Coastal Financial Corporation · NASDAQ:CCB
Coastal Financial — Q3 2023 Earnings Presentation
33 slides from Coastal Financial's earnings presentation, Oct 27, 2023
Slide 1: Investor Presentation
October 27, 2023 INVESTOR PRESENTATION Exhibit 99.1 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: Consolidated Financial Highlights
3 C or e D ep os it s (2 ) CONSOLIDATED FINANCIAL HIGHLIGHTS - As of and for the Quarter ended September 30, 2023 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
Slide 4: Financial Stability
4 FINANCIAL STABILITY DEPOSITS • Deposits increased $127.1 million, or 4.0%, during the three months ended September 30, 2023 • Includes $296.4 million in fully insured IntraFi network sweep deposits as of September 30, 2023, compared to $240.3 million as of June 30, 2023 Note: Data as of three mont
Slide 5: Historic Profitability and Efficiency
5 HISTORIC PROFITABILITY AND EFFICIENCY Net Income and Return on Average Assets N et In co m e ($ 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 ende
Slide 6: Long-Term Strategic Verticals
6 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 Development
Slide 7: CCB Overview
7 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 8: Environmental, Social and Governance ("ESG") Initiatives
8 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 the
Slide 9: Coastal World
9 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 Key Milestones •
Slide 10: Banking as a Service (BaaS) Partners
Banking as a Service – “BaaS” Partners Short- Term Lending Savings Accounts Credit Cards Checking Accounts Investing Health Savings Accounts 10 (Secured) Evergreen (Secured credit card) (Business Checking) (Secured & Unsecured) (Secured by and classified as 1-4 RE) (Acquired by Robinhood) (Owned by
Slide 11: CCBX Banking as a Service Overview
11 29 22 22 19 18 18 2 1 1 1 1 5 1 1 3 1 1 Wind down - preparing to exit relationship Signed letters of intent Implementation / onboarding Friends and family / testing Active September 30, 2022 June 30, 2023 September 30, 2023 CCBX provides banking as a service (BaaS) that enables broker dealers and
Slide 12: CCBX Revenue Growth
12 CCBX REVENUE GROWTH As of and for the three month period indicated (Dollars in thousands) $3,642 $3,607 $3,948 $4,401 September 30, 2022 December 31, 2022 June 30, 2023 September 30, 2023 BaaS Program Fee Income Note: Data as of and for the quarter ended September 30, 2023, unless otherwise indic
Slide 13: Growth in CCBX Activity Based Income
13 GROWTH IN CCBX ACTIVITY BASED INCOME CCBX TRANSACTION AND INTERCHANGE INCOME (Dollars in thousands) 34.2% growth over prior year quarter $940 $964 $917 $1,052 $1,036 $738 $785 $789 $975 $1,216 Transaction income Interchange income 3Q2022 4Q2022 1Q2023 2Q2023 3Q2023 $— $500 $1,000 $1,500 $2,000 $2
Slide 14: CCBX Loans and Deposits
14 CCBX Loans and Deposits (Dollars in millions) $1,202.3 $1,653.1 $1,752.2 BaaS-brokered deposits Demand, noninterest bearing Interest bearing September 30, 2022 June 30, 2023 September 30, 2023 (Dollars in millions) $915.6 $1,295.0 $1,182.8 Other consumer loans Residential RE secured credit cards
Slide 15: Risk Management
15 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 92 110 116 122 124 150 156 Risk Management Compliance BSA Internal Audit CCBX Risk Q1 - 2018 Q2 - 2018 Q3 - 2018 Q4 - 2018 Q1 - 2019 Q2 - 2019 Q3 - 2019 Q4 - 2019 Q1 - 2020 Q2 - 2020 Q3
Slide 16: Loan Composition
16 CRE - Owner Occupied 12.5% C&I 11.1% Consumer and other 25.6% 1-4 Family 16.0% CRE - Non- Owner Occupied 17.5% Multifamily 11.7% Construction and Land Development 5.6% LOAN COMPOSITION Consolidated Loan Composition Community Bank Loan Concentrations by County Consolidated Commercial & Industrial
Slide 17: Deposit Composition
17 Demand, noninterest bearing 19.8% NOW and money market 77.0% Savings 2.6% Time deposits < $100K 0.2% Time deposits > $100K 0.4% 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 18: Deposit Costs
18 DEPOSIT COSTS • Cost of total deposits was 3.14% for the quarter ended September 30, 2023 compared to 2.72% for the quarter ended June 30, 2023, and 0.82% for the quarter ended September 30, 2022 ◦ Cost of deposits for the community bank and CCBX were 1.31% and 4.80%, respectively, for the quarte
Slide 19: Segment Overview - Community Bank and CCBX
19 SEGMENT OVERVIEW - Community Bank and CCBX (for the three months ended) 0.16% 0.98% 1.31% 1.79% 4.42% 4.80% 0.82% 2.72% 3.14% Community Bank CCBX Consolidated September 30, 2022 June 30, 2023 September 30, 2023 —% 1.00% 2.00% 3.00% 4.00% 5.00% Average Cost of Deposits (annualized) 5.31% 6.28% 6.2
Slide 20: Segment Overview - Credit Quality
20 SEGMENT OVERVIEW - Credit Quality 1.26% 1.21% 1.19% 4.28% 6.96% 6.75% 2.36% 3.68% 3.41% Community Bank CCBX Consolidated September 30, 2022 June 30, 2023 September 30, 2023 —% 1.25% 2.50% 3.75% 5.00% 6.25% 7.50% Allowance for Loan Losses to Total Loans CCBX partner agreements provide for a credit
Slide 21: CCBX Loan Portfolio Statistics & Lending Approach
21 CCBX LOAN PORTFOLIO STATISTICS & LENDING APPROACH CCBX Loan Portfolio Information September 30, 2023 (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 Ac
Slide 22: Strong Asset Quality
22 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 0.98% and 1.22% for NPAs/Total Assets and NPLs/Loans Receivable, respectively as
Slide 23: CFC Loan and Deposit Growth
23 CFC LOAN AND DEPOSIT GROWTH $2,507.9 $2,967.0 $1,592.3 $1,713.0 $1,784.7 $915.6 $1,294.5 $1,182.4 Community Bank CCBX September 30, 2022 June 30, 2023 September 30, 2023 Loans decreased $40.5 million or 1.3% from June 30, 2023 as we optimize our CCBX portfolio, strengthening our balance sheet thr
Slide 24: CFC Quarterly Results
24 CFC QUARTERLY RESULTS For the Three Months Ended September 30, Earnings (Dollars in millions, except per share amounts) 2023 2022 Net Income $10.3 $11.1 Efficiency Ratio 58.36% 61.12% Basic Earnings Per Share $0.77 $0.86 Return on Average Assets 1.13% 1.45% Return on Average Equity 14.60% 19.36%B
Slide 25: Appendix
25 APPENDIX
Slide 26: CFC Selected Year-End Financials
26 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 27: CFC Selected Quarterly Financials
27 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 28: Community Bank Loan Portfolio Statistics
28 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 29: Community Bank Office Loan Statistics
29 COMMUNITY BANK OFFICE LOAN STATISTICS Most current data as of September 30, 2023 unless noted otherwise $26.9 $18.9 $16.5 $12.7 $10.2 $— Loan to Value 0% - 50% 51% - 60% 61% - 70% 71% - 80% 81% - 90% 90% -100% $— $20.0 $40.0 Loan to Value Ranges (in millions) 68.0% 32.0% Owner Occupied Non-owner
Slide 30: CCBX Loan Portfolio Statistics & Lending Approach
30 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 31: Asset-Sensitive Balance Sheet
31 ASSET-SENSITIVE BALANCE SHEET Loan Repricing 56% 6% 5% 11% 21% 1% 59% 4% 5% 14% 17% 1% 55% 4% 5% 18% 17% 1% September 30, 2022 June 30, 2023 September 30, 2023 Three months or less Over three months - 12 months Over one year - three years Over three years - five years Over five years - 15 years O
Slide 32: Non-GAAP Reconciliation - Net BaaS Loan Income
32 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 33: Non-GAAP Reconciliation - 2017 Adjusted Measures
33 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