CFHI Coast Finl Hldgs (MM)

Coast Financial Second Quarter Net Interest Income Increases 35% and Revenues Increase 40%; Company Earns $235,000 or $.06 Per Share in Quarter BRADENTON, Fla., July 22 /PRNewswire-FirstCall/ -- Coast Financial Holdings, Inc. (NASDAQ:CFHI), parent company of Coast Bank of Florida, today reported that strong loan and deposit growth contributed to a 35% increase in net interest income for the second quarter of 2004, compared to a year earlier. For the quarter ended June 30, 2004, net income was $235,000, or $0.06 per diluted share, compared to a net loss of $189,000, or $0.14 per diluted share, in the second quarter of 2003. For the first half of the year, net income was $244,000, or $0.06 per diluted share, compared to a net loss of $55,000, or $0.04 per diluted share, for the same period a year earlier. Coast Financial completed the sale of their merchant portfolio in June, one month ahead of schedule, which resulted in a $133,000 after tax gain. Excluding the after tax effect of the gain, net income was $102,000, or $0.03 per diluted share, for the second quarter and $111,000, or $0.03 per diluted share for the six month period. "We have grown our franchise, shifted the loan and deposit mix, focused on community banking and have improved the bottom line. We are now seeing profits and expect to see improved profitability as the year continues," said Brian P. Peters, President and CEO of Coast Financial Holdings, Inc. "Our year to date performance is ahead of plan, even excluding the one time gain. Assets are quickly approaching $350 million, and we will continue to control operating expenses to maximize our profitability going forward." Income Statement Review Second quarter revenue (net interest income before the provision for loan losses plus other operating income) for the quarter ended June 30, 2004, increased 40% to $3.3 million, compared to $2.4 million for the second quarter of 2003. Net interest income before the provision for loan losses, grew 56% to $2.4 million, compared to $1.5 million in the like quarter of 2003. "We increased our provision for loan losses more than three-fold to $491,000 compared to $131,000 in the second quarter a year ago, due to growth of our loan portfolio," Peters added. Following the provision, Coast's net interest income increased 35% to $1.9 million, compared to $1.4 million in the second quarter last year. Net interest margin was 3.21% for the quarter compared to 3.60% for the first quarter of 2004 and 3.18% for the second quarter of 2003. "We invested excess funds in short term investments resulting in a lower yield on earning assets during the quarter. While we have lowered our cost of funds substantially, our net interest margin was off from the previous quarter," said Peters. "As loan growth continues, we expect net interest margin to improve." Non-interest income for the second quarter increased 12% to $949,000, compared to $848,000 for the second quarter of 2003. The increase was due to gain on sale of the merchant portfolio mentioned above. For the first six months of the year, non-interest income was $1.5 million, which was at the same level for the first half of 2003. Non-interest expense totaled $2.4 million for the second quarter of 2004, about level with expenses for the second quarter of 2003. For the first half of the year, non-interest expense was up 26% to $5.0 million, compared to $3.9 million for the first half of 2003. The increase was due to the $400,000 settlement on impaired securities in 2003, and expenses associated with the addition of new branches in each of the preceding three quarters. "In May, we opened our seventh branch -- located in Downtown Bradenton. Already, we have generated strong loans and deposits from the new location, and it continues to perform particularly well for a new branch. We expect it to be profitable within 12 months," said Peters. "Additionally, we are progressing with the new downtown corporate office located in the same building as our branch, and expect to relocate our administrative functions there later this year and sell our existing operations center. We also have two additional branch sites, one owned and one under a contract to buy, which are in the planning stages of development. We are evaluating other potential sites within our rapidly growing market area." Balance Sheet Review Assets increased 60% to $335 million at June 30, 2004, compared to $209 million a year earlier. Stockholders' equity more than doubled from a year earlier to $34 million, primarily as a result of the initial public offering completed in November 2003. Book value increased 20% to $9.04 per share at June 30, 2004, from $7.56 per share a year earlier. Deposits grew 63% over the past twelve months to $275 million at June 30, 2004, compared to $169 million at June 30, 2003. "Our deposit mix is changing," said Peters. "We are shifting away from our dependence on new time deposits and focusing on building core deposits for the long-term, which will enhance customer retention. We also recently launched a new package of deposit products. We expect these products to help grow our demand deposits and fee income." Core deposits have increased by 98% from June 30, 2003, and now represent 42% of total deposits. Time deposits now represent 58% of total deposits compared to 66% of total deposits at June 30, 2003. Net loans jumped 59% to total $257 million at June 30, 2004, from $161 million a year earlier. "We are continuing to build our loan portfolio while maintaining high lending standards," said Peters. "The loan mix is changing to include more commercial loans, and although we are pleased with this increase, we believe it is important to maintain a balance in the portfolio. We expect to increase our lending efforts in home equity and other consumer products with a focus on credit quality and long term profitability." Residential construction and land loans grew 119% and now account for 28% of net loans, compared to 20% at June 30, 2003. Commercial real estate loans more than doubled and now comprise 28% of Coast's net loan portfolio at June 30, 2004, compared to 22% a year earlier. Commercial business loans grew 11% and represent 13% of net loans at the end of the second quarter, compared to 18% a year earlier. The ratio of net charge-offs to average loans outstanding was 0.36% for the second quarter, compared to 0.03% for the same quarter of 2003. At June 30, 2004, non performing assets totaled $1.8 million, or 0.53% of total assets, compared to $1.9 million, or 0.61% of total assets at March 31, 2004, and $525,000, or 0.25% of total assets at June 30, 2003. The allowance for loan losses was $2.8 million, or 1.09% of total loans outstanding, at June 30, 2004, compared to $1.6 million, or 0.98% of total loans, a year earlier. About the Company Coast Financial Holdings, Inc. through its banking subsidiary, Coast Bank of Florida (http://www.coastbankflorida.com/), operates seven full-service banking locations in Manatee County, Florida. Coast Bank of Florida is a general commercial bank that provides full-service banking operations to its customers from its headquarters location and from branch offices in Bradenton, Palmetto and Longboat Key. Through an arrangement with Raymond James Financial Services, Inc., Coast makes asset and investment management services and insurance products available to its customers. This press release and other statements to be made by the Company contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements relating to projections and estimates of earnings, revenues, cost- savings, expenses, or other financial items; statements of management's plans, strategies, and objectives for future operations, and management's expectations as to future performance and operations and the time by which objectives will be achieved; statements concerning proposed new products and services; and statements regarding future economic, industry, or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as "believe," expect," anticipate," project," and conditional verbs such as "may," "could," and "would," and other similar expressions or verbs. Such forward-looking statements reflect management's current expectations, beliefs, estimates, and projections regarding the Company, its industry and future events, and are based upon certain assumptions made by management. These forward-looking statements are not guarantees of future performance and necessarily are subject to risks, uncertainties, and other factors (many of which are outside the control of the Company) that could cause actual results to differ materially from those anticipated. These risks, uncertainties, and other factors include, among others: changes in general economic or business conditions, either nationally or in the State of Florida, changes in the interest rate environment, the Company's ability to successfully open and operate new branches and collect on delinquent loans, changes in the regulatory environment, and other risks described in the Company's Form 10-KSB for the fiscal year ended December 31, 2003 and as described from time to time by the Company in other reports filed by it with the Securities and Exchange Commission. Any forward-looking statement speaks only to the date on which the statement is made, and the Company disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. If the Company does update any forward-looking statements, no inference should be drawn that the Company will make additional updates with respect to that statement or any other forward-looking statements. Contacts: Brian P. Peters, President and CEO Brian F. Grimes, EVP and CFO 941-752-5900 941-752-5900 (tables follow) RESULTS OF OPERATIONS Quarter Ended Six Months Ended (In thousands except shares and per share data) Jun 30, Mar 31, Jun 30, Jun 30, Jun 30, 2004 2004 2003 2004 2003 (unaudited) (unaudited) Interest income: Loans receivable $3,861 $3,604 $2,638 $7,465 $5,056 Securities 245 238 275 483 551 Other interest- earning assets 25 12 21 37 44 Total interest income 4,131 3,854 2,934 7,985 5,651 Interest expense: Deposits 1,705 1,471 1,327 3,176 2,605 Borrowings 73 85 100 158 188 Total interest expense 1,778 1,556 1,427 3,334 2,793 Net interest income before provision for loan losses 2,353 2,298 1,507 4,651 2,858 Provision for loan losses: 491 329 131 820 312 Net interest income after provision for loan losses 1,862 1,969 1,376 3,831 2,546 Non-interest income: Service charges on deposit accounts 106 96 66 202 131 Gain on sale of loans 497 283 414 780 683 Gain on sale of securities available for sale -- -- 61 -- 98 Net loan servicing (costs) fees (101) (58) 2 (159) (10) Asset management fees 6 71 123 77 240 Other 441 196 182 637 325 Total non-interest income 949 588 848 1,537 1,467 Non-interest expense: Salary and employee benefits 1,281 1,330 1 ,234 2,611 2,372 Occupancy and equipment 300 335 259 635 485 Data processing 258 248 228 506 430 Professional fees 141 176 117 317 203 Telephone, postage and supplies 168 168 140 336 259 Advertising 59 97 70 156 144 Settlement on impaired security -- -- -- -- (400) Other 223 188 310 411 439 Total non- interest expense 2,430 2,542 2,358 4,972 3,932 Income before provision for income taxes 381 15 (134) 396 81 Income tax expense (benefit): 146 6 (50) 152 31 Net income (loss) 235 9 (84) 244 50 Dividends on preferred stock -- -- (105) -- (105) Net income (loss) applicable to common stockholders $235 $9 $(189) $244 $(55) Earnings (loss) per share, basic $0.06 $-- $(0.14) $0.07 $(0.04) Earnings (loss) per share, diluted $0.06 $-- $(0.14) $0.06 $(0.04) Weighted average shares outstanding, basic 3,748,110 3,740,032 1,350,450 3,744,071 1,350,450 Weighted average shares outstanding, diluted 3,770,561 3,740,032 1,350,450 3,764,926 1,350,450 FINANCIAL CONDITION (In thousands except shares and per share data) Jun 30, Dec 31, Jun 30, 2004 2003 2003 (unaudited) ASSETS Cash and due from banks $6,992 $4,667 $6,586 Federal funds sold 490 3,000 1,245 Cash and cash equivalents 7,482 7,667 7,831 Securities available for sale 47,482 26,972 28,147 Loans, net of allowance for loan losses of $2,808, $3,163, and $1,587, at 6/30/04, 12/31/03, and 6/30/03 respectively 256,969 214,240 161,316 Foreclosed real estate -- -- 92 Federal Home Loan Bank stock, at cost 854 592 592 Premesis and equipment, net 16,502 8,614 7,057 Accrued interest receivable 1,420 1,187 951 Deferred income taxes 2,454 2,525 1,391 Loan servicing rights -- 1,134 1,019 Other assets 1,518 952 800 $334,681 $263,883 $209,196 LIABILITIES Deposits: Non-interest bearing demand deposits $25,195 $20,293 $18,399 Savings, NOW and money-market deposits 88,970 46,934 39,196 Time deposits 160,859 140,513 110,996 Total deposits 275,024 207,740 168,591 Federal Home Loan Bank advances 2,500 7,500 2,500 Other borrowings 20,251 12,097 19,928 Other liabilities 2,980 2,881 1,976 300,755 230,218 192,995 STOCKHOLDERS' EQUITY Preferred stock, $.01 par value; $11 liquidation value; 5,000,000 shares authorized -- -- 5,995 Common stock, $5 par value; 20,000,000 shares authorized 18,757 18,677 6,752 Additional paid-in capital 19,423 19,351 6,674 Accumulated deficit (3,811) (4,055) (3,157) Accumulated other comprehensive income (443) (308) (63) 33,926 33,665 16,201 Total liabilities and stockholders' equity $334,681 $263,883 $209,196 Preferred shares issued and outstanding at end of period -- -- 545,000 Common shares issued and outstanding at end of period 3,751,350 3,735,450 1,350,450 Book value per common share at end of period $9.04 $9.01 $7.56 ADDITIONAL FINANCIAL INFORMATION (in thousands) LOANS: Jun 30, 2004 Dec 31, 2003 Jun 30, 2003 (unaudited) Commercial $32,388 $30,321 $29,291 Commercial real estate 72,526 55,506 35,155 Installment 35,560 36,687 33,075 Residential real estate 46,075 43,746 31,862 Residential construction 71,276 49,635 32,594 Add (deduct): Deferred loan costs, net 1,953 1,508 925 Allowance for loan losses (2,808) (3,163) (1,587) Loans, net $256,969 $214,240 $161,316 NON-PERFORMING ASSETS: Jun 30, 2004 Dec 31, 2003 Jun 30, 2003 Loans on Non-Accrual Status $1,770 $1,055 $373 Delinquent Loans on Accrual Status -- -- 23 Total Non-Performing Loans 1,770 1,055 396 Real Estate Owned (REO)/ Repossessed assets 13 62 129 Total Non-Performing Assets $1,783 $1,117 $525 Total Non-Performing Assets/Total Assets 0.53% 0.42% 0.25% Quarter Ended CHANGE IN THE Jun 30, 2004 Mar 31, 2004 Jun 30, 2003 ALLOWANCE FOR LOAN LOSSES: Balance at beginning of period $3,212 $3,163 $1,499 Provision for loan losses 491 329 131 Recoveries 8 12 1 Charge-offs (903) (292) (44) Net charge-offs (895) (280) (43) Balance at end of period $2,808 $3,212 $1,587 Net Charge-offs/Average Loans Outstanding 0.36% 0.13% 0.03% Allowance for Loan Losses/ Total Loans Outstanding 1.09% 1.36% 0.98% Allowance for Loan Losses/ Non-Performing Loans 159% 174% 401% ADDITIONAL FINANCIAL INFORMATION (in thousands) (Rates/Ratios Annualized) Quarter Ended Jun 30, 2004 Mar 31, 2004 Jun 30, 2003 (unaudited) OPERATING PERFORMANCE: Average loans $246,154 $223,949 $151,352 Average securities and deposits 48,620 32,842 38,962 Average non-interest-earning assets 28,726 21,536 17,100 Total Average Assets $323,500 $278,327 $207,414 Average interest bearing deposits $243,810 $200,086 $154,242 Average borrowings 18,754 20,631 18,309 Average non-interest bearing liabilities 27,011 24,000 18,606 Total Average Liabilities 289,575 244,717 191,157 Total average equity 33,925 33,610 16,257 Total Average Liabilities And Equity $323,500 $278,327 $207,414 Interest rate yield on loans 6.31% 6.47% 6.99% Interest rate yield on securities and deposits 2.23% 3.06% 3.05% Interest Rate Yield On Interest Earning Assets 5.64% 6.04% 6.18% Interest rate expense on deposits 2.81% 2.96% 3.45% Interest rate expense on borrowings 1.57% 1.66% 2.19% Interest Rate Expense On Interest Bearing Liabilities 2.72% 2.84% 3.32% Interest rate spread 2.92% 3.20% 2.86% Net interest margin 3.21% 3.60% 3.18% Other operating income/Average assets 1.18% 0.85% 1.64% Other operating expense/Average assets 3.02% 3.67% 4.56% Efficiency ratio (non-interest expense/revenue) 73.59% 88.07% 100.13% Return on average assets 0.29% 0.01% -0.16% Return on average equity 2.79% 0.11% -2.07% Average equity/Average assets 10.49% 12.08% 7.84% DATASOURCE: Coast Financial Holdings, Inc. CONTACT: Brian P. Peters, President and CEO, +1-941-752-5900, or , or Brian F. Grimes, EVP and CFO, +1-941-752-5900, or , both of Coast Financial Holdings Web site: http://www.coastbankflorida.com/

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