Coastal Carolina Bancshares, Inc. Reports Record Earnings in 2019

Myrtle Beach, South Carolina – January 24, 2020 – Today, Coastal Carolina Bancshares, Inc. (the “Company”) (OTCQX: CCNB), parent of Coastal Carolina National Bank (“Bank”), reported unaudited financial results for the fourth quarter and year ended December 31, 2019. The Company reported net income of $2,817,002 or $.47 cents per share for the year ended December 31, 2019, compared to $2,115,471 or $.38 cents per share, for the same period ended December 31, 2018. For the quarter ended December 31, 2019, the company reported net income of $891,733 compared to $654,029 in the quarter ended December 31, 2018.

Key YTD Financial Highlights:

Total Assets grew 18% to $446 million at December 31, 2019, compared to $379 million at December 31, 2018
Total Deposits grew 18% to $385 million at December 31, 2019, compared to $327 million at December 31, 2018
Total Loans grew 23% to $354 million at December 31, 2019, compared to $288 million at December 31, 2018
The Bank opened its 8^th location with a Loan Production Office in the Spartanburg, SC market in the fourth quarter

“We are very pleased with our record earnings performance along with quality growth metrics in total assets, deposits and loans in 2019. We achieved record 23% annual loan growth with net loan growth in each of our markets while maintaining the strong asset quality evidenced by our low levels of non-performing assets. Our team continues to display our “We Can Do That” spirit as we strive to make a significant difference in the lives of our customers in all of our markets,” said 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 2019 resulting in regulatory capital ratios at the Bank that exceed the minimums to be considered well capitalized based on the regulatory definition. At December 31, 2019 the Bank’s regulatory capital ratios (Leverage, Tier 1 and Total Risk Based) were 9.52%, 11.36%, and 12.15%, respectively.

Balance Sheet and Credit Quality
Total Assets grew 18% to $446 million at December 31, 2019, compared to $379 million at December 31, 2018. Asset growth was primarily concentrated in loan growth as total loans grew by $66 million or 23% to $354 million at December 31, 2019, compared to $288 million at December 31, 2018. The Bank continues to grow loans effectively while maintaining strong asset quality metrics. The Bank’s non-performing asset ratio as of December 31, 2019 was 0.35% excluding TDRs and 0.58% with the inclusion of performing TDRs. Additionally, the Bank has no outstanding OREO property.

The Bank continues to fund its growth primarily through core local deposits. Total deposits grew 18% to $385 million at December 31, 2019, compared to $327 million at December 31, 2018. Checking and savings account balances increased by $25 million to $104 million during 2019, which represents 27% of the Bank’s total deposit balances. These increases are driven by our team’s persistent focus on establishing and retaining quality retail and commercial deposit relationships. Improved treasury services and cash management products have allowed the Bank to offer a competitive product suite to its commercial customer base.

Income Statement
Net Interest Income
Net interest income increased 13% to $14.3 million for the year ended December 31, 2019, compared to $12.6 million for the previous year ended December 31, 2018. The Bank’s net interest income to average earnings assets was 4.77% for the year ended December 31, 2019, compared to 4.68% for the previous year ended December 31, 2018. Earning asset yield improvement resulted primarily from increased loan yields of 5.23% for the year ended December 31, 2019, compared to 5.00% for the year ended December 31, 2018.

Increased loan yields were offset by corresponding increased deposit and funding costs. The Bank’s cumulative cost of funds increased from 0.96% for the year ended December 31, 2018, to 1.19% for the year ended December 31, 2019. This increase in funding costs was primarily driven by significant deposit competition across each of our markets; however, the increase in funding costs was diminished by the Bank’s improved deposit mix as noted in the Balance Sheet and Credit Quality section above.

The Bank’s overall net interest margin was 3.66% for the year ended December 31, 2019, compared to 3.79% for the year ended December 31, 2018. The decline in margin primarily resulted from a reduction of $339 thousand in the Bank’s acquisition loan mark accretion in 2019 when compared to 2018. The Bank’s underlying core net interest margin after adjusting for the loan mark accretion was 3.58% for the year ended December 31, 2019, compared to 3.59% for the year ended December 31, 2018.

Noninterest Income
Noninterest income increased $515 thousand from $1.4 million for the year ended December 31, 2018, to $1.9 million for the year ended December 31, 2019. The primary driver of this increase was improvement in gains on sale of mortgage loans, which increased by $309 thousand year over year. This increase resulted from both increased mortgage production and an increase in the percentage of mortgage originations, which were sold into the secondary markets.

Noninterest Expense
Noninterest expense totaled $11.9 million for the year ended December 31, 2019, compared to $10.9 million for the year ended December 31, 2018, an increase of 9%. Increases were driven by the Bank’s growth in personnel and facilities coupled with rising technology costs and marketing expenditures. During 2019 the Bank built a new Conway branch and expanded its footprint in Upstate South Carolina with the addition of a loan production office in Spartanburg.

Provision for Loan Losses
The provision for loan losses totaled $712 thousand for the year ended December 31, 2019, compared to $426 thousand for the year ended December 31, 2018, resulting in an overall loan loss reserve as a percentage of total loans of 0.82% at December 31, 2019, compared to 0.83% at December 31, 2018.

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, Lexington, Greenville, Spartanburg, and Brunswick (NC) counties. Coastal Carolina National Bank is a locally operated financial institution focused on providing personalized service and 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, and 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.

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.