CUBI
#Thanks, <UNK>.
No, they are not at all linked.
Not at all.
Yes.
This is ---+ yes, the tech issue is a potential dispute with a technology partner, as I said.
And that regulatory reserve was set up by us in the early part of 2016, I think in the first quarter or second quarter.
And we're the ones who identified the problem at Higher One.
We're the ones who solved it.
And that's why we wanted to make sure that it is still resolved because it's a pending risk issue, and we are hopeful that this quarter we will try to put that behind us.
Not at all.
No, in fact, whatsoever, of any of the regulatory issues ---+ none.
In fact, you can see ---+ <UNK> reported to you, we are building the business, we are growing the business.
And we are very confident that it's going to create significant shareholder value for Customers Bancorp.
I think ---+ all I can say is that we'll look at every single strategic option.
We are in a very strong position.
We can do it organically.
We can acquire someone.
We can merge with someone.
We'll look at every single option because we know it's going to cost us a few million bucks to cross $10 billion.
And we don't want our shareholders to have to pay for that.
So we will look at every single way, which is the best way for us to cross that $10-billion mark.
And you are right, organically we could do it, too.
I think in terms of deposit balances ---+ this is a cyclical business.
And no question about it ---+ like <UNK> said, if you get 100,000 more checking accounts, (inaudible) 250 ---+ you can always do your math [what will it do].
The interesting, most important thing, is our strategy for retaining the customers.
And in retaining the customers, we believe that we will see about 500,000 students graduate by this time next year.
We have very aggressive plans that ---+ what that will do is end up having a pretty significant increase in deposits, as well as pretty significant increase in noninterest income revenue.
There is no question about it.
I'm not at liberty to talk about future goals, but I think <UNK> <UNK> on June 17th shared with you a three-year, down-the-road plan.
All we can say to you is, we are more confident today about achieving the 2019-type numbers that <UNK> put up over there than what we were on June 17th ---+ we are more confident today [that that will happen].
Sure.
I think, <UNK> ---+ like I just stated earlier, it's ---+ the customer-acquisition strategy is to get the students.
Customer-retention strategy is to give them awesome experience in services, and that's what <UNK> talked about before, so that they retain with you, and they stay with you, and at the same time enter into partnerships with ---+ using this model with other types of businesses.
Please look at our investor deck.
We've updated the investor deck on the BankMobile side of it, based upon that strategy of potentially ---+ if you can do this with 800 campuses around the United States, you can do it with lots of other business partners.
And that is where the customer-acquisition strategy, other than students, will come in.
The problem in the banking industry today is that you're only opening up about 1 net new checking account per week per branch.
That's in the entire United States.
There are 94,000 branches.
So all we are doing is opening up all over the US 94,000 checking accounts per week, period.
Our goal, as we see it in the next three years, is to be opening up a million checking accounts a year.
BankMobile is going to position itself to open a million net new checking accounts per year, and retaining them.
We are always trying to get the best quality loans and manage our risk, as <UNK> also indicated to you.
And sure, if we can get high credit quality and high rates simultaneously ---+ we don't find that too often.
And so I don't think you should expect us to get into any new lines of businesses chasing yields.
We are not going to do that.
We will stick to our knitting.
We know ---+ we will stay with what we know well, and we are a business bank, and that's why we will continue doing what we've done and what you've seen from us.
And [sure,] with short-term rates going up, we believe that once next-year's rates ---+ if the Fed continues with its strategy and ---+ taking [a pausing] on the [growth's] point of view in the second half of 2016, like we had indicated to you in the beginning of the year.
Don't expect a lot of growth from us in the second half of 2016.
That is exactly what's going on.
But when you see that happening, our earnings will continue to do well because we are not going to have the provision expense and other things coming through, and other issues impacting it.
So that's exactly what you're seeing.
So once the rates go up, we are going to be in a position to just continue growing in our low-risk business.
And that's what we intend to do.
I think on an average, I think we've indicated to you that you should expect this business getting closer to break-even, if not breaking even, by the end of the year.
We think (inaudible) still be there.
We are obviously spending money on technology and development.
So our objective is not to make this marginally profitable in the short run but to have a strategy that this becomes a very meaningful company with a very meaningful valuation.
That is our priority, and to continue to build upon the management talent and the team that has ---+ and give them an opportunity to grow this business.
So if ---+ in the worst-case scenario, I think you're going to see on an annual basis the kind of loss that we saw in the third quarter because we decided to spend some money.
In the best-case scenario, you'll see a small profit coming from this in the next two or three quarters.
But (inaudible) the plan that we shared on the investor day, that is still a focus for BankMobile management.
No, it's kind of the other way around.
The fourth quarter is not going to be as great as the first quarter will be.
And the third quarter was ---+ only one month was good, but July and August were not (inaudible) best months are September and October.
And then December is slow, and then January, February, March are going to be good.
That's why the first quarter is the best quarter.
And just to add, Bill, the second quarter is the one that's most challenging.
Well, as <UNK> shared, I think it's a focus on adding the schools with quality of students coming from there.
And Andrew Crawford who runs that business for us and his team have done a very good job.
And when Higher One was in all sorts of [state] wondering what is the strategy, there wasn't that clarity of the Department of Education rules, and there wasn't a bank behind it.
So when you have a bank behind it and you have clarity of the rules and the you have a dynamite management team, then you have very good product offerings.
That's why we are getting it, and in fact, we hope to continue with that growth.
And our goal is that within the next 12 months, or so, that hopefully we can add colleges with another 500,000 students coming into us.
I think on the Durbin Amendment, you are correct, that that is [closing] ---+ the Durbin Amendment impacts interchange income on debit cards.
So that will kick in the year that we cross $10 billion.
It'll be after December 31 that the interchange income gets impacted, which means BankMobile will get impacted if they are still on our balance sheet.
But the DFAST requirements with the stress testing and whatnot is all based upon the full quarter average.
And then you have approximately another 12 to 18 months, depending upon where it is, before the stress testing and the other requirements of $10 billion or greater institutions kick in.
So we are a couple of years, two or three years ---+ that's why I said even if it crossed the $10-billion mark sometime next year, the DFAST rules and other requirements will not kick in for us, other than the Durbin Amendment, till sometime in 2018 or even beyond 2018.
Frank, I'll leave it up to you to determine who the potential buyer is.
We're not going to talk about that.
That is correct.
Frank, there's some balance-sheet numbers that were included in the presentation on June 17.
So that will give you some insights in terms of what we were thinking.
But it's hard to put ourselves in the shoes of who the potential acquirer might be and what their strategies might be.
They were mostly from the Higher One distribution channel.
I think I gave you the target for tier-one capital, and we don't have a specific target for the TCE right now, but you can always figure out that this quarter alone, by managing our growth, we added about 50 basis points, 40 basis points or something like that, to our TCE.
And if our earnings are going to be in the $18-million to $20-million range even in the next two or three quarters alone on an average, you're talking about a pretty significant increase in our TCE ratio by managing our growth.
Frank, in the last two years, we've given guidance.
And every single quarter, we have beaten the street estimates consistently.
And so we've decided on a policy not to give guidance, just to focus on performance.
So we are not going to give guidance beyond 2016, that you already have.
We are confirming our guidance that we've given to you for 2016 because ---+ you know, so we will do that.
But we think it's prudent to just focus on the performance of the Company, and the shareholders will get rewarded based upon the performance and not have folks all over the place based upon the guidance, trying to justify why the stock price is where it is.
Okay.
Well, thank you very much, everybody.
And if you have any questions, please give us a call.
And we look forward to a good fourth quarter also.
Thank you.
Have a good evening.
