×

Crescent Financial Bancshares, Inc. Announces Fourth Quarter Net Income of $2.1 Million and Continued Strong Revenue and Loan Growth

Crescent Financial Bancshares, Inc. Logo
VantageSouth Bank Logo
Crescent Financial Bancshares, Inc. Logo

RALEIGH, N.C., Jan. 30, 2013 (GLOBE NEWSWIRE) -- Crescent Financial Bancshares, Inc. (Nasdaq:CRFN) ("Crescent" or the "Company"), today reported financial results for the fourth quarter and year ended December 31, 2012. Crescent Financial is the parent company of VantageSouth Bank (formerly Crescent State Bank) and is a subsidiary of Piedmont Community Bank Holdings, Inc. ("Piedmont").





The fourth quarter and year ended December 31, 2012 summary for Crescent is as follows:

  • Net income in the fourth quarter of 2012 totaled $2.1 million while the net loss in the predecessor fourth quarter of 2011 totaled $852 thousand.
  • Net income totaled $3.8 million in the successor period from February 1 to December 31, 2012 ("2012 Successor Period") and $529 thousand in predecessor period from January 1 to January 31, 2012 ("2012 Predecessor Period"). Net income in the predecessor year ended December 31, 2011 totaled $968 thousand.
  • The fourth quarter of 2012 included $2.3 million in merger, conversion and re-branding costs that reduced net income by $1.4 million on an after-tax basis. Merger, conversion and re-branding costs totaled $3.4 million in the 2012 Successor Period and reduced net income by $2.1 million on an after-tax basis.
  • Annualized revenue growth equaled 21 percent from the third quarter of 2012 to the fourth quarter of 2012 driven by loan growth and improved revenue mix.
  • Annualized net loan growth in the last six months of 2012 was 19 percent, which was driven by loan originations for the second half of 2012 totaling $162.3 million which was a significant increase from $82.9 million in the first half of 2012. Fourth quarter 2012 loan originations totaled $87.6 million.
  • Net interest margin improved to 4.37 percent in the fourth quarter of 2012 from 3.72 percent in the predecessor fourth quarter of 2011. Net interest margin improved to 4.40 percent in the 2012 Successor Period and 4.55 percent in the 2012 Predecessor Period from 4.19 percent in the predecessor year ended December 31, 2011.
  • Revenue mix improved as non-interest income increased to 29 percent of total revenues in the fourth quarter of 2012 from 14 percent of total revenues in the predecessor fourth quarter of 2011. Non-interest income improvement has been primarily due to growth in the Company's mortgage and government-guaranteed lending businesses in 2012.
  • VantageSouth Bank and Crescent State Bank were merged on November 30, 2012 with the combined bank being re-branded as VantageSouth Bank. The combined VantageSouth Bank now operates on a single technology platform and utilizes common business processes and policies across the company.

"We are proud of the many accomplishments of our team members during 2012," stated Scott Custer, President and CEO of the Company and Piedmont. Mr. Custer continued, "Because of their hard work and dedication, the Company was able to complete two mergers, two system conversions, a bank re-branding, and was able to sign a merger agreement with ECB within the year. These activities elevated expenses but simplified our organizational structure and better position the Company for growth. Additionally, the Company continued to execute on its business plan by increasing loan production, growing revenues and improving mix, and decreasing non-performing assets in the fourth quarter of 2012. We look forward to the proposed merger with ECB, which we believe will generate new revenues and create operating efficiencies for the combined institution and provide the Company with new markets, relationship-focused bankers, a strong core deposit franchise, and an established agricultural lending program."

VantageSouth Bank Merger

On November 30, 2012, the Company completed the merger of VantageSouth Bank ("Legacy VantageSouth") into Crescent State Bank in a share exchange based on Crescent's volume weighted average stock price. All outstanding Legacy VantageSouth shares of common stock were converted into Crescent's shares at a 5.3278 exchange ratio for a total transaction value of approximately $35.0 million. At the time of merger, Piedmont owned all outstanding shares of Legacy VantageSouth except for shares of common stock held by directors as required by state law. Piedmont owns approximately 90% of Crescent's outstanding common stock following the merger. Legacy VantageSouth was headquartered in Burlington, North Carolina, and operated five branch offices located in Burlington (2), Fayetteville, Salisbury, and China Grove, North Carolina. The Company re-branded its wholly-owned banking subsidiary as VantageSouth Bank ("VantageSouth") immediately following the merger.

The merger of Legacy VantageSouth into Crescent State Bank was a merger of commonly controlled companies and was accounted for in a manner similar to a pooling of interests transaction. Thus, the Company's financial statements have been retrospectively adjusted to combine the financial statement balances of Crescent and Legacy VantageSouth beginning on November 18, 2011, the date the two companies became commonly controlled by Piedmont. Periods prior to the date of common control reflect only Legacy VantageSouth's historical balances since it was the first company acquired by Piedmont. Due to the application of push-down accounting to Legacy VantageSouth's books on February 1, 2012, periods prior to this date are denoted as "Predecessor Period(s)" and periods after this date are denoted as "Successor Period(s)".

Earnings Per Share

After preferred stock dividends, the Company recognized net income of $0.05 per basic and diluted common share during the fourth quarter of 2012 and a net loss of $0.05 per basic and diluted common share in the predecessor fourth quarter of 2011. The Company recognized net income of $0.01 per basic and diluted common share during the 2012 Predecessor Period and net income of $0.07 per basic and diluted common share in the 2012 Successor Period. Net income per basic and diluted common shared equaled $0.07 for the predecessor year ended December 31, 2011.

Net Interest Income

Net interest income in the fourth quarter of 2012 totaled $10.2 million and net interest income totaled $5.9 million in the predecessor fourth quarter of 2011. Taxable equivalent net interest margin increased to 4.37 percent in the fourth quarter of 2012 from 3.72 percent in the predecessor fourth quarter of 2011. This significant margin improvement resulted from a decline in funding costs and an increase in yield on interest-earning assets. Funding costs declined as the average rate on total interest-bearing liabilities fell from 1.24 percent in the predecessor fourth quarter of 2011 to 0.80 percent in the fourth quarter of 2012. Taxable equivalent yield on interest-earning assets increased from 4.79 percent in the predecessor fourth quarter of 2011 to 5.05 percent in the fourth quarter of 2012. The increase in taxable equivalent yield on interest-earning assets was primarily due to an improved asset mix as lower yielding federal funds and overnight investments were used to fund loan growth and securities purchases in 2012.

Average earning assets totaled $933.0 million in the fourth quarter of 2012 and $628.3 million in the predecessor fourth quarter of 2011. Average interest-bearing liabilities equaled $798.3 million in the fourth quarter of 2012 and $541.7 million in the predecessor fourth quarter of 2011. The increase in average balances was primarily due to Piedmont's acquisition of Crescent in the fourth quarter of 2011 and strong loan growth in the last half of 2012. The first half of the year was marked primarily by a focus on reducing problem assets and building out the Company's lending platform, which included recruiting experienced commercial and retail bankers. In the last half of the year, the Company was able to leverage its lending platform and execute on its business plan by growing its loan portfolio.

Net interest income totaled $37.3 million in the 2012 Successor Period and $3.6 million in the 2012 Predecessor Period compared to net interest income of $11.6 million in the predecessor year ended December 31, 2011. Taxable equivalent net interest margin improved to 4.40 percent in the 2012 Successor Period and 4.55 percent in the 2012 Predecessor Period from 4.19 percent in the predecessor year ended December 31, 2011.

Provision for Loan Losses and Asset Quality

Provision for loan losses totaled $1.2 million in the fourth quarter of 2012 and $729 thousand in the predecessor fourth quarter of 2011. The loan loss provision totaled $5.2 million for the 2012 Successor Period and $195 thousand in the 2012 Predecessor Period while the loan loss provision in the predecessor year ended December 31, 2011 totaled $880 thousand. The allowance for loan losses and related provision are calculated for the following three portfolio categories: (1) loans originated subsequent to Piedmont's respective acquisitions of Legacy VantageSouth, Community Bank of Rowan, and Crescent (or "New Loans"), (2) purchased non-impaired loans, and (3) purchased credit-impaired loans.

The following table summarizes the changes in allowance for loan losses for each loan category in the three month period and 2012 Successor Period ended December 31, 2012:

(Dollars in thousands)
New Loans
Purchased Non-
Impaired
Purchased
Credit-Impaired

Total
Three Months Ended:
Balance at October 1, 2012 $2,152 $87 $907 $3,146
Net charge-offs (315) (315)
Provision for loan losses 513 283 371 1,167
Balance at December 31, 2012 $2,665 $55 $1,278 $3,998
2012 Successor Period:
Balance at February 1, 2012 $1,276 $— $— $1,276
Net charge-offs (2,437) (2,437)
Provision for loan losses 1,389 2,492 1,278 5,159
Balance at December 31, 2012 $2,665 $55 $1,278 $3,998

The allowance for loan losses of $2.7 million on New Loans at December 31, 2012 represents 0.93 percent of outstanding balances on all New Loans. Impaired New Loans at December 31, 2012 represented 0.38 percent of related outstanding balances on impaired New Loans. Although purchased non-impaired loans were adjusted to fair value at acquisition, the Company records charge-offs for losses and provides reserves for deterioration in credit quality on these loans. All revolving loans were classified as purchased non-impaired at each respective acquisition and a majority of the charge-offs and provision relate to acquired revolving home equity lines.

Loans acquired with evidence of credit deterioration since origination have been grouped into pools of loans with similar risk characteristics and accounted for as purchased credit-impaired loans. Subsequent to acquisition of these loans, estimates of pool-level cash flows expected to be collected are updated each reporting period based on assumptions regarding default rates, loss severities, and other factors that reflect current market conditions. If the Company has probable decreases in pool-level cash flows expected to be collected, the provision for loan losses is charged, resulting in an increase to the allowance for loan losses. If there are probable and significant increases in pool-level cash flows expected to be collected, the Company will first reverse any previously established allowance for loan losses and then increase interest income as a prospective yield adjustment over the remaining life of the loans.

Results of the Company's fourth quarter cash flow re-estimation are summarized as follows:

(Dollars in thousands)
Impairment
Cash Flow
Improvement
New
Yield
Previous
Yield
Loan pools with cash flow improvement $(111) $508 7.48% 7.07%
Loan pools with impairment 482 6.51% 6.51%
Total $371 $508 6.82% 6.67%

The fourth quarter of 2012 cash flow re-estimation indicated net improved cash flows on purchased credit-impaired loan pools of $137 thousand. The $508 thousand of cash flow improvement on related loan pools will be recorded as additional interest income as a prospective yield adjustment over the remaining life of the loans. The $371 thousand impairment was recorded to the provision for loan losses in the fourth quarter of 2012. The pool-level impairment and cash flow improvement were calculated as the difference between the pool-level recorded investment and the net present value of estimated cash flows at the time of the cash flow re-estimation.

Non-performing loans as a percentage of total loans was 2.43 percent at December 31, 2012, which was a decline from 2.80 percent at September 30, 2012 and 5.09 percent for the predecessor company at December 31, 2011. Total non-performing assets (which include non-accrual 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 December 31, 2012 was 1.71 percent, which was a decline from 1.97 percent at September 30, 2012 and 3.44 percent for the predecessor company at December 31, 2011.

Non-Interest Income

Non-interest income totaled $4.1 million in the fourth quarter of 2012 compared to $921 thousand in the predecessor fourth quarter of 2011. Non-interest income in the fourth quarter of 2012 included $771 thousand in mortgage banking income, which was an increase from $282 thousand in the fourth quarter of 2011. The Company restructured its mortgage lending business following Piedmont's investment in Crescent and hired additional experienced mortgage lenders. The Company also continues to benefit from the improving housing market in the Raleigh, North Carolina and surrounding areas as well as the currently low interest rate environment that has encouraged refinancings.

Non-interest income in the fourth quarter of 2012 also included $1.7 million in servicing fees and gains on the sale of the guaranteed portion of U.S. Small Business Administration ("SBA") loans originated by the Company, which was a significant increase from $51 thousand in the fourth quarter of 2011. The Company entered the government-guaranteed lending business following Piedmont's acquisition of Community Bank of Rowan in April 2011 and sells the guaranteed portion of certain SBA loans in the secondary market without recourse and recognizes gains as those loans are sold at a premium. Government-guaranteed lending and sales volumes have increased significantly throughout 2012 while secondary market premiums have also risen. Securities gains also contributed to higher non-interest income as the Company realized $603 thousand in gains in the fourth quarter of 2012 compared to losses of $55 thousand in the fourth quarter of 2011.

Non-interest income totaled $11.3 million in the 2012 Successor Period and $657 thousand in the 2012 Predecessor Period. Non-interest income in the predecessor year ended December 31, 2011 equaled $1.7 million. The 2012 Successor Period included $3.2 million in mortgage banking income, $3.1 million in government-guaranteed lending income, and $1.3 million in securities gains while the 2012 Predecessor Period included $225 thousand in mortgage banking income and $98 thousand in government-guaranteed lending income.

Non-Interest Expense

Non-interest expense in the fourth quarter of 2012 totaled $14.4 million compared with $7.4 million in the predecessor fourth quarter of 2011. Non-interest expense in the fourth quarter of 2012 included $6.6 million in salaries and employee benefits expense and $1.4 million in occupancy and equipment expense. Also included in non-interest expense in the fourth quarter of 2012 was $2.3 million in merger, conversion, and re-branding costs associated with the Crescent/ Legacy VantageSouth merger and the proposed merger with ECB Bancorp, Inc. ("ECB").

Non-interest expense totaled $43.2 million in the 2012 Successor Period and $3.2 million in the 2012 Predecessor Period while non-interest expense in the predecessor year ended December 31, 2011 equaled $11.2 million. The 2012 Successor Period included $21.3 million in salaries and employee benefits expense and $4.9 million in occupancy and equipment expense while the 2012 Predecessor Period included $1.7 million in salaries and employee benefits expense and $396 thousand in occupancy and equipment expense. The 2012 Successor Period and 2012 Predecessor Period included $3.4 million and $59 thousand, respectively, in merger, conversion, and re-branding costs associated with the Legacy VantageSouth/Community Bank of Rowan merger, the Crescent/Legacy VantageSouth merger, and the proposed merger with ECB. Higher non-interest expense in the fourth quarter of 2012 and the combined 2012 Predecessor and Successor Periods was driven by the fact that the operations of Crescent State Bank are included in the consolidated results of operations for periods after Piedmont's acquisition on November 19, 2011.

Income Taxes

The Company's income tax benefit in the fourth quarter of 2012 totaled $3.3 million while the Company's income tax benefit in the 2012 Successor Period totaled $3.5 million. Income tax expense totaled $270 thousand in the 2012 Predecessor Period. The income tax benefits recognized in the quarterly and year-to-date successor periods were primarily due to the Company's reversal of a valuation allowance in the fourth quarter of 2012 related to tax benefits generated by Legacy VantageSouth before and after Piedmont's investment in that company. This valuation allowance reversal was based on the Company's analysis of positive and negative evidence regarding future realization of its deferred tax assets, which included an evaluation of historical and forecasted pre-tax earnings, net operating loss periods, merger costs and savings, asset quality trends, capital levels, and potential tax planning strategies. Based on this analysis, the Company determined that there was sufficient positive evidence to indicate that it would likely realize the full value of its deferred tax assets over time and therefore it was determined that no valuation allowance on its deferred tax assets was needed at December 31, 2012.

The Company's income tax benefit in the predecessor fourth quarter of 2011 totaled $504 thousand and was $188 thousand in the predecessor year ended December 31, 2011.

Linked Quarter Comparison

Net income in the fourth quarter of 2012 equaled $2.1 million, which was an increase from $1.3 million in the third quarter of 2012. After preferred stock dividends, the Company recognized net income of $0.05 per basic and diluted common share during the fourth quarter of 2012 compared to a net loss of $0.03 per basic and diluted common share in the third quarter of 2012. The increase in net income on a linked quarter basis was primarily due to the reversal of a $3.3 million valuation allowance in the fourth quarter of 2012 related to tax benefits generated by Legacy VantageSouth before and after Piedmont's investment in that company. Net income before income taxes decreased by $2.6 million in the fourth quarter of 2012 compared to the third quarter of 2012. This decrease in pre-tax net income was primarily due to $1.8 million in higher merger, conversion, and re-branding costs, a $963 thousand increase in salaries and benefits expense and a $411 thousand increase in losses on foreclosed assets. The decline in pre-tax net income was partially offset by a $942 thousand increase in government-guaranteed lending income.

Net interest income in the fourth quarter of 2012 totaled $10.2 million compared to $10.3 million in the third quarter of 2012. Net interest margin declined from 4.49 percent in the third quarter to 4.37 percent in the fourth quarter. The linked quarter decrease in margin was due to lower yields on interest-earning assets as the loan and securities portfolios repriced down somewhat in the fourth quarter, but the impact on net interest income was largely offset by an increase in average loan balances. Average loan balances increased from $722.2 million in the third quarter to $749.1 million in the fourth quarter of 2012. The Company originated 87.6 million in new commercial and consumer loans in the fourth quarter while continuing to resolve problem assets. Excluding the impact of purchase accounting accretion, net interest margin declined from 3.76 percent in the third quarter to 3.74 percent in the fourth quarter of 2012.

Provision for loan losses in the fourth quarter of 2012 totaled $1.2 million compared to provision of $1.1 million in the third quarter of 2012. The moderate increase in provision was related to an increase in provision for purchased credit-impaired loans, which was mostly offset by a decrease in provision for new loans. The provision (or impairment) on purchased credit-impaired loans in the third and fourth quarters was based on the Company's respective quarterly cash flow re-estimations.

Non-interest income in the fourth quarter of 2012 totaled $4.1 million, which was an increase from $3.3 million in the third quarter of 2012. This increase was primarily due to government-guaranteed lending income, which increased by $942 thousand on a linked quarter basis. SBA guaranteed lending and sales volumes have increased significantly throughout 2012 while secondary market premiums have also risen. The improvement in non-interest income was partially offset by mortgage banking income, which decreased by $356 thousand. The Company restructured its mortgage lending business and government-guaranteed lending operations following Piedmont's investment and hired additional experienced mortgage lenders. While mortgage banking income fell on a linked quarter basis, it has been a strong source of non-interest income as the Company continues to benefit from the improving housing market in the Raleigh, North Carolina and surrounding areas as well as the currently low interest rate environment that has encouraged refinancings. Securities gains also contributed to higher non-interest income as the Company realized $603 thousand in gains in the fourth quarter of 2012 compared to $483 thousand in the third quarter.

Non-interest expense in the fourth quarter of 2012 totaled $14.4 million compared to $11.1 million in the third quarter of 2012. This increase was primarily due to a $1.0 million increase in salaries and employee benefits expense related to performance incentive payments at year end and a $1.8 million increase in merger, conversion, and re-branding costs, most of which are included in other non-interest expense.

The Company's income tax benefit equaled $3.3 million in the fourth quarter of 2012 primarily due to the Company's reversal of a valuation allowance related to deferred tax benefits generated by Legacy VantageSouth before and after Piedmont's investment in that company. Income tax expense of $95 thousand in the third quarter of 2012 was based on pre-tax income adjusted for non-taxable income, such as municipal investment income and earnings on bank owned life insurance, and non-deductible expenses, such as certain merger related costs.

Proposed ECB Bancorp, Inc. Merger

On September 25, 2012, Crescent entered into an Agreement and Plan of Merger with ECB (the "ECB Merger Agreement"). Pursuant to the ECB Merger Agreement, ECB will merge with and into Crescent (the "Merger"), which will be the surviving bank holding corporation in the merger. Immediately following the merger, The East Carolina Bank, a North Carolina banking corporation and a wholly-owned subsidiary of ECB, will be merged with and into VantageSouth. At the effective time of the merger, ECB's outstanding shares of common stock will be converted into the right to receive 3.55 shares of the common stock of the Company. The Merger has been approved by the North Carolina Commissioner of Banks but is still subject to federal regulatory approvals and stockholder approvals. The Company expects the merger to close within the first half of 2013.

ECB (NYSE Amex:ECBE) is a bank holding company, headquartered in Engelhard, North Carolina. The East Carolina Bank has twenty-five branch offices in eastern North Carolina stretching from the Virginia to South Carolina state lines east of Interstate 95. ECB offers a full range of financial services, including mortgage, agricultural banking and wealth management services.

VantageSouth Bank is a state chartered bank operating twenty banking offices in Cary (2), Apex, Burlington (2), China Grove, Salisbury, Clayton, Holly Springs, Southern Pines, Pinehurst, Sanford, Fayetteville, Garner, Raleigh (3), Wilmington (2) and Knightdale, North Carolina. Crescent Financial Bancshares, Inc. 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 VantageSouth Bank's website at http://www.vantagesouthbank.com.

The VantageSouth Bank logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=16910

The Crescent Financial Bancshares, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=14863

Forward-looking Statements

Information in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, risks associated with the ownership by Piedmont of a majority of the Company's voting power, including interests of Piedmont differing from other Company stockholders or any change in management, strategic direction, business plan, or operations, the Company's new management's ability to successfully integrate into the Company's business and execute its business plan, the Company's ability to integrate recent and proposed acquisitions into the Company's operations successfully, local economic conditions affecting retail and commercial real estate, disruptions in the credit markets, changes in interest rates, adverse developments in the real estate market affecting the value and marketability of collateral securing loans made by the Bank, the failure of assumptions underlying loan loss and other reserves, competition, and the risk of new and changing regulation. Additional factors that could cause actual results to differ materially are discussed in the Company's filings with the Securities and Exchange Commission (the "SEC"), including without limitation its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K. The forward-looking statements in this press release speak only as of the date of the press release, and the Company does not assume any obligation to update such forward-looking statements.

Information in this press release also contains forward-looking statements with respect to the expected acquisition of ECB by Crescent. These statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by such forward-looking statements, including without limitation: delays in obtaining or failure to receive required regulatory approvals; the possibility that fewer than the required number of ECB's stockholders vote to approve the Merger; the occurrence of events that would have a material adverse effect on ECB or Crescent (as defined in the ECB Merger Agreement); potential delays in the closing of the Merger, potential deposit attrition, higher than expected costs, customer loss and business disruption associated with business integration, including, without limitation, potential difficulties in maintaining relationships with key personnel, technological integration, and other integration related-matters; other uncertainties arising in connection with the Merger; and risk factors that are discussed in Crescent's and ECB's filings with the Securities and Exchange Commission ("SEC"), including without limitation their respective Annual Reports on Form 10-K, their respective Quarterly Reports on Form 10-Q and their respective Current Reports on Form 8-K. Crescent does not undertake a duty to update any forward-looking statements in this Form 8-K.

Additional Information and Where to Find It

In connection with the Merger, Crescent filed with the SEC on November 21, 2012, and amended on December 21, 2012, a Registration Statement on Form S-4 that includes a preliminary Joint Proxy Statement of Crescent and ECB and a preliminary Prospectus of Crescent (together with the Joint Proxy Statement, as amended, the "Joint Proxy Statement/Prospectus"). The companies will file with the SEC other relevant materials in connection with the proposed Merger. Once the Registration Statement is declared effective by the SEC, the companies will mail the Joint Proxy Statement/Prospectus to their respective shareholders. SHAREHOLDERS OF BOTH CRESCENT AND ECB ARE STRONGLY URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION REGARDING CRESCENT, ECB AND THE PROPOSED MERGER. You will be able to obtain a free copy of the Registration Statement, as well as other filings containing information about Crescent at the SEC's Internet site (http://www.sec.gov). The documents can also be obtained, without charge, by directing a written request to either Crescent Financial Bancshares, Inc., 3600 Glenwood Avenue, Suite 300, Raleigh, NC 27612, Attention: Terry Earley, Executive Vice President and Chief Financial Officer, or ECB Bancorp, Inc., Post Office Box 337, Engelhard, NC 27824, Attention: Tom Crowder, Chief Financial Officer.

Crescent, ECB and their respective directors and executive officers may be deemed to be "participants" in the solicitation of proxies from the shareholders of Crescent and ECB in favor of the Merger. Information about the directors and executive officers of ECB and their ownership of ECB common stock is set forth in ECB's definitive proxy statement filed with the SEC on April 27, 2012 and available at the SEC's Internet site (http://www.sec.gov) and from ECB at the address set forth in the preceding paragraph. Information about the directors and executive officers of Crescent and their ownership of Crescent common stock is set forth in Crescent's definitive proxy statement filed with the SEC on April 5, 2012 and available at the SEC's internet site (http://www.sec.gov) and from Crescent at the address set forth in the preceding paragraph. Additional information regarding the interests of these participants and other persons who may be deemed participants in the solicitation may be obtained by reading the Joint Proxy Statement/Prospectus regarding the proposed Merger. Free copies of this document may be obtained as described in the preceding paragraph.

INCOME STATEMENTS (unaudited)

(Dollars in thousands except per share data; prior quarters' information has been retrospectively adjusted to reflect the common control merger between Legacy VantageSouth and Crescent)

Successor Company Predecessor Company
For the Period of For the Period of For the Three Month
For the Three Month Period Ended February 1 to January 1 to Period Ended
December 31, September 30, June 30, March 31, January 31, December 31,
2012 2012 2012 2012 2012 2011
Interest income
Loans $10,898 $10,810 $10,707 $7,302 $3,807 $6,984
Investment securities 855 1,036 1,070 756 395 507
Fed funds sold and interest-earning deposits 20 16 33 16 4 61
Total interest income 11,773 11,862 11,810 8,074 4,206 7,552
Interest expense
Deposits 1,309 1,320 1,462 995 530 1,032
Short-term borrowings 10 3 4 2 18
Long-term debt 279 274 311 201 103 646
Total interest expense 1,598 1,597 1,777 1,198 633 1,696
Net interest income 10,175 10,265 10,033 6,876 3,573 5,856
Provision for loan losses 1,167 1,077 2,046 868 195 729
Net interest income after provision for loan losses 9,008 9,188 7,987 6,008 3,378 5,127
Non-interest income
Mortgage banking income 771 1,127 770 496 225 282
Government-guaranteed lending 1,718 776 572 (6) 98 51
Service charges and fees on deposit accounts 508 523 557 349 194 301
Bank-owned life insurance income 208 215 203 134 70 103
Gain (loss) on sale of available for sale securities 603 483 (27) 192 (55)
Other 325 208 315 307 70 239
Total non-interest income 4,133 3,332 2,390 1,472 657 921
Non-interest expense
Salaries and employee benefits 6,613 5,650 5,513 3,500 1,737 3,923
Occupancy and equipment 1,371 1,387 1,353 809 396 590
Data processing 852 644 596 881 271 (150)
FDIC insurance premiums 216 205 229 277 141 602
Net loss on foreclosed assets 662 251 295 95 11 265
Other loan related expense 352 419 335 417 162 261
Other 4,288 2,584 1,977 1,438 518 1,913
Total non-interest expense 14,354 11,140 10,298 7,417 3,236 7,404
Income (loss) before income taxes (1,213) 1,380 79 63 799 (1,356)
Income taxes (3,326) 95 (259) 4 270 (504)
Net income (loss) 2,113 1,285 338 59 529 (852)
Effective dividend on preferred stock 368 367 367 244 122 182
Net income (loss) to common stockholders $1,745 $918 $(29) $(185) $407 $(1,034)
NET INCOME (LOSS) PER COMMON SHARE
Basic $0.05 $0.03 $— $(0.01) $0.01 $(0.05)
Diluted $0.05 $0.03 $— $(0.01) $0.01 $(0.05)
Successor Company Predecessor Company
For the Period of For the Period of For the Three Month
For the Three Month Period Ended February 1 to January 1 to Period Ended
December 31, September 30, June 30, March 31, January 31, December 31,
2012 2012 2012 2012 2012 2011
COMMON SHARE DATA
Book value per common share $4.18 $4.11 $4.07 $4.10 N/A $4.08
Tangible book value per common share $3.37 $3.31 $3.26 $3.29 N/A $3.27
Ending shares outstanding 35,754,247 35,747,576 35,749,689 35,749,603 35,549,785 35,549,785
Weighted average common shares outstanding - basic 35,730,855 35,728,451 35,727,207 35,721,856 35,515,535 19,061,335
Weighted average common shares outstanding - diluted 35,808,687 35,751,704 35,727,207 35,721,856 35,537,815 19,061,335
PERFORMANCE RATIOS (annualized)
Return on average assets 0.79% 0.49% 0.13% 0.03% 0.58% (0.48)%
Return on average equity 4.84% 2.98% 0.80% 0.21% 3.67% (3.56)%
Tax equivalent yield on earning assets 5.05% 5.18% 5.07% 5.15% 5.35% 4.79%
Cost of interest-bearing liabilities 0.80% 0.83% 0.91% 0.92% 0.95% 1.24%
Tax equivalent net interest margin 4.37% 4.49% 4.30% 4.39% 4.55% 3.72%
Efficiency ratio 100.32% 81.93% 82.89% 88.85% 76.50% 109.25%
Net loan charge-offs 0.17% 0.44% 0.35% 0.45% 0.54%

INCOME STATEMENTS (unaudited)

(Dollars in thousands except per share data; prior years' information has been retrospectively adjusted to reflect the common control merger between Legacy VantageSouth and Crescent)

Successor
Company
Predecessor
Company
February 1 to
December 31,
2012
January 1 to
January 31, 2012
Year Ended
December 31,
2011
Interest income
Loans $39,717 $3,807 $13,362
Investment securities 3,717 395 870
Federal funds sold and interest-earning deposits 85 4 102
Total interest income 43,519 4,206 14,334
Interest expense
Non-maturity deposits 1,873 205 903
Time deposits 3,213 325 1,132
Short-term borrowings 19 18
Long-term debt 1,065 103 725
Total interest expense 6,170 633 2,778
Net interest income 37,349 3,573 11,556
Provision for loan losses 5,159 195 880
Net interest income after provision for loan losses 32,190 3,378 10,676
Non-interest income
Mortgage banking income 3,164 225 440
Government-guaranteed lending 3,061 98 476
Service charges and fees on deposit accounts 1,937 194 516
Bank-owned life insurance income 760 70 103
Gain (loss) on sale of available for sale securities 1,251 (38)
Other 1,154 70 219
Total non-interest income 11,327 657 1,716
Non-interest expense
Salaries and employee benefits 21,276 1,737 5,786
Occupancy and equipment 4,920 396 953
Net (gain) loss on foreclosed assets 1,303 11 (191)
Data processing 2,972 271 1,000
FDIC insurance premiums 926 141 373
Other loan related expense 1,524 162 337
Professional services 4,691 144 867
Advertising and business development 1,083 73 723
Printing, postage, and supplies 786 47 210
Other 3,729 254 1,178
Total non-interest expense 43,210 3,236 11,236
Income before income tax 307 799 1,156
Income tax expense (benefit) (3,486) 270 188
Net income 3,793 529 968
Effective dividend on preferred stock 1,346 122 182
Net income available to common shareholders $2,447 $407 $786
Net income per common share
Basic $0.07 $0.01 $0.07
Diluted $0.07 $0.01 $0.07
Weighted average common shares outstanding
Basic 35,727,930 35,515,535 10,858,657
Diluted 35,800,148 35,537,815 10,916,549
PERFORMANCE RATIOS (annualized)
Return on average assets 0.39% 0.58% 0.32%
Return on average equity 2.41% 3.67% 2.56%
Tax equivalent yield on earning assets 5.12% 5.35% 5.20%
Cost of interest-bearing liabilities 0.86% 0.95% 1.15%
Tax equivalent net interest margin 4.40% 4.55% 4.19%
Efficiency ratio 88.77% 76.50% 84.66%
Net loan charge-offs 0.37% 0.31%

CONSOLIDATED BALANCE SHEETS (unaudited)

(Dollars in thousands, prior periods' information has been retrospectively adjusted to reflect the common control merger between Legacy VantageSouth and Crescent)

Successor Predecessor
Company Company
December 31, September 30, June 30, March 31, December 31,
2012 2012 2012 2012 2011
ASSETS
Cash and due from banks $ 15,735 $ 13,187 $ 18,776 $ 16,373 $ 13,229
Interest-earning deposits with banks 7,978 3,821 6,817 5,020 8,583
Federal funds sold 26,750 20,550 44,535 59,145 24,660
Investment securities available for sale 136,311 153,742 173,757 168,526 169,583
Investment securities held to maturity 180 166 130 125 421
Loans held for sale 16,439 8,239 7,357 4,874 4,214
Loans 763,416 739,028 696,872 704,261 736,089
Allowance for loan losses (3,998) (3,146) (3,043) (1,607) (2,131)
Net loans 759,418 735,882 693,829 702,654 733,958
Federal Home Loan Bank stock 2,307 2,172 3,894 9,793 9,899
Premises and equipment, net 17,351 17,068 17,130 17,054 16,841
Bank-owned life insurance 19,976 19,800 19,620 19,442 19,261
Foreclosed assets 5,837 6,697 7,772 8,340 11,066
Deferred tax asset, net 36,659 33,162 33,590 33,704 33,935
Goodwill 26,254 26,254 26,254 26,254 26,254
Other intangible assets, net 2,376 2,487 2,597 2,708 2,452
Other assets 11,654 10,842 11,771 9,096 13,265
Total assets $ 1,085,225 $ 1,054,069 $ 1,067,829 $ 1,083,108 $ 1,087,621
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits (1)
Non-interest demand $ 71,613 $ 111,725 $ 102,596 $ 99,236 $ 113,321
Interest-bearing demand 188,843 139,768 146,027 160,007 175,840
Money market and savings 260,966 241,324 245,913 227,075 189,468
Time 351,800 360,172 372,074 390,181 407,615
Total deposits 873,222 852,989 866,610 876,499 886,244
Short-term borrowings 7,500 5,000
Long-term debt 19,864 24,326 24,288 24,252 24,216
Other liabilities 10,698 5,243 7,050 6,158 7,652
Total liabilities 911,284 882,558 897,948 911,909 918,112
STOCKHOLDERS' EQUITY
Preferred stock 24,657 24,601 24,544 24,489 24,442
Common stock 36 36 36 36 36
Common stock warrant 1,325 1,325 1,325 1,325 1,325
Additional paid-in capital 147,510 146,655 146,648 146,627 152,515
Accumulated deficit (1,405) (3,200) (4,115) (2,420) (9,089)
Accumulated other comprehensive income 1,818 2,094 1,443 1,142 280
Total stockholders' equity 173,941 171,511 169,881 171,199 169,509
Total liabilities and stockholders' equity $ 1,085,225 $ 1,054,069 $ 1,067,829 $ 1,083,108 $ 1,087,621
(1) Certain business deposit accounts became interest-bearing in the fourth quarter of 2012 as the Company enhanced its deposit product offerings to attract and retain core deposit relationships. This deposit product change increased interest-bearing demand balances while decreasing non-interest demand balances in the fourth quarter.
Successor
Company
Predecessor
Company
December 31, September 30, June 30, March 31, December 31,
2012 2012 2012 2012 2011
CAPITAL RATIOS
Tangible equity to tangible assets 13.75% 13.92% 13.57% 13.49% 13.30%
Tangible common equity to tangible assets 11.42% 11.52% 11.21% 11.17% 10.99%
VantageSouth Bank:
Tier 1 leverage ratio 11.49% 9.89% 9.41% 8.93% 8.49%
Tier 1 risk-based capital ratio 13.48% 12.82% 12.02% 11.17% 10.59%
Total risk-based capital ratio 14.76% 13.28% 12.49% 11.62% 11.85%
Crescent State Bank:
Tier 1 leverage ratio N/A 12.21% 12.11% 12.18% 10.19%
Tier 1 risk-based capital ratio N/A 13.81% 14.22% 14.96% 13.62%
Total risk-based capital ratio N/A 15.20% 15.61% 16.17% 14.64%
ASSET QUALITY DATA
Non-performing loans $12,751 $14,023 $17,983 $19,118 $26,396
Foreclosed assets 5,837 6,697 7,772 8,340 11,066
Total non-performing assets $18,588 $20,720 $25,755 $27,458 $37,462
Allowance for loan losses to loans 0.52% 0.43% 0.44% 0.23% 0.29%
Non-performing loans to total loans 2.43% 2.80% 3.70% 3.90% 5.09%
Non-performing assets to total assets 1.71% 1.97% 2.41% 2.54% 3.44%
Restructured loans not included in categories above 104 917 782

AVERAGE BALANCES, TAXABLE EQUIVALENT INTEREST AND YIELDS/COSTS

(Dollars in thousands)

Successor Company Predecessor Company
Three months ended
December 31, 2012
Three months ended
September 30, 2012
Three months ended
December 31, 2011
Average Average Average Average Average Average
Balance Interest* Yield/Cost* Balance Interest* Yield/Cost* Balance Interest* Yield/Cost*
Assets
Loans $ 749,053 $ 10,898 5.79% $ 722,177 $ 10,810 5.95% $ 437,688 $ 6,984 6.33%
Investment securities 147,188 934 2.52 163,655 1,115 2.71 75,000 540 2.86
Federal funds and other interest-earning assets 36,791 20 0.22 30,844 16 0.21 115,584 61 0.21
Total interest-earning assets 933,032 11,852 5.05% 916,676 11,941 5.18% 628,272 7,585 4.79%
Non-interest-earning assets 132,629 132,347 73,063
Total assets $ 1,065,661 $ 1,049,023 $ 701,335
Liabilities and Equity
Interest-bearing demand $ 159,071 120 0.30% $ 135,786 102 0.30% $ 91,583 $ 217 0.94%
Money market and savings 250,625 343 0.54 244,619 357 0.58 115,012 212 0.73
Time deposits 361,557 846 0.93 362,733 861 0.94 249,627 603 0.96
Total interest-bearing deposits 771,253 1,309 0.68 743,138 1,320 0.71 456,222 1,032 0.90
Short-term borrowings 4,511 10 0.88 1,500 3 0.80 5,670 18 1.26
Long-term debt 22,517 279 4.93 22,802 274 4.78 79,811 646 3.21
Total interest-bearing liabilities 798,281 1,598 0.80% 767,440 1,597 0.83% 541,703 1,696 1.24%
Non interest-bearing deposits 86,266 103,535 60,985
Other liabilities 7,459 6,457 3,656
Total liabilities 892,006 877,432 606,344
Stockholders' equity 173,655 171,591 94,991
Total liabilities and stockholders' equity $ 1,065,661 $ 1,049,023 $ 701,335
Net interest income, taxable equivalent $ 10,254 $ 10,344 $ 5,889
Interest rate spread 4.25% 4.35% 3.55%
Tax equivalent net interest margin 4.37% 4.49% 3.72%
Percentage of average interest-earning assets to average interest-bearing liabilities 116.88% 119.45% 115.98%
* Taxable equivalent basis
Successor Company Predecessor Company
February 1, 2012 through
December 31, 2012
January 1, 2012 through
January 31, 2012
Year Ended December 31, 2011
Average Average Average Average Average Average
balance Interest* Yield/Cost* balance Interest* Yield/Cost* balance Interest* Yield/Cost*
Assets:
Loans $ 727,339 $ 39,717 5.97% $ 730,387 $ 3,807 6.15% $ 201,106 $ 13,362 6.64%
Investment securities 164,113 3,990 2.66% 180,220 419 2.74% 29,827 903 3.03%
Federal funds and other interest-earning assets 42,603 85 0.22% 23,719 4 0.20% 45,384 102 0.22%
Total interest-earning assets 934,055 43,792 5.12% 934,326 4,230 5.35% 276,317 14,367 5.20%
Non-interest-earning assets 127,572 134,240 28,430
Total assets $ 1,061,627 $ 1,068,566 $ 304,747
Liabilities and Equity:
Interest-bearing demand $ 149,394 540 0.39% $ 172,363 108 0.74% $ 36,756 338 0.92%
Money market and savings 236,735 1,333 0.62% 184,716 96 0.61% 59,813 565 0.94%
Time deposits 373,337 3,213 0.94% 404,999 325 0.95% 115,245 1,132 0.98%
Total interest-bearing deposits 759,466 5,086 0.73% 762,078 529 0.82% 211,814 2,035
Short-term borrowings 3,351 19 0.62% 968 1,429 18 1.26%
Long-term debt 22,966 1,065 5.07% 24,217 103 5.02% 27,850 725 2.60%
Total interest-bearing liabilities 785,783 6,170 0.86% 787,263 632 0.95% 241,093 2,778 1.15%
Non interest-bearing deposits 97,250 107,156 24,549
Other liabilities 6,858 4,184 1,266
Total liabilities 889,891 898,603 266,908
Stockholders' equity 171,736 169,963 37,839
Total liabilities and stockholders' equity $ 1,061,627 $ 1,068,566 $ 304,747
Net interest income $ 37,622 $ 3,598 $ 11,589
Interest rate spread 4.26% 4.40% 4.05%
Net interest margin 4.40% 4.55% 4.19%
Percentage of average interest-earning assets to average interest-bearing liabilities 118.87% 118.68% 114.61%
* Taxable equivalent basis

CONTACT: Terry Earley, CFO Crescent Financial Bancshares, Inc. Phone: (919) 659-9015 Email: Terry.Earley@vsb.com

Source:Crescent Financial Bancshares, Inc.