Coastal Financial Corporation · NASDAQ:CCB
Coastal Financial — Q2 2023 Earnings Presentation
33 slides from Coastal Financial's earnings presentation, Jul 28, 2023
Slide 1: Investor Presentation
July 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 June 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-GAAP
Slide 4: Financial Stability: Deposits, Cash and Borrowings, Investments
4 FINANCIAL STABILITY DEPOSITS • Deposits increased $67.3 million, or 2.2%, during the three months ended June 30, 2023 • Includes $240.3 million in fully insured IntraFi network sweep deposits as of June 30, 2023, compared to $94.3 million as of March 31, 2023 Note: Data as of three months ended Ju
Slide 5: Historic Profitability and Efficiency
5 HISTORIC PROFITABILITY AND EFFICIENCY Net Income and Return on Average Assets N et In co m e ($ 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. Official launch announced on June 20, 2023
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 25 22 23 18 18 2 1 1 1 1 4 4 1 1 1 Wind down - preparing to exit relationship Signed letters of intent Implementation / onboarding Friends and family / testing Active June 30, 2022 March 31, 2023 June 30, 2023 CCBX provides banking as a service (BaaS) that enables broker dealers and digital fi
Slide 12: CCBX Revenue Growth
12 CCBX REVENUE GROWTH As of and for the three month period indicated (Dollars in thousands) $3,219 $3,642 $3,607 $3,575 $3,948 June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 BaaS Program Fee Income (1) Note: Data as of and for the quarter ended June 30, 2023, unless
Slide 13: Growth in CCBX Activity Based Income
13 GROWTH IN CCBX ACTIVITY BASED INCOME CCBX TRANSACTION AND INTERCHANGE INCOME (Dollars in thousands) 40.6% growth over prior year quarter $814 $940 $964 $917 $1,052 $628 $738 $785 $789 $975 Transaction income Interchange income 2Q2022 3Q2022 4Q2022 1Q2023 2Q2023 $— $250 $500 $750 $1,000 $1,250 $1,
Slide 14: CCBX Loans and Deposits
14 CCBX Loans and Deposits (Dollars in millions) $1,066.1 $1,563.8 $1,653.1 BaaS-brokered deposits Demand, noninterest bearing Interest bearing June 30, 2022 March 31, 2023 June 30, 2023 (Dollars in millions) $803.9 $1,166.5 $1,295.0 Other consumer loans Residential RE secured credit cards Commercia
Slide 15: Robust Sourcing Capabilities and Partnering
15 ROBUST SOURCING CAPABILITIES AND PARTNERING • Involve board members • Fintech experts and partners • Integrate Coastal LPs Thesis-Driven Sourcing Due Diligence Onboarding to Date Intensive Filtering • Focused points of view and research with experts • Proactive market mapping and product identifi
Slide 16: Risk Management
16 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 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 - 20
Slide 17: Loan Composition
17 CRE - Owner Occupied 12.2% C&I 11.7% Consumer and other 28.1% 1-4 Family 15.4% CRE - Non- Owner Occupied 15.9% Multifamily 10.5% Construction and Land Development 6.2% LOAN COMPOSITION Consolidated Loan Composition Community Bank Loan Concentrations by County Consolidated Commercial & Industrial
Slide 18: Deposit Composition
18 Demand, noninterest bearing 22.9% NOW and money market 73.5% Savings 2.8% Time deposits < $100K 0.3% Time deposits > $100K 0.5% 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 19: Segment Overview - Community Bank and CCBX
19 SEGMENT OVERVIEW - Community Bank and CCBX (for the three months ended) 0.08% 0.66% 0.98% 0.56% 3.89% 4.42% 0.25% 2.13% 2.72% Community Bank CCBX Consolidated June 30, 2022 March 31, 2023 June 30, 2023 —% 1.00% 2.00% 3.00% 4.00% 5.00% Average Cost of Deposits (annualized) 5.04% 5.97% 6.28% 12.35%
Slide 20: Segment Overview - Credit Quality
20 SEGMENT OVERVIEW - Credit Quality 1.36% 1.24% 1.21% 3.55% 5.87% 6.96% 2.11% 3.14% 3.68% Community Bank CCBX Consolidated June 30, 2022 March 31, 2023 June 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 enhancem
Slide 21: Strong Asset Quality
21 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 0.74% and 0.88% for NPAs/Total Assets and NPLs/Loans Receivable, respectively. (
Slide 22: CFC Loan and Deposit Growth
22 CFC LOAN AND DEPOSIT GROWTH $2,334.4 $2,837.2 $1,530.4 $1,671.0 $1,713.0 $804.0 $1,166.2 $1,294.5 Community Bank CCBX June 30, 2022 March 31, 2023 June 30, 2023 Loan Growth of $170.3 million or 6.0% from March 31, 2023 Cost of Deposits 2.72% for the Quarter Ended June 30, 2023 $2,697.3 $3,095.2 $
Slide 23: CFC Quarterly Results
23 CFC QUARTERLY RESULTS For the Three Months Ended June 30, Earnings (Dollars in millions, except per share amounts) 2023 2022 Net Income $12.9 $10.2 Efficiency Ratio 42.92* 58.38% Basic Earnings Per Share $0.97 $0.79 Return on Average Assets 1.52% 1.41% Return on Average Equity 19.53% 18.86%Balanc
Slide 24: Appendix
24 APPENDIX
Slide 25: CFC Selected Year-End Financials
25 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 26: CFC Selected Quarterly Financials
26 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 27: Community Bank Loan Portfolio Statistics
27 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 28: Community Bank Office Loan Statistics
28 COMMUNITY BANK OFFICE LOAN STATISTICS Most current data as of June 30, 2023 unless noted otherwise Days Past Due 97.5% 2.5% Current Past Due 1-29 Days > 30 Days $26.2 $19.6 $16.7 $14.6 $10.3 $— Loan to Value 0% - 50% 51% - 60% 61% - 70% 71% - 80% 81% - 90% 90% -100% $— $10.0 $20.0 $30.0 Loan to V
Slide 29: CCBX Loan Portfolio Statistics & Lending Approach
29 CCBX LOAN PORTFOLIO STATISTICS & LENDING APPROACH CCBX Loan Portfolio Information June 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 Account
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 55% 6% 7% 10% 21% 1% 58% 6% 4% 13% 18% 1% 59% 4% 5% 14% 17% 1% June 30, 2022 March 31, 2023 June 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 Over 15 ye
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