BEAUFORT, S.C., Nov. 12, 2010 (GLOBE NEWSWIRE) -- Coastal Banking Company Inc. (OTCBB:CBCO), the holding company of CBC National Bank, which operates divisions including Lowcountry National Bank in Beaufort, S.C., and First National Bank of Nassau County in Fernandina Beach, Fla., reported a net loss of $496,489, or a loss of $0.25 per diluted share, for the quarter ended Sept. 30, 2010. This compares to a net loss of $425,251, or a loss of $0.22 per diluted share, in the third quarter of 2009.
Key highlights from the third quarter of 2010 include:
- Net interest income rose 7.7 percent from the same period a year ago.
- Noninterest income grew 89.2 percent from last year, due to a large increase in mortgage banking income spurred by low mortgage rates.
- Net interest margin expanded by 52 basis points from the third quarter of 2009.
- Net charge-offs of $1.6 million increased compared to the second quarter of 2010 and were slightly above the $1.5 million of net charge-offs in the third quarter of 2009.
- Other real estate owned of $14.4 million continued to decrease, down by 20.6 percent from $18.2 million at the end of 2009.
- Provision for loan losses of $1.4 million increased compared to the second quarter of 2010 and was slightly higher than the $1.3 million provision in the third quarter of 2009.
- Capital ratios remained strong with a total risk based capital ratio of 14.21 percent and a Tier 1 leverage ratio of 9.12 percent at Sept. 30, 2010.
"Our company continued to work hard to manage the challenges of a poor economy in the third quarter," said Michael G. Sanchez, chief executive officer. "Despite the lack of loan demand, we grew our interest and noninterest income from a year ago and expanded our net interest margin, yet higher expenses associated with other real estate continued to suppress our net income and earnings. Nonperforming assets also rose in the third quarter, which, as we have stated in the past, may periodically happen due to the uneven nature of the current economy. Overall, we remain positive that we are taking the right steps to return our company to profitability."
Net interest income in the third quarter of 2010 totaled $3.2 million, an increase of 7.7 percent from $2.9 million for the same period in 2009. Noninterest income for the third quarter was $3.2 million, an 89.2 percent increase from $1.7 million for the quarter ended Sept. 30, 2009. The increase in noninterest income is due primarily to an increase of $1.6 million in mortgage banking income, which totaled $3.0 million for the quarter ended Sept. 30, 2010, compared to $1.4 million for the same period of 2009.
Noninterest expense was $5.9 million for the third quarter of 2010, compared to $4.1 million for the third quarter of 2009. The comparative increase was due mainly to significantly higher other real estate expenses, which grew $715,000 from the same period last year, and a $627,000 rise in compensation expenses incurred by the company's wholesale mortgage banking division on increased lending levels.
Net interest margin for the quarter ended Sept. 30, 2010, increased to 3.09 percent from 2.94 percent in the previous quarter and 2.57 percent for the quarter ended Sept. 30, 2009.
Total assets at Sept. 30, 2010 were $433.0 million, compared to $463.1 million at Dec. 31, 2009. Total shareholders' equity was $35.7 million at Sept. 30, 2010, compared to $37.9 million at Dec. 31, 2009.
Total deposits were $356.7 million at the end of the third quarter, compared to $368.9 million at Dec. 31, 2009. Total portfolio loans at the end of the third quarter were $277.6 million, compared to $289.7 million at Dec. 31, 2009.
The company's residential mortgage banking division originated approximately $252.6 million in loans available for sale in the secondary market during the third quarter of 2010. This compares to $208.1 million in loans originated for sale in the secondary market during the third quarter of 2009. Since the mortgage banking division began operations in September 2007, the division has originated over $2 billion in residential mortgage loans.
Net charge-offs in the third quarter of 2010 totaled $1.6 million, or 0.56 percent of total loans, compared to $863,000, or 0.30 percent, in the previous quarter, and $1.5 million or 0.50 percent in the third quarter of 2009. Nonaccrual loans as a percentage of total loans at the end of the third quarter of 2010 were 7.20 percent, compared to 5.83 percent at the end of the previous quarter and 7.99 percent at Sept. 30, 2009. Loans past due greater than 30 days and still accruing interest totaled $6.1 million at the end of the third quarter of 2010, compared to $4.9 million at the end of the previous quarter and $2.0 million at Dec. 31, 2009.
Other real estate owned at Sept. 30, 2010 totaled $14.4 million, compared to $16.6 million at June 30, 2010, and $18.2 million at Dec. 31, 2009.
The company's provision for loan losses totaled $1.4 million for the third quarter of 2010, which was $192,000 less than net charge-offs, compared to $685,413 for the second quarter of 2010, which was $178,000 less than net charge-offs, and a provision of $2.1 million, or $53,000 in excess of net charge-offs, at Dec. 31, 2009. The company's allowance for loan losses totaled $6.3 million, or 2.27 percent of loans outstanding, at Sept. 30, 2010, compared to $6.5 million, or 2.28 percent of loans outstanding, at the end of the previous period, and $6.4 million, or 2.20 percent of loans outstanding, at Dec. 31, 2009.
"We elevated our provision for loan losses in response to the ongoing uncertainty in future loan charge-off levels," said Sanchez. "Volatility in the economy, especially as it impacts our borrowers' ability to repay and the relative value of collateral securing some of our loans, will likely keep us in a conservative posture with regards to this provision."
At Sept. 30, 2010, CBC National Bank had a total risk-based capital ratio of 13.58 percent and a Tier 1 risk-based capital ratio of 12.31 percent. The threshold for being classified as "well capitalized" by federal regulators is 10 percent and 6 percent, respectively, for total and Tier 1 risk-based capital.
The company had $113.2 million in funding available from multiple sources at the end of the third quarter of 2010, down slightly from the $118.1 million available at the end of the previous quarter and $114.3 million available at Dec. 31, 2009.
For the nine months ended Sept. 30, 2010, the company had a net loss of $1.5 million, or a loss of $0.76 per diluted share, compared to a net loss of $2.6 million, or a loss of $1.18 per diluted share, in the same period a year ago.
Net interest income for the first nine months of 2010 was $9.1 million, compared to $8.0 million in the first nine months of 2009. Noninterest income was $6.5 million for the first nine months of 2010, compared to $6.1 million in the same period of 2009. Income from Small Business Administration (SBA) loans totaled $183,000 in the first three quarters of 2010, compared to $135,000 in the same period in 2009. Noninterest expense was $14.6 million for the first nine months of 2010, compared to $12.2 million for the same period in 2009.
For the first nine months of 2010, the company recognized income tax expense of $48,000 with an effective tax rate of (3 percent) compared to an income tax benefit of $1.2 million with an effective tax rate of 31 percent for the first nine months of 2009. This was due to the nonrecurring impact of the early redemption of several bank-owned life insurance policies in 2010, which generated taxable income but did not result in GAAP income. As such, the company recognized a substantial tax expense on the taxable gain without any corresponding book income.
About Coastal Banking Company Inc.
Coastal Banking Company Inc., based in Beaufort, S.C., is the $433.0 million-asset bank holding company of CBC National Bank, which operates as Lowcountry National Bank in Beaufort, S.C., First National Bank of Nassau County in Fernandina Beach, Fla., and The Georgia Bank in Meigs, Ga. CBC National Bank, which is headquartered in Fernandina Beach, provides a full range of consumer and business banking services through full-service banking offices in Beaufort, Fernandina Beach, Meigs, Hilton Head, S.C., and Port Royal, S.C. The company also operates a residential mortgage banking division based in Atlanta and commercial loan production offices in Jacksonville, Fla., and Savannah, Ga. The company's common stock is publicly traded on the OTC Bulletin Board under the symbol CBCO. For more information, please visit the company's Web site, www.coastalbanking.com.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK FACTORS
This release contains forward-looking statements including statements relating to present or future trends or factors generally affecting the banking industry and specifically affecting Coastal's operations, markets and products. Without limiting the foregoing, the words "believes," "anticipates," "intends," "expects," or similar expressions are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties. Actual results could differ materially from those projected for many reasons, including, without limitation, changing events and trends that have influenced Coastal's assumptions, but that are beyond Coastal's control. These trends and events include (i) changes in the interest rate environment which may reduce margins, (ii) not achieving expected growth, (iii) less favorable than anticipated changes in the national and local business environments and securities markets, (iv) adverse changes in the regulatory requirements affecting Coastal, (v) greater competitive pressures among financial institutions in Coastal's markets, (vi) greater loan losses than historic levels, and (vii) difficulties in expanding our banking operations into a new geographic market. Additional information and other factors that could affect future financial results are included in Coastal's filings with the Securities and Exchange Commission.
All written or oral forward-looking statements are expressly qualified in their entirety by these cautionary statements. Please also read the additional risks and factors described from time to time in reports and registration statements filed with the Securities and Exchange Commission. Coastal Banking Company, Inc. undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.
CONTACT: Coastal Banking Company Inc. Michael G. Sanchez, Chief Executive Officer 904-321-0400 Marsh Communications LLC Andy Mus, Senior Vice President 404-327-7662