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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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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 March 31, 2004



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



For the transition period from  to



Commission file number 000-1262276



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COAST FINANCIAL HOLDINGS, INC.

(Exact Name of Small Business Issuer 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.)



2412 Cortez Road
West

Bradenton, Florida 34207

(Address of Principal Executive Offices)



(941) 752-5900

(Issuers Telephone Number, Including Area Code)





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



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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days:    YES  x    NO ̈



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



|                                        |  |                              
|--------------------------------------- |  | -----------------------------
|Common stock, par value $5.00 per share |  | 3,747,450 shares             
|(class)                                 |  | Outstanding at April 21, 2004



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



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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 March 31, 2004 (unaudited) and At December 31, 2003                              |  | 2    
|                                                                                                                           | 
|Condensed Consolidated Statements of Earnings -Three Months ended March 31, 2004 and 2003 (unaudited)                      |  | 3    
|                                                                                                                           | 
|Condensed Consolidated Statements of Changes in Stockholders EquityThree Months Ended March 31, 2004 and 2003 (unaudited) |  | 4    
|                                                                                                                           | 
|Condensed Consolidated Statements of Cash Flows -Three Months Ended March 31, 2004 and 2003 (unaudited)                    |  | 5-6  
|                                                                                                                           | 
|Notes to Condensed Consolidated Financial Statements (unaudited)                                                           |  | 7-10 
|                                                                                                                           | 
|Review by Independent Accountants                                                                                          |  | 11   
|                                                                                                                           | 
|Independent Accountants Report                                                                                            |  | 12   
|                                                                                                                           | 
|Item 2. Managements Discussion and Analysis or Plan of Operation                                                          |  | 13-19
|                                                                                                                           | 
|Item 3. Controls and Procedures                                                                                            |  | 20   
|                                                                                                                           | 
|PART II. OTHER INFORMATION                                                                                                 |  |      
|                                                                                                                           | 
|Item 1. Legal Proceedings                                                                                                  |  | 21   
|                                                                                                                           | 
|Item 6. Exhibits and Reports on Form 8-K                                                                                   |  | 21   
|                                                                                                                           | 
|SIGNATURES                                                                                                                 |  | 22   



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)



|                                                                                                                                 |  |               |         |   |                  |         |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | ------- | -
|                                                                                                                                 |  | March 31,2004 |         |   | December 31,2003 |        
|                                                                                                                                 |  | (Unaudited)   |         |   |                  |        
|Assets                                                                                                                           |  |               |         |   |                  |         |  
|Cash and due from banks                                                                                                          |  | $             | 8,362   |   |                  | 4,667   |  
|Federal funds sold                                                                                                               |  |               | 16,065  |   |                  | 3,000   |  
|                                                                                                                                 |  |               |         |   |                  |         |  
|Cash and cash equivalents                                                                                                        |  |               | 24,427  |   |                  | 7,667   |  
|                                                                                                                                 |  |              
|Securities available for sale                                                                                                    |  |               | 27,686  |   |                  | 26,972  |  
|Loans, net of allowance for loan losses of $3,212 in 2004 and $3,163 in 2003                                                     |  |               | 235,347 |   |                  | 214,240 |  
|Federal Home Loan Bank stock, at cost                                                                                            |  |               | 854     |   |                  | 592     |  
|Premises and equipment, net                                                                                                      |  |               | 9,616   |   |                  | 8,614   |  
|Accrued interest receivable                                                                                                      |  |               | 1,263   |   |                  | 1,187   |  
|Deferred income taxes                                                                                                            |  |               | 2,417   |   |                  | 2,525   |  
|Loan servicing rights                                                                                                            |  |               | 1,105   |   |                  | 1,134   |  
|Other assets                                                                                                                     |  |               | 1,019   |   |                  | 952     |  
|                                                                                                                                 |  |               |         |   |                  |         |  
|Total assets                                                                                                                     |  | $             | 303,734 |   |                  | 263,883 |  
|                                                                                                                                 |  |               |         |   |                  |         |  
|Liabilities and Stockholders Equity                                                                                             |  |               |         |   |                  |         |  
|Liabilities:                                                                                                                     |  |               |         |   |                  |         |  
|Noninterest-bearing demand deposits                                                                                              |  |               | 25,356  |   |                  | 20,293  |  
|Savings, NOW and money-market deposits                                                                                           |  |               | 60,125  |   |                  | 46,934  |  
|Time deposits                                                                                                                    |  |               | 162,827 |   |                  | 140,513 |  
|                                                                                                                                 |  |               |         |   |                  |         |  
|Total deposits                                                                                                                   |  |               | 248,308 |   |                  | 207,740 |  
|                                                                                                                                 |  |              
|Federal Home Loan Bank advances                                                                                                  |  |               | 2,500   |   |                  | 7,500   |  
|Other borrowings                                                                                                                 |  |               | 16,148  |   |                  | 12,097  |  
|Other liabilities                                                                                                                |  |               | 2,820   |   |                  | 2,881   |  
|                                                                                                                                 |  |               |         |   |                  |         |  
|Total liabilities                                                                                                                |  |               | 269,776 |   |                  | 230,218 |  
|                                                                                                                                 |  |               |         |   |                  |         |  
|Stockholders equity:                                                                                                            |  |               |         |   |                  |         |  
|Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued or outstanding                                    |  |               |        |   |                  |        |  
|Common stock, $5 par value; 20,000,000 shares authorized, 3,747,450 and 3,735,450 shares issued and outstanding in 2004 and
2003 |  |               | 18,737  |   |                  | 18,677  |  
|Additional paid-in capital                                                                                                       |  |               | 19,404  |   |                  | 19,351  |  
|Accumulated deficit                                                                                                              |  |               | (4,046  | ) |                  | (4,055  | )
|Accumulated other comprehensive income (loss)                                                                                    |  |               | (137    | ) |                  | (308    | )
|                                                                                                                                 |  |               |         |   |                  |         |  
|Total stockholders equity                                                                                                       |  |               | 33,958  |   |                  | 33,665  |  
|                                                                                                                                 |  |               |         |   |                  |         |  
|Total liabilities and stockholders equity                                                                                       |  | $             | 303,734 |   |                  | 263,883 |  
|                                                                                                                                 |  |               |         |   |                  |         |  



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 Earnings (Unaudited)

(In thousands, except per share amounts)



|                                                                        |  |                              |           |   |      |           |  
|----------------------------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | --------- | -
|                                                                        |  | Three Months Ended March 31, |          
|                                                                        |  | 2004                         |           |   | 2003 |          
|Interest income:                                                        |  |                              |           |   |      |           |  
|Loans                                                                   |  | $                            | 3,604     |   |      | 2,418     |  
|Securities                                                              |  |                              | 238       |   |      | 276       |  
|Other                                                                   |  |                              | 12        |   |      | 23        |  
|                                                                        |  |                              |           |   |      |           |  
|Total interest income                                                   |  |                              | 3,854     |   |      | 2,717     |  
|                                                                        |  |                              |           |   |      |           |  
|Interest expense:                                                       |  |                              |           |   |      |           |  
|Deposits                                                                |  |                              | 1,471     |   |      | 1,279     |  
|Borrowings                                                              |  |                              | 85        |   |      | 87        |  
|                                                                        |  |                              |           |   |      |           |  
|Total interest expense                                                  |  |                              | 1,556     |   |      | 1,366     |  
|                                                                        |  |                              |           |   |      |           |  
|Net interest income                                                     |  |                              | 2,298     |   |      | 1,351     |  
|Provision for loan losses                                               |  |                              | 329       |   |      | 181       |  
|                                                                        |  |                              |           |   |      |           |  
|Net interest income after provision for loan losses                     |  |                              | 1,969     |   |      | 1,170     |  
|                                                                        |  |                              |           |   |      |           |  
|Noninterest income:                                                     |  |                              |           |   |      |           |  
|Service charges on deposit accounts                                     |  |                              | 96        |   |      | 65        |  
|Gain on sale of loans held for sale                                     |  |                              | 283       |   |      | 269       |  
|Gain on sale of securities available for sale                           |  |                              |          |   |      | 36        |  
|Net loan servicing cost                                                 |  |                              | (58       | ) |      | (12       | )
|Asset management fees                                                   |  |                              | 71        |   |      | 117       |  
|Other                                                                   |  |                              | 196       |   |      | 145       |  
|                                                                        |  |                              |           |   |      |           |  
|Total noninterest income                                                |  |                              | 588       |   |      | 620       |  
|                                                                        |  |                              |           |   |      |           |  
|Noninterest expenses:                                                   |  |                              |           |   |      |           |  
|Employee compensation and benefits                                      |  |                              | 1,330     |   |      | 1,137     |  
|Occupancy and equipment                                                 |  |                              | 335       |   |      | 227       |  
|Data processing                                                         |  |                              | 248       |   |      | 202       |  
|Professional fees                                                       |  |                              | 176       |   |      | 87        |  
|Office supplies                                                         |  |                              | 56        |   |      | 56        |  
|Advertising                                                             |  |                              | 97        |   |      | 73        |  
|Telephone                                                               |  |                              | 82        |   |      | 40        |  
|Settlement on impaired security                                         |  |                              |          |   |      | (400      | )
|Other                                                                   |  |                              | 218       |   |      | 153       |  
|                                                                        |  |                              |           |   |      |           |  
|Total noninterest expenses                                              |  |                              | 2,542     |   |      | 1,575     |  
|                                                                        |  |                              |           |   |      |           |  
|Earnings before income taxes                                            |  |                              | 15        |   |      | 215       |  
|Income tax provision                                                    |  |                              | 6         |   |      | 81        |  
|                                                                        |  |                              |           |   |      |           |  
|Net earnings                                                            |  | $                            | 9         |   |      | 134       |  
|                                                                        |  |                              |           |   |      |           |  
|Earnings per share, basic and diluted                                   |  | $                            |          |   |      | .10       |  
|                                                                        |  |                              |           |   |      |           |  
|Weighted-average number of common shares outstanding, basic and diluted |  |                              | 3,740,032 |   |      | 1,350,450 |  
|                                                                        |  |                              |           |   |      |           |  



See Accompanying Notes to Condensed
Consolidated Financial Statements.



3



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Changes in Stockholders Equity



Three Months Ended March 31, 2004 and 2003

($ in thousands)



|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|---------------------------------------------------------------------------------------- |  | -------------- | ----- | ----------- | ------ | ------------------------ | ------ | - | ------------------ | ------ | - | ------------------------------------------ | ---- | - | ------------------------ | ------ | -
|                                                                                         |  | PreferredStock |       | CommonStock |        | AdditionalPaid-inCapital |        |   | AccumulatedDeficit |        |   | AccumulatedOtherComprehensiveIncome (Loss) |      |   | TotalStockholdersEquity |       
|Balance at December 31, 2002                                                             |  | $              | 5,995 |             | 6,752  |                          | 5,897  |   |                    | (2,325 | ) |                                            | (58  | ) |                          | 16,261 |  
|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Comprehensive income:                                                                    |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Net earnings (unaudited)                                                                 |  |                |      |             |       |                          |       |   |                    | 134    |   |                                            |     |   |                          | 134    |  
|Net change in unrealized loss on securities available for sale, net of taxes (unaudited) |  |                |      |             |       |                          |       |   |                    |       |   |                                            | 26   |   |                          | 26     |  
|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Comprehensive income (unaudited)                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          | 160    |  
|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Balance at March 31, 2003 (unaudited)                                                    |  | $              | 5,995 |             | 6,752  |                          | 5,897  |   |                    | (2,191 | ) |                                            | (32  | ) |                          | 16,421 |  
|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Balance at December 31, 2003                                                             |  | $              |      |             | 18,677 |                          | 19,351 |   |                    | (4,055 | ) |                                            | (308 | ) |                          | 33,665 |  
|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Comprehensive income:                                                                    |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Net earnings (unaudited)                                                                 |  |                |      |             |       |                          |       |   |                    | 9      |   |                                            |     |   |                          | 9      |  
|Net change in unrealized loss on securities available for sale, net of taxes (unaudited) |  |                |      |             |       |                          |       |   |                    |       |   |                                            | 171  |   |                          | 171    |  
|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Comprehensive income (unaudited)                                                         |  |                |      |             |       |                          |       |   |                    |       |   |                                            |     |   |                          | 180    |  
|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Offering costs relating to 2003 common stock offering paid in 2004 (unaudited)           |  |                |      |             |       |                          | (7     | ) |                    |       |   |                                            |     |   |                          | (7     | )
|Proceeds from exercise of common stock options (12,000 shares) (unaudited)               |  |                |      |             | 60     |                          | 60     |   |                    |       |   |                                            |     |   |                          | 120    |  
|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Balance at March 31, 2004 (unaudited)                                                    |  | $              |      |             | 18,737 |                          | 19,404 |   |                    | (4,046 | ) |                                            | (137 | ) |                          | 33,958 |  
|                                                                                         |  |                |       |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  



See Accompanying Notes to Condensed
Consolidated Financial Statements.



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)



|                                                                                              |  |                              |         |   |      |         |  
|--------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | ------- | -
|                                                                                              |  | Three Months Ended March 31, |        
|                                                                                              |  | 2004                         |         |   | 2003 |        
|Cash flows from operating activities:                                                         |  |                              |         |   |      |         |  
|Net earnings                                                                                  |  | $                            | 9       |   |      | 134     |  
|Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |  |                              |         |   |      |         |  
|Depreciation and amortization                                                                 |  |                              | 174     |   |      | 603     |  
|Provision for loan losses                                                                     |  |                              | 329     |   |      | 181     |  
|Deferred income taxes                                                                         |  |                              | 6       |   |      | 81      |  
|Amortization and accretion of discounts and premiums on securities                            |  |                              | 56      |   |      | 56      |  
|Amortization of loan servicing rights                                                         |  |                              | 243     |   |      | 60      |  
|Gain on sale of securities available for sale                                                 |  |                              |        |   |      | (36     | )
|Settlement on impaired security                                                               |  |                              |        |   |      | (400    | )
|Write-down of foreclosed real estate                                                          |  |                              |        |   |      | 9       |  
|Gain on sale of loans held for sale                                                           |  |                              | (283    | ) |      | (268    | )
|Originations of loans held for sale                                                           |  |                              | (18,249 | ) |      | (21,651 | )
|Proceeds from sale of loans held for sale                                                     |  |                              | 18,318  |   |      | 16,205  |  
|Increase in accrued interest receivable                                                       |  |                              | (76     | ) |      | (69     | )
|Increase in other assets                                                                      |  |                              | (67     | ) |      | (65     | )
|(Decrease) increase in other liabilities                                                      |  |                              | (61     | ) |      | 580     |  
|                                                                                              |  |                              |         |   |      |         |  
|Net cash provided by (used in) operating activities                                           |  |                              | 399     |   |      | (4,580  | )
|                                                                                              |  |                              |         |   |      |         |  
|Cash flows from investing activities:                                                         |  |                              |         |   |      |         |  
|Purchase of securities available for sale                                                     |  |                              | (2,430  | ) |      | (9,053  | )
|Proceeds from maturities, calls, repayments and sales of securities available for sale        |  |                              | 1,933   |   |      | 8,939   |  
|Net increase in loans                                                                         |  |                              | (21,436 | ) |      | (11,499 | )
|Purchase of premises and equipment                                                            |  |                              | (1,176  | ) |      | (1,008  | )
|Purchase of Federal Home Loan Bank stock                                                      |  |                              | (262    | ) |      | (293    | )
|                                                                                              |  |                              |         |   |      |         |  
|Net cash used in investing activities                                                         |  |                              | (23,371 | ) |      | (12,914 | )
|                                                                                              |  |                              |         |   |      |         |  
|Cash flows from financing activities:                                                         |  |                              |         |   |      |         |  
|Net increase in deposits                                                                      |  |                              | 40,568  |   |      | 16,974  |  
|Proceeds from Federal Home Loan Bank advances                                                 |  |                              |        |   |      | 5,000   |  
|Repayments of Federal Home Loan Bank advances                                                 |  |                              | (5,000  | ) |      |        |  
|Net increase in other borrowings                                                              |  |                              | 4,051   |   |      | 2,965   |  
|Offering costs                                                                                |  |                              | (7      | ) |      |        |  
|Proceeds from exercise of common stock options                                                |  |                              | 120     |   |      |        |  
|                                                                                              |  |                              |         |   |      |         |  
|Net cash provided by financing activities                                                     |  |                              | 39,732  |   |      | 24,939  |  
|                                                                                              |  |                              |         |   |      |         |  
|Net increase in cash and cash equivalents                                                     |  |                              | 16,760  |   |      | 7,445   |  
|Cash and cash equivalents at beginning of period                                              |  |                              | 7,667   |   |      | 8,970   |  
|                                                                                              |  |                              |         |   |      |         |  
|Cash and cash equivalents at end of period                                                    |  | $                            | 24,427  |   |      | 16,415  |  
|                                                                                              |  |                              |         |   |      |         |  



(continued)



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows, Continued

(In thousands)



|                                                                                                                           |  |                              |       |      |      
|-------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----- | ---- | -----
|                                                                                                                           |  | Three Months Ended March 31,
|                                                                                                                           |  | 2004                         |       | 2003
|Supplemental disclosure of cash flow information:                                                                          |  |                              |       |      |      
|Cash paid during the period for:                                                                                           |  |                              |       |      |      
|Interest                                                                                                                   |  | $                            | 1,526 |      | 1,370
|                                                                                                                           |  |                              |       |      |      
|Income taxes                                                                                                               |  | $                            |      |      |     
|                                                                                                                           |  |                              |       |      |      
|Noncash transactions:                                                                                                      |  |                              |       |      |      
|Accumulated other comprehensive income (loss), net change inunrealized loss on securities available for sale, net of taxes |  | $                            | 171   |      | 26   
|                                                                                                                           |  |                              |       |      |      
|Originated mortgage loan servicing rights capitalized                                                                      |  | $                            | 214   |      | 148  
|                                                                                                                           |  |                              |       |      |      



See Accompanying Notes to Condensed
Consolidated Financial Statements.



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited)



|1. | General. Coast Financial Holdings, Inc. (the Holding Company) owns 100% of the outstanding common stock of Coast Bank of Florida (the Bank)
(collectively, the Company). On April 15, 2003, the Banks stockholders approved a Plan of Merger and Merger Agreement under which the Bank became a wholly-owned subsidiary of the Holding Company. The Banks stockholders
exchanged their common stock and preferred stock for shares of the Holding Company. As a result, all (1,350,450 shares) of the previously issued $5 par value common stock of the Bank were exchanged for 1,350,450 shares of the $5 par value common
stock of the Holding Company and all (545,000 shares) of the previously issued $.01 par value preferred stock of the Bank were exchanged for 545,000 shares of the $.01 par value preferred stock of the Holding Company. The Holding Companys
merger with the Bank was accounted as a reorganization of entities under common control at historical cost and, the financial data for periods presented include the results of the Bank and Coast Financial Partners, Inc. (CFP).
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



|                               |  |                              |       |   |      |       |  
|------------------------------ |  | ---------------------------- | ----- | - | ---- | ----- | -
|                               |  | Three Months Ended March 31, |      
|                               |  | 2004                         |       |   | 2003 |      
|Balance at beginning of period |  | $                            | 3,163 |   |      | 1,350 |  
|Provision for loan losses      |  |                              | 329   |   |      | 181   |  
|Charge-offs, net of recoveries |  |                              | (280  | ) |      | (32   | )
|                               |  |                              |       |   |      |       |  
|Balance at end of period       |  | $                            | 3,212 |   |      | 1,499 |  
|                               |  |                              |       |   |      |       |  



(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 March 31,
|                                             |  | 2004                         |     | 2003
|Balance at end of period                     |  | $                            | 520 |      | 188
|                                             |  |                              |     |      |    
|Total related allowance for losses           |  | $                            | 355 |      | 94 
|                                             |  |                              |     |      |    
|Average investment in impaired loans         |  | $                            | 339 |      | 127
|                                             |  |                              |     |      |    
|Interest income recognized on impaired loans |  | $                            |    |      |   
|                                             |  |                              |     |      |    
|Interest income received on impaired loans   |  | $                            |    |      |   
|                                             |  |                              |     |      |    



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



|                                             |  |              |       |      |    
|-------------------------------------------- |  | ------------ | ----- | ---- | ---
|                                             |  | At March 31,
|                                             |  | 2004         |       | 2003
|Nonaccrual loans                             |  | $            | 1,850 |      | 242
|Past due ninety days or more, still accruing |  |              |      |      | 30 
|                                             |  |              |       |      |    
|                                             |  | $            | 1,850 |      | 272
|                                             |  |              |       |      |    



|3. | Stock Option Plan.The Company has a stock option plan for certain key employees and directors of the Company. A total of 405,000 shares (amended) of common stock have
been reserved under this plan. 99,600 shares remain available for grant at March 31, 2004. The exercise price of the stock options granted under this plan must at least equal the fair market value of the common stock at the date of grant. The
options have ten year terms and vest over periods of up to three years. A summary of stock option transactions follows ($ in thousands, except per share amounts):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  |                 |   |  |                                 |             |                                 |       |                      |       |  
|-------------------------------- |  | --------------- | - |  | ------------------------------- | ----------- | ------------------------------- | ----- | -------------------- | ----- | -
|                                 |  | Number ofShares |   |  | Range of Per Share Option Price |             | Weighted -AveragePer SharePrice |       | AggregateOptionPrice |      
|Outstanding at December 31, 2003 |  | 305,400         |   |  | $                               | 10.00-14.50 |                                 | 12.90 |                      | 3,941 |  
|Exercised                        |  | (12,000         | ) |  |                                 | 10.00       |                                 | 10.00 |                      | (120  | )
|                                 |  |                 |   |  |                                 |             |                                 |       |                      |       |  
|Outstanding at March 31, 2004    |  | 293,400         |   |  | $                               | 10.00-14.50 |                                 | 13.02 |                      | 3,821 |  
|                                 |  |                 |   |  |                                 |             |                                 |       |                      |       |  



(continued)



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited),
Continued



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



|                                                                                                                                     |  |                              |    |   |      |     |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | -- | - | ---- | --- | -
|                                                                                                                                     |  | Three Months Ended March 31, |   
|                                                                                                                                     |  | 2004                         |    |   | 2003 |    
|Net earnings applicable to common stockholders, as reported                                                                          |  | $                            | 9  |   |      | 134 |  
|Deduct: Total stock-based employee compensationdetermined under the fair value based methodfor all awards, net of related tax
effect |  |                              | (6 | ) |      | (3  | )
|                                                                                                                                     |  |                              |    |   |      |     |  
|Proforma net earnings                                                                                                                |  | $                            | 3  |   |      | 131 |  
|                                                                                                                                     |  |                              |    |   |      |     |  
|Earnings per share:                                                                                                                  |  |                              |    |   |      |     |  
|Basic and diluted, as reported                                                                                                       |  | $                            |   |   |      | .10 |  
|                                                                                                                                     |  |                              |    |   |      |     |  
|Basic and diluted, proforma                                                                                                          |  | $                            |   |   |      | .10 |  
|                                                                                                                                     |  |                              |    |   |      |     |  



There
were no options granted during the three months ended March 31, 2004 or 2003.



(continued)



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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 March 31, 2004 of
the regulatory capital requirements and the Companys and the Banks actual capital on a percentage basis:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                 |  |        |   |  |                       |  
|------------------------------------------------ |  | ------ | - |  | --------------------- | -
|                                                 |  | Actual |   |  | RegulatoryRequirement |  
|Total capital to risk-weighted assets:           |  |        |   |  |                       |  
|Company                                          |  | 16.09  | % |  | 8.00                  | %
|Bank                                             |  | 13.46  | % |  | 8.00                  | %
|Tier I capital to risk-weighted assets:          |  |        |   |  |                       |  
|Company                                          |  | 14.83  | % |  | 4.00                  | %
|Bank                                             |  | 12.20  | % |  | 4.00                  | %
|Tier I capital to total assets - leverage ratio: |  |        |   |  |                       |  
|Company                                          |  | 11.47  | % |  | 4.00                  | %
|Bank                                             |  | 9.45   | % |  | 4.00                  | %



|5. | Earnings Per Share. Basic and diluted earnings per share are computed on the basis of the weighted-average number of shares of common stock outstanding. Outstanding
stock options are not considered dilutive.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. | Sale of Residential Loan Servicing. During the three months ended March 31, 2004 the Bank entered into a contract to sell its servicing portfolio of approximately $112
million in loans. The sale is expected to take place during the second quarter of 2004 and management does not expect the transaction to result in a gain or loss.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|7. | Subsequent Event. On April 7, 2004, the Bank purchased a six story building in downtown Bradenton, Florida for $6.8 million. The building will house, subject to
regulatory approval, a new branch and the Companys headquarters. The Bank expects the branch to open in the second quarter of 2004 and to move its headquarters during the fourth quarter of 2004.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Review by Independent Accountants



Hacker, Johnson & Smith PA, independent accountants, have made a limited review of the financial data as of March 31, 2004, and for the three-month periods ended March 31, 2004 and 2003 presented in this document, in accordance with
standards established by the American Institute of Certified Public Accountants.



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



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Independent Accountants Report



Coast Financial Holdings, Inc.

Bradenton, Florida:



We have reviewed the accompanying condensed consolidated balance sheet of
Coast Financial Holdings, Inc. and Subsidiaries (the Company) as of March 31, 2004 and the related condensed consolidated statements of earnings, changes in stockholders equity and cash flows for the three-month periods ended March
31, 2004 and 2003. These financial statements are the responsibility of the Companys management.



We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with
auditing standards generally accepted in the United States of America, 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 condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.



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



/s/ Hacker, Johnson & Smith PA



HACKER, JOHNSON & SMITH PA

Tampa, Florida

April 14, 2004



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Item 2. Managements Discussion and Analysis

or Plan of Operation



Forward Looking Statements



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



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



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



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



General



Coast Financial Holdings, Inc. (the Holding Company) owns 100% of the outstanding common stock of Coast Bank of
Florida (the Bank) (collectively the Company). On April 15, 2003, the Banks stockholders approved a Plan of Merger and Merger Agreement under which the Bank became a wholly-owned subsidiary of the Holding Company. The
Banks stockholders exchanged their common stock and preferred stock for shares of the Holding Company. As a result, all (1,350,450 shares) of the previously issued $5 par value common stock of the Bank were exchanged for 1,350,450 shares of
the $5 par value common stock of the Holding Company and all (545,000 shares) of the previously issued $.01 par value preferred stock of the Bank were exchanged for 545,000 shares of the $.01 par value preferred stock of the Holding Company. The
Holding Companys merger with the Bank was accounted as a reorganization of entities under common control at historical cost and, the financial data for periods presented include the results of the Bank. In connection with the initial public
offering of the Holding Companys common stock in November 2003, all outstanding preferred stock was converted into common stock. During the three months ended March 31, 2004, Coast Financial Partners, Inc. ceased operations.



Liquidity and Capital Resources



The Companys primary source of cash during the three months ended
March 31, 2004, was from net deposit inflows of approximately $40.6 million, an increase in other borrowings of approximately $4.1 million and principle repayments and calls of securities available for sale of approximately $1.9 million. Cash was
used primarily to originate net loans of approximately $21.4 million, repay Federal Home Loan Bank advances of approximately $5.0 million and to purchase securities of approximately $2.4 million. At March 31, 2004, the Bank exceeded its regulatory
liquidity requirements.



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



Off-Balance Sheet Arrangements and Aggregate Contractual Obligations



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



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



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



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



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



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



A summary of the amounts of the Companys financial instruments, with
off-balance sheet risk at March 31, 2004, follows (in thousands):



|                             |  |                |       
|---------------------------- |  | -------------- | ------
|                             |  | ContractAmount
|Commitments to extend credit |  | $              | 83,598
|                             |  |                |       
|Unused lines of credit loans |  | $              | 21,206
|                             |  |                |       
|Standby letters of credit    |  | $              | 2,636 
|                             |  |                |       



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.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Selected Ratios



The following are presented for the dates and periods indicated:



|                                                 |  |                                 |   |  |                            |    |  |                                |     
|------------------------------------------------ |  | ------------------------------- | - |  | -------------------------- | -- |  | ------------------------------ | ----
|                                                 |  | Three MonthsEnded March 31,2004 |   |  | Year EndedDecember 31,2003 |    |  | Three MonthsEndedMarch 31,2003 |     
|Average equity as a percentage of average assets |  | 12.08                           | % |  | 8.68                       | %  |  | 8.58                           | %   
|Equity to total assets at end of period          |  | 11.18                           | % |  | 12.76                      | %  |  | 8.15                           | %   
|Return on average assets(1)                      |  | 0.01                            | % |  | (0.76                      | )% |  | 0.29                           | %(2)
|Return on average equity(1)                      |  | 0.11                            | % |  | (8.70                      | )% |  | 3.37                           | %(2)
|Dividend payout ratio(3)                         |  | N/A                             |   |  | N/A                        |    |  | N/A                            |     

---

|(1) | Annualized for the three months ended March 31.
|--- | -----------------------------------------------

|(2) | Excluding the after tax settlement on impaired securities during the period, the return on average assets was (0.25)% and the return of average equity was (2.89)%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Results of Operations



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



|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|-------------------------------------------------------------------------------- |  | ---------------------------- | ------- | -------------------- | ---- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- | ----------------- | - | ----- |  | ---- | -
|                                                                                 |  | Three Months Ended March 31, |        
|                                                                                 |  | 2004                         |         |                      | 2003 |                  
|                                                                                 |  | AverageBalance               |         | InterestandDividends |      | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|                                                                                 |  | (Dollars in thousands)       |        
|Interest-earning assets:                                                         |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans (1)                                                                        |  | $                            | 223,949 |                      |      | 3,604             |  | 6.47 | %              |  | $                    | 136,172 |                   |   | 2,418 |  | 7.20 | %
|Securities                                                                       |  |                              | 27,404  |                      |      | 238               |  | 3.49 |                |  |                      | 28,432  |                   |   | 276   |  | 3.94 |  
|Other interest-earning assets (2)                                                |  |                              | 5,438   |                      |      | 12                |  | 0.89 |                |  |                      | 8,163   |                   |   | 23    |  | 1.14 |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                                    |  |                              | 256,791 |                      |      | 3,854             |  | 6.04 |                |  |                      | 172,767 |                   |   | 2,717 |  | 6.38 |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-earning assets                                                       |  |                              | 21,536  |                      |      |                   |  |      |                |  |                      | 15,354  |                   |   |       |  |      |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                                     |  | $                            | 278,327 |                      |      |                   |  |      |                |  | $                    | 188,121 |                   |   |       |  |      |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW and money-market                                                    |  |                              | 50,243  |                      |      | 160               |  | 1.28 |                |  |                      | 39,344  |                   |   | 181   |  | 1.87 |  
|Time deposits                                                                    |  |                              | 149,843 |                      |      | 1,311             |  | 3.52 |                |  |                      | 102,672 |                   |   | 1,098 |  | 4.34 |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                              | 200,086 |                      |      | 1,471             |  | 2.96 |                |  |                      | 142,016 |                   |   | 1,279 |  | 3.65 |  
|Other borrowings                                                                 |  |                              | 20,631  |                      |      | 85                |  | 1.66 |                |  |                      | 13,332  |                   |   | 87    |  | 2.65 |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                              | 220,717 |                      |      | 1,556             |  | 2.84 |                |  |                      | 155,348 |                   |   | 1,366 |  | 3.57 |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                              | 24,000  |                      |      |                   |  |      |                |  |                      | 16,641  |                   |   |       |  |      |  
|Stockholders equity                                                             |  |                              | 33,610  |                      |      |                   |  |      |                |  |                      | 16,132  |                   |   |       |  |      |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                            | 278,327 |                      |      |                   |  |      |                |  | $                    | 188,121 |                   |   |       |  |      |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                                              |  |                              |         |                      | $    | 2,298             |  |      |                |  |                      |         |                   | $ | 1,351 |  |      |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread (3)                                                         |  |                              |         |                      |      |                   |  | 3.20 | %              |  |                      |         |                   |   |       |  | 2.81 | %
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin (4)                                                          |  |                              |         |                      |      |                   |  | 3.60 | %              |  |                      |         |                   |   |       |  | 3.17 | %
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                              | 1.16    |                      |      |                   |  |      |                |  |                      | 1.11    |                   |   |       |  |      |  
|                                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  

---

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

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

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

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



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Three-Month Periods Ended March 31, 2004 and 2003



General. Our net earnings for the three
months ended March 31, 2004, were $9,000 compared to net earnings of $134,000 or $.10 earnings per basic and diluted share of the three months ended March 31, 2003. Excluding the net after tax settlement on impaired securities, during the first
quarter of 2003 there was a net loss for the three months ended March 31, 2003 of $(115,000) or $(0.09) loss per basic and diluted share. Net earnings increased due to an increase in net interest income, which was partially offset by an increase in
noninterest expenses.



During the three months ended March 31,
2003, management made the strategic decision to sell our residential servicing portfolio, and to begin selling residential loans servicing released.



Net Interest Income. Interest income increased to $3.9 million during the three months ended March 31, 2004, from $2.7 million in 2003.
Interest on loans for the three months ended March 31, 2004 was $3.6 million, resulting from an average yield of 6.47% compared to $2.4 million resulting from an average yield of 7.20% for 2003. The increase in interest on loans was primarily due to
an increase in the average loan balance to $223.9 million, during the three months ended March 31, 2004 compared to $136.2 million, in 2003. Interest on securities decreased to $238,000 during the three months ended March 31, 2004, from $276,000 in
2003. The decrease in interest income on securities was primarily due to the decline in the average portfolio yield to 3.49% during the three months ended March 31, 2004 from 3.94% in 2003. Interest on other interest earning assets decreased to
$12,000 during the three months ended March 31, 2004, from $23,000 during the three months ended March 31, 2003.



Interest expense on interest bearing liabilities increased to $1.6 million during the three months ended March 31, 2004, from $1.4 million during the
three months ended March 31, 2003. The increase was due to an increase in the average balance of interest bearing liabilities, which was partially offset by a decrease in the average cost of interest bearing liabilities to 2.84% in 2004 from 3.57%
in 2003. The decline in the average rate paid was the result of managements efforts to increase low cost deposit accounts and the continued decline in overall interest rates. Management is intent on building core deposits for the long-term,
which enhance customer retention, and anticipate the mix of deposits to shift throughout the remainder of 2004.



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



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Three-Month Periods Ended March 31, 2004 and 2003,
Continued



Provision for Loan Losses,
Continued. The provision for loan losses was $329,000 for the three months ended March 31, 2004 compared to $180,000 for the three months ended March 31, 2003. The increase in the provision was due to growth in the loan portfolio. Commercial
real estate loans grew 137% and now comprise 27% of the Banks net loan portfolio at March 31, 2004, compared to 19% in 2003. Residential construction and land loans more than doubled and now account for 26% of net loans, compared to 21% at
March 31, 2003.



The ratio of net charge-offs to average loans
outstanding declined 11 basis points to 0.13% at March 31, 2004, compared to 0.02% at March 31, 2003. Since the three months ended December 31, 2003 the ratio of net charge-offs to average loans outstanding improved 32 basis points from 0.45%.



The allowance for loan losses was $3.2 million at March 31,
2004. While management believes that its allowance for loan losses is adequate as of March 31, 2004, future adjustments to the Companys allowance for loan losses may be necessary if economic conditions differ substantially from the assumptions
used in making the initial determination.



Noninterest
Income. Noninterest income decreased to $588,000 for the three months ended March 31, 2004 compared to $620,000 for the three months ended March 31, 2003. The decrease was due to an increase in net loan servicing costs and a decline
in asset management fees due to the dissolving of CFP during the three months ended March 31, 2004, which was partially offset by an increase in service charges on deposit accounts, other income and fees and gains recognized on the sale of loans
held for sale.



Noninterest Expenses.
Noninterest expense increased to $2.5 million for the three months ended March 31, 2004 compared to $1.6 million for the three months ended March 31, 2003. The increase was due to the $400,000 settlement on impaired securities in 2003 and an
increase in employee compensation and benefits and occupancy and equipment expense due to the opening of a new banking office in both the third and fourth quarter of 2003.



Income Taxes. The income tax provision for the three months ended March 31, 2004 was $6,000 (an
effective rate of 40.0%) compared to $81,000 for the three months ended March 31, 2003 ( an effective rate of 37.7%).



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Item 3. Controls and Procedures



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



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



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



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PART II. OTHER INFORMATION



Item 1. Legal Proceedings



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



Item 6. Exhibits and Reports on Form 8-K



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



|            |  |                                                                                                                                                                  
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                           
|10.5        |  | Separation Agreement by and between Coast Financial Holdings, Inc. and Gerald L. Anthony. Filed with the Companies Form 8K on February 17, 2004.                 
|            | 
|10.6        |  | Purchase and Sale Agreement, dated January 13, 2004, by and between 1301 Associates, L.C. and the Company. Filed with the Companies Form 8K on February 14, 2004.
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.                                         
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.                                         
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002                    
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002                    



|(b) | Reports on Form 8-K.Registrant filed three Form 8-Ks during the three-month period ended March 31, 2004.
|--- | ---------------------------------------------------------------------------------------------------------



On January 29, 2004, Coast Financial Holdings, Inc. issued a press release
announcing its financial results for the year ended December 31, 2003 and for the fourth quarter of 2003.



On February 14, 2004, Coast Financial Holdings, Inc. entered into a purchase agreement to purchase certain real property located in Manatee County,
Florida.



On February 17, 2004, Mr. Gerald L. Anthony resigned
as Chief Executive Officer, President and Director of Coast Financial Holdings, Inc. (the Company). Mr. Brian P. Peters, President and COO of Coast Bank of Florida (the Bank) was appointed as the Chief Executive Officer,
President and Director of the Company and as Chief Executive Officer of the Bank.



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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: April 23, 2004 |  | By:                            |  | /s/ Brian P. Peters                                                  
|                     |  |                                |  | Brian P. Peters, President and Chief Executive Officer               
|                     |  |                               
|Date: April 23, 2004 |  | By:                            |  | /s/ Brian F. Grimes                                                  
|                     |  |                                |  | Brian F. Grimes, Executive Vice President and Chief Financial Officer



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