Coastal Carolina Bancshares, Inc. Reports Third Quarter Earnings
Myrtle Beach, South Carolina – October 27, 2021 – Coastal Carolina Bancshares, Inc. (the “Company”) (OTCQX: CCNB), parent of Coastal Carolina National Bank (the “Bank”), reported unaudited financial results for the third quarter of 2021. The Company reported net income of $4,572,750 or $.74 cents per share for the nine months ended September 30, 2021, compared to $2,475,101 or $.40 cents per share for the same period ended September 30, 2020, representing an 85% increase. Net income for the three months ended September 30, 2021, was $1,651,954 or $.27 cents per share which represents an 8% increase over prior quarter income of $1,533,227 and a 60% increase over quarterly net income of $1,033,424 for the same period one year ago.
2021 Third Quarter Financial Highlights
- Year to date net income of $4,572,750, an increase of 85% over the same period ended September 30, 2020.
- Third quarter net income of $1,651,954, an increase of 60% year over year, and 8% on a linked quarter basis
- Quarterly return on average assets and equity of 0.92% and 11.52%, respectively
- Diluted EPS of $0.27 per share for the quarter and $0.74 year-to-date
- Total Assets increased 4% during the quarter and 22% year-to-date (29% annualized) to $736 million at September 30, 2021
- Total Deposits increased by 4% during the quarter and 24% year-to-date (32% annualized) to $661 million at September 30, 2021
- Total Loans, excluding PPP loans, increased 2% during the quarter and 12% year-to-date (16% annualized) from $391 million at December 31, 2020 to $437 million at September 30, 2021.
“We are very pleased with our earnings performance in the third quarter of 2021. Our CCNB team continues to focus on building and developing new banking relationships, which has resulted in consistent growth in deposits and loans. Each of the markets in which we serve in South Carolina are experiencing strong economic growth and we remain focused on finishing 2021 on a positive note as we help our customers achieve their financial goals,” says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.
Capital
The Company reported tangible book value per share of $8.93 at September 30, 2021 compared to $8.65 at prior quarter end June 30, 2021, and $7.92 at September 30, 2020.
The Company and Bank continued to increase capital through retained earnings during the third quarter of 2021, resulting in Bank capital ratios that exceed the regulatory minimums to be considered well-capitalized. At September 30, 2021, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 8.22%, 12.14%, and 13.17%, respectively.
Balance Sheet and Credit Quality
Total Assets increased by 4% during the second quarter to $736 million at September 30, 2021, compared to $708 million at June 30, 2021, and 22% year-to-date. Asset growth was driven predominantly by continued deposit accumulation and consisted primarily of increases in cash, loans, and securities.
The Bank continued to experience deposit growth during the quarter, reporting $661 million in total deposits on September 30, 2021, compared to $635 million at June 30, 2021 and $533 million at December 31, 2020. Deposits increased 4% over the most recent linked quarter and 24% year-to-date representing an annualized growth rate of 32%. Non-interest checking account balances increased $12 million during the quarter, and represented 20% of the Bank’s total deposits at quarter end. Additionally, interest checking and savings increased $10 million during the quarter. Checking and savings accounts represented 39% of the Bank’s total funding mix at quarter end, while money market accounts and time deposits represented 42% and 19%, respectively.
Total loans increased by $1 million during the quarter, and $42 million year-to-date to $457 million at quarter end. Third quarter net loan growth was impacted by Payroll Protection Program (PPP) loan paydowns of $8 million. Adjusting for PPP loan paydowns, third quarter loan growth totaled $9 million. Total loans, excluding PPP loans, increased 2% during the quarter and 12% year-to-date (16% annualized) from $391 million at December 31, 2020, to $437 million at September 30, 2021.
$19.4 million in PPP balances remained on the Bank’s balance sheet as of quarter end September 30, 2021 net of forgiveness. 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 fourth quarter of 2021 and into early 2022.
Asset quality metrics continued to excel during the third quarter of 2021. The Bank’s non-performing asset ratio as of September 30, 2021, was 0.06% excluding TDRs and 0.19% with the inclusion of performing TDRs. Additionally, the Bank had no charge-offs during the first nine months of 2021 and had no outstanding OREO property at quarter end.
Income Statement
Net Interest Income
Net interest income increased 18% to $5.2 million for the quarter ended September 30, 2021, compared to $4.4 million during the prior year’s third quarter ended September 30, 2020, and increased 4% when compared to $5.0 million reported during the most recent quarter ended June 30, 2021. Net interest increases resulted primarily from growth in average loans outstanding and other earning assets offset by declining interest margins. The Bank recognized approximately $212 and $187 thousand in PPP fee income during the quarters ended September 30 and June 30, 2021, respectively, which contributed to the Bank’s net interest income.
The Bank’s quarterly net interest margin was 3.16% for the quarter ended September 30, 2021, compared to 3.20% for the quarter ended June 30, 2021, and 3.44% for the quarter ended September 30, 2020. The decrease in margin is largely attributable to excess liquidity resulting from the Bank’s continued deposit build. The declining interest rate environment and excess liquidity have led to decreasing 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 0.32% for the quarter ended September 30, 2021, compared to 0.37% for the quarter ended June 30, 2021, and 0.72% for the quarter ended September 30, 2020.
Noninterest Income
Noninterest income totaled $1,254 thousand for the quarter ended September 30, 2021, compared to $1,487 thousand earned during the most recent quarter ended June 30, 2021 and $1,148 thousand in the third quarter of 2020. The decline in noninterest income between the second and third quarters of 2021 is partially attributable to a non-recurring gain of $146,000 in the second quarter from a gain on the sale of fixed assets.
The Bank’s primary source of non-interest income is mortgage revenue including gain on the sale of mortgage loans. Second quarter 2021 mortgage revenues were $957 thousand compared to $1,033 thousand for the most recent linked quarter, and $947 thousand for the same period in the prior year.
Noninterest Expense
Noninterest expense totaled $4.2 million for the quarter ended September 30, 2021, compared to $4.3 million for the prior quarter ended June 30, 2021, and $3.8 million for the comparative quarter ended September 30, 2020. The slight decrease in noninterest expense quarter over quarter resulted primarily from decreased compensation expense (largely attributable to decreased mortgage commissions).
Provision for Loan Losses
During the quarter, the Bank recorded provision expense of $192,000 compared to $258,000 in the most recent linked quarter and $405,000 during the third quarter of last year. The Bank’s loan loss reserves to total loans have increased from 0.96% at the end of the third quarter of 2020 to 1.04% at September 30, 2021. The Bank’s loan loss reserves to total loans requiring reserve (excludes loans held for sale, government-guaranteed and cash-secured loans) have increased from 1.05% at September 30, 2020, to 1.14% at September 30, 2021.
While the Bank’s credit metrics remain strong, the COVID-19 pandemic and related recovery continue to impact the nation’s economy and the people and businesses within the communities we serve. We will continue to monitor local market and portfolio level data to identify negative impacts on the performance of our loan portfolio caused by the pandemic. As the Bank recognizes the need for an increased allowance for loan losses, provisions will be made accordingly.
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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