SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials

COASTAL FINANCIAL CORPORATION
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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[_] Fee paid previously with preliminary materials:

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[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.

1) Amount previously paid:

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2) Form, Schedule or Registration Statement No.:

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3) Filing Party:

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4) Date Filed:

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COASTAL FINANCIAL CORPORATION
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DECEMBER 20, 2005

Dear Shareholder:

You are cordially invited to attend the annual meeting of Shareholders of
Coastal Financial Corporation. The meeting will be held at The Breakers Resort,
2006 N. Ocean Boulevard, Myrtle Beach, South Carolina, on Tuesday January 31,
2006 at 2:00 p.m., Eastern Standard Time.

The Notice of Annual Meeting and Proxy Statement appearing on the
following pages describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of the Corporation.
Directors and Officers of the Corporation, as well as a representative of KPMG
LLP, the Corporation's independent registered public accounting firm, will be
present to respond to appropriate questions of Shareholders.

It is important that your shares are represented at this meeting, whether
or not you attend the meeting in person and regardless of the number of shares
you own. To make sure your shares are represented, we urge you to complete and
mail the enclosed proxy card. If you attend the meeting, you may vote in person
even if you have previously mailed a proxy card.

We look forward to seeing you at the meeting.

Sincerely,

/s/ Michael C. Gerald

Michael C. Gerald
President and
Chief Executive Officer

COASTAL FINANCIAL CORPORATION
2619 OAK STREET
MYRTLE BEACH, SOUTH CAROLINA 29577
(843) 205-2000

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

The annual meeting of Shareholders of Coastal Financial Corporation
("Corporation") will be held at The Breakers Resort, 2006 N. Ocean Boulevard,
Myrtle Beach, South Carolina, on Tuesday, January 31, 2006, at 2:00 p.m.,
Eastern Standard Time, for the following purposes:

1. To elect four directors of the Corporation;

2. Ratification of an Amendment to the Certificate of Incorporation to
increase the Corporation's authorized common stock from 25,000,000
to 50,000,000 shares; and

3. To transact any other business that may properly come before the
meeting.

NOTE: The Board of Directors is not aware of any other business to come
before the meeting.

Shareholders of record at the close of business on December 5, 2005 are
entitled to receive notice of the meeting and to vote at the meeting and any
adjournment or postponement of the meeting.

Please complete and sign the enclosed form of proxy, which is solicited by
the Board of Directors, and mail it promptly in the enclosed envelope. The proxy
will not be used if you attend the meeting and vote in person.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Susan J. Cooke

Susan J. Cooke
Corporate Secretary

Myrtle Beach, South Carolina
December 20, 2005

IMPORTANT: The prompt return of proxies will save the Corporation the expense of
further requests for proxies in order to ensure a quorum. A self-addressed
envelope is enclosed for your convenience. No postage is required if mailed in
the United States.

PROXY STATEMENT
OF
COASTAL FINANCIAL CORPORATION

ANNUAL MEETING OF SHAREHOLDERS
January 31, 2006

This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Coastal Financial Corporation ("Coastal
Financial" or "Corporation") to be used at the Annual Meeting of Shareholders of
the Corporation. The Corporation is the holding company for Coastal Federal
Bank. The meeting will be held at The Breakers Resort, 2006 N. Ocean Boulevard,
Myrtle Beach, South Carolina, on Tuesday, January 31, 2006 at 2:00 p.m., Eastern
Standard Time. This Proxy Statement and the enclosed proxy card are being first
mailed on or about December 20, 2005 to Shareholders of record.

VOTING AND PROXY PROCEDURE

Who Can Vote at the Meeting

You are entitled to vote your Coastal Financial common stock if the
records of the Corporation show that you held your shares as of the close of
business on December 5, 2005. As of the close of business on that date, a total
of 19,479,469 shares of Coastal Financial's common stock were outstanding. Each
share of common stock has one vote. As provided in the Corporation's Certificate
of Incorporation, record holders of the Corporation's common stock who
beneficially own, either directly or indirectly, in excess of 10% of the
Corporation's outstanding shares are not entitled to any vote with respect to
the shares held in excess of the 10% limit.

Attending the Meeting

If you are a beneficial owner of Coastal Financial common stock held by a
broker, bank or other nominee (i.e., in "street name"), you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or letter
from a bank or broker are examples of proof of ownership. If you want to vote
your shares of Coastal Financial common stock held in street name in person at
the meeting, you will have to get a written proxy in your name from the broker,
bank or other nominee, which holds your shares.

Vote Required

The meeting will be held only if there is a quorum. A quorum exists if a
majority of the outstanding shares of common stock entitled to vote is
represented for the transaction of business at the meeting. If you return valid
proxy instructions or attend the meeting in person, your shares will be counted
for purposes of determining whether there is a quorum, even if you abstain from
voting. Broker non-votes also will be counted for purposes of determining the
existence of a quorum. A broker non-vote occurs when a broker, bank or other
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received voting instructions from the
beneficial owner.

In voting on the election of directors, you may vote in favor of all
nominees, withhold votes as to all nominees, or withhold votes as to specific
nominees. There is no cumulative voting for the election of directors. Directors
must be elected by a plurality of the votes cast at the annual meeting. This
means that the nominees receiving the greatest number of votes will be elected
up to the maximum number of directors to be elected at the meeting. The maximum
number of directors to be elected at the meeting is four. Votes that are
withheld and broker non-votes will have no effect on the outcome of the
election.

In voting on the ratification of the amendment to the Certificate of
Incorporation, you may vote in favor of the proposal, vote against the proposal
or abstain from voting. This matter will be decided by the affirmative vote of a
majority of the outstanding shares of Coastal Financial common stock entitled to
vote at the meeting. On this proposal, abstentions and broker non-votes will
have the same effect as a vote against the proposal.

Voting by Proxy

This proxy statement is being sent to you by the Board of Directors of
Coastal Financial for the purpose of requesting that you allow your shares of
Coastal Financial common stock to be represented at the meeting by the persons
named in the enclosed proxy card. All shares of Coastal Financial common stock
represented at the meeting by properly executed and dated proxies will be voted
in accordance with the instructions indicated on the proxy card. If you sign,
date and return a proxy card without giving voting instructions, your shares
will be voted as recommended by the Corporation's Board of Directors. The Board
of Directors unanimously recommends that you vote "FOR" each of the nominees as
director and "FOR" ratification of the amendment to the Certificate of
Incorporation.

If any matters not described in this proxy statement are properly
presented at the meeting, the persons named in the proxy card will use their own
judgment to determine how to vote your shares. This includes a motion to adjourn
or postpone the meeting in order to solicit additional proxies. If the meeting
is postponed or adjourned, your Coastal Financial common stock may be voted by
the persons named in the proxy card on the new meeting date as well, unless you
have revoked your proxy. The Corporation does not know of any other matters to
be presented at the meeting.

You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Secretary of the
Corporation in writing before your shares have been voted at the meeting,
deliver a later dated proxy, or attend the meeting and vote your shares in
person. Attendance at the meeting will not in itself constitute revocation of
your proxy.

If your Coastal Financial common stock is held in street name, you will
receive instructions from your broker, bank or other nominee that you must
follow in order to have your shares voted. Your broker may allow you to deliver
your voting instructions via the telephone or the Internet. Please see the
instruction form provided by your broker, bank or other nominee that accompanies
this proxy statement for further information regarding telephone and Internet
voting. If you wish to change your voting instructions after you have returned
your voting instruction form to your broker or bank, you must contact your
broker or bank.

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CORPORATE GOVERNANCE

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The Corporation periodically reviews its corporate governance policies and
procedures to ensure that the Corporation meets the highest standards of ethical
conduct, reports results with accuracy and transparency and maintains full
compliance with the laws, rules and regulations that govern its operations. As
part of this periodic review, the Board of Directors reviews and adopts best
corporate governance policies and practices for the Corporation.

Code of Business Conduct

The Corporation has adopted a Code of Business Conduct that is designed to
ensure that the Corporation's directors, executive officers and Associates meet
the highest standards of ethical conduct. The Code of Business Conduct requires
that the Corporation's directors, executive officers and Associates avoid
conflicts of interest, comply with all laws and other legal requirements,
conduct business in an honest and ethical manner and otherwise act with
integrity and in the Corporation's best interest. Under the terms of the Code of
Business Conduct, directors, executive officers and Associates are required to
report any conduct that they believe in good faith to be an actual or apparent
violation of the Code of Business Conduct.

As a mechanism to encourage compliance with the Code of Business Conduct,
the Corporation has established procedures to receive, retain and treat
complaints received regarding accounting, internal accounting controls or
auditing matters. These procedures ensure that individuals may submit concerns
regarding questionable accounting or auditing matters in a confidential and
anonymous manner. The Code of Business Conduct also

prohibits the Corporation from retaliating against any director, executive
officer or Associate who reports actual or apparent violations of the Code of
Business Conduct.

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STOCK OWNERSHIP

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The following table provides information, as of December 5, 2005, about
the shares of Coastal Financial common stock that may be considered to be
beneficially owned by each person known to the Corporation to beneficially own
more than 5% of its outstanding common stock, each Named Executive Officer (as
defined in footnote 3 to the table), each director or nominee for director of
the Corporation and by all directors and executive officers of the Corporation
as a group. Unless otherwise indicated, each of the named individuals has sole
voting power and sole investment power with respect to the shares shown. A
person may be considered to beneficially own any share of common stock over
which he or she has, directly or indirectly, sole or shared voting or investing
power. The table reflects adjustments for the 10% stock dividends paid on
January 20, 2005 and November 25, 2005.

Number of Shares
Number of That May Be Acquired Percent of
Shares Owned Within 60 Days By Common Stock
(Excluding Options)(1) Exercising Options Outstanding (2)
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Named Executive Officers (3)

Michael C. Gerald, President, Chief 152,275 406,517 2.81
Executive Officer and Director

Jimmy R. Graham, Executive Vice
President 138,885 283,982 2.14

Jerry L. Rexroad, Executive Vice
President and Chief Financial 36,554(4) 264,692 1.53
Officer

Steven J. Sherry, Executive Vice
President 20,430 157,562 0.91

Phillip G. Stalvey, Executive Vice
President 29,543 261,655 1.48

Directors of the Corporation
(Excluding Named Executive Officers)

E. Lawton Benton 542,074(5) 11,924 2.84

G. David Bishop 704,316(6) 17,238 3.70

J. Robert Calliham 2,179(7) 11,924 0.07

James T. Clemmons 403,813(8) 30,573 2.23

James P. Creel 982,928(9) 58,095 5.33

James H. Dusenbury 64,442(10) 20,781 0.44

William O. Marsh 1,100 0 0.01

Frank A. Thompson, II 28,728(11) 26,095 0.28

W. Cecil Worsley, III 250 0 0.00

Executive Officers and
Directors as a Group (14 persons) 3,107,517 1,551,038 22.15

(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, a person
is deemed to be the beneficial owner, for purposes of this table, of any
shares of the Corporation's Common Stock if he or she has voting and/or
investment power with respect to such security or has a right to acquire,
through the exercise of outstanding options or otherwise, beneficial
ownership at any time within 60 days from December 5, 2005. The table
includes certain shares owned by spouses, other immediate family members
in trust, shares held in retirement accounts or funds for the benefit of
the named individuals, and other forms of ownership, over which shares the
named persons possess voting and/or investment power.
(2) Based on 19,479,469 shares of Common Stock of the Corporation outstanding
and entitled to vote at the Meeting, plus the number of shares that may be
acquired within 60 days by each individual (or group of individuals) by
exercising options.
(3) Under Securities and Exchange Commission regulations, the term "Named
Executive Officer" is defined to include the chief executive officer
regardless of compensation level, and the four most highly compensated
executive officers, other than the chief executive officer, whose total
annual salary and bonus for the last completed fiscal year exceeded
$100,000.
(4) Includes 10,837 shares owned by Jerry L. Rexroad; 19,843 shares owned by
Robin E. Rexroad; 5,874 shares in the Coastal Financial 401-K Plan for
Jerry L. Rexroad.
(5) Includes 507,169 shares owned by RCEE, Inc. of which Mr. Benton is Vice
President; 6 shares owned by Edward Lawton Benton; 524 shares owned by
Edward Lawton Benton - IRA; 34,375 shares owned by Edward Lawton Benton
and Elizabeth Benton.
(6) Includes 53,984 shares owned by G. David Bishop; 268,538 shares owned by
G. J. Bishop Trust, G. David Bishop, Trustee; 81,037 shares owned by Mary
Ann Bishop; 300,757 shares owned by Bishop Investment Company.
(7) Includes 199 shares owned by James R. Calliham; 1,100 shares owned by
Justin Calliham; 660 shares owned by Flo Berry Calliham, and 220 shares
owned by James R. Calliham - Retirement Account.
(8) Includes 35,439 shares owned by J. T. Clemmons; 59,362 shares owned by
Helen W. Clemmons; 3,224 shares owned by J. T. Clemmons - IRA; 379 shares
owned by Helen W. Clemmons - IRA; 305,409 shares owned by Nipaw, LLC.
(9) Includes 709,821 shares owned by Creel Outdoor Advertising, Inc.; 178,515
shares owned by Creel Outdoor Advertising, Inc. Profit Sharing Plan;
40,117 shares owned by Carolyn W. Creel; 1,197 shares owned by Carolyn W.
Creel & James P. Creel, Jr.; 1,197 shares owned by Carolyn W. Creel & C.
Alicia Creel; 8,936 shares owned by Carolyn W. Creel, James P. Creel, Jr.
& Alicia Creel Bame; 26,870 shares owned by James P. Creel; 880 shares
owned by Alicia Creel Bame & Carolyn W. Creel; 15,395 shares owned by Sun
Graphics, Inc., Carolyn W. Creel, President.
(10) Includes 31,967 shares owned by James H. Dusenbury; 32,475 shares owned by
James H. Dusenbury - IRA.
(11) Includes 1,333 shares owned by Frank A. Thompson, II; 11,101 shares owned
by Frank A. Thompson, II - SEP; 1,790 shares owned by Frank A. Thompson II
- IRA; 2,521 shares owned by Sharon Thompson - IRA; 11,983 shares owned by
Frank A. Thompson, II & Sharon Thompson.

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PROPOSAL 1 - ELECTION OF DIRECTORS
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The Corporation's Board of Directors consists of ten members. Nine of them
are independent directors in accordance with the listing standards of the NASDAQ
Stock Market and one is a member of management. The Board is divided into three
classes with three-year staggered terms with approximately one-third of the
directors elected each year. Four directors will be elected at the meeting to
serve for a three-year term, or until their respective successors have been
elected and qualified. The nominees are James T. Clemmons, G. David Bishop,
Frank A. Thompson, II, and William O. Marsh, each of whom currently is a
director of the Corporation and Coastal Federal Bank.

It is intended that the proxies solicited by the Board of Directors will
be voted for the election of the nominees named above. If any nominee is unable
to serve, the persons named in the proxy card would vote your shares to approve
the election of any substitute proposed by the Board of Directors.
Alternatively, the Board of Directors may adopt a resolution to reduce the size
of the Board. At this time, the Board of Directors knows of no reason why any
nominee might be unable to serve.

The Board of Directors unanimously recommends a vote "FOR" the election of all
of the nominees.

Information regarding the nominees and the directors continuing in office
is provided below. Unless otherwise stated, each individual has held his current
occupation for the last five years. The age indicated in each individual's
biography is as of September 30, 2005. The indicated period for service as a
director includes service as a director of Coastal Federal Bank.

Nominees for Election as Directors

The directors standing for election are:

G. David Bishop. Mr. Bishop is Managing Director of White Harvest Trading
Co., LLC. Age 52. Director since 1991.

James T. Clemmons. Mr. Clemmons is the retired President of Coastal
Federal Bank. Age 67. Director since 1979.

William O. Marsh. Mr. Marsh is the President of Palmetto Chevrolet. Age
42. Director since September 2005.

Frank A. Thompson, II. Mr. Thompson is the President of Peoples
Underwriters, Inc. Age 48. Director since 1999.

Directors Continuing in Office

The following directors have terms ending in 2007.

J. Robert Calliham. Mr. Calliham is the President and Chief Executive
Officer of Smith, Sapp, Bookhout, Crumpler & Calliham, P.A. Age 52.
Director since 2004.

James H. Dusenbury. Mr. Dusenbury is a retired attorney/Dusenbury and
Clarkson Law Firm. He has been associated with the Bank since 1965 serving
in the capacity of general counsel, Director and Advisory Director. Age
70. Director since 1997.

Michael C. Gerald. Mr. Gerald is the President and Chief Executive Officer
of the Corporation and Coastal Federal Bank. Age 56. Director since 1986.

The following directors have terms ending in 2008.

E. Lawton Benton. Mr. Benton is President of C. L. Benton & Sons, Inc. Age
45. Director since 2004

James P. Creel. Mr. Creel is President of Creel Corporation. Age 66.
Director since 1990.

W. Cecil Worsley, III. Mr. Worsley is President and Chief Executive
Officer of Worsley Companies. Age 42. Director since September 2005.

Meetings and Committees of the Board of Directors

The Boards of Directors of the Corporation and Coastal Federal Bank
conduct their business through meetings of the Boards and through their
committees. During the fiscal year ended September 30, 2005, the Board of
Directors of the Corporation held thirteen (13) meetings and the Board of
Directors of Coastal Federal Bank held forty-nine (49) regular and special
meetings. No director attended fewer than 75% of the total meetings of the
Boards of Directors and committees on which he served, except for Director
Creel, who attended 73% of the meetings of the Boards of Directors and
committees on which he served.

The Executive Committee of the Board of Directors, consisting of Directors
Clemmons, Creel, Dusenbury and Gerald, meets as necessary between meetings of
the full Board of Directors. The Executive Committee met one (1) time during the
fiscal year ended September 30, 2005.

The Board of Directors of the Company has an Audit Committee, consisting
of Directors Calliham, Creel, and Dusenbury, which is responsible for developing
and monitoring the Company's audit program. Director Marsh was appointed to the
Audit Committee in October 2005. Each member of the Audit Committee satisfies
the standards for independence for audit committee members as defined in the
listing standards of the NASDAQ Stock Market. The Board of Directors has
determined that J. Robert Calliham is an "audit committee financial expert" as
such term is defined under the rules and regulations of the Securities and
Exchange Commission. The Audit Committee selects the Corporation's independent
registered public accounting firm and meets with them to discuss the results of
the annual audit and any related matters. The Audit Committee also receives and
reviews the reports and findings and other information presented to them by
Coastal Federal Bank's officers regarding financial reporting policies and
practices. The Audit Committee met eight (8) times during the fiscal year ended
September 30, 2005. The Audit Committee operates under a written charter, a copy
of which was an appendix to the Corporation's 2004 Annual Meeting Proxy
Statement filed with the Securities and Exchange Commission on December 19,
2003.

The Compensation and Benefits Committee, consisting of Directors Clemmons,
Creel, and Dusenbury, is responsible for all matters regarding the Corporation's
and Coastal Federal Bank's associate compensation and benefit programs. Each
member of the Compensation and Benefits Committee is independent as independence
for compensation committee members is defined under the listing standards of the
NASDAQ Stock Market. This committee met three (3) times during the fiscal year
ended September 30, 2005. The Compensation and Benefits Committee operates under
a written charter.

Directors Benton, Bishop, and Thompson act as the Nominating Committee for
selecting the nominees for election as directors. The Nominating Committee met
two (2) times in its capacity as the Nominating Committee during the fiscal year
ended September 30, 2005. Directors Marsh and Worsley were appointed to the
Nominating Committee in October 2005. Each member of the Nominating Committee is
independent as independence for Nominating Committee members is defined under
the listing standards of the NASDAQ Stock Market. The Nominating Committee acts
under a written charter adopted by the Board of Directors, a copy of which was
included as an appendix to the Corporation's 2005 Annual Meeting Proxy Statement
filed with the Securities and Exchange Commission on December 17, 2004. The
Corporation's Bylaws provide for Shareholder nomination of directors. See
"Shareholder Proposals and Nominations".

Directors' Compensation

Members of the Board of Directors of Coastal Federal Bank receive a fee of
$12,000 annually, except for the Chairman of the Board, who receives $19,500
annually. Members of the Board of Directors of Coastal Financial receive $2,500
annually. Honorary Directors of Coastal Financial receive $1,000 annually.
Non-Associate directors who are members of the Coastal Federal Bank's Loan
Committee receive $50 per committee meeting.

2000 Stock Option and Incentive Plan. At the 2000 Annual Meeting, the
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Corporation's Shareholders approved the 2000 Stock Option Plan. All Directors
participate in the 2000 Stock Option Plan. On January 25, 2005, each Director
received stock options to purchase 4,840 shares of the Corporation's common
stock at an exercise price of $15.91 per share. On September 21, 2005, each
Director received stock options to purchase 3,000 shares of the Corporation's
common stock at an exercise price of $14.50 per share and 3,000 shares of the
Corporation's common stock at an exercise price of $17.00 per share. All options
granted at both dates are immediately exerciseable.

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EXECUTIVE COMPENSATION

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Summary Compensation Table

The following information is furnished for the Chief Executive Officer and
the four other Named Executive Officers.

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SUMMARY COMPENSATION TABLE (1)
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Annual Compensation
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Long-Term
Compensation
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Awards
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Securities
Name and Year Salary Bonus Other Annual Underlying All Other
Principal ($)(1) ($)(2) Compensation Options Compensation
Position ($)(3) (4) ($)(5)
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Michael C. Gerald, 2005 260,400 198,895 18,775 78,025 9,538
President, Chief 2004 248,000 252,982 18,375 34,812 13,000
Executive Officer 2003 236,250 193,351 19,625 35,519 6,000
& Director

Jimmy R. Graham, 2005 151,200 111,756 -0- 55,030 9,375
Executive Vice 2004 144,000 143,615 -0- 23,916 11,632
President 2003 136,500 108,840 -0- 25,688 9,242

Jerry L. Rexroad, 2005 204,750 145,492 4,520 55,030 9,324
Executive Vice 2004 195,000 187,094 4,270 23,916 12,474
President & Chief 2003 185,000 140,850 5,900 25,688 8,857
Financial Officer

Steven J. Sherry, 2005 160,387 117,544 -0- 55,030 9,407
Executive Vice 2004 152,750 150,732 -0- 23,916 12,133
President 2003 145,000 114,450 -0- 25,688 10,954

Phillip G. Stalvey, 2005 190,575 136,562 850 55,030 9,304
Executive Vice 2004 181,500 176,114 850 23,916 12,290
President 2003 172,000 132,270 1,700 25,688 8,947

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(1) Except for directors' fees paid for service on the Board of Directors of
the Corporation, compensation, including fringe benefits, is paid by
Coastal Federal Bank.
(2) Reflects bonuses awarded for the fiscal year which were paid in subsequent
fiscal year.
(3) Reflects directors' fees received during the fiscal year for service on
the Board of Directors of the Corporation and/or its subsidiaries. Does
not include perquisites, which did not exceed, in the aggregate, the
lesser of $50,000 or 10% of salary and bonus.
(4) Reflects adjustments for 10% stock dividends paid on January 20, 2005 and
November 25, 2005.
(5) Consists of employer contributions to the 401k Profit Sharing Plan & Trust
of Coastal Financial Corporation.

Option Grants Table

The following table sets forth the stock options granted under the 2000
Stock Option Plan to the individuals named in the Summary Compensation Table
during the fiscal year ended September 30, 2005. Also listed are the
hypothetical gains or "options spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term. The table reflects adjustments for 10% stock dividends paid on
January 20, 2005 and November 25, 2005.

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INDIVIDUAL GRANTS
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Potential Realizable Value
Number of Percentage of at Assumed Annual Rates
Securities Total of Stock Price Appreciation
Underlying Options For Option Term (1)
Options Granted to Exercise or ----------------------------
Granted Associates Base Price
In Fiscal Per Share Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
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Michael C. Gerald 5,324 0.67 14.46 2015 48,419 122,699
30,161 3.77 12.59 2014 238,862 605,299
23,840 2.98 13.18 2015 195,482 497,364
18,700 2.34 15.45 2015 110,836 347,631

Jimmy R. Graham 24,890 3.11 12.59 2014 197,117 499,515
16,940 2.12 13.18 2015 138,904 353,412
13,200 1.65 15.45 2015 78,237 245,387

Jerry L. Rexroad 24,890 3.11 12.59 2014 197,117 499,515
16,940 2.12 13.18 2015 138,904 353,412
13,200 1.65 15.45 2015 78,237 245,387

Phillip G. Stalvey 24,890 3.11 12.59 2014 197,117 499,515
16,940 2.12 13.18 2015 138,904 353,412
13,200 1.65 15.45 2015 78,237 245,387

Steven J. Sherry 24,890 3.11 12.59 2014 197,117 499,515
16,940 2.12 13.18 2015 138,904 353,412
13,200 1.65 15.45 2015 78,237 245,387
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(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises depend on the future performance of
Coastal Financial's common stock. There can be no assurance that the amounts
reflected in this table will be achieved.

Option Exercise And Fiscal Year End Option Value Table

The following table shows stock option exercises by the individuals named
in the Summary Compensation Table during the fiscal year ended September 30,
2005. In addition, this table includes the number of shares covered by both
exercisable and non-exercisable options as of September 30, 2005. Also reported
are the values for "in-the-money" options, which represent the positive spread
between the exercise price of any such existing options and the year-end price
of Coastal Financial's common stock. The table reflects adjustments for 10%
stock dividends paid on January 20, 2005 and November 25, 2005.

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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------------------------------
Dollar Value of
Number of Unexercised
Unexercised In-the-Money
Number of Options at Options at
Shares FY-End FY-End
Acquired Dollar
on Value Exercisable/ Exercisable/
Name Exercise Realized ($) Unexercisable Unexercisable ($)
- --------------------------------------------------------------------------------------------------------

Michael C. Gerald -- -- 394,776/17,171 2,447,703/155,393

Jimmy R. Graham 28,848 373,296 273,868/14,538 1,688,853/132,142

Jerry L. Rexroad 26,577 320,964 267,579/14,538 1,611,779/132,142

Phillip G. Stalvey -- -- 251,543/14,538 1,452,378/132,142

Steven J. Sherry 11,465 125,129 147,449/14,538 557,188/132,142

========================================================================================================

Employment Agreements

Coastal Federal Bank and the Corporation entered into employment
agreements with Messrs. Gerald, Graham, Rexroad, Sherry and Stalvey effective as
of October 24, 2005. The agreements with Messrs. Gerald, Rexroad and Stalvey
have a term of three years and the agreements with Messrs. Graham and Sherry
have a one-year term. The agreements are renewed automatically on a daily basis
for an additional day beyond their current expiration dates, unless one of the
parties gives at least sixty days' notice of non-renewal. The agreements provide
for annual base salaries of $275,000 for Mr. Gerald, $160,000 for Mr. Graham,
$217,000 for Mr. Rexroad, $168,500 for Mr. Sherry, and $201,000 for Mr. Stalvey.

The agreements address certain payments to be made upon an executive's
death, disability, retirement, voluntary termination or termination with just
cause (as defined in the agreement). Upon an executive's death, his estate
receives any compensation due him through the last day of the calendar month of
his death. If the executive becomes disabled for more than one hundred eighty
days, he will continue to receive seventy-five percent of his monthly base
salary through the earliest of the date of his death, his sixty-fifth birthday
or the third anniversary of his termination date (first anniversary of
termination for Messrs. Graham and Sherry). Upon retirement or other voluntary
termination of employment, the executive receives any compensation and vested
employee benefits payable through his termination date. If the Corporation or
Coastal Federal Bank terminates the executive's employment for just cause, the
executive receives no further compensation or benefits following his termination
date.

The executives also receive payments upon a termination by the Corporation
or Coastal Federal Bank without just cause or upon a voluntary termination
without good reason. Good reason, as defined under the agreement, includes the
following: a material reduction in responsibility or authority or a change in
reporting relationship; assignment of duties inconsistent with the executive's
skills and experience; a reduction in salary or benefits (other than a general
reduction affecting all benefit plan participants) or, following a change in
control, a reduction in salary or benefits from those provided prior to the
change in control; a termination of incentive and benefit plans resulting in a
material reduction in their aggregate value to the executive or the required
relocation of the executive's principal business office or place of residence by
more than 35 miles from their current locations. Good

reason for termination also includes a voluntary termination of employment for
any reason during the period beginning three months prior to a change in control
and ending twelve months after a change in control. Upon termination without
just cause or with good reason, the executive receives base salary and cash
bonus, continued employer contributions under employee benefit plans and health
and welfare benefits for the remaining term of the agreement.

The executives receive a change in control benefit under their agreements
if they are terminated without just cause or voluntarily terminate employment
with good reason during the period beginning three months prior to a change in
control and ending twelve months after a change in control. The change in
control benefit equals three times (one times in the case of Messrs. Graham and
Sherry) the sum of the executive's current base salary and his highest cash
bonus paid or accrued during the three fiscal years preceding the change in
control. The executives also receive continued employer contributions to
employee benefit plans and continued health and welfare coverage for a period of
thirty-six months (twelve months in the case of Messrs. Graham and Sherry)
following termination of employment in connection with a change in control.

The Corporation and Coastal Federal Bank have agreed to provide a tax
"gross-up" payment to indemnify the executives in the event any change in
control payments they receive under the agreements are subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code on excess parachute
payments, as determined pursuant to Section 280G of the Internal Revenue Code.
The Corporation and Coastal Federal Bank have also agreed to provide standard
legal indemnification and liability insurance, in accordance with applicable
laws and regulations.

For a period of one year following a termination of employment without
just cause or with good reason in the ordinary course of business, the
executives agree not to serve as officers, directors or employees of competing
financial institutions or interfere with the Corporation's or Coastal Federal
Bank's existing employment relationships.

Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this proxy statement, in whole or in part, the following
Report of the Compensation and Benefits Committee, the Stock Performance Graph
and the Audit Committee Report shall not be incorporated by reference into any
such filings.

Report of the Compensation and Benefits Committee. The Compensation and
Benefits Committee of the Board of Directors of the Corporation is responsible
for establishing, implementing and monitoring all compensation policies of the
Corporation and its primary operating subsidiary, Coastal Federal Bank. The
Committee is also responsible for evaluating the performance of the Chief
Executive Officer of the Corporation and recommending appropriate compensation
levels. The Chief Executive Officer evaluates the performance of executive
officers of the Corporation and recommends individual compensation levels to the
Compensation and Benefits Committee.

The Compensation and Benefits Committee believes that a compensation plan
for executive officers, including the Chief Executive Officer, should take into
account management skills, long-term performance results and Shareholder
returns. Compensation policies must be maintained to promote: 1) the attraction
and retention of highly qualified executives; 2) motivation of executives that
is related to the performance of the individual and the Corporation; 3) current
and long-term performance; and 4) a financial interest in the success of the
Corporation similar to the interest of its Shareholders.

The Corporation's current compensation plan involves a combination of
salary and bonus to reward short-term performance and grants of stock options to
encourage long-term performance. The salary levels of the executive officers,
including the Chief Executive Officer, are designed to be competitive within the
financial services industry. Compensation surveys are utilized to determine
appropriate salary adjustments.

A 401(k) plan, in which all executive officers, including the Chief
Executive Officer, and Associates of Coastal Financial may participate, has been
designed to align their interest with those of the Shareholders of the
Corporation. Matching contributions to the 401(k) plan are paid based upon the
attainment of established levels of the Corporation's return on average
Shareholders' equity.

The Corporation's Executive Bonus Plan, which includes the Chief Executive
Officer, provides for the payment of a bonus on a graduated scale if the
Corporation's consolidated return on average equity, excluding accumulated
unrealized gains or losses on the securities portfolio, equals or exceeds 14%.
Non-recurring items and non-operational items, such as gain (losses) on
investments securities and early prepayment penalties on Federal Home Loan Bank
advances, as determined by the Corporation's Board of Directors, are excluded
from net income in

computing the Corporation's return on average Stockholders' equity ("Return on
Equity"). The Corporation's Return on Equity, adjusted as discussed above, in
fiscal 2005 was 19.16%. This compares to a Return on Equity, adjusted as
discussed above, in fiscal 2004 of 20.38%. The Executive Bonus Plan, escalates
upon the attainment of higher levels of Return on Equity.

Stock options are the Corporation's primary long-term compensation program
designed to reward the Chief Executive Officer and executives performance
consistent with performance that benefits Shareholders. Awards of stock options
are intended to provide the Chief Executive Officer and other executives with
increased motivation and incentive to exert their best effort on behalf of the
Corporation by enlarging their personal stake in its success through the
opportunity to increase their stock ownership in the Corporation. Options issued
to the Chief Executive Officer and other executives are at a price equal to the
closing price of the Corporation's stock on the date of grant in order to ensure
that any value derived from the grant is realized by Shareholders generally. The
amount of options granted to the Chief Executive Officer and to each other
Executive Officer is based upon the Corporation's performance, the Officer's
performance and relative responsibilities within the Corporation.

Compensation of the Chief Executive Officer. During the fiscal year ended
September 30, 2005, the base compensation of Michael C. Gerald, President and
Chief Executive Officer of the Corporation, was $260,400. In addition, he
received a performance bonus, based on the above referenced criteria, of
$198,895 and other compensation totaling $28,313 as set forth in the Summary
Compensation Table appearing earlier in this proxy statement. This resulted in
total compensation of $487,608. In addition, Mr. Gerald received 78,025 stock
options during the fiscal year ended September 30, 2005. These shares reflect
adjustment for 10% stock dividends paid on January 20, 2005 and November 25,
2005. The Compensation and Benefits Committee believes that Mr. Gerald's
compensation is appropriate based upon his performance in managing the
Corporation and the Corporation's financial performance during the 2005 fiscal
year.

The Compensation and J. T. Clemmons James P. Creel
- --------------------
Benefits Committee James H. Dusenbury
- ------------------

Compensation Committee Interlocks and Insider Participation. There are no
interlocks or insider participation with respect to the Compensation and
Benefits Committee of the Board of Directors of the Corporation.

Performance Graph. The following graph compares the Corporation's cumulative
Shareholder return on its common stock with the return on the Nasdaq Composite
Index and a peer group, the Nasdaq Bank Index. All cumulative returns assume the
investment of $100 in each of the Corporation's Shares common stock, the Nasdaq
Bank Index and the Nasdaq Composite Index on September 30, 2000.

[GRAPH OMITTED]

PERFORMANCE COMPARISON DATA
FIVE YEARS ENDED 09/30/2005

9/30/2000 9/30/2001 9/30/2002 9/30/2003 9/30/2004 9/30/2005

Corporation $100.00 $191.00 $262.80 $328.81 $411.16 $470.28
NASDAQ Bank Index $100.00 $110.09 $115.89 $144.37 $170.44 $187.35
NASDAQ Composite Index $100.00 $ 40.86 $ 32.19 $ 49.04 $ 52.09 $ 59.45

- --------------------------------------------------------------------------------

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

- --------------------------------------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's executive officers and directors, and persons who own more
than 10% of any registered class of the Corporation's equity securities, to file
reports of ownership and changes in ownership with the Securities Exchange
Commission. Executive officers, directors and greater than 10% Shareholders are
required by regulation to furnish the Corporation with copies of all Section
16(a) reports they file.

Based solely on its review of the copies of the reports it has received
and written representation provided to the Corporation from the individuals
required to file the reports, the Corporation believes that each of the
Corporation's executive officers and directors has complied with applicable
reporting requirements for transactions in Coastal Financial common stock during
the fiscal year ended September 30, 2005, except as follows: Executive officer
Steven J. Sherry did not timely file a report for the sale of 1,039 shares that
occurred during November 2004. This sale was subsequently reported in January
2005. Executive officer Jimmy R. Graham did not timely file a report for the
sale of 210 shares owned by his spouse that occurred during November 2004. This
sale was subsequently reported in January 2005. Executive officer E. Haden
Hamilton, Jr. did not timely file a report for the exercise of 1,538 options
that occurred during November 2004. This exercise of options was subsequently
reported in January 2005. Executive officer Phillip G. Stalvey did not timely
file a report for the sale of 11,900 shares that occurred during February 2005.
This sale was subsequently reported in March 2005. Director Frank A. Thompson,
II did not timely file a report for the purchase of 450 shares that occurred
during February 2005. This purchase was subsequently reported in March 2005.

- --------------------------------------------------------------------------------

TRANSACTIONS WITH MANAGEMENT

- --------------------------------------------------------------------------------

The Sarbanes-Oxley Act of 2002 generally prohibits loans by the
Corporation to its executive officers and directors. However, the Sarbanes-Oxley
Act contains a specific exemption from such prohibition for loans by Coastal
Federal Bank to its executive officers and directors in compliance with federal
banking regulations. Federal regulations require that all loans or extensions of
credit to executive officers and directors of insured financial institutions
must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, except for loans made pursuant to programs generally available to
all employees, and must not involve more than the normal risk of repayment or
present other unfavorable features. Coastal Federal Bank is therefore prohibited
from making any new loans or extensions of credit to executive officers and
directors at different rates or terms than those offered to the general public,
except for loans made pursuant to programs generally available to all employees,
and has adopted a policy to this effect. In addition, loans made to a director
or executive officer in an amount that, when aggregated with the amount of all
other loans to such person and his or her related interests, are in excess of
the greater of $25,000 or 5% of the institution's capital and surplus (up to a
maximum of $500,000) must be approved in advance by a majority of the
disinterested members of the Board of Directors.

- --------------------------------------------------------------------------------

PROPOSAL 2 - RATIFICATION OF AN AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO INCREASE THE CORPORATION'S AUTHORIZED COMMON STOCK FROM
25,000,000 TO 50,000,000 SHARES

The Board has unanimously adopted and proposed for Shareholder approval an
amendment to the Corporation's Certificate of Incorporation to increase the
Corporation's authorized Common Stock from 25,000,000 to 50,000,000 shares. The
Corporation's Certificate of Incorporation currently authorizes the issuance of
25,000,000 shares of Common Stock and 1,000,000 shares of serial preferred
stock. As of December 5, 2005, 19,479,469 shares of the Corporation's Common
Stock were issued and outstanding. If the proposed change in authorized capital
is approved by Shareholders, the Corporation will have approximately 27,500,000
shares of unissued and unreserved shares of Common Stock available for issuance
in the future upon filing of a Certificate of Amendment with the Secretary of
State of Delaware. However, if Shareholders approve the proposed amendment, the
Board of Directors retains discretion under Delaware law not to implement the
proposed amendment, in which case the number of authorized shares would remain
at the current level.

The Board of Directors believes that this proposed amendment is in the
best interests of the Corporation and its Shareholders. The proposed increase in
the number of authorized shares would give the Board the necessary flexibility
to issue Common Stock in connection with stock dividends and splits,
acquisitions, financing and employee benefits and for general corporate purposes
without the expense and delay incidental to obtaining Shareholders approval of
an amendment to the Certificate of Incorporation increasing the number of
authorized shares at the time of such action, except as may be required for a
particular issuance by applicable law or by the rules of any stock exchange on
which the Corporation's securities may then be listed.

Although the Board of Directors has no present intention of issuing
additional shares for such purposes, the proposed increase in the number of
authorized shares of Common Stock may enable the Board of Directors to render
more difficult or discourage an attempt by another person or entity to obtain
control of the Corporation. Such additional shares could be issued by the Board
in a public or private sale, merger or similar transaction, increasing the
number of outstanding shares and thereby diluting the equity interest and voting
power of a party attempting to obtain control of the Corporation. The amendment
to the Certificate of Incorporation is not being proposed in response to any
known effort to acquire control of the Corporation.

If the amendment of the Certificate of Incorporation is approved, the
first sentence of Article VI of the Corporation's Certificate of Incorporation
would read as follows:

"The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 51,000,000 of which 50,000,000 are
to be shares of Common stock, $.01 par value per share, and of which
1,000,000 are to be shares of serial preferred stock, $.01 par value per
share."

The remaining text of Article VI of the Corporation's Certificate of
Incorporation would remain unchanged.

The amendment to the Corporation's Certificate of Incorporation to
increase the number of authorized shares of Common Stock requires the
affirmative vote of a majority of the outstanding shares of Coastal Financial
common stock entitled to vote at the Meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE CORPORATION'S CERTIFICATE OF INCORPORATION TO INCREASE THE
CORPORATION'S AUTHORIZED COMMON STOCK FROM 25,000,000 TO 50,000,000 SHARES.

- --------------------------------------------------------------------------------

AUDIT COMMITTEE REPORT

- --------------------------------------------------------------------------------

The Audit Committee of the Corporation's Board of Directors is comprised
of four directors and operates under a written charter adopted by the Board of
Directors. The Board of Directors has determined that each Audit Committee
member is independent in accordance with the listing standards of the NASDAQ
Stock Market, Inc.

The Corporation's management is responsible for the preparation and
presentation of the Corporation's consolidated financial statements, its overall
financial reporting process and for maintaining appropriate internal controls
and procedures that provide for compliance with accounting standards. The
independent registered public accounting firm is responsible for performing an
independent audit of the Corporation's consolidated financial statements and
issuing an opinion on the conformity of those financial statements with United
States generally accepted accounting principles and annually auditing
management's assessment of the effectiveness of internal controls over financial
reporting. The Audit Committee oversees the Corporation's internal control over
financial reporting on behalf of the Board of Directors.

In this context, the Audit Committee has met and held discussions with
management and the independent registered public accounting firm. Management has
represented to the Audit Committee that the Corporation's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles and the Audit Committee has reviewed and discussed the consolidated
financial statements with management and the independent registered public
accounting firm. The Audit Committee has discussed with the independent
registered public accounting firm matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication With Audit Committees), including
the quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity of the disclosures in
the financial statements.

In addition, the Audit Committee has received the written disclosures and
the letter from the independent registered public accounting firm required by
the Independence Standards Board Standard No. 1 (Independence Discussions With
Audit Committees) and has discussed with the independent registered public
accounting firm their independence from the Corporation and its management. In
concluding that the independent registered public accounting firm is
independent, the Audit Committee considered, among other factors, whether the
non-audit services provided by the independent registered public accounting firm
were compatible with its independence.

The Audit Committee discussed with the Corporation's independent
registered public accounting firm the overall scope and plans for their audit.
The Audit Committee meets with the independent registered public accounting
firm, with and without management present, to discuss the results of their
examination, their evaluation of the Corporation's internal control over
financial reporting, and the overall quality of the Corporation's financial
reporting process.

In performing all of these functions, the Audit Committee acts only in an
oversight capacity. In its oversight role, the Audit Committee relies on the
work and assurances of the Corporation's management, which has the primary
responsibility for financial statements and reports, and of the independent
registered public accounting firm who, in their report, express an opinion on
the conformity of the Corporation's financial statements to United States
generally accepted accounting principles. The Audit Committee's oversight does
not provide it with an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles or
policies, or appropriate internal control over financial reporting designed to
assure compliance with accounting standards and applicable laws and regulations.
Furthermore, the Audit Committee's considerations and discussions with
management and the independent registered public accounting firm do not assure
that the Corporation's financial statements are presented in accordance with
generally accepted accounting principles, that the audit of the Corporation's
financial statements has been carried out in accordance with the standards of
the Public Company Accounting Oversight Board (United States) or that the
Corporation's independent registered public accounting firm is in fact
"independent."

In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the Corporation's audited consolidated financial statements be included in
the Corporation's Annual Report on Form 10-K for the year ended September 30,
2005 for filing with the Securities and Exchange Commission. The Audit Committee
has appointed KPMG LLP as the Corporation's independent registered public
accounting firm for the fiscal year ending September 30, 2006.

Members of the Audit Committee:

J. Robert Calliham - Chairman
James P. Creel
James H. Dusenbury
William O. Marsh

- --------------------------------------------------------------------------------

AUDITING AND RELATED FEES

- --------------------------------------------------------------------------------

Independent Registered Public Accounting Firm

KPMG LLP was the Corporation's independent registered public accounting
firm for the 2005 fiscal year. The Audit Committee has appointed KPMG LLP to be
the Corporation's independent registered public accounting firm for the 2006
fiscal year. A representative of KPMG LLP is expected to be present at the
annual meeting to respond to appropriate questions from Shareholders and will
have the opportunity to make a statement should he or she desire to do so.

Audit Fees and Non-Audit Fees

The following table sets forth the fees billed to the Company for the
fiscal years ended September 30, 2005 and 2004 by KPMG LLP:

2004 2005
---- ----

Audit fees (1) $92,000 $142,500

Audit related fees (2) 27,500 158,384
Tax fees (3) 32,875 34,975
All other fees -0- -0-

(1) Audit fees consisted primarily of audit of the Company's annual
financial statements of Coastal Financial Corporation and for the
reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q.
(2) Audit related fees consisted of fees related to FDICIA attestation
services in 2004, a Securities and Exchange Commission registration
statement (Form S-8) in 2004 and fees related to compliance with
Section 404 of the Sarbanes-Oxley Act of 2002 regarding the
Company's internal controls over financial reporting in 2005. Audit
fees include fees related to FDICIA attestation services for 2005.
(3) Consists of tax filing and tax-related compliance.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting Firm

The Audit Committee is responsible for appointing and overseeing the work
of the independent registered public accounting firm and setting the independent
registered public accounting firm's compensation. In accordance with its
charter, the Audit Committee approves, in advance, all audit and permissible
non-audit services to be performed by the independent registered public
accounting firm. This approval process is intended to ensure that the
independent registered public accounting firm does not provide any non-audit
services to the Corporation that are prohibited by law or regulation.

- --------------------------------------------------------------------------------

NOMINATING/CORPORATE GOVERNANCE COMMITTEE PROCEDURES

- --------------------------------------------------------------------------------

General

It is the policy of the Nominating/Corporate Governance Committee of the
Board of Directors of the Corporation to consider director candidates
recommended by Shareholders who appear to be qualified to serve on the
Corporation's Board of Directors. The Nominating/Corporate Governance Committee
may choose not to consider an unsolicited recommendation if no vacancy exists on
the Board of Directors and the Nominating/Corporate Governance Committee does
not perceive a need to increase the size of the Board of Directors. In order to
avoid the unnecessary use of the Nominating/Corporate Governance Committee's
resources, the Nominating/Corporate Governance Committee will consider only
those director candidates recommended in accordance with the procedures set
forth below. The Nominating/Corporate Governance Committee acts under a written
charter adopted by the Board of Directors on June 1, 2004.

Procedures To Be Followed By Shareholders

To submit a recommendation of a director candidate to the
Nominating/Corporate Governance Committee, a Shareholder should submit the
following information in writing, addressed to the Chairman of the
Nominating/Corporate Governance Committee, care of the Corporate Secretary, at
the main office of the Corporation:

1. The name of the person recommended as a director candidate;

2. All information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended;

3. The written consent of the person being recommended as a director
candidate to being named in the proxy statement as a nominee and to
serving as a director if elected;

4. As to the Shareholder making the recommendation, the name and
address, as they appear on the Corporation's books, of such
Shareholder; provided, however, that if the Shareholder is not a
registered holder of the Corporation's common stock, the Shareholder
should submit his or her name and address along with a current
written statement from the record holder of the shares that reflects
ownership of the Company's common stock; and

5. A statement disclosing whether such Shareholder is acting with or on
behalf of any other person and, if applicable, the identity of such
person.

In order for a director candidate to be considered for nomination at the
company's annual meeting of Shareholders, the recommendation must be received by
the Nominating/Corporate Governance Committee at least 120 calendars days prior
to the date the Company's proxy statement was released to Shareholders in
connection with the previous year's annual meeting, advanced by one year.

Minimum Qualifications

The Nominating/Corporate Governance Committee has adopted a set of
criteria that it considers when it selects individuals to be nominated for
election to the Board of Directors. A candidate must meet any qualification
requirements set forth in any Board or committee governing documents.

The Nominating/Corporate Governance Committee will consider the following
criteria in selecting nominees; financial, regulatory and business experience;
familiarity with and participation in the local community; integrity, honesty
and reputation; dedication to the Corporation and its Shareholders;
independence; and any other relevant factors, including age, diversity, size of
the Board of Directors and regulatory disclosure obligations.

In addition prior to nominating an existing director for re-election to
the Board of Directors, the Nominating/Corporate Governance Committee will
consider and review an existing director's Board and committee attendance and
performance; length of Board service; experience, skills and contributions that
the existing director brings to the Board; and independence.

Process For Identifying and Evaluating Nominees

The process that the Nominating/Corporate Governance Committee follows
when it identifies and evaluates individuals to be nominated for election to the
Board of Directors is as follows:

Identification. For purposes of identifying nominees for the Board of
Directors, the Nominating/Corporate Governance Committee relies on personal
contacts of the committee members and other members of the Board of Directors,
as well as their knowledge of members of the communities served by Coastal
Financial. The Nominating/Corporate Governance committee also will consider
director candidates recommended by Shareholders in accordance with the policy
and procedures set forth above. The Nominating/Corporate Governance Committee
has not previously used an independent search firm to identify nominees.

Evaluation. In evaluating potential nominees, the Nominating/Corporate
Governance Committee determines whether the candidate is eligible and qualified
for service on the Board of Directors by evaluating the candidate under the
selection criteria set forth above. In addition, the Nominating/Corporate
Governance Committee will conduct a check of the individual's background and
interview the candidate.

- --------------------------------------------------------------------------------

BOARD POLICIES REGARDING SHAREHOLDER COMMUNICATIONS AND ATTENDANCE AT
ANNUAL MEETINGS

- --------------------------------------------------------------------------------

The Corporation encourages Shareholder communications to the Board of
Directors and/or individual directors. Shareholders who wish to communicate with
the Board of Directors or an individual director should send their communication
to the care of Susan J. Cooke, Corporate Secretary, Coastal Financial
Corporation, 2619 Oak Street, Myrtle Beach, South Carolina 29577. Communications
regarding financial or accounting policies should be sent to the attention of
the Chairman of the Audit Committee. All other communications should be sent to
the attention of the Chairman of the Nominating/Corporate Governance Committee.

Directors are expected to prepare themselves for and to attend all Board
meetings, the Annual Meeting of Shareholders and the meetings of the committees
on which they serve, with the understanding that on occasion a director may be
unable to attend a meeting. All of the Corporation's directors attended the
Corporation's 2005 Annual Meeting of Shareholders.

- --------------------------------------------------------------------------------

SHAREHOLDER PROPOSALS AND NOMINATIONS

- --------------------------------------------------------------------------------

Proposals that Shareholders seek to have included in the proxy statement
for the Corporation's next annual meeting must be received by the Corporation no
later than August 21, 2006. If next year's annual meeting is held on a date more
than 30 calendar days from January 31, 2007, a Shareholder proposal must be
received by a reasonable time before the Corporation begins to print and mail
its proxy solicitation for such annual meeting. Any such proposals will be
subject to the requirements of the proxy rules adopted by the Securities and
Exchange Commission.

- --------------------------------------------------------------------------------

The Company's Bylaws provide that in order for a Shareholder to make
nominations for the election of directors or proposals for business to be
brought before the annual meeting, a Shareholder must deliver notice of such
nominations and/or proposals to the Corporate Secretary not less than 30 nor
more than 60 days prior to the date of the annual meeting; provided that if less
than 40 days' notice of the annual meeting is given to Shareholders, such notice
must be delivered not later than the close of the tenth day following the day on
which notice of the annual meeting was mailed to Shareholders. A copy of the
Bylaws may be obtained from the Corporation.

- --------------------------------------------------------------------------------

MISCELLANEOUS

- --------------------------------------------------------------------------------

The Corporation will pay the cost of this proxy solicitation. The
Corporation will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Coastal Financial common stock. In addition to
soliciting proxies by mail, directors, officers and regular associates of the
Corporation may solicit proxies personally or by telephone. None of these
persons will receive additional compensation for these activities.

The Corporation's Annual Report to Shareholders has been mailed to
Shareholders of record as of the close of business on December 5, 2005. Any
Shareholder who has not received a copy of the Annual Report may obtain a copy
by writing to the Corporate Secretary of the Corporation. The Annual Report is
not to be treated as part of the proxy solicitation material or as having been
incorporated in this proxy statement by reference.

If a Shareholder and others who share the Shareholder's address own shares
in "street name", the Shareholder's broker or other holder of record may be
sending only one Annual Report and Proxy Statement to the Shareholder's address.
This practice, known as "householding," is designed to reduce printing and
postage costs. However, if a Shareholder residing at such an address wishes to
receive a separate Annual Report or Proxy Statement in the future, the
Shareholder should contact the broker or other holder of record. If a
Shareholder owns shares in "street name" and is receiving multiple copies of the
Annual Report and Proxy Statement, the Shareholder may request householding by
contacting its broker or other holder of record.

A copy of the Corporation's Form 10-K, as filed with the Securities
Exchange Commission for the year ended September 30, 2005, may be obtained or
viewed on www.coastalfederal.com by clicking on Investor Services.
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BY ORDER OF THE BOARD OF DIRECTORS

/s/ Susan J. Cooke

Susan J. Cooke
Corporate Secretary

Myrtle Beach, South Carolina
December 20, 2005

[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE

REVOCABLE PROXY
COASTAL FINANCIAL CORPORATION

ANNUAL MEETING OF SHAREHOLDERS
JANUARY 31, 2006

The undersigned hereby appoints the official proxy committee, consisting
of all of the members of the Board of Directors of Coastal Financial
Corporation, Myrtle Beach, South Carolina, with full powers of substitution to
act as attorneys and proxies for the undersigned, to vote all shares of Common
Stock of Coastal Financial Corporation which the undersigned is entitled to vote
at the Annual Meeting of Shareholders, to be held at The Breakers Resort, 2006
N. Ocean Boulevard, Myrtle Beach, South Carolina, on Tuesday, January 31, 2006,
at 2:00 p.m., Eastern Time, and at any and all adjournments thereof, as
indicated to the right:

With- For All
For hold Except
1. The election as directors of all nominees listed [_] [_] [_]
(except as marked to the contrary below):

For a Three Year Term: G. David Bishop, James T. Clemmons, William O. Marsh,
Frank A. Thompson, II

INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.

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For Against Abstain
2. Ratification of an Amendment to the Certificate of [_] [_] [_]
Incorporation to increase the Corporation's
authorized common stock from 25,000,000 to
50,000,000 shares.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSALS.

THIS PROXY, PROPERLY SIGNED AND DATED, WILL BE VOTED AS DIRECTED, BUT IF
NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS
STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE
VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME,
THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
MEETING. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE OFFICIAL PROXY
COMMITTEE TO VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE
THE NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, AND MATTERS
INCIDENT TO THE CONDUCT OF THE 2006 ANNUAL MEETING.

--------------------------
Please be sure to sign below and | Date
date this Proxy in the box provided. |
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- ----Shareholder sign above-------------------Co-holder (if any) sign above------

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^ Detach above card, sign, date and mail in postage paidenvelope provided. ^

COASTAL FINANCIAL CORPORATION

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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.

Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof and after notification to the Secretary of the
Corporation at the Meeting of the Shareholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The above signed acknowledges receipt from the Corporation prior to the
execution of this proxy, of a notice of the Meeting, a proxy statement dated
December 20, 2005 and the 2005 Annual Report to Shareholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, only one signature is required.

PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.

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