COASTAL FINANCIAL CORPCCB
COASTAL FINANCIAL CORP Fair Value Disclosure
Fair Value Measurements
The following tables present estimated fair values of the Company’s financial instruments as of the period indicated, whether or not recognized or recorded in the consolidated balance sheets at the period indicated:
| December 31, 2025 | Fair Value Measurements Using | ||||||||||||||||||||||||||||
| Carrying Value | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||||||||
| Cash and due from banks | $ | 34,241 | $ | 34,241 | $ | 34,241 | $ | — | $ | — | |||||||||||||||||||
| Interest earning deposits with other banks | 702,729 | 702,729 | 702,729 | — | — | ||||||||||||||||||||||||
| Investment securities | 48,247 | 48,742 | — | 48,742 | — | ||||||||||||||||||||||||
| Other investments | 12,837 | 12,837 | — | 10,666 | 2,171 | ||||||||||||||||||||||||
| Loans held for sale | 71,216 | 71,216 | — | 71,216 | |||||||||||||||||||||||||
| Loans receivable | 3,749,531 | 3,738,084 | — | — | 3,738,084 | ||||||||||||||||||||||||
| Accrued interest receivable | 18,613 | 18,613 | — | 18,613 | — | ||||||||||||||||||||||||
| Financial liabilities | |||||||||||||||||||||||||||||
| Deposits | $ | 4,144,199 | $ | 4,130,842 | $ | — | $ | 4,130,842 | $ | — | |||||||||||||||||||
| Subordinated debt | 44,443 | 44,132 | — | 44,132 | — | ||||||||||||||||||||||||
| Junior subordinated debentures | 3,593 | 3,719 | — | 3,719 | — | ||||||||||||||||||||||||
| Accrued interest payable | 1,435 | 1,435 | — | 1,435 | — | ||||||||||||||||||||||||
| December 31, 2024 | Fair Value Measurements Using | ||||||||||||||||||||||||||||
| Carrying Value | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||||||||
| Cash and due from banks | $ | 36,533 | $ | 36,533 | $ | 36,533 | $ | — | $ | — | |||||||||||||||||||
| Interest earning deposits with other banks | 415,980 | 415,980 | 415,980 | — | — | ||||||||||||||||||||||||
| Investment securities | 47,321 | 46,740 | — | 46,740 | — | ||||||||||||||||||||||||
| Other investments | 10,800 | 10,800 | — | 8,181 | 2,619 | ||||||||||||||||||||||||
| Loans held for sale | 20,600 | 20,600 | — | 20,600 | |||||||||||||||||||||||||
| Loans receivable, net | 3,486,565 | 3,460,131 | — | — | 3,460,131 | ||||||||||||||||||||||||
| Accrued interest receivable | 21,104 | 21,104 | — | 21,104 | — | ||||||||||||||||||||||||
| Financial liabilities | |||||||||||||||||||||||||||||
| Deposits | $ | 3,585,332 | $ | 3,584,967 | $ | — | $ | 3,584,967 | $ | — | |||||||||||||||||||
| Subordinated debt | 44,293 | 45,505 | — | 45,505 | — | ||||||||||||||||||||||||
| Junior subordinated debentures | 3,591 | 3,508 | — | 3,508 | — | ||||||||||||||||||||||||
| Accrued interest payable | 962 | 962 | — | 962 | — | ||||||||||||||||||||||||
The Company measures and discloses certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (that is, not a forced liquidation or distressed sale). GAAP establishes a consistent framework for measuring fair value and disclosure requirements about fair value measurements. Among other things, the accounting standard requires the reporting entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Company’s estimates for market assumptions. These two types of inputs create the following fair value hierarchy:
•Level 1 – Quoted prices in active markets for identical instruments. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
•Level 2 – Observable inputs other than Level 1 including quoted prices in active markets for similar instruments, quoted prices in less active markets for identical or similar instruments, or other observable inputs that can be corroborated by observable market data.
•Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs from non-binding single dealer quotes not corroborated by observable market data.
The estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize at a future date. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. In addition, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates that must be made given the absence of active secondary markets for certain financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values.
Items measured at fair value on a recurring basis – The following fair value hierarchy table presents information about the Company’s assets that are measured at fair value on a recurring basis at the dates indicated:
| Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||
| U.S. Agency collateralized mortgage obligations | $ | — | $ | 29 | $ | — | $ | 29 | |||||||||||||||
| $ | — | $ | 29 | $ | — | $ | 29 | ||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||
| U.S. Agency collateralized mortgage obligations | $ | — | $ | 35 | $ | — | $ | 35 | |||||||||||||||
| $ | — | $ | 35 | $ | — | $ | 35 | ||||||||||||||||
The following methods were used to estimate the fair value of the class of financial instruments above:
Investment securities - The fair value of securities is based on quoted market prices, pricing models, quoted prices of similar securities, independent pricing sources, and discounted cash flows.
Limitations: The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2025 and 2024. The factors used in the fair values estimates are subject to change subsequent to the dates the fair value estimates are completed, therefore, current estimates of fair value may differ significantly from the amounts presented herein.
Items measured at fair value on a nonrecurring basis – The following table presents financial assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy of the fair value measurements for those assets at the dates indicated:
| Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Collateral dependent loans | $ | — | $ | — | $ | 97 | $ | 97 | |||||||||||||||
| Equity securities | — | — | 2,171 | 2,171 | |||||||||||||||||||
| Total | $ | — | $ | — | $ | 2,268 | $ | 2,268 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Collateral dependent loans | $ | — | $ | — | $ | 100 | $ | 100 | |||||||||||||||
| Equity securities | — | — | 2,619 | 2,619 | |||||||||||||||||||
| Total | $ | — | $ | — | $ | 2,719 | $ | 2,719 | |||||||||||||||
The amounts disclosed above represent the fair values at the time the nonrecurring fair value measurements were made, and not necessarily the fair value as of the dates reported on.
Individually evaluated loans - Fair values for individually evaluated loans are estimated using the fair value of the collateral less selling costs if the loan results in a Level 3 classification. Individually evaluated loan amounts are initially valued at the lower of cost or fair value. Individually evaluated loans carried at fair value generally receive specific allocations of the allowance for credit losses. The allowance for individually evaluated loans is calculated using either the collateral value method, which considers the likely source of repayment as the value of the collateral less estimated costs to sell, or the net present value method, which considers the contractual principal and interest terms and estimated cash flows available from the borrower to satisfy the debt. Valuation is measured based on the fair value of the underlying collateral or the discounted cash expected future cash flows. Subsequent changes in the value of loans are included within the provision for credit losses - loans in the same manner in which it initially was recognized or as a reduction in the provision that would otherwise be reported. Loans are evaluated quarterly to determine if valuation adjustments should be recorded. The need for valuation adjustments arises when observable market prices or current appraised values of collateral indicate a shortfall in collateral value compared to current carrying values of the related loan. If the Company determines that the value of the individually evaluated loan is less than the carrying value of the loan, the Company either establishes a reserve as a specific component of the allowance for credit losses or charges off that amount. These valuation adjustments are considered nonrecurring fair value adjustments.
Equity securities – The Company measures equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer, with price changes recognized in earnings.
Assets measured at fair value using significant unobservable inputs (Level 3)
The following table presents the carrying value of equity securities without readily determinable fair values, as of December 31, 2025, 2024 and 2023, with adjustments recorded during the periods presented for those securities with observable price changes, if applicable. These equity securities are included in other investments on the balance sheet.
•a $1.8 million and $2.2 million equity interest in a specialized bank technology company as of December 31, 2025 and December 31, 2024, respectively;
•a $350,000 equity interest in a technology company as of the years ended December 31, 2025 and December 31, 2024; and
•a $42,000 and $47,000 equity interest in a technology company as of the years ended December 31, 2025, and December 31, 2024, respectively.
| For the Year Ended December 31, | ||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Carrying value, beginning of period | $ | 2,619 | $ | 2,622 | $ | 2,572 | ||||||||||||||
| Purchases | — | — | 50 | |||||||||||||||||
| Observable price change | (448) | (3) | — | |||||||||||||||||
| Carrying value, end of period | $ | 2,171 | $ | 2,619 | $ | 2,622 | ||||||||||||||
The following table provides a description of the valuation technique, unobservable inputs, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a nonrecurring basis at the date indicated:
| Valuation Technique | Unobservable Inputs | December 31, 2025 Weighted Average Rate | December 31, 2024 Weighted Average Rate | ||||||||||||||||||||
| Collateral dependent loans | Collateral valuations | Discount to appraised value | 8.1% | 8.0% | |||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 12, 2021 | |
| 2019 | Mar 12, 2020 | |
| 2018 | Mar 28, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.