Customers Bancorp Reports Results for Third Quarter 2022
Customers Bancorp, Inc. (NYSE:CUBI)
Third Quarter 2022 Results
Earnings
Earnings Per Share
Return on Assets
Return on Common Equity
$61.4 million
$1.85
1.24%
19.33%
Net Income
Diluted Earnings Per Share
ROAA
ROCE
$82.3 million
$2.48
1.64%
25.91%
Core Earnings*
Core Earnings Per Diluted Share*
Core ROAA*
Core ROCE*
$76.4 million
$2.30
1.95%
31.01%
Core Earnings, excluding PPP*
Core Earnings Per Diluted Share, excluding PPP*
Pre-tax and Pre-provision Adjusted ROAA*
Pre-tax and Pre-provision Adjusted ROCE*
Third Quarter 2022 Highlights
Q3 2022 net income available to common shareholders was $61.4 million, or $1.85 per diluted share; ROAA was 1.24% and ROCE was 19.33%. Q3 2022 core earnings* were $82.3 million, or $2.48 per diluted share; Core ROAA* was 1.64% and Core ROCE* was 25.91%. Q3 2022 core earnings excluding Paycheck Protection Program* ("PPP") were $76.4 million, or $2.30 per diluted share, up 134.9% over Q3 2021, and bringing year-to-date core earnings (excluding PPP)* to $5.15. Q3 2022 adjusted pre-tax pre-provision net income* was $101.0 million; ROAA* was 1.95%, ROCE* was 31.01%. Year-over-year loan growth (excluding loans to mortgage companies and PPP*) was $4.5 billion, or 57.3%, led by our low-risk variable rate specialty lending verticals. Year-over-year deposit growth was $551.4 million, up 3.2%. Total demand deposits increased $141.0 million, or 1.4% year-over-year. Time deposits increased $1.3 billion, or 220.0%. CBIT-related deposits had a balance of $1.9 billion at September 30, 2022, down $191.7 million from June 30, 2022. Q3 2022 net interest margin, tax equivalent* was 3.16%. Q3 2022 net interest margin, tax equivalent, excluding the impact of PPP loans* was 3.18%. Onboarded 111 new CBIT customers in Q3 2022, bringing total customers to 301. Total operating expenses were flat in Q3 2022 compared to Q2 2022 and down $3.8 million over Q3 2021. Q3 2022 benefit to provision for credit losses on loans and leases of $7.8 million was largely driven by the sale of $500.0 million of consumer installment loans, offset in part by the impact of loan growth and our recognition of weaker macroeconomic forecasts. Non-performing assets were $28.0 million, or 0.14% of total assets, at September 30, 2022 compared to $28.2 million, or 0.14% of total assets, at June 30, 2022 and $52.4 million, or 0.27% of total assets, at September 30, 2021. Allowance for credit losses on loans and leases equaled 466% of non-performing loans at September 30, 2022, compared to 558% at June 30, 2022 and 253% at September 30, 2021. Extended one-year common stock repurchase program an additional year, resulting in approximately 2.0 million shares available to be repurchased through September 2023. Tangible book value per share* grew year over year by $3.23, or 9.2%, despite increased AOCI losses of $157.6 million over the same time period. Tangible book value per share* has grown by 74.5% over the past 5 years.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount is included at the end of this document.
CEO Commentary
West Reading, PA, October 26, 2022 - “We delivered another solid quarter and are extremely pleased with our third quarter results despite the challenging interest rate and economic environment,” remarked Customers Bancorp Chairman and CEO, Jay Sidhu. “We remain laser focused on our responsible organic growth strategy and have taken prudent risk management strategic actions over the past several quarters to ensure we are well positioned from a capital, credit, liquidity and earnings perspective. We are also pleased to report that we have already beat our 2022 core earnings per share, excluding PPP* target of $4.75 - $5.00. Core earnings per share, excluding PPP* for third quarter 2022 were $2.30, bringing year-to-date September 2022 core earnings per share, excluding PPP* to $5.15. In addition, core ROAA* was 1.64% and core ROCE* was 25.91% for the third quarter. Q3 2022 net interest income generated by the core bank was up 2% (~10% annualized) over Q2 2022 and 38% year-over-year. Core loan growth was led by increases in low-risk variable rate specialty lending verticals of $0.5 billion, which were largely offset by a decline in loans to mortgage companies of $0.3 billion and a sale of $0.5 billion of consumer installment loans executed as part of our balance sheet optimization initiatives. Asset quality remains exceptional and credit reserves are robust. Our loan and deposit pipelines remain strong and we are very focused on maintaining our margins, moderating our growth, improving our capital ratios, and controlling our expenses. We remain very optimistic about our future,” Mr. Jay Sidhu continued.
Financial Highlights
(Dollars in thousands, except per share data)
At or Three Months Ended
Increase
(Decrease)
Nine Months Ended
Increase
(Decrease)
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Profitability Metrics:
Net income available for common shareholders
$
61,364
$
110,241
$
(48,877
)
(44.3
)%
$
192,779
$
201,487
$
(8,708
)
(4.3
)%
Diluted earnings per share
$
1.85
$
3.25
$
(1.40
)
(43.1
)%
$
5.72
$
6.02
$
(0.30
)
(5.0
)%
Core earnings*
$
82,270
$
113,876
$
(31,606
)
(27.8
)%
$
217,047
$
243,487
$
(26,440
)
(10.9
)%
Core earnings per share*
$
2.48
$
3.36
$
(0.88
)
(26.2
)%
$
6.44
$
7.27
$
(0.83
)
(11.4
)%
Core earnings, excluding PPP*
$
76,424
$
32,539
$
43,885
134.9
%
$
173,422
$
112,759
$
60,663
53.8
%
Core earnings per share, excluding PPP*
$
2.30
$
0.96
$
1.34
139.6
%
$
5.15
$
3.37
$
1.78
52.8
%
Return on average assets ("ROAA")
1.24
%
2.33
%
(1.09
)
1.34
%
1.49
%
(0.15
)
Core ROAA*
1.64
%
2.35
%
(0.71
)
1.50
%
1.76
%
(0.26
)
Return on average common equity ("ROCE")
19.33
%
40.82
%
(21.49
)
20.58
%
26.99
%
(6.41
)
Core ROCE*
25.91
%
42.16
%
(16.25
)
23.17
%
32.61
%
(9.44
)
Adjusted pre-tax pre-provision net income*
$
100,994
$
167,215
$
(66,221
)
(39.6
)%
$
319,335
$
340,451
$
(21,116
)
(6.2
)%
Net interest margin, tax equivalent*
3.16
%
4.59
%
(1.43
)
3.38
%
3.55
%
(0.17
)
Net interest margin, tax equivalent, excluding PPP loans*
3.18
%
3.24
%
(0.06
)
3.27
%
3.17
%
0.10
Loan yield, excluding PPP*
5.15
%
4.42
%
0.73
4.75
%
4.36
%
0.39
Cost of deposits
1.48
%
0.42
%
1.06
0.80
%
0.47
%
0.33
Efficiency ratio
50.00
%
33.42
%
16.58
43.46
%
41.07
%
2.39
Core efficiency ratio*
42.57
%
30.36
%
12.21
41.23
%
37.31
%
3.92
Balance Sheet Trends:
Total assets
$
20,367,621
$
19,108,922
$
1,258,699
6.6
%
Total assets, excluding PPP*
$
19,212,989
$
14,151,565
$
5,061,424
35.8
%
Total loans and leases
$
15,336,688
$
15,515,537
$
(178,849
)
(1.2
)%
Total loans and leases, excluding PPP*
$
14,182,056
$
10,558,180
$
3,623,876
34.3
%
Non-interest bearing demand deposits
$
2,993,793
$
4,954,331
$
(1,960,538
)
(39.6
)%
Total deposits
$
17,522,438
$
16,971,025
$
551,413
3.2
%
Capital Metrics:
Common Equity
$
1,249,137
$
1,146,505
$
102,632
9.0
%
Tangible Common Equity*
$
1,245,508
$
1,142,711
$
102,797
9.0
%
Tangible Common Equity to Tangible Assets*
6.12
%
5.98
%
0.14
Tangible Common Equity to Tangible Assets, excluding PPP*
6.48
%
8.08
%
(1.60
)
Tangible Book Value per common share*
$
38.35
$
35.12
$
3.23
9.2
%
Common equity Tier 1 capital ratio (1)
10.1
%
10.4
%
(0.3
)
Total risk based capital ratio (1)
12.8
%
13.6
%
(0.8
)
(1) Regulatory capital ratios as of September 30, 2022 are estimates.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount is included at the end of this document.
Customers Bank Instant Token (CBIT™)
"Despite significant market volatility that continues in the digital asset space, we are very pleased with our progress to date. In Q3 2022, we onboarded 111 new CBIT-related customers to the Digital Bank, once again beating our internal target, and bringing total customers to 301. Our digital asset-related deposits have stabilized and ended the third quarter at $1.9 billion. We continue to expect digital asset-related deposits to grow in fourth quarter 2022 as our pipelines remain strong, giving us an opportunity to further transform our deposits into a high quality, low-cost, stable and growing deposit franchise. We believe our technology, compliance and customer service and support systems remain among the best in the country," commented Mr. Sam Sidhu, President and CEO of Customers Bank.
Paycheck Protection Program (PPP)
We funded, either directly or indirectly, about 256,000 PPP loans totaling $5.2 billion in 2021, bringing total PPP loans funded to approximately 358,000 and $10.3 billion. We also earned close to $350 million of deferred origination fees from the SBA through the PPP loans, which is significantly accretive to our earnings and capital levels as these loans are forgiven by the government. In Q3 2022, we recognized $11 million of these fees in earnings, bringing total fees recognized to date to $318 million, resulting in approximately $30 million remaining to be recognized throughout 2022 and early 2023. "As we've stated previously, it is difficult to predict the timing of PPP forgiveness. We expect most of the fees to be recognized over the next two quarters," commented Customers Bancorp CFO, Carla Leibold.
Key Balance Sheet Trends
Loans and Leases
The following table presents the composition of total loans and leases as of the dates indicated:
(Dollars in thousands)
September 30,
2022
% of Total
June 30,
2022
% of Total
September 30,
2021
% of Total
Commercial:
Specialty lending
$
5,103,974
33.3
%
$
4,599,640
29.4
%
$
1,736,966
11.2
%
Other commercial & industrial
1,064,332
7.0
1,037,443
6.6
867,401
5.6
Multi-family
2,267,376
14.8
2,012,920
12.9
1,387,166
8.9
Loans to mortgage companies
1,708,587
11.1
1,975,189
12.6
2,626,483
16.9
Commercial real estate owner occupied
726,670
4.7
710,577
4.5
656,044
4.2
Loans receivable, PPP
1,154,632
7.5
1,570,160
10.0
4,957,357
32.0
Commercial real estate non-owner occupied
1,263,211
8.2
1,152,869
7.4
1,144,643
7.4
Construction
136,133
0.9
195,687
1.2
198,607
1.3
Total commercial loans and leases
13,424,915
87.5
13,254,485
84.6
13,574,667
87.5
Consumer:
Residential
466,888
3.0
460,228
2.9
260,820
1.7
Manufactured housing
46,990
0.3
48,570
0.3
55,635
0.3
Personal
1,079,267
7.0
1,641,748
10.5
1,342,650
8.7
Other
318,628
2.2
259,322
1.7
281,765
1.8
Total consumer loans
1,911,773
12.5
2,409,868
15.4
1,940,870
12.5
Total loans and leases
$
15,336,688
100.0
%
$
15,664,353
100.0
%
$
15,515,537
100.0
%
C&I loans and leases, including specialty lending, increased $3.6 billion, or 136.8% year-over-year, to $6.2 billion. Practically all of the increases in outstanding balances were in the low-risk variable rate secured categories of Fund Finance and Lender Finance. Multi-family loans increased $880.2 million, or 63.5%, to $2.3 billion, residential loans increased $206.1 million, or 79.0%, to $466.9 million, commercial real estate non-owner occupied loans increased $118.6 million, or 10.4% year-over-year to $1.3 billion and commercial real estate owner occupied loans increased $70.6 million, or 10.8%, to $726.7 million. These increases in loans and leases were partially offset by a decrease in total consumer installment loans of $226.5 million, or 13.9%, to $1.4 billion primarily due to the sale of a $500.0 million of consumer installment loans and a decrease in construction loans of $62.5 million, or 31.5%, to $136.1 million.
Allowance for Credit Losses on Loans and Leases
The following table presents allowance for credit losses on loans and leases (information as of the dates and periods indicated):
At or Three Months Ended
Increase
(Decrease)
At or Three Months Ended
Increase
(Decrease)
(Dollars in thousands)
September 30,
2022
June 30,
2022
September 30,
2022
September 30,
2021
Allowance for credit losses on loans and leases
$
130,197
$
156,530
$
(26,333
)
$
130,197
$
131,496
$
(1,299
)
Provision (benefit) for credit losses on loans and leases
(7,836
)
24,164
(32,000
)
(7,836
)
13,164
(21,000
)
Net charge-offs (recoveries)
18,498
13,481
5,017
18,498
7,104
11,394
Annualized net charge-offs (recoveries) to average loans and leases
0.47
%
0.36
%
0.47
%
0.17
%
Coverage of credit loss reserves for loans and leases held for investment
0.95
%
1.14
%
0.95
%
1.02
%
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP*
1.03
%
1.28
%
1.03
%
1.65
%
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount is included at the end of this document.
The increase in net charge-offs in Q3 2022 compared to Q2 2022 was primarily due to a partial charge-off of $7.0 million for one performing commercial real estate collateral dependent loan that we felt prudent in exiting at this time. Our consumer net charge-offs were flat in Q3 2022 compared to Q2 2022.
Provision (Benefit) for Credit Losses
Three Months Ended
Increase
(Decrease)
(Dollars in thousands)
September 30,
2022
June 30,
2022
Provision (benefit) for credit losses on loans and leases
$
(7,836
)
$
24,164
$
(32,000
)
Provision (benefit) for credit losses on unfunded commitments
254
608
(354
)
Provision (benefit) for credit losses on available for sale debt securities
(158
)
(317
)
159
Total provision (benefit) for credit losses
$
(7,740
)
$
24,455
$
(32,195
)
The benefit to provision for credit losses on loans and leases in Q3 2022 was $7.8 million, compared to provision expense of $24.2 million in Q2 2022. The benefit to provision in Q3 2022 was primarily due to the sale of $500.0 million of unsecured consumer installment loans in connection with the Company's balance sheet optimization initiatives, partially offset by loan growth and our recognition of weaker macroeconomic forecasts. This sale transaction resulted in approximately $36.8 million of release in allowance for credit losses, which is included in core earnings*. The benefit to provision for credit losses on available for sale investment securities in Q3 2022 was $0.2 million compared to $0.3 million in Q2 2022.
Asset Quality
The following table presents asset quality metrics as of the dates indicated:
(Dollars in thousands)
September 30,
2022
June 30,
2022
Increase
(Decrease)
September 30,
2022
September 30,
2021
Increase
(Decrease)
Non-performing assets ("NPAs"):
Nonaccrual / non-performing loans ("NPLs")
$
27,919
$
28,064
$
(145
)
$
27,919
$
52,041
$
(24,122
)
Non-performing assets
27,965
28,150
(185
)
27,965
52,377
(24,412
)
NPLs to total loans and leases (1)
0.18
%
0.18
%
0.18
%
0.34
%
Reserves to NPLs (1)
466.34
%
557.76
%
466.34
%
252.68
%
NPAs to total assets
0.14
%
0.14
%
0.14
%
0.27
%
Loans and leases risk ratings:
Commercial loans and leases (1)
Pass
$
10,262,647
$
9,355,846
$
906,801
$
10,262,647
$
5,586,462
$
4,676,185
Special Mention
104,560
106,566
(2,006
)
104,560
195,663
(91,103
)
Substandard
329,878
343,175
(13,297
)
329,878
260,271
69,607
Total commercial loans and leases
10,697,085
9,805,587
891,498
10,697,085
6,042,396
4,654,689
Consumer loans
Performing
1,893,977
2,392,852
(498,875
)
1,893,977
1,912,393
(18,416
)
Non-performing
16,680
14,556
2,124
16,680
15,810
870
Total consumer loans
1,910,657
2,407,408
(496,751
)
1,910,657
1,928,203
(17,546
)
Loans and leases receivable
$
12,607,742
$
12,212,995
$
394,747
$
12,607,742
$
7,970,599
$
4,637,143
(1) Excludes loan receivable, PPP, as PPP loans are fully guaranteed by the Small Business Administration.
Over the last decade, we have developed a suite of commercial loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s C&I, loans to mortgage companies, corporate and specialty lending lines of business, and multi-family loans for example, are characterized by conservative underwriting standards and low loss rates. Because of this emphasis, the Bank’s credit quality to date has been incredibly healthy despite a highly adverse economic environment. Maintaining strong asset quality also requires a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, we employ a bottom-up data driven approach to analyze the commercial portfolio. Exposure to industry segments and CRE significantly impacted by COVID-19 initially is not substantial.
Total consumer installment loans were approximately 6.9% of total assets at September 30, 2022 and 9.9% of core loans* were supported by an allowance for credit losses of $71.7 million. At September 30, 2022, our consumer installment portfolio had the following characteristics: average original FICO score of 736, average debt-to-income of 17.9% and average borrower income of $106 thousand.
Non-performing loans at September 30, 2022 were essentially flat at 0.18% of total loans and leases, compared to 0.18% at June 30, 2022 and 0.34% at September 30, 2021.
Deposits
The following table presents the composition of our deposit portfolio as of the dates indicated:
(Dollars in thousands)
September 30,
2022
% of Total
June 30,
2022
% of Total
September 30,
2021
% of Total
Demand, non-interest bearing
$
2,993,793
17.1
%
$
4,683,030
27.6
%
$
4,954,331
29.2
%
Demand, interest bearing
7,124,663
40.7
6,644,398
39.2
5,023,081
29.6
Total demand deposits
10,118,456
57.8
11,327,428
66.8
9,977,412
58.8
Savings
592,002
3.4
640,062
3.8
1,310,343
7.7
Money market
4,913,967
28.0
4,254,205
25.1
5,090,121
30.0
Time deposits
1,898,013
10.8
723,024
4.3
593,149
3.5
Total deposits
$
17,522,438
100.0
%
$
16,944,719
100.0
%
$
16,971,025
100.0
%
Total deposits increased $551.4 million, or 3.2%, to $17.5 billion at September 30, 2022 as compared to a year ago. Time deposits increased $1.3 billion, or 220.0%, to $1.9 billion and total demand deposits increased $141.0 million, or 1.4%, to $10.1 billion. These increases were offset partially by decreases in savings deposits of $718.3 million, or 54.8%, to $592.0 million and money market deposits of $176.2 million, or 3.5%, to $4.9 billion. The total cost of deposits increased by 106 basis points to 1.48% in Q3 2022 from 0.42% in the prior year primarily due to higher market interest rates and a shift in deposit mix.
Capital
The following table presents certain capital amounts and ratios as of the dates indicated:
(Dollars in thousands except per share data)
September 30,
2022
June 30,
2022
September 30,
2021
Customers Bancorp, Inc.
Common Equity
$
1,249,137
$
1,215,596
$
1,146,505
Tangible Common Equity*
1,245,508
1,211,967
1,142,711
Tangible Common Equity to Tangible Assets*
6.12
%
5.99
%
5.98
%
Tangible Common Equity to Tangible Assets, excluding PPP*
6.48
%
6.49
%
8.08
%
Tangible Book Value per common share*
$
38.35
$
37.35
$
35.12
Common equity Tier 1 capital ratio (1)
10.1
%
9.7
%
10.4
%
Total risk based capital ratio (1)
12.8
%
12.6
%
13.6
%
(1) Regulatory capital ratios as of September 30, 2022 are estimates.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount is included at the end of this document.
Customers Bancorp's tangible common equity* increased $102.8 million to $1.2 billion at September 30, 2022 compared to a year ago, as earnings of $291.4 million more than offset a negative impact to accumulated other comprehensive income ("AOCI") from increased unrealized losses on investment securities of $157.6 million (net of taxes). Similarly, tangible book value per common share* increased to $38.35 at September 30, 2022 from $35.12 at September 30, 2021. Customers remains well capitalized by all regulatory measures.
At the Customers Bancorp level, the total risk based capital ratio (estimate) and tangible common equity to tangible assets ratio ("TCE ratio"), excluding PPP loans*, were 12.8% and 6.48%, respectively, at September 30, 2022. "We expect our TCE ratio to be about 7.5% over the next 3 - 4 quarters, supported by growth in retained earnings and prudent balance sheet management," stated Mr. Sam Sidhu.
At the Customers Bank level, capital levels remained strong and well above regulatory minimums. At September 30, 2022, estimated Tier 1 capital and total risk-based capital were 11.7% and 13.0%, respectively.
Key Profitability Trends
Net Interest Income
Net interest income totaled $159.0 million in Q3 2022, a decrease of $5.8 million from Q2 2022, primarily due to lower PPP interest income of $5.9 million resulting from reduced recognition of deferred fees of $4.8 million driven by lower loan forgiveness in Q3 2022. This decrease was offset in part by increased net interest income earned by the core bank of $3.5 million, up 2% (~10% annualized) over Q2 2022, including increased interest income on investment securities and core loans* of $5.1 million and $37.4 million, respectively, mostly due to higher average balances. In addition, higher expenses paid on deposits, fed funds, FHLB advances and other borrowings of $45.4 million resulted mainly from a shift in deposit mix and higher interest rates during Q3 2022. Excluding PPP loans, average interest-earning assets increased $1.0 billion. Interest-earning asset growth was primarily driven by increases in C&I loans and leases, mostly in specialty lending, and some lower-yielding multi-family loans that didn't close until Q3 2022. Compared to Q2 2022, total loan yields increased 54 basis points to 5.08% primarily due to higher interest rates on variable rate loans in specialty lending. Excluding PPP loans, the Q3 2022 total loan yield was 59 basis points higher than Q2 2022 reflecting increased interest rates and the variable rate nature of the loan portfolio.
Non-Interest Income
The following table presents details of non-interest income for the periods indicated:
Three Months Ended
Increase
(Decrease)
(Dollars in thousands)
September 30,
2022
June 30,
2022
Interchange and card revenue
$
72
$
24
$
48
Deposit fees
989
964
25
Commercial lease income
7,097
6,592
505
Bank-owned life insurance
3,449
1,947
1,502
Mortgage warehouse transactional fees
1,545
1,883
(338
)
Gain (loss) on sale of SBA and other loans
106
1,542
(1,436
)
Loss on sale of consumer installment loans
(23,465
)
—
(23,465
)
Loan fees
3,008
2,618
390
Mortgage banking income (loss)
125
173
(48
)
Gain (loss) on sale of investment securities
(2,135
)
(3,029
)
894
Unrealized gain (loss) on investment securities
(259
)
(203
)
(56
)
Unrealized gain (loss) on derivatives
563
821
(258
)
Other
(112
)
(586
)
474
Total non-interest income
$
(9,017
)
$
12,746
$
(21,763
)
Non-interest income totaled $(9.0) million for Q3 2022, a decrease of $21.8 million compared to Q2 2022. The decrease was primarily due to $23.5 million of loss realized from the sale of $500 million of consumer installment loans as part of our balance sheet optimization initiatives, which included the write-off of deferred origination costs and other transaction-related expenses, and lower gains realized on sales of SBA loans in Q3 2022 compared to Q2 2022, partially offset by higher bank-owned life insurance income primarily due to death benefits, lower realized losses from the sale of investment securities and higher commercial lease income and loan fees from continued growth.
Non-Interest Expense
The following table presents details of non-interest expense for the periods indicated:
Three Months Ended
Increase
(Decrease)
(Dollars in thousands)
September 30,
2022
June 30,
2022
Salaries and employee benefits
$
31,230
$
25,334
$
5,896
Technology, communication and bank operations
19,588
22,738
(3,150
)
Professional services
6,269
7,415
(1,146
)
Occupancy
2,605
4,279
(1,674
)
Commercial lease depreciation
5,966
5,552
414
FDIC assessments, non-income taxes and regulatory fees
2,528
1,619
909
Loan servicing
3,851
4,341
(490
)
Loan workout
217
179
38
Advertising and promotion
762
353
409
Other
3,182
4,395
(1,213
)
Total non-interest expense
$
76,198
$
76,205
$
(7
)
The management of non-interest expenses remains a priority for us. However, this will not be at the expense of not making adequate investments with new technologies to support efficient and responsible growth.
Non-interest expenses totaled $76.2 million in Q3 2022, relatively unchanged from Q2 2022 and $3.8 million lower than Q3 2021. The offsetting items this quarter included a $3.2 million decrease in technology, processing and deposit servicing-related expenses mostly due to lower deposit servicing fees paid to BM Technologies, $1.7 million decrease in occupancy mostly due to $0.9 million of impairment charges for consolidation of five branches into other existing locations in Southeastern Pennsylvania recorded in Q2 2022 and $1.1 million decrease in professional fees primarily associated with the PPP loan forgiveness. These decreases were offset in part by higher salaries and employee benefits of $5.9 million primarily due to higher average headcount, incentives and $1.4 million in one-time severance expenses.
Taxes
Income tax expense from continuing operations decreased by $1.0 million to $17.9 million in Q3 2022 from $18.9 million in Q2 2022 primarily due to higher investment tax credits and death benefits on bank owned life insurance policies. The effective tax rate from continuing operations for Q3 2022 and for the nine months ended September 30, 2022 was 22%. Customers expects the full-year 2022 effective tax rate from continuing operations to be approximately 21% to 23%.
Outlook
“Looking ahead, we envision moderate sustainable and responsible organic core growth, maintenance of our margins, improved capital ratios, and higher profitability and are very optimistic about the prospects of our company. We are focused on improving the quality of our balance sheet and deposit franchise and are not focused on growth just for the sake of growth. With about $500 million of loan growth expected in our low-risk specialty lending verticals in fourth quarter 2022, we will have mostly completed our portfolio remix into lower credit risk variable rate loans. As such, we believe that our margin will likely trough in 2022 and we expect margin expansion in 2023 or through the projected rate-hike cycle. Through a combination of revenue growth and prudent expense management, we expect our efficiency ratio to be in the low to mid 40's by early 2023. Customers Bancorp stock at the close of business on October 21, 2022 was trading at $31.17, only 0.8 times tangible book value* at September 30, 2022. Even after selling $500 million of higher yielding consumer installment loans, we continue to expect over $6.00 of core earnings in 2023, two to three years ahead of our previous guidance of $6.00 by 2025/2026,” concluded Mr. Jay Sidhu.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount is included at the end of this document.
Webcast
Date: Thursday, October 27, 2022
Time: 9:00 AM EDT
The live audio webcast, presentation slides, and earnings press release will be made available at https://www.customersbank.com/investor-relations/ and at the Customers Bancorp 3rd Quarter Earnings Webcast.
You may submit questions in advance of the live webcast by emailing our Communications 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. (NYSE:CUBI) is one of the nation’s top-performing banking companies with over $20 billion in assets, making it one of the 100 largest bank holding companies in the US. Through its primary subsidiary, Customers Bank, commercial and consumer clients benefit from a full suite of technology-enabled tailored product experience delivered by best-in-class customer service. A pioneer in Banking-as-a-Service and digital banking products, Customers Bank is one of the very few banks that provides a blockchain-based 24/7/365 digital payment solution. In addition to traditional lines such as C&I lending, commercial real estate lending, and multi-family lending, Customers Bank also provides a number of national corporate banking services for Lender Finance, Fund Finance, Financial Institutions, Technology and Venture, and Healthcare clients. Major accolades include:
#3 top-performing bank with over $10 billion in assets at year-end 2021 per S&P Global S&P Global Market Intelligence, #6 in top-performing banks with assets between $10 billion and 50 billion in 2021 per American Banker, and #21 out of the 100 largest publicly traded banks in 2022 per Forbes.A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender. Learn more: www.customersbank.com.
“Safe Harbor” Statement
In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: the impact of the ongoing pandemic on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply, actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships, higher inflation and its impacts, and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2021, 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 2022 Overview
The following table presents a summary of key earnings and performance metrics for the quarter ended September 30, 2022 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,
2022
2022
2022
2021
2021
2022
2021
GAAP Profitability Metrics:
Net income available to common shareholders
(from continuing and discontinued operations)
$
61,364
$
56,519
$
74,896
$
98,647
$
110,241
$
192,779
$
201,487
Per share amounts:
Earnings per share - basic
$
1.89
$
1.73
$
2.27
$
3.02
$
3.40
$
5.89
$
6.26
Earnings per share - diluted
$
1.85
$
1.68
$
2.18
$
2.87
$
3.25
$
5.72
$
6.02
Book value per common share (1)
$
38.46
$
37.46
$
37.61
$
37.32
$
35.24
$
38.46
$
35.24
CUBI stock price (1)
$
29.48
$
33.90
$
52.14
$
65.37
$
43.02
$
29.48
$
43.02
CUBI stock price as % of book value (1)
77
%
90
%
139
%
175
%
122
%
77
%
122
%
Average shares outstanding - basic
32,455,814
32,712,616
32,957,033
32,625,960
32,449,853
32,706,652
32,206,547
Average shares outstanding - diluted
33,226,607
33,579,013
34,327,065
34,320,327
33,868,553
33,706,864
33,487,672
Shares outstanding (1)
32,475,502
32,449,486
32,957,847
32,913,267
32,537,976
32,475,502
32,537,976
Return on average assets ("ROAA")
1.24
%
1.17
%
1.63
%
2.08
%
2.33
%
1.34
%
1.49
%
Return on average common equity ("ROCE")
19.33
%
18.21
%
24.26
%
33.18
%
40.82
%
20.58
%
26.99
%
Efficiency ratio
50.00
%
42.14
%
39.42
%
38.70
%
33.42
%
43.46
%
41.07
%
Non-GAAP Profitability Metrics (2):
Core earnings
$
82,270
$
59,367
$
75,410
$
101,213
$
113,876
$
217,047
$
243,487
Adjusted pre-tax pre-provision net income
$
100,994
$
105,692
$
112,649
$
130,595
$
167,215
$
319,335
$
340,451
Per share amounts:
Core earnings per share - diluted
$
2.48
$
1.77
$
2.20
$
2.95
$
3.36
$
6.44
$
7.27
Tangible book value per common share (1)
$
38.35
$
37.35
$
37.50
$
37.21
$
35.12
$
38.35
$
35.12
CUBI stock price as % of tangible book value (1)
77
%
91
%
139
%
176
%
122
%
77
%
122
%
Core ROAA
1.64
%
1.23
%
1.64
%
2.13
%
2.35
%
1.50
%
1.76
%
Core ROCE
25.91
%
19.13
%
24.43
%
34.04
%
42.16
%
23.17
%
32.61
%
Adjusted ROAA - pre-tax and pre-provision
1.95
%
2.11
%
2.39
%
2.70
%
3.36
%
2.14
%
2.37
%
Adjusted ROCE - pre-tax and pre-provision
31.01
%
33.37
%
35.89
%
43.25
%
60.81
%
33.40
%
44.30
%
Net interest margin, tax equivalent
3.16
%
3.39
%
3.60
%
4.14
%
4.59
%
3.38
%
3.55
%
Net interest margin, tax equivalent, excluding PPP
3.18
%
3.32
%
3.32
%
3.12
%
3.24
%
3.27
%
3.17
%
Core efficiency ratio
42.57
%
41.74
%
39.47
%
38.14
%
30.36
%
41.23
%
37.31
%
Asset Quality:
Net charge-offs
$
18,498
$
13,481
$
7,226
$
7,582
$
7,104
$
39,205
$
26,216
Annualized net charge-offs to average total loans and leases
0.47
%
0.36
%
0.21
%
0.21
%
0.17
%
0.36
%
0.22
%
Non-performing loans ("NPLs") to total loans and leases (1)
0.18
%
0.18
%
0.31
%
0.34
%
0.34
%
0.18
%
0.34
%
Reserves to NPLs (1)
466.34
%
557.76
%
333.15
%
277.72
%
252.68
%
466.34
%
252.68
%
Non-performing assets ("NPAs") to total assets
0.14
%
0.14
%
0.23
%
0.25
%
0.27
%
0.14
%
0.27
%
Customers Bank Capital Ratios (3):
Common equity Tier 1 capital to risk-weighted assets
11.73
%
11.46
%
11.60
%
11.83
%
12.77
%
11.73
%
12.77
%
Tier 1 capital to risk-weighted assets
11.73
%
11.46
%
11.60
%
11.83
%
12.77
%
11.73
%
12.77
%
Total capital to risk-weighted assets
12.98
%
12.91
%
13.03
%
13.11
%
14.16
%
12.98
%
14.16
%
Tier 1 capital to average assets (leverage ratio)
8.10
%
8.09
%
8.21
%
7.93
%
8.66
%
8.10
%
8.66
%
(1) Metric is a spot balance for the last day of each quarter presented.
(2) Customers' reasons for the use of these non-GAAP measures and a detailed reconciliation between the non-GAAP measures and the comparable GAAP amounts are included at the end of this document.
(3) Regulatory capital ratios are estimated for Q3 2022 and actual for the remaining periods. In accordance with regulatory capital rules, Customers elected to apply the CECL capital transition provisions which delayed the effects of CECL on regulatory capital for two years until January 1, 2022, followed by a three-year transition period. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of September 30, 2022, our regulatory capital ratios reflected 75%, or $46.2 million, benefit associated with the CECL transition provisions.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Dollars in thousands, except per share data)
Nine Months Ended
Q3
Q2
Q1
Q4
Q3
September 30,
2022
2022
2022
2021
2021
2022
2021
Interest income:
Loans and leases
$
200,457
$
168,941
$
157,175
$
198,000
$
233,097
$
526,573
$
538,822
Investment securities
30,546
25,442
20,295
15,202
8,905
76,283
25,211
Other
4,913
1,951
6,006
835
849
12,870
2,814
Total interest income
235,916
196,334
183,476
214,037
242,851
615,726
566,847
Interest expense:
Deposits
65,380
22,781
13,712
15,415
15,915
101,873
47,226
FHLB advances
4,684
2,316
—
51
5
7,000
6,160
Subordinated debt
2,689
2,689
2,689
2,688
2,689
8,067
8,067
FRB PPP liquidity facility, federal funds purchased and other borrowings
4,131
3,696
2,376
2,189
4,350
10,203
14,014
Total interest expense
76,884
31,482
18,777
20,343
22,959
127,143
75,467
Net interest income
159,032
164,852
164,699
193,694
219,892
488,583
491,380
Provision (benefit) for credit losses
(7,994
)
23,847
15,997
13,890
13,164
31,850
13,536
Net interest income after provision (benefit) for credit losses
167,026
141,005
148,702
179,804
206,728
456,733
477,844
Non-interest income:
Interchange and card revenue
72
24
76
84
83
172
252
Deposit fees
989
964
940
1,026
994
2,893
2,748
Commercial lease income
7,097
6,592
5,895
5,378
5,213
19,584
15,729
Bank-owned life insurance
3,449
1,947
8,326
1,984
1,988
13,722
6,432
Mortgage warehouse transactional fees
1,545
1,883
2,015
2,262
3,100
5,443
10,612
Gain (loss) on sale of SBA and other loans
106
1,542
1,507
2,493
5,359
3,155
8,834
Loss on sale of consumer installment loans
(23,465
)
—
—
—
—
(23,465
)
—
Loan fees
3,008
2,618
2,545
2,513
1,909
8,171
5,015
Mortgage banking income (loss)
125
173
481
262
425
779
1,274
Gain (loss) on sale of investment securities
(2,135
)
(3,029
)
(1,063
)
(49
)
6,063
(6,227
)
31,441
Unrealized gain (loss) on investment securities
(259
)
(203
)
(276
)
—
—
(738
)
2,720
Loss on sale of foreign subsidiaries
—
—
—
—
—
—
(2,840
)
Unrealized gain (loss) on derivatives
563
821
964
586
524
2,348
2,622
Loss on cash flow hedge derivative terminations
—
—
—
—
—
—
(24,467
)
Other
(112
)
(586
)
(212
)
452
(72
)
(910
)
504
Total non-interest income
(9,017
)
12,746
21,198
16,991
25,586
24,927
60,876
Non-interest expense:
Salaries and employee benefits
31,230
25,334
26,607
29,940
26,268
83,171
78,262
Technology, communication and bank operations
19,588
22,738
24,068
22,657
21,281
66,394
60,887
Professional services
6,269
7,415
6,956
7,058
6,871
20,640
19,630
Occupancy
2,605
4,279
3,050
4,336
2,704
9,934
7,807
Commercial lease depreciation
5,966
5,552
4,942
4,625
4,493
16,460
13,199
FDIC assessments, non-income taxes and regulatory fees
2,528
1,619
2,383
2,427
2,313
6,530
7,634
Loan servicing
3,851
4,341
2,371
4,361
4,265
10,563
6,402
Merger and acquisition related expenses
—
—
—
—
—
—
418
Loan workout
217
179
(38
)
226
198
358
39
Advertising and promotion
762
353
315
344
302
1,430
1,176
Deposit relationship adjustment fees
—
—
—
—
6,216
—
6,216
Other
3,182
4,395
3,153
5,574
5,098
10,730
11,089
Total non-interest expense
76,198
76,205
73,807
81,548
80,009
226,210
212,759
Income before income tax expense
81,811
77,546
96,093
115,247
152,305
255,450
325,961
Income tax expense
17,899
18,896
19,332
12,993
36,263
56,127
73,947
Net income from continuing operations
$
63,912
$
58,650
$
76,761
$
102,254
$
116,042
$
199,323
$
252,014
(continued)
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Nine Months Ended
Q3
Q2
Q1
Q4
Q3
September 30,
2022
2022
2022
2021
2021
2022
2021
Loss from discontinued operations before income taxes
$
—
$
—
$
—
$
—
$
—
$
—
$
(20,354
)
Income tax expense (benefit) from discontinued operations
—
—
—
1,585
—
—
17,682
Net loss from discontinued operations
—
—
—
(1,585
)
—
—
(38,036
)
Net income
63,912
58,650
76,761
100,669
116,042
199,323
213,978
Preferred stock dividends
2,548
2,131
1,865
2,022
2,981
6,544
9,671
Loss on redemption of preferred stock
—
—
—
—
2,820
—
2,820
Net income available to common shareholders
$
61,364
$
56,519
$
74,896
$
98,647
$
110,241
$
192,779
$
201,487
Basic earnings per common share from continuing operations
$
1.89
$
1.73
$
2.27
$
3.07
$
3.40
$
5.89
$
7.44
Basic earnings per common share
1.89
1.73
2.27
3.02
3.40
5.89
6.26
Diluted earnings per common share from continuing operations
1.85
1.68
2.18
2.92
3.25
5.72
7.15
Diluted earnings per common share
1.85
1.68
2.18
2.87
3.25
5.72
6.02
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - UNAUDITED
(Dollars in thousands)
September 30,
June 30,
March 31,
December 31,
September 30,
2022
2022
2022
2021
2021
ASSETS
Cash and due from banks
$
41,520
$
66,703
$
55,515
$
35,238
$
51,169
Interest earning deposits
362,945
178,475
219,085
482,794
1,000,885
Cash and cash equivalents
404,465
245,178
274,600
518,032
1,052,054
Investment securities, at fair value
2,943,694
3,144,882
4,169,853
3,817,150
1,866,697
Investment securities held to maturity
886,294
495,039
—
—
—
Loans held for sale
5,224
6,595
3,003
16,254
29,957
Loans receivable, mortgage warehouse, at fair value
1,569,090
1,874,603
1,755,758
2,284,325
2,557,624
Loans receivable, PPP
1,154,632
1,570,160
2,195,902
3,250,008
4,957,357
Loans and leases receivable
12,607,742
12,212,995
10,118,855
9,018,298
7,970,599
Allowance for credit losses on loans and leases
(130,197
)
(156,530
)
(145,847
)
(137,804
)
(131,496
)
Total loans and leases receivable, net of allowance for credit losses on loans and leases
15,201,267
15,501,228
13,924,668
14,414,827
15,354,084
FHLB, Federal Reserve Bank, and other restricted stock
64,112
74,626
54,553
64,584
57,184
Accrued interest receivable
107,621
98,727
94,669
92,239
93,514
Bank premises and equipment, net
6,610
6,755
8,233
8,890
9,944
Bank-owned life insurance
336,130
335,153
332,239
333,705
331,423
Goodwill and other intangibles
3,629
3,629
3,678
3,736
3,794
Other assets
408,575
340,184
298,212
305,611
310,271
Total assets
$
20,367,621
$
20,251,996
$
19,163,708
$
19,575,028
$
19,108,922
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand, non-interest bearing deposits
$
2,993,793
$
4,683,030
$
4,594,428
$
4,459,790
$
4,954,331
Interest bearing deposits
14,528,645
12,261,689
11,821,132
12,318,134
12,016,694
Total deposits
17,522,438
16,944,719
16,415,560
16,777,924
16,971,025
Federal funds purchased
365,000
770,000
700,000
75,000
—
FHLB advances
500,000
635,000
—
700,000
—
Other borrowings
123,515
123,450
223,230
223,086
223,151
Subordinated debt
181,882
181,812
181,742
181,673
181,603
Accrued interest payable and other liabilities
287,855
243,625
265,770
251,128
448,844
Total liabilities
18,980,690
18,898,606
17,786,302
18,208,811
17,824,623
Preferred stock
137,794
137,794
137,794
137,794
137,794
Common stock
34,948
34,922
34,882
34,722
33,818
Additional paid in capital
549,066
545,670
542,402
542,391
525,894
Retained earnings
898,511
837,147
780,628
705,732
607,085
Accumulated other comprehensive income (loss), net
(156,126
)
(124,881
)
(62,548
)
(4,980
)
1,488
Treasury stock, at cost
(77,262
)
(77,262
)
(55,752
)
(49,442
)
(21,780
)
Total shareholders' equity
1,386,931
1,353,390
1,377,406
1,366,217
1,284,299
Total liabilities and shareholders' equity
$
20,367,621
$
20,251,996
$
19,163,708
$
19,575,028
$
19,108,922
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED
(Dollars in thousands)
Three Months Ended
September 30, 2022
June 30, 2022
September 30, 2021
Average
Balance
Interest
Income or
Expense
Average
Yield or
Cost (%)
Average
Balance
Interest
Income or
Expense
Average
Yield or
Cost (%)
Average
Balance
Interest
Income or
Expense
Average
Yield or
Cost (%)
Assets
Interest earning deposits
$
528,001
$
2,949
2.22
%
$
434,950
$
919
0.85
%
$
1,279,983
$
490
0.15
%
Investment securities (1)
3,770,922
30,546
3.24
%
4,104,463
25,442
2.48
%
1,511,319
8,905
2.36
%
Loans and leases:
Commercial & industrial:
Specialty lending loans and leases (2)
5,064,730
64,753
5.07
%
4,068,175
39,160
3.86
%
1,732,323
16,393
3.75
%
Other commercial & industrial loans (2)
1,585,136
18,794
4.70
%
1,509,655
14,706
3.91
%
1,292,297
12,259
3.76
%
Commercial loans to mortgage companies
1,623,624
17,092
4.18
%
1,898,554
15,615
3.30
%
2,658,020
21,065
3.14
%
Multi-family loans
2,206,953
20,427
3.67
%
1,845,527
17,313
3.76
%
1,443,846
13,259
3.64
%
Loans receivable, PPP
1,349,403
14,666
4.31
%
1,863,429
20,572
4.43
%
5,778,367
117,102
8.04
%
Non-owner occupied commercial real estate loans
1,372,244
15,595
4.51
%
1,307,995
12,749
3.91
%
1,346,629
12,656
3.73
%
Residential mortgages
513,694
5,008
3.87
%
515,612
4,898
3.81
%
325,851
2,874
3.50
%
Installment loans
1,938,199
44,122
9.03
%
1,909,551
43,928
9.23
%
1,615,411
37,489
9.21
%
Total loans and leases (3)
15,653,983
200,457
5.08
%
14,918,498
168,941
4.54
%
16,192,744
233,097
5.71
%
Other interest-earning assets
68,549
1,964
11.37
%
68,025
1,032
6.09
%
49,780
359
2.86
%
Total interest-earning assets
20,021,455
235,916
4.68
%
19,525,936
196,334
4.03
%
19,033,826
242,851
5.06
%
Non-interest-earning assets
492,911
530,084
705,514
Total assets
$
20,514,366
$
20,056,020
$
19,739,340
Liabilities
Interest checking accounts
6,669,787
33,685
2.00
%
6,409,617
13,644
0.85
%
4,537,421
7,677
0.67
%
Money market deposit accounts
5,789,991
24,348
1.67
%
4,704,767
7,523
0.64
%
5,131,433
5,569
0.43
%
Other savings accounts
625,908
1,818
1.15
%
695,176
758
0.44
%
1,376,077
1,750
0.50
%
Certificates of deposit
1,141,970
5,529
1.92
%
530,180
856
0.65
%
614,404
919
0.59
%
Total interest-bearing deposits (4)
14,227,656
65,380
1.82
%
12,339,740
22,781
0.74
%
11,659,335
15,915
0.54
%
Federal funds purchased
513,011
2,871
2.22
%
642,747
1,429
0.89
%
—
—
—
%
FRB PPP liquidity facility
—
—
—
%
—
—
—
%
2,788,897
2,460
0.35
%
Borrowings
874,497
8,633
3.92
%
940,068
7,272
3.10
%
371,077
4,584
4.90
%
Total interest-bearing liabilities
15,615,164
76,884
1.95
%
13,922,555
31,482
0.91
%
14,819,309
22,959
0.62
%
Non-interest-bearing deposits (4)
3,245,963
4,491,574
3,335,198
Total deposits and borrowings
18,861,127
1.62
%
18,414,129
0.69
%
18,154,507
0.50
%
Other non-interest-bearing liabilities
255,735
259,279
310,519
Total liabilities
19,116,862
18,673,408
18,465,026
Shareholders' equity
1,397,504
1,382,612
1,274,314
Total liabilities and shareholders' equity
$
20,514,366
$
20,056,020
$
19,739,340
Net interest income
159,032
164,852
219,892
Tax-equivalent adjustment (5)
334
270
290
Net interest earnings
$
159,366
$
165,122
$
220,182
Interest spread
3.06
%
3.35
%
4.56
%
Net interest margin
3.16
%
3.38
%
4.58
%
Net interest margin tax equivalent (5)
3.16
%
3.39
%
4.59
%
Net interest margin tax equivalent excl. PPP (6)
3.18
%
3.32
%
3.24
%
(continued)
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED (CONTINUED)
(Dollars in thousands)
(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 1.48%, 0.54% and 0.42% for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, 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, 2022, June 30, 2022 and September 30, 2021, 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 (CONTINUED)
(Dollars in thousands)
Nine Months Ended
September 30, 2022
September 30, 2021
Average
Balance
Interest
Income or
Expense
Average
Yield or
Cost (%)
Average
Balance
Interest
Income or
Expense
Average
Yield or
Cost (%)
Assets
Interest earning deposits
$
595,305
$
4,197
0.94
%
$
1,034,923
$
980
0.13
%
Investment securities (1)
3,969,809
76,283
2.56
%
1,461,070
25,211
2.30
%
Loans and leases:
Commercial & industrial:
Specialty lending loans and leases (2)
3,963,180
127,304
4.29
%
1,560,615
43,658
3.74
%
Other commercial & industrial loans (2)
1,496,772
46,768
4.18
%
1,357,028
38,631
3.81
%
Commercial loans to mortgage companies
1,785,495
46,713
3.50
%
2,837,549
65,925
3.11
%
Multi-family loans
1,863,915
51,506
3.69
%
1,560,565
44,120
3.78
%
Loans receivable, PPP
1,946,651
72,132
4.95
%
5,515,819
197,071
4.78
%
Non-owner occupied commercial real estate loans
1,331,037
40,551
4.07
%
1,354,745
38,637
3.81
%
Residential mortgages
482,263
13,586
3.77
%
348,369
9,486
3.64
%
Installment loans
1,881,160
128,013
9.10
%
1,470,024
101,294
9.21
%
Total loans and leases (3)
14,750,473
526,573
4.77
%
16,004,714
538,822
4.50
%
Other interest-earning assets
62,955
8,673
NM (7)
62,205
1,834
3.94
%
Total interest-earning assets
19,378,542
615,726
4.25
%
18,562,912
566,847
4.08
%
Non-interest-earning assets
526,437
632,202
Total assets
$
19,904,979
$
19,195,114
Liabilities
Interest checking accounts
$
6,286,224
$
55,059
1.17
%
$
3,584,223
$
19,929
0.74
%
Money market deposit accounts
5,128,270
36,545
0.95
%
4,811,540
17,278
0.48
%
Other savings accounts
732,801
3,359
0.61
%
1,415,595
6,227
0.59
%
Certificates of deposit
710,130
6,910
1.30
%
646,257
3,792
0.78
%
Total interest-bearing deposits (4)
12,857,425
101,873
1.06
%
10,457,615
47,226
0.60
%
Federal funds purchased
416,344
4,374
1.40
%
29,286
15
0.07
%
FRB PPP liquidity facility
—
—
—
%
3,525,560
9,229
0.35
%
Borrowings
783,644
20,896
3.57
%
659,334
18,997
3.85
%
Total interest-bearing liabilities
14,057,413
127,143
1.21
%
14,671,795
75,467
0.69
%
Non-interest-bearing deposits (4)
4,206,778
3,016,837
Total deposits and borrowings
18,264,191
0.93
%
17,688,632
0.57
%
Other non-interest-bearing liabilities
250,783
295,752
Total liabilities
18,514,974
17,984,384
Shareholders' equity
1,390,005
1,210,730
Total liabilities and shareholders' equity
$
19,904,979
$
19,195,114
Net interest income
488,583
491,380
Tax-equivalent adjustment (5)
843
871
Net interest earnings
$
489,426
$
492,251
Interest spread
3.32
%
3.51
%
Net interest margin
3.37
%
3.54
%
Net interest margin tax equivalent (5)
3.38
%
3.55
%
Net interest margin tax equivalent excl. PPP (6)
3.27
%
3.17
%
(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 0.80% and 0.47% for the nine months ended September 30, 2022 and 2021, respectively.
(continued)
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED (CONTINUED)
(Dollars in thousands)
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the nine months ended September 30, 2022 and 2021, 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 nine months ended September 30, 2022 and 2021, 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.
(7) Not meaningful.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED
(Dollars in thousands)
September 30,
2022
June 30,
2022
March 31,
2022
December 31,
2021
September 30,
2021
Commercial:
Commercial & industrial:
Specialty lending
$
5,103,974
$
4,599,640
$
2,973,544
$
2,403,991
$
1,736,966
Other commercial & industrial
1,064,332
1,037,443
947,895
942,679
867,401
Multi-family
2,267,376
2,012,920
1,705,027
1,486,308
1,387,166
Loans to mortgage companies
1,708,587
1,975,189
1,830,121
2,362,438
2,626,483
Commercial real estate owner occupied
726,670
710,577
701,893
654,922
656,044
Loans receivable, PPP
1,154,632
1,570,160
2,195,902
3,250,008
4,957,357
Commercial real estate non-owner occupied
1,263,211
1,152,869
1,140,311
1,121,238
1,144,643
Construction
136,133
195,687
161,024
198,981
198,607
Total commercial loans and leases
13,424,915
13,254,485
11,655,717
12,420,565
13,574,667
Consumer:
Residential
466,888
460,228
469,426
350,984
260,820
Manufactured housing
46,990
48,570
50,669
52,861
55,635
Installment:
Personal
1,079,267
1,641,748
1,618,096
1,433,538
1,342,650
Other
318,628
259,322
279,610
310,937
281,765
Total consumer loans
1,911,773
2,409,868
2,417,801
2,148,320
1,940,870
Total loans and leases
$
15,336,688
$
15,664,353
$
14,073,518
$
14,568,885
$
15,515,537
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END DEPOSIT COMPOSITION - UNAUDITED
(Dollars in thousands)
September 30,
2022
June 30,
2022
March 31,
2022
December 31,
2021
September 30,
2021
Demand, non-interest bearing
$
2,993,793
$
4,683,030
$
4,594,428
$
4,459,790
$
4,954,331
Demand, interest bearing
7,124,663
6,644,398
5,591,468
6,488,406
5,023,081
Total demand deposits
10,118,456
11,327,428
10,185,896
10,948,196
9,977,412
Savings
592,002
640,062
802,395
973,317
1,310,343
Money market
4,913,967
4,254,205
4,981,077
4,349,073
5,090,121
Time deposits
1,898,013
723,024
446,192
507,338
593,149
Total deposits
$
17,522,438
$
16,944,719
$
16,415,560
$
16,777,924
$
16,971,025
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY - UNAUDITED
(Dollars in thousands)
As of September 30, 2022
As of June 30, 2022
As of September 30, 2021
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
Commercial & industrial, including specialty lending (1)
$
6,307,803
$
4,078
$
15,131
0.06
%
371.04
%
$
5,737,670
$
4,061
$
11,081
0.07
%
272.86
%
$
2,673,226
$
6,951
$
10,860
0.26
%
156.24
%
Multi-family
2,263,268
1,158
14,244
0.05
%
1230.05
%
2,008,784
1,153
9,765
0.06
%
846.92
%
1,369,876
24,524
4,397
1.79
%
17.93
%
Commercial real estate owner occupied
726,670
2,198
6,220
0.30
%
282.98
%
710,577
2,913
4,745
0.41
%
162.89
%
656,044
2,412
3,617
0.37
%
149.96
%
Commercial real estate non-owner occupied
1,263,211
—
11,332
—
%
—
%
1,152,869
—
8,880
—
%
—
%
1,144,643
2,845
7,375
0.25
%
259.23
%
Construction
136,133
—
1,614
—
%
—
%
195,687
—
1,179
—
%
—
%
198,607
—
886
—
%
—
%
Total commercial loans and leases receivable
10,697,085
7,434
48,541
0.07
%
652.96
%
9,805,587
8,127
35,650
0.08
%
438.66
%
6,042,396
36,732
27,135
0.61
%
73.87
%
Residential
465,772
6,438
5,453
1.38
%
84.70
%
457,768
6,258
5,578
1.37
%
89.13
%
248,153
7,738
1,912
3.12
%
24.71
%
Manufactured housing
46,990
2,584
4,482
5.50
%
173.45
%
48,570
3,071
4,080
6.32
%
132.86
%
55,635
3,520
4,410
6.33
%
125.28
%
Installment
1,397,895
6,848
71,721
0.49
%
1047.33
%
1,901,070
5,965
111,222
0.31
%
1864.58
%
1,624,415
3,544
98,039
0.22
%
2766.34
%
Total consumer loans receivable
1,910,657
15,870
81,656
0.83
%
514.53
%
2,407,408
15,294
120,880
0.64
%
790.38
%
1,928,203
14,802
104,361
0.77
%
705.05
%
Loans and leases receivable (1)
12,607,742
23,304
130,197
0.18
%
558.69
%
12,212,995
23,421
156,530
0.19
%
668.33
%
7,970,599
51,534
131,496
0.65
%
255.16
%
Loans receivable, PPP
1,154,632
—
—
—
%
—
%
1,570,160
—
—
—
%
—
%
4,957,357
—
—
—
%
—
%
Loans receivable, mortgage warehouse, at fair value
1,569,090
—
—
—
%
—
%
1,874,603
—
—
—
%
—
%
2,557,624
—
—
—
%
—
%
Total loans held for sale
5,224
4,615
—
88.34
%
—
%
6,595
4,643
—
70.40
%
—
%
29,957
507
—
1.69
%
—
%
Total portfolio
$
15,336,688
$
27,919
$
130,197
0.18
%
466.34
%
$
15,664,353
$
28,064
$
156,530
0.18
%
557.76
%
$
15,515,537
$
52,041
$
131,496
0.34
%
252.68
%
(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,
2022
2022
2022
2021
2021
2022
2021
Loan type
Commercial & industrial, including specialty lending
$
2,581
$
(416
)
$
(59
)
$
240
$
116
$
2,106
$
208
Multi-family
—
1,990
(337
)
—
—
1,653
1,132
Commercial real estate owner occupied
—
(42
)
(7
)
66
50
(49
)
183
Commercial real estate non-owner occupied
4,831
159
(8
)
(14
)
943
4,982
874
Construction
(10
)
(103
)
(113
)
(3
)
(3
)
(226
)
(122
)
Residential
(13
)
(39
)
(2
)
(6
)
54
(54
)
82
Installment
11,109
11,932
7,752
7,299
5,944
30,793
23,859
Total net charge-offs (recoveries) from loans held for investment
$
18,498
$
13,481
$
7,226
$
7,582
$
7,104
$
39,205
$
26,216
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED
We believe 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 our 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. The non-GAAP measures presented are not necessarily comparable to non-GAAP measures that may be presented by other financial institutions. 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 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
(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
$
61,364
$
1.85
$
56,519
$
1.68
$
74,896
$
2.18
$
98,647
$
2.87
$
110,241
$
3.25
$
192,779
$
5.72
$
201,487
$
6.02
Reconciling items (after tax):
Net loss from discontinued operations
—
—
—
—
—
—
1,585
0.05
—
—
—
—
38,036
1.14
Severance expense
1,058
0.03
—
—
—
—
—
—
—
—
1,058
0.03
1,517
0.05
Impairments on fixed assets and leases
126
0.00
705
0.02
220
0.01
1,118
0.03
—
—
1,051
0.03
—
—
Merger and acquisition related expenses
—
—
—
—
—
—
—
—
—
—
—
—
320
0.01
Loss on sale of consumer installment loans
18,221
0.55
—
—
—
—
—
—
—
—
18,221
0.54
—
—
Legal reserves
—
—
—
—
—
—
—
—
897
0.03
—
—
897
0.03
(Gains) losses on investment securities
1,859
0.06
2,494
0.07
1,030
0.03
43
0.00
(4,591
)
(0.14
)
5,383
0.16
(26,058
)
(0.78
)
Loss on sale of foreign subsidiaries
—
—
—
—
—
—
—
—
—
—
—
—
2,150
0.06
Loss on cash flow hedge derivative terminations
—
—
—
—
—
—
—
—
—
—
—
—
18,716
0.56
Derivative credit valuation adjustment
(358
)
(0.01
)
(351
)
(0.01
)
(736
)
(0.02
)
(180
)
(0.01
)
(198
)
(0.01
)
(1,445
)
(0.04
)
(1,105
)
(0.03
)
Deposit relationship adjustment fees
—
—
—
—
—
—
—
—
4,707
0.14
—
—
4,707
0.14
Loss on redemption of preferred stock
—
—
—
—
—
—
—
—
2,820
0.08
—
—
2,820
0.08
Core earnings
$
82,270
$
2.48
$
59,367
$
1.77
$
75,410
$
2.20
$
101,213
$
2.95
$
113,876
$
3.36
$
217,047
$
6.44
$
243,487
$
7.27
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Core Earnings, excluding PPP - Customers Bancorp
Nine Months Ended
September 30,
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
(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
$
61,364
$
1.85
$
56,519
$
1.68
$
74,896
$
2.18
$
98,647
$
2.87
$
110,241
$
3.25
$
192,779
$
5.72
$
201,487
$
6.02
Less: PPP net income (after tax)
5,846
0.18
13,066
0.39
24,713
0.72
64,323
1.87
81,337
2.40
43,625
1.29
130,728
3.90
Net income to common shareholders, excluding PPP
55,518
1.67
43,453
1.29
50,183
1.46
34,324
1.00
28,904
0.85
149,154
4.43
70,759
2.11
Reconciling items (after tax):
Net loss from discontinued operations
—
—
—
—
—
—
1,585
0.05
—
—
—
—
38,036
1.14
Severance expense
1,058
0.03
—
—
—
—
—
—
—
—
1,058
0.03
1,517
0.05
Impairments on fixed assets and leases
126
0.00
705
0.02
220
0.01
1,118
0.03
—
—
1,051
0.03
—
—
Merger and acquisition related expenses
—
—
—
—
—
—
—
—
—
—
—
—
320
0.01
Loss on sale of consumer installment loans
18,221
0.55
—
—
—
—
—
—
—
—
18,221
0.54
—
—
Legal reserves
—
—
—
—
—
—
—
—
897
0.03
—
—
897
0.03
(Gains) losses on investment securities
1,859
0.06
2,494
0.07
1,030
0.03
43
0.00
(4,591
)
(0.14
)
5,383
0.16
(26,058
)
(0.78
)
Loss on sale of foreign subsidiaries
—
—
—
—
—
—
—
—
—
—
—
—
2,150
0.06
Loss on cash flow hedge derivative terminations
—
—
—
—
—
—
—
—
—
—
—
—
18,716
0.56
Derivative credit valuation adjustment
(358
)
(0.01
)
(351
)
(0.01
)
(736
)
(0.02
)
(180
)
(0.01
)
(198
)
(0.01
)
(1,445
)
(0.04
)
(1,105
)
(0.03
)
Deposit relationship adjustment fees
—
—
—
—
—
—
—
—
4,707
0.14
—
—
4,707
0.14
Loss on redemption of preferred stock
—
—
—
—
—
—
—
—
2,820
0.08
—
—
2,820
0.08
Core earnings, excluding PPP
$
76,424
$
2.30
$
46,301
$
1.38
$
50,697
$
1.48
$
36,890
$
1.07
$
32,539
$
0.96
$
173,422
$
5.15
$
112,759
$
3.37
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(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 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
GAAP net income
$
63,912
$
58,650
$
76,761
$
100,669
$
116,042
$
199,323
$
213,978
Reconciling items (after tax):
Net loss from discontinued operations
—
—
—
1,585
—
—
38,036
Severance expense
1,058
—
—
—
—
1,058
1,517
Impairments on fixed assets and leases
126
705
220
1,118
—
1,051
—
Merger and acquisition related expenses
—
—
—
—
—
—
320
Loss on sale of consumer installment loans
18,221
—
—
—
—
18,221
—
Legal reserves
—
—
—
—
897
—
897
(Gains) losses on investment securities
1,859
2,494
1,030
43
(4,591
)
5,383
(26,058
)
Loss on sale of foreign subsidiaries
—
—
—
—
—
—
2,150
Loss on cash flow hedge derivative terminations
—
—
—
—
—
—
18,716
Derivative credit valuation adjustment
(358
)
(351
)
(736
)
(180
)
(198
)
(1,445
)
(1,105
)
Deposit relationship adjustment fees
—
—
—
—
4,707
—
4,707
Core net income
$
84,818
$
61,498
$
77,275
$
103,235
$
116,857
$
223,591
$
253,158
Average total assets
$
20,514,366
$
20,056,020
$
19,129,330
$
19,214,241
$
19,739,340
$
19,904,979
$
19,195,114
Core return on average assets
1.64
%
1.23
%
1.64
%
2.13
%
2.35
%
1.50
%
1.76
%
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 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
GAAP net income
$
63,912
$
58,650
$
76,761
$
100,669
$
116,042
$
199,323
$
213,978
Reconciling items:
Income tax expense
17,899
18,896
19,332
12,993
36,263
56,127
73,947
Provision (benefit) for credit losses
(7,994
)
23,847
15,997
13,890
13,164
31,850
13,536
Provision (benefit) for credit losses on unfunded commitments
254
608
(109
)
352
669
753
(572
)
Severance expense
1,363
—
—
—
—
1,363
2,004
Net loss from discontinued operations
—
—
—
1,585
—
—
38,036
Impairments on fixed assets and leases
162
914
286
1,260
—
1,362
—
Merger and acquisition related expenses
—
—
—
—
—
—
418
Loss on sale of consumer installment loans
23,465
—
—
—
—
23,465
—
Legal reserves
—
—
—
—
1,185
—
1,185
(Gains) losses on investment securities
2,394
3,232
1,339
49
(6,063
)
6,965
(34,161
)
Loss on sale of foreign subsidiaries
—
—
—
—
—
—
2,840
Loss on cash flow hedge derivative terminations
—
—
—
—
—
—
24,467
Derivative credit valuation adjustment
(461
)
(455
)
(957
)
(203
)
(261
)
(1,873
)
(1,443
)
Deposit relationship adjustment fees
—
—
—
—
6,216
—
6,216
Adjusted net income - pre-tax pre-provision
$
100,994
$
105,692
$
112,649
$
130,595
$
167,215
$
319,335
$
340,451
Average total assets
$
20,514,366
$
20,056,020
$
19,129,330
$
19,214,241
$
19,739,340
$
19,904,979
$
19,195,114
Adjusted ROAA - pre-tax pre-provision
1.95
%
2.11
%
2.39
%
2.70
%
3.36
%
2.14
%
2.37
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIESRECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Core Return on Average Common Equity - Customers Bancorp
Nine Months Ended
September 30,
(Dollars in thousands except per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
GAAP net income to common shareholders
$
61,364
$
56,519
$
74,896
$
98,647
$
110,241
$
192,779
$
201,487
Reconciling items (after tax):
Net loss from discontinued operations
—
—
—
1,585
—
—
38,036
Severance expense
1,058
—
—
—
—
1,058
1,517
Impairments on fixed assets and leases
126
705
220
1,118
—
1,051
—
Merger and acquisition related expenses
—
—
—
—
—
—
320
Loss on sale of consumer installment loans
18,221
—
—
—
—
18,221
—
Legal reserves
—
—
—
—
897
—
897
(Gains) losses on investment securities
1,859
2,494
1,030
43
(4,591
)
5,383
(26,058
)
Loss on sale of foreign subsidiaries
—
—
—
—
—
—
2,150
Loss on cash flow hedge derivative terminations
—
—
—
—
—
—
18,716
Derivative credit valuation adjustment
(358
)
(351
)
(736
)
(180
)
(198
)
(1,445
)
(1,105
)
Deposit relationship adjustment fees
—
—
—
—
4,707
—
4,707
Loss on redemption of preferred stock
—
—
—
—
2,820
—
2,820
Core earnings
$
82,270
$
59,367
$
75,410
$
101,213
$
113,876
$
217,047
$
243,487
Average total common shareholders' equity
$
1,259,711
$
1,244,819
$
1,252,022
$
1,179,478
$
1,071,566
$
1,252,212
$
998,221
Core return on average common equity
25.91
%
19.13
%
24.43
%
34.04
%
42.16
%
23.17
%
32.61
%
Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp
Nine Months Ended
September 30,
(Dollars in thousands except per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
GAAP net income to common shareholders
$
61,364
$
56,519
$
74,896
$
98,647
$
110,241
$
192,779
$
201,487
Reconciling items:
Income tax expense
17,899
18,896
19,332
12,993
36,263
56,127
73,947
Provision (benefit) for credit losses
(7,994
)
23,847
15,997
13,890
13,164
31,850
13,536
Provision (benefit) for credit losses on unfunded commitments
254
608
(109
)
352
669
753
(572
)
Net loss from discontinued operations
—
—
—
1,585
—
—
38,036
Severance expense
1,363
—
—
—
—
1,363
2,004
Impairments on fixed assets and leases
162
914
286
1,260
—
1,362
—
Merger and acquisition related expenses
—
—
—
—
—
—
418
Loss on sale of consumer installment loans
23,465
—
—
—
—
23,465
—
Legal reserves
—
—
—
—
1,185
—
1,185
(Gains) losses on investment securities
2,394
3,232
1,339
49
(6,063
)
6,965
(34,161
)
Loss on sale of foreign subsidiaries
—
—
—
—
—
—
2,840
Loss on cash flow hedge derivative terminations
—
—
—
—
—
—
24,467
Derivative credit valuation adjustment
(461
)
(455
)
(957
)
(203
)
(261
)
(1,873
)
(1,443
)
Deposit relationship adjustment fees
—
—
—
—
6,216
—
6,216
Loss on redemption of preferred stock
—
—
—
—
2,820
—
2,820
Pre-tax pre-provision adjusted net income available to common shareholders
$
98,446
$
103,561
$
110,784
$
128,573
$
164,234
$
312,791
$
330,780
Average total common shareholders' equity
$
1,259,711
$
1,244,819
$
1,252,022
$
1,179,478
$
1,071,566
$
1,252,212
$
998,221
Adjusted ROCE - pre-tax pre-provision
31.01
%
33.37
%
35.89
%
43.25
%
60.81
%
33.40
%
44.30
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIESRECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Net Interest Margin, Tax Equivalent - Customers Bancorp
Nine Months Ended
September 30,
(Dollars in thousands except per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
GAAP net interest income
$
159,032
$
164,852
$
164,699
$
193,694
$
219,892
$
488,583
$
491,380
Tax-equivalent adjustment
334
270
239
276
290
843
871
Net interest income tax equivalent
$
159,366
$
165,122
$
164,938
$
193,970
$
220,182
$
489,426
$
492,251
Average total interest earning assets
$
20,021,455
$
19,525,936
$
18,572,308
$
18,576,433
$
19,033,826
$
19,378,542
$
18,562,912
Net interest margin, tax equivalent
3.16
%
3.39
%
3.60
%
4.14
%
4.59
%
3.38
%
3.55
%
Net Interest Margin, Tax Equivalent, excluding PPP - Customers Bancorp
Nine Months Ended
September 30,
(Dollars in thousands except per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
GAAP net interest income
$
159,032
$
164,852
$
164,699
$
193,694
$
219,892
$
488,583
$
491,380
PPP net interest income
(9,632
)
(18,946
)
(34,615
)
(78,647
)
(112,005
)
(63,193
)
(182,632
)
Tax-equivalent adjustment
334
270
239
276
290
843
871
Net interest income, tax equivalent, excluding PPP
$
149,734
$
146,176
$
130,323
$
115,323
$
108,177
$
426,233
$
309,619
GAAP average total interest earning assets
$
20,021,455
$
19,525,936
$
18,572,308
$
18,576,433
$
19,033,826
$
19,378,542
$
18,562,912
Average PPP loans
(1,349,403
)
(1,863,429
)
(2,641,318
)
(3,898,607
)
(5,778,367
)
(1,946,651
)
(5,515,819
)
Adjusted average total interest earning assets
$
18,672,052
$
17,662,507
$
15,930,990
$
14,677,826
$
13,255,459
$
17,431,891
$
13,047,093
Net interest margin, tax equivalent, excluding PPP
3.18
%
3.32
%
3.32
%
3.12
%
3.24
%
3.27
%
3.17
%
Loan Yield, excluding PPP
Nine Months Ended
September 30,
(Dollars in thousands except per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
Interest income on loans and leases
$
200,457
$
168,941
$
157,175
$
198,000
$
233,097
$
526,573
$
538,822
PPP interest income
(14,666
)
(20,572
)
(36,894
)
(82,086
)
(117,102
)
(72,132
)
(197,071
)
Interest income on core loans (Loans and leases, excluding PPP)
$
185,791
$
148,369
$
120,281
$
115,914
$
115,995
$
454,441
$
341,751
Average total loans and leases
$
15,653,983
$
14,918,498
$
13,656,991
$
14,335,370
$
16,192,744
$
14,750,473
$
16,004,714
Average PPP loans
(1,349,403
)
(1,863,429
)
(2,641,318
)
(3,898,607
)
(5,778,367
)
(1,946,651
)
(5,515,819
)
Adjusted average total loans and leases
$
14,304,580
$
13,055,069
$
11,015,673
$
10,436,763
$
10,414,377
$
12,803,822
$
10,488,895
Loan yield, excluding PPP
5.15
%
4.56
%
4.43
%
4.41
%
4.42
%
4.75
%
4.36
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIESRECONCILIATION 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 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
2022
2021
GAAP net interest income
$
159,032
$
164,852
$
164,699
$
193,694
$
219,892
$
488,583
$
491,380
GAAP non-interest income
$
(9,017
)
$
12,746
$
21,198
$
16,991
$
25,586
$
24,927
$
60,876
Loss on sale of consumer installment loans
23,465
—
—
—
—
23,465
—
(Gains) losses on investment securities
2,394
3,232
1,339
49
(6,063
)
6,965
(34,161
)
Derivative credit valuation adjustment
(461
)
(455
)
(957
)
(203
)
(261
)
(1,873
)
(1,443
)
Loss on cash flow hedge derivative terminations
—
—
—
—
—
—
24,467
Loss on sale of foreign subsidiaries
—
—
—
—
—
—
2,840
Core non-interest income
16,381
15,523
21,580
16,837
19,262
53,484
52,579
Core revenue
$
175,413
$
180,375
$
186,279
$
210,531
$
239,154
$
542,067
$
543,959
GAAP non-interest expense
$
76,198
$
76,205
$
73,807
$
81,548
$
80,009
$
226,210
$
212,759
Severance expense
(1,363
)
—
—
—
—
(1,363
)
(2,004
)
Impairments on fixed assets and leases
(162
)
(914
)
(286
)
(1,260
)
—
(1,362
)
—
Legal reserves
—
—
—
—
(1,185
)
—
(1,185
)
Merger and acquisition related expenses
—
—
—
—
—
—
(418
)
Deposit relationship adjustment fees
—
—
—
—
(6,216
)
—
(6,216
)
Core non-interest expense
$
74,673
$
75,291
$
73,521
$
80,288
$
72,608
$
223,485
$
202,936
Core efficiency ratio (1)
42.57
%
41.74
%
39.47
%
38.14
%
30.36
%
41.23
%
37.31
%
(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 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
GAAP total shareholders' equity
$
1,386,931
$
1,353,390
$
1,377,406
$
1,366,217
$
1,284,299
Reconciling items:
Preferred stock
(137,794
)
(137,794
)
(137,794
)
(137,794
)
(137,794
)
Goodwill and other intangibles
(3,629
)
(3,629
)
(3,678
)
(3,736
)
(3,794
)
Tangible common equity
$
1,245,508
$
1,211,967
$
1,235,934
$
1,224,687
$
1,142,711
GAAP total assets
$
20,367,621
$
20,251,996
$
19,163,708
$
19,575,028
$
19,108,922
Reconciling items:
Goodwill and other intangibles
(3,629
)
(3,629
)
(3,678
)
(3,736
)
(3,794
)
Tangible assets
$
20,363,992
$
20,248,367
$
19,160,030
$
19,571,292
$
19,105,128
Tangible common equity to tangible assets
6.12
%
5.99
%
6.45
%
6.26
%
5.98
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIESRECONCILIATION 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 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
GAAP total shareholders' equity
$
1,386,931
$
1,353,390
$
1,377,406
$
1,366,217
$
1,284,299
Reconciling items:
Preferred stock
(137,794
)
(137,794
)
(137,794
)
(137,794
)
(137,794
)
Goodwill and other intangibles
(3,629
)
(3,629
)
(3,678
)
(3,736
)
(3,794
)
Tangible common equity
$
1,245,508
$
1,211,967
$
1,235,934
$
1,224,687
$
1,142,711
GAAP total assets
$
20,367,621
$
20,251,996
$
19,163,708
$
19,575,028
$
19,108,922
Loans receivable, PPP
(1,154,632
)
(1,570,160
)
(2,195,902
)
(3,250,008
)
(4,957,357
)
Total assets, excluding PPP
$
19,212,989
$
18,681,836
$
16,967,806
$
16,325,020
$
14,151,565
Reconciling items:
Goodwill and other intangibles
(3,629
)
(3,629
)
(3,678
)
(3,736
)
(3,794
)
Tangible assets, excluding PPP
$
19,209,360
$
18,678,207
$
16,964,128
$
16,321,284
$
14,147,771
Tangible common equity to tangible assets, excluding PPP
6.48
%
6.49
%
7.29
%
7.50
%
8.08
%
Tangible Book Value per Common Share - Customers Bancorp
(Dollars in thousands except share and per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
GAAP total shareholders' equity
$
1,386,931
$
1,353,390
$
1,377,406
$
1,366,217
$
1,284,299
Reconciling Items:
Preferred stock
(137,794
)
(137,794
)
(137,794
)
(137,794
)
(137,794
)
Goodwill and other intangibles
(3,629
)
(3,629
)
(3,678
)
(3,736
)
(3,794
)
Tangible common equity
$
1,245,508
$
1,211,967
$
1,235,934
$
1,224,687
$
1,142,711
Common shares outstanding
32,475,502
32,449,486
32,957,847
32,913,267
32,537,976
Tangible book value per common share
$
38.35
$
37.35
$
37.50
$
37.21
$
35.12
Core Loans (Total Loans and Leases, excluding PPP)
(Dollars in thousands except per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Total loans and leases
$
15,336,688
$
15,664,353
$
14,073,518
$
14,568,885
$
15,515,537
Loans receivable, PPP
(1,154,632
)
(1,570,160
)
(2,195,902
)
(3,250,008
)
(4,957,357
)
Core Loans (Loans and leases, excluding PPP)
$
14,182,056
$
14,094,193
$
11,877,616
$
11,318,877
$
10,558,180
Total loans and leases, excluding loans to mortgage companies and PPP
(Dollars in thousands except per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Total loans and leases
$
15,336,688
$
15,664,353
$
14,073,518
$
14,568,885
$
15,515,537
Loans to mortgage companies
(1,708,587
)
(1,975,189
)
(1,830,121
)
(2,362,438
)
(2,626,483
)
Loans receivable, PPP
(1,154,632
)
(1,570,160
)
(2,195,902
)
(3,250,008
)
(4,957,357
)
Total loans and leases, excluding loans to mortgage companies and PPP
$
12,473,469
$
12,119,004
$
10,047,495
$
8,956,439
$
7,931,697
Total Assets, excluding PPP
(Dollars in thousands except per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Total assets
$
20,367,621
$
20,251,996
$
19,163,708
$
19,575,028
$
19,108,922
Loans receivable, PPP
(1,154,632
)
(1,570,160
)
(2,195,902
)
(3,250,008
)
(4,957,357
)
Total assets, excluding PPP
$
19,212,989
$
18,681,836
$
16,967,806
$
16,325,020
$
14,151,565
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP
(Dollars in thousands except per share data)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Loans and leases receivable
$
13,762,374
$
13,783,155
$
12,314,757
$
12,268,306
$
12,927,956
Loans receivable, PPP
(1,154,632
)
(1,570,160
)
(2,195,902
)
(3,250,008
)
(4,957,357
)
Loans and leases held for investment, excluding PPP
$
12,607,742
$
12,212,995
$
10,118,855
$
9,018,298
$
7,970,599
Allowance for credit losses on loans and leases
$
130,197
$
156,530
$
145,847
$
137,804
$
131,496
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP
1.03
%
1.28
%
1.44
%
1.53
%
1.65
%
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