SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ____________)
FILED BY THE REGISTRANT x
FILED BY A PARTY OTHER THAN THE REGISTRANT
CHECK THE APPROPRIATE BOX:
PRELIMINARY PROXY STATEMENT
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
X DEFINITIVE PROXY STATEMENT
DEFINITIVE ADDITIONAL MATERIALS
SOLICITING MATERIAL PURSUANT TO RULE 14A-11(C) OR RULE 14A-12
COASTAL BANCORP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN THE CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT))
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
X NO FEE REQUIRED.
FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(I)(1) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
_____________________________________
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
_____________________________________
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE
ACT RULE 0-11: (SET FORTH THE AMOUNT ON WHICH THE FILING FEE IS
CALCULATED AND STATE HOW IT WAS DETERMINED):
_____________________________________
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
_____________________________________
(5) TOTAL FEE PAID:
_____________________________________
FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS:
CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT
RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS PAID
PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR
THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
_____________________________________
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
_____________________________________
(3) FILING PARTY:
_____________________________________
(4) DATE FILED:
_____________________________________
March 24, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of the
stockholders of Coastal Bancorp, Inc. (the "Company"). The meeting will be
held at the corporate offices of Coastal Bancorp, Inc., at 5718 Westheimer,
Houston, Texas in the Coastal Banc auditorium, Suite 1101, on Thursday, April
23, 1998, at 11:00 a.m., Central Time.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. Stockholders will vote to
elect directors and ratify the Company's independent auditors. The Company's
Board of Directors believes that these proposals are in the best interest of
the Company and its stockholders and recommends that stockholders vote "for"
them at the Annual Meeting. Directors and officers of the Company and
representatives of the Company's independent auditors will be present to
respond to any questions that our stockholders may have.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend
the meeting in person. Let me urge you to mark, sign and date your proxy card
today and return it in the postage paid envelope provided, even if you plan to
attend the Annual Meeting. This will not prevent you from voting in person,
but will ensure that your vote is counted if you are unable to attend.
Your continued support and interest in Coastal Bancorp, Inc. is
appreciated.
Sincerely,
/s/ Manuel J. Mehos
--------------------------
Manuel J. Mehos
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
COASTAL BANCORP, INC.
COASTAL BANC PLAZA
5718 WESTHEIMER, SUITE 600
HOUSTON, TEXAS 77057
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Coastal Bancorp, Inc. (the "Company") will be held at the
corporate offices of Coastal Bancorp, Inc., at 5718 Westheimer, Suite 1101,
Houston, Texas at 11:00 a.m., Central Time, on April 23, 1998 for the
following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To elect three directors of the Company to serve until the annual
meeting of stockholders in the year 2001 and until their successors are
elected and qualified;
(2) To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending December 31, 1998;
and,
(3) To transact such other business as may properly come before the
Annual Meeting, or any adjournment or postponement thereof. Except with
respect to procedural matters incident to the conduct of the Annual Meeting,
management of the Company is not aware of any matters other than those set
forth above which may properly come before the Annual Meeting.
The Board of Directors has fixed February 26, 1998 for the determination
of stockholders entitled to notice of, and to vote at, the Annual Meeting and
any adjournment or postponement thereof. Only those stockholders of record as
of the close of business on that date will be entitled to vote at the Annual
Meeting or at any such adjournment or postponement.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ Linda B. Frazier
---------------------------
Linda B. Frazier
Secretary
Houston, Texas
March 24, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU
PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING,
YOU MAY VOTE IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
COASTAL BANCORP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to the holders of the common stock,
$.01 par value per share (the "Common Stock") of Coastal Bancorp, Inc. (the
"Company") in connection with the solicitation of proxies on behalf of the
Board of Directors of the Company, to be used at the Annual Meeting of
Stockholders to be held at the corporate offices of Coastal Bancorp, Inc., at
5718 Westheimer, Houston, Texas in the Coastal Banc auditorium, Suite 1101, at
11:00 a.m., Central Time, on April 23, 1998 and at any adjournment or
postponement thereof for the purposes set forth in the Notice of Annual
Meeting of Stockholders. This Proxy Statement is expected to be mailed to
stockholders on or about March 24, 1998.
Each proxy solicited hereby, if properly signed and returned to the
Company, will be voted in accordance with the instructions contained therein
if it is not revoked prior to its use. IF NO CONTRARY INSTRUCTIONS ARE GIVEN,
EACH PROXY RECEIVED WILL BE VOTED: (I) FOR THE ELECTION OF THE BOARD'S
NOMINEES AS DIRECTORS OF THE COMPANY; (II) FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1998; AND (III) UPON THE TRANSACTION OF
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING, IN
ACCORDANCE WITH THE BEST JUDGMENT OF THE PERSONS APPOINTED AS PROXIES. ANY
HOLDER OF COMMON STOCK WHO RETURNS A SIGNED PROXY BUT FAILS TO PROVIDE
INSTRUCTIONS AS TO THE MANNER IN WHICH SUCH SHARES ARE TO BE VOTED WILL BE
DEEMED TO HAVE VOTED IN FAVOR OF THE MATTERS SET FORTH IN THE PRECEDING
SENTENCE.
Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Company written
notice of revocation thereof (Linda B. Frazier, Coastal Bancorp, Inc., Coastal
Banc Plaza, 5718 Westheimer, Suite 600, Houston, Texas 77057), (ii) submitting
a duly executed proxy bearing a later date; or (iii) by appearing at the
Annual Meeting and giving the Secretary notice of his or her intention to
vote in person. Proxies solicited hereby may be exercised only at the Annual
Meeting and any adjournment or postponement thereof and will not be used for
any other meeting.
<PAGE>
BACKGROUND INFORMATION
ON
COASTAL BANCORP, INC.
AND
SUBSIDIARIES
Coastal Bancorp, Inc. was incorporated in Texas in March 1994 in
connection with the reorganization of Coastal Banc Savings Association (the
"Association") into the holding company form of organization, which occurred
on July 29, 1994. In addition, effective July 29, 1994, the Association,
which had been a Texas-chartered savings and loan association, converted to a
Texas-chartered savings bank known as Coastal Banc ssb (the "Bank").
Effective November 30, 1996, the Bank engaged in a further holding company
reorganization whereby Coastal Banc Holding Company, Inc., a Delaware
corporation ("HoCo"), became a first-tier wholly-owned subsidiary of the
Company. As a result of these reorganizations, the Company owns 100% of the
voting stock of HoCo and HoCo owns 100% of the voting stock of the Bank. In
addition, HoCo owns 100% of the stock of Coastal Banc Capital Corp. ("CBCC").
HoCo has no operations other than holding the voting common stock of CBCC and
the Bank. The 9.0% Noncumulative Preferred Stock, Series A, issued by the
Association on October 21, 1993 continues to represent, on a share for share
basis, the 9.0% Noncumulative Preferred Stock, Series A, of the Bank. Coastal
Bancorp, Inc. is a registered unitary savings and loan holding company
regulated by the Office of Thrift Supervision.
VOTING SECURITIES AND BENEFICIAL
OWNERSHIP THEREOF
Only holders of record of the Company's Common Stock at the close of
business on February 26, 1998 ("Record Date") will be entitled to notice of,
and to vote at, the Annual Meeting. On the Record Date, there were 5,035,035
shares of Common Stock outstanding and the Company had no other class of
equity securities outstanding. Only holders of Company Common Stock will be
entitled to vote at the Annual Meeting and each share of Common Stock will be
entitled to one vote on all matters properly presented. Stockholders of the
Company are not permitted to cumulate their votes for the election of
directors.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute
a quorum at the Annual Meeting. Directors will be elected by a plurality of
the votes cast at the Annual Meeting. The affirmative vote of a majority of
the total votes present at the Annual Meeting is required for approval of the
proposal to ratify the appointment of the Company's independent auditors.
Abstentions will be counted for purposes of determining the presence of a
quorum at the Annual Meeting. Because of the required votes, abstentions will
have the same effect as a vote against the proposal to ratify the appointment
of the Company's independent auditors, but will not be counted as votes cast
for the election of directors and, thus, will have no effect on the voting for
the election of directors. Under the applicable rules, all of the proposals
for consideration at the Annual Meeting are considered "discretionary" items
upon which brokerage firms may vote in their discretion on behalf of their
clients if such clients have not furnished voting instructions. Thus, there
are no proposals to be considered at the Annual Meeting which are considered
"non-discretionary" and for which there will be "broker non-votes".
At February 26, 1998, directors, executive officers and their affiliates
beneficially owned 1,045,718 shares of Common Stock or 20.12% of the total
shares of Common Stock outstanding on such date. It is anticipated that all
of such shares will be voted for the election of the nominees of the Company's
Board of Directors and in favor of all of the proposals of the Board described
herein.
The following table sets forth the beneficial ownership of the Common
Stock as of February 26, 1998, with respect to (i) any person or entity who is
known to the Company to be the beneficial owner of 5% or more of the Common
Stock; (ii) each nominee for director; (iii) each director of the Company;
(iv) each of the executive officers named in the summary compensation table
(see "Executive Compensation - Summary Compensation Table") and (v) all
directors and executive officers of the Company and its subsidiary, Coastal
Banc ssb, as a group. The address for all directors and executive officers of
the Company and the Bank is Coastal Banc Plaza, 5718 Westheimer, Suite 600,
Houston, Texas 77057. Except as set forth below, as of February 26, 1998, the
Company was aware of no other person or entity unaffiliated with the Company
that was the beneficial owner of 5% or more of the Common Stock.
<PAGE>
<TABLE>
<CAPTION>
Amount of Shares of
Common Stock
Name Beneficially Owned
(and Address) of as of February 26, Percent of
Beneficial Owner 1998(1) Class
- ----------------------------------------- -------------------- --------
<S> <C> <C>
First Manhattan Co.. . . . . . . . . . . . . 481,010(2) 9.26%
437 Madison Avenue
New York, New York 10022
Friedman, Billings, Ramsey Group, Inc. . . . 410,625(2) 7.90
1001 19th Street North
Arlington, Virginia 22209-1710
Robert Edwin Allday, Director. . . . . . . . 0(3) *
Coastal Bancorp, Inc. and Coastal Banc ssb
D. Fort Flowers, Jr., Director . . . . . . . 179,880(4) 3.46
Coastal Bancorp, Inc. and Coastal Banc ssb
Dennis S. Frank, Director. . . . . . . . . . 20,000 *
Coastal Bancorp, Inc. and Coastal Banc ssb
Robert E. Johnson, Jr., Director . . . . . . 12,880(5) *
Coastal Bancorp, Inc. and Coastal Banc ssb
Manuel J. Mehos, Chairman of the Board,. . . 363,750(6) 7.00
President and Chief Executive Officer
Coastal Bancorp, Inc., Coastal Banc
Holding Company, Inc. and Coastal Banc ssb
James C. Niver, Director . . . . . . . . . . 368,952(7) 7.10
Coastal Bancorp, Inc. and Coastal Banc ssb
Clayton T. Stone, Director . . . . . . . . . 600 *
Coastal Bancorp, Inc. and Coastal Banc ssb
John D. Bird, Executive Vice President,. . . 23,666(6) *
Chief Administrative Officer and
Assistant Secretary
Coastal Banc ssb
Gary R. Garrett, Executive Vice President and. 25,548(6) *
Chief Lending Officer
Coastal Banc ssb
David R. Graham, Executive Vice President -. . 9,411(6) *
Real Estate Lending
Coastal Banc ssb
Nancy S. Vadasz, Executive Vice President -. . 14,060(6) *
Market and Product Strategies
Coastal Banc ssb
Catherine N. Wylie, Executive Vice President . 26,971(6) *
and Chief Financial Officer
Coastal Bancorp, Inc., Coastal Banc Holding
Company, Inc. and Coastal Banc ssb
All directors and executive officers of the. . 1,045,718(6) 20.12
Company and the Bank as a group
(12 persons)
</TABLE>
* Represents less than 1.0% of the Common Stock outstanding.
(1) Based upon information furnished by the respective individuals and
filings pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The information is not necessarily indicative of beneficial
ownership for any other purpose. Under regulations promulgated pursuant to
the Exchange Act, shares are deemed to be beneficially owned by a person if he
or she directly or indirectly has or shares (i) voting power, which includes
the power to vote or to direct the voting of the shares, or (ii) investment
power, which includes the power to dispose or to direct the disposition of the
shares. Unless otherwise indicated, the named beneficial owner has sole
voting and dispositive power with respect to the shares.
(2) Based on a Schedule 13G filed under the Exchange Act.
(3) Mr. Allday is the beneficial owner of 2,000 shares of the Bank's 9.0%
Noncumulative Preferred Stock, Series A.
(4) Of such shares, 176,880 are owned by a trust over which Mr. Flowers
has shared voting and dispositive power with two other co-trustees.
(5) Shares are held in trust for his minor children for which Mr. Johnson
serves as trustee.
(6) Under applicable regulations, a person is deemed to have beneficial
ownership of any shares of Common Stock which may be acquired within 60 days
of the Record Date pursuant to the exercise of outstanding stock options.
Shares of Common Stock which are subject to stock options are deemed to be
outstanding for the purpose of computing the percentage of outstanding Common
Stock owned by such person or group but not deemed outstanding for the purpose
of computing the percentage of Common Stock owned by any other person or
group. The amounts set forth in the table include 23,666, 25,548, 9,411,
63,750, 14,060 and 25,021 shares which may be received upon the exercise of
stock options by Messrs. Bird, Garrett, Graham and Mehos and Mmes. Vadasz and
Wylie, respectively, pursuant to stock options. For all directors and
executive officers as a group, the number of shares includes 161,456 shares of
Common Stock subject to outstanding stock options.
(7) Mr. Niver is the co-trustee with his wife of a trust which holds such
shares for their benefit.
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
DIRECTORS WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
Coastal Bancorp, Inc. is a Texas corporation, formed pursuant to the
Texas Business Corporation Act which requires that the business and affairs of
the Company shall be managed by or under the direction of the Board of
Directors. The Company's Articles of Incorporation provide that the Company's
Board of Directors be divided into three classes as nearly equal in number as
possible, with one class to be elected annually, and the Bylaws state that
members of each class are to be elected for a term of office to expire at the
third succeeding annual meeting of stockholders and when their respective
successors have been elected and qualified. The number of directors is
determined from time to time by resolution of the Board. On July 27, 1995,
the Board of Directors voted to increase the size of the Board from seven to
eight members and elected Mr. Clayton T. Stone to fill such vacancy effective
August 24, 1995. Mr. Stone stood for election by the stockholders at the 1996
annual meeting and was elected to a three year term. Effective April 1, 1996,
Mr. Donald Bonham retired from the Board of Directors for personal reasons.
The Board of Directors has not nominated anyone to replace Mr. Bonham as of
the date hereof.
Three of the positions on the Board are to be elected in 1998. Prior to
the formation of the Company, these individuals served as directors of the
Association. The information set forth below relating to their tenure as
directors is as of the date they were first elected as directors of either the
Association or the Company, where applicable. There are no arrangements or
understandings between the Company and any person pursuant to which such
person has been selected as a nominee, and no director is related to any other
director or executive officer of the Company or the Bank by blood, marriage or
adoption.
INFORMATION WITH RESPECT TO CONTINUING DIRECTORS AND NOMINEES FOR DIRECTORS
Information concerning those members of the Board whose terms do not
expire in 1998, including age, tenure and principal position with the Company
and principal occupation during the past five years, as well as the year his
term will expire, is set forth below:
ROBERT E. JOHNSON, JR. Age 44. Director since 1986. Mr. Johnson is a
partner in the law firm of Johnson & Johnson, Austin, Texas. His term as a
director of the Company will expire in 1999.
MANUEL J. MEHOS. Age 43. Director since 1986. Mr. Mehos is the
Chairman of the Board, President and Chief Executive Officer of the Company,
Coastal Banc Holding Company, Inc., Coastal Banc Capital Corp., and the Bank
and also Chief Executive Officer of CoastalBanc Financial Corp., a Bank
subsidiary. He is also a director of each of the Bank's subsidiaries and is
the President of CBS Asset Corp., CBS Builders, Inc. and CoastalBanc
Investment Corporation, which are wholly-owned subsidiaries of the Bank, all
of which are located in Houston, Texas. CBS Asset Corp., CBS Builders, Inc.
and CoastalBanc Investment Corporation are presently inactive. Mr. Mehos also
currently serves on the Finance Commission of Texas. His term as a director
of the Company will expire in 2000.
JAMES C. NIVER. Age 68. Director since 1986. Mr. Niver is retired and
from 1972 until 1995 was employed by Century Land Company, Houston, Texas,
retiring as its President. His term as a director of the Company will expire
in 2000.
CLAYTON T. STONE. Age 63. Director since August 1995. Mr. Stone is an
Executive Vice President of Hines Interests Limited Partnership, Aspen,
Colorado since 1996. Mr. Stone came out of retirement to take this position.
Prior to 1996 he was an independent business consultant and a retired officer
of Gerald D. Hines Interests, Houston, Texas. His term as a director of the
Company will expire in 1999.
THE NOMINEES
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted "FOR" the election of each of the nominees listed
below. If any person named as a nominee should be unable or unwilling to
stand for election at the time of the Annual Meeting, the Board of Directors
will nominate, and the persons named as proxies will vote, for any replacement
nominee or nominees recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why any of the nominees listed below may
not be able to serve as a director if elected.
Information concerning the nominees for director, including age, tenure,
principal position with the Company and principal occupation during the past
five years, as well as the year his term will expire, is set forth below:
R. EDWIN ALLDAY. Age 47. Director since 1986. Mr. Allday is a private
investor and in September 1993 became a senior consultant with The Dini
Partners, Inc., Houston, Texas, a company that provides counseling in
philanthropy and non-profit company management. Mr. Allday was an independent
consultant for community relations for charitable organizations from March
1990 to June 1993. From August 1988 to March 1990, Mr. Allday was the Chief
Operating Officer of the American Leadership Forum, a non-profit organization
which teaches business leadership skills located in Houston, Texas. From
March 1982 to August 1988, Mr. Allday was the General Manager of Anglia
Companies, a family-owned investment management business in Houston, Texas.
If elected, his term as a director of the Company will expire in 2001.
D. FORT FLOWERS, JR. Age 36. Director since 1992. Mr. Flowers is the
President of Sentinel Trust Company, a Texas Limited Banking Association,
Houston, Texas, providing fiduciary and investment management services to
affluent families, their closely held corporations and foundations, a position
he has held since January 1997. Additionally, Mr. Flowers was Chairman of the
Board of DIFCO, Inc., a railroad car engineering and manufacturing company
from before the time he became a director until August, 1997 when that company
was sold. Mr. Flowers is also a director of The Ohio Bank, Findlay, Ohio. If
elected, his term as a director of the Company will expire in 2001.
DENNIS S. FRANK. Age 41. Director since 1988. Mr. Frank is the
Chairman of the Board, Chief Executive Officer and President of Silvergate
Bancorp, La Mesa, California, a position he has held since December 1996.
Additionally, he has been the President and Chief Executive Officer of DSF
Management Corp., a private investment company, located in Houston, Texas,
since March 1994. Prior to that, Mr. Frank was the Manager of the
Association's Capital Markets Division from July 1988 to April 1993 and a
consultant to the Association from April 1993 to April 1994. If elected, his
term as a director of the Company will expire in 2001.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE ABOVE NOMINEES
BE ELECTED AS DIRECTORS OF THE COMPANY.
<PAGE>
STOCKHOLDER NOMINATIONS
The Company's Articles of Incorporation govern nominations for election
to the Board of Directors and require that all nominations for election to the
Board of Directors other than those made by the Board, be made by a
stockholder who has complied with the notice provisions in the Articles.
Written notice of a stockholder's nomination must be communicated to the
attention of the Company's Secretary and either delivered to, or mailed and
received at, the principal executive offices of the Company not less than 60
days prior to the anniversary date of the mailing of the proxy materials by
the Company in connection with the immediately preceding annual meeting of
stockholders of the Company, and with respect to a special meeting of
stockholders for the election of directors, on the close of business on the
tenth day following the date on which notice of such meeting is first given to
stockholders. Such notice shall include specified matters as set forth in the
Articles of Incorporation. If the nomination is not made in accordance with
the requirements set forth in the Articles of Incorporation, the defective
nomination will be disregarded at the Annual Meeting. The Company did not
receive any nominations from stockholders for the Annual Meeting.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
OF COASTAL BANCORP, INC. AND COASTAL BANC SSB
Regular meetings of the Board of Directors of the Company are held
quarterly and special meetings may be called at any time as necessary. During
the year ended December 31, 1997, the Board of Directors of the Company held
ten meetings. No incumbent director of the Company attended fewer than 75% of
the aggregate of the total number of Board meetings held during the period in
which he served as a director in 1997 except Mr. Frank who attended 70%.
The Board of Directors is authorized by its Bylaws to elect members of
the Board to committees of the Board which may be necessary or appropriate for
the conduct of the business of the Company. At December 31, 1997, there were
no committees of the Board of the Company.
Regular meetings of the Board of Directors of the Bank are held monthly
and special meetings may be called at any time as necessary. During the year
ended December 31, 1997, the Board of Directors of the Bank held twelve
meetings. No incumbent director of the Bank attended fewer than 75% of the
aggregate of the total number of Board meetings held during the period in
which he served as a director and the total number of meetings held by
committees of the Board of Directors of the Bank on which he served in 1997.
The Board of Directors of the Bank is authorized by its Bylaws to elect
members of the Board to committees of the Board which may be necessary or
appropriate for the conduct of the business of the Bank. At December 31,
1997, the Bank had an Audit, Compensation, Asset/Liability, Directors' Loan
Review and a Community Reinvestment Act Committee of the Board.
The Audit Committee of the Bank's Board is responsible for reviewing the
reports of the independent auditors and examination reports of regulatory
authorities, monitoring the functions of the internal audit department, which
reports directly to this Committee, and generally overseeing compliance with
internal policies and procedures. The Audit Committee members are Messrs.
Niver (Chairman), Allday and Johnson. This Committee met seven times during
1997.
The Compensation Committee reviews the compensation of senior executive
officers and recommends to the Board adjustments in such compensation based on
a number of factors, including the profitability of the Bank. Messrs. Niver
(Chairman), Flowers and Johnson comprise the Compensation Committee, which met
four times during 1997. See "Executive Compensation - Report of the Board of
Directors on Compensation During Fiscal 1997."
The Asset/Liability Committee met four times in 1997 to authorize
investment categories, overall investment limitations and brokers to be
utilized, to review trade recommendations and past trades of the
Asset/Liability Subcommittee (composed of certain officers) and compliance of
the Bank's investment activities with the Bank's Investment and Interest Rate
Risk Policies and with Board recommendations. The Committee also makes
interest rate risk assessments and formulates asset/liability management
policy for the forthcoming quarterly period. This Committee consists of
Messrs. Frank (Chairman), Flowers, Mehos and Stone.
The Directors' Loan Review Committee met twenty-six times in 1997 to
approve and/or review certain loans. The Committee can approve any class or
type of loan which is authorized for investment by the Board. Specified loan
authority limits are further delegated to the management loan committee, the
management construction loan committee or an individual officer of the Bank.
The Directors' Loan Review Committee consists of Messrs. Mehos (Chairman),
Flowers, Frank, Niver, and Stone.
The Community Reinvestment Act ("CRA") Committee was established to
monitor the Bank's efforts in serving the credit needs of the residents of the
communities in which it does business, including those credit-worthy persons
having low and moderate incomes. The CRA Committee has appointed a CRA
Officer who is responsible for developing and administering the Bank's CRA
program and for training the Bank's staff to comply with CRA regulations, and
Bank policies and procedures. The CRA Officer chairs a management CRA
Committee which works to oversee that the Bank meets the procedural
requirements of the CRA. The CRA Committee is composed of Messrs. Allday
(Chairman), Frank, Mehos and Johnson and met two times in 1997.
<PAGE>
BOARD FEES
Through February 26, 1998, each non-employee director of the Company and
the Bank was paid a fee of $1,550 for each Board meeting attended and a fee of
$300 for each committee meeting attended. From February 26, 1998, forward
however, each non-employee director of the Company and the Bank that attends
the monthly Directors' Loan Review Committee and any additional ad hoc PCC
meeting will be paid a maximum of $600 per month for all meetings. When Board
and committee meetings of the Company are held on the same day as meetings of
the Board and committees of the Bank, only one fee is paid for that date. No
fees are paid for non-attendance; attendance by conference telephone is
similarly not compensated. Directors are also reimbursed for reasonable
travel expenses. Directors who are also employees of the Company and the Bank
receive no fees for attendance at Board or committee meetings.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors of the Company to file reports to indicate ownership and changes in
ownership with the Securities and Exchange Commission and to furnish the
Company with copies of such reports.
Based upon a review of the copies of such forms, the Company believes
that during the year ended December 31, 1997, all Section 16(a) filing
requirements applicable to the Company's officers and directors of the Company
and/or the Bank were complied with.
<PAGE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following table sets forth information concerning executive officers
of the Bank or its subsidiaries who do not serve on the Bank's Board of
Directors. All executive officers are elected by the Board of Directors of
the Bank or of the respective subsidiary and serve until their successors are
elected and qualified. No executive officer is related to any director or
other executive officer of the Bank or its subsidiaries by blood, marriage or
adoption, and there are no arrangements or understandings between a director
and any other person pursuant to which such person was elected an executive
officer.
<TABLE>
<CAPTION>
Position with Bank and
Name Age Principal Occupation During Last Five Years
- --------------- ---- ------------------------------------------------
<S> <C> <C>
John D. Bird . . . 54 Executive Vice President since August 1993, Chief
Administrative Officer since June 1993, and Assistant
Secretary since March 1986; Chief Operations Officer
from March 1986 to June 1993; President and sole
stockholder of Coastal Banc Insurance Agency, Inc.,
an affiliate of the Bank, since May 1987.
Gary R. Garrett. . 51 Executive Vice President since August 1993 and a
director of each of the Bank's subsidiaries; Chief
Lending Officer since 1995; Senior Vice President
--Mortgage Lending from October 1991 to August
1993; Chief Executive Officer and President of
CBS Mortgage Corp. since August 1993; Executive
Vice President, CBS Mortgage Corp. from January
1989 to August 1993. Director and Executive Vice
President of Coastal Banc Capital Corp., an affiliate
of the Bank, since August 1997.
David R. Graham. . 54 Executive Vice President since August 1993 and a
director of each of the Bank's subsidiaries; Senior
Vice President--Real Estate Lending Division from
May 1988 to August 1993. Senior Vice President of
CBS Asset Corp. since April 1993.
Nancy S. Vadasz. . 44 Executive Vice President since June of 1994, Senior
Vice President since September 1991.
Catherine N. Wylie 43 Executive Vice President of Coastal Banc Holding
Company, Inc. since November, 1996, of the
Company since July 1994 and of the Bank since
August 1993 and a director of Coastal Banc Holding
Company, Inc., and of each of the Bank's
subsidiaries; Chief Financial Officer since October
1993; Controller from April 1989 to October 1993;
also Executive Vice President/Treasurer of each
of the Bank's subsidiaries since October 1990.
Director and Executive Vice President of Coastal
Banc Capital Corp., an affiliate of the Bank
since August 1997.
</TABLE>
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE BOARD OF DIRECTORS ON COMPENSATION DURING FISCAL 1997.
Officers of the Company do not receive compensation for their services.
The Compensation Committee of the Board of Directors of the Bank (the
"Committee") is composed entirely of independent outside directors. See
"Information With Respect to Nominees for Director, Directors Whose Terms
Continue and Executive Officers - Board of Directors Meetings and Committees
of Coastal Bancorp, Inc. and Coastal Banc ssb." The Committee is responsible
for reviewing the compensation of executive officers of the Bank and
recommending executive compensation proposals to the Bank's Board of Directors
for approval.
The Board of Directors of the Bank has a compensation philosophy pursuant
to which executive compensation is designed to be at least comparable with
average executive compensation for the Bank's peers, which are generally
considered to be companies of approximately the same size and in the same
industry. Companies included are independent financial companies, banks and
savings and loan associations ranging from $900 million to $4.0 billion in
asset size. In May 1992, the Bank retained an executive compensation
consultant to review its executive compensation policies. The consultant
developed a compensation program for the Bank's executive officers which is a
combination of base salary plus incentive compensation linked to the Bank's
profitability.
The Committee evaluates the base salaries of the Bank's executive
officers annually. An executive officer's base salary is determined based
upon longevity with the Bank, the effectiveness of such individual in
performing his or her duties, peer averages at the position in question and
the Bank's overall performance. No particular weight is assigned to these
variables. The base salary component alone, while designed to be competitive
with peer group averages, is not designed to produce top levels of
compensation for the Bank's executive officers when compared to its peer
group. The incentive component, as described below, which requires the Bank
to achieve returns at a pre-specified level before additional compensation is
paid, is the element which is designed to make total compensation for each of
the Bank's executive officers comparable or better than the comparable
executive compensation for the executive officers in the Bank's peer group.
Based upon the foregoing, Mr. Mehos, the Chief Executive Officer, earned
$264,000 in base salary during 1997.
The amount of incentive compensation is related to the performance of the
Bank. No cash incentive compensation will be paid to the Bank's executive
officers unless the Committee determines the Bank is safe and sound in the
following areas: capital adequacy, earnings composition, earnings capability,
liquidity, risk management (classified assets), strategic planning, and
compliance with laws and regulations.
During 1997, the Board of Directors determined that no incentive awards
to its Executive Management would be paid unless a 7.5% return on average
equity ("ROE") was achieved. Any earnings from extraordinary items or unsound
practices are excluded from such calculations at the Board's discretion.
Gains on sales of securities from the investment account, net of losses of
sales from the investment account, are deducted from the earnings pool.
During 1997, the compensation committee calculated that the Company achieved a
11.68% ROE.
Accordingly, during 1997, a bonus pool of $255,900 in the aggregate was
established and incentive awards were paid to the three top executive officers
of the Bank. See "Summary Compensation Table."
By the Committee:
/s/ James C. Niver
-----------------------
James C. Niver (Chairman)
D. Fort Flowers, Jr.
Robert E. Johnson, Jr.
<PAGE>
SUMMARY COMPENSATION TABLE. To meet the goal of providing shareholders a
concise, comprehensive overview of compensation awarded, earned or paid in the
reporting period, the Summary Compensation Table is utilized by the Company.
The Summary Compensation Table includes individual compensation information
with respect to the Chief Executive Officer and the four other most highly
compensated executive officers of the Bank and its subsidiaries whose total
compensation exceeded $100,000 for services rendered in all capacities during
the fiscal years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------------
NAME AND PRINCIPAL
POSITION(1) Year SALARY(2) BONUS(3)
- ------------------------------ ---- ---------- ---------
<S> <C> <C> <C>
Manuel J. Mehos
Chairman of the Board, 1997 $ 264,000 $ 127,900
President and . . . . . . . . 1996 241,000 131,228
Chief Executive Officer . . . 1995 222,000 0
John D. Bird 1997 130,630 30,000
Executive Vice President and . 1996 121,000 40,000
Chief Administrative Officer. 1995 111,565 0
Gary R. Garrett 1997 164,800 64,000
Executive Vice President and . 1996 160,000 70,000
Chief Lending Officer . . . . 1995 113,300 0
David R. Graham 1997 124,630 32,895
Executive Vice President . . . 1996 121,000 40,000
Real Estate Lending Division. 1995 110,335 0
Catherine N. Wylie 1997 164,800 64,000
Executive Vice President and . 1996 160,000 70,000
Chief Financial Officer . . . 1995 113,300 0
ALL
NAME AND PRINCIPAL AWARDS OTHER
POSITION(1) OPTIONS(4) COMPENSATION(5)
- ------------------------------ ---------- ----------------
<S> <C> <C>
Manuel J. Mehos
Chairman of the Board, . . . . 22,000 $ 2,000
President and . . . . . . . . 30,000 1,425
Chief Executive Officer . . . 19,000 2,310
John D. Bird 5,000 8,000
Executive Vice President and . 5,000 7,425
Chief Administrative Officer. 4,448 8,310
Gary R. Garrett 11,000 5,000
Executive Vice President and . 10,000 4,425
Chief Lending Officer . . . . 5,445 4,700
David R. Graham 8,000 2,000
Executive Vice President . . . 7,500 1,425
Real Estate Lending Division. 4,881 2,310
Catherine N. Wylie 11,000 5,000
Executive Vice President and . 10,000 4,425
Chief Financial Officer . . . 5,445 4,060
</TABLE>
(1) Principal positions are for fiscal 1997.
(2) Does not include amounts attributable to miscellaneous benefits
received by executive officers of the Bank, including use of Bank owned
vehicles. In the opinion of management of the Company, the costs to the
Company of providing such benefits to any individual executive officer during
the year ended December 31, 1997, did not exceed the lesser of $50,000 or 10%
of the total of annual salary and bonus reported for the individual.
(3) Includes lump sum cash bonuses earned for the fiscal year stated
and paid in some cases the subsequent year.
(4) Free standing stock options; see "- Option Grants in Last Fiscal
Year."
(5) Includes for the named individuals employer matching contributions
accrued pursuant to the Company's Profit Sharing (401k) Plan and any car
allowances.
<PAGE>
EXECUTIVE SEVERANCE AGREEMENTS
On June 26, 1997, the Company extended the term of the executive
severance agreements (the "Executive Severance Agreements") with Mr. Garrett
and Ms. Wylie (the "Employees" or "Employee") out one year to expire June 26,
2000. The Executive Severance Agreements provide for the payment of certain
severance benefits to Mr. Garrett and Ms. Wylie in the event of a trigger
event under the Executive Severance Agreements, which means (i) the occurrence
of a change in control of the Company as defined below, or (ii) the voluntary
termination within 90 days of an event which occurs during the "Protected
Period" (i.e., the period six months before and three years after a change of
control or after the expiration of the Executive Severance Agreement) and
constitutes "Good Reason" (as defined below), or (iii) termination for any
reason other than "Just Cause" during the Protected Period. If a trigger
event occurs, the Employees will be entitled to (x) payment by the Company or
the Bank of one times the annual salary and bonus for incentive compensation
(not including stock compensation plans) paid to the Employee during his or
her immediately preceding year of employment or (y) the payment by the Company
or the Bank of an amount equal to 2.99 times their annual salary plus bonuses
paid during the immediately preceding year; and (z) the Company will cause any
and all outstanding options to purchase stock of the Company held by each
Employee to become immediately exercisable in full. The Executive Severance
Agreement also provides that the Company will reimburse the Employee for all
costs and expenses, including reasonable attorney's fees incurred by the
Employee to enforce rights or benefits under such agreements. Other than the
foregoing, the Company has not entered into any employment contracts with any
of its officers.
Under the Executive Severance Agreements, a "Change In Control" of the
Company would be deemed to occur if, (i) the Company is not the surviving
entity in any merger, consolidation, or other reorganization, (ii) the sale,
exchange, lease, transfer or other disposition to any person of all or a
substantial part of the assets, liabilities, or business of the Company or the
Bank, (iii) any change in business of the Company or the Bank such that the
Company does not own the voting stock of the Bank or the business of the Bank
is not as an insured depository institution, (iv) any person or entity
including a "group" as contemplated by Section 13(d)(3) of the Exchange Act
acquires or gains ownership or control (including, without limitation, power
to vote) of more than 25% of the outstanding shares of the Bank's or the
Company's voting stock, or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Bank or
the Company before such election cease to constitute at least two-thirds of
the Board of Directors.
Under the Executive Severance Agreements, (a) "Good Reason" means any of
the following events, which has not been consented to in advance by the
Employee in writing: (i) the requirement that the Employee move his or her
personal residence, or perform his or her principal executive functions, more
than thirty (30) miles from his or her primary office as of the date of the
Change in Control; (ii) a material (defined to be 10% or more) reduction in
the Employee's base compensation as in effect on the date of the Change in
Control or as the same may be increased from time to time; (iii) a successor
to the Company or the Bank fails or refuses to assume the Company's and the
Bank's obligations under the Executive Severance Agreement; (iv) the Company,
the Bank or successor thereto breaches any provision of the Executive
Severance Agreement; or (v) the Employee is terminated for other than Just
Cause after the Change in Control; and (b) "Just Cause" means, in the good
faith determination of the Company's and the Bank's Boards of Directors, the
Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order, or
material breach of any provision of the Executive Severance Agreement. The
Employee shall have the right to make a presentation to the Board of Directors
with counsel prior to rendering of such determination by the Board. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for Just Cause. No act, or failure to act, on the
Employee's part shall be considered "willful" unless he has acted, or failed
to act, with the absence of good faith and without a reasonable belief that
his action or failure to act was in the best interest of the Bank and the
Company.
In the event that the Employee and the Company or the Bank agree that the
Employee will be paid an amount under the Executive Severance Agreement which
triggers the requirement to pay the excise tax required under Section 280G of
the Internal Revenue Code of 1986, as amended, the Company or the Bank will
reimburse the Employee for all such excise taxes.
The Executive Severance Agreement remains in effect for the modified
period commencing on June 26, 1997 (the "Effective Date") and ending on the
earlier of (i) June 26, 2000, or (ii) the date on which the Employee
terminates his or her employment with the Company or the Bank. Any payments
made to the Employee pursuant to the Executive Severance Agreement, or
otherwise, are subject to and conditioned upon their compliance with the
Federal Deposit Insurance Act and any regulations promulgated by the Federal
Deposit Insurance Corporation thereunder.
OPTION GRANTS IN LAST FISCAL YEAR
On March 23, 1995, the Board of Directors adopted the 1995 Stock
Compensation Program (the "New Program"). Stockholders of the Company
approved the New Program at the April 27, 1995 annual meeting. The New
Program is substantially similar to the 1991 Program, as described below. The
Board reserved 255,261 shares of Common Stock for issuance under the New
Program at the time of adoption. There were 125,400 options issued under the
New Program in 1997.
The Board of Directors adopted the 1991 Stock Compensation Program (the
"1991 Program") for the benefit of officers and other selected key employees
of the Company and the Bank who were deemed to be responsible for the future
growth of the Company. Stockholders of the Company approved the program at a
Special Meeting of Stockholders held in December 1991. In connection with the
reorganization of the Association in 1994, the 1991 Program was adopted by the
Company, and approved by stockholders for the benefit of officers and key
employees of the Company and the Bank and its subsidiaries.
An aggregate of 241,001 shares of authorized but unissued shares of
Company Common Stock were originally reserved for future issuance under the
1991 Program. All shares of the 1991 Program have been issued. Shares
issuable under the New Program and the 1991 Program (collectively, the
"Programs") pursuant to the exercise of stock options and/or the granting of
stock appreciation rights and performance shares, are subject to modification
or adjustment to reflect changes in the Company's capitalization.
Of the shares reserved for issuance under the Programs, 30,968 shares are
not currently subject to option at February 28, 1998. The Programs will
remain in effect for a term of ten years from the date of adoption unless
sooner terminated in accordance with the provisions of the Programs. Four
kinds of rights, evidenced by four plans, are contained in the Programs and
are available for grant: (i) incentive stock options; (ii) compensatory stock
options; (iii) stock appreciation rights; and (iv) performance share awards.
The Programs are administered by Messrs. Niver, Flowers and Johnson (the
"Program Administrators"). The Program Administrators are given absolute
discretion under each Program to select the persons to whom options, rights
and awards will be granted and to determine the number of shares subject to
each option, right or award. Only regular, full-time employees of the Company
or the Bank, or any subsidiary of the Company or the Bank are eligible for
selection by the Program Administrators to participate in the Programs.
Non-employee directors are not eligible to receive awards under the Programs.
The option prices per share for incentive stock options granted under the
Programs may not be less than the fair market value of the Company's Common
Stock on the date of the grant; provided, however, that if any employee owns
more than 10% of the combined voting power of all classes of stock of the
Company, the purchase price for shares acquired pursuant to the exercise of an
option shall not be less than 110% of the fair market value of the Common
Stock. The per share exercise price for compensatory options granted under the
Programs may be equal to or less than the fair market value on the date of
grant. The purchase price for shares of Common Stock subject to incentive or
compensatory options may be paid in cash, by check, or if permitted by the
Program Administrators at the time the option is granted, by shares of Common
Stock, or by a combination thereof.
In the event of a change in control of the Company, as defined, all
incentive and compensatory stock options previously granted may become
immediately exercisable notwithstanding any existing installment limitation
which may be established by the Program Administrators, provided that the
exercisability of an option may not be accelerated prior to the six month
anniversary of the date the option is granted.
<PAGE>
AGGREGATE OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth individual grants of options that were
made during the last fiscal year to the executive officers named in the
Summary Compensation Table. This table is intended to allow stockholders to
ascertain the number and size of option grants made during the fiscal year,
the expiration date of the grants and the potential realizable present value
of such options under specified assumptions.
<TABLE>
<CAPTION>
PERCENT OF
OPTIONS TOTAL OPTIONS
GRANTED GRANTED TO EXERCISE
(NO. OF EMPLOYEES PRICE
NAME SHARES)(1) IN FISCAL YEAR PER SHARE
- ----------------- ---------- -------------- ---------
<S> <C> <C> <C>
Manuel J. Mehos. . 9,000 7.18% $29.25
Manuel J. Mehos. . 13,000 10.37 22.75
John D. Bird . . . 5,000 3.99 22.75
Gary R. Garrett. . 11,000 8.77 22.75
David R. Graham. . 8,000 6.38 22.75
Catherine N. Wylie 11,000 8.77 22.75
GRANT DATE
EXPIRATION PRESENT
NAME DATE VALUE(2)
- ---------------- ---------- -----------
<S> <C> <C>
Manuel J. Mehos. . 6/26/07 $107,829
Manuel J. Mehos. . 4/24/07 115,999
John D. Bird . . . 4/24/07 44,615
Gary R. Garrett. . 4/24/07 98,153
David R. Graham. . 4/24/07 71,384
Catherine N. Wylie 4/24/07 98,153
</TABLE>
(1) Total options granted in 1997 were 125,400 shares. The options vest
25% during the first year and an additional 25% for each of the next three
years.
(2) The potential realizable value of the grant of options is the present
value of the grant at the date of grant using a variation of the Black-Scholes
option pricing model. Assumptions used to calculate the present value of the
options granted on April 24, 1997 and June 26, 1997, respectively, were as
follows: an expected volatility rate of 22.19% and 23.18%, a risk free rate
of return of 6.93% and 6.49%, a dividend yield of $.48 per share per year and
the expiration date of April 24, 2007 and June 26, 2007, respectively.
AGGREGATE OPTIONS EXERCISED IN LAST YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, with respect to the executive officers
named in the Summary Compensation Table, information with respect to the
aggregate amount of options exercised during the last fiscal year, any value
realized thereon, the number of unexercised options at the end of the fiscal
year (exercisable and unexercisable) and the value with respect thereto.
<TABLE>
<CAPTION>
Shares Number of Unexercised
Acquired on Value Options at Fiscal Year-End
Name Exercise Realized(2) Exercisable Unexercisable
- ------------ -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Manuel J. Mehos. . -- -- 63,750 36,250
John D. Bird . . . -- -- 23,666 7,362
Gary R. Garrett. . -- -- 25,548 14,611
David R. Graham. . 14,894 249,364 9,411 10,970
Catherine N. Wylie -- -- 25,021 14,611
Value of Unexercised
in-the-Money Options at
Fiscal Year-End(1)
------------------
Name Exercisable Unexercisable
- ------------- ----------- -------------
<S> <C> <C>
Manuel J. Mehos. . $1,179,031 $516,344
John D. Bird . . . 503,666 111,701
Gary R. Garrett. . 512,346 215,780
David R. Graham. . 162,208 163,424
Catherine N. Wylie 499,748 215,780
</TABLE>
(1) Based upon a closing market price for the Company's Common Stock as of
December 31, 1997 of $34.875.
(2) Based upon actual sales price at the time of exercise and sale.
COMPARATIVE STOCK PERFORMANCE GRAPH
The stock performance graph below compares the cumulative total
stockholder return of the Company's Common Stock from December 31, 1992 to
December 31, 1997 with the cumulative total return of the National Association
of Securities Dealers Automated Quotations ("NASDAQ") Market Index and certain
SNL thrift institutions traded on the NASDAQ, as compiled by SNL Securities,
L.P. in its OTC Thrift Index, assuming an investment of $100 on December 31,
1992 and the reinvestment of all dividends. The Company did not pay dividends
on the Company's Common Stock during 1992 or 1993. In 1994, the Company paid
its first dividend of $.08 per share on June 15, 1994. Quarterly dividends of
the same amount were paid on September 15, 1994, December 15, 1994, March 15,
1995, June 15, 1995, September 15, 1995, and December 15, 1995. The Board of
Directors voted at the January 25, 1996 regularly scheduled Board Meeting to
increase the dividend for the fourth quarter of 1995 from $.08 per share to
$.10 per share. Quarterly dividends of $.10 per share were paid on March 15,
1996, June 15, 1996, September 15, 1996 and December 15, 1996. During 1997
the Company paid quarterly dividends in the amount of $.10 per share for March
15, 1997 and quarterly dividends of $.12 per share for June 15, 1997,
September 15, 1997 and December 15, 1997.
<PAGE>
Comparison of Five Year-Cumulative Total Return Performance
<TABLE>
<CAPTION>
Index Period Ending
12/31/92 12/31/93 12/31/94
<S> <C> <C> <C>
Coastal Bancorp, Inc. 100.00 103.92 114.32
NASDAQ - Total US . . 100.00 114.80 112.21
SNL OTC Thrift Index. 100.00 138.34 139.72
Index Period Ending
12/31/95 12/31/96 12/31/97
<S> <C> <C> <C>
Coastal Bancorp, Inc. 142.03 189.66 293.98
NASDAQ - Total US . . 158.70 195.19 239.53
SNL OTS Thrift Index. 212.45 276.38 448.90
</TABLE>
Notes:
A. Each index is weighted for all companies that fit the criteria of
that particular index. The index is calculated to exclude companies as they
are acquired, and add them to the index calculation as they become publicly
traded companies. All companies in existence at a certain time are included
in the calculations.
B. Each index value measures dividend re-investment by assuming
dividends are received in cash on the ex-date and re-invested back into the
company stock paying the dividend on the same day. The stock price on the
ex-date is used to calculate how many shares can be bought with the dividend.
Prepared by SNL Securities LP
Charlottesville, VA 22902
CERTAIN TRANSACTIONS
The Company may make home mortgage or consumer loans to directors,
officers and employees. Any such loan will be made in the ordinary course of
business and on the same terms and conditions, including interest rates and
collateral, as those prevailing for comparable transactions at that time with
non-affiliated parties. The Company had no loans to directors or executive
officers outstanding at the year ended 1997. As a result of the enactment of
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") on August 9, 1989, Section 22(h) of the Federal Reserve Act became
applicable to a savings institution, such as the Bank. This law generally
provides that any credit extended by a savings institution to its executive
officers, directors and, to the extent otherwise permitted, principal
stockholder(s), or any related interest of the foregoing, must (i) be on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions by the savings
association with non-affiliated parties; (ii) be pursuant to underwriting
standards that are no less stringent than those applicable to comparable
transactions with non-affiliated parties; (iii) not involve more than the
normal risk of repayment or present other unfavorable features; and (iv) not
exceed, in the aggregate, the institution's unimpaired capital and surplus, as
defined.
In 1987, the Bank entered into an Administrative Services Agreement with
Coastal Banc Insurance Agency, Inc. ("CBIA"), a Texas business corporation
licensed under Texas law to act as a life insurance agent. CBIA is
wholly-owned by an executive officer of the Bank who receives no salary or
dividends from CBIA. CBIA has granted to the Bank the legal ownership of all
of its books and records and the stockholder of CBIA has granted to the Bank
the right to assign all of its stock in CBIA to any other properly licensed
life insurance agent in the Bank's sole discretion. The Bank has agreed to
provide to CBIA certain services, including but not limited to employee
training, office space, furniture, fixtures, equipment, clerical services,
data processing and other services as well as marketing leads and information
to assist CBIA in the sale of annuities underwritten by an independent annuity
company to the Bank's deposit and loan customers. In consideration for such
services, CBIA has agreed to pay the Bank a flat fee which is subject to
renegotiation on a quarterly basis. The fee payable to the Bank was last
negotiated on December 19, 1997, and was $220,000 for the year ended December
31, 1997. Such fee represented substantially all of CBIA's net income for the
year then ended.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed KPMG Peat Marwick LLP
as independent auditors for the Company for the year ending December 31, 1998,
and has further directed that the selection of auditors be submitted for
ratification by the stockholders at the Annual Meeting. The Company has been
advised by KPMG Peat Marwick LLP that neither the firm nor any of its
associates has any relationship with the Company or its subsidiaries other
than the usual relationship that exists between independent public accountants
and clients. KPMG Peat Marwick LLP will have one or more representatives at
the Annual Meeting who will have an opportunity to make a statement, if he or
she so desires, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR FISCAL 1998.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have presented at the next
Annual Meeting of Stockholders of the Company and included in the proxy
materials used by the Company in connection with such meeting must be received
at the corporate headquarters office of the Company at Coastal Banc Plaza,
5718 Westheimer, Suite 600, Houston, Texas 77057, no later than November 24,
1998. If such proposal is in compliance with all of the requirements of Rule
14a-8 promulgated under the Exchange Act, it will be included in the Proxy
Statement and set forth on the form of proxy issued for the next Annual
Meeting of Stockholders. It is urged that any such proposals be sent by
certified mail, return receipt requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the Exchange Act may be
brought before an annual meeting pursuant to the Company's Articles of
Incorporation, which provide that business must be properly brought before the
meeting by or at the direction of the Board of Directors, or otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Company. To be timely, a stockholder's notice must be delivered to, or mailed
and received at, the principal executive offices of the Company not less than
60 days prior to the anniversary date of the mailing of proxy materials by the
Company in connection with the immediately preceding annual meeting of
stockholders of the Company. A stockholder's notice shall set forth as to
each matter the stockholder proposes to bring before an annual meeting such
information specified in the Company's Articles of Incorporation. If the
proposal is not made in accordance with the terms of the Articles of
Incorporation, such proposal will not be acted upon at the Annual Meeting. No
stockholder proposals were received by the Company in connection with the 1998
Annual Meeting.
OTHER MATTERS
Management is not aware of any business to come before the 1998 Annual
Meeting other than those matters described above in this Proxy Statement and
possibly, procedural matters incident to the conduct of the meeting. However,
if any other matters should properly come before the meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by the Company.
The Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of the Company's Common Stock. In addition
to solicitations by mail, directors, officers and employees of the Company or
its subsidiary may solicit proxies personally or by telephone without
additional compensation.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report for the year ended December 31,
1997 ("Annual Report") accompanies this Proxy Statement. The Annual Report is
not a part of the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1997, AND ANY EXHIBITS THERETO REQUIRED
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE EXCHANGE
ACT. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO CATHERINE N. WYLIE, CHIEF
FINANCIAL OFFICER, COASTAL BANCORP, INC., COASTAL BANC PLAZA, 5718 WESTHEIMER,
SUITE 600, HOUSTON, TEXAS 77057. THE FORM 10-K IS NOT A PART OF THE PROXY
SOLICITATION MATERIALS.
By Order of the Board of Directors
/s/ Linda B. Frazier
-------------------------
Linda B. Frazier
Secretary
March 24, 1998
