Coastal Carolina Bancshares, Inc. Reports Second Quarter 2021 Results

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MYRTLE BEACH, SC / ACCESSWIRE / July 22, 2021 / Coastal Carolina Bancshares, Inc. (the "Company") (OTCQX:CCNB), parent of Coastal Carolina National Bank (the "Bank"), reported unaudited financial results for the second quarter of 2021. The Company reported net income of $2,920,796 or $.47 cents per share for the six months ended June 30, 2021, compared to $1,441,677 or $.23 cents per share for the same period ended June 30, 2020, representing a 103% increase. Net income for the three months ended June 30, 2021, was $1,533,227 or $.25 cents per share which represents a 11% increase over prior quarter income of $1,387,569 and a 126% increase over quarterly net income of $678,943 for the same period one year ago.

2021 Second Quarter Financial Highlights

Second quarter net income of $1,533,227, an increase of 126% year over year, and 11% on a linked quarter basis
Second quarter pre-tax pre-provision earnings of $2.2 million, an increase of 35% year over year, and 12% on a linked quarter basis
Diluted EPS of $0.25 per share for the quarter and $0.47 year-to-date
Total Assets increased 8% during the quarter and 17% year-to-date (34% annualized) to $708 million at June 30, 2021
Total Deposits increased by 9% during the quarter and 19% year-to-date (38% annualized) to $635 million at June 30, 2021
Total Loans increased 4% during the quarter and 10% year-to-date (20% annualized) from $415 million at December 31, 2020 to $456 million at June 30, 2021. This increase includes $4 million of net PPP loan growth.

"We are very pleased with our earnings performance in the second quarter of 2021. Our team continues to focus on building and developing new banking relationships which have resulted in consistent growth in Total Assets, Total Deposits as well as Total Loans. Each of the markets in which we serve is experiencing economic growth and we are proud to help our customers thrive and succeed in this environment. While we focus on our growth trajectory we also continue to look for ways to improve our processes and become even more efficient. Our asset quality remains strong and is a testament to our philosophy of maintaining pristine loan quality while growing our commercial and mortgage loan portfolios at a solid pace." says Laurence S. Bolchoz, Jr., President and Chief Executive Officer of the Company and the Bank.

Coastal Carolina Bancshares, Inc.
Selected Financial Highlights
(unaudited)

		June 30, 2021			March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
Balance Sheet (In Thousands)
Total Assets		$	708,392		$	654,695			$	603,186			$	575,800			$	551,302
Investment Securities			79,593			72,569				68,639				69,310				64,818
Loans, net of unearned income (total loans)			456,026			437,292				414,669				413,749				396,126
Deposits			634,748			583,314				533,040				506,915				483,915
Shareholders' Equity			56,490			54,319				53,860				52,161				50,682

Total Shares Outstanding			6,145,470			6,146,218				6,157,718				6,160,718				6,160,718
Book Value per Share		$	9.19		$	8.84			$	8.75			$	8.47			$	8.23
Tangible Book Value Per Share		$	8.65		$	8.30			$	8.20			$	7.92			$	7.68

Selected % Increases		2nd Qtr 2021			1st Qtr 2021				4th Qtr 2020				3rd Qtr 2020				2nd Qtr 2020
Total Assets			8	%		9	%			5	%			4	%			15	%
Total Loans			4	%		5	%			0	%			4	%			7	%
Total Deposits			9	%		9	%			5	%			5	%			14	%

Selected Ratios
Loan Loss Reserve to Total Loans			1.04	%		1.03	%			1.03	%			0.96	%			0.98	%
Non-Performing Assets (excl TDRs) to Total Assets			0.06	%		0.06	%			0.15	%			0.16	%			0.28	%
Net Charge-Offs to Avg Total Loans (annualized)			0.00	%		0.00	%			0.00	%			0.29	%			0.00	%

	For the							For the				For the				For the
	Three Months Ended							Three Months Ended				Three Months Ended				Six Months Ended
	June 30, 2021							March 31, 2021				June 30, 2020				June 30, 2021
Earnings Breakdown (In Thousands)
Total Interest Income		$	5,737		$	5,582			$	5,444			$	11,319			$	10,461
Total Interest Expense			723			767				1,121				1,490				2,266
Net Interest Income			5,014			4,815				4,323				9,829				8,195
Total Noninterest Income			1,487			1,269				868				2,756				1,434
Total Noninterest Expense			4,306			4,124				3,569				8,430				6,813
Provision for Loan Losses			258			211				770				469				985
Income Before Taxes			1,937			1,749				852				3,686				1,831
Taxes			403			361				173				765				389
Net Income		$	1,534		$	1,388			$	679			$	2,921			$	1,442

Basic Earnings Per Share		$	0.25		$	0.23			$	0.11			$	0.48			$	0.23
Diluted Earnings Per Share		$	0.25		$	0.23			$	0.11			$	0.47			$	0.23
Weighted Average Shares Outstanding - Basic			6,150,442			6,150,442				6,158,970				6,148,451				6,157,587
Weighted Average Shares Outstanding - Diluted			6,164,058			6,160,573				6,158,970				6,160,325				6,157,587

Selected Ratios
Return On Average Assets			0.90	%		0.88	%			0.53	%			0.89	%			0.59	%
Return On Average Equity			11.07	%		10.26	%			5.44	%			10.67	%			5.87	%
Efficiency Ratio			65.96	%		67.49	%			68.35	%			66.71	%			70.32	%
Net Interest Margin - Bank Level			3.20	%		3.32	%			3.66	%			3.25	%			3.64	%

Capital

The Company and Bank continued to increase capital through retained earnings during the second quarter of 2021, resulting in Bank capital ratios that exceed the regulatory minimums to be considered well-capitalized. At June 30, 2021, the Bank's regulatory capital ratios (Leverage, Tier 1, and Total Risk-Based) were 8.37%, 12.21%, and 13.24%, respectively.

The Company reported a tangible book value per share of $8.65 at June 30, 2021 compared to $7.68 at June 30, 2020.

Balance Sheet and Credit Quality

Total Assets increased by 8% during the second quarter to $708 million at June 30, 2021, compared to $655 million at March 31, 2021, and 34% year-to-date. Asset growth was driven predominantly by continued deposit accumulation and consisted primarily of increases in cash, loans, and securities.

The Bank continued to experience significant deposit growth during the quarter, reporting $635 million in total deposits on June 30, 2021, compared to $583 million at March 31, 2021 and $533 million at December 31, 2020. Deposits increased 9% over the most recent linked quarter and 18% year-to-date representing an annualized growth rate of 38%. The Bank continues to focus on local core deposits, resulting in continued improvement in the Bank's funding mix. At quarter end, checking and savings accounts represented 37% of the Bank's total deposits, money market accounts represented 43% and time deposits represented 20%. Non-interest checking account balances increased $20.7 million during the quarter, and represented 19% of the Bank's total deposits at quarter end.

Total loans increased by $19 million during the quarter, and $41 million year-to-date to $456 million at quarter end. Second quarter net loan growth was impacted by Payroll Protection Program (PPP) loan paydowns of $6 million. Adjusting for PPP loan paydowns, second quarter loan growth totaled $25 million which represents an annualized growth rate of 23%.

$27.6 million in PPP balances remained on the Bank's balance sheet as of quarter end June 30, 2021 net of forgiveness. The Bank is currently working through the forgiveness process with its customers, and anticipates that the majority of remaining round one loan forgiveness will occur over the next quarter, and forgiveness of second round PPP lending will continue through year end 2021 and into 2022.

Asset quality metrics remained solid during the second quarter of 2021. The Bank's non-performing asset ratio as of June 30, 2021 was 0.06% excluding TDRs and 0.20% with the inclusion of performing TDRs. Additionally, the Bank had no charge-offs during the first half of 2021, and has no outstanding OREO property.

During the COVID-19 pandemic, the Bank offered temporary deferral and forbearance programs to customers who were, or expected to be, negatively impacted by the pandemic. At June 30, 2021 the bank had only one loan relationship remaining on deferral with a total exposure of less than $50 thousand.

Income Statement

Net Interest Income

Net interest income increased 16% to $5.0 million for the quarter ended June 30, 2021, compared to $4.3 million during the prior year's second quarter ended June 30, 2020, and increased 4% when compared to $4.8 million reported during the most recent quarter ended March 31, 2021. Net interest increases resulted primarily from growth in loans and other earning assets offset by declining interest margins. The Bank recognized approximately $187 and $251 thousand in PPP fee income during the quarters ended June 30 and March 31, 2021, respectively which contributed to the Bank's net interest income.

The Bank's quarterly net interest margin was 3.20% for the quarter ended June 30, 2021, compared to 3.32% for the quarter ended March 31, 2021, and 3.66% for the quarter ended June 30, 2020. The decrease in margin is largely attributable to excess liquidity resulting from the significant deposit build post-pandemic. The declining interest rate environment and excess liquidity have led to decreasing earning asset yields as rate sensitive assets reprice. The impact of asset yield decline has been partially offset by the Bank's decreasing cost of funds resulting from reduced deposit pricing. The Bank's quarterly cost of funds was 0.37% for the quarter ended June 30, 2021, compared to 0.43% for the quarter ended March 31, 2021, and 0.88% for the quarter ended June 30, 2020.

Noninterest Income

Noninterest income totaled $1,487 thousand for the quarter ended June 30, 2021, compared to $1,269 thousand earned during the most recent quarter ended March 31, 2021 and $868 thousand in the second quarter of 2020.

Variations in noninterest income are largely attributable to changes in mortgage revenues including gain on the sale of mortgage loans. Second quarter 2021 mortgage revenues were $1,033 thousand compared to $1,046 thousand for the most recent linked quarter, and $650 thousand for the same period in the prior year. Additionally, other non-interest income increased in the second quarter by approximately $146,000 resulting from a gain on sale of fixed assets.

Noninterest Expense

Noninterest expense totaled $4.3 million for the quarter ended June 30, 2021, compared to $4.1 million for the prior quarter ended March 31, 2021, and $3.6 million for the comparative quarter ended June 30, 2020. Quarter over quarter increases in compensation expense (largely attributable to mortgage commissions), data processing, and other non-interest expense was offset by decreased depreciation expense.

Provision for Loan Losses

During the quarter, the Bank recorded provision expense of $258,000 compared to $211,000 in the most recent linked quarter and $770,000 during the second quarter of last year. The Bank's loan loss reserves to total loans have increased from 0.98% at the end of the second quarter of 2020 to 1.04% at June 30, 2021. The Bank's loan loss reserves to total loans requiring reserve (excludes loans held for sale, government guaranteed and cash secured loans) have increased from 1.06% at June 30, 2020 to 1.13% at June 30, 2021.

While the Bank's credit metrics remain strong, the COVID-19 pandemic and related recovery continue to impact the nation's economy and the people and businesses within the communities we serve. We will continue to monitor local market and portfolio level data to identify negative impacts on the performance of our loan portfolio caused by the pandemic. As the Bank recognizes the need for an increased allowance for loan losses, provisions will be made accordingly.

About Coastal Carolina Bancshares, Inc. Coastal Carolina Bancshares, Inc. is the Bank holding Company of Coastal Carolina National Bank, a Myrtle Beach-based community bank serving Horry, Georgetown, Aiken, Richland, Greenville, Spartanburg, and Brunswick (NC) counties. Coastal Carolina National Bank is a locally operated financial institution focused on providing personalized service. It offers a full range of banking services designed to meet the specific needs of individuals and small and medium-sized businesses. Headquartered in Myrtle Beach, SC, the Bank also has branches in Garden City, North Myrtle Beach, Conway, Aiken, Columbia, and Greenville, as well as a Loan Production Office in Spartanburg, South Carolina. Through the substantial experience of our local management and Board of Directors, Coastal Carolina Bancshares, Inc. seeks to enhance value for our shareholders, build lasting customer relationships, benefit our communities and give our employees a meaningful career opportunity. To learn more about the Company and its subsidiary bank, please visit our website at www.myccnb.com.

Forward-Looking Statements Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements. Actual results might differ materially from those explicit or implicit in the forward-looking statements. Important factors that could cause actual results to differ materially include, without limitation: the effects of future economic conditions; governmental fiscal and monetary policies; legislative and regulatory changes; the risks of changes in interest rates; successful merger integration; management of growth; fluctuations in our financial results; reliance on key personnel; our ability to compete effectively; privacy, security and other risks associated with our business. Coastal Carolina Bancshares, Inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law.