Coastal Carolina Bancshares, Inc. Announces Fourth Quarter and Annual Earnings

Myrtle Beach, South Carolina – January 24, 2024 – 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 2023. The Company reported net income of $8,129,920 or $1.31 per share for the year ended December 31, 2023, compared to $7,211,060 or $1.16 per share for the same period ended December 31, 2022, representing a 13% increase. Net income for the three months ended December 31, 2023 was $1,990,916 or $0.32 cents per share which represents a 2% decrease when compared to prior quarter income of $2,033,656 and a 15% decrease compared to quarterly net income of $2,342,030 during the fourth quarter of 2022.

2023 Fourth Quarter and Annual Financial Highlights

Annual net income of $8,129,920 for the year ended December 31, 2023, an increase of 13% over the same period in 2022
Diluted EPS of $0.32 per share for the quarter and $1.31 per share for the year
Annual and quarterly Return on Average Equity of 13.41% and 12.54%, respectively
Increased book value per share and tangible book value per share from $9.83 and $9.31 at September 30, 2023 to $10.67 and $10.15 at December 31, 2023
Annual deposit growth of $86 million or 12% from $742 million at December 31, 2022 to $828 million at December 31, 2023
Annual loan growth of $115 million or 18% from $649 million at December 31, 2022 to $764 million at December 31, 2023
Key credit quality metrics remained strong with a non-performing assets ratio of 0.0% and no past due loans over the most recent five consecutive quarter ends

“We are very pleased with our strong performance in 2023 in spite of the headwinds we faced with pressure on our net interest margin as a result of unprecedented rate increases. I am very proud of the CCNB team who worked diligently this year to provide exemplary customer service to our clients and prospects which resulted in 12% deposit growth in a very competitive deposit environment. Our lending team continued to execute on our disciplined growth strategy which resulted in 18% loan growth this year. The majority of our loan portfolio growth this year was in 1-4 family residential mortgages and owner occupied commercial real estate which were two areas of focus. Our credit quality metrics continue to be exceptional with no past dues and a non-performing assets ratio of 0.0% for the fifth consecutive quarter. We remain encouraged by the strong local economies in all of our markets and feel we are positioned well for additional growth while also focusing on gaining operating efficiencies,” says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.

Capital

At December 31, 2023, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 9.18%, 11.44%, and 12.44%, respectively. Each of 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 December 31, 2023 of $10.67 and $10.15, respectively, compared to $9.83 and $9.31 at September 30, 2023 and $9.23 and $8.71 at December 31, 2023. Increased book value per share during the quarter resulted from retained earnings accumulation and improved investment portfolio valuations. As market interest rates declined during the latter part of the fourth quarter, bond market values increased resulting in a reduction in the Company’s Accumulated Other Comprehensive Losses (AOCL) and a positive impact on book value.

Balance Sheet and Credit Quality

Total Assets increased by 14% during the year to $937 million at December 31, 2023, compared to $825 million at December 31, 2022. Asset growth was driven primarily by significant loan growth throughout the year and quarter.

Net Loans increased $115 million or 18% during the year from $649 million at December 31, 2022 to $764 million at December 31, 2023. Net loans increased $15 million or 2% during the fourth quarter of 2023. Year-to-date loan growth was concentrated in 1-4 family residential and owner occupied CRE which accounted for $67 million and $24 million in net growth, respectively, which equates to 79% of the Bank’s 2023 net loan growth.

The Company experienced strong deposit growth during the year, reporting $828 million in total deposits on December 31, 2023, compared to $742 million on December 31, 2022, and $825 million at September 30, 2023. Deposits increased 12% during the year and were relatively flat on a linked quarter basis. During the fourth quarter, the Company issued $14 million in brokered certificates of deposit ranging in terms from one year to four years. Each issuance with a maturity greater than one year is callable at the Company’s option after 3 months. Total checking and savings represented 41% of the Bank’s total deposits at quarter end while money market accounts and time deposits represented 41% and 18% of total deposits, respectively.

Asset quality metrics remain pristine at year end 2023 with no loans classified as non-accrual and no loans past due greater than 30 days. This is the fifth consecutive quarter end where the Bank has reported zero non-accrual and past due loans. Additionally, the Bank’s non-performing asset ratio as of December 31, 2023 was 0.00% excluding TDRs and 0.02% when including performing TDRs. The Bank had no charge-offs during the quarter and no outstanding OREO property at December 31, 2023.

Income Statement

Net Interest Income

Net interest income decreased to $6.9 million for the quarter ended December 31, 2023, compared to $7.1 million during the prior quarter ended September 30, 2023, and $7.7 million during the fourth quarter of 2022. The Bank’s net interest margin was 3.17% for the quarter ended December 31, 2023, compared to 3.31% for the prior quarter ended September 30, 2023, and 4.08% during the fourth quarter of 2022.

Year over year and linked quarter margin decline resulted primarily from increased funding costs in a very competitive deposit environment following the Federal Reserve’s cumulative rate hikes totaling 525 basis points over the past two years. The Bank’s cost of funds increased to 2.15% during the fourth quarter of 2023 from 1.83% during the previous quarter, and 0.52% during the fourth quarter of 2022.

Increased funding costs were partially offset by increased yields on earning assets resulting from loan growth and loan repricing in a rising rate environment. The Bank’s yield on earning assets increased to 5.17% during the fourth quarter of 2023 from 5.01% during the third quarter of 2023, and 4.57% during the fourth quarter of 2022.

Noninterest Income

Noninterest income totaled $515 thousand for the quarter ended December 31, 2023, compared to $474 thousand earned during the most recent quarter ended September 30, 2023 and $481 thousand
in the fourth quarter of 2022. Noninterest income declined year over year from $2.2 million for the year ended December 31, 2022 to $1.9 million for the year ended December 31, 2023.

Decreasing annual noninterest income primarily resulted from reduced secondary market mortgage revenues partially offset by increasing deposit service charge income, interchange income, and BOLI (Bank Owned Life Insurance) interest. Mortgage sales volume continues to be negatively impacted by the rising rate environment and low housing inventories. The Company recorded mortgage sales revenues of $759 thousand during the year ended December 31, 2022 compared to $158 thousand for the year ended December 31, 2023.

While mortgage sales volume was down in 2023, a significant portion of the Bank’s mortgage production during the year was retained and contributed to the Bank’s portfolio loan growth and core interest earnings. Portfolio mortgage products are primarily originated with adjustable rate mortgage (ARM) structures and provide an alternative to fixed rate mortgage loans.

Noninterest Expense

Noninterest expense totaled $4.9 million for the quarter ended December 31, 2023, compared to $4.9 million for the prior quarter ended September 30, 2023, and $4.8 million for the comparative quarter ended December 31, 2022. Noninterest expense increased year over year from $18.2 million for the year ended December 31, 2022 to $19.1 million for the year ended December 31, 2023. Increases resulted primarily from higher compensation and benefits expense, increased data processing costs, and higher regulatory assessments/insurance supporting the Company’s continued growth.

Provision for Loan Losses

During the quarter the Bank recorded a net provision of $46 thousand for changes in CECL allowance for credit losses. At quarter end the Bank’s allowance for credit losses on loans increased to $7.8 million while the reserve on unfunded commitments remained relatively flat at $407 thousand. The cumulative CECL reserve of $8.2 million was 1.07% of total loans at December 31, 2023.

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, Greenville, and 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.

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