Crescent Financial Corporation Announces 63% Increase in Fourth Quarter 2006 Earnings and 56% Increase in 2006 Annual Earnings

CARY, N.C., Jan. 19 /PRNewswire-FirstCall/ -- Crescent Financial Corporation , parent company of Crescent State Bank in Cary, North Carolina and Port City Capital Bank in Wilmington, North Carolina today announced unaudited net income for the year ended December 31, 2006 of $4,904,000 reflecting a 56% increase over net income of $3,144,000 for the year ended December 31, 2005. Diluted earnings per share for the current year increased by 13% to $.69 compared to split-adjusted diluted earnings per share of $.61 for the prior year period. The percentage increase in earnings per share was not comparable to the increase in net income due to the issuance of an additional 848,000 shares during the fourth quarter of 2005 and 2,432,000 shares in connection with the acquisition of Port City Capital Bank on August 31, 2006. The increase in net income for 2006 was primarily the result of strong earning asset growth.

Average earning assets for 2006 increased by approximately $137.9 million to $491.8 million compared to $353.9 million for 2005. Earning asset growth resulted in the increase of net interest income by 39% from $14.0 million in 2005 to $19.4 million in 2006. Non-interest income increased by 8% from $2.4 million to $2.6 million. Non-interest expenses increased by 24% from $10.8 million to $13.4 million primarily in the areas of personnel, occupancy and data processing expenses as the Company opened a new loan production office and a full-service branch office in Raleigh, North Carolina during the first and second quarters, respectively, and acquired Port City Capital Bank of Wilmington, North Carolina during the third quarter. The loan loss provision was $991,000 for the year ended December 31, 2006 compared to $807,000 for the prior year.

Unaudited net income for the three-month period ended December 31, 2006 was $1,643,000 or $.19 per diluted share compared with $1,005,000 or $.18 per split-adjusted diluted share for the three-month period ended December 31, 2005. In comparing results for the two quarterly periods, net income increased by 63%, net interest income increased by 59%, non-interest income increased by 4% and non-interest expenses increased by 32%. The loan loss provision was $374,000 for the current three-month period compared to $60,000 for the prior year period.

Crescent Financial Corporation reported total assets on December 31, 2006 of $697.9 million reflecting a 70% increase over total assets of $410.8 million on December 31, 2005. Total net loans increased by 68% from $324.0 million at December 31, 2005 to $542.9 million at December 31, 2006. Total deposits increased 68% from $322.1 million at December 31, 2005 to $541.9 million at December 31, 2006. Total stockholders' equity grew by 100% from $41.5 million at December 31, 2005 to $83.0 million at December 31, 2006. The increase was primarily due to the acquisition of Port City Capital Bank and net income for the year.

Mike Carlton, President and CEO stated, "This past year reflects the results of our plan and continued commitment to build a top-performing financial institution. We are pleased to be able to report to our shareholders the significant increases in both balance sheet and net income over the past twelve months. This most recent quarter reflects the first full period of combined earnings from the completed merger with Port City Capital Bank. Our successes during the year would not have been possible without the dedication and focus from each of our employees.

As we move into 2007 and beyond, our branch network will increase more rapidly than in prior years as we seek out additional expansion opportunities. We have identified several banking locations in the Greater Raleigh area and Southeastern North Carolina, and hope to open three new offices by the end of 2007. Through our existing branch network and other identified communities, we are well positioned for further successes."

Crescent State Bank is a state chartered bank operating ten banking offices in Cary (2), Apex, Clayton, Holly Springs, Southern Pines, Pinehurst, Sanford, Garner and Raleigh, North Carolina and one loan production office in Raleigh, North Carolina. Port City Capital Bank is a state chartered bank operating one full-service banking office in Wilmington, North Carolina. Crescent Financial Corporation stock can be found on the NASDAQ Global Market trading under the symbol CRFN. Investors can access additional corporate information, product descriptions and online services through the Bank's website at http://www.crescentstatebank.com/.

Information in this press release contains "forward-looking statements." These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates and the effects of competition. Additional factors that could cause actual results to differ materially are discussed in Crescent Financial Corporation's recent filings with the Securities Exchange Commission, including but not limited to its Annual Report on Form 10-K and its other periodic reports.

Crescent Financial Corporation Consolidated Balance Sheet (Amounts in thousands except share and per share data) (Unaudited) December 31, September 30, June 30, 2006 2006 2006 ASSETS Cash and due from banks $14,295 $14,046 $12,263 Interest earning deposits with banks 763 812 207 Federal funds sold 92 11,556 8,738 Investment securities available for sale at fair value 84,723 83,827 64,397 Loans 549,819 526,066 365,174 Allowance for loan losses (6,945) (6,573) (4,772) Net Loans 542,874 519,493 360,402 Accrued interest receivable 3,046 2,950 2,146 Federal Home Loan Bank stock 3,583 3,133 3,072 Bank premises and equipment 5,908 5,818 5,067 Investment in life insurance 5,683 5,633 5,583 Goodwill 30,225 30,284 3,600 Other assets 6,717 6,619 5,288 Total Assets $697,909 $684,171 $470,763 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits Demand $70,420 $74,875 $52,179 Savings 78,379 74,277 33,664 Money market and NOW 97,343 110,235 85,342 Time 295,739 280,844 198,444 Total Deposits 541,881 540,231 369,629 Short-term borrowings 24,451 14,741 16,000 Long-term debt 45,248 45,248 40,248 Accrued expenses and other liabilities 3,295 2,697 1,922 Total Liabilities 614,875 602,917 427,799 STOCKHOLDERS' EQUITY Common stock 8,265 8,249 5,798 Additional paid-in capital 62,659 62,522 28,829 Retained earnings 12,611 10,967 9,693 Accumulated other comprehensive loss (501) (484) (1,356) Total Stockholders' Equity 83,034 81,254 42,964 Total Liabilities and Stockholders' Equity $697,909 $684,171 $470,763 Ending shares outstanding (b) 8,265,136 8,248,654 5,798,240 Book value per share $10.05 $9.85 $7.41 Crescent Financial Corporation Consolidated Balance Sheet (Amounts in thousands except share and per share data) (Unaudited) March 31, December 31, 2006 2005 (a) ASSETS Cash and due from banks $10,577 $9,403 Interest earning deposits with banks 571 69 Federal funds sold - - Investment securities available for sale at fair value 59,262 55,550 Loans 355,806 328,322 Allowance for loan losses (4,621) (4,351) Net Loans 351,185 323,971 Accrued interest receivable 1,913 1,768 Federal Home Loan Bank stock 2,712 2,133 Bank premises and equipment 5,008 4,844 Investment in life insurance 5,533 5,483 Goodwill 3,600 3,600 Other assets 4,657 3,967 Total Assets $445,018 $410,788 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits Demand $49,879 $46,830 Savings 12,110 9,365 Money market and NOW 89,472 87,695 Time 198,103 178,191 Total Deposits 349,564 322,081 Short-term borrowings 10,775 14,964 Long-term debt 40,248 30,248 Accrued expenses and other liabilities 2,025 2,038 Total Liabilities 402,612 369,331 STOCKHOLDERS' EQUITY Common stock 5,035 5,026 Additional paid-in capital 29,513 29,406 Retained earnings 8,689 7,707 Accumulated other comprehensive loss (831) (682) Total Stockholders' Equity 42,406 41,457 Total Liabilities and Stockholders' Equity $445,018 $410,788 Ending shares outstanding (b) 5,789,917 5,780,353 Book value per share $7.32 $7.17 Crescent Financial Corporation Consolidated Income Statements (Amounts in thousands except share and per share data) (Unaudited) For the year ended December 31, December 31, 2006 2005 (a) INTEREST INCOME Loans $33,094 $20,456 Investment securities available for sale 3,303 2,323 Fed funds sold and other interest 310 47 Total Interest Income 36,707 22,826 INTEREST EXPENSE Deposits 14,207 6,884 Short-term borrowings 844 475 Long-term debt 2,206 1,513 Total Interest Expense 17,257 8,872 Net Interest Income 19,450 13,954 Provision for loan losses 991 807 Net interest income after provision for loan losses 18,459 13,147 Non-interest income Mortgage loan origination income 642 755 Service charges and fees on deposit accounts 1,288 1,045 Realized gain/loss on sale of securities - (16) Other 682 633 Total non-interest income 2,612 2,417 Non-interest expense Salaries and employee benefits 7,307 5,904 Occupancy and equipment 2,018 1,728 Data processing 834 648 Other 3,228 2,481 Total non-interest expense 13,387 10,761 Income before income taxes 7,684 4,803 Income taxes 2,780 1,659 Net income $4,904 $3,144 NET INCOME PER COMMON SHARE (b) Basic $0.74 $0.64 Diluted $0.69 $0.61 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (b) Basic 6,619,105 4,911,264 Diluted 7,078,590 5,165,861 Return on average assets 0.93% 0.84% Return on average equity 8.72% 10.34% Net interest margin 3.95% 3.94% Allowance for loan losses to avg loans 1.26% 1.33% Nonperforming loans to total loans 0.02% 0.01% Nonperforming assets to total assets 0.03% 0.01% (a) Derived from audited consolidated financial statements. (b) Adjusted, where applicable, for the stock split effected as a 15% stock dividend paid on May 31, 2006 to stockholders of record on May 18, 2006. Crescent Financial Corporation Consolidated Income Statements (Amounts in thousands except share and per share data) (Unaudited) For the three-month period ended December 31, September 30, June 30, 2006 2006 2006 INTEREST INCOME Loans $11,125 $8,516 $7,019 Investment securities available for sale 1,038 877 724 Fed funds sold and other interest 125 129 51 Total Interest Income 12,288 9,522 7,794 INTEREST EXPENSE Deposits 5,161 3,824 2,831 Short-term borrowings 234 164 213 Long-term debt 649 620 534 Total Interest Expense 6,044 4,608 3,578 Net Interest Income 6,244 4,914 4,216 Provision for loan losses 374 182 164 Net interest income after provision for loan losses 5,870 4,732 4,052 Non-interest income Mortgage loan origination income 138 193 165 Service charges and fees on deposit accounts 341 321 308 Realized gain/loss on sale of securities - - - Other 222 181 146 Total non-interest income 701 695 619 Non-interest expense Salaries and employee benefits 2,169 1,899 1,670 Occupancy and equipment 547 512 489 Data processing 260 205 186 Other 1,003 816 759 Total non-interest expense 3,979 3,432 3,104 Income before income taxes 2,592 1,995 1,567 Income taxes 949 721 564 Net income $1,643 $1,274 $1,003 NET INCOME PER COMMON SHARE (b) Basic $0.20 $0.19 $0.17 Diluted $0.19 $0.18 $0.17 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (b) Basic 8,249,710 6,620,379 5,793,021 Diluted 8,697,190 7,080,336 6,025,727 Return on average assets 0.95% 0.94% 0.88% Return on average equity 7.90% 8.99% 9.33% Net interest margin 3.92% 3.89% 3.95% Allowance for loan losses to avg loans 1.26% 1.25% 1.31% Nonperforming loans to total loans 0.02% 0.02% 0.07% Nonperforming assets to total assets 0.03% 0.05% 0.06% (a) Derived from audited consolidated financial statements. (b) Adjusted, where applicable, for the stock split effected as a 15% stock dividend paid on May 31, 2006 to stockholders of record on May 18, 2006. Crescent Financial Corporation Consolidated Income Statements (Amounts in thousands except share and per share data) (Unaudited) For the three-month period ended March 31, December 31, 2006 2005 INTEREST INCOME Loans $6,433 $5,989 Investment securities available for sale 663 612 Fed funds sold and other interest 5 8 Total Interest Income 7,101 6,609 INTEREST EXPENSE Deposits 2,391 2,077 Short-term borrowings 233 211 Long-term debt 403 383 Total Interest Expense 3,027 2,671 Net Interest Income 4,074 3,938 Provision for loan losses 270 60 Net interest income after provision for loan losses 3,804 3,878 Non-interest income Mortgage loan origination income 145 186 Service charges and fees on deposit accounts 318 297 Realized gain/loss on sale of securities - - Other 133 192 Total non-interest income 596 675 Non-interest expense Salaries and employee benefits 1,569 1,723 Occupancy and equipment 469 454 Data processing 183 170 Other 650 659 Total non-interest expense 2,871 3,006 Income before income taxes 1,529 1,547 Income taxes 547 542 Net income $982 $1,005 NET INCOME PER COMMON SHARE (b) Basic $0.17 $0.19 Diluted $0.16 $0.18 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (b) Basic 5,786,227 5,421,741 Diluted 6,010,819 5,656,219 Return on average assets 0.93% 0.98% Return on average equity 9.91% 10.63% Net interest margin 4.09% 4.09% Allowance for loan losses to avg loans 1.30% 1.33% Nonperforming loans to total loans 0.01% 0.01% Nonperforming assets to total assets 0.01% 0.01% (a) Derived from audited consolidated financial statements. (b) Adjusted, where applicable, for the stock split effected as a 15% stock dividend paid on May 31, 2006 to stockholders of record on May 18, 2006.