Coastal Carolina Bancshares, Inc. Reports First Quarter Earnings
Myrtle Beach, South Carolina – April 25, 2023 – Coastal Carolina Bancshares, Inc. (the “Company”) (OTCQX: CCNB), parent of Coastal Carolina National Bank (the “Bank”), reported unaudited financial results for the first quarter. The Company reported net income of $2,120,777 or $0.34 per share for the three months ended March 31, 2023, compared to $1,366,161 or $0.22 per share for the same period ended March 31, 2022, and $2,342,030 or $0.38 per share for the three months ended December 31, 2022.
2023 First Quarter Financial Highlights
- Quarterly net income of $2,120,777, an increase of 55% over the same period in the prior year
- Diluted EPS of $0.34 per share for the quarter
- Quarterly return on average assets of 1.00%
- Quarterly return on average equity of 14.59%
- Quarterly Deposit growth of $25 million or 3% (13% annualized) from $742 million at December 31, 2022 to $767 million at March 31, 2023
- Quarterly Loan growth of $37 million or 6% (23% annualized) from $649 million at December 31, 2022 to $685 million at March 31, 2023
- Key credit quality metrics remained strong during the quarter with a
non-performing assets ratio of 0.0% and no past due loans
“We are very pleased with our performance for the first quarter of 2023. We continue to experience solid growth metrics as we successfully navigate the current volatility in the overall banking industry. We executed on our disciplined loan growth strategy with quarterly core loan growth focused on our local community retail and business clients. A majority of our loan portfolio growth this quarter was in 1-4 family residential mortgages and owner occupied commercial real estate. In addition, with credit performance headwinds potentially coming this year our credit quality metrics remain pristine with no past dues and a non-performing assets ratio of 0.0% at quarter-end. We remain encouraged by the strong local economies in all of our markets in the state of South Carolina and feel we are positioned well for additional growth,” says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.
Capital
At March 31, 2023, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 9.39%, 11.12%, and 12.14%, 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, 2023 of $9.62 and $9.11, respectively compared to $9.23 and $8.71 at December 31, 2022. The increase in book value per share during the quarter resulted from retained earnings and improvements in unrealized gains and losses in the Bank’s investment portfolio.
Balance Sheet and Credit Quality
Total Assets increased by 5% during the quarter to $868 million at March 31, 2023, compared to $825 million at December 31, 2022. The increase in total assets during the period was primarily concentrated in increased net loan balances and cash and cash equivalents.
Net Loans increased $37 million or 6% during the quarter from $649 million at December 31, 2022 to $685 million at March 31, 2023. Cash and equivalents increased $9 million during the quarter.
Loan growth was concentrated primarily in 1-4 family residential, owner occupied CRE, and C&I lending with net growth of $23 million, $7 million and $3 million, respectively.
The Bank continued to see deposit growth during the quarter, even in the midst of the recent banking industry turmoil. Deposits increased 3% (13% annualized) to $767 million on March 31, 2023, compared to $742 million at December 31, 2022. Checking and savings balances increased $7 million during the quarter and represented 45% of the Bank’s total deposits at quarter end. Money market accounts and time deposits increased $3 million and $14 million during the quarter, and represented 40% and 15% of total deposits, respectively.
As liquidity becomes more of a focus throughout the industry, the Bank maintains on balance sheet and contingent liquidity sources necessary to fund its ongoing operations. In addition to cash and equivalents of $38 million, the Bank has additional sources of liquidity, if necessary. The Bank has correspondent fed funds purchased lines of credits totaling $26 million, all of which were undrawn at quarter end.
The Bank also has borrowing capacity at the Federal Home Loan Bank (FHLB) of Atlanta of up to 25% of total assets or approximately $217 million at quarter end. The Bank had outstanding FHLB advances of $15 million as of March 31, 2023 leaving $202 million in remaining available credit, subject to collateral pledging requirements.
The Bank has access to additional funding as needed through the brokered deposit market, national market CDs (Qwickrate), and Fed discount window.
Asset quality metrics remain pristine at quarter-end with no loans classified as non-accrual and no loans past due greater than 30 days at March 31, 2023. The Bank’s non-performing asset ratio as of March 31, 2023 was 0.00% excluding TDRs and 0.02% with performing TDRs included. The Bank had no charge-offs during the quarter and no outstanding OREO property at March 31, 2023.
Income Statement
Net Interest Income
Net interest income increased $1.7 million or 32% to $7.0 million for the quarter ended March 31, 2023, compared to $5.3 million during the prior year’s first quarter ended March 31, 2022, and net interest income decreased $0.7 million on a linked quarter basis. The Bank’s quarterly net interest margin was 3.61% for the quarter ended March 31, 2023, compared to 4.08% for the quarter ended December 31, 2022, and 3.01% for the quarter ended March 31, 2022.
Year over year net interest income and margin improvement resulted primarily from loan growth, growth in other earning assets, and improved yields on earning assets, while the linked quarter interest income decline resulted primarily from increased funding costs. The Bank’s cost of funds increased to 1.03% during the first quarter of 2023 from 0.52% during the fourth quarter of 2022, and 0.23% during the first quarter of 2022. The Company anticipates deposit rate increases will continue to materialize over coming quarters, which could result in tightening net interest margins across the industry.
Noninterest Income
Noninterest income totaled $405 thousand for the quarter ended March 31, 2023, compared to $481 thousand earned during the most recent quarter ended December 31, 2022 and $587 thousand in the first quarter of 2022.
Decreasing noninterest income primarily resulted from decreased mortgage revenues partially offset by increasing deposit service charge and interchange income. Mortgage sales volume continues to be negatively impacted by the rising rate environment and low housing inventories. First quarter 2023 mortgage sales revenues were $29 thousand compared to $44 thousand for the most recent linked quarter, and $275 thousand for the same period in the prior year.
Noninterest Expense
Noninterest expense totaled $4.7 million for the quarter ended March 31, 2023, compared to $4.8 million for the prior quarter ended December 31, 2022, and $4.2 million for the comparative quarter ended March 31, 2022. Quarter over quarter decreases in noninterest expense resulted primarily from reduction in compensation and benefits expenses due in part to decreased mortgage commissions.
Provision for Loan Losses
On January 1, 2023, the Company adopted the Current Expected Credit Loses (CECL) accounting standard. The CECL adoption resulted in a day one increase in the Bank’s allowance for credit losses on loans of $504 thousand and a day one increase in the Bank’s allowance for credit losses on unfunded commitments of $631 thousand. This adjustment also resulted in an increase in the Bank’s deferred tax asset of $241 thousand and a decrease in retained earnings of $894 thousand.
During the quarter the Bank recorded a net provision of $125 thousand for the changes in CECL allowance for credit losses throughout the quarter. At quarter end the Bank’s allowance for credit losses on loans and unfunded commitments was $7.4 million and $518 thousand, respectively.
The cumulative CECL reserve was 115% of total loans at March 31, 2023, while the Bank’s allowance for loan losses to total loans was 1.02% at December 31, 2022 using the previous allowance methodology.
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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