Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Investor Day (October 2018)
122 slides from Customers Bancorp's investor day presentation, Oct 15, 2018
Slide 1: Customers Bancorp, Inc. Analyst Day
Customers Bancorp, Inc. Analyst Day October 15, 2018 October 2018
Slide 2: Agenda
AGENDA I. Customers Bancorp: A brief history III. Business Line Update - Jay Sidhu, Chairman and CEO A. CB Private & Commercial Banking - Dick Ehst, President & COO, Customers Bank II. Positioning CUBI For the future B. Direct Digital Distribution Strategy - Jim Collins, CAO & President, Digital Dir
Slide 3: A Brief History of Customers Bancorp
A Brief History of Customers Bancorp Jay Sidhu, Chairman & CEO October 2018
Slide 4: Customers Bancorp: A Brief History
CUSTOMERS BANCORP: Legacy NPAs Worked Down From 2009 through2012 A BRIEF HISTORY NPAs & 90PD / Total Loans & REO Started CUBI in 2009 to clean up a failing 10.0% 9.0% bank and do FDIC assisted deals 8.0% 7.0% 6.0% 1. New Century bank had ~$250 million in assets NPAs & 90+PD 5.0% 4.0% • Mostly non-co
Slide 5: A Brief History (Cont.)
CUSTOMERS BANCORP: Legacy NPAs Worked Down From 2009 through2012 ABRIEF HISTORY (CONT.) NPAs & 90PD / Total Loans & REO Started CUBI in 2009 to clean up a failing 10.0% 9.0% bank and do FDIC assisted deals 8.0% 7.0% 6.0% 3. Completed 2 FDIC assisted deals NPAs & 90+PD 5.0% 4.0% 3.0% • USA Bank in Ju
Slide 6: Opportunistic Growth Strategies: Warehouse Lending
OPPORTUNISTIC GROWTH Period-End Mortgage Warehouse Balances STRATEGIES: WAREHOUSE LENDING $2,500 Developed Mortgage Warehouse Business $2,000 Mortgage Warehouse Balances 1. Recruited a team in late 2009 from GE Capital / Banco Popular ($ millions) $1,500 2. Continued to build out our infrastructure
Slide 7: Opportunistic Growth Strategies: Buildout C&I Business
OPPORTUNISTIC GROWTH STRATEGIES: BUILDOUT C&I BUSINESS Started buildout of commercial lending 1. Focused on Single Point of Contact (“SPOC”) model 2. “Branch Lite” 3. Recruit teams who bring long-established client relationships 4. We have recruited 20+ teams 5. Accelerated with 2013 acquisition of
Slide 8: Opportunistic Strategies to Build Out C&I (Cont.)
Opportunistic Strategies to Build Out C&I (CONT.) Key Metrics C&I / Owner Occupied CRE LoanRepricing 1. 70% of loans reprice within 1 year 2,000 Millions 2. Loan yields today are right at 5%, but higher in 1,800 equipment finance and healthcare niches 1,600 3. Require compensating deposit balances 9
Slide 9: Opportunistic Growth Strategies: Multifamily
OPPORTUNISTIC GROWTH STRATEGIES: MULTIFAMILY Built a great NYC focused Multifamily business Period-End Multifamily Loans 1. Goal was to build profitability and minimize volatility from mortgage warehouse with a foundation of stable, high quality assets 4,000 2. While we like the asset class, today t
Slide 10: Opportunistic Growth Strategies: Multifamily (Cont.)
OPPORTUNISTIC GROWTH STRATEGIES: MULTIFAMILY (CONT.) Multifamily Loan Repricing Built a great NYC focused Multifamily business 4,000 Millions 1. Goal was to build profitability and minimize volatility from 3,500 mortgage warehouse with a foundation of stable, high quality assets 3,000 17% 2. While w
Slide 11: Opportunistic Growth Strategies: Other CRE
Period-End NOO CRE Loans OPPORTUNISTIC GROWTH STRATEGIES: OTHER CRE Our commercial real estate portfolio has had steady growth and makes up approximately 14% of total loans. Key Metrics 1. Portfolio yield is just over 4% 2. Underwriting focused on conservative loan / values and debt service coverage
Slide 12: Opportunistic Growth Strategies: Other CRE (Cont.)
NOO CRE Loan Repricing OPPORTUNISTIC GROWTH STRATEGIES: OTHER CRE (CONT.) Our commercial real estate portfolio has had steady growth and makes up approximately 14% of total loans. Key Metrics 1. Portfolio yield is just over 4% 2. Underwriting focused on conservative loan / values and debt service co
Slide 13: Opportunistic Growth Strategies: BankMobile
OPPORTUNISTIC GROWTH STRATEGIES: BANKMOBILE Recognizing the changing consumer behavior and advent of mobile technology, we launched BankMobile in 2016. Today BankMobile has: 1. 1.0 million active customers 2. 726 campuses serviced 3. $31 million YTD (9/30/18) non-interest revenues 4. $732 million (9
Slide 14: Opportunistic Growth Strategies: Digital Direct Banking
OPPORTUNISTIC GROWTH Period-End Online Deposits STRATEGIES: DIGITAL $250 DIRECT BANKING $200 Launched a new digital platform in late June, which has had steady growth. $150 $ in Millions $100 Key Metrics 1. Digital offering for high income / high net $50 worth individuals $- Jun ‘18 Jul ‘18 Aug ‘18
Slide 15: Customers Today: Distinct Divisions
CUSTOMERS TODAY: 3 DISTINCT DIVISIONS Launched in late 2009 Launched in Q3 2018 Launched in mid-2016 15
Slide 16: Our View of the Current Banking Environment
Our View of the Current Banking Environment October 2018
Slide 17: Branches Are in Decline
BRANCHES ARE Total Number of Bank and Thrift Offices 110,000 IN DECLINE 9 year CAGR: -1.4% 99,550 Total Decline: -12% 100,000 14 year CAGR: +1.4% Nationally, branches are in decline TODAY 88,063 90,000 Est CAGR:-1.4% 1. Our branch-lite strategy is to enter new markets with LPOs 80,999 80,053 80,000
Slide 18: Rates Are on the Rise
Fed Funds Expectations RATES ARE 3.500 ON THE RISE 3.250 The Fed has raised short-term rates 200 3.000 bps since late 2015. The consensus view is for another increase this year (4 total) 2.750 and 2-3 more increases in 2019, but the Federal Reserve’s Dot Plot suggests it 2.500 could be more. 2.250 2
Slide 19: When Is the Next Recession Coming?
WHEN IS THE NEXT RECESSION COMING? We know a recession will come, but are we getting close? Recession Dashboard Source: Second Curve, Jonathan Golub, Credit Suisse; “S&P 500 to 3,350,” 10/4/18; BLS, Haver Analytics, Credit Suisse 19
Slide 20: When Is the Next Recession Coming?
WHEN IS THE NEXT RECESSION COMING? While a recession will come eventually, it seems that the economy is strong and the near-term likelihood of a recession is low. New York Fed Probability of Recession in Next 12 Months 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1-Sep-91 1-Sep-96 1-Sep-01 1-Sep-06 1-S
Slide 21: Strategies to Manage in This Environment
STRATEGIES TO MANAGE IN THIS ENVIRONMENT Our Strategies 1. Continue to take advantage of our unique lower 3. Manage the balance sheet for higher rates, but also distribution costs with emphasis on digitizing the evaluate the risks of lower rates entire bank, build on our branch lite model, with posi
Slide 22: What's Next? Highlights of Our 3 Year Plan
WHAT’S NEXT? HIGHLIGHTS OF OUR 3 YEARPLAN Our spin-merge plans are on hold, we expect to We will stay below $10 billion in assets while keep BankMobile for the next 2-3 years. growing our core businesses. 1. Decision reflects complications with regulatory 1. We will continue to grow our 3 core busin
Slide 23: What's Next? Highlights of Our 3 Year Plan (Cont.)
WHAT’S NEXT? HIGHLIGHTS OF OUR 3 YEAR PLAN(Cont.) We will strengthen our balance sheet We will focus on digitization of the bank and improve profitability and serving our customers 1. With a smaller balance sheet and BankMobile’s core deposit growth, we expect to significantly Within 3-5 years, we as
Slide 24: Our Strategy to Position CUBI for the Future
Our Strategy to Position CUBI for the Future October 2018
Slide 25: Overall Strategies to Position for the Future
Overall Strategies to Position for theFuture 1. Focus on the digitization of all three operating lines of business Our High Level 2. Continue to build “CB Private and Commercial Banking,” “Direct Digital Bank,” and BankMobile Strategies while deemphasizing non-core businesses 3. Embrace a virtuous c
Slide 26: Consolidated Bancorp Capital
Consolidated Bancorp - TCE / TA* 10.0% CONSOLIDATED 8.0% Target - 7% BANCORP CAPITAL 6.0% Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Estimate Forecast We target a Tangible Common Equity Ratio Greater than 7% and expect to Customers Bancorp, Inc. be around 7.5% by year-end. Consolidated Bancorp - Tier
Slide 27: Consolidated Bancorp Capital (Cont.)
CONSOLIDATED Consolidated Bancorp - Tier 1 Risk Based BANCORP CAPITAL (Cont.) 12.5% Target – 11% We target a Tangible Common Equity 10.5% Ratio Greater than 7% and expect to 8.5% be around 7.5% by year-end. Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 ‘18 Q4 '18 Estimate Forecast 1. Today we have more preferred e
Slide 28: Bank Capital
BANK CAPITAL Bank - TCE / TA* Bank - Tier 1 Leverage 12.0% 10.5% 9.5% 10.0% Target - 9% 8.5% Target - 7% 8.0% 7.5% Q4 '18 6.0% Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Estimate Forecast Q3 '18 Q4 '18 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Estimate Forecast Peer Average - Bank Customers Bank Bank - CET 1 Peer Average
Slide 29: A Focus on Growing TBV
TBV Growth Tangible Book Value1 $25.00 $22.80 $20.00 9% CAGR A FOCUS ON $15.00 GROWING TBV $10.62 CUBI is currently trading $10.00 below TBV! $5.00 $- 2009Q42 2010Q42 2011Q42 2012Q42 2013Q42 2014Q4 2015Q4 2016Q4 2017Q4 2018Q3 Estimate Tangible Book Value Source: Company Data, SNL Financial 1Tangible
Slide 30: Specific Strategies: Core Deposits Growth
SPECIFIC STRATEGIES: CORE DEPOSITS GROWTH We are targeting a stronger mix of core deposit funding. Q3 Trends: 1. Strong deposit growth of $1.2B just in Q3 2018 resulted from deliberate efforts to grow now to build up deposits ahead of future rate hikes, which was reflected in a large Q3 deposit beta
Slide 31: Specific Strategies: Core Deposits Growth (Cont.)
SPECIFIC STRATEGIES: CORE DEPOSITS GROWTH (Cont.) We are targeting a stronger mix of core deposit funding. Q4 2018, 2019, and beyond 1. BankMobile is expected to contribute at least $500M of low cost deposit growth annually starting in 2019 2. We currently have just over $700M of deposits with a cos
Slide 32: Specific Strategy: Core Loan Growth
Loan Growth $12 5.0% 4.26% 4.38% 4.5% SPECIFIC STRATEGY: $10 3.88% 3.76% 3.81% $0.3 3.98% $0.3 $0.6 4.0% 3.5% Loans ($ in Billions) $8 CORE LOAN GROWTH $0.4 Yield on Loans 3.0% $0.4 $3.4 $6 $3.5 2.5% $2.9 $3.4 We are targeting a stronger mix of higher $2.1 2.0% $4 $0.3 yielding loans. 1.5% $3.2 $3.6
Slide 33: Specific Strategy: Stronger Liquidity from Core Deposit & Loan Growth
SPECIFIC STRATEGY: 140% STRONGER LIQUIDITY 120% 100% 103% FROM CORE DEPOSIT & 80% 84% LOAN GROWTH 60% 40% 1. With very strong deposit growth in Q3, our core loan to 20% deposit ratio is now down to 84% 0% 2013 2014 2015 2016 2017 Q3 2018 2. We view mortgage warehouse business as a better Total Loans
Slide 34: Specific Strategy: NIM Expansion Goals
SPECIFIC STRATEGY: NIM EXPANSION GOALS Our long-term NIM target is 2.75%+; it will take 12-18 months to get there through remixing our balance sheet Q3 NIM remained under pressure … but we expect this to be a trough We expect to be at our goal by the end of 2019 given: 1. Robust core deposit growth
Slide 35: NIM Expansion Strategies
NIM EXPANSION STRATEGIES Our long-term NIM target is 2.75%+. It will take 12-18 months to get there through remixing our balance sheet We are reducing our exposure to lower yielding We are also increasing our exposure to higher yielding assets while emphasizing C&I lending assets and diversifying ou
Slide 36: NIM Expansion Strategies
NIM EXPANSION STRATEGIES We recently sold securities and used the proceeds to repay borrowings Securities Portfolio • At the end of August, we sold $495 million of securities with a yield of 2.67% and a weighted average life of 7 years, at an after-tax loss of $14.2M • Today, our pre-tax loss would
Slide 37: NIM Expansion Strategies
NIM EXPANSION STRATEGIES Our long-term NIM target is 2.75%+. It will take 12-18 months to get there through remixing our balance sheet YTD Deposit Growth $9.0 Billions $8.0 $7.0 CDs, $2.4 +25% We are improving our funding $6.0 CDs, $1.9 mix as we replace higher cost $5.0 MMKT / Savings, funding with
Slide 38: NIM Direction of the Industry
NIM of All US Commercial Banks NIM DIRECTION OF 6.00% THE INDUSTRY Industry NIM is under secular pressure 3.15% 3.00% • We are improving our funding mix as we replace higher cost funding with lower cost core deposits from BankMobile, our Digital Direct Bank, and core business units • We are working
Slide 39: Our Strategy: Improve Profitability
OUR STRATEGY: IMPROVE PROFITABILITY We target an ROAA of 1.25% + over a 3-5 year period 1. Target top quartile of peer group – today that equates to 4. We will remain focused on expense control and 1.17%, but we know it is headed higher positive operating leverage 2. We expect that the shift in asse
Slide 40: Our Strategy: Improve Profitability
OUR STRATEGY: IMPROVE PROFITABILITY With a cap on balance sheet size, we are looking very closely at costs 1. We expect to have deminimus growth in CB Private and Commercial banking expense 2. Growth in costs at the digital bank and BankMobile will be tied to their growing contribution 3. Consolidat
Slide 41: Our Strategy: Digital Focus
OUR STRATEGY: DIGITAL FOCUS We will continue to be a leader in the industry’s shift to digital 1. There is a major initiative throughout the company to digitize not only the front end but the entire operation that supports the front end 2. We hold quarterly discussions with our tech partners at FIS
Slide 42: Risk Management Is Always a Focus
RISK MANAGEMENT IS ALWAYS A FOCUS CUBI has been focused from the very beginning on risk management and corporate governance 1. We consider risk management a critical function 2. Over 90 full time employees are dedicated to risk management 3. The Board is actively engaged with top management in setti
Slide 43: Risk Management Is Always a Focus
RISK MANAGEMENT IS ALWAYS A FOCUS 43
Slide 44: Risk Management Is Always a Focus
RISK MANAGEMENT IS ALWAYS A FOCUS 44
Slide 45: Business Line Update
Business Line Update Dick Ehst, President & COO October 2018
Slide 46: CB Private & Commercial Banking
cBe Private & Commercial Banking
Slide 47: Single Point of Contact
OUR STRATEGY: IMPROVE PROFITABILITY Single point of contact “We are a bank of 25 teams of highly-experienced and well-compensated professionals who own the customer experience for both loans and deposits, and are devoted to delivering the entire bank to the customer, with certainty of execution.” 47
Slide 48: The Value & Power of SPOC
The Value & Power of SPOC Interest Alignment Aligns the interests of shareholders, management, regulators & team members. Profit & Loss Single Operating Model Variable Point Delivering the entire Compensation Of bank to the client Model Contact 48
Slide 49: CB Private & Commercial Banking Footprint
CB PRIVATE & COMMERCIAL BANKING FOOTPRINT HQ LPBO (Private Banking Offices) Branches Warehouse Lending Commercial Finance 49
Slide 50: The CB Private & Commercial Banking Team
The CB Private & Commercial Banking Team “Branch Lite” – meeting customers where they are located, not in a branch. 1. 580 total Team Members 2. 36% are client facing 3. 64% are executive, corporate, operations, risk & compliance support 4. 32 work remotely, 548 spread across 32 locations 5. 98% ret
Slide 51: Deposit Generation by Teams & Cost of Funds
Deposit Generation by Teams & Cost of Funds 1. All divisions of the bank are committed to deposit gathering. 2. The divisions have aggressive but achievable goals. Cost of Funds 9/30/2018 2019 Yr End Goal Balance Metro New York 1.84% $2,224 $3,150 New England 1.22% $146 $300 PA/NJ 1.59% $2,349 $2,80
Slide 52: Deposit Gathering
1. Offering new products including 1.5% business checking. • $100 million deposits through this product YTD. 2. Hiring deposit teams. • Team hired for Global Funding in Wyomissing. • Team hired for Philadelphia, New Jersey, Chicago and D.C. DEPOSIT GATHERING • New teams being interviewed for New Eng
Slide 53: C&I Opportunities
1. Focusing on core industries: • Manufacturing & Service • Real Estate • Finance • Healthcare • Hospitality & Food Services C&I OPPORTUNITIES 2. Keeping an eye on margins – 2.75% minimum; 3.0% target 3. Expanding in Philadelphia, Chicago and Washington, D.C. with new teams with strong expectations
Slide 54: Commercial Real Estate
COMMERCIAL REAL ESTATE Commercial Real Estate (CRE) portfolio is about $4.72 billion at 9/30/2018. The portfolio components are: Portfolio Exposure Avg Loan Size % TRBC Multifamily $3,500,000 $6,700 311% Investment CRE $1,000,000 $1,100 89% Construction & Land $220,000 $1,000 20% Development TOTAL $
Slide 55: SBA Opportunities
SBA OPPORTUNITIES SBA Preferred Lender: CONCENTRATION ON VERTICALS: 1. Hospitality, Medical/veterinary practices, Plaintiffs’ attorneys 2. Hired 3 new BDOs w/experience in these verticals, for total of 13 BDOs 3. Strong use of digital and content marketing GREAT CUSTOMER SERVICE: 1. Close within 45
Slide 56: Commercial Leasing Opportunities
1. National footprint • Did business in 24 states in 2018 COMMERCIAL LEASING 2. YTD September 2018 volume of $120 million through 119 contracts OPPORTUNITIES 3. $90 million of contracts are concentrated in four industry sectors: • Transportation – primarily truck fleets • Construction equipment • Mo
Slide 57: Banking Mortgage Companies (Warehouse Lending)
1. Year-end 2018 balance is forecasted to be between $1.3 billion and $1.5 billion 2. YTD September 2018 mortgage warehouse volume was $20.6 billion BANKING MORTGAGE 3. We serve 62 mortgage banking clients COMPANIES 4. Looking ahead, CB Private & Commercial Bank for mortgage (WAREHOUSE companies typ
Slide 58: New Product Introductions
Nationwide Lockbox A highly portable, flexible and scalable approach to retail and wholesale lockbox processing. Electronic Bill Presentment and Payment with Debit / Credit Cards NEW PRODUCT Gives commercial clients the ability to quickly and INTRODUCTIONS easily present summary statements online an
Slide 59: New Product Introductions
REMOTE PAYMENT CONCENTRATION An automated eLockbox solution for collecting bill payments made by consumers at online bill payment sites. REMOTE CAPTURE WITH LOCKBOX Allows commercial clients to use a web-connected PC and desktop scanner to capture payments and transmit NEW PRODUCT them into a lockbo
Slide 60: Credit Process
Loans with aggregate exposure of < or = $1.0MM Directed to centralized Small Business Lending Group where they are underwritten and decisioned through a well-established and proven scoring system that has a well-defined conservative product line with limited to no deviations. Dedicated SBA Credit Of
Slide 61: Credit Process (Cont.)
LOANS WITH AGGREGATE EXPOSURE > $20.0MM Underwritten by the Bank’s Credit Department and approved by the applicable Loan Committee. Each loan committee has at least 8 voting members with at least 4 Credit Officers and 4 Line of CREDIT PROCESS Business Leaders so they are well diversified and meet we
Slide 62: Business Line Update: Direct Digital Distribution Channel
Business Line Update Direct Digital Distribution Channel Jim Collins, Chief Administrative Officer October 2018
Slide 63: Four Pillars of Digital Transformation
FOUR PILLARS OF DIGITAL TRANSFORMATION 1. Reinvent the Customer Journey 2. Leverage the Power of Data 3. Redefine the Operating Model 4. Build a Digital Driven Organization Source: https://thefinancialbrand.com/71733/four-pillars-of-digital-transformation-banking-strategy/ 63
Slide 64: Customers Bank Digital Scope
CUSTOMERS BANK DIGITAL SCOPE Digital-first products, positioning and marketing are no longer “special projects”, but core drivers of growth, revenue, product differentiation and customer loyalty. Our digital strategy has encouraged us to bake digital-first thinking into our core business, from Sales
Slide 65: Example of Leading Technology Adoption
1. Digital Account Creation (FIS IBS) 2. Sales Pipeline Management (Salesforce Sales Cloud) 3. Campaign Management and Customer Email Journeys (Salesforce Marketing Cloud) EXAMPLE OF 4. Case Management (Salesforce Service Cloud) LEADING TECHNOLOGY 5. AI Experimentation (Salesforce Einstein) ADOPTION
Slide 66: Digitization of Our Ecosystem
Digitization of Digital Banking Loss Prevention & Investigations our ecosystem 1. LP&I performs normal account investigations due to fraudulent behavior, suspect behavior, information from other financial institutions, as well as full documentation of cases and account Digital Banking Customer Care
Slide 67: Current Strategy
CURRENT STRATEGY Target Market • High Net Worth, Income, and best customers of traditional banks across the US Focus • To attract nationwide deposits, begin to build long term sustainable relationships with this digital customer base, and build brand awareness in the nationwide digital community Dif
Slide 68: Customers Direct - Digital Brand
CUSTOMERS DIRECT - DIGITAL BRAND 1. Customers Bank Bonus Checking and Ascent MMSA were launched with a slightly bolder color scheme, a digital “twist”. 2. Customers Bank Digital’s brand and positioning strategy leverages the current brand, but appeals to digital-first, retail customers. 3. Customers
Slide 69: Digital Products: Ascent MMSA
1. Money Market Savings Account – Liquidity 2. Currently 2.25% APY 3. $25,000 minimum balance to earn interest 4. No fees, external incoming wire fees refunded DIGITAL PRODUCTS: 5. Marketing Promotion via multiple media outlets ASCENT MMSA 6. Launched July 1, 2018 7. Current Stats (as of Oct 6, 2018
Slide 70: Ascent MMSA: 12 Weeks of Nation-wide Sales Success
ASCENT MMSA: 12 WEEKS OF NATION-WIDE SALES SUCCESS As of October 04, 2018 70
Slide 71: Ascent Money Market
ASCENT MONEY MARKET Top Markets Demographics 1. CA – 25% Age Range % 2. FL – 15% 23 - 27 1% 3. NY – 11% 4. TX – 10% 28 - 35 7% 5. NJ – 6% 36 - 45 16% 46 - 54 20% 55 - 65 32% Over 66 24% 71
Slide 72: On the Roadmap
ON THE ROADMAP Customers Bank Convenience Checking 1. Digital re-launch, targeted at Ascent MMSA customers and new customers 2. No minimum balance 3. No ATM fees with an average total balance of $5,000 4. Checks, debit cards, web/mobile banking with Apple and Samsung pay digital wallets 5. MRDC, bil
Slide 73: On the Roadmap (Cont.)
ON THE ROADMAP (CONT.) Customers Bank Goal Savings 1. Digital-first savings account at a highly competitive rate 2. Innovative online savings tools embedded, including weekly savings auto-sweep (combined with Convenience Checking), online savings goal planner, savings goals and activities alerts (em
Slide 74: Business Line Update: BankMobile
Business Line Update: BankMobile Jay Sidhu, Customers Chairman & CEO Luvleen Sidhu, BankMobile President Bob Savino, BankMobile Chief Product Officer Bob Diegel, BankMobile COO Paul Young, BankMobile CFO October 2018
Slide 75: Our B2B2C Business
OUR B2B2C (BUSINESS TO BUSINESS TO CONSUMER) BUSINESS As you have heard, we are putting our spin-merge plans on hold. Keeping BankMobile for the next 2-3 years is aligned with our strategy to focus on balance sheet mix, capital, and profitability with a balance sheet below $10 billion 1. We intend t
Slide 76: BankMobile Update
BankMobile Update Luvleen Sidhu, President Bob Savino, CTO & CPO Bob Diegel, BankMobile COO Paul Young, CFO October 2018
Slide 77: What We Will Be Covering Today
1. How changing trends are creating unique opportunities for a mobile first digital distribution strategy 2. What is BankMobile’s strategy? Why is it unique and cannot be easily copied? What we will be 3. Critical success factors for BankMobile covering today 4. Status of the student business 5. “Ba
Slide 78: Traditional Banks Have Been Slow to Address Changing Consumer Needs
TRADITIONAL BANKS HAVE BEEN SLOW TO ADDRESS CHANGING CONSUMER NEEDS AND ABANDON INEFFICIENT BRANCH MODEL . . . 1. Customers are 3x more likely to use mobile banking than to visit a bank branch(1) 2. Banks on average open ONLY 1 net new checking account per branch per week – very inefficient model(2)
Slide 79: Americans Are Struggling and Need an Affordable Banking Alternative
AMERICANS ARE STRUGGLING AND NEED AN AFFORDABLE BANKING ALTERNATIVE Of Americans Living pay Do not have enough to pay for a 33% check to pay check1 47% $400 emergency2 20% Are saving nothing3 50% Are saving less than 5%3 BankMobile was formed to address these issues (1) Source: Brookings “The Wealth
Slide 80: Untapped Exponential Technologies Ready to Be Used
Untapped exponential technologies ready to be used • Internet of everything • Sensors • Artificial intelligence • Machine learning • Mobile internet • Personal devices • Blockchain • Data analytics • Robotics • Biometrics $ $ 81
Slide 81: Critical Success Factors
1. Unique and exponentially better customer acquisition strategy 2. Customer engagement and customer for life profitability strategy Critical success factors 3. Unique technology, contractual relationships, and Durbin create barriers to entry 4. Long-term profitability better than traditional banks
Slide 82: Unique and Exponentially Better Customer Acquisition Strategy
Critical success factors 1. Unique and exponentially better customer acquisition strategy • Banks on average open ONLY 1 net new checking account per branch per week – very inefficient model • Here is how BankMobile is operating today: - 1 in every 3 college students in the country go through our di
Slide 83: Customer Engagement and Customer for Life Profitability Strategy
Critical success factors 2. Customer engagement and customer for life profitability strategy 84
Slide 84: Recent Focus in the Student / Disbursement Business
Critical success factors Recent focus in the student / disbursement business • Recovering from Department of Education Ban - Proactive carding ban dropped adoption rate to historical low of ~19%; this took away ~$20 million in non-interest revenues from BankMobile. - Through brand awareness, marketi
Slide 85: Banking as a Service and T-Mobile
Critical success factors Banking as a Service Besides student disbursements, our biggest focus over the last two years has been the development of “Banking as a Service” model BaaS and • Spent significantly in R&D, technology and product development for White Label • Expected to be a very customer f
Slide 86: Unique Technology, Contractual Relationships & Durbin Create Barriers to Entry
Critical success factors 3. Unique technology, contractual relationships, & Durbin create barriers to entry • Today, BankMobile has relationships with approximately 726 campuses that have approximately 5.7 million students • Our patented disbursement process designed for higher ed; saving colleges m
Slide 87: Long-term Profitability Better Than Traditional Banks
Critical success factors 4. Long-term profitability better than traditional banks • 2% or higher ROA which is significantly better than traditional banks • Uniqueness of Durbin – a significant competitive advantage that benefits our partners and our customers • High volume and Low cost customer acqu
Slide 88: Student Segment Update
STUDENT SEGMENT UPDATE October 2018
Slide 89: College Student Segment
College student segment Every student on every campus we serve is exposed to our brand regardless if they choose our product or not. 18+ 700+ 5M+ years of Disbursement campuses served students served Management • Help over 700+ colleges and university campuses across the U.S. deliver financial aid c
Slide 90: BankMobile Has Unparalleled Knowledge of the Student Segment
BankMobile has unparalleled knowledge of the student segment Source: BankMobile Internal Information 91 (1) Organic deposits defined as non-financial aid refund deposits
Slide 91: Market Leader with Diverse Customer Base and Exclusive Campus Relationships
Market Leader with Diverse Customer Base and Exclusive, Long-Term Campus Relationships 700+ (1) Source: Company’s internal sales database and estimated student market size. (2)Source: National Center for Education Statistics. “Enrollment and Employees in Postsecondary Institutions, Fall 2015; 92 and
Slide 92: Revenue Generating Transaction Trends
Revenue Generating transaction trends Organic Deposits Per Spending Per New Account Transacting Account (POS) $1,200 $1,380 $1,370 $1,368.81 $1,000 $962.56 se se a $1,360 re ea $800 inc cr % 97 in $1,350 3% $600 $489.57 $1,340 $400 $1,332.05 $1,330 $200 $1,320 $0 $1,310 01/01/2016 to 01/01/2018 to 0
Slide 93: 76% of Student Customers Likely to Use BankMobile VIBE Post-Graduation
76% of Existing Student Customers Surveyed Likely to Use BankMobile VIBE Post-Graduation 94
Slide 94: Account Engagement
Account Engagement Of the accounts opened in 2018, 73.88% have made a transaction within the first 90 days from account opening. Overall, account retention among newer accounts is showing a positive trend 95
Slide 95: VIBE's Net Promoter Score Significantly Higher than Traditional Banks
VIBE’s Net Promoter Score (“NPS”) Dramatically Increased from One Account and Significantly Higher than Traditional Banks How likely are you to recommend the BankMobile VIBE Account to a friend or colleague? Net Promoter Score BankMobile NPS vs. Traditional Banks NPS Average U.S. Bank 63 63 52 52 50
Slide 96: Bank as a Service Model and Our Unique Technology
“Bank as a Service” Model and our unique technology October 2018
Slide 97: White Label Partnerships
• What do customers want? White Label - Ultimate convenience - Market rates for deposits Partnerships - Faster and easy payment systems - Physical locations to supplement mobile experience - Reliable technology with strong UX 98
Slide 98: Bank as a Service
BankMobile Provides • Fully branded digital bank • Mobile banking app and Online interface • Middleware integration Bank as a service • Compliance / Risk expertise • Customer service support • We believe that there is a significant opportunity to partner with • Data analytics and reporting businesse
Slide 99: Multi-vertical Customer Use Cases
Multi-vertical customer use cases Acquiring customers through non-bank journeys LOAN REFUNDS INSTANT DEPOSIT BANKMOBILE VIBE STUDENT ACCOUNT COLLEGES & STUDENT UNIVERSITIES GRADUATION UPGRADE MULTIPLE VERTICALS D2C ADVERTISTING DUES BANKMOBILE CONSUMER COLLECTION ACCOUNT LABOR UNIONS CONSUMER DIRECT
Slide 100: Customer-centric Technology
Customer-centric technology Modern “Bank as a Service” enabler 101
Slide 101: 3 Year Growth Goals
3 Year Growth Goals October 2018
Slide 102: BankMobile Three Year Growth Trajectory Goals
BankMobile Three Year Growth Trajectory Goals Student Banking White Label Banking Total BankMobile Growth Goals Compelling Financial Opportunities Key Goals - Base Case • Expand the number of contracted • Low-cost and high volume customer • Annual Deposit Growth schools ➢ SSE Growth: 600,000+ per ac
Slide 103: Customer Engagement and Customer for Life Profitability
Customer engagement and customer for life profitability Source: Federal Reserve State of Consumer Finance Chartbook 2016. (1) Assumed on an assumed weighting of 40% in 4 yr schools, 60% in 2yr schools. (2) Based on an increase in transaction account balances of 1.5x with a linear impact on revenues.
Slide 104: Where Are We Heading?
Where are we heading? October 2018
Slide 105: Competition Is Increasing, Yet We Have Strong Barriers to Entry
Competition is increasing, yet we have strong barriers to entry Some Limitations or Barriers to Entry •Financial aid is highly regulated, resource-intensive •DOE rules limit potential fee/revenue streams •Long-Term contracts, high (98%) client retention •Durbin Amendment limits profitability for lat
Slide 106: Goals for the Next 2-3 Years
• Attracting over a million checking accounts per year Goals for the Next 2-3 • Top 5 bank in the country in terms of # of checking accounts • Strong brand presence and perceived as a world-class digital bank Years • Standalone ROAA in 2% range 106
Slide 107: Slide 107
Slide 108: Appendix
Appendix October 2018
Slide 109: Cost of Customer Acquisition
Acquisition costs reflect BankMobile’s unique customer channels Select current new checking account promotions $500 $400 $400 BankMobile Marginal Cost of Customer Acquisition Cost of Customer Acquisition $300 $300 $200 $200 $200 $200 $200 $150 $100 $100 $0 Citizens Bank of America Citi J.P. Morgan C
Slide 110: Putting It All Together
Putting it all together Bob Ramsey, Director of Investor Relations and Strategic Planning October 2018
Slide 111: Impacts on Q3 2018
Impacts on Q3 2018 A quick review of the Q3 financial impact of some Other Q3 trends: of the items you have heard discussed today: • Our deposits grew by $1.2 billion • $14.2M after tax loss on $495M of securities sold in the third • Our NIM remained under pressure in Q3 quarter • We had strong depo
Slide 112: What Will CUBI Look Like in 3 Years?
What will CUBI Look Like in 3 Years? Balance Sheet Statement • We plan to stay under $10 billion in assets • We are adding higher yielding consumer loans but will remain a business bank • Our business mix will be ~15% consumer / 85% business • Multifamily will end this year at or below $3.3 billion
Slide 113: What Will CUBI Look Like in 3 Years?
What will CUBI Look Like in 3 Years? We expect to exceed our TCE/TA* Capital Target by 50 bps by Q4 2018 0.5% 0.2% 7.5% 6.8% Capital Management is Now an Option • In 2019 and 2020 with a stable balance sheet and no dividend, every dollar earned will add to capital ratios • Our board will evaluate sh
Slide 114: What Will CUBI Look Like in 3 Years?
What will CUBI Look Like in 3 Years? NIM Trajectory Profitability 2.75%+ • We expect to reach our NIM target of 2.75%+ by the end of 2019 • Continued focus on efficiency and costs • ROA of 1.25% in 3-5 years, double digit ROTCE Current Sell $500M Reduced Mortgage Shift $500M Grow Grow Rising Rising
Slide 115: Q&A
Q&A Senior executive management OCTOBER 2018
Slide 116: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures - Unaudited Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our results of operations and financial condition relative to other financial institutions. These n
Slide 117: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures - Unaudited Tangible Common Equity to Tangible Assets - Consolidated Bancorp (dollars in thousands) Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 GAAP - Total Shareholders' Equity $ 956,846 $ 936,227 $ 919,088 $ 920,964 $ 910,642 Reconciling Items: Preferred Stock (217,
Slide 118: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures - Unaudited Tangible Common Equity to Tangible Assets - Bank (dollars in thousands) Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 GAAP - Total Shareholders' Equity $ 1,053,297 $ 1,037,815 $ 1,028,941 $ 1,036,525 $ 1,024,575 Reconciling Items: Goodwill and Other Intangib
Slide 119: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures - Unaudited Tangible Book Value per CommonShare (dollars in thousands, except per share data) Q3 2018 Q4 2017 Q4 2016 Q4 2015 Q4 2014 Q4 2013 Q4 2012 Q4 2011 Q4 2010 Q4 2009 GAAP - Total Shareholders'Equity $ 956,846 $ 920,964 $ 855,872 $ 553,902 $ 443,145 $ 386,6
Slide 120: Forward-Looking Statements
Forward-Looking Statements This presentation, as well as other written or oral communications made from time to time by us, contains forward-looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to f
Slide 121: Forward-Looking Statements (Cont.)
Forward-Looking Statements (Cont.) • timely development and acceptance of new banking products and services and perceived overall value of these products and services by users, including the products and services being developed and introduced to the market by the BankMobile division of Customers Ba
Slide 122: Forward-Looking Statements (Cont.)
Forward-Looking Statements (Cont.) • the levels of usage of other BankMobile student customers following graduation of additional product and service offerings of BankMobile or Customers Bank, including mortgages and consumer loans, and the mix of products and services used; • our ability to impleme