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AS FILED WITH THE SEC ON OCTOBER 27, 1999
REGISTRATION NO. 333-86371
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COASTAL BANKING COMPANY, INC.
(Name of Small Business Issuer in Its Charter)
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SOUTH CAROLINA 6021 58-2455445
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
Incorporation or Organization) Classification Code Number) No.)
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1001 BAY STREET, SUITE 202 36 WEST SEA ISLAND PARKWAY
BEAUFORT, SOUTH CAROLINA 29902 BEAUFORT, SOUTH CAROLINA 29902
(843) 522-1228 (843) 522-1228
ADDRESS AND TELEPHONE NUMBER ADDRESS AND TELEPHONE NUMBER
OF PRINCIPAL EXECUTIVE OFFICE OF INTENDED PRINCIPAL PLACE OF BUSINESS
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RANDOLPH C. KOHN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
1001 BAY STREET, SUITE 202
BEAUFORT, SOUTH CAROLINA 29902
(843) 522-1228
(Name, Address, and Telephone Number of Agent For Service)
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COPIES OF ALL COMMUNICATIONS, INCLUDING COPIES OF ALL COMMUNICATIONS
SENT TO AGENT FOR SERVICE, SHOULD BE SENT TO:
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NEIL E. GRAYSON, ESQ. WILLIAM L. FLOYD, ESQ.
C. RUSSELL PICKERING, ESQ. CONRAD D. BROOKS, ESQ.
J. BRENNAN RYAN, ESQ. LONG ALDRIDGE & NORMAN LLP
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P. ONE PEACHTREE CENTER, SUITE 5300
999 PEACHTREE STREET, N.E., SUITE 1400 303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309 ATLANTA, GEORGIA 30308
(404) 817-6000 (404) 527-4000
(404) 817-6225 (FAX) (404) 572-4198 (FAX)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act of 1933 registration statement number of the
earlier effective registration statement for the same offering. [ ] ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [ ] ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [ ] ------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
NO. OF SHARES MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE FEE
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Common Stock, $.01 par value... 1,202,000 $10.00 $12,020,000 *$3,342
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Warrants....................... 202,000 $0 $0 $0
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* We previously paid $2,318 with our initial filing. We are registering an
additional 368,250 shares with this filing, and pursuant to Rule 457(a) we are
paying an additional $1,024 in connection therewith.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SEC IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THIS IS A PRELIMINARY PROSPECTUS AND IS NOT YET COMPLETE. OCTOBER 27, 1999
COASTAL BANKING COMPANY, INC.
A PROPOSED BANK HOLDING COMPANY FOR
LOWCOUNTRY LOGO
870,000 SHARES OF COMMON STOCK
$10.00 PER SHARE
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We are offering shares of common stock of Coastal Banking Company, Inc. to
fund the start-up of Lowcountry National Bank, a proposed new community bank.
Coastal Banking Company, Inc. will be the holding company and sole owner of the
bank. The bank will be headquartered in Beaufort County, South Carolina, and we
expect to open the bank in the first quarter of 2000. This is our first offering
of stock to the public, and there is no public market for our shares. This is a
firm commitment underwriting. The maximum purchase is 5% of the offering,
although the underwriter may at its discretion sell more. We have requested that
quotations for the common shares be reported on the OTC Bulletin Board under the
symbol "CBCO".
Our organizers will receive warrants to purchase one share of common stock
for $10.00 per share for every share they purchase in the offering. We describe
the warrants in more detail in the "Management -- Stock Warrants" section on
page 34.
THIS IS A NEW BUSINESS. AS WITH ALL NEW BUSINESSES, AN INVESTMENT WILL
INVOLVE RISKS. IT IS NOT A DEPOSIT OR A BANK ACCOUNT AND IS NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY. YOU SHOULD NOT INVEST IN THIS OFFERING
UNLESS YOU CAN AFFORD TO LOSE SOME OR ALL OF YOUR INVESTMENT. WE HAVE DESCRIBED
WHAT WE BELIEVE ARE THE MATERIAL RISKS OF THIS INVESTMENT UNDER THE HEADING
"RISK FACTORS" BEGINNING ON PAGE 6.
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PUBLIC OFFERING UNDERWRITER'S PROCEEDS TO COASTAL
PRICE DISCOUNT BANKING COMPANY
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Per Share................................. $10.00 $.70 $9.30
Total..................................... $8,700,000 $511,500 $8,188,500
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We will pay an underwriter's discount of $0.70 per share. We will not pay
the underwriter's discount for up to 275,000 shares of common stock sold to our
directors, executive officers, and certain other investors identified by our
directors and executive officers. The total underwriter's discount above assumes
the underwriter's discount will only be paid on 595,000 shares. In addition to
the discount, we will pay the underwriter a financial advisory fee of $95,000,
which is included in the total underwriter's discount above. Edgar M. Norris has
the right to purchase up to an additional 130,000 shares of common stock at
$10.00 per share, less the underwriter's discount of $0.70 per share, within 30
days from the date of this prospectus to cover over-allotments.
THE UNDERWRITER EXPECTS TO DELIVER THE SHARES OF COMMON STOCK ON
, 1999.
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EDGAR M. NORRIS & CO., INC.
, 1999
<PAGE> 3
COASTAL BANKING COMPANY, INC.
LOWCOUNTRY NATIONAL BANK
PROPOSED MARKET AREA
MAP OF SOUTH CAROLINA AND BEAUFORT COUNTY SHOWING MARKET AREA APPEARS HERE
<PAGE> 4
SUMMARY
We encourage you to read the entire prospectus carefully before investing.
Unless otherwise stated, all information in this prospectus assumes that the
underwriter will not exercise its over-allotment option.
COASTAL BANKING COMPANY AND LOWCOUNTRY NATIONAL BANK
We incorporated Coastal Banking Company, Inc. in June 1999 to organize and
serve as the holding company for Lowcountry National Bank, a new national bank
proposed to be located in Beaufort County, South Carolina. The bank will focus
on the local community, emphasizing personal service to individuals and
businesses in Beaufort County. Our primary service area includes a large portion
of Beaufort County, excluding Hilton Head. On September 30, 1999, we received
preliminary approval from the Office of the Comptroller of the Currency to open
the new bank. Final approval is conditioned upon raising the required minimum
capital, receipt of FDIC approval, and the implementation of proper bank
regulatory policies and procedures. We have also filed for deposit insurance
with the FDIC, but we have not received preliminary approval, and we will file
for approval from the Federal Reserve Board to become a bank holding company and
acquire all of the stock of the new bank upon its formation. We expect to
receive all final regulatory approvals in the fourth quarter of 1999 and to open
for business in the first quarter of 2000 following the completion of the
renovation of our proposed headquarters building.
WHY WE ARE ORGANIZING A NEW BANK IN BEAUFORT COUNTY
Beaufort County is South Carolina's fastest growing county. Between 1990
and 1998, its population increased by an estimated 23.2% from 85,182 to 104,935.
In 1995, Beaufort County's median household income was $35,995, 19.7% above the
state average of $30,060. The population growth and high personal income have
contributed to average annual bank deposit growth of 11.7% in our primary
service area over the last four years from $350 million to almost $490 million.
We believe the need for banking services will increase as the community and the
economy continue to grow.
We believe that there is an opportunity in Beaufort County for a new,
locally managed bank focused on the community and personalized service to the
individual and local business. The current trend of consolidation in the banking
industry has led to the acquisition of all of the locally owned community banks
in our primary service area by large national, super-regional, regional, and
super-community banks. Recently, First Bank, N.A., the only community bank
headquartered in the City of Beaufort, was acquired by First National Bank, a
multi-office bank headquartered in Orangeburg, South Carolina. We believe that
our proposed bank, with local management, will appeal to the citizens of
Beaufort County in the current competitive market, and will benefit from fewer
financial institutions, positive deposit growth, and good economic conditions.
Lowcountry National Bank will be the only independent bank organized and
headquartered in our primary service area, although another organizing group has
begun efforts to form a bank in our primary service area. We will emphasize our
local ownership and management and our strong ties to the Beaufort County
community. Our target market will be primarily individuals and small- to
medium-sized businesses who desire a consistent and professional relationship
with a local banker.
3
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OUR BOARD OF DIRECTORS
Coastal Banking Company was founded by the following thirteen business
leaders who live in the Beaufort County area, and who also will serve as our
initial directors:
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- - Marjorie Trask Gray, DMD - Randolph C. Kohn
- - Dennis O. Green, CPA - Ron Lewis
- - Mark B. Heles - Lila N. Meeks
- - J. Phillip Hodges, Jr. - Robert B. Pinkerton
- - James W. Holden, Jr., DVM - John M. Trask, III
- - Ladson F. Howell - Matt A. Trumps
- - James C. Key
</TABLE>
Our directors are local business people, many of whom have lived in Beaufort for
numerous years and have strong ties to the community. They are also community
leaders and serve on numerous charitable and service organizations throughout
Beaufort County. We believe our directors' ties to the community and their
significant business experience will provide Lowcountry National Bank with the
ability to effectively assess and address the needs of our proposed market area.
MANAGEMENT
- Randolph C. (Randy) Kohn will serve as our president and chief executive
officer. He has more than 28 years of banking experience in both Georgia
and South Carolina. He most recently served as senior vice president and
senior credit officer for Clemson Bank & Trust from 1995 until his
resignation in March 1999 to join the organizational effort for our
proposed bank.
- Ladson Howell will serve as the chairman of our board of directors. He
has worked in Beaufort for over 30 years as an attorney with Howell,
Gibson & Hughes, PA.
- Charlie T. Lovering, Jr. will serve as our senior vice president and
chief financial officer. He has over 14 years of banking experience. He
most recently served as senior vice president and controller of
AmeriBank, N.A. in Savannah, Georgia from 1997 until his resignation in
August 1999 to join our organizational effort.
- Bryan K. Newton will serve as senior vice president and senior credit
officer of Lowcountry National Bank. He has more than 21 years of banking
experience. He most recently served as senior vice president and senior
lender for FirstBank in Beaufort, South Carolina from 1992 until
September 1999.
We are in the process of assembling the remainder of our management team.
We are looking for individuals who will reside in the Beaufort area and have
significant banking experience and a history of service to the community.
Because of the recent merger and acquisition activity in the market, we believe
there is an abundance of local, experienced banking employees who would be
interested in joining our community banking effort.
PRODUCTS AND SERVICES
We plan to offer many of the products and services offered by larger banks
coupled with personalized service. Our lending services will include consumer
loans, commercial and business loans, lines of credit, residential and
commercial real estate loans, and construction loans. We will competitively
price our deposit products which will include checking accounts, savings
accounts, NOW accounts, money market accounts, certificates of deposit,
commercial checking accounts, and IRAs. We also will provide cashier's checks,
safe deposit boxes, travelers checks, direct deposit, bank by mail, and U.S.
Savings Bonds. We intend to deliver our services though a variety of methods,
including ATMs, banking by mail, and drive-through banking.
4
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THE OFFERING AND OWNERSHIP BY MANAGEMENT
We are offering 870,000 shares of our common stock for $10.00 per share. We
have granted the underwriter an over-allotment option to purchase an additional
130,000 shares for sale in the offering. Our organizers intend to purchase
202,000 shares, which represent 23.2% of the shares to be outstanding after the
offering. It is possible the organizers will purchase additional shares. To
compensate them for their financial risk and efforts in organizing the bank, our
organizers will receive warrants to purchase one share of common stock for
$10.00 per share for every share that they purchase in this offering, provided
that we will not grant warrants to purchase more than a total of 202,000 shares.
We hope to sell the majority of the remaining shares to individuals in Beaufort
County who share our desire to support a new, local community bank. After the
offering, we expect to adopt a stock option plan to grant options to our
officers, directors, and employees equal to 15% of the shares outstanding after
the offering, including the options to be granted to Randy Kohn equal to 5% of
the number of shares sold in this offering pursuant to his employment agreement
with us.
USE OF PROCEEDS
We will use a minimum of $6,000,000 of the proceeds of this offering to
capitalize Lowcountry National Bank. This is the amount of capital we believe
the banking regulators will require for us to open the bank. After paying the
expenses of this offering and of organizing the holding company and the bank, we
will invest 25% of the remaining net proceeds in the bank and retain the
remaining 75% to provide general working capital for the holding company. The
bank will use the funds it receives from Coastal Banking Company to pay
expenses, to purchase, renovate, and furnish its offices, and to provide working
capital to operate the bank. For more detailed information see "Use of Proceeds"
on page 10.
WE DO NOT INITIALLY PLAN TO PAY DIVIDENDS
Because we are a new business, we will not pay dividends in the foreseeable
future. We intend to use all available earnings to fund the continued operation
and growth of the bank.
LOCATION OF OFFICES
Our executive offices are currently located at:
1001 Bay Street, Suite 202
Beaufort, South Carolina 29902
(843) 522-1228
Our permanent office will be located at:
36 West Sea Island Parkway
Beaufort, South Carolina 29902
(843) 522-1228
Our permanent office will be in a 5,400 square foot building located on a
2.13 acre site on Ladys Island, just across the Beaufort river from downtown
Beaufort. We will renovate the existing building on the site and we hope to move
into our new office in the first quarter of 2000. We believe this facility will
adequately serve the bank's needs for at least its first year of operation. We
plan to open a branch office within the first three years of operation. See
"Offices and Facilities" on page 13.
5
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RISK FACTORS
The following is a summary of the risks that we believe are the material
risks we will encounter in starting and operating Lowcountry National Bank. An
investment in our common stock involves a significant degree of risk and you
should not invest in the offering unless you can afford to lose some or all of
your investment. Please read the entire prospectus for a more thorough
discussion of the risks of an investment in our common stock.
WE ARE A NEW BUSINESS AND THERE IS A RISK THAT WE MAY NOT BE SUCCESSFUL.
Neither Coastal Banking Company nor Lowcountry National Bank has any
operating history. The operations of new businesses are always risky. Because
Lowcountry National Bank has not yet opened, we do not have historical financial
data and similar information which would be available for a financial
institution that has been operating for several years.
WE EXPECT TO INCUR LOSSES FOR MORE THAN TWO YEARS AND THERE IS A RISK WE MAY
NEVER BECOME PROFITABLE.
In order for us to become profitable, we will need to attract a large
number of customers to deposit and borrow money. This will take time. We expect
to incur large initial expenses and may not be profitable for more than two
years, if at all. Our future profitability is dependent on numerous factors
including the continued success of the economy of the community and favorable
government regulation. While the economy in this area has been strong in recent
years, an economic downturn in the area would hurt our business. We are also a
highly regulated institution. Our ability to grow and achieve profitability may
be adversely affected by state and federal regulations that limit a bank's right
to make loans, purchase securities, and pay dividends. Although we expect to
become profitable in our third year, there is a risk that a deterioration of the
local economy or adverse government regulation could affect our plans. If this
happens, we may never become profitable and you will lose part or all of your
investment.
IF WE EXPERIENCE DELAYS IN RECEIVING REGULATORY APPROVALS, WE WILL NOT BE ABLE
TO OPEN THE BANK FOR BUSINESS AS PLANNED, AND WE WILL SUSTAIN ADDITIONAL LOSSES.
We intend to open the bank in the first quarter of 2000. However, we cannot
begin operations until we receive all required regulatory approvals. We have
received preliminary approval from the Office of the Comptroller of the Currency
to open the bank, and we have filed an application with the FDIC for deposit
insurance, but we have not received the FDIC's preliminary approval. We have
also filed an application with the Federal Reserve to become a bank holding
company and acquire all of the stock of the Lowcountry National Bank. We will
not receive all required final approvals until we satisfy all requirements for
new banks imposed by state and federal regulatory agencies. We expect to receive
final approvals by the fourth quarter of 1999 or the first quarter of 2000, but
it may take longer. If we do not receive all necessary regulatory approvals as
planned, the bank's opening will be delayed or may not occur at all. If the
bank's opening is delayed, our organizational and pre-opening expenses will
increase. Because the bank would not be open and generating revenue, these
additional expenses would cause our accumulated losses to increase.
IF WE ARE UNABLE TO OPEN THE BANK, OUR SHAREHOLDERS MAY LOSE SOME OR ALL OF
THEIR INVESTMENT.
If we do not receive final regulatory approval to operate the bank, or if
we are unable to open the bank for any other reason, our board of directors
intends to propose that the shareholders approve a plan to liquidate Coastal
Banking Company. If we adopt a liquidation plan, we would be dissolved and our
net assets, consisting primarily of the funds received in this offering, less
the costs and expenses we have incurred, would be distributed to our
shareholders. Thus, if we liquidate before we open the bank or become
profitable, you would likely realize substantially less than the $10.00 per
share that you paid for the common shares because we plan to deduct our expenses
from the proceeds returned to shareholders.
6
<PAGE> 8
WE WILL DEPEND HEAVILY ON RANDY KOHN, AND OUR BUSINESS WOULD SUFFER IF SOMETHING
WERE TO HAPPEN TO HIM OR IF HE WERE TO LEAVE.
Randy Kohn will be our president and chief executive officer. He will
provide valuable services to us, and he would be difficult to replace. We have
an employment agreement with Mr. Kohn and carry $500,000 of insurance on his
life payable to the bank. Nevertheless, if he were to leave, our business would
suffer.
WE DETERMINED THE OFFERING PRICE OF $10.00 ARBITRARILY AND IF A PUBLIC MARKET
DEVELOPS AND THE SHARES BECOME FREELY TRADED AFTER THE OFFERING, THE PRICE OF
THE SHARES MAY DECREASE.
Because we do not have any history of operations and there are only ten
shares already outstanding, we determined the price arbitrarily. The offering
price is essentially the book value of the shares prior to deduction for
expenses of the offering and the organization of the holding company and the
bank. The offering price may not be indicative of the present or future value of
the common stock. As a result, the market price of the stock after the offering
may be more susceptible to fluctuations than it otherwise might be. The market
price will be affected by our operating results, which could fluctuate greatly.
These fluctuations could result from expenses of operating and expanding the
bank, trends in the banking industry, economic conditions in our market area,
and other factors which are beyond our control. If our operating results are
below expectations, the market price of the common stock would probably fall.
WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF SHARES
OUTSTANDING AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL OR TRADE
THE SHARES AFTER THE OFFERING.
Initially, there will be no established market for our common stock. After
the offering, we will encourage broker-dealers to match buy and sell orders for
our common stock on the OTC Bulletin Board. However, the trading markets on the
OTC Bulletin Board lack the depth, liquidity, and orderliness necessary to
maintain a liquid market. We do not expect a liquid market for our common stock
to develop for several years, if at all. A public market having depth and
liquidity depends on having enough buyers and sellers at any given time. Because
this a relatively small offering, we do not expect to have enough shareholders
or outstanding shares to support an active trading market. Accordingly,
investors should consider the potential illiquidity and the long-term nature of
an investment in our common stock.
AN ECONOMIC DOWNTURN, ESPECIALLY ONE AFFECTING BEAUFORT COUNTY, SOUTH CAROLINA,
COULD REDUCE OUR CUSTOMER BASE, OUR LEVEL OF DEPOSITS, AND DEMAND FOR FINANCIAL
PRODUCTS SUCH AS LOANS.
As a holding company for a community bank, our ultimate success will be
dependent on the economy of the community. We will operate in Beaufort County,
South Carolina. While the economy in this area has been strong in recent years,
an economic downturn in the area would hurt our business.
AS A BANK, OUR PROFITABILITY, IN LARGE PART, DEPENDS ON THE INTEREST RATES THAT
WE PAY ON DEPOSITS AND COLLECT ON LOANS. FLUCTUATIONS IN INTEREST RATES, WHICH
WE CANNOT PREDICT OR CONTROL, MAY ADVERSELY AFFECT OUR PROFITABILITY.
Our profitability depends, in large part, on the difference between the
income we earn on loans and other assets and the interest we pay on deposits and
other borrowings. This difference is largely determined by interest rates.
Interest rates will be affected by the local, national, and international
economies and by the credit policies of monetary authorities, particularly the
Federal Reserve Board of Governors. Interest rates have historically varied
widely and we cannot control or predict them. Large moves in interest rates may
decrease or eliminate our profitability.
7
<PAGE> 9
WE WILL FACE STRONG COMPETITION FOR CUSTOMERS FROM LARGER AND MORE ESTABLISHED
BANKS, AS WELL AS OTHER DE NOVO COMMUNITY BANKS, WHICH COULD PREVENT US FROM
OBTAINING CUSTOMERS AND MAY CAUSE US TO HAVE TO PAY HIGHER INTEREST RATES TO
ATTRACT CUSTOMERS.
We will encounter strong competition from existing banks and other types of
financial institutions operating in the Beaufort County area and elsewhere. Some
of these competitors have been in business for a long time and have already
established their customer base and name recognition. Most are larger than we
will be and have greater financial and personnel resources than we will have.
Some are large super-regional and regional banks, like BB&T, Bank of America,
First Union, and Wachovia. These institutions offer services, such as extensive
and established branch networks and trust services, that we either do not expect
to provide or will not provide for some time. Due to this competition, we may
have to pay higher rates of interest to attract deposits. In addition,
competitors that are not depository institutions are generally not subject to
the extensive regulations that will apply to our bank. We also may have
competition in the future from other de novo community banks, including a
proposed de novo bank that another group in our primary service area is
currently attempting to organize. See "Proposed Business -- Marketing
Opportunities -- Competition" on page 17 and "Supervision and Regulation"
starting on page 23.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
We will be limited in the amount we can loan a single borrower by the
amount of the bank's capital. The legal lending limit is 15% of the bank's
capital and surplus. Based on an initial capitalization of $6,000,000, less
estimated organizational expenses of $407,000, we expect that our initial legal
lending limit will be approximately $839,000 immediately following the offering.
We intend to impose an internal limit on the bank of 80% of this amount, or
approximately $671,000. These initial limits may be higher because we also
intend to capitalize the bank with 25% of the net proceeds we raise in the
offering in excess of $6,000,000. Until the bank is profitable, our capital, and
therefore, our lending limit will continue to decline. Our lending limit will be
significantly less than the limit for most of our competitors and may affect our
ability to seek relationships with larger businesses in our market area. We
intend to accommodate larger loans by selling participations in those loans to
other financial institutions.
OUR LARGER COMPETITORS HAVE AN ADVANTAGE IN OBTAINING TECHNOLOGY THAT WE
INITIALLY DO NOT PLAN TO USE, WHICH MAY ADVERSELY AFFECT OUR ABILITY TO ATTRACT
AND RETAIN CUSTOMERS.
Large banks have greater financial and personnel resources than we will
have, and they use some technology, like internet banking, that we do not expect
to use, or will not use, for some time. As a result, these large institutions
may be able to attract customers by offering services that we will not provide.
SOUTH CAROLINA STATE LAW AND ANTI-TAKEOVER DEVICES WE HAVE ADOPTED WILL
SIGNIFICANTLY LIMIT THE ABILITY OF OTHERS TO ACQUIRE US, WHICH MAY PREVENT YOU
FROM RECEIVING A PREMIUM FOR YOUR SHARES.
In many cases, shareholders receive a premium for their shares when a
company is purchased by another. However, under South Carolina law no other
financial institution may acquire control of Coastal Banking Company until we
have been in existence for five years. In addition, state and federal law and
our articles of incorporation and bylaws make it difficult for anyone to
purchase Coastal Banking Company without approval of our board of directors. For
a discussion of some of these provisions, please see "Description of Capital
Stock -- Anti-takeover Effects" on page 36.
WE ARE AUTHORIZED TO ISSUE PREFERRED STOCK WHICH, IF ISSUED, MAY ADVERSELY
AFFECT YOUR VOTING RIGHTS AND REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
We are authorized by our articles of incorporation to issue shares of
preferred stock without the consent of our shareholders. Preferred stock, when
issued, may rank senior to common stock with respect to voting rights, payment
of dividends, and amounts received by shareholders upon liquidation,
dissolution,
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<PAGE> 10
or winding up. The existence of rights which are senior to common stock may
reduce the price of our shares. We do not have any plans to issue any shares of
preferred stock at this time.
THE EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE STOCK DILUTION AND MAY
ADVERSELY AFFECT THE VALUE OF OUR COMMON STOCK.
The organizers and officers may exercise warrants and options to purchase
common stock, which would result in the dilution of your proportionate interests
in Coastal Banking Company. Upon completion of the offering, we will issue
warrants to the organizers to purchase one share of common stock at $10.00 per
share for every share they purchase in the offering. We expect to issue 202,000
warrants to our organizers on purchases of 202,000 shares, but we will not grant
warrants to purchase more than a total of 202,000 shares. In addition, after the
offering, we expect to adopt a stock option plan which will permit us to grant
options to our officers, directors, and employees. We anticipate that we will
initially authorize the issuance of a number of shares under the stock option
plan equal to 15% of the shares outstanding after the offering, including
options granted to Mr. Kohn equal to 5% of the total shares sold in this
offering. We do not intend to issue stock options with an exercise price less
than the fair market value of the common stock on the date of grant, or less
than $10.00 per share during the period ending 12 months after the date of this
offering.
IT IS POSSIBLE THAT OUR COMPUTER SYSTEMS OR THOSE OF OUR PROCESSING VENDORS OR
LOAN CUSTOMERS COULD FAIL TO OPERATE ON JANUARY 1, 2000.
Like many financial institutions, we will rely upon computers for
conducting our business and for information systems processing. There is concern
among industry experts that on January 1, 2000, computers will be unable to read
or interpret the new year and there may be widespread computer malfunctions. We
will generally rely on software and hardware developed by independent third
parties to provide our information systems. We will request warranties about
Year 2000 compliance from the primary third party hardware and software system
providers we use. We believe that our other internal systems and software,
including our network connections, will be programmed to comply with Year 2000
requirements, although there is a risk they may not comply. Based on information
currently available, we believe that we will not incur significant expenses in
connection with the Year 2000 issue.
The Year 2000 issue may also negatively affect the business of our
customers. We intend to include Year 2000 readiness in our lending criteria to
minimize this risk. However, we cannot be certain that this will eliminate the
issue, and any financial difficulties our customers experience as a result of
Year 2000 issues could impair their ability to repay loans to the bank.
There is a good chance that we may not open the bank until after January 1,
2000, at which time we believe that most of the uncertainty surrounding the Year
2000 issue should be resolved. In this event, our risks associated with computer
malfunctions should be greatly reduced, but we will still seek to ensure that
our computer systems and our major vendors' and clients' computer systems are in
compliance and functioning properly. For more information on Year 2000 issues,
please refer to page 14.
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" concerning Coastal
Banking Company and Lowcountry National Bank and their operations, performance,
financial conditions, and likelihood of success. These statements are based on
many assumptions and estimates. Our actual results will depend on many factors
about which we are unsure, including those discussed above. Many of these risks
and factors are beyond our control. The words "may," "would," "could," "will,"
"expect," "anticipate," "believe," "intend," "plan," and "estimate," and similar
expressions identify such forward-looking statements. These risks,
uncertainties, and other factors are discussed under the heading "Risk Factors"
beginning on page 6 of this prospectus. We urge you to carefully consider these
factors prior to making an investment.
9
<PAGE> 11
USE OF PROCEEDS
We estimate that we will receive net proceeds of $8,068,500 from the sale
of 870,000 shares of common stock in the offering, after deducting underwriting
discounts and commissions and estimated organizational and offering expenses. If
the underwriter exercises its over-allotment option in full, we will receive
$1,209,000 in additional proceeds. We have established a line of credit with a
third party bank in the amount of $500,000 at the prime rate minus 0.5% to pay
pre-opening expenses of the holding company and the bank prior to the completion
of the offering. We intend to pay off this line of credit with proceeds that we
receive from this offering. The following two paragraphs describe our proposed
use of proceeds based on our present plans and business conditions.
USE OF PROCEEDS BY COASTAL BANKING COMPANY
The following table shows the anticipated use of the proceeds by Coastal
Banking Company. As shown, we intend to use at least $6,000,000 to capitalize
the bank. After paying the expenses of this offering and of organizing the
holding company, we also will capitalize Lowcountry National Bank with 25% of
the remaining net proceeds. We describe the bank's anticipated use of proceeds
in the following section. The underwriter's compensation reflects an
underwriter's discount of $416,500, which reflects a discount of $0.70 on
595,000 shares and no discount on 275,000 shares. This discount assumes that the
directors, officers, and other individuals that our directors and officers
expect to identify after commencement of the offering will purchase 275,000
shares in the offering. If these parties purchase less than 275,000 shares in
the offering, the underwriter's discount may be higher. We also will pay the
underwriter a $95,000 advisory fee. In the event the underwriter exercises its
over-allotment option in full, we will receive additional net proceeds of
$1,209,000, and we will invest approximately $300,000 of these additional
proceeds in the bank and keep the remainder in Coastal Banking Company. We
initially will invest the remaining proceeds, including any additional proceeds
that we may receive if the underwriter exercises its over-allotment option, in
United States government securities or deposit them with Lowcountry National
Bank, but we have not decided specifically how to allocate these proceeds. In
the long-term, we will use these funds for operational expenses and other
general corporate purposes, including the provision of additional capital to the
bank, if necessary. We may also use the proceeds to expand, for example by
opening additional facilities or acquiring other financial institutions.
<TABLE>
<CAPTION>
TOTAL
-----------
<S> <C>
Gross proceeds from offering................................ $ 8,700,000
Less:
Underwriter's discount...................................... (416,500)
Underwriter's advisory fee.................................. (95,000)
Offering expenses........................................... (120,000)
Investment in capital stock of the bank..................... (6,000,000)
-----------
Remaining proceeds.......................................... $ 2,068,500
===========
</TABLE>
USE OF PROCEEDS BY LOWCOUNTRY NATIONAL BANK
The following table shows the anticipated use of the proceeds by Lowcountry
National Bank. If the underwriter exercises its over-allotment option in full,
we will invest approximately $300,000 in additional proceeds in the bank. All
proceeds received by the bank will be in the form of an investment in the bank's
capital stock by Coastal Banking Company as described above. We have entered
into an agreement to purchase 2.13 acres of land with a 5,400 square foot
existing building. Our net cost on the property will be $855,000. We intend to
renovate the existing building at a cost of approximately $600,000 and to
improve the property at a cost of approximately $100,000. We expect to complete
the renovations and occupy the building in the first quarter of 2000. This
building will be our main office. Furniture, fixtures, and equipment will be
capitalized and amortized over the estimated useful life of the asset. The bank
will use
10
<PAGE> 12
the remaining proceeds to make loans, purchase securities, fund expansion
activities, and otherwise conduct the business of the bank.
<TABLE>
<CAPTION>
TOTAL
----------
<S> <C>
Investment by Coastal Banking Company in the bank's capital
stock....................................................... $6,000,000
Less:
Organizational and pre-opening expenses of the bank......... (407,000)
Furniture, fixtures and equipment........................... (465,000)
Net cost of land and building............................... (855,000)
Improvements to land and building........................... (700,000)
----------
Remaining proceeds.......................................... $3,573,000
==========
</TABLE>
11
<PAGE> 13
CAPITALIZATION
The following table shows Coastal Banking Company's capitalization as of
June 30, 1999, and the pro forma consolidated capitalization of Coastal Banking
Company and the bank as adjusted to reflect the proceeds from the sale of
870,000 shares in this offering and after deducting the underwriter's discount
and advisory fee and the estimated expenses of the offering. Coastal Banking
Company's capitalization as of June 30, 1999 reflects the purchase of ten shares
by Randy Kohn for $10.00 per share. These shares will be redeemed after the
offering. The "As Adjusted" column reflects the estimated cost of organizing
Coastal Banking Company and organizing and preparing to open Lowcountry National
Bank through the expected opening date, which we expect to be in the first
quarter of 2000. See "Use of Proceeds" above.
<TABLE>
<CAPTION>
AS ADJUSTED
FOR
JUNE 30, 1999 THE OFFERING
------------- ------------
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Paid-in capital, includes common stock, par value $.01 per
share; 10,000,000 shares authorized; 10 shares issued
and outstanding; 870,000 shares issued and outstanding
as adjusted............................................ $ 100 $8,068,500
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding.... 0 0
Deficit accumulated during the pre-opening stage.......... (144,763) (407,000)
--------- ----------
Total shareholders' equity (deficit).............. $(144,663) $7,661,500
========= ==========
Book value per share...................................... $ N/A $ 8.81
--------- ----------
</TABLE>
DIVIDEND POLICY
We expect initially to retain all earnings to operate and expand the
business. It is unlikely that we will pay any cash dividends in the near future.
Our ability to pay any cash dividends will depend primarily on Lowcountry
National Bank's ability to pay dividends to Coastal Banking Company, which
depends on the profitability of the bank. In order to pay dividends, the bank
must comply with the requirements of all applicable laws and regulations. See
"Supervision and Regulation -- The Bank -- Dividends" on page 26 and
"Supervision and Regulation -- The Bank -- Capital Regulations" on page 27. In
addition to the availability of funds from the bank, our dividend policy is
subject to the discretion of our board of directors and will depend upon a
number of factors, including future earnings, financial condition, cash needs,
and general business conditions.
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND PLAN OF OPERATION
GENERAL
Coastal Banking Company was formed to organize and own all of the capital
stock of Lowcountry National Bank. On September 30, 1999, we received
preliminary approval from the Office of the Comptroller of the Currency to open
the new bank. We have also filed for deposit insurance for the bank with the
FDIC, but we have not received preliminary approval. Whether the charter is
issued and deposit insurance is granted will depend upon, among other things,
compliance with legal requirements imposed by the Office of the Comptroller of
the Currency and the FDIC, including capitalization of the bank with at least a
specified minimum amount of capital which we believe will be $6,000,000. Upon
approval from the Office of the Comptroller of the Currency and the FDIC, we
will file an application with the Federal Reserve to become a bank holding
company, which must be approved before we can acquire the capital stock of the
bank. We expect to receive all regulatory approvals by the fourth quarter of
1999 or the first quarter of 2000.
FINANCIAL RESULTS
As of June 30, 1999, Coastal Banking Company had total assets of $56,337,
consisting of cash $18,805 and premises and equipment $37,532. Coastal Banking
Company incurred a net loss of $144,763 for the period from its inception on
September 29, 1998 through June 30, 1999.
EXPENSES
On completion of the offering and opening of the bank, we expect we will
have incurred the following expenses:
- $511,500 in underwriter's commissions and advisory fees, $602,500 if the
underwriter exercises its over-allotment option in full, which will be
deducted from the proceeds of the offering.
- $120,000 in other expenses of the offering, which will be subtracted from
the proceeds of the offering.
- $407,000 in expenses to organize and prepare to open Lowcountry National
Bank, consisting principally of salaries, overhead and other operating
costs, which will be charged against the income of Lowcountry National
Bank.
Prior to the completion of this offering, we will fund all of our expenses
with a $500,000 line of credit at the prime rate minus 0.5% which we have
obtained from a third party bank. We will use the proceeds of this offering to
repay amounts due under this line of credit. We anticipate that the proceeds of
the offering will be sufficient to satisfy our financial needs at least for the
next twelve months.
OFFICES AND FACILITIES
Our main office will be located on a 2.13 acre site on West Sea Island
Parkway in Beaufort, South Carolina, located just across the Beaufort river from
downtown Beaufort on Ladys Island. The site is currently improved with a 5,400
square foot building, which we intend to renovate to serve as our main office.
We will purchase this site for a net purchase price of $855,000 and the
renovations are expected to cost up to an additional $700,000. We expect to
complete the renovations in the first quarter of 2000. We believe that the
headquarters facility will adequately serve the bank's needs for at least the
first year of operation, but we may pursue branching opportunities as they
arise.
We anticipate that we will open a branch office within three years of the
commencement of operations. In determining whether to open a branch and when, we
will consider a number of factors including the financial performance of the
bank, the impact of the branch on the bank, economic conditions in our market
area, advantages of expanding our market presence, convenience to our
13
<PAGE> 15
customers, and the availability of an acceptable location in the target market
area. Depending on the above factors and other relevant circumstances it is also
possible that we may open more than one branch, or we may not open a branch at
all. We also will need to obtain regulatory approval before we can open any
branch.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Lowcountry National Bank, like most banks, will depend on its net interest
income for its primary source of earnings. Net interest income is the difference
between the interest we charge on our loans and receive from our investments
(our assets), and the interest we pay on deposits (our liabilities). Movements
in interest rates will cause our earnings to fluctuate. To lessen the impact of
these margin swings, we intend to structure our balance sheets so that we can
reprice the rates applicable to our assets and liabilities in roughly equal
amounts at approximately the same time. We will manage the bank's asset mix by
regularly evaluating the yield, credit quality, funding sources, and liquidity
of its assets. We will manage the bank's liability mix by expanding our deposit
base and converting assets to cash as necessary. If there is an imbalance in our
ability to reprice assets and liabilities at any point in time, our earnings may
increase or decrease with changes in the interest rate, creating interest rate
sensitivity. Interest rates have historically varied widely, and we cannot
control or predict them. Despite the measures we plan to take to lessen the
impact of interest rate fluctuations, large moves in interest rates may decrease
or eliminate our profitability.
Liquidity refers to our ability to provide steady sources of funds for loan
commitments and investment activities, as well as to maintain sufficient funds
to cover deposit withdrawals and payment of debt and operating obligations. We
will manage our liquidity by actively monitoring the bank's sources and uses of
funds to meet cash flow requirements and maximize profits.
If the bank is open before January 1, 2000, we expect to increase our cash
on hand because consumer uncertainty about the year 2000 may cause a higher than
normal rate of deposit withdrawal.
CAPITAL ADEQUACY
Capital adequacy for banks and bank holding companies is regulated by the
Office of the Comptroller of the Currency, the Federal Reserve Board of
Governors, and the FDIC. The primary measures of capital adequacy are (i)
risk-based capital guidelines and (ii) the leverage ratio. Changes in these
guidelines or in our levels of capital can affect our ability to expand and pay
dividends. Please see "Supervision and Regulation -- The Bank -- Capital
Regulations" on page 27 for a more detailed discussion.
YEAR 2000 ISSUES
Like many financial institutions, we will rely upon computers for the daily
conduct of our business and for information systems processing. There is concern
among industry experts that on January 1, 2000 some computers will be unable to
"read" the new year resulting in computer malfunctions.
We generally will be relying on software and hardware developed by
independent third parties for our information systems. We have not yet entered
into an agreement with a vendor to provide core data processing software and
services or with a vendor to provide ATM services. We plan to request and review
testing and results from each of our primary vendors demonstrating Year 2000
readiness and compliance. We plan to prepare a comprehensive Year 2000 Plan,
including a budget for Year 2000 testing and vendor monitoring. Our president
will implement the plan with oversight from our board of directors. The plan
involves investigation of each vendor, validation of each vendors testing
procedures and results, testing on our own systems if reasonable, and receiving
Year 2000 warranties from each of our selected vendors. We will seek to ensure
that our agreements with our primary vendors include warranties regarding Year
2000 compliance, although the remedies available under such agreements include
standard disclaimers of liability and specifically exclude special, incidental,
indirect, and consequential damages.
14
<PAGE> 16
Our customers may also have Year 2000 issues. We may incur losses if these
issues affect our loan customers' ability to repay their loans or if they suffer
material harm to their businesses as a result. We intend to request
certification from each commercial borrower that their systems are Year 2000
compliant and that they do not expect to be adversely affected by the year
change. Although these certifications will be helpful, it would be very
difficult for us to accurately assess the Year 2000 readiness of any borrower.
There is a good chance that we may not open the bank until after January 1,
2000, at which time we believe that most of the uncertainty surrounding the Year
2000 issue should be clarified. In this event, our risks associated with
computer malfunctions should be greatly reduced, but we will still seek to
ensure that our computer systems and our major vendors' and clients' computer
systems are in compliance and functioning properly, and we would postpone the
bank's opening until these issues were resolved. If we are open for business
prior to January 1, 2000 and widespread computer malfunctions occur in the
banking industry, our systems would be down for a period of time and we would be
required to complete all transactions and keep all records manually. We will
have all required forms and procedures in place for manual processing, and feel
we can do this without serious disruption of our business.
15
<PAGE> 17
PROPOSED BUSINESS
GENERAL
We incorporated Coastal Banking Company as a South Carolina corporation on
June 8, 1999, primarily to function as a holding company to own and control all
of the capital stock of Lowcountry National Bank. We initially will engage in no
business other than owning and managing the bank.
We have chosen this holding company structure because we believe it will
provide flexibility that would not otherwise be available. Subject to Federal
Reserve Board debt guidelines, the holding company structure can assist the bank
in maintaining its required capital ratios by borrowing money and contributing
the proceeds to the bank as primary capital. Additionally, a holding company may
engage in certain non-banking activities that the Federal Reserve Board has
deemed to be closely related to banking. Although we do not presently intend to
engage in other activities, we will be able to do so with a proper notice or
filing to the Federal Reserve if we believe that there is a need for these
services in our market area and that such activities could be beneficial to the
company.
On September 30, 1999, we received preliminary approval from the Office of
the Comptroller of the Currency to open the new bank. Final approval is
conditioned upon our raising the required minimum capital, which we believe will
be $6,000,000, receipt of FDIC approval, and the implementation of proper bank
regulatory policies and procedures. We have also filed an application with the
FDIC for deposit insurance, but we have not received preliminary approval, and
we will file for approval of the Federal Reserve to become a bank holding
company and acquire all of the stock of the new bank. Subject to receiving
regulatory approval from these agencies, we plan to open the bank in the first
quarter of 2000 and will engage in a general commercial and consumer banking
business as described below.
MARKETING OPPORTUNITIES
Service Area. Our primary service area will consist of the portion of
Beaufort County within a 20 mile radius (specifically excluding Hilton Head
Island) of our main office. This area covers a large portion of Beaufort County,
including Beaufort, Bluffton, Burton, Callawassie Island, Coosaw, Dataw Island,
Harbor Island, Hunting Island, Fripp Island, Ladys Island, Port Royal, Spring
Island, St. Helena Island, and the rapidly growing Sun City, which is expected
to contain 8,900 homes upon completion, of which 1,400 are already sold. More
particularly, the service area for deposits for the bank is within a five mile
radius of our main office, with the 20 mile radius primarily utilized for loan
generation opportunities. Our expansion plans include the opening of a branch
facility in the service area within three years. We plan to leverage existing
contacts and relationships with individuals and companies in this area to more
effectively market the services of the bank.
Economic and Demographic Factors. Beaufort County is South Carolina's
fastest growing county, and it is strategically located in the southeast corner
of South Carolina, 45 miles northeast of Savannah, Georgia, and 65 miles
southwest of Charleston, South Carolina. The economy is aided by the network of
highways that pass through Beaufort County (U.S. 17, U.S. 21, U.S. 278, and S.C.
170), the CSX rail line, and a regional airport located west of Savannah,
Georgia. The local economy is driven primarily by area military installations,
tourism, and transportation services via the Ports Authority facility at Port
Royal (located in Beaufort County). The county enjoys an outstanding
relationship with the United States Marine Corps training facility at Parris
Island, the Marine Corps Air Station (MCAS), and the U.S. Naval Hospital located
in Beaufort County. The MCAS is expanding as evidenced by the recent
announcement that two additional squadrons are scheduled to be transferred to
the MCAS in the near future. Tourism centers primarily on Hilton Head and other
islands in Beaufort County, and the same mild coastal environment that supports
tourism in the area is also fostering a growing retirement community. In March
1999, the unemployment rate in the area was 1.6%, lower than the South Carolina
average of 3.7% and the national average of 4.2%. In 1995, Beaufort County's
median household income was $35,995, 19.7% above the state average of $30,060.
The population of Beaufort County continues to grow at the fastest rate of any
county in South Carolina. By 2003, the population of Beaufort County is
16
<PAGE> 18
expected to increase by 7.7% over the 1998 population, to almost 115,000 people.
The population growth for the county was 23.2% for the period from 1990 to 1998.
Competition. We believe our initial competition for consumer and small
business loans and deposits will be within a 20 mile area of our main office. In
this area, we will concentrate on serving the small business owner and
consumer-oriented businesses that have tended to be underserved by the larger
financial institutions. According to the FDIC, as of June 30, 1998 our primary
market area contained 19 bank branches, encompassing almost $490 million in
deposits.
The consolidation trend in the banking industry has led to the recent
acquisition of FirstBank, N.A., the last community bank headquartered in the
City of Beaufort, by First National Bank, a multi-office bank headquartered in
Orangeburg, South Carolina. Our competitors include large national,
super-regional, and regional institutions, including Wachovia Bank, Regions
Bank, Branch Bank & Trust, First Union National Bank, and Bank of America, as
well as super-community banks headquartered outside of our primary service area,
including First National Bank, Palmetto State Bank, First Citizens Bank, and
Fort Sill National Bank. According to the FDIC's 1998 bank asset data, the large
regional and super-regional banks control 43.5% of the deposit base in our
primary service area and the super-community banks control a 56.5% market share
of deposits. We also may face competition from new banks. An organizing group
has begun efforts to form a new community bank in our primary service area in
the near future. Despite this competition, we believe the proposed bank, with
local management, will prove appealing to the citizens of Beaufort County in the
current competitive market, and will benefit from the continuing consolidation
within the financial institution industry.
BUSINESS STRATEGY
Management Philosophy. Lowcountry National Bank will be the only locally
owned bank with a local shareholder base in Beaufort. As a locally owned bank,
we believe we can offer a unique banking alternative to the banking market by
offering a higher level of customer service and a management team that is more
focused on the needs of the community. We believe that this approach will be
enthusiastically supported by the community. While the bank will have the
ability to offer a broad range of products, we will emphasize the client
relationship. Many of the organizers are residents and business people in the
bank's primary market area and are familiar with the credit needs of the area
through personal experience and communications with their business colleagues.
We believe that the proposed community focus of the bank will succeed in this
market, and that the area will react favorably to the bank's emphasis on service
to small- to medium-sized businesses, individuals, and professional firms.
Operating Strategy. In order to achieve the level of prompt, responsive
service that we believe will be necessary to attract and retain customers and to
develop Lowcountry National Bank's image as a local bank with an individual
focus, we will employ the following operating strategies:
- Experienced Senior Management. We will retain an experienced management
team, led by a president and chief executive officer who has over 28
years of banking experience. Our management team currently consists of
the following individuals:
- Randy Kohn will lead the management team as the president and chief
executive officer for both Coastal Banking Company and Lowcountry
National Bank. He previously served as senior vice president and senior
credit officer for Clemson Bank & Trust, a community bank in Clemson,
South Carolina from 1995 until his resignation in March 1999 to join the
organizational team for our bank. From 1991 to 1995, Mr. Kohn served as
senior vice president and senior credit officer at Citizens Bank, a
community bank in Canton, Georgia.
- Ladson Howell will serve as the chairman of our board of directors. He
has worked in Beaufort for over 30 years as an attorney with Howell,
Gibson & Hughes, PA. Mr. Howell is the former president of the Beaufort
County Bar Association and an active member of the community.
- Charlie T. Lovering, Jr. will serve as our senior vice president and
chief financial officer. He has over 14 years of banking experience. He
most recently served as senior vice president and
17
<PAGE> 19
controller of AmeriBank, N.A. in Savannah, Georgia from 1997 until his
resignation in August 1999 to join our organizational effort. Mr.
Lovering was a senior auditor for SouthTrust Corporation from 1990
through 1996, and an assistant vice president of SouthTrust Bank in
Charleston, South Carolina from 1996 through 1997.
- Bryan K. Newton will serve as senior vice president and senior credit
officer of Lowcountry National Bank. He has more than 21 years of
banking experience. He most recently served as senior vice president and
senior lender for FirstBank in Beaufort, South Carolina from 1992 until
September 1999.
- Community-Oriented Board of Directors. Our management team will operate
under the direction of our board of directors. As described in the
Management Section beginning on page 30, our directors are residents and
business people in the Beaufort area, with significant community
involvement. They are a diverse group that we believe represent many
different interests of the local business community. These directors are
dedicated to the success of the bank, and they will play a key role in
marketing the new bank to the community.
- Individual Customer Focus. Lowcountry National Bank will approach the
market using a client-based philosophy. We will focus on the overall
relationship with each client as opposed to the general product sales
approach used by larger banks. Our executive officers' performance will
be measured in part by their ability to maintain and cultivate client
relationships. We believe this structure will ensure effective
responsiveness to our clients' financial needs, a hallmark of the
community banking approach.
- Local Services and Decision Making. Clients will enjoy a professional
bank environment with access to their specific bank officer. The bank
will provide additional convenience through strategically placed ATMs. We
will emphasize local decision-making with experienced bankers, attention
to strong relationships with customers, and professional and responsive
service.
- Capitalize on Trend Toward Consolidation. The current trend of
consolidation in the banking industry has led to the recent acquisition
of the only locally owned community bank in the City of Beaufort,
continuing a larger trend of bank ownership by large super-regional,
regional, and super-community banks headquartered outside of Beaufort
County.
Although size gives the larger banks certain advantages in competing for
business from large corporations, including higher lending limits and the
ability to offer services in other areas of South Carolina and Beaufort County,
we believe that there is an opportunity in the community banking market in the
Beaufort County area, and that we can successfully fill this role. We will not
compete with large institutions for the primary banking relationships of large
corporations, but will compete for niches in this business and for the consumer
business of their employees. We will also focus on small- to medium-sized
businesses and their employees. These businesses include retail, service, and
tourism. We intend to attract such businesses based on relationships and
contacts of the bank's directors and management.
The current bank consolidation trends may present other opportunities for
us as well. For example, a bank may choose to sell one or more branches
following the acquisition of another bank. While we have no immediate plans to
do so, we may take advantage of these opportunities to acquire additional
branches.
LENDING ACTIVITIES
General. We intend to emphasize a range of lending services, including
real estate, commercial, and consumer loans to individuals and small- to
medium-sized businesses and professional firms that are located in or conduct a
substantial portion of their business in the bank's market area. We will compete
for these loans with competitors who are well established in the Beaufort County
area and have greater resources and lending limits. As a result, we may have to
charge lower interest rates to attract borrowers.
Loan Approval and Review. The bank's loan approval policies will provide
for various levels of officer lending authority. When the amount of aggregate
loans to a single borrower exceeds an individual
18
<PAGE> 20
officer's lending authority, the loan request will be considered and approved by
an officer with a higher lending limit or the directors' loan committee. Loans
in excess of the directors' loan committee's limits must be approved by the full
board of directors. The bank will not make any loans to any director, officer,
or employee of the bank unless the loan is approved by the board of directors of
the bank and is made on terms not more favorable to such person than would be
available to a person not affiliated with the bank. The bank currently intends
to adhere to Federal National Mortgage Association and Federal Home Loan
Mortgage Corporation guidelines in its mortgage loan review process, but may
choose to alter this policy in the future. The bank currently intends to sell
its mortgage loans on the secondary market, but may choose to hold them in the
portfolio in the future.
Loan Distribution. We estimate that the initial percentage distribution of
our loans for the first year will be as follows:
<TABLE>
<S> <C>
Real Estate and Mortgage Loans.............................. 63%
Commercial Loans............................................ 24
Consumer Loans.............................................. 13
---
Total............................................. 100%
===
</TABLE>
These distribution percentages are estimates only. Our actual deposit and loan
distribution will depend on our customers and vary initially and over time. We
will maintain an allowance for loan losses, which we will establish through a
provision for loan losses charged against income. We will charge loans against
this allowance when we believe that the collectibility of the principal is
unlikely. The allowance will be an estimated amount that we believe will be
adequate to absorb losses inherent in the loan portfolio based on evaluations of
its collectibility. We anticipate that initially our loan loss reserve will
equal approximately 1% of the average outstanding balance of our loans. Over
time, we will base the allowance for loan losses on our evaluation of factors
such as changes in the nature and volume of the loan portfolio, overall
portfolio quality, specific problem loans and commitments, and current
anticipated economic conditions that may affect the borrower's ability to pay.
Lending Limits. The bank's lending activities will be subject to a variety
of lending limits imposed by federal law. In general, the bank will be subject
to a legal limit on loans to a single borrower equal to 15% of the bank's
capital and unimpaired surplus. Different limits may apply in certain
circumstances based on the type of loan or the nature of the borrower, including
the borrower's relationship to the bank. These limits will increase or decrease
as the bank's capital increases or decreases. Based upon the capitalization of
the bank with $6,000,000, the bank will initially have a self-imposed loan limit
of $671,000, which represents 80% of our anticipated legal lending limit of
$839,000. These initial limits may be higher because we also intend to
capitalize the bank with 25% of the net remaining proceeds we raise in the
offering, but they will drop as we expect to incur losses, and therefore have
less capital, in first several years of operations. Unless the bank is able to
sell participations in its loans to other financial institutions, the bank will
not be able to meet all of the lending needs of loan customers requiring
aggregate extensions of credit above these limits.
Credit Risk. The principal credit risk associated with each category of
loans is the creditworthiness of the borrower. Borrower creditworthiness is
affected by general economic conditions and the strength of the tourism,
services, and retail market segments. General economic factors affecting a
borrower's ability to repay include interest, inflation, and employment rates
and the strength of local and national economy, as well as other factors
affecting a borrower's customers, suppliers, and employees.
Real Estate and Mortgage Loans. We estimate that loans secured by first or
second mortgages on real estate will make up 63% of the bank's loan portfolio.
These loans will generally fall into one of three categories: commercial real
estate loans, construction and development loans, or residential real estate
loans. Each of these categories is discussed in more detail below, including
their specific risks. Home equity loans are not included because they are
classified as consumer loans, which are discussed below. Interest rates for all
categories may be fixed or adjustable, and will more likely be fixed for
shorter-term loans. The bank will generally charge an origination fee for each
loan.
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Real estate loans are subject to the same general risks as other loans.
They are particularly sensitive to fluctuations in the value of real estate,
which is generally the underlying security for real estate loans. Fluctuations
in the value of real estate, as well as other factors arising after a loan has
been made, could negatively affect a borrower's cash flow, creditworthiness, and
ability to repay the loan. On first and second mortgage loans we would typically
not advance more than 90% of the lesser of the cost or appraised value of the
property. In the event we advance more than 80% of the lesser of the cost or
appraised value of the property, we will typically require mortgage insurance.
We will require a valid mortgage lien on all real estate loans along with a
title lien policy which insures the validity and priority of the lien. We will
also require borrowers to obtain hazard insurance policies and flood insurance,
if applicable.
We will have the ability to originate real estate loans for sale into the
secondary market. We can limit our interest rate and credit risk on these loans
by locking the interest rate for each loan with the secondary investor and
receiving the investor's underwriting approval prior to originating the loan.
- Commercial Real Estate Loans. Commercial real estate loans will
generally have terms of five years or less, although payments may be
structured on a longer amortization basis. We will evaluate each borrower
on an individual basis and attempt to determine its business risks and
credit profile. We will attempt to reduce credit risk in the commercial
real estate portfolio by emphasizing loans on owner-occupied office and
retail buildings where the loan-to-value ratio, established by
independent appraisals, does not exceed 80%. We will also generally
require that debtor cash flow exceed 115% of monthly debt service
obligations. We will typically review all of the personal financial
statements of the principal owners and require their personal guarantees.
These reviews generally reveal secondary sources of payment and liquidity
to support a loan request.
- Construction and Development Real Estate Loans. We will offer adjustable
and fixed rate residential and commercial construction loans to builders
and developers and to consumers who wish to build their own home. The
term of construction and development loans will generally be limited to
eighteen months, although payments may be structured on a longer
amortization basis. Most loans will mature and require payment in full
upon the sale of the property. Construction and development loans
generally carry a higher degree of risk than long term financing of
existing properties. Repayment depends on the ultimate completion of the
project and usually on the sale of the property. Specific risks include:
- cost overruns;
- mismanaged construction;
- inferior or improper construction techniques;
- economic changes or downturns during construction;
- a downturn in the real estate market;
- rising interest rates which may prevent sale of the property; and
- failure to sell completed projects in a timely manner.
We will attempt to reduce risk by obtaining personal guarantees where
possible, and by keeping the loan-to-value ratio of the completed project
below specified percentages. We also may reduce risk by selling
participations in larger loans to other institutions when possible.
- Residential Real Estate Loans. Residential real estate loans generally
will have longer terms up to 30 years. We will offer fixed and adjustable
rate mortgages. We will have limited credit risk on these loans as most
will be sold to third parties soon after closing.
Commercial Loans. The bank will make loans for commercial purposes in
various lines of businesses. Commercial loans are generally considered to have
greater risk than first or second mortgages on real estate because they may be
unsecured, or if they are secured, the value of the security may be difficult to
assess and more likely to decrease than real estate. Equipment loans will
typically be made for
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a term of five years or less at fixed or variable rates, with the loan fully
amortized over the term and secured by the financed equipment and with a
loan-to-value ratio of 80% or less. We will focus our efforts on commercial
loans less than $500,000. Working capital loans will typically have terms not
exceeding one year and will usually be secured by accounts receivable,
inventory, or personal guarantees of the principals of the business. For loans
secured by accounts receivable or inventory, principal will typically be repaid
as the assets securing the loan are converted into cash, and in other cases
principal will typically be due at maturity. Asset based lending, leasing, and
factoring will be offered through third party vendors who can handle the paper
work and servicing and generally assume most of the credit risk. Trade letters
of credit, standby letters of credit, and foreign exchange will be handled
through a correspondent bank as agent for the bank.
We expect to offer small business loans utilizing government enhancements
such as the Small Business Administration's 7(a) program and SBA's 504 programs,
and our CEO has experience with these types of loans. These loans will typically
be partially guaranteed by the government, which may help to reduce the bank's
risk. Government guarantees of SBA loans will not exceed 80% of the loan value
and will generally be less.
The well established banks in the Beaufort County area will make
proportionately more loans to medium- to large-sized businesses than we will.
Many of the bank's anticipated commercial loans likely will be made to small-to
medium-sized businesses which may be less able to withstand competitive,
economic, and financial conditions than larger borrowers.
Consumer Loans. The bank will make a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment
loans and revolving lines of credit. Installment loans typically will carry
balances of less than $50,000 and be amortized over periods up to 60 months.
Consumer loans may be offered on a single maturity basis where a specific source
of repayment is available. Revolving loan products will typically require
monthly payments of interest and a portion of the principal. Consumer loans are
generally considered to have greater risk than first or second mortgages on real
estate because they may be unsecured, or if they are secured, the value of the
security may be difficult to assess and more likely to decrease than real
estate.
We will also offer home equity loans. Our underwriting criteria for and the
risks associated with home equity loans and lines of credit will generally be
the same as those for first mortgage loans. Home equity lines of credit will
typically have terms of 15 years or less, will typically carry balances less
than $125,000, and may extend up to 100% of the available equity of each
property.
DEPOSIT SERVICES
We intend to offer a full range of deposit services that are typically
available in most banks and savings and loan associations, including checking
accounts, commercial accounts, savings accounts, and other time deposits of
various types, ranging from daily money market accounts to longer-term
certificates of deposit. The transaction accounts and time certificates will be
tailored to our primary market area at rates competitive to those offered in the
Beaufort County area. In addition, we intend to offer certain retirement account
services, such as IRAs. We intend to solicit these accounts from individuals,
businesses, associations, organizations, and governmental authorities.
Deposit Distribution. We estimate that the initial percentage distribution
of our deposits for the first year will be as follows:
<TABLE>
<S> <C>
Demand Deposit.............................................. 10%
Savings & Money Market...................................... 28
Public Funds (Time and Savings and Demand Deposits)......... 11
CDs under $100,000.......................................... 37
CDs over $100,000........................................... 14
---
Total............................................. 100%
===
</TABLE>
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OTHER BANKING SERVICES
We anticipate that the bank will offer other bank services including drive
up ATMs, safe deposit boxes, traveler's checks, direct deposit, U.S. Savings
Bonds, and banking by mail. We plan for the bank to become associated with the
Honor and Cirrus ATM networks, which may be used by the bank's customers
throughout Beaufort County and other regions. We believe that by being
associated with a shared network of ATMs, we will be better able to serve our
customers and will be able to attract customers who are accustomed to the
convenience of using ATMs, although we do not believe that maintaining this
association will be critical to our success. We intend to begin offering these
services shortly after opening the bank. We do not expect the bank to exercise
trust powers during its first year of operation.
MARKET SHARE
As of June 30, 1998, total deposits in the bank's primary service area were
almost $490 million. The average annual growth rate in deposits in this area
over the last four years was 11.7%. Based on a more conservative growth rate of
7.2%, the average growth rate in Beaufort County over the last four years,
deposits in the primary service area will grow to over $740 million by 2004. Our
plan over the next five years is to reach a 7.6% market share with deposits of
$56 million. Of course, we cannot be sure that these deposit growth rates will
continue, or that we will accomplish this objective.
EMPLOYEES
We anticipate that, upon commencement of operations, the bank will have
approximately 13 full time employees. Within the first three years, we
anticipate that it will have approximately 20 full time employees operating out
of the bank's main facility and any branch facility. Coastal Banking Company, as
the holding company for the bank, will not have any employees other than its
officers for the foreseeable future.
LEGAL PROCEEDINGS
Neither Coastal Banking Company, Lowcountry National Bank, nor any of their
properties are subject to any legal proceedings.
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SUPERVISION AND REGULATION
Both Coastal Banking Company and Lowcountry National Bank are subject to
extensive state and federal banking laws and regulations which impose specific
requirements or restrictions on and provide for general regulatory oversight of
virtually all aspects of operations. These laws and regulations are generally
intended to protect depositors, not shareholders. The following summary is
qualified by reference to the statutory and regulatory provisions discussed.
Changes in applicable laws or regulations may have a material effect on our
business and prospects. Beginning with the enactment of the Financial
Institution Report Recovery and Enforcement Act in 1989 and following with the
FDIC Improvement Act in 1991, numerous additional regulatory requirements have
been placed on the banking industry in the past several years, and additional
changes have been proposed. Our operations may be affected by legislative
changes and the policies of various regulatory authorities. We cannot predict
the effect that fiscal or monetary policies, economic control, or new federal or
state legislation may have on our business and earnings in the future.
COASTAL BANKING COMPANY
Because it will own the outstanding capital stock of the bank, Coastal
Banking Company will be a bank holding company under the federal Bank Holding
Company Act of 1956 and the South Carolina Banking and Branching Efficiency Act.
Our activities will also be governed by the Glass-Steagall Act of 1933.
The Bank Holding Company Act. Under the Bank Holding Company Act, Coastal
Banking Company will be subject to periodic examination by the Federal Reserve
and required to file periodic reports of its operations and any additional
information that the Federal Reserve may require. Our activities at the bank and
holding company level will be limited to:
- banking and managing or controlling banks;
- furnishing services to or performing services for its subsidiaries; and
- engaging in other activities that the Federal Reserve determines to be so
closely related to banking and managing or controlling banks as to be a
proper incident thereto.
Investments, Control, and Activities. With certain limited exceptions, the
Bank Holding Company Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before:
- acquiring substantially all the assets of any bank;
- acquiring direct or indirect ownership or control of any voting shares of
any bank if after such acquisition it would own or control more than 5%
of the voting shares of such bank (unless it already owns or controls the
majority of such shares); or
- merging or consolidating with another bank holding company.
In addition, and subject to certain exceptions, the Bank Holding Company
Act and the Change in Bank Control Act, together with regulations thereunder,
require Federal Reserve approval prior to any person or company acquiring
"control" of a bank holding company. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more, but less than 25%, of any class of voting
securities and either (i) Coastal Banking Company has registered securities
under Section 12 of the Securities Exchange Act of 1934 or (ii) no other person
owns a greater percentage of that class of voting securities immediately after
the transaction. We intend to register our common stock under the Securities
Exchange Act of 1934. The regulations provide a procedure for challenge of the
rebuttable control presumption.
Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in nonbanking activities
unless the Federal Reserve Board, by order or regulation, has found those
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activities to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Some of the activities that the Federal
Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include:
- making or servicing loans and certain types of leases;
- engaging in certain insurance and discount brokerage activities;
- performing certain data processing services;
- acting in certain circumstances as a fiduciary or investment or financial
adviser;
- owning savings associations; and
- making investments in certain corporations or projects designed primarily
to promote community welfare.
The Federal Reserve Board imposes certain capital requirements on Coastal
Banking Company under the Bank Holding Company Act, including a minimum leverage
ratio and a minimum ratio of "qualifying" capital to risk-weighted assets. These
requirements are described below under "Capital Regulations." Subject to its
capital requirements and certain other restrictions, Coastal Banking Company is
able to borrow money to make a capital contribution to the bank, and these loans
may be repaid from dividends paid from the bank to Coastal Banking Company. Our
ability to pay dividends will be subject to regulatory restrictions as described
below in "The Bank -- Dividends." Coastal Banking Company is also able to raise
capital for contribution to the bank by issuing securities without having to
receive regulatory approval, subject to compliance with federal and state
securities laws.
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
Board policy, Coastal Banking Company will be expected to act as a source of
financial strength to the bank and to commit resources to support the bank in
circumstances in which Coastal Banking Company might not otherwise do so. Under
the Bank Holding Company Act, the Federal Reserve Board may require a bank
holding company to terminate any activity or relinquish control of a nonbank
subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve
Board's determination that such activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository institution
of the bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.
Glass-Steagall Act. We will also be restricted by the provisions of the
Glass-Steagall Act, which prohibits Coastal Banking Company from owning
subsidiaries that are engaged principally in the issue, flotation, underwriting,
public sale, or distribution of securities. The interpretation, scope, and
application of the provisions of the Glass-Steagall Act currently are being
considered and reviewed by regulators and legislators, and the interpretation
and application of those provisions have been challenged in the federal courts.
South Carolina State Regulation. As a bank holding company registered
under the South Carolina Banking and Branching Efficiency Act, we are subject to
limitations on sale or merger and to regulation by the South Carolina Board of
Financial Institutions. Prior to acquiring the capital stock of a national bank,
we are not required to obtain the approval of the Board, but we must notify them
at least 15 days prior to doing so. We must receive the Board's approval prior
to engaging in the acquisition of banking or nonbanking institutions or assets,
and we must file periodic reports with respect to our financial condition and
operations, management, and intercompany relationships between Coastal Banking
Company and its subsidiaries.
THE BANK
The bank will operate as a national banking association incorporated under
the laws of the United States and subject to examination by the Office of the
Comptroller of the Currency. Deposits in the bank
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will be insured by the FDIC up to a maximum amount, which is generally $100,000
per depositor subject to aggregation rules.
The Office of the Comptroller of the Currency and the FDIC will regulate or
monitor virtually all areas of the bank's operations, including:
- security devices and procedures;
- adequacy of capitalization and loss reserves;
- loans;
- investments;
- borrowings;
- deposits;
- mergers;
- issuances of securities;
- payment of dividends;
- interest rates payable on deposits;
- interest rates or fees chargeable on loans;
- establishment of branches;
- corporate reorganizations;
- maintenance of books and records; and
- adequacy of staff training to carry on safe lending and deposit gathering
practices.
The Office of the Comptroller of the Currency requires the bank to maintain
specified capital ratios and imposes limitations on the bank's aggregate
investment in real estate, bank premises, and furniture and fixtures. The Office
of the Comptroller of the Currency will also require the bank to prepare
quarterly reports on the bank's financial condition and to conduct an annual
audit of its financial affairs in compliance with its minimum standards and
procedures.
Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency and their state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. The FDIC
Improvement Act also requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to the
following:
- internal controls;
- information systems and audit systems;
- loan documentation;
- credit underwriting;
- interest rate risk exposure; and
- asset quality.
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National banks and their holding companies which have been chartered or
registered or have undergone a change in control within the past two years or
which have been deemed by the Office of the Comptroller of the Currency or the
Federal Reserve Board to be troubled institutions must give the Office of the
Comptroller of the Currency or the Federal Reserve Board thirty days' prior
notice of the appointment of any senior executive officer or director. Within
the thirty day period, the Office of the Comptroller of the Currency or the
Federal Reserve Board, as the case may be, may approve or disapprove any such
appointment.
Deposit Insurance. The FDIC establishes rates for the payment of premiums
by federally insured banks and thrifts for deposit insurance. A separate Bank
Insurance Fund and Savings Association Insurance Fund are maintained for
commercial banks and savings associations with insurance premiums from the
industry used to offset losses from insurance payouts when banks and thrifts
fail. In 1993, the FDIC adopted a rule which establishes a risk-based deposit
insurance premium system for all insured depository institutions. Under this
system, until mid-1995 depository institutions paid to Bank Insurance Fund or
Savings Association Insurance Fund from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semiannual basis. Once the Bank Insurance Fund
reached its legally mandated reserve ratio in mid-1995, the FDIC lowered
premiums for well-capitalized banks, eventually eliminating premiums for
well-capitalized banks, with a minimum semiannual assessment of $1,000. However,
in 1996 Congress enacted the Deposit Insurance Funds Act of 1996, which
eliminated even this minimum assessment. It also separated the Financial
Corporation assessment to service the interest on its bond obligations. The
amount assessed on individual institutions, including the bank, by the Financial
Corporation assessment is in addition to the amount paid for deposit insurance
according to the risk-related assessment rate schedule. Increases in deposit
insurance premiums or changes in risk classification will increase the bank's
cost of funds, and we may not be able to pass these costs on to our customers.
Transactions With Affiliates and Insiders. The bank will be subject to the
provisions of Section 23A of the Federal Reserve Act, which places limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. The aggregate of
all covered transactions is limited in amount, as to any one affiliate, to 10%
of the bank's capital and surplus and, as to all affiliates combined, to 20% of
the bank's capital and surplus. Furthermore, within the foregoing limitations as
to amount, each covered transaction must meet specified collateral requirements.
Compliance is also required with certain provisions designed to avoid the taking
of low quality assets.
The bank will also be subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies. The bank will be subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.
Dividends. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock until
its surplus equals its stated capital, unless there has been transferred to
surplus no less than one-tenth of the bank's net profits of the preceding two
consecutive half-year periods (in the case of an annual dividend). The approval
of the Office of the Comptroller of the Currency is required if the total of all
dividends declared by a national bank in any calendar year exceeds the total of
its net profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus.
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Branching. National banks are required by the National Bank Act to adhere
to branch office banking laws applicable to state banks in the states in which
they are located. Under current South Carolina law, the bank may open branch
offices throughout South Carolina with the prior approval of the Office of the
Comptroller of the Currency. In addition, with prior regulatory approval, the
bank will be able to acquire existing banking operations in South Carolina.
Furthermore, federal legislation has recently been passed which permits
interstate branching. The new law permits out-of-state acquisitions by bank
holding companies, interstate branching by banks if allowed by state law, and
interstate merging by banks.
Community Reinvestment Act. The Community Reinvestment Act requires that,
in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or facility.
Failure to adequately meet these criteria could impose additional requirements
and limitations on the bank.
Other Regulations. Interest and other charges collected or contracted for
by the bank are subject to state usury laws and federal laws concerning interest
rates. The bank's loan operations are also subject to federal laws applicable to
credit transactions, such as:
- the federal Truth-In-Lending Act, governing disclosures of credit terms
to consumer borrowers;
- the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and public
officials to determine whether a financial institution is fulfilling its
obligation to help meet the housing needs of the community it serves;
- the Equal Credit Opportunity Act, prohibiting discrimination on the basis
of race, creed or other prohibited factors in extending credit;
- the Fair Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies;
- the Fair Debt Collection Act, governing the manner in which consumer
debts may be collected by collection agencies; and
- the rules and regulations of the various federal agencies charged with
the responsibility of implementing such federal laws.
The deposit operations of the bank also are subject to:
- the Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures
for complying with administrative subpoenas of financial records; and
- the Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve Board to implement that act, which governs automatic deposits to
and withdrawals from deposit accounts and customers' rights and
liabilities arising from the use of automated teller machines and other
electronic banking services.
Capital Regulations. The federal bank regulatory authorities have adopted
risk-based capital guidelines for banks and bank holding companies that are
designed to make regulatory capital requirements more sensitive to differences
in risk profiles among banks and bank holding companies and account for
off-balance sheet items. The guidelines are minimums, and the federal regulators
have noted that banks and bank holding companies contemplating significant
expansion programs should not allow expansion to diminish their capital ratios
and should maintain ratios in excess of the minimums. We have not received any
notice indicating that either Coastal Banking Company or Lowcountry National
Bank is subject to higher capital requirements. The current guidelines require
all bank holding companies and federally-regulated banks to maintain a minimum
risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1
capital. Tier 1 capital includes common shareholders' equity, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes
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<PAGE> 29
goodwill and most other intangibles and excludes the allowance for loan and
lease losses. Tier 2 capital includes the excess of any preferred stock not
included in Tier 1 capital, mandatory convertible securities, hybrid capital
instruments, subordinated debt and intermediate term-preferred stock, and
general reserves for loan and lease losses up to 1% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet
items are given credit conversion factors to convert them to asset equivalent
amounts to which an appropriate risk-weight applies. These computations result
in the total risk-weighted assets. Most loans are assigned to the 100% risk
category, except for first mortgage loans fully secured by residential property
and, under certain circumstances, residential construction loans, both of which
carry a 50% rating. Most investment securities are assigned to the 20% category,
except for municipal or state revenue bonds, which have a 50% rating, and direct
obligations of or obligations guaranteed by the United States Treasury or United
States Government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a leverage
ratio, which is equal to Tier 1 capital as a percentage of average total assets
less intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital
base. The minimum required leverage ratio for top-rated institutions is 3%, but
most institutions are required to maintain an additional cushion of at least 100
to 200 basis points.
The FDIC Improvement Act established a new capital-based regulatory scheme
designed to promote early intervention for troubled banks which requires the
FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total risk-based capital ratio of no less than 10%, and
the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. Initially, we
will qualify as "well capitalized."
Under the FDIC Improvement Act regulations, the applicable agency can treat
an institution as if it were in the next lower category if the agency determines
(after notice and an opportunity for hearing) that the institution is in an
unsafe or unsound condition or is engaging in an unsafe or unsound practice. The
degree of regulatory scrutiny of a financial institution increases, and the
permissible activities of the institution decreases, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to do some or all of the following:
- submit a capital restoration plan;
- raise additional capital;
- restrict their growth, deposit interest rates, and other activities;
- improve their management;
- eliminate management fees; or
- divest themselves of all or a part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.
These capital guidelines can affect us in several ways. If we grow at a
rapid pace, our capital may be depleted too quickly, and a capital infusion from
the holding company may be necessary which could impact our ability to pay
dividends. Our capital levels will initially be more than adequate; however,
rapid growth, poor loan portfolio performance, poor earnings performance, or a
combination of these factors could change our capital position in a relatively
short period of time.
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The FDIC Improvement Act requires the federal banking regulators to revise
the risk-based capital standards to provide for explicit consideration of
interest rate risk, concentration of credit risk, and the risks of untraditional
activities. We are uncertain what effect these regulations would have.
Failure to meet these capital requirements would mean that a bank would be
required to develop and file a plan with its primary federal banking regulator
describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless the bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.
Enforcement Powers. The Financial Institution Report Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an institution
to timely file required reports or the filing of false or misleading information
or the submission of inaccurate reports. Civil penalties may be as high as
$1,000,000 a day for such violations. Criminal penalties for some financial
institution crimes have been increased to 20 years. In addition, regulators are
provided with greater flexibility to commence enforcement actions against
institutions and institution-affiliated parties. Possible enforcement actions
include the termination of deposit insurance. Furthermore, banking agencies'
power to issue cease-and-desist orders were expanded. Such orders may, among
other things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnification or
guarantees against loss. A financial institution may also be ordered to restrict
its growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.
Recent Legislative Developments. From time to time, various bills are
introduced in the United States Congress with respect to the regulation of
financial institutions. Some of these proposals, if adopted, could significantly
change the regulation of banks and the financial services industry. For example,
the United States House of Representatives recently passed House Bill 10, the
Financial Services Act of 1999, which, if enacted into law, would make
substantial changes to the regulation of banks and other companies within the
United States financial services industry. We cannot predict whether any of
these proposals will be adopted or, if adopted, what effect these would have.
Effect of Governmental Monetary Policies. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.
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MANAGEMENT
GENERAL
The following table sets forth the number and percentage of outstanding
shares of common stock we expect to be beneficially owned by the directors and
executive officers after the completion of this offering. All of our directors
are organizers of the bank. The mailing addresses of our directors and executive
officers are the same as the address of the bank. Prior to the offering, Randy
Kohn purchased ten shares of common stock for $10.00 per share. We will redeem
this stock after the offering. This table includes shares based on the
"beneficial ownership" concepts as defined by the SEC. Beneficial ownership
includes spouses, minor children, and other relatives residing in the same
household, and trusts, partnerships, corporations or deferred compensation plans
which are affiliated with the principal. This table does not reflect warrants
that will be granted to each organizer to purchase one share of common stock for
every share of common stock purchased by the organizers during the offering
because these warrants will not be exercisable within 60 days of the date of
this prospectus. Other than Charlie T. Lovering, each person listed below is an
organizer of the bank.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ------- -------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Marjorie Trask Gray......................................... 15,000 1.72%
Dennis O. Green............................................. 21,500 2.47
Mark B. Heles............................................... 15,000 1.72
J. Phillip Hodges, Jr....................................... 17,000 1.95
James W. Holden, Jr......................................... 11,500 1.32
Ladson F. Howell............................................ 10,000 1.15
James C. Key................................................ 10,000 1.15
Randolph C. Kohn............................................ 15,000 1.72
Ron Lewis................................................... 13,000 1.49
Charlie T. Lovering......................................... 5,000 .57
Lila N. Meeks............................................... 14,000 1.61
Robert B. Pinkerton......................................... 20,000 2.30
John M. Trask, III.......................................... 25,000 2.87
Matt A. Trumps.............................................. 15,000 1.72
------- -----
All directors and executive officers as a group (14
persons).................................................. 207,000 23.79%
======= =====
</TABLE>
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EXECUTIVE OFFICERS AND DIRECTORS OF COASTAL BANKING COMPANY
The following table sets forth certain information about our executive
officers and directors. The president and chief executive officer and the
directors of Coastal Banking Company will also hold these same positions with
Lowcountry National Bank. Coastal Banking Company's articles of incorporation
provide for a classified board of directors so that, as nearly as possible,
one-third of the directors are elected each year to serve three-year terms. The
terms of office of the classes of directors expire as follows: Class I at the
2000 annual meeting of shareholders, Class II at the 2001 annual meeting of
shareholders, and Class III at the 2002 annual meeting of shareholders.
Executive officers serve at the discretion of the board of directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COASTAL BANKING COMPANY
- ---- --- --------------------------------------------------------
<S> <C> <C>
Marjorie Trask Gray, DMD.............. 29 Director, Class I
Dennis O. Green, CPA.................. 58 Director, Class I, Vice Chairman of the Board
Mark B. Heles......................... 49 Director, Class II
J. Phillip Hodges, Jr................. 52 Director, Class I, Secretary
James W. Holden, Jr., DVM............. 39 Director, Class III
Ladson F. Howell...................... 56 Director, Class I, Chairman of the Board
James C. Key.......................... 59 Director, Class III
Randolph C. Kohn...................... 51 Director, Class I, President and Chief Executive Officer
Ron Lewis............................. 58 Director, Class III
Lila N. Meeks......................... 59 Director, Class II
Robert B. Pinkerton................... 58 Director, Class II
John M. Trask, III.................... 36 Director, Class II
Matt A. Trumps........................ 29 Director, Class III
Charlie T. Lovering................... 32 Senior Vice President and Chief Financial Officer
</TABLE>
MARJORIE TRASK GRAY, DMD, Class I director, has been a dentist with a
general practice in Beaufort, South Carolina since 1997. She graduated from the
University of South Carolina in 1992, and from the Medical University of South
Carolina with a DMD in 1997. Dr. Gray is licensed to practice dentistry in the
state of South Carolina, and is a limited partner and shareholder of several
family owned businesses in Beaufort, South Carolina. She is a member of the
South Carolina Dental Association, the American Dental Association, the
Carterett United Methodist Church, the Beaufort County Open Land Trust, and the
Historic Beaufort Foundation. Dr. Gray also is secretary and treasurer of the
Beaufort Dental Study Club.
DENNIS O. GREEN, CPA, Class I director and vice chairman of the board,
served as Chief Auditor for Citicorp, and its principal banking subsidiary,
Citibank N.A. in New York, New York from 1990 to 1997. Mr. Green is president of
Keiretsu Investments, Inc., a private investment company. He currently serves as
Treasurer Designate for Coastal Heritage Community Development Federal Credit
Union (proposed) on St. Helena Island, South Carolina. He graduated in 1967 from
Wayne State University with a degree in Business Administration/Finance. Mr.
Green has been registered as a Certified Public Accountant in the State of
Michigan since 1969. He is a director and vice president of The Olive Tree
Foundation, a member of the Board of Trustees of Penn Center, Inc., and a
director of the Boys and Girls Clubs of Beaufort.
MARK B. HELES, Class II director, is the owner, president, and chief
executive officer of Tempo Personnel Services, Inc. which he founded in 1985. He
is also a partner in the Magnolia Bakery and Cafe. Mr. Heles received his
license as a Certified Personnel Consultant in 1990 from the National
Association of Personnel Consultants. He graduated from the University of South
Carolina in 1976 with a Bachelor of Science degree in Business
Administration/Finance. Mr. Heles was former president of the Hilton Head Island
Rotary Club, and a past director of the Beaufort Chamber of Commerce. He
currently is a member of the Beaufort and Hilton Head Homebuilders Associations.
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J. PHILLIP HODGES, JR., Class I director and secretary, manages KSH
Properties and KSH Properties, LLC, two investment companies. From 1972 until
his retirement in 1998, Mr. Hodges worked as a stockbroker for The
Robinson-Humphrey Company, LLC, a subsidiary of Salomon Smith Barney, in Albany,
Georgia, most recently as first vice president of sales. He received his Master
of Business Administration in 1978 from Valdosta State College, and a degree in
Finance/Economics from Auburn University in 1974. While working for
Robinson-Humphrey, Mr. Hodges held licenses with the National Association of
Security Dealers, New York Stock Exchange, American Stock Exchange, and
Commodities Futures Trading Corporation. He currently is a member of the Rotary
Club of Beaufort, St. Helena's Episcopal Church, and the Beaufort Historic
Foundation.
JAMES W. HOLDEN, JR., DVM, Class III director, is a licensed veterinarian
in South Carolina and Georgia, and has been the owner and director of Holly Hall
Animal Hospital in Beaufort, South Carolina since 1986. Dr. Holden is also a
general partner and owner of James W. Holden & Co., LLP., a real estate
development company. He received his DVM from the University of Georgia in 1983,
and a degree in Pre-Veterinary Medicine from Clemson University in 1979. He is a
member of the Rotary Club of Beaufort where he served as a director, president,
vice president, and secretary.
LADSON F. HOWELL, Class I director and chairman of the board of directors,
is licensed to practice law in South Carolina and has been an attorney with
Howell, Gibson & Hughes, PA, a law firm located in Beaufort, South Carolina,
since 1968. He received his law degree from the University of South Carolina Law
School in 1968 and a degree in Journalism from the University of South Carolina
in 1965. Mr. Howell was a former president of the Beaufort County Bar
Association. He currently is a member of the South Carolina State Bar
Association, the American Bar Association, and the Administrative Board of
Carterett United Methodist Church.
JAMES C. KEY, Class III director, has been a partner with the Shenandoah
Group, LLP, an audit and control solutions business, in Beaufort, South Carolina
since 1997. He is a licensed Certified Internal Auditor and a licensed real
estate agent in South Carolina. Mr. Key served as a director of the Internal
Audit Department of IBM Corporation in Armonk, New York from 1962 until 1997. He
attended Virginia Tech and Roanoke College, and he graduated from Syracuse
University in 1991 with a degree in Liberal Studies. Mr. Key serves on the Board
of Governors of the Institute of Internal Auditors, Coastal Georgia Chapter and
the Seminar Committee of the Institute of Internal Auditors.
RANDOLPH C. KOHN, Class I director, will serve as the president and chief
executive officer of Coastal Banking Company and Lowcountry National Bank. He
previously served as senior vice president and senior credit officer for Clemson
Bank & Trust, a community bank located in Clemson, South Carolina, from 1995
until March 1999. From 1991 to 1995, Mr. Kohn served as senior vice president
and senior credit officer of Citizens Bank, a community bank located in Canton,
Georgia. He has more than 28 years of banking experience in both Georgia and
South Carolina. He graduated from the University of Georgia in 1970 with a
degree in Business Management. While residing in Clemson, Mr. Kohn was a
director of the Clemson Chamber of Commerce, a director of the City of Clemson
Police Advisory Board, and a member of the Clemson Rotary Club.
RON LEWIS, Class III director, has been owner and operator of two
McDonald's franchises in Beaufort, South Carolina since 1990. He graduated from
the State University of New York, New York in 1961 with a Bachelor of Science
degree in Business/Economics. He is a member of the Board of Directors of the
Marine Institute, the Beaufort County Economic Development Commission, the
Mayor's Committee for the Disabilities, and president of the Greenville Black
McDonalds Owners Association.
CHARLIE T. LOVERING, will serve as senior vice president and chief
financial officer of Coastal Banking Company and Lowcountry National Bank. He
previously served as senior vice president and controller for Ameribank, N.A.,
in Savannah, Georgia from 1997 until August 1999. From May 1996 until July 1997,
Mr. Lovering served as assistant vice president and state compliance and
Community Reinvestment Act officer for SouthTrust Bank of South Carolina in
Charleston. From 1990 until 1996 he served as a senior audit officer for
SouthTrust Corporation. He has more than 14 years of banking experience
throughout the Southeast. He graduated from Auburn University in 1990 with a
degree in business administration and
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<PAGE> 34
accounting. While working in South Carolina, Mr. Lovering served on the South
Carolina Bankers Association Compliance Committee.
LILA N. MEEKS, Class II director, has been the Dean of Academic Affairs for
the University of South Carolina in Beaufort, South Carolina since 1994. She
graduated from Auburn University in 1962, and received a Masters degree in
English from Auburn in 1966. Ms. Meeks is a member of the Beaufort County Open
Land Trust, the Arts Council, the Beaufort County Historical Society, the
Historic Beaufort Foundation, and St. Helena's Episcopal Church.
BRYAN K. NEWTON, will serve as senior vice president and senior credit
officer of Lowcountry National Bank. He previously served as senior vice
president and senior lender for FirstBank, a former community bank located in
Beaufort, South Carolina, from 1992 until September 1999. Mr. Newton has more
than 21 years of banking experience in Louisiana and South Carolina. He
graduated from the University of Louisiana -- Monroe with a Masters Degree in
Business Administration, the School of Banking of the South at Louisiana State
University, and the School of Bank Marketing at the University of Colorado. He
is a member of the Kiwanis Club of Beaufort and treasurer for the Beaufort
County Water Festival.
ROBERT B. PINKERTON, Class II director, has been the president and chief
executive officer of Athena Corporation, a manufacturer and installer of cast
polymer products, since 1990. Mr. Pinkerton served on the Advisory Board for
First Citizens Bank in Beaufort, South Carolina in 1998. He is also involved
with several real estate development companies in Beaufort. He received a law
degree from Wayne State University in 1976, a masters degree from the Chrysler
Institute of Engineering in 1967, and a degree in mechanical engineering from
the Detroit Institute of Technology in 1965. Mr. Pinkerton is a member of the
Rotary Club of Beaufort, the Greater Beaufort Chamber of Commerce, the
Homebuilders Association of the Lowcountry, the South Carolina Chamber of
Commerce, the Beaufort Roundtable, and the United Way of Beaufort County
Director's Circle. In addition, Mr. Pinkerton was named Greater Beaufort Chamber
of Commerce Business Person of the Year in 1998.
JOHN M. TRASK, III, Class II director, has been an owner of Lowcountry Real
Estate, a local real estate company, since 1996. He formerly owned and managed
Pikes Peak of Memphis, a wholesale florist company from 1991 until 1996. Mr.
Trask is active in the Beaufort business community and he has additional
ownership interests in several local businesses. He graduated from Vanderbilt
University with a Bachelor of Arts degree in 1987. Mr. Trask is a licensed real
estate broker in South Carolina. He serves on the Board of Directors of the Boys
and Girls Clubs of Beaufort, the Beaufort Board of Realtors, and the
Homebuilders of the Lowcountry.
MATT A. TRUMPS, Class III director, has been the owner of Tideland Realty,
a local real estate brokerage company, since 1994. He is also a director of
Greenwave Biotech in Beaufort, South Carolina. He was the director of admissions
at Beaufort Academy in Beaufort from 1992 to 1994. Mr. Trumps received a degree
in Political Science from the College of Charleston in 1991. He is a member of
St. Peter's Catholic Church.
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Randy Kohn for a
five-year term, pursuant to which he will serve as the president, the chief
executive officer, and a director of Coastal Banking Company and Lowcountry
National Bank. Mr. Kohn will be paid an initial salary of $96,000, plus his
yearly medical insurance premium. He shall receive an annual increase in his
salary equal to the previous year's salary times the increase in the Consumer
Price Index during the previous year. The board of directors may increase Mr.
Kohn's salary above this level, but not below it. He is entitled to receive a
bonus of $10,000 upon the opening of the bank and will be eligible to receive an
annual bonus of up to 5% of the net pre-tax income of the bank, if the bank
meets performance goals set by the board. He will be eligible to participate in
any management incentive program of the bank or any long-term equity incentive
program and will be eligible for grants of stock options and other awards
thereunder. Upon the closing of the offering (or as soon thereafter as an
appropriate stock option plan is adopted by the company), Mr. Kohn will be
granted options to purchase a number of shares of common stock equal to 5% of
the
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<PAGE> 35
number of shares sold in this offering. These options will vest over a five-year
period and will have a term of ten years. Additionally, Mr. Kohn will
participate in the bank's retirement, welfare, and other benefit programs and is
entitled to a life insurance policy and an accident liability policy and
reimbursement for automobile expenses, club dues, and travel and business
expenses.
Mr. Kohn's employment agreement also provides that following termination of
his employment and for a period of twelve months thereafter, he may not (a)
compete with the company, the bank, or any of its affiliates by, directly or
indirectly, forming, serving as an organizer, director or officer of, or
consultant to, or acquiring or maintaining more than 1% passive investment in, a
depository financial institution or holding company thereof if such depository
institution or holding company has one or more offices or branches within a
radius of thirty miles from the main office of the company or any branch office
of the company, (b) solicit major customers of the bank for the purpose of
providing financial services, or (c) solicit employees of the bank for
employment. If Mr. Kohn terminates his employment for good cause as that term is
defined in the employment agreement or if he is terminated following a change in
control of Coastal Banking Company as defined in the agreement, he will be
entitled to severance compensation of his then current monthly salary for a
period of 12 months, plus accrued bonus, and all outstanding options and
incentives shall vest immediately.
DIRECTOR COMPENSATION
We do not intend to pay directors' fees until the bank is profitable.
However, we reserve the right to pay directors' fees. If we decide to pay
directors' fees in the future, we intend to determine the fees after taking into
account the fees that other banks of our age and size pay to their directors.
STOCK OPTION PLAN
After the offering, we expect to adopt a stock option plan which will
permit Coastal Banking Company to grant options to its officers, directors,
consultants, and employees. We anticipate that we will initially authorize the
issuance of a number of shares under the stock option plan equal to 15% of the
shares outstanding after the offering, including options granted to Mr. Kohn
under his employment agreement. We do not intend to issue stock options at less
than the fair market value of the common stock on the date of grant, or less
than $10.00 per share during the period ending 12 months after the date of this
offering.
STOCK WARRANTS
The organizers have invested significant time and effort to form Coastal
Banking Company and Lowcountry National Bank, and they have individually
guaranteed a $500,000 line of credit to the bank to cover organizational
expenses. In recognition of the financial risk and efforts they have undertaken
in organizing the bank, each organizer will receive, for no additional
consideration, a warrant to purchase one share of common stock at a purchase
price of $10.00 per share for every share purchased by that organizer in the
offering, up to an aggregate maximum for all organizers of 202,000 shares. The
warrants, which will be represented by separate warrant agreements, will vest
over a three year period beginning one year from the date of completion of the
offering and will be exercisable in whole or in part during the ten year period
following that date. The warrants will not be transferable, except for estate
planning purposes, and the warrants and the shares issued pursuant to the
exercise of such warrants will be subject to transferability restrictions
applicable to affiliates of Coastal Banking Company. For more information on
these restrictions see "Shares Eligible for Future Sale" on page 37. If the
Office of the Comptroller of the Currency or the FDIC issues a capital directive
or other order requiring the bank to obtain additional capital, the warrants
will be forfeited if not immediately exercised.
The organizers plan to purchase 202,000 shares of common stock for a total
investment of $2,020,000. As a result, in the event we sell 870,000 of common
stock, the organizers will own approximately 23.22% of the common stock
outstanding upon completion of the offering, and shall have in the aggregate,
warrants to purchase an additional 202,000 shares. If each organizer exercises
his warrants in full, the
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<PAGE> 36
organizers' ownership of Coastal Banking Company will increase to 37.69% of the
outstanding common stock. Although they have not promised to do so, the
organizers may purchase additional shares in the offering, including up to 100%
of the offering, provided that we will not grant warrants to purchase more than
a total of 202,000 shares. All shares purchased by the organizers will be for
investment and not intended for resale. Because purchases by the organizers may
be substantial, you should not assume that the sale of a specified offering
amount indicates the merits of this offering.
EXCULPATION AND INDEMNIFICATION
Coastal Banking Company's articles of incorporation contain a provision
which, subject to certain limited exceptions, limits the liability of a director
for any breach of duty as a director. There is no limitation of liability for:
- a breach of duty involving appropriation of a business opportunity;
- an act or omission which involves intentional misconduct or a knowing
violation of law;
- any transaction from which the director derives an improper personal
benefit; or
- as to any payments of a dividend or any other type of distribution that
is illegal under Section 33-8-330 of the South Carolina Business
Corporation Act of 1988.
In addition, if such act is amended to authorize further elimination or
limitation of the liability of director, then the liability of each director
shall be eliminated or limited to the fullest extent permitted by such
provisions, as so amended, without further action by the shareholders, unless
the law requires such action. The provision does not limit the right of the
company or its shareholders to seek injunctive or other equitable relief not
involving payments in the nature of monetary damages.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
We expect to have banking and other transactions in the ordinary course of
business with the organizers, directors, and officers and their affiliates,
including members of their families or corporations, partnerships, or other
organizations in which such organizers, officers, or directors have a
controlling interest, on no more favorable terms, including price, or interest
rates and collateral, as those prevailing at the time for comparable
transactions with unrelated parties. These transactions are also restricted by
our regulatory agencies, including the Federal Reserve Board. For a discussion
of the Federal Reserve Board regulations, please see "Transactions with
Affiliates and Insiders" on page 26. These transactions are not expected to
involve more than the normal risk of collectibility nor present other
unfavorable features. Loans to individual directors and officers must also
comply with the bank's lending policies, regulatory restrictions, and statutory
lending limits, and directors with a personal interest in any loan application
will be excluded from the consideration of such loan application. We intend for
all of our transactions with organizers or other affiliates to be on terms no
less favorable to the bank than could be obtained from an unaffiliated third
party and to be approved by a majority of our disinterested directors.
PURCHASE OF BANK SITE
Two of our directors, John Trask, III and Matt Trumps, are licensed real
estate brokers and were involved as buyer's brokers in securing the contract for
the purchase of the proposed main office facility for $900,000. The listing
agreement provided for a 10% commission to be paid by the seller and split
evenly between the listing broker and the buyer's brokers. Mr. Trask and Mr.
Trumps have agreed that the portion of the brokerage commission payable to the
buyer's brokers, $45,000, will be credited to Lowcountry National Bank at
closing, which will reduce the total capital outlay by the Bank to consummate
the purchase.
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DESCRIPTION OF CAPITAL STOCK OF COASTAL BANKING COMPANY
GENERAL
The authorized capital stock of Coastal Banking Company consists of
10,000,000 shares of common stock, par value $0.01 per share, and 10,000,000
shares of preferred stock, par value $0.01 per share. The following summary
describes the material terms of Coastal Banking Company's capital stock. For a
detailed description of the provisions summarized below please see the articles
of incorporation of Coastal Banking Company filed as an exhibit to the
Registration Statement of which this prospectus forms a part.
COMMON STOCK
Holders of shares of the common stock are entitled to receive such
dividends as may from time to time be declared by the board of directors out of
funds legally available for distribution. We do not plan to declare any
dividends in the immediate future. See "Dividend Policy" on page 12. Holders of
common stock are entitled to one vote per share on all matters on which the
holders of common stock are entitled to vote and do not have any cumulative
voting rights. Shareholders do not have preemptive, conversion, redemption, or
sinking fund rights. In the event of a liquidation, dissolution, or winding-up
of the company, holders of common stock are entitled to share equally and
ratably in the assets of the company, if any, remaining after the payment of all
debts and liabilities of the company and the liquidation preference of any
outstanding preferred stock. The outstanding shares of common stock are, and the
shares of common stock offered by the company hereby when issued will be, fully
paid and nonassessable. The rights, preferences and privileges of holders of
common stock are subject to any classes or series of preferred stock that the
company may issue in the future.
PREFERRED STOCK
Coastal Banking Company's articles of incorporation provide that the board
of directors may, without the approval of the shareholders, authorize and issue
preferred stock in one or more classes or series with designations, powers,
preferences, and relative, participating, optional and other rights,
qualifications, limitations, and restrictions as the directors may determine,
including the dividend rate, conversion rights, voting rights, redemption price,
and liquidation preference. Any preferred stock so issued may rank senior to the
common stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding-up, or both. In addition, any such shares of
preferred stock may have class or series voting rights. Upon completion of this
offering, we will not have any shares of preferred stock outstanding. Issuances
of preferred stock, while providing the company with flexibility in connection
with general corporate purposes, may, among other things, have an adverse effect
on the rights of holders of common stock (for example, the issuance of any
preferred stock with voting or conversion rights may adversely affect the voting
power of the holders of common stock), and in certain circumstances such
issuances could have the effect of decreasing the market price of the common
stock. Currently, we do not plan to issue any shares of preferred stock.
ANTI-TAKEOVER EFFECTS
The provisions of the articles, the bylaws, and South Carolina law
summarized in the following paragraphs may have anti-takeover effects and may
delay, defer, or prevent a tender offer or takeover attempt that a shareholder
might consider to be in such shareholder's best interest, including those
attempts that might result in a premium over the market price for the shares
held by shareholders, and may make removal of management more difficult.
Restriction on Bank Acquisition. Sections 34-25-50 and 34-25-240 of the
Code of Laws of South Carolina prohibit a company from acquiring Coastal Banking
Company or Lowcountry National Bank until the bank has been in existence and
continuous operation for five years.
Control Share Act. Coastal Banking Company has specifically elected to opt
out of a provision of South Carolina law which may deter or frustrate
unsolicited attempts to acquire certain South Carolina
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corporations. This statute, commonly referred to as the "Control Share Act"
applies to public corporations organized in South Carolina, unless the
corporation specifically elects to opt out. The Control Share Act generally
provides that shares of a public corporation acquired in excess of certain
specific thresholds will not possess any voting rights unless such voting rights
are approved by a majority vote of the corporation's disinterested shareholders.
Authorized but Unissued Stock. The authorized but unissued shares of
common stock and preferred stock will be available for future issuance without
shareholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions, and employee benefit plans. The existence of
authorized but unissued and unreserved shares of common stock and preferred
stock may enable the board of directors to issue shares to persons friendly to
current management, which could render more difficult or discourage any attempt
to obtain control of Coastal Banking Company by means of a proxy contest, tender
offer, merger or otherwise, and thereby protect the continuity of the company's
management.
Number of Directors. The bylaws provide that the number of directors shall
be fixed from time to time by resolution by at least a majority of the directors
then in office, but may not consist of fewer than five nor more than 25 members.
Initially, we will have thirteen directors.
Classified Board of Directors. Our articles and bylaws divide the board of
directors into three classes of directors serving staggered three-year terms. As
a result, approximately one-third of the board of directors will be elected at
each annual meeting of shareholders. The classification of directors, together
with the provisions in the articles and bylaws described below that limit the
ability of shareholders to remove directors and that permit the remaining
directors to fill any vacancies on the board of directors, will have the effect
of making it more difficult for shareholders to change the composition of the
board of directors. As a result, at least two annual meetings of shareholders
may be required for the shareholders to change a majority of the directors,
whether or not a change in the board of directors would be beneficial and
whether or not a majority of shareholders believe that such a change would be
desirable.
Number, Term, and Removal of Directors. We currently have thirteen
directors, but our bylaws authorize this number to be increased or decreased by
our board of directors. Our directors are elected to three year terms by a
plurality vote of our shareholders. Our bylaws provide that our shareholders, by
a majority vote of those entitled to vote in an election of directors, or our
board of directors, by a unanimous vote, excluding the director in question, may
remove a director with or without cause. Our bylaws provide that all vacancies
on our board may be filled by a majority of the remaining directors for the
unexpired term.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The bylaws establish advance notice procedures with regard to
shareholder proposals and the nomination, other than by or at the direction of
the board of directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of shareholder proposals
must be in writing and delivered to the secretary of the company no earlier than
30 days and no later than 60 days in advance of the annual meeting. Shareholder
nominations for the election of directors must be made in writing and delivered
to the secretary of the company no later than 90 days prior to the annual
meeting, and in the case of election to be held at a special meeting of
shareholders for the election of directors, the close of business on the seventh
day following the date on which notice of the meeting is first given to
shareholders. We may reject a shareholder proposal or nomination that is not
made in accordance with such procedures.
Nomination Requirements. Pursuant to the bylaws, we have established
certain nomination requirements for an individual to be elected as a director,
including that the nominating party provide (i) notice that such party intends
to nominate the proposed director; (ii) the name of and certain biographical
information on the nominee; and (iii) a statement that the nominee has consented
to the nomination. The chairman of any shareholders' meeting may, for good cause
shown, waive the operation of these provisions. These provisions could reduce
the likelihood that a third party would nominate and elect individuals to serve
on the board of directors.
37
<PAGE> 39
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 870,000 shares of common
stock outstanding, or 1,000,000 shares if the underwriter exercises its
over-allotment option in full. The shares sold in this offering will be freely
tradable, without restriction or registration under the Securities Act of 1933,
except for shares purchased by "affiliates" of Coastal Banking Company, which
will be subject to resale restrictions under the Securities Act of 1933. An
affiliate of the issuer is defined in Rule 144 under the Securities Act of 1933
as a person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the issuer. Rule 405
under the Securities Act of 1933 defines the term "control" to mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of the person whether through the ownership of
voting securities, by contract or otherwise. Directors and executive officers
will be deemed to be affiliates. These securities held by affiliates may be sold
without registration in accordance with the provisions of Rule 144 or another
exemption from registration.
In general, under Rule 144, an affiliate of the company or a person holding
restricted shares may sell, within any three-month period, a number of shares no
greater than 1% of the then outstanding shares of the common stock or the
average weekly trading volume of the common stock during the four calendar weeks
preceding the sale, whichever is greater. Rule 144 also requires that the
securities must be sold in "brokers' transactions," as defined in the Securities
Act of 1933, and the person selling the securities may not solicit orders or
make any payment in connection with the offer or sale of securities to any
person other than the broker who executes the order to sell the securities. This
requirement may make the sale of the common stock by affiliates of Coastal
Banking Company pursuant to Rule 144 difficult if no trading market develops in
the common stock. Rule 144 also requires persons holding restricted securities
to hold the shares for at least one year prior to sale.
38
<PAGE> 40
UNDERWRITING
Pursuant to the terms and conditions of the Underwriting Agreement, the
underwriter named below has agreed to purchase from the Company the number of
shares of common stock set forth below.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNDERWRITER FIRM SHARES OVER-ALLOTMENT SHARES
- ----------- ----------- ---------------------
<S> <C> <C>
Edgar M. Norris & Co., Inc.................................. 870,000 130,000
</TABLE>
Pursuant to the Underwriting Agreement, Coastal Banking Company has the
right to direct the underwriter to offer and sell up to 275,000 shares of the
common stock to the organizers, directors, and executive officers of Coastal
Banking Company, and to other investors recommended by the organizers, directors
and executive officers. The underwriting discount has been calculated on the
basis of a commission rate of 7.0% provided that there will be no underwriting
discount in connection with the sale of common stock actually purchased by the
directors, executive officers, and recommended investors. Coastal Banking
Company will pay to the underwriter a financial advisory fee of $95,000. If the
number of shares of common stock purchased by directors, executive officers, and
recommended investors is less that 275,000 shares, the financial advisory fee
will be equal to the amount determined by multiplying 95,000 by a fraction the
numerator of which is the total number of shares of common stock purchased by
directors, executive officers, and recommended investors and the denominator of
which is 275,000.
Pursuant to the Underwriting Agreement, Coastal Banking Company has agreed
to reimburse the underwriter for certain expenses, including (i) the fees and
expenses incident to securing the required review by the NASD of the terms of
the sale of the common stock in the offering, (ii) the fees and expenses of
counsel for the underwriter in connection with such review, (iii) the other fees
and expenses of counsel to the underwriter up to an amount of $40,000, and (iv)
all miscellaneous and travel fees and expenses of the underwriter and all
expenses of any information meetings associated with the sale of the common
stock.
The Underwriting Agreement provides that obligations of the underwriter are
subject to approval of certain legal matters by counsel and to various other
conditions customary in a firm commitment underwritten public offering,
including the absence of any material change in Coastal Banking Company's
business and the receipt of certain certificates, opinions, and letters from
Coastal Banking Company and its counsel and independent public accountant. The
underwriter is required to purchase and pay for the shares offered by this
prospectus other than those covered by the over-allotment option described
below.
The underwriter proposes to offer the shares of common stock directly to
the public at the public offering price set forth on the cover page of this
prospectus and to certain securities dealers at the price less a concession not
in excess of $.40 per share. The underwriter may allow, and the selected dealers
may reallow, a concession not in excess of $.10 per share to certain other
broker and dealers. We expect that the shares of common stock will be ready for
delivery on or about , 1999. After the offering, the offering price and
other selling terms may change.
Coastal Banking Company has granted the underwriter an option, exercisable
within 30 days after the date of this prospectus, to purchase up to 130,000
additional shares of common stock to cover over-allotments, if any, at the
public offering price listed on the cover page of this prospectus, less the 7.0%
underwriting discount. The underwriter may purchase these shares only to cover
over-allotments made in connection with this offering.
The underwriter does not intend to sell shares of common stock to any
account over which it exercises discretionary authority.
Coastal Banking Company has agreed to indemnify the underwriter against
certain liabilities, including liabilities under the Securities Act of 1933, as
currently in effect, or to contribute to payments that the underwriter may be
required to make in connection with these liabilities.
Coastal Banking Company, and each of its directors, executive officers, and
organizers have agreed with the underwriter that they will not offer, sell,
contract to sell, or otherwise dispose of any shares of
39
<PAGE> 41
common stock or any securities that can be converted into or exchanged for
shares of common stock for a period of 180 days from the date of this prospectus
without the underwriter's prior written consent, except in limited
circumstances. The underwriter may on occasion be a customer of, engage in
transactions with, and perform services for us and Lowcountry National Bank in
the ordinary course of business.
Coastal Banking Company has also agreed to pay the underwriter a financial
advisory fee of 2% of the amount received from any transaction completed by
Coastal Banking Company prior to the completion of this offering in which
Coastal Banking Company or its shareholders sells or agrees to sell more than
25% of its outstanding stock or more than 25% of its assets.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Coastal Banking Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta,
Georgia. Certain legal matters related to this offering will be passed upon for
the underwriter by Long Aldridge & Norman LLP, Atlanta, Georgia.
EXPERTS
Coastal Banking Company's financial statements dated August 24, 1999 and
for the period from September 29, 1998 (inception), until June 30, 1999 have
been audited by Tourville, Simpson & Henderson, L.L.P., as stated in their
report appearing elsewhere herein, and have been so included in reliance on the
report of this firm given upon their authority as an expert in accounting and
auditing.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-2 (together
with all amendments, exhibits, schedules and supplements thereto, the
"Registration Statement"), under the Securities Act of 1933 and the rules and
regulations thereunder, for the registration of the common stock offered hereby.
This prospectus, which forms a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement. For
further information with respect to Coastal Banking Company, Lowcountry National
Bank, and the common stock, you should refer to the Registration Statement and
the exhibits thereto.
You can examine and obtain copies of the Registration Statement at the
Public Reference Section of the SEC, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site at http://www.sec.gov that contains all of the reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC using the EDGAR filing system, including
Coastal Banking Company.
We have filed or will file various applications with the Office of the
Comptroller of the Currency and the FDIC. You should only rely only on
information in this prospectus and in our related Registration Statement in
making an investment decision. Other available information may be inconsistent
with information in this prospectus, including information in public files or
provided by the Office of the Comptroller of the Currency and the FDIC. This
prospectus supersedes all other available information. Projections appearing in
the applications to such agencies were based on assumptions that the organizers
believed were reasonable at the time, but which may have changed or otherwise be
wrong. Coastal Banking Company and Lowcountry National Bank specifically
disclaim all projections for purposes of this prospectus and caution prospective
investors against placing reliance on them for purposes of making an investment
decision. Statements contained in this prospectus regarding the contents of any
contract or other document referred to are not necessarily complete. If such
contract or document is an exhibit to the Registration Statement, you may obtain
and read such document or contract for more information.
40
<PAGE> 42
As a result of this offering, Coastal Banking Company will become a
reporting company subject to the full informational requirements of the
Securities Exchange Act of 1934. We will fulfill our obligations with respect to
such requirements by filing periodic reports and other information with the SEC.
We will furnish our shareholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each fiscal year containing unaudited summary financial information. Our fiscal
year ends on December 31.
41
<PAGE> 43
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Accountants' Report............................. F-2
Financial Statements:
Balance Sheet as of June 30, 1999......................... F-3
Statement of Operations and Accumulated Deficit For the
Period September 29, 1998 to June 30, 1999............. F-4
Statement of Changes in Stockholders' Equity (deficit) For
the Period September 29, 1998 to June 30, 1999......... F-5
Statement of Cash Flows For the Period September 29, 1998
to June 30, 1999....................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 44
INDEPENDENT ACCOUNTANTS' REPORT
To the Organizers
Coastal Banking Company, Inc.
We have audited the accompanying balance sheet of Coastal Banking Company,
Inc., (a Company in the development stage) as of June 30, 1999 and related
statements of operations and accumulated deficit, stockholders' equity and cash
flows for the period from inception September 29, 1998 to June 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Coastal Banking Company,
Inc., (a Company in the development stage) as of June 30, 1999, and the results
of its operations and its cash flows for the period from inception September 29,
1998 to June 30, 1999 in conformity with generally accepted accounting
principles.
/s/ TOURVILLE, SIMPSON & HENDERSON,
L.L.P.
--------------------------------------------
Tourville, Simpson & Henderson, L.L.P.
Columbia, South Carolina
August 24, 1999
F-2
<PAGE> 45
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 18,805
Premises and equipment...................................... 37,532
---------
Total assets...................................... $ 56,337
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Borrowings.................................................. $ 201,000
---------
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; 10,000,000 shares
authorized; 10 shares issued and outstanding.............. --
Preferred stock -- 10,000,000 shares authorized and
unissued, par value $.01 per share........................ --
Paid-in-capital............................................. 100
Deficit accumulated in the development stage................ (144,763)
---------
Total stockholders' equity (deficit).............. (144,663)
---------
Total liabilities and stockholders' equity........ $ 56,337
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 46
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD SEPTEMBER 29, 1998 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<S> <C>
INCOME...................................................... $ --
---------
EXPENSES
Interest.................................................. 3,066
Salaries and employee benefits............................ 31,620
Consultant fees........................................... 75,855
Professional fees......................................... 5,166
Application fee........................................... 17,400
Other..................................................... 11,656
---------
Total expenses.................................... 144,763
---------
Net loss and accumulated deficit.................. $(144,763)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 47
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 29, 1998 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED IN
--------------- PAID-IN THE DEVELOP-
SHARES AMOUNT CAPITAL MENT STAGE TOTAL
------ ------ ------- -------------- ---------
<S> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK....................... 10 $ -- $100 $ $ 100
Net loss for the period September 29, 1998 to
June 30, 1999................................ (144,763) (144,763)
----- ------ ---- --------- ---------
BALANCE, JUNE 30, 1999......................... 10 $ -- $100 $(144,763) $(144,663)
===== ====== ==== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 48
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 29, 1998 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss and accumulated deficit....................... $(144,763)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of premises and equipment.................. (37,532)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings.................................. 201,000
Issuance of common stock.................................. 100
---------
Cash provided by financing activities..................... 201,100
---------
CASH BALANCE AT END OF PERIOD............................... $ 18,805
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 49
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Coastal Banking Company, Inc. (the Company) was formed to organize and own
all of the capital stock of Lowcountry National Bank (the Bank), a proposed
national bank to be located in Beaufort County, South Carolina, by a group of
thirteen individuals (the Organizers). Upon receipt of required regulatory
approvals, the proposed bank will engage in general banking. The Organizers have
filed applications with the Office of The Comptroller of the Currency to obtain
a national bank charter and with the Federal Deposit Insurance Corporation
(FDIC) for deposit insurance. Provided the necessary capital is raised and the
necessary regulatory approvals are received, it is expected that operations will
commence in the fourth quarter of 1999 or the first quarter of 2000. All of the
Organizers will serve on the initial board of directors.
The Company plans to raise a minimum of $8,700,000 by offering for sale
870,000 shares of its common stock. The organizers, directors, and members of
their immediate families expect to purchase a total of 202,000 shares at an
aggregate purchase price of approximately $2,020,000.
Organizational and Pre-Opening Costs
Activities since inception have consisted of organizational activities
necessary to obtain regulatory approvals and preparation activities to commence
business as a commercial bank. Organizational costs are primarily legal fees,
consulting fees, and application fees related to the incorporation and initial
organization of the Bank. Pre-opening costs are primarily employees' salaries
and benefits, temporary occupancy expense and other operational expenses related
to the preparation for the Bank's opening. The organizational and pre-opening
costs will be charged against the Bank's initial period's operating results.
It is estimated the Bank will incur approximately $407,000 in
organizational and pre-opening costs.
Offering Expenses
Offering expenses, consisting principally of direct incremental costs of
the public stock offering, will be deducted from the proceeds of the offering.
These expenses are estimated to be approximately $631,500.
NOTE 2 PREMISES AND EQUIPMENT
The Company has entered into a contract to purchase its proposed main
office facility for $900,000. As of June 30, 1999, $30,000 of the purchase price
had been paid with the balance being due on the closing date, which cannot be
later than January 22, 2000.
Two of the Company's directors, John Trask, III and Matt Trumps, are
licensed real estate brokers and were the buyer's agents in securing the
contract for the purchase of the office facility. They are to receive a $45,000
commission from the seller which will be credited to the Bank on the closing
date. This will reduce the Bank's investment in the proposed office facility to
$855,000.
NOTE 3 BORROWINGS
As of June 30, 1999, borrowings consist of $201,000 drawn on a $500,000
unsecured line of credit obtained from The Bankers' Bank of Atlanta, Georgia.
The Organizers have individually guaranteed the line of credit. Interest is
payable monthly, at the prime rate minus 1/2 percent, with the principal being
due on April 1, 2000. The line of credit is being used to fund the Bank's
organizational and pre-opening costs.
F-7
<PAGE> 50
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 STOCKHOLDERS' EQUITY
Common stock
Coastal Banking Company, Inc. has the authority to issue up to 10,000,000
shares of voting common stock, par value $.01 per share.
Preferred stock
Coastal Banking Company, Inc. has the authority to issue up to 10,000,000
shares of preferred stock, par value $.01 per share. Also, Coastal Banking
Company, Inc. has the right to establish and designate from time to time any
part or all of the shares by filing an amendment to Coastal Banking Company,
Inc.'s Articles of Incorporation, which is effective without shareholder action,
in such series and with such preferences, limitations, and relative rights as
may be determined by the Board of Directors. The number of authorized shares of
preferred stock may be increased or decreased by the affirmative vote of the
holders of the majority of the shares of common stock, without a vote of the
holders of the shares of preferred stock.
Cumulative voting rights
Coastal Banking Company, Inc. has elected not to have cumulative voting,
and no shares issued by Coastal Banking Company, Inc. may be cumulatively voted.
Preemptive rights
The stockholders of Coastal Banking Company, Inc. shall not have any
preemptive rights regarding any issuance of Coastal Banking Company, Inc.'s
capital stock.
Stock Offering
Upon receiving preliminary regulatory approvals, the Company, through its
underwriter, Edgar M. Norris & Co., Inc., plans to offer for sale to the general
public 870,000 shares of $.01 par value common stock at an offering price of
$10.00 per share. Edgar M. Norris has the right to exercise its over-allotment
option to purchase up to an additional 130,000 shares of common stock at $10.00
per share, less its discount of $.70 per share, and offer these shares to the
public. The total aggregate amount that is anticipated to be raised from the
public stock offering is $8,700,000 or $10,000,000 in the event the underwriter
exercises its over-allotment. The Organizers intend to purchase an aggregate of
202,000 shares of common stock to be sold in the offering which represent 23.22%
of the offering. The Organizers will receive one stock warrant for each share of
common stock purchased in the offering, provided that they may not receive more
than a total of 202,000 shares. The exercise price for the warrants will be
$10.00 per share and may be exercised over a ten (10) year period. The warrants
will be subject to certain conditions and limitations.
NOTE 5 STOCK OPTIONS
The Company has entered into an agreement with a consultant to assist with
the formation of the Bank. As part of the consultant's fee, he was granted
options to purchase 10,000 shares of the Company's common stock for $10 per
share. The options are for a ten year period beginning with the date of the
public stock offering referred to in Note 4 above.
F-8
<PAGE> 51
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 INCOME TAXES
As of June 30, 1999, Coastal Banking Company, Inc. had a net operating loss
carryforward of $144,763.
There was no provision (benefit) for income taxes for the period from
September 29, 1998 to June 30, 1999, since a 100% valuation reserve is being
maintained for the net operating loss carryforward.
NOTE 7 EMPLOYMENT CONTRACT
Coastal Banking Company, Inc. has entered into a five-year employment
contract with its President beginning August 12, 1999. Subject to certain
conditions, at the end of each year of the contract, the contract shall be
extended for an additional year so that the remaining term of the contract shall
continue to be five years. The contract provides that the President will receive
an initial annual salary of $96,000, and shall receive a minimum annual increase
equal to the increase in the Consumer Price Index.
The contract provides that the President shall receive a $10,000 cash bonus
on the date the Bank opens for business and shall be eligible to receive an
annual cash bonus not to exceed 5% of the Bank's pretax income if the Bank
achieves certain performance levels established by the board of directors.
Additionally, the President will receive other benefits including being
eligible for the grant of stock options. Upon the adoption of a stock option
plan the President will be granted the option to purchase 5% of the Company's
common stock sold in the stock offering.
NOTE 8 DATA PROCESSING
Like many financial institutions, Coastal Banking Company, Inc. will rely
upon computers for the daily conduct of its business and for information
processing. There is concern among industry experts that on January 1, 2000
computers will be unable to "read" the new year and there may be widespread
computer malfunctions. Generally, Coastal Banking Company, Inc. will be relying
on software and hardware developed by independent third parties for its
information systems.
Presently, the Company is in the process of evaluating various options for
data processing and has not entered into any agreements for the purchase of
software or hardware. Management intends to take all necessary precautions to
ensure that the information systems it acquires will be Year 2000 compliant.
F-9
<PAGE> 52
- ------------------------------------------------------
- ------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE
NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE
INFORMATION IN THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF THE DATE ON THE
COVER, BUT THE INFORMATION MAY CHANGE IN THE FUTURE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 10
Capitalization........................ 12
Dividend Policy....................... 12
Plan of Operation..................... 13
Proposed Business..................... 16
Supervision and Regulation............ 23
Management............................ 30
Certain Relationships and Related
Transactions........................ 35
Description of Capital Stock.......... 36
Underwriting.......................... 39
Legal Matters......................... 40
Experts............................... 40
Additional Information................ 40
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , ALL DEALERS THAT EFFECT TRANSACTION IN THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITER, AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
870,000 SHARES
COASTAL BANKING
COMPANY, INC.
A PROPOSED BANK HOLDING
COMPANY FOR
LOWCOUNTRY LOGO
(PROPOSED)
COMMON STOCK
--------------------
PROSPECTUS
--------------------
EDGAR M. NORRIS & CO., INC.
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 53
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Coastal Banking Company's articles of incorporation contain a provision
which, subject to certain limited exceptions, limits the liability of a director
to Coastal Banking Company or its shareholders for any breach of duty as a
director. There is no limitation of liability for: a breach of duty involving
appropriation of a business opportunity of Coastal Banking Company; an act or
omission which involves intentional misconduct or a knowing violation of law;
any transaction from which the director derives an improper personal benefit; or
as to any payments of a dividend or any other type of distribution that is
illegal under Section 33-8-330 of the South Carolina Business Corporation Act of
1988 (The "Corporation Act"). In addition, if at any time the Corporation Act
shall have been amended to authorize further elimination or limitation of the
liability of director, then the liability of each director of Coastal Banking
Company shall be eliminated or limited to the fullest extent permitted by such
provisions, as so amended, without further action by the shareholders, unless
the provisions of the Corporation Act require such action. The provision does
not limit the right of Coastal Banking Company or its shareholders to seek
injunctive or other equitable relief not involving payments in the nature of
monetary damages.
Coastal Banking Company's bylaws contain certain provisions which provide
that the company shall indemnify directors to the maximum extent provided by
South Carolina law. This protection is broader than the protection expressly
mandated in Sections 33-8-510 and 33-8-520 of the South Carolina Business
Corporation Act. These statutory sections provide that a company shall indemnify
a director or an officer only to the extent that he has been wholly successful,
on the merits or otherwise, in the defense of any action or proceeding brought
by reason of the fact that the person was a director or officer. This
requirement would include indemnifying directors against expenses, including
attorney's fees, actually and reasonably incurred in connection with the matter.
In addition to this mandatory indemnification right, our bylaws provide
additional mandatory protection that includes, but is not limited to, situations
where the director (a) conducted himself in good faith, (b) reasonably believed
that conduct in his official capacity with the corporation was either in the
corporation's best interest or was not opposed to the best interest of the
corporation; and (c) that he had no reasonable cause to believe his conduct was
unlawful.
Our board of directors also has the authority to extend to officers,
employees, and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The board of directors
intends to extend indemnification rights to all of its executive officers.
The Securities and Exchange Commission has informed us that indemnification
for officers, directors, and controlling persons for liabilities arising under
the Securities Act of 1933 is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable.
We have the power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent against any
liability asserted against him or incurred by him in any such capacity, whether
or not we would have the power to indemnify him against such liability under the
bylaws.
II-1
<PAGE> 54
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting commissions) of the sale of the
shares of common stock are as follows:
<TABLE>
<S> <C>
Registration Fee............................................ $ 3,342
NASD Filing Fee............................................. 1,334
Printing and Engraving...................................... 30,000
Legal Fees and Expenses..................................... 50,000
Accounting Fees............................................. 5,000
Blue Sky Fees and Expenses.................................. 15,000
Miscellaneous Disbursements................................. 15,324
--------
TOTAL............................................. $120,000
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
From inception, Coastal Banking Company has issued a total of ten shares of
its common stock to one of its organizers. The price per share was $10.00 for a
total purchase price of $100.00. There were no underwriting discounts or
commissions paid with respect to these transactions. These shares will be
redeemed at $10.00 per share after the offering. All sales were exempt under
Section 4(2) of the Securities Act of 1933.
ITEM 27. EXHIBITS.
<TABLE>
<C> <C> <S>
1.1* -- Form of Underwriting agreement between Coastal Banking
Company and Edgar M. Norris & Co., Inc.
3.1* -- Articles of Incorporation
3.2* -- Amended and Restated Articles of Incorporation
3.3* -- Bylaws
4.1* -- See Exhibits 3.1, 3.2 and 3.3 for provisions in Coastal
Banking Company's Articles of Incorporation and Bylaws
defining the rights of holders of the common stock
4.2* -- Form of certificate of common stock
5.1* -- Opinion Regarding Legality
10.1* -- Employment Agreement dated August 12, 1999 between Coastal
Banking Company and Randolph C. Kohn
10.2* -- Purchase and Sale Agreement dated February 2, 1999 between
Lowcountry National Bank and Sterling Graydon and Helene
Dowling.
10.3* -- Line of Credit Agreement with The Banker's Bank dated April
1, 1999.
10.5* -- Form of Stock Warrant Agreement
23.1 -- Consent of Independent Public Accountants
23.2* -- Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(appears in its opinion filed as Exhibit 5.1)
24.1* -- Power of Attorney (filed as part of the signature page to
the Registration Statement)
27.1* -- Financial Data Schedule (for electronic filing purposes)
</TABLE>
- ---------------
* Previously filed
II-2
<PAGE> 55
ITEM 28. UNDERTAKINGS.
The undersigned Company will:
(a)(1) File, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of Coastal Banking Company pursuant to the
provisions described in Item 24 above, or otherwise, Coastal Banking
Company has been advised that in the opinion of the SEC for matters under
the securities laws, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
If a claim for indemnification against such liabilities (other than the
payment by Coastal Banking Company of expenses incurred or paid by a director,
officer or controlling person of Coastal Banking Company in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, Coastal Banking Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-3
<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Beaufort, State of South
Carolina, on October 25, 1999.
COASTAL BANKING COMPANY, INC.
By: /s/ RANDOLPH C. KOHN
------------------------------------
Randolph C. Kohn
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Randolph C. Kohn and he is the true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director October 25, 1999
- -----------------------------------------------------
Marjorie Trask Gray, DMD
* Director October 25, 1999
- -----------------------------------------------------
Dennis O. Green, CPA
* Director October 25, 1999
- -----------------------------------------------------
Mark B. Heles
* Director October 25, 1999
- -----------------------------------------------------
J. Phillip Hodges, Jr.
* Director October 25, 1999
- -----------------------------------------------------
James W. Holden, Jr., DVM
* Director, Chairman of the October 25, 1999
- ----------------------------------------------------- Board
Ladson F. Howell
* Director October 25, 1999
- -----------------------------------------------------
James C. Key
</TABLE>
II-4
<PAGE> 57
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RANDOLPH C. KOHN Director, President and Chief October 25, 1999
- ----------------------------------------------------- Executive Officer (principal
Randolph C. Kohn executive officer)
* Director October 25, 1999
- -----------------------------------------------------
Ron Lewis
* Senior Vice President and October 25, 1999
- ----------------------------------------------------- Chief Financial Officer
Charlie T. Lovering (principal financial and
accounting officer)
* Director October 25, 1999
- -----------------------------------------------------
Lila N. Meeks
* Director October 25, 1999
- -----------------------------------------------------
Robert B. Pinkerton
* Director October 25, 1999
- -----------------------------------------------------
John M. Trask, III
* Director October 25, 1999
- -----------------------------------------------------
Matt A. Trumps
/s/ RANDOLPH C. KOHN
- -----------------------------------------------------
*As Attorney-in Fact*
</TABLE>
II-5
<PAGE> 58
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C> <C>
1.1* -- Form of Underwriting agreement between Coastal Banking
Company and Edgar M. Norris & Co., Inc......................
3.1* -- Articles of Incorporation...................................
3.2* -- Amended and Restated Articles of Incorporation..............
3.3* -- Bylaws......................................................
4.1* -- See Exhibits 3.1, 3.2 and 3.3 for provisions in Coastal
Banking Company's Articles of Incorporation and Bylaws
defining the rights of holders of the common stock..........
4.2* -- Form of certificate of common stock.........................
5.1* -- Opinion Regarding Legality..................................
10.1* -- Employment Agreement dated August 12, 1999 between Coastal
Banking Company and Randolph C. Kohn........................
10.2* -- Purchase and Sale Agreement dated February 2, 1999 between
Lowcountry National Bank and Sterling Graydon and Helene
Dowling.....................................................
10.3* -- Line of Credit Agreement with The Banker's Bank dated April
1, 1999.....................................................
10.5* -- Form of Stock Warrant Agreement.............................
23.1 -- Consent of Independent Public Accountants...................
23.2* -- Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(appears in its opinion filed as Exhibit 5.1)...............
24.1* -- Power of Attorney (filed as part of the signature page to
the Registration Statement).................................
27.1* -- Financial Data Schedule (for electronic filing purposes)....
</TABLE>
- ---------------
* Previously filed
<PAGE> 1
EXHIBIT 23.1
TOURVILLE, SIMPSON & HENDERSON, L.L.P
CERTIFIED PUBLIC ACCOUNTANTS
Columbia, South Carolina
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
We hereby consent to the inclusion of our report dated August 24, 1999 on
the financial statements of Coastal Banking Company, Inc., at June 30, 1999 and
for the period then ended, in Amendment #2 to the Form SB-2 Registration
Statement as filed by Coastal Banking Company, Inc., under the Securities Act
of 1933 and the reference to us under the caption "Experts" in the same Form
SB-2 Registration Statement.
/s/ Tourville, Simpson & Henderson, L.L.P.
------------------------------------------
Tourville, Simpson & Henderson, L.L.P.
Columbia, South Carolina
October 26, 1999
