Customers Bancorp Reports Record Third Quarter 2020 Results
Customers Bancorp, Inc. (NYSE: CUBI), the parent company of Customers Bank and its operating division BankMobile (collectively “Customers” or "CUBI"), today reported third quarter 2020 ("Q3 2020") net income to common shareholders of $47.1 million, or $1.48 per diluted share. Core earnings (a non-GAAP measure) for Q3 2020 totaled $38.2 million. or $1.20 per diluted share.
“We are thrilled to report another strong quarter of financial results despite a challenging economic environment,” said Customers Bancorp Chairman and CEO Jay Sidhu. "Our revenues are up 42% over last year, while we have held our expense growth to 10%. At the same time, our asset quality improved materially with non-performing assets as a percent of total assets declining to only 0.34% at September 30, 2020. Our superior financial results were achieved in spite of a $2.4 million decrease in our card related interchange income during the quarter primarily caused by the Durbin Amendment. We are very proud of Customers' talented and hard-working team members who continue to deliver tremendous service to our clients. Earlier this year, our team overcame tremendous obstacles to give approximately 100,000 small businesses and non-profits access to Paycheck Protection Program loans. This initiative has provided substantial benefits to our clients, communities, and shareholders. Customers anticipates continued short-term and long-term improvements in building a very strong franchise focused principally on providing private banking to privately held businesses.”
Loan Portfolio Management During the COVID-19 Crisis
Maintaining strong asset quality remains the highest priority at Customers Bancorp, which includes a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, Customers employs a bottom-up data driven approach to analyze its commercial portfolio. "Each borrower has been stressed for liquidity, debt capacity, and business profitability using forward looking views of their particular business sector, which sometimes reflect shock, reboot, and new normal scenarios. This data driven approach, completed with our traditional high touch approach with risk management processes best positions us to get out ahead of any deterioration in credit quality," Sidhu stated.
Strong commercial loan portfolio with very low concentration in COVID-19 impacted industries and CRE
Total commercial deferments declined to $277 million or 2.4% of total loans and leases, excluding PPP loans (a non-GAAP measure), at September 30, 2020, down from $691 million, or 6.8% of total loans and leases, excluding PPP loans, at July 24, 2020. Customers' commercial deferments peaked at about $1.2 billion earlier this year. Exposure to industry segments significantly impacted by COVID-19 is not substantial. At September 30, 2020, Customers had $86 million in energy and utilities exposure (79% are wind farms; with no deferments); $64 million in colleges and universities (no deferments requested); $71 million in CRE retail sales exposure (mostly auto sales; with no deferments); $29 million in franchise restaurants and dining; and $26 million in entertainment only businesses. At quarter-end, the hospitality portfolio was approximately $404 million (3.5% of total loans and leases, excluding PPP loans), with 31% in deferment. Approximately 19% of the portfolio was operating at 95%+ occupancy under government contracts for transitional housing. The portfolio had an average loan to value of 65% (generally based on appraised value at time of origination) with approximately 74% having full or partial recourse. The majority of the hotels in our current assessment have on-hand and/or access to the cash resources needed to get through the COVID-19 crisis, and for those who may need assistance the Bank is working with them closely to bridge any potential cash flow gaps. At September 30, 2020, the healthcare portfolio was approximately $310 million, comprised predominantly of skilled nursing, which has been deemed an essential business and through a number of federal and state actions has been provided immunity from liability for COVID-19 related deaths. No deferments have been requested and there are no delinquencies. The multi-family portfolio is highly seasoned, with an average vacancy rate of 3.4% and loan to value of 60.3% (generally based on appraised value at time of origination) as of quarter-end. 58% of the portfolio was in New York City, of which 70% was in rent controlled/regulated properties with a vacancy rate of only 1.8%. As of September 30, 2020, 4% of the portfolio was on 90-day deferment. At September 30, 2020, investment CRE had a DSCR of 1.95x and loan to value of 59% (generally based on appraised value at time of origination), with most of the portfolio housed in the New York, Philadelphia, and Boston metro and surrounding markets.Consumer installment, mortgage and home equity loan portfolio continues to perform well
Total consumer-related deferments declined to $25 million, or 0.2% of total loans and leases, excluding PPP loans, at September 30, 2020, down from $60 million, or 0.6% of total loans and leases, excluding PPP loans, at July 24, 2020. The $1.2 billion consumer installment loan portfolio outperformed industry peers with deferments dropping to 1.2% and 30+ DPD delinquency below 1%. Strong credit quality (avg. FICO: 741), low concentration in at risk job segments, and outstanding performance of CB Direct originations have resulted in solid results through the end of Q3 2020. Installment loan portfolio has been managed to moderate growth and strengthening credit quality, by replacing run-off with CB Direct originations at 700 FICO score and above.Aggressively addressing non-performing assets
During September 2020, Customers sold a collateral dependent loan secured by a Class A office building in northern New Jersey. Customers is also proactively addressing another large loan, which makes up approximately 29% of non-performing assets as of September 30, 2020, and plans to move it off the balance sheet over the next 2 - 3 months. “We expect our credit quality to improve or stay unchanged over the next few quarters,” stated Sidhu.
Focus on Building TCE Ratio and other Capital Ratios
Customers remains well capitalized by all regulatory measures. At the Customers Bancorp level, the total risk based capital ratio (estimate) and the tangible common equity to tangible assets ("TCE ratio"), excluding PPP loans (a non-GAAP measure), were 11.6% and 5.9%, respectively, at September 30, 2020. At June 30, 2020, Customers Bancorp's total risk based capital ratio and TCE ratio, excluding PPP loans (a non-GAAP measure), were 12.0% and 5.9%, respectively. Our capital ratios in 2020 were impacted by strong growth in mortgage warehouse balances ($1.6 billion in growth year-to-date) and our TCE ratio was also impacted by a $61.5 million charge to retained earnings in Q1 2020 upon the adoption of CECL. The mortgage warehouse trend has been a function of greater refinance activity due to sharply lower interest rates, an increase in home purchase volumes, and market share gains from other banks. The average life of these warehouse loans (a $3.9 billion balance at September 30, 2020) are generally less than 30 days, affording us a high level of control over our capital position. We forecast our capital levels to improve in fourth quarter 2020 and step-up materially in 2021. We expect capital accretion to be driven by the recognition of $100 million in PPP loan origination fees and a cyclical decline in mortgage warehouse balances. “We forecast our total risk based capital ratio to exceed 12% by the end of this year and 14% by year-end 2021,” Sidhu concluded.
Looking Ahead to $3.00 or higher EPS in 2020 and 2021
Mr. Sidhu stated, "Before COVID-19, Customers was projecting core earnings per share of $3.00 for 2020 with continued improvement expected in all profitability metrics. Like the rest of the industry, rapid changes in economic activity introduced uncertainty to our near-term profitability. We have pivoted our strategy in this environment to building a stronger balance sheet and assisting our customers, team members and community to effectively deal with this crisis and still meet or exceed our core earnings goals for 2020. Our provisions are higher, most customer activity remains slow, and there have been disruptions, but we are also seeing positive trends in deposits, selected growth in certain loan categories, and opportunities to steal market share stemming from our participation in the Paycheck Protection Program.” Mr. Sidhu continued, "Despite all of this, we are still expecting to achieve about $3.00 per share in core earnings for 2020, subject to the amount of PPP revenues that will be recognized in 2020. Longer term, we remain confident in our ability to achieve a run-rate of about $3.00 in core earnings for 2021 and about $6.00 per share in annual core earnings by the end of 2026. We will show progress toward these goals on our quarterly calls,” stated Sidhu.
Customers is well positioned to execute on its 2020 and 2026 LT strategies
Loan growth, excluding PPP and mortgage warehouse balances, is expected to average in the mid-to-high single digits over the next several quarters. Total assets are projected to be about $12 billion -$13 billion at year-end 2020, excluding PPP loans and subject to refinance activity impacting loans to mortgage companies. The total risk based capital ratio is expected to exceed 12% by year-end 2020 and be about 14% by year-end 2021. Preferred equity will not be called in 2020 or 2021. We project the NIM in the 2.90%-3.00% range for the full year 2020 excluding PPP loans. Operating expenses are expected to be about flat over the next few quarters excluding the impact of the BankMobile divestiture. The effective tax rate is forecast to be about 21% - 22.0% for 2020 PPP loans will add about $100 million in pre-tax origination fees. A substantial portion of this amount will be recognized in the first half of 2021. A run-rate of $3.00+ in core EPS for 2020 and 2021 and $6.00 in core EPS for 2026 remains a goal.BankMobile
BankMobile is expected to remain profitable in 2020 The divestiture is on target for completion by year-end 2020Status Report on Strategic Priorities Articulated at Last Analysts Day
Improve Profitability: Top Quartile Profitability with 1.25% Core ROAA in 2-3 years
As stated during our last Analysts Day in October 2018, Customers expects to remain focused on growing its core businesses, while improving margins, capital and profitability. Through favorable mix shifts in both assets and liabilities, while maintaining its superior credit quality culture and extreme focus on productivity improvement, Customers improved the overall quality of its balance sheet and deposit franchise, expanded its net interest margin, enhanced liquidity and remains relatively neutral to interest rate changes. The strategies articulated at the last Analysts Day in October 2018 and subsequent progress through Q3 2020 are summarized below:
Target ROAA in top quartile of peer group, which we expect will equate to a ROAA of 1.25% or higher over the next 2-3 years. ROAA was 1.12% in Q3 2020, up from Q2 2020 ROAA of 0.62% due to increases of $15.5 million in net interest income and $11.6 million in non-interest income, primarily driven by $11.7 million of gain on sale of investment securities, and an $8.0 million reduction in provision for credit losses on loans and leases, mostly due to improving macroeconomic forecasts since Q2 2020. The pre-tax and pre-provision adjusted ROAA (a non-GAAP measure) was 1.43% for Q3 2020, up 4 basis points from 1.39% in Q3 2019. Achieve NIM expansion to 2.75% or greater by Q4 2019, with full year 2019 NIM above 2.70%, through an expected shift in asset and funding mix. Actual results for 2019 were materially better, with full year 2019 NIM of 2.75%. NIM in Q3 2020 was 2.50%, down from 2.65% in Q2 2020 and 2.83% in Q3 2019. NIM, excluding PPP loans (a non-GAAP measure), was 2.86% in Q3 2020, down from 2.97% in Q2 2020. NIM, excluding PPP loans, is expected to remain on average between 2.9% and 3.0% for 2020. BankMobile growth and maturity was expected with profitability achieved by year end 2019. BankMobile reached profitability in Q3 2019 and maintained profitability in Q4 2019, Q2 2020, and Q3 2020, and was also profitable in Q1 2020 on an adjusted pre-tax pre-provision basis (a non-GAAP measure). BankMobile's profitability in Q1 2020 was negatively impacted by increased CECL-related provision expense, the COVID-19 crisis, a legal reserve of $1 million related to the previously disclosed U.S. Department of Education matter, increased depreciation expense related to capitalized development costs for technology placed in service in 2019 and non-capitalizable technology-related expenses. Key strategic priorities for 2020 include keeping BankMobile profitable, and divesting BankMobile Technologies, Inc. ("BMT"), the technology arm of the BankMobile segment, by the end of 2020. Expense control. Customers' efficiency ratio was 50.71% in Q3 2020, down from 58.44% in Q2 2020 and 61.58% in Q3 2019. Improving operating efficiency is a high priority. Growth in core deposits and good quality higher-yielding loans. Demand Deposit Accounts ("DDAs") grew 71% year-over-year. Lower yielding multi-family loans decreased by $847 million, or 30%, year-over-year and were replaced by higher yielding C&I loans and leases and installment loans, which had net growth of $408 million and $599 million year-over-year, respectively. Customers originated an additional $198 million of PPP loans during Q3 2020, with a balance of $5.0 billion at September 30, 2020. Maintain strong credit quality and superior risk management. Non-performing loans ("NPLs") were negatively impacted by one commercial real estate loan. In spite of this, NPLs were only 0.38% of total loans and leases at September 30, 2020. Customers expects to resolve this credit during Q4 2020 or Q1 2021. Reserves to NPLs at September 30, 2020 were 245% and the coverage ratio was 2.0% of loans and leases receivable, excluding PPP loans (a non-GAAP measure). The Bank is relatively neutral to interest rate changes at September 30, 2020. We remain very focused on a strong Risk Management culture throughout our company. Evaluate opportunities to redeem our preferred stock as it becomes callable. Redeeming all of the preferred stock as it becomes callable would result in an increase to our diluted earnings per share by approximately $0.43 annually, if not replaced. Given the current economic uncertainty stemming from the COVID-19 crisis, Customers will not call for redemption any preferred stock in 2020 or 2021.Net Interest Income
Net interest income totaled $107.4 million in Q3 2020, an increase of $15.5 million from Q2 2020, primarily due to a $3.1 billion increase in average interest-earning assets. Earning assets were driven by PPP loan originations and increases in commercial loans to mortgage companies, commercial and industrial loans and leases, investment securities, and interest earning deposits. The benefit of this growth was partially offset by a 15 basis point linked-quarter decline in NIM (a non-GAAP measure) to 2.50%. Compared to Q2 2020, total loan yields decreased 31 basis points to 3.41%. The decrease is attributable to the origination of PPP loans carrying an average yield of 1.97% and lower market interest rates due to the Federal Reserve's forecast of interest rates at zero through 2023. The cost of interest-bearing deposits in Q3 2020 similarly decreased by 26 basis points to 0.85% due to the decline in market interest rates and strategic decisions to reallocate deposit funding to lower cost deposits. Borrowing costs decreased 27 basis points to 0.97% due to the utilization of the FRB PPP Liquidity Facility, costing 0.35%, to fund PPP loans.
Total loans and leases increased $6.3 billion, or 62%, to $16.6 billion at September 30, 2020 compared to the year-ago period. PPP loans originated directly or through fintech partnerships were $5.0 billion at September 30, 2020. Additionally, the loan mix improved year-over-year as commercial loans to mortgage companies increased $1.4 billion to $3.9 billion, commercial and industrial loans and leases increased $408 million to $2.2 billion, and commercial real estate owner occupied loans increased $82 million to $558 million. These increases were offset in part by planned decreases in multi-family loans of $847 million to $2.0 billion and residential mortgages of $297 million to $344 million. “Looking ahead, we see continued growth in core C&I loans offsetting some of the expected decreases in loans to mortgage companies," stated Sidhu.
Total deposits increased $1.9 billion, or 21%, to $10.8 billion at September 30, 2020 compared to the year-ago period. Total demand deposits increased $1.9 billion, or 71%, to $4.6 billion, money market deposits increased $855 million, or 27%, to $4.1 billion, and savings deposits increased $582 million, or 98%, to $1.2 billion. These increases were offset, in part, by a decrease in time deposits of $1.5 billion, or 60%, to $972 million. The total cost of deposits declined to 0.67% for the three months ended September 30, 2020 from 1.82% for the three months ended September 30, 2019.
Risk Management, Provision and Credit Quality
Risk management is a critical component of how Customers creates long-term shareholder value, and Customers believes that asset quality is one of the most important prerequisites to creating shareholder value. Customers believes that asset quality must be diligently addressed through prudent underwriting standards when the economy is strong so that we are well positioned when an economic downturn arises. Since mid-2019, Customers has been operating as though a recession was imminent in the immediate future. "Our Credit Administration Group and Market Presidents started analyzing their portfolios, in detail, and stressing them under adverse scenarios and either exiting or increasing the monitoring activities of higher risk credits early in 2019. Customers' non-performing loans at September 30, 2020 were only 0.38% of total loans and leases. Our Q3 2020 non-performing loans were impacted by one commercial real estate credit, which is expected to be resolved during Q4 2020, reducing our non-performing loans by year-end. We fully expect to maintain superior asset quality in good times and in difficult years," said Mr. Sidhu.
The provision for credit losses on loans and leases in Q3 2020, which was calculated under the CECL accounting standard effective January 1, 2020, was $13.0 million, compared to $20.9 million in Q2 2020. The decrease in Q3 2020 primarily resulted from an improvement in current and future macroeconomic conditions since Q2 2020, partially offset by a $9.6 million charge-off related to one commercial real estate credit expected to be sold during Q4 2020 or Q1 2021. The allowance for credit losses on loans and leases represented just over 2.0% of total loans and leases receivable, excluding PPP loans (a non-GAAP measure) at September 30, 2020, compared to 2.2% at June 30, 2020, and 0.8% at December 31, 2019.
Non-Interest Income
Non-interest income totaled $33.8 million for Q3 2020, an increase of $11.6 million compared to Q2 2020. The increase in non-interest income primarily resulted from an increase of $7.4 million in gain on sale of investment securities, $5.5 million in other non-interest income, $1.0 million in mortgage banking income, and $0.7 million in mortgage warehouse transactional fees, partially offset by a decrease of $2.4 million in interchange and card revenue and a $1.0 million decline in unrealized gains on equity securities issued by a foreign entity. The increase in gain on sale of investment securities primarily resulted from the sale of $58.4 million of agency-guaranteed mortgage-backed securities and $70.0 million in corporate notes in Q3 2020. The increase in other non-interest income was driven by a net derivative valuation adjustment of $5.0 million due to changes in market interest rates and a negative credit valuation adjustment and an unrealized loss on one loan held for sale of $1.5 million during Q2 2020. The increase in mortgage banking income was mainly related to unrealized gains on derivatives and gains on sales of mortgage servicing rights. The increase in mortgage warehouse transactional fees primarily resulted from an increase in transaction volumes due to continued low market interest rates. The decrease in interchange and card revenue primarily resulted from Customers becoming subject to the Federal Reserve's regulation limits on interchange fees for banks over $10 billion in total assets beginning on July 1, 2020. The decrease in unrealized gains on equity securities issued by a foreign entity primarily resulted from a decline in the valuation of those securities.
Non-Interest Expense
Non-interest expense totaled $65.6 million for Q3 2020, an increase of $2.1 million compared to Q2 2020. The increase in non-interest expense primarily resulted from increases of $2.7 million in professional services, $1.4 million in salaries and employee benefits, $1.4 million in FDIC assessments, non-income taxes and regulatory fees, and $1.0 million in merger and acquisition related expenses, partially offset by decreases of $3.6 million in other non-interest expenses and $1.0 million in loan workout expenses. The increase in professional services primarily resulted from consulting services associated with supporting our white label partnership and digital transformation efforts. The increase in salaries and employee benefits primarily resulted from an increase in full time equivalents needed for future growth, one additional business day in Q3 2020, and an increase in incentive accruals tied to Customers' overall performance. The increase in FDIC assessments, non-income taxes and regulatory fees was a function of an increase in FDIC assessment rates due to the temporary utilization of brokered deposits to fund PPP loans. The increase in merger and acquisition related expenses primarily resulted from the pending merger of BankMobile Technologies, Inc. and Megalith Financial Acquisition Corp. The decrease in other non-interest expense primarily resulted from an increase in operating cost reimbursements from Customers' white label partnership. The decrease in loan workout expenses primarily resulted from lower costs related to the workout of two commercial relationships.
Taxes
Customers' effective tax rate was 19.5% for Q3 2020 compared to 23.7% for Q2 2020. The effective tax rate is expected to be between 20% - 21% for 2020.
Webcast
Date:
Thursday, October 29, 2020
Time:
9:00 AM EDT
The live audio webcast, presentation slides, and earnings press release will be made available at https://www.customersbank.com/investor-relations/ and at the Customers Bank 3rd Quarter Earnings Webcast.
The third quarter 2020 earnings press release will be issued after the market close on Wednesday, October 28, 2020.
You may submit questions in advance of the live webcast by emailing Customers' Communications & Marketing Director, David Patti at dpatti@customersbank.com; questions may also be asked during the webcast through the webcast application.
The webcast will be archived for viewing on the Customers Bank Investor Relations page and available beginning approximately two hours after the conclusion of the live event.
Institutional Background
Customers Bancorp, Inc. is a bank holding company located in West Reading, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank. Customers Bank is a community-based, full-service bank with assets of approximately $18.8 billion at September 30, 2020. A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender that provides a range of banking services to small and medium-sized businesses, professionals, individuals and families through offices in Pennsylvania, Illinois, New York, Rhode Island, Massachusetts, New Hampshire and New Jersey. Committed to fostering customer loyalty, Customers Bank uses a High Tech/High Touch strategy that includes use of industry-leading technology to provide customers better access to their money, as well as Concierge Banking® by appointment at customers’ homes or offices 12 hours a day, seven days a week. Customers Bank offers a continually expanding portfolio of loans to small businesses, multi-family projects, mortgage companies and consumers.
Customers Bancorp, Inc.'s voting common shares are listed on the New York Stock Exchange under the symbol CUBI. Additional information about Customers Bancorp, Inc. can be found on the Company’s website, www.customersbank.com.
“Safe Harbor” Statement
In addition to historical information, this press release may contain ”forward-looking statements” within the meaning of the ”safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: the adverse impact on the U.S. economy, including the markets in which we operate, of the coronavirus outbreak, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that effect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; the effects of changes in accounting standards or policies, including Accounting Standards Update ("ASU") 2016-13, Financial Instruments—Credit Losses ("CECL"); and, our ability to divest BankMobile on terms and conditions acceptable to us, in the timeframe we currently intend, and the possible effects on our business and results of operations of a divestiture of BankMobile or if we are unable to divest BankMobile for an extended period of time. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2019, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.
Q3 2020 Overview
The following table presents a summary of key earnings and performance metrics for the quarter ended September 30, 2020 and the preceding four quarters:
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
EARNINGS SUMMARY - UNAUDITED
(Dollars in thousands, except per share data and stock price data)
Q3
Q2
Q1
Q4
Q3
Nine Months Ended
September 30,
2020
2020
2020
2019
2019
2020
2019
GAAP Profitability Metrics:
Net income available to common shareholders
$
47,085
$
19,137
$
(515)
$
23,911
$
23,451
$
65,706
$
40,957
Per share amounts:
Earnings per share - basic
$
1.49
$
0.61
$
(0.02)
$
0.76
$
0.75
$
2.09
$
1.32
Earnings per share - diluted
$
1.48
$
0.61
$
(0.02)
$
0.75
$
0.74
$
2.07
$
1.30
Book value per common share (1)
$
26.43
$
25.08
$
23.74
$
26.66
$
25.66
$
26.43
$
25.66
CUBI stock price (1)
$
11.20
$
12.02
$
10.93
$
23.81
$
20.74
$
11.20
$
20.74
CUBI stock price as % of book value (1)
42
%
48
%
46
%
89
%
81
%
42
%
81
%
Average shares outstanding - basic
31,517,504
31,477,591
31,391,151
31,306,813
31,223,777
31,462,284
31,142,400
Average shares outstanding - diluted
31,736,311
31,625,771
31,391,151
31,876,341
31,644,728
31,666,027
31,581,029
Shares outstanding (1)
31,555,124
31,510,287
31,470,026
31,336,791
31,245,776
31,555,124
31,245,776
Return on average assets ("ROAA")
1.12
%
0.62
%
0.11
%
0.97
%
0.95
%
0.69
%
0.66
%
Return on average common equity ("ROCE")
23.05
%
9.97
%
(0.26)
%
11.58
%
11.81
%
11.01
%
7.12
%
Efficiency ratio
50.71
%
58.44
%
66.03
%
56.98
%
61.58
%
57.74
%
68.48
%
Non-GAAP Profitability Metrics (2):
Core earnings
$
38,210
$
19,174
$
603
$
23,843
$
23,402
$
57,986
$
48,170
Adjusted pre-tax pre-provision net income
$
64,176
$
50,766
$
38,595
$
44,676
$
39,440
$
153,537
$
90,885
Per share amounts:
Core earnings per share - diluted
$
1.20
$
0.61
$
0.02
$
0.75
$
0.74
$
1.83
$
1.53
Tangible book value per common share (1)
$
25.97
$
24.62
$
23.27
$
26.17
$
25.16
$
25.97
$
25.16
CUBI stock price as % of tangible book value (1)
43
%
49
%
47
%
91
%
82
%
43
%
82
%
Core ROAA
0.93
%
0.62
%
0.15
%
0.97
%
0.95
%
0.62
%
0.75
%
Core ROCE
18.71
%
9.99
%
0.30
%
11.55
%
11.78
%
9.71
%
8.37
%
Adjusted ROAA - pre-tax and pre-provision
1.43
%
1.39
%
1.34
%
1.57
%
1.39
%
1.39
%
1.16
%
Adjusted ROCE - pre-tax and pre-provision
29.74
%
24.59
%
17.41
%
19.89
%
18.04
%
23.94
%
13.91
%
Net interest margin, tax equivalent
2.50
%
2.65
%
2.99
%
2.89
%
2.83
%
2.68
%
2.69
%
Net interest margin, tax equivalent, excluding PPP loans
2.86
%
2.97
%
2.99
%
2.89
%
2.83
%
2.93
%
2.69
%
Core efficiency ratio
49.81
%
55.39
%
63.33
%
56.76
%
59.21
%
55.68
%
65.15
%
Asset Quality:
Net charge-offs
$
17,299
$
10,325
$
18,711
$
4,362
$
1,761
$
46,335
$
3,458
Annualized net charge-offs to average total loans and leases
0.45
%
0.32
%
0.79
%
0.18
%
0.07
%
0.49
%
0.05
%
Non-performing loans ("NPLs") to total loans and leases (1)
0.38
%
0.56
%
0.49
%
0.21
%
0.17
%
0.38
%
0.17
%
Reserves to NPLs (1)
244.70
%
185.36
%
296.44
%
264.67
%
288.58
%
244.70
%
288.58
%
Non-performing assets ("NPAs") to total assets
0.34
%
0.48
%
0.53
%
0.19
%
0.15
%
0.34
%
0.15
%
Customers Bank Capital Ratios (3):
Common equity Tier 1 capital to risk-weighted assets
10.12
%
10.64
%
10.60
%
11.32
%
10.85
%
10.12
%
10.85
%
Tier 1 capital to risk-weighted assets
10.12
%
10.64
%
10.60
%
11.32
%
10.85
%
10.12
%
10.85
%
Total capital to risk-weighted assets
11.62
%
12.30
%
12.21
%
12.93
%
12.42
%
11.62
%
12.42
%
Tier 1 capital to average assets (leverage ratio)
9.14
%
9.59
%
9.99
%
10.38
%
9.83
%
9.14
%
9.83
%
(1) Metric is a spot balance for the last day of each quarter presented.
(2) Non-GAAP measures exclude unrealized gains (losses) on loans HFS, investment securities gains and losses, severance expense, merger and acquisition-related expenses, losses realized from the sale of non-QM residential mortgage loans, loss upon acquisition of interest-only GNMA securities, legal reserves, credit valuation adjustments on derivatives, risk participation agreement mark-to-market adjustments, and goodwill and intangible assets. These notable items are not included in Customers' disclosures of core earnings and other core profitability metrics. Please note that not each of the aforementioned adjustments affected the reported amount in each of the periods presented. Customers' reasons for the use of these non-GAAP measures and a detailed reconciliation between the non-GAAP measures and the comparable GAAP amounts are included at the end of this document.
(3) Regulatory capital ratios are estimated for Q3 2020 and actual for the remaining periods. In accordance with regulatory capital rules, Customers elected an option to delay the estimated impact of CECL on its regulatory capital over a five-year transition period ending January 1, 2025. As a result, capital ratios and amounts as of Q3 2020 exclude the impact of the increased allowance for credit losses on loans and leases and unfunded loan commitments attributed to the adoption of CECL and 25% of the quarterly provision for credit losses for subsequent quarters through Q4 2021.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Dollars in thousands, except per share data)
Nine Months Ended
Q3
Q2
Q1
Q4
Q3
September 30,
2020
2020
2020
2019
2019
2020
2019
Interest income:
Loans and leases
$
132,107
$
118,447
$
116,080
$
116,365
$
118,444
$
366,634
$
315,126
Investment securities
6,297
6,155
4,977
5,125
5,867
17,429
18,589
Other
1,246
616
4,286
2,505
2,407
6,149
6,030
Total interest income
139,650
125,218
125,343
123,995
126,718
390,212
339,745
Interest expense:
Deposits
18,347
23,238
34,353
35,992
38,267
75,939
105,472
FHLB advances
5,762
4,736
5,390
6,056
7,563
15,889
20,463
Subordinated debt
2,689
2,689
2,689
1,930
1,684
8,066
5,053
Federal funds purchased and other borrowings
5,413
2,573
1,590
2,424
3,469
9,576
9,039
Total interest expense
32,211
33,236
44,022
46,402
50,983
109,470
140,027
Net interest income
107,439
91,982
81,321
77,593
75,735
280,742
199,718
Provision for credit losses on loans and leases
12,955
20,946
31,786
9,689
4,426
65,688
14,539
Net interest income after provision for credit losses on loans and leases
94,484
71,036
49,535
67,904
71,309
215,054
185,179
Non-interest income:
Interchange and card revenue
4,081
6,478
6,809
6,506
6,869
17,368
22,435
Deposit fees
3,439
3,321
3,460
3,616
3,642
10,221
9,199
Commercial lease income
4,510
4,508
4,268
3,839
3,080
13,286
8,212
Bank-owned life insurance
1,746
1,757
1,762
1,795
1,824
5,265
5,477
Mortgage warehouse transactional fees
3,320
2,582
1,952
1,983
2,150
7,854
5,145
Gain (loss) on sale of SBA and other loans
286
23
11
2,770
—
320
—
Mortgage banking income (loss)
1,013
38
296
(635
)
283
1,347
701
Loss upon acquisition of interest-only GNMA securities
—
—
—
—
—
—
(7,476
)
Gain (loss) on sale of investment securities
11,707
4,353
3,974
—
1,001
20,035
1,001
Unrealized gain (loss) on investment securities
238
1,200
(1,378
)
310
1,333
60
988
Other
3,453
(2,024
)
776
5,629
3,187
2,203
9,443
Total non-interest income
33,793
22,236
21,930
25,813
23,369
77,959
55,125
Non-interest expense:
Salaries and employee benefits
32,676
31,296
28,310
27,697
27,193
92,283
79,936
Technology, communication and bank operations
13,215
13,310
13,050
10,370
8,755
39,576
33,110
Professional services
7,253
4,552
7,670
6,470
8,348
19,476
18,639
Occupancy
3,632
3,025
3,032
3,470
3,661
9,689
9,628
Commercial lease depreciation
3,663
3,643
3,427
2,840
2,459
10,733
6,633
FDIC assessments, non-income taxes and regulatory fees
3,784
2,368
2,867
2,492
(777
)
9,019
3,368
Provision for operating losses
1,186
1,068
912
1,415
3,998
3,166
8,223
Advertising and promotion
—
582
1,641
899
976
2,221
3,145
Merger and acquisition related expenses
1,035
25
50
100
—
1,110
—
Loan workout
846
1,808
366
230
495
3,020
1,458
Other real estate owned
7
12
8
247
108
26
151
Other
(1,736
)
1,817
5,126
2,510
4,376
5,206
8,869
Total non-interest expense
65,561
63,506
66,459
58,740
59,592
195,525
173,160
Income before income tax expense
62,716
29,766
5,006
34,977
35,086
97,488
67,144
Income tax expense
12,201
7,048
1,906
7,451
8,020
21,156
15,343
Net income
50,515
22,718
3,100
27,526
27,066
76,332
51,801
Preferred stock dividends
3,430
3,581
3,615
3,615
3,615
10,626
10,844
Net income available to common shareholders
$
47,085
$
19,137
$
(515
)
$
23,911
$
23,451
$
65,706
$
40,957
Basic earnings per common share
$
1.49
$
0.61
$
(0.02
)
$
0.76
$
0.75
$
2.09
$
1.32
Diluted earnings per common share
$
1.48
$
0.61
$
(0.02
)
$
0.75
$
0.74
$
2.07
$
1.30
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - UNAUDITED
(Dollars in thousands)
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2020
2020
2019
2019
ASSETS
Cash and due from banks
$
5,822
$
44,577
$
18,842
$
33,095
$
12,555
Interest earning deposits
325,594
1,022,753
237,390
179,410
169,663
Cash and cash equivalents
331,416
1,067,330
256,232
212,505
182,218
Investment securities, at fair value
1,133,831
681,382
712,657
595,876
608,714
Loans held for sale
26,689
464,164
450,157
486,328
502,854
Loans receivable, mortgage warehouse, at fair value
3,913,593
2,793,164
2,518,012
2,245,758
2,438,530
Loans receivable, PPP
4,964,105
4,760,427
—
—
—
Loans and leases receivable
7,700,892
7,272,447
7,353,262
7,318,988
7,336,237
Allowance for credit losses on loans and leases
(155,561
)
(159,905
)
(149,283
)
(56,379
)
(51,053
)
Total loans and leases receivable, net of allowance for credit losses on loans and leases
16,423,029
14,666,133
9,721,991
9,508,367
9,723,714
FHLB, Federal Reserve Bank, and other restricted stock
70,387
91,023
87,140
84,214
81,853
Accrued interest receivable
65,668
49,911
40,570
38,072
38,412
Bank premises and equipment, net
11,744
8,380
8,890
9,389
14,075
Bank-owned life insurance
277,826
275,842
273,576
272,546
270,526
Other real estate owned
131
131
131
173
204
Goodwill and other intangibles
14,437
14,575
14,870
15,195
15,521
Other assets
423,569
584,247
452,585
298,052
285,699
Total assets
$
18,778,727
$
17,903,118
$
12,018,799
$
11,520,717
$
11,723,790
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand, non-interest bearing deposits
$
2,327,017
$
1,879,789
$
1,435,151
$
1,343,391
$
1,569,918
Interest bearing deposits
8,512,060
9,086,086
6,978,492
7,305,545
7,355,767
Total deposits
10,839,077
10,965,875
8,413,643
8,648,936
8,925,685
FRB advances
—
—
175,000
—
—
Federal funds purchased
680,000
—
705,000
538,000
373,000
FHLB advances
850,000
850,000
1,260,000
850,000
1,040,800
Other borrowings
123,935
123,833
123,732
123,630
123,528
Subordinated debt
181,324
181,255
181,185
181,115
109,050
FRB PPP liquidity facility
4,811,009
4,419,967
—
—
—
Accrued interest payable and other liabilities
241,891
354,341
195,603
126,241
132,577
Total liabilities
17,727,236
16,895,271
11,054,163
10,467,922
10,704,640
Preferred stock
217,471
217,471
217,471
217,471
217,471
Common stock
32,836
32,791
32,751
32,617
32,526
Additional paid in capital
452,965
450,665
446,840
444,218
441,499
Retained earnings
385,750
338,665
319,529
381,519
357,608
Accumulated other comprehensive loss
(15,751
)
(9,965
)
(30,175
)
(1,250
)
(8,174
)
Treasury stock, at cost
(21,780
)
(21,780
)
(21,780
)
(21,780
)
(21,780
)
Total shareholders' equity
1,051,491
1,007,847
964,636
1,052,795
1,019,150
Total liabilities & shareholders' equity
$
18,778,727
$
17,903,118
$
12,018,799
$
11,520,717
$
11,723,790
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED
(Dollars in thousands)
Three Months Ended
September 30, 2020
June 30, 2020
September 30, 2019
Average Balance
Average
Yield or
Cost (%)
Average Balance
Average
Yield or
Cost (%)
Average Balance
Average
Yield or
Cost (%)
Assets
Interest earning deposits
$
686,928
0.12
%
$
384,622
0.12
%
$
100,343
3.26
%
Investment securities (1)
950,723
2.65
%
705,389
3.49
%
652,142
3.60
%
Loans and leases:
Commercial loans to mortgage companies
2,847,169
2.90
%
2,456,067
2.91
%
2,103,612
4.58
%
Multi-family loans
1,989,074
3.72
%
2,009,847
3.87
%
2,929,650
3.91
%
Commercial and industrial loans and leases (2)
2,599,806
3.82
%
2,460,060
4.05
%
2,159,067
5.24
%
Loans receivable, PPP
4,909,197
1.97
%
2,754,920
1.71
%
—
—
%
Non-owner occupied commercial real estate loans
1,388,306
3.70
%
1,392,131
3.81
%
1,294,246
4.57
%
Residential mortgages
414,781
3.97
%
429,609
3.53
%
729,603
4.11
%
Installment loans
1,255,505
8.37
%
1,288,999
8.72
%
600,256
9.47
%
Total loans and leases (3)
15,403,838
3.41
%
12,791,633
3.72
%
9,816,434
4.79
%
Other interest-earning assets
79,656
5.23
%
98,377
2.06
%
98,279
6.39
%
Total interest-earning assets
17,121,145
3.25
%
13,980,021
3.60
%
10,667,198
4.72
%
Non-interest-earning assets
744,429
695,563
591,946
Total assets
$
17,865,574
$
14,675,584
$
11,259,144
Liabilities
Interest checking accounts
$
2,370,709
0.78
%
$
2,482,222
0.75
%
$
1,014,590
1.83
%
Money market deposit accounts
3,786,032
0.65
%
3,034,457
0.85
%
3,100,975
2.22
%
Other savings accounts
1,125,273
1.06
%
1,177,554
1.94
%
561,790
2.19
%
Certificates of deposit
1,344,134
1.35
%
1,734,062
1.51
%
2,227,817
2.34
%
Total interest-bearing deposits (4)
8,626,148
0.85
%
8,428,295
1.11
%
6,905,172
2.20
%
FRB PPP liquidity facility
4,479,036
0.35
%
942,258
0.35
%
—
—
%
Borrowings
1,236,127
3.19
%
2,282,761
1.62
%
1,770,459
2.86
%
Total interest-bearing liabilities
14,341,311
0.89
%
11,653,314
1.15
%
8,675,631
2.33
%
Non-interest-bearing deposits (4)
2,194,689
1,890,955
1,431,810
Total deposits and borrowings
16,536,000
0.78
%
13,544,269
0.99
%
10,107,441
2.00
%
Other non-interest-bearing liabilities
299,526
142,181
146,347
Total liabilities
16,835,526
13,686,450
10,253,788
Shareholders' equity
1,030,048
989,134
1,005,356
Total liabilities and shareholders' equity
$
17,865,574
$
14,675,584
$
11,259,144
Interest spread
2.47
%
2.61
%
2.71
%
Net interest margin
2.50
%
2.65
%
2.82
%
Net interest margin tax equivalent (5)
2.50
%
2.65
%
2.83
%
Net interest margin tax equivalent excl. PPP (6)
2.86
%
2.97
%
2.83
%
(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes owner occupied commercial real estate loans.
(3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.
(4) Total costs of deposits (including interest bearing and non-interest bearing) were 0.67%, 0.91% and 1.82% for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
(6) Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED
(Dollars in thousands)
Nine Months Ended
September 30, 2020
September 30, 2019
Average Balance
Average Yield
or Cost (%)
Average Balance
Average Yield
or Cost (%)
Assets
Interest earning deposits
$
614,863
0.69
%
$
88,146
2.95
%
Investment securities (1)
741,566
3.13
%
676,859
3.66
%
Loans and leases:
Commercial loans to mortgage companies
2,383,331
3.14
%
1,678,461
4.75
%
Multi-family loans
2,070,564
3.89
%
3,092,473
3.84
%
Commercial and industrial loans and leases (2)
2,507,231
4.18
%
2,041,379
5.19
%
Loans receivable, PPP
2,563,299
1.88
%
—
—
%
Non-owner occupied commercial real estate loans
1,372,090
3.94
%
1,215,469
4.52
%
Residential mortgages
430,058
3.82
%
716,294
4.19
%
Installment loans
1,267,806
8.74
%
337,126
9.42
%
Total loans and leases (3)
12,594,379
3.89
%
9,081,202
4.64
%
Other interest-earning assets
86,454
4.60
%
91,135
5.99
%
Total interest-earning assets
14,037,262
3.71
%
9,937,342
4.57
%
Non-interest-earning assets
679,128
531,656
Total assets
$
14,716,390
$
10,468,998
Liabilities
Interest checking accounts
$
2,050,184
0.90
%
$
889,336
1.89
%
Money market deposit accounts
3,486,445
1.10
%
3,138,112
2.24
%
Other savings accounts
1,147,994
1.68
%
476,331
2.14
%
Certificates of deposit
1,533,628
1.64
%
1,920,063
2.28
%
Total interest-bearing deposits (4)
8,218,251
1.23
%
6,423,842
2.20
%
FRB PPP liquidity facility
1,816,849
0.35
%
—
—
%
Borrowings
1,581,498
2.43
%
1,556,405
2.97
%
Total interest-bearing liabilities
11,616,598
1.26
%
7,980,247
2.35
%
Non-interest-bearing deposits (4)
1,887,463
1,379,633
Total deposits and borrowings
13,504,061
1.08
%
9,359,880
2.00
%
Other non-interest-bearing liabilities
197,428
122,309
Total liabilities
13,701,489
9,482,189
Shareholders' equity
1,014,901
986,809
Total liabilities and shareholders' equity
$
14,716,390
$
10,468,998
Interest spread
2.63
%
2.57
%
Net interest margin
2.67
%
2.69
%
Net interest margin tax equivalent (5)
2.68
%
2.69
%
Net interest margin tax equivalent (6)
2.93
%
2.69
%
(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes owner occupied commercial real estate loans.
(3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.
(4) Total costs of deposits (including interest bearing and non-interest bearing) were 1.00% and 1.81% for the nine months ended September 30, 2020 and September 30, 2019, respectively.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for both the nine months ended September 30, 2020 and 2019, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
(6) Non-GAAP tax-equivalent basis as described in noted (5), for both the nine months ended September 30, 2020 and 2019, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES SEGMENT REPORTING - UNAUDITED (Dollars in thousands, except per share amounts)The following tables present Customers' business segment results for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended September 30, 2020
Three Months Ended September 30, 2019
Customers
Bank Business
Banking
BankMobile
Consolidated
Customers
Bank Business
Banking
BankMobile
Consolidated
Interest income (1)
$
126,648
$
13,002
$
139,650
$
113,995
$
12,723
$
126,718
Interest expense
31,718
493
32,211
50,734
249
50,983
Net interest income
94,930
12,509
107,439
63,261
12,474
75,735
Provision for credit losses on loans and leases
8,699
4,256
12,955
2,475
1,951
4,426
Non-interest income
21,603
12,190
33,793
11,757
11,612
23,369
Non-interest expense
48,926
16,635
65,561
38,347
21,245
59,592
Income (loss) before income tax expense (benefit)
58,908
3,808
62,716
34,196
890
35,086
Income tax expense (benefit)
11,374
827
12,201
7,814
206
8,020
Net income (loss)
47,534
2,981
50,515
26,382
684
27,066
Preferred stock dividends
3,430
—
3,430
3,615
—
3,615
Net income (loss) available to common shareholders
$
44,104
$
2,981
$
47,085
$
22,767
$
684
$
23,451
Basic earnings (loss) per common share
$
1.40
$
0.09
$
1.49
$
0.73
$
0.02
$
0.75
Diluted earnings (loss) per common share
$
1.39
$
0.09
$
1.48
$
0.72
$
0.02
$
0.74
(1) Amounts reported include funds transfer pricing of $2.2 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.
Nine Months Ended September 30, 2020
Nine Months Ended September 30, 2019
Customers
Bank Business
Banking
BankMobile
Consolidated
Customers
Bank Business
Banking
BankMobile
Consolidated
Interest income (1)
$
351,819
$
38,393
$
390,212
$
309,882
$
29,863
$
339,745
Interest expense
108,251
1,219
109,470
139,402
625
140,027
Net interest income
243,568
37,174
280,742
170,480
29,238
199,718
Provision for credit losses on loans and leases
55,620
10,068
65,688
3,245
11,294
14,539
Non-interest income
44,422
33,537
77,959
20,304
34,821
55,125
Non-interest expense
137,055
58,470
195,525
111,840
61,320
173,160
Income (loss) before income tax expense (benefit)
95,315
2,173
97,488
75,699
(8,555
)
67,144
Income tax expense (benefit)
20,708
448
21,156
17,324
(1,981
)
15,343
Net income (loss)
74,607
1,725
76,332
58,375
(6,574
)
51,801
Preferred stock dividends
10,626
—
10,626
10,844
—
10,844
Net income (loss) available to common shareholders
$
63,981
$
1,725
$
65,706
$
47,531
$
(6,574
)
$
40,957
Basic earnings (loss) per common share
$
2.03
$
0.05
$
2.09
$
1.53
$
(0.21
)
$
1.32
Diluted earnings (loss) per common share
$
2.02
$
0.05
$
2.07
$
1.51
$
(0.21
)
$
1.30
As of September 30, 2020 and 2019
Goodwill and other intangibles
$
3,629
$
10,808
$
14,437
$
3,629
$
11,892
$
15,521
Total assets (2)
$
18,203,784
$
574,943
$
18,778,727
$
11,131,914
$
591,876
$
11,723,790
Total deposits
$
9,895,328
$
943,749
$
10,839,077
$
8,260,080
$
665,605
$
8,925,685
Total non-deposit liabilities (2)
$
6,853,184
$
34,975
$
6,888,159
$
1,747,846
$
31,109
$
1,778,955
(1) Amounts reported include funds transfer pricing of $5.3 million and $8.1 million for the nine months ended September 30, 2020 and 2019, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.
(2) Amounts reported exclude inter-segment receivables and payables.
The following tables present Customers' business segment results for the quarter ended September 30, 2020, the preceding four quarters, and the nine months ended September 30, 2020 and 2019, respectively:
Customers Bank Business Banking:
Nine Months Ended September 30,
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
Interest income (1)
$
126,648
$
112,455
$
112,717
$
112,212
$
113,995
$
351,819
$
309,882
Interest expense
31,718
32,856
43,678
46,111
50,734
108,251
139,402
Net interest income
94,930
79,599
69,039
66,101
63,261
243,568
170,480
Provision for credit losses on loans and leases
8,699
19,623
27,298
6,846
2,475
55,620
3,245
Non-interest income
21,603
11,683
11,136
14,964
11,757
44,422
20,304
Non-interest expense
48,926
44,270
43,860
41,494
38,347
137,055
111,840
Income (loss) before income tax expense (benefit)
58,908
27,389
9,017
32,725
34,196
95,315
75,699
Income tax expense (benefit)
11,374
6,611
2,722
6,892
7,814
20,708
17,324
Net income (loss)
47,534
20,778
6,295
25,833
26,382
74,607
58,375
Preferred stock dividends
3,430
3,581
3,615
3,615
3,615
10,626
10,844
Net income (loss) available to common shareholders
$
44,104
$
17,197
$
2,680
$
22,218
$
22,767
$
63,981
$
47,531
Basic earnings (loss) per common share
$
1.40
$
0.55
$
0.09
$
0.71
$
0.73
$
2.03
$
1.53
Diluted earnings (loss) per common share
$
1.39
$
0.54
$
0.09
$
0.70
$
0.72
$
2.02
$
1.51
(1) Amounts reported include funds transfer pricing of $2.2 million, $1.6 million, $1.4 million, $0.7 million and $0.3 million for the three months ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019, respectively. Amounts reported also include funds transfer pricing of $5.3 million and $8.1 million for the nine months ended September 30, 2020 and 2019, respectively. These amounts are credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.
BankMobile:
Nine Months Ended September 30,
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
Interest income (2)
$
13,002
$
12,763
$
12,626
$
11,783
$
12,723
$
38,393
$
29,863
Interest expense
493
380
344
291
249
1,219
625
Net interest income
12,509
12,383
12,282
11,492
12,474
37,174
29,238
Provision for credit losses on loans and leases
4,256
1,323
4,488
2,843
1,951
10,068
11,294
Non-interest income
12,190
10,553
10,794
10,849
11,612
33,537
34,821
Non-interest expense
16,635
19,236
22,599
17,246
21,245
58,470
61,320
Income (loss) before income tax expense (benefit)
3,808
2,377
(4,011)
2,252
890
2,173
(8,555)
Income tax expense (benefit)
827
437
(816)
559
206
448
(1,981)
Net income (loss) available to common shareholders
$
2,981
$
1,940
$
(3,195)
$
1,693
$
684
$
1,725
$
(6,574)
Basic income (loss) per common share
$
0.09
$
0.06
$
(0.10)
$
0.05
$
0.02
$
0.05
$
(0.21)
Diluted income (loss) per common share
$
0.09
$
0.06
$
(0.10)
$
0.05
$
0.02
$
0.05
$
(0.21)
Deposit balances (3)
Disbursements business deposits
$
644,658
$
500,072
$
502,711
$
319,263
$
598,064
White label deposits
299,091
162,691
107,054
81,837
67,541
Total deposits
$
943,749
$
662,763
$
609,765
$
401,100
$
665,605
(2) Amounts reported include funds transfer pricing of $2.2 million, $1.6 million, $1.4 million, $0.7 million and $0.3 million for the three months ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019, respectively. Amounts reported also include funds transfer pricing of $5.3 million and $8.1 million for the nine months ended September 30, 2020 and 2019, respectively. These amounts are credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.
(3) As of September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED
(Dollars in thousands)
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2020
2020
2019
2019
Commercial:
Multi-family
$
1,950,300
$
2,023,571
$
2,069,077
$
2,390,204
$
2,797,579
Mortgage warehouse
3,947,828
2,832,112
2,573,397
2,305,784
2,549,088
Commercial & industrial
2,186,480
2,060,494
2,017,567
1,831,126
1,778,423
Commercial real estate owner occupied
557,595
544,772
543,945
551,948
475,774
Loans receivable, PPP
4,964,105
4,760,427
—
—
—
Commercial real estate non-owner occupied
1,233,882
1,262,373
1,252,826
1,222,772
1,267,679
Construction
122,963
128,834
115,448
117,617
60,429
Total commercial loans and leases
14,963,153
13,612,583
8,572,260
8,419,451
8,928,972
Consumer:
Residential
343,775
352,941
364,760
386,089
640,786
Manufactured housing
64,638
66,865
69,240
71,359
73,626
Installment
1,233,713
1,257,813
1,315,171
1,174,175
634,237
Total consumer loans
1,642,126
1,677,619
1,749,171
1,631,623
1,348,649
Total loans and leases
$
16,605,279
$
15,290,202
$
10,321,431
$
10,051,074
$
10,277,621
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END DEPOSIT COMPOSITION - UNAUDITED
(Dollars in thousands)
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2020
2020
2019
2019
Demand, non-interest bearing
$
2,327,017
$
1,879,789
$
1,435,151
$
1,343,391
$
1,569,918
Demand, interest bearing
2,308,627
2,666,209
1,577,034
1,235,292
1,139,675
Total demand deposits
4,635,644
4,545,998
3,012,185
2,578,683
2,709,593
Savings
1,173,641
1,144,788
1,168,121
919,214
591,336
Money market
4,057,366
3,404,709
2,833,990
3,482,505
3,201,883
Time deposits
972,426
1,870,380
1,399,347
1,668,534
2,422,873
Total deposits
$
10,839,077
$
10,965,875
$
8,413,643
$
8,648,936
$
8,925,685
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY - UNAUDITED
(Dollars in thousands)
As of September 30, 2020
As of June 30, 2020
As of September 30, 2019
Total loans
Non
accrual
/NPLs
Allowance
for credit
losses
Total NPLs
to total
loans
Total
reserves to
total NPLs
Total loans
Non
accrual
/NPLs
Allowance
for credit
losses
Total NPLs
to total
loans
Total
reserves to
total NPLs
Total loans
Non
accrual
/NPLs
Allowance
for credit
losses
Total NPLs
to total
loans
Total
reserves to
total NPLs
Loan type
Multi-family
$
1,950,300
$
11,710
$
15,026
0.60
%
128.32
%
$
1,581,839
$
7,013
$
14,697
0.44
%
209.57
%
$
2,297,807
$
—
$
7,498
—
%
—
%
Commercial & industrial(1)
2,220,715
9,633
12,926
0.43
%
134.18
%
2,099,442
9,974
12,302
0.48
%
123.34
%
1,888,981
5,339
17,299
0.28
%
324.01
%
Commercial real estate owner occupied
557,595
3,599
9,552
0.65
%
265.41
%
544,772
4,022
11,405
0.74
%
283.57
%
475,774
2,072
1,466
0.44
%
70.75
%
Commercial real estate non-owner occupied
1,215,516
2,408
20,200
0.20
%
838.87
%
1,244,773
30,257
26,493
2.43
%
87.56
%
1,267,679
83
6,440
0.01
%
7759.04
%
Construction
122,963
—
6,423
—
%
—
%
128,834
—
5,297
—
%
—
%
60,429
—
658
—
%
—
%
Total commercial loans and leases receivable
6,067,089
27,350
64,127
0.45
%
234.47
%
5,599,660
51,266
70,194
0.92
%
136.92
%
5,990,670
7,494
33,361
0.13
%
445.17
%
Residential
335,452
10,634
4,649
3.17
%
43.72
%
348,109
7,857
4,550
2.26
%
57.91
%
637,707
6,165
4,083
0.97
%
66.23
%
Manufactured housing
64,638
2,778
5,625
4.30
%
202.48
%
66,865
3,331
6,014
4.98
%
180.55
%
73,625
1,567
1,027
2.13
%
65.54
%
Installment
1,233,713
3,118
81,160
0.25
%
2602.95
%
1,257,813
4,887
79,147
0.39
%
1619.54
%
634,235
1,140
12,582
0.18
%
1103.68
%
Total consumer loans receivable
1,633,803
16,530
91,434
1.01
%
553.14
%
1,672,787
16,075
89,711
0.96
%
558.08
%
1,345,567
8,872
17,692
0.66
%
199.41
%
Loans and leases receivable(1)
7,700,892
43,880
155,561
0.57
%
354.51
%
7,272,447
67,341
159,905
0.93
%
237.46
%
7,336,237
16,366
51,053
0.22
%
311.95
%
Loans receivable, PPP
4,964,105
—
—
—
%
—
%
4,760,427
—
—
—
%
—
%
—
—
—
—
%
—
%
Loans receivable, mortgage warehouse, at fair value
3,913,593
—
—
—
%
—
%
2,793,164
—
—
2,438,530
—
—
Total loans held for sale
26,689
19,691
—
73.78
%
—
%
464,164
18,925
—
4.08
%
—
%
502,854
1,325
—
0.26
%
—
%
Total portfolio
$
16,605,279
$
63,571
$
155,561
0.38
%
244.70
%
$
15,290,202
$
86,266
$
159,905
0.56
%
185.36
%
$
10,277,621
$
17,691
$
51,053
0.17
%
288.58
%
(1) Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedules that follow this table.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED
(Dollars in thousands)
Q3
Q2
Q1
Q4
Q3
Nine Months Ended September 30,
2020
2020
2020
2019
2019
2020
2019
Loan type
Multi-family
$
—
$
—
$
—
$
—
$
—
$
—
$
534
Commercial & industrial
(55
)
(4
)
43
(224
)
(20
)
(16
)
(294
)
Commercial real estate owner occupied
44
(2
)
(3
)
(1
)
35
39
(116
)
Commercial real estate non-owner occupied
8,923
2,801
12,797
—
—
24,521
—
Construction
(6
)
(113
)
(3
)
(8
)
(8
)
(122
)
(128
)
Residential
(17
)
(26
)
(29
)
181
(5
)
(72
)
89
Installment
8,410
7,669
5,906
4,414
1,759
21,985
3,373
Total net charge-offs (recoveries) from loans held for investment
$
17,299
$
10,325
$
18,711
$
4,362
$
1,761
$
46,335
$
3,458
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED
Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in Customers' industry. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our ongoing financial results, which we believe enhance an overall understanding of our performance and increases comparability of our period to period results. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. Although non-GAAP financial measures are frequently used in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results of operations or financial condition as reported under GAAP.
The following tables present reconciliations of GAAP to non-GAAP measures disclosed within this document.
Core Earnings - Customers Bancorp
Nine Months Ended
September 30,
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
(dollars in thousands except per share data)
USD
Per share
USD
Per share
USD
Per share
USD
Per share
USD
Per share
USD
Per share
USD
Per share
GAAP net income to common shareholders
$
47,085
$
1.48
$
19,137
$
0.61
$
(515
)
$
(0.02
)
$
23,911
$
0.75
$
23,451
$
0.74
$
65,706
$
2.07
$
40,957
$
1.30
Reconciling items (after tax):
Severance expense
—
—
—
—
—
—
—
—
—
—
—
—
373
0.01
Loss upon acquisition of interest-only GNMA securities
—
—
—
—
—
—
—
—
—
—
—
—
5,682
0.18
Merger and acquisition related expenses
833
0.03
19
—
40
—
76
—
—
—
892
0.03
—
—
Legal reserves
258
0.01
—
—
830
0.03
—
—
1,520
0.05
1,088
0.03
1,520
0.05
(Gains) losses on investment securities
(9,662
)
(0.30
)
(4,543
)
(0.14
)
(1,788
)
(0.06
)
(310
)
(0.01
)
(1,947
)
(0.06
)
(15,993
)
(0.51
)
(1,602
)
(0.05
)
Derivative credit valuation adjustment
(304
)
(0.01
)
4,527
0.14
2,036
0.06
(429
)
(0.01
)
378
0.01
6,259
0.20
1,240
0.04
Risk participation agreement mark-to-market adjustment
—
—
(1,080
)
(0.03
)
—
—
—
—
—
—
(1,080
)
(0.03
)
—
—
Losses on sale of non-QM residential mortgage loans
—
—
—
—
—
—
595
0.02
—
—
—
—
—
—
Unrealized losses on loans held for sale
—
—
1,114
0.04
—
—
—
—
—
—
1,114
0.04
—
—
Core earnings
$
38,210
$
1.20
$
19,174
$
0.61
$
603
$
0.02
$
23,843
$
0.75
$
23,402
$
0.74
$
57,986
$
1.83
$
48,170
$
1.53
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED
(Dollars in thousands, except per share data)
Core Return on Average Assets - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
GAAP net income
$
50,515
$
22,718
$
3,100
$
27,526
$
27,066
$
76,332
$
51,801
Reconciling items (after tax):
Severance expense
—
—
—
—
—
—
373
Loss upon acquisition of interest-only GNMA securities
—
—
—
—
—
—
5,682
Merger and acquisition related expenses
833
19
40
76
—
892
—
Legal reserves
258
—
830
—
1,520
1,088
1,520
(Gains) losses on investment securities
(9,662
)
(4,543
)
(1,788
)
(310
)
(1,947
)
(15,993
)
(1,602
)
Derivative credit valuation adjustment
(304
)
4,527
2,036
(429
)
378
6,259
1,240
Risk participation agreement mark-to-market adjustment
—
(1,080
)
—
—
—
(1,080
)
—
Losses on sale of non-QM residential mortgage loans
—
—
—
595
—
—
—
Unrealized losses on loans held for sale
—
1,114
—
—
—
1,114
—
Core net income
$
41,640
$
22,755
$
4,218
$
27,458
$
27,017
$
68,612
$
59,014
Average total assets
$
17,865,574
$
14,675,584
$
11,573,406
$
11,257,207
$
11,259,144
$
14,716,390
$
10,468,998
Core return on average assets
0.93
%
0.62
%
0.15
%
0.97
%
0.95
%
0.62
%
0.75
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
GAAP net income
$
50,515
$
22,718
$
3,100
$
27,526
$
27,066
$
76,332
$
51,801
Reconciling items:
Income tax expense
12,201
7,048
1,906
7,451
8,020
21,156
15,343
Provision for credit losses on loans and leases
12,955
20,946
31,786
9,689
4,426
65,688
14,539
Provision for credit losses on unfunded commitments
(527
)
(356
)
751
3
(235
)
(132
)
(406
)
Severance expense
—
—
—
—
—
—
490
Loss upon acquisition of interest-only GNMA securities
—
—
—
—
—
—
7,476
Merger and acquisition related expenses
1,035
25
50
100
—
1,110
—
Legal reserves
320
—
1,042
—
2,000
1,362
2,000
(Gains) losses on investment securities
(11,945
)
(5,553
)
(2,596
)
(310
)
(2,334
)
(20,095
)
(1,989
)
Derivative credit valuation adjustment
(378
)
5,895
2,556
(565
)
497
8,073
1,631
Risk participation agreement mark-to-market adjustment
—
(1,407
)
—
—
—
(1,407
)
—
Losses on sale of non-QM residential mortgage loans
—
—
—
782
—
—
—
Unrealized losses on loans held for sale
—
1,450
—
—
—
1,450
—
Adjusted net income - pre-tax pre-provision
$
64,176
$
50,766
$
38,595
$
44,676
$
39,440
$
153,537
$
90,885
Average total assets
$
17,865,574
$
14,675,584
$
11,573,406
$
11,257,207
$
11,259,144
$
14,716,390
$
10,468,998
Adjusted ROAA - pre-tax pre-provision
1.43
%
1.39
%
1.34
%
1.57
%
1.39
%
1.39
%
1.16
%
Core Return on Average Common Equity - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
GAAP net income to common shareholders
$
47,085
$
19,137
$
(515
)
$
23,911
$
23,451
$
65,706
$
40,957
Reconciling items (after tax):
Severance expense
—
—
—
—
—
—
373
Loss upon acquisition of interest-only GNMA securities
—
—
—
—
—
—
5,682
Merger and acquisition related expenses
833
19
40
76
—
892
—
Legal reserves
258
—
830
—
1,520
1,088
1,520
(Gains) losses on investment securities
(9,662
)
(4,543
)
(1,788
)
(310
)
(1,947
)
(15,993
)
(1,602
)
Derivative credit valuation adjustment
(304
)
4,527
2,036
(429
)
378
6,259
1,240
Risk participation agreement mark-to-market adjustment
—
(1,080
)
—
—
—
(1,080
)
—
Losses on sale of non-QM residential mortgage loans
—
—
—
595
—
—
—
Unrealized losses on loans held for sale
—
1,114
—
—
—
1,114
—
Core earnings
$
38,210
$
19,174
$
603
$
23,843
$
23,402
$
57,986
$
48,170
Average total common shareholders' equity
$
812,577
$
771,663
$
807,884
$
819,018
$
787,885
$
797,430
$
769,338
Core return on average common equity
18.71
%
9.99
%
0.30
%
11.55
%
11.78
%
9.71
%
8.37
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
GAAP net income to common shareholders
$
47,085
$
19,137
$
(515
)
$
23,911
$
23,451
$
65,706
$
40,957
Reconciling items:
Income tax expense
12,201
7,048
1,906
7,451
8,020
21,156
15,343
Provision for credit losses on loan and leases
12,955
20,946
31,786
9,689
4,426
65,688
14,539
Provision for credit losses on unfunded commitments
(527
)
(356
)
751
3
(235
)
(132
)
(406
)
Severance expense
—
—
—
—
—
—
490
Loss upon acquisition of interest-only GNMA securities
—
—
—
—
—
—
7,476
Merger and acquisition related expenses
1,035
25
50
100
—
1,110
—
Legal reserves
320
—
1,042
—
2,000
1,362
2,000
(Gains) losses on investment securities
(11,945
)
(5,553
)
(2,596
)
(310
)
(2,334
)
(20,095
)
(1,989
)
Derivative credit valuation adjustment
(378
)
5,895
2,556
(565
)
497
8,073
1,631
Risk participation agreement mark-to-market adjustment
—
(1,407
)
—
—
—
(1,407
)
—
Losses on sale of non-QM residential mortgage loans
—
—
—
782
—
—
—
Unrealized losses on loans held for sale
—
1,450
—
—
—
1,450
—
Pre-tax pre-provision adjusted net income available to common shareholders
$
60,746
$
47,185
$
34,980
$
41,061
$
35,825
$
142,911
$
80,041
Average total common shareholders' equity
$
812,577
$
771,663
$
807,884
$
819,018
$
787,885
$
797,430
$
769,338
Adjusted ROCE - pre-tax pre-provision
29.74
%
24.59
%
17.41
%
19.89
%
18.04
%
23.94
%
13.91
%
Net Interest Margin, Tax Equivalent - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
GAAP net interest income
$
107,439
$
91,982
$
81,321
$
77,593
$
75,735
$
280,742
$
199,718
Tax-equivalent adjustment
225
225
205
187
184
655
548
Net interest income tax equivalent
$
107,664
$
92,207
$
81,526
$
77,780
$
75,919
$
281,397
$
200,266
Average total interest earning assets
$
17,121,145
$
13,980,021
$
10,976,731
$
10,676,730
$
10,667,198
$
14,037,262
$
9,937,342
Net interest margin, tax equivalent
2.50
%
2.65
%
2.99
%
2.89
%
2.83
%
2.68
%
2.69
%
Net Interest Margin, Tax Equivalent, Excluding PPP - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
GAAP net interest income
$
107,439
$
91,982
$
81,321
$
77,593
$
75,735
$
280,742
$
199,718
PPP net interest income
(20,018
)
(9,308
)
—
—
—
(29,326
)
—
Tax-equivalent adjustment
225
225
205
187
184
655
548
Net interest income, tax equivalent, excluding PPP
$
87,646
$
82,899
$
81,526
$
77,780
$
75,919
$
252,071
$
200,266
GAAP average total interest earning assets
$
17,121,145
$
13,980,021
$
10,976,731
$
10,676,730
$
10,667,198
$
14,037,262
$
9,937,342
Average PPP loans
(4,909,197
)
(2,754,920
)
—
—
—
(2,563,299
)
—
Adjusted average total interest earning assets
$
12,211,948
$
11,225,101
$
10,976,731
$
10,676,730
$
10,667,198
$
11,473,963
$
9,937,342
Net interest margin, tax equivalent, excluding PPP
2.86
%
2.97
%
2.99
%
2.89
%
2.83
%
2.93
%
2.69
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Core Efficiency Ratio - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
GAAP net interest income
$
107,439
$
91,982
$
81,321
$
77,593
$
75,735
$
280,742
$
199,718
GAAP non-interest income
$
33,793
$
22,236
$
21,930
$
25,813
$
23,369
$
77,959
$
55,125
Loss upon acquisition of interest-only GNMA securities
—
—
—
—
—
—
7,476
(Gains) losses on investment securities
(11,945
)
(5,553
)
(2,596
)
(310
)
(2,334
)
(20,095
)
(1,989
)
Derivative credit valuation adjustment
(378
)
5,895
2,556
(565
)
497
8,073
1,631
Risk participation agreement mark-to-market adjustment
—
(1,407
)
—
—
—
(1,407
)
—
Losses on sale of non-QM residential mortgage loans
—
—
—
782
—
—
—
Unrealized losses on loans held for sale
—
1,450
—
—
—
1,450
—
Core non-interest income
21,470
22,621
21,890
25,720
21,532
65,980
62,243
Core revenue
$
128,909
$
114,603
$
103,211
$
103,313
$
97,267
$
346,722
$
261,961
GAAP non-interest expense
$
65,561
$
63,506
$
66,459
$
58,740
$
59,592
$
195,525
$
173,160
Severance expense
—
—
—
—
—
—
(490
)
Legal reserves
(320
)
—
(1,042
)
—
(2,000
)
(1,362
)
(2,000
)
Merger and acquisition related expenses
(1,035
)
(25
)
(50
)
(100
)
—
(1,110
)
—
Core non-interest expense
$
64,206
$
63,481
$
65,367
$
58,640
$
57,592
$
193,053
$
170,670
Core efficiency ratio (1)
49.81
%
55.39
%
63.33
%
56.76
%
59.21
%
55.68
%
65.15
%
(1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.
Tangible Common Equity to Tangible Assets - Customers Bancorp
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
GAAP total shareholders' equity
$
1,051,491
$
1,007,847
$
964,636
$
1,052,795
$
1,019,150
Reconciling items:
Preferred stock
(217,471
)
(217,471
)
(217,471
)
(217,471
)
(217,471
)
Goodwill and other intangibles
(14,437
)
(14,575
)
(14,870
)
(15,195
)
(15,521
)
Tangible common equity
$
819,583
$
775,801
$
732,295
$
820,129
$
786,158
GAAP total assets
$
18,778,727
$
17,903,118
$
12,018,799
$
11,520,717
$
11,723,790
Reconciling items:
Goodwill and other intangibles
(14,437
)
(14,575
)
(14,870
)
(15,195
)
(15,521
)
Tangible assets
$
18,764,290
$
17,888,543
$
12,003,929
$
11,505,522
$
11,708,269
Tangible common equity to tangible assets
4.37
%
4.34
%
6.10
%
7.13
%
6.71
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Tangible Book Value per Common Share - Customers Bancorp
(dollars in thousands except share and per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
GAAP total shareholders' equity
$
1,051,491
$
1,007,847
$
964,636
$
1,052,795
$
1,019,150
Reconciling Items:
Preferred stock
(217,471
)
(217,471
)
(217,471
)
(217,471
)
(217,471
)
Goodwill and other intangibles
(14,437
)
(14,575
)
(14,870
)
(15,195
)
(15,521
)
Tangible common equity
$
819,583
$
775,801
$
732,295
$
820,129
$
786,158
Common shares outstanding
31,555,124
31,510,287
31,470,026
31,336,791
31,245,776
Tangible book value per common share
$
25.97
$
24.62
$
23.27
$
26.17
$
25.16
Adjusted Net Income - Pre-Tax Pre-Provision - BankMobile
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
2020
2019
GAAP net income to common shareholders
$
2,981
$
1,940
$
(3,195
)
$
1,693
$
684
$
1,725
$
(6,574
)
Reconciling items:
Income tax expense (benefit)
827
437
(816
)
559
206
448
(1,981
)
Provision for credit losses on loans and leases
4,256
1,323
4,488
2,843
1,951
10,068
11,294
Severance expense
—
—
—
—
—
—
18
Merger and acquisition related expenses
377
25
50
100
—
452
—
Legal reserves
—
—
1,042
—
1,000
1,042
1,000
Pre-tax pre-provision adjusted net income available to common shareholders
$
8,441
$
3,725
$
1,569
$
5,195
$
3,841
$
13,735
$
3,757
Total Loans and Leases, excluding PPP
(dollars in thousands)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
Total loans and leases
$
16,605,279
$
15,290,202
$
10,321,431
$
10,051,074
$
10,277,621
Loans receivable, PPP
(4,964,105
)
(4,760,427
)
—
—
—
Loans and leases, excluding PPP
$
11,641,174
$
10,529,775
$
10,321,431
$
10,051,074
$
10,277,621
Total Assets, excluding PPP
(dollars in thousands)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
Total asset
$
18,778,727
$
17,903,118
$
12,018,799
$
11,520,717
$
11,723,790
Loans receivable, PPP
(4,964,105
)
(4,760,427
)
—
—
—
Total assets, excluding PPP
$
13,814,622
$
13,142,691
$
12,018,799
$
11,520,717
$
11,723,790
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP
(dollars in thousands)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
Loans and leases receivable
$
12,664,997
$
12,032,874
$
7,353,262
$
7,318,988
$
7,336,237
Loans receivable, PPP
(4,964,105
)
(4,760,427
)
—
—
—
Loans and leases held for investment, excluding PPP
$
7,700,892
$
7,272,447
$
7,353,262
$
7,318,988
$
7,336,237
Allowance for credit losses on loans and leases
155,561
159,905
149,283
56,379
51,053
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP
2.02
%
2.20
%
2.03
%
0.77
%
0.70
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Tangible Common Equity to Tangible Assets, excluding PPP - Customers Bancorp
(dollars in thousands except per share data)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
GAAP total shareholders' equity
$
1,051,491
$
1,007,847
$
964,636
$
1,052,795
$
1,019,150
Reconciling items:
Preferred stock
(217,471
)
(217,471
)
(217,471
)
(217,471
)
(217,471
)
Goodwill and other intangibles
(14,437
)
(14,575
)
(14,870
)
(15,195
)
(15,521
)
Tangible common equity
$
819,583
$
775,801
$
732,295
$
820,129
$
786,158
GAAP total assets
$
18,778,727
$
17,903,118
$
12,018,799
$
11,520,717
$
11,723,790
Loans receivable, PPP
(4,964,105
)
(4,760,427
)
—
—
—
Total assets, excluding PPP
$
13,814,622
$
13,142,691
$
12,018,799
$
11,520,717
$
11,723,790
Reconciling items:
Goodwill and other intangibles
(14,437
)
(14,575
)
(14,870
)
(15,195
)
(15,521
)
Tangible assets
$
13,800,185
$
13,128,116
$
12,003,929
$
11,505,522
$
11,708,269
Tangible common equity to tangible assets
5.94
%
5.91
%
6.10
%
7.13
%
6.71
%
Commercial criticized loans and leases receivable to total loans and leases, excluding PPP
(dollars in thousands)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
Special mention loans
$
126,361
$
105,110
$
75,838
$
111,157
$
68,878
Substandard loans
172,217
119,651
130,370
139,744
107,086
Doubtful loans
—
27,921
19,050
—
—
Criticized commercial loans and leases receivable
$
298,578
$
252,682
$
225,258
$
250,901
$
175,964
Total loans and leases
16,605,279
15,290,202
10,321,431
10,051,074
10,277,621
Loans receivable, PPP
(4,964,105
)
(4,760,427
)
—
—
—
Total loans and leases, excluding PPP
$
11,641,174
$
10,529,775
$
10,321,431
$
10,051,074
$
10,277,621
Commercial criticized loans and leases receivable to total loans and leases, excluding PPP
2.56
%
2.40
%
2.18
%
2.50
%
1.71
%
View source version on businesswire.com: https://www.businesswire.com/news/home/20201028006243/en/