Coastal Carolina Bancshares, Inc. Reports First Quarter Earnings
Myrtle Beach, South Carolina – April 26, 2022 – Coastal Carolina Bancshares, Inc. (the “Company”) (OTCQX: CCNB), parent of Coastal Carolina National Bank (the “Bank”), reported unaudited financial results for the first quarter of 2022. The Company reported net income of $1,366,161 or $0.22 per share for the three months ended March 31, 2022, compared to $1,387,569 or $.23 cents per share for the first quarter of last year ended March 31, 2021.
2022 First Quarter Financial Highlights
- First quarter net income of $1,366,161 or $0.22 per share
- Total Loans, excluding PPP loans, increased 8% during the quarter (31% annualized) from $449 million at December 31, 2021 to $483 million at March 31, 2022
- Total Assets increased 5% during the quarter (19% annualized) to $795 million at March 31, 2022
- Total Deposits increased 4% during the quarter (17% annualized) to $713 million at March 31, 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 earnings performance for the first quarter of 2022, especially considering the industry-wide headwinds from reduced PPP and mortgage fee income. We achieved PPP-adjusted loan growth of 8% during the first quarter with significant contributions from all of our markets. There is strong economic activity in our markets and we are positioned well for additional growth with a robust loan pipeline. Our team continues to focus on building new relationships while maintaining excellent credit quality. We look forward to helping our clients prosper and achieve their financial goals,” says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.
Capital
On March 11, 2022 the Company issued $10 million of subordinated debt securities. The debt securities bear interest at a fixed rate of 4.00% for five years from the date of issuance, after which they will transition to a floating rate of the three-month Secured Overnight Financing Rate (SOFR) plus 224 basis points. The securities are redeemable after five years at the option of the Company, subject to applicable regulatory requirements. The Company intends to use the proceeds of this offering for general corporate purposes including supporting the continued strategic growth of the Bank. $5 million was contributed to the Bank during the First quarter.
At March 31, 2022, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 8.70%, 12.56%, and 13.51%, 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 March 31, 2022 of $9.24 and $8.71, respectively compared to 9.67% and 9.13% at December 31, 2021. The reduction in book value per share was the result changes in unrealized gains and losses in the Bank’s investment portfolio. Significant increases in market interest rates during the quarter negatively impacted the fair value of the Bank’s investment portfolio.
Balance Sheet and Credit Quality
Total Assets increased by 5% during the first quarter to $795 million at March 31, 2022, compared to $759 million at December 31, 2021. Asset growth was supported by continued deposit growth and consisted primarily of increases in loans and securities.
The Bank experienced strong deposit growth during the quarter, reporting $713 million in total deposits on March 31, 2022, compared to $684 million at December 31, 2021, an increase of $29 million or 4% over the most recent linked quarter. The Bank continues to improve its funding structure as noninterest checking accounts increased $14 million during the quarter, and total checking and savings account balances increased $25 million. Checking and savings accounts represented 40% of the Bank’s total funding mix at quarter end, while money market accounts and time deposits represented 45% and 15%, respectively.
Loans increased $30 million or 7% during the quarter to $494 million at March 31, 2022 from $463 million at December 31, 2021. Quarterly loan growth was impacted by Payroll Protection Program (PPP) loan pay downs during the quarter of $4 million. Total Loans, excluding PPP loans, increased 8% during the quarter (31% annualized) from $449 million at December 31, 2021 to $483 million at March 31, 2022.
$10.1 million in PPP balances remained on the Bank’s balance sheet as of quarter end March 31, 2022. The Bank is currently working through the forgiveness process with its customers, and anticipates that the majority of remaining loan forgiveness will occur during the second and third quarters of 2022.
Asset quality metrics remained solid during the first quarter of 2022. The Bank’s non-performing asset ratio as of March 31, 2022 was 0.05% excluding TDRs and 0.17% with performing TDRs included. Additionally, the Bank had only one loan charge-off during the quarter totaling less than $1,000 and had no outstanding OREO property at quarter end.
Income Statement
Net Interest Income
Net interest income increased 10% to $5.3 million for the three months ended March 31, 2022, compared to $4.8 million during the prior year’s first quarter ended March 31, 2021, and decreased 1% when compared to $5.4 million reported during the most recent quarter ended December 31, 2021. Net interest income increases year over year resulted primarily from growth in average loans outstanding and other earning assets offset by declining interest margins. Additionally, the Bank recognized approximately $119 thousand in PPP fee income during the quarter ended March 31, 2022, compared to $251 thousand recognized during the prior year’s first quarter, and $127 thousand during the most recent linked quarter. PPP fees are included in and contribute to the Bank’s net interest income.
The Bank’s quarterly net interest margin was 3.01% for the quarter ended March 31, 2022, compared to 3.12% for the quarter ended December 31, 2021, and 3.32% for the quarter ended March 31, 2021. Asset yields have decreased as rate sensitive assets reprice and the Bank holds higher levels of liquidity. 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 0.24% for the quarter ended March 31, 2022, compared to 0.27% for the quarter ended December 31, 2021, and 0.43% for the quarter ended March 31, 2021.
Noninterest Income
Noninterest income totaled $587 thousand for the quarter ended March 31, 2022, compared to $987 thousand earned during the most recent quarter ended December 31, 2021 and $1,269 thousand in the first quarter of 2021.
The Bank’s primary source of non-interest income is mortgage revenue including gain on the sale of mortgage loans. First quarter 2022 mortgage revenues were $275 thousand compared to $650 thousand for the most recent linked quarter, and $1,046 thousand for the same period in the prior year. Mortgage production increased in the first quarter of 2022 when compared to the fourth quarter of 2021; however, mortgage sales revenue declined due to the fact that the Bank retained a larger portion of its mortgage production in the current quarter. During the first quarter of 2022, 32% of mortgage production was sold while in the prior quarter 58% was sold on the secondary market.
Noninterest Expense
Noninterest expense totaled $4.2 million for the quarter ended March 31, 2022, compared to $4.3 million for the prior quarter ended December 31, 2021, and $4.2 million for the comparative quarter ended March 31, 2021. Increases in compensation expense were offset by decreased data processing and other miscellaneous expenses on a linked quarter basis.
Provision for Loan Losses
During the quarter, the Bank recorded provision expense of $75,000 compared to $71,000 in the most recent linked quarter and $211,000 during the first quarter of 2021. The Bank’s loan loss reserves to total loans were 1.03% at March 31, 2022. The Bank’s loan loss reserves to total loans requiring reserve (excludes loans held for sale, government-guaranteed, and cash-secured loans) were 1.06% at March 31, 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.