Crescent Financial Corporation Announces Results For Q2 2010

CARY, N.C., July 28, 2010 (GLOBE NEWSWIRE) -- Crescent Financial Corporation (Nasdaq:CRFN), (the "Company") parent company of Crescent State Bank headquartered in Cary, North Carolina, announced an unaudited net loss for the three months ended June 30, 2010, before adjusting for the effective dividend on preferred stock, of ($4,010,000) compared to net income of $574,000 for the prior year period. After adjusting for $421,000 and $422,000 in dividends and accretion on preferred stock for the two respective periods, net loss attributable to common shareholders for the current period was ($4,431,000) or ($0.46) per diluted share compared with net income attributable to common shareholders of $152,000 or $0.02 per diluted share for the quarter ended June 30, 2009. Despite improvements in net interest income, expansion of net interest margin and higher non-interest revenue, earnings in the current period were impacted by higher loan loss provisions and expenses related to the loan collection and foreclosure process. 

Net Interest Income

Net interest income for the three-month period ended June 30, 2010 increased by $269,000 or 4% to $7.5 million compared with $7.3 million for the period ended June 30, 2009. The yield on average earning assets increased by 8 basis points from 5.74% to 5.82%. In the stable interest rate environment we have experienced since the beginning of 2009, the cost of interest bearing deposits has declined from 3.17% in the prior year period to 2.57% for the quarter ended June 30, 2010. The cost of borrowings has increased from 2.91% to 3.49% as we have taken advantage of the low interest rate environment to extend our borrowings and lock-in favorable long-term pricing to improve our interest rate risk profile. The tax equivalent net interest margin improved to 3.33% for the quarter ended June 30, 2010 compared to 3.00% for the prior year quarter.

On a linked quarter basis, net interest income increased by $77,000 or 1%. The increase is attributable to a slight improvement in the yield on earning assets coupled with a continued reduction in the cost of interest-bearing liabilities. The yield on earning assets increased by 4 basis points from 5.78%, the cost of interest-bearing liabilities declined by 2 basis points from 2.80% and net interest margin improved 6 basis points from 3.27%. 

Provision for Loan Losses and Asset Quality

The provision for loan losses was $8.4 million for the quarter ended June 30, 2010, increasing by $7.3 million when compared to the $1.1 million recorded for the comparative period from the prior year. The size of the provision was due to the increased level of charge-offs for the quarter. Annualized net charge-offs for the current quarter were 3.73% compared to 1.38% for the first quarter of 2010 and 0.94% for the second quarter of 2009. The allowance for loan losses as a percentage of total gross outstanding loans was 2.59% at June 30, 2010, 2.26% at March 31, 2010 and 2.31% at December 31, 2009. 

Nonperforming loans as a percentage of total loans outstanding was 1.68% at June 30, 2010 compared to 3.95% at March 31, 2010 and 2.39% at December 31, 2009. Total nonperforming assets, which include nonaccrual loans, loans past due 90 days or more and still accruing, other real estate owned and repossessed loan collateral, as a percentage of total assets at June 30, 2010 was 2.84% compared with 3.71% at March 31, 2010 and 2.40% at December 31, 2009. The loan loss reserve coverage ratio, which shows the reserve as a percentage of nonperforming loans, was 154% at June 30, 2010, 57% at March 31, 2010 and 95% at December 31, 2009.

The charge-offs recorded by the Company during the second quarter have significantly reduced the level of total nonperforming loans and assets. The level of provisioning during the second quarter has increased both the size of the loan loss reserve as a percentage of total loans and the coverage ratio to nonperforming loans. While certain asset quality ratios at the end of June are encouraging, management cautions that the results should not be interpreted as a signal that the end of the current credit cycle is eminent. The Company will continue to devote resources to managing problem credits and adequately provide for possible future loan losses.

Non-Interest Income

Non interest income increased by $338,000 to $1.1 million compared to $752,000 for the period ended June 30, 2009. During the three-month period ended June 30, 2009, the Company recognized a $219,000 impairment on a nonmarketable equity investment. Other components of the increase in noninterest income over the two comparative periods includes an increase of $78,000 in customer service fees and service charges on deposit accounts and an increase of $45,000 in mortgage loan related revenue. Customer service fees increased from $326,000 to $401,000 and service charges on deposit accounts increased from $70,000 to $73,000. The Company has implemented a correspondent bank platform for its mortgage division and we have begun originating loans in our name and selling them in the secondary market. Mortgage loan related revenue now includes both brokered origination fees as well as gains on sales of loans. 

On a linked quarter basis, non-interest income increased by $45,000. Customer service fees and service charges on deposit accounts increased by $42,000 and mortgage loan related revenue increased by $23,000.  Revenue from brokerage referrals declined by $23,000.

Non-Interest Expenses

Non-interest expenses increased by $860,000 or 14% to $7.2 million compared to $6.3 million for the prior year period. The Company experienced a $1.1 million increase in loan collection expenses compared to the three-month period ended June 30, 2009. Total loan collection expenses for the current quarter totaled $1.3 million compared to $227,000. The expenses were primarily the net result of $901,000 in valuation write-downs on existing other real estate owned, $441,000 in expenses related to the acquisition or ongoing servicing of foreclosed and repossessed loan collateral and $64,000 in net gains on the disposition of other real estate owned. The Company had increases in data processing, occupancy and personnel of $91,000, $90,000 and $32,000, respectively, related to the opening of two full-service offices in Raleigh, North Carolina in 2009 and an increase in account volumes. The increases were more than offset by a $498,000 decrease in FDIC insurance premiums. The decrease in FDIC insurance premiums is attributed to recording the $493,000 special FDIC assessment during the second quarter of 2009.

On a linked quarter basis, non-interest expenses increased by $1.0 million from $6.2 million for the three-month period ended March 31, 2010. The increase was primarily driven by loan collection expenses which increased by $1.0 million from $354,000 for the prior period. Occupancy expense increased by $37,000 and data processing increased by $7,000 while personnel and FDIC insurance premiums decreased by $80,000 and $34,000, respectively.

Six-Month Period

For the six months ended June 30, 2010, the Company reported a net loss, before adjusting for the effective dividend on preferred stock, of ($3,467,000) compared to net income of $1,185,000 for the six months ended June 30, 2009. After adjusting for $841,000 and $590,000 in dividends and accretion on preferred stock for the two respective comparative periods, net loss attributable to common shareholders for the current period was ($4,308,000) or ($0.45) compared to net income of $595,000 or $0.06 for the prior year six-month period. Net interest income increased by 3% or $499,000 to $15.0 million from $14.5 million. The decrease in interest expense on interest-bearing liabilities due to lesser volume and a reduced cost of funds more than offset the reduction in interest income from the smaller average earning asset base. The tax equivalent net interest margin for the current six-month period expanded by 27 basis points from 3.03% to 3.30%. The provision for loan losses was $10.2 million for the six-month period ended June 30, 2010 compared to $2.8 million for the prior year period. The larger provision reflects current economic conditions, credit quality and an increase in net charge-offs. Non-interest income increased by $596,000. For the six-month period ended June 30, 2009, the Company recognized a $406,000 impairment on a nonmarketable equity investment.  Other large components of the increase include a $122,000 increase in customer service fees and service charges on deposit accounts, a $37,000 increase in small, non-yield related loan modification and underwriting fees and a $25,000 increase in brokerage referral fees. Non-interest expenses increased by $1.4 million, or 12%, with over $1.3 million of the increase in the loan collection expense category. The Company converted its data processing platform during the first quarter of 2009 and incurred approximately $235,000 of one-time, non-recurring expenses. 

Balance Sheet

Crescent Financial Corporation has unaudited total assets at June 30, 2010 of $985.7 million. Total assets have declined since December 31, 2009 by approximately 5% or $47.1 million. Total gross loans have decreased by $49.9 million from $759.3 million at December 31, 2009 to $709.4 million at June 30, 2010. Approximately $24.5 million of the decline is attributed to transferring assets from the loan account to other real estate owned or repossessions and charge-offs related to those accounts. The remaining $25.4 million is comprised of payments and payoffs of approximately $47.1 million net of $21.7 million in new loans. Loan demand continues to be soft in our markets. 

Total deposits have declined by $409,000 between December 31, 2009 and June 30, 2010, but the mix of deposits has changed significantly. Time deposits have declined by $33.7 million during the first half of 2010, which includes a $22.5 million reduction in brokered deposits. Time deposits comprise 56% of total deposits at June 30, 2010 compared to 61% at December 31, 2009. Total non-time deposits grew by $33.3 million during the first half of 2010 with interest-bearing checking, savings and non-interest checking increasing by $31.4 million, $7.6 million and $483,000, respectively. The Company continues to experience great success in generating core deposits through Crescent Rewards, a high-yield checking product introduced in December 2008. Money market account balances have declined by $6.1 million, approximately half of which relates to one commercial relationship whose business activity is very seasonal in nature. 

Total borrowings have declined by $45.0 million since December 31, 2009 the majority of which represented overnight borrowings. Although overnight borrowings were available at a very low cost, liquidity being generated through declines in both the loan and investment portfolios has been used to pay down overnight borrowing resulting in a reduction in interest rate risk should short term rates begin to increase. Total stockholders' equity was $87.1 million at June 30, 2010 compared to $89.5 million at year end. The net decrease was primarily related to the net loss for the year and an increase in other comprehensive income. Total risk-based capital ratios at both the Company and Crescent State Bank remain very strong and are 13.65% and 13.52%, respectively, at June 30, 2010.

Mike Carlton, President and CEO, stated, "The second quarter was one of continued recognition of the impact of the current economic climate. The Company recorded significant charge-offs and replenished our reserve for loan losses to a level that management deems appropriate at June 30, 2010. In doing so, the earnings for the Company suffered, but several of our asset quality ratios compared favorably to those presented as of  March 31, 2010. We would caution that while the ratios are improved, they are as of one point in time and the economic climate in which we operate still holds uncertainties. Management continues to expend substantial resources on reviewing and managing both the loan and problem asset portfolios. Despite the loss recorded for the quarter, Crescent's capital ratios continue to be strong and will permit us to work through this credit cycle." 

Crescent State Bank is a state chartered bank operating fifteen banking offices in Cary (2), Apex, Clayton, Holly Springs, Southern Pines, Pinehurst, Sanford, Garner, Raleigh (3), Wilmington (2) and Knightdale, North Carolina.  Crescent Financial Corporation stock can be found on the NASDAQ Global Market trading under the symbol CRFN. Investors can access additional corporate information, product descriptions and online services through the Bank's website at www.crescentstatebank.com.

Information in this press release contains "forward-looking statements." These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates and the effects of competition. Additional factors that could cause actual results to differ materially are discussed in Crescent Financial Corporation's recent filings with the Securities Exchange Commission, including but not limited to its Annual Report on Form 10-K and its other periodic reports.  
  Crescent Financial Corporation      
  Financial Summary      
           
(Amounts in thousands except share and per share data and prior quarters' information may have been reclassified)  
INCOME STATEMENTS (unaudited)          
  For the Three Month Period Ended
  June 30, March 31, December 31, September 30, June 30,
  2010 2010 2009 2009 2009
           
INTEREST INCOME          
Loans  $ 11,496  $ 11,484  $ 11,900  $ 11,986  $ 12,026
Investment securities available for sale  1,857  1,936  2,064  2,081  2,053
Fed funds sold and other interest-earning deposits  8  5  12  1  5
Total Interest Income  13,361  13,425  13,976  14,068  14,084
           
INTEREST EXPENSE          
Deposits  4,232  4,346  4,674  4,885  5,069
Short-term borrowings  124  206  228  507  506
Long-term debt  1,467  1,412  1,399  1,265  1,241
Total Interest Expense  5,823  5,964  6,301  6,657  6,816
           
Net Interest Income  7,538  7,461  7,675  7,411  7,268
Provision for loan losses  8,389  1,801  6,740  1,958  1,132
Net interest income (loss) after          
provision for loan losses  (851)  5,660  935  5,453  6,136
           
Non-interest income          
Mortgage loan origination income  111  193  187  223  215
Service charges and fees on deposit accounts  474  432  455  424  396
Earnings on life insurance  219  217  226  225  228
Gain/loss on sale of available for sale securities  --  --  760  110  --
Loss on impairment of nonmarketable investment  --  --  (197)  --  (219)
Gain on sale of loans  149  44  75  --  --
Other   137  159  153  146  132
Total non-interest income  1,090  1,045  1,659  1,128  752
           
Non-interest expense          
 Salaries and employee benefits  3,050  3,130  2,816  3,030  3,017
 Occupancy and equipment  994  957  936  952  904
 Data processing   393  386  308  358  302
 FDIC deposit insurance premium  275  309  587  310  773
 Impairment of goodwill  --  --  30,233  --  --
 Other  2,443  1,404  1,262  1,237  1,299
Total non-interest expense  7,155  6,186  36,142  5,887  6,295
           
Income (loss) before income taxes  (6,916)  519  (33,548)  694  593
Income taxes  (2,906)  (23)  (1,501)  58  19
           
Net income (loss)  (4,010)  542  (32,047)  636  574
Effective dividend on preferred stock  421  419  604  422  422
Net income (loss) attributable common shareholders'  $ (4,431)  $ 123  $ (32,651)  $ 214  $ 152
           
NET INCOME (LOSS) PER COMMON SHARE          
Basic  $ (0.46)  $ 0.01  $ (3.41)  $ 0.02  $ 0.02
Diluted  $ (0.46)  $ 0.01  $ (3.41)  $ 0.02  $ 0.02
           
COMMON SHARE DATA          
           
Book value per common share  $ 6.62  $ 7.00  $ 6.92  $ 10.46  $ 10.24
Tangible book value per common share  $ 6.54  $ 6.92  $ 6.83  $ 7.23  $ 7.00
Ending shares outstanding  9,664,059 9,626,559 9,626,559 9,626,559 9,626,559
Weighted average common shares outstanding - basic 9,581,390 9,574,264 9,569,290 9,569,290 9,569,290
Weighted average common shares outstanding - diluted 9,581,390 9,587,748 9,569,290 9,606,186 9,599,466
           
PERFORMANCE RATIOS (annualized)          
Return on average assets -1.60% 0.21% -12.00% 0.24% 0.21%
Return on average equity -17.75% 2.36% -103.58% 2.06% 1.89%
Yield on earning assets 5.82% 5.78% 5.76% 5.80% 5.74%
Cost of interest-bearing liabilities 2.78% 2.80% 2.87% 3.03% 3.10%
Tax equivalent net interest margin 3.33% 3.27% 3.21% 3.08% 3.00%
Efficiency ratio 82.92% 72.72% 387.22% 68.94% 78.49%
Net loan charge-offs 3.73% 1.38% 1.53% 0.68% 0.94%
(Amounts in thousands except share and per share data and prior years' information may have been reclassified)
INCOME STATEMENTS (unaudited)    
  For the Six Month Period Ended
  June 30, June 30,
  2010 2009
     
INTEREST INCOME    
Loans  $ 22,980  $ 24,103
Investment securities available for sale  3,793  4,052
Fed funds sold and other interest-earning deposits  13  7
Total Interest Income  26,786  28,162
     
INTEREST EXPENSE    
Deposits  8,578  10,312
Short-term borrowings  330  969
Long-term debt  2,879  2,381
Total Interest Expense  11,787  13,662
     
Net Interest Income  14,999  14,500
Provision for loan losses  10,190  2,829
     
Net interest income after provision for loan losses  4,809  11,671
     
Non-interest income    
Mortgage loan origination income  304  512
Service charges and fees on deposit accounts  906  784
Earnings on life insurance  437  435
Loss on impairment of nonmarketable investment  --  (407)
Gain on sale of loans  193  --
Other   296  217
Total non-interest income  2,136  1,541
     
Non-interest expense    
 Salaries and employee benefits  6,180  5,988
 Occupancy and equipment  1,951  1,655
 Data processing   779  752
 FDIC deposit insurance premium  584  1,022
 Other  3,847  2,496
Total non-interest expense  13,341  11,913
     
Income (loss) before income taxes  (6,396)  1,299
Income taxes  (2,929)  114
     
Net income (loss)  (3,467)  1,185
Effective dividend on preferred stock  841  590
Net income (loss) attributable to common shareholders'  $ (4,308)  $ 595
     
NET INCOME (LOSS) PER COMMON SHARE    
Basic  $ (0.45)  $ 0.06
Diluted  $ (0.45)  $ 0.06
     
Weighted average common shares outstanding - basic 9,577,847 9,569,290
Weighted average common shares outstanding - diluted 9,577,847 9,583,903
     
PERFORMANCE RATIOS (annualized)    
Return on average assets -0.70% 0.22%
Return on average equity -7.75% 1.98%
Yield on earning assets 5.80% 5.80%
Cost of interest-bearing liabilities 2.79% 3.14%
Tax equivalent net interest margin 3.30% 3.03%
Efficiency ratio 77.86% 74.27%
Net loan charge-offs 2.55% 0.58%
(Amounts in thousands)          
CONSOLIDATED BALANCE SHEETS (unaudited)        
  June 30, March 31, December 31, September 30, June 30,
  2010 2010 2009 (a) 2009 2009
ASSETS          
Cash and due from banks  $ 10,895  $ 9,964  $ 9,285  $ 7,841  $ 10,394
Interest earning deposits with banks   2,160  884  4,617  4,436  3,207
Federal funds sold  15,930  15,785  17,825  5,545  15,285
Investment securities available for sale at fair value  186,128  188,609  193,123  198,309  193,764
Loans held for sale  1,317  138  --  --  --
Loans  709,443  744,484  759,348  771,997  775,301
Allowance for loan losses  (18,348)  (16,807)  (17,567)  (13,782)  (13,144)
Net Loans  691,095  727,677  741,781  758,215  762,157
Accrued interest receivable  4,150  4,121  4,260  4,255  4,347
Federal Home Loan Bank stock  11,777  11,777  11,777  11,777  11,777
Bank premises and equipment  11,972  12,002  11,861  11,946  12,007
Investment in life insurance  18,068  17,863  17,658  17,444  17,229
Goodwill  --  --  --  30,233  30,233
Other intangibles  760  793  826  860  893
Other assets  31,473  21,522  19,792  12,842  12,064
           
Total Assets  $ 985,725  $1,011,135  $ 1,032,805  $ 1,063,703  $ 1,073,357
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
LIABILITIES          
Deposits          
Demand  $ 61,525  $ 55,421  $ 61,042  $ 66,947  $ 67,371
Savings  65,653  61,894  58,086  59,973  58,150
Money market and NOW  191,240  182,702  165,994  148,560  136,644
Time  403,807  413,740  437,513  438,702  444,537
Total Deposits  722,225  713,757  722,635  714,182  706,702
           
Short-term borrowings  22,000  57,000  74,000  88,000  128,000
Long-term debt  149,748  145,748  142,748  133,748  113,748
Accrued expenses and other liabilities  4,657  4,158  3,902  4,258  3,680
           
Total Liabilities  898,630  920,663  943,285  940,188  952,130
STOCKHOLDERS' EQUITY          
Preferred stock  23,154  23,043  22,935  22,798  22,687
Common stock  9,664  9,627  9,627  9,627  9,627
Warrant  2,367  2,367  2,367  2,367  2,367
Additional paid-in capital  74,560  74,562  74,530  74,484  74,439
Retained earnings (deficit)  (25,662)  (21,231)  (21,354)  11,298  11,083
Accumulated other comprehensive income (loss)   3,012  2,104  1,415  2,941  1,024
           
Total Stockholders' Equity  87,095  90,472  89,520  123,515  121,227
           
Total Liabilities and Stockholders' Equity  $ 985,725  $1,011,135  $ 1,032,805  $ 1,063,703  $ 1,073,357
( a ) Derived from audited consolidated financial statements.        
           
CAPITAL RATIOS          
           
Tangible equity to tangible assets 8.77% 8.88% 8.59% 8.95% 8.65%
Tangible common equity to tangible assets 6.41% 6.60% 6.37% 6.74% 6.47%
Tier 1 leverage ratio (current quarter estimate) 9.25% 9.49% 9.03% 9.48% 9.34%
Tier 1 risk-based capital ratio (current quarter estimate) 11.44% 11.63% 11.37% 11.49% 11.43%
Total risk-based capital ratio (current quarter estimate) 13.65% 13.80% 13.53% 13.63% 13.56%
ASSET QUALITY RATIOS (in thousands)        
           
Non accrual loans  $ 11,934  $ 29,410  $ 18,134  $ 16,540  $ 13,335
Accruing loans > 90 days past due  --  --  381  --  --
Total nonperforming loans  11,934  29,410  18,515  16,540  13,335
Other real estate owned & repossessions  16,072  8,128  6,306  5,298  4,401
Total nonperforming assets  $ 28,006  $ 37,538  $ 24,821  $ 21,838  $ 17,736
Allowance for loan losses to loans 2.59% 2.26% 2.31% 1.79% 1.70%
Nonperforming loans to total loans 1.68% 3.95% 2.44% 2.14% 1.72%
Nonperforming assets to total assets 2.84% 3.71% 2.40% 2.05% 1.65%
Restructured not included in categories above  11,451  12,368  13,691  9,525  4,482
           
           
  Nonperforming Loan Analysis  
  June 30, 2010 December 31, 2009  
  Outstanding Percentage Outstanding Percentage  
  Loan  of Total Loan  of Total  
  Balance Loans Balance Loans  
Construction and A&D  $ 3,618 0.51%  $ 7,073 0.93%  
Commercial real estate 3,028 0.43% 4,655 0.61%  
Residential mortgage 4,349 0.61% 2,758 0.36%  
Home equity lines and loans 283 0.04% 1,314 0.17%  
Commercial and industrial 648 0.09% 2,706 0.36%  
Consumer 8 0.00% 9 0.00%  
Totals  $ 11,934 1.68%  $ 18,515 2.44%  
           
  Nonperforming Loans by Region  
  As of June 30, 2010  
        Nonperforming  
    % of Total   Loans to   
  Loans Loans Nonperforming Loans  
  Outstanding Outstanding Loans Outstanding  
           
           
Triangle Region  $ 418,204 58.95%  $ 5,447 1.30%  
Sandhills Region  110,072 15.52%  907 0.82%  
Wilmington Region  181,167 25.54%  5,580 3.08%  
           
Totals   $ 709,443 100.00%  $ 11,934 1.68%  
                   
AVERAGE BALANCES, INTEREST AND YIELDS/COSTS (in thousands)              
                   
  For the Three Months Ended 
  June 30, 2010 March 31, 2010 June 30, 2009
  Average   Average Average   Average Average   Average
  Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost
                   
Interest-earnings assets                  
Loan portfolio  $ 736,015  $ 11,496 6.26%  $ 752,131  $ 11,484 6.19%  $ 782,886  $ 12,026 6.16%
Investment securities   194,227  1,857 4.41%  199,542  1,936 4.44%  208,028  2,053 4.35%
Fed funds and other interest-earning   10,826  8 0.30%  9,270  5 0.22%  7,978  5 0.25%
Total interest-earning assets  941,068  13,361 5.82%  960,943  13,425 5.78%  998,892  14,084 5.74%
Noninterest-earning assets  51,135      51,131      71,627    
Total Assets  $ 992,203      $ 1,012,074      $ 1,070,519    
                   
Interest-bearing liabilities                  
Interest-bearing NOW  $ 117,204  801 2.74%  $ 96,841  625 2.62%  $ 53,873  183 1.36%
Money market and savings  133,295  395 1.19%  130,300  405 1.26%  132,295  476 1.44%
Time deposits  409,981  3,036 2.97%  422,701  3,316 3.18%  455,243  4,410 3.89%
Short-term borrowings  29,342  124 1.70%  65,300  206 1.28%  118,239  506 1.72%
Long-term debt  151,177  1,467 3.88%  147,259  1,412 3.84%  122,429  1,241 4.01%
Total interest-bearing liabilities  840,999  5,823 2.78%  862,401  5,964 2.80%  882,079  6,816 3.10%
Non-interest bearing deposits  57,589      55,206      63,380    
Other liabilities  4,001      3,687      2,913    
Total Liabilities  902,589      921,294      948,372    
Stockholders' Equity  89,614      90,780      122,147    
Total Liabilities & Stockholders' Equity  $ 992,203      $ 1,012,074      $ 1,070,519    
                   
Net interest income    $ 7,564      $ 7,461      $ 7,268  
Interest rate spread     3.05%     2.98%     2.64%
Net interest-margin     3.33%     3.27%     3.00%
                   
                   
Percentage of average interest-earning assets to average interest-bearing liabilities     111.90%     111.43%     113.24%
                   
                   
  For the Six Months Ended      
  June 30, 2010 June 30, 2009      
  Average   Average Average   Average      
  Balance Interest Yield/Cost Balance Interest Yield/Cost      
                   
Interest-earnings assets                  
Loan portfolio  $ 744,047  $ 22,980 6.23%  $ 785,832  $ 24,103 6.19%      
Investment securities   196,870  3,793 4.42%  200,013  4,052 4.44%      
Fed funds and other interest-earning   10,052  13 0.26%  6,515  7 0.22%      
Total interest-earning assets  950,969  26,786 5.80%  992,360  28,162 5.80%      
Noninterest-earning assets  51,114      69,670          
Total Assets  $ 1,002,083      $ 1,062,030          
                   
Interest-bearing liabilities                  
Interest-bearing NOW  $ 107,079  1,425 2.68%  $ 48,352  279 1.16%      
Money market and savings  131,806  800 1.22%  136,292  970 1.44%      
Time deposits  416,306  6,353 3.08%  458,374  9,063 3.99%      
Short-term borrowings  47,221  330 1.41%  112,280  969 1.74%      
Long-term debt  149,229  2,879 3.84%  121,797  2,381 3.89%      
Total interest-bearing liabilities  851,641  11,787 2.79%  877,095  13,662 3.14%      
Non-interest bearing deposits  56,404      61,316          
Other liabilities  3,845      3,002          
Total Liabilities  911,890      941,413          
Stockholders' Equity  90,193      120,617          
Total Liabilities & Stockholders' Equity  $ 1,002,083      $ 1,062,030          
                   
Net interest income    $ 15,025      $ 14,500        
Interest rate spread     3.01%     2.66%      
Net interest-margin     3.30%     3.03%      
                   
                   
Percentage of average interest-earning assets to average interest-bearing liabilities     111.66%     113.14%      
CONTACT:  Crescent Financial Corporation          Michael G. Carlton, President and CEO          Bruce W. Elder, Vice President          (919) 466-1005

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