SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
COASTAL FINANCIAL CORPORATION
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(Name of Registrant as Specified in Its Charter)
-------------------------------------
COASTAL FINANCIAL CORPORATION
-------------------------------------
December 28, 1998
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of Coastal Financial Corporation to be held at the Myrtle Beach
Martinique, 7100 N. Ocean Boulevard, Myrtle Beach, South Carolina, on Monday,
January 25, 1999, at 2:00 p.m., Eastern Standard Time.
The attached Notice of Annual Meeting of Shareholders and Proxy
Statement describe the formal business to be transacted at the meeting. During
the meeting, we will also report on the operations of the Corporation. Directors
and Officers of the Corporation, as well as a representative of KPMG Peat
Marwick LLP, the Corporation's independent auditors, will be present to respond
to any questions Shareholders may have.
To ensure proper representation of your shares at the meeting, please
sign, date and return the enclosed proxy card in the enclosed postage-prepaid
envelope as soon as possible, even if you currently plan to attend the meeting.
This will not prevent you from voting in person, but will assure that your vote
is counted if you are unable to attend the meeting.
Sincerely,
/s/ Michael C. Gerald
Michael C. Gerald
President and
Chief Executive Officer
COASTAL FINANCIAL CORPORATION
2619 Oak Street
Myrtle Beach, South Carolina 29577-3129
(843) 448-5151
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 25, 1999
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
("Meeting") of Coastal Financial Corporation ("Corporation") will be held at the
Myrtle Beach Martinique, 7100 N. Ocean Boulevard, Myrtle Beach, South Carolina,
on Monday, January 25, 1999, at 2:00 p.m., Eastern Standard Time.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Corporation;
2. Such other matters as may properly come before the Meeting or any
adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the Meeting.
Any action may be taken on the foregoing proposal at the Meeting on the
date specified above, or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Pursuant to the Bylaws, the Board of
Directors has fixed the close of business on November 30, 1998 as the record
date for the determination of the Shareholders entitled to notice of and to vote
at the Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of Proxy which
is solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The Proxy will not be used if you attend the Meeting and vote in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ SUSAN J. COOKE
SUSAN J. COOKE
SECRETARY
Myrtle Beach, South Carolina
December 28, 1998
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
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PROXY STATEMENT
OF
COASTAL FINANCIAL CORPORATION
2619 Oak Street
Myrtle Beach, South Carolina 29577-3129
(843) 448-5151
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ANNUAL MEETING OF SHAREHOLDERS
January 25, 1999
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Coastal Financial Corporation ("Coastal
Financial" or the "Corporation") to be used at the Annual Meeting of
Shareholders of the Corporation ("Meeting"). The Meeting will be held at the
Myrtle Beach Martinique, 7100 N. Ocean Boulevard, Myrtle Beach, South Carolina,
on Monday, January 25, 1999, at 2:00 p.m., Eastern Standard Time. The
accompanying Notice of Annual Meeting of Shareholders and this Proxy Statement
are being first mailed to Shareholders on or about December 21, 1998.
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REVOCATION OF PROXIES
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Shareholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice delivered in person or mailed to the Secretary of the Corporation at 2619
Oak Street, Myrtle Beach, South Carolina 29577-3129, or by filing a later dated
proxy prior to a vote being taken on the proposals at the Meeting. A proxy will
not be voted if a Shareholder attends the Meeting and votes in person. Proxies
solicited by the Board of Directors of Coastal Financial will be voted in
accordance with the directions given therein. Where no instructions are
indicated, properly executed and dated proxies will be voted for the nominees
for directors set forth herein.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Shareholders of record as of the close of business on November 30,
1998, are entitled to one vote for each share of common stock ("Common Stock")
of the Corporation then held. Shareholders are not permitted to cumulate their
votes for the election of Directors. As of November 30, 1998, the Corporation
had 6,264,467 shares of Common Stock issued and outstanding.
The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares of Common Stock entitled to vote is necessary
to constitute a quorum at the Meeting. The three directors to be elected at the
Meeting will be elected by a plurality of the votes cast by the shareholders
present in person or by proxy and entitled to vote. Votes may be cast for or
withheld from each nominee. Votes that are withheld will have no effect on the
outcome of the election because directors will be elected by a plurality of
votes cast.
1
Persons and groups who beneficially own in excess of 5% of the
Corporation's Common Stock are required to file certain reports with the
Securities and Exchange Commission ("SEC") regarding such ownership pursuant to
the Securities and Exchange Act of 1934, as amended ("1934 Act"). Based upon
such reports, the following table sets forth, as of November 30, 1998, certain
information as to those persons who were beneficial owners of more than 5% of
the outstanding shares of Common Stock. Management knows of no persons other
than those set forth below who owned more than 5% of the outstanding shares of
Common Stock beneficially owned by each director of the Corporation, the "named
executive officers" of the Corporation, and all executive officers and directors
of the Corporation as a group.
Amount and Nature Percent of
of Beneficial Common Stock
Beneficial Owner Ownership (1) Outstanding
- ---------------- ------------- -----------
Beneficial Owners of More Than 5%
(Excluding Directors of the Corporation)
Sea Mist Associates Corporation (2) 339,983 5.42%
Named Executive Officers (3)
Michael C. Gerald, President, Chief
Executive Officer and Director 189,215 3.02
Jimmy R. Graham, Executive Vice President 104,813 1.67
Jerry L. Rexroad, Executive Vice President
and Chief Financial Officer 53,457 (4) 0.85
Phillip G. Stalvey, Executive Vice President 53,091 0.84
Directors of the Corporation
(Excluding Named Executive Officers)
G. David Bishop 297,083 (5) 4.74
J.T. Clemmons 174,266 (6) 2.78
James H. Dusenbury 45,639 0.72
Samuel A. Smart 43,332 0.69
James C. Benton 287,611 (7) 4.59
Harold D. Clardy 75,140 1.19
James P. Creel 339,701 (8) 5.42
Wilson B. Springs 183,622 2.93
All Executive Officers and
Directors as a
Group (12 persons) 1,842,028 (9) 29.40%
- --------------------------
(1) Under Pursuant to Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of the
Corporation's Common Stock if he or she has voting and/or investment power
with respect to such security or has a right to acquire, through the
exercise of outstanding options or otherwise, beneficial ownership at any
time within 60 days from November 30, 1998. The table includes certain
shares owned by spouses, other immediate family members in trust, shares
held in retirement accounts or funds for the benefit of the named
individuals, and other forms of ownership, over which shares the named
persons possess voting and/or investment power.
(2) Includes 2,728 shares owned by Neil Ammons, owner.
2
(3) Under SEC regulation, the term "named executive officer" is defined to
include the chief executive officer, regardless of compensation level, and
the four most highly compensated executive officers, other than the chief
executive officer, whose total annual salary and bonus for the last
completed fiscal year exceeded $100,000.
(4) Includes 1,521 shares owned by Jerry L. Rexroad - IRA; 917 shares owned by
Jerry L. Rexroad & Robin E. Rexroad, Jt Ten; 6,694 shares by Robin E.
Rexroad; and 3,600 shares owned by Jerry L. Rexroad and 2,280 shares
included in the Coastal Financial Corporation's 401-K Plan for Jerry L.
Rexroad.
(5) Includes 48,700 shares owned by G. David Bishop; 99,724 shares for Bishop
Investment Company; 143,105 shares for George Bishop III Trust; and 5,554
non-incentive stock options exercisable within 60 days of November 30,
1998.
(6) Includes 151,998 shares owned by J.T. Clemmons & Helen W. Clemmons; 18,666
shares owned by James T. Clemmons Executor for the Estate of Helen
McGougan; 269 shares owned by J.T. Clemmons - IRA and 3,333 non-incentive
stock options exercisable within 60 days of November 30, 1998.
(7) Includes 266,666 shares owned by RCEE,Inc. of which Mr. Benton is
President; 15,370 shares owned by Mr. Benton; 21 shares owned by Emman Ann
Lawton Benton and 5,554 non-incentive stock options exercisable with 60
days of November 30, 1998.
(8) Includes 254,005 shares owned by Creel Outdoor Advertising, Inc.; 51,988
shares owned by Creel Outdoor Advertising, Inc. Profit Sharing Plan; 2,914
owned by Carolyn W. Creel & James P. Creel, Jr. & Alicia Creel Bame, Jt
Ten; 392 shares owned by Carolyn W. Creel & C. Alicia Creel Jt Ten; 392
shares owned by Carolyn W. Creel & James P. Creel, Jr. Jt Ten; 12,987
shares owned by Carolyn W. Creel; 4,674 shares owned by Sun Graphics, Inc.,
Carolyn W. Creel, President; 289 shares owned by Alicia Creel Bame &
Carolyn W. Creel, Jt Ten; 6,506 shares owned by James P. Creel and 5,554
non-incentive stock options exercisable within 60 days of November 30,
1998.
(9) Includes 277,268 shares subject to stock options exercisable within 60 days
from November 30, 1998, (Mr. Gerald 131,550 shares; Mr. Graham 51,315
shares; Mr. Rexroad 38,444 shares; Mr. Stalvey 23,744 shares; Mr. Bishop
5,554 shares; Mr. Clemmons 3,333 shares; Mr. Smart 3,333 shares; Mr. Benton
5,554 shares; Mr. Clardy 5,554 shares; Mr. Creel 5,554 shares and Mr.
Springs 3,333 shares.)
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PROPOSAL 1 - ELECTION OF DIRECTORS
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The Corporation's Board of Directors is composed of nine members. The
Board of Directors of Coastal Federal Savings Bank ("Coastal Federal" or the
"Bank"), the Corporation's wholly owned subsidiary, also has the same nine
members.
A former member of the Bank's Board of Directors, William J. Sigmon,
Sr., serves as a Director Emeritus of the Bank.
The Corporation's Certificate of Incorporation provides that directors
are to be elected for terms of three years with approximately one-third elected
annually. Three directors will be elected at the Meeting to serve for a
three-year period, or until their respective successors have been elected and
qualified. The Nominating Committee has nominated for election as directors,
James C. Benton, James P. Creel and Wilson B. Springs, each to serve for a
three-year term. All nominees are currently members of the Board.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend or the Board of Directors may amend the Bylaws and
reduce the size of the Board. At this time, the Board knows of no reason why any
nominee might be unavailable to serve.
The Board of Directors recommends a vote "FOR" all of the nominees
for directors of the Corporation.
3
The following table sets forth certain information regarding the
nominees for election as directors and the directors who will continue in office
after the Meeting. There are no family relationships among or between the
directors listed below.
Year First Elected Year
Principal or Nominated Term
Name Age Occupation Director Expires
(1) (2) (3) (4)
- ------------------------------------------------------------------------------------------------------
Board Nominees
--------------
James C. Benton 66 President - C.L. Benton & Sons, Inc. 1979 2002
Heavy Grading, Hauling, Pile Driving
Construction Company
James P. Creel 59 President - Creel Corporation 1990 2002
Operational Management Company in
the accommodations and golf industry
Wilson B. Springs 70 Owner - H.B. Springs Company 1967 2002
Insurance and Real Estate
Directors Continuing in Office
------------------------------
G. David Bishop 45 CEO - WCI Management Group, Inc. 1991 2000
Real Estate Development
J. T. Clemmons 60 Retired - Coastal Federal 1979 2000
Samuel A. Smart 69 Retired - United States 1983 2000
Department of Defense
Harold D. Clardy 71 President - Chapin Company 1975 2001
General Merchandise Company
James H. Dusenbury 63 Attorney - Dusenbury, 1996 2001
Hendrix & Little
Michael C. Gerald 49 President and 1986 2001
Chief Executive Officer
- ----------
(1) As of September 30, 1998.
(2) The listed individuals have held these occupations or positions for at
least the last five years.
(3) Includes prior service on the Board of Directors of Coastal Federal for Mr.
Bishop, Mr. Clemmons, and Mr. Smart.
(4) Assuming re-election at the Meeting for Mr. Benton, Mr. Creel, and Mr.
Springs.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Board of Directors of the Corporation conducts its business through
meetings of the Board and through its committees. During the fiscal year ended
September 30, 1998, the Board of Directors of the Corporation held twelve
meetings. Coastal Federal has its own Board of Directors which conducts its
business through its own committees. During the fiscal year ended September 30,
1998, the Board of Directors for Coastal Federal held twenty-six meetings. No
director of the Corporation or Coastal Federal attended fewer than 75% of the
total meetings of the Board and committee meetings on which such Board member
served during this period for either the Corporation or Coastal Federal.
Presently, Coastal Financial's Board of Directors has three standing
committees: Executive, Audit, and Compensation and Benefits Committee. The
following describes the duties, responsibilities and current membership of these
committees.
The Corporation's Executive Committee meets when called by management
and is empowered to act for the Board of Directors between regular Board
meetings. The Executive Committee met four times in 1998. Its current members
are Messrs. Benton, Clardy, Clemmons (Chairman), Creel, Gerald and Springs.
4
The Corporation's Audit Committee has the primary function of
evaluating audit and compliance performance, handling relations with the
Corporation's independent auditors and establishing policies and procedures
relating to internal auditing functions and controls. Directors Dusenbury,
Chairman, Clardy, Smart, Springs and Creel serve on the committee with Directors
Benton and Bishop as alternates. The Corporation's Audit Committee met one time
during the 1998 fiscal year and the Bank's Audit Committee met four times during
the 1998 fiscal year.
The Corporation's Compensation and Benefits Committee meets as called
by management to review personnel policies and salary and benefit programs.
During 1998 the Compensation and Benefits Committee had one meeting. The members
of the Compensation and Benefits Committee are Messrs. Benton, Clardy, Clemmons,
Creel and Springs.
Article II, Section 14 of the Corporation's Bylaws provides that the
Board of Directors shall act as a nominating committee for selecting the
nominees for election as directors. Such section of the Bylaws also provides as
follows: "No nominations for directors except those made by the nominating
committee shall be voted upon at the annual meeting unless other nominations by
Shareholders are made in writing and delivered to the Secretary of the
Corporation in accordance with the provisions of the Corporation's Certificate
of Incorporation." The Board of Directors of the Corporation held one meeting in
its capacity as the nominating committee during the fiscal year ended September
30, 1998.
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DIRECTORS' COMPENSATION
- --------------------------------------------------------------------------------
Members of the Board of Directors of Coastal Federal receive a fee of
$9,500 annually except for the Chairman of the Board who receives $19,500
annually. Members of the Board of Directors of Coastal Financial receive $2,500
annually. Directors who are members of the Bank's Executive Committee, which
meets on an as-needed basis, are not compensated. Non-Associate directors who
are members of the Bank's Loan Committee receive $50 per committee meeting.
Director's fees increased January, 1998. Total fees paid to Directors, Advisory
Director and Director Emeritus of Coastal Financial Corporation and its
subsidiaries during the fiscal year ended September 30, 1998 were $145,950.
1996 Directors Performance Plan. At the 1996 Annual Meeting, the
Corporation's Shareholders approved the 1996 Directors Performance Plan (the
"Plan"). Beginning with the adjournment of that Meeting and at the adjournment
of the annual meetings for each of the succeeding years during the term of the
Plan, in which the Return on Equity of Coastal Financial for the fiscal year
preceding the annual meeting as reported by Coastal Financial Corporation in its
earnings release for such prior fiscal year is greater than 16.5%, an option
grant will be awarded. If Return on Equity is greater than 16.5%, 17.5% or
19.0%, each Director of Coastal Financial who was also serving in such capacity
as of September 30 of the preceding year will be granted an option to purchase
1,108, 2,216 or 3,191 shares of Coastal Financial Common Stock, respectively,
subject to adjustment as provided in the Plan and provided that no Director may
receive grants of options for shares of Coastal Financial Common Stock under the
Plan in excess of 9,998 shares. In computing Return on Equity, net income is
adjusted for any non-recurring items greater than $250,000, such as changes in
accounting methods. All such non-recurring items will be determined by the
Compensation Committee.
5
Coastal Financial reported for the 1998 fiscal year a return on average
equity of 19.52%. Therefore, after the Annual Meeting on January 25, 1999, 3,191
shares will be granted to each Director.
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EXECUTIVE COMPENSATION
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Summary Compensation Table
The following Summary Compensation Table sets forth certain information
concerning compensation to all executive officers whose total annual salary and
bonus for 1998 exceeded $100,000.
==================================================================================================================
SUMMARY COMPENSATION TABLE (1)
==================================================================================================================
Annual Compensation
==================================================================================================================
Long-Term Compensation
-------------------------------------
Awards Payouts
- ------------------------------------------------------------------------------------------------------------------
Restricted Securities LTIP All Other
Name and Year Salary Bonus Directors' Stock Underlying Payouts Compensa-
Principal ($)(1)(2) ($)(3) Fees Award(s) Options/ ($) tion
Position ($)(4) ($) SARs ($)(5)
(#)
- ------------------------------------------------------------------------------------------------------------------
Michael C. Gerald 1998 165,000.00 121,275.00 16,100.00 - 17,555 - 7,719.00
President, Chief 1997 150,000.00 101,250.00 13,600.00 - 12,079 - 8,619.00
Executive Officer 1996 150,000.00 95,000.00 13,400.00 - - - 8,064.00
& Director
Jerry L. Rexroad, 1998 140,000.00 105,400.00 4,100.00 - 14,222 - 7,701.00
Executive Vice 1997 125,000.00 86,750.00 4,200.00 - 10,413 - 9,092.00
President & Chief 1996 120,000.00 74,000.00 4,000.00 - - - 7,328.00
Financial Officer
Phillip G. Stalvey, 1998 125,000.00 95,875.00 2,600.00 - 14,222 - 8,138.00
Executive Vice 1997 95,000.00 69,350.00 2,000.00 - 10,413 - 7,731.00
President 1996 90,000.00 62,600.00 1,000.00 - - - 4,280.00
Jimmy R. Graham, 1998 90,000.00 66,900.00 100.00 - 14,222 - 7,369.00
Executive Vice 1997 85,000.00 63,550.00 200.00 - 10,413 - 7,988.00
President 1996 80,000.00 57,200.00 - - - - 4,976.00
==================================================================================================================
(1) All compensation, including fringe benefits, are paid by the Bank.
(2) Does not include amounts payable pursuant to an employment agreement in
event of a "change in control" of the Corporation. See "Employment
Agreements."
(3) Reflects bonuses awarded for the fiscal year which were paid in subsequent
fiscal year.
(4) Reflects directors' fees received during the fiscal year for the
Corporation and its Subsidiaries. Does not include perquisites which did
not exceed the lesser of $50,000 or 10% of salary and bonus.
(5) Includes employer contributions to the 401K Profit Sharing Plan & Trust of
Coastal Financial Corporation. Also includes amounts paid for unused
vacation in accordance with the Corporation's Compensation plan to all
Associates.
6
Option Grants Table
The following table sets forth the incentive stock options granted under the
Stock Option and Incentive Plan to the Corporation's Named Executive Officers
during the fiscal year ended September 30, 1998. Also listed are the
hypothetical gains or "options spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term.
==================================================================================================================
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------
Percentage of Potential Realizable Value
Number of Total at Assumed Annual Rates
Securities Options/ of Stock Price Appreciation
Underlying SARs For Option Term (1)
Options/ Granted to ----------------------------------
SARs Associates Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------
Michael C. Gerald 16,604 10.66% 17.300 2007 130,649 457,801
Jimmy R. Graham 14,222 8.64% 18.375 2007 164,349 416,492
Jerry L. Rexroad 14,222 8.64% 18.375 2007 164,349 416,492
Phillip G. Stalvey 14,222 8.64% 18.375 2007 164,349 416,492
==================================================================================================================
(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of Coastal Financial's Common Stock and stock market
conditions. There can be no assurance that the amounts reflected in this
table will be achieved.
Option Exercise Table
The following table shows stock option exercises by the individuals names in the
Summary Compensation Table. In addition, this table includes the number of
shares covered by both exercisable and non-exercisable options as of September
30, 1998. Also reported are the values for "in-the-money" options, which
represent the positive spread between the exercise price of any such existing
options and the year-end price of Coastal Financial Corporation Common Stock.
===================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
===================================================================================================================
Dollar Value of
Number of Unexercised
Unexercised In-the-Money
Number of Options at Options at
Shares FY-End FY-End
Acquired Dollar
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------
Michael C. Gerald 900 18,837 131,550/30,838 2,110,306/206,183
Jimmy R. Graham 2,300 43,010 51,315/25,271 775,704/139,531
Jerry L. Rexroad 1,500 20,076 38,444/43,061 443,114/371,467
Phillip G. Stalvey 1,200 24,660 23,744/25,271 264,748/139,151
===================================================================================================================
7
Pension Plan Table
The following table indicates the annual retirement benefit that would
be payable under the Retirement Plan (as discussed herein) upon retirement at
age 65 to a participant electing to receive his or her retirement benefit in the
standard form of benefit, assuming various specified levels of Retirement Plan
compensation and various specified years of credited service.
============================================================================================================
PENSION PLAN TABLE
- ------------------------------------------------------------------------------------------------------------
Highest Five Year 10 Years 20 Years 30 Years 40 Years
- ------------------------------------------------------------------------------------------------------------
Average Benefit Benefit Benefit Benefit
- ------------------------------------------------------------------------------------------------------------
Compensation Service Service Service Service
- ------------------------------------------------------------------------------------------------------------
$ 50,000 $ 7,500 $ 15,000 $ 22,500 $ 30,000
100,000 15,000 30,000 45,000 60,000
150,000 22,500 45,000 67,500 90,000
200,000 30,000 60,000 90,000 120,000
250,000 37,500 75,000 112,500 123,574 *
============================================================================================================
* For calendar year 1998, the maximum retirement benefit permitted under the
Internal Revenue Code of 1986, as amended ("Code") was $123,574. This
amount is subject to future adjustment by the Internal Revenue Service.
The Revenue Reconciliation Act of 1993 reduced the amount of an
Associate's compensation that may be taken into account for qualified retirement
plan purposes. For plan years beginning in 1994, a qualified retirement plan can
only take into account $160,000 of compensation.
The Bank maintains a noncontributory defined benefit pension plan for
the benefit of all Associates who have completed at least one year of service
and attained age 21. Benefits under the plan are based on length of service and
salary, which is defined to include a participant's total taxable compensation
as reported to the Internal Revenue Service on Form W-2. Participants are 100%
percent vested in their accrued benefits after five years of service.
At the normal retirement age under the plan, age 65, a participant
would receive an annual benefit equal to 1.5% times the participant's years of
credited service times the average of the participant's highest five years'
compensation. The normal form of benefit under the plan is a monthly annuity
payable for the life of the participant with a death benefit payable at the
participant's death. Optional forms of benefit include a lump sum payment and
various alternative annuity payments. The plan also provides for proportionately
reduced benefits in the event of a participant's early retirement prior to
attaining age 65. Benefits under the plan are not subject to reduction from
Social Security or other offset amounts. At September 30, 1998, Messrs. Gerald,
Stalvey, Graham and Rexroad had 23.58 years, 15.75 years, 20.50 years and 2.42
years service under the pension plan, respectively.
8
Employment Agreements
Coastal Federal entered into an employment agreement with Mr. Gerald
upon the completion of the Bank's conversion from mutual to stock form.
Effective September 30, 1998, such employment agreement has an initial term of
three years and provides for an annual base salary of $185,000 subject to annual
adjustment by the Board of Directors. Additionally, on each anniversary of the
commencement date of the agreement, the term of such agreement is extended for
an additional year unless a notice is received from either the Bank or Mr.
Gerald and subject to the review and approval of the Board of Directors. The
agreement also provides for severance payments if employment is terminated
following a change of control. These payments, which will be made promptly after
any change of control, will be equal to 2.99 times the average annual
compensation paid to Mr. Gerald during the five years immediately preceding the
change in control.
Coastal Federal entered into an employment agreement with Mr. Rexroad
effective March 21, 1995. Effective September 30, 1998, such employment
agreement has an initial term of three years and provides for an annual base
salary of $145,600 subject to annual adjustment by the Board of Directors.
Additionally, on each anniversary of the commencement date of the agreement, the
term of such agreement is extended for an additional year unless a notice is
received from either the Bank or Mr. Rexroad and subject to the review and
approval of the Board of Directors. The agreement also provides for severance
payments if employment is terminated following a change of control. These
payments, which will be made promptly after any change of control, will be equal
to 2.99 times the average annual compensation paid to Mr. Rexroad during the
five years immediately preceding the change in control.
Coastal Federal entered into an employment agreement with Mr. Stalvey
effective October 21, 1997. Such employment agreement has an initial term of
three years and provides for an annual base salary of $131,250 subject to annual
adjustment by the Board of Directors. Additionally, on each anniversary of the
commencement date of the agreement, the term of such agreement is extended for
an additional year unless a notice is received from either the Bank or Mr.
Stalvey and subject to the review and approval of the Board of Directors. The
agreement also provides for severance payments if employment is terminated
following a change of control. These payments, which will be made promptly after
any change of control, will be equal to 2.99 times the average annual
compensation paid to Mr. Stalvey during the five years immediately preceding the
change in control.
Coastal Federal entered into an employment agreement with Mr. Graham
effective October 27, 1998. Such employment agreement has an initial term of one
year and provides for an annual base salary of 110,000. Additionally, on each
anniversary of the commencement date of the agreement, the term of such
agreement is extended for an additional year unless a notice is received from
either the Bank or Mr. Graham and subject to the review and approval of the
Board of Directors. The agreement also provides for severance payments if
employment is terminated following a change of control. These payments, which
will be made promptly after any change of control, will be equal to 1.00 times
the average annual compensation paid to Mr. Graham during the five years
immediately preceding the change in control.
The term "control" is defined in the agreement described above as,
among other things, any time during the period of employment when a change of
control is deemed to have occurred under regulations of the Office of Thrift
Supervision ("OTS") or a change in the composition of more than a majority of
the Board of Directors of the Corporation. Based upon the compensation levels of
Messrs. Gerald, Rexroad, Stalvey, and Graham, the aggregate payment which would
have been payable under the terms of the agreement had a change in control
occurred on September 30, 1998 was approximately $640,000, $630,000, $430,000
and $130,000, respectively.
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the 1934 Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Report of the Compensation and
Benefits Committee and Performance Graph shall not be incorporated by reference
into any such filings.
9
Report of the Compensation and Benefits Committee. The Compensation and
Benefits Committee of the Board of Directors of the Corporation is responsible
for establishing, implementing and monitoring all compensation policies of the
Corporation and its primary operating subsidiary, Coastal Federal. The Committee
is also responsible for evaluating the performance of the Chief Executive
Officer of the Corporation and recommending appropriate compensation levels. The
Chief Executive Officer evaluates the performance of executive officers of the
Corporation and recommends individual compensation levels to the Compensation
and Benefits Committee.
The Compensation and Benefits Committee believes that a compensation
plan for executive officers should take into account management skills,
long-term performance results and Shareholder returns. Compensation policies
must be maintained to promote: 1) the attraction and retention of highly
qualified executives; 2) motivation of executives that is related to the
performance of the individual and the Corporation; 3) current and long-term
performance; and 4) a financial interest in the success of the Corporation
similar to the interest of its Shareholders.
The Corporation's current compensation plan involves a combination of
salary and bonus to reward short-term performance and grants of stock options to
encourage long-term performance. The salary levels of the executive officers are
designed to be competitive within the financial services industry. Compensation
surveys are utilized to determine appropriate salary adjustments. A 401(k) plan,
in which all executive officers and Associates of Coastal Financial may
participate has been designed to align their interests with those of the
Shareholders of the Corporation. Matching contributions to the 401(k) plan are
paid based upon the attainment of established levels of Return on Average
Shareholders' Equity ("Return on Equity"). The Corporation's Executive Bonus
Plan provides for the payment of a bonus on a graduated scale if the
Corporation's consolidated Return on Average Equity equals or exceeds 15.0%.
excluding any non-recurring items as determined by the Corporation's Board of
Directors. The Corporation's Return on Equity in fiscal 1998 was 19.52%. This
compares to a Return on Equity in fiscal 1997 of 19.36%. The Executive Bonus
Plan escalates upon the attainment of higher levels of Return on Equity. Stock
options are the Corporation's primary long-term compensation program designed to
reward executive performance consistent with performance that benefits
Shareholders. Awards of stock options are intended to provide executives with
increased motivation and incentive to exert their best efforts on behalf of the
Corporation by enlarging their personal stake in its success through the
opportunity to increase their stock ownership in the Corporation. Options issued
to executives are at a price equal to the closing price of the Corporation's
stock on the date of grant in order to ensure that any value derived from the
grant is realized by Shareholders generally. The amount of options granted to an
Executive Officer is based upon the Corporation's performance, the officer's
performance and relative responsibilities within the Corporation. Options
generally vest over a period of five years.
During the fiscal year ended September 30, 1998, the base compensation
of Michael C. Gerald, President and Chief Executive Officer of the Corporation
was $165,000. For fiscal 1999 Mr. Gerald's base compensation was increased to
$185,000.
Based upon the factors discussed above, the Compensation and Benefits
Committee continues to believe that Mr. Gerald's compensation package as Chief
Executive Officer and President of the Corporation appropriately reflects the
Company's short term and long term performance goals.
The Compensation and James C. Benton J. T. Clemmons Wilson B. Springs
Benefits Committee Harold D. Clardy James P. Creel
Compensation Committee Interlocks and Insider Participation. There are
no interlocks or insider participation with respect to the Compensation and
Benefits Committee of the Board of Directors of the Corporation.
10
Performance Graph. The following graph compares the Corporation's
cumulative Shareholder return on its Common Stock with the return on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
Composite Index and a peer group, the NASDAQ's Bank Index. Total return assumes
the reinvestment of all dividends.
[GRAPHIC -- Graph plotted to points listed in table below]
9/30/93 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
------- ------- ------- ------- ------- -------
Corporation 100.00 125.25 125.78 197.54 317.90 315.50
NASDAQ Bank Index 100.00 105.20 132.64 169.27 282.00 279.85
NASDAQ Composite Index 100.00 100.83 139.28 165.24 226.82 231.79
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TRANSACTIONS WITH MANAGEMENT
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The loans shown in the following table were made in the ordinary course
of business and were made on substantially the same terms, except for the waiver
of fees, as those of comparable transactions and do not involve more than the
normal risk of collectibility or contain other unfavorable features.
At September 30, 1998, Coastal Federal had $1.1 million outstanding in
loans to executive officers and directors, or approximately 2.8 % of
Shareholders' equity.
Director James H. Dusenbury is a partner in the law firm of Dusenbury,
Hendrix & Little located in Myrtle Beach, South Carolina. Mr. Dusenbury serves
as the Bank's General Counsel. During the year ended September 30, 1998,
Dusenbury, Hendrix & Little received approximately $10,905.00 in legal fees for
legal services rendered to the Bank.
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OTHER MATTERS
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The Board of Directors of the Corporation is not aware of any business
to come before the Meeting other than those matters described in this Proxy
Statement. However, if any other matters should properly come before the
Meeting, it is intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the judgment of the person or persons voting
the proxies.
11
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FINANCIAL STATEMENTS
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The cost of solicitation of proxies will be borne by the Corporation.
In addition to solicitations by mail, directors, officers and Associates of the
Corporation may solicit proxies personally or by telephone without additional
compensation.
The Corporation's 1998 Annual Report to Shareholders, including
consolidated financial statements, has been mailed to all Shareholders of record
as of the close of business on November 30, 1998. Any Shareholder who has not
received a copy of such Annual Report may obtain a copy by writing to the
Secretary of the Corporation. Such Annual Report is not to be treated as part of
the proxy solicitation material or as having been incorporated herein by
reference.
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SHAREHOLDERS PROPOSALS
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In order to be eligible for inclusion in the Corporation's proxy
materials for next year's Annual Meeting of Shareholders, which is tentatively
scheduled for January 24, 2000, any Shareholder proposal to take action at such
meeting must be received at the Corporation's main office at 2619 Oak Street,
Myrtle Beach, South Carolina, no later than August 13, 1999. Any such proposals
shall be subject to the requirements of the proxy solicitation rules adopted
under the 1934 Act, as amended. Article II, Section 15 further provides that any
new business to be taken up at the annual meeting shall be stated in writing and
filed with the Secretary of the Corporation in accordance with the provisions of
the Corporation's Certificate of Incorporation. Article XI of the Certificate of
Incorporation provides that notice of a Shareholder's intent to make a
nomination or present new business at the meeting ("Shareholder notice") must be
given not less than thirty days nor more than sixty days prior to any such
meeting; provided however, that if less than thirty-one days' notice of the
meeting is given to Shareholders by the Corporation, a Shareholder's notice
shall be delivered or mailed, as prescribed, to the Secretary of the Corporation
not later than the close of the tenth day following the day on which notice is
mailed to Shareholders. If properly made, such nominations shall be considered
by Shareholders at such meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ SUSAN J. COOKE
SUSAN J. COOKE
SECRETARY
Myrtle Beach, South Carolina
December 28, 1998
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FORM 10-K
A COPY OF THE FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE FURNISHED WITHOUT CHARGE TO SHAREHOLDERS AS OF THE RECORD DATE UPON
WRITTEN REQUEST TO SUSAN J. COOKE, SECRETARY, COASTAL FINANCIAL CORPORATION,
2619 OAK STREET, MYRTLE BEACH, SOUTH CAROLINA 29577-3129.
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12
REVOCABLE PROXY
COASTAL FINANCIAL CORPORATION
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 25, 1999
The undersigned hereby appoints the official proxy committee, consisting of
all of the members of the Board of Directors of Coastal Financial Corporation,
Myrtle Beach, South Carolina, with full powers of substitution to act as
attorneys and proxies for the undersigned, to vote all shares of Common Stock of
Coastal Financial Corporation which the undersigned is entitled to vote at the
Annual Meeting of Shareholders, to be held at the Myrtle Beach Martinique, 7100
N. Ocean Boulevard, Myrtle Beach, South Carolina, on Monday, January 25, 1999,
at 2:00 p.m., Eastern Time, and at any and all adjournments thereof, as
indicated to the right:
1. The election as directors of all nominees listed (except as marked to the
contrary below):
For a Three Year Term: James C. Benton, James P. Creel, Wilson B. Springs
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
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2. In their discretion, such other matters that may properly come before the
Meeting or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSAL.
THIS PROXY, PROPERLY SIGNED AND DATED, WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSITION STATED.
IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING. THIS
PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE OFFICIAL PROXY COMMITTEE TO
VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEE IS
UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, AND MATTERS INCIDENT TO THE
CONDUCT OF THE 1999 ANNUAL MEETING.
Please be sure to sign below and
date this Proxy in the box provided.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
COASTAL FINANCIAL CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Should the undersigned be present and elect to vote at the Annual Meeting or
at any adjournment thereof and after notification to the Secretary of the
Corporation at the Meeting of the Shareholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The above signed acknowledges receipt from the Corporation prior to the
execution of this proxy, of a notice of the Meeting, a proxy statement dated
December 21, 1998 and the 1998 Annual Report to Shareholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, only one signature is required, but each
holder should sign, if possible.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY