CCB Coastal Financial Corporation

2018 Second Quarter Highlights:

Coastal Financial Corporation (NASDAQ: CCB) (the “Company”) today reported unaudited financial results for the second quarter 2018.  Net income for the second quarter of 2018 was $2.2 million, or $0.24 per diluted common share, compared with net income of $1.8 million, or $0.20 per diluted share, for the first quarter of 2018.

On July 18, 2018, the Company closed its initial public offering of 2,577,500 shares of common stock, including the exercise of the over-allotment of 427,500 shares, for net proceeds of $33.2 million after deducting underwriting discounts, commissions, and estimated offering expenses.

Eric Sprink, President and CEO, commented, “We are pleased with our second quarter financial performance, especially our deposit and loan growth.  Historically, the second quarter has been a tougher quarter to grow deposits due to customers withdrawing funds to pay taxes.  However, for the three months ended June 30, 2018 deposit growth on an annualized basis was 9.5% and loan growth was 13.1%.  We believe that the loan and deposit growth, combined with the increase in net interest margin, positions us well for continued growth in earnings.”

In addition, our initial public offering, which was completed on July 20, 2018, was priced at $14.50 a share (which was near the top of the offering range), and net proceeds were $33.2 million after expenses.  We intend to use the net proceeds from this offering to support our growth, organically or through mergers and acquisitions, and for general corporate purposes.”

The Company had net income of $4.0 million for the six months ended June 30, 2018, or $0.44 per diluted common share, compared to $3.2 million, or $0.35 per diluted common share for the six months ended June 30, 2017.

Results of Operations

Net interest income was $8.3 million for the three months ended June 30, 2018, an increase of 6.4% from $7.8 million for the first quarter of 2018, and an increase of 15.3% from $7.2 million for the second quarter of 2017. Increases over the prior quarter and prior year were the result of growth in interest earning assets, primarily loans, and improvements in net interest margin.

Net interest income for the six months ended June 30, 2018 totaled $16.1 million, an increase of 14.2% compared to the same period last year. The $2.0 million increase in net interest income over the same period last year was primarily related to growth in loan balances. During the six months ended June 30, 2018, the average balance of total loans receivable increased by $69.2 million, compared to the same period last year. This increase was partially offset by increased deposit costs from the growth in the balance of our deposits of $40.7 million and an increase in the cost of deposit funds of 12 basis points, compared to the same period last year.

Net interest margin for the quarter ended June 30, 2018 increased 14 basis points to 4.26% from 4.12% for the first quarter of 2018 and from 4.12% for the second quarter of 2017. The increase in net interest over the comparable period in the prior year was primarily due to increases in loan volume as a percent of earning assets and higher prepayment penalties and deferred fees recognized on loans paid off, and to a lesser extent, increases in average loan yields. The average loan receivable balance for the three months ended June 30, 2018 was $689.0 million, an increase of 5.3% compared to the prior quarter of 2018 and an increase of 13.5% from the same quarter one year ago.

Net interest margin for the six months ended June 30, 2018 increased 12 basis points to 4.19% from 4.07% for the comparable period last year. The increase in net interest over the comparable period in the prior year was primarily due to increases in loan volume as a percent of earning assets and higher prepayment penalties and deferred fees recognized on loans paid off in the first two quarters of 2018, and to a lesser extent, increases in average loan yields.

Loan yields for the quarter ended June 30, 2018 were 5.11%, an increase of four basis points from 5.07% for the quarter ended March 31, 2018, and a 12 basis point increase from 4.99% for the quarter ended June 30, 2017. Loan yields for the six months ended June 30, 2018 were 5.09%, an increase of 13 basis points from 4.96% for the six months ended June 30, 2017. Prepayment penalties and deferred fees recognized on loans paid off in both the current quarter and previous quarter were each 0.09% higher than the quarter ended June 30, 2017. Contractual loan yields approximated 4.92% for the three months ended June 30, 2018, 4.88% for the three months ended March 31, 2018, and 4.89% for the three months ended June 30, 2017.

The following table shows the Company’s key performance ratios for the periods indicated.

		Three months ended				Six months ended
		June 30, 2018	March 31, 2018	June 30, 2017		June 30, 2018	June 30, 2017
Return on average assets (1)		1.09%	0.93%	1.03%		1.02%	0.88%
Return on average shareholders’ equity (1)		12.90%	11.09%	12.00%		12.07%	9.81%
Yield on earnings assets (1)		4.73%	4.56%	4.51%		4.65%	4.45%
Yield on loans receivable (1)		5.11%	5.07%	4.99%		5.09%	4.96%
Cost of funds (1)		0.50%	0.46%	0.41%		0.48%	0.41%
Cost of deposits (1)		0.40%	0.37%	0.30%		0.38%	0.31%
Net interest margin (1)		4.26%	4.12%	4.12%		4.19%	4.07%
Noninterest expense to average assets (1)		3.15%	3.07%	3.32%		3.12%	2.98%
Efficiency ratio		66.77%	68.28%	66.27%		67.50%	67.96%
Loans receivable to deposits		94.12%	93.30%	97.25%		94.12%	97.25%
(1) annualized calculations

Noninterest income was $1.2 million for the second quarter of 2018, an increase of $106,000 from $1.1 million for the first quarter of 2018 and an increase of $193,000 from $1.0 million for the comparable period one year ago. The increase compared to the prior quarter was primarily due to newly assessed point of sale/ATM fees and increased activity in merchant services, which resulted in an additional $84,000 of income during the quarter. The increase in noninterest income compared to the same quarter one year ago was primarily related to increases in existing deposit fees and the introduction of new deposit fees to bring those fees in line with the industry. Sublease and lease income decreased in the second quarter 2018, as compared to both first quarter 2018 and second quarter 2017, as a result of a long-term tenant electing to not renew their lease.

Noninterest income was $2.3 million for the six months ended June 30, 2018, compared to $1.9 million for the six months ended June 30, 2017. The increase is primarily related to newly assessed deposit fees, as discussed above. Loan referral fee income, which is earned when a borrower enters into an interest rate swap agreement with a third party, totaled $244,000 for the six months ended June 30, 2018, an increase of $202,000 from the same period last year.

Total noninterest expense for the current quarter increased 4.9% to $6.4 million from $6.1 million for the preceding quarter and increased 16.4% from $5.5 million from the comparable period one year ago. The increased expenses for the current quarter compared to the prior quarter and previous quarter one year ago were primarily due to increases in salary expenses. Full time equivalent employees increased 7% during the current quarter and increased 14% from the same quarter one year ago. Staffing increases are due to the continued organic growth initiatives, and includes increases in sales staff, including hiring new banking teams, and additional back office staffing to support the incremental increases in banking teams and for operation as a public company.

Total noninterest expense for the six months ended June 30, 2018 totaled $12.4 million, an increase of 14.8% compared to the same period last year. The increase is primarily attributable to increased salary expense, as discussed above and the addition of our Woodinville branch in October 2017.

The provision for income taxes decreased 33.3% for the current quarter and the six months ended June 30, 2018, compared to the same periods last year, primarily due to the Tax Cuts and Jobs Act legislation which was signed into law on December 22, 2017. The Company began using the lower tax rate of 21.0% for the current fiscal year.

Balance Sheet

The Company’s total assets increased $45.1 million, or 5.6%, to $850.9 million at June 30, 2018 from $805.8 million at December 31, 2017 due to the Company’s organic growth initiatives.

Total loans receivable, net of allowance for loan losses, increased $43.4 million, or 6.7%, to $692.2 million at June 30, 2018 from $648.8 million at December 31, 2017.  The growth in loans receivable was due primarily to increases in commercial real estate loans of $36.6 million.

The following table summarizes the loan portfolio at the periods indicated.

		As of
		June 30, 2018				December 31, 2017				June 30, 2017
(Dollars in thousands)		Balance		% to Total		Balance		% to Total		Balance		% to Total
Commercial and industrial loans		$	89,284	12.7%		$	88,688	13.5%		$	84,792	13.6%
Real estate:
Construction, land and
land development		46,356		6.6		41,641		6.3		45,626		7.3
Residential		88,422		12.6		87,031		13.3		69,478		11.1
Commercial real estate		474,330		67.7		437,717		66.6		422,156		67.7
Consumer and other		2,670		0.4		2,058		0.3		1,795		0.3
Gross loans receivable		701,062		100.0%		657,135		100.0%		623,847		100.0%
Net deferred origination fees		(370)				(347)				(597)
Loans receivable		$	700,692			$	656,788			$	623,250

Total deposits increased $41.2 million, or 5.9%, to $744.5 million at June 30, 2018 from $703.3 million at December 31, 2017.  The increase in deposits included increases in non-interest bearing deposit accounts of $17.1 million, or 7.1%, and total time deposits of $9.2 million, or 10.1%.

The following table shows the Company’s deposit composition for the periods indicated.

			As of
		June 30, 2018					December 31, 2017					June 30, 2017
(Dollars in thousands)		Balance		% to Total			Balance		% to Total			Balance		% to Total
Demand, non-interest bearing		$	259,449	34.9	%		$	242,358	34.5	%		$	219,872	34.3	%
Now and money market		336,666		45.2			326,412		46.4			305,984		47.8
Savings		48,509		6.5			43,876		6.2			43,152		6.7
Time deposits less than $250,000		65,393		8.8			60,445		8.6			51,899		8.1
Time deposits $250,000 and over		34,451		4.6			30,204		4.3			19,996		3.1
Total		$	744,468	100.0	%		$	703,295	100.0	%		$	640,903	100.0	%

Total shareholders’ equity increased $3.8 million, or 5.8%, to $69.5 million at June 30, 2018 from $65.7 million at December 31, 2017.  The increase in shareholders’ equity was primarily due to net income earned during the year.

Capital Ratios

The Company and the Bank remain well capitalized at June 30, 2018, as summarized in the following table.

Capital Ratios:		Coastal Community Bank		Coastal Financial Corporation		Financial Institution  Basel III Regulatory Guidelines
Tier 1 leverage capital		10.18%		9.21%		5.00%
Tier 1 risk-based capital		11.30%		10.24%		8.00%
Common Equity Tier 1 risk-based capital		11.30%		9.76%		6.50%
Total risk-based capital		12.50%		12.82%		10.00%

Asset Quality

The allowance for loan losses was 1.22% of loans receivable at June 30, 2018, compared to 1.22% at December 31, 2017. Provision for loan losses totaled $392,000 for the current quarter, $501,000 for the preceding quarter, and there was no provision for the same quarter in the prior year. Net charge-offs totaled $370,000 for the six months ended June 30, 2018 compared to net charge-offs of $94,000 for six months ended June 30, 2017.

Non-performing assets were $2.1 million, or 0.24% of total assets, at June 30, 2018, compared to $2.1 million, or 0.26% of total assets at December 31, 2017.  There were no repossessed assets or other real estate owned at June 30, 2018.

Non-performing loans to loans receivable ratio was 0.30% at June 30, 2018, compared to 0.32% at December 31, 2017.  Classified loans were $8.6 million at June 30, 2018, an increase of $700,000, as compared to $7.9 million at December 31, 2017.

The following table details the Company’s non-performing assets for the periods indicated.

		As of
		June 30,			December 31,			June 30,
(Dollars in thousands)		2018			2017			2017
Non-accrual loans:
Commercial and industrial loans		$	703		$	372		$	284
Real estate:
Construction, land and land development		-			-			-
Residential		75			88			151
Commercial real estate		-			345			579
Commercial real estate - troubled debt restructure		1,290			1,315			1,340
Consumer and other loans		-			-			-
Total non-accrual loans		2,068			2,120			2,354
Total accruing loans past due 90 days or more		-			-			-
Total non-performing loans		2,068			2,120			2,354
Other real estate owned		-			-			-
Repossessed assets		-			-			-
Total non-performing assets		$	2,068		$	2,120		$	2,354
Troubled debt restructurings, accruing		-			-			3,999
Total non-performing loans to loans receivable		0.30%			0.32%			0.38%
Total non-performing assets to total assets		0.24%			0.26%			0.32%

About Coastal Financial

Coastal Financial Corporation is an Everett-based Washington State bank holding company with Coastal Community Bank (the “Bank”), a full-service commercial bank, as its sole wholly-owned banking subsidiary.  The Bank operates through its 13 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application.  More information about the Bank can be found on its website at www.coastalbank.com and its investor relations page.

Contact

Eric Sprink, President & Chief Executive Officer, (425) 357-3659Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687

Forward-Looking Statements

This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.

Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission.  These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law.

COASTAL FINANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Dollars in thousands; unaudited)
ASSETS
			June 30,			March 31,			December 31,
			2018			2018			2017
Cash and due from banks			$	14,217		$	13,589		$	13,787
Interest-bearing deposits with other banks			77,232			80,980			75,964
Investment securities, available for sale, at fair value			36,013			36,015			36,927
Investment securities, held to maturity, at amortized cost			1,304			1,323			1,409
Other investments			3,766			3,766			3,680
Loans receivable			700,692			678,515			656,788
Allowance for loan losses			(8,540)			(8,423)			(8,017)
Total loans receivable, net			692,152			670,092			648,771
Premises and equipment, net			12,963			13,000			13,121
Accrued interest receivable			2,290			1,968			2,274
Bank-owned life insurance, net			6,592			6,546			6,500
Deferred tax asset, net			2,253			2,277			2,092
Other assets			2,140			1,406			1,228
	Total assets		$	850,922		$	830,962		$	805,753
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits			$	744,468		$	727,268		$	703,295
Federal Home Loan Bank (FHLB) advances			20,000			20,000			20,000
Subordinated debt			9,957			9,954			9,950
Junior subordinated debentures			3,580			3,580			3,579
Deferred compensation			1,127			1,151			1,175
Accrued interest payable			241			229			228
Other liabilities			2,059			1,853			1,815
	Total liabilities		781,432			764,035			740,042
SHAREHOLDERS’ EQUITY
Common stock			52,946			52,592			52,521
Retained earnings			18,364			16,163			14,134
Accumulated other comprehensive loss, net of tax			(1,820)			(1,828)			(944)
	Total shareholders’ equity		69,490			66,927			65,711
	Total liabilities and shareholders’ equity		$	850,922		$	830,962		$	805,753

COASTAL FINANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Dollars in thousands, except per share amounts; unaudited)
	Three months ended
	June 30, 2018		March 31, 2018		June 30, 2017
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	8,778	$	8,189	$	7,557
Interest on interest-bearing deposits with other banks	236		255		149
Interest on investment securities	155		152		132
Dividends on other investments	62		11		63
Total interest and dividend income	9,231		8,607		7,901
INTEREST EXPENSE
Interest on deposits	712		646		492
Interest on borrowed funds	216		183		185
Total interest expense	928		829		677
Net interest income	8,303		7,778		7,224
PROVISION FOR LOAN LOSSES	392		501		-
Net interest income after provision for loan losses	7,911		7,277		7,224
NONINTEREST INCOME
Deposit service charges and fees	771		687		651
Loan referral fees	114		130		42
Mortgage broker fees	69		37		74
Sublease and lease income	4		57		55
Gain on sale of loans	78		64		58
Other	177		132		140
Total noninterest income	1,213		1,107		1,020
NONINTEREST EXPENSE
Salaries and employee benefits	3,910		3,735		3,174
Occupancy	804		823		740
Data processing	492		479		447
Director and staff expenses	136		144		137
Excise taxes	134		124		112
Marketing	86		57		83
Legal and professional fees	130		80		104
Federal Deposit Insurance Corporation (FDIC) assessments	79		85		78
Business development	72		88		60
Other	511		452		528
Total noninterest expense	6,354		6,067		5,463
Income before provision for income taxes	2,770		2,317		2,781
PROVISION FOR INCOME TAXES	569		474		905
NET INCOME	$	2,201	$	1,843	$	1,876
Basic and diluted earnings per share	$	0.24	$	0.20	$	0.20
Weighted average number of common shares outstanding:
Basic	9,263,302		9,242,839		9,233,738
Diluted	9,282,816		9,248,428		9,236,815

COASTAL FINANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Dollars in thousands, except per share amounts; unaudited)
	Six months ended
	June 30, 2018		June 30, 2017
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	16,967	$	14,833
Interest on interest-bearing deposits with other banks	491		287
Interest on investment securities	307		250
Dividends on other investments	73		74
Total interest and dividend income	17,838		15,444
INTEREST EXPENSE
Interest on deposits	1,358		986
Interest on borrowed funds	399		359
Total interest expense	1,757		1,345
Net interest income	16,081		14,099
PROVISION FOR LOAN LOSSES	893		439
Net interest income after provision for loan losses	15,188		13,660
NONINTEREST INCOME
Deposit service charges and fees	1,458		1,199
Loan referral fees	244		42
Mortgage broker fees	106		115
Sublease and lease income	61		111
Gain on sale of loans	142		84
Other	309		300
Total noninterest income	2,320		1,851
NONINTEREST EXPENSE
Salaries and employee benefits	7,645		6,456
Occupancy	1,627		1,469
Data processing	971		848
Director and staff expenses	280		278
Excise taxes	258		225
Marketing	143		150
Legal and professional fees	210		194
Federal Deposit Insurance Corporation (FDIC) assessments	164		181
Business development	160		127
Other	963		911
Total noninterest expense	12,421		10,839
Income before provision for income taxes	5,087		4,672
PROVISION FOR INCOME TAXES	1,043		1,483
NET INCOME	$	4,044	$	3,189
Basic and diluted earnings per share	$	0.44	$	0.35
Weighted average number of common shares outstanding:
Basic	9,253,095		9,232,444
Diluted	9,265,647		9,235,521

COASTAL FINANCIAL CORPORATIONAVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY(Dollars in thousands; unaudited)
	For the Three Months Ended
	June 30, 2018						March 31, 2018						June 30, 2017
	Average		Interest &		Yield /		Average		Interest &		Yield /		Average		Interest &		Yield /
	Balance		Dividends		Cost (4)		Balance		Dividends		Cost (4)		Balance		Dividends		Cost (4)
Assets
Interest earning assets:
Interest-bearing deposits	$	50,750	$	236	1.87%		$	68,160	$	255	1.52%		$	56,240	$	149	1.06%
Investment securities (1)	39,642		155		1.57		39,717		152		1.55		36,288		132		1.46
Other Investments	3,200		62		7.77		2,912		11		1.53		2,975		63		8.49
Loans receivable (2)	688,975		8,778		5.11		654,570		8,189		5.07		607,197		7,557		4.99
Total interest earning assets	$	782,567	$	9,231	4.73		$	765,359	$	8,607	4.56		$	702,700	$	7,901	4.51
Noninterest earning assets:
Allowance for loan losses	(8,522)						(8,121)						(7,861)
Other noninterest earning assets	36,277						36,077						38,094
Total assets	$	810,322					$	793,315					$	732,933
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest-bearing deposits	$	464,133	$	712	0.62%		$	464,219	$	646	0.56%		$	422,166	$	492	0.47%
Subordinated debt	9,955		147		5.92		9,952		144		5.87		9,941		148		5.97
Junior subordinated debentures	3,580		39		4.37		3,579		35		3.97		3,578		30		3.36
FHLB advances and other borrowings	5,972		30		2.01		793		4		2.05		2,544		7		1.10
Total interest-bearing liabilities	$	483,640	$	928	0.77		$	478,543	$	829	0.70		$	438,229	$	677	0.62
Non-interest bearing deposits	255,615						245,273						229,084
Other liabilities	2,610						2,845						2,889
Total shareholders' equity	68,457						66,654						62,731
Total liabilities and
shareholders' equity	$	810,322					$	793,315					$	732,933
Net interest income			$	8,303					$	7,778					$	7,224
Interest rate spread					3.96%						3.86%						3.89%
Net interest margin (3)					4.26%						4.12%						4.12%
(1) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes nonaccrual loans
(3) Net interest margin represents net interest income divided by the average total interest-earning assets
(4) Yields and rates are annualized

COASTAL FINANCIAL CORPORATIONAVERAGE BALANCES, YIELDS, AND RATES – YEAR-TO-DATE(Dollars in thousands; unaudited)
	For the Six Months Ended
	June 30, 2018						June 30, 2017
	Average		Interest &		Yield /		Average		Interest &				Yield /
	Balance		Dividends		Cost (4)		Balance		Dividends				Cost(4)
Assets
Interest earning assets:
Interest-bearing deposits	$	59,407	$	491	1.67%		$	57,466			$	287	1.01%
Investment securities (1)	39,679		307		1.56		36,336		250				1.39
Other Investments	3,057		73		4.82		2,790		74				5.35
Loans receivable (2)	671,867		16,967		5.09		602,619		14,833				4.96
Total interest earning assets	$	774,010	$	17,838	4.65		$	699,211			$	15,444	4.45
Noninterest earning assets:
Allowance for loan losses	(8,323)						(7,771)
Other noninterest earning assets	36,178						41,361
Total assets	$	801,865					$	732,801
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest-bearing deposits	$	464,176	$	1,358	0.59%		$	423,501			$	986	0.47%
Subordinated debt	9,954		291		5.90		9,940		291				5.90
Junior subordinated debentures	3,580		74		4.17		3,578		58				3.27
FHLB advances and other borrowings	3,397		34		2.02		1,611		10				1.25
Total interest-bearing liabilities	$	481,107	$	1,757	0.74		$	438,630			$	1,345	0.62
Non-interest bearing deposits	250,473						225,769
Other liabilities	2,724						2,820
Total shareholders' equity	67,561						65,582
Total liabilities and
shareholders' equity	$	801,865					$	732,801
Net interest income			$	16,081							$	14,099
Interest rate spread					3.91%								3.84%
Net interest margin (3)					4.19%								4.07%
(1) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes nonaccrual loans
(3) Net interest margin represents net interest income divided by the average total interest-earning assets
(4) Yields and rates are annualized

COASTAL FINANCIAL CORPORATIONQUARTERLY STATISTICS(Dollars in thousands, except per share amounts; unaudited)
	Three Months Ended
	June 30,		March 31,		December 31,		September 30,		June 30,
	2018		2018		2017		2017		2017
Income Statement Data:
Interest and dividend income	$	9,231	$	8,607	$	8,452	$	8,217	$	7,901
Interest expense	928		829		798		732		677
Provision for loan losses	392		501		366		65		-
Net interest income after
provision for loan losses	7,911		7,277		7,288		7,420		7,224
Noninterest income	1,213		1,107		1,053		1,250		1,020
Noninterest expense	6,354		6,067		5,785		5,809		5,463
Provision for income tax	569		474		2,213		957		905
Net income	2,201		1,843		343		1,904		1,876
Adjusted net income (1)	2,201		1,843		1,638		1,904		1,876
	As of Period End or for the three month period
	June 30,		March 31,		December 31,		September 30,		June 30,
	2018		2018		2017		2017		2017
Balance Sheet Data:
Cash and cash-equivalents	$	91,449	$	94,569	$	89,751	$	86,531	$	58,198
Investment securities	37,317		37,338		38,336		40,201		35,280
Loans receivable	700,692		678,515		656,788		630,442		623,250
Allowance for loan losses	(8,540)		(8,423)		(8,017)		(7,947)		(7,889)
Total assets	850,922		830,962		805,753		778,609		738,049
Interest-bearing deposits	485,019		473,268		460,937		438,592		421,031
Noninterest-bearing deposits	259,449		254,000		242,358		242,607		219,872
Total deposits	744,468		727,268		703,295		681,199		640,903
Total borrowings	33,537		33,534		33,529		28,526		30,521
Total shareholders’ equity	69,490		66,927		65,711		65,558		63,600
Share and Per Share Data (2)(3):
Earnings per share – basic	$	0.24	$	0.20	$	0.04	$	0.21	$	0.20
Earnings per share – diluted	$	0.24	$	0.20	$	0.04	$	0.21	$	0.20
Adjusted earnings per share - diluted (4)					$	0.18
Dividends per share	-		-		-		-		-
Book value per share (5)	$	7.47	$	7.23	$	7.10	$	7.09	$	6.88
Tangible book value per share (6)	$	7.47	$	7.23	$	7.10	$	7.09	$	6.88
Weighted avg outstanding shares – basic	9,263,302		9,242,766		9,237,660		9,235,344		9,233,738
Weighted avg outstanding shares – diluted	9,282,816		9,248,365		9,240,737		9,238,421		9,236,815
Shares outstanding at end of period	9,298,553		9,253,303		9,248,901		9,249,006		9,245,546
Credit Quality Ratios:
Nonperforming assets to total assets	0.24%		0.20%		0.26%		0.32%		0.32%
Nonperforming assets to loans receivable
and OREO	0.30%		0.25%		0.32%		0.40%		0.38%
Nonperforming loans to total loans receivable	0.30%		0.25%		0.32%		0.40%		0.38%
Allowance for loan losses to nonperforming loans	412.96%		495.76%		378.16%		316.49%		335.13%
Allowance for loan losses to total loans receivable	1.22%		1.24%		1.22%		1.26%		1.27%
Net charge-offs (recoveries) to average loans (7)	0.16%		0.06%		0.18%		0.01%		-0.06%
Capital Ratios:
Tier 1 leverage capital	9.21%		9.07%		8.95%		9.31%		9.22%
Tier 1 risk-based capital	10.24%		10.25%		10.50%		10.75%		10.43%
Common equity Tier 1 risk-based capital	9.76%		9.75%		9.98%		10.21%		9.89%
Total risk-based capital	12.82%		12.90%		13.24%		13.54%		13.21%
(1) Adjusted net income is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is net income. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.”
(2) Share and per share amounts are based on total common shares outstanding, which includes common stock and nonvoting common stock.
(3) Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018.
(4) Adjusted earnings per share is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is earnings per share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.”
(5) We calculate book value per share as total shareholders’ equity at the end of the relevant period divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period.
(6) Tangible book value per share is a non-GAAP financial measure. We calculate tangible book value per share as total shareholders’ equity at the end of the relevant period, less goodwill and other intangible assets, divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated.
(7) Annualized calculations

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP (“Generally Accepted Accounting Principles”) financial measures in addition to results presented in accordance with GAAP. These measures include the following:

“Adjusted net income” is a non-GAAP measure defined as net income increased by the additional income tax expense that resulted from the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act. The most directly comparable GAAP measure is net income.

“Adjusted earnings per share” is a non-GAAP measure defined as net income, plus additional income tax expense, divided by weighted average outstanding shares (diluted). The most directly comparable GAAP measure is earnings per share.

The Company also presented comparable earnings information using GAAP financial measures. Reconciliations of the GAAP and non-GAAP measures are presented below.  

(Dollars in thousands, except share and per share data)		As of and for three Months ended December 31, 2017
Adjusted net income:
Net income		$	343
Plus: additional income tax expense		1,295
Adjusted net income		$	1,638
Adjusted earnings per share – diluted:
Net income		$	343
Plus: additional income tax expense		1,295
Adjusted net income		$	1,638
Weighted average common shares outstanding– diluted (1)		9,240,737
Adjusted earnings per share – diluted (1)		$	0.18
(1) Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018.