COASTAL FINANCIAL CORP 10-K

Item 9A. Controls and Procedures Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of December 31, 2022. In designing and evaluating our disclosure controls and procedures, we and our management recognize that any controls and procedures, no matter how well-designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported as of the end of the period covered by this annual report. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-15(f) and 15d- 15(f) of the Exchange Act). Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements in accordance with GAAP. Internal control over financial reporting includes self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified. 148 Table of Contents There are inherent limitations in any internal control over financial reporting, no matter how well designed, misstatements due to error or fraud may occur and not be detected, including the possibility of circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of an internal control system may vary over time. Our management assessed its internal control structure over financial reporting as of December 31, 2022 using the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that we maintained effective internal control over financial reporting as of December 31, 2022. Attestation Report of the Independent Registered Public Accounting Firm Not applicable for an emerging growth company. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, such controls. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 149 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance Board of Directors For information relating to the directors of the Company, the section captioned “Items to be Voted on by Shareholders—Item 1—Election of Directors” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders is incorporated herein by reference. Executive Officers For information relating to officers of the Company, see Part I, Item 1, “Business—Information About Our Executive Officers” to this Annual Report on Form 10-K. Delinquent Section 16(a) Reports For information regarding compliance with Delinquent Section 16(a) Reports, the section captioned “Stock Information—Delinquent Section 16(a) Reports” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders is incorporated herein by reference. Disclosure of Code of Ethics For information concerning the Company’s Code of Ethics, the information contained under the section captioned “Corporate Governance—Code of Ethics and Business Conduct” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders is incorporated by reference. A copy of the Code of Ethics and Business Conduct is available to shareholders on the Company’s website at www.coastalbank.com. Audit Committee For information regarding the Audit Committee and its composition and the audit committee financial expert, the section captioned “Corporate Governance—Meetings and Committees of the Board of Directors—Audit Committee” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders is incorporated herein by reference. Item 11. Executive Compensation Executive Compensation For information regarding executive compensation, the sections captioned “Executive Compensation” and “Director Compensation” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters (a) Security Ownership of Certain Beneficial Owners Information required by this item is incorporated herein by reference to the section captioned “Stock Information” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders. (b) Security Ownership of Management Information required by this item is incorporated herein by reference to the section captioned “Stock Information” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders. 150 Table of Contents (c) Changes in Control Management of the Company knows of no arrangements, including any pledge by any person or securities of the Company the operation of which may at a subsequent date result in a change in control of the registrant. (d) Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth information about the Company common stock that may be issued upon the exercise of stock options, warrants and rights under all of the Company’s equity compensation plans as of December 31, 2022. (dollars in thousands, except per share amounts; unaudited) Number of securities to be issued upon exercise of outstanding options Weighted- average exercise price of outstanding options Number of securities remaining available for issuance under equity compensation plans (1) Equity compensation plan approved by stockholders 438,103 $ 8.79 522,822 Equity compensation plan not approved by shareholders - - - Total 438,103 $ 8.79 522,822 (1) This number has been reduced by the number of securities to be issued upon the exercise of outstanding options, also reported in this table. Item 13. Certain Relationships and Related Transactions, and Director Independence Certain Relationships and Related Transactions For information regarding certain relationships and related transactions, the section captioned “ Other Information Relating to Directors and Executive Officers—Transactions with Related Persons” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders is incorporated herein by reference. Director Independence For information regarding director independence, the section captioned “Corporate Governance—Director Independence” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders is incorporated herein by reference. Item 14. Principal Accountant Fees and Services For information regarding the principal accountant fees and expenses, the section captioned “Item 2—Ratification of Selection of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders is incorporated herein by reference. 151 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (1) The financial statements required in response to this item are incorporated herein by reference from Item 8 of this Report on Form 10-K. (2) All financial statement schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto. (3) Exhibits No. Description Location 3.1 Second Amended and Restated Certificate of Incorporation of Coastal Financial Corporation Incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 3.2 Articles of Amendment to the Second Amended and Restated Articles of Incorporation of Coastal Financial Corporation Incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 3.3 Amended and Restated Bylaws of Coastal Financial Corporation Incorporated herein by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 4.1* Form of Common Stock Certificate of Coastal Financial Corporation Incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 4.2 Description of Securities Incorporated herein by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K (File No. 001-38589), filed with the Commission on March 12, 2020. 4.3 Form of 3.375% Fixed-to-Floating Rate Subordinated Note due September 1, 2031 Incorporated herein by reference to Exhibit 4.1 of the Company’s Form 8-K (File No. 001-38589), filed with the Securities and Exchange Commission on August 18, 2021. 10.1+ 2006 Stock Option and Equity Compensation Plan Incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 152 Table of Contents 10.2+ First Amendment to the 2006 Stock Option and Equity Compensation Plan Incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-38589), filed with the Commission on August 7, 2020. 10.3+ Directors’ Stock Bonus Plan Incorporated herein by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 10.4+ 2018 Omnibus Incentive Plan Incorporated herein by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 10.5+ Coastal Financial Corporation Annual Incentive Plan Incorporated herein by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 10.6+ Second Amended and Restated Employment Agreement by and among Coastal Financial Corporation, Coastal Community Bank and Eric M. Sprink dated October 4, 2021. Incorporated herein by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-38589), filed with the Securities and Exchange Commission on October 7, 2021. 10.7+ Amended and Restated Change in Control Severance Agreement by and among Coastal Financial Corporation, Coastal Community Bank, and Joel Edwards Incorporated herein by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 10.8 Lease dated October 21, 1996, between certain persons and Coastal Community Bank Incorporated herein by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 10.9 Lease Amendment 1.0 dated as of August 15, 2006, between certain persons and Coastal Community Bank Incorporated herein by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 10.10 Lease Amendment 2.0 dated as of March 31, 2008, between certain persons and Coastal Community Bank Incorporated herein by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 153 Table of Contents 10.11 Lease Amendment 3.0 dated as of June 29, 2009, between certain persons and Coastal Community Bank Incorporated herein by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 10.12 Lease Amendment 4 .0 dated as of J anuary 31, 2023 , between certain persons and Coastal Community Bank Filed herewith 10.13 Investment Agreement dated as of March 30, 2011, between Coastal Financial Corporation and Steven D. Hovde Incorporated herein by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 10.14 First Amendment to Investment Agreement dated as of May 9, 2019, between Coastal Financial Corporation and Steven D. Hovde Incorporated herein by reference to Exhibit 10.20 to the Company’s Registration Statement on Form S-1 (File No. 333-225715), filed with the Commission on June 19, 2018 10.15# Program Agreement dated as of September 26, 2019 by and between Coastal Community Bank and Aspiration Financial, LLC Incorporated herein by reference to Exhibit 10.1 to Amendment No. 1 to the Company’s Current Report on Form 8-K/A (File No. 001-38589) filed on March 21, 2019. 10.16+ Form of Change in Control Severance Agreement Incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-38589), filed with the Commission on May 8, 2020. 10.17+ Amended Non-Employee Director Compensation Policy Incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-38589), filed with the Commission on November 6, 2020. 10.18 Form of Subordinated Note Purchase Agreement, dated as of August 18, 2021 Incorporated herein by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-38589), filed with the Securities and Exchange Commission on August 18, 2021. 10.19 Form of subordinated Note Purchase Agreement, dated as of November 1, 2022 Incorporated herein by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-38589), filed with the Securities and Exchange Commission on November 1, 2022. 154 Table of Contents 21.1 Subsidiaries Incorporated herein by reference to Exhibit 21.1 of the Company’s Form 10-K (File No. 001-38589), filed with the Securities and Exchange Commission on March 14, 2022. 23.1 Consent of Moss Adams LLP Filed herewith 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 32.1 Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed herewith 32.2 Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed herewith 101 The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheet, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statement of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements Filed herewith 104 Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101 filed herewith) _______________________________________ + Management contract or compensatory plan, contract or arrangement. # Portions of this exhibit have been omitted pursuant to a request for confidential treatment and the non-public information has been filed separately with the SEC. * Certain instruments defining the rights of holders of long-term debt securities of the Company and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company hereby agrees to furnish copies of these instruments to the SEC upon request. Item 16. Form 10-K Summary None. 155 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COASTAL FINANCIAL CORPORATION Dated: March 15, 2023 /s/ Eric M. Sprink Eric M. Sprink Chief Executive Officer 156 Table of Contents Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date /s/ Eric M. Sprink Chief Executive Officer and Director (Principal Executive Officer) March 15, 2023 Eric M. Sprink /s/ Joel G. Edwards Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) March 15, 2023 Joel G. Edwards /s/ Christopher D. Adams Chair of the Board March 15, 2023 Christopher D. Adams /s/ Andrew P. Skotdal Vice Chair of the Board March 15, 2023 Andrew P. Skotdal /s/ Pamela Unger Director March 15, 2023 Pamela Unger /s/ Rilla Delorier Director March 15, 2023 Rilla Delorier /s/ Steven D. Hovde Director March 15, 2023 Steven D. Hovde /s/ Stephan Klee Director March 15, 2023 Stephan Klee /s/ Thomas D. Lane Director March 15, 2023 Thomas D. Lane /s/ Sadhana Akella-Mishra Director March 15, 2023 Sadhana Akella-Mishra /s/ Michael Patterson Director March 15, 2023 Michael Patterson /s/ Gregory A. Tisdel Director March 15, 2023 Gregory A. Tisdel 157