Customers Bancorp Reports Second Quarter 2021 Results
Customers Bancorp, Inc. (NYSE: CUBI), the parent company of Customers Bank (collectively "Customers" or "CUBI"), today reported second quarter 2021 ("Q2 2021") net income to common shareholders of $58.0 million, or $1.72 per diluted share, up from first quarter 2021 ("Q1 2021") net income to common shareholders of $33.2 million, or $1.01 per diluted share. Q1 2021 results included a net loss from discontinued operations of $38.0 million, which reduced GAAP earnings by $1.16 per diluted share, resulting from the divestiture of BankMobile Technologies, Inc. on January 4, 2021. Core earnings for Q2 2021 totaled $59.3 million, or $1.76 per diluted share compared to Q1 2021 core earnings of $70.3 million, or $2.14 per diluted share (non-GAAP measures). Adjusted pre-tax pre-provision net income was $86.5 million for Q2 2021 compared to $86.8 million for Q1 2021 (non-GAAP measures). Net interest margin, tax equivalent ("NIM") remained stable at 3% for Q2 2021 and Q1 2021. Excluding PPP loans, NIM expanded 31 basis points in Q2 2021 as compared to Q1 2021, largely benefiting from the balance sheet restructuring that occurred in Q1 2021, further reductions in deposit costs and disciplined pricing strategy (non-GAAP measures).
“As the Paycheck Protection Program ("PPP") comes to a close, we couldn't be happier with our overall execution and results in this program,” remarked Customers Bancorp Chairman and CEO, Jay Sidhu. “Not only have we supported hundreds of thousands of small businesses, not-for-profits, and the communities we serve, we leveraged our technology expertise to build valuable fintech partnerships, established hundreds of thousands of new customer accounts ripe for in-house analytics and cross-selling and significantly improved our capital position and tangible book value at the same time. All of this was achieved while decreasing the risk profile of Customers Bank. At June 30, 2021, we have strong capital and reserves, exceptional asset quality and expect to report the highest full year earnings in our company's history. This leaves us very well positioned to support future growth and to redeem a portion of our preferred stock later this year, an EPS enhancing action which was approved by our Board earlier today. We remain optimistic about our future.” Mr. Sidhu concluded.
Key Balance Sheet Trends
Total loans and leases increased $1.7 billion, or 11.0%, to $17.0 billion at June 30, 2021 compared to the year-ago period. PPP loans were $6.3 billion at June 30, 2021, an increase of $1.5 billion compared to the year-ago period, driven by $4.1 billion and $0.2 billion in originations from the new round and earlier rounds of PPP loans, respectively. This increase in PPP loans was offset by $2.8 billion in forgiveness from the earlier rounds of PPP loans. Additionally, the loan mix improved year-over-year as commercial and industrial loans and leases increased $233.2 million to $2.3 billion, commercial real estate owner occupied loans increased $108.9 million to $653.6 million, commercial loans to mortgage companies increased $90.1 million to $2.9 billion, and consumer installment loans increased $319.8 million to $1.6 billion. These increases in loans and leases were partially offset by decreases in multi-family loans of $526.1 million to $1.5 billion, commercial real estate non-owner occupied loans of $55.7 million to $1.2 billion and residential mortgages of $79.4 million to $273.5 million. “Looking ahead, we see continued growth in core C&I and consumer loans offsetting some of the expected decreases in loans to mortgage companies in the second half of this year," stated Sidhu.
Total deposits increased $2.9 billion, or 26.5%, to $13.9 billion at June 30, 2021 compared to the year-ago period. Total demand deposits increased $2.4 billion, or 51.9%, to $6.9 billion, money market deposits increased $1.5 billion, or 44.2%, to $4.9 billion, and savings deposits increased $287.0 million, or 25.1%, to $1.4 billion. These increases were offset, in part, by a decrease in time deposits of $1.2 billion, or 66.5%, to $627.2 million. The total cost of deposits declined by 44 basis points to 0.47% in Q2 2021 from 0.91% in the year-ago quarter. At July 15, 2021, the spot cost of deposits was 0.44%. "We expect our deposit costs to be at or below 40 basis points by September 30, 2021," stated Sidhu.
Very Strong Growth in Tangible Common Equity and Tangible Book Value Per Share
Customers experienced significant improvements in regulatory capital ratios in Q2 2021 as compared to a year ago. Customers Bancorp's tangible common equity (a non-GAAP measure) increased by $253.6 million to $1.0 billion at June 30, 2021 from $775.8 million at June 30, 2020, and the tangible book value per common share (a non-GAAP measure) increased to $31.82 at June 30, 2021 from $24.62 at June 30, 2020, an increase of 29.2%. Customers remains well capitalized by all regulatory measures, leaving us well positioned to redeem a portion of the preferred stock prior to year end subject to routine and customary regulatory approval. 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 (a non-GAAP measure), were 13.2% and 7.7%, respectively, at June 30, 2021. At March 31, 2021, Customers Bancorp's total risk based capital ratio and TCE ratio, excluding PPP loans (a non-GAAP measure), were 12.4% and 7.1%, respectively." As a consequence of PPP related income and a potential cyclical decline in mortgage warehouse loans, we expect our capital levels to increase sharply in the second half of 2021 with the TCE ratio excluding PPP loans to be close to 9% by December 31, 2021," commented Customers Bancorp CFO, Carla Leibold.
Loan Portfolio Management During the COVID-19 Crisis
Over the last decade, Customers has developed a suite of commercial and retail loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s C&I, mortgage warehouse, specialty finance 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 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, Customers employs a bottom-up data driven approach to analyze its commercial portfolio.
Strong commercial loan portfolio with very low concentration in COVID-19 impacted industries and CRE
Total commercial deferments declined to $89.8 million, or 0.8% of total loans and leases, excluding PPP loans (a non-GAAP measure), at June 30, 2021, down from $176.1 million, or 1.6% of total loans and leases, excluding PPP loans, at March 31, 2021. Customers' commercial deferments peaked at about $1.2 billion in July 2020. Exposure to industry segments significantly impacted by COVID-19 is not substantial. At June 30, 2021, Customers had $82.8 million in energy and utilities exposure (with no deferments); $62.0 million in colleges and universities (with no deferments); $62.2 million in CRE retail sales exposure (mostly auto sales; with no deferments); $29.9 million in franchise restaurants and dining (with no deferments); and $26.1 million in entertainment only businesses (with no deferments). At June 30, 2021, the hospitality portfolio was $399.3 million, or 3.8% of total loans and leases, excluding PPP loans, with $59.2 million in deferment. Approximately 79.5% ($317.4 million) represents “flagged” facilities, with the majority of the non-flagged being high-end destination hotels in Cape May (NJ), Avalon (NJ), and Long Island (NY). We believe the majority of the hotels have sufficient cash resources to get through the COVID-19 crisis. At June 30, 2021, the healthcare portfolio was approximately $460 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 a weighted average loan to value of 61.7% as of quarter-end. 55.77% of the portfolio was in New York City, of which 70.53% was in rent controlled/regulated properties. As of June 30, 2021, no deferments have been requested. At June 30, 2021, investment CRE had a weighted average loan to value of 63.2%, with approximately 52% of the portfolio housed in New York, Philadelphia and surrounding markets. As of June 30, 2021, $4.4 million of the portfolio was on deferment, with minimal exposure to the office market.Consumer installment, mortgage and home equity loan portfolios continue to perform well
Total consumer-related deferments declined to $8.4 million, or 0.1% of total loans and leases, excluding PPP loans (a non-GAAP measure), at June 30, 2021, down from $13.0 million at March 31, 2021. The $1.6 billion consumer installment loan portfolio outperformed industry peers with deferments dropping to 0.31% and 30+ day delinquency at only 0.66%. Strong credit quality (avg. FICO at origination: 740), low concentration in at-risk job segments, and outstanding performance of CB Direct originations have resulted in solid results through the end of Q2 2021. The consumer installment portfolio has been managed to moderate growth and strengthening credit quality, by replacing run-off with CB Direct originations with higher FICO scores.Key Profitability Trends
Net Interest Income
Net interest income totaled $138.8 million in Q2 2021, an increase of $6.0 million from Q1 2021, primarily due to a $755.1 million net increase in average interest-earning assets and a decrease in the cost of interest-bearing liabilities. Interest-earning asset growth was driven by increases in consumer loans and the latest round of PPP loans, offset in part by PPP loan forgiveness from the first two rounds, which accelerated the recognition of net deferred loan origination fees, and decreases in commercial loans to mortgage companies and multi-family loans. Compared to Q1 2021, total loan yields decreased 28 basis points to 3.74%. The decrease is attributable to lower yields on commercial and industrial loans and leases, increased originations of PPP loans in the latest round and lower forgiveness of PPP loans from the first two rounds, offset in part by higher yields on consumer loans. Total borrowing costs decreased by 23 basis points to 0.77% primarily due to the balance sheet restructuring completed in Q1 2021 and lower utilization of the FRB PPP Liquidity Facility, costing 0.35%, due to the PPP loan forgiveness from the first two rounds and excess cash available to fund additional PPP round 3 originations. FHLB advances and federal funds purchased were also paid off during Q2 2021 due to sufficient liquidity. "It is difficult to predict net interest income in future periods because the timing of PPP forgiveness results in the accelerated recognition of net deferred fees and also affects the amount of net interest income expected to be earned while the PPP loans are held on our balance sheet," commented Mr. Sidhu.
Provision for Credit Losses
The provision for credit losses on loans and leases in Q2 2021 was $3.3 million, compared to a $2.9 million benefit (release) in Q1 2021. The provision in Q2 2021 primarily resulted from an increase in provision for consumer installment loans from continued growth, offset in part by the benefit (release) to the provision for commercial loans resulting from continuing improvement in forecasts of macroeconomic conditions since Q4 2020. The allowance for credit losses on loans and leases represented 1.6% of total loans and leases receivable, excluding PPP loans (a non-GAAP measure) at June 30, 2021, compared to 1.7% at March 31, 2021, and 2.2% at June 30, 2020. Customers' non-performing loans at June 30, 2021 were only 0.27% of total loans and leases, a significant improvement from 0.56% at June 30, 2020.
Non-Interest Income
Non-interest income totaled $16.8 million for Q2 2021, a decrease of $1.6 million compared to Q1 2021. The decrease in non-interest income primarily resulted from decreases of $21.8 million in gain on sale of investment securities and $3.0 million in unrealized gain on derivatives, offset in part by a $24.5 million decrease in loss on cash flow hedge derivative terminations recorded in Q1 2021. In Q2 2021, the change in the fair value of foreign equity securities and the sale of the foreign subsidiaries that held those securities resulted in a net loss of $1.1 million.
Non-Interest Expense
Non-interest expense totaled $70.8 million for Q2 2021, an increase of $8.9 million compared to Q1 2021. The increase was primarily due to approximately $2.5 million of compensation expense associated with an executive's retirement and other one-time benefits, $2.4 million of increased PPP-related costs primarily due to outside professional services used to support the PPP forgiveness process and our participation in the latest round of PPP, increased consumer installment servicing expense of $1.0 million, increased stock-based compensation of $0.9 million related to new awards, and a benefit (release) to credit losses for unfunded commitments of $1.3 million recorded in Q1 2021. "Looking ahead, we expect non-interest expenses to be lower in Q3 2021," stated Ms. Leibold.
Taxes
Income tax expense from continuing operations increased by $2.5 million to $20.1 million in Q2 2021 from $17.6 million in Q1 2021 primarily due to an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes, along with an increase in projected pre-tax income from continuing operations. Customers expects the full-year 2021 effective tax rate from continuing operations to be approximately 23% to 25%, which is comparable to previous years.
Net Loss From Discontinued Operations
The divestiture of BankMobile Technologies, Inc. was completed on January 4, 2021, and its historical financial results are presented as discontinued operations.
Outlook
“Looking ahead, we are very optimistic about the prospects of our company. The best in class tech agility of Customers Bancorp has allowed us to be a major participant in the third round of PPP and to incubate new lines of businesses that leverage our fintech relationships. We expect to launch a private real-time, blockchain-based B2B payments platform with integration of digital and legacy payment rails. The platform will deliver enhanced payments functionality for our business clients and is expected to generate additional deposit growth in targeted niches, such as real estate, monetary and currency exchanges and institutional investments. We also expect our tangible common equity and regulatory capital levels to achieve targeted levels within the next 12 months and our credit quality to remain in line with or better than peers. The financial benefits of PPP aside, we project our recurring earnings power to expand to at least the $4.00 level during 2021 and 2022 and expect to achieve $6.00 in core EPS in 2025 rather than 2026,” concluded Mr. Sidhu.
Our updated financial guidance is as follows:
Loan growth, excluding PPP and mortgage warehouse balances, is expected to average in the mid-to-high single digits over the next several quarters. The balance of commercial loans to mortgage companies is expected to decline to $1.6 billion - $2.4 billion at December 31, 2021. The Total Capital Ratio is expected to be about 14.0% by year-end 2021. The TCE ratio excluding PPP loans is expected to be close to 9.0% by year-end 2021. We project the NIM, excluding PPP loans, to remain within the 3.25% - 3.50% range for the second half of 2021. We project an effective tax rate from continuing operations for 2021 of 23.0% - 25.0%. We now expect to earn at least $6.00 in core EPS in 2021 and 2022. Our core EPS guidance includes the net interest income expected to be earned on the PPP loans. Excluding PPP loans, we expect to earn at least $4 in core EPS in 2021 and 2022 and expect to achieve $6 in core EPS by 2025 rather than 2026.2021 NIM expansion is expected to be achieved by:
Remixing the loan portfolio away from commercial loans to mortgage companies toward other C&I categories and consumer installment loans. Restructuring of the asset and liability side of the balance sheet that was completed in Q1 2021. Bringing our total cost of deposits down to around 35 basis points by year-end 2021.Webcast
Date:
Thursday, July 29, 2021
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 2nd Quarter Earnings Webcast.
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 Bancorp Investor Relations page and available beginning approximately two hours after the conclusion of the live event.
Institutional Background
Customers Bancorp, Inc. (NYSE:CUBI) is a bank holding company located in West Reading, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank, a full-service bank with $19.6 billion in assets at June 30, 2021. 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 and lending services to small and medium-sized businesses, professionals, individuals and families. Services and products are available wherever permitted by law through mobile-first apps, online portals, and a network of offices and branches.
“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 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; 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, 2020, 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.
Q2 2021 Overview
The following table presents a summary of key earnings and performance metrics for the quarter ended June 30, 2021 and the preceding four quarters:
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
EARNINGS SUMMARY - UNAUDITED
(Dollars in thousands, except per share data and stock price data)
Q2
Q1
Q4
Q3
Q2
Six Months Ended
June 30,
2021
2021
2020
2020
2020
2021
2020
GAAP Profitability Metrics:
Net income available to common shareholders
(from continuing and discontinued operations)
$
58,042
$
33,204
$
52,831
$
47,085
$
19,137
$
91,246
$
18,621
Per share amounts:
Earnings per share - basic
$
1.80
$
1.04
$
1.67
$
1.49
$
0.61
$
2.84
$
0.59
Earnings per share - diluted
$
1.72
$
1.01
$
1.65
$
1.48
$
0.61
$
2.74
$
0.59
Book value per common share (1)
$
31.94
$
30.13
$
28.37
$
26.43
$
25.08
$
31.94
$
25.08
CUBI stock price (1)
$
38.99
$
31.82
$
18.18
$
11.20
$
12.02
$
38.99
$
12.02
CUBI stock price as % of book value (1)
122
%
106
%
64
%
42
%
48
%
122
%
48
%
Average shares outstanding - basic
32,279,625
31,883,946
31,638,447
31,517,504
31,477,591
32,082,878
31,434,371
Average shares outstanding - diluted
33,741,468
32,841,711
31,959,100
31,736,311
31,625,771
33,294,075
31,625,669
Shares outstanding (1)
32,353,256
32,238,762
31,705,088
31,555,124
31,510,287
32,353,256
31,510,287
Return on average assets ("ROAA")
1.27
%
0.80
%
1.23
%
1.12
%
0.62
%
1.04
%
0.40
%
Return on average common equity ("ROCE")
23.22
%
14.66
%
24.26
%
23.05
%
9.97
%
19.15
%
4.74
%
Efficiency ratio
46.59
%
48.89
%
43.56
%
46.76
%
50.73
%
47.64
%
52.52
%
Non-GAAP Profitability Metrics (2):
Core earnings
$
59,303
$
70,308
$
54,588
$
38,439
$
21,413
$
129,611
$
26,499
Adjusted pre-tax pre-provision net income
$
86,467
$
86,769
$
77,896
$
64,146
$
53,931
$
173,236
$
98,154
Per share amounts:
Core earnings per share - diluted
$
1.76
$
2.14
$
1.71
$
1.21
$
0.68
$
3.89
$
0.84
Tangible book value per common share (1)
$
31.82
$
30.01
$
27.92
$
25.97
$
24.62
$
31.82
$
24.62
CUBI stock price as % of tangible book value (1)
123
%
106
%
65
%
43
%
49
%
123
%
49
%
Core ROAA
1.30
%
1.61
%
1.26
%
0.93
%
0.68
%
1.45
%
0.52
%
Core ROCE
23.72
%
31.03
%
25.06
%
18.82
%
11.16
%
27.20
%
6.75
%
Adjusted ROAA - pre-tax and pre-provision
1.80
%
1.90
%
1.70
%
1.43
%
1.48
%
1.85
%
1.50
%
Adjusted ROCE - pre-tax and pre-provision
33.27
%
36.80
%
34.20
%
29.73
%
26.24
%
34.95
%
23.16
%
Net interest margin, tax equivalent
2.98
%
3.00
%
2.78
%
2.50
%
2.65
%
2.99
%
2.80
%
Net interest margin, tax equivalent, excluding PPP loans
3.30
%
2.99
%
3.04
%
2.86
%
2.97
%
3.14
%
2.98
%
Core efficiency ratio
44.33
%
41.13
%
42.89
%
46.10
%
47.84
%
42.76
%
50.25
%
Asset Quality:
Net charge-offs
$
6,591
$
12,521
$
8,472
$
17,299
$
10,325
$
19,112
$
29,035
Annualized net charge-offs to average total loans and leases
0.16
%
0.33
%
0.21
%
0.45
%
0.32
%
0.24
%
0.52
%
Non-performing loans ("NPLs") to total loans and leases (1)
0.27
%
0.30
%
0.45
%
0.38
%
0.56
%
0.27
%
0.56
%
Reserves to NPLs (1)
269.96
%
264.21
%
204.48
%
244.70
%
185.36
%
269.96
%
185.36
%
Non-performing assets ("NPAs") to total assets
0.24
%
0.26
%
0.39
%
0.34
%
0.48
%
0.24
%
0.48
%
Customers Bank Capital Ratios (3):
Common equity Tier 1 capital to risk-weighted assets
12.35
%
11.75
%
10.62
%
10.12
%
10.64
%
12.35
%
10.64
%
Tier 1 capital to risk-weighted assets
12.35
%
11.75
%
10.62
%
10.12
%
10.64
%
12.35
%
10.64
%
Total capital to risk-weighted assets
13.72
%
13.11
%
12.06
%
11.62
%
12.30
%
13.72
%
12.30
%
Tier 1 capital to average assets (leverage ratio)
9.07
%
9.35
%
9.21
%
9.29
%
9.59
%
9.07
%
9.59
%
(1)
Metric is a spot balance for the last day of each quarter presented.
(2)
Non-GAAP measures exclude net loss from discontinued operations, loss on sale of foreign subsidiaries, unrealized gains (losses) on loans held for sale, investment securities gains and losses, loss on cash flow hedge derivative terminations, 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, goodwill and intangible assets, and PPP loans. 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 Q2 2021 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 Q2 2021 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)
Six Months Ended
Q2
Q1
Q4
Q3
Q2
June 30,
2021
2021
2020
2020
2020
2021
2020
Interest income:
Loans and leases
$
153,608
$
152,117
$
145,414
$
132,107
$
118,447
$
305,725
$
234,527
Investment securities
8,327
7,979
6,777
6,297
6,155
16,306
11,132
Other
946
1,019
902
1,246
616
1,965
4,902
Total interest income
162,881
161,115
153,093
139,650
125,218
323,996
250,561
Interest expense:
Deposits
15,653
15,658
16,107
18,347
23,238
31,311
57,591
FHLB advances
963
5,192
5,749
5,762
4,736
6,155
10,127
Subordinated debt
2,689
2,689
2,688
2,689
2,689
5,378
5,378
FRB PPP liquidity facility, federal funds purchased and other borrowings
4,819
4,845
5,603
5,413
2,573
9,664
4,163
Total interest expense
24,124
28,384
30,147
32,211
33,236
52,508
77,259
Net interest income
138,757
132,731
122,946
107,439
91,982
271,488
173,302
Provision (benefit) for credit losses on loans and leases
3,291
(2,919)
(2,913)
12,955
20,946
372
52,732
Net interest income after provision (benefit) for credit losses on loans and leases
135,466
135,650
125,859
94,484
71,036
271,116
120,570
Non-interest income:
Interchange and card revenue
84
85
91
92
193
169
463
Deposit fees
891
863
823
650
502
1,754
1,054
Commercial lease income
5,311
5,205
4,853
4,510
4,508
10,516
8,776
Bank-owned life insurance
2,765
1,679
1,744
1,746
1,757
4,444
3,519
Mortgage warehouse transactional fees
3,265
4,247
3,681
3,320
2,582
7,512
4,533
Gain (loss) on sale of SBA and other loans
1,900
1,575
1,689
286
23
3,475
34
Mortgage banking income (loss)
386
463
346
1,013
38
849
334
Gain (loss) on sale of investment securities
1,812
23,566
44
11,707
4,353
25,378
8,328
Unrealized gain (loss) on investment securities
1,746
974
1,387
238
1,200
2,720
(178)
Loss on sale of foreign subsidiaries
(2,840)
—
—
—
—
(2,840)
—
Unrealized gain (loss) on derivatives
(439)
2,537
804
549
(4,158)
2,098
(5,304)
Loss on cash flow hedge derivative terminations
—
(24,467)
—
—
—
(24,467)
—
Other
1,941
1,741
621
753
713
3,682
1,312
Total non-interest income
16,822
18,468
16,083
24,864
11,711
35,290
22,871
Non-interest expense:
Salaries and employee benefits
28,023
23,971
25,600
24,752
23,192
51,994
43,716
Technology, communication and bank operations
19,618
19,988
16,021
13,005
11,103
39,606
21,642
Professional services
8,234
6,289
5,449
4,421
2,974
14,523
6,519
Occupancy
2,482
2,621
2,742
3,368
2,639
5,103
5,252
Commercial lease depreciation
4,415
4,291
3,982
3,663
3,643
8,706
7,070
FDIC assessments, non-income taxes and regulatory fees
2,602
2,719
2,642
3,784
2,368
5,321
5,235
Merger and acquisition related expenses
—
418
709
658
—
418
—
Loan workout
102
(261)
123
846
1,808
(159)
2,175
Advertising and promotion
313
561
—
—
372
874
1,795
Other
5,034
1,330
2,665
1,788
1,692
6,364
5,354
Total non-interest expense
70,823
61,927
59,933
56,285
49,791
132,750
98,758
Income before income tax expense
81,465
92,191
82,009
63,063
32,956
173,656
44,683
Income tax expense
20,124
17,560
23,447
12,016
7,980
37,684
11,254
Net income from continuing operations
61,341
74,631
58,562
51,047
24,976
135,972
33,429
Loss from discontinued operations before income taxes
—
(20,354)
(3,539)
(347)
(3,190)
(20,354)
(9,911)
Income tax expense (benefit) from discontinued operations
—
17,682
(1,222)
185
(932)
17,682
(2,299)
Net loss from discontinued operations
—
(38,036)
(2,317)
(532)
(2,258)
(38,036)
(7,612)
Net income
61,341
36,595
56,245
50,515
22,718
97,936
25,817
Preferred stock dividends
3,299
3,391
3,414
3,430
3,581
6,690
7,196
Net income available to common shareholders
$
58,042
$
33,204
$
52,831
$
47,085
$
19,137
$
91,246
$
18,621
Basic earnings per common share from continuing operations
$
1.80
$
2.23
$
1.74
$
1.51
$
0.68
$
4.03
$
0.83
Basic earnings per common share
$
1.80
$
1.04
$
1.67
$
1.49
$
0.61
$
2.84
$
0.59
Diluted earnings per common share from continuing operations
$
1.72
$
2.17
$
1.73
$
1.50
$
0.68
$
3.88
$
0.83
Diluted earnings per common share
$
1.72
$
1.01
$
1.65
$
1.48
$
0.61
$
2.74
$
0.59
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - UNAUDITED
(Dollars in thousands)
June 30,
March 31,
December 31,
September 30,
June 30,
2021
2021
2020
2020
2020
ASSETS
Cash and due from banks
$
36,837
$
3,123
$
78,090
$
5,822
$
44,577
Interest earning deposits
393,663
512,241
615,264
325,594
1,022,753
Cash and cash equivalents
430,500
515,364
693,354
331,416
1,067,330
Investment securities, at fair value
1,526,792
1,441,904
1,210,285
1,133,831
681,382
Loans held for sale
34,540
46,106
79,086
26,689
464,164
Loans receivable, mortgage warehouse, at fair value
2,855,284
3,407,622
3,616,432
3,913,593
2,793,164
Loans receivable, PPP
6,305,056
5,178,089
4,561,365
4,964,105
4,760,427
Loans and leases receivable
7,772,142
7,536,489
7,575,368
7,700,892
7,272,447
Allowance for credit losses on loans and leases
(125,436)
(128,736)
(144,176)
(155,561)
(159,905)
Total loans and leases receivable, net of allowance for credit losses on loans and leases
16,807,046
15,993,464
15,608,989
16,423,029
14,666,133
FHLB, Federal Reserve Bank, and other restricted stock
39,895
69,420
71,368
70,387
91,023
Accrued interest receivable
90,009
83,186
80,412
65,668
49,911
Bank premises and equipment, net
10,391
10,943
11,225
11,308
7,879
Bank-owned life insurance
329,421
281,923
280,067
277,826
275,842
Goodwill and other intangibles
3,853
3,911
3,969
4,028
4,086
Other assets
362,661
371,439
338,438
354,010
512,209
Assets of discontinued operations
—
—
62,055
80,535
83,159
Total assets
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
$
17,903,118
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand, non-interest bearing deposits
$
2,699,869
$
2,687,628
$
2,356,998
$
2,327,017
$
1,879,789
Interest bearing deposits
11,174,070
9,784,812
8,952,931
8,512,060
9,086,086
Total deposits
13,873,939
12,472,440
11,309,929
10,839,077
10,965,875
Federal funds purchased
—
365,000
250,000
680,000
—
FHLB advances
—
850,000
850,000
850,000
850,000
Other borrowings
124,240
124,138
124,037
123,935
123,833
Subordinated debt
181,534
181,464
181,394
181,324
181,255
FRB PPP liquidity facility
3,865,865
3,284,156
4,415,016
4,811,009
4,419,967
Accrued interest payable and other liabilities
338,801
351,741
152,082
185,927
296,192
Liabilities of discontinued operations
—
—
39,704
55,964
58,149
Total liabilities
18,384,379
17,628,939
17,322,162
17,727,236
16,895,271
Preferred stock
217,471
217,471
217,471
217,471
217,471
Common stock
33,634
33,519
32,986
32,836
32,791
Additional paid in capital
519,294
515,318
455,592
452,965
450,665
Retained earnings
496,844
438,802
438,581
385,750
338,665
Accumulated other comprehensive income (loss)
5,266
5,391
(5,764)
(15,751)
(9,965)
Treasury stock, at cost
(21,780)
(21,780)
(21,780)
(21,780)
(21,780)
Total shareholders' equity
1,250,729
1,188,721
1,117,086
1,051,491
1,007,847
Total liabilities & shareholders' equity
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
$
17,903,118
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED
(Dollars in thousands)
Three Months Ended
June 30, 2021
March 31, 2021
June 30, 2020
Average
Balance
Average
Yield or
Cost (%)
Average
Balance
Average
Yield or
Cost (%)
Average
Balance
Average
Yield or
Cost (%)
Assets
Interest earning deposits
$
646,342
0.12%
$
1,177,315
0.10%
$
384,622
0.12%
Investment securities (1)
1,512,644
2.20%
1,357,558
2.35%
705,389
3.49%
Loans and leases:
Commercial loans to mortgage companies
2,737,629
3.09%
3,122,098
3.09%
2,456,067
2.91%
Multi-family loans
1,551,370
3.88%
1,689,174
3.80%
2,009,847
3.87%
Commercial and industrial loans and leases (2)
2,878,045
3.59%
2,848,328
3.97%
2,460,060
4.05%
Loans receivable, PPP
6,133,184
2.69%
4,623,213
3.41%
2,754,920
1.71%
Non-owner occupied commercial real estate loans
1,368,695
3.86%
1,348,938
3.85%
1,392,131
3.81%
Residential mortgages
346,284
3.62%
373,497
3.78%
429,609
3.53%
Installment loans
1,467,595
9.37%
1,323,863
9.04%
1,288,999
8.72%
Total loans and leases (3)
16,482,802
3.74%
15,329,111
4.02%
12,791,633
3.72%
Other interest-earning assets
57,208
5.32%
79,960
3.64%
98,377
2.06%
Total interest-earning assets
18,698,996
3.49%
17,943,944
3.64%
13,980,021
3.60%
Non-interest-earning assets
607,952
581,777
616,683
Assets of discontinued operations
—
—
78,880
Total assets
$
19,306,948
$
18,525,721
$
14,675,584
Liabilities
Interest checking accounts
$
3,503,242
0.76%
$
2,691,723
0.84%
$
2,482,222
0.75%
Money market deposit accounts
4,859,614
0.47%
4,435,930
0.55%
3,034,457
0.85%
Other savings accounts
1,456,777
0.57%
1,414,350
0.69%
1,177,554
1.94%
Certificates of deposit
658,698
0.78%
666,239
0.97%
1,734,062
1.51%
Total interest-bearing deposits (4)
10,478,331
0.60%
9,208,242
0.69%
8,428,295
1.11%
FRB PPP liquidity facility
3,858,733
0.35%
3,941,718
0.35%
942,258
0.35%
Borrowings
531,757
3.85%
1,171,826
3.23%
2,282,761
1.62%
Total interest-bearing liabilities
14,868,821
0.65%
14,321,786
0.80%
11,653,314
1.15%
Non-interest-bearing deposits (4)
2,889,781
2,819,871
1,890,955
Total deposits and borrowings
17,758,602
0.54%
17,141,657
0.67%
13,544,269
0.99%
Other non-interest-bearing liabilities
328,251
247,798
88,913
Liabilities of discontinued operations
—
—
53,268
Total liabilities
18,086,853
17,389,455
13,686,450
Shareholders' equity
1,220,095
1,136,266
989,134
Total liabilities and shareholders' equity
$
19,306,948
$
18,525,721
$
14,675,584
Interest spread
2.95%
2.97%
2.61%
Net interest margin
2.98%
3.00%
2.65%
Net interest margin tax equivalent (5)
2.98%
3.00%
2.65%
Net interest margin tax equivalent excl. PPP (6)
3.30%
2.99%
2.97%
(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 0.47%, 0.53% and 0.91% for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.
(5)
Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, 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 June 30, 2021, March 31, 2021 and June 30, 2020, 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)
Six Months Ended
June 30, 2021
June 30, 2020
Average
Balance
Average Yield
or Cost (%)
Average
Balance
Average Yield
or Cost (%)
Assets
Interest earning deposits
$
910,362
0.11%
$
578,435
1.03%
Investment securities (1)
1,435,529
2.27%
635,838
3.50%
Loans and leases:
Commercial loans to mortgage companies
2,928,802
3.09%
2,148,863
3.30%
Multi-family loans
1,619,891
3.84%
2,111,853
3.97%
Commercial and industrial loans and leases (2)
2,863,268
3.78%
2,460,435
4.37%
Loans receivable, PPP
5,382,370
3.00%
1,377,460
1.71%
Non-owner occupied commercial real estate loans
1,358,871
3.86%
1,363,795
4.07%
Residential mortgages
359,815
3.71%
437,782
3.75%
Installment loans
1,396,126
9.22%
1,274,024
8.93%
Total loans and leases (3)
15,909,143
3.88%
11,174,212
4.22%
Other interest-earning assets
68,521
4.34%
89,890
4.31%
Total interest-earning assets
18,323,555
3.56%
12,478,375
4.04%
Non-interest-earning assets
594,936
565,304
Assets of discontinued operations
—
80,816
Total assets
$
18,918,491
$
13,124,495
Liabilities
Interest checking accounts
$
3,099,725
0.80%
$
1,888,160
0.98%
Money market deposit accounts
4,648,942
0.51%
3,335,006
1.37%
Other savings accounts
1,435,681
0.63%
1,159,479
1.99%
Certificates of deposit
662,447
0.87%
1,629,416
1.76%
Total interest-bearing deposits (4)
9,846,795
0.64%
8,012,061
1.45%
FRB PPP liquidity facility
3,899,996
0.35%
471,129
0.35%
Borrowings
850,024
3.42%
1,756,080
2.16%
Total interest-bearing liabilities
14,596,815
0.72%
10,239,270
1.52%
Non-interest-bearing deposits (4)
2,855,019
1,732,163
Total deposits and borrowings
17,451,834
0.61%
11,971,433
1.30%
Other non-interest-bearing liabilities
288,246
92,218
Liabilities of discontinued operations
—
53,600
Total liabilities
17,740,080
12,117,251
Shareholders' equity
1,178,411
1,007,244
Total liabilities and shareholders' equity
$
18,918,491
$
13,124,495
Interest spread
2.96%
2.74%
Net interest margin
2.99%
2.79%
Net interest margin tax equivalent (5)
2.99%
2.80%
Net interest margin tax equivalent excl. PPP (6)
3.14%
2.98%
(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 0.50% and 1.19% for the six months ended June 30, 2021 and 2020, respectively.
(5)Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the six months ended June 30, 2021 and 2020, 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 six months ended June 30, 2021 and 2020, 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 SUBSIDIARIESPERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED
(Dollars in thousands)
June 30,
March 31,
December 31,
September 30,
June 30,
2021
2021
2020
2020
2020
Commercial:
Multi-family
$
1,497,485
$
1,659,529
$
1,761,301
$
1,950,300
$
2,023,571
Loans to mortgage companies
2,922,217
3,463,490
3,657,350
3,947,828
2,832,112
Commercial & industrial
2,293,723
2,164,784
2,304,206
2,186,480
2,060,494
Commercial real estate owner occupied
653,649
590,093
572,338
557,595
544,772
Loans receivable, PPP
6,305,056
5,178,089
4,561,365
4,964,105
4,760,427
Commercial real estate non-owner occupied
1,206,646
1,194,832
1,213,815
1,233,882
1,262,373
Construction
179,198
156,837
140,905
122,963
128,834
Total commercial loans and leases
15,057,974
14,407,654
14,211,280
14,963,153
13,612,583
Consumer:
Residential
273,493
295,654
323,322
343,775
352,941
Manufactured housing
57,904
59,977
62,243
64,638
66,865
Installment
1,577,651
1,405,021
1,235,406
1,233,713
1,257,813
Total consumer loans
1,909,048
1,760,652
1,620,971
1,642,126
1,677,619
Total loans and leases
$
16,967,022
$
16,168,306
$
15,832,251
$
16,605,279
$
15,290,202
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END DEPOSIT COMPOSITION - UNAUDITED
(Dollars in thousands)
June 30,
March 31,
December 31,
September 30,
June 30,
2021
2021
2020
2020
2020
Demand, non-interest bearing
$
2,699,869
$
2,687,628
$
2,356,998
$
2,327,017
$
1,879,789
Demand, interest bearing
4,206,355
3,228,941
2,384,691
2,308,627
2,666,209
Total demand deposits
6,906,224
5,916,569
4,741,689
4,635,644
4,545,998
Savings
1,431,756
1,483,482
1,314,817
1,173,641
1,144,788
Money market
4,908,809
4,406,508
4,601,492
4,057,366
3,404,709
Time deposits
627,150
665,881
651,931
972,426
1,870,380
Total deposits
$
13,873,939
$
12,472,440
$
11,309,929
$
10,839,077
$
10,965,875
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY - UNAUDITED
(Dollars in thousands)
As of June 30, 2021
As of March 31, 2021
As of June 30, 2020
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
$
1,497,485
$
21,595
$
5,028
1.44
%
23.28
%
$
1,640,278
$
20,530
$
8,026
1.25
%
39.09
%
$
1,581,839
$
7,013
$
14,697
0.44
%
209.57
%
Commercial & industrial(1)
2,360,656
6,717
8,127
0.28
%
120.99
%
2,220,652
7,544
7,503
0.34
%
99.46
%
2,099,442
9,974
12,302
0.48
%
123.34
%
Commercial real estate owner occupied
653,649
2,688
4,464
0.41
%
166.07
%
590,093
3,242
5,935
0.55
%
183.07
%
544,772
4,022
11,405
0.74
%
283.57
%
Commercial real estate non-owner occupied
1,206,646
—
7,374
—
%
—
%
1,194,832
2,356
11,621
0.20
%
493.25
%
1,244,773
30,257
26,493
2.43
%
87.56
%
Construction
179,198
—
2,643
—
%
—
%
156,837
—
4,103
—
%
—
%
128,834
—
5,297
—
%
—
%
Total commercial loans and leases receivable
5,897,634
31,000
27,636
0.53
%
89.15
%
5,802,692
33,672
37,188
0.58
%
110.44
%
5,599,660
51,266
70,194
0.92
%
136.92
%
Residential
266,911
8,991
2,299
3.37
%
25.57
%
293,805
9,353
3,209
3.18
%
34.31
%
348,109
7,857
4,550
2.26
%
57.91
%
Manufactured housing
57,904
3,239
4,372
5.59
%
134.98
%
59,977
2,871
4,799
4.79
%
167.15
%
66,865
3,331
6,014
4.98
%
180.55
%
Installment
1,549,693
2,728
91,129
0.18
%
3340.51
%
1,380,015
2,185
83,540
0.16
%
3823.34
%
1,257,813
4,887
79,147
0.39
%
1619.54
%
Total consumer loans receivable
1,874,508
14,958
97,800
0.80
%
653.83
%
1,733,797
14,409
91,548
0.83
%
635.35
%
1,672,787
16,075
89,711
0.96
%
558.08
%
Loans and leases receivable(1)
7,772,142
45,958
125,436
0.59
%
272.94
%
7,536,489
48,081
128,736
0.64
%
267.75
%
7,272,447
67,341
159,905
0.93
%
237.46
%
Loans receivable, PPP
6,305,056
—
—
—
%
—
%
5,178,089
—
—
—
%
—
%
4,760,427
—
—
—
%
—
%
Loans receivable, mortgage warehouse, at fair value
2,855,284
—
—
—
%
—
%
3,407,622
—
—
—
%
—
%
2,793,164
—
—
—
%
—
%
Total loans held for sale
34,540
507
—
1.47
%
—
%
46,106
643
—
1.39
%
—
%
464,164
18,925
—
4.08
%
—
%
Total portfolio
$
16,967,022
$
46,465
$
125,436
0.27
%
269.96
%
$
16,168,306
$
48,724
$
128,736
0.30
%
264.21
%
$
15,290,202
$
86,266
$
159,905
0.56
%
185.36
%
(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)
Q2
Q1
Q4
Q3
Q2
Six Months Ended
June 30,
2021
2021
2020
2020
2020
2021
2020
Loan type
Multi-family
$
—
$
1,132
$
—
$
—
$
—
$
1,132
$
—
Commercial & industrial
(283)
375
155
(55)
(4)
92
39
Commercial real estate owner occupied
(1)
134
12
44
(2)
133
(5)
Commercial real estate non-owner occupied
(59)
(10)
(35)
8,923
2,801
(69)
15,598
Construction
(114)
(5)
(6)
(6)
(113)
(119)
(116)
Residential
(12)
40
46
(17)
(26)
28
(55)
Installment
7,060
10,855
8,300
8,410
7,669
17,915
13,575
Total net charge-offs (recoveries) from loans held for investment
$
6,591
$
12,521
$
8,472
$
17,299
$
10,325
$
19,112
$
29,036
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. 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
Six Months Ended
June 30,
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
2021
2020
(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
$
58,042
$
1.72
$
33,204
$
1.01
$
52,831
$
1.65
$
47,085
$
1.48
$
19,137
$
0.61
$
91,246
$
2.74
$
18,621
$
0.59
Reconciling items (after tax):
Net loss from discontinued operations
—
—
38,036
1.16
2,317
0.07
532
0.02
2,258
0.07
38,036
1.14
7,612
0.24
Severance expense
1,517
0.04
—
—
—
—
—
—
—
—
1,517
0.05
—
—
Merger and acquisition related expenses
—
—
320
0.01
508
0.02
530
0.02
—
—
320
0.01
—
—
Legal reserves
—
—
—
—
—
—
258
0.01
—
—
—
—
—
—
(Gains) losses on investment securities
(2,694)
(0.08)
(18,773)
(0.57)
(1,419)
(0.04)
(9,662)
(0.30)
(4,543)
(0.14)
(21,467)
(0.64)
(6,331)
(0.20)
Loss on sale of foreign subsidiaries
2,150
0.06
—
—
—
—
—
—
—
—
2,150
0.06
—
—
Loss on cash flow hedge derivative terminations
—
—
18,716
0.57
—
—
—
—
—
—
18,716
0.56
—
—
Derivative credit valuation adjustment
288
0.01
(1,195)
(0.04)
(448)
(0.01)
(304)
(0.01)
4,527
0.14
(907)
(0.03)
6,563
0.21
Risk participation agreement mark-to-market adjustment
—
—
—
—
—
—
—
—
(1,080)
(0.03)
—
—
(1,080)
(0.03)
Unrealized losses on loans held for sale
—
—
—
—
799
0.03
—
—
1,114
0.04
—
—
1,114
0.04
Core earnings
$
59,303
$
1.76
$
70,308
$
2.14
$
54,588
$
1.71
$
38,439
$
1.21
$
21,413
$
0.68
$
129,611
$
3.89
$
26,499
$
0.84
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
Six Months Ended
June 30,
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
2021
2020
GAAP net income
$
61,341
$
36,595
$
56,245
$
50,515
$
22,718
$
97,936
$
25,817
Reconciling items (after tax):
Net loss from discontinued operations
—
38,036
2,317
532
2,258
38,036
7,612
Severance expense
1,517
—
—
—
—
1,517
—
Merger and acquisition related expenses
—
320
508
530
—
320
—
Legal reserves
—
—
—
258
—
—
—
(Gains) losses on investment securities
(2,694)
(18,773)
(1,419)
(9,662)
(4,543)
(21,467)
(6,331)
Loss on sale of foreign subsidiaries
2,150
—
—
—
—
2,150
—
Loss on cash flow hedge derivative terminations
—
18,716
—
—
—
18,716
—
Derivative credit valuation adjustment
288
(1,195)
(448)
(304)
4,527
(907)
6,563
Risk participation agreement mark-to-market adjustment
—
—
—
—
(1,080)
—
(1,080)
Unrealized losses on loans held for sale
—
—
799
—
1,114
—
1,114
Core net income
$
62,602
$
73,699
$
58,002
$
41,869
$
24,994
$
136,301
$
33,695
Average total assets
$
19,306,948
$
18,525,721
$
18,250,719
$
17,865,574
$
14,675,584
$
18,918,491
$
13,124,495
Core return on average assets
1.30
%
1.61
%
1.26
%
0.93
%
0.68
%
1.45
%
0.52
%
Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision -
Customers Bancorp
Six Months Ended
June 30,
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
2021
2020
GAAP net income
$
61,341
$
36,595
$
56,245
$
50,515
$
22,718
$
97,936
$
25,817
Reconciling items:
Income tax expense
20,124
17,560
23,447
12,016
7,980
37,684
11,254
Provision (benefit) for credit losses on loans and leases
3,291
(2,919)
(2,913)
12,955
20,946
372
52,732
Provision (benefit) for credit losses on unfunded commitments
45
(1,286)
(968)
(527)
(356)
(1,241)
395
Severance expense
2,004
—
—
—
—
2,004
—
Net loss from discontinued operations
—
38,036
2,317
532
2,258
38,036
7,612
Merger and acquisition related expenses
—
418
709
658
—
418
—
Legal reserves
—
—
—
320
—
—
—
(Gains) losses on investment securities
(3,558)
(24,540)
(1,431)
(11,945)
(5,553)
(28,098)
(8,150)
Loss on sale of foreign subsidiaries
2,840
—
—
—
—
2,840
—
Loss on cash flow hedge derivative terminations
—
24,467
—
—
—
24,467
—
Derivative credit valuation adjustment
380
(1,562)
(625)
(378)
5,895
(1,182)
8,451
Risk participation agreement mark-to-market adjustment
—
—
—
—
(1,407)
—
(1,407)
Unrealized losses on loans held for sale
—
—
1,115
—
1,450
—
1,450
Adjusted net income - pre-tax pre-provision
$
86,467
$
86,769
$
77,896
$
64,146
$
53,931
$
173,236
$
98,154
Average total assets
$
19,306,948
$
18,525,721
$
18,250,719
$
17,865,574
$
14,675,584
$
18,918,491
$
13,124,495
Adjusted ROAA - pre-tax pre-provision
1.80
%
1.90
%
1.70
%
1.43
%
1.48
%
1.85
%
1.50
%
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 Common Equity - Customers Bancorp
Six Months Ended
June 30,
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
2021
2020
GAAP net income to common shareholders
$
58,042
$
33,204
$
52,831
$
47,085
$
19,137
$
91,246
$
18,621
Reconciling items (after tax):
Net loss from discontinued operations
—
38,036
2,317
532
2,258
38,036
7,612
Severance expense
1,517
—
—
—
—
1,517
—
Merger and acquisition related expenses
—
320
508
530
—
320
—
Legal reserves
—
—
—
258
—
—
—
(Gains) losses on investment securities
(2,694)
(18,773)
(1,419)
(9,662)
(4,543)
(21,467)
(6,331)
Loss on sale of foreign subsidiaries
2,150
—
—
—
—
2,150
—
Loss on cash flow hedge derivative terminations
—
18,716
—
—
—
18,716
—
Derivative credit valuation adjustment
288
(1,195)
(448)
(304)
4,527
(907)
6,563
Risk participation agreement mark-to-market adjustment
—
—
—
—
(1,080)
—
(1,080)
Unrealized losses on loans held for sale
—
—
799
—
1,114
—
1,114
Core earnings
$
59,303
$
70,308
$
54,588
$
38,439
$
21,413
$
129,611
$
26,499
Average total common shareholders' equity
$
1,002,624
$
918,795
$
866,411
$
812,577
$
771,663
$
960,940
$
789,774
Core return on average common equity
23.72
%
31.03
%
25.06
%
18.82
%
11.16
%
27.20
%
6.75
%
Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp
Six Months Ended
June 30,
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
2021
2020
GAAP net income to common shareholders
$
58,042
$
33,204
$
52,831
$
47,085
$
19,137
$
91,246
$
18,621
Reconciling items:
Income tax expense
20,124
17,560
23,447
12,016
7,980
37,684
11,254
Provision (benefit) for credit losses on loan and leases
3,291
(2,919)
(2,913)
12,955
20,946
372
52,732
Provision (benefit) for credit losses on unfunded commitments
45
(1,286)
(968)
(527)
(356)
(1,241)
395
Net loss from discontinued operations
—
38,036
2,317
532
2,258
38,036
7,612
Severance expense
2,004
—
—
—
—
2,004
—
Merger and acquisition related expenses
—
418
709
658
—
418
—
Legal reserves
—
—
—
320
—
—
—
(Gains) losses on investment securities
(3,558)
(24,540)
(1,431)
(11,945)
(5,553)
(28,098)
(8,150)
Loss on sale of foreign subsidiaries
2,840
—
—
—
—
2,840
—
Loss on cash flow hedge derivative terminations
—
24,467
—
—
—
24,467
—
Derivative credit valuation adjustment
380
(1,562)
(625)
(378)
5,895
(1,182)
8,451
Risk participation agreement mark-to-market adjustment
—
—
—
—
(1,407)
—
(1,407)
Unrealized losses on loans held for sale
—
—
1,115
—
1,450
—
1,450
Pre-tax pre-provision adjusted net income available to common shareholders
$
83,168
$
83,378
$
74,482
$
60,716
$
50,350
$
166,546
$
90,958
Average total common shareholders' equity
$
1,002,624
$
918,795
$
866,411
$
812,577
$
771,663
$
960,940
$
789,774
Adjusted ROCE - pre-tax pre-provision
33.27
%
36.80
%
34.20
%
29.73
%
26.24
%
34.95
%
23.16
%
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) (Dollars in thousands, except per share data)Net Interest Margin, Tax Equivalent - Customers Bancorp
Six Months Ended
June 30,
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
2021
2020
GAAP net interest income
$
138,757
$
132,731
$
122,946
$
107,439
$
91,982
$
271,488
$
173,302
Tax-equivalent adjustment
289
292
219
225
225
581
430
Net interest income tax equivalent
$
139,046
$
133,023
$
123,165
$
107,664
$
92,207
$
272,069
$
173,732
Average total interest earning assets
$
18,698,996
$
17,943,944
$
17,601,999
$
17,121,145
$
13,980,021
$
18,323,555
$
12,478,375
Net interest margin, tax equivalent
2.98
%
3.00
%
2.78
%
2.50
%
2.65
%
2.99
%
2.80
%
Net Interest Margin, Tax Equivalent, Excluding PPP - Customers Bancorp
Six Months Ended
June 30,
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
2021
2020
GAAP net interest income
$
138,757
$
132,731
$
122,946
$
107,439
$
91,982
$
271,488
$
173,302
PPP net interest income
(35,785)
(34,842)
(25,257)
(20,018)
(9,308)
(70,627)
(9,308)
Tax-equivalent adjustment
289
292
219
225
225
581
430
Net interest income, tax equivalent, excluding PPP
$
103,261
$
98,181
$
97,908
$
87,646
$
82,899
$
201,442
$
164,424
GAAP average total interest earning assets
$
18,698,996
$
17,943,944
$
17,601,999
$
17,121,145
$
13,980,021
$
18,323,555
$
12,478,375
Average PPP loans
(6,133,184)
(4,623,213)
(4,782,606)
(4,909,197)
(2,754,920)
(5,382,370)
(1,377,460)
Adjusted average total interest earning assets
$
12,565,812
$
13,320,731
$
12,819,393
$
12,211,948
$
11,225,101
$
12,941,185
$
11,100,915
Net interest margin, tax equivalent, excluding PPP
3.30
%
2.99
%
3.04
%
2.86
%
2.97
%
3.14
%
2.98
%
Core Efficiency Ratio - Customers Bancorp
Six Months Ended
June 30,
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
2021
2020
GAAP net interest income
$
138,757
$
132,731
$
122,946
$
107,439
$
91,982
$
271,488
$
173,302
GAAP non-interest income
$
16,822
$
18,468
$
16,083
$
24,864
$
11,711
$
35,290
$
22,871
(Gains) losses on investment securities
(3,558)
(24,540)
(1,431)
(11,945)
(5,553)
(28,098)
(8,150)
Derivative credit valuation adjustment
380
(1,562)
(625)
(378)
5,895
(1,182)
8,451
Risk participation agreement mark-to-market adjustment
—
—
—
—
(1,407)
—
(1,407)
Unrealized losses on loans held for sale
—
—
1,115
—
1,450
—
1,450
Loss on cash flow hedge derivative terminations
—
24,467
—
—
—
24,467
—
Loss on sale of foreign subsidiaries
2,840
—
—
—
—
2,840
—
Core non-interest income
16,484
16,833
15,142
12,541
12,096
33,317
23,215
Core revenue
$
155,241
$
149,564
$
138,088
$
119,980
$
104,078
$
304,805
$
196,517
GAAP non-interest expense
$
70,823
$
61,927
$
59,933
$
56,285
$
49,791
$
132,750
$
98,758
Severance expense
(2,004)
—
—
—
—
(2,004)
—
Legal reserves
—
—
—
(320)
—
—
—
Merger and acquisition related expenses
—
(418)
(709)
(658)
—
(418)
—
Core non-interest expense
$
68,819
$
61,509
$
59,224
$
55,307
$
49,791
$
130,328
$
98,758
Core efficiency ratio (1)
44.33
%
41.13
%
42.89
%
46.10
%
47.84
%
42.76
%
50.25
%
(1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.
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 - Customers Bancorp
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
GAAP total shareholders' equity
$
1,250,729
$
1,188,721
$
1,117,086
$
1,051,491
$
1,007,847
Reconciling items:
Preferred stock
(217,471)
(217,471)
(217,471)
(217,471)
(217,471)
Goodwill and other intangibles (1)
(3,853)
(3,911)
(14,298)
(14,437)
(14,575)
Tangible common equity
$
1,029,405
$
967,339
$
885,317
$
819,583
$
775,801
GAAP total assets
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
$
17,903,118
Reconciling items:
Goodwill and other intangibles (1)
(3,853)
(3,911)
(14,298)
(14,437)
(14,575)
Tangible assets
$
19,631,255
$
18,813,749
$
18,424,950
$
18,764,290
$
17,888,543
Tangible common equity to tangible assets
5.24
%
5.14
%
4.80
%
4.37
%
4.34
%
(1) Includes goodwill and other intangibles reported in assets of discontinued operations.
Tangible Book Value per Common Share - Customers Bancorp
(dollars in thousands except share and per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
GAAP total shareholders' equity
$
1,250,729
$
1,188,721
$
1,117,086
$
1,051,491
$
1,007,847
Reconciling Items:
Preferred stock
(217,471)
(217,471)
(217,471)
(217,471)
(217,471)
Goodwill and other intangibles (1)
(3,853)
(3,911)
(14,298)
(14,437)
(14,575)
Tangible common equity
$
1,029,405
$
967,339
$
885,317
$
819,583
$
775,801
Common shares outstanding
32,353,256
32,238,762
31,705,088
31,555,124
31,510,287
Tangible book value per common share
$
31.82
$
30.01
$
27.92
$
25.97
$
24.62
(1) Includes goodwill and other intangibles reported in assets of discontinued operations.
Total Loans and Leases, excluding PPP
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
Total loans and leases
$
16,967,022
$
16,168,306
$
15,832,251
$
16,605,279
$
15,290,202
Loans receivable, PPP
(6,305,056)
(5,178,089)
(4,561,365)
(4,964,105)
(4,760,427)
Loans and leases, excluding PPP
$
10,661,966
$
10,990,217
$
11,270,886
$
11,641,174
$
10,529,775
Total Assets, excluding PPP
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
Total assets
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
$
17,903,118
Loans receivable, PPP
(6,305,056)
(5,178,089)
(4,561,365)
(4,964,105)
(4,760,427)
Total assets, excluding PPP
$
13,330,052
$
13,639,571
$
13,877,883
$
13,814,622
$
13,142,691
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)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
Loans and leases receivable
$
14,077,198
$
12,714,578
$
12,136,733
$
12,664,997
$
12,032,874
Loans receivable, PPP
(6,305,056)
(5,178,089)
(4,561,365)
(4,964,105)
(4,760,427)
Loans and leases held for investment, excluding PPP
$
7,772,142
$
7,536,489
$
7,575,368
$
7,700,892
$
7,272,447
Allowance for credit losses on loans and leases
$
125,436
$
128,736
$
144,176
$
155,561
$
159,905
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP
1.61
%
1.71
%
1.90
%
2.02
%
2.20
%
Tangible Common Equity to Tangible Assets, excluding PPP - Customers Bancorp
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
GAAP total shareholders' equity
$
1,250,729
$
1,188,721
$
1,117,086
$
1,051,491
$
1,007,847
Reconciling items:
Preferred stock
(217,471)
(217,471)
(217,471)
(217,471)
(217,471)
Goodwill and other intangibles (1)
(3,853)
(3,911)
(14,298)
(14,437)
(14,575)
Tangible common equity
$
1,029,405
$
967,339
$
885,317
$
819,583
$
775,801
GAAP total assets
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
$
17,903,118
Loans receivable, PPP
(6,305,056)
(5,178,089)
(4,561,365)
(4,964,105)
(4,760,427)
Total assets, excluding PPP
$
13,330,052
$
13,639,571
$
13,877,883
$
13,814,622
$
13,142,691
Reconciling items:
Goodwill and other intangibles (1)
(3,853)
(3,911)
(14,298)
(14,437)
(14,575)
Tangible assets
$
13,326,199
$
13,635,660
$
13,863,585
$
13,800,185
$
13,128,116
Tangible common equity to tangible assets
7.72
%
7.09
%
6.39
%
5.94
%
5.91
%
(1) Includes goodwill and other intangibles reported in assets of discontinued operations.
Deferments to total loans and leases, excluding PPP
(dollars in thousands except per share data)
Q2 2021
Q1 2021
Q4 2020
Total loans and leases
$
16,967,022
$
16,168,306
$
15,832,251
Loans receivable, PPP
(6,305,056)
(5,178,089)
(4,561,365)
Total loans and leases, excluding PPP
$
10,661,966
$
10,990,217
$
11,270,886
Commercial deferments
$
89,800
$
176,100
$
202,100
Consumer deferments
8,400
13,000
16,400
Total deferments
$
98,200
$
189,100
$
218,500
Commercial deferments to total loans and leases, excluding PPP
0.8
%
1.6
%
1.8
%
Consumer deferments to total loans and leases, excluding PPP
0.1
0.1
0.1
Total deferments to total loans and leases, excluding PPP
0.9
%
1.7
%
1.9
%
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