CFHI Coast Finl Hldgs (MM)

Loan Portfolio Increases 45%, Deposits Grow 38% and Revenues Increase 24% BRADENTON, Fla., Nov. 1 /PRNewswire-FirstCall/ -- Coast Financial Holdings, Inc. (NASDAQ:CFHI), parent company of Coast Bank of Florida, today reported significant loan and deposit growth for the third quarter of 2006, with loans growing 45%, deposits increasing 38% and net interest income rising 30% compared to the third quarter a year ago. Coast has generated strong growth in assets of 40% in the past year as it aggressively invested in expanding its franchise in the growing greater Tampa Bay market. For the third quarter of 2006, the company reported a loss of $1.5 million, or $0.22 per share, as compared to earnings of $106,000, or $0.03 per share, in the third quarter a year ago. For the first nine months of 2006, the company reported a loss of $2.5 million, or $0.38 per share, as compared to a loss of $775,000, or $0.21 per share, in the first nine months of 2005. "In the third quarter we continued the implementation of our 2006 business plan with the goal to increase our share of the growing Florida market through continued branch expansion. Earlier this quarter we opened the Walsingham branch in the town of Largo and last week we opened a branch in Pinellas Park. We have opened eight branches in the greater Tampa Bay area in 2006, in addition to the five opened in 2005, now bringing our branch franchise to 20 locations," said Brian Grimes, President and CEO. "We previously announced plans to open two additional branches in late 2006, but based on our new tempered growth strategy in response to the changing local real estate and interest rate markets, we do not expect to open these branches prior to the first quarter of 2008." 2006 Year-To-Date Highlights (compared to 2005 Year-To-Date) - Loan portfolio increased 45% - Deposits increased 38% - Revenues increased 26% - Net interest income increased 30% - Total assets increased 40% - Non-performing assets improved to 0.15% of total assets - Coast incurred an after-tax expense of $476,000 related to costs associated with terminating relationship with former CEO Income Statement Review Third quarter net interest income before the provision for loan loss increased 30% to $4.3 million compared to $3.3 million in the same quarter a year ago. Year-to-date, net interest income before the provision for loan losses increased 33% to $12.6 million compared to $9.4 million in the like period a year ago. Revenues (net interest income before the provision for loan losses plus other operating income) increased 24% to $4.9 million in the third quarter as compared to $4.0 million in the third quarter of 2005. Year- to-date, revenues increased 26% to $14.2 million as compared to $11.3 million in the same period a year ago. Net interest margin was 2.85% in the third quarter of 2006 as compared to 3.06% in the second quarter of 2006 and in the third quarter of 2005. "Our net interest margin came under pressure during the quarter as deposit costs continue to increase faster than loan yields," said Grimes. "We anticipate deposit costs will continue to rise during the remainder of the year and that our net interest margin will continue to tighten." For the first nine months of 2006, net interest margin was 3.00%, as compared to 3.12% in the first nine months of 2005. Because Coast has added eight new branches this year, compensation and occupancy expenses nearly doubled to $4.9 million for the third quarter, as compared to $2.5 million in the same quarter a year ago. In addition, Coast incurred a one-time pre-tax charge of $761,000 in severance related expenses in the third quarter, related to the terminated relationship with the former CEO. Total noninterest expenses increased 83% to $6.9 million in the quarter, as compared to $3.8 million in the third quarter a year ago. For the first nine months of 2006, noninterest expenses were $17.5 million, as compared to $10.6 million in the first nine months of 2005. "Our eight new branches are already attracting new customers and a growth in deposits. Although our new branches are pressuring 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," said Grimes. Balance Sheet Review "During the quarter, loan volumes increased as our new branches expand our market opportunities," said Anne Lee, Chief Operating Officer. "For the most recently completed quarter ending September 30, loans were up $52.2 million, or 43% annualized, as a result of these efforts. We anticipate continued high growth throughout the greater Tampa Bay area, which should continue to fuel significant loan growth for the remainder of the year." Net loans increased 45%, to $531 million at September 30, 2006, as compared to $366 million a year earlier. "Over the past 12 months, the major components of our loan portfolio have shown significant growth," continued Lee. "We have increased residential construction loans 64%, commercial real estate loans 9% and residential real estate loans 90% from a year ago. These components now make up 89% of the loan portfolio." Deposits increased 38% over the past 12 months to $568 million at September 30, 2006, compared to $413 million a year earlier. Savings, NOW and money-market deposits increased 14% and time deposits rose 49% compared to a year ago, while noninterest-bearing demand deposits remained flat. "As interest rates have increased, we have seen customers demand certificates of deposit accounts," noted Lee. Total assets increased to a record $676 million at September 30, 2006, or 40% as compared to $483 million a year earlier. Book value per share improved to $10.99 at September 30, 2006, from 9.03 a year earlier, largely as a result of the public offering completed in the fourth quarter of 2005. Credit Quality Non-performing assets also improved 32% to $985,000, or 0.15% of total assets, at September 30, 2006, as compared to $1.4 million or 0.30% of total assets a year ago. The provision for loan losses for the third quarter was $275,000, as compared to $2,000 in the third quarter of 2005. The allowance for loan losses totaled $3.7 million, or 0.70% of total loans outstanding at quarter-end compared to $3.2 million, or 0.86% of total loans outstanding, at the end of the third quarter of 2005. "We are maintaining our strong credit posture and are being very diligent regarding new loan applications -- across the board," Grimes concluded. About the Company Coast Financial Holdings, Inc. through its banking subsidiary, Coast Bank of Florida (http://www.coastfl.com/), operates 20 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, Lutz, Largo and Pinellas Park. 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 September 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-COASTF (tables follow) COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY Condensed Consolidated Statements of Earnings (Unaudited) ($ in thousands, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Interest income: Loans $9,367 $6,013 $24,510 $16,330 Securities 1,010 578 2,954 1,552 Other interest-earning assets 169 65 558 80 Total interest income 10,546 6,656 28,022 17,962 Interest expense: Deposits 5,991 3,110 14,865 7,895 Borrowings 213 207 600 618 Total interest expense 6,204 3,317 15,465 8,513 Net interest income 4,342 3,339 12,557 9,449 Provision for loan losses 275 2 582 1,884 Net interest income after provision for loan losses 4,067 3,337 11,975 7,565 Noninterest income: Service charges on deposit accounts 126 117 365 364 Gain on sale of loans held for sale 426 491 1,269 1,418 Other service charges and fees 9 17 42 35 Other - (8) 13 4 Total noninterest income 561 617 1,689 1,821 Noninterest expenses: Employee compensation and benefits 3,616 1,915 8,777 5,261 Occupancy and equipment 1,268 614 3,320 1,567 Data processing 281 231 763 662 Professional fees 233 126 667 570 Telephone, postage and supplies 368 287 1,058 782 Advertising 522 356 1,463 867 Other 631 247 1,450 896 Total noninterest expenses 6,919 3,776 17,498 10,605 (Loss) earnings before income tax (benefit) provision (2,291) 178 (3,834) (1,219) Income tax (benefit) provision (835) 72 (1,361) (444) Net (loss) earnings $(1,456) $106 $(2,473) $(775) (Loss) earnings per share, basic $(0.22) 0.03 $(0.38) (0.21) (Loss) earnings per share, diluted $(0.22) 0.03 $(0.38) (0.21) Weighted-average number of common shares outstanding, basic 6,509,057 3,757,650 6,508,373 3,757,632 Weighted-average number of common shares outstanding, diluted 6,509,057 3,820,422 6,508,373 3,757,632 COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (unaudited) ($ in thousands, except per share amounts) Assets September 30, December 31, September 30, 2006 2005 2005 (Unaudited) (Unaudited) Cash and due from banks 13,619 25,203 12,213 Federal funds sold and securities purchased under agreements to resell 4,596 22,810 6,006 Cash and cash equivalents 18,215 48,013 18,219 Securities available for sale 87,727 79,029 67,520 Loans, net of allowance for loan losses of $3,748, $3,146, and $3,183 531,391 390,867 366,125 Federal Home Loan Bank stock, at cost 2,000 1,289 1,289 Premises and equipment, net 27,184 24,780 24,412 Accrued interest receivable 3,453 2,218 1,892 Deferred income taxes 3,821 2,471 2,468 Other assets 2,415 1,627 1,472 Total assets $676,206 $550,294 $483,397 Liabilities and Stockholders' Equity Liabilities: Noninterest-bearing demand deposits $32,710 $33,302 $32,592 Savings, NOW and money-market deposits 103,150 84,635 90,253 Time deposits 432,125 331,520 290,175 Total deposits 567,985 449,457 413,020 Federal Home Loan Bank advances 20,000 10,000 10,000 Other borrowings 13,166 14,367 23,439 Other liabilities 3,537 2,707 3,025 Total liabilities 604,688 476,531 449,484 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 September 30, 2006, December 31, 2005 and September 30, 2005 32,545 32,518 18,788 Additional paid-in capital 45,767 45,591 19,456 Accumulated deficit (6,312) (3,839) (3,999) Accumulated other comprehensive loss (482) (507) (332) Total stockholders' equity 71,518 73,763 33,913 Total liabilities and stockholders' equity $676,206 $550,294 $483,397 ADDITIONAL FINANCIAL INFORMATION (in thousands) LOANS: Sep 30, 2006 Jun 30, 2006 Sep 30, 2005 (unaudited) (unaudited) (unaudited) Commercial $13,969 $13,645 $17,946 Commercial real estate 136,952 131,688 125,450 Installment 45,852 39,800 27,492 Residential real estate 99,580 74,404 50,151 Residential construction 236,739 221,326 146,350 533,092 480,864 367,389 Add (deduct): Deferred loan costs, net 2,047 1,756 1,918 Allowance for loan losses (3,748) (3,446) (3,183) Loans, net $531,391 $479,174 $366,124 NON - PERFORMING ASSETS : Sep 30, 2006 Jun 30, 2006 Sep 30, 2005 (unaudited) Loans on Non - Accrual Status $814 $1,088 $1,334 Delinquent Loans on Accrual Status - - - Total Non - Performing Loans 814 1,088 1,334 Real Estate Owned (REO) / Repossessed assets 171 173 112 Total Non - Performing Assets $985 $1,261 $1,446 Total Non - Performing Assets / Total Assets 0.15% 0.23% 0.30% Three Months Ended Nine Months Ended Sep 30, Sep 30, Sep 30, Sep 30, 2006 2005 2006 2005 (unaudited) (unaudited) CHANGE IN THE ALLOWANCE FOR LOAN LOSSES : Balance at beginning of period $3,446 $3,187 $3,146 $2,901 Provision for loan losses 275 2 582 1,884 Recoveries 39 21 64 116 Charge offs (11) (24) (43) (1,717) Net charge offs 28 (3) 21 (1,601) Balance at end of period $3,749 $3,186 $3,749 $3,184 Net Charge-offs / Average Loans Outstanding -0.02% - -0.01% 0.63% Allowance for Loan Losses / Total Loans Outstanding 0.70% 0.86% 0.70% 0.86% Allowance for Loan Losses / Non - Performing Loans 461.00% 239.00% 461.00% 239.00% ADDITIONAL FINANCIAL INFORMATION (in thousands) (Rates / Ratios Annualized) Three Months Ended Nine Months Ended Sep 30, Sep 30, Sep 30, Sep 30, 2006 2005 2006 2005 (unaudited) (unaudited) OPERATING PERFORMANCE : Average loans $505,606 $362,073 $456,034 $341,124 Average investment securities 85,914 63,605 87,221 60,119 Average other interest-earning assets 12,885 7,041 15,709 3,176 Average non - interest - earning assets 46,859 37,576 44,492 33,991 Total Average Assets $651,264 $470,295 $603,456 $438,410 Average interest bearing deposits $519,221 $370,444 $469,149 $336,422 Average borrowings 25,180 30,974 26,079 33,364 Average non - interest bearing liabilities 35,367 35,004 35,728 34,173 Total Average Liabilities 579,768 436,422 530,956 403,959 Total average equity 71,496 33,873 72,500 34,451 Total Average Liabilities And Equity $651,264 $470,295 $603,456 $438,410 Interest rate yield on loans 7.35% 6.59% 7.19% 6.40% Interest rate yield on investment securities 4.66% 3.61% 4.53% 3.45% Interest rate yield on other interest-earning assets 5.20% 3.66% 4.75% 3.37% Interest Rate Yield On Interest Earning Assets 6.92% 6.10% 6.70% 5.94% Interest rate expense on deposits 4.58% 3.33% 4.24% 3.14% Interest rate expense on borrowings 3.35% 2.65% 3.07% 2.48% Interest Rate Expense On Interest Bearing Liabilities 4.52% 3.28% 4.18% 3.08% Interest rate spread 2.40% 2.82% 2.52% 2.86% Net interest margin 2.85 3.06 3.00% 3.12% Other operating income / Average assets 0.34% 0.52% 0.37% 0.56% Other operating expense / Average assets 4.21% 3.19% 3.88% 3.23% Efficiency ratio (non-interest expense / revenue) 141.12% 95.45% 122.83% 94.10% Return on average assets -0.89% 0.09% -0.55% -0.24% Return on average equity -8.08% 1.24% -4.56% -3.01% Average equity / Average assets 10.98% 7.20% 12.01% 7.86% DATASOURCE: Coast Financial Holdings, Inc. CONTACT: Brian F. Grimes, President and CEO of Coast Financial Holdings, Inc., +1-877-COASTFL, or Web site: http://www.coastfl.com/

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