Coastal Carolina Bancshares, Inc.

What they do

The company, through its subsidiary Coastal Carolina National Bank, provides traditional retail and commercial banking services, including real estate mortgage lending, to customers in the Myrtle Beach area. It operates branches in Myrtle Beach and Garden City. The bank generates most of its income from interest on loans and investments, funded primarily by customer deposits.

Revenue drivers

• Loan portfolio — Net loans were $60.4 million at year-end 2012 and grew to $72.1 million by June 30, 2013. Management is actively channeling funds into higher-yielding loans.
• Investment securities — Available-for-sale securities were $23.3 million at year-end 2012. The bank also recognized gains on sales of investment securities in the first half of 2013.
• Customer deposits — Deposits totaled $86.5 million at year-end 2012 and exceeded $100 million for the first time in mid-2013. Deposit growth is a primary funding source for the loan portfolio.

Recent performance

For the year ended December 31, 2012, the company reported net income of $74,485, compared to a net loss of $1.3 million in 2011. Diluted EPS was $0.03 in 2012 versus a loss of $0.58 in 2011. In the first half of 2013, consolidated net income was $20,819, or $0.01 per share. Total assets rose to $114.8 million at June 30, 2013, with net loans of $72.1 million and deposits of $100.5 million.

Strategy

The company aims to be a premier community bank by providing high-touch, personalized service to small and medium-sized businesses, residents, and real estate clients. Management is focused on developing long-term relationships and growing commercial checking accounts. In 2012, the bank reinvested from securities into higher-yielding loans to improve net interest margin. The company plans to launch mobile banking in October 2013 and intends to reduce SEC filing expenses under the JOBS Act, projecting over $100,000 in annual savings.

Risks

• Credit risk and loan portfolio seasoning — The loan portfolio is relatively unseasoned, and deterioration in credit quality or increased delinquencies could require higher loan loss provisions.
• Interest rate environment — Changes in interest rates could reduce net interest margins, which are a key driver of profitability.
• Local economic conditions — The bank's performance depends on economic conditions in Horry County; a downturn could harm credit quality and loan demand.
• Regulatory and capital requirements — Regulators may impose higher capital standards or restrictions that make it harder to achieve growth objectives.

Outlook

Management reported a fourth consecutive profitable quarter at the end of the second quarter of 2013 and expects continued improvement in net interest margin. The bank plans to introduce mobile banking in October 2013 to enhance customer convenience. Management also expects cost savings from reduced SEC reporting under the JOBS Act to strengthen the bottom line.