UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2013

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                      to                     

Commission file number 333-152331

COASTAL CAROLINA BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

South Carolina	33-1206107
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

1012 38^th Avenue North

Myrtle Beach , South Carolina 29577

(Address of principal executive offices, including zip code)

(843) 839-1953

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  YES    ¨  NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨  YES    x  NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 2,187,000 shares of common stock par value $0.01 per share, were outstanding as of May 5, 2013.

1

INDEX

PART I - FINANCIAL INFORMATION		Page No.
Item 1.	Financial Statements
	Consolidated Balance Sheets – March 31, 2013 (unaudited) and December 31, 2012	3
	Consolidated Statements of Operations and Comprehensive Loss (unaudited) – Three months ended March 31, 2013 and 2012	4
	Consolidated Statements of Shareholders’ Equity (unaudited) – Three months ended March 31, 2013 and 2012	5
	Consolidated Statements of Cash Flows (unaudited) – Three months ended March 31, 2013 and 2012	6
	Notes to the Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosure	29
Item 5.	Other Information	29
Item 6.	Exhibits	29

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

COASTAL CAROLINA BANCSHARES, INC.

Consolidated Balance Sheets

	March 31, 2013 (Unaudited)			December 31, 2012
Assets
Cash and non-interest due from banks	$	1,520,980		$	1,191,971
Federal funds sold		1,157,531			2,104,238
Interest-bearing bank deposits		10,430,010			10,990,700
Total cash and cash equivalents		13,108,521			14,286,909
Securities available for sale		21,859,257			23,344,988
Federal Reserve Bank stock		404,800			404,800
Federal Home Loan Bank stock		121,100			140,400
Loans held for sale		997,700			1,930,811
Loans receivable		67,897,881			61,524,542
Deferred loan fees, net		(118,376	)		(118,141	)
Allowance for loan losses		(1,013,314	)		(1,013,314	)
Loans, net		66,766,191			60,393,087
Premises and equipment, net		1,307,968			654,481
Accrued income and other assets		488,246			475,600
Total assets	$	105,053,783		$	101,631,076
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Non-interest bearing demand	$	5,596,908		$	6,112,228
Interest checking		5,565,641			5,208,599
Money market		36,523,173			31,609,579
Savings		1,011,174			742,846
Certificates of deposit		41,482,002			42,823,987
Total deposits		90,178,898			86,497,239
Accrued expenses and other liabilities		507,603			648,146
Total liabilities		90,686,501			87,145,385
Shareholders’ Equity
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued and outstanding		-			-
Common stock, $.01 par value, 50,000,000 shares authorized, 2,187,000 issued and outstanding		21,870			21,870
Additional paid-in capital		21,823,277			21,817,319
Unearned compensation, nonvested restricted stock		(4,584	)		(5,834	)
Retained deficit		(7,743,117	)		(7,752,367	)
Accumulated other comprehensive income		269,836			404,703
Total shareholders’ equity		14,367,282			14,485,691
Total liabilities and shareholders’ equity	$	105,053,783		$	101,631,076

See notes to the consolidated financial statements.

3

COASTAL CAROLINA BANCSHARES, INC.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ended
	March 31,
	2013			2012
Interest income
Loans, including fees	$	905,182		$	770,452
Federal funds sold and interest-bearing bank deposits		10,221			11,844
Securities		110,975			132,992
Federal Reserve & Federal Home Loan stock dividend		6,891			6,341
Total interest income		1,033,269			921,629
Interest expense
Deposits:
Interest checking		7,497			8,379
Money market and savings		47,441			71,623
Certificates of deposit < $100,000		31,759			35,483
Certificates of deposit > $100,000		76,044			75,127
Total interest expense		162,741			190,612
Net interest income before provision for loan losses		870,528			731,017
Provision for loan losses		-			14,094
Net interest income after provision for loan losses		870,528			716,923
Noninterest income
Service charges on deposits		11,245			19,272
Gain on sale of loans		49,156			19,850
Gain on sale of investment securities		175,897			7,930
ATM, debit, and merchant fees		8,209			4,817
Other		3,222			16,975
Total noninterest income		247,729			68,844
Noninterest expense
Salaries and employee benefits		580,749			538,292
Data processing		106,753			92,417
Professional services		44,819			84,437
Occupancy and equipment		202,849			81,869
Marketing and business development		54,879			41,242
Shareholder communications		15,728			11,687
Postage and supplies		16,570			8,306
Corporate insurance		7,667			6,871
Telecommunications		13,095			4,439
FDIC insurance and regulatory assessments		33,651			31,718
Other		30,554			26,590
Total noninterest expense		1,107,314			927,868
Income (loss) before income taxes		10,943			(142,101	)
Income taxes		1,693			-
Net income (loss)	$	9,250		$	(142,101	)
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale	$	(45,197	)	$	109,745
Reclassification of gains recognized in net loss		(175,897	)		(7,930	)
Tax effect		86,227			(39,708	)
Total other comprehensive income (loss)		(134,867	)		62,107
Comprehensive loss	$	(125,617	)	$	(79,994	)
Loss per share
Basic and diluted earnings (loss) per share	$	0.00		$	(0.06	)
Average shares outstanding		2,187,000			2,189,456

See notes to the consolidated financial statements.

4

COASTAL CAROLINA BANCSHARES, INC.

Consolidated Statements of Shareholders’ Equity (Unaudited)

Three Months Ended March 31, 2013 and 2012

										Unearned						Accumulated
							Additional			Compensation						Other			Total
	Common Stock						Paid-in			Nonvested			Retained			Comprehensive			Shareholders’
	Shares			Amount			Capital			Restricted Stock			Deficit			Income (Loss)			Equity
December 31, 2011		2,190,500		$	21,905		$	21,794,089		$	(44,583	)	$	(7,826,852	)	$	141,265		$	14,085,824
Net loss		-			-			-			-			(142,101	)		-			(142,101	)
Change in unrealized gains and losses on securities, net		-			-			-			-			-			62,107			62,107
Restricted Stock		(2,500	)		(25	)		(8,586	)		10,555			-			-			1,944
Organizer/founder warrants		-			-			4,122			-			-			-			4,122
Stock-based compensation		-			-			8,077			8,611			-			-			16,688
March 31, 2012		2,188,000		$	21,880		$	21,797,702		$	(25,417	)	$	(7,968,953	)	$	203,372		$	14,028,584
December 31, 2012		2,187,000		$	21,870		$	21,817,319		$	(5,834	)	$	(7,752,367	)	$	404,703		$	14,485,691
Net income		-			-			-			-			9,250			-			9,250
Change in unrealized gains and losses on securities, net		-			-			-			-			-			(134,867	)		(134,867	)
Restricted Stock		-			-			(3,889	)		1,528			-			-			(2,361	)
Stock-based compensation		-			-			9,847			(278	)		-			-			9,569
March 31, 2013		2,187,000		$	21,870		$	21,823,277		$	(4,584	)	$	(7,743,117	)	$	269,836		$	14,367,282

See notes to the consolidated financial statements.

5

COASTAL CAROLINA BANCSHARES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
	2013			2012
Operating activities
Net income (loss)	$	9,250		$	(142,101	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses		-			14,094
Increase in deferred loan fees, net		235			3,233
Gains on sale of loans held for sale		(49,156	)		(19,850	)
Origination of loans held for sale, net		(1,661,515	)		(973,925	)
Proceeds from sale of loans held for sale		2,643,782			1,536,125
Premium amortization and discount accretion on securities, net		72,101			137,588
Securities gains, net		(175,897	)		(7,930	)
Depreciation and amortization expense		37,354			23,989
Stock-based compensation expense		7,208			22,754
Decrease (increase) in accrued interest receivable		(11,790	)		2,763
Increase (decrease) in accrued interest payable		1,677			(3,173	)
Decrease (increase) in other assets		(857	)		6,597
Decrease in other liabilities		(55,994	)		(57,640	)
Net cash provided by operating activities		816,398			542,524
Investing activities
Net increase in loans		(6,373,339	)		(2,998,022	)
Purchases of securities available for sale		(3,845,642	)		(2,868,871	)
Proceeds from paydowns of securities available for sale		820,705			1,236,918
Proceeds from sales of securities available for sale		4,393,372			4,276,490
Redemption (purchase) of Federal Home Loan Bank stock		19,300			(46,600	)
Purchases of premises and equipment		(690,841	)		-
Net cash used in investing activities		(5,676,445	)		(400,085	)
Financing activities
Net increase in demand deposits, interest-bearing transaction accounts and savings accounts		5,023,644			2,688,114
Net increase (decrease) in certificates of deposit		(1,341,985	)		1,948,553
Net cash provided by financing activities		3,681,659			4,636,667
Net increase (decrease) in cash and cash equivalents		(1,178,388	)		4,779,106
Cash and cash equivalents, beginning of period		14,286,909			11,320,304
Cash and cash equivalents, end of period	$	13,108,521		$	16,099,410
Supplemental disclosures of cash flow information
Cash paid for:
Interest on deposits	$	161,064		$	193,785

See notes to the consolidated financial statements.

6

COASTAL CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

March 31, 2013

Note 1 - Business and Basis of Presentation

Organization – On February 28, 2008, Coastal Carolina Bancshares, Inc. (the “Company”) was incorporated to act as the holding company for Coastal Carolina National Bank (the “Bank”). The Bank began banking operations on June 8, 2009. The principal business activity of the Bank is to provide banking services to domestic markets, principally in Myrtle Beach, South Carolina. The Bank is a nationally-chartered commercial bank and its deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”).

Basis of Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for 2012 as filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2013.

Note 2 - Summary of Significant Accounting Policies

A summary of these policies is included in our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2012. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for 2012 as filed with the SEC. It is uncertain whether Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (the “FASB”) that do not require adoption until a future date will have a material impact on the Company’s consolidated financial statements upon adoption.

Statement of Cash Flow – For purposes of reporting cash flows, the Company considered certain highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include amounts due from banks, federal funds sold, and interest-bearing bank deposits. Generally, federal funds are sold for one-day periods.

Earnings (Loss) Per Share – Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares. Potential common shares consist of stock options, restricted stock, and warrants.

	Three Months Ended
	March 31,
	2013		2012
Net income (loss)	$	9,250	$	(142,101	)
Weighted-average number of common shares outstanding		2,187,000		2,189,456
Net income (loss) per share	$	0.00	$	(0.06	)

Comprehensive Loss – Accounting principles generally require that recognized income, expenses, gains, and losses be included in net income (loss). Certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component and such items, along with net income (loss), are components of comprehensive loss.

7

Note 3 - Recently Issued or Proposed Accounting Pronouncements

The following is a summary of recent final and proposed authoritative pronouncements:

• The Comprehensive Income topic of the ASC was amended in June 2011. The amendment eliminated the option to present other comprehensive income as a part of the statement of changes in stockholders’ equity and required consecutive presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company January 1, 2012 and have been applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements while the FASB redeliberated the presentation requirements for the reclassification adjustments. In February 2013, the FASB further amended the Comprehensive Income topic clarifying the conclusions from such redeliberations. Specifically, the amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, in certain circumstances an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amendments will be effective for the Company on a prospective basis for reporting periods beginning after December 15, 2012. These amendments did not have a material effect on the Company’s financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Note 4 - Cash and Cash Equivalents

As of March 31, 2013, cash and cash equivalents totaled $13.1 million and were represented by $1.5 million in cash on hand and noninterest-bearing deposits with other banks, $10.4 million in interest-bearing deposits with other banks, and $1.2 million in federal funds sold. Interest-bearing deposits with other banks included $3.7 million in certificates of deposits (“CDs”) invested at other banks that carry a weighted average rate of .62% with maturities between 4 and 18 months, $4.7 million at the Federal Reserve and Federal Home Loan Banks, and $2.0 million in money market deposit accounts. These balances allow the Company to meet liquidity requirements and provide temporary holdings until the funds can be otherwise deployed or invested.

8

Note 5 - Securities

The following is a summary of the amortized cost, unrealized gains and losses, and estimated fair value of the investment securities portfolio at March 31, 2013 and December 31, 2012 by major classification:

	March 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Mortgage-backed securities (MBSs)	$	13,805,602	$	235,731	$	(35,919	)	$	14,005,414
Small Business Administration (SBA) bonds		4,145,020		82,999		-			4,228,019
Collateralized mortgage obligations (CMOs)		2,254,489		54,004		-			2,308,493
Municipal bonds		1,211,793		105,538		-			1,317,331
Total securities available for sale	$	21,416,904	$	478,272	$	(35,919	)	$	21,859,257
	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Mortgage-backed securities (MBSs)	$	14,137,026	$	420,491	$	(12,591	)	$	14,544,926
Small Business Administration (SBA) bonds		4,196,833		70,202		-			4,267,035
Collateralized mortgage obligations (CMOs)		2,395,970		52,133		-			2,448,103
Municipal bonds		1,951,711		133,213		-			2,084,924
Total securities available for sale	$	22,681,540	$	676,039	$	(12,591	)	$	23,344,988

The following table summarizes the unrealized losses and fair value of securities, aggregated by category and length of time that securities have been in a continuous unrealized loss position at March 31, 2013 and December 31, 2012.

	March 31, 2013
	Less than 12 months					12 months or longer				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	Value		Losses			Value		Losses		Value		Losses
Mortgage-backed securities (MBSs)	$	5,786,878	$	(35,919	)	$	-	$	-	$	5,786,878	$	(35,919	)
Total temporarily impaired securities	$	5,786,878	$	(35,919	)	$	-	$	-	$	5,786,878	$	(35,919	)
	December 31, 2012
	Less than 12 months					12 months or longer				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	Value		Losses			Value		Losses		Value		Losses
Mortgage-backed securities (MBSs)	$	2,983,563	$	(12,591	)	$	-	$	-	$	2,983,563	$	(12,591	)
Total temporarily impaired securities	$	2,983,563	$	(12,591	)	$	-	$	-	$	2,983,563	$	(12,591	)

There were no write-downs for other-than-temporary declines in the fair value of debt securities for the three month period ended March 31, 2013. At March 31, 2013, there were no investment securities considered to be other than temporarily impaired. The Bank’s mortgage-backed securities are investment grade securities backed by a pool of mortgages. Principal and interest payments on the underlying mortgages are used to pay monthly interest and principal on the securities.

The contractual maturity distribution and yields of the Bank’s securities portfolio at March 31, 2013 are summarized below. Actual maturities may differ from contractual maturities shown below since borrowers may have the right to pre-pay these obligations without pre-payment penalties.

9

	Securities
	Available For Sale
	Amortized		Estimated
	Cost		Fair Value
Due after five years but within ten years	$	5,327,957	$	5,338,665
Due after ten years		16,088,947		16,520,592
Total (1)	$	21,416,904	$	21,859,257

⁽¹⁾   Maturities estimated based on average life of security.

The Bank also owned Federal Reserve Bank (“FRB”) stock with a cost of $404,800 at March 31, 2013 and December 31, 2012. The yield at both periods was 6%. The amount of FRB stock held is based on our shareholders’ equity. As shareholders’ equity increases or decreases, the amount of FRB stock may also increase or decrease quarterly.

The Bank owned $121,100 in Federal Home Loan Bank (“FHLB”) stock at March 31, 2013 and $140,400 at December 31, 2012. The amount of FHLB stock held is based on our total assets and the amount of outstanding advances with the FHLB. Therefore, stock ownership levels with the FHLB are subject to change. The yield on FHLB stock is variable at the discretion of the FHLB.

Securities with an amortized cost of $11.3 million at March 31, 2013 and $10.3 million at December 31, 2012, were pledged to secure public deposits. During the three months ended March 31, 2013, the Bank sold four mortgage backed securities with amortized costs of $3.5 million and two municipal bonds with amortized costs of $738,000.

Note 6 – Credit Quality

Provision and Allowance for Loan Losses

An allowance for loan losses has been established through a provision for loan losses charged to expense on the consolidated statement of operations. The allowance for loan losses represents an amount management has determined is adequate to absorb probable losses on existing loans that may become uncollectible. Growth in the loan portfolio is the primary reason for additions to the allowance for loan losses. Additionally, provisions may be made for non-performing loans.

The first step in the process is to assign a credit risk grade to each loan in the portfolio based on one common set of parameters that include items such as cash flow coverage ratios, debt-to-worth ratio, liquidity of the borrower, net worth, experience of the borrower, and other factors. The general pool of performing loans is then segmented into categories based on FFIEC call codes, which represent different loan types such as commercial loans, construction loans, consumer loans, and so on. The loss history of each loan type is measured and includes actual history experienced by the Bank and the loss experiences of peer banks. The loss history results in a factor that is applied to each loan pool. Additionally, other factors are applied to represent known or expected changes to the loan portfolio resulting from economic and industry developments, the depth and knowledge of management, changes in policies and practices, and more. These environmental factors require judgment and estimates, and the eventual outcomes may differ from the estimates. The combined factors are applied to each loan category and result in the necessary allowance for the general performing loan pool.

The Bank evaluates non-performing loans, loans with credit risk grades of Special Mention, Substandard, Doubtful, or worse, past due loans, loans on non-accrual, and any restructured loans separately on an individual basis to determine if the loan is impaired. Impaired loans and non-performing loans can require higher loan loss reserves. If a loan is individually evaluated and identified as impaired, it is measured by using either the fair value of the collateral less costs to sell, present value of expected future cash flows discounted at the loans effective interest rate, or observable market price of the loan. Management chooses a method on a loan-by-loan basis depending on which information is available. Measuring impaired loans requires judgment and estimates and the eventual outcomes may differ from the estimates.

The following table sets forth certain information with respect to our allowance for loan losses and the composition of charge offs and recoveries at March 31, 2013 and December 31, 2012.

10

Allowance for Loan Losses and Recorded Investment in Loans Receivable For the Three Months Ended March 31, 2013
	Construction		Real		Real		Commercial
	and Land		Estate		Estate		and
	Development		Mortgage		Other		Industrial		Consumer		Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	70,365	$	195,514	$	660,230	$	45,106	$	30,551	$	11,548	$	1,013,314
Charge-offs		-		-		-		-		-		-		-
Recoveries		-		-		-		-		-		-		-
Provisions		(14,786)		9,928		(129,998)		(5,692)		(926)		141,474		-
Ending Balance	$	55,579	$	205,442	$	530,232	$	39,414	$	29,625	$	153,022	$	1,013,314
Ending Balances:
Individually evaluated for impairment	$	-	$	-	$	103,520	$	-	$	-	$	-	$	103,520
Collectively evaluated for impairment	$	55,579	$	205,442	$	426,712	$	39,414	$	29,625	$	153,022	$	909,794
Loans receivable:
Ending balance - total	$	6,700,560	$	23,798,290	$	30,550,043	$	3,457,887	$	3,391,101			$	67,897,881
Ending Balances:
Individually evaluated for impairment	$	-	$	-	$	1,143,020	$	-	$	-			$	1,143,020
Collectively evaluated for impairment	$	6,700,560	$	23,798,290	$	29,407,023	$	3,457,887	$	3,391,101			$	66,754,861

Allowance for Loan Losses and Recorded Investment in Loans Receivable
	For the Year Ended December 31, 2012
	Construction		Real		Real		Commercial
	and Land		Estate		Estate		and
	Development		Mortgage		Other		Industrial		Consumer		Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	64,170	$	213,709	$	700,160	$	77,123	$	35,027	$	1,688	$	1,091,877
Charge-offs		(37,277)		-		(49,820)		-		(18,680)		-		(105,777)
Recoveries		-		-		-		-		-		-		-
Provisions		43,472		(18,195)		9,890		(32,017)		14,204		9,860		27,214
Ending Balance	$	70,365	$	195,514	$	660,230	$	45,106	$	30,551	$	11,548	$	1,013,314
Ending Balances:
Individually evaluated for impairment	$	-	$	-	$	195,768	$	-	$	-	$	-	$	195,768
Collectively evaluated for impairment	$	70,365	$	195,514	$	464,462	$	45,106	$	30,551	$	11,548	$	817,546
Loans receivable:
Ending balance - total	$	6,671,055	$	18,821,345	$	29,890,399	$	2,670,875	$	3,470,868			$	61,524,542
Ending Balances:
Individually evaluated for impairment	$	-	$	-	$	1,147,143	$	-	$	-			$	1,147,143
Collectively evaluated for impairment	$	6,671,055	$	18,821,345	$	28,743,256	$	2,670,875	$	3,470,868			$	60,377,399

The adequacy of the allowance for loan losses is reviewed on an ongoing basis. The amount of the allowance is adjusted to reflect changing circumstances. Recognized losses are charged to the allowance and recoveries are added back to the allowance. As of

11

March 31, 2013, management considered the allowance for loan losses to be adequate to meet presently known and inherent losses in the loan portfolio. The underlying assumptions used in the analysis may be impacted in future periods by changes in economic conditions, the impact of changing regulations, and the discovery of new information with respect to borrowers not previously known to management. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required.

Credit Quality and Non-Performing Loans

During the first three months of 2013 and 2012, the Bank had no charged-off loans.

Loans are assigned a credit risk grade upon their origination. Loans are monitored for non-performance and may be downgraded to reflect adverse conditions that might affect collectability. Heightened risk characteristics include a history of poor payment performance, poor financial performance, as well as the potential for adverse earnings impact from deteriorating collateral values.

General definitions for each credit risk level are as follows:

• Prime credits present little to no risk as they are secured by cash and/or the borrowers have unquestionable strength with access to liquidity.

• Good credits have average risk. Borrowers have sound primary and secondary repayment sources, strong debt capacity and coverage, and substantial liquidity and net worth. Commercial borrowers in this category work within industries exhibiting strong trends and the company exhibits favorable profitability, liquidity, and leverage trends with good management in key positions.

• Acceptable credits are those that perform relatively close to expectations with adequate evidence the borrower is generating adequate cash flows to service the debt. Borrowers have good debt coverage and capacity, average liquidity and net worth, and operate in industries the exhibit good trends.

• Acceptable with care credits may be borrowers who exhibit a limited asset base and liquidity, have debt capacity that is limited, or may be a start up venture that is dependent on guarantor strength. These borrowers have elements of risk the Bank chooses to closely monitor.

• Special mention credits have a potential weakness that deserves close attention. If left uncorrected, these potential weaknesses may result in deterioration. Credits in this category are formally monitored on a recurring basis.

• Substandard credits are inadequately protected by the worth and paying capacity of the borrower or of the collateral pledged. These credits exhibit a well-defined weakness that may jeopardize the liquidation of the debt. There is a possibility these credits may result in losses if the observed weakness is not corrected.

• Doubtful credits have all the weaknesses of a substandard credit with the added characteristic that the weakness makes collection or liquidation in full improbable.

• Loss assets are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. Losses should be taken in the period in which they surface as uncollectible.

The Bank had $1,143,020 and $2,564,549 in loans classified as Substandard or worse as of March 31, 2013 and December 31, 2012, respectively.

12

Credit risk grades within the loan portfolio as of March 31, 2013 and December 31, 2012 are presented in the following three tables, separately for commercial loans, residential real estate loans, and consumer loans, with breakdowns provided for loan types within those categories.

Credit Risk Profile of Commercial Loans
	March 31, 2013						December 31, 2012
			Commercial						Commercial
			Real Estate		Commercial				Real Estate		Commercial
	Commercial		Construction		Real Estate		Commercial		Construction		Real Estate
Prime	$	633,136	$	-	$	-	$	546,677	$	-	$	-
Good		-		-		-		-		-		-
Acceptable		305,229		166,242		6,949,788		560,448		205,396		6,660,714
Acceptable with care		2,317,235		4,200,492		19,916,930		1,440,387		4,250,177		19,852,022
Special mention		202,287		-		2,540,305		8,095		-		962,830
Substandard assets		-		-		1,143,020		115,268		-		2,414,833
Doubtful assets		-		-		-		-		-		-
Loss assets		-		-		-		-		-		-
Total	$	3,457,887	$	4,366,734	$	30,550,043	$	2,670,875	$	4,455,573	$	29,890,399

Credit Risk Profile of Residential Loans

	March 31, 2013								December 31, 2012
	Residential - Prime				Residential - Subprime				Residential - Prime				Residential - Subprime
	Residential Mortgage		Residential Construction		Residential Mortgage		Residential Construction		Residential Mortgage		Residential Construction		Residential Mortgage		Residential Construction
Prime	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Good		617,714				-		-		172,168		-		-		-
Acceptable		19,113,186		2,333,826		-		-		15,326,704		2,215,482		-		-
Acceptable with care		3,492,910		-		-		-		2,723,410		-		-		-
Special mention		574,480		-		-		-		564,615		-		-		-
Substandard assets		-		-		-		-		34,448		-		-		-
Doubtful assets		-		-		-		-		-		-		-		-
Loss assets		-		-		-		-		-		-		-		-
Total	$	23,798,290	$	2,333,826	$	-	$	-	$	18,821,345	$	2,215,482	$	-	$	-

Credit Risk Profile of Consumer Loans
	March 31, 2013				December 31, 2012
	Consumer -		Consumer -		Consumer -		Consumer -
	Auto		Other		Auto		Other
Prime	$	-	$	221,726	$	-	$	213,556
Good		4,934		6,372		8,214		6,835
Acceptable		38,350		3,091,305		19,764		3,195,705
Acceptable with care		-		17,112		-		14,754
Special mention		10,802		500		11,590		450
Substandard assets		-		-		-		-
Doubtful assets		-		-		-		-
Loss assets		-		-		-		-
Total	$	54,086	$	3,337,015	$	39,568	$	3,431,300

13

Generally, the first indication of the non-performance of a loan is a missed payment. Thus, one of the adverse indicators used in monitoring the credit quality of a loan is the past due status of the loan payments. Generally, a loan will be placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the loan is doubtful. When a loan is placed on non-accrual, all previously accrued interest that has not been received is reversed against current income. The recognition of interest on a non-accrual loan is placed on a cash basis and can be recognized when and if a payment is received. Generally, payments received on non-accrual loans are applied directly to principal.

Below are tables that present the past due status of loans receivable as of March 31, 2013 and December 31, 2012.

March 31, 2013

											Past Due >
	30 - 59 Days		60 - 89 Days								90 Days and
	Past Due		Past Due		Nonaccrual		Current		Total Loans		Accruing
Construction/Land development	$	86,962	$	-	$	-	$	6,613,598	$	6,700,560	$	-
Real estate - mortgage		244,127		-		-		23,554,163		23,798,290		-
Real estate - other		-		-		-		30,550,043		30,550,043		-
Commercial and industrial		-		-		-		3,457,887		3,457,887		-
Consumer and other		-		-		-		3,391,101		3,391,101		-
Total	$	331,089	$	-	$	-	$	67,566,792	$	67,897,881	$	-

December 31, 2012

											Past Due >
	30 - 59 Days		60 - 89 Days								90 Days and
	Past Due		Past Due		Nonaccrual		Current		Total Loans		Accruing
Construction/Land development	$	-	$	-	$	-	$	6,671,055	$	6,671,055	$	-
Real estate - mortgage		-		-		160,000		18,661,345		18,821,345		-
Real estate - other		62,479		40,967		-		29,786,953		29,890,399		-
Commercial and industrial		7,704		-		-		2,663,171		2,670,875		-
Consumer and other		-		-		-		3,470,868		3,470,868		-
Total	$	70,183	$	40,967	$	160,000	$	61,253,392	$	61,524,542	$	-

As of March 31, 2013, loans past due totaled $331,089, none of which were past due greater than 90 days. At March 31, 2013, the Bank had no loans on non-accrual status. As of December 31, 2012, loans past due totaled $271,150, of which $160,000 was past due greater than 90 days and was on nonaccrual status.

The Bank did not have any loans past due 90 days and still accruing as of March 31, 2013 or December 31, 2012.

14

An impaired loan is one in which the Bank does not anticipate full repayment, either from the customer’s inability to repay or from the liquidation of collateral. Impaired loans totaled $1,143,020 and $531,822 as of March 31, 2013 and 2012, respectively. The following table sets forth certain information regarding the type of impaired loans, their related allowances, and any interest income recognized on impaired loans during the quarter ended March 31, 2013 and 2012.

Impaired Loans
As of and For the Quarter Ended March 31, 2013
	Outstanding				Average				Interest
	Principal		Recorded		Recorded		Related		Income
	Balance		Investment		Investment		Allowance		Recognized
With no related allowance recorded:	$	-	$	-	$	-	$	-	$	-
With an allowance recorded:
Construction and land development		-		-		-		-		-
Real estate - mortgage		-		-		-		-		-
Real estate - other		1,143,020		1,143,020		1,147,842		103,520		20,012
Commercial and industrial		-		-		-		-		-
Consumer loans to individuals		-		-		-		-		-
Total:	$	1,143,020	$	1,143,020	$	1,147,842	$	103,520	$	20,012
Impaired Loans
As of and For the Year Ended December 31, 2012
	Outstanding				Average				Interest
	Principal		Recorded		Recorded		Related		Income
	Balance		Investment		Investment		Allowance		Recognized
With no related allowance recorded:	$	-	$	-	$	-	$	-	$	-
With an allowance recorded:
Construction and land development		-		-		-		-		-
Real estate - mortgage		-		-		-		-		-
Real estate - other		1,147,143		1,147,143		1,038,314		195,768		81,847
Commercial and industrial		-		-		-		-		-
Consumer loans to individuals		-		-		-		-		-
Total:	$	1,147,143	$	1,147,143	$	1,038,314	$	195,768	$	81,847

As of March 31, 2013, management was not aware of any additional loans that were not already considered for impairment, categorized as impaired, or on non-accrual.

15

If a loan is modified as a result of a customer’s inability to meet the original terms, and if the modification gives the customer more favorable terms that would not otherwise be granted, the loan is considered to be a troubled debt restructuring. During the three months ended March 31, 2013 and March 31, 2012, the Bank did not identify any new loan modifications deemed to be troubled debt restructurings. The Bank also had no loans previously identified as troubled debt restructurings within the previous 12 months which subsequently defaulted during the three months ended March 31, 2013 and 2012. As of March 31, 2013, the Bank had one loan that qualifies as trouble debt restructuring. The following table presents information regarding the Bank’s loans that qualify as a troubled debt restructuring as of March 31, 2013 and 2012. In addition, the following table presents loans that qualified as troubled debt restructuring as of March 31, 2013 and 2012 which subsequently defaulted.

March 31, 2013
							Number of		Balances of
			Pre-modification		Post-modification		Loans that		Loans that
	Number		Outstanding		Outstanding		Subsequently		Subsequently
	of Loans		Balances		Balances		Defaulted		Defaulted
Construction and land development		-	$	-	$	-		-	$	-
Real estate - mortgage		-		-		-		-		-
Real estate - other		1		1,150,228		1,143,020		-		-
Commercial and industrial		-		-		-		-		-
Consumer and other		-		-		-		-		-
Total		1	$	1,150,228	$	1,143,020		-	$	-
March 31, 2012
							Number of		Balances of
			Pre-modification		Post-modification		Loans that		Loans that
	Number		Outstanding		Outstanding		Subsequently		Subsequently
	of Loans		Balances		Balances		Defaulted		Defaulted
Construction and land development		2	$	137,426	$	118,786		1	$	37,277
Real estate - mortgage		-		-		-		-		-
Real estate - other		-		-		-		-		-
Commercial and industrial		-		-		-		-		-
Consumer and other		1		27,446		18,680		-		-
Total		3	$	164,872	$	137,466		1	$	37,277

Note7 - Fair Value Measurements

The current accounting literature requires the disclosure of fair value information for financial instruments, whether or not they are recognized in the consolidated balance sheets, when it is practical to estimate the fair value. The guidance defines a financial instrument as cash, evidence of an ownership interest in an entity or contractual obligations, which require the exchange of cash, or other financial instruments. Certain items are specifically excluded from the disclosure requirements, including the Company’s common stock, premises and equipment, accrued interest receivable and payable, and other assets and liabilities.

The fair value of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.

The Company has used management’s best estimate of fair value based on the above assumptions. Thus, the fair values presented may not be the amounts, which could be realized, in an immediate sale or settlement of the instrument. In addition, any income taxes or other expenses, which would be incurred in an actual sale or settlement, are not taken into consideration in the fair values presented.

16

Assets and liabilities carried at fair value are classified in one of the following three categories based on a hierarchy for ranking the quality and reliability of the information used to determine fair value:

Level 1	Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasury Securities.
Level 2	Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, mortgage-backed securities, municipal bonds, corporate debt securities and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts and impaired loans.
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly-structured or long-term derivative contracts.

Assets Measured at Fair Value on a Recurring Basis

Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Available-for-sale Securities

Investment securities available-for-sale 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.

Securities traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds are considered highly liquid and are classified as Level 1. 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.

The following table presents the fair value of assets evaluated on a recurring basis as of March 31, 2013 and December 31, 2012 by level within the hierarchy.

17

	Quoted Market Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2013
Mortgage-backed securities (MBS)	$	-	$	14,005,414	$	-
Small Business Administration (SBA) bonds		-		4,228,019		-
Collateralized mortgage obligations (CMOs)		-		2,308,493		-
Municipal bonds		-		1,317,331		-
Total	$	-	$	21,859,257	$	-
December 31, 2012
Mortgage-backed securities (MBS)	$	-	$	14,544,926	$	-
Small Business Administration (SBA) bonds		-		4,267,035		-
Collateralized mortgage obligations (CMOs)		-		2,448,103		-
Municipal bonds		-		2,084,924		-
Total	$	-	$	23,344,988	$	-

There were no other assets and no liabilities measured at fair value on a recurring basis at March 31, 2013 and December 31, 2012.

Fair Value for Assets and Liabilities not Presented on the Balance Sheet at Fair Value

The following presents the carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments that are not presented on the balance sheet at fair value as of March 31, 2013 and December 31, 2012. This table excludes financial instruments for which the carrying amount approximates fair value. For short term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between origination of the instrument and its expected realization. For non-marketable equity securities such as Federal Home Loan Bank and Federal Reserve Bank stock, the carrying amount is a reasonable estimate of the fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government supported institution or to another member institution. For financial liabilities such as noninterest-bearing demand, interest bearing demand, and savings deposits, the carrying amount is a reasonable estimated of fair value due to these products having no stated maturity.

March 31, 2013
	Carrying		Fair Value Measurements
	Amount		Total		Level 1		Level 2		Level 3
Financial assets
Loans, net		66,766,191		67,726,572		-		-		67,726,572
Financial liabilities
Certificates of deposits		41,482,002		41,681,931		-		41,681,931		-
	Notional
		Amount
Commitments to extend credit	$	9,351,255

18

December 31, 2012
	Carrying		Fair Value Measurements
	Amount		Total		Level 1		Level 2		Level 3
Financial assets
Loans, net		60,393,087		61,293,507		-		-		61,293,507
Financial liabilities
Certificates of deposits		42,823,987		42,992,089		-		42,992,089		-
		Notional
		Amount
Commitments to extend credit	$	10,663,082

Loans Receivable

For certain categories of loans, such as variable rate loans, which are repriced frequently and have no significant change in credit risk, fair values are based on the carrying amounts. The fair values of loans, excluding leases, are estimated based on groupings of similar loans by type, interest rate, and borrower creditworthiness. Discounted future cash flow analyses are performed for the groupings, incorporating assumptions of current and projected prepayment speeds and expected loss. Discount rates are determined using the Company’s current origination rates on similar loans, adjusted for changes in current liquidity and credit spreads, if necessary. Because the current liquidity spreads are generally not observable in the market and the expected loss assumptions are based on the Company’s experience, these are Level 3 valuations. However, the fair value of impaired loans is estimated based on discounted cash flows or underlying collateral values, where applicable. Thus, impaired loans are reported at Level 2 and Level 3 depending on the specifics of each impaired loan.

Certificates of Deposits

The fair values of certificates of deposit are estimated using a discounted cash flow calculation that applies current interest rates to a schedule of aggregated expected maturities. These liabilities are reported as a Level 2.

Off-Balance-Sheet Financial Instruments

The carrying amount for loan commitments are reported with zero fair value, since these amounts have not been issued.

Assets Measured at Fair Value on a Non-Recurring Basis

Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. The fair values of mortgage loans held for sale are based on commitments on hand from investors within the secondary market for loans with similar characteristics. Since the secondary market creates some liquidity and observable market inputs for similar assets, these assets are considered a Level 2.

Impaired Loans

A loan is considered impaired when the full payment of all contractual principal and interest due under the original loan terms is not expected. Impaired loans are carried at the present value of estimated future cash flows or the fair value of collateral. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. Loan losses are charged against the allowance when management believes the uncollectibility in full of a loan is confirmed. When the fair value of the collateral is based on an observable market price or a current fair market valuation, generally determined by an appraisal, the Company records the loan as nonrecurring Level 2. Generally, an evaluation or appraisal is considered current when it has been performed within the last twelve months. An updated appraisal is sought when current information becomes more than twelve months old. Appraisals obtained provide “as-is” values. When current evaluations or appraisals are not available, value may be determined using the present value of expected future cash flows discounted at the loans effective interest rate. When a current evaluation or an appraised value is not available and there is no observable market price, the Company records the loan as nonrecurring Level 3. The following table presents the fair value of assets evaluated on a nonrecurring basis as of March 31, 2013 and December 31, 2012.

19

	Carrying Value as of		Quoted Market Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2013
Loans held for sale	$	997,700	$	-	$	997,700	$	-
Impaired Loans:
Construction and land development		-		-		-		-
Real estate - mortgage		-		-		-		-
Real estate - other		1,143,020		-		-		1,143,020
Commercial and industrial		-		-		-		-
Consumer loans to individuals		-		-		-		-
Total	$	2,140,720	$	-	$	997,700	$	1,143,020
December 31, 2012
Loans held for sale	$	1,930,811	$	-	$	1,930,811	$	-
Impaired Loans:
Construction and land development		-		-		-		-
Real estate - mortgage		-		-		-		-
Real estate - other		1,147,143		-		-		1,147,143
Commercial and industrial		-		-		-		-
Consumer loans to individuals		-		-		-		-
Total	$	3,077,954	$	-	$	1,930,811	$	1,147,143

There were no other assets and no liabilities measured at fair value as of March 31, 2013 and December 31, 2012 on a nonrecurring basis. Loans held for sale at December 31, 2012 were sold during the three months ending March 31, 2013, and the values reported for loans held for sale as of March 31, 2013 represent new assets in that category. There were no other transfers between valuation levels for assets measured for fair value on a non-recurring basis.

The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at March 31, 2013 and December 31, 2012.

	March 31,	Valuation	Unobservable
	2013	Techniques	Inputs
Impaired loans
Real estate:
Real estate - other	$    1,143,020	Appraised Value	Value requires significant management judgment or estimation
	December 31,	Valuation	Unobservable
	2012	Techniques	Inputs
Impaired loans
Real estate:
Real estate - other	$    1,147,143	Discounted Cash Flows	Value requires significant management judgment or estimation

20

The impaired loan representing Real Estate – Other at March 31, 2013 is collateralized with first mortgages on multiple properties within Horry County, South Carolina. The loan is considered collateral dependent and impairment was determined based on the current market value of collateralized real estate using recent appraisals as a basis for determining the amount of impairment.

Note 8 – Subsequent Events

In preparing these consolidated financial statements, subsequent events were evaluated through the time the consolidated financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users, or filed with the SEC.

On April 8, 2013, the Company entered into an agreement to lease office space at 1019 Hwy. 17 South, Suite 113, North Myrtle Beach, SC. The term of the lease agreement is twelve months ending May 30, 2014. Monthly rent shall be $995. The purpose of the office is to operate a Loan Production Office.

In conjunction with applicable accounting standards, any other material subsequent events have been either recognized in the consolidated financial statements or disclosed in the notes to the consolidated financial statements.

21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion reviews our results of operations and assesses our financial condition. You should read the following discussion and analysis in conjunction with the accompanying consolidated financial statements. The commentary should be read in conjunction with the discussion of forward-looking statements, the consolidated financial statements, and the related notes and the other statistical information included in this report.

DISCUSSION OF FORWARD-LOOKING STATEMENTS

This report contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may relate to our financial condition, results of operation, plans, objectives, or future performance. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “would,” “could,” “should,” “will,” “expect,” “anticipate,” “predict,” “project,” “potential,” “believe,” “continue,” “assume,” “intend,” “plan,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ from those anticipated in our forward-looking statements include, but are not limited to, those described in our Annual Report on Form 10-K for the year ended December 31, 2012 under Item 1A - Risk Factors and the following:

• significant increases in competitive pressure in the banking and financial services industries;

• changes in the interest rate environment which could reduce anticipated or actual margins;

• changes in political conditions or the legislative or regulatory environment, including the effect of the recent financial reform legislation on the banking and financial services industries;

• changes in the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market;

• general economic conditions, either nationally or regionally and especially in our primary service area, becoming less favorable than expected, resulting in, among other things, a deterioration in credit quality;

• results of examinations by our regulatory authorities, or restrictions and conditions imposed by our regulators on our operations may make it more difficult for us to achieve our goals, including the potential that the regulatory agencies may require higher levels of capital above the current standard regulatory-mandated minimums, including the impact of the proposed capital rules under Basel III;

• changes occurring in business conditions and inflation;

• changes in technology;

• the level of allowance for loan loss and the lack of seasoning of our loan portfolio;

• the rate of delinquencies and amounts of charge-offs;

• the rates of loan and deposit growth;

• adverse changes in asset quality and resulting credit risk-related losses and expenses;

• changes in monetary and tax policies;

• changes in accounting policies and procedures;

• loss of consumer confidence and economic disruptions resulting from terrorist activities;

• our ability to attract and retain key personnel;

• our ability to retain our existing customers, including their deposit relationships;

• changes in the securities markets; and

• other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission.

These risks are exacerbated by the uncertain performance expectations of national and international financial, capital, and credit markets in the future. We are unable to predict what effect these uncertain market conditions will have on our company. There can be no assurance that these unprecedented developments will not materially and adversely affect our business, financial condition and results of operations.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee you that these expectations will be achieved. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

22

Overview

Coastal Carolina Bancshares, Inc. is a bank holding company headquartered in Myrtle Beach, South Carolina. We were incorporated in February 2008 and our national bank subsidiary, Coastal Carolina National Bank, opened for business on June 8, 2009. The principal business activity of our bank is to provide retail and commercial banking services in Myrtle Beach and our surrounding market areas. Our deposits are insured by the FDIC.

Like most community banks, we derive most of our income from interest we receive on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on the majority of which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowings. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.

There are risks inherent in all loans, so we maintain an allowance for loan losses to absorb probable losses on existing loans that may become uncollectible. We establish and maintain this allowance by charging a provision for loan losses against our earnings. In the following section we have included a detailed discussion of this process.

The following discussion describes our results of operations for the three months ended March 31, 2013 and 2012 and also analyzes our financial condition as of March 31, 2013 and December 31, 2012.

Critical Accounting Policies

We have adopted various accounting policies, which govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to our audited consolidated financial statements as of December 31, 2012, as filed in our Annual Report on Form 10-K.

Certain accounting policies involve significant judgments and assumptions by us that may have a material impact on the carrying value of certain assets and liabilities. We consider such accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe are reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Allowance for Loan Losses

We believe the allowance for loan losses is the critical accounting policy that requires the most significant judgment and estimates used in preparation of our consolidated financial statements. Some of the more critical judgments supporting the amount of our allowance for loan losses include judgments about the credit worthiness of borrowers, the estimated value of the underlying collateral, assumptions about cash flow, determination of loss factors for estimating credit losses, and the impact of current events, conditions, and other factors impacting the level of probable inherent losses. Under different conditions, the actual amount of credit losses incurred by us may be different from management’s estimates provided in our consolidated financial statements. Refer to the portion of this discussion that addresses our allowance for loan losses for a more complete discussion of our processes and methodology for determining our allowance for loan losses.

Income Taxes

We use assumptions and estimates in determining income taxes payable or refundable for the current year, deferred income tax liabilities and assets for events recognized differently in our consolidated financial statements and income tax returns, and income tax benefit or expense. Determining these amounts requires analysis of certain transactions and interpretation of tax laws and regulations. Management exercises judgment in evaluating the amount and timing of recognition of resulting tax liabilities and assets. These judgments and estimates are reevaluated on a continual basis as regulatory and business factors change. Valuation allowances are established to reduce deferred tax assets if it is determined to be possible that all or some portion of the potential deferred tax asset will not be realized. Previously, we believed our loss position could adversely impact our ability to recognize the full benefit of our deferred tax asset. Therefore, we placed a valuation allowance for our full deferred tax asset. Currently, net income levels are small and do not warrant a reversal of the deferred tax asset. No assurance can be given that either the tax returns submitted by us or the income tax reported on the financial statements will not be adjusted by either adverse rulings by the United States Tax Court, changes in the tax code, or assessments made by the Internal Revenue Service. We are subject to potential adverse adjustments, including, but

23

not limited to, an increase in the statutory federal or state income tax rates, the permanent non-deductibility of amounts currently considered deductible either now or in future periods, and the dependency on the generation of future taxable income, including capital gains, in order to ultimately realize deferred income tax assets.

Results of Operations

Our primary source of revenue is net interest income. Net interest income is the difference between income earned on interest-bearing assets and interest paid on deposits and borrowings used to support such assets. The level of net interest income is determined by the balances of interest-earning assets and interest-bearing liabilities and corresponding interest rates earned and paid on those assets and liabilities, respectively. In addition to the volume of and corresponding interest rates associated with these interest-earning assets and interest-bearing liabilities, net interest income is affected by the timing of the repricing of these interest-earning assets and interest-bearing liabilities.

Three months ended March 31, 2013 and 2012

We recorded net income of $9,250, or $0.0042 per share, for the three months ended March 31, 2013, compared to a net loss of $142,101, or a loss of $0.06 per share, for the three months ended March 31, 2012. Interest income was $1,033,269 and $921,629 for the three months ended March 31, 2013 and 2012, respectively. The increase in interest income is attributed to the larger loan portfolio maintained by the Bank in 2013, offset by less interest income received on investments and interest bearing bank deposits. Interest income for the three months ended March 31, 2013 was comprised of $905,182 earned on loans, $117,866 earned on investment securities, and $10,221 earned on fed funds sold and interest bearing bank deposits.

Interest expense was $162,741 for the three months ended March 31, 2013, compared to $190,612 for the three months ended March 31, 2012. The decrease in interest expense is attributed to a reduction in deposit rates.

Our net interest spread and net interest margin were 3.37% and 3.51%, respectively, for the three months ended March 31, 2013, compared to 2.87% and 3.06%, respectively, for the three months ended March 31, 2012. We are achieving higher yields on earning assets due to loan growth, as lower yielding liquidity has been redeployed into higher yielding loans. We are also achieving lower costs associated with deposit liabilities.

There was no loan loss provision for the three months ended March 31, 2013, compared to $14,094 for the three months ended March 31, 2012. Loan loss provision is typically driven by loan growth, non-performing loans, and a historical loss and environmental analysis. During the first three months of 2013, three substandard loans showed improvement and were upgraded, resulting in less loan loss reserve needed. This reduction to reserve needs offset the provision need for new loan growth during the first three months of 2013.

Non-interest income was $247,729 for the three months ended March 31, 2013, of which $22,676 came from service charges, NSF, ATM, and other traditional service income, $49,156 came from gains on the sale of mortgage loans, and $175,897 came from gains on sale of investment securities. For the three months ended March 31, 2012, non-interest income was $68,844, of which $25,173 came from service charges, NSF, and other traditional service income, $19,850 came from gains on the sale of mortgage loans, and $7,930 came from gains on the sale of investment securities.

Non-interest expense was $1,107,314 and $927,868 for the three months ended March 31, 2013 and 2012, respectively. The increases are the result of growth and expansion, which resulted in increases in the areas of salaries and employee benefits, occupancy and equipment, marketing, and data processing. Professional service fees, including amounts paid to consultants, was significantly lower when compared to the same period the previous year.

Assets and Liabilities

General

Total assets as of March 31, 2013 were $105.1 million, representing an increase of $3.4 million, or 3.4% compared to $101.6 million as of December 31, 2012. The increase in assets is due primarily to net loan growth of $6.4 million, which was funded primarily by deposit growth of $3.7 million. At March 31, 2013, total assets consisted principally of $13.1 million in cash and cash equivalents, $21.9 million in available-for-sale investment securities, $997,700 in mortgage loans held for sale and $66.8 million in net loans. Net loans at December 31, 2012 were $60.4 million. The primary source of funding is deposits that are acquired locally.

24

Liabilities at March 31, 2013 totaled $90.7 million, represented almost entirely by retail customer deposits totaling $90.2 million. Liabilities as of December 31, 2012 totaled $87.1 million, including $86.5 million in deposits. At March 31, 2013, shareholders’ equity was $14.4 million, compared to $14.5 million as of December 31, 2012. Book value per share was $6.57 at March 31, 2013, compared to $6.62 as of December 31, 2012.

Loans

Loans typically provide higher interest yields than other types of interest-earning assets. Net loans have increased $6.4 million, or 10.55%, to $66.8 million, during the three months ended March 31, 2013, primarily in the categories of Real Estate – Mortgage, Real Estate – Other, and Consumer loans, offset by a decrease in Real Estate – Residential Mortgage and Commercial loans, compared to $60.4 million as of December 31, 2012. The following table summarizes the composition of our loan portfolio as of March 31, 2013 and December 31, 2012.

	March 31,			Percentage of			December 31,			Percentage
	2013			of Total			2012			of Total
Construction and land development	$	6,700,560			9.87	%	$	6,671,055			10.84	%
Real estate - residential mortgage		23,798,290			35.05			18,821,345			30.59
Real estate - other		30,550,043			44.99			29,890,399			48.59
Commercial and industrial		3,457,887			5.09			2,670,875			4.34
Consumer and other		3,391,101			5.00			3,470,868			5.64
Gross loans		67,897,881			100.00	%		61,524,542			100.00	%
Allowance for loan losses		(1,013,314	)		-			(1,013,314	)		-
Deferred loan fees, net		(118,376	)		-			(118,141	)		-
Total loans, net	$	66,766,191			-		$	60,393,087			-

Loans held for sale are represented by 1-4 family residential mortgage loans that are pending sale in the secondary market. The volume of these loans fluctuates month to month. There were $997,700 in loans held for sale as of March 31, 2013 compared to $1,930,811 at December 31, 2012.

Classified Loans

Classified loans are performing loans with elevated levels of credit risk. These loans are assigned credit risk grades of substandard or worse. The Bank’s classified loans decreased during the first three months of 2013 from $2,564,549 as of December 31, 2012 to $1,143,020 as of March 31, 2013, primarily due to the upgrade of three loan relationships.

Nonperforming Loans

At March 31, 2013, there were no nonaccrual loans, compared to $160,000 in nonaccrual loans as of December 31, 2012. There were no accruing loans which were contractually past due 90 days or more as to principal or interest payments at March 31, 2013 and December 31, 2012. Generally, a loan will be placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the loan is doubtful. The nonaccrual loan relationship is considered impaired.

Impaired loans as of March 31, 2013 totaled $1,143,020 and consisted of one large classified loan, compared to impaired loans totaling $531,822 at March 31, 2012.

As of March 31, 2013, we were not aware of any other loans that were not already considered for impairment, categorized as impaired, or on nonaccrual.

Provision and Allowance for Loan Losses

The allowance for loan losses represents an amount which we believe will be adequate to absorb probable losses on existing loans that may become uncollectible. Additions to the allowance are often the result of growth in the loan portfolio. Additionally, our judgment as to the adequacy of the allowance for loan losses is based on an ongoing review of the quality, mix, and size of our overall loan portfolio. We make a number of assumptions regarding current portfolio and economic conditions. We consider our historical loan loss experience, the loan loss experience of our peers, and any specific problem loans and commitments that may affect the borrower’s ability to pay. We believe the assumptions we have made to be reasonable, but which may or may not prove to be accurate.

25

Periodically, we will adjust the amount of the allowance based on changing circumstances. We will charge recognized losses to the allowance and add subsequent recoveries back to the allowance for loan losses. There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for loan losses as estimated at any point in time or that provisions for loan losses will not be significant to a particular accounting period.

We have established an allowance for loan losses through a provision for loan losses charged to expense on our consolidated statement of operations. The allowance for loan losses was $1,013,314 as of March 31, 2013, or 1.50% of gross loans outstanding net of deferred loan fees, compared to $1,013,314 as of December 31, 2012, or 1.65% of gross loans outstanding. The decline is the result of less reserves needed as non-performing loans begin to perform. As a result, there was no provision expense needed for the three months ended March 31, 2013, compared to $14,094 for the three months ended March 31, 2012. To further explain, criticized loans typically require a higher loan loss reserve. At March 31, 2013, our substandard loan balance was $1.1 million, an improvement from $2.6 million at December 31, 2012. Although we have experienced loan growth in 2013 that would typically require provisions to the loan loss reserve, the improvements in our criticized loan balances created an excess reserve that negated the need to add more loan loss provision to the reserve balance.

During the first three months of 2013 and 2012, the Bank had no charged off loans.

As of March 31, 2013, management considered the allowance for loan losses to be adequate and sufficient to meet presently known and inherent losses in the loan portfolio.

Deposits

Our primary source of funds for loans and investments is the funds obtained through our customer deposits. At March 31, 2013, we had $90.2 million in deposits, representing an increase of $3.7 million from December 31, 2012. Our deposits as of March 31, 2013 consisted primarily of $11.2 million in demand deposit accounts, $41.5 million in certificates of deposit, and $37.5 million in savings and money market accounts. As of March 31, 2013, we have no brokered or wholesale deposits and no borrowings.

Liquidity

Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss, and the ability to raise additional funds by increasing liabilities. For an operating bank, liquidity represents the ability to provide steady sources of funds for loan commitments and investment activities, as well as to maintain sufficient funds to cover deposit withdrawals and payment of debt and operating obligations. Liquidity management involves monitoring our sources and uses of funds in order to meet our day-to-day cash flow requirements while maximizing profits. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree of control at the time investment decisions are made. However, net deposit inflows and outflows are far less predictable and are not subject to the same degree of control.

Our primary sources of liquidity are deposits, scheduled repayments on our loans, and interest/principal payments received on and maturities of our investments. We plan to meet our future cash needs through the generation of deposits. Occasionally, we might sell investment securities in connection with the management of our interest sensitivity gap or to manage cash availability. We may also utilize our cash and due from banks and federal funds sold to meet liquidity requirements as needed. In addition, we have the ability, on a short-term basis, to purchase federal funds from other financial institutions or borrow advances from the Federal Home Loan Bank Atlanta.

As of March 31, 2013, our primary sources of liquidity included cash, non-interest and interest-bearing deposits and federal funds sold with financial institutions totaling $13.1 million. In addition, the fair value of our available for sale investment portfolio was $21.9 million as of March 31, 2013. Our lines of credit available with correspondent banks total $8.0 million with no outstanding principal or interest on these lines at March 31, 2013, and are unsecured. These lines may be withdrawn at the discretion of the correspondent financial institutions. Our credit availability at the Federal Home Loan Bank was $10.1 million as of March 31, 2013 and requires collateralization by eligible investment securities or loans. We believe our liquidity levels are adequate to meet our operating needs.

26

Off-Balance Sheet Risk

Through the operations of our bank, we have made contractual commitments to extend credit in the ordinary course of our business activities. These commitments are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time. At March 31, 2013, we had issued commitments to extend credit of $9.4 million through various types of lending arrangements, compared to $10.7 million as of December 31, 2012. We evaluate each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate. We manage the credit risk on these commitments by subjecting them to normal underwriting and risk management processes.

Capital Resources

Total shareholders’ equity was $14.4 million at March 31, 2013 compared to $14.5 million at December 31, 2012. The decrease is the result of decreases to the market value of the investment portfolio.

Our bank and the Company are subject to various regulatory capital requirements administered by the federal banking agencies. However, the Federal Reserve guidelines contain an exemption from the capital requirements for “small bank holding companies” which in 2006 were amended to cover most bank holding companies with less than $500 million in total assets that do not have a material amount of debt or equity securities outstanding registered with the SEC. Since our assets are less than $500 million and our stock is not registered under Section 12 of the Securities Exchange Act of 1934, we believe our Company qualifies as a small bank holding company and is exempt from the capital requirements. Nevertheless, our bank remains subject to these capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the bank’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. Regardless, our bank is “well capitalized” under these minimum capital requirements as set per bank regulatory agencies.

Under the capital adequacy guidelines, regulatory capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted assets. Tier 1 capital consists of common shareholders’ equity, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for loan losses, subject to certain limitations. A third capital ratio that is closely monitored, known as the Tier 1 Leverage Ratio, measures Tier 1 capital as a percentage of average assets during the quarter.

The FDIC Improvement Act established an additional capital-based regulatory scheme designed to promote early intervention for troubled banks which requires the FDIC to choose the least expensive resolution of bank failures. This capital-based regulatory framework contains five categories of compliance with regulatory capital requirements, including “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” To qualify as a “well capitalized” institution, a bank must have a leverage ratio of 5% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a total risk-based capital ratio of 10% or greater, and the Bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level.

Originally, as a new bank, the OCC required the Bank to maintain a Tier 1 leverage ratio of at least 8%, a Tier 1 risk based capital ratio of 8% or greater, and a total risk-based capital ratio of 12% or greater.

Recent OCC guidance (Bulletin 2012-16) recommends a bank to establish a capital policy wherein the internally required and managed level of capital shifts with the risk profile of the institution. If the risk profile of the bank were to grow, the required levels of capital should be increased. The risk profile is measured by a dozen risk indicators, including, but not limited to, non-performing asset levels, rate of growth, earnings performance, audit and exam ratings, liquidity trends, and interest rate risk results. Since the prediction of risk levels in the future can be difficult, the Bank management currently uses the Tier 1 leverage ratio of 8%, Tier 1 risk based capital ratio of 10%, and a total risk based capital ratio of 12% as its minimums for managing capital levels assuming a moderate risk profile.

27

The bank exceeded its minimum regulatory capital ratios as of March 31, 2013 and December 31, 2012, as well as the ratios to be considered “well capitalized.”

The following table sets forth the bank’s various capital ratios at March 31, 2013 and December 31, 2012:

	Tier 1	Tier 1	Total
	Leverage	Risk-Based	Risk-Based
Minimum Required	4.00%	4.00%	8.00%
Minimum Required to be well capitalized	5.00%	6.00%	10.00%
Actual Ratios at March 31, 2013, (Unaudited)
Coastal Carolina National Bank	13.20%	20.74%	21.99%
Consolidated	13.80%	21.83%	23.09%
Actual Ratios at December 31, 2012
Coastal Carolina National Bank	13.47%	21.81%	23.07%
Consolidated	14.10%	23.00%	24.26%

We believe our capital is sufficient to fund the activities of the bank as we grow. As of March 31, 2013, there were no significant firm commitments outstanding for capital expenditures.

In 2010, the Basel Committee adopted the Basel III Capital Rules, which set new capital requirements for banking organizations. In June 2012, the Federal Reserve requested comment on three proposed rules that, taken together, would establish an integrated regulatory capital framework implementing the Basel III regulatory capital reforms in the U.S. As proposed, the U.S. implementation of Basel III would lead to significantly higher capital requirements and more restrictive leverage and liquidity ratios than those currently in place. The proposed rules indicated that the final rule would become effective on January 1, 2013, and the changes set forth in the final rules will be phased in from January 1, 2013 through January 1, 2019. However, due to the volume of public comments reviewed, the final rule did not go into effect on January 1, 2013. The ultimate impact of the U.S. implementation of the new capital and liquidity standards on the Company and the Bank is currently being reviewed and is dependent upon the terms of the final regulations, which may differ from the proposed regulations. Requirements to maintain higher levels of capital or to maintain higher levels of liquid assets could adversely impact our net income and return on equity.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the three months ended March 31, 2013, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

28

Part II – Other Information

Item 1. Legal Proceedings

There are no material pending legal proceedings to which we are a party or to which any of our property is the subject.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

No applicable.

Item 3. Default Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The exhibits required to be filed as part of this Quarterly Report on Form 10-Q are listed in the Exhibit Index attached hereto and are incorporated herein by reference.

29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Coastal Carolina Bancshares, Inc.
	(Registrant)
Date: May 8, 2013	By:	/s/ Laurence S. Bolchoz, Jr.
	Laurence S. Bolchoz, Jr.
	President and Chief Executive Officer
	(Principal Executive Officer)
	By:	/s/ Dawn M. Kinard
	Dawn M. Kinard
	Senior Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

30

EXHIBIT INDEX

Exhibit
Number	Description
31.1	Rule 15d-14(a) Certification of the Principal Executive Officer.
31.2	Rule 15d-14(a) Certification of the Principal Financial Officer.
32	Section 1350 Certifications.
101	The following materials from the Quarterly Report on Form 10-Q of Carolina Coastal Bancshares, Inc. for the quarter ended March 31, 2013, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) Condensed Consolidated Statement of Shareholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements.

*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

31