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| Coastal Bancorp, Inc. Second Quarter Earnings up 20.7% From Prior Quarter |
HOUSTON, July 15 /PRNewswire/ -- Coastal Bancorp, Inc. (Nasdaq: CBSA) today reported net income of $3.3 million for the quarter ended June 30, 1999. Net income for the quarter ended June 30, 1998 was $4.0 million. Diluted earnings per share for the quarter ended June 30, 1999 were $0.46 compared to $0.51 for the same period last year. The weighted average common shares outstanding used in the diluted earnings per share calculations for the periods were 6,535,760 and 7,837,484, respectively. Focusing on 1999 year to date earnings per diluted share compared to the same period in 1998 shows that core earnings, without the effects of the adjustment for the extra loan loss provision in 1999, the one time benefit in 1998 and the issuance of the new 9.12% preferred stock in 1999, would have been $1.04 per diluted share as compared to $0.94. 1999 1998 (unaudited) Diluted EPS as stated $0.85 $1.27 One-time benefit, net -- (0.33) Additional loan loss provision 0.16 -- New 9.12% preferred stock dividend 0.03 -- $1.04 $0.94 In general, during the second quarter of 1999, Coastal experienced substantial paydowns in both loans and mortgage-backed securities of which the replacements of those assets did not occur simultaneously. The assets were replaced by the end of the quarter; however, since the majority of the assets paid off were over five years old, those replacements were lower yielding assets which affected Coastal's net interest income. Another effect on net interest income was the fact that the proceeds received from the 9.12% preferred stock issued on May 11, 1999 were not invested until the end of the quarter. In summary, based on the activity in the first six months of 1999, Coastal is experiencing net interest margins that continue to grow, record growth of fee income and general and administrative expenses which are below budget. On August 27, 1998, December 21, 1998 and February 25, 1999, the Board of Directors authorized three separate repurchase plans for up to 500,000 shares each of the outstanding shares of common stock through an open-market repurchase program and privately negotiated repurchases. As of June 30, 1999, 1,272,679 shares had been repurchased at an average repurchase price of $15.94 per share for a total cost of $20.3 million. On May 11, 1999, Coastal Bancorp, Inc. ("Bancorp") issued 1,100,000 shares of 9.12% Series A Cumulative Preferred Stock, no par value, to the public at a price of $25 per share. Dividends on the preferred stock are payable quarterly at the annual rate of $2.28 per share. The preferred stock is callable on May 15, 2003 at Bancorp's option. Pursuant to the tax benefit agreement with the Federal Deposit Insurance Corporation, Coastal receives a tax benefit for dividends declared on this Bancorp preferred stock. The ongoing quarterly tax benefit will be approximately $219,000, or 3 cents per diluted share, and is expected to continue through the end of 2002. Net interest income increased $2.6 million and noninterest income increased $760,000 from the three months ended June 30, 1998 to the three months ended June 30, 1999. These increases were offset by the increase in the provision for loan losses of $225,000 and the increase in noninterest expense of $4.2 million. The provision for federal income taxes decreased $503,000 due to the decreased income before provision for federal income taxes and minority interest and the tax benefit received by Coastal for the dividends declared on the recently issued Bancorp preferred stock. The increase in net interest income was primarily due to the increase in net interest margin to 2.70% for the three months ended June 30, 1999 from 2.26% for the same period in 1998. The increase in net interest margin was primarily due to an overall decrease of 64 basis points in the average rates paid on interest-bearing liabilities due to the lower cost deposits acquired in the 1998 branch acquisition (the "Valley Acquisition"), the new pricing strategies for certificates of deposit that reduced Coastal's cost of retail deposits and the lower wholesale funding costs. This decrease in the average rate paid on interest-bearing liabilities was slightly offset by a 20 basis point decrease in the average yield received on interest-earning assets. In addition, average net interest-earning assets increased $17.6 million. The increase in noninterest income was due primarily to the $768,000 increase in loan fees and service charges on deposit accounts. The increase in the provision for loan losses was primarily attributable to changes and growth in Coastal's loan portfolio, including the loans acquired in the Valley Acquisition. The increase in noninterest expense was primarily due to an increase in compensation, payroll taxes and other benefits of $2.1 million and an increase in office occupancy of $795,000, primarily due to the twelve branches acquired in the Valley Acquisition. In addition, data processing expenses and the amortization of goodwill increased $290,000 and $287,000, respectively, primarily due to the Valley Acquisition. Net income for the first six months of 1999 was $6.1 million compared to $9.9 million for the same period in 1998. Diluted earnings per share for the six months ended June 30, 1999 was $0.85 compared to $1.27 for the same period last year. Net income attributable to ongoing core operations was $6.5 million for the six months ended June 30, 1999, or $0.90 per diluted share compared to $7.4 million or $0.94 per diluted share for the six months ended June 30, 1998. The weighted average common shares outstanding used in the diluted earnings per share calculations for the periods were 6,803,662 and 7,815,640, respectively. Net income for the first six months of 1999 was reduced by a $1.7 million additional provision for loan losses (above the planned quarterly provision of $675,000 or $1.4 million for the six month period). The additional provision for loan losses was due in part to a $10.0 million participation in a warehouse loan to MCA Financial Corp. of Southfield, Michigan, and certain of its affiliates, (collectively the "Mortgage Banker"), that, during January 1999, was placed on nonaccrual effective December 31, 1998, due to the fact that the Mortgage Banker ceased operations in late January 1999 and shortly thereafter was placed in receivership by the Michigan Bureau of Financial Institutions. Coastal, as of the date hereof, has been unable to verify the extent to which the collateral, if any, is sufficient to prevent Coastal from incurring a loss or the amount of any loss, should one occur. Coastal is working with the lead lender in the participation to obtain the release of the collateral from the bankruptcy court and prepare the collateral for sale. At this time, Coastal is unable to determine the timing, probability, or the amount of any loss which might result from the default by the Mortgage Banker. Coastal is continuing to monitor this situation and will make additions to the overall allowance for loan losses as it deems necessary based on its existing policy. The additional provision for loan losses was also attributable to other changes and growth in Coastal's loan portfolio, including the loans acquired in the Valley Acquisition. Based on the above specific situation and the continuing changes in the loan portfolio, Coastal is planning to increase the quarterly provision for loan losses to $900,000 beginning in Coastal's third quarter of 1999. Net income in the first six months of 1998 was positively affected by a one-time income benefit of $2.6 million (net) or 33 cents per diluted share. This benefit was the result of the resolution of an outstanding tax benefit issue with the Federal Deposit Insurance Corporation as manager of the Federal Savings and Loan Insurance Corporation Resolution Fund. The $3.7 million one- time tax benefit was offset by the recording of an additional provision for loan losses of $1.0 million and a writedown of purchased mortgage loan premium of $709,000. The resolution of the one-time tax benefit issue is also contributing an ongoing quarterly tax benefit of $226,000 or approximately 3 cents per diluted share which is estimated to continue through the end of 2002. At June 30, 1999, Coastal had total assets of approximately $2.9 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 $103.8 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 web site at http://www.coastalbanc.com. Year 2000 Readiness: Coastal's Year 2000 program is on schedule. As of July 6, 1999, all of Coastal's mission critical core processing systems were confirmed as Year 2000 compliant. Coastal will continue to conduct additional testing on other systems and revise contingency plans through the end of 1999 as considered necessary. Year 2000 Readiness Disclosure: Notice is hereby given that the Year 2000 statements set forth in this press release are being designated as a Year 2000 Readiness Disclosure in accordance with Section 3(9) of the Year 2000 Information and Readiness Disclosure Act. "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 information with respect to plans, projections or future performance of the Company, the occurrence of which involve certain risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. COASTAL BANCORP, INC. AND SUBSIDIARIES Selected Financial Data (Dollars In Thousands, except per share data) (unaudited) For the Three Months For the Six Months Ended Ended June 30, June 30, 1999 1998 1999 1998 Net income attributable to: Ongoing core operations $ 3,347 $ 3,979 $ 6,454 $ 7,351 Reversal of accrued income taxes -- -- -- 3,679 Provision for loan losses (net of tax effect) -- -- (1,077) (650) Writedown of purchased mortgage loan premium (net of tax effect) -- -- -- (460) Change in accrued liabilities (net of tax effect) -- -- 742 -- Net income $ 3,347 $ 3,979 $ 6,119 $ 9,920 Net income available to common stockholders $ 3,017 $ 3,979 $ 5,789 $ 9,920 Diluted earnings per share from ongoing core operations $ 0.46 $ 0.51 $ 0.90 $ 0.94 Diluted earnings per share $ 0.46 $ 0.51 $ 0.85 $ 1.27 Diluted cash earnings per share from ongoing core operations $ 0.58 $ 0.57 $ 1.12 $ 1.06 Diluted cash earnings per share $ 0.58 $ 0.57 $ 1.07 $ 1.39 COASTAL BANCORP, INC. AND SUBSIDIARIES Selected Financial Data, Continued (Dollars In Thousands, except per share data) (unaudited) For the Three Months For the Six Months Ended Ended June 30, June 30, 1999 1998 1999 1998 Return from ongoing core operations (before minority interest) on average assets 0.55% 0.63% 0.54% 0.59% Return (before minority interest) on average assets 0.55% 0.63% 0.51% 0.77% Return from ongoing core operations on average common equity 11.58% 14.20% 11.45% 13.55% Return on average common equity 11.58% 14.20% 10.82% 18.28% Net interest margin 2.70% 2.26% 2.67% 2.18% Noninterest expense to average total assets 2.05% 1.44% 1.96% 1.43% Charge-offs of loans receivable $ 554 $ 342 $ 1,107 $ 692 Net charge-offs of loans receivable $ 448 $ 285 $ 980 $ 462 Ratio of net charge-offs to average loans receivable 0.03% 0.02% 0.06% 0.03% Average balance sheet information Assets: Interest-earning assets: Loans receivable $1,622,973 $1,368,699 $1,572,552 $1,341,184 Mortgage-backed securities 1,109,292 1,476,642 1,157,587 1,493,715 Other 61,037 36,204 59,796 36,433 Total interest-earning assets 2,793,302 2,881,545 2,789,935 2,871,332 Noninterest-earning assets 109,397 74,842 115,020 76,897 Total assets $2,902,699 $2,956,387 $2,904,955 $2,948,229 Liabilities and stockholders' equity: Interest-bearing deposits $1,498,713 $1,259,045 $1,513,330 $1,261,643 Borrowings 1,033,932 1,377,318 1,031,095 1,368,195 Senior Notes payable 47,900 50,000 48,250 50,000 Total interest-bearing liabilities 2,580,545 2,686,363 2,592,675 2,679,838 Noninterest-bearing liabilities 174,245 128,873 167,827 130,202 Preferred Stock of the Bank 28,750 28,750 28,750 28,750 Preferred stockholders' equity 14,643 -- 7,857 -- Common stockholders' equity 104,516 112,401 107,846 109,439 Total liabilities and stockholders' equity $2,902,699 $2,956,387 $2,904,955 $2,948,229 COASTAL BANCORP, INC. AND SUBSIDIARIES Other Financial Data (Dollars In Thousands, except share data) (unaudited) June 30, December 31, 1999 1998 Nonaccrual loans receivable $ 21,189 $ 22,837 Loans greater than 90 days delinquent and still accruing 1,124 1,704 Total nonperforming loans 22,313 24,541 Real estate owned and repossessed assets 5,036 4,927 Total nonperforming assets $ 27,349 $ 29,468 Allowance for loan losses $ 13,384 $ 11,358 Ratio of nonperforming loans to loans receivable 1.33% 1.60% Ratio of nonperforming assets to total assets 0.93% 0.99% Ratio of allowance for loan losses to nonperforming loans receivable 59.98% 46.28% Ratio of allowance for loan losses to loans receivable 0.80% 0.74% Book value per common share $ 16.17 $ 15.71 Tangible book value per common share $ 12.08 $ 11.75 Regulatory capital ratios: Tier 1 (Core) 5.71% 5.25% Tier 1 risk-based 9.59% 9.54% Total risk-based 10.37% 10.23% COASTAL BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition (In Thousands, except share data) ASSETS June 30, December 31, 1999 1998 (unaudited) Cash and cash equivalents $ 37,178 $ 45,453 Federal funds sold 2,900 -- Loans receivable 1,673,727 1,538,149 Mortgage-backed securities held-to-maturity 977,813 1,154,116 Mortgage-backed securities available-for-sale, at market value 104,125 96,609 U.S. Treasury security available-for-sale, at market value 2,004 2,016 Mortgage loans held for sale 90 -- Accrued interest receivable 15,507 15,518 Property and equipment 32,279 33,116 Stock in the Federal Home Loan Bank of Dallas (FHLB) 51,166 49,819 Goodwill 29,173 30,687 Mortgage servicing rights 3,442 4,049 Prepaid expenses and other assets 12,232 12,629 $ 2,941,636 $2,982,161 LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 1,624,615 $1,705,004 Advances from the FHLB 987,009 966,720 Securities sold under agreements to repurchase 100,000 100,000 Senior notes payable 47,900 50,000 Advances from borrowers for taxes and insurance 8,020 3,340 Other liabilities and accrued expenses 14,015 15,583 Total liabilities 2,781,559 2,840,647 Minority interest - 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 in 1999 27,500 -- Common stock, $0.01 par value; authorized shares 30,000,000; 7,574,277 and 7,568,255 shares issued in 1999 and 1998 76 76 Additional paid-in capital 32,275 33,696 Retained earnings 92,863 88,144 Accumulated other comprehensive loss - unrealized loss on securities available-for-sale (1,101) (1,374) Treasury stock, at cost (1,272,679 shares in 1999 and 499,600 shares in 1998) (20,286) (7,778) Total stockholders' equity 131,327 112,764 $ 2,941,636 $ 2,982,161 COASTAL BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Income (In Thousands, except per share data) Three Months Ended June 30, 1999 1998 (Unaudited) Interest income: Loans receivable $ 32,824 $ 29,087 Mortgage-backed securities 15,739 22,752 FHLB stock, federal funds sold and other interest-earning assets 788 534 49,351 52,373 Interest expense: Deposits 16,068 15,492 Other borrowed money 2,573 11,812 Senior notes payable 1,197 1,250 Advances from the FHLB: Short-term 3,093 3,624 Long-term 7,573 3,913 30,504 36,091 Net interest income 18,847 16,282 Provision for loan losses 675 450 Net interest income after provision for loan losses 18,172 15,832 Noninterest income: Loan fees and service charges on deposit accounts 1,910 1,142 Loan servicing income, net 152 160 Other 351 351 2,413 1,653 Noninterest expense: Compensation, payroll taxes and other benefits 7,290 5,157 Office occupancy 2,837 2,042 Data processing 863 573 Amortization of goodwill 761 474 Insurance premiums 312 260 Real estate owned 123 171 Other 2,632 1,906 14,818 10,583 Income before provision for Federal income taxes and minority interest 5,767 6,902 Provision for Federal income taxes 1,773 2,276 Income before minority interest 3,994 4,626 Minority interest - preferred stock dividends of Coastal Banc ssb 647 647 Net income $ 3,347 $ 3,979 Net income available to common stockholders $ 3,017 $ 3,979 Basic earnings per share $ 0.47 $ 0.53 Diluted earnings per share $ 0.46 $ 0.51 COASTAL BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Income (In Thousands, except per share data) Six Months Ended June 30, 1999 1998 (Unaudited) Interest income: Loans receivable $ 63,828 $ 56,027 Mortgage-backed securities 33,489 46,198 FHLB stock, federal funds sold and other interest-earning assets 1,560 1,036 98,877 103,261 Interest expense: Deposits 32,878 30,999 Other borrowed money 4,091 23,041 Senior notes payable 2,414 2,500 Advances from the FHLB: Short-term 7,099 7,579 Long-term 15,132 7,860 61,614 71,979 Net interest income 37,263 31,282 Provision for loan losses 3,006 1,900 Net interest income after provision for loan losses 34,257 29,382 Noninterest income: Loan fees and service charges 3,724 2,466 Loan servicing income, net 286 400 Other 843 543 Writedown of purchased mortgage loan premium -- (709) 4,853 2,700 Noninterest expense: Compensation, payroll taxes and other benefits 14,405 10,097 Office occupancy 5,639 4,031 Data processing 1,762 1,181 Amortization of goodwill 1,514 943 Insurance premiums 615 525 Real estate owned 277 423 Other 4,086 3,718 28,298 20,918 Income before provision (benefit) for Federal income taxes and minority interest 10,812 11,164 Provision (benefit) for Federal income taxes 3,399 (50) Income before minority interest 7,413 11,214 Minority interest - preferred stock dividends of Coastal Banc ssb 1,294 1,294 Net income $ 6,119 $ 9,920 Net income available to common stockholders $ 5,789 $ 9,920 Basic earnings per share $ 0.87 $ 1.31 Diluted earnings per share $ 0.85 $ 1.27SOURCE Coastal Bancorp, Inc.
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Company News On-Call:
800-758-5804, ext. 118190
CONTACT:
Manuel J. Mehos, CEO or Catherine N. Wylie,
CFO, both of Coastal Bancorp, 713-435-5000, or fax, 713-435-5106
