Customers Bancorp Reports Record Third Quarter 2021 Results
Customers Bancorp, Inc. (NYSE: CUBI), the parent company of Customers Bank (collectively "Customers" or "CUBI"), today reported third quarter 2021 ("Q3 2021") net income to common shareholders of $110.2 million, or $3.25 per diluted share, significantly up from second quarter 2021 ("Q2 2021") net income to common shareholders of $58.0 million, or $1.72 per diluted share. Core earnings for Q3 2021 totaled $113.9 million, or $3.36 per diluted share compared to Q2 2021 core earnings of $59.3 million, or $1.76 per diluted share (non-GAAP measures). Adjusted pre-tax pre-provision net income was $167.2 million for Q3 2021 compared to $86.5 million for Q2 2021 (non-GAAP measures). Net interest margin, tax equivalent ("NIM") increased to 4.59% for Q3 2021 from 2.98% in Q2 2021.
“This quarter's results mark a milestone in our company's history, with more income earned in a single quarter than any of our previous full-year earnings,” remarked Customers Bancorp Chairman and CEO, Jay Sidhu. “Our organic growth rates remain remarkable, with our C&I loans growing 19% year-over-year, consumer installment loans growing 32%, and non-interest bearing deposits growing 113%. In addition, we funded, either directly or indirectly, about 347,000 PPP loans totaling $10 billion, helping those businesses deal with adversities related to the pandemic with most of them thriving today. We also earned $346 million of deferred origination fees from the SBA through the PPP loans and we could not be prouder of our participation in and execution of this program. As demonstrated this quarter, the recognition of the deferred fees is significantly accretive to our earnings and capital levels as these loans are forgiven by the government. We also recently launched a blockchain-based real time payments token that will immediately begin serving a growing array of B2B clients who want the benefit of instant payments, which is expected to significantly enhance our core low-to-no cost deposit franchise. This combined with our market expansion plans, new teams and lending verticals, and strong pipeline leave us very well positioned to support future growth. We remain optimistic about our future,” Mr. Sidhu concluded.
Launch of Customers Bank Instant Token (CBIT)
“We are thrilled to announce that CBIT on the TassatPay payments platform went live on October 18, 2021. We received $1.5 billion in new non-interest bearing demand deposits as of September 30, 2021 and are very pleased with meeting the needs of our business clients through this block-chain based payment processing system. We not only developed and implemented this new technology, in partnership with TassatPay, in record time, but did so following a very thorough strategic initiative process," commented Mr. Sidhu. "We believe our technology, compliance and customer service and support systems are among the best in the country," concluded Mr. Sidhu.
As of September 30, 2021, $1.5 billion in non-interest bearing demand deposits have been attracted to the Bank through this system. We expect these deposits to grow modestly over the next few quarters, giving us an opportunity to transform our deposits into high quality, low-to-no cost, stable and growing deposit franchise.
Recruitment of New Commercial Teams
To further build out our franchise and support the growth of our business banking initiatives, we are pleased to announce the onboarding of a new expansion market (North Carolina) and three new commercial verticals (Digital Asset Banking, Technology and Venture Capital Banking and Financial Institutions Group). In addition to the teams onboarded this quarter and year to date (Florida, Texas, Harrisburg and Fund Finance), we have several teams currently in the recruitment pipeline. “Our strategy of high tech supported by high touch private banking teams has proven to be a superior business model and growth strategy. The success of our commercial team recruitment to date has given us the confidence to continue to advance the strategy allowing us to deploy the low-to-no-cost deposits we are generating. This is resulting in optimism for future earnings and continued shareholder value creation,” commented Mr. Sidhu.
Key Balance Sheet Trends
Commercial and industrial loans and leases increased $417.9 million to $2.6 billion, commercial real estate owner occupied loans increased $98.4 million to $656.0 million, consumer installment loans increased $390.7 million to $1.6 billion and construction loans increased $75.6 million to $198.6 million. These increases in loans and leases were partially offset by planned decreases in multi-family loans of $563.1 million to $1.4 billion, commercial real estate non-owner occupied loans of $89.2 million to $1.1 billion and residential mortgages of $83.0 million to $260.8 million. “Looking ahead, we see continued growth in core C&I and consumer loans offsetting the continued expected seasonal and yield curve related decreases in loans to mortgage companies at the end of this year," stated Mr. Sidhu.
Total loans and leases decreased $1.1 billion, or 6.6%, to $15.5 billion at September 30, 2021 compared to the year-ago period. As expected, commercial loans to mortgage companies declined $1.3 billion to $2.6 billion compared to the year-ago period. PPP loans were $5.0 billion at September 30, 2021, relatively unchanged from the year-ago period, driven by $4.7 billion in originations and purchases from the latest round of PPP loans, offset by $4.7 billion in forgiveness, repayments and associated net deferred fees from the new round and earlier rounds of PPP loans. Excluding PPP loans and commercial loans to mortgage companies, total loans and leases increased $238.4 million, or 3.1%, as the loan mix continued to improve year-over-year.
Total deposits increased $6.1 billion, or 56.6%, to $17.0 billion at September 30, 2021 compared to the year-ago period. Total demand deposits increased $5.3 billion, or 115.2%, to $10.0 billion, money market deposits increased $1.0 billion, or 25.5%, to $5.1 billion, and savings deposits increased $136.7 million, or 11.6%, to $1.3 billion. These increases were offset, in part, by a decrease in time deposits of $379.3 million, or 39.0%, to $593.1 million. The total cost of deposits declined by 25 basis points to 0.42% in Q3 2021 from 0.67% in the year-ago quarter. "Our current spot cost of deposits is approximately 32 basis points and we expect our deposit costs to be below 30 basis points by December 31, 2021, a dramatic improvement in our deposit franchise," stated Mr. Sidhu.
Other borrowings increased $99.2 million to $223.2 million at September 30, 2021 compared to the year-ago period from the issuance of our 2.875% fixed-to-floating rate senior notes, the proceeds of which were used to redeem all outstanding shares of our Series C and Series D Preferred Stock.
Very Strong Growth in Tangible Common Equity and Tangible Book Value Per Share
Customers experienced significant improvements in regulatory capital ratios in Q3 2021 as compared to a year ago. Customers Bancorp's tangible common equity (a non-GAAP measure) increased by $323.1 million to $1.1 billion at September 30, 2021 from $819.6 million at September 30, 2020, and the tangible book value per common share (a non-GAAP measure) increased to $35.12 at September 30, 2021 from $25.97 at September 30, 2020, an increase of 35.2%. Customers remains well capitalized by all regulatory measures.
At the Customers Bancorp level, the total risk based capital ratio (estimate) and tangible common equity to tangible assets ratio ("TCE ratio"), excluding PPP loans (a non-GAAP measure), were 13.4% and 8.1%, respectively, at September 30, 2021. At June 30, 2021, Customers Bancorp's total risk based capital ratio and TCE ratio, excluding PPP loans (a non-GAAP measure), were 13.3% and 7.7%, respectively.
Loan Portfolio Management During the COVID-19 Crisis
Over the last decade, Customers has developed a suite of commercial and retail loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s C&I, mortgage warehouse, specialty finance lines of business, and multi-family loans for example, are characterized by conservative underwriting standards and low loss rates. Because of this emphasis, the Bank’s credit quality to-date has been healthy despite a highly adverse economic environment. Maintaining strong asset quality also requires a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, Customers employs a bottom-up data driven approach to analyze its commercial portfolio.
Strong commercial loan portfolio with very low concentration in COVID-19 impacted industries and CRE
Total commercial deferments declined to $73.4 million, or 0.7% of total loans and leases, excluding PPP loans (a non-GAAP measure), at September 30, 2021, down from $89.8 million, or 0.8% of total loans and leases, excluding PPP loans, at June 30, 2021. Customers' commercial deferments peaked at about $1.2 billion in July 2020. Exposure to industry segments significantly impacted by COVID-19 is not substantial. At September 30, 2021, Customers had $83.2 million in energy and utilities exposure (with no deferments); $62.0 million in colleges and universities (with no deferments); $62.8 million in CRE retail sales exposure (mostly auto sales; with no deferments); $45.6 million in franchise restaurants and dining (with no deferments); and $23.8 million in entertainment only businesses (with no deferments). At September 30, 2021, the hospitality portfolio was $397.2 million, or 3.8% of total loans and leases, excluding PPP loans (a non-GAAP measure), with $59.2 million in deferment. Approximately 80% ($317.7 million) represents “flagged” facilities, with the majority of the non-flagged being high-end destination hotels in Cape May (NJ), Avalon (NJ), and Long Island (NY). We believe the majority of the hotels have sufficient cash resources to get through the COVID-19 crisis. At September 30, 2021, the healthcare portfolio was approximately $420.6 million, comprised predominantly of skilled nursing, which has been deemed an essential business and through a number of federal and state actions has been provided immunity from liability for COVID-19 related deaths. No deferments have been requested and there are no delinquencies. The multi-family portfolio is highly seasoned, with a weighted average loan to value of 61.7% as of quarter-end. 54.3% of the portfolio was in New York City, of which 70.6% was in rent controlled/regulated properties. As of September 30, 2021, no deferments have been requested. At September 30, 2021, investment CRE had a weighted average loan to value of 62.9%, with approximately 48.1% of the portfolio housed in New York, Philadelphia and surrounding markets. As of September 30, 2021, none of the portfolio was on deferment.Consumer installment, mortgage and home equity loan portfolios continue to perform well
Total consumer-related deferments declined to $6.7 million, or 0.1% of total loans and leases, excluding PPP loans (a non-GAAP measure), at September 30, 2021, down from $8.4 million at June 30, 2021. The $1.6 billion consumer installment loan portfolio outperformed industry peers with deferments dropping to 0.26% and 30+ day delinquency at only 0.80%. Strong credit quality (avg. FICO at origination: 740), low concentration in at-risk job segments, and outstanding performance of CB Direct originations have resulted in solid results through the end of Q3 2021. The consumer installment portfolio has been managed to moderate growth and strengthening credit quality, by replacing run-off with CB Direct originations with higher FICO scores.Key Profitability Trends
Net Interest Income
Net interest income totaled $219.9 million in Q3 2021, an increase of $81.1 million from Q2 2021, primarily due to a $334.8 million net increase in average interest-earning assets and a decrease in the cost of interest-bearing liabilities. Interest-earning asset growth was driven by increases in commercial and industrial loans, consumer loans and the purchases of PPP loans, offset by PPP loan forgiveness from the first two rounds and the latest round, which accelerated the recognition of net deferred loan origination fees, and decreases in commercial loans to mortgage companies and multi-family loans. Compared to Q2 2021, total loan yields increased 197 basis points to 5.71%. The increase is attributable to increased forgiveness of PPP loans and higher yields on C&I loans. Total borrowing costs increased by 12 basis points to 0.89% primarily due to the issuance of fixed-to-floating rate senior notes, the proceeds of which were used to redeem all outstanding shares of our Series C and Series D preferred stock offset by less reliance on borrowings due to higher deposits including the repayment of the FRB PPP Liquidity Facility, costing 0.35%. "As we've stated previously, it is difficult to predict net interest income in future periods because the timing of PPP forgiveness results in the accelerated recognition of net deferred fees and also affects the amount of net interest income expected to be earned while the PPP loans are held on our balance sheet," commented Mr. Sidhu.
Provision for Credit Losses
The provision for credit losses on loans and leases in Q3 2021 was $13.2 million, compared to a $3.3 million provision in Q2 2021. The provision in Q3 2021 was primarily to support continued growth in CB Direct consumer installment loan originations. The allowance for credit losses on loans and leases represented 1.65% of total loans and leases receivable, excluding PPP loans (a non-GAAP measure) at September 30, 2021, compared to 1.61% at June 30, 2021 and 2.02% at September 30, 2020. Customers' non-performing loans at September 30, 2021 were only 0.34% of total loans and leases, an improvement from 0.38% at September 30, 2020.
Non-Interest Income
Non-interest income totaled $25.6 million for Q3 2021, an increase of $8.8 million compared to Q2 2021. A technology-led new initiative for selling excess consumer installment loans into securitizations was launched earlier this year. This resulted in a $4.0 million gain on sale in Q3 2021, bringing YTD September 2021 consumer loan gains to $4.5 million. The SBA gains were $1.3 million in Q3 2021, bringing the YTD September 2021 SBA gains to $4.3 million. "We will continue to grow this initiative," commented Mr. Sidhu. The $6.1 million of gains realized from the sale of investment securities were used to offset a $6.2 million make-whole fee paid to a single high-cost deposit customer in Q3 2021.
Non-Interest Expense
The management of non-interest expenses remains a priority at Customers. However, this will not be at the expense of not making adequate investments with new technologies. Our Q3 2021 normalized expenses were about unchanged over Q2 2021, although our financial statements show an increase of $9.2 million compared to Q2 2021. The increase was primarily due to over $8.0 million of certain one-time or other transitory items including a $6.2 million make-whole fee paid to a single high-cost deposit customer, a litigation settlement amount of $1.2 million, and $0.6 million of increased outside service expense to assist with the PPP forgiveness process, and higher technology and servicing-related expenses of $1.7 million and a $0.6 million increase in the provision to credit losses for unfunded commitments. These increases were offset in part by a net decrease of $1.8 million in salaries and employee benefits primarily resulting from approximately $2.5 million of compensation expense associated with an executive's retirement and other one-time benefits in Q2 2021.
Taxes
Income tax expense from continuing operations increased by $16.2 million to $36.3 million in Q3 2021 from $20.1 million in Q2 2021 primarily due to an increase in projected pre-tax income from continuing operations. The effective tax rate from continuing operations remained relatively constant at approximately 24%. Customers expects the full-year 2021 effective tax rate from continuing operations to be approximately 20% to 25%.
Net Loss From Discontinued Operations
The divestiture of BankMobile Technologies, Inc. was completed on January 4, 2021, and its historical financial results are presented as discontinued operations.
Outlook
“Looking ahead, we are very optimistic about the prospects of our company. The best in class tech agility of Customers Bancorp has allowed us to be a major participant in the PPP program and to incubate new lines of businesses that leverage our fintech relationships. We recently launched a private real-time, blockchain-based B2B payments platform with integration of digital and legacy payment rails. The platform will deliver enhanced payments functionality for our business clients and is expected to generate additional deposit growth in targeted niches, such as real estate, monetary and currency exchanges and institutional investments. We've achieved significant accretion in our capital levels over the past 12 months and our credit quality is expected to remain in line with or better than peers. The financial benefits of PPP aside, we project our recurring core earnings power to be $4.00 in 2021; $4.75 - $5.00 in 2022, an increase of 20% - 25% over 2021 core earnings; and we expect to achieve $6.00 in core EPS even sooner than the guidance we had provided for 2025,” concluded Mr. Sidhu.
Webcast
Date:
Thursday, October 28, 2021
Time:
9:00 AM EDT
The live audio webcast, presentation slides, and earnings press release will be made available at https://www.customersbank.com/investor-relations/ and at the Customers Bancorp 3rd Quarter Earnings Webcast.
You may submit questions in advance of the live webcast by emailing Customers' Communications & Marketing Director, David Patti at dpatti@customersbank.com; questions may also be asked during the webcast through the webcast application.
The webcast will be archived for viewing on the Customers Bancorp Investor Relations page and available beginning approximately two hours after the conclusion of the live event.
Institutional Background
Customers Bancorp, Inc. (NYSE:CUBI) is a bank holding company located in West Reading, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank, a full-service bank with $19.1 billion in assets at September 30, 2021. A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender that provides a range of banking and lending services to small and medium-sized businesses, professionals, individuals and families. Services and products are available wherever permitted by law through mobile-first apps, online portals, and a network of offices and branches. Customers Bank provides blockchain-based digital payments via the Customers Bank Instant Token (CBIT) which allows clients to make real-time payments in US dollars, 24 hours a day, 7 days a week, 365 days a year.
“Safe Harbor” Statement
In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: the adverse impact on the U.S. economy, including the markets in which we operate, of the coronavirus outbreak, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2020, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.
Q3 2021 Overview
The following table presents a summary of key earnings and performance metrics for the quarter ended September 30, 2021 and the preceding four quarters:
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
EARNINGS SUMMARY - UNAUDITED
(Dollars in thousands, except per share data and stock price data)
Q3
Q2
Q1
Q4
Q3
Nine Months Ended
September 30,
2021
2021
2021
2020
2020
2021
2020
GAAP Profitability Metrics:
Net income available to common shareholders
(from continuing and discontinued operations)
$
110,241
$
58,042
$
33,204
$
52,831
$
47,085
$
201,487
$
65,706
Per share amounts:
Earnings per share - basic
$
3.40
$
1.80
$
1.04
$
1.67
$
1.49
$
6.26
$
2.09
Earnings per share - diluted
$
3.25
$
1.72
$
1.01
$
1.65
$
1.48
$
6.02
$
2.07
Book value per common share (1)
$
35.24
$
31.94
$
30.13
$
28.37
$
26.43
$
35.24
$
26.43
CUBI stock price (1)
$
43.02
$
38.99
$
31.82
$
18.18
$
11.20
$
43.02
$
11.20
CUBI stock price as % of book value (1)
122
%
122
%
106
%
64
%
42
%
122
%
42
%
Average shares outstanding - basic
32,449,853
32,279,625
31,883,946
31,638,447
31,517,504
32,206,547
31,462,284
Average shares outstanding - diluted
33,868,553
33,741,468
32,841,711
31,959,100
31,736,311
33,487,672
31,666,027
Shares outstanding (1)
32,537,976
32,353,256
32,238,762
31,705,088
31,555,124
32,537,976
31,555,124
Return on average assets ("ROAA")
2.33
%
1.27
%
0.80
%
1.23
%
1.12
%
1.49
%
0.69
%
Return on average common equity ("ROCE")
40.82
%
23.22
%
14.66
%
24.26
%
23.05
%
26.99
%
11.01
%
Efficiency ratio
33.42
%
46.59
%
48.89
%
43.56
%
46.76
%
41.07
%
50.28
%
Non-GAAP Profitability Metrics (2):
Core earnings
$
113,876
$
59,303
$
70,308
$
54,588
$
38,439
$
243,487
$
64,939
Adjusted pre-tax pre-provision net income
$
167,215
$
86,467
$
86,769
$
77,896
$
64,146
$
340,451
$
162,302
Per share amounts:
Core earnings per share - diluted
$
3.36
$
1.76
$
2.14
$
1.71
$
1.21
$
7.27
$
2.05
Tangible book value per common share (1)
$
35.12
$
31.82
$
30.01
$
27.92
$
25.97
$
35.12
$
25.97
CUBI stock price as % of tangible book value (1)
122
%
123
%
106
%
65
%
43
%
122
%
43
%
Core ROAA
2.35
%
1.30
%
1.61
%
1.26
%
0.93
%
1.76
%
0.69
%
Core ROCE
42.16
%
23.72
%
31.03
%
25.06
%
18.82
%
32.61
%
10.88
%
Adjusted ROAA - pre-tax and pre-provision
3.36
%
1.80
%
1.90
%
1.70
%
1.43
%
2.37
%
1.47
%
Adjusted ROCE - pre-tax and pre-provision
60.81
%
33.27
%
36.80
%
34.20
%
29.73
%
44.30
%
25.41
%
Net interest margin, tax equivalent
4.59
%
2.98
%
3.00
%
2.78
%
2.50
%
3.55
%
2.68
%
Net interest margin, tax equivalent, excluding PPP loans
3.24
%
3.30
%
2.99
%
3.04
%
2.86
%
3.17
%
2.93
%
Core efficiency ratio
30.36
%
44.33
%
41.13
%
42.89
%
46.10
%
37.31
%
48.68
%
Asset Quality:
Net charge-offs
$
7,104
$
6,591
$
12,521
$
8,472
$
17,299
$
26,216
$
46,335
Annualized net charge-offs to average total loans and leases
0.17
%
0.16
%
0.33
%
0.21
%
0.45
%
0.22
%
0.49
%
Non-performing loans ("NPLs") to total loans and leases (1)
0.34
%
0.27
%
0.30
%
0.45
%
0.38
%
0.34
%
0.38
%
Reserves to NPLs (1)
252.68
%
269.96
%
264.21
%
204.48
%
244.70
%
252.68
%
244.70
%
Non-performing assets ("NPAs") to total assets
0.27
%
0.24
%
0.26
%
0.39
%
0.34
%
0.27
%
0.34
%
Customers Bank Capital Ratios (3):
Common equity Tier 1 capital to risk-weighted assets
12.77
%
12.40
%
11.75
%
10.62
%
10.12
%
12.77
%
10.12
%
Tier 1 capital to risk-weighted assets
12.77
%
12.40
%
11.75
%
10.62
%
10.12
%
12.77
%
10.12
%
Total capital to risk-weighted assets
14.16
%
13.77
%
13.11
%
12.06
%
11.62
%
14.16
%
11.62
%
Tier 1 capital to average assets (leverage ratio)
8.66
%
9.07
%
9.35
%
9.21
%
9.29
%
8.66
%
9.29
%
(1) Metric is a spot balance for the last day of each quarter presented.
(2) Non-GAAP measures exclude net loss from discontinued operations, loss on sale of foreign subsidiaries, unrealized gains (losses) on loans held for sale, investment securities gains and losses, loss on cash flow hedge derivative terminations, severance expense, merger and acquisition-related expenses, losses realized from the sale of non-QM residential mortgage loans, loss upon acquisition of interest-only GNMA securities, legal reserves, credit valuation adjustments on derivatives, risk participation agreement mark-to-market adjustments, deposit relationship adjustment fees, loss on redemption of preferred stock, goodwill and intangible assets, and PPP loans. These notable items are not included in Customers' disclosures of core earnings and other core profitability metrics. Please note that not each of the aforementioned adjustments affected the reported amount in each of the periods presented. Customers' reasons for the use of these non-GAAP measures and a detailed reconciliation between the non-GAAP measures and the comparable GAAP amounts are included at the end of this document.
(3) Regulatory capital ratios are estimated for Q3 2021 and actual for the remaining periods. In accordance with regulatory capital rules, Customers elected an option to delay the estimated impact of CECL on its regulatory capital over a five-year transition period ending January 1, 2025. As a result, capital ratios and amounts as of Q3 2021 exclude the impact of the increased allowance for credit losses on loans and leases and unfunded loan commitments attributed to the adoption of CECL and 25% of the quarterly provision for credit losses for subsequent quarters through Q4 2021.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Dollars in thousands, except per share data)
Nine Months Ended
Q3
Q2
Q1
Q4
Q3
September 30,
2021
2021
2021
2020
2020
2021
2020
Interest income:
Loans and leases
$
233,097
$
153,608
$
152,117
$
145,414
$
132,107
$
538,822
$
366,634
Investment securities
8,905
8,327
7,979
6,777
6,297
25,211
17,429
Other
849
946
1,019
902
1,246
2,814
6,149
Total interest income
242,851
162,881
161,115
153,093
139,650
566,847
390,212
Interest expense:
Deposits
15,915
15,653
15,658
16,107
18,347
47,226
75,939
FHLB advances
5
963
5,192
5,749
5,762
6,160
15,889
Subordinated debt
2,689
2,689
2,689
2,688
2,689
8,067
8,066
FRB PPP liquidity facility, federal funds purchased and other
borrowings
4,350
4,819
4,845
5,603
5,413
14,014
9,576
Total interest expense
22,959
24,124
28,384
30,147
32,211
75,467
109,470
Net interest income
219,892
138,757
132,731
122,946
107,439
491,380
280,742
Provision (benefit) for credit losses on loans and leases
13,164
3,291
(2,919)
(2,913)
12,955
13,536
65,688
Net interest income after provision (benefit)
for credit losses on loans and leases
206,728
135,466
135,650
125,859
94,484
477,844
215,054
Non-interest income:
Interchange and card revenue
83
84
85
91
92
252
555
Deposit fees
994
891
863
823
650
2,748
1,703
Commercial lease income
5,213
5,311
5,205
4,853
4,510
15,729
13,286
Bank-owned life insurance
1,988
2,765
1,679
1,744
1,746
6,432
5,265
Mortgage warehouse transactional fees
3,100
3,265
4,247
3,681
3,320
10,612
7,854
Gain (loss) on sale of SBA and other loans
5,359
1,900
1,575
1,689
286
8,834
320
Mortgage banking income (loss)
425
386
463
346
1,013
1,274
1,347
Gain (loss) on sale of investment securities
6,063
1,812
23,566
44
11,707
31,441
20,035
Unrealized gain (loss) on investment securities
—
1,746
974
1,387
238
2,720
60
Loss on sale of foreign subsidiaries
—
(2,840)
—
—
—
(2,840)
—
Unrealized gain (loss) on derivatives
524
(439)
2,537
804
549
2,622
(4,755)
Loss on cash flow hedge derivative terminations
—
—
(24,467)
—
—
(24,467)
—
Other
1,837
1,941
1,741
621
753
5,519
2,066
Total non-interest income
25,586
16,822
18,468
16,083
24,864
60,876
47,736
Non-interest expense:
Salaries and employee benefits
26,268
28,023
23,971
25,600
24,752
78,262
68,467
Technology, communication and bank operations
21,281
19,618
19,988
16,021
13,005
60,887
34,647
Professional services
8,249
8,234
6,289
5,449
4,421
22,772
10,939
Occupancy
2,704
2,482
2,621
2,742
3,368
7,807
8,620
Commercial lease depreciation
4,493
4,415
4,291
3,982
3,663
13,199
10,733
FDIC assessments, non-income taxes and regulatory fees
2,313
2,602
2,719
2,642
3,784
7,634
9,019
Merger and acquisition related expenses
—
—
418
709
658
418
658
Loan workout
198
102
(261)
123
846
39
3,020
Advertising and promotion
302
313
561
—
—
1,176
1,795
Deposit relationship adjustment fees
6,216
—
—
—
—
6,216
—
Other
7,985
5,034
1,330
2,665
1,788
14,349
7,145
Total non-interest expense
80,009
70,823
61,927
59,933
56,285
212,759
155,043
Income before income tax expense
152,305
81,465
92,191
82,009
63,063
325,961
107,747
Income tax expense
36,263
20,124
17,560
23,447
12,016
73,947
23,270
Net income from continuing operations
116,042
61,341
74,631
58,562
51,047
252,014
84,477
Loss from discontinued operations before income taxes
—
—
(20,354)
(3,539)
(347)
(20,354)
(10,259)
Income tax expense (benefit) from discontinued operations
—
—
17,682
(1,222)
185
17,682
(2,114)
Net loss from discontinued operations
—
—
(38,036)
(2,317)
(532)
(38,036)
(8,145)
Net income
116,042
61,341
36,595
56,245
50,515
213,978
76,332
Preferred stock dividends
2,981
3,299
3,391
3,414
3,430
9,671
10,626
Loss on redemption of preferred stock
2,820
—
—
—
—
2,820
—
Net income available to common shareholders
$
110,241
$
58,042
$
33,204
$
52,831
$
47,085
$
201,487
$
65,706
Basic earnings per common share from continuing operations
$
3.40
$
1.80
$
2.23
$
1.74
$
1.51
$
7.44
$
2.35
Basic earnings per common share
$
3.40
$
1.80
$
1.04
$
1.67
$
1.49
$
6.26
$
2.09
Diluted earnings per common share from continuing operations
$
3.25
$
1.72
$
2.17
$
1.73
$
1.50
$
7.15
$
2.33
Diluted earnings per common share
$
3.25
$
1.72
$
1.01
$
1.65
$
1.48
$
6.02
$
2.07
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - UNAUDITED
(Dollars in thousands)
September 30,
June 30,
March 31,
December 31,
September 30,
2021
2021
2021
2020
2020
ASSETS
Cash and due from banks
$
51,169
$
36,837
$
3,123
$
78,090
$
5,822
Interest earning deposits
1,000,885
393,663
512,241
615,264
325,594
Cash and cash equivalents
1,052,054
430,500
515,364
693,354
331,416
Investment securities, at fair value
1,866,697
1,526,792
1,441,904
1,210,285
1,133,831
Loans held for sale
29,957
34,540
46,106
79,086
26,689
Loans receivable, mortgage warehouse, at fair value
2,557,624
2,855,284
3,407,622
3,616,432
3,913,593
Loans receivable, PPP
4,957,357
6,305,056
5,178,089
4,561,365
4,964,105
Loans and leases receivable
7,970,599
7,772,142
7,536,489
7,575,368
7,700,892
Allowance for credit losses on loans and leases
(131,496)
(125,436)
(128,736)
(144,176)
(155,561)
Total loans and leases receivable, net of allowance for credit
losses on loans and leases
15,354,084
16,807,046
15,993,464
15,608,989
16,423,029
FHLB, Federal Reserve Bank, and other restricted stock
57,184
39,895
69,420
71,368
70,387
Accrued interest receivable
93,514
90,009
83,186
80,412
65,668
Bank premises and equipment, net
9,944
10,391
10,943
11,225
11,308
Bank-owned life insurance
331,423
329,421
281,923
280,067
277,826
Goodwill and other intangibles
3,794
3,853
3,911
3,969
4,028
Other assets
310,271
362,661
371,439
338,438
354,010
Assets of discontinued operations
—
—
—
62,055
80,535
Total assets
$
19,108,922
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand, non-interest bearing deposits
$
4,954,331
$
2,699,869
$
2,687,628
$
2,356,998
$
2,327,017
Interest bearing deposits
12,016,694
11,174,070
9,784,812
8,952,931
8,512,060
Total deposits
16,971,025
13,873,939
12,472,440
11,309,929
10,839,077
Federal funds purchased
—
—
365,000
250,000
680,000
FHLB advances
—
—
850,000
850,000
850,000
Other borrowings
223,151
124,240
124,138
124,037
123,935
Subordinated debt
181,603
181,534
181,464
181,394
181,324
FRB PPP liquidity facility
—
3,865,865
3,284,156
4,415,016
4,811,009
Accrued interest payable and other liabilities
448,844
338,801
351,741
152,082
185,927
Liabilities of discontinued operations
—
—
—
39,704
55,964
Total liabilities
17,824,623
18,384,379
17,628,939
17,322,162
17,727,236
Preferred stock
137,794
217,471
217,471
217,471
217,471
Common stock
33,818
33,634
33,519
32,986
32,836
Additional paid in capital
525,894
519,294
515,318
455,592
452,965
Retained earnings
607,085
496,844
438,802
438,581
385,750
Accumulated other comprehensive income (loss)
1,488
5,266
5,391
(5,764)
(15,751)
Treasury stock, at cost
(21,780)
(21,780)
(21,780)
(21,780)
(21,780)
Total shareholders' equity
1,284,299
1,250,729
1,188,721
1,117,086
1,051,491
Total liabilities & shareholders' equity
$
19,108,922
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED
(Dollars in thousands)
Three Months Ended
September 30, 2021
June 30, 2021
September 30, 2020
Average
Balance
Average
Yield or
Cost (%)
Average
Balance
Average
Yield or
Cost (%)
Average
Balance
Average
Yield or
Cost (%)
Assets
Interest earning deposits
$
1,279,983
0.15%
$
646,342
0.12%
$
686,928
0.12%
Investment securities (1)
1,511,319
2.36%
1,512,644
2.20%
950,723
2.65%
Loans and leases:
Commercial loans to mortgage companies
2,658,020
3.14%
2,737,629
3.09%
2,847,169
2.90%
Multi-family loans
1,443,846
3.64%
1,551,370
3.88%
1,989,074
3.72%
Commercial and industrial loans and leases (2)
3,024,620
3.76%
2,878,045
3.59%
2,599,806
3.82%
Loans receivable, PPP
5,778,367
8.04%
6,133,184
2.69%
4,909,197
1.97%
Non-owner occupied commercial real estate loans
1,346,629
3.73%
1,368,695
3.86%
1,388,306
3.70%
Residential mortgages
325,851
3.50%
346,284
3.62%
414,781
3.97%
Installment loans
1,615,411
9.21%
1,467,595
9.37%
1,255,505
8.37%
Total loans and leases (3)
16,192,744
5.71%
16,482,802
3.74%
15,403,838
3.41%
Other interest-earning assets
49,780
2.86%
57,208
5.32%
79,656
5.23%
Total interest-earning assets
19,033,826
5.06%
18,698,996
3.49%
17,121,145
3.25%
Non-interest-earning assets
705,514
607,952
666,477
Assets of discontinued operations
—
—
77,952
Total assets
$
19,739,340
$
19,306,948
$
17,865,574
Liabilities
Interest checking accounts
$
4,537,421
0.67%
$
3,503,242
0.76%
$
2,370,709
0.78%
Money market deposit accounts
5,131,433
0.43%
4,859,614
0.47%
3,786,032
0.65%
Other savings accounts
1,376,077
0.50%
1,456,777
0.57%
1,125,273
1.06%
Certificates of deposit
614,404
0.59%
658,698
0.78%
1,344,134
1.35%
Total interest-bearing deposits (4)
11,659,335
0.54%
10,478,331
0.60%
8,626,148
0.85%
FRB PPP liquidity facility
2,788,897
0.35%
3,858,733
0.35%
4,479,036
0.35%
Borrowings
371,077
4.90%
531,757
3.85%
1,236,127
3.19%
Total interest-bearing liabilities
14,819,309
0.62%
14,868,821
0.65%
14,341,311
0.89%
Non-interest-bearing deposits (4)
3,335,198
2,889,781
2,194,689
Total deposits and borrowings
18,154,507
0.50%
17,758,602
0.54%
16,536,000
0.78%
Other non-interest-bearing liabilities
310,519
328,251
243,812
Liabilities of discontinued operations
—
—
55,714
Total liabilities
18,465,026
18,086,853
16,835,526
Shareholders' equity
1,274,314
1,220,095
1,030,048
Total liabilities and shareholders' equity
$
19,739,340
$
19,306,948
$
17,865,574
Interest spread
4.56%
2.95%
2.47%
Net interest margin
4.58%
2.98%
2.50%
Net interest margin tax equivalent (5)
4.59%
2.98%
2.50%
Net interest margin tax equivalent excl. PPP (6)
3.24%
3.30%
2.86%
(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes owner occupied commercial real estate loans.
(3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.
(4) Total costs of deposits (including interest bearing and non-interest bearing) were 0.42%, 0.47% and 0.67% for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
(6) Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED
(Dollars in thousands)
Nine Months Ended
September 30, 2021
September 30, 2020
Average Balance
Average Yield
or Cost (%)
Average Balance
Average Yield
or Cost (%)
Assets
Interest earning deposits
$
1,034,923
0.13%
$
614,863
0.69%
Investment securities (1)
1,461,070
2.30%
741,566
3.13%
Loans and leases:
Commercial loans to mortgage companies
2,837,549
3.11%
2,383,331
3.14%
Multi-family loans
1,560,565
3.78%
2,070,564
3.89%
Commercial and industrial loans and leases (2)
2,917,643
3.77%
2,507,231
4.18%
Loans receivable, PPP
5,515,819
4.78%
2,563,299
1.88%
Non-owner occupied commercial real estate loans
1,354,745
3.81%
1,372,090
3.94%
Residential mortgages
348,369
3.64%
430,058
3.82%
Installment loans
1,470,024
9.21%
1,267,806
8.74%
Total loans and leases (3)
16,004,714
4.50%
12,594,379
3.89%
Other interest-earning assets
62,205
3.94%
86,454
4.60%
Total interest-earning assets
18,562,912
4.08%
14,037,262
3.71%
Non-interest-earning assets
632,202
599,274
Assets of discontinued operations
—
79,854
Total assets
$
19,195,114
$
14,716,390
Liabilities
Interest checking accounts
$
3,584,223
0.74%
$
2,050,184
0.90%
Money market deposit accounts
4,811,540
0.48%
3,486,445
1.10%
Other savings accounts
1,415,595
0.59%
1,147,994
1.68%
Certificates of deposit
646,257
0.78%
1,533,628
1.64%
Total interest-bearing deposits (4)
10,457,615
0.60%
8,218,251
1.23%
FRB PPP liquidity facility
3,525,560
0.35%
1,816,849
0.35%
Borrowings
688,620
3.69%
1,581,498
2.43%
Total interest-bearing liabilities
14,671,795
0.69%
11,616,598
1.26%
Non-interest-bearing deposits (4)
3,016,837
1,887,463
Total deposits and borrowings
17,688,632
0.57%
13,504,061
1.08%
Other non-interest-bearing liabilities
295,752
143,118
Liabilities of discontinued operations
—
54,310
Total liabilities
17,984,384
13,701,489
Shareholders' equity
1,210,730
1,014,901
Total liabilities and shareholders' equity
$
19,195,114
$
14,716,390
Interest spread
3.51%
2.63%
Net interest margin
3.54%
2.67%
Net interest margin tax equivalent (5)
3.55%
2.68%
Net interest margin tax equivalent excl. PPP (6)
3.17%
2.93%
(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes owner occupied commercial real estate loans.
(3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.
(4) Total costs of deposits (including interest bearing and non-interest bearing) were 0.47% and 1.00% for the nine months ended September 30, 2021 and 2020, respectively.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the nine months ended September 30, 2021 and 2020, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
(6) Non-GAAP tax-equivalent basis as described in note (5), for the nine months ended September 30, 2021 and 2020, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED
(Dollars in thousands)
September 30,
June 30,
March 31,
December 31,
September 30,
2021
2021
2021
2020
2020
Commercial:
Multi-family
$
1,387,166
$
1,497,485
$
1,659,529
$
1,761,301
$
1,950,300
Loans to mortgage companies
2,626,483
2,922,217
3,463,490
3,657,350
3,947,828
Commercial & industrial
2,604,367
2,293,723
2,164,784
2,304,206
2,186,480
Commercial real estate owner occupied
656,044
653,649
590,093
572,338
557,595
Loans receivable, PPP
4,957,357
6,305,056
5,178,089
4,561,365
4,964,105
Commercial real estate non-owner occupied
1,144,643
1,206,646
1,194,832
1,213,815
1,233,882
Construction
198,607
179,198
156,837
140,905
122,963
Total commercial loans and leases
13,574,667
15,057,974
14,407,654
14,211,280
14,963,153
Consumer:
Residential
260,820
273,493
295,654
323,322
343,775
Manufactured housing
55,635
57,904
59,977
62,243
64,638
Installment
1,624,415
1,577,651
1,405,021
1,235,406
1,233,713
Total consumer loans
1,940,870
1,909,048
1,760,652
1,620,971
1,642,126
Total loans and leases
$
15,515,537
$
16,967,022
$
16,168,306
$
15,832,251
$
16,605,279
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END DEPOSIT COMPOSITION - UNAUDITED
(Dollars in thousands)
September 30,
June 30,
March 31,
December 31,
September 30,
2021
2021
2021
2020
2020
Demand, non-interest bearing
$
4,954,331
$
2,699,869
$
2,687,628
$
2,356,998
$
2,327,017
Demand, interest bearing
5,023,081
4,206,355
3,228,941
2,384,691
2,308,627
Total demand deposits
9,977,412
6,906,224
5,916,569
4,741,689
4,635,644
Savings
1,310,343
1,431,756
1,483,482
1,314,817
1,173,641
Money market
5,090,121
4,908,809
4,406,508
4,601,492
4,057,366
Time deposits
593,149
627,150
665,881
651,931
972,426
Total deposits
$
16,971,025
$
13,873,939
$
12,472,440
$
11,309,929
$
10,839,077
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY - UNAUDITED
(Dollars in thousands)
As of September 30, 2021
As of June 30, 2021
As of September 30, 2020
Total loans
Non accrual /NPLs
Allowance for credit losses
Total NPLs
to total
loans
Total reserves to total NPLs
Total loans
Non accrual /NPLs
Allowance for credit losses
Total NPLs to total loans
Total reserves to total NPLs
Total loans
Non accrual /NPLs
Allowance for credit losses
Total NPLs to total loans
Total reserves to total NPLs
Loan type
Multi-family
$
1,369,876
$
24,524
$
4,397
1.79
%
17.93
%
$
1,497,485
$
21,595
$
5,028
1.44
%
23.28
%
$
1,950,300
$
11,710
$
15,026
0.60
%
128.32
%
Commercial & industrial(1)
2,673,226
6,951
10,860
0.26
%
156.24
%
2,360,656
6,717
8,127
0.28
%
120.99
%
2,220,715
9,633
12,926
0.43
%
134.18
%
Commercial real estate owner occupied
656,044
2,412
3,617
0.37
%
149.96
%
653,649
2,688
4,464
0.41
%
166.07
%
557,595
3,599
9,552
0.65
%
265.41
%
Commercial real estate non-owner occupied
1,144,643
2,845
7,375
0.25
%
259.23
%
1,206,646
—
7,374
—
%
—
%
1,215,516
2,408
20,200
0.20
%
838.87
%
Construction
198,607
—
886
—
%
—
%
179,198
—
2,643
—
%
—
%
122,963
—
6,423
—
%
—
%
Total commercial loans and leases receivable
6,042,396
36,732
27,135
0.61
%
73.87
%
5,897,634
31,000
27,636
0.53
%
89.15
%
6,067,089
27,350
64,127
0.45
%
234.47
%
Residential
248,153
7,738
1,912
3.12
%
24.71
%
266,911
8,991
2,299
3.37
%
25.57
%
335,452
10,634
4,649
3.17
%
43.72
%
Manufactured housing
55,635
3,520
4,410
6.33
%
125.28
%
57,904
3,239
4,372
5.59
%
134.98
%
64,638
2,778
5,625
4.30
%
202.48
%
Installment
1,624,415
3,544
98,039
0.22
%
2766.34
%
1,549,693
2,728
91,129
0.18
%
3340.51
%
1,233,713
3,118
81,160
0.25
%
2602.95
%
Total consumer loans receivable
1,928,203
14,802
104,361
0.77
%
705.05
%
1,874,508
14,958
97,800
0.80
%
653.83
%
1,633,803
16,530
91,434
1.01
%
553.14
%
Loans and leases receivable(1)
7,970,599
51,534
131,496
0.65
%
255.16
%
7,772,142
45,958
125,436
0.59
%
272.94
%
7,700,892
43,880
155,561
0.57
%
354.51
%
Loans receivable, PPP
4,957,357
—
—
—
%
—
%
6,305,056
—
—
—
%
—
%
4,964,105
—
—
—
%
—
%
Loans receivable, mortgage warehouse, at fair value
2,557,624
—
—
—
%
—
%
2,855,284
—
—
—
%
—
%
3,913,593
—
—
—
%
—
%
Total loans held for sale
29,957
507
—
1.69
%
—
%
34,540
507
—
1.47
%
—
%
26,689
19,691
—
73.78
%
—
%
Total portfolio
$
15,515,537
$
52,041
$
131,496
0.34
%
252.68
%
$
16,967,022
$
46,465
$
125,436
0.27
%
269.96
%
$
16,605,279
$
63,571
$
155,561
0.38
%
244.70
%
(1) Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedules that follow this table.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED
(Dollars in thousands)
Q3
Q2
Q1
Q4
Q3
Nine Months Ended September 30,
2021
2021
2021
2020
2020
2021
2020
Loan type
Multi-family
$
—
$
—
$
1,132
$
—
$
—
$
1,132
$
—
Commercial & industrial
116
(283)
375
155
(55)
208
(16)
Commercial real estate owner occupied
50
(1)
134
12
44
183
39
Commercial real estate non-owner occupied
943
(59)
(10)
(35)
8,923
874
24,521
Construction
(3)
(114)
(5)
(6)
(6)
(122)
(122)
Residential
54
(12)
40
46
(17)
82
(72)
Installment
5,944
7,060
10,855
8,300
8,410
23,859
21,985
Total net charge-offs (recoveries)
from loans held for investment
$
7,104
$
6,591
$
12,521
$
8,472
$
17,299
$
26,216
$
46,335
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED
Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in Customers' industry. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our ongoing financial results, which we believe enhance an overall understanding of our performance and increases comparability of our period to period results. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. The non-GAAP measures presented are not necessarily comparable to non-GAAP measures that may be presented by other financial institutions. Although non-GAAP financial measures are frequently used in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results of operations or financial condition as reported under GAAP.
The following tables present reconciliations of GAAP to non-GAAP measures disclosed within this document.
Core Earnings - Customers Bancorp
Nine Months Ended
September 30,
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
2021
2020
(dollars in thousands except per share data)
USD
Per share
USD
Per share
USD
Per share
USD
Per share
USD
Per share
USD
Per share
USD
Per share
GAAP net income to common shareholders
$
110,241
$
3.25
$
58,042
$
1.72
$
33,204
$
1.01
$
52,831
$
1.65
$
47,085
$
1.48
$
201,487
$
6.02
$
65,706
$
2.07
Reconciling items (after tax):
Net loss from discontinued operations
—
—
—
—
38,036
1.16
2,317
0.07
532
0.02
38,036
1.14
8,145
0.26
Severance expense
—
—
1,517
0.04
—
—
—
—
—
—
1,517
0.05
—
—
Merger and acquisition related expenses
—
—
—
—
320
0.01
508
0.02
530
0.02
320
0.01
530
0.02
Legal reserves
897
0.03
—
—
—
—
—
—
258
0.01
897
0.03
258
0.01
(Gains) losses on investment securities
(4,591)
(0.14)
(2,694)
(0.08)
(18,773)
(0.57)
(1,419)
(0.04)
(9,662)
(0.30)
(26,058)
(0.78)
(15,993)
(0.51)
Loss on sale of foreign subsidiaries
—
—
2,150
0.06
—
—
—
—
—
—
2,150
0.06
—
—
Loss on cash flow hedge derivative terminations
—
—
—
—
18,716
0.57
—
—
—
—
18,716
0.56
—
—
Derivative credit valuation adjustment
(198)
(0.01)
288
0.01
(1,195)
(0.04)
(448)
(0.01)
(304)
(0.01)
(1,105)
(0.03)
6,259
0.20
Risk participation agreement mark-to-market adjustment
—
—
—
—
—
—
—
—
—
—
—
—
(1,080)
(0.03)
Deposit relationship adjustment fees
4,707
0.14
—
—
—
—
—
—
—
—
4,707
0.14
—
—
Loss on redemption of preferred stock
2,820
0.08
—
—
—
—
—
—
—
—
2,820
0.08
—
—
Unrealized losses on loans held for sale
—
—
—
—
—
—
799
0.03
—
—
—
—
1,114
0.04
Core earnings
$
113,876
$
3.36
$
59,303
$
1.76
$
70,308
$
2.14
$
54,588
$
1.71
$
38,439
$
1.21
$
243,487
$
7.27
$
64,939
$
2.05
Core Return on Average Assets - Customers Bancorp
Nine Months Ended
September 30,
(Dollars in thousands, except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
2021
2020
GAAP net income
$
116,042
$
61,341
$
36,595
$
56,245
$
50,515
$
213,978
$
76,332
Reconciling items (after tax):
Net loss from discontinued operations
—
—
38,036
2,317
532
38,036
8,145
Severance expense
—
1,517
—
—
—
1,517
—
Merger and acquisition related expenses
—
—
320
508
530
320
530
Legal reserves
897
—
—
—
258
897
258
(Gains) losses on investment securities
(4,591)
(2,694)
(18,773)
(1,419)
(9,662)
(26,058)
(15,993)
Loss on sale of foreign subsidiaries
—
2,150
—
—
—
2,150
—
Loss on cash flow hedge derivative terminations
—
—
18,716
—
—
18,716
—
Derivative credit valuation adjustment
(198)
288
(1,195)
(448)
(304)
(1,105)
6,259
Risk participation agreement mark-to-market adjustment
—
—
—
—
—
—
(1,080)
Deposit relationship adjustment fees
4,707
—
—
—
—
4,707
—
Unrealized losses on loans held for sale
—
—
—
799
—
—
1,114
Core net income
$
116,857
$
62,602
$
73,699
$
58,002
$
41,869
$
253,158
$
75,565
Average total assets
$
19,739,340
$
19,306,948
$
18,525,721
$
18,250,719
$
17,865,574
$
19,195,114
$
14,716,390
Core return on average assets
2.35
%
1.30
%
1.61
%
1.26
%
0.93
%
1.76
%
0.69
%
Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
2021
2020
GAAP net income
$
116,042
$
61,341
$
36,595
$
56,245
$
50,515
$
213,978
$
76,332
Reconciling items:
Income tax expense
36,263
20,124
17,560
23,447
12,016
73,947
23,270
Provision (benefit) for credit losses on loans and leases
13,164
3,291
(2,919)
(2,913)
12,955
13,536
65,688
Provision (benefit) for credit losses on unfunded commitments
669
45
(1,286)
(968)
(527)
(572)
(132)
Severance expense
—
2,004
—
—
—
2,004
—
Net loss from discontinued operations
—
—
38,036
2,317
532
38,036
8,145
Merger and acquisition related expenses
—
—
418
709
658
418
658
Legal reserves
1,185
—
—
—
320
1,185
320
(Gains) losses on investment securities
(6,063)
(3,558)
(24,540)
(1,431)
(11,945)
(34,161)
(20,095)
Loss on sale of foreign subsidiaries
—
2,840
—
—
—
2,840
—
Loss on cash flow hedge derivative terminations
—
—
24,467
—
—
24,467
—
Derivative credit valuation adjustment
(261)
380
(1,562)
(625)
(378)
(1,443)
8,073
Risk participation agreement mark-to-market adjustment
—
—
—
—
—
—
(1,407)
Deposit relationship adjustment fees
6,216
—
—
—
—
6,216
—
Unrealized losses on loans held for sale
—
—
—
1,115
—
—
1,450
Adjusted net income - pre-tax pre-provision
$
167,215
$
86,467
$
86,769
$
77,896
$
64,146
$
340,451
$
162,302
Average total assets
$
19,739,340
$
19,306,948
$
18,525,721
$
18,250,719
$
17,865,574
$
19,195,114
$
14,716,390
Adjusted ROAA - pre-tax pre-provision
3.36
%
1.80
%
1.90
%
1.70
%
1.43
%
2.37
%
1.47
%
Core Return on Average Common Equity - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
2021
2020
GAAP net income to common shareholders
$
110,241
$
58,042
$
33,204
$
52,831
$
47,085
$
201,487
$
65,706
Reconciling items (after tax):
Net loss from discontinued operations
—
—
38,036
2,317
532
38,036
8,145
Severance expense
—
1,517
—
—
—
1,517
—
Merger and acquisition related expenses
—
—
320
508
530
320
530
Legal reserves
897
—
—
—
258
897
258
(Gains) losses on investment securities
(4,591)
(2,694)
(18,773)
(1,419)
(9,662)
(26,058)
(15,993)
Loss on sale of foreign subsidiaries
—
2,150
—
—
—
2,150
—
Loss on cash flow hedge derivative terminations
—
—
18,716
—
—
18,716
—
Derivative credit valuation adjustment
(198)
288
(1,195)
(448)
(304)
(1,105)
6,259
Risk participation agreement mark-to-market adjustment
—
—
—
—
—
—
(1,080)
Deposit relationship adjustment fees
4,707
—
—
—
—
4,707
—
Loss on redemption of preferred stock
2,820
—
—
—
—
2,820
—
Unrealized losses on loans held for sale
—
—
—
799
—
—
1,114
Core earnings
$
113,876
$
59,303
$
70,308
$
54,588
$
38,439
$
243,487
$
64,939
Average total common shareholders' equity
$
1,071,566
$
1,002,624
$
918,795
$
866,411
$
812,577
$
998,221
$
797,430
Core return on average common equity
42.16
%
23.72
%
31.03
%
25.06
%
18.82
%
32.61
%
10.88
%
Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
2021
2020
GAAP net income to common shareholders
$
110,241
$
58,042
$
33,204
$
52,831
$
47,085
$
201,487
$
65,706
Reconciling items:
Income tax expense
36,263
20,124
17,560
23,447
12,016
73,947
23,270
Provision (benefit) for credit losses on loan and leases
13,164
3,291
(2,919)
(2,913)
12,955
13,536
65,688
Provision (benefit) for credit losses on unfunded commitments
669
45
(1,286)
(968)
(527)
(572)
(132)
Net loss from discontinued operations
—
—
38,036
2,317
532
38,036
8,145
Severance expense
—
2,004
—
—
—
2,004
—
Merger and acquisition related expenses
—
—
418
709
658
418
658
Legal reserves
1,185
—
—
—
320
1,185
320
(Gains) losses on investment securities
(6,063)
(3,558)
(24,540)
(1,431)
(11,945)
(34,161)
(20,095)
Loss on sale of foreign subsidiaries
—
2,840
—
—
—
2,840
—
Loss on cash flow hedge derivative terminations
—
—
24,467
—
—
24,467
—
Derivative credit valuation adjustment
(261)
380
(1,562)
(625)
(378)
(1,443)
8,073
Risk participation agreement mark-to-market adjustment
—
—
—
—
—
—
(1,407)
Deposit relationship adjustment fees
6,216
—
—
—
—
6,216
—
Loss on redemption of preferred stock
2,820
—
—
—
—
2,820
—
Unrealized losses on loans held for sale
—
—
—
1,115
—
—
1,450
Pre-tax pre-provision adjusted net income available
to common shareholders
$
164,234
$
83,168
$
83,378
$
74,482
$
60,716
$
330,780
$
151,676
Average total common shareholders' equity
$
1,071,566
$
1,002,624
$
918,795
$
866,411
$
812,577
$
998,221
$
797,430
Adjusted ROCE - pre-tax pre-provision
60.81
%
33.27
%
36.80
%
34.20
%
29.73
%
44.30
%
25.41
%
Net Interest Margin, Tax Equivalent - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
2021
2020
GAAP net interest income
$
219,892
$
138,757
$
132,731
$
122,946
$
107,439
$
491,380
$
280,742
Tax-equivalent adjustment
290
289
292
219
225
871
655
Net interest income tax equivalent
$
220,182
$
139,046
$
133,023
$
123,165
$
107,664
$
492,251
$
281,397
Average total interest earning assets
$
19,033,826
$
18,698,996
$
17,943,944
$
17,601,999
$
17,121,145
$
18,562,912
$
14,037,262
Net interest margin, tax equivalent
4.59
%
2.98
%
3.00
%
2.78
%
2.50
%
3.55
%
2.68
%
Net Interest Margin, Tax Equivalent, Excluding PPP - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
2021
2020
GAAP net interest income
$
219,892
$
138,757
$
132,731
$
122,946
$
107,439
$
491,380
$
280,742
PPP net interest income
(112,005)
(35,785)
(34,842)
(25,257)
(20,018)
(182,632)
(29,326)
Tax-equivalent adjustment
290
289
292
219
225
871
655
Net interest income, tax equivalent, excluding PPP
$
108,177
$
103,261
$
98,181
$
97,908
$
87,646
$
309,619
$
252,071
GAAP average total interest earning assets
$
19,033,826
$
18,698,996
$
17,943,944
$
17,601,999
$
17,121,145
$
18,562,912
$
14,037,262
Average PPP loans
(5,778,367)
(6,133,184)
(4,623,213)
(4,782,606)
(4,909,197)
(5,515,819)
(2,563,299)
Adjusted average total interest earning assets
$
13,255,459
$
12,565,812
$
13,320,731
$
12,819,393
$
12,211,948
$
13,047,093
$
11,473,963
Net interest margin, tax equivalent, excluding PPP
3.24
%
3.30
%
2.99
%
3.04
%
2.86
%
3.17
%
2.93
%
Core Efficiency Ratio - Customers Bancorp
Nine Months Ended
September 30,
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
2021
2020
GAAP net interest income
$
219,892
$
138,757
$
132,731
$
122,946
$
107,439
$
491,380
$
280,742
GAAP non-interest income
$
25,586
$
16,822
$
18,468
$
16,083
$
24,864
$
60,876
$
47,736
(Gains) losses on investment securities
(6,063)
(3,558)
(24,540)
(1,431)
(11,945)
(34,161)
(20,095)
Derivative credit valuation adjustment
(261)
380
(1,562)
(625)
(378)
(1,443)
8,073
Risk participation agreement mark-to-market adjustment
—
—
—
—
—
—
(1,407)
Unrealized losses on loans held for sale
—
—
—
1,115
—
—
1,450
Loss on cash flow hedge derivative terminations
—
—
24,467
—
—
24,467
—
Loss on sale of foreign subsidiaries
—
2,840
—
—
—
2,840
—
Core non-interest income
19,262
16,484
16,833
15,142
12,541
52,579
35,757
Core revenue
$
239,154
$
155,241
$
149,564
$
138,088
$
119,980
$
543,959
$
316,499
GAAP non-interest expense
$
80,009
$
70,823
$
61,927
$
59,933
$
56,285
$
212,759
$
155,043
Severance expense
—
(2,004)
—
—
—
(2,004)
—
Legal reserves
(1,185)
—
—
—
(320)
(1,185)
(320)
Merger and acquisition related expenses
—
—
(418)
(709)
(658)
(418)
(658)
Deposit relationship adjustment fees
(6,216)
—
—
—
—
(6,216)
—
Core non-interest expense
$
72,608
$
68,819
$
61,509
$
59,224
$
55,307
$
202,936
$
154,065
Core efficiency ratio (1)
30.36
%
44.33
%
41.13
%
42.89
%
46.10
%
37.31
%
48.68
%
(1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.
Tangible Common Equity to Tangible Assets - Customers Bancorp
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
GAAP total shareholders' equity
$
1,284,299
$
1,250,729
$
1,188,721
$
1,117,086
$
1,051,491
Reconciling items:
Preferred stock
(137,794)
(217,471)
(217,471)
(217,471)
(217,471)
Goodwill and other intangibles (1)
(3,794)
(3,853)
(3,911)
(14,298)
(14,437)
Tangible common equity
$
1,142,711
$
1,029,405
$
967,339
$
885,317
$
819,583
GAAP total assets
$
19,108,922
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
Reconciling items:
Goodwill and other intangibles (1)
(3,794)
(3,853)
(3,911)
(14,298)
(14,437)
Tangible assets
$
19,105,128
$
19,631,255
$
18,813,749
$
18,424,950
$
18,764,290
Tangible common equity to tangible assets
5.98
%
5.24
%
5.14
%
4.80
%
4.37
%
(1) Includes goodwill and other intangibles reported in assets of discontinued operations.
Tangible Book Value per Common Share - Customers Bancorp
(dollars in thousands except share and per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
GAAP total shareholders' equity
$
1,284,299
$
1,250,729
$
1,188,721
$
1,117,086
$
1,051,491
Reconciling Items:
Preferred stock
(137,794)
(217,471)
(217,471)
(217,471)
(217,471)
Goodwill and other intangibles (1)
(3,794)
(3,853)
(3,911)
(14,298)
(14,437)
Tangible common equity
$
1,142,711
$
1,029,405
$
967,339
$
885,317
$
819,583
Common shares outstanding
32,537,976
32,353,256
32,238,762
31,705,088
31,555,124
Tangible book value per common share
$
35.12
$
31.82
$
30.01
$
27.92
$
25.97
(1) Includes goodwill and other intangibles reported in assets of discontinued operations.
Total Loans and Leases, excluding PPP
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Total loans and leases
$
15,515,537
$
16,967,022
$
16,168,306
$
15,832,251
$
16,605,279
Loans receivable, PPP
(4,957,357)
(6,305,056)
(5,178,089)
(4,561,365)
(4,964,105)
Loans and leases, excluding PPP
$
10,558,180
$
10,661,966
$
10,990,217
$
11,270,886
$
11,641,174
Total Assets, excluding PPP
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Total assets
$
19,108,922
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
Loans receivable, PPP
(4,957,357)
(6,305,056)
(5,178,089)
(4,561,365)
(4,964,105)
Total assets, excluding PPP
$
14,151,565
$
13,330,052
$
13,639,571
$
13,877,883
$
13,814,622
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Loans and leases receivable
$
12,927,956
$
14,077,198
$
12,714,578
$
12,136,733
$
12,664,997
Loans receivable, PPP
(4,957,357)
(6,305,056)
(5,178,089)
(4,561,365)
(4,964,105)
Loans and leases held for investment, excluding PPP
$
7,970,599
$
7,772,142
$
7,536,489
$
7,575,368
$
7,700,892
Allowance for credit losses on loans and leases
$
131,496
$
125,436
$
128,736
$
144,176
$
155,561
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP
1.65
%
1.61
%
1.71
%
1.90
%
2.02
%
Tangible Common Equity to Tangible Assets, excluding PPP - Customers Bancorp
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
GAAP total shareholders' equity
$
1,284,299
$
1,250,729
$
1,188,721
$
1,117,086
$
1,051,491
Reconciling items:
Preferred stock
(137,794)
(217,471)
(217,471)
(217,471)
(217,471)
Goodwill and other intangibles (1)
(3,794)
(3,853)
(3,911)
(14,298)
(14,437)
Tangible common equity
$
1,142,711
$
1,029,405
$
967,339
$
885,317
$
819,583
GAAP total assets
$
19,108,922
$
19,635,108
$
18,817,660
$
18,439,248
$
18,778,727
Loans receivable, PPP
(4,957,357)
(6,305,056)
(5,178,089)
(4,561,365)
(4,964,105)
Total assets, excluding PPP
$
14,151,565
$
13,330,052
$
13,639,571
$
13,877,883
$
13,814,622
Reconciling items:
Goodwill and other intangibles (1)
(3,794)
(3,853)
(3,911)
(14,298)
(14,437)
Tangible assets
$
14,147,771
$
13,326,199
$
13,635,660
$
13,863,585
$
13,800,185
Tangible common equity to tangible assets
8.08
%
7.72
%
7.09
%
6.39
%
5.94
%
(1) Includes goodwill and other intangibles reported in assets of discontinued operations.
Deferments to total loans and leases, excluding PPP
(dollars in thousands except per share data)
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Total loans and leases
$
15,515,537
$
16,967,022
$
16,168,306
$
15,832,251
Loans receivable, PPP
(4,957,357)
(6,305,056)
(5,178,089)
(4,561,365)
Total loans and leases, excluding PPP
$
10,558,180
$
10,661,966
$
10,990,217
$
11,270,886
Commercial deferments
$
73,400
$
89,800
$
176,100
$
202,100
Consumer deferments
6,708
8,400
13,000
16,400
Total deferments
$
80,108
$
98,200
$
189,100
$
218,500
Commercial deferments to total loans and leases, excluding PPP
0.7
%
0.8
%
1.6
%
1.8
%
Consumer deferments to total loans and leases, excluding PPP
0.1
0.1
0.1
0.1
Total deferments to total loans and leases, excluding PPP
0.8
%
0.9
%
1.7
%
1.9
%
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