Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Investor Day (October 2018)
123 slides from Customers Bancorp's investor day presentation, Oct 15, 2018
Slide 1: October 2018 Analyst Day
October 2018 Analyst DayOctober 15, 2018 Customers Bancorp, Inc.
Slide 2: Agenda
I. Customers Bancorp: A brief history- Jay Sidhu, Chairman and CEO Positioning CUBI For the futureJay Sidhu, Chairman and CEOOur view of the current banking environmentCurrent strategy to position CUBI for the future a.b.c.d.e.f. CapitalCore Deposit and Loan Growth Strategies and Results to DateNet
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: A BRIEF HISTORY Started CUBI in 2009 to clean up a failing bank and do FDIC assisted deals1. New Century bank had ~$250 million in assets •••• Mostly non-core deposits 5 branches> 9% NPAs & 90+PD / Loans & REO< 6% TCE 2. Strategy: Acquire a banking platform at no cost, do FDIC ass
Slide 5: Customers Bancorp: A Brief History (Cont.)
CUSTOMERS BANCORP: A BRIEF HISTORY (CONT.) Started CUBI in 2009 to clean up a failing bank and do FDIC assisted deals3. Completed 2 FDIC assisted deals USA Bank in July 2010, ISN Bank in September 2010Added ~$305 million in assetsBoosted equity with $40.3 million bargain purchase gain 4. Results: Ac
Slide 6: Opportunistic Growth Strategies: Warehouse Lending
OPPORTUNISTIC GROWTH STRATEGIES: WAREHOUSE LENDING Developed Mortgage Warehouse BusinessRecruited a team in late 2009 from GE Capital / Banco PopularContinued to build out our infrastructureKey MetricsShort duration asset (<30 days)Collateralized, no credit losses to dateLoan yields today are above
Slide 7: Opportunistic Growth Strategies: Buildout C&I Business
OPPORTUNISTIC GROWTH STRATEGIES: BUILDOUT C&I BUSINESS Started buildout of commercial lendingFocused on Single Point of Contact (“SPOC”) model“Branch Lite”Recruit teams who bring long-established client relationshipsWe have recruited 20+ teamsAccelerated with 2013 acquisition of New England team and
Slide 8: Opportunistic Strategies to Build Out C&I (Cont.)
Opportunistic Strategies to Build Out C&I (CONT.) Key Metrics1. 70% of loans reprice within 1 year 2. Loan yields today are right at 5%, but higher in equipment finance and healthcare niches 3. Require compensating deposit balances ($ millions) Period-End C&I / Owner Occupied CRE Loans 2,000 1,800 1
Slide 9: Opportunistic Growth Strategies: Multifamily
OPPORTUNISTIC GROWTH STRATEGIES: MULTIFAMILY Built a great NYC focused Multifamily businessGoal was to build profitability and minimize volatility from mortgage warehouse with a foundation of stable, high quality assetsWhile we like the asset class, today the spreads are not attractive, interest rat
Slide 10: Opportunistic Growth Strategies: Multifamily (Cont.)
OPPORTUNISTIC GROWTH STRATEGIES: MULTIFAMILY (CONT.) Built a great NYC focused Multifamily business 1. Goal was to build profitability and minimize volatility from mortgage warehouse with a foundation of stable, high quality assets 2. While we like the asset class, today the spreads are not attracti
Slide 11: Opportunistic Growth Strategies: Other CRE
OPPORTUNISTIC GROWTH STRATEGIES: OTHER CRE Our commercial real estate portfolio has had steady growth and makes up approximately 14% of total loans.Key Metrics1. Portfolio yield is just over 4% 2. Underwriting focused on conservative loan / values and debt service coverage ratios Period-End NOO CRE
Slide 12: Opportunistic Growth Strategies: Other CRE (Cont.)
OPPORTUNISTIC GROWTH STRATEGIES: OTHER CRE (CONT.) Our commercial real estate portfolio has had steady growth and makes up approximately 14% of total loans.Key MetricsPortfolio yield is just over 4%Underwriting focused on conservative loan / values and debt service coverage ratios NOO CRE Loan Repri
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:1.0 million active customers726 campuses serviced$31 million YTD (9/30/18) non-interest revenues$732 million (9/30/18) of demand
Slide 14: Opportunistic Growth Strategies: Digital Direct Banking
OPPORTUNISTIC GROWTH STRATEGIES: DIGITAL DIRECT BANKING Launched a new digital platform in late June, which has had steady growth. Key Metrics 1. Digital offering for high income / high net worth individuals Period-End Online Deposits $- 14 $50 $100 $150 $200 $250 Jun ‘18 Jul ‘18Source: Company Data
Slide 15: Customers Today: 3 Distinct Divisions
Launched in late 2009 15 Launched in Q3 2018 Launched in mid-2016 CUSTOMERS TODAY: 3 DISTINCT DIVISIONS
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 IN DECLINE Nationally, branches are in decline 1. Our branch-lite strategy is to enter new markets with LPOs 2. We plan to follow with a limited number of new branches added to our private banking offices over next 2-3 years 3. Currently in 5 markets (New York, New England, Pennsylvania
Slide 18: Rates Are on the Rise
RATES ARE ON THE RISE The Fed has raised short-term rates 200 bps since late 2015. The consensus view is for another increase this year (4 total) and 2-3 more increases in 2019, but the Federal Reserve’s Dot Plot suggests it could be more. 2.2502.0001.7501.500 2.500 2.750 3.000 3.250 3.500 Market Ex
Slide 19: When Is the Next Recession Coming?
Recession Dashboard Source: Second Curve, Jonathan Golub, Credit Suisse; “S&P 500 to 3,350,” 10/4/18; BLS, Haver Analytics, Credit Suisse WHEN IS THE NEXT RECESSION COMING? We know a recession will come, but are wegetting close? 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. 20 Source: NY Federal Reserve New York Fed Probability of Recession in Next 12 Months 50%45%40%35%30%25%20%15%10%5%0% 1-Jan-901-Nov-901-S
Slide 21: Strategies to Manage in This Environment
STRATEGIES TO MANAGE IN THIS ENVIRONMENT Our Strategies Continue to take advantage of our unique lower distribution costs with emphasis on digitizing the entire bank, build on our branch lite model, with positive operating leverageFocus on strategies for significant deposit growth at a lower cost; c
Slide 22: What's Next? Highlights of Our Plan
WHAT’S NEXT?HIGHLIGHTS OF OUR 3 YEAR PLAN 22 Our spin-merge plans are on hold, we expect to keep BankMobile for the next 2-3 years.Decision reflects complications with regulatory process for spin/merge, and the value we expect from the launch of our first White Label partnerBankMobile’s future is br
Slide 23: What's Next? Highlights of Our Plan (Cont.)
WHAT’S NEXT?HIGHLIGHTS OF OUR 3 YEAR PLAN (Cont.) 23 We will strengthen our balance sheet and improve profitability1. With a smaller balance sheet and BankMobile’s core deposit growth, we expect to significantly improve our funding mix, deposit cost, net interest margin, liquidity, capital ratios, an
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
1. Focus on the digitization of all three operating lines of business 2. Continue to build “CB Private and Commercial Banking,” “Direct Digital Bank,” and BankMobile while deemphasizing non-core businesses Embrace a virtuous competitive cycleDifferentiation must be based on delivery of service and m
Slide 26: Consolidated Bancorp Capital
CONSOLIDATED BANCORP CAPITAL We target a Tangible Common Equity Ratio Greater than 7% and expect to be around 7.5% by year-end. 1. Today we have more preferred equity than peers, meaning that while CET1 and TCE ratios are narrower than peers, other regulatory capital ratios are closer. At the right
Slide 27: Consolidated Bancorp Capital (Cont.)
We target a Tangible Common Equity Ratio Greater than 7% and expect to be around 7.5% by year-end. 1. Today we have more preferred equity than peers, meaning that while CET1 and TCE ratios are narrower than peers, other regulatory capital ratios are closer. At the right price, we could call preferre
Slide 28: Bank Capital
BANK CAPITAL 10.5% 9.5%8.5%7.5% Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q4 '18Forecast Bank - Tier 1 Leverage Customers Bank Target - 9% 14.0%12.0%10.0% 8.0% Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q4 '18Forecast Peer Average - BankBank - CET 1 Target - 9% 13.5% 11.5% 9.5% Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q4 '18Forecast Peer Av
Slide 29: A Focus on Growing TBV
$10.62 $22.80 $5.00 $10.00 $15.00 $20.00 $25.00 Tangible Book Value1 $- 2009Q42 2010Q42 2011Q42 2012Q42 2015Q4 2016Q4 2017Q4 2013Q42 2014Q4Tangible Book Value 9% CAGR TBV Growth A FOCUS ON GROWING TBVCUBI is currently tradingbelow TBV! 29 1Tangible book value (TBV) is a non-GAAP measure, calculated
Slide 30: Specific Strategies: Core Deposits Growth
SPECIFIC STRATEGIES: CORE DEPOSITS GROWTH We are targeting a stronger mix of core deposit funding.Q3 Trends: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. Dep
Slide 31: Specific Strategies: Core Deposits Growth (Cont.)
We are targeting a stronger mix of core deposit funding.Q4 2018, 2019, and beyondBankMobile is expected to contribute at least $500M of low cost deposit growth annually starting in 2019We currently have just over $700M of deposits with a cost over 2.5% which we plan to run off and replace with low c
Slide 32: Specific Strategy: Core Loan Growth
SPECIFIC STRATEGY: CORE LOAN GROWTHWe are targeting a stronger mix of higher yielding loans. As we maintain a $10 billion balance sheet, the focus will be on growing our best portfolios (fund C&I and consumer loan growth with Multifamily runoff). $0.6 $0.9 $1.0 $1.3 $1.3 $1.3 $1.1 $2.3 $2.9 $3.2 $3.
Slide 33: Specific Strategy: Stronger Liquidity
SPECIFIC STRATEGY: STRONGER LIQUIDITY FROM CORE DEPOSIT & LOAN GROWTH 1. With very strong deposit growth in Q3, our core loan to deposit ratio is now down to 84% 2. We view mortgage warehouse business as a better option to holding liquid investments 103% 84% 20% 40% 60% 80% 100% 120% 140% Total Loan
Slide 34: 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 34 SPECIFIC STRATEGY: NIM EXPANSION GOALS 1. Robust core deposit growth in Q3 reflected our focus on building a base prior to future Fed rate increases; however, was reflected in higher depo
Slide 35: NIM Expansion Strategies
Our long-term NIM target is 2.75%+. It will take12-18 months to get there through remixing our balance sheet 35 NIM EXPANSION STRATEGIES We like the asset class, but not the spreads today. We expect to always maintain around $1 billion or 10% of assets We have been incentivizing loans to refinance o
Slide 36: NIM Expansion Strategies: Securities Sale
NIM EXPANSION STRATEGIES 36 We recently sold securities and used the proceeds to repay borrowingsSecurities 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 $14.2MToday, our pre-tax loss would
Slide 37: NIM Expansion Strategies: Funding Mix
Our long-term NIM target is 2.75%+. It will take12-18 months to get there through remixing our balance sheet NIM EXPANSION STRATEGIES 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 Dem
Slide 38: NIM Direction of the Industry
NIM DIRECTION OF THE INDUSTRY Industry NIM is under secular pressure 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 to expand our NIM, in contrast with broader industr
Slide 39: Our Strategy: Improve Profitability
OUR STRATEGY: IMPROVE PROFITABILITY 39 We target an ROAA of 1.25% + over a 3-5 year period Target top quartile of peer group – today that equates to 1.17%, but we know it is headed higherWe expect that the shift in asset and funding mix will drive a wider NIM at the core banking operationsAs BankMob
Slide 40: Our Strategy: Improve Profitability
OUR STRATEGY: IMPROVE PROFITABILITY 40 With a cap on balance sheet size, we are looking very closely at costsWe expect to have deminimus growth in CB Private and Commercial banking expenseGrowth in costs at the digital bank and BankMobile will be tied to their growing contributionConsolidated effici
Slide 41: Our Strategy: Digital Focus
OUR STRATEGY: DIGITAL FOCUS We will continue to be a leader in the industry’s shift to digital There is a major initiative throughout the company to digitize not only the front end but the entire operation that supports the front endWe hold quarterly discussions with our tech partners at FIS to see
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 governanceWe consider risk management a critical functionOver 90 full time employees are dedicated to risk managementThe Board is actively engaged with top management in setting risk focu
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
CB@ Private & Commercial Banking
Slide 47: Single Point of Contact
OUR STRATEGY: IMPROVE PROFITABILITY 47 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.”
Slide 48: The Value & Power of SPOC
Profit & LossVariable Compensation Model 48 Operating ModelDelivering the entire bank to the client Single Point Of Contact Interest AlignmentAligns the interests of shareholders, management, regulators & team members. The Value & Power of SPOC
Slide 49: CB Private & Commercial Banking Footprint
HQLPBO (Private Banking Offices) BranchesWarehouse Lending Commercial Finance CB PRIVATE & COMMERCIAL BANKING FOOTPRINT 49
Slide 50: The CB Private & Commercial Banking Team
The CB Private & Commercial Banking Team 50 “Branch Lite” – meeting customers where they are located, not in a branch.580 total Team Members36% are client facing64% are executive, corporate, operations, risk & compliance support32 work remotely, 548 spread across 32 locations98% retention rate73% of
Slide 51: Deposit Generation by Teams & Cost of Funds
51 Cost of Funds 9/30/2018Balance 2019 Yr End Goal Metro New York 1.84% $2,224 $3,150 New England 1.22% $146 $300 PA/NJ 1.59% $2,349 $2,800 TOTAL 1.70%(weighted average) $4,719 Deposit Generation by Teams & Cost of Funds All divisions of the bank are committed to deposit gathering.The divisions have
Slide 52: Deposit Gathering
DEPOSIT GATHERING Offering new products including 1.5% business checking.$100 million deposits through this product YTD.Hiring deposit teams. 52 Team hired for Global Funding in Wyomissing.Team hired for Philadelphia, New Jersey, Chicago and D.C.New teams being interviewed for New England.Looking at
Slide 53: C&I Opportunities
C&I OPPORTUNITIES 1. Focusing on core industries: 53 Manufacturing & ServiceReal EstateFinanceHealthcareHospitality & Food Services2. 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 for performa
Slide 54: Commercial Real Estate
COMMERCIAL REAL ESTATE Reaching 420% of total risk based capital (down from nearly 600%) is good but the total CRE will be reduced further, aiming for the 300% guideline in 2019.The Multifamily portfolio will be at or below $3.3 billion by 12/31/2018 and down by about 70% - 75%, to about $1 billion,
Slide 55: SBA Opportunities
SBA OPPORTUNITIES Forecast 2018 Current pipelineForecast 2018 total SBA income Goal for 2019Forecast 2019 total SBA income $100 million origination$74 million$6 million$150 million origination$ ~8 million SBA Preferred Lender:CONCENTRATION ON VERTICALS:Hospitality, Medical/veterinary practices, Plai
Slide 56: Commercial Leasing Opportunities
COMMERCIAL LEASING OPPORTUNITIES 1. National footprint 56 Did business in 24 states in 20182. YTD September 2018 volume of $120 million through 119 contracts 3. $90 million of contracts are concentrated in four industry sectors: Transportation – primarily truck fleetsConstruction equipmentMotor coac
Slide 57: Banking Mortgage Companies (Warehouse Lending)
BANKING MORTGAGECOMPANIES (WAREHOUSE LENDING) 1. Year-end 2018 balance is forecasted to be between $1.3 billion and $1.5 billion 57 2. YTD September 2018 mortgage warehouse volume was $20.6 billion 3. We serve 62 mortgage banking clients 4. Looking ahead, CB Private & Commercial Bank for mortgage co
Slide 58: New Product Introductions
1 NEW PRODUCT INTRODUCTIONS Nationwide LockboxA highly portable, flexible and scalable approach to retail and wholesale lockbox processing.Electronic Bill Presentment and Payment with Debit / Credit CardsGives commercial clients the ability to quickly and easily present summary statements online and
Slide 59: New Product Introductions
NEW PRODUCT INTRODUCTIONS REMOTE PAYMENT CONCENTRATIONAn automated eLockbox solution for collecting bill payments made by consumers at online bill payment sites. 59 REMOTE CAPTURE WITH LOCKBOXAllows commercial clients to use a web-connected PC and desktop scanner to capture payments and transmit the
Slide 60: Credit Process
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. Dedicate
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 Business Leaders so they are well diversified and meet weekly. CONSUMER
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
Reinvent the Customer JourneyLeverage the Power of DataRedefine the Operating ModelBuild a Digital Driven Organization 63 FOUR PILLARS OFDIGITAL TRANSFORMATION Source: https://thefinancialbrand.com/71733/four-pillars-of-digital-transformation-banking-strategy/
Slide 64: Digital Operating Functions
Product Managementdigital accounts, online banking, mobile apps, digital account origination, loan underwriting, fraud & CIP tools, SLAs, KPIs, reporting Customer Care1st tier contact center management, escalations and CUBI Digital Banking Support Team (2nd tier), email, maintenance tickets, monitor
Slide 65: Example of Leading Technology Adoption
EXAMPLE OF LEADING TECHNOLOGYADOPTION Digital Account Creation (FIS IBS)Sales Pipeline Management (Salesforce Sales Cloud)Campaign Management and Customer Email Journeys (Salesforce Marketing Cloud) 4. Case Management (Salesforce Service Cloud) 5. AI Experimentation (Salesforce Einstein) 6. Custom D
Slide 66: Digitization of Our Ecosystem
66 Digitization of our ecosystem Digital Banking Customer CareProvides online and mobile banking support to all CUBI customers (not just Digital Customers).Digital Deposit OperationsThe Deposit Operations team processes maintenance requests via tools used by Tier 1 and Tier 2 customer service.They p
Slide 67: Current Strategy
CURRENT STRATEGY Target MarketHigh Net Worth, Income, and best customers of traditional banks across the USFocusTo attract nationwide deposits, begin to build long term sustainable relationships with this digital customer base, and build brand awareness in the nationwide digital communityDifferentia
Slide 68: Customers Direct - Digital Brand
CUSTOMERS DIRECT - DIGITAL BRAND Customers Bank Bonus Checking and Ascent MMSA were launched with a slightly bolder color scheme, a digital “twist”.Customers Bank Digital’s brand and positioning strategy leverages the current brand, but appeals to digital-first, retail customers.Customers Bank Digit
Slide 69: Digital Products: Ascent MMSA
DIGITAL PRODUCTS: ASCENT MMSA Money Market Savings Account – LiquidityCurrently 2.25% APY$25,000 minimum balance to earn interestNo fees, external incoming wire fees refunded 5. Marketing Promotion via multiple media outlets 6. Launched July 1, 2018 Current Stats (as of Oct 6, 2018):Total customers:
Slide 70: Ascent MMSA: 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 Demographics
Age Range % 23 - 27 1% 28 - 35 7% 36 - 45 16% 46 - 54 20% 55 - 65 32% Over 66 24% ASCENT MONEY MARKET Top Markets Demographics1. CA – 25%2. FL – 15%3. NY – 11%4. TX – 10%5. NJ – 6% 71
Slide 72: On the Roadmap
ON THE ROADMAP 72 Customers Bank Convenience CheckingDigital re-launch, targeted at Ascent MMSA customers and new customersNo minimum balanceNo ATM fees with an average total balance of $5,000Checks, debit cards, web/mobile banking with Apple and Samsung pay digital walletsMRDC, bill-pay, text alert
Slide 73: On the Roadmap (Cont.)
ON THE ROADMAP (CONT.) 73 Customers Bank Goal SavingsDigital-first savings account at a highly competitive rateInnovative online savings tools embedded, including weekly savings auto-sweep (combined with Convenience Checking), online savings goal planner, savings goals and activities alerts (email,
Slide 74: Business Line Update: BankMobile
Business Line Update: BankMobile Jay Sidhu, Customers Chairman & CEO Luvleen Sidhu, BankMobile PresidentBob Savino, BankMobile Chief Product Officer Bob Diegel, BankMobile COOPaul Young, BankMobile CFO October 2018
Slide 75: Our B2B2C Business
75 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 billionWe intend to
Slide 76: Our B2B2C Business: T-Mobile Partnership
OUR B2B2C (BUSINESS TO BUSINESS TO CONSUMER) BUSINESS 76 In coming weeks, we will launch a product with:A major national brandSignificant digital distributionVery competitive bank account product offeringsVery easy to open accounts digitallySubstantial subscription model benefitsA win / win / win fo
Slide 77: BankMobile Update
BankMobile Update Luvleen Sidhu, President Bob Savino, CTO & CPOBob Diegel, BankMobile COO Paul Young, CFO October 2018
Slide 78: What We Will Be Covering Today
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? 3. Critical success factors for BankMobile 4. Status of the student business “Bank
Slide 79: 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 . . . Customers are 3x more likely to use mobile banking than to visit a bank branch(1)Banks on average open ONLY 1 net new checking account per branch per week – very inefficient model(2)~40% of
Slide 80: Americans Are Struggling and Need an Affordable Banking Alternative
AMERICANS ARE STRUGGLING AND NEED AN AFFORDABLE BANKING ALTERNATIVE 33% 47% 50% 20% Of Americans Living pay check to pay check1 Are saving nothing3 Do not have enough to pay for a$400 emergency2 Are saving less than 5%3 BankMobile was formed to address these issuesSource: Brookings “The Wealthy-Hand
Slide 81: Untapped Exponential Technologies Ready to Be Used
Untapped exponential technologies ready to be used Internet of everythingSensorsArtificial intelligenceMachine learningMobile internetPersonal devicesBlockchainData analyticsRoboticsBiometrics 81
Slide 82: Critical Success Factors
Critical success factors 1. Unique and exponentially better customer acquisition strategy 82 2. Customer engagement and customer for life profitability strategy 3. Unique technology, contractual relationships, and Durbin create barriers to entry 4. Long-term profitability better than traditional ban
Slide 83: Unique and Exponentially Better Customer Acquisition Strategy
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 digital “branches”(1)
Slide 84: Customer Engagement and Customer for Life Profitability Strategy
2. Customer engagement and customer for life profitability strategy Critical success factors 84
Slide 85: Recent Focus in the Student / Disbursement Business
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, marketing campaigns, and product
Slide 86: Banking as a Service and T-Mobile
Spent significantly in R&D, technology and product development for White LabelExpected to be a very customer friendly product offeringWe will have more to share later this year 86 Banking as a ServiceBesides student disbursements, our biggest focus over the last two years has been the development of
Slide 87: Unique Technology, Contracts and Durbin Create Barriers to Entry
3. Unique technology, contractual relationships, & Durbin create barriers to entry Today, BankMobile has relationships with approximately 726 campuses that have approximately 5.7 million studentsOur patented disbursement process designed for higher ed; saving colleges millions of dollarsDisbursing ~
Slide 88: Long-Term Profitability Better Than Traditional Banks
4. Long-term profitability better than traditional banks •••• 2% or higher ROA which is significantly better than traditional banksUniqueness of Durbin – a significant competitive advantage that benefits our partners and our customersHigh volume and Low cost customer acquisition - $19 for BankMobile
Slide 89: Student Segment Update
STUDENT SEGMENT UPDATE October 2018
Slide 90: Student Segment: Disbursement Management
Every student on every campus we serve is exposed to our brand regardless if they choose our product or not. 18+years of Disbursement Management College student segment 700+campuses served 5M+students served • • Help over 700+ colleges and university campuses across the U.S. deliver financial aid cr
Slide 91: Unparalleled Knowledge of the Student Segment
BankMobile has unparalleled knowledge of the student segment 91 Source: BankMobile Internal Information(1) Organic deposits defined as non-financial aid refund deposits
Slide 92: Market Leader with Diverse Customer Base and Campus Relationships
Market Leader with Diverse Customer Base and Exclusive, Long-Term Campus Relationships Source: Company’s internal sales database and estimated student market size.Source: National Center for Education Statistics. “Enrollment and Employees in Postsecondary Institutions, Fall 2015; and Financial Stati
Slide 93: Revenue Generating Transaction Trends
Revenue Generating transaction trends $489.57 $962.56 $0 $200 $400 $600 $800 $1,000 $1,200 01/01/2016 to09/30/2016 01/01/2018 to09/30/2018 Organic Deposits Per Transacting Account 97% increase $1,332.05 $1,368.81 $1,310 $1,320 $1,330 $1,340 $1,350 $1,360 $1,370 $1,380 01/01/2016 to09/30/2016 01/01/2
Slide 94: Student Customers Likely to Use BankMobile VIBE Post-Graduation
76% of Existing Student Customers Surveyed Likely to Use BankMobile VIBE Post-Graduation 94
Slide 95: 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 96: VIBE's Net Promoter Score
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? 26 52 0 13 25 38 50 63 Higher One Q4 2015 BankMobile Q4 2017 52 28 30 34 46 0 13 25 38 50 63
Slide 97: "Bank as a Service" Model and Our Unique Technology
“Bank as a Service” Model and our unique technology October 2018
Slide 98: White Label Partnerships
White Label Partnerships • What do customers want? ----- Ultimate convenience Market rates for depositsFaster and easy payment systemsPhysical locations to supplement mobile experience Reliable technology with strong UX 98
Slide 99: Bank as a Service
Bank as a serviceWe believe that there is a significant opportunity to partner with businesses that desire to provide branded banking services “powered by BankMobile” to their customersWe are focusing on Four Verticals for White Label Partnerships Consumer products Large employers (HR benefit) Large
Slide 100: Multiple Verticals
MULTIPLE VERTICALS COLLEGES & UNIVERSITIES STUDENT LOAN REFUNDS BANKMOBILE VIBE STUDENT ACCOUNT BANKMOBILE CONSUMER ACCOUNT GRADUATION UPGRADE CONSUMER D2C ADVERTISTING LABOR UNIONS B2B2C CUSTOMER DUES COLLECTION HR/PAYROLL INSTANT DEPOSIT TELECOM WHITE LABEL BANK ACCOUNT BRAND AFFINITY/ BUNDLED OFF
Slide 101: Customer-Centric Technology Platform
Customer-centric technology platformModern “Bank as a Service” enabler 101
Slide 102: Year Growth Goals
3 Year Growth Goals October 2018
Slide 103: BankMobile Three Year Growth Trajectory Goals
BankMobile Three Year Growth Trajectory Goals Student Banking White Label Banking Total BankMobile Growth GoalsExpand the number of contracted schoolsSSE Growth: 600,000+ per year98% Client Retention Increase adoption of BankMobile Vibe accountsAdoption Rate: 27% Retain more BankMobile Vibe accounts
Slide 104: Customer Engagement and Customer for Life Profitability Strategy
Customer engagement and customer for life profitability strategy Source: Federal Reserve State of Consumer Finance Chartbook 2016.Assumed on an assumed weighting of 40% in 4 yr schools, 60% in 2yr schools.Based on an increase in transaction account balances of 1.5x with a linear impact on revenues.B
Slide 105: Where Are We Heading?
Where are we heading? October 2018
Slide 106: Competition Is Increasing, Yet We Have Strong Barriers to Entry
Competition is increasing, yet we have strong barriers to entry Financial aid is highly regulated, resource-intensiveDOE rules limit potential fee/revenue streamsLong-Term contracts, high (98%) client retentionDurbin Amendment limits profitability for later peersNeed for BAAS partner or bank charter
Slide 107: Goals for the Next 2-3 Years
Goals for the Next 2-3 Years •••• 107 Attracting over a million checking accounts per yearTop 5 bank in the country in terms of # of checking accounts Strong brand presence and perceived as a world-class digital bank Standalone ROAA in 2% range
Slide 108: Slide 108
Slide 109: Appendix
Appendix October 2018
Slide 110: Acquisition Costs Reflect BankMobile's Unique Customer Channels
Acquisition costs reflect BankMobile’s unique customer channels 110 Select current new checking account promotions Colleges pay BankMobile for disbursement services, which further lowers customer acquisition cost to almost zero $400 $300 $200 $200 $200 $200 $150$100 $0 $100 $200 $300 $400 $500 Citiz
Slide 111: Putting It All Together
Putting it all togetherBob Ramsey, Director of Investor Relations and Strategic Planning October 2018
Slide 112: Impacts on Q3 2018
112 Impacts on Q3 2018 A quick review of the Q3 financial impact of some of the items you have heard discussed today:$14.2M after tax loss on $495M of securities sold in the third quarter$ 0.9M after tax net gain on discontinuing cash flow hedge and equity security impairmentsIn total, these notable
Slide 113: What Will CUBI Look Like in 3 Years? Balance Sheet
113 What will CUBI Look Like in 3 Years? Balance Sheet StatementWe plan to stay under $10 billion in assetsWe are adding higher yielding consumer loans but will remain a business bankOur business mix will be ~15% consumer / 85% businessMultifamily will end this year at or below $3.3 billion and tren
Slide 114: What Will CUBI Look Like in 3 Years? Capital Management
What will CUBI Look Like in 3 Years? 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 ratiosOur board will evaluate share repurchases when shares are undervaluedIn times of a stronger valuation, our board will e
Slide 115: What Will CUBI Look Like in 3 Years? Profitability
ProfitabilityWe expect to reach our NIM target of 2.75%+ by the end of 2019 Continued focus on efficiency and costsROA of 1.25% in 3-5 years, double digit ROTCE NIM Trajectory What will CUBI Look Like in 3 Years? 115
Slide 116: Q&A
Q&ASenior executive management OCTOBER 2018
Slide 117: Reconciliation of Non-GAAP Measures - Unaudited
117 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. The
Slide 118: Tangible Common Equity to Tangible Assets - Consolidated Bancorp
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' EquityReconciling Items: Preferred Stock $ 956,846(217,471) $ 936,227(217,471) $ 919,088(217,471)
Slide 119: Tangible Common Equity to Tangible Assets - Bank
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' EquityReconciling Items:Goodwill and Other Intangibles $ 1,053,297(16,825) $ 1,037,815(17,150) $ 1,028,941(17,477
Slide 120: Tangible Book Value per Common Share
Reconciliation of Non-GAAP Measures - Unaudited Tangible Book Value per Common Share(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' EquityReconciling Items: Preferred Stock $ 956,846(217,471) $ 9
Slide 121: Forward-Looking Statements
Forward-Looking Statements 121 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
Slide 122: Forward-Looking Statements (Cont.)
Forward-Looking Statements (Cont.) 122 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
Slide 123: Forward-Looking Statements (Cont.)
Forward-Looking Statements (Cont.) 123 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 implemen