UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. ___)

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐ Preliminary Proxy Statement

☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒ Definitive Proxy Statement

☐ Definitive Additional Materials

☐ Soliciting Material pursuant to §240.14a-12

Coastal Financial Corporation

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

April 8, 2022

Dear Shareholder:

You are cordially invited to attend the 2022 Annual Meeting of Shareholders (the “annual meeting”) of Coastal Financial Corporation (the “Company”). The annual meeting will be held on Tuesday, May 24, 2022 at 6:00 p.m. Pacific Time and will be held in a completely virtual format.  There will not be a physical location for the annual meeting.  The virtual meeting format allows for expanded meeting access for our shareholders in a climate friendly format, since traveling to a physical meeting location is no longer a factor.  Additionally, the virtual meeting format provides improved communication and cost savings for our shareholders and our Company.  To attend the virtual annual meeting you must register in advance at https://register.proxypush.com/CCB prior to the registration deadline of May 23, 2022 at 5:00 p.m. Pacific Time.

The notice of annual meeting and proxy statement appearing on the following pages describe the formal business to be transacted at the annual meeting. Directors and officers of the Company, as well as a representative of Moss Adams LLP, the Company’s independent registered public accounting firm, will be present to respond to appropriate questions of shareholders.

It is important that your shares are represented at this meeting, whether or not you attend the annual meeting virtually and regardless of the number of shares you own. To make sure your shares are represented, we urge you to vote online or to mail your completed proxy card. You may attend and participate in the annual meeting virtually by registering in advance at https://register.proxypush.com/CCB prior to the registration deadline of May 23, 2022 at 5:00 p.m. Pacific Time.  You will be able to vote electronically and submit questions during the annual meeting only if you register to attend the annual meeting.

If you attend the virtual annual meeting, you may vote virtually even if you have previously voted online or if you have mailed a proxy card.

We look forward to seeing you at the annual meeting.

Sincerely,

Eric M. Sprink

President and Chief Executive Officer

This proxy statement is first being sent to the shareholders of the Company on or about April 8, 2022.

NOTICE OF THE 2022 ANNUAL MEETING OF SHAREHOLDERS OF

COASTAL FINANCIAL CORPORATION

Your vote is important.  It is important that your shares be represented and voted at the annual meeting. You can vote your shares online or by completing and returning the proxy card or voting instruction card sent to you. Voting instructions are printed on your proxy card or voting instruction card and are included in the accompanying proxy statement. You can revoke a proxy at any time before its exercise at the annual meeting by following the instructions in the proxy statement. Whether or not you plan to attend the annual meeting, please vote online or by marking, signing, dating and promptly returning the proxy card or voting instruction card.

INFORMATION ABOUT THE ANNUAL MEETING1

Internet Availability of Proxy Materials1

Time and Location1

Who Can Vote at the Annual Meeting1

Attending the Meeting2

Items Voted on; Vote Required2

Abstentions and Broker Non-Votes2

Effect of Not Casting Your Vote For Shares Held in Street Name3

Voting by Proxy3

Revoking Your Proxy3

Annual Meeting Advance Notice Requirements3

Requirements for Shareholder Proposals to Be Included in the Company’s Proxy Materials4

Proxy Solicitation Costs5

Sharing An Address With Other Shareholders5

CORPORATE GOVERNANCE6

General6

Code of Ethics and Business Conduct6

Hedging and Pledging6

Meetings and Committees of the Board of Directors6

Board Diversity Matrix6

Director Independence7

Board Leadership Structure12

Board Oversight of Risk Management12

Attendance at the Annual Meeting of Shareholders13

Diversity, Equity and Inclusion (“DEI”)13

Environment and Sustainability14

Human Capital14

ITEMS TO BE VOTED ON BY SHAREHOLDERS16

ITEM 1. ELECTION OF DIRECTORS16

Nominees for Election of Directors:17

Directors Continuing in Office:18

ITEM 2. RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM21

Audit and Non-Audit Fees21

Pre-Approval of Services by Moss Adams LLP21

Audit Committee Report22

DIRECTOR COMPENSATION24

EXECUTIVE COMPENSATION26

Summary Compensation Table26

Outstanding Equity Awards at 2021 Fiscal Year End28

Employment and Change in Control Agreements with Named Executive Officers30

2018 Omnibus Incentive Plan31

Risk Considerations in our Compensation Program31

STOCK INFORMATION32

Delinquent Section 16(a) Reports35

OTHER INFORMATION RELATED TO DIRECTORS AND EXECUTIVE OFFICERS36

Policies and Procedures for Approval of Related Persons Transactions36

Transactions with Related Persons37

Shareholder Communications39

INFORMATION ABOUT THE ANNUAL MEETING

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Coastal Financial Corporation (which we refer to in this proxy statement as “Coastal Financial,” “we,” “us,” “our,” or the “Company”) to be used at the 2022 Annual Meeting of Shareholders of the Company (the “annual meeting”). The Company is the holding company for Coastal Community Bank (the “Bank”).

Internet Availability of Proxy Materials

This proxy statement, proxy card and the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”) are available at our corporate website at www.coastalbank.com. You also can obtain copies without charge at the SEC’s website at www.sec.gov and may access these materials at www.pstvote.com/coastal2022. A Notice of Internet Availability of Proxy Materials regarding this proxy statement is being first mailed to shareholders on or about April 8, 2022, containing instructions on how to access and review this proxy statement and the Annual Report. The Notice of Internet Availability of Proxy Materials also instructs you how you may submit your proxy online or via mail. If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting those materials included in the Notice of Internet Availability of Proxy Materials.

Website addresses referenced herein are intended to provide inactive, textual references only, and the information on these websites is not part of this proxy statement.

Time and Location

Virtually

The annual meeting will be held in a completely virtual format.  There will be no physical location for the annual meeting.  You may attend, vote and submit questions during the virtual annual meeting by registering in advance at https://register.proxypush.com/CCB prior to the registration deadline of May 23, 2022 at 5:00 p.m. Pacific Time. You may submit written questions or statements during the meeting by following the instructions on the meeting website. You may also submit written questions or statements through the registration website until the registration deadline for the meeting. Questions or statements received from shareholders that are relevant to the business to be conducted at the annual meeting will be read aloud and, if appropriate, answered during the meeting.  You will need the control number located on either your Notice of Internet Availability or on your proxy card to register for the annual meeting.

In order to be climate friendly, provide expanded access, improved communication and cost savings for our shareholders and our Company, this year’s annual meeting will be held in a virtual only format. We have designed our virtual format to enhance, rather than constrain, shareholder access, participation and communication. For example, the virtual format allows shareholders to communicate with us during the annual meeting so they can ask questions. During the live Q&A session of the annual meeting, we may answer questions as they come in, to the extent relevant to the business of the annual meeting, as time permits.  

Who Can Vote at the Annual Meeting

Shareholders of Record

You are entitled to vote your shares of Coastal Financial common stock if the records of the Company show that you held your shares as of the close of business on March 22, 2022 (the “Record Date”).

Beneficial Owners

If your shares are held in a stock brokerage account or by a bank or other nominees, you are considered the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by your broker, bank or other nominee. As the beneficial owner, you have the right to direct your broker, bank or other

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nominee on how to vote your shares. Your broker, bank or other nominee has enclosed a voting instruction form for you to use in directing it on how to vote your shares.

As of the close of business on the Record Date, 12,926,863 shares of Coastal Financial common stock were outstanding and entitled to vote. Each share of common stock has one vote.

Attending the Meeting

If you are a shareholder of record as of the Record Date, you may attend the virtual annual meeting by registering in advance at https://register.proxypush.com/CCB prior to the registration deadline of May 23, 2022 at 5:00 p.m. Pacific Time. If you hold your shares in street name, you will also need to register to attend the virtual annual meeting. Instructions are required to be provided on the voting instruction card provided by the beneficial owner’s broker, bank, or other nominee.

The annual meeting will begin promptly at 6:00 p.m. Pacific Time, on Tuesday, May 24, 2022. We encourage you to access the annual meeting prior to start time. Please allow time for online check-in, which will begin at 5:45 p.m. Pacific Time.

Items Voted on; Vote Required

Quorum

The annual meeting will be held only if there is a quorum. A majority of the outstanding shares of Coastal Financial common stock entitled to vote, represented virtually or by proxy, on a matter constitutes a quorum for that matter. If you return valid proxy instructions or attend the annual meeting virtually, your shares will be counted for purposes of determining whether there is a quorum, even if you abstain from voting. Abstentions, broker non-votes and votes withheld will be treated as present for purposes of determining the presence or absence of quorum.

Vote Required

Abstentions and Broker Non-Votes

Abstentions and “broker non-votes” are not considered “votes cast” and will therefore have no effect on the outcome of any vote taken at the annual meeting. An abstention occurs when a shareholder attends the annual meeting, either virtually or by proxy, but abstains from voting where permitted.  A broker non-vote occurs when a broker, bank or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker, bank or other nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.

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INFORMATION ABOUT THE ANNUAL MEETING

Effect of Not Casting Your Vote For Shares Held in Street Name

Item 1:  If you hold your shares in street name, it is critical that you cast your vote if you want it to count in the election of directors.  Current regulations restrict the ability of your broker, bank or other nominee to vote your uninstructed shares in the election of directors and certain other matters on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your broker, bank or other nominee how to vote in the election of directors, no votes will be cast on your behalf. These are referred to as broker non-votes.

Item 2:  Your broker, bank or other nominee will, however, continue to have discretion to vote any uninstructed shares on the ratification of the appointment of the Company’s independent registered public accounting firm.

Voting by Proxy

This proxy statement is being sent to you by the Board of Directors to request that you allow your shares of Company common stock to be represented at the annual meeting by the persons named in the proxy card. All shares of Company common stock represented at the annual meeting by properly executed and dated proxies will be voted according to the instructions indicated on the proxy card. If you vote online or if you sign, date and return a proxy card without giving voting instructions, your shares will be voted as recommended by the Board of Directors.

The Board of Directors recommends that you vote:

If any matter not described in this proxy statement is properly presented at the annual meeting, the persons named in the proxy card will use their judgment to determine how to vote your shares. This includes a motion to adjourn or postpone the meeting to solicit additional proxies. If the annual meeting is adjourned or postponed, your shares of Coastal Financial common stock may also be voted by the persons named in the proxy card on the new meeting date, unless you have revoked your proxy. The Company does not know of any other matters to be presented at the annual meeting.

If your Coastal Financial common stock is held in street name, you will receive instructions from your broker, bank or other nominee that you must follow to have your shares voted. Your broker, bank or other nominee may allow you to deliver your voting instructions online. Please see the instruction form provided by your broker, bank or other nominee that accompanies this proxy statement. If you wish to change your voting instructions after you have returned your voting instruction form to your broker, bank or other nominees, you must contact your broker, bank or other nominee.

Revoking Your Proxy

You may revoke your proxy at any time before the vote is taken at the annual meeting. To revoke your proxy, you must either advise the Corporate Secretary of the Company in writing, addressed to Corporate Secretary, Coastal Financial Corporation, 5415 Evergreen Way, Everett, Washington 98203 before your Company common stock has been voted at the annual meeting, deliver a later-dated and executed valid proxy or attend the virtual annual meeting and vote your shares virtually. Attendance at the annual meeting will not in itself constitute revocation of your proxy.

Annual Meeting Advance Notice Requirements

Consideration of Director Recommendations by Shareholders. It is the policy of the Governance & Nominating Committee to consider director candidates recommended by shareholders who appear to be qualified to serve on the Board of Directors. The Governance & Nominating Committee may choose not to consider an

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INFORMATION ABOUT THE ANNUAL MEETING

unsolicited recommendation if no vacancy exists on the Board of Directors. In order to avoid the unnecessary use of the Governance & Nominating Committee’s resources, the Governance & Nominating Committee will consider only those director candidates recommended in accordance with the procedures set forth below.

Procedures to be Followed by Shareholders for Consideration of Director Nominees and Other Matters. To submit a recommendation for a director candidate to the Governance & Nominating Committee, a shareholder should submit the following information in writing, addressed to the Chair of the Governance & Nominating Committee, care of the Corporate Secretary, Coastal Financial Corporation, 5415 Evergreen Way, Everett, Washington 98203:

In order for a director candidate to be considered for nomination by the Board of Directors at the Company’s annual meeting of shareholders the recommendation must be received at the principal executive office of the Company at least 90 days prior to the date of the meeting, or, if less than 100 days’ notice is given of the annual meeting of shareholders, the recommendation must be received within 10 business days of such notice. The Company’s Amended and Restated Bylaws (“Bylaws”) provide that a person may not be nominated for election as a director of the Company unless that person is nominated by or at the direction of the Board of Directors or by a shareholder who has given appropriate notice to the Company before the meeting.

Similarly, a shareholder may not bring business before an annual meeting unless the shareholder has given the Company appropriate notice of their intention to bring that business before the meeting. The Company's Corporate Secretary must receive notice of shareholder nomination or proposal not less than 90 days before the annual meeting; provided, that if less than 100 days' of (i) notice or (ii) prior public disclosure of the meeting date is given or made to the shareholders, shareholder notice must be received not later than the close of business on the 10th day following the day the annual meeting notice was (A) mailed or (B) such public disclosure was made.  A shareholder who desires to raise new business must provide certain information as provided by our Bylaws to the Company concerning the nature of the new business, the shareholder, the shareholder’s ownership in the Company and the shareholder’s interest in the business matter. Similarly, a shareholder wishing to nominate any person for election as a director must provide the Company with certain information as provided by our Bylaws concerning the nominee and the proposing shareholder as described above. A copy of our Bylaws may be obtained from the Company.

Requirements for Shareholder Proposals to Be Included in the Company’s Proxy Materials

Shareholders interested in submitting a proposal (other than for the nomination of directors) for inclusion in the proxy materials to be distributed by us for our 2023 Annual Meeting of Shareholders may do so by following the

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INFORMATION ABOUT THE ANNUAL MEETING

procedures prescribed in Rule 14a-8 promulgated under the Exchange Act. The Company must receive proposals that shareholders seek to include in the proxy statement for the Company’s next annual meeting no later than December 9, 2022. If next year’s annual meeting is held on a date more than 30 calendar days from May 23, 2023, a shareholder proposal must be received by a reasonable time before the Company begins to print and mail its proxy solicitation for such annual meeting. Any shareholder proposals will be subject to the requirements of our Bylaws and Rule 14a-8 promulgated under the Exchange Act regarding the inclusion of shareholder proposals in company-sponsored proxy materials. Such proposals should be sent in writing to Coastal Financial Corporation, Corporate Secretary, 5415 Evergreen Way, Everett, Washington 98203.

Proxy Solicitation Costs

The accompanying proxy is being solicited by the Board of Directors.  The Company will pay the cost of this proxy solicitation. The Company will also reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of the Company. In addition to soliciting proxies by mail, directors, officers and regular employees of the Company may solicit proxies personally or by telephone. None of these persons will receive additional compensation for these activities.

Sharing An Address With Other Shareholders

In some cases, shareholders holding their shares in “street name,” who share the same surname and address receive only one copy of the Notice of Internet Availability of Proxy Materials or other annual meeting materials, if any. This practice, known as “householding,” is designed to reduce our printing and postage costs as well as natural resources. However, if a shareholder residing at such an address wishes to receive a separate annual report or Notice of Internet Availability of Proxy Materials in the future, he or she should contact their broker, bank or other nominee. If you are a shareholder of record and are receiving multiple copies of our annual report and proxy statement, you can request householding by contacting the Company’s stock transfer agent (Philadelphia Stock Transfer) by calling their toll-free number at 1-866-223-0448 or by emailing our transfer agent at info@philadelphiastocktransfer.com.

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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

General

The Company periodically reviews its corporate governance policies and procedures to ensure that the Company meets the highest standards of ethical conduct, reports results with accuracy and transparency and maintains full compliance with the laws, rules and regulations that govern the Company’s operations. As part of this periodic corporate governance review, the Board of Directors reviews and strives to adopt best corporate governance policies and practices for the Company.

Code of Ethics and Business Conduct

The Company has adopted a Code of Ethics and Business Conduct that applies to all of its directors, officers and employees, including its principal executive officer, principal financial officer and principal accounting officer and persons performing similar functions. The Code of Ethics and Business Conduct is available upon written request to Corporate Secretary, Coastal Financial Corporation, 5415 Evergreen Way, Everett, Washington 98203 and on the Company’s website at www.coastalbank.com. If the Company amends or grants any waiver from a provision of the Code of Ethics and Business Conduct that applies to its executive officers, it will publicly disclose such amendment or waiver on its website and as required by applicable law, including by filing a Current Report on Form 8-K with the U.S. Securities and Exchange Commission (the “SEC”).

Hedging and Pledging

Our directors, executive officers and certain employees are prohibited from hedging and speculative trading in and out of the Company’s securities, including short sales and leverage transactions, such as puts, calls, and listed and unlisted options.

We also prohibit our directors and certain employees from pledging Company securities as collateral for a loan.

Meetings and Committees of the Board of Directors

The Company conducts business through meetings of its Board of Directors and its committees. The Board of Directors held 11 regular meetings during the fiscal year ended December 31, 2021. No director during 2021 attended fewer than 75% of the total meetings of the Board of Directors and committees on which such director served.

Board Diversity Matrix

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Director Independence

As required under Nasdaq Stock Market, LLC (“Nasdaq”) listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Consistent with these regulations, after review of all relevant transactions or relationships between each director, or any of such director’s family members, and the Company, its senior management and its independent registered public accounting firm, the Board of Directors has determined that all of our directors are independent directors within the meaning of applicable Nasdaq listing standards, except for Eric M. Sprink, who is the President and Chief Executive Officer of the Company and the Bank, Andrew P. Skotdal, who has a 50% interest in an entity from which the Bank leases its Downtown Everett Branch, and Chris Adams, who is a partner of Adams & Duncan Inc., PS, which is a law firm that provides legal services to the Company.

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CORPORATE GOVERNANCE

The following table identifies our standing committees and their members as of March 22, 2022. All members of each committee are independent in accordance with the listing standards of the Nasdaq. The Board of Directors has adopted a written charter for each committee that, among other things, specifies the scope of each committee’s rights and responsibilities. A copy of each committee charter is available on the Company’s website at www.coastalbank.com.

Audit Committee. The Audit Committee assists the Board of Directors in discharging its duties related to the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditor qualifications, independence and performance, the performance of our internal audit function, our accounting and financial reporting process and financial statement audits. Among other things, the functions and responsibilities of the Audit Committee include:

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The Company also provides for appropriate funding, as determined by the Audit Committee, for payment of compensation to the Company’s independent auditor, any independent counsel or other advisors engaged by the Audit Committee and for administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.

The Board of Directors has determined that Stephan Klee is an “audit committee financial expert,” as such term is defined by the rules and regulations of the SEC.

The report of the Audit Committee appears in this proxy statement under the heading “Item 2 — Ratification of Selection of Independent Registered Public Accounting Firm—Audit Committee Report.”

Compensation Committee. The Compensation Committee establishes, administers and reviews the Company’s policies, programs and procedures for compensating its executive officers and directors. Among other things, the functions and responsibilities of the Compensation Committee include:

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Independent Compensation Consultant – Pearl Meyer & Partners LLC (“Pearl Meyer”)

During the past fiscal year, the Compensation Committee engaged Pearl Meyer, an independent compensation consulting firm. Specifically, the Compensation Committee engaged Pearl Meyer to:

Under its charter, the Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other advisor to the Compensation Committee, only after assessing the independence of such person in accordance with SEC and Nasdaq requirements that bear upon the adviser’s independence; however, there is no requirement that any adviser be independent.

The Compensation Committee has assessed Pearl Meyer’s independence and determined that there was no conflict of interest resulting from retaining Pearl Meyer for this engagement.

Governance & Nominating Committee. The Governance & Nominating Committee is responsible for assisting the Board of Directors in discharging its duties related to corporate governance and nominating functions. Among other things, the functions and responsibilities of the Governance & Nominating Committee include:

Minimum Qualifications. The Governance & Nominating Committee has adopted a set of criteria that it considers when it selects individuals to be nominated for election to the Board of Directors. First, a candidate must

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meet the eligibility requirements set forth in the Company’s Bylaws, which include an age limitation. A candidate also must meet any qualification requirements set forth in any Board of Directors or committee governing guidelines.

The Governance & Nominating Committee will consider the following criteria in selecting nominees:

In its consideration of diversity, the Governance & Nominating Committee seeks to create a Board of Directors that is strong in its collective knowledge and that has a diverse set of skills and experience with respect to management and leadership, vision and strategy, accounting and finance, business operations and judgment, industry knowledge and corporate governance. The Governance & Nominating Committee strives to seek out diverse and qualified director candidates who bring a background and expertise in the fintech and digital banking sectors regardless of their gender, race, or other personal characteristics.

In addition, prior to nominating an existing director for re-election to the Board of Directors, the Governance & Nominating Committee will consider and review an existing director’s Board of Directors and committee attendance and performance; length of Board of Directors service; experience, skills and contributions that the existing director brings to the Board of Directors; and independence.

Director Nomination Process. The process that the Governance & Nominating Committee follows when it identifies and evaluates individuals to be nominated for election to the Board of Directors is as follows:

For purposes of identifying nominees for the Board of Directors, the Governance & Nominating Committee relies on personal contacts of the committee members and other members of the Board of Directors, as well as their knowledge of members of the communities served by the Bank. The Governance & Nominating Committee also will consider director candidates recommended by shareholders in accordance with the policy and procedures set forth below. The Governance & Nominating Committee has not previously used and does not currently use an independent search firm to identify nominees.

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In evaluating potential nominees for the Board of Directors, Governance & Nominating Committee determines whether the candidate is eligible and qualified for service on the Board of Directors by evaluating the candidate under the selection criteria set forth above. In addition, the Governance & Nominating Committee will conduct a check of the individual’s background and interview the candidate to further assess the qualities of the prospective nominees and the contributions he or she would make to the Board of Directors.

Board Leadership Structure

Our Board of Directors does not have a formal policy requiring the separation of the roles of Chief Executive Officer and Board Chair. It is the Board of Directors’ view that rather than having a rigid policy, the Board of Directors, with the advice and assistance of the Governance & Nominating Committee, and upon consideration of all relevant factors and circumstances, will determine, as and when appropriate, whether the two offices should be separate. Currently, our leadership structure separates the offices of Chief Executive Officer and Board Chair, with Eric M. Sprink serving as our President and Chief Executive Officer, Christopher D. Adams serving as Board Chair, and Andrew P. Skotdal serving as Vice Chair of the Board.  In keeping with good corporate governance practices, the Board believes that the separation of the duties of Board Chair and Chief Executive Officer eliminates any inherent conflict of interest that may arise when the roles are combined, and that an independent director can best provide the leadership and objectivity required as Chair.  This reinforces the leadership role of our Board of Directors in its oversight of our business and affairs.

Board Oversight of Risk Management

Our Board of Directors believes that effective risk management and control processes are critical to our safety and soundness, our ability to predict and manage the challenges that we face and, ultimately, our long-term corporate success. The Chair of the Board of Directors meets regularly with management to discuss strategy and risks facing the Company. Senior management members attend the Board’s meetings and are available to address any questions or concerns raised by the Board of Directors on risk management and any other matters. The Chair of the Board of Directors and non-executive members of the Board of Directors work together to provide strong, independent oversight of the Company’s management and affairs through its standing committees and, when necessary, special meetings of Independent Directors.

Our Board of Directors, both directly and through its committees, is responsible for overseeing and evaluating our risk management processes, with each of the committees of our Board of Directors assuming a different and important role in overseeing and evaluating the management of the risks the Company faces.

The Board of Directors discusses and evaluates a broad range of topics, including environmental, social and governance (ESG) matters, cybersecurity and human capital management topics including culture, succession planning and development, compensation, benefits, employee recruiting and retention, health, safety and wellness, and diversity, equity and inclusion.

The Audit Committee of the Board of Directors is responsible for overseeing and evaluating risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures and internal control over financial reporting).

The Compensation Committee of the Board of Directors has primary responsibility for risks and exposures associated with our compensation policies, plans and practices, regarding both executive compensation and the Company’s compensation structure generally. In particular, our Compensation Committee, in conjunction with our President and Chief Executive Officer and other members of our management, as appropriate, reviews our incentive compensation arrangements to ensure these programs are consistent with applicable laws and regulations, including safety and soundness requirements, and do not encourage imprudent or excessive risk-taking by our employees.

The Governance & Nominating Committee of the Board of Directors oversees risks associated with the independence of our Board of Directors and potential conflicts of interest.

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The Non-Financial Risk Committee of the Board of Directors is responsible for assisting the Board of Directors in discharging its duties related to overseeing risks in conjunction with the Bank providing Banking as a Service (“BaaS”) to various entities through our CCBX segment.  

While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors oversees overall strategic and reputational risks, and is regularly informed through committee reports and reports directly from officers responsible for oversight of various risks within the Company. In addition, the Board of Directors has oversight with respect to risks related to the COVID-19 pandemic. While its committees addressed COVID-19 risks specific to their delegated duties, the Board of Directors has reviewed, overseen and continues to monitor the identification of COVID-19 risks and mitigation strategies related to the Company's workplace procedures, cybersecurity, liquidity, business strategy, and funding and capital stress forecasts.

Our executive management is responsible for implementing our risk management processes, including by assessing and managing the risks we face, including strategic, operational, regulatory, investment and execution risks, on a day-to-day basis, and reporting to our Board of Directors regarding our risk management processes. Our executive management is also responsible for creating and recommending to our Board of Directors for approval appropriate risk appetite metrics reflecting the aggregate levels and types of risk we are willing to accept in connection with the operation of our business and pursuit of our business objectives.

The role of our Board of Directors in our risk oversight is consistent with our leadership structure, with our President and Chief Executive Officer and the other members of executive management having responsibility for assessing and managing our risk exposure, and our Board of Directors and its committees providing oversight in connection with those efforts. We believe this division of risk management responsibilities presents a consistent, systemic and effective approach for identifying, managing and mitigating risks throughout our operations.

Attendance at the Annual Meeting of Shareholders

The Board of Directors encourages directors to attend the annual meeting of shareholders. Eight directors serving on the Board of Directors at the time of the 2021 Annual Meeting of Shareholders and one director nominee attended the Company’s 2021 Annual Meeting of Shareholders.  

Diversity, Equity and Inclusion (“DEI”)

We believe that DEI needs to start at the top of an organization, and the Company began this process at the Board level in 2017 when our board of directors began discussing strategic planning and board recruitment. As the Company has entered more complex arenas including BaaS, we seek out diverse and qualified director candidates who bring a background and expertise in the fintech and digital banking sectors regardless of their gender, race, or other personal characteristics. Additionally, those board members would need to be representative of the diversity found in our fintech partners. Since beginning this effort the board has added three women directors, two of which are from minority backgrounds.  We strive to maintain a diverse and inclusive work culture in which individual differences and experiences are valued and all employees have the opportunity to contribute and thrive. We believe that leveraging our employees’ diverse perspectives and capabilities will enhance innovation, foster a collaborative work culture and enable us to better serve our customers and communities.

Our commitment to diversity starts with our Board of Directors, which oversees the culture and holds management accountable to build and maintain a diverse and inclusive environment.   We believe a diverse workforce is critical to sustainable success.  As of December 31, 2021, we employed 387 full and part-time employees.  The following table is a breakdown of our workforce as of December 31, 2021.

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We are proud of our workforce and the opportunity to further diversify our team going forward.  

Our DEI efforts are enhanced by our CCBX business partnerships and the customers our partners serve.  Our reach extends to a diverse and often underserved market through our BaaS relationships.  These partners are uniquely qualified to offer access to credit, promote financial well-being, provide financial education, and other services to a variety of customers, including but not limited to, women, people of color, young adults, immigrants, small businesses and other underserved populations.

DEI extends to all our customers as well.  We are focused on supporting small businesses throughout our communities including but not limited to minority, women, and veteran owned businesses. The COVID-19 pandemic exposed the challenges of small business. We are proud to have participated in the Paycheck Protection Program, originating over 5,800 loans totaling more than $763 million to a variety of businesses. During the COVID-19 pandemic, our company also financially supported locally-owned restaurants by providing meals and gift cards for our employees from these locally owned and community based restaurants.  

Environment and Sustainability

Services like mobile and online banking, remote deposit capture, electronic loan payments, eStatements and combined statements enable us to support all customers in their efforts to consume less fuel and paper. We continue to digitize loan origination and deposit account opening processes, reducing trips to the bank and paper documents for our customers.

Additionally, we work hard to ensure that our lending activities do not encourage business activities that could cause irreparable damage to our reputation or the environment. As a result, we try to conduct business responsibly, with awareness to environmental, social, and human rights issues while also monitoring credit risks. This process involves management and Board oversight. In general, we evaluate each credit or transaction on its individual merits, with larger deals receiving more attention and deeper analysis.

We are focused on the environment and committed to business practices and activities that encourage sustainability and minimize our environmental impact.

We demonstrate environmental responsibility in various ways, including:

We are focused on sustainability throughout our everyday business practices by:

Human Capital

As of December 31, 2021, we had 377 full-time equivalent employees, all were located in the United States, however technology has allowed us to expand our reach to include a larger demographic with more remote employees working outside of our physical locations and throughout the country. We seek to attract, retain and develop the most talented employees possible by promoting a strong, positive culture, maintaining a safe and

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CORPORATE GOVERNANCE

healthy workplace, emphasizing open communication with management and investing in training and education.  None of our employees are parties to a collective bargaining agreement. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.

Culture. We have always led with people, building our Bank on the diverse perspectives, knowledge, and experiences of our employees.  Our employees utilize their strengths to set the course and are empowered to do the right things for our clients.  We strive to create an inclusive workplace so we can build and maintain a high-performing culture where engaged, satisfied employees embody our core values: stay flexible, take care of each other, embrace gray thinking, be relentless, be the best and be un-bankey.  

We seek out talent that will be a cultural fit to our core values and have backgrounds that are as diverse as the clients we serve in each of our business units.

Pay Equity. We believe our staff should be paid for the roles they fulfill, their experience, and how they do their jobs, and our goal is to attract, retain and develop quality talent.  To deliver on that commitment, we benchmark and set pay ranges based on banking market data and consider factors such as an employee’s role and experience, the location of their job, and their performance. We also regularly review our compensation practices, both in terms of our overall workforce and individual employees, to ensure our pay is fair and equitable.

Health, Safety and Wellness. Since the onset of the COVID-19 pandemic, we have taken a people-first approach to help our employees manage their work and personal responsibilities, with a strong focus on employee wellbeing, health and safety. Our human resource team engages the staff in an evolving wellness program designed to enhance physical, financial, and mental wellbeing for all our employees. We encourage healthy lifestyle behaviors through regular communications, educational sessions, voluntary progress tracking of beneficial health changes, and wellness challenges.

We value the contributions of our employees, particularly in the face of the challenges posed by the COVID-19 pandemic. Where possible, many employees have been working from home to help maintain their health and safety as well as business continuity. The Bank has accommodated staff who are unable to work on site due to health or family issues, and our human resources department works one-on-one to find solutions that are workable for both staff and the Company.

Community Engagement. We are committed to supporting the communities we serve through donations, sponsorships, employee volunteerism and the Employee Giving Fund.  In 2021, the Bank supported 110 organizations through donations and event sponsorships.

The Employee Giving Fund is supported entirely by donations contributed by employees, enabling staff to pool their donations for the greatest impact in each community we serve. Employees direct the grants from the fund by serving on Bank’s grant advisory committee. Since its inception in 2001, the Employee Giving Fund has awarded 436 grants totaling more than $669,000 through the end of 2021.

While volunteering and supporting our communities continued to look different in 2021 due to the COVID-19 pandemic, employees continued to volunteer in a variety of capacities, and still found many ways to get involved.  In 2021, employees volunteered 6,748 hours supporting 148 organizations.

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ITEMS TO BE VOTED ON BY SHAREHOLDERS

ITEM 1. ELECTION OF DIRECTORS

The Board of Directors consists of eleven members.  Under our second amended and restated articles of incorporation, as amended, the Board is divided into three classes with three-year staggered terms, with approximately one-third of the directors elected each year. Four directors have terms that expire at the annual meeting.

At the annual meeting, shareholders will vote to elect Christopher D. Adams, Steven D. Hovde, Stephan Klee and Thomas D. Lane, whose terms expire at this annual meeting, to each serve for a three-year term. All nominees currently serve on the Board of Directors. The Board has nominated Mr. Adams, Mr. Hovde, Mr. Klee and Mr. Lane to serve until the 2025 annual meeting of shareholders or until their successors are elected, or until their earlier resignation or death. Each of the nominees was recommended for election by the Governance & Nominating Committee, and each such recommendation was approved unanimously by the Board of Directors.  Mr. Hovde, Mr. Klee and Mr. Lane are independent directors within the meaning of the applicable Nasdaq listing rules.

Unless you indicate on the proxy card that your shares should not be voted for the nominees, the Board of Directors intends that the proxies solicited by it and returned will be voted for the election of each of the Board of Directors’ nominees. If any nominee is unable to serve, the persons named in the proxy card will vote your shares to approve the election of any substitute proposed by the Board of Directors. Alternatively, the Board of Directors may adopt a resolution to reduce the size of the Board of Directors. At this time, the Board of Directors knows of no reason why any nominees might be unable to serve.

The Board of Directors unanimously recommends a vote “FOR” the election of Christopher D. Adams, Steven D. Hovde, Stephan Klee and Thomas D. Lane.

The election of each nominee requires a plurality of the votes cast for each nominee.  Abstentions and broker non-votes are treated as present for quorum purposes only and will have no effect on the outcome of the proposal.

Certain information about each of the nominees is furnished below, including their experience, qualifications, attributes or skills that caused the Governance & Nominating Committee and the Board of Directors to determine that the nominees should continue to serve as directors. The age indicated for each individual is as of December 31, 2021. There are no family relationships among the directors or executive officers. The indicated period of service as a director includes service as a director of the Bank.

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ITEM 1. ELECTION OF DIRECTORS

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ITEM 1. ELECTION OF DIRECTORS

18

ITEM 1. ELECTION OF DIRECTORS

19

ITEM 1. ELECTION OF DIRECTORS

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ITEM 2. RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has selected Moss Adams LLP to be the Company’s independent registered public accounting firm for the 2022 fiscal year, subject to ratification by shareholders. Moss Adams LLP has served as our independent registered public accounting firm since 2016.  A representative of Moss Adams LLP will be present at the annual meeting to respond to appropriate questions from shareholders and will have the opportunity to make a statement should he or she desire to do so.

In determining whether to reappoint Moss Adams LLP as the Company’s independent registered public accounting firm, the Audit Committee took into consideration a number of factors, including the length of time the firm has been engaged, the quality of the Audit Committee’s ongoing discussions with Moss Adams LLP, an assessment of the professional qualifications and past performance of Moss Adams LLP and the potential impact of changing independent registered public accounting firms. Through its experience with the Company, Moss Adams LLP has gained institutional knowledge and expertise regarding the Company’s operations, accounting policies and practices and internal control over financial reporting.  

If the ratification of the appointment of Moss Adams LLP is not approved by a majority of the votes cast at the annual meeting, the Audit Committee will consider other independent registered public accounting firms. In addition, if the ratification of Moss Adams LLP is approved by shareholders at the annual meeting, the Audit Committee may also consider other independent registered public accounting firms in the future if it determines that such consideration is in the best interests of the Company and its shareholders.

The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of Moss Adams LLP as the Company’s independent registered public accounting firm.

To be approved, the appointment of Moss Adams LLP as our independent registered public accounting firm must receive an affirmative vote of a majority of the votes cast.  Abstentions are treated as present for quorum. purposes only and will have no effect on the outcome of the proposal. We do not expect to receive broker non-votes in this Item.

Audit and Non-Audit Fees

The following table sets forth the fees billed to the Company for the fiscal years ending December 31, 2021 and December 31, 2020 for services provided by Moss Adams LLP.

Pre-Approval of Services by Moss Adams LLP

The Audit Committee is responsible for appointing, setting compensation and overseeing the work of Moss

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ITEM 2. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTING FIRM

Adams LLP. In accordance with its charter, the Audit Committee approves, in advance, all audit and permissible non-audit services to be performed by Moss Adams LLP. Such approval process ensures that Moss Adams LLP does not provide any non-audit services to the Company that are prohibited by law or regulation.

In addition, the Audit Committee has established a policy regarding pre-approval of all audit and permissible non-audit services provided by Moss Adams LLP. Requests for services by Moss Adams LLP for compliance with the auditor services policy must be specific as to the particular services to be provided. The request may be made with respect to either specific services or a type of service for predictable or recurring services.

Any proposed specific engagement may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the Audit Committee or one or more of its members. The member or members to whom such authority is delegated shall report any specific approval of services at the next regular meeting of the Audit Committee. The Audit Committee will regularly review summary reports detailing all services being provided to the Company by its independent registered public accounting firm.

During the year ended December 31, 2021, all services were approved, in advance, by the Audit Committee in compliance with these procedures.

Audit Committee Report

The Company’s management is responsible for the Company’s internal control over financial reporting. Moss Adams LLP is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing an opinion on the conformity of those financial statements with generally accepted accounting principles. The Audit Committee oversees the Company’s internal control over financial reporting on behalf of the Board of Directors.

In this context, the Audit Committee has met and held discussions with management and Moss Adams LLP. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and Moss Adams LLP.

The Audit Committee has also reviewed and discussed with the Company’s management the audited financial statements in the Annual Report. In addition, the Audit Committee discussed with Moss Adams LLP those matters required to be discussed under applicable Public Company Accounting Oversight Board (“PCAOB”) rules or standards and the SEC. Additionally, Moss Adams LLP provided to the Audit Committee the written disclosures and the letter required under applicable PCAOB rules or standards. The Audit Committee also discussed with Moss Adams LLP its independence from the Company.  In concluding that the accounting firm is independent, the Audit Committee considered, among other factors, whether the non-audit services provided by Moss Adams LLP were compatible with their independence.

The Audit Committee discussed with Moss Adams LLP the overall scope and plans for their audit. The Audit Committee meets with Moss Adams LLP, with and without management present, to discuss the results of their audit, their evaluation of the Company’s internal control over financial reporting, and the overall quality of the Company’s financial reporting process.

In performing all of these functions, the Audit Committee acts only in an oversight capacity. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for financial statements and reports, and of Moss Adams LLP who, in its report, expresses an opinion on the conformity of the Company’s financial statements to generally accepted accounting principles. The Audit Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.

Furthermore, the Audit Committee’s considerations and discussions with management and Moss Adams LLP do not assure that the Company’s financial statements are presented in accordance with generally accepted

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ITEM 2. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTING FIRM

accounting principles, that the audit of the Company’s consolidated financial statements has been carried out in accordance with the standards of the PCAOB or that the Company’s independent registered public accounting firm is in fact “independent.”

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements be included in the Annual Report for filing with the SEC. The Audit Committee has appointed, subject to shareholder ratification, the selection of Moss Adams LLP for the fiscal year ended December 31, 2022.

Audit Committee of the Board of Directors of Coastal Financial Corporation

Stephan Klee (Chair)

Sadhana Akella-Mishra

Rilla R. Delorier

Thomas D. Lane

Michael R. Patterson

Gregory A. Tisdel

Pamela R. Unger

DIRECTOR COMPENSATION

Our Board determines the compensation of our non-employee directors in conjunction with recommendations made by the Compensation Committee. We use a combination of cash and share-based compensation to attract and retain qualified candidates to serve on the Board of Directors. Eric M. Sprink did not receive fees or other compensation for his service as a director of the Company or the Bank during the fiscal year ended December 31, 2021 and is not included in the 2021 Director Compensation Table below.   

Our non-employee directors received compensation for service and attendance as follows during the year ended December 31, 2021:

In addition to the cash compensation outlined above, non-employee directors, excluding the Board Chair, receive approximately $15,000 in restricted stock, and the Board Chair receives approximately $25,000 in restricted stock.  Partial shares are not issued, therefore shares are rounded up to the nearest whole number.

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DIRECTOR COMPENSATION

The following table sets forth information regarding compensation paid for the year ended December 31, 2021 to our directors who were not Named Executive Officers:

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EXECUTIVE COMPENSATION

Summary Compensation Table

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EXECUTIVE COMPENSATION

Outstanding Equity Awards at 2021 Fiscal Year End

The following table provides information regarding outstanding stock option awards held by our Named Executive Officers as of December 31, 2021.

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EXECUTIVE COMPENSATION

The following table provides information regarding outstanding restricted stock units held by our Named Executive Officers as of December 31, 2021.

The Company granted 100,000 PSUs to Mr. Sprink in 2021 to further align his performance with shareholder returns and to retain his services for an extended period.  The price of a share at the time of the grant was $31.00.  The PSUs cliff vest after six years of continuous service only if certain specified performance conditions are met.  Fifty percent of the units (50,000 PSUs) are contingent on achieving stock price hurdles, which will be measured for achievement during the 24-months preceding the 6^th anniversary of the grants (years five and six).  A sustained stock price of at least $50.00 per share for no less than 60 continuous trading days during the measurement period is required to vest 25,000 shares and a sustained stock price of at least $60.00 per share for no less than 60 continuous trading days during the measurement period is required to vest 50,000 shares.   The vesting of an additional 50,000 shares is contingent on relative return on average equity compared to a comparator group, with the Company’s performance needing for be at least in the 90^th percentile, or top 10%, of the group over the six year period.  We believe the achievement of these performance conditions will benefit shareholders of the Company by incentivizing increased shareholder value through higher stock prices and increased earnings.

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EXECUTIVE COMPENSATION

Additionally, on January 25, 2021, Mr. Sprink was granted 5,978 shares of restricted stock pursuant to the Coastal Financial Corporation 2018 Omnibus Incentive Plan that vested immediately.  

Employment and Change in Control Agreements with Named Executive Officers

Employment Agreement with Eric M. Sprink

The Company and the Bank entered into a Second Amended and Restated Employment Agreement (the “Employment Agreement”) effective October 4, 2021 with Eric Sprink, the President and Chief Executive Officer of the Company and the Bank. Mr. Sprink’s Employment Agreement (which has an initial term of five years that extends for successive one-year renewal terms unless either party gives 90-days’ advance notice of non-renewal or the Employment Agreement is otherwise terminated in accordance with its terms) provides that Mr. Sprink will continue to serve as President and Chief Executive Officer of the Company and the Bank, and as a member of the Board of Directors of the Company (subject to re-election by the Company’s shareholders) and the Board of Directors of the Bank. As consideration for these services, the Employment Agreement provides Mr. Sprink with a minimum annual base salary, effective retroactive to January 1, 2021, of $700,000, subject to annual review by the Compensation Committee of the Board of Directors of the Company, an annual cash performance bonus opportunity, equity incentive opportunities, and certain other employee benefits and perquisites, including a car allowance and reimbursement of country club dues.

The Employment Agreement provides for severance benefits if the Company and the Bank terminate Mr. Sprink’s employment without “cause” or if he resigns for “good reason” (as each of those terms is defined in the Employment Agreement), (a “qualifying termination of employment”). Upon a qualifying termination of employment, Mr. Sprink will be entitled to the following payments and benefits under the Employment Agreement: an amount equal to his accrued but unpaid base salary, unused vacation pay and any other amounts or benefits required to be paid under any plan, program contract or agreement with the Company (the “accrued benefits”), an amount in cash equal to two times his then-current annual base salary in monthly installments (unless termination occurs due to a “change in control”) (as such term is defined in the Employment Agreement), the pro-rata portion of his annual cash performance bonus, and reimbursement for the cost of continuing group health plan coverage for himself and his dependents for up to one year following the date of termination of employment. In addition, Mr. Sprink will fully vest in all outstanding unvested equity awards to the extent that such awards would have vested within two years following the termination date based solely on Mr. Sprink’s continued employment. All outstanding unvested equity awards granted under the Amended and Restated Employment Agreement dated as of June 19, 2018 will fully vest.

Pursuant to the Employment Agreement, if Mr. Sprink experiences a qualifying termination of employment within two years following a “change in control”, then, in lieu of the payment and benefits otherwise payable to him, Mr. Sprink will be entitled to receive the accrued benefits and a lump sum cash severance payment equal to three times the sum of his then-current base salary and his annual cash bonus for the prior calendar year. In addition, Mr. Sprink will receive a lump-sum payment equal to the cost of 36 months of continuing group health plan coverage for himself and his dependents and will fully vest in all outstanding unvested equity awards, other than as explicitly provided for in such award agreements, that would have vested based solely on Mr. Sprink’s continued employment.

Mr. Sprink will be subject to a one-year post-termination non-competition covenant and an 18 month post-termination non-solicitation covenant (i) upon termination of Mr. Sprink’s employment without “cause”, for “good reason” or upon a qualifying termination within two years following a “change in control” and payment of the amounts required under the Employment Agreement in each such case or (ii) upon expiration of the Employment Agreement and payment to Mr. Sprink of a salary continuation for 12 months. The Employment Agreement also contains customary confidentiality, non-disparagement and cooperation covenants.

Change in Control Agreement with Joel G. Edwards

The Company and the Bank entered into an amended and restated change in control severance agreement (the “amended severance agreement”) with Mr. Edwards effective June 19, 2018. His amended severance agreement

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EXECUTIVE COMPENSATION

provides that if the Company or the Bank terminates Mr. Edwards's employment without "cause" before or after a "change in control" or if he resigns for "good reason" (as each of those terms is defined in the amended severance agreement) (a "qualifying termination of employment") during the period that begins 90 days prior to a “change in control”, as applicable, and ends 24 months following such “change in control”, then he will be entitled to receive a cash severance payment equal to two times the sum of his then-current base salary, his cash bonus for the calendar year prior to which the “change in control” occurs and the value of any equity incentive awards made in the calendar year prior to which the “change in control” occurs. In addition, if Mr. Edwards experiences a qualifying termination of employment within 24 months of a change of control, he will fully vest in all unvested stock options or other equity incentive compensation awards previously granted to him that would have vested based solely on his continued employment.

Change in Control Agreement with John J. Dickson

The Company and the Bank entered into change in control severance agreement (the “severance agreement”) with Mr. Dickson effective June 30, 2020. Mr. Dickson’s severance agreement provide that if the Company or the Bank terminates his employment without "cause" before or after a "change in control" or if he resigns for “good reason” (as each of those terms is defined in the severance agreement) (a “qualifying termination of employment”), prior to such termination or within 90 days thereafter the Company and/or the Bank enters or entered into an agreement for a “change in control”, as applicable, and ends 24 months following such “change in control”, then he will be entitled to receive a cash severance payment equal to one times the sum of his then-current base salary, his cash bonus for the calendar year prior to which the “change in control” occurs. In addition, if Mr. Dickson experiences a qualifying termination of employment within 24 months of a change of control, he will fully vest in all unvested stock options or other equity incentive compensation awards previously granted to him that would have vested based solely on his continued employment.

2018 Omnibus Incentive Plan

The “2018 Plan”, which was approved by shareholders in April 2018, and amended and approved by shareholders in May 2021, is designed to motivate and reward those employees and other individuals who are expected to perform at the highest level and contribute significantly to our success, thereby furthering our best interests and those of our shareholders. The 2018 Plan will expire on April 30, 2028, the tenth anniversary of shareholder approval. The 2018 Plan will expire sooner if, prior to the end of the term, the maximum number of shares available for issuance under the 2018 Plan has been issued or our Board of Directors terminates the 2018 Plan.

Subject to adjustment (as set forth in the 2018 Plan), $1.1 million shares of our common stock were reserved for awards under the 2018 Plan and, at December 31, 2021, a total of 667,440 shares of our common stock remained available for new awards under the 2018 Plan. In the first quarter of 2022, restricted stock units and shares totaling 53,871 were awarded for 2021 performance, with stock option forfeitures of 800 and restricted stock unit forfeitures of 1,261 leaving 615,630 available for new awards under the 2018 Plan as of March 22, 2022.  Shares granted under the 2018 Plan that are subject to an outstanding award that is forfeited, expires, terminates, otherwise lapses or is settled for cash, in whole or in part, without the delivery of the shares will again be available for issuance under the 2018 Plan. However, shares tendered or withheld in payment of an exercise price or in respect of taxes related to awards will not become available for issuance under the 2018 Plan.  

Risk Considerations in our Compensation Program

We believe that our compensation policies and practices for our employees are reasonable and properly align our employees’ interests with those of our shareholders. We believe that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company. Although certain of our employees who are not Named Executive Officers are compensated by the number or dollar volume of transactions they complete, our extensive underwriting process is designed to prevent us from entering into transactions that deviate from our underwriting standards.

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STOCK INFORMATION

The following table provides information as of the Record Date about the persons known to the Company to be the beneficial owners of more than 5% of the Company’s outstanding common stock based on the information filed by that entity with the SEC⁽¹⁾. A person may be considered to beneficially own any shares of common stock over which he or she has, directly or indirectly, sole or shared voting or investment power.

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STOCK INFORMATION

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STOCK INFORMATION

The following table provides information as of March 22, 2022 about the shares of Coastal Financial common stock that may be considered to be beneficially owned by each director or nominee for director of the Company, by those Named Executive Officers of the Company listed in the Summary Compensation Table and all directors and executive officers of the Company as a group. A person may be considered to beneficially own any shares of common stock over which he or she has directly or indirectly, sole or shared voting or investment power, and any shares which the person would have the right to acquire beneficial ownership of within 60 days through the exercise of any stock option or other right, and are deemed outstanding for the purpose of calculating that person’s percentage ownership.  These shares, however are not deemed outstanding for the purpose of computing the percentage ownership of any other person. 

Unless otherwise indicated, none of the shares listed are pledged as security and each of the listed individuals has sole voting and investment power with respect to the shares shown.

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STOCK INFORMATION

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who own more than 10% of our common stock, to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than 10% shareholders are required by regulation to furnish the Company with copies of all Section 16(a) reports they file.

Based solely on its review of the copies of the reports it has received and written representations provided to the Company from the individuals required to file the reports, the Company believes that each of its executive officers and directors has complied with Section 16(a) filing requirements for transactions in our common stock during the year ended December 31, 2021, except for one late report on Form 4 filed by Pamela R. Unger, to report the granting of restricted stock awards in May 2021, upon her election to the Board of Directors.  The new SEC filing codes were not received in sufficient time to meet the filing deadline.  

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OTHER INFORMATION RELATED TO DIRECTORS AND EXECUTIVE OFFICERS

Policies and Procedures for Approval of Related Persons Transactions

We maintain a Policy and Procedures Governing Related Person Transactions, which is a written policy and set of procedures for the review and approval or ratification of transactions involving related persons. Under the policy, related persons consist of directors, director nominees, executive officers, persons or entities known to us to be the beneficial owner of more than five percent of any outstanding class of the voting securities of the Company, or immediate family members or certain affiliated entities of any of the foregoing persons.

Transactions covered by the policy consist of any financial transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, in which:

The policy excludes certain transactions, including:

Related person transactions will be approved or ratified by the Board of Directors. In determining whether to approve or ratify a related person transaction, the Board of Directors will consider all relevant factors, including:

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OTHER INFORMATION

A member of the Board who has an interest in the transaction will abstain from voting on approval of the transaction, but may, if so requested by the chair of the Board, participate in some or all of the discussion.

Transactions with Related Persons

The Company or the Bank may occasionally enter into transactions with certain “related persons.” Related persons include our executive officers, directors, beneficial owners of 5% or more of our common stock, immediate family members of or other persons sharing a household with these persons and entities in which one of these persons has a direct or indirect material interest. We generally refer to transactions with these related persons in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of the Company's total assets at the end of the fiscal year ended December 31, 2021 and December 31, 2020 as “related party transactions.”

Certain Related Party Transactions

The following is a description of transactions since January 1, 2020, including currently proposed transactions to which we have been or are to be a party in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of the Company’s total assets at the end of the fiscal year ended December 31, 2021 and December 31, 2020, and in which a Related Party had or will have a direct or indirect material interest.

Investment Agreement. On March 30, 2011, in connection with the completion of a private placement of the Company’s common stock in which the Company raised gross proceeds of approximately $5.3 million, the Company entered into an Investment Agreement with Steven D. Hovde, a member of the Board of Directors, (as amended, the “Investment Agreement”). Under this Investment Agreement, Mr. Hovde agreed to certain restrictions for so long as he holds 4.9% or more of the Company’s outstanding common stock, including not to (i) acquire any of the Company’s voting securities if such acquisition would result in Mr. Hovde or his affiliates controlling the Company for purposes of the Bank Holding Company Act of 1956 or the Change in Bank Control Act, owning 25% or more of the total equity of the Company (provided that, pursuant to the Investment Agreement, Mr. Hovde may not acquire securities that would result in the ownership of 33% or more of the Company’s total equity if he owns less than 15% of any class of the Company’s voting securities ) or having beneficial ownership or control of 25% or more of any class of the Company’s voting securities, (ii) make or participate in any solicitation of proxies to vote, or seek to advise or influence any person with respect to the voting of, any of the Company’s voting securities, (iii) propose a director or slate of directors in opposition to a nominee or slate of nominees proposed by us, call a meeting of shareholders or initiate any proposal for action by shareholder of the Company, form or join a group with respect to any of the Company’s voting securities, or otherwise act alone or in concert with others to influence or control the Company’s management, Board of Directors or policies, (iv) bring any action to contest the validity of the restrictions in the Investment Agreement or seek a release, or request an amendment or waiver, of any of the restrictions in the Investment Agreement, (v) enter into, or agree, offer, propose or seek to enter into, any business combination relating to all or part of the Company or the Bank, (vi) publicly disclose any intention, plan or arrangement inconsistent with the foregoing restrictions, (vii) enter into any agreement with us that substantially limits the discretion of the Company’s management over major policies and decisions, or (viii) dispose or threaten to dispose of Mr. Hovde’s equity interest in the Company as a condition or inducement of specific material action or non-action by us. The Company has agreed not to adopt any “poison pill” or shareholder rights plan that would limit Mr. Hovde’s rights to acquire shares up to the limits described in clause (i) above.

The Investment Agreement requires us to elect or appoint a representative of Mr. Hovde to the Board of Directors of the Company and the Bank, subject to the satisfaction of all legal and governance requirements regarding service as a director and approval of the Company’s nominating committee, for as long as he owns 4.9% or more of the Company’s outstanding common stock. The Investment Agreement also requires us to recommend to

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OTHER INFORMATION

shareholders the election of Mr. Hovde’s board representatives, to use the Company’s best efforts to cause them to be elected and to appoint Mr. Hovde’s board representative to two committees of the Board of Directors, subject to meeting applicable governance rules and guidelines. Under the Investment Agreement, for as long as Mr. Hovde owns 4.9% or more of the Company’s outstanding common stock, his board representative is prohibited from serving as Board Chair or Chair of any board committee requiring independence. Mr. Hovde currently serves as the Chair of the Asset Liability and Investment Committee, which does not require independence.  

Mr. Hovde has the right, upon notice to the Company, to convert all or a portion of his shares of common stock into an equivalent number of shares of nonvoting common stock.

The foregoing description of the Investment Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Investments Agreement, which have previously been filed with the SEC.

Downtown Everett Lease. On October 21, 1996, the Company entered into a lease with respect to the Company’s downtown Everett branch facility with a group of investors that includes a limited liability company in which Andrew P. Skotdal, who is one of the Company’s directors, has an interest. The lease commenced in 1997 for a period of ten years and has been renewed through March 31, 2024. Monthly rent under the Everett lease is $46,000 for the remaining lease term. The Company is also responsible for real property taxes, utilities, maintenance, repairs and alterations. Both in 2021 and 2020, the Company made $546,000 in payments related to this lease agreement.

Synctera, formerly Entangle, BaaS Agreement.  The Bank provides BaaS through its CCBX segment to enable broker dealers and digital financial service providers to offer their clients banking services. On March 23, 2020, the Company entered into a Development Partner Agreement (“Entangle Agreement”) with Entangle Inc., a financial technology provider (“Entangle”). Under the Entangle Agreement, the Company invested $250,000 in Entangle and the Bank paid $75,000 of $125,000 pre-paid license fees, the remainder of which will be paid after certain requirements under the Entangle Agreement are satisfied. In July 2020, Entangle changed its name to Synctera. In December 2020, the Company approved an additional investment of $500,000 in Synctera. During the quarter ended September 30, 2021, the Company reassessed the value of our investment in Synctera and recognized a $1.5 million unrealized holding gain as a result of an observable price change.  In December 2020, the Company signed a platform agreement with Synctera, providing access to the Synctera Platform and subscription to the Synctera Service.  As part of this agreement, the $75,000 pre-paid license fee was converted to a credit and will be applied to the monthly fees.  In January 2022, an updated platform agreement was signed.  A flat monthly fee is assessed to the Company which entitles the Company to onboard to the Synctera Platform all fintech customers generated by the Company and the revenue share for direct net revenue received or owed by fintech customers is 50% to the Company and 50% to Synctera.  Diagram Corporation (“Diagram”), a Canadian domiciled venture builder, helps entrepreneurs launch new businesses by providing capital and incubator support.  Diagram places these investments by being the investment manager of certain investment funds in which many third parties invest.  Through its second fund (“Diagram Ventures Limited Partners II”), Diagram is the lead seed investor in Synctera but does not expect to have a majority stake in Synctera once Synctera assumes full business operations.  Portag3 Fund II, a venture capital fund managed by Sagard Holdings, is another investor in Diagram Ventures Limited Partners II and has invested less than 10% of its committed capital in Diagram Ventures Limited Partners II. Stephan Klee, who is a director of the Bank and the Company, is the chief financial officer of Sagard Holdings.  

Legal Services. The Company engages Adams and Duncan, Inc. P.S. for legal services in which Christopher D. Adams, who is one of the Company’s directors, is a partner. For fiscal year ended December 31, 2021 and 2020, total payments for legal services were $812,015 and $429,390, respectively.

Ordinary Banking Relationships

In the ordinary course of the Company’s business, we have engaged in ordinary banking transactions with the Company’s directors, executive officers, their immediate family members and companies in which they may have more than 5% beneficial ownership interest, including deposit relationships and loans to such persons and companies. Any such transactions were made on substantially the same terms, including interest rates and collateral (where applicable), as those prevailing at the time as comparable transactions with persons who were not related to us. Any loans that we make to the Company’s officers, directors and principal shareholders, as well as their

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OTHER INFORMATION

immediate family members and affiliates, are approved by the Board of Directors in accordance with applicable bank regulatory requirements. No related party loans involve more than the normal credit collection risk and do not present any other unfavorable features to us. As of December 31, 2021, we had $8.0 million of loans outstanding to the Company’s directors and officers, their immediate family members and their affiliates, while deposits from this group totaled $4.5 million. As of December 31, 2021, no related party loans were categorized as nonaccrual, past due, restructured or potential problem loans. We expect to continue to enter into transactions in the ordinary course of business on similar terms with the Company’s directors and officers, as well as their immediate family members and affiliates.

Shareholder Communications

The Company encourages shareholder communications to the Board of Directors and/or individual directors. Shareholders who wish to communicate with the Board of Directors or an individual director should send their communications in writing to the care of Joel G. Edwards, Corporate Secretary, Coastal Financial Corporation, 5415 Evergreen Way, Everett, Washington 98203. Communications regarding financial or accounting policies should be sent to the attention of the Chairperson of the Audit Committee. All other communications should be sent to the attention of the Chairperson of the Governance & Nominating Committee.

39

OTHER INFORMATION

THE NOTICE AND PROXY STATEMENT AND ANNUAL REPORT ARE AVAILABILE AT WWW.PSTVOTE.COM/COASTAL2022

THIS PROXY IS BEING SOLICTED BY THE BOARD OF DIRECTORS OF COASTAL FINANCIAL CORPORATION

The undersigned, revoking any previous proxies relating to these shares, hereby acknowledges receipt of the Notice of 2022 Annual Meeting of Shareholders and Proxy Statement dated April 8, 2022, in connection with the 2022 Annual Meeting of Shareholders of Coastal Financial Corporation (the “Company”) to be held virtually at 6:00 p.m., Pacific Time, on Tuesday, May 24, 2022 (“2022 Annual Meeting of Shareholders”), and hereby appoints Eric Sprink and Christopher Adams as proxies, each with the power to

appoint his substitute, and hereby authorizes them to represent and to vote all shares of the Common Stock of COASTAL FINANCIAL CORPORATION registered in the name provided herein which the undersigned is entitled to vote, at the 2022 Annual Meeting of Shareholders, and at any postponements or adjournments thereof, with all the powers the undersigned would have if

personally present. Without limiting the general authorization hereby given, said proxies are, and each of them is, instructed to vote or act as indicated on the reverse side hereof on the proposals set forth in said Proxy.

The 2022 Annual Meeting of Shareholders will be held in a virtual only format via live webcast. To attend the virtual 2022 Annual Meeting of Shareholders you must register in advance at https://register.proxypush.com/CCB prior to the registration deadline of May 23, 2022 at 5:00 p.m. Pacific Time.

SEE REVERSE SIDE FOR ALL PROPOSALS. If you wish to vote in accordance with the Company’s Board of Directors’ (the

“Board of Directors”) recommendations, just sign in blue or black ink on the reverse side. You need not mark any boxes.

YOUR VOTE IS IMPORTANT - PLEASE VOTE PROMPTLY!

Shareholders of record may vote their proxy in the following ways (beneficial owners should follow voting instructions provided by their broker, bank or other nominee on how to vote their shares):

•

Login to

Enter your control number (12-digit number in bottom right corner of this Proxy Card) Vote by 11:59 p.m. Pacific Time on May 23, 2022

Mark, sign and date your proxy card and return it promptly to:

Philadelphia Stock Transfer, Inc.

2320 Haverford Rd

Suite 230

Ardmore, PA 19003

Proxy card must be received by May 24, 2022

●

The Company will be hosting the 2022 Annual Meeting of Shareholders in a virtual only format via live webcast. To attend and vote at the virtual annual meeting, you must register in advance following the instructions above. Upon completing your registration, you will receive further instructions via email, including your unique links that will allow you access to the 2022 Annual Meeting of Shareholders and will permit you to submit questions.

CONTROL NUMBER: «Control #»

40

TO VOTE, MARK BLOCKS IN BLUE OR BLACK INK AS FOLLOWS: ☒

The Board of Directors recommends a vote FOR Proposal 1 and 2.

□ FOR□ AGAINST□ ABSTAIN

In their discretion, the proxies are authorized to vote upon such other matter as may properly come before the meeting or any adjournments or postponements thereof.

This proxy is revocable and when properly executed, will be voted in the manner directed on this Proxy. If no such direction is made, this proxy will be voted in accordance with the recommendations made by the Board of Directors. The proxies will vote in their discretion upon any and all other matters that may properly come before the meeting and any adjournment or postponement thereof.

PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY.

Date:

Signature:

Signature:

NOTE: Please insert date and sign exactly as name(s) appears on this Proxy. Joint owners should each sign. When signing as attorney, executor, administrator, trustee, guardian, or officer or other authorized person on behalf of a corporation or other entity, or in another representative capacity, please give full corporate or other entity title under signature(s) of the authorized officer.

□ Please mark here for address changes or comments. Provide updated address or comments in the space provided below:

8 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Combined Document is available at www.proxyvote.com COASTAL FINANCIAL CORPORATION Annual Meeting of Shareholders May 24, 2021 6:00 PM This proxy is solicited by the Board of Directors The shareholder(s) hereby appoint(s) Eric M. Sprink and Andrew P. Skotdal as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common stock of COASTAL FINANCIAL CORPORATION that the shareholder(s) is/ are entitled to vote at the Annual Meeting of shareholder(s) to be held at 6:00 PM, PDT on May 24, 2021, the principal office of Coastal Community Bank, located at 5415 Evergreen Way, Everett, Washington, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted 'FOR' the director nominees and proposals made by Coastal Find on reverse side