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 March 31, 2000
[ ] 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 OUTSTANDING: 6,143,453 AS OF APRIL 30, 2000
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION
- -------- ----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Financial Statements (unaudited)
Consolidated Statements of Financial Condition at March 31, 2000
and December 31, 1999 1
Consolidated Statements of Income for the Three-Month Periods Ended
March 31, 2000 and 1999 2
Consolidated Statements of Comprehensive Income for the Three-Month
Periods Ended March 31, 2000 and 1999 3
Consolidated Statements of Cash Flows for the Three-Month Periods
Ended March 31, 2000 and 1999 4
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations 16
Item 3 Quantitative and Qualitative Disclosures About Market Risk 20
</TABLE>
PART II. OTHER INFORMATION
- --------- ------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Legal Proceedings 21
Item 2 Changes in Securities 21
Item 3 Default upon Senior Securities 21
Item 4 Submission of Matters to a Vote of Security Holders 21
Item 5 Other Information 21
Item 6 Exhibits and Reports on Form 8-K 21
</TABLE>
SIGNATURES
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
- -------- ---------------------
<TABLE>
<CAPTION>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
March 31, December 31,
ASSETS 2000 1999
- --------------------------------------------------------------------- ---------- ------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 36,879 $ 48,098
Federal funds sold 9,200 --
Loans receivable (note 4) 1,902,021 1,735,081
Mortgage-backed securities held-to-maturity (note 3) 909,557 917,212
Mortgage-backed securities available-for-sale, at fair value (note 3) 95,864 99,665
U.S. Treasury securities held-to-maturity 992 299
Accrued interest receivable 18,467 16,150
Property and equipment 29,704 30,708
Stock in the Federal Home Loan Bank of Dallas (FHLB) 65,276 56,753
Goodwill 26,883 27,636
Mortgage servicing rights (note 4) -- 3,035
Prepaid expenses and other assets 15,318 13,315
---------- ----------
$3,110,161 $2,947,952
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------
<S> <C> <C>
Liabilities:
Deposits (note 5) $1,636,489 $1,624,289
Advances from the FHLB (note 6) 1,240,581 1,096,931
Senior notes payable, net (note 7) 46,900 46,900
Advances from borrowers for taxes and insurance 5,709 3,852
Other liabilities and accrued expenses 16,592 13,774
----------- -----------
Total liabilities 2,946,271 2,785,746
----------- -----------
Minority interest - 9.0% noncumulative preferred stock of
Coastal Banc ssb (note 10) 28,750 28,750
Commitments and contingencies (notes 4 and 8)
Stockholders' equity (notes 1, 3, 9, 11 and 13):
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, $.01 par value; authorized shares
30,000,000; 7,643,453 and 7,616,227 shares issued
in 2000 and 1999, respectively 76 76
Additional paid-in capital 32,912 32,683
Retained earnings 98,861 95,508
Accumulated other comprehensive loss -
unrealized loss on securities available-for-sale (3,746) (1,848)
Treasury stock at cost (1,283,679 shares in 2000
and 1999) (20,463) (20,463)
----------- -----------
Total stockholders' equity 135,140 133,456
----------- -----------
$3,110,161 $2,947,952
=========== ===========
</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
March 31,
--------------------
2000 1999
------------ -------
(Unaudited)
<S> <C> <C>
Interest income:
Loans receivable $ 38,506 $31,004
Mortgage-backed securities 15,433 17,750
FHLB stock, federal funds sold and other interest-earning assets 975 772
------------ -------
54,914 49,526
------------ -------
Interest expense:
Deposits 16,533 16,810
Advances from the FHLB 17,095 11,565
Other borrowed money 1 1,518
Senior notes payable 1,173 1,217
------------ -------
34,802 31,110
------------ -------
Net interest income 20,112 18,416
Provision for loan losses 2,400 2,331
------------ -------
Net interest income after provision for loan losses 17,712 16,085
------------ -------
Noninterest income:
Loan fees and service charges on deposit accounts 2,057 1,814
Loan servicing income, net 201 134
Other 96 492
Gain on sale of mortgage servicing rights 2,172 --
------------ -------
4,526 2,440
------------ -------
Noninterest expense:
Compensation, payroll taxes and other benefits 7,469 7,115
Office occupancy 2,806 2,802
Data processing 859 899
Amortization of goodwill 753 753
Insurance premiums 149 303
Real estate owned 127 154
Other 2,731 1,454
------------ -------
14,894 13,480
------------ -------
Income before provision for Federal income taxes and
minority interest 7,344 5,045
Provision for Federal income taxes 2,209 1,626
------------ -------
Income before minority interest 5,135 3,419
Minority interest - preferred stock dividends of Coastal Banc ssb
(Series A) (note 10) 647 647
------------ -------
Net income $ 4,488 $ 2,772
============ =======
Net income available to common stockholders $ 3,861 $ 2,772
============ =======
Basic earnings per share (note 9) $ 0.61 $ 0.40
============ =======
Diluted earnings per share (note 9) $ 0.60 $ 0.40
============ =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
------------ --------
(Unaudited)
<S> <C> <C>
Net income $ 4,488 $2,772
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities available-for-sale
arising during period (1,898) 316
------------- ------
Total comprehensive income $ 2,590 $3,088
============= ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
2000 1999
-------------------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,488 $ 2,772
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization of property and equipment,
mortgage servicing rights and prepaid expenses and other assets 2,305 2,437
Net premium amortization 248 140
Provision for loan losses 2,400 2,331
Amortization of goodwill 753 753
Originations and purchases of mortgage loans held for sale -- (2,381)
Stock dividends from the FHLB (920) (676)
Gain on sale of mortgage servicing rights (2,172) --
Decrease (increase) in:
Accrued interest receivable (2,317) 332
Other, net 5,671 2,159
--------------- ----------
Net cash provided by operating activities 10,456 7,867
--------------- ----------
Cash flows from investing activities:
Net increase in federal funds sold (9,200) (18,000)
Purchases of mortgage-backed securities held-to-maturity -- (3,080)
Purchase of U.S. Treasury securities (692) --
Principal repayments on mortgage-backed securities held-to-maturity 7,604 95,269
Principal repayments on mortgage-backed securities
available-for-sale 874 11,219
Purchases of loans receivable (225,226) (143,690)
Net decrease in loans receivable 54,847 74,556
Net purchases of property and equipment (240) (772)
Purchases of FHLB stock (7,603) (10)
Proceeds from the sale of mortgage servicing rights 1,127 --
--------------- ----------
Net cash provided (used) by investing activities (178,509) 15,492
--------------- ----------
</TABLE>
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits $ 12,233 $ (39,776)
Advances from the FHLB 2,655,303 1,602,772
Principal payments on advances from the FHLB (2,511,653) (1,572,916)
Securities sold under agreements to repurchase and federal funds
purchased 6,400 37,783
Purchases of securities sold under agreements to repurchase and
federal funds purchased (6,400) (37,783)
Net increase in advances from borrowers for taxes and insurance 1,857 2,206
Exercise of stock options for purchase of common stock, net 229 18
Purchase of Treasury Stock -- (10,659)
Repurchase of Senior Notes -- (2,100)
Dividends paid (1,135) (556)
------------- ------------
Net cash provided (used) by financing activities 156,834 (21,011)
------------- ------------
Net increase (decrease) in cash and cash equivalents (11,219) 2,348
Cash and cash equivalents at beginning of period 48,098 45,453
------------- ------------
Cash and cash equivalents at end of period $ 36,879 $ 47,801
============= ============
Supplemental schedule of cash flows-interest paid $ 34,003 $ 31,463
============= ============
Supplemental schedule of noncash investing and financing activities:
Foreclosures of loans receivable $ 814 $ 528
============= ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(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 period ended March 31, 2000 are not necessarily indicative of the results
that may be expected for the entire fiscal year or any other interim period.
On August 27, 1998, December 21, 1998 and February 25, 1999, the Board of
Directors authorized three separate repurchase plans for up to 500,000 shares
each of the outstanding shares of common stock through an open-market repurchase
program and privately negotiated repurchases, if any. As of March 31, 2000,
1,283,679 shares had been repurchased in the open market at an average
repurchase price of $15.94 per share for a total cost of $20.5 million. On
April 27, 2000, the Board of Directors authorized the fourth such repurchase
plan for up to an additional 500,000 shares of the outstanding shares of common
stock.
(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 subsidiaries, Coastal Banc ssb and
its subsidiary, CoastalBanc Financial Corp. (collectively, the "Bank"), and
Coastal Banc Capital Corp. (collectively with Coastal Bancorp, Inc. and the
Bank, "Coastal"). All significant intercompany balances and transactions have
been eliminated in consolidation.
<PAGE>
(3) MORTGAGE-BACKED SECURITIES
Mortgage-backed securities at March 31, 2000 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------------------------------------
<S> <C> <C> <C> <C>
Held-to-maturity:
REMICS - Agency $ 654,967 $ 1,429 $ (26,355) $ 630,041
REMICS - Non-agency 177,490 -- (10,567) 166,923
FNMA certificates 54,411 3 (2,561) 51,853
GNMA certificates 15,456 -- (245) 15,211
Non-agency securities 7,233 6 (30) 7,209
----------- ------- ---------- ---------
$ 909,557 $ 1,438 $ (39,758) $ 871,237
=========== ======= ========== =========
Available-for-sale:
REMICS - Agency $ 77,345 $ -- $ (5,120) $ 72,225
REMICS - Non-agency 268 -- (3) 265
GNMA certificates 24,015 -- (641) 23,374
----------- ------- ---------- ---------
$ 101,628 $ -- $ (5,764) $ 95,864
=========== ======= ========== =========
</TABLE>
Mortgage-backed securities at December 31, 1999 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------------------------------
<S> <C> <C> <C> <C>
Held-to-maturity:
REMICS - Agency $ 657,305 $ 2,560 $ (13,224) $ 646,641
REMICS - Non-agency 180,163 41 (4,094) 176,110
FNMA certificates 56,068 9 (2,306) 53,771
GNMA certificates 16,129 -- (89) 16,040
Non-agency securities 7,547 -- (175) 7,372
----------- ------- ---------- ---------
$ 917,212 $ 2,610 $ (19,888) $ 899,934
=========== ======= ========== =========
Available-for-sale:
REMICS - Agency $ 77,343 $ -- $ (2,400) $ 74,943
REMICS - Non-agency 372 -- (4) 368
GNMA certificates 24,792 -- (438) 24,354
----------- ------- ---------- ---------
$ 102,507 $ -- $ (2,842) $ 99,665
=========== ======= ========== =========
</TABLE>
<PAGE>
(4) LOANS RECEIVABLE
Loans receivable at March 31, 2000 and December 31, 1999 were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
---------------- -----------------
<S> <C> <C>
Real estate mortgage loans:
First-lien mortgage, primarily residential $ 1,026,271 $ 836,005
Commercial 315,729 314,292
Multifamily 171,040 163,059
Residential construction 134,622 136,675
Acquisition and development 95,943 103,357
Commercial construction 78,411 65,934
Commercial loans, secured by residential mortgage
loans held for sale 45,038 60,372
Commercial, financial and industrial 93,878 100,195
Loans secured by savings deposits 13,598 13,094
Consumer and other loans 60,476 63,383
---------------- -----------
2,035,006 1,856,366
Loans in process (112,216) (108,561)
Allowance for loan losses (12,894) (10,493)
Unearned interest and loan fees (3,482) (2,947)
(Discount) premium to record purchased loans, net (4,393) 716
---------------- -----------
$ 1,902,021 $1,735,081
================ ===========
Weighted average yield 8.54% 8.67%
================ ===========
</TABLE>
At March 31, 2000, Coastal had outstanding commitments to originate or
purchase $109.5 million of real estate mortgage and other loans and had
commitments under lines of credit to originate primary construction and other
loans of approximately $144.1 million. In addition, at March 31, 2000, Coastal
had $7.4 million of outstanding letters of credit. Management anticipates the
funding of these commitments through normal operations.
At March 31, 2000 and December 31, 1999, the carrying value of loans that
were considered to be impaired totaled approximately $3.6 million and $2.0
million, respectively and the related allowance for loan losses on those
impaired loans totaled $1.1 million and $778,000 at March 31, 2000 and December
31, 1999, respectively. The average recorded investment in impaired loans
during the three months ended March 31, 2000 and 1999 was $2.7 million and $9.4
million, respectively.
<PAGE>
An analysis of activity in the allowance for loan losses for the three
months ended March 31, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
Balance, beginning of period $10,493 $11,358
Provision for loan losses 2,400 2,331
Charge-offs (283) (553)
Recoveries 284 21
-------- --------
Balance, end of period $12,894 $13,157
======== ========
</TABLE>
On August 11, 1998, Coastal approved the purchase of a $10.0 million
participation in a warehouse loan aggregating $25.0 million to MCA Financial
Corp., and certain of its affiliates, of Southfield, Michigan (collectively
"MCA"). The lead lender ("Lead Lender") in this facility is a major commercial
bank and the loan was secured by subprime residential loans. In late January
1999, due to a lack of liquidity, MCA ceased operations and shortly thereafter
was seized by the Michigan Bureau of Financial Institutions. A conservator was
appointed to take control of MCA's books and records, marshal that company's
assets and continue its loan servicing operations. A voluntary petition under
Chapter 11 of the U.S. Bankruptcy Code was filed in the U.S. Bankruptcy Court
for the Eastern District of Michigan for MCA on or about February 10, 1999, by
the conservator, who was appointed the "debtor-in-possession," to allow the
conservator time to develop a plan of reorganization while protecting the assets
of MCA.
Effective December 31, 1998, Coastal placed this loan on nonaccrual and had
allocated $1.5 million of the general allowance to this loan. During 1999,
based on updated information received, management made the decision to provide
for and charge-off the remaining balance of the loan. Throughout 1999, Coastal
worked with the Lead Lender and the bankruptcy trustee to determine the value of
and sell the underlying collateral. As of December 31, 1999, Coastal had
received only $1.1 million in proceeds from the collateral on the MCA loan. In
addition, on January 12, 2000, Coastal filed a lawsuit against the Lead Lender
in the participation seeking to recover losses incurred as a result of actions
or omissions of the Lead Lender related to the loan to MCA. Due to the
uncertainty of the value of the remaining collateral, its marketability and the
timing of recovery, if any, from the lawsuit, Coastal charged-off the remaining
$8.9 million balance of this loan in 1999. Coastal will continue to work with
the Lead Lender and the bankruptcy trustee to recover any funds, if possible,
from the collateral or MCA. During the three months ended March 31, 2000,
Coastal received $180,000 in proceeds from the MCA loan which was recorded as a
recovery in the allowance for loan losses during the period.
Effective March 31, 2000, Coastal sold its mortgage servicing rights
portfolio and recorded a nonrecurring gain of $2.2 million. Pursuant to a
purchase and sale agreement, Coastal sold its rights to service approximately
$391.9 million of mortgage loans for third party investors. Coastal is
subservicing the mortgage loans until the transfer to the purchaser which is
expected to occur in May 2000. Coastal will continue to service loans in its
own loans receivable portfolio.
<PAGE>
(5) DEPOSITS
Deposits, their stated rates and the related weighted average interest
rates, at March 31, 2000 and December 31, 1999, are summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Stated Rate March 31, 2000 December 31, 1999
-------------- -------------- -------------------
<S> <C> <C> <C>
Noninterest-bearing checking 0.00% $ 100,772 $ 97,146
Interest-bearing checking 0.75 - 1.75 66,577 65,229
Savings accounts 1.49 - 2.75 47,498 46,011
Money market demand accounts 0.00 - 5.84 333,855 331,082
------------ -----------
548,702 539,468
------------ -----------
Certificate accounts 2.00 - 2.99 245 461
3.00 - 3.99 8,540 23,288
4.00 - 4.99 308,339 446,746
5.00 - 5.99 580,046 543,980
6.00 - 6.99 188,736 62,363
7.00 - 7.99 1,515 7,580
8.00 - 8.99 104 103
9.00 - 9.99 99 99
over 10.00 7 12
------------ -----------
1,087,631 1,084,632
------------ -----------
Premium on purchased deposits 156 189
------------ -----------
$ 1,636,489 $1,624,289
============ ===========
Weighted average interest rate 4.13% 3.96%
=========== ===========
</TABLE>
The scheduled maturities of certificate accounts outstanding at March 31,
2000 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
March 31, 2000
---------------
<S> <C>
0 to 12 months $ 963,230
13 to 24 months 91,869
25 to 36 months 17,548
37 to 48 months 8,927
49 to 60 months 5,719
Over 60 months 338
---------------
$ 1,087,631
===============
</TABLE>
<PAGE>
(6) ADVANCES FROM THE FHLB
The weighted average interest rates on advances from the FHLB at March 31,
2000 and December 31, 1999 were 6.04% and 5.72%, respectively. The scheduled
maturities and related weighted average interest rates on advances from the FHLB
at March 31, 2000 are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Weighted Average
Due during the year ending December 31, Interest Rate Amount
- --------------------------------------- ----------------- -----------
<S> <C> <C>
2000 5.98% $ 887,595
2001 6.22 38,694
2002 6.15 279,245
2003 6.97 5,583
2004 5.75 5,222
2005 5.57 129
2006 6.85 3,123
2007 6.66 1,078
2008 5.51 1,774
2009 8.14 4,097
2010 5.66 187
2011 6.62 1,347
2012 5.68 217
2013 5.75 7,731
2014 5.43 2,956
2018 5.05 1,603
----------------- ----------
6.04% $1,240,581
================= ==========
</TABLE>
Advances from the FHLB are secured by certain first-lien mortgage and
multifamily 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. During
1999, Coastal, after receipt of unsolicited offers, repurchased $3.1 million of
the Senior Notes outstanding at par.
<PAGE>
(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 exposure to fluctuations in interest
rates. These financial instruments include interest rate swap agreements and
interest rate cap agreements.
Coastal utilizes interest rate swap and interest rate cap agreements to
reduce exposure to floating interest rates by altering the interest rate
sensitivity of a portion of its variable-rate assets and borrowings. At March
31, 2000, Coastal had interest rate swap and cap agreements having notional
principal amounts totaling $42.0 million and $163.2 million, respectively.
The terms of the interest rate swap agreements outstanding at March 31,
2000 and December 31, 1999 are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Fair Value at
Floating Rate End of
Notional LIBOR Fixed at Period
Maturity Amount Index Rate End of Period (gain (loss))
- --------------------- --------- ----------- ------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
At March 31, 2000:
2000 $ 4,800 Three-month 6.170% 6.191% $ 7
2000 2,205 Three-month 6.000 6.280 11
2003 17,729 One-month 5.345 5.913 243
2004 3,821 One-month 5.635 6.004 178
2005 13,440 Three-month 6.500 6.101 62
--------- ----------
$ 41,995 $ 501
========= ==========
At December 31, 1999:
2000 $ 4,800 Three-month 6.170% 6.140% $ (70)
2000 2,240 Three-month 6.000 6.184 10
2003 19,290 One-month 5.345 6.476 248
2004 3,842 One-month 5.635 6.463 160
2005 13,440 Three-month 6.500 6.110 215
--------- ----------
$ 43,612 $ 563
========= ==========
</TABLE>
The interest rate swap agreements provide for Coastal to make fixed
interest payments and receive payments based on a floating LIBOR index, as
defined in each agreement. The weighted average interest rate of payments
received on all of the interest rate swap agreements was approximately 6.09% and
the weighted average interest payment rate on all of the interest rate swap
agreements was approximately 5.92% for the three months ended March 31, 2000.
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 on other borrowed money" in the accompanying
consolidated statements of income. The net reduction in interest expense related
to these agreements was $19,000 for the three months ended March 31, 2000 and
the net interest expense related to these agreements was approximately $134,000
for the three months ended March 31, 1999. Coastal had pledged approximately
$954,000 of mortgage-backed securities to secure interest rate swap agreements
at March 31, 2000.
Coastal has interest rate cap agreements with third parties. The
agreements provide for the third parties to make payments to Coastal whenever a
defined floating rate exceeds rates ranging from 7.0% to 9.5%, 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 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 $83,000 and $90,000 at March 31, 2000 and December 31, 1999,
respectively, with the estimated fair value of the agreements being $474,000 and
$750,000 at March 31, 2000 and December 31, 1999, respectively. The interest
rate cap agreements are used to alter the interest rate sensitivity of a portion
of Coastal's mortgage-backed securities and loans receivable. 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 income. The net decrease in interest income related to the interest rate cap
agreements was approximately $6,000 for the three months ended March 31, 2000
and 1999, respectively. No payments were made to Coastal under the interest
rate cap agreements during the three months ended March 31, 2000 or 1999.
Interest rate cap agreements outstanding at March 31, 2000 expire as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Year of Strike Rate Notional
Expiration Range Amount
- ---------- -------------- ---------
<S> <C> <C>
2000 8.50 - 9.50% $ 11,620
2001 7.00 - 9.00 33,968
2002 8.75 - 9.00 18,625
2003 8.00 - 8.50 99,000
---------
$ 163,213
=========
</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 portfolio to expected market level changes in an instantaneous shock of plus
and minus 200 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 attempts to control this risk through credit
monitoring procedures. The notional principal amount does not represent
Coastal's exposure to credit loss.
<PAGE>
(9) EARNINGS PER SHARE
The following summarizes information related to the computation of basic
and diluted earnings per share ("EPS") for the three- month periods ended March
31, 2000 and 1999 (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
<S> <C> <C>
2000 1999
---------- ----------
Net income $ 4,488 $ 2,772
Preferred stock dividends 627 --
---------- ----------
Net income available to common stockholders $ 3,861 $ 2,772
========== ==========
Weighted average number of common shares
outstanding used in basic EPS calculation 6,345,075 6,856,505
Add assumed exercise of outstanding stock
options as adjusted for dilutive securities 130,726 155,166
---------- ----------
Weighted average number of common shares
outstanding used in diluted EPS calculation 6,475,801 7,011,671
========== ==========
Basic EPS $ 0.61 $ 0.40
========== ==========
Diluted EPS $ 0.60 $ 0.40
========== ==========
</TABLE>
The weighted average number of common shares outstanding has been reduced
by the treasury stock held by Coastal. As of March 31, 2000 and 1999, Coastal
had 1,283,679 and 1,160,679 common shares in treasury, respectfully.
(10) COASTAL BANC ssb PREFERRED STOCK
On October 21, 1993, the Bank issued 1,150,000 shares of 9.0% Noncumulative
Preferred Stock, no par value, Series A, at a price of $25 per share to the
public. Dividends on the Preferred Stock are payable quarterly at the annual
rate of $2.25 per share, when, as and if declared by the Board of Directors of
the Bank. At any time on or after December 15, 1998, the Preferred Stock may be
redeemed in whole or in part only at the Bank's option at $25 per share plus
unpaid dividends (whether or not earned or declared) for the then current
dividend period to the date fixed for redemption.
(11) 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%.
<PAGE>
At March 31, 2000, the Bank's regulatory capital in relation to its
existing regulatory capital requirements for capital adequacy purposes was as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Minimum For Capital Well-Capitalized
Actual Adequacy Purposes Requirements
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Requirement Amount Ratio Amount Ratio Amount Ratio
- -------------------- -----------------------------------------------------------------------
Tier 1 (core) $ 172,258 5.77% $119,322 4.00% $149,153 5.00%
Tier 1 risk-based 172,258 9.51 72,442 4.00 108,664 6.00
Total risk-based 185,152 10.22 144,885 8.00 181,106 10.00
</TABLE>
As of March 31, 2000, the most recent notification from the Federal Deposit
Insurance Corporation ("FDIC") categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized, the Bank must maintain minimum Tier 1 (core), Tier 1
risk-based and total risk-based ratios as set forth in the table above. There
are no conditions or events since that notification that management believes
have changed the institution's category.
(12) RECENT ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") Statement No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133, an Amendment of FASB Statement No.
133" ("Statement 137") was issued in June 1999. Statement 137 defers the
effective date of FASB Statement 133, "Accounting for Derivative Instruments and
Hedging Activities" ("Statement 133") for one year. Statement 133, as amended,
is now effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000. Statement 133 generally requires that changes in fair value of a
derivative be recognized currently in earnings unless specific hedge accounting
criteria are met. Upon implementation of Statement 133, hedging relationships
may be redesignated and securities held-to-maturity may be transferred to
available-for-sale or trading. Coastal is evaluating the impact, if any,
Statement 133 may have on its future consolidated financial statements.
(13) COASTAL BANCORP, INC. PREFERRED STOCK
On May 11, 1999, Coastal Bancorp, Inc. ("Bancorp") issued 1,100,000 shares
of 9.12% Series A Cumulative Preferred Stock, no par value, at a price of $25
per share to the public ("Bancorp Preferred Stock"). Dividends on the Bancorp
Preferred Stock are payable quarterly at the annual rate of $2.28 per share.
The preferred stock is callable on May 15, 2003 at Bancorp's option. The $26.0
million net proceeds has been used for repurchases in the open market of
Bancorp's outstanding common stock and of Bancorp's outstanding 10% Senior Notes
with the remaining being invested on a short-term basis. Pursuant to Coastal's
tax benefit agreement with the FDIC, Coastal receives a tax benefit for
dividends paid on the Bancorp Preferred Stock.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
-------------------------------------------------------------------
Financial Condition
- --------------------
Total assets increased 5.5% or $162.2 million from December 31, 1999 to
March 31, 2000. The net increase resulted primarily from an increase of $166.9
million in loans receivable, in addition to increases of $9.2 million and $8.5
million in federal funds sold and stock in the FHLB, respectively. These
increases were only slightly offset by decreases of $11.2 million, $7.7 million
and $3.8 million in cash and cash equivalents, mortgage-backed securities
held-to-maturity and mortgage-backed securities available-for-sale,
respectively. The increase in loans receivable was primarily due to a bulk
residential mortgage loan purchase of $225.2 million (net of purchase discount)
offset by principal payments received and a decrease of $15.3 million in
commercial loans secured by residential mortgage loans held for sale, because of
the decreased emphasis on this type of lending. The decrease in
mortgaged-backed securities was due to principal payments received.
Deposits increased $12.2 million or 0.8% from December 31, 1999 to March
31, 2000 and advances from the FHLB increased 13.1% or $143.7 million.
Stockholders' equity increased 1.3% or $1.7 million from December 31, 1999 to
March 31, 2000 as a result of net income, offset by a $1.9 million increase in
accumulated other comprehensive loss and dividends declared.
Results of Operations for the Three Months Ended March 31, 2000 and 1999
- --------------------------------------------------------------------------------
General
- -------
For the three months ended March 31, 2000, net income was $4.5 million
compared to $2.8 million for the three months ended March 31, 1999. The
increase was due to a $1.7 million increase in net interest income, a $2.1
million increase in noninterest income, offset by a $1.4 million increase in
noninterest expense and a $583,000 increase in the provision for Federal income
taxes. The increase in noninterest income was primarily due to a $2.2 million
nonrecurring gain recorded on the sale of Coastal's mortgage servicing rights in
2000.
Interest Income
- ----------------
Interest income for the three months ended March 31, 2000 increased $5.4
million or 10.9% from the three months ended March 31, 1999. The increase is
due to an increase in average interest-earning assets of $110.8 million and an
increase in the average yield of 0.47% to 7.58% for the three months ended March
31, 2000. Interest income on loans receivable increased $7.5 million due to a
$296.0 million increase in the average balance and an increase in the average
yield from 8.15% for the three months ended March 31, 1999 to 8.47% for the same
period in 2000. Interest income on mortgage-backed securities decreased $2.3
million due to a $190.8 million decrease in the average balance, offset somewhat
by an increase in the average yield from 5.89% for the three months ended March
31, 1999 to 6.08% for the same period in 2000.
In addition, interest income on FHLB stock, federal funds sold and other
interest-earning assets increased $203,000. Total interest-earning assets for
the three months ended March 31, 2000 averaged $2.9 billion as compared to $2.8
billion for the three months ended March 31, 1999.
Interest Expense
- -----------------
Interest expense on interest-bearing liabilities was $34.8 million for the
three months ended March 31, 2000, as compared to $31.1 million for the same
period in 1999. The increase in interest expense was due to a increase in the
average rate paid on interest-bearing liabilities from 4.81% for the three
months ended March 31, 1999 to 5.18% for the three months ended March 31, 2000
and a $73.5 million increase in the average balance of interest-bearing
liabilities. The 0.37% increase in the average rate paid on interest-bearing
liabilities was due primarily to higher wholesale funding costs. The increase
in average interest-bearing liabilities consisted primarily of a $240.2 million
increase in advances from the FHLB, offset somewhat by a $112.5 million decrease
in federal funds purchased and securities sold under agreements to repurchase, a
$52.4 million decrease in interest-bearing deposits and a $1.7 million decrease
in senior notes payable due to repurchases. The increase in the average balance
of advances from the FHLB was primarily due to the additional borrowing in the
first quarter of 2000 to finance the $225.2 million loan purchase mentioned
earlier.
Net Interest Income
- ---------------------
Net interest income was $20.1 million for the three months ended March 31,
2000 and $18.4 million for the same period in 1999. Net interest margin
("Margin") was 2.78% for the three months ended March 31, 2000 compared to 2.64%
for the three months ended March 31, 1999. Margin represents net interest
income as a percentage of average interest-earning assets. Net interest spread
("Spread"), defined to exclude noninterest-bearing deposits, increased from
2.30% for the three months ended March 31, 1999 to 2.40% for the three months
ended March 31, 2000. Management also calculates an alternative Spread which
includes noninterest-bearing deposits. Under this calculation, the alternative
Spreads for the three months ended March 31, 2000 and 1999 were 2.68% and 2.55%,
respectively. Margin and Spread are affected by the changes in the amount and
composition of interest-earning assets and interest-bearing liabilities. The
overall increase in Margin and Spread was primarily due to the 0.47% increase in
the average yield on interest-earning assets, primarily on loans receivable,
offset by a 0.37% increase in the average rate paid on interest-bearing
liabilities. Average net interest-earning assets increased $37.2 million from
the three months ended March 31, 1999 to the three months ended March 31, 2000.
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 LIBOR and
local and regional prime rates and through the efforts to replace LIBOR based
borrowings with lower cost retail deposits. In addition, management intends to
gradually increase commercial, financial and industrial loans and
noninterest-bearing deposits as a percentage of total assets and deposits
respectively.
Provision for Loan Losses
- ----------------------------
The provision for loan losses was $2.4 million for the three months ended
March 31, 2000 compared to $2.3 million for the three months ended March 31,
1999. For the remainder of 2000, Coastal's planned quarterly provision is
$900,000, although no assurance can be given that provisions in excess of this
amount will not be required based on Coastal's then current policy, the
composition of the loans receivable portfolio, the existing nonperforming
assets, delinquency trends and current economic conditions at the time. The
allowance for loan losses as a percentage of total loans was 0.68% at March 31,
2000 and 0.82% at March 31, 1999. Management believes that the present allowance
for loan losses is adequate considering the changing composition of the loans
receivable portfolio, historical loss experience, delinquency trends and current
economic conditions. Management will continue to review its allowance for loan
losses as Coastal's loan portfolio diversifies to determine if changes or
additions are necessary.
Noninterest Income
- -------------------
For the three months ended March 31, 2000, noninterest income increased
$2.1 million to $4.5 million, compared to $2.4 million for the three months
ended March 31, 1999. As mentioned previously, the increase in noninterest
income was primarily due to the $2.2 million gain recorded on the sale of
Coastal's mortgage servicing rights during the three months ended March 31,
2000. Due to the declining servicing portfolio (with an average loan life of
approximately seven years), management decided to take the opportunity to sell
Coastal's entire servicing rights portfolio based on the current market
conditions for loan servicing rights and the expected declining income benefits
of that servicing portfolio on an ongoing basis. Pursuant to a purchase and
sale agreement, Coastal sold its rights to service approximately $391.9 million
of mortgage loans for third party investors, primarily the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation. As part of
this business decision to sell the mortgage servicing rights, management also
decided to purchase a $230.6 million ($225.2 million net of the purchase
discount) package of single family mortgage loans. This package will not only
utilize existing servicing staff once the loan servicing is transferred to
Coastal, but will also provide expected net interest income of approximately
$750,000 per quarter (or $490,000 net of tax) for the next four quarters. This
positive earnings impact offsets the expected ongoing negative impact on
earnings of the March 2000 servicing sale (due to the loss of the related loan
servicing income). Once the transfer of the servicing to the purchaser has been
completed, management expects the sale of the servicing to have an ongoing
slightly negative impact on earnings, net of tax of approximately $150,000 per
quarter for the next four quarters. In addition to the nonrecurring gain,
comparing the first quarter 1999 to the first quarter in 2000, loan fees and
service charges on deposit accounts increased $243,000, loan servicing income
increased slightly by $67,000 and other noninterest income decreased $396,000.
Noninterest Expense
- --------------------
For the three months ended March 31, 2000, noninterest expense increased
$1.4 million from the three months ended March 31, 1999. The increase was due
to a $1.3 million increase in other noninterest expenses primarily because of
the reduction of certain accrued liabilities totaling $1.1 million during the
first quarter of 1999 and a $354,000 increase in compensation, payroll taxes and
other benefits, offset by smaller decreases of $154,000, $40,000 and $27,000 in
insurance premiums expense, including deposit insurance premiums, data
processing expense and real estate owned expense, respectively.
Provision for Federal Income Taxes
- --------------------------------------
The provision for Federal income taxes for the three months ended March 31,
2000 was $2.2 million compared to $1.6 million for the three months ended March
31, 1999. The increase was due to the increased income before provision for
federal income taxes and minority interest in 2000, somewhat offset by the tax
benefit received from the dividends declared on the 9.12% Series A Cumulative
Preferred Stock issued in May 1999.
Liquidity and Capital Resources
- ----------------------------------
Coastal's primary sources of funds consist of deposits bearing market rates
of interest, advances from the FHLB, securities sold under agreements to
repurchase, 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, in addition
to purchasing treasury stock. At March 31, 2000, Coastal had binding commitments
to originate or purchase loans totaling approximately $109.5 million and had
$112.2 million of undisbursed loans in process. Scheduled maturities of
certificates of deposit during the 12 months following March 31, 2000 totaled
$963.2 million at March 31, 2000. Management believes that Coastal has adequate
resources to fund all of its commitments. In addition, Coastal has historically
experienced a retention rate of maturing certificates of deposit of $5,000 or
greater of approximately 80%.
As of March 31, 2000, Coastal operated 50 retail banking offices in Texas
cities, including Houston, Austin, Corpus Christi, the Rio Grande Valley and
small cities in the southeast 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.
<PAGE>
The Year 2000
- ---------------
Coastal has not experienced any significant disruptions to our financial or
operating activities caused by failure of our computerized systems resulting
from Year 2000 issues. Management does not expect Year 2000 issues to have a
material adverse effect on Coastal's operations or financial results in 2000.
Forward-Looking Information
- ----------------------------
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this Quarterly Report on Form 10-Q which
are not historical facts contain forward looking information with respect to
plans, projections or future performance of Coastal, the occurrence of which
involve certain risks and uncertainties detailed in Coastal's filings with the
Securities and Exchange Commission ("SEC").
The Management's Discussion and Analysis of Financial Condition and Results
of Operations set forth in the Form 10-Q should be read in conjunction with the
information contained in the Consolidated Financial Statements and the Notes
thereto. Such discussion 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; risks involved in
Coastal's ability to quickly and efficiently integrate the operations of
acquired entities with those of Coastal; 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
real estate, commercial business and warehouse and loans); and changes in
business strategies and other factors as discussed in Coastal's Annual Report on
Form 10-K for the year ended December 31, 1999, as filed with the SEC on March
28, 2000.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------------
There have been no material changes in Coastal's interest rate risk
position since December 31, 1999. Coastal's principal market risk exposure is to
interest rates. See note 8 of the Notes to Consolidated Financial Statements.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
------------------
In January 2000, Coastal, through its subsidiary, the Bank, filed a lawsuit
against the lead lender on a $25.0 million loan in which the Bank purchased a
40% participation interest. Such lawsuit is described more fully in Coastal's
Current Report on Form 8-K filed on January 12, 2000.
In addition to the above, 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 to the financial condition of Coastal.
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
-----------------------------------------------------------
Not applicable.
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
Exhibit 99 - Forward-Looking Information
(b) Form 8K filed on January 12, 2000 concerning a lawsuit filed by Coastal
against the lead lender on a $25.0 million loan in which the Bank purchased a
40% participation interest.
(c) Form 8K filed on February 14, 2000 concerning the declaration by Coastal
of a quarterly cash dividend of $0.08 per share on its common stock and the
declaration of dividends on Coastal's 9.12% Cumulative Preferred Stock and on
the 9.0% Noncumulative Preferred Stock of the Bank.
<PAGE>
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: 5/15/00 By /s/ Manuel J. Mehos
------- --------------------
Manuel J. Mehos
Chairman of the Board
Chief Executive Officer
Dated: 5/15/00 By /s/ Catherine N. Wylie
------- --------------------------
Catherine N. Wylie
Chief Financial Officer
<PAGE>
Exhibit 27
Financial Data Schedule
[ARTICLE] 9
[LEGEND]
This schedule contains summary financial information extracted from the
consolidated statement of financial condition, the consolidated statement of
income and notes thereto found on pages 1 through 15 of the Company's Form
10-Q for the year-to-date March 31, 2000 and is qualified in its
entirety by reference to such financial statements
[/LEGEND]
<TABLE>
<CAPTION>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-2000
[PERIOD-START] JAN-01-2000
[PERIOD-END] MAR-31-2000
[CASH] 36,879
[INT-BEARING-DEPOSITS] 0
[FED-FUNDS-SOLD] 9,200
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 95,864
[INVESTMENTS-CARRYING] 910,549
[INVESTMENTS-MARKET] 872,229
[LOANS] 1,902,021
[ALLOWANCE] 12,894
[TOTAL-ASSETS] 3,110,161
[DEPOSITS] 1,636,489
[SHORT-TERM] 919,321
[LIABILITIES-OTHER] 51,051
[LONG-TERM] 368,160
[PREFERRED-MANDATORY] 0
[PREFERRED] 27,500
[COMMON] 76
[OTHER-SE] 107,564
[TOTAL-LIABILITIES-AND-EQUITY] 3,110,161
[INTEREST-LOAN] 38,506
[INTEREST-INVEST] 15,433
[INTEREST-OTHER] 975
[INTEREST-TOTAL] 54,914
[INTEREST-DEPOSIT] 16,533
[INTEREST-EXPENSE] 34,802
[INTEREST-INCOME-NET] 20,112
[LOAN-LOSSES] 2,400
[SECURITIES-GAINS] 0
[EXPENSE-OTHER] 15,541
[INCOME-PRETAX] 6,697
[INCOME-PRE-EXTRAORDINARY] 4,488
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 4,488
[EPS-BASIC] 0.61
[EPS-DILUTED] 0.60
[YIELD-ACTUAL] 0
[LOANS-NON] 0
[LOANS-PAST] 0
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 0
[ALLOWANCE-OPEN] 10,493
[CHARGE-OFFS] 283
[RECOVERIES] 284
[ALLOWANCE-CLOSE] 12,894
[ALLOWANCE-DOMESTIC] 12,894
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 0
</TABLE>
<PAGE>
Exhibit 99
Forward-Looking Information
<PAGE>
EXHIBIT 99
Forward-Looking Information
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this Quarterly Report on Form 10-Q which
are not historical facts contain forward looking information with respect to
plans, projections or future performance of Coastal, the occurrence of which
involve certain risks and uncertainties detailed in Coastal's filings with the
Securities and Exchange Commission ("SEC").
The Management's Discussion and Analysis of Financial Condition and Results
of Operations set forth in the Form 10-Q should be read in conjunction with the
information contained in the Consolidated Financial Statements and the Notes
thereto. Such discussion 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; risks involved in
Coastal's ability to quickly and efficiently integrate the operations of
acquired entities with those of Coastal; 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
real estate, commercial business and warehouse and loans); and changes in
business strategies and other factors as discussed in Coastal's Annual Report on
Form 10-K for the year ended December 31, 1999, as filed with the SEC on March
28, 2000.
