Coastal Financial Corporation Announces Fourth Quarter and Year End 2020 Results
Coastal Financial Corporation (Nasdaq: CCB) reported a net income of $15.1 million for 2020, equating to $1.24 per diluted share, a 14% increase from the previous year. Total assets rose 56.5% to $1.77 billion, while deposits grew 46.8% to $1.42 billion. Loan receivables, boosted by $365.8 million in PPP loans, increased 64.7% to $1.55 billion. The company's strategy focuses on expanding core banking, CCBX, and digital services. The fourth quarter net income was $4.7 million with a 12.2% rise in net interest income, indicating resilience amid economic uncertainties.
- Net income for 2020 reached $15.1 million, up 14% year-over-year.
- Total assets increased by $637.6 million, or 56.5%, to $1.77 billion.
- Total loans receivable grew by $608 million, or 64.7%, including $365.8 million in PPP loans.
- Deposits increased by $453.3 million, or 46.8%, totaling $1.42 billion.
- Net interest income rose by $15.4 million, or 36.6%, to $57.4 million for the year.
- An $8.3 million provision for loan losses was recorded, highlighting economic uncertainty.
- Return on average assets decreased to 1.04% from 1.31% year-over-year.
2020 Highlights:
- Net income totaled
$15.1 million for the year ended December 31, 2020, or$1.24 per diluted common share, an increase of14.0% from$13.2 million , or$1.08 per diluted common share, for the year ended December 31, 2019. - Basic earnings per share increased
30.0% , and diluted earnings per share increased26.7% , for the quarter ended December 31, 2020, compared to the quarter ended December 31, 2019. - An
$8.3 million provision for loan losses was recorded during the year ended December 31, 2020, largely due to continued economic uncertainties from the COVID-19 pandemic. - Total assets grew
$637.6 million , or56.5% , to$1.77 billion for the year ended December 31, 2020, compared to$1.13 billion at December 31, 2019. - Total loans receivable, net, including
$365.8 million in PPP loans, grew$608.0 million , or64.7% , to$1.55 billion for the year ended December 31, 2020, compared to$939.1 million at December 31, 2019. - Total deposits increased
$453.3 million , or46.8% , to$1.42 billion for the year ended December 31, 2020, compared to$968.0 million at December 31, 2019.
EVERETT, Wash., Jan. 27, 2021 (GLOBE NEWSWIRE) -- Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), the holding company for Coastal Community Bank (the “Bank”), today reported unaudited financial results for the quarter and year ended December 31, 2020. Net income for the fourth quarter of 2020 was
“If there is one thing 2020 has taught us, it’s how resilient we are. Those words ring true time and time again as we continue to navigate our way through these unprecedented times. Despite the disruptions and economic uncertainty resulting from the COVID-19 pandemic, we are pleased to announce that we finished the year with
“As a preferred Small Business Administration (“SBA”) lender, we are committed to working with the SBA to provide financial assistance to existing and new small business customers via the third round of PPP loans as provided in the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which opened for applications on January 19, 2021. I am proud to report that as of January 25, 2021, we have accepted applications for
“The health and safety of our employees and customers is of utmost importance, and as such we continue to enhance and modify measures already in place to keep us all healthy and safe while remaining open and serving our customers at our drive-throughs, by appointment, call center, mobile banking, online banking and ATMs. In addition, the Company continues to successfully employ remote work arrangements to the fullest extent possible. We remain committed to our customers, communities and employees as we move into this new year. The road ahead may be uncertain, but we are dedicated to strengthening existing relationships and embracing new opportunities for growth by continuing to focus on our three prong strategy of growing our core community bank, growing CCBX, our BaaS division, and building CCDB, our digital banking division.”
Results of Operations
Net interest income was
As of December 31, 2020,
Also contributing to the increase in interest income is fee income recognized on loans made through the Main Street Lending Program (“MSLP”). During the quarter ended December 31, 2020, we recognized
Our yield on loans receivable was
Non-PPP loan growth was
Interest expense was
Net interest income increased
Net interest margin widened in the quarter ending December 31, 2020 and will likely fluctuate over the near term as round one and round two PPP loans are forgiven and round three PPP loans are on-boarded. Accelerated deferred fee recognition related to the forgiven PPP loans supplemented interest income resulting in a net interest margin for the quarter ended December 31, 2020 of
During the quarter ended December 31, 2020, the average balance of total loans receivable increased by
Contractual yield on loans receivable, excluding earned fees approximated
Cost of deposits for the quarter ended December 31, 2020 was
Return on average assets (“ROA”) was
During the second and third quarters of 2020, significant focus was placed on helping the small businesses in our communities through the PPP. We are currently accepting applications for the third round of PPP loans which will begin funding in the first quarter of 2021. The PPP loans from the first and second rounds in 2020 have had a significant impact on our financial statements for the year ended December 31, 2020. These PPP loans along with those loans that fund in round three will continue to impact our results in the future. During the quarter ended December 31, 2020 we began receiving forgiveness payments from the SBA. Throughout this earnings release, we will address the impact, to the extent possible, of these loans including borrowings received through PPPLF to help fund these loans and to aid in liquidity, in addition to earnings and expenses related to these activities. Any estimated adjusted ratios that exclude the impact of this activity are non-GAAP measures. For more information about non-GAAP financial measures, please see the end of this earnings release.
The table below summarizes key information regarding the PPP loans as of the period indicated:
| Original Loan Size | |||||||||||||||||||
| As of December 31, 2020 | |||||||||||||||||||
| > 2,000,000.01 | Totals | ||||||||||||||||||
| (Dollars in thousands; unaudited) | |||||||||||||||||||
| Principal outstanding: | |||||||||||||||||||
| Existing customer | $ | 9,399 | $ | 22,614 | $ | 17,211 | $ | 55,821 | $ | 52,299 | $ | 157,344 | |||||||
| New customer | 18,324 | 30,325 | 34,206 | 64,591 | 61,052 | 208,498 | |||||||||||||
| Total principal outstanding | 27,723 | 52,939 | 51,417 | 120,412 | 113,351 | 365,842 | |||||||||||||
| Deferred fees outstanding | (906 | ) | (1,580 | ) | (1,538 | ) | (2,060 | ) | (631 | ) | (6,715 | ) | |||||||
| Deferred costs outstanding | 487 | 208 | 114 | 86 | 17 | 912 | |||||||||||||
| Net deferred fees | $ | (419 | ) | $ | (1,372 | ) | $ | (1,424 | ) | $ | (1,974 | ) | $ | (614 | ) | $ | (5,803 | ) | |
| Total principal, net of deferred fees | $ | 27,304 | $ | 51,567 | $ | 49,993 | $ | 118,438 | $ | 112,737 | $ | 360,039 | |||||||
| Number of loans: | |||||||||||||||||||
| Existing customer | 434 | 263 | 81 | 77 | 13 | 868 | |||||||||||||
| New customer | 1,006 | 344 | 161 | 90 | 19 | 1,620 | |||||||||||||
| Total loan count | 1,440 | 607 | 242 | 167 | 32 | 2,488 | |||||||||||||
| Percent of total | 57.9 | % | 24.4 | % | 9.7 | % | 6.7 | % | 1.3 | % | 100.0 | % | |||||||
| Forgiveness/Payoffs/Paydowns in Quarter Ended December 31, 2020, net | |||||||||||||||||||
| Dollars | $ | 4,139 | $ | 9,330 | $ | 20,948 | $ | 52,587 | $ | - | $ | 87,004 | |||||||
| Deferred fee recognized | 114 | 470 | 826 | 1,254 | 119 | 2,783 | |||||||||||||
The following table shows the Company’s key performance ratios for the periods indicated. The table also includes ratios that were adjusted by removing the impact of the PPP loans as described above. The adjusted ratios are non-GAAP measures. For more information about non-GAAP financial measures, see the end of this earnings release.
| Three Months Ended | Year ended | ||||||||||||||||||||||
| (unaudited) | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||||||||||||
| Return on average assets (1) | 1.04 | % | 0.95 | % | 0.96 | % | 0.96 | % | 1.31 | % | 0.98 | % | 1.28 | % | |||||||||
| Return on average equity (1) | 13.36 | % | 12.14 | % | 11.37 | % | 8.66 | % | 11.66 | % | 11.44 | % | 11.29 | % | |||||||||
| Pre-tax, pre-provision return on average assets (1)(2) | 1.90 | % | 1.72 | % | 1.72 | % | 1.77 | % | 1.95 | % | 1.78 | % | 1.86 | % | |||||||||
| Yield on earnings assets (1) | 4.16 | % | 3.93 | % | 4.16 | % | 4.79 | % | 4.90 | % | 4.21 | % | 4.90 | % | |||||||||
| Yield on loans receivable (1) | 4.64 | % | 4.33 | % | 4.57 | % | 5.25 | % | 5.36 | % | 4.64 | % | 5.38 | % | |||||||||
| Yield on loans receivable, as adjusted (1)(2) | 5.00 | % | 4.78 | % | 4.94 | % | n/a | n/a | 4.99 | % | n/a | ||||||||||||
| Contractual yield on loans receivable, excluding earned fees (1) | 3.66 | % | 3.61 | % | 3.91 | % | 5.08 | % | 5.15 | % | 3.96 | % | 4.75 | % | |||||||||
| Contractual yield on loans receivable, excluding earned fees and interest on PPP loans, as adjusted (1)(2) | 4.65 | % | 4.69 | % | 4.84 | % | n/a | n/a | 4.80 | % | n/a | ||||||||||||
| Cost of funds (1) | 0.29 | % | 0.33 | % | 0.41 | % | 0.70 | % | 0.70 | % | 0.40 | % | 0.73 | % | |||||||||
| Cost of deposits (1) | 0.22 | % | 0.27 | % | 0.35 | % | 0.64 | % | 0.63 | % | 0.35 | % | 0.65 | % | |||||||||
| Net interest margin (1) | 3.89 | % | 3.62 | % | 3.78 | % | 4.15 | % | 4.26 | % | 3.83 | % | 4.23 | % | |||||||||
| Noninterest expense to average assets (1) | 2.35 | % | 2.26 | % | 2.34 | % | 3.18 | % | 2.90 | % | 2.47 | % | 3.01 | % | |||||||||
| Efficiency ratio | 55.26 | % | 56.73 | % | 57.66 | % | 64.26 | % | 59.86 | % | 58.14 | % | 61.79 | % | |||||||||
| Loans receivable to deposits | 108.85 | % | 110.98 | % | 110.77 | % | 100.01 | % | 97.02 | % | 108.85 | % | 97.02 | % | |||||||||
| (1) Annualized calculations shown for quarterly periods presented. | |||||||||||||||||||||||
| (2) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release. | |||||||||||||||||||||||
Noninterest income was
As of December 31, 2020, there were six active CCBX relationships, two CCBX relationships in the friends and family trials, three CCBX relationships in onboarding/implementation, four signed letters of intent for a CCBX relationship and a solid pipeline of potential new CCBX relationships. The following table illustrates the activity and growth in CCBX for the periods presented:
| As of | |||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | |
| Active | 6 | 4 | 2 |
| Friends and family trials | 2 | 1 | 0 |
| Implementation / onboarding | 3 | 4 | 3 |
| Signed letters of intent | 4 | 2 | 0 |
| Total CCBX relationships | 15 | 11 | 5 |
Total noninterest expense for the fourth quarter of 2020 increased to
The provision for income taxes was
Financial Condition
Total assets increased
Total loans receivable increased
The second round of the PPP program closed to new loan applicants on August 8, 2020, and since that time we have been accepting applications from customers for loan forgiveness. As of December 31, 2020, we have received
The third round of PPP loans opened to applicants on January 19, 2021. We expect to again accept and process applications for both existing and new customers, to help small businesses in our communities. As of January 25, 2021, we have accepted applications for
The following table summarizes the loan portfolio at the periods indicated.
| As of | |||||||||||||||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||||||||||||
| (Dollars in thousands; unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Commercial and industrial loans: | |||||||||||||||||||||
| PPP loans | $ | 365,842 | 23.5 | % | $ | 452,846 | 29.8 | % | $ | - | 0.0 | % | |||||||||
| All other commercial & industrial loans | 173,358 | 11.0 | 136,358 | 8.9 | 111,401 | 11.8 | |||||||||||||||
| Real estate loans: | |||||||||||||||||||||
| Construction, land and land development loans | 94,423 | 6.1 | 100,955 | 6.6 | 97,034 | 10.3 | |||||||||||||||
| Residential real estate loans | 143,869 | 9.3 | 121,147 | 8.0 | 115,011 | 12.2 | |||||||||||||||
| Commercial real estate loans | 774,925 | 49.8 | 705,186 | 46.4 | 613,398 | 65.2 | |||||||||||||||
| Consumer and other loans | 3,916 | 0.3 | 3,927 | 0.3 | 4,214 | 0.5 | |||||||||||||||
| Gross loans receivable | 1,556,333 | 100.0 | % | 1,520,419 | 100.0 | % | 941,058 | 100.0 | % | ||||||||||||
| Net deferred origination fees - PPP loans | (5,803 | ) | (8,586 | ) | - | ||||||||||||||||
| Net deferred origination fees - Other loans | (3,392 | ) | (2,444 | ) | (1,955 | ) | |||||||||||||||
| Loans receivable | $ | 1,547,138 | $ | 1,509,389 | $ | 939,103 | |||||||||||||||
Please see Appendix A for additional loan portfolio detail regarding industry concentrations in response to the volatile economic environment due to the COVID-19 pandemic.
Total deposits increased
The following table summarizes the deposit portfolio at the periods indicated.
| As of | |||||||||||||||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||||||||||||
| (Dollars in thousands, unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
| Demand, noninterest bearing | $ | 592,261 | 41.7 | % | $ | 570,664 | 42.0 | % | $ | 371,243 | 38.4 | % | |||||||||
| NOW and money market | 658,323 | 46.3 | 624,891 | 45.9 | 437,908 | 45.2 | |||||||||||||||
| Savings | 77,611 | 5.4 | 74,694 | 5.5 | 53,365 | 5.5 | |||||||||||||||
| Total core deposits | 1,328,195 | 93.4 | 1,270,249 | 93.4 | 862,516 | 89.1 | |||||||||||||||
| BaaS-brokered deposits | 33,482 | 2.4 | 24,870 | 1.8 | 23,586 | 2.4 | |||||||||||||||
| Time deposits less than | 41,145 | 2.9 | 41,676 | 3.1 | 51,644 | 5.4 | |||||||||||||||
| Time deposits | 18,485 | 1.3 | 23,216 | 1.7 | 30,213 | 3.1 | |||||||||||||||
| Total deposits | $ | 1,421,307 | 100.0 | % | $ | 1,360,011 | 100.0 | % | $ | 967,959 | 100.0 | % | |||||||||
To support and promote the effectiveness of the SBA PPP loan program, the Federal Reserve is supplying liquidity to participating financial institutions through non-recourse term financing secured by PPP loans to small businesses. The PPPLF extends low cost borrowing lines,
The Federal Home Loan Bank (“FHLB”) allows us to borrow against our line of credit, which is collateralized by certain loans. As of December 31, 2020, we borrowed a total of
Total shareholders’ equity increased
Capital Ratios
The Company and the Bank remain well capitalized at December 31, 2020, as summarized in the following table.
| Capital Ratios: | Coastal Community Bank | Coastal Financial Corporation | Financial Institution Basel III Regulatory Guidelines | ||||||||
| (unaudited) | |||||||||||
| Tier 1 leverage capital | 9.29 | % | 9.05 | % | 5.00 | % | |||||
| Adjusted Tier 1 leverage capital ratio, excluding PPP loans (1) | 10.91 | % | 10.63 | % | 5.00 | % | |||||
| Common Equity Tier 1 risk-based capital | 11.86 | % | 11.27 | % | 6.50 | % | |||||
| Tier 1 risk-based capital | 11.86 | % | 11.55 | % | 8.00 | % | |||||
| Total risk-based capital | 13.11 | % | 13.61 | % | 10.00 | % | |||||
| (1) A reconciliation of the non-GAAP measure is set forth at the end of this earnings release. | |||||||||||
As previously disclosed, during the quarter ended March 31, 2020, the Company contributed
Asset Quality
The allowance for loan losses was
The Company’s provision for loan losses during the quarters ended December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020, is related to an increase in qualitative factors related to the economic uncertainties caused by the COVID-19 pandemic and loan growth. The Company is not required to implement the provisions of the Current Expected Credit Loss accounting standard until January 1, 2023 and will continue to account for the allowance for credit losses under the incurred loss model.
At December 31, 2020, our nonperforming assets were
Management is continuing to actively monitor the loan portfolio to identify borrowers experiencing difficulties with repayment and are proactively working with them to reduce potential losses through the prudent use of PPP loans, deferrals, and modifications in accordance with regulatory guidelines. There were no repossessed assets or other real estate owned at December 31, 2020. Our nonperforming loans to loans receivable ratio was
To date we have not seen a significant change in our credit quality metrics, as demonstrated by the low level of charge-offs and nonperforming loans for the year ended December 31, 2020. The long-term economic impact of the COVID-19 pandemic, political gridlock, trade issues, and decline in oil prices is unknown; however, the Company remains diligent in its efforts to communicate and proactively work with borrowers to help mitigate potential credit deterioration.
Pursuant to federal guidance, the Company deferred and/or modified payments on loans to assist customers financially during the COVID-19 pandemic and economic shutdown. A total of
The following table details the Company’s nonperforming assets for the periods indicated.
| As of | ||||||||||
| December 31, | September 30, | December 31, | ||||||||
| (Dollars in thousands, unaudited) | 2020 | 2020 | 2019 | |||||||
| Nonaccrual loans: | ||||||||||
| Commercial and industrial loans | $ | 537 | $ | 625 | $ | 965 | ||||
| Real estate: | ||||||||||
| Construction, land and land development | - | 3,269 | - | |||||||
| Residential real estate | 175 | 178 | 65 | |||||||
| Commercial real estate | - | 405 | - | |||||||
| Total nonaccrual loans | 712 | 4,477 | 1,030 | |||||||
| Accruing loans past due 90 days or more: | ||||||||||
| Total accruing loans past due 90 days or more | - | - | - | |||||||
| Total nonperforming loans | 712 | 4,477 | 1,030 | |||||||
| Other real estate owned | - | - | - | |||||||
| Repossessed assets | - | - | - | |||||||
| Total nonperforming assets | $ | 712 | $ | 4,477 | $ | 1,030 | ||||
| Troubled debt restructurings, accruing | - | - | - | |||||||
| Total nonperforming loans to loans receivable | 0.05 | % | 0.30 | % | 0.11 | % | ||||
| Total nonperforming assets to total assets | 0.04 | % | 0.26 | % | 0.09 | % | ||||
____
* A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
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
Contact
Eric Sprink, President & Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of or reference to forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the risks and uncertainties discussed under “Risk Factors” in our Annual Report on Form 10-K for the most recent period filed, our Quarterly Report on Form 10-Q for the most recent quarter, and in any of our subsequent filings with the Securities and Exchange Commission.
If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. You are cautioned not to place undue reliance on forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law.
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands; unaudited)
| ASSETS | ||||||||||||
| December 31, | September 30, | December 31, | ||||||||||
| 2020 | 2020 | 2019 | ||||||||||
| Cash and due from banks | $ | 18,965 | $ | 14,136 | $ | 16,555 | ||||||
| Interest earning deposits with other banks | 144,152 | 168,034 | 111,259 | |||||||||
| Investment securities, available for sale, at fair value | 20,399 | 20,428 | 28,360 | |||||||||
| Investment securities, held to maturity, at amortized cost | 2,848 | 3,354 | 4,350 | |||||||||
| Other investments | 6,059 | 5,951 | 4,505 | |||||||||
| Loans receivable | 1,547,138 | 1,509,389 | 939,103 | |||||||||
| Allowance for loan losses | (19,262 | ) | (17,046 | ) | (11,470 | ) | ||||||
| Total loans receivable, net | 1,527,876 | 1,492,343 | 927,633 | |||||||||
| Premises and equipment, net | 17,108 | 16,881 | 13,108 | |||||||||
| Operating lease right-of-use assets | 7,120 | 7,379 | 8,493 | |||||||||
| Accrued interest receivable | 8,616 | 8,216 | 2,980 | |||||||||
| Bank-owned life insurance, net | 7,082 | 7,031 | 6,882 | |||||||||
| Deferred tax asset, net | 3,799 | 2,722 | 2,743 | |||||||||
| Other assets | 2,098 | 3,144 | 1,658 | |||||||||
| Total assets | $ | 1,766,122 | $ | 1,749,619 | $ | 1,128,526 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| LIABILITIES | ||||||||||||
| Deposits | $ | 1,421,307 | $ | 1,360,011 | $ | 967,959 | ||||||
| Federal Home Loan Bank advances | 24,999 | 24,999 | 10,000 | |||||||||
| Paycheck Protection Program Liquidity Facility | 153,716 | 202,595 | - | |||||||||
| Subordinated debt, net | 9,993 | 9,989 | 9,979 | |||||||||
| Junior subordinated debentures, net | 3,584 | 3,584 | 3,583 | |||||||||
| Deferred compensation | 863 | 891 | 974 | |||||||||
| Accrued interest payable | 531 | 481 | 308 | |||||||||
| Operating lease liabilities | 7,323 | 7,579 | 8,679 | |||||||||
| Other liabilities | 3,589 | 4,258 | 2,871 | |||||||||
| Total liabilities | 1,625,905 | 1,614,387 | 1,004,353 | |||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Common stock | 87,815 | 87,479 | 86,983 | |||||||||
| Retained earnings | 52,368 | 47,707 | 37,222 | |||||||||
| Accumulated other comprehensive income (loss), net of tax | 34 | 46 | (32 | ) | ||||||||
| Total shareholders’ equity | 140,217 | 135,232 | 124,173 | |||||||||
| Total liabilities and shareholders’ equity | $ | 1,766,122 | $ | 1,749,619 | $ | 1,128,526 | ||||||
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| Three Months Ended | |||||||||
| December 31, | September 30, | December 31, | |||||||
| 2020 | 2020 | 2019 | |||||||
| INTEREST AND DIVIDEND INCOME | |||||||||
| Interest and fees on loans | $ | 17,885 | $ | 16,244 | $ | 12,323 | |||
| Interest on interest earning deposits with other banks | 76 | 99 | 477 | ||||||
| Interest on investment securities | 31 | 27 | 154 | ||||||
| Dividends on other investments | 106 | 24 | 80 | ||||||
| Total interest and dividend income | 18,098 | 16,394 | 13,034 | ||||||
| INTEREST EXPENSE | |||||||||
| Interest on deposits | 758 | 880 | 1,511 | ||||||
| Interest on borrowed funds | 407 | 418 | 192 | ||||||
| Total interest expense | 1,165 | 1,298 | 1,703 | ||||||
| Net interest income | 16,933 | 15,096 | 11,331 | ||||||
| PROVISION FOR LOAN LOSSES | 2,600 | 2,200 | 820 | ||||||
| Net interest income after provision for loan losses | 14,333 | 12,896 | 10,511 | ||||||
| NONINTEREST INCOME | |||||||||
| Deposit service charges and fees | 867 | 824 | 805 | ||||||
| BaaS fees | 735 | 576 | 656 | ||||||
| Loan referral fees | 423 | 180 | 332 | ||||||
| Mortgage broker fees | 216 | 125 | 111 | ||||||
| Sublease and lease income | 31 | 30 | 27 | ||||||
| Gain on sales of loans, net | 35 | 47 | - | ||||||
| Other | (258 | ) | 160 | 128 | |||||
| Total noninterest income | 2,049 | 1,942 | 2,059 | ||||||
| NONINTEREST EXPENSE | |||||||||
| Salaries and employee benefits | 6,433 | 5,971 | 4,901 | ||||||
| Occupancy | 1,026 | 1,091 | 972 | ||||||
| Data processing | 599 | 577 | 544 | ||||||
| Director and staff expenses | 187 | 156 | 302 | ||||||
| Excise taxes | 301 | 291 | 190 | ||||||
| Marketing | 37 | 52 | 93 | ||||||
| Legal and professional fees | 584 | 381 | 231 | ||||||
| Federal Deposit Insurance Corporation assessments | 230 | 148 | (21 | ) | |||||
| Business development | 99 | 72 | 111 | ||||||
| Other | 993 | 927 | 692 | ||||||
| Total noninterest expense | 10,489 | 9,666 | 8,015 | ||||||
| Income before provision for income taxes | 5,893 | 5,172 | 4,555 | ||||||
| PROVISION FOR INCOME TAXES | 1,232 | 1,082 | 947 | ||||||
| NET INCOME | $ | 4,661 | $ | 4,090 | $ | 3,608 | |||
| Basic earnings per common share | $ | 0.39 | $ | 0.34 | $ | 0.30 | |||
| Diluted earnings per common share | $ | 0.38 | $ | 0.34 | $ | 0.30 | |||
| Weighted average number of common shares outstanding: | |||||||||
| Basic | 11,936,289 | 11,919,850 | 11,903,750 | ||||||
| Diluted | 12,280,191 | 12,181,272 | 12,213,512 | ||||||
COASTAL FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts; unaudited)
| Year ended | ||||||
| December 31, | December 31, | |||||
| 2020 | 2019 | |||||
| INTEREST AND DIVIDEND INCOME | ||||||
| Interest and fees on loans | $ | 61,910 | $ | 45,350 | ||
| Interest on interest earning deposits with other banks | 663 | 2,423 | ||||
| Interest on investment securities | 230 | 635 | ||||
| Dividends on other investments | 235 | 179 | ||||
| Total interest and dividend income | 63,038 | 48,587 | ||||
| INTEREST EXPENSE | ||||||
| Interest on deposits | 4,288 | 5,802 | ||||
| Interest on borrowed funds | 1,364 | 774 | ||||
| Total interest expense | 5,652 | 6,576 | ||||
| Net interest income | 57,386 | 42,011 | ||||
| PROVISION FOR LOAN LOSSES | 8,308 | 2,544 | ||||
| Net interest income after provision for loan losses | 49,078 | 39,467 | ||||
| NONINTEREST INCOME | ||||||
| Deposit service charges and fees | 3,091 | 3,107 | ||||
| BaaS fees | 2,365 | 2,060 | ||||
| Loan referral fees | 1,726 | 1,438 | ||||
| Mortgage broker fees | 655 | 447 | ||||
| Sublease and lease income | 122 | 58 | ||||
| Gain on sales of loans, net | 82 | 490 | ||||
| Gain on sales of securities, net | - | 171 | ||||
| Other | 141 | 487 | ||||
| Total noninterest income | 8,182 | 8,258 | ||||
| NONINTEREST EXPENSE | ||||||
| Salaries and employee benefits | 23,302 | 18,959 | ||||
| Occupancy | 3,977 | 3,775 | ||||
| Data processing | 2,348 | 2,081 | ||||
| Director and staff expenses | 800 | 1,000 | ||||
| Excise taxes | 1,057 | 719 | ||||
| Marketing | 317 | 393 | ||||
| Legal and professional fees | 1,762 | 1,103 | ||||
| Federal Deposit Insurance Corporation assessments | 522 | 184 | ||||
| Business development | 344 | 431 | ||||
| Other | 3,690 | 2,418 | ||||
| Total noninterest expense | 38,119 | 31,063 | ||||
| Income before provision for income taxes | 19,141 | 16,662 | ||||
| PROVISION FOR INCOME TAXES | 3,995 | 3,461 | ||||
| NET INCOME | $ | 15,146 | $ | 13,201 | ||
| Basic earnings per common share | $ | 1.27 | $ | 1.11 | ||
| Diluted earnings per common share | $ | 1.24 | $ | 1.08 | ||
| Weighted average number of common shares outstanding: | ||||||
| Basic | 11,920,735 | 11,896,258 | ||||
| Diluted | 12,209,371 | 12,196,120 | ||||
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)
| For the Three Months Ended | |||||||||||||||||||||||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||
| Average | Interest & | Yield / | Average | Interest & | Yield / | Average | Interest & | Yield / | |||||||||||||||||||||
| Balance | Dividends | Cost (4) | Balance | Dividends | Cost (4) | Balance | Dividends | Cost (4) | |||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||||||||
| Interest earning deposits | $ | 166,744 | $ | 76 | 0.18 | % | $ | 137,568 | $ | 99 | 0.29 | % | $ | 106,985 | $ | 477 | 1.77 | % | |||||||||||
| Investment securities (1) | 23,730 | 31 | 0.52 | 23,882 | 27 | 0.45 | 32,871 | 154 | 1.86 | ||||||||||||||||||||
| Other Investments | 6,124 | 106 | 6.89 | 5,951 | 24 | 1.60 | 3,743 | 80 | 8.48 | ||||||||||||||||||||
| Loans receivable (2) | 1,533,533 | 17,885 | 4.64 | 1,493,024 | 16,244 | 4.33 | 911,373 | 12,323 | 5.36 | ||||||||||||||||||||
| Total interest earning assets | 1,730,131 | 18,098 | 4.16 | 1,660,425 | 16,394 | 3.93 | 1,054,972 | 13,034 | 4.90 | ||||||||||||||||||||
| Noninterest earning assets: | |||||||||||||||||||||||||||||
| Allowance for loan losses | (17,767 | ) | (15,711 | ) | (11,002 | ) | |||||||||||||||||||||||
| Other noninterest earning assets | 62,359 | 60,160 | 51,373 | ||||||||||||||||||||||||||
| Total assets | $ | 1,774,723 | $ | 1,704,874 | $ | 1,095,343 | |||||||||||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||||||||
| Interest bearing deposits | $ | 808,351 | $ | 758 | 0.37 | % | $ | 750,790 | $ | 880 | 0.47 | % | $ | 585,277 | $ | 1,511 | 1.02 | % | |||||||||||
| Subordinated debt, net | 9,991 | 148 | 5.89 | 9,987 | 148 | 5.90 | 9,977 | 148 | 5.89 | ||||||||||||||||||||
| Junior subordinated debentures, net | 3,584 | 22 | 2.44 | 3,584 | 23 | 2.55 | 3,583 | 39 | 4.32 | ||||||||||||||||||||
| PPPLF borrowings | 188,222 | 166 | 0.35 | 199,076 | 176 | 0.35 | - | - | 0.00 | ||||||||||||||||||||
| FHLB advances and other borrowings | 25,001 | 71 | 1.13 | 24,999 | 71 | 1.13 | 893 | 5 | 2.22 | ||||||||||||||||||||
| Total interest bearing liabilities | 1,035,149 | 1,165 | 0.45 | 988,436 | 1,298 | 0.52 | 599,730 | 1,703 | 1.13 | ||||||||||||||||||||
| Noninterest bearing deposits | 588,764 | 569,615 | 360,030 | ||||||||||||||||||||||||||
| Other liabilities | 11,968 | 12,781 | 12,869 | ||||||||||||||||||||||||||
| Total shareholders' equity | 138,842 | 134,042 | 122,714 | ||||||||||||||||||||||||||
| Total liabilities and | |||||||||||||||||||||||||||||
| shareholders' equity | $ | 1,774,723 | $ | 1,704,874 | $ | 1,095,343 | |||||||||||||||||||||||
| Net interest income | $ | 16,933 | $ | 15,096 | $ | 11,331 | |||||||||||||||||||||||
| Interest rate spread | 3.71 | % | 3.41 | % | 3.77 | % | |||||||||||||||||||||||
| Net interest margin (3) | 3.89 | % | 3.62 | % | 4.26 | % | |||||||||||||||||||||||
| (1) 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. | |||||||||||||||||||||||||||||
| (2) Includes nonaccrual loans. | |||||||||||||||||||||||||||||
| (3) Net interest margin represents net interest income divided by the average total interest earning assets. | |||||||||||||||||||||||||||||
| (4) Yields and costs are annualized. | |||||||||||||||||||||||||||||
COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE
(Dollars in thousands; unaudited)
| For the Year Ended | |||||||||||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||||||||||
| Average | Interest & | Yield / | Average | Interest & | Yield / | ||||||||||||||
| Balance | Dividends | Cost | Balance | Dividends | Cost | ||||||||||||||
| Assets | |||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||
| Interest earning deposits | $ | 133,951 | $ | 663 | 0.49 | % | $ | 107,916 | $ | 2,423 | 2.25 | % | |||||||
| Investment securities (1) | 24,120 | 230 | 0.95 | 37,368 | 635 | 1.70 | |||||||||||||
| Other Investments | 5,608 | 235 | 4.19 | 3,545 | 179 | 5.05 | |||||||||||||
| Loans receivable (2) | 1,333,028 | 61,910 | 4.64 | 843,450 | 45,350 | 5.38 | |||||||||||||
| Total interest earning assets | $ | 1,496,707 | $ | 63,038 | 4.21 | $ | 992,279 | $ | 48,587 | 4.90 | |||||||||
| Noninterest earning assets: | |||||||||||||||||||
| Allowance for loan losses | (14,686 | ) | (10,304 | ) | |||||||||||||||
| Other noninterest earning assets | 58,970 | 49,998 | |||||||||||||||||
| Total assets | $ | 1,540,991 | $ | 1,031,973 | |||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||
| Interest bearing deposits | $ | 724,279 | $ | 4,288 | 0.59 | % | $ | 565,713 | $ | 5,802 | 1.03 | % | |||||||
| Subordinated debt, net | 9,986 | 589 | 5.90 | 9,971 | 587 | 5.89 | |||||||||||||
| Junior subordinated debentures, net | 3,584 | 105 | 2.93 | 3,582 | 168 | 4.69 | |||||||||||||
| PPPLF borrowings | 124,068 | 435 | 0.35 | - | - | 0.00 | |||||||||||||
| FHLB advances and other borrowings | 20,736 | 235 | 1.13 | 819 | 19 | 2.32 | |||||||||||||
| Total interest bearing liabilities | $ | 882,653 | $ | 5,652 | 0.64 | $ | 580,085 | $ | 6,576 | 1.13 | |||||||||
| Noninterest bearing deposits | 513,550 | 322,064 | |||||||||||||||||
| Other liabilities | 12,445 | 12,944 | |||||||||||||||||
| Total shareholders' equity | 132,343 | 116,880 | |||||||||||||||||
| Total liabilities and | |||||||||||||||||||
| shareholders' equity | $ | 1,540,991 | $ | 1,031,973 | |||||||||||||||
| Net interest income | $ | 57,386 | $ | 42,011 | |||||||||||||||
| Interest rate spread | 3.57 | % | 3.76 | % | |||||||||||||||
| Net interest margin (3) | 3.83 | % | 4.23 | % | |||||||||||||||
| (1) 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. | |||||||||||||||||||
| (2) Includes nonaccrual loans. | |||||||||||||||||||
| (3) Net interest margin represents net interest income divided by the average total interest earning assets. | |||||||||||||||||||
COASTAL FINANCIAL CORPORATION
QUARTERLY STATISTICS
(Dollars in thousands, except share and per share data; unaudited)
| Three Months Ended | |||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| 2020 | 2020 | 2020 | 2020 | 2019 | |||||||||||
| Income Statement Data: | |||||||||||||||
| Interest and dividend income | $ | 18,098 | $ | 16,394 | $ | 15,426 | $ | 13,120 | $ | 13,034 | |||||
| Interest expense | 1,165 | 1,298 | 1,433 | 1,756 | 1,703 | ||||||||||
| Net interest income | 16,933 | 15,096 | 13,993 | 11,364 | 11,331 | ||||||||||
| Provision for loan losses | 2,600 | 2,200 | 1,930 | 1,578 | 820 | ||||||||||
| Net interest income after | |||||||||||||||
| provision for loan losses | 14,333 | 12,896 | 12,063 | 9,786 | 10,511 | ||||||||||
| Noninterest income | 2,049 | 1,942 | 1,520 | 2,671 | 2,059 | ||||||||||
| Noninterest expense | 10,489 | 9,666 | 8,945 | 9,019 | 8,015 | ||||||||||
| Net income - pre-tax, pre-provision (1) | 8,493 | 7,372 | 6,568 | 5,016 | 5,375 | ||||||||||
| Provision for income tax | 1,232 | 1,082 | 967 | 714 | 947 | ||||||||||
| Net income | 4,661 | 4,090 | 3,671 | 2,724 | 3,608 | ||||||||||
| As of and for the Three Month Period | |||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| 2020 | 2020 | 2020 | 2020 | 2019 | |||||||||||
| Balance Sheet Data: | |||||||||||||||
| Cash and cash equivalents | $ | 163,117 | $ | 182,170 | $ | 174,176 | $ | 129,236 | $ | 127,814 | |||||
| Investment securities | 23,247 | 23,782 | 24,318 | 19,759 | 32,710 | ||||||||||
| Loans receivable | 1,547,138 | 1,509,389 | 1,447,144 | 1,005,180 | 939,103 | ||||||||||
| Allowance for loan losses | (19,262 | ) | (17,046 | ) | (14,847 | ) | (12,925 | ) | (11,470 | ) | |||||
| Total assets | 1,766,122 | 1,749,619 | 1,678,956 | 1,184,071 | 1,128,526 | ||||||||||
| Interest bearing deposits | 829,046 | 789,347 | 742,633 | 659,559 | 596,716 | ||||||||||
| Noninterest bearing deposits | 592,261 | 570,664 | 563,794 | 345,503 | 371,243 | ||||||||||
| Core deposits (2) | 1,328,195 | 1,270,249 | 1,212,215 | 892,408 | 862,516 | ||||||||||
| Total deposits | 1,421,307 | 1,360,011 | 1,306,427 | 1,005,062 | 967,959 | ||||||||||
| Total borrowings | 192,292 | 241,167 | 228,725 | 38,564 | 23,562 | ||||||||||
| Total shareholders’ equity | 140,217 | 135,232 | 130,977 | 127,166 | 124,173 | ||||||||||
| Share and Per Share Data (3): | |||||||||||||||
| Earnings per share – basic | $ | 0.39 | $ | 0.34 | $ | 0.31 | $ | 0.23 | $ | 0.30 | |||||
| Earnings per share – diluted | $ | 0.38 | $ | 0.34 | $ | 0.30 | $ | 0.22 | $ | 0.30 | |||||
| Dividends per share | - | - | - | - | - | ||||||||||
| Book value per share (4) | $ | 11.73 | $ | 11.34 | $ | 10.98 | $ | 10.66 | $ | 10.42 | |||||
| Tangible book value per share (5) | $ | 11.73 | $ | 11.34 | $ | 10.98 | $ | 10.66 | $ | 10.42 | |||||
| Weighted avg outstanding shares – basic | 11,936,289 | 11,919,850 | 11,917,394 | 11,909,248 | 11,903,750 | ||||||||||
| Weighted avg outstanding shares – diluted | 12,280,191 | 12,181,272 | 12,190,284 | 12,208,175 | 12,213,512 | ||||||||||
| Shares outstanding at end of period | 11,954,327 | 11,930,243 | 11,926,263 | 11,929,413 | 11,913,885 | ||||||||||
| Stock options outstanding at end of period | 749,397 | 769,607 | 774,587 | 774,937 | 784,217 | ||||||||||
| As of and for the Three Month Period | |||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| 2020 | 2020 | 2020 | 2020 | 2019 | |||||||||||
| Credit Quality Data: | |||||||||||||||
| Nonperforming assets to total assets | 0.04 | % | 0.26 | % | 0.26 | % | 0.06 | % | 0.09 | % | |||||
| Nonperforming assets to loans receivable and OREO | 0.05 | % | 0.30 | % | 0.31 | % | 0.08 | % | 0.11 | % | |||||
| Nonperforming loans to total loans receivable | 0.05 | % | 0.30 | % | 0.31 | % | 0.08 | % | 0.11 | % | |||||
| Allowance for loan losses to nonperforming loans | 2705.3 | % | 380.7 | % | 334.8 | % | 1694.0 | % | 1113.6 | % | |||||
| Allowance for loan losses to total loans receivable | 1.25 | % | 1.13 | % | 1.03 | % | 1.29 | % | 1.22 | % | |||||
| Allowance for loan losses to loans receivable, as adjusted (1) | 1.62 | % | 1.60 | % | 1.46 | % | n/a | n/a | |||||||
| Gross charge-offs | $ | 386 | $ | 2 | $ | 13 | $ | 124 | $ | 242 | |||||
| Gross recoveries | $ | 2 | $ | 1 | $ | 5 | $ | 1 | $ | 4 | |||||
| Net charge-offs to average loans (6) | 0.10 | % | 0.00 | % | 0.00 | % | 0.05 | % | 0.10 | % | |||||
| Capital Ratios (7): | |||||||||||||||
| Tier 1 leverage capital | 9.05 | % | 9.20 | % | 9.38 | % | 11.43 | % | 11.64 | % | |||||
| Common equity Tier 1 risk-based capital | 11.27 | % | 12.14 | % | 12.34 | % | 12.10 | % | 12.74 | % | |||||
| Tier 1 risk-based capital | 11.55 | % | 12.45 | % | 12.67 | % | 12.43 | % | 13.10 | % | |||||
| Total risk-based capital | 13.61 | % | 14.61 | % | 14.88 | % | 14.65 | % | 15.35 | % | |||||
| (1) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release. | |||||||||||||||
| (2) Core deposits are defined as all deposits excluding BaaS-brokered and all time deposits. | |||||||||||||||
| (3) Share and per share amounts are based on total common shares outstanding. | |||||||||||||||
| (4) 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. | |||||||||||||||
| (5) 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. | |||||||||||||||
| (6) Annualized calculations. | |||||||||||||||
| (7) Capital ratios are for the Company, Coastal Financial Corporation. | |||||||||||||||
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 provision for loan losses and provision for income taxes on net income and return on average assets.
Pre-tax, pre-provision net income is a non-GAAP measure that excludes the impact of provision for loan losses and provision for income taxes from net income. The most directly comparable GAAP measure is net income.
Pre-tax, pre-provision return on average assets is a non-GAAP measure that excludes the impact of provision for loan losses and provision for income taxes from return on average assets. The most directly comparable GAAP measure is return on average assets.
Reconciliations of the GAAP and non-GAAP measures are presented below.
| As of and for the Three Months Ended | As of and for the Years Ended | ||||||||||||||||||||||||||
| (Dollars in thousands, unaudited) | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||
| Pre-tax, pre-provision net income and pre-tax, pre-provision return on average assets: | |||||||||||||||||||||||||||
| Total average assets | $ | 1,774,723 | $ | 1,704,874 | $ | 1,538,546 | $ | 1,141,453 | $ | 1,095,343 | $ | 1,540,991 | $ | 1,031,973 | |||||||||||||
| Total net income | 4,661 | 4,090 | 3,671 | 2,724 | 3,608 | 15,146 | 13,201 | ||||||||||||||||||||
| Plus: provision for loan losses | 2,600 | 2,200 | 1,930 | 1,578 | 820 | 8,308 | 2,544 | ||||||||||||||||||||
| Plus: provision for income taxes | 1,232 | 1,082 | 967 | 714 | 947 | 3,995 | 3,461 | ||||||||||||||||||||
| Pre-tax, pre-provision net income | $ | 8,493 | $ | 7,372 | $ | 6,568 | $ | 5,016 | $ | 5,375 | $ | 27,449 | $ | 19,206 | |||||||||||||
| Return on average assets | 1.04 | % | 0.95 | % | 0.96 | % | 0.96 | % | 1.31 | % | 0.98 | % | 1.28 | % | |||||||||||||
| Pre-tax, pre-provision return on average assets: | 1.90 | % | 1.72 | % | 1.72 | % | 1.77 | % | 1.95 | % | 1.78 | % | 1.86 | % | |||||||||||||
The following non-GAAP financial measures are presented to illustrate and identify the impact of PPP loans on loans receivable related measures. By removing these significant items and showing what the results would have been without them, we are providing investors with the information to better compare results with periods that did not have these significant items. These measures include the following:
Adjusted allowance for loan losses to loans receivable is a non-GAAP measure that excludes the impact of PPP loans on balance sheet. The most directly comparable GAAP measure is allowance for loan losses to loans receivable.
Adjusted yield on loans receivable is a non-GAAP measure that excludes the impact of PPP loans on balance sheet. The most directly comparable GAAP measure is yield on loans.
Adjusted contractual yield on loans receivable, excluding earned fees and interest on PPP loans is a non-GAAP measure that excludes the impact of PPP loans on balance sheet. The most directly comparable GAAP measure is contractual yield on loans, excluding fees.
Adjusted Tier 1 leverage capital ratio, excluding PPP loans is a non-GAAP measure that excludes the impact of PPP loans on balance sheet. The most directly comparable GAAP measure is Tier 1 leverage capital ratio.
Reconciliations of the GAAP and non-GAAP measures are presented below.
| Three Months Ended | Year Ended | ||||||||||
| (Dollars in thousands, unaudited) | December 31, 2020 | September 30, 2020 | December 31, 2020 | ||||||||
| Adjusted allowance for loan losses to loans receivable: | |||||||||||
| Total loans, net of deferred fees | $ | 1,547,138 | $ | 1,509,389 | $ | 1,547,138 | |||||
| Less: PPP loans | (365,842 | ) | (452,846 | ) | (365,842 | ) | |||||
| Less: net deferred fees on PPP loans | 5,803 | 8,586 | 5,803 | ||||||||
| Adjusted loans, net of deferred fees | $ | 1,187,099 | $ | 1,065,129 | $ | 1,187,099 | |||||
| Allowance for loan losses | $ | (19,262 | ) | $ | (17,046 | ) | $ | (19,262 | ) | ||
| Allowance for loan losses to loans receivable | 1.25 | % | 1.13 | % | 1.25 | % | |||||
| Adjusted allowance for loan losses to loans receivable | 1.62 | % | 1.60 | % | 1.62 | % | |||||
| Adjusted yield on loans receivable: | |||||||||||
| Total average loans receivable | $ | 1,533,533 | $ | 1,493,024 | $ | 1,333,028 | |||||
| Less: average PPP loans | (424,290 | ) | (448,313 | ) | (302,685 | ) | |||||
| Plus: average deferred fees on PPP loans | 7,385 | 9,599 | 6,432 | ||||||||
| Adjusted total average loans receivable | $ | 1,116,628 | $ | 1,054,310 | $ | 1,036,775 | |||||
| Interest income on loans | $ | 17,885 | $ | 16,244 | $ | 61,910 | |||||
| Less: interest and deferred fee income recognized on PPP loans | (3,847 | ) | (3,566 | ) | (10,172 | ) | |||||
| Adjusted interest income on loans | $ | 14,038 | $ | 12,678 | $ | 51,738 | |||||
| Yield on loans receivable | 4.64 | % | 4.33 | % | 4.64 | % | |||||
| Adjusted yield on loans receivable: | 5.00 | % | 4.78 | % | 4.99 | % | |||||
| Adjusted contractual yield on loans receivable, excluding earned fees and interest on PPP loans: | |||||||||||
| Total average loans receivable | $ | 1,533,533 | $ | 1,493,024 | $ | 1,333,028 | |||||
| Less: average PPP loans | (424,290 | ) | (448,313 | ) | (302,685 | ) | |||||
| Plus: average deferred fees on PPP loans | $ | 7,385 | $ | 9,599 | $ | 6,432 | |||||
| Adjusted total average loans receivable, excluding earned fees | $ | 1,116,628 | $ | 1,054,310 | $ | 1,036,775 | |||||
| Interest and earned fee income on loans | $ | 17,885 | $ | 16,244 | $ | 61,910 | |||||
| Less: earned fee income on all loans | $ | (3,762 | ) | $ | (2,693 | ) | $ | (9,065 | ) | ||
| Less: interest income on PPP loans | (1,064 | ) | (1,129 | ) | (3,030 | ) | |||||
| Adjusted interest income on loans | $ | 13,059 | $ | 12,422 | $ | 49,815 | |||||
| Contractual yield on loans receivable, excluding earned fees | 3.66 | % | 3.61 | % | 3.96 | % | |||||
| Adjusted contractual yield on loans receivable, excluding earned fees and interest on PPP loans: | 4.65 | % | 4.69 | % | 4.80 | % | |||||
| (Dollars in thousands, unaudited) | As of December 31, 2020 | |||
| Adjusted Tier 1 leverage capital ratio, excluding PPP loans: | ||||
| Company: | ||||
| Tier 1 capital | $ | 143,532 | ||
| Average assets for the leverage capital ratio | $ | 1,586,350 | ||
| Less: Average PPP loans | (424,290 | ) | ||
| Plus: Average PPPLF borrowings | 188,222 | |||
| Adjusted average assets for the leverage capital ratio | $ | 1,350,282 | ||
| Tier 1 leverage capital ratio | 9.05 | % | ||
| Adjusted Tier 1 leverage capital ratio, excluding PPP loans | 10.63 | % | ||
| Bank: | ||||
| Tier 1 capital | $ | 147,262 | ||
| Average assets for the leverage capital ratio | $ | 1,585,514 | ||
| Less: Average PPP loans | (424,290 | ) | ||
| Plus: Average PPPLF borrowings | 188,222 | |||
| Adjusted average assets for the leverage capital ratio | $ | 1,349,446 | ||
| Tier 1 leverage capital ratio | 9.29 | % | ||
| Adjusted Tier 1 leverage capital ratio, excluding PPP loans | 10.91 | % | ||
APPENDIX A
As of December 31, 2020
Industry Concentration
We have a diversified loan portfolio, representing a wide variety of industries. Three of our largest categories of our loans are commercial real estate, commercial and industrial, and construction, land and land development loans. Together they represent
Commercial real estate loans represent the largest segment of our loans, comprising
The following table summarizes our exposure by industry for our commercial real estate portfolio as of December 31, 2020:
| (Dollars in thousands, unaudited) | Outstanding Balance | Available Loan Commitments | Total Exposure | % of Total Loans (Outstanding Balance & Available Commitment) | Average Loan Balance | Number of Loans | ||||||||||||||||||
| Hotel/Motel | $ | 120,018 | $ | 228 | $ | 120,246 | 8.0 | % | $ | 4,445 | 27 | |||||||||||||
| Apartments | 107,094 | 2,956 | 110,050 | 7.3 | 1,467 | 73 | ||||||||||||||||||
| Office | 79,712 | 3,008 | 82,720 | 5.5 | 876 | 91 | ||||||||||||||||||
| Warehouse | 78,732 | 1,900 | 80,632 | 5.3 | 1,575 | 50 | ||||||||||||||||||
| Convenience Store | 75,699 | 817 | 76,516 | 5.1 | 1,846 | 41 | ||||||||||||||||||
| Retail | 71,914 | 2,723 | 74,637 | 4.9 | 910 | 79 | ||||||||||||||||||
| Mixed use | 70,196 | 2,555 | 72,751 | 4.8 | 789 | 89 | ||||||||||||||||||
| Mini Storage | 38,923 | 528 | 39,451 | 2.6 | 2,780 | 14 | ||||||||||||||||||
| Manufacturing | 32,381 | 500 | 32,881 | 2.2 | 952 | 34 | ||||||||||||||||||
| Groups < | 100,256 | 5,267 | 105,523 | 7.0 | 1,253 | 80 | ||||||||||||||||||
| Total | $ | 774,925 | $ | 20,482 | $ | 795,407 | 52.7 | % | $ | 1,341 | 578 | |||||||||||||
Commercial and industrial loans comprise
The following table summarizes our exposure by industry, excluding PPP loans, for our commercial and industrial loan portfolio as of December 31, 2020:
| (Dollars in thousands, unaudited) | Outstanding Balance | Available Loan Commitments | Total Exposure | % of Total Loans (Outstanding Balance & Available Commitment) | Average Loan Balance | Number of Loans | ||||||||||||||||||
| Capital Call Lines | $ | 65,559 | $ | 128,208 | $ | 193,767 | 12.8 | % | $ | 1,192 | 55 | |||||||||||||
| Construction/Contractor Services | 14,089 | 26,046 | 40,135 | 2.7 | 99 | 143 | ||||||||||||||||||
| Manufacturing | 11,787 | 5,607 | 17,394 | 1.2 | 210 | 56 | ||||||||||||||||||
| Family and Social Services | 9,894 | 5,466 | 15,360 | 1.0 | 707 | 14 | ||||||||||||||||||
| Medical / Dental / Other Care | 12,300 | 2,376 | 14,676 | 1.0 | 192 | 64 | ||||||||||||||||||
| Financial Institutions | 13,400 | - | 13,400 | 0.9 | 3,350 | 4 | ||||||||||||||||||
| Groups < | 46,329 | 22,181 | 68,510 | 4.5 | 150 | 309 | ||||||||||||||||||
| Total | $ | 173,358 | $ | 189,884 | $ | 363,242 | 24.1 | % | $ | 269 | 645 | |||||||||||||
Construction, land and land development loans comprise
The following table details our exposure for our construction, land and land development portfolio as of December 31, 2020:
| (Dollars in thousands, unaudited) | Outstanding Balance | Available Loan Commitments | Total Exposure | % of Total Loans (Outstanding Balance & Available Commitment) | Average Loan Balance | Number of Loans | ||||||||||||||||||
| Commercial construction | $ | 43,511 | $ | 66,944 | $ | 110,455 | 7.3 | % | $ | 1,813 | 24 | |||||||||||||
| Residential construction | 21,632 | 16,245 | 37,877 | 2.5 | 1,082 | 20 | ||||||||||||||||||
| Land development | 10,405 | 4,505 | 14,910 | 1.0 | 946 | 11 | ||||||||||||||||||
| Developed land loans | 12,624 | 468 | 13,092 | 0.9 | 395 | 32 | ||||||||||||||||||
| Undeveloped land loans | 6,251 | 193 | 6,444 | 0.4 | 391 | 16 | ||||||||||||||||||
| Total | $ | 94,423 | $ | 88,355 | $ | 182,778 | 12.1 | % | $ | 917 | 103 | |||||||||||||
Payment Modifications and Deferrals
As part of our ongoing commitment to our customers we have been continuously proactive in contacting customers impacted by the stay-at-home order in Washington State, temporary business closures, or that have otherwise been impacted by the COVID-19 pandemic and responses thereto. As of December 31, 2020,
There was a total of
The graph below illustrates the status of all the loans that were part of the COVID-19 deferral program:
View graph here: https://www.globenewswire.com/NewsRoom/AttachmentNg/eac49836-c27f-46a0-9a59-a54084ec55f1
The graph below indicates the percentage of loans that remain on a COVID-19 deferral. This illustration is based on total loans outstanding as of as of December 31, 2020.
View graph here: https://www.globenewswire.com/NewsRoom/AttachmentNg/c403935e-5443-44e0-ae4c-c3a529d56ff1
Remaining deferrals by deferral end date as of December 31, 2020:
View graph here: https://www.globenewswire.com/NewsRoom/AttachmentNg/78a0c167-4705-43a0-8739-58ce2faf0ed5
As a result of our proactive approach with customers, we did not see material downgrades in credit during quarter ended December 31, 2020 related to the COVID-19 pandemic. We will continue to be diligent in monitoring credit and changes in the economy, keeping the lines of communication open with our customers, but the full impact of these challenging economic times on our financial condition and liquidity remains to be seen at this time.
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