EXHIBIT 13
ANNUAL REPORT TO STOCKHOLDERS FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 1996
COASTAL FINANCIAL CORPORATION
1996 ANNUAL REPORT
-- DEDICATION --
COASTAL FINANCIAL CORPORATION
A QUEST FOR EXCELLENCE
GREAT PEOPLE
GREAT MARKETS
[GRAPHIC-PHOTOGRAPH]
The ultimate source of our success at Coastal Financial is,
without question, our demonstrated ability to attract, develop
and retain the very best and brightest people.
Their total commitment to Exceeding the Expectations of
our Customers assures a continued focus on our Basic
Corporate Objective of Maximizing The Value Of Our
Shareholders' Investment and our Long-Term Goal Of
Being The Best Financial Services Company In Our Marketplace.
1996 was the best year in Coastal Financial's history and
continued to showcase our capacity for turning
potential into accomplishment.
Our great people, great markets and overriding commitment to
our QUEST FOR EXCELLENCE operating philosophy has again produced
outstanding results for our Shareholders and will help to insure that
our best years are yet to come.
[GRAPHIC-CHART]
The value of one share of Coastal Financial Corporation's Capital Stock
purchased at $10.00 in the initial public offering, and affected by stock
dividends, stock splits, and reinvested cash dividends, was $134.94 based upon
NASDAQ Quotations at September 30, 1996. The foregoing reflects historical
results and may not be indicative of future stock prices.
FINANCIAL HIGHLIGHTS
The following table sets forth certain information concerning the financial
position of the Company (including data from operations of its subsidiaries) as
of and for the dates indicated. The consolidated data is derived in part from,
and should be read in conjunction with, the Consolidated Financial Statements of
the Company and its subsidiaries presented herein.
At September 30,
---------------------------------------------
1992 1993 1994 1995
---- ---- ---- ----
(dollars in thousands, except per share data)
FINANCIAL CONDITION DATA:
Total assets................................................................ $328,175 $335,284 $374,980 $401,201
Loans receivable, net....................................................... 266,722 280,425 331,175 356,819
Mortgage-backed securities.................................................. 14,640 3,525 794 12,776
Cash, interest-bearing deposits and investment securities................... 28,345 27,580 29,316 13,530
Deposits.................................................................... 255,720 266,855 247,385 273,099
Borrowings.................................................................. 48,525 41,906 98,446 95,997
Stockholders' equity........................................................ 18,452 21,829 23,104 24,820
OPERATING DATA:
Interest income............................................................. $ 27,773 $ 25,967 $ 24,562 $ 30,328
Interest expense............................................................ 16,572 12,876 11,548 17,272
-------- -------- -------- --------
Net interest income......................................................... 11,201 13,091 13,014 13,056
Provision for loan losses................................................... 645 1,389 510 202
-------- -------- -------- --------
Net interest income after provision for loan losses......................... 10,556 11,702 12,504 12,854
-------- -------- -------- --------
Other income:
Fees and service charges on loans and deposit accounts...................... 694 811 1,001 1,051
Gain on sales of loans receivable........................................... 284 1,125 411 39
Gain (loss) on sales of investment securities............................... 5 (29) -- --
Gain on sales of mortgage-backed securities, net............................ -- 238 54 --
Real estate operations...................................................... (482) (176) 341 876
Other income................................................................ 1,367 1,209 1,022 1,284
-------- -------- -------- --------
Total other income.......................................................... 1,868 3,178 2,829 3,250
Total general and administrative expense.................................... 8,268 9,272 10,279 10,152
-------- -------- -------- --------
Earnings before income taxes................................................ 4,156 5,608 5,054 5,952
Income taxes................................................................ 1,641 2,270 1,906 2,232
-------- -------- -------- --------
Net earnings before cumulative effect of adopting FASB 109.................. 2,515 3,338 3,148 3,720
-------- -------- -------- --------
Cumulative effect of adopting FASB 109...................................... -- -- 664 --
Net income.................................................................. $ 2,515 $ 3,338 $ 3,812 $ 3,720
======== ======== ======== ========
Net earnings per common share before cumulative effect of adopting FASB
109....................................................................... $ .71 $ .91 $ .86 $ 1.05
Cumulative effect of adopting FASB 109...................................... -- -- .18 --
Net earnings per common share............................................... $ .71 $ .91 $ 1.04 $ 1.05
======== ======== ======== ========
Cash dividends per common share............................................. -- -- $ .19 $ .38
Weighted average shares outstanding......................................... 3,522 3,678 3,661 3,555
======== ======== ======== ========
1996
----
FINANCIAL CONDITION DATA:
Total assets................................................................ $459,712
Loans receivable, net....................................................... 370,368
Mortgage-backed securities.................................................. 27,029
Cash, interest-bearing deposits and investment securities................... 38,332
Deposits.................................................................... 313,430
Borrowings.................................................................. 109,886
Stockholders' equity........................................................ 27,681
OPERATING DATA:
Interest income............................................................. $ 34,720
Interest expense............................................................ 19,091
--------
Net interest income......................................................... 15,629
Provision for loan losses................................................... 790
--------
Net interest income after provision for loan losses......................... 14,839
--------
Other income:
Fees and service charges on loans and deposit accounts...................... 1,415
Gain on sales of loans receivable........................................... 990
Gain (loss) on sales of investment securities............................... (6)
Gain on sales of mortgage-backed securities, net............................ 189
Real estate operations...................................................... 345
Other income................................................................ 1,699
--------
Total other income.......................................................... 4,632
Total general and administrative expense.................................... 13,586
--------
Earnings before income taxes................................................ 5,885
Income taxes................................................................ 2,164
--------
Net earnings before cumulative effect of adopting FASB 109.................. 3,721
--------
Cumulative effect of adopting FASB 109...................................... --
Net income.................................................................. $ 3,721
========
Net earnings per common share before cumulative effect of adopting FASB
109....................................................................... $ 1.04
Cumulative effect of adopting FASB 109...................................... --
Net earnings per common share............................................... $ 1.04
========
Cash dividends per common share............................................. $ .44
========
Weighted average shares outstanding......................................... 3,595
========
Earnings per share and weighted average shares outstanding have been
restated to reflect 10%, 15% and 5% common stock dividends declared on November
29, 1991, August 28, 1992 and May 30, 1995, respectively, three 3 for 2 common
stock dividends declared on January 27, 1993, August 18, 1993 and January 7,
1994, respectively, and two 5 for 4 stock dividends declared on January 9, 1996
and June 20, 1996.
KEY OPERATING RATIOS:
The table below sets forth certain performance ratios of the Company for the
periods indicated.
At or for Years Ended September 30,
---------------------------------------------
1992 1993 1994 1995
---- ---- ---- ----
Other Data:
Return on assets (net income divided by average assets) before impact of
adopting FASB 109......................................................... 0.78% 1.00% 0.92% 0.94%
Including effect of adopting FASB 109....................................... N/A N/A 1.12% N/A
Return on average equity (net income divided by average equity) before
impact of adopting FASB 109............................................... 14.71% 16.59% 13.88% 15.54%
Including effect of adopting FASB 109....................................... N/A N/A 16.80% N/A
Average equity to average assets............................................ 5.30% 6.08% 6.66% 6.08%
Tangible book value per share............................................... $ 5.34 $ 6.27 $ 6.82 $ 7.40
Dividend payout ratio....................................................... N/A N/A 16.19% 34.46%
Interest rate spread (difference between average yield on interest-earning
assets and average cost of interest-bearing liabilities).................. 3.73% 4.15% 4.09% 3.52%
Net interest margin (net interest income as a percentage of average
interest-earning assets).................................................. 3.72% 4.20% 4.12% 3.62%
Allowance for loan losses to total loans at end of period................... 0.69% 0.98% 1.01% 1.00%
Ratio of non-performing assets to total assets (1).......................... 1.83% 0.75% 0.56% 0.53%
Tangible capital ratio...................................................... 5.47% 6.27% 5.94% 6.13%
Core capital ratio.......................................................... 5.47% 6.27% 5.94% 6.13%
Risk-based capital ratio.................................................... 9.05% 10.57% 10.11% 10.45%
Number of:
Real estate loans outstanding............................................. 5,460 5,647 6,614 6,688
Deposit accounts.......................................................... 33,274 32,960 33,618 39,881
Number of full service offices............................................ 8 8 8 8
1996
----
Other Data:
Return on assets (net income divided by average assets) before impact of
adopting FASB 109......................................................... 0.85%
Including effect of adopting FASB 109....................................... N/A
Return on average equity (net income divided by average equity) before
impact of adopting FASB 109............................................... 13.97%
Including effect of adopting FASB 109....................................... N/A
Average equity to average assets............................................ 6.10%
Tangible book value per share............................................... $ 8.04
Dividend payout ratio....................................................... 38.51%
Interest rate spread (difference between average yield on interest-earning
assets and average cost of interest-bearing liabilities).................. 3.76%
Net interest margin (net interest income as a percentage of average
interest-earning assets).................................................. 3.86%
Allowance for loan losses to total loans at end of period................... 1.11%
Ratio of non-performing assets to total assets (1).......................... 0.17%
Tangible capital ratio...................................................... 5.93%
Core capital ratio.......................................................... 5.93%
Risk-based capital ratio.................................................... 10.41%
Number of:
Real estate loans outstanding............................................. 5,741
Deposit accounts.......................................................... 41,755
Number of full service offices............................................ 9
(1) Nonperforming assets consist of nonaccrual loans 90 days or more past due
and real estate acquired through foreclosure.
DEAR FRIENDS
This year's Annual Report focuses on our exceptional people and the dynamic
markets in which we do business.
It was truly a great year. Our stock price increased 56%. Our business
flourished. And, most importantly, our people grew personally and professionally
by facing and conquering the significant challenges which were encountered.
Since 1991, our operating earnings
have increased at an annualized rate in
excess of 17%. Even more exciting is the
fact that, during that same period of
time, the value of Coastal Financial
Corporation's stock has grown at a
compound annual rate of over 68%.
[GRAPHIC-PHOTOGRAPH]
Another noteworthy measure of our
success is evidenced by the growth of
our market capitalization, which has
increased from $4.6 million in October
1990, the date of our initial public
offering, to $65.4 million at the close
of this fiscal year. Simply stated . . .
an initial investment of $1,000 in
October 1990 would have grown to $13,494
at September 30, 1996.
Now that's what I call maximizing the value of Shareholders' Investment, and
it is all due to our great people, great markets and overriding commitment to
our QUEST FOR EXCELLENCE operating philosophy.
1996 . . . OUR BEST YEAR YET
The real news for 1996 was the strong
checking account and loan portfolio growth which
resulted primarily from the restructuring of our
operating environment to create a stronger focus
on the sales and marketing of financial
services. The result was a year in which we
[GRAPHIC-PHOTOGRAPH] achieved dramatic gains in both operating
earnings and Shareholder value.
Our financial performance during fiscal 1996
again met our high expectations and well
positions us to aggressively address future
opportunities.
Noteworthy Financial Results for Fiscal 1996:
-- The market price of Coastal [GRAPHIC-PERFORMANCE GRAPH]
Financial Corporation's stock increased
56%. This compares with an 18.7%
increase in the NASDAQ Bank Index and a
17.6% increase in the NASDAQ Composite
Index during the same period.
-- The value of Coastal Financial
Corporation's common stock has grown at
a compound annual rate of over 68%
during the past five years.
-- An increase of 10.1% in cash
dividends paid per common share.
-- The payment of two 5 for 4 stock
splits in the form of 25% stock
dividends.
-- Net earnings of $3.7 million or [GRAPHIC-CHART}
$1.04 per share, after payment of a
special, one-time FDIC assessment of
$1.0 million, after tax. Excluding this
non-recurring charge, net earnings for
fiscal 1996 increased 27% over the prior
year.
-- Shareholders' equity advanced
11.5% to $27.7 million.
-- Book value per share grew 8.7% to [GRAPHIC-CHART}
$8.04
-- A 14.6% growth in total assets to [GRAPHIC-CHART}
$459.7 million.
-- Loans receivable increased 3.8% to
$370.4 million. Additionally, included
in mortgage-backed securities are $6.2
million of loans which were securitized
in fiscal 1996.
-- Deposits grew 14.8% to the highest
level in the Company's history.
-- Transaction deposits grew by 60%
in fiscal 1996.
-- Non-performing Assets to Total [GRAPHIC-CHART}
Assets decreased to 0.17%.
-- Allowance for Loan Losses to Net [GRAPHIC-CHART}
Loans increased to 1.11%.
-- The Company had Loan Charge Offs
of .05% in 1996.
As good as these results are, what about the future? We believe our
performance during 1996 was a pretty good indication of the good things yet to
come. But before we look forward, let's review our business philosophy and look
back at this past year.
OUR GUIDING VISION
Charles Darwin once wrote "It is not [GRAPHIC-PHOTOGRAPH]
the strongest of the species that
survive, nor the most intelligent, but
the one most responsive to change."
As a financial services leader, we
are constantly focusing on current and
future needs and continually developing
new ideas to keep our Customers happy.
Our QUEST FOR EXCELLENCE operating
philosophy assures that we view change
and constant improvement as essential to
the achievement of our long-term
objectives. Despite our success, we
continue to work hard to keep our
organization efficient, assure that our
most experienced leaders remain close to
our Customers and maintain a fresh
outlook and entrepreneurial spirit.
[GRAPHIC-PHOTOGRAPH] In our ongoing effort to improve upon
our performance, Coastal Financial
Corporation works diligently to create
an exciting and highly charged corporate
atmosphere which is both challenging and
rewarding.
Our unique approach to business has
enabled us to develop the kind of
unencumbered, flexible operating style
that can achieve superior results.
Instead of layers of bureaucracy, we are
substituting significant levels of
personal responsibility to everyone in
the organization. This environment will
help to assure that we remain fast,
flexible and totally Customer focused.
We are absolutely convinced that this approach will help to assure that our
best years are yet to come.
A LOOK AT 1996
It really was a great year for Coastal Financial, especially when you
consider some of the obstacles we overcame.
For starters, we continued to operate [GRAPHIC-PHOTOGRAPH]
in an inequitable environment where
other financial services companies,
whose deposits were insured by the FDIC
under the Bank Insurance Fund (BIF) were
allowed a significant advantage in
premium cost as compared to companies,
such as Coastal Federal, whose deposits
are insured by the FDIC under the
Savings Association Insurance Fund
(SAIF). During fiscal 1996, Coastal
Federal paid $622,000 for FDIC deposit
insurance premiums, while other
financial services companies, with the
same level of deposits, but whose
deposits were insured under the BIF,
would have paid practically nothing for
the same deposit insurance coverage.
This BIF/SAIF insurance premium disparity was significantly reduced with the
passage of the Omnibus Appropriations Bill on September 30, 1996. As a result of
this legislation, Coastal Financial Corporation recognized a $1.0 million
non-recurring charge to after-tax earnings in the fourth quarter of fiscal 1996.
Beginning January 1, 1997, our premiums for deposit insurance, while still
not on parity with BIF insured financial services companies, are expected to be
reduced from 23 cents per $100 in deposits to 6.4 cents per $100 in deposits.
[GRAPHIC-PHOTOGRAPH] We at Coastal Financial have worked
very hard toward the passage of
legislation addressing this disparate
treatment of deposit insurance premiums
for the past two years and are extremely
pleased that the Administration and
Congress have addressed this significant
issue in a responsible manner.
The 1996 financial results are only
partially indicative of the real growth
we experienced this past year. Some of
the initiatives and achievements aimed
at increasing the value of the Company
and maximizing our ability to capitalize
on opportunities in the years ahead
were:
-- A major Corporate reorganization which restructured our operating
environment in order to create a stronger focus on the sales and marketing of
financial services.
-- The extremely successful offering [GRAPHIC-PHOTOGRAPH]
of our COASTAL BANKER CHECKING program
which was developed during fiscal 1995
and introduced at the beginning of
fiscal 1996. As of September 30, 1996,
over 10,000 members of the communities
we serve have switched to this unique
checking account program.
-- The development and implementation
of advanced cash and asset/liability
management processes. These initiatives
will greatly aid us in achieving
profitable growth, controlling general
and administrative expenses and managing
the overall sensitivity of our balance
sheet to interest rate volatility.
-- The consolidation of Coastal Federal's mortgage banking operations into
Coastal Federal Mortgage, formerly Granger-O'Harra Mortgage. Through this
initiative, we have not only enhanced operational efficiency and profitability,
but have also entered a number of new and rapidly growing markets throughout the
state. In fact, in a typical month, over half of our mortgage banking volume now
comes from markets where we had no presence a year ago.
-- The opening of a full service banking office in Florence. In just five
months, we have significantly exceeded our fiscal 1996 business plan objectives
and are well positioned to expand our banking programs to the individuals and
businesses of the growing and dynamic Pee Dee area communities.
-- The continued growth and development of Coastal Investments Corporation
and its talented group of securities brokerage sales professionals. During
fiscal 1996, revenue from the sales of investment products increased by almost
30% over the prior year. We are now poised to grow that organization
substantially through innovative sales and marketing initiatives.
-- The conversion of our Check Imaging system from an outsource environment
to an in-house process. Through this well planned and executed endeavor, we have
considerably shortened the delivery cycle for checking account statements and,
in addition, significantly reduced the costs related to this activity.
-- Our leadership role in serving as [GRAPHIC-PHOTOGRAPH]
the Major Corporate Sponsor for the
Horry County March of Dimes WalkAmerica
Campaign For Healthier Babies continued
to evidence our support for the
communities we serve. The $65,000 which
was raised by our caring and
civic-minded Associates was recognized,
both statewide and nationally, for its
4th place finish among the top 100 South
Carolina teams, and its 89th place
finish among the 500 nationally ranked
teams.
-- The overwhelming response to our
SAVE FOR AMERICA program by local
schools recently prompted state
Treasurer Richard Eckstrom to hail
Coastal Federal as "a model bank for its
long-term vision and community
commitment to encourage student saving."
Through the combined efforts of School
Administrators, Parent-Teacher
Organization volunteers and our
Associates, this vehicle allows school
children to maintain a savings account
through in-school direct deposits and
encourages them to learn the
fundamentals of banking, goal setting
and practical money management.
[GRAPHIC-PHOTOGRAPH] -- Each year, Coastal Financial
Corporation and its great people, give
generously of their time, talents and
financial resources in support of over
250 community organizations which
contribute significantly to the quality
of life, health and welfare of our
neighborhoods.
Our concept of viewing change and
constant improvement as essential to the
achievement of our long-term objectives
is well reflected by these results.
GREAT PEOPLE
Coastal Financial's success in meeting both marketplace and organizational
challenges is due, in large measure, to the fact that our Leadership Group and
Associates are fully committed to our QUEST FOR EXCELLENCE operating philosophy
in the conduct of their routine business activities.
During this past year, several of our Leadership Group members envisioned a
plan to reach out to the new residents of our communities who were interested in
learning more about the banking services available in our marketplace. The
program which was developed in response to this challenge has given us a very
effective new delivery channel to that segment of the market. These Leadership
Group members could have just as easily continued to work in the ways of the
past, but chose instead to make a difference.
All businesses wish for this kind of [GRAPHIC-PHOTOGRAPH]
initiative, but few ever get it. Part of
the reason is too much supervision, too
many committees trying to make decisions
that leaders should be making and
inadequate product and Customer service
training. As a result, the people who
must make decisions while dealing with
Customers feel constrained and
intimidated.
This is just one example of the great
things we see daily which are made
possible by our great people being
totally committed to our QUEST FOR
EXCELLENCE operating philosophy.
This philosophy has two major focuses which guide our day-to-day activities.
The first is a strong commitment to business results, and the second is a high
level of integrity.
[GRAPHIC-PHOTOGRAPH] Our emphasis on results is quite
obvious. We could not have achieved the
tremendous accomplishments of recent
years without the outstanding individual
performance of each of our Leadership
Group members and Associates. However,
it is our corporate commitment to never
compromising our integrity that provides
the foundation for our future.
No matter how good the individual
performances of our great people are,
they are only effective if orchestrated
into something of real value. That
requires teamwork and unselfish ness,
two components which are virtually
unattainable without an extraordinary
degree of integrity and a deep-seeded
sense of confidence and unity of purpose
throughout the organization.
GREAT MARKETS
Horry County, the second fastest [GRAPHIC-PHOTOGRAPH]
growing Metropolitan Statistical Area in
the nation, and Florence County, which
was recently cited by the U.S.
Department Of Commerce as the fastest
growing metropolitan area in the United
States in terms of exports from 1993 to
1995, are certainly two very exciting
markets in which to be building a
financial services business.
According to recent statistics, Horry
County, which has enjoyed an average
annual growth rate of 4.4 percent over
the past 60 years, as compared to the
state average of 1.7 percent, is
projected to achieve average annual
growth of 5.3 percent during the
1990-2010 period. Over that same time
frame, South Carolina's population is
projected to increase by an average
annual rate of 1.4 percent.
And, a rapidly expanding retail and
service-based industry has brought
national attention to the Pee Dee Region
in recent editions of THE NEW YORK
TIMES, THE WALL STREET JOURNAL and THE
KIPLINGER LETTER.
We are, indeed, very fortunate to be
located in the heart of communities with
such exceptional momentum.
COASTAL FINANCIAL'S FUTURE
[GRAPHIC-PHOTOGRAPH] A word about the future. Coastal
Financial has the greatest Board Of
Directors, Leadership Group and
Associates imaginable. They are
talented, experienced and totally
committed to our Basic Corporate
Objective of Maximizing The Value Of Our
Shareholders' Investment and our
Long-Term Goal of Being The Best
Financial Services Company In Our
Marketplace. Not only do they have a
powerful record of accomplishment, but
more importantly, they are determined to
see that our best years are yet to come.
The one question we are most often asked is the same question we continually
ask ourselves: "Can we keep it up?"
[GRAPHIC-PHOTOGRAPH] We believe the answer is a resounding
"yes," as long as we maintain our
philosophy of viewing change and
constant improvement as essential to the
achievement of our long-term objectives.
That's what really sets us apart from
the competition.
Consumer tastes and interests change
at such a rapid pace that the
marketplace and work environment seem to
be in constant flux. Sometimes drastic
change, sometimes subtle change, but
always change.
If we remain fast, flexible and focused, change will never be a problem, but
rather, create unique opportunities.
I just can't thank our great people enough. They do their very best to help
many tens of thousands of our Customers every day and are totally committed to
Exceeding their Expectations on every occasion.
In the final analysis, when you stop and think about it, a goal like that is
really all we can ask for and all we should want, because it's the best way
possible to assure a great future.
All of us at Coastal Financial Corporation appreciate your continued loyalty
and support and are looking ahead to the future with great enthusiasm and
excitement.
/s/Michael C. Gerald
--------------------
Michael C. Gerald
President
MANAGEMENT'S DISCUSSION AND ANALYSIS
General
Coastal Financial Corporation (the "Company"), reported $3.7 million in net
income in fiscal 1996 and 1995. Net earnings for the year ended September 30,
1996 included a special assessment from the FDIC for the recapitalization of the
Savings Association Insurance Fund ("SAIF") of $1,620,000, and a related
reduction in income taxes of $615,000. Excluding this special assessment, net
income increased 27.0% in 1996. Net interest income increased $2.6 million as a
result of increased interest income of $4.4 million offset by an increase of
$1.8 million in interest expense. Provision for loan losses increased from
$202,000 for the year ended September 30, 1995, to $790,000 for the year ended
September 30, 1996. Other income increased from $3.3 million in fiscal 1995, to
$4.6 million in 1996. General and administrative expenses increased $3.4 million
for fiscal 1996, as compared to fiscal 1995. Included in general and
administrative expenses in fiscal 1996, is a $1.6 million special assessment
from the FDIC for the recapitalization of the SAIF Insurance Fund.
Total assets increased from $401.2 million at September 30, 1995 to $459.7
million at September 30, 1996. Liquid assets, consisting of cash,
interest-bearing deposits, and securities, increased from $26.3 million at
September 30, 1995 to $65.3 million at September 30, 1996. Loans receivable
increased 3.8% from $356.8 million at September 30, 1995, to $370.3 million at
September 30, 1996. Total loan originations for fiscal 1996 were $160.3 million
as compared to $141.0 million for fiscal 1995. Mortgage-backed securities
increased from $12.8 million at September 30, 1995, to $27.0 million at
September 30, 1996. Included in the ending mortgage-backed security portfolio
are $6.2 million of mortgage-backed securities which were created from the
securitization of conforming loans during fiscal 1996.
The growth in loans was funded by increased deposits of $40.3 million and
loan repayments. The Company's strategy is to increase its reliance on core
deposits as opposed to its traditional reliance on certificates of deposit and
advances from the Federal Home Loan Bank ("FHLB"). During fiscal 1996, deposits
increased from $273.1 million at September 30, 1995, to $313.4 million at
September 30, 1996. During this same period, transaction deposits increased
$52.7 million.
As a result of $3.7 million in net earnings, the acquisition of Coastal
Federal Mortgage, Inc. for $376,000 (see discussion under "Liquidity and Capital
Resources"), less the cash dividends paid to shareholders of approximately $1.5
million, stockholders' equity increased from $24.8 million at September 30, 1995
to $27.7 million at September 30, 1996.
Liquidity and Capital Resources
In accordance with OTS regulations, the Company is required to maintain
specific levels of cash and liquid investments in qualifying types of United
States treasury and Federal agency securities and other investments generally
having maturities of five years or less. The required level of such investments
is calculated on a liquidity base, consisting of net withdrawable accounts and
short-term borrowings, and is equal to 5.0% of such base amount. Short-term
liquid assets may not be less than 1.0% of the liquidity base.
Historically, the Company has maintained its liquidity at levels believed by
management to be adequate to meet requirements of normal operations, potential
deposit outflows and strong loan demand and still allow for optimal investment
of funds and return on assets. The liquidity ratio, as calculated for regulatory
purposes, was 5.5%, 7.3%, and 8.0% for the years ended September 30, 1994, 1995
and 1996, respectively. The Company expects to continue to maintain liquidity at
approximately the same level as 1996.
The principal sources of funds for the Company are cash flows from
operations, consisting mainly of mortgage, consumer and commercial loan
payments, retail customer deposits and advances from the Federal Home Loan Bank
("FHLB") of Atlanta.
The principal use of cash flows is the origination of loans receivable. The
Company originated loans receivable of $174.8 million, $141.0 million and $160.4
million for the years ended September 30, 1994, 1995 and 1996, respectively. A
large portion of these loan originations were financed through loan principal
repayments which amounted to $104.6 million, $104.2 million and $93.6 million
for the years ended September 30, 1994, 1995 and 1996, respectively. In
addition, the Company has sold certain loans in the secondary market to finance
future loan originations. The increase in originations and sales of mortgage
loans can be primarily attributed to the purchase of Coastal Federal Mortgage,
d/b/a Granger & O'Harra Mortgage Inc. ("CFM") in November 1995. CFM specializes
in originating conforming mortgage loans which are then sold to correspondent
financial institutions. For the year ended September 30, 1996, CFM originated
$36.4 million of loans and sold $34.5 million of loans. For the years ended
September 30, 1994, 1995 and 1996, the Company sold loans amounting to $29.3
million, $2.8 million and $40.7 million, respectively.
During fiscal 1996, deposits increased from $273.1 million at September 30,
1995, to $313.4 million at September 30, 1996. The increase was attributed to
transaction accounts which increased approximately $52.7 million. This was
offset by a decrease in passbook accounts of $3.6 million and certificate
accounts of $8.8 million.
At September 30, 1996, the Company had commitments to originate $9.0 million
in loans and $32.0 million in unused lines of credit, which the Company expects
to fund from normal operations.
At September 30, 1996, the Company had $94.7 million of certificates of
deposit which were due to mature within one year. Based upon previous
experience, the Company believes that a major portion of these certificates will
be redeposited. Additionally, at September 30, 1996, the Company had excess
collateral pledged to the FHLB which would support additional FHLB advance
borrowings of $63.0 million.
As a condition of deposit insurance, current FDIC regulations require that
Coastal Federal Savings Bank (the "Bank") calculate and maintain a minimum
regulatory capital requirement on a quarterly basis and satisfy such requirement
at the calculation date and throughout the ensuing quarter. The Bank's tangible
and core capital approximated $27.3 million at September 30, 1996, exceeding the
Bank's tangible and core requirements by $20.4 million and $13.6 million,
respectively. At September 30, 1996, the Bank's capital exceeded its current
risk-based minimum capital requirement by $7.1 million. The risk-based capital
requirement may increase in the future.
Results of Operations
Comparison of the Years Ended September 30, 1995 and 1996
General
Net earnings were $3.7 million for the years ended September 30, 1995 and
1996. Included in net earnings for 1996, is a special assessment from the FDIC
for the recapitalization of the SAIF of $1,620,000, and a related reduction in
income taxes of $615,000. Excluding this special assessment, net income
increased 27.0% in 1996. Net interest income increased $2.6 million primarily as
a result of an increase in interest income of $4.4 million which was offset by
an increase in interest expense of $1.8 million. Provision for loan losses
increased $588,000. Other income increased from $3.3 million for the year ended
September 30, 1995, to $4.6 million for the year ended September 30, 1996.
General and administrative expenses increased $3.4 million when compared to
fiscal 1995. Included in general and administrative expenses in fiscal 1996, is
a $1.6 million special assessment from the FDIC for the recapitalization of the
SAIF Insurance Fund.
Interest Income
Interest income for the year ended September 30, 1996, increased 14.5% to
$34.7 million as compared to $30.3 million for the year ended September 30, 1995
primarily due to the increased yield on assets and a 11.7% increase in average
interest-earning assets. The net yield on interest-earning assets for the year
ended September 30, 1996, was 8.46% compared to a net yield of 8.27% in the
prior year. The increase in net yield primarily resulted from the repricing of
adjustable-rate mortgage loans and growth in commercial real estate loans which
have a higher yield. The average yield on loans receivable for fiscal year 1996
was 8.57% compared to 8.39% in 1995. The yield on investments which includes
Investments, Overnight Funds and Federal Funds, increased to 6.55% for the
fiscal year 1996 from 5.14% for fiscal year 1995. Total interest-earning assets
for fiscal year 1996 averaged $406.2 million compared to $371.9 million for the
year ended September 30, 1995.
Interest Expense
Interest expense on interest-bearing liabilities was $19.1 million for the
year ended September 30, 1996, as compared to $17.3 million in fiscal 1995. The
cost of interest-bearing liabilities was 4.70% for the year ended September 30,
1996, compared to 4.75% in fiscal year 1995. The increase in interest expense of
10.5% primarily resulted from a growth in deposits and a slight increase in
overall market rates paid on deposits. The average cost of deposits for the year
ended September 30, 1996, was 4.08% compared to 3.96% for the year ended
September 30, 1995. The cost of FHLB advances for fiscal 1996 was 6.27% compared
to 6.53% for fiscal 1995. Total average interest-bearing liabilities increased
11.7% from $363.7 million at September 30, 1995, to $406.2 million at September
30, 1996.
Net Interest Income
Net interest income was $15.6 million for the year ended September 30, 1996,
compared to $13.1 million for the year ended September 30, 1995. The net
interest margin increased to 3.76% for fiscal 1996 compared to 3.52% for fiscal
1995. Average interest-earning assets increased $43.5 million while average
interest-bearing liabilities increased $42.4 million. At September 30, 1996, the
cost of one month advances was approximately 5.5%, compared to approximately
6.7% which was the yield on the 10 year treasury security. Should the yield
curve continue to remain relatively flat, the Company may continue to experience
a high amount of loan prepayments and refinancings and may experience a
declining net interest margin in fiscal 1997.
Provision for Loan Losses
The Company's provision for loan losses increased from $202,000 for fiscal
1995 to $790,000 for fiscal 1996. The allowance for loan losses as a percentage
of loans was 1.11% at September 30, 1996, compared to 1.00% at September 30,
1995. During fiscal 1996, commercial real estate and construction loans
increased 16.3%. As a result of the increase in loans which may possess a higher
degree of risk, the Company increased its allowance for loan losses as a
percentage of loans. Loans delinquent 90 days or more were .12% of total loans
at September 30, 1996, compared to .37% at September 30, 1995. The allowance for
loan losses was 937% of loans delinquent more than 90 days at September 30,
1996, compared to 270% at September 30, 1995. Management believes that the
current level of the allowance for loan losses is adequate considering the
composition of the loan portfolio, the portfolio's loss experience, delinquency
trends, current regional and local economic conditions and other factors. Also
see "Nonperforming Assets" and "Allowance for Loan Losses."
Other Income
In fiscal 1996, total other income increased to $4.6 million as compared to
$3.3 million for the period ended September 30, 1995. Fees and service charges
on loans and deposit accounts increased $364,000 for the year ended September
30, 1996, as a result of growth in core deposits and loans. Income from real
estate operations decreased $531,000 from the prior fiscal year due to reduced
sales of real estate at the Bank's subsidiaries. This was offset by increased
gains on sales of loans receivable and mortgage-backed securities of $951,000
and $189,000, respectively, primarily due to increased mortgage banking
activities of CFM which was acquired in November 1995. Other income increased
from $1.3 million for the year ended September 30, 1995, to $1.7 million for the
year ended September 30, 1996. The increase is attributed to an increase of fee
income from ATMs of $85,000, fee income from debit cards of $53,000, gains on
the sale of assets of $44,000, miscellaneous income of $44,000 and higher
revenues from sales of alternative investment products at the Company's
subsidiary, Coastal Investments Corporation, of $154,000.
Other Expense
General and administrative expenses were $13.6 million for fiscal 1996 as
compared to $10.2 million for fiscal 1995. Salaries and employee benefits were
$6.2 million for fiscal 1996 as compared to $5.3 million for fiscal 1995, or a
16.3% increase. Approximately a third of this increase is attributable to
increased group insurance costs, 401K benefits, and increased bonuses and
incentives. In addition, personnel at CFM accounted for approximately a third of
the increase. Normal salary increases and increased lending personnel accounted
for a significant portion of the remaining increase. Net occupancy, furniture
and fixtures and data processing expense increased $498,000 for fiscal 1996, as
compared to fiscal 1995 primarily as a result of enhancements to technology and
the addition of CFM. FDIC insurance premiums, excluding the special SAIF
assessment, increased from $566,000 for fiscal 1995, to $622,000 for fiscal 1996
as a result of the 14.8% growth in deposits. Other expenses increased from $1.9
million in 1995 to $2.3 million in 1996. In addition, in 1996 the Company
recorded a special assessment from the FDIC for the recapitalization of the SAIF
of $1,620,000.
Income Taxes
Although fiscal 1996 net income was slightly higher than fiscal 1995, income
taxes were slightly lower due to increased tax exempt interest.
Results of Operations
Comparison of the Years Ended September 30, 1994 and 1995
General
Net earnings decreased from $3.8 million for the year ended September 30,
1994, to net earnings of $3.7 million for the year ended September 30, 1995.
Included in net earnings for 1994, is a favorable $664,000 cumulative effect of
the change in accounting for income taxes. Excluding the effect of the
accounting change in 1994, net income increased 18.2% in 1995. Net interest
income increased $42,000 primarily as a result of an increase in interest income
of $5.8 million which was offset by an increase in interest expense of $5.7
million. Provision for loan losses decreased $308,000. Other income increased
from $2.8 million for the year ended September 30, 1994, to $3.3 million for the
year ended September 30, 1995.
Interest Income
Interest income for the year ended September 30, 1995, increased 23.5% to
$30.3 million as compared to $24.6 million for the year ended September 30, 1994
primarily due to the increased yield on assets and a 17.7% increase in average
interest-earning assets. The net yield on interest-earning assets for the year
ended September 30, 1995, was 8.27% compared to a net yield of 7.77% in the
prior year. The increase in net yield primarily resulted from the repricing of
adjustable-rate mortgage loans. The average yield on loans receivable for fiscal
year 1995 was 8.39% compared to 7.93% in 1994. The yield on investments which
includes Investments, Overnight Funds and Federal Funds, increased to 5.14% for
the fiscal year 1995 from 4.20% for fiscal year 1994. Total interest-earning
assets for fiscal year 1995 averaged $371.9 million compared to $316.l million
for the year ended September 30, 1994.
Interest Expense
Interest expense on interest-bearing liabilities was $17.3 million for the
year ended September 30, 1995, as compared to $11.5 million in fiscal 1994. The
cost of interest-bearing liabilities was 4.75% for the year ended September 30,
1995, compared to 3.68% in fiscal year 1994. The increase in interest expense of
49.6% primarily resulted from a growth in deposits and an increase in overall
market rates paid on deposits and FHLB advances. The average rate on deposits
for the year ended September 30, 1995, was 3.96% compared to 3.29% for the year
ended September 30, 1994. The cost of FHLB advances for fiscal 1995 was 6.53%
compared to 5.56% for fiscal 1994. A contributing factor to the increased costs
of advances was a lengthening in the average maturity of the advances. Total
average interest-bearing liabilities increased 15.9% from $313.8 million at
September 30, 1994, to $363.7 million at September 30, 1995.
Net Interest Income
Net interest income was $13.1 million for the year ended September 30, 1995,
compared to $13.0 million for the year ended September 30, 1994. The net
interest margin decreased to 3.52% for fiscal 1995 compared to 4.12% for fiscal
1994. Average interest-earning assets increased $55.8 million while average
interest-bearing liabilities increased $49.9 million. At September 30, 1995, the
cost of one month advances was 6.12%, compared to 6.50% which was the yield on
the 30 year treasury security. Should the yield curve continue to remain flat,
the Bank may continue to experience a high amount of loan prepayments and
refinancings and may experience a declining net interest margin in fiscal 1996.
Provision for Loan Losses
The Company's provision for loan losses decreased from $510,000 for fiscal
1994 to $202,000 for fiscal 1995. The allowance for loan losses as a percentage
of loans was 1.00% at September 30, 1995, compared to 1.01% at September 30,
1994. Loans delinquent 90 days or more were .37% of total loans at September 30,
1995, compared to .35% at September 30, 1994. The allowance for loan losses was
270.42% of loans delinquent more than 90 days at September 30, 1995, compared to
291.39% at September 30, 1994. Management believes that the current level of the
allowance for loan losses is adequate considering the composition of the loan
portfolio, the portfolio's loss experience, delinquency trends, current regional
and local economic conditions and other factors. Also see "Nonperforming Assets"
and "Allowance for Loan Losses."
Other Income
In fiscal 1995, total other income increased to $3.3 million as compared to
$2.8 million for the period ended September 30, 1994. Fees and service charges
on loans and deposit accounts increased $50,000 for the year ended September 30,
1995. Due to the sale of certain real estate held for development and the
realization of a deferred gain on a previous sale of real estate owned which had
been financed by the Bank, income from real estate operations increased $535,000
for the fiscal year. This was partially offset by decreased gains on sales of
loans receivable and mortgage-backed securities of $372,000 and $54,000,
respectively, due to decreased mortgage banking activities. Other income
increased from $1.0 million for the year ended September 30, 1994, to $1.3
million for the year ended September 30, 1995. The increase is attributed to an
increase of FHLB stock dividends of $206,000, income from ATMs of $64,000, and
miscellaneous income of $44,000.
Other Expense
General and administrative expenses were $10.2 million for fiscal 1995 as
compared to $10.3 million for fiscal 1994. Salaries and employee benefits were
$5.3 million for fiscal 1995 as compared to $5.2 million for fiscal 1994, or a
2.2% increase. Throughout fiscal 1995, and into 1996, management has implemented
a number of cost saving measures to reduce the reliance on full time Associates
and minimize the increase in compensation expense. Net occupancy, furniture and
fixtures and data processing expense increased $25,000 for fiscal 1995, as
compared to fiscal 1994. FDIC insurance premiums decreased from $619,000 for
fiscal 1994, to $566,000 for fiscal 1995. Other expenses decreased from $2.2
million in 1994 to $1.9 million in 1995. The decrease is attributed to reduced
legal expenses of $69,000, recruiting expenses services of $36,000 and other
sundry expenses of $136,000.
Income Taxes
Income taxes increased from $1.9 million in fiscal 1994 to $2.2 million in
fiscal as a result of increased earnings before income taxes.
Non-performing Assets
Non-performing assets were $768,000 at September 30, 1996 compared to $2.1
million at September 30, 1995. Non-accrual loans decreased from $1.3 million at
September 30, 1995, to $445,000 at September 30, 1996. Real estate acquired
through foreclosure decreased from $789,000 at September 30, 1995, to $323,000
at September 30, 1996. At September 30, 1996, approximately 69% of the loans 90
days past due are secured by residential mortgage loans. All real estate
acquired through foreclosure is recorded at the lower of cost or fair value less
estimated selling costs and the Company does not expect any material losses on
this real estate. Loans are reviewed on a regular basis and an allowance for
uncollectable interest is established on loans where collection is questionable,
generally when such loans become 90 days delinquent. Loan balances for which
interest amounts have been reserved and all loans more than 90 days delinquent
are considered to be on a non-accrual basis. Typically, payments received on a
non-accrual loan are applied to the outstanding principal or recognized as
interest based upon the collectability of the loan as determined by management.
Allowance for Loan Losses
The Company's management evaluates the need to establish additional
allowances against losses on loans quarterly. Such an evaluation includes a
review of all loans for which full collectability may not be reasonably assured
and considers, among other matters, the estimated market value of the underlying
collateral of problem loans, composition of the loan portfolio, prior loss
experience, economic conditions, etc. The Company established provisions for
loan losses for the years ended September 30, 1994, 1995 and 1996, of $510,000,
$202,000 and $790,000, respectively. For the years ended September 30, 1994,
1995 and 1996, the Company had net charge-offs (recoveries) of ($90,000),
($23,000) and $196,000, respectively. At September 30, 1996, the Company had an
allowance for loan losses of $4.2 million, which was 1.11% of net loans compared
to 1.00% at September 30, 1995. Management believes that the current level of
the allowance for loan losses is adequate considering the composition of the
loan portfolio, the portfolio's loss experience, delinquency trends, current
regional and local economic conditions and other factors. While management uses
the best information available to make evaluations, future adjustments to the
allowance may be necessary if economic conditions differ substantially from the
assumptions used in making the evaluation. The allowance for possible loan
losses is subject to periodic evaluation by various regulatory authorities and
may be subject to adjustment upon their examination.
Impact of New Accounting Pronouncements
On June 30, 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
which is effective for financial statements issued for fiscal years beginning
after December 15, 1995. SFAS No. 121 provides guidance for recognition and
measurement of impairment of long-lived assets, certain identifiable
intangibles, and goodwill related both to assets to be held and used and assets
to be disposed of. This statement is not anticipated to have a material effect
on the Company.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights, an amendment of SFAS No. 65" which is effective prospectively
for fiscal years beginning after December 15, 1995. The statement requires the
recognition of an asset for the right to service mortgage loans for others,
regardless of how those rights were acquired (either purchased or originated).
Further, it amends SFAS 65 to require assessment of impairment based on fair
value. Based upon the Company's present mortgage lending operation, this
statement did not have a significant affect on the Company.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation" which is effective for financial statements issued for fiscal
years beginning after December 15, 1995. SFAS No. 123 provides guidance on the
valuation of compensation costs arising from both fixed and performance stock
compensation plans. SFAS No. 123 encourages but does not require entities to
account for stock compensation awards based on their estimated fair value on the
date they are granted. Entities can continue to follow current accounting
requirements, which generally do not result in an expense charge for most
options. However, they must disclose in a footnote to their financial statements
what the effect on net income and earnings per share would have been had they
used the fair value model. The Company expects to continue its current
accounting practice. Therefore, this statement will generally not have an effect
on future operating results.
In June, 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." This statement
will become effective for transactions occurring after December 31, 1996 and
supersedes SFAS No. 122. The Statement uses a "financial components" approach
that focuses on control to determine the proper accounting for financial asset
transfers. Under that approach, after financial assets are transferred, an
entity would recognize on its balance sheet all assets it controls and
liabilities it has incurred. The entity would remove from the balance sheet
those assets it no longer controls and liabilities it has satisfied. The Company
does not anticipate that adoption of this standard will have a material effect
on the Company's financial statements in 1997.
In November 1995, the FASB issued a guide to implementation of SFAS 115 on
accounting for certain investments in debt and equity securities which allows
for the one time transfer of certain investments classified as held for
investment to available for sale.
In order to increase the Company's ability to manage its liquid assets, the
Company reclassified the majority of its investments classified as held for
investment, which had an amortized cost of $14.8 million and a market value of
$15.0 million, to the available for sale classification in the first quarter of
fiscal 1996.
Effects of Inflation and Changing Prices
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles which require the measurement of
financial position and results of operations in terms of historical dollars,
without consideration of change in the relative purchasing power over time due
to inflation. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effect of inflation. Interest rates do not necessarily
change in the same magnitude as the price of goods and services.
Capital Standards and Regulatory Matters
The Bank's capital standards include (1) a leverage limit requiring all OTS
chartered financial institutions to maintain core capital in an amount not less
than 3% of the financial institution's total assets; (2) a tangible capital
requirement of not less than 1.5% of total assets; and (3) a risk-based capital
requirement of not less than 8.0% of risk weighted assets.
The following table summarizes the capital requirements and the Bank's
capital position at September 30, 1996 (dollars in thousands):
Percent
Amount of Assets
------ ---------
Tangible capital (1)................................. $27,271 5.93%
Tangible capital requirement......................... 6,859 1.50
------- -----
Excess............................................... 20,412 4.43%
======= =====
Core capital......................................... $27,271 5.93%
Core capital requirement............................. 13,719 3.00
------- -----
Excess............................................... $13,552 2.93%
======= =====
Risk-based capital................................... $30,777 10.41%
Minimum risk-based capital requirements.............. 23,641 8.00
------- -----
Excess............................................... $ 7,136 2.41%
======= =====
(1) Equals the Bank's stockholders' equity
The Act also changed the present qualified thrift lender test (QTL). As of
September 30, 1996, Coastal Federal met the existing QTL test. Based on the
Bank's current portfolio of assets, management does not anticipate that the new
QTL regulations will have an adverse effect on the Bank's operations.
Recently the Federal Regulatory Agencies have agreed on a new higher capital
leverage limit for many financial institutions which is 5%. The Bank also meets
this capital standard.
On September 30, 1996, the Bank recorded a $1,620,000 special assessment to
the FDIC for the recapitalization of the SAIF. Beginning January 1, 1997, the
Bank is expected to begin paying 6.4 cents per $100 of deposits insured.
Previously the Bank had been paying approximately 23 cents per $100 of deposits
insured. It is expected that the Bank Insurance Fund ("BIF") members and SAIF
members will begin paying the same amount to the insurance fund in fiscal year
2000.
________________________________________________________________________________
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
COASTAL FINANCIAL CORPORATION
Myrtle Beach, South Carolina
We have audited the consolidated statements of financial condition of
Coastal Financial Corporation and subsidiaries (the "Company") as of September
30, 1995 and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at September 30, 1995 and 1996, and the results of their operations and their
cash flows for each of the years in the three-year period ended September 30,
1996, in conformity with generally accepted accounting principles.
As discussed in note 1, the Company changed its method of accounting for
investments to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting
for Certain Investments in Debt and Equity Securities at October 1, 1994 and
changed its method of accounting for income taxes on October 1, 1993 to adopt
the provisions of SFAS No. 109, Accounting for Income Taxes.
/s/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Greenville, South Carolina
October 18, 1996
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1995 and 1996
ASSETS 1995 1996
-------- --------
(In thousands)
Cash and amounts due from banks.......................................................................... $ 9,318 $ 15,639
Short-term interest-bearing deposits..................................................................... 1,883 5,222
Investment securities held to maturity (market value of $2,297 at September 30, 1995 and $332 at
September 30, 1996).................................................................................... 2,329 330
Investment securities available for sale................................................................. -- 17,141
Mortgage-backed securities held to maturity (market value of $12,904 at September 30, 1995).............. 12,776 --
Mortgage-backed securities available for sale............................................................ -- 27,029
Loans receivable (net of allowance for loan losses of $3,578 at September 30, 1995 and $4,172 at
September 30, 1996).................................................................................... 356,819 370,368
Loans receivable held for sale........................................................................... 2,393 6,803
Real estate acquired through foreclosure, net............................................................ 789 323
Office property and equipment, net....................................................................... 5,415 5,736
Federal Home Loan Bank (FHLB) stock, at cost............................................................. 4,726 5,228
Accrued interest receivable on loans..................................................................... 2,167 2,444
Accrued interest receivable on investment securities..................................................... 250 526
Other assets............................................................................................. 2,336 2,923
-------- --------
$401,201 $459,712
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits............................................................................................... 273,099 313,430
Securities sold under agreements to repurchase......................................................... 2,677 3,365
Advances from FHLB..................................................................................... 93,320 104,553
Other borrowings....................................................................................... -- 1,968
Drafts outstanding..................................................................................... 2,289 1,922
Advances by borrowers for property taxes and insurance................................................. 1,629 1,435
Accrued interest payable............................................................................... 767 798
Other liabilities...................................................................................... 2,600 4,560
-------- --------
Total liabilities.................................................................................. 376,381 432,031
-------- --------
Stockholders' equity:
Serial preferred stock, 1,000,000 shares authorized and unissued....................................... -- --
Common stock $.01 par value, 5,000,000 shares authorized; 3,356,056 shares at September 30, 1995 and
3,442,616 shares at September 30, 1996 issued and outstanding........................................ 34 34
Additional paid-in capital............................................................................. 8,710 8,710
Retained earnings, restricted.......................................................................... 18,674 20,015
Treasury stock, at cost (120,169 and 54,161 shares, respectively)...................................... (2,598) (1,185)
Unrealized gain on securities available for sale, net of income taxes.................................. -- 107
-------- --------
Total stockholders' equity......................................................................... 24,820 27,681
-------- --------
$401,201 $459,712
======== ========
See accompanying notes to consolidated financial statements.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended September 30, 1994, 1995 and 1996
1994 1995 1996
---------- --------- ---------
(In thousands, except
share data)
Interest income:
Loans receivable.......................................................................... $ 23,726 28,671 31,698
Investment securities..................................................................... 501 381 721
Mortgage-backed securities................................................................ 144 732 1,805
Other..................................................................................... 191 544 496
---------- --------- ---------
Total interest income................................................................. 24,562 30,328 34,720
---------- --------- ---------
Interest expense:
Deposits.................................................................................. 8,516 9,890 11,689
Securities sold under agreements to repurchase............................................ 18 63 323
Advances from FHLB........................................................................ 3,014 7,319 7,079
---------- --------- ---------
Total interest expense................................................................ 11,548 17,272 19,091
---------- --------- ---------
Net interest income................................................................... 13,014 13,056 15,629
Provision for loan losses................................................................... 510 202 790
---------- --------- ---------
Net interest income after provision for loan losses................................... 12,504 12,854 14,839
---------- --------- ---------
Other income:
Fees and service charges on loans and deposit accounts.................................... 1,001 1,051 1,415
Gain on sales of loans held for sale...................................................... 411 39 990
Loss on sales of investment securities, net............................................... -- -- (6)
Gain on sales of mortgage-backed securities, net.......................................... 54 -- 189
Income from real estate acquired through foreclosure...................................... 31 224 202
Income from real estate partnerships...................................................... 310 652 143
Other income.............................................................................. 1,022 1,284 1,699
---------- --------- ---------
Total other income.................................................................... 2,829 3,250 4,632
---------- --------- ---------
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended September 30, 1994, 1995 and 1996
(continued)
1994 1995 1996
---------- --------- ---------
(In thousands, except
share data)
General and administrative expenses:
Salaries and employee benefits............................................................ 5,194 5,307 6,174
Net occupancy, furniture and fixtures and data processing expense......................... 2,308 2,333 2,831
FDIC insurance premium.................................................................... 619 566 622
FDIC insurance premium to recapitalize the SAIF........................................... -- -- 1,620
Other expense............................................................................. 2,158 1,946 2,339
---------- --------- ---------
Total general and administrative expense.............................................. 10,279 10,152 13,586
---------- --------- ---------
Earnings before income taxes.......................................................... 5,054 5,952 5,885
Income taxes................................................................................ 1,906 2,232 2,164
---------- --------- ---------
Net income before cumulative effect of adopting SFAS No. 109................................ 3,148 3,720 3,721
Cumulative effect of adopting SFAS No. 109.................................................. 664 -- --
---------- --------- ---------
Net income.................................................................................. $ 3,812 3,720 3,721
========== ========= =========
Earnings per common share before cumulative effect of adopting SFAS No. 109................. $ 0.86 1.05 1.04
Cumulative effect of adopting SFAS No. 109.................................................. 0.18 -- --
Earnings per common share................................................................... $ 1.04 1.05 1.04
========== ========= =========
Weighted average common shares outstanding.................................................. 3,661,000 3,555,000 3,595,000
========== ========= =========
See accompanying notes to consolidated financial statements.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended September 30, 1994, 1995 and 1996
Total
Additional Stock-
Common Paid-in Retained Treasury holders'
Stock Capital Earnings Stock Other Equity
----- ------- -------- ----- ----- ------
(In thousands)
Balance at September 30, 1993............................... $ 33 $6,538 $15,258 $ -- $ -- $21,829
Exercise of stock options................................... -- 88 -- -- -- 88
Cash paid for fractional shares............................. -- -- (7) -- -- (7)
Treasury stock repurchases.................................. -- -- -- (2,001) -- (2,001)
Cash dividends.............................................. -- -- (617) -- -- (617)
Net income.................................................. -- -- 3,812 -- -- 3,812
---- ------ ------- ------- ------ -------
Balance at September 30, 1994............................... 33 6,626 18,446 (2,001) -- 23,104
Exercise of stock options................................... -- 96 (215) 241 -- 122
Treasury stock repurchases.................................. -- -- -- (838) -- (838)
Cash paid for fractional shares............................. -- -- (6) -- -- (6)
Cash dividends.............................................. -- -- (1,282) -- -- (1,282)
Common stock dividend....................................... 1 1,988 (1,989) -- -- --
Net income.................................................. -- -- 3,720 -- -- 3,720
---- ------ ------- ------- ------ -------
Balance at September 30, 1995............................... 34 8,710 18,674 (2,598) -- 24,820
Exercise of stock options................................... -- -- (863) 970 -- 107
Issuance of shares in acquisition........................... -- -- (67) 443 -- 376
Cash paid for fractional shares............................. -- -- (17) -- -- (17)
Cash dividends.............................................. -- -- (1,433) -- -- (1,433)
Unrealized gain on securities available for sale,
net of income taxes....................................... -- -- -- -- 107 107
Net income.................................................. -- -- 3,721 -- -- 3,721
---- ------ ------- ------- ------ -------
$ 34 $8,710 $20,015 $(1,185) $ 107 $27,681
==== ====== ======= ======= ======= =======
See accompanying notes to consolidated financial statements.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended September 30, 1994, 1995 and 1996
1994 1995 1996
---- ---- ----
(In thousands)
Cash flows from operating activities:
Net earnings before FASB 109 adjustment...................................................... $ 3,812 3,720 3,721
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Income from real estate partnerships....................................................... (310) (652) (143)
Depreciation............................................................................... 529 552 740
Provision for loan losses.................................................................. 510 202 790
FHLB stock dividends....................................................................... (95) -- --
Origination of loans receivable held for sale.............................................. (19,626) (5,199) (45,082)
Proceeds from sales of loans receivable held for sale...................................... 29,299 2,806 40,672
(Increase) decrease in:
Other assets............................................................................. (589) (1,266) (587)
Accrued interest receivable.............................................................. 95 (434) (553)
Increase (decrease) in:
Accrued interest payable................................................................. 146 284 31
Deferred income taxes payable............................................................ (399) -- --
Other liabilities........................................................................ 1,128 531 1,960
--------- -------- --------
Net cash provided (used) by operating activities....................................... 14,500 544 1,549
--------- -------- --------
Cash flows from investing activities:
Proceeds from maturities of investment securities held to maturity........................... 6,325 5,675 --
Purchases of investment securities held to maturity.......................................... (1,988) (324) --
Proceeds from sale of investment securities available for sale............................... -- -- 7,000
Proceeds from maturities of investment securities available for sale......................... -- -- 1,999
Purchases of investment securities available for sale........................................ -- -- (24,331)
Purchases of loans receivable................................................................ (63) (6,337) (12,448)
Proceeds from sale of mortgage-backed securities available for sale.......................... 1,613 -- 13,220
Purchases of mortgage-backed securities available for sale................................... -- (1,000) (11,867)
Principal collected on mortgage-backed securities............................................ 1,118 811 4,129
Origination of loans receivable.............................................................. (155,135) (135,830) (115,288)
Principal collected on loans receivable...................................................... 104,589 104,215 93,560
Proceeds from sales of real estate acquired through foreclosure.............................. 765 305 937
Proceeds from sales of office properties and equipment....................................... -- -- 192
Purchases of office properties and equipment................................................. (528) (1,166) (1,253)
Redemptions (purchases) of FHLB stock........................................................ (997) 101 (502)
Other investing activities, net.............................................................. 866 884 447
--------- -------- --------
Net cash used by investing activities.................................................... (43,435) (32,666) (44,205)
--------- -------- --------
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended September 30, 1994, 1995 and 1996
(continued)
1994 1995 1996
---- ---- ----
(In thousands)
Cash flows from financing activities:
Increase (decrease) in deposits.............................................................. (19,470) 25,714 40,331
Increase in securities sold under agreements to repurchase................................... 1,621 771 688
Proceeds from FHLB advances.................................................................. 101,419 365,120 75,850
Repayment of FHLB advances................................................................... (46,500) (368,340) (64,617)
Proceeds from other borrowings............................................................... -- -- 1,968
Increase (decrease) in advance payments by borrowers for property taxes and insurance........ 204 79 (194)
Increase (decrease) in drafts outstanding, net............................................... 272 411 (367)
Repurchase of treasury stock, at cost........................................................ (2,001) (838) --
Cash dividends to stockholders and cash for fractional shares................................ (624) (1,288) (1,450)
Exercise of stock options.................................................................... 88 57 107
--------- -------- --------
Net cash provided by financing activities................................................ 35,009 21,686 52,316
--------- -------- --------
Net increase (decrease) in cash and cash equivalents........................................... 6,074 (10,436) 9,660
--------- -------- --------
Cash and cash equivalents at beginning of year................................................. 15,563 21,637 11,201
--------- -------- --------
Cash and cash equivalents at end of year....................................................... $ 21,637 11,201 20,861
========= ======== ========
Supplemental information:
Interest paid................................................................................ $ 11,402 16,988 19,060
========= ======== ========
Income taxes paid............................................................................ $ 1,684 2,377 3,030
========= ======== ========
Supplemental schedule of non-cash investing and financing transactions:
Securitization of mortgage loans into mortgage-backed securities............................. $ -- 11,793 19,366
========= ======== ========
Transfer of mortgage loans to real estate acquired through foreclosure....................... $ 405 313 471
========= ======== ========
Common stock dividend declared............................................................... $ -- 1,989 --
========= ======== ========
Transfer of investment securities held to maturity to available for sale..................... $ -- -- 14,775
========= ======== ========
See accompanying notes to consolidated financial statements.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the more significant accounting policies used
in the preparation and presentation of the accompanying consolidated financial
statements. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amount of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements. In addition, they affect the reported
amounts of income and expenses during the reporting period. Actual results could
differ from these estimates and assumptions.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Coastal Financial Corporation (the "Company"), and its wholly-owned
subsidiaries, Coastal Federal Mortgage, Inc., Coastal Investments Corporation,
Coastal Technology Services, Inc. and Coastal Federal Savings Bank (the "Bank")
and its wholly-owned subsidiary, Coastal Mortgage Bankers and Realty Co., Inc.
(and its wholly-owned subsidiaries, Shady Forest Development Corporation,
Sherwood Development Corporation, Ridge Development Corporation, 501 Development
Corporation, North Beach Investments, Inc. and North Strand Property Management,
Inc.). In consolidation, all significant intercompany balances and transactions
have been eliminated. Coastal Financial Corporation is a unitary thrift holding
company organized under the laws of the state of Delaware.
The Company's subsidiary operations consist primarily of the origination and
sale of conforming mortgages and the sales of financial products. The Bank's
subsidiary operations consist primarily of the sale of real estate acquired
through direct investments and investments in partnerships with others in the
mid 1980's. Investments in real estate partnerships are accounted for using the
equity method.
(b) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
and amounts due from banks, short-term interest-bearing deposits and federal
funds sold. Cash and cash equivalents have maturities of three months or less.
Accordingly, the carrying amount of such instruments is considered to be a
reasonable estimate of fair value.
(c) Investment and Mortgage-backed Securities
Investment and mortgage-backed securities are accounted for in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", which was adopted by the
Company on October 1, 1994. Investments are classified into three categories as
follows: (1) Held to Maturity -- debt securities that the entity has the
positive intent and ability to hold to maturity, which are reported at amortized
cost; (2) Trading -- debt and equity securities that are bought and held
principally for the purpose of selling them in the near term, which are reported
at fair value, with unrealized gains and losses included in earnings and (3)
Available for Sale -- debt and equity securities that may be sold under certain
conditions, which are reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of stockholders'
equity, net of income taxes.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
The Company determines investment and mortgage-backed securities
classification at the time of purchase. Premiums and discounts on securities are
accreted or amortized as an adjustment to income over the estimated life of the
security using a method which approximates a level yield. Unrealized losses on
securities, reflecting a decline in value judged by the Company to be other than
temporary, are charged to income in the consolidated statements of operations.
In November 1995, the FASB issued a guide to implementation of SFAS No. 115
on accounting for certain investments in debt and equity securities which allows
for the one time transfer of certain investments classified as held to maturity
to available for sale. The Company reclassified its investments classified as
held to maturity to the available for sale classification in the first quarter
of fiscal 1996.
The cost basis of securities sold is determined by specific identification.
Purchases and sales of securities are recorded on a trade date basis. The fair
value of securities is based on quoted market prices or dealer quotes.
The Bank maintained liquid assets in excess of the amount required by
regulations during all periods included in these consolidated financial
statements. The required amount is 5% of the average daily balances of deposits
and short-term borrowings. Liquid assets consist principally of cash, including
time deposits and investment securities.
(d) Allowance for Loan and Real Estate Losses
The Company provides for loan losses on the allowance method. Accordingly,
all loan losses are charged to the allowance and all recoveries are credited to
the allowance. Additions to the allowance for loan losses are provided by
charges to operations based on various factors which, in management's judgment,
deserve current recognition in estimating losses. Such factors considered by
management include the market value of the underlying collateral, growth and
composition of the loan portfolios, the relationship of the allowance for loan
losses to outstanding loans, loss experience, delinquency trends, and local and
regional economic conditions. Management evaluates the carrying value of loans
periodically and the allowance is adjusted accordingly. While management uses
the best information available to make evaluations, future adjustments to the
allowance may be necessary if economic conditions differ substantially from the
assumptions used in making the evaluation. The allowance for possible loan
losses is subject to periodic evaluation by various regulatory authorities and
may be subject to adjustment upon their examination.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of
a Loan" on October 1, 1995. This standard requires that all creditors value
loans at the loan's fair value if it is probable that the creditor will be
unable to collect all amounts due according to the terms of the loan agreement.
Fair value may be determined based upon the present value of expected cash
flows, market price of the loan, if available, or value of the underlying
collateral. Expected cash flows are required to be discounted at the loan's
effective interest rate. SFAS No. 114 was amended by SFAS No. 118 to allow a
creditor to use existing methods for recognizing interest income on an impaired
loan and by requiring additional disclosures about how a creditor recognizes
interest income on an impaired loan. The adoption of the standards required no
increase in the allowance for loan losses and had no impact on net income for
the year ended September 30, 1996.
Under SFAS No. 114, as amended by SFAS No. 118, when the ultimate
collectibility of an impaired loan's principal is in doubt, wholly or partially,
all cash receipts are applied to principal. When this doubt does not exist, cash
receipts are applied under the contractual terms of the loan agreement first to
principal then to interest income. Once the recorded principal balance has been
reduced to zero, future cash receipts are applied to interest income, to the
extent that any interest has been foregone. Further cash receipts are recorded
as recoveries of any amounts previously charged off.
A loan is also considered impaired if its terms are modified in a troubled
debt restructuring after October 1, 1995. For these accruing impaired loans,
cash receipts are typically applied to principal and interest receivable in
accordance with the terms of the restructured loan agreement. Interest income is
recognized on these loans using the accrual method of accounting. As of
September 30, 1996, the Company had no impaired loans.
(e) Loans Receivable Held for Sale
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are provided for in a valuation allowance by charges to
operations. At September 30, 1995 and 1996, the Company had approximately $2.4
million and $6.8 million in mortgage loans held for sale. The market value of
loans receivable held for sale exceeded the carrying value at September 30, 1995
and 1996.
(f) Real Estate Owned and Investments in Real Estate Partnerships
Real estate acquired through foreclosure is initially recorded at the lower
of cost or estimated fair value. Subsequent to the date of acquisition, it is
carried at the lower of cost or fair value, less selling costs. Market values of
real estate owned are reviewed regularly and allowances for losses are
established when it is determined that the carrying value of real estate exceeds
the fair value less selling costs. Costs relating to the development and
improvement of such property are capitalized, whereas those costs relating to
holding the property are charged to expense.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
Real estate purchased for development and sale and investments in real
estate partnerships are stated at the lower of cost or estimated net realizable
value. Costs directly related to such real estate are capitalized until
construction required to bring these properties to a saleable condition is
completed. Capitalized costs include real estate taxes, interest, and other
direct costs incurred during the improvement period.
Gains on the sale of real estate purchased for development and sale are
recorded at the time of sale provided certain criteria relating to property
type, cash down payment, loan terms, and other factors are met. If these
criteria are not met at the date of sale, the gain is deferred and recognized
using the installment or cost recovery method until they are satisfied, at which
time the remaining deferred gain is recorded as income.
Market values of real estate purchased for development and sale are reviewed
regularly and allowances for losses are established when the carrying value
exceeds the estimated net realizable value. In determining the estimated net
realizable value, the Company deducts from the estimated selling price the
projected cost to complete and dispose of the property and the estimated cost
(i.e. interest, property taxes, etc.) to hold the property to an expected date
of sale.
(g) Office Properties and Equipment
Office properties and equipment are carried at cost less accumulated
depreciation. Depreciation is computed primarily on the straight-line method
over estimated useful lives. Estimated lives range up to thirty years for
buildings and improvements and up to ten years for furniture, fixtures and
equipment. Maintenance and repairs are charged to expense as incurred.
Improvements which extend the lives of the respective assets are capitalized.
When property or equipment is sold or otherwise disposed of, the cost and
related accumulated depreciation are removed from the respective accounts and
the resulting gain or loss is reflected in income.
(h) Uncollected Interest
The Company maintains an allowance for the loss of uncollected interest
primarily on loans which are ninety days or more past due. This allowance is
reviewed periodically and necessary adjustments, if any, are included in the
determination of current interest income.
(i) Loan Fees and Discounts
The net of origination fees received and direct costs incurred in the
origination of loans are deferred and amortized to interest income over the
contractual life of the loans adjusted for actual principal repayments using a
method approximating a level yield.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
(j) Income Taxes
Effective October 1, 1993, the Company adopted SFAS No. 109 which resulted
in a favorable cumulative adjustment of approximately $664,000. Deferred taxes
are provided for differences in financial reporting bases for assets and
liabilities as compared with their tax bases. A current tax liability or asset
is established for taxes presently payable or refundable and a deferred tax
liability or asset is established for future tax items. A valuation allowance,
if applicable, is established for deferred tax assets that may not be realized.
The statement also eliminates the tax benefit associated with the thrift bad
debt reserves on a prospective basis. Tax bad debt reserves in excess of the
base year amount (established as taxable years ending December 31, 1987 or
later), creates a tax liability.
(k) Loan Sales
Gains or losses on sales of loans are recognized when substantially all
risks and rewards of ownership are transferred. The Company sells and services
loans under contracts providing for guaranteed yields to buyers for the
remaining lives of the loans which may differ from the loan contract rates.
Gains or losses on such loan sales are determined based on the estimated present
value of the difference between estimated future receipts and normal servicing
costs incurred by the Company. The carrying value of any resulting asset is
reviewed periodically and, if necessary, adjustments are charged or credited to
income to reflect changes in the estimated present value of future cash flows.
(l) Drafts Outstanding
The Company invests all excess funds on deposit at other banks (including
amounts on deposit for payment of outstanding disbursement checks) on a daily
basis in an overnight interest-bearing account. Accordingly, outstanding checks
are reported as a liability.
(m) Securities Sold Under Agreement to Repurchase
The Company has sold an interest in various U.S. Government securities to
certain customers who wish to deposit amounts greater than $100,000. These
agreements function similarly to a certificate of deposit in that the agreement
is for a fixed length of time at a fixed interest rate. However, these deposits
are not insured by the FDIC but are insured by a security interest in the
security. The Company has classified these amounts separately from deposits.
(n) Reclassifications
Certain amounts in the 1994 and 1995 consolidated financial statements have
been reclassified to conform with the 1996 presentation.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(2) INVESTMENT SECURITIES
The amortized cost and market value of investment securities held to
maturity at September 30, 1995 is summarized as follows:
1995
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)
U.S. Government and agency obligations:
Due within one year..................................... $ 1,329 -- (1) 1,328
Due after one but within five years..................... 1,000 -- (31) 969
------- --- --- -----
$ 2,329 -- (32) 2,297
======= === =====
The amortized cost and market value of investment securities available for
sale at September 30, 1996 is summarized as follows:
1996
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)
U.S. Government and agency obligations:
Due within one year..................................... $ -- -- -- --
Due after one but within five years..................... 13,037 -- (150) 12,887
Due after five years.................................... 4,297 -- (43) 4,254
------- --- --- -----
$17,334 -- (193) 17,141
======= ==== ======
There were no investment securities available for sale at September 30,
1995.
There were no realized gains or losses during the year ended September 30,
1995. The Company had gross realized losses of $18,000 and gross realized gains
of $12,000 for the year ended September 30, 1996.
Certain investment and mortgage-backed securities are pledged to secure
other borrowed money and customer deposits in excess of FDIC insurance coverage.
The carrying value of the securities pledged at September 30, 1996 was
$4,784,246 with a market value of $4,832,237.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(3) MORTGAGE-BACKED SECURITIES
Mortgage-backed securities held to maturity at September 30, 1995 consisted
of the following:
1995
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)
FNMA...................................................... $ 538 -- (9) 529
GNMA...................................................... 992 -- (11) 981
FHLMC..................................................... 11,246 148 -- 11,394
------- --- --- ------
$12,776 148 (20) 12,904
======= === === ======
Mortgage-backed securities available for sale at September 30, 1996
consisted of the following:
1996
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)
FNMA...................................................... $ 2,469 12 -- 2,481
GNMA...................................................... 5,330 -- (98) 5,232
FHLMC..................................................... 18,861 455 -- 19,316
------- --- ---- ------
$26,660 467 (98) 27,029
======= === === ======
The Company had gross realized gains of $54,000 on sales of mortgage-backed
securities and no realized losses on sales in 1994. There were no realized gains
or losses for the year ended September 30, 1995. For the year ended September
30, 1996, there were gross realized gains of $189,000 and no realized losses.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(4) LOANS RECEIVABLE, NET
Loans receivable, net at September 30 consisted of the following:
1995 1996
--------- -------
(In thousands)
First mortgage loans:
Single family to 4 family units................................................. $ 226,488 224,570
Other........................................................................... 54,401 61,180
Construction loans.............................................................. 27,905 34,566
Consumer and commercial loans:
Installment consumer loans...................................................... 34,123 31,601
Mobile home loans............................................................... 1,204 1,103
Savings account loans........................................................... 705 436
Equity lines of credit.......................................................... 13,210 12,441
Commercial and other loans...................................................... 19,610 26,946
--------- -------
377,646 392,843
Less:
Allowance for loan losses....................................................... 3,578 4,172
Deferred loan fees (costs)...................................................... 71 (286)
Undisbursed portion of loans in process......................................... 17,178 18,589
--------- -------
$ 356,819 370,368
========= =======
The changes in the allowance for loan losses for the years ended September
30 consisted of the following:
1944 1995 1996
------ ----- -----
(In thousands)
Beginning allowance............................................................ $2,753 3,353 3,578
Provision for loan losses...................................................... 510 202 790
Loan recoveries................................................................ 230 255 82
Loan charge-offs............................................................... (140) (232) (278)
------ ----- -----
$3,353 3,578 4,172
====== ===== =====
Non-accrual loans totaled approximately $1.3 million and $445,000 at
September 30, 1995 and 1996, respectively.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(4) LOANS RECEIVABLE, NET -- Continued
Directors and officers of the Company are customers of the Bank in the
ordinary course of business. Deposits and loans of directors and officers bear
interest at rates and have terms consistent with those offered to other
customers. Loans to officers and directors of the Company for the years ended
September 30, are summarized as follows:
1994 1995 1996
------ ----- -----
(In thousands)
Beginning balance.............................................................. $1,915 1,805 1,598
New loans...................................................................... 304 -- --
Repayments..................................................................... (414) (207) (256)
------ ----- -----
Ending balance................................................................. $1,805 1,598 1,342
====== ===== =====
The carrying amounts and fair values of loans receivable at September 30,
1995 and 1996 are as follows (In thousands):
1995 1996
------------------------ ----------------------
Carrying Calculated Carrying Calculated
Amount Fair Value Amount Fair Value
-------- ------- ------- -------
Mortgage loans.......................................... $291,545 297,543 321,951 330,025
Consumer loans.......................................... 36,032 35,578 24,098 23,520
Equity lines of credit.................................. 13,210 13,479 12,441 12,715
Commercial loans........................................ 19,610 20,892 16,050 16,082
Allowance for loan losses............................... (3,578) (3,578) (4,172) (4,172)
-------- ------- ------- -------
$356,819 363,914 370,368 378,170
======== ======= ======= =======
Management has made estimates of fair value discount rates and estimated
prepayment rates that it believes to be reasonable based upon present market
conditions. However, because there is no active market for many of the above
financial instruments, management believes such information is of limited value
and has no basis to determine whether the fair value presented above would be
indicative of the value which could be negotiated during an actual sale.
Furthermore, this information is as of September 30, 1995 and 1996. Changes in
market interest and prepayment rates since September 30, 1995 and 1996 would
have significant impact on the fair value presented and should be considered
when analyzing this financial data.
A portion of the credit lines and commercial loans have interest rate floors
which may increase the value of these loans. No increase in fair market value
was assigned for these interest rate floors.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(4) LOANS RECEIVABLE, NET -- Continued
At September 30, 1996, excluding single family home loans and the fact that
the majority of the loan portfolio is located in the Company's immediate market
area, there were no concentrations of loans in any type of industry, type of
property, or to one borrower that exceeded 10% of the Company's total loan
portfolio. The Company does have 200 loans aggregating approximately $12.3
million which were originated on individual income producing condominium units
in two projects in which the Bank's subsidiaries were a partner. At September
30, 1996, none of these loans were over sixty days delinquent. The majority of
these loans have been outstanding greater than four years and management does
not believe that they represent a significant risk in the loan portfolio.
Approximately $700,000 of these loans have been sold to other financial
institutions.
At September 30, 1995 and 1996, the Company had commitments outstanding to
originate loans totaling approximately $19.0 million and $9.0 million,
respectively, (excluding undisbursed portion of loans in process). Commitments
on loan originations are made at prevailing market interest rates, and are
generally limited to 60 days from date of application. Additionally, at
September 30, 1995 and 1996, the Company had undisbursed equity lines of credit
of approximately $17.1 million and $15.6 million, respectively.
Loans serviced for the benefit of others amounted to approximately $109.4
million, $110.7 million and $115.1 million at September 30, 1994, 1995 and 1996,
respectively.
As disclosed in note 9, certain mortgage loans are pledged to secure
advances from the Federal Home Loan Bank of Atlanta ("FHLB").
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(5) INVESTMENT IN REAL ESTATE PARTNERSHIPS
The Bank's subsidiaries are general partners in real estate partnerships,
with ownership interests ranging up to 50%, originally organized for the
purposes of constructing and marketing residential real estate. Since 1988,
these subsidiaries have not entered into any new partnerships and the activity
of these partnerships has primarily consisted of selling the remaining interests
in their investments. Condensed combined financial information for the
partnerships at or for the year ended at September 30 is summarized as follows:
1995 1996
---- ----
(In thousands)
Assets (principally land and improvements, at cost), net............................... $222 113
==== ===
Liabilities -- principally deferred revenue on land sold in 1994 in the amount of $233. 76 5
---- ---
Partners' equity:
Bank's subsidiaries.................................................................. 73 46
Others............................................................................... 73 62
---- ---
146 108
---- ---
Liabilities and partners' equity................................................... $222 113
==== ===
1994 1995 1996
---- ---- ----
(In thousands)
Sales...................................... $1,767 2,016 523
Cost of sales.............................. 1,213 885 140
------ ----- ----
Gross profit on sales.................... 554 1,131 383
Other (expense) income, net................ 47 78 (223)
------ ----- ----
Net income............................... $ 601 1,209 160
====== ===== ===
Bank's equity in partnership's income...... $ 310 611 115
====== === ===
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(6) OFFICE PROPERTY AND EQUIPMENT, NET
Office property and equipment, net at September 30 consisted of the
following:
1995 1996
---- ----
(In thousands)
Land..................................................... $ 1,314 1,132
Building and improvements................................ 4,447 4,990
Furniture, fixtures and equipment........................ 5,267 5,964
------- ------
11,028 12,086
Less accumulated depreciation............................ 5,613 6,350
------- ------
$ 5,415 5,736
======= =====
The Company leases office space and various equipment. Total rental expense
for the years ended September 30, 1994, 1995 and 1996 was approximately
$547,000, $121,000, and $86,000 respectively. The rental expense for 1994
included a one-time charge of $150,000 as a result of a lease buyout penalty.
This charge was due to the decision to convert from an in-house computer system
to a data processing center.
Future minimum rental payments for operating leases having remaining
noncancelable lease terms in excess of one year at September 30, 1996 are as
follows (In thousands):
1997............................................ $ 29
1998............................................ 27
1999............................................ 18
2000............................................ --
2001............................................ --
----
$ 74
====
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(7) INVESTMENT REQUIRED BY LAW
Investment in stock of the FHLB is required by law of every
Federally-insured savings institution. No ready market exists for this stock and
it has no quoted market value. However, redemption of this stock has been at par
value.
The Bank, as a member of the FHLB of Atlanta, is required to acquire and
hold shares of capital stock in the FHLB of Atlanta in an amount equal to the
greater of (i) 1.0% of the aggregate outstanding principal amount of residential
mortgage loans, home purchase contracts and similar obligations at the beginning
of each year, or (ii) 1/20 of its advances (borrowings) from the FHLB of
Atlanta. The Bank is in compliance with this requirement with an investment in
FHLB of Atlanta stock of $5.2 million at September 30, 1996.
(8) DEPOSITS
Deposits at September 30, consisted of the following:
1995 1996
-------------------------------------------
Weighted Weighted
Amount Rate Amount Rate
-------------------- -------------------
(Dollars in thousands)
Transaction accounts:
Noninterest bearing.......................$ 16,494 --% $ 19,926 --%
NOW....................................... 29,852 1.53 35,654 1.23
Money market checking..................... 41,516 4.38 84,997 4.85
-------- ---- -------- ----
Total transaction accounts.............. 87,862 2.59 140,577 3.24
-------- ---- -------- ----
Passbook accounts:
Regular passbooks......................... 42,664 2.55 39,287 2.67
Money market.............................. 3,757 2.44 3,553 2.44
-------- ---- -------- ----
Total passbook accounts................. 46,421 2.54 42,840 2.66
-------- ---- -------- ----
Certificate accounts:
0.00 - 5.99%............................ 76,939 113,871
6.00 - 8.00%............................ 61,402 15,623
8.01 - 10.00%............................ 124 130
10.01 - 12.00%............................ 351 389
-------- ---- -------- ----
Total certificate accounts.............. 138,816 6.08 130,013 5.64
-------- ---- -------- ----
$273,099 4.35% $313,430 4.12%
======== ==== ======== ====
The aggregate amount of deposit accounts with a minimum denomination of
$100,000 or more was $56,391,948 and $60,405,591 at September 30, 1995 and 1996,
respectively.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(8) DEPOSITS -- Continued
The amounts and scheduled maturities of certificate accounts at September
30, are as follows:
1995 1996
--------- -------
(In thousands)
Within 1 year................................... $ 117,724 94,651
After 1 but within 2 years...................... 8,749 28,241
After 2 but within 3 years...................... 8,449 5,484
Thereafter...................................... 3,894 1,637
--------- -------
$ 138,816 130,013
========= =======
Interest expense on deposits for the years ended September 30 consisted of
the following:
1994 1995 1996
---- ---- ----
(In thousands)
Transaction accounts.................... $ 1,310 1,925 3,162
Passbook accounts....................... 1,895 1,581 1,599
Certificate accounts.................... 5,311 6,384 6,928
------- ----- ------
$ 8,516 9,890 11,689
======= ===== ======
The fair value of demand deposit accounts is $134.3 million and $183.4
million which was the amount currently payable at September 30, 1995 and 1996,
respectively. The fair value of certificate accounts was $139.6 million and
$130.3 million compared to a book value of $138.8 and $130.0 and was estimated
by discounting the amounts payable at the certificate rates currently offered
for deposits of similar remaining maturities. The fair value estimates above did
not include the substantial benefit that results from the low cost funding
provided by the deposit liabilities compared to the cost of borrowing funds in
the market.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(9) ADVANCES FROM FHLB
Advances from the FHLB at September 30 consisted of the following:
1995 1996
--------------------- ----------------------
Weighted Weighted
Amount Rate Amount Rate
--------------------- ----------------------
(In thousands)
Fiscal Year Maturity
1996........................................ $36,989 6.40% $ -- -- %
1997........................................ 12,368 6.87 54,404 5.68
1998........................................ 21,634 6.62 20,120 5.90
1999........................................ 5,905 7.57 13,105 6.35
2000........................................ 7,461 6.44 6,861 6.46
2001 or greater............................. 8,963 7.05 10,063 6.90
------- ---- -------- ----
$93,320 6.65% $104,553 5.97 %
Stock in the FHLB of Atlanta and specific first mortgage loans of
approximately $160,947,000 and $223,400,000 at September 30, 1995 and 1996,
respectively, are pledged as collateral for these advances. The Bank has adopted
the policy of pledging excess collateral to facilitate future advances. At
September 30, 1996, the excess first mortgage loan collateral pledged to the
FHLB will support additional borrowings of approximately $63 million.
The estimated fair value of the FHLB advances at September 30, 1995 and 1996
is $93.7 million and $104.2 million. This estimate is based on discounting
amounts payable at contractual rates using current market rates for advances
with similar maturities.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(10) INCOME TAXES
Income tax expense for the years ended September 30 consisted of the
following:
Current Deferred Total
------- -------- -----
1994:
Federal................................... 1,569 72 1,641
State..................................... 256 9 265
----- ---- -----
1,825 81 1,906
===== == =====
1995:
Federal................................... 1,697 229 1,926
State..................................... 268 38 306
----- ---- -----
1,965 267 2,232
===== === =====
1996:
Federal................................... 2,528 (646) 1,882
State..................................... 403 (121) 282
----- ---- -----
2,931 (767) 2,164
===== ==== =====
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(10) INCOME TAXES -- Continued
The tax effect of the Company's temporary differences between the financial
statement carrying amounts and tax basis of assets and liabilities that give
rise to the net deferred tax asset at September 30, 1995 and 1996 related to the
following:
1995 1996
---- ----
(In thousands)
Deferred tax assets:
Allowance for loan losses.......................................................... $1,373 1,600
Accrued medical reserves........................................................... 54 79
Other real estate reserves and deferred gains on other real estate................. 76 75
Accrued FDIC premiums.............................................................. -- 615
Net operating loss carryforwards................................................... 138 138
Other.............................................................................. 38 99
------ -----
Total deferred tax assets............................................................ 1,679 2,606
Less valuation allowance............................................................. (138) (138)
------ -----
Net deferred tax assets.............................................................. 1,541 2,468
===== =====
Deferred tax liabilities:
Tax bad debt reserve in excess of base year amount................................. 499 552
Property and equipment principally due to differences in depreciation.............. 185 190
FHLB stock, due to stock dividends not recognized for tax purposes................. 356 356
Investment in Joint Venture........................................................ 150 86
Unrealized gain on securities available for sale................................... -- 69
Deferred loan fees................................................................. -- 204
Other.............................................................................. 170 134
------ -----
Total deferred tax liabilities....................................................... 1,360 1,591
------ -----
Net deferred tax asset............................................................... $ 181 877
====== ===
The net deferred tax asset is included in other assets in the consolidated
financial statements. The valuation allowance relates to the state loss
carryforwards which may not be ultimately realized to reduce taxes of the
Company. A portion of the change in the net deferred tax asset relates to
unrealized gains and losses on securities available for sale. A current period
deferred tax expense of $69,000 for the unrealized gains on securities available
for sale has been recorded directly to stockholders' equity. The balance of the
change in the deferred tax asset results from the current period deferred tax
benefit of $767,000.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(10) INCOME TAXES -- Continued
Income taxes of the Company differ from the amounts computed by applying the
Federal income tax rate of 34% for the years ended September 30 to earnings
before income taxes as follows:
1994 1995 1996
---- ---- ----
(In thousands)
Computed federal income taxes........................ $1,718 2,024 2,001
State tax, net of federal benefit.................... 175 201 173
Other, net........................................... 13 7 (10)
------ ----- -----
Total income tax expense............................. $1,906 2,232 2,164
====== ===== =====
The Bank has been permitted under the Internal Revenue Code to deduct an
annual addition to the tax reserve for bad debts in determining taxable income,
subject to certain limitations. This addition may differ significantly from the
bad debt expense for financial reporting purposes and was based on either 8% of
taxable income (the "Percentage of Taxable Income Method") or actual loan loss
experience (the "Experience Method") for the years ended September 30, 1994,
1995 and 1996. As a result of recent tax legislation, the Bank will be required
to recapture tax bad debt reserves in excess of pre-1988 base year amounts over
a period of approximately eight years. In addition, for the period ending
September 30, 1997, the Bank will be required to change its overall tax method
of accounting for bad debts to either the experience method or the specific
charge-off method.
Retained earnings at September 30, 1995 and 1996 include approximately
$5,200,000 representing pre-1988 tax bad debt base year reserve amounts for
which no deferred income tax liability has been provided since these reserves
are not expected to reverse until indefinite future periods and may never
reverse. Circumstances that would require an accrual of a portion or all of this
unrecorded tax liability are a reduction in qualifying loan levels relative to
the end of 1987, failure to meet the tax definition of a bank, dividend payments
in excess of current year or accumulated tax earnings and profits, or other
distributions in dissolution, liquidation or redemption of the Bank's stock.
(11) BENEFIT PLANS
The Company participates in a multiple-employer defined benefit pension plan
covering substantially all employees. Separate actuarial valuations are not
available for each participating employer, nor are plan assets segregated.
Pension expense for the years ended September 30, 1994, 1995 and 1996 was minor.
Plan assets exceeded the present value of accumulated plan benefits at June 30,
1996, the latest actuarial valuation date.
The Company has a defined contribution plan covering substantially all
employees. The Company matches employee contributions based upon the Company
meeting certain operating results. Matching contributions made by the Company
were approximately $40,000, $28,000 and $149,000 for fiscal years 1994, 1995 and
1996, respectively.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(12) REGULATORY MATTERS
At September 30, 1996, the Bank's loans-to-one borrower limit was
approximately $4.6 million. At September 30, 1996, the Bank is in compliance
with the core, tangible and risk-based capital requirements and loans-to-one
borrower limits.
The regulatory requirements for the Bank and the Bank's compliance with such
requirements at September 30, 1996 is as follows.
Percent
Amount of Assets
------ ---------
(In thousands)
Stockholders' equity for the Bank................................................. $27,318 5.94%
Reduction for investments in and advances to "Nonincludable" subsidiaries......... (47) (.01)
------- -----
Tangible capital.................................................................. 27,271 5.93
Tangible capital requirement...................................................... 6,859 1.50
------- -----
Excess............................................................................ $20,412 4.43%
======= ====
Core capital...................................................................... 27,271 5.93
Core capital requirement.......................................................... 13,719 3.00
------- -----
Excess............................................................................ $13,552 2.93%
======= ====
Risk-based capital................................................................ 30,777 10.41
Risk-based capital requirements................................................... 23,641 8.00
------- -----
Excess............................................................................ $ 7,136 2.41%
======= ====
(13) LIQUIDATION ACCOUNT
In conjunction with the Bank's conversion and sale of common stock, as
required by Office of Thrift Supervision regulations, on October 6, 1990 the
Bank established a liquidation account and will maintain this account for the
benefit of the remaining eligible account holders. The initial balance of this
liquidation account was equal to the Bank's net worth defined by OTS regulations
as of the date of the latest statement of financial condition contained in the
final offering circular. In the event of a complete liquidation of the Bank (and
only in such event) each eligible holder shall be entitled to receive a
liquidation distribution from this account in the amount of the then current
adjusted balance for deposits then held, before any liquidation distribution may
be made to the stockholders. The Bank is prohibited from declaring cash
dividends or repurchasing its capital stock if it would cause a reduction in the
Bank's net worth below either the liquidation account or the statutory net worth
requirements set by the OTS.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(14) EARNINGS PER SHARE
Earnings per share for the years ended September 30, 1994, 1995 and 1996 are
computed by dividing net earnings by the weighted average number of common share
equivalents outstanding during the year. Common share equivalents include, if
applicable, dilutive stock option share equivalents determined by using the
treasury stock method. All share and per share data have been retroactively
restated for all common stock dividends.
(15) STOCK OPTION PLAN
The Company's stock option plan provides for stock options to be granted
primarily to directors, officers and other key employees. Options granted under
the stock option plan may be incentive stock options or non-incentive stock
options. The remaining shares of stock reserved for the stock option plan at
September 30, 1996 amounted to approximately 35,000 shares. All outstanding
options have been retroactively restated to reflect the effects of the common
stock dividends. The stock option plan is administered by three non-management
directors of the Company. At September 30, 1996, the Bank had the following
options outstanding:
Options
Options Available for Option
Grant Date Granted Exercise Price Expiration Date
- ---------- ------- -------- ----- ---------------
September 26, 1990................................ 119,703 100% $ 1.42 September 26, 2000
November 28, 1990................................. 238 100 1.42 November 28, 2000
May 29, 1991...................................... 4,988 100 1.96 May 29, 2001
August 4, 1992.................................... 17,904 80 3.77 August 4, 2002
January 21, 1994.................................. 2,461 40 11.89 January 21, 2004
April 20, 1994.................................... 2,461 40 13.41 April 20, 2004
June 30, 1994..................................... 4,102 40 11.89 June 30, 2004
September 16, 1994................................ 6,603 40 12.19 September 16, 2004
September 28, 1994................................ 820 40 12.19 September 28, 2004
November 14, 1994................................. 1,542 20 11.89 November 14, 2004
March 22, 1995.................................... 3,117 20 12.19 March 22, 2005
May 1, 1995....................................... 32,813 20 10.98 May 1, 2005
September 27, 1995................................ 39,064 20 12.16 September 27, 2005
November 2, 1995.................................. 31,250 -- 12.80 November 2, 2005
November 15, 1995................................. 15,626 -- 12.80 November 15, 2005
May 6, 1996....................................... 3,125 -- 15.60 May 6, 2006
During the years ended September 30, 1994, 1995 and 1996, options for
47,760, 34,027, and 57,647 shares, at an average of $1.93, $1.43, and $1.95 per
share, respectively, were exercised.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(16) COMMON STOCK DIVIDENDS
On January 27, 1993, August 18, 1993 and January 7, 1994, the Company
declared a 3 for 2 stock split in the form of common stock dividends aggregating
327,330, 495,084 and 745,179 shares. On May 30, 1995, the Company declared a 5%
common stock dividend aggregating 102,003 shares at a market value of
approximately $2 million. On January 9, 1996 and June 20, 1996, the Company
declared a five for four stock split in the form of a 25% stock dividend,
aggregating approximately 542,000 and 687,000 shares respectively. All share
data has been retroactively restated to give effect to the common stock
dividends.
(17) CASH DIVIDENDS
On June 28, 1994, September 16, 1994, December 14, 1994 and March 22, 1995
the Company declared a quarterly cash dividend of $.09 per share. On June 21,
1995, September 27, 1995, December 27, 1995 and March 27, 1996, the Company
declared a quarterly cash dividend of $.10 per share. On June 27, 1996 and
September 25, 1996, the Company declared quarterly cash dividends of $.11,
respectively.
(18) LEGAL MATTERS
The legal proceedings against the Company are generally incidental to its
business. Based upon the present status of these cases, management believes that
liabilities arising from these proceedings, if any, will not have a materially
adverse effect on the consolidated financial position or results of operations
of the Company.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(19) QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly operating data for the years ended September 30 is summarized as
follows (In thousands, except share data):
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1995:
Total interest income.............................................. $ 6,984 7,483 7,885 7,976
Total interest expense............................................. 3,693 4,272 4,669 4,638
---------- ---------- --------- ---------
Net interest income................................................ 3,291 3,211 3,216 3,338
Provision for loan losses.......................................... 75 20 50 57
---------- ---------- --------- ---------
Net interest income after provision for loan losses................ 3,216 3,191 3,166 3,281
Other income....................................................... 825 787 723 914
General and administrative expenses................................ 2,569 2,594 2,399 2,590
---------- ---------- --------- ---------
Earnings before income taxes....................................... 1,472 1,384 1,490 1,605
Income taxes....................................................... 530 529 544 629
---------- ---------- --------- ---------
Net earnings....................................................... $ 942 855 946 976
========== ========== ========= =========
Earnings per common share.......................................... $ .26 .24 .27 .28
========== ========== ========= =========
Weighted average shares outstanding................................ 3,592,000 3,553,000 3,550,000 3,523,000
========== ========== ========= =========
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(19) QUARTERLY FINANCIAL DATA (UNAUDITED) -- Continued
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1996:
Total interest income.............................................. $ 8,408 8,577 8,748 8,987
Total interest expense............................................. 4,757 4,685 4,661 4,988
---------- ---------- --------- ---------
Net interest income................................................ 3,651 3,892 4,087 3,999
Provision for loan losses.......................................... 115 225 300 150
---------- ---------- --------- ---------
Net interest income after provision for loan losses................ 3,536 3,667 3,787 3,849
Other income....................................................... 935 1,132 1,291 1,273
General and administrative expenses*............................... 2,792 2,955 3,115 4,723
---------- ---------- --------- ---------
Earnings before income taxes....................................... 1,679 1,844 1,963 399
Income taxes*...................................................... 621 676 729 137
---------- ---------- --------- ---------
Net earnings....................................................... $ 1,058 1,168 1,234 262
========== ========== ========= =========
Earnings per common share.......................................... $ .30 .32 .34 .07
========== ========== ========= =========
Weighted average shares outstanding................................ 3,558,000 3,595,000 3,598,000 3,628,000
========== ========== ========= =========
* The three month period ended September 30, 1996 includes a special assessment
from the FDIC for the recapitalization of the SAIF of $1,620,000, and a
related reduction in income taxes of $615,000. Excluding this special
assessment, net income for the three months ended would have been $1,267,000,
or $0.35 per share.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(20) COASTAL FINANCIAL CORPORATION FINANCIAL STATEMENTS (PARENT COMPANY ONLY)
The following is condensed financial information of Coastal Financial
Corporation (parent company only), the primary asset of which is its investment
in its bank subsidiary, for the periods indicated. (In thousands):
Coastal Financial Corporation
Condensed Balance Sheets
September 30, 1995 and 1996
1995 1996
---- ----
Assets
Cash.......................................................... $ 442 145
Investment in subsidiaries.................................... 24,749 27,855
Deferred tax asset............................................ 86 36
Other assets.................................................. 11 34
------- ------
Total assets............................................ $25,288 28,070
======= ======
Liabilities and Stockholders' Equity
Accounts payable (principally dividends)...................... 468 389
Total stockholders' equity.................................... 24,820 27,681
------- ------
Total liabilities and stockholders' equity.............. $25,288 28,070
======= ======
Coastal Financial Corporation
Condensed Statement of Operations
For the years ended September 30, 1994, 1995 and 1996
1994 1995 1996
---- ---- ----
Income:
Management fees.............................................. $ -- 230 108
Dividends from subsidiary.................................... 3,100 1,725 1,090
Equity in undistributed earnings of subsidiaries............. 871 2,013 2,616
------ ----- -----
Total income............................................. 3,971 3,968 3,814
------ ----- -----
Expenses:
Amortization of organization cost............................ 8 8 14
Professional fees............................................ 181 177 38
Supplies and printing........................................ 26 40 7
Other expenses............................................... 26 25 32
Income tax (benefit) expense................................. (82) (2) 2
------ ----- -----
Total expenses........................................... 159 248 93
------ ----- -----
Net income..................................................... $3,812 3,720 3,721
====== ===== =====
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(20) COASTAL FINANCIAL CORPORATION FINANCIAL STATEMENTS (PARENT COMPANY ONLY)
-- Continued
Coastal Financial Corporation
Condensed Statement of Cash Flows
For the years ended September 30, 1994, 1995 and 1996
1994 1995 1996
---- ---- ----
Operating activities:
Net income................................................................. $ 3,812 3,720 3,721
Adjustments to reconcile net income to net cash (used) provided by:
Equity in undistributed net income of subsidiary......................... (871) (2,013) (2,616)
Increase (decrease) in other assets...................................... 41 (46) 27
Increase (decrease) in other liabilities................................. 308 82 (79)
------- ------ ------
Total cash provided by operating activities............................ 3,290 1,743 1,053
------- ------ ------
Financing activities:
Purchase of Treasury Stock................................................. (2,001) (838) --
Capital contributions to subsidiary........................................ -- (150) --
Cash dividend to shareholders.............................................. (617) (1,282) (1,433)
Proceeds from stock options................................................ 88 56 107
Other financing activities, net............................................ (6) 59 (24)
------- ------ ------
Total cash used by financing activities................................ (2,536) (2,155) (1,350)
------- ------ ------
Net increase (decrease) in cash and cash equivalents......................... 754 (412) (297)
Cash and cash equivalents at beginning of the year........................... 100 854 442
------- ------ ------
Cash and cash equivalents at end of the year................................. $ 854 442 145
======= === ===
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(21)CARRYING AMOUNTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair value of financial instruments as of September
30, 1995 and 1996 are summarized below:
1995 1996
-------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------------------- ----------------------
(In thousands) (In thousands)
Financial Assets
Cash and cash equivalents................................ $ 11,201 11,201 $ 20,861 20,861
Investment securities.................................... 2,329 2,297 17,471 17,473
Mortgage-backed securities............................... 12,776 12,904 27,029 27,029
Loans receivable held for sale........................... 2,393 2,453 6,803 6,905
Loans receivable, net.................................... 356,819 363,914 370,368 378,170
FHLB stock............................................... 4,726 4,726 5,228 5,228
-------- ------- -------- -------
$390,244 397,495 $447,760 455,666
======== ======= ======== =======
Financial Liabilities
Deposits:
Demand accounts........................................ 134,283 134,283 183,417 183,417
Certificate accounts................................... 138,816 139,565 130,013 130,303
Advances from Federal Home Loan Bank..................... 93,320 93,718 104,553 104,241
Securities sold under agreements to repurchase........... 2,677 2,677 3,365 3,365
Other borrowings......................................... -- -- 1,922 1,922
-------- ------- -------- -------
$369,096 370,243 $423,270 423,248
======== ======= ======== =======
The Company had $41.0 million of off-balance sheet financial commitments as
of September 30, 1996, which are commitments to originate loans and unused
consumer lines of credit. Since these obligations are generally based on current
market rates, the carrying amount is considered to be a reasonable estimate of
fair value.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale the Company's entire holdings of a particular financial instrument.
Because no active market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, current interest
rates and prepayment trends, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in any of these assumptions used in
calculating fair value would also significantly affect the estimates. Further,
the fair value estimates were calculated as of September 30, 1996. Changes in
market interest rates and prepayment assumptions could significantly change the
fair value.
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(21)CARRYING AMOUNTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS -- Continued
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, the Company has significant assets and
liabilities that are not considered financial assets or liabilities including
deposit franchise value, loan servicing portfolio, real estate, deferred tax
liabilities, premises and equipment, and goodwill. In addition, the tax
ramifications related to the realization of the unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in any of these estimates.
(22) ACQUISITION
On November 2, 1995, the Company acquired Granger-O'Harra Mortgage, Inc.
Granger-O'Harra is a mortgage brokerage company located in Florence, South
Carolina with assets of approximately $1.0 million. In fiscal 1995,
Granger-O'Harra originated approximately $20 million in mortgage loans. The
Company exchanged approximately 17,500 shares of its stock for the stock of
Granger-O'Harra. In 1996, Granger-O'Harra Mortgage, Inc. was merged into Coastal
Federal Mortgage, Inc. The transaction was accounted for as a purchase and there
were no material intangibles resulting from the transaction.
(23) COMMITMENTS AND CONTINGENCIES
The Company has a $8 million outstanding line of credit with a commercial
bank. The line of credit is secured by 51% of the stock of the Bank. At
September 30, 1996, there was no outstanding balance on this line of credit.
BOARD OF DIRECTORS
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
COASTAL FINANCIAL CORPORATION
DIRECTORS
James C. Benton
President, C. L. Benton &
Sons, Inc.
G. David Bishop
Chairman, WCI Management Group Inc.
Harold D. Clardy
President, Chapin Company
James T. Clemmons
Chairman
Coastal Financial Corporation
James P. Creel
President, Creel Corporation
Michael C. Gerald
President and Chief Executive Officer
Coastal Financial Corporation
Samuel A. Smart
Retired, United States Department of Defense
Wilson B. Springs
Owner, H. B. Springs Company
ADVISORY DIRECTORS
James H. Dusenbury
Dusenbury, Hendrix & Little
Attorneys at Law
William J. Sigmon, Sr.
Former President and Chief Executive Officer
Burroughs &
Chapin Company
COASTAL FEDERAL SAVINGS BANK
DIRECTORS
James C. Benton
President, C. L. Benton &
Sons, Inc.
G. David Bishop
Chairman, WCI Management Group Inc.
Harold D. Clardy
President, Chapin Company
James T. Clemmons
Chairman
Coastal Federal Savings Bank
James P. Creel
President, Creel Corporation
Michael C. Gerald
President and Chief Executive Officer
Coastal Federal Savings Bank
Samuel A. Smart
Retired, United States Department of Defense
Wilson B. Springs
Owner, H. B. Springs Company
DIRECTOR EMERITUS
William J. Sigmon, Sr.
Former President and Chief
Executive Officer
Burroughs & Chapin Company
ADVISORY DIRECTOR
James H. Dusenbury
Dusenbury, Hendrix & Little
Attorneys at Law
COASTAL INVESTMENTS
CORPORATION
DIRECTORS
James C. Benton
President, C. L. Benton &
Sons, Inc.
G. David Bishop
Chairman, WCI Management Group Inc.
James P. Creel
President, Creel Corporation
James H. Dusenbury
Attorney
Dusenbury, Hendrix & Little
Attorneys at Law
Michael C. Gerald
President and Chief
Executive Officer
Coastal Financial Corporation
J. Pinckney Kellett, IV
President and Chief Executive Officer
Coastal Investments Corporation
Jerry L. Rexroad, CPA
Chief Financial Officer
Coastal Investments Corporation
COASTAL TECHNOLOGY SOLUTIONS
DIRECTORS
James T. Clemmons
Chairman
Coastal Financial Corporation
Michael C. Gerald
President and Chief Executive Officer
Coastal Financial Corporation
Jimmy R. Graham
President and Chief
Executive Officer
Coastal Technology Solutions
Jerry L. Rexroad, CPA
Chief Financial Officer
Coastal Technology Solutions
Samuel A. Smart
Retired, United States
Department of Defense
COASTAL FEDERAL MORTGAGE
DIRECTORS
James T. Clemmons
Chairman
Coastal Financial Corporation
Michael C. Gerald
President and Chief Executive Officer
Coastal Financial Corporation
Richard L. Granger
President and Chief Executive Officer
Coastal Federal Mortgage
Robert S. O'Harra
Executive Vice President and
Chief Operating Officer
Coastal Federal Mortgage
Jerry L. Rexroad, CPA
Chief Financial Officer
Coastal Federal Mortgage
Wilson B. Springs
Owner, H.B. Springs Company
Phillip G. Stalvey
Executive Vice President
Coastal Financial Corporation
LEADERSHIP GROUP
COASTAL FEDERAL SAVINGS BANK
Dana J. Berry
Deposit Sales Group Leader
North Myrtle Beach
James W. Boyd
Vice President
Credit Administration Group Leader
Denise F. Brown
Deposit Sales Group Leader
Surfside
O. Kendall Buckner
Vice President
Regional Sales Group Leader
South Strand Region
Cynthia L. Buffington
Item Processing Group Leader
Glenn T. Butler
Vice President
Management Information Systems
Group Leader
Edward F. Cagle
Senior Vice President
Corporate Communications Group Leader
Pamela D. Collins
Deposit Sales Group Leader
Dunes
Susan J. Cooke
Vice President
Corporate Support Group Leader
Patty A. Coveno
Deposit Sales Group Leader
Conway
Robert D. Douglas
Senior Vice President
Human Resources Group Leader
James T. Faulk
Assistant Vice President
Collections Group Leader
Rita E. Fecteau
Vice President
Controller
Trina S. Ferguson
Assistant Vice President
Residential Loan Administration
Group Leader
J. Daniel Fogle
Vice President
Regional Sales Group Leader
Conway Region
Mary L. Geist
Vice President
Computer Services Group Leader
Michael C. Gerald
President and Chief Executive Officer
Belinda B. Gillespie
Assistant Vice President
Office Sales Group Leader
Florence
Jimmy R. Graham
Executive Vice President
Information Systems Group Leader
Allen W. Griffin
Executive Vice President
Sales Servicing Group Leader
Don C. Hamilton
Assistant Vice President
Loan Sales Group Leader
Lisa B. James
Assistant Vice President
Deposit Servicing Group Leader
Ruth S. Kearns
Senior Vice President
Marketing Group Leader
Cecil H. Kennedy
Corporate Services Group Leader
Libby H. Kronenwetter
Assistant Vice President
Business Development Officer
North Strand Region
Debra M. Lambe
Newcomer Sales Officer
Scott W. Lander
Vice President
Regional Sales Group Leader
North Carolina
Regina H. Lewis
Assistant Vice President
Community Relations Officer
Edward L. Loehr
Vice President
Budgeting and Treasury
Sherry A. Maloni
Assistant Vice President
Office Sales Group Leader
Waccamaw Medical Park
Margie A. Marlowe
Customer Delight Group Leader
William H. McCormick
Office Sales Group Leader
Socastee
Lauren E. Miller
Staff Development Coordinator
Erin P. Mitchell
Assistant Vice President
Commercial Sales Officer
David C. Murray
Office Sales Group Leader
Oak Street
Jerry L. Rexroad, CPA
Executive Vice President
Chief Financial Officer
Doug E. Shaffer
Vice President
Regional Sales Group Leader
North Strand Region
Cathe P. Singleton
Office Sales Group Leader
Murrells Inlet
J. Marcus Smith, Jr.
Vice President
Account Servicing Group Leader
Phillip G. Stalvey
Executive Vice President
Sales Group Leader
H. Delan Stevens
Loan Sales Group Leader
Conway
Donna P. Todd
Sales Support Officer
Jeff A. Usher
Assistant Vice President
Loan Sales Group Leader
Surfside
Jerry A. Vereen
Vice President
Regional Sales Group Leader
Corporate Region
Cindy L. Walsh
Loan Servicing Group Leader
Douglas W. Walters
Loan Sales Group Leader
North Myrtle Beach
David E. Williams
Office Sales Group Leader
Dunes
COASTAL FEDERAL SAVINGS BANK OFFICES
(803) 692-BANK
Oak Street Branch*
2619 North Oak Street
Myrtle Beach, SC 29577-3129
(803) 448-5151
Conway Branch*
310 Highway 378
Conway, SC 29526
(803) 444-0225
Dunes Branch*
7500 North Kings Highway
Myrtle Beach, SC 29572
(803) 444-0241
Florence Branch*
1385 Alice Drive
Florence, SC 29505
(803) 444-1299
Murrells Inlet Branch*
Highway 17 South & Inlet Crossing
Murrells Inlet, SC 29576
(803) 444-0200
North Myrtle Beach Branch*
521 Main Street
North Myrtle Beach, SC 29582
(803) 444-0265
Socastee Branch*
4801 Socastee Boulevard
Myrtle Beach, SC 29575
(803) 444-0281
Surfside Branch*
112 Highway 17 South &
Glenns Bay Road
Surfside Beach, SC 29575
(803) 444-0250
Waccamaw Medical Park Branch*
112 Waccamaw Medical Park Drive
Conway, SC 29526
(803) 444-0216
North Carolina Consumer Loan Office
7290 Beach Drive, South West
Sunset Beach, NC 28468
P.O. Box 6188
South Brunswick, NC 28470
(910) 579-8160
* COASTAL BANKER EXPRESS
24-Hour Drive-Up Automatic Teller
Machine Locations
COASTAL INVESTMENTS CORPORATION
(803) 626-0491
Genie R. Blanton
Chief Compliance Officer
Conway Investment Center
(803) 444-0229
Victoria J. Damore
Registered Assistant
Myrtle Beach Investment Center
(803) 626-0491
Shirley A. English, CFP
Investment Services Representative
North Strand Investment Center
(803) 444-0269
Christopher A. Fulmer
Investment Service Representatives
South Strand Investment Center
(803) 444-0203
Shelby S. Hardee
Investment Services Representative
West Region Investment Center
(803) 444-0229
John Michael Hill
Investment Services Representative
Myrtle Beach Investment Center
(803) 626-0491
J. Pinckney Kellett, IV
President and Chief Executive Officer
Myrtle Beach Investment Center
(803) 626-0491
Jerry L. Rexroad, CPA
Chief Financial Officer
Myrtle Beach Investment Center
(803) 448-5151
COASTAL FEDERAL MORTGAGE
(803) 662-2273
Richard L. Granger
President and
Chief Executive Officer
Edward F. Hurley
Vice President
Robert S. O'Harra
Executive Vice President and
Chief Operating Officer
Jerry L. Rexroad, CPA
Chief Financial Officer
Nancy L. Watts
Assistant Vice President
COASTAL TECHNOLOGY SOLUTIONS
(803) 626-0460
Glenn T. Butler
Senior Vice President
Jimmy R. Graham
President and Chief Executive
Officer
Jerry L. Rexroad, CPA
Chief Financial Officer
CORPORATE INFORMATION
Common Stock and Dividend Information The common stock of Coastal Financial
Corporation is quoted through the NASDAQ Stock Market under the symbol CFCP. For
information contact J.C. Bradford at 1-800-829-4522, Trident Financial
Corporation at 1-800-222-2618, Robinson-Humphrey at 1-800-241-0077, Herzog,
Heine, Geduld, Inc. at 1-800-523-4936, Raymond James & Associates, Inc. at
1-800-441-4103 or Wheat First Butcher & Singer Securities at 1-800-678-3232. As
of November 30, 1996 the Corporation had 766 Shareholders and 3,447,187 shares
of common stock outstanding. This does not reflect the number of persons or
entities who hold stock in nominee or "street name." The prices have been
adjusted to reflect the stock dividends discussed below.
Market Price of Common Stock
The table below reflects the high and low bid stock prices published by
NASDAQ for each quarter.
High Low
Fiscal Year 1995: Bid Bid
------ ------
First Quarter........................ $13.40 $11.58
Second Quarter....................... 12.19 11.58
Third Quarter........................ 12.48 10.97
Fourth Quarter....................... 13.12 11.84
Fiscal Year 1996:
First Quarter........................ 13.44 12.16
Second Quarter....................... 16.60 12.48
Third Quarter........................ 17.80 15.20
Fourth Quarter....................... 21.00 17.60
Form 10-K
A copy of Coastal Financial Corporation's Annual Report on Form 10-K, as
filed with the Securities Exchange Commission for the year ended September 30,
1996, may be obtained without a charge by writing to the Shareholder Relations
Officer at the Corporate Address.
Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Coastal Financial Corporation will be
held at the Myrtle Beach Martinique, 7100 North Ocean Boulevard, Myrtle Beach,
South Carolina, on Monday, January 27, 1997 at 2:00 p.m., Eastern Standard Time.
Additional Information
If you are receiving duplicate mailing of Shareholder reports due to
multiple accounts, we can consolidate the mailings without affecting your
account registration. To do this, or for additional information, contact the
Shareholder Relations Office, at the Corporate address shown below.
Corporate Offices
Coastal Financial Corporation
2619 Oak Street
Myrtle Beach, South Carolina 29577
803-692-BANK
Transfer Agent and Registrar
Registrar and Transfer Company
P.O. Box 1010
Cranford, NJ 07016
(800) 866-1340
Independent Certified Public Accountants
KPMG Peat Marwick LLP
P.O. Box 10529
Greenville, South Carolina 29603
General Counsel
James H. Dusenbury
Dusenbury, Hendrix & Little
602 27th Avenue
Myrtle Beach, South Carolina 29577
Special Counsel
Breyer & Aggugia
1300 I Street, N.W.
Suite 470 East
Washington, DC 20005
Shareholder Relations Officer
Susan J. Cooke
Coastal Financial Corporation
2619 Oak Street
Myrtle Beach, South Carolina 29577
803-692-BANK
Coastal Financial Corporation is an equal opportunity employer and pledges
equal opportunities without regard to religion, citizenship, race, color, creed,
sex, age, national origin, disability or status as a disabled or Vietnam-Era
veteran.
COASTAL FINANCIAL CORPORATION
Corporate Office
2619 Oak Street
Myrtle Beach, SC 29577-3129
(803) 448-5151