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| Coastal Bancorp, Inc. Announces First Quarter Results of 51 Cents Per Share And a Reduction of Nonperforming Assets |
| COASTAL BANCORP LOGO
Coastal Bancorp. logo. (PRNewsFoto)[DM] HOUSTON, TX USA | |||
HOUSTON, April 15 /PRNewswire-FirstCall/ -- Coastal Bancorp, Inc. (Nasdaq: CBSA) today reported net income available to common stockholders of $3.1 million for the quarter ended March 31, 2002, compared to $4.6 million for the same period in 2001, which is a $1.4 million, or 31.8%, decrease. The decrease was primarily due to a $3.6 million decrease in net interest income, as a result of overall lower interest rates, higher than expected prepayments on Coastal's mortgage-backed securities and loans receivable (35% on an annualized basis for mortgage-backed securities and 40% for loans receivable) and Coastal's overall smaller asset size as compared to the same period in 2001. This decrease was somewhat offset by a $687,000 increase in noninterest income (primarily due to the $564,000 fair value loss on derivative instruments recorded in 2001), a $432,000 decrease in noninterest expense, a $916,000 decrease in the provision for Federal income taxes, and in 2001 the $104,000 (net of tax) cumulative transition adjustment loss due to the change in accounting for derivative instruments. Diluted earnings per share for the quarter ended March 31, 2002 were $0.51 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 6,110,822 and 6,001,821, respectively. Basic earnings per share for the quarter ended March 31, 2002 were $0.53 compared to $0.80 for the same period in 2001. Net Interest Income As noted previously, due to the overall lower interest rate environment, higher than expected prepayments and Coastal's overall smaller asset size, the most significant contributor to decreased net income available to common stockholders was decreased net interest income. When comparing the two periods, average interest-earning assets decreased $579.4 million. The $579.4 million decrease in average interest-earning assets consisted primarily of a $480.6 million decrease in the average balance of mortgage-backed securities and a $112.4 million decrease in the average balance of loans receivable. The decrease in average interest-earning assets was largely due to the reduction in Coastal's asset size in late November 2001. To strategically restructure a portion of its asset base to make it less vulnerable to market interest rate and price fluctuations, Coastal sold $845 million of mortgage-backed securities and purchased $512 million of primarily pass-through securities at a premium. This transaction had the effect of shortening the duration of the mortgage-backed securities portfolio, thereby lessening the extension risk to Coastal. In addition to the reduction in Coastal's asset size due to the restructuring, during the first three months of 2002 Coastal experienced higher than expected principal paydowns of $44.6 million (or 35% on an annualized basis) on its mortgage-backed securities portfolio and $78.7 million (or 40% on an annualized basis) on its single-family mortgage loan portfolio, which resulted in greater premium amortization on those assets that were purchased at a premium. Comparing the same periods, average interest-bearing liabilities decreased $613.7 million as a result of the restructuring discussed above. Net interest margin increased to 3.10% for the three months ended March 31, 2002 from 2.98% for the three months ended March 31, 2001. This increase in net interest margin was a result of the 2.39% decrease in the average rate paid on interest-bearing liabilities, partially offset by the 2.14% decrease in the average yield on interest-earning assets, both due to the overall decrease in market interest rates during 2001 and through the end of the first quarter of 2002. Noninterest Income, Noninterest Expense and Provision for Federal Income Taxes The increase in noninterest income was primarily due to the $540,000 decrease in the fair value loss on derivative instruments. The fair value loss recorded during the quarter ended March 31, 2001 was primarily attributable to Coastal's interest rate swap positions, which were liquidated in June 2001. As of March 31, 2002, interest rate cap agreements were Coastal's only derivative instruments and were recorded at fair value on Coastal's consolidated statement of financial condition. The increase in noninterest income was also attributable to a $234,000 increase in service charges on deposit accounts and a $67,000 increase in loan fees, offset by a $157,000 decrease in other noninterest income. The $432,000 decrease in noninterest expense was primarily due to decreases of $431,000, $168,000 and $96,000 in data processing, the amortization of goodwill and other intangible assets and office occupancy, respectively, partially offset by a $263,000 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 the amortization of goodwill and other intangible assets was due to the implementation of FASB Statements 141 and 142 on January 1, 2002 (see discussion below). The decrease in office occupancy was primarily due to certain assets becoming fully depreciated during 2001. 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 banking products and lending, including Coastal Banc Capital Corp. staff. The provision for Federal income taxes decreased $916,000 primarily due to the decreased income before Federal income taxes, minority interest and cumulative effect of accounting change, with the effective tax rate being approximately 28% for the quarter ended March 31, 2002 and 31% for the same period in 2001. Asset Quality As shown in the "Other Financial Data" table attached, at March 31, 2002, Coastal had nonperforming loans totaling $16.6 million, which is a decrease of $8.1 million, or 33%, when compared to December 31, 2001. Nonperforming loans are those loans on nonaccrual status as well as those loans greater than ninety (90) days delinquent and still accruing interest. The decrease in nonperforming loans is mainly due to Coastal's decision to liquidate a portion of its under-performing single-family mortgage loans during the first quarter of 2002. On March 22, 2002, Coastal sold $10.8 million of these under- performing loans to a third party investor. In addition, as of March 31, 2002, Coastal also wrote down to fair value and reclassified $9.1 million of other under-performing single-family mortgage loans to the held for sale category. As of the date of this press release, $1.8 million of these loans held for sale have been subsequently sold. The remaining $7.3 million of these loans held for sale are currently under a contract for sale. The ratio of nonperforming assets to total assets was 0.86% at March 31, 2002. The ratio of nonperforming assets to total assets would have been 0.57% at March 31, 2002, had the $9.1 million of loans under contract been sold as of the end of the quarter. At March 31, 2002, $14.3 million, or 86%, of nonperforming loans were first lien residential (single family) mortgage loans (of which $7.3 million were classified as held for sale and recorded at fair value), $1.4 million were commercial real estate loans, $660,000 were commercial, financial and industrial loans, with the balance in other loan categories. At March 31, 2002, the allowance for loan losses as a percentage of nonperforming loans (excluding nonperforming loans held for sale which are recorded at fair value) was 156.1% compared to 62.3% at December 31, 2001. Redemption of Senior Notes On February 1, 2002, Coastal redeemed all of its 10.0 % Senior Notes ($43.9 million) outstanding, at par plus accrued interest. 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 required, effective January 1, 2002, that Coastal evaluate its existing intangible assets and goodwill 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. Coastal implemented these statements on January 1, 2002 and tested for impairment in accordance with the provisions of Statement 142 within the first quarter of 2002. At January 1, 2002, Coastal had unamortized goodwill that was 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 at January 1, 2002 was classified as other intangible assets, because 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. Coastal did not recognize any transitional impairment losses as the cumulative effect of a change in accounting principle during the first quarter of 2002. The Company At March 31, 2002, Coastal had total assets of approximately $2.5 billion, deposits of approximately $1.6 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 $132.4 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 our 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 Three Months Ended March 31, 2002 2001 Basic earnings per share before the cumulative effect of accounting change $ 0.53 $ 0.81 Basic earnings per share $ 0.53 $ 0.80 Diluted earnings per share before the cumulative effect of accounting change $ 0.51 $ 0.78 Diluted earnings per share $ 0.51 $ 0.76 Diluted cash earnings per share (A) $ 0.57 $ 1.00 Return (before minority interest) on average assets 0.71% 0.76% Return on average common equity 9.65% 16.31% Net interest margin 3.10% 2.98% Noninterest expense to average total assets 2.31% 1.93% Charge-offs of loans receivable (B) $ 1,890 $ 1,260 Net charge-offs of loans receivable $ 1,800 $ 1,225 Ratio of net charge-offs to average loans receivable 0.10% 0.06% (A) Cash earnings is calculated by adding back the amortization of goodwill and other intangible assets and the fair value losses recorded pursuant to the adoption of Statement 133. (B) $1.5 million of the charge-offs during the first quarter of 2002 were due to the write-down of certain under-performing single family mortgage loans that were either sold or reclassified to the held for sale category as of March 31, 2002. COASTAL BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA, continued (Dollars In Thousands) (unaudited) For the Three Months Ended March 31, 2002 2001 Average balance sheet information Assets: Interest-earning assets: Loans receivable $1,834,514 $1,946,887 Mortgage-backed securities 498,365 978,991 Other 79,384 65,770 Total interest-earning assets 2,412,263 2,991,648 Noninterest-earning assets 92,347 98,688 Total assets $2,504,610 $3,090,336 Liabilities and stockholders' equity: Interest-bearing deposits $1,479,698 $1,531,216 Borrowings 646,594 1,176,980 Senior Notes payable 15,113 46,900 Total interest-bearing liabilities 2,141,405 2,755,096 Noninterest-bearing liabilities 176,428 165,742 Preferred Stock of Coastal Banc ssb 28,750 28,750 Preferred stockholders' equity 27,500 27,500 Common stockholders' equity 130,527 113,248 Total liabilities and stockholders' equity $2,504,610 $3,090,336 COASTAL BANCORP, INC. AND SUBSIDIARIES OTHER FINANCIAL DATA (Dollars in Thousands, except per share data) (unaudited) March 31, December 31, 2002 2001 Nonaccrual loans receivable: First lien residential $ 6,794 $ 21,744 First lien residential - loans held for sale 7,342 --- Residential construction 74 218 Multifamily real estate 82 82 Commercial real estate 1,255 1,174 Acquisition and development --- 6 Commercial, financial and industrial 559 499 Consumer and other 156 141 16,262 23,864 Loans greater than 90 days delinquent and still accruing: First lien residential 114 62 Residential construction --- 755 Commercial real estate 142 --- Commercial, financial and industrial 101 31 Consumer and other --- 1 357 849 Total nonperforming loans 16,619 24,713 Real estate owned and repossessed assets 4,747 4,607 Total nonperforming assets $ 21,366 $ 29,320 Allowance for loan losses $ 14,485 $ 15,385 Ratio of nonperforming loans to total loans receivable and loans receivable held for sale 0.90% 1.33% Ratio of nonperforming assets to total assets 0.86% 1.13% Ratio of allowance for loan losses to nonperforming loans receivable (excluding nonperforming loans held for sale) 156.12% 62.26% Ratio of allowance for loan losses to loans receivable (excluding loans receivable held for sale) 0.79% 0.83% Book value per common share $ 21.91 $ 21.54 Tangible book value per common share $ 18.61 $ 18.15 Regulatory capital ratios of Coastal Banc ssb: Tier 1 (Core) 6.59% 7.27% Tier 1 risk-based 9.61% 11.90% Total risk-based 10.46% 12.79% COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In Thousands, except share data) ASSETS March 31, December 31, 2002 2001 (unaudited) Cash and cash equivalents $ 32,564 $ 41,537 Federal funds sold 3,510 16,710 Loans receivable 1,831,258 1,863,601 Loans receivable held for sale, at fair value 19,308 --- Mortgage-backed securities available-for-sale, at market value 468,491 514,068 U.S. Treasury securities available-for-sale, at market value 1,529 42,827 Accrued interest receivable 11,456 13,243 Property and equipment 27,018 27,461 Stock in the Federal Home Loan Bank of Dallas (FHLB) 40,328 40,032 Goodwill and other intangible assets 21,277 21,811 Prepaid expenses and other assets 16,510 16,601 $2,473,249 $2,597,891 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $1,639,557 $1,660,386 Advances from the FHLB 625,936 690,877 Senior notes payable --- 43,875 Advances from borrowers for taxes and insurance 5,481 4,259 Other liabilities and accrued expenses 13,616 12,310 Total liabilities 2,284,590 2,411,707 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; 7,847,805 shares issued and 5,848,910 shares outstanding at March 31, 2002; 7,835,178 shares issued and 5,835,178 shares outstanding at December 31, 2001 78 78 Additional paid-in capital 35,424 35,366 Retained earnings 129,830 127,425 Accumulated other comprehensive loss - unrealized loss on securities available-for-sale (1,595) (1,590) Treasury stock, at cost (1,998,895 shares in 2002 and 2,000,000 shares in 2001) (31,328) (31,345) Total stockholders' equity 159,909 157,434 $2,473,249 $2,597,891 COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share data) Three Months Ended March 31, 2002 2001 (Unaudited) Interest income: Loans receivable $ 29,967 $ 43,001 Mortgage-backed securities 4,964 16,258 FHLB stock, federal funds sold and other interest-earning assets 475 906 35,406 60,165 Interest expense: Deposits 11,041 19,921 Other borrowed money --- 3 Senior notes payable 378 1,173 Advances from the FHLB 5,268 16,763 16,687 37,860 Net interest income 18,719 22,305 Provision for loan losses 900 900 Net interest income after provision for loan losses 17,819 21,405 Noninterest income: Service charges on deposit accounts 1,995 1,761 Loan fees 307 240 Gain (loss) on derivative instruments (24) (564) Gain (loss) on sale of real estate owned 22 19 Other 209 366 2,509 1,822 Noninterest expense: Compensation, payroll taxes and other benefits 7,861 7,598 Office occupancy 2,580 2,676 Data processing 423 854 Amortization of goodwill and other intangible assets 534 702 Other 2,852 2,852 14,250 14,682 Income before provision for Federal income taxes, minority interest and cumulative effect of accounting change 6,078 8,545 Provision for Federal income taxes 1,698 2,614 Income before minority interest and cumulative effect of accounting change 4,380 5,931 Minority interest - preferred stock dividends of Coastal Banc ssb 647 647 Income before cumulative effect of accounting change 3,733 5,284 Cumulative effect of change in accounting for derivative instruments, net of tax --- (104) Net income $ 3,733 $ 5,180 Net income available to common stockholders $ 3,106 $ 4,553 Basis earnings per share before cumulative effect of accounting change $ 0.53 $ 0.81 Basic earnings per share $ 0.53 $ 0.80 Diluted earnings per share before cumulative effect of accounting change $ 0.51 $ 0.78 Diluted earnings per share $ 0.51 $ 0.76SOURCE Coastal Bancorp, Inc.
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