Crescent Financial Corporation Announces 44 Percent Quarterly Increase In Net Income for Second Quarter

CARY, N.C. – Crescent Financial Corporation (Nasdaq:CRFN), parent company of Crescent State Bank headquartered in Cary, North Carolina, has announced unaudited net income for the quarter ended June 30, 2007 of $1,448,000, reflecting a 44% increase over net income of $1,003,000 for the prior year quarter. Diluted earnings per share for both three-month periods was $0.15. Per share calculations have been adjusted to reflect the 11-for-10 stock split declared on April 18, 2007 and payable on May 22, 2007 to stockholders of record May 11, 2007. Comparative diluted earnings per share results were impacted by the 2,432,000 shares issued on Aug. 31, 2006 in connection with the acquisition of Port City Capital Bank. Net income for the period ended June 30, 2007 included several non-recurring expense items. During June 2007, Port City Capital Bank, formerly a separate banking subsidiary of Crescent Financial Corporation, was merged into Crescent State Bank. Expenses related to the merger incurred during the second quarter amounted to $146,000, pre-tax. Additionally, the company incurred $44,000 of legal and consulting expenses during the second quarter which are deemed to be non-recurring. The after tax impact of these expenses was approximately $122,000.

The increase in earnings resulted from strong earning asset growth, which was partially offset by a lower net interest margin. Net interest income increased by 56% from $4.2 million in the second quarter of 2006 to $6.6 million in the current quarter. Average earning assets grew by
$277.8 million, from $427.8 million to $705.6 million, of which approximately $153.9 million was attributable to the acquisition of Port City Capital Bank and $123.9 million represented organic growth. Net interest margin was 3.73% for the quarter ended June 30, 2007 compared with 3.95% for the prior year quarter. Strong loan demand, the competitive loan pricing environment in our markets, reliance on wholesale forms of funding and the flat interest rate yield curve have
caused downward pressure on net interest margin.

Non-interest income grew by $28,000 or 5% from $619,000 for the prior year quarter to $647,000 for the three months ended June 30, 2007. Earnings on cash value of bank owned life insurance increased by $43,000 and revenue from service charges and other deposit related fees increased by $14,000. Fees earned on origination of brokered residential mortgage loans declined by $30,000 from $165,000 to $135,000. The decrease in origination revenue is indicative of slower home sales compared to a year ago.

Non-interest expenses increased by $1.5 million or 49% from $3.1million during the second quarter of 2006 to $4.6 million for the current year quarter. A portion of that increase is attributed to the acquisition of Port City Capital Bank in the third quarter of 2006. Total non-interest expenses attributed to Port City for the second quarter of 2007 were approximately $910,000. Personnel expense experienced the largest increase over the past year growing from $1.7
million to $2.5 million. The company has added head count in several operational areas over the past year in order to strengthen the infrastructure needed to further expand the franchise. The provision for loan losses was $322,000 during the current quarter compared with $164,000 for the prior year period.

For the six months ended June 30, 2007, the company reported net income of $2,914,000 reflecting a 47% increase when compared to net income of$1,986,000 for the six months ended June 30, 2006. Diluted earnings per share was $0.30 for both of the two comparative periods. Net interest income increased by $4.5 million or 55% from $8.3 million for the prior year period to $12.8 million for the current six-month period. The net interest margin for the current six-month period was 3.77% compared to 4.02% for the prior year period. Non-interest income increased by $61,000 or 5%. Non-interest expenses increased by $2.9 million or 48%. Non interest expenses attributable to the Port City subsidiary for the six-month period ended June 20, 2007 were approximately $1.4 million of the total increase. The provision for loan losses for the current
six-month period was $682,000 compared with $434,000 for the prior year period.

Crescent Financial Corporation reported total assets on June 30, 2007 of $782.3 million reflecting a 66% increase over total assets of $470.8 million on June 30, 2006. Total net loans increased by 67% from $360.4 million a year ago to $600.8 million at June 30, 2007. Total deposits
increased 67% from $369.6 million to $617.8 million and total borrowings increased by 34% from $56.2 million to $75.2 million. Total stockholders' equity grew by 100% from $43.0 million to $86.0 million due in large part to the acquisition of Port City Capital Bank.

Quotes:
"On June 15th, we merged Port City Capital Bank into Crescent State Bank,” said Michael Carlton, president of Crescent State Bank. “This successful conversion was made possible by the tremendous effort and dedication of our employees. With the conversion behind us, we can now focus our attention on the future of Crescent Financial Corporation. The current interest rate environment is challenging, but we are poised to continue growing both our franchise and our earnings."

About Crescent State Bank:
Crescent State Bank is a wholly owned subsidiary of Crescent Financial Corporation. The Bank has total assets of $782.3 million, deposits of $617.8 million, and net loans of $600.8 million as of June 30, 2007. The bank operates eleven full service banking offices in the communities of Cary (2), Apex, Clayton, Garner, Holly Springs, Sanford, Southern Pines, Pinehurst, Raleigh and Wilmington, North Carolina. For more information, visit http://www.crescentstatebank.com.

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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 and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K and its other periodic reports.

Keywords:
Crescent State Bank, Crescent Financial, Global NASDAQ, Michael G. Carlton, Ray Vaughn, Bruce W. Elder, Cary N.C., Garner, N.C., Apex, N.C., Clayton, N.C., Holly Springs, N.C., Stanford, N.C., Southern Pines, N.C., Pinehurst, N.C., Raleigh, N.C., Wilmington, N.C., Port City Capital Bank, Stock Report, CRFN, Quarterly Report

Patty Briguglio
MMI Associates, Inc.
919-233-6600
patty@mmimarketing.com

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