---



U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB



(Mark One)



|x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended June 30, 2004



| ̈ | Transition report under Section 13 or 15(d) of the Exchange Act
|- | ---------------------------------------------------------------



For the transition period from
 to



Commission file number 000-1262276



COAST FINANCIAL HOLDINGS, INC.

(Exact Name of Small Business Issuer as Specified in Its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 14-1858265                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



2412 Cortez Road
West

Bradenton, Florida 34207

(Address of Principal Executive Offices)



(941) 752-5900

(Issuers Telephone Number, Including Area Code)



---

(Former Name, Former
Address and Former Fiscal Year, if Changed

Since Last Report)



Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:



YES x NO ̈



State the number of shares outstanding of each of
the issuers classes of common equity, as of the latest practicable date;



|                                        |  |                              
|--------------------------------------- |  | -----------------------------
|Common stock, par value $5.00 per share |  | 3,751,350 shares             
|(class)                                 |  | Outstanding at August 6, 2004



Transitional Small Business Format
(Check One): YES ̈NO x



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



INDEX



|                                                                                                                        |  |      
|----------------------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                                        |  | Page 
|PART I. FINANCIAL INFORMATION                                                                                           |  |      
|                                                                                                                        | 
|Item 1. Financial Statements                                                                                            |  |      
|                                                                                                                        | 
|Condensed Consolidated Balance Sheets -At June 30, 2004 (unaudited) and At December 31, 2003                            |  | 2    
|                                                                                                                        | 
|Condensed Consolidated Statements of Operations -Three and Six Months ended June 30, 2004 and 2003 (unaudited)          |  | 3    
|                                                                                                                        | 
|Condensed Consolidated Statements of Changes in Stockholders EquitySix Months Ended June 30, 2004 and 2003 (unaudited) |  | 4    
|                                                                                                                        | 
|Condensed Consolidated Statements of Cash Flows -Six Months Ended June 30, 2004 and 2003 (unaudited)                    |  | 5-6  
|                                                                                                                        | 
|Notes to Condensed Consolidated Financial Statements (unaudited)                                                        |  | 7-10 
|                                                                                                                        | 
|Review by Independent Registered Public Accounting Firm                                                                 |  | 11   
|                                                                                                                        | 
|Report of Independent Registered Public Accounting Firm                                                                 |  | 12   
|                                                                                                                        | 
|Item 2. Managements Discussion and Analysis or Plan of Operation                                                       |  | 13-22
|                                                                                                                        | 
|Item 3. Controls and Procedures                                                                                         |  | 23   
|                                                                                                                        | 
|PART II. OTHER INFORMATION                                                                                              |  |      
|                                                                                                                        | 
|Item 1. Legal Proceedings                                                                                               |  | 24   
|                                                                                                                        | 
|Item 2. Submission of Matters to a Vote of Security Holders                                                             |  | 24   
|                                                                                                                        | 
|Item 6. Exhibits and Reports on Form 8-K                                                                                |  | 25   
|                                                                                                                        | 
|SIGNATURES                                                                                                              |  | 26   





---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------



Condensed Consolidated Balance Sheets

($ in thousands, except per share amounts)



|                                                                                                                                 |  |              |         |   |                  |         |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | ------- | -
|                                                                                                                                 |  | June 30,2004 |         |   | December 31,2003 |        
|                                                                                                                                 |  | (Unaudited)  |         |   |                  |        
|Assets                                                                                                                           |  |              |         |   |                  |         |  
|Cash and due from banks                                                                                                          |  | $            | 6,992   |   |                  | 4,667   |  
|Federal funds sold                                                                                                               |  |              | 490     |   |                  | 3,000   |  
|                                                                                                                                 |  |              |         |   |                  |         |  
|Cash and cash equivalents                                                                                                        |  |              | 7,482   |   |                  | 7,667   |  
|Securities available for sale                                                                                                    |  |              | 47,482  |   |                  | 26,972  |  
|Loans, net of allowance for loan losses of $2,808 and $3,163                                                                     |  |              | 256,969 |   |                  | 214,240 |  
|Federal Home Loan Bank stock, at cost                                                                                            |  |              | 854     |   |                  | 592     |  
|Premises and equipment, net                                                                                                      |  |              | 16,502  |   |                  | 8,614   |  
|Accrued interest receivable                                                                                                      |  |              | 1,420   |   |                  | 1,187   |  
|Deferred income taxes                                                                                                            |  |              | 2,454   |   |                  | 2,525   |  
|Loan servicing rights                                                                                                            |  |              |        |   |                  | 1,134   |  
|Other assets                                                                                                                     |  |              | 1,518   |   |                  | 952     |  
|                                                                                                                                 |  |              |         |   |                  |         |  
|Total assets                                                                                                                     |  | $            | 334,681 |   |                  | 263,883 |  
|                                                                                                                                 |  |              |         |   |                  |         |  
|Liabilities and Stockholders Equity                                                                                             |  |              |         |   |                  |         |  
|Liabilities:                                                                                                                     |  |              |         |   |                  |         |  
|Noninterest-bearing demand deposits                                                                                              |  |              | 25,195  |   |                  | 20,293  |  
|Savings, NOW and money-market deposits                                                                                           |  |              | 88,970  |   |                  | 46,934  |  
|Time deposits                                                                                                                    |  |              | 160,859 |   |                  | 140,513 |  
|                                                                                                                                 |  |              |         |   |                  |         |  
|Total deposits                                                                                                                   |  |              | 275,024 |   |                  | 207,740 |  
|Federal Home Loan Bank advances                                                                                                  |  |              | 2,500   |   |                  | 7,500   |  
|Other borrowings                                                                                                                 |  |              | 20,251  |   |                  | 12,097  |  
|Other liabilities                                                                                                                |  |              | 2,980   |   |                  | 2,881   |  
|                                                                                                                                 |  |              |         |   |                  |         |  
|Total liabilities                                                                                                                |  |              | 300,755 |   |                  | 230,218 |  
|                                                                                                                                 |  |              |         |   |                  |         |  
|Stockholders equity:                                                                                                            |  |              |         |   |                  |         |  
|Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares issued or outstanding                                   |  |              |        |   |                  |        |  
|Common stock, $5 par value; 20,000,000 shares authorized, 3,751,350 and 3,735,450 shares issued and outstanding in 2004 and
2003 |  |              | 18,757  |   |                  | 18,677  |  
|Additional paid-in capital                                                                                                       |  |              | 19,423  |   |                  | 19,351  |  
|Accumulated deficit                                                                                                              |  |              | (3,811  | ) |                  | (4,055  | )
|Accumulated other comprehensive income (loss)                                                                                    |  |              | (443    | ) |                  | (308    | )
|                                                                                                                                 |  |              |         |   |                  |         |  
|Total stockholders equity                                                                                                       |  |              | 33,926  |   |                  | 33,665  |  
|                                                                                                                                 |  |              |         |   |                  |         |  
|Total liabilities and stockholders equity                                                                                       |  | $            | 334,681 |   |                  | 263,883 |  
|                                                                                                                                 |  |              |         |   |                  |         |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



2



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Operations (Unaudited)

($ In thousands, except per share amounts)



|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|------------------------------------------------------------- |  | --------------------------- | --------- | - | ------------------------- | --------- | - | ---- | --------- | - | ---- | --------- | -
|                                                              |  | Three Months Ended June 30, |           |   | Six Months Ended June 30, |          
|                                                              |  | 2004                        |           |   | 2003                      |           |   | 2004 |           |   | 2003 |          
|Interest income:                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Loans                                                         |  | $                           | 3,861     |   |                           | 2,638     |   |      | 7,465     |   |      | 5,056     |  
|Securities                                                    |  |                             | 245       |   |                           | 275       |   |      | 483       |   |      | 551       |  
|Other interest-earning assets                                 |  |                             | 25        |   |                           | 21        |   |      | 37        |   |      | 44        |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Total interest income                                         |  |                             | 4,131     |   |                           | 2,934     |   |      | 7,985     |   |      | 5,651     |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Interest expense:                                             |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Deposits                                                      |  |                             | 1,705     |   |                           | 1,326     |   |      | 3,176     |   |      | 2,605     |  
|Borrowings                                                    |  |                             | 73        |   |                           | 101       |   |      | 158       |   |      | 188       |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Total interest expense                                        |  |                             | 1,778     |   |                           | 1,427     |   |      | 3,334     |   |      | 2,793     |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Net interest income                                           |  |                             | 2,353     |   |                           | 1,507     |   |      | 4,651     |   |      | 2,858     |  
|Provision for loan losses                                     |  |                             | 491       |   |                           | 131       |   |      | 820       |   |      | 312       |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Net interest income after provision for loan losses           |  |                             | 1,862     |   |                           | 1,376     |   |      | 3,831     |   |      | 2,546     |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Noninterest income:                                           |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Service charges on deposit accounts                           |  |                             | 106       |   |                           | 66        |   |      | 202       |   |      | 131       |  
|Gain on sale of loans held for sale                           |  |                             | 379       |   |                           | 414       |   |      | 662       |   |      | 683       |  
|Gain on sale of securities available for sale                 |  |                             |          |   |                           | 62        |   |      |          |   |      | 98        |  
|Gain on sale of mortgage loan servicing rights                |  |                             | 118       |   |                           |          |   |      | 118       |   |      |          |  
|Gain on sale of merchant services                             |  |                             | 212       |   |                           |          |   |      | 212       |   |      |          |  
|Net loan servicing (cost) fees                                |  |                             | (101      | ) |                           | 2         |   |      | (159      | ) |      | (10       | )
|Asset management fees                                         |  |                             |          |   |                           | 123       |   |      | 71        |   |      | 240       |  
|Other service charges and fees                                |  |                             | 220       |   |                           | 173       |   |      | 409       |   |      | 318       |  
|Other                                                         |  |                             | 15        |   |                           | 7         |   |      | 22        |   |      | 7         |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Total noninterest income                                      |  |                             | 949       |   |                           | 847       |   |      | 1,537     |   |      | 1,467     |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Noninterest expenses:                                         |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Employee compensation and benefits                            |  |                             | 1,281     |   |                           | 1,235     |   |      | 2,611     |   |      | 2,372     |  
|Occupancy and equipment                                       |  |                             | 300       |   |                           | 258       |   |      | 635       |   |      | 485       |  
|Data processing                                               |  |                             | 258       |   |                           | 228       |   |      | 506       |   |      | 430       |  
|Professional fees                                             |  |                             | 141       |   |                           | 116       |   |      | 317       |   |      | 203       |  
|Telephone, postage and supplies                               |  |                             | 168       |   |                           | 140       |   |      | 336       |   |      | 259       |  
|Advertising                                                   |  |                             | 59        |   |                           | 71        |   |      | 156       |   |      | 144       |  
|Settlement on impaired security                               |  |                             |          |   |                           |          |   |      |          |   |      | (400      | )
|Other                                                         |  |                             | 223       |   |                           | 309       |   |      | 411       |   |      | 439       |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Total noninterest expenses                                    |  |                             | 2,430     |   |                           | 2,357     |   |      | 4,972     |   |      | 3,932     |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Earnings (loss) before income taxes                           |  |                             | 381       |   |                           | (134      | ) |      | 396       |   |      | 81        |  
|Income tax provision (benefit)                                |  |                             | 146       |   |                           | (50       | ) |      | 152       |   |      | 31        |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Net earnings (loss)                                           |  |                             | 235       |   |                           | (84       | ) |      | 244       |   |      | 50        |  
|Dividends on preferred stock                                  |  |                             |          |   |                           | (105      | ) |      |          |   |      | (105      | )
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Net earnings (loss) applicable to common stockholders         |  | $                           | 235       |   |                           | (189      | ) |      | 244       |   |      | (55       | )
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Earnings (loss) per share, basic                              |  | $                           | 0.06      |   |                           | (0.14     | ) |      | 0.07      |   |      | (0.04     | )
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Earnings (loss) per share, diluted                            |  | $                           | 0.06      |   |                           | (0.14     | ) |      | 0.06      |   |      | (0.04     | )
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Weighted-average number of common shares outstanding, basic   |  |                             | 3,748,110 |   |                           | 1,350,450 |   |      | 3,744,071 |   |      | 1,350,450 |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  
|Weighted-average number of common shares outstanding, diluted |  |                             | 3,770,561 |   |                           | 1,350,450 |   |      | 3,764,926 |   |      | 1,350,450 |  
|                                                              |  |                             |           |   |                           |           |   |      |           |   |      |           |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



3



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Changes in Stockholders Equity



Six Months Ended June 30, 2004 and 2003

($ in thousands)



|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|---------------------------------------------------------------------------------------- |  | --------------- | ----- | ------------ | ------ | -------------------------- | ------ | - | ------------------- | ------ | - | ----------------------------------------------- | ---- | - | -------------------------- | ------ | -
|                                                                                         |  | Preferred Stock |       | Common Stock |        | Additional Paid-in Capital |        |   | Accumulated Deficit |        |   | Accumulated Other Compre- hensive Income (Loss) |      |   | Total Stockholders Equity |       
|Balance at December 31, 2002                                                             |  | $               | 5,995 |              | 6,752  |                            | 5,897  |   |                     | (2,325 | ) |                                                 | (58  | ) |                            | 16,261 |  
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Comprehensive income:                                                                    |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Net earnings (unaudited)                                                                 |  |                 |      |              |       |                            |       |   |                     | 50     |   |                                                 |     |   |                            | 50     |  
|Net change in unrealized loss on securities available for sale, net of taxes (unaudited) |  |                 |      |              |       |                            |       |   |                     |       |   |                                                 | (5   | ) |                            | (5     | )
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Comprehensive income (unaudited)                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            | 45     |  
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Preferred stock dividends declared (unaudited)                                           |  |                 |      |              |       |                            |       |   |                     | (105   | ) |                                                 |     |   |                            | (105   | )
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Balance at June 30, 2003 (unaudited)                                                     |  | $               | 5,995 |              | 6,752  |                            | 5,897  |   |                     | (2,380 | ) |                                                 | (63  | ) |                            | 16,201 |  
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Balance at December 31, 2003                                                             |  | $               |      |              | 18,677 |                            | 19,351 |   |                     | (4,055 | ) |                                                 | (308 | ) |                            | 33,665 |  
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Comprehensive income:                                                                    |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Net earnings (unaudited)                                                                 |  |                 |      |              |       |                            |       |   |                     | 244    |   |                                                 |     |   |                            | 244    |  
|Net change in unrealized loss on securities available for sale, net of taxes (unaudited) |  |                 |      |              |       |                            |       |   |                     |       |   |                                                 | (135 | ) |                            | (135   | )
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Comprehensive income (unaudited)                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            | 109    |  
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Offering costs relating to 2003 common stock offering paid in 2004 (unaudited)           |  |                 |      |              |       |                            | (7     | ) |                     |       |   |                                                 |     |   |                            | (7     | )
|Proceeds from exercise of common stock options (15,900 shares) (unaudited)               |  |                 |      |              | 80     |                            | 79     |   |                     |       |   |                                                 |     |   |                            | 159    |  
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  
|Balance at June 30, 2004 (unaudited)                                                     |  | $               |      |              | 18,757 |                            | 19,423 |   |                     | (3,811 | ) |                                                 | (443 | ) |                            | 33,926 |  
|                                                                                         |  |                 |       |              |        |                            |        |   |                     |        |   |                                                 |      |   |                            |        |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



4



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)



|                                                                                              |  |                           |         |   |      |         |  
|--------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | ------- | -
|                                                                                              |  | Six Months Ended June 30, |        
|                                                                                              |  | 2004                      |         |   | 2003 |        
|Cash flows from operating activities:                                                         |  |                           |         |   |      |         |  
|Net earnings                                                                                  |  | $                         | 244     |   |      | 50      |  
|Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |  |                           |         |   |      |         |  
|Depreciation and amortization                                                                 |  |                           | 407     |   |      | 253     |  
|Provision for loan losses                                                                     |  |                           | 820     |   |      | 312     |  
|Deferred income taxes                                                                         |  |                           | 152     |   |      | 31      |  
|Amortization and accretion of discounts and premiums on securities                            |  |                           | 193     |   |      | 153     |  
|Amortization of loan servicing rights                                                         |  |                           | 274     |   |      | 100     |  
|Gain on sale of securities available for sale                                                 |  |                           |        |   |      | (98     | )
|Gain on sale of merchant services                                                             |  |                           | (212    | ) |      |        |  
|Settlement on impaired security                                                               |  |                           |        |   |      | (400    | )
|Write-down of foreclosed real estate                                                          |  |                           |        |   |      | 32      |  
|Gain on sale of loan servicing rights                                                         |  |                           | (118    | ) |      |        |  
|Gain on sale of loans held for sale                                                           |  |                           | (662    | ) |      | (683    | )
|Originations of loans held for sale                                                           |  |                           | (39,741 | ) |      | (49,876 | )
|Proceeds from sale of loans held for sale                                                     |  |                           | 40,315  |   |      | 43,832  |  
|Increase in accrued interest receivable                                                       |  |                           | (233    | ) |      | (102    | )
|(Increase) decrease in other assets                                                           |  |                           | (469    | ) |      | 199     |  
|Increase in other liabilities                                                                 |  |                           | 99      |   |      | 1,073   |  
|                                                                                              |  |                           |         |   |      |         |  
|Net cash provided by (used in) operating activities                                           |  |                           | 1,069   |   |      | (5,124  | )
|                                                                                              |  |                           |         |   |      |         |  
|Cash flows from investing activities:                                                         |  |                           |         |   |      |         |  
|Purchase of securities available for sale                                                     |  |                           | (26,313 | ) |      | (14,796 | )
|Proceeds from maturities, calls, repayments and sales of securities available for sale        |  |                           | 5,394   |   |      | 16,275  |  
|Net increase in loans                                                                         |  |                           | (43,549 | ) |      | (28,362 | )
|Purchase of premises and equipment                                                            |  |                           | (8,295  | ) |      | (1,275  | )
|Purchase of Federal Home Loan Bank stock                                                      |  |                           | (262    | ) |      | (293    | )
|Proceeds from sale of loan servicing rights                                                   |  |                           | 969     |   |      |        |  
|Proceeds from sale of foreclosed real estate                                                  |  |                           |        |   |      | 223     |  
|Proceeds from sale of merchant services                                                       |  |                           | 212     |   |      |        |  
|                                                                                              |  |                           |         |   |      |         |  
|Net cash used in investing activities                                                         |  |                           | (71,844 | ) |      | (28,228 | )
|                                                                                              |  |                           |         |   |      |         |  
|Cash flows from financing activities:                                                         |  |                           |         |   |      |         |  
|Net increase in deposits                                                                      |  |                           | 67,284  |   |      | 20,427  |  
|Repayments of Federal Home Loan Bank advances                                                 |  |                           | (5,000  | ) |      |        |  
|Net increase in other borrowings                                                              |  |                           | 8,154   |   |      | 11,786  |  
|Offering costs                                                                                |  |                           | (7      | ) |      |        |  
|Proceeds from exercise of common stock options                                                |  |                           | 159     |   |      |        |  
|                                                                                              |  |                           |         |   |      |         |  
|Net cash provided by financing activities                                                     |  |                           | 70,590  |   |      | 32,213  |  
|                                                                                              |  |                           |         |   |      |         |  
|Net decrease in cash and cash equivalents                                                     |  |                           | (185    | ) |      | (1,139  | )
|Cash and cash equivalents at beginning of period                                              |  |                           | 7,667   |   |      | 8,970   |  
|                                                                                              |  |                           |         |   |      |         |  
|Cash and cash equivalents at end of period                                                    |  | $                         | 7,482   |   |      | 7,831   |  
|                                                                                              |  |                           |         |   |      |         |  



(continued)



5



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows, Continued

(In thousands)



|                                                                                                                            |  |                           |       |   |      |       |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ----- | - | ---- | ----- | -
|                                                                                                                            |  | Six Months Ended June 30, |      
|                                                                                                                            |  | 2004                      |       |   | 2003 |      
|Supplemental disclosure of cash flow information:                                                                           |  |                           |       |   |      |       |  
|Cash paid during the period for:                                                                                            |  |                           |       |   |      |       |  
|Interest                                                                                                                    |  | $                         | 3,333 |   |      | 2,812 |  
|                                                                                                                            |  |                           |       |   |      |       |  
|Income taxes                                                                                                                |  | $                         |      |   |      |      |  
|                                                                                                                            |  |                           |       |   |      |       |  
|Noncash transactions:                                                                                                       |  |                           |       |   |      |       |  
|Accumulated other comprehensive income (loss), net change in unrealized loss on securities available for sale, net of taxes |  | $                         | (135  | ) |      | (5    | )
|                                                                                                                            |  |                           |       |   |      |       |  
|Originated mortgage loan servicing rights capitalized                                                                       |  | $                         | 88    |   |      | 344   |  
|                                                                                                                            |  |                           |       |   |      |       |  
|Transfer of loans to foreclosed real estate                                                                                 |  | $                         |      |   |      | 237   |  
|                                                                                                                            |  |                           |       |   |      |       |  
|Transfer of loans servicing rights to other assets                                                                          |  | $                         | 97    |   |      |      |  
|                                                                                                                            |  |                           |       |   |      |       |  
|Preferred stock dividend declared, not yet paid                                                                             |  | $                         |      |   |      | 105   |  
|                                                                                                                            |  |                           |       |   |      |       |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



6



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited)



|1. | General. Coast Financial Holdings, Inc. (the Holding Company) owns 100% of the outstanding common stock of Coast Bank of Florida (the Bank)
(collectively, the Company). On April 15, 2003, the Banks stockholders approved a Plan of Merger and Merger Agreement under which the Bank became a wholly-owned subsidiary of the Holding Company. The Banks stockholders
exchanged their common stock and preferred stock for shares of the Holding Company. As a result, all (1,350,450 shares) of the previously issued $5 par value common stock of the Bank were exchanged for 1,350,450 shares of the $5 par value common
stock of the Holding Company and all (545,000 shares) of the previously issued $0.01 par value preferred stock of the Bank were exchanged for 545,000 shares of the $0.01 par value preferred stock of the Holding Company. The Holding Companys
merger with the Bank was accounted as a reorganization of entities under common control at historical cost and, the financial data for periods presented include the results of the Bank and Coast Financial Partners, Inc. (CFP).
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Holding Companys primary activity is
the operation of the Bank. The Bank is a state (Florida)-chartered commercial bank. The deposit accounts of the Bank are insured by the Federal Deposit Insurance Corporation. The Bank offers a variety of community banking services to individual and
corporate customers through its seven banking offices located in Manatee County, Florida. CFP provided investment advisory services to customers of the Bank. During the three-months ended March 31, 2004, CFP ceased operations and the Bank now
provides these services through an unrelated entity.



In the
opinion of the management of the Company, the accompanying condensed consolidated financial statements contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at June 30, 2004,
the results of operations for the three- and six-month periods ended June 30, 2004 and 2003 and cash flows for the six-month periods ended June 30, 2004 and 2003. The results of operations and other data for the three- and six-month periods ended
June 30, 2004 are not necessarily indicative of results that may be expected for the year ending December 31, 2004.



|2. | Loan Impairment and Loan Losses.The activity in the allowance for loan losses is as follows (in thousands):
|-- | -----------------------------------------------------------------------------------------------------------



|                                |  |                            |       |   |                          |       |   |      |        |   |      |       |  
|------------------------------- |  | -------------------------- | ----- | - | ------------------------ | ----- | - | ---- | ------ | - | ---- | ----- | -
|                                |  | Three Months EndedJune 30, |       |   | Six Months EndedJune 30, |      
|                                |  | 2004                       |       |   | 2003                     |       |   | 2004 |        |   | 2003 |      
|Balance at beginning of period  |  | $                          | 3,212 |   |                          | 1,499 |   |      | 3,163  |   |      | 1,350 |  
|Provision for loan losses       |  |                            | 491   |   |                          | 131   |   |      | 820    |   |      | 312   |  
|Net, charge-offs and recoveries |  |                            | (895  | ) |                          | (43   | ) |      | (1,175 | ) |      | (75   | )
|                                |  |                            |       |   |                          |       |   |      |        |   |      |       |  
|Balance at end of period        |  | $                          | 2,808 |   |                          | 1,587 |   |      | 2,808  |   |      | 1,587 |  
|                                |  |                            |       |   |                          |       |   |      |        |   |      |       |  



(continued)



7



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|2. | Loan Impairment and Loan Losses, Continued.Impaired collateral dependent loans were as follows (in thousands):
|-- | --------------------------------------------------------------------------------------------------------------



|                                             |  |                             |     |                           |     |      |     |      |    
|-------------------------------------------- |  | --------------------------- | --- | ------------------------- | --- | ---- | --- | ---- | ---
|                                             |  | Three Months Ended June 30, |     | Six Months Ended June 30,
|                                             |  | 2004                        |     | 2003                      |     | 2004 |     | 2003
|Balance at end of period                     |  | $                           | 243 |                           | 102 |      | 243 |      | 102
|                                             |  |                             |     |                           |     |      |     |      |    
|Total related allowance for losses           |  | $                           | 40  |                           | 15  |      | 40  |      | 15 
|                                             |  |                             |     |                           |     |      |     |      |    
|Average investment in impaired loans         |  | $                           | 340 |                           | 189 |      | 339 |      | 158
|                                             |  |                             |     |                           |     |      |     |      |    
|Interest income recognized on impaired loans |  | $                           |    |                           |    |      |    |      |   
|                                             |  |                             |     |                           |     |      |     |      |    
|Interest income received on impaired loans   |  | $                           |    |                           |    |      |    |      |   
|                                             |  |                             |     |                           |     |      |     |      |    



Nonaccrual and past
due loans were as follows (in thousands):



|                                             |  |             |       |      |    
|-------------------------------------------- |  | ----------- | ----- | ---- | ---
|                                             |  | At June 30,
|                                             |  | 2004        |       | 2003
|Nonaccrual loans                             |  | $           | 1,770 |      | 373
|Past due ninety days or more, still accruing |  |             |      |      | 23 
|                                             |  |             |       |      |    
|                                             |  | $           | 1,770 |      | 396
|                                             |  |             |       |      |    



|3. | Stock Option Plan.The Company has a stock option plan for certain key employees and directors of the Company. A total of 405,000 shares (amended) of common stock have
been reserved under this plan. 99,600 shares remain available for grant at June 30, 2004. The exercise price of the stock options granted under this plan must at least equal the fair market value of the common stock at the date of grant. The options
have ten year terms and vest over periods of up to three years. A summary of stock option transactions follows ($ in thousands, except per share amounts):
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  |                 |   |  |                             |  |                                |   |  |                      |  
|-------------------------------- |  | --------------- | - |  | --------------------------- |  | ------------------------------ | - |  | -------------------- | -
|                                 |  | Number ofShares |   |  | Rangeof PerShareOptionPrice |  | Weighted-AveragePer SharePrice |   |  | AggregateOptionPrice |  
|Outstanding at December 31, 2003 |  | 305,400         |   |  | $10.00-14.50                |  | 12.90                          |   |  | 3,940                |  
|Exercised                        |  | (15,900         | ) |  | (10.00)                     |  | (10.00                         | ) |  | (159                 | )
|                                 |  |                 |   |  |                             |  |                                |   |  |                      |  
|Outstanding at June 30, 2004     |  | 289,500         |   |  | $10.00-14.50                |  | 13.06                          |   |  | 3,781                |  
|                                 |  |                 |   |  |                             |  |                                |   |  |                      |  



(continued)



8



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|3. | Stock Option Plan, Continued.The Company accounts for their stock option plan under the recognition and measurement principles of Accounting Principles Board Opinion
No. 25. No stock-based employee compensation cost is reflected in net earnings (loss), as all options granted under this plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table
illustrates the effect on net earnings (loss) if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation Transition and Disclosure (collectively SFAS No. 123) to stock-based employee compensation ($ in thousands, except per share amounts).
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                       |  |                            |      |   |                           |       |   |      |      |   |      |       |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ---- | - | ------------------------- | ----- | - | ---- | ---- | - | ---- | ----- | -
|                                                                                                                                       |  | Three Months EndedJune 30, |      |   | Six Months Ended June 30, |      
|                                                                                                                                       |  | 2004                       |      |   | 2003                      |       |   | 2004 |      |   | 2003 |      
|Net earnings (loss) applicable to common stockholders, as reported                                                                     |  | $                          | 235  |   |                           | (189  | ) |      | 244  |   |      | (55   | )
|Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of related tax
effect |  |                            | (6   | ) |                           | (3    | ) |      | (12  | ) |      | (5    | )
|                                                                                                                                       |  |                            |      |   |                           |       |   |      |      |   |      |       |  
|Proforma net earnings (loss)                                                                                                           |  | $                          | 229  |   |                           | (192  | ) |      | 232  |   |      | (60   | )
|                                                                                                                                       |  |                            |      |   |                           |       |   |      |      |   |      |       |  
|Earnings (loss) per share:                                                                                                             |  |                            |      |   |                           |       |   |      |      |   |      |       |  
|Basic, as reported                                                                                                                     |  | $                          | 0.06 |   |                           | (0.14 | ) |      | 0.07 |   |      | (0.04 | )
|                                                                                                                                       |  |                            |      |   |                           |       |   |      |      |   |      |       |  
|Diluted, as reported                                                                                                                   |  | $                          | 0.06 |   |                           | (0.14 | ) |      | 0.06 |   |      | (0.04 | )
|                                                                                                                                       |  |                            |      |   |                           |       |   |      |      |   |      |       |  
|Basic, proforma                                                                                                                        |  | $                          | 0.06 |   |                           | (0.14 | ) |      | 0.06 |   |      | (0.04 | )
|                                                                                                                                       |  |                            |      |   |                           |       |   |      |      |   |      |       |  
|Diluted, proforma                                                                                                                      |  | $                          | 0.06 |   |                           | (0.14 | ) |      | 0.06 |   |      | (0.04 | )
|                                                                                                                                       |  |                            |      |   |                           |       |   |      |      |   |      |       |  



There were no options
granted during the six months ended June 30, 2004 or 2003.



|4. | Regulatory Capital. The Company and the Bank are required to maintain certain minimum regulatory capital requirements. The following is a summary at June 30, 2004 of
the regulatory capital requirements and the Companys and the Banks actual capital on a percentage basis:
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                 |  |        |   |  |                       |  
|------------------------------------------------ |  | ------ | - |  | --------------------- | -
|                                                 |  | Actual |   |  | RegulatoryRequirement |  
|Total capital to risk-weighted assets:           |  |        |   |  |                       |  
|Company                                          |  | 14.86  | % |  | 8.00                  | %
|Bank                                             |  | 12.51  | % |  | 8.00                  | %
|Tier I capital to risk-weighted assets:          |  |        |   |  |                       |  
|Company                                          |  | 13.67  | % |  | 4.00                  | %
|Bank                                             |  | 11.31  | % |  | 4.00                  | %
|Tier I capital to total assets - leverage ratio: |  |        |   |  |                       |  
|Company                                          |  | 10.02  | % |  | 4.00                  | %
|Bank                                             |  | 8.29   | % |  | 4.00                  | %



(continued)



9



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|5. | Earnings (Loss) Per Share. Earnings (loss) per share (EPS) of common stock has been computed on the basis of the weighted-average number of shares of
common stock outstanding. Outstanding stock options are considered dilutive securities in 2004 for purposes of calculating diluted EPS which is computed using the treasury stock method. Outstanding stock options are not considered dilutive
securities in 2003 due to the net losses incurred by the Company. The following table presents the calculations of the weighted-average number of shares for diluted EPS in 2004.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                    |  |                             
|----------------------------------------------------------------------------------- |  | ----------------------------
|                                                                                    |  | Weighted-Average Shares 2004
|Three Months Ended June 30:                                                         |  |                             
|For Basic EPS                                                                       |  | 3,748,110                   
|Effect of dilutive securities-Incremental shares from assumed conversion of options |  | 22,451                      
|                                                                                    |  |                             
|For Diluted EPS                                                                     |  | 3,770,561                   
|                                                                                    |  |                             
|Six Months Ended June 30:                                                           |  |                             
|For Basic EPS                                                                       |  | 3,744,071                   
|Effect of dilutive securities-Incremental shares from assumed conversion of options |  | 20,855                      
|                                                                                    |  |                             
|For Diluted EPS                                                                     |  | 3,764,926                   
|                                                                                    |  |                             



Shares not included
in the computations of diluted earnings per share in 2004 because the options exercise price was not less than the market value for the three- and six-months ended June 30, 2004 are as follows:



|        |  |                  |  |                |       |             |      |               |     
|------- |  | ---------------- |  | -------------- | ----- | ----------- | ---- | ------------- | ----
|        |  | Number of Shares |  | Exercise Price |       | Year Issued |      | Year Expiring
|Options |  | 190,000          |  | $              | 14.50 |             | 2003 |               | 2013
|        |  |                  |  |                |       |             |      |               |     



10



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Review by Independent Registered Public Accounting Firm



Hacker, Johnson & Smith PA, independent registered public accounting firm, have made a limited review of the financial data as of June 30, 2004, and for the three- and six- month periods ended June 30, 2004 and 2003 presented in this
document, in accordance with standards established by the Public Company Accounting Oversight Board.



Their report furnished pursuant to Article 10 of Regulation S-X is included herein.



11



---

Report of Independent Registered Public Accounting Firm



Coast Financial Holdings, Inc.

Bradenton, Florida:



We have reviewed the accompanying interim condensed consolidated balance sheet of Coast Financial Holdings, Inc. and Subsidiary (the Company)
as of June 30, 2004, the related interim condensed consolidated statements of operations for the three- and six- month periods ended June 30, 2004 and 2003 and the related interim condensed consolidated statements of changes in stockholders
equity and cash flows for the six-month periods ended June 30, 2004 and 2003. These interim financial statements are the responsibility of the Companys management.



We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States).
A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying interim condensed consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.



We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the
consolidated balance sheet of the Company as of December 31, 2003, and the related consolidated statements of operations, changes in stockholders equity and cash flows for the year then ended (not presented herein); and in our report dated
January 21, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2003, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it has been derived.



|                                                       
|-------------------------------------------------------
|                                                       
|/s/ Hacker, Johnson & Smith PA                         
|HACKER, JOHNSON & SMITH PA Tampa, Florida July 21, 2004



12



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



|Item 2. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------



Forward Looking Statements



This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, such as statements relating to our financial condition, prospective results of operations, future performance or expectations, plans, objectives, simulation of changes in interest rates, capital spending and financing sources,
and revenue sources. These statements relate to expectations concerning matters that are not historical fact. Accordingly, statements that are based on managements projections, estimates, assumptions and judgments are forward-looking
statements. These forward-looking statements are typically identified by words or phrases such as believe, expect, anticipate, plan, estimate, approximately, intend,
and other similar words and expressions, or future or conditional verbs such as will, should, would, could, and may. In addition, the Company may from time to time make such written or oral
forward-looking statements in future filings with the Securities and Exchange Commission (including exhibits thereto), in its reports to stockholders, and in other communications made by or with the approval of the Company.



These forward-looking statements are based largely on information currently
available to our management, and upon current views, expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and they involve inherent risks and uncertainties. Although we believe that these
forward-looking statements are based upon reasonable estimates, judgments and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, contingencies, and other factors. Accordingly, we cannot give you
any assurance that our expectations will in fact occur or that our estimates, judgments or assumptions will be correct. We caution you that actual results may differ materially and adversely from those expressed or implied by such forward-looking
statements due to a variety of factors, including, but not limited to, those related to the general and local economic environment, competition and competitive products and pricing, fiscal and monetary policies of the U.S. government, inflation,
changes in interest rates, the Companys ability to successfully open and operate new branches and collect on delinquent loans, changes in the value of collateral securing loans we have made, changes in government regulations affecting
financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset/liability management, changes in technology,
changes in the securities markets, and the availability of and the costs associated with sources of liquidity. Accordingly, investors and all others are cautioned not to place undue reliance on such forward-looking statements.



Many of these factors are beyond our control, and you should read carefully
the factors described in Risk Factors in the Companys filings (including its Forms 10-KSB and registration statements) with the Securities and Exchange Commission for a description of some, but not all, risks, uncertainties and
contingencies. These forward-looking statements speak only as of the date of this document. We do not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of
this document or to reflect the occurrence of unanticipated events.



13



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



General



Coast Financial Holdings, Inc. (the Holding Company) owns 100% of the outstanding common stock of Coast Bank of Florida (the Bank)
(collectively the Company). On April 15, 2003, the Banks stockholders approved a Plan of Merger and Merger Agreement under which the Bank became a wholly-owned subsidiary of the Holding Company. The Banks stockholders
exchanged their common stock and preferred stock for shares of the Holding Company. As a result, all (1,350,450 shares) of the previously issued $5 par value common stock of the Bank were exchanged for 1,350,450 shares of the $5 par value common
stock of the Holding Company and all (545,000 shares) of the previously issued $0.01 par value preferred stock of the Bank were exchanged for 545,000 shares of the $0.01 par value preferred stock of the Holding Company. The Holding Companys
merger with the Bank was accounted as a reorganization of entities under common control at historical cost and, the financial data for periods presented include the results of the Bank. In connection with the initial public offering of the Holding
Companys common stock in November 2003, all outstanding preferred stock was converted into common stock. During the three months ended March 31, 2004, Coast Financial Partners, Inc. ceased operations.



Liquidity and Capital Resources



The Companys primary source of cash during the six months ended June
30, 2004, was from net deposit inflows of approximately $67 million, an increase in other borrowings of approximately $8 million and principle repayments and calls of securities available for sale of approximately $5 million. Cash was used primarily
to originate net loans of approximately $44 million, to purchase securities of approximately $26 million, to purchase premises and equipment of approximately $8 million and to repay Federal Home Loan Bank advances of approximately $5 million. At
June 30, 2004, the Bank exceeded its regulatory liquidity requirements.



Management is not aware of any material trends, favorable or unfavorable, in our capital resources. Management will continue to attempt to acquire short-term deposits and low cost transaction accounts.



Off-Balance Sheet Arrangements and Aggregate Contractual Obligations



The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit and standby letters of credit. These instruments involve, to varying degrees,
elements of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet. The contract or notional amounts of these instruments reflect the extent of the Companys involvement in particular
classes of financial instruments.



14



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



The Companys exposure to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to extend credit, unused lines of credit and standby letters of credit is represented by the contractual amount of those instruments. To control the credit risk associated with entering into commitments and
issuing letters of credit, the Company uses the same credit quality, collateral policies, and monitoring controls in making commitments and letter of credit as it does with its lending activities. The Company evaluates each customers
creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on managements credit evaluation.



Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total committed amounts
do not necessarily represent future cash requirements. The Company evaluates each customers credit worthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is
based on managements credit evaluation of the counter party.



Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in
extending loans to customers.



Unused lines of credit and
commitments to extend credit typically result in loans with a market interest rate.



A summary of the amounts of the Companys financial instruments, with off-balance sheet risk at June 30, 2004, follows (in thousands):



|                             |  |                 |       
|---------------------------- |  | --------------- | ------
|                             |  | Contract Amount
|Commitments to extend credit |  | $               | 93,252
|                             |  |                 |       
|Unused lines of credit loans |  | $               | 22,900
|                             |  |                 |       
|Standby letters of credit    |  | $               | 2,789 
|                             |  |                 |       



Management believes
that the Company has adequate resources to fund all of its commitments and that substantially all its existing commitments will be funded within the next twelve months.



15



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Selected Ratios



The following are presented for the dates and periods indicated:



|                                                 |  |                                |   |  |                              |    |  |                                |     
|------------------------------------------------ |  | ------------------------------ | - |  | ---------------------------- | -- |  | ------------------------------ | ----
|                                                 |  | Six Months Ended June 30, 2004 |   |  | Year Ended December 31, 2003 |    |  | Six Months Ended June 30, 2003 |     
|Average equity as a percentage of average assets |  | 11.23                          | % |  | 8.68                         | %  |  | 8.19                           | %   
|Equity to total assets at end of period          |  | 10.14                          | % |  | 12.76                        | %  |  | 7.74                           | %   
|Return on average assets(1)                      |  | 0.16                           | % |  | (0.76                        | )% |  | 0.05                           | %(2)
|Return on average equity(1)                      |  | 1.45                           | % |  | (8.70                        | )% |  | 0.62                           | %(2)
|Dividend payout ratio(3)                         |  | N/A                            |   |  | N/A                          |    |  | N/A                            |     



|(1) | Annualized for the six months ended June 30.
|--- | --------------------------------------------



|(2) | Excluding the after tax settlement on impaired securities during the period, the return on average assets was (0.20)% and the return of average equity was (2.48)%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The Company has not paid dividends on common stock since inception.
|--- | -------------------------------------------------------------------



16



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Results of Operations



The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income
of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread; and
(v) net interest margin.



|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|-------------------------------------------------------------------------------- |  | --------------------------- | ------- | ---------------------- | ---- | ------------------- |  | ---- | --------------- |  | ---------------------- | ------- | ------------------- | - | ----- |  | ---- | -
|                                                                                 |  | Three Months Ended June 30, |        
|                                                                                 |  | 2004                        |         |                        | 2003 |                    
|                                                                                 |  | Average Balance             |         | Interest and Dividends |      | Average Yield/ Rate |  |      | Average Balance |  | Interest and Dividends |         | Average Yield/ Rate |  
|                                                                                 |  | (Dollars in thousands)      |        
|Interest-earning assets:                                                         |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Loans(1)                                                                         |  | $                           | 246,154 |                        |      | 3,861               |  | 6.31 | %               |  | $                      | 151,352 |                     |   | 2,638 |  | 6.99 | %
|Securities                                                                       |  |                             | 37,995  |                        |      | 245                 |  | 2.59 |                 |  |                        | 32,211  |                     |   | 275   |  | 3.42 |  
|Other interest-earning assets(2)                                                 |  |                             | 10,625  |                        |      | 25                  |  | 0.95 |                 |  |                        | 6,751   |                     |   | 21    |  | 1.25 |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total interest-earning assets                                                    |  |                             | 294,774 |                        |      | 4,131               |  | 5.64 |                 |  |                        | 190,314 |                     |   | 2,934 |  | 6.18 |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Noninterest-earning assets                                                       |  |                             | 28,726  |                        |      |                     |  |      |                 |  |                        | 17,100  |                     |   |       |  |      |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total assets                                                                     |  | $                           | 323,500 |                        |      |                     |  |      |                 |  | $                      | 207,414 |                     |   |       |  |      |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Savings, NOW and money-market                                                    |  |                             | 77,819  |                        |      | 318                 |  | 1.64 |                 |  |                        | 42,907  |                     |   | 172   |  | 1.61 |  
|Time deposits                                                                    |  |                             | 165,991 |                        |      | 1,387               |  | 3.36 |                 |  |                        | 111,335 |                     |   | 1,154 |  | 4.16 |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                             | 243,810 |                        |      | 1,705               |  | 2.81 |                 |  |                        | 154,242 |                     |   | 1,326 |  | 3.45 |  
|Other borrowings                                                                 |  |                             | 18,754  |                        |      | 73                  |  | 1.57 |                 |  |                        | 18,309  |                     |   | 101   |  | 2.21 |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                             | 262,564 |                        |      | 1,778               |  | 2.72 |                 |  |                        | 172,551 |                     |   | 1,427 |  | 3.32 |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                             | 27,011  |                        |      |                     |  |      |                 |  |                        | 18,606  |                     |   |       |  |      |  
|Stockholders equity                                                             |  |                             | 33,925  |                        |      |                     |  |      |                 |  |                        | 16,257  |                     |   |       |  |      |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                           | 323,500 |                        |      |                     |  |      |                 |  | $                      | 207,414 |                     |   |       |  |      |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Net interest income                                                              |  |                             |         |                        | $    | 2,353               |  |      |                 |  |                        |         |                     | $ | 1,507 |  |      |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Interest-rate spread(3)                                                          |  |                             |         |                        |      |                     |  | 2.92 | %               |  |                        |         |                     |   |       |  | 2.86 | %
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Net interest margin(4)                                                           |  |                             |         |                        |      |                     |  | 3.21 | %               |  |                        |         |                     |   |       |  | 3.18 | %
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                             | 1.12    |                        |      |                     |  |      |                 |  |                        | 1.10    |                     |   |       |  |      |  
|                                                                                 |  |                             |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  



|(1) | Includes non-accrual loans.
|--- | ---------------------------



|(2) | Includes federal funds sold and interest-bearing deposits.
|--- | ----------------------------------------------------------



|(3) | Interest-rate spread represents the difference between the average yield on interest-earning
assets and the average rate of interest-bearing liabilities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Net interest margin is net interest income divided by average interest-earning assets.
|--- | --------------------------------------------------------------------------------------



17



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of
interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income;
(iv) interest-rate spread; and (v) net interest margin.



|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|-------------------------------------------------------------------------------- |  | ------------------------- | ------- | ---------------------- | ---- | ------------------- |  | ---- | --------------- |  | ---------------------- | ------- | ------------------- | - | ----- |  | ---- | -
|                                                                                 |  | Six Months Ended June 30, |        
|                                                                                 |  | 2004                      |         |                        | 2003 |                    
|                                                                                 |  | Average Balance           |         | Interest and Dividends |      | Average Yield/ Rate |  |      | Average Balance |  | Interest and Dividends |         | Average Yield/ Rate |  
|                                                                                 |  | (Dollars in thousands)    |        
|Interest-earning assets:                                                         |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Loans(1)                                                                         |  | $                         | 235,052 |                        |      | 7,465               |  | 6.39 | %               |  | $                      | 143,804 |                     |   | 5,056 |  | 7.09 | %
|Securities                                                                       |  |                           | 32,699  |                        |      | 483                 |  | 2.97 |                 |  |                        | 30,332  |                     |   | 551   |  | 3.66 |  
|Other interest-earning assets(2)                                                 |  |                           | 8,032   |                        |      | 37                  |  | 0.93 |                 |  |                        | 7,453   |                     |   | 44    |  | 1.19 |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total interest-earning assets                                                    |  |                           | 275,783 |                        |      | 7,985               |  | 5.82 |                 |  |                        | 181,589 |                     |   | 5,651 |  | 6.28 |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Noninterest-earning assets                                                       |  |                           | 25,143  |                        |      |                     |  |      |                 |  |                        | 16,244  |                     |   |       |  |      |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total assets                                                                     |  | $                         | 300,926 |                        |      |                     |  |      |                 |  | $                      | 197,833 |                     |   |       |  |      |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Savings, NOW and money-market                                                    |  |                           | 64,028  |                        |      | 479                 |  | 1.50 |                 |  |                        | 41,161  |                     |   | 352   |  | 1.72 |  
|Time deposits                                                                    |  |                           | 157,926 |                        |      | 2,697               |  | 3.43 |                 |  |                        | 107,007 |                     |   | 2,253 |  | 4.25 |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                           | 221,954 |                        |      | 3,176               |  | 2.88 |                 |  |                        | 148,168 |                     |   | 2,605 |  | 3.55 |  
|Other borrowings                                                                 |  |                           | 19,692  |                        |      | 158                 |  | 1.61 |                 |  |                        | 15,834  |                     |   | 188   |  | 2.39 |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                           | 241,646 |                        |      | 3,334               |  | 2.77 |                 |  |                        | 164,002 |                     |   | 2,793 |  | 3.43 |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                           | 25,490  |                        |      |                     |  |      |                 |  |                        | 17,624  |                     |   |       |  |      |  
|Stockholders equity                                                             |  |                           | 33,790  |                        |      |                     |  |      |                 |  |                        | 16,207  |                     |   |       |  |      |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                         | 300,926 |                        |      |                     |  |      |                 |  | $                      | 197,833 |                     |   |       |  |      |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Net interest income                                                              |  |                           |         |                        | $    | 4,651               |  |      |                 |  |                        |         |                     | $ | 2,858 |  |      |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Interest-rate spread(3)                                                          |  |                           |         |                        |      |                     |  | 3.05 | %               |  |                        |         |                     |   |       |  | 2.85 | %
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Net interest margin(4)                                                           |  |                           |         |                        |      |                     |  | 3.39 | %               |  |                        |         |                     |   |       |  | 3.17 | %
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                           | 1.14    |                        |      |                     |  |      |                 |  |                        | 1.11    |                     |   |       |  |      |  
|                                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  



|(1) | Includes non-accrual loans.
|--- | ---------------------------



|(2) | Includes federal funds sold and interest-bearing deposits.
|--- | ----------------------------------------------------------



|(3) | Interest-rate spread represents the difference between the average yield on interest-earning assets and the average rate of interest-bearing liabilities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Net interest margin is net interest income divided by average interest-earning assets.
|--- | --------------------------------------------------------------------------------------



18



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Three-Month Periods Ended June 30, 2004 and 2003



General. Our net earnings for the three months ended June
30, 2004, were $235,000 or $0.06 earnings per basic and diluted share compared to a net loss of $84,000 or $0.14 loss per basic and diluted share of the three months ended June 30, 2003. Net earnings increased due to an increase in net interest
income, which was partially offset by an increase in noninterest expenses. Also, there was a net after tax gain of $133,000 due to the sale of our merchant services portfolio in 2004.



During the second quarter of 2004, management made the strategic decision to sell our residential servicing portfolio, and begin selling
residential loans servicing released.



The Company has also entered into a
definitive agreement for the sale of its credit card portfolio. This transaction is set to close in the third quarter of 2004.



Net Interest Income. Interest income increased to $4.1 million during the three months ended June 30, 2004, from $2.9 million in 2003. Interest on loans for
the three months ended June 30, 2004 was $3.9 million, resulting from an average yield of 6.31% compared to $2.6 million resulting from an average yield of 6.99% for 2003. The increase in interest on loans was primarily due to an increase in the
average loan balance to $246.2 million, during the three months ended June 30, 2004 compared to $151.4 million, in 2003. Interest on securities decreased to $245,000 during the three months ended June 30, 2004, from $275,000 in 2003. The decrease in
interest income on securities was primarily due to the decline in the average portfolio yield to 2.59% during the three months ended June 30, 2004 from 3.42% in 2003. Interest on other interest earning assets increased to $25,000 during the three
months ended June 30, 2004, from $21,000 during the three months ended June 30, 2003.



Interest expense on interest bearing liabilities increased to $1.8 million during the three months ended June 30, 2004, from $1.4 million during the three months ended June 30, 2003. The increase was due to an increase in the average
balance of interest bearing liabilities, which was partially offset by a decrease in the average cost of interest bearing liabilities to 2.72% in 2004 from 3.32% in 2003. The decline in the average rate paid was the result of managements
efforts to increase low cost deposit accounts and the continued decline in overall interest rates. Management is intent on building core deposits for the long-term, which enhance customer retention, and anticipate the mix of deposits to shift
throughout the remainder of 2004.



Provision for Loan Losses.
Calculating the allowance for loan losses is divided into two primary allocation groups: (1) specific allocation loans and (2) all other passing grade loans. For specific allocation loans, we have determined an allowance amount to set aside which we
believe is sufficient to cover any potential collateral shortfall. Problem loans are identified by the loan officer, loan review, loan committee or by the examiners. Those loans identified as problem loans are assigned a risk grade. Loans graded
special mention are multiplied by an inherent loss factor of 5% to determine the amount to be included in the allowance. Loans graded substandard are generally multiplied by a loss factor of 15%, loans graded doubtful are generally multiplied by a
loss factor of 50% and loans graded loss are multiplied by a loss factor of 100%. In addition to the 5% and 50% on substandard and doubtful loans, respectively, the loans are individually reviewed for any additional reserve that may by necessary.
All other loans, graded pass are multiplied by an historical experience factor to determine the appropriate level of the allowance for loan losses. In addition to historical experience factors, the Company also provides for losses due to economic
factors, concentration of credit and portfolio composition changes.



19



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Three-Month Periods Ended June 30, 2004 and 2003,
Continued



Provision for Loan Losses, Continued. The provision for loan losses was $491,000 for the three months
ended June 30, 2004 compared to $131,000 for the three months ended June 30, 2003. The increase in the provision was due to growth in the loan portfolio. Commercial real estate now comprise 28% of the Banks net loan portfolio at June 30, 2004,
compared to 22% in 2003. Residential construction and land loans more than doubled and now account for 46% of net loans, compared to 40% at June 30, 2003.



The ratio of net charge-offs to average loans outstanding increased 33 basis points to 0.36% at June 30, 2004, compared to .03% at June 30, 2003. Since the three months
ended December 31, 2003 the ratio of net charge-offs to average loans outstanding improved 9 basis points from 0.45%.



The allowance for loan losses was $2.8 million at June 30, 2004. While management believes that its allowance for loan losses is adequate as of June 30, 2004, future
adjustments to the Companys allowance for loan losses may be necessary if economic conditions differ substantially from the assumptions used in making the initial determination.



Noninterest Income. Noninterest income increased to $949,000 for the three months ended June 30, 2004 compared to
$847,000 for the three months ended June 30, 2003. The increase was due to a $212,000 gain on sale of merchant services and a gain of $118,000 on the sale of mortgage loan servicing rights, which was partially offset by a decline in asset management
fees due to the dissolving of CFP and due to an increase in net loan servicing costs.



Noninterest Expenses. Noninterest expense remained at $2.4 million for the three months ended June 30, 2004 compared to the three months ended June 30, 2003. Although noninterest expense remained flat compared to last
year, employee compensation and benefits and occupancy and equipment expense increased due to expenses associated with the addition of new branches, however, this was partially offset by a one time, non-recurring expense of $143,000, incurred in the
second quarter of 2003, relating to the organization of the Holding Company, which is included in other expenses.



Income Taxes. The income tax provision for the three months ended June 30, 2004 was $146,000 (an effective rate of 38.3%) compared to a $50,000 tax
benefit for the three months ended June 30, 2003 (an effective rate of 37.3%).



20



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Six-Month Periods Ended June 30, 2004 and 2003



General. Our net earnings for the six months ended June 30,
2004, were $244,000 or $0.07 basic and $0.06 diluted earnings per share compared to a net loss applicable to common stockholders of $55,000 or $0.04 loss per basic and diluted share of the six months ended June 30, 2003. Excluding the net after tax
settlement on impaired securities, during the six months of 2003 there was a net loss for the six months ended June 30, 2003 of $(305,000) or $(0.22) loss per basic and diluted share. Net earnings increased due to an increase in net interest income,
which was partially offset by an increase in noninterest expenses. Also, there was a net after tax gain of $133,000 due to the sale of our merchant services portfolio in 2004



During the six months ended June 30, 2004, management made the strategic decision to sell our residential servicing portfolio, and to begin
selling residential loans servicing released.



The Company has also entered
into a definitive agreement for the sale of its credit card portfolio. This transaction is set to close in the third quarter of 2004.



Net Interest Income. Interest income increased to $8.0 million during the six months ended June 30, 2004, from $5.7 million in 2003. Interest on loans for
the six months ended June 30, 2004 was $7.5 million, resulting from an average yield of 6.39% compared to $5.1 million resulting from an average yield of 7.09% for 2003. The increase in interest on loans was primarily due to an increase in the
average loan balance to $235.1 million, during the six months ended June 30, 2004 compared to $143.8 million, in 2003. Interest on securities decreased to $0.5 million during the six months ended June 30, 2004, from $0.6 million in 2003. The
decrease in interest income on securities was primarily due to the decline in the average portfolio yield to 2.97% during the six months ended June 30, 2004 from 3.66% in 2003. Interest on other interest earning assets decreased to $37,000 during
the six months ended June 30, 2004, from $44,000 during the six months ended June 30, 2003.



Interest expense on interest bearing liabilities increased to $3.3 million during the six months ended June 30, 2004, from $2.8 million during the six months ended June 30, 2003. The increase was due to an increase in
the average balance of interest bearing liabilities, which was partially offset by a decrease in the average cost of interest bearing liabilities to 2.77% in 2004 from 3.43% in 2003. The decline in the average rate paid was the result of
managements efforts to increase low cost deposit accounts and the continued decline in overall interest rates. Management is intent on building core deposits for the long-term, which enhance customer retention, and anticipate the mix of
deposits to shift throughout the remainder of 2004.



Provision for Loan
Losses. Calculating the allowance for loan losses is divided into two primary allocation groups: (1) specific allocation loans and (2) all other passing grade loans. For specific allocation loans, we have determined an allowance amount to
set aside which we believe is sufficient to cover any potential collateral shortfall. Problem loans are identified by the loan officer, loan review, loan committee or by the examiners. Those loans identified as problem loans are assigned a risk
grade. Loans graded special mention are multiplied by an inherent loss factor of 5% to determine the amount to be included in the allowance. Loans graded substandard are generally multiplied by a loss factor of 15%, loans graded doubtful are
generally multiplied by a loss factor of 50% and loans graded loss are multiplied by a loss factor of 100%. In addition to the 5% and 50% on substandard and doubtful loans, respectively, the loans are individually reviewed for any additional reserve
that may by necessary. All other loans, graded pass are multiplied by an historical experience factor to determine the appropriate level of the allowance for loan losses. In addition to historical experience factors, the Company also provides for
losses due to economic factors, concentration of credit and portfolio composition changes.



21



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Six-Month Periods Ended June 30, 2004 and 2003, Continued



Provision for Loan Losses, Continued. The provision for loan losses was $820,000 for the six months
ended June 30, 2004 compared to $312,000 for the six months ended June 30, 2003. The increase in the provision was due to growth in the loan portfolio. Commercial real estate now comprise 28% of the Banks net loan portfolio at June 30, 2004,
compared to 22% in 2003. Residential construction and land loans more than doubled and now account for 46% of net loans, compared to 40% at June 30, 2003.



The allowance for loan losses was $2.8 million at June 30, 2004. While management believes that its allowance for loan losses is adequate as of June 30, 2004, future
adjustments to the Companys allowance for loan losses may be necessary if economic conditions differ substantially from the assumptions used in making the initial determination.



Noninterest Income. Noninterest income increased to $1,537,000 for the six months ended June 30, 2004 compared to
$1,467,000 for the six months ended June 30, 2003. The increase was due to a $212,000 gain on sale of merchant services and a $118,000 gain on the sale of mortgage loan servicing rights which was partially offset by an increase in net loan servicing
costs and a decline in asset management fees due to the dissolving of CFP during the six months ended June 30, 2004.



Noninterest Expenses. Noninterest expense increased to $5.0 million for the six months ended June 30, 2004 compared to $3.9 million for the six
months ended June 30, 2003. The increase was due to expenses associated with the addition of new branches opened in each of the last preceding three quarters.



Income Taxes. The income tax provision for the six months ended June 30, 2004 was $152,000 (an effective rate of 38.4%) compared to $31,000 for
the six months ended June 30, 2003 (an effective rate of 38.3%).



22



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



|Item 3. | Controls and Procedures
|------- | -----------------------



The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our management, with the participation of our President and Chief
Executive Office and our Chief Financial Officer (the Companys principal executive officer and principal financial officer, respectively), have evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this Form 10-QSB.



Based on this evaluation of our disclosure controls and procedures, our President and Chief Executive Officer and our Chief Financial
Officer have concluded that the Companys disclosure controls and procedures were effective to ensure the disclosure of material information relating to the Company and the Companys consolidated subsidiaries that is required to be
disclosed in reports filed or submitted by the Company under the Exchange Act.



The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the Chief Executive and Chief Financial
officers.



23



---

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------



There are no material pending legal proceeding to which Coast Financial Holdings, Inc., is a party or to which any of their property is subject.



|Item 2. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



The Annual Meeting of Shareholders (the Annual Meeting) of Coast Financial Holdings, Inc., was held on May 18, 2004, to consider the election of eight
directors. Shareholders elected eight directors with terms expiring at the Annual Meeting in 2005. The shareholders also voted on the ratification of amendments to the 2003 Stock Option Plan.



At the Annual Meeting, 3,229,209 shares were present in person or by proxy. Listed below are
the directors that were elected at the Annual Meeting, there terms and a summary of the votes cast for each nominee:



|                    |  |           |  |      |  |          |  |    
|------------------- |  | --------- |  | ---- |  | -------- |  | ---
|Director            |  | For       |  | %    |  | Withheld |  | %  
|James K. Toomey     |  | 3,142,809 |  | 97.3 |  | 86,400   |  | 2.7
|Joseph Gigliotti    |  | 3,142,709 |  | 97.3 |  | 86,500   |  | 2.7
|Kennedy Legler, III |  | 3,142,809 |  | 97.3 |  | 86,400   |  | 2.7
|Paul G. Nobbs       |  | 3,142,809 |  | 97.3 |  | 86,400   |  | 2.7
|Thomas M. OBrien   |  | 3,142,809 |  | 97.3 |  | 86,400   |  | 2.7
|Brian P. Peters     |  | 3,142,109 |  | 97.3 |  | 87,100   |  | 2.7
|John R. Reinemeyer  |  | 3,142,809 |  | 97.3 |  | 86,400   |  | 2.7
|Michael T. Ruffino  |  | 3,142,809 |  | 97.3 |  | 86,400   |  | 2.7



The shareholder vote on one other
matter considered at the meeting was as follows:



|                                                         |  |           |  |      |  |         |  |      |  |         |  |     |  |          |  |     
|-------------------------------------------------------- |  | --------- |  | ---- |  | ------- |  | ---- |  | ------- |  | --- |  | -------- |  | ----
|                                                         |  | For       |  | %    |  | Against |  | %    |  | Abstain |  | %   |  | Non-Vote |  | %   
|Ratification of amendments to the 2003 Stock Option Plan |  | 1,555,268 |  | 48.2 |  | 802,885 |  | 24.9 |  | 51,600  |  | 1.6 |  | 819,456  |  | 25.4
|                                                         |  |           |  |      |  |         |  |      |  |         |  |     |  |          |  |     



Because the votes for approval of the
ratification of amendments to the 2003 Stock Option were greater than votes against, under Florida law the amendment to the 2003 Stock Option Plan were approved.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



PART II. OTHER INFORMATION, CONTINUED



|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



|(a) | Exhibits. The following exhibits were filed with the Securities and Exchange Commission and are incorporated by reference into this Form 10-QSB.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------



|            |  |                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                       
|10.5        |  | Separation Agreement by and between Coast Financial Holdings, Inc. and Gerald L. Anthony (Incorporated by reference to Exhibit 5 to Form 8K to be Filed by the Company on February 17,
2004).
|            | 
|10.6        |  | Purchase and Sale Agreement, dated January 13, 2004, by and between 1301 Associates, L.C. and the Company. Filed with the Companies Form 8K on February 14, 2004.                            
|            | 
|31.1        |  | Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                                                                         
|            | 
|31.2        |  | Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                                                                         
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                



|(b) | Reports on Form 8-K.Registrant filed two Form 8-Ks during the three-month period ended June 30, 2004.
|--- | ------------------------------------------------------------------------------------------------------



On April 22, 2004, the Company filed a current report on Form 8K, under Item
12 announcing its financial results for the first quarter of 2004.



On June 24, 2004, Coast Financial Holdings, Inc. issued a press release announcing the implementation of cost savings and risk reduction and a continued growth plan.



25



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                      |  |  |  |     |  |                                |  |                                              
|--------------------- |  |  |  | --- |  | ------------------------------ |  | ---------------------------------------------
|                      |  |  |  |     |  | COAST FINANCIAL HOLDINGS, INC.
|                      |  |  |  |     |  | (Registrant)                  
|                      |  |  | 
|Date: August 10, 2004 |  |  |  | By: |  | /s/ Brian P. Peters           
|                      |  |  |  |     |  |                                |  | Brian P. Peters, President and Chief         
|                      |  |  |  |     |  |                                |  | Executive Officer                            
|                      |  |  | 
|Date: August 10, 2004 |  |  |  | By: |  | /s/ Brian F. Grimes           
|                      |  |  |  |     |  |                                |  | Brian F. Grimes, Executive Vice President and
|                      |  |  |  |     |  |                                |  | Chief Financial Officer                      



26