Customers Bancorp Reports Strong Second Quarter 2020 Results

GAAP Net Income of $19.1 million, or $0.61 Per Diluted Share, up 237% over Q2 2019

Adjusted Pre-tax Pre-provision Earnings of $50.8 million, up 94% over Q2 2019

Total Assets Grew by $5.9 billion to $17.9 billion, up 49% in Q2 2020

Originated $5.2 billion in PPP Loans

Ranking #6 in Nation With Approximately 100,000 loans to Small Businesses and Non-Profits

  • Q2 2020 GAAP earnings of $19.1 million, or $0.61 per diluted share, and core earnings of $19.2 million, or $0.61 per diluted share (non-GAAP measures), up 51% over Q2 2019.
  • Adjusted pre-tax pre-provision net income for Q2 2020 was $50.8 million, an increase of 94% over Q2 2019 pre-tax pre-provision net income of $26.1 million (non-GAAP measures).
  • Q2 2020 results include a provision for credit losses on loans and leases of $20.9 million. At June 30, 2020, the coverage of credit loss reserves for loans and leases held for investment, excluding Paycheck Protection Program ("PPP") loans (non-GAAP measure), was 2.2%, up from 2.0% at March 31, 2020 and 0.8% at December 31, 2019.
  • Total revenues up 11% over Q1 2020 and 49% over Q2 2019.
  • Net interest income increased by $10.7 million, or 13.1%, over Q1 2020 and $27.3 million, or 42.2%, over Q2 2019. Net interest income, excluding the impact of PPP loan originations ( non-GAAP measure) increased by $1.4 million, or 1.7%, over Q1 2020 and $18.0 million, or 27.8%, over Q2 2019.
  • Q2 2020 net interest margin excluding the impact of PPP loan originations (non-GAAP measure) was 2.97%, a 2 basis point decline from Q1 2020 and a 33 basis point increase over Q2 2019. Q2 2020 net interest margin (a non-GAAP measure) declined 34 basis points from Q1 2020 to 2.65%, mostly due to the origination of $4.8 billion of PPP loans in Q2 2020 at an average yield of 1.71%.
  • Total commercial deferments declined to less than $700 million, or down to about 8.0%, as of July 24, 2020, from a peak of $1.2 billion. Total consumer deferments declined to $60 million, or 3.7%, as of July 24, 2020, from a peak of $108 million.
  • Total assets were $17.9 billion at June 30, 2020, compared to $11.2 billion at June 30, 2019 and $12.0 billion at March 31, 2020. Average assets were $14.7 billion for Q2 2020, compared to $10.4 billion for Q2 2019 and $11.6 billion for Q1 2020.
  • Total loans and leases increased $5.6 billion, or 57%, year-over-year driven by PPP loans of $4.8 billion and strong growth in mortgage warehouse loans of $0.8 billion and commercial and industrial loans and leases of $0.5 billion. Total loans and leases, excluding PPP loans (a non-GAAP measure), increased by $808 million, or 8%, year-over-year.
  • Total deposits increased $2.8 billion, or 34%, year-over-year, which included a $2.2 billion, or 97%, increase in demand deposits.
  • Asset quality remains strong. Non-performing assets were only 0.48% of total assets at June 30, 2020 and reserves equaled 185% of non-performing loans. Net charge-offs were $10.3 million, or 32 basis points of average total loans and leases on an annualized basis.
  • Helped approximately 100,000 small businesses and non-profits by originating about $5.2 billion in PPP loans directly or through fintech partnerships, which is expected to add about $100 million in origination revenues over the life of the PPP loans.


WEST READING, Pa.--()--Customers Bancorp, Inc. (NYSE: CUBI) the parent company of Customers Bank and its operating division BankMobile (collectively “Customers” or "CUBI"), today reported second quarter 2020 ("Q2 2020") net income to common shareholders of $19.1 million, or $0.61 per diluted share. Core earnings (a non-GAAP measure) for Q2 2020 totaled $19.2 million, or $0.61 per diluted share.

“We are very pleased with our financial and business results to date in a difficult environment,” said Customers Bancorp Chairman and CEO Jay Sidhu. “But foremost, I am so pleased and proud to partner with such talented and hard-working team members at a time like this. We did not miss a beat in delivering tremendous service to our clients. And, we overcame tremendous obstacles to give access to Paycheck Protection Program loans to approximately 100,000 small businesses and non-profits. Working nearly around the clock, team members from every department worked with clients to finish loan applications to preserve the jobs of about 1 million Americans. Customers is poised for continued short-term and long-term improvements.”

In light of the COVID-19 public health crisis, Customers immediately responded and implemented the following:

Support for Team Members:

  • 85% of our team members are currently working remotely and are expected to continue working remotely until a vaccine is developed;
  • Special pay considerations, bonuses, additional PTO for essential front line team members;
  • No furloughs; team members are at 100% pay;
  • Zero-interest loans up to $2,500 are available to assist team members and their families facing challenges due to COVID-19;
  • A hotline is available for any team member to call for assistance of any kind; and
  • Set up a $1 million education scholarship fund for children of our team members.

Support for Consumers and Businesses:

  • Participated in the SBA Paycheck Protection Program resulting in approximately $5.2 billion in PPP loan originations to date;
  • Implemented payment modification programs for COVID-19 impacted clients;
  • Not reporting payment deferrals to credit bureaus; and waiving or reducing certain fees.

Support for Communities:

  • Donations leading to more than $1 million to communities in our footprint for urgent basic needs;
  • Additional re-targeting of existing sponsorship and grants to non-profit organizations to support COVID-19 related activities;
  • Provided a webinar for the entire business community on how to survive and thrive during this pandemic crisis;
  • Represented community bank perspectives on CNBC and social media; and
  • Engaged with all team members and our communities in fighting biases, discrimination, and inequalities for all minorities.

Looking Ahead to the Remainder of 2020 and Beyond

Mr. Sidhu stated, "Before COVID-19, Customers was projecting core earnings per share of $3.00 for 2020 with continued improvement expected in all profitability metrics. However, rapid recent changes in economic activity introduce uncertainty to our near-term profitability. We have pivoted our strategy in this environment to building a stronger balance sheet and assisting our customers, team members and community to effectively deal with this crisis. Our provision will be higher, most customer activity will slow, and there will be disruptions, but we are also seeing positive trends in deposits and opportunities to serve customers through the SBA Paycheck Protection Program as well as other U.S. Treasury and Federal stimulus programs." Mr. Sidhu continued, "Despite all of this, we still are hoping to achieve about $3.00 per share in core earnings for 2020, subject to the amount of PPP revenues that will be recognized in 2020 and the economic environment in 2020. Longer term, we remain confident in our ability to achieve a run rate of about $6.00 per share in annual core earnings by the end of 2026."

6th Largest PPP Lender in U.S.; #1 Among Peers

Customers, directly or through fintech partnerships, originated approximately $5.2 billion in PPP loans to date, helping approximately 100,000 small businesses and non-profits across America and preserving about 1 million jobs. The expected revenue from this digital effort and fintech partnership resulted in Customers being the 6th largest PPP lender in the U.S., ranked by number of loans originated, and #1 position among its peer group. The average loan size disbursed by Customers was among the smallest by any bank, being approximately $50,000 per business, helping these small businesses across America save about 1 million jobs. This initiative is expected to result in Customers generating an estimated $100 million in origination fees to be recognized in interest income and an additional $10 million to $15 million in net interest income, materially boosting its tangible common equity to asset ratio. "This initiative is continuing," stated Sidhu.

Loan Portfolio Management during COVID-19 Crisis

Management's monitoring of the loan portfolio is the highest priority at Customers. In addition to very frequent client outreach and monitoring at the individual loan level, Customers has employed a bottoms up data driven approach to analyze its commercial portfolio. "Each borrower has been stressed for liquidity, debt capacity, and business profitability using forward looking views of their particular business sector, which sometimes reflect shock, reboot, and new normal scenarios. This data driven approach, completed with our traditional high touch approach with risk management processes best positions us to get out ahead of any deterioration in credit quality," Sidhu stated.

Here are some details about the loan portfolio with ending balances as of June 30, 2020 and deferment data presented as of July 24, 2020:

Commercial loan portfolio positioned well moving into COVID-19

  • Significant portions of the portfolio represent lending activity to industries that have not been significantly impacted, or not impacted at all, such as Customers' mortgage warehouse and specialty finance lender finance portfolios, which represent 32% and 7%, respectively, of the total commercial loan portfolio, excluding PPP loans. Borrowers in these two segments have requested no deferrals and have no delinquencies.
  • Exposure to industry segments significantly impacted by COVID-19 is not substantial. The energy and utilities exposure was only $79 million (77% are wind farms); $65 million in colleges and universities (with no deferments requested); $54 million in CRE retail sales exposure (mostly auto sales); $51 million in franchise restaurants and dining; and $24 million in entertainment only businesses.
  • Hospitality portfolio is approximately $413 million (about 5% of total commercial loans, excluding PPP), with 73% requesting deferment. Approximately 20% of the portfolio is operating at 95%+ occupancy under government contracts for transitional housing. The portfolio has an average loan to value of 65% (generally based on appraised value at time of origination) with approximately 75% having full or partial recourse.
  • Healthcare portfolio is approximately $290 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.
  • Multi-family portfolio is highly seasoned, with an average vacancy rate of 3.4% and loan to value of 56% (generally based on appraised value at time of origination). 58% of the portfolio is in New York City, of which 69% is in rent controlled/regulated properties with a vacancy rate of only 1.8%. As of July 24, 2020, 10% of the portfolio was on 90-day deferment.
  • Investment CRE has a DSCR of 2.22x and loan to value of 51% (generally based on appraised value at time of origination), with most of the portfolio housed in the New York, Philadelphia, and Boston metro and surrounding markets.

Steady decline in commercial deferment rates as COVID-19 has progressed

Customers' deferments have declined from a peak of about $1.2 billion, or about 13% of the commercial loan portfolio, to approximately $690 million, or about 8% of the commercial loan portfolio as of July 24, 2020.

Strong other consumer loan performance

  • $1.3 billion other consumer loan portfolio outperforms industry peers with deferments dropping below 2% and 30+ DPD delinquency below 1%. Strong credit quality (83% 750+ FICO), low concentration in at risk job segments, and outstanding performance of CB Direct originations have resulted in solid results through end of 2Q.
  • Other consumer loan portfolio being managed to zero growth and strengthening credit quality, by replacing run-off with CB Direct originations 700 FICO and above.

Aggressively addressing non-performing assets

Customers has been proactively addressing two large loans, which make up approximately 53% of non-performing assets as of June 30, 2020. Both of these assets were showing some weakness pre-COVID and Customers opted to take a proactive strategy in identifying and aggressively acting to address these two assets and move them off our balance sheet.

Laser focused on communicating with our borrowers

Undergoing an intensive and continuous portfolio management program that is laser focused on communicating with our borrowers, assessing their future prospects, and incorporating therein industry trends is Customers Bank's style. This program involves the entire senior management team and has been, and continues to be, performed from both a market and line of business perspective. This has enabled identification of problem credits early-on and allows us to accurately assess underlying borrower/portfolio risk and mitigate activities that will lead to increased exposure.

Stress testing

In addition to loan level stress testing, Customers also completed a thorough stress testing of its entire loan portfolio to base, moderate, and most severely adverse cases. "We are pleased to report that Customers remained well capitalized; with mitigating factors, under all those scenarios," stated Sidhu.

Status Report on Strategic Priorities Articulated at Analyst Day in October 2018, with Subsequent Updates

Improve Profitability: Top Quartile Profitability with 1.25% Core ROAA in 2-3 years

As stated during our 2018 Analysts Day in October 2018, Customers expects to remain focused on growing its core businesses, while improving margins, capital and profitability. Through favorable mix shifts in both assets and liabilities, while maintaining its superior credit quality culture and extreme focus on productivity improvement, Customers improved the overall quality of its balance sheet and deposit franchise, expanded its net interest margin, enhanced liquidity and remains relatively neutral to interest rate changes. The strategies articulated at the 2018 Analysts Day in October 2018 and subsequent progress through Q2 2020 are summarized below:

  • Target ROAA in top quartile of peer group, which we expect will equate to a ROAA of 1.25% or higher over the next 2-3 years. ROAA was 0.62% in Q2 2020, up from Q1 2020 ROAA of 0.11% due to the decreases in interest expense on deposits driven by the Federal Reserve interest rate cuts of 150 basis points in March 2020 and in provision for credit losses on loans and leases, mostly due to a reduction in net charge-offs. The pre-tax and pre-provision adjusted ROAA (a non-GAAP measure) was 1.39% for Q2 2020, up 38 basis points from 1.01% in Q2 2019.
  • Achieve NIM expansion to 2.75% or greater by Q4 2019, with full year 2019 NIM above 2.70%, through an expected shift in asset and funding mix. Actual results for 2019 were materially better, with full year 2019 NIM of 2.75%. NIM in Q2 2020 was 2.65%, down from 2.99% in Q1 2020 and up from 2.64% in Q2 2019. Since Q3 2018, Customers effectively restructured its balance sheet resulting in NIM expansion of 18 basis points. Net interest margin, excluding PPP loans, expected to remain on average between 2.9% and 3.0% for 2020.
  • BankMobile growth and maturity was expected with profitability achieved by year end 2019. BankMobile reached profitability in Q3 2019 and maintained profitability in Q4 2019 and Q2 2020, and was also profitable in Q1 2020 on an adjusted pre-tax pre-provision basis (a non-GAAP measure). BankMobile's profitability in Q1 2020 was negatively impacted by increased CECL-related provision expense, the COVID-19 crisis, a legal reserve of $1 million related to the previously disclosed DOE matter, increased depreciation expense related to capitalized development costs for technology placed in service in 2019 and non-capitalizable technology-related expenses. Key strategic priorities for 2020 include keeping BankMobile profitable, and attempting to divest it by the end of 2020.
  • Expense control. Customers' efficiency ratio was 58.44% in Q2 2020, down from 66.03% in Q1 2020 and 77.32% in Q2 2019. Improving operating efficiency is a high priority.
  • Growth in core deposits and good quality higher-yielding loans. Demand Deposit Accounts ("DDAs") grew 97% year-over-year. Lower yielding multi-family loans decreased by $1.0 billion, or 33%, year-over-year and were replaced by higher yielding C&I loans and leases and other consumer loans, which had net growth of $515 million and $712 million year-over-year, respectively. Customers originated $4.8 billion of PPP loans during Q2 2020 and approximately $5.2 billion year to date.
  • Maintain strong credit quality and superior risk management. Non-performing loans ("NPLs") were negatively impacted by two commercial real estate loans in northern New Jersey and Massachusetts, respectively. In spite of this, NPLs were only 0.56% of total loans and leases at June 30, 2020. Customers expects to resolve both of these credits during Q3 or Q4 2020. Reserves to NPLs at June 30, 2020 were 185% and the coverage ratio was 2.2% of loans and leases receivable, excluding PPP loans (a non-GAAP measure). The Bank is relatively neutral to interest rate changes at June 30, 2020. We remain very focused on a strong Risk Management culture throughout our company.
  • Evaluate opportunities to redeem our preferred stock as it becomes callable. Redeeming all of the preferred stock as it becomes callable would result in an increase to our diluted earnings per share by approximately $0.46 annually, if not replaced. Given the current economic uncertainty stemming from the COVID-19 crisis, Customers will not call for redemption any preferred stock in 2020 or 2021.

Focus on Capital Allocation

Customers remains well capitalized by all regulatory measures. At the Customers Bank level, CET 1 ratio was 10.64% and total capital to risk weighted assets was 12.30% at June 30, 2020. "We continue to target reaching about a 7.00% tangible common equity ratio (a non-GAAP measure) organically by the end of 2020 for Customers Bancorp, from strong earnings and controlled balance sheet growth. Customers intends to fund all PPP loans by borrowing from the Federal Reserve PPP Liquidity Facility and pledging the PPP loans as collateral, eliminating any capital needs for any of its PPP loans. Since the average PPP loan on the books is approximately $50,000, we expect about 90% of our loans to be forgiven by the SBA," Sidhu commented. "As stated earlier, PPP initiatives by Customers Bank should result in over $100 million in origination revenues, adding materially to our tangible common equity to asset ratio," concluded Sidhu.

Q2 2020 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended June 30, 2020 and the preceding four quarters:

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

 

 

EARNINGS SUMMARY - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Q2

Q1

Q4

Q3

Q2

Six Months Ended
June 30,

2020

2020

 

2019

2019

2019

2020

2019

 

 

 

 

 

 

 

 

 

GAAP Profitability Metrics:

 

 

 

 

 

 

 

Net income available to common shareholders

$

19,137

 

$

(515

)

 

$

23,911

 

$

23,451

 

$

5,681

 

$

18,621

 

$

17,506

 

Per share amounts:

 

 

 

 

 

 

 

 

Earnings per share - basic

$

0.61

 

$

(0.02

)

 

$

0.76

 

$

0.75

 

$

0.18

 

$

0.59

 

$

0.56

 

 

Earnings per share - diluted

$

0.61

 

$

(0.02

)

 

$

0.75

 

$

0.74

 

$

0.18

 

$

0.59

 

$

0.55

 

 

Book value per common share (1)

$

25.08

 

$

23.74

 

 

$

26.66

 

$

25.66

 

$

24.80

 

$

25.08

 

$

24.80

 

 

CUBI stock price (1)

$

12.02

 

$

10.93

 

 

$

23.81

 

$

20.74

 

$

21.00

 

$

12.02

 

$

21.00

 

 

CUBI stock price as % of book value (1)

48

%

46

 

%

89

%

81

%

85

%

48

%

85

%

Average shares outstanding - basic

31,477,591

 

31,391,151

 

 

31,306,813

 

31,223,777

 

31,154,292

 

31,434,371

 

31,101,037

 

Average shares outstanding - diluted

31,625,771

 

31,391,151

 

31,876,341

 

31,644,728

 

31,625,741

 

31,625,669

 

31,548,022

 

Shares outstanding (1)

31,510,287

 

31,470,026

 

 

31,336,791

 

31,245,776

 

31,202,023

 

31,510,287

 

31,202,023

 

Return on average assets ("ROAA")

0.62

%

0.11

 

%

0.97

%

0.95

%

0.36

%

0.40

%

0.50

%

Return on average common equity ("ROCE")

9.97

%

(0.26

)

%

11.58

%

11.81

%

2.96

%

4.74

%

4.65

%

Efficiency ratio

58.44

%

66.03

 

%

56.98

%

61.58

%

77.32

%

62.09

%

72.76

%

Non-GAAP Profitability Metrics (2):

 

 

 

 

 

 

 

Core earnings

$

19,174

 

$

603

 

 

$

23,843

 

$

23,402

 

$

12,688

 

$

19,776

 

$

24,768

 

Adjusted pre-tax pre-provision net income

$

50,766

 

$

38,595

 

 

$

44,676

 

$

39,440

 

$

26,140

 

$

89,360

 

$

51,445

 

Core ROAA

0.62

%

0.15

 

%

0.97

%

0.95

%

0.63

%

0.41

%

0.64

%

Core ROCE

9.99

%

0.30

 

%

11.55

%

11.78

%

6.62

%

5.04

%

6.57

%

Adjusted ROAA - pre-tax and pre-provision

1.39

%

1.34

 

%

1.57

%

1.39

%

1.01

%

1.37

%

1.03

%

Adjusted ROCE - pre-tax and pre-provision

24.59

%

17.41

 

%

19.89

%

18.04

%

11.75

%

20.92

%

11.73

%

Core efficiency ratio

55.39

%

63.33

 

%

56.76

%

59.21

%

69.25

%

59.16

%

68.66

%

Core earnings per share - diluted

$

0.61

 

$

0.02

 

 

$

0.75

 

$

0.74

 

$

0.40

 

$

0.63

 

$

0.79

 

Tangible book value per common share (1)

$

24.62

 

$

23.27

 

 

$

26.17

 

$

25.16

 

$

24.30

 

$

24.62

 

$

24.30

 

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

49

%

47

 

%

91

%

82

%

86

%

49

%

86

%

Net interest margin, tax equivalent

2.65

%

2.99

 

%

2.89

%

2.83

%

2.64

%

2.80

%

2.62

%

Net interest margin, tax equivalent, excluding PPP loans

2.97

%

2.99

 

%

2.89

%

2.83

%

2.64

%

2.98

%

2.62

%

Asset Quality:

 

 

 

 

 

 

 

Net charge-offs

$

10,325

 

$

18,711

 

 

$

4,362

 

$

1,761

 

$

637

 

$

29,035

 

$

1,697

 

Annualized net charge-offs to average total loans and leases

0.32

%

0.79

 

%

0.18

%

0.07

%

0.03

%

0.52

%

0.04

%

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

0.56

%

0.49

 

%

0.21

%

0.17

%

0.15

%

0.56

%

0.15

%

Reserves to NPLs (1)

185.36

%

296.44

 

%

264.67

%

290.38

%

330.36

%

185.36

%

330.36

%

Customers Bank Capital Ratios (3):

 

 

 

 

 

 

 

Common equity Tier 1 capital to risk-weighted assets

10.64

%

10.60

 

%

11.32

%

10.85

%

11.19

%

10.64

%

11.19

%

Tier 1 capital to risk-weighted assets

10.64

%

10.60

 

%

11.32

%

10.85

%

11.19

%

10.64

%

11.19

%

Total capital to risk-weighted assets

12.30

%

12.21

 

%

12.93

%

12.42

%

12.84

%

12.30

%

12.84

%

Tier 1 capital to average assets (leverage ratio)

9.59

%

9.99

 

%

10.38

%

9.83

%

10.32

%

9.59

%

10.32

%

 

 

 

 

 

 

 

 

 

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

(2) Non-GAAP measures exclude unrealized gains (losses) on loans HFS, investment securities gains and losses, severance expense, merger and acquisition-related expenses, losses realized from the sale of non-QM residential mortgage loans, loss upon acquisition of interest-only GNMA securities, legal reserves, credit valuation adjustments on derivatives, risk participation agreement mark-to-market adjustments, and goodwill and intangible assets. These notable items are not included in Customers' disclosures of core earnings and other core profitability metrics. Please note that not each of the aforementioned adjustments affected the reported amount in each of the periods presented. Customers' reasons for the use of these non-GAAP measures and a detailed reconciliation between the non-GAAP measures and the comparable GAAP amounts are included at the end of this document.

(3) Regulatory capital ratios are estimated for Q2 2020 and actual for the remaining periods. In accordance with regulatory capital rules, Customers elected an option to delay the estimated impact of CECL on its regulatory capital over a five-year transition period ending January 1, 2025. As a result, capital ratios and amounts as of Q2 2020 exclude the impact of the increased allowance for credit losses on loans and leases and unfunded loan commitments attributed to the adoption of CECL and 25% of the quarterly provision for credit losses for subsequent quarters through Q4 2021.

Net Interest Income

Net interest income totaled $92.0 million in Q2 2020, an increase of $10.7 million from Q1 2020, primarily due to a $3.0 billion increase in average interest-earning assets, mostly driven by PPP loan originations and increases in commercial loans to mortgage companies, partially offset by a 34 basis point decline in NIM (a non-GAAP measure) to 2.65%. Compared to Q1 2020, total loan yields decreased 117 basis points to 3.72%. The decrease primarily resulted from the origination of PPP loans, comprising 31% of the total loans and leases at June 30, 2020, yielding 1.71%, and the two Federal Reserve interest rate cuts for 150 basis points during March 2020 due to COVID-19. The cost of interest-bearing deposits in Q2 2020 similarly decreased by 71 basis points to 1.11% due to the interest rate cuts during March 2020. Borrowing costs excluding the impact of FRB PPP Liquidity Facility borrowings decreased by 154 basis points to 1.62% due to the decline in interest rates on short-term borrowings from the interest rate cuts. During Q2 2020, Customers obtained FRB PPP Liquidity Facility borrowings of $4.4 billion, costing 0.35%, to fund its PPP loan originations.

Q2 2020 net interest income increased $27.3 million from Q2 2019, primarily due to a $4.1 billion increase in average interest-earnings assets, primarily related to PPP loan originations, increases in other consumer loans, commercial loans to mortgage companies, and commercial and industrial loans, and one basis point of NIM expansion to 2.65%. Compared to Q2 2019, total loan yields decreased 90 basis points to 3.72%. The decrease primarily resulted from the originations of PPP loans, now comprising 31% of the total loans and leases at June 30, 2020, yielding 1.71%, and the Federal Reserve interest rate cuts for 225 basis points since August 2019.

Total loans and leases increased $5.6 billion, 57%, to $15.3 billion at June 30, 2020 compared to the year-ago period. Customers originated $4.8 billion in PPP loans directly or through fintech partnerships during Q2 2020. Additionally, loan mix improved year-over-year as mortgage warehouse loans increased $778 million to $2.8 billion, commercial and industrial loans and leases increased $515 million to $2.1 billion, commercial real estate non-owner occupied loans increased $86 million to $1.3 billion, and other consumer loans increased $712 million to $1.3 billion. These increases were offset in part by planned decreases in multi-family loans of $990 million to $2.0 billion and residential mortgages of $311 million to $353 million.

Total deposits increased $2.8 billion, or 34%, to $11.0 billion at June 30, 2020 compared to the year-ago period. Total demand deposits increased $2.2 billion, or 97%, to $4.5 billion, money market deposits increased $492 million, or 17%, to $3.4 billion, and savings deposits increased $615 million, or 116%, to $1.1 billion. These increases were offset in part by a decrease in time deposits of $568 million, or 23%, to $1.9 billion.

Risk Management, Provision and Credit Quality

Risk management is a critical component of how Customers creates long-term shareholder value, and Customers believes that asset quality is one of the most important risks in banking to be understood and managed. Customers believes that asset quality risks must be diligently addressed during good economic times with prudent underwriting standards so that when the economy deteriorates the bank's capital is sufficient to absorb all losses without threatening its ability to operate and serve its community and other constituents. Since mid-2019, Customers has been operating in a pre-recessionary environment assuming a recession was imminent in the foreseeable future. "Our Credit Administration Group and Market Presidents started analyzing their portfolios, in detail, and stressing them under adverse scenarios and either exiting or increasing the monitoring activities of higher risk credits. Customers' non-performing loans at June 30, 2020 were only 0.56% of total loans and leases, compared to the industry average non-performing loans of 1.01%, in the most recent period available. Our Q2 2020 non-performing loans were impacted by two commercial real estate credits, with both expected to be resolved during Q3 or Q4 2020, reducing our non-performing loans in future periods. Our expectation is superior asset quality performance in good times and in difficult years," said Mr. Sidhu.

The provision for credit losses on loans and leases in Q2 2020, which was calculated under the CECL accounting standard effective January 1, 2020, was $20.9 million, compared to $31.8 million in Q1 2020 and $5.3 million in Q2 2019. The decrease compared to Q1 2020 primarily resulted from a decline in net charge-offs, while the increase compared to Q2 2019 primarily resulted from the adoption of CECL and the impact of COVID-19. Net charge-offs for Q2 2020 were $10.3 million, or 32 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $18.7 million, or 79 basis points in Q1 2020, and $0.6 million, or 3 basis points in Q2 2019. The allowance for credit losses on loans and leases represented 2.2% of total loans and leases receivable, excluding PPP loans (a non-GAAP measure) at June 30, 2020, compared to 2.0% at March 31, 2020, and 0.6% at June 30, 2019. The allowance for credit losses for unfunded loan commitments is presented within accrued interest payable and other liabilities in the consolidated balance sheet. The Q2 2020 provision for credit losses for unfunded loan commitments was a credit of $0.4 million, compared to a provision of $0.8 million in Q1 2020, and is presented as part of other non-interest expense.

Non-Interest Income

Non-interest income totaled $22.2 million for Q2 2020, an increase of $0.3 million compared to Q1 2020. The increase in non-interest income primarily resulted from increases of $2.6 million in unrealized gain on equity securities issued by a foreign entity, $0.6 million in mortgage warehouse transactional fees, and $0.4 million in gain on sale of investment securities, offset in part by decreases of $2.8 million in other non-interest income and $0.3 million in interchange and card revenue. The increase in mortgage warehouse transactional fees primarily resulted from an increase in transaction volumes due to a decline in market interest rates. The increase in gain on sale of investment securities primarily related to gains realized from the sale of $30.0 million of corporate bonds and $6.3 million in non-agency guaranteed collateralized mortgage obligations in Q2 2020. The decrease in other non-interest income primarily resulted from a negative credit valuation adjustment of $1.8 million primarily resulting from an interest rate swap associated with a non-performing borrower, partially offset by changes in market interest rates, an unrealized loss on one loan held for sale of $1.5 million, and a decline in swap premiums of $1.2 million, offset by an increase in non-qualified retirement plan assets of $1.2 million due to market driven gains of those investments. The decrease in interchange and card revenue primarily resulted from lower activity volumes at BankMobile, principally due to COVID-19.

Non-interest income totaled $22.2 million in Q2 2020, an increase of $10.2 million compared to Q2 2019. The increase in non-interest income primarily resulted from a decrease of $7.5 million in loss realized upon the acquisition of certain interest-only GNMA securities in Q2 2019 and increases of $4.4 million in realized gain on sale of investment securities, $1.7 million in commercial lease income, $1.5 million in unrealized gain on equity securities issued by a foreign entity, $0.9 million in mortgage warehouse transactional fees, offset in part by a decreases of $5.3 million in other non-interest income and $0.3 million in interchange and card revenue. The decrease in loss realized upon the acquisition of certain interest-only GNMA securities resulted from a mortgage warehouse customer that unexpectedly ceased operations in Q2 2019. The increase in gains on sale of investment securities resulted from the sale of $30.0 million of corporate bonds and $6.3 million in non-agency guaranteed collateralized mortgage obligations in Q2 2020. The increase in commercial lease income primarily resulted from organic growth in commercial operating leases. The increase in mortgage warehouse transactional fees primarily resulted from increased refinancing activity driven by the decline in market interest rates. The decrease in non-interest income primarily resulted from a negative mark-to-market derivative credit valuation adjustment of $3.3 million, mostly due to market interest rates and resulting from an interest rate swap associated with a non-performing borrower, an unrealized loss on one loan held for sale of $1.5 million, and a decline in swap premiums of $0.9 million. The decrease in interchange and card revenue primarily resulted from lower activity volumes at BankMobile, principally due to COVID-19.

Non-Interest Expense

Non-interest expense totaled $63.5 million for Q2 2020, a decrease of $3.0 million compared to Q1 2020. The decrease in non-interest expense primarily resulted from decreases of $3.3 million in other non-interest expenses, $3.1 million in professional services, and $1.1 million in advertising and promotion, partially offset in part by increases of $3.0 million in salaries and employee benefits and $1.4 million in loan workout. The decrease in other non-interest expenses was driven by legal reserves of $1.0 million related to a partial settlement of the previously disclosed DOE matter in Q1 2020, a decrease in the provision for credit losses for unfunded commitments of $1.2 million, and a decline in expenses associated with our white label collaboration. The decrease in professional services was primarily driven by management's continued efforts to monitor and control expenses. The decrease in advertising and promotion was driven by decreases in promotional campaigns related to Customers' Digital Banking product and BankMobile and its white label collaboration. The increase in salaries and employee benefits was primarily driven by an increase in full time equivalents needed for future growth. The increase in loan workout was primarily driven by two commercial relationships that are expected to be resolved in the second half of 2020.

Non-interest expense totaled $63.5 million in Q2 2020, an increase of $3.9 million compared to Q2 2019. The increase in non-interest expense primarily resulted from increases of $4.4 million in salaries and employee benefits, $1.4 million in commercial lease depreciation, $1.2 million in loan workout, and $0.9 million in technology, communications and bank operations, offset in part by a decreases of $1.4 million in provision for operating losses, $1.2 million in professional services, $0.8 million in other non-interest expense, and $0.8 million in advertising and promotion. The increase in salaries and employee benefits was primarily driven by annual salary increases and an increase in full time equivalents to support future growth. The increase in commercial lease depreciation was primarily driven by the organic growth of the commercial operating lease portfolio. The increase in loan workout was primarily driven by two commercial relationships. The increase in technology, communications and bank operations primarily resulted from the continued investment in Customers' digital transformation initiatives. The decrease in provision for operating losses was primarily driven from initiatives implemented by management to reduce fraud and theft-based losses. The decrease in professional services was primarily driven by management's continued efforts to monitor and control expenses. The decrease in other non-interest expense was primarily driven by a decline in expenses associated with our white label collaboration. The decrease in advertising and promotion was primarily driven by decreases in promotional campaigns related to Customers' Digital Banking product and BankMobile and its white label collaboration.

Taxes

Customers' effective tax rate was 23.7% for Q2 2020, compared to 38.1% for Q1 2020 and 21.1% for Q2 2019. The decrease in the effective tax rate from Q1 2020 was primarily driven by discrete provision items which increased income tax expense in Q1 2020. The increase in the effective tax rate in Q2 2020 when compared to Q2 2019 is mainly driven by a favorable return to provision adjustment recorded during Q2 2019.

Looking Ahead

Customers is well positioned to execute on its 2020 and 2026 LT strategies

  • Net interest margin, excluding PPP loans, expected to remain on average between 2.9% and 3.0% for 2020
  • Core operating expenses expected to remain flat over next few quarters
  • Tax rate expected to be 22% to 23% for 2020
  • Excluding PPP loans, balance sheet at year-end 2020 expected to be about the same or moderately higher than at December 31, 2019
  • Absent a further deterioration in economic forecasts, management does not expect a material build up in CECL reserves in future quarters
  • PPP loans expected to add about $100 million (pre-tax) to equity capital
  • Management focused on the longer term horizon, striving to achieve a run rate of $6.00 per share in core earnings by end of 2026

Capital allocation and philosophy

  • Targeting CET 1 of 10.5% to 11.0% at Customers Bank and tangible common equity to tangible assets targeted at about 7.0% at year-end 2020 for the holding company, excluding PPP loans
  • Preferred equity will not be called in 2020 or 2021

BankMobile

  • BankMobile expected to remain profitable in 2020
  • Divestiture on target for completion by year-end 2020

Webcast

Date:

Thursday, July 30, 2020

Time:

9:00 AM EDT

The live audio webcast and presentation slides will be made available at https://www.customersbank.com/investor-relations/ and at Customers Bank 2nd Quarter Earnings Webcast.

The second quarter 2020 earnings press release will be issued before the market opens on Thursday, July 30, 2020.

You may submit questions in advance of the live webcast by emailing Customers' Director of Investor Relations, Bob Ramsey at rramsey@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. Telephone playback of the webcast audio will be available beginning July 30 at 2:00 PM EDT until 2:00 PM EDT on August 20, 2020. Details to access the telephone playback will also be found on the Customers Bank Investor Relations page.

Institutional Background

Customers Bancorp, Inc. is a bank holding company located in West Reading, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank. Customers Bank is a community-based, full-service bank with assets of approximately $17.9 billion at June 30, 2020. A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender that provides a range of banking services to small and medium-sized businesses, professionals, individuals and families through offices in Pennsylvania, Illinois, New York, Rhode Island, Massachusetts, New Hampshire and New Jersey. Committed to fostering customer loyalty, Customers Bank uses a High Tech/High Touch strategy that includes use of industry-leading technology to provide customers better access to their money, as well as Concierge Banking® by appointment at customers’ homes or offices 12 hours a day, seven days a week. Customers Bank offers a continually expanding portfolio of loans to small businesses, multi-family projects, mortgage companies and consumers.

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

“Safe Harbor” Statement

In addition to historical information, this press release may contain ”forward-looking statements” within the meaning of the ”safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words ”may,” ”could,” ”should,” ”pro forma,” ”looking forward,” ”would,” ”believe,” ”expect,” ”anticipate,” ”estimate,” ”intend,” ”plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: the adverse impact on the U.S. economy, including the markets in which we operate, of the coronavirus outbreak, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that effect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; the effects of changes in accounting standards or policies, including Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (CECL); and, our ability to divest BankMobile on terms and conditions acceptable to us, in the timeframe we currently intend, and the possible effects on our business and results of operations of a divestiture of BankMobile or if we are unable to divest BankMobile for an extended period of time. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2019, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.

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,

 

2020

 

2020

 

2019

 

2019

 

2019

 

2020

 

2019

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases

$

118,447

 

 

$

116,080

 

 

$

116,365

 

 

$

118,444

 

 

$

103,567

 

 

$

234,527

 

 

$

196,683

 

Investment securities

 

6,155

 

 

 

4,977

 

 

 

5,125

 

 

 

5,867

 

 

 

6,481

 

 

 

11,132

 

 

 

12,722

 

Other

 

616

 

 

 

4,286

 

 

 

2,505

 

 

 

2,407

 

 

 

1,902

 

 

 

4,902

 

 

 

3,620

 

Total interest income

 

125,218

 

 

 

125,343

 

 

 

123,995

 

 

 

126,718

 

 

 

111,950

 

 

 

250,561

 

 

 

213,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

23,238

 

 

 

34,353

 

 

 

35,992

 

 

 

38,267

 

 

 

35,980

 

 

 

57,591

 

 

 

67,204

 

FHLB advances

 

4,736

 

 

 

5,390

 

 

 

6,056

 

 

 

7,563

 

 

 

7,607

 

 

 

10,127

 

 

 

12,900

 

Subordinated debt

 

2,689

 

 

 

2,689

 

 

 

1,930

 

 

 

1,684

 

 

 

1,684

 

 

 

5,378

 

 

 

3,369

 

Federal funds purchased and other borrowings

 

2,573

 

 

 

1,590

 

 

 

2,424

 

 

 

3,469

 

 

 

2,000

 

 

 

4,163

 

 

 

5,569

 

Total interest expense

 

33,236

 

 

 

44,022

 

 

 

46,402

 

 

 

50,983

 

 

 

47,271

 

 

 

77,259

 

 

 

89,042

 

Net interest income

 

91,982

 

 

 

81,321

 

 

 

77,593

 

 

 

75,735

 

 

 

64,679

 

 

 

173,302

 

 

 

123,983

 

Provision for credit losses on loans and leases

 

20,946

 

 

 

31,786

 

 

 

9,689

 

 

 

4,426

 

 

 

5,346

 

 

 

52,732

 

 

 

10,113

 

Net interest income after provision for credit losses on loans and leases

 

71,036

 

 

 

49,535

 

 

 

67,904

 

 

 

71,309

 

 

 

59,333

 

 

 

120,570

 

 

 

113,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interchange and card revenue

 

6,478

 

 

 

6,809

 

 

 

6,506

 

 

 

6,869

 

 

 

6,760

 

 

 

13,287

 

 

 

15,565

 

Deposit fees

 

3,321

 

 

 

3,460

 

 

 

3,616

 

 

 

3,642

 

 

 

3,348

 

 

 

6,782

 

 

 

5,557

 

Commercial lease income

 

4,508

 

 

 

4,268

 

 

 

3,839

 

 

 

3,080

 

 

 

2,730

 

 

 

8,776

 

 

 

5,131

 

Bank-owned life insurance

 

1,757

 

 

 

1,762

 

 

 

1,795

 

 

 

1,824

 

 

 

1,836

 

 

 

3,519

 

 

 

3,653

 

Mortgage warehouse transactional fees

 

2,582

 

 

 

1,952

 

 

 

1,983

 

 

 

2,150

 

 

 

1,681

 

 

 

4,533

 

 

 

2,995

 

Gain (loss) on sale of SBA and other loans

 

23

 

 

 

11

 

 

 

2,770

 

 

 

—

 

 

 

—

 

 

 

34

 

 

 

—

 

Mortgage banking income (loss)

 

38

 

 

 

296

 

 

 

(635

)

 

 

283

 

 

 

250

 

 

 

334

 

 

 

417

 

Loss upon acquisition of interest-only GNMA securities

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(7,476

)

 

 

—

 

 

 

(7,476

)

Gain (loss) on sale of investment securities

 

4,353

 

 

 

3,974

 

 

 

—

 

 

 

1,001

 

 

 

—

 

 

 

8,328

 

 

 

—

 

Unrealized gain (loss) on investment securities

 

1,200

 

 

 

(1,378

)

 

 

310

 

 

 

1,333

 

 

 

(347

)

 

 

(178

)

 

 

(345

)

Other

 

(2,024

)

 

 

776

 

 

 

5,629

 

 

 

3,187

 

 

 

3,254

 

 

 

(1,248

)

 

 

6,257

 

Total non-interest income

 

22,236

 

 

 

21,930

 

 

 

25,813

 

 

 

23,369

 

 

 

12,036

 

 

 

44,167

 

 

 

31,754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

31,296

 

 

 

28,310

 

 

 

27,697

 

 

 

27,193

 

 

 

26,920

 

 

 

59,607

 

 

 

52,743

 

Technology, communication and bank operations

 

13,310

 

 

 

13,050

 

 

 

10,370

 

 

 

8,755

 

 

 

12,402

 

 

 

26,360

 

 

 

24,355

 

Professional services

 

4,552

 

 

 

7,670

 

 

 

6,470

 

 

 

8,348

 

 

 

5,718

 

 

 

12,223

 

 

 

10,291

 

Occupancy

 

3,025

 

 

 

3,032

 

 

 

3,470

 

 

 

3,661

 

 

 

3,064

 

 

 

6,057

 

 

 

5,967

 

Commercial lease depreciation

 

3,643

 

 

 

3,427

 

 

 

2,840

 

 

 

2,459

 

 

 

2,252

 

 

 

7,070

 

 

 

4,174

 

FDIC assessments, non-income taxes and regulatory fees

 

2,368

 

 

 

2,867

 

 

 

2,492

 

 

 

(777

)

 

 

2,157

 

 

 

5,235

 

 

 

4,145

 

Provision for operating losses

 

1,068

 

 

 

912

 

 

 

1,415

 

 

 

3,998

 

 

 

2,446

 

 

 

1,980

 

 

 

4,225

 

Advertising and promotion

 

582

 

 

 

1,641

 

 

 

899

 

 

 

976

 

 

 

1,360

 

 

 

2,222

 

 

 

2,169

 

Merger and acquisition related expenses

 

25

 

 

 

50

 

 

 

100

 

 

 

—

 

 

 

—

 

 

 

75

 

 

 

—

 

Loan workout

 

1,808

 

 

 

366

 

 

 

230

 

 

 

495

 

 

 

643

 

 

 

2,175

 

 

 

963

 

Other real estate owned

 

12

 

 

 

8

 

 

 

247

 

 

 

108

 

 

 

(14

)

 

 

20

 

 

 

43

 

Other

 

1,817

 

 

 

5,126

 

 

 

2,510

 

 

 

4,376

 

 

 

2,634

 

 

 

6,941

 

 

 

4,491

 

Total non-interest expense

 

63,506

 

 

 

66,459

 

 

 

58,740

 

 

 

59,592

 

 

 

59,582

 

 

 

129,965

 

 

 

113,566

 

Income before income tax expense

 

29,766

 

 

 

5,006

 

 

 

34,977

 

 

 

35,086

 

 

 

11,787

 

 

 

34,772

 

 

 

32,058

 

Income tax expense

 

7,048

 

 

 

1,906

 

 

 

7,451

 

 

 

8,020

 

 

 

2,491

 

 

 

8,955

 

 

 

7,323

 

Net income

 

22,718

 

 

 

3,100

 

 

 

27,526

 

 

 

27,066

 

 

 

9,296

 

 

 

25,817

 

 

 

24,735

 

Preferred stock dividends

 

3,581

 

 

 

3,615

 

 

 

3,615

 

 

 

3,615

 

 

 

3,615

 

 

 

7,196

 

 

 

7,229

 

Net income available to common shareholders

$

19,137

 

 

$

(515

)

 

$

23,911

 

 

$

23,451

 

 

$

5,681

 

 

$

18,621

 

 

$

17,506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.61

 

 

$

(0.02

)

 

$

0.76

 

 

$

0.75

 

 

$

0.18

 

 

$

0.59

 

 

$

0.56

 

Diluted earnings per common share

$

0.61

 

 

$

(0.02

)

 

$

0.75

 

 

$

0.74

 

 

$

0.18

 

 

$

0.59

 

 

$

0.55

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - UNAUDITED

(Dollars in thousands)

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

2020

 

2020

 

2019

 

2019

 

2019

ASSETS

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

44,577

 

 

$

18,842

 

 

$

33,095

 

 

$

12,555

 

 

$

24,757

 

Interest earning deposits

 

1,022,753

 

 

 

237,390

 

 

 

179,410

 

 

 

169,663

 

 

 

71,038

 

Cash and cash equivalents

 

1,067,330

 

 

 

256,232

 

 

 

212,505

 

 

 

182,218

 

 

 

95,795

 

Investment securities, at fair value

 

681,382

 

 

 

712,657

 

 

 

595,876

 

 

 

608,714

 

 

 

708,359

 

Loans held for sale

 

464,164

 

 

 

450,157

 

 

 

486,328

 

 

 

502,854

 

 

 

5,697

 

Loans receivable, mortgage warehouse, at fair value

 

2,793,164

 

 

 

2,518,012

 

 

 

2,245,758

 

 

 

2,438,530

 

 

 

2,001,540

 

Loans receivable, PPP

 

4,760,427

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loans and leases receivable

 

7,272,447

 

 

 

7,353,262

 

 

 

7,318,988

 

 

 

7,336,237

 

 

 

7,714,106

 

Allowance for credit losses on loans and leases

 

(159,905

)

 

 

(149,283

)

 

 

(56,379

)

 

 

(51,053

)

 

 

(48,388

)

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

 

14,666,133

 

 

 

9,721,991

 

 

 

9,508,367

 

 

 

9,723,714

 

 

 

9,667,258

 

FHLB, Federal Reserve Bank, and other restricted stock

 

91,023

 

 

 

87,140

 

 

 

84,214

 

 

 

81,853

 

 

 

101,947

 

Accrued interest receivable

 

49,911

 

 

 

40,570

 

 

 

38,072

 

 

 

38,412

 

 

 

38,506

 

Bank premises and equipment, net

 

8,380

 

 

 

8,890

 

 

 

9,389

 

 

 

14,075

 

 

 

10,095

 

Bank-owned life insurance

 

275,842

 

 

 

273,576

 

 

 

272,546

 

 

 

270,526

 

 

 

268,682

 

Other real estate owned

 

131

 

 

 

131

 

 

 

173

 

 

 

204

 

 

 

1,076

 

Goodwill and other intangibles

 

14,575

 

 

 

14,870

 

 

 

15,195

 

 

 

15,521

 

 

 

15,847

 

Other assets

 

584,247

 

 

 

452,585

 

 

 

298,052

 

 

 

285,699

 

 

 

269,165

 

Total assets

$

17,903,118

 

 

$

12,018,799

 

 

$

11,520,717

 

 

$

11,723,790

 

 

$

11,182,427

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Demand, non-interest bearing deposits

$

1,879,789

 

 

$

1,435,151

 

 

$

1,343,391

 

 

$

1,569,918

 

 

$

1,380,698

 

Interest bearing deposits

 

9,086,086

 

 

 

6,978,492

 

 

 

7,305,545

 

 

 

7,355,767

 

 

 

6,805,079

 

Total deposits

 

10,965,875

 

 

 

8,413,643

 

 

 

8,648,936

 

 

 

8,925,685

 

 

 

8,185,777

 

FRB advances

 

—

 

 

 

175,000

 

 

 

—

 

 

 

—

 

 

 

—

 

Federal funds purchased

 

—

 

 

 

705,000

 

 

 

538,000

 

 

 

373,000

 

 

 

406,000

 

FHLB advances

 

850,000

 

 

 

1,260,000

 

 

 

850,000

 

 

 

1,040,800

 

 

 

1,262,100

 

Other borrowings

 

123,833

 

 

 

123,732

 

 

 

123,630

 

 

 

123,528

 

 

 

99,055

 

Subordinated debt

 

181,255

 

 

 

181,185

 

 

 

181,115

 

 

 

109,050

 

 

 

109,026

 

FRB PPP liquidity facility

 

4,419,967

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Accrued interest payable and other liabilities

 

354,341

 

 

 

195,603

 

 

 

126,241

 

 

 

132,577

 

 

 

129,064

 

Total liabilities

 

16,895,271

 

 

 

11,054,163

 

 

 

10,467,922

 

 

 

10,704,640

 

 

 

10,191,022

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

217,471

 

 

 

217,471

 

 

 

217,471

 

 

 

217,471

 

 

 

217,471

 

Common stock

 

32,791

 

 

 

32,751

 

 

 

32,617

 

 

 

32,526

 

 

 

32,483

 

Additional paid in capital

 

450,665

 

 

 

446,840

 

 

 

444,218

 

 

 

441,499

 

 

 

439,067

 

Retained earnings

 

338,665

 

 

 

319,529

 

 

 

381,519

 

 

 

357,608

 

 

 

334,157

 

Accumulated other comprehensive loss

 

(9,965

)

 

 

(30,175

)

 

 

(1,250

)

 

 

(8,174

)

 

 

(9,993

)

Treasury stock, at cost

 

(21,780

)

 

 

(21,780

)

 

 

(21,780

)

 

 

(21,780

)

 

 

(21,780

)

Total shareholders' equity

 

1,007,847

 

 

 

964,636

 

 

 

1,052,795

 

 

 

1,019,150

 

 

 

991,405

 

Total liabilities & shareholders' equity

$

17,903,118

 

 

$

12,018,799

 

 

$

11,520,717

 

 

$

11,723,790

 

 

$

11,182,427

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 30, 2020

 

March 31, 2020

 

June 30, 2019

 

Average
Balance

 

Average
Yield or
Cost (%)

 

Average
Balance

 

Average
Yield or
Cost (%)

 

Average
Balance

 

Average
Yield or
Cost (%)

Assets

 

 

 

 

 

 

 

 

Interest earning deposits

$

384,622

 

0.12%

 

$

772,249

 

1.49%

 

$

78,666

 

3.01%

Investment securities (1)

705,389

 

3.49%

 

566,287

 

3.52%

 

687,048

 

3.77%

Loans and leases:

 

 

 

 

 

 

 

 

Commercial loans to mortgage companies

2,456,067

 

2.91%

 

1,841,659

 

3.82%

 

1,658,070

 

4.76%

Multi-family loans

2,009,847

 

3.87%

 

2,213,858

 

4.06%

 

3,097,537

 

3.84%

Commercial and industrial loans and leases (2)

2,460,060

 

4.05%

 

2,460,811

 

4.70%

 

2,041,315

 

5.19%

Loans receivable, PPP

2,754,920

 

1.71%

 

—

 

—%

 

—

 

—%

Non-owner occupied commercial real estate loans

1,392,131

 

3.81%

 

1,335,459

 

4.35%

 

1,181,455

 

4.53%

Residential mortgages

429,609

 

3.53%

 

445,953

 

3.97%

 

723,160

 

4.28%

Other consumer loans

1,288,999

 

8.72%

 

1,259,051

 

9.14%

 

289,511

 

9.41%

Total loans and leases (3)

12,791,633

 

3.72%

 

9,556,791

 

4.89%

 

8,991,048

 

4.62%

Other interest-earning assets

98,377

 

2.06%

 

81,404

 

7.04%

 

94,388

 

5.58%

Total interest-earning assets

13,980,021

 

3.60%

 

10,976,731

 

4.59%

 

9,851,150

 

4.56%

Non-interest-earning assets

695,563

 

 

 

596,675

 

 

 

520,692

 

 

Total assets

$

14,675,584

 

 

 

$

11,573,406

 

 

 

$

10,371,842

 

 

Liabilities

 

 

 

 

 

 

 

 

Interest checking accounts

$

2,482,222

 

0.75%

 

$

1,294,098

 

1.43%

 

$

836,154

 

1.96%

Money market deposit accounts

3,034,457

 

0.85%

 

3,635,554

 

1.79%

 

3,168,957

 

2.26%

Other savings accounts

1,177,554

 

1.94%

 

1,141,406

 

2.05%

 

484,303

 

2.16%

Certificates of deposit

1,734,062

 

1.51%

 

1,524,770

 

2.04%

 

1,972,792

 

2.33%

Total interest-bearing deposits (4)

8,428,295

 

1.11%

 

7,595,828

 

1.82%

 

6,462,206

 

2.23%

FRB PPP liquidity facility

942,258

 

0.35%

 

—

 

—%

 

—

 

—%

Borrowings

2,282,761

 

1.62%

 

1,229,399

 

3.16%

 

1,462,362

 

3.09%

Total interest-bearing liabilities

11,653,314

 

1.15%

 

8,825,227

 

2.01%

 

7,924,568

 

2.39%

Non-interest-bearing deposits (4)

1,890,955

 

 

 

1,573,371

 

 

 

1,345,494

 

 

Total deposits and borrowings

13,544,269

 

0.99%

 

10,398,598

 

1.70%

 

9,270,062

 

2.04%

Other non-interest-bearing liabilities

142,181

 

 

 

149,453

 

 

 

115,717

 

 

Total liabilities

13,686,450

 

 

 

10,548,051

 

 

 

9,385,779

 

 

Shareholders' equity

989,134

 

 

 

1,025,355

 

 

 

986,063

 

 

Total liabilities and shareholders' equity

$

14,675,584

 

 

 

$

11,573,406

 

 

 

$

10,371,842

 

 

Interest spread

 

2.61%

 

 

2.89%

 

 

2.51%

Net interest margin

 

2.65%

 

 

2.98%

 

 

2.63%

Net interest margin tax equivalent (5)

 

2.65%

 

 

2.99%

 

 

2.64%

Net interest margin tax equivalent excl. PPP (6)

 

2.97%

 

 

2.99%

 

 

2.64%

 

 

 

 

 

 

 

 

 

(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 0.91%, 1.51% and 1.85% for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.

(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

(6) Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

Six Months Ended

 

June 30, 2020

 

June 30, 2019

 

Average Balance

 

Average Yield
or Cost (%)

 

Average Balance

 

Average Yield
or Cost (%)

Assets

 

 

 

 

 

Interest earning deposits

$

578,435

 

1.03%

 

$

81,947

 

2.76%

Investment securities (1)

635,838

 

3.50%

 

689,422

 

3.69%

Loans and leases:

 

 

 

 

 

Commercial loans to mortgage companies

2,148,863

 

3.30%

 

1,462,362

 

4.89%

Multi-family loans

2,111,853

 

3.97%

 

3,175,233

 

3.81%

Commercial and industrial loans and leases (2)

2,460,435

 

4.37%

 

1,981,559

 

5.16%

Loans receivable, PPP

1,377,460

 

1.71%

 

—

 

—%

Non-owner occupied commercial real estate loans

1,363,795

 

4.07%

 

1,175,428

 

4.50%

Residential mortgages

437,782

 

3.75%

 

709,529

 

4.22%

Other consumer loans

1,274,024

 

8.93%

 

203,381

 

9.34%

Total loans and leases (3)

11,174,212

 

4.22%

 

8,707,492

 

4.55%

Other interest-earning assets

89,890

 

4.31%

 

87,503

 

5.76%

Total interest-earning assets

12,478,375

 

4.04%

 

9,566,364

 

4.49%

Non-interest-earning assets

646,120

 

 

 

501,013

 

 

Total assets

$

13,124,495

 

 

 

$

10,067,377

 

 

Liabilities

 

 

 

 

 

Interest checking accounts

$

1,888,160

 

0.98%

 

$

825,672

 

1.93%

Money market deposit accounts

3,335,006

 

1.37%

 

3,156,988

 

2.25%

Other savings accounts

1,159,479

 

1.99%

 

432,893

 

2.10%

Certificates of deposit

1,629,416

 

1.76%

 

1,763,634

 

2.24%

Total interest-bearing deposits (4)

8,012,061

 

1.45%

 

6,179,187

 

2.19%

FRB PPP liquidity facility

471,129

 

0.35%

 

—

 

—%

Borrowings

1,756,080

 

2.16%

 

1,447,606

 

3.04%

Total interest-bearing liabilities

10,239,270

 

1.52%

 

7,626,793

 

2.35%

Non-interest-bearing deposits (4)

1,732,163

 

 

 

1,353,112

 

 

Total deposits and borrowings

11,971,433

 

1.30%

 

8,979,905

 

2.00%

Other non-interest-bearing liabilities

145,818

 

 

 

110,090

 

 

Total liabilities

12,117,251

 

 

 

9,089,995

 

 

Shareholders' equity

1,007,244

 

 

 

977,382

 

 

Total liabilities and shareholders' equity

$

13,124,495

 

 

 

$

10,067,377

 

 

Interest spread

 

2.74%

 

 

2.49%

Net interest margin

 

2.79%

 

 

2.61%

Net interest margin tax equivalent (5)

 

2.80%

 

 

2.62%

Net interest margin tax equivalent (6)

 

2.98%

 

 

2.62%

 

 

 

 

 

 

(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 1.19% and 1.80% for the six months ended June 30, 2020 and June 30, 2019, respectively.

(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for both the six months ended June 30, 2020 and 2019, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

(6) Non-GAAP tax-equivalent basis as described in noted (5), for both the six months ended June 30, 2020 and 2019, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

SEGMENT REPORTING - UNAUDITED

(Dollars in thousands, except per share amounts)

The following tables present Customers' business segment results for the three and six months ended June 30, 2020 and 2019:

 

 

Three Months Ended June 30, 2020

 

Three Months Ended June 30, 2019

 

Customers
Bank Business
Banking

 

BankMobile

 

Consolidated

 

Customers
Bank Business
Banking

 

BankMobile

 

Consolidated

Interest income (1)

$

112,455

 

$

12,763

 

$

125,218

 

$

103,014

 

 

$

8,936

 

 

$

111,950

Interest expense

 

32,856

 

 

380

 

 

33,236

 

 

47,061

 

 

 

210

 

 

 

47,271

Net interest income

 

79,599

 

 

12,383

 

 

91,982

 

 

55,953

 

 

 

8,726

 

 

 

64,679

Provision for loan and lease losses

 

19,623

 

 

1,323

 

 

20,946

 

 

(2,206

)

 

 

7,552

 

 

 

5,346

Non-interest income

 

11,683

 

 

10,553

 

 

22,236

 

 

970

 

 

 

11,066

 

 

 

12,036

Non-interest expense

 

44,270

 

 

19,236

 

 

63,506

 

 

38,107

 

 

 

21,475

 

 

 

59,582

Income (loss) before income tax expense (benefit)

 

27,389

 

 

2,377

 

 

29,766

 

 

21,022

 

 

 

(9,235

)

 

 

11,787

Income tax expense (benefit)

 

6,611

 

 

437

 

 

7,048

 

 

4,629

 

 

 

(2,138

)

 

 

2,491

Net income (loss)

 

20,778

 

 

1,940

 

 

22,718

 

 

16,393

 

 

 

(7,097

)

 

 

9,296

Preferred stock dividends

 

3,581

 

 

—

 

 

3,581

 

 

3,615

 

 

 

—

 

 

 

3,615

Net income (loss) available to common shareholders

$

17,197

 

$

1,940

 

$

19,137

 

$

12,778

 

 

$

(7,097

)

 

$

5,681

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

0.55

 

$

0.06

 

$

0.61

 

$

0.41

 

 

$

(0.23

)

 

$

0.18

Diluted earnings (loss) per common share

$

0.54

 

$

0.06

 

$

0.61

 

$

0.40

 

 

$

(0.22

)

 

$

0.18

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts reported include funds transfer pricing of $1.6 million and $2.2 million for the three months ended June 30, 2020 and 2019, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

 

Six Months Ended June 30, 2020

 

Six Months Ended June 30, 2019

 

Customers
Bank Business
Banking

 

BankMobile

 

Consolidated

 

Customers
Bank Business
Banking

 

BankMobile

 

Consolidated

Interest income (1)

$

225,171

 

$

25,390

 

 

$

250,561

 

$

195,885

 

$

17,140

 

 

$

213,025

Interest expense

 

76,533

 

 

726

 

 

 

77,259

 

 

88,666

 

 

376

 

 

 

89,042

Net interest income

 

148,638

 

 

24,664

 

 

 

173,302

 

 

107,219

 

 

16,764

 

 

 

123,983

Provision for credit losses on loans and leases

 

46,921

 

 

5,811

 

 

 

52,732

 

 

770

 

 

9,343

 

 

 

10,113

Non-interest income

 

22,819

 

 

21,348

 

 

 

44,167

 

 

8,547

 

 

23,207

 

 

 

31,754

Non-interest expense

 

88,130

 

 

41,835

 

 

 

129,965

 

 

73,491

 

 

40,075

 

 

 

113,566

Income (loss) before income tax expense (benefit)

 

36,406

 

 

(1,634

)

 

 

34,772

 

 

41,505

 

 

(9,447

)

 

 

32,058

Income tax expense (benefit)

 

9,334

 

 

(379

)

 

 

8,955

 

 

9,510

 

 

(2,187

)

 

 

7,323

Net income (loss)

 

27,072

 

 

(1,255

)

 

 

25,817

 

 

31,995

 

 

(7,260

)

 

 

24,735

Preferred stock dividends

 

7,196

 

 

—

 

 

 

7,196

 

 

7,229

 

 

—

 

 

 

7,229

Net income (loss) available to common shareholders

$

19,876

 

$

(1,255

)

 

$

18,621

 

$

24,766

 

$

(7,260

)

 

$

17,506

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

0.63

 

$

(0.04

)

 

$

0.59

 

$

0.80

 

$

(0.23

)

 

$

0.56

Diluted earnings (loss) per common share

$

0.63

 

$

(0.04

)

 

$

0.59

 

$

0.79

 

$

(0.23

)

 

$

0.55

As of June 30, 2020 and 2019

 

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

$

3,629

 

$

10,946

 

 

$

14,575

 

$

3,629

 

$

12,218

 

 

$

15,847

Total assets (2)

$

17,316,394

 

$

586,724

 

 

$

17,903,118

 

$

10,555,141

 

$

627,286

 

 

$

11,182,427

Total deposits

$

10,303,112

 

$

662,763

 

 

$

10,965,875

 

$

7,729,580

 

$

456,197

 

 

$

8,185,777

Total non-deposit liabilities (2)

$

5,895,690

 

$

33,706

 

 

$

5,929,396

 

$

1,970,391

 

$

34,854

 

 

$

2,005,245

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts reported include funds transfer pricing of $3.1 million and $7.8 million for the six months ended June 30, 2020 and 2019, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

(2) Amounts reported exclude inter-segment receivables and payables.

The following tables present Customers' business segment results for the quarter ended June 30, 2020, the preceding four quarters, and the six months ended June 30, 2020 and 2019, respectively:

Customers Bank Business Banking:

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

Interest income (1)

 

$

112,455

 

$

112,717

 

$

112,212

 

$

113,995

 

$

103,014

 

 

$

225,171

 

$

195,885

Interest expense

 

 

32,856

 

 

43,678

 

 

46,111

 

 

50,734

 

 

47,061

 

 

 

76,533

 

 

88,666

Net interest income

 

 

79,599

 

 

69,039

 

 

66,101

 

 

63,261

 

 

55,953

 

 

 

148,638

 

 

107,219

Provision for credit losses on loans and leases

 

 

19,623

 

 

27,298

 

 

6,846

 

 

2,475

 

 

(2,206

)

 

 

46,921

 

 

770

Non-interest income

 

 

11,683

 

 

11,136

 

 

14,964

 

 

11,757

 

 

970

 

 

 

22,819

 

 

8,547

Non-interest expense

 

 

44,270

 

 

43,860

 

 

41,494

 

 

38,347

 

 

38,107

 

 

 

88,130

 

 

73,491

Income before income tax expense

 

 

27,389

 

 

9,017

 

 

32,725

 

 

34,196

 

 

21,022

 

 

 

36,406

 

 

41,505

Income tax expense

 

 

6,611

 

 

2,722

 

 

6,892

 

 

7,814

 

 

4,629

 

 

 

9,334

 

 

9,510

Net income

 

 

20,778

 

 

6,295

 

 

25,833

 

 

26,382

 

 

16,393

 

 

 

27,072

 

 

31,995

Preferred stock dividends

 

 

3,581

 

 

3,615

 

 

3,615

 

 

3,615

 

 

3,615

 

 

 

7,196

 

 

7,229

Net income available to common shareholders

 

$

17,197

 

$

2,680

 

$

22,218

 

$

22,767

 

$

12,778

 

 

$

19,876

 

$

24,766

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.55

 

$

0.09

 

$

0.71

 

$

0.73

 

$

0.41

 

 

$

0.63

 

$

0.80

Diluted earnings per common share

 

$

0.54

 

$

0.09

 

$

0.70

 

$

0.72

 

$

0.40

 

 

$

0.63

 

$

0.79

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts reported include funds transfer pricing of $1.6 million, $1.4 million, $0.7 million, $0.3 million and $2.2 million for the three months ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019, respectively. Amounts reported also include funds transfer pricing of $3.1 million and $7.8 million for the six months ended June 30, 2020 and 2019, respectively. These amounts are credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

BankMobile:

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

Interest income (2)

 

$

12,763

 

$

12,626

 

 

$

11,783

 

$

12,723

 

$

8,936

 

 

$

25,390

 

 

$

17,140

 

Interest expense

 

 

380

 

 

344

 

 

 

291

 

 

249

 

 

210

 

 

 

726

 

 

 

376

 

Net interest income

 

 

12,383

 

 

12,282

 

 

 

11,492

 

 

12,474

 

 

8,726

 

 

 

24,664

 

 

 

16,764

 

Provision for credit losses on loans and leases

 

 

1,323

 

 

4,488

 

 

 

2,843

 

 

1,951

 

 

7,552

 

 

 

5,811

 

 

 

9,343

 

Non-interest income

 

 

10,553

 

 

10,794

 

 

 

10,849

 

 

11,612

 

 

11,066

 

 

 

21,348

 

 

 

23,207

 

Non-interest expense

 

 

19,236

 

 

22,599

 

 

 

17,246

 

 

21,245

 

 

21,475

 

 

 

41,835

 

 

 

40,075

 

Income (loss) before income tax expense (benefit)

 

 

2,377

 

 

(4,011

)

 

 

2,252

 

 

890

 

 

(9,235

)

 

 

(1,634

)

 

 

(9,447

)

Income tax benefit

 

 

437

 

 

(816

)

 

 

559

 

 

206

 

 

(2,138

)

 

 

(379

)

 

 

(2,187

)

Net income (loss) available to common shareholders

 

$

1,940

 

$

(3,195

)

 

$

1,693

 

$

684

 

$

(7,097

)

 

$

(1,255

)

 

$

(7,260

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share

 

$

0.06

 

$

(0.10

)

 

$

0.05

 

$

0.02

 

$

(0.23

)

 

$

(0.04

)

 

$

(0.23

)

Diluted income (loss) per common share

 

$

0.06

 

$

(0.10

)

 

$

0.05

 

$

0.02

 

$

(0.22

)

 

$

(0.04

)

 

$

(0.23

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposit balances (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disbursements business deposits

 

$

500,072

 

$

502,711

 

 

$

319,263

 

$

598,064

 

$

409,683

 

 

 

 

 

White label deposits

 

 

162,691

 

 

107,054

 

 

 

81,837

 

 

67,541

 

 

46,514

 

 

 

 

 

Total deposits

 

$

662,763

 

$

609,765

 

 

$

401,100

 

$

665,605

 

$

456,197

 

 

 

 

 

(2) Amounts reported include funds transfer pricing of $1.6 million, $1.4 million, $0.7 million, $0.3 million and $2.2 million for the three months ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019, respectively. Amounts reported also include funds transfer pricing of $3.1 million and $7.8 million for the six months ended June 30, 2020 and 2019, respectively. These amounts are credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

(3) As of June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

2020

 

2020

 

2019

 

2019

 

2019

Commercial:

 

 

 

 

 

 

 

 

 

Multi-family

$

2,023,571

 

 

$

2,069,077

 

 

$

2,390,204

 

 

$

2,797,579

 

 

$

3,014,005

 

Mortgage warehouse

2,832,112

 

 

2,573,397

 

 

2,305,784

 

 

2,549,088

 

 

2,054,104

 

Commercial & industrial

2,060,494

 

 

2,017,567

 

 

1,831,126

 

 

1,778,423

 

 

1,545,930

 

Commercial real estate owner occupied

544,772

 

 

543,945

 

 

551,948

 

 

475,774

 

 

585,985

 

Loans receivable, PPP

4,760,427

 

 

—

 

 

—

 

 

—

 

 

—

 

Commercial real estate non-owner occupied

1,262,373

 

 

1,252,826

 

 

1,222,772

 

 

1,267,679

 

 

1,176,108

 

Construction

128,834

 

 

115,448

 

 

117,617

 

 

60,429

 

 

59,230

 

Total commercial loans and leases

13,612,583

 

 

8,572,260

 

 

8,419,451

 

 

8,928,972

 

 

8,435,362

 

Consumer:

 

 

 

 

 

 

 

 

 

Residential

352,941

 

 

364,760

 

 

386,089

 

 

640,786

 

 

663,959

 

Manufactured housing

66,865

 

 

69,240

 

 

71,359

 

 

73,626

 

 

76,644

 

Other consumer

1,257,813

 

 

1,315,171

 

 

1,174,175

 

 

634,237

 

 

545,378

 

Total consumer loans

1,677,619

 

 

1,749,171

 

 

1,631,623

 

 

1,348,649

 

 

1,285,981

 

Total loans and leases

$

15,290,202

 

 

$

10,321,431

 

 

$

10,051,074

 

 

$

10,277,621

 

 

$

9,721,343

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END DEPOSIT COMPOSITION - UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

2020

 

2020

 

2019

 

2019

 

2019

 

 

 

 

 

 

 

 

 

 

Demand, non-interest bearing

$

1,879,789

 

 

$

1,435,151

 

 

$

1,343,391

 

 

$

1,569,918

 

 

$

1,380,698

 

Demand, interest bearing

2,666,209

 

 

1,577,034

 

 

1,235,292

 

 

1,139,675

 

 

925,180

 

Total demand deposits

4,545,998

 

 

3,012,185

 

 

2,578,683

 

 

2,709,593

 

 

2,305,878

 

Savings

1,144,788

 

 

1,168,121

 

 

919,214

 

 

591,336

 

 

529,532

 

Money market

3,404,709

 

 

2,833,990

 

 

3,482,505

 

 

3,201,883

 

 

2,912,266

 

Time deposits

1,870,380

 

 

1,399,347

 

 

1,668,534

 

 

2,422,873

 

 

2,438,101

 

Total deposits

$

10,965,875

 

 

$

8,413,643

 

 

$

8,648,936

 

 

$

8,925,685

 

 

$

8,185,777

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY - UNAUDITED

(Dollars in thousands)

As of June 30, 2020

As of March 31, 2020

As of June 30, 2019

 

Total loans

Non
accrual
/NPLs

Allowance
for credit
losses

Total
NPLs to
total loans

Total
reserves to
total NPLs

Total loans

Non
accrual
/NPLs

Allowance
for credit
losses

Total
NPLs to
total loans

Total
reserves to
total NPLs

Total loans

Non accrual /NPLs

Allowance
for credit
losses

Total
NPLs to
total loans

Total
reserves to
total NPLs

 

Loan type

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

$

1,581,839

 

$

7,013

 

$

14,697

 

0.44

%

209.57

%

$

1,621,633

 

$

4,020

 

$

8,750

 

0.25

%

217.66

%

$

3,014,005

 

$

—

 

$

9,926

 

—

%

—

%

Commercial & industrial

2,099,442

 

9,974

 

12,302

 

0.48

%

123.34

%

2,072,952

 

9,993

 

18,806

 

0.48

%

188.19

%

1,598,494

 

5,409

 

15,201

 

0.34

%

281.03

%

Commercial real estate owner occupied

544,772

 

4,022

 

11,405

 

0.74

%

283.57

%

543,945

 

2,411

 

8,527

 

0.44

%

353.67

%

585,985

 

918

 

1,895

 

0.16

%

206.43

%

Loans receivable, PPP

4,760,427

 

—

 

—

 

—

%

—

%

—

 

—

 

—

 

—

%

—

%

—

 

—

 

—

 

—

%

—

%

Commercial real estate non-owner occupied

1,244,773

 

30,257

 

26,493

 

2.43

%

87.56

%

1,252,826

 

21,479

 

18,530

 

1.71

%

86.27

%

1,176,108

 

94

 

6,159

 

0.01

%

6552.13

%

Construction

128,834

 

—

 

5,297

 

—

%

—

%

115,448

 

—

 

1,934

 

—

%

—

%

59,230

 

—

 

649

 

—

%

—

%

Total commercial loans and leases receivable

10,360,087

 

51,266

 

70,194

 

0.49

%

136.92

%

5,606,804

 

37,903

 

56,547

 

0.68

%

149.19

%

6,433,822

 

6,421

 

33,830

 

0.10

%

526.86

%

Residential

348,109

 

7,857

 

4,550

 

2.26

%

57.91

%

362,047

 

6,054

 

4,180

 

1.67

%

69.05

%

658,262

 

5,083

 

4,168

 

0.77

%

82.00

%

Manufactured housing

66,865

 

3,331

 

6,014

 

4.98

%

180.55

%

69,240

 

2,558

 

4,987

 

3.69

%

194.96

%

76,644

 

1,570

 

489

 

2.05

%

31.15

%

Other consumer

1,257,813

 

4,887

 

79,147

 

0.39

%

1619.54

%

1,315,171

 

2,519

 

83,569

 

0.19

%

3317.55

%

545,378

 

359

 

10,267

 

0.07

%

2859.89

%

Total consumer loans receivable

1,672,787

 

16,075

 

89,711

 

0.96

%

558.08

%

1,746,458

 

11,131

 

92,736

 

0.64

%

833.13

%

1,280,284

 

7,012

 

14,924

 

0.55

%

212.84

%

Loans and leases receivable

12,032,874

 

67,341

 

159,905

 

0.56

%

237.46

%

7,353,262

 

49,034

 

149,283

 

0.67

%

304.45

%

7,714,106

 

13,433

 

48,754

 

0.17

%

362.94

%

Loans and leases receivable, excluding loans receivable, PPP

7,272,447

 

67,341

 

159,905

 

0.93

%

237.46

%

7,353,262

 

49,034

 

149,283

 

0.67

%

304.45

%

7,714,106

 

13,433

 

48,754

 

0.17

%

362.94

%

Loans receivable, mortgage warehouse, at fair value

2,793,164

 

—

 

—

 

 

 

2,518,012

 

—

 

—

 

 

 

2,001,540

 

—

 

—

 

 

 

Total loans held for sale

464,164

 

18,925

 

—

 

4.08

%

—

%

450,157

 

1,325

 

—

 

0.29

%

—

%

5,697

 

1,325

 

—

 

23.26

%

—

%

Total portfolio

$

15,290,202

 

$

86,266

 

$

159,905

 

0.56

%

185.36

%

$

10,321,431

 

$

50,359

 

$

149,283

 

0.49

%

296.44

%

$

9,721,343

 

$

14,758

 

$

48,754

 

0.15

%

330.36

%

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2

 

Q1

 

Q4

 

Q3

 

Q2

 

Six Months Ended June 30,

 

 

2020

 

 

 

2020

 

 

 

2019

 

 

 

2019

 

 

 

2019

 

 

2020

 

2019

Loan type

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(7

)

 

$

—

 

 

$

534

 

Commercial & industrial

 

(4

)

 

 

43

 

 

 

(224

)

 

 

(20

)

 

 

(155

)

 

 

39

 

 

 

(274

)

Commercial real estate owner occupied

 

(2

)

 

 

(3

)

 

 

(1

)

 

 

35

 

 

 

(31

)

 

 

(5

)

 

 

(151

)

Commercial real estate non-owner occupied

 

2,801

 

 

 

12,797

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15,598

 

 

 

—

 

Construction

 

(113

)

 

 

(3

)

 

 

(8

)

 

 

(8

)

 

 

(114

)

 

 

(116

)

 

 

(120

)

Residential

 

(26

)

 

 

(29

)

 

 

181

 

 

 

(5

)

 

 

61

 

 

 

(55

)

 

 

94

 

Other consumer

 

7,669

 

 

 

5,906

 

 

 

4,414

 

 

 

1,759

 

 

 

883

 

 

 

13,575

 

 

 

1,614

 

Total net charge-offs (recoveries) from loans held for investment

$

10,325

 

 

$

18,711

 

 

$

4,362

 

 

$

1,761

 

 

$

637

 

 

$

29,036

 

 

$

1,697

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED

Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in Customers' industry. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our ongoing financial results, which we believe enhance an overall understanding of our performance and increases comparability of our period to period results. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. Although non-GAAP financial measures are frequently used in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results of operations or financial condition as reported under GAAP.

 

The following tables present reconciliations of GAAP to non-GAAP measures disclosed within this document.

 

Core Earnings - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

June 30,

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

(dollars in thousands except per share data)

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

 

USD

Per share

GAAP net income to common shareholders

$

19,137

 

$

0.61

 

 

$

(515

)

$

(0.02

)

 

$

23,911

 

$

0.75

 

 

$

23,451

 

$

0.74

 

 

$

5,681

$

0.18

 

$

18,621

 

$

0.59

 

 

$

17,506

$

0.55

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

373

 

0.01

 

 

—

 

 

—

 

 

 

373

 

0.01

Loss upon acquisition of interest-only GNMA securities

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

5,682

 

0.18

 

 

—

 

 

—

 

 

 

5,682

 

0.18

Merger and acquisition related expenses

 

19

 

 

—

 

 

 

40

 

 

—

 

 

 

76

 

 

—

 

 

 

—

 

 

—

 

 

 

—

 

—

 

 

59

 

 

—

 

 

 

—

 

—

Legal reserves

 

—

 

 

—

 

 

 

830

 

 

0.03

 

 

 

—

 

 

—

 

 

 

1,520

 

 

0.05

 

 

 

—

 

—

 

 

830

 

 

0.03

 

 

 

—

 

—

(Gains) losses on investment securities

 

(4,543

)

 

(0.14

)

 

 

(1,788

)

 

(0.06

)

 

 

(310

)

 

(0.01

)

 

 

(1,947

)

 

(0.06

)

 

 

347

 

0.01

 

 

(6,331

)

 

(0.20

)

 

 

345

 

0.01

Derivative credit valuation adjustment

 

4,527

 

 

0.14

 

 

 

2,036

 

 

0.06

 

 

 

(429

)

 

(0.01

)

 

 

378

 

 

0.01

 

 

 

605

 

0.02

 

 

6,563

 

 

0.21

 

 

 

862

 

0.03

Risk participation agreement mark-to-market adjustment

 

(1,080

)

 

(0.03

)

 

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

—

 

—

 

 

(1,080

)

 

(0.03

)

 

 

—

 

—

Losses on sale of non-QM residential mortgage loans

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

595

 

 

0.02

 

 

 

—

 

 

—

 

 

 

—

 

—

 

 

—

 

 

—

 

 

 

—

 

—

Unrealized losses on loans held for sale

 

1,114

 

 

0.04

 

 

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

—

 

 

 

—

 

—

 

 

1,114

 

 

0.04

 

 

 

—

 

—

Core earnings

$

19,174

 

$

0.61

 

 

$

603

 

$

0.02

 

 

$

23,843

 

$

0.75

 

 

$

23,402

 

$

0.74

 

 

$

12,688

$

0.40

 

$

19,776

 

$

0.63

 

 

$

24,768

$

0.79

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED

 

Core Return on Average Assets - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

GAAP net income

$

22,718

 

 

$

3,100

 

 

$

27,526

 

 

$

27,066

 

 

$

9,296

 

 

$

25,817

 

 

$

24,735

 

Reconciling items (after tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance expense

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

373

 

 

 

—

 

 

 

373

 

Loss upon acquisition of interest-only GNMA securities

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,682

 

 

 

—

 

 

 

5,682

 

Merger and acquisition related expenses

 

19

 

 

 

40

 

 

 

76

 

 

 

—

 

 

 

—

 

 

 

59

 

 

 

—

 

Legal reserves

 

—

 

 

 

830

 

 

 

—

 

 

 

1,520

 

 

 

—

 

 

 

830

 

 

 

—

 

(Gains) losses on investment securities

 

(4,543

)

 

 

(1,788

)

 

 

(310

)

 

 

(1,947

)

 

 

347

 

 

 

(6,331

)

 

 

345

 

Derivative credit valuation adjustment

 

4,527

 

 

 

2,036

 

 

 

(429

)

 

 

378

 

 

 

605

 

 

 

6,563

 

 

 

862

 

Risk participation agreement mark-to-market adjustment

 

(1,080

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,080

)

 

 

—

 

Losses on sale of non-QM residential mortgage loans

 

—

 

 

 

—

 

 

 

595

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Unrealized losses on loans held for sale

 

1,114

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,114

 

 

 

—

 

Core net income

$

22,755

 

 

$

4,218

 

 

$

27,458

 

 

$

27,017

 

 

$

16,303

 

 

$

26,972

 

 

$

31,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total assets

$

14,675,584

 

 

$

11,573,406

 

 

$

11,257,207

 

 

$

11,259,144

 

 

$

10,371,842

 

 

$

13,124,495

 

 

$

10,067,377

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core return on average assets

 

0.62

%

 

 

0.15

%

 

 

0.97

%

 

 

0.95

%

 

 

0.63

%

 

 

0.41

%

 

 

0.64

%

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)

(Dollars in thousands, except per share data)

Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

GAAP net income

$

22,718

 

$

3,100

 

$

27,526

 

$

27,066

 

$

9,296

 

$

25,817

 

$

24,735

 

Reconciling items:

 

 

 

 

 

 

 

Income tax expense

 

7,048

 

 

1,906

 

 

7,451

 

 

8,020

 

 

2,491

 

 

8,955

 

 

7,323

 

Provision for credit losses on loans and leases

 

20,946

 

 

31,786

 

 

9,689

 

 

4,426

 

 

5,346

 

 

52,732

 

 

10,113

 

Provision for credit losses on unfunded commitments

 

(356

)

 

751

 

 

3

 

 

(235

)

 

(102

)

 

395

 

 

(171

)

Severance expense

 

—

 

 

—

 

 

—

 

 

—

 

 

490

 

 

—

 

 

490

 

Loss upon acquisition of interest-only GNMA securities

 

—

 

 

—

 

 

—

 

 

—

 

 

7,476

 

 

—

 

 

7,476

 

Merger and acquisition related expenses

 

25

 

 

50

 

 

100

 

 

—

 

 

—

 

 

75

 

 

—

 

Legal reserves

 

—

 

 

1,042

 

 

—

 

 

2,000

 

 

—

 

 

1,042

 

 

—

 

(Gains) losses on investment securities

 

(5,553

)

 

(2,596

)

 

(310

)

 

(2,334

)

 

347

 

 

(8,150

)

 

345

 

Derivative credit valuation adjustment

 

5,895

 

 

2,556

 

 

(565

)

 

497

 

 

796

 

 

8,451

 

 

1,134

 

Risk participation agreement mark-to-market adjustment

 

(1,407

)

 

—

 

 

—

 

 

—

 

 

—

 

 

(1,407

)

 

—

 

Losses on sale of non-QM residential mortgage loans

 

—

 

 

—

 

 

782

 

 

—

 

 

—

 

 

—

 

 

—

 

Unrealized losses on loans held for sale

 

1,450

 

 

—

 

 

—

 

 

—

 

 

—

 

 

1,450

 

 

—

 

Adjusted net income - pre-tax pre-provision

$

50,766

 

$

38,595

 

$

44,676

 

$

39,440

 

$

26,140

 

$

89,360

 

$

51,445

 

 

 

 

 

 

 

 

 

Average total assets

$

14,675,584

 

$

11,573,406

 

$

11,257,207

 

$

11,259,144

 

$

10,371,842

 

$

13,124,495

 

$

10,067,377

 

 

 

 

 

 

 

 

 

Adjusted ROAA - pre-tax pre-provision

 

1.39

%

 

1.34

%

 

1.57

%

 

1.39

%

 

1.01

%

 

1.37

%

 

1.03

%

Core Return on Average Common Equity - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

GAAP net income to common shareholders

$

19,137

$

(515

) $ 23,911 $

23,451

$

5,681

 

$

18,621

$

17,506

Reconciling items (after tax):

 

Severance expense

—

—

—

—

 

373

 

—

373

Loss upon acquisition of interest-only GNMA securities

—

—

—

—

 

5,682

 

—

5,682

Merger and acquisition related expenses

19

40

76

—

 

—

 

59

—

Legal reserves

—

830

—

1,520

 

—

 

830

—

(Gains) losses on investment securities

(4,543

)

(1,788

)

(310

)

(1,947

)

 

347

 

(6,331

)

345

Derivative credit valuation adjustment

4,527

2,036

(429

)

378

 

605

 

6,563

862

Risk participation agreement mark-to-market adjustment

(1,080

)

—

—

—

 

—

 

(1,080

)

—

Losses on sale of non-QM residential mortgage loans

—

—

595

—

 

—

 

—

—

Unrealized losses on loans held for sale

1,114

—

—

—

 

—

 

1,114

—

Core earnings

$

19,174

$

603

$

23,843

$

23,402

$

12,688

 

$

19,776

$

24,768

 

 

Average total common shareholders' equity

$

771,663

$

807,884

$

819,018

$

787,885

$

768,592

 

$

789,774

$

759,911

 

 

Core return on average common equity

9.99

%

0.30

%

11.55

%

11.78

%

 

6.62

%

5.04

%

6.57

%

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)

(Dollars in thousands, except per share data)

Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

GAAP net income to common shareholders

$

19,137

 

 

$

(515

)

 

$

23,911

 

 

$

23,451

 

 

$

5,681

 

 

$

18,621

 

 

$

17,506

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

7,048

 

 

 

1,906

 

 

 

7,451

 

 

 

8,020

 

 

 

2,491

 

 

 

8,955

 

 

 

7,323

 

Provision for credit losses on loan and leases

 

20,946

 

 

 

31,786

 

 

 

9,689

 

 

 

4,426

 

 

 

5,346

 

 

 

52,732

 

 

 

10,113

 

Provision for credit losses on unfunded commitments

 

(356

)

 

 

751

 

 

 

3

 

 

 

(235

)

 

 

(102

)

 

 

395

 

 

 

(171

)

Severance expense

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

490

 

 

 

—

 

 

 

490

 

Loss upon acquisition of interest-only GNMA securities

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,476

 

 

 

—

 

 

 

7,476

 

Merger and acquisition related expenses

 

25

 

 

 

50

 

 

 

100

 

 

 

—

 

 

 

—

 

 

 

75

 

 

 

—

 

Legal reserves

 

—

 

 

 

1,042

 

 

 

—

 

 

 

2,000

 

 

 

—

 

 

 

1,042

 

 

 

—

 

(Gains) losses on investment securities

 

(5,553

)

 

 

(2,596

)

 

 

(310

)

 

 

(2,334

)

 

 

347

 

 

 

(8,150

)

 

 

345

 

Derivative credit valuation adjustment

 

5,895

 

 

 

2,556

 

 

 

(565

)

 

 

497

 

 

 

796

 

 

 

8,451

 

 

 

1,134

 

Risk participation agreement mark-to-market adjustment

 

(1,407

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,407

)

 

 

—

 

Losses on sale of non-QM residential mortgage loans

 

—

 

 

 

—

 

 

 

782

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Unrealized losses on loans held for sale

 

1,450

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,450

 

 

 

—

 

Pre-tax pre-provision adjusted net income available to common shareholders

$

47,185

 

 

$

34,980

 

 

$

41,061

 

 

$

35,825

 

 

$

22,525

 

 

$

82,164

 

 

$

44,216

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total common shareholders' equity

$

771,663

 

 

$

807,884

 

 

$

819,018

 

 

$

787,885

 

 

$

768,592

 

 

$

789,774

 

 

$

759,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted ROCE - pre-tax pre-provision

 

24.59

%

 

 

17.41

%

 

 

19.89

%

 

 

18.04

%

 

 

11.75

%

 

 

20.92

%

 

 

11.73

%

Net Interest Margin, Tax Equivalent - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

GAAP net interest income

$

91,982

 

 

$

81,321

 

 

$

77,593

 

 

$

75,735

 

 

$

64,679

 

 

$

173,302

 

 

$

123,983

 

Tax-equivalent adjustment

 

225

 

 

 

205

 

 

 

187

 

 

 

184

 

 

 

183

 

 

 

430

 

 

 

364

 

Net interest income tax equivalent

$

92,207

 

 

$

81,526

 

 

$

77,780

 

 

$

75,919

 

 

$

64,862

 

 

$

173,732

 

 

$

124,347

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total interest earning assets

$

13,980,021

 

 

$

10,976,731

 

 

$

10,676,730

 

 

$

10,667,198

 

 

$

9,851,150

 

 

$

12,478,375

 

 

$

9,566,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin, tax equivalent

 

2.65

%

 

 

2.99

%

 

 

2.89

%

 

 

2.83

%

 

 

2.64

%

 

 

2.80

%

 

 

2.62

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Margin, Tax Equivalent, Excluding PPP - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

GAAP net interest income

$

91,982

 

 

$

81,321

 

 

$

77,593

 

 

$

75,735

 

 

$

64,679

 

 

$

173,302

 

 

$

123,983

 

PPP net interest income

 

(9,308

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(9,308

)

 

 

—

 

Tax-equivalent adjustment

 

225

 

 

 

205

 

 

 

187

 

 

 

184

 

 

 

183

 

 

 

430

 

 

 

364

 

Net interest income, tax equivalent, excluding PPP

$

82,899

 

 

$

81,526

 

 

$

77,780

 

 

$

75,919

 

 

$

64,862

 

 

$

164,424

 

 

$

124,347

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP average total interest earning assets

$

13,980,021

 

 

$

10,976,731

 

 

$

10,676,730

 

 

$

10,667,198

 

 

$

9,851,150

 

 

$

12,478,375

 

 

$

9,566,364

 

Average PPP loans

 

(2,754,920

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,377,460

)

 

 

—

 

Adjusted average total interest earning assets

$

11,225,101

 

 

$

10,976,731

 

 

$

10,676,730

 

 

$

10,667,198

 

 

$

9,851,150

 

 

$

11,100,915

 

 

$

9,566,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin, tax equivalent, excluding PPP

 

2.97

%

 

 

2.99

%

 

 

2.89

%

 

 

2.82

%

 

 

2.64

%

 

 

2.98

%

 

 

2.62

%

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)

(Dollars in thousands, except per share data)

Core Efficiency Ratio - Customers Bancorp

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

GAAP net interest income

$

91,982

 

 

$

81,321

 

 

$

77,593

 

 

$

75,735

 

 

$

64,679

 

 

$

173,302

 

 

$

123,983

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP non-interest income

$

22,236

 

 

$

21,930

 

 

$

25,813

 

 

$

23,369

 

 

$

12,036

 

 

$

44,167

 

 

$

31,754

 

Loss upon acquisition of interest-only GNMA securities

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,476

 

 

 

—

 

 

 

7,476

 

(Gains) losses on investment securities

 

(5,553

)

 

 

(2,596

)

 

 

(310

)

 

 

(2,334

)

 

 

347

 

 

 

(8,150

)

 

 

345

 

Derivative credit valuation adjustment

 

5,895

 

 

 

2,556

 

 

 

(565

)

 

 

497

 

 

 

796

 

 

 

8,451

 

 

 

1,134

 

Risk participation agreement mark-to-market adjustment

 

(1,407

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,407

)

 

 

—

 

Losses on sale of non-QM residential mortgage loans

 

—

 

 

 

—

 

 

 

782

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Unrealized losses on loans held for sale

 

1,450

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,450

 

 

 

—

 

Core non-interest income

 

22,621

 

 

 

21,890

 

 

 

25,720

 

 

 

21,532

 

 

 

20,655

 

 

 

44,511

 

 

 

40,709

 

Core revenue

$

114,603

 

 

$

103,211

 

 

$

103,313

 

 

$

97,267

 

 

$

85,334

 

 

$

217,813

 

 

$

164,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP non-interest expense

$

63,506

 

 

$

66,459

 

 

$

58,740

 

 

$

59,592

 

 

$

59,582

 

 

$

129,965

 

 

$

113,566

 

Severance expense

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(490

)

 

 

—

 

 

 

(490

)

Legal reserves

 

—

 

 

 

(1,042

)

 

 

—

 

 

 

(2,000

)

 

 

—

 

 

 

(1,042

)

 

 

—

 

Merger and acquisition related expenses

 

(25

)

 

 

(50

)

 

 

(100

)

 

 

—

 

 

 

—

 

 

 

(75

)

 

 

—

 

Core non-interest expense

$

63,481

 

 

$

65,367

 

 

$

58,640

 

 

$

57,592

 

 

$

59,092

 

 

$

128,848

 

 

$

113,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core efficiency ratio (1)

 

55.39

%

 

 

63.33

%

 

 

56.76

%

 

 

59.21

%

 

 

69.25

%

 

 

59.16

%

 

 

68.66

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

GAAP total shareholders' equity

$

1,007,847

 

 

$

964,636

 

 

$

1,052,795

 

 

$

1,019,150

 

 

$

991,405

 

Reconciling items:

 

 

 

 

 

 

 

 

 

Preferred stock

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

Goodwill and other intangibles

 

(14,575

)

 

 

(14,870

)

 

 

(15,195

)

 

 

(15,521

)

 

 

(15,847

)

Tangible common equity

$

775,801

 

 

$

732,295

 

 

$

820,129

 

 

$

786,158

 

 

$

758,087

 

 

 

 

 

 

 

 

 

 

 

GAAP total assets

$

17,903,118

 

 

$

12,018,799

 

 

$

11,520,717

 

 

$

11,723,790

 

 

$

11,182,427

 

Reconciling items:

 

 

 

 

 

 

 

 

 

Goodwill and other intangibles

 

(14,575

)

 

 

(14,870

)

 

 

(15,195

)

 

 

(15,521

)

 

 

(15,847

)

Tangible assets

$

17,888,543

 

 

$

12,003,929

 

 

$

11,505,522

 

 

$

11,708,269

 

 

$

11,166,580

 

 

 

 

 

 

 

 

 

 

 

Tangible common equity to tangible assets

 

4.34

%

 

 

6.10

%

 

 

7.13

%

 

 

6.71

%

 

 

6.79

%

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)

(Dollars in thousands, except per share data)

 

Tangible Book Value per Common Share - Customers Bancorp

 

 

 

 

 

 

 

 

 

(dollars in thousands except share and per share data)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

GAAP total shareholders' equity

$

1,007,847

 

 

$

964,636

 

 

$

1,052,795

 

 

$

1,019,150

 

 

$

991,405

 

Reconciling Items:

 

 

 

 

 

 

 

 

 

Preferred stock

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

 

 

(217,471

)

Goodwill and other intangibles

 

(14,575

)

 

 

(14,870

)

 

 

(15,195

)

 

 

(15,521

)

 

 

(15,847

)

Tangible common equity

$

775,801

 

 

$

732,295

 

 

$

820,129

 

 

$

786,158

 

 

$

758,087

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

31,510,287

 

 

 

31,470,026

 

 

 

31,336,791

 

 

 

31,245,776

 

 

 

31,202,023

 

 

 

 

 

 

 

 

 

 

 

Tangible book value per common share

$

24.62

 

 

$

23.27

 

 

$

26.17

 

 

$

25.16

 

 

$

24.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income - Pre-Tax Pre-Provision - BankMobile

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

 

2020

 

2019

GAAP net income to common shareholders

$

1,940

 

$

(3,195

)

 

$

1,693

 

$

684

 

$

(7,097

)

 

$

(1,255

)

 

$

(7,260

)

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

437

 

 

(816

)

 

 

559

 

 

206

 

 

(2,138

)

 

 

(379

)

 

 

(2,187

)

Provision for credit losses on loan and leases

 

1,323

 

 

4,488

 

 

 

2,843

 

 

1,951

 

 

7,552

 

 

 

5,811

 

 

 

9,343

 

Severance expense

 

—

 

 

—

 

 

 

—

 

 

—

 

 

18

 

 

 

—

 

 

 

18

 

Merger and acquisition related expenses

 

25

 

 

50

 

 

 

100

 

 

—

 

 

—

 

 

 

75

 

 

 

—

 

Legal reserves

 

—

 

 

1,042

 

 

 

—

 

 

1,000

 

 

—

 

 

 

1,042

 

 

 

—

 

Pre-tax pre-provision adjusted net income available to common shareholders

$

3,725

 

$

1,569

 

 

$

5,195

 

$

3,841

 

$

(1,665

)

 

$

5,294

 

 

$

(86

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Loans and Leases, excluding PPP

 

 

 

 

 

 

 

 

 

(dollars in thousands)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

Total loans and leases

$

15,290,202

 

 

$

10,321,431

 

$

10,051,074

 

$

10,277,621

 

$

9,721,343

Loans receivable, PPP

 

(4,760,427

)

 

 

—

 

 

—

 

 

—

 

 

—

Loans and leases, excluding PPP

$

10,529,775

 

 

$

10,321,431

 

$

10,051,074

 

$

10,277,621

 

$

9,721,343

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

(dollars in thousands)

Q2 2020

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

Loans and leases receivable

$

12,032,874

 

 

$

7,353,262

 

 

$

7,318,988

 

 

$

7,336,237

 

 

$

7,714,106

 

Loans receivable, PPP

 

(4,760,427

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loans and leases held for investment, excluding PPP

$

7,272,447

 

 

$

7,353,262

 

 

$

7,318,988

 

 

$

7,336,237

 

 

$

7,714,106

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses on loans and leases

 

159,905

 

 

 

149,283

 

 

 

56,379

 

 

 

51,053

 

 

 

48,388

 

 

 

 

 

 

 

 

 

 

 

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

 

2.20

%

 

 

2.03

%

 

 

0.77

%

 

 

0.70

%

 

 

0.63

%

 

Contacts

Jay Sidhu, Chairman & CEO 610-935-8693
Richard Ehst, President & COO 610-917-3263
Carla Leibold, CFO 484-923-8802
Sam Sidhu, Head of Corporate Development 212-843-2485

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Contacts

Jay Sidhu, Chairman & CEO 610-935-8693
Richard Ehst, President & COO 610-917-3263
Carla Leibold, CFO 484-923-8802
Sam Sidhu, Head of Corporate Development 212-843-2485