Central Coast Bancorp Announces a 63.7% Increase in Third Quarter Earnings

Market Wire, October, 2005

Central Coast Bancorp (NASDAQ: CCBN), the holding company for Community Bank of Central California, today announced record quarterly net income of $5,340,000 for the third quarter of 2005. Net income increased 63.7% over the $3,263,000 reported for the third quarter of 2004. Diluted earnings per share for the third quarter of 2005 increased 56.5% to $0.36 from $0.23 in the prior year period. The annualized return on average equity (ROAE) and the return on average assets (ROAA) for the third quarter of 2005 were 18.89% and 1.69% as compared to 13.66% and 1.22% for the same period in 2004.

Net income for the nine months ended September 30, 2005 increased 38.4% to $13,443,000 from $9,715,000 for the nine months ended September 30, 2004. Diluted earnings per share increased to $0.92 from $0.68 for the comparative nine-month periods. For the first nine months of 2005, the annualized ROAE was 16.68% and the ROAA was 1.48% up from 13.99% and 1.25%, respectively, for the same period in 2004. All earnings per share and applicable share data for the 2004 periods have been adjusted for the five-for-four stock split distributed in February 2005.

The Company largely maintained the growth it achieved in its balance sheet in the first half of 2005, ending the third quarter with total assets of $1,233,327,000 as of September 30, 2005, a slight decrease of $15,272,000 (-1.2%) from June 30, 2005 and an increase of $68,666,000 (5.9%) from year-end 2004. Most of the asset growth since year-end has been deployed into the investment portfolio and Fed Funds Sold, as year-to-date loan growth has been relatively flat. Loans at September 30, 2005, totaled $926,306,000, a decrease of $7,117,000 (-0.7%) from June 30, 2005 and $5,210,000 (-0.6%) from year-end 2004. At September 30, 2005, deposits were slightly lower at $1,096,391,000 from June 30, 2005, a decrease of $25,153,000 (-2.2%), but were higher by $45,023,000 (4.3%) from year-end 2004 balances. On a year-over-year basis, the Company's focus on internal growth and de novo branch expansion has generated an increase in total assets of $159,193,000 (14.8%); an increase in loans of $85,757,000 (10.2%); and an increase in deposits of $142,232,000 (14.9%) compared to those balances as of September 30, 2004.

"We are pleased to announce yet another quarter of record-breaking earnings. Focusing on quality loan and deposit relationships, we are building on a strong beginning of the year," stated Nick Ventimiglia, Chairman and CEO. "In addition, while there continues to be deposit pricing pressure, the Bank has continued to realize a net benefit from the rising interest rate environment."

Financial Summary:

Interest income, net interest income, net interest margin and the efficiency ratio are discussed below on a fully taxable equivalent basis. These items have been adjusted to give effect to $369,000 and $244,000, respectively, in taxable equivalent interest income on tax-free investments for the three-month periods ended September 30, 2005 and 2004.

Net interest income for the third quarter of 2005 was $15,084,000, which was an increase of $3,713,000 (32.7%) over the third quarter of 2004. Interest income for the third quarter of 2005 was $19,603,000, an increase of $5,379,000 (37.8%) from the third quarter of 2004. Average earning assets in the third quarter of 2005 increased $190,463,000 (19.2%) over the prior year period. This increase in the volume of earning assets added $2,222,000 to interest income. The average yield on earning assets in the third quarter of 2005 increased 87 basis points to 6.57% from 5.70% in the year earlier period and increased 19 basis points from 6.38% in the second quarter of 2005. The 87 basis point increase in the average yield received resulted in a $3,157,000 increase in interest income.

Interest expense in the third quarter of 2005 totaled $4,519,000, which was an increase of $1,666,000 (58.4%) over the third quarter of 2004. Rates paid on interest-bearing liabilities continued to move upward. The average rate paid on interest-bearing liabilities in the third quarter of 2005 increased 53 basis points to 2.15% from 1.62% in the year earlier period and increased 11 basis points from 2.04% in the second quarter of 2005. The higher rates increased interest expense for the third quarter by $932,000 from the year earlier period. Average balances of interest-bearing liabilities in the third quarter of 2005 increased by $135,033,000 (19.3%) over the prior year period, which added $734,000 to interest expense.

The net interest margin for the third quarter of 2005 was 5.06%, an increase of 13 basis points from 4.93% for second quarter of 2005, and an increase of 52 basis points from 4.56% for the third quarter of 2004. Since the beginning of 2005, deposit pricing pressures have resulted in a slowing of the favorable impact on net interest margin from the current rising rate environment.

The Company made no provision for loan losses in the third quarter of 2005 as compared to $885,000 in the third quarter of 2004. At September 30, 2005, nonperforming and restructured loans totaled $2,993,000 as compared to $835,000 at December 31, 2004 and $2,031,000 at September 30, 2004. The ratio of the allowance for loan losses to total loans was 1.89% at September 30, 2005, 1.75% at December 31, 2004 and 1.76% at September 30, 2004.