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| Coastal Bancorp, Inc. Announces Second Quarter Results of 54 Cents Per Share |
| COASTAL BANCORP LOGO
Coastal Bancorp logo. (PRNewsFoto)[DM TC] HOUSTON, TX USA | |||
HOUSTON, July 15 /PRNewswire-FirstCall/ -- Coastal Bancorp, Inc. (Nasdaq: CBSA) and subsidiaries ("Coastal") today reported net income available to common stockholders of $2.9 million for the quarter ended June 30, 2003, compared to $4.3 million for the same period in 2002, which is a $1.4 million, or 32.7%, decrease. The decrease in net income available to common stockholders was primarily due to a $3.9 million decrease in net interest income, as a result of a 0.63% decrease in net interest margin (due primarily to the overall lower interest rate environment) and a $14.7 million decrease in average net interest-earning assets when comparing the second quarter of 2003 to the same period in 2002. This decrease in net interest income was partially mitigated by a $552,000 increase in noninterest income, a $460,000 decrease in noninterest expense, a $782,000 decrease in the provision for Federal income taxes and a $647,000 decrease in the expense for minority interest (related to preferred stock of Coastal Banc ssb which was redeemed on July 15, 2002). Diluted earnings per share for the quarter ended June 30, 2003 were $0.54, compared to $0.72 for the same period last year. The weighted average common shares outstanding used in the diluted earnings per share calculations for the periods were 5,391,827 and 5,984,436, respectively. Basic earnings per share for the quarter ended June 30, 2003 were $0.56 compared to $0.76 for the same period in 2002. (Logo: http://www.newscom.com/cgi-bin/prnh/19990826/CBSALOGO ) Comparison for the Three Months ended June 30, 2003 and 2002 Net Interest Income As noted above, due to the overall lower interest rate environment, lower net interest income was the most significant contributor to the decrease in net income available to common stockholders. When comparing the two periods, net interest margin decreased 0.63% to 2.60%. The decrease in net interest margin was comprised of a 1.01% decrease in the average yield on interest- earning assets (1.09% on loans receivable and 0.67% on mortgage-backed securities), offset somewhat by the 0.45% decrease in the average rate on interest-bearing liabilities. As in 2002, during 2003 Coastal has continued to experience significant principal paydowns on its mortgage-backed securities and single family mortgage loans receivable portfolios (on an annualized basis, approximately 38% on mortgage-backed securities and over 50% on single family mortgage loans) due to the continuing low market rates of interest and the resulting refinancings of mortgage assets. Due to the fact that Coastal's mortgage assets are primarily acquired through purchases (many at a premium), these significant paydowns are resulting in greater premium amortization (and therefore a lower yield) on those assets. Noninterest Income, Noninterest Expense and Provision for Federal Income Taxes The $552,000 increase in noninterest income was primarily due to the $806,000 increase in service charges on deposit accounts. The increased income from service charges on deposit accounts is due to Coastal's continued focus on increasing transaction-type accounts and the related fee income, including Coastal's Free Checking and Bounce Protection features on retail checking accounts introduced during August 2002. This increase in service charges on deposit accounts was somewhat offset by a $184,000 decrease in the gain on the sale of real estate owned and a $112,000 decrease in loan fees. When comparing the second quarter of 2003 to the same period a year earlier, the $460,000 decrease in noninterest expense was comprised primarily of a decrease in compensation, payroll taxes and benefits of $546,000, and decreases of $238,000 and $127,000 in office occupancy and advertising, respectively. These decreases were somewhat offset by a $378,000 increase in other noninterest expense, a $62,000 increase in data processing and a small increase in postage and delivery expense. The decrease in compensation related expenses was primarily comprised of the following: decreased incentive and bonus expense of $177,000 because of the overall lower net income results, a $142,000 decrease due to the outsourcing of the internal audit department in 2002, a $144,000 decrease due to the sale of the five Hill Country branches in December 2002, in addition to other overall staffing changes to gain efficiencies throughout Coastal. The decrease in office occupancy was primarily due to various assets becoming fully depreciated throughout 2002 and 2003, in addition to decreases in rent and repair expenses. The decrease in advertising expense was due to management's decision to reduce this spending in 2003. The $378,000 increase in other noninterest expense was primarily comprised of a $114,000 increase in audit and accounting fees related to the outsourcing of the internal audit department, a $108,000 increase in legal fees and insurance premiums and a $103,000 increase in expenses related to software and network communications costs. The provision for Federal income taxes decreased $782,000 primarily due to the lower amount of income before Federal income taxes and minority interest, with the effective tax rate being approximately 31% for the quarter ended June 30, 2003 and 32% for the same period in 2002 (when taking into account the tax benefit for the minority interest expense in 2002). The provision for Federal income taxes for both periods includes the tax benefit received from the dividends on the Series A Preferred Stock of Coastal Bancorp, Inc. Asset Quality As shown in the "Other Financial Data" table attached, at June 30, 2003, Coastal had nonperforming loans totaling $14.2 million, which is a $4.4 million, or 23%, decrease when compared to December 31, 2002. Nonperforming loans are those loans on nonaccrual status as well as those loans greater than ninety (90) days delinquent and still accruing interest. This decrease was primarily a result of the decrease in nonperforming first lien residential (single family) mortgage loans, due to management's increased focus on ongoing collection efforts. At June 30, 2003, nonperforming assets (which include nonperforming loans, real estate owned and repossessed assets) were $18.3 million and the ratio of nonperforming assets to total assets was 0.72%. At December 31, 2002, nonperforming assets were $23.0 million and the ratio of nonperforming assets to total assets was 0.91%. At June 30, 2003, $6.2 million, or 44%, of nonperforming loans were first lien residential (single family) mortgage loans, $5.8 million, or 41%, were acquisition and development loans, $810,000, or 6%, were commercial real estate loans, $1.3 million, or 9%, were commercial, financial and industrial loans, with the balance in other loan categories. Of the nonperforming acquisition and development loans outstanding at June 30, 2003 and December 31, 2002, two loans to the same borrower made up $5.7 million and $5.5 million, respectively, of the total at each date. At June 30, 2003, the allowance for loan losses as a percentage of nonperforming loans (excluding nonperforming loans held for sale which are recorded at the lower of cost or fair value) was 132.4% compared to 97.7% at December 31, 2002. Common Stock Repurchase During the quarter ended June 30, 2003, Coastal repurchased 23,000 shares of common stock at a repurchase price of $28.35 per share. As of June 30, 2003, a total of 2,747,500 shares of common stock were held in treasury at an average price of $19.53 per share for a total cost of $53.7 million. Trust Preferred Securities On June 23, 2003, Coastal Bancorp, Inc. ("Bancorp"), through Coastal Capital Trust II (a consolidated trust subsidiary) (the "Trust"), issued to a private institutional investor, 10,000 floating rate trust preferred securities ("Trust Preferred Securities") with a liquidation preference of $1,000 per security. The Trust Preferred Securities represent an interest in the related junior subordinated notes of Bancorp, which were purchased by the Trust and have substantially the same payment terms as these Trust Preferred Securities. The junior subordinated notes are the only assets of the Trust and interest payments from the notes finance the distributions paid on the Trust Preferred Securities. Distributions on the securities are payable quarterly at a variable interest rate, reset quarterly, equal to LIBOR plus 3.05%. Redemption of Bancorp Series A Preferred Stock On July 2, 2003, Bancorp announced that it would redeem all 1,100,000 shares of its 9.12% Series A Cumulative Preferred Stock on July 31, 2003 from stockholders of record on July 31, 2003 at par plus accrued but unpaid dividends to the redemption date. Comparison for the Six Months ended June 30, 2003 and 2002 Net income available to common stockholders for the first six months of 2003 was $6.0 million compared to $7.8 million for the same period in 2002. Diluted earnings per share for the six months ended June 30, 2003 were $1.11 compared to $1.29 for the same period a year earlier. The weighted average common shares outstanding used in the diluted earnings per share calculations for the periods were 5,389,194 and 6,037,079, respectively. Basic earnings per share for the six months ended June 30, 2003 were $1.16 compared to $1.35 for the same period in 2002. As in the comparison for the quarters ended June 30, 2003 and 2002, the decrease in net interest income was the main reason for the decrease in net income available to common stockholders. Net interest income decreased $6.4 million from the six months ended June 30, 2002 to the same period in 2003. When comparing the two periods, net interest margin decreased 0.52% to 2.65%. The decrease in net interest margin was comprised of a 0.97% decrease in the average yield on interest-earning assets (1.07% on loans receivable and 0.77% on mortgage-backed securities), offset somewhat by the 0.53% decrease in the average rate on interest-bearing liabilities. As noted earlier, during 2003 Coastal has continued to experience significant principal paydowns on its mortgage-backed securities and single family mortgage loans receivable portfolios due to the continuing low market rates of interest and the resulting refinancings of mortgage assets. These paydowns, on an annualized basis, were approximately 39% on Coastal's mortgage-backed securities and 48% on Coastal's single family mortgage loans during the six months ended June 30, 2003 and since Coastal's mortgage assets are primarily acquired through purchases (many at a premium), these significant paydowns are resulting in greater premium amortization (and therefore a lower yield) on those assets. This decrease in net interest income was somewhat offset by an increase of $2.0 million in noninterest income, a $256,000 decrease in noninterest expense and a $1.0 million decrease in the provision for Federal income taxes. The increase in noninterest income was primarily due to the $1.7 million increase in service charges on deposit accounts and a $752,000 increase in the gain on the sale of mortgage loans held for sale. The increased income from service charges on deposit accounts is due to Coastal's continued focus on increasing transaction-type accounts and the related fee income, including Coastal's Free Checking and Bounce Protection features on retail checking accounts introduced during August 2002. The increase in the gain on the sale of mortgage loans held for sale was due to routine sales transactions in 2003 by Coastal Banc ssb (the "Bank"), which were facilitated by Coastal Banc Mortgage Corp. ("CBMC"), an affiliate of the Bank. The loans sold were purchased by the Bank in packages with the intention to resell all or part of the loans in the packages to third parties. CBMC was formed during the third quarter of 2002 for the purpose of facilitating the purchase and sale of whole loans and participations to third parties. These increases in noninterest income were somewhat offset by a $336,000 decrease in the gain on the sale of real estate owned and a $200,000 decrease in loan fees. The decrease in noninterest expense was due to decreases of $399,000 in compensation, payroll taxes and other benefits, $501,000 in office occupancy and $281,000 in advertising, somewhat offset by an $891,000 increase in other noninterest expense. The $399,000 decrease in compensation related expenses is primarily comprised of the following: a $257,000 decrease in incentive and bonus expense because of the overall lower net income results, a $293,000 decrease due to the sale of the five Hill Country branches in December 2002, a $252,000 decrease due to the outsourcing of the internal audit department in 2002, offset by a $314,000 increase in compensation paid to CBMC employees including brokerage commissions related to the loan sales mentioned previously. As noted earlier, the decrease in office occupancy was due to various assets becoming fully depreciated in 2002 and in 2003 and the decrease in advertising expense was due to management's decision to reduce this spending in 2003. The increase in other noninterest expense was primarily comprised of the following: a $235,000 increase in audit and accounting fees, a $228,000 increase in legal fees and insurance premiums, a $144,000 increase in the provision for losses on deposit accounts and a $128,000 increase in expenses related to loans and real estate owned. The provision for Federal income taxes decreased $1.0 million due to the lower amount of income before Federal income taxes and minority interest, with the effective tax rate being approximately 31% for the six months ended June 30, 2003 and 32% for the same period in 2002 (when taking into account the tax benefit for the minority interest expense in 2002). The Company At June 30, 2003, Coastal had total assets of approximately $2.5 billion, deposits of approximately $1.6 billion, Series A Cumulative Preferred Stock of $27.5 million and common stockholders' equity of approximately $130.8 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 44 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 Coastal, 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 For the Six Months Ended Ended June 30, June 30, 2003 2002 2003 2002 Basic earnings per share $ 0.56 $ 0.76 $ 1.16 $ 1.35 Diluted earnings per share $ 0.54 $ 0.72 $ 1.11 $ 1.29 Return (before minority interest) on average assets 0.56% 0.89% 0.58% 0.83% Return on average common equity 9.08% 13.17% 9.48% 11.97% Net interest margin 2.60% 3.23% 2.65% 3.17% Noninterest expense to average total assets 2.12% 2.19% 2.20% 2.21% Charge-offs of loans receivable (A) $ 560 $ 384 $ 1,468 $ 2,274 Net charge-offs of loans receivable $ 415 $ 152 $ 1,132 $ 1,952 Ratio of net charge-offs to average loans receivable 0.02% 0.01% 0.06% 0.10% (A) $1.5 million of the charge-offs during the first six months 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 (In Thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, June 30, 2003 2002 2003 2002 Average balance sheet information Assets: Interest-earning assets: Loans receivable $ 1,908,758 $ 1,930,349 $ 1,889,997 $ 1,882,428 Mortgage-backed securities 480,624 454,729 474,429 476,426 Other 50,163 57,820 50,761 68,543 Total interest-earning assets 2,439,545 2,442,898 2,415,187 2,427,397 Noninterest-earning assets 89,285 88,644 89,150 90,506 Total assets $ 2,528,830 $ 2,531,542 $ 2,504,337 $ 2,517,903 Liabilities and stockholders' equity: Interest-bearing deposits $ 1,434,459 $ 1,477,894 $ 1,426,510 $ 1,478,791 Borrowings 683,569 672,523 674,467 659,630 Company obligated mandatorily redeemable 9.0% trust preferred securities of Coastal Capital Trust I 50,000 7,143 50,000 3,591 Company obligated mandatorily redeemable variable rate trust preferred securities of Coastal Capital Trust II 879 --- 442 --- Senior notes payable --- --- --- 7,515 Total interest-bearing liabilities 2,168,907 2,157,560 2,151,419 2,149,527 Noninterest-bearing deposits 188,194 167,156 183,964 163,050 Other noninterest-bearing liabilities 15,609 18,765 14,533 17,903 Preferred stock of Coastal Banc ssb --- 28,750 --- 28,750 Preferred stockholders' equity 27,500 27,500 27,500 27,500 Common stockholders' equity 128,620 131,811 126,921 131,173 Total liabilities and stockholders' equity $ 2,528,830 $ 2,531,542 $ 2,504,337 $ 2,517,903 COASTAL BANCORP, INC. AND SUBSIDIARIES OTHER FINANCIAL DATA (Dollars in Thousands, except per share data) (unaudited) June 30, December 31, 2003 2002 Nonaccrual loans receivable: First lien residential $ 6,187 $ 9,184 Residential construction --- 49 Commercial real estate 810 1,323 Acquisition and development 5,738 5,485 Commercial, financial and industrial 1,302 1,609 Consumer and other 54 128 14,091 17,778 Loans greater than 90 days delinquent and still accruing: Residential construction 62 83 Multifamily real estate --- 282 Acquisition and development 37 59 Commercial real estate --- 302 Commercial, financial and industrial --- 43 99 769 Total nonperforming loans 14,190 18,547 Real estate owned and repossessed assets 4,061 4,433 Total nonperforming assets $ 18,251 $ 22,980 Allowance for loan losses $ 18,786 $ 18,118 Ratio of nonperforming loans to total loans receivable and loans receivable held for sale 0.75% 1.00% Ratio of nonperforming assets to total assets 0.72% 0.91% Ratio of allowance for loan losses to nonperforming loans receivable (excluding nonperforming loans held for sale) 132.39% 97.69% Ratio of allowance for loan losses to loans receivable (excluding loans receivable held for sale) 1.01% 1.00% Book value per common share $ 24.46 $ 23.47 Tangible book value per common share $ 20.74 $ 19.74 Regulatory capital ratios of Coastal Banc ssb: Tier 1 (Core) 7.22% 6.88% Tier 1 risk-based 10.53% 10.32% Total risk-based 11.62% 11.38% COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In Thousands, except share data) ASSETS June 30, December 31, 2003 2002 (unaudited) Cash and cash equivalents $ 37,996 $ 39,766 Federal funds sold 780 27,755 Loans receivable held for sale 18,517 49,886 Loans receivable 1,864,703 1,812,785 Mortgage-backed securities available-for-sale, at fair value 500,917 475,022 Other securities available-for-sale, at fair value 2,284 1,788 Accrued interest receivable 9,530 9,781 Property and equipment 29,362 27,341 Stock in the Federal Home Loan Bank of Dallas (FHLB) 41,733 41,221 Goodwill 21,429 21,429 Prepaid expenses and other assets 16,450 19,370 $ 2,543,701 $ 2,526,144 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 1,619,581 $ 1,614,368 Advances from the FHLB 688,669 696,085 Company obligated mandatorily redeemable 9.0% trust preferred securities of Coastal Capital Trust I 50,000 50,000 Company obligated mandatorily redeemable variable rate trust preferred securities of Coastal Capital Trust II 10,000 --- Advances from borrowers for taxes and insurance 6,529 2,407 Other liabilities and accrued expenses 10,637 10,399 Total liabilities 2,385,416 2,373,259 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; 7,905,060 shares issued and 5,157,560 shares outstanding at June 30, 2003; 7,867,029 shares issued and 5,141,010 shares outstanding at December 31, 2002 79 79 Additional paid-in capital 36,093 35,736 Retained earnings 146,716 141,986 Accumulated other comprehensive income - unrealized gain on securities available-for-sale 1,554 619 Treasury stock, at cost (2,747,500 shares in 2003 and 2,726,019 shares in 2002) (53,657) (53,035) Total stockholders' equity 158,285 152,885 $ 2,543,701 $ 2,526,144 COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share data) Three Months Ended June 30, 2003 2002 (Unaudited) Interest income: Loans receivable $ 25,219 $ 30,741 Mortgage-backed securities 3,485 4,062 FHLB stock, federal funds sold and other interest-earning assets 289 380 28,993 35,183 Interest expense: Deposits 7,758 10,202 Advances from the FHLB 4,233 5,091 Company obligated mandatorily redeemable trust preferred securities 1,133 163 13,124 15,456 Net interest income 15,869 19,727 Provision for loan losses 900 900 Net interest income after provision for loan losses 14,969 18,827 Noninterest income: Service charges on deposit accounts 2,944 2,138 Loan fees 203 315 Gain on sale of loans receivable held for sale 58 40 Gain on derivative instruments 7 --- Gain on sale of real estate owned 34 218 Other 260 243 3,506 2,954 Noninterest expense: Compensation, payroll taxes and other benefits 7,446 7,992 Office occupancy 2,403 2,641 Data processing 461 399 Advertising 294 421 Postage and delivery 378 367 Other 2,377 1,999 13,359 13,819 Income before provision for Federal income taxes and minority interest 5,116 7,962 Provision for Federal income taxes 1,578 2,360 Income before minority interest 3,538 5,602 Minority interest - preferred stock dividends of Coastal Banc ssb --- 647 Net income $ 3,538 $ 4,955 Net income available to common stockholders $ 2,911 $ 4,328 Basic earnings per share $ 0.56 $ 0.76 Diluted earnings per share $ 0.54 $ 0.72 COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share data) Six Months Ended June 30, 2003 2002 (Unaudited) Interest income: Loans receivable $ 50,831 $ 60,708 Mortgage-backed securities 7,152 9,026 FHLB stock, federal funds sold and other interest-earning assets 579 855 58,562 70,589 Interest expense: Deposits 15,806 21,243 Advances from the FHLB 8,458 10,359 Senior notes payable --- 378 Company obligated mandatorily redeemable trust preferred securities 2,258 163 26,522 32,143 Net interest income 32,040 38,446 Provision for loan losses 1,800 1,800 Net interest income after provision for loan losses 30,240 36,646 Noninterest income: Service charges on deposit accounts 5,846 4,133 Loan fees 422 622 Gain on sale of loans receivable held for sale 792 40 Gain (loss) on derivative instruments 13 (24) Gain (loss) on sale of real estate owned (96) 240 Other 522 452 7,499 5,463 Noninterest expense: Compensation, payroll taxes and other benefits 15,454 15,853 Office occupancy 4,720 5,221 Data processing 894 822 Advertising 569 850 Postage and delivery 757 795 Other 4,885 3,994 27,279 27,535 Income before provision for Federal income taxes and minority interest 10,460 14,574 Provision for Federal income taxes 3,237 4,244 Income before minority interest 7,223 10,330 Minority interest - preferred stock dividends of Coastal Banc ssb --- 1,294 Net income $ 7,223 $ 9,036 Net income available to common stockholders $ 5,969 $ 7,782 Basic earnings per share $ 1.16 $ 1.35 Diluted earnings per share $ 1.11 $ 1.29SOURCE 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
