COASTAL FINANCIAL CORPORATION
December 13, 1996
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders of Coastal Financial Corporation to be held at the Myrtle Beach
Martinique, 7100 N. Ocean Boulevard, Myrtle Beach, South Carolina, on Monday,
January 27, 1997, at 2:00 p.m., Eastern Standard Time.
The attached Notice of Annual Meeting of Shareholders and Proxy
Statement describe the formal business to be transacted at the meeting. During
the meeting, we will also report on the operations of the Corporation. Directors
and Officers of the Corporation, as well as a representative of KPMG Peat
Marwick LLP, the Corporation's independent auditors, will be present to respond
to any questions Shareholders may have.
To ensure proper representation of your shares at the meeting, please
sign, date and return the enclosed proxy card in the enclosed postage-prepaid
envelope as soon as possible, even if you currently plan to attend the meeting.
This will not prevent you from voting in person, but will assure that your vote
is counted if you are unable to attend the meeting.
Sincerely,
/s/Michael C. Gerald
--------------------
Michael C. Gerald
President and
Chief Executive Officer
<PAGE>
COASTAL FINANCIAL CORPORATION
2619 Oak Street
Myrtle Beach, South Carolina 29577-3129
(803) 448-5151
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 27, 1997
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
("Meeting") of Coastal Financial Corporation ("Corporation") will be held at the
Myrtle Beach Martinique, 7100 N. Ocean Boulevard, Myrtle Beach, South Carolina,
on Monday, January 27, 1997, at 2:00 p.m., Eastern Standard Time.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of four Directors of the Corporation;
2. To approve an amendment to the Corporation's 1990 Stock
Option and Incentive Plan; and
3. Such other matters as may properly come before the
Meeting or any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come before
the Meeting.
Any action may be taken on the foregoing proposal at the Meeting on the
date specified above, or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Pursuant to the Bylaws, the Board of
Directors has fixed the close of business on November 30, 1996 as the record
date for the determination of the Shareholders entitled to notice of and to vote
at the Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of Proxy which
is solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The Proxy will not be used if you attend the Meeting and vote in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Susan J. Cooke
-----------------
SUSAN J. COOKE
SECRETARY
Myrtle Beach, South Carolina
December 13, 1996
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
<PAGE>
PROXY STATEMENT
OF
COASTAL FINANCIAL CORPORATION
2619 Oak Street
Myrtle Beach, South Carolina 29577-3129
(803) 448-5151
ANNUAL MEETING OF SHAREHOLDERS
January 27, 1997
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Coastal Financial Corporation ("Coastal
Financial" or the "Corporation") to be used at the Annual Meeting of
Shareholders of the Corporation ("Meeting"). The Meeting will be held at the
Myrtle Beach Martinique, 7100 N. Ocean Boulevard, Myrtle Beach, South Carolina,
on Monday, January 27, 1997, at 2:00 p.m., Eastern Standard Time. The
accompanying Notice of Annual Meeting of Shareholders and this Proxy Statement
are being first mailed to Shareholders on or about December 13, 1996.
REVOCATION OF PROXIES
Shareholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice delivered in person or mailed to the Secretary of the Corporation at 2619
Oak Street, Myrtle Beach, South Carolina 29577-3129, or by filing a later proxy
prior to a vote being taken on the proposals at the Meeting. A proxy will not be
voted if a Shareholder attends the Meeting and votes in person. Proxies
solicited by the Board of Directors of Coastal Financial will be voted in
accordance with the directions given therein. Where no instructions are
indicated, proxies will be voted for the nominees for Directors set forth herein
and for the approval of the amendment to the Corporation's 1990 Stock Option and
Incentive Plan.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record as of the close of business on November 30,
1996, are entitled to one vote for each share of common stock ("Common Stock")
of the Corporation then held. Shareholders are not permitted to cumulate their
votes for the election of Directors. As of November 30, 1996, the Corporation
had 3,447,187 shares of Common Stock issued and outstanding.
The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares of Common Stock entitled to vote is necessary
to constitute a quorum at the Meeting. The four Directors to be elected at the
Meeting will be elected by a plurality of the votes cast by the shareholders
present in person or by proxy and entitled to vote. With regard to the election
of Directors, votes may be cast for or withheld from each nominee. Votes that
are withheld will have no effect on the outcome of the election because
Directors will be elected by a plurality of votes cast. Abstentions will be
counted as present for purposes of determining the existence of a quorum
regarding the proposal on which the abstention is noted. Abstentions, therefore,
on the Corporation's proposal to approve an amendment to the Corporation's 1990
Stock Option and Incentive Plan will have the effect of a vote against such
proposal. Broker non-votes will be counted for purposes of determining the
existence of a quorum, but will not be counted for determining the number of
votes cast with respect to a proposal and, accordingly, will have no effect on
the outcome of such proposal.
<PAGE>
Persons and groups who beneficially own in excess of 5% of the
Corporation's Common Stock are required to file certain reports with the
Securities and Exchange Commission ("SEC") regarding such ownership pursuant to
the Securities and Exchange Act of 1934, as amended ("1934 Act"). Based upon
such reports, the following table sets forth, as of November 30, 1996, certain
information as to those persons who were beneficial owners of more than 5% of
the outstanding shares of Common Stock. Management knows of no persons other
than those set forth below who owned more than 5% of the outstanding shares of
Common Stock beneficially owned by each Director of the Corporation, the "named
Executive Officers" of the Corporation, and all Executive Officers and Directors
of the Corporation as a group.
<TABLE>
<CAPTION>
Amount and Nature Percent of
of Beneficial Common Stock
Beneficial Owner Ownership (1) Outstanding
- ---------------- ------------- -----------
<S> <C> <C>
Beneficial Owners of More Than 5%
(Excluding Directors of the Corporation)
J. Wade Nichols & 172,490 5.01 %
Paula C. Nichols Jt Ten
Sea Mist Associates Corporation (2) 184,208 5.35
Named Executive Officers (3)
Michael C. Gerald, President, Chief
Executive Officer and Director 103,497 3.01
Jimmy R. Graham, Executive Vice President 58,592 1.70
Allen W. Griffin, Executive Vice President 27,792 0.81
Jerry L. Rexroad, Executive Vice President
and Chief Financial Officer 13,801 0.40
Phillip G. Stalvey, Executive Vice President 22,347 0.65
Directors of the Corporation
(Excluding Named Executive Officers)
G. David Bishop 97,825 2.84
J.T. Clemmons 103,080 2.99
James H. Dusenbury 20,675 0.60
Samuel A. Smart 19,574 0.57
James C. Benton 181,136 (4) 5.26
Harold D. Clardy 42,488 1.24
James P. Creel 188,384 (5) 5.47
Wilson B. Springs 106,914 3.11
All Executive Officers and
Directors as a Group
(14 persons) 986,107 (6) 28.61 %
- --------------------------
</TABLE>
<PAGE>
(1) Pursuant to Rule 13d-3 under the Exchange Act, a person is deemed to be
the beneficial owner, for purposes of this table, of any shares of the
Corporation's Common Stock if he or she has voting and/or investment power
with respect to such security or has a right to acquire, through the
exercise of outstanding options or otherwise, beneficial ownership at any
time within 60 days from November 30, 1996. The table includes certain
shares owned by spouses, other immediate family members in trust, shares
held in retirement accounts or funds for the benefit of the named
individuals, and other forms of ownership, over which shares the named
persons possess voting and/or investment power.
(2) Includes 1,478 shares owned by Neil Ammons, owner.
(3) Under SEC regulation, the term "Executive Officer" is defined to include
the Chief Executive Officer, regardless of compensation level, and the
four most highly compensated Executive Officers, other than the Chief
Executive Officer, whose total annual salary and bonus for the last
completed fiscal year exceeded $100,000.
(4) Includes 172,490 shares owned by RCEE, Inc. of which Mr. Benton is
President, and 8,646 shares owned by Mr. Benton.
(5) Includes 28,173 shares owned by Creel Outdoor Advertising, Inc. Profit
Sharing Plan; 7,506 shares owned by wife, Carolyn W. Creel; 1,861 shares
owned by Carolyn W. Creel & James P. Creel, Jt Ten; 221 shares owned by
Carolyn W. Creel & Alicia Creel Jt Ten; 2,626 shares owned by Sun
Graphics, Inc., Carolyn W. Creel, President; and 3,525 shares owned by
James P. Creel.
(6) Includes 133,627 shares subject to stock options exercisable within 60
days from November 30, 1996 (Mr. Bishop 3,506 shares; Mr. Gerald 65,099
shares; Mr. Graham 34,318 shares; Mr. Griffin 16,613 shares; Mr. Rexroad
6,562 shares and Mr. Stalvey 7,529 shares).
PROPOSAL 1 - ELECTION OF DIRECTORS
The Corporation's Board of Directors is composed of eight members. The
Board of Directors of Coastal Federal Savings Bank ("Coastal Federal" or the
"Bank"), the Corporation's wholly owned subsidiary, also has eight members.
Two former members of the Corporation's Board of Directors serve as
advisors to the Board. A former member of the Bank's Board of Directors, William
J. Sigmon, Sr., serves as a Director Emeritus of the Bank.
James H. Dusenbury serves as an advisory Director of the Bank.
The Corporation's Certificate of Incorporation provides that Directors
are to be elected for terms of three years with approximately one-third elected
annually. Three Directors will be elected at the Meeting to serve for a
three-year period and one Director for a one-year period, or until their
respective successors have been elected and qualified. The Nominating Committee
has nominated for election as Directors J.T. Clemmons, G. David Bishop, and
Samuel A. Smart, each to serve for a three-year term, and James H. Dusenbury to
serve for a one-year term. All nominees are currently members of the Board
except for Mr. Dusenbury who has served as Advisory Director and General Counsel
for Coastal Federal Savings Bank since July 25, 1978 and as Advisory Director
and General Counsel for the Corporation since 1991. Mr. Dusenbury also served as
a Director of Coastal Federal Savings Bank from January 17, 1973 until July 7,
1978.
<PAGE>
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend or the Board of Directors may amend the Bylaws and
reduce the size of the Board. At this time, the Board knows of no reason why any
nominee might be unavailable to serve.
The Board of Directors recommends a vote "FOR" all of the
nominees for Directors of the Corporation.
<PAGE>
The following table sets forth certain information regarding the
nominees for election as Directors and the Directors who will continue in office
after the Meeting. There are no family relationships among or between the
Directors listed below.
<TABLE>
<CAPTION>
Year
First
Elected
or Year
Principal Nominated Term
Name Age Occupation Director Expires
(1) (2) (3) (4)
---- --- --- --- ---
<S> <C> <C> <C> <C>
Board Nominees
G. David Bishop 43 President - Waccamaw Clay 1991 2000
Products Company, Inc.
Chairman of the Board - WCI
Management Group, Inc.
J.T. Clemmons 58 Retired - Coastal Federal 1979 2000
James H. Dusenbury 61 Attorney - Dusenbury, 1996 1998
Hendrix & Little
Samuel A. Smart 67 Retired - United States 1983 2000
Department of Defense
Directors Continuing in Office
James C. Benton 64 President - C.L. Benton 1979 1999
Sons, Inc.
Harold D. Clardy 69 President - Chapin Company 1975 1998
James P. Creel 57 President - Creel Corporation 1990 1999
Michael C. Gerald 47 President and Chief Executive 1986 1998
Officer
Wilson B. Springs 68 Owner - H.B. Springs 1967 1999
Company
- ----------
</TABLE>
(1) As of September 30, 1996.
(2) The listed individuals have held these occupations or positions for at
least the last five years.
(3) Includes prior service on the Board of Directors of Coastal Federal.
(4) Assuming re-election at the Meeting for Mr. Bishop, Mr. Clemmons, and Mr.
Smart, and election at the meeting for Mr. Dusenbury.
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation conducts its business through
meetings of the Board and through its committees. During the fiscal year ended
September 30, 1996, the Board of Directors of the Corporation held eight
meetings. Coastal Federal has its own Board of Directors which conducts its
business through its own committees. During the fiscal year ended September 30,
1996, the Board of Directors for Coastal Federal held sixteen meetings. No
Director of the Corporation or Coastal Federal attended fewer than 75% of the
total meetings of the Board and committee meetings on which such Board member
served during this period for either the Corporation or Coastal Federal.
Coastal Financial's Board of Directors presently has three standing
committees: Executive, Audit, and Compensation and Benefits Committee. The
following describes the duties, responsibilities and current membership of these
committees.
The Corporation's Executive Committee meets when called by management
and is empowered to act for the Board of Directors between regular Board
meetings. The Executive Committee met five times in 1996. Its current members
are Messrs. Benton, Clardy, Clemmons (Chairman), Creel, Gerald and Springs.
The Corporation's Audit Committee has the primary function of
evaluating audit and compliance performance, handling relations with the
Corporation's independent auditors and establishing policies and procedures
relating to internal auditing functions and controls. Directors Clardy, Smart,
Springs and Creel serve on the committee with Directors Benton and Bishop as
alternates. The Corporation's Audit Committee met one time during the 1996
fiscal year and the Bank's Audit Committee met four times during the 1996 fiscal
year.
The Corporation's Compensation and Benefits Committee meets as called
by management to review personnel policies and salary and benefit programs.
During 1996 the Compensation and Benefits Committee had one meeting. The members
of the Compensation and Benefits Committee are Messrs. Benton, Clardy, Clemmons,
Creel, Gerald and Springs.
Article II, Section 14 of the Corporation's Bylaws provides that the
Board of Directors shall act as a nominating committee for selecting the
nominees for election as Directors. Such section of the Bylaws also provides as
follows: "No nominations for Directors except those made by the nominating
committee shall be voted upon at the annual meeting unless other nominations by
Shareholders are made in writing and delivered to the Secretary of the
Corporation in accordance with the provisions of the Corporation's Certificate
of Incorporation."
Article II, Section 15 further provides that any new business to be
taken up at the annual meeting shall be stated in writing and filed with the
Secretary of the Corporation in accordance with the provisions of the
Corporation's Certificate of Incorporation. Article XI of the Certificate of
Incorporation provides that notice of a Shareholder's intent to make a
nomination or present new business at the meeting ("Shareholder notice") must be
given not less than thirty days nor more than sixty days prior to any such
meeting; provided, however, that if less than thirty-one days' notice of the
meeting is given to Shareholders by the Corporation, a Shareholder's notice
shall be delivered or mailed, as prescribed, to the Secretary of the Corporation
<PAGE>
not later than the close of the tenth day following the day on which notice is
mailed to Shareholders. If properly made, such nominations shall be considered
by Shareholders at such meeting. The Board of Directors of the Corporation held
one meeting in its capacity as the nominating committee during the fiscal year
ended September 30, 1996.
DIRECTORS' COMPENSATION
Members of the Board of Directors of Coastal Federal receive a fee of
$9,000 annually except for the Chairman of the Board who receives $19,000
annually. Since October 1, 1992, members of the Board of Directors of Coastal
Financial have received $100 each quarter. Directors who are members of the
Bank's Executive Committee, which meets on an as-needed basis, are not
compensated. Non-Associate Directors who are members of the Bank's Loan
Committee receive $50 per committee meeting. Director's fees have remained at
the same level since October 13, 1991. Total fees paid to Directors, Advisory
Director and Director Emeritus of Coastal Financial Corporation and its
subsidiaries during the fiscal year ended September 30, 1996 were $126,100.
1996 Directors Performance Plan. At the 1996 Annual Meeting, the
Corporation's Shareholders approved the 1996 Directors Performance Plan (the
"Plan"). Beginning with the adjournment of that Meeting and at the adjournment
of the annual meetings for each of the succeeding years during the term of the
Plan, in which the Return on Equity of Coastal Financial for the fiscal year
preceding the annual meeting as reported by Coastal Financial Corporation in its
earnings release for such prior fiscal year is greater than 16.5%, an option
grant will be awarded. If Return on Equity is greater than 16.5%, 17.5% or
19.0%, each Director of Coastal Financial who was also serving in such capacity
as of September 30 of the preceding year will be granted an option to purchase
625, 1,250 or 1,800 shares of Coastal Financial Common Stock, respectively,
subject to adjustment as provided in the Plan and provided that no Director may
receive grants of options for shares of Coastal Financial Common Stock under the
Plan in excess of 7,500 shares. In computing Return on Equity, net income is
adjusted for any unusual items greater than $250,000, such as changes in
accounting methods, charges for changes in the SAIF insurance fund or any tax
related charges for the bad debt reserve. All such unusual items will be
determined by the Compensation and Benefits Committee.
Coastal Financial reported for the 1996 fiscal year a return on average
equity of 13.97%. However, when excluding the after tax effects of the $1.0
million special charge to recapitalize the SAIF insurance fund, the
Corporation's return on equity was 17.6%. Therefore, at the meeting of the
Compensation and Benefits Committee on October 23, 1996, each Director was
granted an option to purchase 1,250 shares at $20.50 per share.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table sets forth certain information
concerning compensation to all Executive Officers whose total annual salary and
bonus for 1996 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (1)
Annual Compensation
All Other
Name and Directors' Compensa-
Principal Year Salary Bonus Fees tion
Position ($)(1)(2) ($)(3) ($)(4) ($)(5)
-------- --------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Michael C. Gerald, 1996 150,000.00 95,000.00 13,400.00 8,064.00
President, Chief Executive 1995 125,000.00 30,000.00 12,900.00 1,761.00
Officer & Director 1994 107,500.00 25,000.00 12,900.00 3,447.00
Jerry L. Rexroad, 1996 120,000.00 74,000.00 4,000.00 7,328.00
Executive Vice President & 1995 46,875.00 22,500.00 - 23,502.00
Chief Financial Officer 1994 - - - -
Phillip G. Stalvey, 1996 90,000.00 62,600.00 1,000.00 4,280.00
Executive Vice President 1995 75,000.00 22,500.00 100.00 702.00
1994 63,594.00 15,000.00 100.00 1,190.00
Jimmy R. Graham, 1996 80,000.00 57,200.00 - 4,976.00
Executive Vice President 1995 76,444.00 22,500.00 100.00 1,107.00
1994 76,444.00 15,000.00 - 2,003.00
Allen W. Griffin, 1996 80,000.00 57,200.00 - 4,975.00
Executive Vice President 1995 75,000.00 22,500.00 - 1,054.00
1994 63,594.00 15,000.00 - 1,786.00
</TABLE>
- ----------
(1) All compensation, including fringe benefits, are paid by the Bank.
(2) Does not include amounts payable pursuant to an employment agreement in
event of a "change in control" of the Corporation. See "Employment
Agreements."
(3) Reflects bonuses awarded during fiscal year which were paid in subsequent
fiscal year.
(4) Reflects Directors' fees received during the fiscal year for the
Corporation and its Subsidiaries. Does not include perquisites which did
not exceed the lesser of $50,000 or 10% of salary and bonus.
(5) Includes employer contributions to the 401(k) Profit Sharing Plan & Trust
of Coastal Financial Corporation, except, in 1995 for Mr. Rexroad, also
includes moving and temporary living expenses of $23,087.
<PAGE>
Option Grants
The following table set forth the incentive stock options granted under
the Stock Option and Incentive Plan to the Corporation's Executive Officers
during the fiscal year ended September 30, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
Percentage of
Number of Total
Securities Options/ Potential Realizable Value
Underlying SARs at Assumed Annual Rates
Options/ Granted to of Stock Price
SARs Associates Exercise or Appreciation
Granted in Fiscal Base Price Expiration For Option Term (1)
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
(a) (b) (c) (d) (e) (f) (g)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Michael C. Gerald
1996 - - - - - -
1995 15,625 13.07% $12.16 2005 $119,490 $280,410
1994 - - - - - -
Jimmy R. Graham
1996 - - - - - -
1995 7,812 6.54% 12.16 2005 59,744 140,205
1994 - - - - - -
Allen W. Griffin
1996 - - - - - -
1995 7,812 6.54% 12.16 2005 59,744 140,205
1994 - - - - - -
1994
Jerry L. Rexroad
1996 - - - - - -
1995 32,812 26.13% 10.96 2005 226,402 531,304
1994 - - - - - -
Phillip G. Stalvey
1996 - - - - - -
1995 7,812 6.54% 12.16 2005 59,744 140,205
1994 - - - - - -
</TABLE>
- ------------------
(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of Coastal Financial Common Stock and overall market
conditions. There can be no assurance that the amounts reflected in this
table will be achieved.
<PAGE>
Option Exercise Table
The following table sets forth all option exercises under the Stock
Option and Incentive Plan by the Corporation's named Executive Officers during
the fiscal year ended September 30, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired FY-End (#) FY-End ($)
on Value
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- --- --- ------------- -------------
<S> <C> <C> <C> <C>
Michael C. Gerald - - 65,099/15,825 1,110,877/85,500
Jimmy R. Graham - - 34,518/8,325 590,050/42,750
Allen W. Griffin 2,500 42,100 17,613/10,895 268,809/81,917
Jerry L. Rexroad - - 6,562/28,325 52,758/211,050
Phillip G. Stalvey - - 7,529/9,559 104,044/61,556
</TABLE>
Pension Plan Table
The following table indicates the annual retirement benefit that would
be payable under the Retirement Plan (as discussed herein) upon retirement at
age 65 to a participant electing to receive his or her retirement benefit in the
standard form of benefit, assuming various specified levels of Retirement Plan
compensation and various specified years of credited service.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
High - 5 10 Years 20 Years 30 Years 40 Years
Average Benefit Benefit Benefit Benefit
Compensation Service Service Service Service
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 50,000 $ 7,500 $ 15,000 $ 22,500 $ 30,000
100,000 15,000 30,000 45,000 60,000
150,000 22,500 45,000 67,500 90,000
200,000 30,000 60,000 90,000 117,592 *
250,000 37,500 75,000 112,500 117,592 *
</TABLE>
* For calendar year 1996, the maximum retirement benefit permitted under the
Internal Revenue Code of 1986 ("Code"), as amended was $117,592. This amount
is subject to future adjustment by the Internal Revenue Service.
<PAGE>
The Revenue Reconciliation Act of 1993 reduced the amount of an
Associate's compensation that may be taken into account for qualified retirement
plan purposes. For plan years beginning in 1994, a qualified retirement plan can
only take into account $150,000 of compensation.
The Bank maintains a noncontributory defined benefit pension plan for
the benefit of all Associates who have completed at least one year of service
and attained age 21. Benefits under the plan are based on length of service and
salary, which is defined to include a participant's total taxable compensation
as reported to the Internal Revenue Service on Form W-2. Participants are 100%
percent vested in their accrued benefits after five years of service.
At the normal retirement age under the plan, age 65, a participant
would receive an annual benefit equal to 1.5% times the participant's years of
credited service times the average of the participant's highest five years'
salary. The normal form of benefit under the plan is a monthly annuity payable
for the life of the participant with a death benefit payable at the
participant's death. Optional forms of benefit include a lump sum payment and
various alternative annuity payments. The plan also provides for proportionately
reduced benefits in the event of a participant's early retirement prior to
attaining age 65. Benefits under the plan are not subject to reduction from
Social Security or other offset amounts. At September 30, 1996, Messrs. Gerald,
Stalvey, Graham, Griffin and Rexroad had 21.58 years, 13.75 years, 18.50 years,
9.00 years and 5 months of credited service under the pension plan,
respectively.
Employment Agreements
Coastal Federal entered into an employment agreement with Mr. Gerald
upon the completion of the Bank's conversion from mutual to stock form.
Effective September 28, 1996, such employment agreement has an initial term of
three years and provides for an annual base salary of $150,000 subject to annual
adjustment by the Board of Directors. Additionally, on the anniversary of the
commencement date of the agreement, the term of such agreement is extended for
an additional year unless a notice is received from either the Bank or Mr.
Gerald and subject to the review and approval of the Board of Directors. The
agreement also provides for severance payments if employment is terminated
following a change of control. These payments, which will be made promptly after
any change of control, will be equal to 2.99 times the average annual
compensation paid to Mr. Gerald during the five years immediately preceding the
change in control.
Coastal Federal entered into an employment agreement with Mr. Rexroad
effective March 21, 1995. Such employment agreement has an initial term of three
years and provides for an annual base salary of $125,000 subject to annual
adjustment by the Board of Directors. Additionally, on the anniversary of the
commencement date of the agreement, the term of such agreement is extended for
an additional year unless a notice is received from either the Bank or Mr.
Rexroad and subject to the review and approval of the Board of Directors. The
agreement also provides for severance payments if employment is terminated
following a change of control. These payments, which will be made promptly after
any change of control, will be equal to 2.99 times the average annual
compensation paid to Mr. Rexroad during the five years immediately preceding the
change in control.
<PAGE>
Coastal Federal entered into employment agreements with Messrs.
Stalvey, Graham and Griffin effective October 1, 1992. Such employment
agreements have an initial term of one year. Additionally, on the anniversary of
the commencement date of the agreements, the term of such agreements is extended
for an additional year unless a notice is received from either the Bank or
Messrs. Stalvey, Graham or Griffin and subject to the review and approval of the
Board of Directors. The agreement also provides for severance payments if
employment is terminated following a change of control. These payments, which
will be made promptly after any change of control, will be equal to 1.00 times
the average annual compensation paid to Messrs. Stalvey, Graham or Griffin
during the five years immediately preceding the change in control.
The term "control" is defined in the agreement described above as,
among other things, any time during the period of employment when a change of
control is deemed to have occurred under regulations of the Office of Thrift
Supervision ("OTS") or a change in the composition of more than a majority of
the Board of Directors of the Corporation. Based upon the compensation levels of
Messrs. Gerald, Rexroad, Stalvey, Graham and Griffin, the aggregate payment
which would have been payable under the terms of the agreement had a change in
control occurred on September 30, 1996 was approximately $470,279, $514,757,
$92,818, $102,828 and $88,757, respectively.
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the 1934 Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following report and Performance Graph shall
not be incorporated by reference into any such filings.
Report of the Compensation and Benefits Committee. The Compensation and
Benefits Committee of the Board of Directors of the Corporation is responsible
for establishing, implementing and monitoring all compensation policies of the
Corporation and its primary operating subsidiary, Coastal Federal. The Committee
is also responsible for evaluating the performance of the Chief Executive
Officer of the Corporation and recommending appropriate compensation levels. The
Chief Executive Officer evaluates the performance of Executive Officers of the
Corporation and recommends individual compensation levels to the Compensation
and Benefits Committee.
The Compensation and Benefits Committee believes that a compensation
plan for Executive Officers should take into account management skills,
long-term performance results and Shareholder returns. Compensation policies
must be maintained to promote: 1) the attraction and retention of highly
qualified Executives; 2) motivation of Executives that is related to the
performance of the individual and the Corporation; 3) current and long-term
performance; and 4) a financial interest in the success of the Corporation
similar to the interest of its Shareholders.
The Corporation's current compensation plan involves a combination of
salary and bonus to reward short-term performance and grants of stock options to
encourage long-term performance. The salary levels of the Executive Officers are
designed to be competitive within the financial services industry. Compensation
surveys are utilized to determine appropriate salary adjustments. A 401(k) plan,
in which all Executive Officers and Associates of Coastal Financial participate
has been designed to align their interests with those of the Shareholders of the
Corporation. Matching contributions to the 401(k) plan are paid based upon the
attainment of established levels of Return on Average Shareholders' Equity
("Return on Equity"). The Corporation's Executive Bonus Plan provides for the
<PAGE>
payment of a bonus on a graduated scale if the Corporation's consolidated Return
on Average Equity equals or exceeds 15.0%, excluding any unusual items as
determined by the Corporation's Board of Directors. Excluding the after tax
charge of $1.0 million for the recapitalization of the SAIF insurance fund, the
Corporation's Return on Equity in fiscal 1996 was 17.6%. This compares to a
Return on Equity in fiscal 1995 of 15.54%. The Executive Bonus Plan escalates
upon the attainment of higher levels of Return on Equity. Stock options are the
Corporation's primary long-term compensation program designed to reward
Executive performance consistent with performance that benefits Shareholders.
Awards of stock options are intended to provide Executives with increased
motivation and incentive to exert their best efforts on behalf of the
Corporation by enlarging their personal stake in its success through the
opportunity to increase their stock ownership in the Corporation. Options issued
to Executives are at a price equal to the closing price of the Corporation's
stock on the date of grant in order to ensure that any value derived from the
grant is realized by Shareholders generally. The amount of options granted to an
Executive Officer is based upon the Officer's performance and relative
responsibilities within the Corporation. Options generally vest over a period of
five years.
During the fiscal year ended September 30, 1996, the base compensation
of Michael C. Gerald, President and Chief Executive Officer of the Corporation,
Jerry L. Rexroad, Executive Vice President and Chief Financial Officer, Phillip
G. Stalvey, Executive Vice President, Jimmy R. Graham, Executive Vice President,
and Allen W. Griffin, Executive Vice President was $150,000, $120,000, $90,000,
$80,000, and $80,000 respectively. For fiscal 1997, at Mr. Gerald's request,
there was no base compensation increase for Mr. Gerald; however, there was a
$5,000 base compensation increase for Messrs. Rexroad, Stalvey, Graham, and
Griffin.
Based upon the factors discussed above, the Compensation and Benefits
Committee continues to believe that Mr. Gerald's compensation package as Chief
Executive Officer and President of the Corporation appropriately reflects the
Company's short term and long term performance goals.
The Compensation and Benefits Committee
James C. Benton
Harold D. Clardy
J.T. Clemmons
James P. Creel
Wilson B. Springs
Compensation Committee Interlocks and Insider Participation. There are
no interlocks or insider participation with respect to the Compensation and
Benefits Committee of the Board of Directors of the Corporation.
Performance Graph. The following graph compares the Corporation's
cumulative Shareholder return on its Common Stock with the return on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
Composite Index and a peer group, the NASDAQ's Bank Index. Total return assumes
the reinvestment of all dividends.
[GRAPHIC OMITTED]
<PAGE>
TRANSACTIONS WITH MANAGEMENT
Effective with the passage of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA"), Officers and Directors of a
financial institution are prohibited from receiving any loan or extension of
credit at other than market rates and terms. Coastal Federal adopted a policy
effective on the date of such legislation to discontinue the granting of
preferred loans to Directors and Officers. Effective January 1, 1990, Directors,
Officers and Associates were no longer able to receive any loans on preferred
terms. The terms of any loans existing prior to January 1, 1990 will not change,
as allowed by the legislation.
These loans were made in the ordinary course of business and were made
on substantially the same terms, except for interest rates or the waiver of
fees, as those of comparable transactions and do not involve more than the
normal risk of collectibility or contain other unfavorable features.
At September 30, 1996, Coastal Federal had $1.3 million outstanding in
loans to Executive Officers and Directors, or 4% of Shareholders' equity.
Director nominee James H. Dusenbury is a partner in the law firm of
Dusenbury, Hendrix & Little located in Myrtle Beach, South Carolina. Mr.
Dusenbury serves as the Bank's General Counsel. During the year ended September
30, 1996, Dusenbury, Hendrix & Little received approximately $5,900 for legal
services rendered to the Bank.
<PAGE>
Set forth below is certain information relating to loans made to
Executive Officers and Directors of the Bank and their Associates whose total
aggregate loan balances exceeded $60,000 at any time during the fiscal year
ended September 30, 1996.
<TABLE>
<CAPTION>
Highest Balance
Outstanding
During
Name and Date Opening Interest Rate Fiscal
Position Type of Loan Originated Balance Charged (%) 1996
-------- ------------ ---------- ------- ----------- ----
<S> <C> <C> <C> <C> <C>
James P. Creel Mortgage 8-25-71 $ 60,000 $ 25,354.95
Director Mortgage 8-30-93 170,000 7.25 156,457.37
Equity Line 9-08-89 75,000 10.34 130,399.70
Line of Credit 10-30-92 limit 18.00 1,444.76
1,500
Allen Griffin Line of Credit 12-04-87 limit 100 18.00 100.00
Executive Vice Line of Credit 6-24-88 limit 500 18.00 505.52
President Mortgage 3-03-92 63,900 8.00 59,899.26
Line of Credit 9-08-95 limit 1,000 18.00 991.26
James H. Dusenbury Commercial 11-03-89 998,955 10.60 859,410.20
Advisory Director (real estate)
Consumer 8-31-94 75,000 6.50 75,000
Phillip Stalvey Line of Credit 7-05-90 limit 500 18.00 0.00
Executive Vice Equity Line 8-10-90 19,600 10.34 14,323.04
President Mortgage 3-31-93 60,500 7.375 53,664.48
Wilson B. Springs Mortgage 6-28-78 26,567 9.00 17,394.00
Director Equity Line 9-21-90 98,127 10.34 101,409.49
Line of Credit 2-03-94 limit 1,500 18.00
Unsecured 12-11-95 25,000 10.75 0.00
Unsecured 6-10-96 35,000 9.25 25,000
35,000
G. David Bishop Mortgage 2-23-93 350,000 8.25 154,826.78
Director Equity Line 8-22-96 100,000 6.50 0.00
Line of Credit 10-16-95 limit 1,500 12.15 0.00
<PAGE>
<CAPTION>
Outstanding
Name and Prevailing Balance
Position Rate (%) at 9/30/96
-------- -------- ----------
<S> <C> <C>
James P. Creel 8.00 $ 21,968.98
Director 7.25 149,570.58
10.34 121,345.48
10.34 1,367.41
Allen Griffin 18.00 0.00
Executive Vice 18.00 362.85
President 8.00 59,033.35
18.00 805.71
James H. Dusenbury 10.60 828,623.23
Advisory Director
6.50 74,743.30
Phillip Stalvey 18.00 0.00
Executive Vice 10.34 0.00
President 7.375 0.00
Wilson B. Springs 9.00 14,401.00
Director 10.34 25,703.01
18.00 0.00
10.75 0.00
9.25 0.00
G. David Bishop 8.25 125,771.64
Director 6.50 0.00
12.15 0.00
</TABLE>
<PAGE>
PROPOSAL 2 - RATIFICATION OF AN AMENDMENT TO THE
1990 STOCK OPTION AND INCENTIVE PLAN
On January 28, 1991 the Shareholders of the Corporation approved the
1990 Stock Option and Incentive Plan (the "1990 Plan"). On January 23, 1995, the
Shareholders of the Corporation adopted an amendment to the 1990 Plan which
increased the number of shares of Common Stock with respect to which options may
be granted from 260,324 shares to 424,387 shares. On November 20, 1996, the
Board of Directors of the Corporation approved, subject to Shareholder approval,
a second amendment to the 1990 Plan which increases the number of shares of
Common Stock with respect to which options may be granted from 424,387 shares to
624,387 shares. At November 20, 1996, no shares remain reserved for future
option grants. The Board believes that the 1990 Plan has been effective in
helping the Corporation to attract, retain and motivate certain Officers and
Associates and the Board would like to continue to be able to grant options
under the 1990 Plan in the future.
The essential features of the 1990 Plan are outlined below but such
description is qualified in its entirety by reference to the text of the 1990
Plan.
The 1990 Plan was originally adopted by the Bank in connection with the
mutual-to-stock conversion of the Bank in 1990. The 1990 Plan was assumed by the
Corporation upon its acquisition of the Bank in 1991. Options are intended to be
granted to Officers, key Associates and other persons. As of November 20, 1996,
the 1990 Plan participants included 6 Executive Officers and 35 Associates.
Options granted under the 1990 Plan may be Incentive Stock Options
within the meaning of Section 422 of the Internal Revenue Code (the "Code") or
Non-Incentive Stock Options. Each award shall be on such terms and conditions
consistent with the 1990 Plan as the Committee administering the 1990 Plan may
determine. The purposes of the 1990 Plan are to attract and retain key Officers
and Associates and to encourage their continued participation in the success of
the Corporation and its subsidiaries by facilitating their purchase of an equity
interest in the Corporation.
Shares issued upon the exercise of stock options may be either
authorized but unissued shares, or reacquired shares held by the Corporation in
its treasury. Any shares subject to an award which expires or is terminated
unexercised will again be available for issuance under the 1990 Plan. No award
or any right or interest therein is assignable or transferable except by will or
the laws of descent and distribution.
The 1990 Plan is administered by a Committee consisting of three
Directors of the Corporation appointed by the Board. The Committee shall from
time to time determine, at its sole discretion, the Officers, key Associates and
other persons who shall be granted Options or Awards under the 1990 Plan, the
form, content, terms and number of such options and whether Options granted to
each such Associate under the 1990 Plan will be Incentive and/or Non-Incentive
Stock Options. In selecting participants and in determining the number of shares
of Common Stock to be granted to each such participant pursuant to each Award
under the 1990 Plan, the Committee, in its sole discretion, may consider the
nature of the services rendered by each such participant, each such
participant's current and potential contribution to the Corporation, and such
<PAGE>
other factors as the Committee may, in its sole discretion, deem relevant.
Officers, key Associates or other persons who have been granted an award of
options may, if otherwise eligible, be granted additional options. It is
intended that the Committee will have discretion to determine other persons
eligible to receive awards who may include Associates of the Corporation, other
than Officers and key Associates, who make a substantial contribution to the
Corporation.
Stock Options
Under the terms of the 1990 Plan, stock options not exercised within
ten years from the date of grant will expire. In general, Stock Options will not
be exercisable after the expiration of their terms. In the event that the
participant ceases to serve as an Associate of the Corporation or its
subsidiaries for any reason other than death or disability, an exercisable
Incentive Stock Option will continue to be exercisable for three months, but in
no event after the expiration date of the Option. In the event of the death of a
participant during such service or within three months following termination, or
the disability of a participant which results in termination of employment, an
exercisable Incentive Stock Option will continue to be exercisable for one year,
or until its expiration date, if earlier, to the extent exercisable by the
participant immediately prior to his death or disability. The terms and
conditions of a Non-Incentive Stock Option subsequent to a participant's
termination of employment for any reason will be determined by the Stock Option
Committee.
The exercise price for the purchase of shares subject to an Incentive
Stock Option at the date of grant may not be less than 100 percent of the market
value of the shares covered by the Incentive Stock Option on that date. Pursuant
to the 1990 Plan, the exercise price per share subject to a Non-Incentive Stock
Option shall be the price as the Committee may determine in its sole discretion.
The exercise price of Incentive and Non-Incentive Stock Options must be paid for
in full in cash or shares of Common Stock, or a combination of both, as
determined by the Committee.
Effect of Merger and Other Adjustments
Shares as to which awards may be granted under the 1990 Plan and shares
then subject to awards will be adjusted by the Committee in the event of any
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split or other change in the corporate structure of the Corporation.
Provisions of the 1990 Plan Which Could Deter a Hostile Takeover Attempt
Certain provisions of the 1990 Plan may be regarded as having a
deterrent effect in the event of a hostile attempt to acquire control of the
Corporation. The 1990 Plan provides that in the event of any change in control
or imminent change in control of the Corporation, as defined, all outstanding
options become immediately exercisable. For purposes of this section, "change in
control" means: (i) the execution of an agreement for the sale of all, or a
material portion, of the assets of the Corporation; (ii) the execution of an
agreement for a merger or recapitalization of the Corporation or any merger or
recapitalization whereby the Corporation is not the surviving entity; (iii) a
change in control of the Corporation as otherwise defined or determined by the
OTS or regulations promulgated by it; or (iv) the acquisition of the "beneficial
<PAGE>
ownership" (as that term is defined in Section 13(d) of the 1934 Act) of 25
percent or more of the outstanding voting securities of the Corporation by any
person or by persons acting as a group within the meaning of Section 13(d) of
the 1934 Act. For purposes of Section 13(d), "imminent change in control" refers
to any offer or announcement, oral or written, by any person or persons acting
as a group, to acquire control of the Corporation. In the event of any change in
control or certain other extraordinary corporate actions, the Committee, in its
discretion, has the power to adjust the number of shares subject to option or
the per share exercise price, to cancel previously granted options and to make
other adjustments in connection with the 1990 Plan.
Amendment and Termination of the 1990 Plan
The Board of Directors of the Corporation may at any time modify, amend
or terminate the 1990 Plan, but may not, without the prior approval of the
stockholders, make any amendment which increases the total number of shares
which may be subject to awards or which may be subject to awards to participants
who are not full-time Associates or which changes the class of persons eligible
to participate in the 1990 Plan. Unless previously terminated, the 1990 Plan
shall continue in effect for a term of ten years, after which no further awards
may be granted under the 1990 Plan.
Federal Income Tax Consequences of Non-Incentive Options
An option holder, Officer or Director who is granted a Non-Incentive
Stock Option under the Option Plan will not realize any income for Federal
income tax purposes on the grant of an option. An option holder will realize
ordinary income for Federal income tax purposes on the exercise of an option,
provided the shares are not then subject to a substantial risk of forfeiture
within the meaning of Section 83 of the Internal Revenue Code ("Code") ("Risk of
Forfeiture"), in an amount equal to the excess, if any, of the fair market value
of the shares of Common Stock on the date of exercise over the exercise price
thereof. If the shares are subject to a Risk of Forfeiture on the date of
exercise, the option holder will realize ordinary income for the year in which
the shares cease to be subject to a Risk of Forfeiture in an amount equal to the
excess, if any, of the fair market value of the shares at the date they cease to
be subject to a Risk of Forfeiture over the exercise price, unless the option
holder shall have made a timely election under Section 83 of the Code to include
in his income for the year of exercise an amount equal to the excess of the fair
market value of the shares of Common Stock on the date of exercise over the
exercise price. The amount realized for tax purposes by an option holder by
reason of the exercise of a Non-Incentive Stock Option granted under the Option
Plan is subject to withholding by the Corporation and the Corporation is
entitled to a deduction in an amount equal to the income so realized by an
option holder provided all necessary withholding requirements under the Code are
met.
Provided that an Associate satisfies certain holding period
requirements provided by the Code, an Associate will realize long-term capital
gain or loss, as the case may be, if the shares issued upon exercise of a
Non-Incentive Stock Option are disposed of more than one year after (i) the
shares are transferred to the Associate or (ii) if the shares were subject to a
Risk of Forfeiture on the date of exercise and a valid election under Section 83
of the Code shall not have been made, the date as of which the shares cease to
be subject to a Risk of Forfeiture. The amount recognized upon such disposition
will be the difference between the option holder's basis in such shares and the
amount realized upon such disposition. Generally, an option holder's basis in
the shares will be equal to the exercise price plus the amount of income
recognized upon exercise of the option.
<PAGE>
Federal Income Tax Consequences of Incentive Stock Options
An Incentive Stock Option holder who meets the eligibility requirements
of Section 422 of the Code will not realize income for Federal income tax
purposes, and the Corporation will not be entitled to a deduction, on either the
grant or the exercise of an Incentive Stock Option. If the Incentive Stock
Option holder does not dispose of the shares acquired within two years after the
date the Incentive Stock Option was granted or within one year after the
transfer of the shares, (i) any proceeds realized on a sale of such shares in
excess of the option price will be treated as long-term capital gain and (ii)
the Corporation will not be entitled to any deduction for Federal income tax
purposes with respect to such shares.
If an Incentive Stock Option holder disposes of shares during the
two-year or one-year periods referred to above (a "Disqualifying Disposition"),
the Incentive Stock Option holder will not be entitled to the favorable tax
treatment afforded to incentive stock options under the Code. Instead, the
Incentive Stock Option holder will realize ordinary income for Federal income
tax purposes in the year the Disqualifying Disposition is made, in an amount
equal to the excess, if any, of the fair market value of the shares of Common
Stock on the date of exercise over the exercise price.
An Incentive Stock Option holder generally will recognize long-term
capital gains or loss, as the case may be, if the Disqualifying Disposition is
made more than one year after the shares are transferred to the Incentive Stock
Option holder. The amount of any such gain or loss will be equal to the
difference between the amount realized on the Disqualifying Disposition and the
sum of (x) the exercise price and (y) the ordinary income realized by the
Incentive Stock Option holder as the result of the Disqualifying Disposition.
The Corporation will be allowed in the taxable year of a Disqualifying
Disposition a deduction in the same amount as the ordinary income recognized by
the Incentive Stock Option holder provided all necessary withholding
requirements are met.
Notwithstanding the foregoing, if the Disqualifying Disposition is made
in a transaction with respect to which a loss (if sustained) would be recognized
to the Incentive Stock Option holder, then the amount of ordinary income
required to be recognized upon the Disqualifying Disposition will not exceed the
amount by which the amount realized from the disposition exceeds the exercise
price. Generally, a loss may be recognized if the transaction is not a "wash"
sale, a gift or a sale between certain persons or entities classified under the
Code as "related persons".
Alternative Minimum Tax
For purposes of computing the alternative minimum tax with respect to
shares acquired pursuant to the exercise of Incentive Stock Options, the
difference between the fair market value of the shares on the date of exercise
over the exercise price will be an item of tax preference in the year of
exercise if the shares are not subject to a Risk of Forfeiture; if the shares
are subject to a Risk of Forfeiture, the amount of the tax preference taken into
account in the year the Risk of Forfeiture ceased will be the excess of the fair
market value of the shares at the date they cease to be subject to a Risk of
Forfeiture over the exercise price. The basis of the shares for alternative
minimum tax purposes, generally, will be an amount equal to the exercise price,
increased by the amount of the tax preference taken into account in computing
the alternative minimum taxable income. The rate of tax applied in general to
alternative minimum taxable income is 26% to 28%.
<PAGE>
The vote of a majority of the stockholders of the Corporation present
or represented by proxy at the Annual Meeting is required for approval of
Proposal 2.
The Board of Directors recommends a vote "FOR" the ratification of the
amendment to the 1990 Stock Option and Incentive Plan.
OTHER MATTERS
The Board of Directors of the Corporation is not aware of any business
to come before the Meeting other than those matters described in this Proxy
Statement. However, if any other matters should properly come before the
Meeting, it is intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the judgment of the person or persons voting
the proxies.
FINANCIAL STATEMENTS
The cost of solicitation of proxies will be borne by the Corporation.
In addition to solicitations by mail, Directors, Officers and Associates of the
Corporation may solicit proxies personally or by telephone without additional
compensation.
The Corporation's 1996 Annual Report to Shareholders, including
consolidated financial statements, has been mailed to all Shareholders of record
as of the close of business on November 30, 1996. Any Shareholder who has not
received a copy of such Annual Report may obtain a copy by writing to the
Secretary of the Corporation. Such Annual Report is not to be treated as part of
the proxy solicitation material or as having been incorporated herein by
reference.
SHAREHOLDERS PROPOSALS
In order to be eligible for inclusion in the Corporation's proxy
materials for next year's Annual Meeting of Shareholders, any Shareholder
proposal to take action at such meeting must be received at the Corporation's
main office at 2619 Oak Street, Myrtle Beach, South Carolina, no later than
August 25, 1997. Any such proposals shall be subject to the requirements of the
proxy solicitation rules adopted under the 1934 Act, as amended.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Susan J. Cooke
-----------------
SUSAN J. COOKE
SECRETARY
Myrtle Beach, South Carolina
December 13, 1996
- --------------------------------------------------------------------------------
FORM 10-K
A COPY OF THE FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE FURNISHED WITHOUT CHARGE TO SHAREHOLDERS AS OF THE RECORD DATE UPON
WRITTEN REQUEST TO SUSAN J. COOKE, SECRETARY, COASTAL FINANCIAL CORPORATION,
2619 OAK STREET, MYRTLE BEACH, SOUTH CAROLINA 29577-3129.
- --------------------------------------------------------------------------------
<PAGE>
REVOCABLE PROXY
COASTAL FINANCIAL CORPORATION
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 27, 1997
The undersigned hereby appoints the official proxy committee, consisting of
all of the members of the Board of Directors of Coastal Financial Corporation,
Myrtle Beach, South Carolina, with full powers of substitution to act as
attorneys and proxies for the undersigned, to vote all shares of Common Stock of
Coastal Financial Corporation which the undersigned is entitled to vote at the
Annual Meeting of Shareholders, to be held at the Myrtle Beach Martinique, 7100
N. Ocean Boulevard, Myrtle Beach, South Carolina, on Monday, January 27, 1997,
at 2:00 p.m., Eastern Time, and at any and all adjournments thereof, as follows:
1. The election as directors of all nominees listed (except as marked to the
contrary below): For a Three Year Term: J.T. Clemmons, G. David Bishop,
Samuel A. Smart For a One Year Term: James H. Dusenberry
[ ] FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
INSTRUCTION:To withhold authority to vote for any individual nominee, mark "For
All Except"and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. The ratification of an amendment to the 1990 Stock Option and Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSALS.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING. THIS PROXY ALSO CONFERS
DISCRETIONARY AUTHORITY ON THE OFFICIAL PROXY COMMITTEE TO VOTE WITH RESPECT TO
THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEE IS UNABLE TO SERVE OR
FOR GOOD CAUSE WILL NOT SERVE, AND MATTERS INCIDENT TO THE CONDUCT OF THE 1997
ANNUAL MEETING.
Please be sure to sign and date this Proxy in the box below.
Please be sure to sign and date this Proxy in the box below.
__________________________________
Date
__________________________________
Stockholder sign above
__________________________________
Co-holder (if any) sign above
<PAGE>
Detach above card, sign, date and mail in postage paid envelope provided.
COASTAL FINANCIAL CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Should the undersigned be present and elect to vote at the Annual Meeting or
at any adjournment thereof and after notification to the Secretary of the
Corporation at the Meeting of the Shareholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The above signed acknowledges receipt from the Corporation prior to the
execution of this proxy, of a notice of the Meeting, a proxy statement dated
December 13, 1996 and the 1996 Annual Report to Shareholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
