COASTAL FINANCIAL CORPORATION
SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT -
QUARTERLY
(Dollars in thousands; unaudited)
| |
For the Three Months Ended |
| |
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
|
(dollars in thousands, unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2) |
$ |
1,892,298 |
|
$ |
31,043 |
|
6.53 |
% |
|
$ |
1,912,428 |
|
$ |
31,898 |
|
6.64 |
% |
|
$ |
1,811,152 |
|
$ |
28,832 |
|
6.32 |
% |
|
Total interest earning assets |
|
1,892,298 |
|
|
31,043 |
|
6.53 |
|
|
|
1,912,428 |
|
|
31,898 |
|
6.64 |
|
|
|
1,811,152 |
|
|
28,832 |
|
6.32 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
1,029,346 |
|
|
7,161 |
|
2.77 |
% |
|
|
982,280 |
|
|
7,264 |
|
2.94 |
% |
|
|
951,148 |
|
|
6,090 |
|
2.54 |
% |
|
Intrabank liability |
|
357,442 |
|
|
4,290 |
|
4.77 |
|
|
|
406,641 |
|
|
5,540 |
|
5.42 |
|
|
|
275,995 |
|
|
3,799 |
|
5.46 |
|
| Total interest
bearing liabilities |
|
1,386,788 |
|
|
11,451 |
|
3.28 |
|
|
|
1,388,921 |
|
|
12,804 |
|
3.67 |
|
|
|
1,227,143 |
|
|
9,889 |
|
3.20 |
|
| Noninterest
bearing deposits |
|
505,510 |
|
|
|
|
|
|
523,507 |
|
|
|
|
|
|
584,009 |
|
|
|
|
| Net interest income |
|
|
$ |
19,592 |
|
|
|
|
|
$ |
19,094 |
|
|
|
|
|
$ |
18,943 |
|
|
| Net interest
margin(3) |
|
|
|
|
4.12 |
% |
|
|
|
|
|
3.97 |
% |
|
|
|
|
|
4.15 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2)(4) |
$ |
1,527,178 |
|
$ |
58,671 |
|
15.28 |
% |
|
$ |
1,552,443 |
|
$ |
67,692 |
|
17.35 |
% |
|
$ |
1,196,137 |
|
$ |
52,327 |
|
17.36 |
% |
|
Intrabank asset |
|
583,776 |
|
|
7,007 |
|
4.78 |
|
|
|
496,475 |
|
|
6,764 |
|
5.42 |
|
|
|
569,365 |
|
|
7,837 |
|
5.46 |
|
|
Total interest earning assets |
|
2,110,954 |
|
|
65,678 |
|
12.38 |
|
|
|
2,048,918 |
|
|
74,456 |
|
14.46 |
|
|
|
1,765,502 |
|
|
60,164 |
|
13.52 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
2,039,011 |
|
|
22,243 |
|
4.34 |
% |
|
|
1,984,247 |
|
|
24,819 |
|
4.98 |
% |
|
|
1,709,087 |
|
|
21,826 |
|
5.07 |
% |
| Total interest
bearing liabilities |
|
2,039,011 |
|
|
22,243 |
|
4.34 |
|
|
|
1,984,247 |
|
|
24,819 |
|
4.98 |
|
|
|
1,709,087 |
|
|
21,826 |
|
5.07 |
|
| Noninterest
bearing deposits |
|
71,943 |
|
|
|
|
|
|
64,671 |
|
|
|
|
|
|
56,415 |
|
|
|
|
| Net interest income |
|
|
$ |
43,435 |
|
|
|
|
|
$ |
49,637 |
|
|
|
|
|
$ |
38,338 |
|
|
| Net interest
margin(3) |
|
|
|
|
8.19 |
% |
|
|
|
|
|
9.64 |
% |
|
|
|
|
|
8.62 |
% |
| Net interest margin,
net of Baas loan expense (5) |
|
|
|
|
3.50 |
% |
|
|
|
|
|
3.31 |
% |
|
|
|
|
|
3.15 |
% |
| |
For the Three Months Ended |
| |
December 31, 2024 |
|
September 30, 2024 |
|
December 31, 2023 |
|
(dollars in thousands, unaudited) |
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
|
Average
Balance |
|
Interest &
Dividends |
|
Yield /
Cost (1) |
| Treasury
& Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
$ |
501,654 |
|
$ |
6,021 |
|
4.77 |
% |
|
$ |
350,915 |
|
$ |
4,781 |
|
5.42 |
% |
|
$ |
413,127 |
|
$ |
5,687 |
|
5.46 |
% |
|
Investment securities, available for sale (6) |
|
39 |
|
|
— |
|
— |
|
|
|
40 |
|
|
— |
|
— |
|
|
|
100,204 |
|
|
546 |
|
2.16 |
|
|
Investment securities, held to maturity (6) |
|
48,126 |
|
|
661 |
|
5.46 |
|
|
|
48,945 |
|
|
675 |
|
5.49 |
|
|
|
49,469 |
|
|
679 |
|
5.45 |
|
|
Other investments |
|
10,783 |
|
|
191 |
|
7.05 |
|
|
|
11,140 |
|
|
33 |
|
1.18 |
|
|
|
11,683 |
|
|
172 |
|
5.84 |
|
| Total interest earning
assets |
|
560,602 |
|
|
6,873 |
|
4.88 |
% |
|
|
411,040 |
— |
|
5,489 |
|
5.31 |
% |
|
|
574,483 |
|
|
7,084 |
|
4.89 |
% |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances and borrowings |
$ |
— |
|
$ |
1 |
|
— |
% |
|
|
9,717 |
|
|
140 |
|
5.73 |
% |
|
|
3 |
|
|
— |
|
— |
% |
|
Subordinated debt |
|
44,272 |
|
|
599 |
|
5.38 |
% |
|
|
44,234 |
|
|
598 |
|
5.38 |
% |
|
|
44,121 |
|
|
598 |
|
5.38 |
% |
|
Junior subordinated debentures |
|
3,591 |
|
|
67 |
|
7.42 |
|
|
|
3,591 |
|
|
71 |
|
7.87 |
|
|
|
3,590 |
|
|
72 |
|
7.96 |
|
|
Intrabank liability, net (7) |
|
226,334 |
|
|
2,717 |
|
4.78 |
|
|
|
89,834 |
|
|
1,224 |
|
5.42 |
|
|
|
293,370 |
|
|
4,038 |
|
5.46 |
|
| Total interest bearing
liabilities |
|
274,197 |
|
|
3,384 |
|
4.91 |
|
|
|
147,376 |
|
|
2,033 |
|
5.49 |
|
|
|
341,084 |
|
|
4,708 |
|
5.48 |
|
| Net interest income |
|
|
$ |
3,489 |
|
|
|
|
|
$ |
3,456 |
|
|
|
|
|
$ |
2,376 |
|
|
| Net interest
margin(3) |
|
|
|
|
2.48 |
% |
|
|
|
|
|
3.34 |
% |
|
|
|
|
|
1.64 |
% |
(1) Yields and costs are annualized.
(2) Includes loans held for sale and nonaccrual
loans.
(3) Net interest margin represents net interest
income divided by the average total interest earning assets.
(4) CCBX yield does not include the impact of BaaS
loan expense. BaaS loan expense represents the amount paid or
payable to partners for credit enhancements, fraud enhancements and
originating & servicing CCBX loans. See reconciliation of the
non-GAAP measures at the end of this earnings release for the
impact of BaaS loan expense on CCBX loan yield.
(5) Net interest margin, net of BaaS loan expense,
includes the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit
enhancements, fraud enhancements, originating & servicing CCBX
loans. See reconciliation of the non-GAAP measures at the end of
this earnings release.
(6) For presentation in this table, average
balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of discounts.
(7) Intrabank assets and liabilities are
consolidated for period calculations and presented as intrabank
asset, net or intrabank liability, net in the table above.
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to provide
meaningful supplemental information regarding the Company’s
operational performance and to enhance investors’ overall
understanding of such financial performance.
However, these non-GAAP financial measures are supplemental and
are not a substitute for an analysis based on GAAP measures. As
other companies may use different calculations for these adjusted
measures, this presentation may not be comparable to other
similarly titled adjusted measures reported by other companies.
The following non-GAAP measures are presented to illustrate the
impact of BaaS loan expense on net loan income and yield on loans
and CCBX loans and the impact of BaaS loan expense on net interest
income and net interest margin.
Loan income, net of BaaS loan expense, divided by average loans,
is a non-GAAP measure that includes the impact BaaS loan expense on
loan income and the yield on loans. The most directly comparable
GAAP measure is yield on loans.
Net BaaS loan income divided by average CCBX loans is a non-GAAP
measure that includes the impact BaaS loan expense on net BaaS loan
income and the yield on CCBX loans. The most directly comparable
GAAP measure is yield on CCBX loans.
Net interest income, net of BaaS loan expense, is a non-GAAP
measure that includes the impact BaaS loan expense on net interest
income. The most directly comparable GAAP measure is net interest
income.
CCBX net interest margin, net of BaaS loan expense, is a
non-GAAP measure that includes the impact of BaaS loan expense on
net interest rate margin. The most directly comparable GAAP measure
is CCBX net interest margin.
Reconciliations of the GAAP and non-GAAP measures are presented
below.
|
CCBX |
|
As of and for the Three Months Ended |
As of and for the Twelve Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31
2024 |
|
September 30
2024 |
|
December 31
2023 |
December 31
2024 |
|
December 31
2023 |
| Net BaaS
loan income divided by average CCBX loans: |
|
|
|
|
CCBX loan yield (GAAP)(1) |
|
|
15.28 |
% |
|
|
17.35 |
% |
|
|
17.36 |
% |
|
16.89 |
% |
|
|
16.89 |
% |
|
Total average CCBX loans receivable |
|
$ |
1,527,178 |
|
|
$ |
1,552,443 |
|
|
$ |
1,196,137 |
|
$ |
1,427,571 |
|
|
$ |
1,210,413 |
|
|
Interest and earned fee income on CCBX loans (GAAP) |
|
|
58,671 |
|
|
|
67,692 |
|
|
|
52,327 |
|
|
241,134 |
|
|
|
204,458 |
|
|
BaaS loan expense |
|
|
(24,859 |
) |
|
|
(32,612 |
) |
|
|
(24,310 |
) |
|
(111,384 |
) |
|
|
(86,900 |
) |
|
Net BaaS loan income |
|
$ |
33,812 |
|
|
$ |
35,080 |
|
|
$ |
28,017 |
|
$ |
129,750 |
|
|
$ |
117,558 |
|
|
Net BaaS loan income divided by average CCBX loans
(1) |
|
|
8.81 |
% |
|
|
8.99 |
% |
|
|
9.30 |
% |
|
9.09 |
% |
|
|
9.71 |
% |
| CCBX net
interest margin, net of BaaS loan expense: |
|
|
|
|
|
|
|
|
CCBX net interest margin (1) |
|
|
8.19 |
% |
|
|
9.64 |
% |
|
|
8.62 |
% |
|
8.87 |
% |
|
|
9.65 |
% |
|
CCBX earning assets |
|
|
2,110,954 |
|
|
|
2,048,918 |
|
|
|
1,765,502 |
|
|
1,999,695 |
|
|
|
1,574,334 |
|
|
Net interest income (GAAP) |
|
|
43,435 |
|
|
|
49,637 |
|
|
|
38,338 |
|
|
177,320 |
|
|
|
151,883 |
|
|
Less: BaaS loan expense |
|
|
(24,859 |
) |
|
|
(32,612 |
) |
|
|
(24,310 |
) |
|
(111,384 |
) |
|
|
(86,900 |
) |
|
Net interest income, net of BaaS loan expense |
|
$ |
18,576 |
|
|
$ |
17,025 |
|
|
$ |
14,028 |
|
$ |
65,936 |
|
|
$ |
64,983 |
|
|
CCBX net interest margin, net of BaaS loan expense
(1) |
|
|
3.50 |
% |
|
|
3.31 |
% |
|
|
3.15 |
% |
|
3.30 |
% |
|
|
4.13 |
% |
|
Consolidated |
|
As of and for the Three Months Ended |
As of and for the Twelve Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31
2024 |
|
September 30
2024 |
|
December 31
2023 |
December 31
2024 |
|
December 31
2023 |
| Net
interest margin, net of BaaS loan expense: |
|
|
|
|
|
|
|
|
Net interest margin (1) |
|
|
6.65 |
% |
|
|
7.41 |
% |
|
|
6.61 |
% |
|
6.99 |
% |
|
|
7.10 |
% |
|
Earning assets |
|
|
3,980,078 |
|
|
|
3,875,911 |
|
|
|
3,581,772 |
|
|
3,802,275 |
|
|
|
3,364,406 |
|
|
Net interest income (GAAP) |
|
|
66,516 |
|
|
|
72,187 |
|
|
|
59,657 |
|
|
265,876 |
|
|
|
238,727 |
|
|
Less: BaaS loan expense |
|
|
(24,859 |
) |
|
|
(32,612 |
) |
|
|
(24,310 |
) |
|
(111,384 |
) |
|
|
(86,900 |
) |
|
Net interest income, net of BaaS loan expense |
|
$ |
41,657 |
|
|
$ |
39,575 |
|
|
$ |
35,347 |
|
$ |
154,492 |
|
|
$ |
151,827 |
|
|
Net interest margin, net of BaaS loan expense (1) |
|
|
4.16 |
% |
|
|
4.06 |
% |
|
|
3.92 |
% |
|
4.06 |
% |
|
|
4.51 |
% |
|
Loan income net of BaaS loan expense divided by average
loans: |
|
|
|
|
|
|
Loan yield (GAAP)(1) |
|
|
10.44 |
% |
|
|
11.43 |
% |
|
|
10.71 |
% |
|
10.99 |
% |
|
|
10.60 |
% |
|
Total average loans receivable |
|
$ |
3,419,476 |
|
|
$ |
3,464,871 |
|
|
$ |
3,007,289 |
|
$ |
3,320,582 |
|
|
$ |
2,936,908 |
|
|
Interest and earned fee income on loans (GAAP) |
|
|
89,714 |
|
|
|
99,590 |
|
|
|
81,159 |
|
|
364,869 |
|
|
|
311,441 |
|
|
BaaS loan expense |
|
|
(24,859 |
) |
|
|
(32,612 |
) |
|
|
(24,310 |
) |
|
(111,384 |
) |
|
|
(86,900 |
) |
|
Net loan income |
|
$ |
64,855 |
|
|
$ |
66,978 |
|
|
$ |
56,849 |
|
$ |
253,485 |
|
|
$ |
224,541 |
|
|
Loan income, net of BaaS loan expense, divided by average loans
(1) |
|
|
7.55 |
% |
|
|
7.69 |
% |
|
|
7.50 |
% |
|
7.63 |
% |
|
|
7.65 |
% |
(1) Annualized calculations for
periods presented.
The following non-GAAP measure is presented to illustrate the
impact of BaaS loan expense, BaaS fraud expense and reimbursement
of expenses (BaaS) on noninterest expense. The most comparable GAAP
measure is noninterest expense.
| |
|
As of and for the Three Months Ended |
| (dollars in thousands,
unaudited) |
|
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
Noninterest expense, net of reimbursement of expenses
(BaaS) |
|
Noninterest expense (GAAP) |
|
$ |
64,206 |
|
$ |
65,616 |
|
$ |
51,703 |
|
Less: BaaS loan expense |
|
|
24,859 |
|
|
32,612 |
|
|
24,310 |
|
Less: BaaS fraud expense |
|
|
5,043 |
|
|
2,084 |
|
|
779 |
|
Less: Reimbursement of expenses |
|
|
3,468 |
|
|
1,843 |
|
|
1,076 |
| Noninterest expense, net of
BaaS loan expense, BaaS fraud expense and reimbursement of
expenses |
|
$ |
30,836 |
|
$ |
29,077 |
|
$ |
25,538 |
APPENDIX A -
As of December 31, 2024
Industry Concentration
We have a diversified loan portfolio,
representing a wide variety of industries. Our major categories of
loans are commercial real estate, consumer and other loans,
residential real estate, commercial and industrial, and
construction, land and land development loans. Together they
represent $3.49 billion in outstanding loan balances. When combined
with $1.96 billion in unused commitments the total of these
categories is $5.46 billion.
Commercial real estate loans
represent the largest segment of our loans, comprising 39.4% of our
total balance of outstanding loans as of December 31, 2024.
Unused commitments to extend credit represents an additional $34.2
million, and the combined total in commercial real estate loans
represents $1.41 billion, or 25.8% of our total outstanding loans
and loan commitments.
The following table summarizes our loan
commitment by industry for our commercial real estate portfolio as
of December 31, 2024:
|
(dollars in thousands; unaudited) |
|
Outstanding
Balance |
|
Available
Loan
Commitments |
|
Total
Outstanding
Balance &
Available
Commitment |
|
% of Total
Loans
(Outstanding
Balance &
Available
Commitment) |
|
Average Loan
Balance |
|
Number of
Loans |
|
Apartments |
|
$ |
405,561 |
|
$ |
4,953 |
|
$ |
410,514 |
|
7.5 |
% |
|
$ |
3,937 |
|
103 |
| Hotel/Motel |
|
|
154,691 |
|
|
68 |
|
|
154,759 |
|
2.8 |
|
|
|
6,726 |
|
23 |
| Convenience Store |
|
|
139,735 |
|
|
575 |
|
|
140,310 |
|
2.6 |
|
|
|
2,329 |
|
60 |
| Office |
|
|
122,897 |
|
|
7,687 |
|
|
130,584 |
|
2.4 |
|
|
|
1,366 |
|
90 |
| Retail |
|
|
103,312 |
|
|
414 |
|
|
103,726 |
|
1.9 |
|
|
|
993 |
|
104 |
| Warehouse |
|
|
103,130 |
|
|
— |
|
|
103,130 |
|
1.9 |
|
|
|
1,748 |
|
59 |
| Mixed use |
|
|
91,607 |
|
|
5,365 |
|
|
96,972 |
|
1.8 |
|
|
|
1,160 |
|
79 |
| Mini Storage |
|
|
80,837 |
|
|
10,183 |
|
|
91,020 |
|
1.7 |
|
|
|
3,674 |
|
22 |
| Strip Mall |
|
|
43,894 |
|
|
— |
|
|
43,894 |
|
0.8 |
|
|
|
6,271 |
|
7 |
| Manufacturing |
|
|
37,617 |
|
|
1,200 |
|
|
38,817 |
|
0.7 |
|
|
|
1,297 |
|
29 |
| Groups < 0.70% of total |
|
|
91,520 |
|
|
3,777 |
|
|
95,297 |
|
1.7 |
|
|
|
1,173 |
|
78 |
|
Total |
|
$ |
1,374,801 |
|
$ |
34,222 |
|
$ |
1,409,023 |
|
25.8 |
% |
|
$ |
2,102 |
|
654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans comprise 34.6%
of our total balance of outstanding loans as of December 31,
2024. Unused commitments to extend credit represents an additional
$735.8 million, and the combined total in consumer and other loans
represents $1.94 billion, or 35.6% of our total outstanding loans
and loan commitments. As illustrated in the table below, our CCBX
partners bring in a large number of mostly smaller dollar loans,
resulting in an average consumer loan balance of just $1,000. CCBX
consumer loans are underwritten to CCBX credit standards and
underwriting of these loans is regularly tested, including
quarterly testing for partners with portfolio balances greater than
$10.0 million.
The following table summarizes our loan commitment by industry
for our consumer and other loan portfolio as of December 31,
2024:
|
(dollars in thousands; unaudited) |
|
Outstanding
Balance |
|
Available
Loan
Commitments (1) |
|
Total
Outstanding
Balance &
Available
Commitment (1) |
|
% of Total
Loans
(Outstanding
Balance &
Available
Commitment) |
|
Average Loan
Balance |
|
Number of
Loans |
| CCBX
consumer loans |
|
Credit cards |
|
$ |
528,554 |
|
$ |
717,198 |
|
$ |
1,245,752 |
|
22.8 |
% |
|
$ |
1.8 |
|
301,799 |
|
Installment loans |
|
|
656,797 |
|
|
15,806 |
|
|
672,603 |
|
12.3 |
|
|
|
1.0 |
|
690,596 |
|
Lines of credit |
|
|
722 |
|
|
1 |
|
|
723 |
|
0.0 |
|
|
|
1.4 |
|
524 |
|
Other loans |
|
|
7,261 |
|
|
— |
|
|
7,261 |
|
0.1 |
|
|
|
— |
|
163,026 |
| Community
bank consumer loans |
|
Installment loans |
|
|
1,917 |
|
|
2 |
|
|
1,919 |
|
0.1 |
|
|
|
68.5 |
|
28 |
|
Lines of credit |
|
|
181 |
|
|
344 |
|
|
525 |
|
0.0 |
|
|
|
5.7 |
|
32 |
|
Other loans |
|
|
11,444 |
|
|
2,400 |
|
|
13,844 |
|
0.3 |
|
|
|
30.6 |
|
374 |
|
Total |
|
$ |
1,206,876 |
|
$ |
735,751 |
|
$ |
1,942,627 |
|
35.6 |
% |
|
$ |
1.0 |
|
1,156,379 |
(1) Total exposure on CCBX loans is
subject to CCBX partner/portfolio maximum limits.
Residential real estate loans comprise 13.4% of
our total balance of outstanding loans as of December 31,
2024. Unused commitments to extend credit represents an additional
$499.5 million, and the combined total in residential real estate
loans represents $969.3 million, or 17.8% of our total outstanding
loans and loan commitments.
The following table summarizes our loan
commitment by industry for our residential real estate loan
portfolio as of December 31, 2024:
|
(dollars in thousands; unaudited) |
|
Outstanding
Balance |
|
Available
Loan
Commitments (1) |
|
Total
Outstanding
Balance &
Available
Commitment (1) |
|
% of Total
Loans
(Outstanding
Balance &
Available
Commitment) |
|
Average Loan
Balance |
|
Number of
Loans |
| CCBX
residential real estate loans |
|
Home equity line of credit |
|
$ |
267,707 |
|
$ |
453,369 |
|
$ |
721,076 |
|
13.2 |
% |
|
$ |
27 |
|
10,092 |
| Community
bank residential real estate loans |
|
Closed end, secured by first liens |
|
|
165,433 |
|
|
2,080 |
|
|
167,513 |
|
3.1 |
|
|
|
537 |
|
308 |
|
Home equity line of credit |
|
|
25,506 |
|
|
43,102 |
|
|
68,608 |
|
1.3 |
|
|
|
109 |
|
234 |
|
Closed end, second liens |
|
|
11,125 |
|
|
965 |
|
|
12,090 |
|
0.2 |
|
|
|
371 |
|
30 |
|
Total |
|
$ |
469,771 |
|
$ |
499,516 |
|
$ |
969,287 |
|
17.8 |
% |
|
$ |
44 |
|
10,664 |
(1) Total exposure on CCBX loans is subject to
CCBX partner/portfolio maximum limits.
Commercial and industrial loans comprise 8.4%
of our total balance of outstanding loans as of December 31,
2024. Unused commitments to extend credit represents an additional
$645.5 million, and the combined total in commercial and industrial
loans represents $938.9 million, or 17.2% of our total outstanding
loans and loan commitments. Included in commercial and industrial
loans is $109.0 million in outstanding capital call lines, with an
additional $550.9 million in available loan commitments which is
limited to a $350.0 million portfolio maximum. Capital call lines
are provided to venture capital firms through one of our CCBX BaaS
clients. These loans are secured by the capital call rights and are
individually underwritten to the Bank’s credit standards and the
underwriting is reviewed by the Bank on every capital call
line.
The following table summarizes our loan
commitment by industry for our commercial and industrial loan
portfolio as of December 31, 2024:
|
(dollars in thousands; unaudited) |
|
Outstanding
Balance |
|
Available
Loan
Commitments (1) |
|
Total
Outstanding
Balance &
Available
Commitment (1) |
|
% of Total
Loans
(Outstanding
Balance &
Available
Commitment) |
|
Average Loan
Balance |
|
Number of
Loans |
|
Consolidated C&I loans |
|
Capital Call Lines |
|
$ |
109,017 |
|
$ |
550,948 |
|
$ |
659,965 |
|
12.1 |
% |
|
$ |
808 |
|
135 |
|
Construction/Contractor Services |
|
|
24,367 |
|
|
36,343 |
|
|
60,710 |
|
1.1 |
|
|
|
121 |
|
202 |
|
Financial Institutions |
|
|
48,648 |
|
|
— |
|
|
48,648 |
|
0.9 |
|
|
|
4,054 |
|
12 |
|
Retail |
|
|
28,533 |
|
|
5,664 |
|
|
34,197 |
|
0.6 |
|
|
|
14 |
|
2,052 |
|
Manufacturing |
|
|
5,604 |
|
|
4,581 |
|
|
10,185 |
|
0.2 |
|
|
|
147 |
|
38 |
|
Medical / Dental / Other Care |
|
|
7,074 |
|
|
2,641 |
|
|
9,715 |
|
0.2 |
|
|
|
544 |
|
13 |
|
Groups < 0.20% of total |
|
|
70,130 |
|
|
45,360 |
|
|
115,490 |
|
2.1 |
|
|
|
55 |
|
1,275 |
|
Total |
|
$ |
293,373 |
|
$ |
645,537 |
|
$ |
938,910 |
|
17.2 |
% |
|
$ |
79 |
|
3,727 |
(1) Total exposure on CCBX loans is
subject to CCBX partner/portfolio maximum limits.
Construction, land and land development loans
comprise 4.2% of our total balance of outstanding loans as of
December 31, 2024. Unused commitments to extend credit
represents an additional $47.8 million, and the combined total in
construction, land and land development loans represents $196.0
million, or 3.6% of our total outstanding loans and loan
commitments.
The following table details our loan commitment for our
construction, land and land development portfolio as of
December 31, 2024:
|
(dollars in thousands; unaudited) |
|
Outstanding
Balance |
|
Available
Loan
Commitments |
|
Total
Outstanding
Balance &
Available
Commitment |
|
% of Total
Loans
(Outstanding
Balance &
Available
Commitment) |
|
Average Loan
Balance |
|
Number of
Loans |
|
Commercial construction |
|
$ |
83,216 |
|
$ |
30,500 |
|
$ |
113,716 |
|
2.1 |
% |
|
$ |
6,935 |
|
12 |
|
Residential construction |
|
|
40,940 |
|
|
10,873 |
|
|
51,813 |
|
0.9 |
|
|
|
2,408 |
|
17 |
| Developed land loans |
|
|
8,305 |
|
|
456 |
|
|
8,761 |
|
0.2 |
|
|
|
489 |
|
17 |
|
Undeveloped land loans |
|
|
8,665 |
|
|
4,816 |
|
|
13,481 |
|
0.2 |
|
|
|
619 |
|
14 |
| Land development |
|
|
7,072 |
|
|
1,157 |
|
|
8,229 |
|
0.2 |
|
|
|
643 |
|
11 |
|
Total |
|
$ |
148,198 |
|
$ |
47,802 |
|
$ |
196,000 |
|
3.6 |
% |
|
$ |
2,087 |
|
71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exposure and risk in our construction, land and
land development portfolio is declining compared to previous
periods as indicated in the following table:
| |
|
Outstanding Balance as of |
| (dollars in thousands;
unaudited) |
|
December 31,
2024 |
|
September 30,
2024 |
|
June 30,
2024 |
|
March 31,
2024 |
|
December 31,
2023 |
|
Commercial construction |
|
$ |
83,216 |
|
$ |
97,792 |
|
$ |
110,372 |
|
$ |
102,099 |
|
$ |
81,489 |
|
Residential construction |
|
|
40,940 |
|
|
35,822 |
|
|
34,652 |
|
|
28,751 |
|
|
34,213 |
|
Undeveloped land loans |
|
|
8,665 |
|
|
8,606 |
|
|
8,372 |
|
|
8,190 |
|
|
7,890 |
| Developed land loans |
|
|
8,305 |
|
|
14,863 |
|
|
13,954 |
|
|
14,307 |
|
|
20,515 |
| Land development |
|
|
7,072 |
|
|
5,968 |
|
|
5,714 |
|
|
7,515 |
|
|
12,993 |
|
Total |
|
$ |
148,198 |
|
$ |
163,051 |
|
$ |
173,064 |
|
$ |
160,862 |
|
$ |
157,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit total $1.96
billion at December 31, 2024, however we do not
anticipate our customers using the $1.96 billion that is showing as
available due to CCBX partner and portfolio limits.
The following table presents outstanding commitments to extend
credit as of December 31, 2024:
|
Consolidated |
|
|
|
(dollars in thousands; unaudited) |
|
As of December 31, 2024 |
|
Commitments to extend credit: |
|
|
|
Commercial and industrial loans |
|
$ |
94,589 |
|
Commercial and industrial loans - capital call lines |
|
|
550,948 |
|
Construction – commercial real estate loans |
|
|
36,873 |
|
Construction – residential real estate loans |
|
|
10,929 |
|
Residential real estate loans |
|
|
499,516 |
|
Commercial real estate loans |
|
|
34,222 |
|
Credit cards |
|
|
717,198 |
|
Consumer and other loans |
|
|
18,553 |
| Total commitments to extend
credit |
|
$ |
1,962,828 |
| |
|
|
|
We have individual CCBX partner portfolio limits
with our each of our partners to manage loan concentration risk,
liquidity risk, and counter-party partner risk. For example, as of
December 31, 2024, capital call lines outstanding balance
totaled $109.0 million, and while commitments totaled $550.9
million, the commitments are limited to a maximum of $350.0 million
by agreement with the partner. If a CCBX partner goes over their
individual limit, it would be a breach of their contract and the
Bank may impose penalties and would have the choice to fund the
loan.
See the table below for CCBX portfolio maximums and related
available commitments:
|
CCBX |
|
|
|
|
|
|
|
|
|
(dollars in thousands; unaudited) |
|
Balance |
|
Percent of CCBX
loans receivable |
Available
Commitments (1) |
|
Maximum Portfolio
Size |
Cash
Reserve/Pledge
Account Amount (2) |
| Commercial and
industrial loans: |
|
|
|
|
|
|
|
Capital call lines |
|
$ |
109,017 |
|
|
6.8 |
% |
$ |
550,948 |
|
$ |
350,000 |
$ |
— |
|
All other commercial & industrial loans |
|
|
33,961 |
|
|
2.1 |
|
|
19,104 |
|
|
480,000 |
|
834 |
| Real estate loans: |
|
|
|
|
|
|
|
|
|
Home equity lines of credit (3) |
|
|
267,707 |
|
|
16.7 |
|
|
453,369 |
|
|
375,000 |
|
36,241 |
| Consumer and other
loans: |
|
|
|
|
|
|
|
Credit cards - cash secured |
|
|
211 |
|
|
|
|
— |
|
|
|
— |
|
Credit cards - unsecured |
|
|
528,343 |
|
|
|
|
717,198 |
|
|
|
26,742 |
|
Credit cards - total |
|
|
528,554 |
|
|
33.0 |
|
|
717,198 |
|
|
807,484 |
|
26,742 |
|
Installment loans - cash secured |
|
|
127,014 |
|
|
|
|
15,806 |
|
|
|
— |
|
Installment loans - unsecured |
|
|
529,783 |
|
|
|
|
— |
|
|
|
5,332 |
|
Installment loans - total |
|
|
656,797 |
|
|
40.9 |
|
|
15,806 |
|
|
1,787,118 |
|
5,332 |
|
Other consumer and other loans |
|
|
7,983 |
|
|
0.5 |
|
|
1 |
|
|
5,398 |
|
196 |
|
Gross CCBX loans receivable |
|
|
1,604,019 |
|
|
100.0 |
% |
|
1,756,426 |
|
|
3,805,000 |
$ |
69,345 |
| Net deferred origination
fees |
|
|
(442 |
) |
|
|
|
|
|
|
|
Loans receivable |
|
$ |
1,603,577 |
|
|
|
|
|
|
|
(1) Remaining commitment available, net of outstanding
balance.
(2) Balances are as of January 8, 2025.
(3) These home equity lines of credit are secured by residential
real estate and are accessed by using a credit card, but are
classified as 1-4 family residential properties per regulatory
guidelines.
APPENDIX B -
As of December 31, 2024
CCBX – BaaS Reporting Information
During the quarter ended December 31, 2024, $62.1 million
was recorded in BaaS credit enhancements related to the provision
for credit losses - loans and reserve for unfunded commitments for
CCBX partner loans and negative deposit accounts. Agreements with
our CCBX partners provide for a credit enhancement provided by the
partner which protects the Bank by indemnifying or reimbursing
incurred losses. In accordance with accounting guidance, we
estimate and record a provision for expected losses for these CCBX
loans, unfunded commitments and negative deposit accounts. When the
provision for credit losses - loans and provision for unfunded
commitments is recorded, a credit enhancement asset is also
recorded on the balance sheet through noninterest income (BaaS
credit enhancements) in recognition of the CCBX partner legal
commitment to indemnify or reimburse losses. The credit enhancement
asset is relieved as credit enhancement payments and recoveries are
received from the CCBX partner or taken from the partner's cash
reserve account. Agreements with our CCBX partners also provide
protection to the Bank from fraud by indemnifying or reimbursing
incurred fraud losses. BaaS fraud includes noncredit fraud losses
on loans and deposits originated through partners. Fraud losses are
recorded when incurred as losses in noninterest expense, and the
enhancement received from the CCBX partner is recorded in
noninterest income, resulting in a net impact of zero to the income
statement. Many CCBX partners also pledge a cash reserve account at
the Bank which the Bank can collect from when losses occur that is
then replenished by the partner on a regular interval. Although
agreements with our CCBX partners provide for credit enhancements
that provide protection to the Bank from credit and fraud losses by
indemnifying or reimbursing incurred credit and fraud losses, if
our partner is unable to fulfill their contracted obligation then
the bank would be exposed to additional loan and deposit losses if
the cash flows on the loans were not sufficient to fund the
reimbursement of loan losses, as a result of this counterparty
risk. If a CCBX partner does not replenish their cash reserve
account the Bank may consider an alternative plan for funding the
cash reserve. This may involve the possibility of adjusting the
funding amounts or timelines to better align with the partner's
specific situation. If a mutually agreeable funding plan is not
agreed to, the Bank could declare the agreement in default, take
over servicing and cease paying the partner for servicing the loan
and providing credit enhancements. The Bank would evaluate any
remaining credit enhancement asset from the CCBX partner in the
event the partner failed to determine if a write-off is
appropriate. If a write-off occurs, the Bank would retain the full
yield and any fee income on the loan portfolio going forward, and
our BaaS loan expense would decrease once default occurred and
payments to the CCBX partner were stopped.
The Bank records contractual interest earned from the borrower
on CCBX partner loans in interest income, adjusted for origination
costs which are paid or payable to the CCBX partner. BaaS loan
expense represents the amount paid or payable to partners for
credit and fraud enhancements and originating & servicing CCBX
loans. To determine net revenue (Net BaaS loan income) earned from
CCBX loan relationships, the Bank takes BaaS loan interest income
and deducts BaaS loan expense to arrive at Net BaaS loan income
(A reconciliation of the non-GAAP measures are set forth in the
preceding section of this earnings release.) which can be
compared to interest income on the Company’s community bank
loans.
The following table illustrates how CCBX partner loan income and
expenses are recorded in the financial statements:
|
Loan income and related loan expense |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
Yield on loans (1) |
|
|
15.28 |
% |
|
|
17.35 |
% |
|
|
17.36 |
% |
| BaaS loan interest income |
|
$ |
58,671 |
|
|
$ |
67,692 |
|
|
$ |
52,327 |
|
| Less: BaaS loan expense |
|
|
24,859 |
|
|
|
32,612 |
|
|
|
24,310 |
|
|
Net BaaS loan income (2) |
|
$ |
33,812 |
|
|
$ |
35,080 |
|
|
$ |
28,017 |
|
| Net BaaS loan income divided
by average BaaS loans (1)(2) |
|
|
8.81 |
% |
|
|
8.99 |
% |
|
|
9.30 |
% |
(1) Annualized calculation for quarterly periods shown.
(2) A reconciliation of the non-GAAP measures are set forth in the
preceding section of this earnings release.
A decrease in average CCBX loans receivable resulted in
decreased interest income on CCBX loans during the quarter ended
December 31, 2024 compared to the quarter ended
September 30, 2024. The decrease in average CCBX loans
receivable was primarily due to loan sales in the CCBX loan
portfolio as part of our strategy to optimize the CCBX loan
portfolio and strengthen our balance sheet through originating
higher quality new loans and enhanced credit standards. These
higher quality loans also have lower stated rates and expected
losses. As a result, our yield on loans and our BaaS loan expense
decrease by similar amounts. We continue to reposition ourselves by
managing CCBX credit and concentration levels in an effort to
optimize our loan portfolio and generate off balance sheet fee
income. Growth in CCBX loans and deposits has resulted in increases
in interest income and expense for the quarter ended
December 31, 2024 compared to the quarter ended
December 31, 2023.
The following tables are a summary of the interest components,
direct fees, and expenses of BaaS for the periods indicated and are
not inclusive of all income and expense related to BaaS.
|
Interest income |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
Loan interest income |
|
$ |
58,671 |
|
$ |
67,692 |
|
$ |
52,327 |
|
Total BaaS interest income |
|
$ |
58,671 |
|
$ |
67,692 |
|
$ |
52,327 |
|
Interest expense |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
BaaS interest expense |
|
$ |
22,243 |
|
$ |
24,819 |
|
$ |
21,826 |
|
Total BaaS interest expense |
|
$ |
22,243 |
|
$ |
24,819 |
|
$ |
21,826 |
|
BaaS income |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
BaaS program income: |
|
|
|
|
|
|
|
Servicing and other BaaS fees |
|
$ |
1,043 |
|
$ |
1,044 |
|
$ |
1,015 |
| Transaction fees |
|
|
1,783 |
|
|
1,696 |
|
|
1,006 |
| Interchange fees |
|
|
1,916 |
|
|
1,853 |
|
|
1,272 |
| Reimbursement of expenses |
|
|
3,468 |
|
|
1,843 |
|
|
1,076 |
|
BaaS program income |
|
|
8,210 |
|
|
6,436 |
|
|
4,369 |
| BaaS indemnification
income: |
|
|
|
|
|
|
| BaaS credit enhancements |
|
|
62,097 |
|
|
70,108 |
|
|
58,449 |
| BaaS fraud enhancements |
|
|
5,043 |
|
|
2,084 |
|
|
779 |
|
BaaS indemnification income |
|
|
67,140 |
|
|
72,192 |
|
|
59,228 |
| Total noninterest BaaS
income |
|
$ |
75,350 |
|
$ |
78,628 |
|
$ |
63,597 |
Servicing and other BaaS fees decreased $1,000 in the quarter ended
December 31, 2024 compared to the quarter ended
September 30, 2024 while transaction fees and interchange fees
increased $87,000 and $63,000, respectively. We expect servicing
and other BaaS fees to decrease and transaction and interchange
fees to increase as partner activity grows and contracted minimum
fees are replaced with recurring fees and then exceed those minimum
fees. Increases in BaaS reimbursement of fees offsets increases in
noninterest expense from BaaS expenses covered by CCBX
partners.
|
BaaS loan and fraud expense: |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
December 31,
2024 |
|
September 30,
2024 |
|
December 31,
2023 |
|
BaaS loan expense |
|
$ |
24,859 |
|
$ |
32,612 |
|
$ |
24,310 |
| BaaS fraud expense |
|
|
5,043 |
|
|
2,084 |
|
|
779 |
|
Total BaaS loan and fraud expense |
|
$ |
29,902 |
|
$ |
34,696 |
|
$ |
25,089 |
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/20c5a089-a44b-483e-acb5-fccbbe07fc10
Coastal Financial (NASDAQ:CCB)
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から 12 2024 まで 1 2025
Coastal Financial (NASDAQ:CCB)
過去 株価チャート
から 1 2024 まで 1 2025
