Market Overview

Customers Bancorp Reports Net Income For Second Quarter 2018

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  • Customers Bancorp, Inc.'s ("CUBI") second quarter 2018 ("Q2 2018") net income to common shareholders was $20.0 million, or $0.62 per diluted share.  CUBI's six month net income to common shareholders was $40.6 million, or $1.26 per diluted share.  Q2 2018 results include $869,000 of merger and acquisition related charges, or $0.02 per diluted share
  • The Community Business Banking segment net income to common shareholders for Q2 2018 totaled $23.4 million, or $0.72 per diluted share, and for the six month period totaled $44.9 million, or $1.39 per diluted share. The segment's adjusted net income to common shareholders (a non-GAAP measure) for Q2 2018 totaled $23.5 million, or $0.73 per diluted share, and for the six month period totaled $45.0 million, or $1.39 per diluted share
  • Adjusted for merger and acquisition related charges, securities gains and impairment losses, and depreciation and amortization catch-up adjustments, the adjusted Q2 2018 diluted earnings per share (a non-GAAP measure) increased 10% from second quarter 2017 ("Q2 2017"); however, the Community Business Banking segment adjusted earnings (a non-GAAP measure) were relatively flat year-over-year
  • In Q2 2018, the return on average assets ("ROAA") was 0.89% and the ROAA for the Community Business Banking segment was 1.02%
  • The BankMobile segment, which is expected to be spun off to shareholders and merged into Flagship Community Bank, reported a net loss for Q2 2018 of $3.3 million, or $0.10 per diluted share, and for the six month period lost $4.3 million, or $0.13 per diluted share.  Included in its results are $0.02 of merger and acquisition related charges in Q2 2018.  Adjusted for merger and acquisition related charges and depreciation and amortization catch-up adjustments, Q2 2018 losses improved to $(0.08) from $(0.14) in Q2 2017
  • Total assets at June 30, 2018 were $11.1 billion, compared to $10.9 billion at June 30, 2017
  • Commercial and industrial loans at June 30, 2018 increased $306 million, or 21.1%, from June 30, 2017
  • Net interest margin, tax equivalent ("NIM") (a non-GAAP measure) was 2.62% in Q2 2018, compared to 2.67% in Q1 2018 and 2.78% in Q2 2017; seasonal reductions in BankMobile's non-interest bearing deposits reduced NIM approximately 4 basis points from first quarter 2018 ("Q1 2018")
  • The Q2 2018 provision for loan losses decreased $1.3 million from Q2 2017 to a benefit of $0.8 million as a result of the resolution of problem loans, slower asset growth, and outstanding asset quality
  • Q2 2018 book value per common share was $22.70 and tangible book value per common share (a non-GAAP measure) was $22.15. Book value per common share has increased at a compound annual growth rate of 10.3% over the past five years
  • The BankMobile spin-off and merger are tracking to plan, with divestiture anticipated by or shortly after September 30, 2018
  • CUBI common stock, with a July 20, 2018 closing price of $28.69 was trading at 8.72x the consensus 2019 earnings estimate, and 1.30x tangible book value (a non-GAAP measure).

WYOMISSING, Pa., July 25, 2018 (GLOBE NEWSWIRE) -- Customers Bancorp, Inc. (NYSE:CUBI), the parent company of Customers Bank (collectively "Customers"), reported net income to common shareholders of $20.0 million for Q2 2018, compared to $20.1 million for Q2 2017, a decrease of $0.1 million, or 0.29%, and $20.5 million for Q1 2018, a decrease of $0.5 million, or 2.33%.  Fully diluted earnings per common share for Q2 2018 was $0.62, compared to $0.64 for Q1 2018 and $0.62 for Q2 2017.

Customers' Community Business Banking segment reported Q2 2018 net income to common shareholders of $23.4 million, which was relatively flat over Q2 2017, increased 8.67% from $21.5 million for Q1 2018.  Adjusted for securities gains and impairment losses, the segment's adjusted earnings (a non-GAAP measure) in Q2 2018 of $23.5 million increased 9.36% from $21.5 million in Q1 2018.

Customers also reported net income to common shareholders of $40.6 million for the six months ended June 30, 2018, compared to net income to common shareholders of $42.2 million for the six months ended June 30, 2017.  Fully diluted earnings per common share for the six months ended June 30, 2018 was $1.26, compared to $1.29 for the six months ended June 30, 2017.  Adjusted for merger and acquisition related charges, securities gains and impairment losses, and depreciation and amortization catch-up adjustments, Customers' six month net income available to common shareholders (a non-GAAP measure) totaled $41.4 million, a 7.62% increase compared to $38.5 million for the first six months of 2017.

"Our Community Business Banking segment, the core business of Customers once the BankMobile spin-off has been completed, generated adjusted earnings (a non-GAAP measure) of $23.5 million, or $0.73 per share, a 9.1% increase in earnings from Q1 2018 but roughly flat year-over-year.  The benefits of Customers' strong credit quality and disciplined underwriting were particularly evident this quarter as our reserve methodology resulted in a release of reserves, even as we maintained an allowance for loan losses equal to 149% of our nonperforming loans," stated Jay Sidhu, CEO and Chairman of Customers Bank.  "Subject to final regulatory approvals, we anticipate spinning off BankMobile by or shortly after September 30, 2018," Mr. Sidhu concluded.

Strategic Priorities

Grow and Improve Financial Performance of the Community Business Banking Segment; Target in Excess of 1.1% ROAA

Priorities for the Community Business Banking segment in 2018 include strong risk management, core deposit growth, and a focus on net interest margin.  Customers targets an ROAA in excess of 1.10% and a return on tangible common equity ("ROTCE") (a non-GAAP measure) greater than 12% for this segment.  Longer term, the Community Business Banking segment is targeting a net interest margin greater than 2.75%, a compound annual growth rate of 10% to 15% in EPS, and an efficiency ratio in the low forties.

In Q2 2018, the Community Business Banking segment reported net income of $23.4 million ($0.72 per diluted share), which included the funds transfer pricing cost paid by the segment for use of BankMobile's deposits at a rate of  3.03% of those deposits. For Q2 2018, the segment reported an ROAA of 1.02% and an ROTCE of 13.7%.

Credit quality at Customers Bank is very strong, as measured by the low level of nonperforming loans (0.29% of total loans at June 30, 2018); however, Customers' below average credit risk appetite is also reflected in below industry average asset yields and a more narrow net interest margin.  This narrower NIM is mitigated with a significantly better than peer-average non-interest expense to asset ratio.  Customers continues to combat the pressures of a flat yield curve and rising rates by focusing on favorable balance sheet mix shifts.  Customers recently announced its entry into  non-QM residential mortgage lending.  Simultaneously, Customers has been deemphasizing its multi-family business.  Beginning in late 2017, Customers began to significantly limit originations of loans yielding less than 5%.  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 1.42% of average assets in Q2 2018, which Customers believes is over 125 basis points lower than the industry overall.   Core deposit growth is a strategic priority for Customers. Early in July, Customers launched a new digital, on-line banking business with a goal of gathering retail deposits without branches at an average cost that is below its current marginal cost of borrowing.

Increase Capital Ratios

Total shareholders' equity at June 30, 2018 increased $25.9 million, or 2.85%, from June 30, 2017 to $936.2 million.  The estimated total risk-based capital ratio was approximately 12.7% for Q2 2018, compared to 12.4% for Q2 2017.  The estimated common equity Tier 1 capital ratio was approximately 8.7% for Q2 2018, compared to 8.3% for Q2 2017.  The estimated Tier 1 leverage capital ratio was approximately 8.9% for Q2 2018, compared to 8.7% for Q2 2017.  The tangible common equity to tangible assets ratio (a non-GAAP measure) was 6.3% at June 30, 2018, compared to 6.2% at June 30, 2017.

"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%," Mr. Sidhu stated.  "We expect our capital ratios to increase in the later part of 2018 as balance sheet growth moderates further, given seasonal declines in the mortgage warehouse business and our de-emphasis of multi-family lending," concluded Mr. Sidhu.

Grow and Successfully Divest the BankMobile Segment in 2018

BankMobile, a division of Customers Bank, operates a branchless digital bank offering very low cost banking services to its 1.8 million checking account holders, of which 1.0 million are active deposit customers. Deposit balances were approximately $420 million at June 30, 2018.  The BankMobile segment reported a net loss of $3.3 million for Q2 2018, including $869,000, or $0.02 per diluted share, in merger and acquisition related charges.  These charges include professional services expenses incurred in connection with the planned spin-off of the BankMobile business as well as expenses resulting from the 2016 acquisition of the Disbursements business.  Results include the funds transfer pricing benefit for the originated deposits at a rate of 3.03%. Deposits generated by the BankMobile business averaged $468 million for Q2 2018.

During the third quarter of 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. Flagship has filed its confidential Form 10 registration statement with the FDIC to register its class of common stock in connection with its expected listing on a national securities exchange, and the BankMobile spin-off subsidiary has filed its confidential Form 10 registration statement with the SEC to facilitate the spin-off and merger into Flagship.  Public versions of the filings will be made closer to the spin-off date.  Once approvals of the transactions and filings are received from the appropriate regulators, Customers will announce the record date for the distribution of the BankMobile spin-off subsidiary shares to Customers' shareholders.  Following the spin-off of the BankMobile spin-off subsidiary from Customers and merger with Flagship, Customers and Flagship/BankMobile will be entirely separate entities.  Customers will retain no ownership in the BankMobile business, there will be no common employees, facilities, or functions beyond certain temporary support services to BankMobile for an estimated six months according to the terms of a transition services agreement and one common director.  Subject to regulatory approvals, the BankMobile spin-off and merger are anticipated by or shortly after September 30, 2018.

Q2 2018 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended June 30, 2018 and the preceding four quarters, respectively:

 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
EARNINGS SUMMARY - UNAUDITED        
           
(Dollars in thousands, except per share data)          
  Q2 Q1 Q4 Q3 Q2
  2018 2018 2017 2017 2017
           
Net income available to common shareholders $ 20,048   $ 20,527   $ 18,000   $ 4,139   $ 20,107  
Basic earnings per common share ("EPS") $ 0.64   $ 0.65   $ 0.58   $ 0.13   $ 0.66  
Diluted EPS $ 0.62   $ 0.64   $ 0.55   $ 0.13   $ 0.62  
Average common shares outstanding - basic 31,564,893   31,424,496   30,843,319   30,739,671   30,641,554  
Average common shares outstanding - diluted 32,380,662   32,273,973   32,508,030   32,512,692   32,569,652  
Shares outstanding period end 31,669,643   31,466,271   31,382,503   30,787,632   30,730,784  
Return on average assets 0.89 % 0.95 % 0.84 % 0.29 % 0.93 %
Return on average common equity 11.32 % 11.73 % 10.11 % 2.33 % 11.84 %
Net interest margin, tax equivalent (1) 2.62 % 2.67 % 2.79 % 2.62 % 2.78 %
Efficiency ratio 64.35 % 60.84 % 62.42 % 68.55 % 58.15 %
Non-performing loans (NPLs) to total loans (including held-for-sale loans) 0.29 % 0.26 % 0.30 % 0.33 % 0.21 %
Reserves to non-performing loans 149.25 % 173.02 % 146.36 % 130.83 % 204.59 %
Net charge-offs $ 427   $ 633   $ 1,130   $ 2,495   $ 1,960  
Annualized net charge-offs to average total loans 0.02 % 0.03 % 0.05 % 0.11 % 0.09 %
Tier 1 capital to average assets (leverage ratio) (2) 8.87 % 9.03 % 8.94 % 8.35 % 8.66 %
Common equity Tier 1 capital to risk-weighted assets (2) 8.69 % 8.51 % 8.81 % 8.28 % 8.28 %
Tier 1 capital to risk-weighted assets (2) 11.26 % 11.11 % 11.58 % 10.94 % 10.96 %
Total capital to risk-weighted assets (2) 12.66 % 12.55 % 13.05 % 12.40 % 12.43 %
Tangible common equity to tangible assets (3) 6.33 % 6.36 % 7.00 % 6.47 % 6.21 %
Book value per common share $ 22.70   $ 22.30   $ 22.42   $ 22.51   $ 22.54  
Tangible book value per common share (period end) (4) $ 22.15   $ 21.74   $ 21.90   $ 21.98   $ 21.97  
Period end stock price $ 28.38   $ 29.15   $ 25.99   $ 32.62   $ 28.28  
           
(1) Non-GAAP measure calculated as GAAP net interest income, plus tax equivalent interest using an estimated  26% tax rate for Q2 2018 and Q1 2018, and an estimated  35% tax rate for Q4 2017, Q3 2017, and Q2 2017, divided by average interest earning assets.
(2) Regulatory capital ratios are estimated for Q2 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

Q2 2018 net interest income of $67.3 million decreased $1.3 million, or 1.87%, from Q2 2017 as the increase in average interest earning assets of $435.7 million, or 4.40%, was offset by a 16 basis point reduction in net interest margin, tax equivalent (a non-GAAP measure) to 2.62%.  Q2 2018 net interest income of $67.3 million increased $2.3 million, or 3.5%, from Q1 2018 due to a $448.3 million, or 4.54%, increase in average interest earning assets, offset in part by a 5 basis point reduction in net interest margin to 2.62%.  About 4 basis points of net interest margin compression resulted from the seasonal reduction in BankMobile's low cost deposits.

"The sequential quarter net interest margin compression was principally caused by rising funding costs and the seasonal reduction in BankMobile's non-interest bearing deposits," said Robert Wahlman, Customers Bancorp's CFO. "Customers' interest rate sensitivity objective is to limit sensitivity and the impact of a flat curve and rising rates over time.  Our challenge for the second half of 2018 and into 2019 is balancing deposit growth with deposit costs in a competitive, rising rate, flat yield curve environment.  We will continue to focus on originating lower cost, core deposits, disciplined loan pricing and remixing our assets as we work to combat margin pressure," concluded Mr. Wahlman.

Total loans outstanding, including loans held for sale, increased $133.2 million, or 1.48%, to $9.1 billion as of June 30, 2018, compared to total loans of $9.0 billion as of June 30, 2017.  Commercial and industrial loans increased $305.8 million to $1.8 billion, up 21.1% over June 30, 2017.  Commercial loans to mortgage companies decreased $171.3 million to $2.0 billion, a decrease of 7.94% over June 30, 2017. Multi-family loans decreased $7.6 million to $3.5 billion, a decrease of 0.21% over June 30, 2017. Commercial non-owner-occupied real estate loans decreased $60.0 million to $1.2 billion, down 4.94% from June 30, 2017.  Consumer loans, including residential mortgage, increased $36.6 million to $0.6 billion and make up only about 6% of the loan portfolio.

Total deposits decreased $179.4 million, or 2.40%, to $7.3 billion as of June 30, 2018, compared to total deposits of $7.5 billion as of June 30, 2017.  The largest decrease was $370.2 million, or 15.2%, in time deposits, which was partly offset by a $264.0 million, or 73.5%, increase in interest bearing demand deposits.  During Q2 2018, total deposits increased $253 million, or 14%, annualized, compared to Q1 2018.

Provision and Credit

The Q2 2018 provision for loan losses decreased $1.3 million from Q2 2017 to a benefit of $0.8 million.  The Q2 2018 release of $0.8 million in reserves resulted from continued strong asset quality and better than expected resolution of specific problem loans, offset in part by $0.3 million of provision for loan growth.  Net charge-offs for Q2 2018 were $0.4 million, or 2 basis points of annualized net charge-offs to average loans, compared to Q2 2017 net charge-offs of $2.0 million.  There were no significant changes in Customers' methodology that affected the Q2 2018 allowance for loan losses estimate.

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 June 30, 2018 were only 0.29% of total loans, compared to our peer group non-performing loans of approximately 0.82% in the most recent period available, and industry average non-performing loans of 1.26% 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

In Q2 2018, non-interest income decreased $2.3 million, or 12.31%, from Q2 2017 to $16.1 million.  The decline from the year ago period was largely a result of decreases in BankMobile's interchange and card revenue of $2.3 million, mortgage warehouse transactional fees of $0.6 million and deposit fees of $0.5 million. Interchange and card revenue of $6.4 million for Q2 2018 is presented net of $1.2 million of debit and prepaid card interchange expense as a result of adopting the new revenue recognition standard in Q1 2018 on a modified retrospective basis.  If Q2 2017 was presented on a consistent basis with Q2 2018, the reported amount of interchange and card revenue of $8.6 million would have been $7.4 million.  In Q2 2017, debit and prepaid card interchange expense of $1.3 million was presented as technology, communication and bank operations expense within non-interest expense.  BankMobile continues to focus on implementing its "Customers for Life" model and decrease its reliance on Disbursement related deposits. In Q2 2017, Customers also realized $3.2 million of gains from the sale of its investment securities. These decreases in non-interest income in Q2 2018 were offset in part by the increase in income from commercial leases of $1.1 million during Q2 2018.

Non-interest expense

Non-interest expenses totaled $53.8 million, an increase of $3.3 million from Q2 2017, or 6.62%.  Salaries and employee benefits increased $4.1 million as Customers continues to hire new team members in the markets it serves.  Technology, communication, and bank operations expense increased $2.4 million, given the continued investment in the BankMobile segment infrastructure and Customers' recent system conversion.  Technology, communication, and bank operations expense of $11.3 million for Q2 2018 excludes debit and prepaid card interchange expense of $1.2 million, which was reported as a reduction in interchange and card revenue within non-interest income upon adoption of the new revenue recognition standard in Q1 2018.  If Q2 2017 was presented on a consistent basis with Q2 2018, the reported amount of technology, communication and bank operations expense of $8.9 million would have been $7.6 million. These increases were partially offset by decreases in professional services of $2.4 million, which can vary from quarter to quarter.  The Community Business Banking segment's non-interest expenses, which exclude the effect of BankMobile, increased by $7.2 million in Q2 2018 when compared to Q2 2017 primarily as a result of increased salaries and employee benefits of $5.1 million mainly due to salary increases and increased headcount. The BankMobile segment's costs declined by $3.8 million to $16.0 million in Q2 2018 from Q2 2017 as compensation costs and costs for outside services declined.  The Q2 2018 efficiency ratio was 64.4% and the Q2 2018 efficiency ratio for the Community Business Banking segment was 52.8%.

Tax

The provision for income tax expense for Q2 2018 was $6.8 million, resulting in an effective tax rate of 22.4%, compared to 23.5% in Q1 2018.  Customers currently estimates a 2018 effective tax rate of approximately 24.0%.

Profitability

Customers' return on average assets was 0.89% in Q2 2018, compared to 0.93% in Q2 2017, and its return on average common equity was 11.3% in Q2 2018, compared to 11.8% in Q2 2017.  The return on average assets for the Community Business Banking segment was 1.02%, compared to 1.07% in Q2 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 $4.7 billion as of June 30, 2018 included construction loans of $99.6 million, multi-family loans of $3.5 billion, and non-owner occupied commercial real estate loans of $1.1 billion, which represent 392% of total risk-based capital on a combined basis, a reduction from 421% as of June 30, 2017.  Customers' loans subject to regulatory CRE concentration guidelines had 3 year cumulative growth of 46.3% in Q2 2018, a deceleration from 86.6% in Q2 2017.  "In a flat curve environment, we will continue to deemphasize lower yielding multi-family loans and certain CRE loans," stated Mr. Sidhu.

Customers' loans collateralized by multi-family properties were approximately 294% of total risk-based capital at June 30, 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 $6.7 million;
  • Median annual debt service coverage ratio is 136%;
  • Median loan-to-value for the portfolio is 66.9%;
  • 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 inspected thereafter on an annual basis by dedicated portfolio managers or outside inspectors; and
  • Credit approval process is independent of customer sales and portfolio management process.
Conference Call    
Date: Wednesday, July 25, 2018  
Time: 5:00 PM ET  
US Dial-in: 888-523-1194  
International Dial-in:    719-884-1601  
Participant Code: 739801  

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 Wednesday, July 25, 2018 at 8:00 PM ET until 8:00 PM ET on August 24, 2018. To listen, call within the United States 888-203-1112 or 719-457-0820 when calling internationally. Please use the replay pin number 1229607.

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 $11.1 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 in the anticipated time frame or at all, 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)                  
  Q2   Q1   Q4   Q3   Q2
  2018   2018   2017   2017   2017
Interest income:                  
Loans receivable, including fees $ 74,238     $ 66,879     $ 70,935     $ 67,107     $ 67,036  
Loans held for sale 21,002     19,052     20,294     21,633     17,524  
Investment securities 9,765     8,672     4,136     7,307     7,823  
Other 2,634     2,361     2,254     2,238     1,469  
Total interest income 107,639     96,964     97,619     98,285     93,852  
                   
Interest expense:                  
Deposits 24,182     19,793     18,649     18,381     16,228  
Other borrowings 3,275     3,376     3,288     3,168     1,993  
FHLB advances 11,176     7,080     5,697     7,032     5,340  
Subordinated debt 1,684     1,684     1,685     1,685     1,685  
Total interest expense 40,317     31,933     29,319     30,266     25,246  
Net interest income 67,322     65,031     68,300     68,019     68,606  
Provision for loan losses (784 )   2,117     831     2,352     535  
Net interest income after provision for loan losses 68,106     62,914     67,469     65,667     68,071  
                   
Non-interest income:                  
Interchange and card revenue 6,382     9,661     9,780     9,570     8,648  
Mortgage warehouse transactional fees 1,967     1,887     2,206     2,396     2,523  
Bank-owned life insurance 1,869     2,031     1,922     1,672     2,258  
Deposit fees 1,632     2,092     2,121     2,659     2,133  
Gain on sale of SBA and other loans 947     1,361     1,178     1,144     573  
Mortgage banking income 205     121     173     257     291  
Gain on sale of investment securities         268     5,349     3,183  
Impairment loss on investment securities             (8,349 )   (2,882 )
Other 3,125     3,757     2,092     3,328     1,664  
Total non-interest income 16,127     20,910     19,740     18,026     18,391  
                   
Non-interest expense:                  
Salaries and employee benefits 27,748     24,925     25,948     24,807     23,651  
Technology, communication and bank operations 11,322     9,943     12,637     14,401     8,910  
Professional services 3,811     6,008     7,010     7,403     6,227  
Occupancy 3,141     2,834     2,937     2,857     2,657  
FDIC assessments, non-income taxes, and regulatory fees 2,135     2,200     1,290     2,475     2,416  
Merger and acquisition related expenses 869     106     410          
Loan workout 648     659     522     915     408  
Advertising and promotion 319     390     361     404     378  
Other real estate owned expense 58     40     20     445     160  
Other 3,699     5,175     3,653     7,333     5,606  
Total non-interest expense 53,750     52,280     54,788     61,040     50,413  
Income before income tax expense 30,483     31,544     32,421     22,653     36,049  
Income tax expense 6,820     7,402     10,806     14,899     12,327  
Net income 23,663     24,142     21,615     7,754     23,722  
Preferred stock dividends 3,615     3,615     3,615     3,615     3,615  
Net income available to common shareholders $ 20,048     $ 20,527     $ 18,000     $ 4,139     $ 20,107  
                   
 Basic earnings per common share $ 0.64     $ 0.65     $ 0.58     $ 0.13     $ 0.66  
 Diluted earnings per common share $ 0.62     $ 0.64     $ 0.55     $ 0.13     $ 0.62  
                                       
                                       


CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED - UNAUDITED
(Dollars in thousands, except per share data)      
  June 30,   June 30,
  2018   2017
Interest income:      
Loans receivable, including fees $ 141,117     $ 128,497  
Loans held for sale 40,054     31,470  
Investment securities 18,437     13,710  
Other 4,996     3,269  
Total interest income 204,604     176,946  
       
Interest expense:      
Deposits 43,975     30,551  
Other borrowings 6,651     3,600  
FHLB advances 18,256     8,401  
Subordinated debt 3,369     3,370  
Total interest expense 72,251     45,922  
Net interest income 132,353     131,024  
Provision for loan losses 1,333     3,585  
Net interest income after provision for loan losses 131,020     127,439  
       
Non-interest income:      
Interchange and card revenue 16,043     22,158  
Bank-owned life insurance 3,900     3,624  
Mortgage warehouse transactional fees 3,854     4,743  
Deposit fees 3,724     5,260  
Gain on sale of SBA and other loans 2,308     1,901  
Mortgage banking income 325     446  
Impairment loss on investment securities     (4,585 )
Gains on sale of investment securities     3,183  
Other 6,883     4,414  
Total non-interest income 37,037     41,144  
       
Non-interest expense:      
Salaries and employee benefits 52,673     44,763  
Technology, communication and bank operations 21,266     18,827  
Professional services 9,820     13,739  
Occupancy 5,975     5,371  
FDIC assessments, non-income taxes, and regulatory fees 4,335     4,141  
Loan workout 1,307     929  
Advertising and promotion 709     704  
Merger and acquisition related expenses 975      
Other real estate owned expense 98     105  
Other 8,873     11,199  
Total non-interest expense 106,031     99,778  
Income before income tax expense 62,026     68,805  
Income tax expense 14,222     19,336  
Net income 47,804     49,469  
Preferred stock dividends 7,229     7,229  
Net income available to common shareholders $ 40,575     $ 42,240  
       
 Basic earnings per common share $ 1.29     $ 1.38  
 Diluted earnings per common share $ 1.26     $ 1.29  
               
               


CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - UNAUDITED
(Dollars in thousands)
  June 30,   March 31,   December 31,   September 30,   June 30,
  2018   2018   2017   2017   2017
ASSETS                  
Cash and due from banks $ 22,969     $ 9,198     $ 20,388     $ 13,318     $ 28,502  
Interest-earning deposits 228,757     206,213     125,935     206,162     384,740  
Cash and cash equivalents 251,726     215,411     146,323     219,480     413,242  
Investment securities, at fair value 1,161,000     1,181,661     471,371     584,823     1,012,605  
Loans held for sale 1,931,781     1,875,515     1,939,485     2,113,293     2,255,096  
Loans receivable 7,181,726     6,943,566     6,768,258     7,061,338     6,725,208  
Allowance for loan losses (38,288 )   (39,499 )   (38,015 )   (38,314 )   (38,458 )
Total loans receivable, net of allowance for loan losses 7,143,438     6,904,067     6,730,243     7,023,024     6,686,750  
FHLB, Federal Reserve Bank, and other restricted stock 136,066     130,302     105,918     98,611     129,689  
Accrued interest receivable 33,956     31,812     27,021     27,135     26,165  
Bank premises and equipment, net 11,224     11,556     11,955     12,369     12,996  
Bank-owned life insurance 261,121     259,222     257,720     255,683     213,902  
Other real estate owned 1,705     1,742     1,726     1,059     2,358  
Goodwill and other intangibles 17,150     17,477     16,295     16,604     17,615  
Other assets 143,679     140,501     131,498     119,748     113,130  
Total assets $ 11,092,846     $ 10,769,266     $ 9,839,555     $ 10,471,829     $ 10,883,548  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
Demand, non-interest bearing deposits $ 1,090,744     $ 1,260,853     $ 1,052,115     $ 1,427,304     $ 1,109,239  
Interest-bearing deposits 6,205,210     5,781,606     5,748,027     6,169,772     6,366,124  
Total deposits 7,295,954     7,042,459     6,800,142     7,597,076     7,475,363  
Federal funds purchased 105,000     195,000     155,000     147,000     150,000  
FHLB advances 2,389,797     2,252,615     1,611,860     1,462,343     1,999,600  
Other borrowings 186,888     186,735     186,497     186,258     186,030  
Subordinated debt 108,929     108,904     108,880     108,856     108,831  
Accrued interest payable and other liabilities 70,051     64,465     56,212     59,654     53,435  
Total liabilities 10,156,619     9,850,178     8,918,591     9,561,187     9,973,259  
                   
Preferred stock 217,471     217,471     217,471     217,471     217,471  
Common stock 32,200     31,997     31,913     31,318     31,261  
Additional paid in capital 428,796     424,099     422,096     429,633     428,488  
Retained earnings 299,990     279,942     258,076     240,076     235,938  
Accumulated other comprehensive (loss) income (33,997 )   (26,188 )   (359 )   377     5,364  
Treasury stock, at cost (8,233 )   (8,233 )   (8,233 )   (8,233 )   (8,233 )
Total shareholders' equity 936,227     919,088     920,964     910,642     910,289  
Total liabilities & shareholders' equity $ 11,092,846     $ 10,769,266     $ 9,839,555     $ 10,471,829     $ 10,883,548  


   
   
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES  
AVERAGE BALANCE SHEET / NET INTEREST MARGIN (UNAUDITED)  
(Dollars in thousands)            
  Three Months Ended  
  June 30,   March 31,   June 30,  
  2018   2018   2017  
  Average
Balance
Average
yield or cost
(%)
  Average
Balance
Average
yield or cost
(%)
  Average
Balance
Average
yield or cost
(%)
 
Assets                  
Interest earning deposits $ 188,880   1.78%   $ 184,033   1.53%   $ 203,460   1.08%  
Investment securities 1,213,989   3.22%   1,085,429   3.20%   1,066,277   2.94%  
Loans:                  
Commercial loans to mortgage companies 1,760,519   4.93%   1,591,749   4.69%   1,762,469   4.14%  
Multifamily loans 3,561,679   3.90%   3,637,929   3.71%   3,508,619   3.75%  
Commercial and industrial 1,713,150   4.75%   1,653,655   4.34%   1,405,150   4.21%  
Non-owner occupied commercial real estate 1,269,373   4.05%   1,281,502   3.93%   1,299,809   4.00%  
All other loans 482,098   4.85%   330,100   5.07%   542,093   4.36%  
Total loans 8,786,819   4.35%   8,494,935   4.10%   8,518,140   3.98%  
Other interest-earning assets 139,842   5.15%   116,823   5.79%   105,908   3.48%  
Total interest earning assets 10,329,530   4.18%   9,881,220   3.97%   9,893,785   3.80%  
Non-interest earning assets 391,660       394,487       371,548      
Total assets $ 10,721,190       $ 10,275,707       $ 10,265,333      
                   
Liabilities                  
Total interest bearing deposits (1) $ 5,862,211   1.65%   $ 5,812,055   1.38%   $ 6,258,310   1.04%  
Borrowings 2,736,644   2.36%   2,182,463   2.25%   1,951,282   1.85%  
Total interest bearing liabilities 8,598,855   1.88%   7,994,518   1.62%   8,209,592   1.23%  
Non-interest bearing deposits (1) 1,109,527       1,278,947       1,082,799      
Total deposits & borrowings 9,708,382   1.67%   9,273,465   1.39%   9,292,391   1.09%  
Other non-interest bearing liabilities 84,788       75,307       74,429      
Total liabilities 9,793,170       9,348,772       9,366,820      
Common equity 710,549       709,464       681,042      
Preferred stock 217,471       217,471       217,471      
Shareholders' equity 928,020       926,935       898,513      
Total liabilities and shareholders' equity $ 10,721,190       $ 10,275,707       $ 10,265,333      
                   
Net interest margin   2.61%     2.66%     2.78%  
Net interest margin tax equivalent   2.62%     2.67%     2.78%  
   
(1) Total costs of deposits (including interest bearing and non-interest bearing) were 1.39%, 1.13% and 0.89% for the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, respectively.   


   
   
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES  
AVERAGE BALANCE SHEET / NET INTEREST MARGIN (UNAUDITED)  
(Dollars in thousands)      
  Six months ended  
  June 30,   June 30,  
  2018   2017  
  Average
Balance
Average
yield or cost
(%)
  Average
Balance
Average
yield or cost
(%)
 
Assets            
Interest earning deposits $ 186,470   1.66%   $ 350,693   0.88%  
Investment securities 1,150,064   3.21%   948,657   2.91%  
Loans:            
Commercial loans to mortgage companies 1,676,601   4.81%   1,622,182   4.07%  
Multifamily loans 3,599,593   3.81%   3,423,449   3.73%  
Commercial and industrial 1,683,566   4.55%   1,378,085   4.13%  
 Non-owner occupied commercial real estate 1,275,404   3.99%   1,288,610   3.90%  
All other loans 406,519   4.94%   479,242   4.52%  
Total loans 8,641,683   4.23%   8,191,568   3.94%  
Other interest-earning assets 128,396   5.44%   91,026   3.87%  
Total interest earning assets 10,106,613   4.08%   9,581,944   3.72%  
Non-interest earning assets 393,066       356,311      
Total assets $ 10,499,679       $ 9,938,255      
             
Liabilities            
Total interest bearing deposits (1) $ 5,837,271   1.52%   $ 6,237,532   0.99%  
Borrowings 2,461,085   2.31%   1,543,154   2.01%  
Total interest-bearing liabilities 8,298,356   1.75%   7,780,686   1.19%  
Non-interest-bearing deposits (1) 1,193,769       1,198,355      
Total deposits & borrowings 9,492,125   1.53%   8,979,041   1.03%  
Other non-interest bearing liabilities 80,074       75,876      
Total liabilities 9,572,199       9,054,917      
Common equity 710,009       665,867      
Preferred stock 217,471       217,471      
Shareholders' equity 927,480       883,338      
Total liabilities and shareholders' equity $ 10,499,679       $ 9,938,255      
             
Net interest margin   2.64%     2.75%  
Net interest margin tax equivalent   2.64%     2.76%  
             
(1) Total costs of deposits (including interest bearing and non-interest bearing) were 1.26% and 0.83% for the six months ended June 30, 2018 and 2017, respectively.


 
 
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, 2018 and 2017:

  Three months ended June 30, 2018   Three Months Ended June 30, 2017
  Community
Business
Banking
  BankMobile   Consolidated   Community
Business
Banking
  BankMobile   Consolidated
Interest income (1) $ 104,110     $ 3,529     $ 107,639     $ 91,107     $ 2,745     $ 93,852  
Interest expense 40,182     135     40,317     25,228     18     25,246  
Net interest income 63,928     3,394     67,322     65,879     2,727     68,606  
Provision for loan losses (1,247 )   463     (784 )   535         535  
Non-interest income 7,465     8,662     16,127     6,971     11,420     18,391  
Non-interest expense 37,721     16,029     53,750     30,567     19,846     50,413  
Income (loss) before income tax expense (benefit) 34,919     (4,436 )   30,483     41,748     (5,699 )   36,049  
Income tax expense (benefit) 7,910     (1,090 )   6,820     14,493     (2,166 )   12,327  
Net income (loss) 27,009     (3,346 )   23,663     27,255     (3,533 )   23,722  
Preferred stock dividends 3,615         3,615     3,615         3,615  
Net income (loss) available to common shareholders $ 23,394     $ (3,346 )   $ 20,048     $ 23,640     $ (3,533 )   $ 20,107  
                       
Basic earnings (loss) per common share $ 0.74     $ (0.11 )   $ 0.64     $ 0.77     $ (0.12 )   $ 0.66  
Diluted earnings (loss) per common share $ 0.72     $ (0.10 )   $ 0.62     $ 0.73     $ (0.11 )   $ 0.62  

(1) - Amounts reported include funds transfer pricing of $3.5 million and $2.7 million for the three months ended June 30, 2018 and 2017, respectively

  Six Months Ended June 30, 2018   Six Months Ended June 30, 2017
  Community
Business
Banking
  BankMobile   Consolidated   Community
Business
Banking
  BankMobile   Consolidated
Interest income (1) $ 196,664     $ 7,940     $ 204,604     $ 169,938     $ 7,008     $ 176,946  
Interest expense 72,100     151     72,251     45,883     39     45,922  
Net interest income 124,564     7,789     132,353     124,055     6,969     131,024  
Provision for loan losses 627     706     1,333     3,585         3,585  
Non-interest income 15,904     21,133     37,037     12,398     28,746     41,144  
Non-interest expense 72,052     33,979     106,031     60,714     39,064     99,778  
Income (loss) before income tax expense (benefit) 67,789     (5,763 )   62,026     72,154     (3,349 )   68,805  
Income tax expense (benefit) 15,638     (1,416 )   14,222     20,609     (1,273 )   19,336  
Net income (loss) 52,151     (4,347 )   47,804     51,545     (2,076 )   49,469  
Preferred stock dividends 7,229         7,229     7,229         7,229  
Net income (loss) available to common shareholders $ 44,922     $ (4,347 )   $ 40,575     $ 44,316     $ (2,076 )   $ 42,240  
                       
Basic earnings (loss) per common share $ 1.43     $ (0.14 )   $ 1.29     $ 1.45     $ (0.07 )   $ 1.38  
Diluted earnings (loss) per common share $ 1.39     $ (0.13 )   $ 1.26     $ 1.36     $ (0.06 )   $ 1.29  
As of June 30, 2018 and 2017                      
                       
Goodwill and other intangibles $ 3,629     $ 13,521     $ 17,150     $ 3,633     $ 13,982     $ 17,615  
Total assets $ 11,017,272     $ 75,574     $ 11,092,846     $ 10,815,752     $ 67,796     $ 10,883,548  
Total deposits $ 6,876,688     $ 419,266     $ 7,295,954     $ 7,021,922     $ 453,441     $ 7,475,363  
Total non-deposit liabilities $ 2,843,360     $ 17,305     $ 2,860,665     $ 2,481,618     $ 16,278     $ 2,497,896  

(1) - Amounts reported include funds transfer pricing of $7.9 million and $7.0 million for the six months ended June 30, 2018 and 2017, respectively.


The following tables present Customers' business segment results for the quarter ended June 30, 2018 and the preceding four quarters:

Community Business Banking:                    
    Q2 2018   Q1 2018   Q4 2017   Q3 2017   Q2 2017
Interest income (1)   $ 104,110     $ 92,554     $ 94,407     $ 95,585     $ 91,107  
Interest expense   40,182     31,917     29,304     30,250     25,228  
Net interest income   63,928     60,637     65,103     65,335     65,879  
Provision for loan losses   (1,247 )   1,874     179     1,874     535  
Non-interest income   7,465     8,439     8,200     4,190     6,971  
Non-interest expense   37,721     34,331     33,900     33,990     30,567  
Income before income tax expense   34,919     32,871     39,224     33,661     41,748  
Income tax expense   7,910     7,728     13,369     18,999     14,493  
Net income   27,009     25,143     25,855     14,662     27,255  
Preferred stock dividends   3,615     3,615     3,615     3,615     3,615  
Net income available to common shareholders   $ 23,394     $ 21,528     $ 22,240     $ 11,047     $ 23,640  
                     
Basic earnings per common share   $ 0.74     $ 0.69     $ 0.72     $ 0.36     $ 0.77  
Diluted earnings per common share   $ 0.72     $ 0.67     $ 0.68     $ 0.34     $ 0.73  

(1) - Amounts reported include funds transfer pricing of $3.5 million, $4.4 million, $3.2 million, $2.7 million and $2.7 million for the three months ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

                     
BankMobile:                    
    Q2 2018   Q1 2018   Q4 2017   Q3 2017   Q2 2017
Interest income (1)   $ 3,529     $ 4,410     $ 3,212     $ 2,700     $ 2,745  
Interest expense   135     16     15     16     18  
Net interest income   3,394     4,394     3,197     2,684     2,727  
Provision for loan losses   463     243     652     478      
Non-interest income   8,662     12,471     11,540     13,836     11,420  
Non-interest expense   16,029     17,949     20,888     27,050     19,846  
(Loss) income before income tax (benefit) expense   (4,436 )   (1,327 )   (6,803 )   (11,008 )   (5,699 )
Income tax (benefit) expense   (1,090 )   (326 )   (2,563 )   (4,100 )   (2,166 )
Net (loss) income available to common shareholders   $ (3,346 )   $ (1,001 )   $ (4,240 )   $ (6,908 )   $ (3,533 )
                     
Basic (loss) earnings per common share   $ (0.11 )   $ (0.03 )   $ (0.14 )   $ (0.23 )   $ (0.12 )
Diluted (loss) earnings per common share   $ (0.10 )   $ (0.03 )   $ (0.13 )   $ (0.21 )   $ (0.11 )

(1) - Amounts reported include funds transfer pricing of $3.5 million, $4.4 million, $3.2 million, $2.7 million and $2.7 million for the three months ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED

(Dollars in thousands, except per share amounts)

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 used to report business segment performance.

                                 
Adjusted Net Income to Common Shareholders - Customers Bancorp                                        Q2 2018   Q1 2018   Q4 2017   Q3 2017   Q2 2017
  USD Per share   USD Per share   USD Per share   USD Per share   USD Per share
GAAP net income to common shareholders $ 20,048   $ 0.62     $ 20,527   $ 0.64     $ 18,000   $ 0.55     $ 4,139   $ 0.13     $ 20,107   $ 0.62  
Reconciling items (after tax):                            
Religare impairment                   12,934   0.40     1,758   0.05  
Merger and acquisition related expenses 655   0.02     80       256   0.01              
Losses (Gains) on investment securities 138       (10 )     (170 )     (3,356 ) (0.10 )   (1,942 ) (0.06 )
Catch-up depreciation/amortization on BankMobile assets                   1,765   0.05     (883 ) (0.03 )
Adjusted net income to common shareholders $ 20,841   $ 0.64     $ 20,597   $ 0.64     $ 18,086   $ 0.56     $ 15,482   $ 0.48     $ 19,040   $ 0.58  


Adjusted Net Income to Common Shareholders - Customers Bancorp Six Months Ended June 30, 2018   Six Months Ended June 30, 2017  
 
  USD Per share   USD Per share  
GAAP net income to common shareholders $ 40,575   $ 1.26     $ 42,240   $ 1.29    
Reconciling items (after tax):            
Religare impairment       (28 )    
Merger and acquisition related expenses 736   0.02          
Losses (Gains) on investment securities 128       (1,942 ) (0.06 )  
Catch-up depreciation/amortization on BankMobile assets       (1,765 ) (0.05 )  
Adjusted net income to common shareholders $ 41,439   $ 1.28     $ 38,505   $ 1.18    


 
 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
 
Adjusted Net Income to Common Shareholders - Community Business Banking Segment Only  
Q2 2018   Q1 2018   Q4 2017   Q3 2017   Q2 2017
  USD Per share   USD Per share   USD Per share   USD Per share   USD Per share
GAAP net income to common shareholders $ 23,394   $ 0.72     $ 21,528   $ 0.67     $ 22,240   $ 0.68     $ 11,047   $ 0.34     $ 23,640   $ 0.73  
Reconciling items (after tax):                            
Religare impairment                   12,934   0.40     1,758   0.05  
Loss/(Gains) on investment securities 138       (10 )     (170 )     (3,356 ) (0.10 )   (1,942 ) (0.06 )
Adjusted net income to common shareholders $ 23,532   $ 0.73     $ 21,518   $ 0.67     $ 22,070   $ 0.68     $ 20,625   $ 0.64     $ 23,456   $ 0.72  


Adjusted Net Income to Common Shareholders - Community Business Banking Segment Only Six Months Ended June 30, 2018   Six Months Ended June 30, 2017  
   
  USD Per share   USD Per share  
GAAP net income to common shareholders $ 44,922   $ 1.39     $ 44,316   $ 1.36    
Reconciling items (after tax):            
Religare impairment       (28 )    
Loss/(Gains) on investment securities 128       (1,942 ) (0.06 )  
Adjusted net income to common shareholders $ 45,050   $ 1.39     $ 42,346   $ 1.30    


Adjusted Net Income to Common Shareholders - BankMobile Segment                                                             
Q2 2018   Q1 2018   Q4 2017   Q3 2017   Q2 2017
  USD Per share   USD Per share   USD Per share   USD Per share   USD Per share
GAAP net income to common shareholders $ (3,346 ) $ (0.10 )   $ (1,001 ) $ (0.03 )   $ (4,240 ) $ (0.13 )   $ (6,908 ) $ (0.21 )   $ (3,533 ) $ (0.11 )
Reconciling items (after tax):                            
Merger and acquisition related expenses 655   0.02     80       256   0.01              
Catch-up depreciation/amortization on BankMobile assets                   1,765   0.05     (883 ) (0.03 )
Adjusted net income to common shareholders $ (2,691 ) $ (0.08 )   $ (921 ) $ (0.03 )   $ (3,984 ) $ (0.12 )   $ (5,143 ) $ (0.16 )   $ (4,416 ) $ (0.14 )


Adjusted Net Income to Common Shareholders - BankMobile Segment Six Months Ended June 30, 2018   Six Months Ended June 30, 2017  
   
  USD Per share   USD Per share  
GAAP net income to common shareholders $ (4,347 ) $ (0.13 )   $ (2,076 ) $ (0.06 )  
Reconciling items (after tax):            
Merger and acquisition related expenses 736   0.02          
Catch-up depreciation/amortization on BankMobile assets       (1,765 ) (0.05 )  
Adjusted net income to common shareholders $ (3,611 ) $ (0.11 )   $ (3,841 ) $ (0.11 )  


       
       
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES      
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)      
       
Return on Tangible Common Equity - Community Business Banking Segment Only      
  Q2 2018   Q2 2017
GAAP net income to common shareholders $ 23,394     $ 23,640  
       
Total shareholder's equity 907,284     904,973  
Reconciling Items:      
Preferred stock (217,471 )   (217,471 )
Goodwill & other intangibles (3,629 )   (3,633 )
Tangible common equity $ 686,184     $ 683,869  
       
Return on tangible common equity 13.67 %   13.87 %
       


CUSTOMERS BANCORP, INC. AND SUBSIDIARIES        
PERIOD END LOAN COMPOSITION (UNAUDITED)                
(Dollars in thousands)                  
  June 30,   March 31,   December 31,   September 30,   June 30,
  2018   2018   2017   2017   2017
                   
Commercial:                  
Multi-family $ 3,542,770     $ 3,645,374     $ 3,646,572     $ 3,769,206     $ 3,550,375  
Mortgage warehouse 1,987,306     1,931,320     1,844,607     2,012,864     2,158,631  
Commercial & industrial 1,755,183     1,648,324     1,582,667     1,550,210     1,449,400  
Commercial real estate- non-owner occupied 1,155,998     1,195,903     1,218,719     1,237,849     1,216,012  
Construction 88,141     81,102     85,393     73,203     61,226  
Total commercial loans 8,529,398     8,502,023     8,377,958     8,643,332     8,435,644  
                   
Consumer:                  
Residential 494,265     226,501     235,928     436,979     447,150  
Manufactured housing 85,328     87,687     90,227     92,938     96,148  
Other consumer 3,874     3,570     3,547     3,819     3,588  
Total consumer loans 583,467     317,758     329,702     533,736     546,886  
Deferred (fees)/costs and unamortized (discounts)/premiums, net 642     (700 )   83     (2,437 )   (2,226 )
Total loans $ 9,113,507     $ 8,819,081     $ 8,707,743     $ 9,174,631     $ 8,980,304  
                   
 


CUSTOMERS BANCORP, INC. AND SUBSIDIARIES    
PERIOD END DEPOSIT COMPOSITION (UNAUDITED)    
(Dollars in thousands)                  
  June 30,   March 31,   December 31,   September 30,   June 30,
  2018   2018   2017   2017   2017
                   
Demand, non-interest bearing $ 1,090,744     $ 1,260,853     $ 1,052,115     $ 1,427,304     $ 1,109,239  
Demand, interest bearing 623,343     510,418     523,848     362,269     359,361  
Savings 38,457     36,584     38,838     37,654     41,345  
Money market 3,471,249     3,345,573     3,279,648     3,469,410     3,523,056  
Time deposits 2,072,161     1,889,031     1,905,693     2,300,439     2,442,362  
Total deposits $ 7,295,954     $ 7,042,459     $ 6,800,142     $ 7,597,076     $ 7,475,363  
                   
                   


CUSTOMERS BANCORP, INC. AND SUBSIDIARIES          
ASSET QUALITY - UNAUDITED                    
(Dollars in thousands) As of June 30, 2018 As of March 31, 2018 As of June 30, 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 Total
Loans
Non Accrual /NPLs Total Credit Reserves NPLs / Total Loans Total Reserves to Total NPLs
Loan Type
Originated Loans                              
Multi-Family $ 3,540,261   $ 1,343   $ 12,072   0.04 % 898.88 % $ 3,642,808   $   $ 12,545   % % $ 3,396,888   $   $ 12,028   % %
Commercial & Industrial (1) 1,728,577   14,121   14,643   0.82 % 103.70 % 1,618,845   15,299   14,353   0.95 % 93.82 % 1,410,252   12,258   13,701   0.87 % 111.77 %
Commercial Real Estate- Non-Owner Occupied 1,140,483   2,350   4,260   0.21 % 181.28 % 1,176,949     4,444   % % 1,185,878     4,593   % %
Residential 106,076   1,902   2,047   1.79 % 107.62 % 107,920   1,767   2,111   1.64 % 119.47 % 111,157   610   2,169   0.55 % 355.57 %
Construction 88,141     992   % % 81,102     921   % % 61,226     716   % %
Other Consumer (2) 1,752     131   % % 1,339     101   % % 1,159     14   % %
Total Originated Loans 6,605,290   19,716   34,145   0.30 % 173.18 % 6,628,963   17,066   34,475   0.26 % 202.01 % 6,166,560   12,868   33,221   0.21 % 258.17 %
Loans Acquired                              
Bank Acquisitions 136,070   4,264   3,990   3.13 % 93.57 % 141,343   4,146   4,848   2.93 % 116.93 % 157,239   4,228   4,970   2.69 % 117.55 %
Loan Purchases 439,724   2,015   663   0.46 % 32.90 % 173,960   1,979   803   1.14 % 40.58 % 403,635   2,075   1,030   0.51 % 49.64 %
Total Acquired Loans 575,794   6,279   4,653   1.09 % 74.10 % 315,303   6,125   5,651   1.94 % 92.26 % 560,874   6,303   6,000   1.12 % 95.19 %
Deferred (fees) costs and unamortized (discounts) premiums, net 642       % % (700 )     % % (2,226 )     % %
Total Loans Held for Investment 7,181,726   25,995   38,798   0.36 % 149.25 % 6,943,566   23,191   40,126   0.33 % 173.02 % 6,725,208   19,171   39,221   0.29 % 204.59 %
Total Loans Held for Sale 1,931,781       % % 1,875,515       % % 2,255,096       % %
Total Portfolio $ 9,113,507   $ 25,995   $ 38,798   0.29 % 149.25 % $ 8,819,081   $ 23,191   $ 40,126   0.26 % 173.02 % $ 8,980,304   $ 19,171   $ 39,221   0.21 % 204.59 %
                               
(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)                  
  Q2   Q1   Q4   Q3   Q2
  2018   2018   2017   2017   2017
Originated Loans                  
Commercial & Industrial (1) $ 140     $ 54     $ (109 )   $ 2,025     $ 1,840  
Commercial Real Estate- Non-Owner Occupied         731     77      
Residential 42         3     125     69  
Other Consumer (2) 459     254     686     348     172  
Total Net Charge-offs from Originated Loans 641     308     1,311     2,575     2,081  
Loans Acquired                  
Bank Acquisitions (214 )   325     (181 )   (80 )   (121 )
Loan Purchases                  
Total Net Charge-offs (Recoveries) from Acquired Loans (214 )   325     (181 )   (80 )   (121 )
Total Net Charge-offs from Loans Held for Investment $ 427     $ 633     $ 1,130     $ 2,495     $ 1,960  
                   
(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
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.

Net Interest Margin, tax equivalent                          
  Six months ended June 30,                    
  2018   2017   Q2 2018   Q1 2018   Q4 2017   Q3 2017   Q2 2017
GAAP Net interest income $ 132,353     $ 131,024     $ 67,322     $ 65,031     $ 68,300     $ 68,019     $ 68,606  
Tax-equivalent adjustment 342     197     171     171     245     203     104  
Net interest income tax equivalent $ 132,695     $ 131,221     $ 67,493     $ 65,202     $ 68,545     $ 68,222     $ 68,710  
                           
Average total interest earning assets $ 10,106,613     $ 9,581,944     $ 10,329,530     $ 9,881,220     $ 9,875,987     $ 10,352,394     $ 9,893,785  
                           
Net interest margin, tax equivalent 2.64 %   2.76 %   2.62 %   2.67 %   2.79 %   2.62 %   2.78 %
                           


Tangible Common Equity to Tangible Assets                  
  Q2 2018   Q1 2018   Q4 2017   Q3 2017   Q2 2017
GAAP - Total Shareholders' Equity $ 936,227     $ 919,088     $ 920,964     $ 910,642     $ 910,289  
Reconciling Items:                  
  Preferred Stock (217,471 )   (217,471 )   (217,471 )   (217,471 )   (217,471 )
  Goodwill and Other Intangibles (17,150 )   (17,477 )   (16,295 )   (16,604 )   (17,615 )
Tangible Common Equity $ 701,606     $ 684,140     $ 687,198     $ 676,567     $ 675,203  
                   
Total Assets $ 11,092,846     $ 10,769,266     $ 9,839,555     $ 10,471,829     $ 10,883,548  
Reconciling Items:                  
Goodwill and Other Intangibles (17,150 )   (17,477 )   (16,295 )   (16,604 )   (17,615 )
Tangible Assets $ 11,075,696     $ 10,751,789     $ 9,823,260     $ 10,455,225     $ 10,865,933  
                   
Tangible Common Equity to Tangible Assets 6.33 %   6.36 %   7.00 %   6.47 %   6.21 %
                   


CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
                     
Tangible Book Value per Common Share                    
    Q2 2018   Q1 2018   Q4 2017   Q3 2017   Q2 2017
GAAP - Total Shareholders' Equity   $ 936,227     $ 919,088     $ 920,964     $ 910,642     $ 910,289  
Reconciling Items:                    
  Preferred Stock   (217,471 )   (217,471 )   (217,471 )   (217,471 )   (217,471 )
  Goodwill and Other Intangibles   (17,150 )   (17,477 )   (16,295 )   (16,604 )   (17,615 )
Tangible Common Equity   $ 701,606     $ 684,140     $ 687,198     $ 676,567     $ 675,203  
                     
Common shares outstanding   31,669,643     31,466,271     31,382,503     30,787,632     30,730,784  
                     
Tangible Book Value per Common Share   $ 22.15     $ 21.74     $ 21.90     $ 21.98     $ 21.97  
                     

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

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