BRADENTON, Fla., Oct. 26 /PRNewswire-FirstCall/ -- Coast Financial Holdings, Inc. , parent company of Coast Bank of Florida today reported financial results for the quarter ended September 30, 2007.
For the quarter ended September 30, 2007 the company recorded a loss of $14.2 million, or $2.18 per share, as compared to a loss of $1.5 million, or $0.22 per share, reported for the quarter ended September 30, 2006. For the nine months ended September 30, 2007, the company has recorded a loss of $35.3 million, or $5.43 per share.
According to Coast Bank Acting President and Chief Executive Officer, Anne V. Lee, the losses posted in the quarter are reflective of the many critical issues facing the bank at this time. "As a result of the worsening downturn in the investor real estate market, where Coast Bank has significant exposure, non-performing assets continue to rise, severely depressing earnings." Lee continued, "These increases in non-performing assets necessitate additional increases in the Provision for Loan Losses, further increasing the quarterly loss."
For the quarter ended September 30, 2007, Coast Bank increased the provision for loan losses by $9.5 million.
Lee continued, "These factors, coupled with the constraints and significant expense of operating under a regulatory Cease and Desist order; the legal and professional fees associated with protecting the bank's interest in properties associated with affected loans; the costs related to the prospective future acquisition and the challenges of the current interest rate environment create a scenario where it is increasingly difficult for Coast Bank to realize a near-term profit."
Income Statement Review
For the quarter ended September 30, 2007 net interest income before the provision for loan loss decreased 60.46% to $1.7 million, as compared to $4.3 million reported for the quarter ended September 30, 2006. Revenues (net interest income before the provision for loan losses plus other operating income) decreased 57.14% to $2.1 million in the quarter ended September 30, 2007 from the $4.9 million reported for the quarter ended September 30, 2006. Among the factors contributing to the reduction in income is the continuing increase in non-performing assets, primarily in the construction-to-permanent real estate portfolio, including affected loans and similar loans, where the financing by the borrowers was primarily for investment purposes.
Net interest margin compressed in the quarter. For the quarter ended September 30, 2007 net interest margin was 0.98%, as compared to the 2.85% net interest margin reported for the quarter ended September 30, 2006.
Non-interest expenses decreased in the quarter. For the quarter ended September 30, 2007 non-interest expenses totaled $6.8 million; a decrease of less than one percent when compared to the $6.9 million reported for the quarter ended September 30, 2006.
Balance Sheet Review
Deposits increased 4.6%, or $27.7 million to $632.3 million, from $604.6 million reported at December 31, 2006. At September 30, 2007, non-interest bearing demand deposits, savings, NOW and money-market deposits totaled $97.7 million, a decrease of 41.9% when compared to the $168.2 million outstanding at December 31, 2006. During the reporting period, time deposits increased $98.2 million, or 22.5%, to $534.6 million from the $436.4 million outstanding at December 31, 2006.
Total loans decreased for the reporting period. As of September 30, 2007 net loans totaled $530.1 million, representing a decrease of $32.5 million, or 5.8%, compared to $562.6 million at December 31, 2006.
Total assets also decreased. As of September 30, 2007 assets totaled $664.5 million. This total is a decrease of $55.2 million, or 7.7%, compared to $719.7 million at December 31, 2006.
Total Shareholder Equity stood at $22.3 million as of September 30, 2007, a decrease of $34.9 million compared to $57.2 million reported at December 31, 2006.
Credit Quality Review
Non-performing assets increased during the past three months. Lee stated, "The bank continues to experience increases in non-performing assets related to the affected loans resulting from the CCI bankruptcy, as well as other construction-to-permanent loans initiated by individuals for investment purposes." As of September 30, 2007 non-performing assets totaled $77.8 million, an increase of $76.8 million compared to $1.0 million reported at December 31, 2006.
Impact of Non-Performing Assets on Proposed Purchase Price
Under the terms of the agreement with First Banks, CFHI shareholders can receive up to $3.40 in cash for their shares upon closing of the transaction. The per-share price may be adjusted if, on the Determination Date each of the following conditions exist:
-- the Company's allowance for loan and lease losses plus its tangible equity is less than 75% of the Company's non-performing loans and leases plus other real estate owned (the Deficiency), and -- The Deficiency is greater than $1 million.
If each of the above conditions exists, then the aggregate cash consideration to be paid by First Banks will be reduced to the nearest $500,000 increment, rounded upward or downward, to the full amount of the Deficiency and the price per common share will be reduced accordingly. If the deficiency exceeds $10 million, then CFHI or First Banks, respectively, will have the right to terminate the merger agreement. Based on this formula and depending on the amount of the deficiency, the price paid per share could be reduced to $1.86 prior to triggering such termination rights. As of September 30, 2007, the deficiency was approximately $1,286,000 which would result in a payment of approximately $3.17 per share. In view of the current and anticipated performance of CFHI, it is likely that the deficiency will continue to increase in size and the amount paid per share will be further reduced.
COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY Condensed Consolidated Statements of Earnings (Unaudited) ($ in thousands, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Interest income: Loans $8,578 $9,367 $27,713 $4,510 Securities 972 1,010 3,591 2,954 Other interest- earning assets 469 169 1,843 558 Total interest income 10,019 10,546 33,147 28,022 Interest expense: Deposits 8,229 5,991 24,584 14,865 Borrowings 99 213 826 600 Total interest expense 8,328 6,204 25,410 15,465 Net interest income 1,691 4,342 7,737 12,557 Provision for loan losses 9,514 275 11,680 582 Net interest income after provision for loan losses (7,823) 4,067 (3,943) 11,975 Noninterest income: Service charges on deposit accounts 136 126 424 365 Gain on sale of loans held for sale 293 426 1,125 1,269 Other service charges and fees 18 9 53 42 Other - - - 13 Total noninterest income 447 561 1,602 1,689 Noninterest expenses: Employee compensation and benefits 2,473 3,616 8,231 8,777 Occupancy and equipment 1,319 1,268 3,937 3,320 Data processing 270 281 846 763 Professional fees 884 233 2,580 667 Telephone, postage and supplies 280 368 982 1,058 Advertising 159 522 712 1,463 FDIC and State assessments 730 44 1,677 122 Other 702 587 1,708 1,328 Total noninterest expenses 6,817 6,919 20,673 17,498 Loss before income tax expense (benefit) (14,193) (2,291) (23,014) (3,834) Income tax expense (benefit) - (835) 12,320 (1,361) Net loss $(14,193) $(1,456) $(35,334) $(2,473) Loss per share, basic $(2.18) (0.22) $(5.43) (0.38) Loss per share, diluted $(2.18) (0.22) $(5.43) (0.38) Weighted-average number of common shares outstanding, basic 6,509,057 6,509,057 6,509,057 6,508,373 Weighted-average number of common shares outstanding, diluted 6,509,057 6,509,057 6,509,057 6,508,373 COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (unaudited) ($ in thousands, except per share amounts) September 30, December 31, Assets 2007 2006 (Unaudited) Cash and due from banks 9,833 13,952 Federal funds sold and securities purchased under agreements to resell 16,356 385 Cash and cash equivalents 26,189 14,337 Securities available for sale 72,727 92,013 Loans, net of allowance for loan losses of $34,798 and $25,710 530,077 562,574 Federal Home Loan Bank stock, at cost 1,319 3,035 Premises and equipment, net 26,093 27,598 Accrued interest receivable 4,094 4,119 Deferred income taxes - 12,465 Other real estate owned 1,762 167 Other assets 2,191 3,361 Total assets $664,452 719,669 Liabilities and Stockholders' Equity Liabilities: Noninterest-bearing demand deposits $20,071 34,345 Savings, NOW and money-market deposits 77,652 133,819 Time deposits 534,580 436,408 Total deposits 632,303 604,572 Federal Home Loan Bank advances - 41,000 Federal funds purchased - - Repurchase agreement - - Other borrowings 6,777 14,108 Other liabilities 3,121 2,813 Total liabilities 642,201 662,493 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 and 6,509,057 shares issued and outstanding in 2007 and 2006 32,545 32,545 Additional paid-in capital 46,061 45,992 Accumulated deficit (56,453) (21,119) Accumulated other comprehensive loss 98 (242) Total stockholders' equity 22,251 57,176 Total liabilities and stockholders' equity $664,452 719,669 ADDITIONAL FINANCIAL INFORMATION (in thousands) LOANS: Sep 30, 2007 Jun 30, 2007 Sep 30, 2006 (unaudited) (unaudited) (unaudited) Commercial $9,825 $12,684 13,970 Commercial real estate 121,310 125,197 136,952 Installment 56,367 56,110 45,852 Residential real estate 220,140 205,402 99,580 Residential construction 155,168 179,500 236,738 562,810 578,893 533,092 Add (deduct): Deferred loan costs, net 2,065 2,262 2,047 Allowance for loan losses (34,798) (26,666) (3,748) Loans, net $530,077 $554,489 531,391 NON-PERFORMING ASSETS: Sep 30, 2007 Jun 30, 2007 Sep 30, 2006 (unaudited) (unaudited) (unaudited) Loans on Non - Accrual Status $76,018 $63,671 814 Delinquent Loans on Accrual Status -- -- -- Total Non - Performing Loans 76,018 63,671 814 Real Estate Owned (REO)/ Repossessed assets 1,762 1,159 171 Total Non-Performing Assets $77,780 $64,830 985 Total Non-Performing Assets/ Total Assets 11.71% 8.74% 0.15% Three Months Ended Nine Months Ended Sep 30, Sep 30, Sep 30, Sep 30, 2007 2006 2007 2006 CHANGE IN THE (unaudited) (unaudited) (unaudited) (unaudited) ALLOWANCE FOR LOAN LOSSES: Balance at beginning of period $26,666 $3,446 $25,710 $3,146 Provision for loan losses 9,514 275 11,680 582 Recoveries 3 39 25 64 Charge offs (1,385) (11) (2,617) (43) Net charge offs (1,382) 28 (2,592) 21 Balance at end of period $34,798 $3,749 $34,798 $3,749 Net Charge-offs/Average Loans Outstanding 0.96% (0.02)% 0.59% (0.01)% Allowance for Loan Losses/ Total Loans Outstanding 6.16% 0.70% 6.16% 0.70% Allowance for Loan Losses/ Non-Performing Loans 45.78% 460.44% 45.78% 460.44% ADDITIONAL FINANCIAL INFORMATION (in thousands) (Rates/Ratios Annualized) Three Months Ended Nine Months Ended Sep 30, Sep 30, Sep 30, Sep 30, 2007 2006 2007 2006 (unaudited) (unaudited) (unaudited) (unaudited) OPERATING PERFORMANCE: Average loans $570,631 $505,606 $586,463 $456,034 Average investment securities 76,149 85,914 95,654 87,221 Average other interest- earning assets 35,967 12,885 46,713 15,709 Average non-interest- earning assets 18,283 46,859 28,692 44,492 Total Average Assets $701,030 $651,264 $757,522 $603,456 Average interest bearing deposits $631,753 $519,221 $653,705 $469,149 Average borrowings 9,365 25,180 25,204 26,079 Average non-interest bearing liabilities 26,721 35,367 31,250 35,728 Total Average Liabilities 667,839 579,768 710,159 530,956 Total average equity 33,191 71496 47,363 72,500 Total Average Liabilities And Equity $701,030 $651,264 $757,522 $603,456 Interest rate yield on loans 5.96% 7.35% 6.32% 7.19% Interest rate yield on investment securities 5.06% 4.66% 5.02% 4.53% Interest rate yield on other interest-earning assets 5.17% 5.20% 5.28% 4.75% Interest Rate Yield On Interest Earning Assets 5.82% 6.92% 6.08% 6.70% Interest rate expense on deposits 5.17% 4.58% 5.03% 4.24% Interest rate expense on borrowings 4.20% 3.35% 4.37% 3.08% Interest Rate Expense On Interest Bearing Liabilities 5.15% 4.52% 5.00% 4.18% Interest rate spread 0.67% 2.40% 1.08% 2.52% Net interest margin 0.98% 2.85% 1.42% 3.00% Other operating income/ Average assets 0.25% 0.34% 0.28% 0.37% Other operating expense/ Average assets 3.86% 4.21% 3.65% 3.88% Efficiency ratio (non-interest expense/ revenue) 318.85% 141.12% 221.36% 122.83% Return on average assets (8.03)% (0.89)% (6.24)% (0.55)% Return on average equity (169.65)% (8.08)% (99.74)% (4.56)% Average equity/Average assets 4.73% 10.98% 6.25% 12.01% About Coast Financial Holdings:
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, 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.
Further information may be obtained by contacting Tramm Hudson at 941/993-5902.
