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Item 9A. Controls and Procedures

2026-02-27 compared with 2025-03-17 · 71 added, 47 removed, 193 unchanged (38% of the section changed)

Controls and Procedures

Evaluation of Disclosure Controls and Procedures for 2024

Evaluation of Disclosure Controls and Procedures

At December 31, 2025, the end of the period covered by this Annual Report on Form 10-K, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934.

Based on that evaluation, both the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2024, due to the identification of the material weaknesses described below.

In addition, due to the material weaknesses described below and the resulting restatement of our financial statements as of and for the year ended December 31, 2023, management has concluded that our disclosure controls and procedures were not effective as of December 31, 2023, March 31, 2024, June 30, 2024 or September 30, 2024.

Based on that evaluation, both the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2025.

Management’s Report on Internal Control Over Financial Reporting

6 unchanged sentences

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management has concluded that our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), was not effective as of December 31, 2024, due to the material weaknesses described below.

In addition, due to the material weaknesses described below and the resulting restatement of our financial statements as of and for the year ended December 31, 2023, management has concluded that our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), was also ineffective as of December 31, 2023.

Based on this evaluation, management has concluded that our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), was effective as of December 31, 2025.

Existence of Material Weaknesses

A material weakness exists when there is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

During the preparation of our audited financial statements as of and for the year ended December 31, 2024, management identified the following material weaknesses:

• The Company has an ineffective control environment and did not maintain the risk assessment and control activities components of the COSO framework resulting in the Company not appropriately designing and implementing sufficient internal controls around the accounting and financial reporting related to information provided by BaaS partners.

• A deficiency in the design of controls related to the BaaS lending partner accounting policies reflected in BaaS partner reports that could impact the Company’s use of such reports to record interest income, BaaS loan expense and the related balance sheet accounts.

• A deficiency in the design of controls related to the proper presentation of BaaS partner interchange fees on point of sale transactions that conforms with the Company’s adopted accounting policies.

As a result, certain amounts included in interest income, non-interest income, BaaS loan expense, non-interest expense, and the related balance sheet accounts were not recognized in accordance with U.S.

generally accepted accounting principles, which required a restatement of the financial statements for the year ended December 31, 2023, and the interim quarterly periods in 2024 and 2023.

Remediation Plan

Since identifying the material weaknesses described herein, management, under the oversight of the Audit Committee has committed to remediate these deficiencies.

The remediation efforts include implementing controls to:

• Enhance our risk assessment procedures over third-party reports to identify whether additional control activities are needed to conform third party reports to the Company’s accounting policies.

• Periodically verify the accounting policies used by a specific BaaS partner

• Evaluate whether any entries are needed to adjust the interest income and BaaS loan expense reflected on the specific BaaS partner’s system reports

• Evaluate whether any adjustments are needed to third party revenue reports to comply with the Company’s accounting policies.

While we expect that the implementation of these controls will address the material weaknesses, management continues to evaluate the effectiveness of the remedial actions on an ongoing basis.

As a result of the identification of the material weaknesses, management performed extensive testing of the impacted transactions.

Based on additional procedures performed, management concluded that the consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented, in conformity with GAAP.

Moss Adams LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2024, and their report is included in Item 8.

Financial Statements and Supplementary Data.

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, management identified material weaknesses in internal control over financial reporting related to the control environment and the risk assessment and control activities components of the COSO framework associated with accounting and financial reporting for information provided by Banking-as-a-Service (“BaaS”) partners.

These material weaknesses resulted in the restatement of the Company’s financial statements for the year ended December 31, 2023 and interim quarterly periods in 2024 and 2023.

Remediation of Previously Identified Material Weaknesses

During 2025, management, under the oversight of the Audit Committee, designed and implemented a comprehensive remediation plan to address the previously identified material weaknesses.

Remediation actions included enhancements to the Company’s risk assessment procedures over third-party reports, implementation of new and enhanced controls over partner accounting policies, funds flow documentation, partner journal entries, partner data and information produced by the entity, financial statement impact assessments and the establishment of a formal Partner ICFR Program.

All remediation actions were fully implemented as of December 31, 2025 and operated for a sufficient period to allow management to evaluate their design and operating effectiveness.

Management tested the effectiveness of the remediated controls, and Internal Audit independently evaluated the design and operating effectiveness of the Partner ICFR Program and related controls.

The controls were determined to be operating effectively during the period tested.

Based on these evaluations, management concluded that the previously identified material weaknesses have been remediated as of December 31, 2025.

Changes in Internal Control over Financial Reporting

Except as identified above with respect to the identification of the material weaknesses in our internal control over financial reporting during the preparation of our financial statements for the year ended December 31, 2024 and our subsequent efforts to remediate the material weaknesses, there have been no changes in our internal control during our most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In connection with the remediation of the previously identified material weaknesses described above, management implemented enhancements to our internal control over financial reporting during 2025.

Except for the remediation activities described above, there were no changes in our internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Auditor Attestation

Baker Tilly, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2025, and their report is included in Item 8.

Financial Statements and Supplementary Data.

Other Information

During the fiscal quarter ended December 31, 2024 , no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

During the fiscal quarter ended December 31, 2025, no director or officer of the Company adopted , modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

4 unchanged sentences

Executive Officers

For information relating to officers of the Company, see Part I, Item 1, “Business—Information About Our Executive Officers” to this Annual Report on Form 10-K.

For information relating to officers of the Company, the section captioned “Other Information Relating to Directors and Executive Officers—Information About Our Executive Officers” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference.

Delinquent Section 16(a) Reports

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333-225715), filed with the Securities and Exchange Commission on June 19, 2018

3.3 Amended and Restated Bylaws of Coastal Financial Corporation

3.3 Third Amended and Restated Bylaws of Coastal Financial Corporation, effective May 28, 2025

Incorporated herein by reference to

Exhibit 3.3 to the Company’s Registration Statement on Form S-1 (File No.

Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No.

001-38589), filed with the Securities and Exchange Commission on June 03, 2025

6 unchanged sentences

Exhibit 4.2 to the Company’s Annual Report on Form 10-K (File No.

001-38589), filed with the Securities and Exhange Commission on March 12, 2020.

001-38589), filed with the Securities and Exchange Commission on March 12, 2020

4.3 Form of 3.375% Fixed-to-Floating Rate Subordinated Note due September 1, 2031

16 unchanged sentences

333-225715), filed with the Securities and Exchange Commission on June 19, 2018

10.4+ The First Amendment to the Coastal Financial Corporation 2018 Omnibus Incentive Plan

Incorporated herein by reference to Appendix A of the Company's Proxy Statement on Form DEF 14A, filed with the Securities and Exchange Commission on April 9, 2021

10.5+ The Second Amendment to the Coastal Financial Corporation 2018 Omnibus Incentive Plan

Incorporated herein by reference to Appendix A of the Company's Proxy Statement on Form DEF 14A, filed with the Securities and Exchange Commission on April 17, 2025

10.6+ Coastal Financial Corporation Annual Incentive Plan

10 unchanged sentences

333-225715), filed with the Securities and Exchange Commission on June 19, 2018

10.9+ Employee Retirement and Retention Agreement by and among Coastal Financial Corporation, Coastal Community Bank, and Joel Edwards dated May 7, 2025

Incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (File No.

001-38589), filed with the Securities and Exchange Commission on August 8, 2025

10.10 Lease dated October 21, 1996, between certain persons and Coastal Community Bank

46 unchanged sentences

10.22 Employment Agreement by and among Coastal Financial Corporation, Coastal Community Bank and Brian Hamilton, dated September 30, 2024.

Incorporated herein by reference to Exhibit 10.19 of the Company’s Form 10-K (File No.

001-38589), filed with the Securities and Exchange Commission on March 17, 2025

10.23+ Employee Agreement by and among Coastal Financial Corporation, Coastal Community Bank, and Brandon Soto dated October 1, 2025

Incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No.