GlobeNewswire Inc | Oct 27, 2021 09:23AM EDT

October 27, 2021

Third Quarter 2021 Highlights:

-- Total assets increased $444.4 million, or 22.1%, to $2.45 billion for the quarter ended September 30, 2021, compared to $2.01 billion at June 30, 2021. -- Total deposits increased $421.9 million, or 23.4%, to $2.22 billion for the quarter ended September 30, 2021, compared to $1.8 billion at June 30, 2021. -- Loan growth of $47.5 million during the quarter ended September 30, 2021. This growth is net of $130.8 million in forgiven or paid down Paycheck Protection Program (PPP) loans during the quarter ended September 30, 2021. -- CCBX loans increased $86.7 million, and community bank loans increased $89.4 million, excluding PPP loans during the quarter ended September 30, 2021. -- CCBX deposits increased $339.8 million during the quarter ended September 30, 2021. -- Net income totaled $6.7 million for the quarter ended September 30, 2021, or $0.54 per diluted common share, compared to $7.0 million, or $0.56 per diluted common share, for the quarter ended June 30, 2021.

EVERETT, Wash., Oct. 27, 2021 (GLOBE NEWSWIRE) -- Coastal Financial Corporation (Nasdaq: CCB) (the Company), the holding company for Coastal Community Bank (the Bank), today reported unaudited financial results for the quarter ended September 30, 2021. Net income for the third quarter of 2021 was $6.7 million, or $0.54 per diluted common share, compared with net income of $7.0 million, or $0.56 per diluted common share, for the second quarter of 2021, and $4.1 million, or $0.34 per diluted common share, for the quarter ended September 30, 2020.

The third quarter of 2021 ended with total assets of $2.45 billion, an increase of $444.4 million from June 30, 2021. Deposit growth was strong, increasing $421.9 million during the three months ended September 30, 2021. Loans receivable increased $47.5 million, which included non-PPP loan growth of $176.1 million partially offset by $130.8 million in forgiven or repaid PPP loans. Core deposits increased $424.3 million and represented 96.6% of total deposits as of September 30, 2021.

Our three-prong strategy for success and growth continues to be the guide and focus of our efforts. Our CCBX division, which provides Banking as a Service (BaaS), has a total of 26 relationships as of September 30, 2021, an increase of 15 relationships compared to September 30, 2020. CCBX generates additional fee and interest income, as well as related expenses, for the Company by providing BaaS to broker dealers and digital financial service providers who offer their clients these banking services. During the quarter ended September 30, 2021, CCBX deposits increased $339.8 million to $607.2 million. Additionally, we have access to $331.1 million in CCBX brokered deposits that are swept off the balance sheet as of September 30, 2021. CCBX loans increased $86.7 million to $190.1 million as of September 30, 2021, compared to $103.5 million as of June 30, 2021. CCDB our digital banking division, has shifted from the Google banking collaboration to exploring other opportunities in this sector of banking, stated Eric Sprink, the President and CEO of the Company and the Bank.

Results of Operations

Net interest income was $18.8 million for the quarter ended September 30, 2021, an increase of $195,000, or 1.0%, from $18.6 million for the quarter ended June 30, 2021, and an increase of $3.7 million, or 24.6%, from $15.1 million for the quarter ended September 30, 2020. Yield on loans receivable was 4.57% for the three months ended September 30, 2021, compared to 4.44% for the three months ended June 30, 2021 and 4.33% for the three months ended September 30, 2020. The increase in net interest income compared to June 30, 2021 and September 30, 2020, was largely related to increased yield on loans resulting from loan growth and a decrease in lower yielding PPP loans. Average loans receivable for the three months ended September 30, 2021, was $1.68 billion, compared to $1.75 billion and $1.49 billion for the three months ended June 30, 2021 and September 30, 2020, respectively.

Interest and fees on loans totaled $19.4 million for the three months ended September 30, 2021 and June 30, 2021, compared to $16.2 million for the three months ended September 30, 2020. Net non-PPP loan growth of $176.1 million during the quarter ended September 30, 2021, offset a decrease of $130.8 million in PPP loans that were forgiven or repaid, which resulted in the recognition of $2.9 million in net deferred fees on PPP loans. Capital call lines increased $62.6 million, or 63.2%, during the quarter ended September 30, 2021. These loans bear a lower rate of interest, but have less credit risk due to the way the loans are structured compared to other commercial loans. The increase in interest and fees on loans for the quarter ended September 30, 2021, compared to September 30, 2020, was largely due to $3.1 million in increased interest income as a result of loan volume, combined with an increase in net deferred fees recognized on forgiven or repaid PPP loans.

As of September 30, 2021, there were $267.3 million in PPP loans, compared to $398.0 million as of June 30, 2021, and $452.8 million as of September 30, 2020. In the three months ended September 30, 2021, a total of $130.8 million in PPP loans were forgiven or repaid. Net deferred fees recognized on PPP loans contributed $2.9 million for the three months ended September 30, 2021, compared to $3.6 million for the three months ended June 30, 2021, and $2.4 million for the three months ended September 30, 2020.

As of September 30, 2021, $9.4 million in net deferred fees on PPP loans remains to be recognized in interest income along with interest on loans. Net deferred fees on PPP loans are earned over the life of the loan, as a yield adjustment in interest income. Forgiveness of principal, early paydowns and payoffs on PPP loans will increase interest income earned in those periods from the recognition of PPP deferred fees. PPP loans in round one and two were originated in 2020, and were predominately two year loans, with $16.2 million of these loans remaining at September 30, 2021. PPP loans in round three were originated in 2021 and are all five year loans, with $251.1 million of these loans remaining at September 30, 2021.

Interest income from interest earning deposits with other banks was $170,000 at September 30, 2021, an increase of $96,000 and $71,000 due to higher balances compared to June 30, 2021, and September 30, 2020, respectively.

Interest expense was $801,000 for the quarter ended September 30, 2021, a $158,000 decrease from the quarter ended June 30, 2021 and a $497,000 decrease from the quarter ended September 30, 2020. Interest expense on interest bearing deposits decreased despite an increase of $18.7 million and $169.0 million in average interest bearing deposits for the quarter ended September 30, 2021 over the quarters ended June 30, 2021 and September 30, 2020, respectively, as a result of management lowering deposit interest rates and a low interest rate environment. This contributed to our improved cost of deposits which decreased 26.6% and 60.5% for the three months ended September 30, 2021 when compared to the three months ended June 30, 2021 and September 30, 2020, respectively. Interest expense on borrowed funds was $278,000 for the quarter ended September 30, 2021, compared to $331,000 and $418,000 for the quarters ended June 30, 2021 and September 30, 2020, respectively. The decrease in interest expense on borrowed funds from the quarters ended June 30, 2021 and September 30, 2020 is the result of a decrease in average PPPLF borrowings, which were paid off in full as of June 30, 2021. During the quarter ended September 30, 2021, the Company entered into a $25.0 million subordinated note purchase agreement with a current rate of 3.375%, and part of the proceeds were used to repay $10.0 million in subordinated debt at a higher interest rate of 5.65%. The increase in principal balance outstanding resulted in an increase in interest expense on subordinated debt.

Net interest margin decreased for the three months ended September 30, 2021 to 3.48%, compared to 3.70% and 3.62% for the three months ended June 30, 2021 and September 30, 2020, respectively. The net interest margin will likely fluctuate over the near term as PPP loans originated in 2020 and 2021 continue to be forgiven and paid off. The decrease in net interest margin was largely a result of $419.7 million in interest earning deposits as of September 30, 2021, a $184.5 million and $282.1 million increase compared to the quarters ended June 30, 2021 and September 30, 2020, respectively. These interest earning deposits earned an average rate of 16 basis points for the quarter ended September 30, 2021.

Cost of funds decreased four basis points in the quarter ended September 30, 2021 to 0.16%, compared to the quarter ended June 30, 2021 and decreased 17 basis points from the quarter ended September 30, 2020. Cost of deposits for the quarter ended September 30, 2021 was 0.10%, a decrease of four basis points, or a 26.6% decrease, from 0.14% for the quarter ended June 30, 2021, and a 17 basis point decrease, or a 60.5% decrease, from 0.27% for the quarter ended September 30, 2020, largely due to an increase in noninterest bearing deposits and a lower rate environment. Deposit growth from CCBX in noninterest bearing and low interest bearing accounts contributed to the reduced cost of funds in conjunction with rate reductions on our community bank deposits. Noninterest bearing deposits increased $408.5 million, or 46.0%, and $725.8 million, or 127.2%, compared to the quarters ended June 30, 2021, and September 30, 2020, respectively. Market conditions for deposits continued to be competitive during the quarter ended September 30, 2021; however, we have been able to keep our cost of deposits down by increasing low interest bearing and noninterest bearing deposits and allowing high cost deposits to run-off when appropriate, lowering deposit rates and replacing them with lower cost core deposits.

During the quarter ended September 30, 2021, total loans receivable increased by $47.5 million, to $1.71 billion, compared to $1.66 billion for the quarter ended June 30, 2021. Non-PPP loans increased $176.1 million, or 13.8%, for the quarter ended September 30, 2021, compared to the quarter ended June 30, 2021. PPP loans decreased $130.8 million as a result of forgiveness and repayments and totaled $267.3 million as of September 30, 2021 compared to June 30, 2021.

Total yield on loans receivable for the quarter ended September 30, 2021 was 4.57%, compared to 4.44% for the quarter ended June 30, 2021, and 4.33% for the quarter ended September 30, 2020. This increase in yield on loans receivable is attributed to a decrease in the outstanding balance of PPP loans that have a stated rate of 1.0% which is combined with the recognition of net deferred fees on PPP loans that are forgiven or repaid. Additionally, new non-PPP loans generally bear a higher average interest rate than the PPP loans they are replacing.

Yield on loans receivable, excluding earned fees* approximated 3.74% for the quarter ended September 30, 2021, compared to 3.46% for the quarter ended June 30, 2021, and 3.61% for the quarter ended September 30, 2020. Net deferred fees recognized on loans were $3.5 million (includes $2.9 million on PPP loans), $4.3 million (includes $3.6 million on PPP loans) and $2.7 million (includes $2.4 million on PPP loans) for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

Return on average assets (ROA) was 1.21% for the quarter ended September 30, 2021 compared to 1.36% and 0.95% for the quarters ended June 30, 2021 and September 30, 2020, respectively. ROA for the quarter ended September 30, 2021 was impacted by increased demand deposits and cash on the balance sheet, which has resulted in a lower loan to deposit ratio. ROA for the quarter ended September 30, 2020 was impacted by increased provision for loan losses due to the economic uncertainties of the COVID-19 pandemic and loan growth. Pre-tax, pre-provision ROA* was 1.59% for the quarter ended September 30, 2021, compared to 1.87% for the quarter ended June 30, 2021, and 1.72% for the quarter ended September 30, 2020.

The PPP loans originated in the first and second rounds during 2020 and in the third round in 2021 have had a significant impact on our financial statements. These PPP loans will continue to impact our results in the future. We continued to receive forgiveness payments from the SBA. Any estimated adjusted ratios that exclude the impact of this activity are non-GAAP measures. For more information about non-GAAP financial measures, please see the end of this earnings release.

The table below summarizes information about total PPP loans originated in 2020 and 2021.

Total PPP Loan Origination Round 1 & 2 Round 3 Total 2020 2021(Dollars in thousands; unaudited) Loans Originated $ 452,846 $ 311,012 $ 763,858 Deferred fees, net 12,933 13,334 $ 26,267 Outstanding loans and deferred fees as of September 30, 2021 Loans outstanding $ 16,228 $ 251,050 $ 267,278 Deferred fees, net 148 9,269 $ 9,417

As of September 30, 2021 there was $267.3 million in PPP loans, this includes $16.2 million from round 1 & 2 and $251.1 million from round 3. The table below summarizes key information about the remaining PPP loans originated in 2020 and 2021 as of the period indicated:

Outstanding PPP Loans Original Loan Size As of and for the Three Months Ended September 30, 2021 $0.00 - $50,0000.01 $150,000.01 $350,000.01 - > $50,000.00 - - $2,000,000.00 2,000,000.01 Totals $150,000.00 $350,000.00(Dollars in thousands; unaudited) Principal outstanding:Round 1 & 2 $ 1,084 $ 952 $ 1,179 $ 4,221 $ 8,792 $ 16,228 Round 3 23,692 40,604 60,700 123,098 2,956 251,050 Totalprincipal 24,776 41,556 61,879 127,319 11,748 267,278 outstandingNet deferredfees outstandingRound 1 & 2 $ 15 $ 22 $ 36 $ 42 $ 33 $ 148 Round 3 2,083 1,532 2,506 3,123 25 9,269 Total netdeferred $ 2,098 $ 1,554 $ 2,542 $ 3,165 $ 58 $ 9,417 feesoutstandingNumber of loans:Round 1 & 2 73 14 9 10 5 111 Round 3 1,294 445 262 160 1 2,162 Total loan 1,367 459 271 170 6 2,273 countPercent of 60.1 % 20.2 % 11.9 % 7.5 % 0.3 % 100.0 %total Forgiveness/Payoffs/Paydowns in Three Months Ended September 30, 2021Dollars $ 12,199 $ 17,408 $ 21,557 $ 44,995 $ 34,601 $ 130,760 Deferred fee 671 579 638 946 112 2,946 recognized

The following table shows the Companys key performance ratios for the periods indicated. The table also includes ratios that were adjusted by removing the impact of the PPP loans as described above. The adjusted ratios are non-GAAP measures. For more information about non-GAAP financial measures, see the end of this earnings release.

Three Months Ended Nine Months Ended (unaudited) September30, June 30, March31, December31, September30, September30, September30, 2021 2021 2021 2020 2020 2021 2020 Return onaverage 1.21 % 1.36 % 1.28 % 1.04 % 0.95 % 1.28 % 0.96 %assets (1)Return onaverage 16.77 % 18.60 % 16.84 % 13.36 % 12.14 % 17.40 % 10.73 %equity (1)Pre-tax,pre-provisionreturn 1.59 % 1.87 % 1.69 % 1.90 % 1.72 % 1.71 % 1.73 %on averageassets (1)(2)Yield onearnings 3.63 % 3.89 % 3.99 % 4.16 % 3.93 % 3.83 % 4.23 %assets (1)Yield onloans 4.57 % 4.44 % 4.51 % 4.64 % 4.33 % 4.51 % 4.65 %receivable(1)Yield onloansreceivable, 4.53 % 4.65 % 4.78 % 5.00 % 4.78 % 4.64 % 4.99 %excluding PPPloans (1)(2)Yield onloansreceivable, 3.74 % 3.46 % 3.53 % 3.66 % 3.61 % 3.57 % 4.09 %excludingearnedfees (1)(2)Yield onloansreceivable,excludingearnedfees and 4.36 % 4.42 % 4.52 % 4.65 % 4.69 % 4.43 % 4.86 %interest onPPPloans, asadjusted (1)(2)Cost of funds 0.16 % 0.20 % 0.24 % 0.29 % 0.33 % 0.20 % 0.45 %(1)Cost of 0.10 % 0.14 % 0.17 % 0.22 % 0.27 % 0.14 % 0.40 %deposits (1)Net interest 3.48 % 3.70 % 3.76 % 3.89 % 3.62 % 3.64 % 3.81 %margin (1)Noninterestexpense to 2.91 % 2.65 % 2.62 % 2.35 % 2.26 % 2.74 % 2.52 %averageassets (1)Efficiency 64.68 % 58.69 % 60.85 % 55.26 % 56.73 % 61.51 % 59.31 %ratioLoansreceivable to 76.71 % 92.03 % 105.68 % 108.85 % 110.98 % 76.71 % 110.98 %deposits (1) Annualized calculations shown for quarterly periods presented. (2) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.

Noninterest income was $6.1 million as of September 30, 2021, an increase of $1.3 million from $4.8 million as of June 30, 2021, and an increase of $4.2 million from $1.9 million as of September 30, 2020. The increase in noninterest income over the quarter ended June 30, 2021 was due to a $1.5 million unrealized holding gain on an equity investment, a $862,000 increase in BaaS fees, a $175,000 increase in gain on sale of loans, partially offset by the absence of a $1.3 million gain from the sale of a branch that occurred the quarter ended June 30, 2021. The $4.2 million increase in noninterest income over the quarter ended September 30, 2020 was primarily due to a $1.7 million increase in BaaS fees, a $1.5 million unrealized holding gain on an equity investment, a $543,000 increase in loan referral fees, a $159,000 increase in gain on sale of loans, and $132,000 increase in deposit service charges and fees, primarily in point of sale and ATM fees, which were down in 2020 because of stay-at-home orders related to the COVID-19 pandemic. Interchange income from BaaS partners for the quarter ended September 30, 2021 was $188,000, compared to $110,000 and $4,000, as of June 30, 2021 and September 30, 2020, respectively.

Our CCBX division continues to grow, and now has 26 relationships, at varying stages, as of September 30, 2021, compared to 24 CCBX relationships at June 30, 2021 and 11 CCBX relationships as of September 30, 2020, respectively. As of September 30, 2021, we had 16 active CCBX relationships, seven relationships in onboarding/implementation, three signed letters of intent and we believe we have a strong pipeline of potential new CCBX relationships. The following table illustrates the activity and growth in CCBX for the periods presented:

As of September 30, 2021 June 30, 2021 September 30, 2020Active 16 12 4Friends and family / 0 3 1testingImplementation / onboarding 7 7 4Signed letters of intent 3 2 2Total CCBX relationships 26 24 11

Total noninterest expense increased to $16.1 million as of September 30, 2021, compared to $13.7 million as of June 30, 2021 and $9.7 million as of September 30, 2020. Increase in noninterest expense for the quarter ended September 30, 2021, as compared to the quarter ended June 30, 2021, was primarily due to a $1.0 million increase in salaries and employee benefits which is related to the hiring in CCBX, CCDB, and additional staff for our ongoing growth initiatives. BaaS expense increased $616,000 compared to June 30, 2021, which includes $319,000 increase in partner loan expense and $297,000 increase in partner fraud expense. Partner loan expense represents the amount paid to partners for originating and servicing loans. Partner fraud expense represents non-credit fraud losses on partners customer loan and deposit accounts. Any credit enhancement provided by the partner is reimbursed and included in noninterest income. Also contributing to the increase in expenses compared to June 30, 2021 is a $274,000 increase in software license, maintenance and subscription expenses, which is expected to increase as we invest more in automated processing and as we grow our product lines for CCBX and CCDB. In the third quarter of 2021 compared to the second quarter of 2021, legal and professional fees increased $170,000 and Federal Deposit Insurance Corporation (FDIC) assessments increased $175,000. The increase in legal and professional expenses is associated with CCBX division expenses and higher costs associated with legal and accounting work related to financial reporting. The increase in FDIC assessments is largely the result of an increase in deposits combined with other factors that impact the FDIC assessment calculation compared to the quarter ended June 30, 2021.

The increased noninterest expenses for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 were largely due to a $4.0 million increase in salary expenses related to hiring staff for CCBX, CCDB and additional staff for our ongoing banking growth initiatives, an increase of $524,000 in BaaS partner expense and a $480,000 increase in software license, maintenance and subscription expenses. In addition, in the third quarter of 2021 compared to the third quarter of 2020, legal and professional fees increased $415,000 and Federal Deposit Insurance Corporation (FDIC) assessments increased $252,000. The increase in legal and professional expenses is associated with CCBX division expenses and higher costs associated with legal and accounting work related to financial reporting. The increase in FDIC assessments is largely the result of an increase in deposits combined with other factors that impact the FDIC assessment calculation compared to the quarter ended September 30, 2020.

The provision for income taxes was $1.9 million at September 30, 2021, a $419,000 decrease compared to $2.3 million for the second quarter of 2021 as a result of decreased taxable income, and a $788,000 increase compared to $1.1 million for the third quarter of 2020, as a result of increased taxable income. Additionally, the Company is now subject to various state taxes that are being assessed as a result of hiring employees nationwide and CCBX activities expanding into other states, which has increased the overall rate used in calculating the provision for income taxes in the current and future periods. The Company uses a federal statutory tax rate of 21% as a basis for calculating provision for federal income taxes.

Financial Condition

Total assets increased $444.4 million, or 22.1%, to $2.45 billion at September 30, 2021 compared to $2.01 billion at June 30, 2021. The primary cause of the increase was a $386.6 million increase in interest earning deposits with other banks, primarily a result of increased CCBX deposits during the quarter ended September 30, 2021, combined with $47.5 million increase in loans receivable even after experiencing $130.8 million in PPP loan forgiveness and paydowns. Total assets increased $702.0 million, or 40.1%, at September 30, 2021, compared to $1.75 billion at September 30, 2020. This increase was largely the result of a $470.0 million increase in interest earning deposits with other banks including the Federal Reserve, combined with $196.5 million increase in loans receivable.

Total loans receivable increased $47.5 million to $1.71 billion at September 30, 2021, from $1.66 billion at June 30, 2021, and increased $196.3 million from $1.51 billion at September 30, 2020. The increase in loans receivable over the quarter ended June 30, 2021 was the result of $176.1 million in non-PPP loan growth partially offset by $130.8 million in forgiveness, payoffs or principal paydowns on PPP loans. The $176.1 million increase in non-PPP loans includes CCBX loan growth of $86.7 million, and core banking loan growth, which excludes PPP loans and CCBX loans, of $89.4 million during the three months ended September 30, 2021. CCBX loans totaled $190.1 million at September 30, 2021 compared to $103.5 million at June 30, 2021 and $43.8 million at September 30, 2020. Total loans receivable as of September 30, 2021 is net of $14.5 million in net deferred origination fees, $9.4 million of which is attributed to PPP loans. Deferred fees on PPP loans are earned over the life of the loan. Loans that were originated in 2020 are primarily two year loans with some being 5 year loans with $16.2 million of these loans remaining as of September 30, 2021, and all PPP loans originated in 2021 have five year maturities, with $251.1 million of these loans remaining as of September 30, 2021. Along with an increase in loans receivable as of September 30, 2021 compared to June 30, 2021, unused commitments also increased during the same period, with the unused commitments on capital call lines increasing $60.6 million to $347.4 million at September 30, 2021 compared to $286.8 million at June 30, 2021, which should translate into future loan growth as the commitments are utilized. The increase in loans receivable over the quarter ended September 30, 2020 includes growth of $385.4 million in non-PPP loans, partially offset by a $185.6 million decrease in PPP loans as of September 30, 2021. Non-PPP loan growth consists of $117.7 million in capital call lines, $132.2 million in commercial real estate loans, $57.8 million in construction, land and land development loans, $49.0 million in residential real estate loans, and $15.5 million in other commercial and industrial loans. Consumer loans increased $13.2 million, primarily due to growth in CCBX.

The following table summarizes the loan portfolio at the periods indicated.

As of September 30, 2021 June 30, 2021 September 30, 2020 (Dollars in % to % to % tothousands; Balance Total Balance Total Balance Total unaudited) Commercial andindustrial loans:PPP loans $ 267,278 15.5 % $ 398,038 23.8 % $ 452,846 29.8 %Capital call 161,457 9.4 98,905 5.9 43,776 2.9 linesAll othercommercial & 108,120 6.3 102,775 6.1 92,582 6.0 industrialloansReal estate loans:Construction,land andland 158,710 9.2 116,733 7.0 100,955 6.6 developmentloansResidentialreal estate 170,167 9.9 143,574 8.6 121,147 8.0 loansCommercialreal estate 837,342 48.7 807,711 48.2 705,186 46.4 loansConsumer and 17,140 1.0 7,161 0.4 3,927 0.3 other loansGross loans 1,720,214 100.0 % 1,674,897 100.0 % 1,520,419 100.0 %receivableNet deferredorigination (9,417 ) (12,363 ) (8,586 ) fees -PPP loansNet deferredorigination (5,115 ) (4,385 ) (2,444 ) fees -Other loansLoans $ 1,705,682 $ 1,658,149 $ 1,509,389 receivable

Please see Appendix A for additional loan portfolio detail regarding industry concentrations.

The following table details the CCBX loans which are included in the total loan portfolio table above.

As of September 30, 2021 June 30, 2021 September 30, 2020 (Dollars in % to % to % tothousands; Balance Total Balance Total Balance Total unaudited) Commercialand industrialloans:Capital $ 161,457 84.9 % $ 98,905 95.6 % $ 43,776 99.9 %call linesReal estate loans:Residentialreal estate 14,039 7.4 - 0.0 - 0.0 loansConsumerand other loans:Credit 1,711 0.9 1,850 1.8 1 0.0 cardsOtherconsumer 12,937 6.8 2,721 2.6 47 0.1 loansGross CCBXloans 190,144 100.0 % 103,476 100.0 % 43,824 100.0 %receivable

Total deposits increased $421.9 million, or 23.4%, to $2.22 billion at September 30, 2021 from $1.8 billion at June 30, 2021. The increase was due primarily to a $424.3 million increase in core deposits, which is primarily the result of growth in CCBX partners and expanding and growing banking relationships with new customers. Deposits in our CCBX division increased $339.8 million, from $267.4 million at June 30, 2021, to $607.2 million at September 30, 2021. The deposits from our CCBX division are predominately classified as noninterest bearing, or NOW and money market accounts, but a portion of such CCBX deposits may be classified as brokered deposits as a result of the relevant relationship agreement. Currently, the majority of CCBX deposits are noninterest bearing, however, as the Federal Reserve Open Market Committee raises interest rates, a majority of these accounts will bear interest and be reclassified to interest bearing deposits once rates exceed the minimum interest rate set in their respective program agreements and begin to earn interest. During the quarter ended September 30, 2021, noninterest bearing deposits increased $408.5 million, or 46.0%, to $1.30 billion from $887.9 million at June 30, 2021. Included in the increase in noninterest bearing deposits is an increase in CCBX division deposits of $339.8 million for the quarter ended September 30, 2021. In the third quarter of 2021 compared to the second quarter of 2021, NOW and money market accounts increased $12.8 million, and savings accounts increased $3.0 million. BaaS-brokered deposits increased $1.0 million, or 3.7%, and time deposits decreased $3.5 million, or 6.9% in the third quarter of 2021 compared to the second quarter of 2021.

Total deposits increased $863.5 million, or 63.5%, to $2.22 billion at September 30, 2021 compared to $1.36 billion at September 30, 2020. Noninterest bearing deposits increased $725.8 million, or 127.2%, to $1.30 billion at September 30, 2021 from $570.7 million at September 30, 2020. NOW and money market accounts increased $130.9 million, or 21.0%, to $755.8 million at September 30, 2021, and savings accounts increased $21.5 million, or 28.8%, and BaaS-brokered deposits increased $3.5 million, or 14.2% while time deposits decreased $18.2 million, or 28.0%. The overall increase in deposits was achieved despite a decrease of $26.4 million in total deposits compared to September 30, 2020 due to the sale of our Freeland branch which included deposits. Additionally, as of September 30, 2021 we have access to $331.1 million in CCBX customer deposits that are currently being transferred or swept off the Banks balance sheet to other financial institutions on a daily basis. The Bank could retain these deposits for liquidity and funding purposes if needed. If a portion of these deposits are retained, they would be classified as brokered deposits, however if the entire available balance is retained, they would be non-brokered deposits. Efforts to retain and grow core deposits are evidenced by the high ratios in these categories when compared to total deposits.

The following table summarizes the deposit portfolio at the periods indicated.

As of September 30, 2021 June 30, 2021 September 30, 2020 (Dollars in % to % to % tothousands, Balance Total Balance Total Balance Total unaudited) Demand,noninterest $ 1,296,443 58.3 % $ 887,896 49.3 % $ 570,664 42.0 %bearingNOW and money 755,810 34.0 743,014 41.2 624,891 45.9 marketSavings 96,192 4.3 93,224 5.2 74,694 5.5 Total core 2,148,445 96.6 1,724,134 95.7 1,270,249 93.4 depositsBaaS-brokered 28,396 1.3 27,388 1.5 24,870 1.8 depositsTime depositsless than 32,937 1.5 34,809 1.9 41,676 3.1 $250,000Time deposits$250,000 and 13,762 0.6 15,347 0.9 23,216 1.7 overTotal deposits $ 2,223,540 100.0 % $ 1,801,678 100.0 % $ 1,360,011 100.0 %

The following table details the CCBX deposits which are included in the total deposit portfolio table above.

As of September 30, 2021 June 30, 2021 September 30, 2020 (Dollars in % to % to % tothousands, Balance Total Balance Total Balance Total unaudited) Demand,noninterest $ 573,985 94.5 % $ 230,185 86.1 % $ 18,215 35.3 %bearingInterest 4,837 0.8 9,810 3.7 8,489 16.5 bearingTotal core 578,822 95.3 239,995 89.8 26,704 51.8 depositsBaaS-brokered 28,395 4.7 27,387 10.2 24,869 48.2 depositsTotal CCBX $ 607,217 100.0 % $ 267,382 100.0 % $ 51,573 100.0 %deposits

The Federal Home Loan Bank (FHLB) allows us to borrow against our line of credit, which is collateralized by certain loans. As of September 30, 2021, we borrowed a total of $25.0 million in FHLB term advances. This includes a $10.0 million advance that matures in March of 2023 and $15.0 million advance that matures in March 2025. These advances provide an alternative and stable source of funding for loan demand. Although there are no immediate plans to borrow additional funds, additional FHLB borrowing capacity of $95.4 million was available under this arrangement as of September 30, 2021.

During the quarter ended September 30, 2021, the Company entered into a $25.0 million subordinated note purchase agreement with a current rate of 3.375%, some of the proceeds of which were used to repay an existing $10.0 million in subordinated debt at a higher 5.65% interest rate. A total of $11.5 million was contributed to the Bank, and the balance of the amount was retained in cash at the Company level.

Total shareholders equity increased $7.0 million since June 30, 2021. The increase in shareholders equity was primarily due to $6.7 million in net earnings for the three months ended September 30, 2021.

Capital Ratios

The Company and the Bank remain well capitalized at September 30, 2021, as summarized in the following table.

Coastal Coastal Financial InstitutionCapital Ratios: Community Financial Basel III Regulatory Bank Corporation Guidelines(unaudited) Tier 1 leverage 8.14 % 7.48 % 5.00 %capitalAdjusted Tier 1leverage capital 9.54 % 8.77 % 5.00 %ratio, excluding PPPloans^ (1)Common Equity Tier 1 11.07 % 9.94 % 6.50 %risk-based capitalTier 1 risk-based 11.07 % 10.15 % 8.00 %capitalTotal risk-based 12.32 % 12.95 % 10.00 %capital(1) A reconciliation of the non-GAAP measure is set forth at the end of this earnings release.

Asset Quality

The allowance for loan losses was $20.2 million and 1.19% of loans receivable at September 30, 2021 compared to $20.0 million and 1.20% at June 30, 2021 and $17.0 million and 1.13% at September 30, 2020. At September 30, 2021, there was $267.3 million in PPP loans, which are 100% guaranteed by the SBA. Adjusted allowance for loan losses to loans receivable, excluding PPP loans* was 1.40% for the quarter ended September 30, 2021. Provision for loan losses totaled $255,000 for the three months ended September 30, 2021, $361,000 for the three months ended June 30, 2021, and $2.2 million for the three months ended September 30, 2020. Net recoveries totaled $1,000 for the quarter ended September 30, 2021, compared to net charge-offs of $5,000 for the quarter ended June 30, 2021 and $1,000 for the quarter ended September 30, 2020.

The Companys provision for loan losses during the quarter ended September 30, 2021, is related to an increase in non-PPP loan growth. The factors used in managements analysis of the provision for loan losses indicated that a provision of $255,000 and $361,000 was needed for the quarters ended September 30, 2021 and June 30, 2021, respectively. The expected loan losses did not materialize as originally anticipated in 2020 due to the COVID-19 pandemic and related economic slowdown, as evidenced by the low level of charge-offs and nonperforming loans. The economic environment is continuously changing and has shown signs of improvement, with the United States implementing stimulus packages, ongoing vaccination of its population and increased re-opening of economic activities. The Company is not required to implement the provisions of the Current Expected Credit Loss accounting standard until January 1, 2023 and continues to account for the allowance for credit losses under the incurred loss model.

At September 30, 2021, our nonperforming assets were $740,000, or 0.03% of total assets, compared to $648,000, or 0.03%, of total assets at June 30, 2021, and $4.5 million, or 0.26%, of total assets at September 30, 2020. Nonperforming assets increased $92,000 during the quarter ended September 30, 2021, compared to the quarter ended June 30, 2021, due to $123,000 in CCBX loans that are past due 90 days or more and still accruing interest. There were no repossessed assets or other real estate owned at September 30, 2021. Our nonperforming loans to loans receivable ratio was 0.04% at September 30, 2021 and June 30, 2021, compared to 0.30% at September 30, 2020.

For the quarter ended September 30, 2021, we have not seen a significant change in our credit quality metrics, as demonstrated by the low level of charge-offs and nonperforming loans. The long-term economic impact of the COVID-19 pandemic, political gridlock, and trade issues is unknown; however, the Company remains diligent in its efforts to communicate and proactively work with borrowers to help mitigate potential credit deterioration.

Pursuant to federal guidance, the Company deferred and/or modified payments on loans to assist customers financially during the COVID-19 pandemic and economic shutdown. A total of $246.4 million in loans were deferred and/or modified under this guidance. As of the quarter ended September 30, 2021, all loans have either been paid off or returned to active status. The purpose of this program was to provide cash flow relief for small business customers as they navigate through the uncertainties of the COVID-19 pandemic. The Companys deferral program has been successful as evidenced by customers ability to migrate from deferral to active status and resume making payments as planned.

The following table details the Companys nonperforming assets for the periods indicated.

September June September 30, 30, 30,(Dollars in thousands, unaudited) 2021 2021 2020 Nonaccrual loans: Commercial and industrial loans $ 561 $ 482 $ 625 Real estate: Construction, land and land - - 3,269 developmentResidential real estate 56 166 178 Commercial real estate - - 405 Total nonaccrual loans 617 648 4,477 Accruing loans past due 90 days or more:Total accruing loans past due 90 days 123 - - or moreTotal nonperforming loans 740 648 4,477 Other real estate owned - - - Repossessed assets - - - Total nonperforming assets $ 740 $ 648 $ 4,477 Troubled debt restructurings, - - - accruingTotal nonperforming loans to loans 0.04 % 0.04 % 0.30 %receivableTotal nonperforming assets to total 0.03 % 0.03 % 0.26 %assets



A reconciliation of the non-GAAP measures are set forth at the end of thisearnings release.

About Coastal Financial

Coastal Financial Corporation (Nasdaq: CCB) (the Company), is an Everett, Washington based bank holding company whose wholly owned subsidiaries are Coastal Community Bank (Bank) and Arlington Olympic LLC. The $2.45 billion Bank provides service through 14 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application. The Bank provides banking as a service to broker dealers and digital financial service providers through its CCBX Division. To learn more about Coastal visit www.coastalbank.com.

Contact

Eric Sprink, President & Chief Executive Officer, (425) 357-3659Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our managements expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as anticipate, believes, can, could, may, predicts, potential, should, will, estimate, plans, projects, continuing, ongoing, expects, intends and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of or reference to forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the risks and uncertainties discussed under Risk Factors in our Annual Report on Form 10-K for the most recent period filed, our Quarterly Report on Form 10-Q for the most recent quarter, and in any of our subsequent filings with the Securities and Exchange Commission.

If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. You are cautioned not to place undue reliance on forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law.

COASTAL FINANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Dollars in thousands; unaudited)

ASSETS September June 30, September 30, 30, 2021 2021 2020 Cash and due from banks $ 31,722 $ 31,473 $ 14,136 Interest earning deposits with 638,003 251,416 168,034 other banksInvestment securities,available for sale, at fair 32,838 25,341 20,428 valueInvestment securities, held to 2,086 2,101 3,354 maturity, at amortized costOther investments 8,349 6,839 5,951 Loans receivable 1,705,682 1,658,149 1,509,389 Allowance for loan losses (20,222 ) (19,966 ) (17,046 )Total loans receivable, net 1,685,460 1,638,183 1,492,343 Premises and equipment, net 17,231 17,207 16,881 Operating lease right-of-use 6,372 6,637 7,379 assetsAccrued interest receivable 7,549 8,108 8,216 Bank-owned life insurance, net 12,166 12,056 7,031 Deferred tax asset, net 3,807 3,808 2,722 Other assets 5,985 3,969 3,144 Total assets $ 2,451,568 $ 2,007,138 $ 1,749,619 LIABILITIES AND SHAREHOLDERS? EQUITY LIABILITIES Deposits $ 2,223,540 $ 1,801,678 $ 1,360,011 Federal Home Loan Bank advances 24,999 24,999 24,999 Paycheck Protection Program - - 202,595 Liquidity FacilitySubordinated debt, net 24,269 10,000 9,989 Junior subordinated debentures, 3,586 3,585 3,584 netDeferred compensation 774 803 891 Accrued interest payable 147 179 481 Operating lease liabilities 6,583 6,845 7,579 Other liabilities 6,584 4,949 4,258 Total liabilities 2,290,482 1,853,038 1,614,387 SHAREHOLDERS? EQUITY Common stock 88,997 88,699 87,479 Retained earnings 72,083 65,399 47,707 Accumulated other comprehensive 6 2 46 income, net of taxTotal shareholders? equity 161,086 154,100 135,232 Total liabilities and $ 2,451,568 $ 2,007,138 $ 1,749,619 shareholders? equity

COASTAL FINANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Dollars in thousands, except per share amounts; unaudited)

Three Months Ended September 30, June 30, September 30, 2021 2021 2020 INTEREST AND DIVIDEND INCOME Interest and fees on loans $ 19,383 $ 19,365 $ 16,244 Interest on interest earning 170 74 99 deposits with other banksInterest on investment 24 24 27 securitiesDividends on other 31 108 24 investmentsTotal interest and dividend 19,608 19,571 16,394 incomeINTEREST EXPENSE Interest on deposits 523 628 880 Interest on borrowed funds 278 331 418 Total interest expense 801 959 1,298 Net interest income 18,807 18,612 15,096 PROVISION FOR LOAN LOSSES 255 361 2,200 Net interest income after 18,552 18,251 12,896 provision for loan lossesNONINTEREST INCOME - BaaS fees 2,286 1,424 576 Unrealized holding gain on 1,472 - - equity securities, netDeposit service charges and 956 949 824 feesLoan referral fees 723 806 180 Gain on sales of loans, net 206 31 47 Mortgage broker fees 187 253 125 Gain on sale of branch - 1,263 - Other income 302 56 190 Total noninterest income 6,132 4,782 1,942 NONINTEREST EXPENSE Salaries and employee 9,961 8,913 5,971 benefitsOccupancy 1,037 990 1,091 Software licenses,maintenance and 817 543 337 subscriptionsLegal and professional fees 796 626 381 Data processing 761 734 577 BaaS expense 715 99 100 Excise taxes 407 388 291 Federal Deposit Insurance 400 225 148 Corporation assessmentsDirector and staff expenses 274 318 156 Marketing 130 132 52 Other expense 832 763 562 Total noninterest expense 16,130 13,731 9,666 Income before provision for 8,554 9,302 5,172 income taxesPROVISION FOR INCOME TAXES 1,870 2,289 1,082 NET INCOME $ 6,684 $ 7,013 $ 4,090 Basic earnings per common $ 0.56 $ 0.59 $ 0.34 shareDiluted earnings per common $ 0.54 $ 0.56 $ 0.34 shareWeighted average number of common shares outstanding:Basic 11,999,899 11,984,927 11,919,850 Diluted 12,456,674 12,459,467 12,181,272

COASTAL FINANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Dollars in thousands, except per share amounts; unaudited)

Nine Months Ended September 30, September 30, 2021 2020 INTEREST AND DIVIDEND INCOME Interest and fees on loans $ 56,978 $ 44,025 Interest on interest earning deposits with 314 587 other banksInterest on investment securities 76 199 Dividends on other investments 169 129 Total interest and dividend income 57,537 44,940 INTEREST EXPENSE Interest on deposits 1,811 3,530 Interest on borrowed funds 992 957 Total interest expense 2,803 4,487 Net interest income 54,734 40,453 PROVISION FOR LOAN LOSSES 973 5,708 Net interest income after provision for loan 53,761 34,745 lossesNONINTEREST INCOME BaaS fees 4,658 1,630 Unrealized holding gain on equity securities, 1,472 netDeposit service charges and fees 2,768 2,224 Loan referral fees 2,126 1,303 Gain on sales of loans, net 367 47 Mortgage broker fees 702 439 Gain on sale of branch 1,263 - Other 542 490 Total noninterest income 13,898 6,133 NONINTEREST EXPENSE Salaries and employee benefits 26,560 16,869 Occupancy 3,085 2,951 Software licenses, maintenance and 1,844 919 subscriptionsLegal and professional fees 2,182 1,178 Data processing 2,192 1,749 BaaS expense 905 191 Excise taxes 1,154 756 Federal Deposit Insurance Corporation 820 292 assessmentsDirector and staff expenses 812 613 Marketing 344 280 Other 2,315 1,832 Total noninterest expense 42,213 27,630 Income before provision for income taxes 25,446 13,248 PROVISION FOR INCOME TAXES 5,731 2,763 NET INCOME $ 19,715 $ 10,485 Basic earnings per common share $ 1.65 $ 0.88 Diluted earnings per common share $ 1.58 $ 0.86 Weighted average number of common shares outstanding:Basic 11,982,009 11,915,513 Diluted 12,465,346 12,183,845

COASTAL FINANCIAL CORPORATIONAVERAGE BALANCES, YIELDS, AND RATES QUARTERLY(Dollars in thousands; unaudited)

September 30, 2021 June 30, 2021 September 30, 2020 Average Interest Yield Average Interest Yield Average Interest Yield & / & / & / Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost (4) (4) (4)Assets Interest earning assets:Interest earning $ 419,715 $ 170 0.16 % $ 235,187 $ 74 0.13 % $ 137,568 $ 99 0.29 %depositsInvestment 33,788 24 0.28 25,000 24 0.39 23,882 27 0.45 securities (1)Other 6,859 31 1.79 6,835 108 6.34 5,951 24 1.60 investmentsLoans receivable 1,681,069 19,383 4.57 1,750,825 19,365 4.44 1,493,024 16,244 4.33 (2)Total interest 2,141,431 19,608 3.63 2,017,847 19,571 3.89 1,660,425 16,394 3.93 earning assetsNoninterest earning assets:Allowance for (20,102 ) (19,733 ) (15,711 ) loan lossesOthernoninterest 77,221 76,727 60,160 earning assetsTotal assets $ 2,198,550 $ 2,074,841 $ 1,704,874 Liabilities and Shareholders? Equity Interest bearing liabilities:Interest bearing $ 919,792 $ 523 0.23 % $ 901,120 $ 628 0.28 % $ 750,790 $ 880 0.47 %depositsSubordinated 17,073 185 4.30 9,998 146 5.86 9,987 148 5.90 debt, netJuniorsubordinated 3,586 21 2.32 3,585 21 2.35 3,584 23 2.55 debentures, netPPPLF borrowings - - 0.00 107,047 94 0.35 199,076 176 0.35 FHLB advancesand other 24,999 72 1.14 24,999 70 1.12 24,999 71 1.13 borrowingsTotal interestbearing 965,450 801 0.33 1,046,749 959 0.37 988,436 1,298 0.52 liabilitiesNoninterest 1,061,311 863,962 569,615 bearing depositsOther 13,705 12,887 12,781 liabilitiesTotalshareholders' 158,084 151,243 134,042 equityTotal liabilities andshareholders' $ 2,198,550 $ 2,074,841 $ 1,704,874 equityNet interest $ 18,807 $ 18,612 $ 15,096 incomeInterest rate 3.30 % 3.52 % 3.41 %spreadNet interest 3.48 % 3.70 % 3.62 %margin (3) (1) For presentation in this table, average balances and the correspondingaverage rates for investment securities are based upon historical cost, adjustedfor amortization of premiums and accretion of discounts.(2) Includes nonaccrual loans. (3) Net interest margin represents net interest income divided by the average total interest earning assets.(4) Yields and costs are annualized.

COASTAL FINANCIAL CORPORATIONAVERAGE BALANCES, YIELDS, AND RATES YEAR-TO-DATE(Dollars in thousands; unaudited)

For the Nine Months Ended September 30, 2021 September 30, 2020 Average Interest Yield Average Interest Yield & / & / Balance Dividends Cost Balance Dividends Cost (4) (4)Assets Interestearning assets:Interestearning $ 284,225 $ 314 0.15 % $ 122,941 $ 587 0.64 %depositsInvestmentsecurities 27,693 76 0.37 24,252 199 1.10 (1)Other 6,594 169 3.43 5,435 129 3.17 InvestmentsLoansreceivable 1,690,817 56,978 4.51 1,265,705 44,025 4.65 (2)Totalinterest 2,009,329 57,537 3.83 1,418,333 44,940 4.23 earningassetsNoninterestearning assets:Allowance for (19,744 ) (13,651 ) loan lossesOthernoninterest 73,328 57,830 earningassetsTotal assets $ 2,062,913 $ 1,462,512 Liabilitiesand Shareholders?EquityInterestbearing liabilities:Interestbearing $ 892,574 $ 1,811 0.27 % $ 696,051 $ 3,530 0.68 %depositsSubordinated 12,381 477 5.15 9,984 441 5.90 debt, netJuniorsubordinated 3,585 63 2.35 3,583 83 3.09 debentures,netPPPLF 91,850 240 0.35 102,527 269 0.35 borrowingsFHLB advancesand other 24,999 212 1.13 19,304 164 1.13 borrowingsTotalinterest 1,025,389 2,803 0.37 831,449 4,487 0.72 bearingliabilitiesNoninterestbearing 873,271 488,296 depositsOther 12,798 12,607 liabilitiesTotalshareholders' 151,455 130,160 equityTotalliabilities andshareholders' $ 2,062,913 $ 1,462,512 equityNet interest $ 54,734 $ 40,453 incomeInterest rate 3.46 % 3.51 %spreadNet interest 3.64 % 3.81 %margin (3) (1) For presentation in this table, average balances and the correspondingaverage rates for investment securities are based upon historical cost, adjusted for amortization of premiums andaccretion of discounts.(2) Includes nonaccrual loans. (3) Net interest margin represents net interest income divided by the average total interest earning assets.(4) Yields and costs are annualized.

COASTAL FINANCIAL CORPORATIONQUARTERLY STATISTICS(Dollars in thousands, except share and per share data; unaudited)

Three Months Ended September June 30, March 31, December 31, September 30, 30, 2021 2021 2021 2020 2020 IncomeStatement Data:Interest anddividend $ 19,608 $ 19,571 $ 18,358 $ 18,098 $ 16,394 incomeInterest 801 959 1,043 1,165 1,298 expenseNet interest 18,807 18,612 17,315 16,933 15,096 incomeProvision for 255 361 357 2,600 2,200 loan lossesNet interest income afterprovision for 18,552 18,251 16,958 14,333 12,896 loan lossesNoninterest 6,132 4,782 2,984 2,049 1,942 incomeNoninterest 16,130 13,731 12,352 10,489 9,666 expenseProvision for 1,870 2,289 1,572 1,232 1,082 income taxNet income 6,684 7,013 6,018 4,661 4,090 Net income -pre-tax, 8,809 9,663 7,947 8,493 7,372 pre-provision(1) As of and for the Three Month Period September June 30, March 31, December 31, September 30, 30, 2021 2021 2021 2020 2020 Balance Sheet Data:Cash and cash $ 669,725 $ 282,889 $ 204,314 $ 163,117 $ 182,170 equivalentsInvestment 34,924 27,442 22,893 23,247 23,782 securitiesLoans 1,705,682 1,658,149 1,766,723 1,547,138 1,509,389 receivableAllowance for (20,222 ) (19,966 ) (19,610 ) (19,262 ) (17,046 )loan lossesTotal assets 2,451,568 2,007,138 2,029,359 1,766,122 1,749,619 Interestbearing 927,097 913,782 903,025 829,046 789,347 depositsNoninterestbearing 1,296,443 887,896 768,690 592,261 570,664 depositsCore deposits 2,148,445 1,724,134 1,590,850 1,328,195 1,270,249 (2)Total 2,223,540 1,801,678 1,671,715 1,421,307 1,360,011 depositsTotal 52,854 38,584 197,099 192,292 241,167 borrowingsTotalshareholders? 161,086 154,100 146,739 140,217 135,232 equity Share and PerShare Data (3):Earnings per $ 0.56 $ 0.59 $ 0.50 $ 0.39 $ 0.34 share ? basicEarnings pershare ? $ 0.54 $ 0.56 $ 0.49 $ 0.38 $ 0.34 dilutedDividends per - - - - - shareBook value $ 13.41 $ 12.83 $ 12.24 $ 11.73 $ 11.34 per share (4)Tangible bookvalue per $ 13.41 $ 12.83 $ 12.24 $ 11.73 $ 11.34 share (5)Weighted avgoutstanding 11,999,899 11,984,927 11,960,772 11,936,289 11,919,850 shares ?basicWeighted avgoutstanding 12,456,674 12,459,467 12,393,493 12,280,191 12,181,272 shares ?dilutedSharesoutstanding 12,012,107 12,007,669 11,988,636 11,954,327 11,930,243 at end ofperiodStock optionsoutstanding 710,182 714,620 728,492 749,397 769,607 at end ofperiod See footnoteson following page As of and for the Three Month Period September June 30, March 31, December 31, September 30, 30, 2021 2021 2021 2020 2020 Credit Quality Data:Nonperformingassets to 0.03 % 0.03 % 0.03 % 0.04 % 0.26 %total assetsNonperformingassets toloans 0.04 % 0.04 % 0.04 % 0.05 % 0.30 %receivableand OREONonperformingloans to 0.04 % 0.04 % 0.04 % 0.05 % 0.30 %total loansreceivableAllowance forloan lossesto 2732.7 % 3081.2 % 2966.7 % 2705.3 % 380.7 %nonperformingloansAllowance forloan lossesto total 1.19 % 1.20 % 1.11 % 1.25 % 1.13 %loansreceivableAllowance forloan lossesto loans 1.40 % 1.57 % 1.59 % 1.62 % 1.60 %receivable,as adjusted(1)Gross $ 31 $ 12 $ 18 $ 386 $ 2 charge-offsGross $ 32 $ 7 $ 9 $ 2 $ 1 recoveriesNetcharge-offs 0.00 % 0.00 % 0.00 % 0.10 % 0.00 %to averageloans (6) Capital Ratios (7):Tier 1leverage 7.48 % 8.00 % 8.62 % 9.05 % 9.20 %capitalCommon equityTier 1 9.94 % 10.92 % 10.89 % 11.27 % 12.14 %risk-basedcapitalTier 1risk-based 10.15 % 11.16 % 11.15 % 11.55 % 12.45 %capitalTotalrisk-based 12.95 % 13.12 % 13.15 % 13.61 % 14.61 %capital (1) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.(2) Core deposits are defined as all deposits excluding brokered and all time deposits.(3) Share and per share amounts are based on total common shares outstanding. (4) We calculate book value per share as total shareholders? equity at the endof the relevant period divided by the outstanding number of our common shares at the end of each period.(5) Tangible book value per share is a non-GAAP financial measure. We calculatetangible book value per share as total shareholders?equity at the end of the relevant period, less goodwill and other intangibleassets, divided by the outstanding number of ourcommon shares at the end of each period. The most directly comparable GAAP financial measure is book value per share. Wehad no goodwill or other intangible assets as of any of the dates indicated. Asa result, tangible book value per share is thesame as book value per share as of each of the dates indicated.(6)Annualized calculations.(7) Capital ratios are for the Company, Coastal Financial Corporation.

BaaS

The following tables are a summary of the direct fees, expenses and interest components of BaaS for the periods indicated and are not inclusive of all income and expense related to BaaS.

Interest Three Months Nine Months income Ended September 30, Increase Ended September 30, Increase (Dollarsin 2021 2020 (Decrease) 2021 2020 (Decrease) thousands)Loaninterest $ 1,471 $ 279 $ 1,192 $ 2,761 $ 447 $ 2,314 incomeTotal BaaSinterest $ 1,471 $ 279 $ 1,192 $ 2,761 $ 447 $ 2,314 income

Interest Three Months Nine Months expense Ended September Increase Ended September Increase 30, 30,(Dollarsin 2021 2020 (Decrease) 2021 2020 (Decrease) thousands)BaaSinterest $ 23 $ 24 $ (1 ) $ 65 $ 155 $ (90 )expenseTotal BaaSinterest $ 23 $ 24 $ (1 ) $ 65 $ 155 $ (90 )expense

Noninterest Three Months Nine Months income Ended September 30, Increase Ended September 30, Increase (Dollars in 2021 2020 (Decrease) 2021 2020 (Decrease) thousands)Servicingand other $ 1,792 $ 572 $ 1,220 $ 4,019 $ 1,626 $ 2,393 BaaS feesFraud 296 - 296 296 - 296 recoveryCreditenhancement 10 - 10 10 - 10 recoveryInterchange 188 4 184 333 4 329 Total BaaS $ 2,286 $ 576 $ 1,710 $ 4,658 $ 1,630 $ 3,028 fees

Noninterest Three Months Nine Months expense Ended September 30, Increase Ended September 30, Increase (Dollars in 2021 2020 (Decrease) 2021 2020 (Decrease) thousands)BaaS loan expense $ 419 $ 100 $ 319 $ 609 $ 191 $ 418 BaaS fraud expense 296 - 296 296 - 296 Total BaaS expense $ 715 $ 100 $ 615 $ 905 $ 191 $ 714

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Companys operational performance and to enhance investors overall understanding of such financial performance. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.

The following non-GAAP measures are presented to illustrate the impact of provision for loan losses and provision for income taxes on net income and return on average assets.

Pre-tax, pre-provision net income is a non-GAAP measure that excludes the impact of provision for loan losses and provision for income taxes from net income. The most directly comparable GAAP measure is net income.

Pre-tax, pre-provision return on average assets is a non-GAAP measure that excludes the impact of provision for loan losses and provision for income taxes from return on average assets. The most directly comparable GAAP measure is return on average assets.

Reconciliations of the GAAP and non-GAAP measures are presented below.

As of and for the Three Months Ended As of and for the Nine Months Ended(Dollars in September30, June 30, March31, December31, September30, September30, September30,thousands, 2021 2021 2021 2020 2020 2021 2020 unaudited)Pre-tax, pre-provision net income and pre-tax, pre-provision return on average assets:Total average $ 2,198,550 $ 2,074,841 $ 1,912,202 $ 1,774,723 $ 1,704,874 $ 2,062,913 $ 1,462,512 assetsTotal net 6,684 7,013 6,018 4,661 4,090 19,715 10,485 incomePlus:provision for 255 361 357 2,600 2,200 973 5,708 loanlossesPlus:provision for 1,870 2,289 1,572 1,232 1,082 5,731 2,763 income taxesPre-tax,pre-provision $ 8,809 $ 9,663 $ 7,947 $ 8,493 $ 7,372 $ 26,419 $ 18,956 net incomeReturn onaverage 1.21 % 1.36 % 1.28 % 1.04 % 0.95 % 1.28 % 0.96 %assetsPre-tax,pre-provisionreturn on 1.59 % 1.87 % 1.69 % 1.90 % 1.72 % 1.71 % 1.73 %averageassets:

The following non-GAAP measure is presented to illustrate the impact of loan fees on contractual loan yield.

Yield on loans receivable, excluding earned fees is a non-GAAP measure that excludes the impact of earned loan fees on the contractual interest rate yield. The most directly comparable GAAP measure is yield on loans.

Reconciliations of the GAAP and non-GAAP measures are presented below.

As of and for the Three Months Ended As of and for the Nine Months Ended(Dollars in September30, June 30, March31, December31, September30, September30, September30,thousands, 2021 2021 2021 2020 2020 2021 2020 unaudited)Yield on loans receivable, excluding earned fees : Totalaverage $ 1,681,069 $ 1,750,825 $ 1,640,108 $ 1,533,533 $ 1,493,024 $ 1,690,817 $ 1,265,705 loansreceivableInterestand earnedfee 19,383 19,365 18,230 17,885 16,244 56,978 44,025 income onloansLess:earned fee (3,533 ) (4,274 ) (3,974 ) (3,765 ) (2,692 ) (11,782 ) (5,303 )income onall loansAdjustedinterest $ 15,850 $ 15,091 $ 14,256 $ 14,120 $ 13,552 $ 45,196 $ 38,722 incomeon loansYield onloans 4.57 % 4.44 % 4.51 % 4.64 % 4.33 % 4.51 % 4.65 %receivableYield onloansreceivable, 3.74 % 3.46 % 3.53 % 3.66 % 3.61 % 3.57 % 4.09 %excludingearnedfees:Yield onloansreceivable,excludingearned feeson all 4.36 % 4.42 % 4.52 % 4.65 % 4.69 % 4.43 % 4.86 %loansandinterest onPPPloans (1):(1) Non-GAAP measure - see next table of "Non-GAAP Financial Measures" for more information.

The following non-GAAP financial measures are presented to illustrate and identify the impact of PPP loans on loans receivable related measures. By removing these items and showing what the results would have been without them, we are providing investors with the information to better compare results with periods that did not have these items. These measures include the following:

Adjusted allowance for loan losses to loans receivable is a non-GAAP measure that excludes the impact of PPP loans on balance sheet. The most directly comparable GAAP measure is allowance for loan losses to loans receivable.

Yield on loans receivable, excluding PPP loans is a non-GAAP measure that excludes the impact of PPP loans on balance sheet and income statement. The most directly comparable GAAP measure is yield on loans.

Yield on loans receivable, excluding earned fees on all loans and interest on PPP loans is a non-GAAP measure that excludes the impact of earned fees and PPP loans on the balance sheet and income statement. The most directly comparable GAAP measure is yield on loans.

Adjusted Tier 1 leverage capital ratio, excluding PPP loans is a non-GAAP measure that excludes the impact of PPP loans on balance sheet. The most directly comparable GAAP measure is Tier 1 leverage capital ratio.

Reconciliations of the GAAP and non-GAAP measures are presented below.

As of and for the As of and for the Three Months Ended Nine Months Ended (Dollars in September June March December September September Septemberthousands, 30, 30, 31, 31, 30, 30, 30, unaudited) 2021 2021 2021 2020 2020 2021 2020Adjusted allowance for loan losses to loans receivable, excluding PPP loans: Total loans,net of $ 1,705,682 $ 1,658,149 $ 1,766,723 $ 1,547,138 $ 1,509,389 $ 1,705,682 $ 1,509,389 deferredfeesLess: PPP (267,278 ) (398,038 ) (543,827 ) (365,842 ) (452,846 ) (267,278 ) (452,846 )loansLess: netdeferred 9,417 12,363 14,279 5,803 8,586 9,417 8,586 fees onPPP loansAdjustedloans, netof $ 1,447,820 $ 1,272,474 $ 1,237,175 $ 1,187,099 $ 1,065,129 $ 1,447,821 $ 1,065,129 deferredfeesAllowancefor loan $ (20,222 ) $ (19,966 ) $ (19,610 ) $ (19,262 ) $ (17,046 ) $ (20,222 ) $ (17,046 )lossesAllowancefor loanlosses to 1.19 % 1.20 % 1.11 % 1.25 % 1.13 % 1.19 % 1.13 %loansreceivableAdjustedallowancefor loanlosses to 1.40 % 1.57 % 1.59 % 1.62 % 1.60 % 1.40 % 1.60 %loansreceivable,excludingPPP loansYield on loans receivable, excluding PPP loans:Totalaverage $ 1,681,069 $ 1,750,825 $ 1,640,108 $ 1,533,533 $ 1,493,024 $ 1,690,817 $ 1,265,705 loansreceivableLess:average PPP (322,595 ) (509,265 ) (475,941 ) (424,290 ) (448,313 ) (435,372 ) (261,854 )loansPlus:averagedeferred 11,639 14,213 10,788 7,385 9,599 12,216 6,112 fees onPPP loansAdjustedtotalaverage $ 1,370,113 $ 1,255,773 $ 1,174,955 $ 1,116,628 $ 1,054,310 $ 1,267,661 $ 1,009,964 loansreceivableInterestincome on $ 19,383 $ 19,365 $ 18,230 $ 17,885 $ 16,244 $ 56,978 $ 44,025 loansLess:interest anddeferred feeincome (3,744 ) (4,821 ) (4,378 ) (3,847 ) (3,566 ) (12,943 ) (6,325 )recognizedonPPP loansAdjustedinterest $ 15,639 $ 14,544 $ 13,852 $ 14,038 $ 12,678 $ 44,035 $ 37,700 income onloansYield onloans 4.57 % 4.44 % 4.51 % 4.64 % 4.33 % 4.51 % 4.65 %receivableYield onloansreceivable, 4.53 % 4.65 % 4.78 % 5.00 % 4.78 % 4.64 % 4.99 %excludingPPP loans:Yield on loans receivable, excluding earned fees on all loans and interest on PPP loans:Totalaverage $ 1,681,069 $ 1,750,825 $ 1,640,108 $ 1,533,533 $ 1,493,024 $ 1,690,817 $ 1,265,705 loansreceivableLess:average PPP (322,595 ) (509,265 ) (475,941 ) (424,290 ) (448,313 ) (435,372 ) (261,854 )loansPlus:averagedeferred $ 11,639 $ 14,213 $ 10,788 $ 7,385 $ 9,599 $ 12,216 $ 6,112 fees onPPP loansAdjustedtotalaverage $ 1,370,113 $ 1,255,773 $ 1,174,955 $ 1,116,628 $ 1,054,310 $ 1,267,661 $ 1,009,963 loansreceivableInterest andearned fee $ 19,383 $ 19,365 $ 18,230 $ 17,885 $ 16,244 $ 56,978 $ 44,025 incomeon loansLess: earnedfee income $ (3,533 ) $ (4,274 ) $ (3,974 ) $ (3,762 ) $ (2,693 ) $ (11,782 ) $ (5,303 )onall loansLess:interest (796 ) (1,257 ) (1,169 ) (1,064 ) (1,129 ) (3,222 ) (1,966 )income onPPP loansAdjustedinterest $ 15,054 $ 13,834 $ 13,087 $ 13,059 $ 12,422 $ 41,974 $ 36,756 income onloansYield onloans 4.57 % 4.44 % 4.51 % 4.64 % 4.33 % 4.51 % 4.65 %receivableYield onloansreceivable,excluding 3.74 % 3.46 % 3.53 % 4.65 % 3.61 % 3.57 % 4.09 %earned feesonall loans(1):Yield onloansreceivable,excludingearned fees 4.36 % 4.42 % 4.52 % 4.65 % 4.69 % 4.43 % 4.86 %onall loansand interestonPPP loans:(1) Non-GAAP measure - see previous table of "Non-GAAP Financial Measures" for more information.

As of As of(Dollars in thousands, unaudited) September 30, June 30, 2021 2021Adjusted Tier 1 leverage capital ratio, excluding PPP loans: Company: Tier 1 capital $ 164,437 $ 157,450 Average assets for the leverage capital $ 2,198,406 $ 1,967,646 ratioLess: Average PPP loans (322,595 ) (509,265 )Plus: Average PPPLF borrowings - 107,047 Adjusted average assets for the leverage $ 1,875,811 $ 1,565,428 capital ratioTier 1 leverage capital ratio 7.48 % 8.00 %Adjusted Tier 1 leverage capital ratio, 8.77 % 10.06 %excluding PPP loansBank: Tier 1 capital $ 178,857 $ 161,368 Average assets for the leverage capital $ 2,197,276 $ 1,966,528 ratioLess: Average PPP loans (322,595 ) (509,265 )Plus: Average PPPLF borrowings - 107,047 Adjusted average assets for the leverage $ 1,874,681 $ 1,564,310 capital ratioTier 1 leverage capital ratio 8.14 % 8.21 %Adjusted Tier 1 leverage capital ratio, 9.54 % 10.32 %excluding PPP loans

APPENDIX A - As of September 30, 2021

Industry Concentration

We have a diversified loan portfolio, representing a wide variety of industries. Three of our largest categories of our loans are commercial real estate, commercial and industrial, and construction, land and land development loans. Together they represent $1.27 billion in outstanding loan balances, or 87.1% of total gross loans outstanding, excluding PPP loans of $267.3 million. When combined with $589.3 million in unused commitments the total of these three categories is $1.85 billion, or 87.1% of total outstanding loans and loan commitments.

Commercial real estate loans represent the largest segment of our loans, comprising 57.6% of our total balance of outstanding loans, excluding PPP loans, as of September 30, 2021. Unused commitments to extend credit represents an additional $20.9 million, the combined total exposure in commercial real estate loans represents $858.2 million, or 40.3% of our total outstanding loans and loan commitments, excluding PPP loans.

The following table summarizes our exposure by industry for our commercial real estate portfolio as of September 30, 2021:

% of Total(Dollars in Available Loans Average Numberthousands, Outstanding Loan Total (Outstanding Loan of unaudited) Balance Commitments Exposure Balance & Balance Loans Available Commitment)Apartments $ 140,616 $ 2,595 $ 143,211 6.7 % $ 1,926 73 Hotel/Motel 117,924 228 118,152 5.5 4,368 27 Office 92,199 4,513 96,712 4.5 951 97 Retail 84,940 2,672 87,612 4.1 988 86 Convenience 78,361 1,093 79,454 3.7 1,822 43 StoreMixed use 74,521 3,929 78,450 3.7 877 85 Warehouse 76,372 892 77,264 3.6 1,497 51 Mini Storage 39,880 137 40,017 1.9 2,849 14 Manufacturing 37,128 600 37,728 1.8 1,160 32 Groups < 2.0% 95,401 4,247 99,648 4.7 1,239 77 of totalTotal $ 837,342 $ 20,906 $ 858,248 40.3 % $ 1,431 585

Commercial and industrial loans comprise 18.6% of our total balance of outstanding loans, excluding PPP loans, as of September 30, 2021. Unused commitments to extend credit represents an additional $415.9 million, the combined total exposure in commercial and industrial loans represents $685.5 million, or 32.2% of our total outstanding loans and loan commitments, excluding PPP loans.

The following table summarizes our exposure by industry, excluding PPP loans, for our commercial and industrial loan portfolio as of September 30, 2021:

% of Total(Dollars in Available Loans Average Numberthousands, Outstanding Loan Total (Outstanding Loan of unaudited) Balance Commitments Exposure Balance & Balance Loans Available Commitment)Capital Call $ 161,457 $ 347,386 $ 508,843 23.9 % $ 1,509 107 LinesConstruction/Contractor 15,027 29,913 44,940 2.1 98 153 ServicesFinancial 20,150 - 20,150 0.9 3,358 6 InstitutionsMedical /Dental / 12,412 7,155 19,567 0.9 210 59 Other CareManufacturing 12,180 5,041 17,221 0.8 210 58 Retail 9,576 4,348 13,924 0.7 399 24 Groups <0.70% of 38,775 22,033 60,808 2.9 137 284 totalTotal $ 269,577 $ 415,876 $ 685,453 32.2 % $ 390 691

Construction, land and land development loans comprise 10.9% of our total balance of outstanding loans, excluding PPP loans, as of September 30, 2021. Unused commitments to extend credit represents an additional $152.5 million, the combined total exposure in construction, land and land development loans represents $311.3 million, or 14.6% of our total outstanding loans and loan commitments, excluding PPP loans.

The following table details our exposure for our construction, land and land development portfolio as of September 30, 2021:

% of Total(Dollars in Available Loans Average Numberthousands, Outstanding Loan Total (Outstanding Loan of unaudited) Balance Commitments Exposure Balance & Balance Loans Available Commitment)Commercial $ 63,763 $ 123,937 $ 187,700 8.8 % $ 1,993 32 constructionResidential 25,370 19,019 44,389 2.1 793 32 constructionUndeveloped 37,704 3,440 41,144 1.9 2,900 13 land loansDeveloped 17,934 2,240 20,174 0.9 498 36 land loansLand 13,939 3,912 17,851 0.8 871 16 developmentTotal $ 158,710 $ 152,548 $ 311,258 14.6 % $ 1,230 129