Coastal Financial Corporation · NASDAQ:CCB
Coastal Financial — Q1 2024 Earnings Presentation
37 slides from Coastal Financial's earnings presentation, Apr 29, 2024
Slide 1: Investor Presentation – Coastal Financial Corporation
April 29, 2024 INVESTOR PRESENTATION COASTAL FINANCIAL CORPORATION
Slide 2: Legal Information and Disclaimer
2 LEGAL INFORMATION AND DISCLAIMER This presentation and oral statements made regarding the subject of this presentation contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Coastal Financial Corporati
Slide 3: Quarter 1 2024 Summary
3 QUARTER 1 2024 SUMMARY Net Income Quarter ended March 31, 2024 compared to Quarter Ended December 31, 2023 Net income of $6.8 million, or $0.50 per diluted common share, for the three months ended March 31, 2024, compared to $9.0 million, or $0.66 per diluted common share for the three months ende
Slide 4: Quarterly Highlights
4 QUARTERLY HIGHLIGHTS ■ Enhancing credit standards on new CCBX loan originations ■ Effective April 1, 2024 reduced the exposure from 10% to 5% on the CCBX portfolio that the Company is responsible for losses on ■ Coastal worked with One and Robinhood to launch two new lending products in Q1 that ca
Slide 5: Non-GAAP Reconciliation of Unanticipated Expenses
5 NON-GAAP RECONCILIATION OF UNANTICIPATED EXPENSES Three Months Ended Non-GAAP Reconciliation of Unanticipated Expenses March 31, 2024 (dollars in thousands; unaudited) Actual Unanticipated Expenses Adjusted Net interest income $ 60,936 $ — $ 60,936 Provision for credit losses (83,158) (1,096) (82,
Slide 6: Strategy for Reducing Risk and Managing Expenses
6 STRATEGY FOR REDUCING RISK and MANAGING EXPENSES Continue optimizing our CCBX loan portfolio by selling higher yielding loans with a higher potential for credit deterioration or letting these loans run-off Focus on reducing costs through automation and by leveraging gains across the organization b
Slide 7: Consolidated Financial Highlights
7 C or e D ep os it s (2 ) CONSOLIDATED FINANCIAL HIGHLIGHTS - As of and for the Quarter ended March 31, 2024 To ta l A ss et s Note: Annual data as of or for the year ended December 31 of each respective year Lo an s R ec ei va bl e N et I nc om e (1) Tangible equity to tangible assets is a non-GAA
Slide 8: Financial Stability: Deposits, Cash and Borrowings
8 FINANCIAL STABILITY DEPOSITS • Deposits increased $102.6 million, or 3.1%, during the three months ended March 31, 2024 • Includes $336.8 million in fully insured IntraFi network sweep deposits as of March 31, 2024, compared to $340.1 million as of December 31, 2023 Note: Data as of three months e
Slide 9: Continuing Profitability and Efficiency
9 CONTINUING PROFITABILITY AND EFFICIENCY Net Income and Return on Average Assets N et In co m e ($ m m ) Efficiency Ratio (%) and Noninterest Expense (“NIE”) to Average Assets (%) RO A A (% ) Ef fic ie nc y Ra ti o (% ) N IE / A ve ra ge A ss et s (% ) Note: Annual data is as of and for the year en
Slide 10: Long-Term Strategic Verticals
10 LONG-TERM STRATEGIC VERTICALS The Community Bank “CCB” Provide Banking as a Service (BaaS) “CCBX” • Best-in-class community bank that offers lending and deposit products to commercial customers • Community bank loan portfolio consists primarily of CRE loans, Construction, Land and Land Developmen
Slide 11: CCB Overview
11 Coastal Community Bank was established in 1997 with a focus on serving small to medium-sized businesses within the Puget Sound region. Offers traditional lending and deposit products to commercial and retail customers • Lending products: Commercial real estate, Small Business Administration (“SBA
Slide 12: Environmental, Social and Governance (ESG) Initiatives
12 ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG") INITIATIVES (1) Source: 2021 National Survey of Unbanked and Underbanked Households by the Federal Deposit Insurance Corporation (FDIC) in November 2022. For Coastal, ESG is a complex initiative across the whole organization. Addressing the issue of th
Slide 13: Coastal World
13 COASTAL WORLD Coastal World is an immersive 3D web platform that promotes, educates, and informs visitors about digital banking solutions that best fit their lifestyle, values, or specific financial situations through a fun and engaging online experience. Opportunity and Potential 2023 Key Milest
Slide 14: Banking as a Service (BaaS) Partners
Banking as a Service – “BaaS” Partners SHORT-TERM LENDING SAVINGS ACCOUNTS CREDIT CARDS INVESTING CHECKING ACCOUNTS HSA AND FSA ACCOUNTS 14 (Secured) Evergreen (Secured credit card) (Business Checking)(Secured & Unsecured) (Secured by and classified as 1-4 RE) (Formerly X1) (Owned by Progressive) (A
Slide 15: CCBX Partner Pipeline and Strategy
15 25 21 21 18 19 19 1 1 11 1 1 4 1 Wind down - active but preparing to exit relationship Signed letters of intent Implementation / onboarding Friends and family / testing Active March 31, 2023 December 31, 2023 March 31, 2024 CCBX provides banking as a service (BaaS) that enables broker dealers and
Slide 16: CCBX Revenue Growth
16 CCBX REVENUE GROWTH As of and for the three month period indicated (Dollars in thousands) $3,575 $3,948 $4,401 $4,369 $4,825 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 March 31, 2024 BaaS Program Fee Income Note: Data as of and for the quarter ended March 31, 2024, unless o
Slide 17: Growth in CCBX Activity Based Income
17 GROWTH IN CCBX ACTIVITY BASED INCOME CCBX TRANSACTION AND INTERCHANGE INCOME (Dollars in thousands) 56.0% growth over prior year quarter $1,706 $2,027 $2,252 $2,278 $2,661 $917 $1,052 $1,036 $1,006 $1,122 $789 $975 $1,216 $1,272 $1,539 Transaction income Interchange income 1Q2023 2Q2023 3Q2023 4Q
Slide 18: CCBX Loans and Deposits
18 CCBX Loans and Deposits (Dollars in millions) $1,563.8 $1,862.8 $2,028.9 BaaS-brokered deposits Demand, noninterest bearing Interest bearing March 31, 2023 December 31, 2023 March 31, 2024 (Dollars in millions) $1,166.5 $1,196.2 $1,316.7 Other consumer loans Residential RE secured credit cards Co
Slide 19: Risk Management
19 RISK MANAGEMENT Growth and Investment in Risk and Compliance Personnel 4 4 4 4 4 5 5 9 11 12 14 19 43 64 69 80 92 110 116 150 176 210 228 211 211 Risk Management Compliance BSA Internal Audit CCBX Risk Co-sourced BSA Resources Q1 - 2018 Q2 - 2018 Q3 - 2018 Q4 - 2018 Q1 - 2019 Q2 - 2019 Q3 - 2019
Slide 20: Loan Composition
20 CRE - Owner Occupied 12.4% C&I 10.5% Consumer and other 27.1% 1-4 Family 15.5% CRE - Non- Owner Occupied 18.0% Multifamily 11.5% Construction and Land Development 5.0% LOAN COMPOSITION Consolidated Loan Composition Community Bank Loan Concentrations by County Consolidated Commercial & Industrial
Slide 21: Deposit Composition
21 Demand, noninterest bearing 16.6% NOW and money market 80.9% Savings 2.1% Time deposits < $100K 0.2% Time deposits > $100K 0.2% DEPOSIT COMPOSITION Deposit Composition Core Deposit Driven Funding Emphasis on core deposits has helped generate an attractive funding mix • Core deposits are all depos
Slide 22: Deposit Costs
22 DEPOSIT COSTS • Cost of total deposits was 3.49% for the quarter ended March 31, 2024 compared to 3.36% for the quarter ended December 31, 2023, and 2.13% for the quarter ended March 31, 2023 ◦ Cost of deposits for the community bank and CCBX were 1.66% and 4.93%, respectively, for the quarter en
Slide 23: Segment Overview – Community Bank and CCBX
23 SEGMENT OVERVIEW - Community Bank and CCBX (for the three months ended) 0.66% 1.57% 1.66% 3.89% 4.90% 4.93% 2.13% 3.36% 3.49% Community Bank CCBX Consolidated March 31, 2023 December 31, 2023 March 31, 2024 —% 2.50% 5.00% 7.50% Average Cost of Deposits (annualized) 5.97% 6.32% 6.46% 16.09% 17.36%
Slide 24: Segment Overview – Credit Quality
24 SEGMENT OVERVIEW - Credit Quality 1.24% 1.18% 1.14% 5.87% 7.97% 8.96% 3.14% 3.86% 4.35% Community Bank CCBX Consolidated March 31, 2023 December 31, 2023 March 31, 2024 —% 1.25% 2.50% 3.75% 5.00% 6.25% 7.50% 8.75% 10.00% Allowance for Loan Losses to Total Loans CCBX partner agreements provide for
Slide 25: CCBX Loan Portfolio Statistics and Lending Approach
25 CCBX LOAN PORTFOLIO STATISTICS & LENDING APPROACH CCBX Loan Portfolio Information March 31, 2024 (dollars in thousands; unaudited) Type of Lending Balance Percent of CCBX loans receivable Available Commitments (1) Maximum Portfolio Size Number of Accounts Average Loans Size Reserve/ Pledge Accoun
Slide 26: Strong Asset Quality
26 STRONG ASSET QUALITY (1) These ratios are impacted by the increase in CCBX loans over 90 days delinquent that are covered by CCBX partner credit enhancements, see note below for more information. CCBX loans represent 1.21% and 1.47% for NPAs/Total Assets and NPLs/Loans Receivable, respectively as
Slide 27: CFC Loan and Deposit Growth
27 CFC LOAN AND DEPOSIT GROWTH $2.84 $3.03 $3.20 $1.67 $1.83 $1.88 $1.17 $1.20 $1.32 Community Bank CCBX March 31, 2023 December 31, 2023 March 31, 2024 Loans increased $173.5 million or 5.7% from December 31, 2023 as we optimize our CCBX portfolio, strengthening our balance sheet through enhanced c
Slide 28: CFC Quarterly Results
28 CFC QUARTERLY RESULTS For the Three Months Ended March 31, Earnings (Dollars in millions, except per share amounts) 2024 2023 Net Income $6.8 $12.4 Efficiency Ratio 37.88% 43.03% Basic Earnings Per Share $0.51 $0.94 Return on Average Assets 0.73% 1.58% Return on Average Equity 9.21% 19.89%Balance
Slide 29: Appendix
29 APPENDIX
Slide 30: CFC Selected Year-End Financials
30 CFC SELECTED YEAR-END FINANCIALS (1) Share and per share amounts are based on total actual or average common shares outstanding, as applicable. (2) Tangible book value per share is a non-GAAP measure. Since there is no goodwill or other intangible assets as of the dates indicated, tangible book v
Slide 31: CFC Selected Quarterly Financials
31 CFC SELECTED QUARTERLY FINANCIALS (1) Core deposits are defined as all deposits excluding time and brokered deposits. (2) Share and per share amounts are based on total actual or average common shares outstanding, as applicable. (3) Tangible book value per share is a non-GAAP measure. Since there
Slide 32: Community Bank Loan Portfolio Statistics
32 COMMUNITY BANK LOAN PORTFOLIO STATISTICS (1) The Bank’s hotel portfolio predominantly consists of travel hotels/motels and as such our occupancy rates are higher than the national average. (2) Based on best available data. If a loan has multiple guarantors, FICO score represented is highest of th
Slide 33: Office Loans – Community Bank
33 OFFICE LOANS - COMMUNITY BANK Most current data as of March 31, 2024 unless noted otherwise $29.5 $57.1 $18.1 $9.4 $10.1 $— Loan to Value 0% - 50% 51% - 60% 61% - 70% 71% - 80% 81% - 90% 90% -100% $— $25.0 $50.0 $75.0 Loan to Value Ranges (in millions) $54.8 44.1% $69.4 55.9% Owner Occupied (OO)
Slide 34: CCBX Loan Portfolio Statistics and Lending Approach
34 CCBX LOAN PORTFOLIO STATISTICS & LENDING APPROACH 1. Well-Funded Partner Cash Reserve Accounts Partner pledges/places cash in a Bank controlled deposit account at an agreed percentage of the loan balance: • We call this account the cash reserve pledge account; • The Bank has the right to access t
Slide 35: Asset-Sensitive Balance Sheet
35 ASSET-SENSITIVE BALANCE SHEET Loan Repricing 58% 6% 4% 13% 18% 1% 44% 4% 6% 29% 16% 1% 44% 4% 8% 28% 15% 1% March 31, 2023 December 31, 2023 March 31, 2024 Three months or less Over three months - 12 months Over one year - three years Over three years - five years Over five years - 15 years Over
Slide 36: Non-GAAP Reconciliation – Net BaaS Loan Income Interest Margin
36 NON-GAAP RECONCILIATION –Net BaaS Loan Income Interest Margin The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. However,
Slide 37: Non-GAAP Reconciliation – 2017 Adjusted Measures
37 NON-GAAP RECONCILIATION – 2017 ADJUSTED MEASURES Some of the financial measures included in this presentation are not measures of financial performance recognized by GAAP. Our management uses the non-GAAP financial measures set forth below in its analysis of our performance for 2017 to exclude th