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Customers Bancorp Reports Results for First Quarter 2023


Customers Bancorp, Inc. (NYSE:CUBI)

First Quarter 2023 Highlights

  • Q1 2023 net income available to common shareholders was $50.3 million, or $1.55 per diluted share; ROAA was 1.03% and ROCE was 16.00%.
  • Q1 2023 core earnings* were $51.1 million, or $1.58 per diluted share; Core ROAA* was 1.05% and Core ROCE* was 16.28%.
  • Q1 2023 core earnings excluding Paycheck Protection Program* ("PPP") were $41.5 million, or $1.28 per diluted share.
  • Q1 2023 adjusted pre-tax pre-provision net income* was $89.3 million; adjusted pre-tax pre-provision ROAA* was 1.72%; and adjusted pre-tax pre-provision ROCE* was 27.33%.
  • PPP loans decreased $751.9 million over Q4 2022, with less than $250 million outstanding at March 31, 2023.
  • Q1 2023 core loans* were flat over Q4 2022, with loan yields (excluding PPP)* up 60 basis points in Q1 2023.
  • Q1 2023 non-interest bearing deposits grew by $1.6 billion, or 85%, over Q4 2022, leading to a March 31, 2023 spot cost of deposits decline of 14 basis points.
  • Total insured deposits were 81%1 of total deposits at March 31, 2023, with immediately available liquidity covering uninsured deposits by 272%.
  • Q1 2023 net interest margin, tax equivalent was 2.96%. Q1 2023 net interest margin, tax equivalent, excluding the impact of PPP loans* was 2.80%. High levels of cash negatively impacted net interest margin by about 6 basis points2 in Q1 2023.
  • Q1 2023 provision for credit losses on loans and leases of $18.0 million was largely driven by the recognition of weaker macroeconomic forecasts.
  • Non-performing assets were $32.3 million, or 0.15% of total assets, at March 31, 2023, relatively unchanged from December 31, 2022. Allowance for credit losses on loans and leases equaled 406% of non-performing loans at March 31, 2023, compared to 426% at December 31, 2022.
  • Q1 2023 book value per share and tangible book value per share* grew by $2.00 and $1.99, or 5.1%, respectively, with decreased AOCI losses of $6.8 million over the same time period.
  • Repurchased 1,379,883 common shares for $39.8 million in Q1 2023, approximately at 70% of tangible book value per share* at March 31, 2023, leaving 497,509 common shares available for repurchase under the existing authorization.
  • All capital ratios remained stable in Q1 2023. Goal to bring CET 1 ratio to 11.0% - 11.5% by year-end 2023.

 

 

 

 

 

* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

1 Uninsured deposits of $3.9 billion less state and municipal deposits of $393.9 million collateralized by our line of credit from FHLB and from our affiliates of $54.9 million.

2 Assuming cash balance of $0.5 billion.

CEO Commentary

“The first quarter brought unexpected turmoil in the banking industry and I would like to commend our leadership team and all our team members for their remarkable performance navigating these challenges,” said Customers Bancorp Chairman and CEO, Jay Sidhu. “Our first quarter performance is a testament to the strength of our risk management practices and our steadfast focus on strong core banking fundamentals which we refer to as critical success factors. Our Q1 2023 GAAP earnings were $50.3 million, or $1.55 per diluted share. Core earnings* were $51.1 million, or $1.58 per diluted share, and core earnings excluding PPP* were $41.5 million, or $1.28 per diluted share, well above consensus estimates. Importantly, our non-interest bearing deposits grew by $1.6 billion, an impressive 85% increase from year-end balances. This growth came from opening new operating accounts during the quarter, facilitated by our technology and service offerings, coupled with our decision not to pay up for volatile deposits. We also acquired several new relationships from failed banks. At March 31, 2023, our deposit base was well diversified, with approximately 81% of total deposits insured. We maintain a strong liquidity position, with $9.4 billion of liquidity immediately available, which covers approximately 272% of uninsured deposits and our loan to deposit ratio stayed at about 80%," stated Jay Sidhu.

"In 2022, we took proactive measures to moderate loan growth, focusing on floating rate, low-to-no credit risk verticals, to grow and diversify our low-to-no-cost deposit franchise, to prudently manage the duration and return in our securities portfolio, and to maintain strong liquidity. We continued to purposely moderate loan growth in the first quarter 2023 to further improve our capital ratios. At March 31, 2023, we had slightly over $2.0 billion of cash on hand, which negatively impacted net interest margin by roughly 6 basis points, but we believe was prudent given persisting levels of uncertainty. Asset quality remains exceptional and credit reserves are extremely robust at 406% of total non-performing loans at the end of Q1 2023. The prudent risk management strategic actions that we have taken over the past several quarters have us well positioned from a capital, credit, liquidity, interest rate risk, and earnings perspective as we continue through a highly uncertain 2023. With the looming recession, we believe it is prudent to moderate growth, or even shrink the balance sheet somewhat, and focus on further strengthening the balance sheet and improving capital ratios. We are committed to improving our CET 1 ratio to 11.0% - 11.5% by year-end 2023 by retained earnings and balance sheet optimization. We are confident in our ability to manage our credit, interest rate, and liquidity risks, and superbly service our clients in all operating environments. We remain very optimistic about our future,” Jay Sidhu continued.

Financial Highlights

(Dollars in thousands, except per share data)

 

At or Three Months Ended

 

Increase (Decrease)

 

March 31, 2023

 

December 31, 2022

 

Profitability Metrics:

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

50,265

 

 

$

25,623

 

 

$

24,642

 

 

96.2

%

Diluted earnings per share

 

$

1.55

 

 

$

0.77

 

 

$

0.78

 

 

101.3

%

Core earnings*

 

$

51,143

 

 

$

39,368

 

 

$

11,775

 

 

29.9

%

Core earnings per share*

 

$

1.58

 

 

$

1.19

 

 

$

0.39

 

 

32.8

%

Core earnings, excluding PPP*

 

$

41,537

 

 

$

45,324

 

 

$

(3,787

)

 

(8.4

)%

Core earnings per share, excluding PPP*

 

$

1.28

 

 

$

1.37

 

 

$

(0.09

)

 

(6.6

)%

Return on average assets ("ROAA")

 

 

1.03

%

 

 

0.55

%

 

 

0.48

 

 

 

Core ROAA*

 

 

1.05

%

 

 

0.81

%

 

 

0.24

 

 

 

Core ROAA, excluding PPP*

 

 

0.87

%

 

 

0.93

%

 

 

(0.06

)

 

 

Return on average common equity ("ROCE")

 

 

16.00

%

 

 

8.05

%

 

 

7.95

 

 

 

Core ROCE*

 

 

16.28

%

 

 

12.36

%

 

 

3.92

 

 

 

Adjusted pre-tax pre-provision net income*

 

$

89,282

 

 

$

81,377

 

 

$

7,905

 

 

9.7

%

Adjusted pre-tax pre-provision net income ROAA, excluding PPP*

 

 

1.53

%

 

 

1.67

%

 

 

(0.14

)

 

 

Net interest margin, tax equivalent

 

 

2.96

%

 

 

2.67

%

 

 

0.29

 

 

 

Net interest margin, tax equivalent, excluding PPP*

 

 

2.80

%

 

 

2.87

%

 

 

(0.07

)

 

 

Loan yield

 

 

6.70

%

 

 

5.64

%

 

 

1.06

 

 

 

Loan yield, excluding PPP*

 

 

6.46

%

 

 

5.86

%

 

 

0.60

 

 

 

Cost of deposits

 

 

3.32

%

 

 

2.73

%

 

 

0.59

 

 

 

Efficiency ratio

 

 

47.71

%

 

 

49.20

%

 

 

(1.49

)

 

 

Core efficiency ratio*

 

 

47.09

%

 

 

49.12

%

 

 

(2.03

)

 

 

Balance Sheet Trends:

 

 

 

 

 

 

 

 

Total assets

 

$

21,751,614

 

 

$

20,896,112

 

 

$

855,502

 

 

4.1

%

Total loans and leases

 

$

15,063,034

 

 

$

15,794,671

 

 

$

(731,637

)

 

(4.6

)%

Total loans and leases, excluding PPP*

 

$

14,816,776

 

 

$

14,796,518

 

 

$

20,258

 

 

0.1

%

Non-interest bearing demand deposits

 

$

3,487,517

 

 

$

1,885,045

 

 

$

1,602,472

 

 

85.0

%

Total deposits

 

$

17,723,617

 

 

$

18,156,953

 

 

$

(433,336

)

 

(2.4

)%

Capital Metrics:

 

 

 

 

 

 

 

 

Common Equity

 

$

1,283,226

 

 

$

1,265,167

 

 

$

18,059

 

 

1.4

%

Tangible Common Equity*

 

$

1,279,597

 

 

$

1,261,538

 

 

$

18,059

 

 

1.4

%

Common Equity to Total Assets

 

 

5.9

%

 

 

6.1

%

 

 

(0.2

)

 

 

Tangible Common Equity to Tangible Assets*

 

 

5.9

%

 

 

6.0

%

 

 

(0.1

)

 

 

Tangible Common Equity to Tangible Assets, excluding PPP*

 

 

6.0

%

 

 

6.3

%

 

 

(0.3

)

 

 

Book Value per common share

 

$

41.08

 

 

$

39.08

 

 

$

2.00

 

 

5.1

%

Tangible Book Value per common share*

 

$

40.96

 

 

$

38.97

 

 

$

1.99

 

 

5.1

%

Common equity Tier 1 capital ratio (1)

 

 

9.6

%

 

 

9.6

%

 

 

 

 

 

Total risk based capital ratio (1)

 

 

12.3

%

 

 

12.2

%

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

(1) Regulatory capital ratios as of March 31, 2023 are estimates.

* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

Financial Highlights

(Dollars in thousands, except per share data)

 

At or Three Months Ended

 

Increase (Decrease)

 

March 31, 2023

 

March 31, 2022

 

Profitability Metrics:

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

50,265

 

 

$

74,896

 

 

$

(24,631

)

 

(32.9

)%

Diluted earnings per share

 

$

1.55

 

 

$

2.18

 

 

$

(0.63

)

 

(28.9

)%

Core earnings*

 

$

51,143

 

 

$

75,410

 

 

$

(24,267

)

 

(32.2

)%

Core earnings per share*

 

$

1.58

 

 

$

2.20

 

 

$

(0.62

)

 

(28.2

)%

Core earnings, excluding PPP*

 

$

41,537

 

 

$

50,697

 

 

$

(9,160

)

 

(18.1

)%

Core earnings per share, excluding PPP*

 

$

1.28

 

 

$

1.48

 

 

$

(0.20

)

 

(13.5

)%

Return on average assets ("ROAA")

 

 

1.03

%

 

 

1.63

%

 

 

(0.60

)

 

 

Core ROAA*

 

 

1.05

%

 

 

1.64

%

 

 

(0.59

)

 

 

Core ROAA, excluding PPP*

 

 

0.87

%

 

 

1.11

%

 

 

(0.24

)

 

 

Return on average common equity ("ROCE")

 

 

16.00

%

 

 

24.26

%

 

 

(8.26

)

 

 

Core ROCE*

 

 

16.28

%

 

 

24.43

%

 

 

(8.15

)

 

 

Adjusted pre-tax pre-provision net income*

 

$

89,282

 

 

$

112,649

 

 

$

(23,367

)

 

(20.7

)%

Adjusted pre-tax pre-provision net income ROAA, excluding PPP*

 

 

1.53

%

 

 

1.86

%

 

 

(0.33

)

 

 

Net interest margin, tax equivalent

 

 

2.96

%

 

 

3.60

%

 

 

(0.64

)

 

 

Net interest margin, tax equivalent, excluding PPP*

 

 

2.80

%

 

 

3.32

%

 

 

(0.52

)

 

 

Loan yield

 

 

6.70

%

 

 

4.67

%

 

 

2.03

 

 

 

Loan yield, excluding PPP*

 

 

6.46

%

 

 

4.43

%

 

 

2.03

 

 

 

Cost of deposits

 

 

3.32

%

 

 

0.33

%

 

 

2.99

 

 

 

Efficiency ratio

 

 

47.71

%

 

 

39.42

%

 

 

8.29

 

 

 

Core efficiency ratio*

 

 

47.09

%

 

 

39.47

%

 

 

7.62

 

 

 

Balance Sheet Trends:

 

 

 

 

 

 

 

 

Total assets

 

$

21,751,614

 

 

$

19,163,708

 

 

$

2,587,906

 

 

13.5

%

Total loans and leases

 

$

15,063,034

 

 

$

14,073,518

 

 

$

989,516

 

 

7.0

%

Total loans and leases, excluding PPP*

 

$

14,816,776

 

 

$

11,877,616

 

 

$

2,939,160

 

 

24.7

%

Non-interest bearing demand deposits

 

$

3,487,517

 

 

$

4,594,428

 

 

$

(1,106,911

)

 

(24.1

)%

Total deposits

 

$

17,723,617

 

 

$

16,415,560

 

 

$

1,308,057

 

 

8.0

%

Capital Metrics:

 

 

 

 

 

 

 

 

Common Equity

 

$

1,283,226

 

 

$

1,239,612

 

 

$

43,614

 

 

3.5

%

Tangible Common Equity*

 

$

1,279,597

 

 

$

1,235,934

 

 

$

43,663

 

 

3.5

%

Common Equity to Total Assets

 

 

5.9

%

 

 

6.5

%

 

 

(0.6

)

 

 

Tangible Common Equity to Tangible Assets*

 

 

5.9

%

 

 

6.5

%

 

 

(0.6

)

 

 

Tangible Common Equity to Tangible Assets, excluding PPP*

 

 

6.0

%

 

 

7.3

%

 

 

(1.3

)

 

 

Book Value per common share

 

$

41.08

 

 

$

37.61

 

 

$

3.47

 

 

9.2

%

Tangible Book Value per common share*

 

$

40.96

 

 

$

37.50

 

 

$

3.46

 

 

9.2

%

Common equity Tier 1 capital ratio (1)

 

 

9.6

%

 

 

9.9

%

 

 

(0.3

)

 

 

Total risk based capital ratio (1)

 

 

12.3

%

 

 

12.9

%

 

 

(0.6

)

 

 

 

 

 

 

 

 

 

 

 

(1) Regulatory capital ratios as of March 31, 2023 are estimates.

* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

Paycheck Protection Program (PPP)

We funded, either directly or indirectly, about 358,000 loans totaling $10.3 billion. Through the program, we earned close to $350 million of deferred origination fees from the SBA, which was significantly accretive to our earnings and capital levels as these loans were forgiven or guaranteed by the government. In Q1 2023, we recognized $22 million of these fees in earnings, leaving only $3 million to be recognized in future periods. "In Q1 2023, $752 million of PPP loans were repaid, leaving less than $250 million on our balance sheet at March 31, 2023. As we near completion of this program, we are extremely proud of our success in the PPP program and the role we played in supporting small businesses across the country. This program has been a tremendous benefit to our franchise, going forward we will no longer report certain financial metrics excluding PPP," commented Customers Bancorp CFO, Carla Leibold.

Key Balance Sheet Trends

Loans and Leases

The following table presents the composition of total loans and leases as of the dates indicated:

(Dollars in thousands)

March 31, 2023

 

% of Total

 

December 31, 2022

 

% of Total

 

March 31, 2022

 

% of Total

Loans and Leases Held for Investment

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

Commercial & industrial:

 

 

 

 

 

 

 

 

 

 

 

Specialty lending

$

5,519,176

 

37.7

%

 

$

5,412,887

 

35.0

%

 

$

2,973,544

 

21.1

%

Other commercial & industrial

 

1,168,161

 

8.0

 

 

 

1,135,336

 

7.3

 

 

 

947,895

 

6.8

Multifamily

 

2,195,211

 

15.0

 

 

 

2,213,019

 

14.3

 

 

 

1,705,027

 

12.1

 

Loans to mortgage companies

 

1,374,894

 

9.4

 

 

 

1,447,919

 

9.4

 

 

 

1,830,121

 

13.0

 

Commercial real estate owner occupied

 

895,314

 

6.1

 

 

 

885,339

 

5.7

 

 

 

701,893

 

5.0

 

Loans receivable, PPP

 

246,258

 

1.7

 

 

 

998,153

 

6.5

 

 

 

2,195,902

 

15.6

 

Commercial real estate non-owner occupied

 

1,245,248

 

8.5

 

 

 

1,290,730

 

8.4

 

 

 

1,140,311

 

8.1

 

Construction

 

188,123

 

1.3

 

 

 

162,009

 

1.0

 

 

 

161,024

 

1.1

 

Total commercial loans and leases

 

12,832,385

 

87.7

 

 

 

13,545,392

 

87.6

 

 

 

11,655,717

 

82.8

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

Residential

 

494,815

 

3.4

%

 

 

497,952

 

3.2

%

 

 

466,423

 

3.3

%

Manufactured housing

 

43,272

 

0.3

 

 

 

45,076

 

0.3

 

 

 

50,669

 

0.4

 

Installment:

 

 

 

 

 

 

 

 

 

 

 

Personal

 

849,420

 

5.8

 

 

 

964,641

 

6.2

 

 

 

1,584,011

 

11.3

 

Other

 

419,085

 

2.8

 

 

 

413,298

 

2.7

 

 

 

313,695

 

2.2

 

Total installment loans

 

1,268,505

 

8.6

 

 

 

1,377,939

 

8.9

 

 

 

1,897,706

 

13.5

 

Total consumer loans

 

1,806,592

 

12.3

 

 

 

1,920,967

 

12.4

 

 

 

2,414,798

 

17.2

 

Total loans and leases held for investment

$

14,638,977

 

100.0

%

 

$

15,466,359

 

100.0

%

 

$

14,070,515

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Loans Held for Sale

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

Multifamily

$

4,051

 

1.0

%

 

$

4,079

 

1.2

%

 

$

 

%

Commercial real estate non-owner occupied

 

16,000

 

3.7

 

 

 

 

 

 

 

 

 

Total commercial loans and leases

 

20,051

 

4.7

 

 

 

4,079

 

1.2

 

 

 

 

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

Residential

 

821

 

0.2

 

 

 

829

 

0.2

 

 

 

3,003

 

100.0

 

Installment:

 

 

 

 

 

 

 

 

 

 

 

Personal

 

307,336

 

72.5

 

 

 

133,801

 

40.8

 

 

 

 

 

Other

 

95,849

 

22.6

 

 

 

189,603

 

57.8

 

 

 

 

 

Total installment loans

 

403,185

 

95.1

 

 

 

323,404

 

98.6

 

 

 

 

 

Total consumer loans

 

404,006

 

95.3

 

 

 

324,233

 

98.8

 

 

 

3,003

 

100.0

 

Total loans held for sale

$

424,057

 

100.0

%

 

$

328,312

 

100.0

%

 

$

3,003

 

100.0

%

Total loans and leases portfolio

$

15,063,034

 

 

 

$

15,794,671

 

 

 

$

14,073,518

 

 

Loans and Leases Held for Investment

Loans and leases held for investment were $14.6 billion at March 31, 2023, down $827.4 million, or 5.3%, from December 31, 2022. Excluding PPP loans, core loans and leases held for investment* decreased $75.5 million to $14.4 billion at March 31, 2023.

Consumer installment loans held for investment decreased $109.4 million, or 7.9% quarter-over-quarter, to $1.3 billion and commercial real estate non-owner occupied loans decreased $45.5 million, or 3.5% quarter-over-quarter, to $1.2 billion as we continue to reduce risk by remixing our held-for-investment loan and lease portfolio. Loans to mortgage companies decreased $73.0 million, or 5.0% quarter-over-quarter. These decreases were offset in part by increases in commercial and industrial ("C&I") loans and leases of $139.1 million, or 2.1% quarter-over-quarter, to $6.7 billion, led by our variable rate low-to-no credit risk specialty lending verticals.

Loans Held for Sale

Loans held for sale increased $95.7 million quarter-over-quarter, and $421.1 million year-over-year, to $424.1 million at March 31, 2023 primarily due to increased consumer installment loans as we continue to build out our Banking-as-a-Service/Marketplace Lending (BaaS/MPL) strategy in 2023.

Allowance for Credit Losses on Loans and Leases

The following table presents the allowance for credit losses on loans and leases as of the dates and for the periods presented:

 

At or Three Months Ended

 

Increase (Decrease)

 

At or Three Months Ended

 

Increase (Decrease)

(Dollars in thousands)

March 31, 2023

 

December 31, 2022

 

 

March 31, 2023

 

March 31, 2022

 

Allowance for credit losses on loans and leases

$

130,281

 

 

$

130,924

 

 

$

(643

)

 

$

130,281

 

 

$

145,847

 

 

$

(15,566

)

Provision for credit losses on loans and leases

$

18,008

 

 

$

27,891

 

 

$

(9,883

)

 

$

18,008

 

 

$

15,269

 

 

$

2,739

 

Net charge-offs from loans held for investment

$

18,651

 

 

$

27,164

 

 

$

(8,513

)

 

$

18,651

 

 

$

7,226

 

 

$

11,425

 

Annualized net charge-offs to average loans and leases

 

0.49

%

 

 

0.70

%

 

 

 

 

0.49

%

 

 

0.21

%

 

 

Coverage of credit loss reserves for loans and leases held for investment

 

0.97

%

 

 

0.93

%

 

 

 

 

0.97

%

 

 

1.18

%

 

 

Coverage of credit loss reserves for loans and leases held for investment, excluding PPP*

 

0.99

%

 

 

1.00

%

 

 

 

 

0.99

%

 

 

1.44

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

The decrease in net charge-offs in Q1 2023 compared to Q4 2022 was primarily due to one-time charge-offs of $11.0 million for certain loans originated under the PPP program that were subsequently determined to be ineligible for SBA forgiveness and guarantee and ultimately deemed uncollectible in Q4 2022.

The increase in net charge-offs in Q1 2023 compared to Q1 2022 was primarily due to an increase in consumer installment net charge-offs in Q1 2023 compared to Q1 2022.

Provision for Credit Losses

 

 

Three Months Ended

 

Increase (Decrease)

 

Three Months Ended

 

Increase (Decrease)

(Dollars in thousands)

 

March 31, 2023

 

December 31, 2022

 

 

March 31, 2023

 

March 31, 2022

 

Provision for credit losses on loans and leases

 

$

18,008

 

$

27,891

 

$

(9,883

)

 

$

18,008

 

$

15,269

 

 

$

2,739

Provision for credit losses on available for sale debt securities

 

 

1,595

 

 

325

 

 

1,270

 

 

 

1,595

 

 

728

 

 

 

867

Provision for credit losses

 

 

19,603

 

 

28,216

 

 

(8,613

)

 

 

19,603

 

 

15,997

 

 

 

3,606

Provision (benefit) for credit losses on unfunded commitments

 

 

280

 

 

153

 

 

127

 

 

 

280

 

 

(109

)

 

 

389

Total provision for credit losses

 

$

19,883

 

$

28,369

 

$

(8,486

)

 

$

19,883

 

$

15,888

 

 

$

3,995

 

 

 

 

 

 

 

 

 

 

 

 

 

The provision for credit losses on loans and leases in Q1 2023 was $18.0 million, compared to $27.9 million in Q4 2022. The provision in Q1 2023 was primarily due to our recognition of weaker macroeconomic forecasts, as compared to provision in Q4 2022, which was primarily due to one-time charge-offs of $11.0 million for certain loans originated under the PPP program that were subsequently determined to be ineligible for SBA forgiveness and guarantee and ultimately deemed uncollectible, as well as loan growth and our recognition of weaker macroeconomic forecasts. The provision for credit losses on available for sale investment securities in Q1 2023 was $1.6 million compared to provision of $0.3 million in Q4 2022.

The provision for credit losses on loans and leases in Q1 2023 was $18.0 million, compared to $15.3 million in Q1 2022. The provision in Q1 2023 was primarily due to our recognition of weaker macroeconomic forecasts, as compared to provision in Q1 2022, which was primarily due to loan growth. The provision for credit losses on available for sale investment securities in Q1 2023 was $1.6 million compared to $0.7 million in Q1 2022.

Asset Quality

The following table presents asset quality metrics as of the dates indicated:

(Dollars in thousands)

March 31, 2023

 

December 31, 2022

 

Increase (Decrease)

 

March 31, 2023

 

March 31, 2022

 

Increase (Decrease)

Non-performing assets ("NPAs"):

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual / non-performing loans ("NPLs")

$

32,124

 

 

$

30,737

 

 

$

1,387

 

 

$

32,124

 

 

$

43,778

 

 

$

(11,654

)

Non-performing assets

$

32,260

 

 

$

30,783

 

 

$

1,477

 

 

$

32,260

 

 

$

43,864

 

 

$

(11,604

)

NPLs to total loans and leases

 

0.21

%

 

 

0.19

%

 

 

 

 

0.21

%

 

 

0.31

%

 

 

Reserves to NPLs

 

405.56

%

 

 

425.95

%

 

 

 

 

405.56

%

 

 

333.15

%

 

 

NPAs to total assets

 

0.15

%

 

 

0.15

%

 

 

 

 

0.15

%

 

 

0.23

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases (1) risk ratings:

 

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases (2)

 

 

 

 

 

 

 

 

 

 

 

Pass

$

10,928,620

 

 

$

10,793,980

 

 

$

134,640

 

 

$

10,928,620

 

 

$

7,274,294

 

 

$

3,654,326

 

Special Mention

 

136,986

 

 

 

138,829

 

 

 

(1,843

)

 

 

136,986

 

 

 

128,622

 

 

 

8,364

 

Substandard

 

273,154

 

 

 

291,118

 

 

 

(17,964

)

 

 

273,154

 

 

 

301,141

 

 

 

(27,987

)

Total commercial loans and leases

 

11,338,760

 

 

 

11,223,927

 

 

 

114,833

 

 

 

11,338,760

 

 

 

7,704,057

 

 

 

3,634,703

 

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

Performing

 

1,787,123

 

 

 

1,899,376

 

 

 

(112,253

)

 

 

1,787,123

 

 

 

2,399,860

 

 

 

(612,737

)

Non-performing

 

19,469

 

 

 

21,591

 

 

 

(2,122

)

 

 

19,469

 

 

 

14,938

 

 

 

4,531

 

Total consumer loans

 

1,806,592

 

 

 

1,920,967

 

 

 

(114,375

)

 

 

1,806,592

 

 

 

2,414,798

 

 

 

(608,206

)

Loans and leases receivable (1)

$

13,145,352

 

 

$

13,144,894

 

 

$

458

 

 

$

13,145,352

 

 

$

10,118,855

 

 

$

3,026,497

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Risk ratings are assigned to loans and leases held for investment, and excludes loans held for sale and loans receivable, mortgage warehouse, at fair value.

(2) Excludes loan receivable, PPP, as eligible PPP loans are fully guaranteed by the Small Business Administration.

Over the last decade, we have developed a suite of commercial loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s C&I, loans to mortgage companies, corporate and specialty lending lines of business, and multifamily loans for example, are characterized by conservative underwriting standards and low loss rates. Because of this emphasis, the Bank’s credit quality to date has been incredibly healthy despite an adverse economic environment. Maintaining strong asset quality also requires a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, we employ a bottom-up data driven approach to analyze the commercial portfolio.

Total consumer installment loans held for investment at March 31, 2023 were less than 6% of total assets, less than 9% of total loans and leases held for investment, and were supported by an allowance for credit losses of $62.1 million. At March 31, 2023, our consumer installment portfolio had the following characteristics: average original FICO score of 737, average debt-to-income of 20% and average borrower income of $106 thousand.

Non-performing loans at March 31, 2023 were essentially flat at 0.21% of total loans and leases, compared to 0.19% at December 31, 2022, and decreased from 0.31% at March 31, 2022.

Investment Securities

Our investment securities portfolio, including debt securities available for sale ("AFS") and held to maturity ("HTM") provides periodic cash flows through regular maturities and amortization, can be used as collateral to secure additional funding, and is an important component of our liquidity position.

The following table presents the composition of our investment securities portfolio as of the dates indicated:

(Dollars in thousands)

March 31, 2023

 

December 31, 2022

 

March 31, 2022

Debt securities, available for sale

$

2,900,259

 

$

2,961,015

 

$

4,144,029

Equity securities

 

26,710

 

 

26,485

 

 

25,824

Investment securities, at fair value

 

2,926,969

 

 

2,987,500

 

 

4,169,853

Debt securities, held to maturity

 

870,294

 

 

840,259

 

 

Total investment securities portfolio

$

3,797,263

 

$

3,827,759

 

$

4,169,853

Critically important to performance during the recent banking crisis are the characteristics of a bank’s securities portfolio. While there may be virtually no credit risk in some of these portfolios, holding longer term and lower yielding securities is creating challenges for many banks. Our securities portfolio is highly liquid, short in duration, and high in yield. Our AFS debt securities portfolio has a spot yield of 4.91%, an effective duration of approximately 1.5 years, and approximately 47% are variable rate. Additionally, 62% of our AFS securities portfolio was AAA rated at March 31, 2023.

Our HTM debt securities portfolio represents only 4.0% of our total assets at March 31, 2023, and has a spot yield of 3.77% and an effective duration of approximately 4.0 years. Additionally, approximately 51% of our HTM securities are AAA rated and 37% are credit enhanced asset backed securities with no current expectation of credit losses.

Deposits

The following table presents the composition of our deposit portfolio as of the dates indicated:

(Dollars in thousands)

March 31, 2023

 

% of Total

 

December 31, 2022

 

% of Total

 

March 31, 2022

 

% of Total

Demand, non-interest bearing

$

3,487,517

 

19.7

%

 

$

1,885,045

 

10.4

%

 

$

4,594,428

 

28.0

%

Demand, interest bearing

 

5,791,302

 

32.7

 

 

 

8,476,027

 

46.7

 

 

 

5,591,468

 

34.1

 

Total demand deposits

 

9,278,819

 

52.4

 

 

 

10,361,072

 

57.1

 

 

 

10,185,896

 

62.1

 

Savings

 

924,359

 

5.2

 

 

 

811,798

 

4.5

 

 

 

802,395

 

4.9

 

Money market

 

2,019,633

 

11.4

 

 

 

2,734,217

 

15.1

 

 

 

4,981,077

 

30.3

 

Time deposits

 

5,500,806

 

31.0

 

 

 

4,249,866

 

23.3

 

 

 

446,192

 

2.7

 

Total deposits

$

17,723,617

 

100.0

%

 

$

18,156,953

 

100.0

%

 

$

16,415,560

 

100.0

%

Total deposits decreased $433.3 million, or 2.4%, to $17.7 billion at March 31, 2023 as compared to the prior quarter. Importantly, non-interest bearing demand deposits increased $1.6 billion, or 85.0%, to $3.5 billion. Time deposits increased $1.3 billion, or 29.4%, to $5.5 billion and savings deposits increased $112.6 million, or 13.9%, to $924.4 million. These increases were offset by decreases in interest bearing demand deposits of $2.7 billion, or 31.7%, to $5.8 billion and money market deposits of $714.6 million, or 26.1%, to $2.0 billion. The total average cost of deposits increased by 59 basis points to 3.32% in Q1 2023 from 2.73% in the prior quarter primarily due to higher market interest rates and a shift in deposit mix. Total estimated uninsured deposits was $3.5 billion1, or 19% of total deposits (inclusive of accrued interest) at March 31, 2023. We are also highly focused on total deposits with contractual term to manage our liquidity profile and the funding of loans and securities.

Total deposits increased $1.3 billion, or 8.0%, to $17.7 billion at March 31, 2023 as compared to a year ago. Time deposits increased $5.1 billion to $5.5 billion. Interest bearing demand deposits increased $199.8 million, or 3.6%, to $5.8 billion. Savings deposits increased $122.0 million, or 15.2%, to $924.4 million. These increases were offset in part by decreases in money market deposits of $3.0 billion, or 59.5%, to $2.0 billion and non-interest bearing demand deposits of $1.1 billion, or 24.1%, to $3.5 billion. The total average cost of deposits increased by 299 basis points to 3.32% in Q1 2023 from 0.33% in the prior year primarily due to higher market interest rates and a shift in deposit mix.

__________________________________
1 Uninsured deposits of $3.9 billion less state and municipal deposits of $393.9 million collateralized by our line of credit from FHLB and from our affiliates of $54.9 million.

Borrowings

The following table presents the composition of our borrowings as of the dates indicated:

(Dollars in thousands)

March 31, 2023

 

December 31, 2022

 

March 31, 2022

Federal funds purchased

$

 

$

 

$

700,000

FHLB advances

 

2,052,143

 

 

800,000

 

 

Senior notes

 

123,645

 

 

123,580

 

 

223,230

Subordinated debt

 

182,021

 

 

181,952

 

 

181,742

Total borrowings

$

2,357,809

 

$

1,105,532

 

$

1,104,972

Total borrowings increased $1.3 billion, or 113.3%, to $2.4 billion at March 31, 2023 as compared to both the prior quarter and the year-ago quarter. This increase primarily resulted from increased FHLB borrowings to ensure ample cash on hand given the heightened liquidity risk in the banking system, particularly among regional banks in early March 2023. As of March 31, 2023, Customers' borrowing capacity with the FRB and FHLB was approximately $9.8 billion, of which $2.1 billion of available capacity was utilized in borrowings and $397.2 million was utilized to collateralize state and municipal deposits.

Capital

The following table presents certain capital amounts and ratios as of the dates indicated:

(Dollars in thousands except per share data)

March 31, 2023

 

December 31, 2022

 

March 31, 2022

Customers Bancorp, Inc.

 

 

 

 

 

Common Equity

$

1,283,226

 

 

$

1,265,167

 

 

$

1,239,612

 

Tangible Common Equity*

$

1,279,597

 

 

$

1,261,538

 

 

$

1,235,934

 

Common Equity to Total Assets

 

5.9

%

 

 

6.1

%

 

 

6.5

%

Tangible Common Equity to Tangible Assets*

 

5.9

%

 

 

6.0

%

 

 

6.5

%

Tangible Common Equity to Tangible Assets, excluding PPP*

 

6.0

%

 

 

6.3

%

 

 

7.3

%

Book Value per common share

$

41.08

 

 

$

39.08

 

 

$

37.61

 

Tangible Book Value per common share*

$

40.96

 

 

$

38.97

 

 

$

37.50

 

Common equity Tier 1 capital ratio (1)

 

9.6

%

 

 

9.6

%

 

 

9.9

%

Total risk based capital ratio (1)

 

12.3

%

 

 

12.2

%

 

 

12.9

%

 

 

 

 

 

 

(1) Regulatory capital ratios as of March 31, 2023 are estimates.

* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

Customers Bancorp's common equity increased $18.1 million to $1.3 billion, and tangible common equity* increased $18.1 million to $1.3 billion, at March 31, 2023 compared to the prior quarter, respectively, primarily due to earnings of $50.3 million, and reduced unrealized losses on investment securities of $6.8 million (net of taxes) deferred in accumulated other comprehensive income ("AOCI"). These increases were offset in part by $39.8 million of common share repurchases during Q1 2023. Similarly, book value per common share increased to $41.08 from $39.08, and tangible book value per common share* increased to $40.96 from $38.97, at March 31, 2023 and December 31, 2022, respectively.

Customers Bancorp's common equity increased $43.6 million to $1.3 billion, and tangible common equity* increased $43.7 million to $1.3 billion, at March 31, 2023 compared to a year ago, respectively, as earnings of $193.8 million more than offset a negative impact to AOCI from increased unrealized losses on investment securities of $93.7 million (net of taxes). Similarly, book value per common share increased to $41.08 from $37.61, and tangible book value per common share* increased to $40.96 from $37.50, at March 31, 2023 and March 31, 2022, respectively.

At the Customers Bancorp level, the total risk based capital ratio (estimate), common equity to total assets ratio and tangible common equity to tangible assets ratio ("TCE ratio"), excluding PPP loans*, were 12.3%, 5.9% and 6.0%, respectively, at March 31, 2023.

At the Customers Bank level, capital levels remained strong and well above regulatory minimums. At March 31, 2023, estimated Tier 1 capital and total risk-based capital were 11.3% and 12.6%, respectively.

Even though Customers remains well capitalized by all regulatory measures, its goal is to increase its CET 1 ratio at year-end 2023 to be between 11.0% - 11.5%, up about 150 basis points over current levels. "It is prudent to moderate or even shrink our balance sheet in this uncertain environment and have strong capital ratios," stated Jay Sidhu.

Key Profitability Trends

Net Interest Income

Net interest income totaled $149.9 million in Q1 2023, an increase of $14.8 million from Q4 2022, primarily due to higher PPP net interest income of $16.9 million resulting from increased recognition of deferred fees of $18.0 million mainly driven by higher loan forgiveness and guarantee payments by the SBA in Q1 2023. Net interest income earned by the core bank* decreased $2.1 million over Q4 2022, reflecting a shift in funding mix and two less days in Q1 2023. The increase in interest income on investment securities and core loans* of $4.4 million and $20.9 million, respectively, mostly due to higher interest rates on investment securities and variable loans in our commercial loan verticals, were offset by higher expenses paid on deposits and other borrowings of $30.5 million from a shift in funding mix and higher interest rates during Q1 2023. Excluding PPP loans, average interest-earning assets increased $480.3 million. Interest-earning asset growth was primarily driven by increases in interest earning deposits, specialty lending and consumer installment loans held for sale, partially offset by decreases in commercial loans to mortgage companies due to lower mortgage activity from rising interest rates. Compared to Q4 2022, total loan yields increased 106 basis points to 6.70% primarily due to higher interest rates on variable rate loans in commercial loans. Excluding PPP loans, the Q1 2023 total loan yield* was 60 basis points higher than Q4 2022 reflecting increased interest rates and the variable rate nature of the loan portfolio.

Net interest income totaled $149.9 million in Q1 2023, a decrease of $14.8 million from Q1 2022, primarily due to lower PPP net interest income of $20.5 million resulting from reduced recognition of deferred fees of $8.1 million driven by lower loan forgiveness in Q1 2023 and increased funding costs of $7.2 million, reflecting increases in funding rates. This decrease was offset in part by increased net interest income earned by the core bank* of $5.7 million, up 4.4% over Q1 2022, including increased interest income on investment securities and core loans* of $27.0 million and $112.1 million, respectively, mostly due to higher average balances and interest rates on variable loans in specialty lending. In addition, higher expenses paid on deposits and other borrowings of $146.3 million resulted mainly from a shift in funding mix and higher interest rates during Q1 2023. Excluding PPP loans, average interest-earning assets increased $3.7 billion. Interest-earning asset growth was primarily driven by increases in C&I loans and leases, mostly in the variable rate low-to-no credit risk specialty lending verticals and multifamily loans, offset in part by decreases in commercial loans to mortgage companies due to lower mortgage activity from rising interest rates. Total consumer installment loans decreased in Q1 2023 as compared to Q1 2022, as installment loans held for investment decreased primarily for risk management purposes. Compared to Q1 2022, total loan yields increased 203 basis points to 6.70% primarily due to higher interest rates on variable rate loans in specialty lending, partially offset by lower PPP yields driven by lower deferred fee recognition. Excluding PPP loans, the Q1 2023 total loan yield* was 203 basis points higher than Q1 2022 reflecting increased interest rates and the variable rate nature of the loan portfolio.

Non-Interest Income

The following table presents details of non-interest income for the periods indicated:

 

Three Months Ended

 

Increase (Decrease)

 

Three Months Ended

 

Increase (Decrease)

(Dollars in thousands)

March 31, 2023

 

December 31, 2022

 

 

March 31, 2023

 

March 31, 2022

 

Commercial lease income

$

9,326

 

$

8,135

 

 

$

1,191

 

 

$

9,326

 

$

5,895

 

 

$

3,431

 

Loan fees

 

3,990

 

 

4,017

 

 

 

(27

)

 

 

3,990

 

 

2,545

 

 

 

1,445

 

Bank-owned life insurance

 

2,647

 

 

1,975

 

 

 

672

 

 

 

2,647

 

 

8,326

 

 

 

(5,679

)

Mortgage warehouse transactional fees

 

1,074

 

 

1,295

 

 

 

(221

)

 

 

1,074

 

 

2,015

 

 

 

(941

)

Gain (loss) on sale of SBA and other loans

 

 

 

 

 

 

 

 

 

 

 

1,507

 

 

 

(1,507

)

Net gain (loss) on sale of investment securities

 

 

 

(16,937

)

 

 

16,937

 

 

 

 

 

(1,063

)

 

 

1,063

 

Legal settlement gain

 

 

 

7,519

 

 

 

(7,519

)

 

 

 

 

 

 

 

 

Other

 

1,084

 

 

1,341

 

 

 

(257

)

 

 

1,084

 

 

1,973

 

 

 

(889

)

Total non-interest income

$

18,121

 

$

7,345

 

 

$

10,776

 

 

$

18,121

 

$

21,198

 

 

$

(3,077

)

Non-interest income totaled $18.1 million for Q1 2023, an increase of $10.8 million compared to Q4 2022. The increase was primarily due to losses realized from the sale of investment securities of $16.9 million to rebalance the investment portfolio with higher interest-earning securities in Q4 2022, higher commercial lease income of $1.2 million from continued growth and death benefits paid by insurance carriers under the bank-owned life insurance policies of $0.7 million. These increases were partially offset by a $7.5 million gain from a court-approved settlement with a third party PPP service provider in Q4 2022.

Non-interest income totaled $18.1 million for Q1 2023, a decrease of $3.1 million compared to Q1 2022. The decrease was primarily due to lower death benefits paid by insurance carriers under the bank-owned life insurance policies of $5.7 million, reduced mortgage warehouse transactional fees from lower housing activity due to rising interest rates of $0.9 million, and reduced gains realized from sales of SBA loans of $1.5 million as there were no such sales in Q1 2023. These decreases were offset partially by increases in commercial lease income of $3.4 million and loan fees of $1.4 million resulting from continued growth and reduced losses on securities sales of $1.1 million as there were no such sales in Q1 2023.

Non-Interest Expense

The following table presents details of non-interest expense for the periods indicated:

 

Three Months Ended

 

Increase (Decrease)

 

Three Months Ended

 

Increase (Decrease)

(Dollars in thousands)

March 31, 2023

 

December 31, 2022

 

 

March 31, 2023

 

March 31, 2022

 

Salaries and employee benefits

$

32,345

 

$

29,194

 

$

3,151

 

 

$

32,345

 

$

26,607

 

$

5,738

 

Technology, communication and bank operations

 

16,589

 

 

18,604

 

 

(2,015

)

 

 

16,589

 

 

24,068

 

 

(7,479

)

Commercial lease depreciation

 

7,875

 

 

6,518

 

 

1,357

 

 

 

7,875

 

 

4,942

 

 

2,933

 

Professional services

 

7,596

 

 

6,825

 

 

771

 

 

 

7,596

 

 

6,956

 

 

640

 

Loan servicing

 

4,661

 

 

4,460

 

 

201

 

 

 

4,661

 

 

2,371

 

 

2,290

 

Occupancy

 

2,760

 

 

3,672

 

 

(912

)

 

 

2,760

 

 

3,050

 

 

(290

)

FDIC assessments, non-income taxes and regulatory fees

 

2,728

 

 

2,339

 

 

389

 

 

 

2,728

 

 

2,383

 

 

345

 

Advertising and promotion

 

1,049

 

 

1,111

 

 

(62

)

 

 

1,049

 

 

315

 

 

734

 

Other

 

4,530

 

 

5,696

 

 

(1,166

)

 

 

4,530

 

 

3,115

 

 

1,415

 

Total non-interest expense

$

80,133

 

$

78,419

 

$

1,714

 

 

$

80,133

 

$

73,807

 

$

6,326

 

The management of non-interest expenses remains a priority for us. However, this will not deter us from making investments in new technologies to support efficient and responsible growth in the future.

Non-interest expenses totaled $80.1 million in Q1 2023, an increase of $1.7 million compared to Q4 2022. The increase was primarily attributable to increased salaries and employee benefits of $3.2 million driven by higher payroll taxes, benefits and severance accruals and higher commercial lease depreciation of $1.4 million resulting from continued growth in our equipment finance business. These increases were offset in part by decreases of $2.0 million in deposit servicing-related expenses resulting from lower servicing fees and the discontinuation of interchange maintenance fees paid to BM Technologies offset in part by higher software-related expenses and reduced other expenses of $1.2 million primarily due to lower loan workout expenses.

Non-interest expenses totaled $80.1 million in Q1 2023, an increase of $6.3 million compared to Q1 2022. The increase was primarily attributable to increases of $5.7 million in salaries and employee benefits due to higher headcount, annual merit increases, severance accruals and SERP expenses, $2.9 million in commercial lease depreciation from continued growth, $2.3 million in loan servicing for portfolios serviced by third parties, $0.7 million in advertising and promotion mostly due to higher spending on media and advertising agencies for our deposit products and $1.4 million in other expenses mostly due to higher provision for credit losses on unfunded lending commitments and operating losses. These increases were offset in part by a decrease of $7.5 million in deposit servicing-related expenses mostly due to lower servicing fees and the discontinuation of interchange maintenance fees paid to BM Technologies, offset by higher software licenses, fees paid for software as a service and other technology-related expenses.

Taxes

Income tax expense increased by $7.4 million to $14.6 million in Q1 2023 from $7.1 million in Q4 2022 primarily due to higher pre-tax income.

Income tax expense decreased by $4.8 million to $14.6 million in Q1 2023 from $19.3 million in Q1 2022 primarily due to lower pre-tax income and increased income tax credits.

The effective tax rate for Q1 2023 was 21%. Customers expects the full-year 2023 effective tax rate to be approximately 22% to 24%.

Outlook

“Looking ahead, we will continue to moderate growth, or even reduce the size of the balance sheet, as we optimize the balance sheet and materially improve our capital ratios, maximize our efficiency ratio with prudent expense management, and continue to improve deposits and liquidity. We expect 2023 core loans to be essentially flat to down. Deposits are expected to remain relatively flat with a focus on improving our funding profile and reducing high cost deposits. We believe our net interest margin has troughed with expansion opportunities throughout the remainder of 2023. We expect net interest margin, excluding PPP* to increase throughout 2023 by about 20 basis points to 3.00% or higher. 2023 Core EPS (excluding PPP)* is still expected to be about $6.00 with a return on common equity of over 15%. Core non-interest expense* is expected to increase between 5% - 7% in 2023 and we are targeting a CET 1 ratio of approximately 11% - 11.5% by year-end 2023. We are focused on improving the quality of our balance sheet and deposit franchise, improving capital and liquidity, maintaining superior credit quality, expanding our net interest margin, and achieving our tangible book value guidance in excess of $45 by year-end 2023,” concluded Jay Sidhu.

 

 

 

 

 

* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

Webcast

Date:             Friday, April 28, 2023
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 Bancorp 1st Quarter Earnings Webcast.

You may submit questions in advance of the live webcast by emailing our Communications 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. (NYSE:CUBI) is one of the nation’s top-performing banking companies with over $20 billion in assets, making it one of the 100 largest bank holding companies in the US. Through its primary subsidiary, Customers Bank, commercial and consumer clients benefit from a full suite of technology-enabled tailored product experience delivered by best-in-class customer service. A pioneer in Banking-as-a-Service and digital banking products, Customers Bank is one of the very few banks that provides a blockchain-based 24/7/365 digital payment solution. In addition to traditional lines such as C&I lending, commercial real estate lending, and multifamily lending, Customers Bank also provides a number of national corporate banking services to Specialty Lending clients. Major accolades include:

  • #34 out of the 100 largest publicly traded banks in 2023 per Forbes;
  • #64 on Fortune Magazine’s 2022 list of the 100 fastest growing companies in America;
  • #6 in top-performing banks with assets between $10 billion and $50 billion in 2021 per American Banker; and
  • #3 top-performing bank with over $10 billion in assets at year-end 2021 per S&P Global S&P Global Market Intelligence.

A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender. Learn more: 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,” “project,” 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 impact of the ongoing pandemic on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, 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 affect 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, higher inflation and its impacts, and the effects of any changes in accounting standards or policies. 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, 2022, 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.

Q1 2023 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended March 31, 2023 and the preceding four quarters:

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

 

EARNINGS SUMMARY - UNAUDITED

 

 

 

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

Q1

 

Q4

 

Q3

 

Q2

 

Q1

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Profitability Metrics:

 

Net income available to common shareholders

 

$

50,265

 

 

$

25,623

 

 

$

61,364

 

 

$

56,519

 

 

$

74,896

 

 

Per share amounts:

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic

$

1.58

 

 

$

0.79

 

 

$

1.89

 

 

$

1.73

 

 

$

2.27

 

 

 

Earnings per share - diluted

$

1.55

 

 

$

0.77

 

 

$

1.85

 

 

$

1.68

 

 

$

2.18

 

 

 

Book value per common share (1)

$

41.08

 

 

$

39.08

 

 

$

38.46

 

 

$

37.46

 

 

$

37.61

 

 

 

CUBI stock price (1)

$

18.52

 

 

$

28.34

 

 

$

29.48

 

 

$

33.90

 

 

$

52.14

 

 

 

CUBI stock price as % of book value (1)

 

45

%

 

 

73

%

 

 

77

%

 

 

90

%

 

 

139

%

 

Average shares outstanding - basic

 

31,819,203

 

 

 

32,413,459

 

 

 

32,455,814

 

 

 

32,712,616

 

 

 

32,957,033

 

 

Average shares outstanding - diluted

 

32,345,017

 

 

 

33,075,422

 

 

 

33,226,607

 

 

 

33,579,013

 

 

 

34,327,065

 

 

Shares outstanding (1)

 

31,239,750

 

 

 

32,373,697

 

 

 

32,475,502

 

 

 

32,449,486

 

 

 

32,957,847

 

 

Return on average assets ("ROAA")

 

1.03

%

 

 

0.55

%

 

 

1.24

%

 

 

1.17

%

 

 

1.63

%

 

Return on average common equity ("ROCE")

 

16.00

%

 

 

8.05

%

 

 

19.33

%

 

 

18.21

%

 

 

24.26

%

 

Net interest margin, tax equivalent

 

2.96

%

 

 

2.67

%

 

 

3.16

%

 

 

3.39

%

 

 

3.60

%

 

Efficiency ratio

 

47.71

%

 

 

49.20

%

 

 

50.00

%

 

 

42.14

%

 

 

39.42

%

 

Non-GAAP Profitability Metrics (2):

 

 

 

 

 

 

 

 

 

 

Core earnings

$

51,143

 

 

$

39,368

 

 

$

82,270

 

 

$

59,367

 

 

$

75,410

 

 

Adjusted pre-tax pre-provision net income

$

89,282

 

 

$

81,377

 

 

$

100,994

 

 

$

105,692

 

 

$

112,649

 

 

Per share amounts:

 

 

 

 

 

 

 

 

 

 

 

Core earnings per share - diluted

$

1.58

 

 

$

1.19

 

 

$

2.48

 

 

$

1.77

 

 

$

2.20

 

 

 

Tangible book value per common share (1)

$

40.96

 

 

$

38.97

 

 

$

38.35

 

 

$

37.35

 

 

$

37.50

 

 

 

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

 

45

%

 

 

73

%

 

 

77

%

 

 

91

%

 

 

139

%

 

Core ROAA

 

1.05

%

 

 

0.81

%

 

 

1.64

%

 

 

1.23

%

 

 

1.64

%

 

Core ROCE

 

16.28

%

 

 

12.36

%

 

 

25.91

%

 

 

19.13

%

 

 

24.43

%

 

Adjusted ROAA - pre-tax and pre-provision

 

1.72

%

 

 

1.56

%

 

 

1.95

%

 

 

2.11

%

 

 

2.39

%

 

Adjusted ROCE - pre-tax and pre-provision

 

27.33

%

 

 

24.59

%

 

 

31.01

%

 

 

33.37

%

 

 

35.89

%

 

Net interest margin, tax equivalent, excluding PPP loans

 

2.80

%

 

 

2.87

%

 

 

3.18

%

 

 

3.32

%

 

 

3.32

%

 

Core efficiency ratio

 

47.09

%

 

 

49.12

%

 

 

42.57

%

 

 

41.74

%

 

 

39.47

%

 

Asset Quality:

 

 

 

 

 

 

 

 

 

 

Net charge-offs

$

18,651

 

 

$

27,164

 

 

$

18,497

 

 

$

13,481

 

 

$

7,226

 

 

Annualized net charge-offs to average total loans and leases

 

0.49

%

 

 

0.70

%

 

 

0.47

%

 

 

0.36

%

 

 

0.21

%

 

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

 

0.21

%

 

 

0.19

%

 

 

0.18

%

 

 

0.18

%

 

 

0.31

%

 

Reserves to NPLs (1)

 

405.56

%

 

 

425.95

%

 

 

466.34

%

 

 

557.76

%

 

 

333.15

%

 

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

 

0.15

%

 

 

0.15

%

 

 

0.14

%

 

 

0.14

%

 

 

0.23

%

 

Customers Bank Capital Ratios (3):

 

 

 

 

 

 

 

 

 

 

Common equity Tier 1 capital to risk-weighted assets

 

11.3

%

 

 

11.21

%

 

 

11.42

%

 

 

11.46

%

 

 

11.60

%

 

Tier 1 capital to risk-weighted assets

 

11.3

%

 

 

11.21

%

 

 

11.42

%

 

 

11.46

%

 

 

11.60

%

 

Total capital to risk-weighted assets

 

12.6

%

 

 

12.40

%

 

 

12.65

%

 

 

12.91

%

 

 

13.03

%

 

Tier 1 capital to average assets (leverage ratio)

 

8.1

%

 

 

8.15

%

 

 

8.10

%

 

 

8.09

%

 

 

8.21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(2) 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 Q1 2023 and actual for the remaining periods. In accordance with regulatory capital rules, Customers elected to apply the CECL capital transition provisions which delayed the effects of CECL on regulatory capital for two years until January 1, 2022, followed by a three-year transition period. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of March 31, 2023, our regulatory capital ratios reflected 50%, or $30.8 million, benefit associated with the CECL transition provisions.

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

Q1

 

Q4

 

Q3

 

Q2

 

Q1

 

2023

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

$

244,212

 

$

217,471

 

 

$

200,438

 

 

$

168,920

 

 

$

157,120

 

Investment securities

 

47,316

 

 

42,953

 

 

 

30,546

 

 

 

25,442

 

 

 

20,295

 

Loans held for sale

 

11,701

 

 

1,269

 

 

 

19

 

 

 

21

 

 

 

55

 

Interest earning deposits

 

10,395

 

 

6,754

 

 

 

2,949

 

 

 

919

 

 

 

330

 

Other

 

1,321

 

 

1,200

 

 

 

1,964

 

 

 

1,032

 

 

 

5,676

 

Total interest income

 

314,945

 

 

269,647

 

 

 

235,916

 

 

 

196,334

 

 

 

183,476

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

143,930

 

 

124,366

 

 

 

65,380

 

 

 

22,781

 

 

 

13,712

 

FHLB advances

 

10,370

 

 

4,464

 

 

 

4,684

 

 

 

2,316

 

 

 

 

FRB advances

 

6,286

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated debt

 

2,689

 

 

2,688

 

 

 

2,689

 

 

 

2,689

 

 

 

2,689

 

Other borrowings

 

1,771

 

 

2,992

 

 

 

4,131

 

 

 

3,696

 

 

 

2,376

 

Total interest expense

 

165,046

 

 

134,510

 

 

 

76,884

 

 

 

31,482

 

 

 

18,777

 

Net interest income

 

149,899

 

 

135,137

 

 

 

159,032

 

 

 

164,852

 

 

 

164,699

 

Provision (benefit) for credit losses

 

19,603

 

 

28,216

 

 

 

(7,994

)

 

 

23,847

 

 

 

15,997

 

Net interest income after provision (benefit) for credit losses

 

130,296

 

 

106,921

 

 

 

167,026

 

 

 

141,005

 

 

 

148,702

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Commercial lease income

 

9,326

 

 

8,135

 

 

 

7,097

 

 

 

6,592

 

 

 

5,895

 

Loan fees

 

3,990

 

 

4,017

 

 

 

3,008

 

 

 

2,618

 

 

 

2,545

 

Bank-owned life insurance

 

2,647

 

 

1,975

 

 

 

3,449

 

 

 

1,947

 

 

 

8,326

 

Mortgage warehouse transactional fees

 

1,074

 

 

1,295

 

 

 

1,545

 

 

 

1,883

 

 

 

2,015

 

Gain (loss) on sale of SBA and other loans

 

 

 

 

 

 

106

 

 

 

1,542

 

 

 

1,507

 

Gain (loss) on sale of consumer installment loans

 

 

 

 

 

 

(23,465

)

 

 

 

 

 

 

Net gain (loss) on sale of investment securities

 

 

 

(16,937

)

 

 

(2,135

)

 

 

(3,029

)

 

 

(1,063

)

Legal settlement gain

 

 

 

7,519

 

 

 

 

 

 

 

 

 

 

Other

 

1,084

 

 

1,341

 

 

 

1,378

 

 

 

1,193

 

 

 

1,973

 

Total non-interest income

 

18,121

 

 

7,345

 

 

 

(9,017

)

 

 

12,746

 

 

 

21,198

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

32,345

 

 

29,194

 

 

 

31,230

 

 

 

25,334

 

 

 

26,607

 

Technology, communication and bank operations

 

16,589

 

 

18,604

 

 

 

19,588

 

 

 

22,738

 

 

 

24,068

 

Commercial lease depreciation

 

7,875

 

 

6,518

 

 

 

5,966

 

 

 

5,552

 

 

 

4,942

 

Professional services

 

7,596

 

 

6,825

 

 

 

6,269

 

 

 

7,415

 

 

 

6,956

 

Loan servicing

 

4,661

 

 

4,460

 

 

 

3,851

 

 

 

4,341

 

 

 

2,371

 

Occupancy

 

2,760

 

 

3,672

 

 

 

2,605

 

 

 

4,279

 

 

 

3,050

 

FDIC assessments, non-income taxes and regulatory fees

 

2,728

 

 

2,339

 

 

 

2,528

 

 

 

1,619

 

 

 

2,383

 

Advertising and promotion

 

1,049

 

 

1,111

 

 

 

762

 

 

 

353

 

 

 

315

 

Other

 

4,530

 

 

5,696

 

 

 

3,399

 

 

 

4,574

 

 

 

3,115

 

Total non-interest expense

 

80,133

 

 

78,419

 

 

 

76,198

 

 

 

76,205

 

 

 

73,807

 

Income before income tax expense

 

68,284

 

 

35,847

 

 

 

81,811

 

 

 

77,546

 

 

 

96,093

 

Income tax expense

 

14,563

 

 

7,136

 

 

 

17,899

 

 

 

18,896

 

 

 

19,332

 

Net income

 

53,721

 

 

28,711

 

 

 

63,912

 

 

 

58,650

 

 

 

76,761

 

Preferred stock dividends

 

3,456

 

 

3,088

 

 

 

2,548

 

 

 

2,131

 

 

 

1,865

 

Net income available to common shareholders

$

50,265

 

$

25,623

 

 

$

61,364

 

 

$

56,519

 

 

$

74,896

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

1.58

 

$

0.79

 

 

$

1.89

 

 

$

1.73

 

 

$

2.27

 

Diluted earnings per common share

 

1.55

 

 

0.77

 

 

 

1.85

 

 

 

1.68

 

 

 

2.18

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - UNAUDITED

(Dollars in thousands)

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

ASSETS

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

77,251

 

 

$

58,025

 

 

$

41,520

 

 

$

66,703

 

 

$

55,515

 

Interest earning deposits

 

1,969,434

 

 

 

397,781

 

 

 

362,945

 

 

 

178,475

 

 

 

219,085

 

Cash and cash equivalents

 

2,046,685

 

 

 

455,806

 

 

 

404,465

 

 

 

245,178

 

 

 

274,600

 

Investment securities, at fair value

 

2,926,969

 

 

 

2,987,500

 

 

 

2,943,694

 

 

 

3,144,882

 

 

 

4,169,853

 

Investment securities held to maturity

 

870,294

 

 

 

840,259

 

 

 

886,294

 

 

 

495,039

 

 

 

 

Loans held for sale

 

424,057

 

 

 

328,312

 

 

 

5,224

 

 

 

6,595

 

 

 

3,003

 

Loans receivable, mortgage warehouse, at fair value

 

1,247,367

 

 

 

1,323,312

 

 

 

1,569,090

 

 

 

1,874,603

 

 

 

1,755,758

 

Loans receivable, PPP

 

246,258

 

 

 

998,153

 

 

 

1,154,632

 

 

 

1,570,160

 

 

 

2,195,902

 

Loans and leases receivable

 

13,145,352

 

 

 

13,144,894

 

 

 

12,607,742

 

 

 

12,212,995

 

 

 

10,118,855

 

Allowance for credit losses on loans and leases

 

(130,281

)

 

 

(130,924

)

 

 

(130,197

)

 

 

(156,530

)

 

 

(145,847

)

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

 

14,508,696

 

 

 

15,335,435

 

 

 

15,201,267

 

 

 

15,501,228

 

 

 

13,924,668

 

FHLB, Federal Reserve Bank, and other restricted stock

 

124,733

 

 

 

74,196

 

 

 

64,112

 

 

 

74,626

 

 

 

54,553

 

Accrued interest receivable

 

123,754

 

 

 

123,374

 

 

 

107,621

 

 

 

98,727

 

 

 

94,669

 

Bank premises and equipment, net

 

8,581

 

 

 

9,025

 

 

 

6,610

 

 

 

6,755

 

 

 

8,233

 

Bank-owned life insurance

 

339,607

 

 

 

338,441

 

 

 

336,130

 

 

 

335,153

 

 

 

332,239

 

Goodwill and other intangibles

 

3,629

 

 

 

3,629

 

 

 

3,629

 

 

 

3,629

 

 

 

3,678

 

Other assets

 

374,609

 

 

 

400,135

 

 

 

408,575

 

 

 

340,184

 

 

 

298,212

 

Total assets

$

21,751,614

 

 

$

20,896,112

 

 

$

20,367,621

 

 

$

20,251,996

 

 

$

19,163,708

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Demand, non-interest bearing deposits

$

3,487,517

 

 

$

1,885,045

 

 

$

2,993,793

 

 

$

4,683,030

 

 

$

4,594,428

 

Interest bearing deposits

 

14,236,100

 

 

 

16,271,908

 

 

 

14,528,645

 

 

 

12,261,689

 

 

 

11,821,132

 

Total deposits

 

17,723,617

 

 

 

18,156,953

 

 

 

17,522,438

 

 

 

16,944,719

 

 

 

16,415,560

 

Federal funds purchased

 

 

 

 

 

 

 

365,000

 

 

 

770,000

 

 

 

700,000

 

FHLB advances

 

2,052,143

 

 

 

800,000

 

 

 

500,000

 

 

 

635,000

 

 

 

 

Other borrowings

 

123,645

 

 

 

123,580

 

 

 

123,515

 

 

 

123,450

 

 

 

223,230

 

Subordinated debt

 

182,021

 

 

 

181,952

 

 

 

181,882

 

 

 

181,812

 

 

 

181,742

 

Accrued interest payable and other liabilities

 

249,168

 

 

 

230,666

 

 

 

287,855

 

 

 

243,625

 

 

 

265,770

 

Total liabilities

 

20,330,594

 

 

 

19,493,151

 

 

 

18,980,690

 

 

 

18,898,606

 

 

 

17,786,302

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

137,794

 

 

 

137,794

 

 

 

137,794

 

 

 

137,794

 

 

 

137,794

 

Common stock

 

35,258

 

 

 

35,012

 

 

 

34,948

 

 

 

34,922

 

 

 

34,882

 

Additional paid in capital

 

552,255

 

 

 

551,721

 

 

 

549,066

 

 

 

545,670

 

 

 

542,402

 

Retained earnings

 

974,399

 

 

 

924,134

 

 

 

898,511

 

 

 

837,147

 

 

 

780,628

 

Accumulated other comprehensive income (loss), net

 

(156,276

)

 

 

(163,096

)

 

 

(156,126

)

 

 

(124,881

)

 

 

(62,548

)

Treasury stock, at cost

 

(122,410

)

 

 

(82,604

)

 

 

(77,262

)

 

 

(77,262

)

 

 

(55,752

)

Total shareholders' equity

 

1,421,020

 

 

 

1,402,961

 

 

 

1,386,931

 

 

 

1,353,390

 

 

 

1,377,406

 

Total liabilities and shareholders' equity

$

21,751,614

 

 

$

20,896,112

 

 

$

20,367,621

 

 

$

20,251,996

 

 

$

19,163,708

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31, 2023

 

December 31, 2022

 

March 31, 2022

 

Average Balance

 

Interest Income or Expense

 

Average Yield or Cost (%)

 

Average Balance

 

Interest Income or Expense

 

Average Yield or Cost (%)

 

Average Balance

 

Interest Income or Expense

 

Average Yield or Cost (%)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest earning deposits

$

914,149

 

$

10,395

 

4.61

%

 

$

693,563

 

$

6,754

 

3.86

%

 

$

826,240

 

$

329

 

0.16

%

Investment securities (1)

 

4,031,247

 

 

47,316

 

4.69

%

 

 

4,061,555

 

 

42,953

 

4.23

%

 

 

4,036,966

 

 

20,295

 

2.01

%

Loans and leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & industrial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty lending loans and leases (2)

 

5,694,168

 

 

103,688

 

7.38

%

 

 

5,529,567

 

 

90,885

 

6.52

%

 

 

2,730,990

 

 

23,391

 

3.47

%

Other commercial & industrial loans (2)

 

1,705,205

 

 

25,570

 

6.08

%

 

 

1,670,000

 

 

22,796

 

5.42

%

 

 

1,393,418

 

 

13,268

 

3.86

%

Commercial loans to mortgage companies

 

1,262,139

 

 

17,412

 

5.59

%

 

 

1,376,760

 

 

17,701

 

5.10

%

 

 

1,836,647

 

 

14,006

 

3.09

%

Multifamily loans

 

2,206,600

 

 

20,470

 

3.76

%

 

 

2,235,885

 

 

22,481

 

3.99

%

 

 

1,531,846

 

 

13,766

 

3.64

%

Loans receivable, PPP

 

889,235

 

 

23,551

 

10.74

%

 

 

1,065,919

 

 

7,249

 

2.70

%

 

 

2,641,318

 

 

36,894

 

5.66

%

Non-owner occupied commercial real estate loans

 

1,449,722

 

 

20,199

 

5.65

%

 

 

1,430,420

 

 

18,536

 

5.14

%

 

 

1,312,210

 

 

12,207

 

3.77

%

Residential mortgages

 

542,909

 

 

5,598

 

4.18

%

 

 

524,344

 

 

5,462

 

4.13

%

 

 

416,417

 

 

3,680

 

3.58

%

Installment loans

 

1,727,995

 

 

39,425

 

9.25

%

 

 

1,555,108

 

 

33,630

 

8.58

%

 

 

1,794,145

 

 

39,963

 

9.03

%

Total loans and leases (3)

 

15,477,973

 

 

255,913

 

6.70

%

 

 

15,388,003

 

 

218,740

 

5.64

%

 

 

13,656,991

 

 

157,175

 

4.67

%

Other interest-earning assets

 

91,308

 

 

1,321

 

5.87

%

 

 

67,907

 

 

1,200

 

7.01

%

 

 

52,111

 

 

5,677

 

NM(6)

Total interest-earning assets

 

20,514,677

 

 

314,945

 

6.21

%

 

 

20,211,028

 

 

269,647

 

5.30

%

 

 

18,572,308

 

 

183,476

 

4.00

%

Non-interest-earning assets

 

538,243

 

 

 

 

 

 

506,334

 

 

 

 

 

 

557,022

 

 

 

 

Total assets

$

21,052,920

 

 

 

 

 

$

20,717,362

 

 

 

 

 

$

19,129,330

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking accounts

$

7,494,379

 

$

70,485

 

3.81

%

 

$

8,536,962

 

$

70,041

 

3.26

%

 

$

5,769,372

 

$

7,730

 

0.54

%

Money market deposit accounts

 

2,470,004

 

 

20,783

 

3.41

%

 

 

3,094,206

 

 

21,220

 

2.72

%

 

 

4,880,051

 

 

4,674

 

0.39

%

Other savings accounts

 

822,312

 

 

6,286

 

3.10

%

 

 

669,466

 

 

3,368

 

2.00

%

 

 

880,113

 

 

784

 

0.36

%

Certificates of deposit

 

4,504,333

 

 

46,376

 

4.18

%

 

 

3,259,801

 

 

29,737

 

3.62

%

 

 

450,644

 

 

524

 

0.47

%

Total interest-bearing deposits (4)

 

15,291,028

 

 

143,930

 

3.82

%

 

 

15,560,435

 

 

124,366

 

3.17

%

 

 

11,980,180

 

 

13,712

 

0.46

%

Federal funds purchased

 

15,333

 

 

188

 

4.97

%

 

 

151,467

 

 

1,437

 

3.76

%

 

 

88,611

 

 

73

 

0.33

%

Borrowings

 

1,788,116

 

 

20,928

 

4.75

%

 

 

819,032

 

 

8,707

 

4.22

%

 

 

532,610

 

 

4,992

 

3.80

%

Total interest-bearing liabilities

 

17,094,477

 

 

165,046

 

3.91

%

 

 

16,530,934

 

 

134,510

 

3.23

%

 

 

12,601,401

 

 

18,777

 

0.60

%

Non-interest-bearing deposits (4)

 

2,299,295

 

 

 

 

 

 

2,514,316

 

 

 

 

 

 

4,900,983

 

 

 

 

Total deposits and borrowings

 

19,393,772

 

 

 

3.45

%

 

 

19,045,250

 

 

 

2.80

%

 

 

17,502,384

 

 

 

0.43

%

Other non-interest-bearing liabilities

 

247,575

 

 

 

 

 

 

271,129

 

 

 

 

 

 

237,131

 

 

 

 

Total liabilities

 

19,641,347

 

 

 

 

 

 

19,316,379

 

 

 

 

 

 

17,739,515

 

 

 

 

Shareholders' equity

 

1,411,573

 

 

 

 

 

 

1,400,983

 

 

 

 

 

 

1,389,815

 

 

 

 

Total liabilities and shareholders' equity

$

21,052,920

 

 

 

 

 

$

20,717,362

 

 

 

 

 

$

19,129,330

 

 

 

 

Net interest income

 

 

 

149,899

 

 

 

 

 

 

135,137

 

 

 

 

 

 

164,699

 

 

Tax-equivalent adjustment

 

 

 

375

 

 

 

 

 

 

342

 

 

 

 

 

 

239

 

 

Net interest earnings

 

 

$

150,274

 

 

 

 

 

$

135,479

 

 

 

 

 

$

164,938

 

 

Interest spread

 

 

 

 

2.76

%

 

 

 

 

 

2.50

%

 

 

 

 

 

3.57

%

Net interest margin

 

 

 

 

2.95

%

 

 

 

 

 

2.66

%

 

 

 

 

 

3.59

%

Net interest margin tax equivalent

 

 

 

 

2.96

%

 

 

 

 

 

2.67

%

 

 

 

 

 

3.60

%

Net interest margin tax equivalent excl. PPP (5)

 

 

 

 

2.80

%

 

 

 

 

 

2.87

%

 

 

 

 

 

3.32

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 3.32%, 2.73% and 0.33% for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, presented to approximate interest income as a taxable asset and 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.

(6) Not meaningful.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

2023

 

2022

 

2022

 

2022

 

2022

Loans and leases held for investment

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

Commercial & industrial:

 

 

 

 

 

 

 

 

 

Specialty lending

$

5,519,176

 

$

5,412,887

 

$

5,103,974

 

$

4,599,640

 

$

2,973,544

Other commercial & industrial

 

1,168,161

 

 

1,135,336

 

 

1,064,332

 

 

1,037,444

 

 

947,895

Multifamily

 

2,195,211

 

 

2,213,019

 

 

2,263,268

 

 

2,008,784

 

 

1,705,027

Loans to mortgage companies

 

1,374,894

 

 

1,447,919

 

 

1,708,587

 

 

1,975,189

 

 

1,830,121

Commercial real estate owner occupied

 

895,314

 

 

885,339

 

 

726,670

 

 

710,577

 

 

701,893

Loans receivable, PPP

 

246,258

 

 

998,153

 

 

1,154,632

 

 

1,570,160

 

 

2,195,902

Commercial real estate non-owner occupied

 

1,245,248

 

 

1,290,730

 

 

1,263,211

 

 

1,152,869

 

 

1,140,311

Construction

 

188,123

 

 

162,009

 

 

136,133

 

 

195,687

 

 

161,024

Total commercial loans and leases

 

12,832,385

 

 

13,545,392

 

 

13,420,807

 

 

13,250,350

 

 

11,655,717

Consumer:

 

 

 

 

 

 

 

 

 

Residential

 

494,815

 

 

497,952

 

 

465,772

 

 

457,768

 

 

466,423

Manufactured housing

 

43,272

 

 

45,076

 

 

46,990

 

 

48,570

 

 

50,669

Installment:

 

 

 

 

 

 

 

 

 

Personal

 

849,420

 

 

964,641

 

 

1,056,432

 

 

1,613,628

 

 

1,584,011

Other

 

419,085

 

 

413,298

 

 

341,463

 

 

287,442

 

 

313,695

Total installment loans

 

1,268,505

 

 

1,377,939

 

 

1,397,895

 

 

1,901,070

 

 

1,897,706

Total consumer loans

 

1,806,592

 

 

1,920,967