##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(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, 2006



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

For the transition period from  to

Commission file number 000-50433



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COAST
FINANCIAL HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)



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

1301  6thAvenue West, Suite 300

Bradenton, Florida 34205

(Address of Principal Executive Offices)

(941) 752-5900

(Registrants Telephone Number, Including Area Code)



(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)



---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1394 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 ̈

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act). check one:



|                         |  |                    |  |                         
|------------------------ |  | ------------------ |  | ------------------------
|Large Accelerated Filer ̈ |  | Accelerated Filer ̈ |  | Non-Accelerated Filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    YES ̈NO  x

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



|                                        |  |                             
|--------------------------------------- |  | ----------------------------
|Common Stock, par value $5.00 per
share |  | 6,509,057 shares            
|(class)                                 |  | Outstanding at July 21, 2006



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

INDEX





|                                                                                                                         |  |      
|------------------------------------------------------------------------------------------------------------------------ |  | -----
|                                                                                                                         |  | Page 
|PART I. FINANCIAL INFORMATION                                                                                            |  |      
|                                                                                                                         | 
|Item 1. Financial Statements                                                                                             |  |      
|                                                                                                                         | 
|Condensed Consolidated Balance Sheets - At June 30, 2006 (unaudited) and At December 31, 2005                            |  | 2    
|                                                                                                                         | 
|Condensed Consolidated Statements of Operations - Three and Six Months ended June 30, 2006 and 2005 (unaudited)          |  | 3    
|                                                                                                                         | 
|Condensed Consolidated Statements of Changes in Stockholders Equity Six Months Ended June 30, 2006 and 2005 (unaudited) |  | 4    
|                                                                                                                         | 
|Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2006 and 2005 (unaudited)                    |  | 5-6  
|                                                                                                                         | 
|Notes to Condensed Consolidated Financial Statements (unaudited)                                                         |  | 7-11 
|                                                                                                                         | 
|Review by Independent Registered Public Accounting Firm                                                                  |  | 12   
|                                                                                                                         | 
|Report of Independent Registered Public Accounting Firm                                                                  |  | 13   
|                                                                                                                         | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 14-24
|                                                                                                                         | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                       |  | 25   
|                                                                                                                         | 
|Item 4. Controls and Procedures                                                                                          |  | 25   
|                                                                                                                         | 
|PART II. OTHER INFORMATION                                                                                               |  |      
|                                                                                                                         | 
|Item 1. Legal Proceedings                                                                                                |  | 26   
|                                                                                                                         | 
|Item 1A. Risk Factors                                                                                                    |  | 26   
|                                                                                                                         | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                      |  | 26   
|                                                                                                                         | 
|Item 3. Defaults Upon Senior Securities                                                                                  |  | 26   
|                                                                                                                         | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                              |  | 26-27
|                                                                                                                         | 
|Item 5. Other Information                                                                                                |  | 27   
|                                                                                                                         | 
|Item 6. Exhibits                                                                                                         |  | 28   
|                                                                                                                         | 
|SIGNATURES                                                                                                               |  | 30   



1



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##### Table of Contents

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 30,2006 |         |   | December 31,2005 |  
|                                                                                                                                 |  | (Unaudited)  |         |   |                  |  
|Assets                                                                                                                           |  |              |         |   |                  |   |         |  
|Cash and due from banks                                                                                                          |  | $            | 16,649  |   |                  | $ | 25,203  |  
|Federal funds sold and securities purchased under agreements to resell                                                           |  |              | 4,930   |   |                  |   | 22,810  |  
|                                                                                                                                 |  |              |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                        |  |              | 21,579  |   |                  |   | 48,013  |  
|                                                                                                                                 |  |             
|Securities available for sale                                                                                                    |  |              | 86,977  |   |                  |   | 79,029  |  
|Loans, net of allowance for loan losses of $3,446 and $3,146, respectively                                                       |  |              | 479,173 |   |                  |   | 390,867 |  
|Federal Home Loan Bank stock, at cost                                                                                            |  |              | 1,640   |   |                  |   | 1,289   |  
|Premises and equipment, net                                                                                                      |  |              | 26,161  |   |                  |   | 24,780  |  
|Accrued interest receivable                                                                                                      |  |              | 2,941   |   |                  |   | 2,218   |  
|Deferred income taxes                                                                                                            |  |              | 3,289   |   |                  |   | 2,471   |  
|Other assets                                                                                                                     |  |              | 2,913   |   |                  |   | 1,627   |  
|                                                                                                                                 |  |              |         |   |                  |   |         |  
|Total assets                                                                                                                     |  | $            | 624,673 |   |                  | $ | 550,294 |  
|                                                                                                                                 |  |              |         |   |                  |   |         |  
|Liabilities and Stockholders Equity                                                                                             |  |              |         |   |                  |   |         |  
|                                                                                                                                 |  |             
|Liabilities:                                                                                                                     |  |              |         |   |                  |   |         |  
|Noninterest-bearing demand deposits                                                                                              |  | $            | 31,248  |   |                  | $ | 33,302  |  
|Savings, NOW and money-market deposits                                                                                           |  |              | 101,007 |   |                  |   | 84,635  |  
|Time deposits                                                                                                                    |  |              | 391,075 |   |                  |   | 331,520 |  
|                                                                                                                                 |  |              |         |   |                  |   |         |  
|Total deposits                                                                                                                   |  |              | 523,330 |   |                  |   | 449,457 |  
|Federal Home Loan Bank advances                                                                                                  |  |              | 10,000  |   |                  |   | 10,000  |  
|Other borrowings                                                                                                                 |  |              | 15,928  |   |                  |   | 14,367  |  
|Other liabilities                                                                                                                |  |              | 3,116   |   |                  |   | 2,707   |  
|                                                                                                                                 |  |              |         |   |                  |   |         |  
|Total liabilities                                                                                                                |  |              | 552,374 |   |                  |   | 476,531 |  
|                                                                                                                                 |  |              |         |   |                  |   |         |  
|Stockholders equity:                                                                                                            |  |              |         |   |                  |   |         |  
|Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares issued and outstanding                                  |  |              |        |   |                  |   |        |  
|Common stock, $5 par value; 20,000,000 shares authorized, 6,509,057 and 6,503,600 shares issued and outstanding in 2006 and
2005 |  |              | 32,545  |   |                  |   | 32,518  |  
|Additional paid-in capital                                                                                                       |  |              | 45,597  |   |                  |   | 45,591  |  
|Accumulated deficit                                                                                                              |  |              | (4,856  | ) |                  |   | (3,839  | )
|Accumulated other comprehensive loss                                                                                             |  |              | (987    | ) |                  |   | (507    | )
|                                                                                                                                 |  |              |         |   |                  |   |         |  
|Total stockholders equity                                                                                                       |  |              | 72,299  |   |                  |   | 73,763  |  
|                                                                                                                                 |  |              |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                       |  | $            | 624,673 |   |                  | $ | 550,294 |  
|                                                                                                                                 |  |              |         |   |                  |   |         |  

See Accompanying Notes to Condensed Consolidated Financial
Statements.



2



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations (Unaudited)

($ in thousands, except per share amounts)



|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|----------------------------------------------------------------------- |  | -------------------------- | --------- | - | ------------------------ | --------- | - | ---- | --------- | - | ---- | --------- | -
|                                                                        |  | Three Months EndedJune 30, |           |   | Six Months EndedJune 30, |          
|                                                                        |  | 2006                       |           |   | 2005                     |           |   | 2006 |           |   | 2005 |          
|Interest income:                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Loans                                                                   |  | $                          | 8,098     |   |                          | 5,476     |   |      | 15,143    |   |      | 10,317    |  
|Securities                                                              |  |                            | 1,020     |   |                          | 522       |   |      | 1,945     |   |      | 974       |  
|Other interest-earning assets                                           |  |                            | 97        |   |                          | 8         |   |      | 389       |   |      | 15        |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Total interest income                                                   |  |                            | 9,215     |   |                          | 6,006     |   |      | 17,477    |   |      | 11,306    |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Interest expense:                                                       |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Deposits                                                                |  |                            | 4,815     |   |                          | 2,630     |   |      | 8,875     |   |      | 4,785     |  
|Borrowings                                                              |  |                            | 208       |   |                          | 237       |   |      | 387       |   |      | 411       |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Total interest expense                                                  |  |                            | 5,023     |   |                          | 2,867     |   |      | 9,262     |   |      | 5,196     |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Net interest income                                                     |  |                            | 4,192     |   |                          | 3,139     |   |      | 8,215     |   |      | 6,110     |  
|Provision for loan losses                                               |  |                            | 174       |   |                          | 1,522     |   |      | 307       |   |      | 1,882     |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Net interest income after provision for loan losses                     |  |                            | 4,018     |   |                          | 1,617     |   |      | 7,908     |   |      | 4,228     |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Noninterest income:                                                     |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Service charges on deposit accounts                                     |  |                            | 115       |   |                          | 125       |   |      | 239       |   |      | 247       |  
|Gain on sale of loans held for sale                                     |  |                            | 433       |   |                          | 486       |   |      | 843       |   |      | 927       |  
|Other service charges and fees                                          |  |                            | 15        |   |                          | 13        |   |      | 32        |   |      | 26        |  
|Other                                                                   |  |                            |          |   |                          | 4         |   |      | 13        |   |      | 4         |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Total noninterest income                                                |  |                            | 563       |   |                          | 628       |   |      | 1,127     |   |      | 1,204     |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Noninterest expenses:                                                   |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Employee compensation and benefits                                      |  |                            | 2,700     |   |                          | 1,746     |   |      | 5,161     |   |      | 3,346     |  
|Occupancy and equipment                                                 |  |                            | 1,121     |   |                          | 546       |   |      | 2,052     |   |      | 953       |  
|Data processing                                                         |  |                            | 238       |   |                          | 220       |   |      | 482       |   |      | 431       |  
|Professional fees                                                       |  |                            | 235       |   |                          | 347       |   |      | 434       |   |      | 444       |  
|Telephone, postage and supplies                                         |  |                            | 378       |   |                          | 261       |   |      | 690       |   |      | 495       |  
|Advertising                                                             |  |                            | 505       |   |                          | 354       |   |      | 941       |   |      | 511       |  
|Other                                                                   |  |                            | 461       |   |                          | 300       |   |      | 818       |   |      | 649       |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Total noninterest expenses                                              |  |                            | 5,638     |   |                          | 3,774     |   |      | 10,578    |   |      | 6,829     |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Loss before income tax benefit                                          |  |                            | (1,057    | ) |                          | (1,529    | ) |      | (1,543    | ) |      | (1,397    | )
|Income tax benefit                                                      |  |                            | (353      | ) |                          | (571      | ) |      | (526      | ) |      | (516      | )
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Net loss                                                                |  | $                          | (704      | ) |                          | (958      | ) |      | (1,017    | ) |      | (881      | )
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Loss per share basic and diluted                                        |  | $                          | (0.11     | ) |                          | (0.25     | ) |      | (0.16     | ) |      | (0.23     | )
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Weighted-average number of common shares outstanding, basic and diluted |  |                            | 6,509,057 |   |                          | 3,757,650 |   |      | 6,507,703 |   |      | 3,757,623 |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  
|Dividends per share                                                     |  | $                          |          |   |                          |          |   |      |          |   |      |          |  
|                                                                        |  |                            |           |   |                          |           |   |      |           |   |      |           |  

See Accompanying Notes to Condensed Consolidated Financial Statements.



3



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Changes in
Stockholders Equity

Six Months Ended June 30, 2006 and 2005

($ in thousands)



|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|---------------------------------------------------------------------------------------- |  | ----------- | ------ | ------------------------ | ------ | - | ------------------ | ------ | - | ----------------------------------- | ---- | - | ------------------------ | ------ | -
|                                                                                         |  | CommonStock |        | AdditionalPaid-InCapital |        |   | AccumulatedDeficit |        |   | AccumulatedOtherCompre-hensive Loss |      |   | TotalStockholdersEquity |       
|Balance at December 31, 2004                                                             |  | $           | 18,780 |                          | 19,448 |   |                    | (3,224 | ) |                                     | (56  | ) |                          | 34,948 |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Comprehensive loss:                                                                      |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Net loss (unaudited)                                                                     |  |             |       |                          |       |   |                    | (881   | ) |                                     |     |   |                          | (881   | )
|Net change in unrealized loss on securities available for sale, net of taxes (unaudited) |  |             |       |                          |       |   |                    |       |   |                                     | 19   |   |                          | 19     |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Comprehensive loss (unaudited)                                                           |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          | (862   | )
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Proceeds from exercise of common stock options (1,600 shares) (unaudited)                |  |             | 8      |                          | 8      |   |                    |       |   |                                     |     |   |                          | 16     |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Balance at June 30, 2005 (unaudited)                                                     |  | $           | 18,788 |                          | 19,456 |   |                    | (4,105 | ) |                                     | (37  | ) |                          | 34,102 |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Balance at December 31, 2005                                                             |  | $           | 32,518 |                          | 45,591 |   |                    | (3,839 | ) |                                     | (507 | ) |                          | 73,763 |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Comprehensive loss:                                                                      |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Net loss (unaudited)                                                                     |  |             |       |                          |       |   |                    | (1,017 | ) |                                     |     |   |                          | (1,017 | )
|Net change in unrealized loss on securities available for sale, net of taxes (unaudited) |  |             |       |                          |       |   |                    |       |   |                                     | (480 | ) |                          | (480   | )
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Comprehensive loss (unaudited)                                                           |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          | (1,497 | )
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Proceeds from exercise of common stock options (5,457 shares) (unaudited)                |  |             | 27     |                          | 39     |   |                    |       |   |                                     |     |   |                          | 66     |  
|Tax effect from exercise of common stock options (1,624 shares) (unaudited)              |  |             |       |                          | 4      |   |                    |       |   |                                     |     |   |                          | 4      |  
|Share Based Compensation expense (unaudited)                                             |  |             |       |                          | 113    |   |                    |       |   |                                     |     |   |                          | 113    |  
|Offering costs relating to 2005 common stock offering paid in 2006 (unaudited)           |  |             |       |                          | (150   | ) |                    |       |   |                                     |     |   |                          | (150   | )
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  
|Balance at June 30, 2006 (unaudited)                                                     |  | $           | 32,545 |                          | 45,597 |   |                    | (4,856 | ) |                                     | (987 | ) |                          | 72,299 |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                     |      |   |                          |        |  

See Accompanying Notes to Condensed Consolidated Financial Statements.



4



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)



|                                                                                          |  |                          |          |   |      |         |  
|----------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | ------- | -
|                                                                                          |  | Six Months EndedJune 30, |         
|                                                                                          |  | 2006                     |          |   | 2005 |        
|Cash flows from operating activities:                                                     |  |                          |          |   |      |         |  
|Net loss                                                                                  |  | $                        | (1,017   | ) |      | (881    | )
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |  |                          |          |   |      |         |  
|Depreciation and amortization                                                             |  |                          | 879      |   |      | 589     |  
|Provision for loan losses                                                                 |  |                          | 307      |   |      | 1,882   |  
|Deferred income tax benefit                                                               |  |                          | (530     | ) |      | (516    | )
|Amortization and accretion of discounts and premiums on securities                        |  |                          | 81       |   |      | 155     |  
|Share based compensation expense                                                          |  |                          | 113      |   |      |        |  
|(Gain) loss on sale of property and equipment                                             |  |                          | (13      | ) |      | 31      |  
|Gain on sale of loans held for sale                                                       |  |                          | (843     | ) |      | (927    | )
|Originations of loans held for sale                                                       |  |                          | (43,196  | ) |      | (46,998 | )
|Proceeds from sale of loans held for sale                                                 |  |                          | 44,039   |   |      | 47,925  |  
|Increase in accrued interest receivable                                                   |  |                          | (723     | ) |      | (304    | )
|(Increase) decrease in other assets                                                       |  |                          | (1,119   | ) |      | 826     |  
|Increase in other liabilities                                                             |  |                          | 409      |   |      | 571     |  
|                                                                                          |  |                          |          |   |      |         |  
|Net cash (used in) provided by operating activities                                       |  |                          | (1,613   | ) |      | 2,353   |  
|                                                                                          |  |                          |          |   |      |         |  
|Cash flows from investing activities:                                                     |  |                          |          |   |      |         |  
|Purchase of securities available for sale                                                 |  |                          | (20,202  | ) |      | (11,400 | )
|Proceeds from maturities, calls and repayments of securities available for sale           |  |                          | 11,405   |   |      | 7,829   |  
|Net increase in loans                                                                     |  |                          | (88,780  | ) |      | (63,958 | )
|Purchase of Federal Home Loan Bank stock                                                  |  |                          | (351     | ) |      | (716    | )
|Purchase of premises and equipment                                                        |  |                          | (3,880   | ) |      | (5,753  | )
|Proceeds from sale of property and equipment                                              |  |                          | 1,633    |   |      | 25      |  
|                                                                                          |  |                          |          |   |      |         |  
|Net cash used in investing activities                                                     |  |                          | (100,175 | ) |      | (73,973 | )
|                                                                                          |  |                          |          |   |      |         |  
|Cash flows from financing activities:                                                     |  |                          |          |   |      |         |  
|Net increase in deposits                                                                  |  |                          | 73,873   |   |      | 68,455  |  
|Proceeds from Federal Home Loan Bank advances                                             |  |                          | 9,000    |   |      | 61,000  |  
|Repayments of Federal Home Loan Bank advances                                             |  |                          | (9,000   | ) |      | (51,000 | )
|Net increase in other borrowings                                                          |  |                          | 1,561    |   |      | 4,556   |  
|Net decrease in federal funds purchased                                                   |  |                          |         |   |      | (3,790  | )
|Net increase in repurchase agreement                                                      |  |                          |         |   |      | 4,731   |  
|Payment of offering costs relating to 2005 common stock offering                          |  |                          | (150     | ) |      |        |  
|Proceeds from exercise of common stock options                                            |  |                          | 66       |   |      | 16      |  
|Tax effect from exercise of common stock options                                          |  |                          | 4        |   |      |        |  
|                                                                                          |  |                          |          |   |      |         |  
|Net cash provided by financing activities                                                 |  |                          | 75,354   |   |      | 83,968  |  
|                                                                                          |  |                          |          |   |      |         |  
|Net increase in cash and cash equivalents                                                 |  |                          | (26,434  | ) |      | 12,348  |  
|Cash and cash equivalents at beginning of period                                          |  |                          | 48,013   |   |      | 7,122   |  
|                                                                                          |  |                          |          |   |      |         |  
|Cash and cash equivalents at end of period                                                |  | $                        | 21,579   |   |      | 19,470  |  
|                                                                                          |  |                          |          |   |      |         |  

(continued)



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited), Continued

(In thousands)



|                                                                                                                            |  |                           |       |   |      |      
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ----- | - | ---- | -----
|                                                                                                                            |  | Six Months Ended June 30,
|                                                                                                                            |  | 2006                      |       |   | 2005
|Supplemental disclosure of cash flow information:                                                                           |  |                           |       |   |      |      
|Cash paid during the period for:                                                                                            |  |                           |       |   |      |      
|Interest                                                                                                                    |  | $                         | 9,053 |   |      | 5,075
|                                                                                                                            |  |                           |       |   |      |      
|Income taxes                                                                                                                |  | $                         |      |   |      |     
|                                                                                                                            |  |                           |       |   |      |      
|Noncash transactions:                                                                                                       |  |                           |       |   |      |      
|Accumulated other comprehensive (loss) income, net change in unrealized loss on securities available for sale, net of
taxes |  | $                         | (480  | ) |      | 19   
|                                                                                                                            |  |                           |       |   |      |      
|Transfer of loans to other assets                                                                                           |  | $                         | 167   |   |      | 156  
|                                                                                                                            |  |                           |       |   |      |      

See Accompanying Notes to Condensed Consolidated Financial Statements.



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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).

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 eighteen banking located in Manatee Pinellas, Hillsborough and Pasco Counties, Florida. Coast Financial Partners, Inc. (CFP), a wholly owned subsidiary of the Bank, is an inactive
corporation.

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, 2006, the results of operations for the three and six month periods ended June 30, 2006 and 2005 and cash
flows for the six-month periods ended June 30, 2006 and 2005. The results of operations and other data for the three and six-month period ended June 30, 2006 are not necessarily indicative of results that may be expected for the year
ending December 31, 2006.

2.Loan Impairment and Loan Losses.We continued to implement our strategy to exit or
restructure certain under-performing, under-collateralized, or high risk loans that were originated prior to February 2004 as part of our asset quality initiative. In February 2004, the lending relationships which we had identified to possess an
unsatisfactory level of risk totaled approximately $26.2 million. The composition of these loans at that time was approximately $17.8 million of indirect automobile loans and $8.4 million of commercial loans. With respect to these loans, we sought
additional or alternative collateral, a complete exit of the borrower from the Bank, or a restructuring of the credit to accelerate the loan pay-off. As of June 30, 2006, these loans have been reduced to $2.5 million of indirect automobile
loans, and $163,000 of commercial loans.

The activity in the allowance for loan losses is as follows (in
thousands):



|                                  |  |                             |       |      |                           |   |      |       |   |      |        |  
|--------------------------------- |  | --------------------------- | ----- | ---- | ------------------------- | - | ---- | ----- | - | ---- | ------ | -
|                                  |  | Three Months Ended June 30, |       |      | Six Months Ended June 30, |  
|                                  |  | 2006                        |       | 2005 |                           |   | 2006 |       |   | 2005 |       
|Balance at beginning of period    |  | $                           | 3,271 |      | 3,040                     |   |      | 3,146 |   |      | 2,901  |  
|Provision for loan losses         |  |                             | 174   |      | 1,522                     |   |      | 307   |   |      | 1,882  |  
|Net, (charge-offs) and recoveries |  |                             | 1     |      | (1,375                    | ) |      | (7    | ) |      | (1,596 | )
|                                  |  |                             |       |      |                           |   |      |       |   |      |        |  
|Balance at end of period          |  | $                           | 3,446 |      | 3,187                     |   |      | 3,446 |   |      | 3,187  |  
|                                  |  |                             |       |      |                           |   |      |       |   |      |        |  

(continued)



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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,
|                                             |  | 2006                        |     | 2005                      |       | 2006 |   | 2005
|Balance at end of period                     |  | $                           | 502 |                           | 475   |      | $ | 502  |  | 475  
|                                             |  |                             |     |                           |       |      |   |      |  |      
|Total related allowance for losses           |  | $                           | 502 |                           | 39    |      | $ | 502  |  | 39   
|                                             |  |                             |     |                           |       |      |   |      |  |      
|Average investment in impaired loans         |  | $                           | 502 |                           | 1,760 |      | $ | 556  |  | 1,117
|                                             |  |                             |     |                           |       |      |   |      |  |      
|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,
|                                             |  | 2006        |       | 2005
|Nonaccrual loans                             |  | $           | 1,088 |      | 1,072
|Past due ninety days or more, still accruing |  |             |      |      |     
|                                             |  |             |       |      |      
|                                             |  | $           | 1,088 |      | 1,072
|                                             |  |             |       |      |      

3.Share-Based Compensation.Prior to January 1, 2006, the Companys stock
option plans were accounted for under the recognition and measurement provisions of APB Opinion No. 25 (Opinion 25), Accounting for Stock Issued to Employees, and related Interpretations, as permitted by FASB Statement No. 123,
Accounting for Stock-Based Compensation (as amended by SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure) (collectively SFAS 123). No stock-based employee compensation cost was recognized in the
Companys consolidated statements of operations through December 31, 2005, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Effective
January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123 (R) Share-Based Payment (SFAS 123R), using the modified-prospective-transition method. Under that transition method,
compensation cost recognized in 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value calculated in accordance with the original
provisions of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R).

In addition, prior to the adoption of SFAS 123(R), the tax benefits of stock option exercises were classified as operating cash flows. Since the adoption
of SFAS 123(R), tax benefits resulting from tax deductions in excess of the compensation cost recognized for options are classified as financing cash flows. As the Company adopted the modified prospective transition method, the prior period cash
flow statement was not adjusted to reflect current period presentation.

(continued)



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

3.Share-Based Compensation, Continued.The following table illustrates the effect on net losses and losses per share if the Company had applied the fair value recognition
provisions of SFAS 123 to options granted under the Companys stock option plan for the three and six months ended June 30, 2005. For purposes of this pro forma disclosure, the value of the options is estimated using the Black-Scholes
option-pricing model and is being amortized to expense as the options vest (in thousands, except per share data):



|                                                                                                                                       |  |                                  |       |   |                                |   |       |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----- | - | ------------------------------ | - | ----- | -
|                                                                                                                                       |  | Three Months Ended June 30, 2005 |       |   | Six Months Ended June 30, 2005 |  
|Net loss, as reported                                                                                                                  |  | $                                | (958  | ) |                                | $ | (881  | )
|                                                                                                                                       |  |                                 
|Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of related
tax effect |  |                                  | (31   | ) |                                |   | (48   | )
|                                                                                                                                       |  |                                  |       |   |                                |   |       |  
|Proforma net loss                                                                                                                      |  |                                  | (989  | ) |                                |   | (929  | )
|                                                                                                                                       |  |                                  |       |   |                                |   |       |  
|Basic and diluted loss per share:                                                                                                      |  |                                  |       |   |                                |   |       |  
|As reported                                                                                                                            |  |                                  | (0.25 | ) |                                |   | (0.23 | )
|                                                                                                                                       |  |                                  |       |   |                                |   |       |  
|Proforma                                                                                                                               |  |                                  | (0.26 | ) |                                |   | (0.25 | )
|                                                                                                                                       |  |                                  |       |   |                                |   |       |  

The Company has adopted stock option plans in 2003, 2005 and on May 16, 2006 for certain key
employees and directors of the Company. A total of 968,000 shares of common stock have been reserved under these plans. 480,598 shares remain available for grant at June 30, 2006. The exercise price of the stock options granted under these
plans must at least equal the fair market value of the common stock at the date of grant. The options granted to employees generally have ten year terms and one third vest immediately with the remaining vesting over two years. The options issued to
directors generally are fully vested on the date of grant and have ten year terms.

(continued)



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

3.Share-Based Compensation, Continued.

A summary of stock option
transactions follows:



|                                 |  |                  |   |  |                                            |       |                                              |     |                                          |   |      
|-------------------------------- |  | ---------------- | - |  | ------------------------------------------ | ----- | -------------------------------------------- | --- | ---------------------------------------- | - | -----
|                                 |  | Number of Shares |   |  | Weighted- Average Per Share
Exercise Price |       | Weighted- Average Remaining Contractual Term |     | Aggregate Intrinsic Value (in thousands)
|Outstanding at December 31, 2005 |  | 456,449          |   |  | $                                          | 13.64 |                                              |     |                                          |   |      
|Granted                          |  | 11,586           |   |  |                                            | 16.59 |                                              |     |                                          |   |      
|Exercised                        |  | (5,457           | ) |  |                                            | 12.13 |                                              |     |                                          |   |      
|Expired                          |  | (2,833           | ) |  |                                            | 15.60 |                                              |     |                                          |   |      
|                                 |  |                  |   |  |                                            |       |                                              |     |                                          |   |      
|Outstanding at June 30, 2006     |  | 459,745          |   |  | $                                          | 13.72 |                                              | 7.5 |                                          | $ | 1,186
|                                 |  |                  |   |  |                                            |       |                                              |     |                                          |   |      
|Exercisable at June 30, 2006     |  | 410,415          |   |  | $                                          | 13.48 |                                              | 7.3 |                                          | $ | 1,157
|                                 |  |                  |   |  |                                            |       |                                              |     |                                          |   |      

There were no options exercised during the three months ended June 30,2006. The total
intrinsic value of options exercised during the six months ended June 30, 2006 was approximately $66,000. At June 30, 2006, there was approximately $93,000 of total unrecognized compensation expense related to nonvested share-based
compensation arrangements granted under the plans. The cost is expected to be recognized over a weighted-average period of 12 months. The total fair value of shares vesting and recognized as compensation expense was approximately $69,000 and
$113,000 for the three and six months ended June 30, 2006, respectively, and the associated income tax benefit recognized was approximately $10,000 in the three and six months ended June 30, 2006.

The fair value of each option granted for the three and six months ended June 30, 2006 and 2005 is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:



|                                              |  |                             |       |   |                           |   |      |      |  |   |       |   |  |   |      |  
|--------------------------------------------- |  | --------------------------- | ----- | - | ------------------------- | - | ---- | ---- |  | - | ----- | - |  | - | ---- | -
|                                              |  | Three Months Ended June 30, |       |   | Six Months Ended June 30, |  
|                                              |  | 2006                        |       |   | 2005                      |   |      | 2006 |  |   | 2005  |  
|Risk-free interest rate                       |  |                             | 5.08  | % |                           |   | 4.34 | %    |  |   | 4.83  | % |  |   | 4.34 | %
|Dividend yield                                |  |                             |      | % |                           |   |     | %    |  |   |      | % |  |   |     | %
|Expected volatility                           |  |                             | 18.10 | % |                           |   | 4.52 | %    |  |   | 18.32 | % |  |   | 4.52 | %
|Expected life in years                        |  |                             | 5.00  |   |                           |   | 5.75 |      |  |   | 5.26  |   |  |   | 5.75 |  
|                                              |  |                             |       |  
|Per share fair value of options at grant date |  | $                           | 4.60  |   |                           | $ | 6.01 |      |  | $ | 4.73  |   |  | $ | 6.01 |  
|                                              |  |                             |       |   |                           |   |      |      |  |   |       |   |  |   |      |  

As part of its adoption SFAS 123R, the Company examined its historical pattern of option exercises
in an effort to determine if there were any pattern based on certain employee populations. From this analysis, the Company could not identify any patterns in the exercise of options. As such, the Company used the guidance in Staff Accounting
Bulletin No. 107 to determine the estimated life of options issued subsequent to the adoption of SFAS 123R. Based on this guidance, the estimated term was deemed to be the midpoint of the vesting term and the contractual term((vesting term and
original contractual term)/2). Prior to 2006 the expected volatility was based on industry standards, however, in 2006 it is based on the Companys historical volatility.

(continued)



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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, 2006 of the
regulatory capital requirements and the Companys and the Banks actual capital on a percentage basis:



|                                                 |  |        |   |  |                                     |  
|------------------------------------------------ |  | ------ | - |  | ----------------------------------- | -
|                                                 |  | Actual |   |  | Well Capitalized Regulatory Minimum |  
|Total capital to risk-weighted assets:           |  |        |   |  |                                     |  
|Company                                          |  | 17.92  | % |  | 10.00                               | %
|Bank                                             |  | 11.86  | % |  | 10.00                               | %
|Tier I capital to risk-weighted assets:          |  |        |   |  |                                     |  
|Company                                          |  | 17.08  | % |  | 6.00                                | %
|Bank                                             |  | 11.03  | % |  | 6.00                                | %
|Tier I capital to total assets - leverage ratio: |  |        |   |  |                                     |  
|Company                                          |  | 11.95  | % |  | 5.00                                | %
|Bank                                             |  | 7.71   | % |  | 5.00                                | %

5. Loss Per Share. Loss per share of common stock has been computed on the basis of
the weighted-average number of shares of common stock outstanding. Outstanding stock options are not considered dilutive securities for the three and six month periods ended June 30, 2006 and 2005 due to the net loss incurred by the Company.

6.Subsequent Event  Change in Management.Effective July 17, 2006, the Company and the Bank, and Brian P.
Peters, President and Chief Executive Officer of both entities, agreed to terminate their relationship. Under the terms of his employment agreement, Mr. Peters will receive a lump sum severance payment of $742,900. Further, in exchange for his
resignation from the board of directors of the Company and the Bank, and as an expression of gratitude for his service, the exercise period for all of Mr. Peters outstanding stock options have been extended. Each option is now exercisable
for a period of 10 years from their date of grant. The compensation cost recognized as a result of the extension of the exercise period for Mr. Peters options to be recorded in the quarter ending September 30, 2006 will be
approximately $106,000. As a result of Mr. Peters termination the Company expects to expense approximately $479,000 after tax in the third quarter of 2006.



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Review by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith PA, the Companys independent registered public accounting firm, have made a limited review of
the financial data as of June 30, 2006, and for the three and six-month periods ended June 30, 2006 and 2005 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.



12



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##### Table of Contents

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, 2006, and the related
interim condensed consolidated statements of operations for the three and six-month periods ended June 30, 2006 and 2005, and the related interim condensed consolidated statements of Changes in Stockholders Equity and Cash Flows for the
six-month periods ended June 30, 2006 and 2005. 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, 2005, 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 March 24, 2006, 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, 2005, 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 19, 2006



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Item 2. Managements Discussion and Analysis

of Financial Condition and Results of Operations

A Note About Forward Looking Statements

This Quarterly Report on Form 10-Q
(including the exhibits hereto) contains certain 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, results of operations, plans, objectives, future performance or expectations, and business operations. 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 constitute forward-looking statements. These forward-looking statements are typically identified by words or phrases such as believe, expect,
anticipate, plan, estimate, approximately, intend, objective, goal, project, and other similar words and expressions, or future or conditional verbs such
as will, should, would, could, and may. These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions,
plans, estimates, judgments and projections about our business and our industry, and such statements involve inherent risks and uncertainties. Although we believe our expectations are based on reasonable estimates and assumptions, they are not
guarantees of performance and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied
by such forward-looking statements. Accordingly, there is no assurance that our expectations will in fact occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such
forward-looking statements. Some factors include, but are not limited to those described or referenced under Item 1A. Risk Factors, and the following:



| |  |  | general economic conditions, either nationally or in Florida, may be less favorable than expected, resulting in, among other things, a deterioration in credit
quality or a decreased demand for our services and products;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the interest rate environment which could reduce our margins and increase defaults in our loan portfolio;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | the adequacy of our credit risk management and the allowance for loan losses, the Banks asset quality, and our ability to collect on delinquent loans;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the value of collateral securing loans that we have made;
| | - |  | --------------------------------------------------------------------



| |  |  | the availability of and costs associated with sources of liquidity;
| | - |  | -------------------------------------------------------------------



| |  |  | changes in accounting policies and practices, as may be adopted by regulatory agencies as well as the Financial Accounting Standards Board;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to identify, consummate and manage additional branch expansion or acquisition opportunities and, with respect to branch opportunities identified and
acquired, to successfully open and operate new branches in a timely and cost effective manner or, with respect to acquisition opportunities consummated, to successfully manage the integration of acquired businesses;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



| |  |  | changes in political conditions or in the legislative or regulatory environment that adversely affects the businesses in which we are engaged, including the
impact of any changes in laws and regulations relating to banking, securities, taxes, and insurance (such as changes in regulatory fees and capital requirements);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes occurring in consumer spending, saving, and borrowing habits;
| | - |  | ---------------------------------------------------------------------



| |  |  | changes in trade, tax, monetary, or fiscal policies, including the interest rate policies of the Federal Reserve Board;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | money market and monetary fluctuations, and changes in inflation and in the securities markets;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | changes in technology;
| | - |  | ----------------------



| |  |  | changes in the Companys organizational structure and in its compensation and benefit plans, including those necessitated by pressures in the labor market
for attracting and retaining qualified personnel;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unanticipated litigation, regulatory, or other judicial proceedings;
| | - |  | --------------------------------------------------------------------



| |  |  | the success of the Company at managing the risks involved in the foregoing;
| | - |  | ---------------------------------------------------------------------------



| |  |  | other risks which may be described in our future filings with the SEC under the Securities Exchange Act of 1934.
| | - |  | ----------------------------------------------------------------------------------------------------------------

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 this report, our Form 10-K and our registration statements) with the Securities and Exchange Commission for a description of some, but not all, risks, uncertainties and contingencies. All written or oral forward
looking statements that one made or attributable to us are expressly qualified in their entity by this cautionary notice. These forward-looking statements speak only as of the date on which such statement is made. 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.

General

Coast Financial Holdings, Inc. (the Holding
Company) owns 100% of the outstanding common stock of Coast Bank of Florida (the Bank or Coast Bank) (collectively, the Company).

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 eighteen banking offices located in Hillsborough, Manatee, Pinellas and Pasco counties, Florida. Four of our
eighteen branches have been opened during the quarter ended June 30, 2006, including our first branch in Pasco county which was opened in June 2006.



15



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

This Managements Discussion and Analysis of Financial Condition and Results of Operations discuss on a consolidated basis the
operating results and financial condition of the Company for the quarters ended June 30, 2006 and 2005. The discussion and analysis set forth below is intended to assist you in understanding the financial condition and results of our
operations. You should read this discussion together with your review of our consolidated financial statements and the related notes contained herein.

Comparison of Financial Condition at June 30, 2006 and December 31,2005

Our total assets increased 13.6% to $625 million at June 30, 2006, compared to $550 million at December 31, 2005. Book value per share for the quarter ended June 30, 2006 was $11.11 compared to $11.34 for the year ending
December 31, 2005.

Our net loans increased 22.5%, to $479 million at June 30, 2006, compared to $391 million at
December 31, 2005. Of the total, portfolio loans consisted of approximately $13.7 million in commercial loans, approximately $131.7 million in commercial real estate loans, approximately $295.7 million in residential real estate loans, and
approximately $39.8 million in consumer and other loans, net of deferred cost and allowance for loan losses of approximately $1.7 million. The allowance for loan losses increased from $3.1 million at December 31, 2005 to $3.4 million at
June 30, 2006. The allowance for loan losses at June 30, 2006 was 0.72% of portfolio loans.

Results of Operations

Comparison of the Three-Month Periods Ended June 30, 2006 and 2005

General. For the three months ended June 30, 2006, the Company reported a net loss of approximately $704,000, or basic
and diluted losses per share of $0.11 compared to a net loss of approximately $958,000, or a basic and diluted earnings per share of $0.25 for the three months ended June 30, 2005. The decrease in net loss was attributable primarily to a
decrease in the provision for loan losses in addition to an increase in net interest income, partially offset by an increase in noninterest expense and a decrease in noninterest income. The decrease in loan loss provision was primarily due to the
increased second quarter 2005 loan loss provision due to high risk loans identified as part of our 2004 loan review, including those which resulted in a $1.1 million charge-off in the second quarter of 2005 and the increase in noninterest expense
was primarily due to branch expansion costs and increased advertising and marketing cost.

Net Interest
Income. Net interest income increased to $4.2 million during the three months ended June 30, 2006, from $3.1 million for the same period in 2005. Interest on loans for the three months ended June 30, 2006 was $8.1 million,
resulting from an average yield of 7.19% compared to $5.5 million resulting from an average yield of 6.34% for the three months ended June 30, 2005. The increase in interest on loans was primarily due to an increase in the average loan balance
to $452 million, during the three months ended June 30, 2006 compared to $347 million, for the three months ended June 30, 2005. Interest on securities increased to $1.0 million during the three months ended June 30, 2006, from
$522,000 for the same period in 2005. The increase in interest income on securities was primarily due to the increase in the average security balance to $90 million during the three months ended June 30, 2006 from $60 million for the three
months ended June 30, 2005 complemented by a 103 basis point increase in yield over the same period. Interest on other interest earning assets increased to $97,000 during the three months ended June 30, 2006, from $8,000 for the same
period in 2005.



16



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Comparison of the Three-Month Periods Ended June 30, 2006 and 2005, Continued

Net Interest Income, continued.Interest expense on interest bearing liabilities increased to $5.0 million during the three
months ended June 30, 2006, compared to $2.9 million during the three months ended June 30, 2005. The increase was due to an increase in the average balance of interest bearing liabilities, to $486 million in 2006 from $372 million in 2005
in addition to a 105 basis point increase in rate.

Provision for Loan Losses. The provision for loan losses
was $174,000 for the three months ended June 30, 2006 compared to $1.5 million for the three months ended June 30, 2005. The decrease in the provision was primarily due to the provision for the three months ended June 30, 2005 being
substantially increased due to Legacy Loans, including those Legacy Loans with three different borrowers, which resulted in charge-offs of $1.1 million for the three months ended June 30, 2005. There was a minimal amount of charged-off loans
during the quarter ended June 30, 2006. Commercial real estate loans grew 4% and comprise 27% of the Banks loan portfolio at June 30, 2006, compared to 35% at June 30, 2005. Residential construction and land loans grew 66% and
now account for 45% of loans, compared to 36% at June 30, 2005. Residential real estate loans grew 48% and comprise 17% of the Banks loan portfolio at June 30, 2006, compared to 15% at June 30, 2005.

At June 30, 2006 and 2005, we had total net portfolio loans of approximately $479 million and $360 million respectively. The
allowance for loan losses was $3.4 million and $3.2 million at June 30, 2006 and 2005, respectively, representing 0.72% and 0.88% of total net loans at the end of each period. While management believes that its allowance for loan losses is
adequate as of June 30, 2006, 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 decreased to $563,000 for the three months ended June 30, 2006 compared
to $628,000 for the three months ended June 30, 2005. The decrease was due to the decreases in gains recognized on the sale of loans held for sale.

Noninterest Expenses.Noninterest expense increased to $5.6 million for the three months ended June 30, 2006 compared to $3.8 million for the three months ended June 30, 2005. Our most
significant noninterest expenses, those related to salaries and employee benefits, were approximately 47.9% and 46.3%, respectively, of such noninterest expenses for the three months ended June 30, 2006 and 2005. The increase in noninterest
expense during the quarter ended June 30, 2006 was due primarily to salaries and employee benefits and occupancy expenses due to the opening of four branch offices, and the hiring of employees to support the overall growth of the Bank and an
increase of $151,000 in advertising expenditures. The total noninterest expense for the four branches opened for the three months ended June 30, 2006 is approximately $455,000.

Income Taxes. The income tax benefit for the three months ended June 30, 2006 was $353,000, which equates to an effective rate
of 33.4% compared to a tax benefit of $571,000 for the three months ended June 30, 2005, which equates to an effective rate of 37.3%.



17



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Comparison of the Three-Month Periods Ended June 30, 2006 and 2005, Continued

Average Balances and Average Rates.The following table sets forth, for the three months ended June 30, 2006 and 2005,
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, 2006          |         |                        | June 30, 2005 |               
|                                                                                 |  | AverageBalance (1)     |         | InterestIncome/Expense |               | Yield/Rate (2) |  |      | AverageBalance (1) |  | InterestIncome/Expense |         | Yield/Rate (2) |  
|                                                                                 |  | (dollars in thousands) |        
|Interest-earning assets:                                                         |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Loans (3)                                                                        |  | $                      | 452,021 |                        |               | 8,098          |  | 7.19 | %                  |  | $                      | 346,547 |                |   | 5,476 |  | 6.34 | %
|Investment securities (4)                                                        |  |                        | 89,925  |                        |               | 1,020          |  | 4.55 |                    |  |                        | 59,503  |                |   | 522   |  | 3.52 |  
|Other interest-earning assets (5)                                                |  |                        | 7,787   |                        |               | 97             |  | 4.99 |                    |  |                        | 1,239   |                |   | 8     |  | 2.59 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total interest-earning assets                                                    |  |                        | 549,733 |                        |               | 9,215          |  | 6.72 |                    |  |                        | 407,289 |                |   | 6,006 |  | 5.91 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total noninterest earning assets                                                 |  |                        | 43,824  |                        |               |                |  |      |                    |  |                        | 34,798  |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total assets                                                                     |  | $                      | 593,557 |                        |               |                |  |      |                    |  | $                      | 442,087 |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|NOW                                                                              |  | $                      | 42,624  |                        |               | 263            |  | 2.47 |                    |  | $                      | 17,286  |                |   | 14    |  | 0.32 |  
|Money market                                                                     |  |                        | 45,307  |                        |               | 438            |  | 3.87 |                    |  |                        | 69,021  |                |   | 409   |  | 2.38 |  
|Savings                                                                          |  |                        | 4,557   |                        |               | 6              |  | 0.52 |                    |  |                        | 4,031   |                |   | 5     |  | 0.50 |  
|Time                                                                             |  |                        | 366,716 |                        |               | 4,108          |  | 4.49 |                    |  |                        | 244,535 |                |   | 2,202 |  | 3.61 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                        | 459,204 |                        |               | 4,815          |  | 4.21 |                    |  |                        | 334,873 |                |   | 2,630 |  | 3.15 |  
|Other borrowings                                                                 |  |                        | 26,985  |                        |               | 208            |  | 3.09 |                    |  |                        | 36,940  |                |   | 237   |  | 2.57 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                        | 486,189 |                        |               | 5,023          |  | 4.14 |                    |  |                        | 371,813 |                |   | 2,867 |  | 3.09 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total noninterest bearing liabilities                                            |  |                        | 34,735  |                        |               |                |  |      |                    |  |                        | 35,704  |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total liabilities                                                                |  |                        | 520,924 |                        |               |                |  |      |                    |  |                        | 407,517 |                |   |       |  |      |  
|Stockholders equity                                                             |  |                        | 72,633  |                        |               |                |  |      |                    |  |                        | 34,570  |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total liabilities and shareholders equity                                       |  | $                      | 593,557 |                        |               |                |  |      |                    |  | $                      | 442,087 |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Net interest income                                                              |  |                        |         |                        | $             | 4,192          |  |      |                    |  |                        |         |                | $ | 3,139 |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Interest-rate spread (6)                                                         |  |                        |         |                        |               |                |  | 2.58 | %                  |  |                        |         |                |   |       |  | 2.82 | %
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Net interest margin (7)                                                          |  |                        |         |                        |               |                |  | 3.06 | %                  |  |                        |         |                |   |       |  | 3.09 | %
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                        | 1.13    |                        |               |                |  |      |                    |  |                        | 1.10    |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |       |  |      |  

---

|(1) | Average balance represents the average daily balance for the quarters ended June 30, 2006 and 2005.
|--- | ---------------------------------------------------------------------------------------------------

|(2) | Annualized for the three months ended.
|--- | --------------------------------------

|(3) | Non-accruing loans are included in computation of average balance.
|--- | ------------------------------------------------------------------

|(4) | The yield information does not give effect to changes in fair value that are reflected as a component of stockholders equity. Includes FHLB stock.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes federal funds sold and securities purchased under agreements to resell.
|--- | --------------------------------------------------------------------------------

|(6) | Interest-rate spread represents the difference between average yield on interest-bearing assets and the average rate of interest-bearing liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Net interest margin is the net interest income divided by average interest earning assets.
|--- | ------------------------------------------------------------------------------------------



18



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Comparison of the Six-Month Periods Ended June 30, 2006 and 2005

General. For the six months ended June 30, 2006, the Company reported a net loss of approximately $1.0 million, or basic and diluted loss per share of $0.16 compared to a net
loss of approximately $881,000, or a basic and diluted loss per share of $0.23 for the six months ended June 30, 2005. The increase in net loss was attributable primarily to an increase in noninterest expenses, which was partially offset by an
increase in net interest income and a decrease in the provision for loan losses. The increase in noninterest expense was primarily due to branch expansion costs and increased advertising and marketing costs.

Net Interest Income. Net interest income increased to $8.2 million during the six months ended June 30, 2006, from $6.1
million for the same period in 2005. Interest on loans for the six months ended June 30, 2006 was $15.1 million, resulting from an average yield of 7.09% compared to $10.3 million resulting from an average yield of 6.30% for the six months
ended June 30, 2005. The increase in interest on loans was primarily due to an increase in the average loan balance to $430.8 million, during the six months ended June 30, 2006 compared to $330.5 million, for the six months ended
June 30, 2005. Interest on securities increased to $1.9 million during the six months ended June 30, 2006, from $1.0 million for the same period in 2005. The increase in interest income on securities was primarily due to the increase in
the average security balance to $87.9 million during the six months ended June 30, 2006 from $58.3 million for the six months ended June 30, 2005 complemented by a 109 basis point increase in yield over the same period. Interest on other
interest earning assets increased to $389,000 during the six months ended June 30, 2006, from $15,000 during the six months ended June 30, 2005.

Interest expense on interest bearing liabilities increased to $9.3 million during the six months ended June 30, 2006, compared to $5.2 million during the six months ended June 30, 2005. The increase was due
to an increase in the average balance of interest bearing liabilities, to $470.2 million in 2006 from $353.7 million in 2005 in addition to a 101 basis point increase in rate.

Provision for Loan Losses. The provision for loan losses was $307,000 for the six months ended June 30, 2006 compared to $1.9 million for the six months ended June 30,
2005. The decrease in the provision was primarily due to the provision for the six months ended June 30, 2005 being substantially increased due to Legacy Loans, including those Legacy Loans with three different borrowers, which resulted in
charge-offs of $1.1 million for the six months ended June 30, 2005. There was a minimal amount of charged-off loans during the quarter ended June 30, 2006. Commercial real estate loans grew 4% and comprise 27% of the Banks loan
portfolio at June 30, 2006, compared to 35% at June 30, 2005. Residential construction and land loans grew 66% and now account for 45% of loans, compared to 36% at June 30, 2005. Residential real estate loans grew 48% and comprise 17%
of the Banks loan portfolio at June 30, 2006, compared to 15% at June 30, 2005.



19



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Comparison of the Six -Month Periods Ended June 30, 2006 and 2005, Continued

Provision for Loan Losses, continued. At June 30, 2006 and 2005, we had total net portfolio loans of approximately
$479 million and $360 million respectively. The allowance for loan losses was $3.4 million and $3.2 million at June 30, 2006 and 2005, respectively, representing 0.72% and 0.88% of total net loans at the end of each period. While management
believes that its allowance for loan losses is adequate as of June 30, 2006, 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 decreased to $1.1 million for the six
months ended June 30, 2006 compared to $1.2 million for the six months ended June 30, 2005. The decrease was primarily due to the decreases in gains recognized on the sale of loans held for sale.

Noninterest Expenses.Noninterest expense increased to $10.6 million for the six months ended June 30, 2006
compared to $6.8 million for the six months ended June 30, 2005. Our most significant noninterest expenses, those related to salaries and employee benefits, were approximately 48.8% and 49.0%, respectively, of such noninterest expenses for the
six months ended June 30, 2006 and 2005. The increase in noninterest expense in 2006 was due primarily to salaries and employee benefits and occupancy expenses due to the opening of six branch offices, and the hiring of employees to support the
overall growth of the Bank and an increase of $430,000 in advertising expenditures. The total noninterest expense for the six branches opened for the six months ended June 30, 2006 is approximately $987,000.

Income Taxes. The income tax benefit for the six months ended June 30, 2006 was $526,000, which equates to an
effective rate of 34.1% compared to a tax benefit of $516,000 for the six months ended June 30, 2005, which equates to an effective rate of 36.9%.



20



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Comparison of the Six -Month Periods Ended June 30, 2006 and 2005, Continued

Average Balances and Average Rates.The following table sets forth, for the six months ended June 30, 2006 and 2005,
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, 2006          |         |                        | June 30, 2005 |               
|                                                                                 |  | AverageBalance (1)     |         | InterestIncome/Expense |               | Yield/Rate (2) |  |      | AverageBalance (1) |  | InterestIncome/Expense |         | Yield/Rate (2) |  
|                                                                                 |  | (dollars in thousands) |        
|Interest-earning assets:                                                         |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Loans (3)                                                                        |  | $                      | 430,837 |                        |               | 15,143         |  | 7.09 | %                  |  | $                      | 330,476 |                |   | 10,317 |  | 6.30 | %
|Investment securities (4)                                                        |  |                        | 87,886  |                        |               | 1,945          |  | 4.46 |                    |  |                        | 58,347  |                |   | 974    |  | 3.37 |  
|Other interest-earning assets (5)                                                |  |                        | 17,143  |                        |               | 389            |  | 4.58 |                    |  |                        | 1,211   |                |   | 15     |  | 2.50 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total interest-earning assets                                                    |  |                        | 535,866 |                        |               | 17,477         |  | 6.58 |                    |  |                        | 390,034 |                |   | 11,306 |  | 5.85 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total noninterest earning assets                                                 |  |                        | 43,289  |                        |               |                |  |      |                    |  |                        | 32,169  |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total assets                                                                     |  | $                      | 579,155 |                        |               |                |  |      |                    |  | $                      | 422,203 |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Interest-bearing liabilities:                                                    |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|NOW                                                                              |  | $                      | 39,699  |                        |               | 441            |  | 2.24 |                    |  | $                      | 16,484  |                |   | 26     |  | 0.32 |  
|Money market                                                                     |  |                        | 46,038  |                        |               | 803            |  | 3.52 |                    |  |                        | 72,202  |                |   | 809    |  | 2.26 |  
|Savings                                                                          |  |                        | 4,628   |                        |               | 12             |  | 0.52 |                    |  |                        | 3,968   |                |   | 10     |  | 0.51 |  
|Time                                                                             |  |                        | 353,332 |                        |               | 7,619          |  | 4.35 |                    |  |                        | 226,475 |                |   | 3,940  |  | 3.51 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total interest-bearing deposits                                                  |  |                        | 443,697 |                        |               | 8,875          |  | 4.03 |                    |  |                        | 319,129 |                |   | 4,785  |  | 3.02 |  
|Other borrowings                                                                 |  |                        | 26,537  |                        |               | 387            |  | 2.94 |                    |  |                        | 34,578  |                |   | 411    |  | 2.40 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total interest-bearing liabilities                                               |  |                        | 470,234 |                        |               | 9,262          |  | 3.97 |                    |  |                        | 353,707 |                |   | 5,196  |  | 2.96 |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total noninterest bearing liabilities                                            |  |                        | 35,911  |                        |               |                |  |      |                    |  |                        | 33,751  |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total liabilities                                                                |  |                        | 506,145 |                        |               |                |  |      |                    |  |                        | 387,458 |                |   |        |  |      |  
|Stockholders equity                                                             |  |                        | 73,010  |                        |               |                |  |      |                    |  |                        | 34,745  |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total liabilities and shareholders equity                                       |  | $                      | 579,155 |                        |               |                |  |      |                    |  | $                      | 422,203 |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Net interest income                                                              |  |                        |         |                        | $             | 8,215          |  |      |                    |  |                        |         |                | $ | 6,110  |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Interest-rate spread (6)                                                         |  |                        |         |                        |               |                |  | 2.61 | %                  |  |                        |         |                |   |        |  | 2.89 | %
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Net interest margin (7)                                                          |  |                        |         |                        |               |                |  | 3.09 | %                  |  |                        |         |                |   |        |  | 3.16 | %
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                        | 1.14    |                        |               |                |  |      |                    |  |                        | 1.10    |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |               |                |  |      |                    |  |                        |         |                |   |        |  |      |  

---

|(1) | Average balance represents the average daily balance years to date ended June 30, 2006 and 2005.
|--- | ------------------------------------------------------------------------------------------------

|(2) | Annualized for comparability with full year data.
|--- | -------------------------------------------------

|(3) | Non-accruing loans are included in computation of average balance.
|--- | ------------------------------------------------------------------

|(4) | The yield information does not give effect to changes in fair value that are reflected as a component of stockholders equity. Includes FHLB stock.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes federal funds sold and securities purchased under agreements to resell.
|--- | --------------------------------------------------------------------------------

|(6) | Interest-rate spread represents the difference between average yield on interest-bearing assets and the average rate of interest-bearing liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Net interest margin is the net interest income divided by average interest-earning assets.
|--- | ------------------------------------------------------------------------------------------



21



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Liquidity and Capital Resources

The Companys primary source of cash during the six months ended June 30, 2006, was from net deposit inflows of approximately $73.9 million, principle repayments and calls of securities available for sale of
approximately $11.4 million, proceeds from Federal Home Loan Bank advances of approximately $9.0 million, an increase in other borrowings of approximately $1.6 million and proceeds from sale of property and equipment of approximately $1.6 million.
Cash was used primarily to originate net loans of approximately $88.8 million, to purchase securities of approximately $20.2 million, repay Federal Home Loan Bank advances $9.0 million, and to purchase premises and equipment of approximately $3.9
million. Management will continue to attempt to acquire short-term deposits and low cost transaction accounts. At June 30, 2006, the Bank exceeded its regulatory liquidity requirements.

As part of our expansion plans, the Company has agreed to lease from American Financial Realty Trust six former bank branch facilities
located in the greater Tampa Bay region, (the Acquired Branches). Four of the six Acquired Branches have opened during the six months ended June 30, 2006, with the remaining two locations expected to open in the remainder of 2006.
Additionally, we have opened two de novo branches during the six months ended June 30, 2006, and currently plan to open two more in the remainder of 2006. We have entered into 15-year leases for each of the Acquired Branches, which has
obligated us to pay initial annual base rent in an aggregate of approximately $730,000, as well as other occupancy expenses. Further, we are required to pay an annual management fee equal to 3% of the then-annual base rent. We have been carrying
these lease expenses and other expenses associated with the Acquired Branches prior to their opening. In addition to these carrying costs, we have needed to renovate and hire employees to operate each of these branches. The renovations on the four
open Acquired Branches have cost between $325,000 and $400,000. Renovation costs on the remaining Acquired Branches are currently anticipated to be between $350,000 and $550,000. Ground up construction and renovation costs on the two de novo
branches expected to open in the remainder of 2006 are currently anticipated to be between $400,000 and $600,000. We anticipate that the net proceeds from the sale of our common shares in November 2005 will provide the necessary capital for our
current expansion activities and will otherwise satisfy our capital requirements for the foreseeable future.

The Company
also has the ability to borrow funds from the FHLB to supplement its liquidity needs. In addition to its FHLB borrowing capacity, Coast Bank also has arranged for a $4.0 million line of credit with Independent Bankers Bank, and a $4.5 million
line of credit with Compass Bank, each of which bears interest at the then current federal funds rate, to be used to purchase federal funds. Additionally, the Company has an available $5.0 million line of credit with Independent Bankers Bank,
bearing interest at prime minus 1.0%.

Furthermore, if we continue to achieve our anticipated growth levels and/or
significant opportunities to expand our business operations present themselves, the Company is likely to require additional funds in order to finance such growth and expansion activities. Accordingly, the Company is considering and evaluating a
variety of additional sources of funds and capital to meet its cash requirements, including the sale of equity securities, debt financings and borrowings, trust preferred offerings, and other financing alternatives. Although the sale of equity
securities is the most likely source of such funds, there is no assurance that the Company will not seek other financing alternatives, that the Company will be able to obtain additional financing, if needed, or, if available, that it can be obtained
on terms favorable to the Company.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

At June 30, 2006 and 2005, stockholders equity was approximately $72.3 million (or 11.57% of total assets), and $34.8 (or
8.22% of total assets), respectively. Book value per common share was $11.11 at June 30, 2006, $9.27 at June 30, 2005.

Off-Balance Sheet Financial Instruments

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, standby letters of credit, unused lines of credit and unfunded construction
loans. 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.

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, unfunded construction loans, 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 letters of credit as it
does with its lending activities.

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 some 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 and to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The
credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting those commitments.

Unused lines of credit and commitments to extend credit typically results in loans with a market interest rate. The following table is a
summary of the amounts of the financial instruments, with off-balance sheet risk, at June 30, 2006 (in thousands):



|                             |  |                |        
|---------------------------- |  | -------------- | -------
|                             |  | ContractAmount
|Commitments to extend credit |  | $              | 298    
|                             |  |                |        
|Standby letters of credit    |  | $              | 712    
|                             |  |                |        
|Unused lines of credit       |  | $              | 36,492 
|                             |  |                |        
|Unfunded construction loans  |  | $              | 182,585
|                             |  |                |        



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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.

Selected Ratios

The following are presented for the dates and periods indicated:



|                                                 |  |                             |    |  |                            |    |  |                             |   
|------------------------------------------------ |  | --------------------------- | -- |  | -------------------------- | -- |  | --------------------------- | --
|                                                 |  | Six MonthsEndedJune 30,2006 |    |  | Year EndedDecember 31,2005 |    |  | Six MonthsEndedJune 30,2005 |   
|Average equity as a percentage of average assets |  | 12.61                       | %  |  | 9.32                       | %  |  | 8.23                        | % 
|Equity to total assets at end of period          |  | 11.57                       | %  |  | 13.40                      | %  |  | 7.28                        | % 
|Return on average assets(1)                      |  | (0.35                       | )% |  | (0.13                      | )% |  | (0.42                       | )%
|Return on average equity(1)                      |  | (2.82                       | )% |  | (1.43                      | )% |  | (5.11                       | )%
|Dividend payout ratio(2)                         |  | N/A                         |    |  | N/A                        |    |  | N/A                         |   

---

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

|(2) | The Company has not paid dividends on common stock since inception.
|--- | -------------------------------------------------------------------



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Item 3. Quantitative and Qualitative Disclosures About
Market Risk

There have been no material changes in the Companys market risk from December 31, 2005. For
information regarding the Companys market risk, please refer to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

Item 4. 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 (the Exchange Act) is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Companys management, including our Chief Executive Officer and Chief Financial Officer (the
Companys Principal Executive Officer and Principal Financial Officer, respectively), as appropriate to allow for timely decisions regarding timely disclosure. In designing and evaluating disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost/benefit
relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and
our Chief Financial Officer, has 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 Exchange Act as of the end of the period covered by this Form 10-Q.

Based on this evaluation of our disclosure controls and procedures, our Chief Executive Officer and our Chief Financial
Officer have concluded that the Companys disclosure controls and procedures, subject to the limitations disclosed above, were effective as of June 30, 2006.

There were no significant changes in our internal controls over financial reporting (as defined in Rule 13a-15(4) of the Exchange Act) that occurred during the second quarter of our 2006 fiscal
year that has materially affected, or in other factors that could or is reasonably likely to materially affect, these controls subsequent to the date of the evaluation of those controls by the Chief Executive and Chief Financial officers.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its wholly-owned subsidiary, Coast Bank of
Florida, are periodically parties to or otherwise involved in legal proceedings arising in the ordinary course of business. Management does not believe that there is any proceeding threatened or pending against the Company or Coast Bank of Florida
which, if determined adversely, would have a material affect on the business, results of operations, cash flows or financial position of the Company or Coast Bank of Florida.

Item 1A. Risk Factors.

An investment in our common shares involves certain risks,
including those identified and described in Item 1A. of the Companys Annual Report of Form 10-K for the fiscal year ended December 31, 2005 (Form 10-K), as well as cautionary statements contained in this form 10-Q under
the caption A Note About Forward Looking Statements set forth in Part I, Item 2 of this form 10-Q. There have been no material change in the risk factors previously disclosed in the Companys Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

At the Annual Meeting of
Shareholders (the Annual Meeting) of the Company, held on May 16, 2006, shareholders were asked to consider and vote on (a) the election of ten directors and (b) the approval and adoption of the Coast Financial Holdings,
Inc 2006 Stock Incentive Plan (the 2006 Stock Plan). At the Annual Meeting, the shareholders elected each of the ten nominees to serve as directors of the Company and approved the approval and adoption of the 2006 Stock Plan.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

PART II. OTHER INFORMATION, CONTINUED

Item 4. Submission of Matters to a Vote of Security Holders, continued

At the Annual Meeting,
4,573,790 shares were present in person or by proxy. Listed below are the voting results for each of the matters considered and voted on by the Companys shareholders at the Annual Meeting:

Election of Directors



|                    |  |           |  |      |  |          |  |     
|------------------- |  | --------- |  | ---- |  | -------- |  | ----
|Director            |  | For       |  | %    |  | Withheld |  | %   
|James K. Toomey     |  | 4,193,540 |  | 91.7 |  | 380,250  |  | 8.3 
|Joseph Gigliotti    |  | 4,193,540 |  | 91.7 |  | 380,250  |  | 8.3 
|Brian F. Grimes     |  | 4,179,340 |  | 91.4 |  | 394,450  |  | 8.6 
|Kennedy Legler, III |  | 4,193,540 |  | 91.7 |  | 380,250  |  | 8.3 
|Paul G. Nobbs       |  | 4,063,062 |  | 88.8 |  | 510,728  |  | 11.2
|Thomas M. OBrien   |  | 4,193,540 |  | 91.7 |  | 380,250  |  | 8.3 
|Brian P. Peters     |  | 4,188,040 |  | 91.6 |  | 385,750  |  | 8.4 
|John R. Reinemeyer  |  | 4,193,540 |  | 91.7 |  | 380,250  |  | 8.3 
|Michael T. Ruffino  |  | 4,188,040 |  | 91.6 |  | 385,750  |  | 8.4 
|M. Alex White       |  | 4,179,340 |  | 91.4 |  | 394,450  |  | 8.6 

Approval and Adoption of the 2006 Stock Plan



|                                           |  |           |  |         |  |         |  |               
|------------------------------------------ |  | --------- |  | ------- |  | ------- |  | --------------
|                                           |  | For       |  | Against |  | Abstain |  | BrokerNon-Vote
|Ratification of the 2006 Stock Option Plan |  | 1,601,495 |  | 637,632 |  | 1,600   |  | 2,333,063     

Furthermore, because the votes for approval and adoption of the 2006 Stock Plan
exceeded a majority of the votes cast on the proposal at the Annual Meeting, the approval of the 2006 Stock Plan also satisfied applicable Nasdaq rules relating to the approval of stock option plans.

Item 5. Other Information

None.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

PART II. OTHER INFORMATION, CONTINUED

Item 6. Exhibits

The following exhibits are hereby filed with the Securities and Exchange Commission.



|            |  |   |  |                                                                                                                                                                                                                                                                                                                                                                             
|----------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |   |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                      
|3.1         |  |  |  | Articles of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 to the Companys Registration Statement on Form SB-2 (Registration No.
333-108567) previously filed with the Commission.                                                                                                                                                          
|            |  |  
|3.2         |  |  |  | Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.2 to the Companys Registration Statement on Form SB-2 (Registration No. 333-108567)
previously filed with the Commission.                                                                                                                                                                       
|            |  |  
|4.1         |  |  |  | See Exhibits 3.1 and 3.2 for provisions of Articles of Incorporation and the Bylaws of the Company defining the rights of holders of the Companys Common
Stock.                                                                                                                                                                                                            
|            |  |  
|10.1        |  |  |  | Employment Agreement, dated July 26, 2006, by and between the Coast Financial Holdings, Inc, Coast Bank of Florida, and Brian F. Grimes, incorporated herein by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the Commission on July 27, 2006.                                                                                          
|            |  |  
|10.2        |  |  |  | Employment Agreement, dated July 26, 2006, by and between the Coast Financial Holdings, Inc, Coast Bank of Florida, and Anne V. Lee, incorporated herein by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K, filed with the Commission on July 27, 2006.                                                                                              
|            |  |  
|10.3        |  |  |  | Coast Financial Holdings, Inc. Form of Indemnification Agreement entered into with each of the Companys directors and certain of its officers, incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the Commission on October 27, 2005.                                                                                        
|            |  |  
|10.4        |  |  |  | Coast Financial Holdings, Inc. Amended and Restated 2003 Stock Option Plan, dated September 3, 2003, and Forms of Nonqualified Stock Option Agreement and Incentive Stock
Option Agreement, incorporated herein by reference to Exhibit 10.2 to the to the Companys Registration Statement on Form SB-2 (Registration No. 333-108567) previously filed with the Commission.



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|     |  |   |  |                                                                                                                                                                                                                                                                                                                    
|---- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.5 |  |  |  | Coast Financial Holdings, Inc. Stock Incentive Plan, dated May 20, 2005 (2005 Plan), incorporated herein by reference to Exhibit 10.2 to the Companys
Quarterly Report on Form 10-Q, filed with the Commission on August 12, 2005.                                                                              
|     |  |  
|10.6 |  |  |  | Form of Nonqualified Stock Option Agreement and Notice of Exercise, and Form of Incentive Stock Option Agreement and Notice of Exercise, under the 2005 Plan, incorporated
herein by reference to Exhibits 10.1 and 10.2 to the Companys Current Report on Form 8-K filed with the Commission on October 14, 2005.
|     |  |  
|10.7 |  |  |  | Coast Financial Holdings, Inc. Stock Incentive Plan, dated May 16, 2006 (2006 Plan), incorporated herein by reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K filed with the Commission on May 23, 2006.                                                                                     
|     |  |  
|31.1 |  |  |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)).*                                                                                                                                                                                          
|     |  |  
|31.2 |  |  |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)).*                                                                                                                                                                                              
|     |  |  
|32.1 |  |  |  | Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted under Section 906 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(b)).*                                                                                                                                                       
|     |  |  
|32.2 |  |  |  | Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted under Section 906 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(b)).*                                                                                                                                                       

---

|* | Exhibit filed herewith.
|- | -----------------------



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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: July 28, 2006 |  | By:                            |  | /s/ Brian F. Grimes                       
|                    |  |                                |  | Brian F. Grimes, President and Chief      
|                    |  |                                |  | Executive Officer                         
|                    |  |                               
|Date: July 28, 2006 |  | By:                            |  | /s/ Justin D. Locke                       
|                    |  |                                |  | Justin D. Locke, Senior Vice President and
|                    |  |                                |  | Chief Financial Officer                   



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