Coastal Financial Corporation · NASDAQ:CCB
Coastal Financial — Investor Presentation (January 2024)
35 slides from Coastal Financial's investor presentation, Jan 30, 2024
Slide 1: Investor Presentation
January 30, 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: Fiscal Year 2023 Highlights
3 Fiscal Year 2023 Highlights Net Income Year ended December 31, 2023 compared to Year Ended December 31, 2022 Net income of $44.6 million, or $3.27 per diluted common share, for the year ended December 31, 2023, compared to $40.6 million, or $3.01 per diluted common share for the year ended Decembe
Slide 4: Strategy for Reducing Risk and Managing Expenses
4 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 5: Consolidated Financial Highlights
5 C or e D ep os it s (2 ) CONSOLIDATED FINANCIAL HIGHLIGHTS - As of and for the Quarter ended December 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-
Slide 6: Financial Stability: Deposits, Cash and Borrowings, Investments
6 FINANCIAL STABILITY DEPOSITS • Deposits increased $70.7 million, or 2.1%, during the three months ended December 31, 2023 • Includes $340.1 million in fully insured IntraFi network sweep deposits as of December 31, 2023, compared to $296.4 million as of September 30, 2023 Note: Data as of three mo
Slide 7: Historic Profitability and Efficiency
7 HISTORIC PROFITABILITY AND EFFICIENCY Net Income and Return on Average Assets N et In co m e ($ 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 8: Long-Term Strategic Verticals
8 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 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 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 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 and Flexible Spending Accounts 12 (Secured) Evergreen (Secured credit card) (Business Checking) (Secured & Unsecured) (Secured by and classified as 1-4 RE) (Ac
Slide 13: CCBX Banking as a Service Partner Pipeline
13 27 22 21 19 18 19 1 1 11 1 5 1 2 1 Wind down - preparing to exit relationship Signed letters of intent Implementation / onboarding Friends and family / testing Active December 31, 2022 September 30, 2023 December 31, 2023 CCBX provides banking as a service (BaaS) that enables broker dealers and d
Slide 14: CCBX Revenue Growth
14 CCBX REVENUE GROWTH As of and for the three month period indicated (Dollars in thousands) $3,607 $3,948 $4,401 $4,369 December 31, 2022 June 30, 2023 September 30, 2023 December 31, 2023 BaaS Program Fee Income Note: Data as of and for the quarter ended December 31, 2023, unless otherwise indicat
Slide 15: Growth in CCBX Activity Based Income
15 GROWTH IN CCBX ACTIVITY BASED INCOME CCBX TRANSACTION AND INTERCHANGE INCOME (Dollars in thousands) 30.2% growth over prior year quarter $964 $917 $1,052 $1,036 $1,006 $785 $789 $975 $1,216 $1,272 Transaction income Interchange income 4Q2022 1Q2023 2Q2023 3Q2023 4Q2023 $— $500 $1,000 $1,500 $2,00
Slide 16: CCBX Loans and Deposits
16 CCBX Loans and Deposits (Dollars in millions) $1,279.3 $1,752.2 $1,862.8 BaaS-brokered deposits Demand, noninterest bearing Interest bearing December 31, 2022 September 30, 2023 December 31, 2023 (Dollars in millions) $1,012.6 $1,182.8 $1,196.2 Other consumer loans Residential RE secured credit c
Slide 17: Risk Management
17 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 92 110 116 122 124 150 156 149 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
Slide 18: Loan Composition
18 CRE - Owner Occupied 12.9% C&I 9.6% Consumer and other 26.9% 1-4 Family 15.3% CRE - Non- Owner Occupied 17.9% Multifamily 12.2% Construction and Land Development 5.2% LOAN COMPOSITION Consolidated Loan Composition Community Bank Loan Concentrations by County Consolidated Commercial & Industrial (
Slide 19: Deposit Composition
19 Demand, noninterest bearing 18.6% NOW and money market 78.6% Savings 2.3% Time deposits < $100K 0.2% Time deposits > $100K 0.3% 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 20: Deposit Costs
20 DEPOSIT COSTS • Cost of total deposits was 3.36% for the quarter ended December 31, 2023 compared to 3.14% for the quarter ended September 30, 2023, and 1.56% for the quarter ended December 31, 2022 ◦ Cost of deposits for the community bank and CCBX were 1.57% and 4.90%, respectively, for the qua
Slide 21: Segment Overview - Community Bank and CCBX
21 SEGMENT OVERVIEW - Community Bank and CCBX (for the three months ended) 0.37% 1.31% 1.57% 3.13% 4.80% 4.90% 1.56% 3.14% 3.36% Community Bank CCBX Consolidated December 31, 2022 September 30, 2023 December 31, 2023 —% 1.00% 2.00% 3.00% 4.00% 5.00% Average Cost of Deposits (annualized) 5.70% 6.20%
Slide 22: Segment Overview - Credit Quality
22 SEGMENT OVERVIEW - Credit Quality 1.28% 1.19% 1.18% 5.27% 6.75% 7.97% 2.82% 3.41% 3.86% Community Bank CCBX Consolidated December 31, 2022 September 30, 2023 December 31, 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 cre
Slide 23: CCBX Loan Portfolio Statistics & Lending Approach
23 CCBX LOAN PORTFOLIO STATISTICS & LENDING APPROACH CCBX Loan Portfolio Information December 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 Acc
Slide 24: Strong Asset Quality
24 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 1.24% and 1.54% for NPAs/Total Assets and NPLs/Loans Receivable, respectively as
Slide 25: CFC Loan and Deposit Growth
25 CFC LOAN AND DEPOSIT GROWTH $3.03 $1.61 $1.78 $1.83 $1.01 $1.18 $1.20 Community Bank CCBX December 31, 2022 September 30, 2023 December 31, 2023 Loans increased $59.1 million or 2.0% from September 30, 2023 as we optimize our CCBX portfolio, strengthening our balance sheet through enhanced credit
Slide 26: CFC Quarterly Results
26 CFC QUARTERLY RESULTS For the Three Months Ended December 31, Earnings (Dollars in millions, except per share amounts) 2023 2022 Net Income $9.0 $13.1 Efficiency Ratio 41.58% 48.94% Basic Earnings Per Share $0.68 $1.01 Return on Average Assets 0.97% 1.66% Return on Average Equity 12.35% 21.86%Bal
Slide 27: Appendix
27 APPENDIX
Slide 28: CFC Selected Year-End Financials
28 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 29: CFC Selected Quarterly Financials
29 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 30: Community Bank Loan Portfolio Statistics
30 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 31: Office Loans - Community Bank
31 OFFICE LOANS - COMMUNITY BANK Most current data as of December 31, 2023 unless noted otherwise $29.9 $22.3 $15.7 $11.0 $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) $55.9 62.8% $33.1 37.2% Owner Occupied (OO) No
Slide 32: CCBX Loan Portfolio Statistics & Lending Approach
32 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 33: Asset-Sensitive Balance Sheet
33 ASSET-SENSITIVE BALANCE SHEET Loan Repricing 56% 6% 5% 12% 20% 1% 55% 4% 5% 18% 17% 1% 44% 4% 6% 29% 16% 1% December 31, 2022 September 30, 2023 December 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 year
Slide 34: Non-GAAP Reconciliation - Net BaaS Loan Income Interest Margin
34 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 35: Non-GAAP Reconciliation - 2017 Adjusted Measures
35 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
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