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| Coastal Bancorp, Inc. Announces Annual Earnings of $3.17 Per Share and Fourth Quarter Earnings of $0.70 Per Share |
| COASTAL BANCORP LOGO
Coastal Bancorp. logo. (PRNewsFoto)[DM] HOUSTON, TX USA | |||
HOUSTON, Jan. 15 /PRNewswire-FirstCall/ -- Coastal Bancorp, Inc. (Nasdaq: CBSA) today reported net income available to common stockholders of $19.3 million for the year ended December 31, 2001, compared to $17.4 million for 2000. Diluted earnings per common share for the year ended December 31, 2001 were $3.17 compared to $2.87 in 2000. The weighted average common shares outstanding used in the diluted earnings per share calculations for the periods were 6,078,334 for 2001 and 6,058,161 for 2000. Basic earnings per share for the year ended December 31, 2001 were $3.34 compared to $2.94 for 2000. Net income available to common stockholders for the quarter ended December 31, 2001 was $4.3 million, compared to $4.4 million for the same period in 2000. Diluted earnings per share for the quarter ended December 31, 2001 were $0.70 compared to $0.76 for the same period last year. The weighted average common shares outstanding used in the diluted earnings per share calculations for the periods were 6,109,355 and 5,864,139, respectively. Basic earnings per share for the quarter ended December 31, 2001 were $0.74 compared to $0.78 for the fourth quarter of 2000. In November 2001, Coastal completed the sale of approximately $845 million of its mortgage-backed securities. The transaction was undertaken to strategically restructure a portion of Coastal's balance sheet to make it less vulnerable to market interest rate fluctuations and improve the stability and quality of future earnings. During 2001, Coastal recorded a gain of $169,000 on the sale of mortgage-backed securities. Coastal used approximately $514 million of the proceeds to purchase primarily pass-thru mortgage-backed securities with an overall shorter expected duration and reduced borrowings with the remainder. All of the securities purchased and the remaining securities not sold were placed in the available-for-sale category. As a result of the restructuring, Coastal estimates that its asset size will range from $2.5 to $2.7 billion during 2002 with approximately 70 to 75% in loans receivable and 15 to 20% in mortgage-backed securities. This is a reduction of approximately $300 to $500 million in total asset size when compared to the majority of the year ended December 31, 2001. Comparison for the Years Ended December 31, 2001 and 2000 The increase in net income for the year ended December 31, 2001 was comprised of the following compared to 2000: a $2.2 million increase in net interest income, a $1.9 million decrease in the provision for loan losses, somewhat offset by a $881,000 decrease in noninterest income, a $284,000 increase in noninterest expense and a $972,000 increase in the provision for Federal income taxes. The increase in net interest income was due primarily to the increase in net interest margin to 2.97% for the year ended December 31, 2001 from 2.87% for 2000, which included a FHLB special dividend of $1.1 million in 2000. Net interest margin, excluding the FHLB special dividend, was 2.83% for the year ended December 31, 2000. The decrease in noninterest income was primarily due to the $2.2 million gain recorded on the sale of Coastal's mortgage servicing rights during the first quarter of 2000, the related $244,000 decrease in loan servicing income in 2001 and the fair value loss on derivative instruments of $422,000 recorded in 2001 pursuant to the adoption of Statement of Financial Accounting Standards No. 133 on January 1, 2001. The net fair value loss for the year ended December 31, 2001 was primarily attributable to Coastal's interest rate swap positions, which were liquidated in June 2001. As of December 31, 2001, interest rate cap agreements were Coastal's only derivative instruments. These decreases in noninterest income when comparing 2001 to 2000 were somewhat offset by the $169,000 gain that Coastal recorded related to the sale of the mortgage-backed securities mentioned previously. In addition, there were increases of $838,000 in service charges on deposit accounts, $621,000 in the gain on sale of real estate owned and $328,000 in other noninterest income, respectively, comparing 2001 to 2000. The increase in service charges on deposit accounts was due to Coastal's continuing focus on increasing transaction type accounts and the related fee income. The increase in the gain on the sale of real estate owned was primarily due to the $603,000 gain on the sale of one real estate owned property during the third quarter of 2001. The increase in other noninterest income was primarily due to $300,000 in insurance proceeds received in 2001 for reimbursement of certain deposit account losses incurred in prior years. The increase in noninterest expense was due to a $1.6 million, or 5.5%, increase in compensation, payroll taxes and other benefits, partially offset by a decrease of $84,000 in office occupancy, a $317,000 decrease in data processing, a $225,000 decrease in the amortization of goodwill and a decrease of $688,000 in other noninterest expense. The increase in compensation, payroll taxes and other benefits was primarily due to normal merit increases for existing staff, in addition to the staff increases for the item processing functions brought in-house during the third quarter of 2001 and additional personnel needed to continue Coastal's focus on commercial business products and lending. The decrease in data processing expense was due to the conversion to a new mortgage loan data processing system in the second quarter of 2001, the conversion of the Valley Region branches to Coastal's primary deposit and loan data processing system during the third quarter of 2001 and the item processing functions brought in-house during the third quarter of 2001. The decrease in the amortization of goodwill was due to certain goodwill amounts becoming fully amortized during 2001. The decrease in other noninterest expense was due to a decrease of $428,000 related to the Senior notes payable debt issuance costs becoming fully amortized in 2001 and the $401,000 reversal of an accrued franchise tax liability determined not to be payable, offset by other smaller changes in various categories. The provision for Federal income taxes increased $972,000 due to the increased income before Federal income taxes, minority interest and cumulative effect of accounting change. Comparison for the Quarter ended December 31, 2001 and 2000 Comparing the fourth quarter of 2001 to the fourth quarter of 2000, the following were the changes in the components of net income available to common stockholders: net interest income decreased $854,000, noninterest income increased $419,000, noninterest expense decreased $215,000 and the provision for Federal income taxes decreased $92,000. Net Interest Income For the three months ended December 31, 2001, net interest income decreased $854,000 when compared to the same period in 2000. This decrease was primarily due to the reduced net interest income as a result of the $183.6 million decrease in average interest-earning assets when comparing the two periods. This decrease in average interest-earning assets was due to the decrease in Coastal's asset size as a result of the restructuring of Coastal's statement of financial condition in late November 2001 through the sale of approximately $845 million mortgage-backed securities and the replacement of only approximately $514 million of those securities. The $183.6 million decrease in average interest-earning assets consisted primarily of a $229.5 million decrease in the average balance of mortgage-backed securities due to the restructuring mentioned above, offset somewhat by a $21.0 million increase in the average balance of U.S. Treasury securities and a $24.9 million increase in the average balance of other interest-earning assets, primarily FHLB stock and federal funds sold. Comparing the same periods, average interest-bearing liabilities decreased $209.3 million. This decrease was primarily comprised of a $319.1 million decrease in the average balance of securities sold under agreements to repurchase, a $3.0 million decrease in the average balance of Senior notes payable and a $2.3 million decrease in the average balance of interest-bearing deposits, somewhat offset by a $115.1 million increase in the average balance of advances from the FHLB. Net interest margin increased to 2.97% for the three months ended December 31, 2001 from 2.90% for the same period in 2000. This increase in net interest margin was primarily a result of the 2.23% decrease in the average rate paid on interest-bearing liabilities, partially offset by the 2.07% decrease in the average yield on interest-earning assets, both due to the decrease in overall market interest rates during 2001. Provision for Loan Losses During each of the quarters ended December 31, 2001 and 2000, Coastal recorded a provision for loan losses of $900,000. At December 31, 2001, Coastal had nonperforming loans totaling $24.7 million. Nonperforming loans are those loans on nonaccrual status as well as those loans greater than ninety (90) days delinquent and still accruing interest. Of the nonperforming loans at December 31, 2001, $21.8 million, or 88%, were first lien residential (single family) mortgage loans, $1.2 million were commercial real estate loans, $530,000 were commercial, financial and industrial loans, with the balance in the residential construction, multifamily real estate, acquisition and development, consumer and other loan categories. Of the nonperforming first lien residential mortgage loans at December 31, 2001, 86% were purchased and 14% were originated by Coastal. At December 31, 2000, nonperforming loans totaled $21.2 million, of which $16.5 million, or 78%, were first lien residential mortgage loans. At December 31, 2001, the allowance for loan losses as a percentage of nonperforming loans was 62.3% compared to 68.3% at December 31, 2000. Noninterest Income, Noninterest Expense and Provision for Federal Income Taxes The increase in noninterest income was primarily comprised of a $396,000 increase in service charges on deposit accounts, the $169,000 gain on the sale of mortgage-backed securities available-for-sale due to the restructuring in November 2001, a $37,000 increase in loan fees and a $28,000 fair value gain on derivative instruments, somewhat offset by a $139,000 decrease in other noninterest income and a $72,000 decrease in the gain on the sale of real estate owned. The increase in service charges on deposit accounts was due to Coastal's continuing focus on increasing transaction type accounts and the related fee income. The decrease in noninterest expense was due to a $336,000 decrease in data processing expense, a $118,000 decrease in office occupancy, a $47,000 decrease in the amortization of goodwill and a $360,000 decrease in other noninterest expense, partially offset by a $646,000 increase in compensation, payroll taxes and other benefits. The decrease in data processing expense was due to the conversion to a new mortgage loan data processing system in the second quarter of 2001, the conversion of the Valley Region branches to Coastal's primary deposit and loan data processing system during the third quarter of 2001 and the item processing functions brought in-house during the third quarter of 2001. The decrease in office occupancy was primarily due to certain assets becoming fully depreciated during 2001. The decrease in other noninterest expense was primarily due to the $401,000 reversal of an accrued franchise tax liability determined not to be payable and a $150,000 decrease related to the Senior notes payable debt issuance costs becoming fully amortized in 2001, offset by smaller changes in other categories. The increase in compensation, payroll taxes and other benefits was due to normal merit increases for existing staff, in addition to the staff increases for the item processing functions brought in-house during the third quarter of 2001 and additional personnel needed to continue Coastal's focus on commercial business products and lending. The provision for Federal income taxes decreased $92,000 primarily due to the decreased income before Federal income taxes and minority interest. Redemption of the Senior Notes Coastal has notified the Trustee that it will redeem all of its 10.0% Senior notes ($43.9 million currently outstanding) on February 1, 2002 (the "Redemption Date"). The redemption price is par plus accrued interest to the Redemption Date. Implementation of FASB Statements 141 and 142 In July 2001, Statement of Financial Accounting Standards No. 141, "Business Combinations" ("Statement 141") and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("Statement 142") were issued. Statement 141, which is effective for business combinations initiated or completed after June 30, 2001, eliminates the pooling of interests method of accounting for business combinations and requires that the purchase method of accounting be used for all business combinations. Statement 141 also requires, upon adoption of Statement 142, that Coastal evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Statement 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon the adoption of Statement 142. Coastal is required to implement Statement 142 on January 1, 2002 and test for impairment in accordance with the provisions of Statement 142 within the first interim period of 2002. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in that first interim period. At January 1, 2002, Coastal had unamortized goodwill that will be subject to the transition provisions of Statements 141 and 142 in the amount of $5.5 million. Amortization expense related to this goodwill was $618,000 (or approximately $0.10 per diluted share) for the year ended December 31, 2001. The remaining $16.3 million of goodwill will be reclassified to other intangible assets, as those amounts were originally recorded as goodwill pursuant to Statement of Financial Accounting Standards No. 72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions" ("Statement 72") and not subject to the non-amortization provisions of Statement 142. Previously Coastal had estimated and disclosed, based on the interpretations available, that all of the goodwill recorded on its consolidated statement of financial condition would be subject to the non-amortization provisions of Statement 142, with the ongoing earnings effect of that non-amortization being approximately $0.33 per diluted share. Because of updated interpretations of Statement 142, specifically relating to any goodwill originally recorded pursuant to Statement 72, these estimates were revised to that mentioned above. Based on preliminary assessments, it does not appear Coastal will recognize any transitional impairment losses as the cumulative effect of a change in accounting principle. The Company At December 31, 2001, Coastal had total assets of approximately $2.6 billion, deposits of approximately $1.7 billion, preferred stock (Series A) of Coastal Banc ssb of approximately $28.8 million, Series A Cumulative Preferred Stock of $27.5 million and common stockholders' equity of approximately $129.9 million. Coastal Bancorp, Inc. owns, through its wholly-owned subsidiary, Coastal Banc Holding Company, Inc., 100 percent of the voting stock of Coastal Banc ssb, a Texas-chartered FDIC insured, state savings bank headquartered in Houston. Coastal Banc ssb operates 50 branch offices in metropolitan Houston, Austin, Corpus Christi, the Rio Grande Valley and small cities in the southeast quadrant of Texas. You can visit the Company's website at http://www.coastalbanc.com (which is not part of this release). Notice under the Private Securities Litigation Reform Act of 1995 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts contain forward looking statements with respect to plans, projections or future performance of the Company, the occurrence of which involve certain risks and uncertainties. Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in Coastal Bancorp Inc.'s Securities and Exchange Commission filings. Investors are cautioned that any such forward looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward looking statements. Furthermore, Coastal does not intend (and is not obligated) to update publicly any forward looking statement. COASTAL BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (Dollars In Thousands, except per share data) (unaudited) For the For the Three Months Ended Year Ended December 31, December 31, 2001 2000 2001 2000 Basic earnings per share without the adoption of Statement 133 $0.74 $0.78 $3.41 $2.94 Basic earnings per share before the cumulative effect of accounting change for the adoption of Statement 133 $0.74 $0.78 $3.36 $2.94 Basic earnings per share $0.74 $0.78 $3.34 $2.94 Diluted earnings per share without the adoption of Statement 133 $0.70 $0.76 $3.24 $2.87 Diluted earnings per share before the cumulative effect of accounting change for the adoption of Statement 133 $0.70 $0.76 $3.19 $2.87 Diluted earnings per share $0.70 $0.76 $3.17 $2.87 Diluted cash earnings per share (A) $0.79 $0.88 $3.51 $3.37 Return (before minority interest) on average assets (B) 0.78% 0.75% 0.81% 0.74% Return on average common equity (B) 13.26% 16.32% 15.92% 16.51% Net interest margin (B) 2.97% 2.90% 2.97% 2.87% Noninterest expense to average total assets (B) 2.00% 1.91% 1.94% 1.91% Charge-offs of loans receivable $1,109 $629 $4,073 $2,174 Net charge-offs of loans receivable $868 $603 $3,021 $1,776 Ratio of net charge-offs to average loans receivable 0.05% 0.03% 0.16% 0.09% (A) Cash earnings is calculated by adding back goodwill amortization (net of the tax effect). (B) Annualized ratio. COASTAL BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (Dollars In Thousands) (unaudited) For the Three Months Ended For the Year Ended December 31, December 31, 2001 2000 2001 2000 Average balance sheet information Assets: Interest-earning assets: Loans receivable $1,900,113 $1,900,158 $1,942,701 $1,881,124 Mortgage-backed securities 757,041 986,498 905,441 1,002,055 Other 83,303 37,371 63,183 60,747 Total interest-earning assets 2,740,457 2,924,027 2,911,325 2,943,926 Noninterest-earning assets 100,696 93,827 98,487 100,626 Total assets $2,841,153 $3,017,854 $3,009,812 $3,044,552 Liabilities and stockholders' equity: Interest-bearing deposits $1,517,944 $1,520,284 $1,531,004 $1,489,479 Borrowings 911,030 1,115,046 1,078,631 1,176,332 Senior notes payable 43,916 46,900 45,868 46,900 Total interest-bearing liabilities 2,472,890 2,682,230 2,655,503 2,712,711 Noninterest-bearing liabilities 183,190 171,606 176,861 170,083 Preferred stock of Coastal Banc ssb 28,750 28,750 28,750 28,750 Preferred stockholders' equity 27,500 27,500 27,500 27,500 Common stockholders' equity 128,823 107,768 121,198 105,508 Total liabilities and stockholders' equity $2,841,153 $3,017,854 $3,009,812 $3,044,552 COASTAL BANCORP, INC. AND SUBSIDIARIES OTHER FINANCIAL DATA (Dollars In Thousands, except per share data) (unaudited) December 31, December 31, 2001 2000 Nonaccrual loans receivable: First lien residential $21,744 $16,062 Residential construction 218 390 Multifamily real estate 82 --- Commercial real estate 1,174 1,134 Acquisition and development 6 --- Commercial, financial and industrial 499 1,152 Consumer and other 141 496 23,864 19,234 Loans greater than 90 days delinquent and still accruing: First lien residential 62 475 Residential construction 755 --- Commercial real estate --- 736 Commercial, financial and industrial 31 634 Consumer and other 1 153 849 1,998 Total nonperforming loans 24,713 21,232 Real estate owned and repossessed assets 4,607 4,095 Total nonperforming assets $29,320 $25,327 Allowance for loan losses $15,385 $14,507 Ratio of nonperforming loans to loans receivable 1.33% 1.12% Ratio of nonperforming assets to total assets 1.13% 0.82% Ratio of allowance for loan losses to nonperforming loans receivable 62.26% 68.32% Ratio of allowance for loan losses to loans receivable 0.83% 0.77% Book value per common share $21.54 $18.89 Tangible book value per common share $18.15 $15.08 Regulatory capital ratios: Tier 1 (Core) 7.27% 6.22% Tier 1 risk-based 11.90% 9.94% Total risk-based 12.79% 10.72% COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In Thousands, except share data) December 31, December 31, ASSETS 2001 2000 (unaudited) Cash and cash equivalents $41,537 $69,730 Federal funds sold 16,710 869 Loans receivable 1,863,601 1,896,228 Mortgage-backed securities held-to-maturity --- 885,565 Mortgage-backed securities available-for-sale, at market value 514,068 94,673 U.S. Treasury securities held-to-maturity --- 1,497 U.S. Treasury securities available-for-sale, at market value 42,827 --- Accrued interest receivable 13,243 18,772 Property and equipment 27,461 28,086 Stock in the Federal Home Loan Bank of Dallas (FHLB) 40,032 58,005 Goodwill and other intangible assets 21,811 24,611 Prepaid expenses and other assets 16,601 13,575 $2,597,891 $3,091,611 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $1,660,386 $1,674,981 Advances from the FHLB 690,877 1,150,305 Senior notes payable 43,875 46,900 Advances from borrowers for taxes and insurance 4,259 5,050 Other liabilities and accrued expenses 12,310 47,154 Total liabilities 2,411,707 2,924,390 9.0% noncumulative preferred stock of Coastal Banc ssb (Series A) 28,750 28,750 Commitments and contingencies Stockholders' equity Preferred stock, no par value; authorized shares 5,000,000; 9.12% Cumulative, Series A, 1,100,000 shares issued and outstanding 27,500 27,500 Common stock, $0.01 par value; authorized shares 30,000,000; 7,835,178 shares issued and 5,835,178 shares outstanding at December 31, 2001; 7,677,622 shares issued and 5,677,622 shares outstanding at December 31, 2000 78 77 Additional paid-in capital 35,366 33,312 Retained earnings 127,425 110,794 Accumulated other comprehensive loss - unrealized loss on securities available-for-sale (1,590) (1,867) Treasury stock, at cost (2,000,000 shares in 2001 and 2000) (31,345) (31,345) Total stockholders' equity 157,434 138,471 $2,597,891 $3,091,611 COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share data) Three Months Ended December 31, 2001 2000 (unaudited) Interest income: Loans receivable $33,386 $43,954 Mortgage-backed securities 9,227 16,604 FHLB stock, federal funds sold and other interest-earning assets 561 616 43,174 61,174 Interest expense: Deposits 13,738 20,211 Advances from the FHLB 6,207 8,945 Other borrowed money 1,766 9,626 Senior notes payable 1,098 1,173 22,809 39,955 Net interest income 20,365 21,219 Provision for loan losses 900 900 Net interest income after provision for loan losses 19,465 20,319 Noninterest income: Service charges on deposit accounts 2,147 1,751 Loan fees 308 271 Gain on sale of mortgage-backed securities available-for-sale 169 --- Gain on derivative instruments 28 --- Gain (loss) on sale of real estate owned, net (22) 50 Other 230 369 2,860 2,441 Noninterest expense: Compensation, payroll taxes and other benefits 7,860 7,214 Office occupancy 2,707 2,825 Data processing 477 813 Amortization of goodwill and other intangible assets 702 749 Other 2,574 2,934 14,320 14,535 Income before provision for Federal income taxes and minority interest 8,005 8,225 Provision for Federal income taxes 2,425 2,517 Income before minority interest 5,580 5,708 Minority interest - preferred stock dividends of Coastal Banc ssb 647 647 Net income $4,933 $5,061 Net income available to common stockholders $4,306 $4,434 Basic earnings per share $0.74 $0.78 Diluted earnings per share $0.70 $0.76 Effective Federal income tax rate 30.29% 30.60% COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share data) Year Ended December 31, 2001 2000 (unaudited) Interest income: Loans receivable $155,214 $168,105 Mortgage-backed securities 52,873 64,246 FHLB stock, federal funds sold and other interest-earning assets 2,525 4,922 210,612 237,273 Interest expense: Deposits 69,828 73,216 Advances from the FHLB 38,917 58,328 Other borrowed money 10,682 16,671 Senior notes payable 4,588 4,690 124,015 152,905 Net interest income 86,597 84,368 Provision for loan losses 3,900 5,790 Net interest income after provision for loan losses 82,697 78,578 Noninterest income: Service charges on deposit accounts 7,803 6,965 Loan fees 1,248 1,247 Loan servicing income, net --- 244 Gain on sale of mortgage-backed securities available-for-sale 169 --- Gain (loss) on derivative instruments (422) --- Gain on sale of real estate owned, net 819 198 Other 1,526 1,198 Gain on sale of mortgage servicing rights --- 2,172 11,143 12,024 Noninterest expense: Compensation, payroll taxes and other benefits 30,785 29,187 Office occupancy 10,913 10,997 Data processing 3,008 3,325 Amortization of goodwill and other intangible assets 2,800 3,025 Other 10,973 11,661 58,479 58,195 Income before provision for Federal income taxes, minority interest and cumulative effect of accounting change 35,361 32,407 Provision for Federal income taxes 10,867 9,895 Income before minority interest and cumulative effect of accounting change 24,494 22,512 Minority interest - preferred stock dividends of Coastal Banc ssb 2,588 2,588 Income before cumulative effect of accounting change 21,906 19,924 Cumulative effect of change in accounting for derivative instruments, net of tax (104) --- Net income $21,802 $19,924 Net income available to common stockholders $19,294 $17,416 Basic earnings per share before cumulative effect of accounting change $3.36 $2.94 Basic earnings per share $3.34 $2.94 Diluted earnings per share before cumulative effect of accounting change $3.19 $2.87 Diluted earnings per share $3.17 $2.87 Effective Federal income tax rate 30.73% 30.53%SOURCE Coastal Bancorp, Inc.
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CONTACT:
Manuel J. Mehos, CEO, or Catherine N. Wylie,
CFO, both of Coastal Bancorp, Inc., +1-713-435-5327, or fax,
+1-713-435-5106
