Proxy Statement	Offering Circular

MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

Dear Prime Pacific Stockholder:

Your board of directors has unanimously approved a proposed transaction that, if completed, will result in the merger of Prime Pacific Financial Services, Inc. (“Prime Pacific”) with and into Coastal Financial Corporation (“Coastal”). As part of the transaction, Prime Pacific Bank, N.A. will also merge with and into Coastal Community Bank. You are being asked to approve the merger by approving an Amended and Restated Agreement and Plan of Merger between Prime Pacific and Coastal (which we refer to as the merger agreement) at a special meeting of stockholders to be held on October 14, 2015. The merger agreement was amended to account for the use of the Regulation A exemption from registration provided by the Securities and Exchange Commission (the “SEC”), which was adopted by the SEC after the initial execution of the merger agreement.

If the merger agreement is approved at the special meeting, and subject to the other conditions of the merger agreement, Prime Pacific will be merged into Coastal, with Coastal as the surviving entity. As a result, you will have the right to receive for each of your shares of Prime Pacific common stock 0.8047 of a share of Coastal common stock, subject to possible adjustment. In connection with the merger, Coastal expects to issue an aggregate of 7,715,458 shares of Coastal common stock to Prime Pacific stockholders. Following the merger, the stockholders of Prime Pacific as a group will hold approximately 14% of Coastal’s outstanding common stock. Coastal’s common stock is not listed on a national securities exchange and Coastal currently has no plans to list its common stock on a national securities exchange. Accordingly, there is no public market for Coastal’s common stock. However, prior to the closing of the merger, Coastal has agreed to obtain the written commitment of a broker-dealer to act as a market maker for Coastal common stock following the closing. We expect the merger to be tax-free for federal income tax purposes to you with respect to any shares of Coastal common stock you receive in exchange for your shares of Prime Pacific common stock.

After careful consideration, the board of directors of Prime Pacific has determined that the merger is in the best interests of stockholders and recommends that Prime Pacific stockholders vote “FOR” the proposal to approve the merger agreement and “FOR” each of the other items to be considered at the Prime Pacific special meeting. Approval of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Prime Pacific common stock.

This document contains information that you should consider in evaluating the merger agreement and the proposed merger. In particular, you should carefully read the section captioned “Risk Factors” beginning on page 13 for a discussion of certain risk factors relating to the merger agreement and the merger.

We cannot complete the merger unless Prime Pacific’s stockholders approve the merger agreement and we receive all applicable regulatory approvals. A favorable vote by stockholders owning at least a majority of Prime Pacific’s outstanding common stock is needed to approve the merger. Whether or not you plan to attend the special meeting of stockholders of Prime Pacific, please complete, sign, date and return the enclosed proxy card. Your vote is important. If you do not return your proxy card, it will have the same effect as a vote against the merger.

	Glenn A. Deutsch
	President and Chief Executive Officer
	Prime Pacific Financial Services, Inc.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or completeness of this proxy statement/offering circular. Any representation to the contrary is a criminal offense. The Coastal common stock is being issued pursuant to the Regulation A exemption from registration provided by the SEC and such shares will be freely tradable following the merger.

The securities to be issued in the merger are not savings or deposit accounts or other obligations of any bank or nonbank subsidiary of either Coastal or Prime Pacific, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This proxy statement/offering circular is dated September 16, 2015 and is first being mailed to Prime Pacific stockholders on or about September 18, 2015.

2502 196th Street, SW

Suite 108

Lynnwood, Washington 98036

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

A special meeting of stockholders of Prime Pacific Financial Services, Inc. (“Prime Pacific”) will be held at Prime Pacific’s corporate headquarters located at 2502 196th Street, SW, Suite 108, Lynnwood, Washington, at 4:00 p.m., local time, on Wednesday, October 14, 2015.

At the special meeting, you will be asked to:

A copy of the Amended and Restated Agreement and Plan of Merger, which is referred to as the “merger agreement,” is included as Annex A to the accompanying proxy statement/offering circular. The proxy statement/offering circular describes the merger agreement and the proposed merger in detail. We urge you to read it carefully. The proxy statement/offering circular forms a part of this notice.

The board of directors of Prime Pacific recommends that Prime Pacific stockholders vote “FOR” the proposal to approve the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies to vote in favor of the merger agreement.

Prime Pacific’s board of directors has fixed the close of business on September 10, 2015 as the record date for determining the stockholders entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting.

Under Washington law, if the merger is completed, Prime Pacific stockholders of record who do not vote to approve the merger agreement, and otherwise comply with the applicable provisions of Washington law pertaining to objecting stockholders, will be entitled to exercise rights of appraisal and obtain payment in cash of the fair value of their shares of Prime Pacific common stock by following the procedures set forth in detail in the enclosed proxy statement/offering circular. A copy of the section of the Washington Business Corporation Act pertaining to objecting stockholders’ rights of appraisal is included as Annex C to the enclosed proxy statement/offering circular.

Your vote is very important. Your proxy is being solicited by Prime Pacific’s board of directors. The proposal to approve the merger agreement must be approved by the affirmative vote of the holders of a majority of the outstanding shares of Prime Pacific common stock in order to complete the proposed merger. Whether or not you plan to attend the special meeting, please complete and mail the enclosed proxy card in the accompanying envelope, which requires no postage if mailed in the United States. You may revoke your proxy at any time before the special meeting. If you attend the special meeting and vote in person, your proxy vote will not be used.

If you have questions about the merger, or how to submit your proxy, please contact Jennifer Brown, Administrative Assistant, Prime Pacific Financial Services, Inc., at (425) 608-4173.

	By Order of the Board of Directors
	John R. Pfeifer
	Corporate Secretary
Lynnwood, Washington
September 18, 2015

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE PRIME PACIFIC SPECIAL MEETING

The following are some questions that you may have about the merger and the Prime Pacific special meeting, and brief answers to those questions. We urge you to read carefully the entire proxy statement/offering circular because the information in this section does not provide all of the information that might be important to you with respect to the merger and the special meeting.

Unless the context otherwise requires, throughout this document, “Coastal” refers to Coastal Financial Corporation, “Prime Pacific” refers to Prime Pacific Financial Services, Inc. and “we,” “us,” and “our” refers collectively to Coastal and Prime Pacific.

SUMMARY

This summary highlights selected information from this proxy statement/offering circular and may not contain all of the information that is important to you. You should carefully read this entire document, including the appendices, and the other documents to which this document refers to fully understand the merger and the related transactions.

Information About Coastal and Prime Pacific (pages 71 and 72)

Coastal Financial Corporation

Coastal is a bank holding company incorporated under the laws of the State of Washington and headquartered in Everett, Washington. Coastal’s only subsidiary is Coastal Community Bank, a commercial bank chartered under the laws of the State of Washington. Coastal Community Bank was founded in 1997 and currently has 11 offices in Snohomish and Island Counties in Washington. Coastal Community Bank offers a wide variety of deposit and credit products to meet the needs of businesses and consumers in the Puget Sound area. As of March 31, 2015, on a consolidated basis, Coastal had total assets of $581.3 million, deposits of $505.7 million and stockholders’ equity of $53.3 million. Coastal’s principal office is located at 5415 Evergreen Way, Everett, Washington 98203 and its telephone number is (425) 257-9000. For additional information about Coastal, see “Business of Coastal.”

Prime Pacific Financial Services, Inc.

Prime Pacific is a bank holding company incorporated under the laws of the State of Washington and headquartered in Lynnwood, Washington. Prime Pacific is the parent holding company of Prime Pacific Bank, a federally chartered national banking association. Founded 20 years ago, Prime Pacific Bank is a full-service community bank with three branch offices in Lynnwood, Kenmore and Mill Creek in Washington. Providing a full range of retail banking services, Prime Pacific Bank serves individuals and small to medium-sized business located in south Snohomish County and northeast King County. As of March 31, 2015, on a consolidated basis, Prime Pacific had total assets of $121.5 million, deposits of $107.8 million and stockholders’ equity of $13.3 million. Prime Pacific’s principal office is located at 2502 196th Street, SW, Suite 108, Lynnwood, Washington 98036 and its telephone number is (425) 712-9898.

The Merger and the Merger Agreement (pages 32 and 50)

The terms and conditions of the merger are contained in the merger agreement, which is attached to this proxy statement/offering circular as Annex A. We encourage you to read the merger agreement carefully, as it is the legal document that governs the merger.

In the merger, Prime Pacific will merge with and into Coastal, with Coastal as the surviving corporation. Immediately following the merger, Prime Pacific’s wholly owned subsidiary bank, Prime Pacific Bank, will merge with Coastal’s wholly owned subsidiary bank, Coastal Community Bank in the bank merger.

Merger Consideration (page 50)

If the merger is completed, each outstanding share of Prime Pacific common stock will be converted into the right to receive, promptly following the completion of the merger, 0.8047 of a share of Coastal common stock, subject to possible adjustment. Coastal will not issue any fractional shares of Coastal common stock in the merger. Instead, each fraction of a share of Coastal common stock will be rounded up to the nearest whole share.

If Prime Pacific’s adjusted tangible common equity as of the closing date is estimated to be less than $13,500,000, and Coastal and Prime Pacific do not exercise their applicable rights to terminate the merger agreement, the exchange ratio used to calculate the merger consideration shall be reduced by (i) the amount of such deficiency, divided by (ii) 1.69, and (iii) further divided by the number of shares of Prime Pacific common stock outstanding on the closing date of the merger, rounded to four decimal places. Under the merger agreement, “adjusted tangible common equity” will be calculated as tangible common equity adjusted, as needed, to reflect the payment or accrual of all expenses incurred by Prime Pacific in connection with the merger. As of June 30, 2015, Prime Pacific’s adjusted tangible common equity was $13,705,000. Additional income from operations subsequent to June 30, 2015 through the closing date, after reduction for any additional transaction expenses, will have the effect of increasing adjusted tangible common equity.

Prime Pacific Special Meeting (page 28)

The Prime Pacific special meeting will be held at Prime Pacific’s corporate headquarters located at 2502 196th Street, SW, Suite 108, Lynnwood, Washington, at 4:00 p.m., local time, on Wednesday, October 14, 2015. At the special meeting, holders of Prime Pacific common stock will be asked to:

Only holders of record of Prime Pacific common stock at the close of business on September 10, 2015 will be entitled to vote at the Prime Pacific special meeting. Each share of Prime Pacific common stock is entitled to one vote on each proposal to be considered at the Prime Pacific special meeting. As of the record date, there were 9,537,218 shares of Prime Pacific common stock entitled to vote at the Prime Pacific special meeting. As of the record date, the directors and executive officers of Prime Pacific and their affiliates beneficially owned and were entitled to vote approximately 1,434,199 shares of Prime Pacific common stock representing approximately 15% of the shares of Prime Pacific common stock outstanding on that date, which shares owned by directors of record or beneficially are subject to the support agreements described below.

Concurrent with the execution of the merger agreement, each of Prime Pacific’s directors, as well as certain key Prime Pacific stockholders, entered into a support agreement with Coastal under which such Prime Pacific director and stockholder generally has agreed (1) to vote or cause to be voted in favor of the Prime Pacific merger proposal, all shares of Prime Pacific common stock which he or she is the record or beneficial owner as the date of the support agreement and (2) subject to limited exceptions, not to sell or otherwise dispose any of these shares of Prime Pacific common stock until after the approval of the Prime Pacific merger proposal by the stockholders of Prime Pacific. The directors and key stockholders that have entered into support agreements with Coastal hold an aggregate of 3,383,601 shares of Prime Pacific common stock, representing 35% of Prime Pacific’s outstanding common shares as of the record date. For additional information regarding the support agreements, see “The Merger Agreement—Support Agreements.”

To approve the Prime Pacific merger proposal, a majority of the shares of Prime Pacific common stock outstanding and entitled to vote thereon must be voted in favor of such proposal. The Prime Pacific adjournment proposal will be approved if a majority of the votes cast at the Prime Pacific special meeting are voted in favor of the proposal. If you mark “ABSTAIN” on your proxy, or fail to submit a proxy and fail to vote in person at the Prime Pacific special meeting or if your shares are held in street name and you fail to instruct your bank or broker how to vote with respect to the Prime Pacific merger proposal, it will have the same effect as a vote “AGAINST” the Prime Pacific merger proposal. If you mark “ABSTAIN” on your proxy, or fail to submit a proxy and fail to vote in person at the Prime Pacific special meeting or if your shares are in street name and you fail to instruct your bank or broker how to vote with respect to the Prime Pacific adjournment proposal, it will have no effect on the approval of the Prime Pacific adjournment proposal.

Recommendation of Prime Pacific’s Board of Directors (page 28)

After careful consideration, Prime Pacific’s board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Prime Pacific and its stockholders and has approved the merger agreement. Prime Pacific’s board of directors recommends that Prime Pacific stockholders vote “FOR” the approval of the Prime Pacific merger proposal and “FOR” the approval of the Prime Pacific adjournment proposal. For the factors considered by Prime Pacific’s board of directors in reaching its decision to approve the merger agreement, see “The Merger—Prime Pacific’s Reasons for the Merger; Recommendation of Prime Pacific’s Board of Directors.”

Opinion of Performance Trust Capital Partners, LLC — Fairness Opinion Provider to Prime Pacific (page 35)

In connection with its consideration of the merger agreement, on April 16, 2015, the Prime Pacific board of directors received financial advice and presentations regarding the financial aspects of the merger from Performance Trust Capital Partners, LLC (which we refer to as “Performance Trust”), and received Performance Trust’s written opinion, dated April 16, 2015, to the effect that, as of such date and based upon and subject to the various factors, assumptions and limitations set forth in its opinion, the merger consideration was fair, from a financial point of view, to the holders of Prime Pacific common stock. The full text of Performance Trust’s written opinions is attached as Annex B to this proxy statement/offering circular. You should read the opinion in its entirety for a discussion of, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Performance Trust in rendering its opinion. Performance Trust’s opinion is addressed to the Prime Pacific board of directors, is directed only to the merger consideration and does not constitute a recommendation to any Prime Pacific stockholder as to how such stockholder should vote with respect to the merger proposal or any other matter.

Treatment of Prime Pacific Stock Options (page 50)

Subject to the receipt of any required regulatory approval, each Prime Pacific stock option with an exercise price per share that is less than $1.36 per share and is outstanding immediately prior to the merger will be cancelled by Prime Pacific at the time of the merger or immediately prior to the merger and entitle its holder to receive a cash payment equal to: (i) the excess of (A) $1.36 per share over (B) the exercise price per share of the Prime Pacific stock option, multiplied by (ii) the number of shares of Prime Pacific common stock subject to such Prime Pacific stock option. Except as set forth below, Prime Pacific stock options with an exercise price per share equal to or greater than $1.36 per share will, at the time of the merger or immediately prior to the merger, be cancelled and terminated. Each Prime Pacific stock option granted under Prime Pacific’s 2009 Stock Option and Equity Compensation Plan, whether vested or unvested, that is outstanding and unexercised immediately prior to the closing of the merger and that has an exercise price per share equal to or greater than $1.36 shall be converted automatically into an option to purchase, on the same terms and conditions as were applicable under such Prime Pacific stock option immediately prior to the closing of the merger (including vesting terms), the number of shares of Coastal common stock (rounded down to the nearest whole number of shares) equal to the produce of (i) the number of shares of Prime Pacific common stock subject to such Prime Pacific stock option immediately prior to the closing of the merger, multiplied by (ii) the exchange ratio, which such stock option shall have an exercise price per share of Coastal common stock equal to the quotient (rounded up to the nearest whole cent) obtained by dividing (1) the exercise price per share of Prime Pacific common stock subject to such Prime Pacific stock option immediately prior to the closing of the merger, by (2) the exchange ratio.

Material U.S. Federal Income Tax Consequences of the Merger (page 68)

The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. Assuming the merger qualifies as a reorganization, a U.S. holder of Prime Pacific common stock generally will not recognize any gain or loss upon receipt of Coastal common stock in exchange for Prime Pacific common stock in the merger. It is a condition to the completion of the merger that Coastal and Prime Pacific receive written opinions from their respective counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. For further information, see “Material U.S. Federal Income Tax Consequences of the Merger.”

The U.S. federal income tax consequences described above may not apply to all holders of Prime Pacific common stock. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your independent tax advisor for a full understanding of the particular tax consequences of the merger to you.

Dissenters’ Rights in the Merger (page 48)

Under Chapter 23B.13 of the Washington Business Corporation Act, holders of Prime Pacific’s common stock are entitled to dissent from, and obtain payment of the fair value of their shares in cash together with accrued interest in the event of, the consummation of the merger, instead of receiving the merger consideration they would otherwise be entitled to pursuant to the merger agreement. If you wish to assert your statutory dissenters’ rights, you must: (1) deliver to Prime Pacific, before the vote is taken at the special meeting regarding the merger agreement, written notice of your intent to demand payment for your shares of Prime Pacific common stock if the merger is effected, which notice must be separate from your proxy; (2) not vote your shares in favor of the merger agreement; and (3) follow the statutory procedures for perfecting dissenters’ rights under Chapter 23B.13 of the Washington Business Corporation Act, which is attached to this proxy statement/offering circular as Annex C. If you fail to comply with these requirements, then if the merger agreement is approved by Prime Pacific’s stockholders and the merger is completed, your shares of Prime Pacific common stock will be converted into the right to receive the merger consideration, without interest and subject to any applicable withholding of taxes, but you will have no dissenters’ rights with respect to your shares of Prime Pacific common stock. Written notice of your intent to assert dissenters’ rights must be delivered to Prime Pacific at: John R. Pfeifer, Corporate Secretary, Prime Pacific Financial Services, Inc., 2502 196th Street, SW, Suite 108, Lynnwood, Washington 98036. A vote against the Prime Pacific merger proposal alone will not constitute written notice of your intent to assert your dissenters’ rights in connection with the merger.

Interests of Prime Pacific’s Directors and Executive Officers in the Merger (page 47)

Prime Pacific stockholders should be aware that some of Prime Pacific’s directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of Prime Pacific stockholders generally. Prime Pacific’s board of directors was aware of these interests and considered these interests, among other matters, when making its decision to approve the merger agreement, and in recommending that Prime Pacific stockholders vote in favor of approving the merger agreement.

These interests include the following:

For a more complete description of these interests, see “The Merger—Interests of Prime Pacific’s Directors and Executive Officers in the Merger.”

Regulatory Approvals (page 48)

Under applicable law, the merger must be approved by the Board of Governors of the Federal Reserve System, or the Federal Reserve Board, and the bank merger must be approved by the Federal Reserve Board and the Washington Department of Financial Institutions. The U.S. Department of Justice may review the impact of the merger and the bank merger on competition. The Federal Reserve Board approved the merger and the bank merger on August 31, 2015 and the Washington Department of Financial Institutions approved the bank merger on August 31, 2015.

Conditions to Complete the Merger (page 58)

As more fully described in this proxy statement/offering circular and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permitted, waived. These conditions include:

We expect to complete the merger in the fourth quarter of 2015. No assurance can be given, however, as to when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

Agreement Not to Solicit Other Offers (page 58)

Prime Pacific has agreed that it generally will not solicit or encourage any inquiries or proposals regarding any acquisition proposals by third parties. Prime Pacific may respond to an unsolicited acquisition proposal that its board of directors believes is superior to the terms of the merger agreement if, in good faith after consultation with Prime Pacific’s outside legal counsel, the board of directors determines that failing to respond to the unsolicited acquisition proposal would constitute a breach of its fiduciary duty under applicable law. Prime Pacific must promptly notify Coastal if it receives any acquisition proposals.

Termination of the Merger Agreement (page 59)

The merger agreement can be terminated at any time prior to completion of the merger in the following circumstances:

Termination Fee (page 60)

The merger agreement requires the payment of a $450,000 termination fee by Prime Pacific to Coastal if the merger agreement is terminated by Coastal because (i) Prime Pacific materially breaches its duties with respect to the solicitation or consideration of a superior unsolicited acquisition proposal or (ii) Prime Pacific’s board of directors does not publicly recommend that Prime Pacific’s stockholders approve the Prime Pacific merger proposal or subsequently withdraws, qualifies or revises such recommendation in a manner that is materially adverse to Coastal.

In addition, Prime Pacific must pay a termination fee to Coastal if Coastal terminates the merger agreement because Prime Pacific willfully breaches any of its representations, warranties, covenants or obligations under the merger agreement and, in either case, a superior acquisition proposal involving Prime Pacific is publicly announced on or before the date of the Prime Pacific special meeting or the termination of the merger agreement by Coastal, respectively. Under these circumstances, Prime Pacific must pay Coastal a $250,000 termination fee promptly following the termination of the merger agreement and, if Prime Pacific either consummates or enters into a definitive agreement regarding the acquisition proposal within 12 months after termination of the merger agreement, it must pay Coastal an additional $200,000 termination fee.

Finally, if the merger agreement is terminated by either Prime Pacific or Coastal because the other breaches a representation or warranty or breaches a covenant or agreement and the breach is not cured within 30 days following written notice to the party committing the breach, the non-terminating party must pay the terminating party a $250,000 termination fee.

Rights of Prime Pacific Stockholders (page 97)

The rights of Prime Pacific stockholders will change as a result of the merger due to differences in Coastal’s and Prime Pacific’s governing documents. The rights of Prime Pacific and Coastal stockholders are governed by Washington law and by Prime Pacific’s and Coastal’s respective articles of incorporation and bylaws, each as amended to date. Upon completion of the merger, Prime Pacific stockholders will become stockholders of Coastal, as the continuing legal entity in the merger, and the rights of Prime Pacific stockholders will therefore be governed by Washington law and by Coastal’s articles of incorporation and bylaws. See “Comparison of Stockholders’ Rights” for a description of the material differences in stockholder rights under each of the Coastal and Prime Pacific governing documents.

Conversion of Shares; Exchange Procedures (page 51)

To receive your merger consideration, you will need to surrender your Prime Pacific stock certificates. If the merger is completed, the exchange agent appointed by Coastal will send you written instructions for exchanging your Prime Pacific stock certificates. The exchange agent will be Coastal’s stock transfer agent, or an unrelated bank or trust company reasonably acceptable to Prime Pacific. Please do not send in your certificates until you receive these instructions.

Risk Factors (page 13)

You should consider all the information contained in this proxy statement/offering circular in deciding how to vote for the proposals presented in this proxy statement/offering circular. In particular, you should consider the factors under “Risk Factors.”

RISK FACTORS

In addition to the other information included in this proxy statement/offering circular, including the matters addressed under the section “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the following risk factors in deciding how to vote for the proposals presented in this proxy statement/offering circular.

Risks Related to the Merger

The value of Coastal common stock after the merger may be affected by factors different from those affecting the shares of Prime Pacific currently.

Upon completion of the merger, holders of Prime Pacific common stock will become holders of Coastal common stock. Coastal’s business differs in important respects from that of Prime Pacific, and, accordingly, the results of operations of the Coastal and the value of Coastal’s common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of Prime Pacific. Coastal is, and, following the completion of the merger, will continue to be, subject to the risks described in “—Risks Related to Coastal” below.

There is currently no public market for Coastal’s common stock.

There is currently no public market for Coastal’s common stock and there is no guarantee that there will ever be a public trading market. If an active public trading market does not develop, you may not be able to sell all of your shares of Coastal common stock on short notice or at a desirable price. Coastal’s common stock is currently traded in privately negotiated individual transactions. Prior to the closing of the merger, however, Coastal has agreed to obtain the written commitment of a broker-dealer to act as a market maker for Coastal common stock following the closing.

There is little public information about Coastal.

Coastal is not a reporting company under the Securities Exchange Act of 1934, does not file with the Securities and Exchange Commission full annual or quarterly financial statements and is not required to provide its stockholders with a proxy statement in compliance with Schedule 14A under the Securities Exchange Act of 1934. As a result, there may not be current information available to the public upon which investors may base decisions to buy and sell Coastal common stock.

Prime Pacific’s stockholders will have less influence as stockholders of Coastal than as stockholders of Prime Pacific.

Prime Pacific’s stockholders currently have the right to vote in the election of the board of directors of Prime Pacific and on other matters affecting Prime Pacific. Following the merger, the stockholders of Prime Pacific as a group will hold a maximum ownership interest of 14% of Coastal. When the merger occurs, each Prime Pacific stockholder will become a stockholder of Coastal with a percentage ownership of the combined organization that is much smaller than such stockholder’s percentage ownership of Prime Pacific. Because of this, Prime Pacific’s stockholders will have less influence on the management and policies of Coastal than they now have on the management and policies of Prime Pacific.

The shares of Coastal common stock to be received by holders of Prime Pacific common stock will have different rights from the shares of Prime Pacific common stock.

Upon completion of the merger, Prime Pacific stockholders will become Coastal stockholders and their rights as stockholders will be governed by the Washington Business Corporation Act and Coastal’s articles of incorporation and bylaws. The rights associated with Prime Pacific common stock are different from the rights associated with Coastal common stock. See “Comparison of Stockholders’ Rights.”

Combining the two companies may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the merger may not be realized.

Coastal and Prime Pacific have operated and, until the completion of the merger, will continue to operate, independently. The success of the merger, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully combine the businesses of Coastal and Prime Pacific. To realize these anticipated benefits and cost savings, after the completion of the merger, Coastal expects to integrate Prime Pacific’s business into its own. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect Coastal’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. If Coastal experiences difficulties with the integration process, the anticipated benefits of the merger may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause Coastal and/or Prime Pacific to lose customers or cause customers to remove their accounts from Coastal and/or Prime Pacific and move their business to competing financial institutions. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Prime Pacific and Coastal during this transition period and for an undetermined period after completion of the merger on Coastal. In addition, the actual cost savings of the merger could be less than anticipated.

The fairness opinion obtained by Prime Pacific from Performance Trust will not reflect changes in circumstances between signing the merger agreement and completion of the merger.

Prime Pacific has not obtained an updated fairness opinion as of the date of this proxy statement/offering circular from Performance Trust. Changes in the operations and prospects of Coastal or Prime Pacific, general market and economic conditions and other factors which may be beyond the control of Coastal and Prime Pacific, and on which Performance Trust’s fairness opinion was based, may alter the value of Coastal or Prime Pacific or the prices of shares of Coastal common stock or Prime Pacific common stock by the time the merger is completed. The fairness opinion does not speak as of the time the merger will be completed or as of any date other than the dates of such opinion. Because Prime Pacific currently does not anticipate asking Performance Trust to update its fairness opinion, the fairness opinion does not address the fairness of the merger consideration, from a financial point of view, at the time the merger is completed. For a description of the fairness opinion issued by Performance Trust, see “The Merger—Opinion of Performance Trust Capital Partners, LLC — Fairness Opinion Provider to Prime Pacific.” For a description of the other factors considered by the boards of directors of Coastal and Prime Pacific in determining to approve the merger agreement, see “The Merger—Prime Pacific’s Reasons for the Merger; Recommendation of Prime Pacific’s Board of Directors” and “The Merger—Coastal’s Reasons for the Merger.”

Certain of Prime Pacific’s directors and executive officers have interests in the merger that may differ from the interests of Prime Pacific’s stockholders.

Prime Pacific’s stockholders should be aware that some of Prime Pacific’s directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of Prime Pacific’s stockholders generally. These interests and arrangements may create potential conflicts of interest. Prime Pacific’s board of directors was aware of these interests and considered these interests, among other matters, when making its decision to approve the merger agreement, and in recommending that Prime Pacific’s stockholders vote in favor of approving the merger agreement.

These interests include the following:

For a more complete description of these interests, see “The Merger—Interests of Prime Pacific’s Directors and Executive Officers in the Merger.”

Termination of the merger agreement could negatively impact Prime Pacific or Coastal.

If the merger is not completed, the ongoing businesses of Prime Pacific and Coastal may be adversely affected and Prime Pacific and Coastal will be subject to several risks, including the following:

In addition, the financial markets as well as customers and employees of Prime Pacific and/or Coastal may react unfavorably if the merger is not completed. Prime Pacific and/or Coastal also could be subject to litigation related to any failure to complete the merger.

Prime Pacific will be subject to business uncertainties and contractual restrictions while the merger is pending.

Coastal and Prime Pacific have operated and, until the completion of the merger, will continue to operate, independently. Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Prime Pacific and consequently on Coastal. These uncertainties may impair Prime Pacific’s ability to attract, retain or motivate key personnel until the merger is consummated, and could cause customers and others that deal with Prime Pacific to seek to change existing business relationships with Prime Pacific. Retention of certain employees may be challenging during the pendency of the merger, as certain employees may experience uncertainty about their future roles with Coastal. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Coastal, Coastal’s business following the merger could be harmed. In addition, the merger agreement restricts Prime Pacific from making certain acquisitions and taking other specified actions until the merger occurs without the consent of Coastal. These restrictions may prevent Prime Pacific from pursuing attractive business opportunities that may arise prior to the completion of the merger. See “The Merger Agreement—Covenants and Agreements—Conduct of Business Prior to the Completion of the Merger.”

If the merger is not completed, Prime Pacific will have incurred substantial expenses without realizing the expected benefits of the merger.

The merger is subject to closing conditions, including the approval of Prime Pacific’s stockholders, that, if not satisfied, will prevent the merger from being completed. All directors and executive officers of Prime Pacific, as well as certain other Prime Pacific stockholders, have agreed to vote their shares of Prime Pacific common stock in favor of the merger. If Prime Pacific’s stockholders do not approve the merger proposal and the merger is not completed, the resulting failure of the merger could have a material adverse impact on Prime Pacific’s business and operations. In addition to the required approvals and consents from governmental entities and the approval of Prime Pacific stockholders, the merger is subject to other conditions beyond Coastal’s and Prime Pacific’s control that may prevent, delay or otherwise materially adversely affect its completion. Neither Coastal nor Prime Pacific can predict whether and when these other conditions will be satisfied. Prime Pacific has incurred and will incur substantial expenses in connection with the due diligence, negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, printing and mailing this proxy statement/offering circular. If the merger is not completed, Prime Pacific would have to recognize these expenses without realizing the expected benefits of the merger.

The merger agreement limits Prime Pacific’s ability to pursue acquisition proposals and requires Prime Pacific to pay a termination fee to Coastal under certain circumstances, including circumstances relating to acquisition proposals.

The merger agreement prohibits Prime Pacific from initiating, soliciting, encouraging or knowingly facilitating certain third-party acquisition proposals. The merger agreement also provides that Prime Pacific must pay a termination fee in the event that the merger agreement is terminated under certain circumstances, including involving Prime Pacific’s failure to abide by certain obligations not to solicit acquisition proposals. For more information, see “The Merger Agreement—Termination Fee.” These provisions might discourage a potential competing acquirer from considering or proposing an acquisition for all or a significant part of Prime Pacific at a greater value to Prime Pacific’s stockholders than Coastal has offered in the merger. The payment of the termination fee could also have an adverse effect on Prime Pacific’s financial condition.

The unaudited pro forma combined condensed consolidated financial information included in this document is illustrative only and the actual financial condition and results of operations after the merger may differ materially.

The unaudited pro forma combined condensed consolidated financial information in this document is presented for illustrative purposes only and is not necessarily indicative of what Coastal’s actual financial condition or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma combined condensed consolidated financial information reflects adjustments, which are based upon preliminary estimates, to record the Prime Pacific identifiable tangible and intangible assets to be acquired and liabilities to be assumed at fair value and the resulting goodwill to be recognized. The purchase price allocation reflected in this document is preliminary and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the consolidated assets and liabilities of Prime Pacific as of the date of the completion of the merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this proxy statement/offering circular. For more information, please see “Selected Historical and Pro Forma Financial Information.”

Risks Related to Coastal

Changes in interest rates may hurt Coastal’s profits and asset values.

Coastal’s earnings and cash flows depend primarily on its net interest income. Interest rates are highly sensitive to many factors that are beyond Coastal’s control, including general economic conditions and the policies of various governmental and regulatory agencies, particularly the Federal Reserve Board. Changes in market interest rates could have an adverse effect on Coastal’s financial condition and results of operations. Coastal’s interest-bearing liabilities generally reprice or mature more quickly than its interest-earning assets. If rates increase rapidly, Coastal may have to increase the rates paid on deposits, particularly higher cost time deposits and borrowed funds, more quickly than any changes in interest rates earned on loans and investments, resulting in a negative effect on interest rate spreads and net interest income. Increases in interest rates may also make it more difficult for borrowers to repay adjustable rate loans.

Conversely, should market interest rates fall below current levels, Coastal’s net interest margin also could be negatively affected if competitive pressures keep it from further reducing rates on deposits, while the yields on Coastal’s interest-earning assets decrease more rapidly through loan prepayments and interest rate adjustments. Decreases in interest rates often result in increased prepayments of loans and mortgage-related securities, as borrowers refinance their loans to reduce borrowings costs. Under these circumstances, Coastal is subject to reinvestment risk to the extent it is unable to reinvest the cash received from such prepayments in loans or other investments that have interest rates that are comparable to the interest rates on existing loans and securities.

Changes in interest rates also affect the value of Coastal’s interest-earning assets, and in particular its securities portfolio.  Generally, the value of fixed-rate securities fluctuates inversely with changes in interest rates.  Unrealized gains and losses on securities available for sale determined to be temporary in nature are reported as a separate component of equity.  Decreases in the fair value of securities available for sale resulting from increases in interest rates therefore could have an adverse effect on Coastal’s stockholders’ equity.

A large percentage of Coastal’s loans are collateralized by real estate, and further disruptions in the real estate market may result in losses and reduce Coastal’s earnings.

A substantial portion of Coastal’s loan portfolio consists of loans collateralized by real estate.  Future disruptions in the real estate market could significantly impair the value of Coastal’s collateral and its ability to sell the collateral upon foreclosure.  The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended.  If real estate values decline in the future, it will become more likely that Coastal would be required to increase its allowance for loan losses.  If, during a period of lower real estate values, Coastal is required to liquidate the collateral securing a loan to satisfy debts or to increase its allowance for loan losses, it could materially reduce its profitability and adversely affect its financial condition.

Strong competition within Coastal’s market area could adversely affect Coastal’s earnings and hinder growth.

Coastal faces intense competition both in making loans and attracting deposits.  Price competition for loans and deposits might result in Coastal earning less on its loans and paying more on its deposits, which reduces net interest income.  Some of Coastal’s competitors have substantially greater resources than Coastal has and may offer services that it does not provide.  Coastal expects competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing consolidation in the financial services industry.  Coastal’s profitability will depend upon its continued ability to compete successfully in its market areas.

A worsening of economic conditions could adversely affect Coastal’s financial condition and results of operations.

Although the U.S. economy has emerged from the severe recession that occurred in 2008 and 2009, recent economic growth has been slow and uneven, and unemployment levels remain high compared to long-term, historical averages. Recovery by many businesses has been impaired by lower consumer spending and a notable portion of new jobs created nationally have been in somewhat lower wage positions. A return to prolonged deteriorating economic conditions could significantly affect the markets in which Coastal operates, the value of loans and investments, and ongoing operations, costs and profitability. Further declines in real estate values and sales volumes and continued elevated unemployment levels may result in higher than expected loan delinquencies, increases in nonperforming and criticized classified assets and a decline in demand for Coastal’s products and services. These events may cause Coastal to incur losses and may adversely affect its financial condition and results of operations.

If Coastal’s allowance for loan losses is not sufficient to cover actual loan losses, Coastal’s results of operations would be negatively affected.

In determining the amount of the allowance for loan losses, Coastal analyzes its loss and delinquency experience by loan categories and considers the effect of existing economic conditions. In addition, Coastal makes various assumptions and judgments about the collectibility of the loan portfolio, including the creditworthiness of its borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of the loans. If the results of these analyses are incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in the portfolio, which would require additions to the allowance and would reduce net income.

In addition, bank regulators periodically review Coastal’s allowance for loan losses and may require it to increase the allowance for loan losses or recognize further loan charge-offs. Any increase in the allowance for loan losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on Coastal’s financial condition and results of operations.

Because Coastal emphasizes commercial real estate and commercial loan originations, its credit risk may increase and future downturns in the local real estate market or economy could adversely affect its earnings.

Commercial real estate and commercial loans generally have more inherent risk than the residential real estate loans. Because the repayment of commercial real estate and commercial loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy. Commercial real estate and commercial loans also may involve relatively large loan balances to individual borrowers or groups of related borrowers. A future downturn in the local economy could adversely affect the value of properties securing the loan or the revenues from the borrower’s business, thereby increasing the risk of nonperforming loans. As Coastal’s commercial real estate and commercial loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase. Furthermore, it may be difficult to assess the future performance of newly originated commercial loans, as such loans may have delinquency or charge-off levels above our historical experience, which could adversely affect Coastal’s future performance.

Coastal has never paid any dividends and has no plans to pay dividends to stockholders in the future. Coastal’s ability to pay dividends is subject to the ability of Coastal Community Bank to make capital distributions to Coastal, and also may be limited by Federal Reserve Board policy.

Coastal has never paid any dividends and has no plans to pay dividends to stockholders in the future. Coastal’s long-term ability to pay dividends to its stockholders depends primarily on the ability of Coastal Community Bank to make capital distributions to Coastal and on the availability of cash at the holding company level if Coastal Community Bank’s earnings are not sufficient to pay dividends. In addition, the Federal Reserve Board has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the holding company’s net income for the past four quarters, net of dividends paid over that period, is insufficient to fully fund the dividend or the holding company’s overall rate or earnings retention is inconsistent with the its capital needs and overall financial condition. These regulatory policies may adversely affect Coastal’s ability to pay dividends or otherwise engage in capital distributions.

Regulation of the financial services industry is undergoing major changes, and Coastal may be adversely affected by changes in laws and regulations.

Coastal is subject to extensive government regulation, supervision and examination. Such regulation, supervision and examination govern the activities in which we may engage, and is intended primarily for the protection of the deposit insurance fund and Coastal Community Bank’s depositors. In 2010 and 2011, in response to the financial crisis and recession that began in 2008, significant regulatory and legislative changes resulted in broad reform and increased regulation affecting financial institutions. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which we refer to as the “Dodd-Frank Act,” has created a significant shift in the way financial institutions operate and has restructured the regulation of depository institutions by merging the Office of Thrift Supervision into the Office of the Comptroller of the Currency and assigning the regulation of savings and loan holding companies to the Federal Reserve Board. The Dodd-Frank Act also created the Consumer Financial Protection Bureau to administer consumer protection and fair lending laws, a function that was formerly performed by the depository institution regulators. As required by the Dodd-Frank Act, the federal banking regulators have implemented new consolidated capital requirements that will limit Coastal’s ability to borrow at the holding company level and invest the proceeds from such borrowings as capital in Coastal Community Bank that could be leveraged to support additional growth. The Dodd-Frank Act contains various other provisions designed to enhance the regulation of depository institutions and prevent the recurrence of a financial crisis such as that which occurred in 2008 and 2009. The Dodd-Frank Act has had and may continue to have a material impact on our operations, particularly through increased regulatory burden and compliance costs. Any future legislative changes could have a material impact on Coastal’s profitability, the value of assets held for investment or the value of collateral for loans. Future legislative changes could also require changes to business practices and potentially expose us to additional costs, liabilities, enforcement action and reputational risk.

Federal regulatory agencies have the ability to take strong supervisory actions against financial institutions that have experienced increased loan losses and other weaknesses. These actions include the entering into of written agreements and cease and desist orders that place certain limitations on their operations. If we were to become subject to a supervisory agreement such action may negatively impact Coastal’s ability to execute its business plan, and result in operational restrictions, as well as its ability to grow, pay dividends, repurchase stock or engage in mergers and acquisitions.

New regulations could restrict Coastal Community Bank’s ability to originate loans.

The Consumer Financial Protection Bureau has issued a rule designed to clarify for lenders how they can avoid monetary damages under the Dodd-Frank Act, which would hold lenders accountable for ensuring a borrower’s ability to repay a mortgage. Loans that meet this “qualified mortgage” definition will be presumed to have complied with the new ability-to-repay standard. Under the Consumer Financial Protection Bureau’s rule, a “qualified mortgage” loan must not contain certain specified features, including (i) excessive upfront points and fees (those exceeding 3% of the total loan amount, less “bona fide discount points” for prime loans); (ii) interest-only-payments; (iii) negative amortization; or (iv) terms longer than 30 years. Additionally, to qualify as a “qualified mortgage,” a borrower’s total debt-to-income ratio may not exceed 43%. Lenders must also verify and document the income and financial resources relied upon to qualify the borrower for the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments. The Consumer Financial Protection Bureau’s rule on qualified mortgages could limit Coastal Community Bank’s ability or desire to make certain types of loans or loans or pursue certain borrowers, or could make it more expensive/and or time consuming to make these loans, which could limit our growth or profitability.

Changes in Coastal’s accounting policies or in accounting standards could materially affect how Coastal reports its financial condition and results of operations.

Coastal’s accounting policies are essential to understanding its financial condition and results of operations. Some of these policies require the use of estimates and assumptions that may affect the value of Coastal’s assets and liabilities, and financial results. Some of Coastal’s accounting policies are critical because they require management to make difficult, subjective, and complex judgments about matters that are inherently uncertain, and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If such estimates or assumptions underlying Coastal’s financial statements are incorrect, it may experience material losses.

The need to account for certain assets at estimated fair value, such as loans held for sale and investment securities, may adversely affect Coastal’s financial condition and results of operations.

Coastal reports certain assets, such as loans held for sale and investment securities, at estimated fair value. Generally, for assets that are reported at fair value, Coastal uses quoted market prices or valuation models that utilize observable market inputs to estimate fair value. Because Coastal carries these assets on its books at their estimated fair value, it may incur losses even if the asset in question presents minimal credit risk.

Coastal is dependent on upon the services of key executives.

Coastal relies heavily on its executive management team and the loss of, or inability to recruit and retain, key executive officers could have a material adverse impact on Coastal’s operations because, as a small company, Coastal has fewer management-level personnel that have the experience to readily replace these individuals. Changes in key personnel and their responsibilities may be disruptive to Coastal’s business and could have a material adverse effect on Coastal’s business, financial condition and results of operations.

Because the nature of the financial services business involves a high volume of transactions, Coastal faces significant operational risks.

Coastal operates in diverse markets and relies on the ability of its employees and systems to process a significant number of transactions. Operational risk is the risk of loss resulting from operations, including the risk of fraud by employees or persons outside a company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of the internal control system and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due to potential negative publicity. If a breakdown occurs in the internal controls system, improper operation of systems or improper employee actions, Coastal could incur financial loss, face regulatory action, and suffer damage to its reputation.

Risks associated with system failures, interruptions, or breaches of security could negatively affect Coastal’s earnings.

Information technology systems are critical to Coastal’s business. Coastal uses various technology systems to manage customer relationships, general ledger, securities investments, deposits, and loans. Coastal has established policies and procedures to prevent or limit the effect of system failures, interruptions, and security breaches, but such events may still occur or may not be adequately addressed if they do occur. In addition, any compromise of Coastal’s systems could deter customers from using its products and services. Security systems may not protect systems from security breaches.

In addition, Coastal outsources some of its data processing to certain third-party providers. If these third-party providers encounter difficulties, or if Coastal has difficulty communicating with them, Coastal’s ability to adequately process and account for transactions could be affected, and business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any system failures, interruption, or breach of security could damage Coastal’s reputation and result in a loss of customers and business thereby subjecting it to additional regulatory scrutiny, or could expose is to litigation and possible financial liability. Any of these events could have a material adverse effect on its financial condition and results of operations.

Coastal’s risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.

Coastal’s risk management framework is designed to minimize risk and loss to the company. Coastal seeks to identify, measure, monitor, report and control exposure to risk, including strategic, market, liquidity, compliance and operational risks. While Coastal uses a broad and diversified set of risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot anticipate the existence or future development of currently unanticipated or unknown risks. Economic conditions and heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased Coastal’s level of risk. Accordingly, Coastal could suffer losses if it fails to properly anticipate and manage these risks.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/offering circular contains a number of forward-looking statements regarding the financial condition, results of operations, earnings outlook and business prospects of Coastal, Prime Pacific and the potential combined company and may include statements for the period following the completion of the merger. You can find many of these statements by looking for words such as “expects,” “projects,” “anticipates,” “believes,” “intends,” “estimates,” “strategy,” “plan,” “potential,” “possible” and other similar expressions. Statements about the expected timing, completion and effects of the merger and all other statements in this proxy statement/offering circular other than historical facts constitute forward-looking statements.

Forward-looking statements involve certain risks and uncertainties. The ability of either Coastal or Prime Pacific to predict results or actual effects of its plans and strategies, or those of the combined company, is inherently uncertain. Accordingly, actual results may differ materially from those expressed in, or implied by, the forward-looking statements. Some of the factors that may cause actual results or earnings to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those discussed under “Risk Factors” as well as the following:

For any forward-looking statements made in this proxy statement/offering circular, Coastal and Prime Pacific claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this proxy statement/offering circular. Coastal and Prime Pacific do not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this proxy statement/offering circular and attributable to Coastal, Prime Pacific or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement/offering circular.

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

Selected Consolidated Historical Financial Data of Coastal

The following table sets forth selected historical financial and other data of Coastal for the periods and at the dates indicated. The information at December 31, 2014 and 2013 and for the years ended December 31, 2014 and 2013 is derived in part from, and should be read together, with the audited consolidated financial statements and notes thereto of Coastal that are included in this proxy statement/offering circular. The selected data presented below for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for future periods.

⁽¹⁾ Ratios are for Coastal Community Bank.

Selected Consolidated Historical Financial Data of Prime Pacific

The following table sets forth selected historical financial and other data of Prime Pacific for the periods and at the dates indicated. The information at December 31, 2014 and 2013 and for the years ended December 31, 2014 and 2013 is derived in part from, and should be read together, with the audited consolidated financial statements and notes thereto of Prime Pacific that are included in this proxy statement/offering circular. The selected data presented below for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for future periods.

⁽¹⁾ Ratios are for Prime Pacific Bank.

Selected Unaudited Consolidated Pro Forma Financial Data of Coastal and Prime Pacific

The following table shows selected unaudited consolidated pro forma financial data reflecting the merger of Prime Pacific with Coastal, assuming the companies had been combined at the dates and for the periods shown. The pro forma amounts reflect certain purchase accounting adjustments, which are based on estimates that are subject to change depending on fair values as of the merger completion date. These adjustments are described in the notes to unaudited pro forma combined condensed consolidated financial information contained elsewhere in this document under the heading “Unaudited Pro Forma Combined Condensed Consolidated Financial Information.” The pro forma financial data in the table below does not include any projected cost savings, revenue enhancements or other possible financial benefits of the merger to the combined company and does not attempt to suggest or predict future results. This information also does not necessarily reflect what the historical financial condition or results of operations of the combined company would have been had Coastal and Prime Pacific been combined as of the dates and for the periods shown.

Comparative Unaudited Pro Forma Per Share Data

The following table sets forth the book value per common share, cash dividends per common share, and basic and diluted earnings per common share data for each of Coastal and Prime Pacific on a historical basis, for Coastal on a pro forma combined basis and on a pro forma combined basis per Prime Pacific equivalent share. The pro forma combined and pro forma combined per equivalent share information gives effect to the merger as if the merger occurred on December 31, 2014 and as if the merger occurred on January 1, 2014, in the case of the cash dividends and earnings per common share data. The pro forma amounts reflect certain purchase accounting adjustments, which are based on estimates that are subject to change depending on fair values as of the merger completion date. These adjustments are described in the notes to unaudited pro forma combined condensed consolidated financial information contained elsewhere in this document under the heading “Unaudited Pro Forma Combined Condensed Consolidated Financial Information.” The pro forma financial data in the table below does not include any projected cost savings, revenue enhancements or other possible financial benefits of the merger to the combined company and does not attempt to suggest or predict future results. This information also does not necessarily reflect what the historical financial condition or results of operations of the combined company would have been had Coastal and Prime Pacific been combined as of the dates and for the periods shown.

(1) Calculated by multiplying the pro forma combined amounts of Coastal by 0.8047, which is the exchange ratio provided for in the merger agreement for the consideration payable to holders of Prime Pacific common stock.

THE PRIME PACIFIC SPECIAL MEETING

This section contains information about the Prime Pacific special meeting that Prime Pacific has called to allow its stockholders to consider and vote on the Prime Pacific merger proposal and the other Prime Pacific proposals. Prime Pacific commenced the mailing of this proxy statement/offering circular to holders of Prime Pacific common stock on or about September 18, 2015. This proxy statement/offering circular is accompanied by a notice of the Prime Pacific special meeting and a form of proxy card that Prime Pacific’s board of directors is soliciting for use at the Prime Pacific special meeting and at any adjournments or postponements of the Prime Pacific special meeting.

Date, Time and Place of Meeting

The Prime Pacific special meeting will be held at Prime Pacific’s corporate headquarters located at 2502 196th Street, SW, Suite 108, Lynnwood, Washington, at 4:00 p.m., local time, on Wednesday, October 14, 2015.

Matters to Be Considered

At the Prime Pacific special meeting, holders of Prime Pacific common stock will be asked to consider and vote on the following matters:

Recommendation of Prime Pacific’s Board of Directors

After careful consideration, Prime Pacific’s board of directors has determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of Prime Pacific and its stockholders, has approved the merger agreement and recommends that Prime Pacific stockholders vote “FOR” the Prime Pacific merger proposal and “FOR” the Prime Pacific adjournment proposal. See “The Merger—Prime Pacific’s Reasons for the Merger; Recommendation of Prime Pacific’s Board of Directors” for a more detailed discussion of Prime Pacific’s board of directors’ recommendation.

Record Date and Quorum

The Prime Pacific board of directors has fixed the close of business on September 10, 2015 as the record date for determining the holders of shares of Prime Pacific common stock entitled to receive notice of and to vote at the Prime Pacific special meeting. Only holders of record of shares of Prime Pacific common stock as of the close of business on that date will be entitled to vote at the Prime Pacific special meeting and at any adjournment or postponement of that meeting. At the close of business on the record date, there were 9,537,218 shares of Prime Pacific common stock outstanding, held by approximately 353 holders of record.

Each holder of shares of Prime Pacific common stock outstanding as of the close of business on the record date will be entitled to one vote for each share held of record upon each matter properly submitted at the Prime Pacific special meeting and at any adjournment or postponement of that meeting. The presence at the Prime Pacific special meeting, in person or by proxy, of holders of a majority of the outstanding shares of Prime Pacific common stock entitled to vote at the Prime Pacific special meeting will constitute a quorum for the transaction of business. All shares of Prime Pacific common stock present in person or represented by proxy, including abstentions and broker non-votes, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the Prime Pacific special meeting.

Vote Required; Treatment of Abstentions and Failure to Vote

To approve the Prime Pacific merger proposal, the affirmative vote of a majority of the shares of Prime Pacific common stock outstanding and entitled to vote thereon must be voted in favor of such proposal. The Prime Pacific adjournment proposal will be approved if a majority of the votes cast at the Prime Pacific special meeting are voted in favor of the proposal. If you mark “ABSTAIN” on your proxy or fail to submit a proxy and fail to vote in person at the Prime Pacific special meeting with respect to the Prime Pacific merger proposal, it will have the same effect as a vote “AGAINST” such proposal. If you mark “ABSTAIN” on your proxy or fail to submit a proxy and fail to vote in person at the Prime Pacific special meeting with respect to the Prime Pacific adjournment proposal or the Prime Pacific compensation plan proposal, it will have no effect on such proposal.

Shares Held by Directors and Executive Officers; Support Agreements

As of the record date for the Prime Pacific special meeting, Prime Pacific directors and executive officers and their affiliates owned and were entitled to vote approximately 1,432,199 shares of Prime Pacific common stock, representing approximately 15% of the outstanding shares of Prime Pacific common stock. Neither Coastal nor its directors, executive officers and their affiliates own any shares of Prime Pacific common stock.

Concurrent with the execution of the merger agreement, each of Prime Pacific’s directors, as well as certain key Prime Pacific stockholders, entered into a support agreement with Coastal under which such Prime Pacific director and stockholder generally has agreed (1) to vote or cause to be voted in favor of the Prime Pacific merger proposal, all shares of Prime Pacific common stock which he or she is the record or beneficial owner as the date of the support agreement and (2) subject to limited exceptions, not to sell or otherwise dispose any of these shares of Prime Pacific common stock until after the approval of the Prime Pacific merger proposal by the stockholders of Prime Pacific. The directors and key stockholders that have entered into support agreements with Coastal hold an aggregate of 3,383,601 shares of Prime Pacific common stock, representing 35% of Prime Pacific’s outstanding common shares as of the record date. For additional information regarding the support agreements, see “The Merger Agreement—Support Agreements.”

Voting of Proxies; Incomplete Proxies

Each copy of this proxy statement/offering circular mailed to holders of Prime Pacific common stock is accompanied by a form of proxy card with instructions for voting. If you hold shares of Prime Pacific common stock in your name as a stockholder of record, you should complete and return the proxy card accompanying this proxy statement/offering circular, regardless of whether you plan to attend the special meeting.

If you hold shares of Prime Pacific common stock in “street name” through a bank, broker or other nominee, you must direct your bank, broker or other nominee how to vote in accordance with the instructions you have received from your bank, broker or other nominee. For more information, see “—Shares Held in Street Name; Broker Non-Votes.”

All shares represented by valid proxies that Prime Pacific receives through this solicitation, and that are not revoked, will be voted at the Prime Pacific special meeting in accordance with your instructions on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” the Prime Pacific merger proposal and “FOR” the Prime Pacific adjournment proposal. No matters other than the matters described in this proxy statement/ offering circular are anticipated to be presented for action at the Prime Pacific special meeting or at any adjournment or postponement of the Prime Pacific special meeting. However, if other business properly comes before the Prime Pacific special meeting, the proxy agents will, in their discretion, vote upon such matters in their best judgment.

Shares Held in Street Name; Broker Non-Votes

If you are a Prime Pacific stockholder and your shares are held in “street name” through a bank, broker or other nominee, you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions provided by the bank, broker or other nominee. You may not vote shares held in street name by returning a proxy card directly to Prime Pacific or by voting in person at the Prime Pacific special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee. Further, because each of the proposals to be considered at the Prime Pacific special meeting is a “non-routine” matter, under stock exchange rules, banks, brokers or other nominees who hold shares of Prime Pacific common stock on behalf of their customers may not give a proxy to Prime Pacific to vote those shares with respect to any of these proposals without specific voting instructions from their customers. Therefore, if you do not instruct your bank, broker or other nominee on how to vote your street name shares:

Broker non-votes are shares held by a broker, bank or other nominee that are represented at the Prime Pacific special meeting, but with respect to which the broker, bank or nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker, bank or nominee does not have discretionary voting power on such proposal.

Revocability of Proxies and Changes to a Prime Pacific Stockholder’s Vote

If you hold shares of Prime Pacific common stock in your name as a stockholder of record, you may revoke any proxy at any time before it is voted at the Prime Pacific special meeting by (1) signing and returning a proxy card with a later date, (2) delivering a written revocation to Prime Pacific’s Corporate Secretary, or (3) attending the Prime Pacific special meeting in person, notifying the Corporate Secretary and voting by ballot at the Prime Pacific special meeting.

Any stockholder entitled to vote in person at the Prime Pacific special meeting may vote in person regardless of whether a proxy has been previously given, but the mere presence (without notifying Prime Pacific’s Corporate Secretary of revocation) of a stockholder at the Prime Pacific special meeting will not constitute revocation of a previously given proxy.

Written notices of revocation and other communications about revoking your proxy card should be addressed to: John R. Pfeifer, Corporate Secretary, Prime Pacific Financial Services, Inc., 2502 196th Street, SW, Suite 108, Lynnwood, Washington 98036.

If your shares are held in “street name” by a bank, broker or other nominee, you must follow the instructions of your bank, broker or other nominee regarding changes in voting instructions.

Solicitation of Proxies

Prime Pacific will bear the entire cost of soliciting proxies from Prime Pacific stockholders. In addition to solicitation of proxies by mail, Prime Pacific will request that banks, brokers and other record holders send proxies and proxy material to the beneficial owners of Prime Pacific common stock and secure their voting instructions. Prime Pacific will reimburse the record holders for their reasonable expenses in taking those actions. If necessary, Prime Pacific may use its directors and several of its regular employees, who will not be specially compensated, to solicit proxies from the Prime Pacific stockholders, either personally or by telephone, facsimile, letter or electronic means.

Attending the Prime Pacific Special Meeting

All holders of Prime Pacific common stock, including stockholders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the Prime Pacific special meeting. If you hold your Prime Pacific shares in an account at a brokerage firm or bank, your name will not appear on Prime Pacific’s stockholder list. Please bring an account statement or a letter from your broker showing your holdings of Prime Pacific common stock. You may be asked to provide this documentation and picture identification at the meeting registration desk to attend the Prime Pacific special meeting.

PRIME PACIFIC PROPOSALS

Prime Pacific Merger Proposal

As discussed elsewhere in this proxy statement/offering circular, Prime Pacific is asking its stockholders to approve the Prime Pacific merger proposal. Holders of Prime Pacific common stock should read carefully this proxy statement/offering circular in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. In particular, holders of Prime Pacific common stock are directed to the merger agreement, a copy of which is attached as Annex A to this proxy statement/offering circular.

The affirmative vote of the holders of a majority of the outstanding shares of Prime Pacific common stock entitled to vote is required to approve the Prime Pacific merger proposal.

Prime Pacific’s board of directors recommends that Prime Pacific stockholders vote “FOR” the Prime Pacific merger proposal.

Each of Prime Pacific’s directors, as well as certain key Prime Pacific stockholders, has entered into a support agreement with Coastal pursuant to which each has agreed to vote “FOR” the Prime Pacific merger proposal. The directors and key stockholders that have entered into support agreements with Coastal hold an aggregate of 3,383,601 shares of Prime Pacific common stock, representing 35% of Prime Pacific’s outstanding common shares as of the record date. For more information regarding the support agreements, see “The Merger Agreement—Support Agreements.”

Prime Pacific Adjournment Proposal

The Prime Pacific special meeting may be adjourned to another time or place, if necessary or appropriate, to permit, among other things, further solicitation of proxies if necessary to obtain additional votes in favor of the Prime Pacific merger proposal.

If, at the Prime Pacific special meeting, the number of shares of Prime Pacific common stock present or represented and voting in favor of the Prime Pacific merger proposal is insufficient to approve the Prime Pacific merger proposal, Prime Pacific intends to move to adjourn the Prime Pacific special meeting in order to enable the Prime Pacific board of directors to solicit additional proxies for approval of the Prime Pacific merger proposal.

In this proposal, Prime Pacific is asking its stockholders to authorize the holder of any proxy solicited by the Prime Pacific board of directors on a discretionary basis to vote in favor of adjourning the Prime Pacific special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from Prime Pacific stockholders who have previously voted.

The affirmative vote of the holders of a majority of the votes cast on the Prime Pacific adjournment proposal is required to approve the Prime Pacific adjournment proposal.

Prime Pacific’s board of directors recommends that Prime Pacific stockholders vote “FOR” the Prime Pacific adjournment proposal.

THE MERGER

The following discussion contains certain information about the merger. The discussion is subject, and qualified in its entirety by reference, to the merger agreement attached as Annex A to this proxy statement/offering circular and incorporated herein by reference. We urge you to read carefully this entire proxy statement/offering circular, including the merger agreement attached as Annex A, for a more complete understanding of the merger.

Terms of the Merger

Each of Coastal’s and Prime Pacific's board of directors has unanimously approved the merger agreement. The merger agreement provides for the merger of Prime Pacific with and into Coastal, with Coastal continuing as the surviving corporation in the merger. Immediately following the completion of the merger, Prime Pacific's wholly owned bank subsidiary, Prime Pacific Bank, will merge with and into Coastal Community Bank, with Coastal Community Bank continuing as the resulting institution in the bank merger.

In the merger, each share of Prime Pacific common stock, no par value per share, issued and outstanding immediately prior to the completion of the merger, except for (i) shares held by Prime Pacific stockholders that have demanded payment for the fair value of their shares of Prime Pacific common stock in accordance with Chapter 23B.13 of the Washington Business Corporation Act and (ii) shares of Prime Pacific common stock held by Coastal (other than in a fiduciary capacity or in satisfaction of a debt previously contracted), will be converted into the right to receive 0.8047 of a share of Coastal common stock, subject to possible adjustment. Coastal will not issue any fractional shares of Coastal common stock in the merger. Instead, each fraction of a share of Coastal common stock will be rounded up to the nearest whole share.

Prime Pacific stockholders are being asked to approve the merger agreement. See “The Merger Agreement” for additional and more detailed information regarding the legal documents that govern the merger, including information about the conditions to the completion of the merger and the provisions for terminating or amending the merger agreement.

Background of the Merger

Over the years, the President and Chief Executive Officers of Prime Pacific and Coastal have engaged in discussions concerning developments and trends in the Snohomish County banking industry and other matters, and have served on the board of directors of the Community Bankers of Washington together.

In April 2014, the President and Chief Executive Officers of Prime Pacific and Coastal met and informally discussed the possibility of a combination of the two companies and the benefits the stockholders of Prime Pacific might receive from such a combination due to the continued recovery of the Snohomish County economy. Each company was also seeing increased strength in its own financial health.

The President and Chief Executive Officers of Prime Pacific and Coastal continued to meet and discuss a possible combination, which culminated in Coastal’s Chairman of the Board and President and Chief Executive Officer making a presentation to the board of directors of Prime Pacific regarding the opportunities presented by a combination of Coastal and Prime Pacific in November 2014. Prime Pacific and Coastal continued to discuss a “Snohomish County Strategy” for the rest of the year.

In January 2015, the board of directors of Prime Pacific held a board meeting at which time they determined that a merger with Coastal could be in the best interests of the company’s stockholders. Coastal issued a letter of intent to Prime Pacific, which was executed by both parties on February 10, 2015. Prime Pacific engaged Miller Nash Graham & Dunn LLP (formerly Graham & Dunn PC), which had acted as corporate counsel to Prime Pacific previously, as its legal advisor in connection with the transaction and Prime Pacific engaged Performance Trust to give a fairness opinion.

On March 3, 2015, Coastal sent an initial draft of a merger agreement to Prime Pacific. The parties exchanged drafts and revisions over the next month and conducted due diligence investigations. On March 24, 2015, the board of directors of Coastal reviewed the merger agreement and approved the execution of the agreement. On March 30, 2015, the board of directors of Prime Pacific reviewed the terms of the merger agreement in detail and were advised by Performance Trust that they were in position to issue the requested fairness opinion. The Board approved the execution of the agreement at that time, provided that the President and Chief Executive Officer and Chairman felt that there was sufficient stockholder support for the transaction. The merger agreement and related documents were subsequently executed on April 16, 2015.

Shortly after the public announcement of the transaction, Prime Pacific was approached by another banking company, which submitted an unsolicited proposal for the consideration of the board of directors. On April 27, 2015, the board of directors met to consider the proposal in accordance with the specific provisions of the merger agreement with Coastal. The board determined, with the advice of Performance Trust, that the unsolicited proposal constituted a superior proposal under the terms of the merger agreement with Coastal. After making its superior proposal determination, the board negotiated a letter of intent with the other banking company. A letter of intent was executed by both parties on May 5, 2015. Prime Pacific proceeded to negotiate a definitive agreement with the company. Before a definitive agreement was finalized, the other company advised it was withdrawing its proposal based on considerations unrelated to Prime Pacific.

On June 29, 2015, the boards of directors of Coastal and Prime Pacific, respectfully, unanimously approved and entered into an amended and restated merger agreement. Among other things, the amended and restated agreement provided for the issuance of the shares of Coastal common stock to be offered as merger consideration to Prime Pacific stockholders in accordance with Regulation A under the Securities Act of 1933, as amended effective June 19, 2015 and that Coastal would enlist a market maker for its common stock.

Prime Pacific’s Reasons for the Merger; Recommendation of Prime Pacific’s Board of Directors

Like a number of financial institutions, Prime Pacific continues to be impacted by the lingering effects of the recent economic recession and its effect on Prime Pacific’s market area. Prime Pacific’s board of directors and management have been carefully considering all of their options to grow Prime Pacific in an effort to remain competitive in today’s changing banking environment. These options included potential organic growth, strategic alliances and capital infusions.

After carefully considering all of its options, while recognizing its fiduciary duty to stockholders, the current competitive and regulatory environment, capital market conditions and a number of other factors discussed in this proxy statement, Prime Pacific’s board of directors determined that a merger with Coastal on the terms provided in the merger agreement is Prime Pacific’s best option to receive current and future value for our stockholders in today’s challenging and uncertain banking market. Accordingly, on April 16, 2015, Prime Pacific entered into the merger agreement with Coastal pursuant to which Prime Pacific will merge with and into Coastal.

Prime Pacific’s board of directors believes that Coastal shares Prime Pacific’s community banking philosophy and that the merged company will be able to maintain and enhance Prime Pacific’s commitment to provide a high level of personal service and range of products to Prime Pacific’s customers, as well as opportunities for some employees and support for Prime Pacific’s community.

Prime Pacific’s board of directors believes that the merger is fair to and in the best interests of Prime Pacific and its stockholders. Accordingly, the board has approved the merger agreement and recommends that you vote “FOR” the proposal to approve the merger agreement.

In approving the merger agreement, the Prime Pacific board consulted with Performance Trust, with respect to the fairness to stockholders of the proposed acquisition from a financial point of view and with its legal counsel, Miller Nash Graham & Dunn, as to its legal duties and the terms of the merger agreement and related agreements. The terms of the merger agreement, including the consideration to be paid to the Prime Pacific stockholders, were the result of arm’s length negotiations between representatives of the Prime Pacific and Coastal. In evaluating whether to merge with Coastal, Prime Pacific’s board of directors considered a number of factors, including, without limitation, the following:

Prime Pacific’s board of directors also considered a number of countervailing risks and factors concerning the proposed merger. These countervailing risks and factors included the following:

The discussion of the information, risks and factors that Prime Pacific’s board of directors considered in arriving at its decision to approve the merger agreement and recommend that our stockholders vote to approve the merger agreement is not intended to be exhaustive, but includes all material factors considered by Prime Pacific’s board of directors. In view of the wide variety of factors and risks considered in connection with its evaluation of the merger, Prime Pacific’s board of directors did not and does not believe it necessary to, and did not attempt to, rank or quantify the risks and factors. Individual members of the Board may have assigned different weights to the factors and risks in their individual assessments of the merger. The overall analysis of the factors described above included multiple discussions with and questioning of Prime Pacific’s management, financial advisors and legal counsel. Prime Pacific’s board of directors carefully considered the risks and uncertainties associated with Prime Pacific remaining an independent company.

Based on the reasons stated, the Bank’s Board believes that the merger is in the best interests of Prime Pacific and its stockholders. The Board therefore approved the merger agreement and recommends that you vote “FOR” approval of the merger agreement.

This summary of the reasoning of Prime Pacific’s board of directors and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the section of the proxy statement/offering circular entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Opinion of Performance Trust Capital Partners, LLC – Fairness Opinion Provider to Prime Pacific

Prime Pacific engaged Performance Trust Capital Partners, LLC (“Performance Trust”) to render an opinion to the Prime Pacific board of directors as to the fairness, from a financial point of view, to the holders of Prime Pacific common stock, of the exchange ratio in the proposed merger of Prime Pacific with and into Coastal Financial Corporation. Prime Pacific selected Performance Trust because Performance Trust is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger. As part of its investment banking business, Performance Trust is continually engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.

As part of its engagement, representatives of Performance Trust attended the meeting of the Prime Pacific board held on March 30, 2015, at which the Prime Pacific board evaluated the proposed merger. At this meeting, Performance Trust reviewed the financial aspects of the proposed merger and indicated it was prepared to issue its opinion subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Performance Trust as set forth in such opinion, that the merger consideration in the proposed merger was fair, from a financial point of view, to the holders of Prime Pacific common stock. The Performance Trust opinion was issued on April 16, 2015 when the merger agreement and related documents were executed. The Prime Pacific board approved the merger agreement at this meeting, on the condition that the President and Chief Executive Officer and Chairman felt that there was sufficient stockholder support for the transaction. The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex B to this proxy statement/offering circular and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Performance Trust in preparing the opinion.

Performance Trust’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the Prime Pacific board (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, of the merger consideration in the merger to the holders of Prime Pacific common stock. It did not address the underlying business decision of Prime Pacific to engage in the merger or enter into the merger agreement or constitute a recommendation to the Prime Pacific board in connection with the merger, and it does not constitute a recommendation to any Prime Pacific stockholder or any stockholder of any other entity as to how to vote in connection with the merger or any other matter, nor does it constitute a recommendation on whether or not any holder of Prime Pacific common stock should enter into a voting, stockholders’, or affiliates’ agreement with respect to the merger.

Performance Trust’s opinion was reviewed and approved by Performance Trust’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority, Inc.

In connection with the opinion, Performance Trust reviewed, analyzed and relied upon material bearing upon the financial and operating condition of Prime Pacific and Coastal and the merger, including, among other things:

Performance Trust’s consideration of financial information and other factors that Performance Trust deemed appropriate under the circumstances or relevant to its analysis included, among other things, the following:

Performance Trust also performed such other studies and analyses as Performance Trust considered appropriate and have taken into account its assessment of general economic, market and financial conditions and Performance Trust’s experience in other transactions, as well as its experience in securities valuation and knowledge of the banking industry generally.

Performance Trust has also held discussions with management of Prime Pacific and Coastal regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as Performance Trust deemed relevant to its inquiry. While Performance Trust considered the efforts undertaken by Prime Pacific to solicit indications of interests from third parties regarding another transaction, including the raising of additional capital, Performance Trust was not asked to solicit alternative transactions. Performance Trust’s opinion does not address whether there are alternatives for the Board to consider or whether the Board should approve the proposed Merger rather than remain independent.

In conducting its review and arriving at its opinion, Performance Trust relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to Performance Trust from public sources, that was provided to Performance Trust by Prime Pacific and Coastal, or that was otherwise reviewed by Performance Trust. Performance Trust has assumed the accuracy and completeness of all of this information for its opinion. Performance Trust has not independently verified the accuracy or completeness of this information or assumed any responsibility or liability for such verification, accuracy or completeness. Performance Trust has relied upon the respective managements of Prime Pacific and Coastal as to the reasonableness and achievability of the financial and operating forecasts and projections of Prime Pacific and Coastal (and the assumptions and directionality included in this material) that were prepared by and provided to Performance Trust by and discussed with Performance Trust by the managements of Prime Pacific and Coastal. Performance Trust has further assumed, with the consent of the Board, that such forecasts and projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the managements of Prime Pacific and Coastal. Performance Trust has also assumed that these forecasts and projections will be realized in the amounts and in the time periods currently estimated by both companies’ managements. Performance Trust further relied upon Coastal management as to the reasonableness and achievability of the estimates regarding certain pro forma financial effects of the merger on Coastal that were prepared by and provided to Performance Trust by Coastal management and that were discussed with Performance Trust by the Coastal management (and the assumptions and directionality presented in these pro forma results), including without limitation, the expense savings and related expenses expected to result from the merger. Performance Trust has assumed with the consent of the Board that all such estimates were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Coastal management and that such estimates will be realized in the amounts and in the time periods currently estimated by Coastal management.

Performance Trust assumed that, in all respects material to its analyses:

Performance Trust assumed that the merger would be consummated in a manner that complies with the applicable provisions of the Securities Act of 1933, as amended, the Exchange Act and all other applicable federal and state statutes, rules and regulations. Performance Trust further assumed that Prime Pacific relied upon the advice of its counsel, independent accountants and other advisors (other than Performance Trust) as to all legal, financial reporting, tax, accounting and regulatory matters with respect to Prime Pacific, Coastal, the merger and related transactions and the merger agreement. Performance Trust did not provide advice with respect to any such matters.

Performance Trust’s opinion addressed only the fairness, from a financial point of view, as of the date of such opinion, of the exchange ratio in the merger to the holders of Prime Pacific common stock. Performance Trust expressed no view or opinion as to any terms or other aspects of the merger or any related transaction, including without limitation, the form or structure of the merger or any related transaction, any consequences of the merger to Prime Pacific, its stockholders, creditors or otherwise, or any terms, aspects or implications of any voting, support, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger or otherwise. Performance Trust’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to Performance Trust through such date. Developments subsequent to the date of Performance Trust’s opinion may have affected, and may affect, the conclusion reached in Performance Trust’s opinion and Performance Trust did not and does not have an obligation to update, revise or reaffirm its opinion. Performance Trust’s opinion did not address, and Performance Trust expressed no view or opinion with respect to:

In performing its analyses, Performance Trust made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of Performance Trust, Prime Pacific and Coastal. Any estimates contained in the analyses performed by Performance Trust are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the Performance Trust opinion was among several factors taken into consideration by the Prime Pacific board in making its determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the Prime Pacific board with respect to the fairness of the merger consideration. The types and amount of consideration payable in the merger were determined through negotiation between Prime Pacific and Coastal and the decision to enter into the merger agreement was solely that of the Prime Pacific board.

The following is a summary of the material financial analyses performed by Performance Trust in connection with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation made by Performance Trust to the Prime Pacific board, but summarizes the material analyses performed and presented in connection with such opinion. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Performance Trust did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses summarized below include information presented in tabular format. Accordingly, Performance Trust believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion. The tables alone do not constitute a complete description of the financial analyses. For purposes of its analyses, Performance Trust utilized the implied value of merger consideration of $1.36 per share of Prime Pacific common stock, consisting of the implied value of 0.8047 shares of Coastal common stock to be exchanged for each share of Prime Pacific common stock.

Selected Companies Analysis

Prime Pacific. Using publicly available information, Performance Trust compared the financial and market performance and financial condition of Prime Pacific to a group of companies with publicly traded securities that Performance Trust deemed relevant. The group was comprised of 15 selected banks headquartered in the states of Washington, Oregon and Idaho that are publicly traded with total assets of less than $250 million. To perform the selected companies analysis with respect to Prime Pacific, Performance Trust reviewed for each selected company, financial data for, or as of the end of, the most recent three month period for which financial data was publicly available (for the period ended December 31, 2014) and market price information as of March 26, 2015. Certain financial data prepared by Performance Trust, as referenced in the tables presented below, may not correspond to the data presented in Prime Pacific’s historical financial statements as a result of the different periods, assumptions and methods used by Performance Trust to compute the financial data presented.

The banks headquartered in Washington, Oregon and Idaho comprising the group of selected companies reviewed by Performance Trust with respect to Prime Pacific were:

Performance Trust’s analysis showed the following concerning the financial performance of Prime Pacific and the group of 15 selected companies:

In addition, Performance Trust’s analysis showed the following concerning the market performance of the selected companies in the group (excluding the impact of certain selected company last 12 months (“LTM”) earnings per share (“EPS”) multiples considered to be not meaningful because they were negative):

Coastal. Using publicly available information, Performance Trust compared the financial performance, financial condition and market performance of Coastal to a selection of 12 publicly traded US banks with total assets between $500 million and $1.4 billion, and non-performing assets to assets ratios of less than 2%, last twelve month return on average assets greater than 0.50%, and total annual asset growth of greater than 10% in each of the years between 2012 and 2014.

The 12 selected companies with respect to Coastal were:

To perform the selected companies analysis with respect to Coastal, Performance Trust reviewed for each selected company, financial data for, or as of the end of, the most recent three-month period for which financial data was publicly available (for the period ended December 31, 2014) and market price information as of March 26, 2015. Certain financial data prepared by Performance Trust, as referenced in the tables presented below, may not correspond to the data presented in Coastal’s historical financial statements as a result of the different periods, assumptions and methods used by Performance Trust to compute the financial data presented.

Performance Trust’s analysis showed the following concerning the financial performance of Coastal and the selected 12 companies for Coastal:

In addition, Performance Trust’s analysis showed the following concerning the market performance of the selected companies in the group (excluding the impact of certain selected company last 12 months (“LTM”) earnings per share (“EPS”) multiples considered to be not meaningful because they were negative):

Coastal – Second Selected Comparables. Furthermore, using publicly available information, Performance Trust compared the financial performance, financial condition and market performance of Coastal to a second group of banks, a selection of 21 publicly traded companies headquartered in the West with total assets between $500 million and $1.4 billion, non-performing assets to assets ratios of less than 2% and last twelve month return on average assets greater than 0.50%.

The 21 selected companies in the second group with respect to Coastal were:

Performance Trust’s analysis showed the following concerning the financial performance of Coastal and the group of 21 selected companies:

In addition, Performance Trust’s analysis showed the following concerning the market performance of the selected companies in the second group (excluding the impact of certain selected company last 12 months (“LTM”) earnings per share (“EPS”) multiples considered to be not meaningful because they were negative):

No company used as a comparison in the above selected companies analyses is identical to Prime Pacific or Coastal. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Selected Transactions Analysis. Performance Trust reviewed publicly available information related to 12 selected whole bank transactions announced after January 1, 2013 in the West where the selling bank had total assets of less than $250 million and non-performing assets to total assets ratios of less than 3.5%. Terminated transactions were excluded from the selected transactions. The selected transactions included in the group were:

For each selected transaction, Performance Trust derived the ratio of the transaction consideration value paid for the acquired company to the following, in each case based on the latest publicly available financial statements of the acquired company available prior to the announcement of the acquisition:

The above transaction multiples for the selected transactions were compared with the corresponding transaction multiples for the proposed merger based on the implied transaction value for the proposed merger of $1.36 per share of Prime Pacific common stock and using historical financial information for Prime Pacific as of December 31, 2014.

The results of the selected transactions analysis (excluding the impact of certain selected transaction LTM EPS multiples considered to be not meaningful because they were negative) are set forth in the following table:

No company or transaction used as a comparison in the above selected transaction analyses is identical to Prime Pacific or the proposed merger. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Relative Contribution Analysis. Performance Trust analyzed the relative standalone contribution of Coastal and Prime Pacific to various pro forma balance sheet and income statement items of the combined entity at several points in time. This analysis did not include purchase accounting adjustments. To perform this analysis, Performance Trust used balance sheet and income statement data for Prime Pacific and Coastal as of December 31, 2012 and December 31, 2014. This analysis also used various projected pro forma balance sheet and income statement items at December 31, 2017, which were based on financial forecasts and projections relating to the earnings and assets of Coastal and the proposed combined company prepared by Coastal, which were reviewed and provided to Performance Trust by Prime Pacific.

The results of Performance Trust’s analysis as of the December 31, 2012 period are set forth in the following table:

The results of Performance Trust’s analysis as of the December 31, 2014 period are set forth in the following table:

The results of Performance Trust’s analysis as of the projected December 31, 2017 period are set forth in the following table:

Discounted Cash Flow Analysis. Performance Trust performed a discounted cash flow analysis to estimate a range for the implied equity value of Prime Pacific. Performance Trust compared these results to an analysis of the implied equity value of Prime Pacific’s ownership in the proposed combined company. In this analysis, Performance Trust used financial forecasts and projections relating to the earnings and assets of Prime Pacific prepared, and provided to Performance Trust, by Prime Pacific management and assumed discount rates ranging from 10.0% to 19.0%. Performance Trust also used financial forecasts and projections relating to the earnings and assets of Coastal and the proposed combined company prepared by Coastal, which were reviewed and provided to Performance Trust by Prime Pacific. The ranges of values were derived by adding (i) the present value of the estimated net income that Prime Pacific could generate over the period from 2015 to 2017 and (ii) the present value of Prime Pacific’s implied terminal value at the end of such period. In calculating the terminal value of Prime Pacific, Performance Trust applied a range of 13.0x to 21.0x estimated 2017 earnings. In calculating the terminal value of the combined company, Performance Trust applied a range of 17.0x to 25.0x estimated 2017 earnings. This discounted cash flow analysis resulted in a range of implied values per share of Prime Pacific common stock of approximately $1.50 per share to $2.77 per share, as compared to a range of implied values per pro forma equivalent share of Prime Pacific common stock of approximately $1.90 per share to $3.33 per share.

The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates, and discount rates. The analysis did not purport to be indicative of the actual values or expected values of Prime Pacific.

Miscellaneous. Performance Trust acted solely as a fairness opinion provider to Prime Pacific in connection with the proposed merger and did not act as a financial advisor to, or agent of, Prime Pacific or any other person. As part of its investment banking business, Performance Trust is continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions and valuations for various other purposes. As specialists in the securities of banking companies, Performance Trust has experience in, and knowledge of, the valuation of banking enterprises. In the ordinary course of its business as a broker-dealer, Performance Trust may from time to time purchase securities from, and sell securities to, Prime Pacific and Coastal. Performance Trust, as of the date of Performance Trust’s opinion, held no proprietary positions in Prime Pacific or Coastal.

Pursuant to the Performance Trust engagement agreement, Prime Pacific agreed to pay Performance Trust a fixed cash fee, of which a portion became payable to Performance Trust upon the rendering of the opinion, and the majority of which is contingent upon the consummation of the merger. Prime Pacific also agreed to reimburse Performance Trust for its out of pocket expenses incurred in connection with the rendering of its opinion and to indemnify Performance Trust against certain liabilities arising out of its engagement. Other than in connection with this present engagement, during the two years preceding the date of its opinion, Performance Trust has not provided investment banking and financial advisory services to Prime Pacific and has not received compensation from Prime Pacific. In the past two years, Performance Trust has not provided investment banking and financial advisory services to Coastal and has not received compensation from Coastal. Performance Trust may in the future provide investment banking and financial advisory services to Prime Pacific or Coastal and receive compensation for such services.

Coastal’s Reasons for the Merger

After careful consideration, at a meeting held on April 16, 2015, Coastal’s board of directors unanimously determined that the merger agreement, including the merger and the other transactions contemplated thereby, is in the best interests of Coastal and its stockholders.

In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the Coastal board of directors consulted with Coastal management, as well as its independent financial and legal advisors, and considered a number of factors, including (i) Coastal’s review of the business, operations, earnings and financial condition of Prime Pacific; and (ii) the fact that the merger would enable Coastal to expand its strategic presence through three additional bank offices in south Snohomish County and northeast King County

Coastal’s board of directors also considered a number of potential risks and uncertainties associated with the merger in connection with its deliberation of the proposed transaction, including, without limitation, the following:

The foregoing discussion of the information and factors considered by Coastal’s board of directors is not intended to be exhaustive, but includes the material factors considered by Coastal’s board of directors. In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, Coastal’s board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. Coastal’s board of directors considered all these factors as a whole, including discussions with, and questioning of, Coastal’s management and Coastal’s independent financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

Coastal’s board of directors unanimously approved the merger agreement.

This summary of the reasoning of Coastal’s board of directors and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the section of the proxy statement/offering circular entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Interests of Prime Pacific’s Directors and Executive Officers in the Merger

Certain members of the Prime Pacific board of directors and management may be deemed to have interests in the merger, in addition to their interests as stockholders of Prime Pacific generally. The Prime Pacific board of directors was aware of these factors and considered them, among other things, in approving the merger agreement.

Indemnification of Directors and Officers; Insurance

The merger agreement provides that Coastal will, for a period of six years following the closing of the merger, indemnify the present and former directors and officers of Prime Pacific against liabilities and costs that may arise in the future, incurred in connection with claims or actions arising out of or pertaining to matters that existed or occurred prior to the effective date of the merger. The scope of this indemnification is to the fullest extent that such persons would have been entitled to indemnification under applicable law and the articles of incorporation or bylaws of Prime Pacific.

The merger agreement also provides that, for a period of six years following the closing of the merger and subject to certain limitations, Coastal will use reasonable efforts to cause to be maintained in effect, Prime Pacific’s existing director and officer liability insurance policy.

Vesting of Stock Options

Pursuant to Prime Pacific’s stock option plans, a change in control, such as the merger, will accelerate the vesting of any unvested stock options.

Severance Benefits

Certain executive officers of Prime Pacific, including Don Kiser, may be eligible for severance benefits under existing agreements with, and benefit plans offered by, Prime Pacific.

Employment with Coastal

Certain members of the executive management of Prime Pacific will become employees of Coastal Community Bank after the consummation of the Merger. Glenn Deutsch will hold the title of Executive Vice President and Chief Operating Officer, Chuck Dodd will hold the title of Senior Vice President and Senior Credit Officer, and Liz Norsby will hold the title of Senior Vice President and Chief Operations Officer.

Change in Control Severance Agreement

Glenn Deutsch has entered into a change in control severance agreement with Coastal. Subject to certain conditions, the change in control severance agreement provides Mr. Deutsch a benefit in an amount equal to one (1) times Executive's W-2 income (before salary deferrals) received from the Company and/or the Bank for the year preceding the date of closing in connection with a change in control experienced by Coastal.

Restrictive Covenant Agreement

Glenn Deutsch has entered into a restrictive covenant agreement with Coastal. Except under limited circumstances, the restrictive covenant agreement prohibits Mr. Deutsch from soliciting employees or customers of Coastal within the counties of King and Snohomish, Washington. The term of the restrictive covenant agreement commences upon the effective date of the merger and continues until one year after Mr. Deutsch’s termination of employment with Coastal.

Dissenters’ Rights in the Merger

Under Chapter 23B.13 of the Washington Business Corporation Act, holders of Prime Pacific’s common stock are entitled to dissent from, and obtain payment of the fair value of their shares in cash together with accrued interest in the event of, the consummation of the merger, instead of receiving the merger consideration they would otherwise be entitled to pursuant to the merger agreement. If you wish to assert your statutory dissenters’ rights, you must: (1) deliver to Prime Pacific, before the vote is taken at the special meeting regarding the merger agreement, written notice of your intent to demand payment for your shares of Prime Pacific common stock if the merger is effected, which notice must be separate from your proxy; (2) not vote your shares in favor of the merger agreement; and (3) follow the statutory procedures for perfecting dissenters’ rights under Chapter 23B.13 of the Washington Business Corporation Act, which is attached to this proxy statement/offering circular as Annex C. If you fail to comply with these requirements, then if the merger agreement is approved by Prime Pacific’s stockholders and the merger is completed, your shares of Prime Pacific common stock will be converted into the right to receive the merger consideration, without interest and subject to any applicable withholding of taxes, but you will have no dissenters’ rights with respect to your shares of Prime Pacific common stock.

Written notice of your intent to assert dissenters’ rights must be delivered to Prime Pacific at: John R. Pfeifer, Corporate Secretary, Prime Pacific Financial Services, Inc., 2502 196th Street, SW, Suite 108, Lynnwood, Washington 98036.

A vote against the Prime Pacific merger proposal alone will not constitute written notice of your intent to assert your dissenters’ rights in connection with the merger.

Regulatory Approvals Required for the Merger

Under applicable law, the merger must be approved by the Federal Reserve Board, and the bank merger must be approved by the Federal Reserve Board and the Washington Department of Financial Institutions. The U.S. Department of Justice may review the impact of the merger and the bank merger on competition. The Federal Reserve Board approved the merger and the bank merger on August 31, 2015 and the Washington Department of Financial Institutions approved the bank merger on August 31, 2015.

Accounting Treatment

In accordance with current accounting guidance, the merger will be accounted for using the acquisition method in accordance with FASB Topic 805, “Business Combinations.” The result of this is that the recorded assets and liabilities of Coastal will be carried forward at their recorded amounts, the historical operating results will be unchanged for the prior periods being reported on and that the assets and liabilities of Prime Pacific will be adjusted to fair value at the date of the merger. In addition, all identified intangibles will be recorded at fair value and included as part of the net assets acquired. To the extent that the purchase price, consisting of the number of shares of Coastal common stock to be issued to former Prime Pacific stockholders, at fair value, exceeds the fair value of the net assets including identifiable intangibles of Prime Pacific at the merger date, that amount will be reported as goodwill. In accordance with current accounting guidance, goodwill will not be amortized but will be evaluated for impairment annually. Identified intangibles will be amortized over their estimated lives. Further, the acquisition method of accounting results in the operating results of Prime Pacific being included in the operating results of Coastal beginning from the date of completion of the merger.

Coastal’s Dividend Policy

Coastal has never paid any dividends and has no plans to pay dividends to stockholders in the future.

Coastal’s long-term ability to pay dividends to its stockholders depends primarily on the ability of Coastal Community Bank to make capital distributions to Coastal and on the availability of cash at the holding company level if Coastal Community Bank’s earnings are not sufficient to pay dividends. In addition, the Federal Reserve Board has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the holding company’s net income for the past four quarters, net of dividends paid over that period, is insufficient to fully fund the dividend or the holding company’s overall rate or earnings retention is inconsistent with the its capital needs and overall financial condition. These regulatory policies may adversely affect Coastal’s ability to pay dividends or otherwise engage in capital distributions.

Public Trading Markets

There is currently no public market for Coastal’s or Prime Pacific’s common stock and there is no guarantee that there will ever be a public trading market. If an active public trading market does not develop for Coastal’s common stock in the future, Prime Pacific stockholders receiving shares of Coastal common stock in the merger may not be able to sell all of their shares of Coastal common stock on short notice or at a desirable price. Prior to the closing of the merger, Coastal has agreed to obtain the written commitment of a broker-dealer to act as a market maker for Coastal common stock following the closing.

THE MERGER AGREEMENT

The following describes certain aspects of the merger, including certain material provisions of the merger agreement. The following description of the merger agreement is subject to, and qualified in its entirety by reference to, the merger agreement, which is attached to this proxy statement/offering circular as Annex A and is incorporated by reference into this proxy statement/offering circular. We urge you to read the merger agreement carefully and in its entirety, as it is the legal document governing the merger.

Structure of the Merger

Each of Coastal’s and Prime Pacific’s board of directors has approved the merger agreement. The merger agreement provides for the merger of Prime Pacific with and into Coastal, with Coastal continuing as the surviving corporation. Immediately following the completion of the merger, Prime Pacific’s wholly owned subsidiary bank, Prime Pacific Bank, will merge with Coastal’s wholly owned subsidiary bank, Coastal Community Bank.

Merger Consideration

In the merger, each share of Prime Pacific common stock, no par value per share, issued and outstanding immediately prior to the completion of the merger, except for (i) shares held by Prime Pacific stockholders that have demanded payment for the fair value of their shares of Prime Pacific common stock in accordance with Chapter 23B.13 of the Washington Business Corporation Act and (ii) shares of Prime Pacific common stock held by Coastal (other than in a fiduciary capacity or in satisfaction of a debt previously contracted), will be converted into the right to receive 0.8047 of a share of Coastal common stock, subject to possible adjustment. Coastal will not issue any fractional shares of Coastal common stock in the merger. Instead, each fraction of a share of Coastal common stock will be rounded up to the nearest whole share.

Treatment of Prime Pacific Stock Options

Each Prime Pacific stock option with an exercise price per share that is less than $1.36 per share and is outstanding immediately prior to the merger will be cancelled by Prime Pacific at the time of the merger or immediately prior to the merger and entitle its holder to receive a cash payment equal to: (i) the excess of (A) $1.36 per share over (B) the exercise price per share of the Prime Pacific stock option, multiplied by (ii) the number of shares of Prime Pacific common stock subject to such Prime Pacific stock option. Except as set forth below, Prime Pacific stock options with an exercise price per share equal to or greater than $1.36 per share will, at the time of the merger or immediately prior to the merger, be cancelled and terminated. Each Prime Pacific stock option granted under Prime Pacific’s 2009 Stock Option and Equity Compensation Plan, whether vested or unvested, that is outstanding and unexercised immediately prior to the closing of the merger and that has an exercise price per share equal to or greater than $1.36 shall be converted automatically into an option to purchase, on the same terms and conditions as were applicable under such Prime Pacific stock option immediately prior to the closing of the merger (including vesting terms), the number of shares of Coastal common stock (rounded down to the nearest whole number of shares) equal to the produce of (i) the number of shares of Prime Pacific common stock subject to such Prime Pacific stock option immediately prior to the closing of the merger, multiplied by (ii) the exchange ratio, which such stock option shall have an exercise price per share of Coastal common stock equal to the quotient (rounded up to the nearest whole cent) obtained by dividing (1) the exercise price per share of Prime Pacific common stock subject to such Prime Pacific stock option immediately prior to the closing of the merger, by (2) the exchange ratio.

Closing and Effective Time of the Merger

The merger will be completed only if all conditions to the merger set forth in the merger agreement are either satisfied or waived. For more information, see “—Conditions to Complete the Merger.”

The merger will become effective as set forth in the articles of merger to be filed with the Secretary of State of the State of Washington pursuant to the applicable provisions of the Washington Business Corporation Act. The closing of the merger will occur as soon as practicable after all of the conditions to completion of the merger have been satisfied or waived (other than those that by their nature are to be satisfied or waived at the closing of the merger). It currently is anticipated that the closing of the merger will occur in the fourth quarter of 2015, subject to the receipt of regulatory approvals and other customary closing conditions. No assurances can be given as to when or if the merger will be completed.

Conversion of Shares; Exchange Procedures

The conversion of shares of Prime Pacific common stock into the right to receive the merger consideration will occur automatically at the effective time of the merger. Prior to the effective time of the merger, Coastal will appoint its transfer agent or an unrelated bank or trust company, as is reasonably acceptable to Prime Pacific, to act as exchange agent for the exchange of shares of Prime Pacific common stock for the merger consideration.

As soon as practicable following the completion of the merger, the exchange agent will mail to each holder of record of shares of Prime Pacific common stock immediately prior to the effective time of the merger: (1) a letter of transmittal and instructions on how to surrender such holders shares of Prime Pacific common stock in exchange for the merger consideration the holder is entitled to receive under the merger agreement.

If a certificate for shares of Prime Pacific common stock has been lost, stolen or destroyed, the exchange agent will issue the merger consideration upon receipt of (1) an affidavit of that fact by the claimant and (2) if required by Coastal or the exchange agent, the posting of a bond in an amount as Coastal may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such certificate.

After completion of the merger, there will be no further transfers on the stock transfer books of Prime Pacific of shares of Coastal stock that were issued and outstanding immediately prior to the effective time of the merger.

Representations and Warranties

The representations, warranties and covenants described below and included in the merger agreement were made only for purposes of the merger agreement and as of specific dates, are solely for the benefit of Coastal and Prime Pacific, may be subject to limitations, qualifications or exceptions agreed upon by the parties, including those included in confidential disclosures made for the purposes of, among other things, allocating contractual risk between Coastal and Prime Pacific rather than establishing matters as facts, and may be subject to standards of materiality that differ from those standards relevant to stockholders. You should not rely on the representations, warranties, covenants or any description thereof as characterizations of the actual state of facts or condition of Coastal, Prime Pacific or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in public disclosures by Coastal or Prime Pacific. The representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read only in conjunction with the information provided elsewhere in this proxy statement/offering circular.

The merger agreement contains customary representations and warranties of each of Coastal and Prime Pacific relating to their respective businesses. The representations and warranties in the merger agreement do not survive completion of the merger.

The representations and warranties made by each of Prime Pacific and Coastal in the merger agreement relate to a number of matters, including the following:

Certain representations and warranties of Coastal and Prime Pacific are qualified as to “materiality” or “material adverse effect.” For purposes of the merger agreement, a “material adverse effect,” when used in reference to either Coastal, Prime Pacific or the combined company, means an effect which is material and adverse to the business, financial condition, or results of operations of Prime Pacific or Coastal, as the context may dictate, and their subsidiaries taken as a whole; provided, however, that any effect resulting from any of the following events or occurrences shall not be considered in determined whether a material adverse effect has occurred:

Covenants and Agreements

Conduct of Business Prior to the Completion of the Merger

Pursuant to the merger agreement, Prime Pacific has agreed to certain restrictions on its activities until the merger is completed or the merger agreement is terminated. In general, the merger agreement provides that Prime Pacific and its subsidiaries must:

Prime Pacific has further agreed that it will not, and will not permit any of its subsidiaries, to do any of the following without the prior written consent of Coastal:

Regulatory Matters

Coastal and Prime Pacific have agreed to cooperate with each other and use their reasonable best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and governmental entities which are necessary or advisable to consummate the transactions contemplated by the merger agreement, and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such third parties and governmental entities. Specifically, Coastal and Prime Pacific have agreed, no later than 30 days following the date of the merger agreement, or as soon thereafter as practicable, to each prepare and file any applications, notices and filings required in order to obtain the regulatory approvals needed to complete the merger and the bank merger. Coastal and Prime Pacific have also agreed to use their reasonable best efforts to obtain each such requisite regulatory approval as promptly as reasonably practicable.

Employee Benefit Plan Matters

Following the closing of the merger, Coastal has agreed to provide all continuing employees of Prime Pacific with benefit plans and compensation opportunities that are substantially similar to those provided by Coastal to similarly-situated employees of Coastal. Each continuing employee will be treated as a new employee of Coastal for purposes of Coastal Community Bank’s 401(k) plan but Coastal will recognize the service of the covered employee with Prime Pacific for purposes of eligibility, participation and vesting under the 401(k) plan. To the extent that a continuing employee becomes eligible to participate in any other Coastal employee benefit plan following the closing of the merger, Coastal will recognize the service of the covered employee with Prime Pacific for purposes of eligibility, participation and vesting under such Coastal employee benefit plan.

Under the merger agreement, Prime Pacific Bank has agreed to terminate its 401(k) plan immediately prior to the effective time of the merger. Following the termination of Prime Pacific Bank’s 401(k) plan, Coastal will take any necessary action to permit continuing employees to make rollover distributions to Coastal Community Bank’s 401(k) plan.

Coastal has agreed to honor the terms of Prime Pacific’s existing change in control agreements, unless superseded by an agreement by an applicable Prime Pacific employee to enter into a similar agreement with Coastal (subject to the receipt of any required regulatory approval). All full-time employees of Prime Pacific and its subsidiaries who are not covered by a change in control or similar agreement and who are terminated at or prior to the effective time of the merger, or who are terminated by Coastal without cause during the one-year period following the effective time of the merger, will be entitled to a separation benefit equal to two week’s base compensation for each year of service, subject to a maximum payment of 12 weeks’ base compensation.

Director and Officer Indemnification and Insurance

For a period of six years following the effective time of the merger, Coastal has agreed to indemnify all directors and officers of Prime Pacific for any losses incurred by them as a result of their service for Prime Pacific to the fullest extent permitted under Prime Pacific’s articles of incorporation or bylaws to the extent permitted by Washington law.

For a period of six years following the effective time of the merger, Coastal has also agreed to maintain Prime Pacific’s existing directors’ and officers’ liability insurance coverage or provide equivalent coverage; provided, however, that Coastal is not obligated to expend an amount in excess of 200% of the amount of the annual premiums paid by Prime Pacific as of the effective date of the merger for such insurance. If the amount of the annual premiums necessary to maintain or procure such insurance coverage exceeds 200% of the amount of the annual premiums paid by Prime Pacific as of the effective date of the merger, Coastal has agreed to obtain the most advantageous coverage obtainable for an annual premium equal to 200% of the amount of the annual premiums paid by Prime Pacific as of the effective date of the merger. In lieu of the foregoing, Prime Pacific, at the request of Coastal, has agreed to obtain at or prior to the effective time of the merger a prepaid “tail” policy providing single limit equivalent coverage to that described in the preceding sentence.

Tangible Common Equity; Purchase Price Adjustment

Prime Pacific has agreed to deliver to Coastal, no fewer than five business days prior to the closing date of the merger, a good faith estimate of Prime Pacific’s adjusted tangible common equity, as such term is defined below, as of the closing date. If Prime Pacific’s adjusted tangible common equity is estimated to be less than $13,500,000, and Coastal and Prime Pacific do not exercise their applicable rights to terminate the merger agreement, the exchange ratio used to calculate the merger consideration shall be reduced by (i) the amount of such deficiency, divided by (ii) 1.69, and (iii) further divided by the number of shares of Prime Pacific common stock outstanding on the closing date of the merger, rounded to four decimal places. For more information on Coastal’s and Prime Pacific’s right to terminate the merger agreement in the event that Prime Pacific’s adjusted tangible common equity is estimated to be less than $13,500,000, see “—Termination of the Merger Agreement.”

Under the merger agreement, “adjusted tangible common equity” is defined as the excess of (i) the total assets of Prime Pacific less (a) any asset that is considered an intangible asset under generally accepted accounting principles, including, without limitation, any goodwill and any other identifiable intangible assets recorded in accordance with generally accepted accounting principles, but excluding any Small Business Administration servicing assets recorded as an intangible asset, and (b) the amount, if any, by which the aggregate net book value of the land and buildings owned by Prime Pacific exceeds their aggregate appraised value, over (ii) the total liabilities of Prime Pacific, calculated in accordance with generally accepted accounting principles, as of the closing date of the merger, adjusted, as needed, to reflect the payment or accrual of all expenses incurred by Prime Pacific in connection with the negotiation and preparation of the merger agreement and the consummation and performance of the transactions contemplated hereby, including, without limitation professional fees, severance payments, option cancellation expenses, and the purchase of a directors’ and officers’ liability insurance policy tail. Coastal has agreed to waive any adjustment to the exchange ratio that would otherwise result from the aggregate net book value of the land and buildings owned by Prime Pacific exceeding their aggregate appraised value.

Prime Pacific Stockholder Meeting and Recommendation of Prime Pacific’s Board of Directors

Under the merger agreement, Prime Pacific agreed to call the special meeting of Prime Pacific’s stockholders to allow its stockholders to vote upon the approval of the merger agreement. Under the merger agreement, Coastal agreed to prepare, with Prime Pacific’s cooperation, this proxy statement/offering circular and related materials regarding the matters to be presented at the Prime Pacific stockholder meeting.

In connection with the stockholder meeting, Prime Pacific’s board of directors agreed to recommend that Prime Pacific’s stockholders vote in favor of the approval of the Prime Pacific merger proposal. However, Prime Pacific’s board of directors may withdraw, amend or modify its previous recommendation regarding the merger with Coastal if it receives a superior proposal (as defined below) and, after having consulted with its outside legal counsel, it determines that failure to withdraw or modify its previous recommendation would constitute a breach of its fiduciary duties under applicable law.

If Prime Pacific’s board of directors seeks to withdraw, amend or modify its previous recommendation regarding the merger with Coastal, it must provide Coastal with at least five business days’ advance notice of its intent to effect a change of recommendation and with all relevant terms, conditions and transaction documents regarding the superior proposal. In addition, for a period of five business days following the delivery of such notice, Prime Pacific must negotiate in good faith with Coastal to make such adjustments and modifications to the merger agreement so that the terms of the superior proposal will no longer be superior to the terms of the merger agreement.

For purposes of the foregoing, “superior proposal” is defined as an unsolicited, bona fide written offer made by a third party to consummate an acquisition proposal that (i) Prime Pacific’s board of directors determines in good faith, after consulting with its outside legal counsel and its financial advisor, would, if consummated, result in a transaction that is more favorable to the stockholders of Prime Pacific from a financial point of view than the transactions contemplated hereby, including any adjustments to the terms and conditions of such transactions proposed by Coastal in response to such acquisition proposal (taking into account all legal, financial, regulatory and other aspects of the proposal and the entity making the proposal), (ii) is not conditioned on obtaining financing, and (iii) is for 100% of the outstanding shares of common stock of Prime Pacific.

Under the merger agreement, an “acquisition proposal” is defined as any proposal or offer with respect to any of the following (other than the transactions contemplated hereunder): (i) any merger, consolidation, share exchange, business combination, or other similar transaction involving Prime Pacific or any of its subsidiaries; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of Prime Pacific’s consolidated assets in a single transaction or series of transactions; (iii) any tender offer or exchange offer for 25% or more of the outstanding shares of Prime Pacific’s capital stock or the filing of a registration statement under the Securities Act of 1933, as amended, in connection therewith; or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in an any of the foregoing.

Agreement Not to Solicit Other Offers

Under the merger agreement, Prime Pacific has agreed that Prime Pacific, its subsidiaries, and their respective officers, directors, employees and representatives may not:

In addition, Prime Pacific must immediately notify Coastal of all of the relevant details of any acquisition proposal, or request for non-public information or inquiry that could be expected to lead to an acquisition proposal, that Prime Pacific may receive.

Notwithstanding these provisions, if Prime Pacific receives an unsolicited acquisition proposal that its board of directors believes is superior to the terms of the merger with Coastal, then Prime Pacific may (i) furnish non-public information concerning Prime Pacific to the person making the proposal pursuant to a confidentiality agreement on terms that are no more favorable than those contained in the January 15, 2015 non-disclosure agreement between Prime Pacific and Coastal, and (ii) engage in discussions and negotiations with that person, but only if Prime Pacific’s board of directors determines in good faith, after consultation with Prime Pacific’s outside legal counsel, that failing to take such action would constitute a breach of its fiduciary duties under applicable law.

For purposes of this provision, an “acquisition proposal” is defined as any proposal or offer with respect to any of the following (other than the transactions contemplated hereunder): (i) any merger, consolidation, share exchange, business combination, or other similar transaction involving Prime Pacific or any of its subsidiaries; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of Prime Pacific’s consolidated assets in a single transaction or series of transactions; (iii) any tender offer or exchange offer for 25% or more of the outstanding shares of Prime Pacific’s capital stock or the filing of a registration statement under the Securities Act of 1933, as amended, in connection therewith; or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in an any of the foregoing.

Conditions to Complete the Merger

Coastal’s and Prime Pacific’s respective obligations to complete the merger are subject to the satisfaction or, to the extent legally permitted, waiver of a number of conditions. These conditions include:

Coastal and Prime Pacific expect to complete the merger in the fourth quarter of 2015. No assurance can be given, however, as to when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

Termination of the Merger Agreement

The merger agreement can be terminated at any time prior to completion of the merger in the following circumstances:

Effect of Termination

If the merger agreement is terminated, it will become void and have no effect, except that (1) each of Coastal and Prime Pacific will remain liable for any liabilities or damages arising out of its willful and material breach of any provision of the merger agreement and (2) designated provisions of the merger agreement will survive the termination, including those relating to payment of fees and expenses.

Termination Fee

The merger agreement requires the payment of a $450,000 termination fee by Prime Pacific to Coastal if the merger agreement is terminated by Coastal because (i) Prime Pacific materially breaches its duties with respect to the solicitation or consideration of a superior unsolicited acquisition proposal or (ii) Prime Pacific’s board of directors does not publicly recommend that Prime Pacific’s stockholders approve the Prime Pacific merger proposal or subsequently withdraws, qualifies or revises such recommendation in a manner that is materially adverse to Coastal.

In addition, Prime Pacific must pay a termination fee to Coastal if Coastal terminates the merger agreement because Prime Pacific willfully breaches any of its representations, warranties, covenants or obligations under the merger agreement and, in either case, a superior acquisition proposal involving Prime Pacific is publicly announced on or before the date of the Prime Pacific special meeting or the termination of the merger agreement by Coastal, respectively. Under these circumstances, Prime Pacific must pay Coastal a $250,000 termination fee promptly following the termination of the merger agreement and, if Prime Pacific either consummates or enters into a definitive agreement regarding the acquisition proposal within 12 months after termination of the merger agreement, it must pay Coastal an additional $200,000 termination fee.

Finally, if the merger agreement is terminated by either Prime Pacific or Coastal because the other breaches a representation or warranty or breaches a covenant or agreement and the breach is not cured within 30 days following written notice to the party committing the breach, the non-terminating party must pay the terminating party a $250,000 termination fee.

Expenses and Fees

All costs and expenses incurred in connection with the merger agreement and the transactions contemplated thereby will be paid by the party incurring such expense.

Amendment, Waiver and Extension of the Merger Agreement

Prior to the effective time of the merger, any provision of the merger agreement may be: (i) waived in writing by the party benefited by the provision or (ii) amended or modified at any time (including the structure of the transaction) by an agreement in writing between Coastal and Prime Pacific except that, after the approval of the Prime Pacific merger proposal at the special meeting, no amendment or modification may be made to the merger agreement that would reduce the amount or alter or change the kind of merger consideration to be received by Prime Pacific stockholders or that would contravene any provision of the Washington Business Corporation Act or federal banking laws, rules and regulations.

Support Agreements

As an inducement to Coastal to enter into the merger agreement, each of Prime Pacific’s directors, as well as certain key Prime Pacific stockholders, entered into a support agreement with Coastal under which such Prime Pacific directors and stockholders generally has agreed (1) to vote or cause to be voted in favor of the Prime Pacific merger proposal, all shares of Prime Pacific common stock which he or she is the record or beneficial owner as the date of the support agreement and (2) subject to limited exceptions, not to sell or otherwise dispose any of these shares of Prime Pacific common stock until after the approval of the Prime Pacific merger proposal by the stockholders of Prime Pacific. The obligations under each Prime Pacific stockholder’s support agreement will terminate upon the earlier of: (i) the termination of the merger agreement in accordance with its terms; (ii) the approval of the merger and bank merger by Prime Pacific’s stockholders; and (iii) the mutual agreement in writing of the Prime Pacific stockholder and Coastal. The directors and key stockholders that have entered into support agreements with Coastal hold an aggregate of 3,383,601 shares of Prime Pacific common stock, representing 35% of Prime Pacific’s outstanding common shares as of the record date.

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following is the unaudited pro forma combined condensed consolidated financial information for Coastal and Prime Pacific after giving effect to the merger. The unaudited pro forma combined condensed consolidated statement of financial condition as of December 31, 2014 gives effect to the merger as if it occurred on that date. The unaudited pro forma combined condensed consolidated statements of operations for the year ended December 31, 2014 give effect to the merger as if it occurred on January 1, 2014.

The unaudited pro forma combined condensed consolidated financial statements have been prepared using the acquisition method of accounting for business combinations under GAAP. Coastal is the acquirer for accounting purposes. Certain reclassifications have been made to the historical financial statements of Prime Pacific to conform to the presentation in Coastal’s financial statements.

A final determination of the fair values of Prime Pacific’s assets and liabilities, which cannot be made prior to the completion of the merger, will be based on the actual net tangible and intangible assets of Prime Pacific that exist as of the date of completion of the transaction. Consequently, fair value adjustments and amounts preliminarily allocated to goodwill and identifiable intangibles could change significantly from those allocations used in the unaudited pro forma combined condensed consolidated financial statements presented herein and could result in a material change in amortization of acquired intangible assets.

In connection with the plan to integrate the operations of Coastal and Prime Pacific following the completion of the merger, Coastal anticipates that nonrecurring charges, such as costs associated with systems implementation, severance and other costs related to exit or disposal activities, will be incurred. Coastal is not able to determine the timing, nature and amount of these charges as of the date of this proxy statement/offering circular. However, these charges will affect the results of operations of Coastal and Prime Pacific, as well as those of the combined company following the completion of the merger, in the period in which they are recorded. The unaudited pro forma combined condensed consolidated statements of operations do not include the effects of the nonrecurring costs associated with any restructuring or integration activities resulting from the merger, as they are nonrecurring in nature and not factually supportable at this time. Additionally, the unaudited pro forma adjustments do not give effect to any nonrecurring or unusual restructuring charges that may be incurred as a result of the integration of the two companies or any anticipated disposition of assets that may result from such integration.

The actual amounts recorded as of the completion of the merger may differ materially from the information presented in these unaudited pro forma combined condensed consolidated financial statements as a result of, among other things:

The unaudited pro forma combined condensed consolidated financial statements are provided for informational purposes only. The unaudited pro forma combined condensed consolidated financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined condensed consolidated financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined condensed consolidated financial information is based on, and should be read together with, the historical consolidated financial statements and related notes of Coastal and Prime Pacific included in this proxy statement/offering circular.

COASTAL FINANCIAL CORPORATION AND PRIME PACIFIC FINANCIAL SERVICES, INC.

Unaudited Pro Forma Combined Condensed Consolidated Statement of Financial Condition

As of December 31, 2014

(In thousands)