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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

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



For the quarterly period ended September 30, 2005



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



For the transition period from  to



Commission file number 000-50433



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COAST FINANCIAL HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)



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



1301  6thAvenue West, Suite 300

Bradenton, Florida 34205

(Address of Principal Executive Offices)



(941) 752-5900

(Registrants Telephone Number, Including Area Code)





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



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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1394 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:     YES  x    NO ̈



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



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



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



|                                        |  |                                
|--------------------------------------- |  | -------------------------------
|Common stock, par value $5.00 per share |  | 6,257,650 shares               
|(class)                                 |  | Outstanding at October 26, 2005



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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 September 30, 2005 (unaudited) and At December 31, 2004                             |  | 2    
|                                                                                                                              | 
|Condensed Consolidated Statements of Operations -Three and Nine Months ended September 30, 2005 and 2004 (unaudited)          |  | 3    
|                                                                                                                              | 
|Condensed Consolidated Statements of Changes in Stockholders EquityNine Months Ended September 30, 2005 and 2004 (unaudited) |  | 4    
|                                                                                                                              | 
|Condensed Consolidated Statements of Cash Flows -Nine Months Ended September 30, 2005 and 2004 (unaudited)                    |  | 5-6  
|                                                                                                                              | 
|Notes to Condensed Consolidated Financial Statements (unaudited)                                                              |  | 7-13 
|                                                                                                                              | 
|Review by Independent Registered Public Accounting Firm                                                                       |  | 14   
|                                                                                                                              | 
|Report of Independent Registered Public Accounting Firm                                                                       |  | 15   
|                                                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                 |  | 16-26
|                                                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                            |  | 27   
|                                                                                                                              | 
|Item 4. Controls and Procedures                                                                                               |  | 27   
|                                                                                                                              | 
|PART II. OTHER INFORMATION                                                                                                    |  |      
|                                                                                                                              | 
|Item 1. Legal Proceedings                                                                                                     |  | 28   
|                                                                                                                              | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                           |  | 28   
|                                                                                                                              | 
|Item 3. Defaults Upon Senior Securities                                                                                       |  | 28   
|                                                                                                                              | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                                   |  | 28   
|                                                                                                                              | 
|Item 5. Other Information                                                                                                     |  | 28   
|                                                                                                                              | 
|Item 6. Exhibits                                                                                                              |  | 28   
|                                                                                                                              | 
|SIGNATURES                                                                                                                    |  | 29   



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)



|                                                                                                                                 |  |                   |         |   |                  |         |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | ------- | -
|                                                                                                                                 |  | September 30,2005 |         |   | December 31,2004 |        
|                                                                                                                                 |  | (Unaudited)       |         |   |                  |        
|Assets                                                                                                                           |  |                   |         |   |                  |         |  
|                                                                                                                                 |  |                  
|Cash and due from banks                                                                                                          |  | $                 | 12,213  |   |                  | 7,122   |  
|Federal funds sold                                                                                                               |  |                   | 6,006   |   |                  |        |  
|                                                                                                                                 |  |                   |         |   |                  |         |  
|Cash and cash equivalents                                                                                                        |  |                   | 18,219  |   |                  | 7,122   |  
|                                                                                                                                 |  |                  
|Securities available for sale                                                                                                    |  |                   | 67,520  |   |                  | 55,490  |  
|Loans, net of allowance for loan losses of $3,183 and $2,901, respectively                                                       |  |                   | 366,125 |   |                  | 297,725 |  
|Federal Home Loan Bank stock, at cost                                                                                            |  |                   | 1,289   |   |                  | 573     |  
|Premises and equipment, net                                                                                                      |  |                   | 24,412  |   |                  | 18,358  |  
|Accrued interest receivable                                                                                                      |  |                   | 1,892   |   |                  | 1,478   |  
|Deferred income taxes                                                                                                            |  |                   | 2,468   |   |                  | 1,846   |  
|Other assets                                                                                                                     |  |                   | 1,472   |   |                  | 2,031   |  
|                                                                                                                                 |  |                   |         |   |                  |         |  
|Total assets                                                                                                                     |  | $                 | 483,397 |   |                  | 384,623 |  
|                                                                                                                                 |  |                   |         |   |                  |         |  
|Liabilities and Stockholders Equity                                                                                             |  |                   |         |   |                  |         |  
|                                                                                                                                 |  |                  
|Liabilities:                                                                                                                     |  |                   |         |   |                  |         |  
|Noninterest-bearing demand deposits                                                                                              |  | $                 | 32,592  |   |                  | 25,485  |  
|Savings, NOW and money-market deposits                                                                                           |  |                   | 90,253  |   |                  | 99,394  |  
|Time deposits                                                                                                                    |  |                   | 290,175 |   |                  | 201,410 |  
|                                                                                                                                 |  |                   |         |   |                  |         |  
|Total deposits                                                                                                                   |  |                   | 413,020 |   |                  | 326,289 |  
|                                                                                                                                 |  |                  
|Federal Home Loan Bank advances                                                                                                  |  |                   | 10,000  |   |                  | 1,000   |  
|Federal funds purchased                                                                                                          |  |                   |        |   |                  | 3,790   |  
|Other borrowings                                                                                                                 |  |                   | 23,439  |   |                  | 15,867  |  
|Other liabilities                                                                                                                |  |                   | 3,025   |   |                  | 2,729   |  
|                                                                                                                                 |  |                   |         |   |                  |         |  
|Total liabilities                                                                                                                |  |                   | 449,484 |   |                  | 349,675 |  
|                                                                                                                                 |  |                   |         |   |                  |         |  
|Stockholders equity:                                                                                                            |  |                   |         |   |                  |         |  
|Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares issued and outstanding                                  |  |                   |        |   |                  |        |  
|Common stock, $5 par value; 20,000,000 shares authorized, 3,757,650 and 3,756,050 shares issued and outstanding in 2005 and
2004 |  |                   | 18,788  |   |                  | 18,780  |  
|Additional paid-in capital                                                                                                       |  |                   | 19,456  |   |                  | 19,448  |  
|Accumulated deficit                                                                                                              |  |                   | (3,999  | ) |                  | (3,224  | )
|Accumulated other comprehensive loss                                                                                             |  |                   | (332    | ) |                  | (56     | )
|                                                                                                                                 |  |                   |         |   |                  |         |  
|Total stockholders equity                                                                                                       |  |                   | 33,913  |   |                  | 34,948  |  
|                                                                                                                                 |  |                   |         |   |                  |         |  
|Total liabilities and stockholders equity                                                                                       |  | $                 | 483,397 |   |                  | 384,623 |  
|                                                                                                                                 |  |                   |         |   |                  |         |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



2



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Operations (Unaudited)

($ in thousands, except per share
amounts)



|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|------------------------------------------------------------- |  | ------------------------------- | --------- | ------------------------------ | --------- | ---- | --------- | - | ---- | --------- | -
|                                                              |  | Three Months EndedSeptember 30, |           | Nine Months EndedSeptember 30, |          
|                                                              |  | 2005                            |           | 2004                           |           | 2005 |           |   | 2004 |          
|Interest income:                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Loans                                                         |  | $                               | 6,013     |                                | 4,122     |      | 16,330    |   |      | 11,587    |  
|Securities                                                    |  |                                 | 578       |                                | 308       |      | 1,552     |   |      | 791       |  
|Other interest-earning assets                                 |  |                                 | 65        |                                | 3         |      | 80        |   |      | 40        |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Total interest income                                         |  |                                 | 6,656     |                                | 4,433     |      | 17,962    |   |      | 12,418    |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Interest expense:                                             |  |                                 |           |                                |           |      |           |   |      |           |  
|Deposits                                                      |  |                                 | 3,110     |                                | 1,823     |      | 7,895     |   |      | 4,999     |  
|Borrowings                                                    |  |                                 | 207       |                                | 110       |      | 618       |   |      | 268       |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Total interest expense                                        |  |                                 | 3,317     |                                | 1,933     |      | 8,513     |   |      | 5,267     |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Net interest income                                           |  |                                 | 3,339     |                                | 2,500     |      | 9,449     |   |      | 7,151     |  
|                                                              |  |                                 |           |                               
|Provision for loan losses                                     |  |                                 | 2         |                                | 319       |      | 1,884     |   |      | 1,139     |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Net interest income after provision for loan losses           |  |                                 | 3,337     |                                | 2,181     |      | 7,565     |   |      | 6,012     |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Noninterest income:                                           |  |                                 |           |                                |           |      |           |   |      |           |  
|Service charges on deposit accounts                           |  |                                 | 117       |                                | 118       |      | 364       |   |      | 320       |  
|Gain on sale of loans held for sale                           |  |                                 | 491       |                                | 372       |      | 1,418     |   |      | 1,034     |  
|Gain on sale of credit card portfolio                         |  |                                 |          |                                | 173       |      |          |   |      | 173       |  
|Gain on sale of securities available for sale                 |  |                                 |          |                                | 4         |      |          |   |      | 4         |  
|Gain on sale of mortgage loan servicing rights                |  |                                 |          |                                |          |      |          |   |      | 118       |  
|Gain on sale of merchant services                             |  |                                 |          |                                |          |      |          |   |      | 212       |  
|Net loan servicing costs                                      |  |                                 |          |                                |          |      |          |   |      | (159      | )
|Asset management fees                                         |  |                                 |          |                                |          |      |          |   |      | 71        |  
|Other service charges and fees                                |  |                                 | 9         |                                | 88        |      | 35        |   |      | 497       |  
|Other                                                         |  |                                 |          |                                | 11        |      | 4         |   |      | 33        |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Total noninterest income                                      |  |                                 | 617       |                                | 766       |      | 1,821     |   |      | 2,303     |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Noninterest expenses:                                         |  |                                 |           |                                |           |      |           |   |      |           |  
|Employee compensation and benefits                            |  |                                 | 1,915     |                                | 1,339     |      | 5,261     |   |      | 3,950     |  
|Occupancy and equipment                                       |  |                                 | 614       |                                | 403       |      | 1,567     |   |      | 1,038     |  
|Data processing                                               |  |                                 | 231       |                                | 191       |      | 662       |   |      | 697       |  
|Professional fees                                             |  |                                 | 126       |                                | 102       |      | 570       |   |      | 419       |  
|Telephone, postage and supplies                               |  |                                 | 287       |                                | 168       |      | 782       |   |      | 504       |  
|Advertising                                                   |  |                                 | 356       |                                | 90        |      | 867       |   |      | 246       |  
|Other                                                         |  |                                 | 247       |                                | 221       |      | 896       |   |      | 632       |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Total noninterest expenses                                    |  |                                 | 3,776     |                                | 2,514     |      | 10,605    |   |      | 7,486     |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Earnings (loss) before income tax provision (benefit)         |  |                                 | 178       |                                | 433       |      | (1,219    | ) |      | 829       |  
|                                                              |  |                                 |           |                               
|Income tax provision (benefit)                                |  |                                 | 72        |                                | 164       |      | (444      | ) |      | 316       |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Net earnings (loss)                                           |  | $                               | 106       |                                | 269       |      | (775      | ) |      | 513       |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Earnings (loss) per share basic                               |  | $                               | 0.03      |                                | 0.07      |      | (0.21     | ) |      | 0.14      |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Earnings (loss) per share diluted                             |  | $                               | 0.03      |                                | 0.07      |      | (0.21     | ) |      | 0.14      |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Weighted-average number of common shares outstanding, basic   |  |                                 | 3,757,650 |                                | 3,753,065 |      | 3,757,632 |   |      | 3,747,091 |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  
|Weighted-average number of common shares outstanding, diluted |  |                                 | 3,820,422 |                                | 3,786,223 |      | 3,757,632 |   |      | 3,773,096 |  
|                                                              |  |                                 |           |                                |           |      |           |   |      |           |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



3



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Changes in Stockholders Equity (Unaudited)



Nine Months Ended September 30, 2005 and 2004

($ in thousands)



|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|---------------------------------------------------------------------------------------- |  | ----------- | ------ | ------------------------ | ------ | - | ------------------ | ------ | - | ------------------------------------------ | ---- | - | ------------------------ | ------ | -
|                                                                                         |  | CommonStock |        | AdditionalPaid-InCapital |        |   | AccumulatedDeficit |        |   | AccumulatedOtherCompre-hensiveIncome(Loss) |      |   | TotalStockholdersEquity |       
|Balance at December 31, 2003                                                             |  | $           | 18,677 |                          | 19,351 |   |                    | (4,055 | ) |                                            | (308 | ) |                          | 33,665 |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Comprehensive income:                                                                    |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Net earnings (unaudited)                                                                 |  |             |       |                          |       |   |                    | 513    |   |                                            |     |   |                          | 513    |  
|                                                                                         |  |             |        |                          |       
|Net change in unrealized loss on securities available for sale, net of taxes (unaudited) |  |             |       |                          |       |   |                    |       |   |                                            | 220  |   |                          | 220    |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Comprehensive income (unaudited)                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          | 733    |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Offering costs relating to 2003 common stock offering paid in 2004 (unaudited)           |  |             |       |                          | (7     | ) |                    |       |   |                                            |     |   |                          | (7     | )
|Proceeds from exercise of common stock options (20,600 shares) (unaudited)               |  |             | 103    |                          | 104    |   |                    |       |   |                                            |     |   |                          | 207    |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Balance at September 30, 2004 (unaudited)                                                |  | $           | 18,780 |                          | 19,448 |   |                    | (3,542 | ) |                                            | (88  | ) |                          | 34,598 |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Balance at December 31, 2004                                                             |  | $           | 18,780 |                          | 19,448 |   |                    | (3,224 | ) |                                            | (56  | ) |                          | 34,948 |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Comprehensive loss:                                                                      |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Net loss (unaudited)                                                                     |  |             |       |                          |       |   |                    | (775   | ) |                                            |     |   |                          | (775   | )
|Net change in unrealized loss on securities available for sale, net of taxes (unaudited) |  |             |       |                          |       |   |                    |       |   |                                            | (276 | ) |                          | (276   | )
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Comprehensive loss (unaudited)                                                           |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          | (1,051 | )
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Proceeds from exercise of common stock options (1,600 shares) (unaudited)                |  |             | 8      |                          | 8      |   |                    |       |   |                                            |     |   |                          | 16     |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  
|Balance at September 30, 2005 (unaudited)                                                |  | $           | 18,788 |                          | 19,456 |   |                    | (3,999 | ) |                                            | (332 | ) |                          | 33,913 |  
|                                                                                         |  |             |        |                          |        |   |                    |        |   |                                            |      |   |                          |        |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



4



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##### Table of Contents

COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)



|                                                                                           |  |                                |         |   |      |         |  
|------------------------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | ---- | ------- | -
|                                                                                           |  | Nine Months EndedSeptember 30, |        
|                                                                                           |  | 2005                           |         |   | 2004 |        
|Cash flows from operating activities:                                                      |  |                                |         |   |      |         |  
|Net (loss) earnings                                                                        |  | $                              | (775    | ) |      | 513     |  
|Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: |  |                                |         |   |      |         |  
|Depreciation and amortization                                                              |  |                                | 996     |   |      | 655     |  
|Provision for loan losses                                                                  |  |                                | 1,884   |   |      | 1,139   |  
|Deferred income tax (benefit) provision                                                    |  |                                | (456    | ) |      | 316     |  
|Amortization and accretion of discounts and premiums on securities                         |  |                                | 225     |   |      | 327     |  
|Amortization of loan servicing rights                                                      |  |                                |        |   |      | 274     |  
|Gain on sale of securities available for sale                                              |  |                                |        |   |      | (4      | )
|Gain on sale of loans held for sale                                                        |  |                                | (1,418  | ) |      | (1,034  | )
|Gain on sale of loan servicing rights                                                      |  |                                |        |   |      | (118    | )
|Gain on sale of credit card portfolio                                                      |  |                                |        |   |      | (173    | )
|Gain on sale of merchant services                                                          |  |                                |        |   |      | (212    | )
|Originations of loans held for sale                                                        |  |                                | (73,300 | ) |      | (59,056 | )
|Proceeds from sale of loans held for sale                                                  |  |                                | 74,718  |   |      | 60,002  |  
|Increase in accrued interest receivable                                                    |  |                                | (414    | ) |      | (310    | )
|Decrease (increase) in other assets                                                        |  |                                | 661     |   |      | (133    | )
|Increase (decrease) in other liabilities                                                   |  |                                | 296     |   |      | (413    | )
|                                                                                           |  |                                |         |   |      |         |  
|Net cash provided by operating activities                                                  |  |                                | 2,417   |   |      | 1,773   |  
|                                                                                           |  |                                |         |   |      |         |  
|Cash flows from investing activities:                                                      |  |                                |         |   |      |         |  
|Purchase of securities available for sale                                                  |  |                                | (25,768 | ) |      | (31,427 | )
|Proceeds from maturities, calls, repayments and sales of securities available for sale     |  |                                | 13,071  |   |      | 11,733  |  
|Net increase in loans                                                                      |  |                                | (70,440 | ) |      | (66,964 | )
|Purchase of premises and equipment                                                         |  |                                | (7,050  | ) |      | (8,792  | )
|Purchase of Federal Home Loan Bank stock                                                   |  |                                | (716    | ) |      | (262    | )
|Proceeds from sale of other assets                                                         |  |                                | 54      |   |      |        |  
|Proceeds from sale of loan servicing rights                                                |  |                                |        |   |      | 1,066   |  
|Proceeds from sale of credit card portfolio                                                |  |                                |        |   |      | 1,252   |  
|Proceeds from sale of merchant services                                                    |  |                                |        |   |      | 212     |  
|                                                                                           |  |                                |         |   |      |         |  
|Net cash used in investing activities                                                      |  |                                | (90,849 | ) |      | (93,182 | )
|                                                                                           |  |                                |         |   |      |         |  
|Cash flows from financing activities:                                                      |  |                                |         |   |      |         |  
|Net increase in deposits                                                                   |  |                                | 86,731  |   |      | 90,912  |  
|Proceeds from Federal Home Loan Bank advances                                              |  |                                | 62,000  |   |      | 12,200  |  
|Repayments of Federal Home Loan Bank advances                                              |  |                                | (53,000 | ) |      | (13,700 | )
|Net increase in other borrowings                                                           |  |                                | 7,572   |   |      | 3,972   |  
|Net decrease in federal funds purchased                                                    |  |                                | (3,790  | ) |      |        |  
|Payment of offering costs relating to 2003 common stock offering                           |  |                                |        |   |      | (7      | )
|Proceeds from exercise of common stock options                                             |  |                                | 16      |   |      | 207     |  
|                                                                                           |  |                                |         |   |      |         |  
|Net cash provided by financing activities                                                  |  |                                | 99,529  |   |      | 93,584  |  
|                                                                                           |  |                                |         |   |      |         |  



(continued)



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows (Unaudited), Continued

(In thousands)



|                                                                                                                            |  |                                |        |   |      |      
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | -----
|                                                                                                                            |  | Nine Months EndedSeptember 30,
|                                                                                                                            |  | 2005                           |        |   | 2004
|Net increase in cash and cash equivalents                                                                                   |  |                                | 11,097 |   |      | 2,175
|Cash and cash equivalents at beginning of period                                                                            |  |                                | 7,122  |   |      | 7,667
|                                                                                                                            |  |                                |        |   |      |      
|Cash and cash equivalents at end of period                                                                                  |  | $                              | 18,219 |   |      | 9,842
|                                                                                                                            |  |                                |        |   |      |      
|Supplemental disclosure of cash flow information:                                                                           |  |                                |        |   |      |      
|Cash paid during the period for:                                                                                            |  |                                |        |   |      |      
|Interest                                                                                                                    |  | $                              | 8,352  |   |      | 5,233
|                                                                                                                            |  |                                |        |   |      |      
|Income taxes                                                                                                                |  | $                              | 12     |   |      |     
|                                                                                                                            |  |                                |        |   |      |      
|Noncash transactions:                                                                                                       |  |                                |        |   |      |      
|Accumulated other comprehensive income (loss), net change in unrealized loss on securities available for sale, net of taxes |  | $                              | (276   | ) |      | 220  
|                                                                                                                            |  |                                |        |   |      |      
|Originated mortgage loan servicing rights capitalized                                                                       |  | $                              |       |   |      | 88   
|                                                                                                                            |  |                                |        |   |      |      
|Transfer of loans servicing rights to other assets                                                                          |  | $                              |       |   |      | 97   
|                                                                                                                            |  |                                |        |   |      |      
|Transfer of loans to other assets                                                                                           |  | $                              | 156    |   |      |     
|                                                                                                                            |  |                                |        |   |      |      



See
Accompanying Notes to Condensed Consolidated Financial Statements.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited)



|1. | General.Coast Financial Holdings, Inc. (the Holding Company) owns 100% of the outstanding common stock of Coast Bank of Florida (the Bank)
(collectively, the Company).
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
Holding Companys primary activity is the operation of the Bank. The Bank is a state (Florida)-chartered commercial bank. The deposit accounts of the Bank are insured by the Federal Deposit Insurance Corporation. The Bank offers a variety of
community banking services to individual and corporate customers through its twelve banking offices located in Manatee and Pinellas Counties, Florida. Coast Financial Partners, Inc. (CFP), a wholly owned subsidiary of the Bank, 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 September 30, 2005, the results of operations for the three- and nine-month
periods ended September 30, 2005 and 2004 and cash flows for the nine-month periods ended September 30, 2005 and 2004. The results of operations and other data for the three- and nine-month periods ended September 30, 2005 are not
necessarily indicative of results that may be expected for the year ending December 31, 2005.



|2. | Loan Impairment and Loan Losses.We have developed a strategy for the exit or restructuring of certain under performing, under collateralized, or high risk loans that
were originated prior to February 2004. As a result of our review of the entire loan portfolio, we identified lending relationships as of December 31, 2003, totaling approximately $28.4 million that we deemed to possess an unsatisfactory level
of risk. We refer to these loans as Legacy Loans. At February 28, 2004, the Legacy Loans totaled approximately $26.2 million and were comprised of approximately $17.8 million of direct and indirect automobile loans and $8.4 million
of classified commercial loans. For each of the Legacy Loans, we have been seeking and continue to pursue additional or alternative collateral, a complete exit of the borrower from the Bank, or a restructuring of the credit to accelerate the loan
pay-off. As of September 30, 2005, Legacy Loans have been reduced to approximately $4.9 million of direct and indirect automobile loans, $623,000 of classified commercial loans and $1.7 million of nonclassified commercial loans. We also
increased our provision for loan losses in the second quarter of 2005 by $1.3 million for the Legacy Loans, including those which resulted in a $1.1 million charge-off.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|                                |  |                                 |       |   |                                |       |   |      |   |        |      |  |        |  
|------------------------------- |  | ------------------------------- | ----- | - | ------------------------------ | ----- | - | ---- | - | ------ | ---- |  | ------ | -
|                                |  | Three Months EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |      
|                                |  | 2005                            |       |   | 2004                           |       |   | 2005 |   |        | 2004 | 
|Balance at beginning of period  |  | $                               | 3,187 |   |                                | 2,808 |   |      | $ | 2,901  |      |  | 3,163  |  
|Provision for loan losses       |  |                                 | 2     |   |                                | 319   |   |      |   | 1,884  |      |  | 1,139  |  
|Net, charge-offs and recoveries |  |                                 | (6    | ) |                                | (288  | ) |      |   | (1,602 | )    |  | (1,463 | )
|                                |  |                                 |       |   |                                |       |   |      |   |        |      |  |        |  
|Balance at end of period        |  | $                               | 3,183 |   |                                | 2,839 |   |      | $ | 3,183  |      |  | 2,839  |  
|                                |  |                                 |       |   |                                |       |   |      |   |        |      |  |        |  



Impaired collateral
dependent loans were as follows (in thousands):



|                                   |  |                  |     |      |    
|---------------------------------- |  | ---------------- | --- | ---- | ---
|                                   |  | At September 30,
|                                   |  | 2005             |     | 2004
|Balance at end of period           |  | $                | 703 |      | 171
|                                   |  |                  |     |      |    
|Total related allowance for losses |  | $                | 504 |      | 29 
|                                   |  |                  |     |      |    



|                                             |  |                                 |       |                                |     |      |   |       |  |    
|-------------------------------------------- |  | ------------------------------- | ----- | ------------------------------ | --- | ---- | - | ----- |  | ---
|                                             |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                                             |  | 2005                            |       | 2004                           |     | 2005 |   | 2004 
|Average investment in impaired loans         |  | $                               | 1,243 |                                | 280 |      | $ | 1,159 |  | 319
|                                             |  |                                 |       |                                |     |      |   |       |  |    
|Interest income recognized on impaired loans |  | $                               |      |                                |    |      | $ |      |  |   
|                                             |  |                                 |       |                                |     |      |   |       |  |    
|Interest income received on impaired loans   |  | $                               |      |                                |    |      | $ |      |  |   
|                                             |  |                                 |       |                                |     |      |   |       |  |    



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



|                                             |  |                  |       |      |      
|-------------------------------------------- |  | ---------------- | ----- | ---- | -----
|                                             |  | At September 30,
|                                             |  | 2005             |       | 2004
|Nonaccrual loans                             |  | $                | 1,334 |      | 2,036
|Past due ninety days or more, still accruing |  |                  |      |      |     
|                                             |  |                  |       |      |      
|                                             |  | $                | 1,334 |      | 2,036
|                                             |  |                  |       |      |      



|3. | Stock Option Plans.The Company has adopted stock option plans for certain key employees and directors of the Company. A total of 563,000 shares of common stock have
been reserved under these plans. 160,100 shares remain available for grant at September 30, 2005. The exercise price of the stock options granted under these plans must at least equal the fair market value of the common stock at the date of
grant. The options granted to employees generally have ten year terms and vest over periods of up to three years. The options issued to directors generally are fully vested on the date of grant and have ten year terms.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(continued)



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|3. | Stock Option Plans, Continued.A summary of stock option transactions follows ($ in thousands, except per share amounts):
|-- | ------------------------------------------------------------------------------------------------------------------------



|                                  |  |                 |   |  |                               |  |                                |       |                      |   |       |  
|--------------------------------- |  | --------------- | - |  | ----------------------------- |  | ------------------------------ | ----- | -------------------- | - | ----- | -
|                                  |  | Number ofShares |   |  | Range ofPer ShareOption Price |  | Weighted-AveragePer SharePrice |       | AggregateOptionPrice |  
|Outstanding at December 31, 2004  |  | 372,300         |   |  | $10.00-14.50                  |  | $                              | 13.11 |                      | $ | 4,881 |  
|Granted                           |  | 10,000          |   |  | 17.35-17.95                   |  |                                | 17.65 |                      |   | 177   |  
|Exercised                         |  | (1,600          | ) |  | 10.00                         |  |                                | 10.00 |                      |   | (16   | )
|                                  |  |                 |   |  |                               |  |                                |       |                      |   |       |  
|Outstanding at September 30, 2005 |  | 380,700         |   |  | $10.00-17.95                  |  | $                              | 13.24 |                      | $ | 5,042 |  
|                                  |  |                 |   |  |                               |  |                                |       |                      |   |       |  



The Company accounts
for its stock option plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25. No stock-based employee compensation cost is reflected in net earnings (loss), as all options granted under these plans
had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net earnings (loss) if the Company had applied the fair value recognition provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, accounting for stock-based compensation, as amended by SFAS No. 148, accounting for stock-based compensation transition and disclosure, to stock-based employee
compensation. Effective January 1, 2006 the Company will record stock-based employee compensation as an expense. Based on the options granted as of September 30, 2005 our estimated costs for 2006 and 2007 would be approximately $8,000 and
$1,000, respectively, however, this does not include expenses related to any options that have or will be granted after the third quarter of 2005.



|                                                                                                                                       |  |                                 |      |   |                                |      |   |      |       |   |      |      |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ---- | - | ------------------------------ | ---- | - | ---- | ----- | - | ---- | ---- | -
|                                                                                                                                       |  | Three Months EndedSeptember 30, |      |   | Nine Months EndedSeptember 30, |     
|                                                                                                                                       |  | 2005                            |      |   | 2004                           |      |   | 2005 |       |   | 2004 |     
|Net earnings (loss)                                                                                                                    |  | $                               | 106  |   |                                | 269  |   |      | (775  | ) |      | 513  |  
|Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of related tax
effect |  |                                 | (14  | ) |                                | (88  | ) |      | (62   | ) |      | (263 | )
|                                                                                                                                       |  |                                 |      |   |                                |      |   |      |       |   |      |      |  
|Proforma net earnings (loss)                                                                                                           |  | $                               | 92   |   |                                | 181  |   |      | (837  | ) |      | 250  |  
|                                                                                                                                       |  |                                 |      |   |                                |      |   |      |       |   |      |      |  
|Earnings (loss) per share:                                                                                                             |  |                                 |      |   |                                |      |   |      |       |   |      |      |  
|Basic, as reported                                                                                                                     |  | $                               | 0.03 |   |                                | 0.07 |   |      | (0.21 | ) |      | 0.14 |  
|                                                                                                                                       |  |                                 |      |   |                                |      |   |      |       |   |      |      |  
|Diluted, as reported                                                                                                                   |  | $                               | 0.03 |   |                                | 0.07 |   |      | (0.21 | ) |      | 0.14 |  
|                                                                                                                                       |  |                                 |      |   |                                |      |   |      |       |   |      |      |  
|Basic, proforma                                                                                                                        |  | $                               | 0.02 |   |                                | 0.05 |   |      | (0.22 | ) |      | 0.07 |  
|                                                                                                                                       |  |                                 |      |   |                                |      |   |      |       |   |      |      |  
|Diluted, proforma                                                                                                                      |  | $                               | 0.02 |   |                                | 0.05 |   |      | (0.22 | ) |      | 0.07 |  
|                                                                                                                                       |  |                                 |      |   |                                |      |   |      |       |   |      |      |  



(continued)



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|3. | Stock Option Plans, Continued.There were no options granted during the three months ended September 30, 2005 and 2004. The fair value of each option granted is
estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                              |  |                                |      |   |      |   |       |  
|--------------------------------------------- |  | ------------------------------ | ---- | - | ---- | - | ----- | -
|                                              |  | Nine Months EndedSeptember 30, |     
|                                              |  | 2005                           |      |   | 2004 |  
|Risk-free interest rate                       |  |                                | 4.34 | % |      |   | 4.32  | %
|Dividend yield                                |  |                                |     | % |      |   |      | %
|Expected volatility                           |  |                                | 4.52 | % |      |   | 13.72 | %
|Expected life in years                        |  |                                | 5.75 |   |      |   | 10.00 |  
|                                              |  |                               
|Per share fair value of options at grant date |  | $                              | 6.01 |   |      | $ | 4.97  |  
|                                              |  |                                |      |   |      |   |       |  



|4. | Regulatory Capital.The Company and the Bank are required to maintain certain minimum regulatory capital requirements. The following is a summary at September 30,
2005 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                                          |  | 10.66  | % |  | 8.00                  | %
|Bank                                             |  | 10.59  | % |  | 8.00                  | %
|Tier I capital to risk-weighted assets:          |  |        |   |  |                       |  
|Company                                          |  | 9.70   | % |  | 4.00                  | %
|Bank                                             |  | 9.62   | % |  | 4.00                  | %
|Tier I capital to total assets - leverage ratio: |  |        |   |  |                       |  
|Company                                          |  | 6.83   | % |  | 4.00                  | %
|Bank                                             |  | 6.78   | % |  | 4.00                  | %



|5. | Earnings (Loss) Per Share. Earnings (loss) per share (EPS) of common stock has been computed on the basis of the weighted-average number of shares of
common stock outstanding. Outstanding stock options are not considered dilutive securities for the nine months ended 2005 for purposes of calculating diluted EPS due to the net loss incurred by the Company. Outstanding stock options are considered
dilutive securities for the three months ended September 30, 2005 and 2004 and nine months ended September 30, 2004, for purposes of calculating diluted EPS, which is computed using the treasury stock method.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(continued)



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|5. | Earnings (Loss) Per Share, Continued.The following table presents the calculations of the weighted-average number of shares for diluted EPS for the three-months ended
September 30, 2005 and 2004 and nine-months ended September 30, 2004.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                      |  |                         |  |          
|----------------------------------------------------- |  | ----------------------- |  | ---------
|                                                      |  | Weighted-Average Shares
|                                                      |  | 2005                    |  | 2004     
|Three Months Ended September 30:                      |  |                         |  |          
|For Basic EPS                                         |  | 3,757,650               |  | 3,753,065
|Effect of dilutive securities-                        |  |                         |  |          
|Incremental shares from assumed conversion of options |  | 62,772                  |  | 33,158   
|                                                      |  |                         |  |          
|For Diluted EPS                                       |  | 3,820,422               |  | 3,786,223
|                                                      |  |                         |  |          
|Nine Months Ended September 30:                       |  |                         |  |          
|For Basic EPS                                         |  |                         |  | 3,747,091
|Effect of dilutive securities-                        |  |                         |  |          
|Incremental shares from assumed conversion of options |  |                         |  | 26,005   
|                                                      |  |                         |  |          
|For Diluted EPS                                       |  |                         |  | 3,773,096
|                                                      |  |                         |  |          



Shares not included in
the computations of diluted earnings per share for the three-months ended September 30, 2005 because the options exercise price was not less than the market value for the three-months ended September 30, 2005 are as follows:



|        |  |                 |  |               |       |            |      |              |     
|------- |  | --------------- |  | ------------- | ----- | ---------- | ---- | ------------ | ----
|        |  | Number ofShares |  | ExercisePrice |       | YearIssued |      | YearExpiring
|Options |  | 5,000           |  | $             | 17.35 |            | 2005 |              | 2015
|Options |  | 5,000           |  | $             | 17.95 |            | 2005 |              | 2015



Shares not included in
the computation of diluted earnings per share in 2004 because the options exercise price was not less than the market value for the nine-months ended September 30, 2004 are as follows:



|        |  |                 |  |               |       |            |      |              |     
|------- |  | --------------- |  | ------------- | ----- | ---------- | ---- | ------------ | ----
|        |  | Number ofShares |  | ExercisePrice |       | YearIssued |      | YearExpiring
|Options |  | 190,000         |  | $             | 14.50 |            | 2003 |              | 2013



(continued)



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|6. | Branch Expansion.As of September 30, 2005 we have opened five new branches during 2005, four in Pinellas County and one in Manatee County. As part of our
strategy to expand our banking franchise, we successfully bid for the right to lease up to eight former bank branch facilities located in Hillsborough, Manatee, Pinellas and Polk Counties (Expansion Branches). We executed 15-year leases
with American Financial Realty Trust for each of these locations on September 14, 2005 and, subject to regulatory approval, we plan to take possession of these branches during December 2005. We anticipate opening the following Expansion
Branches at a rate of at least two per quarter during 2006:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                         |  |                |  |                        |  |                 |        
|---------------------------------------- |  | -------------- |  | ---------------------- |  | --------------- | -------
|Proposed Branch Location                 |  | Florida County |  | ApproximateSquare Feet |  | AnnualBase Rent
|110 W. Bloomingdale Avenue Brandon, FL   |  | Hillsborough   |  | 2,203                  |  | $               | 80,000 
|510 Oakfield Drive Brandon, FL           |  | Hillsborough   |  | 2,954                  |  | $               | 100,000
|21708 State Road 54 Lutz, FL             |  | Hillsborough   |  | 5,000                  |  | $               | 150,000
|13175 Walsingham road Largo, FL          |  | Pinellas       |  | 6,572                  |  | $               | 160,000
|6108 N. Road 98 Lakeland, FL             |  | Polk           |  | 3,475                  |  | $               | 105,000
|7600 U.S. Hwy 19 North Pinellas Park, FL |  | Pinellas       |  | 2,105                  |  | $               | 120,000
|4601 Manatee Avenue West Bradenton, FL   |  | Manatee        |  | 3,000                  |  | $               | 120,000
|4400 S. Florida Avenue Lakeland, FL      |  | Polk           |  | 7,300                  |  | $               | 185,000



We will pay all
occupancy expenses associated with each lease. In addition to the annual base rent and occupancy expenses, we also will be required to pay an annual management fee equal to 3% of the then annual base rent. As a result, we will carry these lease
expenses and other expenses associated with the Expansion Branches prior to their opening. We also will need to renovate the Expansion Branches (our renovations historically have run between $250,000 to $500,000 per branch) and hire employees to run
each Expansion Branch. Each lease will have three five-year options to renew and will contain provisions for an automatic annual adjustment in the rent payable for such properties in an amount equal to the greater of 3% or the CPI increase. If we
experience delays in opening any of the Expansion Branches, we will be forced to carry the lease and occupancy costs for a longer period of time without the offsetting revenue associated with an opened and operational Expansion Branch. In addition
to the Expansion Branches, we also plan to open three de novobranches in 2006.



(continued)



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|6. | Branch Expansion, Continued. We intend to file all necessary applications with the appropriate banking regulators to add these locations as future branch sites as soon
as practicable. Although we have not yet physically inspected each of these locations, we have no reason to believe that these facilities will require an investment in excess of our historical costs.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Establishing these eight Expansion Branches, together with the three de
novo branches, represents a significant step toward our goal of operating between 30 to 35 branches and becoming the leading independent community bank serving the greater Tampa Bay region.



|7. | Sale of Common Stock.On October 4, 2005 the Company announced that its public offering of 2,500,000 shares of its common stock would be priced at $15.50 per
share. The net proceeds of the offering were approximately $36.7 million, after payment of underwriting discounts and commissions, but excluding estimated offering expenses. The Company has granted the underwriters a 30-day option to purchase up to
an additional 375,000 shares of common stock to cover over-allotments, if any.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Review by Independent Registered Public Accounting Firm



Hacker, Johnson & Smith PA, the Companys independent registered public accounting firm, have made a limited review of the financial data as of September 30, 2005, and for the three and nine-month
periods ended September 30, 2005 and 2004 presented in this document, in accordance with standards established by the Public Company Accounting Oversight Board.



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



14



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



Coast Financial Holdings, Inc.

Bradenton, Florida:



We have
reviewed the accompanying interim condensed consolidated balance sheet of Coast Financial Holdings, Inc. and subsidiary (the Company) as of September 30, 2005, and the related interim condensed consolidated statements of operations
for the three and nine-month periods ended September 30, 2005 and 2004 and the related interim condensed consolidated statements of changes in stockholders equity and cash flows for the nine-month periods ended September 30, 2005 and
2004. These interim financial statements are the responsibility of the Companys management.



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



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



We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the
consolidated balance sheet of the Company as of December 31, 2004, and the related consolidated statements of operations, changes in stockholders equity and cash flows for the year then ended (not presented herein); and in our report
dated March 28, 2005, 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, 2004, 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                
|October 26, 2005              



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Item 2. Managements Discussion and Analysis

of Financial Condition and Results of
Operations



A Note About Forward Looking Statements



This report 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,
the Companys ability to identify, consummate, and manage additional branch expansion or acquisition opportunities, 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 Form 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.



16



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##### Table of Contents

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 or Coast Bank) (collectively, the Company).



The Holding Companys primary activity is the operation of the Bank. The Bank is a state (Florida)-chartered commercial bank. The deposit accounts of
the Bank are insured by the Federal Deposit Insurance Corporation. The Bank offers a variety of community banking services to individual and corporate customers through its twelve banking offices located in Manatee and Pinellas Counties, Florida.
Coast Financial Partners, Inc. (CFP), a wholly owned subsidiary of the Bank, 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.



Results of Operations



Comparison of the Three-Month Periods Ended
September 30, 2005 and 2004



General.
Our net earnings for the three months ended September 30, 2005, were $106,000 or $0.03 earnings per basic and diluted share compared to net earnings of $269,000 or $0.07 earnings per basic and diluted share for the three months ended
September 30, 2004. Net earnings decreased primarily due to an increase in noninterest expenses and the gain on sale of the credit card portfolio in 2004, which was partially offset by an increase in net interest income.



Net Interest Income. Interest income increased to $6.7 million
during the three months ended September 30, 2005, from $4.4 million for the same period in 2004. Interest on loans for the three months ended September 30, 2005 was $6.0 million, resulting from an average yield of 6.59% compared to $4.1
million resulting from an average yield of 6.07% for the three months ended September 30, 2004. The increase in interest on loans was primarily due to an increase in the average loan balance to $362.1 million, during the three months ended
September 30, 2005 compared to $270.2 million, for the three months ended September 30, 2004. Interest on securities increased to $578,000 during the three months ended September 30, 2005, from $308,000 for the same period in 2004.
The increase in interest income on securities was primarily due to the increase in the average security balance to $63.6 million during the three months ended September 30, 2005 from $47.4 million for the three months ended September 30,
2004 complemented by a 102 basis point increase in yield over the same period. Interest on other interest earning assets increased to $65,000 during the three months ended September 30, 2005, from $3,000 during the three months ended
September 30, 2004.



Interest expense on interest bearing
liabilities increased to $3.3 million during the three months ended September 30, 2005, from $1.9 million during the three months ended September 30, 2004. The increase was due to an increase in the average balance of interest bearing
liabilities, to $401.4 million in 2005 from $286.7 million in 2004 in addition to a 60 basis point increase in rate.



17



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Three-Month Periods Ended September 30, 2005 and
2004, Continued



Average Balances and Average
Interest Rates. The following table sets forth, for the three months ended September 30, 2005 and 2004, 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     |        
|                                                                                 |  | September 30, 2005     |         |                        | September 30, 2004 |               
|                                                                                 |  | Average Balance (1)    |         | InterestIncome/Expense |                    | Yield/Rate (2) |  |      | AverageBalance (1) |  | InterestIncome/Expense |         | Yield/Rate (2) |  
|                                                                                 |  | (dollars in thousands) |        
|Interest-earning assets:                                                         |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Loans (3)                                                                        |  | $                      | 362,073 |                        |                    | 6,013          |  | 6.59 | %                  |  | $                      | 270,242 |                |   | 4,122 |  | 6.07 | %
|Investment securities (4)                                                        |  |                        | 63,605  |                        |                    | 578            |  | 3.61 |                    |  |                        | 47,375  |                |   | 308   |  | 2.59 |  
|Other interest-earning assets (5)                                                |  |                        | 7,041   |                        |                    | 65             |  | 3.66 |                    |  |                        | 963     |                |   | 3     |  | 1.41 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total interest-earning assets/interestincome/average yield earned                |  |                        | 432,719 |                        |                    | 6,656          |  | 6.10 |                    |  |                        | 318,580 |                |   | 4,433 |  | 5.54 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total noninterest earning assets                                                 |  |                        | 37,576  |                        |                    |                |  |      |                    |  |                        | 28,303  |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total assets                                                                     |  | $                      | 470,295 |                        |                    |                |  |      |                    |  | $                      | 346,883 |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|NOW                                                                              |  | $                      | 18,126  |                        |                    | 14             |  | 0.31 |                    |  | $                      | 11,332  |                |   | 10    |  | 0.35 |  
|Money market                                                                     |  |                        | 66,300  |                        |                    | 419            |  | 2.51 |                    |  |                        | 76,601  |                |   | 386   |  | 2.00 |  
|Savings                                                                          |  |                        | 4,649   |                        |                    | 6              |  | 0.51 |                    |  |                        | 3,628   |                |   | 5     |  | 0.55 |  
|Time                                                                             |  |                        | 281,369 |                        |                    | 2,671          |  | 3.77 |                    |  |                        | 169,309 |                |   | 1,422 |  | 3.34 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                        | 370,444 |                        |                    | 3,110          |  | 3.33 |                    |  |                        | 260,870 |                |   | 1,823 |  | 2.78 |  
|                                                                                 |  |                        |         |                        |                    |               
|Other borrowings                                                                 |  |                        | 30,974  |                        |                    | 207            |  | 2.65 |                    |  |                        | 25,831  |                |   | 110   |  | 1.69 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total interest-bearing liabilities/interest expense/average rate paid            |  |                        | 401,418 |                        |                    | 3,317          |  | 3.28 |                    |  |                        | 286,701 |                |   | 1,933 |  | 2.68 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total noninterest bearing liabilities                                            |  |                        | 35,004  |                        |                    |                |  |      |                    |  |                        | 26,181  |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total liabilities                                                                |  |                        | 436,422 |                        |                    |                |  |      |                    |  |                        | 312,882 |                |   |       |  |      |  
|Shareholders equity                                                             |  |                        | 33,873  |                        |                    |                |  |      |                    |  |                        | 34,001  |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Total liabilities and shareholders equity                                       |  | $                      | 470,295 |                        |                    |                |  |      |                    |  | $                      | 346,883 |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Net interest income                                                              |  |                        |         |                        | $                  | 3,339          |  |      |                    |  |                        |         |                | $ | 2,500 |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Interest-rate spread (6)                                                         |  |                        |         |                        |                    |                |  | 2.82 | %                  |  |                        |         |                |   |       |  | 2.86 | %
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Net interest margin (7)                                                          |  |                        |         |                        |                    |                |  | 3.06 | %                  |  |                        |         |                |   |       |  | 3.12 | %
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                        | 1.08    |                        |                    |                |  |      |                    |  |                        | 1.11    |                |   |       |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |       |  |      |  

---

|(1) | Average balance represents the average daily balance year to date.
|--- | ------------------------------------------------------------------

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

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



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Three-Month Periods Ended September 30, 2005 and
2004, Continued



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

|(5) | Includes federal funds sold and interest-bearing deposits.
|--- | ----------------------------------------------------------

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

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



Provision for Loan Losses.The provision for loan losses was $2,000 for the three months ended
September 30, 2005 compared to $319,000 for the three months ended September 30, 2004. The decrease in the provision was primarily due to a minimal amount of charged-off loans during the quarter ended September 30, 2005. Commercial
real estate loans grew 47% and comprise 34% of the Banks loan portfolio at September 30, 2005, compared to 31% at September 30, 2004. Residential construction and land loans grew 74% and now account for 39% of loans, compared to 29%
at September 30, 2004.



The allowance for loan losses was
$3.2 million at September 30, 2005. While management believes that its allowance for loan losses is adequate as of September 30, 2005, 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 $617,000 for the three months ended September 30, 2005 compared to $766,000
for the three months ended September 30, 2004. The decrease was due to the non-recurring gain on sale of the credit card portfolio during the three months ended September 30, 2004, which was partially offset by increases in gains
recognized on the sale of loans held for sale.



Noninterest Expenses.Noninterest expense increased to $3.8 million for the three months ended September 30, 2005 compared to $2.5 million for the three months ended September 30, 2004. The increase was due to
an increase in employee compensation and benefits and occupancy and equipment expense due to the opening of two new banking offices in Manatee and Pinellas Counties during the third quarter of 2005 and an increase in advertising expenditures of
$266,000.



Income Taxes. The income tax
provision for the three months ended September 30, 2005 was $72,000, which equates to an effective rate of 40.4% compared to a tax provision of $164,000 for the three months ended September 30, 2004, which equates to an effective rate of
37.9%.



19



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Nine-Month Periods Ended September 30, 2005 and 2004



General.Our net loss for the nine months
ended September 30, 2005, was $775,000 or $0.21 loss per basic and diluted share compared to net earnings of $513,000 for the nine months ended September 30, 2004. The decrease in net earnings in the nine months ended September 30,
2005 compared to the same period in 2004 was attributable primarily to an increase in the provision for loan losses, an increase in noninterest expenses, and a decrease in noninterest income partially offset by an increase in net interest income.
The increase in the loan loss provision was due primarily to Legacy Loans, including those Legacy Loans which resulted in a $1.1 million charge-off in the second quarter of 2005, and the increase in noninterest expense was primarily due to branch
expansion costs and increased advertising and marketing costs.



Net Interest Income.Interest income increased to $18.0 million during the nine months ended September 30, 2005, from $12.4 million for the same period in 2004. Interest on loans for the nine months ended
September 30, 2005 was $16.3 million, resulting from an average yield of 6.40% compared to $11.6 million resulting from an average yield of 6.27% for the nine months ended September 30, 2004. The increase in interest on loans was primarily
due to an increase in the average loan balance to $341.1 million during the nine months ended September 30, 2005 compared to $246.9 million, for the nine months ended September 30, 2004. Interest on securities increased to $1.6 million
during the nine months ended September 30, 2005, from $791,000 for the same period in 2004. The increase in interest income on securities was primarily due to the increase in the average securities balance to $60.1 million during the nine
months ended September 30, 2005 from $37.6 million for the nine months ended September 30, 2004 coupled with a 64 basis point increase in yield. Interest on other interest earning assets increased to $80,000 during the nine months ended
September 30, 2005, from $40,000 during the nine months ended September 30, 2004.



Interest expense on interest bearing liabilities increased to $8.5 million during the nine months ended September 30, 2005, from $5.3 million during the nine months ended September 30, 2004. The increase was
primarily due to an increase in the average balance of interest bearing liabilities to $369.8 million in 2005 from $256.8 million in 2004.



Average Balances and Average Interest Rates. The following table sets forth, for the nine months ended September 30, 2005 and
2004, 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.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Nine-Month Periods Ended September 30, 2005 and
2004, Continued



|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|-------------------------------------------------------------------------------- |  | ---------------------- | ------- | ---------------------- | ------------------ | -------------- |  | ---- | ------------------ |  | ---------------------- | ------- | -------------- | - | ------ |  | ---- | -
|                                                                                 |  | Nine Months Ended      |        
|                                                                                 |  | September 30, 2005     |         |                        | September 30, 2004 |               
|                                                                                 |  | AverageBalance (1)     |         | InterestIncome/Expense |                    | Yield/Rate (2) |  |      | AverageBalance (1) |  | InterestIncome/Expense |         | Yield/Rate (2) |  
|                                                                                 |  | (dollars in thousands) |        
|Interest-earning assets:                                                         |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Loans (3)                                                                        |  | $                      | 341,124 |                        |                    | 16,330         |  | 6.40 | %                  |  | $                      | 246,867 |                |   | 11,587 |  | 6.27 | %
|Investment securities (4)                                                        |  |                        | 60,119  |                        |                    | 1,552          |  | 3.45 |                    |  |                        | 37,627  |                |   | 791    |  | 2.81 |  
|Other interest-earning assets (5)                                                |  |                        | 3,176   |                        |                    | 80             |  | 3.37 |                    |  |                        | 5,658   |                |   | 40     |  | 0.95 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total interest-earning assets/interestincome/average yield earned                |  |                        | 404,419 |                        |                    | 17,962         |  | 5.94 |                    |  |                        | 290,152 |                |   | 12,418 |  | 5.72 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total noninterest earning assets                                                 |  |                        | 33,991  |                        |                    |                |  |      |                    |  |                        | 26,194  |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total assets                                                                     |  | $                      | 438,410 |                        |                    |                |  |      |                    |  | $                      | 316,346 |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Interest-bearing liabilities:                                                    |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|NOW                                                                              |  | $                      | 17,037  |                        |                    | 40             |  | 0.31 |                    |  | $                      | 11,081  |                |   | 28     |  | 0.34 |  
|Money market                                                                     |  |                        | 70,213  |                        |                    | 1,229          |  | 2.34 |                    |  |                        | 58,907  |                |   | 839    |  | 1.90 |  
|Savings                                                                          |  |                        | 4,198   |                        |                    | 16             |  | 0.51 |                    |  |                        | 3,285   |                |   | 13     |  | 0.53 |  
|Time                                                                             |  |                        | 244,974 |                        |                    | 6,610          |  | 3.61 |                    |  |                        | 161,748 |                |   | 4,119  |  | 3.40 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total interest-bearing deposits                                                  |  |                        | 336,422 |                        |                    | 7,895          |  | 3.14 |                    |  |                        | 235,021 |                |   | 4,999  |  | 2.84 |  
|                                                                                 |  |                        |         |                        |                    |               
|Other borrowings                                                                 |  |                        | 33,364  |                        |                    | 618            |  | 2.48 |                    |  |                        | 21,753  |                |   | 268    |  | 1.65 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total interest-bearing liabilities/interest expense/average rate paid            |  |                        | 369,786 |                        |                    | 8,513          |  | 3.08 |                    |  |                        | 256,774 |                |   | 5,267  |  | 2.74 |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total noninterest bearing liabilities                                            |  |                        | 34,173  |                        |                    |                |  |      |                    |  |                        | 25,730  |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total liabilities                                                                |  |                        | 403,959 |                        |                    |                |  |      |                    |  |                        | 282,504 |                |   |        |  |      |  
|Shareholders equity                                                             |  |                        | 34,451  |                        |                    |                |  |      |                    |  |                        | 33,842  |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Total liabilities and shareholders equity                                       |  | $                      | 438,410 |                        |                    |                |  |      |                    |  | $                      | 316,346 |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Net interest income                                                              |  |                        |         |                        | $                  | 9,449          |  |      |                    |  |                        |         |                | $ | 7,151  |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Interest-rate spread (6)                                                         |  |                        |         |                        |                    |                |  | 2.86 | %                  |  |                        |         |                |   |        |  | 2.98 | %
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Net interest margin (7)                                                          |  |                        |         |                        |                    |                |  | 3.12 | %                  |  |                        |         |                |   |        |  | 3.29 | %
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                        | 1.09    |                        |                    |                |  |      |                    |  |                        | 1.13    |                |   |        |  |      |  
|                                                                                 |  |                        |         |                        |                    |                |  |      |                    |  |                        |         |                |   |        |  |      |  

---

|(1) | Average balance represents the average daily balance year to date.
|--- | ------------------------------------------------------------------

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

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

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

|(5) | Includes federal funds sold and interest-bearing deposits.
|--- | ----------------------------------------------------------

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

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



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Nine-Month Periods Ended September 30, 2005 and
2004, Continued



Provision for Loan Losses.
Our provision for loan losses was $1.9 million for the nine months ended September 30, 2005 compared to $1.1 million for the nine months ended September 30, 2004.



The provision was increased $1.3 million in the second quarter of 2005 primarily due to the Legacy Loans, including those
Legacy Loans with three different borrowers which resulted in charge-offs of $1.1 million. The first borrower, a yacht brokerage firm, was issued a $1.0 million commercial line of credit in 2001, secured by yachts under construction. The Bank failed
to secure its lien position on the collateral at the inception of the loan. When the yacht builder (in Canada) went bankrupt, the Banks collateral was liquidated without any principal reduction. The borrower had one completed yacht, which was
sold with proceeds used to pay down the line of credit by $336,000. The borrower then offered the Bank a 28-acre parcel of land on the Braden River as collateral, which had a first lien with another bank of $166,000. In order to protect the
Banks position the Bank purchased the first lien at par. After a lengthy process of obtaining an environmental and engineering study on the parcel to ascertain its potential use and value, it was determined in the second quarter of 2005 that
only 1.4 acres could potentially be developed. With verbal offers in the range of $125,000 to $200,000 the Bank charged off the second lien of $664,000 in the second quarter of 2005. During the third quarter of 2005 we received a complete appraisal
which stated that the value of the property is $600,000. There is no assurance that we will be able to sell the property at the appraised value, if at all. Management is unsure of the true value of the parcel and does not plan to record a recovery,
if any, until the property is sold.



The second borrower, a
formal wear rental business, was issued a $1.4 million commercial line of credit in 2002, secured by business assets. Current Bank management, through a number of concerted efforts, was able to secure principal reductions of approximately $1.0
million. During the second quarter of 2005 the borrower filed bankruptcy on the business and then fled the country. The remaining balance of the loan totaling approximately $400,000 was consequently charged-off, of which approximately $200,000 had
been previously included in our provision for loan loss. Management expects a minimal recovery if any from the liquidation of the business assets.



The last borrower, a glass installation and repair business, was issued a $276,000 commercial line of credit in 2000, secured by business assets. During
the second quarter of 2005 the primary guarantor had closed the business and liquidated all business assets (without Bank consent). Consequently, the loan was charged-off; we are proceeding with judgments and will pursue all legal options in an
effort to recover any portion due on the loan.



In addition to
the loans above relating to charge-offs, we also fully reserved in the second quarter of 2005 a loan made in 2003 to another borrower, a raw waste processor. The commercial loan of approximately $500,000 was secured by business assets. During 2005
the borrower stopped making payments and the loan was placed on nonaccrual status. To fully reserve the loan $184,000 in new reserves were added to an existing $316,000 in reserves made in 2004 for the loan. The borrower is attempting to refinance
the loan with



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Comparison of the Nine-Month Periods Ended September 30, 2005 and
2004, Continued



another lender and, if successful, we may
recover a portion of the loan. Management is unsure that the refinance will occur and will not record a recovery, if any, until the loan is paid off.



Commercial real estate loans grew 47% and comprise 34% of the Banks loan portfolio at September 30, 2005, compared to 31% at September 30,
2004. Residential construction and land loans grew 74% and now account for 39% of loans, compared to 29% at September 30, 2004.



Noninterest Income. Noninterest income decreased to $1.8 million for the nine months ended September 30, 2005 compared to $2.3
million for the nine months ended September 30, 2004. This decrease was primarily due to the one-time gains experienced in 2004 in connection with the sale of our credit card portfolio, our merchant services and our mortgage loan servicing
rights, partially offset with an increase from gains on the sale of loans held for sale, due to an increase in loans sold. Other service charges and fees decreased by $462,000 primarily due to discontinuing merchant services during the second
quarter of 2004. The gains on these assets were part of the restructuring of our operations as a result of the change in our executive management. Based upon the current growth and expansion of building in Florida, absent any unforeseen events, we
anticipate that we will continue to achieve the same results or, possibly increase, our gains on the sales of loans.



Noninterest Expenses. Noninterest expense increased to $10.6 million for the nine months ended September 30, 2005 compared to $7.5
million for the nine months ended September 30, 2004. The increase was primarily due to an increase in employee compensation and benefits and occupancy and equipment expense associated with the addition of five new branches in 2005 and an
increase in advertising expenditures of $621,000.



Income
Taxes. The income tax benefit for the nine months ended September 30, 2005 was $(444,000), which equates to an effective rate of 36.4% compared to a tax provision of $316,000 for the nine months ended September 30, 2004,
which equates to an effective rate of 38.1%.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Liquidity and Capital Resources



The Companys primary source of cash during the nine months ended
September 30, 2005, was from net deposit inflows of approximately $86.7 million, principle repayments and calls of securities available for sale of approximately $13.1 million, net proceeds from Federal Home Loan Bank advances of approximately
$9.0 million and proceeds from a repurchase agreement of $7.6 million. Cash was used primarily to originate net loans of approximately $70.4 million, to purchase securities of approximately $25.8 million, to purchase premises and equipment of
approximately $7.1 million and to repay federal funds purchased of approximately $3.8 million. Management will continue to attempt to acquire short-term deposits and low cost transaction accounts. At September 30, 2005, the Bank exceeded its
regulatory liquidity requirements.



On October 4, 2005
the Company announced that its public offering of 2,500,000 shares of its common stock would be priced at $15.50 per share. The net proceeds of the offering were approximately $36.7 million, after payment of underwriting discounts and commissions,
but excluding estimated offering expenses. The Company has granted the underwriters a 30-day option to purchase up to an additional 375,000 shares of common stock to cover over-allotments, if any.



Branch Expansion Plans.As of September 30, 2005 we have
opened five new branches during 2005, four in Pinellas County and one in Manatee County. As part of our strategy to expand our banking franchise, we successfully bid for the right to lease up to eight former bank branch facilities located in
Hillsborough, Manatee, Pinellas and Polk Counties (Expansion Branches). We executed 15-year leases with American Financial Realty Trust for each of these locations on September 14, 2005 and, subject to regulatory approval, we plan
to take possession of these branches during December 2005. We anticipate opening the Expansion Branches at a rate of at least two per quarter during 2006.



We will pay all occupancy expenses associated with each lease. In addition to the annual base rent and occupancy expenses, we also will be required to pay
an annual management fee equal to 3% of the then annual base rent. As a result, we will carry these lease expenses and other expenses associated with the Expansion Branches prior to their opening. We also will need to renovate the Expansion Branches
(our renovations historically have run between $250,000 to $500,000 per branch) and hire employees to run each Expansion Branch. Each lease will have three five-year options to renew and will contain provisions for an automatic annual adjustment in
the rent payable for such properties in an amount equal to the greater of 3% or the CPI increase. If we experience delays in opening any of the Expansion Branches, we will be forced to carry the lease and occupancy costs for a longer period of time
without the offsetting revenue associated with an opened and operational Expansion Branch. In addition to the Expansion Branches, we also plan to open three de novobranches in 2006.



We intend to file all necessary applications with the appropriate banking
regulators to add these locations as future branch sites as soon as practicable. Although we have not yet physically inspected each of these locations, we have no reason to believe that these facilities will require an investment in excess of our
historical costs.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Establishing these eight Expansion Branches, together with the three de
novo branches, represents a significant step toward our goal of operating between 30 to 35 branches and becoming the leading independent community bank serving the greater Tampa Bay region.



Off-Balance Sheet Arrangements



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, unfunded construction loans, 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.



The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, unfunded construction loans, unused lines of credit and standby letters of credit is
represented by the contractual amount of those instruments. To control the credit risk associated with entering into commitments and issuing letters of credit, the Company uses the same credit quality, collateral policies, and monitoring controls in
making commitments and letters of credit as it does with its lending activities.



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



Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party and to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting those commitments.



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



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



A summary of the amounts of the Companys financial instruments, with
off-balance sheet risk at September 30, 2005, follows (in thousands):



|                             |  |                |        
|---------------------------- |  | -------------- | -------
|                             |  | ContractAmount
|Commitments to extend credit |  | $              | 2,879  
|                             |  |                |        
|Unfunded construction loans  |  | $              | 176,089
|                             |  |                |        
|Unused lines of credit       |  | $              | 30,607 
|                             |  |                |        
|Standby letters of credit    |  | $              | 809    
|                             |  |                |        



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.



Impact of Inflation



The condensed consolidated financial statements and related notes herein have been presented in terms of historic dollars without considering changes in
the relative purchasing power of money over time due to inflation. Unlike industrial companies, substantially all of the assets and virtually all of the liabilities of the Company are monetary in nature. As a result, interest rates have a more
significant impact on the Companys performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as inflation.



Selected Ratios



The following are presented for the dates and periods indicated:



|                                                 |  |                                   |    |  |                            |   |  |                                   |  
|------------------------------------------------ |  | --------------------------------- | -- |  | -------------------------- | - |  | --------------------------------- | -
|                                                 |  | Nine MonthsEndedSeptember 30,2005 |    |  | Year EndedDecember 31,2004 |   |  | Nine MonthsEndedSeptember 30,2004 |  
|Average equity as a percentage of average assets |  | 7.86                              | %  |  | 10.31                      | % |  | 10.70                             | %
|                                                 |  |                                   |   
|Equity to total assets at end of period          |  | 7.02                              | %  |  | 9.09                       | % |  | 9.67                              | %
|                                                 |  |                                   |   
|Return on average assets(1)                      |  | (0.24                             | )% |  | 0.25                       | % |  | 0.22                              | %
|                                                 |  |                                   |   
|Return on average equity(1)                      |  | (3.01                             | )% |  | 2.44                       | % |  | 2.01                              | %
|                                                 |  |                                   |   
|Dividend payout ratio(2)                         |  | N/A                               |    |  | N/A                        |   |  | N/A                               |  

---

|(1) | Annualized for the nine months ended September 30.
|--- | --------------------------------------------------

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



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



Item 3. Quantitative and Qualitative Disclosures About Market Risk



Not applicable.



Item 4. Controls and Procedures



The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (the Exchange Act) is
recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Companys management, including
our Chief Executive Officer and Chief Financial Officer (the Companys Principal Executive Officer and Principal Financial Officer, respectively), as appropriate to allow for timely decisions regarding timely disclosure. In designing and
evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is
required to apply its judgment in evaluating the cost/benefit relationship of possible controls and procedures.



Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Form 10-Q.



Based on this evaluation of our disclosure controls and procedures, our Chief Executive Officer and our Chief Financial Officer have concluded that the
Companys disclosure controls and procedures, subject to the limitations disclosed above, were effective as of September 30, 2005.



There were no significant changes in our internal controls over financial reporting (as defined in Rule 13a-15(4) of the Exchange Act) that occurred
during the third quarter of our 2005 fiscal year that has materially affected, or in other factors that could or is reasonably likely to materially affect, these controls subsequent to the date of the evaluation of those controls by the Chief
Executive and Chief Financial officers.



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COAST FINANCIAL HOLDINGS, INC. AND SUBSIDIARY



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



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



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



None.

Item 3. Defaults Upon Senior Securities



None.



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



None.



Item 5. Other Information



None.



Item 6. Exhibits



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



|            |  |                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                       
|31.1        |  | Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                         
|            | 
|31.2        |  | Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                         
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002



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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: October 26, 2005 |  | By:                            |  | /s/ Brian P. Peters                          
|                       |  |                                |  | Brian P. Peters, President and Chief         
|                       |  |                               
|                       |  |                                |  | Executive Officer                            
|                       |  |                               
|Date: October 26, 2005 |  | By:                            |  | /s/ Brian F. Grimes                          
|                       |  |                                |  | Brian F. Grimes, Executive Vice President and
|                       |  |                               
|                       |  |                                |  | Chief Financial Officer                      



29