Crescent Financial Corporation Announces 54% Increase in Comparative Second Quarter Earnings and 28% Increase in Earnings Per Share

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For Immediate Release Contact: Patty Briguglio (919) 233-6600
Crescent Financial Corporation
Announces 54% Increase in Comparative Second Quarter Earnings and 28% Increase in Earnings Per Share

CARY, N.C. – Crescent Financial Corporation (NasdaqGM: CRFN), parent company of Crescent State Bank today announced unaudited net income for the quarter ended June 30, 2006 of $1,003,000 reflecting a 54% increase over net income of $653,000 for the prior year quarter. Diluted earnings per share for the current three-month period was $.17 compared to diluted earnings per share of $.13 for the prior year period reflecting a 28% increase. The percentage increase in earnings per share and the increase in net income were not comparable due to the issuance of 848,000 shares during the fourth quarter of 2005.
The increase in earnings resulted primarily from strong earning asset growth and was aided to a lesser degree by an improved net interest margin. Earning assets, which include loans outstanding, investment securities, and other interest earning assets, increased by over $70 million over the past twelve months. The net interest margin improved to 3.95% for the current three-month period from 3.88% a year ago. Net interest income increased by $892,000 or 27% from $3.3 million for the prior year quarter to $4.2 million in the current quarter of 2006. Non-interest income increased by $36,000 or 6% due primarily to increases in both deposit service charges and other deposit-related customer service fees. Revenue from mortgage loan origination activities for the current quarter increased slightly as compared with the prior year period. Non-interest expenses increased by 19% from $2.6 million to $3.1 million primarily in those areas most impacted by franchise expansion such as personnel, occupancy, advertising and data processing. During the past year, the Company opened one new full-service branch office, moved a branch office into a permanent building, opened a loan production office and took occupancy of a new Operations facility. The provision for loan losses was $164,000 during the current quarter compared with $303,000 for the prior year period.
For the six months ended June 30, 2006, Crescent reported net income of $1,986,000 or $.33 per diluted share compared with $1,294,000 or $0.26 per diluted share for the six months ended June 30, 2005. Net interest income increased by $1.9 million or 30% from $6.4 million for the prior year period to $8.3 million for the current six-month period. The net interest margin for the current six-month period was 4.02% compared to 3.86% for the prior year period. Non-interest income increased by $87,000 or 8%. Non-interest expenses increased by $937,000 or 19%. The provision for loan losses for the current six-month period was $434,000 compared with $507,000 for the prior year period.

Crescent Financial Corporation reported total assets on June 30, 2006 of $471 million reflecting a $78 million or 20% increase over total assets of $393 million on June 30, 2005. Total net loans increased by $63 million or 21% from $297 million a year ago to $360 million at June 30, 2006. Total deposits increased by $47 million or 14% from $323 million to $370 million and total borrowings increased by 39% from $40 million to $56 million. Total stockholders’ equity grew by 53% from $28 million to $43 million at June 30, 2006 due in large part to the equity offering in the fourth quarter of 2005.

Mike Carlton, President and CEO, stated, “We are pleased with the financial results for both the second quarter and year to date. The increase in net income is especially gratifying in light of the additional expenses associated with the franchise expansion. Over the past twelve months, we have expanded the infrastructure substantially in order to position ourselves for continued growth. This past quarter further reflects our strategic commitment as we opened our tenth office. Additionally, we anticipate completing the recently announced merger with Port City Capital Bank of Wilmington, North Carolina in the third quarter. We are confident that our long-term strategic objectives and unwavering commitment to customer service will position us well for continued growth and prosperity.”
Crescent State Bank is a state chartered bank operating ten banking offices in Cary (2), Apex, Clayton, Holly Springs, Southern Pines, Pinehurst, Sanford, Garner and Raleigh, 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.