ck0001437958-ex991

Everett, WA – 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, 2019. Net income for the third quarter of 2019 was $3.5 million, or $0.29 per diluted common share, compared with net income of $3.3 million, or $0.27 per diluted common share, for the second quarter of 2019.

The Company had net income of $9.6 million for the nine months ended September 30, 2019, or $0.79 per diluted common share, compared to $6.6 million, or $0.66 per diluted common share for the nine months ended September 30, 2018.

Eric Sprink, President and CEO, commented, “We had a strong quarter with earnings of $3.5 million, and loan growth of $28.9 million funded by $62.8 million in core deposit growth. We were extremely pleased to find that we moved into 4^th place in deposit market share in Snohomish County at June 30, 2019, up from 5^th place as compared to one year ago. Additionally, Sandler O’Neill + Partners recognized the Company as a Sm-All Star Class of 2019. Those that make the list have superior performance metrics in growth, profitability, credit quality, and capital strength. After going public last year, this recognizes the hard work and dedication of our board and staff at all levels.”

Net interest income was $10.7 million for the quarter ended September 30, 2019, an increase of 5.3% from $10.2 million for the quarter ended June 30, 2019 and an increase of 21.2% from $8.8 million from the quarter ended September 30, 2018. The increase compared to prior quarter and prior year’s third quarter is related to increased interest income resulting from our continued loan growth and higher loan balances.

Net interest income for the nine months ended September 30, 2019 totaled $30.7 million, an increase of 23.1% compared to $24.9 million for the same period last year. The $5.8 million increase in net interest income over the same period last year was primarily related to loan growth. During the nine months ended September 30, 2019, the average balance of total loans receivable increased by $129.8 million, compared to the same period last year. Increased interest income was partially offset by increased deposit costs from the growth in the balance of our

interest bearing deposits of $86.9 million and an increase in the cost of deposits of 26 basis points, compared to the same period last year.

Net interest margin for the quarter ended September 30, 2019 increased five basis points to 4.29% as compared to 4.24% for the quarter ended June 30, 2019 and was 4.13% for the quarter ended September 30, 2018. The increase over the prior quarter was due to growth in interest earning assets. The increase in net interest margin compared to the prior year is primarily a result of an increase in loans receivable and higher yielding loan balances.

Net interest margin for the nine months ended September 30, 2019 was 4.22% compared to 4.17% for the comparable period last year. Higher loans receivable, increased average loan yields and increased interest earning deposits in the period ended September 30, 2019 were partially offset by an increase in balances and costs, resulting in a five basis point net increase over the nine-month period ended September 30, 2018.

During the quarter ended September 30, 2019 the average balance of total loans receivable increased by $53.0 million, compared to the quarter ended June 30, 2019, and increased by $148.4 million, compared to the same quarter one year ago. Total loan yield for the quarter ended September 30, 2019 was 5.36%, a decrease of three basis points from 5.39% for the quarter ended June 30, 2019, and a 24 basis point increase from 5.12% for the quarter ended September 30, 2018.

Contractual loan yields approximated 5.24% for the three months ended September 30, 2019, compared to 5.23% for the three months ended June 30, 2019, and 5.02% for the three months ended September 30, 2018. The increase in contractual loan yields, as compared to last year, was from pricing new loans at higher rates.

Deposit costs for the quarter ended September 30, 2019 were 0.64%, a decrease of two basis points from 0.66% for the quarter ended June 30, 2019, and a 20 basis point increase from the quarter ended September 30, 2018. Market conditions on deposit rates have changed since the Federal Reserve Open Market Committee lowered rates twice in third quarter.

The following table shows the Company’s key performance ratios for the periods indicated. The table also includes ratios that were adjusted by removing the impact of the previously disclosed atypical wholesale-brokered deposits for the quarters ended June 30, 2019 and March 31, 2019. The wholesale-brokered deposits normalized in the third quarter, therefore no adjustments were made to the performance ratios for the quarter or nine months ended September 30, 2019. 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
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			September 30, 2019			September 30, 2018

Return on average assets (1)		1.35	%		1.31	%		1.14	%		1.33	%		1.18	%		1.27	%		1.07	%
Return on average assets, as adjusted (1,2)	N/A				1.34	%		1.20	%	N/A			N/A			N/A			N/A
Return on average equity (1)		11.72	%		11.45	%		10.25	%		11.31	%		10.59	%		11.16	%		11.37	%
Pre-tax, pre-provision return on average assets (1,3)		1.95	%		1.87	%		1.66	%		1.87	%		1.71	%		1.83	%		1.58	%
Yield on earnings assets (1)		4.94	%		4.92	%		4.82	%		4.93	%		4.62	%		4.89	%		4.64	%
Yield on loans receivable (1)		5.36	%		5.39	%		5.40	%		5.39	%		5.12	%		5.38	%		5.10	%
Loan yield excluding fees (1)		5.24	%		5.23	%		5.22	%		5.15	%		5.02	%		4.94	%
Cost of funds (1)		0.72	%		0.74	%		0.76	%		0.56	%		0.53	%		0.74	%		0.50	%
Cost of funds, as adjusted (1,4)	N/A				0.71	%		0.61	%	N/A			N/A			N/A			N/A
Cost of deposits (1)		0.64	%		0.66	%		0.68	%		0.47	%		0.44	%		0.66	%		0.40	%
Cost of deposits, as adjusted (1,5)	N/A				0.63	%		0.52	%	N/A			N/A			N/A			N/A
Net interest margin (1)		4.29	%		4.24	%		4.13	%		4.43	%		4.13	%		4.22	%		4.17	%
Net interest margin, as adjusted (1,6)	N/A				4.38	%		4.48	%	N/A			N/A			N/A			N/A
Noninterest expense to average assets (1)		2.98	%		3.06	%		3.12	%		3.12	%		2.99	%		3.05	%		3.07	%
Noninterest expense to average assets, as adjusted (1,7)	N/A				3.12	%		3.37	%	N/A			N/A			N/A			N/A
Efficiency ratio		60.46	%		62.05	%		65.20	%		62.54	%		63.59	%		62.50	%		66.09	%
Loans receivable to deposits		94.78	%		97.39	%		81.01	%		95.56	%		96.08	%		94.78	%		96.08	%
Loans receivable to deposits, as adjusted (8)	N/A			N/A				97.44	%	N/A			N/A			N/A			N/A

(1) Annualized calculations shown for quarterly periods presented.
(2) For quarters ended June 30, 2019 and March 31, 2019, adjusted return on average assets is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is return on average assets.
(3) Pre-tax, pre-provision return on average assets is a non-GAAP measure that excludes the impact provision and income tax expense from return on average assets. The most directly comparable GAAP measure is return on average assets.
(4) For quarters ended June 30, 2019 and March 31, 2019, adjusted cost of funds is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is cost of funds.
(5) For quarters ended June 30, 2019 and March 31, 2019, adjusted cost of deposits is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is cost of deposits.
(6) For quarters ended June 30, 2019 and March 31, 2019, adjusted net interest margin is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is net interest margin.
(7) For quarters ended June 30, 2019 and March 31, 2019, adjusted noninterest expense to average assets is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is noninterest expense to average assets.
(8) For quarter ended March 31, 2019, adjusted loans receivable to deposits is a non-GAAP measure that excludes wholesale-brokered deposits on balance sheet. The most directly comparable GAAP measure is loans receivable to deposits.

Noninterest income was $2.1 million for the third quarter of 2019, a decrease of $44,000 from the second quarter of 2019, and an increase of $542,000 from $1.5 million for the comparable period one year ago. A $237,000 increase in gain on sale of loans and a realized net gain on sale of securities of $171,000 were offset by $473,000 less in loan referral fees for the quarter ended September 30, 2019 when compared to the quarter ended June 30, 2019, resulting in a $44,000 decrease in noninterest income. The $542,000 increase over the quarter ended September 30, 2018 was largely due to a $369,000 increase on gain on sale of loans, a $171,000 net gain on sale of securities, a $128,000 increase in fees earned from wholesale banking services and a decrease of $209,000 in loan referral fees.

Noninterest income was $6.2 million for the nine months ended September 30, 2019, compared to $3.9 million for the nine months ended September 30, 2018. The increase is primarily related to increased wholesale banking service fees of $1.0 million and loan referral fee income, which totaled $1.1 million for the nine months ended September 30, 2019, an increase of $653,000 from the same period last year, and is earned when a borrower enters into an interest rate swap agreement with a third party. Gain on sale of loans also contributed to the increase with $348,000 more in income for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.

Total noninterest expense for the current quarter was $7.7 million compared to $7.6 million for the preceding quarter and increased 17.2% from $6.6 million from the comparable period one year ago. Noninterest expense variances for the quarter ended September 30, 2019 as compared to the quarter ended June 30, 2019 include a $442,000 increase in salaries and employee benefits in the current quarter as a result of increases in staffing to support our growth and build our wholesale banking pipeline. Offsetting this increase was a decrease of $138,000 in Federal Deposit Insurance Corporation (FDIC) assessments, as the FDIC issued a credit to qualifying banks beginning in September 2019 as a result of the FDIC fund ratio being in excess of the required ratio. Legal and professional fees were $123,000 lower than the quarter ended June 30, 2019 largely due to expenses from additional reporting and annual meeting expenses that were incurred in the quarter ended June 30, 2019. The increased expenses for the current quarter compared to the comparable quarter one year ago were largely due to increases in salary expenses. Full time equivalent employees at September 30, 2019 totaled 192, which was up 2.7% from the prior quarter and increased 9.1% from the quarter ended September 30, 2018. Staffing increases compared to the prior year are due to continued organic growth initiatives, and include increases in sales staff, including hiring new banking teams, staff for the Edmonds location opened in October 2018, and additional back office staffing to support the incremental increases in banking teams, wholesale banking activities and for operation as a public company. Occupancy expense increased $86,000 over the third quarter of 2019. Occupancy expense for the quarter ended September 30, 2019 was higher than the quarter ended September 30, 2018 largely as a result of expenses related to the opening of the Edmonds branch as well as increases in rent, implementation of the new lease accounting standard, and increases in depreciation from improvements.

Total noninterest expense for the nine months ended September 30, 2019 was $23.1 million, an increase of $4.0 million or 21.1% compared to the same period last year. The increase is primarily attributable to $2.4 million in increased salary expense, as discussed above, an increase of $520,000 in legal and professional fees, largely due to expenses related to being a public company, and our wholesale banking activities, and an increase of $383,000 in occupancy expenses related to the addition of our Edmonds branch in October 2018, higher rent expense, implementation of the new lease accounting standard and increases in depreciation.

The provision for income taxes was $65,000 more this quarter compared to the second quarter of 2019, and $245,000 more than the third quarter of 2018, as a result of increased taxable income. The provision for income taxes was $797,000 more for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 as a result of increased taxable income. The Company uses a federal statutory tax rate of 21% as a basis for calculating provision for income taxes.

The Company’s total assets increased $138.0 million, or 14.5%, to $1.1 billion at September 30, 2019 from $952.1 million at December 31, 2018. The primary cause of the increase was a $104.7 million in increased net loans receivable. Additionally, the Company implemented the new lease accounting standard, which brought operating leases onto the balance sheet on January 1, 2019, and increased assets and liabilities $9.2 million and $9.4 million, respectively, as of September 30, 2019. Total assets increased 5.7% or $59.0 million from June 30, 2019 due to a $28.2 million increase in loans receivable and $36.6 million increase in interest earning deposits.

Total loans receivable, net of allowance for loan losses, increased $104.7 million, or 13.8%, to $863.2 million at September 30, 2019, from $758.5 million at December 31, 2018 and $128.0 million or 17.4% from $735.2 million at September 30, 2018. The growth in net loans receivable was due primarily to increases in commercial real estate loans of $62.6 million and $22.9 million in construction, land and land development loans over the quarter ended

December 31, 2018 and an increase of $75.8 million in commercial real estate loans, $24.7 million in construction, land and land development loans and $20.1 million in commercial and industrial loans over the quarter ended September 30, 2018.

	As of
	September 30, 2019						December 31, 2018						September 30, 2018
(Dollars in thousands)	Balance			% to Total			Balance			% to Total			Balance			% to Total

Commercial and industrial loans	$	105,634			12.1	%	$	90,390			11.8	%	$	85,554			11.5	%
Real estate:
Construction, land and
land development		86,919			9.9			64,045			8.3			62,222			8.4
Residential		100,818			11.5			94,745			12.3			91,995			12.3
Commercial real estate		578,607			66.1			515,959			67.1			502,782			67.5
Consumer and other		3,720			0.4			3,584			0.5			2,583			0.3
Gross loans receivable		875,698			100.0	%		768,723			100.0	%		745,136			100.0	%
Net deferred origination fees		(1,586	)					(824	)					(816	)
Loans receivable	$	874,112					$	767,899					$	744,320

Total deposits increased $118.6 million, or 14.8%, to $922.2 million at September 30, 2019 from $803.6 million at December 31, 2018. The increase is largely due to a $121.5 million increase in core deposits. Included in this increase is approximately $16.0 million in temporary deposits that were brought into the Bank primarily during the third quarter which we believe will exit the Bank during the fourth quarter of 2019. During the nine months ended September 30, 2019 noninterest bearing deposits increased $55.6 million, NOW and money market accounts increased $66.4 million, savings accounts were static, wholesale-brokered deposits increased $2.8 million and time deposits decreased $5.7 million. Total deposits increased $147.5 million or 19.0% compared to September 30, 2018.

The following table summarizes the deposit portfolio at the periods indicated and breaks out wholesale-brokered deposits.

	As of
	September 30, 2019					December 31, 2018					September 30, 2018
(Dollars in thousands)	Balance		% to Total			Balance		% to Total			Balance		% to Total

Demand, noninterest bearing	$	349,087		37.9	%	$	293,525		36.5	%	$	285,979		36.9	%
NOW and money market		416,315		45.1			349,952		43.6			340,930		44.0
Savings		52,191		5.7			52,572		6.5			49,430		6.4
Total core deposits		817,593		88.7			696,049		86.6			676,339		87.3
Wholesale brokered deposits		13,340		1.4			10,521		1.3			-		0.0
Time deposits less than $250,000		58,369		6.3			62,272		7.8			63,715		8.2
Time deposits $250,000 and over		32,947		3.6			34,772		4.3			34,668		4.5
Total deposits	$	922,249		100.0	%	$	803,614		100.0	%	$	774,722		100.0	%

Total shareholders’ equity increased $11.3 million since December 31, 2018. The increase in shareholders’ equity was primarily due to $9.6 million in net earnings in the last nine months and a $1.2 million increase in additional other comprehensive income as a result of an increase in the value of our available for sale investment portfolio. During the third quarter of 2019, we sold $30.0 million of longer-term Treasuries (6-year average life) and replaced them with shorter-term Treasuries (less than 1-year average life) and certificates of deposit with one year maturities. As a result, our exposure to declines in the value of our available for sale investment portfolio has significantly decreased.

The Company and the Bank remain well capitalized at September 30, 2019, as summarized in the following table.

The allowance for loan losses was 1.25% of loans receivable at September 30, 2019 compared to 1.23% at December 31, 2018. Provision for loan losses totaled $637,000 for the current quarter, $547,000 for the preceding quarter, and $508,000 for the same quarter in the prior year. Net charge-offs totaled $192,000 for the quarter ended September 30, 2019, compared to net charge-offs of $19,000 for the quarter ended June 30, 2019 and $63,000 net recoveries for the quarter ended September 30, 2018. Net charge-offs totaled $243,000 for the nine months ended September 30, 2019, compared to $307,000 in net charge-offs for the nine months ended September 30, 2018.

At September 30, 2019 our nonperforming assets were $1.3 million, or 0.12% of total assets, compared to $1.8 million or 0.19% of total assets at December 31, 2018, and $2.5 million, or 0.27% of total assets at September 30, 2018. There were no repossessed assets or other real estate owned at September 30, 2019.

Our nonperforming loans to loans receivable ratio was 0.15% at September 30, 2019, compared to 0.24% at December 31, 2018. Commercial and industrial nonaccrual loans totaled $1.2 million at quarter end, and consisted of five lending relationships. During the third quarter charge-offs totaling $110,000 were recorded on these relationships. Principal reductions along with the aforementioned charge-offs resulted in an overall decrease in our ratios of nonperforming loans and nonperforming assets to total assets compared to December 31, 2018.

The following table details the Company’s nonperforming assets for the periods indicated.

	As of
	September 30,			December 31,			September 30,
(Dollars in thousands)	2019			2018			2018

Nonaccrual loans:
Commercial and industrial loans	$	1,233		$	493		$	1,170
Real estate:
Construction, land and land development		-			-			-
Residential		67			72			74
Commercial real estate		-			-			-
Commercial real estate - troubled debt restructure		-			1,261			1,277
Consumer and other loans		-			-			-
Total nonaccrual loans		1,300			1,826			2,521
Total accruing loans past due 90 days or more		-			-			-
Total nonperforming loans		1,300			1,826			2,521
Other real estate owned		-			-			-
Repossessed assets		-			-			-
Total nonperforming assets	$	1,300		$	1,826		$	2,521
Troubled debt restructurings, accruing		-			-			-
Total nonperforming loans to loans receivable		0.15	%		0.24	%		0.34	%
Total nonperforming assets to total assets		0.12	%		0.19	%		0.27	%

Credit quality has remained stable throughout 2019 as demonstrated by the low level of charge-offs and declining nonperforming loan balance.

Coastal Financial Corporation (NASDAQ: CCB) (the “Company”), is an Everett, Washington based bank holding company with Coastal Community Bank (the “Bank”), a full-service commercial bank, as its sole wholly-owned banking subsidiary. The Bank operates through its 14 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application. To learn more about Coastal Community Bank visit www.coastalbank.com .

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

This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s 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 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.

Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update 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 or circumstances, except as required by law.

ASSETS
	September 30,			June 30,			December 31,
	2019			2019			2018
Cash and due from banks	$	22,060		$	18,735		$	16,315
Interest earning deposits with other banks		131,287			94,735			109,467
Investment securities, available for sale, at fair value		28,319			37,978			36,660
Investment securities, held to maturity, at amortized cost		4,377			4,403			1,262
Other investments		4,405			4,400			3,766
Loans receivable		874,112			845,443			767,899
Allowance for loan losses		(10,888	)		(10,443	)		(9,407	)
Total loans receivable, net		863,224			835,000			758,492
Premises and equipment, net		13,167			12,933			13,167
Operating lease right-of-use assets		9,205			8,922			-
Accrued interest receivable		2,629			2,884			2,526
Bank-owned life insurance, net		6,832			6,783			6,688
Deferred tax asset, net		2,206			2,255			2,518
Other assets		2,349			1,996			1,249
Total assets	$	1,090,060		$	1,031,024		$	952,110

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits	$	922,249		$	868,144		$	803,614
Federal Home Loan Bank (FHLB) advances		20,000			20,000			20,000
Subordinated debt, net		9,975			9,972			9,965
Junior subordinated debentures, net		3,582			3,582			3,581
Deferred compensation		1,000			1,026			1,078
Accrued interest payable		303			298			279
Operating lease liabilities		9,386			9,098			-
Other liabilities		3,143			2,313			4,437
Total liabilities		969,638			914,433			842,954

SHAREHOLDERS’ EQUITY
Common stock		86,866			86,730			86,431
Retained earnings		33,614			30,103			24,021
Accumulated other comprehensive loss, net of tax		(58	)		(242	)		(1,296	)
Total shareholders’ equity		120,422			116,591			109,156
Total liabilities and shareholders’ equity	$	1,090,060		$	1,031,024		$	952,110

	Three months ended
	September 30,			June 30,		September 30,
	2019			2019		2018
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	11,691		$	10,917	$	9,262
Interest on interest earning deposits with other banks		486			652		458
Interest on investment securities		168			160		156
Dividends on other investments		10			75		18
Total interest and dividend income		12,355			11,804		9,894
INTEREST EXPENSE
Interest on deposits		1,435			1,420		851
Interest on borrowed funds		193			198		195
Total interest expense		1,628			1,618		1,046
Net interest income		10,727			10,186		8,848
PROVISION FOR LOAN LOSSES		637			547		508
Net interest income after provision for loan losses		10,090			9,639		8,340
NONINTEREST INCOME
Deposit service charges and fees		795			781		800
Wholesale banking service fees		456			502		328
Loan referral fees		-			473		209
Mortgage broker fees		140			111		52
Sublease and lease income		16			10		10
Gain on sales of loans, net		369			132		-
Gain on sales of securities, net		171			-		-
Other		141			123		147
Total noninterest income		2,088			2,132		1,546
NONINTEREST EXPENSE
Salaries and employee benefits		4,971			4,529		4,027
Occupancy		884			930		798
Data processing		509			499		501
Director and staff expenses		241			217		213
Excise taxes		184			180		146
Marketing		98			108		110
Legal and professional fees		170			293		142
Federal Deposit Insurance Corporation (FDIC) assessments		(4	)		134		83
Business development		122			96		81
Other		573			657		509
Total noninterest expense		7,748			7,643		6,610
Income before provision for income taxes		4,430			4,128		3,276
PROVISION FOR INCOME TAXES		919			854		674
NET INCOME	$	3,511		$	3,274	$	2,602

Basic earnings per share	$	0.30		$	0.28	$	0.23
Diluted earnings per share	$	0.29		$	0.27	$	0.22
Weighted average number of common shares outstanding:
Basic		11,901,873			11,895,026		11,338,320
Diluted		12,188,507			12,202,197		11,609,978


	Nine months ended
	September 30,		September 30,
	2019		2018
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	33,027	$	26,229
Interest on interest earning deposits with other banks		1,946		949
Interest on investment securities		481		463
Dividends on other investments		99		91
Total interest and dividend income		35,553		27,732
INTEREST EXPENSE
Interest on deposits		4,291		2,209
Interest on borrowed funds		582		594
Total interest expense		4,873		2,803
Net interest income		30,680		24,929
PROVISION FOR LOAN LOSSES		1,724		1,401
Net interest income after provision for loan losses		28,956		23,528
NONINTEREST INCOME
Deposit service charges and fees		2,302		2,258
Wholesale banking service fees		1,404		370
Loan referral fees		1,106		453
Mortgage broker fees		336		158
Sublease and lease income		36		71
Gain on sales of loans, net		490		142
Gain on sales of securities, net		171		-
Other		359		414
Total noninterest income		6,204		3,866
NONINTEREST EXPENSE
Salaries and employee benefits		14,058		11,672
Occupancy		2,808		2,425
Data processing		1,537		1,472
Director and staff expenses		698		493
Excise taxes		529		404
Marketing		300		253
Legal and professional fees		872		352
Federal Deposit Insurance Corporation (FDIC) assessments		205		247
Business development		320		241
Other		1,726		1,472
Total noninterest expense		23,053		19,031
Income before provision for income taxes		12,107		8,363
PROVISION FOR INCOME TAXES		2,514		1,717
NET INCOME	$	9,593	$	6,646

Basic earnings per share	$	0.81	$	0.67
Diluted earnings per share	$	0.79	$	0.66
Weighted average number of common shares outstanding:
Basic		11,893,734		9,956,449
Diluted		12,193,071		10,051,415

	For the Three Months Ended
	September 30, 2019								June 30, 2019								September 30, 2018
	Average			Interest &		Yield /			Average			Interest &		Yield /			Average			Interest &		Yield /
	Balance			Dividends		Cost (4)			Balance			Dividends		Cost (4)			Balance			Dividends		Cost (4)
Assets
Interest earning assets:
Interest earning deposits	$	85,406		$	486		2.26	%	$	106,353		$	652		2.46	%	$	90,301		$	458		2.01	%
Investment securities (1)		36,974			168		1.80			40,151			160		1.60			39,613			156		1.56
Other Investments		3,621			10		1.10			3,659			75		8.22			3,000			18		2.38
Loans receivable (2)		865,674			11,691		5.36			812,704			10,917		5.39			717,260			9,262		5.12
Total interest earning assets		991,675			12,355		4.94			962,867			11,804		4.92			850,174			9,894		4.62
Noninterest earning assets:
Allowance for loan losses		(10,548	)							(10,025	)							(8,782	)
Other noninterest earning assets		50,842								49,594								37,000
Total assets	$	1,031,969							$	1,002,436							$	878,392

Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits	$	555,665		$	1,435		1.02	%	$	550,777		$	1,420		1.03	%	$	488,183		$	851		0.69	%
Subordinated debt, net		9,973			148		5.89			9,970			146		5.87			9,959			148		5.90
Junior subordinated debentures, net		3,582			42		4.65			3,582			43		4.81			3,580			41		4.54
FHLB advances and other borrowings		539			3		2.21			1,542			9		2.34			964			6		2.47
Total interest bearing liabilities		569,759			1,628		1.13			565,871			1,618		1.15			502,686			1,046		0.83
Noninterest bearing deposits		330,553								308,739								274,549
Other liabilities		12,756								13,132								3,650
Total shareholders' equity		118,901								114,694								97,507
Total liabilities and
shareholders' equity	$	1,031,969							$	1,002,436							$	878,392
Net interest income				$	10,727							$	10,186							$	8,848
Interest rate spread							3.81	%							3.77	%							3.79	%
Net interest margin (3)							4.29	%							4.24	%							4.13	%

(1) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for 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.

	For the Nine Months Ended
	September 30, 2019								September 30, 2018
	Average			Interest &		Yield /			Average			Interest &		Yield /
	Balance			Dividends		Cost (4)			Balance			Dividends		Cost (4)
Assets
Interest earning assets:
Interest earning deposits	$	108,230		$	1,946		2.40	%	$	69,818		$	949		1.82	%
Investment securities (1)		38,883			481		1.65			39,657			463		1.56
Other Investments		3,479			99		3.80			3,038			91		4.00
Loans receivable (2)		820,560			33,027		5.38			687,165			26,229		5.10
Total interest earning assets		971,152			35,553		4.89			799,678			27,732		4.64
Noninterest earning assets:
Allowance for loan losses		(10,068	)							(8,478	)
Other noninterest earning assets		49,536								36,960
Total assets	$	1,010,620							$	828,160

Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits	$	559,119		$	4,291		1.03	%	$	472,266		$	2,209		0.63	%
Subordinated debt, net		9,970			439		5.89			9,955			439		5.90
Junior subordinated debentures, net		3,582			129		4.81			3,580			116		4.33
FHLB advances and other borrowings		794			14		2.36			2,577			39		2.02
Total interest bearing liabilities		573,465			4,873		1.14			488,378			2,803		0.77
Noninterest bearing deposits		309,270								258,586
Other liabilities		12,971								3,038
Total shareholders' equity		114,914								78,158
Total liabilities and
shareholders' equity	$	1,010,620							$	828,160
Net interest income				$	30,680							$	24,929
Interest rate spread							3.76	%							3.87	%
Net interest margin (3)							4.22	%							4.17	%

(1) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for 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.

	Three Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
	2019			2019			2019			2018			2018
Income Statement Data:
Interest and dividend income	$	12,355		$	11,804		$	11,394		$	11,011		$	9,894
Interest expense		1,628			1,618			1,627			1,123			1,046
Net interest income		10,727			10,186			9,767			9,888			8,848
Provision for loan losses		637			547			540			425			508
Net interest income after
provision for loan losses		10,090			9,639			9,227			9,463			8,340
Noninterest income		2,088			2,132			1,984			1,601			1,546
Noninterest expense		7,748			7,643			7,662			7,185			6,610
Net income - pre-tax, pre-provision		5,067			4,675			4,089			4,304			3,784
Provision for income tax		919			854			741			824			674
Net income		3,511			3,274			2,808			3,055			2,602

	As of Period End or for the Three Month Period
	September 30,			June 30,			March 31,			December 31,			September 30,
	2019			2019			2019			2018			2018
Balance Sheet Data:
Cash and cash equivalents	$	153,347		$	113,470		$	257,659		$	125,782		$	115,508
Investment securities		32,696			42,381			38,217			37,922			37,039
Loans receivable		874,112			845,443			791,072			767,899			744,320
Allowance for loan losses		(10,888	)		(10,443	)		(9,915	)		(9,407	)		(9,111	)
Total assets		1,090,060			1,031,024			1,116,090			952,110			917,029
Interest bearing deposits		573,162			552,254			680,249			510,089			488,743
Noninterest bearing deposits		349,087			315,890			296,247			293,525			285,979
Core deposits (1)		817,593			754,768			716,623			696,049			676,339
Total deposits		922,249			868,144			976,496			803,614			774,722
Total borrowings		33,557			33,554			13,549			33,546			33,542
Total shareholders’ equity		120,422			116,592			112,365			109,156			105,276

Share and Per Share Data (2):
Earnings per share – basic	$	0.30		$	0.28		$	0.24		$	0.26		$	0.23
Earnings per share – diluted	$	0.29		$	0.27		$	0.23		$	0.25		$	0.22
Dividends per share		-			-			-			-			-
Book value per share (3)	$	10.11		$	9.79		$	9.44		$	9.18		$	8.86
Tangible book value per share (4)	$	10.11		$	9.79		$	9.44		$	9.18		$	8.86
Weighted avg outstanding shares – basic		11,901,873			11,895,026			11,884,107			11,877,261			11,338,320
Weighted avg outstanding shares – diluted		12,188,507			12,202,197			12,183,234			12,166,250			11,609,978
Shares outstanding at end of period		11,912,115			11,908,185			11,902,715			11,893,203			11,886,473
Stock options outstanding at end of period		786,257			791,267			804,117			688,312			682,190

	As of Period End or for the Three Month Period
	September 30,			June 30,			March 31,			December 31,			September 30,
	2019			2019			2019			2018			2018
Credit Quality Data:
Nonperforming assets to total assets		0.12	%		0.16	%		0.12	%		0.19	%		0.27	%
Nonperforming assets to loans receivable and OREO		0.15	%		0.19	%		0.17	%		0.24	%		0.34	%
Nonperforming loans to total loans receivable		0.15	%		0.19	%		0.17	%		0.24	%		0.34	%
Allowance for loan losses to nonperforming loans		837.5	%		633.7	%		754.6	%		515.2	%		361.40	%
Allowance for loan losses to total loans receivable		1.25	%		1.24	%		1.25	%		1.23	%		1.22	%
Gross charge-offs	$	196		$	22		$	34		$	134		$	6
Gross recoveries	$	4		$	3		$	2		$	5		$	69
Net charge-offs (recoveries) to average loans (5)		0.09	%		0.01	%		0.02	%		0.07	%		(0.03	%)

Capital Ratios (6):
Tier 1 leverage capital		12.00	%		11.99	%		11.57	%		12.46	%		12.60	%
Tier 1 risk-based capital		13.40	%		12.99	%		13.66	%		14.13	%		14.17	%
Common equity Tier 1 risk-based capital		13.02	%		13.37	%		13.24	%		13.70	%		13.72	%
Total risk-based capital		15.70	%		15.70	%		16.06	%		16.58	%		16.65	%

(1) Core deposits are defined as all deposits excluding wholesale-brokered and time deposits.
(2) Share and per share amounts are based on total common shares outstanding, which includes common stock and nonvoting common stock.
(3) We calculate book value per share as total shareholders’ equity at the end of the relevant period divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period.
(4) Tangible book value per share is a non-GAAP financial measure. We calculate tangible book value per share as total shareholders’ equity at the end of the relevant period, less goodwill and other intangible assets, divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated.
(5) Annualized calculations.
(6) Capital ratios are for the Company, Coastal Financial Corporation.

This earnings release contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP. These measures include the following:

“Adjusted return on average assets” is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is return on average assets.

“Adjusted cost of funds” is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is cost of funds.

“Adjusted cost of deposits” is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is cost of deposits.

“Adjusted net interest margin” is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is net interest margin.

“Adjusted noninterest expense to average assets” is a non-GAAP measure that excludes the temporary impact of holding high rate wholesale deposits on balance sheet. The most directly comparable GAAP measure is noninterest expense to average assets.

“Adjusted loans receivable to deposits” is a non-GAAP measure that excludes wholesale-brokered deposits on balance sheet. The most directly comparable GAAP measure is loans receivable to deposits.

The Company also presented comparable earnings information using GAAP financial measures. Reconciliations of the GAAP and non-GAAP measures are presented below.

(Dollars in thousands)	June 30, 2019			March 31, 2019
Adjusted return on average assets:
Total average assets	$	1,002,436		$	997,069
Less: average wholesale-brokered deposits		20,252			74,116
Adjusted total average deposits and borrowings	$	982,184		$	922,953
Total net income	$	3,274		$	2,808
Less: fees earned on servicing wholesale-brokered deposits		36			78
Adjusted net income	$	3,238		$	2,730
Adjusted return on average assets:		1.34	%		1.20	%
Adjusted cost of funds:
Total average deposits and borrowings	$	874,610		$	872,979
Less: average wholesale-brokered deposits		20,252			74,116
Adjusted total average deposits and borrowings	$	854,358		$	798,863
Total interest expense	$	1,618		$	1,627
Less: interest expense on wholesale-brokered deposits		116			435
Adjusted interest expense	$	1,502		$	1,192
Adjusted cost of funds:		0.71	%		0.61	%
Adjusted cost on deposits:
Total average deposits	$	859,516		$	859,135
Less: average wholesale-brokered deposits		20,252			74,116
Adjusted total average deposits	$	839,264		$	785,019
Interest expense on deposits	$	1,420		$	1,436
Less: interest expense on wholesale-brokered deposits		116			435
Adjusted interest expense on interest bearing deposits	$	1,304		$	1,001
Adjusted cost of deposits:		0.63	%		0.52	%
Adjusted net interest margin:
Total average interest earning assets	$	962,867		$	958,547
Less: average wholesale-brokered deposits held in cash		20,252			74,116
Adjusted total average interest earning assets	$	942,615		$	884,431
Total net interest income	$	10,186		$	9,767
Less: interest income earned wholesale-brokered deposits held in cash		116			435
Plus: interest expense on wholesale-brokered deposits		116			435
Adjusted net interest income		10,186			9,767
Adjusted net interest margin:		4.38	%		4.48	%
Adjusted noninterest expense to average assets:
Total average assets	$	1,002,436		$	997,069
Less: average wholesale-brokered deposits		20,252			74,116
Adjusted total average assets	$	982,184		$	922,953
Total noninterest expense	$	7,643		$	7,662
Adjusted noninterest expense to average assets:		3.12	%		3.37	%

Capital Ratios:	Coastal Community Bank			Coastal Financial Corporation			Financial Institution Basel III Regulatory Guidelines

Tier 1 leverage capital		11.54	%		12.00	%		5.00	%
Tier 1 risk-based capital		12.89	%		13.40	%		8.00	%
Common Equity Tier 1 risk-based capital		12.89	%		13.02	%		6.50	%
Total risk-based capital		14.11	%		15.70	%		10.00	%