# EDGAR Filing Document

**Accession Number:** 0001297107
**File Stem:** 0000950170-25-083183
**Filing Date:** 2025-6
**Character Count:** 2570417
**Document Hash:** 9232e08543bb3a3548bcd2bf0c61026d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-25-083183.hdr.sgml**: 20250606

**ACCESSION NUMBER**: 0000950170-25-083183

**CONFORMED SUBMISSION TYPE**: S-1

**PUBLIC DOCUMENT COUNT**: 55

**FILED AS OF DATE**: 20250606

**DATE AS OF CHANGE**: 20250606

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** CoastalSouth Bancshares, Inc.
- **CENTRAL INDEX KEY:** 0001297107
- **STANDARD INDUSTRIAL CLASSIFICATION:** STATE COMMERCIAL BANKS [6022]
- **ORGANIZATION NAME:** 02 Finance
- **EIN:** 571184730
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** S-1
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-287854
- **FILM NUMBER:** 251031339

**BUSINESS ADDRESS:**
- **STREET 1:** 400 GALLERIA PKWY
- **STREET 2:** SUITE 1900
- **CITY:** ATLANTA
- **STATE:** GA
- **ZIP:** 30339
- **BUSINESS PHONE:** 678-396-4605

**MAIL ADDRESS:**
- **STREET 1:** 400 GALLERIA PKWY
- **STREET 2:** SUITE 1900
- **CITY:** ATLANTA
- **STATE:** GA
- **ZIP:** 30339

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Coastal South Bancshares Inc
- **DATE OF NAME CHANGE:** 20040713

**As filed with the Securities and Exchange Commission on June 6, 2025.** 

**Registration No. 333-**

p

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM S-1**

**REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933**

**COASTALSOUTH BANCSHARES, INC.**

(Exact name of registrant as specified in its charter)

**Georgia**

(State or other jurisdiction of incorporation or organization)

**6022**

(Primary Standard Industrial Classification Code Number)

**57-1184730**

(I.R.S. Employer Identification Number)

**400 Galleria Parkway, Suite 1900, Atlanta, GA 30339** 

**(678) 396-4605**

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

**Stephen R. Stone**

**President and Chief Executive Officer**

**CoastalSouth Bancshares, Inc.**

**400 Galleria Parkway, Suite 1900,** 

**Atlanta, GA 30339** 

**(843) 341-9937**

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

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| | |
|:---|:---|
| &nbsp;&nbsp;**Mark C. Kanaly**<br>**William W. Hooper<br>Alston & Bird LLP<br>1201 W. Peachtree Street, N.E., Suite 4900<br>Atlanta, Georgia 30309<br>(404) 881-7000** | &nbsp;&nbsp;**David W. Ghegan**<br>**Alexander T. Yarbrough**<br>**Cody M. Mathis<br>Troutman Pepper Locke LLP<br>600 Peachtree Street, N.E., Suite 3000<br>Atlanta, Georgia 30308<br>(404) 885-3000** |

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**Approximate date of commencement of proposed sale to the public:**

As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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| | |
|:---|:---|
| &nbsp;&nbsp;Large accelerated filer ☐ | &nbsp;&nbsp;Accelerated filer ☐ |
| &nbsp;&nbsp;Non-accelerated filer ☒ | &nbsp;&nbsp;Smaller reporting company ☒ |
|  | &nbsp;&nbsp;Emerging growth company ☒ |

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

**The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.** 

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**The information in this preliminary prospectus is not complete and may be changed. We may not, and the selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.**

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| | |
|:---|:---|
| **Preliminary Prospectus** | **Subject to Completion, dated June 6, 2025** |

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 **shares**![img173035246_0.jpg](img173035246_0.jpg)

**<u>Common stock</u>**

This is the initial public offering of CoastalSouth Bancshares, Inc. We are offering shares of our voting common stock (our "common stock" or "voting common stock") and the selling shareholders identified in this prospectus are offering an additional shares of our common stock. We and the selling shareholders will be selling the shares of our common stock at the same fixed price. We will not receive any proceeds from the sale of shares of our common stock by the selling shareholders.

Our common stock is presently quoted on the OTC Market Group's OTCQX Best Market under the symbol "COSO." On June 4, 2025, the last reported sale price of our common stock was $21.00 per share. We anticipate that the initial public offering price of our common stock will be between $ and $ per share. We have applied to list our common stock on the New York Stock Exchange ("NYSE") under the symbol "COSO." We believe that upon the completion of this offering, we will meet the standards for listing our common stock on the NYSE, and the completion of this offering is contingent upon such listing.

**Investing in our common stock involves risk. See "**[**<u>Risk Factors</u>**](#risk_factors)**" beginning on page 32 to read about factors you should consider before investing in our common stock.**

**None of the Securities and Exchange Commission (the "SEC"), any state securities commission, the Federal Deposit Insurance Corporation (the "FDIC"), the Board of Governors of the Federal Reserve System nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.** 

**These securities are not deposits, savings accounts or other obligations of any bank or savings association and are not insured or guaranteed by the FDIC or any other governmental agency and are subject to investment risks, including the possible loss of the entire amount you invest.** 

We are an "emerging growth company" and a "smaller reporting company" as defined under the U.S. federal securities laws and are subject to reduced public company reporting requirements.

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| | | |
|:---|:---|:---|
|  | **Per share** | **Total** |
| Initial public offering price of our common stock | $| $|
| Underwriting discounts and commissions <sup>(1)</sup> | $| $|
| Proceeds to us, before expenses | $| $|
| Proceeds to selling shareholders, before expenses | $| $|

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(1) See "Underwriting" for additional disclosure regarding underwriting compensation.

This is a firm commitment underwritten offering. We have granted the underwriters an option to purchase up to an additional shares of common stock from us at the initial public offering price less the underwriting discount within 30 days from the date of this prospectus. The Company intends to provide certain selling shareholders the opportunity to sell additional shares of common stock to satisfy the underwriters' option in lieu of the Company issuing additional shares.

The underwriters expect to deliver the shares to purchasers on or about , 2025.

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| |
|:---|
| *Sole Bookrunner* |
| **Piper Sandler** |
| *Lead Manager* |
| **Stephens Inc.** |

---

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**Prospectus dated , 2025**

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**TABLE OF CONTENTS**

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| | |
|:---|:---|
|  | &nbsp;&nbsp;**Page** |
| &nbsp;&nbsp;[<u>SUMMARY</u>](#summary) | &nbsp;&nbsp;1 |
| &nbsp;&nbsp;[<u>RISK FACTORS</u>](#risk_factors) | &nbsp;&nbsp;32 |
| &nbsp;&nbsp;[<u>USE OF PROCEEDS</u>](#use_of_proceeds) | &nbsp;&nbsp;52 |
| &nbsp;&nbsp;[<u>CAPITALIZATION</u>](#capitalization) | &nbsp;&nbsp;53 |
| &nbsp;&nbsp;[<u>DILUTION</u>](#dilution) | &nbsp;&nbsp;54 |
| &nbsp;&nbsp;[<u>DIVIDEND POLICY</u>](#dividend_policy) | &nbsp;&nbsp;56 |
| &nbsp;&nbsp;[<u>MARKET FOR THE COMMON STOCK</u>](#market_for_common_stock) | &nbsp;&nbsp;57 |
| &nbsp;&nbsp;[<u>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</u>](#mda) | &nbsp;&nbsp;58 |
| &nbsp;&nbsp;[<u>BUSINESS</u>](#business) | &nbsp;&nbsp;87 |
| &nbsp;&nbsp;[<u>SUPERVISION AND REGULATION</u>](#supervision_and_regulation) | &nbsp;&nbsp;99 |
| &nbsp;&nbsp;[<u>MANAGEMENT</u>](#management) | &nbsp;&nbsp;106 |
| &nbsp;&nbsp;[<u>EXECUTIVE COMPENSATION</u>](#executive_compensation) | &nbsp;&nbsp;111 |
| &nbsp;&nbsp;[<u>CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</u>](#certain_relationships_and_rel_party_tran) | &nbsp;&nbsp;119 |
| &nbsp;&nbsp;[<u>PRINCIPAL AND SELLING SHAREHOLDERS</u>](#principal_and_selling_shareholders) | &nbsp;&nbsp;121 |
| &nbsp;&nbsp;[<u>DESCRIPTION OF CAPITAL STOCK</u>](#description_of_capital_stock) | &nbsp;&nbsp;124 |
| &nbsp;&nbsp;[<u>SHARES ELIGIBLE FOR FUTURE SALE</u>](#shares_available_for_future_sale) | &nbsp;&nbsp;130 |
| &nbsp;&nbsp;[<u>CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS OF COMMON STOCK</u>](#mat_us_fed_inc_tax_cons_non_us_holders) | &nbsp;&nbsp;132 |
| &nbsp;&nbsp;[<u>UNDERWRITING</u>](#underwriting) | &nbsp;&nbsp;136 |
| &nbsp;&nbsp;[<u>LEGAL MATTERS</u>](#legal_matters) | &nbsp;&nbsp;140 |
| &nbsp;&nbsp;[<u>EXPERTS</u>](#experts) | &nbsp;&nbsp;140 |
| &nbsp;&nbsp;[<u>WHERE YOU CAN FIND ADDITIONAL INFORMATION</u>](#where_you_can_find_more_information) | &nbsp;&nbsp;140 |
| &nbsp;&nbsp;[<u>INDEX TO FINANCIAL STATEMENTS</u>](#index_financial_statements) | &nbsp;&nbsp;F-1 |

---

**About this Prospectus**

You should rely only on the information contained in this prospectus or in any free writing prospectus that we authorize to be delivered to you. We, the selling shareholders and the underwriters have not authorized anyone to provide you with different or additional information. We, the selling shareholders and the underwriters are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

Unless we state otherwise or the context otherwise requires, references in this prospectus to "we," "our," "us," "ourselves," the "company," "COSO" and the "Company" refer to CoastalSouth Bancshares, Inc., a Georgia corporation, and its consolidated wholly owned banking subsidiary, Coastal States Bank, a South Carolina state-chartered bank ("CSB" or the "Bank").

This prospectus describes the specific details regarding this offering and the terms and conditions of our common stock being offered hereby and the risks of investing in our common stock. For additional information, please see the section entitled "Where You Can Find More Information."

You should not interpret the contents of this prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our common stock.

Unless otherwise stated, all information in this prospectus assumes that the underwriters have not exercised their option to purchase additional shares of our common stock from us.

Through and including , 2025 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

i

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**Market and Industry Data**

Within this prospectus, we reference certain market, industry and demographic data and other statistical information. We have obtained this data and information from various independent, third-party industry sources and publications. Nothing in the data or information used or derived from third-party sources should be construed as advice. Some data and other information are also based on our good faith estimates, which are derived from our review of external surveys and independent sources. We believe that these external sources and estimates are reliable but have not independently verified them. Statements as to our market position are based on market data currently available to us. Although we are not aware of any misstatements regarding the economic, employment, industry and other market data presented herein, these estimates involve inherent risks and uncertainties and are based on assumptions that are subject to change.

**Implications of Being an Emerging Growth Company and a Smaller Reporting Company**

As a company with less than $1.235 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012, or the "JOBS Act." An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. Among other factors, as an emerging growth company:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may present as few as two years of audited financial statements, two years of related management discussion and analysis of financial condition and results of operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we are exempt from the requirement to provide an opinion from our auditors on the design and operating effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended, or the "Sarbanes-Oxley Act;"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we are permitted to provide less extensive disclosure about our executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, which means we do not have to include a compensation discussion and analysis and certain other disclosures regarding our executive compensation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we are not required to hold non-binding advisory votes on executive compensation or golden parachute arrangements.

In addition to the relief described above, the JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. We have irrevocably determined to take advantage of this extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies we can adopt the new or revised standard at the time private companies adopt the new or revised standard. Therefore, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards on a non-delayed basis.

In this prospectus, we have elected to take advantage of the reduced disclosure requirements relating to financial statements and executive compensation, and in the future, we may take advantage of any or all of these exemptions for so long as we remain an emerging growth company. We will remain an emerging growth company until the earliest of (i) the end of the fiscal year during which we have total annual gross revenues of $1.235 billion or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt and (iv) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended.

We are also a "smaller reporting company" as defined in Rule 12b-2 of the Exchange Act. Smaller reporting companies may take advantage many of the same exemptions from disclosure requirements as emerging growth companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will remain a smaller reporting company until the end of the fiscal year in which (1) we have a public common equity float of more than $250 million, or (2) we have annual revenues for the most recently completed fiscal year of more than $100 million and a public common equity float or public float of more than $700 million. We also would not be eligible for status as a smaller reporting company if we become an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent company that is not a smaller reporting company.

We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different from what you might receive from other public reporting companies in which you hold equity interests.

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**GLOSSARY**

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| | |
|:---|:---|
| **Term** | **Definition** |
| ACL | Allowance for credit losses |
| ADC | Acquisition, development, and construction |
| AFS | Available-for-Sale |
| ALCO | Asset/Liability Management Committee |
| AOCI | Accumulated other comprehensive income (loss) |
| ASC | Accounting Standards Codification |
| ASC 326 | ASC Topic 326, Financial Instruments - Credit Losses |
| ASC 820 | ASC Topic 820, Fair Value Measurements |
| ASU | Accounting Standards Update |
| Bank | Coastal States Bank |
| Board | CoastalSouth Bancshares, Inc. Board of Directors |
| BOLI | Bank-owned life insurance |
| BSA | Bank Secrecy Act |
| C&I | Commercial and industrial |
| CBLR | Community bank leverage ratio |
| CECL | Current expected credit loss |
| CET1 | Common equity tier 1 |
| Company | CoastalSouth Bancshares, Inc. |
| CRA | Community Reinvestment Act |
| CRE | Commercial real estate |
| CSM | Coastal States Mortgage, Inc. |
| CVLI | Cash value life insurance |
| DIF | Deposit Insurance Fund |
| Dodd Frank Act | Dodd-Frank Wall Street Reform and Consumer Protection Act |
| DSC | Debt Service Coverage |
| DTI | Debt-to-income ratio |
| Economic Growth Act | Economic Growth, Regulatory Relief and Consumer Protection Act |
| Exchange Act | Securities Exchange Act of 1934, as amended |
| FASB | Financial Accounting Standards Board |
| FDIC | Federal Deposit Insurance Corporation |
| Federal Reserve | The Board of Governors of the Federal Reserve System |
| FHLBA | Federal Home Loan Bank of Atlanta |
| FHLMC | Federal Home Loan Mortgage Corporation |
| FICO | Fair Isaac Corporation |
| FinCEN | Financial Crimes Enforcement Network |
| FNMA | Federal National Mortgage Association |
| FRB | Federal Reserve Bank of Richmond |
| GAAP | Accounting principles generally accepted in the United States of America |
| GGL | Government Guaranteed Lending |
| Ginnie Mae | Government National Mortgage Association |
| GLB Act | Gramm-Leach-Bliley Act |
| Holding Company | CoastalSouth Bancshares, Inc. on an unconsolidated basis |
| LHFI | Loans Held-for-Investment |
| LHFS | Loans Held-for-Sale |
| LTV | Loan-to-value |
| MBF | Mortgage Banker Finance |
| M&A | Mergers and acquisitions |
| MD&A | Management's Discussion and Analysis of Financial Condition and Results of Operations |
| MSA | Metropolitan Statistical Area |
| NOI | Net operating income |
| NPA | Nonperforming asset |

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iii

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| | |
|:---|:---|
| **Term** | **Definition** |
| NYSE | The New York Stock Exchange |
| OREO | Other real estate owned |
| Patriot Act | Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 |
| SBA | United States Small Business Administration |
| SBIC | Small Business Investment Company |
| SCBFI | South Carolina Board of Financial Institutions |
| SEC | Securities and Exchange Commission |
| Securities Act | Securities Act of 1933, as amended |
| TARP | Troubled Asset Relief Program |
| USDA | United States Department of Agriculture |
| U.S. Treasury | United States Department of the Treasury |
| WAC | Weighted-average coupon |

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iv

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**PROSPECTUS SUMMARY**

*This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary may not contain all of the information that you should consider before investing in our securities. You should carefully read this entire prospectus, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the notes related thereto before making an investment decision. Some of the statements in this prospectus constitute forward-looking statements. See "Cautionary Note Regarding Forward-Looking Statements."*

**Our Company**

CoastalSouth Bancshares, Inc. is a bank holding company headquartered in Atlanta, Georgia. Through our wholly owned subsidiary, Coastal States Bank, a South Carolina state-chartered commercial bank, we offer a full range of banking products and services designed for businesses, real estate professionals, and consumers looking for a deep and meaningful relationship with their bank.

Today, we have a community banking presence in some of the fastest growing and most business-friendly markets in the U.S., namely the Lowcountry of South Carolina (Hilton Head Island, Bluffton, and Beaufort), nearby Savannah, Georgia, and the Atlanta, Georgia market.

![img173035246_1.jpg](img173035246_1.jpg)

In addition to our traditional community banking operations, we operate four specialty lines of business that provide scalability and diversification:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Senior Housing Lending- focuses on lending to operators across the spectrum of senior care, with an emphasis on assisted living;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Marine Lending - focuses on consumer loans primarily to high-net-worth borrowers secured by yachts and high-end sport fishing vessels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Government Guaranteed Lending - focuses on origination of small business and other loans guaranteed by the SBA and USDA; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Mortgage Banker Finance - focuses on mortgage warehouse lending to mortgage originators.

By combining the relationship-based focus of a community bank with our specialty lines of business, we believe we can capitalize on the substantial growth opportunities available in our markets, particularly given the scarcity of community banks between $1.5 billion and $5.0 billion in total assets.

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In 2017, the Company completed an offering (our "Recapitalization") to bolster our capital position, raising $62.0 million in common equity. Our Recapitalization was led by Messrs. Stephen Stone, President and Chief Executive Officer, and Tony Valduga, Chief Financial Officer and Chief Operating Officer, and well-respected institutional investors in the banking sector.

Our management team, comprised of 12 senior officers, has more than 200 years of combined experience in building and operating high performing banking franchises in our markets. Messrs. Stone and Valduga, along with other members of our management team, have deep and relevant experience with community bank acquisitions, having completed 16 acquisitions since 2010 (including two at CSB and 14 at a prior institution).

We believe the experience of our management team, the strength of our markets, the scalability of our business, and the scarcity of community banks like CSB in our markets will continue to fuel our financial success and drive strong shareholder returns.

**Our Component Parts: Understanding Our Business and Our Performance**

We believe that our historical success, and our expectations for continued strong future performance, centers on our ability to combine our traditional community banking operations with our four high-performing, specialty lines of business. This concept of integrated and relational component parts can be used to understand the makeup of our lines of business, our growth strategies, our performance ratios, and the ways our Company drives value for both our current and prospective shareholders.

*Our Community Bank & Our Specialty Lines of Business*

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| | | | |
|:---|:---|:---|:---|
| **Senior Housing Lending** | **Marine Lending** | **Government Guaranteed Lending** | **Mortgage Banker Finance** |
| **Community Bank** | **Community Bank** | **Community Bank** | **Community Bank** |

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Our community bank is our first component part and the foundation of our Company. Through our community bank, we focus on commercial and retail clients doing business and/or residing in our local markets. We define our local markets as the communities, and surrounding areas, in which our branches are located. Today, our community bank operates in the vibrant markets of the Lowcountry of South Carolina, as well as the nearby Savannah, Georgia market. Our community bank also operates in the Atlanta, Georgia market, the largest MSA by population in the southeast region of the U.S. Community banking has been a core competency of CSB since our inception in 2004, driving attractively priced core deposit funding that supports growth in all of our specialty lines of business, while providing granular commercial and small business lending opportunities.

We supplement our community bank with four additional component parts, or specialty lines of business, which include Senior Housing Lending, Marine Lending, Government Guaranteed Lending, and Mortgage Banker Finance. These specialty lines of business, described in greater detail below on page 11, serve our clients across the Southeast and the U.S. without reliance on client sourcing within our community banking markets. We have grown these businesses over many years following our Recapitalization, through the hiring of highly experienced relationship managers, and with a focus on scalability, profitability, and strong credit quality. Each of these component parts is time tested and led by CSB team members with long and successful pedigrees in their respective fields. We utilize conservative underwriting methodologies and careful risk selection to deliver attractive risk-adjusted returns. As supplements to our community bank, these four specialty lines of business help to drive our earnings results and our capacity to grow earnings through efficient asset generation, while serving to diversify our balance sheet from both product and geographic perspectives. Although historically focused on asset generation, we expect that each of our lines of business can and will provide a meaningful source of deposit generation going forward.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** |
|  | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of March 31:** |
| *($'s in thousands)* | **2017** | **2018** | **2019** | **2020** | **2021** | **2022** | **2023** | **2024** | **2025** |
| Community Bank | $261388 | $312618 | $356074 | $523553 | $641306 | $776697 | $819610 | $842441 | $863438 |
| Specialty Lines of Business |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Senior Housing Lending | $6000 | $36363 | $80533 | $100391 | $164767 | $249974 | $250593 | $234081 | $245292 |
| &nbsp;&nbsp;&nbsp;&nbsp;Marine Lending | - | 17219 | 13144 | 53434 | 68798 | 203039 | 266197 | 263657 | 284305 |
| &nbsp;&nbsp;&nbsp;&nbsp;Government Guaranteed <br>&nbsp;&nbsp;&nbsp;&nbsp;Lending | 638 | 10546 | 18575 | 25140 | 63245 | 68893 | 82025 | 69264 | 79197 |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage Banker Finance | 34128 | 32641 | 81243 | 113481 | 81453 | 44500 | 82125 | 174033 | 187481 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Specialty Lines of <br>&nbsp;&nbsp;&nbsp;&nbsp;Business | $40766 | $96769 | $193495 | $292446 | $378263 | $566406 | $680940 | $741035 | $796275 |
| Total Loans | $302154 | $409387 | $549569 | $815999 | $1019569 | $1343103 | $1500550 | $1583476 | $1659713 |

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*Our Three Growth Strategies*

![img173035246_2.jpg](img173035246_2.jpg)

We believe in the importance of community banking within the framework of the larger financial services sector and as a pivotal aspect of a vibrant economy. However, fundamental pressures have emerged over time related to the profitability of the financial services industry, broadly, and community banking, specifically. These pressures include compressing net interest margins and rising operating costs (which costs are related to items such as technology, regulatory compliance, and personnel, to name a few).

Due to these industry-wide profitability pressures, we believe the capacity to deliver robust balance sheet growth is a necessary attribute of a successful bank that produces attractive shareholder returns and performance metrics (described below on page 4). Our three component parts of growth - organic growth, acquisitive growth, and business line growth - effectively serve to drive our balance sheet growth and earnings results.

The organic growth of our community bank stems from our ability to attract and expand client relationships, bringing core deposit balances, sourced through our branch system and local communities, and commercial loan balances sourced through our commercial bankers working in our Lowcountry, Savannah and Atlanta MSA markets. In the future, we may look to expand our branch network through de novo branching, which could include opening new branches in our current markets and/or in new markets located in Georgia, South Carolina, or contiguous states, such as Alabama, Florida, North Carolina, and Tennessee. The decision on when and where to expand our branch footprint turns first on our ability to identify and recruit experienced commercial bankers in these new markets.

We supplement our organic growth with carefully selected and financially disciplined acquisitions of other community banks, a strategy our executive team has successfully implemented at CSB and prior companies. Like our organic growth strategy, our M&A strategy is focused on our existing markets, as well as potential new metro markets on an opportunistic basis.

Our third growth strategy refers to both our scalable generation of assets and revenue through our four specialty lines of business (outside of our community bank), as well as our proven ability to establish new specialty lines of business over time while carefully balancing and driving the profitability of our existing lines of business. By way of example, we launched our Senior Housing and our Government Guaranteed Lending business lines in 2017 shortly after our Recapitalization, and later launched our Marine Lending business in 2022 after aggregating a portfolio of loans that were originated by the team that we eventually hired to lead this business. Our Mortgage Banker Finance business line was in existence prior to our Recapitalization, and our management team has overseen its development and expansion since 2017.

Our ability to produce both earnings and balance sheet expansion across these three component parts of our growth strategy, while avoiding over-reliance on any single growth strategy, helps us drive profitability and effectively manage risk.

![img173035246_3.jpg](img173035246_3.jpg)

<sup>(1)</sup> Financial data as of March 31, 2025; Community Bank and Specialty Lines of Business include loans from acquired companies after closing.

<sup>(2)</sup> Represents total loans of each respective acquired company at the time of transaction closing.

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*Our Focal Financial Metrics*

![img173035246_4.jpg](img173035246_4.jpg)

We believe connections exist between the production of returns on average assets and average tangible common equity and our four focal financial metrics: (1) net interest margin, (2) credit metrics, (3) balance sheet and income statement growth, and (4) careful management of expenses as evidenced by our efficiency ratio. We believe the achievement of successful results in each component part is critical to both protecting the value of our bank, particularly during times of stress, and driving growth in shareholder value. When working in concert, these financial metrics have the potential to deliver strong results. When success in any single metric comes at the expense of another metric, the achievement of returns on average assets and average tangible common equity can be challenging.

As illustrated in the financial table below and on page 27, we produced increasing returns on average assets and average tangible common equity, as well as increasing returns on average assets and returns on average tangible common equity when adjusted for non-recurring items, as measured over the last five years. We assess both GAAP returns and adjusted returns (non-GAAP), which remove the impact of certain non-recurring items, such as losses on sales of available for sale securities (as described on page 28).

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** |
|  | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of March 31:** | **As of March 31:** |
|  | **2020** | **2021** | **2022** | **2023** | **2024** | **2024** | **2025** |
| Return on Average Assets (ROAA) | 0.67% | 0.94% | 1.07% | 1.26% | 1.05% | 0.48% | 0.97% |
| Adjusted ROAA <sup>(1)</sup> | 0.60% | 0.96% | 1.08% | 1.24% | 1.18% | 1.00% | 0.97% |
| Return on Average Equity (ROAE) | 6.58% | 10.98% | 15.50% | 17.97% | 12.13% | 5.85% | 10.25% |
| Adjusted ROAE <sup>(1)</sup> | 5.89% | 11.31% | 15.59% | 17.70% | 13.60% | 12.24% | 10.25% |
| Return on Average Tangible <br> Common Equity (ROATCE) <sup>(1)</sup> | 6.97% | 11.52% | 16.29% | 18.72% | 12.49% | 6.04% | 10.52% |
| Adjusted ROATCE <sup>(1)</sup> | 6.24% | 11.87% | 16.38% | 18.44% | 14.00% | 12.64% | 10.52% |

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<sup>(1)</sup> See the section entitled "Non-GAAP Financial Measures Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

We believe we have succeeded in producing these returns over this five-year period by focusing on: (1) delivering a net interest margin above 3.28% throughout this timeframe, (2) maintaining low levels of net charge-offs, with aggregate net charge-offs totaling only $2.0 million, or an annual average of 0.04% of LHFI, (3) producing five-year compounded annual growth rates in total loans of 23.6%, deposits of 25.0%, revenue of 13.7%, net income of 53.1%, adjusted net income (non-GAAP) of 63.3%, fully diluted earnings per share of 42.2%, adjusted fully diluted earnings per share (non-GAAP) of 51.8%, book value per share of 10.4%, and tangible book value per share (non-GAAP) of 11.2%, and (4) managing our expenses as shown by an adjusted efficiency ratio (non-GAAP) of less than 60% over the last three years. See the section entitled "Non-GAAP Financial Measure Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures. We believe our ability to produce results related to each of our focal financial metrics without sacrificing results in any particular measure helps us manage risk.

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** |
|  | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Periods Ended March 31:** | **For the Periods Ended March 31:** |
| *($'s in thousands, except per share data)* | **2020** | **2021** | **2022** | **2023** | **2024** | **5-Year CAGR** | **2024** | **2025** |
| *Balance Sheet Metrics* |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Gross LHFI | $702518 | $938116 | $1298603 | $1418425 | $1409443 | 24.7% | $1403551 | $1472232 |
| &nbsp;&nbsp;Total Loans (HFI + HFS) | 815999 | 1019569 | 1343103 | 1500550 | 1583476 | 23.6% | 1514571 | 1659713 |
| &nbsp;&nbsp;Deposits | 891552 | 1424117 | 1548646 | 1750657 | 1834802 | 25.0% | 1749484 | 1937693 |
| *Performance Metrics* |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Revenue | 38335 | 52441 | 64151 | 72888 | 69836 | 13.7% | 13391 | 18640 |
| &nbsp;&nbsp;Adjusted Revenue <sup>(1)</sup> | 37387 | 50851 | 64151 | 72413 | 73301 | 15.2% | 16856 | 18640 |
| &nbsp;&nbsp;Net Income | 6368 | 12322 | 18190 | 24478 | 21904 | 53.1% | 2429 | 5050 |
| &nbsp;&nbsp;Adjusted Net Income <sup>(1)</sup> | 5702 | 12694 | 18296 | 24114 | 24558 | 63.3% | 5083 | 5050 |
| &nbsp;&nbsp;Diluted EPS | $0.80 | $1.48 | $2.05 | $2.58 | $2.09 | 42.2% | $0.24 | $0.47 |
| &nbsp;&nbsp;Adjusted Diluted EPS <sup>(1)</sup> | $0.71 | $1.53 | $2.07 | $2.54 | $2.35 | 51.8% | $0.50 | $0.47 |
| &nbsp;&nbsp;Book Value per Share | $12.76 | $14.52 | $13.26 | $16.36 | $19.01 | 10.4% | $16.91 | $19.67 |
| &nbsp;&nbsp;Tangible Book Value per Share <sup>(1)</sup> | $12.08 | $13.84 | $12.64 | $15.80 | $18.51 | 11.2% | $16.39 | $19.17 |

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<sup>(1)</sup> See the section entitled "Non-GAAP Financial Measures Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

While the above-mentioned financial metrics comprise our primary focal measures, we take great care to monitor and balance the management of other financial metrics, including, but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our yields on earning assets and costs of funding (which impact our net interest margin);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our sources, levels, and growth of our non-interest income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•metrics related to our balance sheet composition, such as the ratio of our loans to our deposits, our liquidity ratios, and our non-core funding levels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our operating leverage measures; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our asset liability sensitivity measures.

*Our Competitive Advantage - Our Six Non-Financial Value Drivers* 

We believe our non-financial value drivers are our competitive advantage. Much like our Focal Financial Measures, our non-financial attributes combine to help enhance our franchise value and drive returns for our shareholders.

*<u>Management</u>*

Our management team, which is led by our President and Chief Executive Officer, Stephen Stone, has significant experience building and operating community banks in our markets while creating value for the shareholders of these companies. Our Chief Financial Officer and Chief Operating Officer, Tony Valduga, has worked alongside Mr. Stone for the past 14 years at both Community & Southern Bank and CSB.

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| | |
|:---|:---|
| ![img173035246_5.jpg](img173035246_5.jpg)<br>**Stephen R. Stone** <br>Chief Executive Officer | ![img173035246_6.jpg](img173035246_6.jpg)<br>**Anthony P. Valduga** <br>Chief Financial Officer & Chief Operating Officer |

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Following an initial capitalization of Community & Southern Bank in 2010, Messrs. Stone and Valduga, as members of the executive management team, grew Community & Southern to $4.4 billion in assets through a combination of organic growth strategies, acquisitions and the introduction of business lines, similar to the three growth strategies described above. Community & Southern was sold in 2016 to a bank currently known as Bank OZK for a deal value of approximately $800 million. As leaders of our Company, Messrs. Stone and Valduga, along with the other members of our management team, have presided over our Recapitalization in 2017, the execution of two bank acquisitions, the growth of our four specialty lines of business, as described above, and the growth of our balance sheet to $2.2 billion in total assets.

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In addition to Messrs. Stone and Valduga, our team of senior officers and business line leaders are equally focused on risk management as a fundamental governor of our expansion and the achievement of top tier profitability metrics, all while achieving our growth targets. Our leadership team has broad experience in critical tasks such as: 1) sourcing and executing acquisitions and other strategic transactions, 2) building a comprehensive risk management infrastructure, 3) hiring teams of bankers, 4) building specialty lines of business, 5) deploying new technology, 6) managing our balance sheet from interest rate risk, credit risk, liquidity, and capital perspectives, 7) instilling a common culture throughout our organization, 8) expanding into new markets and, 9) maintaining open and collaborative relationships with our regulators. Based on these skill sets and experiences, we believe our current leadership team has the capacity to more than double the asset size of our Company in the future.

We believe our management team's long tenure of working together in our markets provides a strong familiarity with each other and with the markets we serve. Our management team is highly engaged in business development and community service initiatives, and they have proven to be proficient in recruiting talented bankers to join CSB, based, in part, on our reputation for developing high-performing and successful teams. While the Company has defined succession plans in place for its key management team members, the loss of one or more of these executives could have a material adverse effect on our business and our ability to execute our strategic plan.

*<u>Markets</u>*

The markets encompassing our branch footprint include the major Southeast MSAs of Atlanta, Savannah, and Hilton Head. We also view our markets in a more broadly defined geographic area to include the states of Georgia and South Carolina. We have grown to become one of the largest remaining independent bank holding companies headquartered in these two states through our progress in building a balance sheet of $2.2 billion in assets and due to merger activity in our markets reducing the number of our locally headquartered competitors as larger buyers located outside of our markets have acquired these banks.

The demographic strengths of our markets, including the size of these markets (as measured by population and numbers of operating businesses) and the growth attributes of these markets (as measured by the historical and projected population and economic growth), provides meaningful opportunities for CSB to aggregate clients and support our balance sheet and earnings growth goals.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Market Demographics** | **Market Demographics** | **Market Demographics** | **Market Demographics** | **Market Demographics** |
|  |  | **2025 - 2030** |  | **2025 - 2030** |
|  |  | **Projected** | **Median HH** | **Projected** |
|  | **MSA** | **Pop. Change** | **Income** | **HHI Change** |
|  | **Population** | **(%)** | **($)** | **(%)** |
| Atlanta-Sandy Springs-Roswell, GA | 6421346 | 4.4% | 87947 | 7.7% |
| Savannah, GA | 436057 | 6.2% | 73273 | 5.1% |
| Hilton Head Island-Bluffton-Port Royal, SC | 240270 | 7.8% | 86076 | 10.1% |
| **Market Weighted Average** |  | **6.3%** | **86360** | **8.9%** |
| **Nationwide Average** |  | **2.4%** | **78770** | **8.8%** |
| Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. | Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. | Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. | Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. | Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. |

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We believe our Bank is poised to benefit from the demographic and business attributes of our three current markets based on our deposit market share position. The Atlanta MSA is the largest MSA in the southeast region of the U.S. as measured by population, while the populations of the Savannah and Hilton Head Island MSAs are expected to grow at rates more than double that of the U.S., according to the U.S. Census Bureau. Based on information provided by the FDIC as of June 30, 2024, we ranked as the largest headquartered bank by deposits in the Hilton Head Island-Bluffton-Port Royal MSA (the "Hilton Head MSA"), controlling 14.3% of total market deposits in the Hilton Head MSA.

Although we view our markets as one of the keys to our success, operating in these markets is not without risks. Given the size and scale of the Atlanta MSA, we face significant competition in this market from community banks as well as regional and national financial institutions. As of June 30, 2024, there were more than 111 banks and credit unions operating in the Atlanta MSA. In our Lowcountry and Savannah markets, the threat of hurricanes and other weather-related disasters present a significant seasonal threat to our business and operations.

*<u>Culture and Differentiated Brand</u>*

The culture we have developed, which permeates all our client interactions and operational functions, provides continuity of purpose and a guide for our team members' activities across our Bank. We are committed to hiring client facing team members with extensive experience in the local communities we serve and a willingness to embrace our client-focused approach to doing business. We encourage clear and open communications between our team members, as well as between our clients and our team members. Our team members view the bedrock responsibilities of their roles in serving our clients as providing exceptional service while identifying and implementing innovative solutions to our clients' financial services needs. We believe our culture gives us a significant advantage in hiring productive team members from other banks and attracting clients from other financial institutions.

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At CSB, we believe our Company builds strength through relationships. We exist to build meaningful relationships with our team members, our clients, and our communities. Our mission is to: 1) provide tailored advice and banking solutions to our clients to help them achieve financial success, 2) provide our team members the opportunity to achieve personal, professional, and financial success, and 3) make a positive impact on our communities. We believe that by focusing on the five core values described below we can create meaningful relationships between our team members, between our Bank and our clients, and between our Bank and our communities. Each of these relationships is critical to our financial success and supports our capacity to drive shareholder value. Our five core values include:

![img173035246_7.jpg](img173035246_7.jpg)

Our company motto, "Local. And proud of it.", is representative of our brand in the markets we serve. We believe this motto speaks to our commitment to relationships and communities. We believe our team members embrace their standing as local bankers in their communities, striving to develop deep and meaningful relationships with their clients. We believe our relationship-oriented approach to banking resonates with our team members and our clients. Additionally, by nurturing a high-performance culture where success is rewarded and recognized, we believe we are well positioned to attract talented bankers to join our Company.

The culture we have built at CSB also focuses on our communities and our standing as a trusted financial resource to the members of our communities. We encourage our team members to get involved in their communities outside of their work at our Company, as an example, through involvement in community, charitable and non-profit organizations.

Following our Recapitalization in 2017, we established the CSB Community Commitment, a donor advised fund administered through the Community Foundation of the Lowcountry. The CSB Community Commitment is funded by our team members and our Board, and it is overseen by an advisory board comprised of CSB team members from every region and every level throughout the Bank. Over 65% of our team members contributed to the CSB Community Commitment in 2024 and our goal is to increase the participation level to 75% in 2025. The CSB Community Commitment provides direct financial support to charitable organizations in our markets, with a particular emphasis on veterans and childhood development.

*<u>Scarcity Value</u>*

In the State of South Carolina, our Bank is the third largest headquartered bank as measured by total assets as of March 31, 2025. Further, while the list of our competitors in our Georgia and South Carolina markets includes many of the largest banks in the U.S., as well as many large regional banks with assets in excess of $10 billion, we remain one of only 16 banks with total assets between $1.5 billion and $5 billion as of March 31, 2025 headquartered in these states. We believe this scarcity of similarly sized banks in this $1.5 billion to $5 billion asset range positions us favorably to attract commercial and retail clients in our markets, as we compete effectively with our smaller competitors with lower levels of lending capacity and less robust product offerings, as well as our larger competitors with less capacity to deliver customized and attentive client experiences.

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| | | | |
|:---|:---|:---|:---|
| **The Atlanta MSA ($1.5B - $5B in Assets)** <sup>1</sup> | **The Atlanta MSA ($1.5B - $5B in Assets)** <sup>1</sup> | **The Atlanta MSA ($1.5B - $5B in Assets)** <sup>1</sup> |  |
|  | &nbsp;&nbsp;**Total** | &nbsp;&nbsp;**Total** | &nbsp;&nbsp;**Market** |
|  | &nbsp;&nbsp;**Assets** | &nbsp;&nbsp;**Deposits** | &nbsp;&nbsp;**Share** |
| **Institution** | &nbsp;&nbsp;**($M)** | &nbsp;&nbsp;**($M)** | &nbsp;&nbsp;**(%)** |
| MetroCity Bankshares, Inc. | 3660 | 2222 | 1.0 |
| Georgia Banking Company, Inc. | 2474 | 1854 | 0.8 |
| United Bank Corporation | 2152 | 1239 | 0.5 |
| CoastalSouth Bancshares, Inc. | 2190 | 760 | 0.3 |
| Pinnacle Financial Corporation | 2261 | 613 | 0.3 |
| Southern First Bancshares, Inc. | 4284 | 424 | 0.2 |
| HomeTrust Bancshares, Inc. | 4558 | 383 | 0.2 |
| Colony Bankcorp, Inc. | 3172 | 216 | 0.1 |
| First Carolina Financial Services, Inc. | 3217 | 99 | &nbsp;&nbsp;< 0.1 |
| Capital City Bank Group, Inc. | 4461 | 30 | &nbsp;&nbsp;< 0.1 |
| $1.5B - $5B Banks in Market |  | 7841 | 3.4 |
| **Total Institutions In Market** |  | $**230018** | **100%** |

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Note: Market analysis includes banks with $1.5 - $5.0 billion in assets operating in the Company's markets. Financial data is as of the quarter ended March 31, 2025. Deposit information is as of June 30, 2024.

<sup>(1)</sup> Excludes Southern States Bancshares, Inc. as it is a recent acquisition target.

Source: S&P Capital IQ Pro

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| | | | |
|:---|:---|:---|:---|
| **The Lowcountry & Savannah MSAs ($1.5B - $5B in Assets)** | **The Lowcountry & Savannah MSAs ($1.5B - $5B in Assets)** | **The Lowcountry & Savannah MSAs ($1.5B - $5B in Assets)** |  |
|  | &nbsp;&nbsp;**Total** | &nbsp;&nbsp;**Total** | &nbsp;&nbsp;**Market** |
|  | &nbsp;&nbsp;**Assets** | &nbsp;&nbsp;**Deposits** | &nbsp;&nbsp;**Share** |
| **Institution** | &nbsp;&nbsp;**($M)** | &nbsp;&nbsp;**($M)** | &nbsp;&nbsp;**(%)** |
| CoastalSouth Bancshares, Inc. | 2190 | 1048 | 4.7 |
| South Atlantic Bancshares, Inc. | 1784 | 254 | 3.7 |
| The Queensborough Company | 2175 | 182 | 0.8 |
| First Federal Bancorp, MHC | 3975 | 109 | 0.5 |
| Colony Bankcorp, Inc. | 3172 | 101 | 0.5 |
| $1.5B - $5B Banks in Market |  | 1694 | 10.1 |
| **Total Institutions In Market** |  | $**22432** | **100%** |

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Note: Market analysis includes banks with $1.5 - $5.0 billion in assets operating in the Company's markets. Financial data is as of the quarter ended March 31, 2025. Deposit information is as of June 30, 2024.

Source: S&P Capital IQ Pro

Our community bank market areas have undergone significant consolidation over the past few decades. Consolidation activity in our markets has significantly reduced the number of community banks similar to our size, and we believe the limited number of similarly situated competitors presents us with an opportunity to produce profitable growth in the years ahead. At March 31, 2025, there were only four publicly traded companies listed on a major exchanges and headquartered in either Georgia or South Carolina with total assets between $1.5 billion and $5.0 billion: Southern First Bancshares, Inc. ($4.3 billion in assets), MetroCity Bankshares, Inc. ($3.7 billion in total assets), Colony Bankcorp Inc. ($3.2 billion in total assets), and First Community Corp. ($2.0 billion in total assets).

We believe we have benefited from market dislocation caused by bank mergers and acquisitions in our markets, as clients have chosen to move their banking relationships from acquired banks in the aftermath of a sale, and bankers have chosen to move, or have been forced to move due to terminations, from banks in the aftermath of a sale. We have successfully employed this strategy of pursuing bankers and clients since 2017, hiring commercial bankers from merged institutions and drawing clients from merged institutions, which strategy has helped fuel our growth. We anticipate there will be further consolidation of both larger and smaller banks than our Bank with operations or headquarters in our current markets, as well as other nearby Southeast markets, which will create additional opportunities for us to grow.

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In the table below, we illustrate a list of bank merger transactions announced and/or closed in Georgia and South Carolina since 2017 with the selling bank larger than $250 million in assets at time of transaction announcement:

![img173035246_8.jpg](img173035246_8.jpg)

Source: S&P Capital IQ Pro

*<u>Scalability</u>*

Since our Recapitalization in 2017 we have built our Company to achieve scalability. We have invested in hiring long-tenured executive officers and business producers whose backgrounds include prior experience at larger regional banks. We operate a strong information technology platform, which we believe provides us with capacity to support acquisitive growth and additions of new products and business lines. Our investments in systems, such as nCino<sup>TM</sup> (a Salesforce based platform designed to automate and streamline the loan origination process), which we have implemented and customized, as well as the implementation of virtualization and cloud capabilities, have successfully enabled us to create a more efficient and integrated workflow while enhancing responsiveness and improving overall client experience. This scalability of people and operating systems helps us deliver efficient operating results and maintain a strong risk management infrastructure. However, in terms of total assets, we are currently a smaller bank as compared to the majority of the institutions listed in our "Comparable Companies" discussion beginning on page 17. As a result, we may not have similar economies of scale today as those larger institutions.

Our management team continues to focus on the careful evaluation and deployment of additional technology and infosecurity products and services, as well as the implementation of best practices regarding operations and risk management, which we believe will accelerate service delivery and strategic advancements.

*<u>Diversification</u>*

The diversification of our balance sheet, our revenue streams, and our geographies represent one of the most important tenets of our approach to risk management. The makeup of our loans held for investment includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, acquisition, ADC loans, single family residential mortgage loans, senior housing loans, marine loans, and various types of consumer loans. None of these loan types represent greater than 24.0% of our gross loan portfolio as of March 31, 2025. In addition to traditional ADC and CRE ratios, we measure and monitor concentration limitations with respect to our specialty lines of business as a percentage of both our LHFI portfolio and capital. While certain of our specialty lines of business, such as Marine Lending and Senior Housing, are highly scalable, the growth in these areas is governed by the growth of the overall CSB balance sheet.

At March 31, 2025, 52.0% of our LHFI portfolio was secured by commercial real estate. Decreases in real estate values could adversely affect the value of property used as collateral for those loans, which, in turn, can adversely affect the value of our loan portfolio secured by commercial real estate. Many of our commercial business and commercial real estate loans are made to small to medium sized businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability if economic conditions were to deteriorate. If general economic conditions in the market areas in which we operate negatively impact this customer sector, our results of operations and financial condition may be adversely affected. This may impact our ability to compete with larger institutions in attracting new small to medium sized business clients.

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In addition, within our deposit base, no client relationship represents more than 1.5% of total deposits, and the largest 20 deposit relationships comprise less than 12.9% of total deposits, each measured as of March 31, 2025. We generate revenue through our securities portfolio, representing 15.2% of our assets as of March 31, 2025, as well as our loans held for sale, and our noninterest income, which includes service charges on deposit accounts, interchange income, gains on sales of government guaranteed loans, investments in BOLI, and mortgage banking income. We also believe our geographic diversification across the coastal areas of South Carolina and Georgia, the Atlanta MSA, and, as it pertains to the geographic makeup of our specialty line of business clients, the U.S., provides us with additional risk mitigation attributes.

We believe these non-financial value drivers assist us in growing our Company while managing the risks inherent in running a financial services business. We further believe both our current shareholders and prospective shareholders benefit from the presence of these non-financial value drivers.

*Summary of Our Component Parts Approach* 

Our use of a component parts approach to analyzing and building our Company has served to drive our financial success while helping us manage risks inherent in the banking industry. Our analysis of potential growth strategies interwoven with our current lines of business overlay our expectations related to both non-financial value drivers and our focal financial measures. We believe our future success in managing each of these component parts across our lines of business, our growth strategies, our non-financial value drivers, and our focal financial measures will result in positive outcomes for our shareholders.

**Our Company History and Milestones**

We were organized in 2004 in Hilton Head Island, South Carolina with a mission to create a locally owned and operated community bank. Members of the founding management team and board of directors recognized the value and importance a local community bank can provide to clients and communities within its markets. Through locally-sourced loans and deposits and expansion of our branch footprint in the Lowcountry of South Carolina, CSB grew to become the largest community bank operating in Beaufort County, South Carolina, with "community banks" defined as banks with assets less than $10 billion.

In 2017, we completed our Recapitalization. The proceeds from the Recapitalization allowed us to redeem high-cost preferred stock issued through the U.S. Treasury's TARP in the aftermath of the economic downturn during 2007 through 2009 (the "Great Recession"), which TARP preferred stock was utilized to stabilize our capital position as the United States and local economies recovered. Upon closing of the Recapitalization and redemption of the TARP preferred stock, our Board of Directors adopted our strategic plan focused the three-pronged growth strategy described above.

As a result, we grew total assets from $413.5 million in assets as of December 31, 2016 to $2.2 billion in assets as of March 31, 2025 through the successful execution of our organic growth strategy, opportunistic community bank acquisitions, and introduction of specialty lines of business. We have demonstrated positive credit improvements since the years following the Great Recession, reducing non-performing assets from 3.09% of our assets at December 31, 2016 to 0.70% of our assets at March 31, 2025, and our ratio of non-performing assets excluding guaranteed loans to total assets (non-GAAP) was 0.49% at March 31, 2025. We have driven returns on our average assets and average tangible common equity (non-GAAP) from losses of (0.04)% and (0.31)% for the year ended December 31, 2018, respectively, to 1.16% and 13.36%, for the last twelve months ended March 31, 2025, respectively. See the section entitled "Non-GAAP Financial Measure Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures. Since our Recapitalization, we executed two acquisitions of community banks headquartered in the Atlanta MSA. Additionally, as of March 31, 2025, we have hired 34 commercial bankers since December 31, 2017. We view the hiring of commercial bankers focused on loan originations and deposit gathering as a subset of our acquisitive growth strategy and have sourced many of these bankers following the acquisitions of other banks in our markets.

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The chart below highlights some of our accomplishments and key milestones since our Recapitalization in 2017.

![img173035246_9.jpg](img173035246_9.jpg)

**Additional Detail Regarding Our Community Bank and Our Lines of Business**

In addition to our community bank, we operate four specialty lines of business. Each of these specialty lines of business operates on a national basis within the United States. The operation of specialty lines of business such is prevalent in larger regional or national banks, but less frequently part of product offerings of smaller banks with assets less than $10 billion. While the inclusion of these specialty lines of business is less common in a community bank of our asset size, we have developed a strong track record of performance and risk management.

We have built each of these four specialty lines of business through the hiring of experienced managers, business producers, and support personnel, in many cases known to us from previous financial institutions. While we have enjoyed success through organic growth and development of our specialty lines of business, in the future, we may consider acquisitions of additional lines of business on a stand alone basis or as part of the acquisition of whole banks.

A key tenet to our approach to building our specialty lines of business is that we "do not dabble". Prior to launching any new line of business, we assess attributes of the potential new line of business, including our expected ability to scale the business, our profitability expectations for the new line of business, the historical and expected credit profile of the business, the manner in which a new line of business complements or enhances our current lines of business and our community bank, compliance requirements associated with the business, operational capacity for our Company to manage the business, and, our comfort with the leadership of the new line of business.

*Our Community Bank* 

We view our community bank geographically through the lens of three separate markets: 1) the Lowcountry, 2) Savannah, and 3) the Atlanta MSA. Within these three vibrant markets, we house our 11 community bank branches: five are in our Lowcountry Region, including two on Hilton Head Island, two in Bluffton, and one in Beaufort, SC; one is in Savannah; and five are in the Atlanta MSA, including Sandy Springs, Alpharetta, Cumming, Dawsonville, and in Cobb County near The Battery.

Since 2017, we have grown from four bank branches to eleven. Five of these locations are *de novo*, opened by us as opposed to having been purchased through our two bank acquisitions. Our *de novo* branches look and operate differently than many traditional bank branches. Recognizing that client interactions, particularly with commercial clients, continue to migrate from in person to digital communications and transaction execution, our branches are designed to function as more than a transaction hub. In lieu of a traditional teller line, we rely upon a smaller open office design staffed by bankers cross-trained to perform a variety of functions. Our branches typically house three to four full time employees, which differs from historical banking models whereby large numbers of employees

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occupy large bank facilities. In our branches with comparatively less square footage per branch, the balance of our space is devoted to our commercial banking team members and their support staff.

For the three months ended March 31, 2025, and for the year ended December 31, 2024, loan commitment originations for the Community Bank were $126.5 million and $375.5 million, respectively, with a weighted average coupon at origination of 7.23% and 8.32%, respectively. At March 31, 2025 and December 31, 2024, total Community Bank deposits, which excludes Correspondent Banking deposits, were $1.58 billion and $1.45 billion, respectively, with an average of $144.0 million and $131.8 million, respectively, per branch.

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| | |
|:---|:---|
| ![img173035246_10.jpg](img173035246_10.jpg)<br>![img173035246_11.jpg](img173035246_11.jpg)<br>Source: S&P Capital IQ Pro<br>| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*<u>Our Hilton Head Presence</u>*<br>According to the FDIC's Summary of Deposits as of June 30, 2024, in the Hilton Head MSA, we rank third in deposits behind only Wells Fargo & Co. and SouthState Corp., two banks headquartered outside of South Carolina with assets over $50 billion. In addition, the fourth, fifth and sixth ranked banks by deposits are comprised of banks larger than $500 billion in assets. The seventh ranked bank by deposits in the Hilton Head MSA, a community bank like us with less than $10 billion in assets, holds less than one third of our total deposits in the market controlling a market share of only 3.7% as compared to our 14.3% market share. We believe the strength of our deposit rankings as compared to both larger banks and community banks under $10 billion in assets positions us well to compete for clients desiring a strong locally controlled bank. |

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|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*<u>Our Savannah Presence</u>*<br>We opened a de novo branch in the Savannah MSA in 2020. Notwithstanding that this branch opened during COVID-19 lockdowns, it has grown to hold over $70 million in deposits in four years. However, this represents less than a 1.0% market share of deposits based on FDIC's Summary of Deposits as of June 30, 2024. The Savannah MSA holds over $10.1 billion in deposits as of June 30, 2024, providing us with a significant opportunity to continue to build deposit market share. We believe recent consolidation within the community banking space in Savannah will provide attractive client acquisition opportunities. | ![img173035246_12.jpg](img173035246_12.jpg)<br>![img173035246_13.jpg](img173035246_13.jpg)<br>Source: S&P Capital IQ Pro |

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| | |
|:---|:---|
| ![img173035246_14.jpg](img173035246_14.jpg)<br>![img173035246_15.jpg](img173035246_15.jpg)<br>Source: S&P Capital IQ Pro | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*<u>Our Atlanta Presence</u>*<br>Similar to Savannah, but on a far larger scale, our Atlanta MSA franchise holds a small percentage of total deposits, representing only 0.3% of the $230.7 billion total deposit market according to the FDIC Summary of Deposits as of June 30, 2024. We believe our growing deposit franchise in the Atlanta MSA, totaling $760 million in deposits as of June 30, 2024, will continue to benefit from the overall size of this market and our standing as one of the largest remaining independent banks in Georgia and South Carolina, and from the expected continued consolidation of our larger competitors in the market. Likewise, consolidation within the community banking space, as seen in the chart on page 8, has left CSB positioned as one of the few remaining community banks in Atlanta between $1.5 - $5.0 billion in assets. |

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*Senior Housing Lending*

Our Senior Housing business line is focused on lending across the spectrum of senior care, with an emphasis on assisted living. We focus on low leverage lending to experienced operators with strong track records. Our national platform provides a larger screening pool from which to source opportunities that meet our strict underwriting standards. The portfolio has experienced zero net charge-offs since inception in 2017. For the year ended December 31, 2024, the weighted average LTV ratio at origination within this portfolio was approximately 63.5% with a WAC at origination of 8.27%. As of December 31, 2024, the weighted average LTV of our Senior Housing portfolio was 62.4%. The senior housing industry has experienced some financial pressure since 2020 due to the impact of COVID-19, rising interest rates, and inflationary pressure on expenses. However, the mid- to long-term demographic trends in the U.S. cause us to believe this line of business will continue to provide attractive growth opportunities while maintaining our high level of credit-based selectivity.

Our Senior Housing team is comprised of veterans of the senior housing business. Our line of business leader has more than three decades of experience in this industry, as does our senior credit officer for this portfolio. Our Chief Executive Officer and Chief Operating Officer worked with our Senior Housing leadership at the bank they led prior to our Recapitalization, amounting to decades of experience working with our Senior Housing leadership team. Given the significant experience of this team, we have taken special care to plan for the eventual succession of management. Our current managing director of senior housing was hired in 2018 from a highly successful Southeastern regional bank and has worked side by side with our line of business leader on every deal since joining CSB.

Our Senior Housing portfolio is one of the most closely monitored portfolios in the Bank. Our team performs both regulatory and financial monitoring on the entire portfolio each quarter. Key financial metrics such as NOI, occupancy, and DSC are measured, and financial covenants are tested each quarter.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** |
| *($'s in thousands)* | **2020** | **2021** | **2022** | **2023** | **2024** |
| Period End Balance | $100391 | $164767 | $249974 | $250593 | $234081 |
| Annual Originations | 33713 | 122275 | 122431 | 16713 | 73726 |
| # of Loans Originated | 8 | 12 | 13 | 3 | 5 |
| Loan to Value at Origination | 67.2% | 67.0% | 61.9% | 62.1% | 63.5% |
| Year to Date Effective Yield | 5.41% | 4.87% | 5.61% | 8.58% | 8.63% |
| Annual Net Charge-Offs | $- | $- | $- | $- | $- |

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Although deposit generation was not a primary focus of our Senior Housing team prior to 2025, given our deep relationships with our clients and the operating nature of their business, we generally require the operating account for each of our clients, as well as any reserve accounts. Likewise, for construction loans, we will generally require that equity be held at CSB prior to funding. Over time, we expect the deposit contribution from the Senior Housing business line to continue to increase.

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*Marine Lending*

In 2022, we hired a team of bankers to lead our Marine Lending line of business. Our Marine Lending leader and senior underwriter within Marine Lending have more than five decades of cumulative consumer lending experience. We operate a correspondent lending model within our Marine Lending business, whereby we originate direct super-prime consumer loans, defined as having a primary borrower with a strong repayment history and evidence of prior recreational ownership at the time of origination, through a network of twelve national correspondent lenders. Similar to the leadership of our Senior Housing business line, our Chief Executive Officer and Chief Operating Officer worked with our Marine Lending leadership at the bank they led prior to our Recapitalization, amounting to decades of experience working with our Marine Lending leadership team. This included our purchase of certain loans from this team from 2018 to 2022 prior to their onboarding at our Bank.

The primary collateral supporting loans we originate in this line of business are comprised generally of high-end yachts and sport fishing vessels. The loans are primarily made to high net worth clients with attractive, super-prime credit scores (averaging 808 for the year ended December 31, 2024) at time of origination. In addition, our Marine Lending business focuses on "lifestylers," or those borrowers with at least 5 years of boat ownership experience of large vessels. As of December 31, 2024, we had $263.7 million of loans in our Marine Lending loan portfolio. For the year ended December 31, 2024, our average loan size in the portfolio at origination was $370 thousand and the average loan-to-value at time of origination was approximately 76.6%. Since inception, we have repossessed three vessels due to non-payment of borrowers' loans out of 939 originations from the launch of the business through December 31, 2024, while net charge-offs in this portfolio since inception have totaled $41 thousand.

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| | | | |
|:---|:---|:---|:---|
| **Marine Lending** <sup>(1)</sup> **as of December 31:** | **Marine Lending** <sup>(1)</sup> **as of December 31:** | **Marine Lending** <sup>(1)</sup> **as of December 31:** | **Marine Lending** <sup>(1)</sup> **as of December 31:** |
| *($'s in thousands)* | **2022** | **2023** | **2024** |
| Period End Balance | $203039 | $266197 | $263657 |
| Annual Originations | 112840 | 123482 | 73612 |
| Loan to Value at Origination | 58.6% | 61.6% | 76.6% |
| Origination FICO | 765 | 810 | 808 |
| Debt to Income Ratio at Origination | 23.2% | 20.6% | 22.9% |
| Year to Date Effective Yield | 3.34% | 4.14% | 4.82% |
| Weighted Average Coupon at Origination | 5.26% | 7.47% | 7.16% |
| Annual Net Charge-Offs | $- | $5 | $36 |

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<sup>(1)</sup> 2022 information is from launch of CSB Marine line of business in June 2022.

Like Senior Housing, prior to 2025, our Marine Lending line of business was not focused on deposit generation. However, given the financial strength of our Marine Lending clients, we believe there is ample opportunity for us to win deposit business from them. Later this year, we plan to launch a deposit account specifically targeted at this client base.

*Government Guaranteed Lending* 

Our GGL line of business focuses on the origination of loans through the SBA programs, including 7(a) loans and 504 loans, designed to support credit origination to small businesses, as well as loans guaranteed by the USDA. Our GGL team is currently comprised of a managing director, a national sales manager, each with over 30 years of SBA lending experience, as well as seven business development officers. CSB has earned the distinction from the SBA as a Preferred Lender under the SBA's 7(a) program, which designation allows a bank to make final credit decisions on SBA-guaranteed loans.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **GGL as of December 31:** | **GGL as of December 31:** | **GGL as of December 31:** | **GGL as of December 31:** | **GGL as of December 31:** | **GGL as of December 31:** |
| *($'s in thousands)* | **2020** | **2021** | **2022** | **2023** | **2024** |
| Period End Balance | $25140 | $63245 | $68893 | $82025 | $69264 |
| Annual Originations <sup>(1)</sup> | 23269 | 58888 | 28121 | 42743 | 22252 |
| Sold Volume | 13775 | 25018 | 19227 | 20304 | 25362 |
| Gain on Sale Income | 1263 | 2920 | 1877 | 1360 | 1818 |
| Average Net Premium | 9.17% | 11.67% | 9.76% | 6.70% | 7.17% |
| Annual Net Charge-Offs | 0 | -15 | 1042 | 401 | -98 |
| Annual Net Charge-Offs, less Offset<br> from SBA Contingency Reserve <sup>(2)</sup> | 0 | -15 | -82 | 120 | -98 |

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<sup>(1)</sup> In 2024, originations of $20.9 million were associated with a USDA Senior Housing loan. The loan is reported in the Senior Housing origination volume.

<sup>(2)</sup> Gross charge-offs of $1,124 and $281 were fully offset through releases from the SBA contingency reserve in noninterest expense for the period ended December 31, 2022 and 2023, respectively. The SBA contingency reserve was established in conjunction with the acquisition of Cornerstone Bancshares, Inc. in 2021 to capture potential risk of government guarantees not being honored. When SBA repairs or denials occurred on these acquired loans, they were reported as charge-offs; however, the offsetting release from the contingency reserve resulted in no economic loss to the Company.

Our geographic reach within our GGL line of business includes states across the U.S. In 2024, we were among the top 20% of all SBA 7(a) lenders nationwide, and we were ranked in the top 25 of USDA lenders nationally. During the first quarter of 2025, $8.3 million of SBA 7a commitments were produced. There was a total of $13.0 million in guaranteed portions of SBA 7a commitments outstanding on loans with funding in process at March 31, 2025.

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![img173035246_16.jpg](img173035246_16.jpg)

Although deposit generation was not a primary focus of our GGL team prior to 2025, given the operating nature of our clients' businesses, we believe there is ample opportunity to develop full banking relationships with this client base. Our suite of deposit products and treasury management services are well suited to meet the needs of these types of businesses.

*Mortgage Banker Finance*

Our MBF business line provides warehouse lending services to single family mortgage originators across the country. Our program is structured as a purchase and sale of originated single family mortgages, as opposed to traditional warehouse lines of credit. Under this form of warehousing, MBF purchases individual notes directly from our clients, which clients typically include independent mortgage bankers that we have carefully vetted and underwritten. Substantially all single family mortgage loans we originate through MBF have a secondary market commitment to purchase the mortgage at time of origination. We take physical possession of the mortgage notes and allonges and the loans typically remain on our balance sheet for approximately eight to ten calendar days prior to sale.

Recently, the mortgage warehouse lending sector within the broad financial services sector has experienced changes, with certain larger regional banks with assets greater than $10 billion choosing to exit this business line. This reduction of competition has created an opportunity for our Company to deepen our relationships with existing mortgage originators while also adding new originators. Our single family loan originations through MBF are comprised of a mix of purchase loans and refinance loans, defined as loans made for newly purchased homes and loans made to refinance existing debt on a current home, respectively. Our non-reliance on either of these two loan types, along with the addition of new mortgage originators, has helped us maintain the volumes of our originations in our MBF business, even as many other participants in the single family mortgage lending industry have experienced reductions in origination volumes.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** |
| *($'s in thousands)* | **2020** | **2021** | **2022** | **2023** | **2024** |
| Period End Balance | $113481 | $81453 | $44500 | $82125 | $174033 |
| Year to Date Average Balance | 105040 | 99778 | 49823 | 55286 | 123310 |
| Year to Date Effective Yield | 5.55% | 5.54% | 7.58% | 9.20% | 8.33% |
| # of MBF Client Originators | 65 | 68 | 64 | 67 | 83 |

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Our MBF team has historically been focused on generating deposit relationships with our MBF clients. In addition to pledge accounts required from many of our clients, our team has focused on building both interest bearing and non-interest bearing accounts. As of December 31, 2024, MBF client deposits totaled $29.1 million and had a weighted average rate of 0.69%.

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**Our Acquisition Strategy and Our M&A History** 

Since our Recapitalization, we have sought to implement an M&A strategy defined by an opportunistic approach. We are active in assessing opportunities to acquire other banks that we believe would offer us financial and strategic benefits, but we are careful to only pursue transactions on terms acceptable to us. We expect to continue our pursuit of M&A opportunities that offer us both financial and strategic benefits, which acquisitions may include whole bank acquisitions, purchases of branches and assumption of deposits, and acquisitions of non-depository companies.

Our executive team has extensive experience in executing M&A transactions. In our Chief Executive Officer's and Chief Operating Officer's roles at their prior bank, Community & Southern Bank, they closed and integrated fourteen (14) M&A transactions from 2010 to 2015. We have executed and integrated two bank acquisitions since 2017, while assessing possible acquisitions of numerous banks during that timeframe, which, for various reasons, we did not execute. Our successful acquisitions of Foothills Community Bank in 2018 and Cornerstone Bank in 2021 helped to build our community banking presence in our Atlanta market.

![img173035246_17.jpg](img173035246_17.jpg)

Source: S&P Capital IQ Pro

<sup>(1)</sup> Indicates deposits purchased; all other values are assets acquired.

We believe we possess organizational competency in all of the critical facets of M&A. Our sourcing process, including our strategic and financial assessments of possible acquisition targets, provides us with robust information which allows us to focus on attractive opportunities. Our team has experience executing due diligence reviews of potential M&A opportunities once we reach that stage of merger assessment. All members of our board of directors have experience in bank M&A, some having over 30 years of experience, and our board provides support to our management team as we pursue transactions. We engage experienced advisors to assist us with our M&A strategies and execution, including during our due diligence reviews of opportunities and negotiation of merger related agreements. Importantly, our management team has experience closing and integrating acquisitions with a focus on achieving our targeted financial expectations and providing a seamless experience for our acquired bank clients.

There are numerous banks headquartered or operating within our current markets and in markets with proximity to our current markets that we believe could be attractive partners, with characteristics we would assess to be attractive in the context of possible future M&A expansion. In addition to assessing the financial and strategic attributes of each potential target bank, we analyze the markets in which potential target banks operate, focusing on the location of their branches and deposits, to determine attractive demographic and economic factors of those markets. We review the competitive landscape in those markets regarding the makeup and attributes of other banks and financial services companies operating in a potential target's market. We build financial models using conservative and informed assumptions to arrive at potential capacity for our Company to pursue a potential acquisition of a target.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

![img173035246_18.jpg](img173035246_18.jpg)

Source: S&P Capital IQ Pro <sup>1</sup><sup>2</sup><sup>3</sup><sup>4</sup>

We approach our acquisition growth strategy with a disciplined view. We screen potential targets for financial and strategic attributes, which include, but are not limited to,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Strength of deposits, measured by both makeup of deposit types and cost of deposits,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Credit profile, including credit metrics, approach to underwriting loans, and approach to originating loans,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Earnings profile, including net interest margin, management of expenses, and fee income sources and levels,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Franchise position within the target's operating markets,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Culture and talent base,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Diversification of revenue sources, funding sources and loan portfolio,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Capitalization, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Existence or absence of non-traditional business lines.

We review the financial impact of potential acquisitions by modeling our expectations for impact on our tangible book value per share, our capital ratios, our fully diluted earnings per share, and the timeframe during which any dilution to our tangible book value per share is recovered (generally, under three (3) years), along with measures of internal rate of return on our investment (typically seeking to achieve returns in the mid-to-high-teens or above). We may choose to pursue an acquisition that falls outside our historical focal bands related to a particular measure described above, but only based on our assessment of the potential benefits to our franchise and our shareholders driven by our expectations for performance related to other financial measures as well as our expectations related to strategic benefits associated with a potential transaction.

We believe that there are and will continue to be opportunities for us to evaluate potential acquisitions in our current markets and potential new markets that will be accretive to both earnings and our franchise value, while also providing attractive internal rates of return and reasonable tangible book value earn-back periods.

**Our Comparable Companies Analysis**

As a management tool to understand our financial positioning in the banking markets, we review our position within the competitive landscape of banks with attributes we deem comparable to us (our "Comparable Companies" analysis). We refresh our Comparable

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<sup>1</sup><sup>)</sup> Represents the number of banks within target asset sizes headquartered in COSO's focal geographies

<sup>2</sup><sup>)</sup>North Florida counties include: Escambia, Santa Rosa, Walton, Holmes, Jackson, Washington, Bay, Gulf, Calhoun, Franklin, Liberty, Gadsden, Leon, Wakulla, Jefferson, Taylor, Madison, Hamilton, Suwannee, Lafayette, Dixie, Columbia, Gilchrist, Union, Bradford, Alachua, Putnam, Baker, Clay, Nassau, Duval, Saint Johns, and Flagler.

<sup>3</sup><sup>)</sup> Eastern Tennessee counties include: Clay, Pickett, Scott, Jackson, Overton, Putnam, White, Van Buren, Sequatchie, Hamilton, Bledsoe, Cumberland, Fentress, Morgan, Rhea, Meigs, Bradley, McMinn, Polk, Monroe, Roane, Loudon, Campbell, Anderson, Knox, Blount, Sevier, Jefferson, Union, Claiborne, Grainger, Hamblen, Cocke, Greene, Hancock, Hawkins, Washington, Unicoi, Carter, Sullivan, and Johnson.

<sup>4</sup><sup>)</sup> Eastern Alabama counties include: Madison, Jackson, Morgan, DeKalb, Cullman, Blount, Etowah, Cherokee, Jefferson, Saint Clair, Calhoun, Cleburne, Shelby, Talladega, Clay, Randolph, Chilton, Tallapoosa, Chambers, Autauga, Elmore, Lee, Macon, Montgomery, Lowndes, Bullock, Russell, Barbour, Butler, Crenshaw, Coffee, Covington, Pike, Dale, Henry, Geneva, Houston, and Marshall.

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Companies analysis on a quarterly basis following public availability of peer data, both publicly traded company information available through Securities and Exchange Commission filings, and information available through FDIC and Federal Reserve filings.

We select the makeup of companies in our Comparable Companies analysis based on factors related to relative asset size, geography, business model, and performance measures that we select. We begin with the broad universe of all major exchange traded bank holding companies headquartered in the U.S. with assets between $1.0 billion and $10.0 billion, of which there were 198 companies as of March 31, 2025. We then refine the list to exclude companies headquartered outside of the Southeast, leaving 31 companies as of March 31, 2025. We further refine the list to tighten the asset range of the companies to between $1.5 billion and $5.0 billion, leaving 24 companies as of March 31, 2025. We remove companies from this group that operate dissimilar business models from us (as an example, companies that rely on banking-as-a-service relationships with financial technology companies as a meaningful part of their business) and companies that are targets in currently pending acquisitions, resulting in 18 companies remaining on the list as of March 31, 2025. Finally, we refine the list to remove companies with weaker financial returns as measured by last twelve months return on average assets (above 0.75%) and last twelve months return on average tangible common equity (above 8.50%), leaving us with a Comparable Companies list of 10 companies as of March 31, 2025.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Comparable Companies** <sup>(1)</sup> | **Comparable Companies** <sup>(1)</sup> | **Comparable Companies** <sup>(1)</sup> | **Comparable Companies** <sup>(1)</sup> | **Comparable Companies** <sup>(1)</sup> | **Comparable Companies** <sup>(1)</sup> | **Comparable Companies** <sup>(1)</sup> | **Comparable Companies** <sup>(1)</sup> |
|  |  |  |  |  | **Price /** | **Price /** | **Price /** |
|  |  | **Total** | **Market** | **Price /** | **LTM** | **2025E** | **2026E** |
|  |  | **Assets** | **Cap.** | **TBVPS** | **EPS** | **EPS** | **EPS** |
| **Ticker** | **Company Name** | **($M)** | **($M)** | **(%)** | **(x)** | **(x)** | **(x)** |
| HTB | HomeTrust Bancshares Inc. | 4558 | 626 | 120 | 11.4 | 11.1 | 11.2 |
| CCBG | Capital City Bank Group Inc. | 4461 | 632 | 150 | 11.0 | 11.9 | 11.6 |
| MCBS | MetroCity Bankshares Inc. | 3660 | 695 | 165 | 10.6 | 10.1 | 8.1 |
| FCBC | First Community Bankshares Inc | 3226 | 681 | 201 | 13.4 | 14.5 | 13.9 |
| CBAN | Colony Bankcorp Inc. | 3172 | 271 | 115 | 10.8 | 9.2 | 8.0 |
| USCB | USCB Financial Holdings Inc. | 2677 | 324 | 144 | 11.7 | 11.0 | 9.8 |
| CFFI | C&F Financial Corp. | 2613 | 211 | 101 | 9.8 | -- | -- |
| FCCO | First Community Corp. | 2039 | 178 | 132 | 11.7 | 10.1 | 8.6 |
| PEBK | Peoples Bancorp of NC Inc. | 1693 | 146 | 109 | 9.0 | -- | -- |
| VABK | Virginia National Bkshs Corp. | 1634 | 198 | 128 | 11.2 | -- | -- |
|  | Median | 2925 | 297 | 130 | 11.1 | 11.0 | 9.8 |
| **COSO** | **CoastalSouth Bancshares Inc.** | **2190** | **--** | **--** | **--** | **--** | **--** |

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<sup>(1)</sup> Financial data as of March 31, 2025; market data as of June 4, 2025; comparable company data sourced from S&P Capital IQ Pro.

We analyze our Comparable Companies based on various balance sheet and performance metrics, some of which measures are described in the tables below. We strive to drive our performance to the top quartile of companies we view as our Comparable Companies, as well as the top quartile of our view of the public community banking sector, which we define as all major exchange traded bank holding companies with assets between $1.0 billion and $10.0 billion.

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| | | | |
|:---|:---|:---|:---|
|  |  | **Comparable** | **Comparable** |
|  |  | **Companies** | **Companies** |
| **Balance Sheet and Credit** <sup>(1)</sup> | **COSO** | **Median** | **Top Quartile** |
| Loans / Deposits (%) <sup>(2)</sup> | 85.7 | 87.2 | 72.5 |
| Noninterest-Bearing Deposits / Deposits (%) | 15.5 | 26.3 | 36.0 |
| Deposits / Branch ($M) | 176 | 87 | 231 |
| Tangible Common Equity / Tangible Assets (%) <sup>(3)</sup> | 9.01 | 9.00 | 11.52 |
| Bank Level Tier 1 Leverage Ratio (%) | 10.62 | 10.33 | 11.71 |
| Bank Level Total Risk-Based Capital Ratio (%) | 12.52 | 15.15 | 18.76 |
| Nonperforming Assets / Assets (%) <sup>(2)</sup> | 0.70 | 0.24 | 0.10 |
| Allowance for Credit Losses / Loans Held For Investment (%) | 1.16 | 1.09 | 1.42 |
| Last Twelve Months Net Charge-Offs / Average total loans (%) <sup>(2)</sup> | 0.01 | 0.13 | 0.00 |
| 5-Year Average Annual Net Charge-Offs / Average total loans (%) <sup>(2)</sup> | 0.04 | 0.06 | 0.00 |

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<sup>(1)</sup> Financial data as of March 31, 2025; comparable company data sourced from S&P capital IQ Pro; top quartile refers to 75th percentile of data for selected metric unless otherwise noted.

<sup>(2)</sup> Top quartile refers to 25th percentile of data for selected metric due to lower metric representing the preferred result.

<sup>(3)</sup> This is a non-GAAP financial measure. See the section entitled "Non-GAAP Financial Measures Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

Related to the Balance Sheet and Credit metrics illustrated in the table above, we believe that core deposits and non-interest bearing deposits, in particular, are a fundamental bedrock to a strong community bank. Our percentage of core deposits is slightly below the median of our Comparable Companies, and our non-interest bearing deposits as a percentage of our total deposit lags the median of our Comparable Companies. Following the low interest rate environment experienced during the COVID-19 pandemic in 2020 and

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subsequent years, many of our deposit customers began to shift their deposits to interest bearing accounts as the Federal Reserve began raising interest rates in 2022. During this time, the mix of our deposits began to shift toward interest bearing accounts, while our asset growth continued to produce strong results (as illustrated in the chart below). Growing deposits at the same pace as our loans has involved offering competitive interest rates, but, importantly, we are focused on establishing what we view as full banking relationships with our clients, including a focus on transaction accounts. We have continued to add net new deposit accounts every month since our Recapitalization, with our bankers particularly focused on winning commercial deposit relationships.

Our ability to attract and retain experienced commercial bankers is key to our ability to improve our deposit mix and cost of deposits. We believe that our entrepreneurial culture and the competitive landscape in our markets, specifically, the limited number of community banks between $1.5 billion and $5.0 billion in assets, positions us well to be the employer of choice for dynamic bankers interested in joining a company like ours.

We also view M&A as important tool to help us improve our mix of deposits and our cost of deposits. The quality of a potential acquisition target's deposit base is one of our very first due diligence filters. We believe that there exist numerous banks with attractive deposit franchises in our current markets and in surrounding markets we view as offering potential for expansion.

As part of a branch-light strategy, we seek to maintain at least $100 million in deposits per branch to achieve desired efficiencies. Through consolidation and relocation of branches acquired through acquisitions, thoughtful placement of de novo branches, and a focus on staffing our branches with the best local bankers, the average deposits per branch was $176 million at March 31, 2025, which is significantly higher than the median of the Comparable Companies at $87 million.

We believe that credit risk is one of the most critical risks for any financial institution. As seen in the chart above, our NPAs to assets ratio is significantly above the median for the Comparable Companies. However, it is important to note that 32.1%, or $4.7 million, of our non-performing loans are guaranteed by the SBA. Out of our total non-performing assets, $6.5 million is related to a single Senior Housing relationship whose operations were significantly impacted by Hurricane Helene in 2024. We have worked closely with this borrower to secure additional collateral and this borrower continues to cooperate with CSB towards an acceptable resolution of this asset.

Importantly, we believe because of our conservative loan structuring and underwriting, our net charge-offs over the last 12 months of 0.01% compares favorably to our Comparable Companies median of 0.13%, while our average net charge-offs over the past five years is only 0.04%, or an aggregate of net charged off loans of $2,011.

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| | | | |
|:---|:---|:---|:---|
|  |  | **Comparable** | **Comparable** |
|  |  | **Companies** | **Companies** |
| **Growth and Profitability** <sup>(1)</sup> | **COSO** | **Median** | **Top Quartile** |
| 5-Year Total Loans CAGR (%) | 22.4 | 9.1 | 17.5 |
| 5-Year Total Deposits CAGR (%) | 24.0 | 10.4 | 17.1 |
| 5-Year Book Value per Share CAGR (%) | 10.8 | 3.1 | 9.0 |
| 5-Year Tangible Book Value per Share CAGR (%) <sup>(2)</sup> | 11.6 | 3.8 | 11.6 |
| 5-Year Diluted EPS CAGR (%) | 38.2 | 6.0 | 14.0 |
| Last Twelve Months Return on Average Assets (%) | 1.16 | 1.10 | 1.57 |
| Last Twelve Months Return on Average Equity (%) | 12.99 | 11.05 | 13.21 |
| Last Twelve Months Return on Average Tangible Common Equity (%) <sup>(2)</sup> | 13.36 | 12.97 | 14.67 |
| Last Twelve Months Efficiency Ratio (%) <sup>(3)</sup> | 57.6 | 63.9 | 54.5 |
| Last Twelve Months Net Interest Margin (%) | 3.33 | 3.50 | 4.13 |

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<sup>(1)</sup> Financial data as of March 31, 2025; comparable company data sourced from S&P capital IQ Pro; top quartile refers to 75th percentile of data for selected metric unless otherwise noted.

<sup>(2)</sup> This is a non-GAAP financial measure. See the section entitled "Non-GAAP Financial Measures Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

<sup>(3)</sup> Top quartile refers to 25<sup>th</sup> percentile of data for selected metric due to lower metric representing the preferred result.

Related to our Growth and Profitability metrics illustrated in the table above, we believe the combination of growth and profitability is a key driver of value in the banking industry. Our five-year compound annual growth rates compare favorably to our Comparable Companies for each of loans, deposits, earnings per share, and tangible book value per share. Our five-year compound annual growth of our loans of 22.4% compares favorably to the median of 9.1% for our Comparable Companies, our five-year compound annual growth of our deposits of 24.0% compares favorably to the median of 10.4% for our Comparable Companies, our five-year compound annual growth rate of our fully diluted earnings per share of 38.2% compares favorably to the median of 6.0% for our Comparable Companies, and our five-year compound annual growth rate of our tangible book value per share (non-GAAP) of 11.6% compares favorably to the median of 3.8% for our Comparable Companies. See the section entitled "Non-GAAP Financial Measure Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

As well, we believe our profitability results compare favorably to our Comparable Companies. In particular, two of our focal financial metrics, return on average assets and average tangible common equity (non-GAAP), exceed the median of our Comparable Companies. Our return on average assets of 1.16% for the last twelve months is 6 basis points higher (0.06%) than the median of our Comparable Companies, with a return on average assets of 1.10%. Our return on average tangible common equity (non-GAAP) for the

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last twelve months of 13.36% is 39 basis points higher (0.39%) than the median of our Comparable Companies, with a return on average tangible common equity (non-GAAP) of 12.97%. These results are driven in part by our expense management, and resulting efficiency ratio of 57.6% for the last twelve months compared to a median of 63.9% for our Comparable Companies over this same timeframe. See the section entitled "Non-GAAP Financial Measure Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

While our net interest margin of 3.33% for the last twelve months is below the median of our Comparable Companies of 3.50% for the same timeframe, we believe our strategies related to improvements in our mix of deposits and cost of deposits, if executed as discussed above, will help us drive our net interest margin higher, further enhancing our profitability metrics.

**Risk Management**

We believe risk management plays a critical role in the success of any bank. We view a focus on risk management as the responsibility of every CSB team member. As CSB has grown to our current asset size of $2.2 billion at March 31, 2025, we continue to emphasize maintaining robust internal controls and compliance functions across all aspects of our business. Following our Recapitalization, we made significant investments in risk management personnel, systems and third-party advisors to ensure that the Company remains well positioned to support our growth. Our management team has worked closely with, and maintains strong working relationships with, each of our regulators. Our team has extensive experience working with the Federal Reserve, the FDIC, and state banking regulators, in particular, the South Carolina Commissioner of Banking and the Georgia Department of Banking and Finance.

We prioritize the maintenance of an effective risk management culture, which we believe begins with our board of directors. The Credit and Risk Committee and Audit Committee of our board of directors reviews our exposure to strategic risk, reputation risk, credit risk, market risk, liquidity risk, legal and regulatory compliance risk, operations and technology (including cybersecurity) risk, as well as the Company's strategies to monitor, control, and mitigate these risks.

We believe that credit risk is one of the most critical risks for any financial institution. As a result of our disciplined underwriting standards and procedures, we have achieved balance sheet growth to $2.2 billion in assets at March 31, 2025 from $413.5 million at December 31, 2016 while maintaining credit quality ratios that we believe underscore our focus on credit risk management. Our nonperforming assets to total assets ratio was 0.70% as of March 31, 2025, however, approximately $4.7 million or 32.1% of the nonaccrual loan balance is covered by government guarantees. Excluding nonaccrual loans covered by government guarantees, this ratio equates to 0.49% as of March 31, 2025. Our ACL on Loans, excluding unfunded commitments, represented 117.11% of our nonperforming loans as of March 31, 2025, and 172.5% of our nonperforming loans excluding loans covered by government guarantees as of March 31, 2025. Net charge-offs to average loans held-for-investment for the last twelve months ending March 31, 2025 were 0.01% and this ratio has averaged 0.04% over the past five years ended December 31, 2024. We believe these results highlight our unwavering focus on credit.

Our credit culture is guided by the following principles:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Ensure CSB team members have both the experience and expertise in their respective field;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Focus on our clients' experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Underwriting and credit risk management processes tailored to each of our products and niche lines of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Centralized credit underwriting and segregated reporting of credit and lending teams;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Limited individual credit approval limits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Utilization of regional credit officers and line of business credit officers with specific lending authority, allowing for localized analysis, specialized knowledge, and decision making;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Commitment to maintaining portfolio diversification;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Sophisticated portfolio monitoring and analysis and establishment of sub-portfolio limits that we review regularly and adjust in response to changes in our lending strategy and market conditions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Proactive problem asset management focused on getting our clients back on track or, when necessary, exiting relationships and minimizing losses.

**Recent Developments**

Given the close proximity of this offering to the end of the second quarter, we are presenting more current historical and projected financial information in this section. This includes a discussion of certain balance sheet items for the two-month period ended May 31, 2025, as well as projected financial results for the quarter ending June 30, 2025.

The preliminary estimated financial information for the quarter ending June 30, 2025 is based on currently available information. We do not intend to update or otherwise revise these anticipated events and estimates to reflect future events or changes in estimates and do not intend to disclose publicly whether actual events or our actual results will vary from the selected anticipated events or our estimates described below other than through the release of actual results in the ordinary course of business. No independent public

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accounting firm has compiled, examined or performed any procedures with respect to the estimated financial information contained below, nor have they expressed any opinion or other form of assurance on such information or its achievability. These estimates should not be regarded as a representation by us, our management or the underwriters as to our actual results for the second quarter. The assumptions and estimates underlying the estimated financial information are inherently uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties, including those described under "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in this prospectus and the documents incorporated herein by reference. Accordingly, there can be no assurance that the estimated financial information presented below is indicative of our future performance or that actual results will not differ materially from this estimated financial information. You should not place undue reliance on these estimates or selected anticipated events.

*Financial Highlights for the Two-Month Period Ended May 31, 2025*

The following presents certain unaudited financial information as of and for the two-month period ended May 31, 2025. Our second quarter of 2025 has not yet concluded and the following results are preliminary in nature and based upon currently available information. This information does not include normal quarter-end adjustments, such as for provision for credit losses, tax credits, and certain compensation accruals that are determined by periodic production or performance targets. These results are also subject to further revision based upon final actual results for the entire quarter ending June 30, 2025, our review and the review of our independent auditors of such quarterly results and an audit by our independent auditors of our annual results for the year ending December 31, 2025. Therefore, no assurance can be given that, upon completion of our review and the review of our independent auditors, we will not recognize materially different financial results than those set forth below. In addition, we cannot assure you our results for such period will be indicative of our results for the entire quarter ending June 30, 2025 or for the entire year ending December 31, 2025.

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| | | |
|:---|:---|:---|
| **Balance Sheet Summary** | **Balance Sheet Summary** | **Balance Sheet Summary** |
| *($'s in thousands)* | **May 31, 2025** | **March 31, 2025** |
| Balance sheet highlights |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total assets | $2202400 | $2190391 |
| &nbsp;&nbsp;&nbsp;&nbsp;Securities available-for-sale, at fair value | 332140 | 325478 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross loans held for investment | 1514140 | 1472232 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans held for sale | 194919 | 187481 |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill and other intangible assets <sup>(1)</sup> | 6126 | 6199 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deposits | 1928574 | 1937693 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other borrowings | 40747 | 20738 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total shareholder's equity | 205541 | 202104 |
| Asset quality |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Criticized loans (Special Mention) | $19758 | $24814 |
| &nbsp;&nbsp;&nbsp;&nbsp;Classified loans (Substandard), excluding nonaccrual loans | 8500 | 8605 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming assets | 14542 | 15370 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming assets / total assets (%) | 0.66% | 0.70% |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjusted nonperforming assets / total assets (%) <sup>(2)</sup> | 0.45% | 0.49% |

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<sup>(1)</sup> Goodwill and other intangible assets includes commercial mortgage servicing assets of $1.0 million and $1.1 million at May 31, 2025 and March 31, 2025, respectively.

<sup>(2)</sup> This is a non-GAAP financial measure. See the section entitled "Recent Developments - Non-GAAP Financial Measures" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

*Second Quarter Outlook* 

Given the close proximity of this offering to the end of the fiscal second quarter, we are presenting certain projected financial information for the second quarter of 2025. While our second quarter is not yet complete, and we expect to release our second quarter results in the second half of July 2025, the following describes certain of our current expectations for the quarter:

*Balance Sheet Information*. For the quarter ending June 30, 2025, we anticipate reporting total assets of approximately $ billion, total loans held for investment of approximately $ billion, total loans held for sale of between $ and $ million, and total deposits of approximately $ billion. We anticipate reporting a Tier 1 leverage ratio of approximately %.

*Income Statement Information*. We expect to report net income between $ and $ million for the second quarter of 2025 and earnings per diluted share between $ and $(exclusive of the impact of this offering). We anticipate our net interest margin for the second quarter to be between % and %.

*Asset Quality Information*. We anticipate that our non-performing assets will be approximately $ million, down from $ million at the end of the first quarter of 2025. We expect criticized and classified loans, excluding nonperforming loans, to be approximately $ million, down from $ at the end of the first quarter of 2025. We expect our net charge-offs to average loans held for investment to be approximately %.

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Our expectations for the second quarter of 2025 are estimates only and actual results may differ materially from our current estimates. Factors that could cause our actual results to differ from our current estimates include, but are not limited to, the factors described in the section entitled "Risk Factors" beginning on page 32.

*Recent Developments - Non-GAAP Financial Measures*

The Company supplements its financial results that are determined in accordance with GAAP with non-GAAP financial measures, such as adjusted non-performing assets. This supplemental information is not required by or is not presented in accordance with GAAP. The Company refers to these financial measures and ratios as "non-GAAP financial measures" and they should not be considered in isolation or as a substitute for the GAAP measures presented herein.

We use certain non-GAAP financial measures, including the one mentioned above, both to explain our results to shareholders and in the internal evaluation and management of our businesses. Our management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors to view our performance using the same tools that our management uses to evaluate our past performance and prospects for future performance. While we believe that these non-GAAP financial measures are useful in evaluating our performance, this information should be considered as supplemental and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ from similar measures presented by other companies.

The following table presents a reconciliation of the non-GAAP financial measure set forth above to the most closely comparable GAAP financial measures.

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| | | |
|:---|:---|:---|
| *($'s in thousands)* | **May 31, 2025** | **March 31, 2025** |
| Total nonperforming assets | $14542 | $15370 |
| Total assets | 2202400 | 2190391 |
| &nbsp;&nbsp;GAAP-based nonperforming assets / total assets (%) | 0.66% | 0.70% |
| Total nonperforming assets | $14542 | $15370 |
| &nbsp;&nbsp;Adjusted for: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Guaranteed portions of nonaccrual loans | 4607 | 4692 |
| Adjusted total nonperforming assets | $9935 | $10678 |
| Total assets | $2202400 | $2190391 |
| Adjusted nonperforming assets / total assets (%) | 0.45% | 0.49% |

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**Risks Relating to Our Company and an Investment in Our Common Stock**

An investment in our common stock involves substantial risks and uncertainties. Investors should carefully consider all of the information in this prospectus, including the detailed discussion of these and other risks under "Risk Factors" beginning on page 32, prior to investing in our common stock. Some of the significant risks include the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Changes and instability in economic conditions, geopolitical matters and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Recessionary conditions and economic factors could result in heightened credit risk and increases in our level of nonperforming loans which could adversely impact our results of operations and financial condition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We are exposed to higher credit and concentration risk from our commercial real estate, commercial and industrial and commercial construction lending.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our decisions regarding credit risk could be inaccurate and our allowance for credit losses may be inadequate, which could have a material adverse effect on our business, financial condition, results of operations and future prospects.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our largest loan relationships currently make up a significant percentage of our total loans held-for-investment portfolio.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We may have more credit risk and higher credit losses to the extent loans are concentrated by location or industry of the borrowers or collateral, for example, with respect to our Marine Lending or Senior Housing lines of business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We are subject to environmental liability risk associated with our lending activities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Liquidity is essential to our business model and a lack of liquidity, or an increase in the cost of liquidity, could materially impair our ability to fund our operations and jeopardize our results of operation, financial condition and cash flows.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The proportion of our deposit account balances that exceed FDIC insurance limits may expose us to enhanced liquidity risk in times of financial distress.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We are subject to interest rate risk, which could adversely affect our profitability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•A flat or inverted yield curve may reduce our net interest margin and adversely affect our loan and investment portfolios.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We could experience losses due to competition with other financial institutions and non-banks.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We may not be able to overcome the integration and other risks associated with any future acquisitions, which could have an adverse effect on our ability to implement our business strategy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Failure to keep pace with technological change could adversely affect our business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•New lines of business or new products and services may subject us to additional risk.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our residential mortgage warehouse lending program is subject to various risks that could adversely impact our results of operations and financial condition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•SBA lending and other government guaranteed lending is an important part of our business. These lending programs are dependent upon the federal government, and we face specific risks associated with originating SBA and other government guaranteed loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Fraud is a major, and increasing, operational risk for us and all banks.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our internal controls may be ineffective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We may not be able to attract and retain skilled people.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Loss of key employees may disrupt relationships with certain customers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our business continuity plans or data security systems could prove to be inadequate, resulting in Cyberattacks, other data or security breaches or a material interruption in, or disruption to, our business and a negative impact on our results of operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We are dependent upon outside third parties for the processing and handling of our records and data.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We may be adversely affected by the soundness of other financial institutions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a materially adverse effect on our operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Monetary policies and regulations of the Federal Reserve could have an adverse effect on our business, financial condition and results of operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Federal and state banking agencies periodically conduct examinations of our business, including for compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations may adversely affect us.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We are subject to stringent capital requirements, which could have an adverse effect on our operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We are subject to numerous "fair and responsible banking" laws and other laws and regulations designed to protect consumers, and failure to comply with these laws could lead to a wide variety of sanctions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential, or proprietary information of individuals could damage our reputation and otherwise adversely affect our business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We are a bank holding company and are dependent upon the Bank for cash flow, and the Bank's ability to make cash distributions is restricted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The Federal Reserve may require us to commit capital resources to support the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our Bank's FDIC deposit insurance premiums and assessments may increase.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The trading history of our common stock is characterized by low trading volume. The value of your common stock may be subject to sudden decreases due to the volatility of the price of our common stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•An active, liquid trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the public offering price, or at all.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The price of our common stock could be volatile following this offering.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our management will have broad discretion as to the use of proceeds from this offering, and we may not use the proceeds effectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The reduced disclosures and relief from certain other significant disclosure requirements that are available to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The obligations associated with being a public company will require significant resources and management attention, which may divert from our business operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•You will incur immediate dilution as a result of this offering.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our dividend policy may change without notice and any payment of dividends in the future is subject to the discretion of our Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•A future issuance of stock could dilute the value of our common stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our common stock is subordinate to our existing and future indebtedness.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our Certificate of Incorporation and Bylaws, and certain banking laws applicable to us, could have an antitakeover effect that decreases our chances of being acquired, even if our acquisition is in our shareholders' best interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•An investment in our common stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment.

**Corporate Information** 

Our principal executive offices are located at 400 Galleria Parkway, Suite 1900, Atlanta, Georgia 30339 and our telephone number at that address is (678) 396-4605. Our website address is www.coastalstatesbank.com. The information contained on our website is not a part of, or incorporated by reference into, this prospectus.

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**THE OFFERING**

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| | |
|:---|:---|
| **Common stock offered by us** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our voting common stock |
| **Common stock offered by the Selling Shareholders** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our voting common stock. Shares of non-voting common stock offered by the selling shareholders will automatically convert into voting common stock upon transfer. |
| **Underwriters' option to purchase additional shares of common stock**  | We have granted the underwriters an option to purchase up to shares of our voting common stock to cover over-allotments, if any. The Company intends to provide certain selling shareholders the opportunity to sell additional shares of common stock to satisfy the underwriters' option in lieu of the Company issuing additional shares. Shares of non-voting common stock offered by the selling shareholders pursuant to this option, if any, will automatically convert into voting common stock upon transfer. |
| **Common stock outstanding after completion of this offering** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares (or shares if the underwriters exercise their option to purchase additional shares from us in full). |
| **Use of proceeds** | We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $ million (or approximately $million if the underwriters exercise their option to purchase additional shares from us in full), based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus. We intend to use the net proceeds of the offering for working capital and general corporate purposes, which may include, without limitation, supporting our organic growth, funding opportunistic strategic acquisitions, funding branch expansion, and repaying indebtedness, and which could include contributing a significant portion of such proceeds to the Bank. See "Use of Proceeds." |
| **Dividend policy** | We have not historically paid dividends on our common stock. Our board of directors will make any determination whether or not to pay dividends in the future based upon our financial condition, results of operations, capital and regulatory restrictions and other relevant factors. See "Dividend Policy." |
| **Listing and NYSE trading symbol** | We have applied to list our common stock on the NYSE under the symbol "COSO." We believe that upon the completion of this offering, we will meet the standards for listing our common stock on the NYSE, and the completion of this offering is contingent upon such listing. |
| **Directed Share Program** | At our request, the underwriters have reserved up to % of the shares of our common stock offered by this prospectus for sale, at the initial public offering price, to our directors, officers, principal shareholders, employees, business associates, and related persons who have expressed an interest in purchasing our common stock in this offering. We will offer these shares to the extent permitted under applicable regulations in the United States through a directed share program. See the section entitled "Underwriting—Directed Share Program." |
| **Risk factors** | Investing in our common stock involves certain risks. See "Risk Factors," beginning on page 32 of this prospectus, for a discussion of factors that you should carefully consider before investing in our common stock. |

---

Unless otherwise indicated, all information in this prospectus relating to the number of shares of common stock to be outstanding immediately after the completion of this offering is based on 10,274,271 shares outstanding as of March 31, 2025 and:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•assumes no exercise of the underwriters' option to purchase up to additional shares of common stock from us;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•excludes 737,250 shares of our common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $13.30 per share (715,625 options of which are exercisable) as of March 31, 2025;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•excludes 194,650 shares of our common stock issuable upon the future vesting of 194,650 restricted stock units outstanding as of March 31, 2025; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•does not attribute to any director, officer, principal shareholder or related person any purchases of shares of our common stock in this offering, including through the directed share program described in the section entitled "Underwriting— Directed Share Program."

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**SUMMARY HISTORICAL FINANCIAL INFORMATION**

The following table sets forth summary historical consolidated financial data for the Company as of the date and the periods presented. The selected balance sheet data as of December 31, 2024 and 2023 and the selected income statement data for the years ended December 31, 2024 and 2023 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected balance sheet data as of December 31, 2022, 2021 and 2020 and the selected income statement data for the years ended December 31, 2022, 2021 and 2020 have been derived from our audited consolidated financial statements not included in this prospectus. The selected balance sheet data as of March 31, 2025 and the selected income statement data as of March 31, 2025 and 2024 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The selected balance sheet data as of March 31, 2024 has been derived from our internal financial statements not included in this prospectus. Our historical results may not be indicative of our future performance. The selected historical consolidated financial information presented below contains financial measures that are not presented in accordance with accounting principles generally accepted in the United States and have not been audited. See "Non-GAAP Financial Measure Reconciliation." The selected financial data presented below should be read in conjunction with "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.

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| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <u>(dollars in thousands except per</u> <br> <u>share amounts)</u> | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| **Selected Operating Data:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Interest income | $— | 30024 | $— | 29388 | $— | 123649 | $— | 107017 | $— | 66583 | $— | 45999 | $— | 37677 |
| &nbsp;&nbsp;Interest expense |  | 13265 |  | 14003 |  | 58327 |  | 42723 |  | 9622 |  | 4754 |  | 5766 |
| &nbsp;&nbsp;Net interest income |  | 16759 |  | 15385 |  | 65322 |  | 64294 |  | 56961 |  | 41245 |  | 31911 |
| &nbsp;&nbsp;Provision for credit losses |  | 629 |  | 163 |  | 553 |  | 1543 |  | 5078 |  | 1326 |  | 3236 |
| &nbsp;&nbsp;Noninterest income (loss) |  | 1881 |  | (1994) |  | 4514 |  | 8594 |  | 7190 |  | 11196 |  | 6424 |
| &nbsp;&nbsp;Noninterest expense |  | 11419 |  | 10251 |  | 42068 |  | 39850 |  | 35241 |  | 35649 |  | 26878 |
| &nbsp;&nbsp;Income before income tax expense |  | 6592 |  | 2977 |  | 27215 |  | 31495 |  | 23832 |  | 15466 |  | 8221 |
| &nbsp;&nbsp;Income tax expense |  | 1542 |  | 548 |  | 5311 |  | 7017 |  | 5642 |  | 3144 |  | 1853 |
| &nbsp;&nbsp;Net income |  | 5050 |  | 2429 |  | 21904 |  | 24478 |  | 18190 |  | 12322 |  | 6368 |
| &nbsp;&nbsp;Adjusted net income <sup>(1)</sup> |  | 5050 |  | 5083 |  | 24558 |  | 24114 |  | 18296 |  | 12694 |  | 5702 |
| **Share and Per Share Data:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Basic earnings per share | $— | 0.49 | $— | 0.24 | $— | 2.15 | $— | 2.61 | $— | 2.09 | $— | 1.51 | $— | 0.80 |
| &nbsp;&nbsp;Adjusted basic earnings<br> per share <sup>(2)</sup> | $— | 0.49 | $— | 0.51 | $— | 2.41 | $— | 2.57 | $— | 2.10 | $— | 1.56 | $— | 0.72 |
| &nbsp;&nbsp;Diluted earnings per share | $— | 0.47 | $— | 0.24 | $— | 2.09 | $— | 2.58 | $— | 2.05 | $— | 1.48 | $— | 0.80 |
| &nbsp;&nbsp;Adjusted diluted earnings<br> per share <sup>(2)</sup> | $— | 0.47 | $— | 0.50 | $— | 2.35 | $— | 2.54 | $— | 2.07 | $— | 1.53 | $— | 0.71 |
| &nbsp;&nbsp;Book value per share | $— | 19.67 | $— | 16.91 | $— | 19.01 | $— | 16.36 | $— | 13.26 | $— | 14.52 | $— | 12.76 |
| &nbsp;&nbsp;Tangible book value per share <sup>(3)</sup> | $— | 19.17 | $— | 16.39 | $— | 18.51 | $— | 15.80 | $— | 12.64 | $— | 13.84 | $— | 12.08 |
| &nbsp;&nbsp;Shares of common stock outstanding |  | 10274271 |  | 10245496 |  | 10270146 |  | 9539929 |  | 8959374 |  | 8604735 |  | 7993653 |
| &nbsp;&nbsp;Weighted average diluted shares <br> outstanding |  | 10642078 |  | 10222681 |  | 10470633 |  | 9504685 |  | 8853544 |  | 8323712 |  | 7986952 |
| **Selected Balance Sheet Data:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Total assets | $— | 2190391 | $— | 2050951 | $— | 2098712 | $— | 2028599 | $— | 1835478 | $— | 1611657 | $— | 1147532 |
| &nbsp;&nbsp;Securities available-for-sale, at<br> fair value <sup>(4)</sup> |  | 325478 |  | 334970 |  | 335267 |  | 354796 |  | 366120 |  | 293225 |  | 119557 |
| &nbsp;&nbsp;Gross loans held for investment |  | 1472232 |  | 1403551 |  | 1409443 |  | 1418425 |  | 1298603 |  | 938116 |  | 702518 |
| &nbsp;&nbsp;Loans held for sale |  | 187481 |  | 111020 |  | 174033 |  | 82125 |  | 44500 |  | 81453 |  | 113481 |
| &nbsp;&nbsp;Allowance for credit losses |  | 17104 |  | 15774 |  | 17118 |  | 15465 |  | 12362 |  | 8148 |  | 7041 |
| &nbsp;&nbsp;Goodwill and other intangible assets |  | 6199 |  | 6408 |  | 6386 |  | 6463 |  | 6867 |  | 7564 |  | 6322 |
| &nbsp;&nbsp;Deposits |  | 1937693 |  | 1749484 |  | 1834802 |  | 1750657 |  | 1548646 |  | 1424117 |  | 891552 |
| &nbsp;&nbsp;Other borrowings |  | 20738 |  | 96686 |  | 41725 |  | 88672 |  | 140678 |  | 44587 |  | 146036 |
| &nbsp;&nbsp;Total Shareholders' equity |  | 202104 |  | 173228 |  | 195232 |  | 156043 |  | 118797 |  | 124934 |  | 101988 |

---

<sup>(1)</sup> We calculate our adjusted net income as net income excluding items that are not part of core business operations, net of income taxes, which incorporate impacts to noninterest income and noninterest expense. This measure helps management and users of the financial statements to understand how core business operations are performing. This is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SUMMARY HISTORICAL FINANCIAL INFORMATION—Non-GAAP Financial Measure Reconciliation."

<sup>(2)</sup> This is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SUMMARY HISTORICAL FINANCIAL INFORMATION—Non-GAAP Financial Measure Reconciliation."

<sup>(3)</sup> We calculate tangible book value per common share as total shareholders' equity less goodwill and other intangibles, excluding mortgage servicing rights, divided by the outstanding number of our shares of common stock at the end of the relevant period. Tangible book value per common share is a non-GAAP financial measure, and, as we calculate tangible book value per common share, the most comparable GAAP measure is book value per common share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SUMMARY HISTORICAL FINANCIAL INFORMATION—Non-GAAP Financial Measure Reconciliation."

<sup>(4)</sup> We did not have securities held to maturity in any of the years presented.

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---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <u>(dollars in thousands)</u> | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| **Performance Ratios:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pre-tax pre-provision net revenue<br> (PPNR) <sup>(6)</sup> | $— | 7221 | $— | 3140 | $— | 27768 | $— | 33038 | $— | 28910 | $— | 16792 | $— | 11457 |
| &nbsp;&nbsp;Return on average assets (ROAA) <sup>(5)</sup> |  | 0.97% |  | 0.48% |  | 1.05% |  | 1.26% |  | 1.07% |  | 0.94% |  | 0.67% |
| &nbsp;&nbsp;Adjusted return on average assets <br> (Adj. ROAA) <sup>(5)(6)</sup> |  | 0.97 |  | 1.00 |  | 1.18 |  | 1.24 |  | 1.08 |  | 0.96 |  | 0.60 |
| &nbsp;&nbsp;Return on average equity <sup>(5)</sup> |  | 10.25 |  | 5.85 |  | 12.13 |  | 17.97 |  | 15.50 |  | 10.98 |  | 6.58 |
| &nbsp;&nbsp;Adjusted return on average equity <sup>(5)(6)</sup> |  | 10.25 |  | 12.24 |  | 13.60 |  | 17.70 |  | 15.59 |  | 11.31 |  | 5.89 |
| &nbsp;&nbsp;Return on average tangible common <br> equity (ROATCE) <sup>(5)(6)</sup> |  | 10.52 |  | 6.04 |  | 12.49 |  | 18.72 |  | 16.29 |  | 11.52 |  | 6.97 |
| &nbsp;&nbsp;Adjusted return on average tangible<br>&nbsp;&nbsp;&nbsp;&nbsp;common equity (Adj. ROATCE) <sup>(5)(6)</sup> |  | 10.52 |  | 12.64 |  | 14.00 |  | 18.44 |  | 16.38 |  | 11.87 |  | 6.24 |
| &nbsp;&nbsp;Net interest rate spread <sup>(5)(7)</sup> |  | 2.67 |  | 2.42 |  | 2.48 |  | 2.76 |  | 3.28 |  | 3.10 |  | 3.29 |
| &nbsp;&nbsp;Net interest margin <sup>(5)(8)</sup> |  | 3.38 |  | 3.21 |  | 3.29 |  | 3.46 |  | 3.53 |  | 3.28 |  | 3.54 |
| &nbsp;&nbsp;Efficiency ratio <sup>(9)</sup> |  | 61.26 |  | 76.55 |  | 60.24 |  | 54.67 |  | 54.93 |  | 67.98 |  | 70.11 |
| &nbsp;&nbsp;Efficiency ratio, as adjusted <sup>(10)</sup> |  | 61.26 |  | 60.82 |  | 57.39 |  | 55.03 |  | 54.72 |  | 66.02 |  | 71.68 |
| &nbsp;&nbsp;Noninterest income to average total <br> assets <sup>(5)</sup> |  | 0.36 |  | (0.39) |  | 0.22 |  | 0.44 |  | 0.42 |  | 0.85 |  | 0.68 |
| &nbsp;&nbsp;Noninterest income to total revenue <sup>(11)</sup> |  | 10.09 |  | 8.73 |  | 10.89 |  | 11.21 |  | 11.21 |  | 18.89 |  | 14.65 |
| &nbsp;&nbsp;Noninterest expense to average total <br> assets <sup>(5)</sup> |  | 2.19 |  | 2.03 |  | 2.02 |  | 2.04 |  | 2.08 |  | 2.71 |  | 2.83 |
| &nbsp;&nbsp;Average interest-earning assets to <br> average interest-bearing liabilities |  | 126.31 |  | 127.01 |  | 127.70 |  | 130.73 |  | 143.00 |  | 145.55 |  | 138.83 |
| &nbsp;&nbsp;Average equity to average total assets |  | 9.46 |  | 8.21 |  | 8.65 |  | 6.99 |  | 6.93 |  | 8.53 |  | 10.18 |
| **Asset Quality Data:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Net charge-offs to average LHFI <sup>(5)</sup> |  | 0.00% |  | 0.00% |  | 0.01% |  | 0.05% |  | 0.08% |  | 0.03% |  | 0.02% |
| &nbsp;&nbsp;Net charge-offs to total average loans <sup>(5)</sup> |  | 0.00 |  | 0.00 |  | 0.01 |  | 0.05 |  | 0.08 |  | 0.02 |  | 0.02 |
| &nbsp;&nbsp;Total allowance for credit losses<br> to total LHFI |  | 1.16 |  | 1.12 |  | 1.21 |  | 1.09 |  | 0.95 |  | 0.87 |  | 1.00 |
| &nbsp;&nbsp;Total allowance for credit losses<br> to total loans |  | 1.03 |  | 1.04 |  | 1.08 |  | 1.03 |  | 0.92 |  | 0.80 |  | 0.86 |
| &nbsp;&nbsp;Total allowance for credit losses<br> to nonperforming loans |  | 117.11 |  | 406.23 |  | 114.07 |  | 356.50 |  | 153.01 |  | 228.04 |  | 201.52 |
| &nbsp;&nbsp;Nonperforming loans to gross LHFI |  | 0.99 |  | 0.28 |  | 1.06 |  | 0.31 |  | 0.62 |  | 0.38 |  | 0.50 |
| &nbsp;&nbsp;Nonperforming assets to total assets |  | 0.70 |  | 0.19 |  | 0.76 |  | 0.21 |  | 0.44 |  | 0.26 |  | 0.38 |
| &nbsp;&nbsp;Adjusted nonperforming assets to total<br> assets <sup>(6)</sup> |  | 0.49 |  | 0.05 |  | 0.53 |  | 0.08 |  | 0.43 |  | 0.25 |  | 0.38 |
| **Balance Sheet Ratios:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Loan-to-deposit ratio |  | 85.65% |  | 86.57% |  | 86.30% |  | 85.71% |  | 86.73% |  | 71.59% |  | 91.53% |
| &nbsp;&nbsp;Noninterest bearing deposits to<br> total deposits |  | 15.52 |  | 18.37 |  | 16.51 |  | 18.59 |  | 27.41 |  | 30.38 |  | 25.73 |
| **Capital Ratios:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Tangible common equity to tangible<br> assets <sup>(12)</sup> |  | 9.01% |  | 8.21% |  | 9.08% |  | 7.45% |  | 6.19% |  | 7.42% |  | 8.45% |
| &nbsp;&nbsp;Tier 1 leverage ratio <sup>(13)</sup> |  | 10.62 |  | 9.97 |  | 10.64 |  | 9.94 |  | 8.97 |  | 8.25 |  | 9.15 |
| &nbsp;&nbsp;Common equity tier 1 ratio <sup>(13)</sup> |  | 11.55 |  | 11.51 |  | 12.07 |  | 11.52 |  | 9.99 |  | 10.94 |  | 11.46 |
| &nbsp;&nbsp;Tier 1 risk-based capital ratio <sup>(13)</sup> |  | 11.55 |  | 11.51 |  | 12.07 |  | 11.52 |  | 9.99 |  | 10.94 |  | 11.46 |
| &nbsp;&nbsp;Total risk-based capital ratio <sup>(13)</sup> |  | 12.52 |  | 12.43 |  | 12.97 |  | 12.36 |  | 10.77 |  | 11.63 |  | 12.34 |
| **Other:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Number of branches |  | 11 |  | 10 |  | 11 |  | 10 |  | 10 |  | 9 |  | 7 |
| &nbsp;&nbsp;Number of full-time equivalent<br>&nbsp;&nbsp;&nbsp;&nbsp;employees |  | 180 |  | 175 |  | 180 |  | 163 |  | 143 |  | 129 |  | 98 |

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<sup>(5)</sup> Represents annualized March 31, 2025 and 2024 data.

<sup>(6)</sup> This is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SUMMARY HISTORICAL FINANCIAL INFORMATION—Non-GAAP Financial Measure Reconciliation."

<sup>(7)</sup> Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities for the periods.

<sup>(8)</sup> Net interest margin represents net interest income as a percent of average interest-earning assets for the periods.

<sup>(9)</sup> The efficiency ratio represents noninterest expense divided by sum of net interest income and noninterest income.

<sup>(10)</sup> The efficiency ratio, as adjusted, represents noninterest expense divided by the sum of net interest income and noninterest income, excluding net of tax, gains or losses on available-for-sale securities, gain on hedge termination, Merger expenses and bargain purchase gain. This is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SUMMARY HISTORICAL FINANCIAL INFORMATION—Non-GAAP Financial Measure Reconciliation."

<sup>(11)</sup> We calculate revenue as net interest income plus noninterest income, excluding net of tax, gains or losses on available-for-sale securities, gain on hedge termination bargain purchase gain and Merger expenses. This is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SUMMARY HISTORICAL FINANCIAL INFORMATION—Non-GAAP Financial Measure Reconciliation."

<sup>(12)</sup> We calculate tangible common equity as total shareholders' equity less goodwill and other intangibles, excluding mortgage servicing rights, we calculate tangible assets as total assets less goodwill and other intangibles, excluding mortgage servicing rights. This is a non-GAAP financial measure. See our reconciliation of

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non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SUMMARY HISTORICAL FINANCIAL INFORMATION—Non-GAAP Financial Measure Reconciliation."

<sup>(13)</sup> Ratios are for Coastal States Bank only.

**Non-GAAP Financial Measure Reconciliation**

Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional non-GAAP metrics. Tangible book value per share and the ratio of tangible equity to tangible assets are not financial measures recognized under GAAP and, therefore, are considered non-GAAP financial measures.

Our management, banking regulators, many financial analysts and other investors use these non-GAAP financial measures to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions. Tangible equity, tangible assets, tangible book value per share or related measures should not be considered in isolation or as a substitute for total shareholders' equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate tangible equity, tangible assets, tangible book value per share and any other related measures may differ from that of other companies reporting measures with similar names. Management uses these non-GAAP measures because it believes they may provide useful supplemental information for evaluating our operations and performance over periods of time, as well as in managing and evaluating our business and in discussions about our operations and performance. Management believes these non-GAAP measures may also provide users of our financial information with a meaningful measure for assessing our financial results and credit trends, as well as a comparison to financial results for prior periods. These non-GAAP measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP and are not necessarily comparable to other similarly titled measures used by other companies.

The following table reconciles, as of the dates set forth below, shareholders' equity (on a GAAP basis) to tangible equity and total assets (on a GAAP basis) to tangible assets and calculates our tangible book value per share.

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| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <u>(dollars in thousands)</u> | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| **Tangible Common Equity:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Total shareholders' equity | $— | 202104 | $— | 173228 | $— | 195232 | $— | 156043 | $— | 118797 | $— | 124934 | $— | 101988 |
| &nbsp;&nbsp;Less: Goodwill and intangibles |  | (6199) |  | (6408) |  | (6386) |  | (6463) |  | (6867) |  | (7564) |  | (6322) |
| &nbsp;&nbsp; Adjusted for: Mortgage servicing<br>&nbsp;&nbsp;&nbsp;&nbsp; rights |  | 1093 |  | 1121 |  | 1237 |  | 1125 |  | 1302 |  | 1736 |  | 899 |
| Tangible common equity | $— | 196998 | $— | 167941 | $— | 190083 | $— | 150705 | $— | 113232 | $— | 119106 | $— | 96565 |
| &nbsp;&nbsp;Common share outstanding |  | 10274271 |  | 10245496 |  | 10270146 |  | 9539929 |  | 8959374 |  | 8604735 |  | 7993653 |
| &nbsp;&nbsp;Book value per common share | $— | 19.67 |  | 16.91 | $— | 19.01 | $— | 16.36 | $— | 13.26 | $— | 14.52 | $— | 12.76 |
| &nbsp;&nbsp;Tangible book value per common<br> share |  | 19.17 |  | 16.39 |  | 18.51 |  | 15.80 |  | 12.64 |  | 13.84 |  | 12.08 |
| **Tangible Assets:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Total assets | $— | 2190391 | $— | 2050951 | $— | 2098712 | $— | 2028599 | $— | 1835478 | $— | 1611657 | $— | 1147532 |
| &nbsp;&nbsp;Less: goodwill and intangibles |  | (6199) |  | (6408) |  | (6386) |  | (6463) |  | (6867) |  | (7564) |  | (6322) |
| &nbsp;&nbsp; Adjusted for: Mortgage servicing<br>&nbsp;&nbsp;&nbsp;&nbsp;rights |  | 1093 |  | 1121 |  | 1237 |  | 1125 |  | 1302 |  | 1736 |  | 899 |
| Tangible assets | $— | 2185285 | $— | 2045664 | $— | 2093563 | $— | 2023261 | $— | 1829913 | $— | 1605829 | $— | 1142109 |
| Tangible common equity to<br> tangible assets |  | 9.01% |  | 8.21% |  | 9.08% |  | 7.45% |  | 6.19% |  | 7.42% |  | 8.45% |

---

The efficiency ratio, as adjusted, is a non-GAAP measure of expense control relative to adjusted revenue. We calculate the efficiency ratio, adjusted, by dividing total noninterest expenses, as determined under GAAP but excluding merger related expenses, by the sum of total net interest income and total noninterest income, each as determined under GAAP, but excluding net gains or losses on the sale of securities and other nonrecurring income sources, if applicable, from this calculation, which we refer to below as adjusted revenue. We believe that this provides one reasonable measure of core expenses relative to core revenue.

For the noninterest income to total revenue ratio, we calculate revenue as net interest income plus noninterest income but excluding net gains or losses on the sale of securities and other nonrecurring income sources, if applicable, from this calculation, which we refer to below as adjusted revenue. We believe that this provides one reasonable measure of core noninterest income relative to core total revenue.

------

The following table reconciles our efficiency ratio, as adjusted, and noninterest income to total revenue ratio for the periods set forth below.

---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <u>(dollars in thousands)</u> | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| **GAAP-based efficiency ratio** |  | 61.26% |  | 76.55% |  | 60.24% |  | 54.67% |  | 54.93% |  | 67.98% |  | 70.11% |
| &nbsp;&nbsp;Net interest income | $— | 16759 | $— | 15385 | $— | 65322 | $— | 64294 | $— | 56961 | $— | 41245 | $— | 31911 |
| &nbsp;&nbsp;Noninterest income (loss) |  | 1881 |  | (1994) |  | 4514 |  | 8594 |  | 7190 |  | 11196 |  | 6424 |
| &nbsp;&nbsp;Adjusted for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on sale of AFS <br> securities <sup>(1)</sup> |  | - |  | 3465 |  | 3465 |  | 517 |  | - |  | 59 |  | (948) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on hedge termination |  | - |  | - |  | - |  | (992) |  | - |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Bargain purchase gain |  | - |  | - |  | - |  | - |  | - |  | (1649) |  | - |
| &nbsp;&nbsp;Adjusted revenue | $— | 18640 | $— | 16856 | $— | 73301 | $— | 72413 | $— | 64151 | $— | 50851 | $— | 37387 |
| &nbsp;&nbsp;Total noninterest expense |  | 11419 |  | 10251 |  | 42068 |  | 39850 |  | 35241 |  | 35649 |  | 26878 |
| &nbsp;&nbsp;Less: Merger expenses |  | - |  | - |  | - |  | - |  | 139 |  | 2076 |  | 78 |
| &nbsp;&nbsp;Adjusted noninterest expense | $— | 11419 | $— | 10251 | $— | 42068 | $— | 39850 | $— | 35102 | $— | 33573 | $— | 26800 |
| &nbsp;&nbsp;Efficiency ratio, as adjusted |  | 61.26% |  | 60.82% |  | 57.39% |  | 55.03% |  | 54.72% |  | 66.02% |  | 71.68% |
| &nbsp;&nbsp;Noninterest income to total <br> revenue |  | 10.09% |  | 8.73% |  | 10.89% |  | 11.21% |  | 11.21% |  | 18.89% |  | 14.65% |

---

<sup>(1)</sup> 2024 consists of loss on sale of available-for-sale securities due to non-routine strategic portfolio restructuring.

Management will often make adjustments to our results of operations when completing analysis of our operations in order to exclude certain items that we do not consider to be indicative of our core banking operations. For the tables below, net income is adjusted to remove Merger related expenses as well as gains or losses on sales of securities and other nonrecurring income sources, if applicable. While we acknowledge that these items are likely to recur in future periods, they are not considered to be indicative of our core banking operations, and therefore, management often excludes them from our analysis of our return on average assets and our return on average equity to better understand our core operating performance.

The following table reconciles our adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share, as adjusted, for the periods set forth below.

---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <u>(dollars in thousands)</u> | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| Net income | $— | 5050 | $— | 2429 | $— | 21904 | $— | 24478 | $— | 18190 | $— | 12322 | $— | 6368 |
| Average common shares <br> outstanding - basic |  | 10273125 |  | 10043951 |  | 10198298 |  | 9383559 |  | 8707535 |  | 8144215 |  | 7963767 |
| Basic earnings per share | $— | 0.49 | $— | 0.24 | $— | 2.15 | $— | 2.61 | $— | 2.09 | $— | 1.51 | $— | 0.80 |
| Average common shares <br> outstanding - diluted |  | 10642078 |  | 10222681 |  | 10470633 |  | 9504685 |  | 8853544 |  | 8323712 |  | 7986952 |
| Diluted earnings per share | $— | 0.47 | $— | 0.24 | $— | 2.09 | $— | 2.58 | $— | 2.05 | $— | 1.48 | $— | 0.80 |
| Net income | $— | 5050 | $— | 2429 | $— | 21904 | $— | 24478 | $— | 18190 | $— | 12322 | $— | 6368 |
| &nbsp;&nbsp;Adjusted for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on sale of AFS <br> securities, net of tax <sup>(1)</sup> |  | - |  | 2654 |  | 2654 |  | 396 |  | - |  | 45 |  | (726) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on hedge termination, net <br> of tax |  | - |  | - |  | - |  | (760) |  | - |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Bargain purchase gain, net of tax |  | - |  | - |  | - |  | - |  | - |  | (1263) |  | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Merger expenses, net of tax |  | - |  | - |  | - |  | - |  | 106 |  | 1590 |  | 60 |
| Adjusted net income | $— | 5050 | $— | 5083 | $— | 24558 | $— | 24114 | $— | 18296 | $— | 12694 | $— | 5702 |
| Adjusted basic earnings per share | $— | 0.49 | $— | 0.51 | $— | 2.41 | $— | 2.57 | $— | 2.10 | $— | 1.56 | $— | 0.72 |
| Adjusted diluted earnings per share | $— | 0.47 | $— | 0.50 | $— | 2.35 | $— | 2.54 | $— | 2.07 | $— | 1.53 | $— | 0.71 |

---

<sup>(1)</sup> 2024 consists of loss on sale of available-for-sale securities due to non-routine strategic portfolio restructuring.

------

The following table reconciles our adjusted net income and return on average assets, as adjusted, for the periods set forth below.

---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <u>(dollars in thousands)</u> | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| Net income | $— | 5050 | $— | 2429 | $— | 21904 | $— | 24478 | $— | 18190 | $— | 12322 | $— | 6368 |
| Average assets |  | 2111196 |  | 2034863 |  | 2087253 |  | 1949077 |  | 1693351 |  | 1315760 |  | 951264 |
| Return on average assets |  | 0.97 |  | 0.48% |  | 1.05% |  | 1.26% |  | 1.07% |  | 0.94% |  | 0.67% |
| Net income | $— | 5050 | $— | 2429 | $— | 21904 | $— | 24478 | $— | 18190 | $— | 12322 | $— | 6368 |
| &nbsp;&nbsp;Adjusted for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on sale of AFS <br> securities, net of tax <sup>(1)</sup> |  | - |  | 2654 |  | 2654 |  | 396 |  | - |  | 45 |  | (726) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on hedge termination, net <br> of tax |  | - |  | - |  | - |  | (760) |  | - |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Bargain purchase gain, net <br> of tax |  | - |  | - |  | - |  | - |  | - |  | (1263) |  | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Merger expenses, net of tax |  | - |  | - |  | - |  | - |  | 106 |  | 1590 |  | 60 |
| Adjusted net income | $— | 5050 | $— | 5083 | $— | 24558 | $— | 24114 | $— | 18296 | $— | 12694 | $— | 5702 |
| Average assets |  | 2111196 |  | 2034863 |  | 2087253 |  | 1949077 |  | 1693351 |  | 1315760 |  | 951264 |
| Adjusted return on average<br> assets <sup>(2)</sup> |  | 0.97% |  | 1.00% |  | 1.18% |  | 1.24% |  | 1.08% |  | 0.96% |  | 0.60% |

---

<sup>(1)</sup> 2024 consists of loss on sale of available-for-sale securities due to non-routine strategic portfolio restructuring.

<sup>(2)</sup> Represents annualized March 31, 2025 and 2024 data.

The following table reconciles our adjusted net income and return on average equity, as adjusted, for the periods set forth below.

---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <u>(dollars in thousands)</u> | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| Net income | $— | 5050 | $— | 2429 | $— | 21904 | $— | 24478 | $— | 18190 | $— | 12322 | $— | 6368 |
| Average shareholders' equity |  | 199763 |  | 167016 |  | 180628 |  | 136219 |  | 117378 |  | 112211 |  | 96844 |
| Return on average shareholders' <br> equity |  | 10.25 |  | 5.85 |  | 12.13% |  | 17.97% |  | 15.50% |  | 10.98% |  | 6.58% |
| Net income | $— | 5050 | $— | 2429 | $— | 21904 | $— | 24478 | $— | 18190 | $— | 12322 | $— | 6368 |
| &nbsp;&nbsp;Adjusted for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on sale of AFS <br> securities, net of tax <sup>(1)</sup> |  | - |  | 2654 |  | 2654 |  | 396 |  | - |  | 45 |  | (726) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on hedge termination, net <br> of tax |  | - |  | - |  | - |  | (760) |  | - |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Bargain purchase gain, net of tax |  | - |  | - |  | - |  | - |  | - |  | (1263) |  | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Merger expenses, net of tax |  | - |  | - |  | - |  | - |  | 106 |  | 1590 |  | 60 |
| Adjusted net income | $— | 5050 | $— | 5083 | $— | 24558 | $— | 24114 | $— | 18296 | $— | 12694 | $— | 5702 |
| Average shareholders' equity |  | 199763 |  | 167016 |  | 180628 |  | 136219 |  | 117378 |  | 112211 |  | 96844 |
| Adjusted return on average <br> shareholders' equity <sup>(2)</sup> |  | 10.25% |  | 12.24% |  | 13.60% |  | 17.70% |  | 15.59% |  | 11.31% |  | 5.89% |

---

<sup>(1)</sup> 2024 consists of loss on sale of available-for-sale securities due to non-routine strategic portfolio restructuring.

<sup>(2)</sup> Represents annualized March 31, 2025 and 2024 data.

The following table reconciles net income (on a GAAP basis), as of the dates set forth below, to the calculation of the pre-tax, pre-provision net revenue ("PPNR"). PPNR is calculated by adjusting for the income tax expense and the provision for credit losses to the net income.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2024** | **2024** | **2023** | **2022** | **2021** | **2020** |
| <u>(dollars in thousands)</u> | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| Net income (GAAP-based) | 5050 | 2429 | 21904 | 24478 | 18190 | 12322 | 6368 |
| Plus: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Income tax expense | 1542 | 548 | 5311 | 7017 | 5642 | 3144 | 1853 |
| &nbsp;&nbsp;Provision for credit losses | 629 | 163 | 553 | 1543 | 5078 | 1326 | 3236 |
| Pre-tax, pre-provision net revenue | $7221 | $3140 | $27768 | $33038 | $28910 | $16792 | $11457 |

---

------

The following table reconciles, as of the dates set forth below, the calculation of the return on average equity (on a GAAP basis) to the calculation of the return on average tangible equity and the calculation of the adjusted return on average tangible equity.

---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <u>(dollars in thousands)</u> | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| Net income | $— | 5050 | $— | 2429 | $— | 21904 | $— | 24478 | $— | 18190 | $— | 12322 | $— | 6368 |
| Average shareholders' equity |  | 199763 |  | 167016 |  | 180628 |  | 136219 |  | 117378 |  | 112211 |  | 96844 |
| Return on average shareholders' <br> equity |  | 10.25% |  | 5.85% |  | 12.13% |  | 17.97% |  | 15.50% |  | 10.98% |  | 6.58% |
| **Average Tangible Common Equity:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Average shareholders' equity | $— | 199763 | $— | 167016 | $— | 180628 | $— | 136219 | $— | 117378 | $— | 112211 | $— | 96844 |
| &nbsp;&nbsp;Less: Average goodwill and <br> intangibles |  | (6328) |  | (6446) |  | (6372) |  | (6772) |  | (7340) |  | (6372) |  | (6316) |
| &nbsp;&nbsp; Adjusted for: Average mortgage <br>&nbsp;&nbsp;&nbsp;&nbsp; servicing rights |  | 1198 |  | 1134 |  | 1133 |  | 1324 |  | 1647 |  | 1146 |  | 794 |
| Average tangible common equity | $— | 194633 | $— | 161704 | $— | 175389 | $— | 130771 | $— | 111685 | $— | 106985 | $— | 91322 |
| Return on average tangible <br> common shareholders' equity <sup>(1)</sup> |  | 10.52% |  | 6.04% |  | 12.49% |  | 18.72% |  | 16.29% |  | 11.52% |  | 6.97% |
| Net income | $— | 5050 | $— | 2429 | $— | 21904 | $— | 24478 | $— | 18190 | $— | 12322 | $— | 6368 |
| &nbsp;&nbsp;Adjusted for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on sale of AFS <br> securities, net of tax <sup>(1)</sup> |  | - |  | 2654 |  | 2654 |  | 396 |  | - |  | 45 |  | (726) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on hedge termination, net <br> of tax |  | - |  | - |  | - |  | (760) |  | - |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Bargain purchase gain, net <br> of tax |  | - |  | - |  | - |  | - |  | - |  | (1263) |  | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Merger expenses, net of tax |  | - |  | - |  | - |  | - |  | 106 |  | 1590 |  | 60 |
| Adjusted net income | $— | 5050 | $— | 5083 | $— | 24558 | $— | 24114 | $— | 18296 | $— | 12694 | $— | 5702 |
| Average tangible common equity |  | 194633 |  | 161704 |  | 175389 |  | 130771 |  | 111685 |  | 106985 |  | 91322 |
| Adjusted return on average <br> tangible common equity <sup>(2)</sup> |  | 10.52% |  | 12.64 |  | 14.00% |  | 18.44% |  | 16.38% |  | 11.87% |  | 6.24% |

---

<sup>(1)</sup> 2024 consists of loss on sale of available-for-sale securities due to non-routine strategic portfolio restructuring.

<sup>(2)</sup> Represents annualized March 31, 2025 and 2024 data.

The following table reconciles, as of the dates set forth below, the calculation of the nonperforming assets to total assets ratio (on a GAAP basis) and the calculation of the adjusted nonperforming assets to total assets ratio. Adjusted nonperforming assets to total assets ratio is calculated by adjusting for the guaranteed portions of nonaccrual loans from the total nonperforming assets.

---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** | **As of and for the Three Months Ended** |  |  |  |  |  |  |  |  |  |  |
|  | **March 31,** | **March 31,** | **March 31,** | **March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <u>(dollars in thousands)</u> | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** | **(audited)** |
| Total nonperforming assets | $— | 15370 | $— | 3883 | $— | 15870 | $— | 4338 | $— | 8079 | $— | 4213 | $— | 4304 |
| Total assets |  | 2190391 |  | 2050951 |  | 2098712 |  | 2028599 |  | 1835478 |  | 1611657 |  | 1147532 |
| &nbsp;&nbsp;GAAP-based nonperforming assets<br> to total assets |  | 0.70% |  | 0.19% |  | 0.76% |  | 0.21% |  | 0.44% |  | 0.26% |  | 0.38% |
| Total nonperforming assets | $— | 15370 | $— | 3883 | $— | 15870 | $— | 4338 | $— | 8079 | $— | 4213 | $— | 4304 |
| &nbsp;&nbsp;Adjusted for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Guaranteed portions of nonaccrual<br> loans |  | 4692 |  | 2817 |  | 4811 |  | 2689 |  | 218 |  | 226 |  | - |
| Adjusted total nonperforming assets | $— | 10678 | $— | 1066 | $— | 11059 | $— | 1649 | $— | 7861 | $— | 3987 | $— | 4304 |
| Total assets | $— | 2190391 | $— | 2050951 | $— | 2098712 | $— | 2028599 | $— | 1835478 | $— | 1611657 | $— | 1147532 |
| &nbsp;&nbsp;Adjusted nonperforming assets to total<br> assets |  | 0.49% |  | 0.05% |  | 0.53% |  | 0.08% |  | 0.43% |  | 0.25% |  | 0.38% |

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**RISK FACTORS**

*Investing in our common stock involves a significant degree of risk. The material risks and uncertainties that management believes affect us are described below. Before investing in our common stock, you should carefully read and consider the risk factors described below as well as the other information included in this prospectus. Any of these risks, if they are realized, could have a material adverse effect on our business, financial condition, results of operations, and consequently, the value of our common stock. In any such case, you could lose all or a portion of your original investment. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also adversely affect us. Further, to the extent that any of the information in this prospectus constitutes forward-looking statements, the risk factors below are cautionary statements identifying important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. See "Cautionary Note Regarding Forward-Looking Statements."*

RISKS RELATED TO ECONOMIC CONDITIONS

**Changes and instability in economic conditions, geopolitical matters and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition.**

Our success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies. Our traditional community banking operations primarily serve individuals, businesses and municipalities in the Lowcountry of South Carolina, Savannah, and the Atlanta MSA. Conditions such as changes in interest rates, money supply, levels of employment and other factors beyond our control may have a negative impact on economic activity. Any contraction of economic activity, including an economic recession, particularly any economic slowdown in the Lowcountry, Savannah or the Atlanta MSA, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings. Changes in trade policies by the United States or other countries, such as tariffs or retaliatory tariffs, may cause inflation which could impact the prices of products sold by our borrowers to repay their loans.

Interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the Federal Reserve. Although interest rates increased significantly in 2022 and through the first half of 2023 as the Federal Reserve attempted to slow economic growth and counteract rising inflation, the Federal Reserve lowered the federal funds rate in September, November and December of 2024. The interest rate path is less certain for 2025 and any further reduction in rates is likely contingent upon improving inflationary conditions. Further changes in interest rates and monetary policy are dependent upon the Federal Reserve's assessment of economic data as it becomes available.

The Federal Reserve may maintain higher interest rates to counteract persistent inflationary price pressures, which could push down asset prices and weaken economic activity. A deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations. Conversely, lower interest rates may reduce our realized yield on variable rate loans and investment securities and on new loans and securities, which would reduce our interest income and cause downward pressure on net interest income and net interest margin. A significant reduction in our net interest income could have a material adverse impact on our capital, financial condition and results of operations. The Company cannot predict the nature of timing of future changes in monetary, economic, or other policies, or the effect that changes will have on the Company's business activities, financial condition and results of operations.

**Recessionary conditions and economic factors could result in heightened credit risk and increases in our level of nonperforming loans which could adversely impact our results of operations and financial condition.**

As a result of the economic and geopolitical factors discussed above, we also face heightened credit risk, among other forms of risk. As we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral, which, in turn, can adversely affect the value of our loan and investment portfolios. Credit performance over the medium- and long-term is susceptible to economic and market forces and therefore forecasts remain uncertain. Instability and uncertainty in the commercial and residential real estate markets, as well as in the broader commercial and retail credit markets, could have a material adverse effect on our financial condition and results of operations.

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CREDIT RISK

**We are exposed to higher credit and concentration risk from our commercial real estate, commercial and industrial and commercial construction lending.**

Our credit risk and credit losses can increase if our loans become concentrated to borrowers engaged in the same or similar activities or to borrowers who as a group may be uniquely or disproportionately affected by economic or market conditions. As of March 31, 2025 and December 31, 2024, approximately 61.8% and 61.3%, respectively, of our loan portfolio consisted of commercial loans, including commercial and industrial, commercial construction and commercial real estate mortgage loans.

Most of our commercial business and commercial real estate loans are made to small to medium sized businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions. Additionally, these loans may increase concentration risk as to industry or collateral securing our loans. If general economic conditions in the market areas in which we operate negatively impact this customer sector, our results of operations and financial condition may be adversely affected. Further, the deterioration of borrowers' businesses may hinder their ability to repay their loans with the Company, which could have a material adverse effect on our financial condition and results of operations.

**Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.**

The federal bank regulatory agencies have indicated their view that banks with high concentrations of loans secured by commercial real estate are subject to increased risk and should hold higher capital than regulatory minimums to maintain an appropriate cushion against loss that is commensurate with the perceived risk. Because a significant portion of our loan portfolio is dependent on commercial real estate, a change in the regulatory capital requirements applicable to us as a result of these policies could limit our ability to leverage our capital, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

**Our decisions regarding credit risk could be inaccurate and our allowance for credit losses may be inadequate, which could have a material adverse effect on our business, financial condition, results of operations and future prospects.** 

Our earnings are affected by our ability to make loans, and thus we could sustain significant loan losses and consequently significant net losses if we incorrectly assess (i) the creditworthiness of our borrowers resulting in loans to borrowers who fail to repay their loans in accordance with the loan terms or (ii) the value of the collateral securing the repayment of their loans, or we fail to detect or respond to a deterioration in our loan quality in a timely manner. Management makes various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.

We maintain an allowance for credit losses that we consider adequate to absorb losses inherent in the loan portfolio based on our assessment of the information available. In determining the size of our allowance for credit losses, we rely on an analysis of our loan portfolio based on historical loss experience, current conditions, reasonable and supportable forecasts, and other pertinent information. The determination of the appropriate level of the allowance for credit losses involves a high degree of subjectivity and judgment and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. We cannot be certain that our allowance will be adequate over time to cover credit losses in our portfolio because of unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or markets, or borrowers repaying their loans. We target small and medium-sized businesses as loan customers. Because of their size, these borrowers may be less able to withstand competitive or economic pressures than larger borrowers in periods of economic weakness. Also, as we expand into new markets, our determination of the size of the allowance could be understated due to our lack of familiarity with market-specific factors. We believe our allowance for credit losses is adequate, but if the credit quality of our customer base or their debt service behavior materially decreases, if the risk profile of a market, industry or group of customers declines or weakness in the real estate markets and other economics were to arise, or if our allowance for credit losses on loans is not adequate, our business, financial condition, including our liquidity and capital, and results of operations could be materially adversely affected.

Our allowance for credit losses as of March 31, 2025, was $17.1 million, or 1.16% of total gross loans held-for-investment. Our allowance for credit losses as of December 31, 2024, was $17.1 million, or 1.21% of total gross loans held-for-investment. If our assumptions are inaccurate, we may incur loan losses in excess of our current allowance for credit losses and be required to make material additions to our allowance for credit losses, which could have a material adverse effect on our business, financial condition, results of operations and prospects. However, even if our assumptions are accurate, federal and state regulators periodically review our allowance for credit losses and could require us to materially increase our allowance for credit losses or recognize further loan charge-offs based on judgments different than those of our management. Any material increase in our allowance for credit losses or loan

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charge-offs as required by these regulatory agencies could have a material adverse effect on our business, financial condition, results of operations and prospects.

**Our largest loan relationships currently make up a significant percentage of our total loans held-for-investment portfolio.**

As of March 31, 2025, our 10 largest loans held for investment totaled $148.9 million of loans outstanding, or approximately 10.1% of our total LHFI portfolio. As of December 31, 2024, our 10 largest loans held for investment totaled $141.4 million of loans outstanding, or approximately 10.0% of our total LHFI portfolio. Each of the loans associated with these relationships has been underwritten in accordance with our underwriting policies and limits. The concentration risk associated with having a small number of relatively large loan relationships is that, if one or more of these relationships were to become delinquent or suffer default, we could be at risk of material losses. The allowance for credit losses may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the allowance could have a material adverse effect on our business, financial condition, results of operations and prospects.

**We may have more credit risk and higher credit losses to the extent loans are concentrated by location or industry of the borrowers or collateral.**

Our credit risk and credit losses could increase if our loans are concentrated to borrowers engaged in the same or similar activities or to borrowers who as a group may be uniquely or disproportionately affected by economic or market conditions. Deterioration in economic conditions, housing conditions and commodity and real estate values in certain states or locations could result in materially higher credit losses if loans are concentrated in those locations. Our two largest industry concentrations within our LHFI portfolio are Senior Housing and Marine loans. As of March 31, 2025, our loan portfolio had $245.3 million and $284.3 million of Senior Housing and Marine loans which represented approximately 16.7% and 19.3% of the LHFI portfolio, respectively. As of December 31, 2024, our loan portfolio had $234.1 million and $263.7 million of Senior Housing and Marine loans which represented approximately 16.6% and 18.6% of the LHFI portfolio, respectively. Our loans that are collateralized by watercraft or by real estate located in coastal geographies are also subject to disproportionate risk caused by hurricanes and other natural disasters.

In our Senior Housing loan portfolio, the ability of many of our borrowers to repay their loans is dependent, in part, on the receipt of payments and reimbursements under government contracts for services provided. Accordingly, our clients and their ability to service debt may be adversely impacted by the financial health of state or federal payors and the ability of governmental entities, some of which may experience budgetary stress, to make payments for services previously provided. Additionally, across the healthcare industry, structural changes to the government reimbursement model, including Medicare and Medicaid, may negatively impact performance for managed care facilities as borrowers adapt to these changes, which could impact their ability to service debt.

**We are subject to environmental liability risk associated with our lending activities.**

In the course of our business, we may purchase real estate, or we may foreclose on and take title to real estate. Although we have policies and procedures that require us to perform an environmental review before initiating any foreclosure action on nonresidential real property, these reviews may not be sufficient to detect all potential environmental hazards. As a result, we could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination or may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. Any significant environmental liabilities could have a material adverse effect on our business, financial condition, results of operations and prospects.

LIQUIDITY AND FUNDING RISKS

**Liquidity is essential to our business model and a lack of liquidity, or an increase in the cost of liquidity, could materially impair our ability to fund our operations and jeopardize our results of operation, financial condition and cash flows.**

Liquidity represents an institution's ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk arises from the possibility that we may be unable to satisfy current or future funding requirements and needs. Deposit levels may be affected by several factors, including rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, general economic and market conditions, customer concerns about the safety and soundness of our bank, whether real or perceived, or the U.S.

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banking system in general and other factors. Loan repayments are a relatively stable source of funds but are subject to the borrowers' ability to repay loans, which can be adversely affected by a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and other factors. Furthermore, loans generally are not readily convertible to cash.

We anticipate we will continue to rely primarily on deposits, loan repayments, and cash flows from our investment securities to provide liquidity. However, from time to time, secondary sources may be used to augment our primary funding sources. Such secondary sources may include FHLBA advances, brokered deposits, repurchase agreements, secured and unsecured federal funds lines of credit from correspondent banks, Federal Reserve borrowings and/or accessing the equity or debt capital markets. The availability of these secondary funding sources is subject to broad economic conditions, to regulation and to investor assessment of our financial strength and, as such, the cost of funds may fluctuate significantly and/or the availability of such funds may be restricted, thus impacting our net interest income, our immediate liquidity and/or our access to additional liquidity. Additionally, if we fail to remain "well-capitalized," our ability to utilize brokered deposits may be restricted.

An inability to maintain or raise funds (including the inability to access secondary funding sources) in amounts necessary to meet our liquidity needs would have a substantial negative effect, individually or collectively, on our liquidity. Our access to funding sources in amounts adequate to finance our activities, or on terms attractive to us, could be impaired by factors that affect us specifically or the financial services industry in general. For example, factors that could detrimentally impact our access to liquidity sources include our financial results, a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us, a reduction in our credit rating, any damage to our reputation, counterparty availability, changes in the activities of our business partners, changes affecting our loan portfolio or other assets, or any other event that could cause a decrease in depositor or investor confidence in our creditworthiness and business. Our access to liquidity could also be impaired by factors that are not specific to us, such as general business conditions, interest rate fluctuations, severe volatility or disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole, or legal, regulatory, accounting, and tax environments governing our funding transactions. In addition, our ability to raise funds is strongly affected by the general state of the U.S. and world economies and financial markets as well as the policies and capabilities of the U.S. government and its agencies, and may remain or become increasingly difficult due to economic and other factors beyond our control. Any such event or failure to manage our liquidity effectively could affect our competitive position, increase our borrowing costs and the interest rates we pay on deposits, limit our access to the capital markets, or cause us to sell investment securities and incur losses from those sales, any or all of which could have a material adverse effect on our results of operations or financial condition.

**The proportion of our deposit account balances that exceed FDIC insurance limits may expose us to enhanced liquidity risk in times of financial distress.**

Uninsured deposits historically have been viewed by the FDIC as less stable than insured deposits. According to statements made by the FDIC staff and the leadership of the federal banking agencies, customers with larger uninsured deposit account balances often are small- and mid-sized businesses that rely upon deposit funds for payment of operational expenses and, as a result, are more likely to closely monitor the financial condition and performance of their depository institutions. As a result, in the event of financial distress, uninsured depositors historically have been more likely to withdraw their deposits.

If a significant portion of our deposits were to be withdrawn within a short period of time such that additional sources of funding would be required to meet withdrawal demands, we may be unable to obtain funding at favorable terms, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated prevailing interest rates, such as the present period. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates. In addition, because our investment securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may be diminished during periods when interest rates are elevated. Under such circumstances, we may be required to access funding from sources such as the Federal Reserve's discount window in order to manage our liquidity risk.

INTEREST RATE RISKS

**We are subject to interest rate risk, which could adversely affect our profitability.**

Our profitability, like that of most financial institutions, depends to a large extent on our net interest income, which is the difference between our interest income on interest earning assets, such as loans and investment securities, and our interest expense on interest-bearing liabilities, such as deposits and borrowings. We have positioned our balance sheet to perform adequately in both a higher or lower interest rate environment, but this may not remain true in the future. Our interest sensitivity profile was somewhat asset sensitive

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as of March 31, 2025 and December 31, 2024, generally meaning that our net interest income would decrease more from falling interest rates than from increasing interest rates. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could also affect our ability to originate loans and obtain or retain deposits, customer demand for loans, the fair value of our financial assets and liabilities, and the average duration of our assets. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, an increase in interest rates could also have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations. These circumstances could not only result in increased loan defaults, foreclosures and charge-offs, but also necessitate further increases to the allowance for credit losses which could have a material adverse effect on our business, results of operations, financial condition and prospects.

**A flat or inverted yield curve may reduce our net interest margin and adversely affect our loan and investment portfolios.**

The yield curve is a reflection of interest rates applicable to short and long-term debt. The yield curve is steep when short-term rates are much lower than long term rates; it is flat when short-term rates and long-term rates are nearly the same; and it is inverted when short-term rates exceed long-term rates. Historically, the yield curve is usually upward sloping. However, the yield curve can be relatively flat or inverted, which has happened several times in the past few years. A flat or inverted yield curve, which tends to decrease net interest margin, would adversely impact our lending businesses and investment portfolio.

OPERATIONAL RISKS

**We could experience losses due to competition with other financial institutions and non-banks.**

We face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, and internet banks within the various markets in which we operate. We also face competition from many other types of financial institutions, including, without limitation, thrifts, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries, such as online lenders and banks. The financial services industry could become even more competitive as a result of legislative and regulatory changes and continued consolidation. In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.

Our ability to compete successfully depends on a number of factors, including, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the ability to develop, maintain, and build upon long-term customer relationships based on top quality service, high ethical standards, and safe, sound assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the ability to expand our market position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the scope, relevance, and pricing of products and services offered to meet customer needs and demands;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the rate at which we introduce new products and services relative to our competitors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•customer satisfaction with our level of service.

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.

**We may not be able to overcome the integration and other risks associated with any future acquisitions, which could have an adverse effect on our ability to implement our business strategy.**

In the ordinary course of business, we routinely evaluate and pursue acquisition opportunities that we believe complement our activities and have the ability to enhance our profitability and provide attractive risk-adjusted returns. We intend to continue to routinely

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evaluate and pursue such acquisition opportunities. Our future acquisition activities could be material to our business and involve a number of risks, including the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•intense competition from other banking organizations and other acquirers for potential merger candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•market pricing for desirable acquisitions resulting in returns that are less attractive than we have traditionally sought to achieve;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in our attention being diverted from the operation of our existing business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•potential exposure to unknown or contingent liabilities of banks and businesses we acquire, including consumer compliance issues;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the time and expense required to integrate the operations and personnel of the combined businesses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•experiencing higher operating expenses relative to operating income from the new operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•losing key employees and customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•reputational issues if the target's management does not align with our culture and values;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•significant problems relating to the conversion of the financial and customer data of the target;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•integration of acquired customers into our financial and customer product systems;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•risks of impairment to goodwill; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•regulatory timeframes for review of applications may limit the number and frequency of transactions we may be able to consummate.

Depending on the condition of any institution or assets or liabilities that we may acquire, that acquisition may, at least in the near term, adversely affect our capital and earnings and, if not successfully integrated with our organization, may continue to have such effects over a longer period. We may not be successful in overcoming these risks or any other problems encountered in connection with pending or potential acquisitions, and any acquisition we may consider will be subject to prior regulatory approval. Our inability to overcome these risks could have an adverse effect on our ability to implement our business strategy, which, in turn, could have an adverse effect on our business, financial condition and results of operations.

**Failure to keep pace with technological change could adversely affect our business.**

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services including those related to or involving artificial intelligence, machine learnings, blockchain and other distributed ledger technologies. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

**New lines of business or new products and services may subject us to additional risk.**

From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. We may invest significant time and resources in these efforts. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business and/or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business and/or new products or services could have a material adverse effect on our business and, in turn, our financial condition and results of operations.

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**Our residential mortgage warehouse lending program is subject to various risks that could adversely impact our results of operations and financial condition.**

The Company has a nationwide residential mortgage warehouse division, MBF, which provides short term funding to non-bank mortgage loan originators. Short-term funding is provided via a purchase and sale of originated single-family mortgages. Under this form of warehousing, MBF purchases individual notes directly from our clients. Substantially all single-family mortgage loans we originate through MBF have a secondary market takeout at the time of origination. We take physical possession of the notes and allonges and the loans typically remain on our balance sheet for approximately 8-10 days. At March 31, 2025 and December 31, 2024, we had 84 and 83 approved MBF client originators, respectively. Of these MBF client originators, 59 and 53 had mortgages purchased by CSB at March 31, 2025 and December 31, 2024, respectively. At March 31, 2025 and they had purchase limits in varying amounts from $2 million to $30 million, for an aggregate amount of $536 million. At March 31, 2025, there was $187.5 million in loans held for sale outstanding, compared to $174.0 million and $82.1 million outstanding at December 31, 2024 and 2023, respectively.

There are numerous risks associated with residential mortgage warehouse lending, which include, without limitation, (i) credit risks relating to the mortgage loans that are purchased from our clients, (ii) the risk of intentional misrepresentation or fraud by any of these mortgage bankers, (iii) changes in the market value of mortgage loans originated by the mortgage banker, the sale of which is the expected source of repayment to the Company, (iv) unsalable or impaired mortgage loans originated, which could lead to decreased collateral value and the failure of a purchaser of the mortgage loan to purchase the loan from the Company, and (v) the volatility of mortgage loan originations.

**SBA lending and other government guaranteed lending is an important part of our business. These lending programs are dependent upon the federal government, and we face specific risks associated with originating SBA and other government guaranteed loans.**

Our SBA lending program is dependent upon the federal government. As an SBA Preferred Lender, we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender's Preferred Lender status. If we lose our status as a Preferred Lender, we may lose some or all of our customers to lenders who are SBA Preferred Lenders, and as a result we could experience a material adverse effect on our financial results. Any changes to the SBA program, including changes to the level of guarantee provided by the federal government on SBA loans, may also have a material adverse effect on our business.

We anticipate that gains on the sale of loans will comprise a meaningful component of our revenue in 2025. We sell the guaranteed portion of some of our SBA 7(a) loans in the secondary market. These sales have resulted in premium income for us at the time of sale and created a stream of future servicing income. We may not be able to continue originating these loans or selling them in the secondary market. Furthermore, even if we are able to continue originating and selling SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans. When we sell the guaranteed portion of our SBA 7(a) loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we recognize a loss and/or recovery related to the non-guaranteed portion. However, if the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us, which could materially adversely affect our business, results of operations and financial condition.

In addition, we make loans through various programs of the United States Department of Agriculture ("USDA"). A typical SBA 7(a) loan carries a 75% guarantee while USDA guarantees range from 60% to 80% depending on loan size and type. We expect to continue to sell a large proportion of the USDA loans that we originate in the secondary market as they become eligible for sale. The origination and sale of these loans are subject to similar risks associated with the origination and sale of SBA 7(a) loans as described above. The laws, regulations and standard operating procedures that are applicable to SBA and USDA loan products may change at any time. Because government regulation greatly affects the business and financial results of our organization, changes in the laws, regulations and procedures applicable to SBA and USDA loans could adversely affect our ability to operate profitably.

**Fraud is a major, and increasing, operational risk for us and all banks.**

Deposit and loan fraud continue to be major sources of fraud attempts and loss. The sophistication and methods used to perpetrate fraud continue to evolve as technology changes. In addition to cybersecurity risk, new technologies have made it easier for bad actors to obtain and use client personal information, mimic signatures and otherwise create false documents that look genuine. The industry

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fraud threat continues to evolve, including but not limited to card fraud, check fraud, social engineering and phishing attacks for identity theft and account takeover. Additionally, the use of artificial intelligence could exacerbate many of these risks. Our anti-fraud measures are both preventive and, when necessary, responsive; however, some level of fraud loss is unavoidable, and the risk of a major loss cannot be eliminated.

**Our internal controls may be ineffective.**

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the controls are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition.

Failure to achieve and maintain an effective internal control environment could prevent us from accurately reporting our financial results, preventing or detecting fraud or providing timely and reliable financial information pursuant to our reporting obligations, which could result in a material weakness in our internal controls over financial reporting and the restatement of previously filed financial statements and could have a material adverse effect on our business, financial condition and results of operations. Further, ineffective internal controls could cause our investors to lose confidence in our financial information, which could affect the trading price of our common stock.

**We may not be able to attract and retain skilled people.**

Our success depends, in large part, on our ability to attract and retain skilled people. Competition for the best people in most activities engaged in by us can be intense, and we may not be able to hire sufficiently skilled people or to retain them. The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of our markets, years of industry experience, and/or the difficulty of promptly finding qualified replacement personnel.

**Loss of key employees may disrupt relationships with certain customers.**

Our business is primarily relationship-driven in that many of our key employees have extensive customer relationships. Loss of a key employee with such customer relationships may lead to the loss of business if the customers were to follow that employee to a competitor or otherwise choose to transition to another financial services provider. While we believe our relationship with our key personnel is good, we cannot guarantee that all of our key personnel will remain with our organization. Loss of such key personnel could result in the loss of some of our customers.

**Our business continuity plans or data security systems could prove to be inadequate, resulting in Cyberattacks, other data or security breaches or a material interruption in, or disruption to, our business and a negative impact on our results of operations.**

We rely heavily on communications and information systems to conduct our business. Our daily operations depend on the operational effectiveness of our technology to accurately track and record our assets and liabilities. Any failure, interruption, or breach in security of our computer systems or outside vendor technology could result in failures or disruptions in general ledger, deposit, loan, customer relationship management, and other systems leading to inaccurate financial records. While we have disaster recovery and other policies and procedures designed to prevent or limit the effect of any failure, interruption, or security breach of our information systems, there can be no assurance that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions, or security breaches of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our results of operations.

Cybersecurity risks for lenders have significantly increased in recent years, in part, because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of computer hackers, organized crime, terrorists, and other external parties, including foreign state actors. We, our clients and loan applicants, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyberattacks. These cyberattacks could include computer viruses, malicious or destructive code, phishing attacks, denial of service or information, improper access by team members or third-party vendors or other security breaches that have or could in the future result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our team members, our clients and loan applicants or of third parties, or otherwise materially disrupt our or our clients' and loan applicants' or other third parties' network access or business operations.

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Cyberattacks on local and state government databases and offices, including the rising trend of ransomware attacks, also expose us to the risk of losing access to critical data and the ability to provide services to our clients. These attacks can cause havoc and have at times led title insurance underwriters to prohibit us from issuing policies, and to suspend closings, on properties located in the affected counties or states.

In addition, the Bank provides its customers the ability to bank online and through mobile banking. The secure transmission of confidential information over the internet is a critical element of online and mobile banking. While we use qualified third-party vendors to test and audit our network, our network could become vulnerable to unauthorized access, computer viruses, phishing schemes, and other security issues. The Bank may be required to spend significant capital and other resources to alleviate problems caused by security breaches or computer viruses. To the extent that the Bank's activities or the activities of its customers involve the storage and transmission of confidential information, security breaches and viruses could expose the Bank to claims, litigation, and other potential liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in the Bank's systems and could adversely affect its reputation and its ability to generate deposits.

Additionally, we outsource the processing of our core data system, as well as other systems such as online banking, to third party vendors. Prior to establishing an outsourcing relationship, and on an ongoing basis thereafter, management monitors key vendor controls and procedures related to information technology, which includes reviewing reports of service auditor's examinations. If our third-party vendor encounters difficulties or if we have difficulty in communicating with such third party, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business operations.

**We are dependent upon outside third parties for the processing and handling of our records and data.**

We rely on software developed by third-party vendors to process various transactions. In some cases, we have contracted with third parties to run their proprietary software on our behalf. These systems include, but are not limited to, general ledger, payroll, employee benefits, loan and deposit processing, and securities portfolio accounting. While we perform a review of controls instituted by the applicable vendors over these programs in accordance with industry standards and perform our own testing of user controls, we must rely on the continued maintenance of controls by these third-party vendors, including safeguards over the security of customer data. In addition, we maintain, or contract with third parties to maintain daily backups of key processing outputs in the event of a failure on the part of any of these systems. Nonetheless, we may incur a temporary disruption in our ability to conduct business or process transactions, or incur damage to our reputation, if the third-party vendor fails to adequately maintain internal controls or institute necessary changes to systems. Such a disruption or breach of security may have a material adverse effect on our business.

A security breach related to use of third-party software or systems, or the loss or corruption of confidential customer information could adversely affect our ability to provide timely and accurate financial information in compliance with legal and regulatory requirements. Any such failures could result in sanctions from regulatory authorities, significant reputational harm and a decrease in our customers' confidence in us. Additionally, security breaches or the loss, theft or corruption of customer information such as social security numbers, credit card numbers, or other information could result in customer losses, litigation, regulatory sanctions, losses in revenue, increased costs and reputational harm. Our ability to recoup our losses may be limited legally or practically in many situations.

**We may be adversely affected by the soundness of other financial institutions**.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty, and other relationships. We have exposure to different industries and counterparties, and through transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, and other institutional clients. Our transactions with other financial institutions expose us to credit risk in the event of a default of a counterparty. The soundness of many financial services companies may be closely interrelated as a result of credit, trading, clearing and other relationships between such financial services companies. As a result, defaults by, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, can lead, and have led, to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. These losses or defaults could have a material adverse effect on our business, financial condition, results of operations and prospects. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices insufficient to recover the full amount of the loan or derivative exposure due to us. Any such losses could materially and adversely affect our results of operations or earnings.

LEGAL AND REGULATORY RISKS

**Our industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a materially adverse effect on our operations.**

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The banking industry is highly regulated and supervised under both federal and state laws and regulations that are intended primarily for the protection of depositors, customers, the public, the banking system as a whole or the FDIC Deposit Insurance Fund, or DIF, not for the protection of our shareholders and creditors. We are subject to regulation and supervision by the Federal Reserve, and our Bank is subject to regulation and supervision by the Federal Reserve and the SCBFI. Compliance with these laws and regulations can be difficult and costly, and changes to laws and regulations can impose additional compliance costs. The Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd Frank Act, which imposed significant regulatory and compliance changes on financial institutions, is an example of this type of federal law. The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts and terms of loans and investments we may make, the maximum interest rate that may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept and the rates we may pay on such deposits, maintenance of adequate capital and liquidity, changes in control of us and our Bank, transactions between us and our Bank, handling of nonpublic information, restrictions on dividends and establishment of new offices. We must obtain approval from our regulators before engaging in certain activities, and there is risk that such approvals may not be granted, either in a timely manner or at all. These requirements may constrain our operations, and the adoption of new laws and changes to or repeal of existing laws may have an adverse effect on our business, financial condition and results of operations. Also, the burden imposed by those federal and state regulations may place banks in general, including our Bank in particular, at a competitive disadvantage compared to their non-bank competitors. Compliance with current and potential regulation, as well as supervisory scrutiny by our regulators, may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital, and limit our ability to pursue business opportunities in an efficient manner by requiring us to expend significant time, effort and resources to ensure compliance and respond to any regulatory inquiries or investigations. Our failure to comply with any applicable laws or regulations, or regulatory policies and interpretations of such laws and regulations, could result in sanctions by regulatory agencies, civil money penalties or damage to our reputation, all of which could have an adverse effect on our business, financial condition and results of operations.

Applicable laws, regulations, interpretations, enforcement policies and accounting principles have been subject to significant changes in recent years, and may be subject to significant future changes. Additionally, federal and state regulatory agencies may change the manner in which existing regulations are applied. We cannot predict the substance or effect of pending or future legislation or regulation or changes to the application of laws and regulations to us. Future changes may have an adverse effect on our business, financial condition and results of operations.

In addition, given the current economic and financial environment, regulators may elect to alter standards or the interpretation of the standards used to measure regulatory compliance or to determine the adequacy of liquidity, risk management or other operational practices for financial service companies in a manner that impacts our ability to implement our strategy and could affect us in substantial and unpredictable ways, and could have an adverse effect on our business, financial condition and results of operations. Furthermore, the regulatory agencies have broad discretion in their interpretation of laws and regulations and their assessment of the quality of our loan portfolio, securities portfolio and other assets. Based on our regulators' assessment of the quality of our assets, operations, lending practices, investment practices, capital structure or other aspects of our business, we may be required to take additional charges or undertake, or refrain from taking, actions that could have an adverse effect on our business, financial condition and results of operations.

See the discussion below at "Supervision and Regulation" for an additional discussion of the extensive regulation and supervision to which the Company and the Bank are subject.

**Monetary policies and regulations of the Federal Reserve could have an adverse effect on our business, financial condition and results of operations.**

Our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate and changes in banks' reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

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**Federal and state banking agencies periodically conduct examinations of our business, including for compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations may adversely affect us.**

Federal and state regulators periodically examine our business and may require us to remediate adverse examination findings or may take enforcement action against us.

The Federal Reserve and the SCBFI periodically examine our business, including our compliance with laws and regulations. If, as a result of an examination, the Federal Reserve or the SCBFI were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, they may take a number of different remedial actions as they deem appropriate. These actions may include requiring us to remediate any such adverse examination findings.

In addition, these agencies have the power to take enforcement action against us to enjoin "unsafe or unsound" practices, to require affirmative action to correct any conditions resulting from any violation of law or regulation or unsafe or unsound practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to direct the sale of subsidiaries or other assets, to limit dividends and distributions, to restrict our growth, to assess civil money penalties against us or our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is imminent risk of loss to depositors, to terminate our deposit insurance and place our Bank into receivership or conservatorship. Any regulatory enforcement action against us could have an adverse effect on our business, financial condition and results of operations.

**We are subject to stringent capital requirements, which could have an adverse effect on our operations.**

Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and define "capital" for calculating these ratios. The capital rules require bank holding companies and banks to maintain a common equity Tier 1 capital to risk-weighted assets ratio of at least 7.0% (a minimum of 4.5% plus a capital conservation buffer of 2.5%), a Tier 1 capital to risk-weighted assets ratio of at least 8.5% (a minimum of 6.0% plus a capital conservation buffer of 2.5%), a total capital to risk-weighted assets ratio of at least 10.5% (a minimum of 8.0% plus a capital conservation buffer of 2.5%), and a leverage ratio of Tier 1 capital to total consolidated assets of at least 4.0%. An institution's failure to exceed the capital conservation buffer with common equity Tier 1 capital would result in limitations on an institution's ability to make capital distributions and discretionary bonus payments. In addition, for an insured depository institution to be "well-capitalized" under the banking agencies' prompt corrective action framework, it must have a common equity Tier 1 capital ratio of at least 6.5%, Tier 1 capital ratio of at least 8.0%, a total capital ratio of at least 10.0%, and a leverage ratio of at least 5.0%, and must not be subject to any written agreement, order or capital directive, or prompt corrective action directive issued by its primary federal or state banking regulator to meet and maintain a specific capital level for any capital measure.

We operate under the Federal Reserve's Small Bank Holding Company Policy Statement, which exempts from the Federal Reserve's risk-based capital and leverage rules bank holding companies with assets of less than $3.0 billion that are not engaged in significant nonbanking activities, do not conduct significant off-balance sheet activities and that do not have a material amount of debt or equity securities registered with the SEC. Historically, the Federal Reserve has not usually deemed a bank holding company ineligible for application of this policy statement solely because its common stock is registered under the Exchange Act. However, there can be no assurance that the Federal Reserve will continue this practice, and as a result this offering may result in the loss of our status as a small bank holding company for these purposes.

Any new or revised standards adopted in the future may require us to maintain materially more capital, with voting common equity as a more predominant component, or manage the configuration of our assets and liabilities to comply with formulaic capital requirements. We may not be able to raise additional capital at all, or on terms acceptable to us. Failure to maintain capital to meet current or future regulatory requirements could have an adverse effect on our business, financial condition and results of operations.

**We are subject to numerous "fair and responsible banking" laws and other laws and regulations designed to protect consumers, and failure to comply with these laws could lead to a wide variety of sanctions.**

The Equal Credit Opportunity Act, or ECOA, the Fair Housing Act and other fair lending laws and regulations, including state laws and regulations, prohibit discriminatory lending practices by financial institutions. The Federal Trade Commission Act prohibits unfair or deceptive acts or practices, and the Dodd-Frank Act prohibits unfair, deceptive, or abusive acts or practices by financial institutions. The U.S. Department of Justice federal and state banking agencies, and other federal and state agencies, including the Consumer Financial Protection Bureau, or CFPB, are responsible for enforcing these fair and responsible banking laws and regulations. Smaller banks, including the Bank, are subject to rules promulgated by the CFPB but continue to be examined and supervised by federal banking

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agencies for compliance with federal consumer protection laws and regulations. Accordingly, CFPB rulemaking has the potential to have a significant impact on the operations of the Bank.

A challenge to an institution's compliance with fair and responsible banking laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution's performance under fair lending laws in private litigation, including through class action litigation. Such actions could have an adverse effect on our business, financial condition and results of operations.

**We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential, or proprietary information of individuals could damage our reputation and otherwise adversely affect our business.**

Our business requires the collection and retention of large volumes of customer data, including personally identifiable information, or PII, in various information systems that we maintain and in those maintained by third party service providers. We also maintain important internal company data such as PII about our employees and information relating to our operations. We are subject to complex and evolving laws and regulations governing the privacy and protection of PII of individuals (including customers, employees, and other third parties). For example, our business is subject to the GLB Act, which, among other things: (i) imposes certain limitations on our ability to share nonpublic PII about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to "opt out" of any information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Various federal and state banking regulators and states have also enacted data breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in the event of a security breach.

Ensuring that our collection, use, transfer and storage of PII complies with all applicable laws and regulations can increase our costs. Furthermore, we may not be able to ensure that customers and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If personal, confidential or proprietary information of customers or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under privacy and data protection laws and regulations. Concerns regarding the effectiveness of our measures to safeguard PII, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers and thereby reduce our revenues. Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our business, financial condition and results of operations.

**We are a bank holding company and are dependent upon the Bank for cash flow, and the Bank's ability to make cash distributions is restricted.**

We are a bank holding company with no material activities other than activities incidental to holding the common stock of the Bank. Our principal source of funds to pay distributions on our common stock and service any of our obligations, other than further issuances of securities, is dividends received from the Bank. Furthermore, the Bank is not obligated to pay dividends to us, and any dividends paid to us would depend on the earnings or financial condition of the Bank, various business considerations and applicable law and regulation. As is generally the case for banking institutions, the profitability of the Bank is subject to the fluctuating cost and availability of money, changes in interest rates and economic conditions in general. In addition, various federal and state statutes and regulations limit the amount of dividends that the Bank may pay to the Company without regulatory approval. Moreover, we have pledged all of the stock of the Bank as collateral for a revolving commercial line of credit. If we were to default on this line of credit, the lender of such line of credit could foreclose on the Bank's stock and we would lose our principal asset.

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**The Federal Reserve may require us to commit capital resources to support the Bank.**

The Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to its subsidiary banks and to commit resources to support its subsidiary banks. Under the "source of strength" doctrine that was codified by the Dodd-Frank Act, the Federal Reserve may require a bank holding company to make capital injections into a subsidiary bank at times when the bank holding company may not be inclined to do so and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. Accordingly, we could be required to provide financial assistance to the Bank if it experiences financial distress.

A capital injection may be required at a time when our resources are limited, and we may be required to borrow the funds or raise capital to make the required capital injection. Any loan by a bank holding company to its subsidiary bank is subordinate in right of payment to deposits and certain other indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company's general unsecured creditors, including the holders of any note obligations. Thus, any borrowing by a bank holding company for the purpose of making a capital injection to a subsidiary bank may become more difficult and expensive relative to other corporate borrowings.

**We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.**

The BSA, the Patriot Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and to file reports such as suspicious activity reports and currency transaction reports. We are required to comply with these and other anti-money laundering requirements. Our federal and state banking regulators, FinCEN, and other government agencies are authorized to impose significant civil money penalties for violations of anti-money laundering requirements. We are also subject to increased scrutiny of compliance with the regulations issued and enforced by the U.S. Department of the Treasury's Office of Foreign Assets Control, or OFAC, which is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. If our program is deemed deficient, we could be subject to liability, including fines, civil money penalties and other regulatory actions, which may include restrictions on our business operations and our ability to pay dividends, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have significant reputational consequences for us. Any of these circumstances could have an adverse effect on our business, financial condition and results of operations.

**Our Bank's FDIC deposit insurance premiums and assessments may increase.**

Our Bank's deposits are insured by the FDIC up to legal limits and, accordingly, our Bank is subject to insurance assessments based on our Bank's average consolidated total assets less its average tangible equity. Our Bank's regular assessments are determined by its CAMELS composite rating (a supervisory rating system developed to classify a bank's overall condition by taking into account capital adequacy, assets, management capability, earnings, liquidity and sensitivity to market and interest rate risk), taking into account other factors and adjustments. In order to maintain a strong funding position and the reserve ratios of the DIF required by statute and FDIC estimates of projected requirements, the FDIC has the power to increase deposit insurance assessment rates and impose special assessments on all FDIC-insured financial institutions. Any future increases or special assessments could reduce our profitability and could have an adverse effect on our business, financial condition and results of operations.

RISKS RELATED TO OUR COMMON STOCK

**The trading history of our common stock is characterized by low trading volume. The value of your common stock may be subject to sudden decreases due to the volatility of the price of our common stock.**

Although our common stock is currently quoted on the OTCQX Best Market operated by the OTC Markets Group, it trades infrequently. We cannot predict the extent to which investor interest in us and additional shares outstanding will lead to a more active trading market in our common stock or how liquid that market might become. A public trading market having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of willing buyers and sellers of our common stock at any given time, which presence is dependent upon the individual decisions of investors, over which we have no control.

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The market price of our common stock may be highly volatile and subject to wide fluctuations in response to numerous factors, including, but not limited to, the factors discussed in other risk factors and the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•actual or anticipated fluctuations in our operating results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in interest rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in the legal or regulatory environment in which we operate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•press releases, announcements or publicity relating to us or our competitors or relating to trends in our industry;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in expectations as to our future financial performance, including financial estimates or recommendations by securities analysts and investors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•future issuances of our common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in economic conditions in our marketplace, general conditions in the United States economy, financial markets or the banking industry; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•other developments affecting our competitors or us.

These factors may adversely affect the trading price of our common stock, regardless of our actual operating performance, and could prevent you from selling your common stock at or above the price at which you purchased shares. In addition, the stock markets, from time to time, experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of companies. These broad fluctuations may adversely affect the market price of our common stock, regardless of our trading performance.

**An active, liquid trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the public offering price, or at all.**

Our common stock is currently quoted on the OTCQX Best Market operated by the OTC Markets Group under the trading symbol "COSO." We have applied to list our voting common stock on the NYSE under the symbol "COSO." We believe that upon the completion of this offering, we will meet the standards for listing our common stock on the NYSE, and the completion of this offering is contingent upon such listing. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The public offering price for our common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your common stock at or above the public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration acquisitions.

**The price of our common stock could be volatile following this offering.**

The market price of our common stock following this offering may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•general economic conditions and overall market fluctuations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•actual or anticipated fluctuations in our quarterly or annual operating results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in accounting standards, policies, guidance, interpretations or principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the public reaction to our press releases, our other public announcements and our filings with the SEC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in financial estimates and recommendations by securities analysts following our stock, or the failure of securities analysts to cover our common stock after this offering;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in our ability to meet the estimates of securities analysts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the operating and stock price performance of other comparable companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the trading volume of our common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•new technology used, or services offered, by competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in business, legal or regulatory conditions, or other developments affecting the financial services industry, participants in our industry, and publicity regarding our business or any of our significant customers or competitors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•future sales of our common stock by us, directors, executives and significant shareholders, including the sale of our common stock by our existing shareholders who are not subject to the lock-up agreements described in "Underwriting."

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The realization of any of the risks described in this "Risk Factors" section could have a material adverse effect on the market price of our common stock and cause the value of your investment to decline. In addition, the stock market experiences extreme volatility that has often been unrelated to the operating performance of particular companies. These types of broad market fluctuations may adversely affect investor confidence and could affect the trading price of our common stock over the short, medium or long term, regardless of our actual performance. If the market price of our common stock reaches an elevated level following this offering, it may materially and rapidly decline. In the past, following periods of volatility in the market price of a company's securities, shareholders have often instituted securities class action litigation. If we were to be involved in a class action lawsuit, we could incur substantial costs and it could divert the attention of our management team and have a material adverse effect on our business, financial condition and results of operations.

**Our management will have broad discretion as to the use of proceeds from this offering, and we may not use the proceeds effectively.**

We are not required to apply any portion of the net proceeds of this offering for any particular purpose. We intend to use the net proceeds to us from this offering for working capital and general corporate purposes, which may include, without limitation, supporting our organic growth, funding opportunistic strategic acquisitions, funding branch expansion, and repaying indebtedness, which could include contributing a significant portion of such proceeds to the Bank. However, our management will have broad discretion as to the application of the net proceeds of this offering and could use them for purposes other than those contemplated at the time of this offering. At March 31, 2025, our total shareholders' equity was $202.1 million and our total return on average common equity was 10.25%, as annualized, for the three months ended March 31, 2025. We expect our total shareholders' equity to be million upon completion of the offering, based on the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus and shareholders' equity as of March 31, 2025. A portion of the proceeds from this offering are expected to be used to provide additional capital as a cushion against minimum regulatory capital requirements, which may tend to reduce our return on equity as opposed to if such proceeds were used for further growth. Our shareholders may not agree with the manner in which our management chooses to allocate and invest the net proceeds. If we do not invest or apply the net proceeds from this offering in ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

**The reduced disclosures and relief from certain other significant disclosure requirements that are available to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.**

We are an "emerging growth company," as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not "emerging growth companies." These exemptions include the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•exemptions from the requirements to hold non-binding advisory votes on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, even if we comply with the greater obligations of public companies that are not emerging growth companies immediately after this offering, we may avail ourselves of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as we are an emerging growth company.

We will remain an emerging growth company for up to five years, though we may cease to be an emerging growth company earlier under certain circumstances, including if, before the end of such five years, we are deemed to be a large accelerated filer under the rules of the SEC (which depends on, among other things, having a market value of common stock held by non-affiliates in excess of $700 million).

We are also a smaller reporting company, as defined in the Exchange Act. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company, which would allow us to continue taking advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. In addition, for so long as we continue to qualify as a non-accelerated filer, we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

We cannot predict if investors will find our securities less attractive due to our reliance on these exemptions. If investors were to find our securities less attractive as a result of our election, we may have difficulty raising in this offering and future offerings and the market price of our securities may be more volatile.

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**The obligations associated with being a public company will require significant resources and management attention, which may divert from our business operations.**

As a result of this offering, we will become subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition with the SEC. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. As a result, we will incur significant legal, accounting and other expenses that we did not previously incur. We anticipate that these costs will materially increase our general and administrative expenses. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management's attention from implementing our strategic plan, which could prevent us from successfully implementing our growth initiatives and improving our business, results of operations and financial condition.

As an "emerging growth company" as defined in the JOBS Act, we intend to take advantage of certain temporary exemptions from various reporting requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and an exemption from the requirement to obtain an attestation from our auditors on management's assessment of our internal control over financial reporting. When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

**You will incur immediate dilution as a result of this offering.**

If you purchase our common stock in this offering, you will pay more for your shares than the net tangible book value per share immediately following consummation of this offering. As a result, you will incur immediate dilution of per share representing the difference between the offering price of , the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, and our net tangible book value per share as of March 31, 2025, as adjusted after this offering, of per share of common stock. This represents % dilution from the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus. Accordingly, if we were to be liquidated at our book value immediately following this offering, you would not receive the full amount of your investment. See section titled "Dilution" for additional information.

**Our dividend policy may change without notice and any payment of dividends in the future is subject to the discretion of our Board of Directors.**

The holders of our common stock will receive cash dividends if and when declared by our board of directors out of legally available funds. Any future determination relating to the payment of dividends will be made at the discretion of our board of directors and will depend on a number of factors, including our future earnings, capital requirements, financial condition, future prospects, regulatory restrictions, and other factors that our board of directors may deem relevant.

Our principal business operations are conducted through our subsidiary, Coastal States Bank. Cash available to pay dividends to our shareholders is derived in part from dividends paid by Coastal States Bank to us. The ability of Coastal States Bank to pay dividends to us, as well as our ability to pay dividends to our shareholders, will continue to be subject to, and limited by, certain legal and regulatory restrictions. Further, any lenders making loans to us may impose financial covenants that may be more restrictive with respect to dividend payments than the regulatory requirements.

**If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.**

The trading market for our common stock could be affected by whether equity research analysts publish research or reports about us and our business. We cannot predict at this time whether any other research analysts will publish research and reports on us and our common stock. If one or more equity analysts do cover us and our common stock and publish research reports about us, the price of our stock could decline if one or more securities analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business. If any of the analysts who elect to cover us downgrades our stock, our stock price could decline rapidly. If any of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.

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**If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline.**

If our existing shareholders sell substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decrease significantly. The perception in the public market that our existing shareholders might sell shares of common stock could also depress our market price. Upon completion of this offering, we will have<br> shares of our common stock outstanding, or shares if the underwriters exercise in full their option to purchase additional shares from us. Our directors, executive officers and certain other officers, collectively representing % of our common shares outstanding upon completion of this offering, or % if the underwriters exercise in full their option to purchase additional shares, will be subject to the lock-up agreements described in "Underwriting" and the Rule 144 holding period requirements described in "Shares Eligible for Future Sale." After the lock-up periods have expired and the holding periods have elapsed, additional shares of our outstanding common stock will be eligible for sale in the public market. In addition, the underwriters may, at any time and without notice, release all or a portion of the shares subject to lock-up agreements. The market price of shares of our common stock may drop significantly when the restrictions on resale by our existing shareholders lapse. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities and could result in a decline in the value of the shares of our common stock purchased in this offering.

Following the completion of this offering, we also intend to file a registration statement on Form S-8 under the Securities Act covering the shares of our common stock that have been reserved for future issuance under our equity incentive plan. Accordingly, subject to certain vesting requirements, shares registered under that registration statement will be available for sale in the open market by persons other than our executive officers and directors and after the lock-up agreements expire by our executive officers and directors.

**A future issuance of stock could dilute the value of our common stock.**

We may sell additional shares of common stock, or securities convertible into or exchangeable for such shares, in subsequent public or private offerings. Upon completion of this offering, there will be shares of our common stock issued and outstanding, or shares if the underwriters exercise in full their option to purchase additional shares from us. Future issuance of any new shares could cause further dilution in the value of our outstanding shares of common stock. We cannot predict the size or timing of future issuances of our common stock, or securities convertible into or exchangeable for such shares, or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock.

**Our common stock is subordinate to our existing and future indebtedness.**

Shares of our common stock are equity interests and do not constitute indebtedness. As such, our common stock ranks junior to all our customer deposits and indebtedness, and other non-equity claims on us, with respect to assets available to satisfy claims. In addition, the shares of common stock rank junior to the noteholders of the $15,000,000 in subordinated debt that we issued in September 2020.

**We may issue shares of preferred stock in the future which adversely affect holders of our common stock and depress the price of our common stock.**

Our Articles of Incorporation authorize us to issue up to 10,000,000 shares of one or more series of preferred stock. Our board of directors has the authority to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our shareholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium over the market price, and materially adversely affect the market price and the voting and other rights of the holders of our common stock.

**Our Articles of Incorporation and Bylaws, and certain banking laws applicable to us, could have an antitakeover effect that decreases our chances of being acquired, even if our acquisition is in our shareholders' best interests.** 

Our Articles of Incorporation and our Bylaws could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders. Furthermore, with certain limited exceptions, federal regulations prohibit a person or company or a group of persons deemed to be "acting in concert" from, directly or indirectly, acquiring 10% or more (5% or more if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a

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majority of our directors or otherwise direct the management or policies of our Company without prior notice or application to and the approval of the Federal Reserve. Accordingly, prospective investors must comply with these requirements, if applicable, in connection with any purchase of shares of our common stock. Collectively, provisions of our Articles of Incorporation and Bylaws and other statutory and regulatory provisions may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our shareholders receiving a premium over the market price for their common stock. Moreover, the combination of these provisions effectively inhibits certain business combinations, which, in turn, could adversely affect the market price of our common stock.

**An investment in our common stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment.**

An investment in our common stock is not a deposit account or other obligation of the Bank and, therefore, is not insured against loss or guaranteed by the FDIC, any other deposit insurance fund or by any other governmental, public or private entity. An investment in our common stock is inherently risky for the reasons described herein. As a result, if you acquire our common stock, you could lose some or all of your investment.

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**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

This prospectus contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "strive," "projection," "goal," "target," "outlook," "aim," "would," "annualized" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors identified in "Risk Factors" or "Management's Discussion and Analysis of Financial Condition and Results of Operations" or the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•business and general economic conditions, particularly those affecting the financial services industry either nationally or within our primary market areas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the occurrence of significant natural disasters, including hurricanes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to successfully execute our business strategy to achieve profitable growth;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to implement and adapt to changes our business strategies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to manage growth and to increase operating efficiency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to access cost-effective funding in the future;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses ("ACL");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the adequacy of our reserves (including ACL), including the appropriateness of our methodology for calculating such reserves;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•factors that may impact the performance of our loan portfolio, including real estate values and liquidity in our primary service market areas, the financial health of our borrowers and the success of various projects that we finance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•inflation and changes in the interest rate environment that can reduce our margins or reduce the fair value of the financial instruments due to changes in consumer spending, borrowing and savings habits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in the market areas that we serve;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to retain our existing customers and attract and retain new customers relationships;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our focus on small and mid-sized businesses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our capital requirements as an insured depository institution;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•concentration of our loan portfolio in real estate loans, changes in the prices, values and sales volumes of commercial and residential real estate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•credit and lending risks associated with our construction and development, commercial real estate, commercial and industrial, residential real estate and SBA loan portfolios;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a breach in security of our information systems, including the occurrence of a cyber-attack incidents or a deficiencies in cyber security;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•political instability or civil unrest and/or acts of war or terrorism;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes or new fiscal and monetary policies of the federal government and its agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to comply with consumer protection laws, including the CRA and fair lending laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to comply with various governmental and regulatory requirements, including supervisory actions by federal and state banking agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this prospectus.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in the quality or composition of our loan or investment portfolios;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our hedging strategies to mitigate risks associated with changes in interest rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our dependence on third-party service providers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•inaccuracies or other failures from the use of models, including the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•continued or increasing competition and innovation from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to attract and retain skilled people;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB, the SEC or the Public Company Accounting Oversight Board;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•risks related to potential acquisitions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in the scope and cost of FDIC insurance and other coverage;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•risks related to environmental, social and governance ("ESG") strategies and initiatives, the scope and pace of which could alter the Company's reputation and shareholder, associate, customer and third-party affiliations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•restraints on the ability of the Bank to pay dividends to us, which could limit our liquidity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to maintain adequate internal controls over financial reporting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the makeup of our asset mix and investments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to manage our growth;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to increase our operating efficiency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the risk that balance sheet, revenue growth, and loan growth expectations may differ from actual results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the federal budget and economic policy, including the impact of tariffs and trade policies; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•other risks and factors identified in this Form S-1 under the heading "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" section herein.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this prospectus. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward-looking statements in this prospectus. In addition, our past results of operations are not necessarily indicative of our future results. These forward-looking statements represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. However, the events and circumstances reflected in the forward-looking statements may not be achieved or occur. For example, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Any forward-looking statement speaks only as of the date on which it is made, and except as required by applicable law, we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

These statements are inherently uncertain, and we cannot guarantee future results, performance or achievements. You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, performance and events and circumstances may be materially different from what we expect. See the section entitled "Where You Can Find More Information."

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**USE OF PROCEEDS**

Based on an initial public offering price per share of $, which is the midpoint of the price range set forth on the cover page of this prospectus, we estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $ million (or approximately $ million if the underwriters exercise their option to purchase additional shares from us in full). We will not receive any proceeds from the sale of shares of common stock by the selling shareholders.

Each $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by approximately $ million (or approximately $ million if the underwriters exercise their option to purchase additional shares from us in full).

Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of our common stock offered by us would increase or decrease the net proceeds that we receive from this offering by approximately $ million, assuming no change in the assumed initial public offering price and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds to us from this offering for working capital and general corporate purposes, which may include, without limitation, supporting our organic growth, funding opportunistic strategic acquisitions, funding branch expansion, and repaying indebtedness, and which could include contributing a significant portion of such proceeds to the Bank. We have not specifically allocated the amount of net proceeds to us that will be used for these purposes and our management will have broad discretion over how these proceeds are used. We are conducting this offering at this time because we believe that it will allow us to better execute our growth strategy. In the ordinary course of business, we routinely evaluate potential acquisition opportunities for other financial institutions or establish new banking branches, particularly in the communities that we believe provide attractive risk-adjusted returns. Our management will retain broad discretion to allocate the net proceeds of this offering, and the precise amounts and timing of our use of the proceeds will depend upon market conditions, among other factors. We will not receive any proceeds from the sale of shares of common stock by the selling shareholders.

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**CAPITALIZATION**

The following table shows our capitalization, including regulatory capital ratios, on a consolidated basis, as of March 31, 2025:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•on an actual basis; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•on an as adjusted basis after giving effect to the sale and issuance by us of shares of our common stock in this offering at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the front cover page of this prospectus), after deducting underwriting discounts and estimated offering expenses payable by us.

The "as adjusted" information below is illustrative only and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read the following table in conjunction with the sections titled "Summary Historical Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

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| | | |
|:---|:---|:---|
|  | **As of March 31, 2025** | **As of March 31, 2025** |
|  |  | **As** |
|  | **Actual** | **Adjusted** |
| *<u>(in thousands of dollars except share and per share amounts)</u>* | **(unaudited)** | **(unaudited)** |
| **Shareholders' Equity:** |  |  |
| &nbsp;&nbsp;Preferred stock, $1 par value per share, 10,000,000 shares authorized; none<br> issued or outstanding | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;— | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;— |
| &nbsp;&nbsp;Voting common stock, $1 par value per share, 50,000,000 shares authorized; <br> 8,102,242 shares outstanding; shares outstanding, as adjusted | $8102 | $- |
| &nbsp;&nbsp;Non-voting common stock, $1 par value per share, 10,000,000 shares authorized; <br> 2,172,029 shares outstanding; shares outstanding, as adjusted | 2172 | - |
| &nbsp;&nbsp;Capital surplus | 158997 | - |
| &nbsp;&nbsp;Retained earnings | 47044 | - |
| &nbsp;&nbsp;Accumulated other comprehensive loss | (14211) | - |
| **Total shareholders' equity** | $**202104** | $**-** |
| **Capital Ratios**<sup>(1)</sup>**:** |  |  |
| &nbsp;&nbsp;Tier 1 capital to average assets | 10.62% | -% |
| &nbsp;&nbsp;Tier 1 capital to risk-weighted assets | 11.55% | -% |
| &nbsp;&nbsp;Total capital to risk-weighted assets | 12.52% | -% |
| &nbsp;&nbsp;Common equity to Tier 1 capital to risk-weighted assets | 11.55% | -% |
| **Per Share Data:** |  |  |
| &nbsp;&nbsp;Book value per share | $19.67 | $- |
| &nbsp;&nbsp;Tangible book value per share<sup>(2)</sup> | $19.17 | $- |

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<sup>(1)</sup> Ratios are for Coastal States Bank only.

<sup>(2)</sup> We calculate tangible book value per common share as total shareholders' equity less goodwill and other intangibles, excluding mortgage servicing rights, divided by the outstanding number of our shares of common stock at the end of the relevant period. Tangible book value per common share is a non-GAAP financial measure, and, as we calculate tangible book value per common share, the most comparable GAAP measure is book value per common share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "SUMMARY HISTORICAL FINANCIAL INFORMATION—Non-GAAP Financial Measure Reconciliation."

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the as-adjusted amount of each of cash and cash equivalents, additional paid-in capital, total shareholders' equity and total capitalization, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $ million. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of our common stock offered by us would increase (decrease) the as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total shareholders' equity and total capitalization by approximately $ million, assuming no change in the assumed initial public offering price and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The outstanding share information in the table above excludes as of March 31, 2025:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪737,250 shares of our common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $13.30 per share (715,625 options of which are exercisable) as of March 31, 2025; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪194,650 shares of our common stock issuable upon the future vesting of 194,650 restricted stock units outstanding as of March 31, 2025.

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**DILUTION**

If you invest in our common stock in this offering, your ownership interest will experience immediate book value dilution to the extent the public offering price per share exceeds our net tangible book value per share immediately after this offering. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of shares of common stock outstanding.

As at March 31, 2025, our net tangible book value was $197.0 million, or $19.17 per share, based on the number of shares outstanding as of such date. After giving effect to our sale of shares in this offering at an assumed public offering price of $ per share, which is the midpoint of the price range on the cover page of this prospectus, and after deducting underwriting discounts and estimated offering expenses, our as adjusted net tangible book value at March 31, 2025, would have been approximately $ million, or $ per share. Therefore, under those assumptions this offering would result in an immediate increase of $ in the net tangible book value per share to our existing shareholders, and immediate dilution of $ in the net tangible book value per share to investors purchasing shares in this offering.

The following table illustrates this dilution on per share:

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| | | |
|:---|:---|:---|
| Assumed initial public offering price per share |  | $|
| &nbsp;&nbsp;Net tangible book value per share at March 31, 2025 | $19.17 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Increase in net tangible book value per share attributable to this offering |  |  |
| As adjusted tangible book value per share after this offering |  |  |
| Dilution in net tangible book value per share to new investors |  | $|

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If the underwriters exercise their option to purchase additional shares from us in full, the as adjusted net tangible book value after giving effect to this offering would be $ per share. This represents an increase in net tangible book value of $ per share to existing shareholders and dilution of $ per share to new investors.

A $1.00 increase (or decrease) in the assumed public offering price of $ per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, would increase (or decrease) our net tangible book value by $ million, or $ per share, and the dilution to new investors by $ per share, assuming no change to the number of shares offered by us as set forth on the cover of this prospectus, and after deducting underwriting discounts and estimated expenses.

The following table sets forth information regarding the shares issued to, and consideration paid by, our existing shareholders and the shares to be issued to, and consideration to be paid by, investors in this offering at an assumed public offering price of $ per share, which is the midpoint of the price range on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us. This information is presented on an as adjusted basis as of March 31, 2025, after giving effect to our sale of shares of our common stock in this offering (assuming the underwriters do not exercise their option to purchase additional shares from us) at an assumed initial public offering price of $ per share, which is the midpoint of the price range on the cover of this prospectus.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Shares Purchased** | **Shares Purchased** | **Total Consideration** | **Average <br>Price<br> Per Share** |
|  | **Number** | **Percentage** | **Percentage** |  |
| Existing shareholders as of March 31, 2025 |  | % | % | $— |
| New investors in this offering |  | % | % |  |
| Total |  | 100% | $100% | $— |

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Assuming no shares are sold to existing shareholders in this offering and using the number of shares of common stock outstanding as of March 31, 2025, sales of shares of our common stock by the selling shareholders in this offering would reduce the number of shares of common stock held by existing shareholders to , or approximately % of the total shares of our common stock outstanding after this offering, and will result in new investors holding shares, or approximately % of the total shares of our common stock after this offering.

After giving effect to the sale of shares in this offering by the selling shareholders and us, if the underwriters' option to purchase additional shares from us is exercised in full, our existing shareholders would own approximately % and our new investors would own approximately % of the total number of shares of our common stock outstanding after this offering.

The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering to be determined at pricing. To the extent we issue any additional stock options or any outstanding stock options are exercised, or we issue any other securities or convertible debt in the future, investors will experience further dilution.

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The number of shares of our common stock to be outstanding after this offering is based upon 10,274,271 shares of our common stock as of March 31, 2025, and does not include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪737,250 shares of our common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $13.30 per share (715,625 options of which are exercisable) as of March 31, 2025; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪194,650 shares of our common stock issuable upon the future vesting of 194,650 restricted stock units outstanding as of March 31, 2025.

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**DIVIDEND POLICY**

Holders of our common stock are only entitled to receive dividends when, as and if declared by our board of directors out of funds legally available for dividends. We have not paid any cash dividends on our capital stock since inception, and we do not intend to pay cash dividends for the foreseeable future.

Any future determination to pay cash dividends on our common stock will be made by our board of directors and will depend on a number of factors, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪our historical and projected financial condition, liquidity and results of operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪our capital levels and requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪statutory and regulatory prohibitions and other limitations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪any contractual restriction on our ability to pay cash dividends, including pursuant to the terms of any of our credit agreements or other borrowing arrangements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪our business strategy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪tax considerations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪any acquisitions or potential acquisitions that we may examine;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪general economic conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪and other factors deemed relevant by our board of directors.

As a Georgia corporation, we may declare and pay dividends in cash or property unless the payment or declaration would be contrary to restrictions contained in our Articles of Incorporation, or unless, after payment of the dividend, we would not be able to pay our debts when they become due in the usual course of our business or our total assets would be less than the sum of our total liabilities.

We are also subject to certain restrictions on the payment of cash dividends as a result of banking laws, regulations and policies. The FRB has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the FRB's policy provides that dividends should be paid only to the extent that the company's new income for the past two years is sufficient to fund the dividends and only if the prospective rate of earnings retention by the bank holding company appears consistent with the organization's capital needs, asset quality and overall financial condition. The FRB has the authority to prohibit a bank holding company from paying dividends if such payment is deemed to be an unsafe or unsound practice.

Because we are a bank holding company, we are dependent upon the payment of dividends by the Bank to us as our principal source of funds to pay cash dividends in the future, if any, and to make other payments. the Bank is also subject to various legal, regulatory and other restrictions on its ability to pay dividends and make other distributions and payments to us. A South Carolina state member bank does not generally require approval by the SCBFI prior to paying any dividend. The FRB generally does not require the approval of bank dividends so long as the dividend is in an amount equal to its year-to-date net income plus the prior two years' net income.

The SCBFI and the FRB have the authority to prohibit the Bank from paying dividends if such payment is deemed to be an unsafe or unsound practice. In addition, as a depository institution the deposits of which are insured by the FDIC, the Bank may not pay dividends or distribute any of its capital assets while it remains in default on any assessment due to the FDIC or if in the FDIC's opinion, the payment of dividends would constitute an unsafe or unsound practice. The Bank currently is not (and never has been) in default under any of its obligations to the FDIC. To pay a cash dividend, a state member bank must also maintain an adequate capital conservation buffer under the regulatory capital rules.

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**MARKET FOR THE COMMON STOCK**

Existing shares of our common stock are currently quoted on the OTCQX Best Market operated by the OTC Markets Group, Inc. (the "OTCQX") under the symbol "COSO". As of , 2025, there were approximately holders of record of our common stock.

We have applied to list our voting common stock on the NYSE under the symbol "COSO." We believe that upon the completion of this offering, we will meet the standards for listing our common stock on the NYSE, and the completion of this offering is contingent upon such listing.

The following table shows the high and low bid quotations for CoastalSouth Bancshares, Inc. common stock for each full quarterly period within the two most recent fiscal years and any subsequent interim period. There may also have been transactions at prices other than those shown during that time. The market for our common stock is sporadic and at times very limited. The quotations provided below are for the over-the-counter market, which reflect interdealer prices without retail mark-up, mark-down or commissions, and may not represent actual transactions.

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| | | | |
|:---|:---|:---|:---|
| **Fiscal Year Ending December 31, 2025** | **High** | **High** | **Low** |
| Second Quarter (to June 4, 2025) |  | 21.25 | 19.40 |
| First Quarter |  | 22.58 | 20.50 |
| **Fiscal Year Ending December 31, 2024** | **High** | **High** | **Low** |
| Fourth Quarter | $— | 22.00 | 19.68 |
| Third Quarter |  | 21.54 | 16.85 |
| Second Quarter |  | 17.55 | 15.80 |
| First Quarter |  | 17.80 | 15.25 |
| **Fiscal Year Ending December 31, 2023** | **High** | **High** | **Low** |
| Fourth Quarter | $— | 15.75 | 14.35 |
| Third Quarter |  | 16.00 | 14.30 |
| Second Quarter |  | 17.48 | 14.35 |
| First Quarter |  | 18.00 | 15.50 |

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**Equity Compensation Plan Information**

The following table sets forth the information as of December 31, 2024 with respect to shares of common stock that may be issued under the Company's equity compensation plans:

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| | | | |
|:---|:---|:---|:---|
|  | **Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights** | **Weighted Average Exercise Price of Outstanding Options, Warrants and Rights** | **Number of Securities Remaining available for Future Issuance Under Equity Compensation Plan (Excluding Securities Reflected in Column (a))** |
| **Plan Category** | **(a)**<sup>(1)</sup> | **(b)** | **(c)**<sup>(2)</sup> |
| Equity compensation plans approved by security holders | 737250 | $13.30 | 50500 |
| Total at December 31, 2024 | 737250 | $13.30 | 50500 |

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<sup>(1)</sup> Reflects outstanding stock options granted under our 2017 Omnibus Incentive Plan.

<sup>(2)</sup> Reflects shares available for future awards under our 2017 Omnibus Incentive Plan, all of which may be issued pursuant to grants of full-value stock awards.

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**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 *The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the "Summary Historical Financial Information" and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under "Cautionary Note Regarding Forward-Looking Statements," "Risk Factors," and elsewhere in this prospectus, may cause actual results to differ materially from those projected in the forward-looking statements. We assume no obligation to update any of these forward-looking statements.*

**Overview**

We are a bank holding company headquartered in Atlanta, Georgia. We currently operate 11 retail banking branches in three primary markets, including the Lowcountry of South Carolina, Savannah, Georgia, and metro Atlanta, Georgia. CSB also operates four specialty lines of business each of which operates on a national platform, including Senior Housing, Marine Lending, Government Guaranteed Lending, and Mortgage Banker Finance. The deposits of CSB are insured by the FDIC. CSM, a wholly owned subsidiary of CSB, is a mortgage company focused on originating and selling residential mortgages to investors, some of which are retained in the portfolio.

The following discussion and analysis is intended to assist readers in their analysis and understanding of our consolidated financial statements and summary historical financial information appearing in this prospectus and should be read in conjunction therewith. This discussion and analysis presents our financial condition and results of operations on a consolidated basis, unless otherwise specified.

**Public Company Costs**

Following the completion of this offering, we expect to incur additional costs associated with operating as a public company, hiring additional personnel, enhancing technology and expanding our capabilities. We expect that these costs will include legal, regulatory, accounting, investor relations and other expenses that we generally did not incur as a private company. The Sarbanes-Oxley Act, as well as rules adopted by the SEC, the Federal Reserve and national securities exchanges, require public companies to implement specified corporate governance practices that are currently inapplicable to us as a private company. In addition, due to regulatory changes in the banking industry and the implementation of new laws, rules and regulations, we expect to experience higher regulatory compliance costs. These additional rules and regulations will increase our legal, regulatory, accounting and financial compliance costs and will require devotion of additional resources from our management team.

**Critical Accounting Estimates**

Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry. Application of these principles requires management to make estimates, assumptions or judgments that affect the amounts reported in the financial statements and the accompanying notes. These estimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates or judgments. Estimates, assumptions or judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon future events. Carrying assets and liabilities at fair value results in more financial statement volatility. The fair values and the information used to record the valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources.

Certain policies inherently have a greater reliance on the use of estimates, assumptions or judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of our ACL, fair value measurements, stock-based compensation, and income taxes to be the accounting areas that require the most subjective or complex judgments, estimates and assumptions, and where changes in those judgments, estimates and assumptions (based on new or additional information, changes in the economic environment and/or market interest rates, etc.) could have a significant effect on our financial statements. Therefore, we consider these policies, discussed below, to be critical accounting estimates and discuss them directly with the Audit Committee of our Board.

Our most significant accounting policies are presented in Note 1 of the accompanying consolidated financial statements as of December 31, 2024. These policies, along with the disclosures presented in the other notes to the consolidated financial statements and in this MD&A, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.

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*<u>Allowance for Credit Losses</u>*

The ACL represents management's current estimate of credit losses for the remaining estimated life of financial instruments, with particular applicability on our balance sheet to loans held-for-investment and unfunded loan commitments. Estimating the amount of the ACL requires significant judgment and the use of estimates related to historical experience, current conditions, reasonable and supportable forecasts, and the value of collateral on collateral-dependent loans. The loan portfolio also represents the largest asset type on our consolidated balance sheet. Credit losses are charged against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for credit losses is charged to operations based on management's periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

There are many factors affecting the ACL; some are quantitative, while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers the potential factors that could potentially result in credit losses, the process includes subjective elements and is susceptible to significant change. To the extent actual outcomes are worse than management estimates, additional provision for credit losses could be required that could adversely affect our earnings or financial position in future periods.

Additional information on the loan portfolio and ACL can be found in the sections of MD&A titled "Loans," "Allowance for Credit Losses on Loans," "Allowance for Credit Losses for Unfunded Commitments," and "Nonperforming Loans." *Note* 1 to the consolidated financial statements included in this prospectus includes additional information on accounting policies related to the ACL.

*<u>Fair Value Measurements</u>*

ASC 820 defines fair value as the price that would be received to sell a financial asset, or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not available, management judgment is necessary to estimate fair value.

The fair values for AFS securities are generally based upon quoted market prices or observable market prices for similar instruments. Management utilizes a third-party pricing service to assist with determining the fair value of our securities portfolio. The pricing service uses observable inputs when available including benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids and offers. These values take into account recent market activity as well as other market observable data such as interest rate, spread and prepayment information.

The Company's derivative financial instruments, which are interest rate contracts, are valued using a discounted cash flow method that incorporates current market interest rates. We use derivative financial instruments primarily to manage our interest rate risk.

From time to time, we may record assets at fair value on a nonrecurring basis, usually as a result of the write-downs of individual assets due to impairment or to value real estate or property obtained through foreclosure or repossession. In particular, nonaccrual loans may be carried at the fair value of collateral if repayment is expected solely from the collateral. Although management believes its processes for determining the fair value of collateral-dependent loans are appropriate, the processes require management judgment and assumptions and the value of such assets at the time they are revalued or divested may be significantly different from management's determination of fair value.

In addition, changes in market conditions may reduce the availability of quoted prices or observable date. See *Note 17* of our consolidated financial statements as of December 31, 2024, included elsewhere in this prospectus, for a complete discussion of fair value of financial assets and liabilities and their related measurement practices.

*<u>Stock-Based Compensation</u>*

We grant restricted stock units and stock options to purchase our common stock to certain key officers/employees and directors. The benefits provided under all of these plans are subject to ASC Topic 718, *Compensation — Stock Compensation* ("ASC 718"). Stock options are for a fixed number of shares with an exercise price equal to the fair value of the shares at the grant date. The fair value of stock options is determined using the Black-Scholes model which can be affected by our stock price, as well as the input of other subjective assumptions. These assumptions include, but are not limited to, the expected term of stock options and stock price volatility of a peer group of similar financial institutions. Our stock options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates.

The fair value of restricted stock units when granted is the fair value of our stock on the grant date as quoted on OTCQX. Stock-based compensation expense is recognized in the Consolidated Statements of Operations on a straight-line basis over the vesting period. For nonqualified stock options, as compensation expense is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from exercise. At the time that stock-based awards are exercised, cancelled, or expire, we may be required to

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recognize an adjustment to income tax expense. For incentive stock options, we do not recognize an income tax benefit related to compensation expense in the period incurred or when exercised, unless there is a disqualifying disposition.

We have made a company-wide accounting policy election to account for forfeitures of our stock-based awards as they occur.

*<u>Income Taxes</u>*

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance may be established. We consider the determination of this valuation allowance to be a critical accounting policy because of the need to exercise significant judgment in evaluating the amount and timing of recognition of deferred tax liabilities and assets, including projections of future taxable income. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change. See *Note 9* of our consolidated financial statements as of December 31, 2024, included elsewhere in this prospectus, for additional information.

The JOBS Act contains provisions that, among other things, reduce certain reporting and other regulatory requirements for qualifying public companies. As an "emerging growth company," we have elected under the JOBS Act to retain the ability to delay the adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. However, at December 31, 2024, and 2023, we have adopted all new accounting standards that could affect the comparability of our financial statements to those of other public entities. In the event we choose in the future to delay adoption of future accounting pronouncements applicable to public companies, our consolidated financial statements as of a particular date and for a particular period in the future may not be comparable to the financial statements as of such date and for such period of a public company situated similarly to us that is neither an emerging growth company nor an emerging growth company that has opted out of the extended transition period. Such financial statements of the other company may be prepared in conformity with new or revised accounting standards then applicable to public companies, but not to private companies, while, if we are then in the extended transition period, our consolidated financial standards would not be prepared in conformity with such new or revised accounting standards. Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.

Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act, (ii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis), (iii) provide more extensive disclosures regarding our executive compensation arrangements, including a "compensation discussion and analysis" section and all of the disclosures required under the Dodd-Frank Act, (iv) hold nonbinding advisory votes on executive compensation or golden parachute arrangements. These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an "emerging growth company," whichever is earlier.

**Results of Operations — Comparison of Results of Operations for the three months ended March 31, 2025 and 2024**

The following discussion of our results of operations compares the three months ended March 31, 2025 and 2024. We reported net income for the three months ended March 31, 2025 of $5.1 million compared to net income of $2.4 million for the three months ended March 31, 2024. The increase of $2.6 million was primarily attributable to repositioning of approximately $2.7 million, net of tax, of the AFS securities portfolio in the comparable quarter in 2024.

*<u>Net Interest Income</u>*

The following table presents, for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) interest rate spread; and (v) net interest margin. The income and yield from non-taxable investment securities was not adjusted for tax equivalency.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
|  | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** |
|  | **Average** | **Interest and** | **Yield /** | **Average** | **Interest and** | **Yield /** |
| <u>(dollars in thousands)</u> | **Balance** | **Fees** | **Rate** | **Balance** | **Fees** | **Rate** |
| **Earning Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;Cash and due from banks | $22725 | $135 | 2.41% | $21135 | $141 | 2.68% |
| &nbsp;&nbsp;Federal funds sold | 88478 | 963 | 4.41 | 69554 | 994 | 5.75 |
| &nbsp;&nbsp;Investment securities | 335254 | 3800 | 4.60 | 354537 | 3661 | 4.15 |
| &nbsp;&nbsp;Loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans held for sale | 136849 | 2819 | 8.35 | 71239 | 1540 | 8.69 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross loans held for investment | 1428405 | 22307 | 6.33 | 1408451 | 23052 | 6.58 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total earning assets | 2011711 | 30024 | 6.05 | 1924916 | 29388 | 6.14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noninterest-earning assets | 99485 |  |  | 109947 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $2111196 |  |  | $2034863 |  |  |
| **Interest-bearing liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;Demand deposits | $196017 | $333 | 0.69% | $174268 | $170 | 0.39% |
| &nbsp;&nbsp;Money market deposits | 561060 | 4338 | 3.14 | 572157 | 5166 | 3.63 |
| &nbsp;&nbsp;Savings deposits | 35145 | 43 | 0.50 | 39659 | 49 | 0.50 |
| &nbsp;&nbsp;Time deposits | 774634 | 8116 | 4.25 | 631073 | 7208 | 4.59 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | 1566856 | 12830 | 3.32 | 1417157 | 12593 | 3.57 |
| &nbsp;&nbsp;Borrowings | 25764 | 435 | 6.85 | 98415 | 1410 | 5.76 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing liabilities | $1592620 | $13265 | 3.38% | $1515572 | $14003 | 3.72% |
| **Noninterest-bearing liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;Noninterest-bearing deposits | $293387 |  |  | $321419 |  |  |
| &nbsp;&nbsp;Other noninterest-bearing liabilities | 25426 |  |  | 30856 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest-bearing liabilities | 318813 |  |  | 352275 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Shareholders' equity | 199763 |  |  | 167016 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $2111196 |  |  | $2034863 |  |  |
| Net interest income |  | $16759 |  |  | $15385 |  |
| Net interest spread |  |  | 2.67% |  |  | 2.42% |
| Net interest margin |  |  | 3.38% |  |  | 3.21% |

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Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing interest rates and volumes on our net interest income during the periods indicated. The information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volumes and rate have been allocated to volume.

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| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024** | **Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024** | **Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024** |
|  | **Increase (Decrease) Due to Change in:** | **Increase (Decrease) Due to Change in:** | **Increase (Decrease) Due to Change in:** |
| <u>(dollars in thousands)</u> | **Volume** | **Yield/Rate** | **Total Change** |
| **Earning Assets:** |  |  |  |
| &nbsp;&nbsp;Cash and due from banks | $226 | $(232) | $(6) |
| &nbsp;&nbsp;Federal funds sold | 3680 | (3711) | (31) |
| &nbsp;&nbsp;Investment securities | (6243) | 6382 | 139 |
| &nbsp;&nbsp;Loans: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans held for sale | 2249 | (970) | 1279 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross loans held for investment | 13300 | (14045) | (745) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total earning assets | $13212 | $(12576) | $636 |
| **Interest-bearing liabilities:** |  |  |  |
| &nbsp;&nbsp;Demand deposits | $(1905) | $2068 | $163 |
| &nbsp;&nbsp;Money market deposits | 10386 | (11214) | (828) |
| &nbsp;&nbsp;Savings deposits | (5) | (1) | (6) |
| &nbsp;&nbsp;Time deposits | 9610 | (8702) | 908 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | $18086 | $(17849) | $237 |
| &nbsp;&nbsp;Borrowings | (5247) | 4272 | (975) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing liabilities | $12839 | $(13577) | $(738) |
| Net interest income | $373 | $1001 | $1374 |

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Net interest income for the three months ended March 31, 2025 was $16.8 million compared to $15.4 million for the three months ended March 31, 2024, an increase of $1.4 million, or 8.9%. This increase was primarily due to an increase in the average balance of our total interest-earning assets coupled with a decrease in the average rate paid on interest-bearing liabilities. The increase in the average balance for the interest-earning assets was primarily due to an increase in average loans outstanding. The yield on total earning assets and interest-bearing liabilities decreased by 9 and 34 basis points, respectively, during the same period.

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Total interest income for the three months ended March 31, 2025 was $30.0 million compared to $29.4 million for the three months ended March 31, 2024, an increase of $636 thousand, or 2.2%. This increase was primarily due to growth in our loans portfolio albeit with lower yields.

Interest and fees on LHFI were $22.3 million for the three months ended March 31, 2025 compared to $23.1 million for the three months ended March 31, 2024, a decrease of $745 thousand, or 3.2%. This decrease was primarily attributable to a decrease in yield albeit with an increase in average LHFI by $20.0 million or 1.4%. The yield on gross LHFI decreased by 25 basis points compared to the same period in 2024. Interest and fees on LHFS were $2.8 million for the three months ended March 31, 2025 compared to $1.5 million for the three months ended March 31, 2024. This increase was primarily due to an increase in the average balance of LHFS outstanding although the yield decreased by 34 basis points compared to the same period in 2024.

Interest income on investment securities was $3.8 million for the three months ended March 31, 2025 compared to $3.7 million for the three months ended March 31, 2024. This increase was primarily due to the fact that the yield on investment securities increased by 45 basis points albeit with a decrease in the average balance during the period.

Interest expense for the three months ended March 31, 2025 was $13.3 million compared to $14.0 million for the three months ended March 31, 2024. This decrease was primarily attributable to a 34 basis point decrease in the average yield on overall total interest-bearing liabilities, primarily in money market deposit accounts as the rates were adjusted to align with the market. Average borrowings outstanding decreased from March 31, 2024 to March 31, 2025 by $72.7 million, or 73.8%, while the yield increased by 109 basis points during the same period. This decrease was due to decreased costs of funding as management adjusted funding strategies in order to capture lower market rates.

Net interest margin for the three months ended March 31, 2025 and 2024 was 3.38% and 3.21%, respectively. Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. This decrease in our net interest margin is primarily due to the decrease in yield on total earning assets, offset by a decrease in yield for total interest-earning liabilities as discussed above.

*<u>Provision for Credit Losses</u>*

Provision for credit losses for the three months ended March 31, 2025 was $629 thousand compared to $163 thousand for the three months ended March 31, 2024, an increase of $466 thousand. This increase was primarily attributed to additional provision related to production of new LHFI and loan commitments, offset by a reduction on the reserve for one collateral-dependent nonaccrual loan. Our allowance for credit losses as a percentage of gross LHFI at March 31, 2025 and 2024 was 1.16% and 1.12%, respectively.

*<u>Noninterest Income</u>*

Noninterest income for the three months ended March 31, 2025 was $1.9 million, an increase of $3.9 million or 194.3%, compared to a loss of $2.0 million for the three months ended March 31, 2024. This increase was primarily due to nonrecurring losses on AFS securities during the three months ended March 31, 2024, as discussed elsewhere.

The following table sets forth the various components of our noninterest income for the periods indicated:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| <u>(dollars in thousands)</u> | **2025** | **2024** | **Increase (decrease)** | **Increase (decrease)** |
| **Noninterest income:** |  |  |  |  |
| &nbsp;&nbsp;Bank-owned life insurance | $440 | $296 | $144 | 48.6% |
| &nbsp;&nbsp;Gain on sale of government guaranteed loans | - | 320 | (320) | (100.0) |
| &nbsp;&nbsp;Interchange and card fee income | 266 | 216 | 50 | 23.1 |
| &nbsp;&nbsp;Income from mortgage originations | 221 | 238 | (17) | (7.1) |
| &nbsp;&nbsp;Service charges on deposit accounts | 211 | 211 | - | 0.0 |
| &nbsp;&nbsp;Losses on sale of available-for-sale securities | - | (3465) | 3465 | (100.0) |
| &nbsp;&nbsp;Other noninterest income | 743 | 190 | 553 | 291.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income (loss) | $1881 | $(1994) | $3875 | 194.3% |

---

BOLI income increased by $144 thousand to $440 thousand for the three months ended March 31, 2025 compared to $296 thousand for the three months ended March 31, 2024. This increase was primarily attributable to a higher yield on BOLI during the current period.

There were no sales of government guaranteed loans during the three months ended March 31, 2025. Gain on sale of government guaranteed loans were $320 thousand for the same period during 2024. The Company did not have any sales of these types of loans during the three months ended March 31, 2025, as the $8.3 million of SBA 7a loan commitments closed during the quarter were multi-disbursement facilities and are not able to be sold until a future period.

Interchange and card fee income increased by $50 thousand to $266 thousand for the three months ended March 31, 2025 compared to $216 thousand for the three months ended March 31, 2024. This increase was attributable to interchange fees from debit cardholder

------

transactions conducted through a payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are earned on a daily basis.

Mortgage banking related income decreased by $17 thousand to $221 thousand for the three months ended March 31, 2025 compared to $238 thousand for the three months ended March 31, 2024. This decrease was primarily due to slightly lower secondary market mortgage production which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.

Service charges on deposit accounts remained flat at $211 thousand for the three months ended March 31, 2025 and 2024. These service charges are mostly comprised of wire, NSF, and overdraft fees.

There were no sales of AFS securities and therefore, no gains or losses on sale of AFS securities during the three months ended March 31, 2025. During the three months ended March 31, 2024, losses on sale of AFS securities were $3.5 million which were principally due to AFS portfolio strategic repositioning.

Other noninterest income increased by $553 thousand to $743 thousand for the three months ended March 31, 2025 compared to $190 thousand for the three months ended March 31, 2024. The Company recognized income from a SBIC partnership investment during the three months ended March 31, 2025 of $438 thousand related to the sale of one of the underlying fund investments.

*<u>Noninterest Expense</u>* 

Noninterest expense for the three months ended March 31, 2025 was $11.4 million compared to $10.3 million for the three months ended March 31, 2024, an increase of $1.2 million, or 11.4%. This increase was primarily in salaries and employee benefits coupled with Other noninterest expense.

The following table sets forth the major components of our noninterest expense for the three months ended March 31, 2025 and 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| <u>(dollars in thousands)</u> | **2025** | **2024** | **Increase (decrease)** | **Increase (decrease)** |
| **Noninterest expense:** |  |  |  |  |
| &nbsp;&nbsp;Salaries and employee benefits | $6694 | $6047 | $647 | 10.7% |
| &nbsp;&nbsp;Occupancy and equipment | 788 | 743 | 45 | 6.1 |
| &nbsp;&nbsp;Other professional services | 693 | 691 | 2 | 0.3 |
| &nbsp;&nbsp;Software and other technology expense | 703 | 666 | 37 | 5.6 |
| &nbsp;&nbsp;Data processing | 624 | 526 | 98 | 18.6 |
| &nbsp;&nbsp;Regulatory assessment | 361 | 293 | 68 | 23.2 |
| &nbsp;&nbsp;Marketing and advertising | 233 | 179 | 54 | 30.2 |
| &nbsp;&nbsp;Other noninterest expense | 1323 | 1106 | 217 | 19.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | $11419 | $10251 | $1168 | 11.4% |

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Salaries and employee benefits expense for the three months ended March 31, 2025 was $6.7 million compared to $6.0 million for the three months ended March 31, 2024, an increase of $647 thousand, or 10.7%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals and annual salary adjustments. The average number of full-time equivalent employees was 180 for the three months ended March 31, 2025 compared to 175 for the three months ended March 31, 2024.

Occupancy and equipment expense for the three months ended March 31, 2025 was $788 thousand compared to $743 thousand for the three months ended March 31, 2024, an increase of $45 thousand, or 6.1%. This increase was primarily due to new leases and rental increments, property taxes and depreciation, and upkeep related to the properties.

Other professional services expense for the three months ended March 31, 2025 was $693 thousand compared to $691 thousand for the three months ended March 31, 2024, an increase of $2 thousand, or 0.3%. Other professional services expense remained relatively flat from the comparable period.

Software and technology expense for the three months ended March 31, 2025 was $703 thousand compared to $666 thousand for the three months ended March 31, 2024, an increase of $37 thousand, or 5.6%. This expense was primarily comprised of our information technology services, software licenses and maintenance and commensurate with the Company growth.

Data processing expense for the three months ended March 31, 2025 was $624 thousand compared to $526 thousand for the three months ended March 31, 2024, an increase of $98 thousand, or 18.6%. Data processing expense increase was due to increased wire and account processing volumes and other processing costs commensurate with Company growth.

FDIC insurance and regulatory assessment expense for the three months ended March 31, 2025 was $361 thousand compared to $293 thousand for the three months ended March 31, 2024, an increase of $68 thousand, or 23.2%. This increase was primarily attributable to a reduction in the expense accrual in the three months ended March 31, 2024 based on changes the Bank's asset mix and growth rates.

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Marketing and advertising expense for the three months ended March 31, 2025 was $233 thousand compared to $179 thousand for the three months ended March 31, 2024, an increase of $54 thousand, or 30.2%. This increase was primarily attributable to higher marketing and advertising expense during the three months ended March 31, 2025 as compared to the same period last year. Marketing and advertising expense is included in Other noninterest expenses in our Company's Consolidated Statements of Operations.

Other noninterest expenses, excluding marketing and advertising expense, for the three months ended March 31, 2025 were $1.3 million compared to $1.1 million for the three months ended March 31, 2024, an increase of $217 thousand, or 19.6%. This increase was primarily attributable to an Other real estate owned writedown, board of directors fees, and general and administrative expense; offset by a net decrease in Other noninterest expense categories. Included in Other expenses for the three months ended March 31, 2025 and 2024 were directors' fees of $176 thousand and $79 thousand, respectively.

*<u>Income Tax Expense</u>*

Income tax expense for the three months ended March 31, 2025 and 2024 was $1.5 million and $548 thousand, respectively. Effective tax rates were 23.4% and 18.4% for the three months ended March 31, 2025 and 2024, respectively. The increase in effective tax rate compared to the three months ended March 31, 2024 was due to lower recognition of solar tax credits during the three months ended March 31, 2025. We had a net deferred tax asset of $17.1 million and $18.9 million at March 31, 2025 and 2024, respectively.

*<u>Overall Return</u>*

The Company has and continues to consistently improve profitability due to success in our growth strategies to expand our balance sheet by sourcing and acquiring new customer relationships, and, as a result, growing quality loans, as well as a strong deposits base, coupled with a strong net interest margin during the periods indicated in the table below.

The following table sets forth our return on total average assets, return on tangible assets, return on tangible common equity (non-GAAP), and return on average shareholders' equity:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of and for the Three Months Ended March 31,** | **As of and for the Three Months Ended March 31,** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2025** | **2024** | **2024** | **2023** |
|  | **(unaudited)** <sup>(1)</sup> | **(unaudited)** <sup>(1)</sup> | **(audited)** | **(audited)** |
| **Return on Average:** |  |  |  |  |
| &nbsp;&nbsp;Total assets <sup>(2)</sup> | 0.97% | 0.48% | 1.05% | 1.26% |
| &nbsp;&nbsp;Tangible common equity <sup>(2), (3)</sup> | 10.52% | 6.04% | 12.49% | 18.72% |
| &nbsp;&nbsp;Shareholders' equity <sup>(2)</sup> | 10.25% | 5.85% | 12.13% | 17.97% |

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<sup>(1)</sup> Represents annualized March 31, 2025 and 2024 data.

<sup>(2)</sup> Results for the three months ended March 31, 2024 and the year ended December 31, 2025 were impacted by losses on sale of AFS securities due to portfolio restructuring discussed elsewhere.

<sup>(3)</sup> This is a Non-GAAP financial measure. See the section entitled "Non-GAAP Financial Measures Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

**Results of Operations — Comparison of Results of Operations for the Years Ended December 31, 2024 and 2023**

The following discussion of our results of operations compares the years ended December 31, 2024 and 2023. We reported net income for the year ended December 31, 2024 of $21.9 million compared to net income of $24.5 million for the year ended December 31, 2023. The decrease of $2.6 million was primarily attributable to the loss on the sale of AFS during 2024 of approximately $2.7 million, net of tax, due to an AFS portfolio strategic repositioning.

*<u>Net Interest Income</u>*

The following table presents, for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) interest rate spread; and (v) net interest margin. The income and yield from non-taxable investment securities was not adjusted for tax equivalency.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** |
|  | **2024** | **2024** | **2024** | **2023** | **2023** | **2023** |
|  | **Average** | **Interest and** | **Yield /** | **Average** | **Interest and** | **Yield /** |
| <u>(dollars in thousands)</u> | **Balance** | **Fees** | **Rate** | **Balance** | **Fees** | **Rate** |
| **Earning Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;Cash and due from banks | $20546 | $534 | 2.60% | $17866 | $295 | 1.65% |
| &nbsp;&nbsp;Federal funds sold | 69490 | 3751 | 5.40 | 73301 | 4083 | 5.57 |
| &nbsp;&nbsp;Investment securities | 352681 | 16046 | 4.55 | 352089 | 11304 | 3.21 |
| &nbsp;&nbsp;Loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans held for sale | 123310 | 10272 | 8.33 | 55286 | 5087 | 9.20 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross loans held for investment | 1418022 | 93046 | 6.56 | 1358308 | 86248 | 6.35 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total earning assets | 1984049 | 123649 | 6.23 | 1856850 | 107017 | 5.76 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noninterest-earning assets | 103204 |  |  | 92227 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $2087253 |  |  | $1949077 |  |  |
| **Interest-bearing liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;Demand deposits | $179495 | $816 | 0.45% | $168072 | $372 | 0.22% |
| &nbsp;&nbsp;Money market deposits | 598621 | 22349 | 3.73 | 565284 | 16527 | 2.92 |
| &nbsp;&nbsp;Savings deposits | 38074 | 189 | 0.50 | 42939 | 216 | 0.50 |
| &nbsp;&nbsp;Time deposits | 651974 | 30089 | 4.62 | 584983 | 22185 | 3.79 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | 1468164 | 53443 | 3.64 | 1361278 | 39300 | 2.89 |
| &nbsp;&nbsp;Borrowings | 85505 | 4884 | 5.71 | 59061 | 3423 | 5.80 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing liabilities | $1553669 | $58327 | 3.75% | $1420339 | $42723 | 3.01% |
| **Noninterest-bearing liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;Noninterest-bearing deposits | $323949 |  |  | $358650 |  |  |
| &nbsp;&nbsp;Other noninterest-bearing liabilities | 29007 |  |  | 33869 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest-bearing liabilities | 352956 |  |  | 392519 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Shareholders' equity | 180628 |  |  | 136219 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $2087253 |  |  | $1949077 |  |  |
| Net interest income |  | $65322 |  |  | $64294 |  |
| Net interest spread |  |  | 2.48% |  |  | 2.76% |
| Net interest margin |  |  | 3.29% |  |  | 3.46% |

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Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing interest rates and volumes on our net interest income during the periods indicated. The information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volumes and rate have been allocated to volume.

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31, 2024, Compared to the Year Ended December 31, 2023** | **For the Year Ended December 31, 2024, Compared to the Year Ended December 31, 2023** | **For the Year Ended December 31, 2024, Compared to the Year Ended December 31, 2023** |
|  | **Increase (Decrease) Due to Change in:** | **Increase (Decrease) Due to Change in:** | **Increase (Decrease) Due to Change in:** |
| <u>(dollars in thousands)</u> | **Volume** | **Yield/Rate** | **Total Change** |
| **Earning Assets:** |  |  |  |
| &nbsp;&nbsp;Cash and due from banks | $70 | $169 | $239 |
| &nbsp;&nbsp;Federal funds sold | (206) | (126) | (332) |
| &nbsp;&nbsp;Investment securities | 27 | 4715 | 4742 |
| &nbsp;&nbsp;Loans: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans held for sale | 5667 | (482) | 5185 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross loans held for investment | 3918 | 2880 | 6798 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total earning assets | $9476 | $7156 | $16632 |
| **Interest-bearing liabilities:** |  |  |  |
| &nbsp;&nbsp;Demand deposits | $52 | $392 | $444 |
| &nbsp;&nbsp;Money market deposits | 1245 | 4577 | 5822 |
| &nbsp;&nbsp;Savings deposits | (24) | (3) | (27) |
| &nbsp;&nbsp;Time deposits | 3092 | 4812 | 7904 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | $4365 | $9778 | $14143 |
| &nbsp;&nbsp;Borrowings | 1510 | (49) | 1461 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing liabilities | $5875 | $9729 | $15604 |
| Net interest income | $3601 | $(2573) | $1028 |

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Net interest income for the year ended December 31, 2024 was $65.3 million compared to $64.3 million for the year ended December 31, 2023, an increase of $1.0 million, or 1.6%. This increase was primarily due to an increase in the average balance of our total interest-earning assets and better yields on interest-earning assets; offset by an increase in the average rate paid on interest-bearing liabilities. The increase in the average balance for the interest-earning assets was primarily due to an increase in average loans outstanding. The yield on total earning assets and interest-bearing liabilities increased by 47 and 74 basis points, respectively, during the same period.

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Total interest income for the year ended December 31, 2024 was $123.6 million compared to $107.0 million for the year ended December 31, 2023, an increase of $16.6 million, or 15.5%. This increase was primarily due to growth in our loans portfolio and rate increases during 2024.

Interest and fees on LHFI were $93.0 million for the year ended December 31, 2024 compared to $86.2 million for the year ended December 31, 2023, an increase of $6.8 million, or 7.9%. This increase was primarily attributable to an increase in average LHFI by $59.7 million or 4.4%. The yield on gross LHFI increased by 21 basis points during the period. Interest and fees on LHFS were $10.3 million for the year ended December 31, 2024 compared to $5.1 million for the year ended December 31, 2023. This increase was primarily due to an increase in the average balance of LHFS outstanding while the yield decreased by 87 basis points.

Interest income on investment securities was $16.0 million for the year ended December 31, 2024 compared to $11.3 million for the year ended December 31, 2023. This increase was primarily due to the fact that the yield on investment securities increased by 134 basis points as a result of repositioning the portfolio in the first quarter of 2024. The average balance remained steady during the period.

Interest expense for the year ended December 31, 2024 was $58.3 million compared to $42.7 million for the year ended December 31, 2023. This increase was primarily attributable to the 74 basis point increase in the average yield on overall total interest-bearing liabilities, primarily in interest-bearing liabilities categories due to a higher rates environment. Average borrowings outstanding increased from December 31, 2023 to December 31, 2024 by $26.4 million, or 44.8%, while the yield decreased by 8 basis points during the period.

Net interest margin for the years ended December 31, 2024 and 2023 was 3.29% and 3.46%, respectively. Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. This decrease in our net interest margin is primarily due to the decrease in yield on total earning assets, offset by a decrease in yield for total interest-earning liabilities as discussed above.

*<u>Provision for Credit Losses</u>*

Provision for credit losses for the year ended December 31, 2024 was $553 thousand compared to $1.5 million for the year ended December 31, 2023, a decrease of $1.0 million. This decrease was primarily attributed to changes in economic conditions and changes in loan volume, offset with increases in risks of Senior Housing loans. Our allowance for credit losses as a percentage of gross LHFI at December 31, 2024 and 2023 was 1.21% and 1.09%, respectively.

*<u>Noninterest Income</u>*

Noninterest income for the year ended December 31, 2024 was $4.5 million, a decrease of $4.1 million or 47.5%, compared to $8.6 million for the year ended December 31, 2023. This decrease was primarily in losses on AFS securities discussed elsewhere, BOLI and gain on hedge termination in 2023.

The following table sets forth the various components of our noninterest income for the periods indicated:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** |
| <u>(dollars in thousands)</u> | **2024** | **2023** | **Increase (decrease)** | **Increase (decrease)** |
| **Noninterest income:** |  |  |  |  |
| &nbsp;&nbsp;Bank-owned life insurance | $1664 | $2680 | $(1016) | (37.9)% |
| &nbsp;&nbsp;Gain on sale of government guaranteed loans | 1818 | 1360 | 458 | 33.7 |
| &nbsp;&nbsp;Interchange and card fee income | 868 | 1045 | (177) | (16.9) |
| &nbsp;&nbsp;Gain on hedge termination | - | 992 | (992) | (100.0) |
| &nbsp;&nbsp;Income from mortgage originations | 1204 | 912 | 292 | 32.0 |
| &nbsp;&nbsp;Service charges on deposit accounts | 846 | 755 | 91 | 12.1 |
| &nbsp;&nbsp;Losses on sale of available-for-sale securities | (3465) | (517) | (2948) | 570.2 |
| &nbsp;&nbsp;Other noninterest income | 1579 | 1367 | 212 | 15.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | $4514 | $8594 | $(4080) | (47.5)% |

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BOLI income decreased by $1.0 million to $1.7 million for the year ended December 31, 2024 compared to $2.7 million for the year ended December 31, 2023. This decrease was primarily attributable to the BOLI restructuring that occurred in 2023.

Gain on sale of government guaranteed loans increased by $458 thousand to $1.8 million for the year ended December 31, 2024 compared to $1.4 million for the same period during 2023. The Company increased the volume as the premium on government guaranteed loans improved during 2024.

Interchange and card fee income decreased by $177 thousand to $868 thousand for the year ended December 31, 2024 compared to $1.0 million for the year ended December 31, 2023. This decrease was attributable to interchange fees from debit cardholder transactions conducted through a payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are earned on a daily basis.

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There were no hedging relationships terminated during the year ended December 31, 2024. Gain on hedge termination during the year ended December 31, 2023 was $992 thousand.

Mortgage banking related income increased by $292 thousand to $1.2 million for the year ended December 31, 2024 compared to $912 thousand for the year ended December 31, 2023. This increase was primarily due to higher mortgage production, which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.

Service charges on deposit accounts increased by $91 thousand to $846 thousand for the year ended December 31, 2024 compared to $755 thousand for the year ended December 31, 2023. This increase is attributable to higher number of NSF and overdraft fees charged during 2024.

Losses on sale of AFS securities were $3.5 million for the year ended December 31, 2024 compared to $517 thousand for the year ended December 31, 2023. This increase of $2.9 million in losses on sale of AFS securities was principally due to AFS portfolio strategic repositioning in 2024.

Other noninterest income increased by $212 thousand to $1.6 million for the year ended December 31, 2024 compared to $1.4 million for the year ended December 31, 2023. The largest component of other non-interest income consists primarily of SBA loan servicing fees. SBA loan servicing fees decreased by $44 thousand during the year ended December 31, 2024 compared to the same period in 2023.

*<u>Noninterest Expense</u>* 

Noninterest expense for the year ended December 31, 2024 was $42.1 million compared to $39.9 million for the year ended December 31, 2023, an increase of $2.2 million, or 5.6%. This increase was primarily in salaries and employee benefits coupled with Other noninterest expense.

The following table sets forth the major components of our noninterest expense for the years ended December 31, 2024 and 2023:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** | **For the Years Ended December 31,** |
| <u>(dollars in thousands)</u> | **2024** | **2023** | **Increase (decrease)** | **Increase (decrease)** |
| **Noninterest expense:** |  |  |  |  |
| &nbsp;&nbsp;Salaries and employee benefits | $26187 | $24573 | $1614 | 6.6% |
| &nbsp;&nbsp;Occupancy and equipment | 2995 | 2921 | 74 | 2.5 |
| &nbsp;&nbsp;Other professional services | 2046 | 2721 | (675) | (24.8) |
| &nbsp;&nbsp;Software and other technology expense | 2742 | 2334 | 408 | 17.5 |
| &nbsp;&nbsp;Data processing | 2213 | 2080 | 133 | 6.4 |
| &nbsp;&nbsp;Regulatory assessment | 1291 | 1479 | (188) | (12.7) |
| &nbsp;&nbsp;Marketing and advertising | 859 | 740 | 119 | 16.1 |
| &nbsp;&nbsp;Other expenses | 3735 | 3002 | 733 | 24.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | $42068 | $39850 | $2218 | 5.6% |

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Salaries and employee benefits expense for the year ended December 31, 2024 was $26.2 million compared to $24.6 million for the year ended December 31, 2023, an increase of $1.6 million, or 6.6%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals and annual salary adjustments. The average number of full-time equivalent employees was 180 for the year ended December 31, 2024 compared to 163 for the year ended December 31, 2023.

Occupancy and equipment expense for the year ended December 31, 2024 was $3.0 million compared to $2.9 million for the year ended December 31, 2023, an increase of $74 thousand, or 2.5%. This increase was primarily due to new leases and rental increments, property taxes and depreciation, and upkeep related to the properties.

Other professional services expense for the year ended December 31, 2024 was $2.0 million compared to $2.7 million for the year ended December 31, 2023, a decrease of $675 thousand, or 24.8%. This decrease was primarily in loan workout related expenses, general corporate legal fees and outside professional services.

Software and technology expense for the year ended December 31, 2024 was $2.7 million compared to $2.3 million for the year ended December 31, 2023, an increase of $408 thousand, or 17.5%. This expense was primarily comprised of our information technology services, software licenses and maintenance and commensurate with the Company growth.

Data processing expense for the year ended December 31, 2024 was approximately $2.2 million compared to $2.1 million for the year ended December 31, 2023, an increase of $133 thousand, or 6.4%. Data processing expense increase was in line with the Company growth.

FDIC insurance and regulatory assessment expense for the year ended December 31, 2024 was $1.3 million compared to $1.5 million for the year ended December 31, 2023, a decrease of $188 thousand, or 12.7%. This decrease was primarily attributable to increases in capital and changes in asset mix and asset growth rates from 2023 to 2024.

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Marketing and advertising expense for the year ended December 31, 2024 was $859 thousand compared to $740 thousand for the year ended December 31, 2023, an increase of $119 thousand, or 16.1%. This increase was primarily attributable to higher marketing and advertising expense during 2024. Marketing and advertising expense is included in Other expenses in our Company's Consolidated Statements of Operations.

Other expenses, excluding marketing and advertising expense, for the year ended December 31, 2024 were $3.7 million compared to $3.0 million for the year ended December 31, 2023, an increase of $733 thousand, or 24.4%. This increase was primarily attributable to lower release of the SBA Contingency Reserve in 2024 compared to 2023; offset by a net decrease in Other expenses categories. Included in Other expenses for the years ended December 31, 2024 and 2023 were directors' fees of approximately $318 thousand in each fiscal year.

*<u>Income Tax Expense</u>*

Income tax expense for the years ended December 31, 2024 and 2023 was $5.3 million and $7.0 million, respectively. Effective tax rates were 19.5% and 22.3% for the years ended December 31, 2024 and 2023, respectively. The decrease in effective tax rate compared to 2023 was due to a higher acquisition of tax credits in 2024. We had a net deferred tax asset of $18.1 million and $21.2 million at December 31, 2024 and 2023, respectively.

*<u>Overall Return</u>*

The Company has and continues to consistently improve profitability due to success in our growth strategies to expand our balance sheet by sourcing and acquiring new customer relationships, and as a result, growing quality loans, as well as a strong deposits base, coupled with a strong net interest margin during the periods indicated in the table below.

The following table sets forth our return on total average assets, return on tangible assets, return on tangible common equity (non-GAAP), and return on average shareholders' equity:

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| | | |
|:---|:---|:---|
|  | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
|  | **2024** | **2023** |
|  | **(audited)** | **(audited)** |
| **Return on Average:** |  |  |
| &nbsp;&nbsp;Total assets <sup>(1)</sup> | 1.05% | 1.26% |
| &nbsp;&nbsp;Tangible common equity <sup>(1), (2)</sup> | 12.49% | 18.72% |
| &nbsp;&nbsp;Shareholders' equity <sup>(1)</sup> | 12.13% | 17.97% |

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<sup>(1)</sup> Results for the year ended December 31, 2024 were impacted by losses on sale of AFS securities due to portfolio restructuring discussed elsewhere.

<sup>(2)</sup> This is a Non-GAAP financial measure. See the section entitled "Non-GAAP Financial Measures Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

**Financial Condition**

The following discussion of our financial condition compares as of March 31, 2025 with December 31, 2024; and a comparison for the year ended December 31, 2024 with the year ended December 31, 2023.

*<u>Total Assets</u>*

Total assets increased $91.7 million, or 4.4%, to $2.2 billion at March 31, 2025 compared to $2.1 billion at December 31, 2024. The increasing trend in total assets was primarily attributable to an increase in gross LHFI and LHFS, driven by strong demand for our loan products in our markets and the success of our growth initiatives to grow our loans portfolio, coupled with an increase in cash and cash equivalents.

Total assets increased $70.1 million, or 3.5%, to $2.1 billion at December 31, 2024 compared to $2.0 billion at December 31, 2023. The increasing trend in total assets was primarily attributable to an increase in LHFS, driven by increased mortgage warehouse lending activities related to modestly improved market interest rates for mortgage loans and the addition of new MBF clients.

*<u>Loans</u>*

Loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other of our asset category.

Average loans were 77.8% and 77.7% of average earning assets as of March 31, 2025 and December 31, 2024, respectively. Therefore, the quality and diversification of our loan portfolio is an important consideration when reviewing our financial condition. The Company has established systematic procedures for approving and monitoring loans that vary depending on the size and nature of the loan and applies these procedures in a disciplined manner. Total gross loans of $1.7 billion at March 31, 2025 represent an increase of $76.2 million or 4.8% as compared to December 31, 2024.

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Average loans were 77.7% and 76.1% of average earning assets for the years ended December 31, 2024 and 2023, respectively. Total gross loans of $1.6 billion at December 31, 2024 represent an increase of $82.9 million or 5.5% as compared to December 31, 2023.

LHFS are comprised of loans acquired through mortgage warehouse lending activities and origination of mortgage loans. We act as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. We also originate mortgage loans with customers through CSM and sell these loans to third-party investors. LHFS at March 31, 2025 were $187.5 million compared to $174.0 million at December 31, 2024. At December 31, 2024, LHFS were $174.0 million compared to $82.1 million at December 31, 2023.

Gross LHFI increased $62.8 million, or 4.5%, to $1.5 billion as of March 31, 2025 compared to $1.4 billion at December 31, 2024. There was a higher market demand for our commercial and retail loans products during three months ended March 31, 2025 from December 31, 2024, as the Company experienced strong loan demand.

Gross LHFI remained relatively flat at approximately $1.4 billion as of December 31, 2024 and 2023. There was lower market demand for our commercial and retail loans products during 2024 as compared to 2023.

The Company engages in a full complement of lending activities, including CRE loans, construction loans, C&I, and consumer purpose loans. Our loan portfolio has concentrations of over 10% of LHFI in income producing CRE, senior housing, marine vessels loans, and residential mortgages with the remaining balance in other categories within commercial and retail loans categories.

The following table presents the balance and associated percentage of each major category in our loan portfolio as of the dates presented:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **As of March 31, 2025** | **As of March 31, 2025** | **2024** | **2024** | **2023** | **2023** |
| <u>(dollars in thousands)</u> | **Amount** | **% of Total** | **Amount** | **% of Total** | **Amount** | **% of<br> Total** |
| **Commercial loans** |  |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and<br> construction | 76453 | 5.2% | 72520 | 5.2% | 124406 | 8.8% |
| &nbsp;&nbsp;Income producing CRE | 352693 | 24.0 | 321558 | 22.8 | 264043 | 18.6 |
| &nbsp;&nbsp;Owner-occupied CRE | 90204 | 6.1 | 94573 | 6.7 | 92007 | 6.5 |
| &nbsp;&nbsp;Senior housing | 245292 | 16.7 | 234081 | 16.6 | 250593 | 17.7 |
| &nbsp;&nbsp;Commercial and industrial | 145784 | 9.8 | 141626 | 10.0 | 139795 | 9.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 910426 | 61.8% | 864358 | 61.3% | 870844 | 61.4% |
| **Retail loans** |  |  |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 284305 | 19.3% | 263657 | 18.6% | 266197 | 18.8% |
| &nbsp;&nbsp;Residential mortgages | 176794 | 12.0 | 174099 | 12.4 | 146220 | 10.3 |
| &nbsp;&nbsp;Cash value life insurance LOC | 80503 | 5.5 | 86844 | 6.2 | 112457 | 7.9 |
| &nbsp;&nbsp;Other consumer | 20204 | 1.4 | 20485 | 1.5 | 22707 | 1.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 561806 | 38.2% | 545085 | 38.7% | 547581 | 38.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross loans held for investment | 1472232 | 100.0% | 1409443 | 100.0% | 1418425 | 100.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses | (17104) |  | (17118) |  | (15465) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total loans held for investment, net | $1455128 |  | $1392325 |  | $1402960 |  |

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The Company has established policy for managing concentration limits in the loan portfolio for commercial real estate, senior housing, and marine lending, among other loan types. All loan types are within established limits. We use underwriting guidelines to assess the borrowers' historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower's deteriorating financial condition, should that occur.

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The following tables presents the maturity distribution of our loans as of March 31, 2025, December 31, 2024 and December 31, 2023. The tables show the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** |
|  | **Due in One Year or Less** | **Due in One Year or Less** | **Due after One Year Through Five Years** | **Due after One Year Through Five Years** | **Due after Five Years Through Fifteen Years** | **Due after Five Years Through Fifteen Years** | **Due after Fifteen Years** | **Due after Fifteen Years** |  |
| <u>(dollars in thousands)</u> | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Total** |
| **Commercial loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and<br> construction | 500 | $47598 | 59 | $21882 | - | $1708 | - | $4706 | $76453 |
| &nbsp;&nbsp;Income producing CRE | 20033 | 5971 | 162911 | 104694 | 9229 | 30504 | 1145 | 18206 | 352693 |
| &nbsp;&nbsp;Owner-occupied CRE | 2677 | 352 | 39153 | 3796 | 9938 | 9074 | 1249 | 23965 | 90204 |
| &nbsp;&nbsp;Senior housing | - | 96892 | 976 | 147424 | - | - | - | - | 245292 |
| &nbsp;&nbsp;Commercial and industrial | 5307 | 24347 | 40702 | 24822 | 29509 | 20215 | 19 | 863 | 145784 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 28517 | $175160 | 243801 | $302618 | 48676 | $61501 | 2413 | $47740 | $910426 |
| **Retail loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 3535 | $- | - | $- | 29363 | $723 | 220240 | $30444 | $284305 |
| &nbsp;&nbsp;Residential mortgages | 4679 | 283 | 4910 | 713 | 18340 | 4479 | 91921 | 51469 | 176794 |
| &nbsp;&nbsp;Cash value life insurance LOC | - | 20919 | - | 59582 | - | 2 | - | - | 80503 |
| &nbsp;&nbsp;Other consumer | 925 | 374 | 1492 | - | 10654 | 109 | 6329 | 321 | 20204 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 9139 | $21576 | 6402 | $60295 | 58357 | $5313 | 318490 | $82234 | $561806 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross loans held for<br>&nbsp;&nbsp;&nbsp;&nbsp; investment | $37656 | $196736 | $250203 | $362913 | $107033 | $66814 | $320903 | $129974 | $1472232 |

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---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** |
|  | **Due in One Year or Less** | **Due in One Year or Less** | **Due after One Year Through Five Years** | **Due after One Year Through Five Years** | **Due after Five Years Through Fifteen Years** | **Due after Five Years Through Fifteen Years** | **Due after Fifteen Years** | **Due after Fifteen Years** |  |
| <u>(dollars in thousands)</u> | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Total** |
| **Commercial loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and<br> construction | 564 | $45304 | 58 | $22037 | 8 | $504 | - | $4045 | $72520 |
| &nbsp;&nbsp;Income producing CRE | 17239 | 2296 | 164845 | 77491 | 9926 | 29328 | 1151 | 19282 | 321558 |
| &nbsp;&nbsp;Owner-occupied CRE | 3320 | 1997 | 38783 | 3597 | 9767 | 9039 | 1254 | 26816 | 94573 |
| &nbsp;&nbsp;Senior housing | - | 84577 | 981 | 148523 | - | - | - | - | 234081 |
| &nbsp;&nbsp;Commercial and industrial | 3281 | 24302 | 38945 | 27426 | 28920 | 17856 | 19 | 877 | 141626 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 24404 | $158476 | 243612 | $279074 | 48621 | $56727 | 2424 | $51020 | $864358 |
| **Retail loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 3292 | $- | - | $- | 25295 | $737 | 204177 | $30156 | $263657 |
| &nbsp;&nbsp;Residential mortgages | 2398 | 368 | 4084 | 2114 | 8194 | 15042 | 6902 | 134997 | 174099 |
| &nbsp;&nbsp;Cash value life insurance LOC | - | 15850 | - | 70994 | - | - | - | - | 86844 |
| &nbsp;&nbsp;Other consumer | 1028 | 363 | 1584 | 7 | 11648 | 121 | 5397 | 337 | 20485 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 6718 | $16581 | 5668 | $73115 | 45137 | $15900 | 216476 | $165490 | $545085 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross loans held for<br>&nbsp;&nbsp;&nbsp;&nbsp; investment | $31122 | $175057 | $249280 | $352189 | $93758 | $72627 | $218900 | $216510 | $1409443 |

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** |
|  | **Due in One Year or Less** | **Due in One Year or Less** | **Due after One Year Through Five Years** | **Due after One Year Through Five Years** | **Due after Five Years Through Fifteen Years** | **Due after Five Years Through Fifteen Years** | **Due after Fifteen Years** | **Due after Fifteen Years** |  |
| <u>(dollars in thousands)</u> | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Fixed<br>Rate** | **Adjustable<br>Rate** | **Total** |
| **Commercial loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and<br> construction | 703 | $55348 | 14995 | $37272 | 5752 | $376 | 7672 | $2288 | $124406 |
| &nbsp;&nbsp;Income producing CRE | 7377 | 4314 | 136926 | 20634 | 27097 | 29848 | 1165 | 36682 | 264043 |
| &nbsp;&nbsp;Owner-occupied CRE | 4538 | 43 | 34234 | 4289 | 12075 | 8103 | 1267 | 27458 | 92007 |
| &nbsp;&nbsp;Senior housing | - | 87164 | 10296 | 153133 | - | - | - | - | 250593 |
| &nbsp;&nbsp;Commercial and industrial | 1365 | 18508 | 29727 | 30345 | 42161 | 16773 | 20 | 896 | 139795 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 13983 | $165377 | 226178 | $245673 | 87085 | $55100 | 10124 | $67324 | $870844 |
| **Retail loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 4693 | $- | - | $- | 21374 | $240 | 210105 | $29785 | $266197 |
| &nbsp;&nbsp;Residential mortgages | 2161 | 105 | 6748 | 185 | 12823 | 4335 | 77975 | 41888 | 146220 |
| &nbsp;&nbsp;Cash value life insurance LOC | - | 7281 | - | 105176 | - | - | - | - | 112457 |
| &nbsp;&nbsp;Other consumer | 1456 | 493 | 695 | 1024 | 1270 | 6592 | 5945 | 5232 | 22707 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 8310 | $7879 | 7443 | $106385 | 35467 | $11167 | 294025 | $76905 | $547581 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross loans held for <br>&nbsp;&nbsp;&nbsp;&nbsp; investment | $22293 | $173256 | $233621 | $352058 | $122552 | $66267 | $304149 | $144229 | $1418425 |

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The following is a discussion of the Company's segments and classes of LHFI:

*<u>Commercial Loans</u>*

As of March 31, 2025, our total commercial loans comprised of $910.4 million, or 61.8%, of loans, compared to $864.4 million, or 61.3% of loans, as of December 31, 2024. Our total commercial loans balances increased by $46.1 million at March 31, 2025 compared to December 31, 2024.

As of December 31, 2024, our total commercial loans comprised of $864.4 million or 61.3%, of loans, compared to $870.8 million, or 61.4% of loans, as of December 31, 2023. Our total commercial loans balances decreased modestly by $6.5 million at December 31, 2024 compared to December 31, 2023.

Following below are our principal commercial loans portfolio categories:

*Acquisition, Development, and Construction –* ADC loans include both loans and credit lines for the purpose of purchasing, carrying, and developing land into residential subdivisions or various types of commercial developments, such as industrial, hospitality, warehouse, retail, office, and multi-family. This category also includes loans and credit lines for construction of residential developments, multi-family buildings, and commercial buildings. The Company generally engages in ADC lending primarily in local markets served by its branches, and through our homebuilder finance and government guaranteed lending lines of business. The Company recognizes that risks are inherent in the financing of commercial real estate development and construction. These risks include location, market conditions and price volatility, change in interest rates, demand for developed land, lots and buildings, desirability of features and styling of completed developments and buildings, competition from other developments and builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of utilities, roads, public transportation and schools, availability of permanent financing for homebuyers, zoning, environmental restrictions, lawsuits, economic and business cycle, labor, and reputation of the builder or developer.

Each ADC loan is underwritten to address: (i) the desirability of the project, its market viability and projected absorption period; (ii) the creditworthiness of the borrower and the guarantor as to liquidity, cash flow and assets available to ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer's experience and success with similar projects; and (v) the value of the collateral. ADC loans are inspected periodically to ensure that the project is on schedule and eligible for requested draws. Inspections may be performed by construction inspectors hired by the Company or by appropriate loan officers and are conducted periodically to monitor the progress of a particular project. These inspections may also include discussions with project managers and engineers. Rising interest rates and the potential for slowing economic conditions could negatively impact borrowers' and guarantors' ability to repay their debt which could make more of the Company's loans collateral-dependent.

The following table presents the balance and associated percentage of each category in our ADC loan portfolio as of the dates presented:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **As of March 31, 2025** | **As of March 31, 2025** | **2024** | **2024** | **2023** | **2023** |
| <u>(dollars in thousands)</u> | **Amount** | **% of Total** | **Amount** | **% of Total** | **Amount** | **% of<br> Total** |
| **ADC Loans by Type** |  |  |  |  |  |  |
| &nbsp;&nbsp;Residential Builder | 55766 | 72.9% | 57597 | 79.4% | 76583 | 61.6% |
| &nbsp;&nbsp;Other | 15871 | 20.8 | 12682 | 17.5 | 8746 | 7.0 |
| &nbsp;&nbsp;Restaurant | 1424 | 1.9 | 1393 | 1.9 | 4791 | 3.9 |
| &nbsp;&nbsp;Office | 3392 | 4.4 | 848 | 1.2 | - | 0.0 |
| &nbsp;&nbsp;Hospitality | - | - | - | 0.0 | 19694 | 15.8 |
| &nbsp;&nbsp;Multifamily | - | - | - | 0.0 | 11778 | 9.5 |
| &nbsp;&nbsp;Retail | - | - | - | 0.0 | 2814 | 2.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total ADC loans | $76453 | 100.0% | $72520 | 100.0% | $124406 | 100.0% |

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As of March 31, 2025, our ADC loans comprised of $76.5 million, or 5.2%, of loans, compared to $72.5 million, or 5.2% of loans, as of December 31, 2024. Our ADC loans balances increased $3.9 million or 5.4% since December 31, 2024 due to funding of construction projects and new production, offset with loans moving from construction to permanent status and paydowns.

As of December 31, 2024, our ADC loans comprised of $72.5 million, or 5.2%, of loans, compared to $124.4 million, or 8.8% of loans, as of December 31, 2023. Our ADC loans balances decreased $51.9 million or 41.7% since December 31, 2023 due to lower demand in our markets and payoffs of the ADC loans and completion of construction projects resulting in the reclassification of loans from ADC to income producing CRE.

*Income Producing CRE* – Income producing CRE loans include loans to finance income-producing commercial and multifamily properties. Lending in this category is generally limited to properties located in the Company's market area with only limited exposure to properties located elsewhere but owned by in-market borrowers. Loans in this category include loans for neighborhood retail centers, medical and professional offices, single retail stores, warehouses and apartments leased generally to local businesses and residents. The underwriting of these loans takes into consideration the occupancy, rental rates, and local market demand as well as the financial health

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of the borrower. The primary risk associated with loans secured with income producing property is the inability of that property to produce adequate cash flow to service the debt. High unemployment, significant increases to interest rates, generally weak economic conditions and/or an oversupply in the market may result in our customers having difficulty achieving adequate occupancy and/or rental rates. Payments on such loans are often dependent on successful operation or management of the properties. The Company's income producing CRE portfolio is diverse, with exposure spread across multiple real estate purposes.

The following table presents the balance and associated percentage of each category in our income producing CRE loan portfolio as of the dates presented:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **As of March 31, 2025** | **As of March 31, 2025** | **2024** | **2024** | **2023** | **2023** |
| <u>(dollars in thousands)</u> | **Amount** | **% of Total** | **Amount** | **% of Total** | **Amount** | **% of<br> Total** |
| **Income Producing CRE by Type** |  |  |  |  |  |  |
| &nbsp;&nbsp;Hospitality | 124035 | 35.2% | 114591 | 35.6% | 95848 | 36.3% |
| &nbsp;&nbsp;Retail | 72709 | 20.6 | 72051 | 22.4 | 71153 | 27.0 |
| &nbsp;&nbsp;Office | 64391 | 18.3 | 59464 | 18.5 | 52685 | 20.0 |
| &nbsp;&nbsp;Multifamily | 31843 | 9.0 | 31649 | 9.8 | 15667 | 5.9 |
| &nbsp;&nbsp;Other | 29643 | 8.4 | 17745 | 5.5 | 10238 | 3.9 |
| &nbsp;&nbsp;Industrial | 16085 | 4.6 | 14652 | 4.6 | 4338 | 1.6 |
| &nbsp;&nbsp;Restaurant | 12304 | 3.5 | 11406 | 3.6 | 14114 | 5.3 |
| &nbsp;&nbsp;Medical | 1683 | 0.4 | - | 0.0 | - | 0.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total income producing CRE loans | $352693 | 100.0% | $321558 | 100.0% | $264043 | 100.0% |

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As of March 31, 2025, our income producing CRE loans comprised of $352.7 million, or 24.0%, of loans, compared to $321.6 million, or 22.8% of loans, as of December 31, 2024. The weighted average original or renewal LTV of income producing CRE loans with an outstanding balance of greater than $500 thousand, which makes up over 95% of the CRE balances, was 62.1% and 63.0% as of March 31, 2025 and December 31, 2024, respectively. Our income producing CRE loans balances increased $31.1 million or 9.7% since December 31, 2024 due to a steady demand in our markets and the reclassification of certain ADC loans to this category that completed construction during the period.

As of December 31, 2024, our income producing CRE loans comprised of $321.6 million, or 22.8%, of loans, compared to $264.0 million, or 18.6% of loans, as of December 31, 2023. The weighted average original or renewal LTV of income producing CRE loans with an outstanding balance of greater than $500 thousand, which makes up over 95% of the CRE balances, was 63.0% and 63.3% as of December 31, 2024 and 2023, respectively. Our income producing CRE loans balances increased $57.5 million or 21.8% since December 31, 2023 due to a steady demand in our markets coupled with fewer competitors actively pursuing income producing CRE loans and the reclassification of certain ADC loans to this category that completed construction during the year.

*Owner-Occupied CRE* – Owner-occupied CRE loans include loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal guarantees, if applicable, are generally required for these loans. The Company recognizes that risk from economic cycles, pandemics, government regulation, supply chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel, or competitive situations may adversely affect the scheduled repayment of business loans.

The following table presents the balance and associated percentage of each category in our owner-occupied CRE loan portfolio as of the dates presented:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **As of March 31, 2025** | **As of March 31, 2025** | **2024** | **2024** | **2023** | **2023** |
| <u>(dollars in thousands)</u> | **Amount** | **% of Total** | **Amount** | **% of Total** | **Amount** | **% of<br> Total** |
| **Owner-occupied CRE by Type** |  |  |  |  |  |  |
| &nbsp;&nbsp;Office | 39702 | 44.0% | 43546 | 46.0% | 44667 | 48.6% |
| &nbsp;&nbsp;Restaurant | 23243 | 25.8 | 23641 | 25.0 | 19376 | 21.1 |
| &nbsp;&nbsp;Other | 11265 | 12.5 | 12158 | 12.9 | 11409 | 12.4 |
| &nbsp;&nbsp;Medical | 6819 | 7.6 | 8464 | 9.0 | 9048 | 9.8 |
| &nbsp;&nbsp;Retail | 4038 | 4.5 | 3136 | 3.3 | 3339 | 3.6 |
| &nbsp;&nbsp;Industrial | 5137 | 5.6% | 3628 | 3.8 | 4168 | 4.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total owner-occupied CRE loans | $90204 | 100.0% | $94573 | 100.0% | $92007 | 100.0% |

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As of March 31, 2025, our owner-occupied CRE loans comprised of $90.2 million, or 6.1%, of loans, compared to $94.6 million, or 6.7% of loans, as of December 31, 2024. The weighted average original or renewal LTV of owner-occupied CRE loans with an outstanding balance of greater than $500 thousand, which makes up over 72% of the balances, was 76.8% and 76.1% as of March 31, 2025 and December 31, 2024, respectively. Our owner-occupied CRE loans balances decreased $4.4 million or 4.6% since December 31, 2024 as competition remains fierce for this loan type.

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As of December 31, 2024, our owner-occupied CRE loans comprised of $94.6 million, or 6.7%, of loans, compared to $92.0 million, or 6.5% of loans, as of December 31, 2023. The weighted average original or renewal LTV of owner-occupied CRE loans with an outstanding balance of greater than $500 thousand, which makes up over 72% of the balances, was 76.1% and 79.8% as of December 31, 2024 and 2023, respectively. Our owner-occupied CRE loans balances increased $2.6 million or 2.8% since December 31, 2023 as competition remains fierce for this loan type.

*Senior Housing* – Senior housing loans support senior adults facilities, generally restricted for adults over the age of 55 years old. These types of loans include senior apartments, independent living communities, assisted living and memory care communities, nursing homes or skilled nursing facilities, and continuing care retirement communities. The Company recognizes that risk from high resident turnover, pandemics, government regulation, operator risk, increases in acuity, availability and cost of qualified staffing resources, technology risk, and other risks such as liability, insurance, reimbursement and regulatory changes may impact repayment of these loans. Underwriting focuses primarily on operator quality and business operations rather than income producing CRE property quality metrics.

As of March 31, 2025, our Senior housing loans comprised of $245.3 million or 16.7%, of loans, compared to $234.1 million, or 16.6% of loans as of December 31, 2024. The weighted average original or renewal LTV of Senior housing loans was 64.1% and 62.4% as of March 31, 2025 and December 31, 2024, respectively. Our Senior housing loans balances increased $11.2 million or 4.8% since December 31, 2024 as we were able to close loans on two facilities. During the period ended March 31, 2025, we received a pay-off on one loan previously rated substandard. The Company continues to monitor its concentration of Senior housing loans by conducting active quarterly surveillance over the operations and financial performance of each of its Senior housing loans.

As of December 31, 2024, our Senior housing loans comprised of $234.1 million or 16.6%, of loans, compared to $250.6 million, or 17.7% of loans as of December 31, 2023. The weighted average original or renewal LTV of Senior housing loans was 62.4% and 64.4% as of December 31, 2024 and 2023, respectively. Our Senior housing loans balances decreased $16.5 million or 6.6% since December 31, 2023 as the Company monitored its concentration of Senior housing loans.

*Commercial and Industrial* – C&I loans are loans and lines of credit to finance business operations, equipment and other non-real estate collateral primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal and/or corporate guarantees are generally obtained where available and prudent. The Company recognizes that risk from economic cycles, commodity prices, pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel or competitive situations may adversely affect the scheduled repayment of business loans.

As of March 31, 2025, our C&I loans comprised of $145.8 million, or 9.8% of loans, compared to $141.6 million, or 10.0% of loans, as of December 31, 2024. Our C&I loans balances have increased $4.2 million or 2.9% since December 31, 2024 due to increased production and demand.

As of December 31, 2024, our C&I loans comprised of $141.6 million, or 10.0% of loans, compared to $139.8 million, or 9.8% of loans, as of December 31, 2023. Our C&I loans balances have increased modestly by $1.8 million or 1.3% since December 31, 2023 due to a lower production and demand.

*<u>Retail Loans</u>*

As of March 31, 2025, our total retail loans comprised of $561.8 million, or 38.2% of loans, compared to $545.1 million, or 38.7% of loans, as of December 31, 2024. Our total retail loans balances increased $16.7 million or 3.1% since December 31, 2024 due to better production and demand for our retail products, especially marine loans.

As of December 31, 2024, our total retail loans comprised of $545.1 million, or 38.7% of loans, compared to $547.6 million, or 38.6% of loans, as of December 31, 2023. Our total retail loans balances decreased $2.5 million or 0.5% since December 31, 2023 due to a lower production and demand our retail products.

Following below are our principal retail loans portfolio categories:

*Residential Mortgages* – Residential mortgages are first or second-lien loans secured by a primary residence or second home. This category includes permanent mortgage financing, construction loans to individual consumers, and home equity lines of credit. The loans are generally secured by properties located within the local market area of the Bank's retail footprint which originates and services the loan. These loans are underwritten in accordance with the Company's general loan policies and procedures which require, among other things, proper documentation of each borrower's financial condition, satisfactory credit history, and property value. In addition to loans originated through the Company's branches, the Company originates and services residential mortgages sold in the secondary market which are underwritten and closed pursuant to investor and agency guidelines. Significant and rapid declines in real estate values can result in residential mortgage loan borrowers having debt levels in excess of the current market value of the collateral.

As of March 31, 2025, our residential mortgage loans comprised of $176.8 million, or 12.0% of loans, compared to $174.1 million, or 12.4% of loans, as of December 31, 2024. Our residential mortgage loans balances increased $2.7 million or 1.5% since December 31, 2024 due to continued demand for our residential mortgage products.

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As of December 31, 2024, our residential mortgage loans comprised of $174.1 million, or 12.4% of loans, compared to $146.2 million, or 10.3% of loans, as of December 31, 2023. Our residential mortgage loans balances increased $27.9 million or 19.1% since December 31, 2023 due to continued demand for our residential mortgage products.

We originate residential mortgage loans to sell on the secondary market and also to hold for investment. During the three months ended March 31, 2025 and for the year ended December 31, 2024, we originated $19.0 million and $86.0 million, respectively, and sold $8.6 million and $49.5 million, respectively, in home mortgage loans.

During the year ended December 31, 2024, we originated $86.0 million and sold $49.5 million in home mortgage loans. During the year ended December 31, 2023, we originated $77.7 million and sold $35.7 million in home mortgage loans.

*Marine Vessels* – Marine vessel loans are a type of consumer loan used to finance the purchase of a boat or another marine craft. Functioning similarly to auto loans and personal loans, these installment loans come with a repayment term, fixed monthly payments and variable-or-fixed interest rates. These loans are underwritten in accordance with the Company's general loan policies and procedures and are generally secured with title or preferred ships' mortgage on the marine vessel. The Company recognizes that risk from economic cycles, pandemics, government regulation, natural disasters, losses due to theft, or changes to customer's ability to meet the scheduled repayment of marine vessel.

As of March 31, 2025, our marine vessels loans comprised of $284.3 million or 19.3%, of loans, compared to $263.7 million, or 18.6% of loans, as of December 31, 2024. Our marine vessels loans balances increased $20.6 million or 7.8% since December 31, 2024 due to continued demand for our marine vessels loans product.

As of December 31, 2024, our marine vessels loans comprised of $263.7 million or 18.6%, of loans, compared to $266.2 million, or 18.8% of loans, as of December 31, 2023. Our marine vessels loans balances decreased $2.5 million or 1.0% since December 31, 2023 due to lower demand for our marine vessels loans product.

*Cash Value Life Insurance Line of Credit* – Cash value life insurance encompasses multiple types of life insurance that contain a cash value account. This cash value component typically earns interest or other investment gains and grows tax deferred. CVLI loans are generally lines of credit secured by cash value life insurance of the debtor and can be originated for personal or business purposes. Upon the delinquency of the loan or lapse of an insurance policy premium payment, the Company pursues liquidation of the policy cash value in order to satisfy the loan.

As of March 31, 2025, our CVLI loans comprised of $80.5 million, or 5.5% of loans, compared to $86.8 million, or 6.2% of loans, as of December 31, 2024. Our CVLI loans balances decreased $6.3 million or 7.3% since December 31, 2024 due to paydowns outpacing new production or advances on existing lines.

As of December 31, 2024, our CVLI loans comprised of $86.8 million, or 6.2% of loans, compared to $112.5 million, or 7.9% of loans, as of December 31, 2023. Our CVLI loans balances decreased $25.6 million or 22.8% since December 31, 2023 due to higher interest rates which have softened demand for the product.

As of March 31, 2025, our other consumer loans comprised of $20.2 million, or 1.4% of loans, compared to $20.5 million, or 1.5% of loans, as of December 31, 2024. Our other consumer loans balances decreased $281 thousand or 1.4% since December 31, 2024, with no significant change to the portfolio.

As of December 31, 2024, our other consumer loans comprised of $20.5 million, or 1.5% of loans, compared to $22.7 million, or 1.6% of loans, as of December 31, 2023. Our other consumer loans balances decreased $2.2 million or 9.8% since December 31, 2023 due to higher interest rates which have softened demand for the product.

*<u>Internally Assigned Grades on LHFI</u>*

The Company utilizes an internal loan classification system for the Commercial portfolio that is updated to perpetually grade loans according to certain credit quality indicators. These credit quality indicators include, but are not limited to, recent credit performance, delinquency, liquidity, cash flows, debt coverage ratios, collateral type and LTV ratio. The Company determines its risk rating classification of the Retail lending portfolio based on nonaccrual and delinquency status in accordance with the Uniform Retail Credit Classification guidance and industry norms. See Note 3 to the consolidated financial statements.

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The following tables provides details of the Company's loan and lease portfolio by segment, class, and internally<br>assigned grade at March 31, 2025, December 31, 2024 and December 31, 2023:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** |
| <u>(dollars in thousands)</u> | **Pass** | **Special mention** | **Substandard** | **Total** |
| **Commercial loans** |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and construction | 76453 | - | - | 76453 |
| &nbsp;&nbsp;Income producing CRE | 352281 | - | 412 | 352693 |
| &nbsp;&nbsp;Owner-occupied CRE | 83711 | - | 6493 | 90204 |
| &nbsp;&nbsp;Senior housing | 208922 | 24814 | 11556 | 245292 |
| &nbsp;&nbsp;Commercial and industrial | 141202 | - | 4582 | 145784 |
| **Retail loans** <sup>(1)</sup> |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 284305 | - | - | 284305 |
| &nbsp;&nbsp;Residential mortgages | 176633 | - | 161 | 176794 |
| &nbsp;&nbsp;Cash value life insurance LOC | 80503 | - | - | 80503 |
| &nbsp;&nbsp;Other consumer | 20204 | - | - | 20204 |
| **Total** | $1424214 | $24814 | $23204 | $1472232 |

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<sup>(1)</sup> Retail loans are not risk rated, but are classified as performing or nonperforming. Performing loans are presented in the Pass category and nonperforming loans are in the Substandard category.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** |
| <u>(dollars in thousands)</u> | **Pass** | **Special mention** | **Substandard** | **Total** |
| **Commercial loans** |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and construction | 72520 | - | - | 72520 |
| &nbsp;&nbsp;Income producing CRE | 321146 | - | 412 | 321558 |
| &nbsp;&nbsp;Owner-occupied CRE | 87906 | - | 6667 | 94573 |
| &nbsp;&nbsp;Senior housing | 190084 | 25025 | 18972 | 234081 |
| &nbsp;&nbsp;Commercial and industrial | 136878 | 36 | 4712 | 141626 |
| **Retail loans** <sup>(1)</sup> |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 263657 | - | - | 263657 |
| &nbsp;&nbsp;Residential mortgages | 173834 | - | 265 | 174099 |
| &nbsp;&nbsp;Cash value life insurance LOC | 86844 | - | - | 86844 |
| &nbsp;&nbsp;Other consumer | 20442 | - | 43 | 20485 |
| **Total** | $1353311 | $25061 | $31071 | $1409443 |

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<sup>(1)</sup> Retail loans are not risk rated, but are classified as performing or nonperforming. Performing loans are presented in the Pass category and nonperforming loans are in the Substandard category.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** |
| <u>(dollars in thousands)</u> | **Pass** | **Special mention** | **Substandard** | **Total** |
| **Commercial loans** |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and construction | 124406 | - | - | 124406 |
| &nbsp;&nbsp;Income producing CRE | 263504 | 79 | 460 | 264043 |
| &nbsp;&nbsp;Owner-occupied CRE | 85582 | 432 | 5993 | 92007 |
| &nbsp;&nbsp;Senior housing | 214229 | 25491 | 10873 | 250593 |
| &nbsp;&nbsp;Commercial and industrial | 134681 | 102 | 5012 | 139795 |
| **Retail loans** <sup>(1)</sup> |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 266008 | - | 189 | 266197 |
| &nbsp;&nbsp;Residential mortgages | 145874 | - | 346 | 146220 |
| &nbsp;&nbsp;Cash value life insurance LOC | 112457 | - | - | 112457 |
| &nbsp;&nbsp;Other consumer | 22707 | - | - | 22707 |
| **Total** | $1369448 | $26104 | $22873 | $1418425 |

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<sup>(1)</sup> Retail loans are not risk rated, but are classified as performing or nonperforming. Performing loans are presented in the Pass category and nonperforming loans are in the Substandard category.

Pass rated loans were 96.7% of total LHFI at March 31, 2025 as compared to 96.0% at December 31, 2024. Special mention rated loans were 1.7% of total LHFI at March 31, 2025 as compared to 1.8% at December 31, 2024. Substandard loans were 1.6% of total LHFI at March 31, 2025 as compared to 2.2% at December 31, 2024. The primary cause of the decrease in substandard loans during the three months ended March 31, 2025 was the payoff of one Senior housing relationship. The Company continues to monitor these loans, and where covenant defaults have occurred, obtain additional cash collateral to cure the default.

Pass rated loans were 96.0% of total LHFI at December 31, 2024 as compared to 96.5% at December 31, 2023. Special mention rated loans were 1.8% of total LHFI at December 31, 2024 and 2023. Substandard loans were 2.2% of total LHFI at December 31, 2024 as compared to 1.6% at December 31, 2023. The primary cause of the increase in special mention and substandard loans during the comparative periods is continued pressure on Senior housing loans due to increased operating costs and increased debt service in the current interest rate environment leading to decreased debt service coverage.

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*<u>Nonperforming Loans</u>*

Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment. Loans are placed on nonaccrual status when it becomes probable that interest is not fully collectable generally when the loan becomes 90 days past due. Once loans are placed on nonaccrual status, previously accrued but unpaid interest is reversed from interest income, and the accrual of interest income is suspended. Future payments received are applied to the principal balance of the loan. If and when borrowers demonstrate the sustained ability to repay such loans in accordance with the loan's contractual terms, the loan may be returned to accrual status. Loans which become 90 days past due are reviewed for collectability of principal. Principal amounts deemed uncollectible are charged off against the provision for credit losses on loans, unless such loans are in the process of modification, collection through repossession, or foreclosure. Certain consumer loans are not placed on nonaccrual but are monitored and charged-off at 120 days past due.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned until sold and is recorded at the lower of cost or fair value, minus estimated costs to sell. Subsequent to foreclosure, losses resulting from the periodic revaluation of the property are charged to loss on OREO, net and a new carrying value is established. Any gains or losses realized at the time of disposal or subsequent write-downs are reflected in the Consolidated Statements of Operations. Expenses to maintain such assets are included in net cost of operation of OREO.

Nonperforming loans include loans 90 days or more past due and still accruing and loans accounted for on a nonaccrual basis. Nonperforming assets consist of nonperforming loans in addition to OREO.

The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates presented:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of March 31,** | **As of March 31,** | **As of December 31,** | **As of December 31,** |
| <u>(dollars in thousands)</u> | **2025** | **2024** | **2024** | **2023** |
| Nonaccrual loans <sup>(1)</sup> | $14599 | $3849 | $14957 | $4338 |
| Past due loans 90 days and still accruing | 6 | 34 | 49 | - |
| &nbsp;&nbsp;Total nonperforming loans | 14605 | 3883 | 15006 | 4338 |
| &nbsp;&nbsp;Other real estate owned | 765 | - | 864 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total nonperforming assets | $15370 | $3883 | $15870 | $4338 |
| Nonperforming loans to gross LHFI | 0.99% | 0.28% | 1.06% | 0.31% |
| Nonperforming assets to total assets | 0.70% | 0.19% | 0.76% | 0.21% |
| Allowance for credit losses to total LHFI | 1.16% | 1.12% | 1.21% | 1.09% |

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<sup>(1)</sup> Nonaccrual loans include balances of approximately $4.7 million, $4.8 million, and $2.7 million that are covered by government guarantees for March 31, 2025, December 31, 2024 and December 31, 2023, respectively.

Nonperforming loans were $14.6 million and $15.0 million at March 31, 2025 and December 31, 2024, respectively. The modest decrease in nonperforming loans from December 31, 2024 to March 31, 2025 was primarily due to payments collected during the period.

Nonperforming loans were $15.0 million and $4.3 million at December 31, 2024 and 2023, respectively. The increase in nonperforming loans from December 31, 2023 to December 31, 2024 was primarily due to the migration of one senior housing loan and one commercial relationship into nonaccrual status.

The following table sets forth the major classifications of nonaccrual loans for the periods presented:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **As of March 31,** | **As of March 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** |
| <u>(dollars in thousands)</u> | **2025** | **2025** | **2024** | **2024** | **2023** | **2023** |
| **Commercial loans** |  |  |  |  |  |  |
| &nbsp;&nbsp;Income producing CRE | $— | 412 | $— | 412 | $— | 460 |
| &nbsp;&nbsp;Owner-occupied CRE |  | 3348 |  | 3425 |  | 3079 |
| &nbsp;&nbsp;Senior housing |  | 6487 |  | 6570 |  | - |
| &nbsp;&nbsp;Commercial and industrial |  | 4191 |  | 4285 |  | 264 |
| **Retail loans** |  |  |  |  |  |  |
| &nbsp;&nbsp;Marine vessels |  | - |  | - |  | 189 |
| &nbsp;&nbsp;Residential mortgages |  | 161 |  | 265 |  | 346 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total nonaccrual loans** | $— | 14599 | $— | 14957 | $— | 4338 |

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*<u>Allowance for Credit Losses on Loans</u>*

The ACL on loans is a valuation allowance estimated at each balance sheet date in accordance with GAAP that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. The ACL represents management's best estimate of credit losses expected over the life of the loan, adjusted for expected contractual payments and the impact of prepayment expectations. ACL is not required for LHFS and is only recorded for LHFI.

The Company estimates the ACL on loans based on the underlying loans' amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred

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fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. It is the Company's policy to write off uncollectible interest receivable of LHFI when it is considered uncollectible, which is generally when an asset is placed on nonaccrual and exclude it from the ACL.

Expected credit losses are reflected in the ACL through a charge to Provision for credit losses. When the Company deems all or a portion of a loan to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount. Loans are charged off against the ACL when management believes the collection of the principal is unlikely. Subsequent recoveries of previously charged off amounts, if any, are credited to the ACL when received. See *Note 1* of our consolidated financial statements as of December 31, 2024, included elsewhere in this prospectus, for additional information regarding ACL policy.

The allowance for credit losses on loans remained steady at $17.1 million as of March 31, 2025 similar to the balance at December 31, 2024. There was a modest increase in the commercial loans portfolio which was offset by a decrease in the retail loans portfolio.

The allowance for credit losses on loans was $17.1 million at December 31, 2024 compared to $15.5 million at December 31, 2023, an increase of $1.7 million, or 10.7% primarily attributed to increased risks in the Senior Housing portfolio, offset by improved economic conditions and decreased risks in CRE lending as a significant portion of construction loans reached completion during 2024.

*Analysis of the Allowance for Credit Losses on Loans*. The following table provides an analysis of the ACL on loans and net charge-offs for the periods presented:

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| | | | |
|:---|:---|:---|:---|
|  | **As of** | **As of and for the Year Ended December 31,** | **As of and for the Year Ended December 31,** |
| <u>(dollars in thousands)</u> | **March 31, 2025** | **2024** | **2023** |
| Allowance for credit losses on loans at end of period <sup>(1)</sup> | $17104 | $17118 | $15465 |
| Loans balances: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total loans held for investment, end of period | $1472232 | $1409443 | $1418425 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average loans held for investment | $1428405 | $1418022 | $1358308 |
| Net charge-offs to average LHFI | 0.00% | 0.01% | 0.05% |
| Allowance for credit losses on loans to total LHFI <sup>(1)</sup> | 1.16% | 1.21% | 1.09% |
| Nonaccrual loans as a percentage of end of period loans | 0.01% | 1.06% | 0.31% |
| Allowance for credit losses on loans to nonaccrual loans at end of period <sup>(1)</sup> | 117.16% | 114.45% | 356.50% |
| Allowance for credit losses on loans to total nonperforming loans at end of period <sup>(1)</sup> | 117.11% | 114.07% | 356.50% |

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<sup>(1)</sup> Excludes allowance for credit losses for unfunded loans commitments.

At March 31, 2025, the ACL on loans totaled $17.1 million, or 1.16% of loans, compared to $17.1 million, or 1.21% of loans, at December 31, 2024. The decrease in the ACL on loans as a percentage of loans compared to December 31, 2024 was primarily attributed to additional collateral valued for one Senior housing collateral-dependent loan, production mix, and updates to macroeconomic variable forecasts.

At December 31, 2024, the ACL on loans totaled $17.1 million, or 1.21% of loans, compared to $15.5 million, or 1.09% of loans, at December 31, 2023. The increase in the ACL on loans as a percentage of loans compared to December 31, 2023 was primarily attributed to increased risks in the Senior Housing portfolio, offset by improved economic conditions and decreased risks in CRE lending as a significant portion of construction loans reached completion during 2024.

For the three months ended March 31, 2025, our net charge-off ratio as a percentage of average loans, as annualized, was 0.00%, compared to 0.01% for the year ended December 31, 2024.

For the year ended December 31, 2024, our net charge-off ratio as a percentage of average loans was 0.01%, compared to 0.05% for the year ended December 31, 2023. Originating and maintaining high quality loans is a top priority for the management.

As of March 31, 2025, our ratio of nonperforming assets to total assets was 0.70%, compared to 0.76% as of December 31, 2024. The decrease was due to balance sheet growth since December 31, 2024.

As of December 31, 2024, our ratio of nonperforming assets to total assets was 0.76%, compared to 0.21% as of December 31, 2023. The increase was due to an increase in nonaccrual loans coupled with loan growth from December 31, 2023.

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The following table allocates the allowance for credit losses on loans by loan category for the periods presented:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **As of March 31, 2025** | **As of March 31, 2025** | **2024** | **2024** | **2023** | **2023** |
| <u>(dollars in thousands)</u> | **Amount** | **% of Loans in each category to total loans** | **Amount** | **% of Loans in each category to total loans** | **Amount** | **% of Loans in each category to total loans** |
| **Commercial loans** |  |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and<br> construction | 1337 | 5.2% | 1188 | 5.2% | 3318 | 8.8% |
| &nbsp;&nbsp;Income producing CRE | 6619 | 24.0 | 5867 | 22.8 | 5067 | 18.6 |
| &nbsp;&nbsp;Owner-occupied CRE | 595 | 6.1 | 543 | 6.7 | 628 | 6.5 |
| &nbsp;&nbsp;Senior housing | 4149 | 16.7 | 4576 | 16.6 | 1342 | 17.7 |
| &nbsp;&nbsp;Commercial and industrial | 842 | 9.8 | 751 | 10.0 | 1079 | 9.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 13542 | 61.8% | 12925 | 61.3% | 11434 | 61.4% |
| **Retail loans** |  |  |  |  |  |  |
| &nbsp;&nbsp;Residential mortgages | 1309 | 12.0 | 1688 | 12.4 | 2167 | 10.3 |
| &nbsp;&nbsp;Marine vessels | 1801 | 19.3 | 2015 | 18.6 | 1277 | 18.8 |
| &nbsp;&nbsp;Cash value life insurance LOC | 79 | 5.5 | 88 | 6.2 | 122 | 7.9 |
| &nbsp;&nbsp;Other consumer | 373 | 1.4 | 402 | 1.5 | 465 | 1.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 3562 | 38.2% | 4193 | 38.7% | 4031 | 38.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total allowance for credit losses<br>&nbsp;&nbsp;&nbsp;&nbsp; on loans | $17104 | 100.0% | $17118 | 100.0% | $15465 | 100.0% |

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*<u>Allowance for Credit Losses for Unfunded Commitments</u>*

The Company records an ACL for unfunded loan commitments, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for credit losses in the Company's Consolidated Statements of Operations. The ACL for unfunded commitment exposures is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur. The ACL for unfunded commitments is included in Other liabilities on the Company's Consolidated Balance Sheets.

As of March 31, 2025, the ACL for unfunded commitments was $3.3 million compared to $2.7 million at December 31, 2024. The increase in the ACL for unfunded commitments was primarily due to production of new loan commitments.

As of December 31, 2024, the ACL for unfunded commitments was $2.7 million compared to $3.9 million at December 31, 2023. The decrease in the ACL for unfunded commitments was primarily due to changes in economic factors.

It is management's policy to maintain the ACL at a level adequate for risks inherent in the loan portfolio. The FRB and SCBFI also review the ACL as an integral part of their examination process. Based on information currently available, management believes that our ACL is adequate. However, the loan portfolio can be adversely affected if economic conditions or the real estate market in our market areas were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased loan losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

*<u>Net Charge-offs</u>*

The following table summarizes net charge-offs to average loans for each of the periods presented:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** |
| <u>(dollars in thousands)</u> | **Average Loans** | **Net Charge-offs (Recoveries)** | **Net Charge-offs to Average Loans** <sup>(1)</sup> | **Average Loans** | **Net Charge-offs (Recoveries)** | **Net Charge-offs to Average Loans** | **Average Loans** | **Net Charge-offs (Recoveries)** | **Net Charge-offs to Average Loans** |
| **Commercial loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development,<br> and construction | $72235 | $- | 0.00% | $110569 | $- | 0.00% | $100300 | $- | 0.00% |
| &nbsp;&nbsp;Income producing CRE | 325135 | - | 0.00% | 260325 | - | 0.00% | 240152 | 65 | 0.03% |
| &nbsp;&nbsp;Owner-occupied CRE | 85067 | - | 0.00% | 97900 | (53) | -0.05% | 102161 | - | 0.00% |
| &nbsp;&nbsp;Senior housing | 238755 | - | 0.00% | 243235 | - | 0.00% | 264001 | - | 0.00% |
| &nbsp;&nbsp;Commercial and industrial | 160233 | 1 | 0.00% | 144395 | 82 | 0.06% | 115460 | 323 | 0.28% |
| **Retail loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Residential mortgages | 269582 | (2) | 0.00% | 275236 | 36 | 0.01% | 139333 | 156 | 0.11% |
| &nbsp;&nbsp;Marine vessels | 173809 | - | 0.00% | 170354 | (15) | -0.01% | 244850 | 5 | 0.00% |
| &nbsp;&nbsp;Cash value life insurance <br> LOC | 82904 | - | 0.00% | 94428 | 47 | 0.05% | 129652 | - | 0.00% |
| &nbsp;&nbsp;Other consumer | 20685 | 16 | 0.31% | 21580 | (1) | 0.00% | 22399 | 160 | 0.71% |
|  | $1428405 | $15 | 0.00% | $1418022 | $96 | 0.01% | $1358308 | $709 | 0.05% |

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<sup>(1)</sup> Represents annualized March 31, 2025 data.

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Net charge-offs were $15 thousand and $96 thousand as of March 31, 2025 and December 31, 2024, respectively. These net charge-offs related to various small loans across multiple categories in each period.

Net charge-offs were $96 thousand and $709 thousand as of December 31, 2024 and 2023, respectively. Charge-offs were higher in the previous year due to write-offs of loans acquired from the Cornerstone Bank acquisition. These charge-offs were primarily related to SBA loans where the guarantee was not honored by the SBA. The Company carried a contingency reserve related to these items that was recorded at acquisition, and it was released in non-interest expense at the time that these loans were charged-off, effectively neutralizing the impact of the losses on overall earnings.

*<u>Deposits</u>*

Deposits represent our Bank's primary source of funds. We gather deposits primarily through our branch locations and targeting new deposits relationships by our bankers. We offer a variety of deposit products including demand deposits accounts, interest-bearing products, savings accounts, and certificate of deposits. We put continued effort into gathering noninterest demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and expansion into new markets. As the Company wins new loan customers and targets new deposit relationships with competitive rates on interest bearing accounts, our bankers are focused on ensuring that we win the entire relationship, including operating accounts, so that we can preserve our attractive mix of deposits.

Total deposits increased $102.9 million, or 5.6%, to $1.94 billion at March 31, 2025 compared to $1.83 billion at December 31, 2024. As of March 31, 2025, 15.5% of total deposits were comprised of noninterest-bearing deposits accounts and 84.5% of interest-bearing deposit accounts compared to 16.5% and 83.5% as of December 31, 2024, respectively. These increases were due to a continued result of pursuing and winning new relationships as well as maintaining our existing relationships.

Total deposits increased $84.1 million, or 4.8%, to $1.83 billion at December 31, 2024 compared to $1.75 billion at December 31, 2023. As of December 31, 2024, 16.5% of total deposits were comprised of noninterest-bearing deposits accounts and 83.5% of interest-bearing deposit accounts compared to 18.6% and 81.4% as of December 31, 2023, respectively. These increases were due to a continued result of our expanding branch network as well as winning new relationships.

At March 31, 2025, we had total brokered deposits of $287.6 million, or 14.8% of total deposits, compared to $275.3 million, or 15.0% of total deposits, at December 31, 2024.

At December 31, 2024, we had total brokered deposits of $275.3 million, or 15.0% of total deposits, compared to $225.3 million, or 12.9% of total deposits, at December 31, 2023. We use brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network, which are our principal source of funding. Our level of brokered deposits varies from time to time depending on competitive interest rate conditions and other factors and tends to increase as a percentage of total deposits when the brokered deposits are less costly than issuing internet certificates of deposit or borrowing from the Federal Home Loan Bank of Atlanta.

At March 31, 2025, our uninsured deposits were $699.7 million, or 36.1% of total deposits, compared to $667.4 million, or 36.4% of total deposits, at December 31, 2024.

At December 31, 2024, our uninsured deposits were $667.4 million, or 36.4% of total deposits, compared to $625.3 million, or 35.7% of total deposits, at December 31, 2023.

The following table summarizes our average deposit balances and weighted average rates as of the dates presented:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **As of March 31, 2025** | **As of March 31, 2025** | **2024** | **2024** | **2023** | **2023** |
| <u>(dollars in thousands)</u> | **Average Balance** | **Weighted Average Rate**<sup>(1)</sup> | **Average Balance** | **Weighted Average Rate** | **Average Balance** | **Weighted Average Rate** |
| &nbsp;&nbsp;Noninterest-bearing demand deposits | 293387 | -% | 323949 | -% | 358650 | -% |
| &nbsp;&nbsp;Interest-bearing demand deposits | 196017 | 0.69 | 179495 | 0.45 | 168072 | 0.22 |
| &nbsp;&nbsp;Money market deposits | 561060 | 3.14 | 598621 | 3.73 | 565284 | 2.92 |
| &nbsp;&nbsp;Savings deposits | 35145 | 0.50 | 38074 | 0.50 | 42939 | 0.50 |
| &nbsp;&nbsp;Certificates of deposits | 774634 | 4.25 | 651974 | 4.62 | 584983 | 3.79 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | 1566856 | 3.32% | 1468164 | 3.64% | 1361278 | 2.89% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | $1860243 | 2.80% | $1792113 | 2.98% | $1719928 | 2.28% |

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<sup>(1)</sup> Annualized weighted average rate for March 31, 2025.

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The following tables set forth the maturity of time deposits as of March 31, 2025, December 31, 2024 and December 31, 2023:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **As of March 31, 2025 Maturity Within:** | **As of March 31, 2025 Maturity Within:** | **As of March 31, 2025 Maturity Within:** | **As of March 31, 2025 Maturity Within:** | **As of March 31, 2025 Maturity Within:** |
| <u>(dollars in thousands)</u> | **Three Months** | **Three to Six Months** | **Six to Twelve Months** | **After Twelve Months** | **Total** |
| &nbsp;&nbsp;Time deposits ($250,000 or less) | 219406 | 155334 | 182754 | 70157 | 627651 |
| &nbsp;&nbsp;Time deposits (more than $250,000) | 75672 | 58339 | 32886 | 965 | 167862 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total time deposits | $295078 | $213673 | $215640 | $71122 | $795513 |
|  | **As of December 31, 2024 Maturity Within:** | **As of December 31, 2024 Maturity Within:** | **As of December 31, 2024 Maturity Within:** | **As of December 31, 2024 Maturity Within:** | **As of December 31, 2024 Maturity Within:** |
| <u>(dollars in thousands)</u> | **Three Months** | **Three to Six Months** | **Six to Twelve Months** | **After Twelve Months** | **Total** |
| &nbsp;&nbsp;Time deposits ($250,000 or less) | 262984 | 131891 | 195501 | 3234 | 593610 |
| &nbsp;&nbsp;Time deposits (more than $250,000) | 51978 | 79043 | 33600 | 970 | 165591 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total time deposits | $314962 | $210934 | $229101 | $4204 | $759201 |
|  | **As of December 31, 2023 Maturity Within:** | **As of December 31, 2023 Maturity Within:** | **As of December 31, 2023 Maturity Within:** | **As of December 31, 2023 Maturity Within:** | **As of December 31, 2023 Maturity Within:** |
| <u>(dollars in thousands)</u> | **Three Months** | **Three to Six Months** | **Six to Twelve Months** | **After Twelve Months** | **Total** |
| &nbsp;&nbsp;Time deposits ($250,000 or less) | 308870 | 69695 | 129555 | 4574 | 512694 |
| &nbsp;&nbsp;Time deposits (more than $250,000) | 47701 | 30675 | 51414 | 314 | 130104 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total time deposits | $356571 | $100370 | $180969 | $4888 | $642798 |

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*<u>Commercial Mortgage Servicing Rights</u>*

As of March 31, 2025, December 31, 2024 and December 31, 2023, we serviced $112.0 million, $120.4 million and $107.5 million, respectively, of SBA and USDA loans for others. The size of this loan servicing portfolio has grown over the last few years as we consistently originated and sold portions of these loans that we originate while retaining loan servicing rights. Activity for commercial mortgage servicing rights was as follows:

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| | | | |
|:---|:---|:---|:---|
|  | **As of March 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| <u>(dollars in thousands)</u> | **2025** | **2024** | **2023** |
| Balance, beginning of period | 1237 | 1125 | 1302 |
| &nbsp;&nbsp;Additions | - | 426 | 367 |
| &nbsp;&nbsp;Disposals | - | - | - |
| &nbsp;&nbsp;Other changes<sup>(1)</sup> | (144) | (314) | (544) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance, end of period | $1093 | $1237 | $1125 |

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<sup>(1)</sup> Comprised of amortization.

Our commercial mortgage servicing rights are included in intangible assets on our consolidated balance sheets and are reported net of amortization and impairment, if any.

*<u>Other Borrowings</u>*

The Company utilizes FHLBA advances as a supplementary funding source to finance our operations. These FHLBA advances are collateralized by securities owned by the Company and held in safekeeping by the FHLBA, FHLBA stock owned by the Company, and certain qualifying loans secured by real estate, including residential mortgage loans, home equity lines of credit and commercial real estate loans.

At March 31, 2025 and December 31, 2024, we had a maximum borrowing capacity from the FHLBA of $174.1 million and $162.8 million, respectively. As of March 31, 2025, we had no FHLBA advances outstanding. At December 31, 2024, we had $15.0 million of FHLBA advances outstanding.

At December 31, 2024 and 2023, we had a maximum borrowing capacity from the FHLBA of $162.8 million and $148.0 million, respectively. We had $15.0 million and $50.0 million of FHLBA advances outstanding as of December 31, 2024 and 2023, respectively.

As of March 31, 2025 and December 31, 2024, the Company had approximately $6.0 million and $12.0 million, respectively, of a line of credit outstanding, net of debt costs, with a maximum commitment availability of $24.0 million at March 31, 2025 and December 31, 2024.

The Company had approximately $12.0 million, and $24.0 million of a line of credit outstanding, net of debt costs, as of December 31, 2024 and 2023, respectively, with a maximum commitment availability of $24.0 million at December 31, 2024 and 2023.

In addition, the Company had approximately $14.7 million of subordinated debt, net of debt costs, as of March 31, 2024, December 31, 2024, and December 31, 2023.

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*<u>Investment Portfolio</u>*

The securities portfolio is the second largest component of our interest earning assets. The portfolio serves the following purposes: (i) to optimize the Bank's income consistent with the investment portfolio's liquidity and risk objectives; (ii) to balance market and credit risks of other assets and the Bank's liability structure; (iii) to profitably deploy funds which are not needed to fulfill loan demand, deposit redemptions or other liquidity purposes; and (iv) provide collateral which the Bank is required to pledge against public funds.

We classify our securities as either available-for-sale or held-to-maturity at the time of purchase. Investment securities not classified as either held-to-maturity or trading are classified as available-for-sale. All of the securities in our investment portfolio were classified as available-for-sale as of March 31, 2025, December 31, 2024, and December 31, 2023. Investment securities available-for-sale are stated at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of AOCI in the Consolidated Statements of Comprehensive Income. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities.

Securities available-for-sale consist primarily of U.S. Treasuries, municipal obligations, mortgage-backed securities, asset-backed securities, and corporate debt securities. No issuer of the available-for-sale securities comprised more than ten percent of our shareholders' equity as of March 31, 2025, December 31, 2024, and December 31, 2023, except FHLMC, FNMA, Ginnie Mae, and U.S. Treasury within those periods.

The following table summarizes the fair value of the available-for-sale securities portfolio as of the dates presented:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of March 31,** | **As of March 31,** | **As of March 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** | **2023** | **2023** | **2023** |
| <u>(dollars in thousands)</u> | **Amortized Cost** | **Fair Value** | **Unrealized Gain (Loss)** | **Amortized Cost** | **Fair Value** | **Unrealized Gain (Loss)** | **Amortized Cost** | **Fair Value** | **Unrealized Gain (Loss)** |
| &nbsp;&nbsp;U.S. Treasuries | 5991 | 5688 | (303) | 5990 | 5612 | (378) | 53954 | 52008 | (1946) |
| &nbsp;&nbsp;Municipal obligations | 61845 | 53597 | (8248) | 61401 | 53071 | (8330) | 71160 | 62884 | (8276) |
| &nbsp;&nbsp;Mortgage-backed securities | 184694 | 171951 | (12743) | 181242 | 166092 | (15150) | 166112 | 149336 | (16776) |
| &nbsp;&nbsp;Asset-backed securities | 34394 | 34431 | 37 | 46775 | 46940 | 165 | 55874 | 55664 | (210) |
| &nbsp;&nbsp;Corporate debt securities | 60360 | 59811 | (549) | 64264 | 63552 | (712) | 37520 | 34904 | (2616) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total available for sale securities | $347284 | $325478 | $(21806) | $359672 | $335267 | $(24405) | $384620 | $354796 | $(29824) |

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Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At December 31, 2024, we evaluated securities available-for-sale which had an unrealized loss to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value with a charge to earnings. We do not intend to sell these securities, and it is not more likely than not that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity.

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of March 31, 2025 and December 31, 2024. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Yields were computed using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, considering the expected life of each security. The weighted average yield for each maturity range was computed using the amortized cost of each security within the applicable maturity range. The yield on non-taxable investments was not adjusted for tax equivalency.

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** | **As of March 31, 2025** |
|  | **Due in One<br>Year or Less** | **Due in One<br>Year or Less** | **Due after One Year<br>Through Five Years** | **Due after One Year<br>Through Five Years** | **Due after Five Years<br>Through Ten Years** | **Due after Five Years<br>Through Ten Years** | **Due after<br>Ten Years** | **Due after<br>Ten Years** |
| <u>(dollars in thousands)</u> | **Amortized Cost** | **Weighted Average Yield** | **Amortized Cost** | **Weighted Average Yield** | **Amortized Cost** | **Weighted Average Yield** | **Amortized Cost** | **Weighted Average Yield** |
| &nbsp;&nbsp;U.S. Treasuries | - | -% | 5991 | 1.03% | - | -% | - | -% |
| &nbsp;&nbsp;Municipal obligations | - | - | 8310 | 1.90 | 23781 | 2.16 | 29754 | 2.37 |
| &nbsp;&nbsp;Mortgage-backed securities | - | - | 27612 | 2.98 | 14262 | 4.06 | 142820 | 3.43 |
| &nbsp;&nbsp;Asset-backed securities | - | - | - | - | 17309 | 5.87 | 17085 | 5.69 |
| &nbsp;&nbsp;Corporate debt securities | 2473 | 10.00 | 17030 | 7.56 | 37816 | 5.63 | 3041 | 5.58 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total available for sale securities | $2473 | 10.00% | $58943 | 3.96% | $93168 | 4.55% | $192700 | 3.50% |

---

------

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** |
|  | **Due in One<br>Year or Less** | **Due in One<br>Year or Less** | **Due after One Year<br>Through Five Years** | **Due after One Year<br>Through Five Years** | **Due after Five Years<br>Through Ten Years** | **Due after Five Years<br>Through Ten Years** | **Due after<br>Ten Years** | **Due after<br>Ten Years** |
| <u>(dollars in thousands)</u> | **Amortized Cost** | **Weighted Average Yield** | **Amortized Cost** | **Weighted Average Yield** | **Amortized Cost** | **Weighted Average Yield** | **Amortized Cost** | **Weighted Average Yield** |
| &nbsp;&nbsp;U.S. Treasuries | - | -% | 5990 | 1.03% | - | -% | - | -% |
| &nbsp;&nbsp;Municipal obligations | - | - | 6339 | 1.68 | 24310 | 2.20 | 30752 | 2.37 |
| &nbsp;&nbsp;Mortgage-backed securities | - | - | 27823 | 3.05 | 14257 | 4.13 | 139162 | 3.40 |
| &nbsp;&nbsp;Asset-backed securities | - | - | - | - | 23367 | 6.06 | 23408 | 6.24 |
| &nbsp;&nbsp;Corporate debt securities | 2449 | 10.00 | 22443 | 6.55 | 36332 | 5.56 | 3040 | 5.58 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total available for sale securities | $2449 | 10.00% | $62595 | 3.97% | $98266 | 4.64% | $196362 | 3.61% |

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We utilize interest rate swaps agreements for some of our securities available-for-sale as part of our asset-liability management strategy to help mitigate its interest rate risk.

As of March 31, 2025 and December 31, 2024, the carrying amount of our hedged securities available for sale related to cumulative basis adjustment for the fair value hedges was $23.1 million and $22.6 million, respectively.

As of December 31, 2024 and 2023, the carrying amount of our hedged securities available for sale related to cumulative basis adjustment for the fair value hedges was $22.6 million and $22.8 million, respectively.

*<u>Liquidity</u>*

The term liquidity refers to the measure of our ability to meet cash flow requirements of our depositors and borrowers, while at the same time meeting our operational, capital, and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities in order to meet the return on investment objectives of our shareholders.

The Bank's Asset and Liability Committee as well as the Credit and Risk Committee of the Board of Directors are the primary groups responsible for monitoring the Bank's liquidity position. We have identified various liquidity metrics and ratios, including the volatile funds ratio, non-core funding dependency ratio and loan to deposit ratio that these committees use to monitor the Bank's liquidity position. Further, these groups are also responsible for reviewing and monitoring the stress testing of the Bank's overall liquidity under multiple liquidity stress scenarios. As of December 31, 2024, the Bank was in compliance with all internal policies and guidelines.

Our liquidity position is supported by management of our liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and fair value of unpledged investment securities. Other available sources of liquidity include wholesale deposits, and additional borrowings from correspondent banks, FHLBA advances, and the Federal Reserve discount window.

Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and new customer deposits. Other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of March 31, 2025 and December 31, 2024, we had $69.5 million of unsecured federal funds lines with no amounts advanced.

As of December 31, 2024 and 2023, we had $69.5 million and $55.5 million, respectively, of unsecured federal funds lines with no amounts advanced.

As of March 31, 2025 and December 31, 2024, we had access to the Federal Reserve's discount window in the amount of $30.2 million and $30.4 million, respectively. There were no borrowings outstanding as of March 31, 2025 and December 31, 2024 for the Federal Reserve's discount window. We had pledged investment securities at March 31, 2025 and December 31, 2024 totaling $8.7 million and $8.5 million, respectively, as collateral for federal funds purchased. In addition, we also had pledged investment securities at March 31, 2025 and December 31, 2024, totaling $31.8 million and $32.1 million, respectively, as collateral at the FRB.

As of December 31, 2024 and 2023, we had access to the Federal Reserve's discount window in the amount of $30.4 million and $184.1 million, respectively. Of the $184.1 million unused lines of credit from the Federal Reserve Bank of Richmond for 2023, $143.4 million was available under the BTFP and $40.7 million from the discount window, both fully secured by investment securities. There were no borrowings outstanding as of December 31, 2024 and 2023 for the Federal Reserve's discount window. We had pledged investment securities at December 31, 2024 and 2023 totaling $8.5 million and $10.1 million, respectively, as collateral for federal funds purchased. In addition, we also had pledged investment securities at December 31, 2024 and 2023, totaling $32.1 million and $174.1 million, respectively, as collateral at the FRB.

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At March 31, 2025, we had no outstanding advances from the FHLBA while at December 31, 2024, we had $15.0 million, outstanding advances from the FHLBA. Based on the values of collateral pledged, we had $166.1 million and $141.8 million as of March 31, 2025 and December 31, 2024, respectively, of additional borrowing availability with the FHLBA. We had no pledged investment securities at March 31, 2025 or December 31, 2024 pledged as collateral for the FHLBA advances. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.

At December 31, 2024 and 2023, we had $15.0 million and $50.0 million, respectively, of outstanding advances from the FHLBA. Based on the values of collateral pledged, we had $141.8 million and $98.0 million as of December 31, 2024 and 2023, respectively, of additional borrowing availability with the FHLBA. We had no pledged investment securities at December 31, 2024 or December 31, 2023 pledged as collateral for the FHLBA advances. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.

*<u>Capital Requirements</u>*

The Bank is subject to various regulatory capital requirements administered by the Federal Banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct adverse material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum ratios. These include a CET1 risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock plus retained earnings less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets, and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain "high volatility" commercial real estate, past due assets, structured securities, and equity holdings.

The Bank is also required to maintain capital at a minimum level based on total assets, which is known as the Tier 1 leverage ratio. The leverage capital ratio is the ratio of Tier 1 capital to quarterly average assets net of goodwill, certain other intangible assets, and certain required deduction items require the Bank to maintain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) a minimum leverage ratio of Tier 1 capital to average total assets, after certain adjustments, of 4.0%,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a minimum ratio of total-capital to risk-weighted assets of 8.0% and,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) a minimum ratio of CET1 to risk-weighted assets of 4.5%.

In addition, the capital rules require a capital conservation buffer of 2.5% above each of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total capital), comprised of CET1, which is designed to absorb losses during periods of economic stress. These buffer requirements must be met for a bank or bank holding company to be able to pay dividends, engage in share buybacks, or make discretionary bonus payments to executive management without restriction.

*Prompt Corrective Action* — The Federal Banking agencies have broad powers with which to require companies to take prompt corrective action to resolve problems of insured depository institutions that do not meet minimum capital requirements. The law establishes five capital categories for this purpose:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) well-capitalized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) adequately capitalized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) undercapitalized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) significantly undercapitalized; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v) critically undercapitalized.

To be well-capitalized, the Bank must maintain at least the following capital ratios:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•6.5% CET1 to risk-weighted assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•8.0% Tier 1 capital to risk-weighted assets;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•10.0% Total capital to risk-weighted assets; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•5.0% Tier 1 leverage ratio.

The table below summarizes the capital requirements applicable to the Bank in order to be considered "well-capitalized" from a regulatory perspective, as well as the Bank's capital ratios as of March 31, 2025, December 31, 2024 and December 31, 2023. Because the Company is a small bank holding company under the guidelines of the Federal Reserve and is not required to report consolidated capital ratios for regulatory purposes, capital ratios are presented for the Bank only.

The Bank exceeded all regulatory capital requirements and was considered to be "well-capitalized" as of the dates reflected per the table below.

There have been no conditions or events since March 31, 2025 that management believes would change this classification.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Ratio at March 31,** | **Ratio at December 31,** | **Ratio at December 31,** | **Regulatory Capital Ratio Requirements** | **Regulatory Capital Ratio Requirements including Capital Conservation Buffer** | **Minimum Requirements for "Well Capitalized" Depository Institution** |
|  | **2025** | **2024** | **2023** |  |  |  |
| **Coastal States Bank** |  |  |  |  |  |  |
| &nbsp;&nbsp;Total capital (to risk-weighted assets) | 12.52% | 12.97% | 12.36% | 8.00% | 10.50% | 10.00% |
| &nbsp;&nbsp;Tier 1 capital (to risk-weighted assets) | 11.55% | 12.07% | 11.52% | 6.00% | 8.50% | 8.00% |
| &nbsp;&nbsp;CETI capital (to risk-weighted assets) | 11.55% | 12.07% | 11.52% | 4.50% | 7.00% | 6.50% |
| &nbsp;&nbsp;Tier 1 leverage | 10.62% | 10.64% | 9.94% | 4.00% | 4.00% | 5.00% |

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*<u>Contractual Obligations</u>*

The following tables contain supplemental information regarding our total contractual obligations at March 31, 2025, December 31, 2024 and December 31, 2023:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Payments Due at March 31, 2025** | **Payments Due at March 31, 2025** | **Payments Due at March 31, 2025** | **Payments Due at March 31, 2025** | **Payments Due at March 31, 2025** |
| <u>(dollars in thousands)</u> | **Within One Year** | **One to Three Years** | **Three to Five Years** | **After Five Years** | **Total** |
| &nbsp;&nbsp;Deposits without a stated maturity | 1142180 | - | - | - | 1142180 |
| &nbsp;&nbsp;Time deposits | 724391 | 70787 | 335 | - | 795513 |
| &nbsp;&nbsp;Other borrowings <sup>(1)</sup> | 6000 | - | - | 15000 | 21000 |
| &nbsp;&nbsp;Operating lease liabilities | 955 | 1595 | 1324 | 1165 | 5039 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total contractual obligations | $1873526 | $72382 | $1659 | $16165 | $1963732 |

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<sup>(1)</sup> $6 million due within one year includes a gross revolving commercial line of credit outstanding, and $15 million due after five years represents gross subordinated debt outstanding.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Payments Due at December 31, 2024** | **Payments Due at December 31, 2024** | **Payments Due at December 31, 2024** | **Payments Due at December 31, 2024** | **Payments Due at December 31, 2024** |
| <u>(dollars in thousands)</u> | **Within One Year** | **One to Three Years** | **Three to Five Years** | **After Five Years** | **Total** |
| &nbsp;&nbsp;Deposits without a stated maturity | 1075601 | - | - | - | 1075601 |
| &nbsp;&nbsp;Time deposits | 754997 | 3850 | 354 | - | 759201 |
| &nbsp;&nbsp;Other borrowings <sup>(1)</sup> | 27000 | - | - | 15000 | 42000 |
| &nbsp;&nbsp;Operating lease liabilities | 987 | 1642 | 1380 | 1302 | 5311 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total contractual obligations | $1858585 | $5492 | $1734 | $16302 | $1882113 |

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<sup>(1)</sup> $27 million due within one year includes a gross revolving commercial line of credit of $12 million and an FHLB of Atlanta advance of $15 million outstanding; $15 million due after five years represents gross subordinated debt outstanding.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Payments Due at December 31, 2023** | **Payments Due at December 31, 2023** | **Payments Due at December 31, 2023** | **Payments Due at December 31, 2023** | **Payments Due at December 31, 2023** |
| <u>(dollars in thousands)</u> | **Within One Year** | **One to Three Years** | **Three to Five Years** | **After Five Years** | **Total** |
| &nbsp;&nbsp;Deposits without a stated maturity | (642797) | - | - | - | (642797) |
| &nbsp;&nbsp;Time deposits | 638371 | 3651 | 776 | - | 642798 |
| &nbsp;&nbsp;Other borrowings <sup>(1)</sup> | 50000 | 24000 | - | 15000 | 89000 |
| &nbsp;&nbsp;Operating lease liabilities | 1075 | 1790 | 1304 | 1107 | 5276 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total contractual obligations | $46649 | $29441 | $2080 | $16107 | $94277 |

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<sup>(1)</sup> $50 million due within one year is for FHLB of Atlanta advance outstanding, $24 million due within one to three years pertains to gross revolving commercial line of credit outstanding, $15 million due after five years represent gross subordinated debt outstanding.

We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels. We expect to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. We have in place various borrowing mechanisms for both short-term and long-term liquidity needs.

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*<u>Off-Balance Sheet Arrangements</u>*

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company's exposure to credit loss in the event of nonperformance by the other party to the instrument is represented by the contractual notional amount of the instrument. Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company uses the same credit policies in making commitments to extend credit as it does for on-balance-sheet instruments.

Letters of credit are conditional commitments issued to guarantee a customer's performance to a third party and have essentially the same credit risk as other lending facilities. Collateral held for commitments to extend credit and letters of credit varies but may include accounts receivable, inventory, property, plant, equipment and income-producing commercial properties.

The following table summarizes the Bank's off-balance-sheet financial instruments as of the dates presented:

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| | | | |
|:---|:---|:---|:---|
|  | **March 31,** | **December 31,** | **December 31,** |
| <u>(dollars in thousands)</u> | **2025** | **2024** | **2023** |
| &nbsp;&nbsp;Commitments to extend credit | 477635 | 460840 | 410698 |
| &nbsp;&nbsp;Letters of credit | 1203 | 1223 | 501 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $478838 | $462063 | $411199 |

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The Company has invested capital in a limited partnership to obtain renewable energy tax credits generated by solar power projects. The following table summarizes the tax credit investment and equity investment as of March 31, 2025, December 31, 2024 and December 31, 2023:

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| | | | | |
|:---|:---|:---|:---|:---|
| <u>(dollars in thousands)</u> | **Balance Sheet Location** | **March 31, 2025** | **December 31, 2024** | **December 31, 2023** |
| Carrying amount | Other assets | $2611 | $2666 | $783 |
| Amount of future funding commitments not included in carrying amount | N/A | 4721 | 2721 | 2462 |

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**Quantitative and Qualitative Disclosures about Market Risk**

*<u>Market Risk</u>*

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates, and equity prices. The Company's market risk is composed primarily of interest rate risk inherent in the normal course of lending and deposit-taking activities. We are also exposed to market risk in our investing activities.

*<u>Interest Rate Risk Management</u>*

Net interest income is our most significant component of earnings and we consider interest rate risk to be our most significant market risk. Our net interest income results from the difference between the yields we earn on our interest-earning assets, primarily loans and investments, and the rates that we pay on our interest-bearing liabilities, primarily deposits and borrowings. When interest rates change, the yields we earn on our interest-earning assets and the rates we pay on our interest-bearing liabilities do not necessarily move in tandem with each other because of the difference between their maturities and repricing characteristics and which can negatively impact net interest income.

Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but such changes could also affect the average duration of our loan portfolio, investment securities and other interest-earning assets.

Our goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may impact our earnings adversely because the interest rates of the underlying assets and liabilities do not change at the same speed, to the same extent or on the same basis.

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One of the tools management uses to estimate and manage the sensitivity of net interest revenue to changes in interest rates is an asset/liability simulation model. Resulting estimates are based upon multiple assumptions for each scenario, including loan and deposit re-pricing characteristics and the rate of prepayments. The ALCO periodically reviews the assumptions for reasonableness based on historical data and future expectations; however, actual net interest revenue may differ from model results. The primary objective of the simulation model is to measure the potential change in net interest revenue over time using multiple interest rate scenarios. The base scenario assumes rates remain flat and is the scenario to which all others are compared, in order to measure the change in net interest revenue. Policy limits are based on immediate rate shock scenarios which is compared to the base scenario. Other scenarios analyzed may include ramped rate shocks, delayed rate shocks, yield curve steepening or flattening, or other variations in rate movements. While the primary policy scenarios focus on a 12-month time frame, longer time horizons are also modeled.

Our policy is based on the 12-month impact on net interest revenue of interest rate shocks. Our shock scenario assumes rates immediately change the full amount at the scenario onset. The following table presents our interest sensitivity position at the dates indicated.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Net Interest Income<br>Sensitivity** | **Net Interest Income<br>Sensitivity** | **Net Interest Income<br>Sensitivity** | **Net Interest Income<br>Sensitivity** |
|  | **12 Month Projection** | **12 Month Projection** | **12 Month Projection** | **12 Month Projection** |
| **(Shock in basis points)** | **-200** | **-100** | **+100** | **+200** |
| March 31, 2025 | (7.49)% | (4.01)% | 4.76% | 8.94% |
| December 31, 2024 | (5.32)% | (2.88)% | 4.10% | 7.28% |
| December 31, 2023 | (7.18)% | (3.50)% | 3.35% | 6.60% |
| December 31, 2022 | (10.01)% | (4.85)% | 4.63% | 9.13% |

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There has been no significant change in the Company's estimated net interest income sensitivity position from December 31, 2024. From a net interest income perspective, the Company generally has an asset sensitive rate position. With the current inverted interest rate yield curve, modeling of net interest income in changing rate environments presents particular challenges. A flat or inverted interest rate yield curve is an unfavorable interest rate environment for many financial institutions, including the Bank, as short-term interest rates generally drive our deposit pricing and longer-term interest rates generally drive loan pricing. When these rates converge or invert, the profit spread we realize between loan yields and deposit rates narrows, which pressures our NIM.

*<u>Economic Value of Equity</u>*

We also compute amounts by which the net present value of our assets and liabilities (economic value of equity or "EVE") would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the yield curve increases or decreases instantaneously, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The following table sets forth the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the yield curve at the dates indicated.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Economic Value of Equity Sensitivity** | **Economic Value of Equity Sensitivity** | **Economic Value of Equity Sensitivity** | **Economic Value of Equity Sensitivity** |
| **(Shock in basis points)** | **-200** | **-100** | **+100** | **+200** |
| March 31, 2025 | (5.62)% | (2.39)% | 1.05% | (0.33)% |
| December 31, 2024 | (3.51)% | (1.13)% | (0.19)% | (2.22)% |
| December 31, 2023 | (3.49)% | (1.06)% | (1.03)% | (4.33)% |
| December 31, 2022 | (6.60)% | (2.29)% | 0.34% | (1.84)% |

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As previously noted, these assumptions are inherently uncertain, and actual results may differ from simulated results. The current interest rate path is less certain for 2025 and further rate decreases are contingent upon improving inflationary conditions. Further changes to interest rates and monetary policy are dependent upon the Federal Reserve's assessment of economic data as it becomes available. We would expect net interest income to decline somewhat in a decreasing interest rate environment and to increase in an increasing interest rate environment, as our model reflects that interest-earning assets reprice faster than interest-bearing deposits which is attributable to assumed deposit betas and repricing lags as there is continued strong market competition for core deposits.

**CoastalSouth Bancshares, Inc.**

We are a bank holding company and we conduct all of our material business operations through the Bank. As a result, the discussion and analysis above relates to activities primarily conducted at the Bank level.

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**BUSINESS**

**Overview**

CoastalSouth Bancshares, Inc. is a bank holding company headquartered in Atlanta, Georgia. Through our wholly owned subsidiary, Coastal States Bank, a South Carolina state-chartered commercial bank, we offer a full range of banking products and services designed for businesses, real estate professionals, and consumers looking for a deep and meaningful relationship with their bank.

Today, we have a community banking presence in some of the fastest growing and most business-friendly markets in the country, namely the Lowcountry of South Carolina (Hilton Head Island, Bluffton, and Beaufort), nearby Savannah, Georgia, and the Atlanta, Georgia market.

In addition to our traditional community banking operations, we operate four specialty lines of business that provide scalability and diversification:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Senior Housing - focuses on lending to operators across the spectrum of senior care, with an emphasis on assisted living;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Marine Lending - focuses on consumer loans primarily to high-net-worth borrowers secured by yachts and high-end sport fishing vessels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Government Guaranteed Lending - focuses on origination of small business and other loans guaranteed by the SBA and USDA; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Mortgage Banker Finance - focuses on mortgage warehouse lending to mortgage originators.

By combining the relationship-based focus of a community bank with our specialty lines of business, we believe we can capitalize on the substantial growth opportunities available in our markets, particularly given the scarcity of community banks between $1.5 billion and $5.0 billion in total assets.

Our management team, comprised of 12 senior officers, has more than 200 years of combined experience in building and operating high performing banking franchises in our markets. Messrs. Stone and Valduga, along with other members of our management team, have deep and relevant experience with community bank acquisitions, having completed 16 acquisitions since 2010 (including at two CSB and 14 at a prior institution).

We believe the experience of our management team, the strength of our markets, the scalability of our business, and the scarcity of community banks like CSB in our markets will continue to fuel our financial success and drive strong shareholder returns.

**Our Component Parts: Understanding Our Business and Our Performance**

We believe that our historical success, and our expectations for continued strong future performance, centers on our ability to combine our traditional community banking operations with our four high-performing, specialty lines of business. This concept of integrated and relational component parts can be used to understand the makeup of our lines of business, our growth strategies, our performance ratios, and the ways our Company drives value for both our current and prospective shareholders.

*Our Community Bank & Our Specialty Lines of Business*

Our community bank is our first component part and the foundation of our Company. Through our community bank, we focus on commercial and retail clients doing business and/or residing in our local markets. We define our local markets as the communities, and surrounding areas, in which our branches are located. Today, our community bank operates in the vibrant markets of the Lowcountry of South Carolina, as well as the nearby Savannah, Georgia market. Our community bank also operates in the Atlanta, Georgia market, the largest MSA by population in the southeast region of the U.S. Community banking has been a core competency of CSB since our inception in 2004, driving attractively priced core deposit funding that supports growth in all of our specialty lines of business, while providing granular commercial and small business lending opportunities.

We supplement our community bank with four additional component parts, or specialty lines of business, which include Senior Housing, Marine Lending, Government Guaranteed Lending, and Mortgage Banker Finance. These specialty lines of business, described in greater detail below, serve our clients across the Southeast and the U.S. without reliance on client sourcing within our community banking markets. We have grown these businesses over many years following our Recapitalization, through the hiring of highly experienced relationship managers, and with a focus on scalability, profitability, and strong credit quality. Each of these component parts is time tested and led by CSB team members with long and successful pedigrees in their respective fields. We utilize conservative underwriting methodologies and careful risk selection to deliver attractive risk-adjusted returns. As supplements to our community bank, these four specialty lines of business help to drive our earnings results and our capacity to grow earnings through efficient asset generation, while serving to diversify our balance sheet from both product and geographic perspectives. Although historically focused on asset generation, we expect that each of our lines of business can and will provide a meaningful source of deposit generation going forward.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** | **Total Loans** |
|  | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of March 31:** |
| *($'s in thousands)* | **2017** | **2018** | **2019** | **2020** | **2021** | **2022** | **2023** | **2024** | **2025** |
| Community Bank | $261388 | $312618 | $356074 | $523553 | $641306 | $776697 | $819610 | $842441 | $863438 |
| Specialty Lines of Business |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Senior Housing Lending | $6000 | $36363 | $80533 | $100391 | $164767 | $249974 | $250593 | $234081 | $245292 |
| &nbsp;&nbsp;&nbsp;&nbsp;Marine Lending | - | 17219 | 13144 | 53434 | 68798 | 203039 | 266197 | 263657 | 284305 |
| &nbsp;&nbsp;&nbsp;&nbsp;Government Guaranteed <br>&nbsp;&nbsp;&nbsp;&nbsp;Lending | 638 | 10546 | 18575 | 25140 | 63245 | 68893 | 82025 | 69264 | 79197 |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage Banker Finance | 34128 | 32641 | 81243 | 113481 | 81453 | 44500 | 82125 | 174033 | 187481 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Specialty Lines of <br>&nbsp;&nbsp;&nbsp;&nbsp;Business | $40766 | $96769 | $193495 | $292446 | $378263 | $566406 | $680940 | $741035 | $796275 |
| Total Loans | $302154 | $409387 | $549569 | $815999 | $1019569 | $1343103 | $1500550 | $1583476 | $1659713 |

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*Our Three Growth Strategies*

We believe in the importance of community banking within the framework of the larger financial services sector and as a pivotal aspect of a vibrant economy. However, fundamental pressures have emerged over time related to the profitability of the financial services industry, broadly, and community banking, specifically. These pressures include compressing net interest margins and rising operating costs (which costs are related to items such as technology, regulatory compliance, and personnel, to name a few).

Due to these industry-wide profitability pressures, we believe the capacity to deliver robust balance sheet growth is a necessary attribute of a successful bank that produces attractive shareholder returns and performance metrics (as described on page 4). Our three component parts of growth - organic growth, acquisitive growth, and business line growth - effectively serve to drive our balance sheet growth and earnings results.

The organic growth of our community bank stems from our ability to attract and expand client relationships, bringing core deposit balances, sourced through our branch system and local communities, and commercial loan balances sourced through our commercial bankers working in our Lowcountry, Savannah and Atlanta MSA markets. We supplement our organic growth with carefully selected and financially disciplined acquisitions of other community banks, a strategy our executive team has successfully implemented at CSB and prior companies. Our third growth strategy refers to both our scalable generation of assets and revenue through our four specialty lines of business (outside of our community bank), as well as our proven ability to establish new specialty lines of business over time while carefully balancing and driving the profitability of our existing lines of business. By way of example, we launched our Senior Housing and our Government Guaranteed Lending business lines in 2017 shortly after our Recapitalization, and later launched our Marine Lending business in 2022 after aggregating a portfolio of loans that were originated by the team that we eventually hired to lead this business. Our Mortgage Banker Finance business line was in existence prior to our Recapitalization, and our management team has overseen its development and expansion since 2017.

We believe our ability to produce both earnings and balance sheet expansion across these three component parts of our growth strategy, while avoiding over-reliance on any single growth strategy, helps us drive profitability and effectively manage risk.

*Our Focal Financial Metrics*

We believe connections exist between the production of returns on average assets and average tangible common equity and our four focal financial metrics: (1) net interest margin, (2) credit metrics, (3) balance sheet and income statement growth, and (4) careful management of expenses as evidenced by our efficiency ratio. We believe the achievement of successful results in each component part is critical to both protecting the value of our bank, particularly during times of stress, and driving growth in shareholder value. When working in concert, these financial metrics have the potential to deliver strong results. When success in any single metric comes at the expense of another metric, the achievement of returns on average assets and average tangible common equity can be challenging.

As illustrated in the financial table below, we produced increasing returns on average assets and average tangible common equity, as well as increasing returns on average assets and returns on average tangible common equity when adjusted for non-recurring items, as measured over the last five years. We assess both GAAP returns and adjusted returns (non-GAAP), which remove the impact of certain non-recurring items, such as losses on sales of available for sale securities (as described on page 28).

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** | **Selected Financial Performance Metrics** |
|  | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of December 31:** | **As of March 31:** | **As of March 31:** |
|  | **2020** | **2021** | **2022** | **2023** | **2024** | **2024** | **2025** |
| Return on Average Assets (ROAA) | 0.67% | 0.94% | 1.07% | 1.26% | 1.05% | 0.48% | 0.97% |
| Adjusted ROAA <sup>(1)</sup> | 0.60% | 0.96% | 1.08% | 1.24% | 1.18% | 1.00% | 0.97% |
| Return on Average Equity (ROAE) | 6.58% | 10.98% | 15.50% | 17.97% | 12.13% | 5.85% | 10.25% |
| Adjusted ROAE <sup>(1)</sup> | 5.89% | 11.31% | 15.59% | 17.70% | 13.60% | 12.24% | 10.25% |
| Return on Average Tangible <br> Common Equity (ROATCE) <sup>(1)</sup> | 6.97% | 11.52% | 16.29% | 18.72% | 12.49% | 6.04% | 10.52% |
| Adjusted ROATCE <sup>(1)</sup> | 6.24% | 11.87% | 16.38% | 18.44% | 14.00% | 12.64% | 10.52% |

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<sup>(1)</sup> See the section entitled "Non-GAAP Financial Measures Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

We believe we have succeeded in producing these returns over this five-year period by focusing on: (1) delivering a net interest margin above 3.28% throughout this timeframe, (2) maintaining low levels of net charge-offs, with aggregate net charge-offs totaling only $2.0 million, or an annual average of 4 basis points of LHFI, (3) producing five-year compounded annual growth rates in total loans of 23.6%, deposits of 25.0%, revenue of 13.7%, net income of 53.1%, adjusted net income (non-GAAP) of 63.3%, fully diluted earnings per share of 42.2%, adjusted fully diluted earnings per share (non-GAAP) of 51.8%, book value per share of 10.4%, and tangible book value per share (non-GAAP) of 11.2%, and (4) managing our expenses as shown by an adjusted efficiency ratio (non-GAAP) of less than 60% over the last three years. See the section entitled "Non-GAAP Financial Measure Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures. We believe our ability to produce results related to each of our focal financial metrics without sacrificing results in any particular measure helps us manage risk.

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** | **Growth of Selected Financial Metrics** |
|  | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Years Ended December 31:** | **For the Periods Ended March 31:** | **For the Periods Ended March 31:** |
| *($'s in thousands, except per share data)* | **2020** | **2021** | **2022** | **2023** | **2024** | **5-Year CAGR** | **2024** | **2025** |
| *Balance Sheet Metrics* |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Gross LHFI | $702518 | $938116 | $1298603 | $1418425 | $1409443 | 24.7% | $1403551 | $1472232 |
| &nbsp;&nbsp;Total Loans (HFI + HFS) | 815999 | 1019569 | 1343103 | 1500550 | 1583476 | 23.6% | 1514571 | 1659713 |
| &nbsp;&nbsp;Deposits | 891552 | 1424117 | 1548646 | 1750657 | 1834802 | 25.0% | 1749484 | 1937693 |
| *Performance Metrics* |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Revenue | 38335 | 52441 | 64151 | 72888 | 69836 | 13.7% | 13391 | 18640 |
| &nbsp;&nbsp;Adjusted Revenue <sup>(1)</sup> | 37387 | 50851 | 64151 | 72413 | 73301 | 15.2% | 16856 | 18640 |
| &nbsp;&nbsp;Net Income | 6368 | 12322 | 18190 | 24478 | 21904 | 53.1% | 2429 | 5050 |
| &nbsp;&nbsp;Adjusted Net Income <sup>(1)</sup> | 5702 | 12694 | 18296 | 24114 | 24558 | 63.3% | 5083 | 5050 |
| &nbsp;&nbsp;Diluted EPS | $0.80 | $1.48 | $2.05 | $2.58 | $2.09 | 42.2% | $0.24 | $0.47 |
| &nbsp;&nbsp;Adjusted Diluted EPS <sup>(1)</sup> | $0.71 | $1.53 | $2.07 | $2.54 | $2.35 | 51.8% | $0.50 | $0.47 |
| &nbsp;&nbsp;Book Value per Share | $12.76 | $14.52 | $13.26 | $16.36 | $19.01 | 10.4% | $16.91 | $19.67 |
| &nbsp;&nbsp;Tangible Book Value per Share <sup>(1)</sup> | $12.08 | $13.84 | $12.64 | $15.80 | $18.51 | 11.2% | $16.39 | $19.17 |

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<sup>(1)</sup> See the section entitled "Non-GAAP Financial Measures Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

While the above-mentioned financial metrics comprise our primary focal measures, we take great care to monitor and balance the management of other financial metrics, including, but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our yields on earning assets and costs of funding (which impact our net interest margin);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our sources, levels, and growth of our non-interest income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•metrics related to our balance sheet composition, such as the ratio of our loans to our deposits, our liquidity ratios, and our non-core funding levels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our operating leverage measures; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our asset liability sensitivity measures.

*Our Competitive Advantage - Our Six Non-Financial Value Drivers* 

We believe our non-financial value drivers are our competitive advantage. Much like our Focal Financial Measures, these non-financial attributes combine to help enhance our franchise value and drive returns for our shareholders.

*<u>Management</u>*

Our management team, which is led by our President, Chief Executive Officer, and Director, Stephen Stone, has significant experience building and operating community banks in our markets while creating value for the shareholders of these companies. Our Chief Financial Officer and Chief Operating Officer, Tony Valduga, has worked alongside Mr. Stone for the past 14 years at both Community & Southern Bank and CSB.

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Following an initial capitalization of Community & Southern Bank in 2010, Messrs. Stone and Valduga, as members of the executive management team, grew Community & Southern to $4.4 billion in assets through a combination of organic growth strategies, acquisitions and introduction of business lines, similar to the three growth strategies described above. Community & Southern was sold in 2016 to a bank currently known as Bank OZK for a deal value of approximately $800 million. As leaders of our Company, Messrs. Stone and Valduga, along with the other members of our management team, have presided over our Recapitalization in 2017, the execution of two bank acquisitions, the growth of our four specialty lines of business, as described above, and the growth of our balance sheet to $2.2 billion in assets.

In addition to Messrs. Stone and Valduga, our team of senior officers and business line leaders are equally focused on risk management as a fundamental governor of our expansion and the achievement of top tier profitability metrics, all while achieving our growth targets. Our leadership team has broad experience in critical tasks such as: 1) sourcing and executing acquisitions and other strategic transactions, 2) building a comprehensive risk management infrastructure, 3) hiring teams of bankers, 4) building specialty lines of business, 5) deploying new technology, 6) managing our balance sheet from interest rate risk, credit risk, liquidity, and capital perspectives, 7) instilling a common culture throughout our organization, 8) expanding into new markets and, 9) maintaining open and collaborative relationships with our regulators. Based on these skill sets and experiences, we believe our current leadership team has the capacity to more than double the asset size of our Company in the future.

We believe our management team's long tenure of working together in our markets provides a strong familiarity with each other and with the markets we serve. Our management team is highly engaged in business development and community service initiatives, and they have proven to be proficient in recruiting talented bankers to join CSB, based, in part, on our reputation for developing high-performing and successful teams.

*<u>Markets</u>*

The markets encompassing our branch footprint include the major Southeast MSAs of Atlanta, Savannah, and Hilton Head. Within these three vibrant markets, we house our 11 community bank branches: five are in our Lowcountry Region, including two on Hilton Head Island, two in Bluffton, and one in Beaufort, SC; one is in Savannah; and five are in the Atlanta MSA, including Sandy Springs, Alpharetta, Cumming, Dawsonville, and in Cobb County near The Battery. We also view our markets in a more broadly defined geographic area to include the states of Georgia and South Carolina. We have grown to become one of the largest remaining independent bank holding companies headquartered in these two states through our progress in building a balance sheet of $2.2 billion in assets and due to merger activity in our markets reducing the number of our locally headquartered competitors as larger buyers located outside of our markets have acquired these banks.

The demographic strengths of our markets, including the size of these markets (as measured by population and numbers of operating businesses) and the growth attributes of these markets (as measured by the historical and projected population and economic growth), provides meaningful opportunities for CSB to aggregate clients and support our balance sheet and earnings growth goals.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Market Demographics** | **Market Demographics** | **Market Demographics** | **Market Demographics** | **Market Demographics** |
|  |  | **2025 - 2030** |  | **2025 - 2030** |
|  |  | **Projected** | **Median HH** | **Projected** |
|  | **MSA** | **Pop. Change** | **Income** | **HHI Change** |
|  | **Population** | **(%)** | **($)** | **(%)** |
| Atlanta-Sandy Springs-Roswell, GA | 6421346 | 4.4% | 87947 | 7.7% |
| Savannah, GA | 436057 | 6.2% | 73273 | 5.1% |
| Hilton Head Island-Bluffton-Port Royal, SC | 240270 | 7.8% | 86076 | 10.1% |
| **Market Weighted Average** |  | **6.3%** | **86360** | **8.9%** |
| **Nationwide Average** |  | **2.4%** | **78770** | **8.8%** |
| Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. | Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. | Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. | Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. | Source: Demographic data is provided by Claritas based primarily on 2020 U.S. Census data; for non-census year data, Claritas uses samples and projections to estimate the demographic data. |

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We believe our Bank is poised to benefit from the demographic and business attributes of our three current markets based on our deposit market share position. The Atlanta MSA is the largest MSA in the southeast region of the U.S. as measured by population, while the populations of the Savannah and Hilton Head Island MSAs are expected to grow at rates more than double that of the U.S., according to the U.S. Census Bureau. Based on information provided by the FDIC as of June 30, 2024, we ranked as the largest headquartered bank by deposits in the Hilton Head Island-Bluffton-Port Royal MSA (the "Hilton Head MSA"), controlling 14.3% of total market deposits in the Hilton Head MSA.

*Culture and Differentiated Brand*

The culture we have developed, which permeates all our client interactions and operational functions, provides continuity of purpose and a guide for our team members' activities across our Bank. We are committed to hiring client facing team members with extensive experience in the local communities we serve and a willingness to embrace our client-focused approach to doing business. We encourage

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clear and open communications between our team members, as well as between our clients and our team members. Our team members view the bedrock responsibilities of their roles in serving our clients as providing exceptional service while identifying and implementing innovative solutions to our clients' financial services needs. We believe our culture gives us a significant advantage in hiring productive team members from other banks and attracting clients from other financial institutions.

At CSB, we believe our Company builds strength through relationships. We exist to build meaningful relationships with our team members, our clients, and our communities. Our mission is to: 1) provide tailored advice and banking solutions to our clients to help them achieve financial success, 2) provide our team members the opportunity to achieve personal, professional, and financial success, and 3) make a positive impact on our communities. We believe that by focusing on the five core values described below we can create meaningful relationships between our team members, between our Bank and our clients, and between our Bank and our communities. Each of these relationships is critical to our financial success and supports our capacity to drive shareholder value. Our five core values include: character, commitment, trust, service, and community.

Our company motto, "Local. And proud of it.", is representative of our brand in the markets we serve. We believe this motto speaks to our commitment to relationships and communities. We believe our team members embrace their standing as local bankers in their communities, striving to develop deep and meaningful relationships with their clients. We believe our relationship-oriented approach to banking resonates with our team members and our clients. Additionally, by nurturing a high-performance culture where success is rewarded and recognized, we believe we are well positioned to attract talented bankers to join our Company.

The culture we have built at CSB also focuses on our communities and our standing as a trusted financial resource to the members of our communities. We encourage our team members to get involved in their communities outside of their work at our Company, as an example, through involvement in community, charitable and non-profit organizations.

Following our Recapitalization in 2017, we established the CSB Community Commitment, a donor advised fund administered through the Community Foundation of the Lowcountry. The CSB Community Commitment is funded by our team members and our Board, and it is overseen by an advisory board comprised of CSB team members from every region and every level throughout the Bank. Over 65% of our team members contributed to the CSB Community Commitment in 2024 and our goal is to increase the participation level to 75% in 2025. The CSB Community Commitment provides direct financial support to charitable organizations in our markets, with a particular emphasis on veterans and childhood development.

**Our Company History and Milestones**

We were organized in 2004 in Hilton Head Island, South Carolina with a mission to create a locally owned and operated community bank. Members of the founding management team and board of directors recognized the value and importance a local community bank can provide to clients and communities within its markets. Through locally-sourced loans and deposits and expansion of our branch footprint in the Lowcountry of South Carolina, CSB grew to become the largest community bank operating in Beaufort County, South Carolina, with "community banks" defined as banks with assets less than $10 billion.

In 2017, we completed our Recapitalization. The proceeds from the Recapitalization allowed us to redeem high cost preferred stock issued through the U.S. Treasury's TARP in the aftermath of the economic downturn during 2007 through 2009 (the "Great Recession"), which TARP preferred stock was utilized to stabilize our capital position as the United States and local economies recovered. Upon closing of the Recapitalization and redemption of the TARP preferred stock, our Board of Directors adopted our strategic plan focused the three-pronged growth strategy described above.

As a result, we grew total assets from $413.5 million in assets as of December 31, 2016 to $2.2 billion in assets as of March 31, 2025 through the successful execution of our organic growth strategy, opportunistic community bank acquisitions, and introduction of specialty lines of business. We have demonstrated positive credit improvements since the years following the Great Recession, reducing non-performing assets from 3.09% of our assets at December 31, 2016 to 0.70% of our assets at March 31, 2025 and our ratio of non-performing assets excluding guaranteed loans to total assets (non-GAAP) was 0.49% at March 31, 2025. We have driven returns on our average assets and average tangible common equity (non-GAAP) from losses of (0.04)% and (0.31)% for the year ended December 31, 2018, respectively, to 1.16% and 13.36%, for the last twelve months ended March 31, 2025, respectively. See the section entitled "Non-GAAP Financial Measure Reconciliation" for a reconciliation of non-GAAP measures to their most comparable GAAP measures. Since our Recapitalization, we executed two acquisitions—Foothills Community Bank in 2018 and Cornerstone Bank in 2021—to help build our community banking presence in our Atlanta market. Additionally, as of March 31, 2024, we have hired 34 commercial bankers since December 31, 2017. We view the hiring of commercial bankers focused on loan originations and deposit gathering as a subset of our acquisitive growth strategy and have sourced many of these bankers following the acquisitions of other banks in our markets.

**Additional Detail Regarding Our Community Bank and Our Lines of Business**

In addition to our community bank, we operate four specialty lines of business. Each of these specialty lines of business operates on a national basis within the United States. The operation of specialty lines of business such is prevalent in larger regional or national banks, but less frequently part of product offerings of smaller banks with assets less than $10 billion. While the inclusion of these

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specialty lines of business is less common in a community bank of our asset size, we have developed a strong track record of performance and risk management.

We have built each of these four specialty lines of business through the hiring of experienced managers, business producers, and support personnel, in many cases known to us from previous financial institutions. While we have enjoyed success through organic growth and development of our specialty lines of business, in the future, we may consider acquisitions of additional lines of business on a stand alone basis or as part of the acquisition of whole banks.

A key tenet to our approach to building our specialty lines of business is that we "do not dabble". Prior to launching any new line of business, we assess attributes of the potential new line of business, including our expected ability to scale the business, our profitability expectations for the new line of business, the historical and expected credit profile of the business, the manner in which a new line of business complements or enhances our current lines of business and our community bank, compliance requirements associated with the business, operational capacity for our Company to manage the business, and, our comfort with the leadership of the new line of business.

*Our Community Bank* 

We view our community bank geographically through the lens of three separate markets: 1) the Lowcountry, 2) Savannah, and 3) the Atlanta MSA. Within these three vibrant markets, we house our 11 community bank branches.

Since 2017, we have grown from four bank branches to eleven. Five of these locations are *de novo*, opened by us as opposed to having been purchased through our two bank acquisitions. Our *de novo* branches look and operate differently than many traditional bank branches. Recognizing that client interactions, particularly with commercial clients, continue to migrate from in person to digital communications and transaction execution, our branches are designed to function as more than a transaction hub. In lieu of a traditional teller line, we rely upon a smaller open office design staffed by bankers cross-trained to perform a variety of functions. Our branches typically house three to four full time employees, which differs from historical banking models whereby large numbers of employees occupy large bank facilities. In our branches with comparatively less square footage per branch, the balance of our space is devoted to our commercial banking team members and their support staff.

For the three months ended March 31, 2025, and for the year ended December 31, 2024, loan commitment originations for the Community Bank were $126.5 million and $375.5 million, respectively, with a weighted average coupon at origination of 7.23% and 8.32%, respectively. At March 31, 2025 and December 31, 2024, total Community Bank deposits, which excludes Correspondent Banking deposits, were $1.58 billion and $1.45 billion, respectively, with an average of $144.0 million and $131.8 million, respectively, per branch.

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| | |
|:---|:---|
| ![img173035246_19.jpg](img173035246_19.jpg)<br>![img173035246_20.jpg](img173035246_20.jpg)<br>Source: S&P Capital IQ Pro | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*<u>Our Hilton Head Presence</u>*<br>According to the FDIC's Summary of Deposits as of June 30, 2024, in the Hilton Head MSA, we rank third in deposits behind only Wells Fargo & Co. and SouthState Corp., two banks headquartered outside of South Carolina with assets over $50 billion. In addition, the fourth, fifth and sixth ranked banks by deposits are comprised of banks larger than $500 billion in assets. The seventh ranked bank by deposits in the Hilton Head MSA, a community bank like us with less than $10 billion in assets, holds less than one third of our total deposits in the market controlling a market share of only 3.7% as compared to our 14.3% market share. We believe the strength of our deposit rankings as compared to both larger banks and community banks under $10 billion in assets positions us well to compete for clients desiring a strong locally controlled bank. |

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|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*<u>Our Savannah Presence</u>*<br>We opened a de novo branch in the Savannah MSA in 2020. Notwithstanding that this branch opened during COVID-19 lockdowns, it has grown to hold over $70 million in deposits in four years. However, this represents less than a 1% market share of deposits based on FDIC's Summary of Deposits as of June 30, 2024. The Savannah MSA holds over $10.1 billion in deposits as of June 30, 2024, providing us with a significant opportunity to continue to build deposit market share. We believe recent consolidation within the community banking space in Savannah will provide attractive client acquisition opportunities. | ![img173035246_21.jpg](img173035246_21.jpg)<br>![img173035246_22.jpg](img173035246_22.jpg)<br>Source: S&P Capital IQ Pro |

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|:---|:---|
| ![img173035246_23.jpg](img173035246_23.jpg)<br>![img173035246_24.jpg](img173035246_24.jpg)<br>Source: S&P Capital IQ Pro | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*<u>Our Atlanta Presence</u>*<br>Similar to Savannah, but on a far larger scale, our Atlanta MSA franchise holds a small percentage of total deposits, representing only 0.3% of the $230.7 billion total deposit market according to the FDIC Summary of Deposits as of June 30, 2024. We believe our growing deposit franchise in the Atlanta MSA, totaling $760 million in deposits as of June 30, 2024, will continue to benefit from the overall size of this market and our standing as one of the largest remaining independent banks in Georgia and South Carolina, and from the expected continued consolidation of our larger competitors in the market. Likewise, consolidation within the community banking space, as seen in the chart on page 8, has left CSB positioned as one of the few remaining community banks in Atlanta between $1.5 - $5.0 billion in assets. |

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*Senior Housing Lending*

Our Senior Housing business line is focused on lending across the spectrum of senior care, with an emphasis on assisted living. We focus on low leverage lending to experienced operators with strong track records. Our national platform provides a larger screening pool from which to source opportunities that meet our strict underwriting standards. The portfolio has experienced zero net charge-offs since inception in 2017. For the year ended December 31, 2024, the average LTV ratio at origination within this portfolio was approximately 63.5% with a WAC at origination of 8.27%. As of December 31, 2024, the weighted average LTV of our Senior Housing portfolio was 63.6%. The senior housing industry has experienced some financial pressure since 2020 due to the impact of COVID-19, rising interest rates, and inflationary pressure on expenses. However, the mid- to long-term demographic trends in the U.S. cause us to believe this line of business will continue to provide attractive growth opportunities while maintaining our high level of credit-based selectivity.

Our Senior Housing team is comprised of veterans of the senior housing business. Our line of business leader has more than three decades of experience in this industry, as does our senior credit officer for this portfolio. Our Chief Executive Officer and Chief Operating Officer worked with our Senior Housing leadership at the bank they led prior to our Recapitalization, amounting to decades of experience working with our Senior Housing leadership team. Given the significant experience of this team, we have taken special care to plan for eventual succession management. Our current managing director of senior housing was hired in 2018 from a highly successful Southeastern regional bank and has worked side by side with our line of business leader on every deal since joining CSB.

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Our Senior Housing portfolio is one of the most closely monitored portfolios in the Bank. Our team performs both regulatory and financial monitoring on the entire portfolio each quarter. Key financial metrics such as NOI, occupancy, and DSC are measured and financial covenants are tested each quarter.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** | **Senior Housing Lending as of December 31:** |
| *($'s in thousands)* | **2020** | **2021** | **2022** | **2023** | **2024** |
| Period End Balance | $100391 | $164767 | $249974 | $250593 | $234081 |
| Annual Originations | 33713 | 122275 | 122431 | 16713 | 73726 |
| # of Loans Originated | 8 | 12 | 13 | 3 | 5 |
| Loan to Value at Origination | 67.2% | 67.0% | 61.9% | 62.1% | 63.5% |
| Year to Date Effective Yield | 5.41% | 4.87% | 5.61% | 8.58% | 8.63% |
| Annual Net Charge-Offs | $- | $- | $- | $- | $- |

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Although deposit generation was not a primary focus of our Senior Housing team prior to 2025, given our deep relationships with our clients and the operating nature of their business, we generally require the operating account for each of our clients, as well as any reserve accounts. Likewise, for construction loans, we will generally require that equity be held at CSB prior to funding. Over time, we expect the deposit contribution from the Senior Housing business line to continue to increase.

*Marine Lending*

In 2022, we hired a team of bankers to lead our Marine Lending line of business. Our line Marine Lending leader and senior underwriter within Marine Lending have more than five decades of cumulative consumer lending experience. We operate a correspondent lending model within our Marine Lending business, whereby we originate direct super-prime consumer loans, defined as having a primary borrower with a strong repayment history and evidence of prior recreational ownership at the time of origination, through a network of twelve national correspondent lenders. Similar to the leadership of our Senior Housing business line, our Chief Executive Officer and Chief Operating Officer worked with our Marine Lending leadership at the bank they led prior to our Recapitalization, amounting to decades of experience working with our Marine Lending leadership team. This included our purchase of certain loans from this team from 2018 to 2021 prior to their onboarding at our Bank.

The primary collateral supporting loans we originate in this line of business are comprised primarily of high-end yachts and sport fishing vessels. The loans are primarily made to high net worth clients with attractive, super-prime credit scores (averaging 808 for the year ended December 31, 2024) at time of origination. In addition, our Marine Lending business focuses on "lifestylers," or those borrowers with at least 5 years of boat ownership experience of large vessels. As of December 31, 2024, we had $263.7 million of loans in our Marine Lending loan portfolio. For the year ended December 31, 2024, our average loan size in the portfolio at origination was $370 thousand and the average loan-to-value at time of origination was approximately 76.6%. Since inception, we have repossessed three vessels due to non-payment of borrowers' loans out of 939 originations from the launch of the business through December 31, 2024, while net charge-offs in this portfolio since inception have totaled $41 thousand.

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| | | | |
|:---|:---|:---|:---|
| **Marine Lending** <sup>(1)</sup> **as of December 31:** | **Marine Lending** <sup>(1)</sup> **as of December 31:** | **Marine Lending** <sup>(1)</sup> **as of December 31:** | **Marine Lending** <sup>(1)</sup> **as of December 31:** |
| *($'s in thousands)* | **2022** | **2023** | **2024** |
| Period End Balance | $203039 | $266197 | $263657 |
| Annual Originations | 112840 | 123482 | 73612 |
| Loan to Value at Origination | 58.6% | 61.6% | 76.6% |
| Origination FICO | 765 | 810 | 808 |
| Debt to Income Ratio at Origination | 23.2% | 20.6% | 22.9% |
| Year to Date Effective Yield | 3.34% | 4.14% | 4.82% |
| Weighted Average Coupon at Origination | 5.26% | 7.47% | 7.16% |
| Annual Net Charge-Offs | $- | $5 | $36 |

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<sup>(1)</sup> 2022 information is from launch of CSB Marine line of business in June 2022.

Like Senior Housing, prior to 2025, our Marine Lending line of business was not focused on deposit generation. However, given the financial strength of our Marine Lending clients, we believe there is ample opportunity for us to win deposit business from them. Later this year, we plan to launch a deposit account specifically targeted at this client base.

*Government Guaranteed Lending* 

Our GGL line of business focuses on the origination of loans through the SBA programs, including 7(a) loans and 504 loans, designed to support credit origination to small businesses, as well as loans guaranteed by the USDA. Our GGL team is currently comprised of a managing director, a national sales manager, each with over 30 years of SBA lending experience, as well as seven business development officers. CSB has earned the distinction from the SBA as a Preferred Lender under the SBA's 7(a) program,

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which designation allows a bank to make final credit decisions on SBA-guaranteed loans.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **GGL as of December 31:** | **GGL as of December 31:** | **GGL as of December 31:** | **GGL as of December 31:** | **GGL as of December 31:** | **GGL as of December 31:** |
| *($'s in thousands)* | **2020** | **2021** | **2022** | **2023** | **2024** |
| Period End Balance | $25140 | $63245 | $68893 | $82025 | $69264 |
| Annual Originations <sup>(1)</sup> | 23269 | 58888 | 28121 | 42743 | 22252 |
| Sold Volume | 13775 | 25018 | 19227 | 20304 | 25362 |
| Gain on Sale Income | 1263 | 2920 | 1877 | 1360 | 1818 |
| Average Net Premium | 9.17% | 11.67% | 9.76% | 6.70% | 7.17% |
| Annual Net Charge-Offs | 0 | -15 | 1042 | 401 | -98 |
| Annual Net Charge-Offs, less Offset<br> from SBA Contingency Reserve <sup>(2)</sup> | 0 | -15 | -82 | 120 | -98 |

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<sup>(1)</sup> In 2024, originations of $20.9 million were associated with a USDA Senior Housing loan. The loan is reported in the Senior Housing origination volume.

<sup>(2)</sup> Gross charge-offs of $1,124 and $281 were fully offset through releases from the SBA contingency reserve in noninterest expense for the period ended December 31, 2022 and 2023, respectively. The SBA contingency reserve was established in conjunction with the acquisition of Cornerstone Bancshares, Inc. in 2021 to capture potential risk of government guarantees not being honored. When SBA repairs or denials occurred on these acquired loans, they were reported as charge-offs; however, the offsetting release from the contingency reserve resulted in no economic loss to the Company.

Our GGL loan portfolio is comprised of diverse types of loans. We lend for various construction, commercial real estate, and commercial and industrial purposes.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **GGL by Loan Type as of December 31:** | **GGL by Loan Type as of December 31:** | **GGL by Loan Type as of December 31:** | **GGL by Loan Type as of December 31:** | **GGL by Loan Type as of December 31:** | **GGL by Loan Type as of December 31:** |
| *($'s in thousands)* | **2020** | **2021** | **2022** | **2023** | **2024** |
| Acquisition, development, and<br> construction | $1791 | $9470 | $7985 | $2288 | $4045 |
| Income producing CRE | 6864 | 15939 | 19977 | 38948 | 21002 |
| Owner-occupied CRE | 10030 | 28064 | 32362 | 24606 | 27057 |
| Commercial and industrial | 6455 | 9772 | 8569 | 16183 | 17160 |
| Total | $25140 | $63245 | $68893 | $82025 | $69264 |

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Although deposit generation was not a primary focus of our GGL team prior to 2025, given the operating nature of our clients' businesses, we believe there is ample opportunity to develop full banking relationships with this client base. Our suite of deposit products and treasury management services are well suited to meet the needs of these types of businesses.

*Mortgage Banker Finance*

Our MBF business line provides warehouse lending services to single family mortgage originators across the country. Our program is structured as a purchase and sale of originated single family mortgages, as opposed to traditional warehouse lines of credit. Under this form of warehousing, MBF purchases individual notes directly from our clients, which clients typically include independent mortgage bankers that we have carefully vetted and underwritten. Substantially all single family mortgage loans we originate through MBF have a secondary market commitment to purchase the mortgage at time of origination. We take physical possession of the mortgage notes and allonges and the loans typically remain on our balance sheet for approximately eight to ten calendar days prior to sale.

Recently, the mortgage warehouse lending sector within the broad financial services sector has experienced changes, with certain larger regional banks with assets greater than $10 billion choosing to exit this business line. This reduction of competition has created an opportunity for our Company to deepen our relationships with existing mortgage originators while also adding new originators. Our single family loan originations through MBF are comprised of a mix of purchase loans and refinance loans, defined as loans made for newly purchased homes and loans made to refinance existing debt on a current home, respectively. Our non-reliance on either of these two loan types, along with the addition of new mortgage originators, has helped us maintain the volumes of our originations in our MBF business, even as many other participants in the single family mortgage lending industry have experienced reductions in origination volumes.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** | **Mortgage Banker Finance as of December 31:** |
| *($'s in thousands)* | **2020** | **2021** | **2022** | **2023** | **2024** |
| Period End Balance | $113481 | $81453 | $44500 | $82125 | $174033 |
| Year to Date Average Balance | 105040 | 99778 | 49823 | 55286 | 123310 |
| Year to Date Effective Yield | 5.55% | 5.54% | 7.58% | 9.20% | 8.33% |
| # of MBF Client Originators | 65 | 68 | 64 | 67 | 83 |

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Our MBF team has historically been focused on generating deposit relationships with our MBF clients. In addition to pledge accounts required from many of our clients, our team has focused on building both interest bearing and non-interest bearing accounts. As of December 31, 2024, MBF client deposits totaled $29.1 million and had a weighted average rate of 0.69%.

**Demographic Data**

Home to more than 6.4 million people in 2024, the Atlanta MSA experienced the fourth-largest population increase of all MSAs in the nation – an increase of roughly 775,000 people from 2011 to 2021. Atlanta is a major business hub of the southeast, home to 31 of America's largest corporations (Fortune 1000), including 17 ranked in the Fortune 500, as well as more than 200 of the nation's fastest-growing private companies (Inc. 5000). Major companies headquartered in the Atlanta MSA include Delta Air Lines Inc., Home Depot Inc., United Parcel Service Inc., The Coca-Cola Company, and The Southern Company. The Atlanta MSA is home to many colleges and universities, including Georgia Institute of Technology, Emory University and Kennesaw State University. Population growth in the Atlanta MSA is expected to exceed 5.19 *%* from 2025 to 2030 based on information provided by Claritas<sup>(5)</sup>.

In close geographic proximity to our bank headquarters in Hilton Head, the Savannah MSA is home to the third busiest, and fastest growing container port in the U.S. The Savannah area benefits from a diverse mix of industry and services, a history of sustainable population growth, and a moderate tax structure that combine to help grow and sustain the regional economy. Today, the population of the Savannah MSA is more than 436,000, with an expected growth rate of 6.18% in the next 5 years<sup>(</sup><sup>5</sup><sup>)</sup>. Major manufacturing business and other international companies, drawn in part to the scale of Savannah's container port, such as Hyundai Motor Company and Gulfstream Aerospace Corporation, house significant operations in the Savannah MSA. Georgia Southern University and The Savannah College of Art and Design have major campuses in the Savannah MSA, providing a strong pool of graduates for potential hiring for businesses operating in the market. In addition, the historic downtown area of the city of Savannah, a popular tourism destination in the Southeastern United States, drew 17.7 million visitors in 2023 and has received recognition for both its business and cultural richness, including "Best Cities in the US" (#3) by Travel + Leisure, July 2024.

The Lowcountry of South Carolina, recognized as one of the east coast's premier leisure and retirement destinations, present us with large and economically vibrant markets from which to source core deposit clients and commercial borrowers. Today, the Hilton Head MSA is home to more than 240,000 residents and, from 2020 to 2025, grew by 11.28% and is one of the fastest growing MSA's in the Southeast. Over the next five years, the Hilton Head MSA's population is expected to continue to outpace other markets population growth with 7.84% growth from 2025 to 2030 based on information provided by Claritas. Household Income is expected to increase by 10.14% during that time<sup>(5)</sup>. In 2023, Hilton Head drew 2.98 million visitors. Hilton Head Island has been recognized as one of the "25 Best Island Beaches in the World" (#13) by Conde Nast Traveler, as well as the "Best Island in the U.S." Travel and Leisure has also recognized Hilton Head Island as the "3rd Best Island in the continental U.S." In addition to its award winning beaches, Hilton Head is also known for its abundance of golf courses, and is home to the RBC Heritage Golf Tournament at Harbour Town Golf Links.

**Competition**

The banking industry is highly competitive and we face strong competition from many other financial institutions. Our principal competitors are commercial and community banks, credit unions, savings and loan associations, mortgage banking firms and online mortgage lenders and consumer finance companies, including large national financial institutions that operate in our market. Our profitability depends in large part upon our continued ability to successfully compete with these institutions for lending opportunities, deposit funds, financial products, bankers and potential acquisition targets.

We conduct business through 11 branch locations in the Hilton Head MSA, the Savannah MSA, and the Atlanta MSA. Many other commercial and community banks, savings institutions, credit unions and other financial institutions maintain a physical presence in our market areas and some maintain only a virtual presence. Many of these competitors are larger than us, have significantly more resources, greater brand recognition and more extensive and established branch networks or geographic footprints than we do, and may be able to attract customers more effectively than we can. Because of their scale, many of these competitors can be more aggressive than we can on loan and deposit pricing, and may better afford and make broader use of media advertising, support services and electronic technology than we do. Also, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. To offset these competitive disadvantages, we concentrate marketing efforts in the local markets we service with local advertisements, and personal contacts, and we depend on our reputation as having greater personal service, consistency, flexibility and the ability to make credit and other business decisions quickly.

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<sup>5</sup><sup>)</sup> Demographic data is provided by <u>Claritas</u> based primarily on US Census data. For non-census year data, Claritas uses samples and projections to estimate the demographic data. S&P Global Market Intelligence performs calculations on the underlying data provided by Claritas for some of the data presented on this page.

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**Risk Management**

We believe risk management plays a critical role in the success of any bank. We view a focus on risk management as the responsibility of every CSB team member. As CSB has grown to our current asset size of $2.2 billion at March 31, 2025, we continue to emphasize maintaining robust internal controls and compliance functions across all aspects of our business. Following our Recapitalization, we made significant investments in risk management personnel, systems and third-party advisors to ensure that the Company remains well positioned to support our growth. Our management team has worked closely with, and maintains strong working relationships with, each of our regulators. Our team has extensive experience working with the Federal Reserve, the FDIC, and state banking regulators, in particular, the South Carolina Commissioner of Banking and the Georgia Department of Banking and Finance.

We prioritize the maintenance of an effective risk management culture, which we believe begins with our board of directors. The Credit and Risk Committee and Audit Committee of our board of directors reviews our exposure to strategic risk, reputation risk, credit risk, market risk, liquidity risk, legal and regulatory compliance risk, operations and technology (including cybersecurity) risk, as well as the Company's strategies to monitor, control, and mitigate these risks.

We believe that credit risk is one of the most critical risks for any financial institution. As a result of our disciplined underwriting standards and procedures, we have achieved balance sheet growth to $2.2 billion in assets at March 31, 2025 from $413.5 million at December 31, 2016 while maintaining credit quality ratios that we believe underscore our focus on credit risk management. Our nonperforming assets to total assets ratio was 0.70% as of March 31, 2025, however, approximately $4.7 million or 32.1% of the nonaccrual loan balance is covered by government guarantees. Excluding nonaccrual loans covered by government guarantees, this ratio equates to 0.49% as of March 31, 2025. Our ACL on Loans, excluding unfunded commitments, represented 117.11% of our nonperforming loans as of March 31, 2025, and 172.5% of our nonperforming loans excluding loans covered by government guarantees as of March 31, 2025. Net charge-offs to average loans held-for-investment for the last twelve months ending March 31, 2025 were 0.01% and this ratio has averaged 0.04% over the past five years ended December 31, 2024. We believe these results highlight our unwavering focus on credit.

Our credit culture is guided by the following principles:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Ensure CSB team members have both the experience and expertise in their respective field;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Focus on our clients' experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Underwriting and credit risk management processes tailored to each of our products and niche lines of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Centralized credit underwriting and segregated reporting of credit and lending teams;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Limited individual credit approval limits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Utilization of regional credit officers and line of business credit officers with specific lending authority, allowing for localized analysis, specialized knowledge, and decision making;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Commitment to maintaining portfolio diversification;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Sophisticated portfolio monitoring and analysis and establishment of sub-portfolio limits that we review regularly and adjust in response to changes in our lending strategy and market conditions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Proactive problem asset management focused on getting our clients back on track or, when necessary, exiting relationships and minimizing losses.

The role of our board of directors in our risk oversight is consistent with our leadership structure, with our President and Chief Executive Officer and the other members of management team having responsibility for assessing and managing our risk exposure, and our board of directors and its committees providing oversight in connection with those efforts. We believe this division of risk management responsibilities presents a consistent, systemic and effective approach for identifying, managing and mitigating risks throughout our operations.

The Audit Committee of our board of directors is responsible for overseeing risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures and internal control over financial reporting). The Compensation Committee of our board of directors has primary responsibility for risks and exposures associated with our compensation policies, plans and practices, regarding both executive compensation and our compensation structure generally. In particular, our Compensation Committee, in conjunction with our President and Chief Executive Officer and other members of our management, as appropriate, reviews our incentive compensation arrangements to ensure these programs are consistent with applicable laws and regulations, including safety and soundness requirements, and do not encourage imprudent or excessive risk-taking by our employees. The Governance and Nominating Committee of our board of directors oversees risks associated with the independence of our board of directors and potential conflicts of interest.

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**Properties**

Our principal executive offices are located at 400 Galleria Parkway, Suite 1900, Atlanta, Georgia 30339, and we operate 11 additional retail banking branches across Georgia and South Carolina. We also maintain two additional support offices in Florida and North Carolina. We own our branch locations in Hilton Head Island, South Carolina, one of our two locations in Bluffton, South Carolina, Dawsonville, Georgia, Cumming, Georgia, and Savannah Georgia. All other branch and office locations are leased, with the leases expiring at various dates from 2025 through 2035. We believe these facilities and additional or alternative space available to us are adequate to meet our needs for the foreseeable future.

**Human Capital**

To facilitate talent attraction and retention, we strive to create an inclusive, safe and healthy workplace with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits and health and welfare programs.

*Employee Profile*

As of March 31, 2025, we had 179 full-time employees and 1 part-time employee. None of our employees are covered by a collective bargaining agreement. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.

*Compensation and Benefits*

We provide a competitive compensation and benefits program to help meet the needs of our employees. In addition to salaries, these programs include annual bonus opportunities, a 401(k) plan with an employer matching contribution, healthcare and insurance benefits, flexible spending accounts, paid time off, parental and family leave and a team member assistance program.

*Learning and Development*

We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues. In particular, we facilitate the educational and professional development of our employees through support to attend conferences and obtain licenses and certifications while employed by us.

**Legal Proceedings**

From time to time, we are a party to various litigation matters incidental to the conduct of our business. We do not believe that any currently pending legal proceedings will have a material adverse effect on our business, financial condition or results of operations.

**Corporate Information**

Our principal executive offices are located at 400 Galleria Parkway, Suite 1900, Atlanta, Georgia 30339 and our telephone number at that address is (678) 396-4605. Our website address is www.coastalstatesbank.com. The information contained on our website is not a part of, or incorporated by reference into, this prospectus.

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**SUPERVISION AND REGULATION**

**General**

The Bank is incorporated under the laws of the state of South Carolina. It is a member of the Federal Reserve and its deposits are insured under the DIF of the FDIC up to applicable legal limits. The lending, investment, deposit-taking, and other business authority of the Bank is governed primarily by state and federal law and regulations and the Bank is prohibited from engaging in any operations not authorized by such laws and regulations. The Bank is subject to extensive regulation, supervision and examination by, and the enforcement authority of, the SCBFI and FRB, and to a lesser extent by the FDIC, as its deposit insurer. The Bank is also subject to federal financial consumer protection and fair lending laws and regulations of the CFPB, though, because it has less than $10 billion in total consolidated assets, the FRB and SCBFI are responsible for examining and supervising the Bank's compliance with these laws. The regulatory structure establishes a comprehensive framework of activities in which a state member bank may engage and is primarily intended for the protection of depositors, customers and the DIF. The regulatory structure gives the regulatory agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.

The Company is a bank holding company, due to its control of the Bank, and is therefore subject to the requirements of the BHCA, and regulation and supervision by the FRB. The Company files reports with and is subject to periodic examination by the FRB. Any change in the applicable laws and regulations could have a material adverse impact on the Company and the Bank and their operations and the Company's shareholders.

The following is a summary of some of the laws and regulations applicable to the Bank and the Company. The summary is not intended to be exhaustive and is qualified in its entirety by reference to the actual laws and regulations.

**Bank Regulation**

***Lending Standards and Guidance***

State commercial banks have authority to originate and purchase any type of loan, including commercial, commercial real estate, residential mortgages or consumer loans. Aggregate loans by a state commercial bank to any single borrower or group of related borrowers are generally limited to 10% of the Bank's unimpaired capital and may be extended to 15% of the Bank's unimpaired capital with approval by two-thirds vote of the directors of the Bank.

The federal banking agencies adopted uniform regulations prescribing standards for extensions of credit that are secured by liens or interests in real estate or made for the purpose of financing permanent improvements to real estate. Under these regulations, all insured depository institutions, such as the Bank, must adopt and maintain written policies establishing appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose of financing permanent improvements to real estate. These policies must establish loan portfolio diversification standards, prudent underwriting standards (including LTV limits) that are clear and measurable, loan administration procedures, and documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the federal bank regulators' Interagency Guidelines for Real Estate Lending Policies that have been adopted.

The FDIC, the Office of the Comptroller of the Currency and the FRB have also jointly issued the "Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices" (the "CRE Guidance"). The CRE Guidance, which addresses land development, construction, and certain multi-family loans, as well as commercial real estate loans, does not establish specific lending limits but rather reinforces and enhances these agencies' existing regulations and guidelines for such lending and portfolio management. Specifically, the CRE Guidance provides that a bank has a concentration in CRE lending if (1) total reported loans for construction, land development, and other land represent 100% or more of total risk-based capital; or (2) total reported loans secured by multi-family properties, non-farm non-residential properties (excluding those that are owner-occupied), and loans for construction, land development, and other land represent 300% or more of total risk-based capital and the bank's commercial real estate loan portfolio has increased 50% or more during the prior 36 months. If a concentration is present, management must employ heightened risk management practices that address key elements, including board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of increased capital levels as needed to support the level of commercial real estate lending.

***Federal Deposit Insurance***

The Bank is a member of the Deposit Insurance Fund, which is administered by the FDIC. The Bank's deposit accounts are insured by the FDIC, generally up to a maximum of $250,000 per depositor per account type.

The FDIC uses a risk-based assessment system that imposes insurance premiums as determined by multiplying an insured bank's assessment base by its assessment rate. A bank's deposit insurance assessment base is generally equal to its total assets minus its average tangible equity during the assessment period. For a depository institution that has been insured for more than five years and that has

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total consolidated assets of less than $10 billion, such as the Bank, the FDIC determines the assessment rate within a range of base assessment rates based on the bank's CAMELS composite rating, taking into account other factors and adjustments. The CAMELS rating system is a supervisory rating system developed to classify a bank's overall condition by taking into account capital adequacy, assets, management capability, earnings, liquidity and sensitivity to market and interest rate risk. The FDIC has the authority to increase insurance assessments. A significant increase in insurance premiums would have an adverse effect on the operating expenses and results of operations of the Bank. We cannot predict what deposit insurance assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that might lead to termination of deposit insurance at the Bank.

***Capitalization***

The FRB regulations require state member banks, such as the Bank, to meet several minimum capital standards: a common equity Tier 1 (CET1) capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets ratio and a Tier 1 capital to total assets leverage ratio.

The capital standards require the maintenance of a CET1 risk-based capital ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio of at least 4.5%, 6% and 8%, respectively, and a Tier 1 leverage ratio of at least 4% CET1 capital consists primarily of common shareholders' equity and related surplus, plus retained earnings, less any amounts of goodwill, other intangible assets, and other items required to be deducted. Tier 1 capital consists primarily of CET1 and additional Tier 1 capital. Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital primarily includes capital instruments and related surplus meeting specified requirements and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, a bank's assets, including certain off-balance-sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on perceived risks inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one-to-four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans or are in nonaccrual status and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a "capital conservation buffer" consisting of 2.5% of CET1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The Bank's capital conservation buffer was greater than 2.5% of risk-weighted assets at March 31, 2025.

As a result of the Economic Growth Act, banking regulatory agencies adopted a revised definition of "well capitalized" for financial institutions and holding companies with assets of less than $10 billion and that are not determined to be ineligible by their primary federal regulator due to their risk profile (a "Qualifying Community Bank"). The new definition expanded the ways that a Qualifying Community Bank may meet its capital requirements and be deemed "well capitalized." The new rule establishes a CBLR equal to the tangible equity capital divided by the average total consolidated assets of 9%.

A Qualifying Community Bank that meets the CBLR is considered to be well capitalized and to have met generally applicable leverage capital requirements, generally applicable risk-based capital requirements, and any other capital or leverage requirements to which such financial institution or holding company is subject. The Bank did not elect into the CBLR framework at March 31, 2025 as the Bank's capital exceeded all applicable requirements to qualify as "well capitalized."

***Safety and Soundness Standards***

Each federal banking agency, including the FRB, has adopted guidelines establishing general standards relating to, among other things, internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings, compensation, fees and benefits and information security standards. In general, the guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired, and require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal shareholder. The Federal Reserve also has issued guidance on risks banks may face from third-party relationships (e.g., relationships under which the third-party provides services to the bank). The guidance generally requires the

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Bank to perform adequate due diligence on the third-party, appropriately document the relationship, and perform adequate oversight and auditing, in order to the limit the risks to the Bank.

***Prompt Corrective Regulatory Action***

Federal law requires that federal bank regulatory authorities take "prompt corrective action" with respect to institutions that do not meet minimum capital requirements. For these purposes, the statute establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.

As described above, the Bank has not elected to follow the CBLR, so the generally applicable prompt corrective action requirements remain applicable to the Bank. Under prompt corrective action requirements, insured depository institutions are required to meet the following in order to qualify as "well capitalized:" (1) a CET1 risk-based capital ratio of 6.5%; (2) a Tier 1 risk-based capital ratio of 8%; (3) a total risk-based capital ratio of 10% and (4) a Tier 1 leverage ratio of 5%. The Bank was classified as well capitalized at March 31, 2025.

State member banks that have insufficient capital are subject to certain mandatory and discretionary supervisory measures. For example, a bank that is "undercapitalized" (i.e., fails to comply with any regulatory capital requirement) is subject to growth, capital distribution (including dividend) and other limitations, and is required to submit a capital restoration plan; a holding company that controls such a bank is required to guarantee that the bank complies with the restoration plan. If an undercapitalized institution fails to submit an acceptable plan, it is treated as if it is "significantly undercapitalized." A "significantly undercapitalized" bank is subject to additional restrictions. State member banks deemed by the FRB to be "critically undercapitalized" also may not make any payment of principal or interest on certain subordinated debt, extend credit for a highly leveraged transaction, or enter into any material transactions outside the ordinary course of business after 60 days of obtaining such status, and are subject to the appointment of a receiver or conservator within 270 days after obtaining such status.

***Dividends***

The principal source of the Company's cash revenue is dividends from the Bank. There are various legal and regulatory provisions that limit the amount of dividends the Bank can pay to the Company without regulatory approval. Under the South Carolina Code of Laws state-chartered banks are authorized to pay cash dividends up to 100% of net income in any calendar year without obtaining the prior approval of the SCBFI provided that the bank received a composite rating of one or two at the last examination conducted by the State or Federal regulatory authority. All other cash dividends require the specific approval the SCBFI. Moreover, an institution's failure to exceed the capital conservation buffer set forth in the capital rules with CET1 capital would result in limitations on an institution's ability to make capital distributions and discretionary bonus payments. In addition, an insured depository institution is generally prohibited from making capital distributions, including paying dividends, or paying management fees to a holding company, if the institution would thereafter be undercapitalized. Finally, it is prohibited for a depository institution to pay dividends on its capital stock if it is in default of its payment of deposit insurance assessments to the FDIC.

***Transactions with Affiliates and Insiders***

Sections 23A and 23B of the Federal Reserve Act govern transactions between an insured depository institution and its affiliates, which includes the Company. The FRB has adopted Regulation W, which implements and interprets Sections 23A and 23B, in part by codifying prior FRB interpretations.

An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank. A subsidiary of a bank that is not also a depository institution or a "financial subsidiary" under federal law is not treated as an affiliate of the bank for the purposes of Sections 23A and 23B; however, the FRB has the discretion to treat subsidiaries of a bank as affiliates on a case-by-case basis. Section 23A limits the extent to which a bank or its subsidiaries may engage in "covered transactions" with any one affiliate to an amount equal to 10% of the bank's capital stock and surplus. There is an aggregate limit of 20% of the bank's capital stock and surplus for such transactions with all affiliates. The term "covered transaction" includes, among other things, the making of a loan to an affiliate, a purchase of assets from an affiliate, the issuance of a guarantee on behalf of an affiliate and the acceptance of securities of an affiliate as collateral for a loan. All such transactions are required to be on terms and conditions that are consistent with safe and sound banking practices and no transaction may involve the acquisition of any "low quality asset" from an affiliate unless certain conditions are satisfied. Certain covered transactions, such as loans to or guarantees on behalf of an affiliate, must be secured by collateral in amounts ranging from 100 to 130 percent of the loan amount, depending upon the type of collateral. In addition, Section 23B requires that any covered transaction (and specified other transactions) between a bank and an affiliate must be on terms and conditions that are substantially the same, or at least as favorable, to the bank, as those that would be provided to a non-affiliate.

A bank's loans to its executive officers, directors, any owner of more than 10% of its stock (each, an "insider") and certain entities affiliated with any such person (an insider's "related interest") are subject to the conditions and limitations imposed by Section 22(h) of the Federal Reserve Act and the FRB's Regulation O. The aggregate amount of a bank's loans to any insider and the insider's related interests may not exceed the loans-to-one-borrower limit applicable to state member banks. Aggregate loans by a bank to its insiders and insiders' related interests may not exceed 15% of the bank's unimpaired capital and unimpaired surplus plus an additional 10% of

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unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral, or when the aggregate amount on all of the extensions of credit outstanding to all of these persons would exceed the bank's unimpaired capital and unimpaired surplus. With certain exceptions, such as education loans and certain residential mortgages, a bank's loans to its executive officers may not exceed the greater of $25,000 or 2.5% of the bank's unimpaired capital and unimpaired surplus, but in no event more than $100,000. Regulation O also requires that any loan to an insider or a related interest of an insider be approved in advance by a majority of the board of directors of the bank, with any interested director not participating in the voting, if the loan, when aggregated with any existing loans to that insider or the insider's related interests, would exceed the higher of $25,000 or 5% of the bank's unimpaired capital and surplus. Generally, such loans must be made on substantially the same terms as and follow credit underwriting procedures that are no less stringent than, those that are prevailing at the time for comparable transactions with other persons and must not involve more than a normal risk of repayment. An exception is made for extensions of credit made pursuant to a benefit or compensation plan of a bank that is widely available to employees of the bank and that does not give any preference to insiders of the bank over other employees of the bank. South Carolina state code further requires that any loan to an officer or director be approved by two-thirds vote of the whole Board of Directors.

***Enforcement***

The SCBFI and the FRB have extensive enforcement authority over state member banks to correct unsafe or unsound practices and violations of law or regulation. Such authority includes the issuance of cease and desist orders, assessment of civil money penalties and removal of officers and directors. The FRB may also appoint a conservator or receiver for a state member bank under specified circumstances, such as where (i) the bank's assets are less than its obligations to creditors, (ii) the bank is likely to be unable to pay its obligations or meet depositors' demands in the normal course of business, or (iii) a substantial dissipation of bank assets or earnings has occurred due to a violation of law of regulation or unsafe or unsound practices. Separately, the Commissioner of Banking of the SCBFI also has the authority to appoint a receiver or liquidator of any state-chartered bank under specified circumstances, including where (i) the bank is conducting its business in an unauthorized or unsafe manner, (ii) the bank has suspended payment of its obligations, or (iii) the bank cannot with safety and expediency continue to do business.

***Federal Reserve System***

Under federal law and regulations, the Bank is required to maintain sufficient liquidity to ensure safe and sound banking practices. Regulation D, promulgated by the Federal Reserve Board, imposes reserve requirements on all depository institutions, including the Bank, which maintain transaction accounts or non-personal time deposits. Demand deposit accounts, NOW accounts, and certain other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to Regulation D reserve requirements, as are any nonpersonal time deposits. However, effective March 26, 2020, the Federal Reserve Board reduced reserve requirement ratios to zero, thereby effectively eliminating the requirements. The Federal Reserve Board took that action due to a change in its approach to monetary policy; it has indicated that it has no plans to re-impose reserve requirements but could in the future if conditions warrant.

***Examinations and Assessments***

The Bank is required to file periodic reports with and is subject to periodic examination by the SCBFI and FRB. Federal and state regulations generally require periodic on-site examinations for all depository institutions. The Bank is required to pay an annual assessment to the SCBFI to fund the agency's operations.

***Community Reinvestment Act***

Under the CRA, the Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the FRB, in connection with its examination of the Bank, to assess our record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by the Bank, including applications to establish branches and acquire other financial institutions. The CRA requires the FDIC to provide a written evaluation of an institution's CRA performance utilizing a four-tiered descriptive rating system. The Bank's most recent FDIC CRA rating was "Satisfactory."

On October 24, 2023, the FDIC and other federal bank regulatory agencies issued a final rule to strengthen and modernize the CRA regulations. The changes are designed to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to changes in the banking industry including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data collection to bank size and type. Under the final rule, banks with assets of greater than $2 billion as of December 31 in both of the prior two calendar years will be a "large bank." The agencies will evaluate large banks under four tests: a retail lending test, a retail services and products test, a community development financing test, and a community development services test. The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. The final rules have been subject

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to an injunction since March 29, 2024. The effective dates will be extended for each day the injunction remains in place, pending the resolution of the lawsuit.

***USA PATRIOT Act and Money Laundering***

The Bank is subject to BSA regulation, which incorporates several laws, including the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act and related regulations. The USA PATRIOT Act gives the federal government powers to address money laundering and terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. By way of amendments to the BSA, Title III of the USA PATRIOT Act implemented measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.

Among other things, Title III of the USA PATRIOT Act and the related regulations require:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Establishment of anti-money laundering compliance programs that includes policies, procedures, and internal controls; the designation of a BSA officer; a training program; and independent testing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Filing of certain reports to Financial Crimes Enforcement Network and law enforcement that are designated to assist in the detection and prevention of money laundering and terrorist financing activities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Establishment of a program specifying procedures for obtaining and maintaining certain records from customers seeking to open new accounts, including verifying the identity of customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•In certain circumstances, compliance with enhanced due diligence policies, procedures and controls designed to detect and report money-laundering, terrorist financing and other suspicious activity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Monitoring account activity for suspicious transactions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•A heightened level of review for certain high-risk customers or accounts.

The USA PATRIOT Act also includes prohibitions on correspondent accounts for foreign shell banks and requires compliance with record keeping obligations with respect to correspondent accounts of foreign banks.

The bank regulatory agencies have increased the regulatory scrutiny of the BSA and anti-money laundering programs maintained by financial institutions. Significant penalties and fines, as well as other supervisory orders may be imposed on a financial institution for non-compliance with these requirements. In addition, for financial institutions engaging in a merger transaction, federal bank regulatory agencies must consider the effectiveness of the financial institution's efforts to combat money laundering activities. The Bank has adopted policies and procedures to comply with these requirements.

***Privacy and Cybersecurity Laws***

The Bank is subject to a variety of federal and state privacy laws, which govern the collection, safeguarding, sharing and use of customer information, and require that financial institutions have in place policies regarding information privacy and security. For example, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution's privacy policy and practices for sharing nonpublic information with third parties, provide advance notice of any changes to the policies and provide such customers the opportunity to "opt out" of the sharing of certain personal financial information with unaffiliated third parties. It also requires banks to safeguard personal information of consumer customers. The federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cyber risk management standards among financial institutions. As a result, financial institutions, like the Bank, are expected to establish multiple lines of defense and to ensure their risk management processes address the risk posed by potential threats to the institution. A financial institution's management is expected to maintain sufficient processes to effectively respond and recover the institution's operations after a cyber-attack. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations if a critical service provider of the institution falls victim to this type of cyber-attack. On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify their primary federal regulator within 36 hours of a "computer-security incident" that rises to the level of a "notification incident." In addition, effective in December 2023, the SEC issued a new rule that requires registrants to disclose material cybersecurity incidents within four business days. In addition, effective in December 2023, the SEC enhanced and standardized the disclosure obligations related to a registrant's cybersecurity risk management, strategy, and governance. Our information security protocols are designed in part to adhere to the requirements of bank regulatory guidance and these enhanced SEC disclosure requirements. State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements. We expect this trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which our clients are located.

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***Consumer Protection Laws***

While consumer lending is not currently a significant focus of our business, we are subject to numerous laws and regulations intended to protect consumers, in addition to those discussed above, when lending or offering deposit products to consumers. These laws include, among others: the Truth in Lending Act, Truth in Savings Act, Electronic Funds Transfer Act, Expedited Funds Availability Act, Equal Credit Opportunity Act, Fair and Accurate Credit Transactions Act, Fair Housing Act, Fair Credit Reporting Act, Fair Debt Collection Act, the GLB Act, Home Mortgage Disclosure Act, Right to Financial Privacy Act, Real Estate Settlement Procedures Act, laws regarding unfair and deceptive acts and practices and usury laws. Additionally, the Dodd-Frank Act created the CFPB, which has authority to issue regulations prohibiting unfair, deceptive or abusive acts or practices.

**Holding Company Regulation**

***General***

The Company, as a bank holding company controlling the Bank, is subject to regulation and supervision by the FRB under the BHCA. The Company is periodically examined by and required to submit reports to the FRB and must comply with the FRB's rules and regulations. Among other things, the FRB has authority to restrict activities by a bank holding company that are deemed to pose a serious risk to the subsidiary bank.

***Permissible Activities***

A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities found by the FRB to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the FRB has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily to promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.

The Gramm-Leach-Bliley Act of 1999 authorized a bank holding company that meets specified conditions, including being "well capitalized" and "well managed," to opt to become a "financial holding company" and thereby engage in a broader array of financial activities than previously permitted. Such activities can include insurance underwriting and investment banking. A "financial holding company" may engage in a broader array of financial activities than permitted a typical bank holding company. Such activities can include insurance underwriting and investment banking. The Company has not elected "financial holding company" status.

***Capital***

Bank holding companies are subject to consolidated regulatory capital requirements, which have historically been similar to, though less stringent than, those of the for the Bank. Federal legislation, however, required the FRB to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. As a result, consolidated regulatory capital requirements identical to those applicable to the subsidiary banks generally apply to bank holding companies. However, the FRB has provided a "Small Bank Holding Company" exception to its consolidated capital requirements, and subsequent legislation and the related issuance of regulations by the FRB have increased the threshold for the exception to $3.0 billion of consolidated assets. Consequently, bank holding companies such as the Company with less than $3.0 billion of consolidated assets are not subject to the consolidated holding company capital requirements unless otherwise directed by the FRB.

***Source of Strength***

The FRB has issued regulations requiring that all bank holding companies serve as a source of strength to their subsidiary depository institutions by providing financial, managerial and other support in times of an institution's distress.

***Dividends and Stock Repurchases***

The FRB has issued a policy statement regarding the payment of dividends by holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization's capital needs, asset quality and overall supervisory financial condition. Separate regulatory guidance provides for prior consultation with FRB staff concerning dividends in certain circumstances such as where the company's net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company's overall rate or earnings retention is inconsistent with the company's capital needs and overall financial condition. The ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

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The regulatory guidance also states that a bank holding company should consult with FRB supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the bank holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.

There is a separate requirement that a bank holding company give the FRB prior written notice of any purchase or redemption of then outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company's consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, FRB order or directive, or any condition imposed by, or written agreement with, the FRB. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions.

These regulatory policies may affect the ability of the Company to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

***Acquisition of Control of the Company***

Under the Change in Bank Control Act, no person may acquire control of a bank holding company such as the Company unless the FRB has prior written notice and has not issued a notice disapproving the proposed acquisition. In evaluating such notices, the FRB takes into consideration such factors as the financial resources, competence, experience and integrity of the acquirer, the future prospects the bank holding company involved and its subsidiary bank and the competitive effects of the acquisition. Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the company's directors, or a determination by the regulator that the acquirer has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution. Acquisition of more than 10% of any class of a bank holding company's voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, as will be the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.

**Emerging Growth Company Status and Smaller Reporting Company Status**

We are an emerging growth company under the JOBS Act. For as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to public companies. These exemptions include, but are not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As an emerging growth company, we will also not be subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require that our independent auditors audit our internal control over financial reporting. We have also elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Such an election is irrevocable during the period a company is an emerging growth company.

We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the completion of this offering; (ii) the first fiscal year after our annual gross revenues are $1.235 billion (adjusted for inflation) or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year. We expect to lose our status as an emerging growth company at the end of the fifth year after the expected completion date of this offering.

We are also a "smaller reporting company" as defined in Rule 12b-2 of the Exchange Act. Smaller reporting companies may take advantage many of the same exemptions from disclosure requirements as emerging growth companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will remain a smaller reporting company until the end of the fiscal year in which (1) we have a public common equity float of more than $250 million, or (2) we have annual revenues for the most recently completed fiscal year of more than $100 million and a public common equity float or public float of more than $700 million. We also would not be eligible for status as a smaller reporting company if we become an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent company that is not a smaller reporting company.

 **Sarbanes-Oxley Act of 2002**

The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. We have policies, procedures and systems designed to comply with these regulations, and we review and document such policies, procedures and systems to ensure continued compliance with these regulations.

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**MANAGEMENT**

The following table sets forth certain information regarding our executive officers as of the date of this prospectus.

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| | | |
|:---|:---|:---|
| **Name** | **Position(s) with the Company** | **Age** |
| Stephen R. Stone | President & Chief Executive Officer | 49 |
| Anthony P Valduga | Chief Financial Officer & Chief Operating Officer | 47 |
| C. Bradley Turner | Chief Credit Officer | 49 |
| Lauren M. Hemby | Chief Accounting Officer | 41 |

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The following is a brief description of the background and experience of each of our executive officers. No executive officer has any family relationship, as defined in Item 401 of Regulation S-K, with any other executive officer or with any of our directors. There are no arrangements or understandings between any of the executive officers and any other person pursuant to which he or she was selected as an executive officer.

**Stephen R. Stone.** Mr. Stone is the President and Chief Executive Officer of CoastalSouth Bancshares, Inc. and Coastal States Bank. Prior to joining the Bank in 2017, he previously served as the Chief Strategy Officer and General Counsel of Community & Southern Bank. He is a Member of the Boards of Directors of COSO, CSB, and Coastal States Mortgage, Inc., as well as a Member of the Board of Directors of The Buckhead Coalition. Mr. Stone is a graduate of the University of Virginia, and he received his Juris Doctor from the Washington College of Law at American University, cum laude. We believe that Mr. Stone is qualified to serve on our board of directors due to his extensive knowledge of the banking industry and strong leadership skills, which provide the board with invaluable insight and guidance into the business and regulatory requirements of today's banking environment.

**Anthony P. Valduga**. Mr. Valduga serves as the Chief Financial Officer and Chief Operating Officer of Coastal States Bank. Prior to joining the Bank in 2017, Mr. Valduga was the CFO of Community & Southern Holdings, Inc. and Community & Southern Bank. Mr. Valduga led the finance function to include treasury, financial profitability and analysis, shared-loss accounting and reporting, regulatory & investor reporting, tax and overall general accounting functions. Mr. Valduga helped lead efforts around all M&A, to include the successful acquisition and integration of 3 failed banks purchased out of receivership from the FDIC, 3 branch acquisitions, and 3 open bank acquisitions. Prior to joining Community & Southern, Mr. Valduga was with PricewaterhouseCoopers, LLP for 11 years. Mr. Valduga was a leader within the Firm's Banking and Capital Markets practice and had expertise in advising both public and private financial institutions on a wide range of issues including mergers & acquisitions, public offerings and filings, FDIC-assisted transaction accounting, integration and compliance, and other complex finance and accounting related matters. Mr. Valduga earned his Bachelor of Science in Management from the Georgia Institute of Technology.

**C. Bradley Turner.** Mr. Turner serves as Chief Credit Officer of Coastal States Bank and brings 26 years of experience in various credit and lending roles. Before joining the Bank in 2017, Mr. Turner spent six years in an executive leadership role for a national government guaranteed lending team, providing oversight for underwriting, documentation, and portfolio management with an emphasis on superior credit quality. Prior to that, Mr. Turner worked with RBC Bank (USA), a southeastern based regional bank, as a regional credit officer overseeing various portfolios across the bank's footprint. Mr. Turner holds a bachelor's degree in industrial relations from the University of North Carolina at Chapel Hill.

**Lauren M. Hemby.** Ms. Hemby serves as the Chief Accounting Officer of Coastal States Bank and brings over 18 years of experience in accounting, finance and regulatory compliance. Prior to joining Coastal States Bank in 2017, Ms. Hemby worked in various roles at both Community & Southern Bank and SunTrust Bank, where she managed the financial aspects of mergers and acquisitions activity, accounting policy, and led a variety of other accounting, finance, and regulatory areas. Ms. Hemby also worked at PricewaterhouseCoopers, LLP, where she served clients in the firm's financial services assurance practice, including banks, insurance companies, real estate investors, and employee benefit plans. She holds both bachelor's and master's degrees in Accountancy from Wake Forest University.

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**BOARD OF DIRECTORS** 

Our board of directors currently consists of 11 members. The following table sets forth certain information regarding our current directors. Each member of our board of directors also serves as a member of the Bank's board of directors.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name** | **Position(s) with the Company** | **Age** | **Director Since** | **Audit Committee** | **Compensation Committee** | **Credit & Risk Committee** | **Nominating & Corporate Governance Committee** |
| James S. MacLeod | Chairman | 77 | 2003 |  |  |  |  |
| Patrick M. Frawley | Vice Chairman | 74 | 2017 |  | Member | Chair |  |
| John G. Aldridge, Jr. | Director | 56 | 2024 |  |  |  | Member |
| L. Scott Askins | Director | 55 | 2021 |  |  | Member | Member |
| Ernst W. Bruderer | Director | 72 | 2003 | Member |  |  | Chair |
| Mark A. Griffith | Director | 69 | 2012 | Chair |  | Member |  |
| Boris M. Gutin | Director | 50 | 2017 | Member |  | Member |  |
| Michael B. High | Director | 76 | 2017 | Member | Member |  |  |
| James N. Richardson, Jr. | Director | 80 | 2003 |  | Member |  | Member |
| Stephen R. Stone | President, CEO and Director | 49 | 2017 |  |  |  |  |
| Joseph V. Topper, Jr. | Director | 70 | 2017 |  | Chair |  | Member |

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The following is a brief discussion of the business and banking background and experience of our directors, except for Stephen R. Stone, as his business experience is described above in the Management section. The director biographies also contain information regarding the person's experience, qualifications, attributes or skills that led to the conclusion that the person should serve as a director. No director has any family relationship, as defined in Item 401 of Regulation S-K, with any other director or with any of our executive officers. There are no arrangements or understandings between any of the directors and any other person pursuant to which he or she was selected as a director except as disclosed below.

**James S. MacLeod.** Mr. MacLeod serves as Chairman of the board of directors of CoastalSouth Bancshares, Inc. and Coastal States Bank. He has a 53-year career in mortgage finance and is a founder of CoastalSouth Bancshares, Inc. and Coastal States Bank, where he has served in various positions since 2003. Prior to his affiliation with Coastal States Bank, Mr. MacLeod served as Executive Vice President at Mortgage Guaranty Insurance Corporation. He currently serves as the Chairman of the Board of Directors of the Medical University of South Carolina Foundation. He also serves as a Director at Coastal States Mortgage and as a Partner of Nexus Capital. Mr. MacLeod has a Bachelor of Science in Economics from the University of Tampa, a Master in City Planning from the Georgia Institute of Technology, and a Master of Science in Real Estate and Urban Affairs from Georgia State University. We believe Mr. MacLeod is qualified to serve on our board of directors due to his experience in operations, finance and management as well as his strong understanding of developments impacting our markets.

**Patrick M. Frawley.** Mr. Frawley serves as Vice-Chairman of the board of directors of Coastal South Bancshares, Inc. and Coastal States Bank. Mr. Frawley was the founder of Community & Southern Bank, a bank for which he served as the Chief Executive Officer before retiring in 2016. He has served in a variety of key regulatory roles with the Comptroller of the Currency and has held numerous positions with multinational banks. Mr. Frawley is a graduate of Campbell University and Louisiana State University's School of Banking. We believe that Mr. Frawley is qualified to serve on our board of directors due to his background in leading growing strong community banking franchises, as well as the unique perspective on the challenges and opportunities for our organization he can offer based on his regulatory background.

**John G. Aldridge, Jr.** Mr. Aldridge is the Founder and Managing Partner of Aldridge \| Pite, LLP, which was founded in 2009. Mr. Aldridge has founded, owned, operated and sold numerous companies involved in the real estate industry, including title companies, trustee companies, service of process companies, technology (as a service) companies and technology and business process consulting companies. He currently serves as a Director at Altisource Portfolio Solutions S.A. (NASDAQ: ASPS), Atlantic Closing & Escrow, and The First Tee of Metro Atlanta. He also sits on the Advisory Boards of Wrightwell and The Birdsey Group. Mr. Aldridge received his undergraduate degree from the University of North Carolina at Chapel Hill and his Juris Doctor from the Emory University School of Law. We believe Mr. Aldridge is qualified to serve on our board of directors due to his deep legal expertise, significant business acumen and complex understanding of the banking and real estate industries in each of CSB's core markets.

**L. Scott Askins.** Ms. Askins has over 20 years of C-Suite experience in private and public companies, with an extensive background in scaling disruptive technology companies and driving strategy to lead organic and acquisitive growth. She previously served as Vice President and Group Counsel for American Express and was General Counsel, Chief Compliance Officer, and Secretary for Kabbage, Inc. Ms. Askins is a graduate of Clemson University. She also received a Juris Doctor from the University of South Carolina School of Law and a Master of Laws in Taxation from the New York University School of Law. We believe Ms. Askins is qualified to serve on

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our board of directors due to her legal expertise and background serving as a senior executive with financial and technology organizations, which we believe will provide us with insight on how we enhance our digital delivery of our products and services.

**Ernst W. Bruderer.** Mr. Bruderer has an extensive background serving as CEO for various industries. He is the Chairman of the Executive Committee and a Member of the Board of Directors of SYNCO Properties in Charlotte, NC and Chairman Elect of The Global Network Foundation in Atlanta. He also is a founder of CoastalSouth Bancshares, Inc. and Coastal States Bank where he serves as the Chairman of the Nominating and Corporate Governance Committee. He volunteers as a Facilitator for the Central Eurasia Leadership Alliance and the Middle East Leadership Alliance, representing SIBF (Society of International Business Fellows). Mr. Bruderer has a Bachelor of Arts degree in Business and Economics from the University of St. Gall and a Juris Doctor from the University of Zurich. He also attended Post-Graduate LLM Classes at Georgetown Law School. We believe Mr. Bruderer is qualified to serve on our board of directors due to his extensive business and leadership experience.

**Mark A. Griffith.** Mr. Griffith is a retired Managing Director and Director of Real Estate for LNR Partners Europe Ltd. where he was responsible for operations and directing investments strategies across the U.K. and Western Europe before retiring in 2009. He also served as Vice President of three U.S. commercial real estate companies specializing in retail shopping centers and office building ownership, development, and management. Mr. Griffith attended Ohio University. We believe Mr. Griffith is qualified to serve on our board of directors due to his financial background and expertise in running and growing complex real estate operations.

**Boris M. Gutin.** Mr. Gutin has over 20 years of private equity investment experience. He currently is Co-Managing Partner of GCP Capital Partners, a middle-market private equity firm. Mr. Gutin has been at GCP Capital Partners for over 20 years. He previously was employed at American Securities Capital Partners and Goldman Sachs. He currently is a Member of the Board of Directors of MapleMark Bank, Mobilewalla, Alkeme Insurance, Transnetwork, Grasshopper Bank, Verita, and Gavnat. Mr. Gutin is a graduate of Johns Hopkins University and the Harvard Business School. We believe Mr. Gutin is qualified to serve on our board of directors due to his financial background and experience in investing in community banking institutions.

**Michael B. High.** Mr. High is a Partner of Patriot Financial Partners L.P. Prior to joining Patriot Financial Partners, Mr. High was a finance executive at a number of financial institutions including Harleysville National Corporation and Progress Financial Corporation. He currently is a Member of the Board of Directors of DR Bank and Alcar, Inc. Mr. High is a CPA (Inactive) and a graduate of The Pennsylvania State University. We believe Mr. High is qualified to serve on our board of directors due to his financial leadership background at a number of community banking institutions and his experience in investing in community banking institutions.

**James N. Richardson, Jr.** Mr. Richardson is Chairman and CEO of The Richardson Development Group whose holdings include Coligny Plaza, Windmill Harbour Company, the South Carolina Yacht Club, Windmill Harbour Real Estate, and restaurants, including Local Pie Hilton Head, Bluffton and New Riverside, Fish Coastal Seafood and Cool Delivery. He is Commissioner of the South Island Public Service District. Mr. Richardson is a graduate of Mars Hill College. We believe Mr. Richardson is qualified to serve on our board of directors due to his extensive business background and community involvement, which provides us with substantial insights for our business operations.

**Joseph V. Topper, Jr.** Mr. Topper has served as the Chief Executive Officer of Dunne Manning Inc. and Affiliates since 1992. He has 34 years of management experience in the wholesale and retail fuel distribution business. Mr. Topper is Chairman of the Board of CrossAmerica Partners LP, is a Member of the Board of Directors of PBS39 public television and is a Member of the Board of Pool Trust. He has been the past chair of trustees of Villanova University. He is a graduate of Villanova University, and he received a Master of Business Administration from Lehigh University. We believe that Mr. Topper is qualified to serve on our board of directors due to his extensive business experience and community involvement, which provides us with insight into the economic and business operations in our core markets.

**Director Selection Process**

Our board of directors seeks director candidates who uphold the highest standards, are committed to our values and are strong independent stewards of the long-term interests of shareholders. Our Nominating and Corporate Governance Committee (the "NCGC") considers Board composition on an ongoing basis, with a focus on establishing a board of directors with the skills and experience required to effectively oversee the Company's present and future operations and strategy. The NCGC and the Board seek a diverse group of directors with experience in banking and other aspects of business that are relevant to our businesses and operations.

The NCGC also oversees the director nomination process. In considering whether to nominate a director for election, the NCGC considers, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Whether the director possesses personal and professional integrity, sound judgment, forthrightness and has sufficient time and energy to devote to the affairs of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Whether the director possesses a willingness to challenge and stimulate management and the ability to work as part of a team in an environment of trust;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The extent of the director's business and financial acumen and experience, especially in the financial services and products areas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Whether the director assists in achieving a mix of Board members that represents a diversity of background and experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Whether the director would be considered a "financial expert" or "financially literate" as defined in applicable law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Whether the director, by virtue of particular technical expertise, experience or specialized skill relevant to the Company's current or future business, will add specific value as a Board member, including business contacts, reputation, visibility, community involvement, regulatory experience, and independence;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Whether the director is free from conflicts of interest with the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Any factors related to the ability and willingness of a new director to serve, or an existing director to continue his/her service. Each of our director nominees has been recommended for election by the NCGC and approved for nomination by our Board.

**Board Independence**

Under the rules of the NYSE, independent directors must comprise a majority of our board of directors within a specified period of time after the completion of this offering. The rules of the NYSE, as well as those of the SEC, also impose several other requirements with respect to the independence of our directors. Our board of directors has evaluated the independence of its members based upon the rules of the NYSE and the SEC. Applying these standards, our board of directors has determined that, with the exception of Mr. Stone, each of our current directors is an independent director, as defined under the applicable rules. Mr. Stone is not independent because he serves as an executive officer of CoastalSouth Bancshares, Inc. and Coastal States Bank.

**Committees of the Board of Directors**

We conduct business through meetings of our board of directors and its committees. The board of directors of the Company has established standing committees, including an Audit Committee, Compensation Committee, a Nominating and Corporate Governance Committee and a Credit and Risk Committee. Each of these committees operates under a written charter, which governs its composition, responsibilities and operations. Our board of directors also may establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our corporate governance documents.

**Audit Committee**. The Audit Committee assists the board of directors in fulfilling its responsibilities for general oversight of the integrity of our financial statements, compliance with legal and regulatory requirements, the independent registered public accounting firm's qualifications and independence, and the performance of our internal audit and risk assessment function and the independent registered public accounting firm. Among other things, the Audit Committee:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•appoints, evaluates and determines the compensation of our independent registered public accounting firm;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•reviews and approves the scope of the annual audit, audit fees and financial statements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•reviews disclosure controls and procedures, internal controls, internal audit function and corporate policies with respect to financial information;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•oversees investigations into complaints concerning financial matters, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•reviews related party transactions as required; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•annually reviews the Audit/Risk Committee charter and the committee's performance.

The Audit Committee works closely with management as well as our independent registered public accounting firm. The Audit Committee has the authority to obtain advice and assistance from and receive appropriate funding to engage outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties.

The Audit Committee is composed solely of members who satisfy the applicable independence and other requirements of the SEC and the NYSE for Audit Committees and our board of directors has determined that Mark Griffith qualifies as an "audit committee financial expert" under applicable SEC rules.

**Compensation Committee**. The Compensation Committee is responsible for discharging the board of directors' responsibilities relating to compensation of the executives and directors. Among other things, the Compensation Committee:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•review and approve corporate performance goals and objectives relevant to the compensation of executive officers and other members of our management team;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•evaluate and approve compensation plans and programs proposed by management, as well as material modification or termination of existing plans and programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•establish policies with respect to equity compensation arrangements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•reviews and oversees compensation and benefit plans;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•review and approve the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements (including, without limitation, perquisites and any other form of compensation) for executive officers and other members of our management team;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•recommends to the board of directors compensation for directors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•annually reviews the Compensation Committee charter and the committee's performance.

The Compensation Committee is composed solely of members who satisfy the applicable independence requirements of the SEC and the NYSE.

**Nominating and Corporate Governance Committee**. The NCGC is responsible for making recommendations to our board of directors regarding candidates for directorships and the size and composition of our board of directors. In addition, the NCGC is responsible for overseeing our corporate governance guidelines and reporting and making recommendations to our board of directors concerning governance matters. Among other things, the NCGC:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•identifies qualified individuals to be directors consistent with the criteria approved by the board of directors and recommending director nominees to the full board of directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•reviews the structure of the committees of the board of directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•periodically review and assess the Articles of Incorporation and Bylaws for the Company and its subsidiaries and recommends any changes to the Board as necessary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•review and make recommendations to the Board regarding any material communications to the Company's shareholders relating to matters overseen by the Committee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•develops the Company's code of business conduct and ethics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•oversees the Company's environmental, governance and corporate social responsibility efforts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•oversees management succession planning;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•leads the board of directors in its annual performance review;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•develops and recommends corporate governance guidelines;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•and annually reviews the Corporate Governance and Nominating Committee's charter and the committee's performance.

The NCGC is composed solely of members who satisfy the applicable independence requirements of the SEC and the NYSE.

**Credit and Risk Committee.** The Credit and Risk Committee is responsible for discharging the board of directors' responsibility in overseeing the enterprise-wide risk management practices of the Company, the Bank, and their respective subsidiaries, including management's ability to assess and manage credit, market, interest rate, liquidity, reputation, strategic, legal, compliance, and operational risks (which includes information technology risk). Among other things, the Credit and Risk Committees:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•oversees market, treasury, asset-liability and related financial management risk;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•review reports and monitor management's capital and liquidity management efforts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•provide general credit risk oversight, including the evaluation of the Company's overall credit risk profile and whether the profile is within established policy limits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•oversee and review the Company's independent credit and loan review function;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•review and approval of individual loans that meet or exceed identified lending thresholds or legal lending limits and loans that may potentially implicate Regulation O of the Federal Reserve Board;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•oversee and review various aspects of operations risk, including risks related to line of business operations, information technology and systems, data management and information security, and third-party and vendor-management risk;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•oversee and review material legal or litigation risk; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•assist the board of directors' in fulfilling its responsibilities relating to areas of risk identified by regulatory authorities, including areas of safety and soundness and compliance.

The Credit and Risk Committee is composed solely of members who satisfy the applicable independence requirements of the SEC and the NYSE.

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**EXECUTIVE COMPENSATION**

As an emerging growth company under the JOBS Act, we have opted to comply with the executive compensation disclosure rules applicable to "smaller reporting companies" as such term is defined in the rules promulgated under the Securities Act, which permit us to limit reporting of executive compensation to our principal executive officer and our two other most highly compensated executive officers, which are referred to as our "named executive officers."

The compensation reported in the Summary Compensation Table below is not necessarily indicative of how we will compensate our named executive officers in the future. We will continue to review, evaluate and modify our compensation framework to maintain a competitive total compensation package. As such, and as a result of our becoming a publicly traded company, the compensation program following this offering could vary from our historical practices.

Our named executive officers, or NEOs, which consist of our principal executive officer and the Company's two other most highly compensated executive officers during the year ended December 31, 2024, are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Stephen R. Stone, President and Chief Executive Officer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Anthony P. Valduga, Chief Financial Officer & Chief Operating Officer; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•C. Bradley Turner, Chief Credit Officer.

**Summary Compensation Table**

The following table sets forth certain information with respect to the compensation paid to our named executive officers for the fiscal year ended December 31, 2024:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name and Principal Position** | **Salary** | **Stock Awards** <sup>(1)</sup> | **Non-Equity Incentive Plan Compensation** | **All Other Compensation** <sup>(2)</sup> | **Total Compensation** |
| Stephen R. Stone |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;*President & Chief Executive Officer* | $576118 | $680000 | $328300 | $33323 | $1617741 |
| Anthony P. Valduga |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;*Chief Financial Officer & Chief Operating Officer* | 370397 | 280500 | 221000 | 28291 | 900188 |
| C. Bradley Turner |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;*Chief Credit Officer* | 259051 | 41250 | 113500 | 18572 | 432373 |

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<sup>(1)</sup> The amounts reported here do not reflect the actual economic value realized by each named executive officer. In accordance with SEC rules, the Stock Awards column reflects the grant date fair value of restricted stock unit (RSU) awards, calculated in accordance with ASC 718. For additional information, see Note 13 in our consolidated financial statements included in this prospectus. The assumptions used in calculating the grant date fair value of the RSUs reported in this table are set forth in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Stock-Based Compensation."

<sup>(2)</sup> All Other Compensation for 2024 includes the following:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name** | **Health and Welfare Reimbursement** | **401(k) Matching Contributions** | **Life Insurance** | **Cell Phone Reimbursement** |
| Stephen R. Stone | $12604 | $17250 | $2989 | $480 |
| Anthony P. Valduga | 9571 | 17250 | 990 | 480 |
| C. Bradley Turner | - | 17250 | 842 | 480 |

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**Narrative Disclosure to Summary Compensation Table**

*Base Salaries.* Annual base salaries for Messrs. Stone, Valduga and Turner were $576,118, $370,397 and $259,051, respectively, for 2024, and are $620,458, $382,000 and $265,000, respectively, for 2025. The Compensation Committee reviews and establishes the base salary of Mr. Stone on an annual basis. The Compensation Committee relies upon compensation benchmarking provided by Aon's Human Capital Solutions practice, a division of Aon plc ("Aon") otherwise known as McLagan. Specifically, the Company reviews compensation data against other financial institutions between $2-5 billion in total assets.

*<u>Non-Equity Incentive Plan</u>.* Our named executive officers are eligible to receive an annual bonus, as described below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The threshold, target, and maximum payout levels for our NEOs as a percentage of salary for the fiscal year ended December 31, 2024, as approved by the Compensation Committee, are set forth in the table below.

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| | | | |
|:---|:---|:---|:---|
| **Name** | **Threshold <br>(50% of Target)** | **Target** <sup>(1)</sup> | **Maximum <br>(150% of Target)** |
| Stephen R. Stone | 30% | 60% | 90% |
| Anthony P. Valduga | 30% | 60% | 90% |
| C. Bradley Turner | 25% | 50% | 75% |

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<sup>(1)</sup> Target bonus opportunities remained the same for 2025.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Each NEO's annual cash incentive award opportunity for 2024 was based on a combination of corporate performance objectives (weighted 85%) and individual performance objectives (weighted 15%). The Compensation Committee selected adjusted earnings per share (EPS), core deposit growth and core loan growth (weighted 70%, 15% and 15%, respectively) as the corporate objectives for 2024 that would guide the Compensation Committee's assessment of bank performance. Individual performance objectives were determined based on each NEO's respective areas of responsibilities and key functions associated with their respective roles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The Compensation Committee reviewed performance against the metrics described above and determined to award bonuses as reflected in the Non-Equity Incentive Plan column of the Summary Compensation table.

*RSUs.* In 2024, the Compensation Committee granted RSUs to the NEOs, which vest on the fifth anniversary of grant, subject to the NEO's continued service on such date, as follows: Mr. Stone, 40,000; Mr. Valduga, 17,000; and Mr. Turner, 2,500. The Compensation Committee determined to increase the grant date value of RSUs granted in 2024 to more closely align the equity ownership of our named executive officers with those of our peers. In January 2025, the Compensation Committee granted RSUs to the NEOs having a grant date value that more closely resembled historical grants other than for 2024, as follows: Mr. Stone, 17,000; Mr. Valduga, 7,500; and Mr. Turner, 2,000. RSU awards were granted under, and pursuant to the terms and conditions of, the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the "2017 Plan").

*401(k) Plan.* The Bank maintains defined contribution plan under which eligible employees may elect to defer a portion of their compensation and receive certain employer contributions (the "401(k) Plan"). The named executive officers are eligible to participate in the 401(k) Plan on the same terms as other eligible employees of the Bank. Eligible employees are immediately enrolled into the 401(k) Plan.

Under the 401(k) Plan, a participant may elect to defer, on a pretax basis, a portion of their eligible compensation. For 2024, the salary deferral contribution limit is $23,000, provided, however, that a participant over age 50 may contribute an additional $7,500 to the 401(k) Plan, for a total of $30,500. In addition to salary deferral contributions, the Bank makes matching contributions up to 5% of the participant's compensation. A participant is immediately 100% vested in his or her salary deferral contributions. The participant will not vest on the Bank's matching contribution until after 2 years of service with the Bank. Participants become vested in employer discretionary nonelective contributions to the 401(k) Plan pursuant to a six-year graded vesting schedule. Participants become vested in these contributions at a rate of 20% per year beginning in year two.

*Health and Welfare Benefits.* Our named executive officers are eligible to participate in the same benefit plans designed for all of our eligible full-time and part-time employees, including medical, dental, vision, disability and basic group life insurance coverage. In addition, pursuant to the terms of their employment agreements (which are described below), Mr. Stone and Mr. Valduga are entitled to be reimbursed for group health, dental, and welfare benefit plans offered by the Bank.

*Perquisites.* We provide our named executive officers with a limited number of perquisites that we believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions. Our Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to named executive officers.

**Equity Incentive Plans**

***2017 Equity Incentive Plan***. Our shareholders approved the 2017 Equity Incentive Plan to promote the success, and enhance the value of the Company by linking the personal interests of employees, officers, directors and consultants of the Company or any Affiliate to those Company shareholders and by providing such persons with an incentive for outstanding performance. The 2017 Equity Incentive Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of employees, officers, directors and consultants upon whose judgment, interest, and special effort the successful conduct of the Company's operation is largely dependent. The 2017 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors of the Company. As of December 31, 2024, the 2017 Equity Incentive Plan had reserved up to 1,106,500 shares of common stock, which may be delivered pursuant to the exercise of stock options or restricted stock units. During 2024, Messrs. Stone, Valduga, and Turner each received a restricted stock unit award grant with a grant date fair value equal to $680,000, $280,500 and $41,250, respectively.

***2025 Omnibus Incentive Plan****.* In April 2025, the Board and our shareholders approved the CoastalSouth Bancshares, Inc. Omnibus Incentive Plan (the "Omnibus Plan") to promote the success, and enhance the value of the Company by linking the personal interests of employees, officers, directors and consultants of the Company or any affiliate to those of our shareholders and by providing such persons with an incentive for outstanding performance. The Omnibus Plan is further intended to provide flexibility to the Company in its ability

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to motivate, attract and retain the services of employees, officers, directors and consultants upon whose judgment, interest, and special effort the successful conduct of the Company's operation is largely dependent. The following is a summary of the material terms of the Omnibus Plan.

*Permissible Awards.* The Omnibus Plan authorizes the granting of awards in any of the following forms:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•options to purchase shares of our common stock, which may be designated under the tax code as nonstatutory stock options (which may be granted to all participants) or incentive stock options (which may be granted to officers and employees but not to consultants or non-employee directors);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•stock appreciation rights, or SARs, which give the holder the right to receive the difference (payable in cash or stock, as specified in the award agreement) between the fair market value per share of our common stock on the date of exercise over the base price of the award;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•restricted stock, which is subject to restrictions on transferability and subject to forfeiture on terms set by the Compensation Committee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•restricted stock units, or RSUs, which represent the right to receive shares of our common stock (or an equivalent value in cash or other property, as specified in the award agreement) in the future, based upon the attainment of stated vesting criteria;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•deferred stock units, or DSUs, which represent the right granted to receive shares of our common stock (or an equivalent value in cash or other property, as specified in the award agreement) at a future time as determined by the Compensation Committee, or as determined by the recipient within guidelines established by the Compensation Committee in the case of voluntary deferral elections;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•performance awards, which are awards payable in cash or stock upon the attainment of specified performance goals (any award that may be granted under the Omnibus Plan may be granted in the form of a performance award);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•other stock-based awards in the discretion of the Compensation Committee, including unrestricted stock grants; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•cash-based awards, including annual bonuses.

Dividend equivalent rights, which entitle the participant to payments in cash or property calculated by reference to the amount of dividends paid on the shares of stock underlying an award, may be granted with respect to awards other than options or SARs.

*Authorized Shares*.*** Subject to adjustment as provided in the Omnibus Plan, the aggregate number of shares of our common stock reserved and available for issuance pursuant to awards granted under the Omnibus Plan is 260,000, all of which may be granted as incentive stock options. In the event of a nonreciprocal transaction between us and our shareholders that causes the per share value of our common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend), the share authorization limits under the Omnibus Plan will be adjusted proportionately, and the Compensation Committee must make such adjustments to the Omnibus Plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction.

*Limit on Compensation Payable to Non-Employee Directors*.*** With respect to any one calendar year, the aggregate compensation that may be granted to any non-employee director, including all meeting fees, cash retainers and retainers granted in the form of awards, may not exceed $100,000, or $125,000 in the case of a non-employee Chairman of the Board or Lead Director. For purposes of such limit, the value of awards will be determined based on the aggregate grant date fair value of all awards issued to the director in such year (computed in accordance with applicable financial accounting rules).

*Limitations on Transfer; Beneficiaries*. No award will be assignable or transferable by a participant other than by will or the laws of descent and distribution or, except in the case of an incentive stock option, pursuant to a domestic relations order that would satisfy section 414(p)(1)(A) of the Code if such section applied to an award under the Incentive Plan; provided, however, that the Compensation Committee may permit other transfers (other than transfers for value). A participant may, in the manner determined by the Compensation Committee, designate a beneficiary to exercise the rights of the participant and to receive any distribution with respect to any award upon the participant's death.

*Acceleration of Vesting upon Death or Disability.* Except as otherwise provided in the award certificate or any special Incentive Plan document governing an award, upon the termination of a participant's service by reason of death or disability: (i) all of such participant's outstanding options and stock appreciation rights will become fully exercisable; (ii) the time-based vesting restrictions on outstanding awards will lapse; and (iii) the payout opportunities attainable under all of that participant's outstanding performance-based awards will be deemed to have been fully earned as of the date of termination as follows: (i) if the date of termination occurs during the first half of

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the applicable performance period, all relevant performance goals will be deemed to have been achieved at the "target" level, and (ii) if the date of termination occurs during the second half of the applicable performance period, the actual level of achievement of all relevant performance goals against target will be measured as of the end of the calendar quarter immediately preceding the date of termination, and (iii) in either such case, the awards will payout on a pro-rata basis, based on the length of time within the performance period that has elapsed prior to date of termination.

*Discretionary Acceleration.* Our Compensation Committee may, in its discretion, accelerate the vesting and/or payment of any awards for any reason. Our Compensation Committee may discriminate among participants or among awards in exercising such discretion.

*Certain Transactions.* Upon the occurrence or in anticipation of certain corporate events or extraordinary transactions, the Compensation Committee may also make discretionary adjustments to awards, including settling awards for cash, providing that awards will become fully vested and exercisable, providing for awards to be assumed or substituted, or modifying performance targets or periods for awards.

*Termination and Amendment.* The Omnibus Plan will terminate on April 24, 2035, the tenth anniversary of the date our shareholders approved the Omnibus Plan. Our board of directors or Compensation Committee may, at any time and from time to time, terminate or amend the Omnibus Plan, but if an amendment to the Omnibus Plan would constitute a material amendment requiring shareholder approval under applicable listing requirements, laws, policies or regulations, then such amendment will be subject to shareholder approval. No termination or amendment of the Omnibus Plan may adversely affect any award previously granted under the Omnibus Plan without the written consent of the participant. Without the prior approval of our shareholders, and except as otherwise permitted by the anti-dilution provisions of the Omnibus Plan, the Omnibus Plan may not be amended to directly or indirectly reprice, replace or repurchase "underwater" options or SARs.

Our Compensation Committee may amend or terminate outstanding awards. However, such amendments may require the consent of the participant and, unless approved by our shareholders or otherwise permitted by the anti-dilution provisions of the Omnibus Plan, (i) the exercise price or base price of an option or SAR may not be reduced, directly or indirectly, (ii) an option or SAR may not be cancelled in exchange for cash, other awards, or options or SARS with an exercise price or base price that is less than the exercise price or base price of the original option or SAR, or otherwise, (iii) we may not repurchase an option or SAR for value (in cash or otherwise) from a participant if the current fair market value of the shares of our common stock underlying the option or SAR is lower than the exercise price or base price per share of the option or SAR, and (iv) the original term of an option or SAR may not be extended.

*Prohibition on Repricing*. As indicated above under "Termination and Amendment," outstanding stock options and SARs cannot be repriced, directly or indirectly, without the prior consent of our shareholders. The exchange of an "underwater" option or stock appreciation right (i.e., an option or stock appreciation right having an exercise price or base price in excess of the current market value of the underlying stock) for cash or for another award would be considered an indirect repricing and would, therefore, require the prior consent of our shareholders.

*Certain Federal Income Tax Effects*. The U.S. federal income tax discussion set forth below is intended for general information only and does not purport to be a complete analysis of all of the potential tax effects of the Omnibus Plan. It is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. State and local income tax consequences are not discussed and may vary from locality to locality.

<u>Nonstatutory Stock Options</u>. There will be no federal income tax consequences to the optionee or to us upon the grant of a nonstatutory stock option under the Omnibus Plan. When the optionee exercises a nonstatutory option, however, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of our common stock received upon exercise of the option at the time of exercise over the exercise price, and we will be allowed a corresponding federal income tax deduction. Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the shares were held.

<u>Incentive Stock Options</u>. There typically will be no federal income tax consequences to the optionee or to us upon the grant or exercise of an incentive stock option. If the optionee holds the acquired option shares for the required holding period of at least two years after the date the option was granted and one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term capital gain or loss, and we will not be entitled to a federal income tax deduction. If the optionee disposes of the option shares in a sale, exchange or other disqualifying disposition before the required holding period ends, he or she will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise over the exercise price, and we will be allowed a federal income tax deduction equal to such amount. While the exercise of an incentive stock option does not result in current taxable income, the excess of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment for purposes of determining the optionee's alternative minimum taxable income.

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<u>SARs</u>. A participant receiving a SAR under the Omnibus Plan will not recognize income, and we will not be allowed a tax deduction, at the time the award is granted. When the participant exercises a SAR, the amount of cash and the fair market value of any shares of common stock received will be ordinary income to the participant, and we will be allowed a corresponding federal income tax deduction at that time.

<u>Restricted Stock</u>. Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below, a participant will not recognize income, and we will not be allowed a tax deduction, at the time a restricted stock award is granted, provided that the award is nontransferable and is subject to a substantial risk of forfeiture. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of our common stock as of that date (less any amount he or she paid for the stock), and we will be allowed a corresponding federal income tax deduction at that time. If the participant files an election under Section 83(b) of the tax code within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less any amount paid for the stock), and we will be allowed a corresponding federal income tax deduction at that time. Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be able to recover the tax previously paid pursuant to the Section 83(b) election.

<u>Restricted or Deferred Stock Units</u>. A participant will not recognize income, and we will not be allowed a tax deduction, at the time a stock unit award is granted. When the participant receives or has the right to receive shares of common stock (or the equivalent value in cash or other property) in settlement of a stock unit award, a participant will recognize ordinary income equal to the fair market value of our common stock or other property as of that date (less any amount he or she paid for the stock or property), and we will be allowed a corresponding federal income tax deduction.

**Employment Agreements**

We are party to executive employment agreements with each of our named executive officers, except for Mr. Turner.

***Employment Agreement with Stephen R. Stone.*** The Company and the Bank are parties to an employment agreement with Stephen R. Stone, President and Chief Executive Officer of the Company and the Bank. The agreement has an initial three-year term and renews automatically every year for one year thereafter, unless notice of non-renewal is provided by either party. The agreement provides Mr. Stone's base salary, currently $620,458 which may increase during the term of the employment agreement and may not be decreased unless the Bank faces exigent financial conditions. In addition to base salary, Mr. Stone is eligible to participate in the annual cash incentive plan and equity award plan (both of which are described above). The Bank will also reimburse Mr. Stone for the full cost for group health and dental plans as well as up to five hundred dollars ($500) per month towards participation in other welfare benefits plans offered by the Bank. Mr. Stone is also eligible to participate in all incentive, savings and retirement plans, practices, policies and programs available to the other senior officers of the Bank. All reasonable travel and other business expenses incurred by Mr. Stone in the performance of his duties are reimbursed by the Bank in accordance with its reimbursement policy, as amended from time to time.

***Employment Agreement with Anthony P. Valduga***. The Company and the Bank are parties to an employment agreement with Mr. Valduga. The agreement has an initial three-year term and renews automatically every year for one year thereafter, unless notice of non-renewal is provided by either party. The agreement provides Mr. Valduga's base salary, currently $382,000 which may increase during the term of the employment agreement and may not be decreased unless the Bank faces exigent financial conditions. In addition to base salary, Mr. Valduga is eligible to participate in the Bank's annual cash incentive plan and equity award plan (both of which are described above). The Bank will also reimburse Mr. Valduga for the full cost for group health and dental plans as well as up to five hundred dollars ($500) per month towards participation in other welfare benefits plans offered by the Bank. Mr. Valduga is eligible to participate in all incentive, savings and retirement plans, practices, policies and programs available to the other senior officers of the Bank. All reasonable travel and other business expenses incurred by Mr. Valduga in the performance of his duties are reimbursed by the Bank in accordance with its reimbursement policy, as amended from time to time.

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**Outstanding Equity Awards at 2024 Fiscal Year End**

The following table shows stock awards outstanding for each of our named executive officers as of December 31, 2024.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | **Option Awards** | **Option Awards** | **Option Awards** | **Option Awards** | **Stock Awards** | **Stock Awards** |
| **Name** | **Grant Date** | **Number of Securities Underlying Unexercised Options<br>(#) Exercisable** | **Number of Securities Underlying Unexercised Options <br>(#) Unexercisable**<sup>(1)</sup> | **Option Exercise Price ($)** | **Option Expiration Date** | **Number of shares or units of stock that have not vested(#)**<sup>(2)</sup> | **Market value of shares or units of stock that have not vested($)**<sup>(3)</sup> |
| Stephen R. Stone | 9/22/2017 | 75000 | - | 13.00 | 9/22/2027 |  |  |
|  | 5/1/2019 | 34000 | - | 14.00 | 5/1/2029 |  |  |
|  | 5/4/2020 | 10000 | - | 9.02 | 5/4/2030 |  |  |
|  | 10/21/2020 | 10000 | - | 11.79 | 10/21/2030 |  |  |
|  | 1/25/2022 |  |  |  |  | 2475 | 54304 |
|  | 4/27/2023 |  |  |  |  | 17000 | 372997 |
|  | 2/1/2024 |  |  |  |  | 40000 | 877640 |
| Anthony P. Valduga | 9/22/2017 | 75000 | - | 13.00 | 9/22/2027 |  |  |
|  | 5/1/2019 | 23000 | - | 14.00 | 5/1/2029 |  |  |
|  | 5/4/2020 | 7500 | - | 9.02 | 5/4/2030 |  |  |
|  | 10/21/2020 | 7500 | - | 11.79 | 10/21/2030 |  |  |
|  | 1/25/2022 |  |  |  |  | 1650 | 36203 |
|  | 4/27/2023 |  |  |  |  | 13000 | 285233 |
|  | 3/19/2024 |  |  |  |  | 17000 | 372997 |
| C. Bradley Turner | 9/22/2017 | 20000 | - | 13.00 | 9/22/2027 |  |  |
|  | 5/1/2019 | 5000 | - | 14.00 | 5/1/2029 |  |  |
|  | 5/4/2020 | 6000 | - | 9.02 | 5/4/2030 |  |  |
|  | 10/21/2020 | 6000 | - | 11.79 | 10/21/2030 |  |  |
|  | 4/28/2021 | 3000 | 1000 | 16.50 | 4/28/2031 |  |  |
|  | 1/25/2022 | 1500 | 1500 | 16.94 | 1/25/2032 |  |  |
|  | 4/27/2023 |  |  |  |  | 4000 | 87764 |
|  | 3/19/2024 |  |  |  |  | 2500 | 54853 |

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<sup>(1)</sup> Options granted in 2021 vest on April 29, 2025, subject to the NEO's continued service on such date (with certain exceptions). For options granted in 2022, 750 options vested on January 25, 2025 and 750 options vest on January 25, 2026, subject to the NEO's continued service on such date (with certain exceptions).

<sup>(2)</sup> RSUs granted in 2022 vested on January 25, 2025, RSUs granted in 2023 cliff vest on the third anniversary of the grant date, and RSUs granted in 2024 cliff vest on the fifth anniversary of the grant date and in each case subject to the NEO's continued service on such date (with certain exceptions).

<sup>(3)</sup> Market value is calculated on the basis of $21.94 per share, which was the closing sales price for our common stock as reported on the OTCQX on December 31, 2024.

**Potential Payments Upon Termination of Employment or Change in Control**

***Mr. Stone*.** Pursuant to Mr. Stone's employment agreement, in the event of his termination by the Bank without cause (as defined in the agreement) or his resignation for good reason (as defined in the agreement) (in either case, a "qualifying termination"), Mr. Stone will receive a severance payment equal to 1.50 times the sum of (1) Mr. Stone's base salary in effect as of the date of termination and (2) the average of his annual bonuses for the preceding 3 years. Mr. Stone would also receive an additional cash payment equal to the pro-rata portion of his annual cash bonus for the year during which his qualifying termination occurred. In addition, the Bank shall pay the excess cost of COBRA beyond what Mr. Stone would have to pay for such coverage under the Bank's health and welfare plan until the earlier of (1) the date on which he first becomes eligible for health insurance with another employer, or (2) the period that Mr. Stone would be entitled to coverage under COBRA.

In the event of a qualifying termination upon or within 18 months of a change in control of the Company, the agreement provides that Mr. Stone will be entitled to a change in control severance payment equal to 2.99 times the sum of (1) Mr. Stones base salary in effect as of the date of termination and (2) the average of his annual bonuses for the preceding 3 years. The agreement provides that gross payments due to Mr. Stone in the event of a change in control will be reduced to avoid an excess parachute payment under Section 280G of the Code.

The agreement requires compliance with a one-year non-competition covenant inside certain restricted territories and a one-year non-solicitation covenant related to employees and customers.

***Mr. Valduga*.** Pursuant to Mr. Valduga's employment agreement, in the event of his termination by the Bank without cause (as defined in the agreement) or his resignation for good reason (as defined in the agreement) (in either case, a "qualifying termination"), Mr. Valduga will receive a severance payment equal to 1.50 times the sum of (1) Mr. Valduga's base salary in effect as of the date of termination and (2) the average of his annual bonuses for the preceding 3 years. Mr. Valduga would also receive an additional cash payment equal to the pro-rata portion of his annual cash bonus for the year during which his qualifying termination occurred. In addition, the Bank shall pay the excess cost of COBRA beyond what Mr. Valduga would have to pay for such coverage under the

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Bank's health and welfare plan until the earlier of (1) the date on which he first becomes eligible for health insurance with another employer, or (2) the period that Mr. Valduga would be entitled to coverage under COBRA.

In the event of a qualifying termination upon or within 18 months of a change in control of the Company, the agreement provides that Mr. Valduga will be entitled to a change in control severance payment equal to 2.99 times the sum of (1) Mr. Valduga's base salary in effect as of the date of termination and (2) the average of his annual bonuses for the preceding 3 years. The agreement provides that gross payments due to Mr. Valduga in the event of a change in control will be reduced to avoid an excess parachute payment under Section 280G of the Code.

The agreement required compliance with a one-year non-competition covenant inside certain restricted territories and a one-year non-solicitation covenant related to employees and customers.

***Mr. Turner*.** Mr. Turner participates in the Bank's Executive Severance Plan (the "Executive Severance Plan"), which provides severance benefits to designated participants under certain circumstances, subject to the participant's execution of a general release of claims and compliance with restrictive covenants. Pursuant to the Executive Severance Plan, in the event of Mr. Turner's termination by the Bank without cause (as defined in the Executive Severance Plan) or his resignation for good reason (as defined in the Executive Severance Plan) (in either case, a "qualifying termination"), other than in connection with a change in control, Mr. Turner will receive severance in an amount equal to twenty-five percent (25%) of his annual base salary, payable in approximately equal installments over a 3-month period in accordance with the Bank's regular payroll practices. If such qualifying termination occurs within twelve (12) months following a change in control, Mr. Turner will receive, instead, a lump sum payment equal to 1.5 times the sum of (i) his base salary in effect as of the date of termination and (ii) the average of his annual bonuses for the preceding three years, payable in a single lump sum within sixty (60) days following termination. The Executive Severance Plan requires compliance with a one-year non-competition covenant inside certain restricted territories and a one-year non-solicitation covenant related to employees and customers.

***2017 Plan***. Pursuant to the terms of the equity awards granted under the 2017 Plan, in the event of a change in control, all outstanding equity awards will become fully-vested and, in the case of option awards, exercisable.

**2024 Director Compensation**

The following table sets forth information regarding compensation paid, earned or awarded to each non-employee director during the year ended December 31, 2024 for service as a member of our Board and committees thereof, as well as for service on the Bank's board of directors. Mr. Stone does not receive any additional compensation for service on our Board the Bank's board of directors.

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| | | | |
|:---|:---|:---|:---|
|  | **Fees Earned** | **Fees Earned** |  |
| **Name** | **Cash** | **Restricted Stock Awards** <sup>(1)</sup> | **Total** |
| John G. Aldridge, Jr. | $19313 | $29733 | $49046 |
| L. Scott Askins | 25750 | 26265 | 52015 |
| Ernst. W. Bruderer | 29750 | 26265 | 56015 |
| Patrick M. Frawley <sup>(2)</sup> | 30750 | 26265 | 57015 |
| Mark A. Griffith | 29750 | 26265 | 56015 |
| Boris M. Gutin <sup>(3)</sup> | 25750 | 26265 | 52015 |
| Michael B. High <sup>(3)</sup> | 25750 | 26265 | 52015 |
| James N. Richardson, Jr. | 25750 | 26265 | 52015 |
| James S. MacLeod <sup>(2)</sup> | 43250 | 41715 | 84965 |
| Joseph V. Topper | 29750 | 26265 | 56015 |

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<sup>(1)</sup> The amounts reported here do not reflect the actual economic value realized by each non-employee director. In accordance with SEC rules, the Stock Awards column reflects the grant date fair value of RSU awards, calculated in accordance with ASC 718. For additional information, see Note 13 in our consolidated financial statements included in this prospectus. The assumptions used in calculating the grant date fair value of RSUs reported in this table are set forth in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Stock-Based Compensation."

<sup>(2)</sup> As of December 31, 2024, Messrs. MacLeod and Frawley held 55,000 and 15,000 outstanding stock option awards, respectively.

<sup>(3)</sup> In connection with their appointment to our Board, we agreed to compensate each of Messrs. Gutin and High pursuant to the terms of our annual non-employee director compensation program. Due to certain internal policies and arrangements, Messrs. Gutin and High may not receive any direct compensation, either cash or equity, from boards of directors on which they serve; instead, any such payments are required to be made to GCP Capital Partners LLC and Patriot Financial Manager LP, respectively. Accordingly, the annual non-employee director compensation to which Messrs. Gutin and High would have been entitled is paid (including for tax purposes) to GCP Capital Partners LLC and Patriot Financial Manager LP, respectively.

**Director Compensation Policy**

The following table sets forth information for 2024 and 2025 regarding annual cash retainers, equity compensation and additional

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compensation paid based on the Director's chairperson responsibilities.

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| | | |
|:---|:---|:---|
|  | **2024** | **2025** |
| Annual Cash Retainer <sup>(1)</sup> | $25750 | $58830 |
| Annual RSU Grant <sup>(2)</sup> | 29750 | - |
| Chairperson of the Board | 17500 | 17500 |
| Audit Committee Chairperson | 4000 | 4000 |
| Compensation Committee Chairperson | 4000 | 4000 |
| Nominating and Corporate Governance Committee Chairperson | 4000 | 4000 |
| Credit and Risk Committee Chairperson | 5000 | 5000 |

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<sup>(1)</sup> The Chairman receives an additional annual cash retainer amount in 2025 totaling $19,600.

<sup>(2)</sup> The Chairman received an additional RSU grant in 2024 totaling $15,450.

We also offer reimbursements to our directors for their reasonable out-of-pocket expenses, including travel and lodging, incurred in attending meetings of our Board of Directors and Committees.

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**CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**

In addition to the compensation arrangements with directors and executive officers described in "Executive Compensation" above, the following is a description of transactions since January 1, 2023, to which we have been a party in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or beneficial holders of more than five percent of our capital stock, or their immediate family members or entities affiliated with them, had or will have a direct or indirect material interest.

**Policies and Procedures Regarding Related Party Transactions**

Transactions by the Company with related parties are subject to a formal written policy, as well as certain regulatory requirements and restrictions, including Sections 23A and 23B of the Federal Reserve Act and the FRB's Regulation W (which govern certain transactions by Coastal States Bank with its affiliates) and the FRB's Regulation O (which governs certain loans by Coastal States Bank to its executive officers, directors and principal shareholders). We have adopted policies to comply with these regulatory requirements and restrictions.

In addition, we have adopted a written policy governing the approval of related party transactions that complies with all applicable requirements of the SEC and NYSE rules. Related party transactions are transactions in which we are a participant, the amount involved exceeds $120,000 and a related party has or will have a direct or indirect material interest. Related parties of the Company include directors (including nominees for election as directors), executive officers, five percent shareholders and the immediate family members of these persons. In determining whether to approve a related party transaction, the board of directors will consider, among other factors, as it deems appropriate, the related party's interest in the related party transaction, the approximate dollar value of the amount involved in the related party transaction, the approximate dollar value of the amount of the related party's interests in the related party transaction without regard to the amount of any profit or loss, whether the related party transaction was undertaken in the ordinary course of business, whether the related party transaction with the related party is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have been reached with an unrelated third party, the purpose of, and the potential benefits to the Company of, the related party transaction, the fairness of the proposed transaction, the direct or indirect nature of the related party's interest in the transaction, the appearance of an improper conflict of interests for any director or executive officer taking into account the size of the transaction and the financial position of the related party, whether the transaction would impair an outside director's independence, the acceptability of the transaction to our regulators and the potential violations of other corporate policies, and any other information regarding the related party transaction or the related party in the context of the proposed related party transaction that would be material to investors in the light of the circumstances of the particular related party transaction. Upon completion of this offering, our Related Party Transaction Policy will be available on our website at www.coastalstatesbank.com. Information on, or accessible through, our website is not part of this prospectus.

**Private Placements**

Certain of our existing shareholders and related parties purchased shares of our common stock in a private placement that took place on March 31, 2023 and January 26, 2024.

With respect to the March 31, 2023 private placement, certain of our existing shareholders and related parties purchased an aggregate of 553,705 shares of our common stock for an aggregate price of approximately $8.9 million. The following table summarizes purchases by certain of our related parties in connection with this March 2023 private placement.

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| | |
|:---|:---|
| &nbsp;&nbsp;**Shareholder** | &nbsp;&nbsp;**Total Purchase Price** |
| &nbsp;&nbsp;Patriot Fund II | &nbsp;&nbsp;$1500000 |
| &nbsp;&nbsp;GCP CoastalSouth | &nbsp;&nbsp;$2000000 |
| &nbsp;&nbsp;Joseph V. Topper | &nbsp;&nbsp;$1300000 |
| &nbsp;&nbsp;James S. MacLeod | &nbsp;&nbsp;$180000 |
| &nbsp;&nbsp;James N. Richardson, Jr. | &nbsp;&nbsp;$320000 |

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With respect to the January 26, 2024 private placement, certain of our existing shareholders and related parties purchased an aggregate of 701,442 shares of our common stock for an aggregate price of approximately $12.3 million. The following table summarizes purchases by certain of our related parties in connection with this January 2024 private placement.

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| | |
|:---|:---|
| &nbsp;&nbsp;**Shareholder** | &nbsp;&nbsp;**Total Purchase Price** |
| &nbsp;&nbsp;EJF Sidecar Fund Series LLC | &nbsp;&nbsp;$2999990 |
| &nbsp;&nbsp;Joseph V. Topper | &nbsp;&nbsp;$350000 |
| &nbsp;&nbsp;James S. MacLeod | &nbsp;&nbsp;$200008 |
| &nbsp;&nbsp;James N. Richardson, Jr. | &nbsp;&nbsp;$500010 |
| &nbsp;&nbsp;John G. Aldridge, Jr. | &nbsp;&nbsp;$200008 |

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**Banking Relationships and Related Party Transactions**

The Sarbanes-Oxley Act of 2002 generally prohibits publicly traded companies from making loans to their executive officers and directors, but it contains a specific exemption from the prohibition for loans made by federally insured financial institutions, such as Coastal States Bank, to their executive officers and directors in compliance with federal banking regulations. Applicable law and our written credit policies require that loans to insiders be on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties, and must not involve more than the normal risk of repayment or present other unfavorable features. Loans to non- insider employees and other non-insiders are subject to the same requirements and underwriting standards and meet our normal lending guidelines, except that non-insider employees and other non-insiders may receive preferential interest rates and fees as an employee benefit. Loans to individual employees, directors and executive officers must also comply with our Bank's statutory lending limits and regulatory requirements regarding lending limits and collateral. All extensions of credit to the related parties must be reviewed and approved by our Bank's board of directors, and directors with a personal interest in any loan application are excluded from the consideration of such loan application. At March 31, 2025, all of our loans to directors and executive officers were made in compliance with our Regulation O policies and procedures, in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to Coastal States Bank, and did not involve more than the normal risk of collectability or present other features unfavorable to us. These loans were performing according to their original terms at March 31, 2025, and were made in compliance with federal banking regulations.

At March 31, 2025, the aggregate amount of extensions of credit to our directors, executive officers, principal shareholders and their associates was $2.8 million, or approximately 1.36% of our total equity. At March 31, 2025, total unfunded commitments to these related parties were $4.0 million.

**Directed Share Program**

At our request, the underwriters have reserved up to shares of our common stock offered by this prospectus for sale, at the initial public offering price, to our directors, officers, principal shareholders, employees, business associates, and related persons who have expressed an interest in purchasing our common stock in this offering. We will offer these shares to the extent permitted under applicable regulations in the United States through a directed share program. See the section entitled "Underwriting—Directed Share Program."

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**PRINCIPAL AND SELLING SHAREHOLDERS**

The following table sets forth information about the beneficial ownership of our common stock as of March 31, 2025 and as adjusted to reflect the completion of the offering, for:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Each person know to us to be the beneficial owner of more than 5% of our common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Each of our directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Each of our named executive officers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•All directors and executive officers as a group; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•each selling shareholder

We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting of securities, or to dispose or direct the disposition of securities, or has the right to acquire such powers within 60 days of March 31, 2025. For purposes of calculating each person's percentage ownership, common stock issuable pursuant to equity awards that are exercisable within 60 days of March 31, 2025 are included as outstanding and beneficially owned for that person or group, but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each beneficial owner identified in the table possesses sole voting and investment power over all our common stock shown as beneficially owned by the beneficial owner.

The percentage of beneficial ownership is based on 8,102,242 shares of voting common stock outstanding as of March 31, 2025, and shares of common stock outstanding after the completion of this offering, assuming no exercise of the underwriters' option to purchase additional shares of our common stock (or that the underwriter's option is exercised and satisfied by the selling shareholders), and shares of common stock to be outstanding after the completion of this offering, assuming exercise in full of the underwriters' option to purchase additional shares of our common stock from us. The following table does not reflect any shares of our common stock that our directors, officers or principal shareholders may purchase in this offering through the directed share program described in the section entitled "Underwriting."

Shares of non-voting common stock offered by the selling shareholders will automatically convert into voting common stock upon transfer.

Unless otherwise noted, the address for each shareholder listed on the table below is: c/o CoastalSouth Bancshares, Inc. 400 Galleria Parkway, Suite 1900, Atlanta, GA 30339.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Shares Beneficially Owned as of March 31, 2025** | **Shares Beneficially Owned as of March 31, 2025** |  | **Shares Beneficially Owned After the Offering** | **Shares Beneficially Owned After the Offering** | **Shares Beneficially Owned After the Offering** | **Shares Beneficially Owned After the Offering** |
| **Name and Address of Beneficial Owner** | **Number of Shares** | **Percentage** <sup>(1)</sup> | **Shares to be Sold in the Offering** | **Number of Shares** | **Percent, assuming no exercise of underwriters' purchase option** | **Percent, assuming full exercise of underwriters' purchase option from the Company** | **Percent, assuming full exercise of underwriters' purchase option from Selling Shareholders** |
| **Directors:** <sup>(2)</sup> |  |  |  |  |  |  |  |
| John G. Aldridge Jr | 13129 | \* |  |  |  |  |  |
| L. Scott Askins | 11665 | \* |  |  |  |  |  |
| Ernst. W. Bruderer <sup>(3)</sup> | 45131 | \* |  |  |  |  |  |
| Patrick M. Frawley <sup>(4)</sup> | 93899 | 1.16% |  |  |  |  |  |
| Mark A. Griffith <sup>(5)</sup> | 89794 | 1.11% |  |  |  |  |  |
| Boris M. Gutin <sup>(6)</sup> | 7284 | \* |  |  |  |  |  |
| Michael B. High <sup>(7)</sup> | 100 | \* |  |  |  |  |  |
| James S. MacLeod <sup>(8)</sup> | 246251 | 3.02% |  |  |  |  |  |
| James N. Richardson, Jr. <sup>(9)</sup> | 152263 | 1.88% |  |  |  |  |  |
| Joseph V. Topper <sup>(10)</sup> | 414376 | 5.11% |  |  |  |  |  |
| **Executive Officers:** |  |  |  |  |  |  |  |
| Stephen R. Stone <sup>(11)</sup> | 251815 | 3.06% |  |  |  |  |  |
| Anthony P. Valduga <sup>(12)</sup> | 223438 | 2.72% |  |  |  |  |  |
| C. Bradley Turner <sup>(13)</sup> | 56175 | \* |  |  |  |  |  |
| All directors and executive officers as a <br> group (13 persons total) | 1605320 | 18.98% |  |  |  |  |  |
| **5% Shareholders (other than above) <br> and Selling Shareholders:** |  |  |  |  |  |  |  |
| Patriot Financial Partners <sup>(14)</sup><br>Four Radnor Corporate Center <br>100 Matsonford Road<br>Radnor, PA 19087 | 2095950 | 22.11% |  |  |  |  |  |
| GCP Capital Partners <sup>(15)</sup><br>600 Lexington Avenue<br>New York, NY 10022 | 1068652 | 12.64% |  |  |  |  |  |
| EJF Capital LLC <sup>(16)</sup><br>2107 Wilson Blvd<br>Arlington, VA 22201 | 1141838 | 13.37% |  |  |  |  |  |

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\* Indicates beneficial ownership less than 1%

<sup>(1)</sup> Based on 8,102,242 shares of our common voting as of March 31, 2025, except as otherwise noted in the footnotes for Patriot Financial Partners, GCP Capital Partners, and EJF Capital LLC.

<sup>(2)</sup> The address of each director and executive officer is: c/o CoastalSouth Bancshares, Inc. 400 Galleria Parkway, Suite 1900, Atlanta, GA 30339

<sup>(3)</sup> Shares beneficially owned include 35,848 shares held in a joint tenant account with Christina Bruderer.

<sup>(4)</sup> Includes 15,000 vested and unexercised options.

<sup>(5)</sup> Shares beneficially owned include 16,750 shares held by Patricia Ann Griffith as trustee of the Patricia Ann Griffith Revocable Trust, 35,865 shares held by Patricia Ann Griffith as trustee of the Griffith Family Trust, and 37,179 shares held by Mark Allan Griffith as trustee of the Mark Allan Griffith Revocable Trust.

<sup>(6)</sup> Boris M. Gutin currently serves as the representative of GCP CoastalSouth LLC and GCP Capital Partners LLC (collectively, "GCP") on our Board of Directors. Mr. Gutin owns 7,284 shares, but does not beneficially own shares held by GCP.

<sup>(7)</sup> Michael B. High currently serves as the representative of the Patriot Financial Partners II Coastal SPV, LLC ("Patriot Fund II") and Patriot Financial Manager L.P. ("Patriot Financial Manager") on our Board of Directors. Mr. High owns 100 shares, but does not have voting or investment power over any shares held by the Patriot Funds II and Patriot Financial Manager or their affiliates and disclaims any beneficial ownership of such shares.

<sup>(8)</sup> Shares beneficially owned include 191,251 shares held by Srome LLC owned 100% by James S. MacLeod, and 55,000 vested and unexercised options held by James S. MacLeod.

<sup>(9)</sup> Shares beneficially owned include 43,372 shares held by National Financial Services LLC as custodian for James N. Richardson, Jr. IRA, and 108,891 shares held by James N. Richardson, Jr.

<sup>(10)</sup> Shares beneficially owned include 375,226 shares held by Dunne Manning Investments, LP ("DMI"). DMI's voting and dispositive power is held by Dunne Manning GP, LLC. Joseph V. Topper, Jr. currently serves as the representative of DMI on our Board of Directors. Shares beneficially owned also include 7,900 shares held by Joseph V. Topper, Jr. and 31,250 shares held by The Topper Foundation.

<sup>(11)</sup> Shares beneficially owned include 4,830 shares held by UBS as custodian for Stephen R. Stone IRA, 117,985 held by Stephen R. Stone and 129,000 vested and unexercised options.

<sup>(12)</sup> Shares beneficially owned include 70,416 shares held in a joint tenant account with Ryan R. Valduga, 2,500 shares held by Ryan R. Valduga in an IRA, 27,924 held by Anthony P. Valduga in an IRA, 9,598 held by Anthony P. Valduga and 113,000 vested and unexercised options.

<sup>(13)</sup> Shares beneficially owned include 7,925 shares held by Etrade Financial as custodian for Cameron B. Turner IRA, 5,000 held by Cameron B. Turner and 43,250 vested and unexercised options.

<sup>(14)</sup> Patriot Fund II is the holder of record of 711,311 shares of voting common stock and 1,376,739 of non-voting common stock. Patriot Financial Manager is the holder of record of 7,900 shares of voting common stock. Patriot Fund II's voting and dispositive power is held by Patriot Financial Partners II GP, L.P. ("Patriot II GP"), which is the general partner of Patriot Fund II and by Patriot Financial Partners II GP, LLC ("Patriot II LLC"), which is the general partner of Patriot II GP, and by

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&nbsp;&nbsp;&nbsp;&nbsp;W. Kirk Wycoff, Ira M. Lubert, and James J. Lynch who serve as the general partners of the funds and Patriot II GP and as the members of Patriot II LLC. Patriot Financial Manager's voting and dispositive power is held by Patriot Financial Manager GP LLC ("Manager GP") and by W. Kirk Wycoff, Ira M. Lubert and James J. Lynch who serve as members of Manager GP. Mr. Wycoff, Mr. Lubert, and Mr. Lynch each disclaim beneficial ownership of such shares of Voting Common Stock, except to the extent of their respective pecuniary interest in the funds. The ownership percentage assumes that all such shares of non-voting common stock have been converted into common stock.

<sup>(15)</sup> GCP CoastalSouth LLC and GCP Capital Partners LLC (collectively, "GCP") is the holder of record of 718,789 shares of voting common stock and 349,863 of non-voting common stock. GCP Capital Partners IV, L.P and GCP Capital Partners (Cayman) IV, L.P. own 98% and 2% respectively of GCP CoastalSouth LLC. GCP's voting and dispositive power is held by its general partner, GCP Managing Partner IV GP, and GCP's Investment Committee. The ownership percentage assumes that all such shares of non-voting common stock have been converted into common stock.

<sup>(16)</sup> Shares beneficially owned include 192,676 shares of voting common stock held by EJF Financial Services Fund LP ("FSF"). Shares beneficially owned also include 510,735 shares of voting common stock and 438,427 shares of non-voting common stock held by EJF Sidecar Fund, Series LLC – Small Financial Equities Series ("SFES"). FSF's voting and dispositive power is held by EJF Financial Services Fund GP, LLC ("FSF GP"), which is the General Partner of FSF, and SFES' voting and dispositive power is held by EJF Capital LLC ("EJF"), which is the manager of SFES. EJF also serves as the sole member and manager of FSF GP. EJF's voting and dispositive power is held by Neal Wilson and Emanuel Friedman, who serve as members and managers of EJF. Mr. Wilson and Mr. Friedman disclaim beneficial ownership of such shares of voting common stock, except to the extent of their respective pecuniary interests in SFES and FSF.

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**DESCRIPTION OF CAPITAL STOCK**

The following is a summary of the material terms of our capital stock. The following description of our capital stock does not purport to be complete so you should refer to our Articles of Incorporation and Bylaws, which we have included as exhibits to the registration statement of which this prospectus is a part. We urge you to read these documents for a more complete understanding of the information contained in this section.

**General**

Our authorized capital stock consists of 70,000,000 shares, of which 50,000,000 shares are voting common stock, $1.00 par value per share ("voting common stock") and 10,000,000 shares are non-voting common stock, $1.00 par value per share ("non-voting common stock," and together with voting common stock, "common stock"), and 10,000,000 shares are preferred stock, $1.00 par value ("preferred stock"). As of March 31, 2025, 8,102,242 shares of our voting common stock were outstanding, 2,172,029 shares of our non-voting common stock were outstanding, and no shares of our preferred stock were designated or outstanding.

At March 31, 2025, there were 737,250 shares of our common stock issuable upon the exercise of outstanding stock options at a weighted average price of $13.30 per share (715,625 options of which are exercisable) and 194,650 shares of our common stock issuable upon the future vesting of 194,650 restricted stock units outstanding.

If all shares are sold in this offering, we anticipate that there will be shares of our voting common stock, shares of our non-voting common stock, and no shares of preferred stock outstanding upon the completion of this offering.

All of our outstanding shares of common stock are, and the shares of our common stock issued in this offering will be, fully paid and nonassessable.

**Common Stock**

***Voting Common Stock***

*Voting Rights*

Holders of our voting common stock are entitled to one vote per share on all matters requiring shareholder action, including the election of directors. Our Bylaws provide that a majority of the shares entitled to vote at a shareholders' meeting, represented in person or by proxy, constitute a quorum. If a quorum exists, action on a matter by a voting group is approved if the votes cast within the voting group favoring the action exceeds the votes cast opposing the action, unless otherwise specified by law or our Articles of Incorporation and except for the election of directors, which will be determined by a plurality vote. There are no cumulative voting rights.

*Liquidation Rights*

In the event of liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders of voting common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock or any other classes of shares having prior rights as to dividends, if any, then outstanding.

*Dividends*

Holders of our voting common stock may receive dividends when, as and if declared by our board of directors out of funds legally available for the payment of dividends, subject to any restrictions imposed by regulatory authorities and the payment of any preferential amounts to which any class of preferred stock or other classes of shares may be entitled. Our future dividend policy will be subject to the discretion of our board of directors and will depend upon a number of factors, including future earnings, financial condition, liquidity, and general business conditions. Our ability to pay dividends is subject to statutory and regulatory limitations applicable to us and our Bank. Please see "Dividend Policy" and "Supervision and Regulation – Holding Company Regulation – Dividends and Stock Repurchases" for a description of certain limitations and restrictions on the payment of dividends applicable to the Company.

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***Non-voting Common Stock***

*No Voting Rights*

Holders of non-voting common stock do not have any voting rights, except as may otherwise from time to time be required by law.

*Ranking*

Shares of the non-voting common stock rank, with respect to the payment of dividends and distributions upon liquidation, dissolution, or winding-up:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•*pari passu* with the voting common stock; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•subordinate and junior in right of payment and to all other securities of the Company which, by their respective terms, are senior to the non-voting common stock or voting common stock.

*Dividends*

Our non-voting common stock ranks *pari passu* with our voting common stock with respect to payment of dividends and distribution. Holders of non-voting common stock are entitled to receive dividends and distributions in the same per share amount as paid on the voting common stock. No dividends or distributions will be paid to voting common stock or any other class or series of capital stock ranking *pari passu* with the voting common stock (with respect to dividends or distributions) unless an identical dividend or distribution is paid, at the same time, to the non-voting common stock in an amount per share of non-voting common stock equal to the product of, (1) the per share dividend or distribution declared and paid in respect of each share of voting common stock and (2) the number of shares of voting common stock into which such share of non-voting common stock is then convertible.

*No Redemption Rights*

The shares of non-voting common stock are not redeemable at the option of the Company or holders of non-voting common stock at any time.

*Conversion Rights*

Subject to the restrictions and requirements provided in our Articles of Incorporation, a holder of non-voting common stock shall be permitted to convert shares of non-voting common stock into shares of voting common stock at any time or from time to time, provided that upon such conversion the holder, together with all affiliates of the holder, will not own or control in the aggregate more than 9.9% of the Company's voting common stock (or of any class of voting securities issued by the Company). In any such conversion, each share of non-voting common stock will convert into one (1) share of voting common stock, subject to adjustment as provided in our Articles of Incorporation. Additionally, subject to the restrictions provided in our Articles of Incorporation, each share of non-voting common stock will automatically convert into one (1) share of voting common stock, without any further action on the part of any holder, subject to adjustment as provided in our Articles of Incorporation, on the date a holder of non-voting common stock transfers any shares of non-voting common stock to a non-affiliate of the holder.

*Preemptive Rights*

The holders of shares of the non-voting common stock have no preemptive rights under our Articles of Incorporation with respect to any shares of the Company's capital stock or any of its other securities convertible into or carrying rights or options to purchase or otherwise acquire any such capital stock or any interest therein, regardless of how any such securities may be designated, issued, or granted.

*Protective Provisions*

As long as there are any shares of non-voting common stock issued and outstanding, the Company will not, (1) alter or change the rights, preferences, privileges or restrictions for the benefit of the holders of non-voting common stock, (2) increase or decrease the authorized number of shares of non-voting common stock, or (3) enter into any agreement, merger, or business consolidation, or engage in any other transaction, or take any action that would have the effect of changing any preference or any relative or other right provided for the benefit of holders of non-voting common stock.

If the Company repurchases shares of voting common stock, the Company must offer to repurchase shares of non-voting common stock pro rata based upon the then-applicable conversion ratio of non-voting common stock to voting common stock.

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In the event of a capital reorganization of the voting common stock (other than a stock split, reverse stock split, or change of voting common stock into the same or a different number of shares of another class of stock) or a merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all of the Company's properties and assets to any other person or corporation, the Company must make provision for the holders of non-voting common stock to receive, upon conversion of the non-voting common stock, the number of shares of stock or other securities or property of the Company, or of the successor company resulting from such transaction, that such holders would be entitled to receive upon conversion of their non-voting common stock to voting common stock in connection with such transaction.

***Restrictions on Ownership of Company Common Stock***

The ability of a third party to acquire our stock is also limited under applicable U.S. banking laws, and regulatory approval for the acquisition of our stock may be required under certain circumstances. The BHCA requires any bank holding company to obtain the approval of the FRB prior to acquiring more than 5% of our outstanding common stock. Any corporation or other company that becomes a holder of 25% or more of our outstanding common stock, or otherwise is deemed to control us under the BHCA, would be subject to regulation as a bank holding company under the BHCA. In addition, any person other than a bank holding company may be required to obtain prior approval of the FRB to acquire 10% or more of our outstanding common stock under the Change in Bank Control Act. See the section entitled "Supervision and Regulation — Holding Company Regulation" for an additional description of these federal law restrictions on ownership of our common stock.

***Advance Notice Provisions for Shareholder Nominations and Shareholder Proposals***

Our Bylaws provide that shareholders must provide advance notice of any proposal or nomination for election as a director which a shareholder desires to bring before a meeting of shareholders. Such requirements are in addition to any requirements under SEC Rule 14a-8 for shareholder proposals sought to be included in the Company's proxy materials.

**Preferred Stock**

Our Articles of Incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock. The shares of preferred stock may be divided into and issued in one or more series, with such relative rights, preferences, and limitations as determined by the board of directors in its discretion. The board of directors is authorized to establish one or more series of preferred stock and to cause shares of preferred stock to be issued from time to time. At present, the Company has no shares of preferred stock outstanding.

Having shares of preferred stock available for issuance gives us flexibility in that it would allow us to avoid the expense and delay of calling a meeting of shareholders at the time the contingency or opportunity arises. Any issuance of preferred stock with voting rights or which is convertible into voting shares could adversely affect the voting power of the holders of common stock. Furthermore, the issuance of preferred stock could adversely affect the likelihood that such holders will receive dividend payments and payments upon liquidation. The shares of preferred stock that may be issued in the future may have other rights, including economic rights senior to our common stock, and, as a result, could have an adverse effect on the market value of our common stock.

Any of these actions could have an anti-takeover effect and discourage a transaction that some or a majority of our shareholders might believe to be in their best interests or in which our shareholders might receive a premium for their shares over our then-market price.

**Transactions with Certain Investors**

***Registration Rights.*** In connection with the Recapitalization, we entered into a registration rights agreement with certain holders of the Company's common stock (the "Registration Rights Agreement"). After July 28, 2021, certain shareholders who were parties to the Registration Rights Agreements that met certain ownership requirements (the "Qualified Holders") had the right to request that the Company to file a registration statement with the SEC so that the Qualified Holders may resell their shares of common stock. Within sixty (60) days of the Company's receipt of a request from a Qualified Holder to exercise its registration right, the Company's board of directors shall determine whether it is in the best interest of the Company and its shareholders to file a registration statement with the SEC with respect to the common stock subject to the Qualified Holder's request. In the event that the board of directors of the Company determines that it is in the best interest of the Company and its shareholders to file a registration statement, the Company must use its

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commercially reasonable efforts to cause each registration statement to be declared effective by the SEC as soon as practicable following the date of such determination.

***Piggyback Rights.*** If the Company files a registration statement for a primary or secondary offer of its securities (other than a registration statement related to equity compensation plans or mergers and acquisitions), the Registration Rights Agreement requires the Company to give notice at least 15 business days prior to the anticipated registration statement filing date to holders of common stock who are parties to the Registration Rights Agreement, who may elect to have any of their securities that remain "Registrable Securities" included in a piggyback registration statement for resale. The Company must effect registration of all securities that any such holder requests to be included in the piggyback registration within 5 business days following the notice given by the Company. However, if the offering is underwritten, the number of shares to be sold by any such holders may be reduced upon recommendation of the managing underwriters.

***Underwritten Shelf Offering.*** Holders of common stock who are parties to the Registration Rights Agreement are also entitled to certain Form S-3 registration rights. At any time when the Company has an effective registration statement on Form S-3, any such holder can request that we register the offer and sale of their shares of our common stock on a registration statement on Form S-3, so long as the anticipated gross proceeds of such offering will exceed $25 million. These Form S-3 registration rights are subject to specified conditions and limitations, including the right of the underwriters to limit the number of shares included in any such registration under certain circumstances.

***Registration Expenses.*** In any of the foregoing registration statements, the Company will pay the fees and expenses of such registration statements, including all registration and filing fees, printing expenses, trading market fees, fees and disbursements of counsel for the Company.

***Preemptive Rights.*** In connection with the Recapitalization and pursuant to a subsequent Stock Purchase Agreement dated June 18, 2019 (the "2019 SPA"), certain shareholders of the Company generally have the right to purchase its pro rata share of any securities that we may issue in the future. In each case, such rights do not apply to certain transactions such as a mergers or issuances pursuant to an equity incentive plan approved by the board of directors (subject to certain limitations). The purchase right would be triggered as a result of this offering.

***Board Representation and Information Rights.*** The Recapitalization also provided each of Patriot Fund II and GCP CoastalSouth LLC ("GCP CoastalSouth") with the right to select one representative each to the Company and Bank boards of directors and one observer to attend the meetings of the Company and the Bank boards of directors as long as Patriot Partner Fund II and GCP CoastalSouth (and their affiliates) each own at least 50% of the shares of common stock that it purchased in the Recapitalization, or 4.9% or more of the voting common stock of the Company. The Company must recommend that its shareholders elect such board representative of Patriot Partner Fund II and GCP CoastalSouth at any shareholders' meeting. In addition, certain shareholders of the Company who purchased shares in the Recapitalization or pursuant to the 2019 SPA have inspection rights for Company books and records and the right to certain information, including books and records and financial statements.

**Anti-Takeover Provisions**

Provisions of our Articles of Incorporation and Bylaws, and the GBCC and federal banking regulations applicable to us, may be deemed to have anti- takeover effects and may delay, defer or prevent a change of control of the Company and/or limit the price that certain investors may be willing to pay in the future for shares of our common stock. See the section entitled "Supervision and Regulation — Holding Company Regulation" for a description of the federal banking regulations applicable to us that may be deemed to have anti-takeover effects.

***Authorized but Unissued Shares***

The corporate laws and regulations applicable to us will enable our board of directors to issue, from time to time and at its discretion, but subject to the rules of any applicable securities exchange, any authorized but unissued shares of our common stock or preferred stock. Any such issuance of shares could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The ability of our board of directors to issue authorized but unissued shares of our common stock or preferred stock at its sole discretion may enable our board of directors to sell shares to individuals or groups who the board of directors perceives as friendly with management, which may make more difficult unsolicited attempts to obtain control of our organization. In addition, the ability of our board of directors to issue authorized but unissued shares of our capital stock at its sole

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discretion could deprive the shareholders of opportunities to sell their shares of common stock or preferred stock for prices higher than prevailing market prices.

***Preferred Stock***

Our Articles of Incorporation contains provisions that will permit our board of directors to issue, without any further vote or action by the shareholders, shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares constituting the series and the designation of the series, the voting rights (if any) of the shares of the series, and the powers, preferences and relative, participation, optional and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of such series.

***Board Size and Vacancies***

***No Cumulative Voting***

Our Bylaws do not permit cumulative voting in the election of directors. In the absence of cumulative voting, the holders of a majority of the shares of our common stock may elect all of the directors standing for election, if they should so choose.

***Special Meetings of Shareholders***

For a special shareholders' meeting to be called, our Bylaws require the Chairman of the board of directors, the Company's Chief Executive Officer, or the holders of shares of at least 25% of the votes entitled to be cast on each issue proposed to be considered at such special meeting.

***Advance Notice Procedures for Director Nominations and Shareholder Proposals***

Our Bylaws includes an advance notice procedure with regard to business to be brought before an annual or special meeting of shareholders and with regard to the nomination of candidates for election as directors, other than by or at the direction of the board of directors. Although this procedure does not give our board of directors any power to approve or disapprove shareholder nominations for the election of directors or proposals for action, it may have the effect of precluding a contest for the election of directors or the consideration of shareholder proposals if the established procedure is not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its proposal without regard to whether consideration of the nominees or proposals might be harmful or beneficial to our shareholders and us.

***Amending our Bylaws***

Our board of directors may amend our Bylaws, other than a bylaw enacted by shareholders which the board of directors is expressly not permitted to amend without shareholder approval.

***Approval of Merger***

Under the GBCC, most business combinations, including mergers, consolidations and sales of substantially all of the assets of a Georgia corporation, must be approved by the vote of the holders of at least a majority of the outstanding shares of common stock and any other affected class of stock of such corporation. The articles of incorporation or bylaws of a Georgia corporation may, but are not required to, set a higher standard for approval of such transactions. Our Articles of Incorporation and Bylaws do not set higher limits.

***Federal Banking Laws***

The BHCA, and Change in Bank Control Act, and Financial Institutions Code of Georgia impose notice, application and approvals and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect control of bank holding companies or banks, as applicable. These laws could delay or prevent an acquisition.

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**Other Matters**

Under our Articles of Incorporation and Bylaws, the holders of our common stock have no preemptive or other subscription rights (except as otherwise disclosed herein) and there are no redemption, sinking fund or conversion privileges applicable to our common stock.

**Listing**

We have applied to list our voting common stock on the NYSE under the symbol "COSO." We believe that upon the completion of this offering, we will meet the standards for listing our common stock on the NYSE, and the completion of this offering is contingent upon such listing.

**Transfer Agent**

The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.

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**SHARES ELIGIBLE FOR FUTURE SALE**

Prior to this offering, there has been a limited public market for shares of our common stock. Shares of our common stock are currently quoted on the OTCQX Best market, under the symbol "COSO." Future sales of substantial amounts of our common stock in the public market, or the perception that such sales may occur, could adversely affect market prices prevailing from time to time. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market price and our ability to raise equity capital in the future.

Upon completion of this offering, we will have shares of common stock outstanding (or shares if the underwriters exercise their option to purchase additional shares in full and we, rather than the selling shareholders, sell the additional shares to the underwriters). Of these shares, shares of our common stock (or shares if the underwriters exercise their purchase option in full) sold in this offering will be freely transferable without restriction or further registration under the Securities Act of 1933, except for any shares purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act of 1933, including those shares purchased by certain of our directors and officers through the directed share program described in the section entitled "Underwriting." The remaining shares of our issued and outstanding common stock are "restricted shares" as defined in Rule 144. Restricted shares may be sold in the public market only if registered under the Securities Act of 1933 or if they qualify for an exemption from registration under Rules 144 or 701 of the Securities Act of 1933. As a result of the contractual 180-day lock-up period described below, shares (excluding exercisable options and warrants) will be available for sale in the public market only after 180 days from the date of this prospectus (generally subject to volume and other offering limitations).

**Rule 144**

In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell such securities, provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, the sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, the sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering (or approximately shares if the underwriters exercise their purchase option in full); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the average weekly trading volume of our common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;

provided, in each case, that we have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale and notice provisions of Rule 144 to the extent applicable.

**Rule 701**

Rule 701 under the Securities Act generally applies to stock options and restricted common stock granted by an issuer to its employees, directors, officers, consultants or advisors in connection with a compensatory stock or option plan or other written agreement before the issuer becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above, beginning 90 days after the date of this prospectus, may be sold by persons other than our "affiliates," as defined in Rule 144, without compliance with its current public information and minimum holding period requirement of Rule 144 and by "affiliates" under Rule 144 without compliance with its minimum holding period requirement.

**Registration Statement on Form S-8**

In connection with or as soon as practicable following the completion of this offering, we intend to file a registration statement with the SEC on Form S-8 to register approximately shares of our common stock reserved for future issuance under our equity incentive plans, as described further under "Executive Compensation — Incentive Compensation Plans." That registration statement will become effective upon filing and shares of common stock covered by such registration statement will be eligible for sale in the public market immediately after the effective date of such registration statement (unless held by affiliates) subject to the lock-up agreements described below.

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**Lock-up Agreements**

We and each of our directors and executive officers and certain other shareholders, who will own in the aggregate approximately shares, or approximately % of our common stock after the completion of this offering (assuming that the underwriters do not exercise their option to purchase additional shares) have agreed, subject to certain exceptions, not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, otherwise dispose of or transfer any shares of our common stock or any securities convertible into or exchangeable or exercisable for common stock for a period of 180 days after the date of this prospectus, without the prior written consent of Piper Sandler. See "Underwriting." The underwriters do not have any present intention or arrangement to release any shares of our common stock subject to lock-up agreements prior to the expiration of the 180-day lock-up period.

**Registration Rights**

Upon the completion of this offering the holders of shares of our common stock will be entitled to certain rights with respect to the registration of the offer and sale of their shares under the Securities Act of 1933, subject to the terms of the Registration Rights Agreements described under the section titled "Description of Capital Stock—Transactions with Certain Investors—Registration Rights" above. Registration of these shares under the Securities Act of 1933 would result in the shares becoming freely tradable without restriction under the Securities Act of 1933 immediately on the effectiveness of the registration. Any sales of securities by these shareholders could adversely affect the trading price of our common stock. See the section titled "Description of Capital Stock—Transactions with Certain Investors—Registration Rights" for additional information.

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**MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS <br>FOR NON-U.S. HOLDERS**

The following discussion is a summary of the material U.S. federal income tax consequences of the purchase, ownership and disposition of our common stock by Non-U.S. Holders (as defined below) that acquire our common stock in this offering and hold it as a capital asset. This discussion does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS, in each case in effect as of the date of this prospectus. These authorities may change or be subject to differing interpretations at any time. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the statements made and the conclusions reached in the discussion below. There can be no assurance the IRS or a court will agree with our position discussed below regarding the U.S. federal income tax consequences of the purchase, ownership and disposition of our common stock. We cannot assure you that a change in law will not significantly alter the tax considerations described in this discussion.

This discussion does not address all U.S. federal income tax consequences relevant to a Non-U.S. Holder's particular circumstances, including the alternative minimum tax and the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•U.S. expatriates and former citizens or long-term residents of the United States or United States expatriated entities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•persons who have elected to mark securities to market or who hold our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•banks, insurance companies, and other financial institutions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•brokers, dealers or traders in securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•corporations that accumulate earnings to avoid U.S. federal income tax, controlled foreign corporations, and passive foreign investment companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•foreign entities that are treated as stapled to a domestic entity pursuant to Code Section 269B;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•persons who have acquired our common stock in connection with the exercise of employee stock options or otherwise as compensation for services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•tax-exempt organizations, pension plans, tax-qualified retirement plans, or governmental organizations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•persons deemed to sell our common stock under the constructive sale provisions of the Code.

If an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner and the activities of the partnership. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.

**THIS DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.**

*<u>Definition of a Non-U.S. Holder</u>*

For purposes of this discussion, a "Non-U.S. Holder" is any beneficial owner of our common stock that is for U.S. federal income tax purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a non-resident alien;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a foreign corporation (or any other entity treated as a corporation for U.S. federal income tax purposes);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•an estate, the income of which is not subject to U.S. federal income taxation regardless of its source; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•trust that does not have in effect a valid election under the U.S. Treasury Regulations, to be treated as a United States person and (i) no court within the United States is able to exercise primary supervision over the trust's administration and (ii) no United States person has the authority to control all substantial decisions of that trust.

*<u>Distributions</u>*

Distributions of cash or property (other than certain stock distributions) on our common stock will generally constitute dividends for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will first constitute a tax-free return of capital to the extent of a Non-U.S. Holder's adjusted tax basis in its common stock and thereafter capital gain, which is subject to the tax treatment described below in the section entitled "—Sale or Other Taxable Disposition."

Subject to the discussion below in the sections entitled "–Information Reporting and Backup Withholding" and "–FATCA Withholding" and the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder will generally be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends or such lower rate specified by an applicable income tax treaty. To receive a reduced withholding rate, a Non-U.S. Holder must furnish a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate. A Non-U.S. Holder that holds our common stock through a financial institution or other agent will be required to provide appropriate documentation to the financial institution or other agent, which then will be required to provide certification to us or our paying agent either directly or through other intermediaries. A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced income tax treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States (and, as provided by an applicable income tax treaty, attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States.

Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular rates that also apply to U.S. persons. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

*<u>Sale or Other Taxable Disposition</u>*

Subject to the discussion below under "–Information Reporting and Backup Withholding" and "–FATCA Withholding," a Non-U.S. Holder generally will not be subject to U.S. federal income tax or withholding tax on any gain realized upon the sale or other taxable disposition of our common stock unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the gain is effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States (and, as provided by an applicable income tax treaty, attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we are or have been a U.S. real property holding corporation, or USRPHC for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding such disposition or such Non-U.S. Holder's holding period for our common stock (the "relevant period") and the Non-U.S. Holder (i) disposes of our common stock during a calendar year when our common stock is no longer regularly traded on an established securities market or (ii) owned (directly, indirectly and constructively) more than 5% of our common stock at any time during the relevant period.

Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular rates in the same manner as if such holder were a resident of the United States. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.

Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder for the year, provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.

With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our United States real property interests as defined in the Code relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be

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no assurance we currently are not a USRPHC or will not become one in the future. Gain from a disposition of our common stock described in the third bullet point above will be subject to tax generally as if the gain were effectively connected with the conduct of a trade or business in the United States, except that the "branch profits tax" will not apply.

*<u>Information Reporting and Backup Withholding</u>*

Payments of dividends on our common stock and the payment of the proceeds from the sale of our common stock effected at a U.S. office of a broker generally will not be subject to backup withholding and the payment of proceeds from the sale of our common stock effected at a U.S. office of a broker will generally not be subject to information reporting, provided the applicable withholding agent does not have actual knowledge or reason to know the Non-U.S. Holder is a United States person and the Non-U.S. Holder either certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN or W-8BEN-E or other documentation upon which it may rely to treat the payments as made to a non-U.S. person in accordance with Treasury Regulations or otherwise establishes an exemption.

However, we are required to file information returns with the IRS in connection with any distribution on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld. Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.

Payment of the proceeds from the sale of our common stock effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale of our common stock by a Non-U.S. Holder that is effected at a foreign office of a broker will be subject to information reporting and backup withholding if (i) the proceeds are transferred to an account maintained by the Non-U.S. Holder in the United States, (ii) the payment of proceeds or the confirmation of the sale is mailed to the Non-U.S. Holder at a U.S. address or (iii) the sale has some other specified connection with the United States as provided in the Treasury Regulations, unless, in each case, the broker does not have actual knowledge or reason to know that the holder is a United States person and the documentation requirements described above are met or the Non-U.S. Holder otherwise establishes an exemption.

In addition, a sale of our common stock will be subject to information reporting if it is effected at a foreign office of a broker that is (i) a United States person, (ii) a "controlled foreign corporation" for U.S. federal income tax purposes, (iii) a foreign person 50% or more of whose gross income is effectively connected with the conduct of a U.S. trade or business for a specified three-year period or (iv) a foreign partnership, if at any time during its tax year (a) one or more of its partners are "U.S. persons," as defined in the Treasury Regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership or (b) such foreign partnership is engaged in the conduct of a trade or business in the United States, in each case unless the broker does not have actual knowledge or reason to know that the holder is a United States person and the documentation requirements described above are met or an exemption is otherwise established. Backup withholding will apply if the sale is subject to information reporting and the broker has actual knowledge that the holder is a United States person.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder's U.S. federal income tax liability, provided the required information is timely furnished to the IRS. Moreover, certain penalties may be imposed by the IRS on a Non-U.S. Holder who is required to furnish information but does not do so in the proper manner. Non-U.S. Holders should consult their tax advisors regarding the application of backup withholding in their particular circumstances and the availability of and procedure for obtaining an exemption from backup withholding under current Treasury Regulations.

*<u>FACTA Withholding</u>*

Sections 1471 through 1474 of the Code and the Treasury Regulations issued thereunder (commonly referred to as the Foreign Account Tax Compliance Act, or FATCA) impose a 30% withholding tax on dividends paid on our shares to, and (subject to the proposed Treasury Regulations discussed below) the gross proceeds derived from the sale or other disposition of our shares by, a foreign entity if the foreign entity is:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a "foreign financial institution" (as defined under FATCA) that does not furnish proper documentation, typically on IRS Form W-8BEN-E, evidencing either (i) an exemption from FATCA withholding or (ii) its compliance (or deemed compliance) with specified due diligence, reporting, withholding and certification obligations under FATCA or (iii) residence in a jurisdiction that has entered into an intergovernmental agreement with the United States relating to FATCA and compliance with the diligence and reporting requirements of the intergovernmental agreement and local implementing rules; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a "non-financial foreign entity" (as defined under FATCA) that does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (i) an exemption from FATCA or (ii) adequate information regarding substantial United States beneficial owners of such entity (if any).

Withholding under FATCA generally applies to payments of dividends on our shares and to payments of gross proceeds from a sale or other disposition of our shares. Withholding agents may, however, rely on proposed U.S. Treasury Regulations that would no longer

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require FATCA withholding on payments of gross proceeds. A withholding agent such as a broker, and not the Bank, will determine whether or not to implement gross proceeds FATCA withholding.

If a dividend payment is subject to withholding both under FATCA and the withholding tax rules discussed above in the section entitled "— Dividends," the withholding under FATCA may be credited against, and therefore reduce, such other withholding tax. Holders of shares should consult their own tax advisors regarding these requirements and whether they may be relevant to their ownership and disposition of the shares.

Under certain circumstances, a Non-U.S. Holder will be eligible for refunds or credits of withholding taxes imposed under FATCA by filing a United States federal income tax return. Prospective investors should consult their tax advisors regarding the effect of FATCA on their ownership and disposition of our shares.

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**UNDERWRITING**

We and the selling shareholders are offering the shares of our common stock described in this prospectus in an underwritten offering in which we, the selling shareholders and Piper Sandler & Co., as representative of the underwriters named below, will enter into an underwriting agreement with respect to the shares of our common stock being offered hereby. Subject to the terms and conditions contained in the underwriting agreement, each underwriter will agree, severally and not jointly, to purchase, and we and the selling shareholders will, severally and not jointly, agree to sell, the number of shares of our common stock as set forth opposite each underwriter's name in the following table:

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| | |
|:---|:---|
| **Name** | **Number of Shares** |
| Piper Sandler & Co. |  |
| Stephens Inc. |  |
| Total |  |

---

This is a firm commitment underwritten offering. The shares of our common stock will be offered by the underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the underwriters and other conditions specified in the underwriting agreement. The underwriters will reserve the right to withdraw, cancel or modify this offer and to reject orders in whole or in part. The underwriting agreement will provide that the obligations of the underwriters may also be terminated upon the occurrence of the events specified in the underwriting agreement.

The underwriting agreement will provide that the underwriters are obligated to purchase all the shares of common stock in this offering if any are purchased, other than those shares covered by the underwriters' option to purchase additional shares described below. However, the underwriters will not be obligated to take or pay for the shares of our common stock covered by the underwriters' option to purchase additional shares described below, unless and until such option is exercised. The underwriting agreement will provide that, if any underwriter defaults, the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

In connection with this offering, the underwriters or securities dealers may distribute offering documents to investors electronically. See the section entitled " ––Electronic Distribution."

**Purchase Option**

We will grant to the underwriters an option, exercisable no later than 30 days after the date of this prospectus, to purchase up to additional shares of our common stock at the initial public offering price, less the underwriting discount. The Company intends to provide certain selling shareholders the opportunity to sell additional shares of common stock to satisfy the underwriters' option in lieu of the Company issuing additional shares. We will be obligated to sell these shares of common stock to the underwriters to the extent the purchase option is exercised from us. The underwriters may exercise this option only to cover over-allotments, if any, made in connection with the sale of our common stock offered by this prospectus. Furthermore, if the underwriters exercise this option, each underwriter will be obligated, subject to the conditions in the underwriting agreement, to purchase a number of additional shares of common stock proportionate to the number of shares reflected next to such underwriter's name in the table above relative to the total number of shares reflected in such table.

**Discounts and Expenses**

The underwriters will propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain securities dealers at the initial public offering price less a discount of up to $ per share from the initial public offering price. After the initial public offering of the common stock, the underwriters may change the offering price and other selling terms.

The following table shows the per share and total initial public offering price, underwriting discount and the proceeds before expenses to us and to the selling shareholders. The information assumes either (1) no exercise by the underwriters of their option to purchase an additional shares of our common stock, (2) full exercise of such option where the additional shares are all sold by the Company, or (3) full exercise of such option where the additional shares are all sold by the selling shareholders:

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| | | | | |
|:---|:---|:---|:---|:---|
|  |  | **Total** | **Total With Option** | **Total With Option** |
|  |  | **Without** | **(Company Sells** | **(Selling Shareholders** |
|  | **Per Share** | **Option** | **Additional Shares)** | **Sell Additional Shares)** |
| Price to public |  |  |  |  |
| Underwriting discount |  |  |  |  |
| Proceeds to us, before expenses |  |  |  |  |
| Proceeds to selling shareholders, before expenses |  |  |  |  |

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We and the selling shareholders estimate the total expenses of the offering, excluding the underwriting discount and commissions, will be approximately $.We will agree to reimburse the underwriters for certain reasonable and documented out-of-pocket expenses incurred by the underwriters on our behalf and in connection with this offering, including any applicable state securities filings

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and legal fees and expenses of counsel incurred by the underwriters, up to a maximum of $. We will also agree to reimburse the underwriters for certain expenses relating to the clearance of this offering with the Financial Industry Regulatory Authority ("FINRA").

**Right of First Refusal**

We have granted the representative a right of first refusal for a period of 12 months following the date of our engagement letter with the representative to act as lead manager or sole placement agent in any public or private capital raising transaction entered into by us where the securities to be issued are debt securities and where we engage a placement agent, underwriter or other broker or investment bank to facilitate the transaction. We have the right to terminate the engagement letter with the representative for Cause (as defined in the engagement letter) in compliance with FINRA Rule 5110(g)(5)(B). The exercise of such right of termination for Cause eliminates our obligations with respect to the right of first refusal.

**Lock-up Agreements**

We, our directors, executive officers, the selling shareholders and certain holders of our currently outstanding shares of common stock, holding, in the aggregate, shares of our common stock as of , 2025 (representing approximately % of our outstanding common stock as of such date), have agreed, subject to certain exceptions for a period of 180 days after the date of this prospectus, not to sell, offer, agree to sell, contract to sell, hypothecate, pledge, grant any option, right or warrant for the sale of, make any short sale, or otherwise dispose of or hedge, directly or indirectly, any shares of our common stock or securities convertible into, or exchangeable or exercisable for, any shares of our common stock or other rights to purchase shares of our common stock or other similar securities, whether now owned or hereafter acquired or with respect to which such person has or hereafter acquires the power of disposition, or exercise any right with respect to the registration thereof, or file or cause to be filed any registration statement under the Securities Act, with respect to any of the foregoing, without, in each case, the prior written consent of Piper Sandler & Co., as representative of the underwriters.

These restrictions are expressly agreed to preclude us, our directors and executive officers, the selling shareholders and certain other current shareholders, from engaging in any hedging or other transaction or arrangement that is designed to, or that reasonably could be expected to, lead to or result in a sale, disposition or transfer, in whole or in part, directly or indirectly, of any of the economic consequences of ownership of our common stock, whether such transaction would be settled by delivery of common stock or other securities, in cash or otherwise.

**Pricing of the Offering**

Prior to this offering, there has been only a limited public market for shares of our common stock. The initial public offering price of the common stock will be determined by negotiations among us and the representative of the underwriters. In addition to prevailing market conditions, among the factors to be considered in determining the initial public offering price of our common stock will be our historical performance, estimates of our business potential and our earnings prospects, an assessment of our management, and the consideration of the above factors in relation to market valuation of companies in related businesses. The estimated initial public offering price range set forth on the cover page of this prospectus is subject to change as a result of market conditions and other factors. An active trading market for the shares of our common stock may not develop. It is also possible that the shares of our common stock will not trade in the public market at or above the initial public offering price following the completion of this offering.

**Exchange Listing**

We have applied to list our common stock on the NYSE under the symbol "COSO." We believe that upon the completion of this offering, we will meet the standards for listing our common stock on the NYSE, and the completion of this offering is contingent upon such listing.

**Indemnification and Contribution**

We and the selling shareholders have agreed to indemnify the underwriters and their affiliates, selling agents and controlling persons against certain liabilities, including liabilities under the Securities Act. If we and the selling shareholders are unable to provide this indemnification, we will contribute to the payments the underwriters and their affiliates, selling agents, and controlling persons may be required to make in respect of those liabilities.

**Price Stabilization, Short Positions and Penalty Bids**

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shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above. "Naked" short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of our common stock made by the underwriters in the open market prior to the closing of the offering.

As an additional means of facilitating our initial public offering, the underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a portion of the underwriting discount received by such underwriter because the representative has repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of our common stock and, together with the imposition of the penalty bid, may stabilize, maintain, or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time without notice. These transactions may be effected on the NYSE, in the over-the-counter market or otherwise.

**Passive Market Making**

In connection with this offering, the underwriters may engage in passive market making transactions in our common stock on the NYSE in accordance with Rule 103 of Regulation M during a period before the commencement of offers or sales of our common stock and extending through the completion of the distribution of this offering. A passive market maker must generally display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker's bid, the passive market maker may continue to bid and effect purchases at a price exceeding the then highest independent bid until specified purchase limits are exceeded, at which time such bid must be lowered to an amount no higher than the then highest independent bid. Passive market making may cause the price of our common stock to be higher than the price that otherwise would exist in the open market in the absence of those transactions. The underwriters and dealers are not required to engage in passive market making and may end passive market making activities at any time.

**Electronic Distribution**

A prospectus in electronic format may be made available by e-mail or on the websites or through online services maintained by the underwriters or their affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters' websites and any information contained on any other website maintained by the underwriters is not part of this prospectus, has not been approved and/or endorsed by the underwriters or us and should not be relied upon by investors.

**Selling Restrictions**

Other than in the United States, no action has been taken by us, the selling shareholders or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisement in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

**Affiliations**

The underwriters and their respective affiliates are full-service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment advisory, investment research, principal investment, hedging, financing, loan referrals, valuation, and brokerage activities. From time to time, the underwriters and/or their respective affiliates have directly and indirectly engaged, and may in the future engage, in various financial advisory, investment banking loan referrals, and commercial banking services with us and our affiliates for which they received or paid, or may receive or pay, customary compensation, fees, and expense reimbursements.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their clients, and those investment and securities activities may involve our securities and/or instruments. The underwriters and their respective affiliates may also make investment recommendations and/or publish

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or express independent research views in respect of those securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in those securities and instruments.

**Directed Share Program**

At our request, the underwriters have reserved up to % of the shares of common stock offered by this prospectus for sale at the initial public offering price through a directed share program to our directors, executive officers and other designated persons. Our directed share program will be administered by Piper Sandler & Co. or its affiliate. Reserved shares purchased by our directors and executive officers will be subject to the lock-up provisions described above. The number of shares of our common stock available for sale to the general public will be reduced to the extent these persons purchase the reserved shares. Any reserved shares of our common stock that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of common stock offered by this prospectus.

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**LEGAL MATTERS**

The validity of the shares of common stock being offered by this prospectus will be passed upon for us by Alston & Bird LLP, Atlanta, Georgia. The underwriters are represented by Troutman Pepper Locke LLP, Atlanta, Georgia.

**EXPERTS**

The consolidated financial statements of CoastalSouth Bancshares, Inc. as of December 31, 2024 and 2023 and for each of the two years in the period ended December 31, 2024 and 2023 included in this prospectus have been so included in reliance on the report of Elliott Davis, LLC, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

**WHERE YOU CAN FIND ADDITIONAL INFORMATION**

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to our common stock offered hereby. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits or schedules filed therewith. Some items are omitted in accordance with the rules and regulations of the SEC. For further information about us and our common stock that we propose to sell in this offering, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements or summaries in this prospectus as to the contents of any contract or other document referred to in this prospectus are not necessarily complete and, where that contract or document is filed as an exhibit to the registration statement, each statement or summary is qualified in all respects by reference to the exhibit to which the reference relates. Our filings with the SEC, including the registration statement, are also available to you for free on the SEC's internet website at www.sec.gov.

Following the offering, we will become subject to the informational and reporting requirements of the Exchange Act and, in accordance with those requirements, will file reports and proxy and information statements and other information with the SEC. You will be able to inspect and copy these reports and proxy and information statements and other information at the addresses set forth above. We intend to furnish to our shareholders our annual reports containing our audited consolidated financial statements certified by an independent public accounting firm.

We also maintain an internet site at www.coastalstatesbank.com<u>.</u> Information on, or accessible through, our website is not part of this prospectus.

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**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

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| | |
|:---|:---|
| &nbsp;&nbsp;**CONSOLIDATED FINANCIAL STATEMENTS** |  |
| &nbsp;&nbsp;For the three months ended March 31, 2025 and 2024 (unaudited) |  |
| &nbsp;&nbsp; [<u>Consolidated Balance Sheets at March 31, 2025 and December 31, 2024 (audited)</u>](#consolidated_balance_sheets1) | &nbsp;&nbsp;F-2 |
| &nbsp;&nbsp; [<u>Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024</u>](#consolidated_statements_of_operations1) | &nbsp;&nbsp;F-3 |
| &nbsp;&nbsp; [<u>Consolidated Statements of Comprehensive Income for the three months ended March 31, 2025 and 2024</u>](#consolidated_statements_of_comp_income1) | &nbsp;&nbsp;F-4 |
| &nbsp;&nbsp; [<u>Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2025 and 2024</u>](#consolidated_statements_of_changes_she1) | &nbsp;&nbsp;F-5 |
| &nbsp;&nbsp; [<u>Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024</u>](#consolidated_statements_of_cash_flows1) | &nbsp;&nbsp;F-6 |
| &nbsp;&nbsp; [<u>Notes to Consolidated Financial Statements</u>](#notes_to_consolidated_fs1) | &nbsp;&nbsp;F-7 |
| &nbsp;&nbsp;For the years ended <u>December 31, 2024 and 2023</u> |  |
| &nbsp;&nbsp; [<u>Report of Independent Registered Public Accounting Firm</u>](#independent_auditors_report) | &nbsp;&nbsp;F-31 |
| &nbsp;&nbsp; [<u>Consolidated Balance Sheets at December 31, 2024 and 2023</u>](#consolidated_balance_sheets) | &nbsp;&nbsp;F-32 |
| &nbsp;&nbsp;[<u>Consolidated Statements of Operations for the years ended</u>](#consolidated_statements_of_operations)<u>December 31, 2024 and 2023</u> | &nbsp;&nbsp;F-33 |
| &nbsp;&nbsp; [<u>Consolidated Statements of Comprehensive Income for the years ended</u>](#consolidated_statements_of_comp_income)<u>December 31, 2024 and 2023</u> | &nbsp;&nbsp;F-34 |
| &nbsp;&nbsp;[<u>Consolidated Statements of Changes in Shareholders' Equity for the years ended</u>](#consolidated_statements_of_changes_she)<u>December 31, 2024 and 2023</u> | &nbsp;&nbsp;F-35 |
| &nbsp;&nbsp; [<u>Consolidated Statements of Cash Flows for the years ended</u>](#consolidated_statements_of_cash_flows)<u>December 31, 2024 and 2023</u> | &nbsp;&nbsp;F-36 |
| &nbsp;&nbsp; [<u>Notes to Consolidated Financial Statements</u>](#notes_to_consolidated_fs) | &nbsp;&nbsp;F-37 |

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**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Balance Sheets***

***As of March 31, 2025 (unaudited) and December 31, 2024 (audited)***

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| | | |
|:---|:---|:---|
|  | **March 31,** | **December 31,** |
| *<u>(In thousands of dollars except share and per share amounts)</u>* | **2025** | **2024** |
| **Assets** |  |  |
| Cash and cash equivalents |  |  |
| &nbsp;&nbsp;Cash and due from banks | $11504 | $8391 |
| &nbsp;&nbsp;Interest-bearing accounts with other banks | 7876 | 28929 |
| &nbsp;&nbsp;Federal funds sold | 79153 | 30641 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash and cash equivalents | 98533 | 67961 |
| Investments |  |  |
| &nbsp;&nbsp;Securities available-for-sale, at fair value | 325478 | 335267 |
| &nbsp;&nbsp;Non-marketable equity securities | 6834 | 7483 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investments | 332312 | 342750 |
| Loans held for sale | 187481 | 174033 |
| Loans held for investment | 1472232 | 1409443 |
| Allowance for credit losses - loans | (17104) | (17118) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans held for investment, net | 1455128 | 1392325 |
| Bank-owned life insurance | 46924 | 46484 |
| Premises, furniture and equipment, net | 17837 | 17796 |
| Deferred tax asset | 17123 | 18148 |
| Goodwill | 4708 | 4708 |
| Intangible assets | 1491 | 1678 |
| Other assets | 28854 | 32829 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $2190391 | $2098712 |
| **Liabilities** |  |  |
| Deposits |  |  |
| &nbsp;&nbsp;Non-interest bearing transaction accounts | $300678 | $302907 |
| &nbsp;&nbsp;Interest-bearing transaction accounts | 191452 | 181068 |
| &nbsp;&nbsp;Savings and money market | 650050 | 591626 |
| &nbsp;&nbsp;Time deposits | 795513 | 759201 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 1937693 | 1834802 |
| Other borrowings | 20738 | 41725 |
| Other liabilities | 29856 | 26953 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 1988287 | 1903480 |
| **Commitments and Contingencies (Note 4)** |  |  |
| **Shareholders' Equity** |  |  |
| Preferred stock, $1.00 par value, 10,000,000 shares authorized, no shares issued<br> or outstanding |  |  |
| Voting common stock, $1.00 par value, 50,000,000 shares authorized, 8,102,242<br> and 8,098,117 shares issued and outstanding at March 31, 2025 and<br>&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2024, respectively. | 8102 | 8098 |
| Non-voting common stock, $1.00 par value, 10,000,000 shares authorized, 2,172,029<br> shares issued and outstanding at March 31, 2025 and December 31, 2024 | 2172 | 2172 |
| Capital surplus | 158997 | 158755 |
| Retained earnings | 47044 | 41994 |
| Accumulated other comprehensive loss | (14211) | (15787) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity | 202104 | 195232 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $2190391 | $2098712 |

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*The accompanying notes are an integral part of these consolidated financial statements.*

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**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Statements of Operations***

***For the three months ended March 31, 2025 and 2024 (unaudited)***

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| | | |
|:---|:---|:---|
|  | **March 31,** | **March 31,** |
| *<u>(In thousands of dollars, except per share amounts)</u>* | **2025** | **2024** |
| **Interest income** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans, including fees |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans held for investment | $22307 | $23052 |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans held for sale | 2819 | 1540 |
| &nbsp;&nbsp;&nbsp;&nbsp; Investments |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Taxable | 3602 | 3443 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-taxable | 94 | 112 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-marketable equity securities | 104 | 106 |
| &nbsp;&nbsp;&nbsp;&nbsp; Federal funds sold | 963 | 994 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other earning assets from banks | 135 | 141 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | 30024 | 29388 |
| **Interest expense** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest-bearing deposits | 12830 | 12593 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other borrowings | 435 | 1410 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | 13265 | 14003 |
| **Net interest income** | 16759 | 15385 |
| Provision for credit losses | 629 | 163 |
| **Net interest income after provision for credit losses** | 16130 | 15222 |
| **Noninterest income** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Bank-owned life insurance | 440 | 296 |
| &nbsp;&nbsp;&nbsp;&nbsp; Interchange income and card fees | 266 | 216 |
| &nbsp;&nbsp;&nbsp;&nbsp; Income from mortgage originations | 221 | 238 |
| &nbsp;&nbsp;&nbsp;&nbsp; Service charges on deposit accounts | 211 | 211 |
| &nbsp;&nbsp;&nbsp;&nbsp; Gain on sale of government guaranteed loans | - | 320 |
| &nbsp;&nbsp;&nbsp;&nbsp; Losses on sale of available-for-sale securities | - | (3465) |
| &nbsp;&nbsp;&nbsp;&nbsp; Other noninterest income | 743 | 190 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest income (loss) | 1881 | (1994) |
| **Noninterest expenses** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Salaries and employee benefits | 6694 | 6047 |
| &nbsp;&nbsp;&nbsp;&nbsp; Occupancy and equipment | 788 | 743 |
| &nbsp;&nbsp;&nbsp;&nbsp; Software and other technology expense | 703 | 666 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other professional fees | 693 | 691 |
| &nbsp;&nbsp;&nbsp;&nbsp; Data processing | 624 | 526 |
| &nbsp;&nbsp;&nbsp;&nbsp; Regulatory assessment | 361 | 293 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other noninterest expense | 1556 | 1285 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | 11419 | 10251 |
| **Income before taxes** | 6592 | 2977 |
| &nbsp;&nbsp;&nbsp;&nbsp; Income tax provision | 1542 | 548 |
| **Net income** | $5050 | $2429 |
| **Net income per common share:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Basic | $0.49 | $0.24 |
| &nbsp;&nbsp;&nbsp;&nbsp; Diluted | $0.47 | $0.24 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Statements of Comprehensive Income***

***For the three months ended March 31, 2025 and 2024 (unaudited)***

---

| | | |
|:---|:---|:---|
|  | **March 31,** | **March 31,** |
| *<u>(In thousands of dollars)</u>* | **2025** | **2024** |
| **Net income** | $5050 | $2429 |
| **Other comprehensive income** |  |  |
| &nbsp;&nbsp;Change in unrealized gain (loss) on available-for-sale securities | 2599 | (726) |
| &nbsp;&nbsp;Reclassification adjustment for net loss on sale of securities included in net income | - | 3465 |
| &nbsp;&nbsp;Income tax effect | (605) | (644) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized gain on available-for-sale securities, net of tax | 1994 | 2095 |
| **Unrealized (loss) gains on derivatives:** |  |  |
| &nbsp;&nbsp;Change in unrealized (loss) gain on cash flow hedges | (414) | 404 |
| &nbsp;&nbsp;Reclassification adjustment for net (gain) loss included in net income | (136) | (245) |
| &nbsp;&nbsp;Income tax effect | 132 | (38) |
| &nbsp;&nbsp;Unrealized (loss) gain on derivative instruments, net of tax | (418) | 121 |
| **Other comprehensive income, net of tax** | 1576 | 2216 |
| **Comprehensive income** | $6626 | $4645 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Statements of Changes in Shareholders' Equity***

***For the three months ended March 31, 2025 and 2024 (unaudited)***

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  |  |  | **Accumulated** |  |
|  | **Common Stock** | **Common Stock** | **Common Stock** | **Common Stock** |  |  | **Other** |  |
|  | **Voting** | **Voting** | **Non-voting** | **Non-voting** | **Capital** | **Retained** | **Comprehensive** |  |
| *<u>(In thousands of dollars except share amounts)</u>* | **Shares** | **Amount** | **Shares** | **Amount** | **Surplus** | **Earnings** | **Loss** | **Total** |
| **Balance, January 1, 2024** | 7367900 | $7368 | 2172029 | $2172 | $145944 | $20090 | $(19531) | $156043 |
| &nbsp;&nbsp;Issuance of common stock under incentive plan | 4125 | 4 | - | - | (4) | - | - | - |
| &nbsp;&nbsp;Issuance of common stock upon private placement | 701442 | 701 | - | - | 11543 | - | - | 12244 |
| &nbsp;&nbsp;Stock-based compensation expense | - | - | - | - | 296 | - | - | 296 |
| &nbsp;&nbsp;Net income | - | - | - | - | - | 2429 | - | 2429 |
| &nbsp;&nbsp;Other comprehensive income, net of tax | - | - | - | - | - | - | 2216 | 2216 |
| **Balance as of March 31, 2024** | 8073467 | $8073 | 2172029 | $2172 | $157779 | $22519 | $(17315) | $173228 |
| **Balance, January 1, 2025** | 8098117 | 8098 | 2172029 | 2172 | 158755 | 41994 | (15787) | 195232 |
| &nbsp;&nbsp;Issuance of common stock under incentive plan | 4125 | 4 | - | - | (4) | - | - | - |
| &nbsp;&nbsp;Stock-based compensation expense | - | - | - | - | 246 | - | - | 246 |
| &nbsp;&nbsp;Net income | - | - | - | - | - | 5050 | - | 5050 |
| &nbsp;&nbsp;Other comprehensive income, net of tax | - | - | - | - | - | - | 1576 | 1576 |
| **Balance as of March 31, 2025** | 8102242 | $8102 | 2172029 | $2172 | $158997 | $47044 | $(14211) | $202104 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

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**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Statements of Cash Flows***

***For the three months ended March 31, 2025 and 2024 (unaudited)***

---

| | | |
|:---|:---|:---|
|  | **March 31,** | **March 31,** |
| *<u>(In thousands of dollars)</u>* | **2025** | **2024** |
| **Operating activities** |  |  |
| &nbsp;&nbsp;Net income | $5050 | $2429 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash (used) provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 1 | 163 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense and software amortization | 353 | 322 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in cash value of bank-owned life insurance | (440) | (297) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 246 | 296 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss on sale of available-for-sale securities | - | 3465 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of operating lease right-of-use assets | 214 | 200 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt issuance costs | 13 | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Writedown on other real estate owned | 99 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of government guaranteed loans, including originations of servicing rights | - | (320) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on sale of other loans | - | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income from mortgage operations | (221) | (238) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discount accretion and premium amortization on securities available-for-sale | (159) | (1) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangible assets | 187 | 124 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax expense | 552 | 1670 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Originations of loans held for sale | (1350619) | (794673) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from loans held for sale | 1337392 | 770944 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease (increase) in other assets | 2593 | (7377) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase (decrease) in other liabilities | 3531 | (1532) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used by operating activities | (1208) | (24756) |
| **Investing activities** |  |  |
| &nbsp;&nbsp;Purchase of securities available-for-sale | (9000) | (46738) |
| &nbsp;&nbsp;Proceeds from sales of securities available-for-sale | - | 39100 |
| &nbsp;&nbsp;Proceeds from paydowns, calls, and maturities on securities available-for-sale | 22066 | 26342 |
| &nbsp;&nbsp;Net sale of non-marketable equity securities | 649 | 2046 |
| &nbsp;&nbsp;Loan originations and principal collections, net | (63432) | 10288 |
| &nbsp;&nbsp;Net purchase of premises, furniture and equipment | (394) | (161) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used) provided by investing activities | (50111) | 30877 |
| **Financing activities** |  |  |
| &nbsp;&nbsp;Net increase (decrease) in deposits | 102891 | (1173) |
| &nbsp;&nbsp;Net repayment of Federal Home Loan Bank advances | (15000) | (50000) |
| &nbsp;&nbsp;Proceeds from Federal Reserve Bank advances | - | 70000 |
| &nbsp;&nbsp;Proceeds from private placement capital raise | - | 12244 |
| &nbsp;&nbsp;Net repayment of commercial line of credit | (6000) | (12000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 81891 | 19071 |
| **Net increase in cash and cash equivalents** | 30572 | 25192 |
| **Cash and cash equivalents, beginning of year** | 67961 | 48553 |
| **Cash and cash equivalents, end of period** | $98533 | $73745 |
| **Cash (received) paid during the period for:** |  |  |
| &nbsp;&nbsp;Interest | $12867 | $14177 |
| &nbsp;&nbsp;Income taxes | (1667) | 12 |
| **Noncash investing and financing activities:** |  |  |
| &nbsp;&nbsp;Unrealized gain on securities available-for-sale, net | 1994 | 2095 |
| &nbsp;&nbsp;Unrealized (loss) gain on derivatives, net | (418) | 121 |
| &nbsp;&nbsp;Transfers from loans held for investment to loans held for sale | - | 4651 |
| &nbsp;&nbsp;Right-of-use assets obtained in exchange for new operating lease liabilities | - | 323 |
| &nbsp;&nbsp;Lease liabilities arising from obtaining right-of-use assets | - | 323 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements (unaudited)**

**NOTE 1** — **BASIS OF PRESENTATION AND ACCOUNTING POLICIES**

The accompanying unaudited consolidated financial statements include the accounts of CoastalSouth Bancshares, Inc. (the "Company") and its wholly-owned subsidiary. The Company owns 100% of Coastal States Bank (the "Bank"). The Bank has one wholly owned subsidiary, Coastal States Mortgage, Inc., a mortgage company focused on originating and selling residential mortgages to investors and to retain in the portfolio. The "Company" or "our," as used herein, includes Coastal States Bank and Coastal States Mortgage, Inc.

These unaudited Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") followed within the financial services industry for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information or notes required for complete financial statements.

The Company principally operates in one business segment, which is community banking. Accounting standards require that information be reported about a company's operating segments using a "management approach." Reportable segments are identified in these standards as those revenue producing components for which separate financial information is produced internally and which are subject to evaluation by the Chief Operating Decision Maker ("CODM"). The Company's CODM and the segment measure of profit or loss are discussed more broadly in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2024.

In the opinion of management, all adjustments, consisting of normal and recurring items, considered necessary for a fair presentation of the Consolidated Financial Statements for the interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to current year presentation. These reclassifications did not have a material effect on previously reported net income, shareholders' equity or cash flows.

Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. These statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended December 31, 2024.

The Company's significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2024. There were no new accounting policies or changes to existing policies adopted during the three months ended March 31, 2025 which had a significant effect on the Company's results of operations or statement of financial condition. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period.

*<u>Contingencies</u>*

Due to the nature of their activities, the Company and its subsidiary are at times engaged in various legal proceedings that arise in the course of normal business, some of which were outstanding as of March 31, 2025. Although the ultimate outcome of all claims and lawsuits outstanding as of March 31, 2025 cannot be ascertained at this time, it is the opinion of management that these matters, when resolved, will not have a material adverse effect on the Company's results of operations or financial condition.

*<u>Accounting Pronouncements Not Yet Adopted</u>*

In December 2023, the FASB issued ASU 2023-09, *Income Taxes (Topic 740): Improvements to Income Tax Disclosures*. This ASU enhances the transparency and decision usefulness of income tax disclosures for investors, lenders, creditors, and other allocators of capital (collectively, "investors"). These new enhancements are meant to better (1) understand an entity's exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities, (2) assess income tax information that affects cash flow forecasts and capital allocation decisions, and (3) identify potential opportunities to increase future cash flows. For public business entities, these amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments should be applied on a prospective basis and retrospective application is permitted. The adoption of this standard is not expected to have a material effect on the Company's Consolidated Financial Statements.

The Company has further evaluated other Accounting Standards Updates issued during 2025 but does not expect Updates other than those summarized above to have a material impact on the Consolidated Financial Statements.

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

**NOTE 2** — **INVESTMENT SECURITIES**

The amortized cost and estimated fair values of securities available-for-sale along with allowance for credit losses, gross unrealized gains and losses at March 31, 2025 and December 31, 2024 are summarized in the tables below:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** |
| <u>(In thousands of dollars)</u> | **Amortized<br>Cost** | **Allowance for Credit Losses** | **Gross Unrealized Gains** | **Gross Unrealized Losses** | **Estimated Fair Value** |
| U.S. Treasuries | $5991 | $- | $- | $303 | $5688 |
| Municipal obligations | 61845 | - | 14 | 8262 | 53597 |
| Mortgage-backed securities | 184694 | - | 431 | 13174 | 171951 |
| Asset-backed securities | 34394 | - | 276 | 239 | 34431 |
| Corporate debt securities | 60360 | - | 1006 | 1555 | 59811 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total securities available-for-sale | $347284 | $- | $1727 | $23533 | $325478 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| <u>(In thousands of dollars)</u> | **Amortized<br>Cost** | **Allowance for Credit Losses** | **Gross Unrealized Gains** | **Gross Unrealized Losses** | **Estimated Fair Value** |
| U.S. Treasuries | $5990 | $- | $- | $378 | $5612 |
| Municipal obligations | 61401 | - | 37 | 8367 | 53071 |
| Mortgage-backed securities | 181242 | - | 211 | 15361 | 166092 |
| Asset-backed securities | 46775 | - | 384 | 219 | 46940 |
| Corporate debt securities | 64264 | - | 963 | 1675 | 63552 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total securities available-for-sale | $359672 | $- | $1595 | $26000 | $335267 |

---

The following is a summary of maturities of AFS securities as of March 31, 2025. The amortized cost and estimated fair values are based on the contractual maturity dates. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without penalty. Mortgaged-backed securities are not presented by maturity date because pay-downs are expected before contractual maturity dates.

---

| | | |
|:---|:---|:---|
|  | **Amortized** | **Estimated** |
| <u>(In thousands of dollars)</u> | **Cost** | **Fair Value** |
| Due in one year or less | $2473 | $2489 |
| Due after one year but within five years | 31331 | 30955 |
| Due after five years but within ten years | 78906 | 74722 |
| Due after ten years | 49880 | 45361 |
| Mortgage-backed securities | 184694 | 171951 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $347284 | $325478 |

---

The following table shows securities in unrealized loss position for which ACL has not been recorded and the length of time they were in continuous loss positions as at March 31, 2025:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than** | **Less than** | **Twelve months** | **Twelve months** |  |  |
|  | **Twelve months** | **Twelve months** | **or more** | **or more** | **Total** | **Total** |
|  | **Estimated** | **Unrealized** | **Estimated** | **Unrealized** | **Estimated** | **Unrealized** |
| <u>(In thousands of dollars)</u> | **Fair Value** | **losses** | **Fair Value** | **losses** | **Fair Value** | **losses** |
| U.S. Treasuries | $- | $- | $5688 | $303 | $5688 | $303 |
| Municipal obligations | - | - | 52840 | 8262 | 52840 | 8262 |
| Mortgage-backed securities | 31808 | 261 | 105033 | 12913 | 136841 | 13174 |
| Asset-backed securities | 18583 | 41 | 7945 | 198 | 26528 | 239 |
| Corporate debt securities | 4225 | - | 20918 | 1555 | 25143 | 1555 |
| &nbsp;&nbsp;Total temporarily impaired securities | $54616 | $302 | $192424 | $23231 | $247040 | $23533 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

The following table shows securities in unrealized loss position for which ACL has not been recorded and the length of time they were in continuous loss positions as at December 31, 2024:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than** | **Less than** | **Twelve months** | **Twelve months** |  |  |
|  | **Twelve months** | **Twelve months** | **or more** | **or more** | **Total** | **Total** |
|  | **Estimated** | **Unrealized** | **Estimated** | **Unrealized** | **Estimated** | **Unrealized** |
| <u>(In thousands of dollars)</u> | **Fair Value** | **losses** | **Fair Value** | **losses** | **Fair Value** | **losses** |
| U.S. Treasuries | $- | $- | $5612 | $378 | $5612 | $378 |
| Municipal obligations | - | - | 52299 | 8367 | 52299 | 8367 |
| Mortgage-backed securities | 36742 | 610 | 108435 | 14751 | 145177 | 15361 |
| Asset-backed securities | - | - | 11141 | 219 | 11141 | 219 |
| Corporate debt securities | 1245 | 5 | 20801 | 1670 | 22046 | 1675 |
| &nbsp;&nbsp;Total temporarily impaired securities | $37987 | $615 | $198288 | $25385 | $236275 | $26000 |

---

AFS securities are recorded at fair market value. Of the 152 securities in an unrealized loss position at March 31, 2025, 25 securities were in a continuous loss position for less than twelve months, and 127 securities were in a continuous loss position for twelve months or more. The Company believes, based on industry analyst reports, credit ratings and/or government guarantees, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered credit related required to be charged to the allowance.

Based on the results of management's review at March 31, 2025, none of the unrealized loss was attributable to credit impairment and all $23.5 million in unrealized loss was determined to be from factors other than credit. There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all of these securities may be sold or are credit related impaired, which would require a charge to earnings in such periods.

The table below presents a summary of sales activities in the Company's investment securities available-for-sale portfolio:

---

| | | |
|:---|:---|:---|
|  | **For the Three Months Ended March 31,** | **For the Three Months Ended March 31,** |
| <u>(In thousands of dollars)</u> | **2025** | **2024** |
| Gross gains on sales of securities | $- | $47 |
| Gross losses on sales of securities | - | (3512) |
| Net realized losses on sales of securities available-for-sale | $- | $(3465) |
| Sales proceeds | $- | $39100 |

---

At March 31, 2025 investment securities with a book value of $58.7 million and a market value of $51.6 million were pledged to secure federal funds lines of credit, Federal Reserve Bank Discount Window credit availability, and municipal deposits. At December 31, 2024, investment securities with a book value of $59.2 million and a market value of $51.8 million were pledged to secure federal funds lines of credit, Federal Reserve Bank Discount Window credit availability, and municipal deposits.

**NOTE 3 — LOANS AND ALLOWANCE FOR CREDIT LOSSES**

*<u>Composition of Loan Portfolio</u>*

The Company engages in a full complement of lending activities, including commercial real estate loans ("CRE"), construction loans, commercial and industrial loans ("C&I"), and consumer purpose loans. While risk of loss in the Company's portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company's control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio. The following is a brief description of the major loans receivable categories:

*<u>Commercial Loans</u>*

*Acquisition, Development, and Construction ("ADC")* – ADC loans include both loans and credit lines for the purpose of purchasing, carrying, and developing land into residential subdivisions or various types of commercial developments, such as industrial, hospitality, warehouse, retail, office, and multi-family. This category also includes loans and credit lines for construction of residential developments, multi-family buildings, and commercial buildings. The Company generally engages in ADC lending primarily in local markets served by its branches, and through our homebuilder finance and government guaranteed lending lines of business. The Company recognizes that risks are inherent in the financing of commercial real estate development and construction. These risks include location, market conditions and price volatility, change in interest rates, demand for developed land, lots and buildings, desirability of features and styling of completed developments and buildings, competition from other developments and builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of utilities, roads, public transportation and schools,

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

availability of permanent financing for homebuyers, zoning, environmental restrictions, lawsuits, economic and business cycle, labor, and reputation of the builder or developer.

Each ADC loan is underwritten to address: (i) the desirability of the project, its market viability and projected absorption period; (ii) the creditworthiness of the borrower and the guarantor as to liquidity, cash flow and assets available to ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer's experience and success with similar projects; and (v) the value of the collateral. ADC loans are inspected periodically to ensure that the project is on schedule and eligible for requested draws. Inspections may be performed by construction inspectors hired by the Company or by appropriate loan officers and are conducted periodically to monitor the progress of a particular project. These inspections may also include discussions with project managers and engineers. Rising interest rates and the potential for slowing economic conditions could negatively impact borrowers' and guarantors' ability to repay their debt which could make more of the Company's loans collateral-dependent.

*Income Producing CRE* – Income Producing CRE loans include loans to finance income-producing commercial and multi-family properties. Lending in this category is generally limited to properties located in the Company's market area with only limited exposure to properties located elsewhere but owned by in-market borrowers. Loans in this category include loans for neighborhood retail centers, medical and professional offices, single retail stores, warehouses and apartments leased generally to local businesses and residents. The underwriting of these loans takes into consideration the occupancy, rental rates, and local market demand as well as the financial health of the borrower. The primary risk associated with loans secured with income-producing property is the inability of that property to produce adequate cash flow to service the debt. High unemployment, significant increases to interest rates, generally weak economic conditions and/or an oversupply in the market may result in our customers having difficulty achieving adequate occupancy and/or rental rates. Payments on such loans are often dependent on successful operation or management of the properties.

*Owner-Occupied CRE* – Owner-occupied loans include loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal guarantees, if applicable, are generally required for these loans. The Company recognizes that risk from economic cycles, pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel, or competitive situations may adversely affect the scheduled repayment of business loans.

*Senior Housing* – Senior housing loans support senior adults facilities, generally restricted for adults over the age of 55 years old. These types of loans include senior apartments, independent living communities, assisted living and memory care communities, nursing homes or skilled nursing facilities, and continuing care retirement communities. The Company recognizes that risk from high resident turnover, pandemics, government regulation, operator risk, increases in acuity, availability and cost of qualified staffing resources, technology risk, and other risks such as liability, insurance, reimbursement and regulatory changes may impact repayment of these loans. Underwriting focuses primarily on operator quality and business operations rather than income producing CRE property quality metrics.

*Commercial and Industrial* – C&I loans are loans and lines of credit to finance business operations, equipment and other non-real estate collateral primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal and/or corporate guarantees are generally obtained where available and prudent. The Company recognizes that risk from economic cycles, commodity prices, pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel or competitive situations may adversely affect the scheduled repayment of business loans.

*<u>Retail loans</u>*

*Marine Vessels* – Marine vessel loans are a type of consumer loan used to finance the purchase of a boat or another marine craft. Functioning similarly to auto loans and personal loans, these installment loans come with a repayment term, fixed monthly payments and variable-or-fixed interest rates. These loans are underwritten in accordance with the Company's general loan policies and procedures and are generally secured with title or preferred ships' mortgage on the marine vessel. The Company recognizes that risk from economic cycles, pandemics, government regulation, natural disasters, losses due to theft, or changes to customer's ability to meet the scheduled repayment of marine vessel. At March 31, 2025 and December 31, 2024, there were $405 thousand of repossessed marine assets. There were no repossessed assets write-downs during the three months ended March 31, 2025 and $67 thousand of repossessed assets write-downs during the three months ended March 31, 2024.

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**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

*Residential Mortgages* – Residential mortgages are first or second-lien loans secured by a primary residence or second home. This category includes permanent mortgage financing, construction loans to individual consumers, and home equity lines of credit. The loans are generally secured by properties located within the local market area of the Bank's retail footprint which originates and services the loan. These loans are underwritten in accordance with the Company's general loan policies and procedures which require, among other things, proper documentation of each borrower's financial condition, satisfactory credit history, and property value. In addition to loans originated through the Company's branches, the Company originates and services residential mortgages sold in the secondary market which are underwritten and closed pursuant to investor and agency guidelines. At March 31, 2025, there were no residential mortgage loans in process of foreclosure, and at December 31, 2024, there were $164 thousand of residential mortgage loans in process of foreclosure. Additionally, the Company held $765 thousand and $864 thousand foreclosed residential properties at March 31, 2025 and December 31, 2024, respectively.

*Cash Value Life Insurance Line of Credit ("CVLI")* – Cash value life insurance encompasses multiple types of life insurance that contain a cash value account. This cash value component typically earns interest or other investment gains and grows tax-deferred. CVLI loans are generally lines of credit ("LOC") secured by cash value life insurance of the debtor and can be originated for personal or business purposes. Upon the delinquency of the loan or lapse of an insurance policy premium payment, the Company pursues liquidation of the policy cash value in order to satisfy the loan.

*Other Consumer* – Other consumer loans primarily includes unsecured student loans and other secured and unsecured consumer purpose loans. Certain loans are secured by recreational vehicles and other such tangible property. These types of loans may be impacted by negative macroeconomic conditions impacting individual consumers, such as increased unemployment, which can reduce a borrower's ability to repay the loan.

LHFS are comprised of loans acquired through mortgage warehouse lending activities and origination of mortgage loans. The Company serves as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. The Company also originates mortgage loans with customers through CSM and sells the majority of these loans to third-party investors.

Following is a summary of the composition of the loan portfolio at March 31, 2025 and December 31, 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **March 31, 2025** | **March 31, 2025** | **December 31, 2024** | **December 31, 2024** |
| <u>(Dollars in thousands)</u> | **Amount** | **%** | **Amount** | **%** |
| **Commercial loans** |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development and construction | $76453 | 5.2% | $72520 | 5.2% |
| &nbsp;&nbsp;Income producing CRE | 352693 | 24.0 | 321558 | 22.8 |
| &nbsp;&nbsp;Owner-occupied CRE | 90204 | 6.1 | 94573 | 6.7 |
| &nbsp;&nbsp;Senior housing | 245292 | 16.7 | 234081 | 16.6 |
| &nbsp;&nbsp;Commercial and industrial | 145784 | 9.8 | 141626 | 10.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 910426 | 61.8 | 864358 | 61.3 |
| **Retail loans** |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 284305 | 19.3 | 263657 | 18.6 |
| &nbsp;&nbsp;Residential mortgages | 176794 | 12.0 | 174099 | 12.4 |
| &nbsp;&nbsp;Cash value life insurance LOC | 80503 | 5.5 | 86844 | 6.2 |
| &nbsp;&nbsp;Other consumer | 20204 | 1.4 | 20485 | 1.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 561806 | 38.2 | 545085 | 38.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total gross LHFI, net of unearned income | 1472232 | 100.0% | 1409443 | 100.0% |
| Less allowance for credit losses | (17104) |  | (17118) |  |
| LHFI, net | $1455128 |  | $1392325 |  |
| LHFS | $187481 |  | $174033 |  |

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*<u>Credit Quality Indicators</u>*

The Company monitors the credit quality of its commercial loan portfolio using internal credit risk ratings. These credit risk ratings are based upon established regulatory guidance and are assigned upon initial approval of credit to borrowers. Credit risk ratings are updated periodically after the initial assignment or whenever management becomes aware of information affecting the borrowers' ability to fulfill their obligations. The Company utilizes the following categories of credit grades to evaluate its commercial loan portfolio:

***Pass*** — Loans classified as pass are higher quality loans that do not fit any of the other categories below.

***Special Mention*** — Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company's credit position at some future date.

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**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

***Substandard*** — Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

***Doubtful*** — Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the credit quality of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans. The Company had no loans rated Doubtful at March 31, 2025 or December 31, 2024.

The Company monitors the credit quality of its retail portfolio based primarily on payment activity and credit scores. Payment activity is the primary factor considered in determining whether a retail loan should be classified as nonperforming. Retail loans are considered to be nonperforming if they are on nonaccrual status or if they are 90 days past due or greater.

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**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

The following table presents the risk category of term loans on amortized cost basis and, for 2025, gross charge-offs by vintage year as of March 31, 2025:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** |  |  |  |
| <u>(In thousands of dollars)</u> | **2025** | **2024** | **2023** | **2022** | **2021** | **Prior** | **Revolvers** | **Revolvers Converted to Term** | **Total** |
| **Commercial loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Acquisition, development and construction** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $19399 | $42530 | $12087 | $2135 | $- | $301 | $1 | $- | $76453 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total acquisition, development<br> and construction | $19399 | $42530 | $12087 | $2135 | $- | $301 | $1 | $- | $76453 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Income producing CRE** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $32881 | $40240 | $57512 | $122583 | $57551 | $40838 | $327 | $349 | $352281 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | - | 412 | - | - | 412 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total income producing | $32881 | $40240 | $57512 | $122583 | $57551 | $41250 | $327 | $349 | $352693 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Owner-occupied CRE** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $2711 | $2383 | $9744 | $17686 | $24447 | $26380 | $360 | $- | $83711 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | 1812 | - | 3914 | - | 767 | - | - | 6493 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total owner occupied | $2711 | $4195 | $9744 | $21600 | $24447 | $27147 | $360 | $- | $90204 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Senior housing** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $25764 | $45696 | $24389 | $71786 | $31534 | $9753 | $- | $- | $208922 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | 17365 | 7449 | - | - | 24814 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | 6487 | 5069 | - | - | 11556 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total senior housing | $25764 | $45696 | $24389 | $71786 | $55386 | $22271 | $- | $- | $245292 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Commercial and industrial** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $11264 | $40971 | $28193 | $11627 | $17634 | $4648 | $24164 | $2701 | $141202 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | 260 | 2546 | 68 | 1708 | 4582 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-real estate | $11264 | $40971 | $28193 | $11627 | $17894 | $7194 | $24232 | $4409 | $145784 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $6 | $- | $- | $- | $- | $- | $6 |
| **Retail loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Marine vessels** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $28347 | $48150 | $71008 | $92725 | $21483 | $22592 | $- | $- | $284305 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total marine vessels | $28347 | $48150 | $71008 | $92725 | $21483 | $22592 | $- | $- | $284305 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Residential mortgages** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $6297 | $21181 | $26018 | $49279 | $26325 | $28859 | $18460 | $214 | $176633 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | 161 | - | - | 161 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total residential mortgages | $6297 | $21181 | $26018 | $49279 | $26325 | $29020 | $18460 | $214 | $176794 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Cash value life insurance LOC** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $- | $- | $- | $- | $- | $- | $80243 | $260 | $80503 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash value life insurance<br>&nbsp;&nbsp;&nbsp;&nbsp; LOC | $- | $- | $- | $- | $- | $- | $80243 | $260 | $80503 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Other consumer** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $1435 | $1845 | $1971 | $77 | $1646 | $12773 | $457 | $- | $20204 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other consumer | $1435 | $1845 | $1971 | $77 | $1646 | $12773 | $457 | $- | $20204 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $43 | $- | $- | $43 |

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The following table presents the risk category of term loans on amortized cost basis and, for 2024, gross charge-offs by vintage year as of December 31, 2024:

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**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** |  |  |  |
| <u>(In thousands of dollars)</u> | **2024** | **2023** | **2022** | **2021** | **2020** | **Prior** | **Revolvers** | **Revolvers Converted to Term** | **Total** |
| **Commercial loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Acquisition, development and construction** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $56157 | $12929 | $2923 | $8 | $- | $503 | $- | $- | $72520 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total acquisition, development<br> and construction | $56157 | $12929 | $2923 | $8 | $- | $503 | $- | $- | $72520 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Income producing CRE** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $41441 | $54468 | $123767 | $57156 | $28306 | $16006 | $2 | $- | $321146 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | - | 412 | - | - | 412 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total income producing | $41441 | $54468 | $123767 | $57156 | $28306 | $16418 | $2 | $- | $321558 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Owner-occupied CRE** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $4400 | $9803 | $19153 | $26183 | $15831 | $12520 | $16 | $- | $87906 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | 1825 | - | 3996 | - | - | 846 | - | - | 6667 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total owner occupied | $6225 | $9803 | $23149 | $26183 | $15831 | $13366 | $16 | $- | $94573 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Senior housing** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $43372 | $24428 | $80881 | $31613 | $9789 | $- | $- | $- | $190083 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | 17532 | - | 7494 | - | - | 25026 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | 13903 | - | 5069 | - | - | 18972 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total senior housing | $43372 | $24428 | $80881 | $63048 | $9789 | $12563 | $- | $- | $234081 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Commercial and industrial** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $41292 | $34052 | $12364 | $19206 | $1472 | $6400 | $18811 | $3281 | $136878 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | 36 | - | - | - | - | 36 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | 283 | - | 2626 | 69 | 1734 | 4712 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-real estate | $41292 | $34052 | $12364 | $19525 | $1472 | $9026 | $18880 | $5015 | $141626 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $87 | $62 | $- | $- | $- | $- | $- | $149 |
| **Retail loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Marine vessels** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $48640 | $74645 | $95768 | $21729 | $5690 | $17185 | $- | $- | $263657 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total marine vessels | $48640 | $74645 | $95768 | $21729 | $5690 | $17185 | $- | $- | $263657 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $36 | $- | $- | $- | $- | $- | $- | $36 |
| &nbsp;&nbsp;**Residential mortgages** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $19067 | $29485 | $49850 | $27362 | $12472 | $17104 | $18292 | $202 | $173834 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | 164 | - | 101 | 265 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total residential mortgages | $19067 | $29485 | $49850 | $27362 | $12472 | $17268 | $18292 | $303 | $174099 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Cash value life insurance LOC** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $- | $- | $- | $- | $- | $- | $83751 | $3093 | $86844 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total cash value life insurance<br>&nbsp;&nbsp;&nbsp;&nbsp; LOC | $- | $- | $- | $- | $- | $- | $83751 | $3093 | $86844 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $47 | $- | $47 |
| &nbsp;&nbsp;**Other consumer** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $1921 | $1995 | $83 | $1666 | $2898 | $11414 | $465 | $- | $20442 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | 43 | - | - | 43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other consumer | $1921 | $1995 | $83 | $1666 | $2898 | $11457 | $465 | $- | $20485 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $53 | $- | $- | $53 |

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*<u>Nonaccrual and Past Due Loans</u>*

A loan is placed on nonaccrual status when, in management's judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. The Company's loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due

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**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower's financial condition and the prospects for full repayment, approved by the Company's Chief Credit Officer. Past due loans are loans whose principal or interest is past due 30 days or more.

The following table presents a summary of past due and nonaccrual loans as of March 31, 2025:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | **Loans Past Due** | **Loans Past Due** | **Loans Past Due** |  |  |  |
| <u>(In thousands of dollars)</u> | **Current** | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90 Days or More<br>and Accruing** | **Nonaccrual** | **Total<br>Past Due and<br>Nonaccrual** | **Total Loans<br>Receivable** |
| Acquisition, development and<br> construction | $76453 | $- | $- | $- | $- | $- | $76453 |
| Income producing CRE | 351175 | 1106 | - | - | 412 | 1518 | 352693 |
| Owner-occupied CRE | 86856 | - | - | - | 3348 | 3348 | 90204 |
| Senior housing | 238805 | - | - | - | 6487 | 6487 | 245292 |
| Commercial and industrial | 141560 | 13 | 14 | 6 | 4191 | 4224 | 145784 |
| Marine vessels | 284305 | - | - | - | - | - | 284305 |
| Residential mortgages | 175929 | 704 | - | - | 161 | 865 | 176794 |
| Cash value life insurance LOC | 80503 | - | - | - | - | - | 80503 |
| Other consumer | 19835 | 127 | 242 | - | - | 369 | 20204 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1455421 | $1950 | $256 | $6 | $14599 | $16811 | $1472232 |

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The following table presents a summary of past due and nonaccrual loans as of December 31, 2024:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | **Loans Past Due** | **Loans Past Due** | **Loans Past Due** |  |  |  |
| <u>(In thousands of dollars)</u> | **Current** | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90 Days or More<br>and Accruing** | **Nonaccrual** | **Total<br>Past Due and<br>Nonaccrual** | **Total Loans<br>Receivable** |
| Acquisition, development and<br> construction | $72520 | $- | $- | $- | $- | $- | $72520 |
| Income producing CRE | 321146 | - | - | - | 412 | 412 | 321558 |
| Owner-occupied CRE | 91148 | - | - | - | 3425 | 3425 | 94573 |
| Senior housing | 227511 | - | - | - | 6570 | 6570 | 234081 |
| Commercial and industrial | 137330 | 5 | - | 6 | 4285 | 4296 | 141626 |
| Marine vessels | 263657 | - | - | - | - | - | 263657 |
| Residential mortgages | 172525 | 1309 | - | - | 265 | 1574 | 174099 |
| Cash value life insurance LOC | 86844 | - | - | - | - | - | 86844 |
| Other consumer | 19996 | 325 | 121 | 43 | - | 489 | 20485 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1392677 | $1639 | $121 | $49 | $14957 | $16766 | $1409443 |

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*<u>Individually Analyzed Collateral-Dependent Loans</u>*

As of March 31, 2025, there were $14.6 million of individually analyzed collateral-dependent loans which are primarily secured by real estate, equipment and receivables. All of the Company's nonaccrual loans at March 31, 2025 are collateral-dependent. The following table presents an analysis of nonaccrual loans that are also collateral-dependent financial assets and related allowance for credit losses:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **Nonaccrual Loans with No Allowance** | **Nonaccrual Loans with an Allowance** | **Total Nonaccrual Loans** | **Allowance for Credit Losses** | **Nonaccrual Interest Income Recognized** |
| Income producing CRE | $412 | $- | $412 | $- | $- |
| Owner-occupied CRE | 3348 | - | 3348 | - | - |
| Senior housing | - | 6487 | 6487 | 853 | - |
| Commercial and industrial | 1985 | 2206 | 4191 | 42 | - |
| Residential mortgages | 161 | - | 161 | - | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $5906 | $8693 | $14599 | $895 | $15 |

---

As of December 31, 2024, there were $15.0 million of individually analyzed collateral-dependent loans which are primarily secured by real estate, equipment and receivables. All of the Company's nonaccrual loans at December 31, 2024, are collateral-dependent. The

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

following table presents an analysis of nonaccrual loans that are also collateral-dependent financial assets and related allowance for credit losses:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **Nonaccrual Loans with No Allowance** | **Nonaccrual Loans with an Allowance** | **Total Nonaccrual Loans** | **Allowance for Credit Losses** | **Nonaccrual Interest Income Recognized** |
| Income producing CRE | $412 | $- | $412 | $- | $- |
| Owner-occupied CRE | 3425 | - | 3425 | - | - |
| Senior housing | - | 6570 | 6570 | 1703 | - |
| Commercial and industrial | 2057 | 2228 | 4285 | 36 | 134 |
| Marine vessels | - | - | - | - | 3 |
| Residential mortgages | 164 | 101 | 265 | 3 | 6 |
| Cash value life insurance LOC | - | - | - | - | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $6058 | $8899 | $14957 | $1742 | $148 |

---

*<u>Modifications to Borrowers Experiencing Financial Difficulty</u>*

The Company periodically provides modifications to borrowers experiencing financial difficulty. These modifications include either payment deferrals, term extensions, interest rate reductions, principal forgiveness or combinations of modification types. The determination of whether the borrower is experiencing financial difficulty is made on the date of the modification. When principal forgiveness is provided, the amount of principal forgiveness is charged off against the allowance for credit losses with a corresponding reduction in the amortized cost basis of the loan.

The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted as of March 31, 2025:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <u>(Dollars in thousands)</u> | **Payment deferral** | **Combination of term extension and payment delay** | **Combination of term extension and interest rate reduction** | **Total modified loans** | **Percent of total loan class** |
| **Commercial loans** |  |  |  |  |  |
| &nbsp;&nbsp;Senior housing | $- | $9860 | $- | $9860 | 4.0% |
| &nbsp;&nbsp;Commercial and industrial | 2193 | - | 1708 | 3901 | 2.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $2193 | $9860 | $1708 | $13761 | 0.9% |

---

The Company had no unfunded commitments to borrowers experiencing financial difficulty for which the Company has modified their loans as of March 31, 2025 or March 31, 2024.

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the last twelve months as of March 31, 2025:

---

| | |
|:---|:---|
| **Loan type** | **Financial effect** |
| **Payment deferral** |  |
| &nbsp;&nbsp;Commercial and industrial | Provided one year of principal payment deferral (interest only). |
| **Combination of term extension and payment delay** |  |
| &nbsp;&nbsp;Senior housing | &nbsp;&nbsp;&nbsp;&nbsp;Provided weighted average term extension of 9 months and either deferral of principal payments<br> (interest only) or deferral of full interest payments. |
| **Combination of term extension and interest rate<br> reduction** |  |
| &nbsp;&nbsp;Commercial and industrial | Provided 36-month extension broken into three 12-month extension options, and reduced interest<br> rate by 100 bps in the first 12 months and by 50 bps in the second 12 months. |

---

The Company monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the last 12 months as of March 31, 2025:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | **Loans Past Due** | **Loans Past Due** | **Loans Past Due** |  |
| <u>(In thousands of dollars)</u> | **Current** | **30-59<br>Days<br>Past Due** | **60-89<br>Days<br>Past Due** | **90 Days or More<br>Past Due** | **Total** |
| **Commercial real estate** |  |  |  |  |  |
| &nbsp;&nbsp;Senior housing | $9860 | $- | $- | $- | $9860 |
| &nbsp;&nbsp;Commercial and industrial | - | 3901 | - | - | 3901 |
| **&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total** | $9860 | $3901 | $- | $- | $13761 |
| Total nonaccrual loans included above | $6487 | $3901 | $- | $- | $10388 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

The following table provides the amortized cost basis of financing receivables related to loans modified to borrowers experiencing financial difficulty at March 31, 2025 that had a subsequent payment default and were modified in the previous 12 months:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **Principal Forgiveness** | **Payment Deferral** | **Term Extension** | **Interest Rate Reduction** | **Combination Term Extension and Principal Forgiveness** | **Combination Term Extension and Interest Rate Reduction** |
| **Commercial loans** |  |  |  |  |  |  |
| &nbsp;&nbsp;Commercial and industrial | $- | $2193 | $- | $- | $- | $1708 |
| **&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total** | $- | $2193 | $- | $- | $- | $1708 |

---

At March 31, 2024, there were no loans modified to borrowers experiencing financial difficulty.

*<u>Related Party Loans</u>*

Certain parties (principally certain directors and executive officers of the Company, their immediate families and business interests) were loan customers of and had other transactions in the normal course of business with the Company. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectability.

The following table presents a roll forward of the related party loans as of March 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **As of** | **As of** |
| <u>(In thousands of dollars)</u> | **March 31, 2025** | **March 31, 2024** |
| Balance, beginning of year | $330 | $339 |
| &nbsp;&nbsp;New loans | 2500 | 128 |
| &nbsp;&nbsp;Less loan repayments | (79) | (2) |
| Balance, at period-end | $2751 | $465 |

---

None of the related party loans were classified as nonaccrual, past due, restructured, or potential problem loans at March 31, 2025 and 2024.

*<u>Allowance for Credit Losses - Loans</u>*

The allowance for credit losses represents an allowance for expected losses over the remaining contractual life of the assets adjusted for prepayments. The contractual term does not consider extensions, renewals or modifications. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio.

The following table is a summary of the activity within the allowance for credit losses during the three months ended March 31, 2025 and for the three months ended March 31, 2024:

---

| | | | |
|:---|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **ACL- Loans** | **ACL-Unfunded<br> Commitments** | **Total ACL** |
| **<u>Three Months Ended March 31, 2025</u>** |  |  |  |
| Balances - December 31, 2024 | $17118 | $2720 | $19838 |
| &nbsp;&nbsp;&nbsp;&nbsp; Charge-offs | (49) | - | (49) |
| &nbsp;&nbsp;&nbsp;&nbsp; Recoveries | 34 | - | 34 |
| &nbsp;&nbsp;&nbsp;&nbsp; Provision (release) for credit losses | 1 | 628 | 629 |
| **Balances - March 31, 2025** | $17104 | $3348 | $20452 |
| **<u>Three Months Ended March 31, 2024</u>** |  |  |  |
| Balances - December 31, 2023 | $15465 | $3916 | $19381 |
| &nbsp;&nbsp;&nbsp;&nbsp; Charge-offs | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp; Recoveries | 9 | - | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp; Provision (release) for credit losses | 300 | (137) | 163 |
| **Balances - March 31, 2024** | $15774 | $3779 | $19553 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

The following table presents a summary of the Company's allowance, by loan category for credit losses for the three months ended March 31, 2025:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Beginning** |  |  | **Provision** | **Ending** |
| <u>(In thousands of dollars)</u> | **Balance** | **Charge-offs** | **Recoveries** | **(Release)** | **Balance** |
| **Three Months Ended March 31, 2025** |  |  |  |  |  |
| Commercial loans |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and construction | $1188 | $- | $- | $149 | $1337 |
| &nbsp;&nbsp;Income producing CRE | 5867 | - | - | 752 | 6619 |
| &nbsp;&nbsp;Owner-occupied CRE | 543 | - | - | 52 | 595 |
| &nbsp;&nbsp;Senior housing | 4576 | - | - | (427) | 4149 |
| &nbsp;&nbsp;Commercial and industrial | 751 | (6) | 5 | 92 | 842 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 12925 | (6) | 5 | 618 | 13542 |
| Retail loans |  |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 1688 | - | - | (379) | 1309 |
| &nbsp;&nbsp;Residential mortgages | 2015 | - | 2 | (216) | 1801 |
| &nbsp;&nbsp;Cash value life insurance LOC | 88 | - | - | (9) | 79 |
| &nbsp;&nbsp;Other consumer | 402 | (43) | 27 | (13) | 373 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 4193 | (43) | 29 | (617) | 3562 |
| Total allowance for funded loans | 17118 | (49) | 34 | 1 | 17104 |
| Reserve for losses on<br> unfunded loan commitments | 2720 | - | - | 628 | 3348 |
| **&nbsp;&nbsp;&nbsp;&nbsp;Total ACL** | $19838 | $(49) | $34 | $629 | $20452 |

---

The following table presents a summary of the Company's allowance, by loan category for credit losses for the three months ended March 31, 2024:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Beginning** |  |  | **Provision** | **Ending** |
| <u>(In thousands of dollars)</u> | **Balance** | **Charge-offs** | **Recoveries** | **(Release)** | **Balance** |
| **Three Months Ended March 31, 2024** |  |  |  |  |  |
| Commercial loans |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and construction | $3318 | $- | $- | $(518) | $2800 |
| &nbsp;&nbsp;Income producing CRE | 5067 | - | - | 163 | 5230 |
| &nbsp;&nbsp;Owner-occupied CRE | 628 | - | - | (105) | 523 |
| &nbsp;&nbsp;Senior housing | 1342 | - | - | 526 | 1868 |
| &nbsp;&nbsp;Commercial and industrial | 1079 | - | 5 | (162) | 922 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 11434 | - | 5 | (96) | 11343 |
| Retail loans |  |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 1277 | - | - | 356 | 1633 |
| &nbsp;&nbsp;Residential mortgages | 2167 | - | 3 | 162 | 2332 |
| &nbsp;&nbsp;Cash value life insurance LOC | 122 | - | - | (13) | 109 |
| &nbsp;&nbsp;Other consumer | 465 | - | 1 | (109) | 357 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 4031 | - | 4 | 396 | 4431 |
| Total allowance for funded loans | 15465 | - | 9 | 300 | 15774 |
| Reserve for losses on<br> unfunded loan commitments | 3916 | - | - | (137) | 3779 |
| **&nbsp;&nbsp;&nbsp;&nbsp;Total ACL** | $19381 | $- | $9 | $163 | $19553 |

---

**NOTE 4 — COMMITMENTS AND CONTINGENCIES**

In the normal course of business, the Company makes various commitments and incurs certain contingent liabilities that are not reflected in the Company's financial statements. These commitments and contingent liabilities include various guarantees, commitments to extend credit and standby letters of credit. The Company does not anticipate any material losses as a result of these commitments and contingent liabilities.

*<u>Credit Related Commitments</u>*

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Financial instruments where contract amounts represent credit risk as of March 31, 2025 and December 31, 2024:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **March 31, 2025** | **December 31, 2024** |
| Commitments to extend credit | $477635 | $460840 |
| Letters of credit | 1203 | 1223 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $478838 | $462063 |

---

Commitments to extend credit, including unused lines of credit, are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company's exposure to credit loss in the event of nonperformance by the other party to the instrument is represented by the contractual notional amount of the instrument. Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued to guarantee a customer's performance to a third party and have essentially the same credit risk as other lending facilities. Collateral held for commitments to extend credit and letters of credit varies but may include accounts receivable, inventory, property, plant, equipment and income-producing commercial properties. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.

The Company maintains cash deposits with a financial institution that during the year are in excess of the insured limitation of the Federal Deposit Insurance Corporation. If the financial institution were not to honor its contractual liability, the Company could incur losses. Management is of the opinion that there is not material risk because of the financial strength of the institution.

*<u>Tax Credit Investments</u>*

The Company has invested capital in a limited partnership to obtain renewable energy tax credits generated by solar power projects. The following table summarizes the tax credit investment and equity investment as of March 31, 2025 and December 31, 2024:

---

| | | | |
|:---|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **Balance Sheet Location** | **March 31, 2025** | **December 31, 2024** |
| Carrying amount | Other assets | $2611 | $2666 |
| Amount of future funding commitments not included in carrying amount | N/A | 4721 | 2721 |

---

There was $63 thousand and $(68) thousand of net provision (benefit) to income tax expense from tax credit investments recognized in the provision for income taxes for the three months ended March 31, 2025 and 2024, respectively, related to the recognition of tax credits, adjustments to taxes payable from flow-through losses, and changes in deferred tax items in each period.

*<u>Contingencies</u>*

The Company is subject to claims and lawsuits which arise primarily in the ordinary course of business. Management is not aware of any legal proceedings which could have a material adverse effect on the financial position or operating results of the Company.

**NOTE 5 — STOCK-BASED COMPENSATION**

In 2017, the shareholders of the Company approved the CoastalSouth Bancshares, Inc. 2017 Incentive Plan ("2017 Plan") to motivate, attract and retain the services of employees, officers, and directors. At March 31, 2025, 884,750 stock options had been granted and 371,500 shares of restricted stock units had been granted under the 2017 Plan. As of March 31, 2025, the Board of Directors has reserved 1,106,500 shares of the Company's common stock for issuance pursuant to awards granted under the 2017 Plan, any or all of which may be granted as nonqualified stock options, restricted stock, restricted stock units, deferred stock units, stock appreciation rights, performance awards and other stock-based awards, or any other right or interest relating to stock or cash, granted to a Participant under the Plan. Prior to 2022, awards were also able to be granted as incentive stock options. In the event all or a portion of a stock award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares subject to the Award shares again become available for issuance pursuant to awards granted under the 2017 Plan and do not count against the maximum number of reserved shares. In addition, shares of common stock deducted or withheld to satisfy tax withholding obligations count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan, and Shares delivered by a participant to satisfy tax withholding requirements are not added to the 2017 Plan share reserve. The 2017 Plan is administered by the Compensation Committee of our Board of Directors (the "Committee"). The determination of award recipients under the 2017 Plan, and the terms of

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

those awards, are made by the Committee. The terms of each stock-based award are indicated in an award certificate. As of December 31, 2024, there were 1,106,500 shares reserved under the 2017 Plan and as of March 31, 2025, the Board of Directors has not approved additional shares to the plan keeping the total awards at 1,106,500. At March 31, 2025, there were 11,000 remaining shares available to be awarded under the 2017 Plan.

Stock-based awards are recognized over the vesting period and reflected as salaries and employee benefits within the Consolidated Statements of Operations, which was $246 thousand and $296 thousand for the three months ended March 31, 2025 and 2024, respectively.

*<u>Stock Options</u>*

The Company's stock options vest over four years of continuous service, with a majority vesting 25% on the anniversary of the grant date and a minority vesting 100% on the fourth anniversary of the grant date. The terms of all of the options are for ten years expiring on the tenth anniversary of the grant date.

The grant date fair value of stock options is determined using the Black-Scholes model. Volatility is based on a peer group of similar community banks in the southeast United States. The risk-free rate is the treasury rate that most closely relates to the expected life on the grant date.

A summary of stock option activity for the three months ended March 31, 2025 and 2024 is presented below:

---

| | | | |
|:---|:---|:---|:---|
|  |  |  | **Weighted Average** |
|  | **Number of** | **Weighted Average** | **Grant Date** |
|  | **Shares** | **Exercise Price** | **Fair Value** |
| **Outstanding at January 1, 2025** | 737250 | $13.30 | $5.09 |
| &nbsp;&nbsp;Granted | - | - | - |
| &nbsp;&nbsp;Exercised | - | - | - |
| &nbsp;&nbsp;Forfeited or Expired | - | - | - |
| **Outstanding at March 31, 2025** | 737250 | $13.30 | $5.09 |
| **Outstanding at January 1, 2024** | 746750 | $13.29 | $5.09 |
| &nbsp;&nbsp;Granted | 1500 | 15.80 | 7.81 |
| &nbsp;&nbsp;Exercised | - | - | - |
| &nbsp;&nbsp;Forfeited or Expired | - | - | - |
| **Outstanding at March 31, 2024** | 748250 | $13.30 | $5.10 |

---

As of March 31, 2025 and 2024, there was $84 thousand and $309 thousand, respectively, of total unrecognized compensation cost related to stock options granted under the 2017 Plan. As of March 31, 2025, the cost is expected to be recognized over a weighted-average period of 0.89 years.

*<u>Restricted Stock Units</u>*

Periodically, the Company issues restricted stock units to its directors, executive and senior officers. Compensation expense is recognized over the vesting period of the awards based upon the fair value of the stock at grant date. Periodically the Company issues restricted stock units to its directors, executive and senior officers. Compensation expense is recognized over the vesting period of the awards based upon the fair value of the stock at grant date. The Company did not grant any restricted stock units during the three months ended March 31, 2025 to the Board of Directors. During the three months ended March 31, 2024, the Company granted 18,000 of restricted stock units to the Board of Directors. In addition, the Company granted 39,500 and 80,500 of restricted stock units during the three months ended March 31, 2025 and 2024, respectively, to members of management which cliff vest 100% at the end of five years.

A summary of restricted stock unit activity for the three months ended March 31, 2025 and 2024 is below:

---

| | | |
|:---|:---|:---|
|  |  | **Weighted Average** |
|  | **Number of** | **Grant Date** |
|  | **Shares** | **Fair Value** |
| **Outstanding at January 1, 2025** | 159275 | $16.26 |
| &nbsp;&nbsp;Granted | 39500 | 21.00 |
| &nbsp;&nbsp;Delivered | (4125) | 18.25 |
| &nbsp;&nbsp;Forfeited | - | - |
| **Outstanding at March 31, 2025** | 194650 | $17.18 |
| **Outstanding at January 1, 2024** | 89350 | $15.97 |
| &nbsp;&nbsp;Granted | 98500 | 16.51 |
| &nbsp;&nbsp;Delivered | (4125) | 18.25 |
| &nbsp;&nbsp;Forfeited | - | - |
| **Outstanding at March 31, 2024** | 183725 | $16.21 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

As of March 31, 2025 and 2024, there was $2.3 million and $2.5 million, respectively, of total unrecognized compensation cost related to nonvested restricted stock units shares granted under the 2017 Plan. As of March 31, 2025, the cost is expected to be recognized over a weighted-average period of 3.70 years. There were no restricted stock unit awards that were vested but were not delivered during the three months ended March 31, 2025 and 2024.

**NOTE 6 — NET INCOME PER COMMON SHARE**

Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted income per share is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding in-the-money stock warrants and options, as well as restricted stock units. Potential common shares are not included in the denominator of the diluted per share computation when inclusion would be anti-dilutive. As of March 31, 2025 and 2024, there were 1,500 and 123,500, potential common shares that were not included in the potentially dilutive stock options and restricted stock units, respectively.

Net income per common share were calculated as follows:

---

| | | |
|:---|:---|:---|
|  | **March 31,** | **March 31,** |
| <u>(In thousands of dollars except share and per share amounts)</u> | **2025** | **2024** |
| **Net income per share - basic computation:** |  |  |
| Net income available to common shareholders | $5050 | $2429 |
| Average common shares outstanding - basic | 10273125 | 10043951 |
| Basic net income per share | $0.49 | $0.24 |
| **Diluted net income per share computation:** |  |  |
| Net income available to common shareholders | $5050 | $2429 |
| Average common shares outstanding - basic | 10273125 | 10043951 |
| Incremental shares from assumed conversions |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock options | 268574 | 135459 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted stock units | 100379 | 43271 |
| Average common shares outstanding - diluted | 10642078 | 10222681 |
| Diluted net income per share | $0.47 | $0.24 |

---

**NOTE 7 — FAIR VALUE OF FINANCIAL INSTRUMENTS**

US GAAP provides a framework for measuring and disclosing fair value which requires disclosures about the fair value of assets and liabilities recognized in the balance sheet, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or on a nonrecurring basis (for example, collateral-dependent loans).

Fair value is defined as the exchange in price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. US GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

*<u>Fair Value Hierarchy</u>*

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value. These levels are:

**Level 1** Valuation is based upon quoted prices for identical instruments traded in active markets.

**Level 2** Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

**Level 3** Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

*Securities AFS* — Securities AFS are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

*Equity Securities* ***—*** Equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. There were no equity securities held at March 31, 2025 and December 31, 2024.

*Loans Held for Sale* ***—*** Loans held for sale are comprised of loans originated for sale in the ordinary course of business and purchased with intent to sell through MBF. The fair value of loans originated for sale in the secondary market is based on purchase commitments or quoted prices for the same or similar loans and are classified as recurring Level 2. There were no loans held for sale requiring fair value adjustments at March 31, 2025 and December 31, 2024.

*Collateral-Dependent Loans* — The Company does not record loans at fair value on a recurring basis, however, from time to time, a loan is considered collateral-dependent and an allowance for credit loss is established. Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment. If a loan is determined to be collateral-dependent, or if foreclosure is probable, the Company measures the net realizable value of the collateral (fair value less costs to sell) to determine the level of impairment for the loan. The valuation of collateral is supported by an appraisal, brokers price opinion, or other comparable market data. Otherwise, the Company performs a discounted cash flow analysis on the loan to determine the level of ACL needed. At March 31, 2025 and December 31, 2024, substantially all of the collateral-dependent loans were evaluated based upon the fair value of the collateral. Collateral-dependent loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

*OREO* — Foreclosed assets are adjusted to fair value upon transfer of the loans to OREO. Real estate acquired in settlement of loans is recorded initially at estimated fair value of the property less estimated selling costs at the date of foreclosure. The initial recorded value may be subsequently reduced by additional allowances, which are charges to earnings if the estimated fair value of the property less estimated selling costs declines below the initial recorded value. OREO presented as measured on a non-recurring basis includes only those properties that had changes in valuation. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral.

*Derivative Financial Instruments* — The Company's derivative financial instruments, which are interest rate contracts, are valued using a discounted cash flow method that incorporates current market interest rates.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy at March 31, 2025 and December 31, 2024:

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**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** |
| <u>(In thousands of dollars)</u> | **Total** | **Level 1** | **Level 2** | **Level 3** |
| **Assets:** |  |  |  |  |
| &nbsp;&nbsp;***Available-for-sale securities*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasuries | $5688 | $- | $5688 | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal obligations | 53597 | - | 53597 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 171951 | - | 171951 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Asset-backed securities | 34431 | - | 34431 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 59811 | - | 59311 | 500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $325478 | $- | $324978 | $500 |
| &nbsp;&nbsp;***Other*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative assets | $6480 | $- | $6480 | $- |
| **Liabilities:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative liabilities | $(6) | $- | $- | $(6) |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| <u>(In thousands of dollars)</u> | **Total** | **Level 1** | **Level 2** | **Level 3** |
| **Assets:** |  |  |  |  |
| &nbsp;&nbsp;***Available-for-sale securities*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasuries | $5612 | $- | $5612 | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal obligations | 53071 | - | 53071 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 166092 | - | 166092 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Asset-backed securities | 46940 | - | 46940 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 63552 | - | 63052 | 500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $335267 | $- | $334767 | $500 |
| &nbsp;&nbsp;***Other*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative assets | $7717 | $- | $7717 | $- |
| **Liabilities:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative liabilities | $(6) | $- | $- | $(6) |

---

Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended March 31, 2025 and for the year ended December 31, 2024 were $500 thousand. There were no changes in the value in either of those periods.

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents the assets and liabilities carried on the balance sheet by caption and by level within the valuation hierarchy (as described above) for which a nonrecurring change in fair value has been recorded during the years ended March 31, 2025 and December 31, 2024.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** |
| <u>(In thousands of dollars)</u> | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Other real estate owned | $765 | $- | $- | $765 |
| Collateral-dependent loans, net | 13704 | - | - | 13704 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $14469 | $- | $- | $14469 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| <u>(In thousands of dollars)</u> | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Other real estate owned | $864 | $- | $- | $864 |
| Collateral-dependent loans, net | 13215 | - | - | 13215 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $14079 | $- | $- | $14079 |

---

There were no liabilities measured at fair value on a nonrecurring basis at March 31, 2025 and December 31, 2024.

The following tables present quantitative information about the unobservable inputs used in Level 3 fair value measurements at

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

March 31, 2025 and December 31, 2024:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **March 31, 2025** | (In thousands of dollars) |  |  |  |
| **Financial Instrument** | **Net Carrying<br>Value** | **Valuation Technique** | **Unobservable Input** | **Input** |
| Other real estate<br> owned | $765 | Third party appraisal or broker's price opinion | Management discount for costs to sell | 10% |
| Collateral-dependent loans, net | $13704 | Third party appraisal or broker's price opinion | Management discount for costs to sell | 10% |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2024** | (In thousands of dollars) |  |  |  |
| Other real estate<br> owned | $864 | Third party appraisal or broker's price opinion | Management discount for costs to sell | 10% |
| Collateral-dependent loans, net | $13215 | Third party appraisal or broker's price opinion | Management discount for costs to sell | 10% |

---

*<u>Fair Value of Financial Instruments</u>*

The following tables include the estimated fair value of the Company's financial assets and financial liabilities. The methodologies for estimating the fair value of financial assets and financial liabilities measured on a recurring and nonrecurring basis are discussed above. The methodologies for estimating the fair value for other financial assets and financial liabilities are discussed below. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation techniques may have a material effect on the estimated fair value amounts at March 31, 2025.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** |
| <u>(In thousands of dollars)</u> | **Carrying<br>Amount** | **Fair Value** | **Level 1** | **Level 2** | **Level 3** |
| *Financial Assets:* |  |  |  |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $98533 | $98533 | $98533 | $- | $- |
| &nbsp;&nbsp;Loans held for sale | 187481 | 187481 | - | 187481 |  |
| &nbsp;&nbsp;Loans held for investment, net | 1455128 | 1415531 | - | - | 1415531 |
| &nbsp;&nbsp;Non-marketable equity securities | 6834 | 6834 | - | - | 6834 |
| *Financial Liabilities:* |  |  |  |  |  |
| &nbsp;&nbsp;Deposits | 1937693 | 1824267 | - | 1824267 | - |
| &nbsp;&nbsp;Other borrowings | 20738 | 20875 | - | 20875 | - |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| <u>(In thousands of dollars)</u> | **Carrying<br>Amount** | **Fair Value** | **Level 1** | **Level 2** | **Level 3** |
| *Financial Assets:* |  |  |  |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $67961 | $67961 | $67961 | $- | $- |
| &nbsp;&nbsp;Loans held for sale | 174033 | 174033 | - | 174033 |  |
| &nbsp;&nbsp;Loans held for investment, net | 1392325 | 1347071 | - | - | 1347071 |
| &nbsp;&nbsp;Non-marketable equity securities | 7483 | 7483 | - | - | 7483 |
| *Financial Liabilities:* |  |  |  |  |  |
| &nbsp;&nbsp;Deposits | 1834802 | 1723134 | - | 1723134 | - |
| &nbsp;&nbsp;Other borrowings | 41725 | 41531 | - | 41531 | - |

---

*Cash and cash equivalents* **—** The carrying amounts of cash and due from banks and federal funds sold approximate their fair values.

*Loans held for sale* **—** Loans held for sale are carried at the lower of cost or fair value. These loans currently consist of one-to-four family residential real estate loans originated for sale to qualified third parties. Fair value is based upon the contractual price to be received from these third parties, which may be different than cost.

*Loans held for investment, net* **—** Fair values are estimated for portfolios of loans with similar financial characteristics if collateral-dependent. Loans are segregated by type. The fair value of performing loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect observable market information incorporating the credit, liquidity, yield and other risks inherent in the loan. The estimate of maturity is based upon the Company's historical experience with

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

repayments for each loan classification, modified, as required, by an estimate of the effect of the current economic and lending conditions. Fair value for significant non-performing loans is generally based upon recent external appraisals. If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows and discounted rates are judgmentally determined using available market information and specific borrower information.

*Non-marketable equity securities* **—** Non-marketable equity securities are carried at original cost basis, as cost approximates fair value and there is no ready market for such investments.

*Deposits* **—** The fair value of deposits with no stated maturity date, such as noninterest-bearing demand deposits, savings and money market and checking accounts, is based on the discounted value of estimated cash flows. The fair value of time deposits is based upon the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

*Other borrowings* **—** The fair value of the Company's FHLBA, line of credit and subordinated debt advances are estimated based upon the discounted value of contractual cash flows. The fair value of investment securities sold under agreements to repurchase approximates the carrying amount because of the short maturity of these borrowings. The discount rate is estimated using rates quoted for the same or similar issues or the current rates offered to the Company for debt of the same remaining maturities.

**NOTE 8 — REVENUE RECOGNITION**

Accounting Standards Codification ("ASC") 606, *Revenue from Contracts with Customers* ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The Company's sources of revenue are generated from both interest and noninterest revenue streams. The majority of our revenue-generating transactions are not subject to ASC 606. Revenue streams generated by fees and interest from financial instruments, investments, and transfers and servicing of these assets are excluded from this disclosure.

The Company has certain revenue streams within the scope of ASC 606 contained within noninterest income. The Company's contracts with customers generally do not contain terms that require significant judgment to determine the amount of revenue to recognize.

The tables below presents the revenue streams within the scope of the standard and is followed by a description of each noninterest income revenue stream for the three months ended March 31, 2025 and 2024:

---

| | | | |
|:---|:---|:---|:---|
|  | **March 31, 2025** | **March 31, 2025** | **March 31, 2025** |
| <u>(In thousands of dollars)</u> | **Within Scope** | **Out of Scope** | **Total** |
| **Noninterest income:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Bank-owned life insurance | $- | $440 | $440 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income from mortgage originations | - | 221 | 221 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interchange income and card fees | 266 | - | 266 |
| &nbsp;&nbsp;&nbsp;&nbsp;Service charges on deposit accounts | 211 | - | 211 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other noninterest income | 20 | 723 | 743 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | $497 | $1384 | $1881 |

---

---

| | | | |
|:---|:---|:---|:---|
|  | **March 31, 2024** | **March 31, 2024** | **March 31, 2024** |
| <u>(In thousands of dollars)</u> | **Within Scope** | **Out of Scope** | **Total** |
| **Noninterest income:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of government guaranteed loans | $- | $320 | $320 |
| &nbsp;&nbsp;&nbsp;&nbsp;Bank-owned life insurance | - | 296 | 296 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income from mortgage originations | - | 238 | 238 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interchange income and card fees | 216 | - | 216 |
| &nbsp;&nbsp;&nbsp;&nbsp;Service charges on deposit accounts | 211 | - | 211 |
| &nbsp;&nbsp;&nbsp;&nbsp;Losses on sale of available-for-sale securities | - | (3465) | (3465) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other noninterest income | 15 | 175 | 190 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | $442 | $(2436) | $(1994) |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

*Gain on sale of government guaranteed loans* **—** The Company records a gain from the sale of government guaranteed loans to third parties at the time the transfer is complete. The gain on sale is recognized as a result of the recognition of mortgage servicing rights and premiums paid by the buyer for the purchase of the loan.

*Bank-owned life insurance* **—** The Company's income from bank-owned life insurance primarily represents changes in the cash surrender value of such life insurance policies held on certain key employees, for which the Company is the owner and beneficiary. Revenue is recognized in each period based on the change in cash surrender value during the period.

*Income from mortgage originations* **—** The Company earns mortgage production income which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.

*Interchange income and card fees* **—** The Company earns interchange fees from debit cardholder transactions conducted through a payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are earned daily.

*Service charges on deposit accounts* **—** The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees and stop payment charges, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges are withdrawn from the customer's account balance.

*Losses on sale of available-for-sale Securities* **—** The Company recognizes realized gains or losses from the sale of its available-for-sale securities at the trade date and recognizes periodic mark-to-market adjustments on equity securities resulting from changes in fair value.

*Gain (loss) on hedge termination, net* **—** The Company recognizes realized gains or losses from terminated fair value hedging relationships through earnings as excluded components deferred in AOCI or AOCL that were recognized through an amortization approach are released to earnings consistent with how other components of the carrying amount of the hedged item are recognized in earnings. When a cash flow hedging instrument is sold, extinguished, terminated, exercised, or expires, it is derecognized and the amounts in AOCI or AOCL, including amounts remaining related to excluded components that were recognized through an amortization approach, remain there until the forecasted transaction impacts earnings unless the forecasted transaction becomes probable of not occurring.

*Other noninterest income* **—** Other noninterest income consists primarily of loan fees, which are out of the scope of ASC Topic 606. The items within scope of the standard primarily relate to contracts with third parties for miscellaneous referral or broker income.

*Contract assets and liabilities* **—** A contract asset balance typically occurs when an entity performs a service for a customer before the customer payment of consideration, creating a contract receivable, or before payment is due, creating a contract asset. In contrast, a contract liability balance is an entity's obligation to transfer a service to a customer for which the entity has already received payment of consideration from the customer. The Company's noninterest revenue streams that are within the scope of ASC 606 are largely based on transactional activity which typically occurs at a point in time immediately after the performance obligations have been satisfied. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers. Therefore, the Company does not experience significant contract balances. As of March 31, 2025 and 2024, the Company did not have any significant contract balances.

**NOTE 9 — DERIVATIVE FINANCIAL INSTRUMENTS**

The Company utilizes interest rate swaps agreements as part of its asset-liability management strategy to help mitigate its interest rate risk. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Derivative financial instruments are recorded in the Consolidated Balance Sheets as either an asset or a liability (in other assets or other liabilities, respectively) and measured at fair value.

The adoption of ASU 2020-04, Reference Rate Reform (Topic 848) resulted to transitioning away from London Interbank Offered Rate ("LIBOR") to the overnight SOFR swap with a predetermined fallback spread for the fair value hedging instruments. The cumulative basis of the hedged item attributable to changing from the originally designated benchmark interest rate was adjusted to reflect the replacement designated benchmark interest rate. Under this approach, the Company recognizes the change to the hedged item's basis adjustment immediately in earnings within the same income statement line used to present the earnings effect of the hedged

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

item. For the cash flow hedges, LIBOR hedge and hedged item converted to Overnight SOFR as hedged item utilizes a benchmark rate component, and Fed Funds hedge at onset whereas LIBOR hedged item converted to Term SOFR as hedged item utilizes contractually specified rate. This transition occurred after end of day on June 30, 2023.

The Company presents derivative position gross on the balance sheet. The following tables reflects the derivatives recorded on the balance sheet as of the dates indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Included in Other Assets** | **Included in Other Assets** | **Included in Other Liabilities** | **Included in Other Liabilities** |
| (In thousands of dollars) | **Notional** | **Fair** | **Notional** | **Fair** |
| **March 31, 2025** | **Amount** | **Value** | **Amount** | **Value** |
| ***Derivatives designated as hedges:*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps related to<br>&nbsp;&nbsp;&nbsp;&nbsp; cash flow hedges | $225000 | $3850 | $- | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps related to<br>&nbsp;&nbsp;&nbsp;&nbsp; fair value hedges | 25535 | 2630 | - | - |
| ***Derivatives not designated as hedges:*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Sold credit protection on risk<br>&nbsp;&nbsp;&nbsp;&nbsp; participation agreements | - | - | 15000 | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total included in Other assets |  | $6480 |  | $(6) |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Included in Other Assets** | **Included in Other Assets** | **Included in Other Liabilities** | **Included in Other Liabilities** |
| (In thousands of dollars) | **Notional** | **Fair** | **Notional** | **Fair** |
| **December 31, 2024** | **Amount** | **Value** | **Amount** | **Value** |
| ***Derivatives designated as hedges:*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps related to<br>&nbsp;&nbsp;&nbsp;&nbsp; cash flow hedges | $225000 | $4576 | $- | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps related to<br>&nbsp;&nbsp;&nbsp;&nbsp; fair value hedges | 25535 | 3141 | - | - |
| ***Derivatives not designated as hedges:*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Sold credit protection on risk<br>&nbsp;&nbsp;&nbsp;&nbsp; participation agreements | - | - | 15000 | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total included in Other liabilities |  | $7717 |  | $(6) |

---

*<u>Fair Value Hedges</u>* 

Fair value hedge interest rate swaps mature on various dates with a combined notional amount of $25.5 million at March 31, 2025 and December 31, 2024. The risk management objective with respect to the fair value hedges is to hedge the risk of certain municipal securities. These fair value hedges convert the fixed rates of the bonds to a floating leg of Overnight SOFR + 26.161 basis points. The hedges were determined to be effective during the periods presented. The Company expects these hedges to remain effective during the remaining term of the swap.

The following table presents the amounts recorded on the balance sheet related to cumulative basis adjustment for the fair value hedges as of March 31, 2025 and December 31, 2024:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |  |  | **Cumulative Amount of Fair** | **Cumulative Amount of Fair** |
| **Line Item in the** |  |  | **Value Hedging Adjustment** | **Value Hedging Adjustment** |
| **Balance Sheet in** |  |  | **Included in the Carrying** | **Included in the Carrying** |
| **Which the Hedged** | **Carrying Amount** | **Carrying Amount** | **Amount of the** | **Amount of the** |
| **Item is Included** | **of the Hedged Assets** | **of the Hedged Assets** | **Hedged Assets** | **Hedged Assets** |
|  | **March 31,** | **December 31,** | **March 31,** | **December 31,** |
| <u>(In thousands of dollars)</u> | **2025** | **2024** | **2025** | **2024** |
| Securities available-for-sale | $23134 | $22632 | $(2752) | $(3271) |

---

As of March 31, 2025 and December 31, 2024, the total notional amount of the pay-fixed/receive variable interest rate swap portfolio was $25.5 million. There were no hedging adjustments on the balances above for discontinued relationships.

The following table summarizes information about the interest rate swaps designated as fair value hedges at March 31, 2025:

---

| | |
|:---|:---|
| <u>(Dollars in thousands)</u> |  |
| Notional amount of fair value hedges | $25535 |
| Weighted average maturity in years | 4.74 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

The following table presents the change in fair value for derivatives designated as fair value hedges as well as the offsetting change in fair value on the hedged item for the three months ended March 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **March 31,** | **March 31,** |
| <u>(In thousands of dollars)</u> | **2025** | **2024** |
| ***Interest rate contracts: Gain or (Loss)*** |  |  |
| &nbsp;&nbsp;Change in fair value of interest rate swaps hedging available-for-sale<br> securities | $(511) | $391 |
| &nbsp;&nbsp;Change in fair value of hedged available-for-sale securities | $519 | $(398) |

---

The following table presents the effect of fair value hedge Accounting on the Consolidated Statements of Operations and the location and amount of gain or (loss) recognized in income on Fair Value hedging relationships for the three months ended March 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **March 31,** | **March 31,** |
|  | **2025** | **2024** |
|  | **Interest Income** | **Interest Income** |
| <u>(In thousands of dollars)</u> | **(Offset to AOCI)** | **(Offset to AOCI)** |
| ***Gain or (loss) on fair value hedging relationships*** |  |  |
| &nbsp;&nbsp;Interest contracts: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of interest rate swaps hedging available-for-sale<br> securities | $(511) | $391 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of hedged available-for-sale securities | $519 | $(398) |

---

*<u>Cash Flow Hedges</u>* 

A cash flow hedge interest rate swap that matures on February 14, 2026 had a notional amount of $50.0 million as of March 31, 2025. The risk management objective with respect to hedge the risk of variability in its cash flows (i.e., future interest payments) attributable to changes in the SOFR rate. The objective of the hedge is to offset the variability of cash flows due to the rollover of its fixed-rate advances from February 14, 2023 to February 14, 2026. The company designates the $50.0 million interest rate swap (the hedging instrument) as a cash flow hedge of the risk of changes in cash flows attributable to changes in the benchmark Federal Funds interest rate risk for the forecasted issuances of advances arising from a rollover strategy. The forecasted funding will be provided through FHLBA, brokered CD, or other fixed rate advances or a combination thereof. In addition, the funding can be wholly or partially from a term funding based on a contractually specified SOFR interest rate. The hedge was determined to be effective during the periods presented. The Company expects the hedge to remain effective during the remaining term of the swap.

A cash flow hedge interest rate collar that matures on November 2, 2025 had a notional amount of $150.0 million as of March 31, 2025. The risk management objective with respect to this cash flow hedge is to hedge floating rate interest receipts based on the contractually specified SOFR rate. Initially, these receipts are made up of the interest payments received on the first of a previously unhedged $150.0 million pool of customer loans indexed to SOFR for interest payments received from November 2, 2022 through November 2, 2025. The company designates this interest rate collar (the hedging instrument) as a cash flow hedge, hedging the risk of changes in its cash flows between 4.00% and 1.00% attributable to changes in the contractually specified interest rate, currently the SOFR rate, on its customer floating rate loan pool. To reduce upfront premium expense, the company is capping any benefit on its customer floating rate loan pool by selling a 6.00% cap. The combination of the purchased option and the sold option created a collar costing $1.7 million. A $12.5 million portion of the cash flow utilized 1-month LIBOR as their reference rate. These cash flows transitioned to the SOFR rate due to the required LIBOR transition for all LIBOR variable rate instruments after June 30, 2023. This hedge designation references the optional expedients referenced under ASC 848, *Reference Rate Reform* due to the hedged cash flows currently referencing LIBOR at time of designation. This hedge was determined to be effective during the periods presented. The Company expects the hedge to remain effective during the remaining term of the option.

A cash flow hedge interest rate swap that matures on October 21, 2030 had a notional amount of $25.0 million as of March 31, 2025. The risk management objective with respect to the cash flow hedge is to hedge the risk of variability in the Company's cash flows (future interest payments) attributable to changes in the 3-month LIBOR rate pertaining to fluctuations in market interest rates on $25.0 million of FHLBA, brokered Certificate of Deposits or other fixed rate advances for that period. The objective of the hedge is to offset the variability of cash flows due to the rollover of its fixed-rate 3-month FHLBA or another fixed rate advance every quarter from October 31, 2022 to October 21, 2030. After June 30, 2023, both LIBOR hedge and hedged item converted to Overnight SOFR as hedged item utilizes a benchmark rate component. The hedge was determined to be effective during the periods presented. The Company expects the hedge to remain effective during the remaining term of the swap.

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

The tables below present the gains and (losses) recognized in AOCI and the location in the Consolidated Statements of Operations of the gains and (losses) reclassified from OCI into earnings for derivatives designated as cash flow hedges for the three months ended March 31, 2025 and 2024:

---

| | | | |
|:---|:---|:---|:---|
| **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** |
| <u>(In thousands of dollars)</u> |  |  |  |
| **Derivatives in Cash Flow Hedging Relationships** | **Amount of Gain (Loss) Recognized in OCI on Derivative** | **Location of Gain (Loss) Reclassified from OCI into Income** | **Amount of Gain (Loss) Reclassified from OCI into Income (pre-tax)** |
| Interest rate swap contracts |  | Interest income (expense) |  |
| &nbsp;&nbsp;Effective portion | $(282) | Effective portion | $311 |
| &nbsp;&nbsp;Deferred tax | $(132) | Amount excluded from the assessment <br>of effectiveness and amortized into earnings | $(175) |

---

---

| | | | |
|:---|:---|:---|:---|
| **Three Months Ended March 31, 2024** | **Three Months Ended March 31, 2024** | **Three Months Ended March 31, 2024** | **Three Months Ended March 31, 2024** |
| <u>(In thousands of dollars)</u> |  |  |  |
| **Derivatives in Cash Flow Hedging Relationships** | **Amount of Gain (Loss) Recognized in OCI on Derivative** | **Location of Gain (Loss) Reclassified from OCI into Income** | **Amount of Gain (Loss) Reclassified from OCI into Income (pre-tax)** |
| Interest rate swap contracts |  | Interest income (expense) |  |
| &nbsp;&nbsp;Effective portion | $366 | Effective portion | $350 |
| &nbsp;&nbsp;Deferred tax | $38 | Amount excluded from the assessment <br>of effectiveness and amortized into earnings | $(105) |

---

Gains and losses on interest rate swaps related to funding liabilities are recorded in interest income/expense. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives' fair value will not be included in current earnings but are reported as a component of OCI in the Consolidated Statements of Changes in Shareholders' Equity. These changes in fair value will be included in earnings of future periods when earnings are also affected by the changes in the hedged cash flows. To the extent these derivatives are not effective, changes in their fair values are immediately included in other income or expense.

The following tables summarizes information about the interest rate swaps and option collar designated as a cash flow hedge at March 31, 2025:

---

| | |
|:---|:---|
| <u>(Dollars in thousands)</u> |  |
| Notional Amount - Pay Fixed Swap | $75000 |
| Weighted average fixed pay rate | 2.78% |
| Weighted average 3-month receive rate | 4.49% |
| Weighted average maturity in years | 2.43 |
| During the next twelve months, the Company estimates that will be <br> reclassified from OCI as a decrease to interest expense | $699 |
| During the next twelve months, the Company estimates that will be <br> reclassified from Deferred Tax as a decrease to interest expense | $221 |

---

---

| | |
|:---|:---|
| <u>(Dollars in thousands)</u> |  |
| Notional Amount Collar | $150000 |
| Floor strike | 4.00% |
| Cap strike | 6.00% |
| Weighted average maturity in years | 0.59 |
| During the next twelve months, the Company estimates that will be <br> reclassified from OCI as a decrease to interest income | $396 |
| During the next twelve months, the Company estimates that will be <br> reclassified from Deferred Tax as a decrease to interest income | $125 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary<br>Notes to Consolidated Financial Statements (unaudited) - *Continued***

*<u>Derivatives not Designated as Hedges</u>*

*Risk Participation Agreements* — The Company has one risk participation agreement with a financial institution counterparty for an interest rate swap related to a loan in which it is a participant. A risk participation agreement provides credit protection to the financial institution should the borrower fail to perform on their interest rate derivative contract with the financial institution. A risk participation agreement is a credit derivative not designated as a hedge. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities. Changes in the fair value in credit derivatives are recognized directly in earnings. The fee received, less the estimate of the loss for the credit exposure, was recognized in earnings at the time of the transaction.

The net gain (loss) related to changes in fair value from derivative instruments not designated as hedging instruments during the three months ended March 31, 2025 and 2024 is summarized on the table below:

---

| | | | |
|:---|:---|:---|:---|
|  |  | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| <u>(In thousands of dollars)</u> | **Location** | **2025** | **2024** |
| Credit risk participation agreements | Other noninterest income | $- | $11 |

---

**NOTE 10 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)**

The following were changes in accumulated other comprehensive income (loss) by component, net of tax, for the three months ended March 31, 2025 and 2024:

---

| | | | |
|:---|:---|:---|:---|
|  | **Gains and Losses** | **Gains and Losses** |  |
| <u>(In thousands of dollars)</u> | **on Securities** | **on** |  |
| **Three Months Ended March 31, 2025** | **Available-for-Sale** | **Cash Flow Hedges** | **Total** |
| Beginning Balance | $(18713) | $2926 | $(15787) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income (loss) before reclassification, net of tax | 1994 | (314) | 1680 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amounts reclassified from accumulated other comprehensive income, net<br>&nbsp;&nbsp;&nbsp;&nbsp; of tax | - | (104) | (104) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net current period other comprehensive income (loss) | 1994 | (418) | 1576 |
| Ending Balance | $(16719) | $2508 | $(14211) |
| **Three Months Ended March 31, 2024** |  |  |  |
| Beginning Balance | $(22863) | $3332 | $(19531) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income (loss) before reclassification, net of tax | (559) | 309 | (250) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amounts reclassified from accumulated other comprehensive income,<br>&nbsp;&nbsp;&nbsp;&nbsp; net of tax | 2654 | (188) | 2466 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net current period other comprehensive income (loss) | 2095 | 121 | 2216 |
| Ending Balance | $(20768) | $3453 | $(17315) |

---

The following were significant amounts reclassified out of each component of other comprehensive income (loss) for the three months ended March 31, 2025 and 2024:

---

| | | | |
|:---|:---|:---|:---|
|  | (In thousands of dollars) | (In thousands of dollars) |  |
| **Details about Accumulative Other<br>Comprehensive Income (Loss) Components** | **Three Months Ended<br>March 31, 2025** | **Three Months Ended<br>March 31, 2024** | **Affected Line Item<br>Where Net Income<br>is Presented** |
| Realized (gains) losses on available-for-sale securities | $- | $3465 | Losses on sale of available-for-sale securities |
|  | - | - | Gain on hedge termination |
|  | - | (811) | Income tax provision (benefit) |
|  | $- | $2654 | Net income |
| Realized (gains) losses on cash flow hedges | $175 | $105 | Interest income - Loans held-for-investment |
|  | - | 145 | Interest income - Investments, taxable |
|  | - | - | Interest expense - Other borrowings |
|  | (311) | (495) | Interest expense - Interest-bearing deposits |
|  | 32 | 57 | Income tax provision (benefit) |
|  | $(104) | $(188) | Net income |

---

------

![img173035246_25.jpg](img173035246_25.jpg)

**Report of Independent Registered Public Accounting Firm**

<br>To the Shareholders and the Board of Directors of CoastalSouth Bancshares, Inc. and Subsidiary:

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of CoastalSouth Bancshares, Inc. and Subsidiary (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

![img173035246_26.jpg](img173035246_26.jpg)

We have served as the Company's auditor since 2006.

Greenville, South Carolina

March 5, 2025

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Balance Sheets***

***As of and for the Years Ended December 31, 2024 and 2023***

---

| | | |
|:---|:---|:---|
| *<u>(In thousands of dollars except share and per share amounts)</u>* | **2024** | **2023** |
| **Assets** |  |  |
| Cash and cash equivalents |  |  |
| &nbsp;&nbsp;Cash and due from banks | $8391 | $10937 |
| &nbsp;&nbsp;Interest-bearing accounts with other banks | 28929 | 8664 |
| &nbsp;&nbsp;Federal funds sold | 30641 | 28952 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash and cash equivalents | 67961 | 48553 |
| Investments |  |  |
| &nbsp;&nbsp;Securities available-for-sale, at fair value | 335267 | 354796 |
| &nbsp;&nbsp;Non-marketable equity securities | 7483 | 8608 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investments | 342750 | 363404 |
| Loans held for sale | 174033 | 82125 |
| Loans held for investment | 1409443 | 1418425 |
| Allowance for credit losses - loans | (17118) | (15465) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans held for investment, net | 1392325 | 1402960 |
| Bank-owned life insurance | 46484 | 44887 |
| Deferred tax asset | 18148 | 21242 |
| Premises, furniture and equipment, net | 17796 | 17711 |
| Goodwill | 4708 | 4708 |
| Intangible assets | 1678 | 1755 |
| Other assets | 32829 | 41254 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $2098712 | $2028599 |
| **Liabilities** |  |  |
| Deposits |  |  |
| &nbsp;&nbsp;Non-interest bearing transaction accounts | $302907 | $325400 |
| &nbsp;&nbsp;Interest-bearing transaction accounts | 181068 | 174380 |
| &nbsp;&nbsp;Savings and money market | 591626 | 608079 |
| &nbsp;&nbsp;Time deposits | 759201 | 642798 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 1834802 | 1750657 |
| Other borrowings | 41725 | 88672 |
| Other liabilities | 26953 | 33227 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 1903480 | 1872556 |
| **Commitments and Contingencies (Note 12)** |  |  |
| **Shareholders' Equity** |  |  |
| Preferred stock, $1.00 par value, 10,000,000 shares authorized, no shares issued<br> or outstanding |  |  |
| Voting common stock, $1.00 par value, 50,000,000 shares authorized, 8,098,117<br> and 7,367,900 shares issued and outstanding at December 31, 2024 and<br>&nbsp;&nbsp;&nbsp;&nbsp;2023, respectively. | 8098 | 7368 |
| Non-voting common stock, $1.00 par value, 10,000,000 shares authorized, 2,172,029<br> shares issued and outstanding at December 31, 2024 and 2023 | 2172 | 2172 |
| Capital surplus | 158755 | 145944 |
| Retained earnings | 41994 | 20090 |
| Accumulated other comprehensive loss | (15787) | (19531) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity | 195232 | 156043 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $2098712 | $2028599 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Statements of Operations***

***For the Years Ended December 31, 2024 and 2023***

---

| | | |
|:---|:---|:---|
| *<u>(In thousands of dollars, except per share amounts)</u>* | **2024** | **2023** |
| **Interest income** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans, including fees |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans held for investment | $93046 | $86248 |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans held for sale | 10272 | 5087 |
| &nbsp;&nbsp;&nbsp;&nbsp; Investments |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Taxable | 15217 | 10446 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-taxable | 395 | 534 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-marketable equity securities | 434 | 324 |
| &nbsp;&nbsp;&nbsp;&nbsp; Federal funds sold | 3751 | 4083 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other earning assets from banks | 534 | 295 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | 123649 | 107017 |
| **Interest expense** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest-bearing deposits | 53443 | 39300 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other borrowings | 4884 | 3423 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | 58327 | 42723 |
| **Net interest income** | 65322 | 64294 |
| Provision for credit losses | 553 | 1543 |
| **Net interest income after provision for credit losses** | 64769 | 62751 |
| **Noninterest income** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Gain on sale of government guaranteed loans | 1818 | 1360 |
| &nbsp;&nbsp;&nbsp;&nbsp; Bank-owned life insurance | 1664 | 2680 |
| &nbsp;&nbsp;&nbsp;&nbsp; Income from mortgage originations | 1204 | 912 |
| &nbsp;&nbsp;&nbsp;&nbsp; Interchange income and card fees | 868 | 1045 |
| &nbsp;&nbsp;&nbsp;&nbsp; Service charges on deposit accounts | 846 | 755 |
| &nbsp;&nbsp;&nbsp;&nbsp; Gain on hedge termination | - | 992 |
| &nbsp;&nbsp;&nbsp;&nbsp; Losses on sale of available-for-sale securities | (3465) | (517) |
| &nbsp;&nbsp;&nbsp;&nbsp; Other noninterest income | 1579 | 1367 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest income | 4514 | 8594 |
| **Noninterest expenses** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Salaries and employee benefits | 26187 | 24573 |
| &nbsp;&nbsp;&nbsp;&nbsp; Occupancy and equipment | 2995 | 2921 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other professional fees | 2046 | 2721 |
| &nbsp;&nbsp;&nbsp;&nbsp; Software and other technology expense | 2742 | 2334 |
| &nbsp;&nbsp;&nbsp;&nbsp; Data processing | 2213 | 2080 |
| &nbsp;&nbsp;&nbsp;&nbsp; Regulatory assessment | 1291 | 1479 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other noninterest expense | 4594 | 3742 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | 42068 | 39850 |
| **Income before taxes** | 27215 | 31495 |
| &nbsp;&nbsp;&nbsp;&nbsp; Income tax provision | 5311 | 7017 |
| **Net income** | $21904 | $24478 |
| **Net income per common share:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Basic | $2.15 | $2.61 |
| &nbsp;&nbsp;&nbsp;&nbsp; Diluted | $2.09 | $2.58 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Statements of Comprehensive Income***

***For the Years Ended December 31, 2024 and 2023***

---

| | | |
|:---|:---|:---|
| *<u>(In thousands of dollars)</u>* | **2024** | **2023** |
| **Net income** | $21904 | $24478 |
| **Other comprehensive income** |  |  |
| &nbsp;&nbsp;Change in unrealized gain on available-for-sale securities | 1954 | 9078 |
| &nbsp;&nbsp;Reclassification adjustment for net loss on sale of securities included in net income | 3465 | 517 |
| &nbsp;&nbsp;Reclassification adjustment for net gain on termination of fair value hedges included<br> in net income | - | (992) |
| &nbsp;&nbsp;Income tax effect | (1269) | (1964) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized gain on available-for-sale securities, net of tax | 4150 | 6639 |
| **Unrealized (loss) gains on derivatives:** |  |  |
| &nbsp;&nbsp;Change in unrealized gain on cash flow hedges | 762 | 567 |
| &nbsp;&nbsp;Reclassification adjustment for net (gain) loss included in net income | (1296) | 98 |
| &nbsp;&nbsp;Income tax effect | 128 | (160) |
| &nbsp;&nbsp;Unrealized (loss) gain on derivative instruments, net of tax | (406) | 505 |
| **Other comprehensive income, net of tax** | 3744 | 7144 |
| **Comprehensive income** | $25648 | $31622 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Statements of Changes in Shareholders' Equity***

***For the Years Ended December 31, 2024 and 2023***

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  |  | **Retained** | **Accumulated** |  |
|  | **Common Stock** | **Common Stock** | **Common Stock** | **Common Stock** |  | **Earnings** | **Other** |  |
|  | **Voting** | **Voting** | **Non-voting** | **Non-voting** | **Capital** | **(Accumulated** | **Comprehensive** |  |
| *<u>(In thousands of dollars except share amounts)</u>* | **Shares** | **Amount** | **Shares** | **Amount** | **Surplus** | **Deficit)** | **Income/ (Loss)** | **Total** |
| **Balance as of December 31, 2022** | 6894345 | $6894 | 2065029 | $2065 | $136599 | $(86) | $(26675) | $118797 |
| &nbsp;&nbsp;Issuance of common stock under incentive plan | 26850 | 27 | - | - | (27) | - | - | - |
| &nbsp;&nbsp;Issuance of common stock upon private placement | 446705 | 447 | 107000 | 107 | 8281 | - | - | 8835 |
| &nbsp;&nbsp;Stock-based compensation expense | - | - | - | - | 1091 | - | - | 1091 |
| &nbsp;&nbsp;Net income | - | - | - | - | - | 24478 | - | 24478 |
| &nbsp;&nbsp;Cumulative effect of change in accounting for credit<br>&nbsp;&nbsp;&nbsp;&nbsp;losses, net of tax | - | - | - | - | - | (4302) | - | (4302) |
| &nbsp;&nbsp;Other comprehensive loss, net of tax | - | - | - | - | - | - | 7144 | 7144 |
| **Balance as of December 31, 2023** | 7367900 | $7368 | 2172029 | $2172 | $145944 | $20090 | $(19531) | $156043 |
| &nbsp;&nbsp;Issuance of common stock under incentive plan | 28775 | 29 | - | - | (29) | - | - | - |
| &nbsp;&nbsp;Issuance of common stock upon private placement | 701442 | 701 | - | - | 11543 | - | - | 12244 |
| &nbsp;&nbsp;Stock-based compensation expense | - | - | - | - | 1297 | - | - | 1297 |
| &nbsp;&nbsp;Net income | - | - | - | - | - | 21904 | - | 21904 |
| &nbsp;&nbsp;Other comprehensive income, net of tax | - | - | - | - | - | - | 3744 | 3744 |
| **Balance as of December 31, 2024** | 8098117 | $8098 | 2172029 | $2172 | $158755 | $41994 | $(15787) | $195232 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

***Consolidated Statements of Cash Flows***

***For the Years Ended December 31, 2024 and 2023***

---

| | | |
|:---|:---|:---|
| *<u>(In thousands of dollars)</u>* | **2024** | **2023** |
| **Operating activities** |  |  |
| &nbsp;&nbsp;Net income | $21904 | $24478 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash (used) provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 553 | 1543 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense and software amortization | 1329 | 1289 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in cash value of bank-owned life insurance | (1597) | (2680) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 1297 | 1091 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss on sale of available-for-sale securities | 3465 | 517 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of operating lease right-of-use assets | 817 | 769 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt issuance costs | 53 | 38 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net gain on sale of other real estate owned | - | (56) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of government guaranteed loans, including originations of servicing rights | (1818) | (1360) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of other loans | (217) | (455) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income from mortgage operations | (1204) | (912) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on hedge termination | - | (992) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discount accretion and premium amortization on securities available-for-sale | (533) | 564 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangible assets | 503 | 771 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax expense (benefit) | 1953 | (259) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in SBA contingency reserve | (778) | (1848) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Originations of loans held for sale | (5008388) | (2426258) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from loans held for sale | 4967455 | 2437531 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease (increase) in other assets | 7891 | (5177) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease) increase in other liabilities | (5354) | 8545 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used) provided by operating activities | (12669) | 37139 |
| **Investing activities** |  |  |
| &nbsp;&nbsp;Purchase of securities available-for-sale | (79397) | (19417) |
| &nbsp;&nbsp;Proceeds from sales of securities available-for-sale | 39100 | 11987 |
| &nbsp;&nbsp;Proceeds from paydowns, calls, and maturities on securities available-for-sale | 62218 | 27450 |
| &nbsp;&nbsp;Net sale (purchase) of non-marketable equity securities | 1125 | (3211) |
| &nbsp;&nbsp;Loan originations and principal collections, net | (38944) | (170650) |
| &nbsp;&nbsp;Net purchase of premises, furniture and equipment | (1414) | (310) |
| &nbsp;&nbsp;Proceeds from sales of other real estate owned | - | 299 |
| &nbsp;&nbsp;Purchases of bank-owned life insurance | - | (22500) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used by investing activities | (17312) | (176352) |
| **Financing activities** |  |  |
| &nbsp;&nbsp;Net increase in deposits | 84145 | 202011 |
| &nbsp;&nbsp;Net repayment of Federal Home Loan Bank advances | (35000) | (58044) |
| &nbsp;&nbsp;Proceeds from private placement capital raise | 12244 | 8835 |
| &nbsp;&nbsp;Net (repayment) proceeds from commercial line of credit | (12000) | 6000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 49389 | 158802 |
| **Net increase in cash and cash equivalents** | 19408 | 19589 |
| **Cash and cash equivalents, beginning of year** | 48553 | 28964 |
| **Cash and cash equivalents, end of year** | $67961 | $48553 |
| **Cash (received) paid during the year for:** |  |  |
| &nbsp;&nbsp;Interest | $60596 | $36326 |
| &nbsp;&nbsp;Income taxes | (884) | 5293 |
| **Noncash investing and financing activities:** |  |  |
| &nbsp;&nbsp;Unrealized gain on securities available-for-sale, net | 4150 | 6639 |
| &nbsp;&nbsp;Unrealized (loss) gain on derivatives, net | (406) | 505 |
| &nbsp;&nbsp;Transfers of loans to other real estate owned | 864 | - |
| &nbsp;&nbsp;Adoption of ASU 2016-13 | - | 4302 |
| &nbsp;&nbsp;Transfers from loans held for investment to loans held for sale | 47652 | 46094 |
| &nbsp;&nbsp;Right-of-use assets obtained in exchange for new operating lease liabilities | 1084 | - |
| &nbsp;&nbsp;Lease liabilities arising from obtaining right-of-use assets | 1084 | - |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

**NOTE 1** — **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

*<u>Organization</u>*

CoastalSouth Bancshares, Inc. (the "Company"), headquartered in Atlanta, Georgia, is a registered bank holding company with one banking subsidiary, Coastal States Bank ("CSB"). CSB operates 11 retail banking branches in three retail main retail markets, the Lowcountry of South Carolina, Savannah, Georgia, and metro Atlanta, Georgia. CSB also operates four specialty lines of business that operate on a national platform, including senior housing lending, marine lending, government guaranteed lending, including both Small Business Association ("SBA") and United States Department of Agriculture ("USDA") lending, and Mortgage Banker Finance ("MBF"), which provides warehouse lending to independent mortgage originators. The deposits of CSB are insured by the Federal Deposit Insurance Corporation ("FDIC"). CSB has one wholly owned subsidiary, Coastal States Mortgage, Inc. ("CSM"), a mortgage company focused on originating residential mortgages to either sell to investors or to retain in the portfolio.

The Company was organized on September 28, 2003 as a Virginia corporation, with no activity until August 9, 2004. CSB was organized as a South Carolina state-chartered bank on July 30, 2004 and opened on August 9, 2004. On May 12, 2023, the Company was domiciled and incorporated under the laws of the State of Georgia and surrendered its articles of incorporation under the laws of the Commonwealth of Virginia. Upon domestication in the State of Georgia, the name of the Company remained CoastalSouth Bancshares, Inc. Additionally, in 2023, CSB became a member of the Federal Reserve Bank of Richmond, who now serves as the primary federal regulator, replacing the FDIC.

*<u>Nature of Business</u>*

The Company offers full-service banking services designed to meet the needs of retail and commercial customers in the markets in which it operates. The services offered include transaction and savings deposit accounts, commercial and consumer lending, mortgage banking, and other activities related to commercial banking. The Company and CSB are subject to the regulations of certain federal and state agencies and are periodically examined by those regulatory agencies. CSM is an approved mortgage lender with the Federal Housing Administration, Department of Veterans Affairs, Federal Home Loan Mortgage Corporation, and USDA, and an approved servicer with Federal National Mortgage Association.

*<u>Use of Estimates in the Preparation of Financial Statements</u>*

The accounting and reporting policies of the Company and its subsidiaries are in accordance with accounting principles generally accepted in the United States of America ("US GAAP" or "GAAP") and also conform to general industry practices. Some of our significant accounting principles require complex judgments to estimate the values of assets and liabilities, for instance, the Allowance for Credit Losses ("ACL"), among others. All intercompany accounts and transactions have been eliminated in consolidation. Assets and liabilities of purchased companies are stated at estimated fair values at the date of acquisition. Results of operations of companies purchased are included from the date of acquisition.

*<u>Management's Estimates</u>*

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Determination of the allowance for credit losses

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Income taxes, including tax provisions and realization of deferred tax assets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Fair value of assets and liabilities acquired, including intangible assets and goodwill

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Determination of fair value of securities available-for-sale and derivative assets and liabilities

*<u>Debt Securities</u>*

The Company classifies debt investment securities into three categories: trading, held-to-maturity ("HTM"), and available-for-sale ("AFS"). Management determines the appropriate classification of investment securities at the time of purchase. Debt investment securities are classified as HTM when the Company has the positive intent and ability to hold the investment securities to maturity. HTM investment securities are carried at amortized cost. At December 31, 2024 and 2023, the Company had no investment securities classified as HTM.

Investment securities classified as trading are held principally for resale in the near term and are recorded at fair value. Gains or

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

losses, either unrealized or realized, are reported in noninterest income. At December 31, 2024 and 2023, the Company had no investment securities classified as trading.

Investment securities not classified as either HTM or trading are classified as AFS. Investment securities AFS are stated at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of Accumulated other comprehensive income (loss) ("AOCI" or "AOCL") in the Consolidated Statements of Comprehensive Income.

The amortized cost of debt investment securities classified as either HTM or AFS is adjusted for amortization of premiums and accretion of discounts to maturity or call, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization is considered an adjustment to yield on the security and included in interest income from investments. Interest and dividends are included in interest on investment securities in the Consolidated Statements of Operations.

Gains and losses realized from the sales of investment securities are determined by specific identification and are included in noninterest income. The Company, at least on a quarterly basis, evaluates AFS securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value with a charge to earnings.

*<u>Equity Securities</u>*

Equity securities are recorded at fair value, with changes in fair value presented in other noninterest income. The fair value of equity securities is based on observable market prices. At December 31, 2024 and 2023, the Company had no investments classified as equity securities.

*<u>Non-Marketable Equity Securities</u>*

Equity securities without readily determinable fair values (non-marketable) that are not held for trading purposes includes Federal Home Loan Bank of Atlanta ("FHLBA") capital stock, Federal Reserve Bank of Richmond ("FRB") capital stock and various other non-marketable equity investments. Investment in the FHLBA is a condition of borrowing from the FHLBA, and the stock is pledged to collateralize such borrowings. FHLBA stock is carried at cost, classified as a non-marketable security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as interest income. At December 31, 2024 and 2023, the Company's investment in FHLBA stock was $2.1 million and $3.7 million, respectively. By becoming a member bank of the Federal Reserve System during 2023, the Bank was required to subscribe to FRB stock in an amount equivalent to six percent of its capital and surplus. At December 31, 2024 and 2023, the Company's investment in FRB stock was $5.3 million and $4.9 million, respectively. Dividends received on non-marketable equity securities are included as a separate component in interest income.

*<u>Loans Held for Sale</u>*

Loans held for sale ("LHFS") includes loans acquired through the Company's MBF line of business that are acquired with the intent to sell. Interest income on LHFS is recognized in the period earned using the effective interest method. These LHFS are accounted for at the lower of cost or fair value; as of December 31, 2024, and 2023, respectively, there have been no fair value adjustments recorded on this type of LHFS.

LHFS also represents mortgage loans originated by CSM with the intent to sell. Generally, loans originated by CSM with the intent to sell are accounted for at fair value. These loans are initially recorded and carried at fair value, with changes in fair value recognized in income from mortgage originations. There were no LHFS of this type on December 31, 2024 and 2023.

Additionally, the Company may periodically decide to sell other commercial and consumer loans and may reclassify loans from held for investment to held for sale when appropriate. At the time of transfer, the amount by which the amortized cost basis of the LHFS exceeds fair value may be accounted for as a valuation allowance or direct write-down.

*<u>Loans Held for Investment</u>* 

Loans held for investment ("LHFI") are stated at their amortized cost basis, net of any charge-offs, on the balance sheet. Interest income on loans is computed based upon the unpaid principal balance. Interest income on loans is recognized in the period earned and is computed using the effective interest method. The Company separately reports accrued interest receivable on LHFI in Other assets. Loan origination fees and certain direct loan origination costs, as well as purchase premiums and discounts, are deferred and amortized to income over the contractual life of the related loans or commitments, adjusted for prepayments, using a method that approximates a level yield.

Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment. Loans are placed on nonaccrual status

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

when it becomes probable that interest is not fully collectable, generally when the loan becomes 90 days past due. Once loans are placed on nonaccrual status, previously accrued but unpaid interest is reversed from interest income, and the accrual of interest income is suspended. Future payments received are applied to the principal balance of the loan. If and when borrowers demonstrate the sustained ability to repay such loans in accordance with the loan's contractual terms, the loan may be returned to accrual status. Loans which become 90 days past due are reviewed for collectability of principal. Principal amounts deemed uncollectable are charged off against the ACL, unless such loans are in the process of modification, collection through repossession, or foreclosure. Certain consumer loans are not placed on nonaccrual but are monitored and charged-off at 120 days past due.

*<u>Acquired Loans</u>* 

The Company's accounting methods for acquired loans depends on whether or not the acquired loans reflect more-than-insignificant credit deterioration since origination at the date of acquisition.

*Non-Purchased Credit Deteriorated Loans* — Non-Purchased Credit Deteriorated ("Non-PCD") loans do not reflect more-than-insignificant credit deterioration since origination at the date of acquisition. These loans are recorded at fair value and an increase to the ACL is recorded with a corresponding increase to the provision for credit losses at the date of acquisition. The difference between the fair value and the unpaid principal balance ("UPB") at the acquisition date is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.

*Purchased Credit Deteriorated Loans* — Purchased Credit Deteriorated ("PCD") loans, formerly referred to as Purchased Credit Impaired ("PCI") loans and accounted for under ASC 310-30, prior to the adoption of ASU 2016-13, are purchased loans which have experienced more-than-insignificant deterioration in credit quality since origination, as determined by the Company's assessment under the new guidance.

On purchase date, expected credit losses for PCD loans are initially recognized through an ACL and are added to the purchase price to determine the amortized cost basis of the loans. Any non-credit discount (or premium) resulting from acquiring such loans is recognized as an adjustment to interest income over the remaining lives of the loans. Subsequent to the acquisition date, the change in the allowance for credit losses on PCD loans is recognized through provision for credit losses. The non-credit discount (or premium) is accreted or amortized, respectively, into interest income over the remaining life of the PCD loan on a level-yield basis.

For the previously acquired PCI assets through legacy business combinations, the Company utilizes legacy PCI categorization to identify PCD loans. Upon adoption of ASU 2016-13, the Company extinguished the legacy PCI pools. For the new acquisition of loans subsequent to the implementation of ASC 2016-13, the Company identifies PCD loans using several indicators to help identify more-than-insignificant deterioration in credit quality since origination including, but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Delinquency (both current status and historical delinquency patterns)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Regulatory rating of worse than pass

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Nonaccrual status

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Historical troubled debt restructure or restructure of a loan to a borrower experiencing financial difficulties

After acquisition, the ACL for PCD assets is adjusted at each reporting date with a corresponding debit or credit to the provision for credit losses to reflect management's current estimate of expected credit losses. The non-credit discount recorded at acquisition is accreted into interest income over the remaining life of the PCD assets on a level-yield basis. Charge-offs and recoveries on PCD assets is recognized through the ACL.

*<u>Loan Modifications</u>*

ASU 2022-02 eliminated the Troubled Debt Restructurings ("TDR") recognition and measurement guidance for creditors that have adopted Current Expected Credit Losses ("CECL") methodology. Following the adoption of ASU 2022-02, the guidance for modifications to loans with troubled and non-troubled borrowers are the same. Under the new guidance, the Company treats all modifications and refinancings (including those with borrowers that are experiencing financial difficulty) in accordance with the modification guidance in ASC 310-20. The Company evaluates whether the modification represents a new loan or a continuation of an existing loan consistent with the accounting for other loan modifications. A loan modification or refinancing results in a new loan if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The terms of the new loan (including its interest rate) are at least as favorable to the Company as the terms with customers with similar collection risks that are not refinancing or restructuring their loans, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)The modifications to the terms of the loan are more than minor.

When a refinancing or restructuring is deemed to be a modification, the investment in the new loan is comprised of the remaining net investment in the original loan, any additional funds advanced to the borrower, any fees received, and direct loan origination costs associated with the refinancing or restructuring, and the effective interest rate of the loan is recalculated based upon the amortized cost basis of the new loan and its revised contractual cash flows. Unamortized net fees or costs from the original loan and any prepayment penalties are recognized in interest income when the new loan is granted as well as determining a new effective interest rate.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

Modifications to borrowers experiencing financial difficulty are limited to those that result in principal forgiveness, interest rate reductions, other-than-insignificant payment delays, or term extensions in the current reporting period.

*<u>Allowance for Credit Losses — Available-for-Sale Securities</u>*

The impairment model for AFS securities differs from the CECL approach utilized by HTM debt securities because AFS debt securities are measured at fair value rather than amortized cost. Although ASU 2016-13 replaced the legacy OTTI model with a credit loss model, it retained the fundamental nature of the legacy OTTI model. One notable change from the legacy OTTI model is that when evaluating whether credit loss exists, an entity may no longer consider the length of time fair value has been less than amortized cost.

For the AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria is met, the security's amortized cost basis is written down to fair value through income. For those AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than the amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

Any impairment that has not been recorded through an allowance for credit losses is recognized in AOCL. As of December 31, 2024, the Company determined that there were no unrealized loss positions in AFS securities that were as a result of credit losses, and therefore, no ACL was recorded.

*<u>Allowance for Credit Losses – Loans</u>*

Under the CECL model, the ACL on loans is a valuation allowance estimated at each balance sheet date in accordance with GAAP that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. The ACL represents management's best estimate of credit losses expected over the life of the loan, adjusted for expected contractual payments and the impact of prepayment expectations. ACL is not required for LHFS.

The Company estimates the ACL on loans based on the underlying loans' amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. It is the Company's policy to write off uncollectible interest receivable of LHFI when it is considered uncollectible, which is generally when an asset is placed on nonaccrual and exclude it from the ACL.

Expected credit losses are reflected in the ACL through a charge to provision for credit losses. When the Company deems all or a portion of a loan to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount. Loans are charged off against the ACL when management believes the collection of the principal is unlikely. Subsequent recoveries of previously charged off amounts, if any, are credited to the ACL when received.

<u>Loss Rate Method</u>

The Company measures expected credit losses of loans on a collective (pool) basis when the loans share similar risk characteristics. The Company leverages external historical loss data to determine loss rates for loan segments. The external data sets used are more robust than internal data or peer bank call report data. For collective assessment, CSB uses three loss rate models which are the Commercial Real Estate ("CRE") Loss Rate Model, Commercial and Industrial ("C&I") Loss Rate Model, and Expected Consumer Credit Loss Model ("ECCL"). CSB considers the nature of each credit, underwriting considerations, and best model fit within the models to determine the collective pool population.

Loans are pooled based on similar risk characteristics for each of the models used. The Company applies the CRE Loss Rate Model to commercial loans where the value of collateral is the primary factor for underwriting the loan. This includes acquisition, development, and construction loans ("ADC") and income producing CRE loans. These loans are pooled considering vintage, construction status, delinquency status, and property type. The original loan to value of loans in the CRE model is also a risk driver for determining the loss rate of each pool. The Company applies the C&I Loss Rate Model to commercial loans where cash flow of the borrower is the primary factor for underwriting the loan. This includes owner-occupied CRE loans, senior housing loans, and other commercial and industrial loans. These loans are pooled considering the loan's age, credit spread at origination, loan size, primary industry, and regulatory risk rating. The Company applies the ECCL Loss Rate Model to loans where personal creditworthiness is the primary factor for underwriting the loan. This includes residential mortgage loans, marine loans, cash value of life insurance lines of credit, and other consumer loans. These loans are pooled considering various product types, origination vintage, credit score at origination, and borrower state. Additional discussion regarding the Company's loan classifications is included in Note 3, *Loans and Allowance for Credit Losses*.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The Company leverages three economic forecast scenarios, considering a baseline, downside, and upside outcome which are probability weighted as 40%, 30% and 30%, respectively. The forecasts are considered reasonable and supportable for the duration of the forecast. Management reviews the weighting of the above scenarios at least annually to confirm that no changes are needed. Within each loss rate model, the following economic macroeconomic variables are used:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•*<u>CRE Loss Rate Model</u>*: Commercial Real Estate Price Index, Real GDP, Unemployment Rate

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•*<u>C&I Loss Rate Model</u>*: Unemployment Rate, USA BBB Spread

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•*<u>ECCL Loss Rate Model</u>*: Unemployment Rate and various product specific macroeconomic factors

<u>Qualitative Factors</u>

The Company also considers qualitative factor adjustments that are relevant to the institution as of the reporting date in addition to the quantitative model discussed above. This may include, but is not limited to, the nature and volume of the institution's financial assets, the existence, growth, and effect of any concentrations of credit, the volume and severity of past due financial assets, the volume of nonaccrual assets, the volume and severity of adversely classified or graded assets, the value of the underlying collateral for loans that are not collateral-dependent, the institution's lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries, the quality of the institution's credit review function, the experience, ability, and depth of the institution's lending, investment, collection, and other relevant management and staff, the effect of other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters, and actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the institution operates that affect the collectability of financial assets.

<u>Individually Analyzed Collateral-Dependent Loans</u>

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

For practical application, loans may be identified for individual analysis if they are nonaccrual. These loans have a history of non-performance and/or financial difficulty of the borrower. As a matter of Company policy, nonaccrual loans under $100 thousand may be excluded from individual analysis due to materiality. Charge-offs may still be recorded for loans less than $100 thousand when the loan becomes 90 days past due, as determined to be necessary.

<u>Charge-offs and Recoveries</u>

Loan losses are charged against the allowance when management believes that the collection of a loan's principal is unlikely. Subsequent recoveries are credited to the allowance. When any loan or portion thereof becomes uncollectible; (i) if unsecured, the loan is charged-off in full, (ii) if secured, the outstanding principal balance of the loan is charged down to the net liquidation value of the collateral, (iii) any accrued, unpaid interest is also charged-off when the principal balance is charged-off; however, accrued, unpaid interest is generally not charged against the ACL, but is charged against income in the period the charge-off is recognized, and (iv) accrued, unpaid interest is also charged-off against current period earnings when a loan is placed on nonaccrual.

*<u>Allowance for Credit Losses - Unfunded Commitments</u>*

The Company records an ACL on unfunded loan commitments, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for credit losses in the Company's Consolidated Statements of Operations. The ACL unfunded commitment exposures are estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur. The allowance for unfunded commitments is included in Other Liabilities on the Company's Consolidated Balance Sheets.

*<u>Bank-Owned Life Insurance</u>*

Bank-Owned Life Insurance ("BOLI") is long-term life insurance on the lives of certain employees where the insurance policy benefits and ownership are retained by the employer. To date, the Company has purchased life insurance policies on certain senior officers. BOLI is recorded at the cash surrender value, which can be adjusted for charges due at settlement at the balance sheet date. The cash value accumulation on BOLI is permanently tax deferred if the policy is held until the insured person's death. The total amount of BOLI at December 31, 2024 and 2023 was $46.5 million and $44.9 million, respectively.

*<u>Core Deposit Intangible</u>*

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

As a result of business combinations, identifiable intangible assets were recorded representing the estimated value of core deposits assumed. The Company amortizes the intangible assets over their estimated useful lives. Core deposit intangibles are periodically reviewed for reasonableness and are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable.

*<u>Commercial Mortgage Servicing Rights</u>*

The Company's commercial mortgage servicing rights ("CMSRs") arise from the sale of participating interests in government guaranteed loans to third parties where servicing is retained by the Company. The Company defines its classes of servicing assets relationship to the government guarantor, such as USDA or SBA guaranteed loans. The Company initially records servicing assets at fair value at the time the sale is recognized. The determination of fair value is based on a discounted cash flow analysis using the contractual terms of the associated loan being serviced and considers assumptions such as discount rate and prepayment speed. Subsequently, the Company amortizes these servicing assets over the expected life of the related loan, adjusting for expected prepayments. Periodically, the Company evaluates these assets for impairment. When the carrying value exceeds the fair value of a class of servicing assets, the Company recognizes impairment of the servicing assets.

*<u>Goodwill</u>*

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is not amortized but tested for impairment on an annual basis, or more often, if events or circumstances indicate there may be impairment. Goodwill impairment exists when a reporting unit's carrying value of goodwill exceeds its implied fair value.

If the fair value of the reporting unit exceeds its carrying value, no further testing is required. If the carrying value exceeds the fair value, further analysis is required to determine whether an impairment charge must be recorded based upon the implied fair value of goodwill and, if so, the amount of such charge. The Company performs its goodwill testing at least on an annual basis unless it is determined that conditions exist to indicate impairment.

*<u>Premises, Furniture and Equipment</u>*

Premises, furniture and equipment are stated at cost, less accumulated depreciation. The provision for depreciation is computed by the straight-line method, based on the estimated useful lives for buildings of 30 to 40 years and software, furniture, and equipment of 3 to 10 years. Leasehold improvements are amortized over the shorter of the life of the respective leases or the useful life of the asset. The cost of assets sold or otherwise disposed of and the related allowance for depreciation are eliminated from the accounts and the resulting gains or losses are reflected in the Consolidated Statements of Operations when incurred. Routine maintenance and repairs are charged to current expense. The costs of major repairs and improvements are capitalized. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

*<u>Operating Leases</u>*

Operating lease Right-of-Use ("ROU") assets represent the Company's right to use an underlying asset during the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company's incremental collateralized borrowing rate provided by the FHLBA fixed-rate advances at the lease commencement date. ROU assets are further adjusted for lease incentives, if any. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and is recorded in occupancy expense in the Consolidated Statements of Operations. The Company has elected as a practical expedient, an accounting policy election by class of underlying asset, not to separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

*<u>Other Real Estate Owned</u>*

Other real estate owned ("OREO") includes assets that have been acquired in satisfaction of debt through foreclosure. OREO is recorded at the lower of cost or fair value, minus estimated costs to sell. Subsequent to foreclosure, losses resulting from the periodic revaluation of the property are charged to loss on other real estate owned, net and a new carrying value is established. Any gains or losses realized at the time of disposal or subsequent write-downs are reflected in the Consolidated Statements of Operations. Expenses to maintain such assets are included in net cost of operation of other real estate owned which is included in Other noninterest expense.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

OREO outstanding at December 31, 2024 was $864 thousand which is in Other assets on the consolidated balance sheets. There was no OREO outstanding at December 31, 2023.

*<u>Other Borrowings</u>*

The FHLBA allows the Company to obtain advances through its credit program. These advances may be secured by securities owned by the Company and held in safekeeping by the FHLBA, FHLBA stock owned by the Company, and certain qualifying loans secured by real estate, including residential mortgage loans, home equity lines of credit and commercial real estate loans.

The Company also obtains advances via the FRB through the discount window. Discount window advances are secured by investment securities pledged to the FRB. The Company also had access to the Bank Term Funding Program ("BTFP") via the FRB through March 11, 2024 with no outstanding balance December 31, 2024.

The Company also has issued subordinated notes to certain qualified institutional buyers and institutional accredited investors and opened a commercial line of credit with a third party commercial bank that is used for general corporate purposes, including continued growth and maintenance of the bank level regulatory capital ratios.

*<u>Liabilities for Representations and Warranties</u>*

The Company is exposed to certain liabilities under representations and warranties made to purchasers of mortgage loans and servicing rights that require indemnification or repurchase of loans. At the time it issues a guarantee, the Company is required to recognize an initial liability for the fair value of obligations assumed under the guarantee.

The Company establishes a contingency reserve for its liabilities under representations and warranties provided to purchasers of its mortgage loans. This reserve is maintained at a level considered appropriate by management to provide for known and inherent losses. The reserve is based upon a continuing review of past loss experience, estimates and assumptions of risk elements and future economic conditions. Additions to the reserve are recorded in other expenses.

Management's judgment about the adequacy of the reserve is based upon a number of assumptions about future events which it believes to be reasonable. There is no assurance that additional increases in the reserve will not be required. The Company may from time-to-time be required to repurchase loans previously sold to investors due to loan nonperformance. At December 31, 2024 and 2023, the Company had a contingency reserve of $6 thousand and $39 thousand, respectively, for potential mortgage indemnifications to other third-party purchasers.

The Company also establishes a contingency reserve for repairs or denials of guarantees on certain SBA loans sold into the secondary market where the guarantee could be at risk in the SBA contingency reserve, which is included in Other liabilities. Management's judgment about the adequacy of the reserve is based on assumptions about future events which it believes to be reasonable. There is no assurance that additional increases in the reserve will not be required. At December 31, 2024, the Company had no SBA contingency reserve and had a reserve of $778 thousand at December 31, 2023. These contingency reserves were for denials or repairs of SBA guarantees on loans sold to third-party purchasers that were related to SBA loans acquired from Cornerstone Bank.

*<u>Variable Interest Entities</u>*

A variable interest entity ("VIE") is an entity that lacks equity investors or whose equity investors do not have a controlling financial interest in the entity through their equity investments. An entity is considered the primary beneficiary when it received the significant economics of the entity, and it has the power to direct the activities that most impact the VIE's economic performance. The primary beneficiary is required to consolidate the VIE. Upon entering an agreement with a VIE, the Company performs an assessment to determine if consolidation is required.

In 2023, the Company entered into a limited partnership with SOLCAP 2023-2CH LLC ("SOLCAP 2023") with a capital commitment of $8.5 million for the purpose of obtaining the benefits of tax credits generated from renewable energy projects. The Company is not the primary beneficiary of SOLCAP 2023 and therefore does not consolidate the VIE.

In 2024, the Company entered into a limited partnership with SOLCAP 2024-PA LLC ("SOLCAP 2024") with a capital commitment of $6 million for the purposes of obtaining the benefits of tax credits generated from renewable energy projects. The Company is not the primary beneficiary of SOLCAP 2024 and therefore does not consolidate the VIE.

The Company accounts for the VIE under the equity method of accounting. The Company has made an election under ASU 2023-02, *Investments – Equity Method and Joint Ventures (Topic 323): Investments in Tax Credit Structures*, to apply the proportional amortization method ("PAM") to solar tax credit investments when it is eligible. However, the investment SOLCAP 2023 did not meet the criteria for PAM; therefore, the Company is using the deferral method for accounting for the tax credits from this 2023 fund. Future investments in solar tax credits will be evaluated for accounting using PAM. The investment in SOLCAP 2024 did meet the criteria for

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

PAM. The carrying amount of equity method investments is reported in Other assets in the Consolidated Balance Sheets and the net benefit to income tax expense from these tax credit investments is disclosed in Note 12, *Commitments and contingencies*.

Management assesses equity method investments in VIE's for impairment when any events or changes in circumstance indicate that the carrying amount of the investment will not be realized. Management performs this assessment on an annual basis unless specific events or triggers are identified that warrant more timely consideration. Any identified impairment losses are recognized when a decline in value below the carrying amount of the investment is considered to be other-than-temporary, and previously recognized impairment losses are not reversed as is consistent with the guidance.

*<u>Derivative Financial Instruments</u>*

The Company is exposed to certain risks relating to its ongoing business operations and uses interest rate derivatives as part of its asset-liability management strategy to help manage its interest rate risk position. The Company records all derivative assets and liabilities on the Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting in accordance with ASC 815, *Derivatives and Hedging*. The Company currently has derivatives that are designated as qualifying hedging relationships. In addition, the Company also has a credit derivative under a risk participation agreement that is not designated as a qualifying hedging relationship. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities.

Changes in fair value of the Company's cash flow hedges are recognized in AOCI or AOCL and reclassified to earnings in the period during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. For fair value hedges, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item are recognized in current earnings as fair value changes. The change in fair value of the hedged item is recorded as a basis adjustment to the hedged assets or liabilities.

For fair value hedges meeting certain specific criteria, the Company applies the shortcut method of hedge accounting. For other derivatives that do not fall under shortcut method, the Company assesses the effectiveness of each hedging relationship by comparing the changes in the cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions.

*<u>Income Taxes</u>*

Income tax expense is based upon income before income taxes and generally differs from income taxes paid due to deferred income taxes and benefits arising from income and expenses being recognized in different periods for financial and income tax reporting purposes, as well as permanent differences. The Company uses the asset and liability method to account for deferred income taxes. The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the income tax basis of the Company's assets and liabilities at the effective rates expected to be in effect when such amounts are realized or settled. The Company evaluates the realization of deferred tax assets based upon all positive and negative evidence available at the balance sheet date. Realization of deferred tax assets is based upon the Company's judgments, including taxable income within any applicable carryback periods, future projected taxable income, reversal of taxable temporary differences and other tax-planning strategies to maximize realization of the deferred tax assets. A valuation allowance is recognized for a deferred tax asset if, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. In computing the income tax provision or benefit, the Company evaluates the technical merits of its income tax positions based upon current legislative, judicial, and regulatory guidance.

The Company continually monitors and evaluates the potential impact of current events on the estimates used to establish income tax expense and income tax liabilities. The Company and its Subsidiary file a consolidated federal income tax return and separate state income tax returns based upon current tax law, positions taken by various tax auditors within the jurisdictions that the Company is required to file income tax returns, as well as potential or pending audits or assessments by such tax auditors. If the Company incurs interest and/or penalties related to income tax matters, it will report them as a part of income tax expense.

The Company believes that its income tax filing positions taken or expected to be taken in its tax returns will more likely than not be sustained upon audit by the taxing authorities and does not anticipate any adjustments that will result in a material adverse impact on the Company's financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded.

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**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

*<u>Retirement Plan</u>*

The Company has a 401(k) profit sharing plan (the "Plan"), which provides retirement benefits to officers and employees who meet certain age and service requirements. The Plan includes a salary reduction feature pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). At its discretion, the Bank makes matching contributions to the Plan. Employer contributions for the 401(k) profit sharing plan were $970 thousand and $902 thousand in 2024 and 2023, respectively, and are included in salaries and employee benefits.

*<u>Net Income Per Common Share</u>*

Basic net income per common share represents income available to shareholders divided by the weighted-average number of common shares outstanding during the period. Dilutive income per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued by the Company relate solely to outstanding options, warrants and restricted stock units and are determined using the treasury stock method. Potential common shares are not included in the denominator of the diluted per share computation when inclusion would be anti-dilutive.

*<u>Other Comprehensive Income (Loss)</u>*

Other comprehensive income (loss) is defined as the change in shareholders' equity during the period from transactions and other events and circumstances from nonowner sources. Accumulated other comprehensive income (loss) includes the reclassification for realized gains and losses from investment securities sales during the period, the unrealized holding gains and losses from investment securities available-for-sale and the change in fair value of derivatives, including termination of derivatives.

*<u>Statement of Cash Flows</u>*

For purposes of reporting cash flows in the financial statements, the Company considers certain highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents include amounts due from banks, interest bearing accounts with other banks and federal funds sold. Generally, federal funds are sold for one-day periods.

*<u>Off-Balance Sheet Financial Instruments</u>*

In the ordinary course of business, the Company enters into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. These financial instruments are recorded in the financial statements when they become payable by the customer.

*<u>Stock-Based Compensation</u>*

The Company grants stock options, restricted stock units, and other equity awards to purchase its common stock to certain key officers/employees and directors. Stock options are for a fixed number of shares with an exercise price equal to the fair value of the shares at the grant date. The fair value of stock options is determined using the Black-Scholes model. The fair value of restricted stock units when granted is the fair value of the stock on the grant date. Stock-based compensation expense is recognized in the Consolidated Statements of Operations on a straight-line basis over the vesting period. For nonqualified stock options, as compensation expense is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from exercise. At the time that stock-based awards are exercised, cancelled, or expire, the Company may be required to recognize an adjustment to income tax expense. For incentive stock options, the Company does not recognize an income tax benefit related to compensation expense in the period incurred or when exercised, unless there is a disqualifying disposition. The Company recognizes forfeitures of stock-based awards as they occur.

*<u>Fair Value</u>*

US GAAP requires the use of fair values in determining the carrying values of certain assets and liabilities, as well as for specific disclosures. Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between willing market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities.

Individual fair value estimates are classified on a three-tiered scale based upon the relative reliability of the inputs used in the valuation. Fair values determined using Level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based upon Level 2 inputs, which are used when observable data exists for similar assets and liabilities. Fair values for assets and liabilities that are not actively traded in observable markets are based upon Level 3 inputs, which are considered to be unobservable.

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**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

*<u>Business Combinations</u>*

The Company applies the acquisition method of accounting for all business combinations. The acquirer is the entity that obtains control of one or more businesses in the business combination and the acquisition date is the date the acquirer achieved control. The acquirer recognizes the fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree at the acquisition date. If the fair value of assets purchased exceeded the fair value of liabilities assumed, it results in a gain on acquisition. If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. Generally, fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available (the "measurement period"). During the measurement period, the Company may recognize adjustments to the initial amounts recorded as if the accounting for the business combination had been completed at the acquisition date. Adjustments are typically recorded as a result of new information received after the acquisition date that is necessary to identify and measure identifiable assets acquired and liabilities assumed. In many cases, the determination of acquisition-date fair values requires management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are subjective in nature and subject to change.

*<u>Operating Segments</u>*

Accounting standards require that information be reported about a company's operating segments using a "management approach." Reportable segments are identified in these standards as those revenue producing components for which separate financial information is produced internally and which are subject to evaluation by the Chief Operating Decision Maker ("CODM"). While the CODM monitors the revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable segment.

The Company's CODM is the chief executive officer. The segment measure of profit or loss is consolidated net income according to the Consolidated Statements of Operations, the measure of segment assets is total assets of the consolidated company according to the Consolidated Balance Sheets, and the accounting policies of the segment are the same as those described in the Consolidated Financial Statements within Note 1. The CODM monitors budgeted to actual results of net income to assess the company's performance, to make decisions on strategic initiatives, and to establish management's compensation. The segment's revenues are primarily derived from retail and commercial banking products, and investment income.

*<u>Reclassifications</u>*

Certain captions and amounts in the 2023 Consolidated Financial Statements were reclassified to conform with the 2024 presentation. These reclassifications had no effect on the net results of operations or shareholders' equity.

*<u>Accounting Pronouncements Adopted in 2024</u>*

The Company's common stock is quoted on OTCQX, (Ticker: COSO), and as a result, the Company is classified as a public business entity for the purposes of adopting new accounting pronouncements. The table below summarizes Accounting Standard Updates ("ASU") which update various topics of the Accounting Standards Codification ("ASC") recently issued by the Financial Accounting Standards Board ("FASB") that could have a material effect on the Company's financial statements.

In December 2024, the Company adopted ASU 2023-07, Segment Reporting (Topic 280): *Improvements to Reportable Segment Disclosures*, which expands the disclosures required by public entities for reportable segments, thereby responding to stakeholders' requests for more detailed information about expenses within each reportable segment. The expanded disclosures now require public entities to disclose significant expenses for reportable segments in both interim and in annual reporting periods, while entities with only a single reportable segment must now provide all segment disclosures required both in ASC 280, *Segment Reporting*, and under the amendments in ASU 2023-07. The adoption of ASU 2023-07 did not have a material impact on the Company's Consolidated Financial Statements.

*<u>Accounting Pronouncements Not Yet Adopted</u>*

In December 2023, the FASB issued ASU 2023-09, *Income Taxes (Topic 740): Improvements to Income Tax Disclosures*. This ASU enhances the transparency and decision usefulness of income tax disclosures for investors, lenders, creditors, and other allocators of capital (collectively, "investors"). These new enhancements are meant to better (1) understand an entity's exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities, (2) assess income tax information that affects cash flow forecasts and capital allocation decisions, and (3) identify potential opportunities to increase future cash flows. For public business entities, these amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments should be applied on a prospective basis and retrospective application is permitted. The adoption of this standard is not expected to have a material effect on the Company's Consolidated Financial Statements.

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**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The Company has further evaluated other Accounting Standards Updates issued during 2024 but does not expect Updates other than those summarized above to have a material impact on the Consolidated Financial Statements.

**NOTE 2** — **INVESTMENT SECURITIES**

The amortized cost and estimated fair values of securities available-for-sale along with allowance for credit losses, gross unrealized gains and losses at December 31, 2024 and 2023 are summarized in the tables below:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **2024** | **2024** | **2024** | **2024** | **2024** |
| <u>(In thousands of dollars)</u> | **Amortized<br>Cost** | **Allowance for Credit Losses** | **Gross Unrealized Gains** | **Gross Unrealized Losses** | **Estimated Fair Value** |
| U.S. Treasuries | $5990 | $- | $- | $378 | $5612 |
| Municipal obligations | 61401 | - | 37 | 8367 | 53071 |
| Mortgage-backed securities | 181242 | - | 211 | 15361 | 166092 |
| Asset-backed securities | 46775 | - | 384 | 219 | 46940 |
| Corporate debt securities | 64264 | - | 963 | 1675 | 63552 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total securities available-for-sale | $359672 | $- | $1595 | $26000 | $335267 |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **2023** | **2023** | **2023** | **2023** | **2023** |
| <u>(In thousands of dollars)</u> | **Amortized<br>Cost** | **Allowance for Credit Losses** | **Gross Unrealized Gains** | **Gross Unrealized Losses** | **Estimated Fair Value** |
| U.S. Treasuries | $53954 | $- | $- | $1946 | $52008 |
| Municipal obligations | 71160 | - | 287 | 8563 | 62884 |
| Mortgage-backed securities | 166112 | - | 290 | 17066 | 149336 |
| Asset-backed securities | 55874 | - | 337 | 547 | 55664 |
| Corporate debt securities | 37520 | - | 134 | 2750 | 34904 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total securities available-for-sale | $384620 | $- | $1048 | $30872 | $354796 |

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The following is a summary of maturities of AFS securities as of December 31, 2024. The amortized cost and estimated fair values are based on the contractual maturity dates. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without penalty. Mortgaged-backed securities are not presented by maturity date because pay-downs are expected before contractual maturity dates.

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| | | |
|:---|:---|:---|
|  | **Amortized** | **Estimated** |
| <u>(In thousands of dollars)</u> | **Cost** | **Fair Value** |
| Due in one year or less | $2449 | $2489 |
| Due after one year but within five years | 34772 | 34205 |
| Due after five years but within ten years | 84009 | 79707 |
| Due after ten years | 57200 | 52774 |
| Mortgage-backed securities | 181242 | 166092 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $359672 | $335267 |

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The following table shows securities in unrealized loss position for which ACL has not been recorded and the length of time they were in continuous loss positions as at December 31, 2024:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than** | **Less than** | **Twelve months** | **Twelve months** |  |  |
|  | **Twelve months** | **Twelve months** | **or more** | **or more** | **Total** | **Total** |
|  | **Estimated** | **Unrealized** | **Estimated** | **Unrealized** | **Estimated** | **Unrealized** |
| <u>(In thousands of dollars)</u> | **Fair Value** | **losses** | **Fair Value** | **losses** | **Fair Value** | **losses** |
| U.S. Treasuries | $- | $- | $5612 | $378 | $5612 | $378 |
| Municipal obligations | - | - | 52299 | 8367 | 52299 | 8367 |
| Mortgage-backed securities | 36742 | 610 | 108435 | 14751 | 145177 | 15361 |
| Asset-backed securities | - | - | 11141 | 219 | 11141 | 219 |
| Corporate debt securities | 1245 | 5 | 20801 | 1670 | 22046 | 1675 |
| &nbsp;&nbsp;Total temporarily impaired securities | $37987 | $615 | $198288 | $25385 | $236275 | $26000 |

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**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The following table shows securities in unrealized loss position for which ACL has not been recorded and the length of time they were in continuous loss positions as at December 31, 2023:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than** | **Less than** | **Twelve months** | **Twelve months** |  |  |
|  | **Twelve months** | **Twelve months** | **or more** | **or more** | **Total** | **Total** |
|  | **Estimated** | **Unrealized** | **Estimated** | **Unrealized** | **Estimated** | **Unrealized** |
| <u>(In thousands of dollars)</u> | **Fair Value** | **losses** | **Fair Value** | **losses** | **Fair Value** | **losses** |
| U.S. Treasuries | $- | $- | $52008 | $1946 | $52008 | $1946 |
| Municipal obligations | 2124 | 180 | 58787 | 8383 | 60911 | 8563 |
| Mortgage-backed securities | 2382 | 4 | 135771 | 17062 | 138153 | 17066 |
| Asset-backed securities | - | - | 39133 | 547 | 39133 | 547 |
| Corporate debt securities | 13217 | 281 | 17497 | 2469 | 30714 | 2750 |
| &nbsp;&nbsp;Total temporarily impaired securities | $17723 | $465 | $303196 | $30407 | $320919 | $30872 |

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AFS securities are recorded at fair market value. Of the 148 securities in an unrealized loss position at December 31, 2024, 18 securities were in a continuous loss position for less than twelve months, and 130 securities were in a continuous loss position for twelve months or more. The Company believes, based on industry analyst reports, credit ratings and/or government guarantees, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered credit related required to be charged to the allowance.

Based on the results of management's review at December 31, 2024, none of the unrealized loss was attributable to credit impairment and all $26.0 million in unrealized loss was determined to be from factors other than credit. There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all of these securities may be sold or are credit related impaired, which would require a charge to earnings in such periods.

The table below presents a summary of sales activities in the Company's investment securities available-for-sale portfolio:

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| | | |
|:---|:---|:---|
|  | **For the Years Ended December 31,** | **For the Years Ended December 31,** |
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| Gross gains on sales of securities | $47 | $- |
| Gross losses on sales of securities | (3512) | (517) |
| Net realized losses on sales of securities available-for-sale | $(3465) | $(517) |
| Sales proceeds | $39100 | $11987 |

---

At December 31, 2024 investment securities with a book value of $59.2 million and a market value of $51.8 million were pledged to secure federal funds lines of credit, Federal Reserve Bank Discount Window credit availability, and municipal deposits. At December 31, 2023, investment securities with a book value of $204.0 million and a market value of $184.2 million were pledged to secure federal funds lines of credit, Federal Reserve Bank Discount Window and BFTP credit availability.

**NOTE 3 — LOANS AND ALLOWANCE FOR CREDIT LOSSES**

*<u>Composition of Loan Portfolio</u>*

The Company engages in a full complement of lending activities, including commercial real estate loans ("CRE"), construction loans, commercial and industrial loans ("C&I"), and consumer purpose loans. While risk of loss in the Company's portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company's control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio. The following is a brief description of the major loans receivable categories:

*<u>Commercial Loans</u>*

*Acquisition, Development, and Construction ("ADC")* – ADC loans include both loans and credit lines for the purpose of purchasing, carrying, and developing land into residential subdivisions or various types of commercial developments, such as industrial, hospitality, warehouse, retail, office, and multi-family. This category also includes loans and credit lines for construction of residential developments, multi-family buildings, and commercial buildings. The Company generally engages in ADC lending primarily in local markets served by its branches, and through our homebuilder finance and government guaranteed lending lines of business. The Company recognizes that risks are inherent in the financing of commercial real estate development and construction. These risks include location, market conditions and price volatility, change in interest rates, demand for developed land, lots and buildings, desirability of features and styling of completed developments and buildings, competition from other developments and builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of utilities, roads, public transportation and schools,

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**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

availability of permanent financing for homebuyers, zoning, environmental restrictions, lawsuits, economic and business cycle, labor, and reputation of the builder or developer.

Each ADC loan is underwritten to address: (i) the desirability of the project, its market viability and projected absorption period; (ii) the creditworthiness of the borrower and the guarantor as to liquidity, cash flow and assets available to ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer's experience and success with similar projects; and (v) the value of the collateral. ADC loans are inspected periodically to ensure that the project is on schedule and eligible for requested draws. Inspections may be performed by construction inspectors hired by the Company or by appropriate loan officers and are conducted periodically to monitor the progress of a particular project. These inspections may also include discussions with project managers and engineers. Rising interest rates and the potential for slowing economic conditions could negatively impact borrowers' and guarantors' ability to repay their debt which could make more of the Company's loans collateral-dependent.

*Income Producing CRE* – Income Producing CRE loans include loans to finance income-producing commercial and multi-family properties. Lending in this category is generally limited to properties located in the Company's market area with only limited exposure to properties located elsewhere but owned by in-market borrowers. Loans in this category include loans for neighborhood retail centers, medical and professional offices, single retail stores, warehouses and apartments leased generally to local businesses and residents. The underwriting of these loans takes into consideration the occupancy, rental rates, and local market demand as well as the financial health of the borrower. The primary risk associated with loans secured with income-producing property is the inability of that property to produce adequate cash flow to service the debt. High unemployment, significant increases to interest rates, generally weak economic conditions and/or an oversupply in the market may result in our customers having difficulty achieving adequate occupancy and/or rental rates. Payments on such loans are often dependent on successful operation or management of the properties.

*Owner-Occupied CRE* – Owner-occupied loans include loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal guarantees, if applicable, are generally required for these loans. The Company recognizes that risk from economic cycles, pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel, or competitive situations may adversely affect the scheduled repayment of business loans.

*Senior Housing* – Senior housing loans support senior adults facilities, generally restricted for adults over the age of 55 years old. These types of loans include senior apartments, independent living communities, assisted living and memory care communities, nursing homes or skilled nursing facilities, and continuing care retirement communities. The Company recognizes that risk from high resident turnover, pandemics, government regulation, operator risk, increases in acuity, availability and cost of qualified staffing resources, technology risk, and other risks such as liability, insurance, reimbursement and regulatory changes may impact repayment of these loans. Underwriting focuses primarily on operator quality and business operations rather than income producing CRE property quality metrics.

*Commercial and Industrial* – C&I loans are loans and lines of credit to finance business operations, equipment and other non-real estate collateral primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal and/or corporate guarantees are generally obtained where available and prudent. The Company recognizes that risk from economic cycles, commodity prices, pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel or competitive situations may adversely affect the scheduled repayment of business loans.

*<u>Retail loans</u>*

*Marine Vessels* – Marine vessel loans are a type of consumer loan used to finance the purchase of a boat or another marine craft. Functioning similarly to auto loans and personal loans, these installment loans come with a repayment term, fixed monthly payments and variable-or-fixed interest rates. These loans are underwritten in accordance with the Company's general loan policies and procedures and are generally secured with title or preferred ships' mortgage on the marine vessel. The Company recognizes that risk from economic cycles, pandemics, government regulation, natural disasters, losses due to theft, or changes to customer's ability to meet the scheduled repayment of marine vessel. At December 31, 2024, and 2023, there were $405 thousand and $539 thousand of repossessed marine assets, respectively. There were $67 thousand and $91 thousand of repossessed asset write-downs during the years ended December 31, 2024 and 2023, respectively.

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**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

*Residential Mortgages* – Residential mortgages are first or second-lien loans secured by a primary residence or second home. This category includes permanent mortgage financing, construction loans to individual consumers, and home equity lines of credit. The loans are generally secured by properties located within the local market area of the Bank's retail footprint which originates and services the loan. These loans are underwritten in accordance with the Company's general loan policies and procedures which require, among other things, proper documentation of each borrower's financial condition, satisfactory credit history, and property value. In addition to loans originated through the Company's branches, the Company originates and services residential mortgages sold in the secondary market which are underwritten and closed pursuant to investor and agency guidelines. At December 31, 2024 and 2023, there were $164 thousand and $377 thousand of residential mortgage loans in process of foreclosure, respectively. Additionally, the Company held $864 thousand foreclosed residential properties at December 31, 2024. There were no foreclosed residential properties at December 31, 2023.

*Cash Value Life Insurance Line of Credit ("CVLI")* – Cash value life insurance encompasses multiple types of life insurance that contain a cash value account. This cash value component typically earns interest or other investment gains and grows tax-deferred. CVLI loans are generally lines of credit ("LOC") secured by cash value life insurance of the debtor and can be originated for personal or business purposes. Upon the delinquency of the loan or lapse of an insurance policy premium payment, the Company pursues liquidation of the policy cash value in order to satisfy the loan.

*Other Consumer* – Other consumer loans primarily includes unsecured student loans and other secured and unsecured consumer purpose loans. Certain loans are secured by recreational vehicles and other such tangible property. These types of loans may be impacted by negative macroeconomic conditions impacting individual consumers, such as increased unemployment, which can reduce a borrower's ability to repay the loan.

LHFS are comprised of loans acquired through mortgage warehouse lending activities and origination of mortgage loans. The Company serves as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. The Company also originates mortgage loans with customers through CSM and sells the majority of these loans to third-party investors.

Following is a summary of the composition of the loan portfolio at December 31, 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **2024** | **2024** | **2023** | **2023** |
| <u>(Dollars in thousands)</u> | **Amount** | **%** | **Amount** | **%** |
| **Commercial loans** |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development and construction | $72520 | 5.2% | $124406 | 8.8% |
| &nbsp;&nbsp;Income producing CRE | 321558 | 22.8 | 264043 | 18.6 |
| &nbsp;&nbsp;Owner-occupied CRE | 94573 | 6.7 | 92007 | 6.5 |
| &nbsp;&nbsp;Senior housing | 234081 | 16.6 | 250593 | 17.7 |
| &nbsp;&nbsp;Commercial and industrial | 141626 | 10.0 | 139795 | 9.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 864358 | 61.3 | 870844 | 61.4 |
| **Retail loans** |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 263657 | 18.6 | 266197 | 18.8 |
| &nbsp;&nbsp;Residential mortgages | 174099 | 12.4 | 146220 | 10.3 |
| &nbsp;&nbsp;Cash value life insurance LOC | 86844 | 6.2 | 112457 | 7.9 |
| &nbsp;&nbsp;Other consumer | 20485 | 1.5 | 22707 | 1.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 545085 | 38.7 | 547581 | 38.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total gross LHFI, net of unearned income | 1409443 | 100.0% | 1418425 | 100.0% |
| Less allowance for credit losses | (17118) |  | (15465) |  |
| LHFI, net | $1392325 |  | $1402960 |  |
| LHFS | $174033 |  | $82125 |  |

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*<u>Credit Quality Indicators</u>*

The Company monitors the credit quality of its commercial loan portfolio using internal credit risk ratings. These credit risk ratings are based upon established regulatory guidance and are assigned upon initial approval of credit to borrowers. Credit risk ratings are updated periodically after the initial assignment or whenever management becomes aware of information affecting the borrowers' ability to fulfill their obligations. The Company utilizes the following categories of credit grades to evaluate its commercial loan portfolio:

***Pass*** — Loans classified as pass are higher quality loans that do not fit any of the other categories below.

***Special Mention*** — Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company's credit position at some future date.

***Substandard*** — Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

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**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

***Doubtful*** — Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the credit quality of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans. The Company had no loans rated Doubtful at December 31, 2024 or 2023.

The Company monitors the credit quality of its retail portfolio based primarily on payment activity and credit scores. Payment activity is the primary factor considered in determining whether a retail loan should be classified as nonperforming. Retail loans are considered to be nonperforming if they are on nonaccrual status or if they are 90 days past due or greater.

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**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The following table presents the risk category of term loans on amortized cost basis and, for 2024, gross charge-offs by vintage year as of December 31, 2024:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** |  |  |  |
| <u>(In thousands of dollars)</u> | **2024** | **2023** | **2022** | **2021** | **2020** | **Prior** | **Revolvers** | **Revolvers Converted to Term** | **Total** |
| **Commercial loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Acquisition, development and construction** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $56157 | $12929 | $2923 | $8 | $- | $503 | $- | $- | $72520 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total acquisition, development<br> and construction | $56157 | $12929 | $2923 | $8 | $- | $503 | $- | $- | $72520 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Income producing CRE** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $41441 | $54468 | $123767 | $57156 | $28306 | $16006 | $2 | $- | $321146 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | - | 412 | - | - | 412 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total income producing | $41441 | $54468 | $123767 | $57156 | $28306 | $16418 | $2 | $- | $321558 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Owner-occupied CRE** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $4400 | $9803 | $19153 | $26183 | $15831 | $12520 | $16 | $- | $87906 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | 1825 | - | 3996 | - | - | 846 | - | - | 6667 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total owner occupied | $6225 | $9803 | $23149 | $26183 | $15831 | $13366 | $16 | $- | $94573 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Senior housing** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $43372 | $24428 | $80881 | $31613 | $9789 | $- | $- | $- | $190083 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | 17532 | - | 7494 | - | - | 25026 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | 13903 | - | 5069 | - | - | 18972 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total senior housing | $43372 | $24428 | $80881 | $63048 | $9789 | $12563 | $- | $- | $234081 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Commercial and industrial** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $41292 | $34052 | $12364 | $19206 | $1472 | $6400 | $18811 | $3281 | $136878 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | 36 | - | - | - | - | 36 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | 283 | - | 2626 | 69 | 1734 | 4712 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-real estate | $41292 | $34052 | $12364 | $19525 | $1472 | $9026 | $18880 | $5015 | $141626 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $87 | $62 | $- | $- | $- | $- | $- | $149 |
| **Retail loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Marine vessels** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $48640 | $74645 | $95768 | $21729 | $5690 | $17185 | $- | $- | $263657 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total marine vessels | $48640 | $74645 | $95768 | $21729 | $5690 | $17185 | $- | $- | $263657 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $36 | $- | $- | $- | $- | $- | $- | $36 |
| &nbsp;&nbsp;**Residential mortgages** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $19067 | $29485 | $49850 | $27362 | $12472 | $17104 | $18292 | $202 | $173834 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | 164 | - | 101 | 265 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total residential mortgages | $19067 | $29485 | $49850 | $27362 | $12472 | $17268 | $18292 | $303 | $174099 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Cash value life insurance LOC** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $- | $- | $- | $- | $- | $- | $83751 | $3093 | $86844 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash value life insurance<br>&nbsp;&nbsp;&nbsp;&nbsp; LOC | $- | $- | $- | $- | $- | $- | $83751 | $3093 | $86844 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $47 | $- | $47 |
| &nbsp;&nbsp;**Other consumer** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $1921 | $1995 | $83 | $1666 | $2898 | $11414 | $465 | $- | $20442 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | 43 | - | - | 43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other consumer | $1921 | $1995 | $83 | $1666 | $2898 | $11457 | $465 | $- | $20485 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $53 | $- | $- | $53 |

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**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The following table presents the risk category of term loans on amortized cost basis and, for 2023, gross charge-offs by vintage year as of December 31, 2023:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** | **Amortized Cost Basis by Origination Year** |  |  |  |
| <u>(In thousands of dollars)</u> | **2023** | **2022** | **2021** | **2020** | **2019** | **Prior** | **Revolvers** | **Revolvers Converted to Term** | **Total** |
| **Commercial loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Acquisition, development and construction** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $41501 | $74714 | $7618 | $- | $29 | $544 | $- | $- | $124406 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total acquisition, development<br> and construction | $41501 | $74714 | $7618 | $- | $29 | $544 | $- | $- | $124406 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Income producing CRE** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $51322 | $81105 | $71495 | $31446 | $9479 | $17212 | $210 | $1235 | $263504 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | - | - | - | 79 | - | - | 79 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | - | - | - | 460 | - | - | 460 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total income producing | $51322 | $81105 | $71495 | $31446 | $9479 | $17751 | $210 | $1235 | $264043 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $82 | $- | $- | $82 |
| &nbsp;&nbsp;**Owner-occupied CRE** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $11747 | $14452 | $25270 | $17132 | $9979 | $6935 | $38 | $29 | $85582 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | 432 | - | - | - | - | - | - | 432 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | 3079 | - | - | - | 2914 | - | - | 5993 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total owner occupied | $11747 | $17963 | $25270 | $17132 | $9979 | $9849 | $38 | $29 | $92007 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Senior housing** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $36780 | $90770 | $69604 | $17075 | $- | $- | $- | $- | $214229 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | - | 20419 | - | 5072 | - | - | - | 25491 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | 10873 | - | - | - | - | - | 10873 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total senior housing | $36780 | $90770 | $100896 | $17075 | $5072 | $- | $- | $- | $250593 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Commercial and industrial** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $57632 | $16185 | $24905 | $2574 | $3472 | $5639 | $22330 | $1944 | 134681 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special mention | - | 102 | - | - | - | - | - | - | 102 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard | - | - | 301 | - | 2577 | 257 | 1836 | 41 | 5012 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-real estate | $57632 | $16287 | $25206 | $2574 | $6049 | $5896 | $24166 | $1985 | $139795 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $343 | $- | $- | $343 |
| **Retail loans** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Marine vessels** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $96212 | $115858 | $29154 | $6890 | $6148 | $11746 | $- | $- | $266008 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | 189 | - | - | - | - | - | - | 189 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total marine vessels | $96212 | $116047 | $29154 | $6890 | $6148 | $11746 | $- | $- | $266197 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $5 | $- | $- | $- | $- | $- | $- | $5 |
| &nbsp;&nbsp;**Residential mortgages** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $21439 | $41137 | $30933 | $13702 | $2299 | $18879 | $17028 | $457 | 145874 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | 346 | - | - | 346 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total residential mortgages | $21439 | $41137 | $30933 | $13702 | $2299 | $19225 | $17028 | $457 | $146220 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $194 | $- | $- | $194 |
| &nbsp;&nbsp;**Cash value life insurance LOC** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $- | $- | $- | $- | $- | $- | 107599 | 4858 | 112457 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total cash value life insurance<br>&nbsp;&nbsp;&nbsp;&nbsp; LOC | $- | $- | $- | $- | $- | $- | $107599 | $4858 | $112457 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $- | $- | $- | $- |
| &nbsp;&nbsp;**Other consumer** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performing | $3589 | $106 | $1921 | $3558 | $7115 | $5937 | $481 | $- | 22707 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonperforming | - | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other consumer | $3589 | $106 | $1921 | $3558 | $7115 | $5937 | $481 | $- | $22707 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current period gross charge-offs | $- | $- | $- | $- | $- | $212 | $- | $- | $212 |

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*<u>Nonaccrual and Past Due Loans</u>*

A loan is placed on nonaccrual status when, in management's judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. The Company's loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower's financial condition and the prospects for full repayment, approved by the Company's Chief Credit Officer. Past due loans are loans whose principal or interest is past due 30 days or more.

The following table presents a summary of past due and nonaccrual loans as of December 31, 2024:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | **Loans Past Due** | **Loans Past Due** | **Loans Past Due** |  |  |  |
| <u>(In thousands of dollars)</u> | **Current** | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90 Days or More<br>and Accruing** | **Nonaccrual** | **Total<br>Past Due and<br>Nonaccrual** | **Total Loans<br>Receivable** |
| Acquisition, development and<br> construction | $72520 | $- | $- | $- | $- | $- | $72520 |
| Income producing CRE | 321146 | - | - | - | 412 | 412 | 321558 |
| Owner-occupied CRE | 91148 | - | - | - | 3425 | 3425 | 94573 |
| Senior housing | 227511 | - | - | - | 6570 | 6570 | 234081 |
| Commercial and industrial | 137330 | 5 | - | 6 | 4285 | 4296 | 141626 |
| Marine vessels | 263657 | - | - | - | - | - | 263657 |
| Residential mortgages | 172525 | 1309 | - | - | 265 | 1574 | 174099 |
| Cash value life insurance LOC | 86844 | - | - | - | - | - | 86844 |
| Other consumer | 19996 | 325 | 121 | 43 | - | 489 | 20485 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1392677 | $1639 | $121 | $49 | $14957 | $16766 | $1409443 |

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The following table presents a summary of past due and nonaccrual loans as of December 31, 2023:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | **Loans Past Due** | **Loans Past Due** | **Loans Past Due** |  |  |  |
| <u>(In thousands of dollars)</u> | **Current** | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90 Days or More<br>and Accruing** | **Nonaccrual** | **Total<br>Past Due and<br>Nonaccrual** | **Total Loans<br>Receivable** |
| Acquisition, development and<br> construction | $124406 | $- | $- | $- | $- | $- | $124406 |
| Income producing CRE | 263283 | 300 | - | - | 460 | 760 | 264043 |
| Owner-occupied CRE | 88928 | - | - | - | 3079 | 3079 | 92007 |
| Senior housing | 250593 | - | - | - | - | - | 250593 |
| Commercial and industrial | 139492 | 39 | - | - | 264 | 303 | 139795 |
| Marine vessels | 266008 | - | - | - | 189 | 189 | 266197 |
| Residential mortgages | 144936 | 938 | - | - | 346 | 1284 | 146220 |
| Cash value life insurance LOC | 112457 | - | - | - | - | - | 112457 |
| Other consumer | 22521 | 186 | - | - | - | 186 | 22707 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1412624 | $1463 | $- | $- | $4338 | $5801 | $1418425 |

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*<u>Individually Analyzed Collateral-Dependent Loans</u>*

As of December 31, 2024, there were $15.0 million of individually analyzed collateral-dependent loans which are primarily secured by real estate, equipment and receivables. All of the Company's nonaccrual loans at December 31, 2024 are collateral-dependent. The following table presents an analysis of nonaccrual loans that are also collateral-dependent financial assets and related allowance for credit losses:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **Nonaccrual Loans with No Allowance** | **Nonaccrual Loans with an Allowance** | **Total Nonaccrual Loans** | **Allowance for Credit Losses** | **Nonaccrual Interest Income Recognized** |
| Income producing CRE | $412 | $- | $412 | $- | $- |
| Owner-occupied CRE | 3425 | - | 3425 | - | - |
| Senior housing | - | 6570 | 6570 | 1703 | - |
| Commercial and industrial | 2057 | 2228 | 4285 | 36 | 134 |
| Marine vessels | - | - | - | - | 3 |
| Residential mortgages | 164 | 101 | 265 | 3 | 6 |
| Cash value life insurance LOC | - | - | - | - | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $6058 | $8899 | $14957 | $1742 | $148 |

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As of December 31, 2023, there were $4.3 million of individually analyzed collateral-dependent loans which are primarily secured by real estate, equipment and receivables. All of the Company's nonaccrual loans at December 31, 2023, are collateral-dependent. The

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

following table presents an analysis of nonaccrual loans that are also collateral-dependent financial assets and related allowance for credit losses:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **Nonaccrual Loans with No Allowance** | **Nonaccrual Loans with an Allowance** | **Total Nonaccrual Loans** | **Allowance for Credit Losses** | **Nonaccrual Interest Income Recognized** |
| Income producing CRE | $- | $460 | $460 | $3 | $5 |
| Owner-occupied CRE | - | 3079 | 3079 | 19 | 241 |
| Senior housing | - | - | - | - | 398 |
| Commercial and industrial | 223 | 41 | 264 | 177 | 50 |
| Marine vessels | 189 | - | 189 | - | - |
| Residential mortgages | 346 | - | 346 | - | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $758 | $3580 | $4338 | $199 | $706 |

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*<u>Modifications to Borrowers Experiencing Financial Difficulty</u>*

The Company periodically provides modifications to borrowers experiencing financial difficulty. These modifications include either payment deferrals, term extensions, interest rate reductions, principal forgiveness or combinations of modification types. The determination of whether the borrower is experiencing financial difficulty is made on the date of the modification. When principal forgiveness is provided, the amount of principal forgiveness is charged off against the allowance for credit losses with a corresponding reduction in the amortized cost basis of the loan.

The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted as of December 31, 2024:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <u>(Dollars in thousands)</u> | **Payment deferral** | **Combination of term extension and payment delay** | **Combination of term extension and interest rate reduction** | **Total modified loans** | **Percent of total loan class** |
| **Commercial loans** |  |  |  |  |  |
| &nbsp;&nbsp;Senior housing | $- | $9942 | $- | $9942 | 4.2% |
| &nbsp;&nbsp;Commercial and industrial | 2228 | - | 1734 | 3962 | 2.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $2228 | $9942 | $1734 | $13904 | 1.0% |

---

The Company had no unfunded commitments to borrowers experiencing financial difficulty for which the Company has modified their loans.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the twelve months ended December 31, 2024:

---

| | |
|:---|:---|
| **Loan type** | **Financial effect** |
| **Payment deferral** |  |
| &nbsp;&nbsp;Commercial and industrial | Provided one year of principal payment deferral (interest only). |
| **Combination of term extension and payment delay** |  |
| &nbsp;&nbsp;Senior housing | Provided weighted average term extension of 9 months and either deferral of principal payments<br> (interest only) or deferral of full interest payments. |
| **Combination of term extension and interest rate<br> reduction** |  |
| &nbsp;&nbsp;Commercial and industrial | Provided 36-month extension broken into three 12-month extension options, and reduced interest<br> rate by 100 bps in the first 12 months and by 50 bps in the second 12 months. |

---

The Company monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the last 12 months:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | **Loans Past Due** | **Loans Past Due** | **Loans Past Due** |  |
| <u>(In thousands of dollars)</u> | **Current** | **30-59<br>Days<br>Past Due** | **60-89<br>Days<br>Past Due** | **90 Days or More<br>Past Due** | **Total** |
| **Commercial real estate** |  |  |  |  |  |
| &nbsp;&nbsp;Senior housing | $9942 | $- | $- | $- | $9942 |
| &nbsp;&nbsp;Commercial and industrial | 3962 | - | - | - | 3962 |
| **&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total** | $13904 | $- | $- | $- | $13904 |
| Total nonaccrual loans included above | $10532 | $- | $- | $- | $10532 |

---

At December 31, 2024, there were no financing receivables that had a payment default and were modified in the 12 months before default to borrowers experiencing financial difficulty.

*<u>Related Party Loans</u>*

Certain parties (principally certain directors and executive officers of the Company, their immediate families and business interests) were loan customers of and had other transactions in the normal course of business with the Company. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectability.

The following table presents a roll forward of the related party loans as of December 31, 2024 and 2023:

---

| | | |
|:---|:---|:---|
|  | **For the Years Ended** | **For the Years Ended** |
|  | **December 31,** | **December 31,** |
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| Balance, beginning of year | $339 | $526 |
| &nbsp;&nbsp;New loans | - | - |
| &nbsp;&nbsp;Less loan repayments | (9) | (187) |
| Balance, end of year | $330 | $339 |

---

None of the related party loans were classified as nonaccrual, past due, restructured, or potential problem loans at December 31, 2024 or 2023.

*<u>Allowance for Credit Losses - Loans</u>*

The allowance for credit losses represents an allowance for expected losses over the remaining contractual life of the assets adjusted for prepayments. The contractual term does not consider extensions, renewals or modifications. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The following table is a summary of the activity within the allowance for credit losses during the years ended December 31, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **ACL- Loans** | **ACL-Unfunded<br> Commitments** | **Total ACL** |
| **<u>Year Ended December 31, 2024</u>** |  |  |  |
| Balances - December 31, 2023 | $15465 | $3916 | $19381 |
| &nbsp;&nbsp;&nbsp;&nbsp; Charge-offs | (285) | - | (285) |
| &nbsp;&nbsp;&nbsp;&nbsp; Recoveries | 189 | - | 189 |
| &nbsp;&nbsp;&nbsp;&nbsp; Provision (release) for credit losses | 1749 | (1196) | 553 |
| **Balances - December 31, 2024** | $17118 | $2720 | $19838 |
| **<u>Year Ended December 31, 2023</u>** |  |  |  |
| Balances - December 31, 2022 | $12362 | $- | $12362 |
| Impact of adopting ASC 2016-13 | 1666 | 4519 | 6185 |
| Balances - January 1, 2023 | 14028 | 4519 | 18547 |
| &nbsp;&nbsp;&nbsp;&nbsp; Charge-offs | (836) | - | (836) |
| &nbsp;&nbsp;&nbsp;&nbsp; Recoveries | 127 | - | 127 |
| &nbsp;&nbsp;&nbsp;&nbsp; Provision (release) for credit losses | 2146 | (603) | 1543 |
| **Balances - December 31, 2023** | $15465 | $3916 | $19381 |

---

The following table presents a summary of the Company's allowance, by loan category for credit losses for the year ended December 31, 2024:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Beginning** |  |  | **Provision** | **Ending** |
| <u>(In thousands of dollars)</u> | **Balance** | **Charge-offs** | **Recoveries** | **(Release)** | **Balance** |
| **Year Ended December 31, 2024** |  |  |  |  |  |
| Commercial loans |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and construction | $3318 | $- | $- | $(2130) | $1188 |
| &nbsp;&nbsp;Income producing CRE | 5067 | - | - | 800 | 5867 |
| &nbsp;&nbsp;Owner-occupied CRE | 628 | - | 53 | (138) | 543 |
| &nbsp;&nbsp;Senior housing | 1342 | - | - | 3234 | 4576 |
| &nbsp;&nbsp;Commercial and industrial | 1079 | (149) | 67 | (246) | 751 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 11434 | (149) | 120 | 1520 | 12925 |
| Retail loans |  |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 1277 | (36) | - | 447 | 1688 |
| &nbsp;&nbsp;Residential mortgages | 2167 | - | 15 | (167) | 2015 |
| &nbsp;&nbsp;Cash value life insurance LOC | 122 | (47) | - | 13 | 88 |
| &nbsp;&nbsp;Other consumer | 465 | (53) | 54 | (64) | 402 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 4031 | (136) | 69 | 229 | 4193 |
| Total allowance for funded loans | 15465 | (285) | 189 | 1749 | 17118 |
| Reserve for losses on<br> unfunded loan commitments | 3916 | - | - | (1196) | 2720 |
| **&nbsp;&nbsp;&nbsp;&nbsp;Total ACL** | $19381 | $(285) | $189 | $553 | $19838 |

---

The following table presents a summary of the Company's allowance, by loan category for credit losses for the year ended December 31, 2023:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Balance upon** |  |  |  |  |
|  | **Adoption of** |  |  | **Provision** | **Ending** |
| <u>(In thousands of dollars)</u> | **ASU 2016-13** | **Charge-offs** | **Recoveries** | **(Release)** | **Balance** |
| **Year Ended December 31, 2023** |  |  |  |  |  |
| Commercial loans |  |  |  |  |  |
| &nbsp;&nbsp;Acquisition, development, and construction | $1855 | $- | $- | $1463 | $3318 |
| &nbsp;&nbsp;Income producing CRE | 4891 | (82) | 17 | 241 | 5067 |
| &nbsp;&nbsp;Owner-occupied CRE | 832 | - | - | (204) | 628 |
| &nbsp;&nbsp;Senior housing | 994 | - | - | 348 | 1342 |
| &nbsp;&nbsp;Commercial and industrial | 1264 | (343) | 20 | 138 | 1079 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total commercial loans | 9836 | (425) | 37 | 1986 | 11434 |
| Retail loans |  |  |  |  |  |
| &nbsp;&nbsp;Marine vessels | 884 | (5) | - | 398 | 1277 |
| &nbsp;&nbsp;Residential mortgages | 2676 | (194) | 38 | (353) | 2167 |
| &nbsp;&nbsp;Cash value life insurance LOC | 153 | - | - | (31) | 122 |
| &nbsp;&nbsp;Other consumer | 479 | (212) | 52 | 146 | 465 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total retail loans | 4192 | (411) | 90 | 160 | 4031 |
| Total allowance for funded loans | 14028 | (836) | 127 | 2146 | 15465 |
| Reserve for losses on<br> unfunded loan commitments | 4519 | - | - | (603) | 3916 |
| **&nbsp;&nbsp;&nbsp;&nbsp;Total ACL** | $18547 | $(836) | $127 | $1543 | $19381 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

**NOTE 4** — **PREMISES, FURNITURE AND EQUIPMENT**

Premises, furniture and equipment owned and utilized in the operations of the Company are summarized as follows as of December 31:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| Buildings and improvements | $12167 | $12071 |
| Land | 4023 | 4023 |
| Furniture and equipment | 4673 | 4302 |
| Leasehold and land improvements | 4998 | 4315 |
| Software | 1276 | 1033 |
| Vehicles | 19 | 19 |
| Construction in progress | 143 | 122 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 27299 | 25885 |
| Less: accumulated depreciation and amortization | (9503) | (8174) |
| Premises, furniture and equipment, net | $17796 | $17711 |

---

Depreciation expense was $1.2 million for each of the years ended December 31, 2024 and 2023. Software amortization expense for the years ended December 31, 2024 and 2023 was $97 thousand and $68 thousand, respectively.

**NOTE 5** — **OTHER ASSETS**

Other assets consisted of the following as of December 31:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| Accrued interest receivable | $9706 | $9648 |
| Derivative assets | 7717 | 8737 |
| Right-of-use assets | 4036 | 3888 |
| Taxes receivable, net | 2791 | 2849 |
| Solar tax equity investments | 2666 | 783 |
| Prepaid expenses | 1705 | 1693 |
| Other real estate owned | 864 | - |
| Accounts receivable | 292 | 10348 |
| Other | 3052 | 3308 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total other assets | $32829 | $41254 |

---

**NOTE 6** — **GOODWILL AND INTANGIBLE ASSETS**

The Company's carrying amount of goodwill at December 31, 2024, and 2023 and changes to the goodwill are summarized as follows:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| Beginning of year | $4708 | $4708 |
| &nbsp;&nbsp;Acquired goodwill | - | - |
| &nbsp;&nbsp;Impairment | - | - |
| End of year | $4708 | $4708 |

---

Goodwill was recognized as a result of the Company's acquisition of First Citizens Financial Corporation in 2018. As of October 1, 2024, the Company performed its annual goodwill impairment evaluation conducting a comprehensive business valuation analysis using a quantitative method for determining the fair value. The Company determined the fair value of our reporting unit exceeded its carrying amount and that goodwill was not impaired. There are no events that have occurred since the last annual goodwill impairment assessment that would necessitate an interim goodwill impairment. No goodwill was recognized in conjunction with the acquisition of Cornerstone Bank in 2021.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The Company also had other intangible assets at December 31, 2024 and 2023, presented in the following table:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **2024** | **2024** | **2024** | **2023** | **2023** | **2023** |
| <u>(In thousands of dollars)</u> | **Gross Carrying<br>Amount** | **Accumulated<br>Amortization** | **Net Carrying<br>Value** | **Gross Carrying<br>Amount** | **Accumulated<br>Amortization** | **Net Carrying<br>Value** |
| Definite-lived intangible assets: |  |  |  |  |  |  |
| &nbsp;&nbsp;Core deposit intangibles | $1850 | $1409 | $441 | $1850 | $1220 | $630 |
| &nbsp;&nbsp;Commercial mortgage servicing rights | 3445 | 2208 | 1237 | 3019 | 1894 | 1125 |
| Total | $5295 | $3617 | $1678 | $4869 | $3114 | $1755 |

---

Core deposit intangibles are amortized over their estimated useful lives, which the Company determined is ten years. Amortization expense of $189 thousand and $227 thousand at December 31, 2024 and 2023, respectively, was recognized in other noninterest expense.

Commercial mortgage servicing rights arise from the sale of participating interests in government guaranteed loans to third parties where servicing is retained by the Company. These assets are amortized over the expected remaining life of the related loan. Amortization expense of $314 thousand and $544 thousand at December 31, 2024 and 2023, respectively, was recognized in other noninterest income related to these intangible assets. There was no impairment for the commercial mortgage servicing rights for the years ended December 31, 2024 and 2023.

The Company's estimated future amortization of intangible assets at December 31, 2024 is presented in the following table (in thousands of dollars):

---

| | |
|:---|:---|
| 2025 | $349 |
| 2026 | 294 |
| 2027 | 234 |
| 2028 | 131 |
| 2029 | 112 |
| **Thereafter** | 558 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total expected amortization** | $1678 |

---

Contractually specified servicing fees related to commercial mortgage servicing rights of approximately $1.1 million were recognized in Other noninterest income during each of the years ended December 31, 2024, and 2023. The principal balance of loans serviced for third parties was $201.0 million and $170.2 million at December 31, 2024 and 2023, respectively.

A roll forward of each class of commercial mortgage servicing rights is presented as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the years ended December 31,** | **For the years ended December 31,** | **For the years ended December 31,** | **For the years ended December 31,** |
|  | **2024** | **2024** | **2023** | **2023** |
| <u>(In thousands of dollars)</u> | **SBA** | **USDA** | **SBA** | **USDA** |
| Beginning carrying value, net | $697 | $428 | $840 | $462 |
| &nbsp;&nbsp;Amortization | (241) | (73) | (450) | (94) |
| &nbsp;&nbsp;Servicing rights originated | 134 | 292 | 307 | 60 |
| &nbsp;&nbsp;Servicing rights purchased | - | - | - | - |
| &nbsp;&nbsp;Servicing rights sold | - | - | - | - |
| &nbsp;&nbsp;Impairment | - | - | - | - |
| Ending carrying value, net | $590 | $647 | $697 | $428 |

---

The estimated fair value of the commercial mortgage servicing rights was $1.6 million and $1.3 million at December 31, 2024 and 2023, respectively.

**NOTE 7** — **DEPOSITS**

At December 31, 2024, the scheduled maturities of certificates of deposit were as follows:

---

| | |
|:---|:---|
| **Maturing In** | **Amount (in '000)** |
| 2025 | $754997 |
| 2026 | 3180 |
| 2027 | 670 |
| 2028 | 297 |
| 2029 and thereafter | 57 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | $759201 |

---

The Company had $275.3 million and $225.3 million in brokered deposits at December 31, 2024 and 2023, respectively. The Company also had reciprocal deposits of $131.5 million and $172.7 million at December 31, 2024 and 2023.

Time deposits that exceed the FDIC insurance limit of $250 thousand at December 31, 2024 and 2023 were estimated to be $165.6 million and $151.4 million, respectively.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

At December 31, 2024 and 2023, total deposits held by the Company's related parties were $47.5 million and $13.3 million, respectively. There were no deposits held by any depositor that exceeded 5% of the total deposits.

**NOTE 8** — **OTHER BORROWINGS**

The Company had the following other borrowings at December 31, 2024 and 2023:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Average<br>Interest Rate** | **Average<br>Interest Rate** |  | **Amount** | **Amount** |
| <u>(Dollars in thousands)</u> | **2024** | **2023** | **Maturity Date** | **2024** | **2023** |
| Federal Home Loan Bank of Atlanta advances: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Fixed Rate Advance | 4.43% | - | 1/8/2025 | $15000 | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Fixed Rate Advance | - | 5.45% | 1/11/2024 | $- | $25000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Daily Rate Advance | - | 5.57% | 12/31/2024 | - | 25000 |
| Revolving commercial line of credit, net | 8.33% | 8.20% | 12/10/2025 | 11995 | 23990 |
| Subordinated debt, net | 5.95% | 5.95% | 9/15/2030 | 14730 | 14682 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total other borrowings |  |  |  | $41725 | $88672 |

---

The Company had no pledged investment securities as collateral for the FHLBA advances at December 31, 2024 and 2023. The Company's FHLBA stock is also pledged to secure the borrowings. In addition, the Company has pledged blanket liens on its first mortgages 1-4 family residential loans, second mortgages 1-4 family residential loans, including open-ended loans and closed-end 1-4 family residential properties, and commercial real estate loans. The aggregate balance of identified pledgable loans totaled $162.8 million and $148.0 million at December 31, 2024 and 2023, respectively.

CSB had the ability to borrow an additional $141.8 million and $98.0 million at December 31, 2024 and 2023, respectively, from the FHLBA secured by a blanket lien on one-to-four family first mortgage loans, multifamily residential loans, and revolving, open-end loans, marketable securities or cash. FHLBA has approved borrowings up to 20% of CSB's total assets less advances outstanding. The borrowings are available by pledging collateral and purchasing additional stock in the FHLBA. All of the lines discussed above can be revoked at the lender's discretion.

On December 10, 2021, the Company ("Borrower") entered into a Loan and Security Agreement (the "Agreement") with ServisFirst Bank ("Lender"), for the Lender to extend a revolving line of credit in the maximum principal amount of $18.0 million (the "Loan") and commitment. Interest on the principal balance of the Loan from time to time outstanding was payable at a per annum rate (the "Interest Rate") equal to the greater of (i) the Prime Rate in effect from time to time; or (ii) a floor rate of three and twenty-five hundredths percent (3.25%). On November 21, 2023, the Agreement was amended and restated in its entirety to increase the maximum principal amount to $24.0 million and provided other terms and conditions. Interest on the principal balance of the loan from time to time outstanding is payable at a per annum Interest Rate equal to the greater of (i) the Prime Rate in effect from time to time; or (ii) a floor rate of five and twenty-five hundredths percent (5.25%). Each time a change to the Prime Rate occurs, the Interest Rate shall change concurrently with such change in the Prime Rate. At December 31, 2024, the Company had $12.0 million of this revolving commercial line of credit outstanding. Unamortized debt issuance costs related to this line of credit were $5 thousand at December 31, 2024, and $10 thousand at December 31, 2023.

The Company incurred $1.1 million and $1.5 million of interest expense related to the ServisFirst line of credit for the years ended December 31, 2024 and 2023, respectively.

The Company had pledged investment securities at December 31, 2024 and 2023, totaling $8.5 million and $10.1 million, respectively, as collateral for federal funds purchased. As of December 31, 2024, and 2023, the Company had unused lines of credit to purchase federal funds from unrelated banks totaling $69.5 million and $55.5 million, respectively, a portion of which is secured by investment securities. These lines of credit are available on a one-day basis for general corporate purposes. The Company had no outstanding balances under these lines of credit at December 31, 2024 and 2023.

As of December 31, 2024 the Company had an unused line of credit to borrow from the Federal Reserve Bank of Richmond discount window totaling $30.4 million, which was fully secured by investment securities. At December 31, 2023, the Company had and $184.1 million of unused lines of credit from the Federal Reserve Bank of Richmond, with $143.4 million availability under the BTFP and $40.7 million from the discount window, both fully secured by investment securities. The discount window line of credit was available on an overnight basis for general corporate purposes; the BTFP line of credit was available on a term basis for liquidity purposes. The Company had pledged investment securities at December 31, 2024 and 2023 totaling $32.1 million and $174.1 million, respectively, as collateral at the Federal Reserve Bank. As of December 31, 2024 and 2023, the Company had no outstanding balances.

On September 9, 2020, the Company issued a private placement of $15.0 million of 5.95% fixed-to-floating rate subordinated notes due 2030 (the "Notes") to certain qualified institutional buyers and institutional accredited investors (the "Private Placement"). The Notes have been structured to qualify as Tier 2 capital for regulatory capital purposes. The Notes are unsecured and have a ten-year

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

term, maturing September 15, 2030, and bear interest at a fixed annual rate of 5.95%, payable semi-annually in arrears, for the first five years of the term. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financing Rate ("Three-Month SOFR"), plus a spread of 582 basis points, payable quarterly in arrears, provided, however, that, in the event the Three-Month SOFR is less than zero, the Three-Month SOFR shall be deemed to be zero. As provided in the Notes, under specified conditions, the interest rate on the Notes during the Floating Rate Period may be determined based upon a rate other than Three-Month SOFR. The Company may redeem the Notes, in whole or in part, on any interest payment date on or after September 15, 2025, and to redeem the Notes at any time in whole upon certain other specified events. Unamortized debt issuance costs related to the subordinated debt were $270 thousand and $318 thousand at December 31, 2024 and 2023, respectively.

The Company incurred $940 thousand of interest expense related to subordinated debt for each of the years ended December 31, 2024 and 2023.

**NOTE 9** — **INCOME TAXES**

Income tax expense (benefit) for the years ended December 31, 2024 and 2023 is summarized as follows:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| Current portion: |  |  |
| &nbsp;&nbsp; Federal | $2933 | $6656 |
| &nbsp;&nbsp; State | 425 | 620 |
|  | 3358 | 7276 |
| Deferred income tax (benefit) expense | 1953 | (259) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total tax expense | $5311 | $7017 |

---

A reconciliation between the income tax expense and the amount computed by applying the Federal statutory rate of 21% to income before income taxes follows:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| Tax at U.S. Statutory Rate | $5715 | $6614 |
| Increase (decrease) resulting from: |  |  |
| &nbsp;&nbsp;State income tax, net of federal income tax effect | 503 | 590 |
| &nbsp;&nbsp;Stock-based compensation | 16 | 67 |
| &nbsp;&nbsp;Tax exempt income | 9 | (17) |
| &nbsp;&nbsp;Bank-owned life insurance | (349) | (563) |
| &nbsp;&nbsp;Gain on BOLI surrender | - | 789 |
| &nbsp;&nbsp;Tax credit investments | (628) | (509) |
| &nbsp;&nbsp;Other items, net | 45 | 46 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total tax expense | $5311 | $7017 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The gross amounts of deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023 are as follows:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| **Deferred tax assets:** |  |  |
| &nbsp;&nbsp;Net operating loss carryforward | $7134 | $7833 |
| &nbsp;&nbsp;Unrealized loss on securities available-for-sale | 5691 | 6960 |
| &nbsp;&nbsp;ACL - loans | 4024 | 3655 |
| &nbsp;&nbsp;Lease liability | 1124 | 1142 |
| &nbsp;&nbsp;General business credits | - | 1126 |
| &nbsp;&nbsp;ACL - unfunded commitments | 636 | 917 |
| &nbsp;&nbsp;Purchase accounting adjustments | 370 | 758 |
| &nbsp;&nbsp;Accrued expenses | 501 | 697 |
| &nbsp;&nbsp;Investments in partnerships | 518 | 445 |
| &nbsp;&nbsp;Stock-based compensation | 506 | 351 |
| &nbsp;&nbsp;Nonaccrual loan interest | 265 | 158 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax asset | 20769 | 24042 |
| **Deferred tax liabilities:** |  |  |
| &nbsp;&nbsp;Unrealized gain on cash flow hedges | (924) | (1052) |
| &nbsp;&nbsp;Lease right-of-use asset | (944) | (910) |
| &nbsp;&nbsp;Origination costs and fees | (547) | (664) |
| &nbsp;&nbsp;Depreciation | (146) | (93) |
| &nbsp;&nbsp;Prepaid expenses | (60) | (57) |
| &nbsp;&nbsp;Other | - | (24) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax liabilities | (2621) | (2800) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred tax asset | $18148 | $21242 |

---

Deferred tax assets represent the future benefit of deductible differences and, if it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. After review of all positive and negative factors and potential tax planning strategies, as of December 31, 2024 and 2023, management has determined that a valuation allowance is not necessary. Management has determined that it is more likely than not that the remaining deferred tax asset at December 31, 2024 will be realized, and accordingly, has not established a valuation allowance.

The Company has federal net operating losses of $30.5 million and $33.0 million at December 31, 2024 and 2023, respectively. These net operating losses expire at various times from 2028 through 2037. The Company's ability to benefit from the use of these net operating loss carryforwards is limited annually under Section 382 of the Internal Revenue Code. The Company has state net operating losses of $20.4 million and $24.0 million at December 31, 2024 and 2023, respectively. These net operating losses expire at various times from 2028 through 2038.

The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions in accordance with applicable regulations. Tax returns for 2021 and subsequent years are subject to examination by taxing authorities.

**NOTE 10** — **LEASES**

The Company has entered into several operating leases for properties for branch banking and other banking operations. The leases have various initial terms and expire on various dates. The lease agreements generally provide that the Bank is responsible for ongoing repairs and maintenance, insurance, and real estate taxes. The leases also provide for renewal options and certain scheduled increases in monthly lease payments. The Company does not consider exercise of any of these lease renewal options to be reasonably certain.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. For these short-term leases, lease expense is recognized on a straight-line basis over the lease term. There were no rental expenses recorded under short-term leases for the years ended December 31, 2024 and 2023. At December 31, 2024 and 2023, the Company had no leases classified as finance leases.

At December 31, 2024 and 2023, the Company had an operating lease ROU asset of $4.0 million and $3.9 million, and an operating lease liability of $4.8 million and $4.9 million, respectively. The ROU asset and operating lease liability are recorded in other assets and other liabilities, respectively, in the Consolidated Balance Sheets.

Rental expense recorded under long-term leases for the years ended December 31, 2024 and 2023 was $1.1 million and $990 thousand, respectively.

The weighted-average remaining lease term and the weighted-average discount rate for operating leases were 6.28 years and 2.81%, respectively, at December 31, 2024.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

A maturity analysis of the Company's operating lease liabilities and reconciliation of the undiscounted cash flows to the operating lease liability at December 31, 2024 is as follows (in thousands of dollars):

---

| | |
|:---|:---|
| 2025 | $987 |
| 2026 | 833 |
| 2027 | 809 |
| 2028 | 780 |
| 2029 | 600 |
| Thereafter | 1302 |
| &nbsp;&nbsp;Total undiscounted cash flows | 5311 |
| &nbsp;&nbsp;Discount on cash flows | (506) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total lease liability | $4805 |

---

**NOTE 11** — **OTHER NONINTEREST EXPENSE**

A summary of the components of other noninterest expense is as follows for the years ended December 31:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| General and administrative expense | $993 | $883 |
| Marketing and business development | 859 | 740 |
| Other loan expense | 518 | 497 |
| Deposit related expense | 386 | 731 |
| Board of directors fees | 318 | 318 |
| Amortization expense | 287 | 294 |
| SBA contingency reserve | (778) | (1848) |
| Other | 2011 | 2127 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total other noninterest expense | $4594 | $3742 |

---

**NOTE 12 — COMMITMENTS AND CONTINGENCIES**

In the normal course of business, the Company makes various commitments and incurs certain contingent liabilities that are not reflected in the Company's financial statements. These commitments and contingent liabilities include various guarantees, commitments to extend credit and standby letters of credit. The Company does not anticipate any material losses as a result of these commitments and contingent liabilities.

*<u>Credit Related Commitments</u>*

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Financial instruments where contract amounts represent credit risk as of December 31, 2024 and 2023 include:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| Commitments to extend credit | $460840 | $410698 |
| Letters of credit | 1223 | 501 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $462063 | $411199 |

---

Commitments to extend credit, including unused lines of credit, are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company's exposure to credit loss in the event of nonperformance by the other party to the instrument is represented by the contractual notional amount of the instrument. Since certain commitments are expected to expire without

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued to guarantee a customer's performance to a third party and have essentially the same credit risk as other lending facilities. Collateral held for commitments to extend credit and letters of credit varies but may include accounts receivable, inventory, property, plant, equipment and income-producing commercial properties. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.

The Company maintains cash deposits with a financial institution that during the year are in excess of the insured limitation of the Federal Deposit Insurance Corporation. If the financial institution were not to honor its contractual liability, the Company could incur losses. Management is of the opinion that there is not material risk because of the financial strength of the institution.

*<u>Tax Credit Investments</u>*

The Company has invested capital in a limited partnership to obtain renewable energy tax credits generated by solar power projects. The following table summarizes the tax credit investment and equity investment as of December 31, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
| <u>(In thousands of dollars)</u> | **Balance Sheet Location** | **2024** | **2023** |
| Carrying amount | Other assets | $2666 | $783 |
| Amount of future funding commitments not included in carrying amount | N/A | 2721 | 2462 |

---

There was $868 thousand and $598 thousand of net benefit to income tax expense from tax credit investments recognized in the provision for income taxes for the years ended December 31, 2024 and 2023, respectively.

*<u>Contingencies</u>*

The Company is subject to claims and lawsuits which arise primarily in the ordinary course of business. Management is not aware of any legal proceedings which could have a material adverse effect on the financial position or operating results of the Company.

**NOTE 13 — STOCK-BASED COMPENSATION**

In 2017, the shareholders of the Company approved the CoastalSouth Bancshares, Inc. 2017 Incentive Plan ("2017 Plan") to motivate, attract and retain the services of employees, officers, and directors. At December 31, 2024, 884,750 stock options had been granted and 332,000 shares of restricted stock units had been issued under the 2017 Plan. As of December 31, 2024, the Board of Directors has reserved 1,106,500 shares of the Company's common stock for issuance pursuant to awards granted under the 2017 Plan, any or all of which may be granted as nonqualified stock options, restricted stock, restricted stock units, deferred stock units, stock appreciation rights, performance awards and other stock-based awards, or any other right or interest relating to stock or cash, granted to a Participant under the Plan. Prior to 2022, awards were also able to be granted as incentive stock options. In the event all or a portion of a stock award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares subject to the Award shares again become available for issuance pursuant to awards granted under the 2017 Plan and do not count against the maximum number of reserved shares. In addition, shares of common stock deducted or withheld to satisfy tax withholding obligations count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan, and Shares delivered by a participant to satisfy tax withholding requirements are not added to the 2017 Plan share reserve. The 2017 Plan is administered by the Compensation Committee of our Board of Directors (the "Committee"). The determination of award recipients under the 2017 Plan, and the terms of those awards, are made by the Committee. The terms of each stock-based award are indicated in an award certificate. As of December 31, 2023, there were 1,000,720 shares reserved under the 2017 Plan and in 2024, the Board of Directors approved an additional 105,780 shares to the plan bringing to the total awards to 1,106,500. At December 31, 2024, there were 50,500 remaining shares available to be awarded under the 2017 Plan.

Stock-based awards are recognized over the vesting period and reflected as salaries and employee benefits within the Consolidated Statements of Operations, which was $1.3 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively.

*<u>Stock Options</u>*

The Company's stock options vest over four years of continuous service, with a majority vesting 25% on the anniversary of the grant date and a minority vesting 100% on the fourth anniversary of the grant date. The terms of all of the options are for ten years expiring on the tenth anniversary of the grant date.

The grant date fair value of stock options is determined using the Black-Scholes model. Volatility is based on a peer group of similar community banks in the southeast United States. The risk-free rate is the treasury rate that most closely relates to the expected life on the grant date.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

A summary of stock option activity for the years ended December 31, 2024 and 2023 is presented below:

---

| | | | |
|:---|:---|:---|:---|
|  |  |  | **Weighted Average** |
|  | **Number of** | **Weighted Average** | **Grant Date** |
|  | **Shares** | **Exercise Price** | **Fair Value** |
| Outstanding at December 31, 2022 | 753750 | $13.30 | $5.10 |
| Granted | 3500 | 15.70 | 7.00 |
| Exercised | - | - | - |
| Forfeited or Expired | (10500) | 14.26 | 6.36 |
| Outstanding at December 31, 2023 | 746750 | $13.29 | $5.09 |
| Granted | 1500 | 15.80 | 7.81 |
| Exercised | - | - | - |
| Forfeited or Expired | (11000) | 13.34 | 5.18 |
| Outstanding at December 31, 2024 | 737250 | $13.30 | $5.09 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Number of** | **Weighted Average** | **Weighted Average<br>Remaining** | **Aggregate <br>Intrinsic Award** |
|  | **Shares** | **Exercise Price** | **Contractual Life** | **Value** <sup>(1)</sup> |
| Outstanding at December 31, 2023 | 746750 | $13.29 |  |  |
| Outstanding at December 31, 2024 | 737250 | $13.30 | 4.06 | $6370 |
| Vested & exercisable at December 31, 2023 | 605997 | $13.55 |  |  |
| Vested & exercisable at December 31, 2024 | 706250 | $13.15 | 3.93 | $6208 |

---

<sup>(1)</sup> *Presented in thousands and considering a $21.94 market value at December 31, 2024.*

A summary of assumptions used in the valuation for stock options granted during the years ended December 31, 2024 and 2023 is below:

---

| | | |
|:---|:---|:---|
|  | **2024 Black-** | **2023 Black-** |
|  | **Scholes Inputs** | **Scholes Inputs** |
| Expected dividend yield | 0.00% | 0.00% |
| Expected volatility | 46.75% | 38.78% - 38.91% |
| Risk-free interest rate | 4.05% | 3.45% - 4.03% |
| Expected life (in years) | 6.25 | 6.25 |

---

As of December 31, 2024 and 2023, there was $124 thousand and $378 thousand of total unrecognized compensation cost related to stock options granted under the 2017 Plan. As of December 31, 2024, the cost is expected to be recognized over a weighted-average period of 0.96 years.

*<u>Restricted Stock Units</u>*

Periodically, the Company issues restricted stock units to its directors, executive and senior officers. Compensation expense is recognized over the vesting period of the awards based upon the fair value of the stock at grant date. In 2024, the Company granted restricted stock units to members of the Board of Directors of 19,700 that vested on December 31, 2024. In 2023, the Company granted restricted stock units to members of the Board of Directors of 17,600 with a one-year vesting period. Additionally, in 2024 and 2023, 80,500 and 74,500 restricted stock units, respectively, were granted to members of management. The 80,500 restricted stock units granted in 2024 cliff vest 100% at the end of five years. The 74,500 restricted stock units granted in 2023 cliff vest 100% at the end of three years.

A summary of restricted stock unit activity for the years ended December 31, 2024 and 2023 is below:

---

| | | |
|:---|:---|:---|
|  |  | **Weighted Average** |
|  | **Number of** | **Grant Date** |
|  | **Shares** | **Fair Value** |
| Outstanding at December 31, 2022 | 24100 | $17.75 |
| &nbsp;&nbsp;&nbsp;&nbsp;Granted | 92100 | 15.96 |
| &nbsp;&nbsp;&nbsp;&nbsp;Delivered | (26850) | 17.56 |
| &nbsp;&nbsp;&nbsp;&nbsp;Forfeited | - | - |
| Outstanding at December 31, 2023 | 89350 | $15.97 |
| &nbsp;&nbsp;&nbsp;&nbsp;Granted | 100200 | 16.53 |
| &nbsp;&nbsp;&nbsp;&nbsp;Delivered | (28775) | 16.27 |
| &nbsp;&nbsp;&nbsp;&nbsp;Forfeited | (1500) | 15.90 |
| Outstanding at December 31, 2024 | 159275 | $16.26 |

---

As of December 31, 2024 and 2023, there was $1.6 million and $1.0 million of total unrecognized compensation cost related to nonvested restricted stock units shares granted under the 2017 Plan. As of December 31, 2024, the cost is expected to be recognized over a weighted-average period of 3.24 years. There were no restricted stock unit awards that were vested but were not delivered during the year ended December 31, 2024.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

**NOTE 14 — NET INCOME PER COMMON SHARE**

Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted income per share is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding in-the-money stock warrants and options, as well as restricted stock units. Potential common shares are not included in the denominator of the diluted per share computation when inclusion would be anti-dilutive. As of December 31, 2024, and 2023, there were 80,000 and 142,500, potential common shares that were not included in the potentially dilutive stock options, restricted stock units and warrants, respectively.

Net income per common share were calculated as follows:

---

| | | |
|:---|:---|:---|
| <u>(In thousands of dollars except share and per share amounts)</u> | **2024** | **2023** |
| **Net income per share - basic computation:** |  |  |
| Net income available to common shareholders | $21904 | $24478 |
| Average common shares outstanding - basic | 10198298 | 9383559 |
| Basic net income per share | $2.15 | $2.61 |
| **Diluted net income per share computation:** |  |  |
| Net income available to common shareholders | $21904 | $24478 |
| Average common shares outstanding - basic | 10198298 | 9383559 |
| Incremental shares from assumed conversions |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock options | 192283 | 101656 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted stock units | 80052 | 19470 |
| Average common shares outstanding - diluted | 10470633 | 9504685 |
| Diluted net income per share | $2.09 | $2.58 |

---

**NOTE 15 — REGULATORY MATTERS**

CSB is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct adverse material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, CSB must meet specific capital guidelines that involve quantitative measures of CSB's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. CSB's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum ratios (set forth in the table below) of Tier 1 Capital, Common Equity Tier 1 (CET1), and total capital as a percentage of assets and off-balance-sheet exposures, adjusted for risk-weights ranging from 0% to 150%. Tier 1 capital of the CSB consists of common shareholders' equity, excluding the unrealized gain or loss on securities AFS, minus certain intangible assets, while CET1 is comprised of Tier 1 capital, adjusted for certain regulatory deductions and limitations. Tier 2 capital consists of the ACL subject to certain limitations. Total capital for purposes of computing the capital ratios consists of the sum of Tier 1 and Tier 2 capital.

CSB is also required to maintain capital at a minimum level based on total assets, which is known as the Tier 1 leverage ratio. Only the strongest banks are allowed to maintain capital at the minimum requirement of 3%. All others are subject to maintaining ratios 1% to 2% above the minimum.

Effective March 31, 2015, quantitative measures established by applicable regulatory standards, including the newly implemented Basel III revised capital adequacy standards and relevant provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd Frank Act"), require CSB to maintain (i) a minimum ratio of Tier 1 capital to average total assets, after certain adjustments, of 4.00%, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, (iii) a minimum ratio of total-capital to risk-weighted assets of 8.00% and (iv) a minimum ratio of CET1 to risk-weighted assets of 4.50%. A "well-capitalized" institution must generally maintain capital ratios 2% higher than the minimum guidelines. Because the Company is a small bank holding company under the guidelines of the Federal Reserve System and is not required to report consolidated capital ratios for regulatory purposes, capital ratios are presented for CSB only.

In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, CSB is required to maintain a "capital conservation buffer" in addition to its minimum risk-based capital requirements. This buffer is required to consist solely of CET1, but the buffer applies to all three risk-based measurements (CET1, Tier 1 and total capital). The capital conservation buffer

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

consists of an additional amount of Tier 1 capital equal to 2.5% of risk-weighted assets. The capital conservation buffer in effect for the year ended December 31, 2024 was 4.97%.

*Prompt Corrective Action* — In July 2013, the final rules implementing Basel III capital guidelines increased regulatory capital requirements of U.S. banking organizations in a manner that more closely reflected risk exposures and brought the regulatory capital framework into compliance with Basel III. The final rules revised the level at which the Bank becomes subject to corrective action. The federal banking agencies have broad powers with which to require companies to take prompt corrective action to resolve problems of insured depository institutions that do not meet minimum capital requirements. The law establishes five capital categories for this purpose: (i) well-capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; and (v) critically undercapitalized. The final rules amended the thresholds in the prompt corrective action framework to reflect the higher capital ratios required.

Even though the prompt corrective action rules apply to banks and not bank holding companies, the FRB is authorized to take actions at the holding company level. Failure to meet applicable capital standards could subject the bank holding company or the financial institution to a variety of enforcement remedies available to the federal regulatory authorities. These include limitations on the ability to pay dividends, the issuance by the regulatory authorities of a capital directive to increase capital, and the termination of deposit insurance by the FDIC. CoastalSouth Bancshares, Inc. is not subject to the provisions of prompt corrective action.

The following table summarizes the capital amounts and ratios of CSB and the regulatory minimum requirements at December 31, 2024 and 2023:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  | **To Be Well-** | **To Be Well-** |
|  |  |  | **For Capital** | **For Capital** | **Capitalized Under Prompt** | **Capitalized Under Prompt** |
| <u>(Dollars in thousands)</u> | **Actual** | **Actual** | **Adequacy Purposes** | **Adequacy Purposes** | **Corrective Action Provisions** | **Corrective Action Provisions** |
| **December 31, 2024** | **Amount** | **Ratio** | **Amount** | **Ratio** | **Amount** | **Ratio** |
| **Coastal States Bank** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total capital | $242716 | 12.97% | $149715 | 8.00% | $187144 | 10.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital | 225890 | 12.07% | 112287 | 6.00% | 149715 | 8.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;Tier 1 leverage | 225890 | 10.64% | 84923 | 4.00% | 106154 | 5.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;Common Equity Tier 1 Capital | 225890 | 12.07% | 84215 | 4.50% | 121644 | 6.50% |
| **December 31, 2023** |  |  |  |  |  |  |
| **Coastal States Bank** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total capital | $215009 | 12.36% | $139138 | 8.00% | $173922 | 10.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital | 200333 | 11.52% | 104353 | 6.00% | 139138 | 8.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;Tier 1 leverage | 200333 | 9.94% | 80636 | 4.00% | 100795 | 5.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;Common Equity Tier 1 Capital | 200333 | 11.52% | 78265 | 4.50% | 113049 | 6.50% |

---

The Bank's regulatory capital ratios are currently well in excess of the minimum standards and continue to be in the "well-capitalized" regulatory classification.

**NOTE 16 — SHAREHOLDERS' EQUITY**

*Voting Common Stock* **—** The Company issued 28,775 and 26,850 shares of voting common stock for vested restricted stock units ("RSU's") in 2024 and 2023, respectively. On January 26, 2024, 701,442 shares of voting common stock were issued upon a common stock offering private placement. On March 31, 2023, 446,705 shares of voting common stock were issued upon a common stock offering private placement. At December 31, 2024, there were 8,098,117 shares of $1.00 par value voting common stock outstanding.

*Non-voting Common Stock* — On January 26, 2024, there were no shares of non-voting common stock issued upon the common stock offering private placement. On March 31, 2023, 107,000 shares of non-voting common stock were issued upon the common stock offering private placement. At December 31, 2024, there were 2,172,029 shares of $1.00 par value non-voting common stock outstanding.

*Dividends* — The ability of the Company to pay cash dividends to shareholders is dependent upon receiving cash in the form of dividends from its banking subsidiary. However, certain restrictions exist regarding the ability of the subsidiary to transfer funds in the form of cash dividends to the Company. South Carolina banking regulators restrict the amount of dividends that can be paid to shareholders. All of CSB's dividends to the Company are payable only from the undivided profits of CSB. In 2024, CSB paid a $6.0 million dividend to the Company. At December 31, 2024, CSB had retained earnings of $55.8 million.

*Accumulated Other Comprehensive Loss* — Shareholders' equity as of December 31, 2024 was negatively impacted by the decline of fair value for our AFS investment portfolio driven by the rising interest rates. The Company reviews its AFS securities portfolio quarterly for credit related impairment, and none was recognized. Management believes that the decreases in value are driven by these interest rate movements and are not indicative of credit or other performance issues within the securities portfolio. The Company's AOCL as of December 31, 2024 was $15.8 million.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

As a State chartered bank under South Carolina law, the Bank is authorized to pay cash dividends up to 100% of net income in any calendar year without obtaining the prior approval of the South Carolina State Board of Financial Institutions ("State Board") or the Commissioner of Banking provided that the Bank received a composite rating of one or two at the last examination conducted by the State or Federal regulatory authority. Otherwise, the Bank must file an income and expense report and obtain the specific approval of the State Board. Under Federal Reserve Board regulations, the amount of loans or advances from the banking subsidiary to the parent company are also restricted.

**NOTE 17 — FAIR VALUE OF FINANCIAL INSTRUMENTS**

US GAAP provides a framework for measuring and disclosing fair value which requires disclosures about the fair value of assets and liabilities recognized in the balance sheet, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or on a nonrecurring basis (for example, collateral-dependent loans).

Fair value is defined as the exchange in price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. US GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

*<u>Fair Value Hierarchy</u>*

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value. These levels are:

**Level 1** Valuation is based upon quoted prices for identical instruments traded in active markets.

**Level 2** Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

**Level 3** Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

*Securities AFS* — Securities AFS are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

*Equity Securities* ***—*** Equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. There were no equity securities held at December 31, 2024 and 2023.

*Loans Held for Sale* ***—*** Loans held for sale are comprised of loans originated for sale in the ordinary course of business and purchased with intent to sell through MBF. The fair value of loans originated for sale in the secondary market is based on purchase commitments or quoted prices for the same or similar loans and are classified as recurring Level 2. There were no loans held for sale requiring fair value adjustments at December 31, 2024 and 2023.

*Collateral-Dependent Loans* — The Company does not record loans at fair value on a recurring basis, however, from time to time, a loan is considered collateral-dependent and an allowance for credit loss is established. Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment. If a loan is determined to be collateral-dependent, or if foreclosure is probable, the Company measures the net realizable

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

value of the collateral (fair value less costs to sell) to determine the level of impairment for the loan. The valuation of collateral is supported by an appraisal, brokers price opinion, or other comparable market data. Otherwise, the Company performs a discounted cash flow analysis on the loan to determine the level of ACL needed. At December 31, 2024, substantially all of the collateral-dependent loans were evaluated based upon the fair value of the collateral. Collateral-dependent loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

*OREO* — Foreclosed assets are adjusted to fair value upon transfer of the loans to OREO. Real estate acquired in settlement of loans is recorded initially at estimated fair value of the property less estimated selling costs at the date of foreclosure. The initial recorded value may be subsequently reduced by additional allowances, which are charges to earnings if the estimated fair value of the property less estimated selling costs declines below the initial recorded value. OREO presented as measured on a non-recurring basis includes only those properties that had changes in valuation. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral.

*Derivative Financial Instruments* — The Company's derivative financial instruments, which are interest rate contracts, are valued using a discounted cash flow method that incorporates current market interest rates.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy at December 31, 2024 and 2023:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| <u>(In thousands of dollars)</u> | **Total** | **Level 1** | **Level 2** | **Level 3** |
| **Assets:** |  |  |  |  |
| &nbsp;&nbsp;***Available-for-sale securities*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasuries | $5612 | $- | $5612 | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal obligations | 53071 | - | 53071 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 166092 | - | 166092 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Asset-backed securities | 46940 | - | 46940 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 63552 | - | 63052 | 500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $335267 | $- | $334767 | $500 |
| &nbsp;&nbsp;***Other*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative assets | $7717 | $- | $7717 | $- |
| **Liabilities:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative liabilities | $(6) | $- | $- | $(6) |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** |
| <u>(In thousands of dollars)</u> | **Total** | **Level 1** | **Level 2** | **Level 3** |
| **Assets:** |  |  |  |  |
| &nbsp;&nbsp;***Available-for-sale securities*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasuries | $52008 | $- | $52008 | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal obligations | 62884 | - | 62884 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 149336 | - | 149336 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Asset-backed securities | 55664 | - | 55664 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 34904 | - | 34404 | 500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $354796 | $- | $354296 | $500 |
| &nbsp;&nbsp;***Other*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative assets | $8738 | $- | $8738 | $- |
| **Liabilities:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative liabilities | $(165) | $- | $(142) | $(23) |

---

Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2024 and 2023 were $500 thousand. There were no changes in the value in either of those years.

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents the assets and liabilities carried on the balance sheet by caption and by level within the valuation hierarchy (as described above) for which a nonrecurring change in fair value has been recorded during the years ended December 31, 2024 and 2023.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| <u>(In thousands of dollars)</u> | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Other real estate owned | $864 | $- | $- | $864 |
| Collateral-dependent loans, net | $13215 | $- | $- | $13215 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $14079 | $- | $- | $14079 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** |
| <u>(In thousands of dollars)</u> | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Collateral-dependent loans, net | $4139 | $- | $- | $4139 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $4139 | $- | $- | $4139 |

---

There were no liabilities measured at fair value on a nonrecurring basis at December 31, 2024 and 2023.

The following tables present quantitative information about the unobservable inputs used in Level 3 fair value measurements at December 31, 2024 and 2023:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2024** | (In thousands of dollars) |  |  |  |
| **Financial Instrument** | **Net Carrying<br>Value** | **Valuation Technique** | **Unobservable Input** | **Input** |
| Other real estate<br> owned | $864 | Third party appraisal or broker's price opinion | Management discount for costs to sell | 10% |
| Collateral-dependent loans, net | $13215 | Third party appraisal or broker's price opinion | Management discount for costs to sell | 10% |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2023** | (In thousands of dollars) |  |  |  |
| Collateral-dependent loans, net | $4139 | Third party appraisal or broker's price opinion | Management discount for costs to sell | 10% |

---

*<u>Fair Value of Financial Instruments</u>*

The following tables include the estimated fair value of the Company's financial assets and financial liabilities. The methodologies for estimating the fair value of financial assets and financial liabilities measured on a recurring and nonrecurring basis are discussed above. The methodologies for estimating the fair value for other financial assets and financial liabilities are discussed below. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation techniques may have a material effect on the estimated fair value amounts at December 31, 2024.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| <u>(In thousands of dollars)</u> | **Carrying<br>Amount** | **Fair Value** | **Level 1** | **Level 2** | **Level 3** |
| *Financial Assets:* |  |  |  |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $67961 | $67961 | $67961 | $- | $- |
| &nbsp;&nbsp;Loans held for sale | 174033 | 174033 | - | 174033 |  |
| &nbsp;&nbsp;Loans held for investment, net | 1392325 | 1347071 | - | - | 1347071 |
| &nbsp;&nbsp;Non-marketable equity securities | 7483 | 7483 | - | - | 7483 |
| *Financial Liabilities:* |  |  |  |  |  |
| &nbsp;&nbsp;Deposits | 1834802 | 1723134 | - | 1723134 | - |
| &nbsp;&nbsp;Other borrowings | 41725 | 41531 | - | 41531 | - |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** |
| <u>(In thousands of dollars)</u> | **Carrying<br>Amount** | **Fair Value** | **Level 1** | **Level 2** | **Level 3** |
| *Financial Assets:* |  |  |  |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $48553 | $48553 | $48553 | $- | $- |
| &nbsp;&nbsp;Loans held for sale | 82125 | 82125 | - | 82125 |  |
| &nbsp;&nbsp;Loans held for investment, net | 1402960 | 1365857 | - | - | 1365857 |
| &nbsp;&nbsp;Non-marketable equity securities | 8608 | 8608 | - | - | 8608 |
| *Financial Liabilities:* |  |  |  |  |  |
| &nbsp;&nbsp;Deposits | 1750657 | 1655992 | - | 1655992 | - |
| &nbsp;&nbsp;Other borrowings | 88672 | 88672 | - | 88672 | - |

---

*Cash and cash equivalents* **—** The carrying amounts of cash and due from banks and federal funds sold approximate their fair values.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

*Loans held for sale* **—** Loans held for sale are carried at the lower of cost or fair value. These loans currently consist of one-to-four family residential real estate loans originated for sale to qualified third parties. Fair value is based upon the contractual price to be received from these third parties, which may be different than cost.

*Loans held for investment, net* **—** Fair values are estimated for portfolios of loans with similar financial characteristics if collateral-dependent. Loans are segregated by type. The fair value of performing loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect observable market information incorporating the credit, liquidity, yield and other risks inherent in the loan. The estimate of maturity is based upon the Company's historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of the current economic and lending conditions. Fair value for significant non-performing loans is generally based upon recent external appraisals. If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows and discounted rates are judgmentally determined using available market information and specific borrower information.

*Non-marketable equity securities* **—** Non-marketable equity securities are carried at original cost basis, as cost approximates fair value and there is no ready market for such investments.

*Deposits* **—** The fair value of deposits with no stated maturity date, such as noninterest-bearing demand deposits, savings and money market and checking accounts, is based on the discounted value of estimated cash flows. The fair value of time deposits is based upon the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

*Other borrowings* **—** The fair value of the Company's FHLBA, line of credit and subordinated debt advances are estimated based upon the discounted value of contractual cash flows. The fair value of investment securities sold under agreements to repurchase approximates the carrying amount because of the short maturity of these borrowings. The discount rate is estimated using rates quoted for the same or similar issues or the current rates offered to the Company for debt of the same remaining maturities.

**NOTE 18 — REVENUE RECOGNITION**

Accounting Standards Codification ("ASC") 606, *Revenue from Contracts with Customers* ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The Company's sources of revenue are generated from both interest and noninterest revenue streams. The majority of our revenue-generating transactions are not subject to ASC 606. Revenue streams generated by fees and interest from financial instruments, investments, and transfers and servicing of these assets are excluded from this disclosure.

The Company has certain revenue streams within the scope of ASC 606 contained within noninterest income. The Company's contracts with customers generally do not contain terms that require significant judgment to determine the amount of revenue to recognize.

The table below presents the revenue streams within the scope of the standard and is followed by a description of each noninterest income revenue stream for the years ended December 31, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| <u>(In thousands of dollars)</u> | **Within Scope** | **Out of Scope** | **Total** |
| **Noninterest income:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of government guaranteed loans | $- | $1818 | $1818 |
| &nbsp;&nbsp;&nbsp;&nbsp;Bank-owned life insurance | - | 1664 | 1664 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income from mortgage originations | - | 1204 | 1204 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interchange income and card fees | 868 | - | 868 |
| &nbsp;&nbsp;&nbsp;&nbsp;Service charges on deposit accounts | 846 | - | 846 |
| &nbsp;&nbsp;&nbsp;&nbsp;Losses on sale of available-for-sale securities | - | (3465) | (3465) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other noninterest income | 151 | 1428 | 1579 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | $1865 | $2649 | $4514 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** |
| <u>(In thousands of dollars)</u> | **Within Scope** | **Out of Scope** | **Total** |
| **Noninterest income:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Bank-owned life insurance | $- | $2680 | $2680 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of government guaranteed loans | - | 1360 | 1360 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interchange income and card fees | 1045 | - | 1045 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on hedge termination | - | 992 | 992 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income from mortgage originations | - | 912 | 912 |
| &nbsp;&nbsp;&nbsp;&nbsp;Service charges on deposit accounts | 755 | - | 755 |
| &nbsp;&nbsp;&nbsp;&nbsp;Losses on sale of available-for-sale securities | - | (517) | (517) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other noninterest income | 158 | 1209 | 1367 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | $1958 | $6636 | $8594 |

---

*Gain on sale of government guaranteed loans* **—** The Company records a gain from the sale of government guaranteed loans to third parties at the time the transfer is complete. The gain on sale is recognized as a result of the recognition of mortgage servicing rights and premiums paid by the buyer for the purchase of the loan.

*Bank-owned life insurance* **—** The Company's income from bank-owned life insurance primarily represents changes in the cash surrender value of such life insurance policies held on certain key employees, for which the Company is the owner and beneficiary. Revenue is recognized in each period based on the change in cash surrender value during the period.

*Income from mortgage originations* **—** The Company earns mortgage production income which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.

*Interchange income and card fees* **—** The Company earns interchange fees from debit cardholder transactions conducted through a payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are earned daily.

*Service charges on deposit accounts* **—** The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees and stop payment charges, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges are withdrawn from the customer's account balance.

*Losses on sale of available-for-sale Securities* **—** The Company recognizes realized gains or losses from the sale of its available-for-sale securities at the trade date and recognizes periodic mark-to-market adjustments on equity securities resulting from changes in fair value.

*Gain (loss) on hedge termination, net* **—** The Company recognizes realized gains or losses from terminated fair value hedging relationships through earnings as excluded components deferred in AOCI or AOCL that were recognized through an amortization approach are released to earnings consistent with how other components of the carrying amount of the hedged item are recognized in earnings. When a cash flow hedging instrument is sold, extinguished, terminated, exercised, or expires, it is derecognized and the amounts in AOCI or AOCL, including amounts remaining related to excluded components that were recognized through an amortization approach, remain there until the forecasted transaction impacts earnings unless the forecasted transaction becomes probable of not occurring.

*Other noninterest income* **—** Other noninterest income consists primarily of loan fees, which are out of the scope of ASC Topic 606. The items within scope of the standard primarily relate to contracts with third parties for miscellaneous referral or broker income.

*Contract assets and liabilities* **—** A contract asset balance typically occurs when an entity performs a service for a customer before the customer payment of consideration, creating a contract receivable, or before payment is due, creating a contract asset. In contrast, a contract liability balance is an entity's obligation to transfer a service to a customer for which the entity has already received payment of consideration from the customer. The Company's noninterest revenue streams that are within the scope of ASC 606 are largely based on transactional activity which typically occurs at a point in time immediately after the performance obligations have been satisfied. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers. Therefore, the Company does not experience significant contract balances. As of December 31, 2024 and 2023, the Company did not have any significant contract balances.

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

**NOTE 19 — DERIVATIVE FINANCIAL INSTRUMENTS**

The Company utilizes interest rate swaps agreements as part of its asset-liability management strategy to help mitigate its interest rate risk. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Derivative financial instruments are recorded in the Consolidated Balance Sheets as either an asset or a liability (in other assets or other liabilities, respectively) and measured at fair value.

The adoption of ASU 2020-04, Reference Rate Reform (Topic 848) resulted to transitioning away from London Interbank Offered Rate ("LIBOR") to the overnight SOFR swap with a predetermined fallback spread for the fair value hedging instruments. The cumulative basis of the hedged item attributable to changing from the originally designated benchmark interest rate was adjusted to reflect the replacement designated benchmark interest rate. Under this approach, the Company recognizes the change to the hedged item's basis adjustment immediately in earnings within the same income statement line used to present the earnings effect of the hedged item. For the cash flow hedges, LIBOR hedge and hedged item converted to Overnight SOFR as hedged item utilizes a benchmark rate component, and Fed Funds hedge at onset whereas LIBOR hedged item converted to Term SOFR as hedged item utilizes contractually specified rate. This transition occurred after end of day on June 30, 2023.

The Company presents derivative position gross on the balance sheet. The following tables reflects the derivatives recorded on the balance sheet as of the dates indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Included in Other Assets** | **Included in Other Assets** | **Included in Other Liabilities** | **Included in Other Liabilities** |
| (In thousands of dollars) | **Notional** | **Fair** | **Notional** | **Fair** |
| **December 31, 2024** | **Amount** | **Value** | **Amount** | **Value** |
| ***Derivatives designated as hedges:*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps related to<br>&nbsp;&nbsp;&nbsp;&nbsp; cash flow hedges | $225000 | $4576 | $- | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps related to<br>&nbsp;&nbsp;&nbsp;&nbsp; fair value hedges | 25535 | 3141 | - | - |
| ***Derivatives not designated as hedges:*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Sold credit protection on risk<br>&nbsp;&nbsp;&nbsp;&nbsp; participation agreements | - | - | 15000 | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total included in Other assets |  | $7717 |  | $(6) |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Included in Other Assets** | **Included in Other Assets** | **Included in Other Liabilities** | **Included in Other Liabilities** |
| (In thousands of dollars) | **Notional** | **Fair** | **Notional** | **Fair** |
| **December 31, 2023** | **Amount** | **Value** | **Amount** | **Value** |
| ***Derivatives designated as hedges:*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps related to<br>&nbsp;&nbsp;&nbsp;&nbsp; cash flow hedges | $225000 | $5706 | $35000 | $(142) |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps related to<br>&nbsp;&nbsp;&nbsp;&nbsp; fair value hedges | 25535 | 3032 | - | - |
| ***Derivatives not designated as hedges:*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Sold credit protection on risk<br>&nbsp;&nbsp;&nbsp;&nbsp; participation agreements | - | - | 372 | (23) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total included in Other liabilities |  | $8738 |  | $(165) |

---

*<u>Fair Value Hedges</u>* 

Fair value hedge interest rate swaps mature on various dates with a combined notional amount of $25.5 million at December 31, 2024. The risk management objective with respect to the fair value hedges is to hedge the risk of certain municipal securities. These fair value hedges convert the fixed rates of the bonds to a floating leg of Overnight SOFR + 26.161 basis points. The hedges were determined to be effective during the periods presented. The Company expects these hedges to remain effective during the remaining term of the swap.

The following table presents the amounts recorded on the balance sheet related to cumulative basis adjustment for the fair value hedges as of December 31, 2024 and 2023:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |  |  | **Cumulative Amount of Fair** | **Cumulative Amount of Fair** |
| **Line Item in the** |  |  | **Value Hedging Adjustment** | **Value Hedging Adjustment** |
| **Balance Sheet in** |  |  | **Included in the Carrying** | **Included in the Carrying** |
| **Which the Hedged** | **Carrying Amount** | **Carrying Amount** | **Amount of the** | **Amount of the** |
| **Item is Included** | **of the Hedged Assets** | **of the Hedged Assets** | **Hedged Assets** | **Hedged Assets** |
| <u>(In thousands of dollars)</u> | **2024** | **2023** | **2024** | **2023** |
| Securities available-for-sale | $22632 | $22795 | $(3271) | $(3176) |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

As of December 31, 2024, the total notional amount of the pay-fixed/receive variable interest rate swap portfolio was $25.5 million. There were no hedging adjustments on the balances above for discontinued relationships.

During 2023, the Company terminated 8 non-forward starting interest rate swaps designated as fair value hedges with a notional amount of $12.6 million and recognized a gain of $992 thousand in other noninterest income on the Consolidated Statements of Operations during 2023.

The following table summarizes information about the interest rate swaps designated as fair value hedges at December 31, 2024:

---

| | |
|:---|:---|
| <u>(Dollars in thousands)</u> |  |
| Notional amount of fair value hedges | $25535 |
| Weighted average maturity in years | 4.99 |

---

The following table presents the change in fair value for derivatives designated as fair value hedges as well as the offsetting change in fair value on the hedged item for the years ended December 31, 2024 and 2023:

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| ***Interest rate contracts: Gain or (Loss)*** |  |  |
| &nbsp;&nbsp;Change in fair value of interest rate swaps hedging available-for-sale<br> securities | $109 | $(1219) |
| &nbsp;&nbsp;Change in fair value of hedged available-for-sale securities | $(95) | $1177 |

---

The following table presents the effect of fair value hedge Accounting on the Consolidated Statements of Operations and the location and amount of gain or (loss) recognized in income on Fair Value hedging relationships for the years ended December 31, 2024 and 2023:

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2024** | **2023** |
|  | **Interest Income** | **Interest Income** |
| <u>(In thousands of dollars)</u> | **(Offset to AOCI)** | **(Offset to AOCI)** |
| ***Gain or (loss) on fair value hedging relationships*** |  |  |
| &nbsp;&nbsp;Interest contracts: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of interest rate swaps hedging available-for-sale<br> securities | $109 | $(1219) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of hedged available-for-sale securities | $(95) | $1177 |

---

*<u>Cash Flow Hedges</u>* 

A cash flow hedge interest rate swap that matures on February 14, 2026 had a notional amount of $50.0 million as of December 31, 2024. The risk management objective with respect to hedge the risk of variability in its cash flows (i.e., future interest payments) attributable to changes in the SOFR rate. The objective of the hedge is to offset the variability of cash flows due to the rollover of its fixed-rate advances from February 14, 2023 to February 14, 2026. The company designates the $50.0 million interest rate swap (the hedging instrument) as a cash flow hedge of the risk of changes in cash flows attributable to changes in the benchmark Federal Funds interest rate risk for the forecasted issuances of advances arising from a rollover strategy. The forecasted funding will be provided through FHLBA, brokered CD, or other fixed rate advances or a combination thereof. In addition, the funding can be wholly or partially from a term funding based on a contractually specified SOFR interest rate. The hedge was determined to be effective during the periods presented. The Company expects the hedge to remain effective during the remaining term of the swap.

A cash flow hedge interest rate collar that matures on November 2, 2025 had a notional amount of $150.0 million as of December 31, 2024. The risk management objective with respect to this cash flow hedge is to hedge floating rate interest receipts based on the contractually specified SOFR rate. Initially, these receipts are made up of the interest payments received on the first of a previously unhedged $150.0 million pool of customer loans indexed to SOFR for interest payments received from November 2, 2022 through November 2, 2025. The company designates this interest rate collar (the hedging instrument) as a cash flow hedge, hedging the risk of changes in its cash flows between 4.00% and 1.00% attributable to changes in the contractually specified interest rate, currently the SOFR rate, on its customer floating rate loan pool. To reduce upfront premium expense, the company is capping any benefit on its customer floating rate loan pool by selling a 6.00% cap. The combination of the purchased option and the sold option created a collar costing $1.7 million. A $12.5 million portion of the cash flow utilized 1-month LIBOR as their reference rate. These cash flows transitioned to the SOFR rate due to the required LIBOR transition for all LIBOR variable rate instruments after June 30, 2023. This hedge designation references the optional expedients referenced under ASC 848, *Reference Rate Reform* due to the hedged cash flows currently referencing LIBOR at time of designation. This hedge was determined to be effective during the periods presented. The Company expects the hedge to remain effective during the remaining term of the option.

A cash flow hedge interest rate swap that matures on October 21, 2030 had a notional amount of $25.0 million as of December 31,

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

2024. The risk management objective with respect to the cash flow hedge is to hedge the risk of variability in the Company's cash flows (future interest payments) attributable to changes in the 3-month LIBOR rate pertaining to fluctuations in market interest rates on $25.0 million of FHLBA, brokered Certificate of Deposits or other fixed rate advances for that period. The objective of the hedge is to offset the variability of cash flows due to the rollover of its fixed-rate 3-month FHLBA or another fixed rate advance every quarter from October 31, 2022 to October 21, 2030. After June 30, 2023, both LIBOR hedge and hedged item converted to Overnight SOFR as hedged item utilizes a benchmark rate component. The hedge was determined to be effective during the periods presented. The Company expects the hedge to remain effective during the remaining term of the swap.

The tables below present the gains and (losses) recognized in AOCI and the location in the Consolidated Statements of Operations of the gains and (losses) reclassified from OCI into earnings for derivatives designated as cash flow hedges for the years ended December 31, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
| **2024** | **2024** | **2024** | **2024** |
| <u>(In thousands of dollars)</u> |  |  |  |
| **Derivatives in Cash Flow Hedging Relationships** | **Amount of Gain (Loss) Recognized in OCI on Derivative** | **Location of Gain (Loss) Reclassified from OCI into Income** | **Amount of Gain (Loss) Reclassified from OCI into Income (pre-tax)** |
| Interest rate swap contracts |  | Interest income (expense) |  |
| &nbsp;&nbsp;Effective portion | $890 | Effective portion | $1751 |
| &nbsp;&nbsp;Deferred tax | $(128) | Amount excluded from the assessment <br>of effectiveness and amortized into earnings | $(455) |

---

---

| | | | |
|:---|:---|:---|:---|
| **2023** | **2023** | **2023** | **2023** |
| <u>(In thousands of dollars)</u> |  |  |  |
| **Derivatives in Cash Flow Hedging Relationships** | **Amount of Gain (Loss) Recognized in OCI on Derivative** | **Location of Gain (Loss) Reclassified from OCI into Income** | **Amount of Gain (Loss) Reclassified from OCI into Income (pre-tax)** |
| Interest rate swap contracts |  | Interest income (expense) |  |
| &nbsp;&nbsp;Effective portion | $407 | Effective portion | $328 |
| &nbsp;&nbsp;Deferred tax | $160 | Amount excluded from the assessment <br>of effectiveness and amortized into earnings | $(426) |

---

Gains and losses on interest rate swaps related to funding liabilities are recorded in interest income/expense. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives' fair value will not be included in current earnings but are reported as a component of OCI in the Consolidated Statements of Changes in Shareholders' Equity. These changes in fair value will be included in earnings of future periods when earnings are also affected by the changes in the hedged cash flows. To the extent these derivatives are not effective, changes in their fair values are immediately included in other income or expense.

The following tables summarizes information about the interest rate swaps and option collar designated as a cash flow hedge at December 31, 2024:

---

| | |
|:---|:---|
| <u>(Dollars in thousands)</u> |  |
| Notional Amount - Pay Fixed Swap | $75000 |
| Weighted average fixed pay rate | 2.78% |
| Weighted average 3-month receive rate | 5.26% |
| Weighted average maturity in years | 2.68 |
| During the next twelve months, the Company estimates that will be <br> reclassified from OCI as a decrease to interest expense | $806 |
| During the next twelve months, the Company estimates that will be <br> reclassified from Deferred Tax as a decrease to interest expense | $255 |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

---

| | |
|:---|:---|
| <u>(Dollars in thousands)</u> |  |
| Notional Amount Collar | $150000 |
| Floor strike | 4.00% |
| Cap strike | 6.00% |
| Weighted average maturity in years | 0.84 |
| During the next twelve months, the Company estimates that will be <br> reclassified from OCI as a decrease to interest income | $547 |
| During the next twelve months, the Company estimates that will be <br> reclassified from Deferred Tax as a decrease to interest income | $173 |

---

*<u>Derivatives not Designated as Hedges</u>*

*Risk Participation Agreements* — The Company has one risk participation agreement with a financial institution counterparty for an interest rate swap related to a loan in which it is a participant. A risk participation agreement provides credit protection to the financial institution should the borrower fail to perform on their interest rate derivative contract with the financial institution. A risk participation agreement is a credit derivative not designated as a hedge. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities. Changes in the fair value in credit derivatives are recognized directly in earnings. The fee received, less the estimate of the loss for the credit exposure, was recognized in earnings at the time of the transaction.

The net gain (loss) related to changes in fair value from derivative instruments not designated as hedging instruments during the years ended December 31, 2024 and 2023 is summarized on the table below:

---

| | | | |
|:---|:---|:---|:---|
|  |  | **Year Ended December 31,** | **Year Ended December 31,** |
| <u>(In thousands of dollars)</u> | **Location** | **2024** | **2023** |
| Credit risk participation agreements | Other noninterest income | $(6) | $(23) |

---

**NOTE 20 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)**

The following were changes in accumulated other comprehensive income (loss) by component, net of tax, for the years ended December 31, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
|  | **Gains and Losses** | **Gains and Losses** |  |
| <u>(In thousands of dollars)</u> | **on Securities** | **on** |  |
| **Year Ended December 31, 2024** | **Available-for-Sale** | **Cash Flow Hedges** | **Total** |
| Beginning Balance | $(22863) | $3332 | $(19531) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income (loss) before reclassification, net of tax | 1496 | 587 | 2083 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amounts reclassified from accumulated other comprehensive income, net<br>&nbsp;&nbsp;&nbsp;&nbsp; of tax | 2654 | (993) | 1661 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net current period other comprehensive income (loss) | 4150 | (406) | 3744 |
| Ending Balance | $(18713) | $2926 | $(15787) |
| **Year Ended December 31, 2023** |  |  |  |
| Beginning Balance | $(29502) | $2827 | $(26675) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income (loss) before reclassification, net of tax | 7003 | 430 | 7433 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amounts reclassified from accumulated other comprehensive income,<br>&nbsp;&nbsp;&nbsp;&nbsp; net of tax | (364) | 75 | (289) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net current period other comprehensive income (loss) | 6639 | 505 | 7144 |
| Ending Balance | $(22863) | $3332 | $(19531) |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

The following were significant amounts reclassified out of each component of other comprehensive income (loss) for the years ended December 31, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
|  | (In thousands of dollars) | (In thousands of dollars) |  |
| **Details about Accumulative Other<br>Comprehensive Income (Loss) Components** | **Year Ended<br>December 31, 2024** | **Year Ended<br>December 31, 2023** | **Affected Line Item<br>Where Net Income<br>is Presented** |
| Realized (gains) losses on available-for-sale securities | $3465 | $517 | Losses on sale of available-for-sale securities |
|  | - | (992) | Gain on hedge termination |
|  | (811) | 111 | Income tax provision (benefit) |
|  | $2654 | $(364) | Net income |
| Realized (gains) losses on cash flow hedges | $455 | $426 | Interest income - Loans held-for-investment |
|  | 145 | 1378 | Interest income - Investments, taxable |
|  | - | (282) | Interest expense - Other borrowings |
|  | (1896) | (1424) | Interest expense - Interest-bearing deposits |
|  | 303 | (23) | Income tax provision (benefit) |
|  | $(993) | $75 | Net income |

---

**NOTE 21 — CONDENSED FINANCIAL INFORMATION OF COASTALSOUTH BANCSHARES, INC. (PARENT COMPANY ONLY)**

---

| | | |
|:---|:---|:---|
| **Condensed Balance Sheets** | **Condensed Balance Sheets** | **Condensed Balance Sheets** |
| **December 31, 2024 and 2023** | **December 31, 2024 and 2023** | **December 31, 2024 and 2023** |
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| **Assets** |  |  |
| Cash and due from banks <sup>(1)</sup> | $1644 | $2683 |
| Investment in bank subsidiary <sup>(1)</sup> | 218546 | 190081 |
| Other assets | 2092 | 2394 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total assets | 222282 | 195158 |
| **Liabilities** |  |  |
| Other borrowings | 26725 | 38672 |
| Accrued expenses and other liabilities | 325 | 443 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 27050 | 39115 |
| **Shareholders' equity** |  |  |
| Common stock | 10270 | 9540 |
| Capital surplus | 158755 | 145944 |
| Accumulated retained earnings | 41994 | 20090 |
| Accumulated other comprehensive loss | (15787) | (19531) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total shareholders' equity | 195232 | 156043 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $222282 | $195158 |
| <sup>(1)</sup> *Eliminated in consolidation* |  |  |

---

---

| | | |
|:---|:---|:---|
| **Condensed Statements of Operations** | **Condensed Statements of Operations** | **Condensed Statements of Operations** |
| **Years Ended December 31, 2024 and 2023** | **Years Ended December 31, 2024 and 2023** | **Years Ended December 31, 2024 and 2023** |
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| **Income** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividend income from bank subsidiary <sup>(1)</sup> | $6000 | $- |
| &nbsp;&nbsp;Other income | 75 | 17 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total income | 6075 | 17 |
| **Expenses** |  |  |
| &nbsp;&nbsp;Other borrowings | 2030 | 2448 |
| &nbsp;&nbsp;Other expenses | 98 | 75 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 2128 | 2523 |
| Income (loss) before taxes and equity in undistributed income of subsidiary | 3947 | (2506) |
| Income tax benefit | (533) | (651) |
| Income (loss) before equity in undistributed income of subsidiary | 4480 | (1855) |
| Equity in undistributed income of subsidiary <sup>(1)</sup> | 17424 | 26333 |
| **Net income** | $21904 | $24478 |
| <sup>(1)</sup> *Eliminated in consolidation* |  |  |

---

------

**CoastalSouth Bancshares, Inc. and Subsidiary**

**Notes to Consolidated Financial Statements - *Continued***

---

| | | |
|:---|:---|:---|
| **Condensed Statements of Cash Flows** | **Condensed Statements of Cash Flows** | **Condensed Statements of Cash Flows** |
| **Years Ended December 31, 2024 and 2023** | **Years Ended December 31, 2024 and 2023** | **Years Ended December 31, 2024 and 2023** |
| <u>(In thousands of dollars)</u> | **2024** | **2023** |
| **Cash flows from operating activities** |  |  |
| &nbsp;&nbsp;Net income | $21904 | $24478 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash used by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity in undistributed net income of subsidiary | (17424) | (26333) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividend income from bank subsidiary | (6000) | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debt issuance cost amortization | 53 | 38 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in tax receivable | (421) | (226) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in other assets | 310 | (324) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease in accrued expenses and other liabilities | 295 | 364 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used by operating activities | (1283) | (2003) |
| **Cash flows from investing activities** |  |  |
| &nbsp;&nbsp;Investment in subsidiary | - | (14700) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used by investing activities | - | (14700) |
| **Cash flows from financing activities** |  |  |
| &nbsp;&nbsp;Proceeds from commercial line of credit | - | 6000 |
| &nbsp;&nbsp;Repayment of commercial line of credit | (12000) | - |
| &nbsp;&nbsp;Issuance of common stock upon private placement | 12244 | 8835 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 244 | 14835 |
| **Net (decrease) increase in cash and cash equivalents** | (1039) | (1868) |
| **Cash and cash equivalents, beginning of year** | 2683 | 4551 |
| **Cash and cash equivalents, end of year** | $1644 | $2683 |

---

**NOTE 22 — SUBSEQUENT EVENTS**

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Nonrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date.

The Company evaluated subsequent events through the date its financial statements were issued, and there were no other subsequent events requiring accrual or disclosure through March 5, 2025.

------

**PART II — INFORMATION NOT REQUIRED IN PROSPECTUS** <br>

**ITEM 13 — Other Expenses of Issuance and Distribution.**

The following table sets forth all costs and expenses, other than underwriting discounts and commissions, in connection with the sale of shares of our common stock being registered, all of which will be paid by us. All amounts shown are estimates, except for the SEC registration fee, the FINRA filing fee and the NYSE listing fee.

---

| | |
|:---|:---|
| **Expense Category** | **Amounts** |
| SEC registration fee | $12248 |
| FINRA filing fee | 6500 |
| NYSE listing fee | 325000 |
| Legal fees and expenses | 1200000 |
| Accounting fees and expenses | 120000 |
| Printing fees and expenses | 163350 |
| Transfer agent and registrar fees and expenses | 3500 |
| Miscellaneous expenses | 19402 |
| &nbsp;&nbsp; Total | $1850000 |

---

**ITEM 14 — Indemnification of Directors and Officers.**

**Georgia Business Corporation Code**

Subsection (a) of Section 14-2-851 of the Georgia Business Corporation Code (the "GBCC") provides that a corporation may indemnify or obligate itself to indemnify an individual made a party to a proceeding because he or she is or was a director against liability incurred in the proceeding if such individual conducted himself or herself in good faith and such individual reasonably believed, in the case of conduct in an official capacity, that such conduct was in the best interests of the corporation and, in all other cases, that such conduct was at least not opposed to the best interests of the corporation and, in the case of any criminal proceeding, such individual had no reasonable cause to believe such conduct was unlawful. Subsection (d) of Section 14-2-851 of the GBCC provides that a corporation may not indemnify a director in connection with a proceeding by or in the right of the corporation except for reasonable expenses incurred if it is determined that the director has met the relevant standard of conduct, or in connection with any proceeding with respect to conduct under Section 14-2-851 of the GBCC for which he or she was adjudged liable on the basis that personal benefit was improperly received by him or her, whether or not involving action in his or her official capacity.

Section 14-2-852 of the GBCC provides that to the extent that a director has been wholly successful, on the merits or otherwise, in the defense of any proceeding to which he or she was a party, because he or she is or was a director of the corporation, the corporation shall indemnify the director against reasonable expenses incurred by the director in connection with the proceeding.

Pursuant to Section 14-2-854 of the GBCC, a court may order a corporation to indemnify a director or advance expenses if such court determines that the director is entitled to indemnification under the GBCC or that the director is fairly and reasonably entitled to indemnification or advance of expenses in view of all the relevant circumstances, whether or not such director met the standard of conduct set forth in subsections (a) and (b) of Section 14-2-851 of the GBCC, failed to comply with Section 14-2-853 of the GBCC or was adjudged liable as described in paragraph (1) or (2) of subsection (d) of Section 14-2-851 of the GBCC.

Section 14-2-856 of the GBCC permits articles of incorporation, bylaws, a contract, or resolution approved by the shareholders, to authorize us to indemnify a director against claims to which the director was a party, including claims by us or in our right (*e.g.*, shareholder derivative action). However, we may not indemnify the director for liability to us for any appropriation, in violation of the director's duties, of a corporate opportunity, intentional misconduct or knowing violation of the law, unlawful distributions or receipt of an improper personal benefit.

------

Section 14-2-857 of the GBCC provides that a corporation may indemnify and advance expenses to an officer of the corporation who is a party to a proceeding because he or she is an officer of the corporation to the same extent as a director and, if he or she is not a director, to such further extent as may be provided in its articles of incorporation, bylaws, resolution of its board of directors or contract except for liability arising out of conduct specified in Section 14-2-857(a)(2) of the GBCC. Section 14-2-857 of the GBCC also provides that an officer of the corporation who is not a director is entitled to mandatory indemnification under Section 14-2-852 and is entitled to apply for court ordered indemnification or advances for expenses under Section 14-2-854, in each case to the same extent as a director. In addition, Section 14-2-857 provides that a corporation may also indemnify and advance expenses to an employee or agent who is not a director to the extent, consistent with public policy, that may be provided by its articles of incorporation, bylaws, action of its board of directors or contract.

Section 14-2-858 of the GBCC permits us to purchase and maintain insurance on behalf of our directors and officers against liability incurred by them in their capacities or arising out of their status as our directors and officers, regardless of whether we would have the power to indemnify or advance expenses to the director or officer for the same liability under the GBCC.

**Company's Articles of Incorporation and Bylaws; Insurance**

In accordance with Article VII of the Company's Bylaws, every person (and the heirs and legal representatives of such person) who is or was a director or officer of the Company or any other corporation of which he or she served as such at the request of the Company and of which the Company directly or indirectly is a shareholder or creditor, or in which or in the stocks, bonds, securities or other obligations of which it is in any way interested, shall, in accordance with the Bylaws, and to the maximum extent permitted by the GBCC, be indemnified for any liability and expense that may be incurred by such person in connection with or resulting from any threatened, pending or completed action, suit or proceeding, in which he or she may become involved, as a party or prospective party or otherwise, by reason of any action taken or not taken in his or her capacity as such director or officer or as a member of any committee appointed by our board of directors to act for, in the interest of, or on behalf of the Company; provided such person acted in good faith and reasonably believed, in the case of conduct in the person's official capacity, that the conduct was in the Company's best interests, and in all other cases, that the conduct was at least not opposed to the Company's best interests, and, in the case of a criminal proceeding, that the person had no reasonable cause to believe that the conduct was unlawful.

Pursuant to Article VII of the Company's Bylaws, expenses incurred with respect to any proceeding will be advanced by the Company prior to the final disposition of such proceeding upon written affirmation by the recipient of his or her good faith belief that he or she has met the applicable standard of conduct and a written undertaking and agreement of the recipient to repay to the Company such amount of it is ultimately determined that he or she is not entitled to indemnification under the Bylaws.

Notwithstanding the foregoing, under Article VII of the Company Bylaws, no officer or director will be indemnified in respect of any proceeding as to which such person was found liable for negligence or misconduct in the performance of his or her duty to the Company unless and except to the extent that the court in which such proceeding was brought determines upon application that, despite the adjudication of liability and in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper.

The foregoing rights of indemnification and advancement of expenses are in addition to any rights to which any such director or officer or other person may otherwise be entitled under any bylaw, agreement, vote of shareholders or otherwise, and are in addition to the power of the Company to purchase and maintain insurance on behalf of any such director or officer or other person against any liability asserted against him or her and incurred by him or her in such capacity, or arising out of his or her status as such, regardless of whether the Company would have the power to indemnify against such liability under the Company's Bylaws or otherwise.

In addition, our Articles of Incorporation provide that our directors shall not have any personal liability to the Company or to its shareholders for monetary damages for breach of duty of care or other duty as a director to the fullest extent permitted by the GBCC. The elimination of personal liability of directors does not apply to any appropriation of any business opportunity of the Company in violation of the director's duties, acts or omissions which involve intentional misconduct or a knowing violation of law, unlawful distributions or receipt of an improper personal benefit.

We maintain a directors' and officers' liability insurance policy. The policy insures directors and officers against unindemnified losses arising from certain wrongful acts in their capacities as directors and officers and reimburses us for those losses for which we have lawfully indemnified the directors and officers. The policy contains various exclusions.

**ITEM 15 — Recent Sales of Unregistered Securities.**

Between January 1, 2022 and the filing of this registration statement, we have engaged in the following transactions that were not registered under the Securities Act:

------

**Capital Raise Placement Offering.** On January 26, 2024 and March 31, 2023, 701,442 and 553,705, respectively, shares of our common stock were issued upon common stock offering private placement. No underwriter or placement agent was involved in the issuance or sale of any of the shares of common stock, and no underwriting discounts or commissions were paid. The shares of common stock were issued under an exemption from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder as a transaction by an issuer not involving any public offering.

**Capital Raise Warrants.** In conjunction with the July 28, 2017 capital raise, the Company issued stock warrants that vested immediately upon issuance and were outstanding for five years. As of December 31, 2022, 371,564 warrants were exercised, resulting in issuance of 284,119 shares considering net settlement, 13,640 warrants expired, and no warrants were outstanding. No underwriter or placement agent was involved in the issuance or sale of any of the shares of common stock, and no underwriting discounts or commissions were paid. The shares of common stock were issued under an exemption from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder as a transaction by an issuer not involving any public offering.

**Equity Awards and Grants**. During the period between January 1, 2022 and the filing of this registration statement, we have granted 48,000 stock options and 264,700 restricted shares of common stock pursuant to the CoastalSouth Bancshares, Inc. 2017 Incentive Plan ("2017 Plan"). No underwriter or placement agent was involved in the issuance or sale of any of these securities, and no underwriting discounts or commissions were paid. The issuance and sale of the securities described above were made in reliance upon exemptions from registration requirements under Section 4(a)(2) of the Securities Act and pursuant to Rule 701 promulgated under the Securities Act.

**ITEM 16 — Exhibits and Financial Statement Schedules.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Exhibits

---

| | |
|:---|:---|
| **Exhibit Number** | **Exhibit**<br>**Description** |
| 1.1 | Form of Underwriting Agreement\* |
| 3.1 | [<u>Articles of Incorporation</u>](coso-ex3_1.htm) |
| 3.2 | [<u>Third Amended and Restated Bylaws</u>](coso-ex3_2.htm) |
| 4.1 | [<u>Specimen Common Stock Certificate</u>](coso-ex4_1.htm) |
| 4.2 | [<u>Form of Registration Rights Agreement, dated July 28, 2017, by and among CoastalSouth Bancshares, Inc. and Certain Investors</u>](coso-ex4_2.htm)† |
| 4.3 | The other instruments defining the rights of the long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Registrant hereby agrees to furnish copies of these instruments to the SEC upon request |
| 5.1 | Opinion of Alston & Bird LLP\* |
| 10.1 | [<u>CoastalSouth Bancshares, Inc. 2017 Incentive Plan</u>](coso-ex10_1.htm) |
| 10.2 | [<u>Coastal States Bank Annual Performance Plan</u>](coso-ex10_2.htm)† |
| 10.3 | [<u>Coastal States Bank Executive Severance Plan</u>](coso-ex10_3.htm)† |
| 10.4 | [<u>Form of Restricted Stock Unit Grant under the CoastalSouth Bancshares, Inc. 2017 Incentive Plan</u>](coso-ex10_4.htm) |
| 10.5 | [<u>Form of Incentive Stock Option Grant under the CoastalSouth Bancshares, Inc. 2017 Incentive Plan</u>](coso-ex10_5.htm) |
| 10.6 | [<u>Form of Nonstatutory Stock Option Grant under the CoastalSouth Bancshares, Inc. 2017 Incentive Plan</u>](coso-ex10_6.htm) |
| 10.7 | [<u>CoastalSouth Bancshares, Inc. Omnibus Incentive Plan</u>](coso-ex10_7.htm) |
| 10.8 | [<u>Form of Restricted Stock Unit Grant under the CoastalSouth Bancshares, Inc. 2025 Incentive Plan</u>](coso-ex10_8.htm) |
| 10.9 | [<u>Amended and Restated Employment Agreement, dated April 25, 2024, by and between CoastalSouth Bancshares, Inc., Coastal States Bank and Stephen R. Stone</u>](coso-ex10_9.htm) |
| 10.10 | [<u>Amended and Restated Employment Agreement, dated April 25, 2024, by and among CoastalSouth Bancshares, Inc., Coastal States Bank and Anthony P. Valduga</u>](coso-ex10_10.htm) |
| 10.11 | [<u>Stock Purchase Agreement, dated July 28, 2017, by and among CoastalSouth Bancshares, Inc. and Patriot Financial Partners II Coastal SPV, LLC</u>](coso-ex10_11.htm)† |
| 10.12 | [<u>Stock Purchase Agreement, dated July 28, 2017, by and among CoastalSouth Bancshares, Inc. and GCP CoastalSouth LLC</u>](coso-ex10_12.htm)† |
| 10.13 | [<u>Stock Purchase Agreement, dated June 18, 2019, by and among CoastalSouth Bancshares, Inc. and the purchasers named therein</u>](coso-ex10_13.htm)†  |
| 10.14 | [<u>Amended and Restated Loan and Security Agreement, dated November 21, 2023, by and between CoastalSouth Bancshares, Inc. and ServisFirst Bank</u>](coso-ex10_14.htm) |
| 10.15 | [<u>Amended and Restated Revolving Note, dated November 21, 2023, by and between CoastalSouth Bancshares, Inc. and ServisFirst Bank</u>](coso-ex10_15.htm) |
| 10.16 | [<u>Pledge Agreement, dated November 21, 2023, by and between CoastalSouth Bancshares, Inc. and ServisFirst Bank</u>](coso-ex10_16.htm) |

---

------

---

| | |
|:---|:---|
| 21.1 | [<u>Subsidiaries of CoastalSouth Bancshares, Inc.</u>](coso-ex21_1.htm) |
| 23.1 | [<u>Consent of Elliott Davis, LLC</u>](coso-ex23_1.htm) |
| 23.2 | Consent of Alston & Bird LLP (included in Exhibit 5.1)\* |
| 24.1 | [<u>Power of Attorney (included on the signature page hereto)</u>](#signatures) |
| 107 | [<u>Filing Fee Table</u>](coso-exfiling_fees.htm) |
| _____________________________ | _____________________________ |
| \* | To be filed by amendment. |
| † | Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. |

---

**ITEM 17 — Undertakings.**

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

------

**SIGNATURES**

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia, on June 6, 2025.

---

| | |
|:---|:---|
| **COASTALSOUTH BANCSHARES, INC.** | **COASTALSOUTH BANCSHARES, INC.** |
| By: | /s/ Stephen R. Stone |
|  | Stephen R. Stone |
|  | President and Chief Executive Officer |

---

**POWER OF ATTORNEY**

We, the undersigned directors of CoastalSouth Bancshares, Inc. (the "Company"), severally constitute and appoint Stephen R. Stone with full power of substitution, our true and lawful attorney and agent, to do any and all things and acts in our names in the capacities indicated below which said Stephen R. Stone may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with the registration statement on Form S-1 relating to the offering of the Company common stock, including specifically, but not limited to, power and authority to sign for us or any of us in our names in the capacities indicated below the registration statement and any and all amendments (including post-effective amendments) thereto; and we hereby approve, ratify and confirm all that said Stephen R. Stone shall do or cause to be done by virtue hereof.

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Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

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| | | |
|:---|:---|:---|
| **Signature** | **Title** | **Date** |
| /s/ Stephen R. Stone | President, Chief Executive Officer, and Director | June 6, 2025 |
| Stephen R. Stone | (Principal Executive Officer) |  |
| /s/ Anthony P. Valduga | Chief Financial Officer & Chief Operating Officer | June 6, 2025 |
| Anthony P. Valduga | (Principal Financial Officer) |  |
| /s/ Lauren M. Hemby | Chief Accounting Officer | June 6, 2025 |
| Lauren M. Hemby | (Principal Accounting Officer) |  |
| /s/ James S. MacLeod | Director | June 6, 2025 |
| James S. MacLeod |  |  |
| /s/ Joseph V. Topper, Jr. | Director | June 6, 2025 |
| Joseph V. Topper, Jr. |  |  |
| /s/ James N. Richardson, Jr. | Director | June 6, 2025 |
| James N. Richardson, Jr. |  |  |
| /s/ Michael B. High | Director | June 6, 2025 |
| Michael B. High |  |  |
| /s/ Boris M. Gutin | Director | June 6, 2025 |
| Boris M. Gutin |  |  |
| /s/ Mark A. Griffith | Director | June 6, 2025 |
| Mark A. Griffith |  |  |
| /s/ Patrick M. Frawley | Director | June 6, 2025 |
| Patrick M. Frawley |  |  |
| /s/ Ernst W. Bruderer | Director | June 6, 2025 |
| Ernst W. Bruderer |  |  |
| /s/ L. Scott Askins | Director | June 6, 2025 |
| L. Scott Askins |  |  |
| /s/ John G. Aldridge, Jr. | Director | June 6, 2025 |
| John G. Aldridge, Jr. |  |  |

---

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## Exhibit 3.1

**EXHIBIT 3.1**

**ARTICLES OF INCORPORATION** 

**OF**

**COASTALSOUTH BANCSHARES, INC.**

<u>Article I</u> 

The name of the Corporation is CoastalSouth Bancshares, Inc. (the "<u>Corporation</u>").

<u>Article II</u> 

The Corporation is organized pursuant to the Georgia Business Corporation Code (the "<u>Code</u>"). The purpose of the Corporation is to engage in any form or type of business for any lawful purpose or purposes not specifically prohibited to corporations for profit under the Code and to have all the rights, power, privileges and immunities which are now or hereafter may be allowed to corporations under the Code.

<u>Article III</u> 

The Corporation shall have perpetual duration.

<u>Article IV</u> 

The initial principal office of the Corporation shall be located at 5 Bow Circle, Hilton Head Island, South Carolina 29928.

<u>Article V</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The total number of shares that the Corporation is authorized to issue is as follows:

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;<u>Class</u> | &nbsp;&nbsp;<u>No. of Shares</u> | &nbsp;&nbsp;<u>Par Value</u> |
| &nbsp;&nbsp;Common Stock | &nbsp;&nbsp;50000000 | &nbsp;&nbsp;$1.00 |
| &nbsp;&nbsp;Non-Voting Common Stock  | &nbsp;&nbsp;10000000 | &nbsp;&nbsp;$1.00 |
| &nbsp;&nbsp;Preferred Stock | &nbsp;&nbsp;10000000 | &nbsp;&nbsp;$1.00 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)The Board of Directors of the Corporation is authorized, subject to limitations prescribed by law and the provisions of this Article, to provide for the issuance of the shares of Preferred Stock in series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and relative rights of the shares of each such series and the qualifications, or restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The number of shares constituting that series and the distinctive designation of that series;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payments of dividends on shares of that series;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provisions for adjustment of the conversion rate in such events as the Board of Directors shall determine;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding-up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)Any other relative rights, preferences, and limitations of that series.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Subject to the provisions of applicable law, the holders of shares of Common Stock are entitled to receive, when and as declared by the Board of Directors of the Corporation, out of the assets of the Corporation legally available therefor, dividends or other distributions, whether payable in cash, property or securities of the Corporation. The holders of shares of Common Stock are entitled to receive, in proportion to the number of shares of Common Stock held, the Corporation's net assets upon liquidation or dissolution.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)The Non-Voting Common Stock of the Corporation shall have the rights and designations set forth in <u>Article X</u> of these Articles of Incorporation.

<u>Article VI</u> 

The mailing address of the initial registered office of the Corporation shall be 2 Sun Court, Suite 400, Peachtree Corners, GA 30092, located in the County of Gwinnett, and its initial registered agent at such address is Corporation Service Company.

<u>Article VII</u> 

The name and address of the Incorporator is as follows:

<u>Name</u> <u>Address</u> <br> Stephen R. Stone 5 Bow CircleHilton Head IslandSouth Carolina 29928

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<u>Article VIII</u> 

No director shall have any personal liability to the Corporation or to its shareholders for monetary damages for breach of duty of care or other duty as a director, by reason of any act or omission occurring subsequent to the date when this provision becomes effective, and all liability of directors to the Corporation or to its shareholders is hereby eliminated to the fullest extent permitted under Section 14-2-202(b)(4) of the Code. The elimination of personal liability of directors shall not apply to: (a) any appropriation of any business opportunity of the Corporation in violation of the director's duties; (b) acts or omissions which involve intentional misconduct or a knowing violation of law; (c) liabilities of a director imposed by Section 14-2-832 of the Code; or (d) any transaction from which the director derived an improper personal benefit. If applicable law is amended after the effective date of this <u>Article VIII</u> to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director to the Corporation shall be eliminated or limited to the fullest extent permitted by applicable law as so amended. Any repeal or modification of this <u>Article VIII</u> shall only be prospective and shall not affect the rights or protections or increase the liability of any officer or director under this <u>Article VIII</u> in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability or indemnification.

<u>Article IX</u> 

To the fullest extent permitted by the Code, the Corporation is authorized to provide indemnification of(and advancement of expenses to) directors, officers, employees and agents of the Corporation (and any other persons to which applicable law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such persons, or otherwise in excess of the indemnification and advancement otherwise provided by such applicable law. The Corporation may, but shall not be required to, indemnify any and all officers, employees or agents of the Corporation to the same extent as directors.

<u>Article X</u> 

A statement of the powers, designations, preferences, rights, qualifications, limitations and restrictions in respect of the shares of Non-Voting Common Stock is as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.<u>Definitions</u>. The following definitions shall apply for purposes of this <u>Article X</u>:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a."<u>Affiliate</u>" has the meaning set forth in 12 C.F.R. Section 225.2(a) or any successor provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b."<u>Articles of Incorporation</u>" means the Articles of Incorporation of the Corporation, as amended and in effect from time and time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c."<u>Board of Directors</u>" means the board of directors of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.A "<u>business day</u>" means any day other than a Saturday or a Sunday or a day on which banks in South Carolina are authorized or required by law, executive order or regulation to close.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e."<u>Certificate</u>" means a certificate representing one (1) or more shares of Non-Voting Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f."<u>Common Stock</u>" means the voting common stock of the Corporation, par value $1.00 per share.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g."<u>Conversion</u>" has the meaning set forth in Section X.5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h."<u>Conversion Date</u>" means the date that a share of Non-Voting Common Stock is converted into Common Stock in accordance with Section X.5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i."<u>Corporation</u>" means CoastalSouth Bancshares, Inc., a Georgia corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j."<u>Dividends</u>" has the meaning set forth in Section X.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k."<u>Exchange Agent</u>" means Computershare solely in its capacity as transfer and exchange agent for the Corporation, or any successor transfer and exchange agent for the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l."<u>Liquidation Distribution</u>" has the meaning set forth in Section X.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m."<u>Mandatory Conversion Date</u>" means, with respect to shares of Series D Preferred Stock of any and all holders thereof, the effective date of these Articles of Amendment to the Articles of Incorporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n."<u>Non-Voting Common Stock</u>" has the meaning set forth in Section X.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o."<u>Permissible Transfer</u>" means a transfer by the holder of Non-Voting Common Stock (i) to the Corporation; (ii) in a widely distributed public offering of Common Stock or Non-Voting Common Stock; (iii) that is part of an offering that is not a widely distributed public offering of Common Stock or Non-Voting Common Stock but is one in which no one transferee (or group of associated transferees) acquires the rights to receive two percent (2%) or more of any class of the Voting Securities of the Corporation then outstanding (including pursuant to a related series of transfers); (iv) that is part of a transfer of Common Stock or Non-Voting Common Stock to an underwriter for the purpose of conducting a widely distributed public offering; (v) to a transferee that controls more than fifty percent (50%) of the Voting Securities of the Corporation without giving effect to such transfer; or (v) that is part of a transaction approved by the Board of Governors of the Federal Reserve System (the "<u>Federal Reserve</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;p."<u>Person</u>" means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, or any other form of entity not specifically listed herein.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;q."<u>Series D Preferred Stock</u>" means the series of shares of preferred stock of the Corporation designated as "Series D Convertible Perpetual Preferred Stock" which were automatically converted into shares of Non-Voting Common Stock on the Mandatory Conversion Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;r."<u>Voting Security</u>" has the meaning set forth in 12 C.F.R. Section 225.2(q) or any successor provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.<u>Designation; Number of Shares</u>. The class of shares of capital stock hereby authorized shall be designated as "Non-Voting Common Stock". The number of authorized shares of the Non-Voting Common Stock shall be 10,000,000 shares. The Non-Voting Common Stock shall have a par value of $1.00 per share. Each share of Non-Voting Common Stock has the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption as described herein. Each share of Non-Voting Common Stock is identical in all respects to every other share of Non-Voting Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.<u>Dividends</u>. The Non-Voting Common Stock will rank pail passu with the Common Stock with respect to the payment of dividends or distributions, whether payable in cash, securities, options or other property, and with respect to issuance, grant or sale of any rights to purchase stock, warrants, securities or other property (collectively, the "Dividends"). Accordingly, the holders of record of Non-Voting Common Stock will be entitled to receive as, when, and if declared by the Board of Directors, Dividends in the same per share amount as paid on the Common Stock, and no Dividends will be payable on the Common Stock or any other class or series of capital stock ranking with respect to Dividends pail passu with the Common Stock unless a Dividend identical to that paid on the Common Stock is payable, at the same time on the Non-Voting Common Stock in an amount per share of Non-Voting Common Stock equal to the product of (a) the per share Dividend declared and paid in respect of each share of Common Stock and (b) the number of shares of Common Stock into which such share of Non-Voting Common Stock is then convertible (without regard to any limitations on conversion of the Non-Voting Common Stock); <u>provided</u>, <u>however</u>, that if a stock Dividend is declared on Common Stock payable solely in Common Stock, the holders of Non-Voting Common Stock will be entitled to a stock Dividend payable solely in shares of Non-Voting Common Stock. Dividends that are payable on Non-Voting Common Stock will be payable to the holders of record of NonVoting Common Stock as they appear on the stock register of the Corporation on the applicable record date, as determined by the Board of Directors, which record date will be the same as the record date for the equivalent Dividend of the Common Stock. In the event that the Board of Directors does not declare, or pay any Dividends with respect to shares of Common Stock, then the holders of Non-Voting Common Stock will have no right to receive any Dividends.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.<u>Liquidation</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.<u>Rank</u>. The Non-Voting Common Stock will, with respect to rights upon liquidation, winding up and dissolution, rank (i) subordinate and junior in right of payment to all other securities of the Corporation which, by their respective terms, are senior to the Non-Voting Common Stock or the Common Stock, and (ii) *pari passe* with the Common Stock. Not in limitation of anything contained herein, and for purposes of clarity, the Non-Voting Common Stock is subordinated to the general creditors and subordinated debt holders of the Company, and the depositors of the Company's bank subsidiaries, in any receivership, insolvency, liquidation or similar proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.<u>Liquidation Distributions</u>. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Non-Voting Common Stock will be entitled to receive, for each share of NonVoting Common Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, subject to the rights of any Persons to whom the Non-Voting Common Stock is subordinate, a distribution ("<u>Liquidation Distribution</u>") equal to (i) any authorized and declared, but unpaid, Dividends with respect to such share of NonVoting Common Stock at the time of such liquidation, dissolution or winding up, and (ii) the amount the holder of such share of Non-Voting Common Stock would receive in respect of such share if such share had been converted into shares of Common Stock at the then applicable conversion rate at the time of such liquidation, dissolution or winding up (assuming the conversion of all shares of Non-Voting Common Stock at such time, without regard to any limitations on conversion of the Non-Voting Common Stock). All Liquidating Distributions to the holders of the Non-Voting Common Stock and Common Stock set forth in clause (ii) above will be made pro rata to the holders thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.<u>Merger, Consolidation and Sale of Assets Not Liquidation</u>. For purposes of this Section X.4, the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the holders of Non-Voting Common Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or property) of all or substantially all of the assets of the Corporation, will not constitute a liquidation, dissolution or winding up of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.<u>Conversion</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.<u>General</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.A holder of Non-Voting Common Stock shall be permitted to convert shares of Non-Voting Common Stock into shares of Common Stock at any time or from time to time, provided that upon such conversion the holder, together with all Affiliates of the holder, will not own or control in the aggregate more than nine point nine (9.9%) of the Common Stock (or of any class of Voting Securities issued by the Corporation), excluding for the purpose of this calculation any reduction in ownership resulting from transfers by such holder of Voting Securities of the Corporation (which, for the avoidance of doubt, does not include Non-Voting Common Stock). In any such, conversion, each share of Non-Voting Common Stock will convert initially into one (1) share of Common Stock, subject to adjustment as provided in Section X.6 below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.Each share of Non-Voting Common Stock will automatically convert into one (1) share of Common Stock, without any further action on the part of any holder, subject to adjustment as provided in Section, X.6 below, on the date a holder of Non-Voting Common Stock transfers any shares of NonVoting Common Stock to a non-affiliate of the holder in a Permissible Transfer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.To effect any permitted conversion under Section X.5(a)(i) or Section X.5(a)(ii), the holder shall surrender the certificate or certificates evidencing such shares of Non-Voting Common Stock, duly endorsed, at the registered office of the Corporation, and provide written instructions to the Corporation as to the number of shares for which such conversion shall be effected, together with any appropriate documentation that may be reasonably required by the Corporation. Upon the surrender of such certificate(s), the Corporation will issue and deliver to such holder (in the case of a conversion under Section X.5(a)(i)) or such holder's transferee (in the case of a conversion under Section X.5(a)(ii)) a certificate or certificates for the number of shares of Common Stock into which the Non-Voting Common Stock has been converted and, in the event that such conversion is with respect to some, but not all, of the holder's shares of Non-Voting Common Stock, the Corporation shall deliver to such holder a certificate or certificate(s) representing the number of shares of Non-Voting Common Stock that were not converted to Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv.All shares of Common Stock delivered upon conversion of the Non-Voting Common Stock shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests, charges and other encumbrances.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.<u>Reservation of Shares Issuable Upon Conversion</u>. The Corporation will at all times reserve and keep available out of its authorized but unissued Common Stock solely for the purpose of effecting the conversion of the Non-Voting Common Stock such number of shares of Common Stock as will from' time. to time be sufficient to effect the conversion of all outstanding Non-Voting Common Stock; and if at any time the number of shares of authorized but unissued Common Stock will not be sufficient to effect the conversion of all then outstanding Non-Voting common Stock, the Corporation will take such action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Common Stock to such number of shares as will be sufficient for such purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.<u>No Impairment</u>. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section X.5 and in the taking of all such actions as may be necessary or appropriate in order to protect the conversion rights of the holders of the Non-Voting Common Stock against impairment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.<u>Adjustments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.<u>Combinations or Divisions of Common Stock</u>. In the event that the Corporation at any time or from time to time will effect a division of the Common Stock into a greater number of shares (by stock split, reclassification or otherwise other than by payment of a Dividend in Common Stock or in any right to acquire the Common Stock), or in the event the outstanding Common Stock will be combined or consolidated, by reclassification, reverse stock split or otherwise, into a lesser number of shares of the Common Stock, then the dividend, liquidation, and conversion rights of each share of Non-Voting Common Stock in effect immediately prior to such event will, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.<u>Reclassification, Exchange or Substitution</u>. If the Common Stock is changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a division or combination of shares provided for in Section X.6(a) above), (1) the conversion ratio then in effect will, concurrently with the effectiveness of such transaction, be adjusted so that each share of the Non-Voting Common Stock will be convertible into, in lieu of the number of shares of Common Stock which the holders of the Non-Voting Common Stock would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equal to the product of (i) the number of shares of such other class or classes of stock that a holder of a share of Common Stock would be entitled to receive in such transaction and (ii) the number of shares of Common Stock into which such share of NonVoting Common Stock is then convertible (without regard to any limitations on conversion of the Non-Voting Common Stock) immediately before that transaction and (2) the Dividend and Liquidation Distribution rights then in effect will, concurrently with the effectiveness of such transaction, be adjusted so that each share of Non-Voting Common Stock will be entitled to a Dividend and Liquidation Distribution right, in lieu of with respect to the number of shares of Common Stock which the holders of the Non-Voting Common Stock would otherwise have been entitled to receive, with respect to a number of shares of such other class or classes of stock equal to the product of (i) the number of shares of such other class or classes of stock that &holder of a share of Common Stock would be entitled to receive in such transaction and (ii) the number of shares of Common Stock into which such share of Non-Voting Common Stock is then convertible (without regard to any limitations on conversion of the Non-Voting Common Stock) immediately before that transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.<u>Certificates as to Adjustments</u>. Upon the occurrence of each adjustment or readjustment pursuant to this Section X.6, the Corporation at its expense will promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Non-Voting Common Stock a certificate executed by the Corporation's President (or other appropriate officer) setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation will, upon the written request at any time of any holder of Non-Voting Common Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, and (ii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Non-Voting Common Stock.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.<u>Reorganization, Mergers, Consolidations or Sales of Assets</u>. If at any time or from time to time there will be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares otherwise provided for in Section X.6) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all the Corporation's properties and assets to any other Person, then, as a part of such reorganization, merger, consolidation or sale, provision will be made so that the holders of the Non-Voting Common Stock will thereafter be entitled to receive upon conversion of the Non-Voting Common Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor company resulting from such merger or consolidation or sale, to which a holder of that number of shares of Common Stock deliverable upon conversion of the Non-Voting Common Stock would have been entitled to receive on such capital reorganization, merger, consolidation or sale (without regard to any limitations on conversion of the Non-Voting Common Stock).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.<u>Redemption</u>. Except to the extent a liquidation under Section X.4 may be deemed to be a redemption, the Non-Voting Common Stock will not be redeemable at the option of the Corporation or any holder of Non-Voting Common Stock at any time. Notwithstanding the foregoing, the Corporation will not be prohibited from repurchasing or otherwise acquiring shares of Non-Voting Common Stock in voluntary transactions with the holders thereof, subject to compliance with any-applicable legal or regulatory requirements, including applicable. regulatory capital requirements. Any shares of Non-Voting Common Stock repurchased or, otherwise acquired may 'be reissued as additional shares of Non-Voting Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.<u>Voting Rights</u>. The holders of Non-Voting Common Stock will not have any voting rights, except as may otherwise from time to time be required by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.<u>Protective Provisions</u>. So long as any shares of Non-Voting Common Stock are issued and outstanding, the Corporation will not (including by means of merger, consolidation or otherwise), without obtaining the approval (by vote or written consent) of the holders of a majority of the issued and outstanding shares of Non-Voting Common Stock, (a) alter or change the rights, preferences, privileges or restrictions provided for the benefit of the holders of the Non-Voting Common Stock, (b) increase or decrease the authorized number of shares of Non-Voting Common Stock or (c) enter into any agreement, merger or business consolidation, or engage in any other transaction, or take any action that would have the effect of changing any preference or any relative or other right provided for the benefit of the holders of the Non-Voting Common Stock. In the event that the Corporation offers to repurchase shares of Common Stock, the Corporation shall offer to repurchase shares of Non-Voting Common Stock pro rata based upon the number of shares of Common Stock such holders would be entitled to receive if such shares were converted into shares of Common Stock immediately prior to such repurchase.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.<u>Notices</u>. All notices required or permitted to be given by the Corporation with respect to the Non-Voting Common Stock shall be in writing, and if delivered by first class United States mail, postage prepaid, to the holders of the Non-Voting Common Stock at their last addresses as they shall appear upon the books of the Corporation, shall be conclusively presumed to have been duly given, whether or not the holder actually receives such notice; <u>provided</u>, <u>however</u>, that failure to duly give such notice by mail, or any defect in such notice, to the holders of any stock designated for repurchase, shall not affect the validity of the proceedings for the repurchase of any other shares of Non-Voting Common Stock, or of any other matter required to be presented for the approval of the holders of the NonVoting Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.<u>Record Holders</u>. To the fullest extent permitted by law, the Corporation will be entitled to recognize the record holder of any share of Non-Voting Common Stock as the true and lawful owner thereof for all purposes and will not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other Person, whether or not it will have express or other notice thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.<u>Term</u>. The Non-Voting Common Stock shall have perpetual term unless converted in accordance with Section X.5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.<u>No Preemptive Rights</u>. The holders of Non-Voting Common Stock are not entitled to any preemptive or preferential right to purchase or subscribe for any capital stock, obligations, warrants or other securities or rights of the Corporation, except for any such rights that may be granted by way of separate contract or agreement to one or more holders of Non-Voting Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.<u>Replacement Certificates</u>. In the event that any Certificate will have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Corporation, the posting by such Person of a bond in such amount as the Corporation may determine is necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Corporation or the Exchange Agent, as applicable, will deliver in exchange for such lost, stolen or destroyed Certificate a replacement Certificate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.<u>Other Rights</u>. The shares of Non-Voting Common Stock have no preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or rights, other than as set forth herein or as provided by applicable law.

IN WITNESS WHEREOF, the undersigned has executed these Articles of Incorporation as of May 12, 2023.

<u>/s/ Stephen R. Stone</u> 

Stephen R. Stone, Incorporator

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## Exhibit 3.2

**EXHIBIT 3.2**

**THIRD AMENDED AND RESTATED BYLAWS**

**<br>OF** 

**<br>COASTALSOUTH BANCSHARES, INC.** 

<br> **February 26, 2024**

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**Table of Contents**

**Page**

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE I SHAREHOLDERS' MEETINGS | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 1. Annual Meeting | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 2. Special Meetings | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 3. Notice of Meeting | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 4. Waiver of Notice | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5. Quorum and Voting | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6. Record Date | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 7. Conduct of Meetings | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8. Action Without a Meeting | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 9. Shareholder Proposals and Director Nominations | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 10. Place of Shareholders' Meeting | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE II BOARD OF DIRECTORS | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 1. Number, Election and Term | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 2. Removal and Vacancies | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 3. Qualification of Directors | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 4. Meetings and Notices | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5. Quorum and Voting | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6. Conduct of Meetings | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 7. Action Without a Meeting | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE III COMMITTEES | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 1. Creation of Committees and Selection of Members | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 2. Voting and Scope of Authority | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE IV OFFICERS | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 1. Number, Election, and Term | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 2. Duties of Chief Executive Officer | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 3. Duties of Chief Financial Officer | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 4. Duties of Vice President | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5. Duties of Secretary | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6. Duties of Treasurer | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE V DISTRIBUTIONS AND DIVIDENDS | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE VI CERTIFICATES OF STOCK | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 1. Form | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 2. Uncertificated Shares | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 3. Rights of Corporation with Respect to Registered Owners | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 4. Transfers | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5. Lost, Stolen or Destroyed Certificates | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6. Transfer Agent and Registrar | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE VII Indemnification of directors and officers | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 1. Right of Indemnification and Standards of Conduct. | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 2. Advancement of Expenses. | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 3. Determination of Right to Indemnification and Advancement of Expenses. | 11 |

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**Table of Contents**

(continued)

**Page**

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 4. Rights of Indemnification Cumulative. | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5. Notice to Shareholders. | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6. Insurance. | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 7. Amendment. | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8. Successors. | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 9. Severability. | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE VIII SEAL | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE IX VOTING OF OTHER STOCK HELD | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE X CHECKS, NOTES AND DRAFTS | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE XI FISCAL YEAR | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARTICLE XII AMENDMENT OF BYLAWS | 14 |

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**THIRD AMENDED AND RESTATED BYLAWS <br>OF <br>COASTALSOUTH BANCSHARES, INC.**

**ARTICLE I<u><br>SHAREHOLDERS' MEETINGS</u>**

<u>Section 1. Annual Meeting</u>. An annual meeting of the shareholders of the Corporation shall be held each calendar year, as determined by the Board of Directors (the "<u>Board</u>").

<u>Section 2. Special Meetings</u>. A special meeting of the shareholders of the Corporation may be called by the Board, the Chairman of the Board, the Chief Executive Officer, or the holders of shares not representing less than twenty-five percent (25%) of the votes entitled to be cast on each issue proposed to be considered at the special meeting. The business that may be transacted at any special meeting of shareholders shall be limited to that proposed in the notice of the special meeting given in accordance with <u>Section I.3</u> (including related or incidental matters that may be necessary or appropriate to effectuate the proposed business).

<u>Section 3. Notice of Meeting</u>. All meetings of the shareholders shall be held at the times and places fixed by resolution of the Board. Written notice stating the date, time, and location of each meeting of the shareholders, and in case of a special meeting also stating the purpose or purposes for which the meeting is called, shall be given either personally, by mail, by electronic mail or by any other form of notice permitted by the Georgia Business Corporation Code, as amended (the "<u>Code</u>"), to each shareholder of record entitled to vote at such meeting. Such notice shall be given no less than ten (10) nor more than sixty (60) days before the date of such meeting. If an annual or special meeting is adjourned to a different date, time, or location, the Corporation shall give shareholders notice of the new date, time, or location of the adjourned meeting, unless a quorum of shareholders was present at the meeting and information regarding the adjournment was announced before the meeting was adjourned; <u>provided</u>, <u>however</u>, that if a new record date is or must be fixed in accordance with <u>Section I.6</u>, the Corporation must give notice of the adjourned meeting to all shareholders of record as of the new record date who are entitled to vote at the adjourned meeting.

<u>Section 4. Waiver of Notice</u>. A shareholder may waive any notice required by the Code, the Articles of Incorporation of the Corporation (the "<u>Articles</u>"), or these Bylaws, before or after the date and time of the matter to which the notice relates, by delivering to the Corporation a written waiver of notice signed by the shareholder entitled to the notice. In addition, a shareholder's attendance at a meeting shall be (a) a waiver of objection to lack of notice or defective notice of the meeting unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) a waiver of objection to consideration of a particular matter at the meeting that is not within the purpose stated in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Except as otherwise required by the Code, neither the purpose of, nor the business transacted at, the meeting need be specified in any waiver.

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<u>Section 5. Quorum and Voting</u>. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists at the meeting with respect to that matter. A majority of the votes entitled to be cast on the matter by such voting group shall constitute a quorum of the voting group for action on that matter. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or shall be set for that adjourned meeting as provided in <u>Section I.3</u>. If a meeting cannot be organized due to lack of a quorum, those shareholders present may adjourn the meeting to such time and place as they may determine. If a quorum exists, action on a matter by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Code, the Articles, or these Bylaws require a greater number of affirmative votes. Unless otherwise provided in the Articles, each shareholder shall be entitled to one (1) vote in person or by proxy for each share entitled to vote standing in his or her name on the books of the Corporation. Any shareholder directly or indirectly soliciting proxies from other shareholders must use a proxy card color other than white, which shall be reserved for exclusive use by the Board.

<u>Section 6. Record Date</u>. The Board may fix in advance the record date for one (1) or more voting groups in order to make a determination of shareholders for any proper purpose, including, but not limited to, (a) a determination of shareholders entitled to notice or to vote at any meeting of shareholders or, if necessary, any adjournment thereof or (b) entitled to receive payment of any distribution or dividend. The record date fixed under this <u>Section I.6</u> may not be more than seventy (70) days before the date on which the particular action requiring the determination of shareholders is to be taken. A determination of shareholders entitled to notice of or to vote at any meeting of shareholders shall apply to any adjournment of the meeting, unless the Board shall fix a new record date for the reconvened meeting. The Board shall fix a new record date if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting.

<u>Section 7. Conduct of Meetings</u>. The Chairman shall preside over all meetings of the shareholders. If he or she is absent, the Chief Executive Officer shall preside at such meeting. If no such officer is present, a chairman shall be elected at the meeting. The Secretary of the Corporation shall act as Secretary of all the meetings if he or she is present. If he or she is absent, the chairman shall appoint a Secretary of the meeting. The chairman of the meeting may appoint one or more inspectors of election to determine the qualification of voters, the validity of proxies, and the results of ballots.

<u>Section 8. Action Without a Meeting</u>. Any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting and without action by the Board if all of the shareholders entitled to vote with respect to the subject matter of such action or, if permitted by the Articles, by shareholders who would be entitled to vote at a meeting having voting power to cast the requisite number of votes that would be necessary to authorize or take the action at a meeting at which all shareholders entitled to vote were present and voted. The action must be evidenced by one or more written consents describing the action taken, signed by shareholders entitled to take action without a meeting, and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. Where required by Section 14-2-704 or other applicable provision of the Code, the Corporation shall provide shareholders with written notice of actions taken without a meeting.

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If notice of proposed action is required by law to be given to non-voting shareholders and the action is to be taken by unanimous consent of the voting shareholders as provided in this <u>Section I.8</u>, the Corporation shall give its non-voting shareholders written notice of the proposed action at least ten (10) days before the action is taken. The notice shall contain or be accompanied by the same material that would have been required by law to be sent to non-voting shareholders in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.

<u>Section 9. Shareholder Proposals and Director Nominations</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) No proposal for a shareholder vote shall be submitted by a shareholder (a "<u>Shareholder Proposal</u>") to the Corporation's shareholders unless the shareholder submitting such proposal (the "<u>Proponent</u>") shall have filed a written notice setting forth with particularity (i) the names and business addresses of the Proponent and all natural persons, corporations, partnerships, trusts or any other type of legal entity or recognized ownership vehicle (collectively, a "<u>Person</u>") acting in concert with the Proponent; (ii) the name and address of the Proponent and the Persons identified in clause (i), as they appear on the Corporation's books (if they so appear); (iii) the class and number of shares of the Corporation beneficially owned by the Proponent and by each Person identified in clause (i); (iv) a description of the Shareholder Proposal containing all material information relating thereto; (v) for proposals sought to be included in the Corporation's proxy statement, any other information required by Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the "<u>Exchange Act</u>"); and (vi) such other information as the Board reasonably determines is necessary or appropriate to enable the Board and shareholders of the Corporation to consider the Shareholder Proposal. The chairman at any meeting of the shareholders may determine that any Shareholder Proposal was not made in accordance with the procedures prescribed in these Bylaws or is otherwise not in accordance with law, and if it is so determined, such officer shall so declare at the meeting and the Shareholder Proposal shall be disregarded.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Only Persons who are selected and recommended by the Board or the committee of the Board designated to make nominations, or who are nominated by shareholders in accordance with the procedures set forth in this <u>Section I.9</u> shall be eligible for election, or qualified to serve, as Directors. Nominations of individuals for election to the Board at any annual meeting or any special meetings of shareholders at which Directors are to be elected may be made by any shareholder of the Corporation entitled to vote for the election of Directors at that meeting by compliance with the procedures set forth in this <u>Section I.9</u>. Nominations by shareholders pursuant to this <u>Section I.9</u> shall be made by written notice (a "<u>Nomination Notice</u>"), which shall set forth (i) as to each individual nominated, (A) the name, date of birth, business address and residence address of such individual; (B) the business experience during the past five years of such nominee, including his or her principal occupations and employment during such period, the name and principal business of any corporation or other organization in which such occupations and employment were carried on, and such other information as to the nature of his or her responsibilities and level of professional competence as may be sufficient to permit assessment of such prior business experience; (C) whether the nominee is or has ever been at any time a director, officer or owner of five percent (5%) or more of any class of capital stock, partnership interests or other equity interest of any corporation, partnership or other entity with a class of securities registered pursuant to Section 12 of the Exchange Act; (D) any directorships held by such nominee in any corporation with a class of securities registered pursuant to Section 12 of the Exchange Act,

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or subject to the requirements of Section 15(d) of the Exchange Act or any corporation registered as an investment corporation under the Investment Corporation Act of 1940, as amended; (E) whether such nominee has ever been convicted in a criminal proceeding or has ever been subject to a judgment, order, finding or decree of any federal, state or other governmental entity, concerning any violation of federal, state or other law, or any proceeding in bankruptcy, which conviction, order, finding, decree or proceeding may be material to an evaluation of the ability or integrity of the nominee; (G) no later than five (5) business days prior to the date of the applicable meeting of shareholders or, if practicable, any adjournment, recess, rescheduling or postponement thereof (or if not practicable, on the first practicable date prior to the date to which such meeting has been adjourned, recessed, rescheduled or postponed), reasonable evidence that such shareholder has complied with the requirements of Rule 14a-19 of the Exchange Act, and (H) any other information required by law or regulation to be provided by a shareholder intending to nominate a person for election as a Director of the Corporation, as applicable; and (ii) as to the Person submitting the Nomination Notice and any Person acting in concert with such Person, (V) the name and business address of such Person, (W) the name and address of such Person as they appear on the Corporation's books (if they so appear), (X) the class and number of shares of the Corporation that are beneficially owned by such Person, (Y) a description of any agreements, arrangements or understandings with respect to the nomination or proposal among such Person and/or such beneficial owner and any other Person acting in concert, including the nominee, and (Z) a description of any agreements, arrangements or understandings (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that have been entered into as of the date of the Nomination Notice by, or on behalf of, the Person submitting the Nomination Notice, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such Person or such beneficial owner, with respect to securities of the Corporation. At the request of the Corporation, the nominee must submit a completed and signed questionnaire (which questionnaire shall be provided by the Secretary) and provide such other information as the Corporation may reasonably request. A written consent to being named in a proxy statement as a nominee, and to serve as a Director if elected, signed by the nominee, shall be filed with any Nomination Notice, together with evidence satisfactory to the Corporation that such nominee has no interests that would limit his or her ability to fulfill his or her duties of office. If the chairman at any meeting of the shareholders determines that a nomination was not made in accordance with the procedures prescribed by these Bylaws, such officer shall so declare to the meeting and the defective nomination shall be disregarded. Without limiting the foregoing, the information required by this paragraph shall be updated by the shareholder not later than ten (10) days after the record date for the meeting to disclose such information as of the record date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If a Shareholder Proposal or Nomination Notice pursuant to this <u>Section I.9</u> is to be submitted at an annual meeting, it shall be delivered to or be mailed and received by the Secretary of the Corporation at the principal executive office of the Corporation not less than one hundred twenty (120) days nor more than one hundred fifty (150) days before the first anniversary of the date that the Corporation's proxy statement was released to Shareholders in connection with the previous year's annual meeting. However, if no annual meeting was held in the previous year or if the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year's proxy statement, the notice shall be delivered to or

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be mailed and received by the Secretary at the principal executive office of the Corporation not later than the close of business on the tenth (10<sup>th</sup>) day following the earlier of (i) the day on which notice of the date of the forthcoming meeting was mailed or given to shareholders by or on behalf of the Corporation and (ii) the day on which public announcement of the date of the forthcoming meeting was made by or on behalf of the Corporation. If a Shareholder Proposal or Nomination Notice is to be submitted at a special meeting of the shareholders, it shall be delivered to or be mailed and received by the Secretary of the Corporation at the principal executive office of the Corporation no later than the close of business on the earlier of (i) the thirtieth (30<sup>th</sup>) day following the public announcement that a matter will be submitted to a vote of the shareholders at a special meeting, or (ii) the tenth (10<sup>th</sup>) day following the day on which notice of the special meeting was given. In addition, if a shareholder intends to solicit proxies from the shareholders of the Corporation for any meeting of the shareholders, such shareholder shall notify the Corporation of this intent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) No person shall be eligible for election as a Director of the Corporation and no business shall be conducted at any meeting of the shareholders of the Corporation unless nominated or proposed, respectively, in compliance with the procedures set forth in this <u>Section I.9</u>. The chairman of a meeting of shareholders of the Corporation shall, if the facts warrant, determine that business has not been properly brought before the meeting in accordance with the provisions of this <u>Section I.9</u>, and if the chairman should so determine, the chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. In addition, if the chairman determines that a nomination of a Director or Directors was not made in accordance with the procedures specified in this <u>Section I.9</u>, the chairman of the meeting shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) In addition to the foregoing provisions of this <u>Section I.9</u>, a shareholder shall also comply with all applicable requirements of the Exchange Act, and the rules and regulations thereunder with respect to the matters set forth in these Bylaws; <u>provided</u>, <u>however</u>, that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit the requirements of these Bylaws applicable to nominations or proposals as to any other business to be considered pursuant to these Bylaws regardless of the shareholder's intent to utilize Rule 14a-8 promulgated under the Exchange Act. Nothing in this <u>Section I.9</u> shall be deemed to affect any rights (i) of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 promulgated under the Exchange Act or (ii) of the holders of any series of preferred stock of the Corporation if and to the extent provided under applicable law, the Articles of Incorporation, or these Bylaws.

<u>Section 10. Place of Shareholders' Meeting</u>. For any meeting of shareholders as described in <u>Article I</u>, the Board may, in its sole discretion, determine that any meeting of shareholders may be held solely or partially by means of remote communication in lieu of holding the meeting at a designated physical place, in any manner and to the fullest extent permitted by the laws of the State of Georgia. A shareholder participating in a meeting by this means is deemed to be present in person at the meeting.

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**ARTICLE II<u><br>BOARD OF DIRECTORS</u>**

<u>Section 1. Number, Election and Term</u>. The Board shall be elected at the annual meeting of the shareholders or at any special meeting held in lieu thereof. No individual shall be named or elected as a Director without his or her prior consent. The number of Directors shall be no less than five (5) nor more than fifteen (15). The specific number of Directors within that range shall be determined by resolution of the Board. This range or the specific number, if a fixed number of Directors is subsequently established, may be increased or decreased at any time by amendment of these Bylaws; <u>provided</u>, <u>however</u>, no reduction in the number of Directors shall have the effect of shortening the term of any incumbent Director. Except as provided in the Articles, the Directors shall be elected at each annual meeting of shareholders, or at a special meeting of shareholders called for purposes that include the election of directors, by a plurality of the votes cast by the shares entitled to vote and present at the meeting. Directors need not be shareholders or residents of the State of Georgia. Each Director, except in the case of his or her earlier death, resignation, retirement, disqualification, or removal, shall serve until the expiration of his or her respective term and thereafter until his or her successor shall have been elected and qualified.

<u>Section 2. Removal and Vacancies</u>. A Director may be removed, with or without cause, by the shareholders only at a shareholder's meeting for which notice of the removal action has been given. Any or all of the Directors, or a class of Directors, may be removed at any time, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of Directors, at any meeting of shareholders called for that purpose. Any vacancy on the Board, including a vacancy resulting from an increase in the number of Directors, may be filled by the shareholders or the Board; <u>provided</u>, <u>however</u>, if the vacant office was held by a Director elected by a particular voting group of shareholders, only the holders of shares of that voting group or the remaining Directors elected by that voting group shall be entitled to fill the vacancy; <u>provided</u> <u>further</u>, if the Directors remaining in office constitute fewer than a quorum of the Board, the vacancy may be filled by the affirmative vote of a majority of the Directors then remaining in office. A vacancy that will occur at a specific later date, whether by reason of a resignation effective at a later date or otherwise, may be filled before the vacancy occurs, but the new Director may not take office until the vacancy occurs.

<u>Section 3. Qualification of Directors</u>. No Person elected to serve as a Director of the Corporation shall assume office and begin serving unless and until duly qualified to serve, as determined by reference to the Code, the Articles, and any further eligibility requirements established in these Bylaws.

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<u>Section 4. Meetings and Notices</u>. The annual meeting of the Board shall be held, without notice, immediately following the annual meeting of the shareholders. Other meetings of the Board shall be held at times fixed by resolution of the Board, or upon the call of the Chief Executive Officer or a majority of the members of the Board. Notice of any meeting not held at a time fixed herein or by resolution of the Board shall be given to each Director at his or her residence or business address by delivering such notice to him or her or by telephoning it to him or her at least twenty-four (24) hours before the meeting. Any such notice need not set forth the purpose of the meeting. Meetings may be held without notice if all the Directors are present or those not present waive notice before or after the meeting. A Director may waive any notice required by law, the Articles of Incorporation, or these Bylaws before or after the date and time stated in the notice, and such waiver shall be equivalent to the giving of such notice. Except as hereinafter provided, the waiver shall be in writing, signed by the Director entitled to the notice, and shall be filed with the minutes or corporate records. A Director's attendance at or participation in a meeting waives any required notice to him or her of the meeting unless the Director at the beginning of the meeting or promptly upon his or her arrival objects to the holding of the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. The Board may permit any or all Directors to participate in a regular or special meeting of the Board by, or conduct the meeting through the use of, any means of communication by which all Directors participating may simultaneously hear each other during the meeting, provided that the Secretary of the meeting shall maintain complete and accurate minutes of all such meetings.

<u>Section 5. Quorum and Voting</u>. Except as otherwise provided in the Articles or these Bylaws, a quorum of the Board shall consist of a majority of the Directors elected and serving as of the time of the meeting in question. If a quorum is present when a vote is taken, the affirmative vote of a majority of Directors present shall be the act of the Board. A Director who is present at a meeting of the Board or a Committee of the Board when corporate action is taken is deemed to have assented to the action taken unless (1) he or she objects at the beginning of the meeting or promptly upon his or her arrival to holding the meeting or transacting specified business at the meeting; or (2) he or she votes against, or abstains from, the action taken.

<u>Section 6. Conduct of Meetings</u>. The Board may appoint one of its members to serve as Chairman of the Board. The Chairman of the Board shall serve at the pleasure of the Board and shall preside over all meetings of the Board at which he or she is present. If the Chairman be absent at any meeting of the Board or if no Chairman has been appointed, a chairman of the meeting shall be appointed unless the Chief Executive Officer of the Corporation is also a member of the Board and is present, in which event he or she shall act as chairman of the meeting.

<u>Section 7. Action Without a Meeting</u>. Any action required or permitted to be taken at a meeting of the Board or any committee thereof maybe taken without a meeting if such action shall be evidenced by one (1) or more written consents stating the action taken, signed by all members of the Board or committee, as the case may be, and included in the minutes or filed with the records of the Corporation. Action taken under this <u>Section II.7</u> shall be effective when the last Director signs the written consent, unless the consent specifies a different date and also reflects the date of execution by each Director, in which event the action taken shall be effective as of the date specified therein. A written consent under this <u>Section II.7</u> shall have the same force and effect as a unanimous vote of the Board or members of the committee, as the case may be.

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**ARTICLE III<u><br>COMMITTEES</u>**

<u>Section 1. Creation of Committees and Selection of Members</u>. The Board may create one or more standing or ad hoc committee and may designate two (2) or more members of the Board to constitute each such committee. The members of each committee shall serve at the pleasure of the Board. The creation of a committee and appointment of members to such committee shall be approved by a majority of all the Directors in office when the action is taken.

<u>Section 2. Voting and Scope of Authority</u>. The Board may from time to time assign to each committee such duties and responsibilities as the Board may be deem advisable. To the extent permitted by resolution of the Board, each committee may exercise the authority of the Board, except that a committee may not (a) approve or recommend to the shareholders action that is required by law to be approved by shareholders; (b) fill vacancies on the Board or on any of its committees; (c) amend the Articles; (d) adopt, amend, or repeal these Bylaws; (e) approve a plan of merger not requiring shareholder approval; (f) authorize or approve a distribution, except according to a general formula or method prescribed by the Board; or (g) authorize or approve the issuance or sale, or contract for the sale, of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the Board may authorize a committee or a senior executive officer of the Corporation to do so within limits specifically prescribed by the Board. <u>Section 4</u> through <u>Section 6</u> of <u>Article II</u> of these Bylaws, which govern meetings, notice and waiver of notice, quorum and voting requirements, and action without meetings of the Board, shall apply to committees and their members.

**ARTICLE IV<u><br>OFFICERS</u>**

<u>Section 1. Number, Election, and Term</u>. The officers of the Corporation shall consist of a Chief Executive Officer and a Secretary, and may include a President, a Treasurer, one or more Vice Presidents, a Chief Financial Officer and such other officers as it may deem proper, each of whom shall be elected or appointed by the Board. Any person may simultaneously hold more than one office. Each officer shall serve at the pleasure of the Board until his or her death, resignation, or removal, or until his or her replacement is elected or appointed in accordance with this <u>Article IV</u>.

<u>Section 2. Duties of Chief Executive Officer</u>. The Chief Executive Officer shall be the chief executive officer of the Corporation, and when present, shall preside at all meetings of the shareholders. The Chief Executive Officer shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board, provided that he or she is a member of the Board. Except as specifically limited by resolution of the Board, the Chief Executive Officer shall have the power and authority to sign all certificates of stock, bonds, deeds, mortgages, extension agreements, leases, and contracts of the Corporation. The Chief Executive Officer shall further perform all of the duties commonly incident to his or her office, along with such other duties as the Board shall designate from time to time.

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<u>Section 3. Duties of Chief Financial Officer</u>. The Chief Financial Officer, subject to an order of the Board, shall have the care and custody of the money, funds, valuable papers, and documents of the Corporation (other than his or her own bond, if any, which shall be in the custody of the Chief Executive Officer). The Chief Financial Officer shall have the power and authority to sign certificates of stock of the Corporation. The Chief Financial Officer shall further keep accurate books of account of the Corporation's transactions, which books shall be and remain the sole property of the Corporation and, together with all its property in his or her possession, shall be subject at all times to the inspection and control of the Chief Executive Officer and the Board. The Chief Financial Officer shall further have and exercise all of the powers and duties commonly incident to his or her office and shall have and exercise such other duties and powers as the Board shall from time to time designate.

<u>Section 4. Duties of Vice President</u>. Except as specifically limited by resolution of the Board, the Vice President (if there be one) shall, in the absence or disability of the Chief Executive Officer, perform the duties and have the powers of the Chief Executive Officer and shall further have the power and authority to sign all certificates of stock, bonds, deeds, and contracts of the Corporation. The Vice President shall further perform all duties commonly incident to his or her office and shall perform such other duties and have such other powers as the Board shall designate from time to time. In the event that more than one Vice President shall be elected or appointed to office at any one time, the power and authority of each of the respective Vice Presidents shall be determined by resolution of the Board.

<u>Section 5. Duties of Secretary</u>. The Secretary shall keep accurate minutes of all meetings of the shareholders and the Board and shall be authorized to affix the seal of the Corporation to any and all documents and instruments duly executed on behalf of the Corporation by any of its officers. The Secretary shall have the power and authority to sign certificates of stock of the Corporation. In the absence of the Secretary at any meeting, an assistant secretary or a secretary pro tempore shall perform the duties of the Secretary at such meeting. The Secretary shall further perform all the duties commonly incident to the office of Secretary and shall perform such other duties and have such other powers as the Board shall designate from time to time.

<u>Section 6. Duties of Treasurer</u>. Unless otherwise provided by the Board, the Treasurer shall be responsible for the custody of all funds and securities belonging to the Corporation and for the receipt, deposit or disbursement of these funds and securities under the direction of the Board. The Treasurer shall cause full and true accounts of all receipts and disbursements to be maintained and shall cause reports of these receipts and disbursements to be made to the Board and the Chief Executive Officer upon request. The Treasurer or Assistant Treasurer shall perform any other duties and have any other authority as from time to time may be delegated by the Board of Directors or the Chief Executive Officer.

**ARTICLE V<u><br>DISTRIBUTIONS AND DIVIDENDS</u>**

Unless the Articles provide otherwise, the Board, from time to time in its discretion, may authorize or declare distributions or share dividends in accordance with the Code.

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**ARTICLE VI<u><br>CERTIFICATES OF STOCK</u>**

<u>Section 1. Form</u>. The interest of each shareholder of the Corporation shall be evidenced by a certificate or certificates representing shares of the Corporation, which shall be in such form as the Board may adopt in accordance with the Code, except to the extent the Board determines that such shares shall be issued in uncertificated form.

<u>Section 2. Uncertificated Shares</u>. The Corporation may, from time to time, evidence some or all of the issued shares of any or all classes or series by book entry or otherwise without certificates. The Corporation shall, within a reasonable time after the issuance or transfer of uncertificated shares, send to the registered owner of the shares a written notice containing the information required to be set forth or stated on certificates under the Code. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical.

<u>Section 3. Rights of Corporation with Respect to Registered Owners</u>. All transfers of stock of the Corporation shall be made upon its books by surrender of the certificate for the shares transferred, accompanied by an assignment in writing by the holder. Transfer may be accomplished either by the holder in person or by a duly authorized attorney-in-fact. Prior to due presentation for transfer of registration of its shares, the Corporation may treat the registered owner of the shares (or the beneficial owner of the shares to the extent of any rights granted by a nominee certificate on file with the Corporation pursuant to any procedure that may be established by the Corporation in accordance with the Code) as the Person exclusively entitled to vote the shares, to receive any dividend or other distribution with respect to the shares, and for all other purposes; and the Corporation shall not be bound to recognize any equitable or other claim to or interest in the shares on the part of any other Person, whether or not it has express or other notice of such a claim or interest, except as otherwise provided by law.

<u>Section 4. Transfers</u>. Transfers of shares of the Corporation shall be made upon the books of the Corporation or by the transfer agent designated to transfer the shares, only upon direction of the Person named in the certificate or, in the case of uncertificated shares, named as the holder thereof on the books of the Corporation, or by an attorney lawfully constituted in writing. Before a new certificate is issued, any old certificate shall be surrendered for cancellation or, in the case of a certificate alleged to have been lost, stolen, or destroyed, the provisions of <u>Section VI.5</u> of these Bylaws shall have been complied with.

<u>Section 5. Lost, Stolen or Destroyed Certificates</u>. Any Person claiming a share certificate to be lost, stolen, or destroyed shall make an affidavit or affirmation of such claim in such a manner as the Corporation may require and shall, if the Corporation requires, give the Corporation a bond of indemnity in form and amount, and with one or more sureties satisfactory to the Corporation, as the Corporation may require, whereupon an appropriate new certificate may be issued in lieu of the one alleged to have been lost, stolen or destroyed.

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<u>Section 6. Transfer Agent and Registrar</u>. The Board may appoint one or more transfer agents and registrars for its stock and may require stock certificates to be countersigned by any such transfer agent and registered by any such registrar. If certificates of stock of the Corporation are so countersigned by a transfer agent or registered by a registrar other than the Corporation or an employee of the Corporation, the signatures thereon of the officers of the Corporation and the seal of the Corporation thereon may be facsimiles, engraved or printed. If the Person who signed, either manually or in facsimile, a share certificate no longer holds office when the certificate is issued, the certificate shall nevertheless be valid.

**ARTICLE VII<u><br>Indemnification of directors and officers</u>**

<u>Section 1. Right of Indemnification and Standards of Conduct.</u> Every person (and the heirs and legal representatives of such person) who is or was a director or officer of the Corporation or any other corporation of which he or she served as such at the request of the Corporation and of which the Corporation directly or indirectly is a shareholder or creditor, or in which or in the stocks, bonds, securities or other obligations of which it is in any way interested, shall in accordance with Section VII.2, and to the maximum extent permitted by the Code, be indemnified for any liability and expense that may be incurred by such person in connection with or resulting from any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative (whether formal or informal and whether brought by or in the right of the Corporation or otherwise) (any such action, suit or proceeding being referred to in this Article VII as a "Proceeding"), or in connection with any appeal relating thereto, in which he or she may become involved, as a party or prospective party or otherwise, by reason of any action taken or not taken in his or her capacity as such director or officer or as a member of any committee appointed by the Board to act for, in the interest of, or on behalf of the Corporation, whether or not he or she continues to be such at the time such liability or expense shall have been incurred; provided such person (a) acted in good faith and (b) reasonably believed (i) in the case of conduct in the person's official capacity, that the conduct was in the Corporation's best interests; (ii) in all other cases, that the conduct was at least not opposed to the Corporation's best interests; and (iii) in the case of a criminal Proceeding, that the person had no reasonable cause to believe that the conduct was unlawful.

As used in this Article VII, the terms "liability" and "expense" shall include, but shall not be limited to, attorneys' fees and disbursements, court costs, expert witness fees, amounts of judgments, fines or penalties, and amounts paid in compromise or settlement by a director or an officer. The termination of any Proceeding by judgment, order, compromise, settlement (with or without court approval) or conviction or upon a plea of guilty or of nolo contendere, or its equivalent, shall not create a presumption that a director or officer did not meet the standards of conduct set forth in this Section VII.1.

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<u>Section 2. Advancement of Expenses.</u> Expenses incurred with respect to any Proceeding of the character described in Section VII.1 shall be advanced by the Corporation prior to the final disposition thereof upon written affirmation by the recipient of his or her good faith belief that he or she has met the applicable standard of conduct and a written undertaking and agreement of the recipient to repay to the Corporation such amount of it is ultimately determined that he or she is not entitled to indemnification under this Article VII.

<u>Section 3. Determination of Right to Indemnification and Advancement of Expenses.</u> The Corporation acknowledges that indemnification of, and advancement of expenses to, a director or officer under this Article VII has been pre-authorized by the Corporation as permitted by Section 14-2-859(a) of the Code, and that pursuant to the authority exercised under Section 14-2-856 of the Code, no determination need be made for a specific Proceeding that such indemnification of or advances of expenses to the director or officer is permissible in the circumstances because he or she has met a particular standard of conduct.

Notwithstanding the foregoing, no officer or director who was or is a party to any action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was an officer or director of the Corporation shall be indemnified in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Corporation unless and except to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability and in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper.

<u>Section 4. Rights of Indemnification Cumulative.</u> The rights of indemnification provided in this Article VII shall be in addition to any rights to which any such director or officer or other person may otherwise be entitled under any bylaw, agreement, vote of shareholders or otherwise, and shall be in addition to the power of the Corporation to purchase and maintain insurance on behalf of any such director or officer or other person against any liability asserted against him or her and incurred by him or her in such capacity, or arising out of his or her status as such, regardless of whether the Corporation would have the power to indemnify against such liability under this Article VII or otherwise.

<u>Section 5.</u> Notice to Shareholders<u>.</u> If the Corporation indemnifies or advances expenses to a director under any of Sections 14-2-851 through 14-2-854 of the Code in connection with a Proceeding by or in the right of the Corporation, the Corporation shall, to the extent required by Section 14-2-1621 or any other applicable provision of the Code, report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting.

<u>Section 6. Insurance.</u> The Corporation, upon the affirmative vote of a majority of its Board, may purchase and maintain insurance on behalf of any person who is or was a director, trustee, officer, employee or agent of the Corporation, or is or was serving, at the request of the Corporation, as a director, trustee, officer, employee or agent of another firm, corporation, trust or other organization or enterprise against liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the foregoing provisions of these Bylaws.

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<u>Section 7. Amendment.</u> Any amendment to this Article VII that limits or otherwise adversely affects the right of indemnification, advancement of expenses or other rights of any indemnified person hereunder shall, as to such indemnified person, apply only to Proceedings based on actions, events or omissions (collectively, "Post-Amendment Events") occurring after such amendment and after delivery of notice of such amendment to the indemnified person so affected. Any indemnified person shall, as to any Proceeding based on actions, events or omissions occurring prior to the date of receipt of such notice, be entitled to the right of indemnification, advancement of expenses and other rights under this Article VII to the same extent as if such provisions had continued as part of the Bylaws without such amendment. This Section VII.7 shall not be altered, amended or repealed in a manner effective as to any indemnified person (except as to Post-Amendment Events) without the prior written consent of such indemnified person.

<u>Section 8. Successors.</u> For purposes of this Article VII, the term "Corporation" shall include any corporation, joint venture, trust, partnership or unincorporated business association that is the successor to all or substantially all of the business or assets of this Corporation, as a result of merger, consolidation, sale, liquidation or otherwise, and any such successor shall be liable to the persons indemnified under this Article VII on the same terms and conditions and to the same extent as the Corporation.

<u>Section 9. Severability.</u> Each of the Sections of this Article, and each of the clauses set forth herein, shall be deemed separate and independent, and should any part of any such Section or clause be declared invalid or unenforceable by any court of competent jurisdiction, such invalidity or unenforceability shall in no way render invalid or unenforceable any other part thereof or any separate Section or clause of this Article that is not declared invalid or unenforceable.

**ARTICLE VIII<u><br>SEAL</u>** 

The corporate seal will be in such form as the Board may from time to time determine. The Board may authorize the use of one or more facsimile forms of the corporate seal. The corporate seal need not be used unless its use is required by these Bylaws, the Articles, or applicable law.

**ARTICLE IX<u><br>VOTING OF OTHER STOCK HELD</u>**

Unless otherwise provided by the Board of the Corporation, the Chief Executive Officer may appoint agents or attorneys to vote any stock of any other corporation owned by this Corporation or may attend any meeting of the holders of stock of such other corporation and vote such shares in person.

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**ARTICLE X<u><br>CHECKS, NOTES AND DRAFTS</u>**

Checks, notes, drafts and other orders for the payment of money shall be signed by the Chief Financial Officer of the Corporation, or such other Person or Persons as the Board may authorize from time to time. The signature of any such Person may be a facsimile when authorized by the Board.

**ARTICLE XI<u><br>FISCAL YEAR</u>**

The fiscal year of the Corporation shall be the calendar year. The Board is authorized to fix the fiscal year of the Corporation and to change the fiscal year from time to time as it deems appropriate.

**ARTICLE XII<u><br>AMENDMENT OF BYLAWS</u>**

Except as otherwise provided below or under the Code, the Board shall have the power to alter, amend, or repeal these Bylaws or adopt new Bylaws. The shareholders shall have the power to rescind, amend, alter or repeal any Bylaw and to enact Bylaws which, if expressly so provided, may not be amended, altered or repealed by the Board.

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## Exhibit 4.1

**EXHIBIT 4.1**

![img212514305_0.jpg](img212514305_0.jpg)

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**EXHIBIT 4.1**

![img212514305_1.jpg](img212514305_1.jpg)

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## Exhibit 4.2

**EXHIBIT 4.2**

**REGISTRATION RIGHTS AGREEMENT**

This Registration Rights Agreement (this "<u>Agreement</u>") is made and entered into as of July 28, 2017 by and among CoastalSouth Bancshares, Inc., a Virginia corporation (the "<u>Company</u>"), and the several purchasers signatory hereto (each a "<u>Purchaser</u>" and collectively, the "<u>Purchasers</u>").

This Agreement is made pursuant to the Stock Purchase Agreements, each dated as of July 28, 2017 between the Company and each Purchaser (the "<u>Purchase Agreements</u>").

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each of the Purchasers agree as follows:

1.<u>Definitions</u>. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

"<u>Advice</u>" shall have the meaning set forth in Section 8(h).

"<u>Affiliate</u>" means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act.

"<u>Agreement</u>" shall have the meaning set forth in the Preamble.

"<u>Business Day</u>" means a day other than a Saturday or Sunday or other day on which banks located in New York City are authorized or required by law to close.

"<u>Capital Stock</u>" means, with respect to any Person at any time, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of capital stock, securities convertible into or exchangeable or exercise able for any of its shares, interests, participations or other equivalents, partnership interests (whether general or limited), limited liability company interests, or equivalent ownership interests in or issued by such Person.

"<u>Closing Date</u>" has the meaning set forth in the Purchase Agreement.

"<u>Commission</u>" means the United States Securities and Exchange Commission.

"<u>Common Stock</u>" means the voting common stock of the Company, par value $1.00 per share, and any securities into which such shares of voting common stock may hereinafter be reclassified.

"<u>Company</u>" shall have the meaning set forth in the Preamble.

"<u>Effective Date</u>" means the date that the Registration Statement filed pursuant to Section 2 is first declared effective by the Commission.

"<u>Effectiveness Deadline</u>" means, with respect to a Registration Statement, the fifth (5<sup>th</sup>) Trading Day after the date the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be "reviewed" or will not be subject to further review; provided, that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the Commission is closed

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for business, the Effectiveness Deadline shall be extended to the next Business Day on which the Commission is open for business.

"<u>Effectiveness Period</u>" shall have the meaning set forth in Section 2.

"<u>Exchange Act</u>" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"<u>FINRA</u>" shall have the meaning set forth in Section 5(n).

"<u>Grace Period</u>" shall have the meaning set forth in Section 5(d).

"<u>Holder</u>" or "<u>Holders</u>" means the holder or holders, as the case may be, from time to time of Registrable Securities.

"<u>Holders Counsel</u>" shall have the meaning set forth in Section 5(a).

"<u>Indemnified Party</u>" shall have the meaning set forth in Section 7(c).

"<u>Indemnifying Party</u>" shall have the meaning set forth in Section 7(c).

"<u>Initial Registration Statement</u>" means shall have the meaning set forth in Section 2.

"<u>Losses</u>" shall have the meaning set forth in Section 7(a).

"<u>Non-Responsive Holder</u>" shall have the meaning set forth in Section 8(d).

"<u>Non-Voting Common Stock</u>" means the Company's non-voting common stock, par value per $1.00 per share, into which the Series D Preferred Stock is convertible following approval by the Company's shareholders of an amendment to its articles of incorporation authorizing said stock.

"<u>OTC Pink</u>" means the marketplace for trading over-the-counter stocks provided and operated by OTC Markets Group, Inc.

"<u>Other Securities</u>" means shares of Common Stock, Series D Preferred Stock, Non-Voting Common Stock or shares of other Capital Stock of the Company which are contractually entitled to registration rights or Capital Stock which the Company is registering pursuant to a Registration Statement.

"<u>Person</u>" means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. "<u>Piggyback Registration</u>" shall have the meaning set forth in Section 3(a).

"<u>Principal Market</u>" means the Trading Market on which the Common Stock is primarily listed on and quoted for trading.

"<u>Proceeding</u>" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

"<u>Prospectus</u>" means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as

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amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

"<u>Purchase Agreement</u>" shall have the meaning set forth in the Recitals.

"<u>Qualifying Holder</u>" means any Holder who (i) purchased Registrable Securities from the Company on the Closing Date for aggregate consideration of at least $7,082,004, and (ii) continues to hold, together with its Affiliates, in aggregate, at least 50% of such Registrable Securities that such Holder purchased on the Closing Date.

"<u>Qualifying Holder Group</u>" means any Holder, or group of Holders, acting together by the written consent of all such Holders, who collectively hold at least 9.5% of the Common Stock then outstanding (provided that, in making such calculation, (i) all shares of Common Stock into or for which shares of any securities owned by such Holders are directly or indirectly convertible or exercisable (which, for the avoidance of doubt, shall include those shares of Common Stock and Non-Voting Common Stock issuable upon the conversion of shares of Series D Preferred Stock), shall be included in the numerator, (ii) the shares described in clause (i) and all such shares owned by or attributed to other shareholders of the Company shall be included in the denominator, and (iii) all securities issued by the Company after the Closing Date other than in connection with an issuance in which the Holders were offered the right to purchase its pro rata portion of such securities in accordance with Section 4.20 of the Purchase Agreements of the shall be excluded from the denominator).

"<u>Registrable Securities</u>" means all of the Shares, the Underlying Shares and any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Shares or the Underlying Shares, provided that Shares or the Underlying Shares shall cease to be Registrable Securities upon the earliest to occur of the following: (A) a sale pursuant to a Registration Statement or Rule 144 under the Securities Act (in which case, only such security sold shall cease to be a Registrable Security); (B) becoming eligible for sale without time, volume or manner of sale restrictions by the Holders under Rule 144; (C) if such Shares or Underlying Shares have ceased to be outstanding; (D) the date a Registration Statement becomes effective including such Shares or Underlying Shares; or (E) if such Shares or Underlying Shares have been sold in a private transaction in which the Holder's rights under this Agreement have not been assigned to the transferee.

"<u>Registration Statements</u>" means any one or more registration statements of the Company filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statements, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statements.

"<u>Requested Information</u>" shall have the meaning set forth in Section 8(d).

"<u>Rule 144</u>" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any successor rule thereto.

"<u>Rule 144A</u>" means Rule 144A promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any successor rule thereto.

"<u>Rule 415</u>" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any successor rule thereto.

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"<u>Rule 424</u>" means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any successor rule thereto.

"<u>SEC Guidance</u>" means (i) any publicly-available written guidance, comments, requirements or requests of the Commission staff and (ii) the Securities Act.

"<u>Securities Act</u>" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

"<u>Series D Preferred Stock</u>" means the Company's Series D Convertible Perpetual Preferred Stock, par value $1.00 per share, and any securities into which such shares of Series D Convertible Perpetual Preferred Stock may hereinafter be reclassified.

"<u>Shares</u>" means the shares of Common Stock and the shares of Series D Preferred Stock issued or issuable to the Purchasers pursuant to the Purchase Agreements.

"<u>Shelf Offering</u>" shall have the meaning set forth in Section 4(a).

"<u>Take-Down Notice</u>" shall have the meaning set forth in Section 4(a).

"<u>Trading Day</u>" means (i) a day on which the Common Stock is listed or quoted and traded on its Principal Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the- counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported in the OTC Pink; provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

"<u>Trading Market</u>" means whichever of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

"<u>Underlying Shares</u>" means shares of Common Stock, Non-Voting Common Stock and Series D Preferred Stock, and includes the shares of Common Stock into which the shares of Non-Voting Common Stock and Series D Preferred Stock are convertible.

2.<u>Registration Request</u>. At any time following the fourth (4<sup>th</sup>) anniversary of the closing of the transactions contemplated by the Purchase Agreements, any Qualifying Holder or Qualifying Holder Group, shall have the right to request in writing (a "<u>Registration Request</u>") that the Company prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 or, if Rule 415 is not available for offers and sales of the Registrable Securities, by such other means of distribution of Registrable Securities as the Company may reasonably determine. Within sixty (60) days of the Company's receipt of a Registration Request, the Company's Board of Directors shall determine, in its sole reasonable discretion, whether it is in the best interest of the Company and its shareholders to file a Registration Statement with respect to the Registrable Shares subject to the Registration Request. In the event that the Board of Directors of the Company determines that it is in the best interest of the Company and its shareholders to file a Registration Statement with respect to the Registrable Shares subject to the Registration Request, the Company shall use its commercially reasonable efforts to cause each Registration Statement to be declared effective by the Commission as soon as practicable following the date of such determination and shall use its commercially reasonable efforts to

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keep each Registration Statement continuously effective under the Securities Act until the earlier of (i) such time as all of the Registrable Securities covered by such Registration Statement have been publicly sold by the Holders or (ii) the date that all Registrable Securities covered by such Registration Statement may be sold by the Holders without volume or manner of sale restrictions under Rule 144, as determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed and reasonably acceptable to the Company's transfer agent (the "<u>Effectiveness Period</u>"). The Company shall request effectiveness of any such Registration Statement as of 5:00 p.m., New York City time, on a Trading Day. The Company shall promptly notify the Holders via facsimile or electronic mail of a ".pdf" format data file of the effectiveness of a Registration Statement within one (1) Business Day of the Effective Date. The Company shall file a final Prospectus for a Registration Statement with the Commission, as required by Rule 424(b) as promptly as reasonably practicable following the Effective Date.

3.<u>Piggyback Registration</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)If the Company intends to file a Registration Statement covering a primary or secondary offering of any of its Common Stock, Series D Preferred Stock, Non-Voting Common Stock or Other Securities, whether or not the sale for its own account, which is not a registration solely to implement an employee benefit plan pursuant to a registration statement on Form S 8 (or successor form), a registration statement on Form S 4 (or successor form) or a transaction to which Rule 145 or any other similar rule of the Commission is applicable, the Company will promptly (and in any event at least fifteen (15) Business Days before the anticipated filing date) give written notice to the Holders of its intention to effect such a registration (which notice shall state the intended method of disposition of such Registrable Securities, the number of securities proposed to be registered, the proposed managing underwriter(s) (if any, and if known) and a good faith estimate by the Company of the proposed minimum offering price of such equity securities)**.** The Company will effect the registration under the Securities Act of all Registrable Securities that the Holder(s) request(s) be included in such registration (a "<u>Piggyback Registration</u>") by a written notice delivered to the Company within five (5) Business Days after the notice given by the Company in the preceding sentence. Subject to Section 3(b), securities requested to be included in a Company registration pursuant to this Section 3 shall be included by the Company on the same form of Registration Statement as has been selected by the Company for the securities the Company is registering for sale referred to above. The Holders shall be permitted to withdraw all or part of the Registrable Securities from the Piggyback Registration at any time at least two (2) Business Days prior to the effective date of the Registration Statement relating to such Piggyback Registration. If the Company elects to terminate any registration filed under this Section 3 prior to the effectiveness of such registration, the Company will have no obligation to register the securities sought to be included by the Holders in such registration under this Section 3. There shall be no limit to the number of Piggyback Registrations pursuant to this Section 3(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)If a Registration Statement under this Section 3 relates to an underwritten offering and the managing underwriter(s) advise(s) the Company that in its or their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such registration or Prospectus only such number of securities that in the reasonable opinion of such underwriter(s) can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (i) first, the Common Stock and other securities the Company proposes to sell, (ii) second, the Registrable Securities of the Holders who have requested inclusion of Registrable Securities pursuant to this Section 3, pro rata on the basis of the aggregate number of such securities or shares owned by each such person, or as such Holders may otherwise agree, and (iii) third, any other securities of the Company that have been requested to be so included, subject to the terms of this Agreement**.** The Company shall select the investment banking firm or firms to act as the lead underwriter or underwriters in connection with an underwritten offering made pursuant to this Section 3. No Holder may participate in

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any underwritten registration under this Section 3 unless such Holder (i) agrees to sell the Registrable Securities it desires to have covered by the underwritten offering on the basis provided in any underwriting arrangements in customary form and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

4.<u>Underwritten Shelf Offering</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)At any time that a shelf registration statement covering Registrable Securities pursuant to Section 2 or Section 3 is effective, if any Holder delivers a notice to the Company (a "<u>Take-Down Notice</u>") stating that it intends to sell all or part of its Registrable Securities included by it on the shelf registration statement (a "<u>Shelf Offering</u>"), then, the Company shall amend or supplement the shelf registration statement as may be necessary in order to enable such Registrable Securities to be distributed pursuant to the Shelf Offering (taking into account the inclusion of Registrable Securities by any other Holders pursuant to this Section 4(a))**.** In connection with any Shelf Offering, including any Shelf Offering that is an underwritten offering, the Company shall deliver the Take-Down Notice to all other holders of Registrable Securities included on such shelf Registration Statement and permit each such Holder to include its Registrable Securities included on the shelf Registration Statement in the Shelf Offering if such holder notifies the proposing holder(s) and the Company within five (5) business days after delivery of the Take-Down Notice to such Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)The Company shall have no obligation to effect an underwritten offering under this Section 4 on behalf of the holders of Registrable Securities electing to participate in such offering unless the expected gross proceeds from such offering exceed $25,000,000**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)If a Shelf Offering of Registrable Securities included in a Registration Statement is to be conducted as an underwritten offering, then the Holders of the majority of the Registrable Securities included in a Registration Statement shall select the investment banking firm or firms to act as the lead underwriter or underwriters in connection with such offering; provided, that such selection shall be reasonably acceptable to the Company. If, in connection with any such underwritten offering, the managing underwriter(s) advise(s) the Company that in its or their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such registration or Prospectus only such number of securities that in the reasonable opinion of such underwriter(s) can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (i) first, the Registrable Securities of the Holders who have requested registration of Registrable Securities pursuant to this Section 4, pro rata on the basis of the aggregate number of such securities or shares owned by each such person, or as the Holders may otherwise agree amongst themselves, (ii) second, the Common Stock and other securities the Company proposes to sell, and (iii) third, any other securities of the Company that have been requested to be so included, subject to the terms of this Agreement. No Holder may participate in any underwritten registration under this Section 4 unless such Holder (i) agrees to sell the Registrable Securities it desires to include in the underwritten offering on the basis provided in any underwriting arrangements in customary form and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)In addition to Sections (a) and (b) of this Section 4, a Shelf Offering of Registrable Securities included on a Piggyback Registration Statement initiated by Holders shall be subject to the procedures set forth in Section 3(b)**.**

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5.<u>Registration Procedures</u>.

In connection with the Company's registration obligations hereunder:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)the Company shall, not less than three (3) Trading Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto (except for Annual Reports on Form 10 K, Quarterly Reports on Form 10-Q, proxy statements and Current Reports on Form 8 K and any similar or successor reports), furnish to one counsel designated by a majority of the outstanding Registrable Securities ("Holders Counsel"), copies of such Registration Statement, Prospectus or amendment or supplement thereto, as proposed to be filed, which documents will be subject to the reasonable review of Holders Counsel**.** The Company shall not file any Registration Statement or amendment or supplement thereto containing information to which Holders Counsel reasonably objects in good faith, unless the Company shall have been advised by its counsel that the information objected to is required under the Securities Act or the rules or regulations adopted thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)(i) the Company shall prepare and file with the Commission such amendments, including post-effective amendments and supplements, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement continuously effective as to the applicable Registrable Securities for its Effectiveness Period (except during a Grace Period); (ii) the Company shall cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424 (except during a Grace Period); (iii) the Company shall respond as promptly as reasonably practicable to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible, provide the Holders Counsel true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to the Holders as "Selling Shareholders"; and (iv) the Company shall comply in all material respects with the applicable provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by a Registration Statement until such time as all of such Registrable Securities shall have been disposed of (subject to the terms of this Agreement) in accordance with the intended methods of disposition by the Holders thereof as set forth in such Registration Statement as so amended or in such Prospectus as so supplemented; provided, that each Holder shall be responsible for the delivery of the Prospectus to the Persons to whom such Purchaser sells any of the Registrable Securities (including in accordance with Rule 172 under the Securities Act), and each Holder agrees to dispose of Registrable Securities in compliance with applicable federal and state securities laws. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 5(b)) by reason of the Company filing a report on Form 10 K, Form 10-Q or Form 8 K or any analogous report under the Exchange Act, the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the Commission as promptly as practicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)the Company shall notify the Holders (which notice shall, pursuant to clauses (ii) through (iv) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made, if applicable) as promptly as reasonably practicable following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement has been filed with the Commission; (B) with respect to each Registration Statement or any post-effective amendment, when the same has become effective; (ii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (iv) of the occurrence of any event

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or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, form of prospectus or supplement thereto, in light of the circumstances under which they were made), not misleading**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)Notwithstanding anything to the contrary herein, at any time after the Registration Statement has been declared effective by the Commission, the Company may delay the disclosure of material nonpublic information concerning the Company if the disclosure of such information at the time is not, in the good faith judgment of the Company, in the best interests of the Company (such delay, a "Grace Period"), provided, however, that no Grace Period shall extend for more than thirty (30) days**.** During the Grace Period, the Company shall not be required to maintain the effectiveness of any Registration Statement filed hereunder and, in any event, Holders shall suspend sales of Registrable Securities pursuant to such Registration Statements during the pendency of the Grace Period provided, the Company shall promptly (i) notify the Holders in writing of the existence of material non-public information giving rise to a Grace Period or the need to file a post-effective amendment, as applicable, and the date on which such Grace Period will begin, (ii) use commercially reasonable efforts to terminate a Grace Period as promptly as practicable provided that such termination is, in the good faith judgment of the Company, in the best interest of the Company and (iii) notify the Holders in writing of the date on which the Grace Period ends. Notwithstanding anything to the contrary, the Company shall use commercially reasonable efforts to cause the Transfer Agent to deliver unlegended Shares to a transferee of a Holder in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which a Holder has entered into an irrevocable contract for sale prior to the Holder's receipt of the notice of a Grace Period and for which the Holder has not yet settled.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)the Company shall use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as practicable**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)the Company shall, if requested by a Holder, furnish to such Holder, without charge, at least one (1) conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Holder (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that the Company shall have no obligation to provide any document pursuant to this clause that is available on the Commission's EDGAR or successor system**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)the Company agrees to promptly deliver to each Holder whose Registrable Securities are included in the applicable Registration Statement, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request**.** The Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)the Company shall, prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions

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within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any general tax in any such jurisdiction where it is not then so subject or file a consent to service of process in any such jurisdiction**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)the Company shall enter into such customary agreements (including an underwriting agreement in customary form) and take all such other actions reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith or by the managing underwriter(s), if any, in order to expedite or facilitate the disposition of such Registrable Securities**.** In connection with any such permitted underwritten offering of Registrable Securities, (i) the Company shall (A) make such representations and warranties to the selling Holders and the managing underwriter(s), if any, with respect to the business of the Company and its subsidiaries, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers in underwritten offerings, and, if true, confirm the same if and when requested, (B) use its commercially reasonable efforts to furnish opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriter(s), if any, addressed to each of the managing underwriter(s), if any, covering the matters customarily covered in opinions requested in underwritten offerings, (C) use its commercially reasonable efforts to obtain comfort letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement) who have certified the financial statements included in such Registration Statement, addressed to each of the managing underwriter(s), if any, such letters to be in customary form and covering matters of the type customarily covered in comfort letters in connection with underwritten offerings, (D) include in the underwriting agreement indemnification provisions and procedures customary in such underwritten offerings and (E) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith, their counsel and the managing underwriter(s), if any, to evidence the continued validity of the representations and warranties made pursuant to clause (A) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company, (ii) each Holder shall not, during such period (which period shall in no event exceed one hundred and eighty (180) days, following the effective date of any Registration Statement to the extent requested by any managing underwriter, sell, pledge, hypothecate, transfer, make any short sale of, loan, grant any option or right to purchase of, or otherwise transfer or dispose of (other than (i) to donees who agree to be similarly bound, (ii) if the Holder is a corporation, partnership, limited liability company or other business entity (A) any transfer to any shareholder, partner or member of, or owner of a similar equity interest in, such Holder, as the case may be, if, in any such case, such transfer is not for value and such transferee agrees to be similarly bound, (B) any transfer made by a Holder in connection with the sale or other bona fide transfer in a single transaction of all or substantially all of the Holder's capital stock, partnership interests, membership interests or other similar equity interests, as the case may be, or all or substantially all of the Holder's assets where such transferee agrees to be similarly bound and, in any such case not undertaken for the purpose of avoiding the restrictions imposed by this agreement) any Registrable Securities owned by it at any time during such period, except Registrable Securities included in such registration; provided that any release of Registrable Securities from such agreement shall be effected among the Holders on a pro rata basis according to the Registrable Securities then owned by them; provided further, that the Holders will not be restricted from selling or otherwise transferring their Registrable Securities in accordance with the foregoing provision unless all officers and directors of the Company and Purchasers who own more than 2.5% of the outstanding

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shares of Common Stock enter into similar agreements as described in clause (iii) below, and (iii) the Company use commercially reasonable efforts to cause its directors and executive officers to execute and deliver customary lockup agreements in such form and for such time period up to one hundred and eighty (180) days as may be requested by any managing underwriter. The above shall be done at each closing under such underwriting or similar agreement, or as and to the extent required thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)the Company shall make available for inspection by any Holder of Registrable Securities included in such Registration Statement, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by any such seller or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its Subsidiaries (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; provided, however, that any Records that are not generally publicly available at the time of delivery of such Records shall be kept confidential by such Inspectors unless (i) the disclosure of such Records is necessary in the reasonable judgment of the Inspectors to avoid or correct a misstatement or omission in the Registration Statement, or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction; provided, further, that each Holder of Registrable Securities agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company to the extent legally permitted and allow the Company, at its expense, to undertake appropriate action and to prevent disclosure of the Records deemed confidential**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)the Company shall, in the case of an underwritten offering, cause its officers to use their commercially reasonable efforts to support the marketing of the Registrable Securities covered by the Registration Statement (including, without limitation, by participation in "road shows") if requested by the managing underwriter(s) and taking into account the Company's business needs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)the Company shall reasonably cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement and under law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may reasonably request**.** Certificates for Registrable Securities free from all restrictive legends may be transmitted by the transfer agent to a Holder by crediting the account of such Holder's prime broker with DTC as directed by such Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)the Company shall following the occurrence of any event contemplated by Sections 5(c)(ii)(iv), as promptly as reasonably practicable, as applicable: (i) use its commercially reasonable efforts to prevent the issuance of any stop order or obtain its withdrawal at the earliest possible moment if the stop order have been issued, or (ii) taking into account the Company's good faith assessment of any adverse consequences to the Company and its shareholders of the premature disclosure of such event, prepare and file a supplement or amendment, including a post-effective amendment, to the affected Registration Statements or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, form of prospectus or supplement thereto, in light of the circumstances under which they were made), not misleading**.**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)the Company may require each selling Holder to furnish to the Company a certified statement as to (i) the number of securities of the Company beneficially owned by such Holder and any Affiliate thereof, (ii) any Financial Industry Regulatory Authority ("FINRA") affiliations, (iii) any natural persons who have the power to vote or dispose of the Common Stock and (iv) any other information as may be requested by the Commission, FINRA, any state securities commission or any other government or regulatory body with jurisdiction over the Company or its activities**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)the Company shall cooperate with any registered broker through which a Holder proposes to resell its Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule 5110 as requested by any such Holder and the Company shall pay the filing fees required for such filings within two (2) Business Days of the request therefore**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)if requested by Holders Counsel, the Company shall (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees (upon advice of counsel) is required to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as reasonably practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)the Company shall use commercially reasonable efforts to cause all Registrable Securities to be listed on each Trading Market on which securities of the same series or class issued by the Company are then listed, or if no such similar securities are then listed, on a Trading Market selected by the Company**.**

The Company may require each Holder of Registrable Securities as to which any registration is being effected to furnish to the Company in writing such information required in connection with such registration regarding such Holder and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request in writing and the Company may exclude from such registration the Registrable Securities of any Holder who fails to furnish such information within a reasonable time after receiving such request.

6.<u>Registration Expenses</u>. All fees and expenses incident to the Company's performance of or compliance with its obligations under this Agreement (excluding any underwriting discounts and selling commissions, stock transfer taxes and fees of counsel for the Holders) shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence that are the Company's responsibility shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (B) with respect to compliance with applicable state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as requested by the Holders) and (C) if not previously paid by the Company in connection with an issuer filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the Holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the

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Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.

7.<u>Indemnification</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)<u>Indemnification by the Company</u>. The Company shall, notwithstanding any termination of this Agreement, indemnify, defend and hold harmless each Holder, the officers, directors, agents, general partners, managing members, managers, Affiliates and employees, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, general partners, managing members, managers, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable costs of preparation and investigation and reasonable and documented attorneys' fees) and expenses (collectively, "Losses"), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder or on behalf of such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and approved by such Holder or Holders Counsel expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto, (B) Holder's failure to deliver or cause to be delivered the Prospectus or any amendment or supplement thereto made available by the Company in compliance with Section 8(g), or (C) in the case of an occurrence of an event of the type specified in Sections 5(c)(ii) (iv), related to the use by a Holder of an outdated or defective Prospectus after the Company has notified such Holder that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated and defined in Section 8(h) below, but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnified Party (as defined in Section 7(c)) and shall survive the transfer of the Registrable Securities by the Holders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)<u>Indemnification by Holders</u>**<u>.</u>** Each Holder shall, notwithstanding any termination of this Agreement, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, or any form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (A) to the extent, but only to the extent, that such untrue

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statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by or on behalf of such Holder expressly for use therein, or (B) to the extent, but only to the extent, that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and approved by such Holder or Holders Counsel expressly for use in a Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (C) in the case of an occurrence of an event of the type specified in Sections 5(c)(ii) (iv), to the extent, but only to the extent, related to the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 8(h), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected, or (ii) Holder's failure to deliver or cause to be delivered the Prospectus or any amendment or supplement thereto made available by the Company in compliance with Section 8(g). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)<u>Conduct of Indemnification Proceedings</u>. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "<u>Indemnified Party</u>"), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the "<u>Indemnifying Party</u>") in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of one (1) counsel reasonably satisfactory to the Indemnified Party and the payment of all reasonable and documented fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such written notice within a reasonable time of commencement of any such Proceeding shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that such failure shall have materially and adversely prejudiced the Indemnifying Party in its ability to defend such Proceeding.

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest exists if the same counsel were to represent such Indemnified Party and the Indemnifying Party; provided, that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding, does not involve a finding or admission of wrongdoing by the Indemnified Party or any of its affiliates, does not impose equitable remedies or obligations on the Indemnified Party or any or its affiliates other than solely the payment of money damages for which the Indemnifying Party will pay.

Subject to the terms of this Agreement, all documented fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section 7(c)) shall be paid to the Indemnified Party, as incurred, within twenty (20) Trading Days of written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party

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for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally judicially determined to not be entitled to indemnification hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa)<u>Contribution</u>. If a claim for indemnification under Section 7(a) or 7(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 7(d) was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 7(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

The indemnity and contribution agreements contained in this Section 7 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties and are not in diminution or limitation of the indemnification provisions under the Purchase Agreement.

8. <u>Miscellaneous</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb)<u>Remedies</u>. In the event of a breach by the Company or by a Holder of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to seek to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to seek specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages may not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc)<u>Prohibition on Other Registrations</u>. The Company agrees (i) not to effect or initiate a registration statement for any public sale or distribution of any securities similar to those being registered pursuant to this Agreement, or any securities convertible into or exchangeable or exercisable for such securities (other than a registration solely to implement an employee benefit plan pursuant to a registration statement on Form S 8 (or successor form), a registration statement on Form S 4 (or successor form) or a transaction to which Rule 145 or any other similar rule of the Commission is applicable), during the fourteen (14) calendar days prior to, and during the sixty (60) calendar-day period beginning on, the effective date

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of any Registration Statement in which the Holders of Registrable Securities are participating (except as part of any such registration, if permitted).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd)<u>Rule 144 Requirements</u>. If the Company becomes subject to the reporting requirements of the Exchange Act, the Company will use its commercially reasonable efforts to timely file with the Commission such reports and information required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder and as the Commission may require. The Company shall furnish to any Holder of Registrable Securities forthwith upon request a written statement as to its compliance with the reporting requirements of Rule 144 (or any successor exemptive rule), the Securities Act and the Exchange Act (at any time that it is subject to such reporting requirements); a copy of its most recent annual or quarterly report; and such other reports and documents as such Person may reasonably request in availing itself of any rule or regulation of the Commission allowing it to sell any such securities without registration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee)<u>Obligations of Holders and Others in a Registration</u>. Each Holder agrees to timely furnish in writing such information regarding such Person, the securities sought to be registered and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably be required to effect the registration of such Registrable Securities (the "<u>Requested Information</u>") and shall take such other action as the Company may reasonably request in connection with the registration, qualification or compliance or as otherwise provided herein. At least ten (10) Business Days prior to the first anticipated filing date of a Registration Statement, the Company shall notify each holder of the information the Company requires from such Holder if such Holder elects to have any of such Holder's Registrable Securities included in the Registration Statement. If the Company has complied with the 10 Business Day notice provision and at least five (5) Business Days prior to the filing date, the Company has not received the Requested Information from a Holder (a "<u>Non-Responsive Holder</u>"), then the Company may exclude from any Registration Statement the Registrable Securities of such Non-Responsive Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff)<u>Rule 144A</u>. The Company agrees that, upon the request of any Holder of Registrable Securities or any prospective purchaser of Registrable Securities designated by a Holder, the Company shall promptly provide (but in any case within fifteen (15) calendar days of a request) to such Holder or potential purchaser, the following information:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.a brief statement of the nature of the business of the Company and any subsidiaries and the products and services they offer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.the most recent consolidated balance sheets and profit and losses and retained earnings statements, and similar financial statements of the Company for the two (2) most recent fiscal years (such financial information shall be audited, to the extent reasonably available); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.such other information about the Company, any subsidiaries, and their business, financial condition and results of operations as the requesting Holder or purchaser of such Registrable Securities shall reasonably request in order to comply with Rule 144A, as amended, and in connection therewith the anti-fraud provisions of the federal and state securities laws.

The Company hereby represents and warrants to any such requesting Holder and any prospective purchaser of Registrable Securities from such Holder that the information provided by the Company pursuant to this Section 8(e) will, as of their dates, not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg)<u>Limitations on Subsequent Registration Rights</u>. The Company will not enter into any agreements with any holder or prospective holder of any securities of the Company which would grant such holder or prospective holder registration rights with respect to the securities of the Company which would have priority over the Registrable Securities with respect to the inclusion of such securities in any registration. If the Company enters into an agreement that contains terms more favorable, in form or substance, to any shareholders than the terms provided to the Holders under this Agreement, then the Company will modify or revise the terms of this Agreement in order to reflect any such more favorable terms for the benefit of the Holders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh)<u>Compliance</u>. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to the Registration Statement and shall sell the Registrable Securities only in accordance with a method of distribution described in the Registration Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Discontinued Disposition</u>. By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Sections 5(c)(ii) (iv), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the "<u>Advice</u>") by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company may provide appropriate stop orders to enforce the provisions of this paragraph.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj)<u>No Inconsistent Agreements</u>. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date hereof, enter into

any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk)<u>Amendments and Waivers</u>. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, or waived unless the same shall be in writing and signed by the Company and Holders of a majority of the then outstanding Registrable Securities; provided that any such amendment, modification, supplement or waiver that materially, adversely and disproportionately effects the rights or obligations of any Holder vis à vis the other Holders shall require the prior written consent of such Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll)<u>Notices</u>. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the applicable Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(mm)<u>Successors and Assigns</u>. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. The Company may not assign its rights (except by merger or in connection with another entity acquiring all or substantially all of the Company's assets) or obligations hereunder without the prior written consent of all the Holders of the then outstanding Registrable Securities. The rights to have the Company register Registrable Securities pursuant to this Agreement shall be automatically assigned by Purchaser to any transferee of the Shares only if: (a) the transferee or assignee acquires Shares of the Purchaser's Registrable Securities with an original value as of the Closing Date of $5,398,263; (b) the Purchaser agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable period of time after such assignment; (c) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (i)

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the name and address of such transferee or assignee and (ii) the securities with respect to which such registration rights are being transferred or assigned; (d) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws; and (e) at or before the time the Company received the written notice contemplated by clause (c) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein with respect to a Holder or Purchaser. In the event of any delay in filing or effectiveness of the Registration Statement as a result of such assignment by a Purchaser or its transferee, the Company shall not be liable for any damages arising from such delay.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(nn)<u>Execution and Counterparts</u>. This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or ".pdf" signature were the original thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(oo)<u>Governing Law</u>**<u>.</u>** All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(pp)<u>Cumulative Remedies</u>. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(qq)<u>Severability</u>. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their good faith reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(rr)<u>Headings</u>. The headings in this Agreement are for convenience only and shall not limit or otherwise affect the meaning hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ss)<u>Independent Nature of Purchasers' Obligations and Rights</u>. The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. The decision of each Purchaser to purchase the Shares pursuant to the Purchase Agreement has been made independently of any other Purchaser. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment in the Shares or enforcing its rights under the Purchase Agreement. Each Purchaser shall be entitled to protect and enforce its rights, including, without limitation, the rights arising out of this

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Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. The Company acknowledges that each of the Purchasers has been provided with the same Registration Rights Agreement for the purpose of closing a transaction with multiple Purchasers and not because it was required or requested to do so by any Purchaser. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(tt)<u>Effectiveness; Termination</u>. This Agreement and the Purchase Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than as set forth or referred to herein and in the Purchase Agreement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

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| | |
|:---|:---|
| &nbsp;&nbsp;COASTALSOUTH BANCSHARES, INC. | &nbsp;&nbsp;COASTALSOUTH BANCSHARES, INC. |
| &nbsp;&nbsp;By: |  |
|  | &nbsp;&nbsp;Name: James S. Macleod<br>Title: Charmain and Chief Executive Officer |

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, <br>SIGNATURE PAGES OF HOLDERS TO FOLLOW]

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

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| |
|:---|
| &nbsp;&nbsp;NAME OF INVESTING ENTITY |
| &nbsp;&nbsp; <br>AUTHORIZED SIGNATORY |
| &nbsp;&nbsp;By: |
| &nbsp;&nbsp;Name: |
| &nbsp;&nbsp;Title |
| &nbsp;&nbsp; <br>ADDRESS FOR NOTICE |
| &nbsp;&nbsp;c/o: |
| &nbsp;&nbsp;Street: |
| &nbsp;&nbsp;Cit/State/Zip: |
| &nbsp;&nbsp;Attention: |
| &nbsp;&nbsp;Tel: |
| &nbsp;&nbsp;Fax: |
| &nbsp;&nbsp;Email: |

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## Exhibit 10.1

**EXHIBIT 10.1**

**COASTALSOUTH BANCSHARES, INC.**

**2017 INCENTIVE PLAN**

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**COASTALSOUTH BANCSHARES, INC.**

**2017 INCENTIVE PLAN**

**ARTICLE 1** 

**PURPOSE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1. <u>GENERAL.</u> The purpose of the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the "Plan") is to promote the success, and enhance the value, of CoastalSouth Bancshares, Inc. (the "Company"), by linking the personal interests of employees, officers, directors and consultants of the Company or any Affiliate (as defined below) to those of Company shareholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of employees, officers, directors and consultants upon whose judgment, interest, and special effort the successful conduct of the Company's operation is largely dependent.

**ARTICLE 2** 

**DEFINITIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.<u>DEFINITIONS.</u> When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly different meaning is required by the context. The following words and phrases shall have the following meanings:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)"Affiliate" means (i) any Subsidiary or Parent, or (ii) an entity that directly or through one or more intermediaries controls, is controlled by or is under common control with, the Company, as determined by the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)"Award" means an award of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance Awards, Other Stock-Based Awards, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)"Award Certificate" means a written document, in such form as the Committee prescribes from time to time, setting forth the terms and conditions of an Award. Award Certificates may be in the form of individual award agreements or certificates or a program document describing the terms and provisions of an Award or series of Awards under the Plan. The Committee may provide for the use of electronic, internet or other non-paper Award Certificates, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)"Beneficial Owner" shall have the meaning given such term in Rule 13d-3 of the General Rules and Regulations under the 1934 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)"Board" means the Board of Directors of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)"Cause" shall have the meaning, if any, assigned such term in the employment, consulting, severance or similar agreement, if any, between a Participant and the Company or an Affiliate: <u>provided, however,</u> that if there is no such employment, consulting, severance or similar agreement in which such term is defined, a Participant's termination will be considered to be for "Cause" if the Company determines that any of the following has occurred: (i) Participant's material failure to follow the reasonable directions of his or her supervisor that, if such breach is capable of being cured, is not cured by Participant within ten (I 0) days of written notice by the Company of the breach to the supervisor's satisfaction within ten (IO) days after receipt of written notice specifying the particulars of the material failure; (ii) any willful violation of any laws, rules or regulations applicable to the Company or the Company's industry, generally; (iii) Participant's material failure to comply with the Company's policies or guidelines of employment or corporate governance policies or guidelines, including, without limitation, any business code of ethics adopted by the Company, that, if capable of being cured, is not

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cured by Participant within ten (10) days of written notice by the Company of the failure; (iv) any act of fraud, misappropriation or embezzlement by the Participant; (v) any breach of any restrictive covenant agreement between the Company and the Participant; (vii) the Participant's conviction of, or pleading guilty or nolo contendere to, a felony or a crime involving moral turpitude (including pleading guilty or nolo contendere to a felony or lesser charge which results from plea bargaining).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)"Change in Control" means and includes the occurrence of any one of the following events but specifically excludes a Public Offering:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)during any consecutive 12-month period, individuals who, at the beginning of such period, constitute the Board of Directors of the Company (the "Incumbent Directors") cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director after the beginning of such I 2- month period and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; <u>provided, however,</u> that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors ("Election Contest") or other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board ("Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)any person becomes a Beneficial Owner, directly or indirectly, of either (A) 50% or more of the then-outstanding shares of common stock of the Company ("Company Common Stock") or (B) securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of directors (the "Company Voting Securities"); <u>provided, however,</u> that for purposes of this subsection (ii), the following acquisitions of Company Common Stock or Company Voting Securities shall not constitute a Change in Control: (w) an acquisition directly from the Company, (x) an acquisition by the Company or a Subsidiary, (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (z) an acquisition pursuant to a Non Qualifying Transaction (as defined in subsection (iii) below); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a Subsidiary (a "Reorganization"), or the sale or other disposition of all or substantially all of the Company's assets (a "Sale") or the acquisition of assets or stock of another corporation or other entity (an "Acquisition"), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the outstanding Company Common Stock and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Reorganization, Sale or Acquisition (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets or stock either directly or through one or more subsidiaries, the "Surviving Entity") in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any Subsidiary, (y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing) is the Beneficial Owner, directly or indirectly, of 50% or more of the total common stock or 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Entity, and (C) at least a majority of the members of the board of directors of the Surviving Entity were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which

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satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a "Non-Qualifying Transaction").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)"Code" means the Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)"Committee" means the committee of the Board described in Article 4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)"Company" means CoastalSouth Bancshares, Inc., a Virginia corporation, or any successor corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)"Continuous Service" means the absence of any interruption or termination of service as an employee, officer, consultant or director of the Company or any Affiliate, as applicable; provided, however, that for purposes of an Incentive Stock Option "Continuous Service" means the absence of any interruption or termination of service as an employee of the Company or any Parent or Subsidiary, as applicable, pursuant to applicable tax regulations. Continuous Service shall not be considered interrupted in the following cases: (i) a Participant transfers employment between the Company and an Affiliate or between Affiliates, (ii) in the discretion of the Committee as specified at or prior to such occurrence, in the case of a spin-off, sale or disposition of the Participant's employer from the Company or any Affiliate, (iii) a Participant's employment with the Company or an Affiliate is terminated, but the Participant continues to serve as a director of the Company or of an Affiliate, or vice versa, (iv) a Participant transfers from being an employee of the Company or an Affiliate to being a consultant to the Company or of an Affiliate, or vice versa, or (v) any leave of absence authorized in writing by the Company prior to its commencement: provided, however, that for purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Whether military, government or other service or other leave of absence shall constitute a termination of Continuous Service shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive; provided, however, that for purposes of any Award that is subject to Code Section 409A, the determination of a leave of absence must comply with the requirements of a "bona fide leave of absence" as provided in Treas. Reg. Section I .409A- I(h).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) "Deferred Stock Unit" means a right granted to a Participant under A1ticle 8 to receive Shares (or the equivalent value in cash or other property if the Committee so provides) at a future time as determined by the Committee, or as determined by the Participant within guidelines established by the Committee in the case of voluntary deferral elections.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)"Disability" of a Participant shall mean the inability of the Participant, as reasonably determined by the Company, to perform the essential functions of his or her regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six (6) consecutive months.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)"Dividend Equivalent" means a right granted with respect to an Award pursuant to Article 10.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)"Effective Date" has the meaning assigned such term in Section 3.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)"Eligible Participant" means an employee, officer, director or consultant of the Company or any Affiliate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)"Exchange" means any national securities exchange on which the Stock may from time to time be listed or traded.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)"Fair Market Value," on any date, will be determined by such method or procedures as the Committee determines in good faith to be reasonable and in compliance with Code Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)"Full-Value Award" means an Award other than in the form of an Option or SAR, and which is settled by the issuance of Stock (or at the discretion of the Committee, settled in cash valued by reference to Stock value).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)"Good Reason" (or a similar term denoting constructive termination) has the meaning, if any, assigned such term in the employment, consulting, severance or similar agreement, if any, between a Participant and the Company or an Affiliate; <u>provided, however,</u> that if there is no such employment, consulting, severance or similar agreement in which such term is defined, "Good Reason" shall have the meaning, if any, given such term in the applicable Award Ce1tificate. If not defined in either such document, the term "Good Reason" as used herein shall not apply to a pa1ticular Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)"Grant Date" of an Award means the first date on which all necessary corporate action has been taken to approve the grant of the Award as provided in the Plan, or such later date as is determined and specified as part of that authorization process. Notice of the grant shall be provided to the grantee within a reasonable time after the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)"Incentive Stock Option" means an Option that is intended to be an incentive stock option and meets the requirements of Section 422 of the Code or any successor provision thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)"Non-Employee Director" means a director of the Company who is not a common law employee of the Company or an Affiliate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) "Nonstatutory Stock Option" means an Option that is not an Incentive Stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)"Option" means a right granted to a Participant under Article 6 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)"Other Stock-Based Award" means a right, granted to a Participant under Article 11, that relates to or is valued by reference to Stock or other Awards relating to Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa) "Parent" means a corporation, limited liability company, partnership or other entity which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Section 424(e) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb) "Participant" means an Eligible Participant who has been granted an Award under the Plan; provided that in the case of the death of a Pa1ticipant, the term "Participant" refers to a beneficiary designated pursuant to Section 12.5 or the legal guardian or other legal representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc) "Performance Award" means any award granted under the plan pursuant to Article 9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd) "Person" means any individual, entity or group, within the meaning of Section 3(a)(9) of the 1934 Act and as used in Section I3(d)(3) or 14(d)(2) of the 1934 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee) "Plan" means the CoastalSouth Bancshares, Inc. 2017 Incentive Plan, as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff) "Public Offering" means a public offering of any class or series of the Company's equity securities pursuant to a registration statement filed by the Company under the 1933 Act.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg) "Restricted Stock" means Stock granted to a Participant under Article 8 that is subject to ce1tain restrictions and to risk of forfeiture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh) "Restricted Stock Unit" means the right granted to a Participant under Article 8 to receive shares of Stock (or the equivalent value in cash or other prope1ty if the Committee so provides) in the future, which right is subject to certain restrictions and to risk of forfeiture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) "Shares" means shares of the Company's Stock. If there has been an adjustment or substitution with respect to the Shares (whether or not pursuant to Article 13), the term "Shares" shall also include any shares of stock or other securities that are substituted for Shares or into which Shares are adjusted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj) "Stock" means the $1.00 par value common stock of the Company and such other securities of the Company as may be substituted for Stock pursuant to Article 13.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk) "Stock Appreciation Right" or "SAR" means a right granted to a Participant under Article 7 to receive a payment equal to the difference between the Fair Market Value of a Share as of the date of exercise of the SAR over the base price of the SAR, all as determined pursuant to Article 7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll)"Subsidiary" means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(mm) "I 933 Act" means the Securities Act of 1933, as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(nn) "1934 Act" means the Securities Exchange Act of I 934, as amended from time to time.

# **ARTICLE 3** 

# **EFFECTIVE TERM OF PLAN** 
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. l. <u>EFFECTIVE DATE.</u> The Plan will become effective on the date that it is adopted by the Board (the "Effective Date"). However, the Plan shall be submitted to the Company's shareholders for approval within twelve (12) months of the Board's approval thereof. No Incentive Stock Options granted under the Plan may be exercised prior to approval of the Plan by the shareholders and if the shareholders fail to approve the Plan within twelve (12) months of the Board's approval thereof, any Incentive Stock Options previously granted hereunder shall be automatically converted to Nonstatutory Stock Options without any further act by the Company or the Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2. <u>TERM OF PLAN.</u> Unless earlier terminated as provided herein, the Plan shall continue in effect until the tenth anniversary of the Effective Date or, if the shareholders approve an amendment to the Plan that increases the number of Shares subject to the Plan, the tenth anniversary of the date of such approval. The termination of the Plan on such date shall not affect the validity of any Award outstanding on the date of termination, which shall continue to be governed by the applicable terms and conditions of the Plan.

# **ARTICLE 4** 

# **ADMINISTRATION** 
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.<u>COMMITTEE.</u> The Plan shall be administered by a Committee appointed by the Board (which Committee shall consist of at least two directors) or, at the discretion of the Board from time to time, the Plan may be administered by the Board. The members of the Committee shall be appointed by, and may be changed at any time and from time to time in the discretion of, the Board. Unless and until changed by the Board, the Compensation Committee of the Board is designated as the Committee to administer the Plan. The Board may reserve to itself any or all of the authority and responsibility of the Committee under the Plan or may act as administrator of the Plan for any and all purposes. To the extent the Board has reserved any authority and responsibility or during time that the Board is acting as administrator of the Plan, it shall have all the powers and

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protections of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board. To the extent any action of the Board under the Plan conflicts with actions taken by the Committee, the actions of the Board shall control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.<u>ACTION AND INTERPRETATIONS BY THE COMMITTEE.</u> For purposes of

administering the Plan, the Committee may from time to time adopt rules, regulations, guidelines and procedures for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the Plan, as the Committee may deem appropriate. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it deems necessary to carry out the intent of the Plan. The Committee's interpretation of the Plan, any Awards granted under the Plan, any Award Certificate and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties and shall be given the maximum deference permitted by applicable law. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company's or an Affiliate's independent certified public accountants, Company counsel or any executive compensation consultant or other professional retained by the Company or the Committee to assist in the administration of the Plan. No member of the Committee will be liable for any good faith determination, act or omission in connection with the Plan or any Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.<u>AUTHORITY OF COMMITTEE.</u> Except as provided in Section 4.1 hereof, the Committee has the exclusive power, authority and discretion to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Grant Awards;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designate Participants;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Determine the type or types of Awards to be granted to each Participant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Determine the number of Awards to be granted and the number of Shares or dollar amount to which an Award will relate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Determine the terms and conditions of any Award granted under the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Prescribe the form of each Award Certificate, which need not be identical for each Participant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)Decide all other matters that must be determined in connection with an Award;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)Establish, adopt or revise any rules, regulations, guidelines or procedures as it may deem necessary or advisable to administer the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)Amend the Plan or any Award Certificate as provided herein; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)Adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of the United States or any non-U.S. jurisdictions in which the Company or any Affiliate may operate, in order to assure the viability of the benefits of Awards granted to participants located in the United States or such other jurisdictions and to further the objectives of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.<u>DELEGATION.</u> The Board may, by resolution, expressly delegate to a special committee, consisting of one or more directors who may but need not be officers of the Company, the authority, within specified parameters as to the number and terms of Awards, to (i) designate officers and/or employees of the Company or any of its Affiliates to be recipients of Awards under the Plan, and

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&nbsp;&nbsp;&nbsp;&nbsp;(ii) to determine the number of such Awards to be received by any such Participants. The acts of such delegates shall be treated hereunder as acts of the Board and such delegates shall report regularly to the Board and the Committee regarding the delegated duties and responsibilities and any Awards so granted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.<u>INDEMNIFICATION</u>. Each person who is or shall have been a member of the Committee, or the Board, or an officer of the Company to whom authority was delegated in accordance with this Article 4, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's charter or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

# **ARTICLE 5** 
**SHARES SUBJECT TO THE PLAN**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.<u>NUMBER OF SHARES.</u> Subject to adjustment as provided in Sections 5.2 and Section

&nbsp;&nbsp;&nbsp;&nbsp;13.I, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 6,274,499. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 6,274,499.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.<u>SHARE COUNTING.</u> Shares covered by an Award shall be subtracted from the Plan share reserve as of the Grant Date, but shall be added back to the Plan share reserve or otherwise treated in accordance with this Section 5.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The full number of Shares subject to the Option shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan, even if the exercise price of an Option is satisfied through net-settlement or by delivering Shares to the Company (by either actual delivery or attestation).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Upon exercise of Stock Appreciation Rights that are settled in Shares, the full number of Stock Appreciation Rights (rather than any lesser number based on the net number of Shares actually delivered upon exercise) shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Shares withheld from an Award to satisfy tax withholding requirements shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan, and Shares delivered by a participant to satisfy tax withholding requirements shall not be added to the Plan share reserve.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)To the extent that an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares subject to the Award will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Shares subject to Awards settled in cash will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)To the extent that the full number of Shares subject to a Full Value Award is not issued for any reason, including by reason of failure to achieve maximum performance goals, the unissued Shares originally subject to the Award will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)Substitute Awards granted pursuant to Section 12.10 of the Plan shall not count against the Shares otherwise available for issuance under the Plan under Section 5.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3.<u>STOCK DISTRIBUTED.</u> Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

# **ARTICLE 6** 

# **STOCK OPTIONS** 
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1.<u>GENERAL.</u> The Committee is authorized to grant Options to Pm1icipants on the following terms and conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>EXERCISE PRICE.</u> The exercise price per Share under an Option shall be determined by the Committee, provided that the exercise price for any Option (other than an Option issued as a substitute Award pursuant to Section 12.10) shall not be less than the Fair Market Value as of the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>TIME AND CONDITIONS OF EXERCISE.</u> The Committee shall determine the time or times at which an Option may be exercised in whole or in pm1, subject to Section 6.1(d). The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised or vested.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>PAYMENT.</u> The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, and the methods by which Shares shall be delivered or deemed to be delivered to Participants. As determined by the Committee at or after the Grant Date, payment of the exercise price of an Option may be made, in whole or in part, in the form of (i) cash or cash equivalents, (ii) delivery (by either actual delivery or attestation) of previously-acquired Shares based on the Fair Market Value of the Shares on the date the Option is exercised, (iii) withholding of Shares from the Option based on the Fair Market Value of the Shares on the date the Option is exercised, (iv) broker-assisted market sales, or (iv) any other "cashless exercise" arrangement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>EXERCISE TERM.</u> Except for Nonstatutory Options granted to Participants outside the United States, no Option granted under the Plan shall be exercisable for more than ten years from the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>NO DEFERRAL FEATURE.</u> No Option shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>NO DIVIDEND EQUIVALENTS.</u> No Option shall provide for Dividend Equivalents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.<u>INCENTIVE STOCK OPTIONS.</u> The terms of any Incentive Stock Options granted under the Plan must comply with the requirements of Section 422 of the Code. Without limiting the foregoing, any Incentive Stock Option granted to a Participant who at the Grant Date owns more than 10% of the voting power of all classes of shares of the Company must have an exercise price per Share of not less than 110% of the Fair Market Value per Share on the Grant Date and an Option term of not more than five years. If all of the requirements of Section 422 of the Code (including the above) are not met, the Option shall automatically become a Nonstatutory Stock Option.

**ARTICLE 7**

**STOCK APPRECIATION RIGHTS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1.<u>GRANT OF STOCK APPRECIATION RIGHTS.</u> The Committee is authorized to grant Stock Appreciation Rights to Participants on the following terms and conditions:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>RIGHT TO PAYMENT.</u> Upon the exercise of a SAR, the Participant has the right to receive, for each Share with respect to which the SAR is being exercised, the excess, if any, of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Fair Market Value of one Share on the date of exercise; over

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The base price of the SAR as determined by the Committee and set fmih in the Award Certificate, which shall not be less than the Fair Market Value of one Share on the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>TIME AND CONDITIONS OF EXERCISE.</u> The Committee shall determine the time or times at which a SAR may be exercised in whole or in pmi. Except for SARs granted to Participants outside the United States, no SAR shall be exercisable for more than ten years from the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>NO DEFERRAL FEATURE.</u> No SAR shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the SAR.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>NO</u> <u>DIVIDEND EQUIVALENTS.</u> No SAR shall provide for Dividend Equivalents.

**ARTICLE 8**

**RESTRICTED STOCK, RESTRICTED STOCK UNITS AND DEFERRED STOCK UNITS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1.<u>GRANT OF RESTRICTED STOCK, RESTRICTED STOCK UNITS AND DEFERRED</u>

<u>STOCK UNITS.</u> The Committee is authorized to make Awards of Restricted Stock, Restricted Stock Units or Deferred Stock Units to Patiicipants in such amounts and subject to such terms and conditions as may be selected by the Committee. An Award of Restricted Stock, Restricted Stock Units or Deferred Stock Units shall be evidenced by an Award Certificate setting forth the terms, conditions, and restrictions applicable to the Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.<u>ISSUANCE AND RESTRICTIONS.</u> Restricted Stock, Restricted Stock Units or Deferred Stock Units shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, for example, limitations on the right to vote Restricted Stock or the

right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. Except as otherwise provided in an Award Certificate or any special Plan document governing an Award, a Participant shall have none of the rights of a shareholder with respect to Restricted Stock Units or Deferred Stock Units until such time as Shares of Stock are paid in settlement of such Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 <u>DIVIDENDS ON</u> <u>RESTRICTED STOCK.</u> In the case of Restricted Stock, the Committee may provide that ordinary cash dividends declared on the Shares before they are vested (i) will be forfeited; (ii) will be deemed to have been reinvested in additional Shares or otherwise reinvested (subject to Share availability under Section 5.1 hereof and subject to the same vesting provisions as provided for the host Award); (iii) will be credited by the Company to an account for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any dividends accrued with respect to forfeited Restricted Stock will be reconveyed to the Company without fmther consideration or any act or action by the Participant; or (iv) will be paid or distributed to the Participant as accrued (in which case, such dividends must be paid or distributed no later than the 15<sup>th</sup> day of the 3,d month following the later of (A) the calendar year in which the corresponding dividends were paid to shareholders, or (B) the first calendar year in which the Participant's right to such dividends is no longer subject to a substantial risk of forfeiture). Unless otherwise provided by the Committee or in the Award Certificate, dividends accrued on Shares of Restricted Stock before they are vested shall be credited by the Company to an account for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any dividends accrued with respect to forfeited Restricted Stock will be reconveyed to the Company without further consideration or any act or action by the Participant.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4.<u>FORFEITURE.</u> Subject to the terms of the Award Certificate and except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of Continuous Service dming the applicable restriction period or upon failure to satisfy a performance goal dming the applicable restriction period, Restricted Stock or Restricted Stock Units that are at that time subject to restrictions shall be forfeited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5.<u>DELIVERY OF RESTRICTED STOCK.</u> Shares of Restricted Stock shall be delivered to the Participant at the Grant Date either by book-entty registration or by delivering to the Participant, or a custodian or escrow agent (including, without limitation, the Company or one or more of its employees) designated by the Committee, a stock certificate or certificates registered in the name of the Participant. If physical certificates representing shares of Restricted Stock are registered in the name of the Participant, such certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.

# **ARTICLE 9** 

# **PERFORMANCE AWARDS** 
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.<u>GRANT OF PERFORMANCE AWARDS.</u> The Committee is authorized to grant any Award under this Plan, including cash-based Awards, with performance-based vesting criteria, on such terms and conditions as may be selected by the Committee. Any such Awards with performance-based vesting criteria are referred to herein as Performance Awards. The Committee shall have the complete discretion to determine the number of Performance Awards granted to each Participant and to designate the provisions of such Performance Awards as provided in Section 4.3. Performance Awards shall be evidenced by an Award Certificate or a written program established by the Committee, pursuant to which Performance Awards are awarded under the Plan under uniform terms, conditions and restrictions set forth in such written program.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.<u>PERFORMANCE GOALS.</u> The Committee may establish performance goals for Performance Awards which may be based on any criteria selected by the Committee. Such performance goals may be described in terms of Company-wide objectives or in terms of objectives that relate to the performance of the Participant, an Affiliate or a division, region, department or function within the Company or an Affiliate. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or an Affiliate conducts its business, or other events or circumstances render performance goals to be unsuitable, the Committee may equitably modify such performance goals in whole or in part, as the Committee deems appropriate. If a Participant is promoted, demoted or transferred to a different business unit or function during a performance period, the Committee may determine that the performance goals or performance period are no longer appropriate and may (i) adjust, change or eliminate the performance goals or the applicable performance period as it deems appropriate to make such goals and period comparable to the initial goals and period, or (ii) make a cash payment to the participant in an amount determined by the Committee.

**ARTICLE 10**

**DIVIDEND EQUIVALENTS**

I 0.1. <u>GRANT OF DIVIDEND EQUIVALENTS.</u> The Committee is authorized to grant Dividend Equivalents with respect to Full-Value Awards granted hereunder, subject to such terms and conditions as may be selected by the Committee. Dividend Equivalents shall entitle the Pmticipant to receive payments equal to ordinary cash dividends or distributions with respect to all or a portion of the number of Shares subject to a Full-Value Award, as determined by the Committee. The Committee may provide that Dividend Equivalents (i) will be deemed to have been reinvested in additional Shares or otherwise reinvested, which shall be subject to the same vesting provisions as provided for the host Award; (ii) will be credited by the Company to an account for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any Dividend Equivalents accrued with respect to forfeited Awards will be reconveyed to the Company without fmther consideration or any act or action by the Participant; or (iii) will be paid or distributed to the Participant as accrued (in which case, such Dividend Equivalents must be paid or distributed no later than the I 5<sup>th</sup> day of the 3"' month following the later of (A) the calendar year in which the corresponding dividends were paid to shareholders, or (B) the first calendar year in which the Participant's right to such Dividends Equivalents is no longer subject to a substantial risk of forfeiture). Unless otherwise provided by the Committee or in the Award Certificate, Dividend Equivalents accrued on Full-Value Awards before they are vested shall be credited by the Company to an account

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for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any Dividend Equivalents accrued with respect to forfeited Awards will be reconveyed to the Company without fmther consideration or any act or action by the Participant.

**ARTICLE 11**

**STOCK OR OTHER STOCK-BASED AWARDS**

I I. I. <u>GRANT OF STOCK OR OTHER STOCK-BASED AWARDS.</u> The Committee is

authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including without limitation Shares awarded purely as a "bonus" and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, and Awards valued by reference to book value of Shares or the value of securities of or the performance of specified Parents or Subsidiaries. The Committee shall determine the terms and conditions of such Awards.

**ARTICLE 12**

**PROVISIONS APPLICABLE TO AWARDS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.<u>ELIGIBILITY.</u> Awards may be granted only to Eligible Participants. Incentive Stock Options may be granted only to Eligible Participants who are employees of the Company or a Parent or Subsidiary as defined in Section 424(e) and (f) of the Code. Eligible Participants who are service providers to an Affiliate may be granted Options or SARs under this Plan only if the Affiliate qualifies as an "eligible issuer of service recipient stock" within the meaning of Treas. Reg. Section l.409A l(b)(5)(iii)(E).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2.<u>AWARD CERTIFICATES.</u> Each Award shall be evidenced by an Award Certificate. Each Award Certificate shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3.<u>FORM OF PAYMENT FOR AWARDS.</u> At the discretion of the Committee, payment of Awards may be made in cash, Stock, a combination of cash and Stock, or any other form of property as the Committee shall determine. In addition, payment of Awards may include such terms, conditions, restrictions and/or limitations, if any, as the Committee deems appropriate, including, in the case of Awards paid in the form of Stock, restrictions on transfer and forfeiture provisions. Further, payment of Awards may be made in the form ofa lump sum, or in installments, as determined by the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4.<u>LIMITS ON TRANSFER.</u> No right or interest of a Participant in any unexercised or restricted Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an Affiliate, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or an Affiliate,--No unexercised or restricted Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or (except in the case of an Incentive Stock Option) pursuant to a domestic relations order that would satisfy Section 4 l 4(p)(l)(A) of the Code if such Section applied to an Award under the Plan: <u>provided, however,</u> that the Committee may (but need not) permit other transfers (other than transfers for value) where the Committee concludes that such transferability (i) is permitted by Rule 70 I under the I933 Act, if applicable, (ii) does not result in accelerated taxation, (iii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Code Section 422(b), and (iv) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, state or federal tax or securities laws applicable to transferable Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.5.<u>BENEFICIARIES.</u> Notwithstanding Section 12.4, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant's death. A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Certificate applicable to the Participant, except to the extent the Plan and Award Certificate otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, any payment due to the Participant shall be made to the Participant's estate.

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Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant, in the manner provided by the Company, at any time provided the change or revocation is filed with the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.6.<u>ACCELERATION UPON DEATH OR DISABILITY.</u> Except as otherwise provided in the Award Certificate or any special Plan document governing an Award, upon the termination of a person's Continuous Status as a Participant by reason of death or Disability: (i) all of that Participant's outstanding Options and SARs shall become fully exercisable; (ii) all time-based vesting restrictions on that Participant's outstanding Awards shall lapse as of the date of termination; and (iii) the payout opportunities attainable under all of that Participant's outstanding performance-based Awards shall be deemed to have been fully earned as of the date of termination as follows: (A) if the date of termination occurs during the first half of the applicable performance period, all relevant performance goals will be deemed to have been achieved at the "target" level, and (B) if the date of termination occurs during the second half of the applicable performance period, the actual level of achievement of all relevant performance goals against target will be measured as of the end of the calendar quarter immediately preceding the date of termination, and (C) in either such case, there shall be a pro-rata payout to the Participant or his or her estate within sixty (60) days following the date of termination (unless a later date is required by Section 15.3 hereof), based upon the length of time within the performance period that has elapsed prior to the date of termination. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be Nonstatutory Stock Options.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.7.<u>ACCELERATION FOR ANY REASON.</u> The Committee may in its sole discretion at any time determine that all or a portion of such Participant's Options, SARs and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable, that all or a pa1i of the restrictions on all or a portion of the Participant's outstanding Awards shall lapse, and/or that any performance-based criteria with respect to any Awards held by that Participant shall be deemed to be wholly or partially satisfied, in each case, as of such date as the Committee may, in its sole discretion, declare. The Committee may discriminate among Participants and among Awards granted to a Participant in exercising its discretion pursuant to this Section 12.7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.8.<u>FORFEITURE EVENTS.</u> Awards under the Plan shall be subject to any compensation recoupment policy that the Company may adopt from time to time that is applicable by its terms to the Participant. In addition, the Committee may specify in an Award Certificate that the Participant's rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, (i) termination of employment for cause, (ii) violation of material Company or Affiliate policies, (iii) breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, (iv) other conduct by the Participant that is detrimental to the business or reputation of the Company or any Affiliate, or (v) a later determination that the vesting of, or amount realized from, a Performance Award was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, whether or not the Participant caused or contributed to such material inaccuracy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.9.<u>SUBSTITUTE AWARDS.</u> The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Company or an Affiliate as a result of a merger or consolidation of the former employing entity with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the former employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.

**ARTICLE 13**

**CHANGES IN CAPITAL STRUCTURE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1.<u>MANDATORY ADJUSTMENTS.</u> In the event of a nonreciprocal transaction between the Company and its shareholders that causes the per-share value of the Stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend), the authorization limits under Section 5.1 shall be adjusted proportionately, and the Committee shall make such adjustments to the Plan and Awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement

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of rights immediately resulting from such transaction. Action by the Committee may include: (i) adjustment of the number and kind of shares that may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding Awards or the measure to be used to determine the amount of the benefit payable on an Award; and (iv) any other adjustments that the Committee determines to be equitable. Notwithstanding the foregoing, the Committee shall not make any adjustments to outstanding Options or SARs that would constitute a modification or substitution of the stock right under Treas. Reg. Sections l.409A-l(b)(5)(v) that would be treated as the grant of a new stock right or change in the form of payment for purposes of Code Section 409A. Without limiting the foregoing, in the event of a subdivision of the outstanding Stock (stock-split), a declaration of a dividend payable in Shares, or a combination or consolidation of the outstanding Stock into a lesser number of Shares, the authorization limits under Section 5.1 shall automatically be adjusted proportionately, and the Shares then subject to each Award shall automatically, without the necessity for any additional action by the Committee, be adjusted proportionately without any change in the aggregate purchase price therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2<u>DISCRETIONARY ADJUSTMENTS.</u> Upon the occurrence or in anticipation of any corporate event or transaction involving the Company (including, without limitation, any merger, reorganization, recapitalization, combination or exchange of shares, or any transaction described in Section 13.1), the Committee may, in its sole discretion, provide (i) that Awards will be settled in cash rather than Stock, (ii) that Awards will become immediately vested and non-forfeitable and exercisable (in whole or in part) and will expire after a designated period of time to the extent not then exercised (provided that Participants shall be provided with advance written notice of any such exercise period and such period shall allow Participants a reasonable period of time in which to exercise such Awards), (iii) that Awards will be assumed by another party to a transaction or otherwise be equitably converted or substituted in connection with such transaction, (iv) that outstanding Awards may be settled by payment in cash or cash equivalents equal to the excess of the fair market value of the underlying Stock, as of a specified date associated with the transaction (or the per-share transaction price), over the exercise or base price of the Award, (v) that performance targets and performance periods for Performance Awards will be modified, or (vi) any combination of the foregoing. The Committee's determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.3<u>GENERAL.</u> Any discretionary adjustments made pursuant to this Article 13 shall be subject to the provisions of Section 14.2. To the extent that any adjustments made pursuant to this Article 13 cause Incentive Stock Options to cease to qualify as Incentive Stock Options, such Options shall be deemed to be Nonstatutory Stock Options.

**ARTICLE 14**

**AMENDMENT, MODIFICATION AND TERMINATION**

14. l. <u>AMENDMENT,</u> <u>MODIFICATION</u> <u>AND</u> <u>TERMINATION.</u> The Board or the

Committee may, at any time and from time to time, amend, modify or terminate the Plan without shareholder approval; <u>provided, however,</u> that if an amendment to the Plan would, in the reasonable opinion of the Board or the Committee, constitute a material change requiring shareholder approval under applicable laws, policies or regulations, then such amendment shall be subject to shareholder approval; and <u>provided,</u> <u>further,</u> that the Board or Committee may condition any other amendment or modification on the approval of shareholders of the Company for any reason.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.2.<u>AWARDS PREVIOUSLY GRANTED.</u> At any time and from time to time, the Committee may amend, modify or terminate any outstanding Award without approval of the Participant;

**<u>provided, however:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Subject to the terms of the applicable Award Ce1iificate, such amendment, modification or termination shall not, without the Participant's consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination (with the per-share value of an Option or SAR for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment or termination over the exercise or base price of such Award);

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant affected thereby. An outstanding Award shall not be deemed to be "adversely affected" by a Plan amendment if such amendment would not reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment (with the per-share value of an Option or SAR for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment over the exercise or base price of such Award).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.3.<u>COMPLIANCE AMENDMENTS.</u> Notwithstanding anything in the Plan or in any Award Certificate to the contrary, the Board may amend the Plan or an Award Certificate, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or Award Certificate to any present or future law relating to plans of this or similar nature (including, but not limited to, Section 409A of the Code), and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 14.3 to any Award granted under the Plan without further consideration or action.

**ARTICLE 15 GENERAL PROVISIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.1.<u>RIGHTS OF PARTICIPANTS.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)No Participant or any Eligible Participant shall have any claim to be granted any Award under the Plan. Neither the Company, its Affiliates nor the Committee is obligated to treat Participants or Eligible Participants uniformly, and determinations made under the Plan may be made by the Committee selectively among Eligible Participants who receive, or are eligible to receive, Awards (whether or not such Eligible Participants are similarly situated).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Nothing in the Plan, any Award Certificate or any other document or statement made with respect to the Plan, shall interfere with or limit in any way the right of the Company or any Affiliate to terminate any Participant's employment or status as an officer, or any Participant's service as a director, at any time, nor confer upon any Participant any right to continue as an employee, officer, or director of the Company or any Affiliate, whether for the duration of a Participant's Award or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company or any Affiliate and, accordingly, subject to Article 14, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company or any of its Affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)No Award gives a Participant any of the rights of a shareholder of the Company

unless and until Shares are in fact issued to such person in connection with such Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.<u>WITHHOLDING.</u> The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company or such Affiliate, an amount sufficient to satisfy federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of the Plan. The obligations of the Company under the Plan will be conditioned on such payment or arrangements and the Company or such Affiliate will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. Unless otherwise determined by the Committee at the time the Award is granted or thereafter, any such withholding requirement may be satisfied, in whole or in part, by withholding from the Award Shares having a Fair Market Value on the date of withholding equal to the amount required to be withheld in accordance with applicable tax requirements (up to the maximum individual statutory rate in the applicable jurisdiction as may be permitted under then-current accounting principles to qualify for equity classification), all in accordance with such procedures as the Committee establishes. All such elections shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3.<u>SPECIAL PROVISIONS RELATED TO SECTION 409A OF THE CODE.</u>

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>General.</u> It is intended that the payments and benefits provided under the Plan and any Award shall either be exempt from the application of, or comply with, the requirements of Section 409A of the Code. The Plan and all Award Certificates shall be construed in a manner that effects such intent. Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not warranted or guaranteed. Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers (other than in his or her capacity as a Participant) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Definitional Restrictions.</u> Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the extent that any amount or benefit that would constitute non-exempt "deferred compensation" for purposes of Section 409A of the Code ("Non-Exempt Deferred Compensation") would otherwise be payable or distributable, or a different form of payment (e.g., lump sum or installment) of such Non-Exempt Deferred Compensation would be effected, under the Plan or any Award Certificate by reason of the occurrence of a Change in Control, or the Participant's Disability or separation from service, such Non-Exempt Deferred Compensation will not be payable or distributable to the Participant, and/or such different form of payment will not be effected, by reason of such circumstance unless the circumstances giving rise to such Change in Control, Disability or separation from service meet any description or definition of ''change in control event', "disability" or "separation from service", as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition). This provision does not affect the dollar amount or prohibit the *vesting* of any Award upon a Change in Control, Disability or separation from service, however defined. If this provision prevents the payment or distribution of any amount or benefit, or the application of a different form of payment of any amount or benefit, such payment or distribution shall be made at the time and in the form that would have applied absent the non- 409A-conforming event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Allocation among Possible Exemptions.</u> If any one or more Awards granted under the Plan to a Participant could qualify for any separation pay exemption described in Treas. Reg. Section 1.409A-l(b)(9), but such Awards in the aggregate exceed the dollar limit permitted for the separation pay exemptions, the Company shall determine which Awards or portions thereof will be subject to such exemptions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Installment Payments.</u> If, pursuant to an Award, a Participant is entitled to a series of installment payments, such Participant's right to the series of installment payments shall be treated as a right to a series of separate payments and not to a single payment. For purposes of the preceding sentence, the term "series of installment payments" has the meaning provided in Treas. Reg. Section I .409A- 2(b)(2)(iii) (or any successor thereto).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Timing of Release of Claims.</u> Whenever an Award conditions a payment or benefit on the Participant's execution and non-revocation of a release of claims, such release must be executed and all revocation periods shall have expired within 60 days after the date of termination of the Participant's employment; failing which such payment or benefit shall be forfeited. If such payment or benefit is exempt from Section 409A of the Code, the Company may elect to make or commence payment at any time during such 60-day period. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then (i) if such 60-day period begins and ends in a single calendar year, the Company may make or commence payment at any time during such period at its discretion, and (ii) if such 60-day period begins in one calendar year and ends in the next calendar year, the payment shall be made or commence during the second such calendar year (or any later date specified for such payment under the applicable Award), even if such signing and non-revocation of the release occur during the first such calendar year included within such 60-day period. In other words, a Participant is not permitted to influence the calendar year of payment based on the timing of signing the release.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Permitted Acceleration.</u> The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section l.409A-3U)(4) to Participants of deferred amounts, provided that such distribution(s) meets the requirements of Treas. Reg. Section I .409A-3(j)(4).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.4.<u>UNFUNDED STATUS OF AWARDS.</u> The Plan is intended to be an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Certificate shall give the Participant any rights that are greater

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than those of a general creditor of the Company or any Affiliate. In its sole discretion, the Committee may authorize the creation of granter trusts or other arrangements to meet the obligations created under the Plan to deliver Shares or payments in lieu of Shares or with respect to Awards. This Plan is not intended to be subject to ERISA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.5.<u>RELATIONSHIP TO OTHER BENEFITS.</u> No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Affiliate unless provided otherwise in such other plan. Nothing contained in the Plan will prevent the Company from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.6.<u>EXPENSES.</u> The expenses of administering the Plan shall be borne by the Company and its Affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.7.<u>TITLES AND HEADINGS.</u> The titles and headings of the Sections in the Plan are for convenience or reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.8.<u>GENDER AND NUMBER.</u> Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.9.<u>FRACTIONA</u><u>L</u> <u>SHARES.</u> No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.10.<u>GOVERNMENT</u> <u>AN</u><u>D</u> <u>OTHER REGULATIONS.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Committee may require each Participant to represent to the Company in writing that the Participant is acquiring securities of the Company for investment purposes and without a view to distribution thereof and as to such other matters as the Committee believes are appropriate. All certificates for Shares or other securities delivered under the Plan will be subject to such share transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the 1933 Act, the 1934 Act, any securities exchange upon which the Shares are then listed, and any other applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Notwithstanding any other provision of the Plan, no Participant who acquires Shares pursuant to the Plan may, during any period of time that such Participant is an affiliate of the Company (within the meaning of the rules and regulations of the Securities and Exchange Commission under the 1933 Act), sell such Shares, unless such offer and sale is made (i) pursuant to an effective registration statement under the 1933 Act, which is current and includes the Shares to be sold, or (ii) pursuant to an appropriate exemption from the registration requirement of the 1933 Act, such as that set forth in Rule 144 promulgated under the 1933 Act, such as that set forth in Rule 144 promulgated under the 1933 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Notwithstanding any other provision of the Plan, if at any time the Committee shall determine that the registration, listing or qualification of the Shares covered by an Award upon any Exchange or under any foreign, federal, state or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection ,with, the granting of such Award or the purchase or receipt of Shares thereunder, no Shares may be purchased, delivered or received pursuant to such Award unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Committee. Any Participant receiving or purchasing Shares pursuant to an Award shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements. The Company shall not be

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required to issue or deliver any certificate or certificates for Shares under the Plan prior to the Committee's determination that all related requirements have been fulfilled. The Company shall in no event be obligated to register any securities pursuant to the 1933 Act or applicable state or foreign law or to take any other action in order to cause the issuance and delivery of such certificates to comply with any such law, regulation or requirement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.11.<u>GOVERNING</u> <u>LAW.</u> To the extent not governed by federal law, the Plan and all Award Certificates shall be construed in accordance with and governed by the laws of the State of South Carolina.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.12.<u>SEVERABI</u><u>LI</u><u>TY</u>. In the event that any provision of this Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability will not be construed as rendering any other provisions contained herein as invalid or unenforceable, and all such other provisions will be given full force and effect to the same extent as though the invalid or unenforceable provision was not contained herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.13.<u>NO LIMITATIONS ON RIGHTS OF COMPANY.</u> The grant of any Award shall not in any way affect the right or power of the Company to make adjustments, reclassification or changes in its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets. The Plan shall not restrict the authority of the Company, for proper corporate purposes, to draft or assume awards, other than under the Plan, to or with respect to any person. If the Committee so directs, the Company may issue or transfer Shares to an Affiliate, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Affiliate will transfer such Shares to a Participant in accordance with the terms of an Award granted to such Participant and specified by the Committee pursuant to the provisions of the Plan.

The foregoing is hereby acknowledged as being the Coastal South Bancshares, Inc. 2017 Incentive Plan as adopted by the Board on July 26, 2017 and by the shareholders on August 28, 2017.

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| |
|:---|
| COASTALSOUTH BANCSHARES, INC. |
| /s/ Stephen R. Stone |
| By: Stephen R. Stone |
| Its: Chief Executive Officer |

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**AMENDMENT TO THE COASTALSOUTH BANCSHARES, INC.**

**2017 INCENTIVE PLAN**

This Amendment to the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the <u>"Plan")</u>, was adopted by the Board of Directors of CoastalSouth Bancshares, Inc. (the <u>"Company")</u> effective as of July 25, 2018 (the <u>"Effective Date").</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. The Plan is hereby amended, effective as of the Effective Date, by deleting Section 5.1 in its entirety and replacing it with the following:

"5. l. <u>NUMBER OF SHARES.</u> Subject to adjustment as provided in Sections

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 and Section 13.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 6,350,999. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 6,274,499."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Except as expressly amended hereby, the terms of the Plan shall be and remain unchanged and the Plan as amended hereby shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized representative on the day and year first above written.

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| |
|:---|
| COASTALSOUTH BANCSHARES, INC. |
| /s/ Stephen R. Stone |
| By: Stephen R. Stone |
| Its: Chief Executive Officer |

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**AMENDMENT NO. 2 TO THE COASTALSOUTH BANCSHARES, INC.**

**2017 INCENTIVE PLAN**

This Amendment to the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the <u>"Plan")</u>, was adopted by the Board of Directors of CoastalSouth Bancshares, Inc. (the <u>"Company")</u> effective as of January 30, 2020 (the <u>"Effective Date").</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. The Plan is hereby amended, effective as of the Effective Date, by deleting Section 5.1 in its entirety and replacing it with the following:

"5.1. <u>NUMBER OF SHARES.</u> Subject to adjustment as provided in Sections

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 and Section 13.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 854,943. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 854,943."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Except as expressly amended hereby, the terms of the Plan shall be and remain unchanged and the Plan as amended hereby shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized representative on the day and year first above written.

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| |
|:---|
| COASTALSOUTH BANCSHARES, INC. |
| /s/ Stephen R. Stone |
| By: Stephen R. Stone |
| Its: Chief Executive Officer |

---

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**AMENDMENT NO. 3 TO THE COASTALSOUTH BANCSHARES, INC.**

**2017 INCENTIVE PLAN**

This Amendment to the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the <u>"Plan")</u>, was adopted by the Board of Directors of CoastalSouth Bancshares, Inc. (the <u>"Company")</u> effective as of October 28, 2021 (the <u>"Effective Date").</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Plan is hereby amended, effective as of the Effective Date, by deleting Section 5.1 in its entirety and replacing it with the following:

"5.1. <u>NUMBER OF SHARES.</u> Subject to adjustment as provided in Sections

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 and Section 13.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 911,908. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 911,908."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Except as expressly amended hereby, the terms of the Plan shall be and remain unchanged and the Plan as amended hereby shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized representative on the day and year first above written.

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| |
|:---|
| COASTALSOUTH BANCSHARES, INC. |
| /s/ Stephen R. Stone |
| By: Stephen R. Stone |
| Its: Chief Executive Officer |

---

------

**AMENDMENT NO. 4 TO THE COASTALSOUTH BANCSHARES, INC.**

**2017 INCENTIVE PLAN**

This Amendment to the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the <u>"Plan")</u>, was adopted by the Board of Directors of CoastalSouth Bancshares, Inc. (the <u>"Company")</u> effective as of October 27, 2022 (the <u>"Effective Date").</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. The Plan is hereby amended, effective as of the Effective Date, by deleting Section 5.1 in its entirety and replacing it with the following:

"5.1. <u>NUMBER OF SHARES.</u> Subject to adjustment as provided in Sections

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 and Section 13.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 945,350. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 945,350."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Except as expressly amended hereby, the terms of the Plan shall be and remain unchanged and the Plan as amended hereby shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized representative on the day and year first above written.

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| |
|:---|
| COASTALSOUTH BANCSHARES, INC. |
| /s/ Stephen R. Stone |
| By: Stephen R. Stone |
| Its: Chief Executive Officer |

---

------

**AMENDMENT NO. 5 TO THE COASTALSOUTH BANCSHARES, INC.**

**2017 INCENTIVE PLAN**

This Amendment to the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the <u>"Plan")</u>, was adopted by the Board of Directors of CoastalSouth Bancshares, Inc. (the <u>"Company")</u> effective as of April 27, 2023 (the <u>"Effective Date")</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. The Plan is hereby amended, effective as of the Effective Date, by deleting Section 5.1 in its entirety and replacing it with the following:

"5.1. <u>NUMBER OF SHARES.</u> Subject to adjustment as provided in Sections

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 and Section 13.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 1,000,720. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 1,000,720."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Except as expressly amended hereby, the terms of the Plan shall be and remain unchanged and the Plan as amended hereby shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized representative on the day and year first above written.

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| |
|:---|
| COASTALSOUTH BANCSHARES, INC. |
| /s/ Stephen R. Stone |
| By: Stephen R. Stone |
| Its: Chief Executive Officer |

---

------

**AMENDMENT NO. 6 TO THE COASTALSOUTH BANCSHARES, INC.**

**2017 INCENTIVE PLAN**

This Amendment to the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the <u>"Plan")</u>, was adopted by the Board of Directors of CoastalSouth Bancshares, Inc. (the <u>"Company")</u> effective as of January 26, 2024 (the <u>"Effective Date")</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. The Plan is hereby amended, effective as of the Effective Date, by deleting Section 5.1 in its entirety and replacing it with the following:

"5.1. <u>NUMBER OF SHARES.</u> Subject to adjustment as provided in Sections

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 and Section 13.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 1,070,864. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 1,070,864."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Except as expressly amended hereby, the terms of the Plan shall be and remain unchanged and the Plan as amended hereby shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized representative on the day and year first above written.

---

| |
|:---|
| COASTALSOUTH BANCSHARES, INC. |
| /s/ Stephen R. Stone |
| By: Stephen R. Stone |
| Its: Chief Executive Officer |

---

------

**AMENDMENT NO. 7 TO THE COASTALSOUTH BANCSHARES, INC.**

**2017 INCENTIVE PLAN**

This Amendment to the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the "<u>Plan</u>"), was adopted by the Board of Directors of CoastalSouth Bancshares, Inc. (the "<u>Company</u>") effective as of November 19, 2024 (the "<u>Effective Date</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.The Plan is hereby amended, effective as of the Effective Date, by deleting Section 5.1 in its entirety and replacing it with the following:

"5.1. <u>NUMBER OF SHARES</u>. Subject to adjustment as provided in Sections

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 and Section 13.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 1,106,500. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 1,106,500."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Except as expressly amended hereby, the terms of the Plan shall be and remain unchanged and the Plan as amended hereby shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized representative on the day and year first above written.

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| |
|:---|
| COASTALSOUTH BANCSHARES, INC. |
| /s/ Stephen R. Stone |
| By: Stephen R. Stone |
| Its: Chief Executive Officer |

---

------

## Exhibit 10.2

**EXHIBIT 10.2**

**COASTAL STATES BANK**

**ANNUAL PERFORMANCE PLAN**

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**COASTALSTATES BANK<br>ANNUAL PERFORMANCE PLAN**

**ARTICLE 1<br>ESTABLISHMENT OF PLAN**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <u>PURPOSE</u><u>.</u> The purpose of this CoastalStates Bank Annual Performance Plan (the "<u>Plan</u>") is to provide for the payment of annual cash incentive awards to eligible employees of CoastalStates Bank, the payment of which will be based on the achievement of one or more Performance Objectives during a Plan Year. The Plan shall remain in effect for successive Plan Years unless and until terminated by the Committee pursuant to Article 7. Unless otherwise specified by the Committee, the Performance Objectives include Bank Performance Objectives and Individual Performance Objectives. Bank Performance Objectives are designed to focus on overall corporate financial or operational results that drive shareholder value. Individual Performance Objectives are intended to measure individual goals and competencies and to motivate and reward outstanding individual performance. The Plan is a sub-plan of the CoastalSouth Banchsares, Inc. 2017 Incentive Plan, or any successor thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <u>PLAN EFFECTIVE DATE</u><u>.</u> This Plan shall be effective as of the Plan Effective Date (as defined below).

**ARTICLE 2<br>DEFINITIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <u>DEFINITIONS</u><u>.</u> Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Incentive Plan (as defined below). In addition, the following terms shall have the following meanings for purposes of this Plan, unless the context in which they are used clearly indicates that some other meaning is intended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) "Annual Incentive Award" means the incentive award payable to a Participant under this Plan calculated by reference to the achievement of applicable Performance Objectives, as determined in accordance with Article 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) "Article 6 Effective Date" has the meaning set forth in Section 6.1 hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) "Bank" means CoastalStates Bank, a South Carolina bank, or any successor thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) "Bank Performance Objectives" means the Bank Performance Objectives established by the Committee for a Plan Year, as provided in Article 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) "Beneficiary" means the beneficiary or beneficiaries designated by a Participant, in the manner determined by the Committee, to receive the benefits, if any, payable on behalf of the Participant under the Plan after the death of such Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) "Certification Date" has the meaning set forth in Section 5.5 hereof.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) "Change in Control" means the occurrence of a "change in the ownership" of the Bank or the Holding Company, a "change in effective control" of the Bank or the Holding Company, or a "change in the ownership of a substantial portion of the assets" of the Bank or the Holding Company, as such terms are defined in Treasury Regulation Section 1.409A-3(i)(5)(v), (vi), and (vii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) "Committee" means the Joint Compensation Committee of the Board of Directors of the Bank and the Holding Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) "Conversion Date" has the meaning set forth in Section 6.4(b) hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) "Deferral Election" means the Participant's annual irrevocable written election, made in accordance with Section 6.2 on the form provided by the Committee, to defer the receipt of a stipulated amount of his or her Annual Incentive Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) "Deferral Percentage" has the meaning set forth in Section 6.2 hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) "Deferred Stock Unit Grant Date" has the meaning set forth in Section 6.2 hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) "Holding Company" means CoastalSouth Bancshares, Inc., a Virginia corporation, or any successor corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) "Individual Performance Objectives" means the Individual Performance Objectives established by the Committee for a Plan Year, as provided in Article 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) "Incentive Plan" means the CoastalSouth Bancshares, Inc. 2017 Incentive Plan, or any successor thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) "Initial Deferral Eligibility Date" means the later of (i) the date that the Participant is first designated as qualified to participate in the Plan under Section 4.1, and (ii) the Article 6 Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) "Line of Business Incentive Plan" means any Line of Business Incentive Plan established under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) "Participant" means a person who, as an employee of the Bank or any Affiliate, has been designated by the Committee as a Participant in the Plan for any given Plan Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) "Performance Objectives" means, collectively, with respect to a Participant, any Bank Performance Objectives and Individual Performance Objectives applicable to the Participant, as provided in Article 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t) "Plan" means this CoastalStates Bank Annual Performance Plan, as set forth in this document together with any subsequent amendments hereto and all Line of Business Incentive Plans established hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u) "Plan Effective Date" means January 1, 2018 (the beginning of fiscal year 2018).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) "Plan Year" means January 1 to December 31 of each year (the fiscal year of the Bank).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w) "Separation from Service" means a separation from service with the Bank or an Affiliate in accordance with the requirements of Section 409A of the Code and the regulations (or similar guidance) thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) "Target Award" has the meaning described in Section 5.2.

**ARTICLE 3<br>ADMINISTRATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <u>COMMITTEE</u><u>.</u> This Plan shall be administered by the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <u>AUTHORITY OF COMMITTEE</u><u>.</u> The Committee has the exclusive power, authority and discretion to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) designate Participants for each Plan Year (by individual or employee class);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) establish and review Individual Performance Objectives and weightings for different Individual Performance Objectives for each Plan Year;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) establish and review Bank Performance Objectives and weightings for different Bank Performance Objectives for each Plan Year;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) establish Target Awards for Participants for each Plan Year, subject to the terms of any employment agreement with the Participant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) determine whether and to what extent Performance Objectives were achieved for each Plan Year;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) increase or decrease the Annual Incentive Award otherwise payable to any Participant resulting from the achievement of Bank Performance Objectives and Individual Performance Objectives in any Plan Year, based on such objective or subjective factors as the Committee shall deem relevant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer this Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) make all other decisions and determinations that may be required under this Plan or as the Committee deems necessary or advisable to administer this Plan; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) amend this Plan as provided herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <u>DECISIONS BINDING</u><u>.</u> The Committee's interpretation of this Plan and all decisions and determinations by the Committee with respect to this Plan are final, binding, and conclusive on all parties.

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**ARTICLE 4<br>ELIGIBILITY**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <u>DESIGNATION OF PARTICIPANTS</u>. **<u>Exhibit A</u>** hereto, as amended from time to time, and each Line of Business Incentive Plan hereunder, lists the Participants in this Plan for the 2018 Plan Year. The Committee, in its discretion, may determine whether other positions or individuals may qualify for participation in all or any portion of this Plan for any subsequent Plan Year or change Target Awards of existing Participants, subject to the terms of any employment agreement with the Participant. On or before March 15 of each Plan Year, the Committee shall approve and substitute a new **<u>Exhibit A</u>** indicating the Participants and their Target Awards for that Plan Year. The Committee will notify or cause Participants to be notified of their eligibility to participate, and the terms thereof, in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <u>PARTIAL YEAR PARTICIPATION</u><u>.</u> If a Participant begins employment or is promoted to an eligible position after the beginning of a Plan Year, the Committee, in its discretion, may determine whether such employee may participate in this Plan and if so, the terms of such participation, which will be prorated based on the number of days such person participated in this Plan during the Plan Year, unless the Committee determines otherwise. If a Participant takes a leave of absence during the Plan Year for any reason, the Participant will receive a pro rata share of an Annual Incentive Award, if any, for such Plan Year, unless the Committee decides otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <u>DEMOTIONS</u><u>.</u> If a Participant is demoted during the Plan Year, the Committee will determine whether Plan participation ends at that time, or is continued at a reduced level.

**ARTICLE 5<br>OPERATION OF THE PLAN**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <u>PLAN STRUCTURE</u><u>.</u> Subject to the terms and conditions of this Plan, each Participant shall be eligible to receive an Annual Incentive Award for the Plan Year if the Bank and the Participant meets or exceeds certain Performance Objectives set by the Committee. Each Plan Year, the Committee shall establish or approve Performance Objectives and their respective weightings and Target Awards as provided in Sections 5.2, 5.3 and 5.4. In establishing Performance Objectives, the Committee may take into account such factors as it deems appropriate, including, without limitation, prior year results, planned business results, anticipated business trends, performance relative to peer companies and macroeconomic conditions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <u>ESTABLISHMENT OF TARGET AWARDS</u>. **<u>Exhibit A</u>** sets forth the percentage of each Participant's base salary that, subject to the terms and conditions of this Plan, will be awarded to the Participant for that Plan Year if the established Performance Objectives are achieved at the target level (the "<u>Target Award</u>") Each Participant's Target Award percentage will be communicated in writing to the Participant upon such Participant's initial participation in the Plan, and shall remain in effect until any change thereto is communicated to the Participant in writing. The actual Annual Incentive Award to a Participant may be greater or less than his or her Target Award, depending on the level of achievement of Bank Performance Objectives and Individual Performance Objectives.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <u>BANK PERFORMANCE OBJECTIVES</u><u>.</u> On or before March 15 of each Plan Year, the Committee shall approve Bank Performance Objectives for that Plan Year, which shall be communicated in writing to the Participants. The Bank Performance Objectives shall include a formula or performance scorecard that the Committee will consider in determining a Participant's Annual Incentive Award. Such Bank Performance Objectives shall be set forth in **<u>Schedule I</u>** attached to this Plan document, as changed from year to year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 <u>INDIVIDUAL PERFORMANCE OBJECTIVES</u><u>.</u> On or before March 15 of each Plan Year, the Committee may approve Individual Performance Objectives for the Chief Executive Officer, and the Committee and the Chief Executive Officer or other appropriate officers may approve Individual Performance Objectives for other Participants. Individual Performance Objectives should be designed to promote accountability for personal performance regarding areas under the Participant's responsibility. Any such Individual Performance Objectives will be communicated to Participants in writing. The Committee shall consider the degree of achievement of Individual Performance Objectives in determining a Participant's Annual Incentive Award. Such Individual Performance Objectives shall be set forth in **<u>Schedule I</u>** attached to this Plan document, as changed from year to year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 <u>PAYOUT FORM AND TIMING; CERTIFICATION OF ACHIEVEMENT OF PERFORMANCE OBJECTIVES</u>. Payment of an Annual Incentive Award shall be conditioned on the written certification of the Committee that the Performance Objectives and any other material conditions were satisfied (the "Certification Date"). Subject to Article 6 hereof with respect to both elective and mandatory deferrals, Annual Incentive Awards will be paid in a lump sum in cash within thirty (30) days after the Certification Date, but no later than March 15 following the end of the Plan Year for which the Annual Incentive Awards, if any, were earned.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 <u>TERMINATION OF EMPLOYMENT</u><u>.</u> Subject to any contrary provision in an individual employment, severance or similar agreement with a Participant, a Participant must be actively employed and in good standing or on approved leave of absence on the date that the Annual Incentive Awards, if any, are paid in order to be eligible to receive an Annual Incentive Award for such Plan Year. Participants whose employment terminates for any reason prior to the date of payment of the Annual Incentive Award (whether before the end of the Plan Year or after) shall forfeit their right to receive an Annual Incentive Award. Any amounts paid on behalf of a deceased Participant will be paid to the Participant's Beneficiary, or, if no Beneficiary has been designated or survives the Participant, any payment due to the deceased Participant shall be made to his or her estate.

**ARTICLE 6<br>DEFERRAL OF ANNUAL INCENTIVE AWARD**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <u>ARTICLE 6 EFFECTIVE DATE</u>. This Article 6 shall become operative upon approval by the Committee (the "<u>Article 6 Effective Date</u>").

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <u>ELECTIVE DEFERRAL OF ANNUAL INCENTIVE AWARD</u><u>.</u> Pursuant to the terms and conditions in this Article 6 and subject to share availability under the Incentive Plan, a Participant may elect to defer some or all of his Annual Incentive Award in the form of Deferred Stock Units by submitting a Deferral Election in the form provided by the Committee during the enrollment periods established by the Committee and in the manner specified by the Committee, but in any event, in accordance with Section 6.3 hereof. A Participant is not required to make a Deferral Election for any Plan Year. Unless otherwise specified by the Committee in the Deferral Election, a Participant may defer between twenty-five percent (25%) and one hundred percent (100%) of his or her Annual Incentive Award for a Plan Year (the "Deferral Percentage"); *provided, however,* that a Participant may elect to defer twenty-five percent (25%) or more above a designated threshold amount of his or her Annual Incentive Award, even if that results in an actual deferral of less than twenty-five percent (25%) of the Participant's entire Annual Incentive Award for that Plan Year. These minimums may be modified by the Committee for a given Plan Year on the election forms for such Plan Year without the need of a formal plan amendment. If a Participant makes an election pursuant to this Section 6.2, he shall receive, on the Certification Date (the "Deferred Stock Unit Grant Date"), a number of Deferred Stock Units determined by dividing the Deferral Percentage by the Fair Market Value per share of Stock on the Deferred Stock Unit Grant Date (rounded up to the nearest whole share).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <u>TIMING REQUIREMENTS FOR DEFERRAL ELECTIONS.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>First Year of Eligibility</u>. Except as noted below, a Participant shall have thirty (30) days following his or her Initial Deferral Eligibility Date in which to execute and deliver to the Committee a Deferral Election by which the Participant elects to defer a stipulated percentage of his or her Annual Incentive Award to be earned during the portion of the Plan Year remaining after the Deferral Election is made and which, but for such Deferral Election, would be paid to the Participant. If a Participant is already eligible to participate in a different deferred compensation plan sponsored by the Bank which, under the plan aggregation rules contained in Treasury Regulation 1.409A-1(c)(2), is considered to be the same type of plan as this Plan, the Participant shall not be eligible to make a Deferral Election until the next Plan Year in accordance with subparagraph (b) below. The Deferral Election described in this paragraph becomes irrevocable upon the end of such 30-day period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Elections Following First Year of Eligibility.</u> Unless paragraph (a) above applies or the Committee imposes an earlier deadline through an annual enrollment program, a Participant shall have until December 31 of each Plan Year to execute and deliver to the Committee a Deferral Election providing for the Deferral of a stipulated percentage of any Annual Incentive Award which the Participant may earn during the following Plan Year and which, but for such Deferral Election, would be paid to the Participant. If the Participant fails to deliver a new Deferral Election prior to the commencement of the new Plan Year, the same Deferral Election from the prior Plan Year, if any, will be in effect during the new Plan Year. Notwithstanding the foregoing, in the event that the Annual Incentive Award qualifies as "performance-based compensation" as described in Treasury Regulation 1.409A-1(e), the Committee may, but is not required to, authorize Participants to file a Deferral Election with respect to such performance-based compensation no later than the date that is six months before the end of the applicable performance period, subject to the requirements set forth in Treasury Regulation 1.409A-2(a)(8), including the requirement

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that: (i) the Participant perform services continuously from the later of the beginning of the Plan Year or the date the criteria are established through the date the Deferral Election is submitted; and (ii) the Annual Incentive Award is not readily ascertainable as of the date the Deferral Election is filed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <u>TERMS AND CONDITIONS OF DEFERRED STOCK UNITS</u><u>.</u> Deferred Stock Units granted under this Plan shall be evidenced by an Award Certificate and shall be subject to the terms and conditions of the Incentive Plan and the terms and conditions described herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Vesting.</u> Any Deferred Stock Units granted under the Plan will be 100% vested and nonforfeitable as of the Deferred Stock Unit Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Conversion Date.</u> The Deferred Stock Units shall be credited to a bookkeeping account on behalf of the Participant. The Deferred Stock Units shall be converted to actual Shares of Stock on the earlier of (i) the second (2nd) anniversary of the applicable Deferred Stock Unit Grant Date, (ii) a Change in Control, or (iii) the Participant's Separation from Service (each, a "<u>Conversion Date</u>"). Stock certificates evidencing the conversion of the Deferred Stock Units into Shares of Stock will be registered on the books of the Holding Company in the Participant's name as of the Conversion Date and delivered to the Participant as soon as practical thereafter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <u>SOURCE OF SHARES OF STOCK</u><u>.</u> The shares of Stock that may be issued pursuant to the Plan shall be issued under the Incentive Plan, subject to all of the terms and conditions of the Incentive Plan. The terms contained in the Incentive Plan are incorporated into and made a part of this Plan with respect to shares of Stock granted pursuant hereto and any such grant shall be governed by and construed in accordance with the Incentive Plan. In the event of any actual or alleged conflict between the provisions of the Incentive Plan and the provisions of this Plan, the provisions of the Incentive Plan shall be controlling and determinative. This Plan does not constitute a separate source of Shares for the grant of the Stock awards described herein.

**ARTICLE 7<br>AMENDMENT, MODIFICATION AND TERMINATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <u>AMENDMENT</u><u>. MODIFICATION AND TERMINATION.</u> The Committee may, at any time and from time to time, amend, modify or terminate this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <u>TERMINATION AFTER OR DURING PLAN YEAR</u><u>.</u> Termination of this Plan after a Plan Year but before Annual Incentive Awards are paid for that Plan Year will not reduce Participants' rights to receive Annual Incentive Awards for the Plan Year. Termination or amendment of this Plan during a Plan Year may be retroactive to the beginning of the Plan Year, at the discretion of the Committee. If a Change in Control occurs, no amendment or termination may adversely affect amounts payable to a Participant without the consent of the Participant.

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**ARTICLE 8<br>GENERAL PROVISIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <u>FORFEITURE EVENTS</u><u>.</u> Annual Incentive Awards, including Deferred Stock Units, if any, granted under this Plan shall be subject to any compensation recoupment policy that the Committee may adopt from time to time that is applicable by its terms to the Participant. In addition, the Committee may specify that the Participant's rights, payments and benefits with respect to awards granted hereunder shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Annual Incentive Award. Such events may include, but shall not be limited to, (i) termination of employment for cause, (ii) violation of material Bank or Affiliate policies, (iii) breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, (iv) other conduct by the Participant that is detrimental to the business or reputation of the Bank or any Affiliate, or (v) a later determination that the vesting of, or amount realized from, an Annual Incentive Award was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, whether or not the Participant caused or contributed to such material inaccuracy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <u>NO RIGHT TO PARTICIPATE</u><u>.</u> No officer or employee shall have any right to be selected to participate in this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 <u>NO RIGHT TO EMPLOYMENT</u><u>.</u> Nothing in this Plan shall interfere with or limit in any way the right of the Bank or any Affiliate to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Bank or any Affiliate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 <u>WITHHOLDING</u><u>.</u> The Bank or any Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Bank or any Affiliate, an amount sufficient to satisfy federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 <u>FUNDING</u><u>.</u> Benefits payable under this Plan to a Participant or to a Beneficiary will be paid by the Bank from its general assets. The Bank is not required to segregate on its books or otherwise establish any funding procedure for any amount to be used for the payment of benefits under this Plan. The Bank may, however, in its sole discretion, set funds aside in investments to meet its anticipated obligations under this Plan. Any such action or set-aside may not be deemed to create a trust of any kind between the Bank and any Participant or beneficiary or to constitute the funding of any Plan benefits. Consequently, any person entitled to a payment under this Plan will have no rights greater than the rights of any other unsecured creditor of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 <u>EXPENSES</u><u>.</u> The expenses of administering this Plan shall be borne by the Bank and its Subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 <u>TITLES AND HEADINGS</u><u>.</u> The titles and headings of the Sections in this Plan are for convenience of reference only, and in the event of any conflict, the text of this Plan, rather than such titles or headings, shall control.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8 <u>GENDER AND NUMBER</u><u>.</u> Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.9 <u>GOVERNING LAW</u><u>.</u> To the extent not governed by federal law, this Plan shall be construed in accordance with and governed by the laws of the State of South Carolina.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.10 <u>SECTION 409A OF THE CODE</u><u>.</u> It is intended that the payments and benefits provided under the Plan and any award granted thereunder shall either be exempt from the application of, or comply with, the requirements of Section 409A of the Code. The Plan and all Award Certificates shall be construed in a manner that effects such intent. Nevertheless, the tax treatment of the benefits provided under the Plan or any award granted thereunder is not warranted or guaranteed. Neither the Bank, its Affiliates nor their respective directors, officers, employees or advisers (other than in his or her capacity as a Participant) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any award granted thereunder.

The foregoing is hereby acknowledged as being the CoastalStates Bank Annual Performance Plan as adopted by the Committee on December 13, 2017, to be effective as of January 1, 2018.

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**<u>EXHIBIT A</u>**

**PARTICIPANTS AND INCENTIVE AWARD PERCENTAGES**

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**<u>SCHEDULE I</u>**

BANK PERFORMANCE OBJECTIVES

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## Exhibit 10.3

**EXHIBIT 10.3**

*Execution Version*

# **COASTAL STATES BANK** 

# **EXECUTIVE SEVERANCE PLAN** 
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** **Establishment; Purpose.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Establishment</u>. CoastalStates Bank (the "<u>Bank</u>") hereby establishes the CoastalStates Bank Executive Severance Plan (the "<u>Plan</u>"), as set forth in this document, effective as of January 1, 2018 (the "<u>Effective Date</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Purpose</u>. The Plan is designed to provide for financial protection to certain key executives of the Bank in the event of unexpected job loss, in order to encourage the continued attention of participants who are expected to make substantial contributions to the success of the Bank and thereby provide for stability and continuity of management. With respect to executives identified as Tier 1 Participants and Tier 2 Participants, this Plan supersedes all prior plans, policies and practices of the Bank, including provisions of any employment agreement between the Participant and the Bank with respect to severance or separation pay for the Participant. The Plan is the only severance program for such Participants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** **Definitions.** For purposes of the Plan, the following terms have the meanings set forth

below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)"<u>Accrued Benefits</u>" has the meaning given to that term in Section 4(a)(i) hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)"<u>Affiliate</u>" means (i) any Subsidiary or Parent, or (ii) an entity that directly or through one or more intermediaries controls, is controlled by or is under common control with, the Bank, as determined by the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)"<u>Annual Base Salary</u>" means, at any time, the Participant's then annual rate of base salary in effect as of the Date of Termination, including any amounts deferred under the qualified retirement plan or nonqualified deferred compensation plan, but excluding amounts (i) received under short-term or long- term incentive or other bonus plans, regardless of whether or not the amounts are deferred, or (ii) designated by the Bank as payment toward reimbursement of expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)"<u>Annual Incentive</u>" means an annual, cash-based incentive payment under the Bank's short-term cash-based annual incentive plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)"<u>Board</u>" means the Board of Directors of the Bank, as constituted at any time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)"<u>Bonus Amount</u>" means, for a Tier 1 or Tier 2 Participant, an amount equal to his or her Annual Incentive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)"<u>Cause</u>" shall mean a good faith determination by the Board that any of the following has occurred:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)a material breach of the terms of this Plan by the Participant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)failure by the Participant to perform the Participant's duties and responsibilities as assigned to him or her in a diligent and professional manner;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)conduct by the Participant that (A) constitutes fraud or dishonesty and (B) is demonstrably likely to lead to material injury to the Bank or resulted or was intended to result in direct or indirect gain to or personal enrichment of the Participant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)conduct by the Participant that constitutes willful misconduct or insubordination, or gross malfeasance of duty;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)conviction of *(or plea of nolo contendere by)* the Participant of a crime involving breach of trust or moral turpitude or a felony;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)illegal drug use, habitual abuse of controlled substances or insobriety, sexual harassment or other sexual misconduct; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)conduct by the Participant that results in the permanent removal of the Participant from his or her position as an officer or employee of the Bank pursuant to a written order by any regulatory agency with authority or jurisdiction over the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)"<u>Change in Control</u>" means the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a subsidiary of the Company (a "<u>Reorganization</u>"), or the sale or other disposition of all or substantially all of the Company's assets (a "<u>Sale</u>") or the acquisition of assets or stock of another corporation or other entity (an "<u>Acquisition</u>"), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the beneficial owners (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 Act, as amended ("<u>Beneficial</u> <u>Owners</u>")), respectively, of the outstanding Company Stock and the Company's then outstanding securities eligible to vote for the election of directors ("<u>Company Voting Securities</u>") immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from or surviving such Reorganization, Sale or Acquisition (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets or stock either directly or through one or more subsidiaries, the "<u>Surviving Entity</u>") in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any subsidiary of the Company, (y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing) is the Beneficial Owner, directly or indirectly, of 50% or more of the total common stock or 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Entity. A Change in Control shall not include a public offering of any class or series of the Company's equity securities pursuant to a registration statement filed by the Company under the Securities and Exchange Act of 1933, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)"<u>CIC Severance Amount</u>" means an amount equal to (x) 1.5 times the sum of (1) the Participant's Base Salary in effect as of the Date of Termination, and (2) the average of the Annual Incentive earned by Participant for each of the three fiscal years immediately preceding the year in which the Date of Termination occurs, for Tier 1 Participants, or (y) 1.0 times the sum of (1) the Participant's Base Salary in effect as of the Date of Termination, and (2) the average of the Annual Incentive earned by Participant for each of the three fiscal years immediately preceding the year in which the Date of Termination occurs, for Tier 2 Participants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)"<u>Code</u>" means the Internal Revenue Code of 1986, as amended.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)"<u>Committee</u>" means the Compensation Committee of the Board or any other committee designated by the Board to administer this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)"<u>Company</u>" means CoastalStates Bank and its Affiliates, and any successor to its business or assets, by operation of law or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)"<u>Date of Termination</u>" means the effective date of the termination of the Participant's employment with the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)"<u>Disability</u>" means, as reasonably determined by the Board, that the Participant has become unable to perform the essential functions of his or her regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of one hundred and twenty (120) substantially consecutive days.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)"<u>Effective Date</u>" means January 1, 2018.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)"<u>Employee</u>" means a full-time salaried employee of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)"<u>ERISA</u>" means the Employee Retirement Income Security Act of 1974, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)"<u>Exempt Person</u>" means any employee benefit plan of the Bank or a trustee or other administrator or fiduciary holding securities under an employee benefit plan of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)"<u>Good Reason</u>" means the occurrence of any of the following, without the Participant's consent:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)a material diminution in the Participant's Base Salary, unless the Bank faces exigent financial conditions, in which case Participant's Base Salary may be reduced *pari passu* with the other senior executive officers of the Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)a material diminution in the Participant's authority, duties, or responsibilities such that the Participant's authority, duties or responsibilities are no longer commensurate with those typically provided by an executive officer of the Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)the relocation of the Participant's principal office to a facility or location more than fifty (50) miles away from the Bank's principal office; <u>provided</u>, <u>however</u>, that Good Reason shall not include (A) any relocation of the Participant's principal office which is proposed or initiated by the Participant; or (B) any relocation that results in the Participant's principal place office being closer to the Participant's then-principal residence; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)any action or inaction that constitutes a material breach by the Company or Bank

of this Plan.

Notwithstanding anything in this Plan to the contrary, a termination by a Participant shall not constitute termination for Good Reason unless the Participant shall first have delivered to the Bank written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than thirty (30) days after the initial occurrence of such event) (the "<u>Good Reason Notice</u>"), and the Bank has not taken action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Participant within thirty (30) days following its receipt of such Good Reason Notice. Good Reason shall not include the

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Participant's death or Disability. The Participant's Date of Termination for Good Reason must occur within a period of ninety (90) days after the occurrence of an event of Good Reason.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)"<u>Letter Agreement</u>" shall mean the letter from the Bank to a selected executive notifying such executive of his or her selection for participation in this Plan and including a written acknowledgement that such executive is entitled to the benefits, and subject to the obligations, of a Participant under this Plan in substantially the form attached hereto as <u>Exhibit B</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)"<u>Non-Exempt Deferred Compensation</u>" means non-exempt "deferred compensation" for purposes of Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)"<u>Notice of Termination</u>" means a written notice which (i) indicates the specific termination provision in this Plan relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant's employment under the provision so indicated and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 calendar days after the giving of such notice).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)"<u>Other Benefits</u>" has the meaning given to that term in Section 4(a)(iii) hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)"<u>Parent</u>" means a corporation, limited liability company, partnership or other entity which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)"<u>Participant</u>" means any individual who (i) is an Employee at the time he or she is designated by the Board or the Committee as a Tier 1 Participant or Tier 2 Participant in this Plan, and (ii) signs and delivers to the Bank a Letter Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)"<u>Protective Covenants</u>" means the protective covenants contained in Section 7 hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa) "<u>Qualified Termination</u>" means any termination of a Participant's employment: (i) by the Bank other than for Cause, Disability or death; or (ii) by the Participant for Good Reason.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb) "<u>Release</u>" has the meaning given to that term in Section 5 hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc) "<u>Severance Amount</u>" means one fourth (1/4) of the Participant's Annual Base Salary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd) "<u>Severance Payment Period</u>" means three (3) months, commencing on the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee) "<u>Subsidiary</u>" means any corporation, limited liability company, partnership or other entity, domestic or foreign, of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff) "<u>Target Annual Incentive</u>" means a Participant's then-current target Annual Incentive opportunity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg) "<u>Tier 1 Participant</u>" means any Employee of the Bank serving in the position of a senior officer designated by the Committee as a Tier 1 Participant.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh) "<u>Tier 2 Participant</u>" means any Employee of the Bank serving in the position of a senior officer designated by the Committee as a Tier 2 Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** **Participation.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Designation of Participants</u>. Eligibility to participate in the Plan shall be limited to those key Employees of the Bank who (i) are designated as Tier 1 or Tier 2 Participants by the Committee, in its sole discretion, and (ii) following such designation, deliver to the Bank a properly executed copy of the Letter Agreement confirming the Employee's eligibility for this Plan and agreement to the terms of the Plan and the Letter Agreement within thirty (30) days after receipt thereof. The Committee shall limit the class of persons designated as Participants in the Plan to a "select group of management or highly compensated employees," within the meaning of Sections 201, 301 and 401 of ERISA. In lieu of expressly designating Tier 2 Participants for Plan participation, the Committee may establish eligibility criteria (consistent with the provisions of this Section 3(a)) providing for participation of one or more Employees qualifying as Tier 2 Participants who satisfy such criteria. Notwithstanding the foregoing, an Employee who is a party to an employment agreement, offer letter, or other arrangement with the Bank that provides for severance benefits shall not be eligible to participate in this Plan, unless such Employee is designated as a Participant by the Committee and such Employee executes any and all documentation as required by the Bank to waive all rights to severance benefits under such employment agreement, offer letter, or other arrangement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Duration of Participation</u>. A Participant shall cease to be a Participant in this Plan if: (i) the Participant ceases to be employed by the Bank, unless such Participant is then entitled to a severance benefit as provided in Section 4(a) of this Plan; or (ii) the Committee removes the Employee as a Participant by notice to the Employee in accordance with Section 17 hereof. Further, participation in this Plan is subject to the unilateral right of the Committee to terminate or amend the Plan in whole or in part as provided in, and subject to the limitations of, Section 18 hereof. Notwithstanding anything herein to the contrary, a Participant who is then entitled to a severance benefit as provided in Section 4(a) of this Plan shall remain a Participant in this Plan until the amounts and benefits payable under this Plan have been paid or provided to the Participant in full. Any severance benefits to be provided to a Participant under this Plan are subject to all of the terms and conditions of the Plan, including Sections 5, 7 and 8.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>No Employment Rights</u>. Participation in the Plan does not alter the status of a Participant as an at-will employee, and nothing in the Plan will limit or affect in any manner the right of the Bank to terminate the employment or adjust the compensation of a Participant at any time and for any reason (with or without Cause).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** **Severance Benefits.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Qualified Termination</u>. Subject to compliance with Sections 5, 7 and 8 hereof, in the event that a Participant incurs a Qualified Termination, the Participant shall be entitled to the compensation and benefits set forth in this Section 4(a).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Accrued Benefits</u>. The Bank shall pay or provide to the Participant the sum of: (A) the Participant's Annual Base Salary earned through the Date of Termination, to the extent not previously paid; (B) any Annual Incentive payable for services rendered in the fiscal year preceding the fiscal year in which the Date of Termination occurs that has not been paid on or prior to the Date of Termination based on actual performance against the target levels; (C) any accrued but unused vacation time in accordance with Bank policy; and (D) reimbursement for any unreimbursed business expenses incurred through the Date of Termination in accordance with Bank policy (the sum of the amounts described in clauses (A) through (D) shall be referred to as the "<u>Accrued Benefits</u>"). The Accrued Benefits shall be paid in a single lump sum within 60 calendar days after the Date of Termination or such earlier date as may be required by the applicable Bank plan or policy or by applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Severance Payments</u>. The Bank shall pay to the Participant an amount equal to the Severance Amount. The Severance Amount shall be subject to applicable withholding and shall be payable during the Severance Payment Period in approximately equal installments in accordance with the Bank regular payroll practices, commencing with the Bank's first regular payroll that occurs after the sixtieth (60th) day following the Date of Termination; provided that the first such payment shall consist of all amounts payable to the Participant pursuant to this Section 4(a)(ii) between the Date of Termination and the first payroll date to occur after the sixtieth (60th) day following the Date of Termination; <u>provided</u>, <u>however</u>, that if such termination occurs within twelve months following a Change in Control, then the Bank shall pay to the Participant an amount equal to the CIC Severance Amount in a lump sum in cash within sixty (60) days after the Date of Termination, the exact payment date to be determined by the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Other Benefits</u>. To the extent not previously paid or provided, the Bank shall pay or provide, or cause to be paid or provided, to the Participant (or his or her beneficiary or estate) any other amounts or benefits required to be paid or provided or which the Participant is eligible to receive under any plan, program, policy or practice or contract or agreement of the Bank (such other amounts and benefits shall be hereinafter referred to as the "<u>Other Benefits</u>") in accordance with the terms and normal procedures of each such plan, program, policy or practice or contract or agreement, based on accrued and vested benefits through the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Other Terminations</u>. If a Participant's employment is terminated for Cause or as a result of the Participant's Disability or death, or if the Participant voluntarily terminates his or her employment other than for Good Reason, then the Bank shall pay or provide to the Participant the Accrued Benefits, payable in accordance with Section 4(a)(i) of this Plan, and the Other Benefits, and no further amounts shall be payable to the Participant under this Section 4 after the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Notice of Termination</u>. Any termination by the Bank for Cause or by Participant for Good Reason shall be communicated by Notice of Termination to the Participant and to the Bank in accordance with Section 17 and as stated in the Good Reason definition, respectively. The failure by the Bank or the Participant to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Bank or the Participant hereunder or preclude the Bank or the Participant from asserting such fact or circumstance in enforcing the Bank's or the Participant's rights hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Resignation from All Positions</u>. Notwithstanding any other provision of this Plan, upon the termination of a Participant's employment for any reason, unless otherwise requested by the Bank, the Participant shall immediately resign from all officer and director positions that he or she may hold with the Bank. As a condition of receiving any severance benefits under this Plan, each Participant shall execute any and all documentation to effectuate such resignations upon request by the Bank, but he or she shall be treated for all purposes as having so resigned upon termination of his or her employment, regardless of when or whether he or she executes any such documentation.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.** **Release.** Notwithstanding anything contained herein to the contrary, the Bank shall not be obligated to provide any severance payment or benefit under Section 4(a)(ii) hereof unless the Participant has executed and not revoked, within forty-five (45) days after the Date of Termination, a separation agreement which includes a general release of claims, in form and substance reasonably acceptable to the Bank (the "<u>Release</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.** **No Mitigation**. In no event shall a Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Participant under any of the provisions of this Plan and such amounts shall not be reduced whether or not the Participant obtains other employment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.** **Protective Covenants.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Acknowledgments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Condition of Employment and Other Consideration</u>. The Participant acknowledges and agrees that he or she has received good and valuable consideration for entering into the agreements contained in this Section 7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Access to Confidential Information, Relationships, and Goodwill</u>. The Participant acknowledges and agrees that he or she is being provided and entrusted with Confidential Information (as that term is defined in Section 7(b) hereof), including highly confidential customer information that is subject to extensive measures to maintain its secrecy within the Company, is not known in the trade or disclosed to the public, and would materially harm the Company's legitimate business interests if it was disclosed or used in violation of this Section 7. The Participant also acknowledges and agrees that he or she is being provided and entrusted with access to the Company's customer and employee relationships and goodwill. The Participant further acknowledges and agrees that the Company would not provide access to the Confidential Information, customer and employee relationships, and goodwill in the absence of the Participant's execution of and compliance with this Section 7. The Participant further acknowledges and agrees that the Company's Confidential Information, customer and employee relationships, and goodwill are valuable assets of the Company and are legitimate business interests that are properly subject to protection through the covenants contained in this Section 7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Potential Unfair Competition</u>. The Participant acknowledges and agrees that as a result of his or her employment with the Company, his or her knowledge of and access to Confidential Information, and his or her relationships with the Company's customers and employees, the Participant would have an unfair competitive advantage if the Participant were to engage in activities in violation of this Section 7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)<u>No Undue Hardship</u>. The Participant acknowledges and agrees that, in the event that his or her employment with the Company terminates, the Participant possesses marketable skills and abilities that will enable him or her to find suitable employment without violating the covenants set forth in this Section 7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)<u>Geographic Scope of Service</u>. Executive acknowledges and agrees that, by virtue of his or her senior executive status with the Company and his or her substantial access to Confidential Information, customer and employee relationships, and goodwill described above, he or she will engage in business on behalf of the Company throughout the entire geographic area in which the Company conducts business, including but not limited to the Restricted Territory (as that term is defined in Section 7(b) hereof).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Definitions</u>. The following capitalized terms used in this Section 7 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)"<u>Competitive Services</u>" means the provision of all credit-related policies, practices, administration and management services on behalf of any person or entity principally engaged in the community banking or commercial banking business, including, without limitation, originating, underwriting, closing and selling loans, receiving deposits and otherwise engaging in the business of banking, as well as the business of providing any other activities, products, or services of the type conducted, authorized, offered, or provided by the Company as of the Participant's Termination Date, or during the two (2) years immediately prior to the Participant's Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)"<u>Confidential Information</u>" means any and all data and information relating to the Company, its activities, business, or clients that (A) is or has been disclosed to the Participant or of which the Participant becomes or has become aware as a consequence of his or her employment with the Company; (B) has value to the Company; and (C) is not generally known outside of the Company and is not publicly available. "Confidential Information" shall include, but is not limited to, the following types of information regarding, related to, or concerning the Company: trade secrets; financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information. "Confidential Information" also includes combinations of information or materials which individually may be generally known outside of the Company, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company. In addition to data and information relating to the Company, "Confidential Information" also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company by such third party, and that the Company has a duty or obligation to keep confidential. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)"<u>Material Contact</u>" means contact between the Participant and a customer or potential customer of the Company (A) with whom or which the Participant has or had dealings on behalf of the Company; (B) whose dealings with the Company are or were coordinated or supervised by the Participant; (C) about whom the Participant obtains Confidential Information in the ordinary course of business as a result of his or her employment with the Company; or (D) who receives products or services of the Company, the sale or provision of which results or resulted in compensation, commissions, or earnings for Executive within the two (2) years prior to the Participant's Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)"<u>Person</u>" means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)"<u>Principal or Representative</u>" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)"<u>Protected Customer</u>" means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom the Participant has had Material Contact on behalf of the Company during his or her employment with the Company.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)"<u>Protected Work</u>" means any and all ideas, inventions, formulas, Confidential Information, source codes, object codes, techniques, processes, concepts, systems, programs, software,

software integration techniques, hardware systems, schematics, flow charts, computer data bases, client lists, trademarks, service marks, brand names, trade names, compilations, documents, data, notes, designs, drawings, technical data and/or training materials, including improvements thereto or derivatives therefrom, whether or not patentable, and whether or not subject to copyright or trademark or trade secret protection, conceived, developed or produced by the Participant, or by others working with the Participant or under his or her direction, during the period of his or her employment and relating to the Company's business, relating to work performed by Executive for the Company, or using the Company's resources or time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)"<u>Restricted Period</u>" means any time during the Participant's employment with the Bank, and if the Participant's employment is terminated for any reason, the Restricted Period shall mean during the Participant's employment plus twelve (12) months following the Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)"<u>Restricted Territory</u>" means all counties in South Carolina (and any other State) in which the Company maintains one or more branches or has filed the requisite notices or applications with the appropriate regulatory authority to open one or more branches at the time of the conduct in question (if the conduct occurs while the Participant is still employed by the Company) or the Termination Date (if the conduct occurs after the Participant's Termination), as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)"<u>Protective Covenants</u>" means the protective covenants contained in subsections (c) through (h) of this Section 7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)"<u>Termination</u>" means the termination of the Participant's employment with the Company, for any reason, whether with or without cause, upon the initiative of either party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii)"<u>Termination Date</u>" means the date of the Participant's Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Restriction on Disclosure and Use of Confidential Information</u>. The Participant agrees that the Participant shall not, directly or indirectly, use any Confidential Information on the Participant's own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information or for three (3) years following the Termination Date, whichever is shorter. The Participant further agrees that he or she shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Section 7 is not intended to, and does not, alter either the Company's rights or the Participant's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, the Participant shall not be restricted from disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; <u>provided</u>, <u>however</u>, that in the event such disclosure is required by law, the Participant shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by the Participant.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Non-Competition</u>. The Participant agrees that during the Restricted Period, he or she will not, without prior written consent of the Company, directly or indirectly (i) carry on or engage in Competitive Services within the Restricted Territory on his or her own behalf or on behalf of any Person or any Principal or Representative of any Person, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any business, whether in corporate, proprietorship or partnership form or otherwise where such business is engaged in the provision of Competitive Services within the Restricted Territory; provided, however, that the foregoing shall not prohibit the Participant from directly or indirectly owning five percent or less of the equity ownership interests of company, provided that the Participant does not provide management or consulting services to such company and does not belong to the board of directors (or functionally equivalent governing body) of such company. The Participant acknowledges that the Restricted Territory is reasonable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Non-Solicitation of Protected Customers</u>. The Participant agrees that during the Restricted Period, he or she shall not, without the prior written consent of the Company, directly or indirectly, on his or her own behalf or as a Principal or Representative of any Person, solicit, divert, take away, or attempt to solicit, divert, or take away a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Non-Recruitment of Employees</u>. The Participant agrees that during the Restricted Period, he or she shall not, directly or indirectly, whether on his or her own behalf or as a Principal or Representative of any Person, solicit, induce or hire away or attempt to solicit, induce or hire away any employee of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<u>Proprietary Rights.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Ownership and Assignment of Protected Works</u>. The Participant agrees that any and all Confidential Information and Protected Works are the sole property of the Company, and that no compensation in addition to the Participant's base salary is due to the Participant for development or transfer of such Protected Works. The Participant agrees that he or she shall promptly disclose in writing to the Company the existence of any Protected Works. The Participant hereby assigns all of his or her rights, title and interest in any and all Protected Works, including all patents or patent applications, and all copyrights therein, to the Company. The Participant shall not be entitled to use Protected Works for his or her own benefit or the benefit of anyone except the Company without written permission from the Company and then only subject to the terms of such permission. The Participant further agrees that he or she will communicate to the Company any facts known to him or her and testify in any legal proceedings, sign all lawful papers, make all rightful oaths, execute all divisionals, continuations, continuations-in-part, foreign counterparts, or reissue applications, all assignments, all registration applications, and all other instruments or papers to carry into full force and effect the assignment, transfer, and conveyance hereby made or to be made and generally do everything possible for title to the Protected Works and all patents or copyrights or trademarks or service marks therein to be clearly and exclusively held by the Company. The Participant agrees that he or she will not oppose or object in any way to applications for registration of Protected Works by the Company or others designated by the Company. The Participant agrees to exercise reasonable care to avoid making Protected Works available to any third party and shall be liable to the Company for all damages and expenses, including reasonable attorneys' fees, if Protected Works are made available to third parties by him or her without the express written consent of the Company.

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Anything herein to the contrary notwithstanding, the Participant will not be obligated to assign to the Company any Protected Work for which no equipment, supplies, facilities, or Confidential Information of the Company was used and which was developed entirely on the Participant's own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development; or (b) the invention results from any work performed by the Participant for the Company. The Participant likewise will not be obligated to assign to the Company any Protected Work that is conceived by the Participant after the Participant leaves the employ or service of the Company, except that the Participant is so obligated if the same relates to or is based on Confidential Information to which the Participant had access by virtue of his or her employment with the Company. Similarly, the Participant will not be obligated to assign any Protected Work to the Company that was conceived and reduced to practice prior to his or her employment, regardless of whether such Protected Work relates to or would be useful in the business of the Company. The Participant acknowledges and agrees that there are no Protected Works conceived and reduced to practice by him or her prior to his or her employment with the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>No Other Duties</u>. The Participant acknowledges and agrees that there is no other contract or duty on his or her part now in existence to assign Protected Works to anyone other than the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Works Made for Hire</u>. The Company and the Participant acknowledge that in the course of his or her employment with the Company, the Participant may from time to time create for the Company copyrightable works. Such works may consist of manuals, pamphlets, instructional materials, computer programs, software, software integration techniques, software codes, and data, technical data, photographs, drawings, logos, designs, artwork or other copyrightable material, or portions thereof, and may be created within or without the Company's facilities and before, during or after normal business hours. All such works related to or useful in the business of the Company are specifically intended to be works made for hire by the Participant, and the Participant shall cooperate with the Company in the protection of the Company's copyrights in such works and, to the extent deemed desirable by the Company, the registration of such copyrights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)<u>Return of Materials</u>. The Participant agrees that he or she will not retain or destroy (except as set forth below), and will immediately return to the Company on or prior to the Termination Date, or at any other time the Company requests such return, any and all property of the Company that is in his or her possession or subject to his or her control, including, but not limited to, keys, credit and identification cards, personal items or equipment, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, computers, mobile devices, other electronic media, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Protected Works and Confidential Information belonging to the Company or that the Participant received from or through his or her employment or service with the Company. The Participant will not make, distribute, or retain copies of any such information or property. To the extent that the Participant has electronic files or information in his or her possession or control that belong to the Company, contain Confidential Information, or constitute Protected Works (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the Termination Date, or at any other time the Company requests, the Participant shall (A) provide the Company with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Company); (B) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Company-owned computers, mobile devices, electronic media, cloud storage, or other media, devices, or equipment, such that such files and information are permanently deleted and irretrievable; and (C) provide a written certification to the Company that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted. The Participant agrees that he or

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she will reimburse the Company for all of its costs, including reasonable attorneys' fees, of recovering the above materials and otherwise enforcing compliance with this provision if he or she does not return the materials to the Company or take the required steps with respect to electronic information or files on or prior to the Termination Date or at any other time the materials and/or electronic file actions are requested by the Company or if the Participant otherwise fails to comply with this provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Enforcement of Protective Covenants</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Rights and Remedies Upon Breach</u>. The parties specifically acknowledge and agree that the remedy at law for any breach of the Protective Covenants will be inadequate, and that in the event the Participant breaches, or threatens to breach, any of the Protective Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, the Participant from violating or threatening to violate the Protective Covenants and to have the Protective Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Protective Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. The Participant understands and agrees that if he or she violates any of the obligations set forth in the Protective Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. The Participant understands and agrees that, if the Parties become involved in legal action regarding the enforcement of the Protective Covenants and if the Company prevails in such legal action, the Company will be entitled, in addition to any other remedy, to recover from the Participant any amounts previously received by the Participant pursuant to Section 4(a)(ii) and its reasonable costs and attorneys' fees incurred in enforcing such covenants. The Company's ability to enforce its rights under the Protective Covenants or applicable law against the Participant shall not be impaired in any way by the existence of a claim or cause of action on the part of the Participant based on, or arising out of, this Plan or any other event or transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Severability and Modification of Covenants</u>. The Participant acknowledges and agrees that each of the Protective Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Protective Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Protective Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Protective Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Plan or such Protective Covenant. If any of the provisions of the Protective Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Company's legitimate business interests and may be enforced by the Company to that extent in the manner described above and all other provisions of this Plan shall be valid and enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)<u>Disclosure of Plan</u>. The Participant acknowledges and agrees that, during Restricted Period, he or she will disclose the existence and terms of this Plan to any prospective employer, business partner, investor, or lender prior to entering into an employment, partnership or other business relationship with such prospective employer, business partner, investor, or lender. The Participant further agrees that the Company shall have the right to make any such prospective employer, business partner, investor, or lender of the Participant aware of the existence and terms of this Plan.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.** **Agreement Not to Disparage**. The Participant hereby agrees that at all times after becoming a Participant in this Plan he or she will not make any statement, whether verbally or in written form, or otherwise take any action that may reasonably be considered to disparage or impugn the Bank or any of its subsidiaries or affiliates; the management, practices, services, or reputation of the Bank or any of its subsidiaries or affiliates; or any of the Bank's or any of its subsidiaries' or affiliates' employees, officers, directors, agents, or affiliates. Notwithstanding the foregoing, this Section 8 shall not limit the rights of the Participant to provide truthful testimony or make truthful statements which are compelled by a court of competent jurisdiction, arbitrator, regulatory agency or other tribunal or investigative body in accordance with any applicable statute, rule, or regulation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.** **Effect on Other Plans, Agreements and Benefits**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Relation to Other Benefits</u>. Unless otherwise provided herein, nothing in this Plan shall prevent or limit a Participant's continuing or future participation in any plan, program, policy or practice provided by the Bank for which the Participant may qualify, nor, except as explicitly set forth in this Plan, shall anything herein limit or otherwise affect such rights as a Participant may have under any other contract or agreement with the Bank. Further, the Participant's voluntary termination of employment, with or without Good Reason as might be applicable, shall in no way affect the Participant's ability to terminate employment by reason of the Participant's "retirement" under, or to be eligible to receive benefits under, any compensation and benefits plans, programs or arrangements of the Bank, including, without limitation, any retirement or pension plans or arrangements or substitute plans adopted by the Bank, and any termination which otherwise qualifies as Good Reason shall be treated as such even it is also a "retirement" for purposes of any such plan. Any economic or other benefit to a Participant under this Plan will not be taken into account in determining any benefits to which the Participant may be entitled under any profit- sharing, retirement, workers compensation or other benefit or compensation plan maintained by the Bank (except to the extent provided otherwise in any such plan with respect to Accrued Benefits).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Non-Duplication</u>. Notwithstanding the foregoing provisions of Section 8(a), and except as specifically provided below, any severance benefits received by a Participant pursuant to this Plan shall be in lieu of any general severance policy or other severance plan maintained by the Bank (other than a stock option, restricted stock, share or unit, performance share or unit, long-term incentive award, annual incentive award, supplemental retirement, deferred compensation or similar plan or agreement which may contain provisions operative on a termination of the Participant's employment or may incidentally refer to accelerated vesting or accelerated payment upon a termination of employment). Further, as a condition of participating in this Plan, each Participant who is a party to an employment agreement or offer letter with the Bank that otherwise would provide for severance benefits acknowledges and agrees that the severance benefits payable under this Plan shall be in lieu of and in full substitution for (and not in duplication of), any right to severance benefits under any such employment agreement or offer letter with the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.** **Certain Tax Matters.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Code Section 409A.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>General</u>. This Plan shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder. Nevertheless, the tax treatment of the benefits provided under this Plan is not warranted or guaranteed. Neither the Bank nor Parent nor any of their respective directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant as a result of the application of Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Definitional Restrictions</u>. Notwithstanding anything in this Plan to the contrary, to

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the extent that any amount or benefit that would constitute Non-Exempt Deferred Compensation would otherwise be payable or distributable hereunder by reason of a Participant's termination of employment, such Non-Exempt Deferred Compensation will not be payable or distributable to the Participant by reason of such circumstance unless the circumstances giving rise to such termination of employment meet any description or definition of "separation from service" in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition). If this provision prevents the payment or distribution of any Non-Exempt Deferred Compensation, such payment or distribution shall be made on the date, if any, on which an event occurs that constitutes a Section 409A-compliant "separation from service".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Treatment of Installment Payments</u>. Each payment under Section 4(a)(ii) of this Plan, including, without limitation, each installment payment, shall be considered a separate payment, as described in Treas. Reg. Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) <u>Timing of Release of Claims.</u> Whenever in this Plan a payment or benefit is conditioned on the Participant's execution of a Release, such Release must be executed and all revocation periods shall have expired within sixty (60) days after the Date of Termination; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then such payment or benefit (including any installment payments) that would have otherwise been payable during such 60-day period shall be accumulated and paid on the 60th day after the Date of Termination provided such release shall have been executed and such revocation periods shall have expired. If such payment or benefit is exempt from Section 409A of the Code, the Bank may elect to make or commence payment at any time during such period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)<u>Timing of Reimbursements and In-kind Benefits</u>. If the Participant is entitled to be paid or reimbursed for any taxable expenses under this the Plan, and such payments or reimbursements are includible in the Participant's federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of the Participant to reimbursement of expenses under the Plan shall be subject to liquidation or exchange for another benefit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)<u>Permitted Acceleration</u>. The Bank shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to a Participant of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)<u>Six-Month Delay in Certain Circumstances</u>. Notwithstanding anything in the Plan to the contrary, if any amount or benefit that would constitute Non-Exempt Deferred Compensation would otherwise be payable or distributable under this Plan by reason of a Participant's separation from service during a period in which the Participant is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes): (i) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six- month period immediately following the Participant's separation from service will be accumulated through and paid or provided on the first day of the seventh month following the Participant's separation from service (or, if the Participant dies during such period, within thirty (30) days after the Participant's death) (in either case, the "<u>Required Delay Period</u>"); and (ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period. For purposes of this Plan, the term "Specified Employee" has the meaning given such term in Code Section 409A and the final regulations thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Code Section 280G</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Notwithstanding anything in this Plan to the contrary, in the event it shall be determined that any benefit, payment or distribution by the Bank to or for the benefit of the Participant (whether payable or distributable pursuant to the terms of this Plan or otherwise) (such benefits, payments or distributions are hereinafter referred to as "<u>Payments</u>") would, if paid, be subject to the excise tax (the "<u>Excise Tax</u>") imposed by Section 4999 of the Code, then the aggregate present value of the Payments shall be reduced (but not below zero) to an amount expressed in present value that maximizes the aggregate present value of the Payments without causing the Payments or any part thereof to be subject to the Excise Tax and therefore nondeductible by the Bank because of Section 280G of the Code (the "Reduced Amount"). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the change of control, as determined by the Determination Firm (as defined in Section 10(b)(ii) below). For purposes of this Section 10(b), present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 10(b), the "Parachute Value" of a Payment means the present value as of the date of the change of control of the portion of such Payment that constitutes a "parachute payment" under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) All determinations required to be made under this Section 10(b), including whether an Excise Tax would otherwise be imposed, whether the Payments shall be reduced, the amount of the Reduced Amount, and the assumptions to be utilized in arriving at such determinations, shall be made by a nationally recognized accounting firm or compensation consulting firm mutually acceptable to the Bank and the Participant (the "<u>Determination Firm</u>") which shall provide detailed supporting calculations both to the Bank and the Participant within 15 business days of the receipt of notice from the Participant that a Payment is due to be made, or such earlier time as is requested by the Bank. All fees and expenses of the Determination Firm shall be borne solely by the Bank. Any determination by the Determination Firm shall be binding upon the Bank and the Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Determination Firm hereunder, it is possible that Payments hereunder will have been unnecessarily limited by this Section 10(b) ("<u>Underpayment</u>"), consistent with the calculations required to be made hereunder. The Determination Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Bank to or for the benefit of the Participant together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code, but no later than March 15 of the year after the year in which the Underpayment is determined to exist, which is when the legally binding right to such Underpayment arises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.** **Administration**. The Committee shall have complete discretion to interpret where necessary all provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan), to make factual findings with respect to any issue arising under the Plan, to determine the rights and status under the Plan of Participants or other persons, to resolve questions (including factual questions) or disputes arising under the Plan and to make any determinations with respect to the benefits payable under the Plan and the persons entitled thereto as may be necessary for the purposes of the Plan. Without limiting the generality of the foregoing, the Committee is hereby granted the authority (a) to determine whether a particular Employee is a Participant, and (b) to determine if a person is entitled to benefits hereunder and, if so, the amount and duration of such benefits. The Committee may delegate, subject to such terms as the Committee shall determine, any of its authority hereunder to one or more officers of the Bank. In the event of such delegation, all references to the Committee in this Plan shall be deemed references to such delegates as it relates to those aspects of the Plan that have been delegated. The Committee's determination of the rights of any person hereunder shall be final and binding on all persons.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.** **Claims for Benefits.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Filing a Claim</u>. Any Participant or beneficiary who wishes to file a claim for benefits under

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the Plan shall file his or her claim in writing with the Bank. Any such claim should be sent to the Bank's General Counsel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Review of a Claim</u>. The Bank shall, within 90 calendar days after receipt of such written claim (unless special circumstances require an extension of time, but in no event more than 180 calendar days after such receipt), send a written notification to the Participant or beneficiary as to its disposition. If the claim is wholly or partially denied, such written notification shall (i) state the specific reason or reasons for the denial, (ii) make specific reference to pertinent Plan provisions on which the denial is based, (iii) provide a description of any additional material or information necessary for the Participant or beneficiary to perfect the claim and an explanation of why such material or information is necessary, and (iv) set forth the procedure by which the Participant or beneficiary may appeal the denial of his or her claim, including, without limitation, a statement of the claimant's right to bring an action under Section 502(a) of ERISA following an adverse determination on appeal.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Appeal of a Denied Claim</u>. If a Participant or beneficiary wishes to appeal the denial of his or her claim, he or she must request a review of such denial by making application in writing to the Committee within 60 calendar days after receipt of such denial. The Participant or beneficiary (or his or her duly authorized legal representative) may submit, in writing, issues and comments in support of his or her position. A Participant or beneficiary who fails to file an appeal within the 60-day period set forth in this Section 12(c) shall be prohibited from doing so at a later date or from bringing an action under ERISA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Review of a Claim on Appeal</u>. Within 60 calendar days after receipt of a written appeal (unless the Committee determines that special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than 120 calendar days after such receipt), the Committee shall notify the Participant or beneficiary of the final decision. The final decision shall be in writing and shall include (i) specific reasons for the decision, written in a manner calculated to be understood by the claimant,

(ii)specific references to the pertinent Plan provisions on which the decision is based, (iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents relevant to the claim for benefits, and (iv) a statement describing the claimant's right to bring an action under Section 502(a) of ERISA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.** **Participants Deemed to Accept Plan.** By accepting any payment or benefit under the Plan, each Participant and each person claiming under or through any such Participant shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Committee, the Bank, in any case in accordance with the terms and conditions of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.** **Successors.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Company Successors</u>. This Plan shall bind any successor of the Bank, its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Bank would be obligated under this Plan if no succession had taken place. The Bank shall require any such successor to expressly assume and agree to perform this Plan in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Participant Successors</u>. The rights of a Participant to receive any benefits hereunder shall not be assignable, transferable or delegable, whether by pledge, creation of a security interest or otherwise, other than by a transfer by his or her will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 14(b), the Bank shall have no liability or obligation to pay any amount so attempted to be assigned, transferred or delegated. At no time will any such right or interest be subject to the claims of creditors nor liable to attachment, execution or other legal process. This Plan shall inure to the benefit of a Participant's heirs, executors, administrators and legal representatives

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and beneficiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.** **Unfunded Status.** All payments pursuant to the Plan shall be made from the general funds of the Bank and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Bank as a result of participating in the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.** **Withholding.** The Bank may withhold from any amounts payable under this Plan all federal, state, city or other taxes as the Bank are required to withhold pursuant to any law or government regulation or ruling.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.** **Notices.** Any notice provided for in this Plan shall be in writing and shall be either personally delivered, sent by reputable overnight carrier or mailed by first class mail, return receipt requested, to the recipient. Notices to Participant shall be sent to the address of Participant most recently provided to the Bank. Notices to the Bank should be sent to CoastalStates Bank, 5 Bow Circle, Hilton Head Island, South Carolina, 29928, Attention: Mr. Steven LaSota, Chief Administrative Officer. Notice and communications shall be effective on the date of delivery if delivered by hand, on the first business day following the date of dispatch if delivered utilizing overnight courier, or three business days after having been mailed, if sent by first class mail.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.** **Amendments; Termination.** The Committee expressly reserves the unilateral right, at any time, without the consent of the impacted Participant or Participants, to amend or terminate the Plan in whole or in part, including without limitation to remove individuals as Participants or to modify or eliminate all or any benefits under Section 4 hereof; provided that (a) no such action shall impair the rights of a Participant who previously has incurred a Qualified Termination unless such amendment, modification, removal or termination is agreed to in a writing signed by the Participant and the Bank and (b) the Plan may not be terminated or amended within twelve months after a Change in Control in any manner that would adversely affect the benefits available to any Participant under the Plan. If such notice is delivered by the Bank, this Plan (or the participation of selected executives), along with all corresponding rights, duties, and covenants shall automatically be amended or expire as stated in such notice. Notwithstanding the above, the Committee may modify the Plan at any time without the Participants' consent to comply with the requirements of Section 409A of the Code and any other rule, regulation, or statute, as determined by the Committee in its sole and absolute discretion. Section 7 and Section 19 shall survive the termination of this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.** **Applicable Law; Forum Selection; Consent to Jurisdiction.** The Plan shall be governed by and construed and interpreted in accordance with the laws of the State of South Carolina without giving effect to its conflicts of law principles. Employee agrees that the exclusive forum for any action to enforce this Plan, as well as any action relating to or arising out of this Plan, shall be the state or federal courts of the State of South Carolina. With respect to any such court action, the Participant hereby (a) irrevocably submits to the personal jurisdiction of such courts; (b) consents to service of process; (c) consents to venue; and (d) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, service of process, or venue. Both the Bank and the Participant agree that the state and federal courts of the State of South Carolina are convenient forums for any dispute that may arise herefrom and that neither party shall raise as a defense that such courts are not convenient forums.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**20.** **Severability.** Whenever possible, each provision of this Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Plan is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Plan shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**21.** **Regulatory Action**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)If a Participant is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("<u>FDIA</u>") (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Plan with respect to such Participant shall terminate, as of the effective date of such order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)If a Participant is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), all obligations of the Bank under this Plan with respect to such Participant shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank shall reinstate (in whole or in part) any of its obligations which were suspended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)If the Bank is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Plan shall terminate as of the date of default.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)All obligations under this Plan shall be terminated, except to the extent a determination is made that continuation of the Plan is necessary for the continued operation of the Bank (1) by the director of the FDIC or her or her designee (the "<u>Director</u>"), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in 13(c) of the FDIA; or (2) by the Director, at the time the Director approves a supervisory merger to resolve problems related to operation of the Bank when the Bank is determined by the Director to be in an unsafe and unsound condition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Notwithstanding anything contained in this Plan to the contrary, no payments shall be made pursuant to any provision herein in contravention of the requirements of Section 2[18(k)] of the FDIA (12 U.S.C. 1828(k)). In particular, the provisions pertaining to the potential for payments shall have no force or effect as long as either the agreement concerning the potential for payments or the actual payment of such amounts would be considered a "golden parachute payment," with the meaning of 12

C.F.R. Section 359.1(f).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**21.** **Headings**. Headings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof.

\*\*\*\*\*\*\*\*\*\*\*\*\*\*

The foregoing is hereby acknowledged as being the CoastalStates Bank Executive Severance Plan as adopted by the Compensation Committee of the Board of Directors of CoastalStates Bank on January 23, 2018.

# **COASTALSTATES BANK** 
By: /s/ Stephen R. Stone

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President and CEO

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<u>EXHIBIT A</u>

# **INITIAL PARTICIPANTS IN THE COASTAL STATES BANK** 
**EXECUTIVE SEVERANCE PLAN**

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<u>EXHIBIT B</u>

# **FORM OF LETTER AGREEMENT** 

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## Exhibit 10.4

**EXHIBIT 10.4**

*RSU Form*

# **R E S T R I C T E D S T O C K U N I T A W A R D C E R T I F I C A T E** 

## *Non-transferable* 
G R A N T TO

*("Grantee")*

by CoastalSouth Bancshares, Inc. (the "Company") of

restricted stock units convertible, on a one-for-one basis, into shares of Stock (the "Units")

pursuant to and subject to the provisions of the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the "Plan") and to the terms and conditions set forth on the following pages (the "Terms and Conditions"). By accepting the Units, Grantee shall be deemed to have agreed to the Terms and Conditions set forth in this Award Certificate and the Plan. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

Unless vesting is accelerated in accordance with the Plan or in the discretion of the Board, the Units shall vest (become non-forfeitable) in accordance with the following schedule, provided that Grantee remains in Continuous Service as a Participant on each vesting date:

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| | |
|:---|:---|
| &nbsp;&nbsp; <br><u>Vesting Date</u> | &nbsp;&nbsp;Number of <u><br>Units Vested</u> |

---

IN WITNESS WHEREOF, CoastalSouth Bancshares, Inc., acting by and through its duly authorized officers, has caused this Award Certificate to be duly executed.

CoastalSouth Bancshares, Inc. By: Its: Grant Date: <br>

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*RSU Form*

TERMS AND CONDITIONS

1. <u>Vesting of Units</u>. The Units have been credited to a bookkeeping account on behalf of Grantee. The Units will vest and become non-forfeitable on the earliest to occur of the following (each, a "Vesting Date"): (a) as to the percentages of the Units specified on the cover page hereof, on the respective Vesting Dates specified on the cover page hereof, subject to Grantee's Continuous Service on each vesting date; (b) as to all of the Units, on the termination of Grantee's Continuous Service by the Company by reason of Grantee's death or Disability; or (c) as to all of the Units, on the occurrence of a Change in Control. If Grantee's Continuous Service terminates prior to a Vesting Date for any reason other than as described in (b) above, Grantee shall forfeit all right, title and interest in and to the then unvested Units as of the date of such termination and the unvested Units will be reconveyed to the Company without further consideration or any act or action by Grantee.

2. <u>Conversion to Stock</u>. The Units that vest upon a Vesting Date will be converted to shares of Stock on the Vesting Date (the "Conversion Date"). The shares of Stock will be registered in the name of Grantee as of the Conversion Date, and certificates for the shares of Stock (or, at the option of the Company, statements of book entry notation of the shares of Stock in the name of Grantee in lieu thereof) shall be delivered to Grantee or Grantee's designee upon request of Grantee as soon as practicable after the Conversion Date.

3. <u>Dividend Rights</u>. If any dividends or other distributions are paid with respect to the Stock while the Units are outstanding, the dollar amount or fair market value of such dividends or distributions with respect to the number of shares of Stock then underlying the Units shall be credited to a bookkeeping account and held (without interest) by the Company for the account of Grantee until the Conversion Date. Such amounts shall be subject to the same vesting and forfeiture provisions as the Units to which they relate. Accrued dividends held pursuant to the foregoing provision shall be paid by the Company to Grantee on the Conversion Date.

4. <u>Voting Rights</u>. Grantee shall not have voting rights with respect to the Units. Upon conversion of the Units into shares of Stock, Grantee will obtain full voting rights and other rights as a shareholder of the Company.

5. <u>Limitation of Rights</u>. Nothing in this Award Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Grantee's service at any time, nor confer upon Grantee any right to continue in the service of the Company or any Affiliate.

6. <u>Restrictions on Transfer and Pledge</u>. No right or interest of Grantee in the Units may be pledged, encumbered, or hypothecated to or in favor of any party, or shall be subject to any lien, obligation, or liability of Grantee to any other party. The Units are not assignable or transferable by Grantee other than to a beneficiary or by will or the laws of descent and distribution or pursuant to a domestic relations order that would satisfy Code Section 414(p)(1)(A) if such Section applied to the Units.

7. <u>Restrictions on Issuance of Shares</u>. If at any time the Board shall determine in its discretion, that registration, listing or qualification of the Shares covered by the Units upon any securities exchange or under any foreign, federal, or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to the settlement of the Units, the Units may not be settled in whole or in part unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board.

8. <u>Plan Controls</u>. The terms contained in the Plan are incorporated into and made a part of this Award Certificate and this Award Certificate shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Certificate, the provisions of the Plan shall be controlling and determinative.

9. <u>Payment of Taxes</u>. The Company or any Affiliate employing Grantee has the authority and the right to deduct or withhold, or require Grantee to remit to the employer, an amount sufficient to satisfy federal, state, and local taxes (including Grantee's FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the vesting or settlement of the Units. The withholding requirement will be satisfied by withholding from the Units Shares having a fair market value on the date of withholding equal to the amount required to be withheld for tax purposes, all in accordance with such procedures as the Company establishes. The obligations of the Company under this Certificate will be conditional on such payment or arrangements, and the Company, and, where applicable, its Affiliates will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to Grantee.

10. <u>Successors</u>. This Award Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Award Certificate and the Plan.

11. <u>Severability</u>. If any one or more of the provisions contained in this Award Certificate is invalid, illegal or unenforceable, the other provisions of this Award Certificate will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

12. <u>Notice</u>. Notices hereunder must be in writing, delivered personally or sent by registered or certified U.S. mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to CoastalSouth Bancshares, Inc., 5 Bow Circle, Hilton Head, SC 29928, Attn: Secretary, or any other address designated by the Company in a written notice to Grantee. Notices to Grantee will be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.

------

## Exhibit 10.5

**EXHIBIT 10.5**

*ISO Form*

# **I N C E N T I V E S T O C K O P T I O N C E R T I F I C A T E** 

## *Non-transferable* 
G R A N T TO

_____________________________

*("Optionee")*

of the right to purchase from CoastalSouth Bancshares, Inc. (the "Company")

________ shares of its common stock, par value $1.00 (the "Common Stock"), at the price of $_____ per share

pursuant to and subject to the provisions of the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the "Plan") and to the terms and conditions set forth on the following pages (the "Terms and Conditions"). By accepting the Option, Optionee shall be deemed to have agreed to the Terms and Conditions set forth in this Award Certificate and the Plan. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

Unless vesting is accelerated in accordance with the Plan or in the discretion of the Board, the Option shall vest (become exercisable) in accordance with the following schedule, provided that Optionee remains in Continuous Service as a Participant on each vesting date:

---

| | |
|:---|:---|
| &nbsp;&nbsp; <br><u>Vesting Date</u> | &nbsp;&nbsp;Number of <u><br>Option Shares Vested</u> |

---

IN WITNESS WHEREOF, CoastalSouth Bancshares, Inc., acting by and through its duly authorized officers, has caused this Award Certificate to be duly executed.

CoastalSouth Bancshares, Inc. By: Its: Grant Date: ________________ <br>

------

TERMS AND CONDITIONS

1. <u>Vesting of Option</u>. The Option shall vest (become exercisable) in accordance with the schedule shown on the cover page of this Award Certificate, subject to Optionee's Continuous Service from the date hereof through each of the applicable dates as set forth thereon. Notwithstanding the foregoing vesting schedule, the Option shall become fully vested and exercisable upon (i) Optionee's death during his or her Continuous Service, (ii) the termination of Optionee's Continuous Service by the Company by reason of his or her Disability, or (iii) a Change in Control. In the event of the termination of Optionee's Continuous Service for any reason other than death or Disability, the unvested portion of the Option will expire immediately.

2. <u>Term of Option and Limitations on Right to Exercise</u>. The term of the Option will be for a period of ten years, expiring at 5:00 p.m., Eastern Time, on the tenth anniversary of the Grant Date (the "Expiration Date"). To the extent not previously exercised, the Option will lapse prior to the Expiration Date upon the earliest to occur of the following circumstances:

(a) three (3) months after the termination of Optionee's Continuous Service for any reason other than (i) by reason of Optionee's death or Disability, or (ii) by the Company for Cause;

(b) twelve (12) months after the date of the termination of Optionee's Continuous Service by reason of his or her Disability;

(c) eighteen (18) months after Optionee's death, if (i) Optionee dies during his or her Continuous Service and before the Option otherwise expires, or (ii) Optionee dies during the three month period described in subsection (a) above and before the Option otherwise expires or (iii) Optionee dies during the twelve-month period described in subsection (b) above and before the Option otherwise expires (upon Optionee's death, the Option may be exercised by Optionee's estate or other beneficiary designated pursuant to the Plan); or

(d) immediately upon the termination of Optionee's Continuous Service by the Company for Cause.

If Optionee or his or her beneficiary exercises an Option after termination of service, the Option may be exercised only with respect to the Shares that were otherwise vested on Optionee's termination of Continuous Service. For the avoidance of doubt, any portion of the Option that is unvested as of the date of Optionee's termination of Continuous Service shall expire as of the date of Optionee's termination of Continuous Service.

3. <u>Exercise of Option</u>. The Option shall be exercised by (a) written notice directed to the Secretary of the Company or his or her designee at the address and in the form specified by the Company from time to time and (b) payment to the Company in full for the Shares subject to such exercise. If the person exercising an Option is not Optionee, such person shall also deliver with the notice of exercise appropriate proof of his or her right to exercise the Option. Payment for such Shares shall be (i) in cash, (ii) by delivery (actual or by attestation) of Shares previously acquired by the purchaser, (iii) at the election of the Company, by withholding of Shares from the Option, or (iv) any combination thereof, for the number of Shares specified in such written notice. Shares surrendered or withheld for this purpose shall be valued at their Fair Market Value on the date of exercise.

4. <u>Limitation of Rights</u>. The Option does not confer to Optionee or Optionee's beneficiary any rights of a shareholder of the Company unless and until Shares are in fact issued to such person in connection with the exercise of the Option. Nothing in this Award Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Optionee's service at any time, nor confer upon Optionee any right to continue in the service of the Company or any Affiliate.

5. <u>Restrictions on Transfer and Pledge</u>. No right or interest of Optionee in the Option may be pledged, encumbered, or hypothecated to or in favor of any party, or shall be subject to any lien, obligation, or liability of Optionee to any other party. The Option is not assignable or transferable by Optionee other than by will or the laws of descent and distribution. The Option may be exercised during the lifetime of Optionee only by Optionee or any permitted transferee.

6. <u>Restrictions on Issuance of Shares</u>. If at any time the Board shall determine in its discretion, that registration, listing or qualification of the Shares covered by the Option upon any securities exchange or under any foreign, federal, or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to the exercise of the Option, the Option may not be exercised in whole or in part unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board.

7. <u>Notification of Disposition</u>. Optionee agrees to notify the Company in writing within thirty (30) days of any disposition of Shares acquired by Optionee pursuant to the exercise of the Option, if such disposition occurs within two years of the Grant Date, or one year of the date of exercise, of the Option. The Company has the authority and the right to deduct or withhold, or require Optionee to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes required by law to be withheld with respect to any "disqualifying disposition" of Shares.

8. <u>Interpretation</u>. It is the intent of the parties hereto that the Option qualifies for incentive stock option treatment pursuant to, and to the extent permitted by, Section 422 of the Code. All provisions hereof are intended to have, and shall be construed to have, such meanings as are set forth in applicable provisions of the Code and Treasury Regulations to allow the Option to so qualify. To the extent that any portion of the Option fails to qualify for incentive stock option treatment pursuant to Section 422 of the Code, such nonqualifying portion of the Option shall be a nonstatutory stock option, governed under Section 83 of the Code.

9. <u>Plan Controls</u>. The terms contained in the Plan are incorporated into and made a part of this Award Certificate and this Award Certificate shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Certificate, the provisions of the Plan shall be controlling and determinative.

10. <u>Successors</u>. This Award Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Award Certificate and the Plan.

------

*ISO Form*

11. <u>Severability</u>. If any one or more of the provisions contained in this Award Certificate is invalid, illegal or unenforceable, the other provisions of this Award Certificate will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

12. <u>Notice</u>. Notices hereunder must be in writing, delivered personally or sent by registered or certified U.S. mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to CoastalSouth Bancshares, Inc., 5 Bow Circle, Hilton Head, SC 29928, Attn: Secretary, or any other address designated by the Company in a written notice to Optionee. Notices to Optionee will be directed to the address of Optionee then currently on file with the Company, or at any other address given by Optionee in a written notice to the Company.

------

## Exhibit 10.6

**EXHIBIT 10.6**

*NQSO Form*

# **N O N S T A T U T O R Y S T O C K O P T I O N C E R T I F I C A T E** 

## *Non-transferable* 
G R A N T TO

_____________________________

*("Optionee")*

of the right to purchase from CoastalSouth Bancshares, Inc. (the "Company")

________ shares of its common stock, par value $1.00 (the "Common Stock"), at the price of $_____ per share

pursuant to and subject to the provisions of the CoastalSouth Bancshares, Inc. 2017 Incentive Plan (the "Plan") and to the terms and conditions set forth on the following pages (the "Terms and Conditions"). By accepting the Option, Optionee shall be deemed to have agreed to the Terms and Conditions set forth in this Award Certificate and the Plan. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

Unless vesting is accelerated in accordance with the Plan or in the discretion of the Board, the Option shall vest (become exercisable) in accordance with the following schedule, provided that Optionee remains in Continuous Service as a Participant on each vesting date:

---

| | |
|:---|:---|
| &nbsp;&nbsp; <br><u>Vesting Date</u> | &nbsp;&nbsp;Number of <u><br>Option Shares Vested</u> |

---

IN WITNESS WHEREOF, CoastalSouth Bancshares, Inc., acting by and through its duly authorized officers, has caused this Award Certificate to be duly executed.

CoastalSouth Bancshares, Inc. By: Its: Grant Date: ________________ <br>

------

*NQSO Form*

TERMS AND CONDITIONS

1. <u>Vesting of Option</u>. The Option shall vest (become exercisable) in accordance with the schedule shown on the cover page of this Award Certificate, subject to Optionee's Continuous Service from the date hereof through each of the applicable dates as set forth thereon. Notwithstanding the foregoing vesting schedule, the Option shall become fully vested and exercisable upon (i) Optionee's death during his or her Continuous Service, (ii) the termination of Optionee's Continuous Service by the Company by reason of his or her Disability, or (iii) a Change in Control. In the event of the termination of Optionee's Continuous Service for any reason other than death or Disability, the unvested portion of the Option will expire immediately.

2. <u>Term of Option and Limitations on Right to Exercise</u>. The term of the Option will be for a period of ten years, expiring at 5:00 p.m., Eastern Time, on the tenth anniversary of the Grant Date (the "Expiration Date"). To the extent not previously exercised, the Option will lapse prior to the Expiration Date upon the earliest to occur of the following circumstances:

(a) three (3) months after the termination of Optionee's Continuous Service for any reason other than (i) by reason of Optionee's death or Disability, or (ii) by the Company for Cause;

(b) twelve (12) months after the date of the termination of Optionee's Continuous Service by reason of his or her Disability;

(c) eighteen (18) months after Optionee's death, if (i) Optionee dies during his or her Continuous Service and before the Option otherwise expires, or (ii) Optionee dies during the three month period described in subsection (a) above and before the Option otherwise expires or (iii) Optionee dies during the twelve-month period described in subsection (b) above and before the Option otherwise expires (upon Optionee's death, the Option may be exercised by Optionee's estate or other beneficiary designated pursuant to the Plan); or

(d) immediately upon the termination of Optionee's Continuous Service by the Company for Cause.

If Optionee or his or her beneficiary exercises an Option after termination of service, the Option may be exercised only with respect to the Shares that were otherwise vested on Optionee's termination of Continuous Service. For the avoidance of doubt, any portion of the Option that is unvested as of the date of Optionee's termination of Continuous Service shall expire as of the date of Optionee's termination of Continuous Service.

3. <u>Exercise of Option</u>. The Option shall be exercised by (a) written notice directed to the Secretary of the Company or his or her designee at the address and in the form specified by the Company from time to time and (b) payment to the Company in full for the Shares subject to such exercise. If the person exercising an Option is not Optionee, such person shall also deliver with the notice of exercise appropriate proof of his or her right to exercise the Option. Payment for such Shares shall be (i) in cash, (ii) by delivery (actual or by attestation) of Shares previously acquired by the purchaser, (iii) at the election of the Company, by withholding of Shares from the Option, or (iv) any combination thereof, for the number of Shares specified in such written notice. Shares surrendered or withheld for this purpose shall be valued at their Fair Market Value on the date of exercise.

4. <u>Limitation of Rights</u>. The Option does not confer to Optionee or Optionee's beneficiary any rights of a shareholder of the Company unless and until Shares are in fact issued to such person in connection with the exercise of the Option. Nothing in this Award Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Optionee's service at any time, nor confer upon Optionee any right to continue in the service of the Company or any Affiliate.

5. <u>Restrictions on Transfer and Pledge</u>. No right or interest of Optionee in the Option may be pledged, encumbered, or hypothecated to or in favor of any party, or shall be subject to any lien, obligation, or liability of Optionee to any other party. The Option is not assignable or transferable by Optionee other than by will or the laws of descent and distribution. The Option may be exercised during the lifetime of Optionee only by Optionee or any permitted transferee.

6. <u>Restrictions on Issuance of Shares</u>. If at any time the Board shall determine in its discretion, that registration, listing or qualification of the Shares covered by the Option upon any securities exchange or under any foreign, federal, or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to the exercise of the Option, the Option may not be exercised in whole or in part unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board.

7. <u>Plan Controls</u>. The terms contained in the Plan are incorporated into and made a part of this Award Certificate and this Award Certificate shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Certificate, the provisions of the Plan shall be controlling and determinative.

8. <u>Successors</u>. This Award Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Award Certificate and the Plan.

9. <u>Severability</u>. If any one or more of the provisions contained in this Award Certificate is invalid, illegal or unenforceable, the other provisions of this Award Certificate will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

10. <u>Notice</u>. Notices hereunder must be in writing, delivered personally or sent by registered or certified U.S. mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to CoastalSouth Bancshares, Inc., 5 Bow Circle, Hilton Head, SC 29928, Attn: Secretary, or any other address designated by the Company in a written notice to Optionee. Notices to Optionee will be directed to the address of Optionee then currently on file with the Company, or at any other address given by Optionee in a written notice to the Company.

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## Exhibit 10.7

**EXHIBIT 10.7**

**COASTALSOUTH BANCSHARES, INC.**

**Omnibus INCENTIVE PLAN**

**Article 1<br>PURPOSE**

1.1GENERAL. The purpose of the CoastalSouth Bancshares, Inc. Plan (the "Plan") is to promote the success, and enhance the value, of CoastalSouth Bancshares, Inc. (the "Company"), by linking the personal interests of employees, officers, directors and consultants of the Company or any Affiliate (as defined below) to those of Company shareholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of employees, officers, directors and consultants upon whose judgment, interest, and special effort the successful conduct of the Company's operation is largely dependent. Accordingly, the Plan permits the grant of incentive awards from time to time to selected employees, officers, directors and consultants of the Company and its Affiliates.

**Article 2<br>DEFINITIONS**

2.1DEFINITIONS. When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly different meaning is required by the context. The following words and phrases shall have the following meanings:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)"Affiliate" means (i) any Subsidiary or Parent, or (ii) an entity that directly or through one or more intermediaries controls, is controlled by or is under common control with, the Company, as determined by the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)"Award" means an award of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance Awards, Other Stock-Based Awards, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)"Award Certificate" means a written document, in such form as the Committee prescribes from time to time, setting forth the terms and conditions of an Award. Award Certificates may be in the form of individual award agreements or certificates or a program document describing the terms and provisions of an Award or series of Awards under the Plan. The Committee may provide for the use of electronic, internet or other non-paper Award Certificates, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)"Beneficial Owner" shall have the meaning given such term in Rule 13d-3 of the General Rules and Regulations under the 1934 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)"Board" means the Board of Directors of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)"Cause" shall have the meaning, if any, assigned such term in the employment, consulting, severance or similar agreement, if any, between a Participant and the Company or an Affiliate; <u>provided</u>, <u>however</u>, that if there is no such employment, consulting, severance or similar agreement in which such term is defined, a Participant's termination will be considered to be for "Cause" if the Company determines that any of the following has occurred: (i) Participant's

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![gfx161929570_0.jpg](gfx161929570_0.jpg)

material failure to follow the reasonable directions of his or her supervisor that, if such breach is capable of being cured, is not cured by Participant within ten (10) days of written notice by the Company of the breach to the supervisor's satisfaction within ten (10) days after receipt of written notice specifying the particulars of the material failure; (ii) any willful violation of any laws, rules or regulations applicable to the Company or the Company's industry, generally; (iii) Participant's material failure to comply with the Company's policies or guidelines of employment or corporate governance policies or guidelines, including, without limitation, any business code of ethics adopted by the Company, that, if capable of being cured, is not cured by Participant within ten (10) days of written notice by the Company of the failure; (iv) any act of fraud, misappropriation or embezzlement by the Participant; (v) any breach of any restrictive covenant agreement between the Company and the Participant; (vii) the Participant's conviction of, or pleading guilty or nolo contendere to, a felony or a crime involving moral turpitude (including pleading guilty or nolo contendere to a felony or lesser charge which results from plea bargaining).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)"Change in Control" means and includes the occurrence of any one of the following events but specifically excludes a Public Offering:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) during any consecutive 12-month period, individuals who, at the beginning of such period, constitute the Board of Directors of the Company (the "Incumbent Directors") cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director after the beginning of such 12-month period and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; <u>provided</u>, <u>however</u>, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors ("Election Contest") or other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board ("Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) any person becomes a Beneficial Owner, directly or indirectly, of either (A) 50% or more of the then-outstanding shares of common stock of the Company ("Company Common Stock") or (B) securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of directors (the "Company Voting Securities"); <u>provided</u>, <u>however</u>, that for purposes of this subsection (ii), the following acquisitions of Company Common Stock or Company Voting Securities shall not constitute a Change in Control: (w) an acquisition directly from the Company, (x) an acquisition by the Company or a Subsidiary, (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (iii) below); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a Subsidiary (a "Reorganization"), or the sale or other disposition of all or substantially all of the Company's assets (a "Sale") or the acquisition of assets or stock of another corporation or other entity (an "Acquisition"), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the outstanding Company Common Stock and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 50%

------

of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Reorganization, Sale or Acquisition (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets or stock either directly or through one or more subsidiaries, the "Surviving Entity") in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any Subsidiary, (y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing) is the Beneficial Owner, directly or indirectly, of 50% or more of the total common stock or 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Entity, and (C) at least a majority of the members of the board of directors of the Surviving Entity were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a "Non-Qualifying Transaction").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)"Code" means the Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)"Committee" means the Compensation Committee of the Board, or such other committee designated by the Board to administer the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)"Company" means CoastalSouth Bancshares, Inc., a Georgia corporation, or any successor corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)"Continuous Service" means the absence of any interruption or termination of service as an employee, officer, director or consultant of the Company or any Affiliate, as applicable; provided, however, that for purposes of an Incentive Stock Option "Continuous Service" means the absence of any interruption or termination of service as an employee of the Company or any Parent or Subsidiary, as applicable, pursuant to applicable tax regulations. Continuous Service shall not be considered interrupted in the following cases: (i) a Participant transfers employment between the Company and an Affiliate or between Affiliates, (ii) in the discretion of the Committee as specified at or prior to such occurrence, in the case of a spin-off, sale or disposition of the Participant's employer from the Company or any Affiliate, (iii) a Participant transfers from being an employee of the Company or an Affiliate to being a director of the Company or of an Affiliate, or vice versa, (iv) in the discretion of the Committee, a Participant transfers from being an employee of the Company or an Affiliate to being a consultant to the Company or of an Affiliate, or vice versa, (v) in the discretion of the Committee as specified at or prior to such occurrence, a Participant transfers from being an employee of the Company or an Affiliate to being a consultant to the Company or an Affiliate, or vice versa, or (vi) any leave of absence authorized in writing by the Company prior to its commencement; provided, however, that for purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Whether military, government or other service or other leave of absence shall constitute a termination of Continuous

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![gfx161929570_0.jpg](gfx161929570_0.jpg)

Service shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive; provided, however, that for purposes of any Award that is subject to Code Section 409A, the determination of a leave of absence must comply with the requirements of a "bona fide leave of absence" as provided in Treas. Reg. Section 1.409A-1(h).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)"Deferred Stock Unit" means a right granted to a Participant under Article 9 to receive Shares (or the equivalent value in cash or other property if the Committee so provides) at a future time as determined by the Committee, or as determined by the Participant within guidelines established by the Committee in the case of voluntary deferral elections.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)"Disability" means the inability of the Participant, as reasonably determined by the Company, to perform the essential functions of his or her regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six (6) consecutive months.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)"Dividend Equivalent" means a right granted to a Participant under Article 11.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)"Effective Date" has the meaning assigned such term in Section 3.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)"Eligible Participant" means an employee, officer, director or consultant of the Company or any Affiliate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)"Exchange" means any national securities exchange on which the Stock may from time to time be listed or traded.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)"Fair Market Value," on any date, means (i) if the Stock is listed on a securities exchange, the closing sales price on such exchange on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the Stock is not listed on a securities exchange, the mean between the bid and offered prices as quoted by the applicable interdealer quotation system for such date, provided that if the Stock is not quoted on an interdealer quotation system or it is determined that the fair market value is not properly reflected by such quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable and in compliance with Code Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)"Full-Value Award" means an Award other than in the form of an Option or SAR, and which is settled by the issuance of Stock (or at the discretion of the Committee, settled in cash valued by reference to Stock value).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)"Good Reason" (or a similar term denoting constructive termination) has the meaning, if any, assigned such term in the employment, consulting, severance or similar agreement, if any, between a Participant and the Company or an Affiliate; <u>provided</u>, <u>however</u>, that if there is no such employment, consulting, severance or similar agreement in which such term is defined, "Good Reason" shall have the meaning, if any, given such term in the applicable Award Certificate. If not defined in either such document, the term "Good Reason" as used herein shall not apply to a particular Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)"Grant Date" of an Award means the first date on which all necessary corporate action has been taken to approve the grant of the Award as provided in the Plan, or such later date

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as is determined and specified as part of that authorization process. Notice of the grant shall be provided to the grantee within a reasonable time after the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)"Incentive Stock Option" means an Option that is intended to be an incentive stock option and meets the requirements of Section 422 of the Code or any successor provision thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)"Non-Employee Director" means a director of the Company who is not a common law employee of the Company or an Affiliate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)"Nonstatutory Stock Option" means an Option that is not an Incentive Stock Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)"Option" means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)"Other Stock-Based Award" means a right, granted to a Participant under Article 13, that relates to or is valued by reference to Stock or other Awards relating to Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)"Parent" means a corporation, limited liability company, partnership or other entity which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Section 424(e) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)"Participant" means an Eligible Participant who has been granted an Award under the Plan; provided that in the case of the death of a Participant, the term "Participant" refers to a beneficiary designated pursuant to Section 13.4 or the legal guardian or other legal representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa)"Performance Award" means any award granted under the Plan pursuant to Article 10.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb)"Person" means any individual, entity or group, within the meaning of Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) or 14(d)(2) of the 1934 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc)"Plan" means the CoastalSouth Bancshares, Inc. Omnibus Incentive Plan, as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd)"Public Offering" means a public offering of any class or series of the Company's equity securities pursuant to a registration statement filed by the Company under the 1933 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee)"Restricted Stock" means Stock granted to a Participant under Article 9 that is subject to certain restrictions and to risk of forfeiture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff)"Restricted Stock Unit" means the right granted to a Participant under Article 9 to receive shares of Stock (or the equivalent value in cash or other property if the Committee so provides) in the future, which right is subject to certain restrictions and to risk of forfeiture.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg)"Shares" means shares of the Company's Common Stock. If there has been an adjustment or substitution pursuant to Section 14.1, the term "Shares" shall also include any shares of stock or other securities that are substituted for Shares or into which Shares are adjusted pursuant to Section 14.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh)"Stock" means the Company's Common Stock, $1.00 par value and such other securities of the Company as may be substituted for Stock pursuant to Article 14.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)"Stock Appreciation Right" or "SAR" means a right granted to a Participant under Article 8 to receive a payment equal to the difference between the Fair Market Value of a Share as of the date of exercise of the SAR over the base price of the SAR, all as determined pursuant to Article 8.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj)"Subsidiary" means any corporation, limited liability company, partnership or other entity, domestic or foreign, of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk)"1933 Act" means the Securities Act of 1933, as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll)"1934 Act" means the Securities Exchange Act of 1934, as amended from time to time.

**Article 3<br>EFFECTIVE TERM OF PLAN**

3.1 EFFECTIVE DATE. The Plan shall be effective as of March 20, 2025, the date it was approved by the Board (the "Effective Date").

3.2 TERMINATION OF PLAN. Unless earlier terminated as provided herein, the Plan shall continue in effect until the date of the 2035 annual shareholders' meeting. The termination of the Plan on such date shall not affect the validity of any Award outstanding on the date of termination, which shall continue to be governed by the applicable terms and conditions of the Plan. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the Effective Date.

**Article 4<br>ADMINISTRATION**

4.1 COMMITTEE. The Plan shall be administered by the Committee or, at the discretion of the Board from time to time, the Plan may be administered by the Board. The Board may reserve to itself any or all of the authority and responsibility of the Committee under the Plan or may act as administrator of the Plan for any and all purposes. To the extent the Board has reserved any authority and responsibility or during any time that the Board is acting as administrator of the Plan, it shall have all the powers and protections of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board. To the extent any action of the Board under the Plan conflicts with actions taken by the Committee, the actions of the Board shall control.

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4.2 ACTION AND INTERPRETATIONS BY THE COMMITTEE. For purposes of administering the Plan, the Committee may from time to time adopt rules, regulations, guidelines and procedures for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the Plan, as the Committee may deem appropriate. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it deems necessary to carry out the intent of the Plan. The Committee's interpretation of the Plan, any Awards granted under the Plan, any Award Certificate and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company's or an Affiliate's independent certified public accountants, Company counsel or any executive compensation consultant or other professional retained by the Company or the Committee to assist in the administration of the Plan. No member of the Committee will be liable for any good faith determination, act or omission in connection with the Plan or any Award.

4.3 AUTHORITY OF COMMITTEE. Except as provided in Section 4.1 hereof, the Committee has the exclusive power, authority and discretion to: (a) grant Awards; (b) designate Participants; (c) determine the type or types of Awards to be granted to each Participant; (d) determine the number of Awards to be granted and the number of Shares or dollar amount to which an Award will relate; (e) determine the terms and conditions of any Award granted under the Plan; (f) prescribe the form of each Award Certificate, which need not be identical for each Participant; (g) decide all other matters that must be determined in connection with an Award; (h) establish, adopt or revise any plan, program or policy for the grant of Awards as it may deem necessary or advisable, including but not limited to short-term incentive programs, and any special plan documents; (i) establish, adopt or revise any rules, regulations, guidelines or procedures as it may deem necessary or advisable to administer the Plan; (j) make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan; (k) amend the Plan or any Award Certificate as provided herein; and (l) adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of the United States or any non-U.S. jurisdictions in which the Company or any Affiliate may operate, in order to assure the viability of the benefits of Awards granted to participants located in the United States or such other jurisdictions and to further the objectives of the Plan.

4.4 DELEGATION.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Committee may delegate to one or more of its members or to one or more officers of the Company or an Affiliate or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individuals may have under this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)The Board may, by resolution, expressly delegate to a special committee, consisting of one or more directors who may but need not be officers of the Company, the authority, within specified parameters as to the number and terms of Awards, to (i) designate officers and/or employees of the Company or any of its Affiliates to be recipients of Awards under the Plan, and (ii) to determine the number of such Awards to be received by any such Participants. The acts of such delegates shall be treated hereunder as acts of the Board and such delegates shall report regularly to the Board and the Compensation Committee regarding the delegated duties and responsibilities and any Awards so granted.

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4.5. INDEMNIFICATION. Each person who is or shall have been a member of the Committee, or the Board, or an officer of the Company to whom authority was delegated in accordance with this Article 4, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's charter or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

**Article 5<br>SHARES SUBJECT TO THE PLAN**

5.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 5.2 and Section 14.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 260,000, all of which may be granted as Incentive Stock Options.

5.2 SHARE COUNTING. Shares covered by an Award shall be subtracted from the Plan share reserve as of the Grant Date but shall be added back to the Plan share reserve or otherwise treated in accordance with subsections (a) through (i) of this Section 5.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)To the extent that an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares subject to the Award will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Shares subject to Awards settled in cash will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Shares withheld from an Award to satisfy tax withholding requirements will count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan, and Shares delivered by a participant to satisfy tax withholding requirements will not be added to the Plan share reserve.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)The full number of Shares subject to an Option shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan, even if the exercise price of an Option is satisfied through net-settlement or by delivering Shares to the Company (by either actual delivery or attestation).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)The full number of Shares subject to a SAR shall count against the number of Shares remaining available for issuance pursuant to Awards made under the Plan (rather than the net number of Shares actually delivered upon exercise).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Substitute Awards granted pursuant to Section 13.9 of the Plan shall not count against the Shares otherwise available for issuance under the Plan under Section 5.1.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)Subject to applicable Exchange requirements, shares available under a shareholder-approved plan of a company acquired by the Company (as appropriately adjusted to Shares to reflect the transaction) may be issued under the Plan pursuant to Awards granted to individuals who were not employees of the Company or its Affiliates immediately before such transaction and will not count against the maximum share limitation specified in Section 5.1.

5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

5.4 LIMITATION ON COMPENSATION FOR NON-EMPLOYEE DIRECTORS. With respect to any one calendar year, the aggregate compensation that may be granted to any Non-Employee Director, including all meeting fees, cash retainers and retainers granted in the form of Awards, shall not exceed $100,000, or $125,000 in the case of a non-employee Chairman of the Board or Lead Director. For purposes of such limit, the value of Awards will be determined based on the aggregate Grant Date fair value of all awards issued to the director in such year (computed in accordance with applicable financial accounting rules).

**Article 6<br>ELIGIBILITY**

6.1 GENERAL. Awards may be granted only to Eligible Participants. Incentive Stock Options may be granted only to Eligible Participants who are employees of the Company or a Parent or Subsidiary as defined in Section 424(e) and (f) of the Code. Eligible Participants who are service providers to an Affiliate may be granted Options or SARs under this Plan only if the Affiliate qualifies as an "eligible issuer of service recipient stock" within the meaning of §1.409A-1(b)(5)(iii)(E) of the final regulations under Code Section 409A.

**Article 7<br>STOCK OPTIONS**

7.1 GENERAL. The Committee is authorized to grant Options to Participants on the following terms and conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Exercise Price</u>. The exercise price per Share under an Option shall be determined by the Committee, provided that the exercise price for any Option (other than an Option issued as a substitute Award pursuant to Section 13.9) shall not be less than the Fair Market Value as of the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Prohibition on Repricing</u>. Except as otherwise provided in Section 14.1, without the prior approval of shareholders of the Company: (i) the exercise price of an Option may not be reduced, directly or indirectly, (ii) an Option may not be cancelled in exchange for cash, other Awards or Options or SARs with an exercise or base price that is less than the exercise price of the original Option, and (iii) the Company may not repurchase an Option for value (in cash or otherwise) from a Participant if the current Fair Market Value of the Shares underlying the Option is lower than the exercise price per share of the Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Time and Conditions of Exercise</u>. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, subject to Section 7.1(e), and may include in the Award Certificate a provision that an Option that is otherwise exercisable and has an exercise price that is less than the Fair Market Value of the Stock on the last day of its term will be automatically exercised on such final date of the term by means of a "net exercise," thus entitling

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the optionee to Shares equal to the intrinsic value of the Option on such exercise date, less the number of Shares required for tax withholding. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised or vested.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Payment</u>. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, and the methods by which Shares shall be delivered or deemed to be delivered to Participants. As determined by the Committee at or after the Grant Date, payment of the exercise price of an Option may be made, in whole or in part, in the form of (i) cash or cash equivalents, (ii) delivery (by either actual delivery or attestation) of previously-acquired Shares based on the Fair Market Value of the Shares on the date the Option is exercised, (iii) withholding of Shares from the Option based on the Fair Market Value of the Shares on the date the Option is exercised, (iv) broker-assisted market sales, or (iv) any other "cashless exercise" arrangement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Exercise Term</u>. Except for Nonstatutory Options granted to Participants outside the United States, no Option granted under the Plan shall be exercisable for more than ten years from the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>No Deferral Feature</u>. No Option shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<u>No Dividend Equivalents</u>. No Option shall provide for Dividend Equivalents.

7.2 INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options granted under the Plan must comply with the requirements of Section 422 of the Code. Without limiting the foregoing, any Incentive Stock Option granted to a Participant who at the Grant Date owns more than 10% of the voting power of all classes of shares of the Company must have an exercise price per Share of not less than 110% of the Fair Market Value per Share on the Grant Date and an Option term of not more than five years. If all of the requirements of Section 422 of the Code (including the above) are not met, the Option shall automatically become a Nonstatutory Stock Option.

**Article 8<br>STOCK APPRECIATION RIGHTS**

8.1 GRANT OF STOCK APPRECIATION RIGHTS. The Committee is authorized to grant Stock Appreciation Rights to Participants on the following terms and conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Right to Payment</u>. Upon the exercise of a SAR, the Participant has the right to receive, for each Share with respect to which the SAR is being exercised, the excess, if any, of: (i) the Fair Market Value of one Share on the date of exercise; over (ii) The base price of the SAR as determined by the Committee and set forth in the Award Certificate, which shall not be less than the Fair Market Value of one Share on the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Prohibition on Repricing</u>. Except as otherwise provided in Section 14.1, without the prior approval of the shareholders of the Company, (i) the base price of a SAR may not be reduced, directly or indirectly, (ii) a SAR may not be cancelled in exchange for cash, other Awards, or Options or SARs with an exercise or base price that is less than the base price of the original SAR, and (iii) the Company may not repurchase a SAR for value (in cash or otherwise) from a

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Participant if the current Fair Market Value of the Shares underlying the SAR is lower than the base price per share of the SAR.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Time and Conditions of Exercise</u>. The Committee shall determine the time or times at which a SAR may be exercised in whole or in part, and may include in the Award Certificate a provision that a SAR that is otherwise exercisable and has a base price that is less than the Fair Market Value of the Stock on the last day of its term will be automatically exercised on such final date of the term, thus entitling the holder to cash or Shares equal to the intrinsic value of the SAR on such exercise date, less the cash or number of Shares required for tax withholding. Except for SARs granted to Participants outside the United States, no SAR shall be exercisable for more than ten years from the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>No Deferral Feature</u>. No SAR shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the SAR.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>No Dividend Equivalents</u>. No SAR shall provide for Dividend Equivalents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Other Terms</u>. All SARs shall be evidenced by an Award Certificate. Subject to the limitations of this Article 8, the terms, methods of exercise, methods of settlement, form of consideration payable in settlement (e.g., cash, Shares or other property), and any other terms and conditions of the SAR shall be determined by the Committee at the time of the grant and shall be reflected in the Award Certificate.

**Article 9<br>RESTRICTED STOCK AND STOCK UNITS**

9.1 GRANT OF RESTRICTED STOCK AND STOCK UNITS. The Committee is authorized to make Awards of Restricted Stock, Restricted Stock Units or Deferred Stock Units to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee. An Award of Restricted Stock, Restricted Stock Units or Deferred Stock Units shall be evidenced by an Award Certificate setting forth the terms, conditions, and restrictions applicable to the Award.

9.2 ISSUANCE AND RESTRICTIONS. Restricted Stock, Restricted Stock Units or Deferred Stock Units shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, for example, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. Except as otherwise provided in an Award Certificate or any special Plan document governing an Award, a Participant shall have none of the rights of a shareholder with respect to Restricted Stock Units or Deferred Stock Units until such time as Shares of Stock are paid in settlement of such Awards.

9.3 DIVIDENDS ON RESTRICTED STOCK. The Committee may provide that ordinary cash dividends declared on the Shares before they are vested (i) will be forfeited, (ii) will be deemed to have been reinvested in additional Shares or otherwise reinvested (subject to Share availability under Section 5.1 hereof and subject to the same vesting provisions as provided for the host Award), (iii) will be credited by the Company to an account for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any dividends accrued with

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respect to forfeited Restricted Stock will be reconveyed to the Company without further consideration or any act or action by the Participant, or (iv) will be paid or distributed to the Participant as soon as practical following the date that the dividends were paid to shareholders. Unless otherwise provided by the Committee or in the Award Certificate, dividends accrued on Shares of Restricted Stock before they are vested shall be credited by the Company to an account for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any dividends accrued with respect to forfeited Restricted Stock will be reconveyed to the Company without further consideration or any act or action by the Participant. .

9.4 FORFEITURE. Subject to the terms of the Award Certificate and except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of Continuous Service during the applicable restriction period or upon failure to satisfy a performance goal during the applicable restriction period, Restricted Stock or Restricted Stock Units that are at that time subject to restrictions shall be forfeited.

9.5 DELIVERY OF RESTRICTED STOCK. Shares of Restricted Stock shall be delivered to the Participant at the Grant Date either by book-entry registration or by delivering to the Participant, or a custodian or escrow agent (including, without limitation, the Company or one or more of its employees) designated by the Committee, a stock certificate or certificates registered in the name of the Participant. If physical certificates representing shares of Restricted Stock are registered in the name of the Participant, such certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.

**Article 10<br>PERFORMANCE AWARDS**

10.1 GRANT OF PERFORMANCE AWARDS. The Committee is authorized to grant any Award under this Plan, including cash-based Awards, with performance-based vesting criteria, on such terms and conditions as may be selected by the Committee. Any such Awards with performance-based vesting criteria are referred to herein as Performance Awards. The Committee shall have the complete discretion to determine the number of Performance Awards granted to each Participant and to designate the provisions of such Performance Awards as provided in Section 4.3. All Performance Awards shall be evidenced by an Award Certificate or a written program established by the Committee, pursuant to which Performance Awards are awarded under the Plan under uniform terms, conditions and restrictions set forth in such written program.

10.2 PERFORMANCE GOALS. The Committee may establish performance goals for Performance Awards which may be based on any criteria selected by the Committee. Such performance goals may be described in terms of Company-wide objectives or in terms of objectives that relate to the performance of the Participant, an Affiliate or a division, region, department or function within the Company or an Affiliate. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or an Affiliate conducts its business, or other events or circumstances render performance goals to be unsuitable, the Committee may modify such performance goals in whole or in part, as the Committee deems appropriate. If a Participant is promoted, demoted or transferred to a different business unit or function during a performance period, the Committee may determine that the performance goals or performance period are no longer appropriate and may (i) adjust, change or eliminate the performance goals or the applicable performance period as it deems appropriate to make such goals and period comparable to the initial goals and period, or (ii) make a cash payment to the participant in an amount determined by the Committee.

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**Article 11<br>DIVIDEND EQUIVALENTS**

11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend Equivalents with respect to Full-Value Awards granted hereunder. Dividend Equivalents shall entitle the Participant to receive payments equal to ordinary cash dividends or distributions with respect to all or a portion of the number of Shares subject to a Full-Value Award, as determined by the Committee. Dividend Equivalents accruing on unvested Full-Value Awards shall, as provided in the Award Certificate, either (i) be reinvested in the form of additional Shares (subject to Share availability under Section 5.1 hereof), which shall be subject to the same vesting provisions as provided for the host Award, (ii) be credited by the Company to an account for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and, in either case, any Dividend Equivalents accrued with respect to forfeited Awards will be reconveyed to the Company without further consideration or any act or action by the Participant, or (iii) be paid to the Participant as soon as practical following the date that the dividends were paid to shareholders. Unless otherwise provided by the Committee or in the Award Certificate, Dividend Equivalents accrued on Full-Value Awards before they are vested shall be credited by the Company to an account for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any Dividend Equivalents accrued with respect to forfeited Full-Value Awards will be reconveyed to the Company without further consideration or any act or action by the Participant.

**Article 12<br>STOCK OR OTHER STOCK-BASED AWARDS**

12.1 GRANT OF STOCK OR OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including without limitation Shares awarded purely as a "bonus" and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, and Awards valued by reference to book value of Shares or the value of securities of or the performance of specified Parents or Subsidiaries. The Committee shall determine the terms and conditions of such Awards.

**Article 13<br>PROVISIONS APPLICABLE TO AWARDS**

13.1 AWARD CERTIFICATES. Each Award shall be evidenced by an Award Certificate. Each Award Certificate shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.

13.2 FORM OF PAYMENT FOR AWARDS. At the discretion of the Committee, payment of Awards may be made in cash, Stock, a combination of cash and Stock, or any other form of property as the Committee shall determine. In addition, payment of Awards may include such terms, conditions, restrictions and/or limitations, if any, as the Committee deems appropriate, including, in the case of Awards paid in the form of Stock, restrictions on transfer and forfeiture provisions. Further, payment of Awards may be made in the form of a lump sum, or in installments, as determined by the Committee.

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13.3 LIMITS ON TRANSFER. No right or interest of a Participant in any unexercised or restricted Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an Affiliate, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or an Affiliate. No unexercised or restricted Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under the Plan; provided, however, that the Committee may (but need not) permit other transfers (other than transfers for value) where the Committee concludes that such transferability (i) is permitted by Rule 701 under the 1933 Act, if applicable, (ii) does not result in accelerated taxation, (iii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Code Section 422(b), and (iv) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, state or federal tax or securities laws applicable to transferable Awards.

13.4 BENEFICIARIES. Notwithstanding Section 13.3, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant's death. A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Certificate applicable to the Participant, except to the extent the Plan and Award Certificate otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, any payment due to the Participant shall be made to the Participant's estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant, in the manner provided by the Company, at any time provided the change or revocation is filed with the Committee.

13.5 STOCK TRADING RESTRICTIONS. All Stock issuable under the Plan is subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate or issue instructions to the transfer agent to reference restrictions applicable to the Stock.

13.6 ACCELERATION UPON DEATH OR DISABILITY. Except as otherwise provided in the Award Certificate or any special Plan document or separate agreement with a Participant governing an Award, upon the termination of a person's Continuous Service by reason of death or Disability: (a) all of that Participant's outstanding Options and SARs shall become fully exercisable; (b) all time-based vesting restrictions on that Participant's outstanding Awards shall lapse as of the date of termination; and (c) the payout opportunities attainable under all of that Participant's outstanding performance-based Awards shall be deemed to have been fully earned as of the date of termination as follows: (i) if the date of termination occurs during the first half of the applicable performance period, all relevant performance goals will be deemed to have been achieved at the "target" level, and (ii) if the date of termination occurs during the second half of the applicable performance period, the actual level of achievement of all relevant performance goals against target will be measured as of the end of the calendar quarter immediately preceding the date of termination, and (iii) in either such case, there shall be a prorata payout to the Participant or his or her estate within sixty (60) days following the date of termination (unless a later date is required by Section 16.3 hereof), based upon the length of time within the performance period that has elapsed prior to the date of termination. To the extent that this provision causes Incentive Stock Options to exceed the

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dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be Nonstatutory Stock Options.

13.7 DISCRETION TO ACCELERATE AWARDS. Regardless of whether an event has occurred as described in Section 13.6 above, the Committee may in its sole discretion determine that, at any time or for any reason, all or a portion of such Participant's Options or SARs shall become fully or partially exercisable, that all or a part of the restrictions on all or a portion of the Participant's outstanding Awards shall lapse, and/or that any performance-based criteria with respect to any Awards held by that Participant shall be deemed to be wholly or partially satisfied, in each case, as of such date as the Committee may, in its sole discretion, declare. The Committee may discriminate among Participants and among Awards granted to a Participant in exercising its discretion pursuant to this Section 13.7.

13.8 FORFEITURE EVENTS. Awards under the Plan shall be subject to any compensation recoupment policy that the Committee may adopt from time to time that is applicable by its terms to the Participant. In addition, the Committee may specify in an Award Certificate that the Participant's rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, (i) termination of employment for cause, (ii) violation of material Company or Affiliate policies, (iii) breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, (iv) other conduct by the Participant that is detrimental to the business or reputation of the Company or any Affiliate, or (v) a later determination that the vesting of, or amount realized from, a Performance Award was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, whether or not the Participant caused or contributed to such material inaccuracy.

13.9 SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Company or an Affiliate as a result of a merger or consolidation of the former employing entity with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the former employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.

**Article 14<br>CHANGES IN CAPITAL STRUCTURE**

14.1 MANDATORY ADJUSTMENTS. In the event of a nonreciprocal transaction between the Company and its shareholders that causes the per-share value of the Stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend), the authorization limits under Section 5.1 shall be adjusted proportionately, and the Committee shall make such adjustments to the Plan and Awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. Action by the Committee may include: (i) adjustment of the number and kind of shares that may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding Awards or the measure to be used to determine the amount of the benefit payable on an Award; and (iv) any other adjustments that the Committee determines to be equitable. Notwithstanding the foregoing, the Committee shall not make any adjustments to outstanding Options or SARs that would constitute a modification or substitution of the stock right under Treas. Reg. Sections 1.409A-1(b)(5)(v) that would be treated

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as the grant of a new stock right or change in the form of payment for purposes of Code Section 409A. Without limiting the foregoing, in the event of a subdivision of the outstanding Stock (stock-split), a declaration of a dividend payable in Shares, or a combination or consolidation of the outstanding Stock into a lesser number of Shares, the authorization limits under Section 5.1 shall automatically be adjusted proportionately, and the Shares then subject to each Award shall automatically, without the necessity for any additional action by the Committee, be adjusted proportionately without any change in the aggregate purchase price therefor.

14.2 DISCRETIONARY ADJUSTMENTS. Upon the occurrence or in anticipation of any corporate event or transaction involving the Company (including, without limitation, any merger, reorganization, recapitalization, combination or exchange of shares, or any transaction described in Section 14.1), the Committee may, in its sole discretion, provide (i) that Awards will be settled in cash rather than Stock, (ii) that Awards will become immediately vested and non-forfeitable and exercisable (in whole or in part) and will expire after a designated period of time to the extent not then exercised (provided that Participants shall be provided with advance written notice of any such exercise period and such period shall allow Participants a reasonable period of time in which to exercise such Awards), (iii) that Awards will be assumed by another party to a transaction or otherwise be equitably converted or substituted in connection with such transaction, (iv) that outstanding Awards may be settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying Stock, as of a specified date associated with the transaction, over the exercise or base price of the Award, (v) that performance targets and performance periods for Performance Awards will be modified, or (vi) any combination of the foregoing. The Committee's determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated.

14.3 GENERAL. Any discretionary adjustments made pursuant to this Article 14 shall be subject to the provisions of Section 15.2. To the extent that any adjustments made pursuant to this Article 14 cause Incentive Stock Options to cease to qualify as Incentive Stock Options, such Options shall be deemed to be Nonstatutory Stock Options.

**Article 15<br>AMENDMENT, MODIFICATION AND TERMINATION**

15.1 AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee may, at any time and from time to time, amend, modify or terminate the Plan without shareholder approval; provided, however, that if an amendment to the Plan would, in the reasonable opinion of the Board or the Committee, either (i) materially increase the number of Shares available under the Plan, (ii) expand the types of awards under the Plan, (iii) materially expand the class of participants eligible to participate in the Plan, (iv) materially extend the term of the Plan, or (v) otherwise constitute a material change requiring shareholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of an Exchange, then such amendment shall be subject to shareholder approval; and provided, further, that the Board or Committee may condition any other amendment or modification on the approval of shareholders of the Company for any reason, including by reason of such approval being necessary or deemed advisable (i) to comply with the listing or other requirements of an Exchange, or (ii) to satisfy any other tax, securities or other applicable laws, policies or regulations. Without the prior approval of the shareholders of the Company, the Plan may not be amended to permit: (i) the exercise price or base price of an Option or SAR to be reduced, directly or indirectly, (ii) an Option or SAR to be cancelled in exchange for cash, other Awards, or Options or SARs with an exercise or base price that is less than the exercise price or base price of the original Option or SAR, or (iii) the Company to repurchase an Option or SAR for value (in cash or otherwise) from a Participant if the current Fair Market Value of the

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Shares underlying the Option or SAR is lower than the exercise price or base price per share of the Option or SAR.

15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the Committee may amend, modify or terminate any outstanding Award without approval of the Participant; provided, however:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Subject to the terms of the applicable Award Certificate, such amendment, modification or termination shall not, without the Participant's consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination (with the per-share value of an Option or SAR for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment or termination over the exercise or base price of such Award);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)The original term of an Option or SAR may not be extended without the prior approval of the shareholders of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Except as otherwise provided in Section 14.1, without the prior approval of the shareholders of the Company, (i) the exercise price of an Option or base price of a SAR may not be reduced, directly or indirectly, (ii) an option or SAR may not be cancelled in exchange for cash, other Awards or Options or SARs with an exercise or base price that is less than the exercise price or base price of the original Option or SAR, or otherwise, and (iii) the Company may not repurchase an Option or SAR for value (in cash or otherwise) from a Participant if the current Fair Market Value of the Shares underlying the Option or SAR is lower than the exercise price or base price per share of the Option or SAR; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant affected thereby. An outstanding Award shall not be deemed to be "adversely affected" by a Plan amendment if such amendment would not reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment (with the per-share value of an Option or SAR for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment over the exercise or base price of such Award).

15.3 COMPLIANCE AMENDMENTS. Notwithstanding anything in the Plan or in any Award Certificate to the contrary, the Board may amend the Plan or an Award Certificate, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or Award Certificate to any present or future law relating to plans of this or similar nature (including, but not limited to, Section 409A of the Code), and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 15.3 to any Award granted under the Plan without further consideration or action.

**Article 16<br>GENERAL PROVISIONS**

16.1 RIGHTS OF PARTICIPANTS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)No Participant or any Eligible Participant shall have any claim to be granted any Award under the Plan. Neither the Company, its Affiliates nor the Committee is obligated to treat

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Participants or Eligible Participants uniformly, and determinations made under the Plan may be made by the Committee selectively among Eligible Participants who receive, or are eligible to receive, Awards (whether or not such Eligible Participants are similarly situated).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Nothing in the Plan, any Award Certificate or any other document or statement made with respect to the Plan, shall interfere with or limit in any way the right of the Company or any Affiliate to terminate any Participant's employment or status as an officer, or any Participant's service as a director or consultant, at any time, nor confer upon any Participant any right to continue as an employee, officer, director or consultant of the Company or any Affiliate, whether for the duration of a Participant's Award or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company or any Affiliate and, accordingly, subject to Article 15, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company or any of its Affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)No Award gives a Participant any of the rights of a shareholder of the Company unless and until Shares are in fact issued to such person in connection with such Award.

16.2 WITHHOLDING. The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company or such Affiliate, an amount sufficient to satisfy federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of the Plan. The obligations of the Company under the Plan will be conditioned on such payment or arrangements and the Company or such Affiliate will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. Unless otherwise determined by the Committee at the time the Award is granted or thereafter, any such withholding requirement may be satisfied, in whole or in part, by withholding from the Award Shares having a Fair Market Value on the date of withholding equal to the amount required to be withheld in accordance with applicable tax requirements (up to the maximum individual statutory rate in the applicable jurisdiction as may be permitted under then-current accounting principles to qualify for equity classification), in accordance with such procedures as the Committee establishes. All such elections shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

16.3 SPECIAL PROVISIONS RELATED TO SECTION 409A OF THE CODE.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)It is intended that the payments and benefits provided under the Plan and any Award shall either be exempt from the application of, or comply with, the requirements of Section 409A of the Code. The Plan and all Award Certificates shall be construed in a manner that effects such intent. Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not warranted or guaranteed. Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers (other than in his or her capacity as a Participant) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the extent that any amount or benefit that would constitute non-exempt "deferred compensation" for purposes of Section 409A of the Code ("Non-Exempt Deferred Compensation") would otherwise be payable or distributable, or a different form of payment (e.g., lump sum or installment)

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of such Non-Exempt Deferred Compensation would be effected, under the Plan or any Award Certificate by reason of the occurrence of a Change in Control, or the Participant's Disability or separation from service, such Non-Exempt Deferred Compensation will not be payable or distributable to the Participant, and/or such different form of payment will not be effected, by reason of such circumstance unless the circumstances giving rise to such Change in Control, Disability or separation from service meet any description or definition of "change in control event", "disability" or "separation from service", as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition). This provision does not prohibit the vesting of any Award upon a Change in Control, Disability or separation from service, however defined. If this provision prevents the payment or distribution of any amount or benefit, or the application of a different form of payment of any amount or benefit, such payment or distribution shall be made at the time and in the form that would have applied absent the Change in Control, Disability or separation from service as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Notwithstanding anything in the Plan or in any Award Certificate to the contrary, if any amount or benefit that would constitute Non-Exempt Deferred Compensation would otherwise be payable or distributable under this Plan or any Award Certificate by reason of a Participant's separation from service during a period in which the Participant is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes): (i) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following the Participant's separation from service will be accumulated through and paid or provided on the first day of the seventh month following the Participant's separation from service (or, if the Participant dies during such period, within 30 days after the Participant's death) (in either case, the "Required Delay Period"); and (ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period. For purposes of this Plan, the term "Specified Employee" has the meaning given such term in Code Section 409A and the final regulations thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)If, pursuant to an Award, a Participant is entitled to a series of installment payments, such Participant's right to the series of installment payments shall be treated as a right to a series of separate payments and not to a single payment. For purposes of the preceding sentence, the term "series of installment payments" has the meaning provided in Treas. Reg. Section 1.409A-2(b)(2)(iii) (or any successor thereto).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Whenever an Award conditions a payment or benefit on the Participant's execution and non-revocation of a release of claims, such release must be executed and all revocation periods shall have expired within sixty (60) days after the date of termination of the Participant's employment; failing which such payment or benefit shall be forfeited. If such payment or benefit is exempt from Section 409A of the Code, the Company may elect to make or commence payment at any time during such 60-day period. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then, subject to subsection (c) above, (i) if such 60-day period begins and ends in a single calendar year, the Company may make or commence payment at any time during such period at its discretion, and (ii) if such 60-day period begins in one calendar year and ends in the next calendar year, the payment shall be made or commence during the second such calendar year (or any later date specified for such payment under the applicable Award), even if such signing and non-revocation of the release occur during the first such calendar year included within such 60-day period. In other words, a Participant is not permitted to influence the calendar year of payment based on the timing of signing the release.

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16.4 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Certificate shall give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate. In its sole discretion, the Committee may authorize the creation of grantor trusts or other arrangements to meet the obligations created under the Plan to deliver Shares or payments in lieu of Shares or with respect to Awards. This Plan is not intended to be subject to ERISA.

16.5 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Affiliate unless provided otherwise in such other plan. Nothing contained in the Plan will prevent the Company from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

16.6 EXPENSES. The expenses of administering the Plan shall be borne by the Company and its Affiliates.

16.7 TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

16.8 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

16.9 FRACTIONAL SHARES. No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down.

16.10 GOVERNMENT AND OTHER REGULATIONS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Committee may require each Participant to represent to the Company in writing that the Participant is acquiring securities of the Company for investment purposes and without a view to distribution thereof and as to such other matters as the Committee believes are appropriate. All certificates for Shares or other securities delivered under the Plan will be subject to such share transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the 1933 Act, the 1934 Act, any securities exchange upon which the Shares are then listed, and any other applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Notwithstanding any other provision of the Plan, no Participant who acquires Shares pursuant to the Plan may, during any period of time that such Participant is an affiliate of the Company (within the meaning of the rules and regulations of the Securities and Exchange Commission under the 1933 Act), sell such Shares, unless such offer and sale is made (i) pursuant to an effective registration statement under the 1933 Act, which is current and includes the Shares to be sold, or (ii) pursuant to an appropriate exemption from the registration requirement of the 1933 Act, such as that set forth in Rule 144 promulgated under the 1933 Act.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Notwithstanding any other provision of the Plan, if at any time the Committee shall determine that the registration, listing or qualification of the Shares covered by an Award upon any Exchange or under any foreign, federal, state or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Award or the purchase or receipt of Shares thereunder, no Shares may be purchased, delivered or received pursuant to such Award unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Committee. Any Participant receiving or purchasing Shares pursuant to an Award shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements. The Company shall not be required to issue or deliver any certificate or certificates for Shares under the Plan prior to the Committee's determination that all related requirements have been fulfilled. The Company shall in no event be obligated to register any securities pursuant to the 1933 Act or applicable state or foreign law or to take any other action in order to cause the issuance and delivery of such certificates to comply with any such law, regulation or requirement.

16.11 GOVERNING LAW. To the extent not governed by federal law, the Plan and all Award Certificates shall be construed in accordance with and governed by the laws of the State of Georgia.

16.12 SEVERABILITY. In the event that any provision of this Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability will not be construed as rendering any other provisions contained herein as invalid or unenforceable, and all such other provisions will be given full force and effect to the same extent as though the invalid or unenforceable provision was not contained herein.

16.13 NO LIMITATIONS ON RIGHTS OF COMPANY. The grant of any Award shall not in any way affect the right or power of the Company to make adjustments, reclassification or changes in its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets. The Plan shall not restrict the authority of the Company, for proper corporate purposes, to draft or assume awards, other than under the Plan, to or with respect to any person. If the Committee so directs, the Company may issue or transfer Shares to an Affiliate, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Affiliate will transfer such Shares to a Participant in accordance with the terms of an Award granted to such Participant and specified by the Committee pursuant to the provisions of the Plan.

The foregoing is hereby acknowledged as being the CoastalSouth Bancshares, Inc. Omnibus Incentive Plan as adopted by the Board on March 20, 2025 and approved by the Company's shareholders on April 24, 2025.

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## Exhibit 10.8

**EXHIBIT 10.8**

*RSU Form*

# **R E S T R I C T E D S T O C K U N I T A W A R D C E R T I F I C A T E** 

## *Non-transferable* 
G R A N T TO

*("Grantee")*

by CoastalSouth Bancshares, Inc. (the "Company") of

restricted stock units convertible, on a one-for-one basis, into shares of Stock (the "Units")

pursuant to and subject to the provisions of the CoastalSouth Bancshares, Inc. 2025 Incentive Plan (the "Plan") and to the terms and conditions set forth on the following pages (the "Terms and Conditions"). By accepting the Units, Grantee shall be deemed to have agreed to the Terms and Conditions set forth in this Award Certificate and the Plan. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

Unless vesting is accelerated in accordance with the Plan or in the discretion of the Board, the Units shall vest (become non-forfeitable) in accordance with the following schedule, provided that Grantee remains in Continuous Service as a Participant on each vesting date:

---

| | |
|:---|:---|
| &nbsp;&nbsp; <br><u>Vesting Date</u> | &nbsp;&nbsp;Number of <u><br>Units Vested</u> |

---

IN WITNESS WHEREOF, CoastalSouth Bancshares, Inc., acting by and through its duly authorized officers, has caused this Award Certificate to be duly executed.

CoastalSouth Bancshares, Inc. By: Its: Grant Date: <br>

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*RSU Form*

TERMS AND CONDITIONS

1. <u>Vesting of Units</u>. The Units have been credited to a bookkeeping account on behalf of Grantee. The Units will vest and become non-forfeitable on the earliest to occur of the following (each, a "Vesting Date"): (a) as to the percentages of the Units specified on the cover page hereof, on the respective Vesting Dates specified on the cover page hereof, subject to Grantee's Continuous Service on each vesting date; (b) as to all of the Units, on the termination of Grantee's Continuous Service by the Company by reason of Grantee's death or Disability; or (c) as to all of the Units, on the occurrence of a Change in Control. If Grantee's Continuous Service terminates prior to a Vesting Date for any reason other than as described in (b) above, Grantee shall forfeit all right, title and interest in and to the then unvested Units as of the date of such termination and the unvested Units will be reconveyed to the Company without further consideration or any act or action by Grantee.

2. <u>Conversion to Stock</u>. The Units that vest upon a Vesting Date will be converted to shares of Stock on the Vesting Date (the "Conversion Date"). The shares of Stock will be registered in the name of Grantee as of the Conversion Date, and certificates for the shares of Stock (or, at the option of the Company, statements of book entry notation of the shares of Stock in the name of Grantee in lieu thereof) shall be delivered to Grantee or Grantee's designee upon request of Grantee as soon as practicable after the Conversion Date.

3. <u>Dividend Rights</u>. If any dividends or other distributions are paid with respect to the Stock while the Units are outstanding, the dollar amount or fair market value of such dividends or distributions with respect to the number of shares of Stock then underlying the Units shall be credited to a bookkeeping account and held (without interest) by the Company for the account of Grantee until the Conversion Date. Such amounts shall be subject to the same vesting and forfeiture provisions as the Units to which they relate. Accrued dividends held pursuant to the foregoing provision shall be paid by the Company to Grantee on the Conversion Date.

4. <u>Voting Rights</u>. Grantee shall not have voting rights with respect to the Units. Upon conversion of the Units into shares of Stock, Grantee will obtain full voting rights and other rights as a shareholder of the Company.

5. <u>Limitation of Rights</u>. Nothing in this Award Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Grantee's service at any time, nor confer upon Grantee any right to continue in the service of the Company or any Affiliate.

6. <u>Restrictions on Transfer and Pledge</u>. No right or interest of Grantee in the Units may be pledged, encumbered, or hypothecated to or in favor of any party, or shall be subject to any lien, obligation, or liability of Grantee to any other party. The Units are not assignable or transferable by Grantee other than to a beneficiary or by will or the laws of descent and distribution or pursuant to a domestic relations order that would satisfy Code Section 414(p)(1)(A) if such Section applied to the Units.

7. <u>Restrictions on Issuance of Shares</u>. If at any time the Board shall determine in its discretion, that registration, listing or qualification of the Shares covered by the Units upon any securities exchange or under any foreign, federal, or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to the settlement of the Units, the Units may not be settled in whole or in part unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board.

8. <u>Plan Controls</u>. The terms contained in the Plan are incorporated into and made a part of this Award Certificate and this Award Certificate shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Certificate, the provisions of the Plan shall be controlling and determinative.

9. <u>Payment of Taxes</u>. The Company or any Affiliate employing Grantee has the authority and the right to deduct or withhold, or require Grantee to remit to the employer, an amount sufficient to satisfy federal, state, and local taxes (including Grantee's FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the vesting or settlement of the Units. The withholding requirement will be satisfied by withholding from the Units Shares having a fair market value on the date of withholding equal to the amount required to be withheld for tax purposes, all in accordance with such procedures as the Company establishes. The obligations of the Company under this Certificate will be conditional on such payment or arrangements, and the Company, and, where applicable, its Affiliates will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to Grantee.

10. <u>Successors</u>. This Award Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Award Certificate and the Plan.

11. <u>Severability</u>. If any one or more of the provisions contained in this Award Certificate is invalid, illegal or unenforceable, the other provisions of this Award Certificate will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

12. <u>Notice</u>. Notices hereunder must be in writing, delivered personally or sent by registered or certified U.S. mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to CoastalSouth Bancshares, Inc., 400 Galleria Parkway, Suite 1900, Atlanta, Georgia 30339, Attn: Secretary, or any other address designated by the Company in a written notice to Grantee. Notices to Grantee will be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.

13. <u>Clawback</u>. The Units shall be subject to any compensation recoupment policy of the Company that is applicable by its terms to Grantee and to awards of this type.

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## Exhibit 10.9

**EXHIBIT 10.9**

&nbsp;&nbsp; <br>**AMENDED AND RESTATED**<br>**EMPLOYMENT AGREEMENT**<br>**BETWEEN**<br>**STEPHEN R. STONE**<br>**AND**<br>**COASTALSOUTH BANCSHARES, INC.**<br>**COASTALSTATES BANK**<br>**<u>THIS AGREEMENT CONTAINS A BINDING, IRREVOCABLE AGREEMENT</u> <u>TO ARBITRATE AND IS SUBJECT TO ARBITRATION PURSUANT TO TITLE 15, CHAPTER 48 (UNIFORM ARBITRATION ACT)</u>**<br>**<u>OF THE CODE OF LAWS OF SOUTH CAROLINA.</u>**<br>

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**EMPLOYMENT AGREEMENT**

**AMENDED AND RESTATED EMPLOYMENT AGREEMENT**

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "<u>Agreement</u>") is made and entered into this 25th day of April, 2024 by and among CoastalSouth Bancshares, Inc., a Virginia corporation (the "<u>Company</u>"), Coastal States Bank, a South Carolina non-member bank (the "<u>Bank</u>") and Stephen R. Stone (the "<u>Executive</u>"), to be effective as of the Effective Date as defined in Section 1. This Agreement amends and restates that certain existing employment agreement between the parties dated April 29, 2021. Unless the context requires otherwise, as used herein the term "Bank" shall refer to the Company and the Bank.

<u>BACKGROUND</u>

WHEREAS, the Bank desires to engage the Executive as the President and Chief Executive Officer of the Company and the Bank from and after the Effective Date, in accordance with the terms of this Agreement. The Executive is willing to serve as such in accordance with the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

**<u>THIS AGREEMENT CONTAINS A BINDING, IRREVOCABLE AGREEMENT</u>**

**<u>TO ARBITRATE AND IS SUBJECT TO ARBITRATION</u>**

**<u>PURSUANT TO TITLE 15, CHAPTER 48 (UNIFORM ARBITRATION ACT) OF THE CODE OF LAWS OF SOUTH CAROLINA.</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.<u>Effective Date</u>. The effective date of this Agreement (the "<u>Effective Date</u>") shall be April 25, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.<u>Employment</u>. The Executive is hereby employed on the Effective Date as the President and Chief Executive Officer of the Company and the Bank. In this capacity, the Executive shall have the duties, responsibilities, and authority commensurate with such position as shall be assigned to him by the Boards of Directors of the Company and the Bank (the "<u>Board</u>"). In his capacity as President and Chief Executive Officer, the Executive will report directly to the Board. The Executive also shall serve as a member of the Company Board and as a member of the Bank Board, so long as he is employed as the Chief Executive Officer of the Company and the Chief Executive Officer of the Bank and is elected to the Company Board and the Bank Board by shareholders of the Company and the Bank, respectively.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.<u>Term</u>. Unless earlier terminated herein in accordance with Section 7 hereof, the Executive's employment with the Bank shall be governed by the terms and conditions of this Agreement for a period beginning on the Effective Date and ending on the third (3<sup>rd</sup>) anniversary of the Effective Date (the "<u>Term</u>"). The third anniversary of the Effective Date is referred to herein as the "<u>Term End</u> <u>Date</u>." Beginning on Term End Date and on each anniversary of the Term End Date thereafter, the Term shall, without further action by the Executive or the Bank, be extended by an additional one-year period; <u>provided</u>, <u>however</u>, that either party may cause the Term to cease to extend automatically, by giving written notice to the other not less than ninety (90) days prior to the scheduled expiration of the Term. Upon such notice, the Term shall terminate upon the expiration of the then-current term, including any prior extensions. Notwithstanding the foregoing, if the Company and/or the Bank enters into a letter of intent ("<u>LOI</u>") with a third party to effect a transaction that would result in a Change in Control (as defined in Section 6 hereof), then the Bank shall not be permitted to provide the Executive with notice of non-renewal of the Term pursuant to this Section 3 following the execution date of the LOI unless and until such LOI is terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.<u>Extent of Service</u>. During the Term, the Executive agrees to devote all his professional and business-related time to the business and affairs of the Bank and its affiliates and to use his best efforts to perform faithfully and efficiently his job responsibilities. The Executive acknowledges and agrees that from time to time the Bank may assign the Executive additional positions with the Bank or one of the Bank's affiliated companies (including its parent companies and subsidiaries), with such additional title, duties, and responsibilities as determined by the Board in its sole discretion. The Executive agrees to serve any and all such positions without additional compensation. As used in this Agreement, the term "<u>the Bank</u>" includes the Bank and any such affiliated companies to which the Executive may be assigned. The parties agree that the conduct of the following services and activities during the Term shall not be a violation of this Agreement: (A) serving on corporate, civic or charitable boards or committees; (B) delivering lectures, fulfilling speaking engagements, or teaching at educational institutions, and (C) managing personal investments, so long as such services and activities do not materially interfere with the performance of the Executive's responsibilities as the Chief Executive Officer of the Bank in accordance with this Agreement; provided further, however, that the Company Board or Bank Board may require the Executive to cease providing any particular service or participating in any particular activity if the Company Board or Bank Board, as applicable, reasonably concludes that such service or activity is not in the best interests of the Bank.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.<u>Compensation and Benefits</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Base Salary</u>. During the Term and effective as of January 1, 2024, the Bank will pay to the Executive a base salary at the rate of U.S. five hundred seventy-seven thousand one hundred and seventy dollars ($577,170) per year ("<u>Base Salary</u>"), less normal withholdings, payable in approximately equal bi-weekly or other installments as are or become customary under the Bank's payroll practices for its employees from time to time. The Compensation Committee of the Company Board (the "<u>Compensation Committee</u>") shall review the Executive's Base Salary annually and may increase the Executive's Base Salary from year to year. Such adjusted salary then shall become the Executive's Base Salary for purposes of this Agreement. The annual review of the Executive's salary by the Compensation Committee will consider, among other things, the Executive's own performance, the Company's performance, and the Bank's performance. The Base Salary may not be decreased, unless the Bank faces exigent financial conditions, in which case Executive's Base Salary may be reduced *pari passu* with the other senior executive officers of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Incentive, Savings and Retirement Plans</u>. During the Term, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies, and programs available to the other senior officers of the Bank. Without limiting the foregoing, the following shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)During the Term, the Executive shall have an opportunity to receive an annual cash bonus based upon the achievement of performance goals established from year to year by the Compensation Committee (the "<u>Annual Bonus</u>"). Unless and until changed by the Compensation Committee, the Executive's target for the Annual Bonus shall be sixty percent (60%) of Base Salary (the "<u>Target Bonus</u>"). The Target Bonus may be changed annually by the Compensation Committee at its sole discretion, but not decreased, unless the Bank faces exigent financial conditions, in which case Executive's Target Bonus may be reduced *pari passu* with the other senior executive officers of the Bank. The Compensation Committee shall establish performance goals and objectives from year to year on which the Target Bonus shall be based, but the Compensation Committee reserves the sole discretion to modify such goals and objectives, or the final amount of the Annual Bonus, based upon unforeseen events occurring during the related year or its assessment of the Bank's or the Executive's performance in general. The Annual Bonus shall be administered under a written compensation plan approved by the Company Board, which shall provide for threshold, target, and stretch goals and payouts for each fiscal year. Except as otherwise provided by the Compensation Committee, the Executive must be employed by the Bank on the date the Annual Bonus, if any, is paid in order to receive the Annual Bonus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)During the Term, Executive shall have an opportunity to receive annual equity awards under the Company's 2017 Incentive Plan (the "<u>Plan</u>"). The purpose of the Plan is to promote the success, and enhance the value, of the Company, by linking the personal interests of the Executive to those of Company shareholders and by providing Executive with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate and retain the services of the Executive upon whose judgment, interest, and special effort the successful conduct of the Company's operation is largely dependent.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

During the Term, the Executive may be eligible for stock-based awards under the Plan, as determined by the Compensation Committee. The type and amount of such awards shall be determined by the Compensation Committee and shall be based upon the achievement of performance goals established from year to year by the Compensation Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Upon recommendation of the Executive, the Compensation Committee shall review and consider the establishment of a non-qualified retirement plan for the benefit of the Executive and other senior executive officers of the Bank, with terms that the Compensation Committee and Executive consider to be consistent with similar plans established by the Bank's peers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Welfare Benefit Plans</u>. The Executive and his eligible dependents shall be eligible for participation in the welfare benefit plans, practices, policies and programs provided by the Bank, if any, to the extent available to other peer employees and subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of the Bank to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time. Without limiting the foregoing, during the Term, (i) the Bank shall pay the full cost for the Executive and the Executive's eligible dependents to participate in the group health and dental plan(s) sponsored by the Bank, and (ii) the Bank shall pay up to an aggregate of five hundred dollars ($500) per month towards the Executive's participation in any other welfare benefit plan offered by the Bank. Notwithstanding the foregoing, if at any time the Bank determines, in its sole discretion, that its payment of the full cost of the Executive and the Executive's eligible dependents participation in the Bank's group health and dental plans as contemplated in subsection (i) of the previous sentence would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Internal Revenue Code of 1986, as amended (the "<u>Code</u>") or any statute or regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act ("<u>ACA</u>"), as amended by the 2010 Health Care and Education Reconciliation Act), then the Bank shall not be obligated to pay the full cost of such participation and the parties agree to reform this Section 5(d) in a manner as is necessary to comply with Section 105(h)(2) of the Code, the ACA or any statute or regulation of similar effect. The Bank does not warrant the taxability or nontaxability of the benefits afforded pursuant to this Section 5(d) or Section 8(a)(iii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Expenses</u>. During the Term, the Executive shall be entitled to receive prompt reimbursement from the Bank for all reasonable and customary expenses incurred by the Executive in the course of performing his duties and responsibilities under this Agreement, in accordance with the policies, practices, and procedures of the Bank with respect to travel, entertainment, and other business expenses ("<u>Business Expenses</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Professional Associations</u>. The Executive shall be entitled to attend such courses, annual meetings, conferences, and seminars of his selection at the Bank's expense, provided that the Bank shall only be required to cover reasonable expenses associated with the Employee's attendance at such courses, conferences and seminars that are incurred consistent with the Bank's budget and policies then in effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Vacation</u>. During the Term, Executive will be entitled to four weeks of paid vacation each year in accordance with the policies, practices, and procedures of the Bank.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.<u>Change in Control</u>. For purposes of this Agreement, "<u>Change in Control</u>" shall mean the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a subsidiary of the Company (a "<u>Reorganization</u>"), or the sale or other disposition of all or substantially all of the Company's assets (a "<u>Sale</u>") or the acquisition of assets or stock of another corporation or other entity (an "<u>Acquisition</u>"), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the beneficial owners (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 Act, as amended ("<u>Beneficial Owners</u>")), respectively, of the outstanding Company Stock and the Company's then outstanding securities eligible to vote for the election of directors ("<u>Company Voting Securities</u>") immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from or surviving such Reorganization, Sale or Acquisition (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets or stock either directly or through one or more subsidiaries, the "Surviving Entity") in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any subsidiary of the Company, (y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing) is the Beneficial Owner, directly or indirectly, of 50% or more of the total common stock or 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Entity. A Change in Control shall not include a public offering of any class or series of the Company's equity securities pursuant to a registration statement filed by the Company under the Securities and Exchange Act of 1933, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.<u>Termination of Employment</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Death</u>. The Executive's employment shall terminate automatically upon the Executive's death during the Term.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Disability</u>. If the Bank determines in good faith that the Executive has become Disabled (as defined below) during the Term, then it may give to the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Bank shall terminate effective on the thirtieth (30<sup>th</sup>) day after receipt of such written notice by the Executive (the "<u>Disability Effective Date</u>"), provided that, within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "<u>Disability</u>" shall mean the inability of the Executive, as reasonably determined by the Bank, to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six (6) consecutive months. At the request of the Executive or his personal representative, the Bank's determination that the Disability of Executive has occurred shall be certified by a physician mutually agreed upon by the Executive, or his personal representative, and the Bank.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Termination by the Bank</u>. The Bank may terminate the Executive's employment during the Term with or without Cause. For purposes of this Agreement, a termination shall be considered to be for "<u>Cause</u>" if it occurs in conjunction with a good faith determination by the Board that any of the following have occurred:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)a material breach of the terms of this Agreement by the Executive, including, without limitation, failure by the Executive to perform the Executive's duties and responsibilities in the manner and to the extent required under this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)conduct by the Executive that (A) constitutes fraud or dishonesty and (B) is demonstrably likely to lead to material injury to the Bank or resulted or was intended to result in direct or indirect gain to or personal enrichment of the Executive;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)conduct by the Executive that constitutes willful misconduct or insubordination, or gross malfeasance of duty;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)conviction of *(or plea of nolo contendere by)* the Executive during the Term of a crime involving breach of trust or moral turpitude or a felony;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)the exhibition by Executive of a standard of behavior within the scope of Executive's employment that is materially disruptive to the orderly conduct of the Bank's business operations (including, without limitation, substance abuse or sexual misconduct) to a level which, in the Board's good faith and reasonable judgment, with Executive abstaining from participating in the consideration of and vote on the matter, is materially detrimental to the Bank's best interest; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)conduct by the Executive that results in the permanent removal of the Executive from his position as an officer or employee of the Bank pursuant to a written order by any regulatory agency with authority or jurisdiction over the Bank.

In the event that the Bank seeks to terminate Executive's employment for Cause under subsections (i), (iii), or (v) above, Executive shall have the following cure provisions and rights: the Bank shall furnish to Executive in writing a notice of the subsection relied upon and describing the facts establishing Cause under that subsection. Executive shall then have a period of thirty (30) days after receipt of such written notice of proposed termination by the Company in which to attempt to effect a cure of the specified Cause. At the end of such thirty (30) day period, Executive shall be provided with an opportunity to be heard in person by the Board (with the assistance of counsel, if desired). In the event of any such hearing, if the Board determine that no such cure has been effected then the Executive's employment shall be terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Termination by the Executive</u>. The Executive's employment may be terminated by the Executive for any reason or for Good Reason by providing thirty (30) days prior written notice to the Bank. For purposes of this Agreement, "<u>Good Reason</u>" shall mean the occurrence of any of the following, without the Executive's consent:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)a material diminution in the Executive's Base Salary or reduction in target Annual Bonus, except as contemplated by Sections 5(a) and 5(b), respectively;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)a material diminution in the Executive's authority, duties, or responsibilities such that the Executive's authority, duties or responsibilities are no longer commensurate with those typically provided by a Chief Executive Officer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)the relocation of the Executive's principal office to a facility or location more than fifty (50) miles away from the Company's principal office; <u>provided</u>, <u>however</u>, that Good Reason shall not include (A) any relocation of the Executive's principal office which is proposed or initiated by the Executive; or (B) any relocation that results in the Executive's principal place office being closer to the Executive's then-principal residence; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)any action or inaction that constitutes a material breach by the Company or Bank of this Agreement.

The Executive's termination for Good Reason must occur within a period of ninety (90) days after the occurrence of an event of Good Reason. A termination by the Executive shall not constitute termination for Good Reason unless the Executive shall first have delivered to the Bank written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than thirty (30) days after the initial occurrence of such event), and there shall have passed a reasonable time (not less than thirty (30) days) within which the Bank may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Executive. Good Reason shall not include the Executive's death or Disability. The parties intend, believe, and take the position that a resignation by the Executive for Good Reason as defined above effectively constitutes an involuntary separation from service within the meaning of Section 409A of the Code and Treas. Reg. Section 1.409A-1(n)(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Notice of Termination</u>. Any termination by the Bank or the Executive shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 18(d) of this Agreement. For purposes of this Agreement, a "<u>Notice of Termination</u>" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by the Executive or the Bank to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Bank, respectively, hereunder or preclude the Executive or the Bank, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Bank's rights hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Date of Termination</u>. "<u>Date of Termination</u>" means (i) if the Executive's employment is terminated other than by reason of death or Disability, the date of receipt of the Notice of Termination or, subject to any cure period, any later date specified therein within sixty (60) days after receipt of the Notice of Termination, as the case may be, or (ii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.<u>Obligations of the Bank upon Termination</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Termination by the Bank Other Than for Cause or Disability; Termination by Executive for Good Reason</u>. If, during the Term, (A) the Bank shall terminate the Executive's employment other than for Cause or Disability, or (B) the Executive shall terminate employment for Good Reason, then, and with respect to the payments and benefits described in clauses (ii) and (iii) below, only if within sixty (60) days after the Date of Termination the Executive shall have executed a separation agreement containing a full general release of claims and covenant not to sue in a form satisfactory to the Bank (the "<u>Release</u>") and such Release shall not have been revoked within the time period specified therein:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)the Bank shall pay to the Executive in a lump sum in cash within sixty (60) days after the Date of Termination, the exact payment date to be determined by the Bank, the sum of (1) the Executive's Base Salary through the Date of Termination to the extent not theretofore paid, and (2) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the "<u>Accrued Obligations</u>");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)the Bank shall pay to the Executive in a lump sum in cash within sixty (60) days after the Date of Termination, the exact payment date to be determined by the Bank, a severance payment equal to 1.50 times the sum of (1) the Executive's Base Salary in effect as of the Date of Termination, and (2) the average of the Annual Bonuses earned by Executive for each of the three fiscal years immediately preceding the year in which the Date of Termination occurs (the "<u>Three-Year</u> <u>Average Annual Bonus</u>"); <u>provided</u>, <u>however</u>, that if such termination occurs within eighteen (18) months following a Change in Control, then the Bank shall pay to the Executive in a lump sum in cash within sixty (60) days after the Date of Termination, the exact payment date to be determined by the Bank, a severance payment equal to the 2.99 times the sum of (1) the Executive's Base Salary in effect as of the Date of Termination, and (2) the Three-Year Average Annual Bonus;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)if the Executive elects to continue participation in any group medical, dental, vision and/or prescription drug plan benefits to which the Executive and/or the Executive's eligible dependents would be entitled under Section 4980B of the Code (COBRA), then during the period that the Executive is entitled to such coverage under COBRA (the "<u>Welfare Benefits Continuation</u> <u>Period</u>"), the Bank shall pay the excess of (1) the COBRA cost of such coverage over (2) the amount that the Executive would have had to pay for such coverage if he had remained employed during the Welfare Benefits Continuation Period and paid the active employee rate for such coverage; <u>provided</u>, <u>however</u>, that (A) that if the Executive becomes eligible to receive group health benefits under a program of a subsequent employer or otherwise (including coverage available to the Executive's spouse), the Bank's obligation to pay any portion of the cost of health coverage as described herein shall cease, except as otherwise provided by law; and (B) the Welfare Benefits Continuation Period shall run concurrently with any period for which the Executive is eligible to elect health coverage under COBRA; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)to the extent not theretofore paid or provided, the Bank shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Bank and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "<u>Other Benefits</u>").

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For the avoidance of doubt, the parties acknowledge that, in the event that the Executive terminates his employment for Good Reason as a result of the decrease in his Base Salary as contemplated in Section 7(d)(i) hereof, then the Base Salary used for purposes of the calculation of the Accrued Obligations and severance payment under subsection (ii) above, shall be the Base Salary in effect immediately prior to such reduction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Death or Disability</u>. If the Executive's employment is terminated by reason of the Executive's death or Disability during the Term, this Agreement shall terminate without further obligations to the Executive or the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid by the Bank to the Executive or the Executive's estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days after the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 8(b) shall include without limitation, and the Executive or the Executive's estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices, and policies relating to death or disability benefits, if any, as are applicable to the Executive on the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Termination by the Bank for Cause; Executive's Resignation without Good Reason</u>. If, during the Term, the Bank shall terminate Executive's employment for Cause or the Executive shall resign for any reason other than for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid by the Bank to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Resignations</u>. Termination of the Executive's employment for any reason whatsoever shall constitute the Executive's resignation as an officer of the Bank, its subsidiaries and affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.<u>Restrictive Covenants</u>. For purposes of this Section 9, the "<u>Company</u>" shall be deemed to include both CoastalSouth Bancshares, Inc. and the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Acknowledgments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Condition of Employment and Other Consideration</u>. The Executive acknowledges and agrees that he has received good and valuable consideration for entering into this Agreement and further acknowledges that the Company would not continue to employ the Executive in the absence of his execution of and compliance with this Section 9.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Access to Confidential Information, Relationships, and Goodwill</u>. The Executive acknowledges and agrees that he is being provided and entrusted with Confidential Information (as that term is defined in Section 9(b) hereof), including highly confidential customer information that is subject to extensive measures to maintain its secrecy within the Company, is not known in the trade or disclosed to the public, and would materially harm the Company's legitimate business interests if it was disclosed or used in violation of this Agreement. The Executive also acknowledges and agrees that he is being provided and entrusted with access to the Company's customer and employee relationships and goodwill. The Executive further acknowledges and agrees that the Company would not provide access to the Confidential Information, customer and employee relationships, and goodwill in the absence of the Executive's execution of and compliance with this Agreement. The Executive further acknowledges and agrees that the Company's Confidential Information, customer and employee relationships, and goodwill are valuable assets of the Company and are legitimate business interests that are properly subject to protection through the covenants contained in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Potential Unfair Competition</u>. The Executive acknowledges and agrees that as a result of his employment with the Company, his knowledge of and access to Confidential Information, and his relationships with the Company's customers and employees, the Executive would have an unfair competitive advantage if the Executive were to engage in activities in violation of this Section 9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)<u>No Undue Hardship</u>. The Executive acknowledges and agrees that, in the event that his employment with the Company terminates, the Executive possesses marketable skills and abilities that will enable him to find suitable employment without violating the covenants set forth in this Section 9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)<u>Voluntary Execution</u>. Executive acknowledges and affirms that he is executing this Agreement voluntarily, that he has read this Agreement carefully and had a full and reasonable opportunity to consider this Agreement (including an opportunity to consult with legal counsel), and that he has not been pressured or in any way coerced, threatened or intimidated into signing this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)<u>Geographic Scope of Service</u>. Executive acknowledges and agrees that, by virtue of his senior executive status with the Company and his substantial access to Confidential Information, customer and employee relationships, and goodwill described above, he will engage in business on behalf of the Company throughout the entire geographic area in which the Company conducts business, including but not limited to the Restricted Territory (as that term is defined in Section 9(b) hereof).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Definitions</u>. The following capitalized terms used in this Section 9 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)"<u>Competitive Services</u>" means the provision of all credit-related policies, practices, administration and management services on behalf of any person or entity principally engaged in the community banking or commercial banking business, including, without limitation, originating, underwriting, closing and selling loans, receiving deposits and otherwise

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engaging in the business of banking, as well as the business of providing any other activities, products, or services of the type conducted, authorized, offered, or provided by the Company as of the Executive's Termination Date, or during the two (2) years immediately prior to the Executive's Termination Date; <u>provided</u>, <u>however</u>, that the provision of legal services to any such person or entity, whether or not directly or indirectly related to banking, shall not be considered "Competitive Services" for the purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)"<u>Confidential Information</u>" means any and all data and information relating to the Company, its activities, business, or clients that (A) is or has been disclosed to the Executive or of which the Executive becomes or has become aware as a consequence of his employment with the Company; (B) has value to the Company; and (C) is not generally known outside of the Company and is not publicly available. "Confidential Information" shall include, but is not limited to the following types of information regarding, related to, or concerning the Company: trade secrets; financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information. "Confidential Information" also includes combinations of information or materials which individually may be generally known outside of the Company, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company. In addition to data and information relating to the Company, "Confidential Information" also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company by such third party, and that the Company has a duty or obligation to keep confidential. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)"<u>Material Contact</u>" means contact between the Executive and a customer or potential customer of the Company (A) with whom or which the Executive has or had dealings on behalf of the Company; (B) whose dealings with the Company are or were coordinated or supervised by the Executive; (C) about whom the Executive obtains Confidential Information in the ordinary course of business as a result of his employment with the Company; or (D) who receives products or services of the Company, the sale or provision of which results or resulted in compensation, commissions, or earnings for Executive within the two (2) years prior to the Executive's Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)"<u>Person</u>" means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)"<u>Principal or Representative</u>" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)"<u>Protected Customer</u>" means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom the Executive has had Material Contact on behalf of the Company during his employment with the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)"<u>Protected Work</u>" means any and all ideas, inventions, formulas, Confidential Information, source codes, object codes, techniques, processes, concepts, systems, programs, software, software integration techniques, hardware systems, schematics, flow charts, computer data bases, client lists, trademarks, service marks, brand names, trade names, compilations, documents, data, notes, designs, drawings, technical data and/or training materials, including improvements thereto or derivatives therefrom, whether or not patentable, and whether or not subject to copyright or trademark or trade secret protection, conceived, developed or produced by the Executive, or by others working with the Executive or under his direction, during the period of his employment and relating to the Company's business, relating to work performed by Executive for the Company, or using the Company's resources or time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)"<u>Restricted Period</u>" means any time during the Executive's employment with the Company, and if the Executive's employment is terminated for any reason during the Term or if the Executive has given notice to the Company under Section 3 hereof to cause the Term to cease to extend automatically, the Restricted Period shall mean during the Executive's employment plus twelve (12) months following the Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)"<u>Restricted Territory</u>" means all counties in South Carolina (and any other State) in which the Company maintains one or more branches or has filed the requisite notices or applications with the appropriate regulatory authority to open one or more branches at the time of the conduct in question (if the conduct occurs while the Executive is still employed by the Company) or the Termination Date (if the conduct occurs after the Executive's Termination), as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)"<u>Restrictive Covenants</u>" means the restrictive covenants contained in subsections (c) through (h) of this Section 9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)"<u>Termination</u>" means the termination of the Executive's employment with the Company, for any reason, whether with or without cause, upon the initiative of either party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii)"<u>Termination Date</u>" means the date of the Executive's Termination.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Restriction on Disclosure and Use of Confidential Information</u>. The Executive agrees that the Executive shall not, directly or indirectly, use any Confidential Information on the Executive's own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information or for three (3) years following the Termination Date, whichever is shorter. The Executive further agrees that he shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company's rights or the Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, the Executive shall not be restricted from disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; <u>provided</u>, <u>however</u>, that in the event such disclosure is required by law, the Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by the Executive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Non-Competition</u>. The Executive agrees that during the Restricted Period, he will not, without prior written consent of the Company, directly or indirectly (i) carry on or engage in Competitive Services within the Restricted Territory on his own behalf or on behalf of any Person or any Principal or Representative of any Person, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any business, whether in corporate, proprietorship or partnership form or otherwise where such business is engaged in the provision of Competitive Services within the Restricted Territory; <u>provided</u>, <u>however</u>, that the foregoing shall not prohibit the Executive from directly or indirectly owning five percent or less of the equity ownership interests of company, provided that the Executive does not provide management or consulting services to such company and does not belong to the board of directors (or functionally equivalent governing body) of such company. The Executive acknowledges that the Restricted Territory is reasonable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Non-Solicitation of Protected Customers</u>. The Executive agrees that during the Restricted Period, he shall not, without the prior written consent of the Company, directly or indirectly, on his own behalf or as a Principal or Representative of any Person, solicit, divert, take away, or attempt to solicit, divert, or take away a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Non-Recruitment of Employees</u>. The Executive agrees that during the Restricted Period, he shall not, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, solicit, induce or hire away or attempt to solicit, induce or hire away any employee of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<u>Proprietary Rights</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Ownership and Assignment of Protected Works</u>. The Executive agrees that any and all Confidential Information and Protected Works are the sole property of the Company, and that no compensation in addition to the Executive's base salary is due to the

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Executive for development or transfer of such Protected Works. The Executive agrees that he shall promptly disclose in writing to the Company the existence of any Protected Works. The Executive hereby assigns all of his rights, title and interest in any and all Protected Works, including all patents or patent applications, and all copyrights therein, to the Company. The Executive shall not be entitled to use Protected Works for his own benefit or the benefit of anyone except the Company without written permission from the Company and then only subject to the terms of such permission. The Executive further agrees that he will communicate to the Company any facts known to him and testify in any legal proceedings, sign all lawful papers, make all rightful oaths, execute all divisionals, continuations, continuations-in-part, foreign counterparts, or reissue applications, all assignments, all registration applications, and all other instruments or papers to carry into full force and effect the assignment, transfer, and conveyance hereby made or to be made and generally do everything possible for title to the Protected Works and all patents or copyrights or trademarks or service marks therein to be clearly and exclusively held by the Company. The Executive agrees that he will not oppose or object in any way to applications for registration of Protected Works by the Company or others designated by the Company. The Executive agrees to exercise reasonable care to avoid making Protected Works available to any third party and shall be liable to the Company for all damages and expenses, including reasonable attorneys' fees, if Protected Works are made available to third parties by him without the express written consent of the Company.

Anything herein to the contrary notwithstanding, the Executive will not be obligated to assign to the Company any Protected Work for which no equipment, supplies, facilities, or Confidential Information of the Company was used and which was developed entirely on the Executive's own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development; or (b) the invention results from any work performed by the Executive for the Company. The Executive likewise will not be obligated to assign to the Company any Protected Work that is conceived by the Executive after the Executive leaves the employ or service of the Company, except that the Executive is so obligated if the same relates to or is based on Confidential Information to which the Executive had access by virtue of his employment with the Company. Similarly, the Executive will not be obligated to assign any Protected Work to the Company that was conceived and reduced to practice prior to his employment, regardless of whether such Protected Work relates to or would be useful in the business of the Company. The Executive acknowledges and agrees that there are no Protected Works conceived and reduced to practice by him prior to his employment with the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>No Other Duties</u>. The Executive acknowledges and agrees that there is no other contract or duty on his part now in existence to assign Protected Works to anyone other than the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Works Made for Hire</u>. The Company and the Executive acknowledge that in the course of his employment with the Company, the Executive may from time to time create for the Company copyrightable works. Such works may consist of manuals, pamphlets, instructional materials, computer programs, software, software integration techniques, software codes, and data, technical data, photographs, drawings, logos, designs, artwork or other copyrightable material, or portions thereof, and may be created within or without the Company's facilities and before, during or after normal business hours. All such works related to or useful in

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the business of the Company are specifically intended to be works made for hire by the Executive, and the Executive shall cooperate with the Company in the protection of the Company's copyrights in such works and, to the extent deemed desirable by the Company, the registration of such copyrights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)<u>Return of Materials</u>. The Executive agrees that he will not retain or destroy (except as set forth below), and will immediately return to the Company on or prior to the Termination Date, or at any other time the Company requests such return, any and all property of the Company that is in his possession or subject to his control, including, but not limited to, keys, credit and identification cards, personal items or equipment, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, computers, mobile devices, other electronic media, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Protected Works and Confidential Information belonging to the Company or that the Executive received from or through his employment or service with the Company. The Executive will not make, distribute, or retain copies of any such information or property. To the extent that the Executive has electronic files or information in his possession or control that belong to the Company, contain Confidential Information, or constitute Protected Works (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the Termination Date, or at any other time the Company requests, the Executive shall (A) provide the Company with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Company); (B) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non Company owned computers, mobile devices, electronic media, cloud storage, or other media, devices, or equipment, such that such files and information are permanently deleted and irretrievable; and (C) provide a written certification to the Company that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted. The Executive agrees that he will reimburse the Company for all of its costs, including reasonable attorneys' fees, of recovering the above materials and otherwise enforcing compliance with this provision if he does not return the materials to the Company or take the required steps with respect to electronic information or files on or prior to the Termination Date or at any other time the materials and/or electronic file actions are requested by the Company or if the Executive otherwise fails to comply with this provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Enforcement of Restrictive Covenants</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Rights and Remedies Upon Breach</u>. The parties specifically acknowledge and agree that the remedy at law for any breach of the Restrictive Covenants will be inadequate, and that in the event the Executive breaches, or threatens to breach, any of the Restrictive Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, the Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company.

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The Executive understands and agrees that if he violates any of the obligations set forth in the Restrictive Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. The Executive understands and agrees that, if the Parties become involved in legal action regarding the enforcement of the Restrictive Covenants and if the Company prevails in such legal action, the Company will be entitled, in addition to any other remedy, to recover from the Executive any amounts previously received by the Executive pursuant to Section 8(a)(ii) and its reasonable costs and attorneys' fees incurred in enforcing such covenants. The Company's ability to enforce its rights under the Restrictive Covenants or applicable law against the Executive shall not be impaired in any way by the existence of a claim or cause of action on the part of the Executive based on, or arising out of, this Agreement or any other event or transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Severability and Modification of Covenants</u>. The Executive acknowledges and agrees that each of the Restrictive Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Restrictive Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Restrictive Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Restrictive Covenant. If any of the provisions of the Restrictive Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Company's legitimate business interests and may be enforced by the Company to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)<u>Disclosure of Agreement</u>. The Executive acknowledges and agrees that, during Restricted Period, he will disclose the existence and terms of this Agreement to any prospective employer, business partner, investor, or lender prior to entering into an employment, partnership or other business relationship with such prospective employer, business partner, investor, or lender. The Executive further agrees that the Company shall have the right to make any such prospective employer, business partner, investor, or lender of the Executive aware of the existence and terms of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.<u>Agreement Not to Disparage</u>. The Executive hereby agrees that at all times after the date hereof he will not make any statement, whether verbally or in written form, or otherwise take any action that may reasonably be considered to disparage or impugn the Bank or any of its subsidiaries or affiliates; the management, practices, services, or reputation of the Bank or any of its subsidiaries or affiliates; or any of the Bank's or any of its subsidiaries' or affiliates' employees, officers, directors, agents, or affiliates. Notwithstanding the foregoing, this Section 10 shall not limit the rights of the Executive to provide truthful testimony or make truthful statements which are compelled by a court of competent jurisdiction, arbitrator, regulatory agency or other tribunal or investigative body in accordance with any applicable statute, rule, or regulation.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.<u>Non-exclusivity of Rights</u>. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any employee benefit plan, program, policy, or practice provided by the Bank or its affiliated companies and for which the Executive may qualify, except as specifically provided herein. Amounts that are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice, or program of the Bank or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.<u>Full Settlement; No Mitigation</u>. The Bank's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any setoff, counterclaim, recoupment, defense or other claim, right or action which the Bank may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.<u>Code Section 280G</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by the Bank to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (such benefits, payments or distributions are hereinafter referred to as "<u>Payments</u>") would, if paid, be subject to the excise tax imposed by Section 4999 of the Code (the "<u>Excise Tax</u>"), then, (1) the parties agree to take such action(s) as may be necessary to place Executive in the best after-tax position taking into account all income, employment and excise taxes, without regard to the deductibility of any payments by the Bank, and (2) prior to the making of any Payments to Executive, a calculation shall be made comparing (i) the net after-tax benefit to Executive of the Payments after payment by Executive of the Excise Tax, to (ii) the net after-tax benefit to Executive if the Payments had been limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (i) above is less than the amount calculated under (ii) above, then the Payments shall be limited to the extent necessary to avoid being subject to the Excise Tax (the "<u>Reduced Amount</u>"). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the Change in Control, as determined by the Determination Firm (as defined in Section 13(b) below). For purposes of this Section 13, present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 13, the "<u>Parachute Value</u>" of a Payment means the present value as of the date of the Change in Control of the portion of such Payment that constitutes a "parachute payment" under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)All determinations required to be made under this Section 13, including whether an Excise Tax would otherwise be imposed, whether the Payments shall be reduced, the amount of the Reduced Amount, and the assumptions to be utilized in arriving at such determinations, shall be made by an accounting firm or compensation consulting firm mutually acceptable to the Bank and Executive (the "<u>Determination Firm</u>") which shall provide detailed

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supporting calculations both to the Bank and Executive within 15 business days after the receipt of notice from Executive that a Payment is due to be made, or such earlier time as is requested by the Bank. All fees and expenses of the Determination Firm shall be borne solely by the Bank. Any determination by the Determination Firm shall be binding upon the Bank and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Determination Firm hereunder, it is possible that Payments which Executive was entitled to, but did not receive pursuant to Section 13 (a), could have been made without the imposition of the Excise Tax ("<u>Underpayment</u>"), consistent with the calculations required to be made hereunder. In such event, the Determination Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Bank to or for the benefit of Executive but no later than March 15 of the year after the year in which the Underpayment is determined to exist, which is when the legally binding right to such Underpayment arises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)For purposes of determining whether and the extent to which the Payments will be subject to the Excise Tax, no portion of the Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a "payment" within the meaning of Section 280G(b) of the Code shall be taken into account. To the extent requested by Executive, the Bank shall cooperate with Executive in good faith in valuing, and shall direct the Determination Firm to value, services to be provided by Executive (including refraining from performing services pursuant to a covenant not to compete) before, on or after the date of the transaction which cause the application of Section 280G of the Code such that payments in respect of such services may be considered to be "reasonable compensation" within the meaning of the regulations under Section 280G of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)In the event that the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 13 shall be of no further force or effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.<u>Arbitration</u>. Any claim or dispute arising under or relating to this Agreement or the breach, termination, or validity of any term of this Agreement shall be subject to arbitration, and prior to commencing any court action, the parties agree that they shall arbitrate all controversies; <u>provided</u>, <u>however</u>, that nothing in this Section 14 shall prohibit the Bank from exercising its right under Section 9 to pursue injunctive remedies with respect to a breach or threatened breach of the Restrictive Covenants. The arbitration shall be conducted in Atlanta, Georgia, in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. §1, *et. seq.* The arbitrator(s) shall be authorized to award both liquidated and actual damages, in addition to injunctive relief, but no punitive damages. The arbitrator(s) may also award attorney's fees and costs, without regard to any restriction on the amount of such award under Georgia or other applicable law. Such an award shall be binding and conclusive upon the parties hereto, subject to 9 U.S.C. §10. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.<u>Successors</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)This Agreement is personal to the Executive and without the prior written consent of the Bank shall not be assignable by the Executive otherwise than by will or the laws of

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descent and distribution. Notwithstanding the foregoing, the Bank may, without the Executive's consent, assign, whether by assignment agreement, merger, operation of law or otherwise, this Agreement to the Company or to any successor or affiliate of the Company, subject to such assignee's express assumption of all obligations of the Bank hereunder. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)This Agreement shall inure to the benefit of and be binding upon the Bank and its successors and assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place. As used in this Agreement, "<u>Bank</u>" shall mean the Bank as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.<u>Cooperation</u>. The Executive shall provide the Executive's reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during the Executive's employment hereunder. This provision shall survive any termination of this Agreement. The Bank shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive's performance of obligations under this Section 16 at the request of the Bank. The Executive's obligations under this Section 16, and the Executive's rights to payment or reimbursement of expenses pursuant to this Section 16, shall expire at the end of ten (10) years after the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.<u>Code Section 409A</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>General</u>. This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder (and any applicable transition relief under Section 409A of the Code). Nevertheless, the tax treatment of the benefits provided under the Agreement is not warranted or guaranteed. Neither the Bank nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Executive as a result of the application of Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Definitional Restrictions</u>. Notwithstanding anything in this Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt "deferred compensation" for purposes of Section 409A of the Code ("<u>Non-Exempt Deferred Compensation</u>") would otherwise be payable or distributable hereunder by reason of the Executive's termination of employment, such Non-Exempt Deferred Compensation will not be payable or distributable to the Executive by reason of such circumstance unless the circumstances giving rise to such termination of employment meet any description or definition of "separation from service" in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition). This provision does not prohibit

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the *vesting* of any Non-Exempt Deferred Compensation upon a termination of employment, however defined. If this provision prevents the payment or distribution of any Non-Exempt Deferred Compensation, such payment or distribution shall be made on the date, if any, on which an event occurs that constitutes a Section 409A-compliant "separation from service."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Timing of Release of Claims</u>. Whenever in this Agreement a payment or benefit is conditioned on Executive's execution of a release of claims, such release must be executed and all revocation periods shall have expired within sixty (60) days after the Date of Termination; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then such payment or benefit (including any installment payments) that would have otherwise been payable during such 60-day period shall be accumulated and paid on the 60<sup>th</sup> day after the Date of Termination provided such release shall have been executed and such revocation periods shall have expired. If such payment or benefit is exempt from Section 409A of the Code, the Bank may elect to make or commence payment at any time during such period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Permitted Acceleration</u>. The Bank shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to the Executive of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Timing of Reimbursements and In-kind Benefits</u>. If, during the Term, Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, and such payments or reimbursements are includible in Executive's federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of Executive to reimbursement of expenses under this Agreement shall be subject to liquidation or exchange for another benefit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.<u>Miscellaneous</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Governing Law; Forum Selection; Consent to Jurisdiction</u>. The Company and the Executive agree that this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Georgia without giving effect to its conflicts of law principles. The Executive agrees that the exclusive forum for any action to enforce this Agreement, as well as any action relating to or arising out of this Agreement, shall be a court of competent jurisdiction in the State of Georgia, Fulton County. With respect to any such court action, the Executive hereby (a) irrevocably submits to the personal jurisdiction of such courts; (b) consents to service of process; (c) consents to venue; and (d) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, service of process, or venue. Both parties hereto further agree that such courts are convenient forums for any dispute that may arise herefrom and that neither party shall raise as a defense that such courts are not convenient forums.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Captions</u>. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Amendments</u>. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Notices</u>. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

<u>If to the Executive</u>: Stephen R. Stone

Address on file with the Bank

<u>If to the Bank</u>: Coastal States Bank

5 Bow Circle

Hilton Head, SC 29928

Attention: Secretary

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Severability</u>. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Withholding</u>. The Bank may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<u>Waivers</u>. The Executive's or the Bank's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Bank may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)<u>Entire Agreement</u>. Except as provided herein, this Agreement contains the entire agreement between the Bank and the Executive with respect to the subject matter hereof and, from and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Construction</u>. The Bank and the Executive understand and agree that because they both have been given the opportunity to have counsel review and revise this Agreement, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Instead, the language of all parts of this Agreement shall be construed as a whole, and according to its fair meaning, and not strictly for or against either of the parties.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)<u>Counterparts</u>. This Agreement may be executed in two or more counterparts, and it shall not be necessary that the signatures of the parties hereto be contained on any one counterpart hereof. Each counterpart shall be deemed an original but all counterparts together shall constitute one and the same instrument. Any signature page of any such counterpart, or any electronic facsimile thereof, may be attached or appended to any other counterpart to complete a fully executed counterpart of this Agreement, and any telecopy or other electronic transmission of any signature shall be deemed an original and shall bind such party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.<u>Regulatory Action</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("<u>FDIA</u>") (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement shall terminate, as of the effective date of such order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)If Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), all obligations of the Bank under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank shall reinstate (in whole or in part) any of its obligations which were suspended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)If the Bank is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)All obligations under this Agreement shall be terminated, except to the extent a determination is made that continuation of the Agreement is necessary for the continued operation of the Bank (1) by the director of the FDIC or her or her designee (the "<u>Director</u>"), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in 13(c) of the FDIA; or (2) by the Director, at the time the Director approves a supervisory merger to resolve problems related to operation of the Bank when the Bank is determined by the Director to be in an unsafe and unsound condition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Notwithstanding anything contained in this Agreement to the contrary, no payments shall be made pursuant to any provision herein in contravention of the requirements of Section 2[18(k)] of the FDIA (12 U.S.C. 1828(k)). In particular, the provisions pertaining to the potential for payments shall have no force or effect as long as either the agreement concerning the potential for payments or the actual payment of such amounts would be considered a "golden parachute payment," with the meaning of 12 C.F.R. Section 359.1(f).

(Signatures on following page)

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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, each of the Company and the Bank have caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

---

| |
|:---|
| &nbsp;&nbsp;EXECUTIVE<br>/s/ Stephen R. Stone |
| &nbsp;&nbsp;Stephen R. Stone |
| &nbsp;&nbsp;COASTALSOUTH BANCSHARES, INC. |

---

.

---

| | |
|:---|:---|
| &nbsp;&nbsp; <br>By: | &nbsp;&nbsp;/s/ Chariman of the Board  |
|  | &nbsp;&nbsp;Chairman of the Board |
| &nbsp;&nbsp; <br>COASTAL STATES BANK | &nbsp;&nbsp; <br>COASTAL STATES BANK |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp; <br>By: | &nbsp;&nbsp;/s/ Chairman of the Board  |
|  | &nbsp;&nbsp;Chairman of the Board |

---

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## Exhibit 10.10

**EXHIBIT 10.10**

**____________________________________________________________**

**amended and restated**

**Employment AGREEMENT**

**BETWEEN**

**ANTHONY P. VALDUGA**

**AND**

**COASTALSOUTH BANCSHARES, Inc.**

**COASTALSTATES bANK**

**<u>THIS AGREEMENT CONTAINS A BINDING, IRREVOCABLE AGREEMENT</u>**

**<u>TO ARBITRATE AND IS SUBJECT TO ARBITRATION</u>** 

**<u>PURSUANT TO TITLE 15, CHAPTER 48 (UNIFORM ARBITRATION ACT)</u>** 

**<u>OF THE CODE OF LAWS OF SOUTH CAROLINA.</u>**

**_________________________________________________________________**

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**amended and restated Employment AGREEMENT**

This amended and restated EMPLOYMENT Agreement (this "<u>Agreement</u>") is made and entered into this 25<sup>th</sup> day of April, 2024 (the "<u>Effective Date</u>") by and among CoastalSouth Bancshares, Inc., a Virginia corporation (the "<u>Company</u>"), Coastal States Bank, a South Carolina nonmember bank (the "<u>Bank</u>") and Anthony P. Valduga (the "<u>Executive</u>"), to be effective as of the Effective Date as defined in Section 1. This Agreement amends and restates that certain existing employment agreement between the parties dated April 29, 2021. Unless the context requires otherwise, as used herein the term "Bank" shall refer to the Company and the Bank.

<u>BACKGROUND</u>

WHEREAS, the Bank desires to engage the Executive as the Chief Financial Officer and Chief Operating Officer ("CFO / COO") of the Company and the Bank from and after the Effective Date, in accordance with the terms of this Agreement. The Executive is willing to serve as such in accordance with the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

**<u>THIS AGREEMENT CONTAINS A BINDING, IRREVOCABLE AGREEMENT</u>**

**<u>TO ARBITRATE AND IS SUBJECT TO ARBITRATION</u>** 

**<u>PURSUANT TO TITLE 15, CHAPTER 48 (UNIFORM ARBITRATION ACT)</u>** 

**<u>OF THE CODE OF LAWS OF SOUTH CAROLINA.</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Effective Date</u>. The effective date of this Agreement (the "<u>Effective Date</u>") shall be April 25, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Employment</u>. The Executive is hereby employed on the Effective Date as the Chief Financial Officer and Chief Operating Officer (the "<u>CFO / COO</u>") of the Company and the Bank. In this capacity, the Executive shall have the duties, responsibilities, and authority commensurate with such position as shall be assigned to him by the Boards of Directors of the Company and the Bank (the "<u>Board</u>") or the Chief Executive Officer of the Company. In his capacity as CFO / COO, the Executive will report directly to the Chief Executive Officer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Term</u>. Unless earlier terminated herein in accordance with Section 7 hereof, the Executive's employment with the Bank shall be governed by the terms and conditions of this Agreement for a period beginning on the Effective Date and ending on the third (3<sup>rd</sup>) anniversary of the Effective Date (the "<u>Term</u>"). The third anniversary of the Effective Date is referred to herein as the "<u>Term End Date</u>." Beginning on Term End Date and on each anniversary of the Term End Date thereafter, the Term shall, without further action by the Executive or the Bank, be extended by an additional one-year period; <u>provided</u>, <u>however</u>, that either party may cause the Term to cease to extend automatically, by giving written notice to the other not less than ninety (90) days prior to the scheduled expiration of the Term. Upon such notice, the Term shall terminate upon the expiration of the then-current term, including any prior extensions. Notwithstanding the foregoing, if the Company and/or the Bank enters into a letter of intent ("<u>LOI</u>") with a third party to effect a transaction that would result in a Change in Control (as defined in Section 6 hereof), then the Bank shall not be permitted to provide the Executive with notice of non-renewal of the Term pursuant to this Section 3 following the execution date of the LOI unless and until such LOI is terminated.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Extent of Service</u>. During the Term, the Executive agrees to devote all his professional and business-related time to the business and affairs of the Bank and its affiliates and to use his best efforts to perform faithfully and efficiently his job responsibilities. The Executive acknowledges and agrees that from time to time the Bank may assign the Executive additional positions with the Bank or one of the Bank's affiliated companies (including its parent companies and subsidiaries), with such additional title, duties, and responsibilities as determined by the Board in its sole discretion. The Executive agrees to serve any and all such positions without additional compensation. As used in this Agreement, the term "<u>the Bank</u>" includes the Bank and any such affiliated companies to which the Executive may be assigned. The parties agree that the conduct of the following services and activities during the Term shall not be a violation of this Agreement: (A) serving on corporate, civic or charitable boards or committees; (B) delivering lectures, fulfilling speaking engagements, or teaching at educational institutions, and (C) managing personal investments, so long as such services and activities do not materially interfere with the performance of the Executive's responsibilities as the CFO / COO of the Bank in accordance with this Agreement; provided further, however, that the Company Board or Bank Board may require the Executive to cease providing any particular service or participating in any particular activity if the Company Board or Bank Board, as applicable, reasonably concludes that such service or activity is not in the best interests of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Compensation and Benefits</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Base Salary</u>. During the Term and effective as of January 1, 2024, the Bank will pay to the Executive base salary at the rate of U.S. three hundred and seventy-one thousand dollars ($371,000) per year ("<u>Base Salary</u>"), less normal withholdings, payable in approximately equal bi-weekly or other installments as are or become customary under the Bank's payroll practices for its employees from time to time. The Compensation Committee of the Company Board (the "<u>Compensation Committee</u>") shall review the Executive's Base Salary annually and may increase the Executive's Base Salary from year to year. Such adjusted salary then shall become the Executive's Base Salary for purposes of this Agreement. The annual review of the Executive's salary by the Compensation Committee will consider, among other things, the Executive's own performance, the Company's performance, and the Bank's performance. The Base Salary may not be decreased, unless the Bank faces exigent financial conditions, in which case Executive's Base Salary may be reduced *pari passu* with the other senior executive officers of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Incentive, Savings and Retirement Plans</u>. During the Term, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies, and programs available to the other senior officers of the Bank. Without limiting the foregoing, the following shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) During the Term, the Executive shall have an opportunity to receive an annual cash bonus based upon the achievement of performance goals established from year to year by the Compensation Committee (the "<u>Annual Bonus</u>"). Unless and until changed by the Compensation Committee, the Executive's target for the Annual Bonus shall be sixty percent (60%) of Base Salary (the "<u>Target Bonus</u>"). The Target Bonus may be changed annually by the Compensation Committee at its sole discretion, but not decreased, unless the Bank faces exigent financial conditions, in which case Executive's Target Bonus may be reduced *pari passu* with the other senior executive officers of the Bank. The Compensation Committee shall establish performance goals and objectives from year to year on which the Target Bonus shall be based, but the Compensation Committee reserves the sole discretion to modify such goals and objectives, or the final amount of the Annual Bonus, based upon unforeseen events occurring during the related year or its assessment of the Bank's or the Executive's performance in general. The Annual Bonus shall be administered under a written compensation plan approved by the Company Board, which shall provide for threshold, target, and stretch goals and payouts for each fiscal year. Except as otherwise provided by the Compensation Committee, the Executive must be employed by the Bank on the date the Annual Bonus, if any, is paid in order to receive the Annual Bonus.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) During the Term, Executive shall have an opportunity to receive annual equity awards under the Company's 2017 Incentive Plan (the "<u>Plan</u>"). The purpose of the Plan is to promote the success, and enhance the value, of the Company, by linking the personal interests of the Executive to those of Company shareholders and by providing Executive with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate and retain the services of the Executive upon whose judgment, interest, and special effort the successful conduct of the Company's operation is largely dependent.

During the Term, the Executive may be eligible for stock-based awards under the Plan, as determined by the Compensation Committee. The type and amount of such awards shall be determined by the Compensation Committee and shall be based upon the achievement of performance goals established from year to year by the Compensation Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Upon recommendation of the Executive, the Compensation Committee shall review and consider the establishment of a non-qualified retirement plan for the benefit of the Executive and other senior executive officers of the Bank, with terms that the Compensation Committee and Executive consider to be consistent with similar plans established by the Bank's peers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Welfare Benefit Plans</u>. The Executive and his eligible dependents shall be eligible for participation in the welfare benefit plans, practices, policies, and programs provided by the Bank, if any, to the extent available to other peer employees and subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of the Bank to amend, modify or terminate any such benefit plans, policies, or programs at any time and from time to time. Without limiting the foregoing, during the Term, (i) the Bank shall pay the full cost for the Executive and the Executive's eligible dependents to participate in the group health and dental plan(s) sponsored by the Bank, and (ii) the Bank shall pay up to an aggregate of five hundred dollars ($500) per month towards the Executive's participation in any other welfare benefit plan offered by the Bank. Notwithstanding the foregoing, if at any time the Bank determines, in its sole discretion, that its payment of the full cost of the Executive and the Executive's eligible dependents participation in the Bank's group health and dental plans as contemplated in subsection (i) of the previous sentence would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Internal Revenue Code of 1986, as amended (the "<u>Code</u>") or any statute or regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act ("<u>ACA</u>"), as amended by the 2010 Health Care and Education Reconciliation Act), then the Bank shall not be obligated to pay the full cost of such participation and the parties agree to reform this Section 5(d) in a manner as is necessary to comply with Section 105(h)(2) of the Code, the ACA or any statute or regulation of similar effect. The Bank does not warrant the taxability or nontaxability of the benefits afforded pursuant to this Section 5(d) or Section 8(a)(iii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Expenses</u>. During the Term, the Executive shall be entitled to receive prompt reimbursement from the Bank for all reasonable and customary expenses incurred by the Executive in the course of performing his duties and responsibilities under this Agreement, in accordance with the policies, practices, and procedures of the Bank with respect to travel, entertainment, and other business expenses ("<u>Business Expenses</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Professional Associations</u>. The Executive shall be entitled to attend such courses, annual meetings, conferences, and seminars of his selection at the Bank's expense, provided that the Bank shall only be required to cover reasonable expenses associated with the Employee's attendance at such courses, conferences and seminars that are incurred consistent with the Bank's budget and policies then in effect.

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![gfx16311514_0.jpg](gfx16311514_0.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Vacation</u>. During the Term, Executive will be entitled to four weeks of paid vacation each year in accordance with the policies, practices, and procedures of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Change in Control</u>. For purposes of this Agreement, "<u>Change in Control</u>" shall mean the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a subsidiary of the Company (a "<u>Reorganization</u>"), or the sale or other disposition of all or substantially all of the Company's assets (a "<u>Sale</u>") or the acquisition of assets or stock of another corporation or other entity (an "<u>Acquisition</u>"), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the beneficial owners (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 Act, as amended ("<u>Beneficial Owners</u>")), respectively, of the outstanding Company Stock and the Company's then outstanding securities eligible to vote for the election of directors ("<u>Company Voting Securities</u>") immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from or surviving such Reorganization, Sale or Acquisition (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets or stock either directly or through one or more subsidiaries, the "Surviving Entity") in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any subsidiary of the Company, (y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing) is the Beneficial Owner, directly or indirectly, of 50% or more of the total common stock or 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Entity. A Change in Control shall not include a public offering of any class or series of the Company's equity securities pursuant to a registration statement filed by the Company under the Securities and Exchange Act of 1933, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Termination of Employment</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Death</u>. The Executive's employment shall terminate automatically upon the Executive's death during the Term.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Disability</u>. If the Bank determines in good faith that the Executive has become Disabled (as defined below) during the Term, then it may give to the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Bank shall terminate effective on the thirtieth (30<sup>th</sup>) day after receipt of such written notice by the Executive (the "<u>Disability Effective Date</u>"), provided that, within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "<u>Disability</u>" shall mean the inability of the Executive, as reasonably determined by the Bank, to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six (6) consecutive months. At the request of the Executive or his personal representative, the Bank's determination that the Disability of Executive has occurred shall be certified by a physician mutually agreed upon by the Executive, or his personal representative, and the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Termination by the Bank</u>. The Bank may terminate the Executive's employment during the Term with or without Cause. For purposes of this Agreement, a termination shall be considered

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to be for "Cause" if it occurs in conjunction with a good faith determination by the Board that any of the following have occurred:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a material breach of the terms of this Agreement by the Executive, including, without limitation, failure by the Executive to perform the Executive's duties and responsibilities in the manner and to the extent required under this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) conduct by the Executive that (A) constitutes fraud or dishonesty and (B) is demonstrably likely to lead to material injury to the Bank or resulted or was intended to result in direct or indirect gain to or personal enrichment of the Executive;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) conduct by the Executive that constitutes willful misconduct or insubordination, or gross malfeasance of duty;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) conviction of *(or plea of nolo contendere by)* the Executive during the Term of a crime involving breach of trust or moral turpitude or a felony;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the exhibition by Executive of a standard of behavior within the scope of Executive's employment that is materially disruptive to the orderly conduct of the Bank's business operations (including, without limitation, substance abuse or sexual misconduct) to a level which, in the Board's good faith and reasonable judgment, with Executive abstaining from participating in the consideration of and vote on the matter, is materially detrimental to the Bank's best interest; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) conduct by the Executive that results in the permanent removal of the Executive from his position as an officer or employee of the Bank pursuant to a written order by any regulatory agency with authority or jurisdiction over the Bank.

In the event that the Bank seeks to terminate Executive's employment for Cause under subsections (i) or (iii) above, Executive shall have the following cure provisions and rights: the Bank shall furnish to Executive in writing a notice of the subsection relied upon and describing the facts establishing Cause under that subsection. Executive shall then have a period of thirty (30) days after receipt of such written notice of proposed termination by the Company in which to attempt to effect a cure of the specified Cause. At the end of such thirty (30) day period, Executive shall be provided with an opportunity to be heard in person by the Board (with the assistance of counsel, if desired). In the event of any such hearing, if the Board determine that no such cure has been effected then the Executive's employment shall be terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Termination by the Executive</u>. The Executive's employment may be terminated by the Executive for any reason or for Good Reason by providing thirty (30) days prior written notice to the Bank. For purposes of this Agreement, "<u>Good Reason</u>" shall mean the occurrence of any of the following, without the Executive's consent:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a material diminution in the Executive's Base Salary or reduction in target Annual Bonus, except as contemplated by Sections 5(a) and 5(b);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a material diminution in the Executive's authority, duties, or responsibilities such that the Executive's authority, duties or responsibilities are no longer commensurate with those typically provided by a CFO / COO;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the relocation of the Executive's principal office to a facility or location more than fifty (50) miles away from the Company's principal office; <u>provided</u>, <u>however</u>, that Good Reason shall not include (A) any relocation of the Executive's principal office which is proposed or initiated by the Executive; or (B) any relocation that results in the Executive's principal place office being closer to the Executive's then-principal residence; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) any action or inaction that constitutes a material breach by the Company or Bank of this Agreement.

The Executive's termination for Good Reason must occur within a period of ninety (90) days after the occurrence of an event of Good Reason. A termination by the Executive shall not constitute termination for Good Reason unless the Executive shall first have delivered to the Bank written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than thirty (30) days after the initial occurrence of such event), and there shall have passed a reasonable time (not less than thirty (30) days) within which the Bank may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Executive. Good Reason shall not include the Executive's death or Disability. The parties intend, believe, and take the position that a resignation by the Executive for Good Reason as defined above effectively constitutes an involuntary separation from service within the meaning of Section 409A of the Code and Treas. Reg. Section 1.409A-1(n)(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Notice of Termination</u>. Any termination by the Bank or the Executive shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 18(d) of this Agreement. For purposes of this Agreement, a "<u>Notice of Termination</u>" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by the Executive or the Bank to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Bank, respectively, hereunder or preclude the Executive or the Bank, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Bank's rights hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Date of Termination</u>. "Date of Termination" means (i) if the Executive's employment is terminated other than by reason of death or Disability, the date of receipt of the Notice of Termination or, subject to any cure period, any later date specified therein within sixty (60) days after receipt of the Notice of Termination, as the case may be, or (ii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Obligations of the Bank upon Termination</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Termination by the Bank Other Than for Cause or Disability; Termination by Executive for Good Reason</u>. If, during the Term, (A) the Bank shall terminate the Executive's employment other than for Cause or Disability, or (B) the Executive shall terminate employment for Good Reason, then, and with respect to the payments and benefits described in clauses (ii) and (iii) below, only if within sixty (60) days after the Date of Termination the Executive shall have executed a separation agreement containing a full general release of claims and covenant not to sue in a form satisfactory to the Bank (the "<u>Release</u>") and such Release shall not have been revoked within the time period specified therein:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Bank shall pay to the Executive in a lump sum in cash within sixty (60) days after the Date of Termination, the exact payment date to be determined by the Bank, the sum of (1) the Executive's Base Salary through the Date of Termination to the extent not theretofore paid, and (2) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the "<u>Accrued Obligations</u>");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Bank shall pay to the Executive in a lump sum in cash within sixty (60) days after the Date of Termination, the exact payment date to be determined by the Bank, a severance payment equal to 1.50 times the sum of (1) the Executive's Base Salary in effect as of the Date of Termination, and (2) the average of the Annual Bonuses earned by Executive for each of the three fiscal years immediately preceding the year in which the Date of Termination occurs (the "<u>Three-Year Average Annual Bonus</u>"); <u>provided</u>, <u>however</u>, that if such termination occurs within eighteen (18) months following a Change in Control, then the Bank shall pay to the Executive in a lump sum in cash within sixty (60) days after the Date of Termination, the exact payment date to be determined by the Bank, a severance payment equal to the 2.99 times the sum of (1) the Executive's Base Salary in effect as of the Date of Termination, and (2) the Three-Year Average Annual Bonus;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) if the Executive elects to continue participation in any group medical, dental, vision and/or prescription drug plan benefits to which the Executive and/or the Executive's eligible dependents would be entitled under Section 4980B of the Code (COBRA), then during the period that the Executive is entitled to such coverage under COBRA (the "<u>Welfare Benefits Continuation Period</u>"), the Bank shall pay the excess of (1) the COBRA cost of such coverage over (2) the amount that the Executive would have had to pay for such coverage if he had remained employed during the Welfare Benefits Continuation Period and paid the active employee rate for such coverage; <u>provided</u>, <u>however</u>, that (A) that if the Executive becomes eligible to receive group health benefits under a program of a subsequent employer or otherwise (including coverage available to the Executive's spouse), the Bank's obligation to pay any portion of the cost of health coverage as described herein shall cease, except as otherwise provided by law; and (B) the Welfare Benefits Continuation Period shall run concurrently with any period for which the Executive is eligible to elect health coverage under COBRA; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) to the extent not theretofore paid or provided, the Bank shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Bank and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "<u>Other Benefits</u>").

For the avoidance of doubt, the parties acknowledge that, in the event that the Executive terminates his employment for Good Reason as a result of the decrease in his Base Salary as contemplated in Section 7(d)(i) hereof, then the Base Salary used for purposes of the calculation of the Accrued Obligations and severance payment under subsection (ii) above, shall be the Base Salary in effect immediately prior to such reduction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Death or Disability</u>. If the Executive's employment is terminated by reason of the Executive's death or Disability during the Term, this Agreement shall terminate without further obligations to the Executive or the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid by the Bank to the Executive or the Executive's estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days after the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 8(b) shall include without limitation, and the Executive or the Executive's estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs,

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practices, and policies relating to death or disability benefits, if any, as are applicable to the Executive on the Date of Termination.

(c) <u>Termination by the Bank for Cause; Executive's Resignation without Good Reason</u>. If, during the Term, the Bank shall terminate Executive's employment for Cause or the Executive shall resign for any reason other than for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid by the Bank to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Resignations</u>. Termination of the Executive's employment for any reason whatsoever shall constitute the Executive's resignation as an officer of the Bank, its subsidiaries and affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <u>Restrictive Covenants</u>. For purposes of this Section 9, the "<u>Company</u>" shall be deemed to include both CoastalSouth Bancshares, Inc. and the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Acknowledgments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Condition of Employment and Other Consideration</u>. The Executive acknowledges and agrees that he has received good and valuable consideration for entering into this Agreement and further acknowledges that the Company would not continue to employ the Executive in the absence of his execution of and compliance with this Section 9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Access to Confidential Information, Relationships, and Goodwill</u>. The Executive acknowledges and agrees that he is being provided and entrusted with Confidential Information (as that term is defined in Section 9(b) hereof), including highly confidential customer information that is subject to extensive measures to maintain its secrecy within the Company, is not known in the trade or disclosed to the public, and would materially harm the Company's legitimate business interests if it was disclosed or used in violation of this Agreement. The Executive also acknowledges and agrees that he is being provided and entrusted with access to the Company's customer and employee relationships and goodwill. The Executive further acknowledges and agrees that the Company would not provide access to the Confidential Information, customer and employee relationships, and goodwill in the absence of the Executive's execution of and compliance with this Agreement. The Executive further acknowledges and agrees that the Company's Confidential Information, customer and employee relationships, and goodwill are valuable assets of the Company and are legitimate business interests that are properly subject to protection through the covenants contained in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <u>Potential Unfair Competition</u>. The Executive acknowledges and agrees that as a result of his employment with the Company, his knowledge of and access to Confidential Information, and his relationships with the Company's customers and employees, the Executive would have an unfair competitive advantage if the Executive were to engage in activities in violation of this Section 9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) <u>No Undue Hardship</u>. The Executive acknowledges and agrees that, in the event that his employment with the Company terminates, the Executive possesses marketable skills and abilities that will enable him to find suitable employment without violating the covenants set forth in this Section 9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) <u>Voluntary Execution</u>. Executive acknowledges and affirms that he is executing this Agreement voluntarily, that he has read this Agreement carefully and had a full and

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reasonable opportunity to consider this Agreement (including an opportunity to consult with legal counsel), and that he has not been pressured or in any way coerced, threatened or intimidated into signing this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) <u>Geographic Scope of Service</u>. Executive acknowledges and agrees that, by virtue of his senior executive status with the Company and his substantial access to Confidential Information, customer and employee relationships, and goodwill described above, he will engage in business on behalf of the Company throughout the entire geographic area in which the Company conducts business, including but not limited to the Restricted Territory (as that term is defined in Section 9(b) hereof).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Definitions</u>. The following capitalized terms used in this Section 9 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:

(i) "<u>Competitive Services</u>" means the provision of all credit-related policies, practices, administration and management services on behalf of any person or entity principally engaged in the community banking or commercial banking business, including, without limitation, originating, underwriting, closing and selling loans, receiving deposits and otherwise engaging in the business of banking, as well as the business of providing any other activities, products, or services of the type conducted, authorized, offered, or provided by the Company as of the Executive's Termination Date, or during the two (2) years immediately prior to the Executive's Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) "<u>Confidential Information</u>" means any and all data and information relating to the Company, its activities, business, or clients that (A) is or has been disclosed to the Executive or of which the Executive becomes or has become aware as a consequence of his employment with the Company; (B) has value to the Company; and (C) is not generally known outside of the Company and is not publicly available. "Confidential Information" shall include, but is not limited to the following types of information regarding, related to, or concerning the Company: trade secrets; financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information. "Confidential Information" also includes combinations of information or materials which individually may be generally known outside of the Company, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company. In addition to data and information relating to the Company, "Confidential Information" also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company by such third party, and that the Company has a duty or obligation to keep confidential. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) "<u>Material Contact</u>" means contact between the Executive and a customer or potential customer of the Company (A) with whom or which the Executive has or had dealings on behalf of the Company; (B) whose dealings with the Company are or were coordinated or supervised by the

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Executive; (C) about whom the Executive obtains Confidential Information in the ordinary course of business as a result of his employment with the Company; or (D) who receives products or services of the Company, the sale or provision of which results or resulted in compensation, commissions, or earnings for Executive within the two (2) years prior to the Executive's Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) "<u>Person</u>" means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) "<u>Principal or Representative</u>" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) "<u>Protected Customer</u>" means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom the Executive has had Material Contact on behalf of the Company during his employment with the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) "<u>Protected Work</u>" means any and all ideas, inventions, formulas, Confidential Information, source codes, object codes, techniques, processes, concepts, systems, programs, software, software integration techniques, hardware systems, schematics, flow charts, computer data bases, client lists, trademarks, service marks, brand names, trade names, compilations, documents, data, notes, designs, drawings, technical data and/or training materials, including improvements thereto or derivatives therefrom, whether or not patentable, and whether or not subject to copyright or trademark or trade secret protection, conceived, developed or produced by the Executive, or by others working with the Executive or under his direction, during the period of his employment and relating to the Company's business, relating to work performed by Executive for the Company, or using the Company's resources or time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) "<u>Restricted Period</u>" means any time during the Executive's employment with the Company, and if the Executive's employment is terminated for any reason during the Term or if the Executive has given notice to the Company under Section 3 hereof to cause the Term to cease to extend automatically, the Restricted Period shall mean during the Executive's employment plus twelve (12) months following the Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) "<u>Restricted Territory</u>" means all counties in South Carolina (and any other State) in which the Company maintains one or more branches or has filed the requisite notices or applications with the appropriate regulatory authority to open one or more branches at the time of the conduct in question (if the conduct occurs while the Executive is still employed by the Company) or the Termination Date (if the conduct occurs after the Executive's Termination), as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) "<u>Restrictive Covenants</u>" means the restrictive covenants contained in subsections (c) through (h) of this Section 9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi) "<u>Termination</u>" means the termination of the Executive's employment with the Company, for any reason, whether with or without cause, upon the initiative of either party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii) "<u>Termination Date</u>" means the date of the Executive's Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Restriction on Disclosure and Use of Confidential Information</u>. The Executive agrees that the Executive shall not, directly or indirectly, use any Confidential Information on the Executive's own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such

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Confidential Information. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information or for three (3) years following the Termination Date, whichever is shorter. The Executive further agrees that he shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company's rights or the Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, the Executive shall not be restricted from disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; <u>provided</u>, <u>however</u>, that in the event such disclosure is required by law, the Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by the Executive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Non-Competition</u>. The Executive agrees that during the Restricted Period, he will not, without prior written consent of the Company, directly or indirectly (i) carry on or engage in Competitive Services within the Restricted Territory on his own behalf or on behalf of any Person or any Principal or Representative of any Person, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any business, whether in corporate, proprietorship or partnership form or otherwise where such business is engaged in the provision of Competitive Services within the Restricted Territory; <u>provided</u>, <u>however</u>, that the foregoing shall not prohibit the Executive from directly or indirectly owning five percent or less of the equity ownership interests of company, provided that the Executive does not provide management or consulting services to such company and does not belong to the board of directors (or functionally equivalent governing body) of such company. The Executive acknowledges that the Restricted Territory is reasonable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Non-Solicitation of Protected Customers</u>. The Executive agrees that during the Restricted Period, he shall not, without the prior written consent of the Company, directly or indirectly, on his own behalf or as a Principal or Representative of any Person, solicit, divert, take away, or attempt to solicit, divert, or take away a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Non-Recruitment of Employees</u>. The Executive agrees that during the Restricted Period, he shall not, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, solicit, induce or hire away or attempt to solicit, induce or hire away any employee of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Proprietary Rights</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Ownership and Assignment of Protected Works</u>. The Executive agrees that any and all Confidential Information and Protected Works are the sole property of the Company, and that no compensation in addition to the Executive's base salary is due to the Executive for development or transfer of such Protected Works. The Executive agrees that he shall promptly disclose in writing to the Company the existence of any Protected Works. The Executive hereby assigns all of his rights, title and interest in any and all Protected Works, including all patents or patent applications, and all copyrights therein, to the Company. The Executive shall not be entitled to use Protected Works for his own benefit or the benefit of anyone except the Company without written permission from the Company and then only subject to the terms of such permission. The Executive further agrees that he will communicate to the Company any facts known to him and testify in any legal proceedings, sign all lawful papers, make all rightful oaths, execute all divisionals, continuations, continuations-in-part, foreign counterparts, or reissue applications, all assignments, all registration applications, and all other instruments or papers to carry into full force and effect the assignment, transfer, and conveyance hereby made or to be made and generally do

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everything possible for title to the Protected Works and all patents or copyrights or trademarks or service marks therein to be clearly and exclusively held by the Company. The Executive agrees that he will not oppose or object in any way to applications for registration of Protected Works by the Company or others designated by the Company. The Executive agrees to exercise reasonable care to avoid making Protected Works available to any third party and shall be liable to the Company for all damages and expenses, including reasonable attorneys' fees, if Protected Works are made available to third parties by him without the express written consent of the Company.

Anything herein to the contrary notwithstanding, the Executive will not be obligated to assign to the Company any Protected Work for which no equipment, supplies, facilities, or Confidential Information of the Company was used and which was developed entirely on the Executive's own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development; or (b) the invention results from any work performed by the Executive for the Company. The Executive likewise will not be obligated to assign to the Company any Protected Work that is conceived by the Executive after the Executive leaves the employ or service of the Company, except that the Executive is so obligated if the same relates to or is based on Confidential Information to which the Executive had access by virtue of his employment with the Company. Similarly, the Executive will not be obligated to assign any Protected Work to the Company that was conceived and reduced to practice prior to his employment, regardless of whether such Protected Work relates to or would be useful in the business of the Company. The Executive acknowledges and agrees that there are no Protected Works conceived and reduced to practice by him prior to his employment with the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>No Other Duties</u>. The Executive acknowledges and agrees that there is no other contract or duty on his part now in existence to assign Protected Works to anyone other than the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <u>Works Made for Hire</u>. The Company and the Executive acknowledge that in the course of his employment with the Company, the Executive may from time to time create for the Company copyrightable works. Such works may consist of manuals, pamphlets, instructional materials, computer programs, software, software integration techniques, software codes, and data, technical data, photographs, drawings, logos, designs, artwork or other copyrightable material, or portions thereof, and may be created within or without the Company's facilities and before, during or after normal business hours. All such works related to or useful in the business of the Company are specifically intended to be works made for hire by the Executive, and the Executive shall cooperate with the Company in the protection of the Company's copyrights in such works and, to the extent deemed desirable by the Company, the registration of such copyrights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Return of Materials</u>. The Executive agrees that he will not retain or destroy (except as set forth below), and will immediately return to the Company on or prior to the Termination Date, or at any other time the Company requests such return, any and all property of the Company that is in his possession or subject to his control, including, but not limited to, keys, credit and identification cards, personal items or equipment, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, computers, mobile devices, other electronic media, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Protected Works and Confidential Information belonging to the Company or that the Executive received from or through his employment or service with the Company. The Executive will not make, distribute, or retain copies of any such information or property. To the extent that the Executive has electronic files or information in his possession or control that belong to the

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Company, contain Confidential Information, or constitute Protected Works (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the Termination Date, or at any other time the Company requests, the Executive shall (A) provide the Company with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Company); (B) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Company-owned computers, mobile devices, electronic media, cloud storage, or other media, devices, or equipment, such that such files and information are permanently deleted and irretrievable; and (C) provide a written certification to the Company that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted. The Executive agrees that he will reimburse the Company for all of its costs, including reasonable attorneys' fees, of recovering the above materials and otherwise enforcing compliance with this provision if he does not return the materials to the Company or take the required steps with respect to electronic information or files on or prior to the Termination Date or at any other time the materials and/or electronic file actions are requested by the Company or if the Executive otherwise fails to comply with this provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Enforcement of Restrictive Covenants</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Rights and Remedies Upon Breach</u>. The parties specifically acknowledge and agree that the remedy at law for any breach of the Restrictive Covenants will be inadequate, and that in the event the Executive breaches, or threatens to breach, any of the Restrictive Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, the Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. The Executive understands and agrees that if he violates any of the obligations set forth in the Restrictive Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. The Executive understands and agrees that, if the Parties become involved in legal action regarding the enforcement of the Restrictive Covenants and if the Company prevails in such legal action, the Company will be entitled, in addition to any other remedy, to recover from the Executive any amounts previously received by the Executive pursuant to Section 8(a)(ii) and its reasonable costs and attorneys' fees incurred in enforcing such covenants. The Company's ability to enforce its rights under the Restrictive Covenants or applicable law against the Executive shall not be impaired in any way by the existence of a claim or cause of action on the part of the Executive based on, or arising out of, this Agreement or any other event or transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Severability and Modification of Covenants</u>. The Executive acknowledges and agrees that each of the Restrictive Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Restrictive Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Restrictive Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Restrictive Covenant. If any of the provisions of the Restrictive Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Company's legitimate business interests and may be

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enforced by the Company to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <u>Disclosure of Agreement</u>. The Executive acknowledges and agrees that, during Restricted Period, he will disclose the existence and terms of this Agreement to any prospective employer, business partner, investor, or lender prior to entering into an employment, partnership or other business relationship with such prospective employer, business partner, investor, or lender. The Executive further agrees that the Company shall have the right to make any such prospective employer, business partner, investor, or lender of the Executive aware of the existence and terms of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. <u>Agreement Not to Disparage</u>. The Executive hereby agrees that at all times after the date hereof he will not make any statement, whether verbally or in written form, or otherwise take any action that may reasonably be considered to disparage or impugn the Bank or any of its subsidiaries or affiliates; the management, practices, services, or reputation of the Bank or any of its subsidiaries or affiliates; or any of the Bank's or any of its subsidiaries' or affiliates' employees, officers, directors, agents, or affiliates. Notwithstanding the foregoing, this Section 10 shall not limit the rights of the Executive to provide truthful testimony or make truthful statements which are compelled by a court of competent jurisdiction, arbitrator, regulatory agency or other tribunal or investigative body in accordance with any applicable statute, rule, or regulation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. <u>Non-exclusivity of Rights</u>. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any employee benefit plan, program, policy, or practice provided by the Bank or its affiliated companies and for which the Executive may qualify, except as specifically provided herein. Amounts that are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice, or program of the Bank or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement.

12. <u>Full Settlement; No Mitigation</u>. The Bank's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Bank may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.

13. <u>Code Section 280G</u>.

(a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by the Bank to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (such benefits, payments or distributions are hereinafter referred to as "<u>Payments</u>") would, if paid, be subject to the excise tax imposed by Section 4999 of the Code (the "<u>Excise Tax</u>"), then, (1) the parties agree to take such action(s) as may be necessary to place Executive in the best after-tax position taking into account all income, employment and excise taxes, without regard to the deductibility of any payments by the Bank, and (2) prior to the making of any Payments to Executive, a calculation shall be made comparing (i) the net after-tax benefit to Executive of the Payments after payment by Executive of the Excise Tax, to (ii) the net after-tax benefit to Executive if the Payments had been limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (i) above is less than the amount calculated under (ii) above, then the Payments shall be limited to the extent necessary to avoid being subject to the Excise Tax

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(the "<u>Reduced Amount</u>"). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the Change in Control, as determined by the Determination Firm (as defined in Section 13(b) below). For purposes of this Section 13, present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 13, the "<u>Parachute Value</u>" of a Payment means the present value as of the date of the Change in Control of the portion of such Payment that constitutes a "parachute payment" under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

(b) All determinations required to be made under this Section 13, including whether an Excise Tax would otherwise be imposed, whether the Payments shall be reduced, the amount of the Reduced Amount, and the assumptions to be utilized in arriving at such determinations, shall be made by an accounting firm or compensation consulting firm mutually acceptable to the Bank and Executive (the "<u>Determination Firm</u>") which shall provide detailed supporting calculations both to the Bank and Executive within 15 business days after the receipt of notice from Executive that a Payment is due to be made, or such earlier time as is requested by the Bank. All fees and expenses of the Determination Firm shall be borne solely by the Bank. Any determination by the Determination Firm shall be binding upon the Bank and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Determination Firm hereunder, it is possible that Payments which Executive was entitled to, but did not receive pursuant to Section 13 (a), could have been made without the imposition of the Excise Tax ("<u>Underpayment</u>"), consistent with the calculations required to be made hereunder. In such event, the Determination Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Bank to or for the benefit of Executive but no later than March 15 of the year after the year in which the Underpayment is determined to exist, which is when the legally binding right to such Underpayment arises.

(c) For purposes of determining whether and the extent to which the Payments will be subject to the Excise Tax, no portion of the Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a "payment" within the meaning of Section 280G(b) of the Code shall be taken into account. To the extent requested by Executive, the Bank shall cooperate with Executive in good faith in valuing, and shall direct the Determination Firm to value, services to be provided by Executive (including refraining from performing services pursuant to a covenant not to compete) before, on or after the date of the transaction which cause the application of Section 280G of the Code such that payments in respect of such services may be considered to be "reasonable compensation" within the meaning of the regulations under Section 280G of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) In the event that the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 13 shall be of no further force or effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. <u>Arbitration</u>. Any claim or dispute arising under or relating to this Agreement or the breach, termination, or validity of any term of this Agreement shall be subject to arbitration, and prior to commencing any court action, the parties agree that they shall arbitrate all controversies; <u>provided</u>, <u>however</u>, that nothing in this Section 14 shall prohibit the Bank from exercising its right under Section 9 to pursue injunctive remedies with respect to a breach or threatened breach of the Restrictive Covenants. The arbitration shall be conducted in Atlanta, Georgia, in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. §1, *et. seq.* The arbitrator(s) shall be authorized to award both liquidated and actual damages, in addition to injunctive relief, but no punitive damages. The arbitrator(s) may also award attorney's fees and costs, without regard to any restriction on the amount of such award under Georgia or other applicable law. Such an award shall be

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binding and conclusive upon the parties hereto, subject to 9 U.S.C. §10. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. <u>Successors</u>.

(a) This Agreement is personal to the Executive and without the prior written consent of the Bank shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. Notwithstanding the foregoing, the Bank may, without the Executive's consent, assign, whether by assignment agreement, merger, operation of law or otherwise, this Agreement to the Company or to any successor or affiliate of the Company, subject to such assignee's express assumption of all obligations of the Bank hereunder. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Bank and its successors and assigns.

(c) The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place. As used in this Agreement, "<u>Bank</u>" shall mean the Bank as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

16. <u>Cooperation</u>. The Executive shall provide the Executive's reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during the Executive's employment hereunder. This provision shall survive any termination of this Agreement. The Bank shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive's performance of obligations under this Section 16 at the request of the Bank. The Executive's obligations under this Section 16, and the Executive's rights to payment or reimbursement of expenses pursuant to this Section 16, shall expire at the end of ten (10) years after the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17. <u>Code Section 409A</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>General</u>. This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder (and any applicable transition relief under Section 409A of the Code). Nevertheless, the tax treatment of the benefits provided under the Agreement is not warranted or guaranteed. Neither the Bank nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Executive as a result of the application of Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Definitional Restrictions</u>. Notwithstanding anything in this Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt "deferred compensation" for purposes of Section 409A of the Code ("<u>Non-Exempt Deferred Compensation</u>") would otherwise be payable or distributable hereunder by reason of the Executive's termination of employment, such Non-Exempt Deferred Compensation will not be payable or distributable to the Executive by reason of such circumstance unless the circumstances giving rise to such termination of employment meet any description or definition of "separation from service" in Section 409A of the Code and applicable

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regulations (without giving effect to any elective provisions that may be available under such definition). This provision does not prohibit the *vesting* of any Non-Exempt Deferred Compensation upon a termination of employment, however defined. If this provision prevents the payment or distribution of any Non-Exempt Deferred Compensation, such payment or distribution shall be made on the date, if any, on which an event occurs that constitutes a Section 409A-compliant "separation from service."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Timing of Release of Claims</u>. Whenever in this Agreement a payment or benefit is conditioned on Executive's execution of a release of claims, such release must be executed and all revocation periods shall have expired within sixty (60) days after the Date of Termination; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then such payment or benefit (including any installment payments) that would have otherwise been payable during such 60-day period shall be accumulated and paid on the 60<sup>th</sup> day after the Date of Termination provided such release shall have been executed and such revocation periods shall have expired. If such payment or benefit is exempt from Section 409A of the Code, the Bank may elect to make or commence payment at any time during such period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Permitted Acceleration</u>. The Bank shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to the Executive of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Timing of Reimbursements and In-kind Benefits</u>. If, during the Term, Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, and such payments or reimbursements are includible in Executive's federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of Executive to reimbursement of expenses under this Agreement shall be subject to liquidation or exchange for another benefit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18. <u>Miscellaneous</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Governing Law</u>; Forum Selection; Consent to Jurisdiction. The Company and the Executive agree that this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Georgia without giving effect to its conflicts of law principles. The Executive agrees that the exclusive forum for any action to enforce this Agreement, as well as any action relating to or arising out of this Agreement, shall be a court of competent jurisdiction in the State of Georgia, Fulton County. With respect to any such court action, the Executive hereby (a) irrevocably submits to the personal jurisdiction of such courts; (b) consents to service of process; (c) consents to venue; and (d) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, service of process, or venue. Both parties hereto further agree that such courts are convenient forums for any dispute that may arise herefrom and that neither party shall raise as a defense that such courts are not convenient forums.

(b) <u>Captions</u>. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

(c) <u>Amendments</u>. This Agreement may not be amended or modified otherwise than-by a written agreement executed by the parties hereto or their respective successors and legal representatives.

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(d) <u>Notices</u>. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

<u>If to the Executive</u>: Anthony P. Valduga

Address on file with the Bank

<u>If to the Bank</u>: Coastal States Bank

5 Bow Circle

Hilton Head, SC 29928

Attention: Secretary

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(e) <u>Severability</u>. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(f) <u>Withholding</u>. The Bank may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(g) <u>Waivers</u>. The Executive's or the Bank's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Bank may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Entire Agreement</u>. Except as provided herein, this Agreement contains the entire agreement between the Bank and the Executive with respect to the subject matter hereof and, from and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Construction</u>. The Bank and the Executive understand and agree that because they both have been given the opportunity to have counsel review and revise this Agreement, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Instead, the language of all parts of this Agreement shall be construed as a whole, and according to its fair meaning, and not strictly for or against either of the parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <u>Counterparts</u>. This Agreement may be executed in two or more counterparts, and it shall not be necessary that the signatures of the parties hereto be contained on any one counterpart hereof. Each counterpart shall be deemed an original but all counterparts together shall constitute one and the same instrument. Any signature page of any such counterpart, or any electronic facsimile thereof, may be attached or appended to any other counterpart to complete a fully executed counterpart of this Agreement, and any telecopy or other electronic transmission of any signature shall be deemed an original and shall bind such party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19. <u>Regulatory Action</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit

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Insurance Act ("<u>FDIA</u>") (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement shall terminate, as of the effective date of such order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), all obligations of the Bank under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank shall reinstate (in whole or in part) any of its obligations which were suspended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If the Bank is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) All obligations under this Agreement shall be terminated, except to the extent a determination is made that continuation of the Agreement is necessary for the continued operation of the Bank (1) by the director of the FDIC or her or her designee (the "<u>Director</u>"), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in 13(c) of the FDIA; or (2) by the Director, at the time the Director approves a supervisory merger to resolve problems related to operation of the Bank when the Bank is determined by the Director to be in an unsafe and unsound condition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Notwithstanding anything contained in this Agreement to the contrary, no payments shall be made pursuant to any provision herein in contravention of the requirements of Section 2[18(k)] of the FDIA (12 U.S.C. 1828(k)). In particular, the provisions pertaining to the potential for payments shall have no force or effect as long as either the agreement concerning the potential for payments or the actual payment of such amounts would be considered a "golden parachute payment," with the meaning of 12 C.F.R. Section 359.1(f).

(Signatures on following page)

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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from the Board, each of the Company and the Bank have caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

EXECUTIVE

<u>/s/ Anthony P. Valduga</u> 

Anthony P. Valduga

COASTALSOUTH BANCSHARES, INC.

By: <u>/s/ Stephen R. Stone</u> 

President and CEO

COASTAL STATES BANK

By: <u>/s/ Stephen R. Stone</u> 

President and CEO

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## Exhibit 10.11

**EXHIBIT 10.11**

***Execution Version***

**STOCK PURCHASE AGREEMENT**

This Stock Purchase Agreement (this "*Agreement*") is dated as of July 28, 2017, by and among CoastalSouth Bancshares, Inc., a Virginia corporation (the "*Company*"), and the purchaser identified on the signature pages hereto ("*Purchaser*").

**RECITALS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.The Company and Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 of Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "Commission") under the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.Purchaser wishes to purchase, and the Company wishes to sell, the following securities described further herein, upon the terms and conditions stated in this Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)at the Closing, shares of Common Stock, in the amount set forth below Purchaser's name on the signature page of this Agreement (which shall be collectively referred to herein as the "*Common Shares*");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)at the Closing, shares of Series D Preferred Stock, in the amount set forth below the purchaser's name on the signature page to this Agreement (which shall be collectively referred to herein as the "*Series D Preferred Shares*" and, together with the Common Shares and the shares of Common Stock underlying the Series D Preferred Shares, the "*Pre-Amendment Shares*");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)following the effectiveness of the Post-Closing Articles of Amendment, shares of Non-Voting Common Stock upon the mandatory conversion of the Series D Preferred Shares (which shall be collectively referred to herein as the "*Converted Non-Voting Common Shares*"); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)following the effectiveness of the Post-Closing Articles of Amendment, a warrant in the form attached hereto as Exhibit A (the "*Warrant*") granting Purchaser the right to purchase shares of Non-Voting Common Stock in the amount (subject to adjustment in proportion to any stock splits or reverse stock splits of the Common Stock prior to the issuance of the Warrant) set forth below Purchaser's name on the signature page of this Agreement (which shall be collectively referred to herein as the "*Warrant Non-Voting Common Shares*" and, together with the Warrant, the Converted Non-Voting Common Shares, the Warrant Non-Voting Common Shares, and the shares of Common Stock underlying each of the Converted Non-Voting Common Shares and the Warrant Non-Voting Common Shares, the "*Post Amendment Shares*", and, together with the Pre-Amendment Shares, the "*Shares*").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.Simultaneously with the sale of the Shares to Purchaser, the Company will be selling shares of Common Stock and Series D Preferred Stock to certain other purchasers (the "Other Purchasers"), which sales will also in reliance of upon the exemptions from securities registration afforded by Section 4(a)(2) of the Securities Act and Regulation D and will result in the Company raising an aggregate amount of approximately $60 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.At the Closing, the Company, Purchaser and certain of the Other Purchasers will execute and deliver a registration rights agreement, substantially in the form attached hereto as Exhibit B (the "Registration Rights Agreement"), pursuant to which, among other things, the Company will agree to

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provide certain registration rights with respect to the Shares under the Securities Act and the rules and regulations promulgated thereunder and applicable state securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.The Company and Purchaser acknowledge that the Company has valuable net operating loss ("NOL") carry-forwards, the use of which would be limited if the Company were to experience an "ownership change" under Section 382 of the Code as a result of the transfer of the Shares issuable hereunder (or upon conversion of shares of Series D Preferred Stock or Non-Voting Common Stock in to Common Stock), and accordingly, the Company and Purchaser further acknowledge that any prospective transferee of the Shares will be required to provide the Transfer Agent with a representation letter substantially in the form attached hereto as Exhibit M (the "Transferee Letter") and that each of the stock certificates issued in connection with this offering will contain a legend to ensure that a prospective transferee is aware of this requirement. In addition, at the Closing, the Company and Purchaser will execute and deliver a letter agreement, substantially in the form attached hereto as Exhibit N (the "Prior Notice Letter"), pursuant to which, among other things, the Purchasers will agree to consult with the Company at least 10 days prior to any proposed purchase or sale of Shares regarding the potential adverse tax impact that the purchase or sale could have on the NOLs and, if requested by the Company, to provide to the other party to the proposed purchase or sale any disclosure prepared by the Company describing the potential adverse tax impact.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.The Company has engaged Sandler O'Neill & Partners and Hovde Group, LLC as its placement agents (the "Placement Agents") for the offering of Common Stock.

**NOW, THEREFORE,** in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and Purchaser hereby agree as follows:

**Article I** 

**Definitions**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1**Definitions**. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:

"*Action*" means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or, to the Company's Knowledge, threatened in writing against the Company, any Subsidiary or any of their respective properties or any officer, director or employee of the Company or any Subsidiary acting in his or her capacity as an officer, director or employee before or by any federal, state, county, local or foreign court, arbitrator, governmental or administrative agency, regulatory authority, stock market, stock exchange or trading facility.

"*Acquisition Proposal*" means a written offer or proposal involving the Company or any of its Subsidiaries with respect to: (i) any merger, reorganization, consolidation, share exchange, share issuance, recapitalization, business combination, liquidation, dissolution or other similar transaction involving any sale, issuance, lease, exchange, mortgage, pledge, transfer or other disposition of, all or a material portion of the assets or equity securities or deposits of, the Company or any of its Subsidiaries, in a single transaction or series of related transactions; (ii) any tender offer or exchange offer for all or a material portion of the outstanding shares of capital stock of the Company or any of its Subsidiaries; or (iii) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

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"*Affiliate*" means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act.

"*Agreement*" shall have the meaning ascribed to such term in the Preamble.

"*Articles of Incorporation*" means the Articles of Incorporation of the Company and all amendments thereto, as the same may be amended from time to time, including, without limitation, the Post-Closing Articles of Amendment.

"*Bank*" means CoastalStates Bank, a South Carolina state-chartered commercial bank.

"*Beneficially Own(s)*" means the act of having Beneficial Ownership of a security or being the Beneficial Owner thereof.

"*Beneficial Owner*" means a Person who has Beneficial Ownership of a security.

"*Beneficial Ownership*" means, with respect to any security, the power to directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares (a) voting power, which includes the power to vote, or to direct the voting of, such security; and/or (b) investment power, which includes the power to dispose, or to direct the disposition of, such security.

"*BHC Act*" has the meaning set forth in Section 3.1(a).

"*BHC Act Control*" has the meaning set forth in Section 3.1(pp).

"*Burdensome Condition*" has the meaning set forth in Section 4.12.

"*Business Day*" means a day, other than a Saturday or Sunday, on which banks in South Carolina are open for the general transaction of business.

"*Closing*" means the closing of the purchase and sale of the Shares pursuant to this Agreement.

"*Closing Date*" means the third Business Day following the date that Purchaser and all Other Purchasers have obtained Non-Control Determinations, provided that all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all of the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied or waived, as the case may be, or such other date as the parties may agree, or such other date as the Parties may agree in writing.

"*CIBC Act*" means the Change in Bank Control Act of 1978, as amended.

"*Code*" means the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder.

"*Commission*" has the meaning set forth in the Recitals.

"*Common Shares*" has the meaning set forth in the Recitals.

"*Common Stock*" means the shares of voting common stock, par value $1.00 per share, of the Company, and also includes any securities into which the Common Stock may hereafter be reclassified or changed.

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"*Company*" shall have the meaning ascribed to such term in the Preamble. "Company Counsel" means Alston & Bird LLP.

"*Company Deliverables*" has the meaning set forth in Section 2.2(a).

"*Company Entity*" means, collectively, the Company and each of its Subsidiaries.

"*Company Financial Statements*" has the meaning set forth in Section 3.1(h).

"*Company Reports*" has the meaning set forth in Section 3.1(ee).

"*Company's Knowledge*" means with respect to any statement made to the knowledge of the Company, that the statement is based upon the actual knowledge after reasonable inquiry of the executive officers of the Company.

"*Contract*" means any written or oral agreement, arrangement, authorization, commitment, contract, indenture, instrument, lease, license, obligation, plan, practice, restriction, understanding, or undertaking of any kind or character, or other document to which any Person is a party or that is binding on any Person or its capital stock, assets or business.

"*Control*" (including the terms "controlling," "controlled by" or "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

"*Covered Person*" has the meaning set forth in Section 3.1(nn).

"*Converted Non-Voting Common Shares*" has the meaning set forth in the Recitals.

"*Data Room*" means the virtual data room established for the purpose of sharing due diligence materials with respect to the Company.

"*Disclosed*" means, with respect to any matter, that it has been described in the Schedules.

"*Disqualification Event*" has the meaning set forth in Section 3.1(nn).

"*DTC*" means The Depository Trust Company.

"*Environmental Laws*" has the meaning set forth in Section 3.1(k).

"*ERISA*" has the meaning set forth in Section 3.1(ll).

*"Escrow Agent"* has the meaning set forth in Section 2.1(c).

*"Escrow Agreement"* has the meaning set forth in Section 2.1(c).

"*Exchange Act*" means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

"*Expedited Issuance*" has the meaning set forth in Section 4.18(f).

"*FDIC*" means the Federal Deposit Insurance Corporation.

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"*Federal Reserve*" means the Board of Governors of the Federal Reserve System.

"*GAAP*" means U.S. generally accepted accounting principles, as applied by the Company.

"*Intellectual Property*" has the meaning set forth in Section 3.1(q).

"*Investor Presentation*" means the Project Freebird Common Equity Offering investor presentation, including the appendix thereto, dated February 2017 and the supplements thereto, dated March 2017, March 30, 2017 and June 2017.

"*Legend Removal Date*" has the meaning set forth in Section 4.1(c).

"*Lien*" means any lien, charge, claim, encumbrance, security interest, right of first refusal, preemptive right or other restrictions of any kind.

"*Material Adverse Effect*" means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, properties, business, condition (financial or otherwise) or prospects of the Company and the Subsidiaries, taken as a whole, or (iii) any adverse impairment to the Company's ability to perform in any material respect on a timely basis its obligations under any Transaction Document; provided, however, that "Material Adverse Effect" shall not include the impact of (A) changes in banking, tax and similar laws of general applicability or interpretations thereof by any applicable governmental authority, (B) changes in GAAP or regulatory accounting requirements applicable to banks and their holding companies generally, (C) changes in general economic conditions, including interest rates, affecting banks generally, or (D) the effects of any action or omission taken by the Company or the Bank with the prior written consent of Purchaser, except, with respect to clauses (A), (B) and (C), to the extent that the effect of such changes has a disproportionate impact on the Company and the Subsidiaries, taken as a whole, relative to other similarly situated banks and their holding companies generally.

"*Material Contract*" has the meaning set forth in Section 3.1(qq).

"*Material Permits*" has the meaning set forth in Section 3.1(o).

"*Money Laundering Laws*" has the meaning set forth in Section 3.1(cc).

"*New Issuance*" has the meaning set forth in Section 4.18(a).

"*New Security*" has the meaning set forth in Section 4.18(a).

"*New York Courts*" means state or federal courts located in the city of New York, New York.

"*NOL*" has the meaning set forth in the Recitals.

"*Non-Control Determinations*" has the meaning set forth in Section 5.1(s).

"*Non-Voting Common Stock*" means the non-voting common stock of the Company, par value $1.00 per share, authorized by and subject to the terms and conditions of the Post-Closing Articles of Amendment, which is subject to the terms and conditions of the Post-Closing Articles of Amendment, convertible into shares of Common Stock.

"*OFAC*" has the meaning set forth in Section 3.1(bb).

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"*Other Purchasers*" has the meaning set forth in the recitals.

"*Outside Date*" means one hundred twenty (120) days following the date of this Agreement; provided that if such day is not a Business Day, the first day following such day that is a Business Day.

"*Person*" means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

"*Placement Agents*" has the meaning set forth in the Recitals.

"*Post Amendment Shares*" has the meaning set forth in the Recitals.

"*Post-Closing Articles of Amendment*" means the Articles of Amendment to the Company's Articles of Incorporation substantially in the form attached hereto as Exhibit C.

*"Pre-Amendment Shares*" has the meaning set forth in the Recitals.

"*Preemptive Rights*" has the meaning set forth in Section 4.18(c).

"*Preemptive Rights Notice*" has the meaning set forth in Section 4.18(a).

"*Prior Notice Letter*" has the meaning set forth in the Recitals.

"*Proceeding*" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

"*Purchaser Party*" has the meaning set forth in Section 4.5(a).

"*Purchase Price*" means $1.30 per share of Common Stock and $1,300.00 per share of Series D Preferred Stock.

"*Purchaser*" shall have the meaning ascribed to such term in the Preamble.

"*Purchaser Deliverables*" has the meaning set forth in Section 2.2(b).

"*Purchaser Party*" has the meaning set forth in Section 4.5(a).

"*Qualifying Ownership Interest*" means, with respect to Purchaser, ownership by Purchaser together with its Affiliates, of either in the aggregate 50% or more of all of the Shares purchased by such Purchaser and its Affiliates under this Agreement or, in the aggregate, 4.9% or more of the Common Stock then outstanding (provided that, in making such calculation, (i) all shares of Common Stock into or for which shares of any securities owned by such Purchaser and its Affiliates are directly or indirectly convertible or exercisable (which, for the avoidance of doubt, shall include those shares of Common Stock and Non-Voting Common Stock issuable upon the conversion of shares of Series D Preferred Stock), shall be included in the numerator, (ii) the shares described in clause (i) and all such shares owned by or attributed to Other Purchasers shall be included in the denominator, and (iii) all securities issued by the Company after the Closing Date other than in connection with an issuance in which Purchaser was offered the right to purchase its pro rata portion of such securities in accordance with Section 4.20 shall be excluded from the denominator.

"*Registration Rights Agreement*" has the meaning set forth in the Recitals.

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"*Regulation D*" has the meaning set forth in the Recitals.

"*Regulatory Agreement*" has the meaning set forth in Section 3.1(gg).

"*Required Approvals*" has the meaning set forth in Section 3.1(e).

"*Reserve Bank*" means the Federal Reserve Bank of Richmond.

"*Rule 144*" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

"*Schedules*" means the disclosure schedules delivered by the Company to Purchasers herewith.

"*SCOCB*" means the Office of the Commissioner of Banking of South Carolina.

"*Secretary's Certificate*" has the meaning set forth in Section 2.2(a)(iv).

"*Securities Act*" has the meaning set forth in the Recitals.

"*Series A Preferred Stock*" means the Fixed Rate Cumulative Preferred Stock, Series A of the Company.

"*Series B Preferred Stock*" means the Fixed Rate Cumulative Preferred Stock, Series B of the Company.

"*Series D Articles of Amendment*" means the Articles of Amendment to the Company's Articles of Incorporation designating the Series D Preferred Stock in the form attached hereto as Exhibit D.

"*Series D Preferred Shares*" has the meaning set forth in the recitals.

"*Series D Preferred Stock*" means a newly-issued series of convertible perpetual preferred stock, Series D, par value $1.00 per share, of the Company, which, subject to the terms and conditions of the Series D Articles of Amendment, is convertible into shares of Common Stock and, following the effectiveness of the Post-Closing Articles of Amendment, is mandatorily convertible into shares of Non-Voting Common Stock.

"*Shareholder Meeting*" means the meeting of the Company's shareholders to be held within sixty (60) days following the Closing for the purpose of, among other things, authorizing a 10 for 1 reverse stock split and approving the Post-Closing Articles of Amendment.

"*Shares*" has the meaning set forth in the Recitals.

"*Solicitor*" has the meaning set forth in Section 3.1(nn).

"*South Carolina Courts*" means the state and federal courts sitting in the State of South Carolina.

"*Subscription Amount*" means the aggregate amount to be paid for the Shares purchased hereunder as indicated on Purchaser's signature page to this Agreement next to the heading "Aggregate Purchase Price (Subscription Amount)."

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"*Subsidiary*" means any entity in which the Company, directly or indirectly, owns sufficient capital stock or holds a sufficient equity or similar interest such that it is required by GAAP to be consolidated with the Company in the financial statements of the Company.

"*Tax*" means any and all domestic or foreign, federal, state, local or other taxes, customs, duties, governmental fees or other like assessments or charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any governmental entity, including taxes on or with respect to income, franchises, windfall or other profits, gross receipts, property, transfer, sales, use, license, alternative or add on minimum, escheatment or unclaimed property, capital stock, payroll, employment, unemployment, social security, workers' compensation or net worth, and taxes in the nature of excise, withholding, ad valorem or value added or similar taxes.

"*Tax Opinion*" has the meaning set forth in Section 5.1(l).

"*Transaction Documents*" means this Agreement, the Schedules and Exhibits attached hereto, and any other documents or agreements executed by the Company or Purchaser in connection with the transactions contemplated hereunder.

"*Transfer Agent*" means Computershare, or any successor transfer agent for the Company.

"*Transferee Letter*" has the meaning set forth in the Recitals.

"*U.S. Sanctions Laws*" has the meaning set forth in Section 3.2(q).

"*VCOC Letter Agreement*" means the letter agreement in the form attached hereto as Exhibit L, dated as of the Closing Date, between the Company and Purchaser.

"*Voting Securities*" means capital stock of the Company that is a "voting security" as that term is defined in section 225.2(q) of the Federal Reserve's Regulation Y (or any successor provision).

"*Warrant*" has the meaning set forth in the Recitals.

*"Warrant Non-Voting Common Shares"* has the meaning set forth in the Recitals.

**Article II** 

**PURCHASE AND SALE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1**Closing**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Purchase of Shares**. Subject to the terms and conditions set forth in this Agreement, the Company shall issue and sell to Purchaser, and Purchaser shall purchase from the Company, (i) the number of Shares set forth on the signature page hereto at a per share price equal to the Purchase Price and (ii) the Warrant at no additional consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Closing**. The Closing of the purchase and sale of the Pre-Amendment Shares pursuant to this Agreement shall take place at the offices of Alston & Bird LLP, 1201 W. Peachtree St., Atlanta, Georgia on the Closing Date or at such other locations or remotely by facsimile transmission or other electronic means as the parties may mutually agree.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2**Closing Deliveries**.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)On or prior to the Closing, the Company shall issue, deliver or cause to be delivered to Purchaser the following (the *"Company Deliverables"*):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)certificates or book-entry shares evidencing the issuance of the number of shares of Common Stock and Series D Preferred Stock set forth on the signature page hereto to Purchaser, registered in the name of Purchaser or its nominee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)a legal opinion of Company Counsel, dated as of the Closing Date and in the form attached hereto as Exhibit E, executed by such counsel and addressed to Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)the Registration Rights Agreement, duly executed by the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)a certificate of the Secretary of the Company, in the form attached hereto as Exhibit F (the "*Secretary's Certificate*"), dated as of the Closing Date, (a) certifying the resolutions adopted by the Board of Directors of the Company or a duly authorized committee thereof approving the transactions contemplated by this Agreement, the other Transaction Documents and the issuance of the Pre-Amendment Shares and the Post Amendment Shares (upon receipt of the requisite approvals), (b) certifying the Articles of Incorporation and Bylaws of the Company in effect as of the Closing and (c) certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)a certificate, dated as of the Closing Date and signed by its Chief Executive Officer or its Chief Financial Officer, certifying to the fulfillment of the conditions specified in Sections 5.1(a), (b), (d), (f), (g), (h), (i), (n), (o) (p) and (v) in the form attached hereto as Exhibit G;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)a Certificate of Existence for the Company from the Virginia State Corporation Commission and a Certificate of Existence for the Bank from the Secretary of State of South Carolina, each as of a date that is no more than three (3) Business Days prior to the Closing Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)evidence of the filing and effectiveness of the Series D Articles of Amendment with the Virginia State Corporation Commission;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)the VCOC Letter Agreement, duly executed by the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)the Prior Notice Letter duly executed by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)On or prior to the Closing Date, Purchaser shall deliver or cause to be delivered to the Company the following (the "*Purchaser Deliverables*"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)its Subscription Amount, in U.S. dollars and in immediately available funds, in the amount indicated below Purchaser's name on the signature page hereto under the heading "Aggregate Purchase Price (Subscription Amount)" by wire transfer to the account provided by the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)the Registration Rights Agreement, duly executed by Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)a fully completed and duly executed Accredited Investor Questionnaire, reasonably satisfactory to the Company in the form attached hereto as <u>Exhibit H</u>;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)a fully executed Support Agreement in the form attached hereto as <u>Exhibit I</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)the VCOC Letter Agreement, duly executed by the Purchaser; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)the Prior Notice Letter duly executed by Purchaser.

**Article III** **<br>REPRESENTATIONS AND WARRANTIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1**Representations and Warranties of the Company**. The Company hereby represents and warrants as of the date hereof and as of the Closing Date, except for the representations and warranties that speak as of a specific date, which shall be made as of such date, to Purchaser that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Subsidiaries**. The Company has no direct or indirect Subsidiaries except as set forth in Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any and all Liens, and all the issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. The Company owns, directly or indirectly, all of the stock, except for any preferred securities, of the trusts set forth in Schedule 3.1(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Organization and Qualification**. The Company and each of its Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own or lease and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and each of its Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not in the reasonable judgment of the Company be expected to have a Material Adverse Effect. The Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "*BHC Act*"). The Bank is the Company's only Subsidiary banking institution. The Bank's deposit accounts are insured up to applicable limits by the FDIC, and all premiums and assessments required to be paid in connection therewith have been paid when due and no proceeding for the termination of such insurance is pending or, to the Company's Knowledge, threatened. The Company and each of its Subsidiaries has conducted its business in compliance with all applicable federal, state and foreign laws, orders, judgments, decrees, rules, regulations and applicable stock exchange requirements, including all laws and regulations restricting activities of bank holding companies and banking organizations, except for any noncompliance that, individually or in the aggregate, has not had and would not be reasonably expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Authorization; Enforcement; Validity**. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder, including, without limitation, to issue the Pre-Amendment Shares and, subject only to the requisite approval of the shareholders and the effectiveness of the Post-Closing Articles of Amendment, the Post Amendment Shares, in each case in accordance with the terms hereof. The Company's execution and delivery of each of the Transaction Documents and the consummation by it of the transactions contemplated hereby and

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thereby (including, but not limited to, the sale and delivery of the Pre-Amendment Shares and, subject only to the requisite approval of the shareholders and the effectiveness of the Post-Closing Articles of Amendment, the sale and delivery of the Post Amendment Shares) have been duly authorized by all necessary corporate action on the part of the Company, and no further corporate action is required by the Company, its board of directors or its shareholders in connection therewith other than in connection with the Required Approvals. Each of the Transaction Documents has been (or upon delivery will have been) duly executed by the Company and is, or when delivered in accordance with the terms hereof or thereof, will constitute the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. There are no shareholder agreements, voting agreements, or other similar arrangements with respect to the Company's capital stock to which the Company is a party or, to the Company's Knowledge, between or among any of the Company's shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**No Conflicts**. The execution, delivery and performance by the Company of the Transaction Documents and the consummation by the Company of the transactions contemplated hereby or thereby (including, without limitation, the issuance of the Shares) do not and will not, subject to receipt of the Required Approvals, (i) conflict with or violate any provisions of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or otherwise result in a violation of the organizational documents of the Company or any Subsidiary, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would result in a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any Material Contract, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations and the rules and regulations thereunder, assuming, without investigation, the correctness of the representations and warranties made by Purchaser herein, of any self-regulatory organization to which the Company or its securities are subject), or by which any property or asset of the Company is bound or affected, except in the case of clauses (ii) and (iii) such as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Filings, Consents and Approvals**. Neither the Company nor any of its Subsidiaries is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority, self- regulatory organization or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filings required by any applicable state securities laws, (ii) the filing of a Notice of Exempt Offering of Securities on Form D with the Commission under Regulation D of the Securities Act, (iii) the filings required in accordance with Section 4.12 of this Agreement, (iv) the filing of any applicable notices and/or applications to or the receipt of any applicable consents or non-objections from the state or federal bank regulatory authorities that govern the Company or the Bank (including, but not limited to, any necessary regulatory approvals for the redemption of the Series A Preferred Stock and the Series B Preferred Stock described in Section 5.1(g) and the sale by holders of Common Stock described in Section 5.1(h)), (v) the filing of the Series D Articles of Amendment with the Virginia State Corporation Commission; (vi) approval by the Company's shareholders of the Post- Closing of Amendment; (vii) the filing of the Post-Closing Articles of Amendment with the Virginia State Corporation Commission; and (viii) those that have been made or obtained prior to the date of this Agreement (collectively, the "*Required Approvals*"). The Company is unaware of any facts or

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circumstances relating to the Company or its Subsidiaries which would be likely to prevent the Company from obtaining or effecting any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Capitalization**. The number of shares and type of all authorized, issued and outstanding capital stock, options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) is set forth on Schedule 3.1(g). Immediately following the Closing, (i) 41,991,084 shares of Common Stock and (ii) 15,049.816 shares of Series D Preferred Stock will be issued and outstanding. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable, have been issued in compliance in all material respects with all applicable federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase any capital stock of the Company. No shares of the Company's outstanding capital stock are subject to preemptive rights or any other similar rights. Other than as set forth on Schedule 3.1(g): (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company; and (ii) there are no material outstanding debt securities, notes, credit agreements, credit facilities

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or other agreements, documents or instruments evidencing indebtedness of the Company or by which the Company is bound. Other than the Registration Rights Agreement entered into pursuant to this Agreement, there are no agreements or arrangements under which the Company is obligated to register the sale of any of its securities under the Securities Act. Except as set forth on Schedule 3.1(g), there are no outstanding securities or instruments of the Company that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company or any of its Subsidiaries. The Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. There are no securities or instruments issued by or to which the Company is a party containing anti-dilution or similar provisions that will be triggered by the issuance of the Shares. Provided that the Post-Closing Articles of Amendment and the 10-for-1 reverse stock split are approved at the Shareholder Meeting, the Company will, following the filing of the Post Closing Articles of Amendment, reserve, free of any preemptive or similar rights of shareholders of the Company, a number of unissued shares of Common Stock and Non-Voting Common Stock, sufficient to issue and deliver the Underlying Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Financial Statements**. Each of the audited consolidated balance sheets of the Company and its Subsidiaries and the related audited consolidated statements of income (loss), statements of shareholders' equity and comprehensive income (loss) and cash flows, together with the notes thereto, for the years ended December 31, 2014, 2015 and 2016, and the unaudited consolidated balance sheets of the Company and its Subsidiaries and the related unaudited consolidated statements of income (loss), statements of shareholders' equity and comprehensive income (loss) and cash flows, together with the notes thereto, for the period ended March 31, 2017, all of which have been previously provided or made available to Purchaser (collectively, the "*Company Financial Statements*"), (i) have been prepared from, and are in accordance with, the books and records of the Company and its Subsidiaries, (ii) complied, as of their respective date of such filing, in all material respects with applicable accounting requirements, (iii) have been prepared in accordance with GAAP applied on a consistent basis, and (iv) present fairly in all material respects the consolidated financial position of the Company and its Subsidiaries at the dates and the consolidated results of operations, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for the periods stated therein. The Bank's allowance for loan losses is in compliance in all material respects with (A) the Bank's methodology for determining the adequacy of its allowance for loan losses and (B) the standards established by applicable Governmental Entities and the Financial Accounting Standards Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Tax Matters**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The Company and each of its Subsidiaries (x) has prepared and filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (y) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, with respect to which adequate reserves have been set aside on the books of the Company and (z) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply, except, in the case of clauses (x) and (y) above, where the failure to so pay or file any such tax, assessment, charge or return would not have or reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Neither the Company nor any of its Subsidiaries is a party to, is bound by or has any material obligation under, any Tax sharing or Tax indemnity agreement or similar contract or arrangement other than any contract or agreement between or among the Company and any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has participated in any "reportable transaction" within the meaning of Treasury Regulations Section 1.6011-4, or any other transaction requiring disclosure under analogous provisions of state, local or foreign law. Neither the Company nor any

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of its Subsidiaries has liability for the Taxes of any person other than the Company or any its Subsidiaries under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee, successor or otherwise. Neither the Company nor any Company Subsidiary has been a "distributing corporation" or a "controlled corporation" in any distribution in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable. The Company has not been a United States real property holding corporation within the meaning of Section 897 of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Neither the Company nor any of its Subsidiaries has undergone an "ownership change" within the meaning of Code Section 382(g), and the consummation of the Transactions should not cause an "ownership change" within the meaning of Code Section 382(g).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Material Changes**. Since the date of the latest audited Company Financial Statements, except as set forth on Schedule 3.1(j), (i) there have been no events, occurrences or developments that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in Company Financial Statements pursuant to GAAP, (iii) the Company has not altered materially its method of accounting or the manner in which it keeps its accounting books and records, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed, or made any agreements to purchase or redeem any shares of its capital stock, (v) the Company has not issued any equity securities to any officer, director, or Affiliate, (vi) there has not been any material change or amendment to, or any waiver of any material right by the Company under, any Material Contract under which the Company or any of its Subsidiaries is bound or subject, and (vii) to the Company's Knowledge, there has not been a material increase in the aggregate dollar amount of (A) the Bank's nonperforming loans (including nonaccrual loans and loans 90 days or more past due and still accruing interest) or (B) the reserves or allowances established on the Company's or the Bank's financial statements with respect thereto. Moreover, since the date(s) the Company afforded Purchaser (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares, and (ii) access to information about the Company and its Subsidiaries and their respective financial condition, results of operations, business, properties, management, prospects, and any potential transactions sufficient to enable it to evaluate its investment, there have been no events, occurrences, or developments that have materially affected or would reasonably be expected to materially affect, either individually or in the aggregate, the information as presented to Purchaser in connection with the offering of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**Environmental Matters**. Neither the Company nor any of its Subsidiaries (i) is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "*Environmental Laws*"), (ii) owns or operates any real property contaminated with any substance that is in violation of any Environmental Laws, (iii) is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any Environmental Laws; in each case, which violation, contamination, liability or claim has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and, to the Company's Knowledge, there is no pending or threatened investigation that might lead to such a claim.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Litigation**. There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or (ii) except as described on

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Schedule 3.1(l), is reasonably likely to have a Material Adverse Effect, individually or in the aggregate, if there were an unfavorable decision. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There is no Action by the Company or any of its Subsidiaries pending or which the Company or any of its Subsidiaries intends to initiate (other than collection or similar claims in the ordinary course of business). There has not been, and to the Company's Knowledge there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any executive officers or directors of the Company in their capacities as such, which individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**Employment Matters**. No labor dispute exists or, to the Company's Knowledge, is imminent with respect to any of the employees of the Company or its Subsidiaries which would have or reasonably be expected to have a Material Adverse Effect. None of employees of the Company or any of its Subsidiaries is a member of a union that relates to such employee's relationship with the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and each Subsidiary believes that its relationship with its employees is good. To the Company's Knowledge, no executive officer is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of a third party, and to the Company's Knowledge, the continued employment of each such executive officer does not subject the Company or any Subsidiary to any liability with respect to any of the foregoing matters. The Company is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. As of the date of this Agreement, except as set forth on Schedule 3.1(m) or otherwise Disclosed, no material employee has given notice to the Company or any of its Subsidiaries of his or her intent to terminate his or her employment or service relationship with the Company or any of its Subsidiaries. The Company and its Subsidiaries are in material compliance with all laws concerning the classification of employees and independent contractors and have properly classified all such individuals for purposes of participation in employee benefit plans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Compliance**. Neither the Company nor any of its Subsidiaries (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any of its Subsidiaries under), nor has the Company or any of its Subsidiaries received written notice of a claim that it is in default under or that it is in violation of, any Material Contract (whether or not such default or violation has been waived), (ii) is in violation of any order of which the Company has been made aware in writing of any court, arbitrator or governmental body having jurisdiction over the Company or its Subsidiaries or their respective properties or assets, (iii) is in violation of, or in receipt of written notice that it is in violation of, any statute, rule, regulation, policy, guideline or order of any governmental authority or self-regulatory organization applicable to the Company or any of its Subsidiaries, or which would have the effect of revoking or limiting FDIC deposit insurance, except in each case as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)**Regulatory Permits**. The Company and each of its Subsidiaries possess all certificates, authorizations, consents and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as currently conducted, except where the failure to possess such certificates, authorizations, consents or permits, individually or in the aggregate, has not had and would not reasonably be expected to have, individually or in the aggregate, a Material

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Adverse Effect ("*Material Permits*"), and (i) neither the Company nor any of its Subsidiaries has received any notice in writing of proceedings relating to the revocation or material adverse modification of any such Material Permits and (ii) the Company is unaware of any facts or circumstances that would give rise to the revocation or material adverse modification of any Material Permits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)**Title to Assets**. The Company and its Subsidiaries have good and marketable title to all real property and tangible personal property owned by them which is material to the business of the Company and its Subsidiaries, taken as a whole, in each case free and clear of all Liens except such as do not materially affect the value of such property or do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and facilities by the Company and its Subsidiaries. No notice of a claim of default by any party to any lease entered into by the Company or any of its Subsidiaries has been delivered to either the Company or any of its Subsidiaries or is now pending, and there does not exist any event or circumstance that with notice or passing of time, or both, would constitute a default or excuse performance by any party thereto. None of the owned or leased premises or properties of the Company or any of its Subsidiaries is subject to any current or potential interests of third parties or other restrictions or limitations that would impair or be inconsistent in any material respect with the current use of such property by the Company or any of its Subsidiaries, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)**Patents and Trademarks**. The Company and its Subsidiaries own, possess, license or have other rights to use all foreign and domestic patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, inventions, trade secrets, technology, Internet domain names, know-how and other intellectual property (collectively, the "*Intellectual Property*") necessary for the conduct of their respective businesses as now conducted or as proposed to be conducted except where the failure to own, possess, license or have such rights would not have or reasonably be expected to have a Material Adverse Effect. Except as set forth in Schedule 3.1(q) and except where such violations or infringements would not have or reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (a) there are no rights of third parties to any such Intellectual Property; (b) there is no infringement by third parties of any such Intellectual Property; (c) there is no pending or threatened action, suit, proceeding or claim by others challenging the Company's and its Subsidiaries' rights in or to any such Intellectual Property; (d) there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property; and (e) there is no pending or threatened action, suit, proceeding or claim by others that the Company and/or any Subsidiary infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)**Insurance**. The Company and each of the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes to be prudent and customary in the businesses and locations in which and where the Company and the Subsidiaries are engaged. The Company and its Subsidiaries have not been refused any insurance coverage sought or applied for, and the Company and its Subsidiaries do not have any reason to believe that they will not be able to renew their existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue their business at a cost that would not have a Material Adverse Effect. All premiums due and payable under all such policies and bonds have been timely paid, and the Company and its Subsidiaries are in material compliance with the terms of such policies and bonds. Neither the Company nor any of its Subsidiaries has received any notice of cancellation of any such insurance, nor, to the Company's Knowledge, will it or any Subsidiary be unable to renew their respective existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would be materially higher than their existing insurance coverage. The Company (i) maintains directors' and officers'

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liability insurance and fiduciary liability insurance with benefits and levels of coverage as disclosed in Schedule 3.1(r), (ii) has timely paid all premiums on such policies, and (iii) there has been no lapse in coverage during the term of such policies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)**Transactions with Affiliates and Employees**. Except as set forth in Schedule 3.1(s) and other than the grant of stock options or other equity awards that are not individually or in the aggregate material in amount, none of the officers or directors of the Company or any of its Subsidiaries and, to the Company's Knowledge, none of the employees of the Company or any of its Subsidiaries, is presently a party to any transaction with the Company or any of its Subsidiaries or to a presently contemplated transaction (other than for services as employees, officers and directors) that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Securities Act if the Company were subject to such regulation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)**Certain Fees**. No person or entity will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company, other than the Placement Agents with respect to the offer and sale of the Shares (which placement agent fees are being paid by the Company and are set forth in Schedule 3.1(t)).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)**Private Placement**. Assuming the accuracy of Purchaser's representations and warranties set forth in Section 3.2 of this Agreement, the accuracy of the information disclosed in the Accredited Investor Questionnaire, no registration under the Securities Act is required for the offer and sale of the Shares by the Company to Purchaser under the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)**Registration Rights**. Other than as provided in the Registration Rights Agreement entered into pursuant to this Agreement, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)**No Integrated Offering**. Assuming the accuracy of Purchaser's representations and warranties set forth in Section 3.2, none of the Company, its Subsidiaries nor, to the Company's Knowledge, any of its Affiliates or any Person acting on its behalf has, directly or indirectly, at any time within the past six months, made any offers or sales of any Company security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Shares as contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)**Investment Company**. Neither the Company nor any of its Subsidiaries is required to be registered as, and is not an Affiliate of, and immediately following the Closing will not be required to register as, an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)**Unlawful Payments**. Neither the Company nor any of its Subsidiaries, nor to the Company's Knowledge, any directors, officers, employees, agents or other Persons acting at the direction of or on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries: (a) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to foreign or domestic political activity; (b) made any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (c) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (d) made any other

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unlawful bribe, rebate, payoff, influence payment, kickback or other material unlawful payment to any foreign or domestic government official or employee**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)**Off Balance Sheet Arrangements**. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other affiliated entity that is not reflected on or disclosed in the Company Financial Statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa)**Acknowledgment Regarding Purchaser's Purchase of Shares**. The Company acknowledges and agrees that Purchaser is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by Purchaser or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to Purchaser's purchase of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb)**OFAC**. Neither the Company nor any Subsidiary nor, to the Company's Knowledge, any director, officer, agent, employee, Affiliate or Person acting on behalf of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ("*OFAC*"); and the Company will not knowingly use the proceeds of the sale of the Shares towards any sales or operations in Cuba, Iran, Syria, Sudan, North Korea, Crimea Region of the Ukraine or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc)**Money Laundering Laws**. The operations of each of the Company and any Subsidiary are, and have been conducted at all times, in compliance in all material respects with the money laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the "*Money Laundering Laws*") and to the Company's Knowledge, no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company and/or any Subsidiary with respect to the Money Laundering Laws is pending or threatened.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd)**No Additional Agreements**. Except with respect to employee stock options that have been Disclosed, the Company has no agreements or understandings with any other Person to purchase shares of Common Stock or Series D Preferred Stock on terms more favorable to such Person than as set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee)**Reports, Registrations and Statements**. Since January 1, 2014, the Company and each Subsidiary have filed all material reports, registrations and statements, together with any required amendments thereto, that it was required to file with the Federal Reserve, the FDIC, the SCOCB, and any other applicable federal or state securities or banking authorities. All such reports and statements filed with any such regulatory body or authority are collectively referred to herein as the "*Company Reports*." As of their respective dates, the Company Reports complied in all material respects with all the rules and regulations promulgated by the Federal Reserve, the FDIC, the SCOCB and any other applicable foreign, federal or state securities or banking authorities, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff)**Bank Regulatory Capitalization**. As of March 31, 2017, the Bank was considered "well capitalized" under the FDIC's regulatory framework for prompt corrective action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg)**Agreements with Regulatory Agencies.** Except as set forth on Schedule 3.1(gg), neither the Company nor any Subsidiary is subject to any cease-and-desist or other similar order or

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enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or has adopted any board resolutions at the request of, any governmental entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management or its operations or business (each item in this sentence, a "*Regulatory Agreement*"), nor has the Company or any Subsidiary been advised in writing since December 31, 2015 by any governmental entity that it intends to issue, initiate, order, or request any such Regulatory Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh)**Compliance with Certain Banking Regulations**. To the Company's Knowledge, there are no facts or circumstances, and the Company has no reason to believe that any facts or circumstances exist, that would cause the Bank: (i) to be deemed not to be in satisfactory compliance with the Community Reinvestment Act and the regulations promulgated thereunder or to be assigned a CRA rating by federal or state banking regulators of lower than "satisfactory;" (ii) to be deemed to be operating in violation, in any material respect, of the Bank Secrecy Act of 1970, as amended, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (also known as the USA PATRIOT Act), any order issued with respect to anti-money laundering by OFAC, or any other anti-money laundering statute, rule or regulation; or (iii) to be deemed not to be in satisfactory compliance, in any material respect, with all applicable privacy of customer information requirements contained in any applicable federal and state privacy laws and regulations as well as the provisions of all information security programs adopted by the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)**No General Solicitation or General Advertising**. Neither the Company nor, to the Company's Knowledge, any person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj)**Mortgage Banking Business**. Except as has not had and would not reasonably be expected to have a Material Adverse Effect:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The Company and each of its Subsidiaries has complied with, and all documentation in connection with the origination, processing, underwriting and credit approval of any mortgage loan originated, purchased or serviced by the Company or any of its Subsidiaries satisfied, (A) all applicable federal, state and local laws, rules and regulations with respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing, or filing of claims in connection with mortgage loans, including all laws relating to real estate settlement procedures, consumer credit protection, truth in lending laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, (B) the responsibilities and obligations relating to mortgage loans set forth in any agreement between the Company or any of its Subsidiaries and any Agency, Loan Investor or Insurer, (C) the applicable rules, regulations, guidelines, handbooks and other requirements of any Agency, Loan Investor or Insurer and (D) the terms and provisions of any mortgage or other collateral documents and other loan documents with respect to each mortgage loan; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)No Agency, Loan Investor or Insurer has (A) claimed in writing that the Company or any of its Subsidiaries has violated or has not complied with the applicable underwriting standards with respect to mortgage loans sold by the Company or any of its Subsidiaries to a Loan Investor or Agency, or with respect to any sale of mortgage servicing rights to a Loan Investor, (B) imposed in writing restrictions on the activities (including commitment authority) of the Company or any of its Subsidiaries or (C) indicated in writing to the Company or any of its Subsidiaries that it has terminated or

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intends to terminate its relationship with the Company or any of its Subsidiaries for poor performance, poor loan quality or concern with respect to the Company's or any of its Subsidiaries' compliance with laws,

For purposes of this Section 3.1(jj): (A) "*Agency*" means the Federal Housing Administration, the Federal Home Loan Mortgage Corporation, the Farmers Home Administration (now known as Rural Housing and Community Development Services), the Federal National Mortgage Association, the United States Department of Veterans' Affairs, the Rural Housing Service of the U.S. Department of Agriculture or any other federal or state agency with authority to (i) determine any investment, origination, lending or servicing requirements with regard to mortgage loans originated, purchased or serviced by the Company or any of its Subsidiaries or (ii) originate, purchase, or service mortgage loans, or otherwise promote mortgage lending, including state and local housing finance authorities; (B) "*Loan Investor*" means any person (including an Agency) having a beneficial interest in any mortgage loan originated, purchased or serviced by the Company or any of its Subsidiaries or a security backed by or representing an interest in any such mortgage loan; and (C) "*Insurer*" means a person who insures or guarantees for the benefit of the mortgagee all or any portion of the risk of loss upon borrower default on any of the mortgage loans originated, purchased or serviced by the Company or any of its Subsidiaries, including the Federal Housing Administration, the United States Department of Veterans' Affairs, the Rural Housing Service of the U.S. Department of Agriculture and any private mortgage insurer, and providers of hazard, title or other insurance with respect to such mortgage loans or the related collateral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk)**Risk Management Instruments**. The Company and its Subsidiaries have in place risk management policies and procedures sufficient in scope and operation to protect against risks of the type and in amounts reasonably expected to be incurred by companies of similar size and in similar lines of business as the Company and its Subsidiaries. Except as has not had or would not reasonably be expected to have a Material Adverse Effect, since January 1, 2015, all derivative instruments, including, swaps, caps, floors and option agreements, whether entered into for the Company's own account, or for the account of one or more of the Subsidiaries, were entered into (1) only in the ordinary course of business, (2) in accordance with prudent practices and in all respects with all applicable laws, rules, regulations and regulatory policies and (3) with counterparties believed to be financially responsible at the time; and each of them constitutes the valid and legally binding obligation of the Company or one of the Subsidiaries, enforceable in accordance with its terms. Neither the Company nor the Subsidiaries, nor, to the Knowledge of the Company, any other party thereto, is in breach of any of its obligations under any such agreement or arrangement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll)**ERISA**. The Company and its Subsidiaries are in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("*ERISA*"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or its Subsidiaries would have any liability; the Company and its subsidiaries have not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan; " or (ii) Sections 412 or 4971 of the Code; and each "Pension Plan" for which the Company or any of its Subsidiaries would have liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(mm)**Shell Company Status**. The Company is not, and has never been, an issuer identified in Rule 144(i)(1).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(nn)**No "Bad Actor" Disqualification**. The Company has exercised reasonable care, in accordance with Commission rules and guidance, and has conducted a factual inquiry including the procurement of relevant questionnaires from each Covered Person (as defined below) or other means, the

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nature and scope of which reflect reasonable care under the relevant facts and circumstances, to determine whether any Covered Person (as defined below) is subject to any of the "bad actor" disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act ("*Disqualification Events*"). To the Company's Knowledge, after conducting such sufficiently diligent factual inquiries, no Covered Person is subject to a Disqualification Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Securities Act. "*Covered Persons*" are those persons specified in Rule 506(d)(1) under the Securities Act, including the Company; any predecessor or Affiliate of the Company; any director, executive officer, other officer participating in the offering; any general partner or managing member of the Company; any Beneficial Owner of 20% or more of the Company's outstanding voting equity securities, calculated on the basis of voting power; any promoter (as defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of the sale of the securities being offered hereunder; and any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of the Shares (a "*Solicitor*"), any general partner or managing member of any Solicitor, and any director, executive officer or other officer participating in the offering of any Solicitor or general partner or managing member of any Solicitor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(oo)**Change in Control**. Except as set forth on Schedule 3.1(oo), the issuance of the Shares to Purchaser as contemplated by this Agreement will not trigger any rights under any "change of control" provision in any of the agreements to which the Company or any of its Subsidiaries is a party, including any employment, "change in control," severance or other compensatory agreements and any benefit plan, which results in payments to the counterparty or the acceleration of vesting of benefits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(pp)**Common Control**. The Company is not and, after giving effect to the offering and sale of the Shares, will not be under the control (as defined in the BHC Act and the Federal Reserve's Regulation Y (12 CFR Part 225) ("*BHC Act Control*")) of any company (as defined in the BHC Act and the Federal Reserve's Regulation Y). The Company is not in BHC Act Control of any federally insured depository institution other than the Bank. The Bank is not under the BHC Act Control of any company (as defined in the BHC Act and the Federal Reserve's Regulation Y) other than the Company. Neither the Company nor the Bank controls, in the aggregate, more than five percent of the outstanding voting class, directly or indirectly, of any federally insured depository institution (other than the Company with respect to the Bank). The Bank is not subject to the liability of any commonly controlled depository institution pursuant to Section 5(e) of the Federal Deposit Insurance Act (12 U.S.C. § 1815(e)).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(qq)**Material Contracts**. Except as disclosed Schedule 3.1(qq), none of the Company Entities, nor any of their respective assets, businesses, or operations, is a party to, or is bound or affected by, or receives benefits under, (i) any employment, severance, termination, consulting, or retirement Contract with any Person (including current or former directors, officers, or employees of any Company Entity), (ii) any Contract relating to the borrowing of money by any Company Entity or the guarantee by any Company Entity of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds repurchase agreements, fully-secured by the United States government and government agency securities, and Federal Home Loan Bank advances incurred in the ordinary course of the Company's business, trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of the Company's business), (iii) any Contract which prohibits, limits or restricts any Company Entity or any employee of a Company Entity from engaging in any business activities in any geographic area, line of business or otherwise in competition with any other Person, (iv) any Contract involving Intellectual Property (other than Contracts entered into in the ordinary course with customers and "shrink-wrap" software licenses), (v) any Contract relating to the provision of data processing, network communication, or other technical services to or by any Company Entity, (vi) any Contract relating to the purchase or sale of any goods or services (other than Contracts entered into in the ordinary course of business involving payments under any individual Contract not in excess of $25,000), (vii) any exchange-traded or over-the-

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counter swap, forward, future, option, cap, floor, or collar financial Contract, or any other interest rate or foreign currency protection Contract not included on its balance sheet, (viii) any material Contract that would be terminable other than by a Company Entity or any Contract under which a material payment obligation of a Company Entity (or any successor(s) thereto) would arise or be accelerated, in each case as a result of the announcement or consummation of the transactions contemplated by this Agreement (either alone or upon the occurrence of any additional acts or events), (ix) any Contract or agreement that contains any (A) exclusive dealing obligation, (B) "clawback" or similar undertaking requiring the reimbursement or refund of any fees, (C) "most favored nation" or similar provision granted by any Company Entity or (D) provision that grants any right of first refusal or right of first offer or similar right or that limits or purports to limit the ability of any Company Entity to own, operate, sell, transfer, pledge or otherwise dispose of any assets or business, (x) any material Contract or agreement that would require any consent or approval of a counterparty as a result of the consummation of the transactions contemplated by this Agreement and (xi) any contract not listed above that is material to the financial condition, results of operations or business of the Company or any other Company Entities ((i)-(xi), the "*Material Contracts*"). With respect to each Material Contract: (A) the Contract is in full force and effect; (B) no Company Entity is in material Default thereunder; (C) no Company Entity has repudiated or waived any material provision of any such Contract; (D) no other party to any such Contract is, to Company's Knowledge, in default in any respect or has repudiated or waived any material provision thereunder; and (E) no consent is required by a Material Contract for the execution, delivery, or performance of this Agreement, the issuance of the Shares, or the other transactions contemplated hereby. Except as set forth on Schedule 3.1(qq), all of the indebtedness (other than deposit liabilities) of any Company Entity for money borrowed is prepayable at any time by such Company Entity without penalty, premium or charge. The Company has made available to Purchaser, prior to the date hereof, true, correct, and complete copies of, and listed on Schedule 3.1(qq), each Material Contract to which the Company or any of its Subsidiaries is a party or subject (whether written or oral, express or implied) as of the date of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(rr)**Most Favored Nation.** Except as set forth on Schedule 3.1(rr), the Company is not a party to any agreement with any other Person with respect to the issuance or sale of Common Stock or Series D Preferred stock on terms more favorable to such other Person than the terms set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ss)**Internal Accounting Controls**. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(tt)**Application of Takeover Protections; Rights Agreements**. The Company does not currently have in place any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company. The Company and its Board of Directors have taken all action necessary to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to Purchaser as a direct consequence of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Shares and any Purchaser's ownership of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(uu)**Support Agreements**. Each of the (i) directors and executive officers of the Company who is a Beneficial Owner of any shares of Common Stock, and (ii) holders of Common Stock

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whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding as of the date hereof has executed and delivered to the Company a Support Agreement in the form attached hereto as Exhibit I.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vv)**Employment Agreements**. The Company has entered into employment agreements with Stephen R. Stone and Anthony P. Valduga in the forms provided in the Data Room and has provided copies of such executed employment agreements to Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ww)**No Undisclosed Liabilities**. There are no material liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable, or otherwise, except for (i) liabilities appropriately reflected or reserved against in accordance with GAAP in the Company's audited consolidated balance sheet for the year ended December 31, 2016, and (ii) liabilities that have arisen in the ordinary and usual course of business and consistent with past practice since December 31, 2016, except for such liabilities that have not had and would not reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xx)**Investor Presentation**. The Investor Presentation did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2**Representations and Warranties of Purchaser**. Purchaser hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Organization; Authority**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)If Purchaser is an entity, it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, partnership, limited liability company or other applicable similar power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. If Purchaser is an entity, the execution, delivery and performance by Purchaser of the applicable Transaction Documents to which it is a party and the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or, if Purchaser is not a corporation, such partnership, limited liability company or other applicable like action, on the part of Purchaser. If Purchaser is an entity, each of the applicable Transaction Documents to which it is a party has been duly executed by Purchaser, and when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)If Purchaser is not an entity, the execution, delivery and performance by Purchaser of the applicable Transaction Documents to which it is a party and the transactions contemplated by this Agreement have been duly authorized. Each of the applicable Transaction Documents to which Purchaser is a party has been duly executed by Purchaser, and when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**No Conflicts**. The execution, delivery and performance by Purchaser of this Agreement and the consummation by Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of Purchaser (if such Purchaser is an entity), (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Purchaser is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Purchaser to perform its obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Investment Intent**. Purchaser understands that the Shares are "restricted securities" and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Shares as principal for its own account and not with a view to, or for distributing or reselling such Shares or any part thereof in violation of the Securities Act or any applicable state securities laws, *provided, however*, that by making the representations herein, Purchaser does not agree to hold any of the Shares for any minimum period of time and reserves the right at all times to sell or otherwise dispose of all or any part of such Shares under an exemption from such registration and in compliance with applicable federal and state securities laws. Purchaser is acquiring the Shares hereunder in the ordinary course of its business. Purchaser does not presently have any agreement, plan or understanding, directly or indirectly, with any Person to distribute or effect any distribution of any of the Shares (or any securities which are derivatives thereof) to or through any person or entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Purchaser Status**. At the time Purchaser was offered the Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501(a) under the Securities Act. Purchaser has provided the information in the Accredited Investor Questionnaire attached hereto as Exhibit H.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Reliance**. The Company will be entitled to rely upon this Agreement and is irrevocably authorized to produce this Agreement or a copy hereof to (A) any regulatory authority having jurisdiction over the Company and its affiliates and (B) any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby, in each case, to the extent required by any court or governmental authority to which the Company is subject, provided that the Company provides Purchaser with prior written notice of such disclosure to the extent practicable and allowed by applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**General Solicitation**. Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other form of "general solicitation" or "general advertising" (as such terms are used in Regulation D promulgated under the Securities Act and interpreted by the Commission).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Direct Purchase**. Purchaser is purchasing the Shares directly from the Company and not from the Placement Agents. The Placement Agents did not make any representations or warranties to Purchaser, express or implied, regarding the Shares, the Company or the Company's offering of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Experience of Purchaser**. Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. Purchaser is capable of protecting its own interests in connection with this investment and has experience as an investor in securities of companies like the

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Company. Purchaser is able to hold the Shares indefinitely if required, is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment. Further, Purchaser understands that no representation is being made as to the future trading value or trading volume of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Access to Information**. Purchaser is sufficiently aware of the Company's business affairs and financial condition to reach an informed and knowledgeable decision to acquire the Shares. Purchaser acknowledges that it has had the opportunity to (i) ask such questions as it has deemed necessary of, and to receive answers from, management and representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares and any such questions have been answered to Purchaser's reasonable satisfaction; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Purchaser has received all information it deems appropriate for assessing the risk of an investment in the Shares. Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Shares. Purchaser acknowledges that neither the Company nor the Placement Agents have made any representation, express or implied, with respect to the accuracy, completeness or adequacy of any available information except that the Company has made the express representations and warranties contained in Section 3.1 of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Brokers and Finders**. No Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**Independent Investment Decision**. Purchaser has independently evaluated the merits of its decision to purchase Shares pursuant to the Transaction Documents, and Purchaser confirms that it has not relied on the advice of the Company or the Placement Agents (or any of their respective agents, counsel or Affiliates) or any Other Purchaser or Other Purchaser's business and/or legal counsel in making such decision. Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company (including, without limitation, by the Placement Agents) to Purchaser in connection with the purchase of the Shares constitutes legal, regulatory, tax or investment advice. Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Shares. Purchaser understands that the Placement Agents have acted solely as the agents of the Company in this placement of the Shares and Purchaser has not relied on the business, legal or regulatory advice of the Placement Agents or any of their agents, counsel or Affiliates in making its investment decision hereunder, and confirms that none of such Persons has made any representations or warranties to Purchaser in connection with the transactions contemplated by the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Reliance on Exemptions**. Purchaser understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Purchaser's compliance with, the representations, warranties, agreements, acknowledgements and understandings of Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of Purchaser to acquire the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**No Governmental Review**. Purchaser understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or

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endorsement of the Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Residency**. Purchaser's residence (if an individual) or office in which its investment decision with respect to the Shares was made (if an entity) are located at the address immediately below Purchaser's name on its signature page hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)**Antitrust and Other Consents, Filings, Etc**. Assuming the accuracy of the Company's representations and warranties regarding its capitalization, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any governmental entity or authority or any other person or entity in respect of any law or regulation, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder, is necessary or required to be obtained or made by Purchaser, and no lapse of a waiting period under law applicable to Purchaser is necessary or required, in each case in connection with the execution, delivery or performance by Purchaser of this Agreement or the purchase of the Shares contemplated hereby, other than (1) providing any information to the Federal Reserve, Reserve Bank, and/or SCOCB to obtain a Non-Control Determination and (2) passivity and/or anti-association commitments that may be required by the Federal Reserve or Reserve Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)**Trading**. Purchaser acknowledges that there is not currently an established trading market for the Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)**OFAC and Anti-Money Laundering**. Purchaser understands, acknowledges, represents and agrees that (i) Purchaser is not the target of any sanction, regulation, or law promulgated by OFAC, the Financial Crimes Enforcement Network or any other U.S. governmental entity ("*U.S. Sanctions Laws*"); (ii) Purchaser is not owned by, controlled by, under common control with, or acting on behalf of any person that is the target of U.S. Sanctions Laws; (iii) Purchaser is not a "foreign shell bank" and is not acting on behalf of a "foreign shell bank" under applicable anti-money laundering laws and regulations; (iv) Purchaser's entry into this Agreement or consummation of the transactions contemplated hereby will not contravene U.S. Sanctions Laws or Money Laundering Laws; (v) to the extent permitted under applicable law, if requested by the Company in writing, Purchaser will promptly provide to the Company or any regulatory or law enforcement authority such information or documentation as may be required to comply with U.S. Sanctions Laws or Money Laundering Laws; and (vi) the Company may provide to any regulatory or law enforcement authority information or documentation regarding, or provided by, Purchaser for the purposes of complying with U.S. Sanctions Laws or Money Laundering Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)**Knowledge as to Conditions**. Purchaser does not have knowledge of any circumstance that will prohibit Purchaser from obtaining a Non-Control Determination or any other regulatory approvals required for Purchaser to consummate the transactions contemplated by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)**Bank Holding Company Status**. Purchaser has not or is not acting in concert with any other Person in connection with the transactions contemplated by this Agreement, other than Affiliates of Purchaser identified by Purchaser to the Company as Affiliates. Assuming the accuracy of the representations and warranties of the Company contained herein, Purchaser, either acting alone or together with any other Person will not, directly or indirectly, own, control or have the power to vote, immediately after giving effect to its purchase of the Shares pursuant to this Agreement, in excess of 9.9% of the outstanding shares of the Company's voting stock of any class or series. Without limiting the foregoing, assuming the accuracy of the representations and warranties of the Company contained herein, Purchaser represents and warrants that it does not and will not as a result of its purchase or holding of the purchased Shares or any other securities of the Company have "control" of the Company or the Bank, and has no

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present intention of acquiring "control" of the Company or the Bank, for purposes of the BHC Act or the CIBC Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)**Not Acting in Concert**. (i) Purchaser has not entered into any other agreements or understandings with any Other Purchasers in respect of the Transaction, including any agreements or understandings regarding the voting or transfer of securities of the Company, and has not induced or been induced by any Other Purchaser to enter into any such other agreement; (ii) Purchaser has not shared with or received from any Other Purchaser or potential investor (nor any such Other Purchaser's or potential investor's agents, Affiliates or advisors) any proprietary due diligence materials in connection with or related to Purchaser's acquisition of Shares; (iii) Purchaser has not induced or been induced by any Other Purchaser to purchase the Shares or enter into this Agreement; (iv) Purchaser is not an Affiliate of any Other Purchaser, and to Purchaser's knowledge, Purchaser has not be advised or managed by an advisor or manager that advises or manages any Other Purchaser; (v) Purchaser has not paid, and does not have any agreement or informal understanding to pay, any fees to any Other Purchasers in connection with the transactions contemplated by this Agreement; (vi) Purchaser has not, as part of a group consisting of substantially the same Persons comprising the Other Purchasers, engaged in any additional business activities or ventures in the United States; and (vii) the number of Shares that Purchaser has elected to acquire was not directly based on the number of shares acquired by any Other Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3The Company and Purchaser acknowledge and agree that no party to this Agreement has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Article III and the Transaction Documents**.**

**Article IV** **OTHER AGREEMENTS OF THE PARTIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1**Transfer Restrictions**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Compliance with Laws**. Notwithstanding any other provision of this Article IV, Purchaser covenants that the Shares may be disposed of only pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act, or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and in compliance with any applicable state, federal or foreign securities laws. In connection with any transfer of the Shares other than (i) pursuant to an effective registration statement or (ii) to the Company, the Company may require the transferor thereof to provide to the Company and the Transfer Agent, at the transferor's expense, an opinion of counsel selected by the transferor and reasonably acceptable to the Company and the Transfer Agent, the form and substance of which opinion shall be reasonably satisfactory to the Company and the Transfer Agent, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. As a condition of transfer (other than pursuant to clauses (i) or (ii) of the preceding sentence), any such transferee shall agree in writing to be bound by the terms of this Agreement and the Prior Notice Letter and be required to provide the Transfer Agent with the Transferee Letter, and such transferee shall have the rights of Purchaser under this Agreement and the Registration Rights Agreement with respect to such transferred Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Legends**. Certificates evidencing the Shares shall bear any legend as required by the "blue sky" laws of any state and a restrictive legend in substantially the following form (and, with respect to Shares held in book-entry form, the Transfer Agent will record such a legend on the share register), until such time as they are not required under Section 4.1(c) or applicable law:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE

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SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT.

UNTIL THE THIRD ANNIVERSARY OF THE ISSUANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE, THE HOLDER OF THIS CERTIFICATE MUST COMPLY WITH THE NOTICE REQUIREMENT SET FORTH IN THAT CERTAIN STOCK PURCHASE AGREEMENT DATED JULY 28, 2017 (THE "STOCK PURCHASE AGREEMENT"), COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE COMPANY OR ANY SUCCESSOR THERETO, PRIOR TO ANY PURCHASE OR SALE OF SHARES.

UNTIL THE THIRD ANNIVERSARY OF THE ISSUANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE, PRIOR TO ANY TRANSFER OF THESE SHARES, THE PROPOSED TRANSFEREE MUST EXECUTE AND DELIVER TO THE COMPANY'S TRANSFER AGENT A PURCHASER REPRESENTATION LETTER IN ACCORDANCE WITH THE STOCK PURCHASE AGREEMENT, A COPY OF WHICH IS ON FILE WITH AND MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Removal of Legends**. Upon the written request of the holder, the first paragraph of the restrictive legend set forth in Section 4.1(b) above shall be removed and the Company shall issue a certificate without such portion of the restrictive legend to the holder of the applicable Shares upon which it is stamped, if (i) such Shares are registered for resale under the Securities Act or (ii) such Shares are eligible for sale without restriction under Rule 144(d)(1)(ii). Upon the written request of the holder at any time following the third anniversary of the Closing Date, the second and third paragraphs of the restrictive legend set forth in Section 4.1(b) above shall be removed and the Company shall issue a certificate without such portion of the restrictive legend to the holder of the applicable Shares upon which it is stamped. Following the earlier of (x) the effective date of a registration statement filed pursuant to the Securities Act that includes such Shares or (y) such Shares becoming eligible for sale without restriction under Rule 144(d)(1)(ii), the Company, upon the written request of the holder, shall instruct the Transfer Agent to remove the first paragraph of the restrictive legend from such holder's Shares and shall cause its counsel to issue any legend removal opinion required by the Transfer Agent. Following the third anniversary of the Closing Date, the Company, upon the written request of the holder, shall instruct the Transfer Agent to

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remove the second paragraph of the restrictive legend from such holder's Shares and shall cause its counsel to issue any legend removal opinion required by the Transfer Agent. Any fees (with respect to the Transfer Agent, Company counsel or otherwise) associated with the issuance of such opinion or the removal of such legend shall be borne by the Company. If a legend is no longer required pursuant to the foregoing, the Company will no later than three (3) Business Days following the delivery by Purchaser to the Company or the Transfer Agent (with notice to the Company) of a legended certificate or instrument representing such Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) (such third Business Day, the "*Legend Removal Date*") deliver or cause to be delivered to Purchaser a certificate or instrument (as the case may be) representing such Shares that is free from all restrictive legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.1(c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)The Company and Purchaser acknowledge that the Company has valuable NOL carry-forwards, the use of which would be limited if the Company were to experience an "ownership change" under Section 382 of the Code as a result of the transfer of the Shares issuable hereunder (or upon conversion of the Shares into the Underlying Shares), and accordingly, until the third anniversary of the Closing, Purchaser (i) agrees to consult with the Company at least 10 days prior to any proposed purchase or sale of Shares regarding the potential adverse tax impact that the purchase or sale could have on the NOLs and (ii) acknowledges that any prospective transferee of the Shares will be required to provide the Transfer Agent with a representation letter substantially in the form of the Transferee Letter**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Acknowledgement**. Purchaser acknowledges its primary responsibilities under the Securities Act and accordingly will not sell or otherwise transfer the Shares or any interest therein without complying with the requirements of the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2**Acknowledgment of Dilution**. The Company acknowledges that the issuance of the Shares may result in dilution of the outstanding shares of Common Stock. The Company further acknowledges that its obligations under this Agreement, including without limitation its obligation to issue the Shares pursuant to this Agreement, are unconditional (except as otherwise set forth herein) and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other shareholders of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3**Form D and Blue Sky**. The Company agrees to timely file a Form D with respect to the Shares as required under Regulation D. Purchaser agrees to timely provide Company with any and all needed information in connection with Company's preparation and filing of a Form D. The Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Shares for sale to the Purchaser at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States (or to obtain an exemption from such qualification). The Company shall make all filings and reports relating to the offer and sale of the Shares required under applicable securities or "Blue Sky" laws of the states of the United States following the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4**No Integration**. The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that will be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities Act of the sale of the Shares to the Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5**Indemnification**.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Indemnification of Purchaser**. The Company will indemnify and hold Purchaser and its directors, officers, stockholders, members, partners, employees, agents and investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, Agents, stockholders, agents, members, partners, employees, agents or investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a "*Purchaser Party*") harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation (collectively, "Losses") that any such Purchaser Party may suffer or incur as a result of (i) any breach of any of the representations and warranties made by the Company in this Agreement or in the other Transaction Documents, (ii) any covenant or agreement made by the Company in this Agreement or in the other Transaction Documents or (iii) any action instituted against a Purchaser Party in any capacity, or any of them or their respective Affiliates, by any shareholder of the Company or any other Person who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by this Agreement. The Company will not be liable to any Purchaser Party under this Agreement to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party's breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Conduct of Indemnification Proceedings**. Promptly after receipt by any Purchaser Party of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 4.5(a), such Purchaser Party shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Purchaser Party, and shall assume the payment of all fees and expenses; *provided, however*, that the failure of any Purchaser Party so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is actually and materially and adversely prejudiced by such failure to notify. In any such proceeding, any Purchaser Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party unless: (i) the Company and the Purchaser Party shall have mutually agreed to the retention of such counsel; (ii) the Company shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Purchaser Party in such proceeding; or (iii) in the reasonable judgment of counsel to such Purchaser Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Without the prior written consent of the Purchaser Party, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Purchaser Party is or could have been a party and indemnity could have been sought hereunder by such Purchaser Party, unless such settlement includes an unconditional release of such Purchaser Party from all liability arising out of such proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Limitation on Amount of Company's Indemnification Liability**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Tipping Basket. Except as provided otherwise in 4.5(c)(iii), the Company will not be liable for Losses that otherwise are indemnifiable under Section 4.5(a)(i) until the total of all Losses under Section 4.5(a)(i) incurred by Purchaser exceeds $200,000.00, at which point the Company shall be liable for the full amount of all Losses.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Maximum. Except as provided otherwise in Section 4.5(c)(iii), the maximum aggregate liability of the Company for all Losses under Section 4.5(a) is the Subscription Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Exceptions. The provisions of Section 4.5(c)(i) and (ii) do not apply to (A) claims due to the inaccuracy of any of the representations or breach of any of the warranties of the Company in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(g), 3.1(h), 3.1(i), 3.1(t), 3.1(rr) or 3.1(tt), or (B) indemnification claims involving fraud, willful misconduct or intentional misconduct by the Company. For purposes of the indemnity contained in Section 4.5(a)(i) and Section 4.5(c), all qualifications and limitations set forth in the parties' representations and warranties as to "materiality," "Material Adverse Effect" and words of similar import shall be disregarded in determining whether there shall have been any inaccuracy in or breach of any representations and warranties in this Agreement and the Losses arising therefrom.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Exclusive Remedies**. Purchaser acknowledges and agrees that following the Closing, the indemnification provisions hereunder shall be the sole and exclusive remedies of Purchasers for any breach of the representations, warranties or covenants contained in the this Agreement, except in the case of fraud or willful breach of this Agreement or with respect to matters for which the remedy of specific performance, injunctive relief or other non-monetary equitable remedies are available. No investigation of the Company by Purchaser, whether prior to or after the date hereof, shall limit any Purchaser Party's exercise of any right hereunder or be deemed to be a waiver of any such right. The parties agree that any indemnification payment made pursuant to this Agreement shall be treated as an adjustment to the Purchase Price for tax purposes, unless otherwise required by Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6**Use of Proceeds**. The Company shall use the net proceeds from the sale of the Shares hereunder (i) to redeem the Company's outstanding Series A Preferred Stock and Series B Preferred Stock as soon as reasonably practicable following the Closing, and (ii) for general corporate purposes. In addition, a portion of the proceeds will be invested in the Bank and a portion will be retained by the Company. The Bank may use the proceeds it receives from the Company to augment its capital position, support its operations, fund future acquisitions, or for general corporate purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7**Limitation on Beneficial Ownership**. No Other Purchaser (and its Affiliates or any other Persons with which it is acting in concert) will be entitled to purchase a number of securities (including any securities into which Series D Preferred Stock are convertible) that would result in such Other Purchaser becoming, directly or indirectly, the Beneficial Owner of more than 9.9% of the number of shares of the Company's Voting Securities issued and outstanding or 33.3% of the Company's total equity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8**Certain Transactions**. The Company will not merge or consolidate into, or sell, transfer or lease all or substantially all of its property or assets to, any other party unless the successor, transferee or lessee party, as the case may be (if not the Company), expressly assumes the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9**No Additional Issuances**. Between the date of this Agreement and the Closing Date, except for the Shares being issued pursuant to this Agreement and the shares of Common Stock and Series D Preferred Stock to be issued to the Other Purchasers, the Company shall not issue or agree to issue any additional shares of Common Stock or other securities. Notwithstanding the foregoing, nothing in this Section 4.9 shall restrict the Company from issuing securities in response or pursuant to an order or directive from the Federal Reserve with respect to capital adequacy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10**Conduct of Business**.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)From the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, except as contemplated by this Agreement, the Company will, and will cause its Subsidiaries to, operate their business in the ordinary course consistent with past practice, preserve intact the current business organization of the Company, use commercially reasonable efforts to retain the services of their employees, consultants and agents, preserve the current relationships of the Company and its Subsidiaries with material customers and other Persons with whom the Company and its Subsidiaries have and intend to maintain significant relations, pay all applicable federal, state, local and foreign Taxes when due and payable (other than those Taxes the payment of which the Company challenges in good faith in appropriate proceedings and which are fully reserved for to the extent required by GAAP), maintain, renew, keep in full force and effect and preserve its rights, franchises and licenses and all permits necessary for the conduct of the business of the Company and its Subsidiaries as currently conducted, comply with all orders, writs, and decrees applicable to it and to the conduct of its business and operations, maintain all of its operating assets in their current condition (normal wear and tear excepted) and will not take or omit to take any action that would constitute a breach of Section 3.1(j).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Without limiting the generality of Section 4.10(a), from the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, except as contemplated by this Agreement or otherwise required by law, rule or regulation, or by policies imposed by any governmental entity, without the prior written consent of Purchaser (which shall not be unreasonably withheld, conditioned or delayed), the Company shall not, and it shall not permit any Subsidiary to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Enter into any significant new line of business or materially change its lending, investment, underwriting, risk and asset liability management, and other banking and operating policies, expect (A) as required by applicable law or policies imposed by any governmental entity, or (B) pursuant to a planned course of action that was previously disclosed to Purchaser or is set forth on Schedule 4.10(b)(i);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Acquire or agree to acquire by merging or consolidating with, or by purchasing a portion of the equity interests of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Make any capital expenditure in excess of $500,000 individually or

$1,000,000 in the aggregate, other than as required pursuant .to commitments entered into prior to the date of this Agreement that are set forth on Schedule 4.10(b)(iii);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)Except as set forth on Schedule 4.10(b)(iv), sell any assets in any one transaction or series of related transactions where the aggregate sales price equals or exceeds $1,000,000 or represents a discount of 20% or more from the aggregate book value of such assets less the amount of any applicable specific reserves with respect to such assets, provided that the foregoing shall not apply to any sales by the Company or any Subsidiary of the Company of single family or 1-4 family residential mortgages in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of its stock or directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its stock or any options or other rights, grants or awards with respect to the Common Stock, or enter into any contract with respect thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)Incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for the obligations of, any other Person,

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except in the ordinary and usual course of business and consistent with past practice, including as to amounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)Amend (A) its Articles of Incorporation or bylaws or similar organizational documents or (B) any term of any outstanding security issued by the Company or any Subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)Other than, in each case, in the ordinary and usual course of business and consistent with past practice or required by applicable law, grant any salary or wage increase or increase any employee benefit, including incentive or bonus payments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)Change any material accounting policies or procedures (including procedures with respect to reserves, revenue recognition, payments of accounts payable and collection of accounts receivable) used by it unless required by the Company's independent public auditors, applicable law or GAAP;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)Settle any litigation involving claims against the Company or any of its Subsidiaries resulting in monetary damages or other payments in excess of $500,000; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)Agree or commit to do any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11**Avoidance of Control**. Notwithstanding anything to the contrary in this Agreement, neither the Company nor any Subsidiary shall take any action (including, without limitation, any redemption, repurchase, rescission or recapitalization of Common Stock, or securities or rights, options or warrants to purchase Common Stock, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for Common Stock in each case, where Purchaser is not given the right to participate in such redemption, repurchase, rescission or recapitalization to the extent of Purchaser's pro rata proportion), that would cause Purchaser's ownership of any class of Voting Securities of the Company (together with the ownership by Purchaser's Affiliates (as such term is used under the BHC Act) of Voting Securities of the Company) to exceed 9.9%, in each case without the prior written consent of Purchaser, or to increase to an amount that would constitute "control" under the BHC Act, the CIBC Act or any rules or regulations promulgated thereunder (or any successor provisions) or otherwise cause Purchaser to "control" the Company under and for purposes of the BHC Act, the CIBC Act or any rules or regulations promulgated thereunder (or any successor provisions). Notwithstanding anything to the contrary in this Agreement, Purchaser (together with its Affiliates (as such term is used under the BHC Act)) shall not have the ability to purchase or exercise any voting rights of any class of securities in excess of 9.9% of the total outstanding Voting Securities of the Company, and Purchaser covenants and agrees that it shall not take any action that would cause Purchaser to exercise any voting rights of any class of security in excess of 9.9% of the total outstanding Voting Securities of the Company. In the event either the Company or Purchaser breaches its obligations under this Section 4.11 or believes that it is reasonably likely to breach such an obligation, it shall promptly notify the other parties hereto and shall cooperate in good faith with such parties to modify ownership or make other arrangements or take any other action, in each case, as is necessary to cure or avoid such breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12**Reasonable Best Efforts.** Subject to the other provisions of this Agreement, each of the Company and Purchaser agree to use their respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including using reasonable best efforts to accomplish the following: (a) the taking of all reasonable acts necessary to cause the conditions to Closing to be satisfied; (b) the making of all necessary registrations and filings and the taking of all reasonable steps

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necessary to obtain an approval, order or waiver from, or to avoid an action or proceeding by any governmental entity or third party, and the obtaining of all necessary actions or nonactions, waivers, consents and approvals from governmental entities or third parties, including the Required Approvals (c) solely with respect to the Company, redemption of its Series A Preferred Stock and Series B Preferred Stock; (d) solely with respect to the Company, the transfer of Common Stock by holders of greater than 4.9% of the company's outstanding Common Stock in accordance with Section 5.1(h) of this Agreement; (e) solely with respect to the Company, any necessary Regulatory Approvals for such redemption and transfer; (f) solely with respect to the Company, the obtaining of the Tax Opinion; (g) solely with respect to the Company, holding the Shareholder Meeting; and (h) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. Purchaser, on the one hand, and the Company, on the other hand, agrees to keep the other reasonably apprised of the status of matters referred to in this Section 4.12. The Company shall promptly furnish Purchaser with copies of written communications received by it or its Affiliates from, or delivered by any of the foregoing to, any governmental entity in respect of the transactions contemplated by this Agreement; *provided*, *that* the Company may redact any confidential information contained therein. Upon request by the Company, Purchaser shall promptly furnish the Company with copies of non- confidential written communications received by it or its Affiliates from, or delivered by any of the foregoing to, any governmental entity in respect of the transactions contemplated by this Agreement. Notwithstanding anything in this Section 4.12 or elsewhere in this Agreement to the contrary, Purchaser shall not be required to provide to any person pursuant to this Agreement any of its, its Affiliates', its investment advisor's or its or their control persons' or equity holders' nonpublic, proprietary, personal or otherwise confidential information including the identities or financial condition of limited partners, shareholders or non-managing members of Purchaser or its Affiliates or their investment advisors. The Company shall file Form Ds timely with the Commission and other jurisdictions' securities and blue sky officials and, to the extent applicable, shall cause its placement agent to timely file with FINRA all offering materials required by FINRA Rule 5123. Notwithstanding anything to the contrary in this Section 4.12, Purchaser shall not be required to perform any of the above actions if such performance would constitute or could reasonably result in any restriction or condition that Purchaser determines, in its reasonable good faith judgment, (i) is materially and unreasonably burdensome, or (ii) would reduce the benefits of the transactions contemplated hereby to Purchaser to such a degree that Purchaser would not have entered into this Agreement had such condition or restriction been known to it on the date of this Agreement (any such condition or restriction, a "*Burdensome Condition*"); for the avoidance of doubt, any requirement to disclose the identities or financial condition of limited partners, shareholders or non-managing members of Purchaser or its Affiliates or its investment advisers shall be deemed a Burdensome Condition unless otherwise determined by Purchaser in its sole discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13**[Intentionally Omitted]**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14**Shareholder Meeting**. The Company shall hold the Shareholder Meeting within sixty (60) days of the Closing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15**Warrant.** Conditioned upon the occurrence of the Closing and the approval of the Post- Closing Articles of Amendment at the Shareholder Meeting, the Company shall (a) within one (1) Business Day following the Shareholder Meeting, file the Post-Closing Articles of Amendment with the Virginia State Corporation Commission, (b) within two (2) Business Days following the Shareholder Meeting, deliver evidence to the Purchaser of the effectiveness of the Post-Closing Articles of Amendment with the Virginia State Corporation Commission, and (c) within three (3) Business Days of the effectiveness of the Post-Closing Articles of Amendment, issue the Warrant to the Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.16**Most Favored Nation**. During the period from the date of this Agreement through the date on which the Warrant is issued by the Company to the Purchaser, neither the Company nor its Subsidiaries

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shall enter into any additional, or modify any existing, agreements, arrangements or understandings with any existing or future investors in the Company or any of its Subsidiaries, including the Other Purchasers, that have the effect of establishing rights or otherwise benefiting such other investors in a manner more favorable in any material respect to such investors than the rights and benefits established in favor of Purchaser by this Agreement and the Transaction Documents, unless, in any such case, Purchaser has been provided a copy of such additional or modified agreement and Purchaser has been offered the opportunity to receive such rights and benefits of such additional or modified agreement at least ten business days prior to the execution of such additional or modified agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.17**Board Representation; Information and Access**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Company will cause one representative of Purchaser (the "*Board Representative*") to be elected or appointed to the board of directors of the Company (the "*Board of Directors*"), effective as of the Closing, subject to satisfaction of all legal and regulatory requirements regarding service and election or appointment as a director of the Company, and the board of directors of the Bank (the "*Bank Board*"), subject to all legal and regulatory requirements regarding service and election or appointment as a director of the Bank, in each case, with respect to Purchaser, so long as Purchaser, together with its Affiliates, owns the Qualifying Ownership Interest. So long as Purchaser, together with its Affiliates, has a Qualifying Ownership Interest, the Company will recommend to its shareholders the election of the Board Representative to the Board of Directors at each special meeting of the Company's shareholders or the annual meeting of the Company's shareholders, as applicable, subject to satisfaction of all legal and regulatory requirements regarding service and election or appointment as a director of the Company. If Purchaser no longer has a Qualifying Ownership Interest, Purchaser will have no further rights under Sections 4.19(a) and 4.19(b) and, at the written request of the Board of Directors, shall use commercially reasonable efforts to cause its Board Representative to resign from the Board of Directors and the Bank Board as promptly as possible thereafter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)The Board Representative shall, subject to applicable law, be one of the Company's nominees to serve on the Board of Directors**.** The Company shall use its reasonable best efforts to have the Board Representative elected as a director of the Company by the shareholders of the Company, and the Company shall solicit proxies for the Board Representative to the same extent as it does for any of its other Company nominees to the Board of Directors. The Company shall ensure, and shall cause the Bank to ensure, that the Board of Directors and the Bank Board shall have at least four members for so long as Purchaser shall have the right to appoint a Board Representative. Purchaser covenants and agrees to hold any information obtained from its Board Representative in confidence. Notwithstanding anything to the contrary contained herein, at all times when Purchaser maintains a Qualifying Ownership Interest, it shall comply in all respects with the Federal Reserve's Policy Statement on equity investments in banks and bank holding companies and any other guidance promulgated in connection with the matters addressed therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Subject to Section 4.17(a), upon the death, resignation, retirement, disqualification, or removal from office as a member of the Board of Directors or the Bank Board of its Board Representative, Purchaser shall have the right to designate the replacement for such Board Representative, which replacement shall satisfy all legal, bank regulatory and governance requirements regarding service as a director of the Company**.** The Board and the Bank Board shall use their respective reasonable best efforts to take all action required to fill the vacancy resulting therefrom with such person (including such person, subject to applicable law, being one of the Company's nominees to serve on the Board and the Bank Board), using reasonable best efforts to have such person elected as director of the Company by the shareholders of the Company and the Company soliciting proxies for such person to the same extent as it does for any of its other nominees to the Board, as the case may be.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)The Company hereby agrees that, from and after the Closing Date, for so long as Purchaser and its Affiliates in the aggregate have a Qualifying Ownership Interest, the Company shall invite a person designated by Purchaser (the "*Observer*") to attend meetings of the Board of Directors and the Bank Board (including any meetings of committees thereof on which the Board Representative is permitted to attend) in a nonvoting, nonparticipating observer capacity**.** The Observer shall not have any right to make motions or vote on any matter presented to the Board of Directors or the Bank Board or any committee thereof. The Company shall give the Observer written notice of each meeting of the Board of Directors and the Bank Board at the same time and in the same manner as the members of the Board of Directors or the Bank Board (as the case may be), shall provide the Observer with all written materials and other information given to members of the Board of Directors or the Bank Board (as the case may be) at the same time such materials and information are given to such members (provided, however, that the Observer shall not be provided any confidential supervisory information) and shall permit the Observer to attend as an observer at all meetings thereof, and in the event the Company proposes to take any action by written consent in lieu of a meeting, the Company shall give written notice thereof to the Observer prior to the effective date of such consent describing the nature and substance of such action and including the proposed text of such written consents. If Purchaser no longer has a Qualifying Ownership Interest, the Investor will have no further rights under this Section 4.17(d).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)The Board Representative shall be entitled to compensation and indemnification and insurance coverage in connection with his or her role as a director to the same extent as other directors on the Board of Directors or the Bank Board, as applicable, and shall be entitled to reimbursement for reasonable and documented out-of-pocket expenses incurred in attending meetings of the Board of Directors and the Bank Board, or any committee thereof in accordance with Company policy**.** The Company shall notify the Board Representative or the Observer, as the case may be, of all regular meetings and special meetings of the Board of Directors or the Bank Board and of all regular and special meetings of any committee of the Board of Directors or the Bank Board. The Company shall provide the Board Representative or the Observer, as the case may be, with copies of all notices, minutes, consents and other material that it provides to all members of the Board of Directors or the Bank Board (as applicable) at the same time such materials are provided to the other members.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)The Company acknowledges that the Board Representative may have certain rights to indemnification, advancement of expenses and/or insurance provided by Purchaser and/or its Affiliates (collectively, the "*Purchaser Indemnitors*")**.** The Company hereby agrees on behalf of itself and the Bank that with respect to a claim by a Board Representative for indemnification arising out his or her service as a director of the Company and/or the Bank (1) that it is the indemnitor of first resort (i.e., its obligations to the Board Representative with respect to indemnification, advancement of expenses and/or insurance (which obligations shall be the same as, but in no event greater than, any such obligations to members of the Board or the Bank Board, as applicable) are primary and any obligation of the Purchaser Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Board Representative are secondary), and (2) the Purchaser Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Board Representative against the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.18**Preemptive Rights**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**New Issuance.** Following the Closing, for so long as Purchaser holds a Qualifying Ownership Interest, if the Company proposes to issue (a "*New Issuance*") any equity (including shares of Common Stock, Non-Voting Common Stock or shares of preferred stock), or any securities, options or debt convertible or exchangeable into equity or that include an equity component (any such security, a "*New Security*"), the Company shall provide written notice of such proposed New Issuance to the Purchaser no later than fifteen (15) Business Days prior to the anticipated issuance date (the "*Preemptive Rights Notice*").

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Purchaser shall have the right to purchase for cash, at the price and on the same terms and conditions and at the same time as the New Issuance, such number of New Securities as are required to enable it to maintain its proportionate Common Stock-equivalent interest in the Company immediately prior to any such issuance of New Securities. The Preemptive Rights Notice shall set forth all material terms and conditions of the New Issuance, including the number of New Securities proposed to be issued, the issue price and the maximum number of New Securities that the Investor may purchase the New Issuance pursuant to the immediately preceding sentence. Notwithstanding anything to the contrary, herein, Purchaser shall not have any Preemptive Rights in connection with (i) any Common Stock, Series D Preferred Stock or other securities issuable upon the exercise or conversion of any securities of the Company outstanding as of the date hereof or issued or contemplated to be issued pursuant to this Agreement and the other Transaction Documents; (ii) pursuant to the granting or exercise of employee stock options, restricted stock or other stock incentives pursuant to the Company's stock incentive plans approved by the board of directors or the issuance of stock pursuant to the Company's employee stock purchase plan approved by the board of directors or similar plan where stock is being issued or offered to a trust, other entity or otherwise, for the benefit of any employees, officers or directors of the Company, in each case in the ordinary course of providing incentive compensation; or (iii) issuances of capital stock as full or partial consideration for a merger, acquisition, joint venture, strategic alliance, license agreement or other similar nonfinancing transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Limitation on Voting Securities.** Notwithstanding anything in this Section 4.18 to the contrary, upon the request of the Purchaser that the Purchaser not be issued Voting Securities in whole or in part upon the exercise of its Preemptive Rights, the Company shall cooperate with the Purchaser to modify the proposed issuance of New Securities to the Purchaser to provide for the issuance of Series D Preferred Stock, Non-Voting Common Stock or other non-voting securities in lieu of Voting Securities, provided, however, that Purchaser and the Company shall further cooperate in good faith to formulate such modification in a manner that does not inadvertently cause any other shareholder's ownership of any class of Voting Securities of the Company (together with the ownership by such other shareholder's affiliates) to exceed 9.9%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Notice.** If the information contained in the Preemptive Rights Notice constitutes material non-public information (as defined under the applicable securities laws), the Company shall deliver such Preemptive Rights Notice only to the individuals identified in Section 6.3 hereof, and shall not communicate the information to anyone else acting on behalf of Purchaser without the consent of one of the designated individuals. Purchaser shall have 20 Business Days from the date of receipt of such Preemptive Rights Notice to notify the Company in writing that it intends to exercise its rights provided in this Section 4.18 ("*Preemptive Rights*") and as to the amount of New Securities the Purchaser desires to purchase, up to the Preemptive Rights Amount). Such notice shall constitute a nonbinding indication of interest of Purchaser to purchase the amount of New Securities so specified at the price and other terms set forth in the Company's notice to it. The failure of Purchaser to respond within such 20 Business Day period shall be deemed to be a waiver of Purchaser's Preemptive Rights only with respect to the New Issuance described in the applicable Preemptive Rights Notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Purchase Mechanism.** The closing of the acceptances of the Preemptive Rights shall take place at the same time as the closing(s) under definitive agreements with other participants in the New Issuance, which in any event shall occur within ninety (90) days after the anticipated date of the New Issuance as set forth in the Preemptive Rights Notice. In the event that the New Issuance is not consummated within the time frame described above, the Company's right to consummate such New Issuance shall expire and the Company shall be required to comply with the procedures set forth in this Section 4.18 prior to any subsequent New Issuance. At the consummation of any New Issuance, the Company shall issue certificates to Purchaser promptly following payment by Purchaser of the purchase price for such exercise in accordance with the terms and conditions as specified in the Preemptive Rights

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Notice. Each of the Company and Purchaser agrees to use its commercially reasonable efforts to secure any regulatory or shareholder approvals or other consents, and to comply with any law or regulation necessary in connection with the offer, sale and purchase of, such New Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Failure of Purchaser.** In the event that Purchaser fails to exercise its rights provided in this Section 4.18 within this 20 Business Day period or, if so exercised, Purchaser is unable to consummate such purchase within the time period specified in Section 4.18 above because of its failure to obtain any required regulatory or shareholder consent or approval, the Company shall thereafter be entitled (during the period of 90 days following the conclusion of the applicable period) to sell or enter into an agreement (pursuant to which the sale of the New Securities covered thereby shall be consummated, if at all, within 90 days from the date of such agreement) to sell the New Securities not elected to be purchased pursuant to this Section 4.18 by the Purchaser or which the Purchaser is unable to purchase because of such failure to obtain any such consent or approval, at a price and upon terms no more favorable in the aggregate to the purchasers of such New Securities than were specified in the Company's notice to Purchaser. Notwithstanding the foregoing, if such sale is subject to the receipt of any regulatory or shareholder approval or consent or the expiration of any waiting period, the time period during which such sale may be consummated shall be extended until the expiration of five Business Days after all such approvals or consents have been obtained or waiting periods expired, but in no event shall such time period exceed 180 days from the date of the applicable agreement with respect to such sale. In the event the Company has not sold the New Securities or entered into an agreement to sell the New Securities within such 90-day period (or sold and issued New Securities in accordance with the foregoing within 90 days from the date of such agreement (as such period may be extended in the manner described above for a period not to exceed 180 days from the date of such agreement)), the Company shall not thereafter offer, issue or sell such New Securities without first offering such New Securities to Purchaser in the manner provided above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**Expedited Issuance; Regulatory Directive.** Notwithstanding the foregoing provisions of this Section 4.18, if a majority of the board of directors of the Company determines that the Company must issue equity or debt securities on an expedited basis, then the Company may consummate the proposed issuance or sale of such securities ("*Expedited Issuance*") and then comply with the provisions of this Section 4.18 provided that (i) the purchasers of such New Securities have consented in writing to the issuance of additional New Securities in accordance with the provisions of this Section 4.18, and (ii) the sale of any such additional New Securities under this Section 4.18 to Purchaser and any other shareholder pursuant to similar provisions in the other securities purchase agreements shall be consummated as promptly as is practicable but in any event no later than 90 days subsequent to the date on which the Company consummates the Expedited Issuance under this Section 4.18(f). Notwithstanding anything to the contrary herein, the consent of the purchasers of such New Securities shall not be required in connection with any Expedited Issuance undertaken at the written direction of the applicable federal banking regulator of the Company or the Bank. Notwithstanding anything to the contrary in this Agreement, no rights of Purchaser under this Agreement will be adversely affected solely as the result of the temporary dilution of its percentage ownership of Company securities due to an Expedited Issuance under this Section 4.18(f); *provided*, *however*, that such rights may be adversely affected from and after such time, if any, that Purchaser declines to purchase Company securities offered to Purchaser under this Section 4.18.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Non-Cash Consideration**. In the case of the offering of securities for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by the board of directors; *provided*, *however*, that such fair value as determined by the board of directors shall not exceed the aggregate market price of the securities being offered as of the date the board of directors authorizes the offering of such securities.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Cooperation**. The Company and Purchaser shall cooperate in good faith to facilitate the exercise of Purchaser's rights under this Section 4.18, including to secure any required approvals or consents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.19**Long Term Incentive Plan**. The Company may reserve up to 10% of its fully diluted Common Stock outstanding (excluding any warrants issued to Purchaser or Other Purchasers) under a Long-Term Incentive Plan ("*LTIP*"). The LTIP and all awards issued thereunder shall be administered by the Compensation Committee of the Board of Directors of the Company. Incentive Stock Options issued under the LTIP shall be time vested awards. Restricted shares or similar instruments issued under the LTIP shall have performance vesting features.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.20**Access, Information and Confidentiality**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Purchaser shall be provided with access, information, and other rights as provided in the VCOC Letter Agreement**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)From and after the date hereof and until the Closing, the Company shall, and shall cause each of its Subsidiaries to afford the officers, directors, employees, attorneys, accountants and other authorized representatives of Purchaser reasonable access to the management personnel, offices, properties, books and records of the Company and each of its Subsidiaries, other than confidential supervisory information, at such times during regular business hours as Purchaser may reasonably request upon three (3) business days' notice but not more frequently than once per calendar quarter, and shall furnish Purchaser with all financial, business, operating and other data and information (including, but not limited to, the Company's assets, properties, business and operations) that Purchaser, through its directors, officers, employees, consultants or agents, may reasonably request; provided, that nothing in this Agreement shall require the furnishing of any information prior to the Closing which would place at risk the ability of the Company or its attorneys to claim attorney-client privilege or work product privilege with respect to any third parties; provided, further, that all information obtained by Purchaser pursuant to this Section 4.20(a) shall be subject Purchaser's confidentiality obligations set forth in Section 4.20(c) of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Each party to this Agreement will hold, and will use commercially reasonable efforts to cause its respective subsidiaries and their directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a governmental entity is necessary or appropriate in connection with any necessary regulatory approval, or request for information or similar process, or unless compelled to disclose by judicial or administrative process or, based on the advice of its counsel, by other requirement of law or the applicable requirements of any governmental entity (in which case, the party permitted to disclose such information shall, to the extent legally permissible and reasonably practicable, provide the other party with prior written notice of such permitted disclosure), all nonpublic records, books, contracts, instruments, computer data and other data and information (collectively, "Information") concerning the other party hereto furnished to it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) previously known by such party on a nonconfidential basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from other sources by the party to which it was furnished), and neither party hereto shall release or disclose such Information to any other person, except its Affiliates, partners, auditors, attorneys, financial advisors, other consultants and advisors with the express understanding that such parties will maintain the confidentiality of the Information and, to the extent permitted above, to auditors and bank and securities regulatory authorities; provided, however, that (i) Purchaser is permitted to disclose Information to auditors and bank and securities regulatory authorities without prior written notice to the Company in connection with any audit or examination that does not explicitly reference the Company or this Agreement and (ii) each Purchaser may identify the Company and the number and value of such Purchaser's security holdings in the Company in accordance with applicable

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investment reporting and disclosure regulations or internal policies without prior notice to or consent from the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.21**Public Announcement.** The Company and Purchaser will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to the Transaction Documents. The Company shall not publicly disclose the name of Purchaser or any Affiliate or investment adviser of Purchaser, or include the name of Purchaser or any Affiliate or investment adviser of Purchaser in any press release or in any filing with the Commission (other than the Registration Statement) or any regulatory agency, without the prior written consent of Purchaser, except as required by federal securities law in connection with any registration statement contemplated by the Registration Rights Agreement. Whenever any party determines, based upon the advice of such party's counsel, that a public announcement or other disclosure is required by or advisable with respect to any applicable law or regulation, the parties shall discuss such disclosure with each other in good faith prior to the making of such public announcement or other disclosure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.22**Acquisition Proposals**. Between the date of this Agreement and the Closing Date, the Company shall notify Purchaser orally and in writing promptly (but in no event later than one (1) Business Day) after receipt by the Company of any proposal or offer from any Person to effect an Acquisition Proposal or any request in connection with a prospective Acquisition Proposal for non-public information relating to the Company or for access to the properties, books or records of the Company by any Person other than Purchaser and the Other Purchasers, indicating in such notice the material terms and conditions of any such proposal or offer and the identity of the Person making the proposal or offer, and thereafter shall keep Purchaser reasonably informed with respect to the status of such proposal or offer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.23**Notice of Certain Events**. Between the date of this Agreement and the Closing Date, Each party hereto shall promptly notify the other party hereto of (a) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware prior to the Closing that would constitute a violation or breach of the Transaction Documents (or a breach of any representation or warranty contained herein or therein) or, if the same were to continue to exist as of the Closing Date, would constitute the non-satisfaction of any of the conditions set forth in Sections 5.1 or 5.2 hereof, and (b) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware that would have been required to have been disclosed pursuant to the terms of this Agreement had such event, condition, fact, circumstance, occurrence, transaction or other item existed as of the date hereof; provided that delivery of any notice pursuant to this Section 4.23 shall not modify the representations, warranties, covenants, agreements or obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement. Notwithstanding the foregoing, neither party shall be required to take any action that would jeopardize such party's attorney-client privilege.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.24**Shareholder Litigation**. The Company shall promptly inform Purchaser of any claim, action, suit, arbitration, mediation, demand, hearing, investigation or proceeding ("*Shareholder Litigation*") against the Company, any of its Subsidiaries or any of the past or present executive officers or directors of the Company or its Subsidiaries that is threatened in writing or initiated by or on behalf of any shareholder of the Company in connection with or relating to the transactions contemplated hereby or by the Transaction Documents. The Company shall consult with Purchaser and keep Purchaser informed of all material filings and developments relating to any such Shareholder Litigation.

**Article V** 

**CONDITIONS PRECEDENT TO CLOSING**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1**Conditions Precedent to the Obligations of Purchaser to Purchase Shares at the Closing**. The obligation of Purchaser to acquire Shares at the Closing is subject to the fulfillment to

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Purchaser's satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by Purchaser:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Representations and Warranties**. The representations and warranties of the Company contained herein shall be true and correct as of the date when made and as of the Closing Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date, which shall have been true and correct as of the date specified therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Performance**. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**No Injunction**. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction, nor has there been any regulatory communication, that prohibits the consummation of any of the transactions contemplated by the Transaction Documents or restricts Purchaser or any of Purchaser's Affiliates from owning or voting any securities of the Company in accordance with the terms thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Consents**. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, non-objections, registrations and waivers necessary for consummation of the purchase and sale of the Shares (including all Required Approvals), all of which shall be and remain so long as necessary in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Company Deliverables**. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**Minimum Offering Amount**. The Company shall have received and accepted fully paid subscription amounts for shares of Common Stock and Series D Preferred Stock totaling not less than $60,000,000 and such amount shall be in escrow for the benefit of the Company or shall have been previously received by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Redemption of Series A and B Preferred Stock**. The Company shall have entered into an agreement with the holders of its Series A Preferred Stock and Series B Preferred Stock pursuant to which the Company would redeem all of the issued and outstanding shares of Series A Preferred Stock and Series B Preferred Stock, including all of the Company's accrued obligations thereunder, in exchange for aggregate consideration not to exceed $24,940,995 (the "*Redemption Agreement*"), which Redemption Agreement will provide for a consummation of the transactions contemplated thereby that will occur as soon as possible after Closing, and all of the conditions to the closing of the transactions contemplated by the Redemption Agreement (other than the Company's receipt of the gross proceeds of not less than $60,000,000 from private placement transactions) shall be satisfied.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Purchase of Shares held by Certain Existing Shareholders**. Each holder of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing shall have either sold to unaffiliated third parties or to the Company (in exchange for newly issued subordinated notes from the Company on terms acceptable to Purchaser) no fewer than fifty percent (50%) of their respective shares of Common Stock, and, in connection therewith, such existing shareholders shall agree to sell shares of Common Stock pursuant to purchase agreements in substantially the forms provided in the Data Room as follows: (i) each of Stephen R. Stone and Anthony P. Valduga shall purchase a minimum of 461,000 and (ii) Patrick M. Frawley shall purchase a minimum of 453,768 shares of Common Stock.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Regulatory Approvals for Redemptions**. The Company shall have obtained all necessary regulatory approvals for the transactions described in Sections 5.1(g) and 5.1(h).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Termination**. This Agreement shall not have been terminated in accordance with Section 6.15 herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**No Burdensome Condition**. Since the date hereof, there shall not be imposed any Burdensome Condition, provided, however, that for the purpose of this Section 5.1(k), a request from the Federal Reserve or Reserve Bank that Purchaser enter into customary passivity commitments shall not be considered a "Burdensome Condition."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Tax Opinion**. The Company shall have received a limited scope tax opinion (the "*Tax Opinion*") from KPMG LLP, in substantially the form attached hereto as Exhibit J, to the effect that, based on the most current information available prior to the Closing Date as provided by the Company to KPMG LLP, the transactions contemplated by this Agreement should not cause an "ownership change" within the meaning of Section 382 of the Code, and, subject to the Purchaser's execution of a customary reliance letter with KPMG LLP pursuant to which the Purchaser shall reasonably agree to KPMG LLP's standard terms and conditions, the Purchaser shall be permitted to rely on such opinion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**Ownership Limitation**. The purchase of the Shares by Purchaser shall not (i) cause Purchaser or any of its Affiliates to violate any banking regulation, (ii) require Purchaser or any of its Affiliates to file a prior notice under the BHC Act or the CIBC Act, or otherwise seek prior approval of any banking regulator (other than normal vetting procedures that may be required for the Purchaser to receive a Non-Control Determination and enter into passivity commitments and/or anti-association commitments to the Federal Reserve or Reserve Bank), (iii) require Purchaser or any of its Affiliates to become a bank holding company or otherwise serve as a source of strength for the Company or any Subsidiary or (iv) cause Purchaser, together with any other person whose Company securities would be aggregated with Purchaser's Company securities for purposes of any banking regulation or law, to collectively be deemed to own, control or have the power to vote securities which (assuming, for this purpose only, full conversion and/or exercise of such securities by Purchaser and such other Persons) would represent more than 9.9% of any class of Voting Securities of the Company outstanding at such time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Material Adverse Effect**. No Material Adverse Effect shall have occurred since the date of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)**Board of Director Reconstitution**. The Company shall have received executed resignations from seven (7) members of the boards of directors (or equivalent governing bodies) of the Company and each of its Subsidiaries in substantially the form attached hereto as Exhibit K, which resignations shall not have been rescinded or otherwise become ineffective, and the Company shall have satisfied all legal, regulatory and governance requirements such that the following individuals shall have been elected or appointed to the Boards of Directors of the Company and the Bank effective as of the Closing: Michael B. High; Boris Guten; Joe Topper; Patrick M. Frawley; and Stephen R. Stone.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)**Support Agreements**. Each of the (i) directors and executive officers of the Company who is a Beneficial Owner of any shares of Common Stock, (ii) holders of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing, (iii) the Company and (iv) the Other Purchasers shall have executed and delivered to the Company a Support Agreement in the form attached hereto as Exhibit I and copies of all such Support Agreements shall be delivered to Purchaser.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)**Registration Rights Agreement**. The Company shall have executed and delivered the Registration Rights Agreement to the Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)**Series D Articles of Amendment**. The Company shall have filed with the Virginia State Corporation Commission and the Virginia State Corporation Commission shall have issued a certificate of amendment evidencing the effectiveness of the Series D Articles of Amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)**Non-Control Determination**. Purchaser shall have received satisfactory feedback from the Federal Reserve, Reserve Bank and the SCOCB (which may be the absence of any communication from the Federal Reserve, Reserve Bank or the SCOCB, as applicable) that Purchaser will not have "control" of the Company or the Bank for purposes of the BHC Act, CIBC Act, Regulation Y or applicable state law (the "*Non-Control Determinations*").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)**Employment Agreements**. The Company shall have entered into employment agreements with Stephen R. Stone and Anthony P. Valduga in the forms provided in the Data Room and such employment agreements shall remain in effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)**VCOC Letter Agreement.** The Company shall have executed and delivered the VCOC Letter Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)**Prior Notice Letter**. Each of the (i) directors and executive officers of the Company who is a Beneficial Owner of any shares of Common Stock, (ii) holders of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing, (iii) the Company and (iv) Other Purchasers shall have executed the Prior Notice Letter (or, in the case of the Persons described in clauses (i) and (ii), a letter agreement binding such Person to covenants substantially similar to those contained in the Prior Notice Letter).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2**Conditions Precedent to the Obligations of the Company to sell Shares at the Closing**. The Company's obligation to sell and issue the Shares to Purchaser at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any of which may be waived by the Company:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Representations and Warranties**. The representations and warranties made by Purchaser in Section 3.2 hereof shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date, except for representations and warranties that speak as of a specific date, which shall have been true and correct as of the date specified therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Performance**. Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by Purchaser at or prior to the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**No Injunction**. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction, nor has there been any regulatory communication, that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Consents**. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, non-objections, registrations and waivers necessary for consummation of the purchase and sale of the Shares, all of which shall be and remain so long as necessary in full force and effect.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Purchaser Deliverables**. Purchaser shall have delivered its Purchaser Deliverables in accordance with Section 2.2(b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**Minimum Offering Amount**. The Company shall have received and accepted fully paid subscription amounts for shares of Common Stock and Series D Preferred Stock totaling not less than $60,000,000 and such amount shall be in escrow for the benefit of the Company or shall have been previously received by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Redemption of Series A and B Preferred Stock**. The Company shall have entered into the Redemption Agreement, and all of the conditions to the closing of the transactions contemplated by the Redemption Agreement (other than the Company's receipt of the gross proceeds of not less than $60,000,000 from private placement transactions) shall be satisfied.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Purchase of Shares held by Certain Existing Shareholders**. Each holder of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing shall have either sold to unaffiliated third parties or to the Company (in exchange for newly issued subordinated notes from the Company on terms acceptable to Purchaser) no fewer than fifty percent (50%) of their respective shares of Common Stock, and, in connection therewith, such existing shareholders shall agree to sell shares of Common Stock pursuant to purchase agreements in substantially the forms provided in the Data Room as follows: (i) each of Stephen R. Stone and Anthony P. Valduga shall purchase a minimum of 461,000 and (ii) Patrick M. Frawley shall purchase a minimum of 453,768 shares of Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Regulatory Approvals for Redemptions**. The Company shall have obtained all necessary regulatory approvals for the redemptions described in Sections 5.2(g) and 5.2(h).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Termination**. This Agreement shall not have been terminated in accordance with Section 6.15 herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**Tax Opinion**. The Company shall have received a limited scope tax opinion (the "*Tax Opinion*") from KPMG LLP, in substantially the form attached hereto as <u>Exhibit J</u>, to the effect that, based on the most current information available prior to the Closing Date as provided by the Company to KPMG LLP, the transactions contemplated by this Agreement should not cause an "ownership change" within the meaning of Section 382 of the Code, and, subject to the Purchaser's execution of a customary reliance letter with KPMG LLP pursuant to which the Purchaser shall reasonably agree to KPMG LLP's standard terms and conditions, the Purchaser shall be permitted to rely on such opinion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Ownership Limitation**. The purchase of the Shares by Purchaser shall not result in Purchaser, together with any other person whose Company securities would be aggregated with Purchaser's Company securities for purposes of any bank regulation or law, to collectively be deemed to own, control or have the power to vote more than 9.9% of the outstanding shares of Common Stock as of the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**Support Agreements**. Each of the (i) directors and executive officers of the Company who is a Beneficial Owner of any shares of Common Stock, (ii) holders of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing, (iii) Purchaser, and (iv) the Other Purchasers shall have executed and delivered to the Company a Support Agreement in the form attached hereto as Exhibit I.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Employment Agreements**. The Company shall have entered into employment agreements with Stephen R. Stone and Anthony P. Valduga in the forms provided in the Data Room.

**Article VI** 

**MISCELLANEOUS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1**Fees and Expenses**. Except as set forth elsewhere in the Transaction Documents, the parties hereto shall be responsible for the payment of all expenses incurred by them in connection with the preparation and negotiation of the Transaction Documents and the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, the Company will reimburse Purchaser at the Closing for all reasonable transaction expenses incurred by Purchaser in connection with the transactions contemplated by this Agreement, including due diligence, legal fees (including the preparation and review of definitive documentation and regulatory filings), travel expenses and other disbursements, subject to a maximum amount of $50,000. Notwithstanding the foregoing or anything in this Agreement to the contrary, in the event that this Agreement is terminated pursuant to Section 6.15(a)(viii), the Company will reimburse Purchaser within two (2) Business Days following such termination for all reasonable transaction expenses incurred by Purchaser in connection with the transactions contemplated by this Agreement, including due diligence, legal fees (including the preparation and review of definitive documentation and regulatory filings), travel expenses and other disbursements. The Company shall pay all amounts owed to the Placement Agents relating to or arising out of the transactions contemplated hereby. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the Shares to Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2**Entire Agreement**. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company and Purchaser will execute and deliver to the other such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3**Notices**. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or e-mail (provided the sender receives a machine-generated confirmation of successful facsimile transmission or e-mail notification or confirmation of receipt of an e-mail transmission) at the facsimile number or e-mail address specified in this Section prior to 5:00 p.m., Eastern time, on a Business Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile or e-mail at the facsimile number or e-mail address specified in this Section on a day that is not a Business Day or later than 5:00 p.m., Eastern time, on any Business Day, (c) if sent by U.S. nationally recognized overnight courier service with next day delivery specified (receipt requested) the Business Day following delivery to such courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

If to the Company CoastalSouth Bancshares, Inc.5 Bow Circle Hilton Head Island, SC 29928 Attention : Stephen R. Stone Telephone: (843) 341-9937 Facsimile: (843) 689-7835

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| | |
|:---|:---|
|  | &nbsp;&nbsp;Email: sstone@coastalstatesbank.com |
| &nbsp;&nbsp;With a copy to: | &nbsp;&nbsp;Mark C. Kanaly, Esq.<br>Alston & Bird LLP <br>One Atlantic Center <br>1201 West Peachtree Street <br>Atlanta, Georgia 30309 <br>Telephone: (404) 881-7000 <br>Facsimile: (404) 881-7777 <br>Email: Mark.Kanaly@alston.com |
| &nbsp;&nbsp; <br>If to Purchaser: | &nbsp;&nbsp; <br>To the address set forth under Purchaser's name on the signature page hereof; or such other address as may be designated in writing hereafter, in the same manner, by such Person. |

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or such other address as may be designated in writing hereafter, in the same manner, by such Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4**Amendments; Waivers; No Additional Consideration**. No amendment or waiver of any provision of this Agreement will be effective with respect to any party unless made in writing and signed by a duly authorized representative of such party. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5**Construction**. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6**Successors and Assigns**. The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their successors and permitted assigns. This Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the prior written consent of Purchaser. Purchaser may assign its rights hereunder in whole or in part to any Person to whom Purchaser assigns or transfers any of the Shares in compliance with the Transaction Documents and applicable law, provided such transferee shall agree in writing to be bound, with respect to the transferred Shares, by the terms and conditions of this Agreement that apply to the "Purchaser."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7**No Third-Party Beneficiaries**. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than, solely with respect to the provisions of Section 4.5, the Purchaser Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8**Governing Law**. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party

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hereto or its respective Affiliates, employees or agents) shall be commenced on an exclusive basis in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. **EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9**Survival**. The representations and warranties contained herein shall survive the Closing and the delivery of the Shares as follows: (i) the representations and warranties of the Company set forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(e), 3.1(f), 3.1(g), 3.1(h), 3.1(t), 3.1(rr) and 3.1(tt), and shall survive indefinitely, (ii) the representations and warranties of the Company set forth in Sections 3.1(i), 3.1(k), 3.1(ff) shall survive for the applicable statute of limitations, and (iii) all other representations and warranties of the Company set forth in Sections 3.1 shall survive for a period of eighteen (18) months following the Closing and the delivery of the Shares. All representations and warranties of Purchaser set forth in Section 3.2 shall survive for a period of 12 months following the Closing Date. All covenants and agreements of the parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10**Execution**. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11**Severability**. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.12**Replacement of Share Certificates**. If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company and the Transfer Agent of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company and the Transfer Agent

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for any losses in connection therewith or, if required by the Transfer Agent, a bond in such form and amount as is required by the Transfer Agent. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement certificate. If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.13**Remedies**. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, Purchaser and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.14**Payment Set Aside**. To the extent that the Company makes a payment or payments to Purchaser pursuant to any Transaction Document or Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.15**Termination**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)This Agreement may be terminated and the sale and purchase of the Shares abandoned at any time prior to the Closing:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)by the mutual written consent of the Company and Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)by either the Company or Purchaser upon written notice to the other, if the Closing has not been consummated on or prior to 5:00 p.m., Eastern time, on the Outside Date; *provided, however*, that the right to terminate this Agreement under this Section 6.15(a)(ii) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)by the Company or Purchaser, upon written notice to the other parties, in the event that any governmental entity shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement, and such order, decree, injunction or other action shall have become final and nonappealable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)by Purchaser, prior to the Closing, upon written notice to the Company, if there has been a breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 5.1(a) or Section 5.1(b) would not be satisfied;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)by the Company, prior to Closing, upon written notice to Purchaser, if there has been a breach of any representation, warranty, covenant or agreement made by Purchaser in this

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Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 5.2(a) or Section 5.2(b) would not be satisfied;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)by the Company or Purchaser, upon written notice to the other, if any of the conditions to the Closing set forth in Sections 5.1 or 5.2 are not capable of being satisfied on or before 5:00 p.m., Eastern time, on the Outside Date; *provided, however,* that the right to terminate this Agreement under this Section 6.5(a)(vi) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the conditions to the Closing set forth in Sections 5.1 or 5.2 to occur on or before such time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)by Purchaser, upon written notice to the Company, in the event that Purchaser receives notice that it will not receive the Non-Control Determinations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)by Purchaser, upon written notice to the Company, if the Company has entered into any agreement with respect to (A) issuing any other securities, or (b) a transaction that has resulted in, or would result in if consummated, a change in control of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)In the event of any termination of this Agreement as provided in Section 6.15, this Agreement (other than Article VI (other than Sections 6.9 and 6.17) and all applicable defined terms, which shall remain in full force and effect) shall forthwith become wholly void and of no further force and effect; provided, nothing in this Section 6.15 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The Company shall promptly notify the Purchaser if any agreements with any Other Purchaser are terminated**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.16**Rescission and Withdrawal Right**. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.17**Adjustments in Common Stock Numbers and Prices**. In the event of any stock split, reverse stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof and prior to the Closing, each reference in any Transaction Document to a number of shares or a price per share shall be deemed to be amended to appropriately account for such event.

[*Remainder of Page Intentionally Left Blank*]

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**IN WITNESS WHEREOF,** the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

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| | |
|:---|:---|
| &nbsp;&nbsp;COASTALSOUTH BANCSHARES, INC. | &nbsp;&nbsp;COASTALSOUTH BANCSHARES, INC. |
| &nbsp;&nbsp;By: | &nbsp;&nbsp; <br>*/s/ James MacLeod* |
| &nbsp;&nbsp; <br>James S. Macleod<br>Charmain and Chief Executive Officer | &nbsp;&nbsp; <br>James S. Macleod<br>Charmain and Chief Executive Officer |

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*Signature Page to Stock Purchase Agreement*

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| |
|:---|
| &nbsp;&nbsp;&nbsp;NAME OF PURCHASER<br>Patriot Financial Partners II Coastal SPU, LLC |
| &nbsp;&nbsp;&nbsp;By: |
| &nbsp;&nbsp;&nbsp;Name: |
| &nbsp;&nbsp;&nbsp;Title |
| &nbsp;&nbsp;&nbsp; <br>Aggregate Purchase Price<br>(Subscription Amount): $<u>16,870,212</u> |
| &nbsp;&nbsp;&nbsp; <br>Number of shares of Common Stock to be Acquired: <u>4,157,117</u> |
| &nbsp;&nbsp; <br>Number of shares of Series D Preferred Stock to be Acquired: <u>8,819.969</u> |
| &nbsp;&nbsp;&nbsp; <br>Number of Warrants to be Acquired: <u>1, 366,694</u> |
| &nbsp;&nbsp;&nbsp; <br>Tax ID No:  |
| &nbsp;&nbsp;&nbsp; <br>Address for Notice:  |
| &nbsp;&nbsp;&nbsp; <br>Telephone: |
| &nbsp;&nbsp;&nbsp;Facsimile: |
| &nbsp;&nbsp;&nbsp;Email: |
| &nbsp;&nbsp;&nbsp;Attention |

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Delivery Instructions:

(if different than above)

*Signature Page to Stock Purchase Agreement*

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**EXHIBITS**

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| | | |
|:---|:---|:---|
| A | **-** | Form of Warrant |
| B | **-** | Form of Registration Rights Agreement |
| C | **-** | Form of Post-Closing Articles of Amendment |
| D | **-** | Form of Series D Articles of Amendment |
| E | **-** | Form of Legal Opinion of Company Counsel |
| F | **-** | Form of Secretary's Certificate |
| G | **-** | Form of Officer's Certificate |
| H | **-** | Form of Accredited Investor Questionnaire |
| I | **-** | Form of Support Agreement |
| J | **-** | Form of Tax Opinion |
| K | **-** | Form of Director Resignations |
| L | **-** | Form of VCOC Letter Agreement |
| M | **-** | Transferee Letter |
| N | **-** | Prior Notice Letter |

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**EXHIBIT A**

Form of Warrant

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**EXHIBIT B**

Form of Registration Rights Agreement

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**EXHIBIT C**

Form of Post-Closing Articles of Amendment

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**EXHIBIT D**

Form of Series D Articles of Amendment

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**EXHIBIT E**

Form of Legal Opinion of Company Counsel

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**EXHIBIT F**

Form of Secretary's Certificate

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**EXHIBIT G**

Form of Officer's Certificate

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**<u>Exhibit H</u>**

**ACCREDITED INVESTOR QUESTIONNAIRE**

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**Exhibit I**

Form of Support Agreement

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**Exhibit J**

Form of Tax Opinion

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**Exhibit K**

Form of Director Resignations

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**Exhibit L**

Form of VCOC Letter Agreement

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**Exhibit M**

**Form of Transferee Letter**

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**Exhibit N**

**Form of Prior Notice Letter**

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## Exhibit 10.12

**EXHIBIT 10.12**

***Execution Version***

**STOCK PURCHASE AGREEMENT**

This Stock Purchase Agreement (this "*Agreement*") is dated as of July 28, 2017, by and among CoastalSouth Bancshares, Inc., a Virginia corporation (the "*Company*"), and the purchaser identified on the signature pages hereto ("*Purchaser*").

**RECITALS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.The Company and Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "*Securities Act*"), and Rule 506 of Regulation D ("*Regulation D*") as promulgated by the United States Securities and Exchange Commission (the "*Commission*") under the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.Purchaser wishes to purchase, and the Company wishes to sell, the following securities described further herein, upon the terms and conditions stated in this Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)at the Closing, shares of Common Stock, in the amount set forth below Purchaser's name on the signature page of this Agreement (which shall be collectively referred to herein as the "*Common Shares*");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)at the Closing, shares of Series D Preferred Stock, in the amount set forth below the purchaser's name on the signature page to this Agreement (which shall be collectively referred to herein as the "*Series D Preferred Shares*" and, together with the Common Shares and the shares of Common Stock underlying the Series D Preferred Shares, the "*Pre-Amendment Shares*");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)following the effectiveness of the Post-Closing Articles of Amendment, shares of Non-Voting Common Stock upon the mandatory conversion of the Series D Preferred Shares (which shall be collectively referred to herein as the "*Converted Non-Voting Common Shares*"); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)following the effectiveness of the Post-Closing Articles of Amendment, a warrant in the form attached hereto as Exhibit A (the "*Warrant*") granting Purchaser the right to purchase shares of Non-Voting Common Stock in the amount (subject to adjustment in proportion to any stock splits or reverse stock splits of the Common Stock prior to the issuance of the Warrant) set forth below Purchaser's name on the signature page of this Agreement (which shall be collectively referred to herein as the "*Warrant Non-Voting Common Shares*" and, together with the Warrant, the Converted Non-Voting Common Shares, the Warrant Non-Voting Common Shares, and the shares of Common Stock underlying each of the Converted Non-Voting Common Shares and the Warrant Non-Voting Common Shares, the "*Post Amendment Shares*", and, together with the Pre-Amendment Shares, the "*Shares*").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.Simultaneously with the sale of the Shares to Purchaser, the Company will be selling shares of Common Stock and Series D Preferred Stock to certain other purchasers (the

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"*Other Purchasers*"), which sales will also in reliance of upon the exemptions from securities registration afforded by Section 4(a)(2) of the Securities Act and Regulation D and will result in the Company raising an aggregate amount of approximately $60 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.At the Closing, the Company, Purchaser and certain of the Other Purchasers will execute and deliver a registration rights agreement, substantially in the form attached hereto as Exhibit B (the "*Registration Rights Agreement*"), pursuant to which, among other things, the Company will agree to provide certain registration rights with respect to the Shares under the Securities Act and the rules and regulations promulgated thereunder and applicable state securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.The Company and Purchaser acknowledge that the Company has valuable net operating loss ("*<u>NOL</u>*") carry-forwards, the use of which would be limited if the Company were to experience an "ownership change" under Section 382 of the Code as a result of the transfer of the Shares issuable hereunder (or upon conversion of shares of Series D Preferred Stock or Non-Voting Common Stock in to Common Stock), and accordingly, the Company and Purchaser further acknowledge that any prospective transferee of the Shares will be required to provide the Transfer Agent with a representation letter substantially in the form attached hereto as <u>Exhibit M</u> (the "*Transferee Letter*") and that each of the stock certificates issued in connection with this offering will contain a legend to ensure that a prospective transferee is aware of this requirement. In addition, at the Closing, the Company and Purchaser will execute and deliver a letter agreement, substantially in the form attached hereto as <u>Exhibit N</u> (the "*Prior Notice Letter*"), pursuant to which, among other things, the Purchasers will agree to consult with the Company at least 10 days prior to any proposed purchase or sale of Shares regarding the potential adverse tax impact that the purchase or sale could have on the NOLs and, if requested by the Company, to provide to the other party to the proposed purchase or sale any disclosure prepared by the Company describing the potential adverse tax impact.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.The Company has engaged Sandler O'Neill & Partners and Hovde Group, LLC as its placement agents (the "*Placement Agents*") for the offering of Common Stock.

**NOW, THEREFORE,** in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and Purchaser hereby agree as follows:

**Article I** **<br>DEFINITIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.**Definitions**. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:

"*Action*" means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or, to the Company's Knowledge, threatened in writing against the Company, any Subsidiary or any of their respective properties or any officer, director or employee of the Company or any Subsidiary acting in his or her capacity as an officer, director or employee before or by any federal, state, county, local or foreign court,

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arbitrator, governmental or administrative agency, regulatory authority, stock market, stock exchange or trading facility.

"*Acquisition Proposal*" means a written offer or proposal involving the Company or any of its Subsidiaries with respect to: (i) any merger, reorganization, consolidation, share exchange, share issuance, recapitalization, business combination, liquidation, dissolution or other similar transaction involving any sale, issuance, lease, exchange, mortgage, pledge, transfer or other disposition of, all or a material portion of the assets or equity securities or deposits of, the Company or any of its Subsidiaries, in a single transaction or series of related transactions; (ii) any tender offer or exchange offer for all or a material portion of the outstanding shares of capital stock of the Company or any of its Subsidiaries; or (iii) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

"*Affiliate*" means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act.

"*Agreement*" shall have the meaning ascribed to such term in the Preamble.

"*Articles of Incorporation*" means the Articles of Incorporation of the Company and all amendments thereto, as the same may be amended from time to time, including, without limitation, the Post-Closing Articles of Amendment.

"*Bank*" means CoastalStates Bank, a South Carolina state-chartered commercial bank. "*Beneficially Own(s)*" means the act of having Beneficial Ownership of a security or being the Beneficial Owner thereof.

"*Beneficial Owner*" means a Person who has Beneficial Ownership of a security.

"*Beneficial Ownership*" means, with respect to any security, the power to directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares (a) voting power, which includes the power to vote, or to direct the voting of, such security; and/or (b) investment power, which includes the power to dispose, or to direct the disposition of, such security.

"*BHC Act*" has the meaning set forth in Section 3.1(a).

"*BHC Act Control*" has the meaning set forth in Section 3.1(pp).

"*Burdensome Condition*" has the meaning set forth in Section 4.12.

"*Business Day*" means a day, other than a Saturday or Sunday, on which banks in South Carolina are open for the general transaction of business.

"*Closing*" means the closing of the purchase and sale of the Shares pursuant to this Agreement.

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"*Closing Date*" means the third Business Day following the date that Purchaser and all Other Purchasers have obtained Non-Control Determinations, provided that all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all of the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied or waived, as the case may be, or such other date as the parties may agree, or such other date as the Parties may agree in writing.

"*CIBC Act*" means the Change in Bank Control Act of 1978, as amended.

"*Code*" means the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder.

"*Commission*" has the meaning set forth in the Recitals.

"*Common Shares*" has the meaning set forth in the Recitals.

"*Common Stock*" means the shares of voting common stock, par value $1.00 per share, of the Company, and also includes any securities into which the Common Stock may hereafter be reclassified or changed.

"*Company*" shall have the meaning ascribed to such term in the Preamble.

"*Company Counsel*" means Alston & Bird LLP.

"*Company Deliverables*" has the meaning set forth in Section 2.2(a).

"*Company Entity*" means, collectively, the Company and each of its Subsidiaries.

"*Company Financial Statements*" has the meaning set forth in Section 3.1(h).

"*Company Reports*" has the meaning set forth in Section 3.1(ee).

"*Company's Knowledge*" means with respect to any statement made to the knowledge of the Company, that the statement is based upon the actual knowledge after reasonable inquiry of the executive officers of the Company.

"*Contract*" means any written or oral agreement, arrangement, authorization, commitment, contract, indenture, instrument, lease, license, obligation, plan, practice, restriction, understanding, or undertaking of any kind or character, or other document to which any Person is a party or that is binding on any Person or its capital stock, assets or business.

"*Control*" (including the terms "controlling," "controlled by" or "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

"*Covered Person*" has the meaning set forth in Section 3.1(nn).

"*Converted Non-Voting Common Shares*" has the meaning set forth in the Recitals.

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"*Data Room*" means the virtual data room established for the purpose of sharing due diligence materials with respect to the Company.

"*Disclosed*" means, with respect to any matter, that it has been described in the Schedules.

"*Disqualification Event*" has the meaning set forth in Section 3.1(nn).

"*DTC*" means The Depository Trust Company.

"*Environmental Laws*" has the meaning set forth in Section 3.1(k).

"*ERISA*" has the meaning set forth in Section 3.1(ll).

*"Escrow Agent"* has the meaning set forth in Section 2.1(c).

*"Escrow Agreement"* has the meaning set forth in Section 2.1(c).

"*Exchange Act*" means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

"*Expedited Issuance*" has the meaning set forth in Section 4.18(f).

"*FDIC*" means the Federal Deposit Insurance Corporation.

"*Federal Reserve*" means the Board of Governors of the Federal Reserve System.

"*GAAP*" means U.S. generally accepted accounting principles, as applied by the Company.

"*Intellectual Property*" has the meaning set forth in Section 3.1(q).

"*Investor Presentation*" means the Project Freebird Common Equity Offering investor presentation, including the appendix thereto, dated February 2017 and the supplements thereto, dated March 2017, March 30, 2017 and June 2017.

"*Legend Removal Date*" has the meaning set forth in Section 4.1(c).

"*Lien*" means any lien, charge, claim, encumbrance, security interest, right of first refusal, preemptive right or other restrictions of any kind.

"*Material Adverse Effect*" means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, properties, business, condition (financial or otherwise) or prospects of the Company and the Subsidiaries, taken as a whole, or (iii) any adverse impairment to the Company's ability to perform in any material respect on a timely basis its obligations under any Transaction Document; provided, however, that "Material Adverse Effect" shall not include the impact of (A) changes in banking, tax and similar laws of general applicability or interpretations thereof by any applicable governmental authority, (B) changes in GAAP or regulatory accounting requirements applicable to banks and their holding companies generally, (C) changes in general economic conditions, including interest rates, affecting banks generally, or (D) the effects of any

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action or omission taken by the Company or the Bank with the prior written consent of Purchaser, except, with respect to clauses (A), (B) and (C), to the extent that the effect of such changes has a disproportionate impact on the Company and the Subsidiaries, taken as a whole, relative to other similarly situated banks and their holding companies generally.

"*Material Contract*" has the meaning set forth in Section 3.1(qq).

"*Material Permits*" has the meaning set forth in Section 3.1(o).

"*Money Laundering Laws*" has the meaning set forth in Section 3.1(cc).

"*New Issuance*" has the meaning set forth in Section 4.18(a).

"*New Security*" has the meaning set forth in Section 4.18(a).

"*New York Courts*" means state or federal courts located in the city of New York, New York.

"*NOL*" has the meaning set forth in the Recitals.

"*Non-Control Determinations*" has the meaning set forth in Section 5.1(s).

"*Non-Voting Common Stock*" means the non-voting common stock of the Company, par value $1.00 per share, authorized by and subject to the terms and conditions of the Post-Closing Articles of Amendment, which is subject to the terms and conditions of the Post-Closing Articles of Amendment, convertible into shares of Common Stock.

"*OFAC*" has the meaning set forth in Section 3.1(bb).

"*Other Purchasers*" has the meaning set forth in the recitals.

"*Outside Date*" means one hundred twenty (120) days following the date of this Agreement; provided that if such day is not a Business Day, the first day following such day that is a Business Day.

"*Person*" means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

"*Placement Agents*" has the meaning set forth in the Recitals.

"*Post Amendment Shares*" has the meaning set forth in the Recitals.

"*Post-Closing Articles of Amendment*" means the Articles of Amendment to the Company's Articles of Incorporation substantially in the form attached hereto as Exhibit C.

*"Pre-Amendment Shares*" has the meaning set forth in the Recitals.

"*Preemptive Rights*" has the meaning set forth in Section 4.18(c).

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"*Preemptive Rights Notice*" has the meaning set forth in Section 4.18(a).

"*Prior Notice Letter*" has the meaning set forth in the Recitals.

"*Proceeding*" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

"*Purchaser Party*" has the meaning set forth in Section 4.5(a).

"*Purchase Price*" means $1.30 per share of Common Stock and $1,300.00 per share of Series D Preferred Stock.

"*Purchaser*" shall have the meaning ascribed to such term in the Preamble.

"*Purchaser Deliverables*" has the meaning set forth in Section 2.2(b).

"*Purchaser Party*" has the meaning set forth in Section 4.5(a).

"*Qualifying Ownership Interest*" means, with respect to Purchaser, ownership by Purchaser together with its Affiliates, of either in the aggregate 50% or more of all of the Shares purchased by such Purchaser and its Affiliates under this Agreement or, in the aggregate, 4.9% or more of the Common Stock then outstanding (provided that, in making such calculation, (i) all shares of Common Stock into or for which shares of any securities owned by such Purchaser and its Affiliates are directly or indirectly convertible or exercisable (which, for the avoidance of doubt, shall include those shares of Common Stock and Non-Voting Common Stock issuable upon the conversion of shares of Series D Preferred Stock), shall be included in the numerator, (ii) the shares described in clause (i) and all such shares owned by or attributed to Other Purchasers shall be included in the denominator, and (iii) all securities issued by the Company after the Closing Date other than in connection with an issuance in which Purchaser was offered the right to purchase its pro rata portion of such securities in accordance with Section 4.20 shall be excluded from the denominator.

"*Registration Rights Agreement*" has the meaning set forth in the Recitals.

"*Regulation D*" has the meaning set forth in the Recitals.

"*Regulatory Agreement*" has the meaning set forth in Section 3.1(gg).

"*Required Approvals*" has the meaning set forth in Section 3.1(e).

"*Reserve Bank*" means the Federal Reserve Bank of Richmond.

"*Rule 144*" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

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"*Schedules*" means the disclosure schedules delivered by the Company to Purchasers herewith. "*SCOCB*" means the Office of the Commissioner of Banking of South Carolina.

"*Secretary's Certificate*" has the meaning set forth in Section 2.2(a)(iv).

"*Securities Act*" has the meaning set forth in the Recitals.

"*Series A Preferred Stock*" means the Fixed Rate Cumulative Preferred Stock, Series A of the Company.

"*Series B Preferred Stock*" means the Fixed Rate Cumulative Preferred Stock, Series B of the Company.

"*Series D Articles of Amendment*" means the Articles of Amendment to the Company's Articles of Incorporation designating the Series D Preferred Stock in the form attached hereto as Exhibit D.

"*Series D Preferred Shares*" has the meaning set forth in the recitals.

"*Series D Preferred Stock*" means a newly-issued series of convertible perpetual preferred stock, Series D, par value $1.00 per share, of the Company, which, subject to the terms and conditions of the Series D Articles of Amendment, is convertible into shares of Common Stock and, following the effectiveness of the Post-Closing Articles of Amendment, is mandatorily convertible into shares of Non-Voting Common Stock.

"*Shareholder Meeting*" means the meeting of the Company's shareholders to be held within sixty (60) days following the Closing for the purpose of, among other things, authorizing a 10 for 1 reverse stock split and approving the Post-Closing Articles of Amendment.

"*Shares*" has the meaning set forth in the Recitals.

"*Solicitor*" has the meaning set forth in Section 3.1(nn).

"*South Carolina Courts*" means the state and federal courts sitting in the State of South Carolina.

"*Subscription Amount*" means the aggregate amount to be paid for the Shares purchased hereunder as indicated on Purchaser's signature page to this Agreement next to the heading "Aggregate Purchase Price (Subscription Amount)."

"*Subsidiary*" means any entity in which the Company, directly or indirectly, owns sufficient capital stock or holds a sufficient equity or similar interest such that it is required by GAAP to be consolidated with the Company in the financial statements of the Company.

"*Tax*" means any and all domestic or foreign, federal, state, local or other taxes, customs, duties, governmental fees or other like assessments or charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any governmental entity, including taxes on or with respect to income, franchises,

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windfall or other profits, gross receipts, property, transfer, sales, use, license, alternative or add on minimum, escheatment or unclaimed property, capital stock, payroll, employment, unemployment, social security, workers' compensation or net worth, and taxes in the nature of excise, withholding, ad valorem or value added or similar taxes.

"*Tax Opinion*" has the meaning set forth in Section 5.1(l).

"*Transaction Documents*" means this Agreement, the Schedules and Exhibits attached hereto, and any other documents or agreements executed by the Company or Purchaser in connection with the transactions contemplated hereunder.

"*Transfer Agent*" means Computershare, or any successor transfer agent for the Company.

"*Transferee Letter*" has the meaning set forth in the Recitals.

"*U.S. Sanctions Laws*" has the meaning set forth in Section 3.2(q).

"*VCOC Letter Agreement*" means the letter agreement in the form attached hereto as Exhibit L, dated as of the Closing Date, between the Company and Purchaser.

"*Voting Securities*" means capital stock of the Company that is a "voting security" as that term is defined in section 225.2(q) of the Federal Reserve's Regulation Y (or any successor provision).

"*Warrant*" has the meaning set forth in the Recitals.

*"Warrant Non-Voting Common Shares"* has the meaning set forth in the Recitals.

**Article II** **<br>PURCHASE AND SALE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.**Closing**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Purchase of Shares**. Subject to the terms and conditions set forth in this Agreement, the Company shall issue and sell to Purchaser, and Purchaser shall purchase from the Company, (i) the number of Shares set forth on the signature page hereto at a per share price equal to the Purchase Price and (ii) the Warrant at no additional consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Closing**. The Closing of the purchase and sale of the Pre-Amendment Shares pursuant to this Agreement shall take place at the offices of Alston & Bird LLP, 1201 W. Peachtree St., Atlanta, Georgia on the Closing Date or at such other locations or remotely by facsimile transmission or other electronic means as the parties may mutually agree.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.**Closing Deliveries**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)On or prior to the Closing, the Company shall issue, deliver or cause to be delivered to Purchaser the following (the "*Company Deliverables*"):

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)certificates or book-entry shares evidencing the issuance of the number of shares of Common Stock and Series D Preferred Stock set forth on the signature page hereto to Purchaser, registered in the name of Purchaser or its nominee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)a legal opinion of Company Counsel, dated as of the Closing Date and in the form attached hereto as Exhibit E, executed by such counsel and addressed to Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)the Registration Rights Agreement, duly executed by the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)a certificate of the Secretary of the Company, in the form attached hereto as Exhibit F (the "*Secretary's Certificate*"), dated as of the Closing Date, (a) certifying the resolutions adopted by the Board of Directors of the Company or a duly authorized committee thereof approving the transactions contemplated by this Agreement, the other Transaction Documents and the issuance of the Pre-Amendment Shares and the Post Amendment Shares (upon receipt of the requisite approvals), (b) certifying the Articles of Incorporation and Bylaws of the Company in effect as of the Closing and (c) certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)a certificate, dated as of the Closing Date and signed by its Chief Executive Officer or its Chief Financial Officer, certifying to the fulfillment of the conditions specified in Sections 5.1(a), (b), (d), (f), (g), (h), (i), (n), (o) (p) and (v) in the form attached hereto as Exhibit G;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)a Certificate of Existence for the Company from the Virginia State Corporation Commission and a Certificate of Existence for the Bank from the Secretary of State of South Carolina, each as of a date that is no more than three (3) Business Days prior to the Closing Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)evidence of the filing and effectiveness of the Series D Articles of Amendment with the Virginia State Corporation Commission;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)the VCOC Letter Agreement, duly executed by the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)the Prior Notice Letter duly executed by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)On or prior to the Closing Date, Purchaser shall deliver or cause to be delivered to the Company the following (the "*Purchaser Deliverables*"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)its Subscription Amount, in U.S. dollars and in immediately available funds, in the amount indicated below Purchaser's name on the signature page hereto under the heading "Aggregate Purchase Price (Subscription Amount)" by wire transfer to the account provided by the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)the Registration Rights Agreement, duly executed by Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)a fully completed and duly executed Accredited Investor Questionnaire, reasonably satisfactory to the Company in the form attached hereto as <u>Exhibit H</u>;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)a fully executed Support Agreement in the form attached hereto as <u>Exhibit I</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)the VCOC Letter Agreement, duly executed by the Purchaser; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)the Prior Notice Letter duly executed by Purchaser.

**Article III** **<br>REPRESENTATIONS AND WARRANTIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.**Representations and Warranties of the Company**. The Company hereby represents and warrants as of the date hereof and as of the Closing Date, except for the representations and warranties that speak as of a specific date, which shall be made as of such date, to Purchaser that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Subsidiaries**. The Company has no direct or indirect Subsidiaries except as set forth in Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any and all Liens, and all the issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. The Company owns, directly or indirectly, all of the stock, except for any preferred securities, of the trusts set forth in Schedule 3.1(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Organization and Qualification**. The Company and each of its Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own or lease and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and each of its Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not in the reasonable judgment of the Company be expected to have a Material Adverse Effect. The Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "*BHC Act*"). The Bank is the Company's only Subsidiary banking institution. The Bank's deposit accounts are insured up to applicable limits by the FDIC, and all premiums and assessments required to be paid in connection therewith have been paid when due and no proceeding for the termination of such insurance is pending or, to the Company's Knowledge, threatened. The Company and each of its Subsidiaries has conducted its business in compliance with all applicable federal, state and foreign laws, orders, judgments, decrees, rules, regulations and applicable stock exchange requirements, including all laws and regulations restricting activities of bank holding companies and banking organizations, except for any noncompliance that, individually or in the aggregate, has not had and would not be reasonably expected to have a Material Adverse Effect.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Authorization; Enforcement; Validity**. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder, including, without limitation, to issue the Pre-Amendment Shares and, subject only to the requisite approval of the shareholders and the effectiveness of the Post-Closing Articles of Amendment, the Post Amendment Shares, in each case in accordance with the terms hereof. The Company's execution and delivery of each of the Transaction Documents and the consummation by it of the transactions contemplated hereby and thereby (including, but not limited to, the sale and delivery of the Pre-Amendment Shares and, subject only to the requisite approval of the shareholders and the effectiveness of the Post-Closing Articles of Amendment, the sale and delivery of the Post Amendment Shares) have been duly authorized by all necessary corporate action on the part of the Company, and no further corporate action is required by the Company, its board of directors or its shareholders in connection therewith other than in connection with the Required Approvals. Each of the Transaction Documents has been (or upon delivery will have been) duly executed by the Company and is, or when delivered in accordance with the terms hereof or thereof, will constitute the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. There are no shareholder agreements, voting agreements, or other similar arrangements with respect to the Company's capital stock to which the Company is a party or, to the Company's Knowledge, between or among any of the Company's shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**No Conflicts**. The execution, delivery and performance by the Company of the Transaction Documents and the consummation by the Company of the transactions contemplated hereby or thereby (including, without limitation, the issuance of the Shares) do not and will not, subject to receipt of the Required Approvals, (i) conflict with or violate any provisions of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or otherwise result in a violation of the organizational documents of the Company or any Subsidiary, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would result in a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any Material Contract, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations and the rules and regulations thereunder, assuming, without investigation, the correctness of the representations and warranties made by Purchaser herein, of any self-regulatory organization to which the Company or its securities are subject), or by which any property or asset of the Company is bound or affected, except in the case of clauses (ii) and (iii) such as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Filings, Consents and Approvals**. Neither the Company nor any of its Subsidiaries is required to obtain any consent, waiver, authorization or order of, give any notice

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to, or make any filing or registration with, any court or other federal, state, local or other governmental authority, self-regulatory organization or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filings required by any applicable state securities laws, (ii) the filing of a Notice of Exempt Offering of Securities on Form D with the Commission under Regulation D of the Securities Act, (iii) the filings required in accordance with Section 4.12 of this Agreement, (iv) the filing of any applicable notices and/or applications to or the receipt of any applicable consents or non-objections from the state or federal bank regulatory authorities that govern the Company or the Bank (including, but not limited to, any necessary regulatory approvals for the redemption of the Series A Preferred Stock and the Series B Preferred Stock described in Section 5.1(g) and the sale by holders of Common Stock described in Section 5.1(h)), (v) the filing of the Series D Articles of Amendment with the Virginia State Corporation Commission; (vi) approval by the Company's shareholders of the Post-Closing of Amendment; (vii) the filing of the Post-Closing Articles of Amendment with the Virginia State Corporation Commission; and (viii) those that have been made or obtained prior to the date of this Agreement (collectively, the "*Required Approvals*"). The Company is unaware of any facts or circumstances relating to the Company or its Subsidiaries which would be likely to prevent the Company from obtaining or effecting any of the foregoing.

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not be subject to preemptive or similar rights other than as set forth in Section 4.18 of this Agreement. Assuming the accuracy of the representations and warranties of Purchaser in this Agreement, the Shares will be issued in compliance with all applicable federal and state securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Capitalization**. The number of shares and type of all authorized, issued and outstanding capital stock, options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) is set forth on Schedule 3.1(g). Immediately following the Closing, (i) 41,991,084 shares of Common Stock and (ii) 15,049.816 shares of Series D Preferred Stock will be issued and outstanding. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable, have been issued in compliance in all material respects with all applicable federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase any capital stock of the Company. No shares of the Company's outstanding capital stock are subject to preemptive rights or any other similar rights. Other than as set forth on Schedule 3.1(g): (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company; and (ii) there are no material outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or by which the Company is bound. Other than the Registration Rights Agreement entered into pursuant to this Agreement, there are no agreements or arrangements under which the Company is obligated to register the sale of any of its securities under the Securities Act. Except as set forth on Schedule 3.1(g), there are no outstanding securities or instruments of the Company that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company or any of its Subsidiaries. The Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. There are no securities or instruments issued by or to which the Company is a party containing anti-dilution or similar provisions that will be triggered by the issuance of the Shares. Provided that the Post-Closing Articles of Amendment and the 10-for-1 reverse stock split are approved at the Shareholder Meeting, the Company will, following the filing of the Post Closing Articles of Amendment, reserve, free of any preemptive or similar rights of shareholders of the Company, a number of unissued shares of Common Stock and Non-Voting Common Stock, sufficient to issue and deliver the Underlying Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Financial Statements**. Each of the audited consolidated balance sheets of the Company and its Subsidiaries and the related audited consolidated statements of income (loss), statements of shareholders' equity and comprehensive income (loss) and cash flows, together with the notes thereto, for the years ended December 31, 2014, 2015 and 2016, and the unaudited consolidated balance sheets of the Company and its Subsidiaries and the related unaudited consolidated statements of income (loss), statements of shareholders' equity and comprehensive income (loss) and cash flows, together with the notes thereto, for the period ended March 31, 2017,

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all of which have been previously provided or made available to Purchaser (collectively, the "*Company Financial Statements*"), (i) have been prepared from, and are in accordance with, the books and records of the Company and its Subsidiaries, (ii) complied, as of their respective date of such filing, in all material respects with applicable accounting requirements, (iii) have been prepared in accordance with GAAP applied on a consistent basis, and (iv) present fairly in all material respects the consolidated financial position of the Company and its Subsidiaries at the dates and the consolidated results of operations, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for the periods stated therein. The Bank's allowance for loan losses is in compliance in all material respects with (A) the Bank's methodology for determining the adequacy of its allowance for loan losses and (B) the standards established by applicable Governmental Entities and the Financial Accounting Standards Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Tax Matters**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The Company and each of its Subsidiaries (x) has prepared and filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (y) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, with respect to which adequate reserves have been set aside on the books of the Company and (z) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply, except, in the case of clauses (x) and (y) above, where the failure to so pay or file any such tax, assessment, charge or return would not have or reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Neither the Company nor any of its Subsidiaries is a party to, is bound by or has any material obligation under, any Tax sharing or Tax indemnity agreement or similar contract or arrangement other than any contract or agreement between or among the Company and any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has participated in any "reportable transaction" within the meaning of Treasury Regulations Section 1.6011-4, or any other transaction requiring disclosure under analogous provisions of state, local or foreign law. Neither the Company nor any of its Subsidiaries has liability for the Taxes of any person other than the Company or any its Subsidiaries under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee, successor or otherwise. Neither the Company nor any Company Subsidiary has been a "distributing corporation" or a "controlled corporation" in any distribution in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable. The Company has not been a United States real property holding corporation within the meaning of Section 897 of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Neither the Company nor any of its Subsidiaries has undergone an "ownership change" within the meaning of Code Section 382(g), and the consummation of the Transactions should not cause an "ownership change" within the meaning of Code Section 382(g).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Material Changes**. Since the date of the latest audited Company Financial Statements, except as set forth on Schedule 3.1(j), (i) there have been no events, occurrences or developments that have had or would reasonably be expected to have, either individually or in the

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aggregate, a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in Company Financial Statements pursuant to GAAP, (iii) the Company has not altered materially its method of accounting or the manner in which it keeps its accounting books and records, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed, or made any agreements to purchase or redeem any shares of its capital stock, (v) the Company has not issued any equity securities to any officer, director, or Affiliate, (vi) there has not been any material change or amendment to, or any waiver of any material right by the Company under, any Material Contract under which the Company or any of its Subsidiaries is bound or subject, and (vii) to the Company's Knowledge, there has not been a material increase in the aggregate dollar amount of (A) the Bank's nonperforming loans (including nonaccrual loans and loans 90 days or more past due and still accruing interest) or (B) the reserves or allowances established on the Company's or the Bank's financial statements with respect thereto. Moreover, since the date(s) the Company afforded Purchaser (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares, and (ii) access to information about the Company and its Subsidiaries and their respective financial condition, results of operations, business, properties, management, prospects, and any potential transactions sufficient to enable it to evaluate its investment, there have been no events, occurrences, or developments that have materially affected or would reasonably be expected to materially affect, either individually or in the aggregate, the information as presented to Purchaser in connection with the offering of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**Environmental Matters**. Neither the Company nor any of its Subsidiaries (i) is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "*Environmental Laws*"), (ii) owns or operates any real property contaminated with any substance that is in violation of any Environmental Laws, (iii) is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any Environmental Laws; in each case, which violation, contamination, liability or claim has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and, to the Company's Knowledge, there is no pending or threatened investigation that might lead to such a claim.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Litigation**. There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or (ii) except as described on Schedule 3.1(l), is reasonably likely to have a Material Adverse Effect, individually or in the aggregate, if there were an unfavorable decision. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There is no Action by the Company or any of its Subsidiaries pending or which the Company or any of its Subsidiaries intends to initiate (other than collection or similar claims in the ordinary course of business). There has not been, and to the Company's Knowledge there is not pending or contemplated, any investigation by the Commission involving the Company or any current or

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former director or officer of the Company. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any executive officers or directors of the Company in their capacities as such, which individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**Employment Matters**. No labor dispute exists or, to the Company's Knowledge, is imminent with respect to any of the employees of the Company or its Subsidiaries which would have or reasonably be expected to have a Material Adverse Effect. None of employees of the Company or any of its Subsidiaries is a member of a union that relates to such employee's relationship with the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and each Subsidiary believes that its relationship with its employees is good. To the Company's Knowledge, no executive officer is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of a third party, and to the Company's Knowledge, the continued employment of each such executive officer does not subject the Company or any Subsidiary to any liability with respect to any of the foregoing matters. The Company is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. As of the date of this Agreement, except as set forth on Schedule 3.1(m) or otherwise Disclosed, no material employee has given notice to the Company or any of its Subsidiaries of his or her intent to terminate his or her employment or service relationship with the Company or any of its Subsidiaries. The Company and its Subsidiaries are in material compliance with all laws concerning the classification of employees and independent contractors and have properly classified all such individuals for purposes of participation in employee benefit plans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Compliance**. Neither the Company nor any of its Subsidiaries (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any of its Subsidiaries under), nor has the Company or any of its Subsidiaries received written notice of a claim that it is in default under or that it is in violation of, any Material Contract (whether or not such default or violation has been waived), (ii) is in violation of any order of which the Company has been made aware in writing of any court, arbitrator or governmental body having jurisdiction over the Company or its Subsidiaries or their respective properties or assets, (iii) is in violation of, or in receipt of written notice that it is in violation of, any statute, rule, regulation, policy, guideline or order of any governmental authority or self-regulatory organization applicable to the Company or any of its Subsidiaries, or which would have the effect of revoking or limiting FDIC deposit insurance, except in each case as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)**Regulatory Permits**. The Company and each of its Subsidiaries possess all certificates, authorizations, consents and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as currently conducted, except where the failure to possess such certificates, authorizations, consents or

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permits, individually or in the aggregate, has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect ("*Material Permits*"), and (i) neither the Company nor any of its Subsidiaries has received any notice in writing of proceedings relating to the revocation or material adverse modification of any such Material Permits and (ii) the Company is unaware of any facts or circumstances that would give rise to the revocation or material adverse modification of any Material Permits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)**Title to Assets**. The Company and its Subsidiaries have good and marketable title to all real property and tangible personal property owned by them which is material to the business of the Company and its Subsidiaries, taken as a whole, in each case free and clear of all Liens except such as do not materially affect the value of such property or do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and facilities by the Company and its Subsidiaries. No notice of a claim of default by any party to any lease entered into by the Company or any of its Subsidiaries has been delivered to either the Company or any of its Subsidiaries or is now pending, and there does not exist any event or circumstance that with notice or passing of time, or both, would constitute a default or excuse performance by any party thereto. None of the owned or leased premises or properties of the Company or any of its Subsidiaries is subject to any current or potential interests of third parties or other restrictions or limitations that would impair or be inconsistent in any material respect with the current use of such property by the Company or any of its Subsidiaries, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)**Patents and Trademarks**. The Company and its Subsidiaries own, possess, license or have other rights to use all foreign and domestic patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, inventions, trade secrets, technology, Internet domain names, know-how and other intellectual property (collectively, the "*Intellectual Property*") necessary for the conduct of their respective businesses as now conducted or as proposed to be conducted except where the failure to own, possess, license or have such rights would not have or reasonably be expected to have a Material Adverse Effect. Except as set forth in Schedule 3.1(q) and except where such violations or infringements would not have or reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (a) there are no rights of third parties to any such Intellectual Property; (b) there is no infringement by third parties of any such Intellectual Property; (c) there is no pending or threatened action, suit, proceeding or claim by others challenging the Company's and its Subsidiaries' rights in or to any such Intellectual Property; (d) there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property; and (e) there is no pending or threatened action, suit, proceeding or claim by others that the Company and/or any Subsidiary infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)**Insurance**. The Company and each of the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes to be prudent and customary in the businesses and locations in which and where the Company and the Subsidiaries are engaged. The Company and its Subsidiaries have not been refused any insurance coverage sought or applied for, and the Company and its Subsidiaries

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do not have any reason to believe that they will not be able to renew their existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue their business at a cost that would not have a Material Adverse Effect. All premiums due and payable under all such policies and bonds have been timely paid, and the Company and its Subsidiaries are in material compliance with the terms of such policies and bonds. Neither the Company nor any of its Subsidiaries has received any notice of cancellation of any such insurance, nor, to the Company's Knowledge, will it or any Subsidiary be unable to renew their respective existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would be materially higher than their existing insurance coverage. The Company (i) maintains directors' and officers' liability insurance and fiduciary liability insurance with benefits and levels of coverage as disclosed in Schedule 3.1(r), (ii) has timely paid all premiums on such policies, and (iii) there has been no lapse in coverage during the term of such policies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)**Transactions with Affiliates and Employees**. Except as set forth in Schedule 3.1(s) and other than the grant of stock options or other equity awards that are not individually or in the aggregate material in amount, none of the officers or directors of the Company or any of its Subsidiaries and, to the Company's Knowledge, none of the employees of the Company or any of its Subsidiaries, is presently a party to any transaction with the Company or any of its Subsidiaries or to a presently contemplated transaction (other than for services as employees, officers and directors) that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Securities Act if the Company were subject to such regulation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)**Certain Fees**. No person or entity will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company, other than the Placement Agents with respect to the offer and sale of the Shares (which placement agent fees are being paid by the Company and are set forth in Schedule 3.1(t)).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)**Private Placement**. Assuming the accuracy of Purchaser's representations and warranties set forth in Section 3.2 of this Agreement, the accuracy of the information disclosed in the Accredited Investor Questionnaire, no registration under the Securities Act is required for the offer and sale of the Shares by the Company to Purchaser under the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)**Registration Rights**. Other than as provided in the Registration Rights Agreement entered into pursuant to this Agreement, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)**No Integrated Offering**. Assuming the accuracy of Purchaser's representations and warranties set forth in Section 3.2, none of the Company, its Subsidiaries nor, to the Company's Knowledge, any of its Affiliates or any Person acting on its behalf has, directly or indirectly, at any time within the past six months, made any offers or sales of any Company security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Shares as contemplated hereby.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)**Investment Company**. Neither the Company nor any of its Subsidiaries is required to be registered as, and is not an Affiliate of, and immediately following the Closing will not be required to register as, an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)**Unlawful Payments**. Neither the Company nor any of its Subsidiaries, nor to the Company's Knowledge, any directors, officers, employees, agents or other Persons acting at the direction of or on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries: (a) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to foreign or domestic political activity; (b) made any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (c) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (d) made any other unlawful bribe, rebate, payoff, influence payment, kickback or other material unlawful payment to any foreign or domestic government official or employee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)**Off Balance Sheet Arrangements**. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other affiliated entity that is not reflected on or disclosed in the Company Financial Statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa)**Acknowledgment Regarding Purchaser's Purchase of Shares**. The Company acknowledges and agrees that Purchaser is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by Purchaser or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to Purchaser's purchase of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb)**OFAC**. Neither the Company nor any Subsidiary nor, to the Company's Knowledge, any director, officer, agent, employee, Affiliate or Person acting on behalf of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ("*OFAC*"); and the Company will not knowingly use the proceeds of the sale of the Shares towards any sales or operations in Cuba, Iran, Syria, Sudan, North Korea, Crimea Region of the Ukraine or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc)**Money Laundering Laws**. The operations of each of the Company and any Subsidiary are, and have been conducted at all times, in compliance in all material respects with the money laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the "*Money Laundering Laws*") and to the Company's Knowledge, no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company and/or any Subsidiary with respect to the Money Laundering Laws is pending or threatened.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd)**No Additional Agreements**. Except with respect to employee stock options that have been Disclosed, the Company has no agreements or understandings with any other Person to purchase shares of Common Stock or Series D Preferred Stock on terms more favorable to such Person than as set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee)**Reports, Registrations and Statements**. Since January 1, 2014, the Company and each Subsidiary have filed all material reports, registrations and statements, together with any required amendments thereto, that it was required to file with the Federal Reserve, the FDIC, the SCOCB, and any other applicable federal or state securities or banking authorities. All such reports and statements filed with any such regulatory body or authority are collectively referred to herein as the "*Company Reports*." As of their respective dates, the Company Reports complied in all material respects with all the rules and regulations promulgated by the Federal Reserve, the FDIC, the SCOCB and any other applicable foreign, federal or state securities or banking authorities, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff)**Bank Regulatory Capitalization**. As of March 31, 2017, the Bank was considered "well capitalized" under the FDIC's regulatory framework for prompt corrective action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg)**Agreements with Regulatory Agencies.** Except as set forth on Schedule 3.1(gg), neither the Company nor any Subsidiary is subject to any cease-and-desist or other similar order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or has adopted any board resolutions at the request of, any governmental entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management or its operations or business (each item in this sentence, a "*Regulatory Agreement*"), nor has the Company or any Subsidiary been advised in writing since December 31, 2015 by any governmental entity that it intends to issue, initiate, order, or request any such Regulatory Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh)**Compliance with Certain Banking Regulations**. To the Company's Knowledge, there are no facts or circumstances, and the Company has no reason to believe that any facts or circumstances exist, that would cause the Bank: (i) to be deemed not to be in satisfactory compliance with the Community Reinvestment Act and the regulations promulgated thereunder or to be assigned a CRA rating by federal or state banking regulators of lower than "satisfactory;" (ii) to be deemed to be operating in violation, in any material respect, of the Bank Secrecy Act of 1970, as amended, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (also known as the USA PATRIOT Act), any order issued with respect to anti-money laundering by OFAC, or any other anti-money laundering statute, rule or regulation; or (iii) to be deemed not to be in satisfactory compliance, in any material respect, with all applicable privacy of customer information requirements contained in any applicable federal and state privacy laws and regulations as well as the provisions of all information security programs adopted by the Bank.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)**No General Solicitation or General Advertising**. Neither the Company nor, to the Company's Knowledge, any person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj)**Mortgage Banking Business**. Except as has not had and would not reasonably be expected to have a Material Adverse Effect:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The Company and each of its Subsidiaries has complied with, and all documentation in connection with the origination, processing, underwriting and credit approval of any mortgage loan originated, purchased or serviced by the Company or any of its Subsidiaries satisfied, (A) all applicable federal, state and local laws, rules and regulations with respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing, or filing of claims in connection with mortgage loans, including all laws relating to real estate settlement procedures, consumer credit protection, truth in lending laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, (B) the responsibilities and obligations relating to mortgage loans set forth in any agreement between the Company or any of its Subsidiaries and any Agency, Loan Investor or Insurer, (C) the applicable rules, regulations, guidelines, handbooks and other requirements of any Agency, Loan Investor or Insurer and (D) the terms and provisions of any mortgage or other collateral documents and other loan documents with respect to each mortgage loan; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)No Agency, Loan Investor or Insurer has (A) claimed in writing that the Company or any of its Subsidiaries has violated or has not complied with the applicable underwriting standards with respect to mortgage loans sold by the Company or any of its Subsidiaries to a Loan Investor or Agency, or with respect to any sale of mortgage servicing rights to a Loan Investor, (B) imposed in writing restrictions on the activities (including commitment authority) of the Company or any of its Subsidiaries or (C) indicated in writing to the Company or any of its Subsidiaries that it has terminated or intends to terminate its relationship with the Company or any of its Subsidiaries for poor performance, poor loan quality or concern with respect to the Company's or any of its Subsidiaries' compliance with laws,

For purposes of this Section 3.1(jj): (A) "*Agency*" means the Federal Housing Administration, the Federal Home Loan Mortgage Corporation, the Farmers Home Administration (now known as Rural Housing and Community Development Services), the Federal National Mortgage Association, the United States Department of Veterans' Affairs, the Rural Housing Service of the U.S. Department of Agriculture or any other federal or state agency with authority to (i) determine any investment, origination, lending or servicing requirements with regard to mortgage loans originated, purchased or serviced by the Company or any of its Subsidiaries or (ii) originate, purchase, or service mortgage loans, or otherwise promote mortgage lending, including state and local housing finance authorities; (B) "*Loan Investor*" means any person (including an Agency) having a beneficial interest in any mortgage loan originated, purchased or serviced by the Company or any of its Subsidiaries or a security backed by or representing an interest in any such mortgage loan; and (C) "*Insurer*" means a person who insures or guarantees for the benefit of the mortgagee all or any portion of the risk of loss upon borrower default on any of the mortgage loans

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originated, purchased or serviced by the Company or any of its Subsidiaries, including the Federal Housing Administration, the United States Department of Veterans' Affairs, the Rural Housing Service of the U.S. Department of Agriculture and any private mortgage insurer, and providers of hazard, title or other insurance with respect to such mortgage loans or the related collateral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk)**Risk Management Instruments**. The Company and its Subsidiaries have in place risk management policies and procedures sufficient in scope and operation to protect against risks of the type and in amounts reasonably expected to be incurred by companies of similar size and in similar lines of business as the Company and its Subsidiaries. Except as has not had or would not reasonably be expected to have a Material Adverse Effect, since January 1, 2015, all derivative instruments, including, swaps, caps, floors and option agreements, whether entered into for the Company's own account, or for the account of one or more of the Subsidiaries, were entered into (1) only in the ordinary course of business, (2) in accordance with prudent practices and in all respects with all applicable laws, rules, regulations and regulatory policies and (3) with counterparties believed to be financially responsible at the time; and each of them constitutes the valid and legally binding obligation of the Company or one of the Subsidiaries, enforceable in accordance with its terms. Neither the Company nor the Subsidiaries, nor, to the Knowledge of the Company, any other party thereto, is in breach of any of its obligations under any such agreement or arrangement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll)**ERISA**. The Company and its Subsidiaries are in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("*ERISA*"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or its Subsidiaries would have any liability; the Company and its subsidiaries have not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan; " or (ii) Sections 412 or 4971 of the Code; and each "Pension Plan" for which the Company or any of its Subsidiaries would have liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(mm)**Shell Company Status**. The Company is not, and has never been, an issuer identified in Rule 144(i)(1).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(nn)**No "Bad Actor" Disqualification**. The Company has exercised reasonable care, in accordance with Commission rules and guidance, and has conducted a factual inquiry including the procurement of relevant questionnaires from each Covered Person (as defined below) or other means, the nature and scope of which reflect reasonable care under the relevant facts and circumstances, to determine whether any Covered Person (as defined below) is subject to any of the "bad actor" disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act ("*Disqualification Events*"). To the Company's Knowledge, after conducting such sufficiently diligent factual inquiries, no Covered Person is subject to a Disqualification Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Securities Act. "*Covered Persons*" are those persons specified in Rule 506(d)(1) under the Securities Act, including the Company; any predecessor or Affiliate of the Company; any director,

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executive officer, other officer participating in the offering; any general partner or managing member of the Company; any Beneficial Owner of 20% or more of the Company's outstanding voting equity securities, calculated on the basis of voting power; any promoter (as defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of the sale of the securities being offered hereunder; and any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of the Shares (a "*Solicitor*"), any general partner or managing member of any Solicitor, and any director, executive officer or other officer participating in the offering of any Solicitor or general partner or managing member of any Solicitor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(oo)**Change in Control**. Except as set forth on Schedule 3.1(oo), the issuance of the Shares to Purchaser as contemplated by this Agreement will not trigger any rights under any "change of control" provision in any of the agreements to which the Company or any of its Subsidiaries is a party, including any employment, "change in control," severance or other compensatory agreements and any benefit plan, which results in payments to the counterparty or the acceleration of vesting of benefits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(pp)**Common Control**. The Company is not and, after giving effect to the offering and sale of the Shares, will not be under the control (as defined in the BHC Act and the Federal Reserve's Regulation Y (12 CFR Part 225) ("*BHC Act Control*")) of any company (as defined in the BHC Act and the Federal Reserve's Regulation Y). The Company is not in BHC Act Control of any federally insured depository institution other than the Bank. The Bank is not under the BHC Act Control of any company (as defined in the BHC Act and the Federal Reserve's Regulation Y) other than the Company. Neither the Company nor the Bank controls, in the aggregate, more than five percent of the outstanding voting class, directly or indirectly, of any federally insured depository institution (other than the Company with respect to the Bank). The Bank is not subject to the liability of any commonly controlled depository institution pursuant to Section 5(e) of the Federal Deposit Insurance Act (12 U.S.C. § 1815(e)).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(qq)**Material Contracts**. Except as disclosed Schedule 3.1(qq), none of the Company Entities, nor any of their respective assets, businesses, or operations, is a party to, or is bound or affected by, or receives benefits under, (i) any employment, severance, termination, consulting, or retirement Contract with any Person (including current or former directors, officers, or employees of any Company Entity), (ii) any Contract relating to the borrowing of money by any Company Entity or the guarantee by any Company Entity of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds repurchase agreements, fully-secured by the United States government and government agency securities, and Federal Home Loan Bank advances incurred in the ordinary course of the Company's business, trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of the Company's business), (iii) any Contract which prohibits, limits or restricts any Company Entity or any employee of a Company Entity from engaging in any business activities in any geographic area, line of business or otherwise in competition with any other Person, (iv) any Contract involving Intellectual Property (other than Contracts entered into in the ordinary course with customers and "shrink-wrap" software licenses), (v) any Contract relating to the provision of data processing, network communication, or other technical services to or by any Company Entity, (vi) any Contract relating to the purchase or sale of any goods or services (other than Contracts entered into in the ordinary course of

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business involving payments under any individual Contract not in excess of $25,000), (vii) any exchange-traded or over-the-counter swap, forward, future, option, cap, floor, or collar financial Contract, or any other interest rate or foreign currency protection Contract not included on its balance sheet, (viii) any material Contract that would be terminable other than by a Company Entity or any Contract under which a material payment obligation of a Company Entity (or any successor(s) thereto) would arise or be accelerated, in each case as a result of the announcement or consummation of the transactions contemplated by this Agreement (either alone or upon the occurrence of any additional acts or events), (ix) any Contract or agreement that contains any (A) exclusive dealing obligation, (B) "clawback" or similar undertaking requiring the reimbursement or refund of any fees, (C) "most favored nation" or similar provision granted by any Company Entity or (D) provision that grants any right of first refusal or right of first offer or similar right or that limits or purports to limit the ability of any Company Entity to own, operate, sell, transfer, pledge or otherwise dispose of any assets or business, (x) any material Contract or agreement that would require any consent or approval of a counterparty as a result of the consummation of the transactions contemplated by this Agreement and (xi) any contract not listed above that is material to the financial condition, results of operations or business of the Company or any other Company Entities ((i)-(xi), the "*Material Contracts*"). With respect to each Material Contract: (A) the Contract is in full force and effect; (B) no Company Entity is in material Default thereunder; (C) no Company Entity has repudiated or waived any material provision of any such Contract; (D) no other party to any such Contract is, to Company's Knowledge, in default in any respect or has repudiated or waived any material provision thereunder; and (E) no consent is required by a Material Contract for the execution, delivery, or performance of this Agreement, the issuance of the Shares, or the other transactions contemplated hereby. Except as set forth on Schedule 3.1(qq), all of the indebtedness (other than deposit liabilities) of any Company Entity for money borrowed is prepayable at any time by such Company Entity without penalty, premium or charge. The Company has made available to Purchaser, prior to the date hereof, true, correct, and complete copies of, and listed on Schedule 3.1(qq), each Material Contract to which the Company or any of its Subsidiaries is a party or subject (whether written or oral, express or implied) as of the date of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(rr)**Most Favored Nation.** Except as set forth on Schedule 3.1(rr), the Company is not a party to any agreement with any other Person with respect to the issuance or sale of Common Stock or Series D Preferred stock on terms more favorable to such other Person than the terms set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ss)(ss) **Internal Accounting Controls**. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(tt)**Application of Takeover Protections; Rights Agreements**. The Company does not currently have in place any stockholder rights plan or similar arrangement relating to

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accumulations of beneficial ownership of Common Stock or a change in control of the Company. The Company and its Board of Directors have taken all action necessary to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to Purchaser as a direct consequence of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Shares and any Purchaser's ownership of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(uu)(uu) **Support Agreements**. Each of the (i) directors and executive officers of the Company who is a Beneficial Owner of any shares of Common Stock, and (ii) holders of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding as of the date hereof has executed and delivered to the Company a Support Agreement in the form attached hereto as Exhibit I.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vv)**Employment Agreements**. The Company has entered into employment agreements with Stephen R. Stone and Anthony P. Valduga in the forms provided in the Data Room and has provided copies of such executed employment agreements to Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ww)(ww) **No Undisclosed Liabilities**. There are no material liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable, or otherwise, except for (i) liabilities appropriately reflected or reserved against in accordance with GAAP in the Company's audited consolidated balance sheet for the year ended December 31, 2016, and (ii) liabilities that have arisen in the ordinary and usual course of business and consistent with past practice since December 31, 2016, except for such liabilities that have not had and would not reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xx)**Investor Presentation**. The Investor Presentation did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.**Representations and Warranties of Purchaser**. Purchaser hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Organization; Authority**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)If Purchaser is an entity, it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, partnership, limited liability company or other applicable similar power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. If Purchaser is an entity, the execution, delivery and performance by Purchaser of the applicable Transaction Documents to which it is a party and the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or, if Purchaser is not a corporation, such partnership, limited liability company or other applicable like action, on the part of Purchaser. If Purchaser is an entity, each of

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the applicable Transaction Documents to which it is a party has been duly executed by Purchaser, and when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)If Purchaser is not an entity, the execution, delivery and performance by Purchaser of the applicable Transaction Documents to which it is a party and the transactions contemplated by this Agreement have been duly authorized. Each of the applicable Transaction Documents to which Purchaser is a party has been duly executed by Purchaser, and when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**No Conflicts**. The execution, delivery and performance by Purchaser of this Agreement and the consummation by Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of Purchaser (if such Purchaser is an entity), (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Purchaser is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Purchaser to perform its obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Investment Intent**. Purchaser understands that the Shares are "restricted securities" and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Shares as principal for its own account and not with a view to, or for distributing or reselling such Shares or any part thereof in violation of the Securities Act or any applicable state securities laws, *provided, however*, that by making the representations herein, Purchaser does not agree to hold any of the Shares for any minimum period of time and reserves the right at all times to sell or otherwise dispose of all or any part of such Shares under an exemption from such registration and in compliance with applicable federal and state securities laws. Purchaser is acquiring the Shares hereunder in the ordinary course of its business. Purchaser does not presently have any agreement, plan or understanding, directly or indirectly, with any Person to distribute or effect any distribution of any of the Shares (or any securities which are derivatives thereof) to or through any person or entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Purchaser Status**. At the time Purchaser was offered the Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501(a) under the Securities Act. Purchaser has provided the information in the Accredited Investor Questionnaire attached hereto as <u>Exhibit H</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Reliance**. The Company will be entitled to rely upon this Agreement and is irrevocably authorized to produce this Agreement or a copy hereof to (A) any regulatory authority having jurisdiction over the Company and its affiliates and (B) any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby, in each case, to the extent required by any court or governmental authority to which the Company is subject, provided that the Company provides Purchaser with prior written notice of such disclosure to the extent practicable and allowed by applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**General Solicitation**. Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other form of "general solicitation" or "general advertising" (as such terms are used in Regulation D promulgated under the Securities Act and interpreted by the Commission).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Direct Purchase**. Purchaser is purchasing the Shares directly from the Company and not from the Placement Agents. The Placement Agents did not make any representations or warranties to Purchaser, express or implied, regarding the Shares, the Company or the Company's offering of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Experience of Purchaser**. Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. Purchaser is capable of protecting its own interests in connection with this investment and has experience as an investor in securities of companies like the Company. Purchaser is able to hold the Shares indefinitely if required, is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment. Further, Purchaser understands that no representation is being made as to the future trading value or trading volume of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Access to Information**. Purchaser is sufficiently aware of the Company's business affairs and financial condition to reach an informed and knowledgeable decision to acquire the Shares. Purchaser acknowledges that it has had the opportunity to (i) ask such questions as it has deemed necessary of, and to receive answers from, management and representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares and any such questions have been answered to Purchaser's reasonable satisfaction; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Purchaser has received all information it deems appropriate for assessing the risk of an investment in the Shares. Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Shares. Purchaser acknowledges that neither the Company nor the Placement Agents have made any representation, express or implied, with respect to the accuracy, completeness or adequacy of any available information except that the Company has made the express representations and warranties contained in Section 3.1 of this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Brokers and Finders**. No Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**Independent Investment Decision**. Purchaser has independently evaluated the merits of its decision to purchase Shares pursuant to the Transaction Documents, and Purchaser confirms that it has not relied on the advice of the Company or the Placement Agents (or any of their respective agents, counsel or Affiliates) or any Other Purchaser or Other Purchaser's business and/or legal counsel in making such decision. Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company (including, without limitation, by the Placement Agents) to Purchaser in connection with the purchase of the Shares constitutes legal, regulatory, tax or investment advice. Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Shares. Purchaser understands that the Placement Agents have acted solely as the agents of the Company in this placement of the Shares and Purchaser has not relied on the business, legal or regulatory advice of the Placement Agents or any of their agents, counsel or Affiliates in making its investment decision hereunder, and confirms that none of such Persons has made any representations or warranties to Purchaser in connection with the transactions contemplated by the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Reliance on Exemptions**. Purchaser understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Purchaser's compliance with, the representations, warranties, agreements, acknowledgements and understandings of Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of Purchaser to acquire the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**No Governmental Review**. Purchaser understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Residency**. Purchaser's residence (if an individual) or office in which its investment decision with respect to the Shares was made (if an entity) are located at the address immediately below Purchaser's name on its signature page hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)**Antitrust and Other Consents, Filings, Etc**. Assuming the accuracy of the Company's representations and warranties regarding its capitalization, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any governmental entity or authority or any other person or entity in respect of any law or regulation, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder, is necessary or required to be obtained or made by Purchaser, and no lapse of a waiting period under law applicable to Purchaser is necessary or required, in each case in connection with the execution, delivery or performance by Purchaser of this Agreement or the purchase of the Shares contemplated hereby, other than (1) providing any information to the Federal Reserve,

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Reserve Bank, and/or SCOCB to obtain a Non-Control Determination and (2) passivity and/or anti-association commitments that may be required by the Federal Reserve or Reserve Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)**Trading**. Purchaser acknowledges that there is not currently an established trading market for the Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)**OFAC and Anti-Money Laundering**. Purchaser understands, acknowledges, represents and agrees that (i) Purchaser is not the target of any sanction, regulation, or law promulgated by OFAC, the Financial Crimes Enforcement Network or any other U.S. governmental entity ("*U.S. Sanctions Laws*"); (ii) Purchaser is not owned by, controlled by, under common control with, or acting on behalf of any person that is the target of U.S. Sanctions Laws; (iii) Purchaser is not a "foreign shell bank" and is not acting on behalf of a "foreign shell bank" under applicable anti-money laundering laws and regulations; (iv) Purchaser's entry into this Agreement or consummation of the transactions contemplated hereby will not contravene U.S. Sanctions Laws or Money Laundering Laws; (v) to the extent permitted under applicable law, if requested by the Company in writing, Purchaser will promptly provide to the Company or any regulatory or law enforcement authority such information or documentation as may be required to comply with U.S. Sanctions Laws or Money Laundering Laws; and (vi) the Company may provide to any regulatory or law enforcement authority information or documentation regarding, or provided by, Purchaser for the purposes of complying with U.S. Sanctions Laws or Money Laundering Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)**Knowledge as to Conditions**. Purchaser does not have knowledge of any circumstance that will prohibit Purchaser from obtaining a Non-Control Determination or any other regulatory approvals required for Purchaser to consummate the transactions contemplated by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)**Bank Holding Company Status**. Purchaser has not or is not acting in concert with any other Person in connection with the transactions contemplated by this Agreement, other than Affiliates of Purchaser identified by Purchaser to the Company as Affiliates. Assuming the accuracy of the representations and warranties of the Company contained herein, Purchaser, either acting alone or together with any other Person will not, directly or indirectly, own, control or have the power to vote, immediately after giving effect to its purchase of the Shares pursuant to this Agreement, in excess of 9.9% of the outstanding shares of the Company's voting stock of any class or series. Without limiting the foregoing, assuming the accuracy of the representations and warranties of the Company contained herein, Purchaser represents and warrants that it does not and will not as a result of its purchase or holding of the purchased Shares or any other securities of the Company have "control" of the Company or the Bank, and has no present intention of acquiring "control" of the Company or the Bank, for purposes of the BHC Act or the CIBC Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)**Not Acting in Concert**. (i) Purchaser has not entered into any other agreements or understandings with any Other Purchasers in respect of the Transaction, including any agreements or understandings regarding the voting or transfer of securities of the Company, and has not induced or been induced by any Other Purchaser to enter into any such other agreement; (ii) Purchaser has not shared with or received from any Other Purchaser or potential investor (nor any such Other Purchaser's or potential investor's agents, Affiliates or advisors) any proprietary due diligence materials in connection with or related to Purchaser's acquisition of

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Shares; (iii) Purchaser has not induced or been induced by any Other Purchaser to purchase the Shares or enter into this Agreement; (iv) Purchaser is not an Affiliate of any Other Purchaser, and to Purchaser's knowledge, Purchaser has not be advised or managed by an advisor or manager that advises or manages any Other Purchaser; (v) Purchaser has not paid, and does not have any agreement or informal understanding to pay, any fees to any Other Purchasers in connection with the transactions contemplated by this Agreement; (vi) Purchaser has not, as part of a group consisting of substantially the same Persons comprising the Other Purchasers, engaged in any additional business activities or ventures in the United States; and (vii) the number of Shares that Purchaser has elected to acquire was not directly based on the number of shares acquired by any Other Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.The Company and Purchaser acknowledge and agree that no party to this Agreement has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Article III and the Transaction Documents.

**Article IV** 

**OTHER AGREEMENTS OF THE PARTIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.**Transfer Restrictions**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Compliance with Laws**. Notwithstanding any other provision of this Article IV, Purchaser covenants that the Shares may be disposed of only pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act, or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and in compliance with any applicable state, federal or foreign securities laws. In connection with any transfer of the Shares other than (i) pursuant to an effective registration statement or (ii) to the Company, the Company may require the transferor thereof to provide to the Company and the Transfer Agent, at the transferor's expense, an opinion of counsel selected by the transferor and reasonably acceptable to the Company and the Transfer Agent, the form and substance of which opinion shall be reasonably satisfactory to the Company and the Transfer Agent, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. As a condition of transfer (other than pursuant to clauses (i) or (ii) of the preceding sentence), any such transferee shall agree in writing to be bound by the terms of this Agreement and the Prior Notice Letter and be required to provide the Transfer Agent with the Transferee Letter, and such transferee shall have the rights of Purchaser under this Agreement and the Registration Rights Agreement with respect to such transferred Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Legends**. Certificates evidencing the Shares shall bear any legend as required by the "blue sky" laws of any state and a restrictive legend in substantially the following form (and, with respect to Shares held in book-entry form, the Transfer Agent will record such a legend on the share register), until such time as they are not required under Section 4.1(c) or applicable law:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES

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LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT.

UNTIL THE THIRD ANNIVERSARY OF THE ISSUANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE, THE HOLDER OF THIS CERTIFICATE MUST COMPLY WITH THE NOTICE REQUIREMENT SET FORTH IN THAT CERTAIN STOCK PURCHASE AGREEMENT DATED JULY 28, 2017 (THE "STOCK PURCHASE AGREEMENT"), COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE COMPANY OR ANY SUCCESSOR THERETO, PRIOR TO ANY PURCHASE OR SALE OF SHARES.

UNTIL THE THIRD ANNIVERSARY OF THE ISSUANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE, PRIOR TO ANY TRANSFER OF THESE SHARES, THE PROPOSED TRANSFEREE MUST EXECUTE AND DELIVER TO THE COMPANY'S TRANSFER AGENT A PURCHASER REPRESENTATION LETTER IN ACCORDANCE WITH THE STOCK PURCHASE AGREEMENT, A COPY OF WHICH IS ON FILE WITH AND MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Removal of Legends**. Upon the written request of the holder, the first paragraph of the restrictive legend set forth in Section 4.1(b) above shall be removed and the Company shall issue a certificate without such portion of the restrictive legend to the holder of the applicable Shares upon which it is stamped, if (i) such Shares are registered for resale under the Securities Act or (ii) such Shares are eligible for sale without restriction under Rule 144(d)(1)(ii). Upon the written request of the holder at any time following the third anniversary of the Closing Date, the second and third paragraphs of the restrictive legend set forth in Section 4.1(b) above shall be removed and the Company shall issue a certificate without such portion of the restrictive legend to the holder of the applicable Shares upon which it is stamped. Following the earlier of (x) the effective date of a registration statement filed pursuant to the Securities Act that includes such Shares or (y) such Shares becoming eligible for sale without restriction under Rule 144(d)(1)(ii), the Company, upon the written request of the holder, shall instruct the Transfer Agent to remove the first paragraph of the restrictive legend from such holder's Shares and shall cause its counsel

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to issue any legend removal opinion required by the Transfer Agent. Following the third anniversary of the Closing Date, the Company, upon the written request of the holder, shall instruct the Transfer Agent to remove the second paragraph of the restrictive legend from such holder's Shares and shall cause its counsel to issue any legend removal opinion required by the Transfer Agent. Any fees (with respect to the Transfer Agent, Company counsel or otherwise) associated with the issuance of such opinion or the removal of such legend shall be borne by the Company. If a legend is no longer required pursuant to the foregoing, the Company will no later than three (3) Business Days following the delivery by Purchaser to the Company or the Transfer Agent (with notice to the Company) of a legended certificate or instrument representing such Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) (such third Business Day, the "*Legend Removal Date*") deliver or cause to be delivered to Purchaser a certificate or instrument (as the case may be) representing such Shares that is free from all restrictive legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.1(c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)The Company and Purchaser acknowledge that the Company has valuable NOL carry-forwards, the use of which would be limited if the Company were to experience an "ownership change" under Section 382 of the Code as a result of the transfer of the Shares issuable hereunder (or upon conversion of the Shares into the Underlying Shares), and accordingly, until the third anniversary of the Closing, Purchaser (i) agrees to consult with the Company at least 10 days prior to any proposed purchase or sale of Shares regarding the potential adverse tax impact that the purchase or sale could have on the NOLs and (ii) acknowledges that any prospective transferee of the Shares will be required to provide the Transfer Agent with a representation letter substantially in the form of the Transferee Letter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Acknowledgement**. Purchaser acknowledges its primary responsibilities under the Securities Act and accordingly will not sell or otherwise transfer the Shares or any interest therein without complying with the requirements of the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.**Acknowledgment of Dilution**. The Company acknowledges that the issuance of the Shares may result in dilution of the outstanding shares of Common Stock. The Company further acknowledges that its obligations under this Agreement, including without limitation its obligation to issue the Shares pursuant to this Agreement, are unconditional (except as otherwise set forth herein) and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other shareholders of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.**Form D and Blue Sky**. The Company agrees to timely file a Form D with respect to the Shares as required under Regulation D. Purchaser agrees to timely provide Company with any and all needed information in connection with Company's preparation and filing of a Form D. The Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Shares for sale to the Purchaser at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States (or to obtain an exemption from such qualification). The Company shall make all filings and reports relating to the offer and sale of the Shares required

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under applicable securities or "Blue Sky" laws of the states of the United States following the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.**No Integration**. The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that will be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities Act of the sale of the Shares to the Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.**Indemnification**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Indemnification of Purchaser**. The Company will indemnify and hold Purchaser and its directors, officers, stockholders, members, partners, employees, agents and investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, Agents, stockholders, agents, members, partners, employees, agents or investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a "*Purchaser Party*") harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation (collectively, "Losses") that any such Purchaser Party may suffer or incur as a result of (i) any breach of any of the representations and warranties made by the Company in this Agreement or in the other Transaction Documents, (ii) any covenant or agreement made by the Company in this Agreement or in the other Transaction Documents or (iii) any action instituted against a Purchaser Party in any capacity, or any of them or their respective Affiliates, by any shareholder of the Company or any other Person who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by this Agreement. The Company will not be liable to any Purchaser Party under this Agreement to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party's breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Conduct of Indemnification Proceedings**. Promptly after receipt by any Purchaser Party of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 4.5(a), such Purchaser Party shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Purchaser Party, and shall assume the payment of all fees and expenses; *provided, however*, that the failure of any Purchaser Party so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is actually and materially and adversely prejudiced by such failure to notify. In any such proceeding, any Purchaser Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party unless: (i) the Company and the Purchaser Party shall have mutually agreed to the retention of such counsel; (ii) the Company shall have failed promptly to assume the defense of such proceeding and to employ

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counsel reasonably satisfactory to such Purchaser Party in such proceeding; or (iii) in the reasonable judgment of counsel to such Purchaser Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Without the prior written consent of the Purchaser Party, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Purchaser Party is or could have been a party and indemnity could have been sought hereunder by such Purchaser Party, unless such settlement includes an unconditional release of such Purchaser Party from all liability arising out of such proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Limitation on Amount of Company's Indemnification Liability**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Tipping Basket. Except as provided otherwise in 4.5(c)(iii), the Company will not be liable for Losses that otherwise are indemnifiable under Section 4.5(a)(i) until the total of all Losses under Section 4.5(a)(i) incurred by Purchaser exceeds $200,000.00, at which point the Company shall be liable for the full amount of all Losses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Maximum. Except as provided otherwise in Section 4.5(c)(iii), the maximum aggregate liability of the Company for all Losses under Section 4.5(a) is the Subscription Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Exceptions. The provisions of Section 4.5(c)(i) and (ii) do not apply to (A) claims due to the inaccuracy of any of the representations or breach of any of the warranties of the Company in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(g), 3.1(h), 3.1(i), 3.1(t), 3.1(rr) or 3.1(tt), or (B) indemnification claims involving fraud, willful misconduct or intentional misconduct by the Company. For purposes of the indemnity contained in Section 4.5(a)(i) and Section 4.5(c), all qualifications and limitations set forth in the parties' representations and warranties as to "materiality," "Material Adverse Effect" and words of similar import shall be disregarded in determining whether there shall have been any inaccuracy in or breach of any representations and warranties in this Agreement and the Losses arising therefrom.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Exclusive Remedies**. Purchaser acknowledges and agrees that following the Closing, the indemnification provisions hereunder shall be the sole and exclusive remedies of Purchasers for any breach of the representations, warranties or covenants contained in the this Agreement, except in the case of fraud or willful breach of this Agreement or with respect to matters for which the remedy of specific performance, injunctive relief or other non-monetary equitable remedies are available. No investigation of the Company by Purchaser, whether prior to or after the date hereof, shall limit any Purchaser Party's exercise of any right hereunder or be deemed to be a waiver of any such right. The parties agree that any indemnification payment made pursuant to this Agreement shall be treated as an adjustment to the Purchase Price for tax purposes, unless otherwise required by Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6.**Use of Proceeds**. The Company shall use the net proceeds from the sale of the Shares hereunder (i) to redeem the Company's outstanding Series A Preferred Stock and Series B Preferred Stock as soon as reasonably practicable following the Closing, and (ii) for general corporate purposes. In addition, a portion of the proceeds will be invested in the Bank and a portion

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will be retained by the Company. The Bank may use the proceeds it receives from the Company to augment its capital position, support its operations, fund future acquisitions, or for general corporate purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7.**Limitation on Beneficial Ownership**. No Other Purchaser (and its Affiliates or any other Persons with which it is acting in concert) will be entitled to purchase a number of securities (including any securities into which Series D Preferred Stock are convertible) that would result in such Other Purchaser becoming, directly or indirectly, the Beneficial Owner of more than 9.9% of the number of shares of the Company's Voting Securities issued and outstanding or 33.3% of the Company's total equity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8.**Certain Transactions**. The Company will not merge or consolidate into, or sell, transfer or lease all or substantially all of its property or assets to, any other party unless the successor, transferee or lessee party, as the case may be (if not the Company), expressly assumes the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9.**No Additional Issuances**. Between the date of this Agreement and the Closing Date, except for the Shares being issued pursuant to this Agreement and the shares of Common Stock and Series D Preferred Stock to be issued to the Other Purchasers, the Company shall not issue or agree to issue any additional shares of Common Stock or other securities. Notwithstanding the foregoing, nothing in this Section 4.9 shall restrict the Company from issuing securities in response or pursuant to an order or directive from the Federal Reserve with respect to capital adequacy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10.**Conduct of Business**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)From the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, except as contemplated by this Agreement, the Company will, and will cause its Subsidiaries to, operate their business in the ordinary course consistent with past practice, preserve intact the current business organization of the Company, use commercially reasonable efforts to retain the services of their employees, consultants and agents, preserve the current relationships of the Company and its Subsidiaries with material customers and other Persons with whom the Company and its Subsidiaries have and intend to maintain significant relations, pay all applicable federal, state, local and foreign Taxes when due and payable (other than those Taxes the payment of which the Company challenges in good faith in appropriate proceedings and which are fully reserved for to the extent required by GAAP), maintain, renew, keep in full force and effect and preserve its rights, franchises and licenses and all permits necessary for the conduct of the business of the Company and its Subsidiaries as currently conducted, comply with all orders, writs, and decrees applicable to it and to the conduct of its business and operations, maintain all of its operating assets in their current condition (normal wear and tear excepted) and will not take or omit to take any action that would constitute a breach of Section 3.1(j).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Without limiting the generality of Section 4.10(a), from the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, except as contemplated by this Agreement or otherwise required by law, rule or regulation, or by

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policies imposed by any governmental entity, without the prior written consent of Purchaser (which shall not be unreasonably withheld, conditioned or delayed), the Company shall not, and it shall not permit any Subsidiary to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Enter into any significant new line of business or materially change its lending, investment, underwriting, risk and asset liability management, and other banking and operating policies, expect (A) as required by applicable law or policies imposed by any governmental entity, or (B) pursuant to a planned course of action that was previously disclosed to Purchaser or is set forth on Schedule 4.10(b)(i);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Acquire or agree to acquire by merging or consolidating with, or by purchasing a portion of the equity interests of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Make any capital expenditure in excess of $500,000 individually or$1,000,000 in the aggregate, other than as required pursuant .to commitments entered into prior to the date of this Agreement that are set forth on Schedule 4.10(b)(iii);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)Except as set forth on Schedule 4.10(b)(iv), sell any assets in any one transaction or series of related transactions where the aggregate sales price equals or exceeds $1,000,000 or represents a discount of 20% or more from the aggregate book value of such assets less the amount of any applicable specific reserves with respect to such assets, provided that the foregoing shall not apply to any sales by the Company or any Subsidiary of the Company of single family or 1-4 family residential mortgages in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of its stock or directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its stock or any options or other rights, grants or awards with respect to the Common Stock, or enter into any contract with respect thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)Incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for the obligations of, any other Person, except in the ordinary and usual course of business and consistent with past practice, including as to amounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)Amend (A) its Articles of Incorporation or bylaws or similar organizational documents or (B) any term of any outstanding security issued by the Company or any Subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)Other than, in each case, in the ordinary and usual course of business and consistent with past practice or required by applicable law, grant any salary or wage increase or increase any employee benefit, including incentive or bonus payments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)Change any material accounting policies or procedures (including procedures with respect to reserves, revenue recognition, payments of accounts payable and

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collection of accounts receivable) used by it unless required by the Company's independent public auditors, applicable law or GAAP;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)Settle any litigation involving claims against the Company or any of its Subsidiaries resulting in monetary damages or other payments in excess of $500,000; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)Agree or commit to do any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11.**Avoidance of Control**. Notwithstanding anything to the contrary in this Agreement, neither the Company nor any Subsidiary shall take any action (including, without limitation, any redemption, repurchase, rescission or recapitalization of Common Stock, or securities or rights, options or warrants to purchase Common Stock, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for Common Stock in each case, where Purchaser is not given the right to participate in such redemption, repurchase, rescission or recapitalization to the extent of Purchaser's pro rata proportion), that would cause Purchaser's ownership of any class of Voting Securities of the Company (together with the ownership by Purchaser's Affiliates (as such term is used under the BHC Act) of Voting Securities of the Company) to exceed 9.9%, in each case without the prior written consent of Purchaser, or to increase to an amount that would constitute "control" under the BHC Act, the CIBC Act or any rules or regulations promulgated thereunder (or any successor provisions) or otherwise cause Purchaser to "control" the Company under and for purposes of the BHC Act, the CIBC Act or any rules or regulations promulgated thereunder (or any successor provisions). Notwithstanding anything to the contrary in this Agreement, Purchaser (together with its Affiliates (as such term is used under the BHC Act)) shall not have the ability to purchase or exercise any voting rights of any class of securities in excess of 9.9% of the total outstanding Voting Securities of the Company, and Purchaser covenants and agrees that it shall not take any action that would cause Purchaser to exercise any voting rights of any class of security in excess of 9.9% of the total outstanding Voting Securities of the Company. In the event either the Company or Purchaser breaches its obligations under this Section 4.11 or believes that it is reasonably likely to breach such an obligation, it shall promptly notify the other parties hereto and shall cooperate in good faith with such parties to modify ownership or make other arrangements or take any other action, in each case, as is necessary to cure or avoid such breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.**Reasonable Best Efforts.** Subject to the other provisions of this Agreement, each of the Company and Purchaser agree to use their respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including using reasonable best efforts to accomplish the following: (a) the taking of all reasonable acts necessary to cause the conditions to Closing to be satisfied; (b) the making of all necessary registrations and filings and the taking of all reasonable steps necessary to obtain an approval, order or waiver from, or to avoid an action or proceeding by any governmental entity or third party, and the obtaining of all necessary actions or nonactions, waivers, consents and approvals from governmental entities or third parties, including the Required Approvals (c) solely with respect to the Company, redemption of its Series A Preferred Stock and Series B Preferred Stock; (d) solely with respect to the Company, the transfer of Common Stock by holders of greater than 4.9% of the company's outstanding Common Stock in accordance with Section 5.1(h) of this Agreement; (e) solely with

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respect to the Company, any necessary Regulatory Approvals for such redemption and transfer; (f) solely with respect to the Company, the obtaining of the Tax Opinion; (g) solely with respect to the Company, holding the Shareholder Meeting; and (h) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. Purchaser, on the one hand, and the Company, on the other hand, agrees to keep the other reasonably apprised of the status of matters referred to in this Section 4.12. The Company shall promptly furnish Purchaser with copies of written communications received by it or its Affiliates from, or delivered by any of the foregoing to, any governmental entity in respect of the transactions contemplated by this Agreement; *provided*, *that* the Company may redact any confidential information contained therein. Upon request by the Company, Purchaser shall promptly furnish the Company with copies of non-confidential written communications received by it or its Affiliates from, or delivered by any of the foregoing to, any governmental entity in respect of the transactions contemplated by this Agreement. Notwithstanding anything in this Section 4.12 or elsewhere in this Agreement to the contrary, Purchaser shall not be required to provide to any person pursuant to this Agreement any of its, its Affiliates', its investment advisor's or its or their control persons' or equity holders' nonpublic, proprietary, personal or otherwise confidential information including the identities or financial condition of limited partners, shareholders or non-managing members of Purchaser or its Affiliates or their investment advisors. The Company shall file Form Ds timely with the Commission and other jurisdictions' securities and blue sky officials and, to the extent applicable, shall cause its placement agent to timely file with FINRA all offering materials required by FINRA Rule 5123. Notwithstanding anything to the contrary in this Section 4.12, Purchaser shall not be required to perform any of the above actions if such performance would constitute or could reasonably result in any restriction or condition that Purchaser determines, in its reasonable good faith judgment, (i) is materially and unreasonably burdensome, or (ii) would reduce the benefits of the transactions contemplated hereby to Purchaser to such a degree that Purchaser would not have entered into this Agreement had such condition or restriction been known to it on the date of this Agreement (any such condition or restriction, a "*Burdensome Condition*"); for the avoidance of doubt, any requirement to disclose the identities or financial condition of limited partners, shareholders or non-managing members of Purchaser or its Affiliates or its investment advisers shall be deemed a Burdensome Condition unless otherwise determined by Purchaser in its sole discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13.**[Intentionally Omitted]**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14.**Shareholder Meeting**. The Company shall hold the Shareholder Meeting within sixty (60) days of the Closing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15.**Warrant.** Conditioned upon the occurrence of the Closing and the approval of the Post-Closing Articles of Amendment at the Shareholder Meeting, the Company shall (a) within one (1) Business Day following the Shareholder Meeting, file the Post-Closing Articles of Amendment with the Virginia State Corporation Commission, (b) within two (2) Business Days following the Shareholder Meeting, deliver evidence to the Purchaser of the effectiveness of the Post-Closing Articles of Amendment with the Virginia State Corporation Commission, and (c) within three (3) Business Days of the effectiveness of the Post-Closing Articles of Amendment, issue the Warrant to the Purchaser.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.16.**Most Favored Nation**. During the period from the date of this Agreement through the date on which the Warrant is issued by the Company to the Purchaser, neither the Company nor its Subsidiaries shall enter into any additional, or modify any existing, agreements, arrangements or understandings with any existing or future investors in the Company or any of its Subsidiaries, including the Other Purchasers, that have the effect of establishing rights or otherwise benefiting such other investors in a manner more favorable in any material respect to such investors than the rights and benefits established in favor of Purchaser by this Agreement and the Transaction Documents, unless, in any such case, Purchaser has been provided a copy of such additional or modified agreement and Purchaser has been offered the opportunity to receive such rights and benefits of such additional or modified agreement at least ten business days prior to the execution of such additional or modified agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.17.**Board Representation; Information and Access.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Company will cause one representative of Purchaser (the "*Board Representative*") to be elected or appointed to the board of directors of the Company (the "*Board of Directors*"), effective as of the Closing, subject to satisfaction of all legal and regulatory requirements regarding service and election or appointment as a director of the Company, and the board of directors of the Bank (the "*Bank Board*"), subject to all legal and regulatory requirements regarding service and election or appointment as a director of the Bank, in each case, with respect to Purchaser, so long as Purchaser, together with its Affiliates, owns the Qualifying Ownership Interest. So long as Purchaser, together with its Affiliates, has a Qualifying Ownership Interest, the Company will recommend to its shareholders the election of the Board Representative to the Board of Directors at each special meeting of the Company's shareholders or the annual meeting of the Company's shareholders, as applicable, subject to satisfaction of all legal and regulatory requirements regarding service and election or appointment as a director of the Company. If Purchaser no longer has a Qualifying Ownership Interest, Purchaser will have no further rights under Sections 4.19(a) and 4.19(b) and, at the written request of the Board of Directors, shall use commercially reasonable efforts to cause its Board Representative to resign from the Board of Directors and the Bank Board as promptly as possible thereafter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)The Board Representative shall, subject to applicable law, be one of the Company's nominees to serve on the Board of Directors. The Company shall use its reasonable best efforts to have the Board Representative elected as a director of the Company by the shareholders of the Company, and the Company shall solicit proxies for the Board Representative to the same extent as it does for any of its other Company nominees to the Board of Directors. The Company shall ensure, and shall cause the Bank to ensure, that the Board of Directors and the Bank Board shall have at least four members for so long as Purchaser shall have the right to appoint a Board Representative. Purchaser covenants and agrees to hold any information obtained from its Board Representative in confidence. Notwithstanding anything to the contrary contained herein, at all times when Purchaser maintains a Qualifying Ownership Interest, it shall comply in all respects with the Federal Reserve's Policy Statement on equity investments in banks and bank holding companies and any other guidance promulgated in connection with the matters addressed therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Subject to Section 4.17(a), upon the death, resignation, retirement, disqualification, or removal from office as a member of the Board of Directors or the Bank Board

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of its Board Representative, Purchaser shall have the right to designate the replacement for such Board Representative, which replacement shall satisfy all legal, bank regulatory and governance requirements regarding service as a director of the Company. The Board and the Bank Board shall use their respective reasonable best efforts to take all action required to fill the vacancy resulting therefrom with such person (including such person, subject to applicable law, being one of the Company's nominees to serve on the Board and the Bank Board), using reasonable best efforts to have such person elected as director of the Company by the shareholders of the Company and the Company soliciting proxies for such person to the same extent as it does for any of its other nominees to the Board, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)The Company hereby agrees that, from and after the Closing Date, for so long as Purchaser and its Affiliates in the aggregate have a Qualifying Ownership Interest, the Company shall invite a person designated by Purchaser (the "*Observer*") to attend meetings of the Board of Directors and the Bank Board (including any meetings of committees thereof on which the Board Representative is permitted to attend) in a nonvoting, nonparticipating observer capacity. The Observer shall not have any right to make motions or vote on any matter presented to the Board of Directors or the Bank Board or any committee thereof. The Company shall give the Observer written notice of each meeting of the Board of Directors and the Bank Board at the same time and in the same manner as the members of the Board of Directors or the Bank Board (as the case may be), shall provide the Observer with all written materials and other information given to members of the Board of Directors or the Bank Board (as the case may be) at the same time such materials and information are given to such members (provided, however, that the Observer shall not be provided any confidential supervisory information) and shall permit the Observer to attend as an observer at all meetings thereof, and in the event the Company proposes to take any action by written consent in lieu of a meeting, the Company shall give written notice thereof to the Observer prior to the effective date of such consent describing the nature and substance of such action and including the proposed text of such written consents. If Purchaser no longer has a Qualifying Ownership Interest, the Investor will have no further rights under this Section 4.17(d).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)The Board Representative shall be entitled to compensation and indemnification and insurance coverage in connection with his or her role as a director to the same extent as other directors on the Board of Directors or the Bank Board, as applicable, and shall be entitled to reimbursement for reasonable and documented out-of-pocket expenses incurred in attending meetings of the Board of Directors and the Bank Board, or any committee thereof in accordance with Company policy. The Company shall notify the Board Representative or the Observer, as the case may be, of all regular meetings and special meetings of the Board of Directors or the Bank Board and of all regular and special meetings of any committee of the Board of Directors or the Bank Board. The Company shall provide the Board Representative or the Observer, as the case may be, with copies of all notices, minutes, consents and other material that it provides to all members of the Board of Directors or the Bank Board (as applicable) at the same time such materials are provided to the other members.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)The Company acknowledges that the Board Representative may have certain rights to indemnification, advancement of expenses and/or insurance provided by Purchaser and/or its Affiliates (collectively, the "*Purchaser Indemnitors*"). The Company hereby agrees on behalf of itself and the Bank that with respect to a claim by a Board Representative for

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indemnification arising out his or her service as a director of the Company and/or the Bank (1) that it is the indemnitor of first resort (i.e., its obligations to the Board Representative with respect to indemnification, advancement of expenses and/or insurance (which obligations shall be the same as, but in no event greater than, any such obligations to members of the Board or the Bank Board, as applicable) are primary and any obligation of the Purchaser Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Board Representative are secondary), and (2) the Purchaser Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Board Representative against the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.18.**Preemptive Rights**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**New Issuance.** Following the Closing, for so long as Purchaser holds a Qualifying Ownership Interest, if the Company proposes to issue (a "*New Issuance*") any equity (including shares of Common Stock, Non-Voting Common Stock or shares of preferred stock), or any securities, options or debt convertible or exchangeable into equity or that include an equity component (any such security, a "*New Security*"), the Company shall provide written notice of such proposed New Issuance to the Purchaser no later than fifteen (15) Business Days prior to the anticipated issuance date (the "*Preemptive Rights Notice*"). Purchaser shall have the right to purchase for cash, at the price and on the same terms and conditions and at the same time as the New Issuance, such number of New Securities as are required to enable it to maintain its proportionate Common Stock-equivalent interest in the Company immediately prior to any such issuance of New Securities. The Preemptive Rights Notice shall set forth all material terms and conditions of the New Issuance, including the number of New Securities proposed to be issued, the issue price and the maximum number of New Securities that the Investor may purchase the New Issuance pursuant to the immediately preceding sentence. Notwithstanding anything to the contrary, herein, Purchaser shall not have any Preemptive Rights in connection with (i) any Common Stock, Series D Preferred Stock or other securities issuable upon the exercise or conversion of any securities of the Company outstanding as of the date hereof or issued or contemplated to be issued pursuant to this Agreement and the other Transaction Documents; (ii) pursuant to the granting or exercise of employee stock options, restricted stock or other stock incentives pursuant to the Company's stock incentive plans approved by the board of directors or the issuance of stock pursuant to the Company's employee stock purchase plan approved by the board of directors or similar plan where stock is being issued or offered to a trust, other entity or otherwise, for the benefit of any employees, officers or directors of the Company, in each case in the ordinary course of providing incentive compensation; or (iii) issuances of capital stock as full or partial consideration for a merger, acquisition, joint venture, strategic alliance, license agreement or other similar nonfinancing transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Limitation on Voting Securities.** Notwithstanding anything in this Section 4.18 to the contrary, upon the request of the Purchaser that the Purchaser not be issued Voting Securities in whole or in part upon the exercise of its Preemptive Rights, the Company shall cooperate with the Purchaser to modify the proposed issuance of New Securities to the Purchaser to provide for the issuance of Series D Preferred Stock, Non-Voting Common Stock or other non-voting securities in lieu of Voting Securities, provided, however, that Purchaser and the Company shall further cooperate in good faith to formulate such modification in a manner that does not

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inadvertently cause any other shareholder's ownership of any class of Voting Securities of the Company (together with the ownership by such other shareholder's affiliates) to exceed 9.9%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Notice.** If the information contained in the Preemptive Rights Notice constitutes material non-public information (as defined under the applicable securities laws), the Company shall deliver such Preemptive Rights Notice only to the individuals identified in Section 6.3 hereof, and shall not communicate the information to anyone else acting on behalf of Purchaser without the consent of one of the designated individuals. Purchaser shall have 20 Business Days from the date of receipt of such Preemptive Rights Notice to notify the Company in writing that it intends to exercise its rights provided in this Section 4.18 ("*Preemptive Rights*") and as to the amount of New Securities the Purchaser desires to purchase, up to the Preemptive Rights Amount). Such notice shall constitute a nonbinding indication of interest of Purchaser to purchase the amount of New Securities so specified at the price and other terms set forth in the Company's notice to it. The failure of Purchaser to respond within such 20 Business Day period shall be deemed to be a waiver of Purchaser's Preemptive Rights only with respect to the New Issuance described in the applicable Preemptive Rights Notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Purchase Mechanism.** The closing of the acceptances of the Preemptive Rights shall take place at the same time as the closing(s) under definitive agreements with other participants in the New Issuance, which in any event shall occur within ninety (90) days after the anticipated date of the New Issuance as set forth in the Preemptive Rights Notice. In the event that the New Issuance is not consummated within the time frame described above, the Company's right to consummate such New Issuance shall expire and the Company shall be required to comply with the procedures set forth in this Section 4.18 prior to any subsequent New Issuance. At the consummation of any New Issuance, the Company shall issue certificates to Purchaser promptly following payment by Purchaser of the purchase price for such exercise in accordance with the terms and conditions as specified in the Preemptive Rights Notice. Each of the Company and Purchaser agrees to use its commercially reasonable efforts to secure any regulatory or shareholder approvals or other consents, and to comply with any law or regulation necessary in connection with the offer, sale and purchase of, such New Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Failure of Purchaser.** In the event that Purchaser fails to exercise its rights provided in this Section 4.18 within this 20 Business Day period or, if so exercised, Purchaser is unable to consummate such purchase within the time period specified in Section 4.18 above because of its failure to obtain any required regulatory or shareholder consent or approval, the Company shall thereafter be entitled (during the period of 90 days following the conclusion of the applicable period) to sell or enter into an agreement (pursuant to which the sale of the New Securities covered thereby shall be consummated, if at all, within 90 days from the date of such agreement) to sell the New Securities not elected to be purchased pursuant to this Section 4.18 by the Purchaser or which the Purchaser is unable to purchase because of such failure to obtain any such consent or approval, at a price and upon terms no more favorable in the aggregate to the purchasers of such New Securities than were specified in the Company's notice to Purchaser. Notwithstanding the foregoing, if such sale is subject to the receipt of any regulatory or shareholder approval or consent or the expiration of any waiting period, the time period during which such sale may be consummated shall be extended until the expiration of five Business Days after all such approvals or consents have been obtained or waiting periods expired, but in no event shall such time period exceed 180 days from the date of the applicable agreement with respect to such sale.

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In the event the Company has not sold the New Securities or entered into an agreement to sell the New Securities within such 90-day period (or sold and issued New Securities in accordance with the foregoing within 90 days from the date of such agreement (as such period may be extended in the manner described above for a period not to exceed 180 days from the date of such agreement)), the Company shall not thereafter offer, issue or sell such New Securities without first offering such New Securities to Purchaser in the manner provided above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**Expedited Issuance; Regulatory Directive.** Notwithstanding the foregoing provisions of this Section 4.18, if a majority of the board of directors of the Company determines that the Company must issue equity or debt securities on an expedited basis, then the Company may consummate the proposed issuance or sale of such securities ("*Expedited Issuance*") and then comply with the provisions of this Section 4.18 provided that (i) the purchasers of such New Securities have consented in writing to the issuance of additional New Securities in accordance with the provisions of this Section 4.18, and (ii) the sale of any such additional New Securities under this Section 4.18 to Purchaser and any other shareholder pursuant to similar provisions in the other securities purchase agreements shall be consummated as promptly as is practicable but in any event no later than 90 days subsequent to the date on which the Company consummates the Expedited Issuance under this Section 4.18(f). Notwithstanding anything to the contrary herein, the consent of the purchasers of such New Securities shall not be required in connection with any Expedited Issuance undertaken at the written direction of the applicable federal banking regulator of the Company or the Bank. Notwithstanding anything to the contrary in this Agreement, no rights of Purchaser under this Agreement will be adversely affected solely as the result of the temporary dilution of its percentage ownership of Company securities due to an Expedited Issuance under this Section 4.18(f); *provided*, *however*, that such rights may be adversely affected from and after such time, if any, that Purchaser declines to purchase Company securities offered to Purchaser under this Section 4.18.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Non-Cash Consideration**. In the case of the offering of securities for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by the board of directors; *provided*, *however*, that such fair value as determined by the board of directors shall not exceed the aggregate market price of the securities being offered as of the date the board of directors authorizes the offering of such securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Cooperation**. The Company and Purchaser shall cooperate in good faith to facilitate the exercise of Purchaser's rights under this Section 4.18, including to secure any required approvals or consents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.19.**Long Term Incentive Plan**. The Company may reserve up to 10% of its fully diluted Common Stock outstanding (excluding any warrants issued to Purchaser or Other Purchasers) under a Long-Term Incentive Plan ("*LTIP*"). The LTIP and all awards issued thereunder shall be administered by the Compensation Committee of the Board of Directors of the Company. Incentive Stock Options issued under the LTIP shall be time vested awards. Restricted shares or similar instruments issued under the LTIP shall have performance vesting features.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.20.**Access, Information and Confidentiality**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Purchaser shall be provided with access, information, and other rights as provided in the VCOC Letter Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)From and after the date hereof and until the Closing, the Company shall, and shall cause each of its Subsidiaries to afford the officers, directors, employees, attorneys, accountants and other authorized representatives of Purchaser reasonable access to the management personnel, offices, properties, books and records of the Company and each of its Subsidiaries, other than confidential supervisory information, at such times during regular business hours as Purchaser may reasonably request upon three (3) business days' notice but not more frequently than once per calendar quarter, and shall furnish Purchaser with all financial, business, operating and other data and information (including, but not limited to, the Company's assets, properties, business and operations) that Purchaser, through its directors, officers, employees, consultants or agents, may reasonably request; provided, that nothing in this Agreement shall require the furnishing of any information prior to the Closing which would place at risk the ability of the Company or its attorneys to claim attorney-client privilege or work product privilege with respect to any third parties; provided, further, that all information obtained by Purchaser pursuant to this Section 4.20(a) shall be subject Purchaser's confidentiality obligations set forth in Section 4.20(c) of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Each party to this Agreement will hold, and will use commercially reasonable efforts to cause its respective subsidiaries and their directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a governmental entity is necessary or appropriate in connection with any necessary regulatory approval, or request for information or similar process, or unless compelled to disclose by judicial or administrative process or, based on the advice of its counsel, by other requirement of law or the applicable requirements of any governmental entity (in which case, the party permitted to disclose such information shall, to the extent legally permissible and reasonably practicable, provide the other party with prior written notice of such permitted disclosure), all nonpublic records, books, contracts, instruments, computer data and other data and information (collectively, "Information") concerning the other party hereto furnished to it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) previously known by such party on a nonconfidential basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from other sources by the party to which it was furnished), and neither party hereto shall release or disclose such Information to any other person, except its Affiliates, partners, auditors, attorneys, financial advisors, other consultants and advisors with the express understanding that such parties will maintain the confidentiality of the Information and, to the extent permitted above, to auditors and bank and securities regulatory authorities; provided, however, that (i) Purchaser is permitted to disclose Information to auditors and bank and securities regulatory authorities without prior written notice to the Company in connection with any audit or examination that does not explicitly reference the Company or this Agreement and (ii) each Purchaser may identify the Company and the number and value of such Purchaser's security holdings in the Company in accordance with applicable investment reporting and disclosure regulations or internal policies without prior notice to or consent from the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.21.**Public Announcement.** The Company and Purchaser will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to the Transaction Documents. The Company shall not publicly disclose

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the name of Purchaser or any Affiliate or investment adviser of Purchaser, or include the name of Purchaser or any Affiliate or investment adviser of Purchaser in any press release or in any filing with the Commission (other than the Registration Statement) or any regulatory agency, without the prior written consent of Purchaser, except as required by federal securities law in connection with any registration statement contemplated by the Registration Rights Agreement. Whenever any party determines, based upon the advice of such party's counsel, that a public announcement or other disclosure is required by or advisable with respect to any applicable law or regulation, the parties shall discuss such disclosure with each other in good faith prior to the making of such public announcement or other disclosure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.22.**Acquisition Proposals**. Between the date of this Agreement and the Closing Date, the Company shall notify Purchaser orally and in writing promptly (but in no event later than one (1) Business Day) after receipt by the Company of any proposal or offer from any Person to effect an Acquisition Proposal or any request in connection with a prospective Acquisition Proposal for non-public information relating to the Company or for access to the properties, books or records of the Company by any Person other than Purchaser and the Other Purchasers, indicating in such notice the material terms and conditions of any such proposal or offer and the identity of the Person making the proposal or offer, and thereafter shall keep Purchaser reasonably informed with respect to the status of such proposal or offer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.23.**Notice of Certain Events**. Between the date of this Agreement and the Closing Date, Each party hereto shall promptly notify the other party hereto of (a) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware prior to the Closing that would constitute a violation or breach of the Transaction Documents (or a breach of any representation or warranty contained herein or therein) or, if the same were to continue to exist as of the Closing Date, would constitute the non-satisfaction of any of the conditions set forth in Sections 5.1 or 5.2 hereof, and (b) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware that would have been required to have been disclosed pursuant to the terms of this Agreement had such event, condition, fact, circumstance, occurrence, transaction or other item existed as of the date hereof; provided that delivery of any notice pursuant to this Section 4.23 shall not modify the representations, warranties, covenants, agreements or obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement. Notwithstanding the foregoing, neither party shall be required to take any action that would jeopardize such party's attorney-client privilege.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.24.**Shareholder Litigation**. The Company shall promptly inform Purchaser of any claim, action, suit, arbitration, mediation, demand, hearing, investigation or proceeding ("*Shareholder Litigation*") against the Company, any of its Subsidiaries or any of the past or present executive officers or directors of the Company or its Subsidiaries that is threatened in writing or initiated by or on behalf of any shareholder of the Company in connection with or relating to the transactions contemplated hereby or by the Transaction Documents. The Company shall consult with Purchaser and keep Purchaser informed of all material filings and developments relating to any such Shareholder Litigation.

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**Article V** **<br>CONDITIONS PRECEDENT TO CLOSING**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.**Conditions Precedent to the Obligations of Purchaser to Purchase Shares at the Closing**. The obligation of Purchaser to acquire Shares at the Closing is subject to the fulfillment to Purchaser's satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by Purchaser:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Representations and Warranties**. The representations and warranties of the Company contained herein shall be true and correct as of the date when made and as of the Closing Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date, which shall have been true and correct as of the date specified therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Performance**. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**No Injunction**. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction, nor has there been any regulatory communication, that prohibits the consummation of any of the transactions contemplated by the Transaction Documents or restricts Purchaser or any of Purchaser's Affiliates from owning or voting any securities of the Company in accordance with the terms thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Consents**. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, non-objections, registrations and waivers necessary for consummation of the purchase and sale of the Shares (including all Required Approvals), all of which shall be and remain so long as necessary in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Company Deliverables**. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**Minimum Offering Amount**. The Company shall have received and accepted fully paid subscription amounts for shares of Common Stock and Series D Preferred Stock totaling not less than $60,000,000 and such amount shall be in escrow for the benefit of the Company or shall have been previously received by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Redemption of Series A and B Preferred Stock**. The Company shall have entered into an agreement with the holders of its Series A Preferred Stock and Series B Preferred Stock pursuant to which the Company would redeem all of the issued and outstanding shares of Series A Preferred Stock and Series B Preferred Stock, including all of the Company's accrued obligations thereunder, in exchange for aggregate consideration not to exceed $24,940,995 (the "*Redemption Agreement*"), which Redemption Agreement will provide for a consummation of the transactions contemplated thereby that will occur as soon as possible after Closing, and all of the conditions to the closing of the transactions contemplated by the Redemption Agreement (other than the Company's receipt of the gross proceeds of not less than $60,000,000 from private placement transactions) shall be satisfied.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Purchase of Shares held by Certain Existing Shareholders**. Each holder of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing shall have either sold to unaffiliated third parties or to the Company (in exchange for newly issued subordinated notes from the Company on terms acceptable to Purchaser) no fewer than fifty percent (50%) of their respective shares of Common Stock, and, in connection therewith, such existing shareholders shall agree to sell shares of Common Stock pursuant to purchase agreements in substantially the forms provided in the Data Room as follows: (i) each of Stephen R. Stone and Anthony P. Valduga shall purchase a minimum of 461,000 and (ii) Patrick M. Frawley shall purchase a minimum of 453,768 shares of Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Regulatory Approvals for Redemptions**. The Company shall have obtained all necessary regulatory approvals for the transactions described in Sections 5.1(g) and 5.1(h).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Termination**. This Agreement shall not have been terminated in accordance with Section 6.15 herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**No Burdensome Condition**. Since the date hereof, there shall not be imposed any Burdensome Condition, provided, however, that for the purpose of this Section 5.1(k), a request from the Federal Reserve or Reserve Bank that Purchaser enter into customary passivity commitments shall not be considered a "Burdensome Condition."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Tax Opinion**. The Company shall have received a limited scope tax opinion (the "*Tax Opinion*") from KPMG LLP, in substantially the form attached hereto as Exhibit J, to the effect that, based on the most current information available prior to the Closing Date as provided by the Company to KPMG LLP, the transactions contemplated by this Agreement should not cause an "ownership change" within the meaning of Section 382 of the Code, and, subject to the Purchaser's execution of a customary reliance letter with KPMG LLP pursuant to which the Purchaser shall reasonably agree to KPMG LLP's standard terms and conditions, the Purchaser shall be permitted to rely on such opinion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**Ownership Limitation**. The purchase of the Shares by Purchaser shall not (i) cause Purchaser or any of its Affiliates to violate any banking regulation, (ii) require Purchaser or any of its Affiliates to file a prior notice under the BHC Act or the CIBC Act, or otherwise seek prior approval of any banking regulator (other than normal vetting procedures that may be required for the Purchaser to receive a Non-Control Determination and enter into passivity commitments and/or anti-association commitments to the Federal Reserve or Reserve Bank), (iii) require Purchaser or any of its Affiliates to become a bank holding company or otherwise serve as a source of strength for the Company or any Subsidiary or (iv) cause Purchaser, together with any other person whose Company securities would be aggregated with Purchaser's Company securities for purposes of any banking regulation or law, to collectively be deemed to own, control or have the power to vote securities which (assuming, for this purpose only, full conversion and/or exercise of such securities by Purchaser and such other Persons) would represent more than 9.9% of any class of Voting Securities of the Company outstanding at such time.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Material Adverse Effect**. No Material Adverse Effect shall have occurred since the date of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)**Board of Director Reconstitution**. The Company shall have received executed resignations from seven (7) members of the boards of directors (or equivalent governing bodies) of the Company and each of its Subsidiaries in substantially the form attached hereto as Exhibit K, which resignations shall not have been rescinded or otherwise become ineffective, and the Company shall have satisfied all legal, regulatory and governance requirements such that the following individuals shall have been elected or appointed to the Boards of Directors of the Company and the Bank effective as of the Closing: Michael B. High; Boris Guten; Joe Topper; Patrick M. Frawley; and Stephen R. Stone.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)**Support Agreements**. Each of the (i) directors and executive officers of the Company who is a Beneficial Owner of any shares of Common Stock, (ii) holders of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing, (iii) the Company and (iv) the Other Purchasers shall have executed and delivered to the Company a Support Agreement in the form attached hereto as Exhibit I and copies of all such Support Agreements shall be delivered to Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)**Registration Rights Agreement**. The Company shall have executed and delivered the Registration Rights Agreement to the Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)**Series D Articles of Amendment**. The Company shall have filed with the Virginia State Corporation Commission and the Virginia State Corporation Commission shall have issued a certificate of amendment evidencing the effectiveness of the Series D Articles of Amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)**Non-Control Determination**. Purchaser shall have received satisfactory feedback from the Federal Reserve, Reserve Bank and the SCOCB (which may be the absence of any communication from the Federal Reserve, Reserve Bank or the SCOCB, as applicable) that Purchaser will not have "control" of the Company or the Bank for purposes of the BHC Act, CIBC Act, Regulation Y or applicable state law (the "*Non-Control Determinations*").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)**Employment Agreements**. The Company shall have entered into employment agreements with Stephen R. Stone and Anthony P. Valduga in the forms provided in the Data Room and such employment agreements shall remain in effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)**VCOC Letter Agreement.** The Company shall have executed and delivered the VCOC Letter Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)**Prior Notice Letter**. Each of the (i) directors and executive officers of the Company who is a Beneficial Owner of any shares of Common Stock, (ii) holders of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing, (iii) the Company and (iv) Other Purchasers shall have executed the Prior Notice Letter (or, in the case of the Persons described in clauses (i) and (ii), a letter agreement binding such Person to covenants substantially similar to those contained in the Prior Notice Letter).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.**Conditions Precedent to the Obligations of the Company to sell Shares at the Closing**. The Company's obligation to sell and issue the Shares to Purchaser at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any of which may be waived by the Company:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Representations and Warranties**. The representations and warranties made by Purchaser in Section 3.2 hereof shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date, except for representations and warranties that speak as of a specific date, which shall have been true and correct as of the date specified therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Performance**. Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by Purchaser at or prior to the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**No Injunction**. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction, nor has there been any regulatory communication, that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Consents**. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, non-objections, registrations and waivers necessary for consummation of the purchase and sale of the Shares, all of which shall be and remain so long as necessary in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Purchaser Deliverables**. Purchaser shall have delivered its Purchaser Deliverables in accordance with Section 2.2(b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**Minimum Offering Amount**. The Company shall have received and accepted fully paid subscription amounts for shares of Common Stock and Series D Preferred Stock totaling not less than $60,000,000 and such amount shall be in escrow for the benefit of the Company or shall have been previously received by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Redemption of Series A and B Preferred Stock**. The Company shall have entered into the Redemption Agreement, and all of the conditions to the closing of the transactions contemplated by the Redemption Agreement (other than the Company's receipt of the gross proceeds of not less than $60,000,000 from private placement transactions) shall be satisfied.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Purchase of Shares held by Certain Existing Shareholders**. Each holder of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing shall have either sold to unaffiliated third parties or to the Company (in exchange for newly issued subordinated notes from the Company on terms acceptable to Purchaser) no fewer than fifty percent (50%) of their respective shares of Common Stock, and, in connection therewith, such existing shareholders shall agree to sell shares of Common Stock pursuant to purchase agreements in substantially the forms provided in the Data Room as follows: (i) each of Stephen R. Stone and Anthony P. Valduga shall purchase a minimum

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of 461,000 and (ii) Patrick M. Frawley shall purchase a minimum of 453,768 shares of Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Regulatory Approvals for Redemptions**. The Company shall have obtained all necessary regulatory approvals for the redemptions described in Sections 5.2(g) and 5.2(h).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Termination**. This Agreement shall not have been terminated in accordance with Section 6.15 herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**Tax Opinion**. The Company shall have received a limited scope tax opinion (the "*Tax Opinion*") from KPMG LLP, in substantially the form attached hereto as <u>Exhibit J</u>, to the effect that, based on the most current information available prior to the Closing Date as provided by the Company to KPMG LLP, the transactions contemplated by this Agreement should not cause an "ownership change" within the meaning of Section 382 of the Code, and, subject to the Purchaser's execution of a customary reliance letter with KPMG LLP pursuant to which the Purchaser shall reasonably agree to KPMG LLP's standard terms and conditions, the Purchaser shall be permitted to rely on such opinion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Ownership Limitation**. The purchase of the Shares by Purchaser shall not result in Purchaser, together with any other person whose Company securities would be aggregated with Purchaser's Company securities for purposes of any bank regulation or law, to collectively be deemed to own, control or have the power to vote more than 9.9% of the outstanding shares of Common Stock as of the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**Support Agreements**. Each of the (i) directors and executive officers of the Company who is a Beneficial Owner of any shares of Common Stock, (ii) holders of Common Stock whose holdings constitute greater than 4.9% of the total number of shares of Common Stock outstanding prior to the Closing, (iii) Purchaser, and (iv) the Other Purchasers shall have executed and delivered to the Company a Support Agreement in the form attached hereto as Exhibit I.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Employment Agreements**. The Company shall have entered into employment agreements with Stephen R. Stone and Anthony P. Valduga in the forms provided in the Data Room.

**Article VI** **<br>MISCELLANEOUS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1.**Fees and Expenses**. Except as set forth elsewhere in the Transaction Documents, the parties hereto shall be responsible for the payment of all expenses incurred by them in connection with the preparation and negotiation of the Transaction Documents and the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, the Company will reimburse Purchaser at the Closing for all reasonable transaction expenses incurred by Purchaser in connection with the transactions contemplated by this Agreement, including due diligence, legal fees (including the preparation and review of definitive documentation and regulatory filings), travel expenses and other disbursements, subject to a maximum amount of $50,000. Notwithstanding the foregoing or anything in this Agreement to the contrary, in the event that this Agreement is terminated pursuant to Section 6.15(a)(viii), the Company will reimburse

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Purchaser within two (2) Business Days following such termination for all reasonable transaction expenses incurred by Purchaser in connection with the transactions contemplated by this Agreement, including due diligence, legal fees (including the preparation and review of definitive documentation and regulatory filings), travel expenses and other disbursements. The Company shall pay all amounts owed to the Placement Agents relating to or arising out of the transactions contemplated hereby. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the Shares to Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.**Entire Agreement**. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company and Purchaser will execute and deliver to the other such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3.**Notices**. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or e-mail (provided the sender receives a machine-generated confirmation of successful facsimile transmission or e-mail notification or confirmation of receipt of an e-mail transmission) at the facsimile number or e-mail address specified in this Section prior to 5:00 p.m., Eastern time, on a Business Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile or e-mail at the facsimile number or e-mail address specified in this Section on a day that is not a Business Day or later than 5:00 p.m., Eastern time, on any Business Day, (c) if sent by U.S. nationally recognized overnight courier service with next day delivery specified (receipt requested) the Business Day following delivery to such courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

If to the Company: CoastalSouth Bancshares, Inc.

5 Bow Circle

Hilton Head Island, SC 29928 Attention : Stephen R. Stone Telephone: (843) 341-9937 Facsimile: (843) 689-7835

Email: sstone@coastalstatesbank.com

With a copy to: Mark C. Kanaly, Esq.

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street Atlanta, Georgia 30309 Telephone: (404) 881-7000 Facsimile: (404) 881-7777

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Email: Mark.Kanaly@alston.com

If to Purchaser: To the address set forth under Purchaser's name on the signature page hereof; or such other address as may be designated in writing hereafter, in the same manner, by such Person.

or such other address as may be designated in writing hereafter, in the same manner, by such Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4.**Amendments; Waivers; No Additional Consideration**. No amendment or waiver of any provision of this Agreement will be effective with respect to any party unless made in writing and signed by a duly authorized representative of such party. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5.**Construction**. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6.**Successors and Assigns**. The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their successors and permitted assigns. This Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the prior written consent of Purchaser. Purchaser may assign its rights hereunder in whole or in part to any Person to whom Purchaser assigns or transfers any of the Shares in compliance with the Transaction Documents and applicable law, provided such transferee shall agree in writing to be bound, with respect to the transferred Shares, by the terms and conditions of this Agreement that apply to the "Purchaser."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7.**No Third-Party Beneficiaries**. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than, solely with respect to the provisions of Section 4.5, the Purchaser Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8.**Governing Law**. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be commenced on an exclusive basis in the New York Courts. Each

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party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. **EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9.**Survival**. The representations and warranties contained herein shall survive the Closing and the delivery of the Shares as follows: (i) the representations and warranties of the Company set forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(e), 3.1(f), 3.1(g), 3.1(h), 3.1(t), 3.1(rr) and 3.1(tt), and shall survive indefinitely, (ii) the representations and warranties of the Company set forth in Sections 3.1(i), 3.1(k), 3.1(ff) shall survive for the applicable statute of limitations, and (iii) all other representations and warranties of the Company set forth in Sections 3.1 shall survive for a period of eighteen (18) months following the Closing and the delivery of the Shares. All representations and warranties of Purchaser set forth in Section 3.2 shall survive for a period of 12 months following the Closing Date. All covenants and agreements of the parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10.**Execution**. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11.**Severability**. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.12.**Replacement of Share Certificates**. If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company and the Transfer Agent of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company and the Transfer Agent for any losses in connection therewith or, if required by the Transfer Agent, a bond in such form and amount as is required by the Transfer Agent. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement certificate. If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.13.**Remedies**. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, Purchaser and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.14.**Payment Set Aside**. To the extent that the Company makes a payment or payments to Purchaser pursuant to any Transaction Document or Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.15.**Termination**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)This Agreement may be terminated and the sale and purchase of the Shares abandoned at any time prior to the Closing:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)by the mutual written consent of the Company and Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)by either the Company or Purchaser upon written notice to the other, if the Closing has not been consummated on or prior to 5:00 p.m., Eastern time, on the Outside Date; *provided, however*, that the right to terminate this Agreement under this Section 6.15(a)(ii) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)by the Company or Purchaser, upon written notice to the other parties, in the event that any governmental entity shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement, and such order, decree, injunction or other action shall have become final and nonappealable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)by Purchaser, prior to the Closing, upon written notice to the Company, if there has been a breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 5.1(a) or Section 5.1(b) would not be satisfied;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)by the Company, prior to Closing, upon written notice to Purchaser, if there has been a breach of any representation, warranty, covenant or agreement made by Purchaser in this Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 5.2(a) or Section 5.2(b) would not be satisfied;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)by the Company or Purchaser, upon written notice to the other, if any of the conditions to the Closing set forth in Sections 5.1 or 5.2 are not capable of being satisfied on or before 5:00 p.m., Eastern time, on the Outside Date; *provided, however,* that the right to terminate this Agreement under this Section 6.5(a)(vi) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the conditions to the Closing set forth in Sections 5.1 or 5.2 to occur on or before such time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)by Purchaser, upon written notice to the Company, in the event that Purchaser receives notice that it will not receive the Non-Control Determinations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)by Purchaser, upon written notice to the Company, if the Company has entered into any agreement with respect to (A) issuing any other securities, or (b) a transaction that has resulted in, or would result in if consummated, a change in control of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)In the event of any termination of this Agreement as provided in Section 6.15, this Agreement (other than Article VI (other than Sections 6.9 and 6.17) and all applicable defined terms, which shall remain in full force and effect) shall forthwith become wholly void and of no further force and effect; provided, nothing in this Section 6.15 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The Company shall promptly notify the Purchaser if any agreements with any Other Purchaser are terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.16.**Rescission and Withdrawal Right**. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever Purchaser exercises a right, election, demand or option under a Transaction Document

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and the Company does not timely perform its related obligations within the periods therein provided, then Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.17.**Adjustments in Common Stock Numbers and Prices**. In the event of any stock split, reverse stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof and prior to the Closing, each reference in any Transaction Document to a number of shares or a price per share shall be deemed to be amended to appropriately account for such event.

*[Remainder of Page Intentionally Left Blank]*

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**IN WITNESS WHEREOF,** the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

COASTALSOUTH BANCSHARES, INC.

By: <u>/s/ James S. MacLeod</u> 

James S. MacLeod

Chairman and Chief Executive Officer

*Signature Page to Stock Purchase Agreement*

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NAME OF PURCHASER:

GCP CoastalSouth LLC

By:

Name:

Title:

Aggregate Purchase Price

(Subscription Amount): $<u>7,082,003.50</u>

Number of shares of Common Stock to be Acquired: <u>4,157,117</u>

Number of shares of Series D Preferred Stock to be Acquired: <u>1,290.578</u>

Number of Warrants to be Acquired: <u>573,729</u>

Tax ID No.:

Address for Notice:

Attn.:

Telephone:

Facsimile:

Email:

Delivery Instructions:

(if different than above)

*Signature Page to Stock Purchase Agreement*

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**EXHIBITS**

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| | |
|:---|:---|
| A | Form of Warrant |
| B | Form of Registration Rights Agreement |
| C | Form of Post-Closing Articles of Amendment |
| D | Form of Series D Articles of Amendment |
| E | Form of Legal Opinion of Company Counsel |
| F | Form of Secretary's Certificate |
| G | Form of Officer's Certificate |
| H | Form of Accredited Investor Questionnaire |
| I | Form of Support Agreement |
| J | Form of Tax Opinion |
| K | Form of Director Resignations |
| L | Form of VCOC Letter Agreement |
| M | Transferee Letter |
| N | Prior Notice Letter |

---

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**EXHIBIT A**

Form of Warrant

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**EXHIBIT B**

Form of Registration Rights Agreement

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**EXHIBIT C**

Form of Post-Closing Articles of Amendment

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**EXHIBIT D**

Form of Series D Articles of Amendment

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**EXHIBIT E**

Form of Legal Opinion of Company Counsel

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**EXHIBIT F**

Form of Secretary's Certificate

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**EXHIBIT G**

Form of Officer's Certificate

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**Exhibit H**

**ACCREDITED INVESTOR QUESTIONNAIRE**

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**Exhibit I**

Form of Support Agreement

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**Exhibit J**

Form of Tax Opinion

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**Exhibit K**

Form of Director Resignations

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**Exhibit L**

**Form of VCOC Letter Agreement**

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**Exhibit M**

**Form of Transferee Letter**

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**Exhibit N**

**Form of Prior Notice Letter**

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## Exhibit 10.13

**EXHIBIT 10.13**

**STOCK PURCHASE AGREEMENT**

This Stock Purchase Agreement (this "*Agreement*") is dated as of June 18, 2019, by and among CoastalSouth Bancshares, Inc., a Virginia corporation (the "*Company*"), and the each of the purchasers identified on the signature pages hereto (each, a "*Purchaser*" and collectively, the "*Purchasers*").

**RECITALS**

The Company and Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "*Securities Act*"), and Rule 506 of Regulation D ("*Regulation D*") as promulgated by the United States Securities and Exchange Commission (the "*Commission*") under the Securities Act.

Purchaser wishes to purchase, and the Company wishes to sell, the following securities described further herein, upon the terms and conditions stated in this Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) shares of Voting Common Stock, in the amount set forth below Purchaser's name on the signature page of this Agreement (which shall be collectively referred to herein as the "*Voting Common Shares*"); and/or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) shares of Non-Voting Common Stock, in the amount set forth below Purchaser's name on the signature page of this Agreement (which shall be collectively referred to herein as the "*Non-Voting Common Stock*", together with the Voting Common Shares, the "*Shares*").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. The Company has engaged Sandler O'Neill & Partners, L.P. as its placement agent (the "Placement Agent") for the offering of Common Stock.

**NOW, THEREFORE,** in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and Purchaser hereby agree as follows:

**ARTICLE I** **<br>DEFINITIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.**Definitions**. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:

"*Action*" means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or, to the Company's Knowledge, threatened in writing against the Company, any Subsidiary or any of their respective properties or any officer, director or employee of the Company or any Subsidiary acting in his or her capacity as an officer, director or employee before or by any federal, state, county, local or foreign court, arbitrator, governmental or administrative agency, regulatory authority, stock market, stock exchange or trading facility.

"*Acquisition Proposal*" means a written offer or proposal involving the Company or any of its Subsidiaries with respect to: (i) any merger, reorganization, consolidation, share exchange, share issuance, recapitalization, business combination, liquidation, dissolution or other similar transaction involving any sale, issuance, lease, exchange, mortgage, pledge, transfer or other disposition of, all or a material portion of the assets or equity securities or deposits of, the Company or any of its Subsidiaries, in a single transaction or series of related transactions; (ii) any tender offer or exchange offer for all or a material portion of the outstanding shares of capital stock of the Company or any of its Subsidiaries; or (iii) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

*Signature Page to Stock Purchase Agreement*

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"*Affiliate*" means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act.

"*Agreement*" shall have the meaning ascribed to such term in the Preamble.

"*Articles of Incorporation*" means the Articles of Incorporation of the Company and all amendments thereto, as the same may be amended from time to time.

"*Bank*" means Coastal States Bank, a South Carolina state-chartered commercial bank.

"*Beneficially Own(s)*" means the act of having Beneficial Ownership of a security or being the Beneficial Owner thereof.

"*Beneficial Owner*" means a Person who has Beneficial Ownership of a security.

"*Beneficial Ownership*" means, with respect to any security, the power to directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares (a) voting power, which includes the power to vote, or to direct the voting of, such security; and/or (b) investment power, which includes the power to dispose, or to direct the disposition of, such security.

"*BHC Act*" has the meaning set forth in Section 3.1(b).

"*BHC Act Control*" has the meaning set forth in Section 3.1(oo).

"*Burdensome Condition*" has the meaning set forth in Section 4.11.

"*Business Day*" means a day, other than a Saturday or Sunday, on which banks in South Carolina are open for the general transaction of business.

"*Closing*" means the closing of the purchase and sale of the Shares pursuant to this Agreement.

"*Closing Date*" means the third Business Day following the date that all Purchasers have obtained Non-Control Determinations, as applicable, provided that all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all of the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied or waived, as the case may be, or such other date as the parties may agree, or such other date as the Parties may agree in writing.

"*CIBC Act*" means the Change in Bank Control Act of 1978, as amended.

"*Code*" means the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder.

"*Commission*" has the meaning set forth in the Recitals.

"*Common Stock*" means the Voting Common Stock and Non-Voting Common Stock, collectively.

"*Company*" shall have the meaning ascribed to such term in the Preamble.

"*Company Counsel*" means Alston & Bird LLP.

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"*Company Deliverables*" has the meaning set forth in Section 2.2(a).

"*Company Entity*" means, collectively, the Company and each of its Subsidiaries.

"*Company Financial Statements*" has the meaning set forth in Section 3.1(h).

"*Company Reports*" has the meaning set forth in Section 3.1(dd).

"*Company's Knowledge*" means with respect to any statement made to the knowledge of the Company, that the statement is based upon the actual knowledge after reasonable inquiry of the executive officers of the Company.

"*Contract*" means any written or oral agreement, arrangement, authorization, commitment, contract, indenture, instrument, lease, license, obligation, plan, practice, restriction, understanding, or undertaking of any kind or character, or other document to which any Person is a party or that is binding on any Person or its capital stock, assets or business.

"*Control*" (including the terms "controlling," "controlled by" or "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

"*Covered Person*" has the meaning set forth in Section 3.1(mm).

"*Data Room*" means the virtual data room established for the purpose of sharing due diligence materials with respect to the Company.

"*Disclosed*" means, with respect to any matter, that it has been described in the Schedules.

"*Disqualification Events*" has the meaning set forth in Section 3.1(mm).

"*Environmental Laws*" has the meaning set forth in Section 3.1(k).

"*ERISA*" has the meaning set forth in Section 3.1(kk).

"*Exchange Act*" means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

"*Expedited Issuance*" has the meaning set forth in Section 4.12(f).

"*FDIC*" means the Federal Deposit Insurance Corporation.

"*Federal Reserve*" means the Board of Governors of the Federal Reserve System.

"*GAAP*" means U.S. generally accepted accounting principles, as applied by the Company.

"*Intellectual Property*" has the meaning set forth in Section 3.1(q).

"*Investor Presentation*" means the Company's investor presentation dated March 2019, a copy of which has been delivered to each Purchaser and is available in the Data Room.

"*Lien*" means any lien, charge, claim, encumbrance, security interest, right of first refusal, preemptive right or other restrictions of any kind.

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"*Material Adverse Effect*" means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, properties, business, condition (financial or otherwise) or prospects of the Company and the Subsidiaries, taken as a whole, or (iii) any adverse impairment to the Company's ability to perform in any material respect on a timely basis its obligations under any Transaction Document; provided, however, that "Material Adverse Effect" shall not include the impact of (A) changes in banking, tax and similar laws of general applicability or interpretations thereof by any applicable governmental authority, (B) changes in GAAP or regulatory accounting requirements applicable to banks and their holding companies generally, (C) changes in general economic conditions, including interest rates, affecting banks generally, or (D) the effects of any action or omission taken by the Company or the Bank with the prior written consent of Purchaser, except, with respect to clauses (A), (B) and (C), to the extent that the effect of such changes has a disproportionate impact on the Company and the Subsidiaries, taken as a whole, relative to other similarly situated banks and their holding companies generally.

"*Material Contracts*" has the meaning set forth in Section 3.1(pp).

"*Material Permits*" has the meaning set forth in Section 3.1(o).

"*Money Laundering Laws*" has the meaning set forth in Section 3.1(bb).

*"New Issuance" has the meaning set forth in Section 4.12(a).*

*"New Security" has the meaning set forth in Section 4.12(a).*

"*New York Courts*" means state or federal courts located in the city of New York, New York.

"*Non-Control Determinations*" means satisfactory feedback from the Federal Reserve, Reserve Bank and the SCOCB (which may be the absence of any communication from the Federal Reserve, Reserve Bank or the SCOCB, as applicable) that Purchaser will not have "control" of the Company or the Bank for purposes of the BHC Act, CIBC Act, Regulation Y or applicable state law. Notwithstanding any other provision in this Agreement and for the avoidance of doubt, Purchaser shall not be required to pursue a Non-Control Determination unless Purchaser will hold 7.5% or more of the Voting Securities of the Company immediately following the Closing.

"*Non-Voting Common Stock*" means the non-voting common stock of the Company, par value $1.00 per share, having the rights and designations set forth in Article Thirteenth of the Articles of Incorporation.

"*OFAC*" has the meaning set forth in Section 3.1(aa).

"*Officer's Certificate*" has the meaning set forth in Section 2.2(a)(iii).

"*Outside Date*" means ninety (90) days following the date of this Agreement; provided that if such day is not a Business Day, the first day following such day that is a Business Day.

"*Person*" means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

"*Placement Agent*" has the meaning set forth in the Recitals.

"*Preemptive Rights*" has the meaning set forth in Section 4.12(c).

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"*Preemptive Rights Notice*" has the meaning set forth in Section 4.12(a).

"*Prior SPA"* has the meaning set forth in Section 6.2.

"*Proceeding*" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

"*Purchase Price*" means $13.25 per share of Common Stock.

"*Purchaser*" shall have the meaning ascribed to such term in the Preamble.

"*Purchaser Deliverables*" has the meaning set forth in Section 2.2(b).

"*Purchaser Party*" has the meaning set forth in Section 4.5(a).

"*Qualifying Ownership Interest*" means, with respect to any Purchaser, that the following conditions are satisfied: (i) ownership by such Purchaser together with its Affiliates, in the aggregate, of 4% or more of the Common Stock outstanding as of the Closing; and (ii) ownership by Purchaser together with its Affiliates, at the time of determination, 4% or more of the Common Stock then outstanding.

"*Qualifying Purchaser*" means a Purchaser who holds a Qualifying Ownership Interest at the relevant time of determination.

*Registration Rights Agreement*" has the meaning set forth in Section 4.19.

"*Regulation D*" has the meaning set forth in the Recitals.

"*Regulatory Agreement*" has the meaning set forth in Section 3.1(ff).

"*Required Approvals*" has the meaning set forth in Section 3.1(e).

"*Reserve Bank*" means the Federal Reserve Bank of Richmond.

"*Rule 144*" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

"*Government Guaranteed Loans*" means loans that are partially guaranteed through government programs, including but not limited to (i) loans made to small business concerns in compliance with Section 7(a) of the Small Business Act and the rules and regulations promulgated thereunder and (ii) mortgage loans originated in accordance with the criteria established by and guaranteed by the United States Department of Agriculture.

"*Schedules*" means the disclosure schedules delivered by the Company to Purchasers herewith.

"*SCOCB*" means the Office of the Commissioner of Banking of South Carolina.

"*Secondary Transactions*" has the meaning set forth in Section 3.2(u).

"*Securities Act*" has the meaning set forth in the Recitals.

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"*Shares*" has the meaning set forth in the Recitals.

"*Solicitor*" has the meaning set forth in Section 3.1(mm).

"*South Carolina Courts*" means the state and federal courts sitting in the State of South Carolina.

"*Subscription Amount*" means the aggregate amount to be paid by each Purchaser for the Shares purchased hereunder as indicated on Purchaser's signature page to this Agreement next to the heading "Aggregate Purchase Price (Subscription Amount)."

"*Subsidiary*" means any entity in which the Company, directly or indirectly, owns sufficient capital stock or holds a sufficient equity or similar interest such that it is required by GAAP to be consolidated with the Company in the financial statements of the Company.

"*Tax*" means any and all domestic or foreign, federal, state, local or other taxes, customs, duties, governmental fees or other like assessments or charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any governmental entity, including taxes on or with respect to income, franchises, windfall or other profits, gross receipts, property, transfer, sales, use, license, alternative or add on minimum, escheatment or unclaimed property, capital stock, payroll, employment, unemployment, social security, workers' compensation or net worth, and taxes in the nature of excise, withholding, ad valorem or value added or similar taxes.

"*Transaction Documents*" means this Agreement, the Schedules and Exhibits attached hereto, and any other documents or agreements executed by the Company or Purchaser in connection with the transactions contemplated hereunder.

"*Transfer Agent*" means Computershare, or any successor transfer agent for the Company.

"*Transferee Letter*" has the meaning set forth in the Recitals.

"*U.S. Sanctions Laws*" has the meaning set forth in Section 3.2(q).

"*VCOC Letter Agreement*" means the letter agreement in the form attached hereto as Exhibit E, dated as of the Closing Date, between the Company and each Qualifying Purchaser.

"*Voting Common Shares*" has the meaning set forth in the Recitals.

"*Voting Common Stock*" means the shares of voting common stock, par value $1.00 per share, of the Company.

"*Voting Securities*" means capital stock of the Company that is a "voting security" as that term is defined in section 225.2(q) of the Federal Reserve's Regulation Y (or any successor provision).

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**ARTICLE II** **<br>PURCHASE AND SALE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.**Closing**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Purchase of Shares**. Subject to the terms and conditions set forth in this Agreement, the Company shall issue and sell to each Purchaser, and each Purchaser shall purchase from the Company, the number of Shares set forth on the signature page hereto at a per share price equal to the Purchase Price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Closing**. The Closing of the purchase and sale of the Shares pursuant to this Agreement shall take place at the offices of Alston & Bird LLP, 1201 W. Peachtree St., Atlanta, Georgia on the Closing Date or at such other locations or remotely by facsimile transmission or other electronic means as the parties may mutually agree.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.**Closing Deliveries**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)On or prior to the Closing, the Company shall issue, deliver or cause to be delivered to each Purchaser the following (the "*Company Deliverables*"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)book-entry shares evidencing the issuance of the number of shares of Common Stock set forth on the signature page hereto to Purchaser, registered in the name of Purchaser or its nominee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)a legal opinion of Company Counsel, dated as of the Closing Date and in the form attached hereto as Exhibit A, executed by such counsel and addressed to Purchaser and the Placement Agent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)a certificate of the of an officer of the Company, in the form attached hereto as Exhibit B (the "*Officer's Certificate*"), dated as of the Closing Date, (a) certifying the resolutions adopted by the Board of Directors of the Company or a duly authorized committee thereof approving the transactions contemplated by this Agreement, the other Transaction Documents and the issuance of the Shares, (b) certifying the Articles of Incorporation and Bylaws of the Company in effect as of the Closing and (c) certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)a certificate, dated as of the Closing Date and signed by its Chief Executive Officer or its Chief Financial Officer, certifying to the fulfillment of the conditions specified in Sections 5.1(a), (b), (d), (e), (f), (g), and (j) in the form attached hereto as Exhibit C;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)a Certificate of Existence for the Company from the Virginia State Corporation Commission and a Certificate of Existence for the Bank from the Secretary of State of South Carolina, each as of a date that is no more than three (3) Business Days prior to the Closing Date; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)only if Purchaser will be a Qualifying Purchaser immediately following the Closing, the VCOC Letter Agreement, duly executed by the Company.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following (the "*Purchaser Deliverables*"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)its Subscription Amount, in U.S. dollars and in immediately available funds, in the amount indicated below Purchaser's name on the signature page hereto under the heading "Aggregate Purchase Price (Subscription Amount)" by wire transfer to the account provided by the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)a fully completed and duly executed Accredited Investor Questionnaire, reasonably satisfactory to the Company in the form attached hereto as Exhibit D; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)only if Purchaser will be a Qualifying Purchaser immediately following the Closing, the VCOC Letter Agreement, duly executed by the Purchaser.

**ARTICLE III** **<br>REPRESENTATIONS AND WARRANTIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.**Representations and Warranties of the Company**. The Company hereby represents and warrants as of the date hereof and as of the Closing Date, except for the representations and warranties that speak as of a specific date, which shall be made as of such date, to each Purchaser that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Subsidiaries**. The Company has no direct or indirect Subsidiaries except as set forth in Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any and all Liens, and all the issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Organization and Qualification**. The Company and each of its Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own or lease and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and each of its Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not in the reasonable judgment of the Company be expected to have a Material Adverse Effect. The Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "*BHC Act*"). The Bank is the Company's only Subsidiary banking institution. The Bank's deposit accounts are insured up to applicable limits by the FDIC, and all premiums and assessments required to be paid in connection therewith have been paid when due and no proceeding for the termination of such insurance is pending or, to the Company's Knowledge, threatened. The Company and each of its Subsidiaries has conducted its business in compliance with all applicable federal, state and foreign laws, orders, judgments, decrees, rules, regulations and applicable stock exchange requirements, including all laws and regulations restricting activities of bank holding companies and banking organizations, except for any noncompliance that, individually or in the aggregate, has not had and would not be reasonably expected to have a Material Adverse Effect.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Authorization; Enforcement; Validity**. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder in accordance with the terms hereof. The Company's execution and delivery of each of the Transaction Documents and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company, and no further corporate action is required by the Company, its board of directors or its shareholders in connection therewith other than in connection with the Required Approvals. Each of the Transaction Documents has been (or upon delivery will have been) duly executed by the Company and is, or when delivered in accordance with the terms hereof or thereof, will constitute the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. There are no shareholder agreements, voting agreements, or other similar arrangements with respect to the Company's capital stock to which the Company is a party or, to the Company's Knowledge, between or among any of the Company's shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**No Conflicts**. The execution, delivery and performance by the Company of the Transaction Documents and the consummation by the Company of the transactions contemplated hereby or thereby (including, without limitation, the issuance of the Shares) do not and will not, subject to receipt of the Required Approvals, (i) conflict with or violate any provisions of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or otherwise result in a violation of the organizational documents of the Company or any Subsidiary, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would result in a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any Material Contract, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations and the rules and regulations thereunder, assuming, without investigation, the correctness of the representations and warranties made by Purchaser herein, of any self-regulatory organization to which the Company or its securities are subject), or by which any property or asset of the Company is bound or affected, except in the case of clauses (ii) and (iii) such as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Filings, Consents and Approvals**. Neither the Company nor any of its Subsidiaries is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority, self-regulatory organization or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filings required by any applicable state securities laws, (ii) the filing of a Notice of Exempt Offering of Securities on Form D with the Commission under Regulation D of the Securities Act, (iii) the filings required in accordance with Section 4.11 of this Agreement, (iv) the filing of any applicable notices and/or applications to or the receipt of any applicable consents or non-objections from the state or federal bank regulatory authorities that govern the Company or the Bank, and (v) those that have been made or obtained prior to the date of this Agreement (collectively, the "*Required Approvals*"). The Company is unaware of any facts or circumstances relating to the Company or its Subsidiaries which would be likely to prevent the Company from obtaining or effecting any of the foregoing.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Capitalization**. The number of shares and type of all authorized, issued and outstanding capital stock, options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) is set forth on Schedule 3.1(g). Immediately following the Closing, (i) 6,156,011 shares of Voting Common Stock and (ii) 1,753,507 shares of Non-Voting Common Stock will be issued and outstanding. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable, have been issued in compliance in all material respects with all applicable federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase any capital stock of the Company. No shares of the Company's outstanding capital stock are subject to preemptive rights or any other similar rights other than as set forth on Schedule 3.1(f). Other than as set forth on Schedule 3.1(g): (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company; and (ii) there are no material outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or by which the Company is bound. Except as set forth on Schedule 3.1(g), there are no outstanding securities or instruments of the Company that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company or any of its Subsidiaries. The Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. There are no securities or instruments issued by or to which the Company is a party containing anti-dilution or similar provisions that will be triggered by the issuance of the Shares.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Financial Statements**. Each of the audited consolidated balance sheets of the Company and its Subsidiaries and the related audited consolidated statements of income (loss), statements of shareholders' equity and comprehensive income (loss) and cash flows, together with the notes thereto, for the years ended December 31, 2016, 2017 and 2018, and the unaudited consolidated balance sheets of the Company and its Subsidiaries and the related unaudited consolidated statements of income (loss), statements of shareholders' equity and comprehensive income (loss) and cash flows, together with the notes thereto, for the period ended March 31, 2019, all of which have been previously provided or made available to Purchaser (collectively, the "*Company Financial Statements*"), (i) have been prepared from, and are in accordance with, the books and records of the Company and its Subsidiaries, (ii) complied, as of their respective date of such filing, in all material respects with applicable accounting requirements, (iii) have been prepared in accordance with GAAP applied on a consistent basis, and (iv) present fairly in all material respects the consolidated financial position of the Company and its Subsidiaries at the dates and the consolidated results of operations, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for the periods stated therein. The Bank's allowance for loan losses is in compliance in all material respects with (A) the Bank's methodology for determining the adequacy of its allowance for loan losses and (B) the standards established by applicable Governmental Entities and the Financial Accounting Standards Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Tax Matters**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The Company and each of its Subsidiaries (x) has prepared and filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (y) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, with respect to which adequate reserves have been set aside on the books of the Company and (z) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply, except, in the case of clauses (x) and (y) above, where the failure to so pay or file any such tax, assessment, charge or return would not have or reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Neither the Company nor any of its Subsidiaries is a party to, is bound by or has any material obligation under, any Tax sharing or Tax indemnity agreement or similar contract or arrangement other than any contract or agreement between or among the Company and any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has participated in any "reportable transaction" within the meaning of Treasury Regulations Section 1.6011-4, or any other transaction requiring disclosure under analogous provisions of state, local or foreign law. Neither the Company nor any of its Subsidiaries has liability for the Taxes of any person other than the Company or any its Subsidiaries under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee, successor or otherwise. Neither the Company nor any Company Subsidiary has been a "distributing corporation" or a "controlled corporation" in any distribution in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable. The Company has not been a United States real property holding corporation within the meaning of Section 897 of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Material Changes**. Since the date of the latest audited Company Financial Statements, except as set forth on Schedule 3.1(j), (i) there have been no events, occurrences or developments that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in Company Financial Statements pursuant to GAAP, (iii) the Company has not altered materially its method of accounting or the manner in which it keeps its accounting books and records, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed, or made any agreements to purchase or redeem any shares of its capital stock, (v) the Company has not issued any equity securities to any officer, director, or Affiliate, (vi) there has not been any material change or amendment to, or any waiver of any material right by the Company under, any Material Contract under which the Company or any of its Subsidiaries is bound or subject, and (vii) to the Company's Knowledge, there has not been a material increase in the aggregate dollar amount of (A) the Bank's nonperforming loans (including nonaccrual loans and loans 90 days or more past due and still accruing interest) or (B) the reserves or allowances established on the Company's or the Bank's financial statements with respect thereto. Moreover, since the date(s) the Company afforded Purchaser (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares, and (ii) access to information about the Company and its Subsidiaries and their respective financial condition, results of operations, business, properties, management, prospects, and any potential transactions sufficient to enable it to evaluate its investment, there have been no events, occurrences, or developments that have materially affected or would reasonably be expected to materially affect, either individually or in the aggregate, the information as presented to Purchaser in connection with the offering of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**Environmental Matters**. Neither the Company nor any of its Subsidiaries (i) is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "*Environmental Laws*"), (ii) owns or operates any real property contaminated with any substance that is in violation of any Environmental Laws, (iii) is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any Environmental Laws; in each case, which violation, contamination, liability or claim has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and, to the Company's Knowledge, there is no pending or threatened investigation that might lead to such a claim.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Litigation**. There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or (ii) is reasonably likely to have a Material Adverse Effect, individually or in the aggregate, if there were an unfavorable decision. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There is no Action by the Company or any of its Subsidiaries pending or which the Company or any of its Subsidiaries intends to initiate (other than collection or similar claims in the ordinary course of business). There has not been, and to the Company's Knowledge there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any executive officers or directors of the Company in their capacities as such, which individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**Employment Matters**. No labor dispute exists or, to the Company's Knowledge, is imminent with respect to any of the employees of the Company or its Subsidiaries which would have or reasonably be expected to have a Material Adverse Effect. None of employees of the Company or any of its Subsidiaries is a member of a union that relates to such employee's relationship with the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and each Subsidiary believes that its relationship with its employees is good. To the Company's Knowledge, no executive officer is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of a third party, and to the Company's Knowledge, the continued employment of each such executive officer does not subject the Company or any Subsidiary to any liability with respect to any of the foregoing matters. The Company is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Company and its Subsidiaries are in material compliance with all laws concerning the classification of employees and independent contractors and have properly classified all such individuals for purposes of participation in employee benefit plans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Compliance**. Neither the Company nor any of its Subsidiaries (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any of its Subsidiaries under), nor has the Company or any of its Subsidiaries received written notice of a claim that it is in default under or that it is in violation of, any Material Contract (whether or not such default or violation has been waived), (ii) is in violation of any order of which the Company has been made aware in writing of any court, arbitrator or governmental body having jurisdiction over the Company or its Subsidiaries or their respective properties or assets, (iii) is in violation of, or in receipt of written notice that it is in violation of, any statute, rule, regulation, policy, guideline or order of any governmental authority or self-regulatory organization applicable to the Company or any of its Subsidiaries, or which would have the effect of revoking or limiting FDIC deposit insurance, except in each case as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)**Regulatory Permits**. The Company and each of its Subsidiaries possess all certificates, authorizations, consents and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as currently conducted, except where the failure to possess such certificates, authorizations, consents or permits, individually or in the aggregate, has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect ("*Material Permits*"), and (i) neither the Company nor any of its Subsidiaries has received any notice in writing of proceedings relating to the revocation or material adverse modification of any such Material Permits and (ii) the Company is unaware of any facts or circumstances that would give rise to the revocation or material adverse modification of any Material Permits.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)**Title to Assets**. The Company and its Subsidiaries have good and marketable title to all real property and tangible personal property owned by them which is material to the business of the Company and its Subsidiaries, taken as a whole, in each case free and clear of all Liens except such as do not materially affect the value of such property or do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and facilities by the Company and its Subsidiaries. No notice of a claim of default by any party to any lease entered into by the Company or any of its Subsidiaries has been delivered to either the Company or any of its Subsidiaries or is now pending, and there does not exist any event or circumstance that with notice or passing of time, or both, would constitute a default or excuse performance by any party thereto. None of the owned or leased premises or properties of the Company or any of its Subsidiaries is subject to any current or potential interests of third parties or other restrictions or limitations that would impair or be inconsistent in any material respect with the current use of such property by the Company or any of its Subsidiaries, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)**Patents and Trademarks**. The Company and its Subsidiaries own, possess, license or have other rights to use all foreign and domestic patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, inventions, trade secrets, technology, Internet domain names, know-how and other intellectual property (collectively, the "*Intellectual Property*") necessary for the conduct of their respective businesses as now conducted or as proposed to be conducted except where the failure to own, possess, license or have such rights would not have or reasonably be expected to have a Material Adverse Effect. Except where such violations or infringements would not have or reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (a) there are no rights of third parties to any such Intellectual Property; (b) there is no infringement by third parties of any such Intellectual Property; (c) there is no pending or threatened action, suit, proceeding or claim by others challenging the Company's and its Subsidiaries' rights in or to any such Intellectual Property; (d) there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property; and (e) there is no pending or threatened action, suit, proceeding or claim by others that the Company and/or any Subsidiary infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)**Insurance**. The Company and each of the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes to be prudent and customary in the businesses and locations in which and where the Company and the Subsidiaries are engaged. The Company and its Subsidiaries have not been refused any insurance coverage sought or applied for, and the Company and its Subsidiaries do not have any reason to believe that they will not be able to renew their existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue their business at a cost that would not have a Material Adverse Effect. All premiums due and payable under all such policies and bonds have been timely paid, and the Company and its Subsidiaries are in material compliance with the terms of such policies and bonds. Neither the Company nor any of its Subsidiaries has received any notice of cancellation of any such insurance, nor, to the Company's Knowledge, will it or any Subsidiary be unable to renew their respective existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would be materially higher than their existing insurance coverage. The Company (i) maintains directors' and officers' liability insurance and fiduciary liability insurance with benefits and levels of coverage as disclosed in Schedule 3.1(r), (ii) has timely paid all premiums on such policies, and (iii) there has been no lapse in coverage during the term of such policies.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)**Transactions with Affiliates and Employees**. Other than the grant of stock options or other equity awards that are not individually or in the aggregate material in amount, none of the officers or directors of the Company or any of its Subsidiaries and, to the Company's Knowledge, none of the employees of the Company or any of its Subsidiaries, is presently a party to any transaction with the Company or any of its Subsidiaries or to a presently contemplated transaction (other than for services as employees, officers and directors) that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Securities Act if the Company were subject to such regulation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)**Certain Fees**. No person or entity will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or any Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company, other than fees being paid by the Company to the Placement Agent with respect to the offer and sale of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)**Private Placement**. Assuming the accuracy of each Purchaser's representations and warranties set forth in Section 3.2 of this Agreement and the accuracy of the information disclosed in the Accredited Investor Questionnaire, no registration under the Securities Act is required for the offer and sale of the Shares by the Company to Purchaser under the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)**No Integrated Offering**. Assuming the accuracy of Purchaser's representations and warranties set forth in Section 3.2, none of the Company, its Subsidiaries nor, to the Company's Knowledge, any of its Affiliates or any Person acting on its behalf has, directly or indirectly, at any time within the past six months, made any offers or sales of any Company security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Shares as contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)**Investment Company**. Neither the Company nor any of its Subsidiaries is required to be registered as, and is not an Affiliate of, and immediately following the Closing will not be required to register as, an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)**Unlawful Payments**. Neither the Company nor any of its Subsidiaries, nor to the Company's Knowledge, any directors, officers, employees, agents or other Persons acting at the direction of or on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries: (a) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to foreign or domestic political activity; (b) made any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (c) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (d) made any other unlawful bribe, rebate, payoff, influence payment, kickback or other material unlawful payment to any foreign or domestic government official or employee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)**Off Balance Sheet Arrangements**. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other affiliated entity that is not reflected on or disclosed in the Company Financial Statements, other than letters of credit and similar arrangements entered into by the Bank in the ordinary course of business.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)**Acknowledgment Regarding Purchaser's Purchase of Shares**. The Company acknowledges and agrees that each Purchaser is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that each Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to such Purchaser's purchase of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa)**OFAC**. Neither the Company nor any Subsidiary nor, to the Company's Knowledge, any director, officer, agent, employee, Affiliate or Person acting on behalf of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ("*OFAC*"); and the Company will not knowingly use the proceeds of the sale of the Shares towards any sales or operations in Cuba, Iran, Syria, Sudan, North Korea, Crimea Region of the Ukraine or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb)**Money Laundering Laws**. The operations of each of the Company and any Subsidiary are, and have been conducted at all times, in compliance in all material respects with the money laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the "*Money Laundering Laws*") and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company and/or any Subsidiary with respect to the Money Laundering Laws is pending or to the Company's Knowledge, threatened.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc)**No Additional Agreements**. Except with respect to employee stock options that have been Disclosed, the Company has no agreements or understandings with any other Person to purchase Shares on terms more favorable to such Person than as set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd)**Reports, Registrations and Statements**. Since January 1, 2016, the Company and each Subsidiary have filed all material reports, registrations and statements, together with any required amendments thereto, that it was required to file with the Federal Reserve, the FDIC, the SCOCB, and any other applicable federal or state securities or banking authorities. All such reports and statements filed with any such regulatory body or authority are collectively referred to herein as the "*Company Reports*." As of their respective dates, the Company Reports complied in all material respects with all the rules and regulations promulgated by the Federal Reserve, the FDIC, the SCOCB and any other applicable foreign, federal or state securities or banking authorities, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee)**Bank Regulatory Capitalization**. As of March 31, 2019, the Bank was considered "well capitalized" under the FDIC's regulatory framework for prompt corrective action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff)**Agreements with Regulatory Agencies.** Neither the Company nor any Subsidiary is subject to any cease-and-desist or other similar order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or has adopted any board resolutions at the request of, any governmental entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management or its operations or business (each item in this sentence, a "*Regulatory Agreement*"), nor has the Company or any Subsidiary been advised in writing since December 31, 2021 by any governmental entity that it intends to issue, initiate, order, or request any such Regulatory Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg)**Compliance with Certain Banking Regulations**. To the Company's Knowledge, there are no facts or circumstances, and the Company has no reason to believe that any facts or circumstances exist, that would cause the Bank: (i) to be deemed not to be in satisfactory compliance with the Community Reinvestment Act and the regulations promulgated thereunder or to be assigned a CRA rating by federal or state banking regulators of lower than "satisfactory;" (ii) to be deemed to be operating in violation, in any material respect, of the Bank Secrecy Act of 1970, as amended, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (also known as the USA PATRIOT Act), any order issued with respect to anti-money laundering by OFAC, or any other anti-money laundering statute, rule or regulation; or (iii) to be deemed not to be in satisfactory compliance, in any material respect, with all applicable privacy of customer information requirements contained in any applicable federal and state privacy laws and regulations as well as the provisions of all information security programs adopted by the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh)**No General Solicitation or General Advertising**. Neither the Company nor, to the Company's Knowledge, any person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)**Mortgage Banking Business**. Except as has not had and would not reasonably be expected to have a Material Adverse Effect:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The Company and each of its Subsidiaries has complied with, and all documentation in connection with the origination, processing, underwriting and credit approval of any mortgage loan originated, purchased or serviced by the Company or any of its Subsidiaries satisfied, (A) all applicable federal, state and local laws, rules and regulations with respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing, or filing of claims in connection with mortgage loans, including all laws relating to real estate settlement procedures, consumer credit protection, truth in lending laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, (B) the responsibilities and obligations relating to mortgage loans set forth in any agreement between the Company or any of its Subsidiaries and any Agency, Loan Investor or Insurer, (C) the applicable rules, regulations, guidelines, handbooks and other requirements of any Agency, Loan Investor or Insurer and (D) the terms and provisions of any mortgage or other collateral documents and other loan documents with respect to each mortgage loan; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)No Agency, Loan Investor or Insurer has (A) claimed in writing that the Company or any of its Subsidiaries has violated or has not complied with the applicable underwriting standards with respect to mortgage loans sold by the Company or any of its Subsidiaries to a Loan Investor or Agency, or with respect to any sale of mortgage servicing rights to a Loan Investor, (B) imposed in writing restrictions on the activities (including commitment authority) of the Company or any of its Subsidiaries or (C) indicated in writing to the Company or any of its Subsidiaries that it has terminated or intends to terminate its relationship with the Company or any of its Subsidiaries for poor performance, poor loan quality or concern with respect to the Company's or any of its Subsidiaries' compliance with laws,

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For purposes of this Section 3.1(ii): (A) "*Agency*" means the Federal Housing Administration, the Federal Home Loan Mortgage Corporation, the Farmers Home Administration (now known as Rural Housing and Community Development Services), the Federal National Mortgage Association, the United States Department of Veterans' Affairs, the Rural Housing Service of the U.S. Department of Agriculture or any other federal or state agency with authority to (i) determine any investment, origination, lending or servicing requirements with regard to mortgage loans originated, purchased or serviced by the Company or any of its Subsidiaries or (ii) originate, purchase, or service mortgage loans, or otherwise promote mortgage lending, including state and local housing finance authorities; (B) "*Loan Investor*" means any person (including an Agency) having a beneficial interest in any mortgage loan originated, purchased or serviced by the Company or any of its Subsidiaries or a security backed by or representing an interest in any such mortgage loan; and (C) "*Insurer*" means a person who insures or guarantees for the benefit of the mortgagee all or any portion of the risk of loss upon borrower default on any of the mortgage loans originated, purchased or serviced by the Company or any of its Subsidiaries, including the Federal Housing Administration, the United States Department of Veterans' Affairs, the Rural Housing Service of the U.S. Department of Agriculture and any private mortgage insurer, and providers of hazard, title or other insurance with respect to such mortgage loans or the related collateral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj)**Risk Management Instruments**. The Company and its Subsidiaries have in place risk management policies and procedures sufficient in scope and operation to protect against risks of the type and in amounts reasonably expected to be incurred by companies of similar size and in similar lines of business as the Company and its Subsidiaries. Except as has not had or would not reasonably be expected to have a Material Adverse Effect, since January 1, 2017, all derivative instruments, including, swaps, caps, floors and option agreements, whether entered into for the Company's own account, or for the account of one or more of the Subsidiaries, were entered into (1) only in the ordinary course of business, (2) in accordance with prudent practices and in all respects with all applicable laws, rules, regulations and regulatory policies and (3) with counterparties believed to be financially responsible at the time; and each of them constitutes the valid and legally binding obligation of the Company or one of the Subsidiaries, enforceable in accordance with its terms. Neither the Company nor the Subsidiaries, nor, to the Knowledge of the Company, any other party thereto, is in breach of any of its obligations under any such agreement or arrangement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk)**ERISA**. The Company and its Subsidiaries are in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("*ERISA*"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or its Subsidiaries would have any liability; the Company and its subsidiaries have not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan; " or (ii) Sections 412 or 4971 of the Code; and each "Pension Plan" for which the Company or any of its Subsidiaries would have liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll)**Shell Company Status**. The Company is not, and has never been, an issuer identified in Rule 144(i)(1).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(mm)**No "Bad Actor" Disqualification**. The Company has exercised reasonable care, in accordance with Commission rules and guidance, and has conducted a factual inquiry including the procurement of relevant questionnaires from each Covered Person (as defined below) or other means, the nature and scope of which reflect reasonable care under the relevant facts and circumstances, to determine whether any Covered Person (as defined below) is subject to any of the "bad actor" disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act ("*Disqualification Events*"). To the Company's Knowledge, after conducting such sufficiently diligent factual inquiries, no Covered Person is subject to a Disqualification Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Securities Act. "*Covered Persons*" are those persons specified in Rule 506(d)(1) under the Securities Act, including the Company; any predecessor or Affiliate of the Company; any director, executive officer, other officer participating in the offering; any general partner or managing member of the Company; any Beneficial Owner of 20% or more of the Company's outstanding voting equity securities, calculated on the basis of voting power; any promoter (as defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of the sale of the securities being offered hereunder; and any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of the Shares (a "*Solicitor*"), any general partner or managing member of any Solicitor, and any director, executive officer or other officer participating in the offering of any Solicitor or general partner or managing member of any Solicitor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(nn)**Change in Control**. The issuance of the Shares to Purchaser as contemplated by this Agreement will not trigger any rights under any "change of control" provision in any of the agreements to which the Company or any of its Subsidiaries is a party, including any employment, "change in control," severance or other compensatory agreements and any benefit plan, which results in payments to the counterparty or the acceleration of vesting of benefits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(oo)**Common Control**. The Company is not and, after giving effect to the offering and sale of the Shares, will not be under the control (as defined in the BHC Act and the Federal Reserve's Regulation Y (12 CFR Part 225) ("*BHC Act Control*")) of any company (as defined in the BHC Act and the Federal Reserve's Regulation Y). The Company is not in BHC Act Control of any federally insured depository institution other than the Bank. The Bank is not under the BHC Act Control of any company (as defined in the BHC Act and the Federal Reserve's Regulation Y) other than the Company. Neither the Company nor the Bank controls, in the aggregate, more than five percent of the outstanding voting class, directly or indirectly, of any federally insured depository institution (other than the Company with respect to the Bank). The Bank is not subject to the liability of any commonly controlled depository institution pursuant to Section 5(e) of the Federal Deposit Insurance Act (12 U.S.C. § 1815(e)).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(pp)**Material Contracts**. Except as disclosed Schedule 3.1(pp), none of the Company Entities, nor any of their respective assets, businesses, or operations, is a party to, or is bound or affected by, or receives benefits under, (i) any employment, severance, termination, consulting, or retirement Contract with any Person (including current or former directors, officers, or employees of any Company Entity), (ii) any Contract relating to the borrowing of money by any Company Entity or the guarantee by any Company Entity of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds repurchase agreements, fully-secured by the United States government and government agency securities, and Federal Home Loan Bank advances incurred in the ordinary course of the Company's business, trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of the Company's business), (iii) any Contract which prohibits, limits or restricts any Company Entity or any employee of a Company Entity from engaging in any business activities in any geographic area, line of business or otherwise in competition with any other Person, (iv) any Contract relating to the purchase or sale of any goods or services (other than Contracts entered into in the ordinary course of business involving payments under any individual Contract not in excess of $100,000), (v) any exchange-traded or over-the-counter swap, forward, future, option, cap, floor, or collar financial Contract, or any other interest rate or foreign currency protection Contract not included on its balance sheet, (vi) any material Contract that would be terminable other than by a Company Entity or any Contract under which a material payment obligation of a Company Entity (or any successor(s) thereto) would arise or be accelerated, in each case as a result of the announcement or consummation of the transactions contemplated by this Agreement (either alone or upon the occurrence of any additional acts or events), (vii) any Contract or agreement that contains any (A) exclusive dealing obligation, (B) "clawback" or similar undertaking requiring the reimbursement or refund of any fees, (C) "most favored nation" or similar provision granted by any Company Entity or (D) provision that grants any right of first refusal or right of first offer or similar right or that limits or purports to limit the ability of any Company Entity to own, operate, sell, transfer, pledge or otherwise dispose of any assets or business, (viii) any material Contract or agreement that would require any consent or approval of a counterparty as a result of the consummation of the transactions contemplated by this Agreement and (ix) any contract not listed above that is material to the financial condition, results of operations or business of the Company or any other Company Entities ((i)-(ix), the "*Material Contracts*"). With respect to each Material Contract: (A) the Contract is in full force and effect; (B) no Company Entity is in material Default thereunder; (C) no Company Entity has repudiated or waived any material provision of any such Contract; (D) no other party to any such Contract is, to Company's Knowledge, in default in any respect or has repudiated or waived any material provision thereunder; and (E) no consent is required by a Material Contract for the execution, delivery, or performance of this Agreement, the issuance of the Shares, or the other transactions contemplated hereby. Except as set forth on Schedule 3.1(pp), all of the indebtedness (other than deposit liabilities) of any Company Entity for money borrowed is prepayable at any time by such Company Entity without penalty, premium or charge. The Company has made available to Purchaser, prior to the date hereof, true, correct, and complete copies of, and listed on Schedule 3.1(pp), each Material Contract to which the Company or any of its Subsidiaries is a party or subject (whether written or oral, express or implied) as of the date of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(qq)**Internal Accounting Controls**. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(rr)**Application of Takeover Protections; Rights Agreements**. The Company does not currently have in place any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company. The Company and its Board of Directors have taken all action necessary to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to Purchaser as a direct consequence of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Shares and any Purchaser's ownership of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ss)**No Undisclosed Liabilities**. There are no material liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable, or otherwise, except for (i) liabilities appropriately reflected or reserved against in accordance with GAAP in the Company's audited consolidated balance sheet for the year ended December 31, 2018, and (ii) liabilities that have arisen in the ordinary and usual course of business and consistent with past practice since December 31, 2018, except for such liabilities that have not had and would not reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(tt)**Investor Presentation**. The Investor Presentation did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.**Representations and Warranties of Purchaser**. Each Purchaser hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Organization; Authority**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)If Purchaser is an entity, it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, partnership, limited liability company or other applicable similar power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. If Purchaser is an entity, the execution, delivery and performance by Purchaser of the applicable Transaction Documents to which it is a party and the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or, if Purchaser is not a corporation, such partnership, limited liability company or other applicable like action, on the part of Purchaser. If Purchaser is an entity, each of the applicable Transaction Documents to which it is a party has been duly executed by Purchaser, and when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)If Purchaser is not an entity, the execution, delivery and performance by Purchaser of the applicable Transaction Documents to which it is a party and the transactions contemplated by this Agreement have been duly authorized. Each of the applicable Transaction Documents to which Purchaser is a party has been duly executed by Purchaser, and when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**No Conflicts**. The execution, delivery and performance by Purchaser of this Agreement and the consummation by Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of Purchaser (if such Purchaser is an entity), (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Purchaser is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Purchaser to perform its obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Investment Intent**. Purchaser understands that the Shares are "restricted securities" and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Shares as principal for its own account and not with a view to, or for distributing or reselling such Shares or any part thereof in violation of the Securities Act or any applicable state securities laws, *provided, however*, that by making the representations herein, Purchaser does not agree to hold any of the Shares for any minimum period of time and reserves the right at all times to sell or otherwise dispose of all or any part of such Shares under an exemption from such registration and in compliance with applicable federal and state securities laws. Purchaser is acquiring the Shares hereunder in the ordinary course of its business. Purchaser does not presently have any agreement, plan or understanding, directly or indirectly, with any Person to distribute or effect any distribution of any of the Shares (or any securities which are derivatives thereof) to or through any person or entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Purchaser Status**. At the time Purchaser was offered the Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501(a) under the Securities Act. Purchaser has provided the information in the Accredited Investor Questionnaire attached hereto as <u>Exhibit D</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Reliance**. The Company will be entitled to rely upon this Agreement and is irrevocably authorized to produce this Agreement or a copy hereof to (A) any regulatory authority having jurisdiction over the Company and its affiliates and (B) any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby, in each case, to the extent required by any court or governmental authority to which the Company is subject, provided that the Company provides Purchaser with prior written notice of such disclosure to the extent practicable and allowed by applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**General Solicitation**. Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other form of "general solicitation" or "general advertising" (as such terms are used in Regulation D promulgated under the Securities Act and interpreted by the Commission).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Direct Purchase**. Purchaser is purchasing the Shares directly from the Company and not from the Placement Agent. The Placement Agent did not make any representations or warranties to Purchaser, express or implied, regarding the Shares, the Company or the Company's offering of the Shares.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Experience of Purchaser**. Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Shares. Purchaser is capable of protecting its own interests in connection with this investment and has experience as an investor in securities of companies like the Company. Purchaser is able to hold the Shares indefinitely if required, is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment. Further, Purchaser understands that no representation is being made as to the future trading value or trading volume of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Access to Information**. Purchaser is sufficiently aware of the Company's business affairs and financial condition to reach an informed and knowledgeable decision to acquire the Shares. Purchaser acknowledges that it has had the opportunity to (i) ask such questions as it has deemed necessary of, and to receive answers from, management and representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares and any such questions have been answered to Purchaser's reasonable satisfaction; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Purchaser has received all information it deems appropriate for assessing the risk of an investment in the Shares. Purchaser has reviewed the information set forth in the Company's Reports and the exhibits and schedules thereto and contained in the Data Room. Purchaser acknowledges that neither the Company nor the Placement Agent have made any representation, express or implied, with respect to the accuracy, completeness or adequacy of any available information except that the Company has made the express representations and warranties contained in Section 3.1 of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Brokers and Finders**. No Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)**Independent Investment Decision**. Purchaser has independently evaluated the merits of its decision to purchase Shares pursuant to the Transaction Documents, and Purchaser confirms that it has not relied on the advice of the Company or the Placement Agent (or any of their respective agents, counsel or Affiliates) or any other Purchaser or other Purchaser's business and/or legal counsel in making such decision. Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company (including, without limitation, by the Placement Agent) to Purchaser in connection with the purchase of the Shares constitutes legal, regulatory, tax or investment advice. Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Shares. Purchaser understands that the Placement Agent have acted solely as the agents of the Company in this placement of the Shares and Purchaser has not relied on the business, legal or regulatory advice of the Placement Agent or any of their agents, counsel or Affiliates in making its investment decision hereunder, and confirms that none of such Persons has made any representations or warranties to Purchaser in connection with the transactions contemplated by the Transaction Documents.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)**Reliance on Exemptions**. Purchaser understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Purchaser's compliance with, the representations, warranties, agreements, acknowledgements and understandings of Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of Purchaser to acquire the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)**No Governmental Review**. Purchaser understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)**Residency**. Purchaser's residence (if an individual) or office in which its investment decision with respect to the Shares was made (if an entity) are located at the address immediately below Purchaser's name on its signature page hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)**Antitrust and Other Consents, Filings, Etc**. Assuming the accuracy of the Company's representations and warranties regarding its capitalization, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any governmental entity or authority or any other person or entity in respect of any law or regulation, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder, is necessary or required to be obtained or made by Purchaser, and no lapse of a waiting period under law applicable to Purchaser is necessary or required, in each case in connection with the execution, delivery or performance by Purchaser of this Agreement or the purchase of the Shares contemplated hereby, other than (1) providing any information to the Federal Reserve, Reserve Bank, and/or SCOCB to obtain a Non-Control Determination and (2) passivity and/or anti-association commitments that may be required by the Federal Reserve or Reserve Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)**Trading**. Purchaser acknowledges that there is not currently an established trading market for the Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)**OFAC and Anti-Money Laundering**. Purchaser understands, acknowledges, represents and agrees that (i) Purchaser is not the target of any sanction, regulation, or law promulgated by OFAC, the Financial Crimes Enforcement Network or any other U.S. governmental entity ("*U.S. Sanctions Laws*"); (ii) Purchaser is not owned by, controlled by, under common control with, or acting on behalf of any person that is the target of U.S. Sanctions Laws; (iii) Purchaser is not a "foreign shell bank" and is not acting on behalf of a "foreign shell bank" under applicable anti-money laundering laws and regulations; (iv) Purchaser's entry into this Agreement or consummation of the transactions contemplated hereby will not contravene U.S. Sanctions Laws or Money Laundering Laws; (v) to the extent permitted under applicable law, if requested by the Company in writing, Purchaser will promptly provide to the Company or any regulatory or law enforcement authority such information or documentation as may be required to comply with U.S. Sanctions Laws or Money Laundering Laws; and (vi) the Company may provide to any regulatory or law enforcement authority information or documentation regarding, or provided by, Purchaser for the purposes of complying with U.S. Sanctions Laws or Money Laundering Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)**Knowledge as to Conditions**. Purchaser does not have knowledge of any circumstance that will prohibit Purchaser from obtaining a Non-Control Determination (if applicable) or any other regulatory approvals required for Purchaser to consummate the transactions contemplated by this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)**Bank Holding Company Status**. Purchaser has not or is not acting in concert with any other Person in connection with the transactions contemplated by this Agreement, other than Affiliates of Purchaser identified by Purchaser to the Company as Affiliates. Assuming the accuracy of the representations and warranties of the Company contained herein, Purchaser, either acting alone or together with any other Person will not, directly or indirectly, own, control or have the power to vote, immediately after giving effect to its purchase of the Shares pursuant to this Agreement, in excess of 9.99% of the outstanding shares of the Company's voting stock of any class or series. Without limiting the foregoing, assuming the accuracy of the representations and warranties of the Company contained herein, Purchaser represents and warrants that it does not and will not as a result of its purchase or holding of the purchased Shares or any other securities of the Company have "control" of the Company or the Bank, and has no present intention of acquiring "control" of the Company or the Bank, for purposes of the BHC Act or the CIBC Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)**Not Acting in Concert**. (i) Purchaser has not entered into any other agreements or understandings with any other Purchasers in respect of the Transaction, including any agreements or understandings regarding the voting or transfer of securities of the Company, and has not induced or been induced by any other Purchaser to enter into any such other agreement; (ii) Purchaser has not shared with or received from any other Purchaser or potential investor (nor any such other Purchaser's or potential investor's agents, Affiliates or advisors) any proprietary due diligence materials in connection with or related to Purchaser's acquisition of Shares; (iii) Purchaser has not induced or been induced by any other Purchaser to purchase the Shares or enter into this Agreement; (iv) Purchaser has not paid, and does not have any agreement or informal understanding to pay, any fees to any other Purchasers in connection with the transactions contemplated by this Agreement; (v) Purchaser has not, as part of a group consisting of substantially the same Persons comprising the other Purchasers, engaged in any additional business activities or ventures in the United States; and (vi) the number of Shares that Purchaser has elected to acquire was not directly based on the number of shares acquired by any other Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)**Other Transactions**. Purchaser acknowledges that, subsequent to the transactions contemplated by this Agreement, other potential investors may be purchasing shares of Common Stock from existing Company shareholders (collectively, the "*Secondary Transactions*") pursuant to privately negotiated transactions that have been facilitated by the Placement Agent. Purchaser further acknowledges that (i) the Secondary Transactions may be on terms different from the terms of this Agreement, (ii) neither the Company nor the Placement Agent will make any representation or warranty to the Purchaser that terms of this Agreement are more or less favorable to the Purchasers hereunder than the terms provided to the investors purchasing shares of Common Stock in the Secondary Transactions, (iii) the price per share of the shares of Common Stock sold in the Secondary Transactions could be lower than the Purchase Price, and such shares of Common Stock may be sold without transfer restrictions, and (iv) any Secondary Transaction occurring through the OTCQX Market or subsequent resale of these shares of Common Stock could cause the price of the Common Stock quoted on the OTCQX Market to drop below the Purchase Price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 The Company and each Purchaser acknowledge and agree that no party to this Agreement has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Article III and the Transaction Documents.

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**ARTICLE IV** **<br>OTHER AGREEMENTS OF THE PARTIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.**Transfer Restrictions**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Compliance with Laws**. Purchaser understands and acknowledges that the Shares are being sold by Company without registration under the Securities Act in reliance on the exemption from federal and state registration set forth in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and similar exemptions under applicable state securities laws, and accordingly, notwithstanding any other provision of this Article IV, Purchaser covenants that the Shares may be resold, pledged or otherwise transferred only pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act, or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and in compliance with any applicable state, federal or foreign securities laws. Purchaser further understands and acknowledges that Company will not be obligated in the future to register the Shares under the Securities Act or under any state securities laws. Neither the Placement Agent nor Company has made or is making any representation, warranty or covenant, express or implied, as to the availability of any exemption from registration under the Securities Act or any applicable state securities laws for the resale, pledge or other transfer of the Shares. In connection with any transfer of the Shares other than (i) pursuant to an effective registration statement or (ii) to the Company, the Company may require the transferor thereof to provide to the Company and the Transfer Agent, at the transferor's expense, an opinion of counsel selected by the transferor and reasonably acceptable to the Company and the Transfer Agent, the form and substance of which opinion shall be reasonably satisfactory to the Company and the Transfer Agent, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. As a condition of transfer (other than pursuant to clauses (i) or (ii) of the preceding sentence), any such transferee shall agree in writing to be bound by the terms of this Agreement and be required to provide the Transfer Agent with the Transferee Letter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Legends**. Certificates evidencing the Shares shall bear any legend as required by the "blue sky" laws of any state and a restrictive legend in substantially the following form (and, with respect to Shares held in book-entry form, the Transfer Agent will record such a legend on the share register), until such time as they are not required under Section 4.1(c) or applicable law:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Removal of Legends**. Upon the written request of the holder, the restrictive legend set forth in Section 4.1(b) above shall be removed and the Company shall issue a certificate without such restrictive legend to the holder of the applicable Shares upon which it is stamped, if (i) such Shares are registered for resale under the Securities Act or (ii) such Shares are eligible for sale without restriction under Rule 144(d)(1)(ii). Following the earlier of (x) the effective date of a registration statement filed pursuant to the Securities Act that includes such Shares or (y) such Shares becoming eligible for sale without restriction under Rule 144(d)(1)(ii), the Company, upon the written request of the holder, shall instruct the Transfer Agent to remove the restrictive legend from such holder's Shares and shall cause its counsel to issue any legend removal opinion required by the Transfer Agent. Any fees (with respect to the Transfer Agent, Company counsel or otherwise) associated with the issuance of such opinion or the removal of such legend shall be borne by the Company. If a legend is no longer required pursuant to the foregoing, the Company will no later than three (3) Business Days following the delivery by Purchaser to the Company or the Transfer Agent (with notice to the Company) of a legended certificate or instrument representing such Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) deliver or cause to be delivered to Purchaser a certificate or instrument (as the case may be) representing such Shares that is free from all restrictive legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.1(c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Acknowledgement**. Purchaser acknowledges its primary responsibilities under the Securities Act and accordingly will not sell or otherwise transfer the Shares or any interest therein without complying with the requirements of the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.**Acknowledgment of Dilution**. The Company acknowledges that the issuance of the Shares may result in dilution of the outstanding shares of Common Stock. The Company further acknowledges that its obligations under this Agreement, including without limitation its obligation to issue the Shares pursuant to this Agreement, are unconditional (except as otherwise set forth herein) and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other shareholders of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.**Form D and Blue Sky**. The Company agrees to timely file a Form D with respect to the Shares as required under Regulation D. Purchaser agrees to timely provide Company with any and all needed information in connection with Company's preparation and filing of a Form D. The Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Shares for sale to the Purchaser at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States (or to obtain an exemption from such qualification). The Company shall make all filings and reports relating to the offer and sale of the Shares required under applicable securities or "Blue Sky" laws of the states of the United States following the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.**No Integration**. The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that will be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities Act of the sale of the Shares to the Purchaser.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.**Indemnification**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Indemnification of Purchaser**. The Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members, partners, employees, agents and investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, Agents, stockholders, agents, members, partners, employees, agents or investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a "*Purchaser Party*") harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation (collectively, "Losses") that any such Purchaser Party may suffer or incur as a result of (i) any breach of any of the representations and warranties made by the Company in this Agreement or in the other Transaction Documents, (ii) any covenant or agreement made by the Company in this Agreement or in the other Transaction Documents or (iii) any action instituted against a Purchaser Party in any capacity, or any of them or their respective Affiliates, by any shareholder of the Company or any other Person who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by this Agreement. The Company will not be liable to any Purchaser Party under this Agreement to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party's breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Conduct of Indemnification Proceedings**. Promptly after receipt by any Purchaser Party of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 4.5(a), such Purchaser Party shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Purchaser Party, and shall assume the payment of all fees and expenses; *provided, however*, that the failure of any Purchaser Party so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is actually and materially and adversely prejudiced by such failure to notify. In any such proceeding, any Purchaser Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party unless: (i) the Company and the Purchaser Party shall have mutually agreed to the retention of such counsel; (ii) the Company shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Purchaser Party in such proceeding; or (iii) in the reasonable judgment of counsel to such Purchaser Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Without the prior written consent of the Purchaser Party, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Purchaser Party is or could have been a party and indemnity could have been sought hereunder by such Purchaser Party, unless such settlement includes an unconditional release of such Purchaser Party from all liability arising out of such proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Limitation on Amount of Company's Indemnification Liability.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Tipping Basket. Except as provided otherwise in 4.5(c)(iii), the Company will not be liable for Losses that otherwise are indemnifiable under Section 4.5(a)(i) until the total of all Losses under Section 4.5(a)(i) incurred by a Purchaser exceeds $200,000.00, at which point the Company shall be liable for the full amount of all Losses.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Maximum. Except as provided otherwise in Section 4.5(c)(iii), the Company shall not be liable for any Losses in respect of any Purchaser and its respective Purchaser Parties under Section 4.5(a) in excess of such Purchaser's Subscription Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Exceptions. The provisions of Section 4.5(c)(i) and (ii) do not apply to (A) claims due to the inaccuracy of any of the representations or breach of any of the warranties of the Company in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(g), 3.1(h), 3.1(i), 3.1(t), 3.1(rr) or 3.1(ss), or (B) indemnification claims involving fraud, willful misconduct or intentional misconduct by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)For purposes of the indemnity contained in Section 4.5(a)(i) and this Section 4.5(c), all qualifications and limitations set forth in the parties' representations and warranties as to "materiality," "Material Adverse Effect" and words of similar import shall be disregarded in determining whether there shall have been any inaccuracy in or breach of any representations and warranties in this Agreement and the Losses arising therefrom.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Exclusive Remedies**. Each Purchaser acknowledges and agrees that following the Closing, the indemnification provisions hereunder shall be the sole and exclusive remedies of Purchasers for any breach of the representations, warranties or covenants contained in the this Agreement, except in the case of fraud or willful breach of this Agreement or with respect to matters for which the remedy of specific performance, injunctive relief or other non-monetary equitable remedies are available. No investigation of the Company by Purchaser, whether prior to or after the date hereof, shall limit any Purchaser Party's exercise of any right hereunder or be deemed to be a waiver of any such right. The parties agree that any indemnification payment made pursuant to this Agreement shall be treated as an adjustment to the Purchase Price for tax purposes, unless otherwise required by Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6.**Use of Proceeds**. The Company shall use the net proceeds from the sale of the Shares hereunder for general corporate purposes. In addition, a portion of the proceeds will be invested in the Bank and a portion will be retained by the Company. The Bank may use the proceeds it receives from the Company to augment its capital position, support its operations, fund future acquisitions, or for general corporate purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7.**Limitation on Beneficial Ownership**. No Purchaser (and its Affiliates or any other Persons with which it is acting in concert) will be entitled to purchase a number of Shares that would result in such Purchaser becoming, directly or indirectly, the Beneficial Owner of more than 9.99% of the number of shares of the Company's Voting Securities issued and outstanding or 33.3% of the Company's total equity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8.**No Additional Issuances**. Between the date of this Agreement and the Closing Date, except for the Shares being issued pursuant to this Agreement, the Company shall not issue or agree to issue any additional shares of Common Stock or other securities. Notwithstanding the foregoing, nothing in this Section 4.8 shall restrict the Company from issuing securities in response or pursuant to an order or directive from the Federal Reserve with respect to capital adequacy.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9.**Conduct of Business**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)From the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, except as contemplated by this Agreement, the Company will, and will cause its Subsidiaries to, operate their business in the ordinary course consistent with past practice, preserve intact the current business organization of the Company, use commercially reasonable efforts to retain the services of their employees, consultants and agents, preserve the current relationships of the Company and its Subsidiaries with material customers and other Persons with whom the Company and its Subsidiaries have and intend to maintain significant relations, pay all applicable federal, state, local and foreign Taxes when due and payable (other than those Taxes the payment of which the Company challenges in good faith in appropriate proceedings and which are fully reserved for to the extent required by GAAP), maintain, renew, keep in full force and effect and preserve its rights, franchises and licenses and all permits necessary for the conduct of the business of the Company and its Subsidiaries as currently conducted, comply with all orders, writs, and decrees applicable to it and to the conduct of its business and operations, maintain all of its operating assets in their current condition (normal wear and tear excepted) and will not take or omit to take any action that would constitute a breach of Section 3.1(j).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Without limiting the generality of Section 4.9(a), from the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, except as contemplated by this Agreement or otherwise required by law, rule or regulation, or by policies imposed by any governmental entity, without the prior written consent of Purchaser (which shall not be unreasonably withheld, conditioned or delayed), the Company shall not, and it shall not permit any Subsidiary to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Enter into any significant new line of business or materially change its lending, investment, underwriting, risk and asset liability management, and other banking and operating policies, expect (A) as required by applicable law or policies imposed by any governmental entity, or (B) pursuant to a planned course of action that was previously Disclosed to Purchaser ;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Acquire or agree to acquire by merging or consolidating with, or by purchasing a portion of the equity interests of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Make any capital expenditure in excess of $500,000 individually or $1,000,000 in the aggregate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)Sell any assets in any one transaction or series of related transactions where the aggregate sales price equals or exceeds $1,000,000 or represents a discount of 20% or more from the aggregate book value of such assets less the amount of any applicable specific reserves with respect to such assets, provided that the foregoing shall not apply to any sales by the Company or any Subsidiary of the Company of single family or 1-4 family residential mortgages or Government Guaranteed Loans (or any portion thereof) in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of its stock or directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its stock or any options or other rights, grants or awards with respect to the Common Stock, or enter into any contract with respect thereto;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)Incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for the obligations of, any other Person, except in the ordinary and usual course of business and consistent with past practice, including as to amounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)Amend (A) its Articles of Incorporation or bylaws or similar organizational documents or (B) any term of any outstanding security issued by the Company or any Subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)Other than, in each case, in the ordinary and usual course of business and consistent with past practice or required by applicable law, grant any salary or wage increase or increase any employee benefit, including incentive or bonus payments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)Change any material accounting policies or procedures (including procedures with respect to reserves, revenue recognition, payments of accounts payable and collection of accounts receivable) used by it unless required by the Company's independent public auditors, applicable law or GAAP;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)Settle any litigation involving claims against the Company or any of its Subsidiaries resulting in monetary damages or other payments in excess of $500,000; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)Agree or commit to do any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10.**Avoidance of Control**. Notwithstanding anything to the contrary in this Agreement, neither the Company nor any Subsidiary shall take any action (including, without limitation, any redemption, repurchase, rescission or recapitalization of Common Stock, or securities or rights, options or warrants to purchase Common Stock, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for Common Stock in each case, where Purchaser is not given the right to participate in such redemption, repurchase, rescission or recapitalization to the extent of Purchaser's pro rata proportion), that would cause a Purchaser's ownership of any class of Voting Securities of the Company (together with the ownership by Purchaser's Affiliates (as such term is used under the BHC Act) of Voting Securities of the Company) to exceed 9.99%, in each case without the prior written consent of such Purchaser, or to increase to an amount that would constitute "control" under the BHC Act, the CIBC Act or any rules or regulations promulgated thereunder (or any successor provisions) or otherwise cause a Purchaser to "control" the Company under and for purposes of the BHC Act, the CIBC Act or any rules or regulations promulgated thereunder (or any successor provisions). Notwithstanding anything to the contrary in this Agreement, no Purchaser (together with its Affiliates (as such term is used under the BHC Act)) shall have the ability to purchase or exercise any voting rights of any class of securities in excess of 9.99% of the total outstanding Voting Securities of the Company, and each Purchaser covenants and agrees that it shall not take any action that would cause such Purchaser to exercise any voting rights of any class of security in excess of 9.99% of the total outstanding Voting Securities of the Company. In the event either the Company or any Purchaser breaches its obligations under this Section 4.10 or believes that it is reasonably likely to breach such an obligation, it shall promptly notify the affected Purchasers (in the case of the Company) or the Company (in the case of any Purchaser) and shall cooperate in good faith with such parties to modify ownership or make other arrangements or take any other action, in each case, as is necessary to cure or avoid such breach.

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4.11.**Reasonable Best Efforts.** Subject to the other provisions of this Agreement, the Company and each Purchaser agrees to use its respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including using reasonable best efforts to accomplish the following: (a) the taking of all reasonable acts necessary to cause the conditions to Closing to be satisfied; (b) the making of all necessary registrations and filings and the taking of all reasonable steps necessary to obtain an approval, order or waiver from, or to avoid an action or proceeding by any governmental entity or third party, and the obtaining of all necessary actions or nonactions, waivers, consents and approvals from governmental entities or third parties, including the Required Approvals (c) solely with respect to the Company, any necessary Regulatory Approvals for such redemption and transfer; and (d) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. Purchaser, on the one hand, and the Company, on the other hand, agrees to keep the other reasonably apprised of the status of matters referred to in this Section 4.11. The Company shall promptly furnish each Purchaser with copies of written communications received by it or its Affiliates from, or delivered by any of the foregoing to, any governmental entity in respect of the transactions contemplated by this Agreement; *provided*, *that* the Company may redact any confidential information contained therein. Upon request by the Company, each Purchaser shall promptly furnish the Company with copies of non-confidential written communications received by it or its Affiliates from, or delivered by any of the foregoing to, any governmental entity in respect of the transactions contemplated by this Agreement. Notwithstanding anything in this Section 4.11 or elsewhere in this Agreement to the contrary, no Purchaser shall be required to provide to any person pursuant to this Agreement any of its, its Affiliates', its investment advisor's or its or their control persons' or equity holders' nonpublic, proprietary, personal or otherwise confidential information including the identities or financial condition of limited partners, shareholders or non-managing members of Purchaser or its Affiliates or their investment advisors. The Company shall file Form Ds timely with the Commission and other jurisdictions' securities and blue sky officials and, to the extent applicable, shall cause its placement agent to timely file with FINRA all offering materials required by FINRA Rule 5123. Notwithstanding anything to the contrary in this Section 4.11, no Purchaser shall be required to perform any of the above actions if such performance would constitute or could reasonably result in any restriction or condition that such Purchaser determines, in its reasonable good faith judgment, (i) is materially and unreasonably burdensome, or (ii) would reduce the benefits of the transactions contemplated hereby to such Purchaser to such a degree that such Purchaser would not have entered into this Agreement had such condition or restriction been known to it on the date of this Agreement (any such condition or restriction, a "*Burdensome Condition*"); for the avoidance of doubt, any requirement to disclose the identities or financial condition of limited partners, shareholders or non-managing members of such Purchaser or its Affiliates or its investment advisers shall be deemed a Burdensome Condition unless otherwise determined by such Purchaser in its sole discretion.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.**Preemptive Rights**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**New Issuance.** Following the Closing, if the Company proposes to issue (a "*New Issuance*") any equity (including shares of Common Stock, Non-Voting Common Stock or shares of preferred stock), or any securities, options or debt convertible or exchangeable into equity or that include an equity component (any such security, a "*New Security*"), the Company shall provide written notice of such proposed New Issuance to each Qualifying Purchaser no later than fifteen (15) Business Days prior to the anticipated issuance date (the "*Preemptive Rights Notice*"). Each Qualifying Purchaser shall have the right to purchase for cash, at the price and on the same terms and conditions and at the same time as the New Issuance, such number of New Securities as are required to enable it to maintain its proportionate Common Stock-equivalent interest in the Company immediately prior to any such issuance of New Securities. The Preemptive Rights Notice shall set forth all material terms and conditions of the New Issuance, including the number of New Securities proposed to be issued, the issue price and the maximum number of New Securities that the Qualifying Purchaser may purchase the New Issuance pursuant to the immediately preceding sentence. Notwithstanding anything to the contrary, herein, no Qualifying Purchaser shall have any Preemptive Rights in connection with (i) any Common Stock or other securities issuable upon the exercise or conversion of any securities of the Company outstanding as of the date hereof or issued or contemplated to be issued pursuant to this Agreement and the other Transaction Documents; (ii) pursuant to the granting or exercise of employee stock options, restricted stock or other stock incentives pursuant to the Company's stock incentive plans approved by the board of directors or the issuance of stock pursuant to the Company's employee stock purchase plan approved by the board of directors or similar plan where stock is being issued or offered to a trust, other entity or otherwise, for the benefit of any employees, officers or directors of the Company, in each case in the ordinary course of providing incentive compensation; or (iii) issuances of capital stock as full or partial consideration for a merger, acquisition, joint venture, strategic alliance, license agreement or other similar nonfinancing transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Limitation on Voting Securities.** Notwithstanding anything in this Section 4.12 to the contrary, upon the request of a Qualifying Purchaser that the Qualifying Purchaser not be issued Voting Securities in whole or in part upon the exercise of its Preemptive Rights, the Company shall cooperate with the Qualifying Purchaser to modify the proposed issuance of New Securities to the Qualifying Purchaser to provide for the issuance of Non-Voting Common Stock or other non-voting securities in lieu of Voting Securities, provided, however, that the Qualifying Purchaser and the Company shall further cooperate in good faith to formulate such modification in a manner that does not inadvertently cause any other shareholder's ownership of any class of Voting Securities of the Company (together with the ownership by such other shareholder's affiliates) to exceed 9.99%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Notice.** If the information contained in the Preemptive Rights Notice constitutes material non-public information (as defined under the applicable securities laws), the Company shall deliver such Preemptive Rights Notice only to the individuals identified in Section 6.3 hereof, and shall not communicate the information to anyone else acting on behalf of a Qualifying Purchaser without the consent of one of the designated individuals. Each Qualifying Purchaser shall have 20 Business Days from the date of receipt of such Preemptive Rights Notice to notify the Company in writing that it intends to exercise its rights provided in this Section 4.12 ("*Preemptive Rights*") and as to the amount of New Securities the Qualifying Purchaser desires to purchase, up to the Preemptive Rights Amount. Such notice shall constitute a nonbinding indication of interest of Purchaser to purchase the amount of New Securities so specified at the price and other terms set forth in the Company's notice to it. The failure of a Qualifying Purchaser to respond within such 20 Business Day period shall be deemed to be a waiver of the Qualifying Purchaser's Preemptive Rights only with respect to the New Issuance described in the applicable Preemptive Rights Notice.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Purchase Mechanism.** The closing of the acceptances of the Preemptive Rights shall take place at the same time as the closing(s) under definitive agreements with other participants in the New Issuance, which in any event shall occur within ninety (90) days after the anticipated date of the New Issuance as set forth in the Preemptive Rights Notice. In the event that the New Issuance is not consummated within the time frame described above, the Company's right to consummate such New Issuance shall expire and the Company shall be required to comply with the procedures set forth in this Section 4.12 prior to any subsequent New Issuance. At the consummation of any New Issuance, the Company shall issue certificates to the Qualifying Purchasers who elect to exercise their Preemptive Rights promptly following payment by such Qualifying Purchaser of the purchase price for such exercise in accordance with the terms and conditions as specified in the Preemptive Rights Notice. The Company and each Qualifying Purchaser agree to use commercially reasonable efforts to secure any regulatory or shareholder approvals or other consents, and to comply with any law or regulation necessary in connection with the offer, sale and purchase of, such New Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Failure of Purchaser.** In the event that any Qualifying Purchaser fails to exercise its rights provided in this Section 4.12 within this 20 Business Day period or, if so exercised, such Qualifying Purchaser is unable to consummate such purchase within the time period specified in Section 4.12 above because of its failure to obtain any required regulatory or shareholder consent or approval, the Company shall thereafter be entitled (during the period of 90 days following the conclusion of the applicable period) to sell or enter into an agreement (pursuant to which the sale of the New Securities covered thereby shall be consummated, if at all, within 90 days from the date of such agreement) to sell the New Securities not elected to be purchased pursuant to this Section 4.12 by the Qualifying Purchaser or which the Qualifying Purchaser is unable to purchase because of such failure to obtain any such consent or approval, at a price and upon terms no more favorable in the aggregate to the purchasers of such New Securities than were specified in the Company's notice to the Qualifying Purchaser. Notwithstanding the foregoing, if such sale is subject to the receipt of any regulatory or shareholder approval or consent or the expiration of any waiting period, the time period during which such sale may be consummated shall be extended until the expiration of five Business Days after all such approvals or consents have been obtained or waiting periods expired, but in no event shall such time period exceed 180 days from the date of the applicable agreement with respect to such sale. In the event the Company has not sold the New Securities or entered into an agreement to sell the New Securities within such 90-day period (or sold and issued New Securities in accordance with the foregoing within 90 days from the date of such agreement (as such period may be extended in the manner described above for a period not to exceed 180 days from the date of such agreement)), the Company shall not thereafter offer, issue or sell such New Securities without first offering such New Securities to the Qualifying Purchasers in the manner provided above.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**Expedited Issuance; Regulatory Directive.** Notwithstanding the foregoing provisions of this Section 4.12, if a majority of the board of directors of the Company determines that the Company must issue equity or debt securities on an expedited basis, then the Company may consummate the proposed issuance or sale of such securities ("*Expedited Issuance*") and then comply with the provisions of this Section 4.12 provided that (i) the purchasers of such New Securities have consented in writing to the issuance of additional New Securities in accordance with the provisions of this Section 4.12, and (ii) the sale of any such additional New Securities under this Section 4.12 to each Qualifying Purchaser and any other shareholder pursuant to similar provisions in the other securities purchase agreements shall be consummated as promptly as is practicable but in any event no later than 90 days subsequent to the date on which the Company consummates the Expedited Issuance under this Section 4.12(f). Notwithstanding anything to the contrary herein, the consent of the purchasers of such New Securities shall not be required in connection with any Expedited Issuance undertaken at the written direction of the applicable federal banking regulator of the Company or the Bank. Notwithstanding anything to the contrary in this Agreement, no rights of any Qualifying Purchaser under this Agreement will be adversely affected solely as the result of the temporary dilution of its percentage ownership of Company securities due to an Expedited Issuance under this Section 4.12(f); *provided*, *however*, that such rights may be adversely affected from and after such time, if any, that Purchaser declines to purchase Company securities offered to Purchaser under this Section 4.12.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Non-Cash Consideration**. In the case of the offering of securities for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by the board of directors; *provided*, *however*, that such fair value as determined by the board of directors shall not exceed the aggregate market price of the securities being offered as of the date the board of directors authorizes the offering of such securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Cooperation**. The Company and each Qualifying Purchaser shall cooperate in good faith to facilitate the exercise of Purchaser's rights under this Section 4.12, including to secure any required approvals or consents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13.**Long Term Incentive Plan**. The Company may reserve up to 10% of its fully diluted Common Stock outstanding under a Long-Term Incentive Plan ("*LTIP*"). The LTIP and all awards issued thereunder shall be administered by the Compensation Committee of the Board of Directors of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14.**Access, Information and Confidentiality**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Each Qualifying Purchaser shall be provided with access, information, and other rights as provided in the VCOC Letter Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Each party to this Agreement will hold, and will use commercially reasonable efforts to cause its respective subsidiaries and their directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a governmental entity is necessary or appropriate in connection with any necessary regulatory approval, or request for information or similar process, or unless compelled to disclose by judicial or administrative process or, based on the advice of its counsel, by other requirement of law or the applicable requirements of any governmental entity (in which case, the party permitted to disclose such information shall, to the extent legally permissible and reasonably practicable, provide the other party with prior written notice of such permitted disclosure), all nonpublic records, books, contracts, instruments, computer data and other data and information (collectively, "Information") concerning the other party hereto furnished to it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) previously known by such party on a nonconfidential basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from other sources by the party to which it was furnished), and neither party hereto shall release or disclose such Information to any other person, except its Affiliates, partners, auditors, attorneys, financial advisors, other consultants and advisors with the express understanding that such parties will maintain the confidentiality of the Information and, to the extent permitted above, to auditors and bank and securities regulatory authorities; provided, however, that (i) Purchaser is permitted to disclose Information to auditors and bank and securities regulatory authorities without prior written notice to the Company in connection with any audit or examination that does not explicitly reference the Company or this Agreement and (ii) each Purchaser may identify the Company and the number and value of such Purchaser's security holdings in the Company in accordance with applicable investment reporting and disclosure regulations or internal policies without prior notice to or consent from the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15.**Public Announcement.** The Company and the Purchasers will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to the Transaction Documents. The Company shall not publicly disclose the name of any Purchaser or any Affiliate or investment adviser of any Purchaser, or include the name of any Purchaser or any Affiliate or investment adviser of any Purchaser in any press release or in any filing with the Commission (other than the Registration Statement) or any regulatory agency, without the prior written consent of such Purchaser, except as required by federal securities law in connection with any registration statement covering the Purchaser's Shares. Whenever any party determines, based upon the advice of such party's counsel, that a public announcement or other disclosure is required by or advisable with respect to any applicable law or regulation, the parties shall discuss such disclosure with each other in good faith prior to the making of such public announcement or other disclosure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.16.**Acquisition Proposals**. Between the date of this Agreement and the Closing Date, the Company shall notify each Purchaser orally or in writing promptly (but in no event later than one (1) Business Day) after receipt by the Company of any proposal or offer from any Person to effect an Acquisition Proposal or any request in connection with a prospective Acquisition Proposal for non-public information relating to the Company or for access to the properties, books or records of the Company by any Person other than the Purchasers, indicating in such notice the material terms and conditions of any such proposal or offer and the identity of the Person making the proposal or offer, and thereafter shall keep Purchaser reasonably informed with respect to the status of such proposal or offer.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.17.**Notice of Certain Events**. Between the date of this Agreement and the Closing Date, the Company will notify each Purchaser, and each Purchaser will notify the Company, of (a) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware prior to the Closing that would constitute a violation or breach of the Transaction Documents (or a breach of any representation or warranty contained herein or therein) or, if the same were to continue to exist as of the Closing Date, would constitute the non-satisfaction of any of the conditions set forth in Sections 5.1 or 5.2 hereof, and (b) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware that would have been required to have been disclosed pursuant to the terms of this Agreement had such event, condition, fact, circumstance, occurrence, transaction or other item existed as of the date hereof; provided that delivery of any notice pursuant to this Section 4.17 shall not modify the representations, warranties, covenants, agreements or obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement. Notwithstanding the foregoing, neither party shall be required to take any action that would jeopardize such party's attorney-client privilege.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.18.**Shareholder Litigation**. The Company shall promptly inform the Purchasers of any claim, action, suit, arbitration, mediation, demand, hearing, investigation or proceeding ("*Shareholder Litigation*") against the Company, any of its Subsidiaries or any of the past or present executive officers or directors of the Company or its Subsidiaries that is threatened in writing or initiated by or on behalf of any shareholder of the Company in connection with or relating to the transactions contemplated hereby or by the Transaction Documents. The Company shall keep the Purchasers informed of all material filings and developments relating to any such Shareholder Litigation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.19.**Registration Rights Agreement**. To the extent that a Purchaser is party to that certain Registration Rights Agreement dated July 28, 2017 (the "*Registration Rights Agreement*") between the Company and the Persons referenced therein, all of the shares of Common Stock purchased by such Purchaser pursuant to this Agreement shall be deemed "Shares" for purchases of the Registration Rights Agreement (as such term is used therein). For the avoidance of doubt, (a) the Purchasers hereto who are a party to the Registration Rights Agreement hold a majority of the Registrable Securities (as defined in the Registration Rights Agreement) currently outstanding, and (b) this Section 4.19 shall be an effective amendment to the Registration Rights Agreement in accordance with Section 8(j) thereof).

**ARTICLE V** **<br>CONDITIONS PRECEDENT TO CLOSING**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.**Conditions Precedent to the Obligations of Purchaser to Purchase Shares at the Closing**. The obligation of Purchaser to acquire Shares at the Closing is subject to the fulfillment to Purchaser's satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by Purchaser:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Representations and Warranties**. The representations and warranties of the Company contained herein (i) to the extent qualified by materiality or Material Adverse Effect shall be true and correct in all respects as of the date when made and as of the Closing Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date, which shall have been true and correct as of the date specified therein, and (ii) to the extent not qualified by materiality or Material Adverse Effect, shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date, which shall have been true and correct in all material respects as of the date specified therein.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Performance**. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**No Injunction**. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction, nor has there been any regulatory communication, that prohibits the consummation of any of the transactions contemplated by the Transaction Documents or restricts Purchaser or any of Purchaser's Affiliates from owning or voting any securities of the Company in accordance with the terms thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Consents**. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, non-objections, registrations and waivers necessary for consummation of the purchase and sale of the Shares (including all Required Approvals), all of which shall be and remain so long as necessary in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Company Deliverables**. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**Minimum Offering Amount**. The Company shall have received and accepted fully paid subscription amounts for Shares totaling not less than $18,000,000 and such amount shall be in escrow for the benefit of the Company or shall have been previously received by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Termination**. This Agreement shall not have been terminated in accordance with Section 6.15 herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**No Burdensome Condition**. Since the date hereof, there shall not be imposed any Burdensome Condition on such Purchaser, provided, however, that for the purpose of this Section 5.1(h), a request from the Federal Reserve or Reserve Bank that Purchaser enter into customary passivity commitments shall not be considered a "Burdensome Condition."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)**Ownership Limitation**. The purchase of the Shares by Purchaser shall not (i) cause Purchaser or any of its Affiliates to violate any banking regulation, (ii) require Purchaser or any of its Affiliates to file a prior notice under the BHC Act or the CIBC Act, or otherwise seek prior approval of any banking regulator (other than normal vetting procedures that may be required for the Purchaser to receive a Non-Control Determination and enter into passivity commitments and/or anti-association commitments to the Federal Reserve or Reserve Bank), (iii) require Purchaser or any of its Affiliates to become a bank holding company or otherwise serve as a source of strength for the Company or any Subsidiary or (iv) cause Purchaser, together with any other person whose Company securities would be aggregated with Purchaser's Company securities for purposes of any banking regulation or law, to collectively be deemed to own, control or have the power to vote securities which (assuming, for this purpose only, full conversion and/or exercise of such securities by Purchaser and such other Persons) would represent more than 9.99% of any class of Voting Securities of the Company outstanding at such time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)**Material Adverse Effect**. No Material Adverse Effect shall have occurred since the date of this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.**Conditions Precedent to the Obligations of the Company to sell Shares at the Closing**. The Company's obligation to sell and issue the Shares to Purchaser at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any of which may be waived by the Company:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Representations and Warranties**. The representations and warranties made by Purchaser in Section 3.2 hereof shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date, except for representations and warranties that speak as of a specific date, which shall have been true and correct as of the date specified therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Performance**. Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by Purchaser at or prior to the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**No Injunction**. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction, nor has there been any regulatory communication, that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)**Consents**. The Company shall have obtained in a timely fashion any and all consents, permits, approvals, non-objections, registrations and waivers necessary for consummation of the purchase and sale of the Shares, all of which shall be and remain so long as necessary in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)**Purchaser Deliverables**. Purchaser shall have delivered its Purchaser Deliverables in accordance with Section 2.2(b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)**Minimum Offering Amount**. The Company shall have received and accepted fully paid subscription amounts for shares of Common Stock totaling not less than $18,000,000 and such amount shall be in escrow for the benefit of the Company or shall have been previously received by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)**Termination**. This Agreement shall not have been terminated in accordance with Section 6.15 herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)**Ownership Limitation**. The purchase of the Shares by Purchaser shall not result in Purchaser, together with any other person whose Company securities would be aggregated with Purchaser's Company securities for purposes of any bank regulation or law, to collectively be deemed to own, control or have the power to vote more than 9.99% of the outstanding shares of Common Stock as of the Closing Date.

**ARTICLE VI** **<br>MISCELLANEOUS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1.**Fees and Expenses**. Except as set forth elsewhere in the Transaction Documents, the parties hereto shall be responsible for the payment of all expenses incurred by them in connection with the preparation and negotiation of the Transaction Documents and the consummation of the transactions contemplated hereby. The Company shall pay all amounts owed to the Placement Agent relating to or arising out of the transactions contemplated hereby. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the Shares to Purchaser.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.**Entire Agreement**. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company and Purchaser will execute and deliver to the other such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents. Notwithstanding the foregoing and for the avoidance of doubt, the Transaction Documents do not supersede (a) any Stock Purchase Agreement dated as of July 28, 2017 (a "*Prior SPA*") between any Purchaser and the Company nor (b) any of the prior Transaction Documents (as defined and contemplated in the Prior SPAs), except as specifically set forth in Section 4.19 of this Agreement in respect of the Registration Rights Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3.**Notices**. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or e-mail (provided the sender receives a machine-generated confirmation of successful facsimile transmission or e-mail notification or confirmation of receipt of an e-mail transmission) at the facsimile number or e-mail address specified in this Section prior to 5:00 p.m., Eastern time, on a Business Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile or e-mail at the facsimile number or e-mail address specified in this Section on a day that is not a Business Day or later than 5:00 p.m., Eastern time, on any Business Day, (c) if sent by U.S. nationally recognized overnight courier service with next day delivery specified (receipt requested) the Business Day following delivery to such courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

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| | |
|:---|:---|
| &nbsp;&nbsp;If to the Company: | &nbsp;&nbsp;CoastalSouth Bancshares, Inc. <br>3350 Riverside Parkway, Suite 700<br>Atlanta, Georgia 30339<br>Attention : Stephen R. Stone<br>Telephone: (843) 341-9937<br>Facsimile: (843) 689-7835<br>Email: sstone@coastalstatesbank.com |
| &nbsp;&nbsp;With a copy to: | &nbsp;&nbsp;Mark C. Kanaly, Esq.<br>Alston & Bird LLP<br>One Atlantic Center<br>1201 West Peachtree Street<br>Atlanta, Georgia 30309<br>Telephone: (404) 881-7000<br>Facsimile: (404) 881-7777<br>Email: Mark.Kanaly@alston.com |
| &nbsp;&nbsp;If to Purchaser: | &nbsp;&nbsp;To the address set forth under Purchaser's name on the signature page hereof; or such other address as may be designated in writing hereafter, in the same manner, by such Person. |

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or such other address as may be designated in writing hereafter, in the same manner, by such Person.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4.**Amendments; Waivers; No Additional Consideration**. No amendment or waiver of any provision of this Agreement will be effective with respect to any party unless made in writing and signed by a duly authorized representative of such party. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5.**Construction**. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6.**Successors and Assigns**. The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their successors and permitted assigns. This Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the prior written consent of Purchaser. Purchaser may assign its rights hereunder in whole or in part to any Person to whom Purchaser assigns or transfers any of the Shares in compliance with the Transaction Documents and applicable law, provided such transferee shall agree in writing to be bound, with respect to the transferred Shares, by the terms and conditions of this Agreement that apply to the "Purchaser."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7.**No Third-Party Beneficiaries**. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than, solely with respect to the provisions of Section 4.5, each Purchaser Party and provided, the Placement Agent may rely on the representations and warranties contained herein to the same extent as if it were a party to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8.**Governing Law**. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be commenced on an exclusive basis in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. **EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9.**Survival**. The representations and warranties contained herein shall survive the Closing and the delivery of the Shares as follows: (i) the representations and warranties of the Company set forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(e), 3.1(f), 3.1(g), 3.1(h), 3.1(t), 3.1(rr) and 3.1(tt), and shall survive indefinitely, (ii) the representations and warranties of the Company set forth in Sections 3.1(i), 3.1(k), 3.1(ee) shall survive for the applicable statute of limitations, and (ii) all other representations and warranties of the Company set forth in Sections 3.1 shall survive for a period of eighteen (18) months following the Closing and the delivery of the Shares. All representations and warranties of Purchaser set forth in Section 3.2 shall survive for a period of 12 months following the Closing Date. All covenants and agreements of the parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10.**Execution**. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11.**Severability**. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.12.**Replacement of Share Certificates**. If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company and the Transfer Agent of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company and the Transfer Agent for any losses in connection therewith or, if required by the Transfer Agent, a bond in such form and amount as is required by the Transfer Agent. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement certificate. If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.13.**Remedies**. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, Purchaser and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.14.**Payment Set Aside**. To the extent that the Company makes a payment or payments to Purchaser pursuant to any Transaction Document or Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.15.**Termination**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)This Agreement may be terminated and the sale and purchase of the Shares abandoned at any time prior to the Closing:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)by the written consent of the Company and any Purchaser (with respect such Purchaser only);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)by any Purchaser (with respect to itself only) upon written notice to the other parties, if the Closing has not been consummated on or prior to 11:59 p.m., Eastern Time, on the Outside Date; provided, however, that the right to terminate this Agreement under this Section 6.15(a)(ii) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)by the Company or any Purchaser (with respect to such Purchaser only), upon written notice to the other parties, in the event that any governmental entity shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement, and such order, decree, injunction or other action shall have become final and nonappealable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)by any Purchaser (with respect to itself only), upon written notice to the Company, if there has been a breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 5.1(a) or Section 5.1(b) would not be satisfied;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)by the Company, upon written notice to any Purchaser, if there has been a breach of any representation, warranty, covenant or agreement made by such Purchaser in this Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 5.2(a) or Section 5.2(b) would not be satisfied with respect to such Purchaser; provided, however, that such termination by the Company shall only be as to the breaching Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)by any Purchaser (with respect to itself only), upon written notice to the Company, in the event that such Purchaser receives notice that it will not receive the Non-Control Determinations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)by any Purchaser, with respect to such Purchaser, if the Company directly or indirectly effects, causes to be effected, or enters into any definitive agreement to effect any transaction with a third party with respect to an Acquisition Proposal or that would reasonably be expected to result in a Change in Control.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)In the event of any termination of this Agreement as provided in Section 6.15, this Agreement (other than Article VI (other than Sections 6.9 and 6.17) and all applicable defined terms, which shall remain in full force and effect) shall forthwith become wholly void and of no further force and effect; provided, nothing in this Section 6.15 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The Company shall promptly notify each of the Purchasers if this Agreement is terminated with respect to any individual Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.16.**Rescission and Withdrawal Right**. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.17.**Adjustments in Common Stock Numbers and Prices**. In the event of any stock split, reverse stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof and prior to the Closing, each reference in any Transaction Document to a number of shares or a price per share shall be deemed to be amended to appropriately account for such event.

[*Remainder of Page Intentionally Left Blank*]

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**IN WITNESS WHEREOF**, the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

&nbsp;&nbsp;COASTALSOUTH BANCSHARES, INC.<br>By: <u>/s/</u> *<u>Stephen R. Stone</u>*<br> Stephen R. Stone<br> President and Chief Executive Officer<br>

*Signature Page to Stock Purchase Agreement*

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| | |
|:---|:---|
|  | &nbsp;&nbsp;NAME OF PURCHASER:<br>___________________________________<br>By:<br>Name:<br>Title:<br>Aggregate Purchase Price<br>(Subscription Amount): __________<br>Number of shares of Voting Common Stock to be Acquired: ________<br>Number of shares of Non-Voting Common <br>Stock to be Acquired: ________<br>Tax ID No.: ________<br>Address for Notice:<br>________<br>Telephone: ________<br>Facsimile: ________________<br>Email: ________<br>Attention: |
| &nbsp;&nbsp;Delivery Instructions:<br>(if different than above)<br>|  |

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*Signature Page to Stock Purchase Agreement*

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**EXHIBITS**

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;A | &nbsp;&nbsp;- | &nbsp;&nbsp;Form of Legal Opinion of Company Counsel |
| &nbsp;&nbsp;B | &nbsp;&nbsp;- | &nbsp;&nbsp;Form of Officer's Certificate |
| &nbsp;&nbsp;C | &nbsp;&nbsp;- | &nbsp;&nbsp;Form of Closing Certificate |
| &nbsp;&nbsp;D | &nbsp;&nbsp;- | &nbsp;&nbsp;Form of Accredited Investor Questionnaire |
| &nbsp;&nbsp;E | &nbsp;&nbsp;- | &nbsp;&nbsp;Form of VCOC Letter Agreement |

---

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**EXHIBIT A**

Form of Legal Opinion of Company Counsel

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**EXHIBIT B**

Form of Officer's Certificate

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**EXHIBIT C**

Form of Closing Certificate

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**EXHIBIT D**

**ACCREDITED INVESTOR QUESTIONNAIRE**

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**EXHIBIT E**

**Form of VCOC Letter Agreement**

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## Exhibit 10.14

**EXHIBIT 10.14**

**AMENDED AND RESTATED<br>LOAN AND SECURITY AGREEMENT**

**By and Between**

**COASTALSOUTH BANCSHARES, INC.**

**and**

**SERVISFIRST BANK**

**November 21, 2023**

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**AMENDED AND RESTATED<br>LOAN AND SECURITY AGREEMENT**

**THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT** (this "Agreement") is made and entered into as of November 21, 2023, by and between **COASTALSOUTH BANCSHARES, INC.,** a corporation organized under the laws of the State of Georgia ("Borrower"), and **SERVISFIRST BANK**, an Alabama banking corporation ("Lender").

**<u>W I T N E S S E T H:</u>**

Borrower has requested that Lender extend to the Borrower a revolving line of credit in the maximum principal amount of up to $24,000,000 (the "Loan"), and Lender is willing to make the Loan upon the terms and conditions hereinafter set forth; and

Borrower and Lender are parties to that certain Loan and Security Agreement dated as of December '10, 2021 in which Lender extended to Borrower a revolving line of credit in the maximum principal amount of up to $18,000,000 (the "Original LSA"); and

This Agreement shall amend and restate in its entirety the Original LSA to increase the maximum principal amount from $18,000,000 to $24,000,000 and provide the other terms and conditions contained herein.

**NOW, THEREFORE**, in consideration of the promises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, each intending to be legally bound hereby, agree as follows:

**Article 1** **DEFINITIONS**

Section 1.01<u>Defined Terms</u>. As used herein:

"<u>Advance</u>" means each loan of money or credit made to Borrower by Lender under the Commitment.

"<u>Affiliate</u>" or "Affiliates" shall mean any Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, Borrower, or (ii) five percent (5%) or more of the equity interest of which is held beneficially or of record by Borrower. The term "control" means the possession, directly or indirectly, of the power to cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

"<u>Agreement</u>" means this Loan and Security Agreement, as amended or supplemented from time to time.

"<u>Call Report</u>" means Consolidated Reports of Condition and Income (or any successor reports thereto) filed by the Subsidiary Bank with its primary federal banking regulator for the corresponding time period.

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"<u>Capital</u>" means, with respect to the Subsidiary Bank, the "tier 1 capital" of the Subsidiary Bank, as reported on Schedule RC-R of the Subsidiary Bank's most recent quarterly Call Report.

"<u>Change in Control</u>" means either (i) the acquisition by any Person or any group of Persons (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of beneficial ownership, directly or indirectly, of 40% or more of the outstanding shares of voting stock of Borrower or (ii) Borrower ceases to own 100% of the outstanding shares of voting stock of the Subsidiary Bank.

"<u>Collateral</u>" is defined in <u>Section 4.01</u> of this Agreement.

"<u>Collateral Documents</u>" means the documents specified in <u>Section 3.01(B)</u> –(<u>D</u>).

"<u>Commitment</u>" means Lender's commitment to extend from $18,000,000 to $24,000,000 and lend to Borrower up to the sum of $24,000,000 in principal amount outstanding from time to time pursuant to, and subject to, the terms of this Agreement.

"<u>Default</u>" means any event described in <u>Section 7.01</u>.

"<u>ERlSA</u>" means the Employee Retirement Security Act of 1974, as amended.

"<u>Generally Accepted Accounting Principles</u>" or "<u>GAAP</u>" means generally accepted principles of accounting in the United States in effect from time to time applied in a manner consistent with those used in preparing such financial statements as have theretofore been furnished to Lender by Borrower.

"<u>Governmental Authority</u>" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, which has or asserts jurisdiction over Lender, Borrower or any of its Subsidiaries, or over the property of any of them.

"<u>Indebtedness</u>" means all items of indebtedness, obligation or liability, whether matured or unmatured, liquidated or unliquidated, direct or contingent, joint or several, including, but without limitation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)All indebtedness guaranteed, directly or indirectly, in any manner, or endorsed (other than for collection or deposit in the ordinary course of business) or discounted with recourse;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)All indebtedness in effect guaranteed, directly or indirectly, through agreements, contingent or otherwise:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)to purchase such indebtedness; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)to purchase, sell or lease (as lessee or lessor) property, products, materials or supplies or to purchase or sell services primarily for the purpose of enabling the debtor to make payment of such indebtedness or to assure the owner of the indebtedness against loss; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)to supply funds to or in any other manner invest in the debtor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)All indebtedness secured by (or for which the holder of such indebtedness has a right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien, security

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interest or other charge or encumbrance upon property owned or acquired subject thereto, whether or not the liabilities secured thereby have been assumed; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)All indebtedness incurred as the lessee of goods or services under leases that, in accordance with Generally Accepted Accounting Principles, should not be reflected on the lessee's balance sheet.

"<u>Interest Rate</u>" is defined in <u>Section 2.05(A)(1)</u> of this Agreement.

"<u>Laws</u>" means all ordinances, statutes, rules, regulations, orders, injunctions, writs or decrees of any governmental or political subdivision or agency thereof, or any court or similar entity established by any thereof.

"<u>Loan</u>" has the meaning set forth in the recitals of this Agreement.

"<u>Maturity Date</u>" means the earlier of December 10, 2025, or the date the maturity of the Note is accelerated pursuant to Section 7.02 of this Agreement.

"<u>Non-Performing Assets</u>" means, with respect to the Subsidiary Bank, the sum of (a) the Subsidiary Bank's loans and leases which are on nonaccrual status, (b) the Subsidiary Bank's loans and leases which are at least ninety (90) days past due, (c) all other non-performing loans and leases of the Subsidiary Bank, (d) the other real estate owned by the Subsidiary Bank, and (e) all other non-performing assets of the Subsidiary Bank.

"<u>Non-Use Fee</u>" has the meaning set forth in <u>Section 2.08</u> of this Agreement.

"<u>Non-Performing Assets Ratio</u>" means, with respect to the Subsidiary Bank, the ratio of the Subsidiary Bank's Non-Performing Assets to the Subsidiary Bank's Capital plus Reserves.

"<u>Note</u>" means the Amended and Restated Revolving Note dated November 21, 2023, in the principal amount of $24,000,000, made by Borrower to evidence Borrower's obligation to repay the Loan and the interest thereon and includes any amendment to such Note and any promissory note given in extension or renewal of, or in substitution for, such Note evidencing Borrower's obligation to repay the Loan.

"<u>Obligations</u>" means all of the following.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)The Obligation of Borrower to pay the principal of and interest on the Note in accordance with the terms thereof, and to satisfy all of its other liabilities to Lender, whether hereunder or otherwise (including, without limitation, under any swap or other hedging agreement made by Borrower with or in favor of Lender), whether now existing or hereafter incurred, matured or unmatured, direct or contingent, joint or several, including any extensions, modifications, renewals thereof and substitutions therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)The Obligation of Borrower to repay to Lender all amounts advanced by Lender hereunder or otherwise on behalf of Borrower, including, but without limitation, advances for principal or interest payments to prior secured parties, mortgagees, or lienors, or for taxes, levies, insurance, rent, repairs to or maintenance or storage of any of the Collateral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G)The Obligation of Borrower to reimburse Lender, on demand, for all of Lender's expenses and costs, including the reasonable fees and expenses of its counsel, in connection with the preparation, administration, amendment, modifications, or enforcement of this Agreement and

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the documents required hereunder, including, without limitation, any proceeding brought or threatened to enforce payment of any of the obligations referred to in the foregoing paragraphs (A) and (B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H)The Obligation of Borrower to comply with the terms of this Agreement, the Note and the Collateral Documents.

"<u>Origination Fee</u>" means the fee payable by Borrower to Lender in an amount equal to ten basis points (0.10%) of the $6,000,000 increase in the Commitment which amount is agreed to be $6,000.

"<u>Person</u>" means any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, joint venture, court, or government or political subdivision or agency thereof.

"Pledge Agreement" means that certain Pledge Agreement of even date herewith pursuant to which Lender is granted a security interest in the Pledged Stock.

"<u>Pledged Stock</u>" means one hundred percent (100%) of the capital stock of the Subsidiary Bank.

"<u>Potential Default</u>" means an event of default which but for the lapse of time or the giving of notice, or both, would constitute a Default.

"<u>Prime Rate</u>" means the floating rate designated as such in the "Money Rates" section of <u>The Wall Street Journal</u> (or any generally recognized successor) on any particular day. The Prime Rate is not necessarily the lowest interest rate charged by Lender.

"<u>Records</u>" means instruments, agreements, correspondence, memoranda, tapes, discs, papers, books and other documents, or transcribed information of any type, whether express in ordinary or machine language, and all filing cabinets and other containers in which the foregoing is stored or maintained.

"<u>Regulation U</u>" means Regulation U of the Board of Governors of the Federal Reserve System as now or from time to time hereafter in effect and shall include any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.

"<u>Reserves</u>" means, with respect to the Subsidiary Bank, the "allowance for loan and lease losses" of the Subsidiary Bank as reported on Schedule RC of the Subsidiary Bank's most recent quarterly Call Report.

"<u>Return on Assets Ratio</u>" means, with respect to the Subsidiary Bank, the ratio of (a) year-to-date "net income" of the Subsidiary Bank for the current calendar year, as reported on Schedule RI of the Subsidiary Bank's most recent quarterly Call Report, annualized over the current calendar year, to (b) average "total assets" as reported on Schedule RC-K of the Subsidiary Bank's most recent quarterly Call Report.

"<u>Subsidiary</u>" means any corporation, including but not limited to the Subsidiary Bank, of which more than fifty-one percent (51%) of the outstanding voting securities shall, at the time of determination, be owned directly, or indirectly through one or more intermediaries, by Borrower.

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"<u>Subsidiary Bank</u>" means CoastalStates Bank, a banking corporation organized under the laws of the State of South Carolina, which is a wholly-owned Subsidiary of Borrower.

"<u>Tier I Leverage Ratio</u>" means, with respect to the Subsidiary Bank, the tier 1 leverage ratio as defined by the capital maintenance regulations of the primary federal bank regulatory agency of the Subsidiary Bank and reported on Schedule RC-R of the Subsidiary Bank's most recent quarterly Call Report.

Section 1.02<u>Construction</u>. All accounting terms used herein shall have their customary meanings under, and shall be construed in accordance with, GAAP.

Section 1.03<u>UCC Definitions</u>. All other capitalized terms contained in this Agreement shall, unless otherwise defined herein or unless the context otherwise indicates, have their respective meanings under the Uniform Commercial Code of Alabama.

**Article 2** **THE LOAN**

Section 2.01<u>General Terms</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)Subject to the terms and conditions of this Agreement, Lender will lend to Borrower the principal sum of up to $24,000,000 on a revolving basis. Lender shall make Advances under such Loan from time to time until the Maturity Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)Subject to the terms hereof, Borrower may borrow, repay without penalty or premium, and reborrow under the Loan, from the date of this Agreement until the Maturity Date. If at any time the unpaid principal balance of the Loan exceeds the Commitment, Borrower shall immediately and without demand pay such sums to Lender as are necessary to reduce the principal balance of the Loan to not more than the Commitment.

Section 2.02<u>The Note</u>. On the date hereof, Borrower will execute and deliver the Note to Lender to evidence Borrower's Obligations to repay the Loan and the interest thereon.

Section 2.03<u>Use of Proceeds; Disbursement of the Loan</u>. Borrower will use the proceeds of the Loan solely (a) for general corporate purposes, (b) to reimburse Lender for any expenses incurred by Lender in connection with making the Loan, and (c) to otherwise pay Lender sums due to Lender under this Agreement or the other instruments, agreements and documents related to this Agreement.

Section 2.04<u>Payments of Principal</u>. If not earlier demanded pursuant to Section 7.02 hereof, the outstanding principal balance of each Advance made under the Loan shall be due and payable to Lender on the Maturity Date.

Section 2.05<u>Interest Rate and Payments of lnterest</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)Interest shall be calculated and paid as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Interest on the principal balance of the Loan from time to time outstanding will be payable at a per annum rate (the "Interest Rate") equal to the greater of (i) the Prime

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Rate in effect from time to time; or (ii) a floor rate of five and twenty-five hundredths percent (5.25%).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Each time a change to the Prime Rate occurs, the Interest Rate shall change concurrently with such change in the Prime Rate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)Interest shall be calculated on the basis of a 360-day year, by multiplying the product of the principal amount outstanding and the applicable rate by the actual number of days elapsed, and dividing by 360, and shall be payable quarterly in arrears, on the 10th day of each and every calendar quarter (that is, on March 10, June 10, September 10, and December 10) commencing with the first calendar quarter following the first Advance and continuing on the 1st day of each calendar quarter thereafter until the outstanding principal balance of all Advances have been repaid in full, with the final payment of accrued and unpaid interest due and payable on the Maturity Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)If, at any time, the Interest Rate shall be deemed by any competent Governmental Authority to exceed the maximum rate of interest permitted by any applicable Laws, then, for such time as the Interest Rate would be deemed excessive, its application shall be suspended and there shall be charged instead the maximum rate of interest permissible under such Laws.

Section 2.06<u>Payment to Lender</u>. All sums payable to Lender under the Loan shall be paid directly to Lender in United States Dollars and immediately available funds. If Lender shall send to Borrower statements of amounts due hereunder, such statements shall be considered correct and conclusively binding on Borrower unless Borrower notifies Lender to the contrary within thirty (30) days of its receipt of any statement which it deems to be incorrect. Alternatively, at its sole discretion, Lender may charge against any deposit account of Borrower all or any part of any amount due hereunder.

Section 2.07<u>Late Fee/Default Rate of Interest</u>. Borrower promises to pay to Lender a late fee equal to three percent (3.00%) of the amount of each installment of principal and/or installment of interest which is received more than ten (10) days after the due date thereof; provided, however, that such late fee shall not be less than $20.00 nor more than the maximum amount (if any) permitted by law. The principal balance of the Loan outstanding after maturity (whether by acceleration or otherwise) shall bear interest at a per annum rate of interest equal to two percent (2.00%) plus the otherwise applicable Interest Rate and shall be calculated pursuant to <u>Section 2.05</u> hereof. This section does not extend any payment due date expressly stated in this Agreement or any Collateral Document and does not in any way prevent or estop Lender from requiring that payments be made by Borrower strictly when due. Unless accepted by Lender, and unless accompanied by all other amounts then due to Lender, the tender of such payment by Borrower shall not cure the Default arising from the payment default upon which such late charge was assessed.

Section 2.08<u>Non-Use Fee</u>. Borrower shall pay on an annual basis in arrears to Lender a non-use fee equal to .10% (10 bps) multiplied by the average unused principal amount of the Commitment for the applicable 12-month period (the "Non-Use Fee"), which amount shall be payable no later than 15 days following the first anniversary date of this Agreement. The Non Use Fee shall be waived if (i) as of the date of calculation, no Default or Potential Default shall have

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occurred and be continuing and (ii) Borrower has been obligated under the Loan for an average outstanding balance of $9,000,000 or more for the first twelve (12) consecutive calendar months of the Loan commencing as of the date hereof.

Section 2.09<u>Origination Fee</u>. On the date hereof, Borrower shall pay to the Lender the Origination Fee.

**Article 3** **CONDITIONS PRECEDENT**

The obligation of Lender to make the Loan hereunder is subject to the following conditions precedent:

Section 3.01<u>Conditions to the Loan</u>. Prior to the initial disbursement of the Loan, Borrower shall have delivered to Lender the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)the duly executed Note;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)the duly executed Pledge Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)original certificate representing the Pledged Stock, accompanied by a stock power endorsed in blank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)if requested by Lender, the financing statements described in <u>Section 4.05</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)copies, certified as of the date of this Agreement by Borrower's corporate secretary, of resolutions of Borrower's board of directors authorizing the execution, delivery and performance of this Agreement, the Note, the Collateral Documents, and each other document to be delivered pursuant hereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)copies, certified as of the date of this Agreement by their respective corporate secretaries, of the articles of incorporation of Borrower and the Subsidiary Bank, together with a certificate (dated the date of this Agreement) of the their respective corporate secretaries to the effect that such articles of incorporation have not been amended except as provided in such articles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G)copies, certified as of the date of this Agreement by their respective corporate secretaries, of the bylaws of Borrower and the Subsidiary Bank, together with a certificate (dated the date of this Agreement) of the their respective corporate secretaries to the effect that such bylaws have not been amended except as provided in such bylaws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H)a certificate (dated the date of this Agreement) of Borrower's corporate secretary as to the incumbency and signatures of the officers of Borrower signing this Agreement, the Note, the Collateral Documents, and each other document to be delivered pursuant hereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(I)certificates, as of the most recent dates practicable, of the secretary of state and department of commerce, respectively of the state of incorporation of Borrower and

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the Subsidiary Bank as to the existence and good standing of Borrower and the Subsidiary Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(J)an opinion of counsel to Borrower that Borrower has all necessary authority to enter into this Agreement and perform its obligations hereunder and this Agreement is a valid obligation of Borrower enforceable and binding m accordance with its terms subject to customary bankruptcy qualifications;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(K)receipt by Lender of such financial information, projections, budgets, business plans, cash flows and such other information as Lender may reasonably request, and Lender must be reasonably satisfied that such information fairly presents the business and financial condition of Borrower and does not contain material misstatements or omissions of material facts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(L)evidence acceptable to Lender that Borrower and the Subsidiary Bank have received all necessary regulatory approvals (or that no regulatory approvals are necessary) for (i) Borrower to obtain the Loan, (ii) Borrower and the Subsidiary Bank to enter into and perform their Obligations under this Agreement and the Collateral Documents, and (iii) payment by the Subsidiary Bank of dividends to Borrower in amounts sufficient to comply with the repayment terms of the Loan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(M)such other documentation as Lender shall require regarding Borrower or the Subsidiary Bank, including, without limitation, opinions and certificates of Borrower's independent certified public accountants, appraisals, reports of other independent consultants selected by Lender, and certificates of Borrower's officers.

Section 3.02<u>Conditions to Each Advance</u>. Without limiting the foregoing, at the time of each Advance under the Loan, Borrower shall have furnished such information to Lender as Lender shall reasonably request to evidence that (a) the proceeds of such Advance will be used for the purposes permitted hereunder, and (b) the use of the proceeds in such manner will not cause or bring about a Default or Potential Default hereunder.

Section 3.03<u>Certain Events</u>. Without limiting the foregoing, at the time of the disbursement of each Advance:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)No Default or Potential Default shall have occurred and be continuing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)The Collateral Documents shall be in full force and effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)The Subsidiary Bank's Call Report for the most recently-ended calendar quarter, filed by the Subsidiary Bank with any applicable regulatory authority, shall have been delivered to Lender;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)All representations and warranties set forth in <u>Article 5</u> shall be true and correct as of the time of such disbursement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)There shall have been no material adverse change in the consolidated financial condition or business of Borrower or the Subsidiary Bank (measured against the most current

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financial statements of Borrower and the Subsidiary Bank delivered to or otherwise reviewed by Lender prior to the date of this Agreement).

Section 3.04<u>Legal Matters</u>. At the time of the disbursement of each Advance, all legal matters necessary to preserve and perfect Lender's security interest in the Collateral and Borrower's obligation to repay the Loan shall be satisfactory to Lender and its counsel.

Section 3.05<u>Deposit Accounts</u>. Subsidiary Bank shall maintain a deposit account with Lender. Subsidiary Bank will allow Lender to bid on additional mutually beneficial correspondent services.

**Article 4** **COLLATERAL SECURITY**

Section 4.01<u>Composition of the Collateral</u>. The property in which a security interest is granted pursuant to the provisions of <u>Sections 4.02</u> and <u>4.03</u> is herein collectively called the "Collateral." The Collateral, together with all of Borrower's other property of any kind held by Lender, shall stand as one general, continuing collateral security for all Obligations and may be retained by Lender until all Obligations have been satisfied in full.

Section 4.02[Reserved]

Section 4.03<u>Security lnterest in the Pledged Stock</u>. As further security for the prompt satisfaction of all Obligations, Borrower hereby assigns and transfers to Lender all of its rights, title and interest in and to, and grants Lender a lien upon and security interest in, all of the Pledged Stock, whether now owned or hereafter acquired, together with all replacements therefor and all proceeds thereof, and all Records pertaining to any of the Collateral.

Section 4.04<u>Priority of Liens</u>. The foregoing liens shall be first and prior liens on the Pledged Stock and other Collateral.

Section 4.05<u>Financing Statements</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)Borrower:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Hereby authorizes the filing of such financing statements (including amendments thereto and continuation statements thereof) in form satisfactory to Lender as Lender may hereafter specify in order to perfect Lender's lien on and security interest in the Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Will pay or reimburse Lender for all costs and taxes of filing or recording such financing statements (including amendments thereto and continuation statements thereof) in form satisfactory to Lender as Lender may hereafter specify, provided such financing statements are consistent with the provisions of this Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)Will take such other commercially reasonable steps as Lender may direct to perfect Lender's interest in the Collateral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)In addition to the foregoing, and not in limitation thereof:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)A carbon, photographic, or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed in any appropriate public office in lieu thereof; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)To the extent lawful, Borrower hereby appoints Lender as its attorney-in- fact (without requiring Lender to act as such) for the sole purpose of filing any financing statement and any amendment thereto in the name of Borrower, and to perform all other acts that Lender reasonably deems appropriate to perfect and continue its security interest in, and to protect and preserve, the Collateral.

**Article 5** **REPRESENTATIONS AND WARRANTIES**

Section 5.01<u>Original</u>. To induce Lender to enter into this Agreement, Borrower represents and warrants to Lender as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)Borrower owns 100% of the outstanding capital stock of the Subsidiary Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)Borrower is a corporation duly organized, validly existing and in good standing under the Laws of the state of its formation; the Subsidiary Bank is a corporation duly organized, validly existing and in good standing under the Laws of the state of its formation; Borrower and the Subsidiary Bank have the lawful power to own their properties and to engage in the business they conduct, and are duly qualified and in good standing as foreign corporations in the jurisdictions wherein the nature of the business transacted by them or property owned by them make such qualification necessary; the states in which Borrower and the Subsidiary Bank are qualified to do business are set forth in <u>Exhibit B</u>; the addresses of Borrower's and the Subsidiary Bank's respective principal places of business are set forth in <u>Exhibit B</u>; and as of the date of this Agreement, neither Borrower nor the Subsidiary Bank has changed its name, been the surviving corporation in a merger, acquired any business, within three (3) years and one (1) month prior to the date hereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)Neither Borrower nor the Subsidiary Bank is in material default with respect to any of its existing Indebtedness, or under any material lease, contract or commitment of any kind, and, to Borrower's knowledge, all parties (including Borrower and the Subsidiary Bank) to all such material leases, contracts and other commitments to which Borrower or the Subsidiary Bank is a party (expressly excluding any lease, contract or commitment made with a customer of Subsidiary Bank in the ordinary course of Subsidiary Bank's business) are in material compliance with the provisions of such leases, contracts and other commitments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)The making and performance of this Agreement, the Note, and the Collateral Documents will not (immediately, or with the passage of time, or with the giving of notice):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Violate any provision of the articles of incorporation or bylaws of Borrower or the Subsidiary Bank, or violate any Laws or result in a default under any contract, agreement, or instrument to which Borrower or the Subsidiary Bank is a party or by which Borrower or the Subsidiary Bank or any of their respective properties are bound; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Result in the creation or imposition of any security interest in, or lien or encumbrance upon, any of the assets of Borrower or the Subsidiary Bank, except in favor of Lender;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)Borrower has the power and authority to enter into and perform this Agreement, the Note, and the Collateral Documents, and to incur the Obligations herein and therein provided for, and has taken all corporate action necessary to authorize the execution, delivery, and performance of this Agreement, the Note, and the Collateral Documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)This Agreement and the Collateral Documents are, and the Note when delivered will be, valid, binding, and enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws, and judicial decisions affecting the rights of creditors generally and by general principles of equity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G)Except to the extent disclosed to Lender in writing, there is no pending or, to Borrower's knowledge, threatened order, notice, claim, litigation, proceeding or investigation against or affecting Borrower or the Subsidiary Bank, whether or not covered by insurance, that would involve the payment by Borrower or Subsidiary Bank of $500,000.00 or more if adversely determined;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H)Borrower has good and marketable title to all of the Collateral, subject to no security interest, encumbrance or lien, or claim of any third person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(I)Borrower's and the Subsidiary Bank's financial statements (including Call Reports, in the case of the Subsidiary Bank) furnished to Lender, including any schedules and notes pertaining thereto, have been prepared in accordance with Generally Accepted Accounting Principles consistently applied, and fully and fairly present the financial condition of Borrower at the dates thereof and the results of operations for the periods covered thereby, and there have been no material adverse changes in the consolidated financial condition or business of Borrower from the date of the latest financial statements provided to Lender to the date hereof, or the Subsidiary Bank from its most recently filed Call Report to the date hereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(J)As at the date of this Agreement, neither Borrower nor the Subsidiary Bank has any material Indebtedness of any nature, including, but without limitation, liabilities for taxes and any interest or penalties relating thereto, except to the extent reflected (in a footnote or otherwise) and reserved against in the financial statements of Borrower most recently delivered to Lender or the most recent Call Report of the Subsidiary Bank, or as disclosed in or permitted by this Agreement, as applicable; Borrower does not know and has no reasonable ground to know of any basis for the assertion against it or the Subsidiary Bank of any material Indebtedness of any nature not fully reflected and reserved against in the above referenced respective financial statements or Call Reports, as applicable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(K)Except as otherwise permitted herein, Borrower and the Subsidiary Bank have filed all material federal, state and local tax returns and other reports they are required by Law to file prior to the date hereof and which are material to the conduct of their business, have paid or caused to be paid all material taxes, assessments and other governmental charges that are due and payable prior to the date hereof, and have made adequate provision for the payment of such taxes,

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assessments or other charges accruing but not yet payable; Borrower has no knowledge of any deficiency or additional assessment in a materially important amount in connection with any taxes, assessments or charges not provided for on its books or the books of the Subsidiary Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(L)Neither Borrower nor the Subsidiary Bank is in material violation of any applicable Laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(M)No representation or warranty by Borrower or the Subsidiary Bank contained herein or in any certificate or other document furnished by Borrower or the Subsidiary Bank pursuant hereto contains any untrue statement of material fact or omits to state a material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(N)Each consent, approval or authorization of, or filing, registration or qualification with, any Person that is required to be obtained or effected by Borrower or the Subsidiary Bank in connection with the execution and delivery of this Agreement, the Note, and the Collateral Documents, or the undertaking or performance of any obligation hereunder or thereunder, has been duly obtained or effected;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(O)The Pledged Stock constitutes all of the issued and outstanding capital stock of the Subsidiary Bank. There are no outstanding warrants, options, rights or other commitments (including, but without limitation, convertible notes or securities) entitling any Person to purchase or otherwise acquire any shares of capital stock of Borrower or the Subsidiary Bank. The Pledged Stock does not constitute "Margin Stock" as defined in Federal Reserve Board Regulation U (12 C.F.R. §§ 221.1 et seq.);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(P)Borrower has not made any agreement or taken any action which may cause anyone to become entitled to a commission or finder's fee as a result of the making of the Loan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Q)Borrower does not maintain any "Defined Benefit Pension Plans", as defined in ERISA; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(R)Section 5.02 Survival. All of the representations and warranties set forth in <u>Section 5.01</u> shall survive and shall remain true and correct until all Obligations are satisfied in full (except, if applicable, to the extent that any such representation or warranty expressly relates solely to an earlier date or period of time).

**Article 6** **THE BORROWER'S COVENANTS**

Borrower hereby covenants and agrees with Lender that, so long as any of the Obligations remain unsatisfied, it will comply with the following covenants:

Section 6.01<u>Affirmative Covenants</u>.

Unless Lender shall otherwise agree in writing, Borrower shall abide by and perform the following covenants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)Subsidiary Bank shall maintain a minimum balance of $6,000,000 in one or more deposit accounts with Lender .

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)Borrower will use the proceeds of the Loan solely for the purposes described in <u>Section 2.03</u> of this Agreement. Borrower will furnish Lender such evidence as it may reasonably require with respect to such use.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)Borrower will furnish Lender all of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)with respect to Borrower only, quarterly, within sixty (60) days after the close of each calendar quarter, and at such other times as Lender may request:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)a statement of stockholders' equity and a statement of cash flows of such entity as of and for such quarter;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)an income statement of such entity for such quarter; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)a balance sheet (consolidated, in the case of an entity that has one or more Subsidiaries) of such entity as of the end of such period;

all in reasonable detail, subject to year-end audit adjustments and certified by Borrower's president or principal financial officer to have been prepared in accordance with Generally Accepted Accounting Principles consistently applied, except for any inconsistencies explained in such certificate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)with respect to each of Borrower and the Subsidiary Bank, annually, within one hundred twenty (120) days after December 31 of each year:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)a statement of stockholders' equity and the consolidated statement of cash flows of the Borrower and its affiliates of and for such fiscal year;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)an income statement of such entity for such fiscal year; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)a balance sheet (in the case of an entity that has one or more Subsidiaries, such balance sheet shall be delivered on a consolidated basis and, if requested by Lender, also on a parent-only basis) of such entity as of the end of such fiscal year;

all in reasonable detail, including all supporting schedules and comments, audited by an independent public accountant selected by Borrower and reasonably acceptable to Lender, and certified by such accountant to have been prepared in accordance with Generally Accepted Accounting Principles consistently applied, except for any inconsistencies explained in such certificate. In addition, if requested by Lender, Borrower will obtain from such independent certified public accountants and deliver to Lender, within one hundred twenty (120) days after the close of each fiscal year, the independent certified public accountants' written statement that in making the examination necessary to their certification they have obtained no knowledge of any Default or Potential Default by Borrower or the Subsidiary Bank, or disclosed all Defaults or Potential Defaults of which they have obtained knowledge; provided, however, that in making their examination such accountants shall not be required to go beyond the bounds of generally accepted auditing procedures for the purpose of certifying financial statements. Lender shall have the right,

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from time to time, to discuss Borrower's and the Subsidiary Bank's affairs directly with Borrower's and the Subsidiary Bank's independent public accountants after notice to Borrower and the Subsidiary Bank and upon opportunity for Borrower and the Subsidiary Bank to be present at any such discussions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)Contemporaneously with each quarterly and year-end financial report required by the foregoing paragraphs (1) and (2), a certificate of the president or principal financial officer of Borrower and the Subsidiary Bank, in the form of Exhibit A, stating that he or she has individually reviewed the provisions of this Agreement and that a review of the activities of Borrower and the Subsidiary Bank during such year or quarterly period, as the case may be, has been made by or under the supervision of the signer of such certificate with a view to determining whether Borrower and the Subsidiary Bank have kept, observed, performed and fulfilled all their obligations under this Agreement, and that, to the best of his or her knowledge, Borrower and the Subsidiary Bank have observed and performed each and every undertaking contained in this Agreement and are not at the time in default in the observance or performance of any of the terms and conditions hereof or, if Borrower or the Subsidiary Bank shall be so in default, specifying all such defaults and events of which he or she may have knowledge.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)Promptly after receipt thereof, copies of all material reports and documents submitted to Borrower or the Subsidiary Bank by any applicable regulatory authority (other than those which Borrower and the Subsidiary Bank are prohibited from disclosing under applicable Laws), and, simultaneously with the filing thereof, but in any event within forty-five (45) days of the end of each calendar quarter, copies of all financial reports, including but not limited to quarterly Call Reports, filed by the Borrower and/or the Subsidiary Bank with any applicable regulatory authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)Promptly after sending or making available or filing of the same, but in any event within fifteen (15) days after issuance, copies of all reports, proxy statements and financial statements that Borrower or the Subsidiary Bank sends or makes available to the stockholders and all registration statements and reports, including, if applicable, but not limited to 8-Ks and 10-Qs that Borrower or the Subsidiary Bank files with the Securities and Exchange Commission or any successor Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)As soon as reasonably practicable following the occurrence thereof, notice of (i) any material change in Borrower's or the Subsidiary Bank's financial condition or executive management, or (ii) any other change internally or externally that could materially affect the capital, earnings or financial condition of Borrower or the Subsidiary Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7)Such other reports, financial information, projections, budgets, capital plans and other information as Lender may reasonably require.

Documents required to be delivered pursuant to <u>Section 6.0l(A), (B), (C)(I), (C)(2), (C)(4), and (C)(5)</u> (to the extent any such documents are included in materials otherwise filed with the Securities and Exchange Commission, Federal Reserve, or Federal Deposit Insurance Corporation) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the

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date on which such documents are posted on Borrower's behalf on an internet or intranet website, if any, to which Lender has access.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)Borrower will pay or cause to be paid when due all taxes, assessments and charges or levies imposed upon it or the Subsidiary Bank or on any of its property or the Subsidiary Bank's property or which it or the Subsidiary Bank is required to withhold and pay over, except where contested in good faith by appropriate proceedings with adequate reserve therefor having been set aside on Borrower's or the Subsidiary Bank's books, but Borrower shall pay or cause to be paid all such taxes, assessments, charges or levies forthwith whenever foreclosure on any lien that has attached (or any security therefor) appears imminent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)Borrower will, when requested so to do and unless prohibited by any federal, state and/or local Laws, make available for inspection by duly authorized representatives of Lender any of its or the Subsidiary Bank's Records, and will furnish Lender any information regarding its or the Subsidiary Bank's business affairs and financial condition within a reasonable time after written request therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)Borrower will maintain, and will cause the Subsidiary Bank to maintain, liability insurance, property insurance (including, without limitation, fire and extended coverage insurance on all assets owned by Borrower or the Subsidiary Bank, as applicable), and other types of insurance (including, without limitation, insurance coverage on the directors and officers of Borrower and the Subsidiary Bank), all in such form and amounts as are consistent with industry practices and with such insurers as may be satisfactory to Lender. Borrower will furnish to Lender such evidence of insurance as Lender may require. Borrower hereby agrees that, in the event it fails to pay or cause to be paid the premium on any such insurance, Lender may do so and shall be reimbursed by Borrower therefor, along with interest on the amount so paid at the Interest Rate (or default rate, if applicable).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G)Borrower will take all necessary steps to preserve its and the Subsidiary Bank's corporate existence and comply with all present and future Laws applicable to it or the Subsidiary Bank in the operation of its or the Subsidiary Bank's business, and all material leases, contracts and commitments of any kind to which it or the Subsidiary Bank is subject. Borrower will cause the Subsidiary Bank to comply in all material respects with their respective obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H)Borrower will give immediate notice to Lender of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)any litigation or proceeding in which it or the Subsidiary Bank is a party if an adverse decision therein would require it or the Subsidiary Bank to pay more than $500,000.00 or deliver assets the value of which exceeds such sum (whether or not the claim is considered to be covered by insurance); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)the institution of any other suit or proceeding involving Borrower or the Subsidiary Bank that might materially and adversely affect Borrower's or the Subsidiary Bank's operations, financial condition, property or business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(I)Within ten (10) days of Lender's request therefor, Borrower will furnish Lender with copies of federal income tax returns filed by Borrower or the Subsidiary Bank.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(J)Borrower will cause the Subsidiary Bank at all times to maintain (in accordance with Generally Accepted Accounting Principles):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)a "well-capitalized" status in accordance with the regulations of the primary federal bank regulatory agency of the Subsidiary Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)a Tier 1 Leverage Ratio greater than eight percent (8.0%);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)a Non-Performing Assets Ratio less than twenty-five percent (25%); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)a Return on Assets Ratio greater than four tenths of one percent (0.40%).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(K)Borrower will notify Lender immediately if it becomes aware of the occurrence of any Default or Potential Default, or the failure of Borrower to observe any of its undertakings hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(L)Borrower shall (a) ensure that no Person which owns a controlling interest in or controls Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control ("OFAC"), the Department of the Treasury or included in any Executive Orders, (b) not use or permit the use of any proceeds of the Loan to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, (c) comply with all applicable Bank Secrecy Act laws and regulations, as amended, and (d) provide all information necessary for Lender to comply with the USA Patriot Act, as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(M)Borrower will maintain direct ownership of one hundred percent (100%) of the issued and outstanding capital stock of the Subsidiary Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(N)Borrower will pay, or cause the Subsidiary Bank to pay, when due (or within applicable grace periods) all Indebtedness due third Persons, except when the amount therefor is being contested in good faith by appropriate proceedings and with adequate reserves therefor being set aside on the books of Borrower or the Subsidiary Bank. If default be made by Borrower or the Subsidiary Bank in the payment of any principal (or installment thereof) of, or interest on, any such Indebtedness, Lender shall have the right, in its discretion, to pay such interest or principal for the account of Borrower or the Subsidiary Bank and be reimbursed by Borrower therefor, along with interest on the amount so paid at the Interest Rate (or default rate, if applicable).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(O)Borrower shall cause the Subsidiary Bank to pay dividends to Borrower in an amount sufficient to fulfill its Obligations to repay the Loan, subject to any limitations on the Subsidiary Bank's ability to declare and pay dividends that are imposed by applicable Law or the requirements of any regulatory authority with jurisdiction of the Subsidiary Bank. Borrower shall immediately notify Lender within two (2) business days of any regulatory prohibition relative to the payment of dividends to Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(P)Borrower shall promptly notify Lender in the event of the departure or removal of the current Chief Executive Officer or Chief Financial Officer of either Borrower or the Subsidiary Bank, and Lender may accelerate the Loan in accordance with Section 7.02 at any time after 90 days but no longer than 120 days following any such departure or removal.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Q)In the event Borrower fails to maintain a Tier 1 Leverage Ratio greater than eight percent (8.0%) in accordance with Section 6.0l(J)(2), Borrower shall have a period to cure the failure for thirty (30) days. In the event Borrower fails to maintain a Non-Performing Assets Ratio of less than twenty-five percent (25%) in accordance with Section 6.01(1)(3) or a Return on Assets Ratio greater than four tenths of one percent (0.40%) in accordance with Section 6.01(J)(4), Borrower shall have a period to cure the failure for three (3) months.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(R)Borrower shall maintain an interest reserve of at least $1,500,000 at all times during the term of the Loan, it being understood that such funds may be maintained at the Subsidiary Bank and commingled with other funds of Borrower.

Section 6.02<u>Negative Covenants</u>.

Unless Lender shall otherwise consent in writing, which consent shall not unreasonably be withheld, Borrower shall abide by the following covenants:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)Neither Borrower nor the Subsidiary Bank will change its name, enter into any merger, consolidation, or reorganization, reclassify its capital stock, or liquidate or dissolve, except pursuant to a transaction in which Borrower or the Subsidiary Bank, as appropriate, is the acquiror and no Change in Control has occurred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)Neither Borrower nor the Subsidiary Bank will sell, transfer, lease or otherwise dispose of all or any material part of its assets, nor sell any item of Collateral, including but without limitation with respect to Borrower, any of the capital stock of the Subsidiary Bank. Further, neither Borrower nor the Subsidiary Bank will purchase any material part of the assets of another Person, except pursuant to a transaction by the Subsidiary Bank in the ordinary course of business or a transaction in which Borrower or the Subsidiary Bank, as appropriate, is the acquiror and no Change in Control has occurred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)Borrower will not mortgage, pledge, grant or permit to exist a security interest in or lien upon any item of Collateral, including, but without limitation any of the capital stock of the Subsidiary Bank, now owned or hereafter acquired.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)Neither Borrower nor the Subsidiary Bank will become liable, directly or indirectly, as guarantor or otherwise for any obligation of any Person, except for the Subsidiary Bank's endorsement of commercial paper for deposit or collection in the ordinary course of business, and the Subsidiary Bank's issuance of letters of credit in the ordinary course of business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)Neither Borrower nor the Subsidiary Bank (whether acting in its individual capacity or as a joint venture partner) will incur, create, assume, or permit to exist any Indebtedness except:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)the Loan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Indebtedness described in the financial statements of Borrower most recently delivered to Lender, or the most recent Call Reports of the Subsidiary Bank, as applicable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)trade indebtedness incurred in the ordinary course of business;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)Indebtedness no greater than $2,000,000 or Indebtedness approved in writing by Lender; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)contingent Indebtedness permitted by Section 6.02(D).

Without limiting the foregoing, the Subsidiary Bank shall not issue commercial paper, subordinated debt or any similar debt instrument, and the Subsidiary Bank shall not obtain any non-traditional funding, without Lender's prior written consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)Borrower will not amend, nor cause the Subsidiary Bank to amend, its articles of incorporation or bylaws, or alter, through agreement or otherwise, any voting rights or rights to elect or appoint directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G)Borrower will not declare or pay any dividends, or make any other payment or distribution on account of its capital stock unless (1) no Default or Potential Default shall have occurred and be continuing, and (2) after giving pro forma effect to such dividend, payment or distribution, Borrower shall be in compliance with the covenants of borrower set forth in Article 6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H)Borrower will not furnish Lender any certificate or other document that will knowingly contain any untrue statement of material fact or that will knowingly omit to state a material fact necessary to make it not misleading in light of the circumstances under which it was furnished.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(I)Borrower will not directly or indirectly apply any part of the proceeds of the Loan to the purchasing or carrying of any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, or any regulations, interpretations or rulings thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(J)Borrower will not enter into any transaction with any Affiliate including, without limitation, the purchase, sale or exchange of property or the rendering of any service, except in the ordinary course of business and pursuant to the reasonable requirements of Borrower's business and upon terms found by its board of directors to be fair and reasonable and no less favorable to Borrower than would obtain in a comparable arm's-length transaction with a Person not an Affiliate.

**Article 7** **DEFAULT**

Section 7.01<u>Events of Default</u>. The occurrence of any one or more of the following events shall constitute a Default hereunder:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)Borrower shall fail to pay when due any installment of principal or interest or fee payable hereunder or under the Note, or any of Borrower's other Obligations to Lender. For the purposes of this paragraph, there shall be a ten (10) day grace period in the event of a late payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)Borrower shall fail to observe or perform any other obligation to be observed or performed by it hereunder or under the Note or any of the Collateral Documents. In the event of a failure to meet an obligation under this paragraph, Lender shall give Borrower notice of the

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failure. From the date notice is received, Borrower shall have a thirty (30) day period in which to cure such failure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)Borrower or the Subsidiary Bank shall fail to pay any Indebtedness in excess of $500,000.00 due any third Persons after demand therefor and such failure shall continue beyond any applicable grace period, unless any such failure is being contested in good faith by appropriate proceedings with adequate reserve therefor being set aside on Borrower's or the Subsidiary Bank's books. For the purposes of this paragraph, there shall be a ten (10) day grace period to cure such failure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)Any financial statement, Call Report, representation, warranty or certificate made or furnished by Borrower or the Subsidiary Bank to Lender under or in connection with this Agreement, or as an inducement to Lender to enter into this Agreement, or in any separate statement or document to be delivered hereunder to Lender, shall be materially false, incorrect, or incomplete when made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)Borrower shall admit its inability to pay its debts as they mature, or shall make an assignment for the benefit of its or any of its creditors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)Proceedings in bankruptcy, or for reorganization of Borrower or the Subsidiary Bank or for the readjustment of any of its debts, under the Bankruptcy Code, as amended, or any part thereof, or under any other Laws, whether state or federal, for the relief of debtors, now or hereafter existing, (i) shall be commenced against Borrower or the Subsidiary Bank and shall not be discharged within thirty (30) days after their commencement, or (ii) shall be commenced by Borrower or the Subsidiary Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G)Any proceedings shall be instituted for the appointment of a receiver or trustee for Borrower or the Subsidiary Bank or for any substantial part of their respective assets, or any proceedings shall be instituted for the dissolution of or the full or partial liquidation of Borrower or the Subsidiary Bank, or Borrower or the Subsidiary Bank shall discontinue its business or materially change the nature of its business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H)Borrower or the Subsidiary Bank shall suffer final judgments for payment of money aggregating in excess of $500,000.00 and shall not discharge the same within a period of thirty (30) days unless, pending further proceedings, execution has been effectively stayed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(I)A judgment creditor of Borrower shall obtain possession of any of the Collateral by any means, including, but without limitation, levy, distraint, replevin or self-help.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(J)The validity or enforceability of this Agreement, the Note or the Collateral Documents shall be contested by Borrower, the Subsidiary Bank, or any shareholder of Borrower, or the Borrower shall deny that it has any or further liability or Obligation hereunder or thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(K)Borrower or the Subsidiary Bank shall fail to maintain all regulatory licenses and permits necessary to the conduct of their respective business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(L)If any of Borrower's or the Subsidiary Bank's banking regulators issues a cease and desist order, consent order, or similar non-confidential action against Borrower or the Subsidiary

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Bank, and, in each case, such action results from the applicable regulator's determination that Borrower or the Subsidiary Bank, as applicable, has acted in an unsafe or unsound manner.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(M)Borrower ceases to own one hundred percent (100%) of the issued and outstanding capital stock of the Subsidiary Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(N)There is a Change in Control with respect to Borrower or the Subsidiary Bank.

Section 7.02<u>Acceleration</u>. If a Default shall have occurred and be continuing beyond any applicable grace or cure periods, or if a departure of executive management occurs under Section 6.01(P) and Lender elects to accelerate the Loan during the period set forth in such Section 6.0l(P), then, at the option of Lender (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of a Default specified in <u>Sections 7.01(E)</u>, (<u>F</u>) or (<u>G</u>), Lender may terminate all commitments to lend hereunder and may declare, by written notice to Borrower, that all Obligations, whether hereunder or otherwise, are immediately due and payable.

Section 7.03<u>Remedies</u>. If a Default shall have occurred and be continuing beyond any applicable notice and grace periods, then whether or not acceleration occurs under <u>Section 7.02</u>. Lender shall have, in addition to the rights and remedies given it by this Agreement and the Collateral Documents, all those allowed by all applicable Laws, including, but without limitation, the Uniform Commercial Code as enacted in any jurisdiction in which any Collateral may be located. After deducting from the proceeds of sale or other disposition of the Collateral all expenses (including all reasonable expenses for legal services), Lender shall apply such proceeds toward the satisfaction of the Obligations. Borrower shall be liable for any deficiency, and any remainder of the proceeds after satisfaction in full of the Obligations shall be distributed as required by applicable Laws. Notice of any sale or other disposition shall be given to Borrower (and/or to the Subsidiary Bank, if required under applicable Laws) at least five (5) days before the time of any intended public sale or of the time after which any intended private sale or other disposition of the Collateral is to be made, which Borrower hereby agrees shall be reasonable notice of such sale or other disposition. Borrower agrees to assemble, or to cause to be assembled, at its own expense, the Collateral at such place or places as Lender shall designate. At any such sale or other disposition, Lender may, to the extent permissible under applicable Laws, purchase the whole or any part of the Collateral, free from any right of redemption on the part of Borrower or the Subsidiary Bank, which right is hereby waived and released. Without limiting the generality of any of the rights and remedies conferred upon Lender under this section, Lender may, to the full extent permitted by applicable Laws, at Lender's option, use, operate, manage and control the Collateral in any lawful manner.

**Article 8** **MISCELLANEOUS**

Section 8.01<u>Construction</u>. The provisions of this Agreement shall be in addition to those of any guaranty, pledge or security agreement, note or other evidence of liability held by Lender, all of which shall be construed as complementary to each other. Nothing herein contained shall prevent Lender from enforcing any or all other notes, guaranty agreements, pledge agreements, or security agreements in accordance with their respective terms.

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Section 8.02<u>Further Assurance</u>. From time to time, Borrower will, or will cause the Subsidiary Bank to, execute and deliver to Lender such additional documents and will provide such additional information as Lender may reasonably require to carry out the terms of this Agreement and be informed of Borrower's and/or the Subsidiary Bank's status and affairs.

Section 8.03<u>Enforcement and Waiver by Lender</u>. Lender shall have the right at all times to enforce the provisions of this Agreement and the Collateral Documents in strict accordance with the terms hereof and thereof, notwithstanding any conduct or custom on the part of Lender in refraining from so doing at any time or times. The failure of Lender at any time or times to enforce its rights under such provisions, strictly in accordance with the same, shall not be construed as having created a custom in any way or manner contrary to specific provisions of this Agreement or as having in any way or manner modified or waived the same. All rights and remedies of Lender are cumulative and concurrent and the exercise of one right or remedy shall not be deemed a waiver or release of any other right or remedy.

Section 8.04<u>Expenses of Lender</u>. Borrower will, on demand, reimburse Lender for any and all expenses, fees, taxes, or other costs (including, without limitation, (a) expenses for lien searches and other due diligence searches, (b) any recordation tax, indebtedness tax, documentary stamp tax, intangible tax, or similar tax due in connection with the Loan or any security instrument related to the Loan, (c) any recording fees or other costs due in connection with any security instrument related to the Loan, and (d) the reasonable fees and expenses of legal counsel for Lender) incurred in connection with the enforcement of this Agreement and the Collateral Documents and the collection or attempted collection of the Note and the other Obligations.

Section 8.05<u>Notices</u>. Any notice or other communication required or permitted to be given by this Agreement, the Note, the Collateral Documents or any related document, or by applicable Laws, shall be in writing and shall be deemed received (a) on the date delivered, if sent by hand delivery (to the person or department if one is specified below) with receipt acknowledged by the recipient thereof, (b) three (3) business days following the date deposited in U.S. mail, certified or registered, with return receipt requested, or (c) one (1) business day following the date deposited with Federal Express or other national overnight carrier, and in each case addressed as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)If to Borrower:

CoastalSouth Bancshares, Inc.c/o CoastalStates Bank<br>5 Bow Circle<br>Hilton Head Island, SC 29928<br>Attention: Mr. Stephen Stone, CEO

Mr. Tony Valduga, CFO

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)If to Lender:

ServisFirst Bank<br>2500 Woodcrest Place<br>

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Birmingham, Alabama 35209<br>Attention: William Mellown

First Vice President, Correspondent Banking

Section 8.06<u>Waiver; Release and Indemnity by Borrower</u>. To the maximum extent permitted by applicable Laws, Borrower:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)Waives (1) protest with respect to all Indebtedness at any time held by Lender on which Borrower is in any way liable; and (2) notice and opportunity to be heard before exercise by Lender of the remedies of set-off or other summary procedures permitted by any applicable Laws or by any agreement with Borrower, and except where required hereby or by any applicable Laws, notice of any other action taken by Lender; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)Releases Lender and its officers, directors, agents, attorneys and employees from all claims for loss or damage caused by any act or omission on the part of any of them involving the Loan, this Agreement, the Note, the Collateral Documents, any related documents, or any of the other matters and transactions contemplated herein or therein, except gross negligence or willful misconduct; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)Indemnifies Lender and its officers, directors, agents, attorneys and employees against, and agrees to hold Lender and all of such other persons harmless from, any claims, demands, liabilities, costs, damages, and judgments (including, without limitation, costs of defense and attorneys' fees) arising directly or indirectly out of or in connection with any matter involving the Loan, this Agreement, the Note, the Collateral Documents, any related documents, or any of the other matters and transactions contemplated herein or therein, except where such claims, demands, liabilities, costs, damages and judgments arise out of the gross negligence or willful misconduct of Lender. This agreement of indemnity shall be a continuing agreement and shall survive payment of the Loan, the Note and termination of this Agreement.

Section 8.07<u>Applicable Law; Jurisdiction and Venue</u>. The substantive Laws of the United States and the State of Alabama shall govern the construction of this Agreement and the documents executed and delivered pursuant hereto, and the rights and remedies of the parties hereto and thereto. Borrower hereby consents to the jurisdiction of the State of Alabama; and agrees that venue for any dispute relating to or arising out of the transaction contemplated by this Agreement shall lie exclusively in an appropriate state or federal court located in Jefferson County, Alabama.

Section 8.08<u>Binding Effect, Assignment and Entire Agreement</u>. This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and permitted assigns of the parties hereto. Borrower has no right to assign any of its rights or obligations hereunder without the prior written consent of Lender. Lender may freely assign the Loan, in whole or in part. This Agreement and the documents executed and delivered pursuant hereto, constitute the entire agreement between the parties, and may be amended only by a writing signed on behalf of each party.

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Section 8.09<u>Severability</u>. If any provision of this Agreement shall be held invalid under any applicable Laws, such invalidity shall not affect any other provision of this Agreement that can be given effect without the invalid provision, and, to this end, the provisions hereof are severable.

Section 8.10<u>Counterparts</u>. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument.

Section 8.11<u>Extension and Renewal</u>. The Loan may, in the sole and absolute discretion of Lender, be renewed or extended beyond the Maturity Date only upon the express written agreement of Borrower and Lender. Any renewal or extension shall be upon the terms and subject to the conditions stated in such written agreement. In the absence of such extension or renewal, the obligations of Lender hereunder with respect to the Loan shall terminate on the Maturity Date.

Section 8.12<u>Seal</u>. This Agreement is intended to take effect as an instrument under seal.

Section 8.13<u>No Third Party Beneficiaries, Etc</u>. Monitoring, inspections and review of financial information by Lender may not be relied upon by Borrower or any other Person and shall be for the sole benefit of Lender. Further, there are no third party beneficiaries of this Agreement or any documents related hereto, and no person or entity other than Lender and Borrower shall be entitled to rely hereon or thereon or benefit herefrom or therefrom.

Section 8.14<u>Waiver of Trial by Jury</u>. EACH OF THE BORROWER AND THE LENDER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING OUT OF OR IN ANY WAY PERTAINING OR RELATING TO THIS AGREEMENT, THE NOTE, THE COLLATERAL DOCUMENTS, OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR (b) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE, THE COLLATERAL DOCUMENTS, OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR IN CONNECTION WITH THE TRANSACTIONS RELATED THERETO OR CONTEMPLATED THEREUNDER, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE BORROWER AND THE LENDER AGREE THAT EITHER OR BOTH OF THEM MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT BETWEEN THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY, AND THAT ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THEM SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

[*Signature Page Follows*]

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**IN WITNESS WHEREOF**, the parties hereto have duly executed this Agreement as of the day and year first above written.

BORROWER:

COASTALSOUTH BANCSHARES, INC.

By <u>/s/ Stephen R. Stone</u> 

Name <u>Stephen R. Stone</u> 

Its <u>President and CEO</u> 

LENDER:

SERVISFIRST BANK

By <u>/s/ William McMullan</u> 

Name <u>William McMullan</u> 

Its <u>First VP</u> 

Signature Page for Loan and Security Agreement

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**EXHIBIT A TO<br>LOAN AND SECURITY AGREEMENT**

<u>BORROWER'S COMPLIANCE CERTIFICATE</u>

ServisFirst Bank<br>2500 Woodcrest Place<br>Birmingham, Alabama 35209<br>Attention: William Mellown, Vice President, Correspondent Banking

Re: Amended and Restated Loan and Security Agreement dated November 21, 2023

Gentlemen:

In connection with the foregoing, the officer executing this certificate on behalf of Borrower and the Subsidiary Bank certifies as follows:

a) I am familiar with the terms and conditions of the Loan and Security Agreement (the "Loan Agreement") dated , 21 ___, between Borrower and Lender. I have individually reviewed the provisions of the Loan Agreement, and a review of the activities of Borrower and the Subsidiary Bank from , 21___, until , 21 ___, has been made under my supervision with the view of determining whether Borrower and the Subsidiary Bank have kept, observed, performed and fulfilled all their obligations under the Loan Agreement.

b) The financial covenants for the Subsidiary Bank set forth in <u>Section 6.01(J)</u> of the Agreement are set forth below, together with the status or calculation thereof for the above-referenced period:

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| | | |
|:---|:---|:---|
|  | &nbsp;&nbsp;<u>Required</u> | &nbsp;&nbsp;<u>As of Reporting Date</u> |
| &nbsp;&nbsp;(1) Status ........................ | &nbsp;&nbsp;"well capitalized" |  |
| &nbsp;&nbsp;(2) Tier 1 Leverage Ratio greater than... | &nbsp;&nbsp;8.0% |  |
| &nbsp;&nbsp;(3) Non-Performing Assets Ratio.......... | &nbsp;&nbsp;< 25% |  |
| &nbsp;&nbsp;(4) Return on Assets Ratio greater than. | &nbsp;&nbsp;0.40% |  |

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c) Borrower and the Subsidiary Bank have observed and performed each and every undertaking contained in the Loan Agreement and are not at this time in default in the observance or performance of any of the terms and conditions thereof except as provided for on the attached schedule. I hereby certify that no Default or Potential Default exists as of the date hereof.

[*Signature Page Follows*]

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**IN WITNESS WHEREOF**, the undersigned have caused this certificate to be executed by their duly authorized representatives on the dates set forth below.

COASTALSOUTH BANCSHARES, INC.

By

Name

Its

Date:

COASTALSTATES BANK.

By

Name

Its

Date:

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**<u>COMPLIANCE CERTIFICATE SCHEDULE OF DEFAULTS</u>**

A. Nature of Default(s) or Potential Default(s):

B. Steps Borrower proposes to cure Default(s) or Potential Default(s):

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**EXHIBIT B TO<br>LOAN AND SECURITY AGREEMENT**

<u>STATES QUALIFIED. PRINCIPAL PLACES OF BUSINESS</u> 

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;<u>Entity</u> | &nbsp;&nbsp;<u>State(s) Qualified</u> | &nbsp;&nbsp;<u>Principal Place of Business</u> |
| &nbsp;&nbsp;CoastalSouth Bancshares, Inc. | &nbsp;&nbsp;Georgia; South Carolina | &nbsp;&nbsp;5 Bow Circle<br>Hilton Head Island, SC 29928 |
| &nbsp;&nbsp;CoastalStates Bank | &nbsp;&nbsp;South Carolina | &nbsp;&nbsp;5 Bow Circle<br>Hilton Head Island, SC 29928 |

---

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## Exhibit 10.15

**EXHIBIT 10.15**

**AMENDED AND RESTATED REVOLVING NOTE**

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| | |
|:---|:---|
| &nbsp;&nbsp;**$24000000** | &nbsp;&nbsp;**Birmingham, Alabama** |
|  | &nbsp;&nbsp;**November 21, 2023** |

---

FOR VALUE RECEIVED, **COASTALSOUTH BANCSHARES, INC.,** a corporation organized under the laws of the State of Georgia (the "Borrower"), promises to pay to the order of **SERVISFIRST BANK**, an Alabama banking corporation (hereinafter called the "Lender" or, together with any other holder of this note, the "Holder"), the principal sum of TWENTY-FOUR MILLION and 00/100 DOLLARS ($24,000,000) or the aggregate unpaid principal sum advanced hereunder, whichever is less, together with interest on the unpaid balance of said principal sum outstanding from time to time, from the date hereof until paid in full, at the Interest Rate in effect from time to time under that certain Amended and Restated Loan and Security Agreement of even date herewith by and between the Borrower and the Lender (as may be amended from time to time, the "Loan Agreement"; capitalized terms used herein but not otherwise defined herein shall have the meaning assigned to them in the Loan Agreement). Interest shall be calculated on the basis of a 360-day year, by multiplying the product of the principal amount outstanding and the applicable rate by the actual number of days elapsed, and dividing by 360.

This note evidences indebtedness of the Borrower under a revolving line of credit extended by the Lender to the Borrower. In connection therewith, subject to the terms of the Loan Agreement, the Borrower may borrow, repay without penalty or premium, and reborrow hereunder, from the date hereof until the Maturity Date. It is contemplated that by reason of prepayments hereon there may be times when no indebtedness is owing hereunder. Notwithstanding any such occurrence, this note shall remain valid and shall be in full force and effect as to each principal advance made hereunder subsequent to each such occurrence. Each principal advance and each payment thereon made pursuant to this note shall be reflected by the notations made by the Lender on the internal records of the Lender, and the Lender is hereby authorized to record thereon such principal advances and payments with copies of such notations provided to Borrower, which copies shall be deemed a part of this Note. The aggregate unpaid amounts reflected by the notations on said internal records shall be deemed rebuttably presumptive evidence of the principal amount remaining outstanding and unpaid on this note. No failure of the Lender to record any advance or payment shall limit or otherwise affect the obligation of the Borrower hereunder with respect to any advance, and no payment of the principal by the Borrower shall be affected by the failure of the Lender to record the same.

Principal and interest on the indebtedness evidenced by this note shall be due and payable at such times, and on such other terms and conditions, as are set forth in the Loan Agreement. To the extent the Loan Agreement would require the Borrower to pay late fees or other amounts to the Lender under certain circumstances, the Borrower shall pay such late fees and other amounts in accordance with the terms of the Loan Agreement. To the extent the Loan Agreement would increase the interest rate payable on the indebtedness evidenced by this note under certain default conditions or other circumstances, such interest rate shall be increased in accordance with the terms of the Loan Agreement.

------

All payments due under this note shall be made to the Holder at the office of the Lender at 2500 Woodcrest Place, Birmingham, Alabama 35209, or at such other place as the Holder may designate. All such payments shall be made in legal tender of the United States of America in immediately available funds. If any payment of principal or interest on this note shall become due on a Saturday, Sunday or any day on which the Holder is legally closed to business, such payment shall automatically be deemed to be due on the next succeeding business day. Time is of the essence with respect to the payment of every installment of principal and of interest hereunder and the performance of every other covenant made by the undersigned under this note, the Loan Agreement, the Collateral Documents and any agreement which secures the payment of this note.

The Borrower hereby waives demand, presentment, dishonor, notice of dishonor and any other requirement necessary to hold it obligated hereon. The Borrower hereby agrees that any collateral now or hereafter held for the obligations of the Borrower under this note may hereafter be released, compromised, or exchanged, and that the Holder may fail to perfect its lien or security interest in such collateral or may permit the perfection of its lien or security interest in such collateral to lapse, all without in any way affecting or releasing the liability of the Borrower under this note.

The Borrower agrees to pay all intangibles taxes, documentary stamp taxes, recording fees or taxes and other taxes and fees due to any governmental authority in connection with the execution and delivery of this note, the Loan Agreement, or any other agreement that provides collateral for this note. The Borrower agrees to pay all costs and expenses, including reasonable attorneys' fee, incurred by the Holder of this note in collecting or attempting to collect this note.

The Holder shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies under this note, the Loan Agreement, any agreement which provides collateral for this note, or applicable law. All rights and remedies of the Holder under this note, the Loan Agreement, any such agreement providing collateral for this note, and applicable law shall be cumulative and may be exercised successively or concurrently. This note shall be governed by and construed in accordance with the laws of the United States and of the State of Alabama. Any provision of this note which shall be deemed to be unenforceable or invalid under any such law shall be ineffective only to the extent of such unenforceability or invalidity, without affecting the enforceability or validity of any other provision hereof.

This note has been executed by the Borrower without condition that anyone else should sign or become bound hereunder and without any other conditions whatever being made. The provisions hereof are binding on the successors and assigns of the Borrower, and shall inure to the benefit of the Holder, its successors and assigns.

This note amends and restates that certain Revolving Note made by Borrower and payable to Lender in the original principal amount of $18,000,000, dated December 10, 2021 (the "Original Note"). Borrower acknowledges and agrees that this note is issued in substitution for and replacement of, but not in payment of, the Original Note. This note shall in no event be deemed to constitute a waiver, novation, release, discharge or other extinguishment of the indebtedness

------

evidenced by the Original Note, which continues in full force and effect, as amended and restated by the terms of this note.

*[Signature Page Follows*]

------

IN WITNESS WHEREOF, the undersigned has executed and delivered this Revolving Note as an instrument under seal on the date first above written.

COASTALSOUTH BANCSHARES, INC.

By: <u>/s/ Stephen R. Stone</u> 

Name: <u>Stephen R. Stone</u> 

Its: <u>President and CEO</u> 

Address: CoastalSouth Bancshares, Inc.

5 Bow Circle

Hilton Head Island, SC 29928

Attention: Stephen Stone

Tax ID Number:

Signature Page to Revolving Note

------

## Exhibit 10.16

**EXHIBIT 10.16**

**PLEDGE AGREEMENT**

THIS PLEDGE AGREEMENT is made and entered into as of November 21, 2023, by and between **COASTALSOUTH BANCSHARES, INC**., a corporation organized under the laws of the State of Georgia ("Borrower"), and **SERVISFIRST BANK**, an Alabama banking corporation ("Lender").

<u>W</u> <u>I</u> <u>T</u> <u>N</u> <u>E</u> <u>S</u> <u>S</u> <u>E</u> <u>T</u> <u>H:</u>

Borrower has executed and delivered to Lender a certain Amended and Restated Revolving Note (the "Note") and a certain Amended and Restated Loan and Security Agreement (the "Loan Agreement"), each of even date herewith.

As an inducement to Lender to make the loan provided for in the Loan Agreement, Borrower agreed to execute this Pledge Agreement and, pursuant hereto, to pledge the Pledged Stock, as defined in this Pledge Agreement, as security for the prompt payment and performance of all obligations of the Borrower under the Note and the Loan Agreement (the "Obligations").

NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.(a) The term "Pledged Stock" means the shares of stock described in Schedule I hereto, together with all certificates, options, rights or other distributions issued as an addition to, in substitution or in exchange for, or on account of, any such shares, and all proceeds of all the foregoing, now or hereafter owned or acquired by Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The term "Event of Default" means the occurrence of any Default under the Loan Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.(a) As security for the prompt payment and performance of the Obligations, Borrower hereby pledges to Lender the Pledged Stock and grants to Lender a lien on and security interest therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Except as otherwise provided in subparagraph (d) below, if Borrower shall become entitled to receive or shall receive, in connection with any of the Pledged Stock, any:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Stock certificate, including, but without limitation, any certificate representing a stock dividend or in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Option, warrant, or right, whether as addition to or in substitution or in exchange for any of the Pledged Stock, or otherwise;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Dividend or distribution payable in property, including securities issued by other than the issuer of any of the Pledged Stock; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)Dividends or distributions of any sort, then:

------

Borrower shall accept the same as Lender's agent, in trust for Lender, and shall deliver them forthwith to Lender in the exact form received with, as applicable, Borrower's endorsement when necessary, or appropriate stock powers duly executed in blank, to be held by Lender, subject to the terms hereof, as part of the Pledged Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Upon the occurrence of an Event of Default, Lender, at its option, may have any or all of the Pledged Stock registered in its name or that of its nominee as a secured party, and Borrower hereby covenants that, upon Lender's request, Borrower will cause the issuer of the Pledged Stock to effect such registration. Immediately and without further notice, upon the occurrence of an Event of Default, whether or not the Pledged Stock shall have been registered in the name of Lender or its nominee, Lender or its nominee shall have, with respect to the Pledged Stock, all voting rights and other corporate rights, and all conversion, exchange, subscription and other rights, privileges and options pertaining thereto as if it were the absolute owner thereof, including, without limitation, the right to exchange any or all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof, or upon the exercise by such issuer of any right, privilege, or option pertaining to any of the Pledged Stock, and, in connection therewith, to deliver any of the Pledged Stock to any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine, all without liability except to account for property actually received by it; but Lender shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Unless an Event of Default shall have occurred and be continuing, Borrower shall be entitled, if not prohibited by the Loan Agreement, to receive for its own use cash dividends paid on or with respect to the Pledged Stock. Upon the occurrence of an Event of Default, Lender may require any such cash dividends to be delivered to Lender as additional security hereunder or to be applied toward the payment or performance of the Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Upon the occurrence of an Event of Default, Lender may, without demand of performance or other demand, advertisement, or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Borrower or any other person (all of which are, to the extent permitted by law, hereby expressly waived), forthwith realize upon the Pledged Stock or any part thereof, and may forthwith sell or otherwise dispose of and deliver the Pledged Stock, or any part thereof or interest therein, in one or more parcels at public or private sale or sales, at any exchange, broker's board or at any of Lender's offices or elsewhere, at such prices and on such terms (including, but without limitation, a requirement that any purchaser of all or any part of the Pledged Stock purchase the shares constituting the Pledged Stock for investment and without any intention to make a distribution thereof) as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk, with the right to Lender or any purchaser to purchase upon any such sale the whole or any part of the Pledged Stock free of any right or equity of redemption in Borrower, which right or equity is hereby expressly waived and released.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)The proceeds of any such disposition or other action by Lender shall be applied as follows:

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)First, to the costs and expenses incurred in connection therewith or incidental thereto or to the care or safekeeping of any of the Pledged Stock or in any way relating to the rights of Lender hereunder, including brokers' fees and reasonable attorneys' fees and legal expenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Second, to the payment and performance of the Obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)Third, to the payment of any other amounts required by applicable law (including, without limitation, Section 9-615 of the Uniform Commercial Code); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)Fourth, to Borrower or its transferees, to the extent of any surplus proceeds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Lender need not give more than five (5) days' notice of the time and place of any public sale or of the time after which a private sale may take place, which notice Borrower hereby deems reasonable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Borrower represents and warrants that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)It has, and has duly exercised, all requisite power and authority to enter into this Pledge Agreement, to pledge the Pledged Stock for the purposes described in paragraph 2(a), and to carry out the transactions contemplated by this Pledge Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)It is the legal and beneficial owner of all of the Pledged Stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The shares of the Pledged Stock constitute all of the issued and outstanding shares of the issuer thereof; and there are no outstanding warrants, options, rights or other commitments (including, but without limitation, convertible notes or securities) entitling any person to purchase or otherwise acquire any such shares;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)All of the shares of the Pledged Stock have been duly and validly issued, are fully paid and nonassessable, and are owned by Borrower free of any pledge, mortgage, hypothecation, lien, charge, encumbrance or security interest in such shares or the proceeds thereof, except for that granted hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)The execution and delivery of this Pledge Agreement, and the performance of its terms, will not violate or constitute a default under the terms of any agreement, indenture or other instrument, license, judgment, decree, order, law, statute, ordinance or other governmental rule or regulation, applicable to Borrower or any of its property; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Upon delivery of the Pledged Stock to Lender or its agent, this Pledge Agreement shall create a valid first lien upon and perfected security interest in the Pledged Stock and the proceeds thereof, subject to no prior security interest, lien, charge or encumbrances, or agreement purporting to grant to any third party a security interest in the property or assets of Borrower which would include the Pledged Stock.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.(a) Borrower hereby covenants that, until all of the Obligations have been paid and performed in full, it will not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)sell, convey, or otherwise dispose of any of the Pledged Stock or any interest therein or create, incur, or permit to exist any pledge, mortgage, lien, charge, encumbrance or any security interest whatsoever in or with respect to any of the Pledged Stock or the proceeds thereof, other than that created hereby; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)consent to or approve the issuance of any additional shares of any class of capital stock in the issuer of the Pledged Stock; or any securities convertible voluntarily by the holder thereof or automatically upon the occurrence or nonoccurrence of any event or condition into, or exchangeable for, any such shares; or any warrants, options, rights or other commitments entitling any person to purchase or otherwise acquire any such shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Borrower warrants and will at its own expense, defend Lender's right, title, special property and security interest in and to the Pledged Stock against the claims of any person, firm, corporation or other entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.Borrower will promptly deliver to Lender all written notices, and will promptly give Lender written notice of any other notices, received by it with respect to Pledged Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.Borrower shall at any time, and from time to time, upon the written request of Lender, execute and deliver such further documents and do such further acts and things as Lender may reasonably request to effect the purposes of this Pledge Agreement, including, without limitation, delivering to Lender upon the occurrence of any Event of Default irrevocable proxies with respect to the Pledged Stock in form satisfactory to Lender. Until receipt of such separate proxies, this Pledge Agreement shall constitute Borrower's proxy to Lender or its nominee to vote all shares of Pledged Stock then registered in Borrower's name.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.Upon the payment and performance in full of all Obligations and the payment and performance of all additional costs and expenses of Lender as provided herein, this Pledge Agreement shall terminate and Lender shall deliver to Borrower, at Borrower's expense, such of the Pledged Stock as shall not have been sold or otherwise applied pursuant to this Pledge Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. (a) Beyond the exercise of reasonable care to assure the safe custody of the Pledged Stock while held hereunder, Lender shall have no duty or liability to preserve rights pertaining thereto and shall be relieved of all responsibility for the Pledged Stock upon surrendering it or tendering surrender of it to Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)No course of dealing between Borrower and Lender, nor any failure to exercise, nor any delay in exercising, any right, power or privilege of Lender hereunder, under the Loan Agreement, or under the Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)The rights and remedies provided herein, in the Loan Agreement, and in the Note and in all other agreements, instruments, and documents delivered pursuant to or in connection with the Note, are cumulative and are in addition to and not exclusive of any rights or remedies provided by law, including, but without limitation, the rights and remedies of a secured party under the Uniform Commercial Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The provisions of this Pledge Agreement are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such validity or unenforceability shall affect only such clause or provision or part thereof in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision in this Pledge Agreement in any jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.Any notice required or permitted by this Pledge Agreement shall be effective if given in accordance with the provisions of the Loan Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.This Pledge Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.This Pledge Agreement shall be construed in accordance with the substantive law of the State of Alabama without regard to principles of conflicts of law and is intended to take effect as an instrument under seal.

[*Signature Page Follows*]

------

**IN WITNESS WHEREOF**, the parties hereto have duly executed this Pledge Agreement as of the date and year first above written.

BORROWER:

COASTALSOUTH BANCSHARES, INC.

By: <u>/s/ Stephen R. Stone</u> 

Name: <u>Stephen R. Stone</u> 

Its: <u>President and CEO</u> 

ACCEPTED:

SERVISFIRST BANK

By: <u>/s/ William McMullan</u> 

Name: <u>William McMullan</u> 

Its: <u>First VP</u> 

Signature Page for Pledge Agreement

------

**SCHEDULE I**

<u>PLEDGED STOCK</u>

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;**<u>ISSUER</u>** | &nbsp;&nbsp;**CERTIFICATE <u>NUMBER</u>** | &nbsp;&nbsp;**REGISTERED <u>OWNER</u>** | &nbsp;&nbsp;**NUMBER OF <u>SHARES</u>** |
| &nbsp;&nbsp;COASTALSTATES BANK | &nbsp;&nbsp;1 | &nbsp;&nbsp;COASTALSOUTH BANCHSHARES, INC. | &nbsp;&nbsp;1,600,000 |

---

------

## Exhibit 21.1

**EXHIBIT 21.1**

**LIST OF SUBSIDIARIES**

CoastalSouth Bancshares, Inc., a Georgia corporation, owns, either directly or indirectly, 100% of the stock of the following subsidiaries:

---

| | |
|:---|:---|
| **Subsidiary Name** | **State of Incorporation** |
| Coastal States Bank | State of South Carolina |
| Coastal States Mortgage, Inc. | State of South Carolina |

---

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## Exhibit 23.1

**EXHIBIT 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the use in this Registration Statement on Form S-1 of CoastalSouth Bancshares, Inc. of our report dated March 5, 2025, relating to the consolidated financial statements of CoastalSouth Bancshares, Inc. and Subsidiary appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to our firm under the heading "Experts" in such Prospectus.

/s/ Elliott Davis, LLC

Greenville, South Carolina

June 6, 2025

------

## Ex-Filing

**EXHIBIT 107**

**Calculation of Filing Fee Tables**

**Form S-1**<br>(Form Type)

**CoastalSouth Bancshares, Inc.** <br>(Exact Name of Registrant as Specified in its Charter)

**Table 1: Newly Registered and Carry Forward Securities**

---

| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | &nbsp;&nbsp;**Security Type** | &nbsp;&nbsp;**Security<br>Class<br>Title** | **Fee<br>Calculation<br>or Carry<br>Forward Rule** | &nbsp;&nbsp;**Amount<br>Registered** | **Proposed<br>Maximum<br>Offering Price<br>Per Unit** | **Maximum<br>Aggregate<br>Offering Price(1)(2)** | **Fee Rate** | **Amount of<br>Registration Fee** | **Carry<br>Forward<br>Form Type** | **Carry<br>Forward<br>File Number** | **Carry<br>Forward<br>Initial<br>effective date** | **Filing Fee<br>Previously Paid<br>In Connection<br>with Unsold<br>Securities<br>to be Carried<br>Forward** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Newly Registered Securities** |
| Fees to Be Paid | Equity | Common stock, $1.00 par value per share | 457(o) |  |  | $80000000 | 0.0001531 | $12248.00 |  |  |  |  |
| Fees Previously Paid | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;— |  |  |  |  |  |  |  |  |  |  |  |
| **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** | **Carry Forward Securities** |
| Carry Forward Securities |  |  |  |  |  |  |  |  |  |  |  |  |
|  | **Total Offering Amounts** | **Total Offering Amounts** | **Total Offering Amounts** | **Total Offering Amounts** |  |  |  | $12248.00 |  |  |  |  |
|  | **Total Fees Previously Paid** | **Total Fees Previously Paid** | **Total Fees Previously Paid** | **Total Fees Previously Paid** |  |  |  | $0.00 |  |  |  |  |
|  | **Total Fee Offsets** | **Total Fee Offsets** | **Total Fee Offsets** | **Total Fee Offsets** |  |  |  | $0.00 |  |  |  |  |
|  | **Net Fee Due** | **Net Fee Due** | **Net Fee Due** | **Net Fee Due** |  |  |  | $12248.00 |  |  |  |  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Includes offering price of shares of common stock that the underwriters have the option to purchase from the registrant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933. This amount represents the proposed maximum aggregate offering price of the securities registered hereunder to be sold by the registrant and the selling shareholders.

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