2018 Third Quarter Highlights:

• Net income totaled $2.6 million for the third quarter of 2018, or $0.22 per diluted common share, up 18.2% from $2.2 million for the second quarter of 2018.
• Total assets were $917.0 million at September 30, 2018, up 7.8% from $850.9 million at June 30, 2018.
• Total loans receivable grew at a rate of 17.8% annualized for the nine months ended September 30, 2018.
• Total deposits grew at a rate of 13.5% annualized for the nine months ended September 30, 2018.
• Noninterest bearing deposits at September 30, 2018 were 36.9% of total deposits.
• Cost of deposits were 0.44% for the third quarter of 2018, up 0.04% from the second quarter of 2018.
• Initial public offering of 2,577,500 shares of common stock completed, on July 18, 2018, for net proceeds of $33.2 million.

EVERETT, Wash., Oct. 23, 2018 (GLOBE NEWSWIRE) -- Coastal Financial Corporation (NASDAQ: CCB) (the “Company”) today reported unaudited financial results for the third quarter 2018.  Net income for the third quarter of 2018 was $2.6 million, or $0.22 per diluted common share, compared with net income of $2.2 million, or $0.24 per diluted share, for the second quarter of 2018.

On July 18, 2018, the Company closed its initial public offering of 2,577,500 shares of common stock, including the exercise of the over-allotment of 427,500 shares, for net proceeds of $33.2 million after deducting underwriting discounts, commissions, and estimated offering expenses.

Eric Sprink, President and CEO, commented, “We had a solid third quarter with record earnings of $2.6 million, record loan growth of $43.6 million, and deposit growth of $30.3 million of which $26.5 million of the growth was in noninterest bearing deposits.  The strong increases in loans and core deposits starts to leverage a portion of the $33.2 million in capital raised in our July initial public offering (IPO) and positions us well for future earnings.  We also took advantage of an opportunity to hire local and experienced staff in third quarter to open our fourteenth branch on October 9, 2018.  The new branch in Edmonds, Washington (a $975 million deposit market – based on FDIC Summary of Deposits as of June 30, 2018) positions us well for future deposit growth and to continue leveraging capital through our organic growth strategy.  In addition to growing the Bank, we continue to explore opportunities with Fintech companies with the aim of building another recurring fee income source.”

The Company had net income of $6.6 million for the nine months ended September 30, 2018, or $0.66 per diluted common share, compared to $5.1 million, or $0.55 per diluted common share for the nine months ended September 30, 2017.

Results of Operations

Net interest income was $8.8 million for the three months ended September 30, 2018, an increase of 6.0% from $8.3 million for the second quarter of 2018, and an increase of 17.3% from $7.5 million for the third quarter of 2017. Increases over the prior quarter and prior year were the result of growth in interest earning assets, primarily loans, and improvements in net interest margin. Net interest income for the nine months ended September 30, 2018 totaled $24.9 million, an increase of 15.3% compared to the same period last year. The $3.3 million increase in net interest income over the same period last year was primarily related to growth in loan balances. During the nine months ended September 30, 2018, the average balance of total loans receivable increased by $77.2 million, compared to the same period last year. The $3.5 million increase in loan interest income was partially offset by increased deposit costs of $683,000 from the growth in the average balance of our deposits of $47.2 million and an increase in the cost of deposit funds of 15 basis points, compared to the same period last year.

Net interest margin for the quarter ended September 30, 2018 decreased 13 basis points to 4.13% from 4.26% for the second quarter of 2018 and decreased one basis point from 4.14% for the third quarter of 2017. The net interest margin for the quarter ended September 30, 2018 is a normalized margin, as compared to prior quarters. The quarter ended June 30, 2018 included significant prepayment penalties and deferred fees recognized on loans paid off.  The slight decrease from the same period one year ago is primarily related to increased deposit costs over the period and a slight shift in the mix of interest earning assets of approximately 3% to more lower yielding interest bearing deposits from loans receivable. This allocation shift is a result of cash received from the IPO, which is temporary and will be gradually deployed into higher earning assets.

Net interest margin for the nine months ended September 30, 2018 increased eight basis points to 4.17% from 4.09% for the comparable period last year. The increase in net interest margin over the comparable period in the prior year was primarily due to increases in loan volume as a percent of earning assets and higher prepayment penalties and deferred fees recognized on loans paid off in the first two quarters of 2018, and to a lesser extent, increases in average loan yields.

Loan yields for the quarter ended September 30, 2018 were 5.12%, an increase of one basis point from 5.11% for the quarter ended June 30, 2018, and a ten basis point increase from 5.02% for the quarter ended September 30, 2017. Loan yields for the nine months ended September 30, 2018 were 5.10%, an increase of 12 basis points from 4.98% for the nine months ended September 30, 2017. Contractual loan yields approximated 5.02% for the three months ended September 30, 2018, 4.92% for the three months ended June 30, 2018, and 4.91% for the three months ended September 30, 2017.  The ten basis point increase in contractual loan yields, as compared to prior quarter, was from pricing new loans at higher rates and variable loans repricing with the increase in Federal Funds rate.

The following table shows the Company’s key performance ratios for the periods indicated.

		Three months ended										Nine months ended
		September 30, 2018			June 30, 2018			September 30, 2017				September 30, 2018			September 30, 2017
Return on average assets (1)			1.18	%		1.09	%		1.02	%			1.07	%		0.92	%
Return on average shareholders’ equity (1)			10.59	%		12.90	%		11.75	%			11.37	%		10.41	%
Yield on earnings assets (1)			4.62	%		4.73	%		4.54	%			4.64	%		4.48	%
Yield on loans receivable (1)			5.12	%		5.11	%		5.02	%			5.10	%		4.98	%
Cost of funds (1)			0.53	%		0.50	%		0.43	%			0.50	%		0.41	%
Cost of deposits (1)			0.44	%		0.40	%		0.33	%			0.40	%		0.31	%
Net interest margin (1)			4.13	%		4.26	%		4.14	%			4.17	%		4.09	%
Noninterest expense to average assets (1)			2.99	%		3.15	%		3.12	%			3.07	%		3.02	%
Efficiency ratio			63.59	%		66.77	%		66.50	%			66.09	%		67.44	%
Loans receivable to deposits			96.08	%		94.12	%		92.55	%			96.08	%		92.55	%
(1) annualized calculations

Noninterest income was $1.5 million for the third quarter of 2018, an increase of $333,000 from $1.2 million for the second quarter of 2018 and an increase of $296,000 from $1.3 million for the comparable period one year ago. The increase compared to the prior quarter and to the same quarter one year ago was primarily due fees earned from wholesale banking services provided which resulted in an additional $286,000 of income during the quarter, and additional $328,000 of income compared to the same quarter last year. Additional noninterest income in the current quarter as compared to the same quarter one year ago were related to increases in existing deposit fees and the introduction of few new deposit fees. Our deposit fees are now roughly in line with peers. Sublease and lease income decreased in the third quarter 2018, as compared to the third quarter 2017, as a result of a long-term tenant electing to not renew its lease.

Noninterest income was $3.9 million for the nine months ended September 30, 2018, compared to $3.1 million for the nine months ended September 30, 2017. The increase was primarily related to wholesale banking services and increases in deposit fees. Loan referral fee income, which is earned when a borrower enters into an interest rate swap agreement with a third party also grew and totaled $453,000 for the nine months ended September 30, 2018, an increase of $177,000 from the same period last year.

Total noninterest expense for the current quarter increased 3.1% to $6.6 million from $6.4 million for the preceding quarter and increased 13.8% from $5.8 million from the comparable period one year ago. The increased expenses for the current quarter compared to the prior quarter and previous quarter one year ago were primarily due to increases in salary expenses. Full time equivalent employees increased 4% during the current quarter and increased 9% from the same quarter one year ago. Staffing increases are due to the continued organic growth initiatives, and includes increases in sales staff, including hiring new banking teams, and additional back office staffing to support the incremental increases in banking teams and for operation as a public company.  During the quarter legal and professional fees continued to be higher by $37,000 as a result of growth initiatives and credit actions, $68,000 of expenses related to hiring staff early for new Edmonds branch plus ordinary costs associated with opening a new branch, and increasing our unfunded commitment reserve by $54,000 for increased loan commitments.

Total noninterest expense for the nine months ended September 30, 2018 totaled $19.0 million, an increase of 14.5% compared to the same period last year. The increase is primarily attributable to increased salary expense from our organic growth initiatives, new wholesale banking services, and early termination of a contract for $120,000.

The provision for income taxes decreased approximately 30% for the current quarter and the nine months ended September 30, 2018, compared to the same periods last year, primarily due to the Tax Cuts and Jobs Act legislation which was signed into law on December 22, 2017. The Company used federal statutory tax rates of 21% and 34% for the nine months ended September 30, 2018, and 2017, respectively, as a basis for calculating provision for income taxes.

Balance Sheet

The Company’s total assets increased $111.2 million, or 13.8%, to $917.0 million at September 30, 2018 from $805.8 million at December 31, 2017 due to the Company’s successful IPO and organic growth initiatives.

Total loans receivable, net of allowance for loan losses, increased $86.4 million, or 13.3%, to $735.2 million at September 30, 2018 from $648.8 million at December 31, 2017.  The growth in loans receivable was due primarily to increases in commercial real estate loans of $65.1 million.

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

		As of
		September 30, 2018							December 31, 2017							September 30, 2017
(Dollars in thousands)		Balance			% to Total				Balance			% to Total				Balance			% to Total
Commercial and industrial loans		$	85,554			11.5	%		$	88,688			13.5	%		$	87,418			13.9	%
Real estate:
Construction, land and
land development			62,222			8.4				41,641			6.3				41,098			6.5
Residential			91,995			12.3				87,031			13.3				66,962			10.6
Commercial real estate			502,782			67.5				437,717			66.6				433,707			68.7
Consumer and other			2,583			0.3				2,058			0.3				1,870			0.3
Gross loans receivable			745,136			100.0	%			657,135			100.0	%			631,055			100.0	%
Net deferred origination fees			(816	)						(347	)						(613	)
Loans receivable		$	744,320						$	656,788						$	630,442

Total deposits increased $71.4 million, or 10.2%, to $774.7 million at September 30, 2018 from $703.3 million at December 31, 2017.  The increase in deposits included increases in noninterest bearing deposit accounts of $43.6 million, or 18.0%.

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

		As of
		September 30, 2018							December 31, 2017							September 30, 2017
(Dollars in thousands)		Balance			% to Total				Balance			% to Total				Balance			% to Total
Demand, noninterest bearing		$	285,979			36.9	%		$	242,358			34.5	%		$	242,607			35.6	%
NOW and money market			340,930			44.0				326,412			46.4				309,856			45.5
Savings			49,430			6.4				43,876			6.2				45,696			6.7
Time deposits less than $250,000			63,715			8.2				60,445			8.6				56,308			8.3
Time deposits $250,000 and over			34,668			4.5				30,204			4.3				26,732			3.9
Total		$	774,722			100.0	%		$	703,295			100.0	%		$	681,199			100.0	%

Total shareholders’ equity increased $39.6 million, or 60.2%, to $105.3 million at September 30, 2018 from $65.7 million at December 31, 2017.  The Company’s successful IPO in July of 2018 increased capital by $33.2 million. The remaining increase in shareholders’ equity was primarily due to net income earned during the year. The Company contributed $15.0 million of the $33.2 million to the Bank.

Capital Ratios

The Company and the Bank remain well capitalized at September 30, 2018, as summarized in the following table.

Capital Ratios:	Coastal Community Bank				Coastal Financial Corporation				Financial Institution  Basel III Regulatory Guidelines
Tier 1 leverage capital		11.42	%			12.60	%			5.00	%
Tier 1 risk-based capital		12.82	%			14.17	%			8.00	%
Common Equity Tier 1 risk-based capital		12.82	%			13.72	%			6.50	%
Total risk-based capital		14.03	%			16.65	%			10.00	%

Asset Quality

The allowance for loan losses was 1.22% of loans receivable at September 30, 2018. Provision for loan losses totaled $508,000 for the current quarter, $392,000 for the preceding quarter, and $65,000 for the same quarter in the prior year. Net recoveries totaled $63,000 for the quarter ended September 30, 2018 compared to net charge-offs of $7,000 for quarter ended September 30, 2017.

Provision for loan losses totaled $1.4 million for the nine months September 30, 2018 and $504,000 for the same period in the prior year. Net charge-offs totaled $307,000 for the nine months ended September 30, 2018 compared to net charge-offs of $101,000 for nine months ended September 30, 2017.

Nonperforming assets were $2.5 million, or 0.27% of total assets, at September 30, 2018, compared to $2.1 million, or 0.26% of total assets at December 31, 2017.  There were no repossessed assets or other real estate owned at September 30, 2018.

Nonperforming loans to loans receivable ratio was 0.34% at September 30, 2018, compared to 0.32% at December 31, 2017.  Classified loans were $10.1 million at September 30, 2018, an increase of $2.2 million, as compared to $7.9 million at December 31, 2017.

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

		As of
		September 30,				December 31,				September 30,
(Dollars in thousands)		2018				2017				2017
Nonaccrual loans:
Commercial and industrial loans		$	1,170			$	372			$	454
Real estate:
Construction, land and land development			-				-				-
Residential			74				88				150
Commercial real estate			-				345				580
Commercial real estate - troubled debt restructure			1,277				1,315				1,328
Consumer and other loans			-				-				-
Total nonaccrual loans			2,521				2,120				2,512
Total accruing loans past due 90 days or more			-				-				-
Total nonperforming loans			2,521				2,120				2,512
Other real estate owned			-				-				-
Repossessed assets			-				-				-
Total nonperforming assets		$	2,521			$	2,120			$	2,512
Troubled debt restructurings, accruing			-				-				3,978
Total nonperforming loans to loans receivable			0.34	%			0.32	%			0.40	%
Total nonperforming assets to total assets			0.27	%			0.26	%			0.32	%

About Coastal Financial

Coastal Financial Corporation is an Everett-based Washington State bank holding company with Coastal Community Bank (the “Bank”), a full-service commercial bank, as its sole wholly-owned banking subsidiary.  The Bank operates through its 14 branches in Snohomish, Island, and King Counties, the Internet and its mobile banking application.  More information about the Bank can be found on its website at www.coastalbank.com and its investor relations page.

Contact

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

Forward-Looking Statements

This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.

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

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

ASSETS
		September 30,				June 30,				December 31,
		2018				2018				2017
Cash and due from banks		$	16,837			$	14,217			$	13,787
Interest earning deposits with other banks			98,671				77,232				75,964
Investment securities, available for sale, at fair value			35,749				36,013				36,927
Investment securities, held to maturity, at amortized cost			1,290				1,304				1,409
Other investments			3,766				3,766				3,680
Loans receivable			744,320				700,692				656,788
Allowance for loan losses			(9,111	)			(8,540	)			(8,017	)
Total loans receivable, net			735,209				692,152				648,771
Premises and equipment, net			12,845				12,963				13,121
Accrued interest receivable			2,299				2,290				2,274
Bank-owned life insurance, net			6,640				6,592				6,500
Deferred tax asset, net			2,309				2,253				2,092
Other assets			1,414				2,140				1,228
Total assets		$	917,029			$	850,922			$	805,753
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits		$	774,722			$	744,468			$	703,295
Federal Home Loan Bank (FHLB) advances			20,000				20,000				20,000
Subordinated debt			9,961				9,957				9,950
Junior subordinated debentures			3,581				3,580				3,579
Deferred compensation			1,102				1,127				1,175
Accrued interest payable			257				241				228
Other liabilities			2,130				2,059				1,815
Total liabilities			811,753				781,432				740,042
SHAREHOLDERS’ EQUITY
Common stock			86,334				52,946				52,521
Retained earnings			20,966				18,364				14,134
Accumulated other comprehensive loss, net of tax			(2,024	)			(1,820	)			(944	)
Total shareholders’ equity			105,276				69,490				65,711
Total liabilities and shareholders’ equity		$	917,029			$	850,922			$	805,753

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

	Three months ended
	September 30, 2018			June 30, 2018			September 30, 2017
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	9,262		$	8,778		$	7,908
Interest on interest earning deposits with other banks		458			236			171
Interest on investment securities		156			155			135
Dividends on other investments		18			62			3
Total interest and dividend income		9,894			9,231			8,217
INTEREST EXPENSE
Interest on deposits		851			712			540
Interest on borrowed funds		195			216			192
Total interest expense		1,046			928			732
Net interest income		8,848			8,303			7,485
PROVISION FOR LOAN LOSSES		508			392			65
Net interest income after provision for loan losses		8,340			7,911			7,420
NONINTEREST INCOME
Deposit service charges and fees		800			771			725
Wholesale banking service fees		328			42			-
Loan referral fees		209			114			234
Mortgage broker fees		52			69			80
Sublease and lease income		10			4			56
Gain on sale of loans		-			78			18
Other		147			135			137
Total noninterest income		1,546			1,213			1,250
NONINTEREST EXPENSE
Salaries and employee benefits		4,027			3,910			3,491
Occupancy		798			804			784
Data processing		501			492			463
Director and staff expenses		213			136			172
Excise taxes		146			134			119
Marketing		110			86			148
Legal and professional fees		142			130			87
Federal Deposit Insurance Corporation (FDIC) assessments		83			79			90
Business development		81			72			68
Other		509			511			387
Total noninterest expense		6,610			6,354			5,809
Income before provision for income taxes		3,276			2,770			2,861
PROVISION FOR INCOME TAXES		674			569			957
NET INCOME	$	2,602		$	2,201		$	1,904
Basic earnings per share	$	0.23		$	0.24		$	0.21
Diluted earnings per share	$	0.22		$	0.24		$	0.21
Weighted average number of common shares outstanding:
Basic		11,338,320			9,265,153			9,235,344
Diluted		11,609,978			9,284,947			9,238,808

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

	Nine months ended
	September 30, 2018			September 30, 2017
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	26,229		$	22,741
Interest on interest earning deposits with other banks		949			458
Interest on investment securities		463			385
Dividends on other investments		91			77
Total interest and dividend income		27,732			23,661
INTEREST EXPENSE
Interest on deposits		2,209			1,526
Interest on borrowed funds		594			551
Total interest expense		2,803			2,077
Net interest income		24,929			21,584
PROVISION FOR LOAN LOSSES		1,401			504
Net interest income after provision for loan losses		23,528			21,080
NONINTEREST INCOME
Deposit service charges and fees		2,258			1,924
Wholesale banking service fees		370			-
Loan referral fees		453			276
Mortgage broker fees		158			195
Sublease and lease income		71			167
Gain on sale of loans		142			102
Other		414			437
Total noninterest income		3,866			3,101
NONINTEREST EXPENSE
Salaries and employee benefits		11,672			9,947
Occupancy		2,425			2,253
Data processing		1,472			1,311
Director and staff expenses		493			450
Excise taxes		404			344
Marketing		253			298
Legal and professional fees		352			281
Federal Deposit Insurance Corporation (FDIC) assessments		247			271
Business development		241			195
Other		1,472			1,298
Total noninterest expense		19,031			16,648
Income before provision for income taxes		8,363			7,533
PROVISION FOR INCOME TAXES		1,717			2,440
NET INCOME	$	6,646		$	5,093
Basic earnings per share	$	0.67		$	0.55
Diluted earnings per share	$	0.66		$	0.55
Weighted average number of common shares outstanding:
Basic		9,956,449			9,233,421
Diluted		10,051,415			9,236,175

COASTAL FINANCIAL CORPORATION
AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY
(Dollars in thousands; unaudited)

	For the Three Months Ended
	September 30, 2018										June 30, 2018										September 30, 2017
	Average			Interest &			Yield /				Average			Interest &			Yield /				Average			Interest &			Yield /
	Balance			Dividends			Cost (4)				Balance			Dividends			Cost (4)				Balance			Dividends			Cost (4)
Assets
Interest earning assets:
Interest earning deposits	$	90,301		$	458			2.01	%		$	50,750		$	236			1.87	%		$	53,959		$	171			1.26	%
Investment securities (1)		39,613			156			1.56				39,642			155			1.57				36,458			135			1.47
Other Investments		3,000			18			2.38				3,200			62			7.77				3,043			3			0.39
Loans receivable (2)		717,260			9,262			5.12				688,975			8,778			5.11				624,463			7,908			5.02
Total interest earning assets	$	850,174		$	9,894			4.62			$	782,567		$	9,231			4.73			$	717,923		$	8,217			4.54
Noninterest earning assets:
Allowance for loan losses		(8,782	)									(8,522	)									(7,890	)
Other noninterest earning assets		37,000										36,277										37,293
Total assets	$	878,392									$	810,322									$	747,326
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits	$	488,183		$	851			0.69	%		$	464,133		$	712			0.62	%		$	428,036		$	540			0.50	%
Subordinated debt		9,959			148			5.90				9,955			147			5.92				9,945			148			5.90
Junior subordinated debentures		3,580			41			4.54				3,580			39			4.37				3,579			31			3.44
FHLB advances and other borrowings		964			6			2.47				5,972			30			2.01				3,294			13			1.57
Total interest bearing liabilities	$	502,686		$	1,046			0.83			$	483,640		$	928			0.77			$	444,854		$	732			0.65
Noninterest bearing deposits		274,549										255,615										233,896
Other liabilities		3,650										2,610										3,557
Total shareholders' equity		97,507										68,457										65,019
Total liabilities and
shareholders' equity	$	878,392									$	810,322									$	747,326
Net interest income				$	8,848									$	8,303									$	7,485
Interest rate spread								3.79	%									3.96	%									3.89	%
Net interest margin (3)								4.13	%									4.26	%									4.14	%
(1) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes nonaccrual loans
(3) Net interest margin represents net interest income divided by the average total interest earning assets
(4) Yields and costs are annualized

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

	For the Nine Months Ended
	September 30, 2018										September 30, 2017
	Average			Interest &			Yield /				Average			Interest &			Yield /
	Balance			Dividends			Cost (4)				Balance			Dividends			Cost (4)
Assets
Interest earning assets:
Interest earning deposits	$	69,818		$	949			1.82	%		$	56,284		$	458			1.09	%
Investment securities (1)		39,657			463			1.56				36,377			385			1.42
Other Investments		3,038			91			4.00				2,875			77			3.58
Loans receivable (2)		687,165			26,229			5.10				609,981			22,741			4.98
Total interest earning assets	$	799,678		$	27,732			4.64			$	705,517		$	23,661			4.48
Noninterest earning assets:
Allowance for loan losses		(8,478	)									(7,811	)
Other noninterest earning assets		36,960										39,990
Total assets	$	828,160									$	737,696
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits	$	472,266		$	2,209			0.63	%		$	425,030		$	1,526			0.48	%
Subordinated debt		9,955			439			5.90				9,941			439			5.90
Junior subordinated debentures		3,580			116			4.33				3,578			90			3.36
FHLB advances and other borrowings		2,577			39			2.02				2,179			22			1.35
Total interest bearing liabilities	$	488,378		$	2,803			0.77			$	440,728		$	2,077			0.63
Noninterest bearing deposits		258,586										228,507
Other liabilities		3,038										3,069
Total shareholders' equity		78,158										65,392
Total liabilities and
shareholders' equity	$	828,160									$	737,696
Net interest income				$	24,929									$	21,584
Interest rate spread								3.87	%									3.85	%
Net interest margin (3)								4.17	%									4.09	%
(1) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes nonaccrual loans
(3) Net interest margin represents net interest income divided by the average total interest earning assets
(4) Yields and costs are annualized

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

	Three Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
	2018			2018			2018			2017			2017
Income Statement Data:
Interest and dividend income	$	9,894		$	9,231		$	8,607		$	8,452		$	8,217
Interest expense		1,046			928			829			798			732
Provision for loan losses		508			392			501			366			65
Net interest income after
provision for loan losses		8,340			7,911			7,277			7,288			7,420
Noninterest income		1,546			1,213			1,107			1,053			1,250
Noninterest expense		6,610			6,354			6,067			5,785			5,809
Provision for income tax		674			569			474			2,213			957
Net income		2,602			2,201			1,843			343			1,904
Adjusted net income (1)		2,602			2,201			1,843			1,638			1,904
	As of Period End or for the three month period
	September 30,			June 30,			March 31,			December 31,			September 30,
	2018			2018			2018			2017			2017
Balance Sheet Data:
Cash and cash equivalents	$	115,508		$	91,449		$	94,569		$	89,751		$	86,531
Investment securities		37,039			37,317			37,338			38,336			40,201
Loans receivable		744,320			700,692			678,515			656,788			630,442
Allowance for loan losses		(9,111	)		(8,540	)		(8,423	)		(8,017	)		(7,947	)
Total assets		917,029			850,922			830,962			805,753			778,609
Interest bearing deposits		488,743			485,019			473,268			460,937			438,592
Noninterest bearing deposits		285,979			259,449			254,000			242,358			242,607
Total deposits		774,722			744,468			727,268			703,295			681,199
Total borrowings		33,542			33,537			33,534			33,529			28,526
Total shareholders’ equity		105,276			69,490			66,927			65,711			65,558
Share and Per Share Data (2)(3):
Earnings per share – basic	$	0.23		$	0.24		$	0.20		$	0.04		$	0.21
Earnings per share – diluted	$	0.22		$	0.24		$	0.20		$	0.04		$	0.21
Adjusted earnings per share - diluted (4)										$	0.18
Dividends per share		-			-			-			-			-
Book value per share (5)	$	8.86		$	7.47		$	7.23		$	7.10		$	7.09
Tangible book value per share (6)	$	8.86		$	7.47		$	7.23		$	7.10		$	7.09
Weighted avg outstanding shares – basic		11,338,320			9,265,153			9,241,620			9,237,660			9,235,344
Weighted avg outstanding shares – diluted		11,609,978			9,284,947			9,247,209			9,240,737			9,238,808
Shares outstanding at end of period		11,886,473			9,298,553			9,253,303			9,248,901			9,249,006
Stock options outstanding at end of period		682,190			707,460			768,850			668,934			669,394
Credit Quality Ratios:
Nonperforming assets to total assets		0.27	%		0.24	%		0.20	%		0.26	%		0.32	%
Nonperforming assets to loans receivable
and OREO		0.34	%		0.30	%		0.25	%		0.32	%		0.40	%
Nonperforming loans to total loans receivable		0.34	%		0.30	%		0.25	%		0.32	%		0.40	%
Allowance for loan losses to nonperforming loans		361.40	%		412.96	%		495.76	%		378.16	%		316.36	%
Allowance for loan losses to total loans receivable		1.22	%		1.22	%		1.24	%		1.22	%		1.26	%
Net charge-offs (recoveries) to average loans (7)		-0.03	%		0.16	%		0.06	%		0.18	%		0.00	%
Capital Ratios:
Tier 1 leverage capital		12.60	%		9.21	%		9.07	%		8.95	%		9.31	%
Tier 1 risk-based capital		14.17	%		10.24	%		10.25	%		10.50	%		10.75	%
Common equity Tier 1 risk-based capital		13.72	%		9.76	%		9.75	%		9.98	%		10.21	%
Total risk-based capital		16.65	%		12.82	%		12.90	%		13.24	%		13.54	%
(1) Adjusted net income is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is net income. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.”
(2) Share and per share amounts are based on total common shares outstanding, which includes common stock and nonvoting common stock.
(3) Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018.
(4) Adjusted earnings per share is a non-GAAP financial measure that excludes the impact of the revaluation of our deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. The most directly comparable GAAP measure is earnings per share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Non-GAAP Financial Measures.”
(5) We calculate book value per share as total shareholders’ equity at the end of the relevant period divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period.
(6) Tangible book value per share is a non-GAAP financial measure. We calculate tangible book value per share as total shareholders’ equity at the end of the relevant period, less goodwill and other intangible assets, divided by the outstanding number of our common shares, which includes common stock and nonvoting common stock, at the end of each period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated.
(7) Annualized calculations

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP (“Generally Accepted Accounting Principles”) financial measures in addition to results presented in accordance with GAAP. These measures include the following:

“Adjusted net income” is a non-GAAP measure defined as net income increased by the additional income tax expense that resulted from the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act. The most directly comparable GAAP measure is net income.

“Adjusted earnings per share” is a non-GAAP measure defined as net income, plus additional income tax expense, divided by weighted average outstanding shares (diluted). The most directly comparable GAAP measure is earnings per share.

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

(Dollars in thousands, except share and per share data)		As of and for three Months ended December 31, 2017
Adjusted net income:
Net income		$	343
Plus: additional income tax expense			1,295
Adjusted net income		$	1,638
Adjusted earnings per share – diluted:
Net income		$	343
Plus: additional income tax expense			1,295
Adjusted net income		$	1,638
Weighted average common shares outstanding– diluted (1)			9,240,737
Adjusted earnings per share – diluted (1)		$	0.18
(1) Share and per share information has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018.

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