Customers Bancorp Reports Full Year 2019 Net Income up 13% Over Full Year 2018 and Fourth Quarter 2019 Net Income up 68% Over Fourth Quarter 2018

Record Q4 2019 GAAP Earnings up $10 million Over Q4 2018, and Core Earnings up $7 million

Year-end Assets Exceed $10 billion as CUBI Resumes Growth Strategy and Reaffirms Target of $3 Core EPS for 2020 and Sets Goal of $6 Core EPS for 2025

  • Q4 2019 GAAP Earnings Per Diluted Share of $0.75 and Q4 2019 Core Earnings Per Diluted Share of $0.76
  • Q4 2019 Return on Average Assets of 0.97% up 37% Over Q4 2018 and Q4 2019 Pre-Tax and Pre-Provision Adjusted Return on Average Assets of 1.59% up 42% Over Q4 2018
  • Q4 2019 Net Interest Margin Expands 6 Basis Points From Q3 2019 to 2.89%
  • Customers Bank Business Banking Segment Q4 2019 Net Income Increases 27% Over Q4 2018. BankMobile Segment Moves From a Loss of $3.3 Million in Q4 2018 to a Profit of $1.7 Million in Q4 2019
  • CUBI Stock Price up 31% in 2019, Trading at only 89% of Book Value and 91% of Tangible Book Value, and 8.4x the 2020 Consensus EPS Estimate of $2.84, at Year-end 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 record fourth quarter 2019 ("Q4 2019") net income to common shareholders of $23.9 million, or $0.75 per diluted share, up from $23.5 million in third quarter 2019 ("Q3 2019") and $14.2 million in fourth quarter 2018 ("Q4 2018"). Core earnings for Q4 2019 totaled $24.3 million, or $0.76 per diluted share, up from $23.0 million in Q3 2019 and $17.0 million in Q4 2018 (non-GAAP measures). Q4 2019 core earnings per diluted share was up 43% over Q4 2018 core earnings per diluted share (non-GAAP measures). Net interest margin, tax equivalent ("NIM") (a non-GAAP measure), expanded 6 basis points during Q4 2019 to 2.89%. Full year 2019 ("FY 2019") net income to common shareholders was $64.9 million, or $2.05 per diluted share, up from full year 2018 ("FY 2018") net income to common shareholders of $57.2 million, or $1.78 per diluted share. Core earnings for FY 2019 totaled $71.2 million, or $2.25 per diluted share, compared to core earnings of $78.5 million, or $2.43 per diluted share, for FY 2018 (non-GAAP measures). FY 2019 NIM expanded 17 basis points to 2.75% from FY 2018 NIM of 2.58% (non-GAAP measures).

(Dollars in thousands, except earnings per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Net Income to Common Shareholders (GAAP)

 

Q4 2019

 

EPS

 

Q4 2018

 

EPS

 

FY 2019

 

EPS

 

FY 2018

 

EPS

Customers Bank Business Banking

$

22,218

 

 

$

0.70

 

 

$

17,521

 

 

$

0.55

 

 

$

69,751

 

 

$

2.20

 

 

$

70,698

 

 

$

2.19

 

BankMobile

1,693

 

 

0.05

 

 

(3,274)

 

 

(0.10)

 

 

(4,883)

 

 

(0.15)

 

 

(13,462)

 

 

(0.42)

 

Consolidated

$

23,911

 

 

$

0.75

 

 

$

14,247

 

 

$

0.44

 

 

$

64,868

 

 

$

2.05

 

 

$

57,236

 

 

$

1.78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core Earnings (Non-GAAP Measure)

 

Q4 2019

 

EPS

 

Q4 2018

 

EPS

 

FY 2019

 

EPS

 

FY 2018

 

EPS

Customers Bank Business Banking

$

22,503

 

 

$

0.71

 

 

$

19,911

 

 

$

0.62

 

 

$

75,235

 

 

$

2.38

 

 

$

88,633

 

 

$

2.75

 

BankMobile

1,769

 

 

0.06

 

 

(2,919)

 

 

(0.09)

 

 

(4,034)

 

 

(0.13)

 

 

(10,150)

 

 

(0.31)

 

Consolidated

$

24,272

 

 

$

0.76

 

 

$

16,992

 

 

$

0.53

 

 

$

71,202

 

 

$

2.25

 

 

$

78,483

 

 

$

2.43

 

  • Total assets were $11.5 billion at December 31, 2019, compared to $11.7 billion at September 30, 2019 and $9.8 billion at December 31, 2018. Total assets at December 31, 2019 reflected a change in management's strategy to expand beyond $10 billion in assets during the quarter.
  • Loan mix improved year-over-year, as commercial and industrial ("C&I") loans and leases, excluding commercial loans to mortgage companies, increased $487 million, or 26%. Commercial loans to mortgage companies increased $844 million, or 58%, year-over-year as the continued low interest rate environment resulted in a higher 2019 year-end balance than historically experienced. Other consumer loans increased $1.1 billion year-over-year. Multi-family loans decreased $893 million, or 27%, year-over-year, consistent with management's strategy to reduce its overall exposure in this loan portfolio.
  • Total deposits increased $1.5 billion, or 21%, year-over-year, which included a $653 million, or 34%, increase in demand deposits.
  • The BankMobile segment reported Q4 2019 GAAP earnings per diluted share of $0.05, an increase of $0.15 from a loss per diluted share of $(0.10) in Q4 2018 and the second consecutive quarter of segment profitability.
  • NIM (a non-GAAP measure) expanded 6 basis points from Q3 2019 to 2.89% in Q4 2019 and up 32 basis points over Q4 2018; this marks our fifth consecutive quarter of NIM expansion from the trough of 2.47% reported in Q3 2018.
  • Core earnings in Q4 2019 was impacted by a $0.8 million ($0.02 per diluted share) loss realized from the sale of non-qualifying ("non-QM") residential mortgage loans and a $0.3 million ($0.01 per diluted share) gain on investment securities.
  • Core earnings in FY 2019 was impacted by a loss upon acquisition of interest-only GNMA securities of $7.5 million ($0.18 per diluted share), $2.3 million ($0.06 per diluted share) of gains on investment securities, $2 million ($0.05 per diluted share) of legal reserve accruals, a $0.8 million ($0.02 per diluted share) loss realized from the sale of non-QM residential mortgage loans and $0.5 million ($0.01 per diluted share) of severance expense.
  • The return on average assets ("ROAA") was 0.97% in Q4 2019, up from 0.95% in Q3 2019 and 0.71% in Q4 2018. Core ROAA (a non-GAAP measure) was 0.98% in Q4 2019, up from 0.94% in Q3 2019 and 0.82% in Q4 2018.
  • The pre-tax and pre-provision adjusted ROAA (a non-GAAP measure) for Q4 2019 was 1.59%, up from 1.38% in Q3 2019 and 1.12% in Q4 2018.
  • The return on average common equity ("ROCE") was 11.58 % in Q4 2019 compared to 11.81% in Q3 2019 and up from 7.58% in Q4 2018. Core ROCE (a non-GAAP measure) was 11.76% in Q4 2019, up from 11.59% in Q3 2019 and 9.05% in Q4 2018.
  • Asset quality remains strong. Non-performing loans were only 0.21% of total loans and leases at December 31, 2019 and reserves equaled 265% of non-performing loans. Net charge-offs were only $4.4 million, or 18 basis points of average total loans and leases on an annualized basis, during Q4 2019.
  • Reflecting changes in loan mix, the provision for loan losses was $9.7 million in Q4 2019, compared to $4.4 million in Q3 2019 and $1.4 million in Q4 2018.
  • Q4 2019 book value per common share was $26.66 and tangible book value per common share (a non-GAAP measure) was $26.17. Tangible book value per common share has increased at a compound annual growth rate of about 10% over the past five years.
  • On December 9, 2019, Customers Bancorp completed a public offering of $74.8 million of its 15-year fixed rate 5.375% Subordinated Notes due 2034, which qualifies as Tier 2 capital. $50 million of the net proceeds from that offering were contributed to Customers Bank as qualifying Tier 1 capital.
  • Based on the January 17, 2020 closing price of $22.56, Customers Bancorp common equity is trading at 0.86x tangible book value of $26.17 (a non-GAAP measure) and 7.9x the 2020 consensus EPS estimate of $2.84.

Jay Sidhu, CEO and Chairman of Customers Bancorp, Inc. stated, "We are pleased to report that we ended Q4 2019 with record earnings, superior asset quality, strong control in expenses, and our fifth consecutive quarter of net interest margin expansion, a reflection of improved loan mix, core deposit growth, disciplined pricing strategy and absolute focus on efficiency improvement and risk management. We are also excited that BankMobile attained profitability for the second consecutive quarter and its White Label banking strategy has already generated over $80 million of very low-cost deposits to Customers, a number that is expected to grow over time."

Status Report on Strategic Priorities Articulated at Analyst Day in October 2018

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 remain focused on growing its core businesses, while improving margins, capital and profitability. Through favorable mix shifts in both assets and liabilities, while maintaining its superior credit quality culture and extreme focus on productivity improvement, Customers improved the overall quality of its balance sheet and deposit franchise, expanded its net interest margin, enhanced liquidity and remains relatively neutral to interest rate changes. The strategies articulated at the 2018 Analysts Day in October 2018 and subsequent 2019 progress are summarized below:

  • Target ROAA in top quartile of peer group, which we expect will equate to a ROAA of 1.25% or higher over the next 2-3 years. ROAA was 0.97% in Q4 2019, up significantly from Q4 2018 ROAA of 0.71%. The pre-tax and pre-provision adjusted ROAA (a non-GAAP measure) was 1.59% for Q4 2019, up from 1.12% in Q4 2018.
  • 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. Actual results are materially better. NIM was 2.89% in Q4 2019, up from 2.83% in Q3 2019 and 2.57% in Q4 2018. FY 2019 NIM was 2.75%, up from FY 2018 NIM of 2.58%. Since Q3 2018, Customers effectively restructured its balance sheet resulting in NIM expansion of 42 basis points (non-GAAP measures).
  • BankMobile growth and maturity was expected with profitability achieved by year end 2019. BankMobile reached profitability in Q3 2019 and maintained profitability in Q4 2019. BankMobile is expected to remain profitable in 2020.
  • Expense control. Customers' efficiency ratio was 56.98% in Q4 2019, down from 61.58% in Q3 2019 and 69.99% in Q4 2018. Customers' efficiency ratio for FY 2019 was 65.15%, down from 65.35% for FY 2018.
  • Growth in core deposits and good quality higher-yielding loans. Demand Deposit Accounts ("DDAs") grew 34% year-over-year. Lower yielding multi-family loans decreased by $893 million, or 27%, year-over-year and were replaced by higher yielding C&I loans and leases and other consumer loans, which had net growth of $487 million and $1.1 billion year-over-year, respectively.
  • Maintain strong credit quality and superior risk management. Non-Performing Loans ("NPLs") were only 0.21% of total loans and leases at December 31, 2019. Reserves to NPLs at December 31, 2019 were 265%, an improvement from 147% at December 31, 2018. The Bank is relatively neutral to interest rate changes at December 31, 2019. We remain very focused on a strong Risk Management culture throughout the company.
  • Evaluate opportunities to redeem our preferred stock as it becomes callable. Redeeming all of the preferred stock as it becomes callable would result in an increase to our diluted earnings per share by approximately $0.46 annually. Customers will continue to analyze the best ways to execute this strategy over the next two years, subject to liquidity and capital needs.

Focus on Capital Allocation

The tangible common equity to tangible assets ratio (a non-GAAP measure) was 7.13% and the estimated common equity Tier 1 capital to risk-weighted assets ratio was 8.00% at December 31, 2019, while the leverage ratio was 9.26%. Capital ratios increased from Q3 2019. Customers Bancorp, Inc. also raised $74.8 million in 15-year fixed rate subordinated notes during Q4 2019, $50.0 million of which was contributed to Customers Bank as qualifying Tier 1 capital with the remaining net proceeds retained by Customers Bancorp increasing its liquidity position. Mr. Sidhu stated, "As capital builds, we will evaluate the best uses for our excess capital, which may include calling our preferred equity as it becomes callable, starting in 2020."

BankMobile Segment Update

BankMobile, a division of Customers Bank, operates a branchless digital bank offering low cost banking services to over two million Americans, with approximately 1.1 million active deposit customers. Customers reported in Q4 2018 that it expects to retain BankMobile for up to a 2-3 year period, but will regularly evaluate the best options for BankMobile.

BankMobile deposits averaged $543 million in Q4 2019, with an average cost of just 0.21%, and Q4 2019 revenues were $22.3 million and FY 2019 revenues were $86.4 million. The Q4 2019 segment earnings increased to $1.7 million, or $0.05 per diluted share, compared to a net loss of $3.3 million, or $(0.10) per diluted share in Q4 2018, principally due to an increase in net interest income, partially offset by an increase in provision for loan losses. BankMobile had its second consecutive quarter of profitability and is expected to remain profitable in 2020. "We remain in the investment mode for our white label and other unique Banking as a Service ("BaaS") strategic opportunities for BankMobile," stated Luvleen Sidhu, President and Chief Executive Officer of BankMobile. "The profitability improvement has come from increasing revenues from our student banking business while watching our expenses. We are very optimistic about our longer term opportunities to supplement this profitability and growth with continued expansion of our BaaS business," Luvleen Sidhu concluded. "Since Customers Bancorp, Inc. decided to cross the $10 billion asset mark at December 31, 2019, Customers will explore all strategic options for BankMobile in 2020," concluded Jay Sidhu, Customers Bancorp, Inc. CEO and Chairman.

Q4 2019 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended December 31, 2019, the preceding four quarters, and the twelve months ended December 31, 2019 and 2018, respectively:

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

 

 

EARNINGS SUMMARY - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Q4

Q3

Q2

Q1

Q4

Twelve Months Ended
December 31,

2019

2019

2019

2019

2018

2019

2018

 

 

 

 

 

 

 

 

 

GAAP Profitability Metrics:

 

 

 

 

 

 

 

Net income available to common shareholders

$

23,911

 

$

23,451

 

$

5,681

 

$

11,825

 

$

14,247

 

$

64,868

 

$

57,236

 

Per share amounts:

 

 

 

 

 

 

 

 

Earnings per share - basic

$

0.76

 

$

0.75

 

$

0.18

 

$

0.38

 

$

0.45

 

$

2.08

 

$

1.81

 

 

Earnings per share - diluted

$

0.75

 

$

0.74

 

$

0.18

 

$

0.38

 

$

0.44

 

$

2.05

 

$

1.78

 

 

Book value per common share (1)

$

26.66

 

$

25.66

 

$

24.80

 

$

24.44

 

$

23.85

 

$

26.66

 

$

23.85

 

 

CUBI stock price (1)

$

23.81

 

$

20.74

 

$

21.00

 

$

18.31

 

$

18.20

 

$

23.81

 

$

18.20

 

 

CUBI stock price as % of book value (1)

89

%

81

%

85

%

75

%

76

%

89

%

76

%

Average shares outstanding - basic

31,306,813

 

31,223,777

 

31,154,292

 

31,047,191

 

31,616,740

 

31,183,841

 

31,570,118

 

Average shares outstanding - diluted

31,876,341

 

31,644,728

 

31,625,741

 

31,482,867

 

32,051,030

 

31,646,216

 

32,233,098

 

Shares outstanding (1)

31,336,791

 

31,245,776

 

31,202,023

 

31,131,247

 

31,003,028

 

31,336,791

 

31,003,028

 

Return on average assets ("ROAA")

0.97

%

0.95

%

0.36

%

0.64

%

0.71

%

0.74

%

0.69

%

Return on average common equity ("ROCE")

11.58 %

11.81

%

2.96

%

6.38

%

7.58

%

8.30

%

7.90

%

Efficiency ratio

56.98 %

61.58

%

77.32

%

68.32

%

69.99

%

65.15

%

65.35

%

Non-GAAP Profitability Metrics (2):

 

 

 

 

 

 

 

Core earnings

$

24,272

 

$

23,024

 

$

12,083

 

$

11,823

 

$

16,992

 

$

71,202

 

$

78,483

 

Per share amounts:

 

 

 

 

 

 

 

 

Core earnings per share - diluted

$

0.76

 

$

0.73

 

$

0.38

 

$

0.38

 

$

0.53

 

$

2.25

 

$

2.43

 

 

Tangible book value per common share (1)

$

26.17

 

$

25.16

 

$

24.30

 

$

23.92

 

$

23.32

 

$

26.17

 

$

23.32

 

 

CUBI stock price as % of tangible book value (1)

91

%

82

%

86

%

77

%

78

%

91

%

78

%

Net interest margin, tax equivalent

2.89

%

2.83

%

2.64

%

2.59

%

2.57

%

2.75

%

2.58

%

Tangible common equity to tangible assets (1)

7.13

%

6.71

%

6.79

%

7.35

%

7.36

%

7.13

%

7.36

%

Core ROAA

0.98

%

0.94

%

0.61

%

0.64

%

0.82

%

0.80

%

0.89

%

Core ROCE

11.76

%

11.59

%

6.31

%

6.38

%

9.05

%

9.11

%

10.83

%

Adjusted pre-tax pre-provision net income

$

45,238

 

$

39,178

 

$

25,446

 

$

25,036

 

$

27,957

 

$

134,895

 

$

124,410

 

Adjusted ROAA - pre-tax and pre-provision

1.59

%

1.38

%

0.98

%

1.04

%

1.12

%

1.26

%

1.19

%

Adjusted ROCE - pre-tax and pre-provision

20.16

%

17.91

%

11.39

%

11.57

%

12.96

%

15.40

%

15.18

%

Core efficiency ratio

56.45

%

59.51

%

69.90

%

68.32

%

66.18

%

62.96

%

63.23

%

Asset Quality:

 

 

 

 

 

 

 

Net charge-offs

$

4,362

 

$

1,761

 

$

637

 

$

1,060

 

$

2,154

 

$

7,821

 

$

3,685

 

Annualized net charge-offs to average total loans and leases

0.18

%

0.07

%

0.03

%

0.05

%

0.10

%

0.08

%

0.04

%

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

0.21

%

0.17

%

0.15

%

0.26

%

0.32

%

0.21

%

0.32

%

Reserves to NPLs (1)

264.67

%

290.38

%

330.36

%

194.15

%

147.16

%

264.67

%

147.16

%

Regulatory Ratios (3):

 

 

 

 

 

 

 

Common equity Tier 1 capital to risk-weighted assets

8.00

%

7.81

%

8.04

%

8.91

%

8.96

%

8.00

%

8.96

%

Tier 1 capital to risk-weighted assets

10.11

%

9.95

%

10.32

%

11.47

%

11.58

%

10.11

%

11.58

%

Total capital to risk-weighted assets

12.21

%

11.36

%

11.76

%

12.92

%

13.00

%

12.21

%

13.00

%

Tier 1 capital to average assets (leverage ratio)

9.26

%

9.01

%

9.51

%

10.01

%

9.66

%

9.26

%

9.66

%

(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 multi-family loans, losses realized from the sale of non-QM residential mortgage loans, loss upon acquisition of interest-only GNMA securities, legal reserves and goodwill and 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 Q4 2019.

Net Interest Income

FY 2019 net interest income was $277.3 million, up almost $20 million from $257.9 million for FY 2018. Net interest income totaled $77.6 million in Q4 2019, an increase of $1.9 million from Q3 2019, primarily due to an increase in the average balance of non-interest bearing deposits of about $150 million and a 16 basis point decline in the cost of interest-bearing liabilities. Compared to Q3 2019, total loan yields decreased 11 basis points to 4.68%. The cost of interest-bearing deposits in Q4 2019 decreased by 18 basis points due to two Federal Reserve interest rate cuts in September 2019 and October 2019. Borrowing costs increased 5 basis points to 2.91% due to the issuance of $25 million in five-year 4.5% senior notes in September 2019 and $74.8 million in 15-year 5.375% subordinated notes in December 2019, partially offset by two Federal Reserve interest rate cuts in September 2019 and October 2019.

Q4 2019 net interest income increased $16.1 million from Q4 2018, primarily due to 32 basis points of NIM (a non-GAAP measure) expansion and a $1.2 billion increase in average interest-earning assets. Compared to Q4 2018, total loan yields increased 31 basis points to 4.68%. Given Federal Reserve interest rate hikes in 2018 and interest rate cuts in the second half of 2019, the cost of interest-bearing liabilities remained flat at 2.17%.

Total loans and leases increased $1.5 billion, or 17.6%, to $10.1 billion at December 31, 2019 compared to the year-ago period. Mortgage warehouse loans increased $844 million to $2.3 billion, C&I loans and leases increased $487 million to $2.4 billion, commercial real estate non-owner occupied loans increased $98 million to $1.2 billion and other consumer loans increased $1.1 billion to $1.2 billion. These increases were offset in part by planned decreases in multi-family loans of $893 million to $2.4 billion and residential mortgages of $190 million to $378 million.

Total deposits increased $1.5 billion, or 21.1%, to $8.6 billion at December 31, 2019 compared to the year-ago period. Total demand deposits increased $653 million, or 33.9%, to $2.6 billion, savings deposits increased $535 million, or 139.0%, to $919 million, and money market deposits increased $385 million, or 12.4%, to $3.5 billion. These increases were offset in part by a decrease in time deposits of $66 million, or 3.8%, to $1.7 billion. In July 2018, Customers launched a new digital, on-line savings banking product with a goal of gathering retail deposits. At December 31, 2019, this new product generated $863 million in retail deposits, an increase of $330 million since September 30, 2019.

Provision, Credit Quality and Risk Management

The provision for loan and lease losses totaled $24.2 million for FY 2019, up from $5.6 million in FY 2018, while NPLs to total loans and leases improved to 0.21% at December 31, 2019 from 0.32% at December 31, 2018. The provision for loan and lease losses totaled $9.7 million in Q4 2019, compared to $4.4 million in Q3 2019 and $1.4 million in Q4 2018. The Q4 2019 provision expense included $5.0 million for quarter-over-quarter changes in the mix of the loan portfolio and $0.5 million for specifically identified loans. Net charge-offs for Q4 2019 were $4.4 million, or 18 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $1.8 million, or 7 basis points in Q3 2019, and $2.2 million, or 10 basis points in Q4 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 December 31, 2019 were only 0.21% of total loans and leases, 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 1.03% 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 $80.9 million for FY 2019, an increase of $21.9 million compared to FY 2018. Non-interest income totaled $25.8 million in Q4 2019, an increase of $2.4 million compared to Q3 2019. The increase in non-interest income primarily resulted from increases of $2.8 million in gains on sales of SBA loans, $2.4 million in other non-interest income and $0.8 million in commercial lease income, partially offset by decreases of $1.0 million in gains on sales of investment securities, $1.0 million in unrealized gains on investment securities, $0.9 million in mortgage banking income and $0.4 million in interchange and card revenue. The increase in gains on sales of SBA loans resulted from a strategic shift to no longer retain all SBA loans on our balance sheet in Q4 2019. The increase in other non-interest income primarily resulted from derivative transactions and the increase in commercial lease income resulted from the continued growth of our Equipment Finance Group. The decrease in gain on sales of investment securities resulted from the gain realized from the sale of $95 million of corporate bonds during Q3 2019. The decrease in unrealized gains on investment securities primarily resulted from a smaller improvement in the fair values of the interest-only GNMA securities and equity securities issued by a foreign entity during Q4 2019. The decrease in mortgage banking income primarily resulted from a $0.8 million loss realized from the sale of $230 million of non-QM residential mortgage loans in Q4 2019. 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.

Non-Interest Expense

Non-interest expense totaled $231.9 million for FY 2019, an increase of $11.7 million compared to FY 2018. Non-interest expense totaled $58.7 million in Q4 2019, a decrease of $0.9 million compared to Q3 2019. The decrease in non-interest expense in Q4 2019 primarily resulted from decreases of $2.6 million in provision for operating losses, $1.9 million in professional services and $1.9 million in other non-interest expense, partially offset by increases of $3.3 million in FDIC assessments, $1.6 million in technology and $0.5 million in salaries and employee benefits. The decrease in the provision for operating losses primarily resulted from an internet-based organized crime ring which targeted BankMobile checking accounts in Q3 2019. The decrease in professional services primarily resulted from successful concentrated cost savings initiatives in Q4 2019. The decrease in other non-interest expense primarily resulted from legal reserve accruals totaling $2.0 million recognized in Q3 2019 for previously disclosed legal matters. The increase in FDIC assessments primarily resulted from a $2.6 million small bank assessment credit provided by the FDIC in Q3 2019 related to Customers' contribution to the growth of the FDIC's deposit insurance fund since July 2016. The increase in technology primarily resulted from continued investment in Customers' digital transformation initiatives. The increase in salaries and employee benefits primarily resulted from an increase in full-time equivalents.

Taxes

Customers' effective tax rate was 21.3% for Q4 2019, compared to 22.9% for Q3 2019 and 22.2% for Q4 2018. The decrease in the effective tax rate from Q3 2019 and Q4 2018 was primarily driven by strategic initiatives to lower Customers' effective tax rate through effective use of available tax credits and changes in the apportionment of revenues to states with lower tax costs. Customers expects the full-year 2020 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 $3.7 billion as of December 31, 2019 included construction loans of $0.1 billion, multi-family loans of $2.4 billion, and non-owner occupied commercial real estate loans of $1.1 billion, which represent 294% of total risk-based capital on a combined basis, a reduction from a 361% commercial real estate concentration as of December 31, 2018. Customers' loans subject to regulatory CRE concentration guidelines had a 3 year cumulative reduction of 16.0% as of the end of Q4 2019, a deceleration from cumulative growth of 10.6% a year ago.

Customers' loans collateralized by multi-family properties were approximately 23.8% of Customers' total loan portfolio and approximately 191% of total risk-based capital at December 31, 2019, down from approximately 38.4% and 270%, respectively, at December 31, 2018. Following are some key characteristics of Customers' multi-family loan portfolio:

  • Mostly 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 approximately $6.9 million;
  • Current weighted average annual debt service coverage ratio is 1.51x;
  • Current weighted average loan-to-value for the portfolio is 60.1%;
  • 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.

Recap of 2019 and Looking Ahead to 2020 and Beyond

Mr. Sidhu stated, "Customers' core earnings per share was $2.25 for 2019, in line with our internal expectations and higher than targets we had made public. After diligent consideration and analysis, we decided to end 2019 with total assets above $10 billion. This decision reflects our desire and optimism to continue to grow the Customers Bank Business Banking segment while giving careful consideration to the future strategic options for our BankMobile segment."

Looking ahead to 2020, Mr. Sidhu continued "Customers is projecting core earnings per share of $3.00 for 2020 with continued improvement in all profitability metrics." Mr. Sidhu continued, "In addition, management and our Board of Directors have been actively engaged in developing a vision and strategy for 2025 and are pleased to make public our confidence in achieving $6 per share in annual core earnings by the end of 2025."

Conference Call

 

 

 

Date:

Thursday, January 23, 2020

Time:

9:00 AM EST

US Dial-in:

+1 (800) 368-1029

International Dial-in:

+1 (334) 777-6981

Participant Code:

094854

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 fourth quarter results. A playback of the call will be available beginning January 23, 2020 at 12:00 PM EST until 12:00 PM EST on February 22, 2020. To listen, call within the United States +1 (888) 203-1112, or +1 (719) 457-0820 when calling internationally. Please use the replay passcode 3422011.

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 $11.5 billion at December 31, 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, 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)

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

Q4

 

Q3

 

Q2

 

Q1

 

Q4

 

December 31,

 

2019

 

2019

 

2019

 

2019

 

2018

 

2019

 

2018

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases

$

116,365

 

 

$

118,444

 

 

$

103,567

 

 

$

93,116

 

 

$

94,248

 

 

$

431,491

 

 

$

373,234

 

Investment securities

5,125

 

 

5,867

 

 

6,481

 

 

6,241

 

 

6,277

 

 

23,713

 

 

33,209

 

Other

2,505

 

 

2,407

 

 

1,902

 

 

1,718

 

 

2,778

 

 

8,535

 

 

11,508

 

Total interest income

123,995

 

 

126,718

 

 

111,950

 

 

101,075

 

 

103,303

 

 

463,739

 

 

417,951

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

35,992

 

 

38,267

 

 

35,980

 

 

31,225

 

 

34,029

 

 

141,464

 

 

110,808

 

FHLB advances

6,056

 

 

7,563

 

 

7,607

 

 

5,293

 

 

3,662

 

 

26,519

 

 

31,043

 

Subordinated debt

1,930

 

 

1,684

 

 

1,684

 

 

1,684

 

 

1,684

 

 

6,983

 

 

6,737

 

Other borrowings

2,424

 

 

3,469

 

 

2,000

 

 

3,569

 

 

2,404

 

 

11,463

 

 

11,486

 

Total interest expense

46,402

 

 

50,983

 

 

47,271

 

 

41,771

 

 

41,779

 

 

186,429

 

 

160,074

 

Net interest income

77,593

 

 

75,735

 

 

64,679

 

 

59,304

 

 

61,524

 

 

277,310

 

 

257,877

 

Provision for loan and lease losses

9,689

 

 

4,426

 

 

5,346

 

 

4,767

 

 

1,385

 

 

24,227

 

 

5,642

 

Net interest income after provision for loan and lease losses

67,904

 

 

71,309

 

 

59,333

 

 

54,537

 

 

60,139

 

 

253,083

 

 

252,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interchange and card revenue

6,506

 

 

6,869

 

 

6,760

 

 

8,806

 

 

7,568

 

 

28,941

 

 

30,695

 

Deposit fees

3,616

 

 

3,642

 

 

3,348

 

 

2,209

 

 

2,099

 

 

12,815

 

 

7,824

 

Commercial lease income

3,839

 

 

3,080

 

 

2,730

 

 

2,401

 

 

1,982

 

 

12,051

 

 

5,354

 

Bank-owned life insurance

1,795

 

 

1,824

 

 

1,836

 

 

1,816

 

 

1,852

 

 

7,272

 

 

7,620

 

Mortgage warehouse transactional fees

1,983

 

 

2,150

 

 

1,681

 

 

1,314

 

 

1,495

 

 

7,128

 

 

7,158

 

Gain (loss) on sale of SBA and other loans

2,770

 

 

 

 

 

 

 

 

(110)

 

 

2,770

 

 

3,294

 

Mortgage banking income (loss)

(635)

 

 

283

 

 

250

 

 

167

 

 

73

 

 

66

 

 

606

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

(7,476)

 

 

 

 

 

 

(7,476)

 

 

 

Gain (loss) on sale of investment securities

 

 

1,001

 

 

 

 

 

 

 

 

1,001

 

 

(18,659)

 

Unrealized gain (loss) on investment securities

310

 

 

1,333

 

 

(347)

 

 

2

 

 

(101)

 

 

1,299

 

 

(1,634)

 

Other

5,629

 

 

3,187

 

 

3,254

 

 

3,003

 

 

5,019

 

 

15,071

 

 

16,740

 

Total non-interest income

25,813

 

 

23,369

 

 

12,036

 

 

19,718

 

 

19,877

 

 

80,938

 

 

58,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

27,697

 

 

27,193

 

 

26,920

 

 

25,823

 

 

26,706

 

 

107,632

 

 

104,841

 

Technology, communication and bank operations

10,370

 

 

8,755

 

 

12,402

 

 

11,953

 

 

11,531

 

 

43,481

 

 

44,454

 

Professional services

6,470

 

 

8,348

 

 

5,718

 

 

4,573

 

 

5,674

 

 

25,109

 

 

20,237

 

Occupancy

3,470

 

 

3,661

 

 

3,064

 

 

2,903

 

 

2,933

 

 

13,098

 

 

11,809

 

Commercial lease depreciation

2,840

 

 

2,459

 

 

2,252

 

 

1,923

 

 

1,550

 

 

9,473

 

 

4,388

 

FDIC assessments, non-income taxes, and regulatory fees

2,492

 

 

(777)

 

 

2,157

 

 

1,988

 

 

1,892

 

 

5,861

 

 

8,642

 

Provision for operating losses

1,415

 

 

3,998

 

 

2,446

 

 

1,779

 

 

1,685

 

 

9,638

 

 

5,616

 

Advertising and promotion

899

 

 

976

 

 

1,360

 

 

809

 

 

917

 

 

4,044

 

 

2,446

 

Merger and acquisition related expenses

100

 

 

 

 

 

 

 

 

470

 

 

100

 

 

4,391

 

Loan workout

230

 

 

495

 

 

643

 

 

320

 

 

360

 

 

1,687

 

 

2,183

 

Other real estate owned (income) expenses

247

 

 

108

 

 

(14)

 

 

57

 

 

285

 

 

398

 

 

449

 

Other

2,510

 

 

4,376

 

 

2,634

 

 

1,856

 

 

3,042

 

 

11,380

 

 

10,723

 

Total non-interest expense

58,740

 

 

59,592

 

 

59,582

 

 

53,984

 

 

57,045

 

 

231,901

 

 

220,179

 

Income before income tax expense

34,977

 

 

35,086

 

 

11,787

 

 

20,271

 

 

22,971

 

 

102,120

 

 

91,054

 

Income tax expense

7,451

 

 

8,020

 

 

2,491

 

 

4,831

 

 

5,109

 

 

22,793

 

 

19,359

 

Net income

27,526

 

 

27,066

 

 

9,296

 

 

15,440

 

 

17,862

 

 

79,327

 

 

71,695

 

Preferred stock dividends

3,615

 

 

3,615

 

 

3,615

 

 

3,615

 

 

3,615

 

 

14,459

 

 

14,459

 

Net income available to common shareholders

$

23,911

 

 

$

23,451

 

 

$

5,681

 

 

$

11,825

 

 

$

14,247

 

 

$

64,868

 

 

$

57,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.76

 

 

$

0.75

 

 

$

0.18

 

 

$

0.38

 

 

$

0.45

 

 

$

2.08

 

 

$

1.81

 

Diluted earnings per common share

$

0.75

 

 

$

0.74

 

 

$

0.18

 

 

$

0.38

 

 

$

0.44

 

 

$

2.05

 

 

$

1.78

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - UNAUDITED

(Dollars in thousands)

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

2019

 

2019

 

2019

 

2019

 

2018

ASSETS

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

33,095

 

 

$

12,555

 

 

$

24,757

 

 

$

41,723

 

 

$

17,696

 

Interest-earning deposits

179,410

 

 

169,663

 

 

71,038

 

 

75,939

 

 

44,439

 

Cash and cash equivalents

212,505

 

 

182,218

 

 

95,795

 

 

117,662

 

 

62,135

 

Investment securities, at fair value

595,876

 

 

608,714

 

 

708,359

 

 

678,142

 

 

665,012

 

Loans held for sale

486,328

 

 

502,854

 

 

5,697

 

 

1,602

 

 

1,507

 

Loans receivable, mortgage warehouse, at fair value

2,245,758

 

 

2,438,530

 

 

2,001,540

 

 

1,480,195

 

 

1,405,420

 

Loans and leases receivable

7,318,988

 

 

7,336,237

 

 

7,714,106

 

 

7,264,049

 

 

7,138,074

 

Allowance for loan and lease losses

(56,379)

 

 

(51,053)

 

 

(48,388)

 

 

(43,679)

 

 

(39,972)

 

Total loans and leases receivable, net of allowance for loan and lease losses

9,508,367

 

 

9,723,714

 

 

9,667,258

 

 

8,700,565

 

 

8,503,522

 

FHLB, Federal Reserve Bank, and other restricted stock

84,214

 

 

81,853

 

 

101,947

 

 

80,416

 

 

89,685

 

Accrued interest receivable

38,072

 

 

38,412

 

 

38,506

 

 

35,716

 

 

32,955

 

Bank premises and equipment, net

9,389

 

 

14,075

 

 

10,095

 

 

10,542

 

 

11,063

 

Bank-owned life insurance

272,546

 

 

270,526

 

 

268,682

 

 

266,740

 

 

264,559

 

Other real estate owned

173

 

 

204

 

 

1,076

 

 

976

 

 

816

 

Goodwill and other intangibles

15,195

 

 

15,521

 

 

15,847

 

 

16,173

 

 

16,499

 

Other assets

298,052

 

 

285,699

 

 

269,165

 

 

235,360

 

 

185,672

 

Total assets

$

11,520,717

 

 

$

11,723,790

 

 

$

11,182,427

 

 

$

10,143,894

 

 

$

9,833,425

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Demand, non-interest bearing deposits

$

1,343,391

 

 

$

1,569,918

 

 

$

1,380,698

 

 

$

1,372,358

 

 

$

1,122,171

 

Interest-bearing deposits

7,305,545

 

 

7,355,767

 

 

6,805,079

 

 

6,052,960

 

 

6,020,065

 

Total deposits

8,648,936

 

 

8,925,685

 

 

8,185,777

 

 

7,425,318

 

 

7,142,236

 

Federal funds purchased

538,000

 

 

373,000

 

 

406,000

 

 

388,000

 

 

187,000

 

FHLB advances

850,000

 

 

1,040,800

 

 

1,262,100

 

 

1,025,832

 

 

1,248,070

 

Other borrowings

123,630

 

 

123,528

 

 

99,055

 

 

123,963

 

 

123,871

 

Subordinated debt

181,115

 

 

109,050

 

 

109,026

 

 

109,002

 

 

108,977

 

Accrued interest payable and other liabilities

126,241

 

 

132,577

 

 

129,064

 

 

93,406

 

 

66,455

 

Total liabilities

10,467,922

 

 

10,704,640

 

 

10,191,022

 

 

9,165,521

 

 

8,876,609

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

217,471

 

 

217,471

 

 

217,471

 

 

217,471

 

 

217,471

 

Common stock

32,617

 

 

32,526

 

 

32,483

 

 

32,412

 

 

32,252

 

Additional paid in capital

444,218

 

 

441,499

 

 

439,067

 

 

436,713

 

 

434,314

 

Retained earnings

381,519

 

 

357,608

 

 

334,157

 

 

328,476

 

 

316,651

 

Accumulated other comprehensive loss

(1,250)

 

 

(8,174)

 

 

(9,993)

 

 

(14,919)

 

 

(22,663)

 

Treasury stock, at cost

(21,780)

 

 

(21,780)

 

 

(21,780)

 

 

(21,780)

 

 

(21,209)

 

Total shareholders' equity

1,052,795

 

 

1,019,150

 

 

991,405

 

 

978,373

 

 

956,816

 

Total liabilities & shareholders' equity

$

11,520,717

 

 

$

11,723,790

 

 

$

11,182,427

 

 

$

10,143,894

 

 

$

9,833,425

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

December 31, 2019

 

September 30, 2019

 

December 31, 2018

 

Average
Balance

Average
Yield or
Cost (%)

 

Average
Balance

Average
Yield or
Cost (%)

 

Average
Balance

Average
Yield or
Cost (%)

Assets

 

 

 

 

 

 

 

 

Interest earning deposits

$

150,382

 

2.21%

 

$

100,343

 

3.26%

 

$

185,145

 

2.24%

Investment securities (1)

584,955

 

3.50%

 

652,142

 

3.60%

 

697,474

 

3.60%

Loans and leases:

 

 

 

 

 

 

 

 

Commercial loans to mortgage companies

2,158,626

 

4.16%

 

2,103,612

 

4.58%

 

1,409,197

 

5.03%

Multi-family loans

2,654,919

 

3.96%

 

2,929,650

 

3.91%

 

3,445,267

 

3.76%

Commercial and industrial loans and leases (2)

2,318,313

 

4.79%

 

2,159,067

 

5.24%

 

1,823,189

 

4.93%

Non-owner occupied commercial real estate loans

1,325,630

 

4.55%

 

1,294,246

 

4.57%

 

1,224,750

 

4.40%

Residential mortgages

631,370

 

4.05%

 

729,603

 

4.11%

 

599,797

 

4.02%

Other consumer loans

765,765

 

9.11%

 

600,256

 

9.47%

 

60,210

 

9.26%

Total loans and leases (3)

9,854,623

 

4.68%

 

9,816,434

 

4.79%

 

8,562,410

 

4.37%

Other interest-earning assets

86,770

 

7.63%

 

98,279

 

6.39%

 

73,091

 

9.41%

Total interest-earning assets

10,676,730

 

4.61%

 

10,667,198

 

4.72%

 

9,518,120

 

4.31%

Non-interest-earning assets

580,477

 

 

 

591,946

 

 

 

429,247

 

 

Total assets

$

11,257,207

 

 

 

$

11,259,144

 

 

 

$

9,947,367

 

 

Liabilities

 

 

 

 

 

 

 

 

Interest checking accounts

$

1,152,349

 

1.65%

 

$

1,014,590

 

1.83%

 

$

767,154

 

1.60%

Money market deposit accounts

3,190,543

 

2.01%

 

3,100,975

 

2.22%

 

3,391,542

 

2.08%

Other savings accounts

722,487

 

2.09%

 

561,790

 

2.19%

 

350,304

 

1.99%

Certificates of deposit

2,012,497

 

2.21%

 

2,227,817

 

2.34%

 

2,141,598

 

2.11%

Total interest-bearing deposits (4)

7,077,876

 

2.02%

 

6,905,172

 

2.20%

 

6,650,598

 

2.03%

Borrowings

1,424,550

 

2.91%

 

1,770,459

 

2.86%

 

983,540

 

3.13%

Total interest-bearing liabilities

8,502,426

 

2.17%

 

8,675,631

 

2.33%

 

7,634,138

 

2.17%

Non-interest-bearing deposits (4)

1,580,050

 

 

 

1,431,810

 

 

 

1,261,330

 

 

Total deposits and borrowings

10,082,476

 

1.83%

 

10,107,441

 

2.00%

 

8,895,468

 

1.86%

Other non-interest-bearing liabilities

138,242

 

 

 

146,347

 

 

 

89,202

 

 

Total liabilities

10,220,718

 

 

 

10,253,788

 

 

 

8,984,670

 

 

Shareholders' equity

1,036,489

 

 

 

1,005,356

 

 

 

962,697

 

 

Total liabilities and shareholders' equity

$

11,257,207

 

 

 

$

11,259,144

 

 

 

$

9,947,367

 

 

Interest spread

 

2.78%

 

 

2.71%

 

 

2.45%

Net interest margin

 

2.89%

 

 

2.82%

 

 

2.57%

Net interest margin tax equivalent (5)

 

2.89%

 

 

2.83%

 

 

2.57%

(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 1.65%, 1.82% and 1.71% for the three months ended December 31, 2019, September 30, 2019 and December 31, 2018, respectively.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended December 31, 2019, September 30, 2019 and December 31, 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)

 

 

 

 

 

 

Twelve Months Ended

 

December 31, 2019

 

December 31, 2018

 

Average Balance

Average Yield
or Cost (%)

 

Average Balance

Average Yield
or Cost (%)

Assets

 

 

 

 

 

Interest earning deposits

$

103,833

 

2.68%

 

$

217,168

 

1.90%

Investment securities (1)

653,694

 

3.63%

 

1,005,688

 

3.30%

Loans and leases:

 

 

 

 

 

Commercial loans to mortgage companies

1,799,489

 

4.58%

 

1,610,168

 

4.92%

Multi-family loans

2,982,185

 

3.87%

 

3,549,511

 

3.82%

Commercial and industrial loans and leases (2)

2,111,181

 

5.08%

 

1,743,696

 

4.72%

Non-owner occupied commercial real estate loans

1,243,236

 

4.53%

 

1,257,545

 

4.32%

Residential mortgages

694,889

 

4.15%

 

497,772

 

4.05%

Other consumer loans

445,166

 

9.28%

 

20,028

 

8.78%

Total loans and leases (3)

9,276,146

 

4.65%

 

8,678,720

 

4.30%

Other interest-earning assets

90,035

 

6.39%

 

110,223

 

6.71%

Total interest-earning assets

10,123,708

 

4.58%

 

10,011,799

 

4.17%

Non-interest-earning assets

543,962

 

 

 

406,303

 

 

Total assets

$

10,667,670

 

 

 

$

10,418,102

 

 

Liabilities

 

 

 

 

 

Interest checking accounts

$

955,630

 

1.82%

 

$

630,335

 

1.49%

Money market deposit accounts

3,151,328

 

2.18%

 

3,417,779

 

1.77%

Other savings accounts

538,375

 

2.12%

 

135,994

 

1.67%

Certificates of deposit

1,943,361

 

2.26%

 

2,066,896

 

1.87%

Total interest-bearing deposits (4)

6,588,694

 

2.15%

 

6,251,004

 

1.77%

Borrowings

1,523,171

 

2.95%

 

1,951,921

 

2.52%

Total interest-bearing liabilities

8,111,865

 

2.30%

 

8,202,925

 

1.95%

Non-interest-bearing deposits (4)

1,430,149

 

 

 

1,189,638

 

 

Total deposits and borrowings

9,542,014

 

1.95%

 

9,392,563

 

1.70%

Other non-interest-bearing liabilities

126,325

 

 

 

83,563

 

 

Total liabilities

9,668,339

 

 

 

9,476,126

 

 

Shareholders' equity

999,331

 

 

 

941,976

 

 

Total liabilities and shareholders' equity

$

10,667,670

 

 

 

$

10,418,102

 

 

Interest spread

 

2.63%

 

 

2.47%

Net interest margin

 

2.74%

 

 

2.58%

Net interest margin tax equivalent (5)

 

2.75%

 

 

2.58%

(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 1.76% and 1.49% for the twelve months ended December 31, 2019 and December 31, 2018, respectively.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for both the year ended December 31, 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 twelve months ended December 31, 2019 and 2018:

 

Three Months Ended December 31, 2019

 

Three Months Ended December 31, 2018

 

Customers
Bank
Business
Banking

 

BankMobile

 

Consolidated

 

Customers
Bank
Business
Banking

 

BankMobile

 

Consolidated

Interest income (1)

$

112,212

 

 

$

11,783

 

 

$

123,995

 

 

$

98,129

 

 

$

5,174

 

 

$

103,303

 

Interest expense

46,111

 

 

291

 

 

46,402

 

 

41,592

 

 

187

 

 

41,779

 

Net interest income

66,101

 

 

11,492

 

 

77,593

 

 

56,537

 

 

4,987

 

 

61,524

 

Provision for loan and lease losses

6,846

 

 

2,843

 

 

9,689

 

 

(200)

 

 

1,585

 

 

1,385

 

Non-interest income

14,964

 

 

10,849

 

 

25,813

 

 

9,352

 

 

10,525

 

 

19,877

 

Non-interest expense

41,494

 

 

17,246

 

 

58,740

 

 

38,778

 

 

18,267

 

 

57,045

 

Income (loss) before income tax expense (benefit)

32,725

 

 

2,252

 

 

34,977

 

 

27,311

 

 

(4,340)

 

 

22,971

 

Income tax expense (benefit)

6,892

 

 

559

 

 

7,451

 

 

6,175

 

 

(1,066)

 

 

5,109

 

Net income (loss)

25,833

 

 

1,693

 

 

27,526

 

 

21,136

 

 

(3,274)

 

 

17,862

 

Preferred stock dividends

3,615

 

 

 

 

3,615

 

 

3,615

 

 

 

 

3,615

 

Net income (loss) available to common shareholders

$

22,218

 

 

$

1,693

 

 

$

23,911

 

 

$

17,521

 

 

$

(3,274)

 

 

$

14,247

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

0.71

 

 

$

0.05

 

 

$

0.76

 

 

$

0.55

 

 

$

(0.10)

 

 

$

0.45

 

Diluted earnings (loss) per common share

$

0.70

 

 

$

0.05

 

 

$

0.75

 

 

$

0.55

 

 

$

(0.10)

 

 

$

0.44

 

(1) Amounts reported include funds transfer pricing of $0.7 million and $3.8 million for the three months ended December 31, 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.

 

Twelve Months Ended December 31, 2019

 

Twelve Months Ended December 31, 2018

 

Customers
Bank
Business
Banking

 

BankMobile

 

Consolidated

 

Customers
Bank
Business
Banking

 

BankMobile

 

Consolidated

Interest income (2)

$

422,094

 

 

$

41,645

 

 

$

463,739

 

 

$

400,948

 

 

$

17,003

 

 

$

417,951

 

Interest expense

185,513

 

 

916

 

 

186,429

 

 

159,674

 

 

400

 

 

160,074

 

Net interest income

236,581

 

 

40,729

 

 

277,310

 

 

241,274

 

 

16,603

 

 

257,877

 

Provision for loan and lease losses

10,091

 

 

14,136

 

 

24,227

 

 

2,928

 

 

2,714

 

 

5,642

 

Non-interest income

35,268

 

 

45,670

 

 

80,938

 

 

17,499

 

 

41,499

 

 

58,998

 

Non-interest expense

153,333

 

 

78,568

 

 

231,901

 

 

146,946

 

 

73,233

 

 

220,179

 

Income (loss) before income tax expense (benefit)

108,425

 

 

(6,305)

 

 

102,120

 

 

108,899

 

 

(17,845)

 

 

91,054

 

Income tax expense (benefit)

24,215

 

 

(1,422)

 

 

22,793

 

 

23,742

 

 

(4,383)

 

 

19,359

 

Net income (loss)

84,210

 

 

(4,883)

 

 

79,327

 

 

85,157

 

 

(13,462)

 

 

71,695

 

Preferred stock dividends

14,459

 

 

 

 

14,459

 

 

14,459

 

 

 

 

14,459

 

Net income (loss) available to common shareholders

$

69,751

 

 

$

(4,883)

 

 

$

64,868

 

 

$

70,698

 

 

$

(13,462)

 

 

$

57,236

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

2.24

 

 

$

(0.16)

 

 

$

2.08

 

 

$

2.24

 

 

$

(0.43)

 

 

$

1.81

 

Diluted earnings (loss) per common share

$

2.20

 

 

$

(0.15)

 

 

$

2.05

 

 

$

2.19

 

 

$

(0.42)

 

 

$

1.78

 

As of December 31, 2019 and 2018

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

$

3,629

 

 

$

11,566

 

 

$

15,195

 

 

$

3,629

 

 

$

12,870

 

 

$

16,499

 

Total assets (3)

$

10,990,550

 

 

$

530,167

 

 

$

11,520,717

 

 

$

9,688,146

 

 

$

145,279

 

 

$

9,833,425

 

Total deposits

$

8,247,836

 

 

$

401,100

 

 

$

8,648,936

 

 

$

6,766,378

 

 

$

375,858

 

 

$

7,142,236

 

Total non-deposit liabilities (3)

$

1,789,329

 

 

$

29,657

 

 

$

1,818,986

 

 

$

1,719,225

 

 

$

15,148

 

 

$

1,734,373

 

(2) Amounts reported include funds transfer pricing of $8.8 million and $15.7 million for the twelve months ended December 31, 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 December 31, 2019, the preceding four quarters, and the twelve months ended December 31, 2019 and 2018, respectively:

Customers Bank Business Banking:

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended
December 31,

 

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

2019

 

2018

Interest income (1)

 

$

112,212

 

 

$

113,995

 

 

$

103,014

 

 

$

92,871

 

 

$

98,129

 

 

$

422,094

 

 

$

400,948

 

Interest expense

 

46,111

 

 

50,734

 

 

47,061

 

 

41,605

 

 

41,592

 

 

185,513

 

 

159,674

 

Net interest income

 

66,101

 

 

63,261

 

 

55,953

 

 

51,266

 

 

56,537

 

 

236,581

 

 

241,274

 

Provision for loan and lease losses

 

6,846

 

 

2,475

 

 

(2,206)

 

 

2,976

 

 

(200)

 

 

10,091

 

 

2,928

 

Non-interest income (loss)

 

14,964

 

 

11,757

 

 

970

 

 

7,577

 

 

9,352

 

 

35,268

 

 

17,499

 

Non-interest expense

 

41,494

 

 

38,347

 

 

38,107

 

 

35,384

 

 

38,778

 

 

153,333

 

 

146,946

 

Income before income tax expense

 

32,725

 

 

34,196

 

 

21,022

 

 

20,483

 

 

27,311

 

 

108,425

 

 

108,899

 

Income tax expense

 

6,892

 

 

7,814

 

 

4,629

 

 

4,880

 

 

6,175

 

 

24,215

 

 

23,742

 

Net income

 

25,833

 

 

26,382

 

 

16,393

 

 

15,603

 

 

21,136

 

 

84,210

 

 

85,157

 

Preferred stock dividends

 

3,615

 

 

3,615

 

 

3,615

 

 

3,615

 

 

3,615

 

 

14,459

 

 

14,459

 

Net income available to common shareholders

 

$

22,218

 

 

$

22,767

 

 

$

12,778

 

 

$

11,988

 

 

$

17,521

 

 

$

69,751

 

 

$

70,698

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.71

 

 

$

0.73

 

 

$

0.41

 

 

$

0.39

 

 

$

0.55

 

 

$

2.24

 

 

$

2.24

 

Diluted earnings per common share

 

$

0.70

 

 

$

0.72

 

 

$

0.40

 

 

$

0.38

 

 

$

0.55

 

 

$

2.20

 

 

$

2.19

 

(1) Amounts reported include funds transfer pricing of $0.7 million, $0.3 million, $2.2 million, $5.6 million and $3.8 million for the three months ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018, respectively. Amounts reported also include funds transfer pricing of $8.8 million and $15.7 million for the twelve months ended December 31, 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:

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended
December 31,

 

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

2019

 

2018

Interest income (2)

 

$

11,783

 

 

$

12,723

 

 

$

8,936

 

 

$

8,204

 

 

$

5,174

 

 

$

41,645

 

 

$

17,003

 

Interest expense

 

291

 

 

249

 

 

210

 

 

166

 

 

187

 

 

916

 

 

400

 

Net interest income

 

11,492

 

 

12,474

 

 

8,726

 

 

8,038

 

 

4,987

 

 

40,729

 

 

16,603

 

Provision for loan and lease losses

 

2,843

 

 

1,951

 

 

7,552

 

 

1,791

 

 

1,585

 

 

14,136

 

 

2,714

 

Non-interest income

 

10,849

 

 

11,612

 

 

11,066

 

 

12,141

 

 

10,525

 

 

45,670

 

 

41,499

 

Non-interest expense

 

17,246

 

 

21,245

 

 

21,475

 

 

18,600

 

 

18,267

 

 

78,568

 

 

73,233

 

Loss before income tax expense or benefit

 

2,252

 

 

890

 

 

(9,235)

 

 

(212)

 

 

(4,340)

 

 

(6,305)

 

 

(17,845)

 

Income tax benefit

 

559

 

 

206

 

 

(2,138)

 

 

(49)

 

 

(1,066)

 

 

(1,422)

 

 

(4,383)

 

Net loss available to common shareholders

 

$

1,693

 

 

$

684

 

 

$

(7,097)

 

 

$

(163)

 

 

$

(3,274)

 

 

$

(4,883)

 

 

$

(13,462)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic loss per common share

 

$

0.05

 

 

$

0.02

 

 

$

(0.23)

 

 

$

(0.01)

 

 

$

(0.10)

 

 

$

(0.16)

 

 

$

(0.43)

 

Diluted loss per common share

 

$

0.05

 

 

$

0.02

 

 

$

(0.22)

 

 

$

(0.01)

 

 

$

(0.10)

 

 

$

(0.15)

 

 

$

(0.42)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposit balances (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disbursements business deposits

 

$

319,263

 

 

$

598,064

 

 

$

409,683

 

 

$

615,710

 

 

$

370,690

 

 

 

 

 

White label deposits

 

81,837

 

 

67,541

 

 

46,514

 

 

11,046

 

 

5,168

 

 

 

 

 

Total deposits

 

$

401,100

 

 

$

665,605

 

 

$

456,197

 

 

$

626,756

 

 

$

375,858

 

 

 

 

 

(2) Amounts reported include funds transfer pricing of $0.7 million, $0.3 million, $2.2 million, $5.6 million and $3.8 million for the three months ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018, respectively. Amounts reported also include funds transfer pricing of $8.8 million and $15.7 million for the twelve months ended December 31, 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 December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

2019

 

2019

 

2019

 

2019

 

2018

Commercial:

 

 

 

 

 

 

 

 

 

Multi-family

$

2,392,146

 

 

$

2,800,018

 

 

$

3,017,531

 

 

$

3,212,312

 

 

$

3,285,297

 

Mortgage warehouse

2,305,953

 

 

2,549,286

 

 

2,054,307

 

 

1,535,343

 

 

1,461,810

 

Commercial & industrial

2,381,792

 

 

2,252,843

 

 

2,131,790

 

 

1,983,081

 

 

1,894,887

 

Commercial real estate non-owner occupied

1,223,529

 

 

1,268,557

 

 

1,176,575

 

 

1,107,336

 

 

1,125,106

 

Construction

118,418

 

 

61,200

 

 

59,811

 

 

53,372

 

 

56,491

 

Total commercial loans and leases

8,421,838

 

 

8,931,904

 

 

8,440,014

 

 

7,891,444

 

 

7,823,591

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

 

 

 

 

 

 

 

Residential

378,470

 

 

631,866

 

 

654,556

 

 

626,668

 

 

568,068

 

Manufactured housing

70,398

 

 

72,616

 

 

75,597

 

 

77,778

 

 

79,731

 

Other consumer

1,178,283

 

 

643,553

 

 

552,839

 

 

153,153

 

 

74,035

 

Total consumer loans

1,627,151

 

 

1,348,035

 

 

1,282,992

 

 

857,599

 

 

721,834

 

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

2,085

 

 

(2,318)

 

 

(1,663)

 

 

(3,197)

 

 

(424)

 

Total loans and leases

$

10,051,074

 

 

$

10,277,621

 

 

$

9,721,343

 

 

$

8,745,846

 

 

$

8,545,001

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END DEPOSIT COMPOSITION - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

2019

 

2019

 

2019

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

Demand, non-interest bearing

$

1,343,391

 

 

$

1,569,918

 

 

$

1,380,698

 

 

$

1,372,358

 

 

$

1,122,171

 

Demand, interest bearing

1,235,292

 

 

1,139,675

 

 

925,180

 

 

811,490

 

 

803,948

 

Savings

919,214

 

 

591,336

 

 

529,532

 

 

417,346

 

 

384,545

 

Money market

3,482,505

 

 

3,201,883

 

 

2,912,266

 

 

3,265,823

 

 

3,097,391

 

Time deposits

1,668,534

 

 

2,422,873

 

 

2,438,101

 

 

1,558,301

 

 

1,734,181

 

Total deposits

$

8,648,936

 

 

$

8,925,685

 

 

$

8,185,777

 

 

$

7,425,318

 

 

$

7,142,236

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY - UNAUDITED

(Dollars in thousands)

As of December 31, 2019

As of September 30, 2019

As of December 31, 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

$

1,909,274

$

4,117

$

6,157

0.22

%

149.55

%

$

2,300,244

 

$

$

7,498

%

%

$

3,285,297

 

$

1,155

$

11,462

0.04

%

992.38

%

Commercial & industrial (1)

2,441,987

6,494

17,791

0.27

%

273.96

%

2,363,599

 

7,382

18,765

0.31

%

254.20

%

1,951,277

 

18,801

15,465

0.96

%

82.26

%

Commercial real estate non-owner occupied

1,223,529

76

6,243

0.01

%

8214.47

%

1,268,557

 

83

6,440

0.01

%

7759.04

%

1,125,106

 

129

6,093

0.01

%

4723.26

%

Construction

118,418

1,262

%

%

61,200

 

658

%

%

56,491

 

624

%

%

Total commercial loans and leases receivable

5,693,208

10,687

31,453

0.19

%

294.31

%

5,993,600

 

7,465

33,361

0.12

%

446.90

%

6,418,171

 

20,085

33,644

0.31

%

167.51

%

Residential

375,014

6,128

3,218

1.63

%

52.51

%

628,786

 

6,093

4,083

0.97

%

67.01

%

566,561

 

5,605

3,654

0.99

%

65.19

%

Manufactured housing

70,398

1,655

1,178

2.35

%

71.18

%

72,616

 

1,567

1,051

2.16

%

67.07

%

79,731

 

1,693

633

2.12

%

37.39

%

Other consumer

1,178,283

1,551

20,648

0.13

%

1331.27

%

643,553

 

1,140

12,582

0.18

%

1103.68

%

74,035

 

111

2,529

0.15

%

2278.38

%

Total consumer loans receivable

1,623,695

9,334

25,044

0.57

%

268.31

%

1,344,955

 

8,800

17,716

0.65

%

201.32

%

720,327

 

7,409

6,816

1.03

%

92.00

%

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

2,085

%

%

(2,318

)

%

%

(424

)

%

%

Loans and leases receivable

7,318,988

20,021

56,497

0.27

%

282.19

%

7,336,237

 

16,265

51,077

0.22

%

314.03

%

7,138,074

 

27,494

40,460

0.39

%

147.16

%

Loans receivable, mortgage warehouse, at fair value

2,245,758

%

%

2,438,530

 

%

%

1,405,420

 

%

%

Total loans held for sale

486,328

1,325

0.27

%

%

502,854

 

1,325

0.26

%

%

1,507

 

%

%

Total portfolio

$

10,051,074

$

21,346

$

56,497

0.21

%

264.67

%

$

10,277,621

 

$

17,590

$

51,077

0.17

%

290.38

%

$

8,545,001

 

$

27,494

$

40,460

0.32

%

147.16

%

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

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

December 31,

 

Q4

 

Q3

 

Q2

 

Q1

 

Q4

 

 

2019

 

2019

 

2019

 

2019

 

2018

 

2019

 

2018

Loan type

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

$

 

 

$

 

 

$

(7

)

 

$

541

 

 

$

 

 

$

534

 

$

 

Commercial & industrial (1)

(225

)

 

15

 

 

(186

)

 

(239

)

 

1,457

 

 

(635

)

1,740

 

Commercial real estate non-owner occupied

(8

)

 

(8

)

 

(114

)

 

(6

)

 

(10

)

 

(136

)

(246

)

Residential

181

 

 

(5

)

 

61

 

 

33

 

 

52

 

 

270

 

390

 

Other consumer

4,414

 

 

1,759

 

 

883

 

 

731

 

 

655

 

 

7,787

 

1,801

 

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

$

4,362

 

 

$

1,761

 

 

$

637

 

 

$

1,060

 

 

$

2,154

 

 

$

7,820

 

$

3,685

 

(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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

December 31,

Q4 2019

 

Q3 2019

 

Q2 2019

 

Q1 2019

 

Q4 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

$

23,911

 

$

0.75

 

$

23,451

 

$

0.74

 

$

5,681

$

0.18

$

11,825

 

$

0.38

$

14,247

$

0.44

$

64,868

 

$

2.05

 

$

57,236

$

1.78

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

 

 

 

 

373

 

0.01

 

 

 

1,421

 

0.04

 

373

 

 

0.01

 

 

1,421

 

0.04

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

 

5,682

 

0.18

 

 

 

 

 

5,682

 

 

0.18

 

 

Merger and acquisition related expenses

 

76

 

 

 

 

 

 

 

 

 

355

 

0.01

 

76

 

 

 

3,312

 

0.10

Losses on sale of multi-family loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

868

 

0.03

 

 

 

868

 

0.03

Legal reserves

 

 

 

 

 

1,520

 

 

0.05

 

 

 

 

 

 

 

 

 

1,520

 

 

0.05

 

 

 

(Gains) losses on investment securities

 

(310

)

 

(0.01

)

 

(1,947

)

 

(0.06

)

 

347

 

0.01

 

(2

)

 

101

 

(1,912

)

 

(0.06

)

 

15,646

 

0.49

Losses on sale of non-QM residential mortgage loans

 

595

 

 

0.02

 

 

 

 

 

 

 

 

595

 

 

0.02

 

 

Core earnings

$

24,272

 

$

0.76

 

$

23,024

 

$

0.73

 

$

12,083

$

0.38

$

11,823

 

$

0.38

$

16,992

$

0.53

$

71,202

 

$

2.25

 

$

78,483

$

2.43

 
 

Core Return on Average Assets - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

December 31,

(dollars in thousands except per share data)

Q4 2019

 

Q3 2019

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

2019

 

2018

GAAP net income

$

27,526

 

 

$

27,066

 

 

$

9,296

 

 

$

15,440

 

 

$

17,862

 

 

$

79,327

 

 

$

71,695

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

 

 

 

373

 

 

 

 

1,421

 

 

373

 

 

1,421

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

5,682

 

 

 

 

 

 

5,682

 

 

 

Merger and acquisition related expenses

76

 

 

 

 

 

 

 

 

355

 

 

76

 

 

3,312

 

Losses on sale of multi-family loans

 

 

 

 

 

 

 

 

868

 

 

 

 

868

 

Legal reserves

 

 

1,520

 

 

 

 

 

 

 

 

1,520

 

 

 

(Gains) losses on investment securities

(310

)

 

(1,947

)

 

347

 

 

(2

)

 

101

 

 

(1,912

)

 

15,646

 

Losses on sale of non-QM residential mortgage loans

595

 

 

 

 

 

 

 

 

 

 

595

 

 

 

Core net income

$

27,887

 

 

$

26,639

 

 

$

15,698

 

 

$

15,438

 

 

$

20,607

 

 

$

85,661

 

 

$

92,942

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total assets

$

11,257,207

 

 

$

11,259,144

 

 

$

10,371,842

 

 

$

9,759,529

 

 

$

9,947,367

 

 

$

10,667,670

 

 

$

10,418,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core return on average assets

0.98

%

 

0.94

%

 

0.61

%

 

0.64

%

 

0.82

%

 

0.80

%

 

0.89

%

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

December 31,

(dollars in thousands except per share data)

Q4 2019

Q3 2019

Q2 2019

Q1 2019

Q4 2018

2019

2018

GAAP net income

$

27,526

 

$

27,066

 

$

9,296

 

$

15,440

 

$

17,862

 

$

79,327

 

$

71,695

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

7,451

 

 

8,020

 

 

2,491

 

 

4,831

 

 

5,109

 

 

22,793

 

 

19,359

 

Provision for loan and lease losses

 

9,689

 

 

4,426

 

 

5,346

 

 

4,767

 

 

1,385

 

 

24,227

 

 

5,642

 

Severance expense

 

 

 

490

 

 

 

1,869

 

 

490

 

 

1,869

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

7,476

 

 

 

 

7,476

 

 

Merger and acquisition related expenses

 

100

 

 

 

 

 

470

 

 

100

 

 

4,391

 

Losses on sale of multi-family loans

 

 

 

 

 

1,161

 

 

 

1,161

 

Legal reserves

 

 

2,000

 

 

 

 

 

2,000

 

 

(Gains) losses on investment securities

 

(310

)

 

(2,334

)

 

347

 

 

(2

)

 

101

 

 

(2,300

)

 

20,293

 

Losses on sale of non-QM residential mortgage loans

 

782

 

 

 

 

 

 

782

 

 

Adjusted net income - pre-tax pre-provision

$

45,238

 

$

39,178

 

$

25,446

 

$

25,036

 

$

27,957

 

$

134,895

 

$

124,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total assets

 

$11,257,207

 

$

11,259,144

 

 

$10,371,842

 

 

$9,759,529

 

$

9,947,367

 

$

10,667,670

 

$

10,418,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted ROAA - pre-tax pre-provision

 

1.59

%

 

1.38

%

 

0.98

%

 

1.04

%

 

1.12

%

 

1.26

%

 

1.19

%

 

 

 

 

 

 

 

 

 

 

Core Return on Average Common Equity - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

December 31,

(dollars in thousands except per share data)

Q4 2019

Q3 2019

Q2 2019

Q1 2019

Q4 2018

2019

2018

GAAP net income to common shareholders

$

23,911

 

$

23,451

 

$

5,681

 

$

11,825

 

$

14,247

 

$

64,868

 

$

57,236

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

 

 

373

 

 

 

1,421

 

 

373

 

 

1,421

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

5,682

 

 

 

 

5,682

 

 

Merger and acquisition related expenses

 

76

 

 

 

 

 

355

 

 

76

 

 

3,312

 

Losses on sale of multi-family loans

 

 

 

 

 

868

 

 

 

868

 

Legal reserves

 

 

1,520

 

 

 

 

 

1,520

 

 

(Gains) losses on investment securities

 

(310

)

 

(1,947

)

 

347

 

 

(2

)

 

101

 

 

(1,912

)

 

15,646

 

Losses on sale of non-QM residential mortgage loans

 

595

 

 

 

 

 

 

595

 

 

Core earnings

$

24,272

 

$

23,024

 

$

12,083

 

$

11,823

 

$

16,992

 

$

71,202

 

$

78,483

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total common shareholders' equity

$

819,018

 

$

787,885

 

$

768,592

 

$

751,133

 

$

745,226

 

$

781,860

 

$

724,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core return on average common equity

 

11.76

%

 

11.59

%

 

6.31

%

 

6.38

%

 

9.05

%

 

9.11

%

 

10.83

%

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

December 31,

(dollars in thousands except per share data)

Q4 2019

 

Q3 2019

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

2019

 

2018

GAAP net income to common shareholders

$

23,911

 

 

$

23,451

 

 

$

5,681

 

 

$

11,825

 

 

$

14,247

 

 

$

64,868

 

 

$

57,236

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

7,451

 

 

8,020

 

 

2,491

 

 

4,831

 

 

5,109

 

 

22,793

 

 

19,359

 

Provision for loan and lease losses

9,689

 

 

4,426

 

 

5,346

 

 

4,767

 

 

1,385

 

 

24,227

 

 

5,642

 

Severance expense

 

 

 

 

490

 

 

 

 

1,869

 

 

490

 

 

1,869

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

7,476

 

 

 

 

 

 

7,476

 

 

 

Merger and acquisition related expenses

100

 

 

 

 

 

 

 

 

470

 

 

100

 

 

4,391

 

Losses on sale of multi-family loans

 

 

 

 

 

 

 

 

1,161

 

 

 

 

1,161

 

Legal reserves

 

 

2,000

 

 

 

 

 

 

 

 

2,000

 

 

 

(Gains) losses on investment securities

(310

)

 

(2,334

)

 

347

 

 

(2

)

 

101

 

 

(2,300

)

 

20,293

 

Losses on sale of non-QM residential mortgage loans

782

 

 

 

 

 

 

 

 

 

 

782

 

 

 

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

$

41,623

 

 

$

35,563

 

 

$

21,831

 

 

$

21,421

 

 

$

24,342

 

 

$

120,436

 

 

$

109,951

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total common shareholders' equity

$

819,018

 

 

$

787,885

 

 

$

768,592

 

 

$

751,133

 

 

$

745,226

 

 

$

781,860

 

 

$

724,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted ROCE - pre-tax pre-provision

20.16

%

 

17.91

%

 

11.39

%

 

11.57

%

 

12.96

%

 

15.40

%

 

15.18

%

 
 

Net Interest Margin, Tax Equivalent - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

December 31,

(dollars in thousands except per share data)

Q4 2019

 

Q3 2019

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

2019

 

2018

GAAP net interest income

$

77,593

 

 

$

75,735

 

 

$

64,679

 

 

$

59,304

 

 

$

61,524

 

 

$

277,310

 

 

$

257,877

 

Tax-equivalent adjustment

187

 

 

184

 

 

183

 

 

181

 

 

171

 

 

735

 

 

685

 

Net interest income tax equivalent

$

77,780

 

 

$

75,919

 

 

$

64,862

 

 

$

59,485

 

 

$

61,695

 

 

$

278,045

 

 

$

258,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total interest earning assets

$

10,676,730

 

 

$

10,667,198

 

 

$

9,851,150

 

 

$

9,278,413

 

 

$

9,518,120

 

 

$

10,123,708

 

 

$

10,011,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin, tax equivalent

2.89

%

 

2.83

%

 

2.64

%

 

2.59

%

 

2.57

%

 

2.75

%

 

2.58

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

December 31,

(dollars in thousands except per share data)

Q4 2019

 

Q3 2019

 

Q2 2019

 

Q1 2019

 

Q4 2018

 

2019

 

2018

GAAP net interest income

$

77,593

 

 

$

75,735

 

 

$

64,679

 

 

$

59,304

 

 

$

61,524

 

 

$

277,310

 

 

$

257,877

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP non-interest income

$

25,813

 

 

$

23,369

 

 

$

12,036

 

 

$

19,718

 

 

$

19,877

 

 

$

80,938

 

 

$

58,998

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

7,476

 

 

 

 

 

 

7,476

 

 

 

(Gains) losses on investment securities

(310

)

 

(2,334

)

 

347

 

 

(2

)

 

101

 

 

(2,300

)

 

20,293

 

Losses on sale of multi-family loans

 

 

 

 

 

 

 

 

1,161

 

 

 

 

1,161

 

Losses on sale of non-QM residential mortgage loans

782

 

 

 

 

 

 

 

 

 

 

782

 

 

 

Core non-interest income

26,285

 

 

21,035

 

 

19,859

 

 

19,716

 

 

21,139

 

 

86,896

 

 

80,452

 

Core revenue

$

103,878

 

 

$

96,770

 

 

$

84,538

 

 

$

79,020

 

 

$

82,663

 

 

$

364,206

 

 

$

338,329

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP non-interest expense

$

58,740

 

 

$

59,592

 

 

$

59,582

 

 

$

53,984

 

 

$

57,045

 

 

$

231,901

 

 

$

220,179

 

Severance expense

 

 

 

 

(490

)

 

 

 

(1,869

)

 

(490

)

 

(1,869

)

Legal reserves

 

 

(2,000

)