Coast National Bank Announces First Quarter Earnings Results 2013

May 2, 2013

SAN LUIS OBISPO, CA--(Marketwired - May 2, 2013) - Coast National Bank, a wholly owned subsidiary of Coast Bancorp ( OTCBB : CTBP ) today reported net income of $366,181 for the quarter ended March 31, 2013, up 278% percent from ($205,860) loss for the quarter ended March 31, 2012.

"During the first quarter of 2013, the bank continued its positive progress in its turnaround efforts building further upon a profitable 4th quarter of 2012 and positive earnings report for 2012 Year end.

"The success of our Small Business Lending focus is a significant contributor to the profitability of the bank right now as we continue to rebuild and strive to accomplish our strategic objectives," said President and Chief Executive Officer Anita M. Robinson.

"Our customer loyalty and the support from our community has been a tremendous influence in our ability to accomplish significant positive progress in the past year. A strong core customer base and recognizing the greater need for the small banks in our community has provided fuel for our team."

First Quarter 2013 Highlights:
(Quarter ending March 31, 2013 compared to March 31, 2012)

Total Assets - Total Assets at March 31, 2013, totaled $114.7 Million, as compared to $130.5 Million on March 31, 2012. This is primarily due to the sale of the bank's Morro Bay branch office to Heritage Oaks Bank which closed in December 2012. The sale represented sale of deposits and Real Property with some limited fixed assets. This resulted in a net decline in Total Assets of $15.8 Million or 12% year over year.

Liquidity - The bank continues to be very liquid with over $35.0 Million in Cash and Liquid Assets at March 31, 2013 as compared to $30.0 Million as of March 2012.

Net Loans - Net Loans at first quarter 2013 ended at $64.8 Million as compared to $83.1 Million at the same period of 2012. This reflects the aggressive work in the resolution of troubled loan assets and the resultant reduction in problem loans. The bank is now poised to grow the portfolio through healthy lending and underwriting practices, yet continue to demonstrate its expertise in lending to the small business sector.

Total Deposits - Total Deposits declined year over year from $123.2 Million to $106.1 Million or 14%. This decline reflects the sale of $27.0 Million in Deposits for the Morro Bay Office in December 2012. Deposits actually increased during the year as the net change for March 31, 2013 was $(17.0) Million. The most significant portion of the reduction was in Time Certificates of Deposits. This contributed to the savings in the bank's cost of funds.

Net Interest Income - Net Interest Income has declined by $78,014 from prior year or 7%. This is a direct result of the loan portfolio decline in net loans outstanding (reduction in volume) as compared to negative impact from rates. As the bank is focused on ongoing loan growth, this decline should be stemmed and turn to growth.

Interest Income from Loans reflected a decline year over year of $118,685 or (10%), which was partially offset by reduced Interest Expense of $51,045 or (43%). This demonstrates the ongoing management of the bank's cost of funds.

Net Income - Net Income at three months ending March 31, 2013 was $366,181 improved from ($205,860) at March 31, 2012 or 278%. This is largely due to the non-interest income derived from the gain on sale of S.B.A. guaranteed loans of $572,871, compared to $67,761 in first quarter 2012, an increase of $505,110 or 745% over prior year.

Additionally, non-interest expense reduced year over year to $1,493,022 from $1,615,104 at March 31, 2012. This represents an 8% reduction in non-interest expense, after realizing some ongoing expense related to the sale of the Morro Bay branch office in December 2012.

Capital - Coast National Bank continued to improve the bank's Capital ratios through increased Profitability and the reduction in Total Assets (Sale of branch). While the bank is still not in compliance with the Minimum Regulatory Capital level of 9.0% under its Consent Order, it is considered to be "Well Capitalized". Management and the board of directors have developed a capital plan which will bring the bank into compliance in this area.

             
    Regulatory Minimum Capital to be considered "Well Capitalized"   Coast National Bank
March 31, 2012
 
Coast National Bank
March 31, 2013
Total Risk-Based Capital Ratio   10.00%   9.92%   12.65%
Tier 1 Risk-Based Capital Ratio   6.00%   8.63%   11.36%
Tier 1 Leverage Capital Ratio   5.00%   5.25%   6.83%
             

Credit Quality - The risk profile of the bank's credit portfolio has improved dramatically over the past year. A focused effort to return the portfolio to a level of low - moderate risk was imperative. This was accomplished as demonstrated by the metrics outlined below:

         
    March 31, 2012   March 31, 2013
    '000'   '000'
         
Classified Loans/Capital   128.46%   54.23%
         
Non-Performing Assets   $4,848.   $2,731.
         
Other Real Estate Owned (OREO)   $1,863.   $1,456.
         
Classified Loans + OREO/Capital   151.84%   68.06%
         
Net Charge Offs/Net Loans   .42%   .05%
         
Loan Loss Reserve Coverage/Net Loans   4.38%   4.55%
         
Loan to Deposit ratio   64%   66%
         
Texas Ratio   45.85%   25.93%
         

Additional News - The bank opened a loan production office in Atascadero in February 2013. This "Business Banking Center" will focus on Small Business Lending and loan production for the North County. It is staffed by existing lenders and management team covering the north county. The new location is located in the Adobe Plaza Center at 7315 El Camino Real, Atascadero. This office location also has an ATM and Night Depository on site for convenience.

Established in 1997, Coast National Bank is an independent locally owned commercial bank serving consumers and businesses through four local offices serving San Luis Obispo County. With a focus on delivering quality customer service, Coast National Bank provides small business loans and an array of business and personal banking deposit products and other services. For further information, visit www.coastnationalbank.com or call 805.541.0400.

Coast National Bank is an equal housing lender and member FDIC.

Statements concerning future performance, developments or events, expectations for growth, income forecasts, sales activity for collateral, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to the ongoing financial crisis in the United States and the markets in which Coast National Bank operates, and the response of the federal and state government and our regulators thereto, continued growth, Coast National Bank's beliefs as to the adequacy of its existing and anticipated allowances for loan losses, beliefs and expectations regarding actions that may be taken by regulatory authorities having oversight of Coast National Bank's operations, interest rates and financial policies of the United States government, continued weakness in the real estate markets within which we operate and general economic conditions. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, Coast Bancorp's results could differ materially from those expressed in, implied or projected by such forward-looking statements. Coast National Bank assumes no obligation to update such forward-looking statements.