Customers Bancorp Inc. hopes to divest its BankMobile division within 60 days and is in "final negotiations with a partner," Chairman and CEO Jay Sidhu said on a Jan. 26 earnings call.
"Within the next 60 days we are very hopeful that we will be able to announce to the Street our divestiture, details of our divestiture," he said, according to a transcript. "We are in final negotiations with a partner right now and though no assurances can be made, obviously, this will happen, but we are hopeful that it's going to happen. As the result of that the Street should expect a pretty significant gain to Customers Bancorp coming from that transaction."
Sandler O'Neill analyst Frank Schiraldi wrote in a note that the midpoint of management's assumptions for aggregate deposits in 2017 and estimated deposit premium point to a sale price between $50 million and $60 million, though he pointed out that a December 2016 filing disclosed a bonus for management if BankMobile sold for more than $100 million.
Customers listed BankMobile under its discontinued operations in its most recent earnings release. The division reported a $3.5 million loss for the fourth quarter of 2016 — $1.4 million steeper than the prior quarter due to a forced divestiture regarding deposit accounts it was servicing for after it purchased Higher One Holdings Inc.'s student checking and refund management disbursement services business in mid-2016. Higher One, WEX Inc. and Customers all received regulatory fines and orders from the Federal Reserve and the FDIC regarding their participation in Higher One's "OneAccount" product.
Regulators had determined that deposit accounts associated with WEX were not brokered deposits but owned by WEX, which is an industrial loan company and could not maintain consumer checking accounts, said BankMobile Chief Strategy Officer Luvleen Sidhu. Customers had until Nov. 1 to decide whether to open a new account with BankMobile; those who did not would receive a check for their deposit balance. BankMobile was able to convince holders of about 300,000 of the 1 million accounts to stay, Sidhu said. "We anticipate that it will take up to a year to fully recover from the ramifications of this regulatory challenge," Sidhu said.
"I hate to say it as a member of a regulated entity, but this was an absolute inappropriate decision by the regulators," Jay Sidhu said, according to the transcript. "It is what it is. That's why we had to do what we had to do. We lost deposits. We lost on revenues and we spent well over $1 million trying to communicate with these customers to let them become aware of it. And then students don't open mail, students don't open even email. It was very difficult to even communicate with them. That's why these checks are lost and the Federal Reserve has resulted in many students losing millions of dollars of money. Kudos to them."