Coastal Carolina Bancshares, Inc. Reports Second Quarter Results

Myrtle Beach, South Carolina – July 23, 2024 – Coastal Carolina Bancshares, Inc. (the “Company”) (OTCQX: CCNB), parent of Coastal Carolina National Bank (the “Bank”), reported unaudited financial results for the second quarter of 2024. The Company reported net income for the three months ended June 30, 2024 of $1,956,948 or $0.31 per share, compared to $1,984,571 or $0.32 per share for the same period in the prior year and $1,650,696 or $0.26 per share for the prior quarter ended March 31, 2024. The Company reported net income of $3,607,644 or $0.58 per share for the six months ended June 30, 2024, compared to $4,105,348 or $0.66 per share for the same period ended June 30, 2023.

2024 Second Quarter Financial Highlights

Quarterly net income of $1.96 million and diluted EPS of $0.31 per share, an increase of 19% over the most recent linked quarter.
Increased book value per share and tangible book value per share from $10.90 and $10.39 at March 31, 2024 to $11.22 and $10.72 at June 30, 2024
Asset balances eclipsed $1 billion for the first quarter in Bank history
Quarterly Asset growth of $98 million or 10% (40% annualized) from $970 million at March 30, 2024 to $1,068 million at June 30, 2024
Quarterly Deposit growth of $95 million or 11% (43% annualized) from $876 million at March 31, 2024 to $971 million at June 30, 2024
Quarterly Loan growth of $11 million or 1% (6% annualized) from $782 million at March 31, 2024 to $793 million at June 30, 2024
Key credit quality metrics remained strong with a non-performing assets ratio of 0.0% and no past due loans over the most recent seven consecutive quarter ends

Capital

At June 30, 2024, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 8.91%, 11.67%, and 12.71%, 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 June 30, 2024 of $11.22 and $10.72, respectively, compared to $10.90 and $10.39 at March 31, 2024. Increased book value per share resulted from retained earnings accumulation and improvements in the Bank’s investment portfolio values during the quarter.

Balance Sheet and Credit Quality

Total Assets increased by 10% during the quarter and 14% during the first six months of the year to $1,068 million at June 30, 2024. Asset growth was driven by significant deposit growth during the quarter resulting in increased cash and cash equivalents and increased loan balances.

President and CEO of the Company and the Bank Laurence S. Bolchoz, Jr., commented, “CCNB reached a pivotal milestone during the second quarter of 2024 when we eclipsed $1 billion in total assets. While there is no magic to the $1 billion dollar number, it has been a strategic target for the Bank for some time, and we are proud to have achieved this goal.”

The Company continued to experience considerable deposit growth during the quarter reporting $971 million in total deposits on June 30, 2024, compared to $876 million at March 31, 2024, and $828 million at December 31, 2023. Deposits increased 17% year-to-date and 11% on a linked quarter basis. At quarter end, checking and savings accounts represented 41% of the Bank’s total deposit balances while money market accounts and time deposits represented 43% and 16% of total deposits, respectively. Mr. Bolchoz stated, “The Bank’s deposit development has been remarkable during the first half of 2024 with over $140 million in deposit growth. While seasonal deposit ebbs and flows contributed to deposit growth in the quarter, we are pleased that our persistent focus on deposit acquisition and retention is paying off.”

Net Loans increased $11 million or 1% during the second quarter, and $30 million or 4% year-to-date to $793 million at June 30, 2024. Year to date loan growth was concentrated in 1-4 family residential and non-owner occupied CRE which accounted for $23 million and $14 million in net growth, respectively, offset by a decrease of $14 million in commercial and residential construction balances.

The Company continues to report excellent asset quality metrics at quarter end with no loans classified as non-accrual and no loans past due greater than 30 days. Additionally, the Bank’s non-performing asset ratio as of June 30, 2024 was 0.00%. There were no charge-offs during the quarter, and no outstanding OREO property at June 30, 2024. Credit quality metrics remain pristine as there were no past dues or loans on non-accrual for the seventh consecutive quarter, a phenomenal accomplishment and a testament to the Bank’s entire loan and credit team.

Income Statement

Net Interest Income

Net interest income increased $0.7 million or 10% to $7.5 million for the quarter ended June 30, 2024, compared to $6.9 million during the most recent linked quarter and $6.9 million in the prior year’s second quarter ended June 30, 2023. The Bank’s net interest margin was 3.19% for the quarter ended June 30, 2024, compared to 3.08% for the prior quarter ended March 31, 2024, and 3.35% during the second quarter of 2023.

Net interest margin expanded during the second quarter with the Bank’s net interest margin increasing 11 basis points from 3.08% in the first quarter of 2024 to 3.19% in the second quarter. Net interest margin expansion was driven by increasing yields on earning assets. The Bank’s yield on earning assets increased to 5.41% for the quarter ended June 30, 2024 compared to 5.22% during the first quarter of 2024, and 4.83% for the quarter ended June 30, 2023.

The Bank’s earning asset yield improved due to increased earnings from cash balances resulting from the Bank’s significant deposit growth, and higher loan yields resulting from loan growth and repricing. The Bank’s loan yields increased to 5.75% during the second quarter of 2024 compared to 5.62% in the prior quarter.

Increased asset yields were partially offset by continued increases in the Bank’s funding costs. The Bank’s cost of funds increased to 2.38% for the quarter ended June 30, 2024 compared to 2.30% during the first quarter of 2024, and 1.60% for the quarter ended June 30, 2023. Mr. Bolchoz said, “We are very pleased that the Bank’s net interest margin is improving and has been on an upward trajectory since its’ low point in December of 2023. While funding costs continue to rise, the pace of these increases has slowed, and earning asset yields increased at a faster pace than funding costs during the second quarter.”

Noninterest Income

Noninterest income totaled $558 thousand for the quarter ended June 30, 2024, compared to $507 thousand earned during the most recent quarter ended March 31, 2024 and $495 thousand
in the second quarter of 2024.

Increased noninterest income results primarily from increased deposit service charges, interchange income, and secondary market mortgage revenues. Mortgage sales revenues improved when compared to both the most current linked quarter and the second quarter of 2023. The Company recorded mortgage sales revenues of $92 thousand during the quarter ended June 30, 2024 compared to $62 thousand for the quarter ended March 31, 2024, and $51 thousand for during the second quarter of 2023.

While mortgage sales volume remains somewhat muted, the Bank continues to originate a significant portion of its mortgage production through portfolio mortgage products. 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 $5.5 million for the quarter ended June 30, 2024, compared to $5.2 million for the prior quarter ended March 31, 2024, and $4.7 million for the comparative quarter ended June 30, 2023. Linked quarter increases resulted primarily from increased mortgage commissions and higher compensation and benefits expense due to the addition of a production team in the Bank’s new Orangeburg market. Mr. Bolchoz recently announced that CCNB has expanded its footprint by opening its ninth full-service office in Orangeburg, SC. The new branch is temporarily located adjacent to the permanent facility to be constructed at 1807 Columbia Rd. in Orangeburg. He noted the Bank was fortunate to identify a highly-experienced team of local community bankers to spearhead entry into the growing Orangeburg market.

Provision for Loan Losses

During the quarter the Bank recorded a net provision of $95 thousand for changes in the CECL allowance for credit losses. At quarter end the Bank’s allowance for credit losses on loans increased to $8.1 million while the reserve on unfunded commitments decreased slightly to $375 thousand. The cumulative CECL reserve of $8.4 million was 1.06% of total loans outstanding at June 30, 2024.

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, Orangeburg, 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, Orangeburg, 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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