Coastal Carolina Bancshares, Inc. Reports Record Quarterly Earnings
Coastal Carolina Bancshares, Inc. Reports Record Quarterly Earnings
Myrtle Beach, South Carolina – October 25, 2022 – Coastal Carolina Bancshares, Inc. (the “Company”) (OTCQX: CCNB), parent of Coastal Carolina National Bank (the “Bank”), reported unaudited financial results for the third quarter of 2022. The Company reported net income of $4,869,031 or $0.79 per share for the nine months ended September 30, 2022, compared to $4,572,750 or $0.74 cents per share for the same period ended September 30, 2021, representing a 6% increase. Net income for the three months ended September 30, 2022 was $2,009,804 or $0.32 cents per share, which represents a 35% increase over prior quarter income of $1,493,066 and a 22% increase over quarterly net income of $1,651,954 for the same period one year ago.
2022 Third Quarter and YTD Financial Highlights
- Third quarter net income of $2,009,804, an increase of 22% year over year, and 35% on a linked quarter basis
- Quarterly return on average assets and equity of 1.00% and 14.96%, respectively
- Diluted Eps of $0.32 per share for the quarter and $0.79 year-to-date
- Quarterly margin expansion of 0.57% resulting in third quarter Bank only net interest margin of 3.91%
- Total Loans increased $133 million or 29% year-to-date (38% annualized) from $463 million at December 31, 2021 to $596 million at September 30, 2022
- Total Deposits increased $36 million or 5% year-to-date (7% annualized) to $721 million at September 30, 2022
- Key credit quality metrics remained strong during the quarter with a non-performing assets ratio of 0.05%
“We are very pleased with our performance for the third quarter of 2022. We continued to see significant loan growth and very sound credit quality metrics this quarter which have contributed to record levels of growth and profitability. Our team continues to focus on building loan and core deposit relationships, as we remain aware of the potential challenges in this unique rising rate and inflationary economic environment in our country. We remain encouraged by the strong local economies in all of our markets and feel we are positioned well for additional growth buoyed by a robust South Carolina economy,” says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.
Capital
At September 30, 2022, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 9.15%, 11.31%, and 12.26%, respectively. These ratios exceed the regulatory minimums to be considered well capitalized.
The Company reported book value per share and tangible book value per share at September 30, 2022 of $8.69 and $8.17, respectively compared to $9.67 and $9.13 at December 31, 2021. The reduction in book value per share is the result of changes in unrealized gains and losses in the Bank’s investment portfolio partially offset by retained earnings. Significant increases in market interest rates during the year have negatively impacted the fair value of the Bank’s investment portfolio.
Balance Sheet and Credit Quality
Total Assets increased by 6% during the first nine months of the year to $804 million at September 30, 2022. Asset growth consisted primarily of increases in net loans and securities offset by a reduction in cash and cash equivalents.
Net Loans increased $44 million or 8% during the third quarter, and $133 million year-to-date to $596 million at quarter end. This year-to-date increase represents an annualized growth rate of 38%.
Loan growth was impacted by Payroll Protection Program (PPP) loan pay downs of $6.7 million during the quarter and $13.7 million year-to-date. $0.6 million in PPP balances remained on the Bank’s balance sheet as of quarter end September 30, 2022. The Bank is wrapping up the forgiveness process with its customers, and anticipates that the majority of remaining loan forgiveness will occur during the fourth quarter of 2022.
The Bank continued to experience deposit growth during the quarter, reporting $721 million in total deposits on September 30, 2022, compared to $717 million at June 30, 2022, and $684 million at December 31, 2021. Total checking balances increased $20 million during the quarter and represented 43% of the Bank’s total deposits at quarter end. Checking and savings accounts represented 47% of the Bank’s total deposits at quarter end, while money market accounts and time deposits represented 40% and 13%, respectively.
Asset quality metrics remained strong during the third quarter of 2022. The Bank’s non-performing asset ratio as of September 30, 2022 was 0.05% excluding TDRs and 0.07% with performing TDRs included. Additionally, the Bank had no loan charge-offs during the quarter and only one charge-off during the first nine months totaling less than $500. The Bank had no outstanding OREO property at quarter end.
Income Statement
Net Interest Income
Net interest income increased 39% to $7.2 million for the quarter ended September 30, 2022, compared to $5.2 million during the prior year’s third quarter ended September 30, 2021, and increased 18% when compared to $6.1 million reported during the most recent quarter ended June 30, 2022. Year-over-year, net interest income increased $3.6 million or 24% from $15 million in the third quarter of 2021 to $18.6 million in the third quarter of 2022. Net interest income increases resulted primarily from the significant loan growth noted above, growth in other earning assets, and improved yields on earning assets.
The Bank’s quarterly net interest margin was 3.91% for the quarter ended September 30, 2022, compared to 3.16% for the quarter ended September 30, 2021, and 3.34% for the quarter ended June 30, 2022. The Bank’s improved margin results primarily from loan growth, improved earning asset yields, and lagging rate increases on interest bearing deposits.
The Bank’s earning asset yield increased 0.61% from 3.55% during the second quarter of 2022 to 4.16% during the third quarter, while the Bank’s cost of funds only increased 0.05% to 0.27% for third quarter of 2022. While funding costs remained low during the third quarter of 2022, the Bank anticipates that its costs of funds will increase in future quarters given the current interest rate environment.
Noninterest Income
Noninterest income totaled $551 thousand for the quarter ended September 30, 2022, compared to $622 thousand earned during the most recent quarter ended June 30, 2022 and $1,254 thousand in the third quarter of 2021.
The Bank’s primary source of non-interest income is mortgage revenue including gain on the sale of mortgage loans. Mortgage sales volume continues to be negatively impacted by the rising rate environment and low housing inventories. Third quarter 2022 mortgage revenues were $174 thousand compared to $267 thousand for the most recent linked quarter, and $957 thousand for the same period in the prior year. While mortgage sales volume is down, the Bank’s mortgage production has been sustained by various portfolio mortgage products which contribute to the Bank’s net loan growth and core earnings. Most portfolio mortgage products are originated with adjustable rate mortgage (ARM) structures and provide an alternative to fixed rate mortgage loans.
Noninterest Expense
Noninterest expense totaled $4.7 million for the quarter ended September 30, 2022, compared to $4.5 million for the prior quarter ended June 30, 2022, and $4.2 million for the comparative quarter ended September 30, 2021. Quarter over quarter increases in noninterest expense resulted primarily from increased compensation and benefits expenses and other miscellaneous expenses.
Provision for Loan Losses
During the quarter, the Bank recorded provision expense of $555,000 compared to $450,000 in the most recent linked quarter and $192,000 during the third quarter of 2021. The Bank’s loan loss reserves to total loans was 1.02% at September 30, 2022.
About Coastal Carolina Bancshares, Inc. Coastal Carolina Bancshares, Inc. is the Bank holding Company of Coastal Carolina National Bank, a Myrtle Beach-based community bank serving Horry, Georgetown, Aiken, Richland, Greenville, Spartanburg, and Brunswick (NC) counties. Coastal Carolina National Bank is a locally operated financial institution focused on providing personalized service. It offers a full range of banking services designed to meet the specific needs of individuals and small and medium-sized businesses. Headquartered in Myrtle Beach, SC, the Bank also has branches in Garden City, North Myrtle Beach, Conway, Aiken, Columbia, and Greenville, as well as a Loan Production Office in Spartanburg, South Carolina. Through the substantial experience of our local management and Board of Directors, Coastal Carolina Bancshares, Inc. seeks to enhance value for our shareholders, build lasting customer relationships, benefit our communities and give our employees a meaningful career opportunities. To learn more about the Company and its subsidiary bank, please visit our website at www.myccnb.com.
Forward-Looking Statements Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements. Actual results might differ materially from those explicit or implicit in the forward-looking statements. Important factors that could cause actual results to differ materially include, without limitation: the effects of future economic conditions; governmental fiscal and monetary policies; legislative and regulatory changes; the risks of changes in interest rates; successful merger integration; management of growth; fluctuations in our financial results; reliance on key personnel; our ability to compete effectively; privacy, security and other risks associated with our business. Coastal Carolina Bancshares, Inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
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