SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OT 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO
_________________.
Commission File Number 0-25933
SOUTHCOAST FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in the Charter)
South Carolina 58-2384011
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
530 Johnnie Dodds Boulevard, Mt. Pleasant, SC 29464
(Address of Principal Executive Offices)
(843) 884-0504
(Registrant's Telephone Number, including Area Code)
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
1934 during the preceding 12 months (or for such shorter periods 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 (New Registrant)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock - No Par Value
1,047,987 Shares Outstanding on June 30, 1999
Transitional Small Business Issuer Disclosure Format: [ ] Yes [ X ] No
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
SOUTHCOAST FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1999 1998
---- ----
ASSETS
<S> <C> <C>
Cash and due from banks ......................................................... $ 3,285,758 $ 1,211,451
Federal funds sold .............................................................. 2,060,000 4,220,000
Investment securities available for sale ........................................ 4,142,828 2,732,978
Loans, net of allowance of $775,000 and $325,000 ................................ 27,306,007 10,821,975
Property and equipment - net .................................................... 3,158,150 1,243,133
Other assets .................................................................... 1,159,022 453,207
------------ ------------
Total assets ................................................................ $ 41,111,765 $ 20,682,744
============ ============
LIABILITIES
Deposits
Noninterest-bearing ........................................................... $ 3,593,360 $ 2,114,621
Interest bearing .............................................................. 23,445,192 7,444,869
------------ ------------
Total deposits .............................................................. 27,038,552 9,559,490
Federal Home Loan Bank borrowings ............................................... 4,000,000 950,000
Other liabilities .................................................................. 360,034 98,670
------------ ------------
Total liabilities ........................................................... 31,398,586 10,608,160
------------ ------------
SHAREHOLDERS' EQUITY
Common stock (no par value; 20,000,000 shares authorized;
1,047,987 shares outstanding at June 30, 1999. $5.00 par
value; 20,000,000 shares authorized; 952,713 shares
outstanding at December 31, 1998) ............................................. 10,520,053 4,763,565
Paid-in capital .................................................................... - 5,756,488
Retained deficit ................................................................... (748,347) (451,147)
Accumulated other comprehensive income (loss) ................................... (58,527) 5,678
------------ ------------
Total shareholders' equity .................................................. 9,713,179 10,074,584
------------ ------------
Total liabilities and shareholders' equity .................................. $ 41,111,765 $ 20,682,744
============ ============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
SOUTHCOAST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months Six months
ended ended ended
March 31, 1999 June 30, 1999 June 30, 1999
-------------- ------------- -------------
INTEREST INCOME
<S> <C> <C> <C>
Loans, including fees ........................................ $ 366,146 $ 608,935 $ 975,081
Investment securities ........................................ 47,143 65,335 112,478
Federal funds sold ........................................... 48,748 35,715 84,463
----------- ----------- -----------
Total interest income .................................... 462,037 709,985 1,172,022
INTEREST EXPENSE
Deposits and borrowings ...................................... 139,542 257,878 397,420
----------- ----------- -----------
Net interest income ...................................... 322,495 452,107 774,602
PROVISION FOR POSSIBLE LOAN LOSSES .............................. 225,000 225,000 450,000
----------- ----------- -----------
Net interest income after provision for loan losses ...... 97,495 227,107 324,602
----------- ----------- -----------
NONINTEREST INCOME
Service fees on deposit accounts ............................. 18,277 24,025 42,302
Fees on loans sold ........................................... 15,170 15,274 30,444
Other ........................................................ 24,610 12,816 37,426
----------- ----------- -----------
Total noninterest income ................................. 58,057 52,115 110,172
----------- ----------- -----------
NONINTEREST EXPENSES
Salaries and employee benefits ............................... 252,153 324,211 576,364
Occupancy .................................................... 13,984 16,103 30,087
Furniture and equipment ...................................... 32,577 35,189 67,766
Advertising and public relations ............................. 17,623 21,232 38,855
Professional fees ............................................ 15,715 44,150 59,865
Travel and entertainment ..................................... 15,041 24,374 39,415
Telephone, postage and supplies .............................. 23,057 29,719 52,776
Other operating .............................................. 8,998 12,316 21,314
----------- ----------- ----------
Total noninterest expenses ............................... 379,148 507,294 886,442
----------- ----------- ----------
Loss before income taxes ................................. (223,596) (228,072) (451,668)
INCOME TAX BENEFIT .............................................. 75,996 78,472 154,468
----------- ----------- ----------
Net loss ................................................. $ (147,600) $ (149,600) $ (297,200)
=========== =========== ===========
NET LOSS PER COMMON SHARE ....................................... $ (.14) $ (.14) $ (.28)
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING ............................. 1,047,987 1,047,987 1,047,987
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
SOUTHCOAST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated Total
Common stock other share-
------------ Paid-in Retained comprehensive holders'
Shares Amount capital deficit income equity
------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 ............. - $ - $ - $ - $ - $ -
Net loss .......................... - - - (451,147) - (451,147)
Other comprehensive income, net
of tax:
Unrealized holding gains on
securities available for sale . - - - - 5,678 5,678
Reclassification adjustments for
gains included in net loss .... - - - - - -
------------
Comprehensive income (loss) ....... - - - - - (445,469)
Sale of stock (net of offering
costs of $912,503) .............. 952,713 4,763,565 5,756,488 - - 10,520,053
--------- ------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1998 ........... 952,713 4,763,565 5,756,488 (451,147) 5,678 10,074,584
Net loss .......................... - - - (297,200) - (297,200)
Other comprehensive income, net
of tax:
Unrealized holding losses on
securities available for sale . - - - - (64,205) (64,205)
Reclassification adjustments for
gains included in net loss .... - - - - - -
------------
Comprehensive income (loss) ....... - - - - - (361,405)
11-for-10 stock split ............. 95,274 476,370 (476,370) - - -
Par value conversion .............. - 5,280,118 (5,280,118) - - -
--------- ------------ ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 1999 ............... 1,047,987 $ 10,520,053 $ - $ (748,347) $ (58,527) $ 9,713,179
========= ============ ============ ============ ============ ============
(Unaudited)
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
SOUTHCOAST FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended June 30, 1999
(Unaudited)
OPERATING ACTIVITIES
Net loss ................................................... $ (297,200)
Adjustments to reconcile net loss to net cash provided
by operating activities
Deferred income taxes .................................... (154,468)
Provision for possible loan losses ....................... 450,000
Depreciation and amortization ............................ 50,794
Increase in other assets ................................. (64,272)
Increase in other liabilities ............................ 261,364
------------
Net cash provided by operating activities ............ 246,218
------------
INVESTING ACTIVITIES
Decrease in federal funds sold ............................. 2,160,000
Purchase of investment securities available for sale ....... (1,961,130)
Net increase in loans ...................................... (16,934,032)
Purchase of property and equipment ......................... (1,965,811)
------------
Net cash used for investing activities ............... (18,700,973)
------------
FINANCING ACTIVITIES
Increase in Federal Home Loan Bank borrowings .............. 3,050,000
Net increase in deposits ................................... 17,479,062
Net cash provided by financing activities ............ 20,529,062
Increase in cash and due from banks .................. 2,074,307
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD .................. 1,211,451
------------
CASH AND DUE FROM BANKS, END OF PERIOD ........................ $ 3,285,758
============
See notes to consolidated financial statements.
5
<PAGE>
SOUTHCOAST FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and item 310 (b) of
Regulation S-B of the Securities and Exchange Commission. Accordingly they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, in the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included.
NOTE 2 - ORGANIZATION
Southcoast Financial Corporation (the "Company") is a South Carolina
corporation organized in 1999 for the purpose of being a holding company for
Southcoast Community Bank (the "Bank"). On April 29, 1999, pursuant to a Plan of
Exchange approved by the shareholders, all of the outstanding shares of capital
stock of the Bank were exchanged for shares of common stock of the Company. The
Company presently engages in no business other than that of owning the Bank and
has no employees.
NOTE 3 - NET INCOME PER SHARE
Net income per share is computed on the basis of the weighted average
number of common shares outstanding in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share". The Company does not have
any instruments which are dilutive; therefore, only basic net income per share
of common stock is presented.
In March, 1999, the Company declared an eleven-for-ten stock split of
the Company's common stock. The weighted average number of shares and all other
share data have been restated for all periods presented to reflect this stock
split.
6
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the financial statements and related notes appearing in the Form 10-SB of
Southcoast Financial Corporation. Results of operations for the period ending
June 30, 1999 are not necessarily indicative of the results to be attained for
any other period.
FORWARD LOOKING STATEMENTS
Statements included in Management's Discussion and Analysis which are
not historical in nature are intended to be, and are hereby identified as
"forward looking statements" for purposes of the safe harbor provided by Section
21E of the Securities Exchange Act of 1934, as amended. The Company cautions
readers that forward looking statements, including without limitation, those
relating to the Company's response to the Year 2000 problem, future business
prospects, revenues, working capital, liquidity, capital needs, interest costs,
and income, are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward looking
statements, due to several important factors herein identified, among others,
and other risks and factors identified from time to time in the Company's
reports filed with the Securities and Exchange Commission.
NET INTEREST INCOME
Net interest income is the difference between the interest earned on earning
assets and the interest paid for funds acquired to support those assets. Net
interest income, the principal source of the Company's earnings, was $774,602
for the six months ended June 30, 1999. For the three months ended June 30,
1999 net interest income was $452,107 compared to $322,495 for the three
months ended March 31, 1999.
Changes that affect net interest income are changes in the average rate
earned on interest earning assets, changes in the average rate paid on
interest bearing liabilities, and changes in the volume of interest earning
assets and interest bearing liabilities.
Average earning assets for the quarter ending June 30, 1999 increased to
$30.6 million or 42.7 percent from the $21.4 million reported for the first
quarter ending March 31, 1999. The increase was mainly attributable to the
increase in loans supported by a $9.6 million increase in interest bearing
deposits which resulted from favorable economic conditions in the Charleston,
South Carolina market and the Company's marketing efforts.
The following table represents changes in the Company's net interest income
which are primarily a result of changes in volume and rates of its interest
earnings assets and interest bearing liabilities. The increase in net
interest income is due to increased volume of earning assets and interest
bearing liabilities coupled with a 64 basis point increase in the Company's
net interest spread. The net interest spread is the difference between the
yield on earning assets minus the average rate of interest bearing
liabilities.
7
<PAGE>
<TABLE>
<CAPTION>
Three months ended Three months ended Six months ended
March 31, 1999 June 30, 1999 June 30, 1999
-------------- ------------- -------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
ASSETS balance expense rate balance expense rate balance expense Rate
- ------ ------- ------- ---- ------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds sold ...... $ 4,170,408 $ 48,748 4.68% $ 2,910,713 $ 35,715 4.91% $ 3,540,561 $ 84,463 4.77%
Investments ............. 3,367,041 47,143 5.60 4,632,690 65,335 5.64 3,999,866 112,478 5.62
----------- -------- ----------- ----------- ----------- ----------
Total investments and
federal funds sold ... 7,537,449 95,891 5.09 7,543,403 101,050 5.36 7,540,426 196,941 5.22
Loans ................... 13,865,838 366,146 10.56 23,014,557 608,935 10.58 18,440,198 975,081 10.58
----------- -------- ----------- ----------- ----------- ----------
Total earning assets .... 21,403,287 462,037 8.63 30,557,960 709,985 9.29 25,980,624 1,172,022 9.02
-------- -----------
Other assets ............ 2,078,417 3,370,376 2,724,396
----------- ----------- -----------
Total assets ............ $23,481,704 $33,928,336 $28,705,020
=========== =========== ===========
Interest bearing deposits $11,076,050 $133,328 4.82 $19,313,760 $ 233,794 4.84 $15,194,905 $ 367,122 4.83
FHLB advances ........... 438,925 6,214 5.66 1,873,656 24,084 5.14 1,156,291 30,298 5.24
----------- -------- ----------- ----------- ----------- ----------
Total interest bearing
liabilities .......... 11,514,975 139,542 4.85 21,187,416 257,878 4.87 16,351,196 397,420 4.86
Non-interest bearing
liabilities .......... 1,903,790 2,839,435 2,371,612
----------- -------- ----------- ----------- ----------- ----------
Total liabilities ....... 13,418,765 139,542 4.16 24,026,851 257,878 4.29 18,722,808 397,420 4.25
Equity .................. 10,062,939 9,901,485 9,982,212
----------- ----------- -----------
Total liabilities and
Equity ............... $23,481,704 $33,928,336 $28,705,020
=========== =========== ===========
Net interest income/
margin ............... $322,495 6.03 $ 452,107 5.92 $ 774,602 5.96
======== =========== ==========
Net interest spread ..... 3.78 4.42 4.16
</TABLE>
As reflected above, for the three months ended June 30, 1999 the average yield
on earning assets amounts amounted to 9.29 percent, while the average cost of
interest-bearing liabilities was 4.87 percent. For the three months ended March
31, 1999 the average yield on earning assets was 8.63 percent and the average
cost of interest-bearing liabilities was 4.85 percent. The increase in the yield
on earning assets is attributable to the increased volume of loans, which gives
the Company a greater return than the other types of earning assets. The net
interest margin is computed by subtracting interest expense from interest income
and dividing the resulting figure by average interest-earning assets. The net
interest margin for the three months ended June 30, 1999 was 5.92 percent
compared to 6.03 percent for the three months ended March 31, 1999. The decrease
in the net interest margin is attributable to the increase in interest bearing
liabilities which resulted in an increase in the cost of total liabilities to
support earning assets. The cost of total liabilities was 4.16 percent for the
three months ended March 31, 1999 compared to 4.29 percent for the three months
ended June 30, 1999. For the six months ended June 30, 1999, the net interest
margin was 5.96 percent.
The following table represents changes in the Company's net interest income
which are primarily a result of changes in the volume and rates of its
interest-earning assets and interest-bearing liabilities.
8
<PAGE>
Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>
For the three months ended June 30, 1999
versus three months ended March 31, 1999
----------------------------------------
Volume Rate Net change
------ ---- ----------
<S> <C> <C> <C>
Federal funds sold ................................................ $ (14,725) $1,692 $ (13,033)
Investments ....................................................... 17,721 471 18,192
--------- ------ ---------
Total investments and federal funds sold .......................... 2,996 2,163 5,159
Total loans ....................................................... 241,584 1,205 242,789
--------- ------ ---------
Total earning assets .............................................. 244,580 3,368 247,948
Total interest-bearing liabilities ................................ 117,214 1,122 118,336
--------- ------ ---------
Net interest income ............................................... $ 127,366 $2,246 $ 129,612
========= ====== =========
</TABLE>
RESULTS OF OPERATIONS
The Company's net loss for the six months ended June 30, 1999 was $297,200 or
$.28 per share. For the three months ended June 30, 1999 the net loss was
$149,600 or $.14 per share compared to $147,600 or $.14 per share for the
three months ended March 31, 1999. The quarter ended June 30, 1999 includes
salaries and other operating expenses necessary to support the hiring and
training of staff for the Savannah Highway branch that will be opening during
the third quarter of 1999.
Noninterest income for the six months ended June 30, 1999 was $110,172. For
the three months ended June 30, 1999, the noninterest income was $52,115
compared to $58,057 for the three months ended March 31, 1999. The three
months ended March 31, 1999 included a $12,591 gain on the sale of
securities. Fees on deposits grew to $24,025 for the three months ended June
30, 1999 from $18,277 for the three months ended March 31, 1999. The increase
in deposit fees corresponds to the continued increase in deposits.
Noninterest expenses for the six months ended June 30, 1999 were $886,442. Of
this total, $674,217 represents salaries and benefits, occupancy cost and
furniture and equipment expenses. For the three months ended June 30, 1999,
total non-interest expenses amounted to $507,294 compared to $379,148 for the
three months ended March 31, 1999. The $128,146 increase in expenses in the
second quarter is primarily related to the hiring of the staff for the
Savannah Highway branch and expenses associated with the formation of the
holding company.
The allowance for loan losses was 2.76 percent of loans as of June 30, 1999
compared to 2.92 percent as of December 31, 1998. In management's opinion,
the allowance for loan losses is adequate.
9
<PAGE>
LIQUIDITY
Liquidity is the ability to meet current and future obligations through
liquidation or maturity of existing assets or the acquisition of liabilities.
Southcoast Financial Corporation manages both assets and liabilities to
achieve appropriate levels of liquidity. Cash and short-term investments are
the Company's primary sources of asset liquidity. These funds provide a
cushion against short-term fluctuations in cash flow from both deposits and
loans. The investment portfolio is the Company's principal source of
secondary asset liquidity. However, the availability of this source of funds
is influenced by market conditions. Individual and commercial deposits are
the Company's primary source of funds for credit activities. Management
believes that the Company's liquidity sources are adequate to meet its
operating needs.
LOANS
Commercial financial and agricultural loans made up 14 percent of the total
loan portfolio as of June 30, 1999, totaling $4.0 million. Loans secured by
real estate for construction and land development totaled $2.7 million or 10
percent of the total loan portfolio while all other loans secured by real
estate totaled $20.1 million or 72 percent of the total loan portfolio as of
June 30, 1999. Installment loans and other consumer loans to individuals
comprised $1.3 or 5 percent of the total loan portfolio.
CAPITAL RESOURCES
The capital base for the Company decreased by the $297,200 net loss for the
six months of 1999. The Company's equity to asset ratio was 23.6 percent as
of June 30, 1999 compared to 48.7 percent as of December 31, 1998.
The Federal Deposit Insurance Corporation has issued guidelines for
risk-based capital requirements. As shown in the table below, as of June 30,
1999, the Company exceeds the capital requirement levels that are to be
maintained.
Capital Ratios
<TABLE>
<CAPTION>
Well Capitalized Adequately Capitalized
Actual Requirement Requirement
------ ----------- -----------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total capital to risk weighted assets .......... $10,011 42.84% $2,337 10.00% $1,870 8.00%
Tier 1 capital to risk weighted assets ......... 9,713 41.56 1,402 6.00 935 4.00
Tier 1 capital to average assets ............... 9,713 28.63 1,696 5.00 1,357 4.00
</TABLE>
YEAR 2000 READINESS DISCLOSURE
Many computer-based information systems in use today exclude the century as
part of the date definition, which could cause inaccurate calculations after
December 31, 1999. The "Year 2000 Problem" had been recognized at the time
company management was deciding which vendor packages to use in its daily
operations. Management obtained representations from all of its vendors that
the hardware/software was Year 2000 compliant. However, despite these
representations, management has completed extensive testing of all of its
computer hardware and software which has confirmed Year 2000 compliance. The
estimated total cost of the testing was $20,000. The Company does not
anticipate incurring any additional expenses to become Year 2000 compliant.
Year 2000 problems encountered by customers and vendors of goods and services
other than computer and data processing systems could adversely affect the
Company. Management has developed contingency plans to deal with the types
and extent of possible problems it can foresee. Contingency plans include the
identification of alternate sources of computer hardware and software as well
as plans for carrying on essential business functions without the use of
computers. Based on the information it has obtained and reviewed, management
of the Company does not believe that the most reasonably likely worst-case
scenario the Company would encounter would be materially worse than a
substantial inconvenience. Nevertheless, Year 2000 problems could have a
material adverse effect on the Company, the dollar amount of which cannot be
accurately quantified at this time because of inherent variables and
uncertainties.
10
<PAGE>
IMPACT OF INFLATION
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Company are primarily monetary in nature. Therefore,
interest rates have a more significant impact on the Company's performance
than do the effects of changes in the general rate of inflation and changes
in prices. In addition, interest rates do not necessarily move in the same
magnitude as the prices of goods and services. As discussed previously,
management seeks to manage the relationships between interest sensitive
assets and liabilities in order to protect against wide rate fluctuations,
including those resulting from inflation.
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
On April 20, 1999, the shareholders of Southcoast Community Bank (now
the wholly owned subsidiary of the Company) held their regular annual meeting.
At the meeting, two matters were submitted to a vote with results as follows:
1. Election of eight directors for a term of one year each.
DIRECTORS Shares Voted
For Abstain
--- -------
William A. Coates 662,649 1,358
Thomas E. Hamer, Sr. 662,649 1,358
Paul D. Hollen, III 662,649 1,358
L. Wayne Pearson 662,649 1,358
Norman T. Russell 662,649 1,358
Robert M. Scott 662,649 1,358
James H. Sexton, Jr. 662,649 1,358
James P. Smith 662,649 1,358
All of the directors also serve as initial directors of the Company.
2. Approval of the Plan of Exchange between the Company and Southcoast Community
Bank.
FOR: 662,649 Shares AGAINST: 1,600 Shares ABSTAIN: 1,000 Shares
ITEM 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit No.
From Item 601 of
Regulation S-B Description
-------------- -----------
2 Plan of Exchange between the Company
and Southcoast Community Bank
27 Financial Data Schedule
b) Reports on form 8-K. None.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Southcoast Financial Corporation
Name of Company
L. Wayne Pearson
By: ------------------------------------------------- Date: August 16, 1999
President and Chief Executive Officer
Robert M. Scott
By: ------------------------------------------------- Date: August 16, 1999
Executive Vice President and Chief
Financial Officer
(Principal financial officer)
12
<PAGE>
EXHIBIT INDEX
Exhibit No.
From Item 601 of
Regulation S-B Description
-------------- -----------
2 Plan of Exchange between the Company
and Southcoast Community Bank
27 Financial Data Schedule
13
PLAN OF EXCHANGE
This Plan of Exchange has been adopted as of the 11th day of March,
1999, by and between Southcoast Financial Corporation (the "Holding Company")
and Southcoast Community Bank (the "Bank").
1. The name of the corporation whose shares will be acquired is
Southcoast Community Bank.
2. The name of the acquiring corporation is Southcoast Financial
Corporation.
3. At the Effective Time, as hereinafter defined, every outstanding
share of the common stock of the Bank shall be exchanged for and one share of
the common stock of the Holding Company without any further action by the
holders of shares of common stock of the Bank. At the Effective Time, the
Holding Company shall, without any further action, become the owner and holder
of all of the issued and outstanding shares of the common stock of the Bank.
4. The Effective Time shall be the time stated in, or, if no time is
stated, the time of the filing of, the Articles of Merger or Share Exchange
filed with the South Carolina Secretary of State.
5. After the Effective Time, persons who were holders of the common
stock of the Bank at and before the Effective Time shall have no further rights
as shareholders of the Bank.
6. After the Effective time, certificates representing shares of the
common stock of the Bank shall evidence only the right of the holders to
surrender such certificates to the Holding Company and receive certificates for
an equivalent number of shares of common stock of the Holding Company.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1999, (unaudited) and the Consolidated
Statement of Income for the six months ended June 30, 1999 (unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,803
<INT-BEARING-DEPOSITS> 1,483
<FED-FUNDS-SOLD> 2,060
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,143
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 28,081
<ALLOWANCE> 775
<TOTAL-ASSETS> 41,112
<DEPOSITS> 27,039
<SHORT-TERM> 4,000
<LIABILITIES-OTHER> 360
<LONG-TERM> 0
0
0
<COMMON> 10,520
<OTHER-SE> (807)
<TOTAL-LIABILITIES-AND-EQUITY> 41,112
<INTEREST-LOAN> 975
<INTEREST-INVEST> 112
<INTEREST-OTHER> 85
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<INCOME-PRETAX> (452)
<INCOME-PRE-EXTRAORDINARY> (297)
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<NET-INCOME> (297)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)
<YIELD-ACTUAL> 5.96
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<ALLOWANCE-UNALLOCATED> 0
</TABLE>
