Coastal Financial Corporation · NASDAQ:CCB
Coastal Financial — Q1 2023 Earnings Presentation
36 slides from Coastal Financial's earnings presentation, Apr 28, 2023
Slide 1: Investor Presentation
April 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 March 31, 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-GAA
Slide 4: Historic Profitability and Efficiency
4 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 5: Long-Term Strategic Verticals
5 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 6: Recent Events - Deposits
6 RECENT EVENTS - Deposits DEPOSITS March 31, 2023 compared to December 31, 2022 • Deposits increased $277.7 million, or 9.9%, during the three months ended March 31, 2023 • Includes $94.3 million in fully insured IntraFi network sweep deposits as of March 31, 2023, compared to $12.5 million as of D
Slide 7: Recent Events - Liquidity
7 RECENT EVENTS - Liquidity Cash and Interest Earning Deposits • Primarily held at Federal Reserve Bank • $393.9 million at March 31, 2023 compared to $342.1 million as of December 31, 2022 Note: Data as of three months ended March 31, 2023 unless otherwise indicated • Capacity to borrow $575.1 mill
Slide 8: Recent Events - Investments
8 RECENT EVENTS - Investments Available for Sale • Available for Sale securities of $98.0 million as of March 31, 2023 • 99.7% are U.S. Treasuries • Weighted average remaining duration of 11 months • Unrealized losses were just $2.3 million, or 0.88%, of shareholders' equity as of March 31, 2023 • $
Slide 9: CCB Overview
9 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 10: Environmental, Social and Governance (ESG) Initiatives
10 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 11: Coastal World
11 COASTAL WORLD In late 2022, the bank soft launched www.coastalworld.com an immersive 3D web platform that promotes, educates and informs visitors about digital banking solutions through our fintech partners. Through activities and games, users are able to learn which providers best fit their life
Slide 12: 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 12 (Secured)
Slide 13: CCBX Banking as a Service Partners
13 28 27 25 20 19 18 1 1 1 5 1 2 5 4 2 1 Wind down - preparing to exit relationship Signed letters of intent Implementation / onboarding Friends and family / testing Active March 31, 2022 December 31, 2022 March 31, 2023 CCBX provides banking as a service (BaaS) that enables broker dealers and digit
Slide 14: CCBX Revenue Growth
14 CCBX REVENUE GROWTH As of and for the three month period indicated (Dollars in thousands) $2,466 $3,219 $3,642 $3,607 $3,575 March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 BaaS Program Fee Income (1) Note: Data as of and for the quarter ended March 31, 2023, unle
Slide 15: Growth in CCBX Activity Based Income
15 GROWTH IN CCBX ACTIVITY BASED INCOME CCBX TRANSACTION AND INTERCHANGE INCOME (Dollars in thousands) 84.4% growth over prior year quarter $493 $814 $940 $964 $917$432 $628 $738 $785 $789 Transaction income Interchange income 1Q2022 2Q2022 3Q2022 4Q2022 1Q2023 $— $250 $500 $750 $1,000 $1,250 $1,500
Slide 16: CCBX Loans and Deposits
16 CCBX Loans and Deposits (Dollars in millions) $899.5 $1,279.3 $1,563.8 BaaS-brokered deposits Demand, noninterest bearing Interest bearing March 31, 2022 December 31, 2022 March 31, 2023 (Dollars in millions) $515.3 $1,012.6 $1,166.5 Other consumer loans Residential RE secured credit cards Commer
Slide 17: Robust Sourcing Capabilities and Partnering
17 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 18: Risk Management
18 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 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 - 2020 Q
Slide 19: Loan Composition
19 CRE - Owner Occupied 12.4% C&I 11.5% Consumer and other 26.5% 1-4 Family 16.0% CRE - Non- Owner Occupied 16.2% Multifamily 10.2% Construction and Land Development 7.3% LOAN COMPOSITION Consolidated Loan Composition Community Bank Loan Concentrations by County Consolidated Commercial & Industrial
Slide 20: Deposit Composition
20 Demand, noninterest bearing 24.6% NOW and money market 71.3% Savings 3.2% Time deposits < $100K 0.4% 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 21: Segment Overview - Community Bank and CCBX
21 SEGMENT OVERVIEW - Community Bank and CCBX (for the three months ended) 0.11% 0.37% 0.66% 0.06% 3.13% 3.89% 0.09% 1.56% 2.13% Community Bank CCBX Consolidated March 31, 2022 December 31, 2022 March 31, 2023 —% 1.00% 2.00% 3.00% 4.00% Average Cost of Deposits (annualized) 5.16% 5.70% 5.97% 12.73%
Slide 22: Segment Overview - Credit Quality
22 SEGMENT OVERVIEW - Credit Quality 1.42% 1.28% 1.24% 3.52% 5.27% 5.87% 1.97% 2.82% 3.14% Community Bank CCBX Consolidated March 31, 2022 December 31, 2022 March 31, 2023 —% 1.25% 2.50% 3.75% 5.00% 6.25% Allowance for Loan Losses to Total Loans CCBX partner agreements provide for a credit enhanceme
Slide 23: Strong Asset Quality
23 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 0.71% and 0.87% for NPAs/Total Assets and NPLs/Loans Receivable, respectively. (
Slide 24: CFC Loan and Deposit Growth
24 CFC LOAN AND DEPOSIT GROWTH $1,964.2 $2,627.3 $2,837.2 $1,448.8 $1,614.8 $1,671.0 $515.4 $1,012.5 $1,166.2 Community Bank CCBX March 31, 2022 December 31, 2022 March 31, 2023 Loan Growth of $209.9 million or 8.0% from December 31, 2022 Cost of deposits 2.13% for the Quarter Ended March 31, 2023 $
Slide 25: CFC Quarterly Results
25 CFC QUARTERLY RESULTS 1Q 2023 Financial Results: For the Three Months Ended March 31, Earnings (Dollars in millions, except per share amounts) 2023 2022 Net Income $12.4 $6.2 Basic Earnings Per Share $0.94 $0.48 Return on Average Assets 1.58% 0.93% Return on Average Equity 19.89% 12.12% Balance S
Slide 26: Appendix
26 APPENDIX
Slide 27: CFC Selected Year-End Financials
27 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 28: CFC Selected Quarterly Financials
28 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 29: Community Bank Loan Portfolio Statistics
29 COMMUNITY BANK LOAN PORTFOLIO STATISTICS (1) (1) (2) (2) (3) (1) Based on best available data. If a loan has multiple guarantors, FICO score represented is highest of the guarantors. FICO scores are based off origination unless updated through annual term loan review or other credit action. (2) L
Slide 30: CCBX Loan Portfolio Statistics & Lending Approach
30 CCBX LOAN PORTFOLIO STATISTICS & LENDING APPROACH CCBX Loan Portfolio Information March 31, 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 Accoun
Slide 31: CCBX Loan Portfolio Statistics & Lending Approach
31 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 32: CCB: A Conservatively Positioned Balance Sheet
32 CCB: A Conservatively Positioned Balance Sheet Insured Deposits Less Than $250K as a % of Total Deposits Cash Balances as a % of Total Deposits Insured Deposits as a % of Total Deposits Company Name Ticker 4Q22 Coastal Financial Corp. CCB *72.3% Northwest Bancshares, Inc. NWBI 64.5% NBT Bancorp I
Slide 33: CCB: A Conservatively Positioned Balance Sheet - AOCI Risk
33 CCB: A Conservatively Positioned Balance Sheet Potential Risk From Negative AOCI Impacts Mark-to-Market HTM Securities Impact AFS Securities Maturing 3+ Years / Assets Company Name Ticker AFS Securities Univest Financial Corp. UVSP 3.7% ServisFirst Bancshares, Inc. SFBS 3.3% QCR Holdings, Inc. QC
Slide 34: Asset-Sensitive Balance Sheet
34 ASSET-SENSITIVE BALANCE SHEET Loan Repricing 45% 8% 9% 13% 23% 2% 56% 6% 5% 12% 20% 1% 58% 6% 4% 13% 18% 1% March 31, 2022 December 31, 2022 March 31, 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
Slide 35: Non-GAAP Reconciliation - Net BaaS Loan Income
35 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 36: Non-GAAP Reconciliation - 2017 Adjusted Measures
36 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