Coastal Carolina Bancshares, Inc. Announces 2020 Earnings
Myrtle Beach, South Carolina – January 27, 2021 – Coastal Carolina Bancshares, Inc. (the “Company”) (OTCQX: CCNB), parent of Coastal Carolina National Bank (the “Bank”), reported unaudited financial results for the fourth quarter and year-end 2020. The Company reported net income of $3,740,032 or $.61 cents per share for the twelve months ended December 31, 2020, compared to $2,817,002 or $.46 cents per share, for the same period ended December 31, 2019, representing a 32.8% increase. Net income for the three months ended December 31, 2020, was $1,264,931 or $.21 cents per share which represents a 22% increase over prior quarter income of $1,033,424 and a 42% increase over quarterly net income of $891,733 for the same period one year ago.
2020 Financial Highlights
- 2020 net income of $3,740,032 representing an increase of 32.8% when compared to the prior year
- Fourth-quarter net income of $1,264,931, an increase of 42% year over year, and 22% on a linked quarter basis
- Total Assets increased 35% during the year to $603 million at December 31, 2020
- Total Deposits increased by 38% during the year to $533 million at December 31, 2020
- Total Loans increased 17% (11% excluding PPP loans) during the year to $415 million at December 31, 2020
- 2020 pre-tax pre-provision earnings of $6.4 million representing an increase of 49%, when compared to the prior year
- Mortgage revenue of $3.2 million for the year and $1.2 million during the fourth quarter
“This year has been a challenging year for our team and our customers. I am very proud of the CCNB team and the way in which we served our customers and our communities in these most trying of times. We are pleased to report excellent earnings and asset growth, which is a testament of the exemplary work of our entire team. We had earnings growth of 32% this year in spite of allocating a higher than normal loan loss provision in preparation for any unknown negative impact of the pandemic on our loan portfolio. As we move into 2021, we will continue to focus on the COVID-19 pandemic and continue to position our balance sheet proactively for any potential deterioration that may occur as a result of an extended pandemic.” says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.
Capital
The Company and Bank continued to increase capital through retained earnings during the fourth quarter of 2020, resulting in Bank capital ratios that exceed the regulatory minimums to be considered well-capitalized. At December 31, 2020, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 8.66%, 12.13%, and 13.16%, respectively.
On December 1, 2020, the Company announced the adoption of a stock repurchase plan. Under the repurchase plan, the Company may repurchase up to 100,000 shares of its currently outstanding common stock. During the fourth quarter, 3,000 shares were repurchased under the plan with an average price of $7.23 per share.
Balance Sheet and Credit Quality
Total Assets increased by 5% during the fourth quarter to $603 million at December 31, 2020, compared to $576 million at September 30, 2020, and 35% year-to-date. Total loans increased to $415 million at December 31, 2020 resulting in annual loan growth of 17%. Loan growth totaled $61 million during 2020 bolstered by Payroll Protection Program (PPP) loan originations of $26.3 million of which $23.6 million remained on the Bank’s balance sheet at year-end. Excluding PPP loans, year-to-date loan growth was $38 million which represents an 11% growth rate.
As noted above, the Bank originated $26.3 million in PPP loans in the second quarter of 2020, and $23.6 million of these balances remained on Bank’s balance sheet as of quarter end December 31, 2020. The Bank is currently working through the forgiveness process with its customers and anticipates that the majority of loan forgiveness will occur over the first half of 2021. As forgiveness accelerates for the first round of PPP, the Bank is currently engaged in assisting its customers with the second round of PPP lending.
The Bank continued to experience strong deposit growth during the quarter, reporting $533 million in total deposits on December 31, 2020, compared to $507 million at September 30, 2020, and $385 million at December 31, 2019. Deposits increased 5% over the most recent linked quarter, and 38% year to date. The Bank’s deposit mix improved significantly throughout 2020. Checking and savings accounts increased by $79 million or 76% during the year, and money market accounts increased by $74 million or 52%. While checking, savings, and money market accounts increased considerably during the year, higher-cost CDs remained flat for the year at $140 million.
The Bank has demonstrated strong asset quality metrics throughout 2020. The Bank’s non-performing asset ratio excluding TDRs has declined from 0.35% at December 31, 2019, to 0.15% at December 31, 2020. Including performing TDRs, this ratio decreased from 0.58% at December 31, 2019 to 0.32% at December 31, 2020. Additionally, the Bank had no charge-offs during the fourth quarter of 2020 and has no outstanding OREO property.
Due to the statewide “Stay at Home” order and other disruptions caused by COVID-19, the Bank demonstrated support for its local communities by proactively offering temporary deferral and forbearance programs to customers who were, or expected to be, negatively impacted by the pandemic. Deferral requests (or interest-only payment relief) were granted on loans totaling $78 million, which represented approximately 20% of the Bank’s loan portfolio. The majority of these deferral requests were received and processed during the second quarter of 2020. As of quarter end, September 30, 2020, total deferrals had decreased to $13.7 million or approximately 3% of the Bank’s quarter-end loan portfolio, and at year-end December 31, 2020 loan deferrals decreased further to $4.8 million or approximately 1% of the Bank’s year-end loan portfolio. All remaining deferred loans are paying on interest-only terms through the balance of their deferral period.
Income Statement
Net Interest Income
Net interest income increased 21% to $17.2 million for the year ended December 31, 2020, compared to $14.3 million for the prior year ended December 31, 2019. Net interest income increased 22% to $4.6 million for the quarter ended December 31, 2020, compared to $3.8 million for the prior year’s fourth quarter ended December 31, 2019, and increased 5% when compared to $4.4 million reported during the most recent quarter ended September 30, 2020. Net interest increases resulted primarily from growth in earning assets. Additionally, the Bank recognized approximately $645 thousand in PPP fee income during the year ended December, 31 2020 which contributed to the Bank’s growth in net interest income.
The Bank’s quarterly net interest margin was 3.41% for the quarter ended December 31, 2020, compared to 3.44% for the quarter ended September 30, 2020, and 3.76% for the quarter ended December 31, 2019. The decrease in margin is largely attributable to the changing interest rate environment as a result of Federal Reserve rate decreases during the latter part of 2019 and first quarter of 2020. The Federal Reserve’s target rate was reduced by 1.50% during March 2020 in response to the COVID-19 pandemic.
Asset yields have decreased as rate-sensitive assets reprice and the Bank holds higher levels of liquidity post-pandemic. The impact of asset yield decline has been partially offset by the Bank’s decreasing cost of funds resulting from reduced deposit pricing. The Bank’s quarterly cost of funds was 0.55% for the quarter ended December 31, 2020, compared to 0.72% for the quarter ended September 30, 2020, and 1.19% for the quarter ended December 31, 2019.
Noninterest Income
Noninterest income increased 26% to $1,450 thousand for the quarter ended December 31, 2020, compared to $1,148 thousand earned during the most recent quarter ended September 30, 2020. Net interest income increased 150% when compared to $580 thousand for the prior year’s fourth quarter ended December 31, 2019.
The increase in noninterest income is largely attributable to increased mortgage revenues including gain on the sale of mortgage loans. Fourth-quarter mortgage revenues were $1,213 thousand compared to $947 thousand for the most recent linked quarter, and $348 thousand for the same period in the prior year. Annual mortgage revenues for 2020 were $3,156 thousand compared to $1,198 thousand in 2019, representing an increase of 163% year over year. The diligent work of our mortgage team and the timely addition of additional mortgage sales and operations staff has allowed the Bank to take advantage of the unprecedented opportunities in today’s mortgage market.
Noninterest Expense
Noninterest expense totaled $4.2 million for the quarter ended December 31, 2020, compared to $3.8 million for the prior quarter ended September 30, 2020, and $2.9 million for the comparative quarter ended December 31, 2019. Increases resulted primarily from increased salaries and employee benefits largely impacted by mortgage compensation expense. Additional noninterest expense increases resulted from increased occupancy and depreciation expense, professional service expenses related to the Company’s subordinated debt issuance, FDIC insurance expenses, data processing costs, and other miscellaneous expenses.
Provision for Loan Losses
As noted in the credit quality section above, the Bank’s asset quality metrics remain solid, and the Bank has demonstrated encouraging trends in loan deferrals which decreased from a high water mark of 20% of the total loan portfolio to 3% at the end of the third quarter, and 1% at yearend December 31, 2020. However, the COVID-19 pandemic continues to impact the nation’s economy and the people and businesses within the communities we serve, creating continued uncertainty regarding future credit losses. As a result, the Bank has taken steps to position its balance sheet for the uncertainty in the current economic climate.
During the quarter, the Bank recorded a provision expense of $300,000 compared to $315,000 in the same quarter last year. The Bank contributed $1,690,000 to the provision year-to-date compared to $712,000 for the year ended December 31, 2019. The Bank’s loan loss reserves to total loans have increased from 0.82% at year-end 2019 to 1.03% at December 31, 2020. The Bank’s loan loss reserves to total loans requiring reserve (excludes loans held for sale, government-guaranteed and cash-secured loans) have increased from 0.89% at year-end 2019 to 1.12% at December 31, 2020.
We will continue to monitor local market and portfolio level data to identify negative impacts on the performance of our loan portfolio caused by the pandemic. As the Bank recognizes the need for an increased allowance for loan losses, provisions will be made accordingly.
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 opportunity. 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.