Document:

Exhibit 4.1

 

FORM
OF SUBORDINATED NOTE
 

COASTAL FINANCIAL
CORPORATION

3.375%
FIXED-TO-FLOATING RATE Subordinated Note due
September 1, 2031

THE INDEBTEDNESS
EVIDENCED BY THIS SUBORDINATED NOTE IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS (AS DEFINED IN SECTION
3 OF THIS SUBORDINATED NOTE) OF COASTAL FINANCIAL CORPORATION (THE “COMPANY”), INCLUDING OBLIGATIONS OF
THE COMPANY TO ITS GENERAL CREDITORS AND SECURED CREDITORS, AND IS UNSECURED. IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION
OF CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES. IN THE EVENT OF LIQUIDATION ALL HOLDERS OF SENIOR INDEBTEDNESS OF THE COMPANY
SHALL BE ENTITLED TO BE PAID IN FULL WITH SUCH INTEREST AS MAY BE PROVIDED BY LAW BEFORE ANY PAYMENT SHALL BE MADE ON ACCOUNT
OF PRINCIPAL OF OR INTEREST ON THIS SUBORDINATED NOTE. AFTER PAYMENT IN FULL OF ALL SUMS OWING TO SUCH HOLDERS OF SENIOR INDEBTEDNESS,
THE HOLDER OF THIS SUBORDINATED NOTE, TOGETHER WITH THE HOLDERS OF ANY OBLIGATIONS OF THE COMPANY RANKING ON A PARITY WITH THE
SUBORDINATED NOTES, SHALL BE ENTITLED TO BE PAID FROM THE REMAINING ASSETS OF THE COMPANY THE UNPAID PRINCIPAL AMOUNT OF THIS
SUBORDINATED NOTE PLUS ACCRUED AND UNPAID INTEREST THEREON BEFORE ANY PAYMENT OR OTHER DISTRIBUTION, WHETHER IN CASH, PROPERTY
OR OTHERWISE, SHALL BE MADE (i) with respect to any obligation that by its terms expressly
is junior in the right of payment to the Subordinated Notes, (ii) with respect to any indebtedness between the Company and any
of its subsidiaries or affiliates, or (iii) on account OF ANY SHARES OF CAPITAL STOCK OF THE COMPANY.

THE INDEBTEDNESS
EVIDENCED BY THIS SUBORDINATED NOTE IS NOT A DEPOSIT AND IS NOT INSURED BY ANY FEDERAL AGENCY OR INSTRUMENTALITY, INCLUDING, WITHOUT
LIMITATION, THE FEDERAL DEPOSIT INSURANCE CORPORATION.

THIS
SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $250,000 AND MULTIPLES OF $1,000 IN EXCESS
THEREOF. ANY ATTEMPTED TRANSFER OF THIS SUBORDINATED NOTE IN A DENOMINATION OF LESS THAN $1,000 SHALL BE DEEMED TO BE VOID AND
OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SUBORDINATED NOTE FOR
ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON THIS SUBORDINATED NOTE, AND SUCH PURPORTED TRANSFEREE SHALL
BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SUBORDINATED NOTE.

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THIS
SUBORDINATED NOTE MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THIS SUBORDINATED NOTE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE
STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO, AND
IN ACCORDANCE WITH, A REGISTRATION STATEMENT THAT IS EFFECTIVE UNDER THE SECURITIES ACT AT THE TIME OF SUCH TRANSFER; (B) TO A
PERSON THAT YOU REASONABLY BELIEVE TO BE A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT
OR TO A PERSON THAT YOU REASONABLY BELIEVE TO BE AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(A)(1), (2), (3),
(7) OR (9) OF REGULATION D UNDER THE SECURITIES ACT; OR (C) UNDER ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (INCLUDING, IF AVAILABLE, THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT).

ANY PURCHASER
OF THIS SUBORDINATED NOTE IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER ("RULE 144A") OR ANOTHER EXEMPTION UNDER THE SECURITIES
ACT. THE HOLDER OF THIS SUBORDINATED NOTE HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SUBORDINATED NOTE MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) (a) TO A PERSON WHO IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (II) TO
THE COMPANY, OR (III) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SUBORDINATED NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN CLAUSE (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144
FOR RESALE OF THE SUBORDINATED NOTE EVIDENCED HEREBY.

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CERTAIN
ERISA CONSIDERATIONS:

THE HOLDER
OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT IT
IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE
“PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS”
OF ANY PLAN MAY ACQUIRE OR HOLD THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR
THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1
OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT
PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE AND HOLDING. ANY PURCHASER OR HOLDER
OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER:
(I) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE
OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLANS, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN
ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLANS TO FINANCE SUCH PURCHASE OR (II) SUCH PURCHASE OR HOLDING WILL NOT RESULT
IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE
UNDER APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

ANY
FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH
HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN.

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No.
[  ]

COASTAL
FINANCIAL CORPORATION

3.375%
FIXED-TO-FLOATING RATE Subordinated Note due September 1, 2031

1.              Subordinated
Notes. This Subordinated Note is one of an issue of notes of Coastal Financial Corporation, a Washington corporation (the
“Company”) designated as the “3.375% Fixed-to-Floating Rate Subordinated Notes due September 1,
2031” (the “Subordinated Notes”) issued pursuant to that Subordinated Note Purchase Agreement,
dated as of August 18, 2021, by and between the Company and the purchaser of the Subordinated Notes identified on the signature
pages thereto (the “Purchase Agreement”).

2.              Payment.
The Company, for value received, promises to pay to [ ] or its registered assigns, the principal sum of Twenty-Five Million Dollars
(U.S.) ($25,000,000), plus accrued but unpaid interest on September 1, 2031 (“Stated Maturity”) and to pay
interest thereon (i) from and including August 18, 2021 (the “Issue Date”) to but excluding September 1, 2026 or the
earlier redemption date contemplated by Section 4 of this Subordinated Note, at the rate of 3.375% per annum, computed
on the basis of a 360-day year consisting of twelve 30-day months and payable semi-annually in arrears on March 1 and September
1 of each year (each payment date, a “Fixed Rate Interest Payment Date”),
beginning on the Issue Date, and (ii) from and including September 1, 2026 to but excluding the Stated Maturity or the earlier
redemption date contemplated by Section 4 of this Subordinated Note, at the rate per annum, reset quarterly, equal to the
Floating Interest Rate (as defined below) determined on the Floating Interest Determination Date (as defined below) of the applicable
interest period plus 276 basis points, computed on the basis of a 360-day year and the actual number of days elapsed and payable
quarterly in arrears (each quarterly period, a “Floating Rate Period”) on March 1, June 1, September 1 and
December 1 of each year (each payment date, a “Floating Rate Interest
Payment Date”). Dollar amounts resulting from this calculation shall be rounded to the nearest cent, with one-half cent
being rounded up. The term “Floating Interest Determination Date” means the date upon which the Floating Interest
Rate is determined by the Calculation Agent (as defined below) pursuant to the Three-Month Term SOFR Conventions (as defined below).
Any payment of principal of or interest on this Subordinated Note that would otherwise become due and payable on a day which is
not a Business Day shall become due and payable on the next succeeding Business Day, with the same force and effect as if made
on the date for payment of such principal or interest, and no interest will accrue in respect of such payment for the period after
such day; provided, that in the event that any scheduled Floating Rate Interest Payment Date falls on a day that is not a Business
Day and the next succeeding Business Day falls in the next succeeding calendar month, such Floating Rate Interest Payment Date
will be accelerated to the immediately preceding Business Day, and, in each such case, the amounts payable on such Business Day
will include interest accrued to, but excluding, such Business Day. Dollar amounts resulting from interest calculations will be
rounded to the nearest cent, with one half cent being rounded upward. Notwithstanding anything to the contrary, (i) in the event
the Three-Month Term SOFR (as defined below) is less than zero, the Three-Month Term SOFR shall be deemed to be zero, and (ii)
if a Benchmark Transition Event (as defined below) and its related Benchmark Replacement Date (as defined below) have occurred
and the Benchmark Replacement (as defined below) is less than zero, then the Benchmark Replacement shall be deemed to be zero.

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(a)            The
Company shall take such actions as are necessary to ensure that from the commencement of the Floating Rate Period for so long
as any of the Subordinated Notes remain outstanding there will at all times be a Calculation Agent appointed to calculate Three-Month
Term SOFR in respect of each Floating Rate Period. The calculation of Three-Month Term SOFR for each applicable Floating Rate
Period by the Calculation Agent will (in the absence of manifest error) be final and binding. The Calculation Agent’s determination
of any interest rate and its calculation of interest payments for any period will be maintained on file at the Calculation Agent’s
principal offices, will be made available to any Noteholder (as defined below) upon request. The Calculation Agent may be removed
by the Company. If the Calculation Agent is unable or unwilling to act as Calculation Agent or is removed by the Company, the
Company will promptly appoint a replacement Calculation Agent. The Calculation Agent may not resign its duties without a successor
having been duly appointed; provided, that if a successor Calculation Agent has not been appointed by the Company and such successor
accepted such position within thirty (30) days after the giving of notice of resignation by the Calculation Agent, then the resigning
Calculation Agent may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor
Calculation Agent with respect to such series. For the avoidance of doubt, if at any time there is no Calculation Agent appointed
by the Company, then the Company shall be the Calculation Agent. 

(b)           An
“Interest Payment Date” is either a Fixed Rate Interest Payment Date or a Floating Rate Interest Payment Date,
as applicable. 

(c)            The
“Floating Interest Rate” means: 

(i)             initially Three-Month Term SOFR (as defined below).

(ii)            Notwithstanding
the foregoing clause (i) of this Section 2(c):

(1)            If
the Calculation Agent determines prior to the relevant Floating Interest Determination Date that a Benchmark Transition Event
and its related Benchmark Replacement Date (each of such terms as defined below) have occurred with respect to Three-Month Term
SOFR, then the Company shall promptly provide notice of such determination to the Noteholders and Section 2(d) will thereafter
apply to all determinations, calculations and quotations made or obtained for the purposes of calculating the Floating Interest
Rate payable on the Subordinated Notes during a relevant Floating Rate Period.

(2)            However,
if the Calculation Agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred
with respect to Three-Month Term SOFR, but for any reason the Benchmark Replacement has not been determined as of the relevant
Floating Interest Determination Date, the Floating Interest Rate for the applicable Floating Rate Period will be equal to the
Floating Interest Rate on the last Floating Interest Determination Date for the Subordinated Notes, as determined by the Calculation
Agent.

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(d)            Effect
of Benchmark Transition Event. 

(i)             If
the Calculation Agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior
to the Reference Time (as defined below) in respect of any determination of the Benchmark (as defined below) on any date, the
Benchmark Replacement will replace the then-current Benchmark for all purposes relating to the Subordinated Notes during the relevant
Floating Rate Period in respect of such determination on such date and all determinations on all subsequent dates.

(ii)            In
connection with the implementation of a Benchmark Replacement, the Calculation Agent will have the right to make Benchmark Replacement
Conforming Changes from time to time, and such changes shall become effective without consent from the Noteholders or any other
party.

(iii)           The
Calculation Agent is expressly authorized to make certain determinations, decisions and elections under the Subordinated Notes,
including with respect to the use of Three-Month Term SOFR as the Benchmark under this Section 2(d). Any determination,
decision or election that may be made by the Calculation Agent under the terms of the Subordinated Notes, including any determination
with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date, and any
decision to take or refrain from taking any action or any selection:

(1)            will
be conclusive and binding absent manifest error;

(2)            if
made by the Company as the Calculation Agent, will be made in the Company’s sole discretion; 

(3)            if
made by the Calculation Agent other than the Company, will be made after consultation with the Company, and the Calculation Agent
will not make any such determination, decision or election to which the Company reasonably objects; and

(4)            notwithstanding
anything to the contrary in this Subordinated Note or the Purchase Agreement, shall become effective without consent from the
Noteholders or any other party.

(iv)           If
the Calculation Agent fails to make any determination, decision or election that it is required to make under the terms of the
Subordinated Notes, then the Company will make such determination, decision or election on the same basis as described above.

(v)            For
the avoidance of doubt, after a Benchmark Transition Event and its related Benchmark Replacement Date have occurred, interest
payable on this Subordinated Note for the Floating Rate Period will be an annual rate equal to the sum of the applicable Benchmark
Replacement and 276 basis points.

(vi)           If
the then-current Benchmark is Three-Month Term SOFR, the Calculation Agent will have the right to establish the Three-Month Term
SOFR Conventions, and if any of the foregoing provisions concerning the calculation of the interest rate and the payment of interest
during the Floating Rate Period are inconsistent with any of the Three-Month Term SOFR Conventions determined by the Calculation
Agent, then the relevant Three-Month Term SOFR Conventions will apply.

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(vii)         As
used in this Subordinated Note:

(1)            “Benchmark”
means, initially, Three-Month Term SOFR; provided that if the Calculation Agent determines on or prior to the Reference Time that
a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR or
the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement.

(2)            “Benchmark
Replacement” means the Interpolated Benchmark with respect to the then-current Benchmark for such Benchmark; provided
that if (a) the Calculation Agent cannot determine the Interpolated Benchmark as of the Benchmark Replacement Date or (b) the
then-current Benchmark is Three-Month Term SOFR and a Benchmark Transition Event and its related Benchmark Replacement Date have
occurred with respect to Three-Month Term SOFR (in which event no Interpolated Benchmark with respect to Three-Month Term SOFR
shall be determined), then “Benchmark Replacement” means the first alternative set forth in the order below
that can be determined by the Calculation Agent as of the Benchmark Replacement Date:

a.             Compounded
SOFR;

b.             the
sum of: (i) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the
replacement for the then-current Benchmark for the applicable Corresponding Tenor and (ii) the Benchmark Replacement Adjustment;

c.             the
sum of: (i) the ISDA Fallback Rate and (ii) the Benchmark Replacement Adjustment;

d.             the
sum of: (i) the alternate rate of interest that has been selected by the Calculation Agent as the replacement for the then-current
Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate of interest as a replacement
for the then-current Benchmark for U.S. dollar denominated floating rate securities at such time and (ii) the Benchmark Replacement
Adjustment.

(3)            “Benchmark
Replacement Adjustment” means the first alternative set forth in the order below that can be determined by the Calculation
Agent as of the Benchmark Replacement Date:

a.              the
spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value
or zero) that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;

b.             if
the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment;

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c.              the
spread adjustment (which may be a positive or negative value or zero) that has been selected by the Calculation Agent giving due
consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for
the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar denominated
floating rate securities at such time.

(4)            “Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical,
administrative or operational changes (including changes to the definition of  “Floating Rate Period,” timing
and frequency of determining rates with respect to each Floating Rate Period and making payments of interest, rounding of amounts
or tenors, and other administrative matters) that the Calculation Agent decides may be appropriate to reflect the adoption of
such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Calculation Agent decides that
adoption of any portion of such market practice is not administratively feasible or if the Calculation Agent determines that no
market practice for use of the Benchmark Replacement exists, in such other manner as the Calculation Agent determines is reasonably
necessary).

(5)            “Benchmark Replacement Date” means the earliest to occur of the following events with respect to the
then-current Benchmark:

a.             in
the case of clause (a) of the definition of “Benchmark Transition Event,” the relevant Reference Time
in respect of any determination; or

b.             in
the case of clause (b) or (c) of the definition of “Benchmark Transition Event,” the later of (i) the
date of the public statement or publication of information referenced therein and (ii) the date on which the administrator
of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or

c.             in
the case of clause (d) of the definition of “Benchmark Transition Event,” the date of the public statement
or publication of information referenced therein.

For
the avoidance of doubt, for purposes of the definitions of Benchmark Replacement Date and Benchmark Transition Event, references
to the Benchmark also include any reference rate underlying the Benchmark (for example, if the Benchmark becomes Compounded SOFR,
references to the Benchmark would include SOFR).

For
the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than,
the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the
Reference Time for such determination.

(6)            “Benchmark
Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

a.              if
the Benchmark is Three-Month Term SOFR, (i) the Relevant Governmental Body has not selected or recommended a forward-looking term
rate for a tenor of three months based on SOFR, (ii) the development of a forward-looking term rate for a tenor of three months
based on SOFR that has been recommended or selected by the Relevant Governmental Body is not complete or (iii) the Company determines
that use of a forward-looking rate for a tenor of three months based on SOFR is not administratively feasible;

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b.             a
public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that such administrator
has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or
publication, there is no successor administrator that will continue to provide the Benchmark;

c.              a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the
central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark,
a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency
or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased
or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication,
there is no successor administrator that will continue to provide the Benchmark; or

d.             a
public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing
that the Benchmark is no longer representative.

(7)            “Business Day” means any day that is not a Saturday or Sunday and that is not a day on which banks in
the State of Washington are generally authorized or required by law or executive order to be closed. 

(8)            “Calculation Agent” means the agent (which may be the Company or an Affiliate of the Company) as may
be appointed by the Company to act as Calculation Agent for the Subordinated Notes prior to the commencement of the Floating Rate
Period to act in accordance with Section 2. The initial Calculation Agent shall be the Company.

(9)            “Compounded
SOFR” means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for
this rate, and conventions for this rate being established by the Calculation Agent in accordance with:

a.              the
rate, or methodology for this rate and conventions for this rate selected or recommended by the Relevant Governmental Body for
determining Compounded SOFR; provided that:

b.             if,
and to the extent that, the Calculation Agent determines that Compounded SOFR cannot be determined in accordance with clause
(a) above, then the rate, or methodology for this rate, and conventions for this rate that have been selected by the
Calculation Agent giving due consideration to any industry-accepted market practice for U.S. dollar denominated floating rate
securities at such time.

For
the avoidance of doubt, the calculation of Compounded SOFR will exclude the Benchmark Replacement Adjustment and 276 basis points.

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(10)          “Corresponding
Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length
(disregarding Business Day adjustment) as the applicable tenor for the then-current Benchmark.

(11)          “FRBNY” means the Federal Reserve Bank of New York.

(12)          “FRBNY’s Website” means the website of the FRBNY at http://www.newyorkfed.org, or any successor
source.

(13)          “Interpolated Benchmark” with respect to the Benchmark means the rate determined for the Corresponding
Tenor by interpolating on a linear basis between: (1) the Benchmark for the longest period (for which the Benchmark is available)
that is shorter than the Corresponding Tenor and (2) the Benchmark for the shortest period (for which the Benchmark is available)
that is longer than the Corresponding Tenor.

(14)          “ISDA”
means the International Swaps and Derivatives Association, Inc. or any successor thereto.

(15)          “ISDA
Definitions” means the 2006 ISDA Definitions published by the ISDA or any successor thereto, as amended or supplemented
from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.

(16)          “ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or
zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an
index cessation event with respect to the Benchmark for the applicable tenor.

(17)          “ISDA
Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective
upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable
ISDA Fallback Adjustment.

(18)          “Reference Time” with respect to any determination of the Benchmark means (a) if the Benchmark
is Three-Month Term SOFR, the time determined by the Calculation Agent after giving effect to the Three-Month Term SOFR Conventions,
and (b) if the Benchmark is not Three-Month Term SOFR, the time determined by the Calculation Agent after giving effect to
the Benchmark Replacement Conforming Changes.

(19)          “Relevant Governmental Body” means the Board of Governors of the Federal Reserve System (the “Federal
Reserve”) and/or the FRBNY, or a committee officially endorsed or convened by the Federal Reserve and/or the FRBNY or
any successor thereto.

(20)          “SOFR” means the daily secured overnight financing rate published by the FRBNY, as the administrator
of the benchmark, (or a successor administrator) on the FRBNY’s Website (or such successor’s website).

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(21)          “Term
SOFR” means the forward-looking term rate for the applicable Corresponding Tenor based on SOFR that has been selected
or recommended by the Relevant Governmental Body.

(22)          “Term SOFR Administrator” means any entity designated by the Relevant Governmental Body as the administrator
of Term SOFR (or successor administrator).

(23)          “Three-Month Term SOFR” means the rate for Term SOFR for a tenor of three months that is published by
the Term SOFR Administrator at the Reference Time for any Floating Rate Period, as determined by the Calculation Agent after giving
effect to the Three-Month Term SOFR Conventions. All percentages used in or resulting from any calculation of Three-Month Term
SOFR shall be rounded, if necessary, to the nearest one-hundred-thousandth of a percentage point, with 0.000005% rounded
up to 0.00001%.

(24)          “Three-Month Term SOFR Conventions” means any determination, decision or election with respect to any
technical, administrative or operational matter (including with respect to the manner and timing of the publication of Three-Month
Term SOFR, or changes to the definition of “Floating Rate Period”, timing and frequency of determining Three-Month
Term SOFR with respect to each Floating Rate Period and making payments of interest, rounding of amounts or tenors, and other
administrative matters) that the Calculation Agent decides may be appropriate to reflect the use of Three-Month Term SOFR as the
Benchmark in a manner substantially consistent with market practice (or, if the Calculation Agent decides that adoption of any
portion of such market practice is not administratively feasible or if the Calculation Agent determines that no market practice
for the use of Three-Month Term SOFR exists, in such other manner as the Calculation Agent determines is reasonably necessary).

(25)          “Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement
Adjustment.

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3.              Subordination.

(a)             The
indebtedness of the Company evidenced by this Subordinated Note, including the principal and interest on this Subordinated Note,
shall be subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors of the Company
whether now outstanding or subsequently created, assumed, guaranteed or incurred (collectively, “Senior Indebtedness”),
which shall consist of principal of (and premium, if any) and interest, if any, on: (i) all indebtedness and obligations of, or
guaranteed or assumed by, the Company for money borrowed, whether or not evidenced by bonds, debentures, securities, notes or
other similar instruments, and including, but not limited to, all obligations to the Company’s general creditors and secured
creditors; (ii) any deferred obligations of the Company for the payment of the purchase price of property or assets acquired other
than in the ordinary course of business; (iii) all obligations, contingent or otherwise, of the Company in respect of any letters
of credit, bankers’ acceptances, security purchase facilities and similar direct credit substitutes; (iv) any capital lease
obligations of the Company; (v) all obligations of the Company in respect of interest rate swap, cap or other agreements, interest
rate future or option contracts, currency swap agreements, currency future or option contracts, commodity contracts and other
similar arrangements or derivative products; (vi) any obligation of the Company to its general creditors, as defined for purposes
of the capital adequacy regulations of the Federal Reserve applicable to the Company, as the same may be amended or modified from
time to time; (vii) all obligations that are similar to those in clauses (i) through (v) of other persons for the payment of which
the Company is responsible or liable as obligor, guarantor or otherwise arising from an off-balance sheet guarantee; (viii) all
obligations of the types referred to in clauses (i) through (vi) of other persons secured by a lien on any property or asset of
the Company, and (ix) in the case of (i) through (viii) above, all amendments, renewals, extensions, modifications and refundings
of such indebtedness and obligations; except “Senior Indebtedness” does not include (A) the Subordinated Notes,
(B) any obligation that by its terms expressly is junior to, or ranks equally in right of payment with, the Subordinated Notes,
or (C) any indebtedness between the Company and any of its subsidiaries or Affiliates. This Subordinated Note is not secured by
any assets of the Company or any subsidiary or Affiliate of the Company. The term “Affiliate(s)” means, with
respect to any Person (as such term is defined in the Purchase Agreement), such Person’s immediate family members, partners,
members or parent and subsidiary corporations, and any other Person directly
or indirectly controlling, controlled by, or under common control with said Person and their respective Affiliates.

(b)            In the event of any liquidation of the Company, holders of Senior Indebtedness of the Company shall be entitled to be paid
in full with such interest as may be provided by law before any payment shall be made on account of principal of or interest on
this Subordinated Note. Additionally, in the event of any insolvency, dissolution, assignment for the benefit of creditors or
any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, holders of Senior Indebtedness
shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on the Subordinated
Notes, including this Subordinated Note. In the event of any such proceeding, after payment in full of all sums owing with respect
to the Senior Indebtedness, the registered holders of the Subordinated Notes from time to time (each a “Noteholder”
and, collectively, the “Noteholders”), together with the holders of any obligations of the Company ranking
on a parity with the Subordinated Notes, shall be entitled to be paid from the remaining assets of the Company the unpaid principal
thereof, and the unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall
be made (i) with respect to any obligation that by its terms expressly is junior to in the right of payment to the Subordinated
Notes, (ii) with respect to any indebtedness between the Company and any of its subsidiaries or Affiliates or (iii) on account
of any capital stock.

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(c)            If
there shall have occurred and be continuing (i) a default in any payment with respect to any Senior Indebtedness or (ii) an event
of default with respect to any Senior Indebtedness as a result of which the maturity thereof is accelerated, unless and until
such payment default or event of default shall have been cured or waived or shall have ceased to exist, no payments shall be made
by the Company with respect to the Subordinated Notes, notwithstanding the provisions of Section 17 hereof. The provisions
of this paragraph shall not apply to any payment with respect to which Section 3(b) above would be applicable.

(d)            Nothing
herein shall act to prohibit, limit or impede the Company from issuing additional debt of the Company having the same rank as
the Subordinated Notes or which may be junior or senior in rank to the Subordinated Notes. Each Noteholder, by its acceptance
hereof, agrees to and shall be bound by the provisions of this Section 3. Each Noteholder, by its acceptance hereof, further
acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration
for each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance
of the Subordinated Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness, and such holder
of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing
to hold or in continuing to hold such Senior Indebtedness.

4.              Redemption. 

(a)            Redemption
Prior to Fifth Anniversary. This Subordinated Note shall not be redeemable by the Company in whole or in part prior to the
fifth anniversary of the Issue Date, except in the event of: (i) a Tier 2 Capital Event (as defined below); (ii) a Tax Event (as
defined below); or (iii) an Investment Company Event (as defined below). Upon the occurrence of a Tier 2 Capital Event, a Tax
Event or an Investment Company Event, subject to Section 4(f) below, the Company may redeem this Subordinated Note in whole,
but not in part, at any time, upon giving not less than ten (10) calendar days’ notice to the Noteholders at an amount equal
to 100% of the outstanding principal amount being redeemed plus accrued and unpaid interest, to but excluding the redemption date.
“Tier 2 Capital Event” means the receipt by the Company of an opinion of counsel to the Company to the effect
that there is a material risk that the Subordinated Note no longer qualifies to be eligible for treatment as “Tier 2”
Capital (as defined by the Federal Reserve) (or its then equivalent) as a result of a change in law or regulation, or interpretation
or application of law or regulation by any judicial, legislative or regulatory authority that becomes effective after the Issue
Date. “Tax Event” means the receipt by the Company of an opinion of counsel to the Company that as a result
of any amendment to, or change (including any final and adopted (or enacted) prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such laws or regulations, there is a material risk
that interest payable by the Company on the Subordinated Notes is not, or within 120 days after the receipt of such opinion will
not be, deductible by the Company, in whole or in part, for United States federal income tax purposes. “Investment Company
Event” means the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material
risk that the Company is or, within 120 days after the receipt of such opinion will be, required to register as an investment
company pursuant to the Investment Company Act of 1940, as amended.

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(b)            Redemption
on or after Fifth Anniversary. On or after the fifth anniversary of the Issue Date, subject to Section 4(f) below,
this Subordinated Note shall be redeemable at the option of and by the Company, in whole or in part at any time and from time
to time upon any Interest Payment Date, at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued
but unpaid interest, to but excluding the redemption date, but in all cases in a principal amount with integral multiples of $1,000.
In addition, on or after the fifth anniversary of the Issue Date, subject to Section 4(f), the Company may redeem all or
a portion of the Subordinated Notes, at any time upon the occurrence of a Tier 2 Capital Event, Tax Event or an Investment Company
Event. 

(c)            Partial
Redemption. If less than the then outstanding principal amount of this Subordinated Note is redeemed, (i) a new Subordinated
Note shall be issued representing the unredeemed portion without charge to the holder thereof and (ii) such redemption shall be
effected on a pro rata basis as to the Noteholders. For purposes of clarity, upon a partial redemption, a like percentage of the
principal amount of every Subordinated Note held by every Noteholder shall be redeemed. 

(d)            No
Redemption at Option of Noteholder. This Subordinated Note is not subject to redemption at the option of the holder of this
Subordinated Note. 

(e)            Effectiveness of Redemption. If notice of redemption has been duly given and notwithstanding that this Subordinated
Note has been called for redemption but has not yet been surrendered for cancellation, on and after the date fixed for redemption
interest shall cease to accrue on the portion of this Subordinated Note called for redemption; this Subordinated Note shall no
longer be deemed outstanding with respect to the portion called for redemption and all rights with respect to the portion of this
Subordinated Note called for redemption shall forthwith on such date fixed for redemption cease and terminate unless the Company
shall default in the payment of the redemption price, subject only to the right of the Noteholder to receive the amount payable
on such redemption, without interest.

(f)             Regulatory
Approvals. Any such redemption shall be subject to receipt of any and all required federal and state regulatory approvals,
including, but not limited to, the consent of the Federal Reserve. In the case of any redemption of this Subordinated Note pursuant
to paragraphs (b) or (c) of this Section 4, the Company will give the Noteholder notice of redemption, which notice shall
indicate the aggregate principal amount of Subordinated Notes to be redeemed, not less than 30 nor more than 45 calendar days
prior to the proposed redemption date.

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(g)            Purchase
and Resale of the Subordinated Notes. Subject to any required federal and state regulatory approvals and the provisions of
this Subordinated Note, the Company shall have the right to purchase any of the Subordinated Notes at any time in the open market,
private transactions or otherwise. If the Company purchases any Subordinated Notes, it may, in its discretion, hold, resell or
cancel any of the purchased Subordinated Notes.

5.              Events of Default; Acceleration. Each of the following events shall constitute an “Event of Default”:

(a)            the entry of a decree or order for relief in respect of the Company by a court having jurisdiction in the premises in an
involuntary case or proceeding under any applicable bankruptcy, insolvency, or reorganization law, now or hereafter in effect
of the United States or any political subdivision thereof, and such decree or order will have continued unstayed and in effect
for a period of 90 consecutive days;

(b)            the commencement by the Company of a voluntary case under any applicable bankruptcy, insolvency or reorganization law,
now or hereafter in effect of the United States or any political subdivision thereof, or the consent by the Company to the entry
of a decree or order for relief in an involuntary case or proceeding under any such law;

(c)            the Company (i) becomes insolvent or is unable to pay its debts as they mature, (ii) makes an assignment for the benefit
of creditors, (iii) admits in writing its inability to pay its debts as they mature, or (iv) ceases to be a bank holding company
or financial holding company under the Bank Holding Company Act of 1956, as amended;

(d)            the
failure of the Company to pay any installment of interest on any of the Subordinated Notes as and when the same will become due
and payable, and the continuation of such failure for a period of 30 days;

(e)            the failure of the Company to pay all or any part of the principal of any of the Subordinated Notes as and when the same
will become due and payable;

(f)             the
liquidation of the Company (for the avoidance of doubt, “liquidation” does not include any merger, consolidation,
sale of equity or assets or reorganization (exclusive of a reorganization in bankruptcy) of the Company or any of its subsidiaries);

(g)            the
failure of the Company to perform any other covenant or agreement on the part of the Company contained in the Subordinated Notes,
and the continuation of such failure for a period of 30 days after the date on which notice specifying such failure, stating that
such notice is a “Notice of Default” hereunder and demanding that the Company remedy the same, will have been given,
in the manner set forth in Section 21, to the Company by a Noteholder; or 

(h)            the
default by the Company under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company having
an aggregate principal amount outstanding of at least $5,000,000, whether such indebtedness now exists or is created or incurred
in the future, which default (i) constitutes a failure to pay any portion of the principal of such indebtedness when due and payable
after the expiration of any applicable grace period or (ii) results in such indebtedness becoming due or being declared due and
payable prior to the date on which it otherwise would have become due and payable without, in the case of clause (i), such
indebtedness having been discharged or, in the case of clause (ii), without such indebtedness having been discharged or
such acceleration having been rescinded or annulled.

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Unless
the principal of this Subordinated Note already shall have become due and payable, if an Event of Default described in Section
5(a) or Section 5(b) shall have occurred and be continuing, Noteholders holding not less than twenty percent (20%)
in aggregate principal amount of the Subordinated Notes at the time outstanding, by notice in writing to the Company, may declare
the principal amount of all outstanding Subordinated Notes to be due and payable immediately and, upon any such declaration, the
same shall become and shall be immediately due and payable. The Company waives demand, presentment for payment, notice of nonpayment,
notice of protest, and all other notices. Notwithstanding the foregoing, because the Subordinated Notes are required to qualify
for treatment as Tier 2 Capital, upon the occurrence of an Event of Default other than an Event of Default described in Section 5(a)
or Section 5(b), the Noteholders may not accelerate the Stated Maturity of the Subordinated Notes and make the
principal of, and any accrued and unpaid interest on, the Subordinated Notes, immediately due and payable. The Company,
within 30 calendar days after the receipt of written notice from any Noteholder of the occurrence of an Event of Default with
respect to this Subordinated Note, shall notify all Noteholders, at their addresses shown on the Security Register (as defined
in Section 13 below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived
before the giving of such notice as certified by the Company in writing to the Noteholder or Noteholders who provided written
notice of such Event of Default.

6.              Failure
to Make Payments. In the event of any failure by the Company to make any required payment of principal or interest on this
Subordinated Note when such payment becomes due and payable (and in the case of payment of interest, such failure to pay shall
have continued for 30 calendar days), the Company will, upon demand of the Noteholders, pay to the Noteholders the amount then
due and payable on this Subordinated Note for principal and interest (without acceleration of this Subordinated Note in any manner),
with interest on the overdue principal and interest at the rate borne by this Subordinated Note, to the extent permitted by applicable
law. If the Company fails to pay such amount upon such demand, the Noteholders may, among other things, institute a judicial proceeding
for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the
same against the Company and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the property
of the Company.

Upon
the occurrence of a failure by the Company to make any required payment of principal or interest on this Subordinated Note when
such payment becomes due and payable, or an Event of Default, until such failure to pay or Event of Default is cured by the Company,
the Company shall not, except as required by any federal or state governmental agency: (a) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock; (b)
make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any indebtedness of the Company
that ranks equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee that ranks equal with
or junior to the Subordinated Notes, other than (i) any dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, any class of the Company’s common stock; (ii) any declaration of a non-cash dividend
in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s
capital stock or the exchange or conversion of one class or series of the Company’s capital stock for another class or series
of the Company’s capital stock; (iv) the purchase of fractional interests in shares of the Company’s capital stock
pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; or (v) purchases
of any class of the Company’s common stock related to or from any benefit plans for the Company’s directors, officers
or employees or any of the Company’s dividend reinvestment plans.

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7.             Affirmative
Covenants of the Company.

(a)            Notice
of Certain Events. To the extent permitted by applicable statute, rule or regulation, the Company shall provide written notice
to the Noteholder of the occurrence of any of the following events as soon as practicable, but in no event later than fifteen
(15) Business Days following the Company becoming aware of the occurrence of such event:

(i)             The total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 risk-based capital ratio or leverage
ratio of the Company (but only to the extent the Company is required to measure and report such ratios on a consolidated basis
under applicable law) or any of the Company’s banking subsidiaries becomes less than eight percent (8.0%), six percent (6.0%),
four and one-half percent (4.5%) or four percent (4.0%), respectively, as of the end of any fiscal quarter; 

(ii)            The
Company, or any of the chairman of the board, the chief executive officer, the president, the chief operating officer, the chief
financial officer, the treasurer, any assistant treasurer, the controller or the secretary of the Company becomes subject to any
formal, written regulatory enforcement action (as defined by the applicable regulatory agency);

(iii)           The
ratio of non-performing assets to total assets of Coastal Community Bank (the “Bank”), as calculated by the Company
in the ordinary course of business and consistent with past practices, becomes greater than four percent (4.0%).

(iv)           The
appointment, resignation, removal or termination of the chief executive officer, president, chief operating officer, chief financial
officer, chief credit officer, chief lending officer or any director of the Company or a Bank; or

(v)            There
occurs a change in ownership of twenty-five percent (25.0%) or more of the voting securities of the Company, except as a result
of the issuance of Company common stock.

(b)            Payment
of Principal and Interest. The Company covenants and agrees for the benefit of the Noteholders that it will duly and punctually
pay the principal of, and interest on, this Subordinated Note, in accordance with the terms hereof. 

(c)            Maintenance
of Office. The Company will maintain an office or agency in the city of Everett, Washington, where Subordinated Notes may
be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of
the Subordinated Notes may be served. The Company may also from time to time designate one or more other offices or agencies where
the Subordinated Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office
or agency in Everett, Washington. The Company will give prompt written notice to the Noteholders of any such designation or rescission
and of any change in the location of any such other office or agency.

    	A-17

    	 

    

(d)            Corporate
Existence. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect: (i)
the corporate existence of the Company; (ii) the existence (corporate or other) of each subsidiary; and (iii) the rights (charter
and statutory), licenses and franchises of the Company and each of its subsidiaries; provided, however, that the Company will
not be required to preserve the existence (corporate or other) of any of its subsidiaries or any such right, license or franchise
of the Company or any of its subsidiaries if the Board of Directors of the Company determines that the preservation thereof is
no longer desirable in the conduct of the business of the Company and its subsidiaries taken as a whole and that the loss thereof
will not be disadvantageous in any material respect to the Noteholders.

(e)            Maintenance
of Properties. The Company will, and will cause each subsidiary to, cause all its properties used or useful in the conduct
of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment
of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section will prevent the Company or any subsidiary from discontinuing the
operation and maintenance of any of their respective properties if such discontinuance is, in the judgment of the Board of Directors
of the Company or of any subsidiary, as the case may be, desirable in the conduct of its business.

(f)             Compliance
Certificate. Not later than 120 days following the end of each fiscal year, the Company shall provide the Noteholders with
a certificate (the “Compliance Certificate”), executed by the principal executive officer and principal financial
officer of the Company in their capacities as such, stating whether, to the best of his or her knowledge, as of the end of such
immediately preceding fiscal year, (i) the Company has complied with all notice provisions and covenants contained in this Subordinated
Note; (ii) an Event of Default has occurred; or (iii) an event or events have occurred that in the reasonable judgment of the
management of the Company would have a material adverse effect on the ability of the Company to perform its obligations under
this Subordinated Note.

(g)            Tier
2 Capital. Whether or not the Company is subject to consolidated capital requirements under applicable regulations of the
Federal Reserve, if all or any portion of the Subordinated Notes ceases to be eligible to qualify as Tier 2 Capital, other than
due to the limitation imposed on the capital treatment of subordinated debt during the five (5) years immediately preceding the
Stated Maturity of the Subordinated Notes, the Company will promptly notify the Noteholder and thereafter, subject to the Company’s
right to redeem the Subordinated Notes under such circumstances pursuant to the terms of the Subordinated Notes, if requested
by the Company, the Company and the Noteholder will work together in good faith to execute and deliver all agreements as reasonably
necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to be eligible
to qualify as Tier 2 Capital; provided, however, that nothing contained in this Section 7(g) shall limit
the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event pursuant to Section
4(a) or Section 4(b).

    	A-18

    	 

    

(h)            Compliance
with Laws. The Company shall comply with the requirements of all laws, regulations, orders and decrees applicable to it or
its properties, except for such noncompliance that would not reasonably be expected to have a Material Adverse Effect (as such
term is defined in the Purchase Agreement) on the Company and its subsidiaries taken as a whole.

(i)             Taxes
and Assessments. The Company shall punctually pay and discharge all material taxes, assessments, and other governmental charges
or levies imposed upon it or upon its income or upon any of its properties; provided, that no such taxes, assessments or other
governmental charges need be paid if they are being contested in good faith by the Company.

(j)             Financial Statements; Access to Records.

(i)             Within
forty-five (45) days following the end of any fiscal quarter, the Company shall provide the Noteholders (subject to such confidentiality
requests as the Company shall reasonably seek) with copies of the Company’s unaudited consolidated balance sheet and statement
of income (loss) for and as of the end of such immediately preceding fiscal quarter, prepared in accordance with past practice,
provided that the Company shall not be obligated to provide the Noteholders copies of the Company’s financial statements
that are included in a Quarterly Report on Form 10-Q that the Company has publicly filed with the Securities and Exchange Commission
(“SEC”) Quarterly financial statements, if required herein, shall be unaudited and need not comply with GAAP.

(ii)            Not later than ninety (90) days from the end of each fiscal year, the Company shall provide the Noteholders with copies
of the Company’s audited financial statements consisting of the consolidated balance sheet of the Company as of the fiscal
year end and the related statements of income (loss) and retained earnings, stockholders’ equity and cash flows for the
fiscal year then ended, provided that the Company shall not be obligated to provide Noteholders copies of the Company’s
audited financial statements that are included in an Annual Report on Form 10-K that the Company has publicly filed with the SEC.
Such financial statements shall be prepared in accordance with GAAP applied on a consistent basis throughout the period involved.

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8.              Negative Covenants of the Company.

(a)            Limitation
on Dividends. The Company shall not declare or pay any dividend or make any distribution on capital stock or other equity
securities of any kind of the Company if the Company is not “well capitalized” for regulatory capital purposes immediately
prior to the declaration of such dividend or distribution, except for dividends payable solely in shares of common stock of the
Company.

(b)            Merger
or Sale of Assets. The Company shall not merge into another entity, effect a Change in Bank Control (as defined below), or
convey, transfer or lease all or substantially all of its properties and assets to any person, unless:

(i)             the
continuing entity into which the Company is merged or the person which acquires by conveyance or transfer or which leases all
or substantially all of the properties and assets of the Company shall be a corporation, association or other legal entity organized
and existing under the laws of the United States of America, any State thereof or the District of Columbia and expressly assumes
the due and punctual payment of the principal of and any premium and interest on the Subordinated Notes according to their terms,
and the due and punctual performance of all covenants and conditions hereof on the part of the Company to be performed or observed;
and

(ii)            immediately
after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing.

“Change
in Bank Control” means the sale, transfer, lease or conveyance by the Company, or an issuance of stock by the Bank,
in either case resulting in ownership by the Company of securities that provides it with less than 80% of the Bank’s outstanding
voting equity securities, calculated on the basis of voting power.

9.              Denominations.
The Subordinated Notes are issuable only in registered form without interest coupons in minimum denominations of $250,000 and
integral multiples of $1,000 in excess thereof.

10.            Charges
and Transfer Taxes. No service charge will be made for any registration of transfer or exchange of this Subordinated Note,
or any redemption or repayment of this Subordinated Note, or any conversion or exchange of this Subordinated Note for other types
of securities or property, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental
charges that may be imposed in connection with the transfer or exchange of this Subordinated Note from the Noteholder requesting
such transfer or exchange.

    	A-20

    	 

    

11.            Payment Procedures. Payment of the principal and interest payable on the Stated Maturity will be made by check,
by wire transfer or by Automated Clearing House (ACH) transfer in immediately available funds to a bank account in the United
States designated by the Noteholder if such Noteholder shall have previously provided wire instructions to the Company, upon presentation
and surrender of this Subordinated Note at the Payment Office (as defined in Section 21 below) or at such other place
or places as the Company shall designate by notice to the Noteholders as the Payment Office, provided that this Subordinated Note
is presented to the Company in time for the Company to make such payments in such funds in accordance with its normal procedures.
Payments of interest (other than interest payable on the Stated Maturity) shall be made by wire transfer or by ACH transfer in
immediately available funds or check mailed to the registered Noteholder, as such person’s address appears on the Security
Register (as defined below). Interest payable on any Interest Payment Date shall be payable to the Noteholder in whose name this
Subordinated Note is registered at the close of business on the fifteenth calendar day prior to the applicable Interest Payment
Date, without regard to whether such date is a Business Day, except that interest not paid on the Interest Payment Date, if any,
will be paid to the Noteholder in whose name this Subordinated Note is registered at the close of business on a special record
date fixed by the Company (a “Special Record Date”), notice of which shall be given to the Noteholder not less
than ten (10) calendar days prior to such Special Record Date. To the extent permitted by applicable law, interest shall accrue,
at the rate at which interest accrues on the principal of this Subordinated Note, on any amount of principal or interest on this
Subordinated Note not paid when due. All payments on this Subordinated Note shall be applied first against interest due hereunder;
and then against principal due hereunder. The Noteholder acknowledges and agrees that the payment of all or any portion of the
outstanding principal amount of this Subordinated Note and all interest hereon shall be pari passu in right of payment
and in all other respects to the other Subordinated Notes. In the event that the Noteholder receives payments in excess of its
pro rata share of the Company’s payments to the Noteholders of all of the Subordinated Notes, then the Noteholder shall
hold in trust all such excess payments for the benefit of the holders of the other Subordinated Notes and shall pay such amounts
held in trust to such other Noteholders upon demand by such Noteholders.

12.            Form of Payment. Payments of principal and interest on this Subordinated Note shall be made in such coin or currency
of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

13.            Registration
of Transfer, Security Register. Except as otherwise provided herein, this Subordinated Note is transferable in whole or in
part, and may be exchanged for a like aggregate principal amount of Subordinated Notes of other authorized denominations, by the
Noteholder in person, or by its attorney duly authorized in writing, at the Payment Office. The Company shall maintain a register
providing for the registration of the Subordinated Notes and any exchange or transfer thereof (the “Security Register”).
Upon surrender or presentation of this Subordinated Note for exchange or registration of transfer, the Company shall execute and
deliver in exchange therefor a Subordinated Note or Subordinated Notes of like aggregate principal amount, each in a minimum denomination
of $250,000 or any amount in excess thereof which is an integral multiple of $1,000 (and, in the absence of an opinion of counsel
satisfactory to the Company to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are registered
in such name or names requested by the Noteholder. Any Subordinated Note presented or surrendered for registration of transfer
or for exchange shall be duly endorsed and accompanied by a written instrument of transfer in such form as is attached hereto
and incorporated herein, duly executed by the Noteholder or its attorney duly authorized in writing, with such tax identification
number or other information for each person in whose name a Subordinated Note is to be issued, and accompanied by evidence of
compliance with any restrictive legend(s) appearing on such Subordinated Note or Subordinated Notes as the Company may reasonably
request to comply with applicable law. No exchange or registration of transfer of this Subordinated Note shall be made on or after
(i) the fifteenth (15th) day immediately preceding the Stated Maturity or (ii) the due delivery of notice of redemption.

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14.            Priority.
The Subordinated Notes rank pari passu among themselves and pari passu, in the event of any insolvency proceeding,
dissolution, assignment for the benefit of creditors, reorganization, restructuring of debt, marshaling of assets and liabilities
or similar proceeding or any liquidation or winding up of the Company with all other present or future unsecured subordinated
debt obligations of the Company, except any unsecured subordinated debt that, pursuant to its express terms, is senior or subordinate
in right of payment to the Subordinated Notes and all Senior Indebtedness.

15.            Ownership.
Prior to due presentment of this Subordinated Note for registration of transfer, the Company may treat the Noteholder in whose
name this Subordinated Note is registered in the Security Register as the absolute owner of this Subordinated Note for receiving
payments of principal and interest on this Subordinated Note and for all other purposes whatsoever, whether or not this Subordinated
Note be overdue, and the Company shall not be affected by any notice to the contrary.

16.            Waiver
and Consent.

(a)            Any
consent or waiver given by the holder of this Subordinated Note shall be conclusive and binding upon such Noteholder and upon
all future holders of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer hereof or in
exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Subordinated Note. This
Subordinated Note may also be amended or waived pursuant to, and in accordance with, the provisions of Section 7.3 of the Purchase
Agreement. No delay or omission of the holder of this Subordinated Note to exercise any right or remedy accruing upon any Event
of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Any
insured depository institution which shall be a holder of this Subordinated Note or which otherwise shall have any beneficial
ownership interest in this Subordinated Note shall, by its acceptance of such Subordinated Note (or beneficial interest therein),
be deemed to have waived any right of offset with respect to the repayment of the indebtedness evidenced thereby.

    	A-22

    	 

    

(b)            No waiver or amendment of any term, provision, condition, covenant or agreement in the Subordinated Notes shall be effective
except with the consent of the Noteholders holding more than fifty percent (50%) in aggregate principal amount (excluding any
Subordinated Notes held by the Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided,
however, that without the consent of each Noteholder of an affected Subordinated Note, no such amendment or waiver may:
(i) reduce the principal amount of any Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on
any Subordinated Note; (iii) extend the maturity of any Subordinated Note; (iv) change the currency in which payment of the obligations
of the Company under the Subordinated Notes are to be made; (v) lower the percentage of aggregate principal amount of outstanding
Subordinated Notes required to approve any amendment of the Subordinated Notes; (vi) make any changes to Section 5
(Events of Default; Acceleration); Section 6 (Failure to Make Payments); Section 7 (Affirmative Covenants of the
Company); Section 8 (Negative Covenants of the Company) or Section 16 (Waiver and Consent) of the Subordinated Notes
that adversely affects the rights of any Noteholder; or (vii) disproportionately affect any of the Noteholders of the then outstanding
Subordinated Notes. Notwithstanding the foregoing, the Company may amend or supplement the Subordinated Notes without the consent
of the Noteholders to cure any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition
to or in place of certificated Subordinated Notes, or to make any change that does not adversely affect the rights of any Noteholder
of any of the Subordinated Notes. No failure to exercise or delay in exercising, by any Noteholder of the Subordinated Notes,
of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided
by law, except as restricted hereby. The rights and remedies provided in this Subordinated Note are cumulative and not exclusive
of any right or remedy provided by law or equity. No notice or demand on the Company in any case shall, in itself, entitle the
Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the
Noteholders to any other or further action in any circumstances without notice or demand. No consent or waiver, expressed or implied,
by the Noteholders to or of any breach or default by the Company in the performance of its obligations hereunder shall be deemed
or construed to be a consent or waiver to or of any other breach or default in the performance of the same or any other obligations
of the Company hereunder. Failure on the part of the Noteholders to complain of any acts or failure to act or to declare an Event
of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Noteholders of their rights
hereunder or impair any rights, powers or remedies on account of any breach or default by the Company.

17.           Absolute and Unconditional Obligation of the Company. No provisions of this Subordinated Note shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay the principal and interest on this Subordinated Note
at the times, places and rate, and in the coin or currency, herein prescribed.

18.            Successors
and Assigns. This Subordinated Note shall be binding upon the Company and inure to the benefit of the Noteholder and its respective
successors and permitted assigns. The Noteholder may assign all, or any part of, or any interest in, the Noteholder’s rights
and benefits hereunder. To the extent of any such assignment, such assignee shall have the same rights and benefits against the
Company and shall agree to be bound by and to comply with the terms and conditions of the Purchase Agreement as it would have
had if it were the Noteholder hereunder.

19.            No
Sinking Fund; Convertibility. This Subordinated Note is not entitled to the benefit of any sinking fund. This Subordinated
Note is not convertible into or exchangeable for any of the equity securities, other securities or assets of the Company or any
subsidiary.

    	A-23

    	 

    

20.            No
Recourse Against Others. No recourse under or upon any obligation, covenant or agreement contained in this Subordinated Note,
or for any claim based thereon or otherwise in respect thereof, will be had against any past, present or future shareholder, employee,
officer, or director, as such, of the Company or of any predecessor or successor, either directly or through the Company or any
predecessor or successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or
by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of
this Subordinated Note by the holder of this Subordinated Note and as part of the consideration for the issuance of this Subordinated
Note.

21.            Notices.
All notices to the Company under this Subordinated Note shall be in writing and addressed to the Company at 5415 Evergreen Way
Everett, Washington 98203, Attention: Joel G. Edwards (Executive Vice President and Chief Financial Officer), or to such other
address as the Company may provide to the Noteholders (the “Payment Office”). All notices to the Noteholders
shall be deemed to have been given if in writing and if delivered personally, or if mailed, postage prepaid, by United States
registered or certified mail, return receipt requested, or if delivered by a responsible overnight commercial courier promising
next business day delivery. Any notice given in accordance with the foregoing shall be deemed
given when delivered personally or, if mailed, three (3) Business Days after it shall have been deposited in the United States
mails as aforesaid or, if sent by overnight courier, the Business Day following the date of delivery to such courier (provided
next business day delivery was requested).

22.            Further
Issues. The Company may, without the consent of the Noteholders of the Subordinated Notes, create and issue additional notes
having the same terms and conditions of the Subordinated Notes (except for the Issue Date) so that such further notes shall be
consolidated and form a single series with the Subordinated Notes. 

23.            Governing
Law; Interpretation. THIS SUBORDINATED NOTE WILL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND
WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO GIVING EFFECT TO ANY
LAWS OR PRINCIPLES OF CONFLICT OF LAWS THAT WOULD APPLY THE LAWS OF A DIFFERENT. THIS SUBORDINATED NOTE IS INTENDED TO MEET THE
CRITERIA FOR QUALIFICATION OF THE OUTSTANDING PRINCIPAL AS TIER 2 CAPITAL UNDER THE REGULATORY GUIDELINES OF THE FEDERAL RESERVE,
AND THE TERMS HEREOF SHALL BE INTERPRETED IN A MANNER TO SATISFY SUCH INTENT.

    	A-24

    	 

    

IN
WITNESS WHEREOF, the undersigned has caused this Subordinated Note to be duly executed and attested.

	 	COASTAL FINANCIAL CORPORATION
	 	 	 
	 	

        

        By:
	
	 	 	Name:
	 	 	Title:	          

 

	ATTEST:	 
	 	 
	 	 
	Name:	 
	Title:  	 

 

[Signature
Page to Subordinated Note]

    	

    	 

    

ASSIGNMENT
FORM

To assign
this Subordinated Note, fill in the form below: (I) or (we) assign and transfer this Subordinated Note to:

	 
	(Print or type assignee’s name, address
    and zip code)

 

	 
	(Insert assignee’s social security
    or tax I.D. No.)

 

and irrevocably
appoint _______________________ agent to transfer this Subordinated Note on the books of the Company. The agent may substitute
another to act for him.

 

	Date:_____________________________	Your signature:____________________________________
	 	(Sign exactly as your name appears on the
    face of this Subordinated Note)
	 	 
	 	Tax Identification No:_______________________________

 

Signature
Guarantee: _______________________________________________________________________________

(Signatures
must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions
with membership in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15 promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)).

 

The
undersigned certifies that it [is / is not] an Affiliate of the Company and that, to its knowledge, the proposed transferee [is
/ is not] an Affiliate of the Company.

 

In
connection with any transfer or exchange of this Subordinated Note occurring prior to the date that is one year after the later
of the date of original issuance of this Subordinated Note and the last date, if any, on which this Subordinated Note was owned
by the Company or any Affiliate of the Company, the undersigned confirms that this Subordinated Note is being:

 

CHECK
ONE BOX BELOW:

	o 	(1)	acquired for the undersigned’s
    own account, without transfer;
	 	 	 
	o 	(2)	transferred to the Company;
	 	 	 
	o 	(3)	transferred in accordance and in compliance
    with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”);
	 	 	 
	o 	(4)	transferred under an effective registration
    statement under the Securities Act;
	 	 	 
	o 	(5)	transferred in accordance with and in compliance
    with Regulation S under the Securities Act;
	 	 	 

    	 

    	 

    

	o 	(6)	transferred to an institutional “accredited
    investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act);
	 	 	 
	o 	(7)	transferred to an “accredited investor”
    (as defined in Rule 501(a)(4) under the Securities Act), not referred to in item (6) that has been provided with the information
    designated under Section 4(d) of the Securities Act of 1933; or
	 	 	 
	o 	(8)	transferred in accordance with another
    available exemption from the registration requirements of the Securities Act.

Unless
one of the boxes is checked, the Company will refuse to register this Subordinated Note in the name of any person other than the
registered holder thereof; provided, however, that if box (5), (6), (7) or (8) is checked, the Company may require, prior to registering
any such transfer of this Subordinated Note, in its sole discretion, such legal opinions, certifications and other information
as the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act such as the exemption provided by Rule 144 under such Act.

		Signature: _______________________________________

 

	Signature Guarantee: _______________________________________________________________________________

(Signatures
must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions
with membership in an approved signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-l5).

TO BE COMPLETED
BY PURCHASER IF BOX (1) OR (3) ABOVE IS CHECKED.

 

The
undersigned represents and warrants that it is purchasing this Subordinated Note for its own account or an account with respect
to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule
144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s
foregoing representations in order to claim the exemption from registration provided by Rule 144A.

 

	Date:	 	 	Signature:Exhibit 10.1

 

SUBORDINATED
NOTE PURCHASE AGREEMENT

This
SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of August 18, 2021, and is made by and
between Coastal Financial Corporation, a Washington corporation (the “Company”), and the purchaser of the Subordinated
Notes (as defined herein) identified on the signature page hereto (the “Purchaser”).

RECITALS

WHEREAS,
the Company has requested that the Purchaser purchase from the Company up to $25,000,000 in aggregate principal amount of
Subordinated Notes, which aggregate amount is intended to be eligible to qualify as Tier 2 Capital (as defined herein);

WHEREAS,
the Company has engaged Keefe, Bruyette & Woods, Inc. (“KBW”), Raymond James & Associates,
Inc., Stephens, Inc. and Hovde Group, LLC. as its placement agents (“Placement Agents”) for the offering of
the Subordinated Notes;

WHEREAS,
the Purchaser is an institutional “accredited investor” as such term is defined in Rule 501(a)(1)-(3), (7) and
(9) of Regulation D (“Regulation D”) adopted under the Securities Act of 1933, as amended (the “Securities
Act”) or a QIB (as defined herein);

WHEREAS,
the offer and sale of the Subordinated Notes by the Company is being made in reliance upon the exemptions from registration
available under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D; and

WHEREAS,
each Purchaser is willing to purchase from the Company a Subordinated Note in the principal amount set forth on such Purchaser’s
respective signature page hereto (the “Subordinated Note Amount”) in accordance with the terms, subject to
the conditions and in reliance on, the recitals, representations, warranties, covenants and agreements set forth herein and in
the Subordinated Notes:

NOW,
THEREFORE, in consideration of the mutual covenants, conditions and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

AGREEMENT

1.             DEFINITIONS.

1.1           Defined
Terms. The following capitalized terms used in this Agreement and in the Subordinated
Notes have the meanings defined or referenced below. Certain other capitalized terms used only in specific sections of this Agreement
may be defined in such sections.

“Affiliate(s)”
means, with respect to any Person, such Person’s immediate family members, partners, members or parent and subsidiary corporations,
and any other Person directly or indirectly controlling, controlled by, or under common control with said Person and their respective
Affiliates.

    	 

    	 

    

“Agreement”
has the meaning set forth in the preamble hereto.

“Bank”
means Coastal Community Bank, a Washington state-chartered commercial bank and wholly owned subsidiary of the Company.

“Business
Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in the State of Washington
are permitted or required by any applicable law or executive order to close.

“Bylaws”
means the Amended and Restated Bylaws of the Company, as in effect on the Closing Date.

“Charter”
means the Second Amended and Restated Certificate of Incorporation of the Company, as amended and as in effect on the Closing
Date.

“Closing”
has the meaning set forth in Section 2.5.

“Closing
Date” means August 18, 2021.

“Company”
has the meaning set forth in the preamble hereto and shall include any successors to the Company.

“Company
Covered Person” has the meaning set forth in Section 4.2.4.

“Company’s
Reports” means (i) the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with
the SEC on March 12, 2021, including the audited financial statements of the Company contained therein; (ii) the Company’s
Quarterly Reports on Form 10-Q for the quarter ended March 31, 2021, as filed with the SEC on May 7, 2021 and for the quarter
ended June 30, 2021, as filed with the SEC on August 6, 2021, including the unaudited financial statements of the Company contained
therein and (iii) the Company’s public reports for the year ended December 31, 2020 and the periods ended March 31, 2021
and June 30, 2021; as filed with the FRB and FDIC as required by regulations of the FRB and FDIC, respectively.

“Disqualification
Event” has the meaning set forth in Section 4.2.4.

“Equity
Interest” means any and all shares, interests, participations or other equivalents (however designated) of capital stock
of a corporation, any and all equivalent ownership interests in a Person which is not a corporation, and any and all warrants,
options or other rights to purchase any of the foregoing.

“Event
of Default” has the meaning set forth in the Subordinated Notes.

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

“FDIC”
means the Federal Deposit Insurance Corporation.

“FRB”
means the Board of Governors of the Federal Reserve System.

    	 

    	 

    

“GAAP”
means generally accepted accounting principles in effect from time to time in the United States of America.

“Governmental
Agency(ies)” means, individually or collectively, any federal, state, county or local governmental department, commission,
board, regulatory authority or agency (including, without limitation, each applicable Regulatory Agency) with jurisdiction over
the Company or a Subsidiary.

“Governmental
Licenses” has the meaning set forth in Section 4.3.

“Hazardous
Materials” means flammable explosives, asbestos, urea formaldehyde insulation, polychlorinated biphenyls, radioactive
materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances
which are “hazardous substances,” “hazardous wastes,” “hazardous materials” or “toxic
substances” under the Hazardous Materials Laws and/or other applicable environmental laws, ordinances or regulations.

“Hazardous
Materials Laws” mean any laws, regulations, permits, licenses or requirements pertaining to the protection, preservation,
conservation or regulation of the environment which relates to real property, including: the Clean Air Act, as amended, 42 U.S.C.
Section 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation
and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C. Section 9601
et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act,
as amended, 29 U.S.C. Section 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001
et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.; and all comparable state and local laws and regulations.

“Indebtedness”
means: (i) all items arising from the borrowing of money that, according to GAAP as in effect from time to time, would be included
in determining total liabilities as shown on the consolidated balance sheet of the Company; and (ii) all obligations for indebtedness
secured by any lien in property owned by the Company or any Subsidiary whether or not such obligations shall have been assumed;
provided, however, Indebtedness shall not include deposits or other Indebtedness created, incurred or maintained
in the ordinary course of the Company’s or the Bank’s business (including, without limitation, federal funds purchased,
advances from any Federal Home Loan Bank, secured deposits of municipalities, letters of credit issued by the Company or the Bank
or any other Subsidiary and repurchase arrangements) and consistent with customary banking practices and applicable laws and regulations.

“Investor
Presentation” has the meaning set forth in Section 4.7.

“Leases”
means all leases, licenses or other documents providing for the use or occupancy of any portion of any Property, including all
amendments, extensions, renewals, supplements, modifications, sublets and assignments thereof and all separate letters or separate
agreements relating thereto.

    	 

    	 

    

“Material
Adverse Effect” means, with respect to any Person, any change or effect that (i) is or would be reasonably likely to
be material and adverse to the financial condition, results of operations or business of such Person and its Subsidiaries taken
as a whole, or (ii) would materially impair the ability of such Person to perform its respective obligations under any of the
Transaction Documents, or otherwise materially impede the consummation of the transactions contemplated hereby; provided,
however, that “Material Adverse Effect” shall not be deemed to include the impact of (1) changes in laws, rules
or regulations of general applicability or interpretations thereof by Governmental Agencies, (2) changes in GAAP or regulatory
accounting requirements applicable to financial institutions and their holding companies generally, (3) changes after the date
of this Agreement in general economic or capital market conditions affecting financial institutions or their market prices generally
and not specifically related to the Company, the Bank or the Purchaser, (4) direct effects of compliance with this Agreement on
the operating performance of the Company, the Bank or the Purchaser, including expenses incurred by the Company, the Bank or the
Purchaser in consummating the transactions contemplated by this Agreement, (5) changes in global, national or regional political
conditions, including the outbreak or escalation of war or acts of terrorism, (6) changes, after the date hereof, resulting from
hurricanes, earthquakes, tornados, floods or other natural disasters or from any epidemic, pandemic, or outbreak of any disease
or other public health event (including the any outbreaks, epidemics or pandemics relating to COVID-19, or any evolutions or mutations
thereof (the “Pandemic”) and the implementation of any quarantine, “shelter in place”, “stay
at home”, workforce reduction, social distancing, shut down, closure, sequester or other laws or directives, guidelines
or recommendations promulgated by any regulatory authority, including the Centers for Disease Control and Prevention and the World
Health Organization, in each case, in connection with or in response to the Pandemic (the “Pandemic Measures”))
in the jurisdictions in which the Company operates and (7) the effects of any action or omission taken by the Company with the
prior written consent of the Purchaser, and vice versa, or as otherwise contemplated by this Agreement and the Subordinated Notes,
except in the case of (1), (2), (3), (6) or (7) to the extent such fact, event, change, condition, occurrence, development, circumstance
or effect, has a disproportionate impact on the business, assets, financial condition or results of operations of the Company
and its Subsidiaries taken as a whole compared to other comparable companies within the banking industry, in which case the disproportionate
effect will be taken into account.

“Maturity
Date” means September 1, 2031.

“Person”
means an individual, a corporation (whether or not for profit), a partnership, a limited liability company, a joint venture, an
association, a trust, an unincorporated organization, a government or any department or agency thereof (including a Governmental
Agency) or any other entity or organization.

“Placement
Agents” has the meaning set forth in the Recitals.

“Property”
means any real property owned or leased by the Company or any Subsidiary of the Company.

    	 

    	 

    

“Purchaser”
has the meaning set forth in the preamble hereto.

“QIB”
means a Qualified Institutional Buyer, as defined in Rule 144A under the Securities Act.

“Regulation
D” has the meaning set forth in the Recitals.

“Regulatory
Agency” means any federal or state agency charged with the supervision or regulation of depository institutions or holding
companies of depository institutions, or engaged in the insurance of depository institution deposits, or any court, administrative
agency or commission or other authority, body or agency having supervisory or regulatory authority with respect to the Company,
the Bank or any of their Subsidiaries.

“SEC”
means the United States Securities and Exchange Commission.

“Secondary
Market Transaction” has the meaning set forth in Section 5.5.

“Securities
Act” has the meaning set forth in the Recitals.

“Subordinated
Note” means the Subordinated Note (or collectively, the “Subordinated Notes”) in the form attached
as Exhibit A hereto, as amended, restated, supplemented or modified from time to time, and each Subordinated Note delivered
in substitution or exchange for such Subordinated Note.

“Subordinated
Note Amount” has the meaning set forth in the Recitals.

“Subsidiary”
or “Subsidiaries” means with respect to any Person, any corporation or entity in which a majority of the outstanding
Equity Interest is directly or indirectly owned by such Person.

“Tier
2 Capital” has the meaning given to the term “Tier 2 capital” in 12 C.F.R. Part 217 and 12 C.F.R. Part 250,
as amended, modified and supplemented and in effect from time to time or any replacement thereof.

“Transaction
Documents” means this Agreement and the Subordinated Note.

1.2           Interpretations.
The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined. The words “hereof”,
“herein” and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement. The word “including” when used in this Agreement
without the phrase “without limitation,” shall mean “including, without limitation.” All references to
time of day herein are references to Eastern Time unless otherwise specifically provided. All references to this Agreement and
the Subordinated Notes shall be deemed to be to such documents as amended, modified or restated from time to time. With respect
to any reference in this Agreement to any defined term, (i) if such defined term refers to a Person, then it shall also mean all
heirs, legal representatives and permitted successors and assigns of such Person, and (ii) if such defined term refers to a document,
instrument or agreement, then it shall also include any amendment, replacement, extension or other modification thereof.

    	 

    	 

    

1.3           Exhibits Incorporated. All
Exhibits attached hereto are hereby incorporated into this Agreement.

2.             SUBORDINATED
DEBT.

2.1           Certain
Terms. Subject to the terms and conditions herein contained, the Company hereby agrees
to issue and sell to the Purchaser Subordinated Notes in an aggregate principal amount equal to the aggregate of the Subordinated
Note Amounts. The Purchaser agrees to purchase the Subordinated Notes in an amount equal to such Purchaser’s Subordinated
Note Amount from the Company on the Closing Date in accordance with the terms of, and subject to the conditions and provisions
set forth in, this Agreement and the Subordinated Notes. The Subordinated Note Amounts shall be disbursed in accordance with Section
3.1. The Subordinated Notes shall bear interest per annum as set forth in the Subordinated Notes. The unpaid principal balance
of the Subordinated Notes plus all accrued but unpaid interest thereon shall be due and payable on the Maturity Date, or such
earlier date on which such amount shall become due and payable on account of (i) acceleration by the Purchaser in accordance with
the terms of the Subordinated Notes and this Agreement or (ii) the Company’s delivery of a notice of redemption or repayment
in accordance with the terms of the Subordinated Notes.

2.2           Subordination.
The Subordinated Notes shall be subordinated in accordance with the subordination provisions set forth therein.

2.3           Maturity
Date. On the Maturity Date, all sums due and owing under this Agreement and the Subordinated
Notes shall be repaid in full. The Company acknowledges and agrees that the Purchaser has not made any commitments, either express
or implied, to extend the terms of the Subordinated Notes past their Maturity Date, and shall not extend such terms beyond the
Maturity Date unless the Company and the Purchaser hereafter specifically otherwise agree in writing.

2.4           Unsecured
Obligations. The obligations of the Company to the Purchaser under the Subordinated
Notes shall be unsecured and not covered by a guarantee of the Company or an Affiliate of the Company.

2.5           The
Closing. The closing of the sale and purchase of the Subordinated Notes (the “Closing”)
shall occur remotely via the electronic or other exchange of documents and signature pages, on the Closing Date, or at such other
place or time or on such other date as the parties hereto may agree.

2.6           Payments. The Company agrees
that the matters concerning payments and application of payments shall be as set forth in this Agreement and the Subordinated
Notes.

2.7           No
Right of Offset. Each Purchaser hereby expressly waives any right of offset it may
have against the Company or any of its Subsidiaries.

2.8           Use
of Proceeds. The Company shall use the net proceeds from the sale of Subordinated Notes
for general corporate purposes, including, without limitation, the repayment of certain outstanding indebtedness.

    	 

    	 

    

3.             Sale
and Purchase; Closing.

3.1           Sale
and Purchase. On the Closing Date, assuming all of the terms and conditions set forth
in Section 3.2 have been satisfied by the Company and the Company has executed and delivered to the Purchaser this Agreement
and such Purchaser’s Subordinated Note and any other related documents in form and substance reasonably satisfactory to
the Purchaser, the Purchaser shall disburse to the Company in immediately available funds the Subordinated Note Amount set forth
on each Purchaser’s respective signature page hereto to the Company in exchange for a certificate representing the Subordinated
Notes.

3.2           Conditions Precedent to Closing.

3.2.1       Conditions
to the Purchaser’s Obligation. The obligation of each Purchaser to consummate
the purchase of the Subordinated Notes to be purchased by such Purchaser at Closing is subject to delivery by or at the direction
of the Company to such Purchaser (or, with respect to the opinions of counsel, the Placement Agent) each of the following (or
written waiver by such Purchaser prior to the Closing of such delivery):

3.2.1.1     Transaction
Documents. Each of the Transaction Documents has been duly authorized and executed
by the Company.

3.2.1.2    Authority Documents.

(a)           A
copy, certified by the Secretary or Assistant Secretary of the Company, of the Charter of the Company;

(b)           A
certificate of existence of the Company issued by the Secretary of State of the State of Washington;

(c)            A
copy, certified by the Secretary or Assistant Secretary of the Company, of the Bylaws of the Company;

(d)            A
copy, certified by the Secretary or Assistant Secretary of the Company, of the resolutions of the board of directors of the Company,
and any committee thereof, authorizing the execution, delivery and performance of the Transaction Documents;

(e)            An
incumbency certificate of the Secretary or Assistant Secretary of the Company certifying the names of the officer or officers
of the Company authorized to sign the Transaction Documents and the other documents provided for in this Agreement;

(f)             The
opinion of Adams & Duncan, Inc., P.S., Washington counsel to the Company, dated as of the Closing Date, Substantially in the
form set forth as Exhibit B attached hereto addressed to the Purchaser and the Placement Agents; and

    	 

    	 

    

(g)            The
opinion of Covington & Burling LLP, counsel to the Company, dated as of the Closing Date, substantially in the form set forth
at Exhibit C attached hereto addressed to the Purchaser and Placement Agents.

3.2.1.3      Other
Documents. Such other certificates, schedules, resolutions, notes and/or other documents which are provided for hereunder
or as a Purchaser may reasonably request.

3.2.1.4     Aggregate
Investments. Prior to, or contemporaneously with the Closing, each Purchaser shall have actually subscribed for the Subordinated
Note Amount set forth on such Purchaser’s signature page to this Agreement.

3.2.2       Conditions to the Company’s Obligation.

3.2.2.1      With
respect to a given Purchaser, the obligation of the Company to consummate the sale of the Subordinated Notes and to effect the
Closing is subject to delivery by or at the direction of such Purchaser to the Company of this Agreement, duly authorized and
executed by such Purchaser.

4.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The
Company hereby represents and warrants to each Purchaser as follows:

4.1           Organization
and Authority.

4.1.1        Organization
Matters of the Company and Its Subsidiaries.

4.1.1.1     The
Company is a duly organized corporation, is validly existing and in good standing under the laws of the State of Washington and
has all requisite corporate power and authority to conduct its business and activities as presently conducted, to own its properties,
and to perform its obligations under the Transaction Documents. The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing
would not result in a Material Adverse Effect. The Company is duly registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended.

4.1.1.2     The
entities set forth on Schedule A attached hereto are the only direct or indirect Subsidiaries of the Company. Each Subsidiary
of the Company (other than the Bank) has been duly organized and is validly existing either as a corporation or limited liability
company, or, in the case of the Bank, has been duly chartered and is validly existing as a state-chartered commercial bank, in
each case in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own,
lease and operate its properties and to conduct its business and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure to so qualify or to be in good standing would not reasonably
be expected to result in a Material Adverse Effect. All of the issued and outstanding shares of capital stock or other equity
interests in each Subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable and
are owned by the Company, directly or through Subsidiaries of the Company, free and clear of any security interest, mortgage,
pledge, lien, encumbrance or claim (except as disclosed in the Company’s Reports); none of the outstanding shares of capital
stock of, or other Equity Interests in, any Subsidiary of the Company were issued in violation of the preemptive or similar rights
of any security holder of such Subsidiary of the Company or any other entity.

    	 

    	 

    

4.1.1.3      The
Bank is Washington state-chartered commercial bank. The deposit accounts of the Bank are insured by the FDIC up to applicable
limits. The Bank has not received any written notice or other information indicating that the Bank is not an “insured depository
institution” as defined in 12 U.S.C. Section 1813, nor has any event occurred which could reasonably be expected to materially
and adversely affect the status of the Bank as an FDIC-insured institution.

4.1.2        Capital
Stock and Related Matters. The Charter of the Company authorizes the Company to issue
300,000,000 shares of common stock, no par value (“Common Stock”), and 25,000,000 shares of preferred stock,
no par value (“Preferred Stock”). As of the date of this Agreement, there are 12,010,787 shares of the Company’s
Common Stock issued and outstanding and no shares of the Company’s Preferred Stock issued and outstanding. All of the outstanding
capital stock of the Company has been duly authorized and validly issued and is fully paid and non-assessable. There are, as of
the date hereof, no outstanding options, rights, warrants or other agreements or instruments obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of the Company or obligating
the Company to grant, extend or enter into any such agreement or commitment to any Person other than the Company except pursuant
to the Company’s equity incentive plans duly adopted by the Company’s Board of Directors.

4.2           No
Impediment to Transactions.

4.2.1       Transaction
is Legal and Authorized. The issuance of the Subordinated Notes, the borrowing of
the aggregate of the Subordinated Note Amount, the execution of the Transaction Documents and compliance by the Company with all
of the provisions of the Transaction Documents are within the corporate and other powers of the Company.

4.2.2       Agreement.
The Transaction Documents have been duly authorized, executed and delivered by the Company, and, assuming due authorization, execution
and delivery by the other parties hereto, constitutes the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable
principles.

    	 

    	 

    

4.2.3        Subordinated Notes. The Subordinated
Notes have been duly authorized by the Company and when executed by the Company and issued, delivered to and paid for by the Purchaser
in accordance with the terms of the Agreement, will have been duly executed, issued and delivered, and will constitute
legal, valid and binding obligations of the Company and enforceable in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’
rights generally or by general equitable principles.

4.2.4        Exemption
from Registration. Neither the Company, nor any of its Subsidiaries or Affiliates,
nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the Subordinated Notes. Assuming the accuracy of the representations
and warranties of each Purchaser set forth in this Agreement, the Subordinated Notes will be issued in a transaction exempt from
the registration requirements of the Securities Act. No “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii)
of the Securities Act (a “Disqualification Event”) is applicable to the Company or, to the Company’s
knowledge, any Person described in Rule 506(d)(1) (each, a “Company Covered Person”). To the Company’s
knowledge, after exercising reasonable care, no Company Covered Person is subject to a Disqualification Event. The Company has
complied, to the extent applicable, with its disclosure obligations under Rule 506(e).

4.2.5        No
Defaults or Restrictions. Neither the execution and delivery of the Transaction Documents
nor compliance with their respective terms and conditions will (whether with or without the giving of notice or lapse of time
or both) (i) violate, conflict with or result in a breach of, or constitute a default under: (1) the Charter or Bylaws of the
Company; (2) any of the terms, obligations, covenants, conditions or provisions of any corporate restriction or of any contract,
agreement, indenture, mortgage, deed of trust, pledge, bank loan or credit agreement, or any other agreement or instrument to
which the Company or Bank, as applicable, is now a party or by which it or any of its properties is now bound or affected; (3)
any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Agency applicable
to the Company or the Bank; or (4) any statute, rule or regulation applicable to the Company, except, (A) in the case of items
(2), (3) or (4), for such violations and conflicts that would not reasonably be expected to have, singularly or in the aggregate,
a Material Adverse Effect on the Company and its Subsidiaries taken as a whole or (B) in the case of item (2), have otherwise
been consented to or waived, or (ii) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever
upon any property or asset of the Company. Neither the Company nor the Bank is in default in the performance, observance or fulfillment
of any of the terms, obligations, covenants, conditions or provisions contained in any indenture or other agreement creating,
evidencing or securing Indebtedness of any kind or pursuant to which any such Indebtedness is issued, or any other agreement or
instrument to which the Company or the Bank, as applicable, is a party or by which the Company or the Bank, as applicable, or
any of its properties is now bound or affected, except, in each case, only such defaults that would not reasonably be expected
to have, singularly or in the aggregate, a Material Adverse Effect on the Company.

4.2.6        Governmental
Consent. No governmental orders, permissions, consents, approvals or authorizations
are required to be obtained by the Company that have not been obtained, and no registrations or declarations are required to be
filed by the Company that have not been filed in connection with, or, in contemplation of, the execution and delivery of, and
performance under, the Transaction Documents, except for applicable requirements, if any, of the Securities Act, the Exchange
Act, Regulation D or any applicable state securities laws or “blue sky” laws of the various states and any applicable
federal or state banking laws and regulations.

    	 

    	 

    

4.3           Possession
of Licenses and Permits. The Company and its Subsidiaries possess such permits, licenses,
approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate
Governmental Agencies necessary to conduct the business now operated by them except where the failure to possess such Governmental
Licenses would not, singularly or in the aggregate, have a Material Adverse Effect on the Company or such applicable Subsidiary.
The Company and each Subsidiary of the Company is in compliance with the terms and conditions of all such Governmental Licenses,
except where the failure to so comply would not, individually or in the aggregate, have a Material Adverse Effect on the Company
or such applicable Subsidiary of the Company. All of the Governmental Licenses are valid and in full force and effect, except
where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect
would not have a Material Adverse Effect on the Company or such applicable Subsidiary of the Company. Neither the Company nor
any Subsidiary of the Company has received any written notice of proceedings relating to the revocation or modification of any
such Governmental Licenses except where such proceedings would not have a Material Adverse Effect on the Company or such applicable
Subsidiary of the Company.

4.4           Financial Condition.

4.4.1        Company
Financial Statements. The financial statements of the Company included in the Company’s
Reports (including the related notes, where applicable), which have been provided to the Purchaser (i) have been prepared from,
and are in accordance with, the books and records of the Company; (ii) fairly present in all material respects the results of
operations, cash flows, changes in stockholders’ equity and financial position of the Company and its consolidated Subsidiaries,
for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements
to recurring year-end audit adjustments normal in nature and amount), as applicable; (iii) complied as to form, as of their respective
dates of filing in all material respects with applicable accounting and banking requirements as applicable, with respect thereto;
and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, (x)
as indicated in such statements or in the notes thereto, (y) for any statement therein or omission therefrom that was corrected,
amended, or supplemented or otherwise disclosed or updated in a subsequent Company’s Report, and (z) to the extent that
any unaudited interim financial statements do not contain the footnotes required by GAAP, and were or are subject to normal and
recurring year-end adjustments, which were not or are not expected to be material in amount, either individually or in the aggregate.
The books and records of the Company have been, and are being, maintained in all material respects in accordance with GAAP and
any other applicable legal and accounting requirements. The Company does not have any material liability of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to become due) required to be reflected on or reserved
against in a balance sheet prepared in accordance with GAAP, except for those liabilities that are reflected or reserved against
on the consolidated balance sheet of the Company contained in the Company’s Reports for the Company’s most recently
completed quarterly or annual fiscal period, as applicable, and for liabilities incurred in the ordinary course of business consistent
with past practice or in connection with this Agreement and the transactions contemplated hereby.

    	 

    	 

    

4.4.2       Absence of Default. Since the
end of the Company’s last fiscal year ended December 31, 2020, no event has occurred which either of itself or with the
lapse of time or the giving of notice or both, would give any creditor of the Company the right to accelerate the maturity of
any material Indebtedness of the Company. The Company is not in default under any other Lease, agreement or instrument, or any
law, rule, regulation, order, writ, injunction, decree, determination or award, non-compliance with which would reasonably be
expected to result in a Material Adverse Effect on the Company.

4.4.3       Solvency.
After giving effect to the consummation of the transactions contemplated by this Agreement, the Company has capital sufficient
to carry on its business and transactions and is solvent and able to pay its debts as they mature. No transfer of property is
being made and no Indebtedness is being incurred in connection with the transactions contemplated by this Agreement with the intent
to hinder, delay or defraud either present or future creditors of the Company or any Subsidiary of the Company.

4.4.4       Ownership
of Property. The Company and each of its Subsidiaries has good and marketable title
as to all real property owned by it and good title to all assets and properties owned by the Company and such Subsidiary in the
conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and
property reflected in the most recent balance sheet contained in the Company’s Reports or acquired subsequent thereto (except
to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such
balance sheet), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure
liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to the Federal Home
Loan Bank, inter-bank credit facilities, reverse repurchase agreements or any transaction by the Bank acting in a fiduciary capacity,
(ii) statutory liens for amounts not yet delinquent or which are being contested in good faith, (iii) such as do not, individually
or in the aggregate, result in a Material Adverse Effect and (iv) as disclosed in the Company’s Reports. The Company and
each of its Subsidiaries, as lessee, has the right under valid and existing Leases of real and personal properties that are material
to the Company or such Subsidiary, as applicable, in the conduct of its business to occupy or use all such properties as presently
occupied and used by it.

4.5           No
Material Adverse Change. Since the end of the Company’s last fiscal year ended
December 31, 2020, there has been no development or event which has had or would reasonably be expected to have a Material Adverse
Effect on the Company or any of its Subsidiaries.

    	 

    	 

    

4.6           Legal
Matters.

4.6.1       Compliance
with Law. The Company and each of its Subsidiaries (i) has complied with and (ii)
to the Company’s knowledge, is not under investigation with respect to, and, to the Company’s knowledge, has not been
threatened to be charged with or given any written notice of any material violation of, any applicable statutes, rules, regulations,
orders and restrictions of any domestic or foreign government, or any instrumentality or agency thereof, having jurisdiction over
the conduct of its business or the ownership of its properties, except where any such failure to comply or violation would not
reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole. The Company and
each of its Subsidiaries is in compliance with, and at all times since December 31, 2018, has been in compliance with its own
privacy policies and written commitments to customers, consumers and employees, concerning data protection, the privacy and security
of personal data, and the nonpublic personal information of its customers, consumers and employees, in each case except where
any such failure to comply would not result, either individually or in the aggregate, in a Material Adverse Effect. At no time
during the two years prior to the date hereof has the Company or any of its Subsidiaries received any written notice asserting
any violations of any of the foregoing.

4.6.2        Regulatory
Enforcement Actions. The Company, the Bank and its other Subsidiaries are in compliance
in all material respects with all laws administered by and regulations of any Governmental Agency applicable to it or to them,
except where the failure to comply would not have a Material Adverse Effect. None of the Company, the Bank, the Company’s
or the Bank’s Subsidiaries nor any of their officers or directors is now operating under any material restrictions, written
agreements, memoranda, commitment letter, supervisory letter or similar regulatory correspondence, or other commitments (other
than restrictions of general application) imposed by any Governmental Agency, nor are, to the Company’s knowledge any such
restrictions threatened, or any agreements, memoranda or commitments being sought by any Governmental Agency. To the Company’s
knowledge, no legal or regulatory violations previously identified by, or penalties or other remedial action previously imposed
by, any Governmental Agency remains unresolved.

4.6.3        Pending
Litigation. Except as set forth in the Company’s Reports, there are no actions,
suits, proceedings or written agreements pending, or, to the Company’s knowledge, threatened or proposed, against the Company
or any of its Subsidiaries at law or in equity before or by any Governmental Agency, that would reasonably be expected to have
a Material Adverse Effect on the Company and any of its Subsidiaries, taken as a whole, or materially and adversely affect the
issuance or payment of the Subordinated Notes; and neither the Company nor any of its Subsidiaries is a party to or named as subject
to the provisions of any order, writ, injunction, or decree of, or any written agreement with, any court, commission, board or
agency, domestic or foreign, that either separately or in the aggregate, would reasonably be expected to result in a Material
Adverse Effect on the Company and any of its Subsidiaries, taken as a whole.

4.6.4        Environmental.
Except as would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (i) no Property
is or, to the Company’s knowledge, has been a site for the use, generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any Hazardous Materials and neither the Company nor any of its Subsidiaries
has engaged in such activities, and (ii) there are no claims or actions pending or, to the Company’s knowledge, threatened
against the Company or any of its Subsidiaries by any Governmental Agency or by any other Person relating to any Hazardous Materials
or pursuant to any Hazardous Materials Law.

    	 

    	 

    

4.6.5       Brokerage
Commissions. Except for commissions paid to the Placement Agents, neither the
Company nor any Affiliate of the Company is obligated to pay any brokerage commission or finder’s fee to any Person in
connection with the transactions contemplated by this Agreement.

4.6.6        Investment
Company Act. Neither the Company nor any of its Subsidiaries is an “investment
company” or a company “controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended.

4.7           No
Misstatement. None of the representations, warranties, covenants and agreements made
in the Transaction Documents or in any certificate, delivered to the Purchaser, by or on behalf of the Company pursuant to or
in connection with this Agreement, when viewed together as a whole, contains any untrue statement of a material fact, or omits
to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances when
made or furnished to the Purchaser, as of the date of this Agreement.

4.8           Internal
Accounting Controls. The Company and the Bank have established and maintain a system
of internal control over financial reporting that pertains to the maintenance of records that accurately and fairly reflect the
transactions and dispositions of the Company’s assets (on a consolidated basis), provides reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s
and the Bank’s receipts and expenditures and receipts and expenditures of each of the Company’s other Subsidiaries
are being made only in accordance with authorizations of the Company’s management and Board of Directors, and provides reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company on
a consolidated basis that could have a Material Adverse Effect. Such internal control over financial reporting is effective to
provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the Company’s
financial statements for external purposes in accordance with GAAP. Since the date of the Company’s latest audited financial
statements filed with the SEC, there has not been and there currently is not (i) any significant deficiency or material weakness
in the design or operation of its internal control over financial reporting which is reasonably likely to adversely affect its
ability to record, process, summarize and report financial information, or (ii) any fraud, whether or not material, that involves
management or other employees who have a role in the Company’s or the Bank’s internal control over financial reporting.
The Company (A) has implemented and maintains disclosure controls and procedures reasonably designed and maintained to ensure
that material information relating to the Company is made known to the Chief Executive Officer and the Chief Financial Officer
of the Company by others within the Company and (B) has disclosed, based on its most recent evaluation prior to the date
hereof, to the Company’s outside auditors and the audit committee of the Company’s Board of Directors any significant
deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the Company’s internal controls over financial reporting. Such disclosure controls and procedures
are effective for the purposes for which they were established.

    	 

    	 

    

4.9           Tax Matters. The Company, the
Bank and each other Subsidiary of the Company have (i) filed all material foreign, U.S. federal, state and local tax returns,
information returns and similar reports that are required to be filed prior to the date hereof, or requests for extensions to
file such returns have been timely filed, and all such tax returns are true, correct and complete in all material respects, and
(ii) paid all material taxes required to be paid by it and any other material assessment, fine or penalty levied against it other
than taxes (x) currently payable without penalty or interest, or (y) being contested in good faith by appropriate proceedings.

4.10         Exempt
Offering. Assuming the accuracy of the Purchaser’s representations and warranties
set forth in this Agreement, no registration under the Securities Act is required for the offer and sale of the Subordinated Notes
by the Company to the Purchaser.

4.11         Representations and Warranties Generally.
The representations and warranties of the Company set forth in this Agreement that do not contain a “Material Adverse Effect”
qualification or other express materiality or similar qualification are true and correct in all material respects (i) as of the
Closing Date and (ii) as otherwise specifically provided herein. The representations and warranties of the Company set forth in
this Agreement that contain a “Material Adverse Effect” qualification or any other express materiality or similar
qualification are true and correct (a) as of the Closing Date and (b) as otherwise specifically provided herein.

5.             GENERAL
COVENANTS, CONDITIONS AND AGREEMENTS.

The
Company hereby further covenants and agrees with each Purchaser as follows:

5.1           Compliance
with Transaction Documents. The Company shall comply with, observe and timely perform
each and every one of the covenants, agreements and obligations of the Company under the Transaction Documents.

5.2           Affiliate
Transactions. The Company shall not itself, nor shall it cause, permit or allow any
of its Subsidiaries to enter into any transaction, including, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate of the Company except in the ordinary course of business and pursuant to the reasonable requirements
of the Company’s or such Affiliate’s business and upon terms consistent with applicable laws and regulations and reasonably
found by the appropriate board(s) of directors to be fair and reasonable and no less favorable to the Company or such Affiliate
than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate.

5.3           Compliance
with Laws.

5.3.1       Generally.
The Company shall comply and cause the Bank and each of its other Subsidiaries to comply in all material respects with all applicable
statutes, rules, regulations, orders and restrictions in respect of the conduct of its business and the ownership of its properties,
except, in each case, where such noncompliance would not reasonably be expected to have a Material Adverse Effect on the Company.

5.3.2        Regulated
Activities. The Company shall not itself, nor shall it cause, permit or allow the
Bank or any other of its Subsidiaries to (i) engage in any business or activity not permitted by all applicable laws and regulations,
except where such business or activity would not reasonably be expected to have a Material Adverse Effect on the Company, the
Bank and/or such of its Subsidiaries or (ii) make any loan or advance secured by the capital stock of another bank or depository
institution, or acquire the capital stock, assets or obligations of or any interest in another bank or depository institution,
in each case other than in accordance with applicable laws and regulations and safe and sound banking practices.

    	 

    	 

    

5.3.3        Taxes.
The Company shall and shall cause the Bank and any other of its Subsidiaries to promptly pay and discharge all material taxes,
assessments and other governmental charges imposed upon the Company, the Bank or any other of its Subsidiaries or upon the income,
profits, or property of the Company or any Subsidiary and all claims for labor, material or supplies which, if unpaid, might by
law become a lien or charge upon the property of the Company, the Bank or any other of its Subsidiaries. Notwithstanding the foregoing,
none of the Company, the Bank or any other of its Subsidiaries shall be required to pay any such tax, assessment, charge or claim,
so long as the validity thereof shall be contested in good faith by appropriate proceedings, and appropriate reserves therefor
shall be maintained on the books of the Company, the Bank or such other Subsidiary, as the case may be.

5.3.4        Corporate
Existence. The Company shall do or cause to be done all things reasonably necessary
to maintain, preserve and renew its corporate existence and that of the Bank and the other Subsidiaries and its and their rights
and franchises, and comply in all material respects with all related laws applicable to the Company, the Bank or the other Subsidiaries;
provided, however, that the Company may consummate a merger in which (a) the Company is the surviving entity or (b) if
the Company is not the surviving entity, the surviving entity assumes, by operation of law or otherwise, all of the obligations
of the Company under the Subordinated Notes.

5.3.5        Dividends,
Payments, and Guarantees During Event of Default. Upon the occurrence of a failure by the Company to make any required
payment of principal or interest on the Subordinated Note when such payment becomes due and payable, or upon an Event of Default
(as defined under the Subordinated Notes), until such failure to pay or Event of Default is cured by the Company or waived by
the Purchaser in accordance with the terms of the Subordinated Notes and except as required by any federal or state Governmental
Agency, the Company shall not (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock; (b) make any payment of principal of, or interest or premium, if any, on, or
repay, repurchase or redeem any of the Company’s Indebtedness that ranks equal with or junior to the Subordinated Notes;
or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than (i) any dividends
or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of the Company’s
common stock; (ii) any declaration of a non-cash dividend in connection with the implementation of a shareholders’ rights
plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant
thereto; (iii) as a result of a reclassification of the Company’s capital stock or the exchange or conversion of one class
or series of the Company’s capital stock for another class or series of the Company’s capital stock; (iv) the purchase
of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged; or (v) purchases of any class of the Company’s common stock
related to or from any benefit plans for the Company’s directors, officers or employees or any of the Company’s dividend
reinvestment plans.

    	 

    	 

    

5.3.6         Tier
2 Capital. If all or any portion of the Subordinated Notes ceases to be eligible
to qualify as Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the
five (5) years immediately preceding the Maturity Date of the Subordinated Notes, the Company will as promptly as reasonably practicable
notify the Noteholders (as defined in the Subordinated Notes), and thereafter the Company and the Noteholders (as defined in the
Subordinated Notes) will work together in good faith to execute and deliver all agreements as reasonably necessary in order to
restructure the applicable portions of the obligations evidenced by the Subordinated Notes to be eligible to qualify as Tier 2
Capital; provided, however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated
Notes upon the occurrence of a Tier 2 Capital Event as described in the Subordinated Notes.

5.4           Absence
of Control. It is the intent of the parties to this Agreement that in no event shall
the Purchaser, by reason of any of the Transaction Documents, be deemed to control, directly or indirectly, the Company, and the
Purchaser shall not exercise, or be deemed to exercise, directly or indirectly, a controlling influence over the management or
policies of the Company.

5.5           Secondary
Market Transactions. To the extent and so long as not in violation of Section 6.4
hereof, each Purchaser shall have the right at any time and from time to time to securitize its Subordinated Notes or any portion
thereof in a single asset securitization or a pooled loan securitization of rated single or multi-class securities secured by
or evidencing ownership interests in the Subordinated Notes (each such securitization is referred to herein as a “Secondary
Market Transaction”). In connection with any such Secondary Market Transaction, the Company shall, at the Company’s
expense, reasonably cooperate with the Purchaser and otherwise reasonably assist the Purchaser in satisfying the market standards
to which the Purchaser customarily adhere or which may be reasonably required in the marketplace or by applicable rating agencies
in connection with any such Secondary Market Transaction, but in no event shall the Company be required to incur any costs or
expenses in excess of $5,000 in connection therewith. Subject to any written confidentiality obligation, including the terms of
any non-disclosure agreement between the Purchaser and the Company, all information regarding the Company may be furnished, without
liability except in the case of gross negligence or willful misconduct, to any Purchaser and to any Person reasonably deemed necessary
by the Purchaser in connection with participation in such Secondary Market Transaction. The Purchaser shall cause any Person to
whom the Purchaser wishes to deliver confidential Company information related to the Secondary Market Transaction to execute and
deliver to the Company a non- disclosure agreement reasonably acceptable to the Company unless such Person is a party to a commercially
reasonable non-disclosure agreement to which the Company is a third party beneficiary All documents, financial statements, appraisals
and other data relevant to the Company or the Subordinated Notes may be retained by any such Person, subject to the terms of any
applicable nondisclosure agreement between the Purchaser and the Company.

    	 

    	 

    

5.6           No
Promotion. The Company agrees that it will not, and shall cause each of its Affiliates
Subsidiaries to not, without the prior written consent of the applicable Purchaser, use in advertising, or otherwise use publicly,
the name of such Purchaser or any Affiliate thereof, or any partner or employee of such Purchaser or any Affiliate thereof, nor
any trade name, trademark, trade device, service mark, symbol or any abbreviation, contraction or simulation thereof owned by
such Purchaser or any Affiliate thereof, except as otherwise required by law or the applicable rules or regulations of any securities
exchange or securities market, in which case the Company shall allow the Purchaser reasonable time to comment on such release
or announcement in advance of such issuance. The Company further agrees that it shall obtain the written consent of the applicable
Purchaser prior to the Company’s issuance of any public statement detailing the purchase of Subordinated Notes by such Purchaser
pursuant to this Agreement, in which case the Company shall allow the Purchaser reasonable time to comment on such release or
announcement in advance of such issuance.

6.             REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE PURCHASER.

Each
Purchaser hereby represents and warrants to the Company, and covenants with the Company, severally and not jointly, as follows:

6.1           Legal
Power and Authority. It has all necessary power and authority to execute, deliver
and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. It is an entity duly
organized, validly existing and in good standing under the laws of its jurisdiction of organization.

6.2          Authorization
and Execution. The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of such Purchaser, and, assuming due authorization, execution and delivery
by the other parties hereto, this Agreement is a legal, valid and binding obligation of such Purchaser, enforceable against such
Purchaser in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

6.3           No
Conflicts. Neither the execution, delivery or performance of the Transaction Documents
nor the consummation of any of the transactions contemplated thereby will conflict with, violate, constitute a breach of or a
default (whether with or without the giving of notice or lapse of time or both) under (i) its organizational documents, (ii) any
agreement to which it is party, (iii) any law applicable to it or (iv) any order, writ, judgment, injunction, decree, determination
or award binding upon or affecting it.

6.4           Purchase
for Investment. It is purchasing the Subordinated Note for its own account and not
with a view to distribution and with no present intention of reselling, distributing or otherwise disposing of the same. It has
no present or contemplated agreement, undertaking, arrangement, obligation, Indebtedness or commitment providing for, or which
is likely to compel, a disposition of the Subordinated Notes in any manner.

6.5           Institutional
Accredited Investor. It is and will be on the Closing Date (i) an institutional “accredited
investor” as such term is defined in Rule 501(a) of Regulation D and as contemplated by subsections (1)-(3), (7) and (9)
of Rule 501(a) of Regulation D, and has no less than $5,000,000 in total assets, or (ii) a QIB.

    	 

    	 

    

6.6           Financial
and Business Sophistication. It has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the prospective investment in the Subordinated Notes.
It has relied solely upon its own knowledge of, and/or the advice of its own legal, financial, tax or other advisors with regard
to, the legal, financial, tax and other considerations involved in deciding to purchase the Subordinated Notes.

6.7           Ability
to Bear Economic Risk of Investment. It recognizes that an investment in the Subordinated
Notes is a speculative investment that involves substantial risk, including risks related to the Company’s business, operating
results, financial condition and cash flows, which risks it has carefully considered in connection with making an investment in
the Subordinated Notes. It has the ability to bear the economic risk of the prospective investment in the Subordinated Notes,
including the ability to hold the Subordinated Notes indefinitely, and further including the ability to bear a complete loss of
all of its investment in the Company.

6.8           Information. It acknowledges
that (i) it is not being provided with the disclosures that would be required if the offer and sale of the Subordinated Notes
were registered under the Securities Act, nor is it being provided with any offering circular, private placement memorandum or
prospectus prepared in connection with the offer and sale of the Subordinated Notes; (ii) it has conducted its own examination
of the Company and the terms of the Subordinated Notes to the extent it deems necessary to make its decision to invest in the
Subordinated Notes; (iii) it has availed itself of publicly available financial and other information concerning the Company to
the extent it deems necessary to make its decision to purchase the Subordinated Notes (including meeting with representatives
of the Company); and (iv) it has not received nor relied on any form of general solicitation or general advertising (within the
meaning of Regulation D) from the Company in connection with the offer and sale of the Subordinated Notes. It has reviewed the
information set forth in the Company’s Reports, the exhibits hereto and the information in connection with the transactions
contemplated by this Agreement.

6.9          Access
to Information. It acknowledges that it and its advisors have been furnished with
all materials relating to the business, finances and operations of the Company that have been requested by it or its advisors
and reviewed the information contained therein, given the opportunity to ask questions of, and to receive answers from, persons
acting on behalf of the Company concerning terms and conditions of the transactions contemplated by this Agreement in order to
make an informed and voluntary decision to enter into this Agreement.

6.10        Investment
Decision. It has made its own investment decision based upon its own judgment, due
diligence and advice from such advisors as it has deemed necessary and not upon any view expressed by any other Person or entity,
including the Placement Agents. Neither such inquiries nor any other due diligence investigations conducted by it or its advisors
or representatives, if any, shall modify, amend or affect its right to rely on the Company’s representations and warranties
contained herein. It is not relying upon, and has not relied upon, any advice, statement, representation or warranty made by any
Person by or on behalf of the Company, including, without limitation, the Placement Agents, except for the express statements,
representations and warranties of the Company made or contained in this Agreement. Furthermore, it acknowledges that (i) the Placement
Agents have not performed any due diligence review on behalf of it and (ii) nothing in this Agreement or any other materials presented
by or on behalf of the Company to it in connection with the purchase of the Subordinated Notes constitutes legal, tax, accounting
or investment advice.

    	 

    	 

    

6.11        Private
Placement; No Registration; Restricted Legends. It understands and acknowledges that
the Subordinated Notes are being sold by the Company without registration under the Securities Act in reliance on the exemption
from federal and state registration set forth in, respectively, Rule 506(b) of Regulation D promulgated under Section 4(a)(2)
of the Securities Act and Section 18 of the Securities Act, or any state securities laws, and accordingly, may be resold, pledged
or otherwise transferred only if exemptions from the Securities Act and applicable state securities laws are available to it.
It is not subscribing for the Subordinated Notes as a result of or subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting.
It further acknowledges and agrees that all certificates or other instruments representing the Subordinated Notes will bear the
restrictive legend set forth in the form of Subordinated Note. It further acknowledges its primary responsibilities under the
Securities Act and, accordingly, will not sell or otherwise transfer the Subordinated Notes or any interest therein without complying
with the requirements of the Securities Act and the rules and regulations promulgated thereunder and the requirements set forth
in this Agreement. None of the Placement Agents nor the Company have or has made or are or is making any representation, warranty
or covenant, express or implied, as to the availability of any exemption from registration under the Securities Act or any applicable
state securities laws for the resale, pledge or other transfer of the Subordinated Notes, or that the Subordinated Notes purchased
by it will ever be able to be lawfully resold, pledged or otherwise transferred.

6.12         Placement
Agents. It will purchase the Subordinated Note(s) directly from the Company and not
from the Placement Agent and understands that none of the Placement Agents nor any other broker or dealer has any obligation to
make a market in the Subordinated Notes.

6.13         Tier
2 Capital. If the Company provides notice as contemplated in Section 5.3.6
of the occurrence of the event contemplated in such section, thereafter the Company and the Purchaser will work together in good
faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations
evidenced by the Subordinated Notes to be eligible to qualify as Tier 2 Capital; provided, however, that nothing contained in
this Agreement shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital
Event as described in the Subordinated Notes.

6.14         Not Debt of the Bank; Not Savings Accounts, etc.
It acknowledges that the Company is a bank holding company and the Company’s rights and the rights of the Company’s
creditors, including, the Noteholders (as defined in the Subordinated Notes), to participate in the assets of any Subsidiary during
its liquidation or reorganization are structurally subordinate to the prior claims of the Subsidiary’s creditors. It acknowledges
and agrees that the Subordinated Notes are not savings accounts or deposits of the Bank and are not insured or guaranteed by the
FDIC or any Governmental Agency, and that no Governmental Agency has passed upon or will pass upon the offer or sale of the Subordinated
Notes or has made or will make any finding or determination as to the fairness of this investment.

    	 

    	 

    

6.15         Accuracy
of Representations. It understands that each of the Placement Agents and the Company
are relying and will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements in connection
with the transactions contemplated by this Agreement, and agrees that if any of the representations or acknowledgements made by
it are no longer accurate as of the Closing Date, or if any of the agreements made by it are breached on or prior to the Closing
Date, it shall promptly notify the Placement Agents and the Company.

6.16         Representations
and Warranties Generally. The representations and warranties of such Purchaser set
forth in this Agreement are true and correct as of the date hereof and will be true and correct as of the Closing Date and as
otherwise specifically provided herein. Any certificate signed by a duly authorized representative of such Purchaser and delivered
to the Company or to counsel for the Company shall be deemed to be a representation and warranty by such Purchaser to the Company
as to the matters set forth therein.

7.             MISCELLANEOUS.

7.1           Prohibition
on Assignment by the Company. Except as described in Section 8(b) (Merger or Sale
of Assets) of the Subordinated Notes, the Company may not assign, transfer or delegate any of its rights or obligations under
this Agreement or the Subordinated Notes without the prior written consent of all the Noteholders (as defined in the Subordinated
Note).

7.2           Time
of the Essence. Time is of the essence for this Agreement.

7.3           Waiver
or Amendment. No waiver or amendment of any term, provision, condition, covenant
or agreement herein or in the Subordinated Notes shall be effective unless in writing and except with the consent of the holders
of at least fifty percent (50%) of the aggregate principal amount (excluding any Subordinated Notes held by the Company or any
of its Affiliates) of the Subordinated Notes at the time outstanding; provided, however, that without the consent
of each holder of an affected Subordinated Note, no such amendment or waiver may: (i) reduce the principal amount of the Subordinated
Note; (ii) reduce the rate of or change the time for payment of interest on any Subordinated Note; (iii) extend the maturity of
any Subordinated Note; (iv) change the currency in which payment of the obligations of the Company under this Agreement and the
Subordinated Notes are to be made; (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required
to approve any amendment of this Agreement or the Subordinated Notes; (vi) make any changes to Section 6 (Failure to Make Payments)
of the Subordinated Notes that adversely affects the rights of any holder of a Subordinated Note; or (vii) disproportionately
and adversely affect the rights of any of the holders of the then outstanding Subordinated Notes. Notwithstanding the foregoing,
the Company may amend or supplement the Subordinated Notes without the consent of the holders of the Subordinated Notes to cure
any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of certificated
Subordinated Notes, or to make any change that does not adversely affect the rights of any holder of any of the Subordinated Notes.
No failure to exercise or delay in exercising, by a Purchaser or any holder of the Subordinated Notes, of any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege
preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law. The rights and remedies
provided in this Agreement are cumulative and not exclusive of any right or remedy provided by law or equity. No notice or demand
on the Company in any case shall, in itself, entitle the Company to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Purchaser to any other or further action in any circumstances without
notice or demand. No consent or waiver, expressed or implied, by the Purchaser to or of any breach or default by the Company in
the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach
or default in the performance of the same or any other obligations of the Company hereunder. Failure on the part of the Purchaser
to complain of any acts or failure to act or to declare an Event of Default, irrespective of how long such failure continues,
shall not constitute a waiver by the Purchaser of their rights hereunder or impair any rights, powers or remedies on account of
any breach or default by the Company.

    	 

    	 

    

7.4           Required
Waiver Disclosure. Appendix A hereto sets forth certain disclosures relating to KBW
that the Company is required to provide to the Purchaser.

7.5           Severability. Any provision
of this Agreement which is unenforceable or invalid or contrary to law, or the inclusion of which would adversely affect the validity,
legality or enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms and provisions of
this Agreement shall subsist and be fully effective according to the tenor of this Agreement the same as though any such invalid
portion had never been included herein. Notwithstanding any of the foregoing to the contrary, if any provisions of this Agreement
or the application thereof are held invalid or unenforceable only as to particular persons or situations, the remainder of this
Agreement, and the application of such provision to persons or situations other than those to which it shall have been held invalid
or unenforceable, shall not be affected thereby, but shall continue valid and enforceable to the fullest extent permitted by law.

7.6           Notices.
Any notice which any party hereto may be required or may desire to give hereunder shall be deemed to have been given if in writing
and if delivered personally, or if mailed, postage prepaid, by United States registered or certified mail, return receipt requested,
or if delivered by a responsible overnight commercial courier promising next business day delivery, or if by email with confirmation
of transmission, addressed:

	 	if
    to the Company:	Coastal Financial Corporation

        5415 Evergreen Way

        Everett, Washington 98203

        Tel: (425) 257-9000

        Attention: Joel G. Edwards

        Executive Vice President
        and Chief Financial Officer

	 	 	 
	 	with
    a copy to:	Covington
        & Burling LLP

        620 Eighth Avenue,

        New
        York, New York 10020

        Tel:
        212-841-1017

        Attention:
        Christopher J. DeCresce

        

	 	 	 	 
	 	if
    to the Purchaser:	To
    the address indicated on such Purchaser’s signature page.	 

    	 

    	 

    

or to
such other address or addresses as the party to be given notice may have furnished in writing to the party seeking or desiring
to give notice, as a place for the giving of notice; provided that no change in address shall be effective until five (5) Business
Days after being given to the other party in the manner provided for above. Any notice given in accordance with the foregoing
shall be deemed given when delivered personally or, if mailed, three (3) Business Days after it shall have been deposited in the
United States mails as aforesaid or, if sent by overnight courier, the Business Day following the date of delivery to such courier
(provided next business day delivery was requested).

7.7           Successors
and Assigns. This Agreement shall inure to the benefit of the parties and their respective
heirs, legal representatives, successors and assigns; except that (i) unless a Purchaser consents in writing, no assignment made
by the Company in violation of this Agreement shall be effective or confer any rights on any purported assignee of the Company,
and (ii) unless such assignment complies with the Assignment Form attached to the Subordinated Notes, no assignment made by a
Purchaser shall be effective or confer any rights on any purported assignee of Purchaser. The term “successors and assigns”
will not include a purchaser of any of the Subordinated Notes from any Purchaser merely because of such purchase but shall include
a purchaser of any of the Subordinated Notes pursuant to an assignment complying with the Assignment Form attached to the Subordinated
Notes.

7.8           No Joint Venture. Nothing contained
herein or in any document executed pursuant hereto and no action or inaction whatsoever on the part of a Purchaser, shall be deemed
to make a Purchaser a partner or joint venturer with the Company.

7.9           Documentation.
All documents and other matters required by any of the provisions of this Agreement to be submitted or furnished to a Purchaser
shall be in form and substance satisfactory to such Purchaser.

7.10         Entire
Agreement. The Transaction Documents, along with any exhibits hereto and thereto,
constitute the entire agreement between the parties hereto with respect to the subject matter hereof and may not be modified or
amended in any manner other than by supplemental written agreement executed by the parties hereto. No party, in entering into
this Agreement, has relied upon any representation, warranty, covenant, condition or other term that is not set forth in the Transaction
Documents.

7.11        Choice
of Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to its laws or principles of conflict of laws. Nothing herein shall be deemed
to limit any rights, powers or privileges which a Purchaser may have pursuant to any law of the United States of America or any
rule, regulation or order of any department or agency thereof and nothing herein shall be deemed to make unlawful any transaction
or conduct by a Purchaser which is lawful pursuant to, or which is permitted by, any of the foregoing.

    	 

    	 

    

7.12         No
Third Party Beneficiary. This Agreement is made for the sole benefit of the Company
and the Purchaser, and no other Person shall be deemed to have any privity of contract hereunder nor any right to rely hereon
to any extent or for any purpose whatsoever, nor shall any other Person have any right of action of any kind hereon or be deemed
to be a third party beneficiary hereunder; provided, that the Placement Agents may rely on the representations and warranties
contained herein to the same extent as if it were a party to this Agreement.

7.13         Legal
Tender of United States. All payments hereunder shall be made in coin or currency
which at the time of payment is legal tender in the United States of America for public and private debts.

7.14         Captions; Counterparts. Captions
contained in this Agreement in no way define, limit or extend the scope or intent of their respective provisions. This Agreement
may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same
instrument. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile signature page were an original thereof.

7.15         Knowledge;
Discretion. All references herein to a Purchaser’s or the Company’s knowledge
shall be deemed to mean the knowledge of such party based on the actual knowledge of such party’s Chief Executive Officer
and Chief Financial Officer or such other persons holding equivalent offices. Unless specified to the contrary herein, all references
herein to an exercise of discretion or judgment by a Purchaser, to the making of a determination or designation by a Purchaser,
to the application of a Purchaser’s discretion or opinion, to the granting or withholding of a Purchaser’s consent
or approval, to the consideration of whether a matter or thing is satisfactory or acceptable to a Purchaser, or otherwise involving
the decision making of a Purchaser, shall be deemed to mean that such Purchaser shall decide using the reasonable discretion or
judgment of a prudent lender.

7.16         Waiver
of Right to Jury Trial. TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING
IN ANY WAY IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF THE COMPANY OR THE PURCHASER.
THE PARTIES ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL SELECTED OF THEIR OWN FREE WILL. THE PARTIES FURTHER ACKNOWLEDGE THAT (I) THEY HAVE READ AND UNDERSTAND THE MEANING
AND RAMIFICATIONS OF THIS WAIVER, (II) THIS WAIVER HAS BEEN REVIEWED BY THE PARTIES AND THEIR COUNSEL AND IS A MATERIAL INDUCEMENT
FOR ENTRY INTO THIS AGREEMENT AND (III) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED
THEREIN.

    	 

    	 

    

7.17         Expenses.
Except as otherwise provided in this Agreement, each of the parties will bear and pay all other costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated pursuant to this Agreement, provided, that the Company shall
reimburse the Purchaser for its reasonable attorney's fees in connection with this Agreement, provided further, that such expense
reimbursement shall not exceed $5,000 in the aggregate.

7.18         Survival.
Each of the representations and warranties set forth in this Agreement shall survive the consummation of the transactions contemplated
hereby for a period of one year after the date hereof. Except as otherwise provided herein, all covenants and agreements contained
herein shall survive until, by their respective terms, they are no longer operative.

 

[Signature
Pages Follow]

    	 

    	 

    

IN
WITNESS WHEREOF, the Company has caused this Subordinated Note Purchase Agreement to be executed by its duly authorized representative
as of the date first above written.

	 	COMPANY:
	 	 	 
	 	Coastal financial corporation
	 	 	                    
	 	By: 	 
	 	 	Name:
	 	 	Title:

[Company Signature
Page to Subordinated Note Purchase Agreement]

    	 

    	 

    

IN
WITNESS WHEREOF, the Purchaser has caused this Subordinated Note Purchase Agreement to be executed by its duly authorized
representative as of the date first above written.

	 	PURCHASER:
	 	 	 
	 	[INSERT PURCHASER’S NAME]
	 	 	                  
	 	By:  	 
	 	 	Name: [●]
	 	 	Title:   [●]
	 	 	 
	 	Address of Purchaser:
	 	 	 
	 	[●]
	 	 	 
	 	Principal Amount of Purchased Subordinated Note:
	 	 	 
	 	$[●]

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