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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, 2022. Record quarterly net income for the third quarter of 2022 was $11.1 million, or $0.82 per diluted common share, compared with net income of $10.2 million, or $0.76 per diluted common share, for the second quarter of 2022, and $6.7 million, or $0.54 per diluted common share, for the quarter ended September 30, 2021.

Total assets increased $164.0 million, or 5.5%, during the third quarter of 2022 to $3.13 billion, from $2.97 billion at June 30, 2022. Loan growth of $173.5 million, or 7.4%, for the three months ended September 30, 2022 to $2.51 billion. Loan growth included CCBX loan growth of $111.6 million, or 13.9%, and an increase of $61.9 million, or 4.0% in community bank loans, which is net of $10.6 million in PPP loan forgiveness/repayments. Deposits grew $139.8 million, or 5.2%, during the three months ended September 30, 2022 and included CCBX deposit growth of $136.2 million, or 12.8%, and an increase of $3.6 million, or 0.2%, in community bank deposits.

“Loans increased $173.5 million, or 7.4%, in the three months ended September 30, 2022, with $111.6 million of that growth in our CCBX segment, which provides Banking as a Service (“BaaS”). Our CCBX segment has grown to $915.6 million in loans, or 36.5% of total loans receivable, excluding $43.3 million in loans held for sale and our community bank loans have grown to $1.6 billion in loans receivable, as of September 30, 2022. Additionally, deposits grew $139.8 million, or 5.2%, during the three months ended September 30, 2022.

“We achieved record net income for the second consecutive quarter. For the quarter ended September 30, 2022 we had net income of $11.1 million, an increase of $925,000, or 9.1%, over the quarter ended June 30, 2022. Additionally, the Bank was recently named to the Piper Sandler Bank & Thrift Sm-All Stars Class of 2022 and was one of just two banks to receive the award for the fourth consecutive year. The recognition as a top performing bank is a huge honor and accomplishment and is reflective of the strong commitment our team has to our customers, communities and shareholders”, stated Eric Sprink, the CEO of the Company and the Bank.

The Company has one main subsidiary, the Bank which consists of two segments: CCBX and the community bank. The CCBX segment includes our BaaS activities and the community bank segment includes all other banking activities. Net interest income was $49.2 million for the quarter ended September 30, 2022, an increase of $9.3 million, or 23.3%, from $39.9 million for the quarter ended June 30, 2022, and an increase of $30.4 million, or 161.5%, from $18.8 million for the quarter ended September 30, 2021. Yield on loans receivable was 8.46% for the three months ended September 30, 2022, compared to 7.34% for the three months ended June 30, 2022 and 4.57% for the three months ended September 30, 2021. The increase in net interest income compared to June 30, 2022 and September 30, 2021, was largely related to increased yield on loans resulting from higher interest rates and growth in higher yielding loans, primarily from CCBX. Total average loans receivable for the three months ended September 30, 2022 was $2.45 billion, compared to $2.19 billion for the three months ended June 30, 2022, and $1.68 billion for the three months ended September 30, 2021.

Interest and fees on loans totaled $52.3 million for the three months ended September 30, 2022 compared to $40.2 million and $19.4 million for the three months ended June 30, 2022 and September 30, 2021, respectively. Loan growth of $173.5 million, or 7.4%, during the quarter ended September 30, 2022 included $111.6 million increase in CCBX loans; this includes capital call lines, which decreased $50.6 million, or 22.5%, during the quarter ended September 30, 2022. Capital call lines bear a lower rate of interest, but have less credit risk due to the way the loans are structured compared to other commercial loans. The increase in interest and fees on loans for the quarter ended September 30, 2022, compared to June 30, 2022 and September 30, 2021, was largely due to growth in higher yielding loans. As a result of the Federal Open Market Committee (“FOMC”) raising rates 3.0% in 2022, interest rates on our existing variable rate loans are affected, as are the rates on new loans. We continue to monitor the impact of these increases in interest rates. The FOMC last raised rates 0.75% on September 21, 2022.

Interest income from interest earning deposits with other banks was $2.3 million at September 30, 2022, an increase of $1.3 million compared to June 30, 2022, and an increase of $2.1 million compared to September 30, 2021 due to an increase in interest rates. The average balance of interest earning deposits with other banks for the three months ended September 30, 2022 was $397.6 million, compared to $499.9 million and $419.7 million for the three months ended June 30, 2022 and September 30, 2021, respectively. Interest earning deposits with other banks decreased as a result of increased loan demand. Those deposits were used to fund higher yielding loans receivable. Additionally, the average yield on these interest earning deposits with other banks increased to 2.27% for the quarter ended September 30, 2022, compared to 0.77% and 0.16% for the quarters ended June 30, 2022 and September 30, 2021, respectively.

Interest expense was $6.0 million for the quarter ended September 30, 2022, a $4.0 million increase from the quarter ended June 30, 2022 and a $5.2 million increase from the quarter ended September 30, 2021. Interest expense on borrowed funds was $273,000 for the quarter ended September 30, 2022, compared to $260,000 and $278,000 for the quarters ended June 30, 2022 and September 30, 2021, respectively. Interest expense on borrowed funds increased $13,000 compared to the three months ended June 30, 2022, as a result of the increase in interest rates. The $5,000 decrease in interest expense on borrowed funds from the quarter ended September 30, 2021 is the result of a decrease in Federal Home Loan Bank borrowings, which were paid off in the first quarter of 2022. Interest expense on interest bearing deposits increased $4.0 million for the quarter ended September 30, 2022, compared to the quarter ended June 30, 2022, and $5.2 million compared to the quarter ended September 30, 2021 as a result an increase in CCBX deposits that are tied to and reprice when the FOMC raises rates. Additionally, as a result of the interest rate increases, a significant portion of CCBX deposits that were not earning interest were reclassified to interest bearing deposits from noninterest bearing deposits during the first and second quarters of 2022, which also contributed to the increase in interest expense compared to September 30, 2021. These CCBX deposits were reclassified because the current interest rate exceeded the minimum interest rate set in their respective program agreements, as a result of the first and second quarter 2022 interest rate increases. We do not expect additional CCBX deposits will be reclassified as a result of future rate increases.

Total cost of deposits was 0.82% for the three months ended September 30, 2022, 0.25% for the three months ended June 30, 2022, and 0.10%, for the three months ended September 30, 2021. Community bank and CCBX cost of deposits were 0.16% and 1.79% respectively, for the three months ended September 30, 2022, compared to 0.08% and 0.56%, for the three months ended June 30, 2022, and 0.13% and 0.02% for the three months ended September 30, 2021. The increase in cost of deposits for the three months ended September 30, 2022 compared to the prior periods for both segments is a result of increased interest rates. Also impacting CCBX cost of deposits was the reclassification of deposits from noninterest bearing to interest bearing in the first two quarters of 2022. Any additional interest rate increases will increase our cost of deposits and result in higher interest expense on interest bearing deposits.

Net interest margin was 6.58% for the three months ended September 30, 2022, compared to 5.66% and 3.48% for the three months ended June 30, 2022 and September 30, 2021, respectively. The increase in net interest margin compared to the three months ended June 30, 2022 and September 30, 2021, was largely a result of an increase in higher rate loans. Loans receivable increased $173.5 million and $802.2 million, compared to June 30, 2022 and September 30, 2021, respectively. Additionally, the Fed Funds interest rate increases have resulted in existing, variable rate loans repricing to higher interest rates. Interest on loans receivable increased $12.2 million, or 30.3%, to $52.3 million for the three months ended September 30, 2022, compared to $40.2 million for the three months ended June 30, 2022, and $19.4 million for the three months ended September 30, 2021. Also contributing to the increase in net interest margin compared to the three months ended June 30, 2022 and September 30, 2021, was $1.3 million and $2.1 million increase in interest on interest earning deposits, respectively. These interest earning deposits earned an average rate of 2.27% for the quarter ended September 30, 2022, compared to 0.77% and 0.16% for the quarters ended June 30, 2022 and September 30, 2021, respectively. Average investment securities decreased $17.6 million to $103.7 million for the three months ended September 30, 2022 compared to the three months ended June 30, 2022, and increased $69.9 million compared to the three months ended September 30, 2021. Interest on investment securities decreased $9,000 for the three months ended September 30, 2022 compared to the three months ended June 30, 2022 due to lower average outstanding balance on investments and increased $530,000 compared to September 30, 2021, as a result of the increase in average outstanding balance coupled with increased yield, which also positively impacted net interest margin. These increases in interest income were partially offset by increases in interest expense on interest bearing deposits, as previously discussed.

Cost of funds was 0.85% for the quarter ended September 30, 2022, an increase of 56 basis points from the quarter ended June 30, 2022 and an increase of 69 basis points from the quarter ended September 30, 2021. Cost of deposits for the quarter ended September 30, 2022 was 0.82%, compared to 0.25% for the quarter ended June 30, 2022, and 0.10% for the quarter ended September 30, 2021. The increased cost of funds and deposits compared to June 30, 2022 and September 30, 2021 was largely due to the increase in interest rates compared to the previous periods. Noninterest bearing deposits of $813.2 million for the quarter ended September 30, 2022 decreased $4.8 million, or 0.59%, compared to the quarter ended June 30, 2022, and decreased $483.2 million, or 37.3%, compared to the quarter ended September 30, 2021 due to the aforementioned reclassification of CCBX noninterest bearing deposits to interest bearing deposits.

During the quarter ended September 30, 2022, total loans receivable increased by $173.5 million, or 7.4%, to $2.51 billion, compared to $2.33 billion for the quarter ended June 30, 2022. The increase consists of $111.6 million in CCBX loan growth and $61.9 million in community bank loan growth. Community bank loan growth includes a decrease of $10.6 million in PPP loans from forgiveness and repayments. Total loans receivable grew $802.2 million as of September 30, 2022, compared to the quarter ended September 30, 2021. This increase includes CCBX loan growth of $725.4 million and community bank loan growth of $76.9 million. Community bank loan growth is net of $261.5 million in PPP loan forgiveness/repayments, as of September 30, 2022, compared September 30, 2021. During the quarter ended September 30, 2022, $48.1 million in CCBX loans were transferred into loans held for sale, with $64.8 million in loans sold during the quarter and $43.3 million remaining in loans held for sale as of September 30, 2022; compared to $60.0 million held for sale as of June 30, 2022.

Total yield on loans receivable for the quarter ended September 30, 2022 was 8.46%, compared 7.34% for the quarter ended June 30, 2022, and 4.57% for the quarter ended September 30, 2021. This increase in yield on loans receivable is a combination of an overall increase in interest rates as well as additional volume in higher rate consumer loans from CCBX partners. During the quarter ended September 30, 2022, CCBX loans outstanding increased 13.9%, or $111.6 million, with an average CCBX yield of 13.96% and community bank loans increased 4.0%, or $61.9 million, with an average yield of 5.31%. The yield on CCBX loans does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans. Net BaaS loan income divided by average CCBX loans outstanding was 7.05% for the quarter ended September 30, 2022 and was impacted by the $50.6 million decline in capital call lines during the quarter that are priced at prime minus 0.50%.


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2022		June 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
	Yield on Loans	Cost of Deposits	Yield on Loans	Cost of Deposits	Yield on Loans	Cost of Deposits	Yield on Loans	Cost of Deposits	Yield on Loans	Cost of Deposits
Community Bank	5.31%	0.16%	5.04%	0.08%	4.67%	0.13%	5.17%	0.11%	4.60%	0.15%
CCBX (1)	13.96%	1.79%	12.35%	0.56%	3.65%	0.02%	13.16%	0.91%	3.26%	0.04%
Consolidated	8.46%	0.82%	7.34%	0.25%	4.57%	0.10%	7.63%	0.41%	4.51%	0.14%


	For the Three Months Ended
	September 30, 2022				June 30, 2022				September 30, 2021
(dollars in thousands, unaudited)	Income / Expense		Income / expense divided by average CCBX loans		Income / Expense		Income / expense divided by average CCBX loans		Income / Expense		Income / expense divided by average CCBX loans
BaaS loan interest income	$	31,449	13.96	%	$	21,281	12.35	%	$	1,471	3.65	%
Less: BaaS loan expense	15,560		6.91	%	12,229		7.10	%	419		1.04	%
Net BaaS loan income (1)	$	15,889	7.05	%	$	9,052	5.25	%	$	1,052	2.61	%
Average BaaS Loans	$	893,655			$	691,294			$	160,022


	Three Months Ended										Nine Months Ended
(unaudited)	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021		September 30, 2022		September 30, 2021

Return on average assets (1)	1.45	%	1.41	%	0.93	%	1.14	%	1.21	%	1.18	%	1.28	%
Return on average equity (1)	19.36	%	18.86	%	12.12	%	16.80	%	16.77	%	16.90	%	17.40	%
Yield on earnings assets (1)	7.38	%	5.94	%	4.58	%	4.09	%	3.63	%	6.03	%	3.83	%
Yield on loans receivable (1)	8.46	%	7.34	%	6.80	%	5.92	%	4.57	%	7.63	%	4.51	%



Cost of funds (1)	0.85	%	0.29	%	0.14	%	0.14	%	0.16	%	0.44	%	0.20	%
Cost of deposits (1)	0.82	%	0.25	%	0.09	%	0.09	%	0.10	%	0.41	%	0.14	%
Net interest margin (1)	6.58	%	5.66	%	4.45	%	3.95	%	3.48	%	5.61	%	3.64	%
Noninterest expense to average assets (1)	6.66	%	5.29	%	4.52	%	3.29	%	2.91	%	5.54	%	2.74	%
Noninterest income to average assets (1)	4.48	%	3.53	%	3.27	%	2.22	%	1.11	%	3.79	%	0.90	%
Efficiency ratio	61.12	%	58.38	%	59.34	%	54.08	%	64.68	%	59.77	%	61.51	%
Loans receivable to deposits (2)	89.92	%	86.54	%	76.24	%	73.73	%	76.71	%	89.92	%	76.71	%


	Three Months Ended
	September 30,		June 30,		September 30,
(dollars in thousands; unaudited)	2022		2022		2021
Deposit service charges and fees	$	986	$	988	$	956
Mortgage broker fees	24		85		187
Loan referral fees	—		208		723

Unrealized (loss) gain on equity securities, net	(133)		(2)		1,472
Gain on sales of loans, net	—		—		206
Other	236		313		302
Noninterest income, excluding BaaS program income and BaaS indemnification income	1,113		1,592		3,846
Servicing and other BaaS fees	1,079		1,159		1,313
Transaction fees	940		814		146
Interchange fees	738		628		188
Reimbursement of expenses	885		618		333
BaaS program income	3,642		3,219		1,980
BaaS credit enhancements	17,928		14,207		10
Baas fraud enhancements	11,708		6,474		296
BaaS indemnification income	29,636		20,681		306
Total noninterest income	$	34,391	$	25,492	$	6,132

due to an increase of $9.4 million in BaaS income partially offset by a $208,000 decrease in loan referral fees. The $9.4 million increase in BaaS income included a $3.7 million increase in BaaS credit enhancements related to the allowance for loan losses and reserve for unfunded commitments, $5.2 million increase in BaaS fraud enhancements, and an increase of $423,000 in BaaS program income (see “Appendix B” for more information on the accounting for BaaS allowance for loan losses, reserve for unfunded commitments and credit and fraud enhancements). The $28.3 million increase in noninterest income over the quarter ended September 30, 2021 was primarily due to a $31.0 million increase in BaaS income partially offset by a decrease of $1.6 million in unrealized gain on equity securities and a decrease of $723,000 in loan referral fees. The $31.0 million increase in BaaS income included a $17.9 million increase in BaaS credit enhancements, $11.4 million increase in BaaS fraud enhancements and $1.7 million increase in other BaaS program income. BaaS program income is steadily growing,with an increase of 13.1% compared to the quarter ended June 30, 2022, and an increase of 83.9% compared to the quarter ended September 30, 2021.


	Three Months Ended
	September 30,		June 30,		September 30,
(dollars in thousands; unaudited)	2022		2022		2021
Salaries and employee benefits	$	14,506	$	12,238	$	9,961
Legal and professional fees	2,251		1,002		796
Data processing and software licenses	1,670		1,546		1,333
Occupancy	1,147		1,083		1,037
FDIC assessments	850		855		400
Point of sale expense	742		409		212
Excise taxes	588		564		407
Director and staff expenses	475		377		274
Marketing	69		74		130
Other	1,522		1,318		865
Noninterest expense, excluding BaaS loan and BaaS fraud expense	23,820		19,466		15,415
BaaS loan expense	15,560		12,229		419
BaaS fraud expense	11,707		6,474		296
BaaS loan and fraud expense	27,267		18,703		715
Total noninterest expense	$	51,087	$	38,169	$	16,130

increase in noninterest expense for the quarter ended September 30, 2022, as compared to the quarter ended June 30, 2022, was primarily due to a $8.6 million increase in BaaS expense ($3.3 million of which is related to partner loan expense and $5.2 million of which is related to partner fraud expense). Partner loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements, and servicing CCBX loans. Partner fraud expense represents non-credit fraud losses on partner’s customer loan and deposit accounts, a portion of this expense is realized during the quarter, and a portion is estimated based on historical or other information from our partner. Also contributing to the increase in noninterest expense compared to June 30, 2022 is a $2.3 million increase in salaries and employee benefits which is related to hiring in CCBX and additional staff for our ongoing growth initiatives. In the quarter ended September 30, 2022 compared to the quarter ended June 30, 2022, legal and professional fees increased $1.2 million, point of sale expenses increased $333,000 and data processing and software license expense increased $124,000 The increase in legal and professional expenses is due to increased fees related to building our regulatory compliance infrastructure, our data management capabilities, and risk management, and increased consulting expenses. The increase in point of sale expenses is primarily a result of increased activity in CCBX; CCBX BaaS program income in noninterest income also increased as a result of this activity. Data processing and software license fees are expected to increase as we invest in software related to CCBX, information technology and risk management.

The increased noninterest expenses for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021 were largely due to an increase of $26.6 million in BaaS partner expense ($15.1 million of which is related to partner loan expense and $11.4 million of which is related to partner fraud expense), $4.5 million increase in salary and employee benefits related to hiring staff for CCBX and additional staff for our ongoing growth initiatives and $1.5 million increase in legal and professional fees due to increased fees related to data and risk management, and increased regulatory consulting expenses. Additionally, there was a $530,000 increase in point of sale expenses, $450,000 increase in FDIC assessments and $337,000 increase in data processing and software licenses. The increase in point of sale expenses is attributed to increased CCBX activity; CCBX BaaS program income in noninterest income also increased as a result of this activity. The increase in FDIC assessments is largely the result of an increase in assets combined with other factors that impact the FDIC assessment calculation compared to the quarter ended September 30, 2021. The increase in data processing and software licenses expenses was a result of implementing software to monitor and assist in the reporting of CCBX activities and monitoring of transactions to automate and improve efficiency.

The provision for income taxes was $3.0 million for the three months ended September 30, 2022, $2.9 million for the three months ended June 30, 2022 and $1.9 million for the third quarter of 2021. The Company is subject to various state taxes that are assessed as CCBX activities and employees expand into other states, which has increased the overall tax rate used in calculating the provision for income taxes in the current and future periods. The Company uses a federal statutory tax rate of 21.0% as a basis for calculating provision for federal income taxes and 1.0% for calculating the provision for state taxes.

Total assets increased $164.0 million, or 5.5%, to $3.13 billion at September 30, 2022 compared to $2.97 billion at June 30, 2022. The increase is primarily due to loans receivable increasing $173.5 million during the quarter ended September 30, 2022. Loans held for sale decreased $16.7 million, to $43.3 million during the quarter ended September 30, 2022. Also contributing to the increase in assets for the quarter ended September 30, 2022 was a $8.3 million increase in interest earning deposits with other banks, as a result of higher deposit totals. Total assets increased $682.2 million, or 27.8%, at September 30, 2022, compared to $2.45 billion at September 30, 2021. The increase is primarily due to loans receivable increasing $802.2 million, and an increase of $64.8 million in investment securities. Partially offsetting the increase is a $264.8 million decrease in interest earning deposits with other banks, resulting from increased loan demand, compared to September 30, 2021.

Total loans receivable increased $173.5 million to $2.51 billion at September 30, 2022, from $2.33 billion at June 30, 2022, and increased $802.2 million from $1.71 billion at September 30, 2021. The increase in loans receivable over the quarter ended June 30, 2022 was the result of $111.6 million in CCBX loan growth and $61.9 million in community bank loan growth. Community bank loan growth includes $10.6 million in PPP loan forgiveness and paydowns for the quarter ended September 30, 2022. The change in loans receivable over the quarter ended September 30, 2021 includes CCBX loan growth of $725.4 million and $76.9 million in community bank loan growth as of September 30, 2022. Community bank loan growth is net of $261.5 million in PPP loan forgiveness and paydowns since September 30, 2021.


	As of September 30, 2022					As of June 30, 2022					As of September 30, 2021
(dollars in thousands; unaudited)	Amount			Percent		Amount			Percent		Amount			Percent
Commercial and industrial loans:
PPP loans	$	5,794		0.2	%	$	16,398		0.7	%	$	267,278		15.5	%
Capital call lines	174,311			6.9		224,930			9.6		161,457			9.4
All other commercial & industrial loans	159,823			6.4		160,636			6.9		108,120			6.3
Total commercial and industrial loans:	339,928			13.5		401,964			17.2		536,855			31.2
Real estate loans:
Construction, land and land development	224,188			8.9		225,512			9.6		158,710			9.2
Residential real estate	402,781			16.0		326,661			14.0		170,167			9.9
Commercial real estate	1,024,067			40.7		956,320			40.8		837,342			48.7
Consumer and other loans	523,536			20.9		430,083			18.4		17,140			1.0
Gross loans receivable	2,514,500			100.0	%	2,340,540			100.0	%	1,720,214			100.0	%
Net deferred origination fees - PPP loans	(111)					(396)					(9,417)
Net deferred origination fees - all other loans	(6,500)					(5,790)					(5,115)
Loans receivable	$	2,507,889				$	2,334,354				$	1,705,682
Loan Yield (1)	8.46		%			7.34		%			4.57		%


Community Bank	As of
	September 30, 2022					June 30, 2022					September 30, 2021
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total		Balance			% to Total
Commercial and industrial loans:
PPP loans	$	5,794		0.4	%	$	16,398		1.1	%	$	267,278		17.5	%
All other commercial & industrial loans	143,808			9.0		142,569			9.3		108,120			7.1
Real estate loans:
Construction, land and land development loans	224,188			14.0		225,512			14.7		158,710			10.4
Residential real estate loans	198,871			12.5		193,518			12.6		156,128			10.2
Commercial real estate loans	1,024,067			64.0		956,320			62.2		837,342			54.7
Consumer and other loans:
Other consumer and other loans	2,220			0.1		2,325			0.1		2,492			0.1
Gross Community Bank loans receivable	1,598,948			100.0	%	1,536,642			100.0	%	1,530,070			100.0	%
Net deferred origination fees	(6,628)					(6,240)					(14,602)
Loans receivable	$	1,592,320				$	1,530,402				$	1,515,468
Loan Yield(1)	5.31		%			5.04		%			4.67		%


CCBX	As of
	September 30, 2022					June 30, 2022					September 30, 2021
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total		Balance			% to Total
Commercial and industrial loans:
Capital call lines	$	174,311		19.0	%	$	224,930		28.0	%	$	161,457		84.9	%
All other commercial & industrial loans	16,015			1.8		18,067			2.2		—			0.0
Real estate loans:
Residential real estate loans	203,910			22.3		133,143			16.5		14,039			7.4
Consumer and other loans:
Credit cards	216,995			23.7		139,501			17.4		1,711			0.9
Other consumer and other loans	304,321			33.2		288,257			35.9		12,937			6.8
Gross CCBX loans receivable	915,552			100.0	%	803,898			100.0	%	190,144			100.0	%
Net deferred origination costs	17					54					70
Loans receivable	$	915,569				$	803,952				$	190,214
Loan Yield - CCBX (1)(2)	13.96		%			12.35		%			3.65		%

Total deposits increased $139.8 million, or 5.2%, to $2.84 billion at September 30, 2022 from $2.70 billion at June 30, 2022. The increase was due to a $143.0 million increase in core deposits, partially offset by a $2.6 million decrease in time deposits. Our increase in deposits is primarily the result of growth in CCBX. Deposits in our CCBX segment increased $136.2 million, from $1.07 billion at June 30, 2022, to $1.20 billion at September 30, 2022 and community bank deposits increased $3.6 million to $1.63 billion at September 30, 2022. The deposits from our CCBX segment are predominately classified as interest bearing, or NOW and money market accounts, but a portion of such CCBX deposits may be classified as brokered deposits as a result of the relationship agreement. During the quarter ended September 30, 2022, noninterest bearing deposits decreased $4.8 million, or 0.6%, to $813.2 million from $818.1 million at June 30, 2022. In the quarter ended September 30, 2022 compared to the quarter ended June 30, 2022, NOW and money market accounts increased $146.8 million and savings deposits increased $1.0 million. Partially offsetting those increases is a decrease of $638,000 in BaaS-brokered deposits and a decrease of $2.6 million in time deposits.

Total deposits increased $613.5 million, or 27.6%, to $2.84 billion at September 30, 2022 compared to $2.22 billion at September 30, 2021. The increase in deposits is largely the result of growth in CCBX and is also due to expanding and growing banking relationships with community bank customers. Noninterest bearing deposits decreased $483.2 million, or 37.3%, to $813.2 million at September 30, 2022 from $1.3 billion at September 30, 2021. NOW and money market accounts increased $1.05 billion, or 139.1%, to $1.81 billion at September 30, 2022, and savings accounts increased $11.3 million, or 11.8%, and BaaS-brokered deposits increased $47.0 million, or 165.4% while time deposits decreased $12.8 million, or 27.5%, in the third quarter of 2022 compared to the third quarter of 2021. Additionally, as of September 30, 2022 we have access to $266.7 million in CCBX customer deposits that are currently being transferred off the Bank’s balance sheet to other financial institutions on a daily basis. The Bank could retain these deposits for liquidity and funding purposes if needed. If a portion of these deposits are retained, they would be classified as brokered deposits, however if the entire available balance is retained, they would be non-brokered deposits. Efforts to retain and grow core deposits are evidenced by the high ratios in these categories when compared to total deposits.


	As of September 30, 2022					As of June 30, 2022					As of September 30, 2021
(dollars in thousands; unaudited)	Amount			Percent of Total Deposits		Balance			Percent of Total Deposits		Balance			Percent of Total Deposits
Demand, noninterest bearing	$	813,217		28.7	%	$	818,052		30.3	%	$	1,296,443		58.3	%
NOW and money market	1,807,105			63.7		1,660,315			61.6		755,810			34.0
Savings	107,508			3.8		106,464			3.9		96,192			4.3
Total core deposits	2,727,830			96.2		2,584,831			95.8		2,148,445			96.6
BaaS-brokered deposits	75,363			2.6		76,001			2.8		28,396			1.3
Time deposits less than $100,000	13,296			0.5		14,009			0.5		15,701			0.7
Time deposits $100,000 and over	20,577			0.7		22,464			0.8		30,998			1.4
Total	$	2,837,066		100.0	%	$	2,697,305		100.0	%	$	2,223,540		100.0	%
Cost of Deposits (1)	0.82		%			0.25		%			0.10		%


Community Bank	As of
	September 30, 2022					June 30, 2022					September 30, 2021
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total		Balance			% to Total
Demand, noninterest bearing	$	746,516		45.7	%	$	729,436		44.7	%	$	722,458		44.7	%
NOW and money market	748,347			45.8		759,704			46.6		750,973			46.5
Savings	106,059			6.5		105,576			6.5		96,192			6.0
Total core deposits	1,600,922			97.9		1,594,716			97.8		1,569,623			97.1
Brokered deposits	1			0.0		1			0.0		1			0.0
Time deposits less than $100,000	13,296			0.8		14,009			0.9		15,701			1.0
Time deposits $100,000 and over	20,577			1.3		22,464			1.4		30,998			1.9
Total Community Bank deposits	$	1,634,796		100.0	%	$	1,631,190		100.0	%	$	1,616,323		100.0	%
Cost of deposits(1)	0.16		%			0.08		%			0.13		%


CCBX	As of
	September 30, 2022					June 30, 2022					September 30, 2021
(dollars in thousands; unaudited)	Balance			% to Total		Balance			% to Total		Balance			% to Total
Demand, noninterest bearing	$	66,701		5.5	%	$	88,616		8.3	%	$	573,985		94.5	%
NOW and money market	1,058,758			88.1		900,611			84.5		4,837			0.8
Savings	1,449			0.1		888			0.1		—			—
Total core deposits	1,126,908			93.7		990,115			92.9		578,822			95.3
BaaS-brokered deposits	75,362			6.3		76,000			7.1		28,395			4.7
Total CCBX deposits	$	1,202,270		100.0	%	$	1,066,115		100.0	%	$	607,217		100.0	%
Cost of deposits (1)	1.79		%			0.56		%			0.02		%


	As of September 30, 2022									As of June 30, 2022									As of September 30, 2021
(dollars in thousands; unaudited)	Community Bank			CCBX			Total			Community Bank			CCBX			Total			Community Bank			CCBX			Total
Loans receivable	$	1,592,320		$	915,569		$	2,507,889		$	1,530,402		$	803,952		$	2,334,354		$	1,515,468		$	190,214		$	1,705,682
Allowance for loan losses	(20,139)			(39,143)			(59,282)			(20,785)			(28,573)			(49,358)			(20,070)			(152)			(20,222)
Allowance for loan losses to total loans receivable	1.26		%	4.28		%	2.36		%	1.36		%	3.55		%	2.11		%	1.32		%	0.08		%	1.19		%

Provision for loan losses totaled $18.4 million for the three months ended September 30, 2022, $14.1 million for the three months ended June 30, 2022, and $255,000 for the three months ended September 30, 2021. Net charge-offs totaled $8.5 million for the quarter ended September 30, 2022, compared to $3.5 million for the quarter ended June 30, 2022 and $(1,000) for the quarter ended September 30, 2021. Net charge-offs increased due to CCBX partner loans and the reclassification and charge-off of negative deposit accounts. CCBX partner agreements provide for a credit enhancement that covers the net-charge-offs on CCBX loans and negative deposit accounts.


	Three Months Ended
	September 30, 2022									June 30, 2022									September 30, 2021
(dollars in thousands; unaudited)	Community Bank			CCBX			Total			Community Bank			CCBX			Total			Community Bank			CCBX			Total
Gross charge-offs	$	411		$	8,102		$	8,513		$	3		$	3,539		$	3,542		$	14		$	17		$	31
Gross recoveries	(3)			(6)			(9)			(36)			—			(36)			(24)			(8)			(32)
Net charge-offs	$	408		$	8,096		$	8,504		$	(33)		$	3,539		$	3,506		$	(10)		$	9		$	(1)
Net charge-offs to average loans	0.10		%	3.59		%	1.38		%	(0.01)		%	2.05		%	0.64		%	0.00		%	0.02		%	0.00		%

loan losses that was recorded for CCBX for the quarter ended June 30, 2022. CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for loan losses. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses. In accordance with accounting guidance, we estimate and record a provision for probable losses for these CCBX loans and reclassified negative deposit accounts. When the provision for CCBX loan losses and provision for unfunded commitments is recorded, a receivable is also recorded on the balance sheet through noninterest income (BaaS credit enhancements). Incurred losses are recorded in the allowance for loan losses. The receivable is relieved when credit enhancement recoveries are received from the CCBX partner. Although agreements with our CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses by absorbing incurred credit and fraud losses, if our partner is unable to fulfill their contracted obligations then the bank would be exposed to additional loan losses, as a result of this counterparty risk. The factors used in management’s analysis for community bank loan losses indicated that a recapture/adjustment for loan losses of $238,000 and provision of $109,000 was needed for the quarters ended September 30, 2022 and June 30, 2022, respectively. The community bank recapture/adjustment was the result of transferring a portion of the allowance from the community bank segment to the CCBX segment. In accordance with the program agreement, in the quarter ended September 30, 2022, the Company was responsible for losses on $7.8 million from one CCBX partner for which there is no credit enhancement . CCBX partners indemnify the Bank for loan losses/charge-offs on loans they originate, other than the aforementioned $7.8 million. The economic environment is continuously changing, due to increased inflation, global unrest, the war in Ukraine, upcoming midterm elections, trade issues that have may impact the provision and therefore the allowance. The Company is not required to implement the provisions of the Current Expected Credit Loss accounting standard until January 1, 2023 and continues to account for the allowance for credit losses under the incurred loss model.

At September 30, 2022, our nonperforming assets were $22.9 million, or 0.73% of total assets, compared to $5.8 million, or 0.20%, of total assets, at June 30, 2022, and $740,000, or 0.03% of total assets, at September 30, 2021. These ratios are impacted by the increase in CCBX loans over 90 days delinquent that are covered by CCBX partner credit enhancements. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses. Under the agreement, the CCBX partner will reimburse the Bank for its loss/charge-off on these loans. Nonperforming assets increased $17.1 million during the quarter ended September 30, 2022, compared to the quarter ended June 30, 2022, due to the addition of $10.2 million in CCBX loans that are past due 90 days or more and still accruing combined with $6.8 million more in community bank nonaccrual loans. Community bank nonaccrual loans increased with the addition of one new nonaccrual loan partially offset by other nonaccrual principal reductions/charge-offs. There were no repossessed assets or other real estate owned at September 30, 2022. Our nonperforming loans to loans receivable ratio was 0.91% at September 30, 2022, compared to 0.25% at June 30, 2022, and 0.04% at September 30, 2021.

For the quarter ended September 30, 2022, we have seen a slight change in our community bank credit quality metrics, as demonstrated by the $408,000 of community bank net charge-offs and $7.1 million of nonperforming community bank loans. For the quarter ended September 30, 2022, $8.1 million in net charge-offs were recorded on CCBX loans. These loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for loan losses. Agreements with our CCBX loan and deposit partners provide for a credit enhancement against loan and fraud losses.


(dollars in thousands; unaudited)	As of September 30, 2022			As of June 30, 2022			As of September 30, 2021
Nonaccrual loans:
Commercial and industrial loans	$	94		$	111		$	561
Real estate loans:
Construction, land and land development	66			67			—
Residential real estate	—			53			56
Commercial real estate	6,901			—			—
Total nonaccrual loans	7,061			231			617
Accruing loans past due 90 days or more:
Commercial & industrial loans	138			10			—
Real estate loans:
Residential real estate loans	638			123			1
Consumer and other loans:
Credit cards	4,777			1,283			94
Other consumer and other loans	10,268			4,164			28
Total accruing loans past due 90 days or more	15,821			5,580			123
Total nonperforming loans	22,882			5,811			740
Real estate owned	—			—			—
Repossessed assets	—			—			—
Troubled debt restructurings, accruing	—			—			—
Total nonperforming assets	$	22,882		$	5,811		$	740
Total nonaccrual loans to loans receivable	0.28		%	0.01		%	0.04		%
Total nonperforming loans to loans receivable	0.91		%	0.25		%	0.04		%
Total nonperforming assets to total assets	0.73		%	0.20		%	0.03		%


Community Bank	As of
(dollars in thousands; unaudited)	September 30, 2022		June 30, 2022		September 30, 2021
Nonaccrual loans:
Commercial and industrial loans	$	94	$	111	$	561
Real estate:
Construction, land and land development	66		67		—
Residential real estate	—		53		56
Commercial real estate	6,901		—		—
Total nonaccrual loans	7,061		231		617
					—
Accruing loans past due 90 days or more:
Total accruing loans past due 90 days or more	—		—		—
Total nonperforming loans	7,061		231		617
Other real estate owned	—		—		—
Repossessed assets	—		—		—
Total nonperforming assets	$	7,061	$	231	$	617


CCBX	As of
(dollars in thousands; unaudited)	September 30, 2022		June 30, 2022		September 30, 2021
Nonaccrual loans	$	—	$	—	$	—
Accruing loans past due 90 days or more:
Commercial & industrial loans	138		10		—
Real estate loans:
Residential real estate loans	638		123		1
Consumer and other loans:
Credit cards	4,777		1,283		94
Other consumer and other loans	10,268		4,164		28
Total accruing loans past due 90 days or more	15,821		5,580		123
Total nonperforming loans	15,821		5,580		123
Other real estate owned	—		—		—
Repossessed assets	—		—		—
Total nonperforming assets	$	15,821	$	5,580	$	123

Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), is an Everett, Washington based bank holding company whose wholly owned subsidiaries are Coastal Community Bank (“Bank”) and Arlington Olympic LLC. The $3.13 billion Bank provides service through 14 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application. The Bank provides banking as a service to broker-dealers and digital financial service providers through its CCBX segment. To learn more about the Company visit www.coastalbank.com.

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our 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 or reference to forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the risks and uncertainties discussed under “Risk Factors” in our Annual Report on Form 10-K for the most recent period filed, our Quarterly Report on Form 10-Q for the most recent quarter, and in any of our subsequent filings with the Securities and Exchange Commission.

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


ASSETS
	September 30, 2022		June 30, 2022		September 30, 2021
Cash and due from banks	$	37,482	$	40,750	$	31,722
Interest earning deposits with other banks	373,246		364,939		638,003
Investment securities, available for sale, at fair value	97,621		108,560		32,838
Investment securities, held to maturity, at amortized cost	1,250		1,261		2,086
Other investments	10,581		10,379		8,349
Loans held for sale, at par	43,314		60,000		—
Loans receivable	2,507,889		2,334,354		1,705,682
Allowance for loan losses	(59,282)		(49,358)		(20,222)
Total loans receivable, net	2,448,607		2,284,996		1,685,460
Premises and equipment, net	18,467		18,670		17,231
Operating lease right-of-use assets	5,293		5,565		6,372
Accrued interest receivable	13,114		12,430		7,549
Bank-owned life insurance, net	12,576		12,485		12,166
Deferred tax asset, net	13,997		11,709		3,807
Other assets	58,193		37,978		5,985
Total assets	$	3,133,741	$	2,969,722	$	2,451,568

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits	$	2,837,066	$	2,697,305	$	2,223,540
Federal Home Loan Bank ("FHLB") advances	—		—		24,999
Subordinated debt	24,343		24,324		24,269
Junior subordinated debentures	3,588		3,587		3,586
Deferred compensation	648		680		774
Accrued interest payable	153		330		147
Operating lease liabilities	5,514		5,786		6,583
Other liabilities	33,696		20,049		6,584
Total liabilities	2,905,008		2,752,061		2,290,482

SHAREHOLDERS’ EQUITY
Common stock	123,944		123,226		88,997
Retained earnings	106,880		95,779		72,083
Accumulated other comprehensive (loss) income, net of tax	(2,091)		(1,344)		6
Total shareholders’ equity	228,733		217,661		161,086
Total liabilities and shareholders’ equity	$	3,133,741	$	2,969,722	$	2,451,568


	Three Months Ended
	September 30, 2022		June 30, 2022		September 30, 2021
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	52,328	$	40,166	$	19,383
Interest on interest earning deposits with other banks	2,273		956		170
Interest on investment securities	554		563		24
Dividends on other investments	24		134		31
Total interest income	55,179		41,819		19,608
INTEREST EXPENSE
Interest on deposits	5,717		1,673		523
Interest on borrowed funds	273		260		278
Total interest expense	5,990		1,933		801
Net interest income	49,189		39,886		18,807
PROVISION FOR LOAN LOSSES	18,428		14,094		255
Net interest income after provision for loan losses	30,761		25,792		18,552
NONINTEREST INCOME
Deposit service charges and fees	986		988		956
Loan referral fees	—		208		723
Gain on sales of loans, net	—		—		206
Mortgage broker fees	24		85		187
Unrealized (loss) gain on equity securities, net	(133)		(2)		1,472

Other income	236		313		302
Noninterest income, excluding BaaS program income and BaaS indemnification income	1,113		1,592		3,846
Servicing and other BaaS fees	1,079		1,159		1,313
Transaction fees	940		814		146
Interchange fees	738		628		188
Reimbursement of expenses	885		618		333
BaaS program income	3,642		3,219		1,980
BaaS credit enhancements	17,928		14,207		10
BaaS fraud enhancements	11,708		6,474		296
BaaS indemnification income	29,636		20,681		306
Total noninterest income	34,391		25,492		6,132
NONINTEREST EXPENSE
Salaries and employee benefits	14,506		12,238		9,961
Occupancy	1,147		1,083		1,037
Data processing and software licenses	1,670		1,546		1,333
Legal and professional fees	2,251		1,002		796
Point of sale expense	742		409		212
Excise taxes	588		564		407
Federal Deposit Insurance Corporation ("FDIC") assessments	850		855		400
Director and staff expenses	475		377		274
Marketing	69		74		130
Other expense	1,522		1,318		865
Noninterest expense, excluding BaaS loan and BaaS fraud expense	23,820		19,466		15,415
BaaS loan expense	15,560		12,229		419
BaaS fraud expense	11,707		6,474		296
BaaS loan and fraud expense	27,267		18,703		715
Total noninterest expense	51,087		38,169		16,130
Income before provision for income taxes	14,065		13,115		8,554
PROVISION FOR INCOME TAXES	2,964		2,939		1,870
NET INCOME	$	11,101	$	10,176	$	6,684
Basic earnings per common share	$	0.86	$	0.79	$	0.56
Diluted earnings per common share	$	0.82	$	0.76	$	0.54
Weighted average number of common shares outstanding:
Basic	12,938,200		12,928,061		11,999,899
Diluted	13,536,823		13,442,013		12,456,674

(Dollars in thousands, except per share amounts; unaudited)


	Nine Months Ended
	September 30, 2022		September 30, 2021
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	122,126	$	56,978
Interest on interest earning deposits with other banks	3,631		314
Interest on investment securities	1,188		76
Dividends on other investments	195		169
Total interest income	127,140		57,537
INTEREST EXPENSE
Interest on deposits	7,943		1,811
Interest on borrowed funds	854		992
Total interest expense	8,797		2,803
Net interest income	118,343		54,734
PROVISION FOR LOAN LOSSES	45,464		973
Net interest income after provision for loan losses	72,879		53,761
NONINTEREST INCOME
Deposit service charges and fees	2,858		2,768
Loan referral fees	810		2,126
Gain on sales of loans, net	—		367
Mortgage broker fees	232		702
Unrealized (loss) gain on equity securities, net	(135)		1,472
Gain on sale of bank branch including deposits and loans, net	—		1,263
Other income	814		542
Noninterest income, excluding BaaS program income and BaaS indemnification income	4,579		9,240
Servicing and other BaaS fees	3,407		3,046
Transaction fees	2,247		264
Interchange fees	1,798		333
Reimbursement of expenses	1,875		709
BaaS program income	9,327		4,352
BaaS credit enhancements	45,210		10
BaaS fraud enhancements	22,753		296
BaaS indemnification income	67,963		306
Total noninterest income	81,869		13,898
NONINTEREST EXPENSE
Salaries and employee benefits	37,829		26,560
Occupancy	3,366		3,085
Data processing and software licenses	4,719		3,457
Legal and professional fees	3,961		2,182
Point of sale expense	1,399		475
Excise taxes	1,501		1,154
Federal Deposit Insurance Corporation ("FDIC") assessments	2,309		820
Director and staff expenses	1,196		812
Marketing	242		344
Other expense	4,318		2,419
Noninterest expense, excluding BaaS loan and BaaS fraud expense	60,840		41,308
BaaS loan expense	36,079		609
BaaS fraud expense	22,752		296
BaaS loan and fraud expense	58,831		905
Total noninterest expense	119,671		42,213
Income before provision for income taxes	35,077		25,446
PROVISION FOR INCOME TAXES	7,570		5,731
NET INCOME	$	27,507	$	19,715
Basic earnings per common share	$	2.13	$	1.65
Diluted earnings per common share	$	2.04	$	1.58
Weighted average number of common shares outstanding:
Basic	12,921,814		11,982,009
Diluted	13,484,950		12,465,346


	For the Three Months Ended
	September 30, 2022						June 30, 2022						September 30, 2021
	Average Balance		Interest & Dividends		Yield / Cost (1)		Average Balance		Interest & Dividends		Yield / Cost (1)		Average Balance		Interest & Dividends		Yield / Cost (1)
Assets
Interest earning assets:
Interest earning deposits	$	397,621	$	2,273	2.27	%	$	499,918	$	956	0.77	%	$	419,715	$	170	0.16	%
Investment securities, available for sale (2)	102,438		545		2.11		119,975		554		1.85		31,693		9		0.11
Investment securities, held to maturity (2)	1,257		9		2.84		1,280		9		2.82		2,095		15		2.84
Other investments	10,520		24		0.91		10,225		134		5.26		6,859		31		1.79
Loans receivable (3)	2,452,815		52,328		8.46		2,194,761		40,166		7.34		1,681,069		19,383		4.57
Total interest earning assets	2,964,651		55,179		7.38		2,826,159		41,819		5.94		2,141,431		19,608		3.63
Noninterest earning assets:
Allowance for loan losses	(51,259)						(46,354)						(20,102)
Other noninterest earning assets	128,816						115,788						77,221
Total assets	$	3,042,208					$	2,895,593					$	2,198,550

Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits	$	1,953,170	$	5,717	1.16	%	$	1,792,119	$	1,673	0.37	%	$	919,792	$	523	0.23	%

FHLB advances and borrowings	—		—		—		—		—		—		24,999		72		1.14
Subordinated debt	24,331		234		3.82		24,313		231		3.81		17,073		185		4.30
Junior subordinated debentures	3,587		39		4.31		3,587		29		3.24		3,586		21		2.32
Total interest bearing liabilities	1,981,088		5,990		1.20		1,820,019		1,933		0.43		965,450		801		0.33
Noninterest bearing deposits	807,952						839,562						1,061,311
Other liabilities	25,662						19,550						13,705
Total shareholders' equity	227,506						216,462						158,084
Total liabilities and shareholders' equity	$	3,042,208					$	2,895,593					$	2,198,550
Net interest income			$	49,189					$	39,886					$	18,807
Interest rate spread					6.18	%					5.51	%					3.30	%
Net interest margin (4)					6.58	%					5.66	%					3.48	%


	For the Three Months Ended
	September 30, 2022							June 30, 2022						September 30, 2021
(dollars in thousands, unaudited)	Average Balance		Interest & Dividends		Yield / Cost (1)			Average Balance		Interest & Dividends		Yield / Cost (1)		Average Balance		Interest & Dividends		Yield / Cost (1)
Community Bank
Assets
Loans receivable (2)	$	1,559,160	$	20,879	5.31	%		$	1,503,467	$	18,885	5.04	%	$	1,521,047	$	17,912	4.67	%
Liabilities
Interest bearing deposits	901,339		642		0.28			921,499		317		0.14		888,485		500		0.22
Noninterest bearing deposits	735,038							740,575						696,906
Total deposits	1,636,377		642		0.16			1,662,074		317		0.08		1,585,391		500		0.13

CCBX
Assets
Loans receivable (2)(3)	$	893,655	$	31,449	13.96	%		$	691,294	$	21,281	12.35	%	$	160,022	$	1,471	3.65	%
Liabilities
Interest bearing deposits	1,051,831		5,075		1.91			870,620		1,356		0.62		31,307		23		0.29
Noninterest bearing deposits	72,914							98,987						364,405
Total deposits	1,124,745		5,075		1.79		1.79	969,607		1,356		0.56		395,712		23		0.02


	For the Nine Months Ended
	September 30, 2022						September 30, 2021
(dollars in thousands; unaudited)	Average Balance		Interest & Dividends		Yield / Cost (1)		Average Balance		Interest & Dividends		Yield / Cost (1)
Assets
Interest earning assets:
Interest earning deposits	$	578,855	$	3,631	0.84	%	$	284,225	$	314	0.15	%
Investment securities, available for sale (2)	89,173		1,160		1.74		25,344		45		0.24
Investment securities, held to maturity (2)	1,276		28		2.93		2,349		31		1.76
Other investments	9,996		195		2.61		6,594		169		3.43
Loans receivable (3)	2,141,127		122,126		7.63		1,690,817		56,978		4.51
Total interest earning assets	2,820,427		127,140		6.03		2,009,329		57,537		3.83
Noninterest earning assets:
Allowance for loan losses	(42,836)						(19,744)
Other noninterest earning assets	112,468						73,328
Total assets	$	2,890,059					$	2,062,913

Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits	$	1,628,765	$	7,943	0.65	%	$	892,574	$	1,811	0.27	%
PPPLF borrowings	—		—		0.00		91,850		240		0.35
FHLB advances and borrowings	8,058		69		1.14		24,999		212		1.13
Subordinated debt	24,313		695		3.82		12,381		477		5.15
Junior subordinated debentures	3,587		90		3.35		3,585		63		2.35
Total interest bearing liabilities	1,664,723		8,797		0.71		1,025,389		2,803		0.37
Noninterest bearing deposits	987,343						873,271
Other liabilities	20,442						12,798
Total shareholders' equity	217,551						151,455
Total liabilities and shareholders' equity	$	2,890,059					$	2,062,913
Net interest income			$	118,343					$	54,734
Interest rate spread					5.32	%					3.46	%
Net interest margin (4)					5.61	%					3.64	%


	For the Nine Months Ended
	September 30, 2022						September 30, 2021
(dollars in thousands; unaudited)	Average Balance		Interest & Dividends		Yield / Cost (1)		Average Balance		Interest & Dividends		Yield / Cost (1)
Community Bank
Assets
Loans receivable (2)	$	1,483,553	$	57,405	5.17	%	$	1,577,448	$	54,217	4.60	%
Liabilities
Interest bearing deposits	919,415		1,394		0.20		862,986		1,746		0.27
Noninterest bearing deposits	731,517						660,773
Total deposits	$	1,650,932	$	1,394	0.11		$	1,523,759	$	1,746	0.15

CCBX
Assets
Loans receivable (2)(3)	$	657,574	$	64,721	13.16	%	$	113,369	$	2,761	3.26	%
Liabilities
Interest bearing deposits	709,350		6,549		1.23		29,588		65		0.29
Noninterest bearing deposits	255,826						212,498
Total deposits	$	965,176	$	6,549	0.91		$	242,086	$	65	0.04


	Three Months Ended
	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021
Income Statement Data:
Interest and dividend income	$	55,179	$	41,819	$	30,142	$	25,546	$	19,608
Interest expense	5,990		1,933		874		843		801
Net interest income	49,189		39,886		29,268		24,703		18,807
Provision for loan losses	18,428		14,094		12,942		8,942		255
Net interest income after provision for loan losses	30,761		25,792		16,326		15,761		18,552
Noninterest income	34,391		25,492		21,986		14,220		6,132
Noninterest expense	51,087		38,169		30,415		21,050		16,130
Provision for income tax	2,964		2,939		1,667		1,641		1,870
Net income	11,101		10,176		6,230		7,290		6,684

	As of and for the Three Month Period
	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021
Balance Sheet Data:
Cash and cash equivalents	$	410,728	$	405,689	$	682,109	$	813,161	$	669,725
Investment securities	98,871		109,821		136,177		36,623		34,924
Loans held for sale	43,314		60,000		—		—		—
Loans receivable	2,507,889		2,334,354		1,964,209		1,742,735		1,705,682
Allowance for loan losses	(59,282)		(49,358)		(38,770)		(28,632)		(20,222)
Total assets	3,133,741		2,969,722		2,833,750		2,635,517		2,451,568
Interest bearing deposits	2,023,849		1,879,253		1,738,426		1,007,879		927,097
Noninterest bearing deposits	813,217		818,052		838,044		1,355,908		1,296,443
Core deposits (1)	2,727,830		2,584,831		2,460,954		2,249,573		2,148,445
Total deposits	2,837,066		2,697,305		2,576,470		2,363,787		2,223,540
Total borrowings	27,931		27,911		27,893		52,873		52,854
Total shareholders’ equity	228,733		217,661		207,920		201,222		161,086

Share and Per Share Data (2):
Earnings per share – basic	$	0.86	$	0.79	$	0.48	$	0.60	$	0.56
Earnings per share – diluted	$	0.82	$	0.76	$	0.46	$	0.57	$	0.54
Dividends per share	—		—		—		—		—
Book value per share (3)	$	17.66	$	16.81	$	16.08	$	15.63	$	13.41
Tangible book value per share (4)	$	17.66	$	16.81	$	16.08	$	15.63	$	13.41
Weighted avg outstanding shares – basic	12,938,200		12,928,061		12,898,746		12,144,452		11,999,899
Weighted avg outstanding shares – diluted	13,536,823		13,442,013		13,475,337		12,701,464		12,456,674
Shares outstanding at end of period	12,954,573		12,948,623		12,928,548		12,875,315		12,012,107
Stock options outstanding at end of period	644,334		655,844		666,774		694,519		710,182


	As of and for the Three Month Period
	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Credit Quality Data:
Nonperforming assets (5) to total assets	0.73		%	0.09		%	0.08		%	0.07		%	0.03		%
Nonperforming assets (5) to loans receivable and OREO	0.91		%	0.11		%	0.12		%	0.10		%	0.04		%
Nonperforming loans (5) to total loans receivable	0.91		%	0.11		%	0.12		%	0.10		%	0.04		%
Allowance for loan losses to nonperforming loans	259.1		%	849.4		%	1653.3		%	1657.9		%	2732.7		%
Allowance for loan losses to total loans receivable	2.36		%	2.11		%	1.97		%	1.64		%	1.19		%

Gross charge-offs	$	8,513		$	3,542		$	2808		$	579		$	31
Gross recoveries	$	9		$	36		$	4		$	47		$	32
Net charge-offs to average loans (6)	1.38		%	0.64		%	0.64		%	0.13		%	0.00		%
Credit enhancement income (7)	$	8,102		$	3,539		$	2804		$	363		$	18

Capital Ratios (8):
Tier 1 leverage capital	7.70		%	7.68		%	7.75		%	8.07		%	7.48		%
Common equity Tier 1 risk-based capital	8.49		%	8.51		%	9.71		%	11.06		%	9.94		%
Tier 1 risk-based capital	8.62		%	8.65		%	9.88		%	11.26		%	10.15		%
Total risk-based capital	10.80		%	10.88		%	12.30		%	13.89		%	12.95		%

(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 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.

(7)Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses. In accordance with accounting guidance, we estimate and record a provision for probable losses for these CCBX loans. When the provision for loan losses and provision for unfunded commitments is recorded, a receivable is also recorded on the balance sheet through noninterest income (BaaS credit enhancements). This is the amount of CCBX incurred losses that were recorded and are covered by the partner’s credit enhancements.


	As of and for the Three Months Ended						As of and for the Nine Months Ended
(Dollars in thousands, unaudited)	September 30, 2022		June 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Revenue excluding BaaS credit enhancements and BaaS fraud enhancements:
Total net interest income	$	49,189	$	39,886	$	18,807	$	118,343	$	54,734
Total noninterest income	34,391		25,492		6,132		81,869		13,898
Total Revenue	$	83,580	$	65,378	$	24,939	$	200,212	$	68,632
Less: BaaS credit enhancements	(17,928)		(14,207)		(10)		(45,210)		(10)
Less: BaaS fraud enhancements	(11,708)		(6,474)		(296)		(22,753)		(296)
Total revenue excluding BaaS credit enhancements and BaaS fraud enhancements	$	53,944	$	44,697	$	24,633	$	132,249	$	68,326


	As of and for the Three Months Ended									As of and for the Nine Months Ended
(dollars in thousands; unaudited)	September 30, 2022			June 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Net BaaS loan income divided by average CCBX loans:
Total average CCBX loans receivable	$	893,655		$	691,294		$	160,022		$	657,574		$	113,369
Interest and earned fee income on CCBX loans	31,449			21,281			1,471			64,721			2,761
Less: loan expense on CCBX loans		(15,560)			(12,229)			(419)			(36,079)			(609)
Net BaaS loan income	$	15,889		$	9,052		$	1,052		$	28,642		$	2,152
Net BaaS loan income divided by average CCBX loans	7.05		%	5.25		%	2.61		%	5.82		%	2.54		%
CCBX loan yield	13.96		%	12.35		%	3.65		%	13.16		%	3.26		%


(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Exposure		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
Apartments	$	208,509	$	5,658	$	214,167	4.4	%	$	2,644	81
Hotel/Motel	165,233		4,880		170,113		3.5		6,075		28
Office	100,224		3,522		103,746		2.1		1,048		99
Retail	116,648		3,631		120,279		2.5		1,215		99
Convenience Store	81,286		4,336		85,622		1.8		2,088		41
Mixed use	84,255		4,681		88,936		1.8		988		90
Warehouse	74,382		1,766		76,148		1.6		1,410		54
Manufacturing	40,634		1,765		42,399		0.9		1,211		35
Mini Storage	46,989		1,810		48,799		1.0		3,050		16
Groups < 0.70% of total	105,907		5,148		111,055		2.3		1,354		82
Total	$	1,024,067	$	37,197	$	1,061,264	22.0	%	$	1,698	625

Consumer loans comprise 20.9% of our total balance of outstanding loans as of September 30, 2022. Unused commitments to extend credit represents an additional $802.6 million, and the combined total exposure in consumer and other loans represents $1.3 billion, or 27.4% of our total outstanding loans and loan commitments. As illustrated in the table below, our CCBX partners bring in a large number of mostly smaller dollar loans, resulting in an average consumer loan of just $1,200. CCBX consumer loans are underwritten to CCBX credit standards and underwriting of these loans is regularly tested.


(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Exposure		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
CCBX consumer loans
Installment loans	$	294,907	$	—	$	294,907	6.1	%	$	1.5	196,058
Credit cards	216,995		800,914		1,017,909		21.1		1.3		162,170
Lines of credit	6,104		559		6,663		0.1		0.2		30,481
Other loans	3,310		—		3,310		0.1		0.2		16,854
Community bank consumer loans
Lines of credit	155		397		552		0.0		3.7		42
Installment loans	1,408		716		2,124		0.0		33.5		42
Other loans	657		—		657		0.0		1.9		339
Total	$	523,536	$	802,586	$	1,326,122	27.4	%	$	1.2	405,986


(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Exposure		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
CCBX residential real estate loans
Home equity line of credit	$	203,910	$	436,346	$	640,256	13.2	%	$	23	8,836
Community bank residential real estate loans
Closed end, secured by first liens	173,890		4,389		178,279		3.7		610		285
Home equity line of credit	15,750		33,945		49,695		1.0		85		186
Closed end, second liens	9,231		1,912		11,143		0.2		330		28
Total	$	402,781	$	476,592	$	879,373	18.2	%	$	43	9,335

Commercial and industrial loans comprise 13.5% of our total balance of outstanding loans as of September 30, 2022. Unused commitments to extend credit represents an additional $839.7 million, and the combined total exposure in commercial and industrial loans represents $1.18 billion, or 24.4% of our total outstanding loans and loan commitments. Included in commercial and industrial loans is $174.3 million in outstanding capital call lines, with an additional $760.2 million in available loan commitments, which is provided to venture capital firms through one of our CCBX BaaS clients.


(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Exposure		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
Capital Call Lines	$	174,311	$	760,192	$	934,503	19.3	%	$	1,019	171
Construction/Contractor Services	23,737		31,764		55,501		1.1		129		184
Financial Institutions	35,150		—		35,150		0.7		3,906		9
Manufacturing	14,530		5,477		20,007		0.4		382		38
Medical / Dental / Other Care	21,408		4,833		26,241		0.5		335		64
Retail	17,054		5,792		22,846		0.5		25		676
Groups < 0.30% of total	53,738		31,660		85,398		1.8		177		303
Total	$	339,928	$	839,718	$	1,179,646	24.4	%	$	235	1,445


(dollars in thousands; unaudited)	Outstanding Balance		Available Loan Commitments		Total Exposure		% of Total Loans (Outstanding Balance & Available Commitment)		Average Loan Balance		Number of Loans
Commercial construction	$	109,874	$	116,147	$	226,021	4.7	%	$	3,789	29
Residential construction	38,795		31,170		69,965		1.4		970		40
Undeveloped land loans	41,373		4,068		45,441		0.9		3,183		13
Developed land loans	19,436		6,130		25,566		0.5		607		32
Land development	14,710		5,485		20,195		0.4		774		19
Total	$	224,188	$	163,000	$	387,188	8.0	%	$	1,686	133

During the quarter ended September 30, 2022, $17.9 million was recorded in BaaS credit enhancements related to the provision for loan losses and reserve for unfunded commitments for CCBX partner loans and negative deposit accounts. Agreements with our CCBX partners provide for a credit enhancement provided by the partner which protects the Bank by absorbing incurred losses. In accordance with accounting guidance, we estimate and record a provision for probable losses for these CCBX loans and negative deposit accounts. When the provision for loan losses and provision for unfunded commitments is recorded, a receivable is also recorded on the balance sheet through noninterest income (BaaS credit enhancements) in recognition of the CCBX partner legal commitment to cover losses. The receivable is relieved as credit enhancement recoveries are received from the CCBX partner. Agreements with our CCBX partners also provide protection to the Bank from fraud by absorbing incurred fraud losses. Fraud losses are recorded when incurred as losses in noninterest expense, and the enhancement received from the CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement. CCBX partners also pledge a cash reserve account at the Bank which the Bank can collect from when losses occur that is then replenished by the partner on a regular interval. Although agreements with our CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses by absorbing incurred credit and fraud losses, if our partner is unable to fulfill their contracted obligations to replenish their cash reserve account then the bank would be exposed to additional loan and deposit losses, as a result of this counterparty risk. If a CCBX partner does not replenish their cash reserve account then the Bank can declare the agreement in default, take over servicing and cease paying the partner for servicing the loan and providing credit enhancements. The Bank would write-off any remaining receivable from the CCBX partner but would retain the full yield on the loan going forward, and BaaS loan expense would decrease once default occurred and payments to the CCBX partner were stopped.

For CCBX partner loans the Bank records contractual interest earned from the borrower on loans in interest income, adjusted for origination costs which are paid or payable to the CCBX partner. BaaS loan expense represents the amount paid or payable to partners for credit enhancements and servicing CCBX loans. To determine net revenue (Net BaaS loan income) earned from CCBX loan relationships, one takes BaaS loan interest income and deducts BaaS loan expense to arrive at Net BaaS loan income which can be compared to interest income on the Company’s community bank loans.


Loan income and related loan expense	Three Months Ended									Nine Months Ended
(dollars in thousands; unaudited)	September 30, 2022			June 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
BaaS loan interest income	$	31,449		$	21,281		$	1,471		$	64,721		$	2,761
Less: BaaS loan expense	15,560			12,229			419			36,079			609
Net BaaS loan income (1)	15,889			9,052			1,052			28,642			2,152
Net BaaS loan income divided by average BaaS loans (1)	7.05		%	5.25		%	2.61		%	5.82		%	2.54		%
Yield on loans	13.96		%	12.35		%	3.65		%	13.16		%	3.26		%


BaaS income	Three Months Ended						Nine Months Ended
(dollars in thousands; unaudited)	September 30, 2022		June 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Program income:
Servicing and other BaaS fees	$	1,079	$	1,159	$	1,313	$	3,407	$	3,046
Transaction fees	940		814		146		2,247		264
Interchange fees	738		628		188		1,798		333
Reimbursement of expenses	885		618		333		1,875		709
Program income	3,642		3,219		1,980		9,327		4,352
Indemnification income:
Credit enhancements	17,928		14,207		10		45,210		10
Fraud enhancements	11,708		6,474		296		22,753		296
Indemnification income	29,636		20,681		306		67,963		306
Total BaaS income	$	33,278	$	23,900	$	2,286	$	77,290	$	4,658


(unaudited)	Coastal Community Bank		Coastal Financial Corporation		Financial Institution Basel III Regulatory Guidelines
Tier 1 leverage capital	8.34	%	7.70	%	5.00	%

Common Equity Tier 1 risk-based capital	9.34	%	8.49	%	6.50	%
Tier 1 risk-based capital	9.34	%	8.62	%	8.00	%
Total risk-based capital	10.60	%	10.80	%	10.00	%


Interest income	Three Months Ended						Nine Months Ended
(dollars in thousands; unaudited)	September 30, 2022		June 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Loan interest income	$	31,449	$	21,281	$	1,471	$	64,721	$	2,761
Total BaaS interest income	$	31,449	$	21,281	$	1,471	$	64,721	$	2,761