Coastal Carolina Bancshares, Inc. Reports Record Fourth Quarter and Annual Earnings
Myrtle Beach, South Carolina – January 30, 2023 – 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 2022. The Company reported net income of $7,211,060 or $1.16 per share for the year ended December 31, 2022, compared to $6,238,629 or $1.01 per share for the same period ended December 31, 2021, representing a 16% increase. Net income for the three months ended December 31, 2022 was $2,342,030 or $0.38 cents per share which represents a 17% increase over prior quarter income of $2,009,804 and a 41% increase over quarterly net income of $1,665,879 for the same period one year ago.
2022 Fourth Quarter and Annual Financial Highlights
- Annual net income of $7,211,060, an increase of 16% over the same period ended December 31, 2021
- Fourth quarter net income of $2,342,030, an increase of 41% year over year
- Diluted EPS of $0.38 per share for the quarter and $1.16 for the year
- Quarterly return on average assets of 1.15%
- Quarterly return on average equity of 16.96%
- Quarterly margin expansion of 0.17% resulting in fourth quarter Bank only net interest margin of 4.08%
- Annual Loan growth of $185 million or 40% from $463 million at December 31, 2021 to $649 million at December 31, 2022
- Annual Deposit growth of $58 million or 8% from $684 million at December 31, 2021 to $742 million at December 31, 2022
- Key credit quality metrics remained strong during the quarter with a non-performing assets ratio of 0.0% at year end
“We are very pleased with our performance for the fourth quarter and the year of 2022 as a whole. We experienced record loan growth this year which led to the most profitable year in our history. Most importantly, with credit performance headwinds potentially coming in 2023 our credit quality metrics remain pristine with no past dues and a non-performing assets ratio of 0.0% at year end. These record results clearly indicate that our team of dynamic bankers continues to perform at an exemplary level. We remain encouraged by the strong local economies in all of our markets and feel we are positioned well for additional growth,” says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.
At December 31, 2022, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 9.43%, 11.04%, and 12.00%, respectively. 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 December 31, 2022 of $9.23 and $8.71, respectively compared to $8.69 and $8.17 at September 30, 2022 and $9.67 and $9.13 at December 31, 2021. The reduction in book value per share year over year resulted from changes in unrealized gains and losses in the Bank’s investment portfolio partially offset by retained earnings. Significant increases in market interest rates during the year negatively impacted the fair value of the Bank’s investment portfolio; however, book value increased during the fourth quarter through retained earnings and improved bond market values.
Balance Sheet and Credit Quality
Total Assets increased by 9% during the year to $825 million at December 31, 2022, compared to $759 million at December 31, 2021. The increase in total assets during the year was driven primarily by an increase in net loans and securities partially offset by a decline in cash and cash equivalents.
Net Loans increased $185 million or 40% during the year from $463 million at December 31, 2021 to $649 million at December 31, 2022. Net loans increased $53 million or 9% during the fourth quarter of 2022.
Loan growth was impacted by Payroll Protection Program (PPP) loan pay downs of $13.9 million during the year. Four PPP loans totaling $474 thousand remained on the Bank’s balance sheet as of quarter end December 31, 2022. The Bank is wrapping up the forgiveness process with its customers, and anticipates that the remaining loan forgiveness will occur during the first half of 2023.
The Bank continued to experience deposit growth during the quarter and year, reporting $742 million in total deposits on December 31, 2022, compared to $721 million at September 30, 2022, and $684 million at December 31, 2021. Non-interest checking balances increased $9 million during the quarter and represented 23% of the Bank’s total deposits at quarter end. Checking and savings accounts represented 46% of the Bank’s total deposits at quarter end, while money market accounts and time deposits represented 40% and 14%, respectively.
Asset quality metrics were pristine at year end with no loans classified as non-accrual and no loans past due greater than 30 days at December 31, 2022. The Bank’s non-performing asset ratio as of December 31, 2022 was 0.00% excluding TDRs and 0.02% with performing TDRs included. During the fourth quarter of 2022, the Bank experienced net loan recoveries of $39 thousand. Additionally, the Bank had no outstanding OREO property at December 31, 2022.
Net Interest Income
Net interest income increased 44% to $7.7 million for the quarter ended December 31, 2022, compared to $5.4 million during the prior year’s fourth quarter ended December 31, 2021, and increased 7% when compared to $7.2 million reported during the most recent quarter ended September 30, 2022. Year-over-year, net interest income increased $6.0 million or 29% from $20.4 million in 2021 to $26.4 million in 2022. Net interest income increases resulted primarily from the significant loan growth noted above, growth in other earning assets, and improved yields on earning assets partially offset by increased cost of deposits.
The Bank’s quarterly net interest margin was 4.08% for the quarter ended December 31, 2022, compared to 3.12% for the quarter ended December 31, 2021, and 3.91% for the quarter ended September 30, 2022. The Bank’s annual net interest margin increased to 3.58% in 2022 from 3.19% in 2021. Improved net interest margins resulted primarily from loan growth, increased earning asset yields, and lagging rate increases on interest bearing deposits.
The Bank’s earning asset yield increased 0.41% from 4.16% during the third quarter of 2022 to 4.57% during the fourth quarter. The Bank’s cost of funds increased 0.25% from 0.27% during the third quarter to 0.52% during the fourth quarter of 2022. The Company anticipates deposit rate increases will continue to materialize over coming quarters which could result in tightening net interest margins across the industry.
Noninterest income totaled $481 thousand for the quarter ended December 31, 2022, compared to $551 thousand earned during the most recent quarter ended September 30, 2022 and $987 thousand in the fourth quarter of 2021. Noninterest income declined $2.8 million from $5.0 million for the year ended December 31, 2021 to $2.2 million for the year ended December 31, 2022.
Decreasing noninterest income primarily resulted from decreased mortgage revenues. Mortgage sales volume continues to be negatively impacted by the rising rate environment and low housing inventories. Fourth quarter 2022 mortgage revenues were $44 thousand compared to $174 thousand for the most recent linked quarter, and $650 thousand for the same period in the prior year. Annual mortgage revenues were $759 thousand for the year ended December 31, 2022 compared to $3.7 million for the year ended December 31, 2021.
Although mortgage sales volume was down in 2022, a portion of the Bank’s mortgage production during the year contributed to the Bank’s record loan growth and core interest earnings. Most portfolio mortgage products are originated with adjustable rate mortgage (ARM) structures and provide an alternative to fixed rate mortgage loans.
Noninterest expense totaled $4.8 million for the quarter ended December 31, 2022, compared to $4.7 million for the prior quarter ended September 30, 2022, and $4.3 million for the comparative quarter ended December 31, 2021. Quarter over quarter increases in noninterest expense resulted primarily from increased compensation and benefits expenses, business development costs, and professional services.
Provision for Loan Losses
During the quarter, the Bank recorded provision expense of $505 thousand compared to $555 thousand in the most recent linked quarter and $71 thousand during the fourth quarter of 2021. The Bank’s loan loss reserves to total loans was 1.02% at December 31, 2022.
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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