Customers Bancorp Reports First Quarter 2018 Net Income of $20.5 Million; Diluted EPS of $0.64
- Community Business Banking Segment Net Income to Common Shareholders for Q1 2018 Totaled $21.5 Million, or $0.67 Per Diluted Share, an Increase of 4.1% From Q1 2017. Excluding Religare-Related Impairment Charges and Tax Benefits Totaling $1.8 Million Recorded in Q1 2017 (a Non-GAAP Measure), Net Income to Common Shareholders Increased 13.9% From Q1 2017
- Customers Bancorp, Inc. ("CUBI") Assets at March 31, 2018 Totaled $10.8 Billion, an Increase of Approximately $0.9 Billion From December 31, 2017, Including $0.7 Billion of Investment Securities Growth and $0.1 Billion of Loan Growth
- Loans at March 31, 2018 Increased $111.3 Million From December 31, 2017 (5% Annualized Growth), Driven by Commercial and Industrial Loans (17% Annualized Growth) and Mortgage Warehouse Loans (19% Annualized Growth)
- Net Interest Margin Narrowed 12 Basis Points From Q4 2017 to Q1 2018 to 2.67%. Excluding Loan Prepayment Fees, the Net Interest Margin Narrowed 5 Basis Points From Q4 2017 to Q1 2018 to 2.65% Due to Securities Purchases, the Flatness of the Curve, and Rising Funding Costs, Offset in Part by a Seasonal Increase in BankMobile's Non-Interest Bearing Deposits
- At March 31, 2018, the Estimated Tier 1 Risk-Based Capital Ratio Was Approximately 11.11%, the Estimated Total Risk-Based Capital Ratio Was Approximately 12.55%, the Estimated Common Equity Tier 1 Ratio Was Approximately 8.51%, the Estimated Tier 1 Leverage Capital Ratio Was Approximately 9.03% and the Tangible Common Equity to Tangible Assets Ratio (a Non-GAAP Measure) Was 6.36%, Consistent With Our Expectations for Capital Ratios to Fall Through Mid-Year and Rebuild Into Year-End
- The Consolidated Return on Average Assets Was 0.95% in Q1 2018; the Return on Average Assets for the Community Business Banking Segment Was 1.00% in Q1 2018
- Q1 2018 Book Value Per Common Share Was $22.30 and Tangible Book Value Per Common Share (a Non-GAAP Measure) Was $21.74. Book Value Per Share Has Increased at a Compound Annual Growth Rate of 10.4% Over The Past Five Years
- BankMobile Spin-Off and Merger Tracking to Plan, With Expected Divestiture in Q3 2018
- CUBI Common Stock, With an April 25, 2018 Closing Price of $29.80 Was Trading at a Price-to-Earnings Ratio Multiple to 2018 Consensus Earnings of 11.0x and to 2019 Consensus Earnings of 9.1x. At March 31, 2018, CUBI Common Stock Was Trading at 134.1% of Tangible Book Value (a Non-GAAP Measure).
WYOMISSING, Pa., April 30, 2018 (GLOBE NEWSWIRE) -- Customers Bancorp, Inc. (NYSE: CUBI), the parent company of Customers Bank (collectively “Customers”), reported net income to common shareholders of $20.5 million for the first quarter of 2018 ("Q1 2018") compared to $22.1 million for the first quarter of 2017 ("Q1 2017"), a decrease of $1.6 million, or 7.3%, and $18.0 million for the fourth quarter of 2017 ("Q4 2017"), an increase of $2.5 million, or 14.0%. Fully diluted earnings per common share for Q1 2018 was $0.64 compared to $0.67 for Q1 2017, a decrease of $0.03, or 4%, and $0.55 for Q4 2017, an increase of $0.09, or 16%. There were no notable items in Q1 2018. Q4 2017 results included a deferred tax asset re-measurement charge to income tax expense of $5.5 million ($0.17 per diluted share) as a result of the enactment of the Tax Cuts and Jobs Act of 2017 in December 2017 and a $7.3 million benefit ($0.23 per diluted share) from exercises of employee stock options, principally by Customers' CEO, and vesting of restricted stock units. Q1 2017 included $6.1 million of tax benefits for the vesting of restricted shares and stock option exercises and the adoption of a new tax strategy (a $0.19 per diluted share benefit) and a $1.7 million impairment loss on securities ($0.05 per diluted share cost).
“The core Community Business Banking segment, the continuing business of Customers once the BankMobile spin-off has been completed, generated earnings of $21.5 million, a 13.9% increase from the Q1 2017 adjusted Community Business Banking segment earnings (a non-GAAP measure). The segment earned a 1.0% return on average assets ('ROAA'), which we expect to move closer to our 1.1% target through year-end as we focus on managing expenses and bolstering net interest margin through loan pricing discipline, and an expected favorable funding mix shift. The Community Business Banking segment is currently on track to achieve earnings within our guided range of $2.75 to $3.00 for the year," stated Jay Sidhu, CEO and Chairman of Customers Bank. "Additionally, we remain focused and on target with our plans to divest BankMobile, build capital, and strengthen performance at the Community Business Banking segment, which we believe will drive above average shareholder value.”
Outlook
“Last quarter, Customers decided to provide more guidance for 2018 to provide greater transparency given the expected divestiture of BankMobile and impact of tax reform," stated Mr. Sidhu.
Customers expects a more moderate pace of asset growth through the remainder of 2018, with an emphasis on shifting from lower yielding to higher yielding assets. The Community Business Banking segment is expected to grow total assets approximately 10% to 15% in 2018. The full year net interest margin will likely be at the low end of the targeted 2.70% to 2.80% range. The efficiency ratio for the Community Business Banking segment in 2018 is expected to be in the mid to high 40%s with fee income of approximately $35 million to $40 million. We estimate an effective consolidated tax rate of approximately 24% for 2018. Customers expects to earn diluted EPS of $2.75 to $3.00 from the Community Business Banking segment, our core franchise which will remain as our continuing business after the spin-off and merger have been completed.
Customers expects to complete the divestiture of BankMobile in Q3 2018. BankMobile’s business is seasonal, and the full year earnings impact of BankMobile on Customers' results of operations will depend on the exact time of divestiture; however, it is currently Customers’ expectation that BankMobile's segment results will be no more than a $4.0 million loss per quarter until its divestiture.
Strategic Priorities
End 2018 With Capital Ratios Around 2017 Levels
Total shareholders' equity at March 31, 2018 decreased slightly from December 31, 2017 to $919.1 million as unrealized fair value losses on debt securities resulting from higher interest rates more than offset earnings retained in the quarter, which had a negative impact on our tangible common equity to tangible assets ratio (a non-GAAP measure). The estimated total risk-based capital ratio was approximately 12.55% for Q1 2018 compared to 13.1% for Q4 2017. The estimated common equity Tier 1 capital ratio was approximately 8.51% for Q1 2018 compared to 8.81% for Q4 2017. The estimated Tier 1 leverage capital ratio was approximately 9.03% for Q1 2018 compared to 8.94% for Q4 2017. The tangible common equity to tangible assets ratio (a non-GAAP measure) was approximately 6.36% at March 31, 2018 compared to 7.00% at December 31, 2017.
Customers recognizes the importance of not only being well capitalized in the current regulatory environment but to have adequate capital buffers to absorb any unexpected shocks. "As we expected, our capital ratios declined in Q1 2018 as we purchased securities and mortgage warehouse balances increased," stated Mr. Sidhu. "We continue to target a Tier I leverage capital ratio of 9.0% or higher and a total risk-based capital ratio of around 13.0% by the end of this year," Mr. Sidhu continued. "We expect capital ratios to remain below target through the middle of the year, given growth in the mortgage warehouse business, but then improve in the fourth quarter," concluded Mr. Sidhu.
Grow and Successfully Divest BankMobile in Third Quarter 2018
BankMobile operates a branchless digital bank offering very low cost banking services to its 1.1 million active deposit customers. Deposit balances were approximately $623.6 million at March 31, 2018, including approximately $619.4 million of non-interest bearing deposit accounts.
During Q1 2018, the BankMobile segment reported net interest income of $4.4 million, non-interest income of $12.5 million, operating expenses of $17.9 million, provision for loan losses of $0.2 million and a tax benefit of $0.3 million from the operating losses, resulting in a net loss of $1.0 million. The BankMobile segment results include the funds transfer pricing benefit received by the segment for the originated deposits in the segment reporting results at a rate of approximately 2.8%. Deposits generated by the BankMobile business averaged $644 million for Q1 2018 and $794 million for Q1 2017.
During Q3 2017, Customers decided that the best strategy for its shareholders for divesting BankMobile was to spin-off BankMobile to Customers’ shareholders subject to an agreement with Flagship Community Bank ("Flagship") for Flagship to acquire the BankMobile business. The transactions are expected to be completed in Q3 2018. Flagship has filed an application with the FDIC for its acquisition of BankMobile’s deposits.
Customers expects to shortly file an initial, confidential version of its Form 10 registration statement with the SEC with respect to the spin-off and the distribution of BankMobile Technologies, Inc. common stock to Customers’ shareholders. Customers expects a public version of the filing to be made closer to the spin-off date in accordance with SEC rules. Once approvals of the transactions and filings are received from the FDIC and SEC as appropriate, Customers will announce the record date for the distribution of BankMobile Technologies, Inc. shares to Customers' shareholders. Following the spin-off of BankMobile from Customers and merger of BankMobile with Flagship, Customers and Flagship/BankMobile will be entirely separate entities. Customers will retain no ownership in BankMobile, there will be no common employees, facilities, or functions beyond certain temporary support services to BankMobile according to the terms of a transition services agreement and one common director. Following the spin-off and merger, Customers' shareholders are to receive ownership of over 50% of Flagship common shares in what is expected to be a tax-free transaction.
Grow and Improve Financial Performance of the Community Business Banking Segment
Priorities for the Community Business Banking segment in 2018 include strong risk management, core deposit growth, a focus on net interest margin, and carefully managed credit risk. Customers is targeting an ROAA of approximately 1.10% and a return on tangible common equity ("ROTCE") (a non-GAAP measure) greater than 12%. Longer term, Customers is targeting a net interest margin between 2.80% to 3.00%, a compound annual growth rate ("CAGR") of 15% in EPS, and an efficiency ratio in the low 40%s.
In Q1 2018, the Community Business Banking segment reported net income of $21.5 million ($0.67 per diluted share), which included the funds transfer pricing cost paid by the segment for use of BankMobile’s deposits at a rate of approximately 2.8% of those deposits. For Q1 2018, the segment reported an ROAA of 1.00%, ROTCE of 13.1% (a non-GAAP measure) and an efficiency ratio of 49.7%, compared to the respective Q1 2017 metrics of 1.03%, 12.8% and 46.2%.
Credit quality at Customers Bank is very strong, as measured by the low level of net charge-offs (3 basis points of average loans on an annualized basis in Q1 2018) and nonperforming loans (0.26% of total loans at March 31, 2018). Customers' lower than peer credit risk appetite is also reflected in below average asset yields and a narrower net interest margin.
Customers' deposit strategy is to look at the total cost of deposits as the sum of operating and interest costs. Customers’ branch light model, with a focus on cost control, is reflected in dramatically lower operating expenses than the industry - operating expenses in the Community Business Banking segment were equal to 1.36% of average assets in Q1 2018, which we believe is over 125 basis points lower than the industry overall, and enables us to pay a somewhat higher than peer interest rate. Core deposit growth is a strategic priority for Customers. Of note, excluding BankMobile deposits, the Community Business Banking segment grew non-interest bearing demand deposits by 26.4% in Q1 2018 from Q1 2017 to $641 million. In 2018, Customers is developing new deposit products and incentives to support our drive to grow low cost core deposits.
Q1 2018 Overview
The following table presents a summary of key earnings and performance metrics for the quarter ended March 31, 2018 and the preceding four quarters, respectively:
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||
| EARNINGS SUMMARY - UNAUDITED | |||||||||||||||||||
| (Dollars in thousands, except per-share data) | |||||||||||||||||||
| Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
| 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
| Net income available to common shareholders | $ | 20,527 | $ | 18,000 | $ | 4,139 | $ | 20,107 | $ | 22,132 | |||||||||
| Basic earnings per common share ("EPS") | $ | 0.65 | $ | 0.58 | $ | 0.13 | $ | 0.66 | $ | 0.73 | |||||||||
| Diluted EPS | $ | 0.64 | $ | 0.55 | $ | 0.13 | $ | 0.62 | $ | 0.67 | |||||||||
| Average common shares outstanding - basic | 31,424,496 | 30,843,319 | 30,739,671 | 30,641,554 | 30,407,060 | ||||||||||||||
| Average common shares outstanding - diluted | 32,273,973 | 32,508,030 | 32,512,692 | 32,569,652 | 32,789,160 | ||||||||||||||
| Shares outstanding period end | 31,466,271 | 31,382,503 | 30,787,632 | 30,730,784 | 30,636,327 | ||||||||||||||
| Return on average assets | 0.95 | % | 0.84 | % | 0.29 | % | 0.93 | % | 1.09 | % | |||||||||
| Return on average common equity | 11.73 | % | 10.11 | % | 2.33 | % | 11.84 | % | 13.80 | % | |||||||||
| Net interest margin, tax equivalent (1) | 2.67 | % | 2.79 | % | 2.62 | % | 2.78 | % | 2.73 | % | |||||||||
| Efficiency ratio | 60.84 | % | 62.42 | % | 68.55 | % | 58.15 | % | 56.82 | % | |||||||||
| Non-performing loans (NPLs) to total loans (including held-for-sale loans) | 0.26 | % | 0.30 | % | 0.33 | % | 0.21 | % | 0.33 | % | |||||||||
| Reserves to non-performing loans | 173.02 | % | 146.36 | % | 130.83 | % | 204.59 | % | 149.85 | % | |||||||||
| Net charge-offs | $ | 633 | $ | 1,130 | $ | 2,495 | $ | 1,960 | $ | 482 | |||||||||
| Annualized net charge-offs to average total loans | 0.03 | % | 0.05 | % | 0.11 | % | 0.09 | % | 0.02 | % | |||||||||
| Tier 1 capital to average assets (leverage ratio) (2) | 9.03 | % | 8.94 | % | 8.35 | % | 8.66 | % | 9.04 | % | |||||||||
| Common equity Tier 1 capital to risk-weighted assets (2) | 8.51 | % | 8.81 | % | 8.28 | % | 8.28 | % | 8.51 | % | |||||||||
| Tier 1 capital to risk-weighted assets (2) | 11.11 | % | 11.58 | % | 10.94 | % | 10.96 | % | 11.35 | % | |||||||||
| Total capital to risk-weighted assets (2) | 12.55 | % | 13.05 | % | 12.40 | % | 12.43 | % | 12.99 | % | |||||||||
| Tangible common equity to tangible assets (3) | 6.36 | % | 7.00 | % | 6.47 | % | 6.21 | % | 6.52 | % | |||||||||
| Book value per common share | $ | 22.30 | $ | 22.42 | $ | 22.51 | $ | 22.54 | $ | 21.62 | |||||||||
| Tangible book value per common share (period end) (4) | $ | 21.74 | $ | 21.90 | $ | 21.98 | $ | 21.97 | $ | 21.04 | |||||||||
| Period end stock price | $ | 29.15 | $ | 25.99 | $ | 32.62 | $ | 28.28 | $ | 31.53 | |||||||||
| (1) Non-GAAP measure calculated as GAAP net interest income, plus tax equivalent interest using a 26% rate for Q1 2018, and a 35% rate for Q1 2017 to Q4 2017, divided by average interest earning assets. | |||||||||||||||||||
| (2) Regulatory capital ratios are estimated for Q1 2018. | |||||||||||||||||||
| (3) Non-GAAP measure calculated as GAAP total shareholders' equity less preferred stock and goodwill and other intangibles divided by total assets less goodwill and other intangibles. | |||||||||||||||||||
| (4) Non-GAAP measure calculated as GAAP total shareholders' equity less preferred stock and goodwill and other intangibles divided by common shares outstanding at period end. | |||||||||||||||||||
Net interest income
Q1 2018 net interest income of $65.0 million increased $2.6 million, or 4.2%, from Q1 2017 as average interest earning assets increased $0.6 billion, or 6.6%, and the net interest margin narrowed 6 basis points to 2.67%. Q1 2018 net interest income of $65.0 million decreased $3.3 million, or 4.8%, from Q4 2017 as the $122.2 million, or 1.25% increase in average earning assets was more than offset by a 12 basis point reduction in net interest margin to 2.67%.
"The sequential quarter net interest margin compression was principally caused by lower prepayment penalty income and shifts in our balance sheet mix as we replaced securities sold last year," said Mr. Sidhu. The reduction in loan prepayments accounted for approximately 6 basis points of the 12 basis points sequential compression, and totaled $0.6 million in Q1 2018, compared to $2.1 million in Q4 2017. "Excluding prepayment income and balance sheet mix shifts, we estimate 2-3 basis points of core margin compression, as the increase in loan yields excluding prepayments benefited net interest margin by about 8 basis points, which was more than offset by approximately 10 basis points of margin pressure from higher funding costs. Customers' objective is to manage interest rate sensitivity to about a neutral position, not speculating on whether interest rates go up or down. We will continue to focus on loan pricing and remixing our assets and as we work to strengthen core deposit funding to combat margin pressure," concluded Mr. Sidhu.
Total loans outstanding, including commercial loans held for sale, increased $111 million, or 1.28%, to $8.8 billion as of March 31, 2018 compared to total loans of $8.7 billion as of December 31, 2017. Commercial and industrial loans increased $66 million to $1.6 billion, up 4.1% over December 31, 2017. Commercial loans to mortgage companies increased $87 million to $1.9 billion, an increase of 4.7% over December 31, 2017 reflecting typical seasonality. Multi-family loans were flat at $3.6 billion compared to December 31, 2017. Commercial non-owner-occupied real estate loans decreased $23 million to $1.2 billion, down 1.9% from December 31, 2017. Reflecting Q4 2017 loan sales, consumer loans decreased $12 million to $0.3 billion and make up less than 4% of the loan portfolio.
Total deposits increased by $242 million, or 3.6%, to $7.0 billion as of March 31, 2018 compared to total deposits of $6.8 billion as of December 31, 2017. Non-interest bearing demand deposit accounts increased by $209 million, or 19.8%, to $1.3 billion reflecting favorable seasonal trend at BankMobile. Interest bearing demand deposit accounts decreased $13 million to $510 million, money market deposit accounts increased $66 million to $3.3 billion, and certificates of deposit accounts decreased $17 million to $1.9 billion.
Provision and Credit
Customers’ Q1 2018 provision for loan losses totaled $2.1 million compared to a provision expense of $3.1 million in Q1 2017. The Q1 2018 provision expense included $0.9 million for loan portfolio growth and $1.3 million for specifically identified loans, offset in part by a $0.2 million release resulting from improved asset quality and lower incurred losses than previously estimated. Net charge-offs for Q1 2018 were $0.6 million, compared to Q1 2017 net charge-offs of $0.5 million. There were no significant changes in Customers' methodology for estimating the allowance for loan losses in Q1 2018.
Risk management is a critical component of how Customers creates long-term shareholder value, and Customers believes that asset quality is one of the most important risks in banking to be understood and managed. Customers believes that asset quality risks must be diligently addressed during good economic times with prudent underwriting standards so that when the economy deteriorates the bank's capital is sufficient to absorb all losses without threatening its ability to operate and serve its community and other constituents. "Customers' non-performing loans at March 31, 2018 were only 0.26% of total loans, compared to our peer group non-performing loans of approximately 0.80% in the most recent period available, and industry average non-performing loans of 1.30% in the most recent period available. Our expectation is superior asset quality performance in good times and in difficult years," said Mr. Sidhu.
Non-interest income
Non-interest income increased $2.7 million (up 14.7%) in Q1 2018 to $20.9 million compared to Q4 2017, but was $1.0 million (down 4.5%) below Q1 2017. The modest decline from the year ago period was largely a result of decreases in BankMobile's interchange and card revenue of $3.0 million and deposit fees of $1.0 million, offset in part by increases in miscellaneous fee income of $1.0 million, primarily from commercial leases, as well as a Q1 2017 other-than-temporary impairment charges on investment securities of $1.7 million.
Non-interest expense
Non-interest expenses totaled $52.3 million, an increase of $3.8 million from Q1 2017, or 7.8%. Salaries and employee benefits increased $3.8 million as Customers continues to hire new team members in the markets it serves. Technology, communication, and bank operations increased $0.9 million, largely the result of our continued investment in our BankMobile segment infrastructure. These increases were partially offset by decreases in professional services of $1.5 million. The Community Business Banking segment's non-interest expenses, which exclude the effect of BankMobile, increased by $4.2 million in Q1 2018 when compared to Q1 2017 primarily as a result of increased salaries and employee benefits of $3.1 million mainly due to salary increases and increased headcount.
The Q1 2018 efficiency ratio was 60.8% compared to the Q1 2017 efficiency ratio of 56.8%. The Q1 2018 efficiency ratio for the Community Business Banking segment was 49.7% compared to the Q1 2017 efficiency ratio of 46.2% for the segment.
Tax
The provision for income tax expense for Q1 2018 was $7.4 million, resulting in an effective tax rate of 23.5%, compared to 21.4% in Q1 2017 and 33.3% in Q4 2017. In Q1 2017, Customers recorded a $6.1 million tax benefit related to the vesting of restricted shares and exercises of employee stock options, and the adoption of a tax strategy to capture the benefit of certain securities losses that reduced the 2017 effective tax rate to 21.4%. In Q4 2017, Customers recorded a deferred tax asset re-measurement charge to its income tax expense of $5.5 million ($0.17 per diluted share) as a result of the enactment of the Tax Cuts and Jobs Act of 2017 in December 2017. This adjustment was offset by the tax benefit recognized in Q4 2017 of $7.3 million ($0.23 per diluted share) resulting from exercises of employee stock options and vesting of restricted stock units. Customers currently estimates a 2018 effective tax rate of approximately 24.0%.
Profitability
Customers' return on average assets was 0.95% in Q1 2018 compared to 1.09% in Q1 2017, and its return on average common equity was 11.73% in Q1 2018 compared to 13.80% in Q1 2017. The return on average assets for the Community Business Banking Segment was 1.00%, compared to 1.03% in Q1 2017.
Managing Commercial Real Estate Concentration Risks and Providing High Net Worth Families Loans for Their Multi-Family Holdings
Customers' total commercial real estate ("CRE") loan exposures subject to regulatory concentration guidelines of $4.8 billion as of March 31, 2018 included construction loans of $92.9 million, multi-family loans of $3.6 billion, and non-owner occupied commercial real estate loans of $1.1 billion, which represent 409% of total risk-based capital on a combined basis, a reduction from 418% as of December 31, 2017. Customers' loans subject to regulatory CRE concentration guidelines had 3 year cumulative growth of 61% in Q1 2018, a deceleration from 112% in Q1 2017.
Recognizing the risks that accompany certain elements of commercial real estate lending, Customers has studiously sought to manage risk and has concluded that it has appropriate risk management systems in place to manage this portfolio. Customers' total real estate construction and development exposure, arguably the riskiest area of CRE, was only $92.9 million at March 31, 2018, less than 10% of total risk-based capital.
Customers' loans collateralized by multi-family properties were approximately 307% of total risk-based capital at March 31, 2018. Customers' multi-family exposures are focused principally on loans to high net worth families collateralized by multi-family properties that are of modest size and subject to what Customers believes are conservative underwriting standards. Customers believes it has a strong risk management process to manage the portfolio risks prospectively and that this portfolio will perform well even under a stressed scenario. Following are some key characteristics of Customers' multi-family loan portfolio:
- Principally concentrated in New York City with an emphasis on properties subject to some type of rent control; and principally to high net worth families;
- Average loan size is $6.9 million;
- Median annual debt service coverage ratio is 137%;
- Median loan-to-value for the portfolio is 66.8%;
- All loans are individually stressed with an increase of 1% and 2% to the cap rate and an increase of 1.5% and 3% in loan interest rates;
- All properties are inspected prior to a loan being granted and monitored thereafter on an annual basis by dedicated portfolio managers; and
- Credit approval process is independent of customer sales and portfolio management process.
| Conference Call | |||
| Date: | Monday, April 30, 2018 | ||
| Time: | 11:00 AM ET | ||
| US Dial-in: | 800-310-6649 | ||
| International Dial-in: | 719-457-1083 | ||
| Participant Code: | 610980 |
Please dial in at least 10 minutes before the start of the call to ensure timely participation. Slides accompanying the presentation will be available on the Company's website at http://customersbank.com/investor_relations.php prior to the call. A playback of the call will be available beginning April 30, 2018 at 2:00 PM ET until 2:00 PM ET on May 30, 2018. To listen, call within the United States 888-203-1112 or 719-457-0820 when calling internationally. Please use the replay pin number 3965806.
Institutional Background
Customers Bancorp, Inc. is a bank holding company located in Wyomissing, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank. Customers Bank is a community-based, full-service bank with assets of approximately $10.8 billion. A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender that provides a range of banking services to small and medium-sized businesses, professionals, individuals and families through offices in Pennsylvania, the District of Columbia, Illinois, New York, Rhode Island, Massachusetts, New Hampshire and New Jersey. Committed to fostering customer loyalty, Customers Bank uses a High Tech/High Touch strategy that includes use of industry-leading technology to provide customers better access to their money, as well as Concierge Banking® by appointment at customers’ homes or offices 12 hours a day, seven days a week. Customers Bank offers a continually expanding portfolio of loans to small businesses, multi-family projects, mortgage companies and consumers.
Customers Bancorp, Inc.'s voting common shares are listed on the New York Stock Exchange under the symbol CUBI. Additional information about Customers Bancorp, Inc. can be found on the Company’s website, www.customersbank.com.
“Safe Harbor” Statement
In addition to historical information, this press release may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.'s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words "may," "could," "should," "pro forma," "looking forward," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.'s control). Numerous competitive, economic, regulatory, legal and technological factors, among others, could cause Customers Bancorp, Inc.'s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. In addition, important factors relating to the acquisition of the Disbursements business, the combination of Customers' BankMobile business with the acquired Disbursements business, the implementation of Customers Bancorp, Inc.'s strategy regarding BankMobile, the possibility of events, changes or other circumstances occurring or existing that could result in the planned spin-off and merger of BankMobile not being completed, the possibility that the planned spin-off and merger of BankMobile may be more expensive to complete than anticipated, the possibility that the expected benefits of the planned transactions to Customers and its shareholders may not be achieved, the possibility of Customers incurring liabilities relating to the disposition of BankMobile, or the possible effects on Customers' results of operations if the planned spin-off and merger of BankMobile are not completed in a timely fashion or at all also could cause Customers Bancorp's actual results to differ from those in the forward-looking statements. Further, Customers' expectations with respect to the effects of the new tax law could be affected by future clarifications, amendments, and interpretations of such law. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management's current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.'s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2017, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank.
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED - UNAUDITED | |||||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
| 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
| Interest income: | |||||||||||||||||||
| Loans receivable, including fees | $ | 66,879 | $ | 70,935 | $ | 67,107 | $ | 67,036 | $ | 61,461 | |||||||||
| Loans held for sale | 19,052 | 20,294 | 21,633 | 17,524 | 13,946 | ||||||||||||||
| Investment securities | 8,672 | 4,136 | 7,307 | 7,823 | 5,887 | ||||||||||||||
| Other | 2,361 | 2,254 | 2,238 | 1,469 | 1,800 | ||||||||||||||
| Total interest income | 96,964 | 97,619 | 98,285 | 93,852 | 83,094 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 19,793 | 18,649 | 18,381 | 16,228 | 14,323 | ||||||||||||||
| Other borrowings | 3,376 | 3,288 | 3,168 | 1,993 | 1,608 | ||||||||||||||
| FHLB advances | 7,080 | 5,697 | 7,032 | 5,340 | 3,060 | ||||||||||||||
| Subordinated debt | 1,684 | 1,685 | 1,685 | 1,685 | 1,685 | ||||||||||||||
| Total interest expense | 31,933 | 29,319 | 30,266 | 25,246 | 20,676 | ||||||||||||||
| Net interest income | 65,031 | 68,300 | 68,019 | 68,606 | 62,418 | ||||||||||||||
| Provision for loan losses | 2,117 | 831 | 2,352 | 535 | 3,050 | ||||||||||||||
| Net interest income after provision for loan losses | 62,914 | 67,469 | 65,667 | 68,071 | 59,368 | ||||||||||||||
| Non-interest income: | |||||||||||||||||||
| Interchange and card revenue | 9,661 | 8,265 | 8,321 | 8,014 | 12,663 | ||||||||||||||
| Deposit fees | 2,092 | 2,121 | 2,659 | 2,133 | 3,127 | ||||||||||||||
| Bank-owned life insurance | 2,031 | 1,922 | 1,672 | 2,258 | 1,367 | ||||||||||||||
| Mortgage warehouse transactional fees | 1,887 | 2,206 | 2,396 | 2,523 | 2,221 | ||||||||||||||
| Gain on sale of SBA and other loans | 1,361 | 1,178 | 1,144 | 573 | 1,328 | ||||||||||||||
| Mortgage banking income | 121 | 173 | 257 | 291 | 155 | ||||||||||||||
| Gain on sale of investment securities | — | 268 | 5,349 | 3,183 | — | ||||||||||||||
| Impairment loss on investment securities | — | — | (8,349 | ) | (2,882 | ) | (1,703 | ) | |||||||||||
| Other | 3,757 | 2,092 | 3,328 | 1,664 | 2,748 | ||||||||||||||
| Total non-interest income | 20,910 | 18,225 | 16,777 | 17,757 | 21,906 | ||||||||||||||
| Non-interest expense: | |||||||||||||||||||
| Salaries and employee benefits | 24,925 | 25,948 | 24,807 | 23,651 | 21,112 | ||||||||||||||
| Technology, communication and bank operations | 9,943 | 11,122 | 13,152 | 8,276 | 9,068 | ||||||||||||||
| Professional services | 6,008 | 7,010 | 7,403 | 6,227 | 7,512 | ||||||||||||||
| Occupancy | 2,834 | 2,937 | 2,857 | 2,657 | 2,714 | ||||||||||||||
| FDIC assessments, non-income taxes, and regulatory fees | 2,200 | 1,290 | 2,475 | 2,416 | 1,725 | ||||||||||||||
| Loan workout | 659 | 522 | 915 | 408 | 521 | ||||||||||||||
| Merger and acquisition related expenses | 106 | 410 | — | — | — | ||||||||||||||
| Advertising and promotion | 390 | 361 | 404 | 378 | 326 | ||||||||||||||
| Other real estate owned expense (income) | 40 | 20 | 445 | 160 | (55 | ) | |||||||||||||
| Other | 5,175 | 3,653 | 7,333 | 5,606 | 5,595 | ||||||||||||||
| Total non-interest expense | 52,280 | 53,273 | 59,791 | 49,779 | 48,518 | ||||||||||||||
| Income before income tax expense | 31,544 | 32,421 | 22,653 | 36,049 | 32,756 | ||||||||||||||
| Income tax expense | 7,402 | 10,806 | 14,899 | 12,327 | 7,009 | ||||||||||||||
| Net income | 24,142 | 21,615 | 7,754 | 23,722 | 25,747 | ||||||||||||||
| Preferred stock dividends | 3,615 | 3,615 | 3,615 | 3,615 | 3,615 | ||||||||||||||
| Net income available to common shareholders | $ | 20,527 | $ | 18,000 | $ | 4,139 | $ | 20,107 | $ | 22,132 | |||||||||
| Basic earnings per common share | $ | 0.65 | $ | 0.58 | $ | 0.13 | $ | 0.66 | $ | 0.73 | |||||||||
| Diluted earnings per common share | $ | 0.64 | $ | 0.55 | $ | 0.13 | $ | 0.62 | $ | 0.67 | |||||||||
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||
| CONSOLIDATED BALANCE SHEET - UNAUDITED | |||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
| 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
| ASSETS | |||||||||||||||||||
| Cash and due from banks | $ | 9,198 | $ | 20,388 | $ | 13,318 | $ | 28,502 | $ | 25,004 | |||||||||
| Interest-earning deposits | 206,213 | 125,935 | 206,162 | 384,740 | 152,286 | ||||||||||||||
| Cash and cash equivalents | 215,411 | 146,323 | 219,480 | 413,242 | 177,290 | ||||||||||||||
| Investment securities, at fair value | 1,181,661 | 471,371 | 584,823 | 1,012,605 | 1,017,300 | ||||||||||||||
| Loans held for sale | 1,875,515 | 1,939,485 | 2,113,293 | 2,255,096 | 1,684,548 | ||||||||||||||
| Loans receivable | 6,943,566 | 6,768,258 | 7,061,338 | 6,725,208 | 6,599,443 | ||||||||||||||
| Allowance for loan losses | (39,499 | ) | (38,015 | ) | (38,314 | ) | (38,458 | ) | (39,883 | ) | |||||||||
| Total loans receivable, net of allowance for loan losses | 6,904,067 | 6,730,243 | 7,023,024 | 6,686,750 | 6,559,560 | ||||||||||||||
| FHLB, Federal Reserve Bank, and other restricted stock | 130,302 | 105,918 | 98,611 | 129,689 | 85,218 | ||||||||||||||
| Accrued interest receivable | 31,812 | 27,021 | 27,135 | 26,165 | 25,603 | ||||||||||||||
| Bank premises and equipment, net | 11,556 | 11,955 | 12,369 | 12,996 | 12,512 | ||||||||||||||
| Bank-owned life insurance | 259,222 | 257,720 | 255,683 | 213,902 | 213,005 | ||||||||||||||
| Other real estate owned | 1,742 | 1,726 | 1,059 | 2,358 | 2,738 | ||||||||||||||
| Goodwill and other intangibles | 17,477 | 16,295 | 16,604 | 17,615 | 17,618 | ||||||||||||||
| Other assets | 140,501 | 131,498 | 119,748 | 113,130 | 111,244 | ||||||||||||||
| Total assets | $ | 10,769,266 | $ | 9,839,555 | $ | 10,471,829 | $ | 10,883,548 | $ | 9,906,636 | |||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||
| Demand, non-interest bearing deposits | $ | 1,260,853 | $ | 1,052,115 | $ | 1,427,304 | $ | 1,109,239 | $ | 1,209,688 | |||||||||
| Interest-bearing deposits | 5,781,606 | 5,748,027 | 6,169,772 | 6,366,124 | 6,125,792 | ||||||||||||||
| Total deposits | 7,042,459 | 6,800,142 | 7,597,076 | 7,475,363 | 7,335,480 | ||||||||||||||
| Federal funds purchased | 195,000 | 155,000 | 147,000 | 150,000 | 215,000 | ||||||||||||||
| FHLB advances | 2,252,615 | 1,611,860 | 1,462,343 | 1,999,600 | 1,206,550 | ||||||||||||||
| Other borrowings | 186,735 | 186,497 | 186,258 | 186,030 | 87,289 | ||||||||||||||
| Subordinated debt | 108,904 | 108,880 | 108,856 | 108,831 | 108,807 | ||||||||||||||
| Accrued interest payable and other liabilities | 64,465 | 56,212 | 59,654 | 53,435 | 73,693 | ||||||||||||||
| Total liabilities | 9,850,178 | 8,918,591 | 9,561,187 | 9,973,259 | 9,026,819 | ||||||||||||||
| Preferred stock | 217,471 | 217,471 | 217,471 | 217,471 | 217,471 | ||||||||||||||
| Common stock | 31,997 | 31,913 | 31,318 | 31,261 | 31,167 | ||||||||||||||
| Additional paid in capital | 424,099 | 422,096 | 429,633 | 428,488 | 428,454 | ||||||||||||||
| Retained earnings | 279,942 | 258,076 | 240,076 | 235,938 | 215,830 | ||||||||||||||
| Accumulated other comprehensive (loss) income | (26,188 | ) | (359 | ) | 377 | 5,364 | (4,872 | ) | |||||||||||
| Treasury stock, at cost | (8,233 | ) | (8,233 | ) | (8,233 | ) | (8,233 | ) | (8,233 | ) | |||||||||
| Total shareholders' equity | 919,088 | 920,964 | 910,642 | 910,289 | 879,817 | ||||||||||||||
| Total liabilities & shareholders' equity | $ | 10,769,266 | $ | 9,839,555 | $ | 10,471,829 | $ | 10,883,548 | $ | 9,906,636 | |||||||||
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||
| AVERAGE BALANCE SHEET / NET INTEREST MARGIN (UNAUDITED) | ||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||
| 2018 | 2017 | 2017 | ||||||||||||||||
| Average Balance | Average yield or cost (%) | Average Balance | Average yield or cost (%) | Average Balance | Average yield or cost (%) | |||||||||||||
| Assets | ||||||||||||||||||
| Interest earning deposits | $ | 184,033 | 1.53 | % | $ | 204,762 | 1.33 | % | $ | 499,561 | 0.79 | % | ||||||
| Investment securities | 1,085,429 | 3.20 | % | 572,071 | 2.84 | % | 829,730 | 2.88 | % | |||||||||
| Loans: | ||||||||||||||||||
| Commercial loans to mortgage companies | 1,591,749 | 4.69 | % | 1,789,230 | 4.36 | % | 1,480,335 | 3.99 | % | |||||||||
| Multifamily loans | 3,637,929 | 3.71 | % | 3,716,104 | 3.81 | % | 3,337,334 | 3.71 | % | |||||||||
| Commercial and industrial | 1,653,655 | 4.34 | % | 1,560,778 | 4.21 | % | 1,350,720 | 4.05 | % | |||||||||
| Non-owner occupied commercial real estate | 1,281,502 | 3.93 | % | 1,300,329 | 4.14 | % | 1,277,286 | 3.81 | % | |||||||||
| All other loans | 330,100 | 5.07 | % | 508,680 | 4.49 | % | 415,693 | 4.74 | % | |||||||||
| Total loans | 8,494,935 | 4.10 | % | 8,875,121 | 4.08 | % | 7,861,368 | 3.89 | % | |||||||||
| Other interest-earning assets | 116,823 | 5.79 | % | 107,033 | 5.81 | % | 75,980 | 4.41 | % | |||||||||
| Total interest earning assets | 9,881,220 | 3.97 | % | 9,758,987 | 3.97 | % | 9,266,639 | 3.64 | % | |||||||||
| Non-interest earning assets | 394,487 | 404,694 | 340,902 | |||||||||||||||
| Total assets | $ | 10,275,707 | $ | 10,163,681 | $ | 9,607,541 | ||||||||||||
| Liabilities | ||||||||||||||||||
| Total interest bearing deposits (1) | $ | 5,812,055 | 1.38 | % | $ | 5,982,054 | 1.24 | % | $ | 6,216,524 | 0.93 | % | ||||||
| Borrowings | 2,182,463 | 2.25 | % | 1,990,497 | 2.13 | % | 1,130,490 | 2.28 | % | |||||||||
| Total interest bearing liabilities | 7,994,518 | 1.62 | % | 7,972,551 | 1.46 | % | 7,347,014 | 1.14 | % | |||||||||
| Non-interest bearing deposits (1) | 1,278,947 | 1,194,038 | 1,315,194 | |||||||||||||||
| Total deposits & borrowings | 9,273,465 | 1.39 | % | 9,166,589 | 1.27 | % | 8,662,208 | 0.97 | % | |||||||||
| Other non-interest bearing liabilities | 75,307 | 72,986 | 77,339 | |||||||||||||||
| Total liabilities | 9,348,772 | 9,239,575 | 8,739,547 | |||||||||||||||
| Shareholders' equity | 926,935 | 924,106 | 867,994 | |||||||||||||||
| Total liabilities and shareholders' equity | $ | 10,275,707 | $ | 10,163,681 | $ | 9,607,541 | ||||||||||||
| Net interest margin | 2.66 | % | 2.78 | % | 2.73 | % | ||||||||||||
| Net interest margin tax equivalent | 2.67 | % | 2.79 | % | 2.73 | % | ||||||||||||
| (1) Total costs of deposits (including interest bearing and non-interest bearing) were 1.13%, 1.03% and 0.77% for the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, respectively. | ||||||||||||||||||
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||
| PERIOD END LOAN COMPOSITION (UNAUDITED) | |||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
| 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
| Commercial: | |||||||||||||||||||
| Multi-family | $ | 3,645,374 | $ | 3,646,572 | $ | 3,769,206 | $ | 3,550,375 | $ | 3,438,483 | |||||||||
| Mortgage warehouse | 1,931,320 | 1,844,607 | 2,012,864 | 2,158,631 | 1,739,377 | ||||||||||||||
| Commercial & industrial | 1,648,324 | 1,582,667 | 1,550,210 | 1,449,400 | 1,337,265 | ||||||||||||||
| Commercial real estate- non-owner occupied | 1,195,903 | 1,218,719 | 1,237,849 | 1,216,012 | 1,230,738 | ||||||||||||||
| Construction | 81,102 | 85,393 | 73,203 | 61,226 | 74,956 | ||||||||||||||
| Total commercial loans | 8,502,023 | 8,377,958 | 8,643,332 | 8,435,644 | 7,820,819 | ||||||||||||||
| Consumer: | |||||||||||||||||||
| Residential | 226,501 | 235,928 | 436,979 | 447,150 | 363,584 | ||||||||||||||
| Manufactured housing | 87,687 | 90,227 | 92,938 | 96,148 | 99,182 | ||||||||||||||
| Other consumer | 3,570 | 3,547 | 3,819 | 3,588 | 3,240 | ||||||||||||||
| Total consumer loans | 317,758 | 329,702 | 533,736 | 546,886 | 466,006 | ||||||||||||||
| Deferred (fees)/costs and unamortized (discounts)/premiums, net | (700 | ) | 83 | (2,437 | ) | (2,226 | ) | (2,834 | ) | ||||||||||
| Total loans | $ | 8,819,081 | $ | 8,707,743 | $ | 9,174,631 | $ | 8,980,304 | $ | 8,283,991 | |||||||||
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||
| PERIOD END DEPOSIT COMPOSITION (UNAUDITED) | |||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
| 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
| Demand, non-interest bearing | $ | 1,260,853 | $ | 1,052,115 | $ | 1,427,304 | $ | 1,109,239 | $ | 1,209,688 | |||||||||
| Demand, interest bearing | 510,418 | 523,848 | 362,269 | 359,361 | 317,638 | ||||||||||||||
| Savings | 36,584 | 38,838 | 37,654 | 41,345 | 45,569 | ||||||||||||||
| Money market | 3,345,573 | 3,279,648 | 3,469,410 | 3,523,056 | 3,201,116 | ||||||||||||||
| Time deposits | 1,889,031 | 1,905,693 | 2,300,439 | 2,442,362 | 2,561,469 | ||||||||||||||
| Total deposits | $ | 7,042,459 | $ | 6,800,142 | $ | 7,597,076 | $ | 7,475,363 | $ | 7,335,480 | |||||||||
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||
| ASSET QUALITY - UNAUDITED | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | As of March 31, 2018 | As of December 31, 2017 | ||||||||||||||||||||||||||||
| Total Loans | Non Accrual /NPLs | Total Credit Reserves | NPLs / Total Loans | Total Reserves to Total NPLs | Total Loans | Non Accrual /NPLs | Total Credit Reserves | NPLs / Total Loans | Total Reserves to Total NPLs | |||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||
| Originated Loans | ||||||||||||||||||||||||||||||
| Multi-Family | $ | 3,642,808 | $ | — | $ | 12,545 | — | % | — | % | $ | 3,499,760 | $ | — | $ | 12,169 | — | % | — | % | ||||||||||
| Commercial & Industrial (1) | 1,618,845 | 15,299 | 14,353 | 0.95 | % | 93.82 | % | 1,546,109 | 18,478 | 13,369 | 1.20 | % | 72.35 | % | ||||||||||||||||
| Commercial Real Estate- Non-Owner Occupied | 1,176,949 | — | 4,444 | — | % | — | % | 1,199,053 | — | 4,564 | — | % | — | % | ||||||||||||||||
| Residential | 107,920 | 1,767 | 2,111 | 1.64 | % | 119.47 | % | 107,742 | 1,506 | 2,119 | 1.40 | % | 140.70 | % | ||||||||||||||||
| Construction | 81,102 | — | 921 | — | % | — | % | 85,393 | — | 979 | — | % | — | % | ||||||||||||||||
| Other Consumer (2) | 1,339 | — | 101 | — | % | — | % | 1,292 | — | 77 | — | % | — | % | ||||||||||||||||
| Total Originated Loans | 6,628,963 | 17,066 | 34,475 | 0.26 | % | 202.01 | % | 6,439,349 | 19,984 | 33,277 | 0.31 | % | 166.52 | % | ||||||||||||||||
| Loans Acquired | ||||||||||||||||||||||||||||||
| Bank Acquisitions | 141,343 | 4,146 | 4,848 | 2.93 | % | 116.93 | % | 149,400 | 4,472 | 4,558 | 2.99 | % | 101.92 | % | ||||||||||||||||
| Loan Purchases | 173,960 | 1,979 | 803 | 1.14 | % | 40.58 | % | 179,426 | 1,959 | 825 | 1.09 | % | 42.11 | % | ||||||||||||||||
| Total Acquired Loans | 315,303 | 6,125 | 5,651 | 1.94 | % | 92.26 | % | 328,826 | 6,431 | 5,383 | 1.96 | % | 83.70 | % | ||||||||||||||||
| Deferred (fees) costs and unamortized (discounts) premiums, net | (700 | ) | — | — | — | % | — | % | 83 | — | — | — | % | — | % | |||||||||||||||
| Total Loans Held for Investment | 6,943,566 | 23,191 | 40,126 | 0.33 | % | 173.02 | % | 6,768,258 | 26,415 | 38,660 | 0.39 | % | 146.36 | % | ||||||||||||||||
| Total Loans Held for Sale | 1,875,515 | — | — | — | % | — | % | 1,939,485 | — | — | — | % | — | % | ||||||||||||||||
| Total Portfolio | $ | 8,819,081 | $ | 23,191 | $ | 40,126 | 0.26 | % | 173.02 | % | $ | 8,707,743 | $ | 26,415 | $ | 38,660 | 0.30 | % | 146.36 | % | ||||||||||
| (1) Commercial & industrial loans, including owner occupied commercial real estate. | ||||||||||||||||||||||||||||||
| (2) Includes activity for BankMobile related loans, primarily overdrawn deposit accounts. | ||||||||||||||||||||||||||||||
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||
| NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED | |||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
| 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
| Originated Loans | |||||||||||||||||||
| Commercial & Industrial (1) | $ | 54 | $ | (109 | ) | $ | 2,025 | $ | 1,840 | $ | (45 | ) | |||||||
| Commercial Real Estate- Non-Owner Occupied | — | 731 | 77 | — | — | ||||||||||||||
| Residential | — | 3 | 125 | 69 | 31 | ||||||||||||||
| Other Consumer (2) | 254 | 686 | 348 | 172 | (22 | ) | |||||||||||||
| Total Net Charge-offs (Recoveries) from Originated Loans | 308 | 1,311 | 2,575 | 2,081 | (36 | ) | |||||||||||||
| Loans Acquired | |||||||||||||||||||
| Bank Acquisitions | 325 | (181 | ) | (80 | ) | (121 | ) | 518 | |||||||||||
| Loan Purchases | — | — | — | — | — | ||||||||||||||
| Total Net Charge-offs (Recoveries) from Acquired Loans | 325 | (181 | ) | (80 | ) | (121 | ) | 518 | |||||||||||
| Total Net Charge-offs from Loans Held for Investment | $ | 633 | $ | 1,130 | $ | 2,495 | $ | 1,960 | $ | 482 | |||||||||
| (1) Commercial & industrial loans, including owner occupied commercial real estate. | |||||||||||||||||||
| (2) Includes activity for BankMobile related loans, primarily overdrawn deposit accounts. | |||||||||||||||||||
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
| SEGMENT REPORTING - UNAUDITED |
(Dollars in thousands, except per share amounts)
The following tables present Customers' business segment results for the quarters ended March 31, 2018 and 2017:
| Three Months Ended March 31, 2018 | Three Months Ended March 31, 2017 | ||||||||||||||||||||||
| Community Business Banking | BankMobile | Consolidated | Community Business Banking | BankMobile | Consolidated | ||||||||||||||||||
| Interest income (1) | $ | 92,554 | $ | 4,410 | $ | 96,964 | $ | 78,832 | $ | 4,262 | $ | 83,094 | |||||||||||
| Interest expense | 31,917 | 16 | 31,933 | 20,656 | 20 | 20,676 | |||||||||||||||||
| Net interest income | 60,637 | 4,394 | 65,031 | 58,176 | 4,242 | 62,418 | |||||||||||||||||
| Provision for loan losses | 1,874 | 243 | 2,117 | 3,050 | — | 3,050 | |||||||||||||||||
| Non-interest income | 8,439 | 12,471 | 20,910 | 5,427 | 16,479 | 21,906 | |||||||||||||||||
| Non-interest expense | 34,331 | 17,949 | 52,280 | 30,147 | 18,371 | 48,518 | |||||||||||||||||
| Income (loss) before income tax expense (benefit) | 32,871 | (1,327 | ) | 31,544 | 30,406 | 2,350 | 32,756 | ||||||||||||||||
| Income tax expense (benefit) | 7,728 | (326 | ) | 7,402 | 6,116 | 893 | 7,009 | ||||||||||||||||
| Net income (loss) | 25,143 | (1,001 | ) | 24,142 | 24,290 | 1,457 | 25,747 | ||||||||||||||||
| Preferred stock dividends | 3,615 | — | 3,615 | 3,615 | — | 3,615 | |||||||||||||||||
| Net income (loss) available to common shareholders | $ | 21,528 | $ | (1,001 | ) | $ | 20,527 | $ | 20,675 | $ | 1,457 | $ | 22,132 | ||||||||||
| Basic earnings (loss) per common share | $ | 0.69 | $ | (0.04 | ) | $ | 0.65 | $ | 0.68 | $ | 0.05 | $ | 0.73 | ||||||||||
| Diluted earnings (loss) per common share | $ | 0.67 | $ | (0.03 | ) | $ | 0.64 | $ | 0.63 | $ | 0.04 | $ | 0.67 | ||||||||||
| As of March 31, 2018 and 2017 | |||||||||||||||||||||||
| Goodwill and other intangibles | $ | 3,630 | $ | 13,847 | $ | 17,477 | $ | 3,636 | $ | 13,982 | $ | 17,618 | |||||||||||
| Total assets | $ | 10,690,479 | $ | 78,787 | $ | 10,769,266 | $ | 9,833,721 | $ | 72,915 | $ | 9,906,636 | |||||||||||
| Total deposits | $ | 6,418,810 | $ | 623,649 | $ | 7,042,459 | $ | 6,627,061 | $ | 708,419 | $ | 7,335,480 | |||||||||||
| Total non-deposit liabilities | $ | 2,759,156 | $ | 48,563 | $ | 2,807,719 | $ | 1,660,967 | $ | 30,372 | $ | 1,691,339 | |||||||||||
(1) - Amounts reported include funds transfer pricing of $4.4 million and $4.3 million for the three months ended March 31, 2018 and 2017, respectively.
The following tables present Customers' business segment results for the quarter ended March 31, 2018 and the preceding four quarters:
| Community Business Banking: | ||||||||||||||||||||
| Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 | ||||||||||||||||
| Interest income (1) | $ | 92,554 | $ | 94,407 | $ | 95,585 | $ | 91,107 | $ | 78,832 | ||||||||||
| Interest expense | 31,917 | 29,304 | 30,250 | 25,228 | 20,656 | |||||||||||||||
| Net interest income | 60,637 | 65,103 | 65,335 | 65,879 | 58,176 | |||||||||||||||
| Provision for loan losses | 1,874 | 179 | 1,874 | 535 | 3,050 | |||||||||||||||
| Non-interest income | 8,439 | 8,200 | 4,190 | 6,971 | 5,427 | |||||||||||||||
| Non-interest expense | 34,331 | 33,900 | 33,990 | 30,567 | 30,147 | |||||||||||||||
| Income before income tax expense | 32,871 | 39,224 | 33,661 | 41,748 | 30,406 | |||||||||||||||
| Income tax expense | 7,728 | 13,369 | 18,999 | 14,493 | 6,116 | |||||||||||||||
| Net income | 25,143 | 25,855 | 14,662 | 27,255 | 24,290 | |||||||||||||||
| Preferred stock dividends | 3,615 | 3,615 | 3,615 | 3,615 | 3,615 | |||||||||||||||
| Net income available to common shareholders | $ | 21,528 | $ | 22,240 | $ | 11,047 | $ | 23,640 | $ | 20,675 | ||||||||||
| Basic earnings per common share | $ | 0.69 | $ | 0.72 | $ | 0.36 | $ | 0.77 | $ | 0.68 | ||||||||||
| Diluted earnings per common share | $ | 0.67 | $ | 0.68 | $ | 0.34 | $ | 0.73 | $ | 0.63 | ||||||||||
(1) - Amounts reported include funds transfer pricing of $4.4 million, $3.2 million, $2.7 million, $2.7 million and $4.3 million for the three months ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.
| BankMobile: | ||||||||||||||||||||
| Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 | ||||||||||||||||
| Interest income (1) | $ | 4,410 | $ | 3,212 | $ | 2,700 | $ | 2,745 | $ | 4,262 | ||||||||||
| Interest expense | 16 | 15 | 16 | 18 | 20 | |||||||||||||||
| Net interest income | 4,394 | 3,197 | 2,684 | 2,727 | 4,242 | |||||||||||||||
| Provision for loan losses | 243 | 652 | 478 | — | — | |||||||||||||||
| Non-interest income | 12,471 | 10,025 | 12,587 | 10,786 | 16,479 | |||||||||||||||
| Non-interest expense | 17,949 | 19,373 | 25,801 | 19,212 | 18,371 | |||||||||||||||
| (Loss) income before income tax (benefit) expense | (1,327 | ) | (6,803 | ) | (11,008 | ) | (5,699 | ) | 2,350 | |||||||||||
| Income tax (benefit) expense | (326 | ) | (2,563 | ) | (4,100 | ) | (2,166 | ) | 893 | |||||||||||
| Net (loss) income available to common shareholders | $ | (1,001 | ) | $ | (4,240 | ) | $ | (6,908 | ) | $ | (3,533 | ) | $ | 1,457 | ||||||
| Basic (loss) earnings per common share | $ | (0.04 | ) | $ | (0.14 | ) | $ | (0.23 | ) | $ | (0.11 | ) | $ | 0.05 | ||||||
| Diluted (loss) earnings per common share | $ | (0.03 | ) | $ | (0.13 | ) | $ | (0.21 | ) | $ | (0.11 | ) | $ | 0.04 | ||||||
(1) - Amounts reported include funds transfer pricing of $4.4 million, $3.2 million, $2.7 million, $2.7 million and $4.3 million for the three months ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
| RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED |
(Dollars in thousands, except per share data)
Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our financial results, which we believe enhance an overall understanding of our performance. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. Although non-GAAP financial measures are frequently used in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results of operations or financial condition as reported under GAAP.
The following tables present reconciliations of GAAP to Non-GAAP measures disclosed within this document.
| Adjusted Net Income to Common Shareholders - Community Business Banking Segment Only | ||||||||||||||||||||||||||||||||||
| Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 | ||||||||||||||||||||||||||||||
| USD | Per share | USD | Per share | USD | Per share | USD | Per share | USD | Per share | |||||||||||||||||||||||||
| GAAP net income to common shareholders | $ | 21,528 | $ | 0.67 | $ | 22,240 | $ | 0.68 | $ | 11,047 | $ | 0.34 | $ | 23,640 | $ | 0.73 | $ | 20,675 | $ | 0.63 | ||||||||||||||
| Reconciling items (after tax): | ||||||||||||||||||||||||||||||||||
| Loss of deferred tax asset for Religare impairment | — | — | — | — | 4,898 | 0.15 | — | — | — | — | ||||||||||||||||||||||||
| Religare impairment - excluding loss of deferred tax asset considered above | — | — | — | — | 8,036 | 0.25 | 1,758 | 0.05 | (1,786 | ) | (0.05 | ) | ||||||||||||||||||||||
| Gains on investment securities | (10 | ) | — | (170 | ) | — | (3,356 | ) | (0.10 | ) | (1,942 | ) | (0.06 | ) | — | — | ||||||||||||||||||
| Adjusted net income to common shareholders | $ | 21,518 | $ | 0.67 | $ | 22,070 | $ | 0.68 | $ | 20,625 | $ | 0.64 | $ | 23,456 | $ | 0.72 | $ | 18,889 | $ | 0.58 | ||||||||||||||
| Return on Tangible Common Equity - Community Business Banking Segment Only | |||||||
| Q1 2018 | Q1 2017 | ||||||
| GAAP net income to common shareholders | $ | 21,528 | $ | 20,675 | |||
| Total shareholder's equity | 887,192 | 878,114 | |||||
| Reconciling Items: | |||||||
| Preferred stock | (217,471 | ) | (217,471 | ) | |||
| Goodwill & other intangibles | (3,630 | ) | (3,636 | ) | |||
| Tangible common equity | $ | 666,091 | $ | 657,007 | |||
| Return on tangible common equity | 13.11 | % | 12.76 | % | |||
| Net Interest Margin, tax equivalent | |||||||||||||||||||
| Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 | |||||||||||||||
| GAAP Net interest income | $ | 65,031 | $ | 68,300 | $ | 68,019 | $ | 68,606 | $ | 62,418 | |||||||||
| Tax-equivalent adjustment | 171 | 245 | 203 | 104 | 93 | ||||||||||||||
| Net interest income tax equivalent | $ | 65,202 | $ | 68,545 | $ | 68,222 | $ | 68,710 | $ | 62,511 | |||||||||
| Average total interest earning assets | $ | 9,881,220 | $ | 9,758,987 | $ | 10,352,394 | $ | 9,893,785 | $ | 9,266,639 | |||||||||
| Net interest margin, tax equivalent | 2.67 | % | 2.79 | % | 2.62 | % | 2.78 | % | 2.73 | % | |||||||||
| Tangible Common Equity to Tangible Assets | |||||||||||||||||||
| Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 | |||||||||||||||
| GAAP - Total Shareholders' Equity | $ | 919,088 | $ | 920,964 | $ | 910,642 | $ | 910,289 | $ | 879,817 | |||||||||
| Reconciling Items: | |||||||||||||||||||
| Preferred Stock | (217,471 | ) | (217,471 | ) | (217,471 | ) | (217,471 | ) | (217,471 | ) | |||||||||
| Goodwill and Other Intangibles | (17,477 | ) | (16,295 | ) | (16,604 | ) | (17,615 | ) | (17,618 | ) | |||||||||
| Tangible Common Equity | $ | 684,140 | $ | 687,198 | $ | 676,567 | $ | 675,203 | $ | 644,728 | |||||||||
| Total Assets | $ | 10,769,266 | $ | 9,839,555 | $ | 10,471,829 | $ | 10,883,548 | $ | 9,906,636 | |||||||||
| Reconciling Items: | |||||||||||||||||||
| Goodwill and Other Intangibles | (17,477 | ) | (16,295 | ) | (16,604 | ) | (17,615 | ) | (17,618 | ) | |||||||||
| Tangible Assets | $ | 10,751,789 | $ | 9,823,260 | $ | 10,455,225 | $ | 10,865,933 | $ | 9,889,018 | |||||||||
| Tangible Common Equity to Tangible Assets | 6.36 | % | 7.00 | % | 6.47 | % | 6.21 | % | 6.52 | % | |||||||||
| Tangible Book Value per Common Share | |||||||||||||||||||
| Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 | |||||||||||||||
| GAAP - Total Shareholders' Equity | $ | 919,088 | $ | 920,964 | $ | 910,642 | $ | 910,289 | $ | 879,817 | |||||||||
| Reconciling Items: | |||||||||||||||||||
| Preferred Stock | (217,471 | ) | (217,471 | ) | (217,471 | ) | (217,471 | ) | (217,471 | ) | |||||||||
| Goodwill and Other Intangibles | (17,477 | ) | (16,295 | ) | (16,604 | ) | (17,615 | ) | (17,618 | ) | |||||||||
| Tangible Common Equity | $ | 684,140 | $ | 687,198 | $ | 676,567 | $ | 675,203 | $ | 644,728 | |||||||||
| Common shares outstanding | 31,466,271 | 31,382,503 | 30,787,632 | 30,730,784 | 30,636,327 | ||||||||||||||
| Tangible Book Value per Common Share | $ | 21.74 | $ | 21.90 | $ | 21.98 | $ | 21.97 | $ | 21.04 | |||||||||
Contacts:
Jay Sidhu, Chairman & CEO 610-935-8693
Robert Wahlman, CFO 610-743-8074
Bob Ramsey, Director of Investor Relations and Strategic Planning 484-926-7118