8-K: Coastal Financial Corporation Appoints Baker Tilly as New Auditor Following Moss Adams Merger, Discloses Adverse Opinion on Internal Controls

Coastal Financial Corporation announced the appointment of Baker Tilly US, LLP as its new independent registered public accounting firm, succeeding Moss Adams LLP due to a merger, while also disclosing an adverse opinion on its internal control over financial reporting for 2024.

Summary

• Coastal Financial Corporation (the "Company") was notified on June 3, 2025, that its independent registered public accounting firm, Moss Adams LLP, merged with Baker Tilly US, LLP, effective the same day.
• As a result of the merger, Moss Adams LLP resigned as the Company's auditors.
• The Audit Committee of the Company's Board of Directors approved the appointment of Baker Tilly US, LLP as the successor independent registered public accounting firm.
• Moss Adams' audit report on the Company's consolidated financial statements for the years ended December 31, 2024, and 2023, did not contain an adverse opinion, disclaimer, qualification, or modification.
• However, Moss Adams' audit report on the Company's internal control over financial reporting as of December 31, 2024, contained an adverse opinion.
• There were no disagreements with Moss Adams on accounting principles, financial statement disclosure, or auditing scope/procedure during the years ended December 31, 2024, and 2023, and through June 3, 2025.
• No reportable events requiring disclosure pursuant to Item 304(a)(1)(v) of Regulation S-K occurred during the specified periods.
• The Company did not consult with Baker Tilly regarding accounting principles or audit opinions prior to their appointment.
• Moss Adams provided a letter to the SEC confirming their agreement with the Company's statements in the Form 8-K.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the adverse opinion on internal control over financial reporting, which is a serious issue for a public company, despite the routine nature of the auditor change itself.

Positives

• The change in auditor was a result of a merger between accounting firms, not due to disagreements or issues with the Company.
• Moss Adams' audit reports on the Company's consolidated financial statements for 2024 and 2023 did not contain an adverse opinion, disclaimer, qualification, or modification.
• There were no disagreements with Moss Adams on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure during the periods reported.

Negatives

• Moss Adams' audit report on the Company's internal control over financial reporting as of December 31, 2024, contained an adverse opinion.

Risks

• The adverse opinion on internal control over financial reporting as of December 31, 2024, indicates a material weakness in the Company's financial reporting processes, which could lead to errors or misstatements in future financial reports.
• Weaknesses in internal controls can increase the risk of fraud or operational inefficiencies.

Future Outlook

The document does not provide specific forward-looking financial guidance or strategic outlook beyond the change in auditing firm and the implications of the internal control finding. The Company will now work with Baker Tilly US, LLP for future audits.

Management Comments

• The report was signed by Joel G. Edwards, Executive Vice President and Chief Financial Officer, indicating management's acknowledgment and filing of the information.

Industry Context

Mergers between large accounting firms are common in the auditing industry, often leading to changes in client auditors. However, an adverse opinion on internal controls is a company-specific issue that signals a significant weakness in a company's financial reporting infrastructure, which is not typical across the industry.

Comparison to Industry Standards

• The change in auditor due to a merger is a common occurrence in the auditing industry, reflecting consolidation trends among professional services firms.
• An adverse opinion on internal control over financial reporting, as reported for Coastal Financial Corporation for 2024, is a significant deviation from industry best practices and regulatory expectations. Publicly traded companies are generally expected to maintain effective internal controls over financial reporting to ensure the reliability of their financial statements. This contrasts with companies like JPMorgan Chase or Bank of America, which typically maintain effective internal controls and receive unqualified opinions on their internal control over financial reporting.

Corporate Governance

Stakeholder Impact

• Shareholders: May be concerned about the reliability of financial reporting due to the adverse opinion on internal controls, potentially impacting investor confidence and stock valuation.
• Regulatory Authorities: The SEC will note the adverse opinion on internal controls, potentially leading to increased scrutiny.
• Management: Will be tasked with remediating the material weaknesses in internal controls.

Next Steps

• Baker Tilly US, LLP will serve as the Company's independent registered public accounting firm for future audits.
• The Company will need to address the issues leading to the adverse opinion on internal control over financial reporting.

Key Dates

Recommendation

Keywords

SEC filing, 8-K, auditor change, independent registered public accounting firm, internal control over financial reporting, adverse opinion, Moss Adams LLP, Baker Tilly US LLP, Coastal Financial Corporation, corporate governance, financial reporting