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| Coastal Bancorp, Inc. Announces Third Quarter Results of 51 Cents Per Share |
| COASTAL BANCORP LOGO
Coastal Bancorp logo. (PRNewsFoto)[DM TC] HOUSTON, TX USA | |||
HOUSTON, Oct. 15 /PRNewswire-FirstCall/ -- Coastal Bancorp, Inc. (Nasdaq: CBSA) and subsidiaries ("Coastal") today reported net income available to common stockholders of $2.8 million for the quarter ended September 30, 2003, compared to $3.7 million for the same period in 2002. The decrease in net income available to common stockholders was primarily due to a $3.5 million decrease in net interest income, as a result of a 0.63% decrease in net interest margin. Net interest margin decreased from 2.97% to 2.34% when comparing the third quarter of 2003 to the same period in 2002, due primarily to principal paydowns, amortization of the related premiums and the replacement of assets at lower yields (interest rates). This decrease in net interest income was partially offset by an $827,000 increase in noninterest income, a $469,000 decrease in noninterest expense, a $547,000 decrease in the provision for Federal income taxes and a $213,000 decrease in the expense for minority interest (related to the preferred stock of Coastal Banc ssb which was redeemed on July 15, 2002). In addition, dividends on preferred stock decreased $411,000. On July 31, 2003, Coastal Bancorp, Inc. ("Bancorp") redeemed all of its 9.12% Series A Cumulative Preferred Stock at par plus accrued but unpaid dividends to the redemption date. Diluted earnings per share for the quarter ended September 30, 2003 were $0.51, compared to $0.68 for the same period last year. The weighted average common shares outstanding used in the diluted earnings per share calculations for the periods were 5,387,347 and 5,474,435, respectively. Basic earnings per share for the quarter ended September 30, 2003 were $0.53 compared to $0.72 for the same period in 2002. Comparison for the Three Months ended September 30, 2003 and 2002 Net Interest Income As noted above, due to the principal paydowns, amortization of related premiums and the replacement of assets at lower yields (interest rates), 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 2.34%. The decrease in net interest margin was comprised of a decrease in the average yield on interest-earning assets from 5.49% to 4.30%; offset somewhat by a decrease in the average rate on interest-bearing liabilities from 2.81% to 2.19%. During 2003, Coastal has experienced significant principal paydowns on its mortgage-backed securities and single-family mortgage loans receivable portfolios (on an annualized basis, approximately 49% on mortgage-backed securities and over 60% on single- family mortgage loans) due to the continuing low market rates of interest and the resulting refinancing of its mortgage assets. Because the majority of Coastal's single-family mortgage assets have been acquired through bulk purchases, the significant paydowns Coastal has experienced have resulted in greater premium amortization (and therefore a lower yield) on those purchased assets. When comparing the third quarter of 2003 to the same period in 2002, the average yield on loans decreased from 5.99% to 4.85% and the average yield on mortgage-backed securities decreased from 3.60% to 2.48%. Noninterest Income, Noninterest Expense and Provision for Federal Income Taxes The $827,000 increase in noninterest income was primarily due to a $414,000 increase in service charges on deposit accounts, a $302,000 gain on the sale of mortgage-backed securities available for sale and a $106,000 increase in the gain on the sale of real estate owned. 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. When comparing the third quarter of 2003 to the same period a year earlier, the $469,000 decrease in noninterest expense was comprised primarily of a decrease in compensation, payroll taxes and benefits of $723,000 and a decrease of $210,000 in advertising. These decreases were somewhat offset by a $324,000 increase in other noninterest expense and increases of $97,000 and $48,000 in office occupancy and data processing, respectively. The decrease in compensation related expenses was primarily comprised of the following: decreased incentive and bonus expense of $298,000 because of the overall lower net income results, a $121,000 decrease due to the outsourcing of the internal audit department in September of 2002, a $151,000 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 advertising expense was due to management's decision to reduce this spending in 2003. The $324,000 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 and a $251,000 increase in expenses related to loans, repossessed assets and real estate owned. The provision for Federal income taxes decreased $547,000 primarily due to the lower amount of income before Federal income taxes and minority interest, with the effective tax rate being approximately 33% for the quarter ended September 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 includes the tax benefit received from the dividends on the Series A Preferred Stock of Coastal Bancorp, Inc. of $76,000 and $219,000 for the quarters ended September 30, 2003 and 2002, respectively. This benefit ceased upon redemption of the Bancorp Preferred stock on July 31, 2003. Asset Quality As shown in the "Other Financial Data" table attached, at September 30, 2003, Coastal had nonperforming loans totaling $15.4 million, which is a $3.1 million, or 17%, 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 September 30, 2003, nonperforming assets (which include nonperforming loans, real estate owned and repossessed assets) were $18.5 million and the ratio of nonperforming assets to total assets was 0.70%. At December 31, 2002, nonperforming assets were $23.0 million and the ratio of nonperforming assets to total assets was 0.91%. At September 30, 2003, $7.9 million, or 51%, of nonperforming loans were first lien residential (single-family) mortgage loans, $5.7 million, or 37%, were acquisition and development loans, $583,000, or 4%, were commercial real estate loans, $1.1 million, or 7%, were commercial, financial and industrial loans, with the balance in other loan categories. Of the nonperforming acquisition and development loans outstanding at September 30, 2003 and December 31, 2002, two loans to the same borrower made up $5.5 million of the total at each date. At September 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 123.8% compared to 97.7% at December 31, 2002. Common Stock Repurchase As of September 30, 2003, a total of 2,746,875 shares of common stock were held in treasury at an average price of $19.53 per share for a total cost of $53.6 million. Trust Preferred Securities On June 23, 2003, Bancorp, through Coastal Capital Trust II (a consolidated trust subsidiary) ("CCTII"), issued to a private institutional investor, 10,000 floating rate trust preferred securities ("Trust Preferred Securities II") with a liquidation preference of $1,000 per security. The Trust Preferred Securities II represent an interest in the related junior subordinated notes of Bancorp, which were purchased by CCTII and have substantially the same payment terms as these Trust Preferred Securities II. The junior subordinated notes are the only assets of CCTII and interest payments from the notes finance the distributions paid on the Trust Preferred Securities II. Distributions on the securities are payable quarterly at a variable interest rate, reset quarterly, equal to LIBOR plus 3.05%, and are included in interest expense in the consolidated statements of income. Redemption of Bancorp Series A Preferred Stock On July 31, 2003, Bancorp redeemed all of its 9.12% Series A Cumulative Preferred Stock (1,100,000 shares) from stockholders of record on July 31, 2003 at par plus accrued but unpaid dividends to the redemption date. Comparison for the Nine Months ended September 30, 2003 and 2002 Net income available to common stockholders for the first nine months of 2003 was $8.7 million compared to $11.5 million for the same period in 2002. Diluted earnings per share for the nine months ended September 30, 2003 were $1.62 compared to $1.97 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 5,388,567 and 5,858,701, respectively. Basic earnings per share for the nine months ended September 30, 2003 were $1.69 compared to $2.06 for the same period in 2002. As in the comparison for the quarters ended September 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 $9.9 million from the nine months ended September 30, 2002 to the same period in 2003. When comparing the two periods, net interest margin decreased 0.56% to 2.54%. The decrease in net interest margin was comprised of a decrease in the average yield on interest-earning assets from 5.72% to 4.67%; offset somewhat by a decrease in the average rate on interest-bearing liabilities from 2.94% to 2.38%. As noted earlier, during 2003 Coastal has experienced 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 refinancing of its mortgage assets. These paydowns, on an annualized basis, were approximately 43% on Coastal's mortgage-backed securities and 50% on Coastal's single-family mortgage loans during the nine months ended September 30, 2003. Since the majority of Coastal's single-family mortgage assets have been acquired primarily through bulk purchases, the significant paydowns Coastal has experienced have resulted in greater premium amortization (and therefore a lower yield) on those purchased assets. When comparing the nine months ended September 30, 2003 to the same period in 2002, the average yield on loans decreased from 6.31% to 5.20% and the average yield on mortgage-backed securities decreased from 3.73% to 2.83%. This decrease in net interest income was somewhat offset by an increase of $2.9 million in noninterest income, a $725,000 decrease in noninterest expense, a $1.6 million decrease in the provision for Federal income taxes and a $1.5 million decrease in the expense for minority interest (related to preferred stock of Coastal Banc ssb which was redeemed on July 15, 2002). As previously noted, dividends on preferred stock decreased $411,000 due to the redemption of the 9.12% Series A Cumulative Preferred Stock on July 31, 2003. The increase in noninterest income was primarily due to a $2.1 million increase in service charges on deposit accounts, a $758,000 increase in the gain on the sale of mortgage loans held for sale and a $302,000 increase in the gain on the sale of mortgage-backed securities available 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 $230,000 decrease in the gain on the sale of real estate owned and a $207,000 decrease in loan fees. The decrease in noninterest expense was due to decreases of $1.1 million in compensation, payroll taxes and other benefits, $404,000 in office occupancy and $491,000 in advertising, somewhat offset by a $1.2 million increase in other noninterest expense. The $1.1 million decrease in compensation related expenses is primarily comprised of the following: a $555,000 decrease in incentive and bonus expense because of the overall lower net income results, a $444,000 decrease due to the sale of the five Hill Country branches in December 2002, a $373,000 decrease due to the outsourcing of the internal audit department in September of 2002, offset by a $281,000 increase in compensation paid to CBMC employees including brokerage commissions related to the loan sales mentioned previously. 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 $349,000 increase in audit and accounting fees, a $353,000 increase in legal fees and insurance premiums, a $122,000 increase in the provision for losses on deposit accounts and a $379,000 increase in expenses related to loans, repossessed assets and real estate owned. The provision for Federal income taxes decreased $1.6 million due to the lower amount of income before Federal income taxes and minority interest, with the effective tax rate being approximately 32% for the nine months ended September 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 includes the tax benefit received from the dividends on the Series A Preferred Stock of Coastal Bancorp, Inc. of $514,000 and $658,000 for the nine months ended September 30, 2003 and 2002, respectively. This benefit ceased upon redemption of the Bancorp Preferred stock on July 31, 2003. The Company At September 30, 2003, Coastal had total assets of approximately $2.6 billion, deposits of approximately $1.6 billion and common stockholders' equity of approximately $131.3 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 Ended For the Nine Months Ended September 30, September 30, 2003 2002 2003 2002 Basic earnings per share $0.53 $0.72 $1.69 $2.06 Diluted earnings per share $0.51 $0.68 $1.62 $1.97 Return (before minority interest) on average assets 0.45% 0.71% 0.53% 0.79% Return on average common equity 8.41% 12.64% 9.11% 12.18% Net interest margin 2.34% 2.97% 2.54% 3.10% Noninterest expense to average total assets 2.01% 2.15% 2.13% 2.19% Charge-offs of loans receivable(A) $904 $511 $2,372 $2,785 Net charge-offs of loans receivable $620 $129 $1,752 $2,081 Ratio of net charge-offs to average loans receivable 0.03% 0.00% 0.09% 0.11% (A) $1.5 million of the charge-offs during the first nine 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 Nine Months Ended September 30, September 30, 2003 2002 2003 2002 Average balance sheet information Assets: Interest-earning assets: Loans receivable $1,972,000 $1,973,354 $1,917,630 $1,913,072 Mortgage-backed securities 523,888 449,477 491,096 467,344 Other 53,834 48,895 51,797 61,922 Total interest- earning assets 2,549,722 2,471,726 2,460,523 2,442,338 Noninterest-earning assets 90,919 87,334 89,746 89,438 Total assets $2,640,641 $2,559,060 $2,550,269 $2,531,776 Liabilities and stockholders' equity: Interest-bearing deposits $1,430,674 $1,482,524 $1,427,913 $1,480,049 Borrowings 803,423 682,936 717,925 667,484 Company obligated mandatorily redeemable 9.0% trust preferred securities of Coastal Capital Trust I 50,000 50,000 50,000 19,231 Company obligated mandatorily redeemable variable rate trust preferred securities of Coastal Capital Trust II 10,000 --- 3,663 --- Senior notes payable --- --- --- 4,982 Total interest- bearing liabilities 2,294,097 2,215,460 2,199,501 2,171,746 Noninterest-bearing deposits 189,786 171,400 185,926 165,864 Other noninterest- bearing liabilities 17,616 22,745 15,572 19,536 Preferred stock of Coastal Banc ssb --- 4,375 --- 20,536 Preferred stockholders' equity 8,967 27,500 21,254 27,500 Common stockholders' equity 130,175 117,580 128,016 126,594 Total liabilities and stockholders' equity $2,640,641 $2,559,060 $2,550,269 $2,531,776 COASTAL BANCORP, INC. AND SUBSIDIARIES OTHER FINANCIAL DATA (Dollars in Thousands, except per share data) (unaudited) September 30, December 31, 2003 2002 Nonaccrual loans receivable: First lien residential $7,904 $9,184 Residential construction --- 49 Commercial real estate 583 1,323 Acquisition and development 5,562 5,485 Commercial, financial and industrial 723 1,609 Consumer and other 33 128 14,805 17,778 Loans greater than 90 days delinquent and still accruing: Residential construction 33 83 Multifamily real estate --- 282 Acquisition and development 144 59 Commercial real estate --- 302 Commercial, financial and industrial 424 43 601 769 Total nonperforming loans 15,406 18,547 Real estate owned and repossessed assets 3,091 4,433 Total nonperforming assets $18,497 $22,980 Allowance for loan losses $19,066 $18,118 Ratio of nonperforming loans to total loans receivable and loans receivable held for sale 0.79% 1.00% Ratio of nonperforming assets to total assets 0.70% 0.91% Ratio of allowance for loan losses to nonperforming loans receivable (excluding nonperforming loans held for sale) 123.76% 97.69% Ratio of allowance for loan losses to loans receivable (excluding loans receivable held for sale) 0.98% 1.00% Book value per common share $24.49 $23.47 Tangible book value per common share $20.71 $19.74 Regulatory capital ratios of Coastal Banc ssb: Tier 1 (Core) 6.29% 6.88% Tier 1 risk-based 9.21% 10.32% Total risk-based 10.28% 11.38% COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In Thousands, except share data) ASSETS September 30, December 31, 2003 2002 (unaudited) Cash and cash equivalents $35,347 $39,766 Federal funds sold 1,490 27,755 Loans receivable held for sale --- 49,886 Loans receivable 1,951,987 1,812,785 Mortgage-backed securities available-for- sale, at fair value 527,668 475,022 Other securities available-for-sale, at fair value 2,271 1,788 Accrued interest receivable 9,466 9,781 Property and equipment 29,804 27,341 Stock in the Federal Home Loan Bank of Dallas (FHLB) 45,243 41,221 Goodwill 21,429 21,429 Prepaid expenses and other assets 16,351 19,370 $2,641,056 $2,526,144 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $1,638,914 $1,614,368 Advances from the FHLB 792,031 696,085 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 8,304 2,407 Other liabilities and accrued expenses 10,514 10,399 Total liabilities 2,509,763 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 Common stock, $0.01 par value; authorized shares 30,000,000; 7,929,485 shares issued and 5,182,610 shares outstanding at September 30, 2003; 7,867,029 shares issued and 5,141,010 shares outstanding at December 31, 2002 79 79 Additional paid-in capital 36,475 35,736 Retained earnings 148,699 141,986 Accumulated other comprehensive income (loss) - unrealized gain (loss) on securities available-for-sale (315) 619 Treasury stock, at cost (2,746,875 shares in 2003 and 2,726,019 shares in 2002) (53,645) (53,035) Total stockholders' equity 131,293 152,885 $2,641,056 $2,526,144 COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share data) Three Months Ended September 30, 2003 2002 (Unaudited) Interest income: Loans receivable $24,049 $29,649 Mortgage-backed securities 3,251 4,034 FHLB stock, federal funds sold and other interest-earning assets 250 348 27,550 34,031 Interest expense: Deposits 7,128 9,616 Advances from the FHLB 4,291 4,944 Senior Notes payable --- --- Company obligated mandatorily redeemable trust preferred securities 1,229 1,112 12,648 15,672 Net interest income 14,902 18,359 Provision for loan losses 900 900 Net interest income after provision for loan losses 14,002 17,459 Noninterest income: Service charges on deposit accounts 3,013 2,599 Loan fees 259 266 Gain on sale of loans receivable held for sale 6 --- Gain on derivative instruments 2 6 Gain (loss) on sale of real estate owned 73 (33) Gain on sale of mortgage backed securities available for sale 302 --- Other 226 216 3,881 3,054 Noninterest expense: Compensation, payroll taxes and other benefits 7,245 7,968 Office occupancy 2,505 2,408 Data processing 461 413 Advertising 336 546 Postage and delivery 406 411 Other 2,458 2,134 13,411 13,880 Income before provision for Federal income taxes and minority interest 4,472 6,633 Provision for Federal income taxes 1,498 2,045 Income before minority interest 2,974 4,588 Minority interest - preferred stock dividends of Coastal Banc ssb --- 213 Net income $2,974 $4,375 Net income available to common stockholders $2,758 $3,748 Basic earnings per share $0.53 $0.72 Diluted earnings per share $0.51 $0.68 COASTAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share data) Nine Months Ended September 30, 2003 2002 (Unaudited) Interest income: Loans receivable $74,880 $90,357 Mortgage-backed securities 10,403 13,060 FHLB stock, federal funds sold and other interest-earning assets 829 1,203 86,112 104,620 Interest expense: Deposits 22,934 30,859 Advances from the FHLB 12,749 15,303 Senior notes payable --- 378 Company obligated mandatorily redeemable trust preferred securities 3,487 1,275 39,170 47,815 Net interest income 46,942 56,805 Provision for loan losses 2,700 2,700 Net interest income after provision for loan losses 44,242 54,105 Noninterest income: Service charges on deposit accounts 8,859 6,732 Loan fees 681 888 Gain on sale of loans receivable held for sale 798 40 Gain (loss) on derivative instruments 15 (18) Gain (loss) on sale of real estate owned (23) 207 Gain on sale of mortgage backed securities available for sale 302 --- Other 748 668 11,380 8,517 Noninterest expense: Compensation, payroll taxes and other benefits 22,699 23,821 Office occupancy 7,225 7,629 Data processing 1,355 1,235 Advertising 905 1,396 Postage and delivery 1,163 1,206 Other 7,343 6,128 40,690 41,415 Income before provision for Federal income taxes and minority interest 14,932 21,207 Provision for Federal income taxes 4,735 6,289 Income before minority interest 10,197 14,918 Minority interest - preferred stock dividends of Coastal Banc ssb --- 1,507 Net income $10,197 $13,411 Net income available to common stockholders $8,727 $11,530 Basic earnings per share $1.69 $2.06 Diluted earnings per share $1.62 $1.97SOURCE 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
