UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended JUNE 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Transition Period from _________ to _________
Commission File Number: 0-24526
COASTAL BANCORP, INC.
(Exact name of Registrant as specified in its charter)
Texas 76-0428727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5718 Westheimer, Suite 600
Houston, Texas 77057
(Address of principal executive office)
(713) 435-5000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
COMMON STOCK ISSUED AND OUTSTANDING: 4,971,532 AS OF JUNE 30, 1997
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Financial Statements
Consolidated Statements of Financial Condition at June 30, 1997
(unaudited) and December 31, 1996 1
Consolidated Statements of Income for the Six-Month Periods Ended
June 30, 1997 and 1996 (unaudited) 2
Consolidated Statements of Income for the Three-Month Periods
Ended June 30, 1997 and 1996 (unaudited) 3
Consolidated Statements of Cash Flows for the Six-Month Periods
Ended June 30, 1997 and 1996 (unaudited) 4
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Legal Proceedings 20
Item 2 Changes in Securities 20
Item 3 Default upon Senior Securities 20
Item 4 Submission of Matters to a Vote of Securities Holders 20
Item 5 Other Information 20
Item 6 Exhibits and Reports on Form 8-K 20
</TABLE>
SIGNATURES
5
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30, December 31,
1997 1996
------------ -------------
ASSETS (Unaudited)
- --------------
<S> <C> <C>
Cash and amounts due from depository institutions $ 27,807 $ 27,735
Federal funds sold 6,300 --
Loans receivable (note 4) 1,336,632 1,229,748
Mortgage-backed securities held-to-maturity (note 3) 1,322,884 1,344,587
Mortgage-backed securities available-for-sale, at
market value 179,662 180,656
U.S. Treasury security available-for-sale,
at market value -- 11
Mortgage loans held for sale 357 298
Accrued interest receivable 15,118 14,690
Property and equipment 20,401 14,987
Stock in the Federal Home Loan Bank of Dallas (FHLB) 20,171 25,971
Goodwill 16,648 15,596
Mortgage servicing rights 6,207 6,810
Prepaid expenses and other assets 11,895 14,818
------------ ----------
$ 2,964,082 $ 2,875,907
============ ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Savings deposits (note 5) $1,364,759 $1,310,835
Advances from the FHLB (note 6) 397,936 409,720
Securities sold under agreements to
repurchase (note 6) 998,399 966,987
Senior notes payable (note 7) 50,000 50,000
Advances from borrowers for taxes and insurance 10,482 4,676
Other liabilities and accrued expenses 15,062 10,791
----------- -----------
Total liabilities 2,836,638 2,753,009
----------- -----------
9.0% noncumulative preferred stock of
Coastal Banc ssb 28,750 28,750
Commitments and contingencies (notes 4 and 8)
Stockholders' equity (notes 2 and 10):
Preferred stock, no par value; authorized
shares 5,000,000; no shares issued -- --
Common stock, $.01 par value; authorized
shares 30,000,000; 4,971,532 and 4,966,941 shares
issued and outstanding in 1997 and 1996 50 50
Additional paid-in capital 32,667 32,604
Retained earnings 69,561 64,597
Unrealized gain (loss) on securities
available-for-sale (3,584) (3,103)
----------- -----------
Total stockholders' equity 98,694 94,148
----------- -----------
$2,964,082 $2,875,907
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1997 1996
----------- ----------
(Unaudited)
<S> <C> <C>
Interest income:
Mortgage-backed securities $ 46,401 $48,310
Loans receivable 52,430 47,738
Federal funds sold, certificates of deposit and
other investments 671 706
----------- --------
99,502 96,754
----------- --------
Interest expense:
Savings deposits 30,545 29,767
Other borrowed money 27,776 27,026
Senior notes payable 2,500 2,500
Advances from the FHLB:
Short-term 3,712 2,636
Long-term 6,057 6,680
----------- --------
70,590 68,609
--------- --------
Net interest income 28,912 28,145
Provision for loan losses 900 1,025
--------- --------
Net interest income after provision for
loan losses 28,012 27,120
--------- --------
Noninterest income:
Loan fees and service charges on
deposit accounts 1,875 1,590
Loan servicing income, net 764 752
Gain on sale of branch office -- 521
Gain on sales of mortgage-backed securities
available-for-sale, net -- (4)
Other 380 246
---------- --------
3,019 3,105
---------- --------
Noninterest expense:
Compensation, payroll taxes and other benefits 9,318 8,106
Office occupancy 3,264 2,836
Insurance premiums 545 1,477
Data processing 1,110 1,294
Amortization of goodwill 882 897
Real estate owned 482 386
Other 3,850 4,041
--------- --------
19,451 19,037
--------- --------
Income before provision for Federal
income taxes 11,580 11,188
Provision for Federal income taxes 4,229 4,090
---------- --------
Net income before preferred stock dividends 7,351 7,098
Preferred stock dividends of Coastal Banc ssb
(Series A) 1,294 1,294
---------- --------
Net income after preferred stock dividends $ 6,057 $ 5,804
========== ========
Net earnings per share (note 9) $ 1.19 $ 1.16
========== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------
1997 1996
--------- ----------
(Unaudited)
<S> <C> <C>
Interest income:
Mortgage-backed securities $ 23,209 $23,813
Loans receivable 26,415 24,058
Federal funds sold, certificates of deposit
and other investments 274 329
---------- -------
49,898 48,200
---------- -------
Interest expense:
Savings deposits 15,379 14,685
Other borrowed money 13,996 13,029
Senior notes payable 1,250 1,250
Advances from the FHLB:
Short-term 1,856 1,517
Long-term 3,153 3,421
---------- -------
35,634 33,902
---------- -------
Net interest income 14,264 14,298
Provision for loan losses 450 450
---------- -------
Net interest income after provision for
loan losses 13,814 13,848
---------- -------
Noninterest income:
Loan fees and service charges on deposit accounts 981 795
Loan servicing income, net 357 359
Gain on sale of branch office -- 521
Other 212 135
---------- -------
1,550 1,810
---------- -------
Noninterest expense:
Compensation, payroll taxes and other benefits 4,693 4,219
Office occupancy 1,653 1,419
Insurance premiums 274 731
Data processing 597 696
Amortization of goodwill 445 449
Real estate owned 243 133
Other 1,989 2,250
------------ -------
9,894 9,897
------------ -------
Income before provision for Federal
income taxes 5,470 5,761
Provision for Federal income taxes 2,004 2,103
----------- -------
Net income before preferred stock dividends 3,466 3,658
Preferred stock dividends of Coastal Banc ssb
(Series A) 647 647
----------- -------
Net income after preferred stock dividends $ 2,819 $ 3,011
=========== =======
Net earnings per share (note 9) $ 0.55 $ 0.60
=========== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1997 1996
---------- ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income before preferred stock dividends $ 7,351 $ 7,098
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of property
and equipment, purchased loans servicing
rights, capitalized excess servicing fees
and prepaid expenses and other assets 3,397 2,796
Net premium amortization 516 719
Provision for loan losses 900 1,025
Amortization of goodwill 882 897
Originations and purchases of mortgage loans
held for sale (6,549) (12,784)
Sales of mortgage loans held for sale 6,490 11,547
Loss on sales of mortgage-backed securities
available-for-sale -- 4
Gain on sale of branch office -- (521)
Decrease (increase) in:
Accrued interest receivable (428) 1,008
Other, net 8,936 818
Stock dividends from the FHLB (644) (537)
-------- ------------
Net cash provided by operating activities 20,851 12,070
-------- ------------
Cash flows from investing activities:
Net increase in federal funds sold (6,300) --
Purchases of mortgage-backed securities
held-to-maturity (257) --
Purchase of U.S. Treasury security
available-for-sale -- (11)
Principal repayments on mortgage-backed
securities 21,976 24,071
Principal repayments on mortgage-backed
securities available-for-sale 255 395
Proceeds from maturity of U.S. Treasury
security available-for-sale 11 4,000
Proceeds from sales of mortgage-backed securities
available-for-sale -- 860
Purchases of loans receivable (113,194) (43,344)
Net decrease in loans receivable 1,872 7,766
Net purchases of property and equipment (6,115) (2,056)
Purchase of FHLB stock (2,556) (7,924)
Proceeds from sales of FHLB stock 9,000 5,000
Cash and cash equivalents received (paid) in
business combination transaction, net of
disposition transaction 52,119 (13,622)
--------- ------------
Net cash used by investing activities (43,189) (24,865)
--------- ------------
(continued)
</TABLE>
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1997 1996
------- ------------
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in savings deposits $ (700) $ 6,690
Advances from the FHLB 2,087,700 1,587,709
Principal payments on advances from the FHLB (2,099,484) (1,465,999)
Securities sold under agreements to repurchase 5,192,412 4,769,934
Purchases of securities sold under agreements
to repurchase (5,161,000) (4,879,973)
Exercise of stock options for purchase of
common stock, net 63 51
Net increase in advances from borrowers for taxes
and insurance 5,806 4,559
Dividends paid (2,387) (2,286)
----------- ------------
Net cash provided by financing activities 22,410 20,685
----------- ------------
Net increase in cash and cash equivalents 72 7,890
Cash and cash equivalents at beginning of period 27,735 10,044
----------- ------------
Cash and cash equivalents at end of period $ 27,807 $ 17,934
=========== ============
Supplemental schedule of cash flows-interest
paid $ 69,390 $ 71,242
=========== ============
Supplemental schedule of noncash investing
and financing activities:
Foreclosures of loans receivable $ 3,065 $ 2,366
=========== ============
In connection with the purchase of a
branch office in 1997, Coastal
recorded the following assets and liabilities:
Savings deposits acquired $ 54,563 $ --
Goodwill 1,935 --
Accrued interest payable and other
liabilities acquired 184 --
Property and equipment acquired 693 --
=========== ============
In connection with the sale of a branch
office in 1996, Coastal recorded the
following reductions of assets and
liabilities:
Savings deposits sold $ -- $ 14,850
Accrued interest payable sold -- 65
Loans receivable sold -- 155
Property and equipment sold -- 438
Reduction of goodwill -- 179
========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
COASTAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements were
prepared in accordance with the instructions for Form 10-Q and, therefore, do
not include all disclosures necessary for a complete presentation of financial
condition, results of operations, and cash flows in conformity with generally
accepted accounting principles. All adjustments which are, in the opinion of
management, of a normal recurring nature and are necessary for a fair
presentation of the interim financial statements, have been included. The
results of operations for the periods ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the entire fiscal year or
any other interim period.
(2) PRINCIPLES OF CONSOLIDATION
The accompanying unaudited Consolidated Financial Statements include the
accounts of Coastal Bancorp, Inc. and its wholly-owned subsidiary, Coastal
Banc Holding Company, Inc. and its wholly-owned subsidiary, Coastal Banc ssb
and subsidiaries (collectively, Coastal). Coastal Banc ssb's subsidiaries
include CoastalBanc Financial Corp., CBS Mortgage Corp., and CBS Asset Corp.
(collectively with Coastal Banc ssb, the Bank). All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain amounts within the accompanying consolidated financial statements
and the related notes have been reclassified to conform to the current year
presentation. Such reclassifications had no effect on net income or total
stockholders' equity.
(3) MORTGAGE-BACKED SECURITIES
Mortgage-backed securities at June 30, 1997 (unaudited) were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity:
REMICS - Agency $ 927,739 $ 4,326 $ (35,531) $ 896,534
REMICS - Non-agency 270,185 911 (10,064) 261,032
FNMA certificates 77,421 65 (1,280) 76,206
GNMA certificates 31,744 592 -- 32,336
Non-agency securities 15,767 425 (247) 15,945
Interest-only securities 28 -- -- 28
--------- ----- -------- ----------
$ 1,322,884 $ 6,319 $ (47,122) $ 1,282,081
========= ===== ======== ==========
Available-for-sale:
REMICS - Agency $ 182,471 $ 1,102 $ (6,568) $ 177,005
REMICS - Non-agency 2,706 -- (49) 2,657
--------- ----- -------- ---------
$ 185,177 $ 1,102 $ (6,617) $ 179,662
========= ===== ======== =========
</TABLE>
Mortgage-backed securities at December 31, 1996 were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-maturity:
REMICS - Agency $ 932,488 $ 4,730 $ (31,142) $ 906,076
REMICS - Non-agency 278,612 834 (9,958) 269,488
FNMA certificates 79,628 72 (1,072) 78,628
GNMA certificates 34,031 282 -- 34,313
Non-agency securities 19,790 363 (95) 20,058
Interest-only securities 38 -- (3) 35
--------- ---------- ----------- ---------
$ 1,344,587 $ 6,281 $ (42,270) $ 1,308,598
========= ========== =========== ==========
Available-for-sale:
REMICS - Agency $ 182,467 $ 1,207 $ (5,946) $ 177,728
REMICS - Non-agency 2,962 -- (34) 2,928
--------- ---------- ---------- ---------
$ 185,429 $ 1,207 $ (5,980) $ 180,656
========= ========== ========== =========
</TABLE>
(4) LOANS RECEIVABLE
Loans receivable at June 30, 1997 and December 31, 1996 were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------- ------------------
(Unaudited)
<S> <C> <C> <C> <C>
Real estate mortgage loans:
First-lien mortgage, primarily residential $ 824,233 $ 791,337
Multifamily 149,950 139,486
Residential construction 81,222 77,146
Acquisition and development 28,759 26,132
Commercial 149,153 119,004
Commercial construction 11,385 3,963
Commercial loans, secured by residential
mortgage loans held for sale 70,948 53,573
Commercial loans, secured by mortgage
servicing rights 32,619 21,380
Commercial, financial and industrial 23,229 21,965
Loans secured by savings deposits 8,603 8,849
Consumer and other loans 13,390 14,400
-------------- --------
1,393,491 1,277,235
Loans in process (51,067) (38,742)
Allowance for loan losses (6,862) (6,880)
Unearned loan fees (2,574) (2,344)
Premium to record purchased loans, net 3,644 479
-------------- ----------
$ 1,336,632 $ 1,229,748
============== ==========
Weighted average yield 8.38% 8.37%
============== ==========
</TABLE>
At June 30, 1997, Coastal had outstanding commitments to originate or
purchase $55.6 million of real estate mortgage and other loans and had
commitments under lines of credit to originate primary construction and other
loans of approximately $93.1 million. In addition, at June 30, 1997, Coastal
had $2.1 million of outstanding letters of credit. Management anticipates the
funding of these commitments through normal operations.
At June 30, 1997 and December 31, 1996, the carrying value of loans that
were considered to be impaired totaled approximately $795,000 and $725,000,
respectively, (all of which are on nonaccrual) and the related allowance for
loan losses on those impaired loans totaled $569,000 and $524,000,
respectively. The average recorded investment in impaired loans during the
six months ended June 30, 1997 and 1996 was $735,000 and $939,000,
respectively.
An analysis of activity in the allowance for loan losses for the six
months ended June 30, 1997 and 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
Six months ended June 30,
---------------------------
1997 1996
--------- -------
(Unaudited)
<S> <C> <C>
Balance, beginning of period $ 6,880 $5,703
Provision for loan losses 900 1,025
Charge-offs, net of recoveries (918) (385)
------------ -------
Balance, end of period $ 6,862 $6,343
============ =======
</TABLE>
Coastal services for others loans receivable which are not included in
the Consolidated Financial Statements. The total amounts of such loans were
$726.0 million and $776.7 million at June 30, 1997 and December 31, 1996,
respectively.
<PAGE>
(5) SAVINGS DEPOSITS
Savings deposits, their stated rates and the related weighted average
interest rates at June 30, 1997 and December 31, 1996 are summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Stated Rate June 30, 1997 December 31, 1996
---------------- -------------- ------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Noninterest-bearing checking 0.00% $ 99,479 $ 85,259
NOW accounts 1.74 - 2.00 64,314 56,862
Savings accounts 2.28 - 2.75 26,265 22,135
Money market demand accounts 3.15 - 4.51 161,537 151,046
---------- ------------
351,595 315,302
---------- ------------
Certificate accounts 2.00 - 2.99 6,957 12,930
3.00 - 3.99 2,268 1,905
4.00 - 4.99 85,786 95,087
5.00 - 5.99 820,574 776,765
6.00 - 6.99 85,131 91,128
7.00 - 7.99 7,986 12,964
8.00 - 8.99 3,371 3,515
9.00 - 9.99 966 1,171
10.00 - 10.99 245 249
11.00 - 11.99 17 17
---------- ------------
1,013,301 995,731
---------- ------------
Discount to record
savings deposits at fair value, net (137) (198)
-------------- ------------
$ 1,364,759 $ 1,310,835
============== ============
Weighted average rate 4.70% 4.67%
============== ============
</TABLE>
The scheduled maturities of certificate accounts outstanding at June 30,
1997 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1997
--------------
(Unaudited)
<S> <C> <C>
0 to 12 months $ 717,502
12 to 24 months 244,868
24 to 36 months 36,939
36 to 48 months 8,618
48 to 60 months 5,222
Over 60 months 152
--------------
$ 1,013,301
==============
</TABLE>
<PAGE>
(6) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FHLB ADVANCES
(a) The weighted average interest rates on securities sold under
agreements to repurchase at June 30, 1997 and December 31, 1996 were 5.56% and
5.55%, respectively. The stated interest rates on securities sold under
agreements to repurchase ranged from 5.27% to 5.66% at June 30, 1997.
(b) The weighted average interest rate on advances from the FHLB at
June 30, 1997 and December 31, 1996 were 5.69% and 5.61%, respectively. FHLB
advances and related interest rates and maturities at June 30, 1997 and
December 31, 1996 are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Maturity Interest rates June 30, 1997 December 31, 1996
- -------- --------------- ------------- -----------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
1997 4.93 - 8.31% $ 180,630 $ 189,127
1998 5.25 - 6.96 19,598 19,674
1999 4.95 - 8.11 120,645 170,871
2000 5.57 - 7.76 8,167 8,320
2001 6.03 - 6.46 8,756 8,854
2002 5.60 47,600 --
2004 6.52 3,031 3,201
2006 6.91 3,142 3,167
2007 6.80 - 7.94 480 488
2009 8.25 4,577 4,681
2011 6.35 - 7.24 1,310 1,337
------------- -----------------
$ 397,936 $ 409,720
============= =================
</TABLE>
FHLB advances are secured by certain first-lien mortgage loans and
mortgage-backed securities owned by Coastal.
(7) SENIOR NOTES PAYABLE
On June 30, 1995, Coastal issued $50.0 million of 10.0% Senior Notes due
June 30, 2002. The Senior Notes are redeemable at Coastal's option, in whole
or in part, on or after June 30, 2000, at par, plus accrued interest to the
redemption date. Interest on the Senior Notes is payable quarterly.
(8) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Coastal is a party to financial instruments with off-balance sheet risk
in the normal course of business to reduce its own exposure to fluctuations in
interest rates. These financial instruments include interest rate swap
agreements and interest rate cap agreements.
Coastal is a party to interest rate swap and interest rate cap agreements
in order to reduce its exposure to floating interest rates by altering the
interest rate sensitivity of a portion of its variable-rate assets and
borrowings. At June 30, 1997, Coastal had interest rate swap and cap
agreements having notional principal amounts totaling $60.8 million and $306.7
million, respectively.
<PAGE>
The terms of the interest rate swap agreements outstanding at June 30,
1997 (unaudited) and December 31, 1996 are summarized as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Floating Fair Value at
Notional LIBOR Fixed Rate at End of Period
Maturity Amount Index Rate End gain (loss)
of Period
- ----------------- ------- --------- ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
At June 30, 1997:
1997 $ 5,000 One-month 4.990% 5.703% $ 1
6,000 Three-month 6.493 5.813 (14)
1998 4,400 Three-month 6.709 5.813 (29)
1999 14,600 Three-month 6.926 5.813 (170)
2000 4,800 Three-month 6.170 5.598 (39)
2,590 Three-month 6.000 5.750 36
2005 23,442 Three-month 6.500 5.539 134
-------- ----------
$ 60,832 $ (81)
======== ==========
At December 31, 1996:
1997 $ 5,000 One-month 4.990% 5.633% $ 6
6,000 Three-month 6.493 5.500 (65)
1998 4,400 Three-month 6.709 5.500 (111)
1999 14,600 Three-month 6.926 5.500 (619)
2000 4,800 Three-month 6.170 5.543 (64)
2,660 Three-month 6.000 5.617 24
2005 23,442 Three-month 6.500 5.500 (15)
-------- ---------------
$ 60,902 $ (844)
======== ===============
</TABLE>
The agreements provide for Coastal to make weighted average fixed
interest payments and receive payments based on a floating LIBOR index, as
defined in each agreement. The weighted average interest received rate on all
of the interest rate swap agreements was approximately 5.61% and the weighted
average interest payment rate on all of the interest rate swap agreements was
approximately 6.42% for the six months ended June 30, 1997. Payments on the
interest rate swap agreements are based on the notional principal amount of
the agreements; no funds were actually borrowed or are to be repaid. The
interest rate swap agreements are used to alter the interest rate sensitivity
of a portion of Coastal's variable-rate borrowings. As such, Coastal records
net interest expense or income related to these agreements on a monthly basis
in "interest expense" in the accompanying consolidated statements of
operations. The net interest expense related to these agreements was
approximately $246,000 for the six months ended June 30, 1997 and
approximately $309,000 for the six months ended June 30, 1996. Coastal had
pledged approximately $6.8 million of mortgage-backed securities to secure
interest rate swap agreements at June 30, 1997.
Coastal has interest rate cap agreements with various counterparties.
The agreements provide for the counterparties to make payments to Coastal
whenever a defined floating rate exceeds rates ranging from 5.0% to 12.5%,
depending on the agreement. Payments on the interest rate cap agreements are
based on the notional principal amount of the agreements; no funds were
actually borrowed or are to be repaid. The
<PAGE>
purchase prices of the interest rate cap agreements are capitalized and
included in "prepaid expenses and other assets" in the accompanying
consolidated statements of financial condition and are amortized over the life
of the agreements using the straight-line method. The unamortized portion of
the purchase price of the interest rate cap agreements was approximately
$591,000 and $1.1 million at June 30, 1997 and December 31, 1996,
respectively, with the estimated fair value of the agreements being $791,000
and $639,000 at June 30, 1997 and December 31, 1996, respectively. The
interest rate cap agreements are used to alter the interest rate sensitivity
of a portion of Coastal's mortgage-backed securities, loans receivable and
their related funding sources. As such, the amortization of the purchase price
and interest income from the interest rate cap agreements are recorded in
"interest income on mortgage-backed securities or loans receivable," as
appropriate, in the accompanying consolidated statements of operations. The
net decrease in interest income related to the interest rate cap agreements
was approximately $201,000 and $283,000 for the six months ended June 30, 1997
and 1996 respectively.
Interest rate cap agreements outstanding at June 30, 1997 expire as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Year of Strike rate Notional
expiration range amount
- ---------- -------------- ---------
<S> <C> <C>
1997 5.0 - 9.0% $ 86,650
1998 5.0 - 12.5 156,400
1999 7.25 - 11.0 52,422
2000 7.5 - 9.5 11,265
---------
$ 306,737
=========
</TABLE>
Market risk, or the risk of loss due to movement in market prices or
rates, is quantified by Coastal through a risk monitoring process of marking
to market the mortgage-backed securities portfolio to expected market level
changes in an instantaneous shock of plus and minus 200 basis points on a
monthly basis and 300 basis points on a quarterly basis. This process
discloses the effects on market values of the assets and liabilities,
unrealized gains and losses, including off-balance sheet items, as well as
potential changes in net interest income.
The fluctuation in the market value, however, has no effect on the level
of earnings of Coastal because the securities are categorized as
"held-to-maturity" or "available-for-sale".
Coastal is exposed to credit loss in the event of nonperformance by the
counterparty to the swap or cap and controls this risk through credit
monitoring procedures. The notional principal amount does not represent
Coastal's exposure to credit loss.
<PAGE>
(9) NET EARNINGS PER SHARE
Net earnings per share is calculated by dividing net income after
preferred stock dividends by the weighted average number of common shares and
common stock equivalents. Stock options outstanding are regarded as common
stock equivalents and are, therefore, considered in earnings per share
calculations if dilutive. Common stock equivalents are computed using the
treasury stock method. The weighted average number of shares used in the
computation of earnings per share is 5,122,618 and 5,022,070 for the three
months ended June 30, 1997 and 1996, respectively (unaudited) and 5,110,292
and 5,016,086 for the six months ended June 30, 1997 and 1996, respectively
(unaudited).
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(Statement 128). Statement 128 supersedes APB Opinion No. 15, "Earnings Per
Share" and specifies the computation, presentation and disclosure requirements
for earnings per share (EPS) for entities with publicly held common stock.
Statement 128 replaces the presentation of primary and fully diluted EPS with
basic EPS and diluted EPS, respectively. Statement 128 is effective for
financial statements for both interim and annual periods ending after December
15, 1997. After adoption, all prior-period EPS data presented will be
restated to conform with Statement 128. The adoption of Statement 128 is not
expected to have a material impact on Coastal's consolidated financial
statements.
(10) STATUTORY CAPITAL REQUIREMENTS
The applicable regulations require federally insured institutions, which
are not the highest rated, to have a minimum regulatory tier 1 (core) capital
to total assets ratio equal to a minimum of 4.0%, a tier 1 risk-based capital
to risk-weighted assets ratio of 4.0% and total risk-based capital to
risk-weighted assets ratio of 8.0%.
At June 30, 1997, the Bank's regulatory capital (unaudited) in relation
to its current existing regulatory capital requirements were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Actual Requirement Excess
Capital Requirement Dollar Percent Dollar Percent Dollar Percent
- -------------------- -------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 (core) $156,185 5.49% $ 113,760 4.00% $ 42,425 1.49%
Tier 1 risk-based 156,185 11.25 55,548 4.00 100,637 7.25
Total risk-based 163,047 11.74 111,097 8.00 51,950 3.74
</TABLE>
At June 30, 1997, the Bank, according to certain capital requirements
outlined by the FDIC, was categorized as "well capitalized".
(11) BRANCH ACQUISITION
On June 21, 1997, Coastal announced the completion of the acquisition of
the Wells Fargo Bank (Texas) branch located at 441 Austin Avenue in Port
Arthur, Texas. At the date of acquisition, the Port Arthur location had
approximately $54.6 million in deposits which were assumed by Coastal, in
addition, approximately $693,000 of operating assets were purchased in the
transaction.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Total assets increased 3.1% or $88.2 million from December 31, 1996 to
June 30, 1997. The net increase resulted primarily from an increase in loans
receivable of $106.9 million, an increase in Federal funds sold of $6.3
million, an increase in property and equipment of $5.4 million, offset by
decreases of $21.7 million and $5.8 million in mortgage-backed securities
held-to-maturity and stock in the Federal Home Loan Bank of Dallas,
respectively. The increase in loans receivable was primarily due to a bulk
loan purchase of residential mortgage loans totalling $97.5 million in June of
1997 (resulting from the investment of the cash received from the branch
acquisition that closed on June 21, 1997) and the increase in Federal funds
sold was due to Coastal's use of this overnight investment alternative for
excess funds beginning in the second quarter of 1997. The increase in
property and equipment was due primarily to the acquisition of assets related
to the relocation of Coastal's corporate headquarters. The relocation, which
will be finalized during the third quarter of 1997, will consolidate Coastal's
administrative, primarily lending and mortgage servicing offices. The
decrease in mortgage-backed securities held-to-maturity was due to principal
payments received.
Savings deposits increased slightly by 4.1% or $53.9 million from
December 31, 1996 to June 30, 1997. This increase was primarily due to the
branch acquisition of $54.6 million in deposits completed on June 21, 1997,
offset by a slight decrease in existing deposits. Securities sold under
agreements to repurchase increased 3.3% or $31.4 million and advances from the
FHLB decreased by $11.8 million or 2.9% from December 31, 1996 to June 30,
1997. The reallocation of the borrowings outstanding during such period was
directly attributable to Coastal's change in funding sources to take advantage
of more favorable interest rates. Stockholders' equity increased 4.8% or $4.5
million from December 31, 1996 to June 30, 1997 as a result primarily of net
income offset by a $481,000 increase in the unrealized loss on securities
available-for-sale and by dividends declared.
Results of Operations for the Six Months Ended June 30, 1997 and 1996
General
For the six months ended June 30, 1997, net income before preferred stock
dividends increased 3.6% to $7.4 million from $7.1 million for the six months
ended June 30, 1996. Net interest income increased slightly by $767,000 for
the six months ended June 30, 1997 as compared to the six months ended June
30, 1996. Noninterest income decreased during such period by $86,000 primarily
due to the $521,000 nonrecurring gain on the sale of a branch office that was
recorded during the six months ended June 30, 1996. Noninterest expense
increased by $414,000 and the provision for Federal income taxes increased
$139,000.
Interest Income
Interest income for the six months ended June 30, 1997 increased $2.7
million or 2.8% from the six months ended June 30, 1996. The increase was
primarily due to an increase of $4.7 million in interest earned on loans
receivable over the prior comparable period. The increase in interest income
on loans receivable was due to a $119.2 million increase in the average
balance of loans receivable offset by a slight decrease in the average yield
from 8.50% for the six months ended June 30, 1996 to 8.44% for the six months
ended June 30, 1997. This increase was offset by a $1.9 million decrease in
interest income on mortgage-backed securities primarily due to a lower average
balance and a decrease in the average yield on mortgage-backed securities from
6.15% for the six months ended June 30, 1996 to 6.09% for the six months ended
June 30, 1997 and a $35,000 decrease in interest income on Federal funds sold,
certificates of deposit and other investments. Total interest-earning assets
for the six months ended June 30, 1997 averaged $2.8 billion as compared to
$2.7 billion for the six months ended June 30, 1996.
<PAGE>
Interest Expense
Interest expense on interest-bearing liabilities was $70.6 million for
the six months ended June 30, 1997, as compared to $68.6 million for the same
period in 1996. The increase in interest expense was due to a $73.2 million
increase in the average balance of interest-bearing liabilities during such
period at the average rate paid of 5.38% for both the six month periods ended
June 30, 1997 and 1996. The increase in average interest-bearing liabilities
consisted of a $37.7 million increase in interest-bearing savings deposits, a
$21.6 million increase in securities sold under agreements to repurchase, a
$13.6 million increase in FHLB advances and a $326,000 increase in Federal
funds purchased.
Net Interest Income
Net interest income was $28.9 million for the six months ended June 30,
1997 as compared to $28.1 million for the same period in 1996. The increase
in net interest income was due to the slightly improved net interest rate
spread (Spread) percentage. Spread, defined to exclude noninterest-bearing
deposits, increased from 1.73% for the six months ended June 30, 1996 to 1.75%
for the six months ended June 30, 1997. Management also calculates an
alternative Spread which includes noninterest-bearing deposits. Under this
calculation, the alternative Spreads for the six months ended June 30, 1997
and 1996 were 1.91% and 1.90%, respectively. Net interest margin (Margin) was
2.07% for both the six month periods ended June 30, 1997 and 1996. Margin
represents net interest income as a percentage of average interest-earning
assets. Margin and Spread are affected by the changes in the amount and
composition of interest-earning assets and interest-bearing liabilities. The
increase in the Spread was primarily due to a slight increase in the average
yield on interest-earning assets from 7.11% for the six months ended June 30,
1996 to 7.13% for the same period in 1997. In addition, average net
interest-earning assets decreased $4.6 million from the six months ended June
30, 1996 to the six months ended June 30, 1997.
The slight improvement in the Spread level is consistent with
management's goal of achieving a more desirable asset/liability composition
which is less vulnerable to market interest rate fluctuations, primarily
through the addition of loans tied to variable rates such as the London
Interbank Offered Rate (LIBOR) and local and regional prime rates. To
continue the improvement in both the Margin and Spread levels, management
intends to gradually increase commercial business loans to approximately 15%
of total assets and commercial business (noninterest-bearing) deposits to
approximately 10% of total deposits within three to five years.
Provision for Loan Losses
Provision for loan losses was $900,000 for the six months ended June 30,
1997 as compared to $1.0 million for the six months ended June 30, 1996. The
decrease in the provision for loan losses was due to management's satisfaction
with the current allowance for loan losses established based on Coastal's
loan loss policy. The allowance for loan losses as a percentage of total
loans was 0.51% at June 30, 1997 and 0.56% at June 30, 1996. Although
no assurance can be given, management believes that the present allowance
for loan losses is adequate considering historical loss experience,
delinquency trends and current economic conditions. Management will continue
to review its loan loss allowance policy as Coastal's loan portfolio grows and
diversifies to determine if changes to the policy and resulting allowance for
loan losses are necessary.
Noninterest Income
For the six months ended June 30, 1997, noninterest income decreased
$86,000 or 2.8% to $3.0 million, compared to $3.1 million for the six months
ended June 30, 1996. The decrease in noninterest income was primarily due to
the $521,000 nonrecurring gain on the sale of a branch office recorded during
the six months ended June 30, 1996. This decrease was somewhat offset by an
increase of $285,000 in loan fees and service charges and a $134,000 increase
in other noninterest income. The increase in loan fees and service charges
was due primarily to an increase of $245,000 in service charges on deposit
accounts.
Noninterest Expense
For the six months ended June 30, 1997, noninterest expense increased
$414,000 or 2.2% to $19.5 million compared to $19.0 million for the six months
ended June 30, 1996. Compensation, payroll taxes and other benefits as well
as office occupancy expense increased $1.2 million and $428,000, respectively,
from the six months ended June 30, 1996 to the six months ended June 30, 1997,
primarily due to the staffing increases related to the expansion of the loan
product base and the continuing development of commercial business lending
programs. In addition, real estate owned expenses increased by $96,000.
These increases were somewhat offset by a $932,000 decrease in insurance
premiums. This decrease was due primarily to the decreased deposit insurance
premiums as a result of the lower assessment rates applicable to Coastal in
1997 pursuant to the passage of the Deposit Insurance Funds Act of 1996.
Other decreases included a $184,000 decrease in data processing expenses (due
in part to the 1996 data processing conversion expenses incurred), a $15,000
decrease in the amortization of goodwill and a $191,000 decrease in other
noninterest expenses.
Provision for Federal Income Taxes
For the six months ended June 30, 1997, the provision for Federal income
taxes was $4.2 million compared to $4.0 million for the six months ended June
30, 1996 at an average effective rate of approximately 36.5%.
Results of Operations for the Three Months Ended June 30, 1997 and 1996
General
For the three months ended June 30, 1997, net income before preferred
stock dividends decreased 5.3% to $3.5 million from $3.7 million for the three
months ended June 30, 1996. Net interest income decreased $34,000 for the
three months ended June 30, 1997 as compared to the three months ended June
30, 1996. Noninterest income decreased during such period by $260,000
primarily due to the $521,000 nonrecurring gain on the sale of a branch office
that was recorded during the three months ended June 30, 1996. Noninterest
expense decreased by $3,000 and the provision for federal income taxes
decreased by $99,000.
Interest Income
Interest income for the three months ended June 30, 1997 increased $1.7
million or 3.5% from the three months ended June 30, 1996. The increase was
primarily due to an increase of $2.4 million in interest earned on loans
receivable over the prior comparable quarter. The increase in interest income
on loans receivable was due to a $113.2 million increase in the average
balance of loans receivable offset by a slight decrease in the average yield
from 8.49% for the three months ended June 30, 1996 to 8.47% for the three
months ended June 30, 1997. This increase was offset by a $604,000 decrease
in interest income on mortgage-backed securities primarily due to a lower
average balance and a $55,000 decrease in interest income on Federal funds
sold, certificates of deposit and other investments. Total interest-earning
assets for the three months ended June 30, 1997 averaged $2.8 billion as
compared to $2.7 billion for the three months ended June 30, 1996.
Interest Expense
Interest expense on interest-bearing liabilities was $35.6 million for
the three months ended June 30, 1997, as compared to $33.9 million for the
same period in 1996. The increase in interest expense was due to a $68.8
million increase in the average balance of interest-bearing liabilities during
such period and an increase in the average rate paid on interest-bearing
liabilities from 5.32% for the three months ended June 30, 1996 to 5.45% for
the three months ended June 30, 1997. The increase in average
interest-bearing liabilities consisted of a $37.9 million increase in
securities sold under agreements to repurchase, a $36.8 million increase in
interest-bearing savings deposits, a $648,000 increase in Federal funds
purchased offset by a $6.5 million decrease in FHLB advances.
Net Interest Income
Net interest income was $14.3 million for the three months ended June 30,
1997 and for the same period in 1996. Net interest margin (Margin) decreased
from 2.10% for the three months ended June 30, 1996 to 2.05% for the three
months ended June 30, 1997. Margin represents net interest income as a
percentage of average interest-earning assets. Net interest rate spread
(Spread), defined to exclude noninterest-bearing deposits, decreased from
1.76% for the three months ended June 30, 1996 to 1.71% for the three months
ended June 30, 1997. Management also calculates an alternative Spread which
includes noninterest-bearing deposits. Under this calculation, the
alternative Spreads for the three months ended June 30, 1997 and 1996 were
1.88% and 1.93%, respectively. Margin and Spread are affected by the changes
in the amount and composition of interest-earning assets and interest-bearing
liabilities. The decrease in the Margin and Spread were primarily due to the
increase in the average interest rates paid on interest-bearing liabilities
from 5.32% for the three months ended June 30, 1996 to 5.45% for the same
period in 1997, offset by an increase in the average yield on interest-earning
assets from 7.08% for the three months ended June 30, 1996 to 7.16% for the
same period in 1997. In addition, average net interest-earning assets
decreased $6.3 million from the three months ended June 30, 1996 to the three
months ended June 30, 1997.
Management's goal is to achieve a more desirable asset/liability
composition which is less vulnerable to market interest rate fluctuations,
primarily through the addition of loans tied to variable rates such as the
London Interbank Offered Rate (LIBOR) and local and regional prime rates.
Management intends to gradually increase commercial business loans to
approximately 15% of total assets and commercial business
(noninterest-bearing) deposits to approximately 10% of total deposits within
three to five years.
Provision for Loan Losses
Provision for loan losses was $450,000 for the three months ended June
30, 1997 and 1996. The allowance for loan losses as a percentage of total
loans was 0.51% at June 30, 1997 and 0.56% at June 30, 1996. Although no
assurance can be given, management believes that the present allowance for
loan losses is adequate considering historical loss experience, delinquency
trends and current economic conditions. Management will continue to review its
loan loss allowance policy as Coastal's loan portfolio grows and diversifies
to determine if changes to the policy and resulting allowance for loan losses
are necessary.
Noninterest Income
For the three months ended June 30, 1997, noninterest income decreased
$260,000 or 14.4% to $1.6 million, compared to $1.8 million for the three
months ended June 30, 1996. The decrease in noninterest income was due to the
$521,000 nonrecurring gain on the sale of a branch office recorded during the
three months ended June 30, 1996. This decrease was somewhat offset by an
increase of $186,000 in loan fees and service charges and a $77,000 increase
in other noninterest income. The increase in loan fees and service charges
was due to an increase of $141,000 in service charges on deposit accounts.
<PAGE>
Noninterest Expense
For the three months ended June 30, 1997, noninterest expense decreased
$3,000 from the three months ended June 30, 1996. Compensation, payroll taxes
and other benefits as well as office occupancy expense increased $474,000 and
$234,000, respectively, from the three months ended June 30, 1996 to the three
months ended June 30, 1997, primarily due to the staffing increases related to
the expansion of the loan product base and the continuing development of
commercial business lending programs. In addition, real estate owned expenses
increased by $110,000. These increases were somewhat offset by a $457,000
decrease in insurance premiums. This decrease from the prior related quarter
was due primarily to the decreased deposit insurance premiums as a result of
the lower assessment rates applicable to Coastal in 1997 pursuant to the
passage of the Deposit Insurance Funds Act of 1996. Other decreases included
a $99,000 decrease in data processing expenses (due in part to the 1996 data
processing conversion expenses incurred), a $4,000 decrease in the
amortization of goodwill and a $261,000 decrease in other noninterest expense.
Provision for Federal Income Taxes
For the three months ended June 30, 1997, the provision for Federal
income taxes was $2.0 million compared to $2.1 million for the three months
ended June 30, 1996 at an average effective rate of approximately 36.5%.
Liquidity and Capital Resources
Coastal's primary sources of funds consist of savings deposits bearing
market rates of interest, securities sold under agreements to repurchase,
advances from the FHLB, Federal funds purchased and principal payments on
loans receivable and mortgage-backed securities. Coastal uses its funding
resources principally to meet its ongoing commitments to fund maturing
deposits and deposit withdrawals, repay borrowings, purchase loans receivable
and mortgage-backed securities, fund existing and continuing loan commitments,
maintain its liquidity, meet operating expenses and fund acquisitions of other
banks and thrifts, either on a branch office or whole bank acquisition basis.
At June 30, 1997, Coastal had binding commitments to originate or purchase
loans totaling approximately $55.6 million and had $51.1 million of
undisbursed loans in process. Scheduled maturities of certificates of deposit
during the 12 months following June 30, 1997 totaled $717.5 million at June
30, 1997. Management believes that Coastal has adequate resources to fund all
of its commitments.
As of June 30, 1997, Coastal operated 37 retail banking offices in Texas
cities, including Houston, Austin, Corpus Christi and small cities in the
south east quadrant of Texas. Management's five year goal is to have over $5
billion in assets, over $3 billion in deposits, $2.5 billion in loans and 80
branches in cities throughout central and south Texas, although there can be
no assurance that this goal can be accomplished through growth or
acquisitions.
Forward-Looking Information
The above discussion should be read in conjunction with the information
contained in the Consolidated Financial Statements and the Notes thereto. The
above information contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and
are subject to the safe harbor created by that Reform Act. The words
"estimate," "project," "anticipate," "expect," "intend," "believe," "plans,"
and similar expressions are intended to identify forward-looking statements.
Because such forward-looking statements involve risks and uncertainties, there
are important factors that could cause actual results to differ materially
from those expressed or implied by such forward-looking statements. Factors,
all of which are difficult to predict and many of which are beyond the control
of Coastal, that could cause actual results to differ materially include, but
are not limited to: risks related to Coastal's acquisition strategy,
including risks of adversely changing results of operations and factors
affecting Coastal's ability to consummate further acquisitions; changes in
general economic and business conditions; changes in market rates of interest;
changes in the laws and regulations applicable to Coastal; the risks
associated with the Bank's Non-Traditional lending (loans other than
single-family residential mortgage loans such as multifamily, real estate
acquisition and development, commercial, warehouse and mortgage servicing
rights loans); and changes in business strategies and other factors as
discussed in Coastal's Annual Report on Form 10-K as filed with the Securities
and Exchange Commission on March 26, 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Coastal is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by
management to be immaterial.
Item 2. Changes in Securities
a) Not applicable.
b) Not applicable.
Item 3. Default Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
On April 24, 1997, at the Annual Meeting of Stockholders of Coastal
Bancorp, Inc. (the Company), the stockholders voted upon and approved the
election of two directors and the ratification of the appointment of KPMG Peat
Marwick LLP as the Company's independent auditors for the fiscal year ending
December 31, 1997. With respect to such matters, the results of the votes
were as follows:
1) Election of directors:
Number of Votes
In favor Withheld
Manuel J. Mehos 3,568,294 4,500
James C. Niver 3,568,294 4,500
2) Ratification of KPMG Peat Marwick LLP as the Company's independent
auditors:
Number of votes in favor: 3,568,644
Number of votes against: 2,325
Number of votes abstaining: 1,825
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibits are filed as part of this report:
Exhibit 27 - Financial Data Schedule (filed via EDGAR)
Exhibit 99 - Forward-Looking Information
b) Form 8-K filed on May 5, 1997 to disclose an increase in the dividends
declared on common stock from $0.10 to $0.12 per common share for the first
quarter of 1997 for shareholders of record on May 15, 1997, payable on June
15, 1997.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: 8/8/97 By/s/ Manuel J. Mehos
Manuel J. Mehos
Chairman of the Board
Chief Executive Officer
Dated: 8/8/97 By/s/ Catherine N. Wylie
Catherine N. Wylie
Chief Financial Officer
Exhibit 27
Financial Data Schedule
(filed via EDGAR)
Exhibit 99
Forward-Looking Information
Forward-Looking Information
The information included in Item 2 (Management's Discussion and Analysis
of Financial Condition and Results of Operations) should be read in
conjunction with the information contained in the Consolidated Financial
Statements and the Notes thereto. The information contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"), and is subject to the safe harbor created by that
Reform Act. The words "estimate," "project," "anticipate," "expect,"
"intend," "believe," "plans," and similar expressions are intended to identify
forward-looking statements. Because such forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements. Factors, all of which are difficult to predict
and many of which are beyond the control of Coastal, that could cause actual
results to differ materially include, but are not limited to: risks related
to Coastal's acquisition strategy, including risks of adversely changing
results of operations and factors affecting Coastal's ability to consummate
further acquisitions; changes in general economic and business conditions;
changes in market rates of interest; changes in the laws and regulations
applicable to Coastal; the risks associated with the Bank's Non-Traditional
lending (loans other than single-family residential mortgage loans such as
multifamily, real estate acquisition and development, commercial, warehouse
and mortgage servicing rights loans); and changes in business strategies and
other factors as discussed in Coastal's Annual Report on Form 10-K as filed
with the Securities and Exchange Commission on March 26, 1997.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of financial condition and the consolidated statement of
operations and notes thereto found on pages 1 through 13 of the Company's Form
10-Q for year-to-date and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 27,807
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 179,662
<INVESTMENTS-CARRYING> 1,322,884
<INVESTMENTS-MARKET> 1,282,081
<LOANS> 1,336,632
<ALLOWANCE> 6,862
<TOTAL-ASSETS> 2,964,082
<DEPOSITS> 1,364,759
<SHORT-TERM> 1,048,110
<LIABILITIES-OTHER> 54,294
<LONG-TERM> 398,225
0
0
<COMMON> 50
<OTHER-SE> 98,644
<TOTAL-LIABILITIES-AND-EQUITY> 2,964,082
<INTEREST-LOAN> 52,430
<INTEREST-INVEST> 46,401
<INTEREST-OTHER> 671
<INTEREST-TOTAL> 99,502
<INTEREST-DEPOSIT> 30,545
<INTEREST-EXPENSE> 70,590
<INTEREST-INCOME-NET> 28,912
<LOAN-LOSSES> 900
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 20,745
<INCOME-PRETAX> 10,286
<INCOME-PRE-EXTRAORDINARY> 10,286
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,057
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,880
<CHARGE-OFFS> 967
<RECOVERIES> 49
<ALLOWANCE-CLOSE> 6,862
<ALLOWANCE-DOMESTIC> 6,862
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
