Coastal Carolina Bancshares, Inc. Reports Fourth Quarter and Annual Earnings
Myrtle Beach, South Carolina – January 26, 2022 – 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 2021. The Company reported net income of $6,238,629 or $1.01 per share for the year ended December 31, 2021, compared to $3,740,032 or $.61 cents per share for the same period ended December 31, 2020, representing a 67% increase. Net income for the three months ended December 31, 2021, was $1,665,879 or $.27 per share which represents a 1% increase over prior quarter income of $1,651,954 and a 32% increase over quarterly net income of $1,264,931 for the same period one year ago.
2021 Fourth Quarter Financial Highlights
- Annual net income of $6,238,629, an increase of 67% over the same period ended December 31, 2020
- Fourth-quarter net income of $1,665,879, an increase of 32% year over year
- Annual and quarterly return on average assets 0.90%
- Annual and quarterly return on average equity of 11.06% and 11.32%, respectively
- EPS of $0.27 per share for the quarter and $1.01 for the year 2021
- Total Assets increased 26% annually to $759 million
- Total Deposits increased 28% annually to $684 million
- Total Loans, excluding PPP loans, increased 15% in 2021 from $391 million at December 31, 2020, to $449 million at December 31, 2021
“We are very pleased with our earnings performance for the year ended 2021. Our CCNB team continues to focus on building and developing new banking relationships, which has resulted in consistent growth in all of our markets. We continued to show an increase in earnings in 2021 as a result of strong deposit growth and loan portfolio growth while maintaining excellent credit quality. We look forward to 2022 and 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
The Company and Bank continued to increase capital through retained earnings during the fourth quarter of 2021, resulting in Bank capital ratios that exceed the regulatory minimums to be considered well-capitalized. At December 31, 2021, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 8.17%, 12.22%, and 13.23%, respectively.
The Company reported tangible book value per share of $9.13 at December 31, 2021 compared to $8.93 at prior quarter end September 30, 2021 and $8.20 at December 31, 2020.
Balance Sheet and Credit Quality
Total Assets increased by 26% during the year to $759 million at December 31, 2021, compared to $603 million at December 31, 2020. Assets increased 3% quarter over quarter. Asset growth was supported by continued deposit growth and consisted primarily of increases in cash, loans, and securities.
The Bank continued to experience strong deposit growth during the quarter, reporting $684 million in total deposits on December 31, 2021, compared to $661 million at September 30, 2021 and $533 million at December 31, 2020. Deposits increased 4% over the most recent linked quarter and 28% for the year. Checking and savings account balances increased $7 million during the quarter and $81 million during 2021. Checking and savings accounts represented 39% of the Bank’s total funding mix at year end, while money market accounts and time deposits represented 44% and 17%, respectively.
Total loans increased by $6 million during the quarter, and $48 million during the year to $463 million at year end. Annual and quarterly loan growth was impacted by Payroll Protection Program (PPP) loan originations and pay downs during 2021 including $5 million in fourth quarter pay downs. Total Loans, excluding PPP loans, increased $11 million or 3% during the quarter and $58 million or 15% for the year.
$14.4 million in PPP balances remained on the Bank’s balance sheet as of year end December 31, 2021. 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 first half of 2022.
Asset quality metrics continued to hold strong during the fourth quarter of 2021. The Bank’s non-performing asset ratio as of December 31, 2021, was 0.06% excluding TDRs and 0.18% with performing TDRs included. Additionally, the Bank had only one loan charge-off during the year totaling $2,500 and had no outstanding OREO property at year end.
Income Statement
Net Interest Income
Net interest income increased 18% year over year to $20.4 million for the year ended December 31, 2021, compared to $17.2 million during the prior year ended December 31, 2020. Net interest income increased 16% to $5.4 million for the quarter ended December 31, 2021, compared to $4.6 million during the prior year’s fourth quarter ended December 31, 2020, and increased 3% when compared to $5.2 million reported during the most recent quarter ended September 30, 2021. Net interest income increases resulted primarily from growth in average loans outstanding and other earning assets offset by declining interest margins. The Bank recognized approximately $777 and $127 thousand in PPP fee income during the year and quarter ended December 31, 2021, respectively which contributed to the Bank’s net interest income.
The Bank’s net interest margins were 3.19% and 3.12%, respectively for the year and quarter ended December 31, 2021, compared to 3.52% and 3.41% for the year and quarter ended December 31, 2020. The above margin compression is largely attributable to excess liquidity resulting from the Bank’s deposit accumulation outpacing loan production.
The declining interest rate environment and excess liquidity have led to decreased earning asset yields; however, 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 0.27% for the quarter ended December 31, 2021, compared to 0.32% for the quarter ended September 30, 2021, and 0.55% for the quarter ended December 31, 2020. Annual cost of funds declined from 0.80% for the prior year ended December 31, 2020, to 0.35% for the year ended December 31, 2021.
Noninterest Income
Noninterest income totaled $4,997 thousand for the year ended December 31, 2021, compared to $4,032 thousand earned during the prior year ended December 31, 2020, representing an increase of 24%. Noninterest income totaled $987 thousand for the quarter ended December 31, 2021, compared to $1,254 thousand earned during the most recent quarter ended September 30, 2021, and $1,450 thousand in the fourth quarter of 2020.
The Bank’s primary source of non-interest income is mortgage revenue including gain on the sale of mortgage loans. Annual 2021 mortgage sales revenue was $3.7 million compared to $2.5 million in 2020. Fourth quarter 2021 mortgage revenues were $650 thousand compared to $957 thousand for the most recent linked quarter, and $1,213 thousand for the same period in the prior year. The quarter over quarter decline in mortgage revenues results from decreased mortgage refinance production and an increased percentage of retained portfolio mortgage production.
Noninterest Expense
Noninterest expense totaled $16.9 million for the year ended December 31, 2021, compared to $14.8 million for the prior year ended December 31, 2020, representing an increase of 14%. Noninterest expense totaled $4.3 million for the quarter ended December 31, 2021, compared to $4.2 million for the prior quarter ended September 30, 2021, and $4.2 million for the comparative quarter ended December 31, 2020. The increase in noninterest expense year over year results primarily from increased compensation expense partially attributable to increased mortgage support and commissions. Increased data processing expense, and increased FDIC insurance costs resulting from the Bank’s significant deposit growth also contributed to this increase.
Provision for Loan Losses
During the quarter, the Bank recorded provision expense of $71,000 compared to $192,000 in the most recent linked quarter and $300,000 during the fourth quarter of last year. The Bank’s loan loss reserves to total loans have increased from 1.03% at the end of the fourth quarter of 2020 to 1.08% at December 31, 2021. The Bank’s loan loss reserves to total loans requiring reserve (excludes loans held for sale, government guaranteed and cash secured loans) were 1.13% at December 31, 2021.
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.
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