SALARY CONTINUATION AGREEMENT

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Exhibit 10.3

SALARY CONTINUATION AGREEMENT

        This Salary Continuation Agreement (the " Agreement ") is made this 6 ^th day of April, 2005, by and among Coastal Banking Company, Inc., a South Carolina corporation (the " Company "), Lowcountry National Bank, a national bank organized under the laws of the United States (the " Bank ") (the "Company and the Bank being referred to herein collectively as the " Employer ") and James L. Pate (the " Executive ").

WITNESSETH

        WHEREAS, the Bank is a national bank organized under the laws of the United States;

        WHEREAS, Executive is the Chief Financial Officer of Employer; and

        WHEREAS, the parties desire to enter into this agreement to provide for certain severance payments to Executive in the event there is a Change in Control (as defined herein) and in accordance of the terms and conditions of this Agreement.

        NOW, THEREFORE, in consideration of Executive's services to Employer, the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:

1.

Definitions.

        a.     " Cause " shall mean (A) the commission by the Executive of a willful act (including, without limitation, a dishonest or fraudulent act) or a grossly negligent act, or the willful or grossly negligent omission to act by the Executive, which is intended to cause, causes, or is reasonably likely to cause material harm to the Employer (including harm to its business reputation); (B) the indictment of the Executive for the commission or perpetration by the Executive of any felony or any crime involving dishonesty, moral turpitude or fraud; (C) the material breach by the Executive of this Agreement that, if susceptible of cure, remains uncured 10 days following written notice to the Executive of such breach; (D) the exhibition by the Executive of a standard of behavior within the scope of his employment that is materially disruptive to the orderly conduct of the Employer's business operations (including, without limitation, substance abuse or sexual misconduct) to a level which, in the Board of Directors' good faith and reasonable judgment, is materially detrimental to the Employer's best interest, that, if susceptible of cure, remains uncured 10 days following written notice to the Executive of such specific inappropriate behavior; (E) the receipt of any form of notice, written or otherwise, that any regulatory agency having jurisdiction over the Employer intends to institute any form of formal or informal ( e.g. , a memorandum of understanding which relates to the Executive's performance) regulatory action against the Executive or the Employer if the Board of Directors in good faith determines that the subject matter of such action involves acts or omissions by or under the supervision of the Executive or that termination of the Executive would advance the Employer's compliance with the purpose of the action or would assist the Employer in avoiding or reducing the restrictions or adverse effects to the Employer related to the regulatory action; or (F) the failure of the Executive to render the services hereunder in accordance with an appropriate performance standard determined in the sole discretion of the Board of Directors;

        b.     " Change in Control " shall mean the occurrence during the Term of any of the following events, unless such event is a result of a Non-Control Transaction:

          (i)  The individuals who, as of the date of this Agreement, are members of the Board of Directors of the Company (the " Incumbent Board ") cease for any reason to constitute at least 50% of the Board of Directors of the Company; provided , however , that if the election, or nomination for election by the Company's shareholders, of any new director was approved in advance by a vote of at least 50% of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; provided , further , that no individual shall be considered a member of the Incumbent Board if such

individual initially assumed office as a result of either an actual or threatened election contest, or other actual or threatened solicitation of proxies, proxy contest, or consents by or on behalf of any person other than the Board of Directors of the Company, including by reason of any agreement intended to avoid or settle any election contest or proxy contest.

         (ii)  An acquisition (other than directly from the Company) of any voting securities of the Company (the " Voting Securities ") by any " Person " (as the term "person" is used for purposes of Section 13(d) or 14(d) of the Exchange Act) immediately after which such Person has " Beneficial Ownership " (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the Company's then outstanding Voting Securities; provided , however , that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Acquisition shall not constitute an acquisition which would cause a Change in Control.

        (iii)  Consummation of: (i) a merger, consolidation, or reorganization involving the Company; (ii) a complete liquidation or dissolution of the Company; or (iii) the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary).

        (iv)  A notice of an application is filed with the Office of Comptroller of the Currency (the " OCC ") or the Federal Reserve Board or any other bank or thrift regulatory approval (or notice of no disapproval) is granted by the Federal Reserve, the OCC, the Federal Deposit Insurance Corporation, or any other regulatory authority for permission to acquire control of the Company or any of its banking subsidiaries; provided that if the application is file