Customers Bancorp Reports Net Income For Second Quarter 2019

Strong Loan Growth, Expanded Net Interest Margin and Expense Control Expected to Show Strong Core Earnings Growth for Rest of 2019

WYOMISSING, Pa.--()--Customers Bancorp, Inc. (NYSE: CUBI) the parent company of Customers Bank and its operating division BankMobile (collectively “Customers” or "CUBI"), today reported second quarter 2019 ("Q2 2019") net income to common shareholders of $5.7 million, or $0.18 per diluted share. Core earnings for Q2 2019, which excludes losses related to interest-only GNMA securities acquired from a mortgage warehouse customer of $7.5 million, totaled $12.1 million, or $0.38 per diluted share (a non-GAAP measure). Net interest margin, tax equivalent ("NIM") (a non-GAAP measure), expanded 5 basis points during Q2 2019 and average total loans and leases grew $570 million, or 7%, over first quarter 2019 ("Q1 2019").

(Dollars in thousands,

except per share amounts)

USD

 

Per Share

 

 

USD

 

Per Share

Q2 2019 Net Income to Common Shareholders (GAAP)

 

 

 

 

YTD June 2019 Net Income to Common Shareholders (GAAP)

 

 

 

Customers Bank Business Banking

$

12,778

 

 

$

0.40

 

 

Customers Bank Business Banking

$

24,766

 

 

$

0.79

 

BankMobile

(7,097

)

 

(0.22

)

 

BankMobile

(7,260

)

 

(0.23

)

Consolidated

$

5,681

 

 

$

0.18

 

 

Consolidated

$

17,506

 

 

$

0.55

 

 

 

 

 

 

 

 

 

 

Q2 2019 Core Earnings (Non-GAAP Measure)

 

 

 

 

YTD June 2019 Core Earnings (Non-GAAP Measure)

 

 

 

Customers Bank Business Banking

$

19,166

 

 

$

0.61

 

 

Customers Bank Business Banking

$

31,152

 

 

$

0.99

 

BankMobile

(7,084

)

 

(0.22

)

 

BankMobile

(7,247

)

 

(0.23

)

Consolidated

$

12,083

 

 

$

0.38

 

 

Consolidated

$

23,906

 

 

$

0.76

 

  • Customers Bank Business Banking segment reported Q2 2019 earnings per diluted share of $0.40, an increase of $0.02 per diluted share from Q1 2019. Customers Bank Business Banking segment Q2 2019 core earnings per diluted share of $0.61 (a non-GAAP measure) increased $0.23 per diluted share from Q1 2019.
  • Notable charges during Q2 2019 totaled $8.3 million, or $0.20 per diluted share, including a $7.5 million loss realized upon the acquisition of certain interest-only GNMA securities that served as the primary collateral for a mortgage warehouse customer that unexpectedly ceased operations in Q2 2019, or $0.18 per diluted share, accrued severance expense of $0.5 million, or $0.01 per diluted share, and other securities losses of $0.3 million, or $0.01 per diluted share.
  • NIM (a non-GAAP measure) expanded 5 basis points from Q1 2019 to 2.64% in Q2 2019; this marks our third consecutive quarter of NIM expansion from the trough of 2.47% reported in third quarter 2018 ("Q3 2018").
  • Total assets were $11.2 billion at June 30, 2019, compared to $10.1 billion at March 31, 2019 and $11.1 billion at June 30, 2018. Total asset growth reflected a stronger than expected seasonal increase in mortgage warehouse loans outstanding.
  • Total deposits increased $890 million, or 12.2%, year-over-year, which included a $592 million, or 34.5% increase in demand deposits. BankMobile's first White Label banking partnership deposit balances were approaching $50 million at June 30, 2019.
  • Loan mix improved year-over-year, as commercial and industrial ("C&I") loans, excluding commercial loans to mortgage companies, increased $377 million, or 21%, and consumer loans increased $549 million. As planned, multi-family loans decreased $525 million, or 15%, year-over-year.
  • Asset quality remains strong. Non-performing loans were only 0.15% of total loans at June 30, 2019 and reserves equaled 330% of non-performing loans. Net charge-offs were only $0.6 million, or 3 basis points of average total loans on an annualized basis, during Q2 2019.
  • Reflecting growth in C&I and consumer loans, the provision for loan losses was $5.3 million in Q2 2019, compared to $4.8 million in Q1 2019 and a benefit of $0.8 million in second quarter 2018 ("Q2 2018").
  • The BankMobile segment reported a loss per diluted share of $(0.22) in Q2 2019, compared to a loss per diluted share of $(0.10) in Q2 2018. Q2 2019 BankMobile segment results reflect an increase in provision for loan losses of $7.1 million, or $0.17 per diluted share, primarily as a result of increased consumer loan growth. Of the $386 million of consumer loan additions during Q2 2019, approximately $206 million was added in June 2019, with $155 million added on June 28, 2019, which impacted provision this quarter and will benefit net interest income in future periods.
  • Q2 2019 book value per common share was $24.80 and tangible book value per common share (a non-GAAP measure) was $24.30. Tangible book value per common share has increased at a compound annual growth rate of 10.0% over the past five years.
  • Based on the July 17, 2019 closing price of $19.65, Customers Bancorp common equity is trading at 0.81x tangible book value of $24.30 (a non-GAAP measure) and 7.3x the 2020 consensus estimate of $2.71.

Jay Sidhu, CEO and Chairman of Customers Bank stated, "We are pleased with improvements in core earnings and margin expansion this quarter, a reflection of strong loan growth and improved loan mix. We are also excited that BankMobile's first White Label partnership has generated nearly $50 million of very low-cost deposits to Customers. We expect White Label banking to add significant new customers and deposits to our bank over time."

Commenting on Q2 2019 notable items, Mr. Sidhu continued, "We were disappointed with the unexpected, abrupt shut down of one of our mortgage warehouse customers this quarter. We view this as an isolated event that is not indicative of the overall credit quality of our mortgage warehouse portfolio. We took possession of certain interest-only GNMA securities that secured our loan. The shortfall in the fair value of the interest-only GNMA securities resulted in a write-down of approximately $7.5 million. We are still planning to pursue all legal remedies to recover as much of this charge as possible. Separately, a severance charge of $0.5 million during the quarter resulted from our continued diligent analysis of staffing and de-emphasis of less profitable lines of business. We expect the staffing reductions to reduce annual compensation expense by at least $3 million. Other expense control initiatives related to our banking operations have been initiated and are expected to result in material cost savings in the second half of 2019."

Looking Ahead

Mr. Sidhu continued, "Customers expects core earnings per share to exceed $2.20 in 2019, in line with or ahead of most Street estimates. The planned commercial and consumer loan growth in 2019 requires upfront provision expense. This provision expense caused a drag on Q1 2019 and Q2 2019 earnings and provision expense is expected to be lower in the second half of 2019. Earnings should accelerate starting in Q3 2019. For 2020, Customers is projecting core earnings per share of at least $3.00, an increase of about 45% from the current 2019 consensus estimates.

Net interest margin is now expected to increase over 15 basis points during the second half of 2019 to 2.80% by Q4 2019, with full-year 2019 net interest margin above 2.70%. Average interest earning assets for 2019 are expected to be roughly equal to 2018 average interest earning assets. Core non-interest income is expected to grow approximately 10% - 20% from 2018 and the core efficiency ratio for full-year 2019 is expected to be in the mid-60%s. C&I loans, excluding loans to mortgage companies, are expected to grow over $500 million in 2019, while consumer loans are expected to be approximately 80% of average BankMobile deposits and less than 7.5% of Customers Bank Business Banking segment loans. Core deposit growth is expected to maintain the same pace in the second half of 2019 as the first half of 2019. Continued growth in retained earnings is expected to provide flexibility to call preferred equity as it becomes callable beginning in 2020 and to consider common stock buybacks if CUBI continues to trade below market multiples."

Mr. Sidhu continued, "We believe, at this time, we are on track to achieve core earnings per share in 2019 that meet or exceed Street expectations. Looking ahead, we expect a stronger second half of 2019 and expect core earnings per share to be $3.00 or higher in 2020 and to achieve a core return on average assets of 1.25% within 2-3 years."

Strategic Priorities

Improve Profitability: Target a 2.75% NIM by Q4 2019 and a 1.25% Core ROAA in 2-3 years

As stated during our 2018 Analysts Day in October 2018, Customers expects to keep average total assets relatively flat in 2019, with a focus on growing its core businesses, while improving margins, capital, and profitability. Through favorable mix shifts in both assets and liabilities, Customers expects to improve the overall quality of its balance sheet and deposit franchise, expand its net interest margin, enhance liquidity and improve interest rate sensitivity.

  • Target core return on average assets ("ROAA") in top quartile of peer group, which we expect will equate to a ratio of 1.25% or higher over the next 2-3 years.
  • Achieve NIM expansion to 2.75% or greater by Q4 2019, with a full year 2019 NIM above 2.70%, through an expected shift in asset and funding mix. We now expect NIM to be 2.80% for Q4 2019.
  • BankMobile growth and maturity expected to enhance profitability; we expect BankMobile to be profitable by Q4 2019.
  • Expense control; we expect very modest growth in most Customers Bank Business Banking segment expenses during 2019, and incremental spend in other areas will be driven by revenue growth or new business or technology initiatives at BankMobile.
  • Core deposit and good quality higher-yielding loan growth are strategic priorities. Customers currently has $1.9 billion of loans with yields below 3.75% at June 30, 2019, of which $1.6 billion are multi-family loans. Over the next two years, we expect to run-off these lower-yielding multi-family loans and will replace them with higher-yielding interest earning assets. During the second half of 2019, we plan to continue reducing this portfolio by $1 billion or more.
  • Maintain strong credit quality and superior risk management. We do not see any material deterioration on the asset quality front. The Bank is relatively neutral to interest rate changes at June 30, 2019.
  • Evaluate opportunities to redeem our preferred stock as it becomes callable or buy back our common stock, if that is a better option. Redeeming all of the preferred stock as it becomes callable would add approximately $0.45 to our diluted earnings per share.

Focus on Capital Allocation

The tangible common equity to tangible assets ratio (a non-GAAP measure) was 6.8% at June 30, 2019, while the leverage ratio was 9.5%. These ratios are higher than last year, but declined from March 31, 2019 due to higher seasonal asset levels. "We anticipate having excess capital above our targeted minimum tangible common equity ratio of 7.0% at year-end, which gives us options," Sidhu stated. "As capital builds, we will evaluate the best uses for our excess capital, which may include common stock buybacks or calling our preferred equity as it becomes callable, starting in 2020," Sidhu continued.

BankMobile Segment is Expected to Generate a Positive Earnings Contribution by Q4 2019

BankMobile, a division of Customers Bank, operates a branchless digital bank offering low cost banking services to approximately 1.0 million active deposit customers. Customers reported in Q4 2018 that it expects to retain BankMobile for a 2-3 year period, but will regularly evaluate the best options for BankMobile. "We expect to update the market about our current plans for BankMobile sometime during Q4 2019," stated Sidhu.

BankMobile deposits averaged $489 million in Q2 2019, with an average cost of just 0.17%. The Q2 2019 segment net loss increased to $7.1 million, or $(0.22) per diluted share, compared to a net loss of $3.3 million, or $(0.10) per diluted share in Q2 2018, principally due to an increase in the provision for loan losses of $7.1 million driven from upfront provisions for consumer loans added to the BankMobile segment during Q2 2019. BankMobile is expected to generate a positive contribution to Customers' earnings in Q4 2019, given consumer loan growth, expected core deposit growth, and fee changes to its student disbursement business which will be fully implemented in Q3 2019. These fees are waived for customers that meet minimum monthly deposit requirements, as part of BankMobile's goals of creating customers for life with very low cost banking products. The new fees help balance that strategy with the need to cover costs from more transactional accounts and encourage customers to use BankMobile as a primary banking relationship.

In late November 2018, BankMobile's first White Label banking partnership went live in a beta test phase, making BankMobile's best in class banking products available to the partner's broad customer base, and on April 18, 2019, the partner made a public announcement and began the first phase of national digital marketing efforts. The partnership has generated nearly $50 million in deposits.

Q2 2019 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended June 30, 2019 and the preceding four quarters, respectively:

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

EARNINGS SUMMARY - UNAUDITED

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data and stock price data)

Q2

Q1

Q4

Q3

Q2

2019

2019

2018

2018

2018

 

 

 

 

 

 

GAAP Profitability Metrics:

 

 

 

 

 

Net income available to common shareholders

$

5,681

 

$

11,825

 

$

14,247

 

$

2,414

 

$

20,048

 

Per share amounts:

 

 

 

 

 

Earnings per share - basic

$

0.18

 

$

0.38

 

$

0.45

 

$

0.08

 

$

0.64

 

Earnings per share - diluted

$

0.18

 

$

0.38

 

$

0.44

 

$

0.07

 

$

0.62

 

Book value per common share (1)

$

24.80

 

$

24.44

 

$

23.85

 

$

23.27

 

$

22.70

 

CUBI stock price (1)

$

21.00

 

$

18.31

 

$

18.20

 

$

23.53

 

$

28.38

 

Average shares outstanding - basic

 

31,154,292

 

 

31,047,191

 

 

31,616,740

 

 

31,671,122

 

 

31,564,893

 

Average shares outstanding - diluted

 

31,625,741

 

 

31,482,867

 

 

32,051,030

 

 

32,277,590

 

 

32,380,662

 

Shares outstanding (1)

 

31,202,023

 

 

31,131,247

 

 

31,003,028

 

 

31,687,340

 

 

31,669,643

 

Return on average assets ("ROAA")

 

0.36

%

 

0.64

%

 

0.71

%

 

0.22

%

 

0.89

%

Return on average common equity ("ROCE")

 

2.96

%

 

6.38

%

 

7.58

%

 

1.31

%

 

11.32

%

Efficiency ratio

 

77.32

%

 

68.32

%

 

69.99

%

 

66.42

%

 

64.35

%

Non-GAAP Profitability Metrics (2):

 

 

 

 

 

Core earnings

$

12,083

 

$

11,823

 

$

16,992

 

$

20,053

 

$

20,841

 

Per share amounts:

 

 

 

 

 

Core earnings per share - diluted

$

0.38

 

$

0.38

 

$

0.53

 

$

0.62

 

$

0.64

 

Tangible book value per common share (1)

$

24.30

 

$

23.92

 

$

23.32

 

$

22.74

 

$

22.15

 

Net interest margin, tax equivalent

 

2.64

%

 

2.59

%

 

2.57

%

 

2.47

%

 

2.62

%

Tangible common equity to tangible assets (1)

 

6.79

%

 

7.35

%

 

7.36

%

 

6.80

%

 

6.33

%

Core ROAA

 

0.61

%

 

0.64

%

 

0.82

%

 

0.88

%

 

0.91

%

Core ROCE

 

6.31

%

 

6.38

%

 

9.05

%

 

10.86

%

 

11.76

%

Adjusted pre-tax pre-provision net income

$

25,446

 

$

25,036

 

$

27,957

 

$

31,821

 

$

30,706

 

Adjusted ROAA - pre-tax and pre-provision

 

0.98

%

 

1.04

%

 

1.12

%

 

1.18

%

 

1.15

%

Adjusted ROCE - pre-tax and pre-provision

 

11.39

%

 

11.57

%

 

12.96

%

 

15.28

%

 

15.29

%

Core efficiency ratio

 

69.90

%

 

68.32

%

 

66.18

%

 

62.99

%

 

63.26

%

Asset Quality:

 

 

 

 

 

Net charge-offs

$

637

 

$

1,060

 

$

2,154

 

$

471

 

$

427

 

Annualized net charge-offs to average total loans

 

0.03

%

 

0.05

%

 

0.10

%

 

0.02

%

 

0.02

%

Non-performing loans ("NPLs") to total loans (1)

 

0.15

%

 

0.26

%

 

0.32

%

 

0.27

%

 

0.29

%

Reserves to NPLs (1)

 

330.36

%

 

194.15

%

 

147.16

%

 

174.56

%

 

149.25

%

Regulatory Ratios (3):

 

 

 

 

 

Common equity Tier 1 capital to risk-weighted assets

 

8.04

%

 

8.91

%

 

8.96

%

 

8.70

%

 

8.61

%

Tier 1 capital to risk-weighted assets

 

10.31

%

 

11.47

%

 

11.58

%

 

11.26

%

 

11.16

%

Total capital to risk-weighted assets

 

11.66

%

 

12.92

%

 

13.00

%

 

12.69

%

 

12.55

%

Tier 1 capital to average assets (leverage ratio)

 

9.51

%

 

10.01

%

 

9.66

%

 

8.91

%

 

8.87

%

(1) Metric is a spot balance for the last day of each quarter presented.

(2) Non-GAAP measures exclude investment securities gains and losses, severance expense, merger and acquisition-related expenses, losses realized from the sale of lower-yielding investment securities and multi-family loans, loss upon acquisition of interest-only GNMA securities, and certain intangible assets. These notable items are not included in Customers' disclosures of core earnings and other core profitability metrics. Please note that not each of the aforementioned adjustments affected the reported amount in each of the periods presented. Customers' reasons for the use of these non-GAAP measures and a detailed reconciliation between the non-GAAP measures and the comparable GAAP amounts are included at the end of this document.

(3) Regulatory capital ratios are estimated for Q2 2019.

Net Interest Income

Net interest income totaled $64.7 million in Q2 2019, an increase of $5.4 million from Q1 2019, primarily due to a $0.6 billion increase in average interest-earning assets and a 5 basis point expansion of NIM. Compared to Q1 2019, total loan yields increased 14 basis points to 4.62%. The cost of interest-bearing deposits increased by 8 basis points. Borrowing costs increased 11 basis points to 3.09% due to an increase in longer-term borrowings. Total deposit and borrowing costs were 2.04% for Q2 2019, up 9 basis points from 1.95% for Q1 2019.

Q2 2019 net interest income decreased $2.6 million from Q2 2018 primarily due to a $0.5 billion reduction in average interest-earning assets, offset in part by 2 basis points of NIM expansion. Compared to Q2 2018, total loan yields increased 27 basis points to 4.62%. Total investment securities yields increased 55 basis points to 3.77% mostly due to the sale of $495 million of lower-yielding securities in Q3 2018 and run-off of other lower-yielding securities. Given Federal Reserve interest rate hikes in 2018 and the associated increases in market interest rates, the cost of deposits and borrowings increased 51 basis points to 2.04% for Q2 2019, up from 1.67% for Q2 2018.

Total loans increased $608 million, or 6.7%, to $9.7 billion at June 30, 2019 compared to the year-ago period. C&I loans increased $377 million to $2.1 billion, commercial loans to mortgage companies increased $67 million to $2.1 billion; residential mortgages increased $160 million to $655 million; consumer loans increased $549 million to $553 million; and commercial real estate non-owner-occupied loans increased $20.6 million to $1.2 billion. These increases were offset in part by a planned decrease in multi-family loans of $525 million, or 14.8%, to $3.0 billion.

Total deposits increased $890 million, or 12.2%, to $8.2 billion at June 30, 2019 compared to the year-ago period. Total demand deposits increased $592 million, or 34.5%, to $2.3 billion, certificates of deposit accounts increased $366 million, or 17.7%, to $2.4 billion, and savings deposits increased $491 million to $530 million. In July 2018, Customers launched a new digital, on-line savings banking product with a goal of gathering retail deposits. As of June 30, 2019, this new product generated $479 million in retail deposits, an increase of $118 million since March 31, 2019. Higher cost money market deposits decreased $559 million, or 16.1%, to $2.9 billion at June 30, 2019 compared to the year-ago period.

Provision, Credit Quality and Risk Management

The provision for loan losses totaled $5.3 million in Q2 2019, compared to $4.8 million in Q1 2019 and a benefit of $0.8 million in Q2 2018. The Q2 2019 provision expense included $8.0 million for net growth in the consumer and C&I loan portfolios, net of the multi-family loan run off, and $0.1 million for impaired loan provisions, offset in part by a release of reserve of $2.9 million resulting from lower expected credit losses than previously estimated. Net charge-offs for Q2 2019 were $0.6 million, or 3 basis points of average loans on an annualized basis, compared to net charge-offs of $1.1 million, or 5 basis points in Q1 2019, and $0.4 million, or 2 basis points in Q2 2018.

Risk management is a critical component of how Customers creates long-term shareholder value, and Customers believes that asset quality is one of the most important risks in banking to be understood and managed. Customers believes that asset quality risks must be diligently addressed during good economic times with prudent underwriting standards so that when the economy deteriorates the bank's capital is sufficient to absorb all losses without threatening its ability to operate and serve its community and other constituents. "Customers' non-performing loans at June 30, 2019 were only 0.15% of total loans, compared to our peer group non-performing loans of approximately 0.74% in the most recent period available, and industry average non-performing loans of 1.13% in the most recent period available. Our expectation is superior asset quality performance in good times and in difficult years," said Mr. Sidhu.

Non-Interest Income

Non-interest income totaled $12.0 million in Q2 2019, a decrease of $7.7 million compared to Q1 2019. The decrease in non-interest income primarily reflects a $7.5 million loss on the shortfall in the fair value of the interest-only GNMA securities acquired from a commercial mortgage warehouse loan customer that unexpectedly shut down operations in May 2019 and a seasonal decrease of $2.0 million in interchange and card revenue, offset in part by increases of $1.1 million in deposit fees, $0.4 million in mortgage warehouse transactional fees, and $0.3 million in commercial lease income. The decrease in interchange and card revenue primarily resulted from a seasonal decrease in activity at BankMobile, coinciding with the end of the academic semester, partially offset by higher negotiated fee sharing rates with our debit card processor. The increase in deposit fees primarily resulted from an increase in service charges on some deposit accounts relating to a change in the fee structure at BankMobile. The increase in mortgage warehouse transaction fees primarily resulted from a seasonal increase in activity volumes. The increase in commercial lease income primarily resulted from the continued growth of our Equipment Finance Group.

Non-Interest Expense

Non-interest expense totaled $59.6 million in Q2 2019, an increase of $5.6 million compared to Q1 2019. The increase in non-interest expense primarily resulted from increases of $1.1 million in professional services, $1.1 million in salaries and employee benefits, $0.8 million in other non-interest expenses, $0.7 million in provision for operating losses, and $0.5 million for technology-related costs. The increase in professional services and other non-interest expenses primarily resulted from our ongoing investment in our White Label partnership. The increase in salaries and employee benefits primarily resulted from additional working days compared to the prior quarter, severance payments related to a reduction of headcount, primarily in less profitable business lines, and an increase in headcount at BankMobile.

Tax

Customers' effective tax rate was 21.1% for Q2 2019, compared to 23.8% for Q1 2019 and 22.4% for Q2 2018. The decrease in the effective tax rate from Q1 2019 and Q2 2018 was primarily driven by a favorable return to provision adjustment recorded during Q2 2019. Customers expects the full-year 2019 effective tax rate to be approximately 22% to 24%.

Significantly Lowering Commercial Real Estate Concentration

Customers' total commercial real estate ("CRE") loan exposures subject to regulatory concentration guidelines of $4.2 billion as of June 30, 2019 included construction loans of $78 million, multi-family loans of $3.0 billion, and non-owner occupied commercial real estate loans of $1.1 billion, which represent 340% of total risk-based capital on a combined basis, a reduction from a 392% commercial real estate concentration as of June 30, 2018. Customers' loans subject to regulatory CRE concentration guidelines had a 3 year cumulative reduction of 7.6% in Q2 2019, a deceleration from cumulative growth of 46.3% a year ago.

Customers' loans collateralized by multi-family properties were approximately 31.0% of Customers' total loan portfolio and approximately 246% of total risk-based capital at June 30, 2019, down from approximately 38.9% and 294%, respectively, at June 30, 2018. Following are some key characteristics of Customers' multi-family loan portfolio:

  • Principally concentrated in New York City with an emphasis on properties subject to some type of rent control; and principally to high net worth families;
  • Current average loan size is $6.9 million;
  • Current weighted average annual debt service coverage ratio is 1.52x;
  • Current weighted average loan-to-value for the portfolio is 62.3%;
  • All loans are individually stressed with an increase of 1% and 2% to the cap rate and an increase of 1.5% and 3% in loan interest rates;
  • All properties are inspected prior to a loan being granted and inspected thereafter on an annual basis by dedicated portfolio managers or outside inspectors; and
  • Credit approval process is independent of customer sales and portfolio management process.

Conference Call

Date:

Wednesday, July 24, 2019

Time:

5:00 PM EDT

US Dial-in:

800-309-1256

International Dial-in:

323-347-3622

Participant Code:

119216

Please dial in at least 10 minutes before the start of the call to ensure timely participation. Slides accompanying the presentation will be available on Customers' website at https://www.customersbank.com/investor-relations/ prior to the call.

Please submit any questions you have regarding the earnings in advance to rramsey@customersbank.com and the executives will address them on the call. Customers will also open the lines to questions following management's presentation of the second quarter results. A playback of the call will be available beginning July 24, 2019 at 8:00 PM EDT until 8:00 PM EDT on August 23, 2019. To listen, call within the United States 888-203-1112, or 719-457-0820 when calling internationally. Please use the replay passcode 9112020.

Institutional Background

Customers Bancorp, Inc. is a bank holding company located in Wyomissing, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank. Customers Bank is a community-based, full-service bank with assets of approximately $11.2 billion at June 30, 2019. A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender that provides a range of banking services to small and medium-sized businesses, professionals, individuals and families through offices in Pennsylvania, the District of Columbia, Illinois, New York, Rhode Island, Massachusetts, New Hampshire and New Jersey. Committed to fostering customer loyalty, Customers Bank uses a High Tech/High Touch strategy that includes use of industry-leading technology to provide customers better access to their money, as well as Concierge Banking® by appointment at customers’ homes or offices 12 hours a day, seven days a week. Customers Bank offers a continually expanding portfolio of loans to small businesses, multi-family projects, mortgage companies and consumers.

Customers Bancorp, Inc.'s voting common shares are listed on the New York Stock Exchange under the symbol CUBI. Additional information about Customers Bancorp, Inc. can be found on the Company’s website, www.customersbank.com.

“Safe Harbor” Statement

In addition to historical information, this press release may contain ''forward-looking statements'' within the meaning of the ''safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.'s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words ''may,'' ''could,'' ''should,'' ''pro forma,'' ''looking forward,'' ''would,'' ''believe,'' ''expect,'' ''anticipate,'' ''estimate,'' ''intend,'' ''plan,'' or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.'s control). Numerous competitive, economic, regulatory, legal and technological factors, among others, could cause Customers Bancorp, Inc.'s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. In addition, important factors relating to the acquisition of the Disbursements business, the combination of Customers' BankMobile business with the acquired Disbursements business, the implementation of Customers Bancorp, Inc.'s strategy to retain BankMobile for 2-3 years, the possibility that the expected benefits of retaining BankMobile for 2-3 years may not be achieved, or the possible effects on Customers' results of operations if BankMobile is never divested could cause Customers Bancorp's actual results to differ from those in the forward-looking statements. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management's current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.'s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2018, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

Q2

 

Q1

 

Q4

 

Q3

 

Q2

 

June 30,

 

2019

 

2019

 

2018

 

2018

 

2018

 

2019

 

2018

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases

$

103,567

 

 

$

93,116

 

 

$

94,248

 

 

$

97,815

 

 

$

95,240

 

 

$

196,683

 

 

$

181,171

 

Investment securities

6,481

 

 

6,241

 

 

6,277

 

 

8,495

 

 

9,765

 

 

12,722

 

 

18,437

 

Other

1,902

 

 

1,718

 

 

2,778

 

 

3,735

 

 

2,634

 

 

3,620

 

 

4,996

 

Total interest income

111,950

 

 

101,075

 

 

103,303

 

 

110,045

 

 

107,639

 

 

213,025

 

 

204,604

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

35,980

 

 

31,225

 

 

34,029

 

 

32,804

 

 

24,182

 

 

67,204

 

 

43,975

 

FHLB advances

7,607

 

 

5,293

 

 

3,662

 

 

9,125

 

 

11,176

 

 

12,900

 

 

18,256

 

Subordinated debt

1,684

 

 

1,684

 

 

1,684

 

 

1,684

 

 

1,684

 

 

3,369

 

 

3,369

 

Other borrowings

2,000

 

 

3,569

 

 

2,404

 

 

2,431

 

 

3,275

 

 

5,569

 

 

6,651

 

Total interest expense

47,271

 

 

41,771

 

 

41,779

 

 

46,044

 

 

40,317

 

 

89,042

 

 

72,251

 

Net interest income

64,679

 

 

59,304

 

 

61,524

 

 

64,001

 

 

67,322

 

 

123,983

 

 

132,353

 

Provision for loan and lease losses

5,346

 

 

4,767

 

 

1,385

 

 

2,924

 

 

(784

)

 

10,113

 

 

1,333

 

Net interest income after provision for loan and lease losses

59,333

 

 

54,537

 

 

60,139

 

 

61,077

 

 

68,106

 

 

113,870

 

 

131,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interchange and card revenue

6,760

 

 

8,806

 

 

7,568

 

 

7,084

 

 

6,382

 

 

15,565

 

 

16,043

 

Deposit fees

3,348

 

 

2,209

 

 

2,099

 

 

2,002

 

 

1,632

 

 

5,557

 

 

3,724

 

Commercial lease income

2,730

 

 

2,401

 

 

1,982

 

 

1,419

 

 

1,091

 

 

5,131

 

 

1,953

 

Bank-owned life insurance

1,836

 

 

1,816

 

 

1,852

 

 

1,869

 

 

1,869

 

 

3,653

 

 

3,900

 

Mortgage warehouse transactional fees

1,681

 

 

1,314

 

 

1,495

 

 

1,809

 

 

1,967

 

 

2,995

 

 

3,854

 

Gain (loss) on sale of SBA and other loans

 

 

 

 

(110

)

 

1,096

 

 

947

 

 

 

 

2,308

 

Mortgage banking income

250

 

 

167

 

 

73

 

 

207

 

 

205

 

 

417

 

 

325

 

Loss upon acquisition of interest-only GNMA securities

(7,476

)

 

 

 

 

 

 

 

 

 

(7,476

)

 

 

Gain (loss) on sale of investment securities

 

 

 

 

 

 

(18,659

)

 

 

 

 

 

 

Other

2,907

 

 

3,005

 

 

4,918

 

 

5,257

 

 

2,034

 

 

5,912

 

 

4,930

 

Total non-interest income

12,036

 

 

19,718

 

 

19,877

 

 

2,084

 

 

16,127

 

 

31,754

 

 

37,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

26,920

 

 

25,823

 

 

26,706

 

 

25,462

 

 

27,748

 

 

52,743

 

 

52,673

 

Technology, communication and bank operations

12,402

 

 

11,953

 

 

11,531

 

 

11,657

 

 

11,322

 

 

24,355

 

 

21,266

 

Professional services

5,718

 

 

4,573

 

 

5,674

 

 

4,743

 

 

3,811

 

 

10,291

 

 

9,820

 

Occupancy

3,064

 

 

2,903

 

 

2,933

 

 

2,901

 

 

3,141

 

 

5,967

 

 

5,975

 

Commercial lease depreciation

2,252

 

 

1,923

 

 

1,550

 

 

1,103

 

 

920

 

 

4,174

 

 

1,735

 

FDIC assessments, non-income taxes, and regulatory fees

2,157

 

 

1,988

 

 

1,892

 

 

2,415

 

 

2,135

 

 

4,145

 

 

4,335

 

Provision for operating losses

2,446

 

 

1,779

 

 

1,685

 

 

1,171

 

 

1,233

 

 

4,225

 

 

2,759

 

Advertising and promotion

1,360

 

 

809

 

 

917

 

 

820

 

 

319

 

 

2,169

 

 

709

 

Merger and acquisition related expenses

 

 

 

 

470

 

 

2,945

 

 

869

 

 

 

 

975

 

Loan workout

643

 

 

320

 

 

360

 

 

516

 

 

648

 

 

963

 

 

1,307

 

Other real estate owned (income) expenses

(14

)

 

57

 

 

285

 

 

66

 

 

58

 

 

43

 

 

98

 

Other

2,634

 

 

1,856

 

 

3,042

 

 

3,305

 

 

1,546

 

 

4,491

 

 

4,379

 

Total non-interest expense

59,582

 

 

53,984

 

 

57,045

 

 

57,104

 

 

53,750

 

 

113,566

 

 

106,031

 

Income before income tax expense

11,787

 

 

20,271

 

 

22,971

 

 

6,057

 

 

30,483

 

 

32,058

 

 

62,026

 

Income tax expense

2,491

 

 

4,831

 

 

5,109

 

 

28

 

 

6,820

 

 

7,323

 

 

14,222

 

Net income

9,296

 

 

15,440

 

 

17,862

 

 

6,029

 

 

23,663

 

 

24,735

 

 

47,804

 

Preferred stock dividends

3,615

 

 

3,615

 

 

3,615

 

 

3,615

 

 

3,615

 

 

7,229

 

 

7,229

 

Net income available to common shareholders

$

5,681

 

 

$

11,825

 

 

$

14,247

 

 

$

2,414

 

 

$

20,048

 

 

$

17,506

 

 

$

40,575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.18

 

 

$

0.38

 

 

$

0.45

 

 

$

0.08

 

 

$

0.64

 

 

$

0.56

 

 

$

1.29

 

Diluted earnings per common share

$

0.18

$

0.38

$

0.44

$

0.07

$

0.62

$

0.55

$

1.26

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - UNAUDITED

(Dollars in thousands)

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

2019

 

2019

 

2018

 

2018

 

2018

ASSETS

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

24,757

 

 

$

41,723

 

 

$

17,696

 

 

$

12,943

 

 

$

22,969

 

Interest-earning deposits

71,038

 

 

75,939

 

 

44,439

 

 

653,091

 

 

228,757

 

Cash and cash equivalents

95,795

 

 

117,662

 

 

62,135

 

 

666,034

 

 

251,726

 

Investment securities, at fair value

708,359

 

 

678,142

 

 

665,012

 

 

668,851

 

 

1,161,000

 

Loans held for sale

5,697

 

 

1,602

 

 

1,507

 

 

1,383

 

 

1,043

 

Loans receivable, mortgage warehouse, at fair value

2,001,540

 

 

1,480,195

 

 

1,405,420

 

 

1,516,327

 

 

1,930,738

 

Loans receivable

7,714,106

 

 

7,264,049

 

 

7,138,074

 

 

7,239,950

 

 

7,181,726

 

Allowance for loan losses

(48,388

)

 

(43,679

)

 

(39,972

)

 

(40,741

)

 

(38,288

)

Total loans receivable, net of allowance for loan losses

9,667,258

 

 

8,700,565

 

 

8,503,522

 

 

8,715,536

 

 

9,074,176

 

FHLB, Federal Reserve Bank, and other restricted stock

101,947

 

 

80,416

 

 

89,685

 

 

74,206

 

 

136,066

 

Accrued interest receivable

38,506

 

 

35,716

 

 

32,955

 

 

32,986

 

 

33,956

 

Bank premises and equipment, net

10,095

 

 

10,542

 

 

11,063

 

 

11,300

 

 

11,224

 

Bank-owned life insurance

268,682

 

 

266,740

 

 

264,559

 

 

263,117

 

 

261,121

 

Other real estate owned

1,076

 

 

976

 

 

816

 

 

1,450

 

 

1,705

 

Goodwill and other intangibles

15,847

 

 

16,173

 

 

16,499

 

 

16,825

 

 

17,150

 

Other assets

269,165

 

 

235,360

 

 

185,672

 

 

165,416

 

 

143,679

 

Total assets

$

11,182,427

 

 

$

10,143,894

 

 

$

9,833,425

 

 

$

10,617,104

 

 

$

11,092,846

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Demand, non-interest bearing deposits

$

1,380,698

 

 

$

1,372,358

 

 

$

1,122,171

 

 

$

1,338,167

 

 

$

1,090,744

 

Interest-bearing deposits

6,805,079

 

 

6,052,960

 

 

6,020,065

 

 

7,175,547

 

 

6,205,210

 

Total deposits

8,185,777

 

 

7,425,318

 

 

7,142,236

 

 

8,513,714

 

 

7,295,954

 

Federal funds purchased

406,000

 

 

388,000

 

 

187,000

 

 

 

 

105,000

 

FHLB advances

1,262,100

 

 

1,025,832

 

 

1,248,070

 

 

835,000

 

 

2,389,797

 

Other borrowings

99,055

 

 

123,963

 

 

123,871

 

 

123,779

 

 

186,888

 

Subordinated debt

109,026

 

 

109,002

 

 

108,977

 

 

108,953

 

 

108,929

 

Accrued interest payable and other liabilities

129,064

 

 

93,406

 

 

66,455

 

 

80,846

 

 

70,051

 

Total liabilities

10,191,022

 

 

9,165,521

 

 

8,876,609

 

 

9,662,292

 

 

10,156,619

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

217,471

 

 

217,471

 

 

217,471

 

 

217,471

 

 

217,471

 

Common stock

32,483

 

 

32,412

 

 

32,252

 

 

32,218

 

 

32,200

 

Additional paid in capital

439,067

 

 

436,713

 

 

434,314

 

 

431,205

 

 

428,796

 

Retained earnings

334,157

 

 

328,476

 

 

316,651

 

 

302,404

 

 

299,990

 

Accumulated other comprehensive loss

(9,993

)

 

(14,919

)

 

(22,663

)

 

(20,253

)

 

(33,997

)

Treasury stock, at cost

(21,780

)

 

(21,780

)

 

(21,209

)

 

(8,233

)

 

(8,233

)

Total shareholders' equity

991,405

 

 

978,373

 

 

956,816

 

 

954,812

 

 

936,227

 

Total liabilities & shareholders' equity

$

11,182,427

 

 

$

10,143,894

 

 

$

9,833,425

 

 

$

10,617,104

 

 

$

11,092,846

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

Average Balance

Average
Yield or
Cost (%)

 

Average Balance

Average
Yield or
Cost (%)

 

Average Balance

Average
Yield or
Cost (%)

Assets

 

 

 

 

 

 

 

 

Interest earning deposits

$

 

78,666

 

3.01

%

 

$

 

85,263

 

2.52

%

 

$

 

188,880

 

1.78

%

Investment securities (1)

 

687,048

 

3.77

%

 

 

691,823

 

3.61

%

 

 

1,213,989

 

3.22

%

Loans and leases:

 

 

 

 

 

 

 

 

Commercial loans to mortgage companies

 

1,658,070

 

4.76

%

 

 

1,264,478

 

5.05

%

 

 

1,760,519

 

4.93

%

Multi-family loans

 

3,097,537

 

3.84

%

 

 

3,253,792

 

3.79

%

 

 

3,561,679

 

3.90

%

Commercial and industrial loans and leases (2)

 

2,041,315

 

5.19

%

 

 

1,921,139

 

5.14

%

 

 

1,713,150

 

4.75

%

Non-owner occupied commercial real estate loans

 

1,181,455

 

4.53

%

 

 

1,169,333

 

4.47

%

 

 

1,269,373

 

4.34

%

Residential mortgages

 

723,160

 

4.28

%

 

 

695,748

 

4.16

%

 

 

477,932

 

4.08

%

Consumer loans

 

289,511

 

9.41

%

 

 

116,295

 

9.15

%

 

 

4,166

 

4.62

%

Total loans and leases (3)

 

8,991,048

 

4.62

%

 

 

8,420,785

 

4.48

%

 

 

8,786,819

 

4.35

%

Other interest-earning assets

 

94,388

 

5.58

%

 

 

80,542

 

5.98

%

 

 

139,842

 

5.15

%

Total interest-earning assets

 

9,851,150

 

4.56

%

 

 

9,278,413

 

4.41

%

 

 

10,329,530

 

4.18

%

Non-interest-earning assets

 

520,692

 

 

 

 

481,116

 

 

 

 

391,660

 

 

Total assets

$

 

10,371,842

 

 

 

$

 

9,759,529

 

 

 

$

 

10,721,190

 

 

Liabilities

 

 

 

 

 

 

 

 

Interest checking accounts

$

 

836,154

 

1.96

%

 

$

 

815,072

 

1.90

%

 

$

 

554,441

 

1.58

%

Money market deposit accounts

 

3,168,957

 

2.26

%

 

 

3,144,888

 

2.24

%

 

 

3,310,979

 

1.63

%

Other savings accounts

 

484,303

 

2.16

%

 

 

380,911

 

2.02

%

 

 

36,784

 

0.27

%

Certificates of deposit

 

1,972,792

 

2.33

%

 

 

1,552,153

 

2.14

%

 

 

1,960,007

 

1.75

%

Total interest-bearing deposits (4)

 

6,462,206

 

2.23

%

 

 

5,893,024

 

2.15

%

 

 

5,862,211

 

1.65

%

Borrowings

 

1,462,362

 

3.09

%

 

 

1,432,685

 

2.98

%

 

 

2,736,644

 

2.36

%

Total interest-bearing liabilities

 

7,924,568

 

2.39

%

 

 

7,325,709

 

2.31

%

 

 

8,598,855

 

1.88

%

Non-interest-bearing deposits (4)

 

1,345,494

 

 

 

 

1,360,815

 

 

 

 

1,109,527

 

 

Total deposits and borrowings

 

9,270,062

 

2.04

%

 

 

8,686,524

 

1.95

%

 

 

9,708,382

 

1.67

%

Other non-interest-bearing liabilities

 

115,717

 

 

 

 

104,401

 

 

 

 

84,788

 

 

Total liabilities

 

9,385,779

 

 

 

 

8,790,925

 

 

 

 

9,793,170

 

 

Shareholders' equity

 

986,063

 

 

 

 

968,604

 

 

 

 

928,020

 

 

Total liabilities and shareholders' equity

$

 

10,371,842

 

 

 

$

 

9,759,529

 

 

 

$

 

10,721,190

 

 

Interest spread

 

2.51

%

 

 

2.46

%

 

 

2.51

%

Net interest margin

 

2.63

%

 

 

2.59

%

 

 

2.61

%

Net interest margin tax equivalent (5)

 

2.64

%

 

 

2.59

%

 

 

2.62

%

(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(2) Includes owner occupied commercial real estate loans.

(3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.

(4) Total costs of deposits (including interest bearing and non-interest bearing) were 1.85%, 1.75% and 1.39% for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively.

(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended June 30, 2019, March 31, 2019 and June 30 2018, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

Six Months Ended

 

June 30, 2019

 

June 30, 2018

 

Average Balance

Average
Yield or
Cost (%)

 

Average Balance

Average
Yield or
Cost (%)

Assets

 

 

 

 

 

Interest earning deposits

$

 

81,947

 

2.76

%

 

$

 

186,470

 

1.66

%

Investment securities (1)

 

689,422

 

3.69

%

 

 

1,150,064

 

3.21

%

Loans and leases:

 

 

 

 

 

Commercial loans to mortgage companies

 

1,462,362

 

4.89

%

 

 

1,676,601

 

4.81

%

Multi-family loans

 

3,175,233

 

3.81

%

 

 

3,599,593

 

3.81

%

Commercial and industrial loans and leases (2)

 

1,981,559

 

5.16

%

 

 

1,683,566

 

4.55

%

Non-owner occupied commercial real estate loans

 

1,175,428

 

4.50

%

 

 

1,275,404

 

4.26

%

Residential mortgages

 

709,529

 

4.22

%

 

 

402,638

 

4.09

%

Consumer loans

 

203,381

 

9.34

%

 

 

3,881

 

4.78

%

Total loans and leases (3)

 

8,707,492

 

4.55

%

 

 

8,641,683

 

4.23

%

Other interest-earning assets

 

87,503

 

5.76

%

 

 

128,396

 

5.44

%

Total interest-earning assets

 

9,566,364

 

4.49

%

 

 

10,106,613

 

4.08

%

Non-interest-earning assets

 

501,013

 

 

 

 

393,066

 

 

Total assets

$

 

10,067,377

 

 

 

$

 

10,499,679

 

 

Liabilities

 

 

 

 

 

Interest checking accounts

$

 

825,672

 

1.93

%

 

$

 

526,995

 

1.38

%

Money market deposit accounts

 

3,156,988

 

2.25

%

 

 

3,356,717

 

1.50

%

Other savings accounts

 

432,893

 

2.10

%

 

 

37,138

 

0.27

%

Certificates of deposit

 

1,763,634

 

2.24

%

 

 

1,916,421

 

1.62

%

Total interest-bearing deposits (4)

 

6,179,187

 

2.19

%

 

 

5,837,271

 

1.52

%

Borrowings

 

1,447,606

 

3.04

%

 

 

2,461,085

 

2.31

%

Total interest-bearing liabilities

 

7,626,793

 

2.35

%

 

 

8,298,356

 

1.75

%

Non-interest-bearing deposits (4)

 

1,353,112

 

 

 

 

1,193,769

 

 

Total deposits and borrowings

 

8,979,905

 

2.00

%

 

 

9,492,125

 

1.53

%

Other non-interest-bearing liabilities

 

110,090

 

 

 

 

80,074

 

 

Total liabilities

 

9,089,995

 

 

 

 

9,572,199

 

 

Shareholders' equity

 

977,382

 

 

 

 

927,480

 

 

Total liabilities and shareholders' equity

$

 

10,067,377

 

 

 

$

 

10,499,679

 

 

Interest spread

 

2.49

%

 

 

2.55

%

Net interest margin

 

2.61

%

 

 

2.64

%

Net interest margin tax equivalent (5)

 

2.62

%

 

 

2.64

%

(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(2) Includes owner occupied commercial real estate loans.

(3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.

(4) Total costs of deposits (including interest bearing and non-interest bearing) were 1.80% and 1.26% for the six months ended June 30, 2019 and June 30, 2018, respectively.

(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for both the six months ended June 30, 2019 and 2018, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

SEGMENT REPORTING - UNAUDITED

(Dollars in thousands, except per share amounts)

 

The following tables present Customers' business segment results for the three and six months ended June 30, 2019 and 2018:

 

Three Months Ended June 30, 2019

 

Three Months Ended June 30, 2018

 

Customers
Bank
Business
Banking

 

BankMobile

 

Consolidated

 

Customers
Bank
Business
Banking

 

BankMobile

 

Consolidated

 

Interest income (1)

$

 

103,014

 

 

$

 

8,936

 

 

$

 

111,950

 

 

$

 

104,110

 

 

$

 

3,529

 

 

$

107,639

 

Interest expense

 

47,061

 

 

 

210

 

 

 

47,271

 

 

 

40,182

 

 

 

135

 

 

 

40,317

 

Net interest income

 

55,953

 

 

 

8,726

 

 

 

64,679

 

 

 

63,928

 

 

 

3,394

 

 

 

67,322

 

Provision for loan losses

 

(2,206

)

 

 

7,552

 

 

 

5,346

 

 

 

(1,247

)

 

 

463

 

 

 

(784

)

Non-interest income

 

970

 

 

 

11,066

 

 

 

12,036

 

 

 

7,465

 

 

 

8,662

 

 

 

16,127

 

Non-interest expense

 

38,107

 

 

 

21,475

 

 

 

59,582

 

 

 

37,721

 

 

 

16,029

 

 

 

53,750

 

Income (loss) before income tax expense (benefit)

 

21,022

 

 

 

(9,235

)

 

 

11,787

 

 

 

34,919

 

 

 

(4,436

)

 

 

30,483

 

Income tax expense (benefit)

 

4,629

 

 

 

(2,138

)

 

 

2,491

 

 

 

7,910

 

 

 

(1,090

)

 

 

6,820

 

Net income (loss)

 

16,393

 

 

 

(7,097

)

 

 

9,296

 

 

 

27,009

 

 

 

(3,346

)

 

 

23,663

 

Preferred stock dividends

 

3,615

 

 

 

 

 

3,615

 

 

 

3,615

 

 

 

 

 

3,615

 

Net income (loss) available to common shareholders

$

 

12,778

 

 

$

 

(7,097

)

 

$

 

5,681

 

 

$

 

23,394

 

 

$

 

(3,346

)

 

$

20,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

 

0.41

 

 

$

 

(0.23

)

 

$

 

0.18

 

 

$

 

0.74

 

 

$

 

(0.11

)

 

$

0.64

 

Diluted earnings (loss) per common share

$

 

0.40

 

 

$

 

(0.22

)

 

$

 

0.18

 

 

$

 

0.72

 

 

$

 

(0.10

)

 

$

0.62

 

(1) Amounts reported include funds transfer pricing of $2.2 million and $3.5 million for the three months ended June 30, 2019 and 2018, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

 

Six Months Ended June 30, 2019

 

Six Months Ended June 30, 2018

 

Customers
Bank
Business
Banking

 

BankMobile

 

Consolidated

 

Customers
Bank
Business
Banking

 

BankMobile

 

Consolidated

Interest income (2)

$

195,885

 

 

$

17,140

 

 

$

213,025

 

 

$

196,664

 

 

$

7,940

 

 

$

204,604

 

Interest expense

88,666

 

 

376

 

 

89,042

 

 

72,100

 

 

151

 

 

72,251

 

Net interest income

107,219

 

 

16,764

 

 

123,983

 

 

124,564

 

 

7,789

 

 

132,353

 

Provision for loan losses

770

 

 

9,343

 

 

10,113

 

 

627

 

 

706

 

 

1,333

 

Non-interest income

8,547

 

 

23,207

 

 

31,754

 

 

15,904

 

 

21,133

 

 

37,037

 

Non-interest expense

73,491

 

 

40,075

 

 

113,566

 

 

72,052

 

 

33,979

 

 

106,031

 

Income (loss) before income tax expense (benefit)

41,505

 

 

(9,447

)

 

32,058

 

 

67,789

 

 

(5,763

)

 

62,026

 

Income tax expense (benefit)

9,510

 

 

(2,187

)

 

7,323

 

 

15,638

 

 

(1,416

)

 

14,222

 

Net income (loss)

31,995

 

 

(7,260

)

 

24,735

 

 

52,151

 

 

(4,347

)

 

47,804

 

Preferred stock dividends

7,229

 

 

 

 

7,229

 

 

7,229

 

 

 

 

7,229

 

Net income (loss) available to common shareholders

$

24,766

 

 

$

(7,260

)

 

$

17,506

 

 

$

44,922

 

 

$

(4,347

)

 

$

40,575

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

0.80

 

 

$

(0.23

)

 

$

0.56

 

 

$

1.43

 

 

$

(0.14

)

 

$

1.29

 

Diluted earnings (loss) per common share

$

0.79

 

 

$

(0.23

)

 

$

0.55

 

 

$

1.39

 

 

$

(0.13

)

 

$

1.26

 

As of June 30, 2019 and 2018

 

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

$

3,629

 

 

$

12,218

 

 

$

15,847

 

 

$

3,629

 

 

$

13,521

 

 

$

17,150

 

Total assets (3)

$

10,555,141

 

 

$

627,286

 

 

$

11,182,427

 

 

$

11,017,272

 

 

$

75,574

 

 

$

11,092,846

 

Total deposits

$

7,729,580

 

 

$

456,197

 

 

$

8,185,777

 

 

$

6,876,688

 

 

$

419,266

 

 

$

7,295,954

 

Total non-deposit liabilities

$

1,970,391

 

 

$

34,854

 

 

$

2,005,245

 

 

$

2,843,360

 

 

$

17,305

 

 

$

2,860,665

 

(2) Amounts reported include funds transfer pricing of $7.8 million and $7.9 million for the six months ended June 30, 2019 and 2018, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

(3) Amounts reported exclude inter-segment receivables.

The following tables present Customers' business segment results for the quarter ended June 30, 2019, the preceding four quarters, and the six months ended June 30, 2019, and 2018, respectively:

Customers Bank Business Banking:

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

Interest income (1)

 

$

103,014

 

 

$

92,871

 

 

$

98,129

 

 

$

106,156

 

 

$

104,110

 

 

$

195,885

 

 

$

196,664

 

Interest expense

 

47,061

 

 

41,605

 

 

41,592

 

 

45,982

 

 

40,182

 

 

88,666

 

 

72,100

 

Net interest income

 

55,953

 

 

51,266

 

 

56,537

 

 

60,174

 

 

63,928

 

 

107,219

 

 

124,564

 

Provision for loan losses

 

(2,206

)

 

2,976

 

 

(200

)

 

2,502

 

 

(1,247

)

 

770

 

 

627

 

Non-interest income (loss)

 

970

 

 

7,577

 

 

9,352

 

 

(7,756

)

 

7,465

 

 

8,547

 

 

15,904

 

Non-interest expense

 

38,107

 

 

35,384

 

 

38,778

 

 

36,115

 

 

37,721

 

 

73,491

 

 

72,052

 

Income before income tax expense

 

21,022

 

 

20,483

 

 

27,311

 

 

13,801

 

 

34,919

 

 

41,505

 

 

67,789

 

Income tax expense

 

4,629

 

 

4,880

 

 

6,175

 

 

1,930

 

 

7,910

 

 

9,510

 

 

15,638

 

Net income

 

16,393

 

 

15,603

 

 

21,136

 

 

11,871

 

 

27,009

 

 

31,995

 

 

52,151

 

Preferred stock dividends

 

3,615

 

 

3,615

 

 

3,615

 

 

3,615

 

 

3,615

 

 

7,229

 

 

7,229

 

Net income available to common shareholders

 

$

12,778

 

 

$

11,988

 

 

$

17,521

 

 

$

8,256

 

 

$

23,394

 

 

$

24,766

 

 

$

44,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.41

 

 

$

0.39

 

 

$

0.55

 

 

$

0.26

 

 

$

0.74

 

 

$

0.80

 

 

$

1.43

 

Diluted earnings per common share

 

$

0.40

 

 

$

0.38

 

 

$

0.55

 

 

$

0.26

 

 

$

0.72

 

 

$

0.79

 

 

$

1.39

 

(1) Amounts reported include funds transfer pricing of $2.2 million, $5.6 million, $3.8 million, $3.9 million and $3.5 million for the three months ended June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018, respectively. Amounts reported also include funds transfer pricing of $7.8 million and $7.9 million for the six months ended June 30, 2019 and 2018, respectively. These amounts are credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits. 

BankMobile:

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

Interest income (2)

 

$

8,936

 

 

$

8,204

 

 

$

5,174

 

 

$

3,889

 

 

$

3,529

 

 

$

17,140

 

 

$

7,940

 

Interest expense

 

210

 

 

166

 

 

187

 

 

62

 

 

135

 

 

376

 

 

151

 

Net interest income

 

8,726

 

 

8,038

 

 

4,987

 

 

3,827

 

 

3,394

 

 

16,764

 

 

7,789

 

Provision for loan losses

 

7,552

 

 

1,791

 

 

1,585

 

 

422

 

 

463

 

 

9,343

 

 

706

 

Non-interest income

 

11,066

 

 

12,141

 

 

10,525

 

 

9,840

 

 

8,662

 

 

23,207

 

 

21,133

 

Non-interest expense

 

21,475

 

 

18,600

 

 

18,267

 

 

20,989

 

 

16,029

 

 

40,075

 

 

33,979

 

Loss before income tax expense or benefit

 

(9,235

)

 

(212

)

 

(4,340

)

 

(7,744

)

 

(4,436

)

 

(9,447

)

 

(5,763

)

Income tax benefit

 

(2,138

)

 

(49

)

 

(1,066

)

 

(1,902

)

 

(1,090

)

 

(2,187

)

 

(1,416

)

Net loss available to common shareholders

 

$

(7,097

)

 

$

(163

)

 

$

(3,274

)

 

$

(5,842

)

 

$

(3,346

)

 

$

(7,260

)

 

$

(4,347

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic loss per common share

 

$

(0.23

)

 

$

(0.01

)

 

$

(0.10

)

 

$

(0.18

)

 

$

(0.11

)

 

$

(0.23

)

 

$

(0.14

)

Diluted loss per common share

 

$

(0.22

)

 

$

(0.01

)

 

$

(0.10

)

 

$

(0.18

)

 

$

(0.10

)

 

$

(0.23

)

 

$

(0.13

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposit balances (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disbursements business deposits

 

$

409,683

 

 

$

615,710

 

 

$

370,690

 

 

$

732,489

 

 

$

419,266

 

 

 

 

 

White label deposits

 

46,514

 

 

11,046

 

 

5,168

 

 

 

 

 

 

 

 

 

Total deposits

 

$

456,197

 

 

$

626,756

 

 

$

375,858

 

 

$

732,489

 

 

$

419,266

 

 

 

 

 

(2) Amounts reported include funds transfer pricing of $2.2 million, $5.6 million, $3.8 million, $3.9 million and $3.5 million for the three months ended June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018, respectively. Amounts reported also include funds transfer pricing of $7.8 million and $7.9 million for the six months ended June 30, 2019 and 2018, respectively. These amounts are credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

(3) As of June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END LOAN COMPOSITION - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

2019

 

2019

 

2018

 

2018

 

2018

Commercial:

 

 

 

 

 

 

 

 

 

Multi-family

$

3,017,531

 

 

$

3,212,312

 

 

$

3,285,297

 

 

$

3,504,540

 

 

$

3,542,770

 

Mortgage warehouse

2,054,307

 

 

1,535,343

 

 

1,461,810

 

 

1,574,731

 

 

1,987,306

 

Commercial & industrial

2,131,790

 

 

1,983,081

 

 

1,894,887

 

 

1,783,300

 

 

1,755,183

 

Commercial real estate non-owner occupied

1,176,575

 

 

1,107,336

 

 

1,125,106

 

 

1,157,849

 

 

1,155,998

 

Construction

59,811

 

 

53,372

 

 

56,491

 

 

95,250

 

 

88,141

 

Total commercial loans

8,440,014

 

 

7,891,444

 

 

7,823,591

 

 

8,115,670

 

 

8,529,398

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

 

 

 

 

 

 

 

Residential

654,556

 

 

626,668

 

 

568,068

 

 

511,236

 

 

494,265

 

Manufactured housing

75,597

 

 

77,778

 

 

79,731

 

 

82,589

 

 

85,328

 

Consumer

552,839

 

 

153,153

 

 

74,035

 

 

51,210

 

 

3,874

 

Total consumer loans

1,282,992

 

 

857,599

 

 

721,834

 

 

645,035

 

 

583,467

 

Deferred (fees)/costs and unamortized (discounts)/premiums, net

(1,663

)

 

(3,197

)

 

(424

)

 

(3,045

)

 

642

 

Total loans

$

9,721,343

 

 

$

8,745,846

 

 

$

8,545,001

 

 

$

8,757,660

 

 

$

9,113,507

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END DEPOSIT COMPOSITION - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

2019

 

2019

 

2018

 

2018

 

2018

 

 

 

 

 

 

 

 

 

 

Demand, non-interest bearing

$

1,380,698

 

 

$

1,372,358

 

 

$

1,122,171

 

 

$

1,338,167

 

 

$

1,090,744

 

Demand, interest bearing

925,180

 

 

811,490

 

 

803,948

 

 

833,176

 

 

623,343

 

Savings

529,532

 

 

417,346

 

 

384,545

 

 

275,825

 

 

38,457

 

Money market

2,912,266

 

 

3,265,823

 

 

3,097,391

 

 

3,673,065

 

 

3,471,249

 

Time deposits

2,438,101

 

 

1,558,301

 

 

1,734,181

 

 

2,393,481

 

 

2,072,161

 

Total deposits

$

8,185,777

 

 

$

7,425,318

 

 

$

7,142,236

 

 

$

8,513,714

 

 

$

7,295,954

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY - UNAUDITED

(Dollars in thousands)

As of June 30, 2019

As of March 31, 2019

As of June 30, 2018

 

Total loans

Non accrual /NPLs

Total credit reserves

Total NPLs to total loans

Total reserves to total NPLs

Total loans

Non accrual /NPLs

Total credit reserves

Total NPLs to total loans

Total reserves to total NPLs

Total loans

Non accrual /NPLs

Total credit reserves

Total NPLs to total loans

Total reserves to total NPLs

Loan type

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

$

3,017,531

 

$

 

$

9,926

 

%

%

$

3,212,312

 

$

1,997

 

$

10,630

 

0.06

%

532.30

%

$

3,542,770

 

$

1,343

 

$

12,069

 

0.04

%

898.66

%

Commercial & industrial (1)

2,184,556

 

6,327

 

17,065

 

0.29

%

269.72

%

2,038,229

 

13,064

 

16,072

 

0.64

%

123.03

%

1,811,751

 

14,401

 

15,246

 

0.79

%

105.87

%

Commercial real estate non-owner occupied

1,176,575

 

94

 

6,159

 

0.01

%

6552.13

%

1,107,336

 

102

 

6,015

 

0.01

%

5897.06

%

1,155,998

 

2,536

 

6,698

 

0.22

%

264.12

%

Construction

59,811

 

 

649

 

%

%

53,372

 

 

584

 

%

%

88,141

 

 

992

 

%

%

Total commercial loans and leases receivable

6,438,473

 

6,421

 

33,799

 

0.10

%

526.38

%

6,411,249

 

15,163

 

33,301

 

0.24

%

219.62

%

6,598,660

 

18,280

 

35,005

 

0.28

%

191.49

%

Residential

648,860

 

5,083

 

4,168

 

0.78

%

82.00

%

625,066

 

5,574

 

6,572

 

0.89

%

117.90

%

493,222

 

5,606

 

2,908

 

1.14

%

51.87

%

Manufactured housing

75,597

 

1,570

 

489

 

2.08

%

31.15

%

77,778

 

1,924

 

644

 

2.47

%

33.47

%

85,328

 

2,015

 

659

 

2.36

%

32.70

%

Consumer

552,839

 

359

 

10,298

 

0.06

%

2868.52

%

153,153

 

108

 

3,689

 

0.07

%

3415.74

%

3,874

 

94

 

226

 

2.43

%

240.43

%

Total consumer loans receivable

1,277,296

 

7,012

 

14,955

 

0.55

%

213.28

%

855,997

 

7,606

 

10,905

 

0.89

%

143.37

%

582,424

 

7,715

 

3,793

 

1.32

%

49.16

%

Deferred (fees) costs and unamortized (discounts) premiums, net

(1,663

)

 

 

%

%

(3,197

)

 

 

%

%

642

 

 

 

%

%

Loans and leases receivable

7,714,106

 

13,433

 

48,754

 

0.17

%

362.94

%

7,264,049

 

22,769

 

44,206

 

0.31

%

194.15

%

7,181,726

 

25,995

 

38,798

 

0.36

%

149.25

%

Loans receivable, mortgage warehouse, at fair value

2,001,540

 

 

 

%

%

1,480,195

 

 

 

%

%

1,930,738

 

 

 

%

%

Total loans held for sale

5,697

 

1,325

 

 

23.26

%

%

1,602

 

 

 

%

%

1,043

 

 

 

%

%

Total portfolio

$

9,721,343

 

$

14,758

 

$

48,754

 

0.15

%

330.36

%

$

8,745,846

 

$

22,769

 

$

44,206

 

0.26

%

194.15

%

$

9,113,507

 

$

25,995

 

$

38,798

 

0.29

%

149.25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Commercial & industrial loans, including owner occupied commercial real estate loans.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Q2

 

Q1

 

Q4

 

Q3

 

Q2

 

2019

 

2019

 

2018

 

2018

 

2018

Loan type

 

 

 

 

 

 

 

 

 

Multi-family

$

(7

)

 

$

541

 

 

$

 

 

$

 

 

$

 

Commercial & industrial (1)

(186

)

 

(239

)

 

1,457

 

 

60

 

 

192

 

Commercial real estate non-owner occupied

(114

)

 

(6

)

 

(10

)

 

(15

)

 

(209

)

Residential

61

 

 

33

 

 

52

 

 

(6

)

 

(15

)

Consumer

883

 

 

731

 

 

655

 

 

432

 

 

459

 

Total net charge-offs (recoveries) from loans held for investment

$

637

 

 

$

1,060

 

 

$

2,154

 

 

$

471

 

 

$

427

 

 

 

 

 

 

 

 

 

 

 

(1) Commercial & industrial loans, including owner occupied commercial real estate.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO 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 core results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in Customers' industry. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our ongoing financial results, which we believe enhance an overall understanding of our performance and increases comparability of our period to period results. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. Although non-GAAP financial measures are frequently used in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results of operations or financial condition as reported under GAAP.

The following tables present reconciliations of GAAP to non-GAAP measures disclosed within this document.

Core Earnings - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

(dollars in thousands except per share data)

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

GAAP net income to common shareholders

$

 

5,681

 

$

 

0.18

 

 

$

 

11,825

 

$

 

0.38

 

 

$

 

14,247

 

$

 

0.44

 

 

$

 

2,414

 

$

 

0.07

 

 

$

 

20,048

 

$

 

0.62

 

 

$

 

17,506

 

$

 

0.55

 

 

$

 

40,575

 

$

 

1.26

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

373

 

 

0.01

 

 

 

 

 

 

1,421

 

 

0.04

 

 

 

 

 

 

 

 

 

373

 

 

0.01

 

 

 

 

Loss upon acquisition of interest-only GNMA securities

 

5,682

 

 

0.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,682

 

 

0.18

 

 

 

 

Merger and acquisition related expenses

 

 

 

 

 

 

 

355

 

 

0.01

 

 

 

2,222

 

 

0.07

 

 

 

655

 

 

0.02

 

 

 

 

 

 

735

 

 

0.02

 

Losses on sale of multi-family loans

 

 

 

 

 

 

 

868

 

 

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

(Gains) losses on investment securities

 

347

 

 

0.01

 

 

 

(2

)

 

 

 

101

 

 

 

 

15,417

 

 

0.48

 

 

 

138

 

 

 

 

345

 

 

0.01

 

 

 

128

 

 

Core earnings

$

 

12,083

 

$

 

0.38

 

 

$

 

11,823

 

$

 

0.38

 

 

$

 

16,992

 

$

 

0.53

 

 

$

 

20,053

 

$

 

0.62

 

 

$

 

20,841

 

$

 

0.64

 

 

$

 

23,906

 

$

 

0.76

 

 

$

 

41,438

 

$

 

1.28

 

Core Return on Average Assets - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

(dollars in thousands except per share data)

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

GAAP net income

$

 

9,296

 

 

$

 

15,440

 

 

$

 

17,862

 

 

$

 

6,029

 

 

$

 

23,663

 

 

$

 

24,735

 

 

$

 

47,804

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

373

 

 

 

 

 

1,421

 

 

 

 

 

 

 

373

 

 

 

Loss upon acquisition of interest-only GNMA securities

 

5,682

 

 

 

 

 

 

 

 

 

 

 

5,682

 

 

 

Merger and acquisition related expenses

 

 

 

 

 

355

 

 

 

2,222

 

 

 

655

 

 

 

 

 

735

 

Losses on sale of multi-family loans

 

 

 

 

 

868

 

 

 

 

 

 

 

 

 

(Gains) losses on investment securities

 

347

 

 

 

(2

)

 

 

101

 

 

 

15,417

 

 

 

138

 

 

 

345

 

 

 

128

 

Core net income

$

 

15,698

 

 

$

 

15,438

 

 

$

 

20,607

 

 

$

 

23,668

 

 

$

 

24,456

 

 

$

 

31,135

 

 

$

 

48,667

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total assets

$

 

10,371,842

 

 

$

 

9,759,529

 

 

$

 

9,947,367

 

 

$

 

10,728,339

 

 

$

 

10,721,190

 

 

$

 

10,067,377

 

 

$

 

10,499,679

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core return on average assets

 

0.61

%

 

 

0.64

%

 

 

0.82

%

 

 

0.88

%

 

 

0.91

%

 

 

0.62

%

 

 

0.93

%

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)

(Dollars in thousands, except per share data)

 

Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

(dollars in thousands except per share data)

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

 

GAAP net income

$

9,296

 

 

$

15,440

 

 

$

17,862

 

 

$

6,029

 

 

$

23,663

 

 

$

24,735

 

 

$

47,804

 

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

2,491

 

 

4,831

 

 

5,109

 

 

28

 

 

6,820

 

 

7,323

 

 

14,222

 

 

Provision for loan losses

5,346

 

 

4,767

 

 

1,385

 

 

2,924

 

 

(784

)

 

10,113

 

 

1,333

 

 

Severance expense

490

 

 

 

 

1,869

 

 

 

 

 

 

490

 

 

 

 

Loss upon acquisition of interest-only GNMA securities

7,476

 

 

 

 

 

 

 

 

 

 

7,476

 

 

 

 

Merger and acquisition related expenses

 

 

 

 

470

 

 

2,945

 

 

869

 

 

 

 

975

 

 

Losses on sale of multi-family loans

 

 

 

 

1,161

 

 

 

 

 

 

 

 

 

 

(Gains) losses on investment securities

347

 

 

(2

)

 

101

 

 

19,895

 

 

138

 

 

345

 

 

128

 

 

Adjusted net income - pre-tax pre-provision

$

25,446

 

 

$

25,036

 

 

$

27,957

 

 

$

31,821

 

 

$

30,706

 

 

$

50,482

 

 

$

64,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total assets

$

10,371,842

 

 

$

9,759,529

 

 

$

9,947,367

 

 

$

10,728,339

 

 

$

10,721,190

 

 

$

10,067,377

 

 

$

10,499,679

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted ROAA - pre-tax pre-provision

0.98

%

 

1.04

%

 

1.12

%

 

1.18

%

 

1.15

%

 

1.01

%

 

1.24

%

 

 

Core Return on Average Common Equity - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

(dollars in thousands except per share data)

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

GAAP net income to common shareholders

$

 

5,681

 

 

$

 

11,825

 

 

$

 

14,247

 

 

$

 

2,414

 

 

$

 

20,048

 

 

$

 

17,506

 

 

$

 

40,575

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

373

 

 

 

 

 

1,421

 

 

 

 

 

 

 

373

 

 

 

Loss upon acquisition of interest-only GNMA securities

 

5,682

 

 

 

 

 

 

 

 

 

 

 

5,682

 

 

 

Merger and acquisition related expenses

 

 

 

 

 

355

 

 

 

2,222

 

 

 

655

 

 

 

 

 

735

 

Losses on sale of multi-family loans

 

 

 

 

 

868

 

 

 

 

 

 

 

 

 

(Gains) losses on investment securities

 

347

 

 

 

(2

)

 

 

101

 

 

 

15,417

 

 

 

138

 

 

 

345

 

 

 

128

 

Core earnings

$

 

12,083

 

 

$

 

11,823

 

 

$

 

16,992

 

 

$

 

20,053

 

 

$

 

20,841

 

 

$

 

23,906

 

 

$

 

41,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total common shareholders' equity

$

 

768,592

 

 

$

 

751,133

 

 

$

 

745,226

 

 

$

 

732,302

 

 

$

 

710,549

 

 

$

 

759,911

 

 

$

 

710,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core return on average common equity

 

6.31

%

 

 

6.38

%

 

 

9.05

%

 

 

10.86

%

 

 

11.76

%

 

 

6.34

%

 

 

11.77

%

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)

(Dollars in thousands, except per share data)

 

Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

(dollars in thousands except per share data)

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

 

GAAP net income to common shareholders

$

 

5,681

 

 

$

 

11,825

 

 

$

 

14,247

 

 

$

 

2,414

 

 

$

 

20,048

 

 

$

 

17,506

 

 

$

 

40,575

 

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

2,491

 

 

 

4,831

 

 

 

5,109

 

 

 

28

 

 

 

6,820

 

 

 

7,323

 

 

 

14,222

 

 

Provision for loan losses

 

5,346

 

 

 

4,767

 

 

 

1,385

 

 

 

2,924

 

 

 

(784

)

 

 

10,113

 

 

 

1,333

 

 

Severance expense

 

490

 

 

 

 

 

1,869

 

 

 

 

 

 

 

490

 

 

 

 

Loss upon acquisition of interest-only GNMA securities

 

7,476

 

 

 

 

 

 

 

 

 

 

 

7,476

 

 

 

 

Merger and acquisition related expenses

 

 

 

 

 

470

 

 

 

2,945

 

 

 

869

 

 

 

 

 

975

 

 

Losses on sale of multi-family loans

 

 

 

 

 

1,161

 

 

 

 

 

 

 

 

 

 

(Gains) losses on investment securities

 

347

 

 

 

(2

)

 

 

101

 

 

 

19,895

 

 

 

138

 

 

 

345

 

 

 

128

 

 

Pre-tax pre-provision adjusted net income available to common shareholders

$

 

21,831

 

 

$

 

21,421

 

 

$

 

24,342

 

 

$

 

28,206

 

 

$

 

27,091

 

 

$

 

43,253

 

 

$

 

57,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total common shareholders' equity

$

 

768,592

 

 

$

 

751,133

 

 

$

 

745,226

 

 

$

 

732,302

 

 

$

 

710,549

 

 

$

 

759,911

 

 

$

 

710,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted ROCE - pre-tax pre-provision

 

11.39

%

 

 

11.57

%

 

 

12.96

%

 

 

15.28

%

 

 

15.29

%

 

 

11.48

%

 

 

16.26

%

 

 

Net Interest Margin, Tax Equivalent - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

(dollars in thousands except per share data)

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

GAAP net interest income

$

 

64,679

 

 

$

 

59,304

 

 

$

 

61,524

 

 

$

 

64,001

 

 

$

 

67,322

 

 

$

 

123,983

 

 

$

 

132,353

 

Tax-equivalent adjustment

 

183

 

 

 

181

 

 

 

171

 

 

 

172

 

 

 

171

 

 

 

364

 

 

 

342

 

Net interest income tax equivalent

$

 

64,862

 

 

$

 

59,485

 

 

$

 

61,695

 

 

$

 

64,173

 

 

$

 

67,493

 

 

$

 

124,347

 

 

$

 

132,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total interest earning assets

$

 

9,851,150

 

 

$

 

9,278,413

 

 

$

 

9,518,120

 

 

$

 

10,318,943

 

 

$

 

10,329,530

 

 

$

 

9,566,364

 

 

$

 

10,106,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin, tax equivalent

 

2.64

%

 

 

2.59

%

 

 

2.57

%

 

 

2.47

%

 

 

2.62

%

 

 

2.62

%

 

 

2.64

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)

(Dollars in thousands, except per share data)

 

Core Efficiency Ratio - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

(dollars in thousands except per share data)

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

 

GAAP net interest income

$

 

64,679

 

 

$

 

59,304

 

 

$

 

61,524

 

 

$

 

64,001

 

 

$

 

67,322

 

 

$

 

123,983

 

 

$

 

132,353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP non-interest income

$

 

12,036

 

 

$

 

19,718

 

 

$

 

19,877

 

 

$

 

2,084

 

 

$

 

16,127

 

 

$

 

31,754

 

 

$

 

37,037

 

 

Loss upon acquisition of interest-only GNMA securities

 

7,476

 

 

 

 

 

 

 

 

 

 

 

7,476

 

 

 

 

(Gains) losses on investment securities

 

347

 

 

 

(2

)

 

 

101

 

 

 

19,895

 

 

 

138

 

 

 

345

 

 

 

128

 

 

Losses on sale of multi-family loans

 

 

 

 

 

1,161

 

 

 

 

 

 

 

 

 

 

Core non-interest income

 

19,859

 

 

 

19,716

 

 

 

21,139

 

 

 

21,979

 

 

 

16,265

 

 

 

39,575

 

 

 

37,165

 

 

Core revenue

$

 

84,538

 

 

$

 

79,020

 

 

$

 

82,663

 

 

$

 

85,980

 

 

$

 

83,587

 

 

$

 

163,558

 

 

$

 

169,518

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP non-interest expense

$

 

59,582

 

 

$

 

53,984

 

 

$

 

57,045

 

 

$

 

57,104

 

 

$

 

53,750

 

 

$

 

113,566

 

 

$

 

106,031

 

 

Severance expense

 

(490

)

 

 

 

 

(1,869

)

 

 

 

 

 

 

(490

)

 

 

 

Merger and acquisition related expenses

 

 

 

 

 

(470

)

 

 

(2,945

)

 

 

(869

)

 

 

 

 

(735

)

 

Core non-interest expense

$

 

59,092

 

 

$

 

53,984

 

 

$

 

54,706

 

 

$

 

54,159

 

 

$

 

52,881

 

 

$

 

113,076

 

 

$

 

105,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core efficiency ratio (1)

 

69.90

%

 

 

68.32

%

 

 

66.18

%

 

 

62.99

%

 

 

63.26

%

 

 

69.14

%

 

 

62.11

%

 

(1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.

Tangible Common Equity to Tangible Assets - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands except per share data)

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

GAAP - Total shareholders' equity

$

 

991,405

 

 

$

 

978,373

 

 

$

 

956,816

 

 

$

 

954,812

 

 

$

 

936,227

 

Reconciling items:

 

 

 

 

 

 

 

 

 

Preferred stock

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

Goodwill and other intangibles

 

(15,847

)

 

 

(16,173

)

 

 

(16,499

)

 

 

(16,825

)

 

 

(17,150

)

Tangible common equity

$

 

758,087

 

 

$

 

744,729

 

 

$

 

722,846

 

 

$

 

720,516

 

 

$

 

701,606

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

 

11,182,427

 

 

$

 

10,143,894

 

 

$

 

9,833,425

 

 

$

 

10,617,104

 

 

$

 

11,092,846

 

Reconciling items:

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

 

(15,847

)

 

 

(16,173

)

 

 

(16,499

)

 

 

(16,825

)

 

 

(17,150

)

Tangible assets

$

 

11,166,580

 

 

$

 

10,127,721

 

 

$

 

9,816,926

 

 

$

 

10,600,279

 

 

$

 

11,075,696

 

 

 

 

 

 

 

 

 

 

 

Tangible common equity to tangible assets

 

6.79

%

 

 

7.35

%

 

 

7.36

%

 

 

6.80

%

 

 

6.33

%

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)

(Dollars in thousands, except per share data)

 

Tangible Book Value per Common Share - Customers Bancorp

 

 

 

 

 

 

 

 

 

(dollars in thousands except per share data)

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

GAAP - Total shareholders' equity

$

 

991,405

 

 

$

 

978,373

 

 

$

 

956,816

 

 

$

 

954,812

 

 

$

 

936,227

 

Reconciling Items:

 

 

 

 

 

 

 

 

 

Preferred stock

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

Goodwill and other intangibles

 

(15,847

)

 

 

(16,173

)

 

 

(16,499

)

 

 

(16,825

)

 

 

(17,150

)

Tangible common equity

$

 

758,087

 

 

$

 

744,729

 

 

$

 

722,846

 

 

$

 

720,516

 

 

$

 

701,606

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

31,202,023

 

 

 

31,131,247

 

 

 

31,003,028

 

 

 

31,687,340

 

 

 

31,669,643

 

 

 

 

 

 

 

 

 

 

 

Tangible book value per common share

$

 

24.30

 

 

$

 

23.92

 

 

$

 

23.32

 

 

$

 

22.74

 

 

$

 

22.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Book Value per Common Share - CAGR - Customers Bancorp

(dollars in thousands except per share data)

Q2 2019

 

Q4 2018

 

Q4 2017

 

Q4 2016

 

Q4 2015

 

Q4 2014

 

Q4 2013

GAAP - Total shareholders' equity

$

 

991,405

 

 

$

 

956,816

 

 

$

 

920,964

 

 

$

 

855,872

 

 

$

 

553,902

 

 

$

 

443,145

 

 

$

 

386,623

 

Reconciling Items:

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(55,569

)

 

 

 

 

Goodwill and other intangibles

 

(15,847

)

 

 

(16,499

)

 

 

(16,295

)

 

 

(17,621

)

 

 

(3,651

)

 

 

(3,664

)

 

 

(3,676

)

Tangible common equity

$

 

758,087

 

 

$

 

722,846

 

 

$

 

687,198

 

 

$

 

620,780

 

 

$

 

494,682

 

 

$

 

439,481

 

 

$

 

382,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

31,202,023

 

 

 

31,003,028

 

 

 

31,382,503

 

 

 

30,289,917

 

 

 

26,901,801

 

 

 

26,745,529

 

 

 

26,646,566

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible book value per common share

$

 

24.30

 

 

$

 

23.32

 

 

$

 

21.90

 

 

$

 

20.49

 

 

$

 

18.39

 

 

$

 

16.43

 

 

$

 

14.37

 

CAGR

 

10.02

%

 

 

 

 

 

 

 

 

 

 

 

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)

(Dollars in thousands, except per share data)

 

Core Earnings - Customers Bank Business Banking Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

(dollars in thousands except per share data)

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

GAAP net income to common shareholders

$

 

12,778

 

$

0.40

 

 

$

 

11,988

 

$

0.38

 

 

$

 

17,521

 

$

0.55

 

 

$

 

8,256

 

$

0.26

 

 

$

 

23,394

 

$

0.72

 

 

$

 

24,766

 

$

0.79

 

 

$

 

44,922

 

$

1.39

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

359

 

 

0.01

 

 

 

 

 

 

1,421

 

 

0.04

 

 

 

 

 

 

 

 

 

359

 

 

0.01

 

 

 

 

Loss upon acquisition of interest-only GNMA securities

 

5,682

 

 

0.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,682

 

 

0.18

 

 

 

 

Losses on sale of multi-family loans

 

 

 

 

 

 

 

868

 

 

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

(Gains) losses on investment securities

 

347

 

 

0.01

 

 

 

(2

)

 

 

 

101

 

 

 

 

15,417

 

 

0.48

 

 

 

138

 

 

 

 

345

 

 

0.01

 

 

 

128

 

 

Core earnings

$

 

19,166

 

$

0.61

 

 

$

 

11,986

 

$

0.38

 

 

$

 

19,911

 

$

0.62

 

 

$

 

23,673

 

$

0.73

 

 

$

 

23,532

 

$

0.73

 

 

$

 

31,152

 

$

0.99

 

 

$

 

45,050

 

$

1.39

 

Core Loss - BankMobile Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

Q3 2018

 

Q2 2018

 

2019

 

2018

(dollars in thousands except per share data)

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

GAAP net loss to common shareholders

$

 

(7,097