Deposits

3 Months Ended

Mar. 31, 2020

Banking and Thrift [Abstract]

Deposits

8. Deposits

WEX Bank’s regulatory status enables it to raise capital to fund the Company’s working capital requirements by issuing deposits, subject to FDIC rules governing minimum financial ratios. See Note 18, Supplementary Regulatory Capital Disclosure, for further information concerning these FDIC requirements.

WEX Bank accepts its deposits through: (i) certain customers as required collateral for credit that has been extended (“customer deposits”) and (ii) contractual arrangements with brokerage firms for both certificate of deposit and brokered money market deposit products. Customer deposits are generally non-interest bearing, certificates of deposit are issued at fixed rates and brokered money market deposits are issued at variable rates based on LIBOR or the Federal Funds rate.

The following table presents the composition of deposits, which are classified as short-term or long-term based on their contractual maturities:

(In thousands)	March 31, 2020			December 31, 2019
Interest-bearing brokered money market deposits(a)	$	372,884		$	362,246
Customer deposits	100,719			112,571
Certificates of deposit with maturities within 1 year(a)(b)	663,520			835,996
Short-term deposits	1,137,123			1,310,813
Certificates of deposit with maturities greater than 1 year and less than 5 years(a)(b)	173,399			143,399
Total deposits	$	1,310,522		$	1,454,212
Weighted average cost of funds on certificates of deposit outstanding	2.52		%	2.57		%
Weighted average cost of interest-bearing brokered money market deposits	0.96		%	1.88		%

^(a) As of March 31, 2020 and December 31, 2019, all certificates of deposit and brokered money market deposits were in denominations of $250 thousand or less, corresponding to FDIC deposit insurance limits.

^(b) Original maturities range from 6 months to 5 years, with interest rates ranging from 1.45 percent to 3.52 percent as of March 31, 2020. At December 31, 2019, original maturities ranged from 4 months to 5 years with interest rates ranging from 1.80 percent to 3.52 percent.

On April 9, 2020, WEX Bank raised an additional $315.0 million of funding by issuing certificates of deposit, with original maturities ranging from 12 to 24 months and interest rates ranging from 1.25 percent to 1.40 percent.

In accordance with regulatory requirements, WEX Bank maintains reserves against a portion of its outstanding customer deposits by keeping balances with the Federal Reserve Bank. There was no required reserve at March 31, 2020, due to temporarily relaxed Federal Reserve requirements enacted in response to the COVID-19 pandemic. The required reserve was $24.9 million as of December 31, 2019.

ICS Purchases

From time to time, WEX Bank utilizes alternative funding sources such as Promontory Interfinancial Network, LLC’s ICS service, which provides for one-way buy transactions among banks for the purposes of purchasing cost-effective variable-rate funding without collateralization. WEX Bank may purchase brokered money market demand accounts and demand deposit

accounts in amounts not to exceed $125.0 million through this service. There were no outstanding balances for ICS purchases at March 31, 2020 and December 31, 2019.