Crescent Financial Corporation Announces 49% Increase In Comparative First Quarter Earnings

Crescent Financial Corporation (NasdaqGM: CRFN), parent company of Crescent State Bank of Cary and Port City Capital Bank of Wilmington, N.C., today announced unaudited net income for the quarter ended March 31, 2007 of $1,466,000, reflecting a 49% increase over net income of $982,000 for the prior year quarter. Diluted earnings per share for the current three-month period was $.15 compared to $.15 for the prior year period. 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 August 31, 2006 in connection with the acquisition of Port City Capital Bank.

The increase in earnings resulted from strong earning asset growth despite a lower net interest margin. Net interest income increased by 53% from $4.1 million in the first quarter of 2006 to $6.2 million in the current quarter of 2007. Average earning assets grew by $260.2 million from $404.0 million for the first quarter of 2006 to $664.2 million for the current quarter. Of the total increase in average earning assets, approximately $153.9 million was attributable to the acquisition of Port City Capital Bank and $106.3 million represents organic growth. Net interest margin, interest income less interest expense expressed as a percentage of average assets, was 3.81% for the quarter ended March 31, 2007 compared with 4.09% for the prior year quarter. The Company continues to experience strong loan demand and must rely heavily on wholesale forms of funding. The incremental cost of wholesale funds coupled with the competitive nature of loan pricing has caused downward pressure on net interest margin.

Non-interest income grew by $33,000 or 6% from $596,000 for the prior year quarter to $629,000 for the three months ended March 31, 2007. Revenues from service charges and other deposit related fees increased by $30,000 and earnings on cash value of bank owned life insurance and other miscellaneous fees increased by $27,000 and $7,000, respectively. Fees earned on origination of brokered residential mortgage loans declined by $30,000 from $145,000 to $115,000. The decrease reflects a slight reduction in home sales volume in our markets.

Non-interest expenses increased by $1.3 million or 47% from $2.9 million during the first quarter of 2006 to $4.2 million for the current year quarter. A portion of that increase is attributed to the acquisition of Port City Capital Bank in August 2006. Total non-interest expenses incurred by our new subsidiary for the first quarter of 2007 were approximately $694,000. Personnel expense experienced the largest increase over the past year growing from $1.6 million to $2.4 million. The Company has added head count in several operational areas within our organization in order to create the infrastructure needed to further expand the franchise. The provision for loan losses was $359,000 during the current quarter compared with $270,000 for the prior year period.

Crescent Financial Corporation reported total assets on March 31, 2007 of $751.5 million reflecting a 69% increase over total assets of $445.0 million on March 31, 2006. Total net loans increased by 65% from $351.2 million a year ago to $578.9 million at March 31, 2007. Total deposits increased 69% from $349.6 million to $590.0 million and total borrowings increased by 44% from $51.0 million to $73.2 million. Total stockholders’ equity grew by 101% from $42.4 million to $85.0 million at March 31, 2007 due in large part to the acquisition of Port City Capital Bank.

Quotes:
"We are pleased to present the first quarter results of Crescent Financial Corporation," said Michal G. Carlton, president and CEO of Crescent State Bank. "We have spent the first quarter of 2007 strengthening our most important assert: our people. As we move closer to the anticipated conversion of Port City Capital Bank into Crescent State Bank in mid June and look to further expand the franchise towards the latter part of the year, we needed to fill some important operational and lending positions. I believe the foundation has now been set upon which to further build our brand and presence. The entire Crescent team looks forward to making 2007 the most successful year in the company’s short history."

About Crescent Financial Corporation:
Crescent Financial Corporation is the bank holding company for Crescent State Bank in Cary, North Carolina and Port City Capital Bank in Wilmington, North Carolina. The Company has total assets of approximately $752 million, deposits of approximately $590 million, and loans of $579 million as of March 31, 2007, with 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

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

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