Coastal Carolina Bancshares, Inc. Announces Record Quarterly Earnings
Myrtle Beach, South Carolina – April 23, 2021 – Coastal Carolina Bancshares, Inc. (the “Company”) (OTCQX: CCNB), parent of Coastal Carolina National Bank (the “Bank”), reported unaudited financial results for the first quarter of 2021. The Company reported net income of $1,387,569 or $.23 cents per share for the three months ended March 31, 2021, compared to $1,264,931 or $.21 cents per share for the prior quarter ended December 31, 2020 and $762,734 for the first quarter of last year ended March 31, 2020. This represents an increase of 10% on a linked quarter basis and 82% year over year.
2021 First Quarter Financial Highlights
- First quarter net income of $1,387,569, an increase of 82% year over year, and 10% on a linked quarter basis
- Total Assets increased 9% during the quarter (34% annualized) to $655 million at March 31, 2021
- Total Deposits increased by 9% during the quarter (38% annualized) to $583 million at March 31, 2021
- Total Loans increased 5% during the quarter (22% annualized) from $415 million at December 31, 2020 to $437 million at March 31, 2020. This increase includes $10 million of net PPP loan growth.
- Mortgage revenue of $1,046 thousand during the first quarter
“This year has been a challenging year for our team and our customers. I am very proud of the CCNB team and the way in which we served our customers and our communities in these most trying of times. We are pleased to report record earnings for the first quarter of 2021 with an increase in net income of 82% year over year. We continue to demonstrate consistent growth in Total Assets, Total Deposits as well as Total Loans. Our team has continued to help our business customers through the SBA’s Payment Protection Program (PPP) which has had a positive impact on our first quarter performance. Our mortgage team continues to be an important part of our story as they exceeded $1 million in revenue during the first quarter while closing a record number of mortgage loans. The real estate markets in all of the communities in which we operate continue to experience record numbers of relocations to the great state of South Carolina.” says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.
The Company and Bank continued to increase capital through retained earnings during the first quarter of 2021, resulting in Bank capital ratios that exceed the regulatory minimums to be considered well-capitalized. At March 31, 2021, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 8.52%, 12.12%, and 13.14%, respectively.
Balance Sheet and Credit Quality
Total Assets increased by 9% during the first quarter to $655 million at March 31, 2021, compared to $603 million at December 31, 2020. Total loans increased 5% during the quarter to $437 million at March 31, 2021 from $415 million at December 31, 2020. Net loan growth totaled $22 million during the first quarter of 2021 bolstered by net Payroll Protection Program (PPP) loan growth of $10 million. Net PPP loan growth consisted of $19 million in new PPP loan fundings offset by paydowns from PPP loan forgiveness. Excluding PPP loans, year to date loan growth was $12.4 million which represents a 13% annualized growth rate.
As noted above, the Bank originated $19 million in PPP loans in the first quarter of 2021. When combined with prior period PPP loans, $34 million in PPP balances remained on Bank’s balance sheet as of quarter end March 31, 2021. The Bank is currently working through the forgiveness process with its customers, and anticipates that the majority of round one loan forgiveness will occur over first half of 2021. We anticipate forgiveness of the second round of PPP lending will continue through year end 2021 and into 2022.
The Bank continued to experience significant deposit growth during the quarter, reporting $583 million in total deposits on March 31, 2021, compared to $533 million at December 31, 2020. Deposits increased 9% over the most recent linked quarter representing an annualized growth rate of 38%. The Bank’s deposit mix continued to improve during the period. Checking and savings accounts now represent 35%, money market accounts represent 41%, and time deposits represent 24% of the Bank’s total deposits.
Asset quality metrics remained sound during the first quarter of 2021. The Bank’s non-performing asset ratio excluding TDRs has declined from 0.15% at December 31, 2020 to 0.06% at March 31, 2021. Including performing TDRs, this ratio decreased from 0.32% at December 31, 2020 to 0.21% at March 31, 2021. Additionally, the Bank had no charge-offs during the first quarter of 2021, and has no outstanding OREO property.
Due to the statewide “Stay at Home” order and other disruptions caused by COVID-19, the Bank demonstrated support for its local communities by proactively offering temporary deferral and forbearance programs to customers who were, or expected to be, negatively impacted by the pandemic. Last summer at the peak, deferral requests (or interest only payment relief) were granted on loans totaling $78 million, which represented approximately 20% of the Bank’s loan portfolio. As of year end December 31, 2020 loan deferrals had decreased to $4.8 million or approximately 1% of the Bank’s year end loan portfolio. At March 31, 2021 loan deferrals decreased further to $4.7 million. All remaining deferred loans are paying on interest only terms and are expected to resume contractual payments at the end of their respective deferral periods.
Net Interest Income
Net interest income increased 24% to $4.8 million for the quarter ended March 31, 2021, compared to $3.9 million for the prior year’s first quarter ended March 31, 2020, and increased 4% when compared to $4.6 million reported during the most recent quarter ended December 31, 2020. Net interest increases resulted primarily from growth in earning assets offset by declining interest margins. Additionally, the Bank recognized approximately $251 thousand in PPP fee income during the quarter ended March 31, 2021 which contributed to the Bank’s net interest income.
The Bank’s quarterly net interest margin was 3.32% for the quarter ended March 31, 2021, compared to 3.41% for the quarter ended December 31, 2020, and 3.62% for the quarter ended March 31, 2020. The decrease in margin is largely attributable to the declining interest rate environment during the latter part of 2019 and throughout 2020. Asset yields have decreased as rate sensitive assets reprice and the Bank holds higher levels of liquidity post pandemic. 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 0.43% for the quarter ended March 31, 2021, compared to 0.55% for the quarter ended December 31, 2020, and 1.13% for the quarter ended March 31, 2020.
Noninterest income totaled $1,269 thousand for the quarter ended March 31, 2021, compared to $1,450 thousand earned during the most recent quarter ended December 31, 2020 and $566 thousand in the first quarter of 2020.
Fluctuations in noninterest income are largely attributable to changes in mortgage revenues including gain on the sale of mortgage loans. First quarter 2021 mortgage revenues were $1,046 thousand compared to $1,213 thousand for the most recent linked quarter, and $346 thousand for the same period in the prior year. While mortgage production increased in the first quarter when compared to the fourth quarter of 2020, mortgage sales revenue declined due primarily to the fact that the Bank retained a larger portion of its mortgage production in the current quarter. During the first quarter of 2021, 65% of mortgage production was sold while in the prior quarter 77% was sold on the secondary market.
Noninterest expense totaled $4.1 million for the quarter ended March 31, 2021, compared to $4.2 million for the prior quarter ended December 31, 2020, and $3.2 million for the comparative quarter ended March 31, 2020. Increases in compensation expense, data processing, and FDIC insurance were offset by decreased professional services, shareholder relations, and other miscellaneous expenses.
Provision for Loan Losses
During the quarter, the Bank recorded provision expense of $211,000 compared to $300,000 in the most recent linked quarter and $215,000 during the first quarter of last year. The Bank’s loan loss reserves to total loans have increased from 0.84% at the end of the first quarter of 2020 to 1.03% at the current quarter ended March 31, 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 0.90% at March 31, 2020 to 1.14% at March 31, 2021.
As noted in the credit quality section above, the Bank’s asset quality metrics remain solid, and the Bank has demonstrated encouraging trends in loan deferrals which decreased from a high water-mark of 20% of the total loan portfolio to 1% at quarter end March 31, 2021. However, the COVID-19 pandemic continues to impact the nation’s economy and the people and businesses within the communities we serve, creating continued uncertainty regarding future credit losses.
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.