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Customers Bancorp Reports Record Third Quarter 2020 Results


GAAP Net Income of $47.1 million, or $1.48 Per Diluted Share, up 100% over Q3 2019

ROAA of 1.12%, ROCE of 23.05%, and PTPP ROAA of 1.43%

  • Q3 2020 GAAP earnings of $47.1 million, or $1.48 per diluted share, up 100% over Q3 2019.
  • Q3 2020 core earnings (a non-GAAP measure) was $38.2 million, or $1.20 per diluted share, up 62% over Q3 2019.
  • Adjusted pre-tax pre-provision net income (a non-GAAP measure) for Q3 2020 was $64.2 million, an increase of 63% over Q3 2019 adjusted pre-tax pre-provision net income of $39.4 million. Q3 2020 adjusted pre-tax pre-provision return on average assets (a non-GAAP measure) was 1.43%.
  • Q3 2020 results include a provision for credit losses on loans and leases of $13.0 million. At September 30, 2020, the coverage of credit loss reserves for loans and leases held for investment, excluding Paycheck Protection Program ("PPP") loans (a non-GAAP measure), was 2.0%, up from 0.8% at December 31, 2019.
  • Non-performing assets were 0.34% of total assets at September 30, 2020 compared to 0.48% of total assets at June 30, 2020. Our allowance for credit losses equaled 245% of non-performing loans at September 30, 2020, up from 185% at June 30, 2020.
  • Total revenues were up 23.7% over Q2 2020 and 42.5% over Q3 2019. The Bank will earn approximately $100 million in pre-tax origination fees from PPP loans, significantly adding to its common tangible equity in 2021.
  • Net interest income increased by $15.5 million, or 16.8%, over Q2 2020 and $31.7 million, or 41.9%, over Q3 2019. Net interest income, excluding the impact of PPP loans (a non-GAAP measure), increased by $4.7 million, or 5.7%, over Q2 2020 and $11.7 million, or 15.4%, over Q3 2019.
  • Q3 2020 net interest margin, excluding the impact of PPP loans (a non-GAAP measure), was 2.86%, an 11 basis point decline from Q2 2020 and a 3 basis point increase from Q3 2019. Q3 2020 net interest margin (a non-GAAP measure) declined 15 basis points from Q2 2020 to 2.50%, mostly due to PPP loans at an average yield of 1.97% and excess cash on balance sheet.
  • Total loans and leases increased $6.3 billion, or 61.6%, year-over-year driven by PPP loans of $5.0 billion and strong growth in short-term commercial loans to mortgage companies of $1.4 billion. Total loans and leases, excluding PPP loans, increased $1.4 billion, or 13.3%, year-over-year.
  • Total deposits increased $1.9 billion, or 21.4%, year-over-year, which included a $1.9 billion, or 71.1%, increase in demand deposits. The total cost of deposits dropped to 0.67% in Q3 2020, a decline of 115 basis points from 1.82% in the year-ago quarter.
  • Excluding PPP loans, total deferments declined to $302 million, or 2.6%, of total loans and leases at September 30, 2020, down from $750.5 million, or 7.3%, of total loans and leases at July 24, 2020.
  • Commercial criticized loans as a percent of total loans and leases, excluding PPP loans (a non-GAAP measure), remained relatively low at 2.56% at September 30, 2020.

WEST READING, Pa.--(BUSINESS WIRE)-- Customers Bancorp, Inc. (NYSE: CUBI), the parent company of Customers Bank and its operating division BankMobile (collectively “Customers” or "CUBI"), today reported third quarter 2020 ("Q3 2020") net income to common shareholders of $47.1 million, or $1.48 per diluted share. Core earnings (a non-GAAP measure) for Q3 2020 totaled $38.2 million. or $1.20 per diluted share.

“We are thrilled to report another strong quarter of financial results despite a challenging economic environment,” said Customers Bancorp Chairman and CEO Jay Sidhu. "Our revenues are up 42% over last year, while we have held our expense growth to 10%. At the same time, our asset quality improved materially with non-performing assets as a percent of total assets declining to only 0.34% at September 30, 2020. Our superior financial results were achieved in spite of a $2.4 million decrease in our card related interchange income during the quarter primarily caused by the Durbin Amendment. We are very proud of Customers' talented and hard-working team members who continue to deliver tremendous service to our clients. Earlier this year, our team overcame tremendous obstacles to give approximately 100,000 small businesses and non-profits access to Paycheck Protection Program loans. This initiative has provided substantial benefits to our clients, communities, and shareholders. Customers anticipates continued short-term and long-term improvements in building a very strong franchise focused principally on providing private banking to privately held businesses.”

Loan Portfolio Management During the COVID-19 Crisis

Maintaining strong asset quality remains the highest priority at Customers Bancorp, which includes a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, Customers employs a bottom-up data driven approach to analyze its commercial portfolio. "Each borrower has been stressed for liquidity, debt capacity, and business profitability using forward looking views of their particular business sector, which sometimes reflect shock, reboot, and new normal scenarios. This data driven approach, completed with our traditional high touch approach with risk management processes best positions us to get out ahead of any deterioration in credit quality," Sidhu stated.

Strong commercial loan portfolio with very low concentration in COVID-19 impacted industries and CRE

  • Total commercial deferments declined to $277 million or 2.4% of total loans and leases, excluding PPP loans (a non-GAAP measure), at September 30, 2020, down from $691 million, or 6.8% of total loans and leases, excluding PPP loans, at July 24, 2020. Customers' commercial deferments peaked at about $1.2 billion earlier this year.
  • Exposure to industry segments significantly impacted by COVID-19 is not substantial. At September 30, 2020, Customers had $86 million in energy and utilities exposure (79% are wind farms; with no deferments); $64 million in colleges and universities (no deferments requested); $71 million in CRE retail sales exposure (mostly auto sales; with no deferments); $29 million in franchise restaurants and dining; and $26 million in entertainment only businesses.
  • At quarter-end, the hospitality portfolio was approximately $404 million (3.5% of total loans and leases, excluding PPP loans), with 31% in deferment. Approximately 19% of the portfolio was operating at 95%+ occupancy under government contracts for transitional housing. The portfolio had an average loan to value of 65% (generally based on appraised value at time of origination) with approximately 74% having full or partial recourse. The majority of the hotels in our current assessment have on-hand and/or access to the cash resources needed to get through the COVID-19 crisis, and for those who may need assistance the Bank is working with them closely to bridge any potential cash flow gaps.
  • At September 30, 2020, the healthcare portfolio was approximately $310 million, comprised predominantly of skilled nursing, which has been deemed an essential business and through a number of federal and state actions has been provided immunity from liability for COVID-19 related deaths. No deferments have been requested and there are no delinquencies.
  • The multi-family portfolio is highly seasoned, with an average vacancy rate of 3.4% and loan to value of 60.3% (generally based on appraised value at time of origination) as of quarter-end. 58% of the portfolio was in New York City, of which 70% was in rent controlled/regulated properties with a vacancy rate of only 1.8%. As of September 30, 2020, 4% of the portfolio was on 90-day deferment.
  • At September 30, 2020, investment CRE had a DSCR of 1.95x and loan to value of 59% (generally based on appraised value at time of origination), with most of the portfolio housed in the New York, Philadelphia, and Boston metro and surrounding markets.

Consumer installment, mortgage and home equity loan portfolio continues to perform well

  • Total consumer-related deferments declined to $25 million, or 0.2% of total loans and leases, excluding PPP loans, at September 30, 2020, down from $60 million, or 0.6% of total loans and leases, excluding PPP loans, at July 24, 2020.
  • The $1.2 billion consumer installment loan portfolio outperformed industry peers with deferments dropping to 1.2% and 30+ DPD delinquency below 1%. Strong credit quality (avg. FICO: 741), low concentration in at risk job segments, and outstanding performance of CB Direct originations have resulted in solid results through the end of Q3 2020.
  • Installment loan portfolio has been managed to moderate growth and strengthening credit quality, by replacing run-off with CB Direct originations at 700 FICO score and above.

Aggressively addressing non-performing assets

During September 2020, Customers sold a collateral dependent loan secured by a Class A office building in northern New Jersey. Customers is also proactively addressing another large loan, which makes up approximately 29% of non-performing assets as of September 30, 2020, and plans to move it off the balance sheet over the next 2 - 3 months. “We expect our credit quality to improve or stay unchanged over the next few quarters,” stated Sidhu.

Focus on Building TCE Ratio and other Capital Ratios

Customers remains well capitalized by all regulatory measures. At the Customers Bancorp level, the total risk based capital ratio (estimate) and the tangible common equity to tangible assets ("TCE ratio"), excluding PPP loans (a non-GAAP measure), were 11.6% and 5.9%, respectively, at September 30, 2020. At June 30, 2020, Customers Bancorp's total risk based capital ratio and TCE ratio, excluding PPP loans (a non-GAAP measure), were 12.0% and 5.9%, respectively. Our capital ratios in 2020 were impacted by strong growth in mortgage warehouse balances ($1.6 billion in growth year-to-date) and our TCE ratio was also impacted by a $61.5 million charge to retained earnings in Q1 2020 upon the adoption of CECL. The mortgage warehouse trend has been a function of greater refinance activity due to sharply lower interest rates, an increase in home purchase volumes, and market share gains from other banks. The average life of these warehouse loans (a $3.9 billion balance at September 30, 2020) are generally less than 30 days, affording us a high level of control over our capital position. We forecast our capital levels to improve in fourth quarter 2020 and step-up materially in 2021. We expect capital accretion to be driven by the recognition of $100 million in PPP loan origination fees and a cyclical decline in mortgage warehouse balances. “We forecast our total risk based capital ratio to exceed 12% by the end of this year and 14% by year-end 2021,” Sidhu concluded.

Looking Ahead to $3.00 or higher EPS in 2020 and 2021

Mr. Sidhu stated, "Before COVID-19, Customers was projecting core earnings per share of $3.00 for 2020 with continued improvement expected in all profitability metrics. Like the rest of the industry, rapid changes in economic activity introduced uncertainty to our near-term profitability. We have pivoted our strategy in this environment to building a stronger balance sheet and assisting our customers, team members and community to effectively deal with this crisis and still meet or exceed our core earnings goals for 2020. Our provisions are higher, most customer activity remains slow, and there have been disruptions, but we are also seeing positive trends in deposits, selected growth in certain loan categories, and opportunities to steal market share stemming from our participation in the Paycheck Protection Program.” Mr. Sidhu continued, "Despite all of this, we are still expecting to achieve about $3.00 per share in core earnings for 2020, subject to the amount of PPP revenues that will be recognized in 2020. Longer term, we remain confident in our ability to achieve a run-rate of about $3.00 in core earnings for 2021 and about $6.00 per share in annual core earnings by the end of 2026. We will show progress toward these goals on our quarterly calls,” stated Sidhu.

Customers is well positioned to execute on its 2020 and 2026 LT strategies

  • Loan growth, excluding PPP and mortgage warehouse balances, is expected to average in the mid-to-high single digits over the next several quarters.
  • Total assets are projected to be about $12 billion -$13 billion at year-end 2020, excluding PPP loans and subject to refinance activity impacting loans to mortgage companies.
  • The total risk based capital ratio is expected to exceed 12% by year-end 2020 and be about 14% by year-end 2021.
  • Preferred equity will not be called in 2020 or 2021.
  • We project the NIM in the 2.90%-3.00% range for the full year 2020 excluding PPP loans.
  • Operating expenses are expected to be about flat over the next few quarters excluding the impact of the BankMobile divestiture.
  • The effective tax rate is forecast to be about 21% - 22.0% for 2020
  • PPP loans will add about $100 million in pre-tax origination fees. A substantial portion of this amount will be recognized in the first half of 2021.
  • A run-rate of $3.00+ in core EPS for 2020 and 2021 and $6.00 in core EPS for 2026 remains a goal.

BankMobile

  • BankMobile is expected to remain profitable in 2020
  • The divestiture is on target for completion by year-end 2020

Status Report on Strategic Priorities Articulated at Last Analysts Day

Improve Profitability: Top Quartile Profitability with 1.25% Core ROAA in 2-3 years

As stated during our last 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 last Analysts Day in October 2018 and subsequent progress through Q3 2020 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 1.12% in Q3 2020, up from Q2 2020 ROAA of 0.62% due to increases of $15.5 million in net interest income and $11.6 million in non-interest income, primarily driven by $11.7 million of gain on sale of investment securities, and an $8.0 million reduction in provision for credit losses on loans and leases, mostly due to improving macroeconomic forecasts since Q2 2020. The pre-tax and pre-provision adjusted ROAA (a non-GAAP measure) was 1.43% for Q3 2020, up 4 basis points from 1.39% in Q3 2019.
  • Achieve NIM expansion to 2.75% or greater by Q4 2019, with full year 2019 NIM above 2.70%, through an expected shift in asset and funding mix . Actual results for 2019 were materially better, with full year 2019 NIM of 2.75%. NIM in Q3 2020 was 2.50%, down from 2.65% in Q2 2020 and 2.83% in Q3 2019. NIM, excluding PPP loans (a non-GAAP measure), was 2.86% in Q3 2020, down from 2.97% in Q2 2020. NIM, excluding PPP loans, is expected to remain on average between 2.9% and 3.0% for 2020.
  • 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, Q2 2020, and Q3 2020, and was also profitable in Q1 2020 on an adjusted pre-tax pre-provision basis (a non-GAAP measure). BankMobile's profitability in Q1 2020 was negatively impacted by increased CECL-related provision expense, the COVID-19 crisis, a legal reserve of $1 million related to the previously disclosed U.S. Department of Education matter, increased depreciation expense related to capitalized development costs for technology placed in service in 2019 and non-capitalizable technology-related expenses. Key strategic priorities for 2020 include keeping BankMobile profitable, and divesting BankMobile Technologies, Inc. ("BMT"), the technology arm of the BankMobile segment, by the end of 2020.
  • Expense control. Customers' efficiency ratio was 50.71% in Q3 2020, down from 58.44% in Q2 2020 and 61.58% in Q3 2019. Improving operating efficiency is a high priority.
  • Growth in core deposits and good quality higher-yielding loans. Demand Deposit Accounts ("DDAs") grew 71% year-over-year. Lower yielding multi-family loans decreased by $847 million, or 30%, year-over-year and were replaced by higher yielding C&I loans and leases and installment loans, which had net growth of $408 million and $599 million year-over-year, respectively. Customers originated an additional $198 million of PPP loans during Q3 2020, with a balance of $5.0 billion at September 30, 2020.
  • Maintain strong credit quality and superior risk management. Non-performing loans ("NPLs") were negatively impacted by one commercial real estate loan. In spite of this, NPLs were only 0.38% of total loans and leases at September 30, 2020. Customers expects to resolve this credit during Q4 2020 or Q1 2021. Reserves to NPLs at September 30, 2020 were 245% and the coverage ratio was 2.0% of loans and leases receivable, excluding PPP loans (a non-GAAP measure). The Bank is relatively neutral to interest rate changes at September 30, 2020. We remain very focused on a strong Risk Management culture throughout our 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 $0.43 annually, if not replaced. Given the current economic uncertainty stemming from the COVID-19 crisis, Customers will not call for redemption any preferred stock in 2020 or 2021.

Net Interest Income

Net interest income totaled $107.4 million in Q3 2020, an increase of $15.5 million from Q2 2020, primarily due to a $3.1 billion increase in average interest-earning assets. Earning assets were driven by PPP loan originations and increases in commercial loans to mortgage companies, commercial and industrial loans and leases, investment securities, and interest earning deposits. The benefit of this growth was partially offset by a 15 basis point linked-quarter decline in NIM (a non-GAAP measure) to 2.50%. Compared to Q2 2020, total loan yields decreased 31 basis points to 3.41%. The decrease is attributable to the origination of PPP loans carrying an average yield of 1.97% and lower market interest rates due to the Federal Reserve's forecast of interest rates at zero through 2023. The cost of interest-bearing deposits in Q3 2020 similarly decreased by 26 basis points to 0.85% due to the decline in market interest rates and strategic decisions to reallocate deposit funding to lower cost deposits. Borrowing costs decreased 27 basis points to 0.97% due to the utilization of the FRB PPP Liquidity Facility, costing 0.35%, to fund PPP loans.

Total loans and leases increased $6.3 billion, or 62%, to $16.6 billion at September 30, 2020 compared to the year-ago period. PPP loans originated directly or through fintech partnerships were $5.0 billion at September 30, 2020. Additionally, the loan mix improved year-over-year as commercial loans to mortgage companies increased $1.4 billion to $3.9 billion, commercial and industrial loans and leases increased $408 million to $2.2 billion, and commercial real estate owner occupied loans increased $82 million to $558 million. These increases were offset in part by planned decreases in multi-family loans of $847 million to $2.0 billion and residential mortgages of $297 million to $344 million. “Looking ahead, we see continued growth in core C&I loans offsetting some of the expected decreases in loans to mortgage companies," stated Sidhu.

Total deposits increased $1.9 billion, or 21%, to $10.8 billion at September 30, 2020 compared to the year-ago period. Total demand deposits increased $1.9 billion, or 71%, to $4.6 billion, money market deposits increased $855 million, or 27%, to $4.1 billion, and savings deposits increased $582 million, or 98%, to $1.2 billion. These increases were offset, in part, by a decrease in time deposits of $1.5 billion, or 60%, to $972 million. The total cost of deposits declined to 0.67% for the three months ended September 30, 2020 from 1.82% for the three months ended September 30, 2019.

Risk Management, Provision and Credit Quality

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 prerequisites to creating shareholder value. Customers believes that asset quality must be diligently addressed through prudent underwriting standards when the economy is strong so that we are well positioned when an economic downturn arises. Since mid-2019, Customers has been operating as though a recession was imminent in the immediate future. "Our Credit Administration Group and Market Presidents started analyzing their portfolios, in detail, and stressing them under adverse scenarios and either exiting or increasing the monitoring activities of higher risk credits early in 2019. Customers' non-performing loans at September 30, 2020 were only 0.38% of total loans and leases. Our Q3 2020 non-performing loans were impacted by one commercial real estate credit, which is expected to be resolved during Q4 2020, reducing our non-performing loans by year-end. We fully expect to maintain superior asset quality in good times and in difficult years," said Mr. Sidhu.

The provision for credit losses on loans and leases in Q3 2020, which was calculated under the CECL accounting standard effective January 1, 2020, was $13.0 million, compared to $20.9 million in Q2 2020. The decrease in Q3 2020 primarily resulted from an improvement in current and future macroeconomic conditions since Q2 2020, partially offset by a $9.6 million charge-off related to one commercial real estate credit expected to be sold during Q4 2020 or Q1 2021. The allowance for credit losses on loans and leases represented just over 2.0% of total loans and leases receivable, excluding PPP loans (a non-GAAP measure) at September 30, 2020, compared to 2.2% at June 30, 2020, and 0.8% at December 31, 2019.

Non-Interest Income

Non-interest income totaled $33.8 million for Q3 2020, an increase of $11.6 million compared to Q2 2020. The increase in non-interest income primarily resulted from an increase of $7.4 million in gain on sale of investment securities, $5.5 million in other non-interest income, $1.0 million in mortgage banking income, and $0.7 million in mortgage warehouse transactional fees, partially offset by a decrease of $2.4 million in interchange and card revenue and a $1.0 million decline in unrealized gains on equity securities issued by a foreign entity. The increase in gain on sale of investment securities primarily resulted from the sale of $58.4 million of agency-guaranteed mortgage-backed securities and $70.0 million in corporate notes in Q3 2020. The increase in other non-interest income was driven by a net derivative valuation adjustment of $5.0 million due to changes in market interest rates and a negative credit valuation adjustment and an unrealized loss on one loan held for sale of $1.5 million during Q2 2020. The increase in mortgage banking income was mainly related to unrealized gains on derivatives and gains on sales of mortgage servicing rights. The increase in mortgage warehouse transactional fees primarily resulted from an increase in transaction volumes due to continued low market interest rates. The decrease in interchange and card revenue primarily resulted from Customers becoming subject to the Federal Reserve's regulation limits on interchange fees for banks over $10 billion in total assets beginning on July 1, 2020. The decrease in unrealized gains on equity securities issued by a foreign entity primarily resulted from a decline in the valuation of those securities.

Non-Interest Expense

Non-interest expense totaled $65.6 million for Q3 2020, an increase of $2.1 million compared to Q2 2020. The increase in non-interest expense primarily resulted from increases of $2.7 million in professional services, $1.4 million in salaries and employee benefits, $1.4 million in FDIC assessments, non-income taxes and regulatory fees, and $1.0 million in merger and acquisition related expenses, partially offset by decreases of $3.6 million in other non-interest expenses and $1.0 million in loan workout expenses. The increase in professional services primarily resulted from consulting services associated with supporting our white label partnership and digital transformation efforts. The increase in salaries and employee benefits primarily resulted from an increase in full time equivalents needed for future growth, one additional business day in Q3 2020, and an increase in incentive accruals tied to Customers' overall performance. The increase in FDIC assessments, non-income taxes and regulatory fees was a function of an increase in FDIC assessment rates due to the temporary utilization of brokered deposits to fund PPP loans. The increase in merger and acquisition related expenses primarily resulted from the pending merger of BankMobile Technologies, Inc. and Megalith Financial Acquisition Corp. The decrease in other non-interest expense primarily resulted from an increase in operating cost reimbursements from Customers' white label partnership. The decrease in loan workout expenses primarily resulted from lower costs related to the workout of two commercial relationships.

Taxes

Customers' effective tax rate was 19.5% for Q3 2020 compared to 23.7% for Q2 2020. The effective tax rate is expected to be between 20% - 21% for 2020.

Webcast

Date:

Thursday, October 29, 2020

Time:

9:00 AM EDT

The live audio webcast, presentation slides, and earnings press release will be made available at https://www.customersbank.com/investor-relations/ and at the Customers Bank 3rd Quarter Earnings Webcast.

The third quarter 2020 earnings press release will be issued after the market close on Wednesday, October 28, 2020.

You may submit questions in advance of the live webcast by emailing Customers' Communications & Marketing Director, David Patti at [email protected]; questions may also be asked during the webcast through the webcast application.

The webcast will be archived for viewing on the Customers Bank Investor Relations page and available beginning approximately two hours after the conclusion of the live event.

Institutional Background

Customers Bancorp, Inc. is a bank holding company located in West Reading, 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 $18.8 billion at September 30, 2020. 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 events and 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, including: the adverse impact on the U.S. economy, including the markets in which we operate, of the coronavirus outbreak, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that effect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; the effects of changes in accounting standards or policies, including Accounting Standards Update ("ASU") 2016-13, Financial Instruments—Credit Losses ("CECL"); and, our ability to divest BankMobile on terms and conditions acceptable to us, in the timeframe we currently intend, and the possible effects on our business and results of operations of a divestiture of BankMobile or if we are unable to divest BankMobile for an extended period of time. 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, 2019, 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, except as may be required under applicable law.

Q3 2020 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended September 30, 2020 and the preceding four quarters:

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

EARNINGS SUMMARY - UNAUDITED

 

 

 

 

 

 

 

 

 

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

Q3

Q2

Q1

Q4

Q3

Nine Months Ended
September 30,

2020

2020

2020

2019

2019

2020

2019

 

 

 

 

 

 

 

 

 

GAAP Profitability Metrics:

 

 

 

 

 

 

 

 

Net income available to common shareholders

$

47,085

 

$

19,137

 

$

(515)

 

$

23,911

 

$

23,451

 

$

65,706

 

$

40,957

 

Per share amounts:

 

 

 

 

 

 

 

 

Earnings per share - basic

$

1.49

 

$

0.61

 

$

(0.02)

 

$

0.76

 

$

0.75

 

$

2.09

 

$

1.32

 

Earnings per share - diluted

$

1.48

 

$

0.61

 

$

(0.02)

 

$

0.75

 

$

0.74

 

$

2.07

 

$

1.30

 

Book value per common share (1)

$

26.43

 

$

25.08

 

$

23.74

 

$

26.66

 

$

25.66

 

$

26.43

 

$

25.66

 

CUBI stock price (1)

$

11.20

 

$

12.02

 

$

10.93

 

$

23.81

 

$

20.74

 

$

11.20

 

$

20.74

 

CUBI stock price as % of book value (1)

42

%

48

%

46

%

89

%

81

%

42

%

81

%

Average shares outstanding - basic

31,517,504

 

31,477,591

 

31,391,151

 

31,306,813

 

31,223,777

 

31,462,284

 

31,142,400

 

Average shares outstanding - diluted

31,736,311

 

31,625,771

 

31,391,151

 

31,876,341

 

31,644,728

 

31,666,027

 

31,581,029

 

Shares outstanding (1)

31,555,124

 

31,510,287

 

31,470,026

 

31,336,791

 

31,245,776

 

31,555,124

 

31,245,776

 

Return on average assets ("ROAA")

1.12

%

0.62

%

0.11

%

0.97

%

0.95

%

0.69

%

0.66

%

Return on average common equity ("ROCE")

23.05

%

9.97

%

(0.26)

%

11.58

%

11.81

%

11.01

%

7.12

%

Efficiency ratio

50.71

%

58.44

%

66.03

%

56.98

%

61.58

%

57.74

%

68.48

%

Non-GAAP Profitability Metrics (2):

 

 

 

 

 

 

 

 

Core earnings

$

38,210

 

$

19,174

 

$

603

 

$

23,843

 

$

23,402

 

$

57,986

 

$

48,170

 

Adjusted pre-tax pre-provision net income

$

64,176

 

$

50,766

 

$

38,595

 

$

44,676

 

$

39,440

 

$

153,537

 

$

90,885

 

Per share amounts:

 

 

 

 

 

 

 

 

Core earnings per share - diluted

$

1.20

 

$

0.61

 

$

0.02

 

$

0.75

 

$

0.74

 

$

1.83

 

$

1.53

 

Tangible book value per common share (1)

$

25.97

 

$

24.62

 

$

23.27

 

$

26.17

 

$

25.16

 

$

25.97

 

$

25.16

 

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

43

%

49

%

47

%

91

%

82

%

43

%

82

%

Core ROAA

0.93

%

0.62

%

0.15

%

0.97

%

0.95

%

0.62

%

0.75

%

Core ROCE

18.71

%

9.99

%

0.30

%

11.55

%

11.78

%

9.71

%

8.37

%

Adjusted ROAA - pre-tax and pre-provision

1.43

%

1.39

%

1.34

%

1.57

%

1.39

%

1.39

%

1.16

%

Adjusted ROCE - pre-tax and pre-provision

29.74

%

24.59

%

17.41

%

19.89

%

18.04

%

23.94

%

13.91

%

Net interest margin, tax equivalent

2.50

%

2.65

%

2.99

%

2.89

%

2.83

%

2.68

%

2.69

%

Net interest margin, tax equivalent, excluding PPP loans

2.86

%

2.97

%

2.99

%

2.89

%

2.83

%

2.93

%

2.69

%

Core efficiency ratio

49.81

%

55.39

%

63.33

%

56.76

%

59.21

%

55.68

%

65.15

%

Asset Quality:

 

 

 

 

 

 

 

 

Net charge-offs

$

17,299

 

$

10,325

 

$

18,711

 

$

4,362

 

$

1,761

 

$

46,335

 

$

3,458

 

Annualized net charge-offs to average total loans and leases

0.45

%

0.32

%

0.79

%

0.18

%

0.07

%

0.49

%

0.05

%

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

0.38

%

0.56

%

0.49

%

0.21

%

0.17

%

0.38

%

0.17

%

Reserves to NPLs (1)

244.70

%

185.36

%

296.44

%

264.67

%

288.58

%

244.70

%

288.58

%

Non-performing assets ("NPAs") to total assets

0.34

%

0.48

%

0.53

%

0.19

%

0.15

%

0.34

%

0.15

%

Customers Bank Capital Ratios (3):

 

 

 

 

 

 

 

 

Common equity Tier 1 capital to risk-weighted assets

10.12

%

10.64

%

10.60

%

11.32

%

10.85

%

10.12

%

10.85

%

Tier 1 capital to risk-weighted assets

10.12

%

10.64

%

10.60

%

11.32

%

10.85

%

10.12

%

10.85

%

Total capital to risk-weighted assets

11.62

%

12.30

%

12.21

%

12.93

%

12.42

%

11.62

%

12.42

%

Tier 1 capital to average assets (leverage ratio)

9.14

%

9.59

%

9.99

%

10.38

%

9.83

%

9.14

%

9.83

%

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

 

 

(2) Non-GAAP measures exclude unrealized gains (losses) on loans HFS, investment securities gains and losses, severance expense, merger and acquisition-related expenses, losses realized from the sale of non-QM residential mortgage loans, loss upon acquisition of interest-only GNMA securities, legal reserves, credit valuation adjustments on derivatives, risk participation agreement mark-to-market adjustments, 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 Q3 2020 and actual for the remaining periods. In accordance with regulatory capital rules, Customers elected an option to delay the estimated impact of CECL on its regulatory capital over a five-year transition period ending January 1, 2025. As a result, capital ratios and amounts as of Q3 2020 exclude the impact of the increased allowance for credit losses on loans and leases and unfunded loan commitments attributed to the adoption of CECL and 25% of the quarterly provision for credit losses for subsequent quarters through Q4 2021.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

Q3

 

Q2

 

Q1

 

Q4

 

Q3

 

September 30,

 

2020

 

2020

 

2020

 

2019

 

2019

 

2020

 

2019

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases

$

132,107

 

 

$

118,447

 

 

$

116,080

 

 

$

116,365

 

 

$

118,444

 

 

$

366,634

 

 

$

315,126

 

Investment securities

6,297

 

 

6,155

 

 

4,977

 

 

5,125

 

 

5,867

 

 

17,429

 

 

18,589

 

Other

1,246

 

 

616

 

 

4,286

 

 

2,505

 

 

2,407

 

 

6,149

 

 

6,030

 

Total interest income

139,650

 

 

125,218

 

 

125,343

 

 

123,995

 

 

126,718

 

 

390,212

 

 

339,745

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

18,347

 

 

23,238

 

 

34,353

 

 

35,992

 

 

38,267

 

 

75,939

 

 

105,472

 

FHLB advances

5,762

 

 

4,736

 

 

5,390

 

 

6,056

 

 

7,563

 

 

15,889

 

 

20,463

 

Subordinated debt

2,689

 

 

2,689

 

 

2,689

 

 

1,930

 

 

1,684

 

 

8,066

 

 

5,053

 

Federal funds purchased and other borrowings

5,413

 

 

2,573

 

 

1,590

 

 

2,424

 

 

3,469

 

 

9,576

 

 

9,039

 

Total interest expense

32,211

 

 

33,236

 

 

44,022

 

 

46,402

 

 

50,983

 

 

109,470

 

 

140,027

 

Net interest income

107,439

 

 

91,982

 

 

81,321

 

 

77,593

 

 

75,735

 

 

280,742

 

 

199,718

 

Provision for credit losses on loans and leases

12,955

 

 

20,946

 

 

31,786

 

 

9,689

 

 

4,426

 

 

65,688

 

 

14,539

 

Net interest income after provision for credit losses on loans and leases

94,484

 

 

71,036

 

 

49,535

 

 

67,904

 

 

71,309

 

 

215,054

 

 

185,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interchange and card revenue

4,081

 

 

6,478

 

 

6,809

 

 

6,506

 

 

6,869

 

 

17,368

 

 

22,435

 

Deposit fees

3,439

 

 

3,321

 

 

3,460

 

 

3,616

 

 

3,642

 

 

10,221

 

 

9,199

 

Commercial lease income

4,510

 

 

4,508

 

 

4,268

 

 

3,839

 

 

3,080

 

 

13,286

 

 

8,212

 

Bank-owned life insurance

1,746

 

 

1,757

 

 

1,762

 

 

1,795

 

 

1,824

 

 

5,265

 

 

5,477

 

Mortgage warehouse transactional fees

3,320

 

 

2,582

 

 

1,952

 

 

1,983

 

 

2,150

 

 

7,854

 

 

5,145

 

Gain (loss) on sale of SBA and other loans

286

 

 

23

 

 

11

 

 

2,770

 

 

 

 

320

 

 

 

Mortgage banking income (loss)

1,013

 

 

38

 

 

296

 

 

(635

)

 

283

 

 

1,347

 

 

701

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

 

 

 

 

 

 

 

 

(7,476

)

Gain (loss) on sale of investment securities

11,707

 

 

4,353

 

 

3,974

 

 

 

 

1,001

 

 

20,035

 

 

1,001

 

Unrealized gain (loss) on investment securities

238

 

 

1,200

 

 

(1,378

)

 

310

 

 

1,333

 

 

60

 

 

988

 

Other

3,453

 

 

(2,024

)

 

776

 

 

5,629

 

 

3,187

 

 

2,203

 

 

9,443

 

Total non-interest income

33,793

 

 

22,236

 

 

21,930

 

 

25,813

 

 

23,369

 

 

77,959

 

 

55,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

32,676

 

 

31,296

 

 

28,310

 

 

27,697

 

 

27,193

 

 

92,283

 

 

79,936

 

Technology, communication and bank operations

13,215

 

 

13,310

 

 

13,050

 

 

10,370

 

 

8,755

 

 

39,576

 

 

33,110

 

Professional services

7,253

 

 

4,552

 

 

7,670

 

 

6,470

 

 

8,348

 

 

19,476

 

 

18,639

 

Occupancy

3,632

 

 

3,025

 

 

3,032

 

 

3,470

 

 

3,661

 

 

9,689

 

 

9,628

 

Commercial lease depreciation

3,663

 

 

3,643

 

 

3,427

 

 

2,840

 

 

2,459

 

 

10,733

 

 

6,633

 

FDIC assessments, non-income taxes and regulatory fees

3,784

 

 

2,368

 

 

2,867

 

 

2,492

 

 

(777

)

 

9,019

 

 

3,368

 

Provision for operating losses

1,186

 

 

1,068

 

 

912

 

 

1,415

 

 

3,998

 

 

3,166

 

 

8,223

 

Advertising and promotion

 

 

582

 

 

1,641

 

 

899

 

 

976

 

 

2,221

 

 

3,145

 

Merger and acquisition related expenses

1,035

 

 

25

 

 

50

 

 

100

 

 

 

 

1,110

 

 

 

Loan workout

846

 

 

1,808

 

 

366

 

 

230

 

 

495

 

 

3,020

 

 

1,458

 

Other real estate owned

7

 

 

12

 

 

8

 

 

247

 

 

108

 

 

26

 

 

151

 

Other

(1,736

)

 

1,817

 

 

5,126

 

 

2,510

 

 

4,376

 

 

5,206

 

 

8,869

 

Total non-interest expense

65,561

 

 

63,506

 

 

66,459

 

 

58,740

 

 

59,592

 

 

195,525

 

 

173,160

 

Income before income tax expense

62,716

 

 

29,766

 

 

5,006

 

 

34,977

 

 

35,086

 

 

97,488

 

 

67,144

 

Income tax expense

12,201

 

 

7,048

 

 

1,906

 

 

7,451

 

 

8,020

 

 

21,156

 

 

15,343

 

Net income

50,515

 

 

22,718

 

 

3,100

 

 

27,526

 

 

27,066

 

 

76,332

 

 

51,801

 

Preferred stock dividends

3,430

 

 

3,581

 

 

3,615

 

 

3,615

 

 

3,615

 

 

10,626

 

 

10,844

 

Net income available to common shareholders

$

47,085

 

 

$

19,137

 

 

$

(515

)

 

$

23,911

 

 

$

23,451

 

 

$

65,706

 

 

$

40,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

1.49

 

 

$

0.61

 

 

$

(0.02

)

 

$

0.76

 

 

$

0.75

 

 

$

2.09

 

 

$

1.32

 

Diluted earnings per common share

$

1.48

 

 

$

0.61

 

 

$

(0.02

)

 

$

0.75

 

 

$

0.74

 

 

$

2.07

 

 

$

1.30

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - UNAUDITED

(Dollars in thousands)

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

2020

 

2020

 

2020

 

2019

 

2019

ASSETS

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

5,822

 

 

$

44,577

 

 

$

18,842

 

 

$

33,095

 

 

$

12,555

 

Interest earning deposits

325,594

 

 

1,022,753

 

 

237,390

 

 

179,410

 

 

169,663

 

Cash and cash equivalents

331,416

 

 

1,067,330

 

 

256,232

 

 

212,505

 

 

182,218

 

Investment securities, at fair value

1,133,831

 

 

681,382

 

 

712,657

 

 

595,876

 

 

608,714

 

Loans held for sale

26,689

 

 

464,164

 

 

450,157

 

 

486,328

 

 

502,854

 

Loans receivable, mortgage warehouse, at fair value

3,913,593

 

 

2,793,164

 

 

2,518,012

 

 

2,245,758

 

 

2,438,530

 

Loans receivable, PPP

4,964,105

 

 

4,760,427

 

 

 

 

 

 

 

Loans and leases receivable

7,700,892

 

 

7,272,447

 

 

7,353,262

 

 

7,318,988

 

 

7,336,237

 

Allowance for credit losses on loans and leases

(155,561

)

 

(159,905

)

 

(149,283

)

 

(56,379

)

 

(51,053

)

Total loans and leases receivable, net of allowance for credit losses on loans and leases

16,423,029

 

 

14,666,133

 

 

9,721,991

 

 

9,508,367

 

 

9,723,714

 

FHLB, Federal Reserve Bank, and other restricted stock

70,387

 

 

91,023

 

 

87,140

 

 

84,214

 

 

81,853

 

Accrued interest receivable

65,668

 

 

49,911

 

 

40,570

 

 

38,072

 

 

38,412

 

Bank premises and equipment, net

11,744

 

 

8,380

 

 

8,890

 

 

9,389

 

 

14,075

 

Bank-owned life insurance

277,826

 

 

275,842

 

 

273,576

 

 

272,546

 

 

270,526

 

Other real estate owned

131

 

 

131

 

 

131

 

 

173

 

 

204

 

Goodwill and other intangibles

14,437

 

 

14,575

 

 

14,870

 

 

15,195

 

 

15,521

 

Other assets

423,569

 

 

584,247

 

 

452,585

 

 

298,052

 

 

285,699

 

Total assets

$

18,778,727

 

 

$

17,903,118

 

 

$

12,018,799

 

 

$

11,520,717

 

 

$

11,723,790

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Demand, non-interest bearing deposits

$

2,327,017

 

 

$

1,879,789

 

 

$

1,435,151

 

 

$

1,343,391

 

 

$

1,569,918

 

Interest bearing deposits

8,512,060

 

 

9,086,086

 

 

6,978,492

 

 

7,305,545

 

 

7,355,767

 

Total deposits

10,839,077

 

 

10,965,875

 

 

8,413,643

 

 

8,648,936

 

 

8,925,685

 

FRB advances

 

 

 

 

175,000

 

 

 

 

 

Federal funds purchased

680,000

 

 

 

 

705,000

 

 

538,000

 

 

373,000

 

FHLB advances

850,000

 

 

850,000

 

 

1,260,000

 

 

850,000

 

 

1,040,800

 

Other borrowings

123,935

 

 

123,833

 

 

123,732

 

 

123,630

 

 

123,528

 

Subordinated debt

181,324

 

 

181,255

 

 

181,185

 

 

181,115

 

 

109,050

 

FRB PPP liquidity facility

4,811,009

 

 

4,419,967

 

 

 

 

 

 

 

Accrued interest payable and other liabilities

241,891

 

 

354,341

 

 

195,603

 

 

126,241

 

 

132,577

 

Total liabilities

17,727,236

 

 

16,895,271

 

 

11,054,163

 

 

10,467,922

 

 

10,704,640

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

217,471

 

 

217,471

 

 

217,471

 

 

217,471

 

 

217,471

 

Common stock

32,836

 

 

32,791

 

 

32,751

 

 

32,617

 

 

32,526

 

Additional paid in capital

452,965

 

 

450,665

 

 

446,840

 

 

444,218

 

 

441,499

 

Retained earnings

385,750

 

 

338,665

 

 

319,529

 

 

381,519

 

 

357,608

 

Accumulated other comprehensive loss

(15,751

)

 

(9,965

)

 

(30,175

)

 

(1,250

)

 

(8,174

)

Treasury stock, at cost

(21,780

)

 

(21,780

)

 

(21,780

)

 

(21,780

)

 

(21,780

)

Total shareholders' equity

1,051,491

 

 

1,007,847

 

 

964,636

 

 

1,052,795

 

 

1,019,150

 

Total liabilities & shareholders' equity

$

18,778,727

 

 

$

17,903,118

 

 

$

12,018,799

 

 

$

11,520,717

 

 

$

11,723,790

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

September 30, 2020

 

June 30, 2020

 

September 30, 2019

 

Average Balance

Average
Yield or
Cost (%)

 

Average Balance

Average
Yield or
Cost (%)

 

Average Balance

Average
Yield or
Cost (%)

Assets

 

 

 

 

 

 

 

 

Interest earning deposits

$

686,928

 

0.12

%

 

$

384,622

 

0.12

%

 

$

100,343

 

3.26

%

Investment securities (1)

950,723

 

2.65

%

 

705,389

 

3.49

%

 

652,142

 

3.60

%

Loans and leases:

 

 

 

 

 

 

 

 

Commercial loans to mortgage companies

2,847,169

 

2.90

%

 

2,456,067

 

2.91

%

 

2,103,612

 

4.58

%

Multi-family loans

1,989,074

 

3.72

%

 

2,009,847

 

3.87

%

 

2,929,650

 

3.91

%

Commercial and industrial loans and leases (2)

2,599,806

 

3.82

%

 

2,460,060

 

4.05

%

 

2,159,067

 

5.24

%

Loans receivable, PPP

4,909,197

 

1.97

%

 

2,754,920

 

1.71

%

 

 

%

Non-owner occupied commercial real estate loans

1,388,306

 

3.70

%

 

1,392,131

 

3.81

%

 

1,294,246

 

4.57

%

Residential mortgages

414,781

 

3.97

%

 

429,609

 

3.53

%

 

729,603

 

4.11

%

Installment loans

1,255,505

 

8.37

%

 

1,288,999

 

8.72

%

 

600,256

 

9.47

%

Total loans and leases (3)

15,403,838

 

3.41

%

 

12,791,633

 

3.72

%

 

9,816,434

 

4.79

%

Other interest-earning assets

79,656

 

5.23

%

 

98,377

 

2.06

%

 

98,279

 

6.39

%

Total interest-earning assets

17,121,145

 

3.25

%

 

13,980,021

 

3.60

%

 

10,667,198

 

4.72

%

Non-interest-earning assets

744,429

 

 

 

695,563

 

 

 

591,946

 

 

Total assets

$

17,865,574

 

 

 

$

14,675,584

 

 

 

$

11,259,144

 

 

Liabilities

 

 

 

 

 

 

 

 

Interest checking accounts

$

2,370,709

 

0.78

%

 

$

2,482,222

 

0.75

%

 

$

1,014,590

 

1.83

%

Money market deposit accounts

3,786,032

 

0.65

%

 

3,034,457

 

0.85

%

 

3,100,975

 

2.22

%

Other savings accounts

1,125,273

 

1.06

%

 

1,177,554

 

1.94

%

 

561,790

 

2.19

%

Certificates of deposit

1,344,134

 

1.35

%

 

1,734,062

 

1.51

%

 

2,227,817

 

2.34

%

Total interest-bearing deposits (4)

8,626,148

 

0.85

%

 

8,428,295

 

1.11

%

 

6,905,172

 

2.20

%

FRB PPP liquidity facility

4,479,036

 

0.35

%

 

942,258

 

0.35

%

 

 

%

Borrowings

1,236,127

 

3.19

%

 

2,282,761

 

1.62

%

 

1,770,459

 

2.86

%

Total interest-bearing liabilities

14,341,311

 

0.89

%

 

11,653,314

 

1.15

%

 

8,675,631

 

2.33

%

Non-interest-bearing deposits (4)

2,194,689

 

 

 

1,890,955

 

 

 

1,431,810

 

 

Total deposits and borrowings

16,536,000

 

0.78

%

 

13,544,269

 

0.99

%

 

10,107,441

 

2.00

%

Other non-interest-bearing liabilities

299,526

 

 

 

142,181

 

 

 

146,347

 

 

Total liabilities

16,835,526

 

 

 

13,686,450

 

 

 

10,253,788

 

 

Shareholders' equity

1,030,048

 

 

 

989,134

 

 

 

1,005,356

 

 

Total liabilities and shareholders' equity

$

17,865,574

 

 

 

$

14,675,584

 

 

 

$

11,259,144

 

 

Interest spread

 

2.47

%

 

 

2.61

%

 

 

2.71

%

Net interest margin

 

2.50

%

 

 

2.65

%

 

 

2.82

%

Net interest margin tax equivalent (5)

 

2.50

%

 

 

2.65

%

 

 

2.83

%

Net interest margin tax equivalent excl. PPP ( 6)

 

2.86

%

 

 

2.97

%

 

 

2.83

%

(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 0.67%, 0.91% and 1.82% for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, 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.

(6) Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. 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)

 

 

 

 

 

 

Nine Months Ended

 

September 30, 2020

 

September 30, 2019

 

Average Balance

Average Yield
or Cost (%)

 

Average Balance

Average Yield
or Cost (%)

Assets

 

 

 

 

 

Interest earning deposits

$

614,863

 

0.69

%

 

$

88,146

 

2.95

%

Investment securities (1)

741,566

 

3.13

%

 

676,859

 

3.66

%

Loans and leases:

 

 

 

 

 

Commercial loans to mortgage companies

2,383,331

 

3.14

%

 

1,678,461

 

4.75

%

Multi-family loans

2,070,564

 

3.89

%

 

3,092,473

 

3.84

%

Commercial and industrial loans and leases (2)

2,507,231

 

4.18

%

 

2,041,379

 

5.19

%

Loans receivable, PPP

2,563,299

 

1.88

%

 

 

%

Non-owner occupied commercial real estate loans

1,372,090

 

3.94

%

 

1,215,469

 

4.52

%

Residential mortgages

430,058

 

3.82

%

 

716,294

 

4.19

%

Installment loans

1,267,806

 

8.74

%

 

337,126

 

9.42

%

Total loans and leases (3)

12,594,379

 

3.89

%

 

9,081,202

 

4.64

%

Other interest-earning assets

86,454

 

4.60

%

 

91,135

 

5.99

%

Total interest-earning assets

14,037,262

 

3.71

%

 

9,937,342

 

4.57

%

Non-interest-earning assets

679,128

 

 

 

531,656

 

 

Total assets

$

14,716,390

 

 

 

$

10,468,998

 

 

Liabilities

 

 

 

 

 

Interest checking accounts

$

2,050,184

 

0.90

%

 

$

889,336

 

1.89

%

Money market deposit accounts

3,486,445

 

1.10

%

 

3,138,112

 

2.24

%

Other savings accounts

1,147,994

 

1.68

%

 

476,331

 

2.14

%

Certificates of deposit

1,533,628

 

1.64

%

 

1,920,063

 

2.28

%

Total interest-bearing deposits (4)

8,218,251

 

1.23

%

 

6,423,842

 

2.20

%

FRB PPP liquidity facility

1,816,849

 

0.35

%

 

 

%

Borrowings

1,581,498

 

2.43

%

 

1,556,405

 

2.97

%

Total interest-bearing liabilities

11,616,598

 

1.26

%

 

7,980,247

 

2.35

%

Non-interest-bearing deposits (4)

1,887,463

 

 

 

1,379,633

 

 

Total deposits and borrowings

13,504,061

 

1.08

%

 

9,359,880

 

2.00

%

Other non-interest-bearing liabilities

197,428

 

 

 

122,309

 

 

Total liabilities

13,701,489

 

 

 

9,482,189

 

 

Shareholders' equity

1,014,901

 

 

 

986,809

 

 

Total liabilities and shareholders' equity

$

14,716,390

 

 

 

$

10,468,998

 

 

Interest spread

 

2.63

%

 

 

2.57

%

Net interest margin

 

2.67

%

 

 

2.69

%

Net interest margin tax equivalent (5)

 

2.68

%

 

 

2.69

%

Net interest margin tax equivalent ( 6)

 

2.93

%

 

 

2.69

%

 

 

 

 

 

 

(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 1.00% and 1.81% for the nine months ended September 30, 2020 and September 30, 2019, respectively.

(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for both the nine months ended September 30, 2020 and 2019, 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.

(6) Non-GAAP tax-equivalent basis as described in noted (5), for both the nine months ended September 30, 2020 and 2019, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. 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 nine months ended September 30, 2020 and 2019:

 

 

Three Months Ended September 30, 2020

 

Three Months Ended September 30, 2019

 

Customers
Bank Business
Banking

 

BankMobile

 

Consolidated

 

Customers
Bank Business
Banking

 

BankMobile

 

Consolidated

Interest income (1)

$

126,648

 

 

$

13,002

 

 

$

139,650

 

 

$

113,995

 

 

$

12,723

 

 

$

126,718

 

Interest expense

31,718

 

 

493

 

 

32,211

 

 

50,734

 

 

249

 

 

50,983

 

Net interest income

94,930

 

 

12,509

 

 

107,439

 

 

63,261

 

 

12,474

 

 

75,735

 

Provision for credit losses on loans and leases

8,699

 

 

4,256

 

 

12,955

 

 

2,475

 

 

1,951

 

 

4,426

 

Non-interest income

21,603

 

 

12,190

 

 

33,793

 

 

11,757

 

 

11,612

 

 

23,369

 

Non-interest expense

48,926

 

 

16,635

 

 

65,561

 

 

38,347

 

 

21,245

 

 

59,592

 

Income (loss) before income tax expense (benefit)

58,908

 

 

3,808

 

 

62,716

 

 

34,196

 

 

890

 

 

35,086

 

Income tax expense (benefit)

11,374

 

 

827

 

 

12,201

 

 

7,814

 

 

206

 

 

8,020

 

Net income (loss)

47,534

 

 

2,981

 

 

50,515

 

 

26,382

 

 

684

 

 

27,066

 

Preferred stock dividends

3,430

 

 

 

 

3,430

 

 

3,615

 

 

 

 

3,615

 

Net income (loss) available to common shareholders

$

44,104

 

 

$

2,981

 

 

$

47,085

 

 

$

22,767

 

 

$

684

 

 

$

23,451

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

1.40

 

 

$

0.09

 

 

$

1.49

 

 

$

0.73

 

 

$

0.02

 

 

$

0.75

 

Diluted earnings (loss) per common share

$

1.39

 

 

$

0.09

 

 

$

1.48

 

 

$

0.72

 

 

$

0.02

 

 

$

0.74

 

(1) Amounts reported include funds transfer pricing of $2.2 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

 

Nine Months Ended September 30, 2020

 

Nine Months Ended September 30, 2019

 

Customers
Bank Business
Banking

 

BankMobile

 

Consolidated

 

Customers
Bank Business
Banking

 

BankMobile

 

Consolidated

Interest income (1)

$

351,819

 

 

$

38,393

 

 

$

390,212

 

 

$

309,882

 

 

$

29,863

 

 

 

$

339,745

 

Interest expense

108,251

 

 

1,219

 

 

109,470

 

 

139,402

 

 

625

 

 

 

140,027

 

Net interest income

243,568

 

 

37,174

 

 

280,742

 

 

170,480

 

 

29,238

 

 

 

199,718

 

Provision for credit losses on loans and leases

55,620

 

 

10,068

 

 

65,688

 

 

3,245

 

 

11,294

 

 

 

14,539

 

Non-interest income

44,422

 

 

33,537

 

 

77,959

 

 

20,304

 

 

34,821

 

 

 

55,125

 

Non-interest expense

137,055

 

 

58,470

 

 

195,525

 

 

111,840

 

 

61,320

 

 

 

173,160

 

Income (loss) before income tax expense (benefit)

95,315

 

 

2,173

 

 

97,488

 

 

75,699

 

 

(8,555

)

 

 

67,144

 

Income tax expense (benefit)

20,708

 

 

448

 

 

21,156

 

 

17,324

 

 

(1,981

)

 

 

15,343

 

Net income (loss)

74,607

 

 

1,725

 

 

76,332

 

 

58,375

 

 

(6,574

)

 

 

51,801

 

Preferred stock dividends

10,626

 

 

 

 

10,626

 

 

10,844

 

 

 

 

 

10,844

 

Net income (loss) available to common shareholders

$

63,981

 

 

$

1,725

 

 

$

65,706

 

 

$

47,531

 

 

$

(6,574

)

 

 

$

40,957

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

2.03

 

 

$

0.05

 

 

$

2.09

 

 

$

1.53

 

 

$

(0.21

)

 

 

$

1.32

 

Diluted earnings (loss) per common share

$

2.02

 

 

$

0.05

 

 

$

2.07

 

 

$

1.51

 

 

$

(0.21

)

 

 

$

1.30

 

As of September 30, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

$

3,629

 

 

$

10,808

 

 

$

14,437

 

 

$

3,629

 

 

$

11,892

 

 

 

$

15,521

 

Total assets (2)

$

18,203,784

 

 

$

574,943

 

 

$

18,778,727

 

 

$

11,131,914

 

 

$

591,876

 

 

 

$

11,723,790

 

Total deposits

$

9,895,328

 

 

$

943,749

 

 

$

10,839,077

 

 

$

8,260,080

 

 

$

665,605

 

 

 

$

8,925,685

 

Total non-deposit liabilities (2)

$

6,853,184

 

 

$

34,975

 

 

$

6,888,159

 

 

$

1,747,846

 

 

$

31,109

 

 

 

$

1,778,955

 

(1) Amounts reported include funds transfer pricing of $5.3 million and $8.1 million for the nine months ended September 30, 2020 and 2019, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

(2) Amounts reported exclude inter-segment receivables and payables.

The following tables present Customers' business segment results for the quarter ended September 30, 2020, the preceding four quarters, and the nine months ended September 30, 2020 and 2019, respectively:

Customers Bank Business Banking:

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

Q3 2020

 

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

2020

 

2019

Interest income (1)

 

$

126,648

 

 

$

112,455

 

 

$

112,717

 

 

$

112,212

 

 

$

113,995

 

 

$

351,819

 

 

$

309,882

 

Interest expense

 

31,718

 

 

32,856

 

 

43,678

 

 

46,111

 

 

50,734

 

 

108,251

 

 

139,402

 

Net interest income

 

94,930

 

 

79,599

 

 

69,039

 

 

66,101

 

 

63,261

 

 

243,568

 

 

170,480

 

Provision for credit losses on loans and leases

 

8,699

 

 

19,623

 

 

27,298

 

 

6,846

 

 

2,475

 

 

55,620

 

 

3,245

 

Non-interest income

 

21,603

 

 

11,683

 

 

11,136

 

 

14,964

 

 

11,757

 

 

44,422

 

 

20,304

 

Non-interest expense

 

48,926

 

 

44,270

 

 

43,860

 

 

41,494

 

 

38,347

 

 

137,055

 

 

111,840

 

Income (loss) before income tax expense (benefit)

 

58,908

 

 

27,389

 

 

9,017

 

 

32,725

 

 

34,196

 

 

95,315

 

 

75,699

 

Income tax expense (benefit)

 

11,374

 

 

6,611

 

 

2,722

 

 

6,892

 

 

7,814

 

 

20,708

 

 

17,324

 

Net income (loss)

 

47,534

 

 

20,778

 

 

6,295

 

 

25,833

 

 

26,382

 

 

74,607

 

 

58,375

 

Preferred stock dividends

 

3,430

 

 

3,581

 

 

3,615

 

 

3,615

 

 

3,615

 

 

10,626

 

 

10,844

 

Net income (loss) available to common shareholders

 

$

44,104

 

 

$

17,197

 

 

$

2,680

 

 

$

22,218

 

 

$

22,767

 

 

$

63,981

 

 

$

47,531

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

 

$

1.40

 

 

$

0.55

 

 

$

0.09

 

 

$

0.71

 

 

$

0.73

 

 

$

2.03

 

 

$

1.53

 

Diluted earnings (loss) per common share

 

$

1.39

 

 

$

0.54

 

 

$

0.09

 

 

$

0.70

 

 

$

0.72

 

 

$

2.02

 

 

$

1.51

 

(1) Amounts reported include funds transfer pricing of $2.2 million, $1.6 million, $1.4 million, $0.7 million and $0.3 million for the three months ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019, respectively. Amounts reported also include funds transfer pricing of $5.3 million and $8.1 million for the nine months ended September 30, 2020 and 2019, 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:

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

Q3 2020

 

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

2020

 

2019

Interest income (2)

 

$

13,002

 

 

$

12,763

 

 

$

12,626

 

 

$

11,783

 

 

$

12,723

 

 

$

38,393

 

 

$

29,863

 

Interest expense

 

493

 

 

380

 

 

344

 

 

291

 

 

249

 

 

1,219

 

 

625

 

Net interest income

 

12,509

 

 

12,383

 

 

12,282

 

 

11,492

 

 

12,474

 

 

37,174

 

 

29,238

 

Provision for credit losses on loans and leases

 

4,256

 

 

1,323

 

 

4,488

 

 

2,843

 

 

1,951

 

 

10,068

 

 

11,294

 

Non-interest income

 

12,190

 

 

10,553

 

 

10,794

 

 

10,849

 

 

11,612

 

 

33,537

 

 

34,821

 

Non-interest expense

 

16,635

 

 

19,236

 

 

22,599

 

 

17,246

 

 

21,245

 

 

58,470

 

 

61,320

 

Income (loss) before income tax expense (benefit)

 

3,808

 

 

2,377

 

 

(4,011)

 

 

2,252

 

 

890

 

 

2,173

 

 

(8,555)

 

Income tax expense (benefit)

 

827

 

 

437

 

 

(816)

 

 

559

 

 

206

 

 

448

 

 

(1,981)

 

Net income (loss) available to common shareholders

 

$

2,981

 

 

$

1,940

 

 

$

(3,195)

 

 

$

1,693

 

 

$

684

 

 

$

1,725

 

 

$

(6,574)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share

 

$

0.09

 

 

$

0.06

 

 

$

(0.10)

 

 

$

0.05

 

 

$

0.02

 

 

$

0.05

 

 

$

(0.21)

 

Diluted income (loss) per common share

 

$

0.09

 

 

$

0.06

 

 

$

(0.10)

 

 

$

0.05

 

 

$

0.02

 

 

$

0.05

 

 

$

(0.21)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposit balances (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disbursements business deposits

 

$

644,658

 

 

$

500,072

 

 

$

502,711

 

 

$

319,263

 

 

$

598,064

 

 

 

 

 

White label deposits

 

299,091

 

 

162,691

 

 

107,054

 

 

81,837

 

 

67,541

 

 

 

 

 

Total deposits

 

$

943,749

 

 

$

662,763

 

 

$

609,765

 

 

$

401,100

 

 

$

665,605

 

 

 

 

 

(2) Amounts reported include funds transfer pricing of $2.2 million, $1.6 million, $1.4 million, $0.7 million and $0.3 million for the three months ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019, respectively. Amounts reported also include funds transfer pricing of $5.3 million and $8.1 million for the nine months ended September 30, 2020 and 2019, 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 September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019.

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

2020

 

2020

 

2020

 

2019

 

2019

Commercial:

 

 

 

 

 

 

 

 

 

Multi-family

$

1,950,300

 

 

$

2,023,571

 

 

$

2,069,077

 

 

$

2,390,204

 

 

$

2,797,579

 

Mortgage warehouse

3,947,828

 

 

2,832,112

 

 

2,573,397

 

 

2,305,784

 

 

2,549,088

 

Commercial & industrial

2,186,480

 

 

2,060,494

 

 

2,017,567

 

 

1,831,126

 

 

1,778,423

 

Commercial real estate owner occupied

557,595

 

 

544,772

 

 

543,945

 

 

551,948

 

 

475,774

 

Loans receivable, PPP

4,964,105

 

 

4,760,427

 

 

 

 

 

 

 

Commercial real estate non-owner occupied

1,233,882

 

 

1,262,373

 

 

1,252,826

 

 

1,222,772

 

 

1,267,679

 

Construction

122,963

 

 

128,834

 

 

115,448

 

 

117,617

 

 

60,429

 

Total commercial loans and leases

14,963,153

 

 

13,612,583

 

 

8,572,260

 

 

8,419,451

 

 

8,928,972

 

Consumer:

 

 

 

 

 

 

 

 

 

Residential

343,775

 

 

352,941

 

 

364,760

 

 

386,089

 

 

640,786

 

Manufactured housing

64,638

 

 

66,865

 

 

69,240

 

 

71,359

 

 

73,626

 

Installment

1,233,713

 

 

1,257,813

 

 

1,315,171

 

 

1,174,175

 

 

634,237

 

Total consumer loans

1,642,126

 

 

1,677,619

 

 

1,749,171

 

 

1,631,623

 

 

1,348,649

 

Total loans and leases

$

16,605,279

 

 

$

15,290,202

 

 

$

10,321,431

 

 

$

10,051,074

 

 

$

10,277,621

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END DEPOSIT COMPOSITION - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

2020

 

2020

 

2020

 

2019

 

2019

 

 

 

 

 

 

 

 

 

 

Demand, non-interest bearing

$

2,327,017

 

 

$

1,879,789

 

 

$

1,435,151

 

 

$

1,343,391

 

 

$

1,569,918

 

Demand, interest bearing

2,308,627

 

 

2,666,209

 

 

1,577,034

 

 

1,235,292

 

 

1,139,675

 

Total demand deposits

4,635,644

 

 

4,545,998

 

 

3,012,185

 

 

2,578,683

 

 

2,709,593

 

Savings

1,173,641

 

 

1,144,788

 

 

1,168,121

 

 

919,214

 

 

591,336

 

Money market

4,057,366

 

 

3,404,709

 

 

2,833,990

 

 

3,482,505

 

 

3,201,883

 

Time deposits

972,426

 

 

1,870,380

 

 

1,399,347

 

 

1,668,534

 

 

2,422,873

 

Total deposits

$

10,839,077

 

 

$

10,965,875

 

 

$

8,413,643

 

 

$

8,648,936

 

 

$

8,925,685

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY - UNAUDITED

(Dollars in thousands)

As of September 30, 2020

As of June 30, 2020

As of September 30, 2019

 

Total loans

Non
accrual
/NPLs

Allowance
for credit
losses

Total NPLs
to total
loans

Total
reserves to
total NPLs

Total loans

Non
accrual
/NPLs

Allowance
for credit
losses

Total NPLs
to total
loans

Total
reserves to
total NPLs

Total loans

Non
accrual
/NPLs

Allowance
for credit
losses

Total NPLs
to total
loans

Total
reserves to
total NPLs

 

Loan type

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

$

1,950,300

 

$

11,710

 

$

15,026

 

0.60

%

128.32

%

$

1,581,839

 

$

7,013

 

$

14,697

 

0.44

%

209.57

%

$

2,297,807

 

$

 

$

7,498

 

%

%

Commercial & industrial(1)

2,220,715

 

9,633

 

12,926

 

0.43

%

134.18

%

2,099,442

 

9,974

 

12,302

 

0.48

%

123.34

%

1,888,981

 

5,339

 

17,299

 

0.28

%

324.01

%

Commercial real estate owner occupied

557,595

 

3,599

 

9,552

 

0.65

%

265.41

%

544,772

 

4,022

 

11,405

 

0.74

%

283.57

%

475,774

 

2,072

 

1,466

 

0.44

%

70.75

%

Commercial real estate non-owner occupied

1,215,516

 

2,408

 

20,200

 

0.20

%

838.87

%

1,244,773

 

30,257

 

26,493

 

2.43

%

87.56

%

1,267,679

 

83

 

6,440

 

0.01

%

7759.04

%

Construction

122,963

 

 

6,423

 

%

%

128,834

 

 

5,297

 

%

%

60,429

 

 

658

 

%

%

Total commercial loans and leases receivable

6,067,089

 

27,350

 

64,127

 

0.45

%

234.47

%

5,599,660

 

51,266

 

70,194

 

0.92

%

136.92

%

5,990,670

 

7,494

 

33,361

 

0.13

%

445.17

%

Residential

335,452

 

10,634

 

4,649

 

3.17

%

43.72

%

348,109

 

7,857

 

4,550

 

2.26

%

57.91

%

637,707

 

6,165

 

4,083

 

0.97

%

66.23

%

Manufactured housing

64,638

 

2,778

 

5,625

 

4.30

%

202.48

%

66,865

 

3,331

 

6,014

 

4.98

%

180.55

%

73,625

 

1,567

 

1,027

 

2.13

%

65.54

%

Installment

1,233,713

 

3,118

 

81,160

 

0.25

%

2602.95

%

1,257,813

 

4,887

 

79,147

 

0.39

%

1619.54

%

634,235

 

1,140

 

12,582

 

0.18

%

1103.68

%

Total consumer loans receivable

1,633,803

 

16,530

 

91,434

 

1.01

%

553.14

%

1,672,787

 

16,075

 

89,711

 

0.96

%

558.08

%

1,345,567

 

8,872

 

17,692

 

0.66

%

199.41

%

Loans and leases receivable(1)

7,700,892

 

43,880

 

155,561

 

0.57

%

354.51

%

7,272,447

 

67,341

 

159,905

 

0.93

%

237.46

%

7,336,237

 

16,366

 

51,053

 

0.22

%

311.95

%

Loans receivable, PPP

4,964,105

 

 

 

%

%

4,760,427

 

 

 

%

%

 

 

 

%

%

Loans receivable, mortgage warehouse, at fair value

3,913,593

 

 

 

%

%

2,793,164

 

 

 

 

 

2,438,530

 

 

 

 

 

Total loans held for sale

26,689

 

19,691

 

 

73.78

%

%

464,164

 

18,925

 

 

4.08

%

%

502,854

 

1,325

 

 

0.26

%

%

Total portfolio

$

16,605,279

 

$

63,571

 

$

155,561

 

0.38

%

244.70

%

$

15,290,202

 

$

86,266

 

$

159,905

 

0.56

%

185.36

%

$

10,277,621

 

$

17,691

 

$

51,053

 

0.17

%

288.58

%

(1) Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. 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. Please refer to the reconciliation schedules that follow this table.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3

 

Q2

 

Q1

 

Q4

 

Q3

 

Nine Months Ended September 30,

 

2020

 

2020

 

2020

 

2019

 

2019

 

2020

 

2019

Loan type

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

534

 

Commercial & industrial

(55

)

 

(4

)

 

43

 

 

(224

)

 

(20

)

 

(16

)

 

(294

)

Commercial real estate owner occupied

44

 

 

(2

)

 

(3

)

 

(1

)

 

35

 

 

39

 

 

(116

)

Commercial real estate non-owner occupied

8,923

 

 

2,801

 

 

12,797

 

 

 

 

 

 

24,521

 

 

 

Construction

(6

)

 

(113

)

 

(3

)

 

(8

)

 

(8

)

 

(122

)

 

(128

)

Residential

(17

)

 

(26

)

 

(29

)

 

181

 

 

(5

)

 

(72

)

 

89

 

Installment

8,410

 

 

7,669

 

 

5,906

 

 

4,414

 

 

1,759

 

 

21,985

 

 

3,373

 

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

$

17,299

 

 

$

10,325

 

 

$

18,711

 

 

$

4,362

 

 

$

1,761

 

 

$

46,335

 

 

$

3,458

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

September 30,

Q3 2020

 

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

2020

 

2019

(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

$

47,085

 

$

1.48

 

 

$

19,137

 

$

0.61

 

 

$

(515

)

$

(0.02

)

 

$

23,911

 

$

0.75

 

 

$

23,451

 

$

0.74

 

 

$

65,706

 

$

2.07

 

 

$

40,957

 

$

1.30

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

373

 

0.01

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,682

 

0.18

 

Merger and acquisition related expenses

833

 

0.03

 

 

19

 

 

 

40

 

 

 

76

 

 

 

 

 

 

892

 

0.03

 

 

 

 

Legal reserves

258

 

0.01

 

 

 

 

 

830

 

0.03

 

 

 

 

 

1,520

 

0.05

 

 

1,088

 

0.03

 

 

1,520

 

0.05

 

(Gains) losses on investment securities

(9,662

)

(0.30

)

 

(4,543

)

(0.14

)

 

(1,788

)

(0.06

)

 

(310

)

(0.01

)

 

(1,947

)

(0.06

)

 

(15,993

)

(0.51

)

 

(1,602

)

(0.05

)

Derivative credit valuation adjustment

(304

)

(0.01

)

 

4,527

 

0.14

 

 

2,036

 

0.06

 

 

(429

)

(0.01

)

 

378

 

0.01

 

 

6,259

 

0.20

 

 

1,240

 

0.04

 

Risk participation agreement mark-to-market adjustment

 

 

 

(1,080

)

(0.03

)

 

 

 

 

 

 

 

 

 

 

(1,080

)

(0.03

)

 

 

 

Losses on sale of non-QM residential mortgage loans

 

 

 

 

 

 

 

 

 

595

 

0.02

 

 

 

 

 

 

 

 

 

 

Unrealized losses on loans held for sale

 

 

 

1,114

 

0.04

 

 

 

 

 

 

 

 

 

 

 

1,114

 

0.04

 

 

 

 

Core earnings

$

38,210

 

$

1.20

 

 

$

19,174

 

$

0.61

 

 

$

603

 

$

0.02

 

 

$

23,843

 

$

0.75

 

 

$

23,402

 

$

0.74

 

 

$

57,986

 

$

1.83

 

 

$

48,170

 

$

1.53

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED

(Dollars in thousands, except per share data)

 

Core Return on Average Assets - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

September 30,

(dollars in thousands except per share data)

Q3 2020

 

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

2020

 

2019

GAAP net income

$

50,515

 

 

$

22,718

 

 

$

3,100

 

 

$

27,526

 

 

$

27,066

 

 

$

76,332

 

 

$

51,801

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

 

 

 

 

 

 

 

 

 

 

 

373

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

 

 

 

 

 

 

 

 

5,682

 

Merger and acquisition related expenses

833

 

 

19

 

 

40

 

 

76

 

 

 

 

892

 

 

 

Legal reserves

258

 

 

 

 

830

 

 

 

 

1,520

 

 

1,088

 

 

1,520

 

(Gains) losses on investment securities

(9,662

)

 

(4,543

)

 

(1,788

)

 

(310

)

 

(1,947

)

 

(15,993

)

 

(1,602

)

Derivative credit valuation adjustment

(304

)

 

4,527

 

 

2,036

 

 

(429

)

 

378

 

 

6,259

 

 

1,240

 

Risk participation agreement mark-to-market adjustment

 

 

(1,080

)

 

 

 

 

 

 

 

(1,080

)

 

 

Losses on sale of non-QM residential mortgage loans

 

 

 

 

 

 

595

 

 

 

 

 

 

 

Unrealized losses on loans held for sale

 

 

1,114

 

 

 

 

 

 

 

 

1,114

 

 

 

Core net income

$

41,640

 

 

$

22,755

 

 

$

4,218

 

 

$

27,458

 

 

$

27,017

 

 

$

68,612

 

 

$

59,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total assets

$

17,865,574

 

 

$

14,675,584

 

 

$

11,573,406

 

 

$

11,257,207

 

 

$

11,259,144

 

 

$

14,716,390

 

 

$

10,468,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core return on average assets

0.93

%

 

0.62

%

 

0.15

%

 

0.97

%

 

0.95

%

 

0.62

%

 

0.75

%

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

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

September 30,

(dollars in thousands except per share data)

Q3 2020

 

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

2020

 

2019

GAAP net income

$

50,515

 

 

$

22,718

 

 

$

3,100

 

 

$

27,526

 

 

$

27,066

 

 

$

76,332

 

 

$

51,801

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

12,201

 

 

7,048

 

 

1,906

 

 

7,451

 

 

8,020

 

 

21,156

 

 

15,343

 

Provision for credit losses on loans and leases

12,955

 

 

20,946

 

 

31,786

 

 

9,689

 

 

4,426

 

 

65,688

 

 

14,539

 

Provision for credit losses on unfunded commitments

(527

)

 

(356

)

 

751

 

 

3

 

 

(235

)

 

(132

)

 

(406

)

Severance expense

 

 

 

 

 

 

 

 

 

 

 

 

490

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

 

 

 

 

 

 

 

 

7,476

 

Merger and acquisition related expenses

1,035

 

 

25

 

 

50

 

 

100

 

 

 

 

1,110

 

 

 

Legal reserves

320

 

 

 

 

1,042

 

 

 

 

2,000

 

 

1,362

 

 

2,000

 

(Gains) losses on investment securities

(11,945

)

 

(5,553

)

 

(2,596

)

 

(310

)

 

(2,334

)

 

(20,095

)

 

(1,989

)

Derivative credit valuation adjustment

(378

)

 

5,895

 

 

2,556

 

 

(565

)

 

497

 

 

8,073

 

 

1,631

 

Risk participation agreement mark-to-market adjustment

 

 

(1,407

)

 

 

 

 

 

 

 

(1,407

)

 

 

Losses on sale of non-QM residential mortgage loans

 

 

 

 

 

 

782

 

 

 

 

 

 

 

Unrealized losses on loans held for sale

 

 

1,450

 

 

 

 

 

 

 

 

1,450

 

 

 

Adjusted net income - pre-tax pre-provision

$

64,176

 

 

$

50,766

 

 

$

38,595

 

 

$

44,676

 

 

$

39,440

 

 

$

153,537

 

 

$

90,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total assets

$

17,865,574

 

 

$

14,675,584

 

 

$

11,573,406

 

 

$

11,257,207

 

 

$

11,259,144

 

 

$

14,716,390

 

 

$

10,468,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted ROAA - pre-tax pre-provision

1.43

%

 

1.39

%

 

1.34

%

 

1.57

%

 

1.39

%

 

1.39

%

 

1.16

%

Core Return on Average Common Equity - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

September 30,

(dollars in thousands except per share data)

Q3 2020

 

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

2020

 

2019

GAAP net income to common shareholders

$

47,085

 

 

$

19,137

 

 

$

(515

)

 

$

23,911

 

 

$

23,451

 

 

$

65,706

 

 

$

40,957

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

 

 

 

 

 

 

 

 

 

 

 

373

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

 

 

 

 

 

 

 

 

5,682

 

Merger and acquisition related expenses

833

 

 

19

 

 

40

 

 

76

 

 

 

 

892

 

 

 

Legal reserves

258

 

 

 

 

830

 

 

 

 

1,520

 

 

1,088

 

 

1,520

 

(Gains) losses on investment securities

(9,662

)

 

(4,543

)

 

(1,788

)

 

(310

)

 

(1,947

)

 

(15,993

)

 

(1,602

)

Derivative credit valuation adjustment

(304

)

 

4,527

 

 

2,036

 

 

(429

)

 

378

 

 

6,259

 

 

1,240

 

Risk participation agreement mark-to-market adjustment

 

 

(1,080

)

 

 

 

 

 

 

 

(1,080

)

 

 

Losses on sale of non-QM residential mortgage loans

 

 

 

 

 

 

595

 

 

 

 

 

 

 

Unrealized losses on loans held for sale

 

 

1,114

 

 

 

 

 

 

 

 

1,114

 

 

 

Core earnings

$

38,210

 

 

$

19,174

 

 

$

603

 

 

$

23,843

 

 

$

23,402

 

 

$

57,986

 

 

$

48,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total common shareholders' equity

$

812,577

 

 

$

771,663

 

 

$

807,884

 

 

$

819,018

 

 

$

787,885

 

 

$

797,430

 

 

$

769,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core return on average common equity

18.71

%

 

9.99

%

 

0.30

%

 

11.55

%

 

11.78

%

 

9.71

%

 

8.37

%

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

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

September 30,

(dollars in thousands except per share data)

Q3 2020

 

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

2020

 

2019

GAAP net income to common shareholders

$

47,085

 

 

$

19,137

 

 

$

(515

)

 

$

23,911

 

 

$

23,451

 

 

$

65,706

 

 

$

40,957

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

12,201

 

 

7,048

 

 

1,906

 

 

7,451

 

 

8,020

 

 

21,156

 

 

15,343

 

Provision for credit losses on loan and leases

12,955

 

 

20,946

 

 

31,786

 

 

9,689

 

 

4,426

 

 

65,688

 

 

14,539

 

Provision for credit losses on unfunded commitments

(527

)

 

(356

)

 

751

 

 

3

 

 

(235

)

 

(132

)

 

(406

)

Severance expense

 

 

 

 

 

 

 

 

 

 

 

 

490

 

Loss upon acquisition of interest-only GNMA securities

 

 

 

 

 

 

 

 

 

 

 

 

7,476

 

Merger and acquisition related expenses

1,035

 

 

25

 

 

50

 

 

100

 

 

 

 

1,110

 

 

 

Legal reserves

320

 

 

 

 

1,042

 

 

 

 

2,000

 

 

1,362

 

 

2,000

 

(Gains) losses on investment securities

(11,945

)

 

(5,553

)

 

(2,596

)

 

(310

)

 

(2,334

)

 

(20,095

)

 

(1,989

)

Derivative credit valuation adjustment

(378

)

 

5,895

 

 

2,556

 

 

(565

)

 

497

 

 

8,073

 

 

1,631

 

Risk participation agreement mark-to-market adjustment

 

 

(1,407

)

 

 

 

 

 

 

 

(1,407

)

 

 

Losses on sale of non-QM residential mortgage loans

 

 

 

 

 

 

782

 

 

 

 

 

 

 

Unrealized losses on loans held for sale

 

 

1,450

 

 

 

 

 

 

 

 

1,450

 

 

 

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

$

60,746

 

 

$

47,185

 

 

$

34,980

 

 

$

41,061

 

 

$

35,825

 

 

$

142,911

 

 

$

80,041

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total common shareholders' equity

$

812,577

 

 

$

771,663

 

 

$

807,884

 

 

$

819,018

 

 

$

787,885