CFHI Coast Finl Hldgs (MM)

Loan Portfolio Increases 33%, Deposits Grow 33% and Revenues Rise 26% BRADENTON, Fla., July 28 /PRNewswire-FirstCall/ -- Coast Financial Holdings, Inc. (NASDAQ:CFHI), parent company of Coast Bank of Florida, today reported solid loan and deposit growth for the second quarter of 2006. In the second quarter, loans grew 33%, deposits increased 33% and net interest income increased 34% compared to the second quarter a year ago. Coast has experienced strong growth in assets of 33% compared to the second quarter a year ago. "Our business plan objective is to increase our share of the fast-growing Florida market through continued branch expansion. We are confident this strategy will significantly improve shareholder value in the long term, although in the short term we will continue to incur losses until these new branches become established," said Brian Grimes, recently promoted to president and CEO. "In 2006, we have already opened six branches in Pinellas, Hillsborough, Manatee and Pasco counties. These six branches now bring our franchise to 18 locations in the greater Tampa Bay area. In addition, we have two acquired and two de novo branches scheduled to open later this year." For the second quarter of 2006, the company reported a loss of $704,000, or $0.11 per diluted share, compared to a loss of $958,000, or $0.25 per diluted share, in the second quarter of 2005. For the first six months of 2006, the company reported a loss of $1.0 million, or $0.16 per share, compared to a loss of $881,000, or $0.23 per share, in the first six months of 2005. "Even though losses were experienced, results were in line with the Company's 2006 business plan," said Grimes. Income Statement Review Revenues (net interest income before the provision for loan losses plus other operating income) increased 26% to $4.8 million in the second quarter compared to $3.8 million in the second quarter of 2005. For the first six months of the year, revenues increased 28% to $9.3 million compared to $7.3 million in the first six months of 2005. Second quarter net interest income before the provision for loan loss increased 34% to $4.2 million, compared to $3.1 million in the same quarter a year ago. Year-to-date, net interest income before the provision for loan losses increased 34% to $8.2 million compared to $6.1 million in the like period a year ago. Net interest margin was 3.06% in the second quarter of 2006 compared to 3.09% in the second quarter a year ago and 3.13% in the first quarter of 2006. "In the quarter, our net interest margin came under pressure as deposit costs increased faster than loan yields," said Grimes. "We expect out net interest margin to continue to tighten during the remainder of the year as pricing remains competitive and the higher costs of deposits associated with other branch expansion." For the first six months of 2006, net interest margin was 3.09% compared to 3.16% in the first six months of 2005. "Our new branches are proving to be very successful in helping us to reach new customers and grow deposits," said Grimes. "Although they initially put pressure on expenses, primarily due to the increase in staffing and occupancy expenses, we expect that over time they will add to our profitability by providing us low cost deposits to fund loan growth." Noninterest expenses were $5.6 million in the second quarter of 2006 compared to $3.8 million in the second quarter a year ago. For the first six months of 2006, noninterest expenses were $10.6 million compared to $6.8 million in the first six months of 2005, primarily due to the additional eight branches opened during the same period. Balance Sheet Review "Our lending team has done an excellent job of growing the loan portfolio and adding to the loan pipeline while maintaining loan quality," said Anne Lee, Chief Operating Officer. "We anticipate continued high growth throughout the greater Tampa Bay area, which should continue to fuel double digit growth in our loan portfolio." Net loans increased 33%, to $479 million at June 30, 2006, compared to $360 million a year earlier. "Over the past 12 months, the major components of our loan portfolio have showed significant growth," Lee continued. "We have increased residential construction loans 66%, commercial real estate loans 4% and residential real estate loans 48% from a year ago. These components now make up 89% of the loan portfolio." Deposits grew 33% over the past 12 months to $523 million at June 30, 2006, compared to $395 million a year earlier. Savings, NOW and money-market deposits increased 12% and time deposits rose 47% compared to a year ago, while noninterest-bearing demand deposits decreased slightly. "We are very fortunate to have been able to recruit such a seasoned, experienced staff to operate our new branches," noted Lee Assets increased 33% to a record $625 million at June 30, 2006, compared to $468 million a year earlier. Book value per share improved to $11.11 at June 30, 2006, from $9.08 a year earlier, largely as a result of the public offering completed in the fourth quarter of 2005. Asset quality continues to improve, with non-performing assets at $1.3 million, or 0.20% of total assets at June 30, 2006, compared to $1.3 million or 0.27% of total assets a year earlier. The provision for loan losses for the second quarter was $174,000, compared to $1.5 million in the second quarter of 2005 when Coast charged off $1.1 million for certain loans that were originated before February 2004. The allowance for loan losses totals $3.4 million, or 0.71% of total loans outstanding at quarter-end compared to $3.2 million, or 0.88% of total loans outstanding, at the end of the second quarter of 2005. About the Company Coast Financial Holdings, Inc. through its banking subsidiary, Coast Bank of Florida ( http://www.coastfl.com/ ), operates 18 full-service banking locations in Manatee, Pinellas, Hillsborough and Pasco counties, Florida. Coast Bank of Florida is a commercial bank that provides full-service banking operations to its customers from its headquarters location and from branch offices in Bradenton, Longboat Key, Seminole, Dunedin, Clearwater, Kenneth City, Brandon, St. Petersburg and Lutz. 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, 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-K for the fiscal year ended December 31, 2005, in the Company's form 10-Q for the quarter ended June 30, 2006, 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 F. Grimes, President and CEO 877-COASTFL THE CEREGHINO GROUP CORPORATE INVESTOR RELATIONS 1809 7TH Avenue, Suite 1414 Seattle, WA 981081 206.388-5785 http://www.stockvalues.com/ (tables follow) COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY Condensed Consolidated Statements of Earnings (Unaudited) ($ in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Interest income: Loans $8,098 $5,476 $15,143 $10,317 Securities 1,020 522 1,945 974 Other interest-earning assets 97 8 389 15 Total interest income 9,215 6,006 17,477 11,306 Interest expense: Deposits 4,815 2,630 8,875 4,785 Borrowings 208 237 387 411 Total interest expense 5,023 2,867 9,262 5,196 Net interest income 4,192 3,139 8,215 6,110 Provision for loan losses 174 1,522 307 1,882 Net interest income after provision for loan losses 4,018 1,617 7,908 4,228 Noninterest income: Service charges on deposit accounts 115 125 239 247 Gain on sale of loans held for sale 433 486 843 927 Other service charges and fees 15 13 32 26 Other -- 4 13 4 Total noninterest income 563 628 1,127 1,204 Noninterest expenses: Employee compensation and benefits 2,700 1,746 5,161 3,346 Occupancy and equipment 1,121 546 2,052 953 Data processing 238 220 482 431 Professional fees 235 347 434 444 Telephone, postage and supplies 378 261 690 495 Advertising 505 354 941 511 Other 461 300 818 649 Total noninterest expenses 5,638 3,774 10,578 6,829 Loss before income tax benefit (1,057) (1,529) (1,543) (1,397) Income tax benefit (353) (571) (526) (516) Net loss $(704) $(958) $(1,017) $(881) Loss per share, basic and diluted $(0.11) (0.25) $(0.16) (0.23) Weighted-average number of common shares outstanding, basic and diluted 6,509,057 3,757,650 6,507,703 3,757,623 COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (unaudited) ($ in thousands, except per share amounts) June 30, December 31, June 30, 2006 2005 2005 Assets (Unaudited) (Unaudited) Cash and due from banks 16,649 25,203 12,050 Federal funds sold and securities purchased under agreements to resell 4,930 22,810 7,420 Cash and cash equivalents 21,579 48,013 19,470 Securities available for sale 86,977 79,029 58,935 Loans, net of allowance for loan losses of $3,446, $3,146, and $3,187 479,173 390,867 359,645 Federal Home Loan Bank stock, at cost 1,640 1,289 1,289 Premises and equipment, net 26,161 24,780 23,466 Accrued interest receivable 2,941 2,218 1,782 Deferred income taxes 3,289 2,471 2,352 Other assets 2,913 1,627 1,361 Total assets $624,673 550,294 $468,300 Liabilities and Stockholders' Equity Liabilities: Noninterest-bearing demand deposits $31,248 33,302 $37,507 Savings, NOW and money-market deposits 101,007 84,635 90,227 Time deposits 391,075 331,520 267,010 Total deposits 523,330 449,457 394,744 Federal Home Loan Bank advances 10,000 10,000 11,000 Federal funds purchased -- -- -- Repurchase agreement -- -- 4,731 Other borrowings 15,928 14,367 20,423 Other liabilities 3,116 2,707 3,300 Total liabilities 552,374 476,531 434,198 Stockholders' equity: Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares issued and outstanding -- -- -- Common stock, $5 par value; 20,000,000 shares authorized, 6,509,057, 6,503,600 and 3,757,650 shares issued and outstanding in June 30, 2006, December 31, 2005 and June 30, 2005 32,545 32,518 18,788 Additional paid-in capital 45,597 45,591 19,456 Accumulated deficit (4,856) (3,839) (4,105) Accumulated other comprehensive loss (987) (507) (37) Total stockholders' equity 72,299 73,763 34,102 Total liabilities and stockholders' equity $624,673 550,294 $468,300 ADDITIONAL FINANCIAL INFORMATION (in thousands) Jun 30, Mar 31, Jun 30, LOANS: 2006 2006 2005 (unaudited) Commercial $13,645 $16,485 23,447 Commercial real estate 131,688 126,210 126,201 Installment 39,800 33,059 27,292 Residential real estate 74,404 64,159 49,672 Residential construction 221,326 188,770 134,283 480,863 428,684 360,895 Add (deduct): Deferred loan costs, net 1,756 1,844 1,937 Allowance for loan losses (3,446) (3,271) (3,187) Loans, net $479,173 $427,257 359,645 NON - PERFORMING ASSETS: Jun 30, Mar 31, Jun 30, 2006 2006 2005 (unaudited) Loans on Non-Accrual Status $1,088 $922 1,072 Delinquent Loans on Accrual Status -- -- -- Total Non-Performing Loans 1,088 922 1,072 Real Estate Owned (REO) / Repossessed assets 173 171 181 Total Non-Performing Assets $1,261 $1,093 1,253 Total Non-Performing Assets / Total Assets 0.20% 0.19% 0.27% Three Months Ended Six Months Ended Jun 30, Jun 30, Jun 30, Jun 30, 2006 2005 2006 2005 CHANGE IN THE ALLOWANCE (unaudited) (unaudited) (unaudited) (unaudited) FOR LOAN LOSSES: Balance at beginning of period $3,271 $3,040 $3,146 $2,901 Provision for loan losses 174 1,522 307 1,882 Recoveries 14 16 25 95 Charge offs (13) (1,391) (32) (1,691) Net charge offs 1 (1,375) (7) (1,596) Balance at end of period $3,446 $3,187 $3,446 $3,187 Net Charge-offs / Average Loans Outstanding -- % 1.59 % -- % 0.98 % Allowance for Loan Losses / Total Loans Outstanding 0.71 % 0.88 % 0.71 % 0.88 % Allowance for Loan Losses / Non - Performing Loans 317.00 % 297.00 % 317.00 % 297.00 % ADDITIONAL FINANCIAL INFORMATION (in thousands) (Rates / Ratios Annualized) Three Months Ended Six Months Ended Jun 30, Jun 30, Jun 30, Jun 30, 2006 2005 2006 2005 (unaudited) (unaudited) (unaudited) (unaudited) OPERATING PERFORMANCE : Average loans $452,021 $346,547 $430,837 $330,476 Average investment securities 89,925 59,503 87,886 58,347 Average other interest- earning assets 7,787 1,239 17,143 1,211 Average non-interest - earning assets 43,824 34,798 43,289 32,169 Total Average Assets $593,557 $442,087 $579,155 $422,203 Average interest bearing deposits $459,204 $334,873 $443,697 $319,129 Average borrowings 26,985 36,940 26,537 34,578 Average non-interest bearing liabilities 34,735 35,704 35,911 33,751 Total Average Liabilities 520,924 407,517 506,145 387,458 Total average equity 72,139 34,570 72,762 34,745 Total Average Liabilities And Equity $593,063 $442,087 $578,907 $422,203 Interest rate yield on loans 7.19 % 6.34 % 7.09 % 6.30 % Interest rate yield on investment securities 4.55 % 3.52 % 4.46 % 3.37 % Interest rate yield on other interest-earning assets 4.99 % 2.59 % 4.58 % 2.50 % Interest Rate Yield On Interest Earning Assets 6.72 % 5.91 % 6.58 % 5.85 % Interest rate expense on deposits 4.21 % 3.15 % 4.03 % 3.02 % Interest rate expense on borrowings 3.09 % 2.57 % 2.94 % 2.40 % Interest Rate Expense On Interest Bearing Liabilities 4.14 % 3.09 % 3.97 % 2.96 % Interest rate spread 2.58 % 2.82 % 2.61 % 2.89 % Net interest margin 3.06 % 3.09 % 3.09 % 3.16 % Other operating income / Average assets 0.38 % 0.57 % 0.39 % 0.58 % Other operating expense / Average assets 3.81 % 3.42 % 3.68 % 3.26 % Efficiency ratio (non- interest expense / revenue) 118.57 % 100.19 % 113.23 % 93.37 % Return on average assets (0.48)% (0.87)% (0.35)% (0.42)% Return on average equity (3.89)% (11.12)% (2.81)% (5.11)% Average equity / Average assets 12.24 % 7.82 % 12.61 % 8.23 % DATASOURCE: Coast Financial Holdings, Inc. CONTACT: Brian F. Grimes, President and CEO, Coast Financial Holdings, Inc., +1-877-COASTFL, or ; or investor relations, The Cereghino Group, +1-206-388-5785, for Coast Financial Holdings Web site: http://www.coastfl.com/

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