Coastal Carolina Bancshares, Inc. Reports Second Quarter Results
Myrtle Beach, South Carolina – July 26, 2022 – 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 2022. The Company reported net income of $2,859,227 or $0.46 per share for the six months ended June 30, 2022, compared to $2,920,796 or $.47 cents per share for the same period ended June 30, 2021. Net income for the three months ended June 30, 2022 was $1,493,066 or $.24 cents per share which represents a 9% increase over prior quarter income of $1,366,161.
2022 Second Quarter and YTD Financial Highlights
- Net Interest Income increased 15% from $5.3 million in the prior quarter to $6.1 million at June 30, 2022
- Second quarter pre-tax pre-provision earnings of $2.3 million, an increase of 4% year over year, and 32% on a linked quarter basis
- Total Loans increased 19% year-to-date (38% annualized) from $463 million at December 31, 2021 to $552 million at June 30, 2022
- Total Assets increased 6% year-to-date (11% annualized) to $801 million at June 30, 2022
- Total Deposits increased 5% year-to-date (10% annualized) to $717 million at June 30, 2022
- Key credit quality metrics remained strong during the quarter with a non-performing assets ratio of 0.05%
“We are very pleased with our earnings performance for the second quarter of 2022. We continued to see significant loan growth this quarter which is a testament to our loan production and servicing teams. There continues to be good economic activity in all our markets and we are positioned well for additional loan growth with a strong loan pipeline. Our team continues to focus on building new relationships while maintaining excellent credit quality,” says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.
At June 30, 2022, the Bank’s regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 8.64%, 11.49%, and 12.41%, 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 June 30, 2022 of $8.75 and $8.23, respectively compared to $9.67 and $9.13 at December 31, 2021. The reduction in book value per share was the result of 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.
Balance Sheet and Credit Quality
Total Assets increased by 1% during the second quarter and 6% during the first six months of the year to $801 million at June 30, 2022. Asset growth consisted primarily of increases in net loans and securities offset by a reduction in cash and cash equivalents.
Net Loans increased $58 million or 12% during the second quarter, and $89 million year-to-date to $552 million at quarter end. This year-to-date increase represents an annualized growth rate of 38%.
Loan growth was impacted by Payroll Protection Program (PPP) loan pay downs of $3 million during the quarter and $7 million year to date. $7.3 million in PPP balances remained on the Bank’s balance sheet as of quarter end June 30, 2022. 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 third and fourth quarters of 2022.
The Bank continued to experience deposit growth during the quarter, reporting $717 million in total deposits on June 30, 2022, compared to $713 million at March 31, 2022, and $684 million at December 31, 2021. Deposits increased 5% year to date and 1% on a linked quarter basis. The Bank remains focused on local core deposits as its primary source of funding which has resulted in continued improvement in the Bank’s deposit mix. At quarter end, checking and savings accounts represented 44% of the Bank’s total deposits, money market accounts represented 42% and time deposits represented 14%. Non-interest checking account balances increased $17 million during the quarter and represented 22% of the Bank’s total deposits at quarter end.
Asset quality metrics remained strong during the second quarter of 2022. The Bank’s non-performing asset ratio as of June 30, 2022 was 0.05% excluding TDRs and 0.17% with performing TDRs included. Additionally, the Bank had no loan charge-offs during the quarter and only one charge-off during the first six months totaling less than $1,000. The Bank had no outstanding OREO property at quarter end.
Net Interest Income
Net interest income increased 22% to $6.1 million for the quarter ended June 30, 2022, compared to $5.0 million during the prior year’s second quarter ended June 30, 2021, and increased 15% when compared to $5.3 million reported during the most recent quarter ended March 31, 2022. Net interest income increases resulted primarily from growth in loans and other earning assets as noted above and improved yields on earning assets.
Additionally, the Bank recognized approximately $95 thousand in PPP fee income during the quarter ended June 30, 2022, compared to $187 thousand recognized during the prior year’s second quarter, and $119 thousand during the most recent linked quarter. PPP fees are included in and contribute to the Bank’s net interest income.
The Bank’s quarterly net interest margin was 3.34% for the quarter ended June 30, 2022, compared to 3.20% for the quarter ended June 30, 2021, and 2.98% for the quarter ended March 31, 2022. The Bank’s improved margin results primarily from loan growth, improved asset yields, and stable funding costs. The Bank’s earning asset yield increased from 3.20% during the first quarter of 2022 to 3.55% during the second quarter while the Bank’s cost of funds remained relatively stable at 0.22%. While funding costs remained low during the second quarter of 2022, the Bank anticipates that its costs of funds will increase in future quarters given the current interest rate environment.
Noninterest income totaled $622 thousand for the quarter ended June 30, 2022, compared to $587 thousand earned during the most recent quarter ended March 31, 2022 and $1,487 thousand in the second quarter of 2021.
The Bank’s primary source of non-interest income is mortgage revenue including gain on the sale of mortgage loans. Mortgage sales volume has been negatively impacted by the rising rate environment and low housing inventories. Second quarter 2022 mortgage revenues were $267 thousand compared to $275 thousand for the most recent linked quarter, and $1,032 thousand for the same period in the prior year. While mortgage sales volume is down, the Bank’s mortgage production remains stable and serves to bolster the Bank’s core earnings through portfolio loan growth.
Noninterest expense totaled $4.5 million for the quarter ended June 30, 2022, compared to $4.2 million for the prior quarter ended March 31, 2022, and $4.3 million for the comparative quarter ended June 30, 2021. Quarter over quarter increases in noninterest expense resulted primarily from increased compensation expense, data processing expense, and other miscellaneous expenses.
Provision for Loan Losses
During the quarter, the Bank recorded provision expense of $450,000 compared to $75,000 in the most recent linked quarter and $258,000 during the second quarter of 2021. The Bank’s loan loss reserves to total loans was 1.00% at June 30, 2022. The Bank’s loan loss reserves to total loans requiring reserve (excludes loans held for sale, government guaranteed and cash secured loans) was 1.03% at June 30, 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 opportunities. 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.