Customers Bancorp (CUBI) Q3 2018 Earnings Conference Call Transcript

Customers Bancorp (CUBI 0.60%)
Q3 2018 Earnings Conference Call
Oct. 26, 2018 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the third-quarter 2018 Customers Bancorp Incorporated earnings call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Bob Ramsey, Please go ahead, sir.

Bob Ramsey -- Executive Vice President and Chief Financial Officer

Thank you, and good morning, everyone. Customers Bancorp's third-quarter earnings release was issued yesterday evening as well as an investor presentation. Both are posted on the company's website at www.customersbank.com. Representing the company on our call today are Jay Sidhu, chairman and chief executive officer; Bob Wahlman, chief financial officer; Dick Ehst, chief operating officer; and Carla Leibold, our chief technology officer; and myself, Bob Ramsey, director of investor relations and strategic planning.

Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated. Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities laws. Please refer to our SEC filings, including our Form 10-K and 10-Q for a more detailed description of the risk factors that may affect our results.

Copies may be obtained from the SEC or by visiting the Investor Relations section of our website. At this time, it's my pleasure to introduce Customer Bancorp's CEO Jay Sidhu. Jay, the floor is yours.

Jay Sidhu -- Chairman and Chief Executive Officer

Thank you very much, Bob, and good morning, ladies and gentlemen. Thanks for calling in for our third-quarter earnings call. Although the corporation reported a diluted operating EPS of $0.62, which were 29%, and operating return on average assets of 88 basis points and operating return on average common equity of about 11%. The Community Business Banking segment continues to perform very well.

And we reported operating diluted EPS for that segment, which is our core bank, of $0.73, which were up 14% over last year. And operating return on average assets of little over 1%, and the return on average common equity of about 13.5%, and efficiency ratio of 50%, which we expect to get down in the 40s -- low 40s within the 24-month period. So from an earning asset point of view, we reported 15% year-over-year growth in C&I lending, which excludes our loans held for sale in the mortgage warehouse category. And as you would expect, based upon the guidance that we had provided, we'd be reporting a 7% year-over-year decline in multifamily loans, and that decline will increase over the next couple of quarters.

On the liability side, we achieved $1.2 billion, which is 17% quarter-over-quarter deposit growth, and I'll talk a little bit more about that in a minute. And simultaneously, we are totally balanced on an interest rate risk point of view at September 30 since we sold about $500 million of lower-yielding securities and repaid a similar amount of borrowings significantly improving the interest rate risk profile and putting an absolute floor on our margin. Credit quality remained very strong, and basically no change in our pristine credit quality. From a deposit point of view, as I mentioned, the core deposit growth as part of our strategy accelerated immensely in Q3 2018.

We did that for three reasons. Number one was that for the year, we've been planning and executing many improvements in our deposit generation and product offering capabilities, all of those were implemented starting Q3 and ending results is that our escrow balances increased significantly, as an example, starting Q3. Also, we launched a CB digital bank, which is a direct bank for high income, high net-worth individuals across America, and that's generating approximately between $52 million to $100 million a month in core deposit growth. And then thirdly, the BankMobile deposits continued to increase.

So as a result of all these activities, demand deposits increased 38% quarter over quarter. Money market and savings increased 19% quarter over quarter, and time deposits increased 25% quarter over quarter. From a loan growth point of view, as I mentioned to you earlier, C&I grew 15% year over year and multifamily declined 7% year over year. We launched our consumer loan offerings in partnership principally with Upstart this quarter.

And as a result of that, we showed some modest increases, and you should expect over the next 12 to 18 months that consumer loans will become a bigger and bigger part of our earning asset base. The yields that we are getting on the consumer loans right now are ranging between 8% to 12% or 13%. And from a margin point of view, the yield in the loans increased in this quarter only three basis points but up 44 basis points from last year same period, and this was due to seasonality -- seasonally lower balances in our mortgage warehouse business as well as a fairly significant impact to lower prepayment fees in all our loan categories, including C&I loans as well as the multifamily loans. And we believe that prepayment fees will stay low in this rising rate environment.

From a NIM point of view, we hit a trough. We don't believe you're going to experience any NIM compression. From here and out, you should expect us to report higher -- gradually higher NIM, and we are shooting for a NIM of 2.75% within the next 12 to 18 months. Some of the steps which gave us this confidence is that, as I shared with you earlier, we sold $495 million of securities, added 2.67% yield, and we exited approximately $500 million of borrowings at a 2.85% cost, which obviously this transaction is NIM positive and frees up capital for deployment in much higher-yielding assets.

And we expect a significant growth and low-cost BankMobile white label deposits starting sometime in next year. And we think that within 12 months after the launch of our relationship with our white label partner, which is T-Mobile, that we expect deposits to be about $500 million and these will be very low-cost deposits. We expect multifamily loans to end 2018 at about $3.3 billion and continue to head lower. And next year, we believe they could be down at least 20%.

And we will grow our C&I loans next year and as well as consumer loans. And from a originations point of view, the company today in the fourth quarter is not originating any loans below 5.25%. And from a product and a channel strategy, including the digital channel for our direct bank, we are continuing to experience -- we did not increase any rates after the last Fed increase, but we are still experiencing between $50 million to $60 million inflow of core deposits at this time. From a loan repricing characteristics, 85% of our C&I loans reprice immediately all within one year, and this includes our loans to mortgage companies.

But on the multifamily side, as you would expect, only 13% will reprice within one year. And on a commercial real estate side, it's 40%. While multifamily and commercial real estate, in our opinion, are assets which do not do well at all in a rising rate and a flat environment and hence they will be significantly will be reducing our exposure on those assets significantly over the next several quarters. Within a three-year period, we expect multifamily loans still.

We like that asset category to be approximately $1 billion in outstandings, and we will selectively book those loans at higher yields and get the lower-yielding loans of our balance sheet. From a C&I point of view, they today makeup 38% of our loans, and you should expect that percentage to increase to over 50% within a three-year period. From a BankMobile business segment point of view, the BankMobile reported a loss -- adjusted operating loss of $3.6 million or $0.11 per diluted share, and we expect the fourth-quarter loss not to exceed this number. We are totally laser focused on making BankMobile profitable by end of next year.

And BankMobile deposits averaged about $500 million in Q3. And we, in spite of lots of regulatory Department of Education headwinds, we are very encouraged that our new customers that we're attracting in the student business view our product offering as a core product, majority of them do, and hence we continue to see average deposits grow. We are looking at all sorts of strategies to improve the performance of BankMobile and get to the profitability, including assessing higher fees wherever we see unprofitable customer segment. It's much more important for us to improve profitability than just get more accounts, and then whatever we get we want to make them customers for life.

The BankMobile segment reporting reflects a margin of only 3%, the lower 3%, and we believe that it should -- it can easily a margin of well over 6% with consumer loans, and that itself on a stand-alone basis would significantly improve the profitability of BankMobile. Our operating expenses decreased 17% over the prior year, and this includes some subsidies toward our technology expenses from our white label partners, but still our investments in research and development and technology investments have been fairly significant to support the expected white label partnership of BankMobile. And we are very confident that in 2020 BankMobile will definitely be profit -- very profitable, leading to within a two- to three-year period return on assets which would -- we expect that to be greater than the average return on assets of our Community Business segment. So given that somewhat of a shift in our strategy that we announced on our analyst day few weeks ago, I'm now going to discuss with you our strategic priorities.

No. 1, clearly, is to create shareholder value through significantly improved profitability. The consumer business segment of our business reported an ROA -- operating ROA of little over 1%. We're not happy with that.

And we targeted a return on average assets of at least 1.25% within three years, perhaps it could take five years, but we are shooting for as quickly as possible within a three- to five-year period. We're targeting continuation of our double-digit return on tangible common equity as well as a NIM of 2.75%, and we hope to get that done by end of next year, perhaps by middle of the following year at the latest. As I mentioned earlier, we hit a trough in Q3 on the margin, and you should expect margin to gradually expand after starting with the fourth quarter. And at the same time, the Community Business Banking segment, we are launching several initiatives, including a total digitization of all our activities at the business -- at the Community Business bank, and hence you should expect that we will maintain expense growth to an absolute minimum, and any expense growth will be tied directly to revenue growth.

So No. 2 priority that we shared with the investment community on our analyst day was a focus to grow core banking while we gradually exit what we consider to be non-core banking. So we expect to grow our core franchise, which is low-cost core deposits. And from those categories, just for next year, you should expect about a $600 million increase in deposits from our core franchise.

On top of that, we should expect another about $500 million to $600 million increase through what we call our CB Digital Direct Bank, which is the bank we started in the third quarter aiming toward at the high income, high net worth individuals throughout the country. And thirdly, you should expect, after the launch of our white label partner, on an annual basis about $500 million growth through BankMobile, and that will be expected to be very low-cost deposit or zero cost deposits. And from a balance sheet point of view, we expect to manage the consolidated balance sheet under $10 billion and significantly improve capital and profitability while preserving, in our opinion, by staying below $10 billion the full interchange income from the debit cards that we have well over $1 million already being used by our customers. No.

3 strategic priority we shared with the investment community was that we expect to grow BankMobile for the next two to three years before we expect to spin it off. And because we are excited about BankMobile's profitability and we will do everything humanly possible to make our student business profitable by end of next year, and we expect to generate significant low-cost core deposits through our white label partnership. Why are we doing this? Because we, like I mentioned, we are excited about the BankMobile's new white label partnership and we are excited about the -- about turning around the existing student disbursement business. And at the same time, we believed strongly that the only way our shareholders could enjoy in the upside of BankMobile was if they own a significant portion of BankMobile, and that's why the spin merge made a lot of sense to us.

However, we were very disappointed with the regulatory complication, which clearly stated that if our -- if Customers Bancorp shareholders collectively owned more than 24.9% of the company called BankMobile or the new company called BankMobile, then the Federal Reserve determine they will consider ourselves affiliates and take away the advantage of Durbin for BankMobile. There is no way we can guarantee what our shareholders whether they will hang on to the stock or they'll sell the stock or they'll trade the stock, and that made the spin-merge option totally -- created inability for us to execute that. So now we are looking at is while we grow BankMobile, we -- you should expect us within the next 12 to 24 months continue look at every option, including the option of Customers Bancorp becoming a two-bank holding company and then doing an IPO for the BankMobile part of our two-bank holding company. So the board will be looking at and assessing the options available to us on a regular basis, but we believe it will take us two to three years to while we are very focused on improving our shareholder value and improving our core banking business, improving our capital ratios, improving our margin and really increasing -- improving the franchise value of our company that we will be very well-positioned at that time to spin-off and do an IPO for BankMobile, assuming that it really continues to grow its white label business.

So that's on our third strategic priority, which is BankMobile. Our fourth strategic priority is strengthening our mix. So in September, we sold about $500 million of low-yielding securities, as I shared with you earlier. And these were funded with the borrowings at a cost higher than what the securities were yielding.

And like I mentioned earlier, we expect to grow C&I lending. You should expect about $500 million increase in C&I loans next year at about five and a quarter percent, and you should expect somewhere around a $400 million increase in our consumer loan portfolio next year, which will yield about 8% to 12%. And then how would we create an opportunity or space on the balance sheet, that's going to be through similar reductions between multifamily and commercial real estate assets on our balance sheet. I've already given you some of the guidance on our deposit side, and we continue to focus on generation of low-cost core deposits, where the all-in cost should be significantly below the interest expense on our balance sheet right now, and we currently have over $700 million of deposits, as an example, with a cost of over two and a half percent, and we expect to get those off our balance sheet.

The number five strategic priority we shared with the investment community was deploying our excess capital to benefit our shareholders. And today, we already have a TCE ratio of approximately seven and a half percent, and today, our balance sheet is slightly below $10 billion already. And we are targeting to always maintain a TCE ratio above 7% target. So as we retain our earnings and we manage our balance sheet, you should expect obviously our capital ratios to continue to build.

And our board will always on a regular basis evaluate various options for capital allocation and -- including potentially buying back our preferred shares when they become callable. So we -- I personally, along with many of the colleagues who I've spoken to, we can't wait for the blackout period to end. And with the company right now trading at about in the mid-80s of tangible book value and about eight point five times last 12 months earnings, we are obviously very bullish on our stocks, and you should expect some insiders to be buyers this quarter and -- at these levels. And also I want to share with you that all management is taking at least 70% of their bonuses this year in CUBI stock.

So with that, I'd like to open it up, Nick, for any questions from anybody who is on the call.

Questions and Answers:

Operator

Thank you. [Operator instructions] And our first question comes from Steve Moss of B. Riley FBR. Please go ahead, sir.

Steve Moss -- B. Riley FBR -- Analyst

Good morning. I'd want you guys to talk about the 2.75% NIM target here. Just wondering if you assume any additional rate hikes in 2019 in that number?

Jay Sidhu -- Chairman and Chief Executive Officer

Yes, we do. So we assume three to four rates hikes between now and second half of next year.

Steve Moss -- B. Riley FBR -- Analyst

OK. And then in terms of running off the multifamily loans, do you expect to undertake a securitization in the next 12 months?

Jay Sidhu -- Chairman and Chief Executive Officer

Steve, I think Dick mentioned on the Analyst Day that over the next couple of months, so we will be looking at some partnership with some funds or working with an investment bank for continuing with our originations and getting into the securitization business. But that would be for the new originations because, as you know, the average yield on our existing portfolio will create some losses which are not acceptable to us because our multifamily business is still a profitable business. It's just that when you assume four or five Fed rate hikes, it will become not profitable. And that's why we don't want to be sitting here four quarters from now blaming that why our profitability is what it is because 34% of our balance sheet today is in the multifamily business.

And so we will be proactively encouraging our customers to find another home and hanging on to our core customers. And that's why we are sharing with you that we expect our commercial real estate portfolio to be down about 20% or so by the end of next year and then gradually continuing with that, but the securitization opportunity will be for new business.

Steve Moss -- B. Riley FBR -- Analyst

OK. And then, I guess, my third question here, on the potential for capital deployment and being above your CET -- above your tangible common equity target of 7% by at year end. Will you consider doing share repurchases ahead of that?

Jay Sidhu -- Chairman and Chief Executive Officer

Our board probably will put on the agenda capital management options for us at our November meeting. Yes, I would expect that to be on the agenda.

Steve Moss -- B. Riley FBR -- Analyst

All right. Thank you very much.

Operator

Thank you. [Operator instructions] Our next question comes from Michael Perito of KBW. Please go ahead.

Michael Perito -- KBW -- Analyst

Morning.

Jay Sidhu -- Chairman and Chief Executive Officer

Hey, Mike. Good morning.

Michael Perito -- KBW -- Analyst

Thanks for the strategic run down there. I just have a couple modeling questions that I wanted to touch base on. I guess, one, with the good C&I and consumer growth we saw in the quarter, would you guys say that this all else equal, I guess, from a loss perspective that this provisioning run rate is kind of a good level as you continue to remix the loan portfolio as we move into next year?

Jay Sidhu -- Chairman and Chief Executive Officer

I think, Mike, consumer loans, we are looking at reserves and provisions based upon the historical losses of similar assets that we are putting on the books, and they are ranging between a low of 3% to a high of 8%, depends upon the quality of those. And so we will do what is appropriate to from a reserving point of view, and we are well under way in preparation for CECL also. And at the right time, we will give the appropriate guidance to the marketplace. But our reserving will be in accordance with the normally accepted regulatory guidelines as well as GAAP.

Michael Perito -- KBW -- Analyst

OK. And then, Jay, can you remind us, now that you guys will be potentially holding on to BankMobile for the last couple of years here, just I know there's a bit of seasonality in their business. I think if I remember correctly, the third and first quarters typically have the highest deposit balances. But can you just kind of walk us to remind us some -- about some of the fee expense and deposit seasonality that BankMobile has as we try to think about our models for the next couple of years?

Jay Sidhu -- Chairman and Chief Executive Officer

Mike, you're right. From a deposit side of it, it's the third quarter and the first quarter, and the same thing goes for debit card interchange income, which is the -- from a noninterest income point of view the greatest contributor in that area. And so the students are hardly around in the summertime. And that's why when you see majority of the third quarter and majority of the second quarter, they are not even on campus.

And that's why seasonally, those happen to be the weaker quarters of noninterest income as well as net interest income revenue. However, contrary to what we shared with you based upon feedback that we got from many other investors and analysts, we are seriously looking at continuation of our segment reporting in 2019. And when we share with you our fourth-quarter results, we will give you our final decision. And so we -- you should -- it will make it hopefully easier for you to model where Customers Bank Business Banking segment is going.

And as you know, the Customers Bank business segment contains two divisions by us. One is this what we call the CB Private and Commercial Banking division and the second one is our Direct Digital Bank division. And then the BankMobile segment will have consumer loans as well as deposits as well as noninterest income. In terms of couple of years for BankMobile, you're absolutely right.

What I would say is, we expect it to be no more than three years.

Bob Ramsey -- Executive Vice President and Chief Financial Officer

And Mike, I would point you to Slide 16. It has got, I think, 11 quarters of BankMobile segment results. So that should give you a good feel of the historical seasonality in the disbursement business, which will continue in future periods. And as we add white label, that's not going to have the same seasonality.

So that will be a change as we go forward as well.

Michael Perito -- KBW -- Analyst

And that was on the investor day, Bob?

Bob Ramsey -- Executive Vice President and Chief Financial Officer

Yes, it is. Of the deck we've got out yesterday for the third quarter, not the investor day deck but the deck really your choice.

Michael Perito -- KBW -- Analyst

Thank you. And then just lastly, I saw the comment in the earnings release that the tax rate is going to be -- you expect it to be around 24% for the fourth quarter. Just does that persistent to next year as well?

Jay Sidhu -- Chairman and Chief Executive Officer

That's very interesting. We are one of the few banks that are investing in research and development. And so the tax rate is going to be now dependent also on our R&D expenses. And chief accounting officer just this morning was sharing with us that in 2018, tax rates will be impacted because we have quite a bit of investments in research and development in the year 2018.

And what you'll notice impacting our tax rate in the third quarter was the true-up from some other adjustments, including a little bit of R&D that we had. So we are looking at lowering a little bit our tax rate, but for -- you should assume what we gave the guidance that we have given to you.

Michael Perito -- KBW -- Analyst

OK. Thank you for taking my questions, guys. I appreciate it.

Jay Sidhu -- Chairman and Chief Executive Officer

Thank you, Mike.

Operator

Thank you. And our next question comes from Russell Gunther of D.A. Davidson. Please go ahead.

Russell Gunther -- D.A. Davidson -- Analyst

Hey. Good morning guys.

Jay Sidhu -- Chairman and Chief Executive Officer

Morning, Russ.

Russell Gunther -- D.A. Davidson -- Analyst

I wanted to ask a question on the margin guide. That 2.75%, Jay, does that include the benefit you would expect from the new white label partnership and those kind of low to no cost deposits you highlighted earlier? Or would you expect potential upside to that 2.75% as those deposits begin to come in?

Jay Sidhu -- Chairman and Chief Executive Officer

Russell, we've said 2.75% plus, and we are laser focused on getting to 2.75%, but that did assume the white label being launched in the first quarter. And for whatever reason that timing gets affected, then it can affect a little bit. But we are working on in every area of the company. I've already shared with you we are not booking any loans below 5.25% as an example, and we are paying off and letting deposits runoff.

We're not chasing anything like that, and we are developing deeper relationships with our consumer as well as predominantly our business customers because we are a business bank. But our strategy is very clear. We expect lots of headwinds in the industry from a continuation of a reasonably flat curve, which could invert in our opinion in the second half of next year because the Fed just totally focused on fighting inflation and continuing to increase short-term rates. And we want to be ahead of the curve.

And while the industry is going to experience margin compression, we want to be the outlier which is so -- gradually showing a margin expansion. So asset liability management is being managed by us actively on a weekly basis. And we have a very, very focused execution strategies in place over the years. We -- yesterday, management spent all day off-site meeting with every leader of the company.

And we will be having these kind of meetings on a regular basis. We are laser-focused on getting to the 2.75% margin.

Russell Gunther -- D.A. Davidson -- Analyst

Great. Well, thank you for your thoughts on that, Jay. And then last one is on the Community Business Bank expenses. I think about $36 million this quarter.

I heard just you say you guys are kind of laser-focused at keeping that flat. But how should we think about the $36 million going forward? Is it safe to annualize that number and hold it flat? Is it safe to annualize that and assume some sort of growth rate? Just appreciate any thoughts you guys could share on that line item. Thank you.

Dick Ehst -- President and Chief Operating Officer

Yes. Russ, this is Dick Ehst. The opportunities that we've got in front of us to digitize this company certainly will have an impact on our OPEX. We do expect that throughout the entire year, we will not increase our OPEX beyond what the amount was for 2018.

But how we continue to manage, we've instituted several cost-saving initiatives throughout the company. We've dug very deep into the organization to try to find every place where we can save money, and we are continuing to do that. It's part of our DNA. One of the things that we -- in fact, many years ago, in fact what's I think four, five years ago, we were operating at an OPEX of about $213 million to $215 million.

And we put a stake in the ground that we were going to get to $165 million by 2016. And the street thought we were nuts, and so did the employees. We managed to get to that point, in fact, we're going to finish out this year to about $135 million, but we will continue to work on that relationship. And I think from your perspective, you should expect that you can straight line the numbers, but you should expect that we will not increase our OPEX in 2019 over what we experienced in 2018.

Russell Gunther -- D.A. Davidson -- Analyst

I appreciate the color there. Thank you for taking my questions, guys.

Operator

Thank you. And our next question comes from Bill Dezellem from Tieton Capital. Please go ahead.

Bill Dezellem -- Titan Capital Management -- Analyst

Thank you. I have a couple of questions. First of all, relative to your deposit growth, would you talk about how you accomplished the deposit growth that you had here into this quarter? And you gave some guidance for the coming year for deposit growth that seemed quite strong. So I suspect whatever you did to grow deposit this quarter, you view is replicable, but would you address that also, please?

Jay Sidhu -- Chairman and Chief Executive Officer

We grew deposits in three areas this past quarter, like I've shared that was in our private banking groups. We have deposit teams in our private banking group, which are totally focused on generating deposits. We have what we call hybrid teams in our private banking group, which are sort of focused on both gathering deposits as well as earning assets. And then we have of course some teams, which are very much focused on the earning assets side.

Our comp plans are such that if you run sort of -- every team runs sort of a balanced bank, their compensation -- incentive compensation as the highest. So we have a laser focused on generating core deposits through our private banking operations and providing them with all the products that are needed so that they can sell in the marketplace and attract the kind of clients that we want to attract both on the liability and the asset side. So we, as Dick had shared on the analyst days, we needed to develop a lot of products as well as continue to recruit the teams. We are in active discussions right now on a very attractive deposit team from a very good deposit generator in New York.

And we think that's -- those kind of things will continue on top of the normal activities. And that's why we're shooting for approximately $600 million deposit growth through our various teams next year. The second area happens to be our consumer business. And in the consumer business, we see that as an opportunity both on the liability and the asset side.

So I think with the digitization of the delivery channels, it is, in our opinion, very appropriate to expect us to continue to focus on the high income, high net worth individuals because that is -- we are a private business bank, and we are now also creating a private consumer bank. And so we are starting with our deposits, but we are not going to have just one product. We will be offering through the digital channels consumer checking accounts as well as investment accounts. We -- I think at the analyst day I shared with you.

By the end of the year, you should expect us probably to get into in a partnership with somebody to offer wealth management services also. So when you combine all that, that's how I gave the guidance that next year, we should expect about a $600 million deposit growth through digital channel from the consumer sector. And so that's really in the core bank. And in the BankMobile, it's very much oriented toward continuation of having retaining the customers we are attracting in the student business as well as getting the white label partnerships launched and signing up more white label partners next year.

That's what gives us the confidence level of building low cost to very low-cost deposits at the BankMobile.

Bill Dezellem -- Titan Capital Management -- Analyst

OK. That's helpful, Jay. At the analyst meeting, did we hear correctly that you are really hoping that BankMobile will be profitable in all of 2019, both on the student disbursement side and on the white label/T-Mobile side of the business?

Jay Sidhu -- Chairman and Chief Executive Officer

We expect the white label side of the business to be profitable for all of 2019. I think we said and if I wasn't clear, let me make it clear now. We said that we expect the student business to be profitable by end of 2019. So when you combine the two, we are hopeful that the student -- that the BankMobile may not have any losses, but that's -- it all depends on the timing of the launch of our white label partner as well as our ability to attract new white label partners according -- in accordance with our plan.

But the target for student banking to be stop the bleeding is by end of next year.

Bill Dezellem -- Titan Capital Management -- Analyst

That is helpful. So basically, a super simplistic way to look at customers today is that the traditional bank earned what $0.73 or so this quarter and next year, you would have that rate of earnings plus the BankMobile loss going away, and if you're lucky, some level of profit and the bank itself growing a bit, but even if you did not, that $0.73, is there any reason that one couldn't annualize that at what's that work out to be something in that $2.90 range?

Jay Sidhu -- Chairman and Chief Executive Officer

Well, we are not giving guidance, earnings guidance. I'll leave that up for you to determine that. That's what we have stated on the analyst day. And like I said, student banking will continue to lose money, but we expect the losses to stop by end of next year.

Bill Dezellem -- Titan Capital Management -- Analyst

Great. Thank you for taking the questions, Jay.

Jay Sidhu -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. And we have no additional questions at this time.

Jay Sidhu -- Chairman and Chief Executive Officer

Well, ladies and gentlemen, once again, thank you very much for taking the time. Now we are going to be out aggressively, meeting with the investment community over the next couple of months at KBW and Sandler, and I think also, Davidson is taking us out in the month of November. So we look forward to meeting many of you. Thanks so much.

Have a good day.

Operator

[Operator signoff]

Duration: 42 minutes

Call Participants:

Bob Ramsey -- Executive Vice President and Chief Financial Officer

Jay Sidhu -- Chairman and Chief Executive Officer

Steve Moss -- B. Riley FBR -- Analyst

Michael Perito -- KBW -- Analyst

Russell Gunther -- D.A. Davidson -- Analyst

Dick Ehst -- President and Chief Operating Officer

Bill Dezellem -- Titan Capital Management -- Analyst

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