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Customers Bancorp Reports Net Income For Second Quarter 2018


  • Customers Bancorp, Inc.'s ("CUBI") second quarter 2018 ("Q2 2018") net income to common shareholders was $20.0 million, or $0.62 per diluted share.  CUBI's six month net income to common shareholders was $40.6 million, or $1.26 per diluted share.  Q2 2018 results include $869,000 of merger and acquisition related charges, or $0.02 per diluted share
  • The Community Business Banking segment net income to common shareholders for Q2 2018 totaled $23.4 million, or $0.72 per diluted share, and for the six month period totaled $44.9 million, or $1.39 per diluted share. The segment's adjusted net income to common shareholders (a non-GAAP measure) for Q2 2018 totaled $23.5 million, or $0.73 per diluted share, and for the six month period totaled $45.0 million, or $1.39 per diluted share
  • Adjusted for merger and acquisition related charges, securities gains and impairment losses, and depreciation and amortization catch-up adjustments, the adjusted Q2 2018 diluted earnings per share (a non-GAAP measure) increased 10% from second quarter 2017 ("Q2 2017"); however, the Community Business Banking segment adjusted earnings (a non-GAAP measure) were relatively flat year-over-year
  • In Q2 2018, the return on average assets ("ROAA") was 0.89% and the ROAA for the Community Business Banking segment was 1.02%
  • The BankMobile segment, which is expected to be spun off to shareholders and merged into Flagship Community Bank, reported a net loss for Q2 2018 of $3.3 million, or $0.10 per diluted share, and for the six month period lost $4.3 million, or $0.13 per diluted share.  Included in its results are $0.02 of merger and acquisition related charges in Q2 2018.  Adjusted for merger and acquisition related charges and depreciation and amortization catch-up adjustments, Q2 2018 losses improved to $(0.08) from $(0.14) in Q2 2017
  • Total assets at June 30, 2018 were $11.1 billion, compared to $10.9 billion at June 30, 2017
  • Commercial and industrial loans at June 30, 2018 increased $306 million, or 21.1%, from June 30, 2017
  • Net interest margin, tax equivalent ("NIM") (a non-GAAP measure) was 2.62% in Q2 2018, compared to 2.67% in Q1 2018 and 2.78% in Q2 2017; seasonal reductions in BankMobile's non-interest bearing deposits reduced NIM approximately 4 basis points from first quarter 2018 ("Q1 2018")
  • The Q2 2018 provision for loan losses decreased $1.3 million from Q2 2017 to a benefit of $0.8 million as a result of the resolution of problem loans, slower asset growth, and outstanding asset quality
  • Q2 2018 book value per common share was $22.70 and tangible book value per common share (a non-GAAP measure) was $22.15. Book value per common share has increased at a compound annual growth rate of 10.3% over the past five years
  • The BankMobile spin-off and merger are tracking to plan, with divestiture anticipated by or shortly after September 30, 2018
  • CUBI common stock, with a July 20, 2018 closing price of $28.69 was trading at 8.72x the consensus 2019 earnings estimate, and 1.30x tangible book value (a non-GAAP measure).

WYOMISSING, Pa., July 25, 2018 (GLOBE NEWSWIRE) -- Customers Bancorp, Inc. (NYSE: CUBI), the parent company of Customers Bank (collectively “Customers”), reported net income to common shareholders of $20.0 million for Q2 2018, compared to $20.1 million for Q2 2017, a decrease of $0.1 million, or 0.29%, and $20.5 million for Q1 2018, a decrease of $0.5 million, or 2.33%.  Fully diluted earnings per common share for Q2 2018 was $0.62, compared to $0.64 for Q1 2018 and $0.62 for Q2 2017.

Customers' Community Business Banking segment reported Q2 2018 net income to common shareholders of $23.4 million, which was relatively flat over Q2 2017, increased 8.67% from $21.5 million for Q1 2018.  Adjusted for securities gains and impairment losses, the segment's adjusted earnings (a non-GAAP measure) in Q2 2018 of $23.5 million increased 9.36% from $21.5 million in Q1 2018.

Customers also reported net income to common shareholders of $40.6 million for the six months ended June 30, 2018, compared to net income to common shareholders of $42.2 million for the six months ended June 30, 2017.  Fully diluted earnings per common share for the six months ended June 30, 2018 was $1.26, compared to $1.29 for the six months ended June 30, 2017.  Adjusted for merger and acquisition related charges, securities gains and impairment losses, and depreciation and amortization catch-up adjustments, Customers' six month net income available to common shareholders (a non-GAAP measure) totaled $41.4 million, a 7.62% increase compared to $38.5 million for the first six months of 2017.

“Our Community Business Banking segment, the core business of Customers once the BankMobile spin-off has been completed, generated adjusted earnings (a non-GAAP measure) of $23.5 million, or $0.73 per share, a 9.1% increase in earnings from Q1 2018 but roughly flat year-over-year.  The benefits of Customers' strong credit quality and disciplined underwriting were particularly evident this quarter as our reserve methodology resulted in a release of reserves, even as we maintained an allowance for loan losses equal to 149% of our nonperforming loans," stated Jay Sidhu, CEO and Chairman of Customers Bank.  "Subject to final regulatory approvals, we anticipate spinning off BankMobile by or shortly after September 30, 2018," Mr. Sidhu concluded.

Strategic Priorities

Grow and Improve Financial Performance of the Community Business Banking Segment; Target in Excess of 1.1% ROAA

Priorities for the Community Business Banking segment in 2018 include strong risk management, core deposit growth, and a focus on net interest margin.  Customers targets an ROAA in excess of 1.10% and a return on tangible common equity ("ROTCE") (a non-GAAP measure) greater than 12% for this segment.  Longer term, the Community Business Banking segment is targeting a net interest margin greater than 2.75%, a compound annual growth rate of 10% to 15% in EPS, and an efficiency ratio in the low forties.

In Q2 2018, the Community Business Banking segment reported net income of $23.4 million ($0.72 per diluted share), which included the funds transfer pricing cost paid by the segment for use of BankMobile’s deposits at a rate of  3.03% of those deposits. For Q2 2018, the segment reported an ROAA of 1.02% and an ROTCE of 13.7%.

Credit quality at Customers Bank is very strong, as measured by the low level of nonperforming loans (0.29% of total loans at June 30, 2018); however, Customers' below average credit risk appetite is also reflected in below industry average asset yields and a more narrow net interest margin.  This narrower NIM is mitigated with a significantly better than peer-average non-interest expense to asset ratio.  Customers continues to combat the pressures of a flat yield curve and rising rates by focusing on favorable balance sheet mix shifts.  Customers recently announced its entry into  non-QM residential mortgage lending.  Simultaneously, Customers has been deemphasizing its multi-family business.  Beginning in late 2017, Customers began to significantly limit originations of loans yielding less than 5%.  Customers' deposit strategy is to look at the total cost of deposits as the sum of operating and interest costs. Customers’ branch light model, with a focus on cost control, is reflected in dramatically lower operating expenses than the industry - operating expenses in the Community Business Banking segment were equal to 1.42% of average assets in Q2 2018, which Customers believes is over 125 basis points lower than the industry overall.   Core deposit growth is a strategic priority for Customers. Early in July, Customers launched a new digital, on-line banking business with a goal of gathering retail deposits without branches at an average cost that is below its current marginal cost of borrowing.

Increase Capital Ratios

Total shareholders' equity at June 30, 2018 increased $25.9 million, or 2.85%, from June 30, 2017 to $936.2 million.  The estimated total risk-based capital ratio was approximately 12.7% for Q2 2018, compared to 12.4% for Q2 2017.  The estimated common equity Tier 1 capital ratio was approximately 8.7% for Q2 2018, compared to 8.3% for Q2 2017.  The estimated Tier 1 leverage capital ratio was approximately 8.9% for Q2 2018, compared to 8.7% for Q2 2017.  The tangible common equity to tangible assets ratio (a non-GAAP measure) was 6.3% at June 30, 2018, compared to 6.2% at June 30, 2017.

"We continue to target a Tier I leverage capital ratio of 9.0% or higher and a total risk-based capital ratio of around 13.0%," Mr. Sidhu stated.  "We expect our capital ratios to increase in the later part of 2018 as balance sheet growth moderates further, given seasonal declines in the mortgage warehouse business and our de-emphasis of multi-family lending," concluded Mr. Sidhu.

Grow and Successfully Divest the BankMobile Segment in 2018

BankMobile, a division of Customers Bank, operates a branchless digital bank offering very low cost banking services to its 1.8 million checking account holders, of which 1.0 million are active deposit customers. Deposit balances were approximately $420 million at June 30, 2018.  The BankMobile segment reported a net loss of $3.3 million for Q2 2018, including $869,000, or $0.02 per diluted share, in merger and acquisition related charges.  These charges include professional services expenses incurred in connection with the planned spin-off of the BankMobile business as well as expenses resulting from the 2016 acquisition of the Disbursements business.  Results include the funds transfer pricing benefit for the originated deposits at a rate of 3.03%. Deposits generated by the BankMobile business averaged $468 million for Q2 2018.

During the third quarter of 2017, Customers decided that the best strategy for its shareholders for divesting BankMobile was to spin-off BankMobile to Customers’ shareholders subject to an agreement with Flagship Community Bank ("Flagship") for Flagship to acquire the BankMobile business. Flagship has filed its confidential Form 10 registration statement with the FDIC to register its class of common stock in connection with its expected listing on a national securities exchange, and the BankMobile spin-off subsidiary has filed its confidential Form 10 registration statement with the SEC to facilitate the spin-off and merger into Flagship.  Public versions of the filings will be made closer to the spin-off date.  Once approvals of the transactions and filings are received from the appropriate regulators, Customers will announce the record date for the distribution of the BankMobile spin-off subsidiary shares to Customers' shareholders.  Following the spin-off of the BankMobile spin-off subsidiary from Customers and merger with Flagship, Customers and Flagship/BankMobile will be entirely separate entities.  Customers will retain no ownership in the BankMobile business, there will be no common employees, facilities, or functions beyond certain temporary support services to BankMobile for an estimated six months according to the terms of a transition services agreement and one common director.  Subject to regulatory approvals, the BankMobile spin-off and merger are anticipated by or shortly after September 30, 2018.

Q2 2018 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended June 30, 2018 and the preceding four quarters, respectively:

 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
EARNINGS SUMMARY - UNAUDITED    
      
(Dollars in thousands, except per share data)     
 Q2Q1Q4Q3Q2
 20182018201720172017
      
Net income available to common shareholders$20,048 $20,527 $18,000 $4,139 $20,107 
Basic earnings per common share ("EPS")$0.64 $0.65 $0.58 $0.13 $0.66 
Diluted EPS$0.62 $0.64 $0.55 $0.13 $0.62 
Average common shares outstanding - basic31,564,893 31,424,496 30,843,319 30,739,671 30,641,554 
Average common shares outstanding - diluted32,380,662 32,273,973 32,508,030 32,512,692 32,569,652 
Shares outstanding period end31,669,643 31,466,271 31,382,503 30,787,632 30,730,784 
Return on average assets0.89%0.95%0.84%0.29%0.93%
Return on average common equity11.32%11.73%10.11%2.33%11.84%
Net interest margin, tax equivalent (1)2.62%2.67%2.79%2.62%2.78%
Efficiency ratio64.35%60.84%62.42%68.55%58.15%
Non-performing loans (NPLs) to total loans (including held-for-sale loans)0.29%0.26%0.30%0.33%0.21%
Reserves to non-performing loans149.25%173.02%146.36%130.83%204.59%
Net charge-offs$427 $633 $1,130 $2,495 $1,960 
Annualized net charge-offs to average total loans0.02%0.03%0.05%0.11%0.09%
Tier 1 capital to average assets (leverage ratio) (2)8.87%9.03%8.94%8.35%8.66%
Common equity Tier 1 capital to risk-weighted assets (2)8.69%8.51%8.81%8.28%8.28%
Tier 1 capital to risk-weighted assets (2)11.26%11.11%11.58%10.94%10.96%
Total capital to risk-weighted assets (2)12.66%12.55%13.05%12.40%12.43%
Tangible common equity to tangible assets (3)6.33%6.36%7.00%6.47%6.21%
Book value per common share$22.70 $22.30 $22.42 $22.51 $22.54 
Tangible book value per common share (period end) (4)$22.15 $21.74 $21.90 $21.98 $21.97 
Period end stock price$28.38 $29.15 $25.99 $32.62 $28.28 
      
(1) Non-GAAP measure calculated as GAAP net interest income, plus tax equivalent interest using an estimated  26% tax rate for Q2 2018 and Q1 2018, and an estimated  35% tax rate for Q4 2017, Q3 2017, and Q2 2017, divided by average interest earning assets.
(2) Regulatory capital ratios are estimated for Q2 2018.
(3) Non-GAAP measure calculated as GAAP total shareholders' equity less preferred stock and goodwill and other intangibles divided by total assets less goodwill and other intangibles.
(4) Non-GAAP measure calculated as GAAP total shareholders' equity less preferred stock and goodwill and other intangibles divided by common shares outstanding at period end.
 

Net interest income

Q2 2018 net interest income of $67.3 million decreased $1.3 million, or 1.87%, from Q2 2017 as the increase in average interest earning assets of $435.7 million, or 4.40%, was offset by a 16 basis point reduction in net interest margin, tax equivalent (a non-GAAP measure) to 2.62%.  Q2 2018 net interest income of $67.3 million increased $2.3 million, or 3.5%, from Q1 2018 due to a $448.3 million, or 4.54%, increase in average interest earning assets, offset in part by a 5 basis point reduction in net interest margin to 2.62%.  About 4 basis points of net interest margin compression resulted from the seasonal reduction in BankMobile's low cost deposits.

"The sequential quarter net interest margin compression was principally caused by rising funding costs and the seasonal reduction in BankMobile's non-interest bearing deposits," said Robert Wahlman, Customers Bancorp's CFO. "Customers' interest rate sensitivity objective is to limit sensitivity and the impact of a flat curve and rising rates over time.  Our challenge for the second half of 2018 and into 2019 is balancing deposit growth with deposit costs in a competitive, rising rate, flat yield curve environment.  We will continue to focus on originating lower cost, core deposits, disciplined loan pricing and remixing our assets as we work to combat margin pressure," concluded Mr. Wahlman.

Total loans outstanding, including loans held for sale, increased $133.2 million, or 1.48%, to $9.1 billion as of June 30, 2018, compared to total loans of $9.0 billion as of June 30, 2017.  Commercial and industrial loans increased $305.8 million to $1.8 billion, up 21.1% over June 30, 2017.  Commercial loans to mortgage companies decreased $171.3 million to $2.0 billion, a decrease of 7.94% over June 30, 2017. Multi-family loans decreased $7.6 million to $3.5 billion, a decrease of 0.21% over June 30, 2017. Commercial non-owner-occupied real estate loans decreased $60.0 million to $1.2 billion, down 4.94% from June 30, 2017.  Consumer loans, including residential mortgage, increased $36.6 million to $0.6 billion and make up only about 6% of the loan portfolio.

Total deposits decreased $179.4 million, or 2.40%, to $7.3 billion as of June 30, 2018, compared to total deposits of $7.5 billion as of June 30, 2017.  The largest decrease was $370.2 million, or 15.2%, in time deposits, which was partly offset by a $264.0 million, or 73.5%, increase in interest bearing demand deposits.  During Q2 2018, total deposits increased $253 million, or 14%, annualized, compared to Q1 2018.

Provision and Credit

The Q2 2018 provision for loan losses decreased $1.3 million from Q2 2017 to a benefit of $0.8 million.  The Q2 2018 release of $0.8 million in reserves resulted from continued strong asset quality and better than expected resolution of specific problem loans, offset in part by $0.3 million of provision for loan growth.  Net charge-offs for Q2 2018 were $0.4 million, or 2 basis points of annualized net charge-offs to average loans, compared to Q2 2017 net charge-offs of $2.0 million.  There were no significant changes in Customers' methodology that affected the Q2 2018 allowance for loan losses estimate.

Risk management is a critical component of how Customers creates long-term shareholder value, and Customers believes that asset quality is one of the most important risks in banking to be understood and managed.  Customers believes that asset quality risks must be diligently addressed during good economic times with prudent underwriting standards so that when the economy deteriorates the bank's capital is sufficient to absorb all losses without threatening its ability to operate and serve its community and other constituents.  "Customers' non-performing loans at June 30, 2018 were only 0.29% of total loans, compared to our peer group non-performing loans of approximately 0.82% in the most recent period available, and industry average non-performing loans of 1.26% in the most recent period available.  Our expectation is superior asset quality performance in good times and in difficult years," said Mr. Sidhu.

Non-interest income

In Q2 2018, non-interest income decreased $2.3 million, or 12.31%, from Q2 2017 to $16.1 million.  The decline from the year ago period was largely a result of decreases in BankMobile's interchange and card revenue of $2.3 million, mortgage warehouse transactional fees of $0.6 million and deposit fees of $0.5 million. Interchange and card revenue of $6.4 million for Q2 2018 is presented net of $1.2 million of debit and prepaid card interchange expense as a result of adopting the new revenue recognition standard in Q1 2018 on a modified retrospective basis.  If Q2 2017 was presented on a consistent basis with Q2 2018, the reported amount of interchange and card revenue of $8.6 million would have been $7.4 million.  In Q2 2017, debit and prepaid card interchange expense of $1.3 million was presented as technology, communication and bank operations expense within non-interest expense.  BankMobile continues to focus on implementing its "Customers for Life" model and decrease its reliance on Disbursement related deposits. In Q2 2017, Customers also realized $3.2 million of gains from the sale of its investment securities. These decreases in non-interest income in Q2 2018 were offset in part by the increase in income from commercial leases of $1.1 million during Q2 2018.

Non-interest expense

Non-interest expenses totaled $53.8 million, an increase of $3.3 million from Q2 2017, or 6.62%.  Salaries and employee benefits increased $4.1 million as Customers continues to hire new team members in the markets it serves.  Technology, communication, and bank operations expense increased $2.4 million, given the continued investment in the BankMobile segment infrastructure and Customers' recent system conversion.  Technology, communication, and bank operations expense of $11.3 million for Q2 2018 excludes debit and prepaid card interchange expense of $1.2 million, which was reported as a reduction in interchange and card revenue within non-interest income upon adoption of the new revenue recognition standard in Q1 2018.  If Q2 2017 was presented on a consistent basis with Q2 2018, the reported amount of technology, communication and bank operations expense of $8.9 million would have been $7.6 million. These increases were partially offset by decreases in professional services of $2.4 million, which can vary from quarter to quarter.  The Community Business Banking segment's non-interest expenses, which exclude the effect of BankMobile, increased by $7.2 million in Q2 2018 when compared to Q2 2017 primarily as a result of increased salaries and employee benefits of $5.1 million mainly due to salary increases and increased headcount. The BankMobile segment's costs declined by $3.8 million to $16.0 million in Q2 2018 from Q2 2017 as compensation costs and costs for outside services declined.  The Q2 2018 efficiency ratio was 64.4% and the Q2 2018 efficiency ratio for the Community Business Banking segment was 52.8%.

Tax

The provision for income tax expense for Q2 2018 was $6.8 million, resulting in an effective tax rate of 22.4%, compared to 23.5% in Q1 2018.  Customers currently estimates a 2018 effective tax rate of approximately 24.0%.

Profitability

Customers' return on average assets was 0.89% in Q2 2018, compared to 0.93% in Q2 2017, and its return on average common equity was 11.3% in Q2 2018, compared to 11.8% in Q2 2017.  The return on average assets for the Community Business Banking segment was 1.02%, compared to 1.07% in Q2 2017.

Managing Commercial Real Estate Concentration Risks and Providing High Net Worth Families Loans for Their Multi-Family Holdings

Customers' total commercial real estate ("CRE") loan exposures subject to regulatory concentration guidelines of $4.7 billion as of June 30, 2018 included construction loans of $99.6 million, multi-family loans of $3.5 billion, and non-owner occupied commercial real estate loans of $1.1 billion, which represent 392% of total risk-based capital on a combined basis, a reduction from 421% as of June 30, 2017.  Customers' loans subject to regulatory CRE concentration guidelines had 3 year cumulative growth of 46.3% in Q2 2018, a deceleration from 86.6% in Q2 2017.  "In a flat curve environment, we will continue to deemphasize lower yielding multi-family loans and certain CRE loans," stated Mr. Sidhu.

Customers' loans collateralized by multi-family properties were approximately 294% of total risk-based capital at June 30, 2018.  Customers' multi-family exposures are focused principally on loans to high net worth families collateralized by multi-family properties that are of modest size and subject to what Customers believes are conservative underwriting standards.  Customers believes it has a strong risk management process to manage the portfolio risks prospectively and that this portfolio will perform well even under a stressed scenario.  Following are some key characteristics of Customers' multi-family loan portfolio:

  • Principally concentrated in New York City with an emphasis on properties subject to some type of rent control; and principally to high net worth families;
  • Average loan size is $6.7 million;
  • Median annual debt service coverage ratio is 136%;
  • Median loan-to-value for the portfolio is 66.9%;
  • All loans are individually stressed with an increase of 1% and 2% to the cap rate and an increase of 1.5% and 3% in loan interest rates;
  • All properties are inspected prior to a loan being granted and inspected thereafter on an annual basis by dedicated portfolio managers or outside inspectors; and
  • Credit approval process is independent of customer sales and portfolio management process.
Conference Call  
Date:Wednesday, July 25, 2018 
Time:5:00 PM ET 
US Dial-in:888-523-1194 
International Dial-in:   719-884-1601 
Participant Code:739801 

Please dial in at least 10 minutes before the start of the call to ensure timely participation.  Slides accompanying the presentation will be available on the company's website at http://customersbank.com/investor_relations.php prior to the call.  A playback of the call will be available beginning Wednesday, July 25, 2018 at 8:00 PM ET until 8:00 PM ET on August 24, 2018. To listen, call within the United States 888-203-1112 or 719-457-0820 when calling internationally. Please use the replay pin number 1229607.

Institutional Background

Customers Bancorp, Inc. is a bank holding company located in Wyomissing, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank.  Customers Bank is a community-based, full-service bank with assets of approximately $11.1 billion.  A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender that provides a range of banking services to small and medium-sized businesses, professionals, individuals and families through offices in Pennsylvania, the District of Columbia, Illinois, New York, Rhode Island, Massachusetts, New Hampshire and New Jersey.  Committed to fostering customer loyalty, Customers Bank uses a High Tech/High Touch strategy that includes use of industry-leading technology to provide customers better access to their money, as well as Concierge Banking® by appointment at customers’ homes or offices 12 hours a day, seven days a week. Customers Bank offers a continually expanding portfolio of loans to small businesses, multi-family projects, mortgage companies and consumers.

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

“Safe Harbor” Statement

In addition to historical information, this press release may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.'s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words "may," "could," "should," "pro forma," "looking forward," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.'s control). Numerous competitive, economic, regulatory, legal and technological factors, among others, could cause Customers Bancorp, Inc.'s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. In addition, important factors relating to the acquisition of the Disbursements business, the combination of Customers' BankMobile business with the acquired Disbursements business, the implementation of Customers Bancorp, Inc.'s strategy regarding BankMobile, the possibility of events, changes or other circumstances occurring or existing that could result in the planned spin-off and merger of BankMobile not being completed in the anticipated time frame or at all, the possibility that the planned spin-off and merger of BankMobile may be more expensive to complete than anticipated, the possibility that the expected benefits of the planned transactions to Customers and its shareholders may not be achieved, the possibility of Customers incurring liabilities relating to the disposition of BankMobile, or the possible effects on Customers' results of operations if the planned spin-off and merger of BankMobile are not completed in a timely fashion or at all also could cause Customers Bancorp's actual results to differ from those in the forward-looking statements.  Further, Customers' expectations with respect to the effects of the new tax law could be affected by future clarifications, amendments, and interpretations of such law.  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, 2017, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank.

 
 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED - UNAUDITED
(Dollars in thousands, except per share data)         
 Q2 Q1 Q4 Q3 Q2
 2018 2018 2017 2017 2017
Interest income:         
Loans receivable, including fees$74,238  $66,879  $70,935  $67,107  $67,036 
Loans held for sale21,002  19,052  20,294  21,633  17,524 
Investment securities9,765  8,672  4,136  7,307  7,823 
Other2,634  2,361  2,254  2,238  1,469 
Total interest income107,639  96,964  97,619  98,285  93,852 
          
Interest expense:         
Deposits24,182  19,793  18,649  18,381  16,228 
Other borrowings3,275  3,376  3,288  3,168  1,993 
FHLB advances11,176  7,080  5,697  7,032  5,340 
Subordinated debt1,684  1,684  1,685  1,685  1,685 
Total interest expense40,317  31,933  29,319  30,266  25,246 
Net interest income67,322  65,031  68,300  68,019  68,606 
Provision for loan losses(784) 2,117  831  2,352  535 
Net interest income after provision for loan losses68,106  62,914  67,469  65,667  68,071 
          
Non-interest income:         
Interchange and card revenue6,382  9,661  9,780  9,570  8,648 
Mortgage warehouse transactional fees1,967  1,887  2,206  2,396  2,523 
Bank-owned life insurance1,869  2,031  1,922  1,672  2,258 
Deposit fees1,632  2,092  2,121  2,659  2,133 
Gain on sale of SBA and other loans947  1,361  1,178  1,144  573 
Mortgage banking income205  121  173  257  291 
Gain on sale of investment securities    268  5,349  3,183 
Impairment loss on investment securities      (8,349) (2,882)
Other3,125  3,757  2,092  3,328  1,664 
Total non-interest income16,127  20,910  19,740  18,026  18,391 
          
Non-interest expense:         
Salaries and employee benefits27,748  24,925  25,948  24,807  23,651 
Technology, communication and bank operations11,322  9,943  12,637  14,401  8,910 
Professional services3,811  6,008  7,010  7,403  6,227 
Occupancy3,141  2,834  2,937  2,857  2,657 
FDIC assessments, non-income taxes, and regulatory fees2,135  2,200  1,290  2,475  2,416 
Merger and acquisition related expenses869  106  410     
Loan workout648  659  522  915  408 
Advertising and promotion319  390  361  404  378 
Other real estate owned expense58  40  20  445  160 
Other3,699  5,175  3,653  7,333  5,606 
Total non-interest expense53,750  52,280  54,788  61,040  50,413 
Income before income tax expense30,483  31,544  32,421  22,653  36,049 
Income tax expense6,820  7,402  10,806  14,899  12,327 
Net income23,663  24,142  21,615  7,754  23,722 
Preferred stock dividends3,615  3,615  3,615  3,615  3,615 
Net income available to common shareholders$20,048  $20,527  $18,000  $4,139  $20,107 
          
 Basic earnings per common share$0.64  $0.65  $0.58  $0.13  $0.66 
 Diluted earnings per common share$0.62  $0.64  $0.55  $0.13  $0.62 
                    
                    

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED - UNAUDITED
(Dollars in thousands, except per share data)   
 June 30, June 30,
 2018 2017
Interest income:   
Loans receivable, including fees$141,117  $128,497 
Loans held for sale40,054  31,470 
Investment securities18,437  13,710 
Other4,996  3,269 
Total interest income204,604  176,946 
    
Interest expense:   
Deposits43,975  30,551 
Other borrowings6,651  3,600 
FHLB advances18,256  8,401 
Subordinated debt3,369  3,370 
Total interest expense72,251  45,922 
Net interest income132,353  131,024 
Provision for loan losses1,333  3,585 
Net interest income after provision for loan losses131,020  127,439 
    
Non-interest income:   
Interchange and card revenue16,043  22,158 
Bank-owned life insurance3,900  3,624 
Mortgage warehouse transactional fees3,854  4,743 
Deposit fees3,724  5,260 
Gain on sale of SBA and other loans2,308  1,901 
Mortgage banking income325  446 
Impairment loss on investment securities  (4,585)
Gains on sale of investment securities  3,183 
Other6,883  4,414 
Total non-interest income37,037  41,144 
    
Non-interest expense:   
Salaries and employee benefits52,673  44,763 
Technology, communication and bank operations21,266  18,827 
Professional services9,820  13,739 
Occupancy5,975  5,371 
FDIC assessments, non-income taxes, and regulatory fees4,335  4,141 
Loan workout1,307  929 
Advertising and promotion709  704 
Merger and acquisition related expenses975   
Other real estate owned expense98  105 
Other8,873  11,199 
Total non-interest expense106,031  99,778 
Income before income tax expense62,026  68,805 
Income tax expense14,222  19,336 
Net income47,804  49,469 
Preferred stock dividends7,229  7,229 
Net income available to common shareholders$40,575  $42,240 
    
 Basic earnings per common share$1.29  $1.38 
 Diluted earnings per common share$1.26  $1.29 
        
        

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - UNAUDITED
(Dollars in thousands)
 June 30, March 31, December 31, September 30, June 30,
 2018 2018 2017 2017 2017
ASSETS         
Cash and due from banks$22,969  $9,198  $20,388  $13,318  $28,502 
Interest-earning deposits228,757  206,213  125,935  206,162  384,740 
Cash and cash equivalents251,726  215,411  146,323  219,480  413,242 
Investment securities, at fair value1,161,000  1,181,661  471,371  584,823  1,012,605 
Loans held for sale1,931,781  1,875,515  1,939,485  2,113,293  2,255,096 
Loans receivable7,181,726  6,943,566  6,768,258  7,061,338  6,725,208 
Allowance for loan losses(38,288) (39,499) (38,015) (38,314) (38,458)
Total loans receivable, net of allowance for loan losses7,143,438  6,904,067  6,730,243  7,023,024  6,686,750 
FHLB, Federal Reserve Bank, and other restricted stock136,066  130,302  105,918  98,611  129,689 
Accrued interest receivable33,956  31,812  27,021  27,135  26,165 
Bank premises and equipment, net11,224  11,556  11,955  12,369  12,996 
Bank-owned life insurance261,121  259,222  257,720  255,683  213,902 
Other real estate owned1,705  1,742  1,726  1,059  2,358 
Goodwill and other intangibles17,150  17,477  16,295  16,604  17,615 
Other assets143,679  140,501  131,498  119,748  113,130 
Total assets$11,092,846  $10,769,266  $9,839,555  $10,471,829  $10,883,548 
          
LIABILITIES AND SHAREHOLDERS' EQUITY         
Demand, non-interest bearing deposits$1,090,744  $1,260,853  $1,052,115  $1,427,304  $1,109,239 
Interest-bearing deposits6,205,210  5,781,606  5,748,027  6,169,772  6,366,124 
Total deposits7,295,954  7,042,459  6,800,142  7,597,076  7,475,363 
Federal funds purchased105,000  195,000  155,000  147,000  150,000 
FHLB advances2,389,797  2,252,615  1,611,860  1,462,343  1,999,600 
Other borrowings186,888  186,735  186,497  186,258  186,030 
Subordinated debt108,929  108,904  108,880  108,856  108,831 
Accrued interest payable and other liabilities70,051  64,465  56,212  59,654  53,435 
Total liabilities10,156,619  9,850,178  8,918,591  9,561,187  9,973,259 
          
Preferred stock217,471  217,471  217,471  217,471  217,471 
Common stock32,200  31,997  31,913  31,318  31,261 
Additional paid in capital428,796  424,099  422,096  429,633  428,488 
Retained earnings299,990  279,942  258,076  240,076  235,938 
Accumulated other comprehensive (loss) income(33,997) (26,188) (359) 377  5,364 
Treasury stock, at cost(8,233) (8,233) (8,233) (8,233) (8,233)
Total shareholders' equity936,227  919,088  920,964  910,642  910,289 
Total liabilities & shareholders' equity$11,092,846  $10,769,266  $9,839,555  $10,471,829  $10,883,548 

 

  
  
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES 
AVERAGE BALANCE SHEET / NET INTEREST MARGIN (UNAUDITED) 
(Dollars in thousands)      
 Three Months Ended 
 June 30, March 31, June 30, 
 2018 2018 2017 
 Average
Balance
Average
yield or cost
(%)
 Average
Balance
Average
yield or cost
(%)
 Average
Balance
Average
yield or cost
(%)
 
Assets         
Interest earning deposits$188,880 1.78% $184,033 1.53% $203,460 1.08% 
Investment securities1,213,989 3.22% 1,085,429 3.20% 1,066,277 2.94% 
Loans:         
Commercial loans to mortgage companies1,760,519 4.93% 1,591,749 4.69% 1,762,469 4.14% 
Multifamily loans3,561,679 3.90% 3,637,929 3.71% 3,508,619 3.75% 
Commercial and industrial1,713,150 4.75% 1,653,655 4.34% 1,405,150 4.21% 
Non-owner occupied commercial real estate1,269,373 4.05% 1,281,502 3.93% 1,299,809 4.00% 
All other loans482,098 4.85% 330,100 5.07% 542,093 4.36% 
Total loans8,786,819 4.35% 8,494,935 4.10% 8,518,140 3.98% 
Other interest-earning assets139,842 5.15% 116,823 5.79% 105,908 3.48% 
Total interest earning assets10,329,530 4.18% 9,881,220 3.97% 9,893,785 3.80% 
Non-interest earning assets391,660   394,487   371,548   
Total assets$10,721,190   $10,275,707   $10,265,333   
          
Liabilities         
Total interest bearing deposits (1)$5,862,211 1.65% $5,812,055 1.38% $6,258,310 1.04% 
Borrowings2,736,644 2.36% 2,182,463 2.25% 1,951,282 1.85% 
Total interest bearing liabilities8,598,855 1.88% 7,994,518 1.62% 8,209,592 1.23% 
Non-interest bearing deposits (1)1,109,527   1,278,947   1,082,799   
Total deposits & borrowings9,708,382 1.67% 9,273,465 1.39% 9,292,391 1.09% 
Other non-interest bearing liabilities84,788   75,307   74,429   
Total liabilities9,793,170   9,348,772   9,366,820   
Common equity710,549   709,464   681,042   
Preferred stock217,471   217,471   217,471   
Shareholders' equity928,020   926,935   898,513   
Total liabilities and shareholders' equity$10,721,190   $10,275,707   $10,265,333   
          
Net interest margin 2.61%  2.66%  2.78% 
Net interest margin tax equivalent 2.62%  2.67%  2.78% 
  
(1) Total costs of deposits (including interest bearing and non-interest bearing) were 1.39%, 1.13% and 0.89% for the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, respectively.  

 

  
  
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES 
AVERAGE BALANCE SHEET / NET INTEREST MARGIN (UNAUDITED) 
(Dollars in thousands)   
 Six months ended 
 June 30, June 30, 
 2018 2017 
 Average
Balance
Average
yield or cost
(%)
 Average
Balance
Average
yield or cost
(%)
 
Assets      
Interest earning deposits$186,470 1.66% $350,693 0.88% 
Investment securities1,150,064 3.21% 948,657 2.91% 
Loans:      
Commercial loans to mortgage companies1,676,601 4.81% 1,622,182 4.07% 
Multifamily loans3,599,593 3.81% 3,423,449 3.73% 
Commercial and industrial1,683,566 4.55% 1,378,085 4.13% 
 Non-owner occupied commercial real estate1,275,404 3.99% 1,288,610 3.90% 
All other loans406,519 4.94% 479,242 4.52% 
Total loans8,641,683 4.23% 8,191,568 3.94% 
Other interest-earning assets128,396 5.44% 91,026 3.87% 
Total interest earning assets10,106,613 4.08% 9,581,944 3.72% 
Non-interest earning assets393,066   356,311   
Total assets$10,499,679   $9,938,255   
       
Liabilities      
Total interest bearing deposits (1)$5,837,271 1.52% $6,237,532 0.99% 
Borrowings2,461,085 2.31% 1,543,154 2.01% 
Total interest-bearing liabilities8,298,356 1.75% 7,780,686 1.19% 
Non-interest-bearing deposits (1)1,193,769   1,198,355   
Total deposits & borrowings9,492,125 1.53% 8,979,041 1.03% 
Other non-interest bearing liabilities80,074   75,876   
Total liabilities9,572,199   9,054,917   
Common equity710,009   665,867   
Preferred stock217,471   217,471   
Shareholders' equity927,480   883,338   
Total liabilities and shareholders' equity$10,499,679   $9,938,255   
       
Net interest margin 2.64%  2.75% 
Net interest margin tax equivalent 2.64%  2.76% 
       
(1) Total costs of deposits (including interest bearing and non-interest bearing) were 1.26% and 0.83% for the six months ended June 30, 2018 and 2017, respectively.

 

 
 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
SEGMENT REPORTING - UNAUDITED

(Dollars in thousands, except per share amounts)

The following tables present Customers' business segment results for the three and six months ended June 30, 2018 and 2017:

 Three months ended June 30, 2018 Three Months Ended June 30, 2017
 Community
Business
Banking
 BankMobile Consolidated Community
Business
Banking
 BankMobile Consolidated
Interest income (1)$104,110  $3,529  $107,639  $91,107  $2,745  $93,852 
Interest expense40,182  135  40,317  25,228  18  25,246 
Net interest income63,928  3,394  67,322  65,879  2,727  68,606 
Provision for loan losses(1,247) 463  (784) 535    535 
Non-interest income7,465  8,662  16,127  6,971  11,420  18,391 
Non-interest expense37,721  16,029  53,750  30,567  19,846  50,413 
Income (loss) before income tax expense (benefit)34,919  (4,436) 30,483  41,748  (5,699) 36,049 
Income tax expense (benefit)7,910  (1,090) 6,820  14,493  (2,166) 12,327 
Net income (loss)27,009  (3,346) 23,663  27,255  (3,533) 23,722 
Preferred stock dividends3,615    3,615  3,615    3,615 
Net income (loss) available to common shareholders$23,394  $(3,346) $20,048  $23,640  $(3,533) $20,107 
            
Basic earnings (loss) per common share$0.74  $(0.11) $0.64  $0.77  $(0.12) $0.66 
Diluted earnings (loss) per common share$0.72  $(0.10) $0.62  $0.73  $(0.11) $0.62 

(1) - Amounts reported include funds transfer pricing of $3.5 million and $2.7 million for the three months ended June 30, 2018 and 2017, respectively

 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
 Community
Business
Banking
 BankMobile Consolidated Community
Business
Banking
 BankMobile Consolidated
Interest income (1)$196,664  $7,940  $204,604  $169,938  $7,008  $176,946 
Interest expense72,100  151  72,251  45,883  39  45,922 
Net interest income124,564  7,789  132,353  124,055  6,969  131,024 
Provision for loan losses627  706  1,333  3,585    3,585 
Non-interest income15,904  21,133  37,037  12,398  28,746  41,144 
Non-interest expense72,052  33,979  106,031  60,714  39,064  99,778 
Income (loss) before income tax expense (benefit)67,789  (5,763) 62,026  72,154  (3,349) 68,805 
Income tax expense (benefit)15,638  (1,416) 14,222  20,609  (1,273) 19,336 
Net income (loss)52,151  (4,347) 47,804  51,545  (2,076) 49,469 
Preferred stock dividends7,229    7,229  7,229    7,229 
Net income (loss) available to common shareholders$44,922  $(4,347) $40,575  $44,316  $(2,076) $42,240 
            
Basic earnings (loss) per common share$1.43  $(0.14) $1.29  $1.45  $(0.07) $1.38 
Diluted earnings (loss) per common share$1.39  $(0.13) $1.26  $1.36  $(0.06) $1.29 
As of June 30, 2018 and 2017           
            
Goodwill and other intangibles$3,629  $13,521  $17,150  $3,633  $13,982  $17,615 
Total assets$11,017,272  $75,574  $11,092,846  $10,815,752  $67,796  $10,883,548 
Total deposits$6,876,688  $419,266  $7,295,954  $7,021,922  $453,441  $7,475,363 
Total non-deposit liabilities$2,843,360  $17,305  $2,860,665  $2,481,618  $16,278  $2,497,896 

(1) - Amounts reported include funds transfer pricing of $7.9 million and $7.0 million for the six months ended June 30, 2018 and 2017, respectively.

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

Community Business Banking:          
  Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017
Interest income (1) $104,110  $92,554  $94,407  $95,585  $91,107 
Interest expense 40,182  31,917  29,304  30,250  25,228 
Net interest income 63,928  60,637  65,103  65,335  65,879 
Provision for loan losses (1,247) 1,874  179  1,874  535 
Non-interest income 7,465  8,439  8,200  4,190  6,971 
Non-interest expense 37,721  34,331  33,900  33,990  30,567 
Income before income tax expense 34,919  32,871  39,224  33,661  41,748 
Income tax expense 7,910  7,728  13,369  18,999  14,493 
Net income 27,009  25,143  25,855  14,662  27,255 
Preferred stock dividends 3,615  3,615  3,615  3,615  3,615 
Net income available to common shareholders $23,394  $21,528  $22,240  $11,047  $23,640 
           
Basic earnings per common share $0.74  $0.69  $0.72  $0.36  $0.77 
Diluted earnings per common share $0.72  $0.67  $0.68  $0.34  $0.73 

(1) - Amounts reported include funds transfer pricing of $3.5 million, $4.4 million, $3.2 million, $2.7 million and $2.7 million for the three months ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

           
BankMobile:          
  Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017
Interest income (1) $3,529  $4,410  $3,212  $2,700  $2,745 
Interest expense 135  16  15  16  18 
Net interest income 3,394  4,394  3,197  2,684  2,727 
Provision for loan losses 463  243  652  478   
Non-interest income 8,662  12,471  11,540  13,836  11,420 
Non-interest expense 16,029  17,949  20,888  27,050  19,846 
(Loss) income before income tax (benefit) expense (4,436) (1,327) (6,803) (11,008) (5,699)
Income tax (benefit) expense (1,090) (326) (2,563) (4,100) (2,166)
Net (loss) income available to common shareholders $(3,346) $(1,001) $(4,240) $(6,908) $(3,533)
           
Basic (loss) earnings per common share $(0.11) $(0.03) $(0.14) $(0.23) $(0.12)
Diluted (loss) earnings per common share $(0.10) $(0.03) $(0.13) $(0.21) $(0.11)

(1) - Amounts reported include funds transfer pricing of $3.5 million, $4.4 million, $3.2 million, $2.7 million and $2.7 million for the three months ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

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

(Dollars in thousands, except per share amounts)

Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our financial results, which we believe enhance an overall understanding of our performance. 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 used to report business segment performance.

                 
Adjusted Net Income to Common Shareholders - Customers Bancorp                                       Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017
 USDPer share USDPer share USDPer share USDPer share USDPer share
GAAP net income to common shareholders$20,048 $0.62  $20,527 $0.64  $18,000 $0.55  $4,139 $0.13  $20,107 $0.62 
Reconciling items (after tax):              
Religare impairment         12,934 0.40  1,758 0.05 
Merger and acquisition related expenses655 0.02  80   256 0.01       
Losses (Gains) on investment securities138   (10)  (170)  (3,356)(0.10) (1,942)(0.06)
Catch-up depreciation/amortization on BankMobile assets         1,765 0.05  (883)(0.03)
Adjusted net income to common shareholders$20,841 $0.64  $20,597 $0.64  $18,086 $0.56  $15,482 $0.48  $19,040 $0.58 

 

Adjusted Net Income to Common Shareholders - Customers BancorpSix Months Ended June 30, 2018 Six Months Ended June 30, 2017 
 
 USDPer share USDPer share 
GAAP net income to common shareholders$40,575 $1.26  $42,240 $1.29  
Reconciling items (after tax):      
Religare impairment   (28)  
Merger and acquisition related expenses736 0.02     
Losses (Gains) on investment securities128   (1,942)(0.06) 
Catch-up depreciation/amortization on BankMobile assets   (1,765)(0.05) 
Adjusted net income to common shareholders$41,439 $1.28  $38,505 $1.18  

 

 
 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
 
Adjusted Net Income to Common Shareholders - Community Business Banking Segment Only 
Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017
 USDPer share USDPer share USDPer share USDPer share USDPer share
GAAP net income to common shareholders$23,394 $0.72  $21,528 $0.67  $22,240 $0.68  $11,047 $0.34  $23,640 $0.73 
Reconciling items (after tax):              
Religare impairment         12,934 0.40  1,758 0.05 
Loss/(Gains) on investment securities138   (10)  (170)  (3,356)(0.10) (1,942)(0.06)
Adjusted net income to common shareholders$23,532 $0.73  $21,518 $0.67  $22,070 $0.68  $20,625 $0.64  $23,456 $0.72 

 

Adjusted Net Income to Common Shareholders - Community Business Banking Segment OnlySix Months Ended June 30, 2018 Six Months Ended June 30, 2017 
  
 USDPer share USDPer share 
GAAP net income to common shareholders$44,922 $1.39  $44,316 $1.36  
Reconciling items (after tax):      
Religare impairment   (28)  
Loss/(Gains) on investment securities128   (1,942)(0.06) 
Adjusted net income to common shareholders$45,050 $1.39  $42,346 $1.30  

 

Adjusted Net Income to Common Shareholders - BankMobile Segment                                               
Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017
 USDPer share USDPer share USDPer share USDPer share USDPer share
GAAP net income to common shareholders$(3,346)$(0.10) $(1,001)$(0.03) $(4,240)$(0.13) $(6,908)$(0.21) $(3,533)$(0.11)
Reconciling items (after tax):              
Merger and acquisition related expenses655 0.02  80   256 0.01       
Catch-up depreciation/amortization on BankMobile assets         1,765 0.05  (883)(0.03)
Adjusted net income to common shareholders$(2,691)$(0.08) $(921)$(0.03) $(3,984)$(0.12) $(5,143)$(0.16) $(4,416)$(0.14)

 

Adjusted Net Income to Common Shareholders - BankMobile SegmentSix Months Ended June 30, 2018 Six Months Ended June 30, 2017 
  
 USDPer share USDPer share 
GAAP net income to common shareholders$(4,347)$(0.13) $(2,076)$(0.06) 
Reconciling items (after tax):      
Merger and acquisition related expenses736 0.02     
Catch-up depreciation/amortization on BankMobile assets   (1,765)(0.05) 
Adjusted net income to common shareholders$(3,611)$(0.11) $(3,841)$(0.11) 

 

    
    
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES   
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)   
    
Return on Tangible Common Equity - Community Business Banking Segment Only   
 Q2 2018 Q2 2017
GAAP net income to common shareholders$23,394  $23,640 
    
Total shareholder's equity907,284  904,973 
Reconciling Items:   
Preferred stock(217,471) (217,471)
Goodwill & other intangibles(3,629) (3,633)
Tangible common equity$686,184  $683,869 
    
Return on tangible common equity13.67% 13.87%
    

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES    
PERIOD END LOAN COMPOSITION (UNAUDITED)        
(Dollars in thousands)         
 June 30, March 31, December 31, September 30, June 30,
 2018 2018 2017 2017 2017
          
Commercial:         
Multi-family$3,542,770  $3,645,374  $3,646,572  $3,769,206  $3,550,375 
Mortgage warehouse1,987,306  1,931,320  1,844,607  2,012,864  2,158,631 
Commercial & industrial1,755,183  1,648,324  1,582,667  1,550,210  1,449,400 
Commercial real estate- non-owner occupied1,155,998  1,195,903  1,218,719  1,237,849  1,216,012 
Construction88,141  81,102  85,393  73,203  61,226 
Total commercial loans8,529,398  8,502,023  8,377,958  8,643,332  8,435,644 
          
Consumer:         
Residential494,265  226,501  235,928  436,979  447,150 
Manufactured housing85,328  87,687  90,227  92,938  96,148 
Other consumer3,874  3,570  3,547  3,819  3,588 
Total consumer loans583,467  317,758  329,702  533,736  546,886 
Deferred (fees)/costs and unamortized (discounts)/premiums, net642  (700) 83  (2,437) (2,226)
Total loans$9,113,507  $8,819,081  $8,707,743  $9,174,631  $8,980,304 
          
 

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES  
PERIOD END DEPOSIT COMPOSITION (UNAUDITED)  
(Dollars in thousands)         
 June 30, March 31, December 31, September 30, June 30,
 2018 2018 2017 2017 2017
          
Demand, non-interest bearing$1,090,744  $1,260,853  $1,052,115  $1,427,304  $1,109,239 
Demand, interest bearing623,343  510,418  523,848  362,269  359,361 
Savings38,457  36,584  38,838  37,654  41,345 
Money market3,471,249  3,345,573  3,279,648  3,469,410  3,523,056 
Time deposits2,072,161  1,889,031  1,905,693  2,300,439  2,442,362 
Total deposits$7,295,954  $7,042,459  $6,800,142  $7,597,076  $7,475,363 
          
          

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES     
ASSET QUALITY - UNAUDITED          
(Dollars in thousands)As of June 30, 2018As of March 31, 2018As of June 30, 2017
 Total
Loans
Non Accrual /NPLsTotal
Credit Reserves
NPLs / Total LoansTotal
Reserves to Total NPLs
Total
Loans
Non Accrual /NPLsTotal Credit ReservesNPLs / Total LoansTotal Reserves to Total NPLsTotal
Loans
Non Accrual /NPLsTotal Credit ReservesNPLs / Total LoansTotal Reserves to Total NPLs
Loan Type
Originated Loans               
Multi-Family$3,540,261 $1,343 $12,072 0.04%898.88%$3,642,808 $ $12,545 %%$3,396,888 $ $12,028 %%
Commercial & Industrial (1)1,728,577 14,121 14,643 0.82%103.70%1,618,845 15,299 14,353 0.95%93.82%1,410,252 12,258 13,701 0.87%111.77%
Commercial Real Estate- Non-Owner Occupied1,140,483 2,350 4,260 0.21%181.28%1,176,949  4,444 %%1,185,878  4,593 %%
Residential106,076 1,902 2,047 1.79%107.62%107,920 1,767 2,111 1.64%119.47%111,157 610 2,169 0.55%355.57%
Construction88,141  992 %%81,102  921 %%61,226  716 %%
Other Consumer (2)1,752  131 %%1,339  101 %%1,159  14 %%
Total Originated Loans6,605,290 19,716 34,145 0.30%173.18%6,628,963 17,066 34,475 0.26%202.01%6,166,560 12,868 33,221 0.21%258.17%
Loans Acquired               
Bank Acquisitions136,070 4,264 3,990 3.13%93.57%141,343 4,146 4,848 2.93%116.93%157,239 4,228 4,970 2.69%117.55%
Loan Purchases439,724 2,015 663 0.46%32.90%173,960 1,979 803 1.14%40.58%403,635 2,075 1,030 0.51%49.64%
Total Acquired Loans575,794 6,279 4,653 1.09%74.10%315,303 6,125 5,651 1.94%92.26%560,874 6,303 6,000 1.12%95.19%
Deferred (fees) costs and unamortized (discounts) premiums, net642   %%(700)  %%(2,226)  %%
Total Loans Held for Investment7,181,726 25,995 38,798 0.36%149.25%6,943,566 23,191 40,126 0.33%173.02%6,725,208 19,171 39,221 0.29%204.59%
Total Loans Held for Sale1,931,781   %%1,875,515   %%2,255,096   %%
Total Portfolio$9,113,507 $25,995 $38,798 0.29%149.25%$8,819,081 $23,191 $40,126 0.26%173.02%$8,980,304 $19,171 $39,221 0.21%204.59%
                
(1) Commercial & industrial loans, including owner occupied commercial real estate.       
(2) Includes activity for BankMobile related loans, primarily overdrawn deposit accounts.       
        
        

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED
(Dollars in thousands)         
 Q2 Q1 Q4 Q3 Q2
 2018 2018 2017 2017 2017
Originated Loans         
Commercial & Industrial (1)$140  $54  $(109) $2,025  $1,840 
Commercial Real Estate- Non-Owner Occupied    731  77   
Residential42    3  125  69 
Other Consumer (2)459  254  686  348  172 
Total Net Charge-offs from Originated Loans641  308  1,311  2,575  2,081 
Loans Acquired         
Bank Acquisitions(214) 325  (181) (80) (121)
Loan Purchases         
Total Net Charge-offs (Recoveries) from Acquired Loans(214) 325  (181) (80) (121)
Total Net Charge-offs from Loans Held for Investment$427  $633  $1,130  $2,495  $1,960 
          
(1) Commercial & industrial loans, including owner occupied commercial real estate.
(2) Includes activity for BankMobile related loans, primarily overdrawn deposit accounts.
          
          

 

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

(Dollars in thousands, except per share data)

Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our financial results, which we believe enhance an overall understanding of our performance. 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.

Net Interest Margin, tax equivalent             
 Six months ended June 30,          
 2018 2017 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017
GAAP Net interest income$132,353  $131,024  $67,322  $65,031  $68,300  $68,019  $68,606 
Tax-equivalent adjustment342  197  171  171  245  203  104 
Net interest income tax equivalent$132,695  $131,221  $67,493  $65,202  $68,545  $68,222  $68,710 
              
Average total interest earning assets$10,106,613  $9,581,944  $10,329,530  $9,881,220  $9,875,987  $10,352,394  $9,893,785 
              
Net interest margin, tax equivalent2.64% 2.76% 2.62% 2.67% 2.79% 2.62% 2.78%
              

 

Tangible Common Equity to Tangible Assets         
 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017
GAAP - Total Shareholders' Equity$936,227  $919,088  $920,964  $910,642  $910,289 
Reconciling Items:         
  Preferred Stock(217,471) (217,471) (217,471) (217,471) (217,471)
  Goodwill and Other Intangibles(17,150) (17,477) (16,295) (16,604) (17,615)
Tangible Common Equity$701,606  $684,140  $687,198  $676,567  $675,203 
          
Total Assets$11,092,846  $10,769,266  $9,839,555  $10,471,829  $10,883,548 
Reconciling Items:         
Goodwill and Other Intangibles(17,150) (17,477) (16,295) (16,604) (17,615)
Tangible Assets$11,075,696  $10,751,789  $9,823,260  $10,455,225  $10,865,933 
          
Tangible Common Equity to Tangible Assets6.33% 6.36% 7.00% 6.47% 6.21%
          

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
           
Tangible Book Value per Common Share          
  Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017
GAAP - Total Shareholders' Equity $936,227  $919,088  $920,964  $910,642  $910,289 
Reconciling Items:          
  Preferred Stock (217,471) (217,471) (217,471) (217,471) (217,471)
  Goodwill and Other Intangibles (17,150) (17,477) (16,295) (16,604) (17,615)
Tangible Common Equity $701,606  $684,140  $687,198  $676,567  $675,203 
           
Common shares outstanding 31,669,643  31,466,271  31,382,503  30,787,632  30,730,784 
           
Tangible Book Value per Common Share $22.15  $21.74  $21.90  $21.98  $21.97 
           

Contacts:
Jay Sidhu, Chairman & CEO 610-935-8693
Robert Wahlman, CFO 610-743-8074
Bob Ramsey, Director of Investor Relations and Strategic Planning 484-926-7118