Coastal Financial Corporation (CCB) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $11.6 million ($0.84 per diluted share), up from $6.8 million in Q1 2024 but down from $12.9 million in Q2 2023, mainly due to higher interest expense and credit loss provisions.

• Total assets reached $3.96 billion, up 5.5% from year-end and 2.5% sequentially, driven by $300.4 million growth in loans receivable.

• Deposit growth resumed, up 2.3% to $3.54 billion, with CCBX deposits up 1.4% and community bank deposits up 3.7% after prior declines.

• CCBX segment expanded to 21 partners, with significant growth in loans and deposits, focusing on larger, established partners and new lending products.

Financial highlights

• Net interest income for Q2 2024 was $66.2 million, up 6.2% year-over-year and 8.7% sequentially; net interest margin was 7.13%, down from 7.58% year-over-year but up from 6.78% sequentially.

• Provision for credit losses rose to $61.9 million, mainly from CCBX loan growth; net charge-offs were $53.2 million, with 97.6% covered by partner credit enhancements.

• Noninterest income was $69.9 million, up 19.3% year-over-year but down $17.1 million sequentially, driven by BaaS program fluctuations.

• Noninterest expense rose to $58.8 million, up 13.3% year-over-year and $2.8 million sequentially, mainly from higher BaaS loan expense and technology investments.

• Allowance for credit losses was $147.9 million (4.45% of loans), up from $117.0 million at year-end and $139.3 million in Q1 2024.

Outlook and guidance

• Management will continue to optimize the CCBX loan portfolio, focus on larger partners, and sell loans to manage risk and maintain credit quality.

• Deposit growth is expected to continue, with a focus on core deposits and efficient use of technology to manage expenses.

• The company is monitoring regulatory changes regarding brokered deposits and third-party arrangements, which could impact deposit classification and costs.

• Management expects continued focus on credit quality, risk management, and adapting to changing interest rate environments.