Crescent Financial Bancshares, Inc. Announces Financial Results for Third Quarter of 2012 Reflecting Strong Loan Growth and Net

Crescent Financial Bancshares, Inc. Announces Financial Results for Third
Quarter of 2012 Reflecting Strong Loan Growth and Net Interest Margin
Expansion

RALEIGH, N.C., Oct. 30, 2012 (GLOBE NEWSWIRE) -- Crescent Financial
Bancshares, Inc. (Nasdaq:CRFN) (hereinafter referred to as "Crescent
Financial" or the "Company"), the parent company of Crescent State Bank
("CSB") and a subsidiary of Piedmont Community Bank Holdings, Inc.
("Piedmont"), today reported financial results for the third quarter and nine
months ended September 30, 2012.

The third quarter and year-to-date summary for Crescent Financial is as
follows:

  *Net income totaled $337 thousand during the nine months ended September
    30, 2012 compared to a net loss of $13.5 million in the predecessor nine
    months ended September 30, 2011. Net income in the third quarter of 2012
    equaled $46 thousand compared to a net loss of $3.0 million in the
    predecessor third quarter of 2011. The third quarter of 2012 included $535
    thousand in merger and conversion related costs that reduced net income by
    $329 thousand on an after-tax basis.
    
  *After the preferred stock dividend, the Company recognized a net loss of
    $0.03 per common share during the first nine months of 2012 compared to a
    net loss of $1.54 per common share in the predecessor first nine months of
    2011. The Company recognized net loss of $0.01 per common share during the
    third quarter of 2012 compared to a net loss of $0.36 per common share in
    the predecessor third quarter of 2011.
    
  *Asset quality continued to improve as non-performing assets decreased to
    1.61 percent of total assets at September30, 2012 from 2.38 percent of
    total assets at June 30, 2012 and 3.87 percent of total assets at
    December31, 2011.
    
  *The Company originated $56.3 million of commercial and consumer loans in
    the third quarter of 2012 after $48.0 million of loan originations in the
    second quarter of 2012 and $15.0 million of loan originations in the first
    quarter of 2012.
    
  *Net interest margin improved to 4.44 percent in the third quarter of 2012
    from 3.17 percent in the predecessor third quarter of 2011. Net interest
    margin improved to 4.38 percent in the first nine months of 2012 from 2.98
    percent in the predecessor first nine months of 2011.
    
  *Mortgage banking income improved to $1.1 million in the third quarter of
    2012 from $475 thousand in the predecessor third quarter of 2011. Mortgage
    banking income improved to $2.4 million in the first nine months of 2012
    compared to $900 thousand in the predecessor first nine months of 2011.
    
  *The Company announced proposed mergers with VantageSouth Bank
    ("VantageSouth"), which is a subsidiary of Piedmont, and ECB Bancorp, Inc.
    ("ECB").

"In the third quarter of 2012, Crescent Financial increased loan origination
volume, expanded net interest margin, improved mortgage income, and decreased
non-performing assets," stated Scott Custer, President and CEO of the Company
and Piedmont. Mr. Custer continued, "Since Piedmont's investment, we have
aggressively resolved legacy problem assets and have been replacing them with
high quality loans that we believe will provide stable revenue growth over
time. We also look forward to Crescent Financial's proposed acquisitions of
VantageSouth and ECB, which we believe will generate new revenues and create
operating efficiencies for the combined institution and will provide Crescent
Financial with new markets, relationship-focused bankers, strong core deposit
franchises, and an established SBA lending and agricultural lending program."

Net Interest Income

Net interest income in the third quarter of 2012 totaled $7.6 million compared
to net interest income of $6.8 million in the predecessor third quarter of
2011. Taxable equivalent net interest margin increased from 3.17 percent in
the third quarter of 2011 to 4.44 percent in the third quarter of 2012. This
significant margin improvement was primarily due to a decline in funding costs
as the average rate on total interest-bearing liabilities fell from 2.10
percent in the third quarter of 2011 to 0.87 percent in the third quarter of
2012. Taxable equivalent yield on interest-earning assets increased from 5.05
percent in the third quarter of 2011 to 5.15 percent in the third quarter of
2012.The increase in taxable equivalent yield on interest-earning assets was
primarily attributable to an increase in the yield on loans which includes
accretion on purchased loans.

Average earning assets totaled $689.5 million in the third quarter of 2012,
which was a decline from $871.5 million in the third quarter of 2011. The
decline in average earning assets was due to balance sheet restructuring late
in 2011, purchase accounting fair value adjustments, continued resolution of
problem assets, and a change in the Company's business model effected after
Piedmont's investment that has shifted the loan portfolio mix away from
construction and speculative land loans toward commercial loans for operating
businesses. This decline was comprised of a $97.2 million decrease in the
average balance of loans outstanding, a $72.0 million decrease in the average
balance of the securities portfolio and a $12.9 million decrease in the
average balances of federal funds sold and other interest-earning cash.

Net interest income in the first nine months of 2012 totaled $22.9 million
compared to net interest income of $19.1 million in the predecessor first nine
months of 2011. Taxable equivalent net interest margin increased from 2.98
percent in the first nine months of 2011 to 4.38 percent in the first nine
months of 2012.

Year-to-date accretion of the discount on purchased non-impaired loans added
$489 thousand to net interest income in the first nine months of 2012 and
increased earning asset yields by 0.09 percent. Additionally, the Company
recorded $835 thousand of income in the first nine months of 2012 related to
recovery payments in excess of carrying value on certain purchased
credit-impaired loans not grouped in pools. These loan recoveries benefited
earning asset yields by 0.16 percent. Net amortization of purchase accounting
fair value adjustments on interest-bearing liabilities increased net interest
income by $2.5 million in the first nine months of 2012 and lowered the cost
of interest-bearing liabilities by 0.58 percent. The remaining decline in the
cost of interest-bearing liabilities not attributable to amortization of fair
value adjustments was due to the repricing and change in mix of deposits to
favor low-cost, core deposits.

Provision for Loan Losses and Asset Quality

Provision for loan losses in the third quarter of 2012 totaled $958 thousand
compared to provision of $4.5 million in the predecessor third quarter of
2011. The loan loss provision for the first nine months of 2012 totaled $3.7
million compared to provision of $14.5 million in the predecessor first nine
months of 2011.The allowance for loan losses and related provision are
calculated for loans originated subsequent to Piedmont's investment in the
Company (or "New Loans"), purchased non-impaired loans, and purchased
credit-impaired loans.

The following table summarizes the changes in allowance for loan losses for
each loan category in the three month and nine month periods ended
September30, 2012:

(Dollars in         New Loans Purchased          Purchased             Total
thousands)                    Non-Impaired       Credit-Impaired
Three Months Ended:                                                 
Balance July 1,     $ 707     $ 634              $ 772                 $ 2,113
2012
Net charge-offs     —         (807)              —                     (807)
Provision for loan  564       259                135                   958
losses
Balance September   $ 1,271   $ 86               $ 907                 $ 2,264
30, 2012
                                                                   
Nine Months Ended:                                                  
Balance January 1,  $ 227     $ —                $ —                   $ 227
2012
Net charge-offs     —         (1,693)            —                     (1,693)
Provision for loan  1,044     1,779              907                   3,730
losses
Balance September   $ 1,271   $ 86               $ 907                 $ 2,264
30, 2012

The allowance for loan losses of $1.3 million on new loans at September30,
2012 represents 0.98 percent of related outstanding balances. There were no
impaired new loans at September30, 2012 or December31, 2011. 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 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 are
accounted for as purchased credit-impaired loans. Subsequent to acquisition of
these loans, estimates of 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 cash flows expected to be collected (other
than due to decreases in interest rates), 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 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 third quarter cash flow re-estimation are summarized
as follows:

(Dollars in thousands)                Impairment CashFlow   New   Previous
                                                 Improvement Yield Yield
Loan pools with cash flow improvement $ (143)    $ 1,026     6.44% 6.09%
Loan pools with impairment            278        —           8.18% 8.18%
                                                              
Total                                 $ 135      $ 1,026     6.67% 6.49%

The third quarter of 2012 cash flow re-estimation indicated net improved cash
flows on purchased credit-impaired loan pools of $891 thousand. The $1.0
million 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 $135 thousand impairment was recorded to the
provision for loan losses in the third 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 held for investment
totaled 1.65 percent at September30, 2012, which was a decline from 2.90
percent at June 30, 2012 and 4.14 percent at December31, 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 September30, 2012 totaled 1.61
percent, which was a decline from 2.38 percent at June 30, 2012 and 3.87
percent at December31, 2011.The decline in non performing assets was due
primarily to a reduction in loans greater than 90 days past due and accruing
as well as a reduction in other real estate owned as we continue to resolve
legacy problem assets.

Non-Interest Income

Non-interest income in the third quarter of 2012 totaled $2.3 million compared
to $1.4 million in the predecessor third quarter of 2011. The primary reasons
for the increase was due to growth in the Company's mortgage lending business
and an increase in realized gains on securities sold in the third quarter of
2012. Total mortgage banking income increased from $475 thousand in the third
quarter of 2011 to $1.1 million in the third quarter of 2012. The Company
restructured its mortgage lending business following Piedmont's investment,
hired additional experienced mortgage lenders and continues to benefit from
the improving housing market in the Raleigh, North Carolina area as well as
the currently low interest rate environment that has encouraged
refinancings.The gain on sale of available for sale securities increased $473
thousand in the third quarter of 2012 when compared to the same period of 2011
primarily due to the sale of certain equity securities.

Non-interest income in the first nine months of 2012 totaled $5.7 million
compared to $3.6 million in the predecessor first nine months of 2011. The
primary reason for this increase is the growth in the Company's mortgage
lending business. Total mortgage banking income increased from $900 thousand
in the first nine months of 2011 to $2.4 million in the first nine months of
2012.

Non-Interest Expense

Non-interest expense in the third quarter of 2012 totaled $8.8 million
compared with $6.8 million in the predecessor third quarter of 2011. Salaries
and employee benefits increased by $1.1 million due to additions of commercial
and mortgage bankers following Piedmont's investment. Professional services
expense increased by $759 thousand, which was primarily due to $535 thousand
in merger and conversion related costs. Also contributing to higher
non-interest expense was a $191 thousand increase in occupancy and equipment
expense.

Partially offsetting the increase in non-interest expense was a reduction of
$133 thousand in federal deposit insurance premium expense primarily due to a
lower assessed premium rate and a de-leveraged balance sheet that reduced the
assessment base.

Non-interest expense in the first nine months of 2012 totaled $24.4 million
compared with $21.7 million in the predecessor first nine months of 2011.
Salaries and employee benefits increased by $2.5 million partially due to a
contract termination payment to a former executive and due to additions of
commercial and mortgage bankers following Piedmont's investment. Other
non-interest expense and professional services increased by a combined $1.5
million, which was primarily due to $539 thousand in merger and conversion
related costs. Also contributing to higher non-interest expense was a $292
thousand increase in occupancy and equipment expense and a $251 thousand
increase in data processing expense.

Partially offsetting the increase in year-to-date non-interest expense was a
reduction of $439 thousand in federal deposit insurance premium expense
primarily due to a lower assessed premium rate and a de-leveraged balance
sheet that reduced the assessment base. The Company also reduced foreclosed
asset losses by $1.4 million due to a significant reduction in the level of
other real estate and foreclosed assets.

Income Taxes

The Company's income tax expense in the third quarter of 2012 totaled $94
thousand, which represented a 67.1 percent effective tax rate on pre-tax
income. The Company's income tax expense in the first nine months of 2012
totaled $109 thousand, which represented a 24.4 percent effective tax rate on
pre-tax income. The effective tax rate was determined by the Company's
statutory income tax rate adjusted primarily for non-taxable municipal
investment income and earnings on bank owned life insurance. The Company did
not record any tax benefit associated with the pre-tax loss in the predecessor
third quarter of 2011. The valuation allowance on deferred tax assets was
increased in the prior year period to reflect a full reserve on the tax
benefit generated by losses in that quarter.

Because of the improvement in the Company's earnings prospects following
Piedmont's investment and based on an analysis of positive and negative
evidence related to its deferred tax assets, 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 established no
valuation allowance on its deferred tax assets at September30, 2012.

Linked Quarter Comparison

Net income in the third quarter of 2012 equaled $46 thousand compared to a net
loss of $414 thousand in the second quarter of 2012. After the preferred stock
dividend, the Company recognized a net loss of $0.01 per common share during
the third quarter of 2012 compared to a net loss of $0.03 per common share in
the second quarter of 2012.The increase in net income was the result of
improved net interest margins, lower provision for loan losses, increased
mortgage banking income and higher gains on the sale of securities, partially
offset by higher merger and conversion costs incurred in the third quarter of
2012.

Net interest income in the third quarter of 2012 totaled $7.6 million compared
to net interest income of $7.4 million in thesecond quarter of 2012. Net
interest margin increased from 4.25 percent in the second quarter to 4.44
percent in the third quarter. The linked quarter increase in margin and net
interest income was due to an increase in average loan balances and a decline
in the rates and average balances of interest-bearing liabilities. These
increases in income were partially offset by reductions in average balances of
investment securities and other interest-earning assets.

Average loan balances increased from $510.7 million in the second quarter of
2012 to $529.1 million in the third quarter of 2012. This increase was a
result of the Company's ability to originate $56.3 million in new loans in the
third quarter of 2012 while continuing to resolve problem assets. Accretion of
the discount on purchased non-impaired loans and the related benefit to net
interest income increased by $109 thousand from the second quarter to the
third quarter. Conversely, income related to recovery payments in excess of
carrying value on certain purchased credit-impaired loans not grouped in pools
decreased from $202 thousand in the second quarter to $70 thousand in the
third quarter.

Provision for loan losses in the third quarter of 2012 totaled $958 thousand
compared to provision of $2.0 million in the second quarter of 2012. The
decrease in provision was related to a $223 thousand increase in provision for
new loans, offset by a $596 thousand decrease in provision for purchased
non-impaired loans, and a $637 thousand decrease in provision for purchased
credit-impaired loans. The provision (or impairment) on purchased
credit-impaired loans in the third quarter was based on the quarterly cash
flow re-estimation.

Non-interest income in the third quarter of 2012 totaled $2.3 million compared
to $1.7 million in the second quarter of 2012. This increase was primarily due
to gains on sales of securities, which increased by $510 thousand on a linked
quarter basis, and mortgage banking income, which increased by $377 thousand.
The Company restructured its mortgage lending business following Piedmont's
investment, hired additional experienced mortgage lenders and continues to
benefit from the improving housing market in the Raleigh, North Carolina area
as well as the currently low interest rate environment that has encouraged
refinancings.

Non-interest expense in the third quarter of 2012 totaled $8.8 million
compared to $7.9 million in the second quarter of 2012. This increase was
primarily due to a $249 thousand increase in salaries and employee benefits
and a $487 thousand increase in other non-interest expense.Other non-interest
expense increased primarily due to merger and conversion related expenses.

The income tax expense of $94 thousand in the third quarter of 2012 and income
tax benefit of $340 thousand in the second quarter of 2012 were based on
pre-tax loss and income in the respective quarters adjusted for non-taxable
income such as municipal investment income and earnings on bank owned life
insurance.

Piedmont Investment

On November 18, 2011, the Company completed the issuance and sale of
18,750,000 shares of its common stock to Piedmont for $75.0 million in cash.
As part of its investment, Piedmont also made a tender offer to the Company's
stockholders commencing on November 8, 2011 to purchase up to 67% of the
Company's outstanding common stock at a price of $4.75 per share ("Tender
Offer"). Pursuant to the Tender Offer, Piedmont purchased 6,128,423 shares of
the Company's common stock for $29.1 million. As a result of Piedmont's
initial investment and the Tender Offer, Piedmont owns approximately 88% of
the Company's outstanding common stock.

Because of the level of Piedmont's ownership and control, the Company applied
push-down accounting as of November 18, 2011. Accordingly, as of this date,
the Company's assets and liabilities were adjusted to estimated fair value at
the acquisition date, and the allowance for loan losses was eliminated. The
Company is currently within the one-year measurement period with respect to
the acquisition date, and thus, future material adjustments to these purchase
accounting fair value adjustments are possible.

In the nine months of 2012, goodwill increased by $3.1 million as a result of
adjustments to refine the Company's acquisition date estimate of market rent
on two branch leases, adjustments to refine the valuation of certain other
real estate owned, adjustments to the acquisition date fair value of the
split-dollar liability on bank owned life insurance, and adjustments to refine
acquisition date cash flow estimates and the related valuation of certain
loans. Balances and activity in the Company's consolidated financial
statements prior to Piedmont's investment have been labeled with "Predecessor
Company" while balances and activity subsequent to Piedmont's investment have
been labeled with "Successor Company."

Merger Activity

VantageSouth Bank Merger

On July 27, 2012, Crescent Financial filed an application with the Company's
regulators to merge VantageSouth Bank, which is 100% owned by Piedmont, into
CSB. On August 10, 2012, an Agreement and Plan of Merger ("VantageSouth Merger
Agreement") was entered into by the Company, CSB, and VantageSouth Bank to
merge VantageSouth Bank into CSB in a share exchange based on the Company's
volume weighted average stock price. Pursuant to terms of the VantageSouth
Merger Agreement, outstanding VantageSouth Bank shares will be converted into
the Company's shares equal to the exchange ratio. The exchange ratio will be
4.8204 if the Company's volume weighted average stock price is at or above
$5.25. If the Company's volume weighted average stock price is at or below
$4.75, the exchange ratio will be 5.3278, and if the Company's volume weighted
average stock price is below $5.25 but above $4.75, the exchange ratio will be
equal to $25.307 divided by a number equal to the Company's volume weighted
average stock price.

VantageSouth Bank is headquartered in Burlington, North Carolina, and operates
five branch offices located in Burlington (2), Fayetteville, and Salisbury
(2), North Carolina. As of September 30, 2012, VantageSouth Bank had
approximately $260.7 million in total assets and 1,382,961 outstanding common
shares. The Company's board of directors established an independent special
committee which evaluated, negotiated, and made a favorable recommendation to
the board regarding the proposed merger. The completion of the merger is
subject to all required regulatory and stockholder approvals.VantageSouth's
common stock is not registered under the Exchange Act and, as a result,
VantageSouth does not file securities reports with the SEC. However,
additional financial and regulatory information is available in Reports of
Condition and Income ("Call Reports") filed by VantageSouth with the FDIC,
which are publicly accessible at http://www.fdic.gov. Such reports are not
incorporated by reference in this release or in the accompanying Form 8-K. As
VantageSouth Bank and Crescent Financial are commonly controlled by Piedmont,
preliminary financial results for VantageSouth Bank for the third quarter and
first nine months of 2012 are furnished below for informational purposes.

VantageSouth Bank Preliminary Financial                    
Results
(dollars in thousands)                   Three months ended Nine months ended
                                         September 30, 2012 September 30, 2012
Net interest income                      $ 2,651            $ 7,813
Provision for loan losses                (120)              (457)
Net interest income after provision      2,531              7,356
Non-interest income                      995                2,173
Non-interest expense                     (2,288)            (7,687)
Net income before tax                    1,238              1,842
Income tax expense                       —                  —
Net income                               $ 1,238            $ 1,842
                                                          
Net interest margin (annualized)         4.61%              4.56%
Return on average assets (annualized)    1.97%              0.98%

East Carolina Bancorp Merger

On September 25, 2012, Crescent Financial and ECB entered into an Agreement
and Plan of Merger (the "ECB Merger Agreement"). Pursuant to the ECB Merger
Agreement, ECB will, on the terms and subject to the conditions set forth in
the ECB Merger Agreement, merge with and into the Company so that the Company
is the surviving bank holding corporation in the merger (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 CSB.At the effective time of the Merger (the "Effective Time"), each
share of common stock, par value $3.50 per share, of ECB issued and
outstanding immediately before the Effective Time (the "ECB Common Stock"),
except for shares of ECB Common Stock owned by ECB or the Company (other than
certain trust account shares), will be converted into the right to receive
3.55 shares of the common stock, par value $0.001 per share of the Company.
The completion of the merger is subject to all required regulatory and
stockholder approvals.

ECB is a bank holding company, headquartered in Engelhard, North Carolina,
whose wholly-owned subsidiary, The East Carolina Bank, is a state-chartered,
independent community bank insured by the FDIC. ECB has 25 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 Mortgages, Agricultural Banking and Wealth Management services.
ECB's common stock is listed on NYSE Amex under the symbol "ECBE".

Crescent State Bank is a state chartered bank operating fifteen banking
offices in Cary (2), Apex, Clayton, Holly Springs, Southern Pines, Pinehurst,
Sanford, 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
Crescent State Bank's website at http://www.crescentstatebank.com.

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, 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.

Disclaimer

This press release is not a solicitation of a proxy, an offer to purchase, nor
a solicitation of an offer to sell shares of the Company, and it is not a
substitute for any proxy statement or other filings that may be made with the
SEC. If such documents are filed with the SEC, investors will be urged to
thoroughly review and consider them because they will contain important
information, including risk factors. Any such documents, once filed, would be
available free of charge at the SEC's website (www.sec.gov) and from the
Company.



INCOME STATEMENTS (unaudited)
(Dollars in thousands except per share data; prior quarters' information may
have been reclassified)
                                                         
                      Successor Company                   Predecessor Company
                                              For the  For the   For the
                                                  Period   Period
                                                  November           Three
                      For the Three Month Period 19       October 1 Month
                       Ended                      through  through   Period
                                                                     Ended
                      September  June 30, March  December November  September
                       30,                 31,    31,      18,       30,
                      2012       2012     2012   2011     2011      2011
INTEREST INCOME                                                 
Loans                  $ 7,953    $ 7,849  $      $ 4,252  $ 4,439   $ 9,030
                                           8,335
Investment securities  893        931      963    313      874       1,836
available for sale
Fed funds sold and
other interest-earning 10         26       12     45       7         18
deposits
Total interest income  8,856      8,806    9,310  4,610    5,320     10,884
INTEREST EXPENSE                                                
Deposits               992        1,125    1,124  617      1,315     2,719
Short-term borrowings  —          1        2      18       21        21
Long-term debt         250        287      276    624      718       1,387
Total interest expense 1,242      1,413    1,402  1,259    2,054     4,127
                                                               
Net interest income    7,614      7,393    7,908  3,351    3,266     6,757
Provision for loan     958        1,968    804    227      2,207     4,452
losses
Net interest income
after provision for    6,656      5,425    7,104  3,124    1,059     2,305
loan losses
                                                               
Non-interest income                                             
Mortgage banking       1,066      689      656    169      341       475
income
Service charges and
fees on deposit        425        443      447    217      242       470
accounts
Earnings on bank owned 215        203      204    103      112       215
life insurance
Gain (loss) on sale of
available for sale     483        (27)     192    (55)     3,642     57
securities
Impairment of
marketable equity      —          —        —      —        —         (48)
securities
Other                  133        375      150    50       174       275
Total non-interest     2,322      1,683    1,649  484      4,511     1,444
income
Non-interest expense                                            
Salaries and employee  4,263      4,014    3,822  2,399    3,163     3,140
benefits
Occupancy and          1,159      1,121    971    436      529       968
equipment
Data processing        546        503      519    241      241       447
FDIC insurance         159        174      345    141      191       292
premiums
Net loss (gain) on     191        63       (58)   (9)      (74)      291
foreclosed assets
Other loan related     411        365      496    231      373       378
expense
Other                  2,109      1,622    1,596  837      1,175     1,237
Total non-interest     8,838      7,862    7,691  4,276    5,597     6,753
expense
                                                               
Income (loss) before   140        (754)    1,062  (668)    (27)      (3,004)
income taxes
Income taxes           94         (340)    354    (520)    —         —
Net income (loss)      46         (414)    708    (148)    (27)      (3,004)
Effective dividend on  367        373      384    182      233       442
preferred stock
Net income (loss)
attributable to common $ (321)    $ (787)  $ 324  $ (330)  $ (260)   $ (3,446)
stockholders
                                                               
NET INCOME (LOSS) PER COMMON SHARE
Basic                  $ (0.01)   $ (0.03) $ 0.01 $ (0.01) $ (0.03)  $ (0.36)
Diluted                $ (0.01)   $ (0.03) $ 0.01 $ (0.01) $ (0.03)  $ (0.36)

                                      

                                                           
                Successor Company                           Predecessor Company
                                              For the    For the   For the
                                                  Period     Period
                                                                       Three
                For the Three Month Period Ended November   October 1 Month
                                                  19 through through   Period
                                                                       Ended
                September  June 30,   March 31,  December   November  September
                 30,                              31,        18,       30,
                2012       2012       2012       2011       2011      2011
COMMON SHARE
                                                                 
Book value per   $ 4.17     $ 4.16     $ 4.24     $ 4.17     $ 4.16    $ 4.48
common share
Tangible book
value per common $ 3.28     $ 3.30     $ 3.39     $ 3.39     $ 4.10    $ 4.41
share
Ending shares    28,379,445 28,385,308 28,360,196 28,412,059 9,662,059 9,662,059
outstanding
Weighted average
common shares    28,361,357 28,361,060 28,360,196 28,353,053 9,587,324 9,587,324
outstanding -
basic
Weighted average
common shares    28,361,357 28,361,060 28,385,439 28,353,053 9,587,324 9,587,324
outstanding -
diluted
                                                                 
PERFORMANCE RATIOS (annualized)
                                                                 
Return on        0.02%      (0.20)%    0.35%      (0.13)%    (0.02)%   (1.29)%
average assets
Return on        0.13%      (1.15)%    1.99%      (0.85)%    (0.31)%   (17.21)%
average equity
Tax equivalent
yield on earning 5.15%      5.05%      5.25%      4.45%      4.95%     5.05%
assets
Cost of
interest-bearing 0.87%      0.97%      0.95%      1.41%      2.04%     2.10%
liabilities
Tax equivalent
net interest     4.44%      4.25%      4.46%      3.24%      3.09%     3.17%
margin
Efficiency ratio 88.95%     86.62%     80.48%     111.50%    71.97%    82.34%
Net loan         0.61%      0.47%      0.22%      —%         2.74%     2.64%
charge-offs




INCOME STATEMENTS (unaudited)
(Dollars in thousands except per share data; prior years' information may have
been reclassified)
                                                       
                                  Successor Company     Predecessor Company
                                  Nine months ended     Nine months ended
                                   September 30, 2012    September 30, 2011
Interest income                                         
Loans                              $ 24,137              $ 27,130
Investment securities available    2,787                 5,325
for sale
Federal funds sold and             48                    75
interest-earning deposits
Total interest income              26,972                32,530
                                                       
Interest expense                                        
Deposits                           3,242                 9,199
Short-term borrowings              2                     58
Long-term debt                     814                   4,135
Total interest expense             4,058                 13,392
Net interest income                22,914                19,138
Provision for loan losses          3,730                 14,511
Net interest income after          19,184                4,627
provision for loan losses
                                                       
Non-interest income                                     
Mortgage banking income            2,411                 900
Service charges and fees on        1,315                 1,374
deposit accounts
Earnings on bank owned life        622                   644
insurance
Gain on sale of available for sale 648                   299
securities
Other                              658                   345
Total non-interest income          5,654                 3,562
                                                       
Non-interest expense                                    
Salaries and employee benefits     12,099                9,624
Occupancy and equipment            3,251                 2,959
Data processing                    1,568                 1,317
FDIC deposit insurance premium     678                   1,117
Professional services              3,193                 2,042
Net loss on foreclosed assets      196                   1,643
Other loan related expense         1,272                 1,165
Other                              2,135                 1,817
Total non-interest expense         24,392                21,684
Income (loss) before income taxes  446                   (13,495)
Income taxes                       109                   —
Net income (loss)                  337                   (13,495)
Effective dividend on preferred    1,124                 1,306
stock
                                                       
Net loss attributable to common    $ (787)               $ (14,801)
shareholders
                                                       
Net loss per common share                               
Basic                              $ (0.03)              $ (1.54)
Diluted                            $ (0.03)              $ (1.54)
Weighted average common shares                          
outstanding
Basic                              28,361,159            9,585,056
Diluted                            28,361,159            9,585,056
                                                       
PERFORMANCE RATIOS (annualized)                         
Return on average assets           0.06%                 (1.91%
Return on average equity           0.31%                 (24.59%
Tax equivalent yield on earning    5.15%                 4.99%
assets
Cost of interest-bearing           0.93%                 2.23%
liabilities
Tax equivalent net interest margin 4.38%                 2.98%
Efficiency ratio                   85.38%                95.52%
Net loan charge-offs               0.43%                 2.61%

                                      


CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars in thousands)
                                                            
                        Successor Company                       Predecessor
                                                                 Company
                        September June 30,  March 31, December  September 30,
                         30,                           31,
                        2012      2012      2012      2011 (a)  2011
ASSETS                                                       
Cash and due from banks  $ 9,249   $ 13,695  $ 12,027  $ 8,844   $ 9,551
Interest-earning         1,702     1,144     2,120     1,773     1,187
deposits with banks
Federal funds sold       3,935     40,775    42,925    14,745    20,780
Investment securities    132,953   151,430   144,944   143,504   216,932
available for sale
Mortgage loans held for  7,023     3,226     3,317     3,841     2,821
sale
Loans held for           540,946   508,284   514,276   551,392   615,980
investment
Allowance for loan       (2,264)   (2,113)   (737)     (227)     (22,601)
losses
Net Loans                538,682   506,171   513,539   551,165   593,379
                                                            
Federal Home Loan Bank   1,255     2,931     8,669     8,669     9,156
stock
Premises and equipment,  10,684    10,623    10,619    10,286    10,988
net
Bank owned life          19,800    19,620    19,441    19,261    19,068
insurance
Foreclosed assets        3,828     4,743     5,497     9,017     13,643
Deferred tax asset, net  30,913    31,128    31,317    31,517    11,564
Goodwill                 23,110    23,110    23,110    23,110    —
Other intangibles, net   2,036     2,100     2,165     2,230     593
Other assets             8,594     9,061     6,190     8,345     6,299
                                                            
Total Assets             $ 793,764 $ 819,757 $ 825,880 $ 836,307 $ 915,961
                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES                                                  
Deposits                                                     
Demand                   $ 86,454  $ 77,650  $ 75,320  $ 91,215  $ 70,739
Savings                  38,780    41,008    42,613    46,840    50,130
Money market and NOW     247,772   262,532   251,433   226,584   226,868
Time                     260,893   278,318   289,463   309,779   338,437
Total Deposits           633,899   659,508   658,829   674,418   686,174
                                                            
Short-term borrowings    —         —         5,000     —         5,000
Long-term debt           12,326    12,288    12,251    12,216    152,748
Accrued expenses and     4,696     5,397     5,183     6,615     5,057
other liabilities
                                                            
Total Liabilities        650,921   677,193   681,263   693,249   848,979
STOCKHOLDERS' EQUITY                                         
Preferred stock          24,601    24,544    24,489    24,442    23,741
Common stock             28        28        28        28        9,662
Common stock warrant     1,325     1,325     1,325     1,325     2,367
Additional paid-in       117,459   117,453   117,445   117,434   74,736
capital
Retained earnings        (2,292)   (1,968)   480       (182)     (46,776)
(accumulated deficit)
Accumulated other        1,722     1,182     850       11        3,252
comprehensive income
                                                            
Total Stockholders'      142,843   142,564   144,617   143,058   66,982
Equity
                                                            
Total Liabilities and    $ 793,764 $ 819,757 $ 825,880 $ 836,307 $ 915,961
Stockholders' Equity
                                                            
(a) Derived from audited financial statements



                                      

                          Successor Company                     Predecessor
                                                                 Company
                          September June 30, March 31, December September 30,
                           30,                          31,
                          2012      2012     2012      2011     2011
CAPITAL RATIOS                                               
Tangible equity to         15.31%    14.77%   14.91%    14.52%   7.25%
tangible assets
Tangible common equity to  12.11%    11.68%   11.85%    11.50%   4.66%
tangible assets
Tier 1 leverage ratio      12.43%    12.36%   12.72%    10.68%   7.25%
Tier 1 risk-based capital  14.11%    14.59%   15.66%    14.26%   9.39%
ratio
Total risk-based capital   15.50%    15.98%   16.87%    15.27%   11.71%
ratio
                                                            
ASSET QUALITY DATA                                           
                                                            
Nonperforming loans        $ 8,937   $ 14,762 $ 15,423  $ 22,888 $ 43,115
Foreclosed assets          3,828     4,743    5,497     9,422    13,643
Total nonperforming assets $ 12,765  $ 19,505 $ 20,920  $ 32,310 $ 56,758
                                                            
Allowance for loan losses  0.42%     0.42%    0.14%     0.04%    3.67%
to loans
Nonperforming loans to     1.65%     2.90%    3.00%     4.15%    7.00%
total loans
Nonperforming assets to    1.61%     2.38%    2.53%     3.86%    6.20%
total assets
Restructured not included  —         —        —         —        10,602
in categories above

                                      

AVERAGE BALANCES, TAXABLE EQUIVALENT INTEREST AND YIELDS/COSTS
(Dollars in thousands)

                    SuccessorCompany                                           PredecessorCompany
                    Three months ended September  Three months ended June 30,   Three months ended September
                     30, 2012                      2012                          30, 2011
(Dollars in          Average Interest* Average     Average Interest* Average     Average Interest* Average
thousands)           Balance           Yield/Cost* Balance           Yield/Cost* Balance           Yield/Cost*
                                                                                          
Assets                                                                                     
Loans                $       $ 7,953   5.98%       $       $ 7,849   6.18%       $       $ 9,030   5.72%
                     529,127                       510,749                       626,279
Investment           140,997 970       2.74        148,280 996       2.70        212,968 2,052     3.82
securities
Federal funds and
other                19,346  11        0.22        46,896  26        0.22        32,242  18        0.22
interest-earning
Total
interest-earning     689,470 8,934     5.15%       705,925 8,871     5.05%       871,489 11,100    5.05%
assets
Non-interest-earning 110,236                     106,846                     53,037           
assets
Total assets         $                           $                           $                
                     799,706                       812,771                       924,526
                                                                                          
Liabilities and                                                                            
Equity
Interest-bearing NOW $       85        0.31%       $       144       0.49%       $       $ 494     1.36%
                     109,120                       119,234                       144,255
Money market and     181,522 261       0.57        169,392 306       0.73        131,112 223       0.68
savings
Time deposits        266,804 646       0.96        285,436 675       0.95        347,257 2,001     2.29
Total
interest-bearing     557,446 992       0.71        574,062 1,125     0.79        622,624 2,718     1.73
deposits
Short-term           —       —         —           1,389   1         0.17        5,000   21        1.70
borrowings
Long-term debt       12,307  250       8.10        12,269  287       9.41        152,748 1,387     3.60
Total
interest-bearing     569,753 1,242     0.87%       587,720 1,413     0.97%       780,372 4,126     2.10%
liabilities
Noninterest-bearing  81,387                      75,363                      70,190           
deposits
Other liabilities    4,062                       4,729                       4,708            
Total liabilities    655,202                     667,812                     855,270          
Stockholders' equity 144,504                     144,959                     69,256           
Total liabilities    $                             $                             $
and stockholders'    799,706                     812,771                     924,526          
equity
                                                                                          
Net interest income,        $ 7,692                     $ 7,458                     $ 6,974   
taxable equivalent
Interest rate spread                 4.28%                       4.08%                       2.95%
Tax equivalent net                   4.44%                       4.25%                       3.17%
interest margin
                                                                                          
Percentage of
average
interest-earning                     121.01%                     120.11%                     111.68%
assets to average
interest-bearing
liabilities
                                                                                          
* Taxable equivalent                                                                       
basis

                                      

                    Successor Company             Predecessor Company
                    Nine months ended September   Nine months ended September
                     30, 2012                      30, 2011
(Dollars in          Average Interest* Average     Average Interest* Average
thousands)           Balance           Yield/Cost* Balance           Yield/Cost*
                                                               
Assets                                                          
Loans                $       $ 24,137  6.11%       $       $ 27,130  5.62%
                     527,968                       645,915
Investment           147,363 2,995     2.71        202,621 6,071     4.01
securities
Federal funds and
other                29,244  45        0.21        43,717  75        0.23
interest-earning
Total
interest-earning     704,575 27,178    5.15%       892,253 33,276    4.99%
assets
Non-interest-earning 106,236                     54,289           
assets
Total assets         $                           $                
                     810,811                       946,542
                                                               
Liabilities and                                                 
Equity
Interest-bearing NOW $       466       0.50%       $       $ 1,950   1.75%
                     123,544                       148,855
Money market and     161,257 773       0.64        132,339 807       0.82
savings
Time deposits        283,983 2,003     0.94        365,254 6,452     2.36
Total
interest-bearing     568,783 3,242     0.76        646,448 9,209     1.90
deposits
Short-term           1,668   2         0.18        4,549   58        1.71
borrowings
Long-term debt       12,266  814       8.87        153,481 4,135     3.60
Total
interest-bearing     582,717 4,058     0.93%       804,478 13,402    2.23%
liabilities
Noninterest-bearing  78,900                      64,141           
deposits
Other liabilities    4,514                       4,536            
Total liabilities    666,131                     873,154          
Stockholders' equity 144,680                     73,388           
Total liabilities    $                             $
and stockholders'    810,811                     946,542          
equity
                                                               
Net interest income,        $ 23,120                    $ 19,874  
taxable equivalent
Interest rate spread                 4.22%                       2.76%
Tax equivalent net                   4.38%                       2.98%
interest margin5
                                                               
Percentage of
average
interest-earning                     120.91                      110.91%
assets to average
interest-bearing
liabilities
                                                               
* Taxable equivalent                                            
basis

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

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