Oct 29, 2026 earnings call — BaaS partner review and cost cuts
Coastal returned to profitability with net income of $13.8 million and highlighted $14.1 million in BaaS program fee income.
Revenue $0.1B (est $0.2B) · EPS $0.89 (est $0.96)
Key quotes
"Approximately 96.7% of BaaS nonperforming loans are covered by partner credit enhancements."
"We have identified over $20 million in potential annualized savings in noninterest expenses and expect to achieve these potential savings over the next 4 to 6 quarters."
"As of September 30, we held $3.04 billion of BaaS deposits on the balance sheet across 21 active partners, with another $6.29 billion swept off the balance sheet."
Analyst Q&A 4
partner credit and expense cuts
Q (Sun Young Lee · TD Cowen): The analyst asked whether the chance of recovering the provision or credit enhancement value changed since Q2, whether any other credit areas worry them, and if the $20 million annual savings will reduce expenses further and be linear into 2027.
A: Management said the recovery probability has materially stayed the same and they are monitoring the partner and the portfolio. They noted past-due amounts and charge-offs are improving, but higher interest rates affected CECL models and weighted average lives required increasing the allowance. On costs, they feel confident about the $20 million target, have just started the work, and will keep reviewing vendors and duplicative spend before giving projections on ratios.
"During the quarter, interest rates moved, and that can affect the CECL models on a fixed-rate portfolio." — Eric Sprink
$20M savings and partner exits
Q (Andrew Terrell · Stephens): Is the $20 million a gross or net number and how will it flow over 4–6 quarters? Also, what is the net earnings impact of losing Bluevine and is there risk of more partner exits? Any change in how you manage partner credit protections?
A: They said the $20 million is a pretax number and there could be reinvestment at stages, but they expect to see that run rate over the next 4 to 6 quarters. On Bluevine, management called the change unsurprising, said they have alternative funding to sweep deposits back, have not finished net income calculations, and are weighing oversight costs versus savings. They also said they are learning and will update partner monitoring, looking at liquidity, cash pledges, partner earnings and revenue diversity to improve indemnification and oversight.
"So we certainly see that as a pretax number, and there will be potentially reinvestment that can happen at different stages as we evaluate the business and the needs and everything on a go forward." — Christopher Adams (CHAIR)
AI, CECL provision drivers, NIM mix
Q (Timothy Switzer · KBW): How has AI improved onboarding and servicing while cutting costs? For the partner provision, how much was loan growth versus macro CECL changes and charge-offs, and should we expect ongoing modest provisions? Also, is NIM change mix or pricing driven?
A: They said AI work has focused on oversight, compliance and AML rather than onboarding, and operations have refined techniques to rationalize pipeline while keeping oversight. On the provision, loan growth was nominal; charge-offs were modest and down quarter-over-quarter, and the main driver was macro rate changes that extended weighted average life in CECL, leading to a $3.1 million allowance they deemed unrecoverable. On NIM, they said loan mix moved toward cash-secured installment loans (about $265 million) which have lower gross yields, while disciplined underwriting helped lower charge-offs and maintain net yields.
"But with that said, the charge-offs was down pretty dramatically quarter-over-quarter." — Eric Sprink
platform capacity, card sales, partner size
Q (Joseph Yanchunis · Raymond James): How much more revenue can the current platform handle without big new spending? How has market demand for sold credit-card paper changed? Has thinking about the optimal size of individual partners changed?
A: They said the platform has been built for years, can scale and they can remove duplicate vendors, so they see no limitation on growth while pursuing a leaner, more efficient organization. On credit-card sales they said a very large, successful transaction showed the market is liquid and secondary markets are operating efficiently. On partner size, they said they have skewed to larger companies, focus on diversification and risk-adjusted returns, and manage concentrations to balance on- and off-balance-sheet upside.
"I don't think there's any limitation in terms of how we've constructed it on our growth side of things." — Christopher Adams (CHAIR)