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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 27, 2023
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Pennsylvania | 001-35542 | 27-2290659 |
(State or other jurisdiction of incorporation or organization) | (Commission File number) | (IRS Employer Identification No.) |
701 Reading Avenue
West Reading PA 19611
(Address of principal executive offices, including zip code)
(610) 933-2000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instructions A.2. below): | | | | | |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
|
Securities registered pursuant to Section 12(g) of the Act: | | | | | | | | | | | | | | |
Title of Each Class | | Trading Symbols | | Name of Each Exchange on which Registered |
Voting Common Stock, par value $1.00 per share | | CUBI | | New York Stock Exchange |
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Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series E, par value $1.00 per share | | CUBI/PE | | New York Stock Exchange |
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series F, par value $1.00 per share | | CUBI/PF | | New York Stock Exchange |
5.375% Subordinated Notes due 2034 | | CUBB | | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On July 27, 2023, Customers Bancorp, Inc. (the "Company") issued a press release announcing unaudited financial information for the quarter ended June 30, 2023, a copy of which is included as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.
Item 7.01 Regulation FD Disclosure
The Company has posted to its website a slide presentation which is attached hereto as Exhibit 99.2 to this Current Report on Form 8-K and incorporated into this Item 7.01 by reference.
The information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto and incorporated by reference into Item 2.02 and Item 7.01, respectively, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, such information, including the exhibits attached hereto, shall not be deemed incorporated by reference into any of the Company's reports or filings with the SEC, whether made before or after the date hereof, except as expressly set forth by specific reference in such report or filing. The information in this Current Report on Form 8-K, including the exhibits attached hereto, shall not be deemed an admission as to the materiality of any information in this Current Report on Form 8-K that is required to be disclosed solely to satisfy the requirements of Regulation FD.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits. | | | | | | | | |
Exhibit | | Description |
| | Press Release dated July 27, 2023 |
| | Slide presentation dated July 2023 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
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| CUSTOMERS BANCORP, INC. |
| |
| By: /s/ Carla A. Leibold |
| Name: Carla A. Leibold |
| Title: Executive Vice President - Chief Financial Officer |
Date: July 27, 2023
EXHIBIT INDEX
| | | | | | | | |
Exhibit No. | | Description |
| | Press Release dated July 27, 2023 |
| | Slide presentation dated July 2023 |
Exhibit 99.1
Customers Bancorp, Inc. (NYSE:CUBI)
701 Reading Avenue
West Reading, PA 19611
Contact:
David W. Patti, Communications Director 610-451-9452
Customers Bancorp Reports Results for Second Quarter 2023
Second Quarter 2023 Highlights
•Q2 2023 net income available to common shareholders was $44.0 million, or $1.39 per diluted share; ROAA was 0.88% and ROCE was 13.22%.
•Q2 2023 core earnings* were $52.2 million, or $1.65 per diluted share; Core ROAA* was 1.03% and Core ROCE* was 15.67%.
•CET 1 capital ratio of 10.3%1 at June 30, 2023, compared to 9.6% at March 31, 2023.
Significant progress toward stated goal of 11.0% - 11.5% by year-end 2023.
•Q2 2023 net interest margin, tax equivalent (NIM) was 3.15%, an increase of 19 basis points over Q1 2023 NIM of 2.96%. Q1 2023 NIM (excluding PPP)* was 2.80%.
•Significant positive deposit mix shift in Q2 2023 as total deposits grew by $226.8 million, with an increase in non-interest bearing deposits of $1.0 billion, or 29%, over Q1 2023. The average cost of deposits decreased 21 basis points in Q2 2023 while the June 30, 2023 spot cost of deposits declined one basis point from March 31, 2023 despite an increase in market interest rates in Q2 2023.
•Total estimated insured deposits were 77%2 of total deposits at June 30, 2023, with immediately available liquidity covering uninsured deposits by approximately 222%.
•Q2 2023 adjusted pre-tax pre-provision net income* was $96.8 million; adjusted pre-tax pre-provision ROAA* was 1.79%; and adjusted pre-tax pre-provision ROCE* was 28.01%.
•Q2 2023 loans declined $1.2 billion or 7.6% over Q1 2023, with average loan yields up 13 basis points in Q2 2023, principally due to non-strategic loan sales.
•Q2 2023 provision for credit losses on loans and leases of $22.4 million was largely driven by the recognition of weaker macroeconomic forecasts.
•Non-performing assets were $28.4 million, or 0.13% of total assets, at June 30, 2023, down $3.9 million, or 12%, from March 31, 2023. Allowance for credit losses on loans and leases equaled 494% of non-performing loans at June 30, 2023, compared to 406% at March 31, 2023.
•Q2 2023 book value per share and tangible book value per share* both grew by $1.08, or 2.6%, with increased AOCI losses of $11.9 million over the same time period.
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*Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document. |
1 Regulatory capital ratios as of June 30, 2023 are estimates. |
2 Uninsured deposits (estimate) of $4.7 billion to be reported on the Bank's call report, less state and municipal deposits of $459.4 million collateralized by our line of credit from FHLB and from our affiliates of $92.0 million. |
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CEO Commentary
West Reading, PA, July 27, 2023 - “We are very pleased with our second quarter results as we executed seamlessly on our strategic priorities and delivered one of our strongest quarters to date,” said Customers Bancorp Chairman and CEO Jay Sidhu. “While the industry continues to face significant headwinds from rising funding costs, negative deposit mix shifts and net interest margin compression, we successfully grew total deposits by $226.8 million in Q2 2023, even after the payoff of net brokered CDs of $660 million, with an increase in non-interest bearing deposits of $1 billion, or 29%. We expanded our net interest margin significantly over Q1 2023 despite holding even higher cash balances for prudent risk management purposes. Notably, our average cost of deposits decreased 21 basis points during the quarter as we replaced higher cost wholesale deposits with lower cost core deposits and continued to strengthen our deposit franchise. Our average loan yields increased 13 basis points as a result of the increase in interest rates and the floating rate nature of our loan portfolio. Following through on the commitments we made last quarter, we successfully exited certain non-strategic loan portfolios by selling $670 million in short-term syndicated capital call lines of credit and $556.7 million in consumer installment loans. This provided balance sheet capacity for the previously announced $631 million Venture Banking portfolio acquired from the FDIC at a 15% discount and afforded us a significant opportunity to further grow and strengthen our deposit franchise, improve our profitability, and increase our capital ratios," stated Jay Sidhu.
"Our Q2 2023 GAAP earnings were $44.0 million, or $1.39 per diluted share. Core earnings* were $52.2 million, or $1.65 per diluted share, well above consensus estimates. At June 30, 2023, our deposit base was well diversified, with approximately 77%2 of total deposits insured. We maintain a strong liquidity position, with $9.1 billion of liquidity immediately available, which covers approximately 222% of uninsured deposits and our loan to deposit ratio was about 77%. We continued to purposely moderate loan growth and took other strategic actions in the second quarter 2023 to further improve our capital ratios. At June 30, 2023, we had $3.2 billion of cash on hand, which we believe was prudent given persisting levels of uncertainty. Asset quality remains exceptional and credit reserves are extremely robust at 494% of total non-performing loans at the end of Q2 2023. The prudent risk management strategic actions that we have taken over the past several quarters have us well positioned from a capital, credit, liquidity, interest rate risk, and earnings perspective as we enter the second half of 2023. With persisting levels of uncertainty, we believe it is prudent to continue to moderate growth, or even shrink the balance sheet somewhat, and focus on further strengthening the balance sheet and improving capital ratios. We remain committed to improving our CET 1 ratio to 11.0% - 11.5% by year-end 2023 and are extremely proud of the progress that we made in just one quarter. We are confident in our ability to manage our credit, interest rate, and liquidity risks, and superbly service our clients in all operating environments. We are incredibly optimistic about our future,” Jay Sidhu continued.
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*Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document. |
1 Regulatory capital ratios as of June 30, 2023 are estimates. |
2 Uninsured deposits (estimate) of $4.7 billion to be reported on the Bank's call report, less state and municipal deposits of $459.4 million collateralized by our line of credit from FHLB and from our affiliates of $92.0 million. |
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Financial Highlights
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands, except per share data) | | At or Three Months Ended | | Increase (Decrease) | | | | |
| June 30, 2023 | | March 31, 2023 | | | | | | |
Profitability Metrics: | | | | | | | | | | | | | | | | |
Net income available for common shareholders | | $ | 44,007 | | | $ | 50,265 | | | $ | (6,258) | | | (12.5) | % | | | | | | | | |
Diluted earnings per share | | $ | 1.39 | | | $ | 1.55 | | | $ | (0.16) | | | (10.3) | % | | | | | | | | |
Core earnings* | | $ | 52,163 | | | $ | 51,143 | | | $ | 1,020 | | | 2.0 | % | | | | | | | | |
Core earnings per share* | | $ | 1.65 | | | $ | 1.58 | | | $ | 0.07 | | | 4.4 | % | | | | | | | | |
Core earnings, excluding PPP* | | $ | 54,231 | | | $ | 41,537 | | | $ | 12,694 | | | 30.6 | % | | | | | | | | |
Core earnings per share, excluding PPP* | | $ | 1.72 | | | $ | 1.28 | | | $ | 0.44 | | | 34.4 | % | | | | | | | | |
Return on average assets ("ROAA") | | 0.88 | % | | 1.03 | % | | (0.15) | | | | | | | | | | | |
Core ROAA* | | 1.03 | % | | 1.05 | % | | (0.02) | | | | | | | | | | | |
Core ROAA, excluding PPP* | | 1.07 | % | | 0.87 | % | | 0.20 | | | | | | | | | | | |
Return on average common equity ("ROCE") | | 13.22 | % | | 16.00 | % | | (2.78) | | | | | | | | | | | |
Core ROCE* | | 15.67 | % | | 16.28 | % | | (0.61) | | | | | | | | | | | |
Adjusted pre-tax pre-provision net income* | | $ | 96,833 | | | $ | 89,282 | | | $ | 7,551 | | | 8.5 | % | | | | | | | | |
Adjusted pre-tax pre-provision net income ROAA, excluding PPP* | | 1.83 | % | | 1.53 | % | | 0.30 | | | | | | | | | | | |
Net interest margin, tax equivalent | | 3.15 | % | | 2.96 | % | | 0.19 | | | | | | | | | | | |
Net interest margin, tax equivalent, excluding PPP* | | 3.20 | % | | 2.80 | % | | 0.40 | | | | | | | | | | | |
Loan yield | | 6.83 | % | | 6.70 | % | | 0.13 | | | | | | | | | | | |
Loan yield, excluding PPP* | | 6.89 | % | | 6.46 | % | | 0.43 | | | | | | | | | | | |
Cost of deposits | | 3.11 | % | | 3.32 | % | | (0.21) | | | | | | | | | | | |
Efficiency ratio | | 49.25 | % | | 47.71 | % | | 1.54 | | | | | | | | | | | |
Core efficiency ratio* | | 47.84 | % | | 47.09 | % | | 0.75 | | | | | | | | | | | |
Balance Sheet Trends: | | | | | | | | | | | | | | | | |
Total assets | | $ | 22,028,565 | | | $ | 21,751,614 | | | $ | 276,951 | | | 1.3 | % | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total loans and leases | | $ | 13,910,907 | | | $ | 15,063,034 | | | $ | (1,152,127) | | | (7.6) | % | | | | | | | | |
Total loans and leases, excluding PPP* | | $ | 13,722,144 | | | $ | 14,816,776 | | | $ | (1,094,632) | | | (7.4) | % | | | | | | | | |
Non-interest bearing demand deposits | | $ | 4,490,198 | | | $ | 3,487,517 | | | $ | 1,002,681 | | | 28.8 | % | | | | | | | | |
Total deposits | | $ | 17,950,431 | | | $ | 17,723,617 | | | $ | 226,814 | | | 1.3 | % | | | | | | | | |
Capital Metrics: | | | | | | | | | | | | | | | | |
Common Equity | | $ | 1,318,858 | | | $ | 1,283,226 | | | $ | 35,632 | | | 2.8 | % | | | | | | | | |
Tangible Common Equity* | | $ | 1,315,229 | | | $ | 1,279,597 | | | $ | 35,632 | | | 2.8 | % | | | | | | | | |
Common Equity to Total Assets | | 6.0 | % | | 5.9 | % | | 0.1 | | | | | | | | | | | |
Tangible Common Equity to Tangible Assets* | | 6.0 | % | | 5.9 | % | | 0.1 | | | | | | | | | | | |
Tangible Common Equity to Tangible Assets, excluding PPP* | | 6.0 | % | | 6.0 | % | | 0.0 | | | | | | | | | | | |
Book Value per common share | | $ | 42.16 | | | $ | 41.08 | | | $ | 1.08 | | | 2.6 | % | | | | | | | | |
Tangible Book Value per common share* | | $ | 42.04 | | | $ | 40.96 | | | $ | 1.08 | | | 2.6 | % | | | | | | | | |
Common equity Tier 1 capital ratio (1) | | 10.3 | % | | 9.6 | % | | 0.7 | | | | | | | | | | | |
Total risk based capital ratio (1) | | 13.1 | % | | 12.3 | % | | 0.8 | | | | | | | | | | | |
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(1) Regulatory capital ratios as of June 30, 2023 are estimates. |
*Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document. |
Financial Highlights
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands, except per share data) | | | | | | At or Three Months Ended | | Increase (Decrease) | | Six Months Ended | | Increase (Decrease) |
| | | | | | June 30, 2023 | | June 30, 2022 | | | June 30, 2023 | | June 30, 2022 | |
Profitability Metrics: | | | | | | | | | | | | | | | | | | | | | | | | |
Net income available for common shareholders | | | | | | | | | | $ | 44,007 | | | $ | 56,519 | | | $ | (12,512) | | | (22.1) | % | | $ | 94,272 | | | $ | 131,415 | | | $ | (37,143) | | | (28.3) | % |
Diluted earnings per share | | | | | | | | | | $ | 1.39 | | | $ | 1.68 | | | $ | (0.29) | | | (17.3) | % | | $ | 2.95 | | | $ | 3.87 | | | $ | (0.92) | | | (23.8) | % |
Core earnings* | | | | | | | | | | $ | 52,163 | | | $ | 59,367 | | | $ | (7,204) | | | (12.1) | % | | $ | 103,306 | | | $ | 134,777 | | | $ | (31,471) | | | (23.4) | % |
Core earnings per share* | | | | | | | | | | $ | 1.65 | | | $ | 1.77 | | | $ | (0.12) | | | (6.8) | % | | $ | 3.22 | | | $ | 3.97 | | | $ | (0.75) | | | (18.9) | % |
Core earnings, excluding PPP* | | | | | | | | | | $ | 54,231 | | | $ | 46,301 | | | $ | 7,930 | | | 17.1 | % | | $ | 95,768 | | | $ | 96,998 | | | $ | (1,230) | | | (1.3) | % |
Core earnings per share, excluding PPP* | | | | | | | | | | $ | 1.72 | | | $ | 1.38 | | | $ | 0.34 | | | 24.6 | % | | $ | 2.99 | | | $ | 2.86 | | | $ | 0.13 | | | 4.5 | % |
Return on average assets ("ROAA") | | | | | | | | | | 0.88 | % | | 1.17 | % | | (0.29) | | | | | 0.96 | % | | 1.39 | % | | (0.43) | | | |
Core ROAA* | | | | | | | | | | 1.03 | % | | 1.23 | % | | (0.20) | | | | | 1.04 | % | | 1.43 | % | | (0.39) | | | |
Core ROAA, excluding PPP* | | | | | | | | | | 1.07 | % | | 1.04 | % | | 0.03 | | | | | 0.97 | % | | 1.04 | % | | (0.07) | | | |
Return on average common equity ("ROCE") | | | | | | | | | | 13.22 | % | | 18.21 | % | | (4.99) | | | | | 14.57 | % | | 21.23 | % | | (6.66) | | | |
Core ROCE* | | | | | | | | | | 15.67 | % | | 19.13 | % | | (3.46) | | | | | 15.97 | % | | 21.77 | % | | (5.80) | | | |
Adjusted pre-tax pre-provision net income* | | | | | | | | | | $ | 96,833 | | | $ | 105,692 | | | $ | (8,859) | | | (8.4) | % | | $ | 186,115 | | | $ | 218,341 | | | $ | (32,226) | | | (14.8) | % |
Adjusted pre-tax pre-provision net income ROAA, excluding PPP* | | | | | | | | | | 1.83 | % | | 1.85 | % | | (0.02) | | | | | 1.69 | % | | 1.86 | % | | (0.17) | | | |
Net interest margin, tax equivalent | | | | | | | | | | 3.15 | % | | 3.39 | % | | (0.24) | | | | | 3.06 | % | | 3.49 | % | | (0.43) | | | |
Net interest margin, tax equivalent, excluding PPP* | | | | | | | | | | 3.20 | % | | 3.32 | % | | (0.12) | | | | | 3.01 | % | | 3.32 | % | | (0.31) | | | |
Loan yield | | | | | | | | | | 6.83 | % | | 4.54 | % | | 2.29 | | | | | 6.77 | % | | 4.60 | % | | 2.17 | | | |
Loan yield, excluding PPP* | | | | | | | | | | 6.89 | % | | 4.56 | % | | 2.33 | | | | | 6.67 | % | | 4.50 | % | | 2.17 | | | |
Cost of deposits | | | | | | | | | | 3.11 | % | | 0.54 | % | | 2.57 | | | | | 3.22 | % | | 0.44 | % | | 2.78 | | | |
Efficiency ratio | | | | | | | | | | 49.25 | % | | 42.14 | % | | 7.11 | | | | | 48.51 | % | | 40.76 | % | | 7.75 | | | |
Core efficiency ratio* | | | | | | | | | | 47.84 | % | | 41.74 | % | | 6.10 | | | | | 47.49 | % | | 40.59 | % | | 6.90 | | | |
Balance Sheet Trends: | | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | | | | | | | | | $ | 22,028,565 | | | $ | 20,251,996 | | | $ | 1,776,569 | | | 8.8 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total loans and leases | | | | | | | | | | $ | 13,910,907 | | | $ | 15,664,353 | | | $ | (1,753,446) | | | (11.2) | % | | | | | | | | |
Total loans and leases, excluding PPP* | | | | | | | | | | $ | 13,722,144 | | | $ | 14,094,193 | | | $ | (372,049) | | | (2.6) | % | | | | | | | | |
Non-interest bearing demand deposits | | | | | | | | | | $ | 4,490,198 | | | $ | 4,683,030 | | | $ | (192,832) | | | (4.1) | % | | | | | | | | |
Total deposits | | | | | | | | | | $ | 17,950,431 | | | $ | 16,944,719 | | | $ | 1,005,712 | | | 5.9 | % | | | | | | | | |
Capital Metrics: | | | | | | | | | | | | | | | | | | | | | | | | |
Common Equity | | | | | | | | | | $ | 1,318,858 | | | $ | 1,215,596 | | | $ | 103,262 | | | 8.5 | % | | | | | | | | |
Tangible Common Equity* | | | | | | | | | | $ | 1,315,229 | | | $ | 1,211,967 | | | $ | 103,262 | | | 8.5 | % | | | | | | | | |
Common Equity to Total Assets | | | | | | | | | | 6.0 | % | | 6.0 | % | | 0.0 | | | | | | | | | | | |
Tangible Common Equity to Tangible Assets* | | | | | | | | | | 6.0 | % | | 6.0 | % | | 0.0 | | | | | | | | | | | |
Tangible Common Equity to Tangible Assets, excluding PPP* | | | | | | | | | | 6.0 | % | | 6.5 | % | | (0.5) | | | | | | | | | | | |
Book Value per common share | | | | | | | | | | $ | 42.16 | | | $ | 37.46 | | | $ | 4.70 | | | 12.5 | % | | | | | | | | |
Tangible Book Value per common share* | | | | | | | | | | $ | 42.04 | | | $ | 37.35 | | | $ | 4.69 | | | 12.6 | % | | | | | | | | |
Common equity Tier 1 capital ratio (1) | | | | | | | | | | 10.3 | % | | 9.7 | % | | 0.6 | | | | | | | | | | | |
Total risk based capital ratio (1) | | | | | | | | | | 13.1 | % | | 12.6 | % | | 0.5 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(1) Regulatory capital ratios as of June 30, 2023 are estimates. |
*Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document. |
Key Balance Sheet Trends
Loans and Leases
The following table presents the composition of total loans and leases as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | June 30, 2023 | | % of Total | | March 31, 2023 | | % of Total | | June 30, 2022 | | % of Total |
Loans and Leases Held for Investment | | | | | | | | | | | |
Commercial: | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial & industrial: | | | | | | | | | | | |
Specialty lending | $ | 5,534,832 | | | 40.0 | % | | $ | 5,519,176 | | | 37.7 | % | | $ | 4,599,640 | | | 29.4 | % |
Other commercial & industrial | 1,052,145 | | | 7.6 | | | 1,168,161 | | | 8.0 | | | 1,037,444 | | | 6.7 | |
Multifamily | 2,151,734 | | | 15.6 | | | 2,195,211 | | | 15.0 | | | 2,008,784 | | | 12.8 | |
Loans to mortgage companies | 1,108,598 | | | 8.0 | | | 1,374,894 | | | 9.4 | | | 1,975,189 | | | 12.6 | |
Commercial real estate owner occupied | 842,042 | | | 6.1 | | | 895,314 | | | 6.1 | | | 710,577 | | | 4.5 | |
Loans receivable, PPP | 188,763 | | | 1.4 | | | 246,258 | | | 1.7 | | | 1,570,160 | | | 10.0 | |
Commercial real estate non-owner occupied | 1,211,091 | | | 8.8 | | | 1,245,248 | | | 8.5 | | | 1,152,869 | | | 7.4 | |
Construction | 212,214 | | | 1.5 | | | 188,123 | | | 1.3 | | | 195,687 | | | 1.2 | |
Total commercial loans and leases | 12,301,419 | | | 89.0 | | | 12,832,385 | | | 87.7 | | | 13,250,350 | | | 84.6 | |
Consumer: | | | | | | | | | | | |
Residential | 487,199 | | | 3.5 | | | 494,815 | | | 3.4 | | | 457,768 | | | 3.0 | |
Manufactured housing | 41,664 | | | 0.3 | | | 43,272 | | | 0.3 | | | 48,570 | | | 0.3 | |
| | | | | | | | | | | |
Installment: | | | | | | | | | | | |
Personal | 752,470 | | | 5.4 | | | 849,420 | | | 5.8 | | | 1,613,628 | | | 10.3 | |
Other | 250,047 | | | 1.8 | | | 419,085 | | | 2.8 | | | 287,442 | | | 1.8 | |
Total installment loans | 1,002,517 | | | 7.2 | | | 1,268,505 | | | 8.6 | | | 1,901,070 | | | 12.1 | |
| | | | | | | | | | | |
Total consumer loans | 1,531,380 | | | 11.0 | | | 1,806,592 | | | 12.3 | | | 2,407,408 | | | 15.4 | |
Total loans and leases held for investment | $ | 13,832,799 | | | 100.0 | % | | $ | 14,638,977 | | | 100.0 | % | | $ | 15,657,758 | | | 100.0 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
Loans Held for Sale | | | | | | | | | | | |
Commercial: | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Multifamily | $ | — | | | — | % | | $ | 4,051 | | | 1.0 | % | | $ | 4,136 | | | 62.7 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Commercial real estate non-owner occupied | — | | | — | | | 16,000 | | | 3.7 | | | — | | | — | |
| | | | | | | | | | | |
Total commercial loans and leases | — | | | — | | | 20,051 | | | 4.7 | | | 4,136 | | | 62.7 | |
Consumer: | | | | | | | | | | | |
Residential | 1,234 | | | 1.6 | | | 821 | | | 0.2 | | | 2,459 | | | 37.3 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Installment: | | | | | | | | | | | |
Personal | 76,874 | | | 98.4 | | | 307,336 | | | 72.5 | | | — | | | — | |
Other | — | | | — | | | 95,849 | | | 22.6 | | | — | | | — | |
Total installment loans | 76,874 | | | 98.4 | | | 403,185 | | | 95.1 | | | — | | | — | |
| | | | | | | | | | | |
Total consumer loans | 78,108 | | | 100.0 | | | 404,006 | | | 95.3 | | | 2,459 | | | 37.3 | |
Total loans held for sale | $ | 78,108 | | | 100.0 | % | | $ | 424,057 | | | 100.0 | % | | $ | 6,595 | | | 100.0 | % |
| | | | | | | | | | | |
Total loans and leases portfolio | $ | 13,910,907 | | | | | $ | 15,063,034 | | | | | $ | 15,664,353 | | | |
Loans and Leases Held for Investment
Loans and leases held for investment were $13.8 billion at June 30, 2023, down $806.2 million, or 5.5%, from March 31, 2023, consistent with our stated goal of purposely moderating loan growth and exiting non-strategic relationships. Loans held for investment decreased in every category, except for relatively small increases in construction loans and specialty lending activities within commercial and industrial ("C&I") loans quarter-over-quarter.
On June 15, 2023, Customers acquired $631.0 million of a Venture Banking loan portfolio at a discount from the FDIC. Customers has also recruited team members that originated these loans to service the venture-backed growth industry from seed-stage through late-stage. The newly recruited team gives clients access to the capital to grow from innovation to maturity and leverage a customized, best-in-class tech platform to support their growth. The team has long-standing relationships with these clients offering them premier end-to-end financial services meeting their needs. The addition of these team members creates venture banking client coverage in Austin, the Bay Area, Boston, Southern California, Chicago, Denver, Raleigh/Durham, and Washington, D.C. The technology and life sciences portfolio has been combined with Customers’ existing technology and venture capital banking vertical. The portfolio of capital call loans to venture capital firms has been combined with Customers' existing direct capital call lines vertical within fund finance. This acquisition was accomplished from exiting and selling all non strategic short-term syndicated capital call lines of credit and payoffs and sales of other loans, and contributed to the moderate growth in specialty lending verticals of $15.7 million, or 0.3% quarter-over-quarter. Other C&I loans decreased $116.0 million, or 9.9% quarter-over-quarter, to $1.1 billion. Loans to mortgage companies decreased $266.3 million, or 19.4% quarter-over-quarter due to lower mortgage activity. Consumer installment loans held for investment decreased $266.0 million, or 21.0% quarter-over-quarter, to $1.0 billion as we continue to execute on our held-for-sale strategy and de-risk the held-for-investment loan portfolio in 2023.
Loans and leases held for investment of $13.8 billion at June 30, 2023 was down $1.8 billion, or 11.7%, year-over-year, largely driven by reduced balances in PPP loans of $1.4 billion, consumer installment loans of $898.6 million, and loans to mortgage companies of $866.6 million, offset in part by net growth in the lower risk variable rate specialty lending verticals of $935.2 million.
Loans Held for Sale
Loans held for sale decreased $345.9 million quarter-over-quarter, and were only $78.1 million at June 30, 2023 as we continue to build out our held-for-sale strategy in 2023. On June 30, 2023, Customers sold consumer installment loans that were classified as held for sale with a carrying value of $556.7 million, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale during Q2 2023, accrued interest and unamortized deferred loan origination costs. As part of these sales, Customers recognized a net loss on sale of $1.0 million, which is presented within "Gain (loss) on sale of SBA and other loans" in the consolidated statement of income.
Allowance for Credit Losses on Loans and Leases
The following table presents the allowance for credit losses on loans and leases as of the dates and for the periods presented: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At or Three Months Ended | | Increase (Decrease) | | At or Three Months Ended | | Increase (Decrease) | | | | |
(Dollars in thousands) | June 30, 2023 | | March 31, 2023 | | | June 30, 2023 | | June 30, 2022 | | | | | | |
Allowance for credit losses on loans and leases | $ | 139,656 | | | $ | 130,281 | | | $ | 9,375 | | | $ | 139,656 | | | $ | 156,530 | | | $ | (16,874) | | | | | | | |
Provision for credit losses on loans and leases | $ | 22,363 | | | $ | 18,008 | | | $ | 4,355 | | | $ | 22,363 | | | $ | 24,164 | | | $ | (1,801) | | | | | | | |
Net charge-offs from loans held for investment | $ | 15,564 | | | $ | 18,651 | | | $ | (3,087) | | | $ | 15,564 | | | $ | 13,481 | | | $ | 2,083 | | | | | | | |
| | | | | | | | | | | | | | | | | |
Annualized net charge-offs to average loans and leases | 0.42 | % | | 0.49 | % | | | | 0.42 | % | | 0.36 | % | | | | | | | | |
Coverage of credit loss reserves for loans and leases held for investment | 1.09 | % | | 0.97 | % | | | | 1.09 | % | | 1.14 | % | | | | | | | | |
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP* | 1.11 | % | | 0.99 | % | | | | 1.11 | % | | 1.28 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
*Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document. |
The decrease in net charge-offs in Q2 2023 compared to Q1 2023 was primarily due to a charge-off of a non-owner occupied commercial real estate loan in Q1 2023 and a decrease in consumer installment net charge-offs in Q2 2023 compared to Q1 2023. The net charge-offs of $15.6 million in Q2 2023 excludes $6.2 million of charge-offs for certain PCD loans acquired from FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the loan portfolio on June 15, 2023.
The increase in net charge-offs in Q2 2023 compared to Q2 2022, excluding the charge-offs for certain PCD loans acquired from FDIC, was primarily due to an increase in consumer installment net charge-offs in Q2 2023 compared to Q2 2022.
Provision for Credit Losses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Increase (Decrease) | | Three Months Ended | | Increase (Decrease) | | | | |
(Dollars in thousands) | June 30, 2023 | | March 31, 2023 | | | June 30, 2023 | | June 30, 2022 | | | | | | |
Provision for credit losses on loans and leases | $ | 22,363 | | | $ | 18,008 | | | $ | 4,355 | | | $ | 22,363 | | | $ | 24,164 | | | $ | (1,801) | | | | | | | |
Provision (benefit) for credit losses on available for sale debt securities | 1,266 | | | 1,595 | | | (329) | | | 1,266 | | | (317) | | | 1,583 | | | | | | | |
Provision for credit losses | 23,629 | | | 19,603 | | | 4,026 | | | 23,629 | | | 23,847 | | | (218) | | | | | | | |
Provision (benefit) for credit losses on unfunded commitments | (304) | | | 280 | | | (584) | | | (304) | | | 608 | | | (912) | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total provision for credit losses | $ | 23,325 | | | $ | 19,883 | | | $ | 3,442 | | | $ | 23,325 | | | $ | 24,455 | | | $ | (1,130) | | | | | | | |
| | | | | | | | | | | | | | | | | |
The provision for credit losses on loans and leases in Q2 2023 was $22.4 million, compared to $18.0 million in Q1 2023. The provision in Q2 2023 was primarily due to our recognition of weaker macroeconomic forecasts, partially offset by lower consumer installment loans, as compared to provision in Q1 2023. The provision for credit losses on available for sale investment securities in Q2 2023 was $1.3 million compared to provision of $1.6 million in Q1 2023.
The provision for credit losses on loans and leases in Q2 2023 was $22.4 million, compared to $24.2 million in Q2 2022. The provision in Q2 2023 was primarily due to our recognition of weaker macroeconomic forecasts, partially offset by lower consumer installment loans, as compared to provision in Q2 2022, which was primarily to support loan growth. The provision for credit losses on available for sale investment securities in Q2 2023 was $1.3 million compared to a benefit to provision of $0.3 million in Q2 2022.
Asset Quality
The following table presents asset quality metrics as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | June 30, 2023 | | March 31, 2023 | | Increase (Decrease) | | June 30, 2023 | | June 30, 2022 | | Increase (Decrease) |
Non-performing assets ("NPAs"): | | | | | | | | | | | |
Nonaccrual / non-performing loans ("NPLs") | $ | 28,244 | | | $ | 32,124 | | | $ | (3,880) | | | $ | 28,244 | | | $ | 28,064 | | | $ | 180 | |
Non-performing assets | $ | 28,380 | | | $ | 32,260 | | | $ | (3,880) | | | $ | 28,380 | | | $ | 28,150 | | | $ | 230 | |
NPLs to total loans and leases | 0.20 | % | | 0.21 | % | | | | 0.20 | % | | 0.18 | % | | |
Reserves to NPLs | 494.46 | % | | 405.56 | % | | | | 494.46 | % | | 557.76 | % | | |
NPAs to total assets | 0.13 | % | | 0.15 | % | | | | 0.13 | % | | 0.14 | % | | |
| | | | | | | | | | | |
Loans and leases (1) risk ratings: | | | | | | | | | | | |
Commercial loans and leases (2) | | | | | | | | | | | |
Pass | $ | 10,667,619 | | | $ | 10,928,620 | | | $ | (261,001) | | | $ | 10,667,619 | | | $ | 9,355,846 | | | $ | 1,311,773 | |
Special Mention (3) | 166,468 | | | 136,986 | | | 29,482 | | | 166,468 | | | 106,566 | | | 59,902 | |
Substandard (3) | 272,301 | | | 273,154 | | | (853) | | | 272,301 | | | 343,175 | | | (70,874) | |
| | | | | | | | | | | |
Total commercial loans and leases | 11,106,388 | | | 11,338,760 | | | (232,372) | | | 11,106,388 | | | 9,805,587 | | | 1,300,801 | |
Consumer loans | | | | | | | | | | | |
Performing | 1,508,208 | | | 1,787,123 | | | (278,915) | | | 1,508,208 | | | 2,392,852 | | | (884,644) | |
Non-performing | 23,172 | | | 19,469 | | | 3,703 | | | 23,172 | | | 14,556 | | | 8,616 | |
Total consumer loans | 1,531,380 | | | 1,806,592 | | | (275,212) | | | 1,531,380 | | | 2,407,408 | | | (876,028) | |
Loans and leases receivable (1) | $ | 12,637,768 | | | $ | 13,145,352 | | | $ | (507,584) | | | $ | 12,637,768 | | | $ | 12,212,995 | | | $ | 424,773 | |
| | | | | | | | | | | |
(1) Risk ratings are assigned to loans and leases held for investment, and excludes loans held for sale and loans receivable, mortgage warehouse, at fair value.
(2) Excludes loan receivable, PPP, as eligible PPP loans are fully guaranteed by the Small Business Administration.
(3) Includes $24.3 million of C&I loans rated Special Mention and $2.1 million rated Substandard at June 30, 2023 that were acquired from the FDIC on June 15, 2023.
Over the last decade, we have developed a suite of commercial loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s C&I, loans to mortgage companies, corporate and specialty lending lines of business, and multifamily 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 incredibly healthy despite an 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, we employ a bottom-up data driven approach to analyze the commercial portfolio.
Total consumer installment loans held for investment at June 30, 2023 were less than 5% of total assets and approximately 7% of total loans and leases held for investment, and were supported by an allowance for credit losses of $57.6 million. At June 30, 2023, our consumer installment portfolio had the following characteristics: average original FICO score of 733, average debt-to-income of 19% and average borrower income of $105 thousand.
Non-performing loans at June 30, 2023 were essentially flat at 0.20% of total loans and leases, compared to 0.21% at March 31, 2023 and 0.18% at June 30, 2022.
Investment Securities
Our investment securities portfolio, including debt securities available for sale ("AFS") and held to maturity ("HTM") provides periodic cash flows through regular maturities and amortization, can be used as collateral to secure additional funding, and is an important component of our liquidity position.
The following table presents the composition of our investment securities portfolio as of the dates indicated: | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | June 30, 2023 | | March 31, 2023 | | June 30, 2022 |
Debt securities, available for sale | $ | 2,797,940 | | | $ | 2,900,259 | | | $ | 3,120,111 | |
Equity securities | 26,698 | | | 26,710 | | | 24,771 | |
Investment securities, at fair value | 2,824,638 | | | 2,926,969 | | | 3,144,882 | |
Debt securities, held to maturity | 1,258,560 | | | 870,294 | | | 495,039 | |
Total investment securities portfolio | $ | 4,083,198 | | | $ | 3,797,263 | | | $ | 3,639,921 | |
Critically important to performance during the recent banking crisis are the characteristics of a bank’s securities portfolio. While there may be virtually no credit risk in some of these portfolios, holding longer term and lower yielding securities is creating challenges for many banks. Our securities portfolio is highly liquid, short in duration, and high in yield. At June 30, 2023, our AFS debt securities portfolio had a spot yield of 5.38%, an effective duration of approximately 1.5 years, and approximately 47% are variable rate. Additionally, 62% of our AFS securities portfolio was AAA rated at June 30, 2023.
At June 30, 2023, our HTM debt securities portfolio represented only 5.7% of our total assets at June 30, 2023, had a spot yield of 4.41% and an effective duration of approximately 3.0 years. Additionally, at June 30, 2023, approximately 36% of our HTM securities were AAA rated and 57% were credit enhanced asset backed securities with no current expectation of credit losses.
As a part of the sales of consumer installment loans that were classified as held for sale, Customers provided some financing to the purchaser for a portion of the sale price in the form of $436.8 million of asset-backed securities, collateralized by the sold loans, which accounted for the increase in HTM debt securities at June 30, 2023 as compared to the prior quarter.
Deposits
The following table presents the composition of our deposit portfolio as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | June 30, 2023 | | % of Total | | March 31, 2023 | | % of Total | | June 30, 2022 | | % of Total |
Demand, non-interest bearing | $ | 4,490,198 | | | 25.0 | % | | $ | 3,487,517 | | | 19.7 | % | | $ | 4,683,030 | | | 27.6 | % |
Demand, interest bearing | 5,551,037 | | | 30.9 | | | 5,791,302 | | | 32.7 | | | 6,644,398 | | | 39.2 | |
Total demand deposits | 10,041,235 | | | 55.9 | | | 9,278,819 | | | 52.4 | | | 11,327,428 | | | 66.8 | |
Savings | 1,048,229 | | | 5.8 | | | 924,359 | | | 5.2 | | | 640,062 | | | 3.8 | |
Money market | 2,004,264 | | | 11.2 | | | 2,019,633 | | | 11.4 | | | 4,254,205 | | | 25.1 | |
Time deposits | 4,856,703 | | | 27.1 | | | 5,500,806 | | | 31.0 | | | 723,024 | | | 4.3 | |
Total deposits | $ | 17,950,431 | | | 100.0 | % | | $ | 17,723,617 | | | 100.0 | % | | $ | 16,944,719 | | | 100.0 | % |
Total deposits increased $226.8 million, or 1.3%, to $18.0 billion at June 30, 2023 as compared to the prior quarter. Importantly, non-interest bearing demand deposits increased $1.0 billion, or 28.8%, to $4.5 billion. Savings deposits increased $123.9 million, or 13.4%, to $1.0 billion. These increases were offset by decreases in time deposits of $644.1 million, or 11.7%, to $4.9 billion, interest bearing demand deposits of $240.3 million, or 4.1%, to $5.6 billion and money market deposits of $15.4 million, or 0.8%, to $2.0 billion. The total average cost of deposits decreased by 21 basis points to 3.11% in Q2 2023 from 3.32% in the prior quarter primarily due to a shift in deposit mix. Total estimated uninsured deposits was $4.1 billion1, or 23% of total deposits (inclusive of accrued interest) at June 30, 2023. We are also highly focused on total deposits with contractual term to manage our liquidity profile and the funding of loans and securities.
1 Uninsured deposits (estimate) of $4.7 billion to be reported on the Bank's call report, less state and municipal deposits of $459.4 million collateralized by our line of credit from FHLB and from our affiliates of $92.0 million.
Total deposits increased $1.0 billion, or 5.9%, to $18.0 billion at June 30, 2023 as compared to a year ago. Time deposits increased $4.1 billion to $4.9 billion. Savings deposits increased $408.2 million, or 63.8%, to $1.0 billion. These increases were offset in part by decreases in money market deposits of $2.2 billion, or 52.9%, to $2.0 billion, interest bearing demand deposits of $1.1 billion, or 16.5%, to $5.6 billion and non-interest bearing demand deposits of $192.8 million, or 4.1%, to $4.5 billion. The total average cost of deposits increased by 257 basis points to 3.11% in Q2 2023 from 0.54% in the prior year primarily due to higher market interest rates and a shift in deposit mix.
Borrowings
The following table presents the composition of our borrowings as of the dates indicated: | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | June 30, 2023 | | March 31, 2023 | | June 30, 2022 |
| | | | | |
Federal funds purchased | $ | — | | | $ | — | | | $ | 770,000 | |
FHLB advances | 2,046,142 | | | 2,052,143 | | | 635,000 | |
Senior notes | 123,710 | | | 123,645 | | | 123,450 | |
Subordinated debt | 182,091 | | | 182,021 | | | 181,812 | |
Total borrowings | $ | 2,351,943 | | | $ | 2,357,809 | | | $ | 1,710,262 | |
Total borrowings were $2.4 billion at June 30, 2023, relatively unchanged from the prior quarter. As of June 30, 2023, Customers' borrowing capacity with the FRB and FHLB was approximately $8.6 billion, of which $2.1 billion of available capacity was utilized in borrowings and $600.5 million was utilized to collateralize state and municipal deposits.
Total borrowings increased $641.7 million, or 37.5%, to $2.4 billion at June 30, 2023 as compared to a year ago. This increase primarily resulted from an increase in FHLB advances to ensure ample cash on hand given the heightened liquidity risk in the banking system, particularly among regional banks since early March 2023, net of repayments of federal funds purchased.
Capital
The following table presents certain capital amounts and ratios as of the dates indicated: | | | | | | | | | | | | | | | | | |
(Dollars in thousands except per share data) | June 30, 2023 | | March 31, 2023 | | June 30, 2022 |
Customers Bancorp, Inc. | | | | | |
Common Equity | $ | 1,318,858 | | | $ | 1,283,226 | | | $ | 1,215,596 | |
Tangible Common Equity* | $ | 1,315,229 | | | $ | 1,279,597 | | | $ | 1,211,967 | |
Common Equity to Total Assets | 6.0 | % | | 5.9 | % | | 6.0 | % |
Tangible Common Equity to Tangible Assets* | 6.0 | % | | 5.9 | % | | 6.0 | % |
Tangible Common Equity to Tangible Assets, excluding PPP* | 6.0 | % | | 6.0 | % | | 6.5 | % |
Book Value per common share | $ | 42.16 | | | $ | 41.08 | | | $ | 37.46 | |
Tangible Book Value per common share* | $ | 42.04 | | | $ | 40.96 | | | $ | 37.35 | |
Common equity Tier 1 (CET 1) capital ratio (1) | 10.3 | % | | 9.6 | % | | 9.7 | % |
Total risk based capital ratio (1) | 13.1 | % | | 12.3 | % | | 12.6 | % |
| | | | | |
(1) Regulatory capital ratios as of June 30, 2023 are estimates. |
*Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document. |
Customers Bancorp's common equity increased $35.6 million to $1.3 billion, and tangible common equity* increased $35.6 million to $1.3 billion, at June 30, 2023 compared to the prior quarter, respectively, as earnings of $44.0 million more than offset a negative impact of increased unrealized losses on investment securities of $11.9 million (net of taxes) deferred in accumulated other comprehensive income ("AOCI"). Similarly, book value per common share increased to $42.16 from $41.08, and tangible book value per common share* increased to $42.04 from $40.96, at June 30, 2023 and March 31, 2023, respectively.
Customers Bancorp's common equity increased $103.3 million to $1.3 billion, and tangible common equity* increased $103.3 million to $1.3 billion, at June 30, 2023 compared to a year ago, respectively, as earnings of $181.3 million more than offset a negative impact to AOCI from increased unrealized losses on investment securities of $43.3 million (net of taxes) and $45.1 million of common share repurchases. Similarly, book value per common share increased to $42.16 from $37.46, and tangible book value per common share* increased to $42.04 from $37.35, at June 30, 2023 and June 30, 2022, respectively.
At the Customers Bancorp level, the CET 1 capital ratio (estimate), total risk based capital ratio (estimate), common equity to total assets ratio and tangible common equity to tangible assets ratio ("TCE ratio") were 10.3%, 13.1%, 6.0%, and 6.0%, respectively, at June 30, 2023.
At the Customers Bank level, capital levels remained strong and well above regulatory minimums. At June 30, 2023, estimated Tier 1 capital (estimate) and total risk-based capital (estimate) were 11.9% and 13.3%, respectively.
Even though Customers remains well capitalized by all regulatory measures, its goal is to increase its CET 1 ratio at year-end 2023 to be between 11.0% - 11.5%. "It is prudent to continue to moderate or even shrink our balance sheet in this uncertain environment and have strong capital ratios," stated Jay Sidhu.
Key Profitability Trends
Net Interest Income
Net interest income totaled $165.3 million in Q2 2023, an increase of $15.4 million from Q1 2023, primarily due to higher interest income from interest earning deposits of $17.2 million maintained in response to heightened liquidity risk in the banking system, particularly among regional banks since early March 2023, variable rate lower credit risk specialty lending of $18.1 million, and commercial loans to mortgage companies of $2.2 million, reflecting higher average balances and market interest rates. These increases were partially offset by lower interest income on consumer installment loans of $2.3 million reflecting the impact of the sales transactions that occurred late in Q2 2023 and reduced PPP interest income of $21.9 million resulting primarily from reduced recognition of deferred fees as the PPP program was substantially completed in Q1 2023. In addition, interest expense on deposits and other borrowings decreased by $0.2 million in Q2 2023 largely resulting from the positive shift in deposit mix towards no to lower-interest bearing deposits despite higher interest rates during Q2 2023, mostly offset by increased borrowing costs reflecting a full quarter impact of FHLB advances drawn in Q1 2023.
Net interest income totaled $165.3 million in Q2 2023, an increase of $0.4 million from Q2 2022. This increase was due to higher interest income of $133.8 million resulting from increased average balance of interest earning assets of $1.5 billion and higher market interest rates on variable rate loans and investments, offset in part by higher interest expenses on deposits and other borrowings of $133.4 million primarily resulting from higher average balances of interest bearing deposits and other borrowings and increased market rates. Interest-earning asset growth was primarily driven by increases in C&I loans and leases, mostly in the variable rate lower credit risk specialty lending verticals and multifamily loans, offset in part by decreases in commercial loans to mortgage companies due to lower mortgage activity from rising interest rates, PPP loans as the PPP program was substantially completed in Q1 2023 and consumer installment loans. Total consumer installment loans decreased in Q2 2023 as compared to Q2 2022, as installment loans held for investment decreased primarily for risk management purposes and implementation of our held-for-sale strategy.
Non-Interest Income
The following table presents details of non-interest income for the periods indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Increase (Decrease) | | Three Months Ended | | Increase (Decrease) | | | | |
(Dollars in thousands) | June 30, 2023 | | March 31, 2023 | | | June 30, 2023 | | June 30, 2022 | | | | | | |
Commercial lease income | $ | 8,917 | | | $ | 9,326 | | | $ | (409) | | | $ | 8,917 | | | $ | 6,592 | | | $ | 2,325 | | | | | | | |
Loan fees | 4,271 | | | 3,990 | | | 281 | | | 4,271 | | | 2,618 | | | 1,653 | | | | | | | |
Bank-owned life insurance | 4,997 | | | 2,647 | | | 2,350 | | | 4,997 | | | 1,947 | | | 3,050 | | | | | | | |
Mortgage warehouse transactional fees | 1,376 | | | 1,074 | | | 302 | | | 1,376 | | | 1,883 | | | (507) | | | | | | | |
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Gain (loss) on sale of SBA and other loans | (761) | | | — | | | (761) | | | (761) | | | 1,542 | | | (2,303) | | | | | | | |
Loss on sale of capital call lines of credit | (5,037) | | | — | | | (5,037) | | | (5,037) | | | — | | | (5,037) | | | | | | | |
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Net gain (loss) on sale of investment securities | — | | | — | | | — | | | — | | | (3,029) | | | 3,029 | | | | | | | |
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Other | 2,234 | | | 1,084 | | | 1,150 | | | 2,234 | | | 1,193 | | | 1,041 | | | | | | | |
Total non-interest income | $ | 15,997 | | | $ | 18,121 | | | $ | (2,124) | | | $ | 15,997 | | | $ | 12,746 | | | $ | 3,251 | | | | | | | |
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Non-interest income totaled $16.0 million for Q2 2023, a decrease of $2.1 million compared to Q1 2023. The decrease was primarily due to a loss of $5.0 million realized from the sale of non-strategic short-term syndicated capital call lines of credit within our Specialty Lending vertical that the Bank exited completely and $0.8 million of net loss on sales of SBA loans and consumer installment loans that were classified as held for sale. These decreases were offset in part by increases in death benefits paid by insurance carriers under the bank-owned life insurance policies of $2.4 million and other income of $1.2 million mostly related to income from CRA-qualified investments in small business investment companies and tax interest and penalties refunds.
Non-interest income totaled $16.0 million for Q2 2023, an increase of $3.3 million compared to Q2 2022. The increase was primarily due to lower loss on securities sales of $3.0 million as there were no such sales in Q2 2023, and increases in death benefits paid by insurance carriers under the bank-owned life insurance policies of $3.1 million, commercial lease income of $2.3 million, loan fees of $1.7 million resulting from growth and other income of $1.0 million. These increases were offset partially by a $5.0 million loss realized from the sale of non-strategic short-term syndicated capital call lines of credit that the Bank exited completely and a decrease in net gain on sale of SBA and other loans of $2.3 million due to lower gains on sales of SBA loans and losses on sales of consumer installment loans that were classified as held for sale.
Non-Interest Expense
The following table presents details of non-interest expense for the periods indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Increase (Decrease) | | Three Months Ended | | Increase (Decrease) | | | | |
(Dollars in thousands) | June 30, 2023 | | March 31, 2023 | | | June 30, 2023 | | June 30, 2022 | | | | | | |
Salaries and employee benefits | $ | 33,120 | | | $ | 32,345 | | | $ | 775 | | | $ | 33,120 | | | $ | 25,334 | | | $ | 7,786 | | | | | | | |
Technology, communication and bank operations | 16,407 | | | 16,589 | | | (182) | | | 16,407 | | | 22,738 | | | (6,331) | | | | | | | |
Commercial lease depreciation | 7,328 | | | 7,875 | | | (547) | | | 7,328 | | | 5,552 | | | 1,776 | | | | | | | |
Professional services | 9,192 | | | 7,596 | | | 1,596 | | | 9,192 | | | 7,415 | | | 1,777 | | | | | | | |
Loan servicing | 4,777 | | | 4,661 | | | 116 | | | 4,777 | | | 4,341 | | | 436 | | | | | | | |
Occupancy | 2,519 | | | 2,760 | | | (241) | | | 2,519 | | | 4,279 | | | (1,760) | | | | | | | |
FDIC assessments, non-income taxes and regulatory fees | 9,780 | | | 2,728 | | | 7,052 | | | 9,780 | | | 1,619 | | | 8,161 | | | | | | | |
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Advertising and promotion | 546 | | | 1,049 | | | (503) | | | 546 | | | 353 | | | 193 | | | | | | | |
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Other | 5,628 | | | 4,530 | | | 1,098 | | | 5,628 | | | 4,574 | | | 1,054 | | | | | | | |
Total non-interest expense | $ | 89,297 | | | $ | 80,133 | | | $ | 9,164 | | | $ | 89,297 | | | $ | 76,205 | | | $ | 13,092 | | | | | | | |
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The management of non-interest expenses remains a priority for us. However, this will not deter us from making investments in new technologies to support efficient and responsible growth in the future.
Non-interest expenses totaled $89.3 million in Q2 2023, an increase of $9.2 million compared to Q1 2023. The increase was primarily attributable to higher FDIC assessments, non-income taxes and regulatory fees of $7.1 million resulting from higher FDIC assessment rates, higher professional fees of $1.6 million to enhance our technology, compliance and risk management capabilities, other expenses of $1.1 million primarily due to higher provision for operating losses and increased salaries and employee benefits of $0.8 million driven by higher incentives and stock based awards offset by lower benefits and severance.
Non-interest expenses totaled $89.3 million in Q2 2023, an increase of $13.1 million compared to Q2 2022. The increase was primarily attributable to increases of $8.2 million of FDIC assessments, non-income taxes and regulatory fees resulting from higher FDIC assessment rates, $7.8 million in salaries and employee benefits due to higher headcount, annual merit increases, incentives and SERP expenses, $1.8 million in professional fees mostly for transaction related legal fees, $1.8 million in commercial lease depreciation from growth and $1.1 million in other expenses primarily due to higher provision for operating losses. These increases were offset in part by decreases of $6.3 million in deposit servicing-related expenses mostly due to lower servicing fees and the discontinuation of interchange maintenance fees paid to BM Technologies offset by higher fees paid for software as a service and $1.8 million in occupancy mostly due to impairments associated with consolidation of branch locations in Q2 2022.
Taxes
Income tax expense increased by $6.2 million to $20.8 million in Q2 2023 from $14.6 million in Q1 2023 primarily due to tax expense of $4.1 million recognized in Q2 2023 on surrendered bank-owned life insurance policies.
Income tax expense increased by $1.9 million to $20.8 million in Q2 2023 from $18.9 million in Q2 2022 primarily due to tax expense on surrendered bank-owned life insurance policies, offset in part by lower pre-tax income and increased income tax credits.
The effective tax rate for Q2 2023 was 30%, primarily due to tax on surrendered bank-owned life insurance policies. Excluding the tax on surrendered bank-owned life insurance policies, the effective tax rate for Q2 2023 was 24%. Customers expects the full-year 2023 effective tax rate to be approximately 22% to 24%.
Outlook
“Looking ahead, we will continue to moderate growth, or even reduce the size of the balance sheet, as we optimize the balance sheet and materially improve our capital ratios, maintain positive operating leverage with prudent expense management, and continue to improve deposits and liquidity. We expect 2023 core loans to be essentially flat to down. Deposits are expected to remain relatively flat with a focus on improving our funding profile and reducing high cost deposits. We expect full year 2023 net interest margin, excluding PPP* to be at the upper end of the previously guided range of 2.85% - 3.05%. 2023 Core EPS (excluding PPP)* is still expected to be about $6.00 with a core return on common equity* of over 15%. Core non-interest expense* is now expected to increase about 15% in 2023 as a result of higher FDIC assessments and the newly recruited Venture Banking team. We are still targeting a CET 1 ratio of approximately 11.0% - 11.5% by year-end 2023, following up on the 70 basis point increase we achieved during Q2 2023. We are focused on improving the quality of our balance sheet and deposit franchise, improving capital and liquidity, maintaining superior credit quality, expanding our net interest margin, and achieving our tangible book value guidance in excess of $45 by year-end 2023,” concluded Customers Bancorp President Sam Sidhu.
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*Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document. |
Webcast
Date: Friday, July 28, 2023
Time: 9:00 AM EDT
The live audio webcast, presentation slides, and earnings press release will be made available at https://www.customersbank.com/investor-relations/ and at the Customers Bancorp 2nd Quarter Earnings Webcast.
You may submit questions in advance of the live webcast by emailing our Communications 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 Bank Investor Relations page and available beginning approximately two hours after the conclusion of the live event.
Institutional Background
Customers Bancorp, Inc. (NYSE:CUBI) is one of the nation’s top-performing banking companies with over $22 billion in assets, making it the 81 largest bank holding companies in the US. Through its primary subsidiary, Customers Bank, commercial and consumer clients benefit from a full suite of technology-enabled tailored product experiences delivered by best-in-class customer service. In addition to traditional lines such as C&I lending, commercial real estate lending, and multifamily lending, Customers Bank also provides a number of national corporate banking services to Specialty Lending clients. Major accolades include:
•#5 in top-performing banks with assets between $10 billion and $50 billion in 2022 per American Banker;
•#34 out of the 100 largest publicly traded banks in 2023 per Forbes; and
•#64 on Fortune Magazine’s 2022 list of the 100 fastest growing companies in America.
A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender. Learn more: 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,” “project,” 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: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, the impact of COVID-19 and its variants on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, 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, higher inflation and its impacts, 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, 2022, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.
Q2 2023 Overview
The following table presents a summary of key earnings and performance metrics for the quarter ended June 30, 2023 and the preceding four quarters:
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |
EARNINGS SUMMARY - UNAUDITED | |
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(Dollars in thousands, except per share data and stock price data) | Q2 | | Q1 | | Q4 | | Q3 | | Q2 | | Six Months Ended June 30, | |
2023 | | 2023 | | 2022 | | 2022 | | 2022 | | 2023 | | 2022 | |
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GAAP Profitability Metrics: | |
Net income available to common shareholders
| $ | 44,007 | | | $ | 50,265 | | | $ | 25,623 | | | $ | 61,364 | | | $ | 56,519 | | | $ | 94,272 | | | $ | 131,415 | | |
Per share amounts: | | | | | | | | | | | | | | |
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| Earnings per share - basic | $ | 1.41 | | | $ | 1.58 | | | $ | 0.79 | | | $ | 1.89 | | | $ | 1.73 | | | $ | 2.99 | | | $ | 4.00 | | |
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| Earnings per share - diluted | $ | 1.39 | | | $ | 1.55 | | | $ | 0.77 | | | $ | 1.85 | | | $ | 1.68 | | | $ | 2.95 | | | $ | 3.87 | | |
| Book value per common share (1) | $ | 42.16 | | | $ | 41.08 | | | $ | 39.08 | | | $ | 38.46 | | | $ | 37.46 | | | $ | 42.16 | | | $ | 37.46 | | |
| CUBI stock price (1) | $ | 30.26 | | | $ | 18.52 | | | $ | 28.34 | | | $ | 29.48 | | | $ | 33.90 | | | $ | 30.26 | | | $ | 33.90 | | |
| CUBI stock price as % of book value (1) | 72 | % | | 45 | % | | 73 | % | | 77 | % | | 90 | % | | 72 | % | | 90 | % | |
Average shares outstanding - basic | 31,254,125 | | | 31,819,203 | | | 32,413,459 | | | 32,455,814 | | | 32,712,616 | | | 31,535,103 | | | 32,834,150 | | |
Average shares outstanding - diluted | 31,591,142 | | | 32,345,017 | | | 33,075,422 | | | 33,226,607 | | | 33,579,013 | | | 31,965,997 | | | 33,950,973 | | |
Shares outstanding (1) | 31,282,318 | | | 31,239,750 | | | 32,373,697 | | | 32,475,502 | | | 32,449,486 | | | 31,282,318 | | | 32,449,486 | | |
Return on average assets ("ROAA") | 0.88 | % | | 1.03 | % | | 0.55 | % | | 1.24 | % | | 1.17 | % | | 0.96 | % | | 1.39 | % | |
Return on average common equity ("ROCE") | 13.22 | % | | 16.00 | % | | 8.05 | % | | 19.33 | % | | 18.21 | % | | 14.57 | % | | 21.23 | % | |
Net interest margin, tax equivalent | 3.15 | % | | 2.96 | % | | 2.67 | % | | 3.16 | % | | 3.39 | % | | 3.06 | % | | 3.49 | % | |
Efficiency ratio | 49.25 | % | | 47.71 | % | | 49.20 | % | | 50.00 | % | | 42.14 | % | | 48.51 | % | | 40.76 | % | |
Non-GAAP Profitability Metrics (2): | | | | | | | | | | | | | | |
Core earnings | $ | 52,163 | | | $ | 51,143 | | | $ | 39,368 | | | $ | 82,270 | | | $ | 59,367 | | | $ | 103,306 | | | $ | 134,777 | | |
Adjusted pre-tax pre-provision net income | $ | 96,833 | | | $ | 89,282 | | | $ | 81,377 | | | $ | 100,994 | | | $ | 105,692 | | | $ | 186,115 | | | $ | 218,341 | | |
Per share amounts: | | | | | | | | | | | | | | |
| Core earnings per share - diluted | $ | 1.65 | | | $ | 1.58 | | | $ | 1.19 | | | $ | 2.48 | | | $ | 1.77 | | | $ | 3.22 | | | $ | 3.97 | | |
| Tangible book value per common share (1) | $ | 42.04 | | | $ | 40.96 | | | $ | 38.97 | | | $ | 38.35 | | | $ | 37.35 | | | $ | 42.04 | | | $ | 37.35 | | |
| CUBI stock price as % of tangible book value (1) | 72 | % | | 45 | % | | 73 | % | | 77 | % | | 91 | % | | 72 | % | | 91 | % | |
Core ROAA | 1.03 | % | | 1.05 | % | | 0.81 | % | | 1.64 | % | | 1.23 | % | | 1.04 | % | | 1.43 | % | |
Core ROCE | 15.67 | % | | 16.28 | % | | 12.36 | % | | 25.91 | % | | 19.13 | % | | 15.97 | % | | 21.77 | % | |
Adjusted ROAA - pre-tax and pre-provision | 1.79 | % | | 1.72 | % | | 1.56 | % | | 1.95 | % | | 2.11 | % | | 1.76 | % | | 2.25 | % | |
Adjusted ROCE - pre-tax and pre-provision | 28.01 | % | | 27.33 | % | | 24.59 | % | | 31.01 | % | | 33.37 | % | | 27.68 | % | | 34.62 | % | |
Net interest margin, tax equivalent, excluding PPP loans | 3.20 | % | | 2.80 | % | | 2.87 | % | | 3.18 | % | | 3.32 | % | | 3.01 | % | | 3.32 | % | |
Core efficiency ratio | 47.84 | % | | 47.09 | % | | 49.12 | % | | 42.57 | % | | 41.74 | % | | 47.49 | % | | 40.59 | % | |
Asset Quality: | | | | | | | | | | | | | | |
Net charge-offs | $ | 15,564 | | | $ | 18,651 | | | $ | 27,164 | | | $ | 18,497 | | | $ | 13,481 | | | $ | 34,215 | | | $ | 20,707 | | |
Annualized net charge-offs to average total loans and leases | 0.42 | % | | 0.49 | % | | 0.70 | % | | 0.47 | % | | 0.36 | % | | 0.46 | % | | 0.29 | % | |
Non-performing loans ("NPLs") to total loans and leases (1) | 0.20 | % | | 0.21 | % | | 0.19 | % | | 0.18 | % | | 0.18 | % | | 0.20 | % | | 0.18 | % | |
Reserves to NPLs (1) | 494.46 | % | | 405.56 | % | | 425.95 | % | | 466.34 | % | | 557.76 | % | | 494.46 | % | | 557.76 | % | |
Non-performing assets ("NPAs") to total assets | 0.13 | % | | 0.15 | % | | 0.15 | % | | 0.14 | % | | 0.14 | % | | 0.13 | % | | 0.14 | % | |
Customers Bank Capital Ratios (3): | | | | | | | | | | | | | | |
Common equity Tier 1 capital to risk-weighted assets | 11.9 | % | | 11.31 | % | | 11.21 | % | | 11.42 | % | | 11.46 | % | | 11.9 | % | | 11.46 | % | |
Tier 1 capital to risk-weighted assets | 11.9 | % | | 11.31 | % | | 11.21 | % | | 11.42 | % | | 11.46 | % | | 11.9 | % | | 11.46 | % | |
Total capital to risk-weighted assets | 13.3 | % | | 12.64 | % | | 12.40 | % | | 12.65 | % | | 12.91 | % | | 13.3 | % | | 12.91 | % | |
Tier 1 capital to average assets (leverage ratio) | 8.0 | % | | 8.09 | % | | 8.15 | % | | 8.10 | % | | 8.09 | % | | 8.0 | % | | 8.09 | % | |
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(1) Metric is a spot balance for the last day of each quarter presented. | |
(2) Customers' reasons for the use of these non-GAAP measures and a detailed reconciliation between the non-GAAP measures and the comparable GAAP amounts are included at the end of this document. | |
(3) Regulatory capital ratios are estimated for Q2 2023 and actual for the remaining periods. In accordance with regulatory capital rules, Customers elected to apply the CECL capital transition provisions which delayed the effects of CECL on regulatory capital for two years until January 1, 2022, followed by a three-year transition period. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of June 30, 2023, our regulatory capital ratios reflected 50%, or $30.8 million, benefit associated with the CECL transition provisions. | |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED |
(Dollars in thousands, except per share data) | | | | | | | | | | | Six Months Ended |
| Q2 | | Q1 | | Q4 | | Q3 | | Q2 | | June 30, |
| 2023 | | 2023 | | 2022 | | 2022 | | 2022 | | 2023 | | 2022 |
Interest income: | | | | | | | | | | | | | |
Loans and leases | $ | 241,745 | | | $ | 244,212 | | | $ | 217,471 | | | $ | 200,438 | | | $ | 168,920 | | | $ | 485,957 | | | $ | 326,040 | |
Investment securities | 48,026 | | | 47,316 | | | 42,953 | | | 30,546 | | | 25,442 | | | 95,342 | | | 45,737 | |
Loans held for sale | 11,149 | | | 11,701 | | | 1,269 | | | 19 | | | 21 | | | 22,850 | | | 76 | |
Interest earning deposits | 27,624 | | | 10,395 | | | 6,754 | | | 2,949 | | | 919 | | | 38,019 | | | 1,248 | |
Other | 1,616 | | | 1,321 | | | 1,200 | | | 1,964 | | | 1,032 | | | 2,937 | | | 6,709 | |
Total interest income | 330,160 | | | 314,945 | | | 269,647 | | | 235,916 | | | 196,334 | | | 645,105 | | | 379,810 | |
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Interest expense: | | | | | | | | | | | | | |
Deposits | 136,375 | | | 143,930 | | | 124,366 | | | 65,380 | | | 22,781 | | | 280,305 | | | 36,493 | |
FHLB advances | 24,285 | | | 10,370 | | | 4,464 | | | 4,684 | | | 2,316 | | | 34,655 | | | 2,316 | |
FRB advances | — | | | 6,286 | | | — | | | — | | | — | | | 6,286 | | | — | |
Subordinated debt | 2,689 | | | 2,689 | | | 2,688 | | | 2,689 | | | 2,689 | | | 5,378 | | | 5,378 | |
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Other borrowings | 1,540 | | | 1,771 | | | 2,992 | | | 4,131 | | | 3,696 | | | 3,311 | | | 6,072 | |
Total interest expense | 164,889 | | | 165,046 | | | 134,510 | | | 76,884 | | | 31,482 | | | 329,935 | | | 50,259 | |
Net interest income | 165,271 | | | 149,899 | | | 135,137 | | | 159,032 | | | 164,852 | | | 315,170 | | | 329,551 | |
Provision (benefit) for credit losses | 23,629 | | | 19,603 | | | 28,216 | | | (7,994) | | | 23,847 | | | 43,232 | | | 39,844 | |
Net interest income after provision (benefit) for credit losses | 141,642 | | | 130,296 | | | 106,921 | | | 167,026 | | | 141,005 | | | 271,938 | | | 289,707 | |
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Non-interest income: | | | | | | | | | | | | | |
Commercial lease income | 8,917 | | | 9,326 | | | 8,135 | | | 7,097 | | | 6,592 | | | 18,243 | | | 12,487 | |
Loan fees | 4,271 | | | 3,990 | | | 4,017 | | | 3,008 | | | 2,618 | | | 8,261 | | | 5,163 | |
Bank-owned life insurance | 4,997 | | | 2,647 | | | 1,975 | | | 3,449 | | | 1,947 | | | 7,644 | | | 10,273 | |
Mortgage warehouse transactional fees | 1,376 | | | 1,074 | | | 1,295 | | | 1,545 | | | 1,883 | | | 2,450 | | | 3,898 | |
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Gain (loss) on sale of SBA and other loans | (761) | | | — | | | — | | | 106 | | | 1,542 | | | (761) | | | 3,049 | |
Loss on sale of capital call lines of credit | (5,037) | | | — | | | — | | | — | | | — | | | (5,037) | | | — | |
Loss on sale of consumer installment loans | — | | | — | | | — | | | (23,465) | | | — | | | — | | | — | |
Net gain (loss) on sale of investment securities | — | | | — | | | (16,937) | | | (2,135) | | | (3,029) | | | — | | | (4,092) | |
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Legal settlement gain | — | | | — | | | 7,519 | | | — | | | — | | | — | | | — | |
Other | 2,234 | | | 1,084 | | | 1,341 | | | 1,378 | | | 1,193 | | | 3,318 | | | 3,166 | |
Total non-interest income | 15,997 | | | 18,121 | | | 7,345 | | | (9,017) | | | 12,746 | | | 34,118 | | | 33,944 | |
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Non-interest expense: | | | | | | | | | | | | | |
Salaries and employee benefits | 33,120 | | | 32,345 | | | 29,194 | | | 31,230 | | | 25,334 | | | 65,465 | | | 51,941 | |
Technology, communication and bank operations | 16,407 | | | 16,589 | | | 18,604 | | | 19,588 | | | 22,738 | | | 32,996 | | | 46,806 | |
Commercial lease depreciation | 7,328 | | | 7,875 | | | 6,518 | | | 5,966 | | | 5,552 | | | 15,203 | | | 10,494 | |
Professional services | 9,192 | | | 7,596 | | | 6,825 | | | 6,269 | | | 7,415 | | | 16,788 | | | 14,371 | |
Loan servicing | 4,777 | | | 4,661 | | | 4,460 | | | 3,851 | | | 4,341 | | | 9,438 | | | 6,712 | |
Occupancy | 2,519 | | | 2,760 | | | 3,672 | | | 2,605 | | | 4,279 | | | 5,279 | | | 7,329 | |
FDIC assessments, non-income taxes and regulatory fees | 9,780 | | | 2,728 | | | 2,339 | | | 2,528 | | | 1,619 | | | 12,508 | | | 4,002 | |
Advertising and promotion | 546 | | | 1,049 | | | 1,111 | | | 762 | | | 353 | | | 1,595 | | | 668 | |
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Other | 5,628 | | | 4,530 | | | 5,696 | | | 3,399 | | | 4,574 | | | 10,158 | | | 7,689 | |
Total non-interest expense | 89,297 | | | 80,133 | | | 78,419 | | | 76,198 | | | 76,205 | | | 169,430 | | | 150,012 | |
Income before income tax expense | 68,342 | | | 68,284 | | | 35,847 | | | 81,811 | | | 77,546 | | | 136,626 | | | 173,639 | |
Income tax expense | 20,768 | | | 14,563 | | | 7,136 | | | 17,899 | | | 18,896 | | | 35,331 | | | 38,228 | |
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Net income | 47,574 | | | 53,721 | | | 28,711 | | | 63,912 | | | 58,650 | | | 101,295 | | | 135,411 | |
Preferred stock dividends | 3,567 | | | 3,456 | | | 3,088 | | | 2,548 | | | 2,131 | | | 7,023 | | | 3,996 | |
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Net income available to common shareholders | $ | 44,007 | | | $ | 50,265 | | | $ | 25,623 | | | $ | 61,364 | | | $ | 56,519 | | | $ | 94,272 | | | $ | 131,415 | |
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Basic earnings per common share | $ | 1.41 | | | $ | 1.58 | | | $ | 0.79 | | | $ | 1.89 | | | $ | 1.73 | | | $ | 2.99 | | | $ | 4.00 | |
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Diluted earnings per common share | 1.39 | | | 1.55 | | | 0.77 | | | 1.85 | | | 1.68 | | | 2.95 | | | 3.87 | |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEET - UNAUDITED |
(Dollars in thousands) |
| June 30, | | March 31, | | December 31, | | September 30, | | June 30, |
| 2023 | | 2023 | | 2022 | | 2022 | | 2022 |
ASSETS | | | | | | | | | |
Cash and due from banks | $ | 54,127 | | | $ | 77,251 | | | $ | 58,025 | | | $ | 41,520 | | | $ | 66,703 | |
Interest earning deposits | 3,101,097 | | | 1,969,434 | | | 397,781 | | | 362,945 | | | 178,475 | |
Cash and cash equivalents | 3,155,224 | | | 2,046,685 | | | 455,806 | | | 404,465 | | | 245,178 | |
Investment securities, at fair value | 2,824,638 | | | 2,926,969 | | | 2,987,500 | | | 2,943,694 | | | 3,144,882 | |
Investment securities held to maturity | 1,258,560 | | | 870,294 | | | 840,259 | | | 886,294 | | | 495,039 | |
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Loans held for sale | 78,108 | | | 424,057 | | | 328,312 | | | 5,224 | | | 6,595 | |
Loans receivable, mortgage warehouse, at fair value | 1,006,268 | | | 1,247,367 | | | 1,323,312 | | | 1,569,090 | | | 1,874,603 | |
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Loans receivable, PPP | 188,763 | | | 246,258 | | | 998,153 | | | 1,154,632 | | | 1,570,160 | |
Loans and leases receivable | 12,637,768 | | | 13,145,352 | | | 13,144,894 | | | 12,607,742 | | | 12,212,995 | |
Allowance for credit losses on loans and leases | (139,656) | | | (130,281) | | | (130,924) | | | (130,197) | | | (156,530) | |
Total loans and leases receivable, net of allowance for credit losses on loans and leases | 13,693,143 | | | 14,508,696 | | | 15,335,435 | | | 15,201,267 | | | 15,501,228 | |
FHLB, Federal Reserve Bank, and other restricted stock | 126,240 | | | 124,733 | | | 74,196 | | | 64,112 | | | 74,626 | |
Accrued interest receivable | 119,501 | | | 123,754 | | | 123,374 | | | 107,621 | | | 98,727 | |
Bank premises and equipment, net | 8,031 | | | 8,581 | | | 9,025 | | | 6,610 | | | 6,755 | |
Bank-owned life insurance | 290,322 | | | 339,607 | | | 338,441 | | | 336,130 | | | 335,153 | |
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Goodwill and other intangibles | 3,629 | | | 3,629 | | | 3,629 | | | 3,629 | | | 3,629 | |
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Other assets | 471,169 | | | 374,609 | | | 400,135 | | | 408,575 | | | 340,184 | |
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Total assets | $ | 22,028,565 | | | $ | 21,751,614 | | | $ | 20,896,112 | | | $ | 20,367,621 | | | $ | 20,251,996 | |
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LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | |
Demand, non-interest bearing deposits | $ | 4,490,198 | | | $ | 3,487,517 | | | $ | 1,885,045 | | | $ | 2,993,793 | | | $ | 4,683,030 | |
Interest bearing deposits | 13,460,233 | | | 14,236,100 | | | 16,271,908 | | | 14,528,645 | | | 12,261,689 | |
Total deposits | 17,950,431 | | | 17,723,617 | | | 18,156,953 | | | 17,522,438 | | | 16,944,719 | |
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Federal funds purchased | — | | | — | | | — | | | 365,000 | | | 770,000 | |
FHLB advances | 2,046,142 | | | 2,052,143 | | | 800,000 | | | 500,000 | | | 635,000 | |
Other borrowings | 123,710 | | | 123,645 | | | 123,580 | | | 123,515 | | | 123,450 | |
Subordinated debt | 182,091 | | | 182,021 | | | 181,952 | | | 181,882 | | | 181,812 | |
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Accrued interest payable and other liabilities | 269,539 | | | 249,168 | | | 230,666 | | | 287,855 | | | 243,625 | |
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Total liabilities | 20,571,913 | | | 20,330,594 | | | 19,493,151 | | | 18,980,690 | | | 18,898,606 | |
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Preferred stock | 137,794 | | | 137,794 | | | 137,794 | | | 137,794 | | | 137,794 | |
Common stock | 35,301 | | | 35,258 | | | 35,012 | | | 34,948 | | | 34,922 | |
Additional paid in capital | 555,737 | | | 552,255 | | | 551,721 | | | 549,066 | | | 545,670 | |
Retained earnings | 1,018,406 | | | 974,399 | | | 924,134 | | | 898,511 | | | 837,147 | |
Accumulated other comprehensive income (loss), net | (168,176) | | | (156,276) | | | (163,096) | | | (156,126) | | | (124,881) | |
Treasury stock, at cost | (122,410) | | | (122,410) | | | (82,604) | | | (77,262) | | | (77,262) | |
Total shareholders' equity | 1,456,652 | | | 1,421,020 | | | 1,402,961 | | | 1,386,931 | | | 1,353,390 | |
Total liabilities and shareholders' equity | $ | 22,028,565 | | | $ | 21,751,614 | | | $ | 20,896,112 | | | $ | 20,367,621 | | | $ | 20,251,996 | |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED | |
(Dollars in thousands) | | | | | | | | | | | | | | | | | | |
| Three Months Ended | |
| June 30, 2023 | | March 31, 2023 | | June 30, 2022 | |
| Average Balance | | Interest Income or Expense | | Average Yield or Cost (%) | | Average Balance | | Interest Income or Expense | | Average Yield or Cost (%) | | Average Balance | | Interest Income or Expense | | Average Yield or Cost (%) | |
Assets | | | | | | | | | | | | | | | | | | |
Interest earning deposits | $ | 2,150,154 | | | $ | 27,624 | | | 5.15% | | $ | 914,149 | | | $ | 10,395 | | | 4.61% | | $ | 434,950 | | | $ | 919 | | | 0.85% | |
Investment securities (1) | 3,949,732 | | | 48,026 | | | 4.86% | | 4,031,247 | | | 47,316 | | | 4.69% | | 4,104,463 | | | 25,442 | | | 2.48% | |
Loans and leases: | | | | | | | | | | | | | | | | | | |
Commercial & industrial: | | | | | | | | | | | | | | | | | | |
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Specialty lending loans and leases (2) | 5,832,485 | | | 121,779 | | | 8.37% | | 5,694,168 | | | 103,688 | | | 7.38% | | 4,068,175 | | | 39,160 | | | 3.86% | |
Other commercial & industrial loans (2) | 1,672,668 | | | 26,028 | | | 6.24% | | 1,705,205 | | | 25,570 | | | 6.08% | | 1,509,655 | | | 14,706 | | | 3.91% | |
Commercial loans to mortgage companies | 1,300,496 | | | 19,606 | | | 6.05% | | 1,262,139 | | | 17,412 | | | 5.59% | | 1,898,554 | | | 15,615 | | | 3.30% | |
Multifamily loans | 2,181,617 | | | 21,095 | | | 3.88% | | 2,206,600 | | | 20,470 | | | 3.76% | | 1,845,527 | | | 17,313 | | | 3.76% | |
Loans receivable, PPP | 207,127 | | | 1,633 | | | 3.16% | | 889,235 | | | 23,551 | | | 10.74% | | 1,863,429 | | | 20,572 | | | 4.43% | |
Non-owner occupied commercial real estate loans | 1,428,086 | | | 19,877 | | | 5.58% | | 1,449,722 | | | 20,199 | | | 5.65% | | 1,307,995 | | | 12,749 | | | 3.91% | |
Residential mortgages | 535,739 | | | 5,735 | | | 4.28% | | 542,909 | | | 5,598 | | | 4.18% | | 515,612 | | | 4,898 | | | 3.81% | |
Installment loans | 1,684,215 | | | 37,141 | | | 8.84% | | 1,727,995 | | | 39,425 | | | 9.25% | | 1,909,551 | | | 43,928 | | | 9.23% | |
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Total loans and leases (3) | 14,842,432 | | | 252,894 | | | 6.83% | | 15,477,973 | | | 255,913 | | | 6.70% | | 14,918,498 | | | 168,941 | | | 4.54% | |
Other interest-earning assets | 131,362 | | | 1,616 | | | 4.93% | | 91,308 | | | 1,321 | | | 5.87% | | 68,025 | | | 1,032 | | | 6.09% | |
Total interest-earning assets | 21,073,680 | | | 330,160 | | | 6.28% | | 20,514,677 | | | 314,945 | | | 6.21% | | 19,525,936 | | | 196,334 | | | 4.03% | |
Non-interest-earning assets | 581,055 | | | | | | | 538,243 | | | | | | | 530,084 | | | | | | |
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Total assets | $ | 21,654,735 | | | | | | | $ | 21,052,920 | | | | | | | $ | 20,056,020 | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | |
Interest checking accounts | $ | 5,309,775 | | | $ | 49,862 | | | 3.77% | | $ | 7,494,379 | | | $ | 70,485 | | | 3.81% | | $ | 6,409,617 | | | $ | 13,644 | | | 0.85% | |
Money market deposit accounts | 1,978,546 | | | 19,678 | | | 3.99% | | 2,470,004 | | | 20,783 | | | 3.41% | | 4,704,767 | | | 7,523 | | | 0.64% | |
Other savings accounts | 997,205 | | | 9,839 | | | 3.96% | | 822,312 | | | 6,286 | | | 3.10% | | 695,176 | | | 758 | | | 0.44% | |
Certificates of deposit | 5,020,205 | | | 56,996 | | | 4.55% | | 4,504,333 | | | 46,376 | | | 4.18% | | 530,180 | | | 856 | | | 0.65% | |
Total interest-bearing deposits (4) | 13,305,731 | | | 136,375 | | | 4.11% | | 15,291,028 | | | 143,930 | | | 3.82% | | 12,339,740 | | | 22,781 | | | 0.74% | |
Federal funds purchased | — | | | — | | | —% | | 15,333 | | | 188 | | | 4.97% | | 642,747 | | | 1,429 | | | 0.89% | |
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Borrowings | 2,357,981 | | | 28,514 | | | 4.85% | | 1,788,116 | | | 20,928 | | | 4.75% | | 940,068 | | | 7,272 | | | 3.10% | |
Total interest-bearing liabilities | 15,663,712 | | | 164,889 | | | 4.22% | | 17,094,477 | | | 165,046 | | | 3.91% | | 13,922,555 | | | 31,482 | | | 0.91% | |
Non-interest-bearing deposits (4) | 4,258,711 | | | | | | | 2,299,295 | | | | | | | 4,491,574 | | | | | | |
Total deposits and borrowings | 19,922,423 | | | | | 3.32% | | 19,393,772 | | | | | 3.45% | | 18,414,129 | | | | | 0.69% | |
Other non-interest-bearing liabilities | 259,111 | | | | | | | 247,575 | | | | | | | 259,279 | | | | | | |
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Total liabilities | 20,181,534 | | | | | | | 19,641,347 | | | | | | | 18,673,408 | | | | | | |
Shareholders' equity | 1,473,201 | | | | | | | 1,411,573 | | | | | | | 1,382,612 | | | | | | |
Total liabilities and shareholders' equity | $ | 21,654,735 | | | | | | | $ | 21,052,920 | | | | | | | $ | 20,056,020 | | | | | | |
Net interest income | | | 165,271 | | | | | | | 149,899 | | | | | | | 164,852 | | | | |
Tax-equivalent adjustment | | | 390 | | | | | | | 375 | | | | | | | 270 | | | | |
Net interest earnings | | | $ | 165,661 | | | | | | | $ | 150,274 | | | | | | | $ | 165,122 | | | | |
Interest spread | | | | | 2.96% | | | | | | 2.76% | | | | | | 3.35% | |
Net interest margin | | | | | 3.14% | | | | | | 2.95% | | | | | | 3.38% | |
Net interest margin tax equivalent | | | | | 3.15% | | | | | | 2.96% | | | | | | 3.39% | |
Net interest margin tax equivalent excl. PPP (5) | | | | | 3.20% | | | | | | 2.80% | | | | | | 3.32% | |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED (CONTINUED) | |
(Dollars in thousands) | | | | | | | | | | | | | | | | | | |
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(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 3.11%, 3.32% and 0.54% for the three months ended June 30, 2023, March 31, 2023 and June 30, 2022, respectively. | |
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(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended June 30, 2023, March 31, 2023 and June 30, 2022, presented to approximate interest income as a taxable asset and 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. | |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED (CONTINUED) |
(Dollars in thousands) | | | | | | | | | | | |
| Six Months Ended |
| June 30, 2023 | | June 30, 2022 |
| Average Balance | | Interest Income or Expense | | Average Yield or Cost (%) | | Average Balance | | Interest Income or Expense | | Average Yield or Cost (%) |
Assets | | | | | | | | | | | |
Interest earning deposits | $ | 1,535,566 | | | $ | 38,019 | | | 4.99% | | $ | 629,514 | | | $ | 1,248 | | | 0.40% |
Investment securities (1) | 3,990,265 | | | 95,342 | | | 4.78% | | 4,070,901 | | | 45,737 | | | 2.25% |
Loans and leases: | | | | | | | | | | | |
Commercial & industrial: | | | | | | | | | | | |
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Specialty lending loans and leases (2) | 5,763,708 | | | 225,467 | | | 7.89% | | 3,403,276 | | | 62,551 | | | 3.71% |
Other commercial & industrial loans (2) | 1,688,847 | | | 51,598 | | | 6.16% | | 1,451,858 | | | 27,974 | | | 3.89% |
Commercial loans to mortgage companies | 1,281,424 | | | 37,018 | | | 5.83% | | 1,867,772 | | | 29,620 | | | 3.20% |
Multifamily loans | 2,194,039 | | | 41,565 | | | 3.82% | | 1,689,553 | | | 31,079 | | | 3.71% |
Loans receivable, PPP | 546,297 | | | 25,184 | | | 9.30% | | 2,250,224 | | | 57,466 | | | 5.15% |
Non-owner occupied commercial real estate loans | 1,438,844 | | | 40,076 | | | 5.62% | | 1,310,091 | | | 24,956 | | | 3.84% |
Residential mortgages | 539,304 | | | 11,333 | | | 4.24% | | 466,288 | | | 8,578 | | | 3.71% |
Installment loans | 1,705,984 | | | 76,566 | | | 9.05% | | 1,852,167 | | | 83,892 | | | 9.13% |
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Total loans and leases (3) | 15,158,447 | | | 508,807 | | | 6.77% | | 14,291,229 | | | 326,116 | | | 4.60% |
Other interest-earning assets | 111,446 | | | 2,937 | | | 5.32% | | 60,113 | | | 6,709 | | | NM (6) |
Total interest-earning assets | 20,795,724 | | | 645,105 | | | 6.25% | | 19,051,757 | | | 379,810 | | | 4.02% |
Non-interest-earning assets | 559,766 | | | | | | | 543,479 | | | | | |
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Total assets | $ | 21,355,490 | | | | | | | $ | 19,595,236 | | | | | |
Liabilities | | | | | | | | | | | |
Interest checking accounts | $ | 6,396,042 | | | $ | 120,347 | | | 3.79% | | $ | 6,091,263 | | | $ | 21,374 | | | 0.71% |
Money market deposit accounts | 2,222,917 | | | 40,461 | | | 3.67% | | 4,791,925 | | | 12,197 | | | 0.51% |
Other savings accounts | 910,241 | | | 16,125 | | | 3.57% | | 787,134 | | | 1,542 | | | 0.39% |
Certificates of deposit | 4,763,694 | | | 103,372 | | | 4.38% | | 490,632 | | | 1,380 | | | 0.57% |
Total interest-bearing deposits (4) | 14,292,894 | | | 280,305 | | | 3.95% | | 12,160,954 | | | 36,493 | | | 0.61% |
Federal funds purchased | 7,624 | | | 188 | | | 4.97% | | 367,210 | | | 1,502 | | | 0.82% |
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Borrowings | 2,074,623 | | | 49,442 | | | 4.81% | | 737,464 | | | 12,264 | | | 3.35% |
Total interest-bearing liabilities | 16,375,141 | | | 329,935 | | | 4.06% | | 13,265,628 | | | 50,259 | | | 0.76% |
Non-interest-bearing deposits (4) | 3,284,416 | | | | | | | 4,695,148 | | | | | |
Total deposits and borrowings | 19,659,557 | | | | | 3.38% | | 17,960,776 | | | | | 0.56% |
Other non-interest-bearing liabilities | 253,376 | | | | | | | 248,266 | | | | | |
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Total liabilities | 19,912,933 | | | | | | | 18,209,042 | | | | | |
Shareholders' equity | 1,442,557 | | | | | | | 1,386,194 | | | | | |
Total liabilities and shareholders' equity | $ | 21,355,490 | | | | | | | $ | 19,595,236 | | | | | |
Net interest income | | | 315,170 | | | | | | | 329,551 | | | |
Tax-equivalent adjustment | | | 765 | | | | | | | 509 | | | |
Net interest earnings | | | $ | 315,935 | | | | | | | $ | 330,060 | | | |
Interest spread | | | | | 2.86% | | | | | | 3.45% |
Net interest margin | | | | | 3.05% | | | | | | 3.48% |
Net interest margin tax equivalent | | | | | 3.06% | | | | | | 3.49% |
Net interest margin tax equivalent excl. PPP (5) | | | | | 3.01% | | | | | | 3.32% |
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(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 3.22% and 0.44% for the six months ended June 30, 2023 and 2022, respectively. |
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(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the six months ended June 30, 2023 and 2022, presented to approximate interest income as a taxable asset and 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. |
(6) Not meaningful. |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED |
(Dollars in thousands) | | | | | | | | | |
| June 30, | | March 31, | | December 31, | | September 30, | | June 30, |
| 2023 | | 2023 | | 2022 | | 2022 | | 2022 |
Loans and leases held for investment | | | | | | | | | |
Commercial: | | | | | | | | | |
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Commercial & industrial: | | | | | | | | | |
Specialty lending | $ | 5,534,832 | | | $ | 5,519,176 | | | $ | 5,412,887 | | | $ | 5,103,974 | | | $ | 4,599,640 | |
Other commercial & industrial | 1,052,145 | | | 1,168,161 | | | 1,135,336 | | | 1,064,332 | | | 1,037,444 | |
Multifamily | 2,151,734 | | | 2,195,211 | | | 2,213,019 | | | 2,263,268 | | | 2,008,784 | |
Loans to mortgage companies | 1,108,598 | | | 1,374,894 | | | 1,447,919 | | | 1,708,587 | | | 1,975,189 | |
Commercial real estate owner occupied | 842,042 | | | 895,314 | | | 885,339 | | | 726,670 | | | 710,577 | |
Loans receivable, PPP | 188,763 | | | 246,258 | | | 998,153 | | | 1,154,632 | | | 1,570,160 | |
Commercial real estate non-owner occupied | 1,211,091 | | | 1,245,248 | | | 1,290,730 | | | 1,263,211 | | | 1,152,869 | |
Construction | 212,214 | | | 188,123 | | | 162,009 | | | 136,133 | | | 195,687 | |
Total commercial loans and leases | 12,301,419 | | | 12,832,385 | | | 13,545,392 | | | 13,420,807 | | | 13,250,350 | |
Consumer: | | | | | | | | | |
Residential | 487,199 | | | 494,815 | | | 497,952 | | | 465,772 | | | 457,768 | |
Manufactured housing | 41,664 | | | 43,272 | | | 45,076 | | | 46,990 | | | 48,570 | |
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Installment: | | | | | | | | | |
Personal | 752,470 | | | 849,420 | | | 964,641 | | | 1,056,432 | | | 1,613,628 | |
Other | 250,047 | | | 419,085 | | | 413,298 | | | 341,463 | | | 287,442 | |
Total installment loans | 1,002,517 | | | 1,268,505 | | | 1,377,939 | | | 1,397,895 | | | 1,901,070 | |
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Total consumer loans | 1,531,380 | | | 1,806,592 | | | 1,920,967 | | | 1,910,657 | | | 2,407,408 | |
Total loans and leases held for investment | $ | 13,832,799 | | | $ | 14,638,977 | | | $ | 15,466,359 | | | $ | 15,331,464 | | | $ | 15,657,758 | |
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Loans held for sale | | | | | | | | | |
Commercial: | | | | | | | | | |
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Multifamily | $ | — | | | $ | 4,051 | | | $ | 4,079 | | | $ | 4,108 | | | $ | 4,136 | |
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Commercial real estate non-owner occupied | — | | | 16,000 | | | — | | | — | | | — | |
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Total commercial loans and leases | — | | | 20,051 | | | 4,079 | | | 4,108 | | | 4,136 | |
Consumer: | | | | | | | | | |
Residential | 1,234 | | | 821 | | | 829 | | | 1,116 | | | 2,459 | |
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Installment: | | | | | | | | | |
Personal | 76,874 | | | 307,336 | | | 133,801 | | | — | | | — | |
Other | — | | | 95,849 | | | 189,603 | | | — | | | — | |
Total installment loans | 76,874 | | | 403,185 | | | 323,404 | | | — | | | — | |
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Total consumer loans | 78,108 | | | 404,006 | | | 324,233 | | | 1,116 | | | 2,459 | |
Total loans held for sale | $ | 78,108 | | | $ | 424,057 | | | $ | 328,312 | | | $ | 5,224 | | | $ | 6,595 | |
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Total loans and leases portfolio | $ | 13,910,907 | | | $ | 15,063,034 | | | $ | 15,794,671 | | | $ | 15,336,688 | | | $ | 15,664,353 | |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
PERIOD END DEPOSIT COMPOSITION - UNAUDITED |
(Dollars in thousands) | | | | | | | | | |
| June 30, | | March 31, | | December 31, | | September 30, | | June 30, |
| 2023 | | 2023 | | 2022 | | 2022 | | 2022 |
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Demand, non-interest bearing | $ | 4,490,198 | | | $ | 3,487,517 | | | $ | 1,885,045 | | | $ | 2,993,793 | | | $ | 4,683,030 | |
Demand, interest bearing | 5,551,037 | | | 5,791,302 | | | 8,476,027 | | | 7,124,663 | | | 6,644,398 | |
Total demand deposits | 10,041,235 | | | 9,278,819 | | | 10,361,072 | | | 10,118,456 | | | 11,327,428 | |
Savings | 1,048,229 | | | 924,359 | | | 811,798 | | | 592,002 | | | 640,062 | |
Money market | 2,004,264 | | | 2,019,633 | | | 2,734,217 | | | 4,913,967 | | | 4,254,205 | |
Time deposits | 4,856,703 | | | 5,500,806 | | | 4,249,866 | | | 1,898,013 | | | 723,024 | |
Total deposits | $ | 17,950,431 | | | $ | 17,723,617 | | | $ | 18,156,953 | | | $ | 17,522,438 | | | $ | 16,944,719 | |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |
ASSET QUALITY - UNAUDITED | |
(Dollars in thousands) | As of June 30, 2023 | | As of March 31, 2023 | | As of June 30, 2022 | |
| 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 | |
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Loan type | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial & industrial, including specialty lending (1) | $ | 6,689,307 | | | $ | 4,441 | | | $ | 29,092 | | | 0.07 | % | | 655.08 | % | | $ | 6,814,864 | | | $ | 3,886 | | | $ | 20,050 | | | 0.06 | % | | 515.95 | % | | $ | 5,737,670 | | | $ | 4,061 | | | $ | 11,081 | | | 0.07 | % | | 272.86 | % | |
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Multifamily | 2,151,734 | | | 4,022 | | | 15,400 | | | 0.19 | % | | 382.89 | % | | 2,195,211 | | | 881 | | | 15,084 | | | 0.04 | % | | 1712.15 | % | | 2,008,784 | | | 1,153 | | | 9,765 | | | 0.06 | % | | 846.92 | % | |
Commercial real estate owner occupied | 842,042 | | | 3,304 | | | 10,215 | | | 0.39 | % | | 309.17 | % | | 895,314 | | | 3,621 | | | 8,472 | | | 0.40 | % | | 233.97 | % | | 710,577 | | | 2,913 | | | 4,745 | | | 0.41 | % | | 162.89 | % | |
Commercial real estate non-owner occupied | 1,211,091 | | | — | | | 13,495 | | | — | % | | — | % | | 1,245,248 | | | — | | | 11,032 | | | — | % | | — | % | | 1,152,869 | | | — | | | 8,880 | | | — | % | | — | % | |
Construction | 212,214 | | | — | | | 2,639 | | | — | % | | — | % | | 188,123 | | | — | | | 2,336 | | | — | % | | — | % | | 195,687 | | | — | | | 1,179 | | | — | % | | — | % | |
Total commercial loans and leases receivable | 11,106,388 | | | 11,767 | | | 70,841 | | | 0.11 | % | | 602.03 | % | | 11,338,760 | | | 8,388 | | | 56,974 | | | 0.07 | % | | 679.23 | % | | 9,805,587 | | | 8,127 | | | 35,650 | | | 0.08 | % | | 438.66 | % | |
Residential | 487,199 | | | 7,306 | | | 6,846 | | | 1.50 | % | | 93.70 | % | | 494,815 | | | 6,473 | | | 6,853 | | | 1.31 | % | | 105.87 | % | | 457,768 | | | 6,258 | | | 5,578 | | | 1.37 | % | | 89.13 | % | |
Manufactured housing | 41,664 | | | 2,634 | | | 4,338 | | | 6.32 | % | | 164.69 | % | | 43,272 | | | 2,568 | | | 4,339 | | | 5.93 | % | | 168.96 | % | | 48,570 | | | 3,071 | | | 4,080 | | | 6.32 | % | | 132.86 | % | |
Installment | 1,002,517 | | | 6,537 | | | 57,631 | | | 0.65 | % | | 881.61 | % | | 1,268,505 | | | 8,720 | | | 62,115 | | | 0.69 | % | | 712.33 | % | | 1,901,070 | | | 5,965 | | | 111,222 | | | 0.31 | % | | 1864.58 | % | |
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Total consumer loans receivable | 1,531,380 | | | 16,477 | | | 68,815 | | | 1.08 | % | | 417.64 | % | | 1,806,592 | | | 17,761 | | | 73,307 | | | 0.98 | % | | 412.74 | % | | 2,407,408 | | | 15,294 | | | 120,880 | | | 0.64 | % | | 790.38 | % | |
Loans and leases receivable (1) | 12,637,768 | | | 28,244 | | | 139,656 | | | 0.22 | % | | 494.46 | % | | 13,145,352 | | | 26,149 | | | 130,281 | | | 0.20 | % | | 498.23 | % | | 12,212,995 | | | 23,421 | | | 156,530 | | | 0.19 | % | | 668.33 | % | |
Loans receivable, PPP | 188,763 | | | — | | | — | | | — | % | | — | % | | 246,258 | | | — | | | — | | | — | % | | — | % | | 1,570,160 | | | — | | | — | | | — | % | | — | % | |
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Loans receivable, mortgage warehouse, at fair value | 1,006,268 | | | — | | | — | | | — | % | | — | % | | 1,247,367 | | | — | | | — | | | — | % | | — | % | | 1,874,603 | | | — | | | — | | | — | % | | — | % | |
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Total loans held for sale | 78,108 | | | — | | | — | | | — | % | | — | % | | 424,057 | | | 5,975 | | | — | | | 1.41 | % | | — | % | | 6,595 | | | 4,643 | | | — | | | 70.40 | % | | — | % | |
Total portfolio | $ | 13,910,907 | | | $ | 28,244 | | | $ | 139,656 | | | 0.20 | % | | 494.46 | % | | $ | 15,063,034 | | | $ | 32,124 | | | $ | 130,281 | | | 0.21 | % | | 405.56 | % | | $ | 15,664,353 | | | $ | 28,064 | | | $ | 156,530 | | | 0.18 | % | | 557.76 | % | |
(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.
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED |
(Dollars in thousands) | | | | | | | | | | | | | |
| Q2 | | Q1 | | Q4 | | Q3 | | Q2 | | Six Months Ended June 30, |
| 2023 (1) | | 2023 | | 2022 (2) | | 2022 | | 2022 | | 2023 | | 2022 |
Loan type | | | | | | | | | | | | | |
Commercial & industrial, including specialty lending | $ | 258 | | | $ | (71) | | | $ | 12,960 | | | $ | 2,581 | | | $ | (416) | | | $ | 187 | | | $ | (475) | |
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Multifamily | 1,448 | | | — | | | — | | | — | | | 1,990 | | | 1,448 | | | 1,653 | |
Commercial real estate owner occupied | (34) | | | — | | | (2) | | | — | | | (42) | | | (34) | | | (49) | |
Commercial real estate non-owner occupied | 266 | | | 4,234 | | | 972 | | | 4,831 | | | 159 | | | 4,500 | | | 151 | |
Construction | — | | | (116) | | | (10) | | | (10) | | | (103) | | | (116) | | | (216) | |
Residential | 24 | | | (2) | | | 7 | | | (13) | | | (39) | | | 22 | | | (41) | |
Installment | 13,602 | | | 14,606 | | | 13,237 | | | 11,108 | | | 11,932 | | | 28,208 | | | 19,684 | |
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Total net charge-offs (recoveries) from loans held for investment | $ | 15,564 | | | $ | 18,651 | | | $ | 27,164 | | | $ | 18,497 | | | $ | 13,481 | | | $ | 34,215 | | | $ | 20,707 | |
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(1) Excludes $6.2 million of charge-offs for certain PCD loans acquired from FDIC during the three months ended June 30, 2023 that were applied against $8.7 million of allowance for credit losses on PCD loans recognized upon the acquisition of the loan portfolio on June 15, 2023.
(2) Includes $11.0 million of one-time charge-offs from certain C&I loans originated under the PPP program that were subsequently determined to be ineligible for SBA forgiveness and guarantee and were deemed uncollectible during the three months ended December 31, 2022.
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED |
We believe 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 our 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.
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Core Earnings - Customers Bancorp | | | | | | | | | | | | | | | | Six Months Ended June 30, |
Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
(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 | $ | 44,007 | | $ | 1.39 | | | $ | 50,265 | | $ | 1.55 | | | $ | 25,623 | | $ | 0.77 | | | $ | 61,364 | | $ | 1.85 | | | $ | 56,519 | | $ | 1.68 | | | $ | 94,272 | | $ | 2.95 | | | $ | 131,415 | | $ | 3.87 | |
Reconciling items (after tax): | | | | | | | | | | | | | | | | | | | | |
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Severance expense | 141 | | 0.00 | | | 637 | | 0.02 | | | — | | — | | | 1,058 | | 0.03 | | | — | | — | | | 778 | | 0.02 | | | — | | — | |
Impairments on fixed assets and leases | 12 | | 0.00 | | | 86 | | 0.00 | | | — | | — | | | 126 | | 0.00 | | | 705 | | 0.02 | | | 98 | | 0.00 | | | 925 | | 0.03 | |
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Loss on sale of consumer installment loans | — | | — | | | — | | — | | | — | | — | | | 18,221 | | 0.55 | | | — | | — | | | — | | — | | | — | | — | |
Loss on sale of capital call lines of credit | 3,914 | | 0.12 | | | — | | — | | | — | | — | | | — | | — | | | — | | — | | | 3,914 | | 0.12 | | | — | | — | |
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(Gains) losses on investment securities | 49 | | 0.00 | | | (49) | | 0.00 | | | 13,543 | | 0.41 | | | 1,859 | | 0.06 | | | 2,494 | | 0.07 | | 0 | | 0.00 | | | 3,524 | | 0.10 | |
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Derivative credit valuation adjustment | (101) | | 0.00 | | | 204 | | 0.01 | | | 202 | | 0.01 | | | (358) | | (0.01) | | | (351) | | (0.01) | | | 103 | | 0.00 | | | (1,087) | | (0.03) | |
Tax on surrender of bank-owned life insurance policies | 4,141 | | 0.13 | | | — | | — | | | — | | — | | | — | | — | | | — | | — | | | 4,141 | | 0.13 | | | — | | — | |
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Core earnings | $ | 52,163 | | $ | 1.65 | | | $ | 51,143 | | $ | 1.58 | | | $ | 39,368 | | $ | 1.19 | | | $ | 82,270 | | $ | 2.48 | | | $ | 59,367 | | $ | 1.77 | | | $ | 103,306 | | $ | 3.22 | | | $ | 134,777 | | $ | 3.97 | |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) |
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(Dollars in thousands, except per share data) |
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Core Earnings, excluding PPP - Customers Bancorp | | | | | | | | | | | | | | | | Six Months Ended June 30, |
Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
(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 | $ | 44,007 | | $ | 1.39 | | | $ | 50,265 | | $ | 1.55 | | | $ | 25,623 | | $ | 0.77 | | | $ | 61,364 | | $ | 1.85 | | | $ | 56,519 | | $ | 1.68 | | | $ | 94,272 | | $ | 2.95 | | | $ | 131,415 | | $ | 3.87 | |
Less: PPP net income (loss) (after tax) | (2,068) | | (0.07) | | | 9,606 | | 0.30 | | | (5,956) | | (0.18) | | | 5,846 | | 0.18 | | | 13,066 | | 0.39 | | | 7,538 | | 0.24 | | | 37,779 | | 1.11 | |
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Net income to common shareholders, excluding PPP | 46,075 | | 1.46 | | | 40,659 | | 1.26 | | | 31,579 | | 0.95 | | | 55,518 | | 1.67 | | | 43,453 | | 1.29 | | | 86,734 | | 2.71 | | | 93,636 | | 2.76 | |
Reconciling items (after tax): | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Severance expense | 141 | | 0.00 | | | 637 | | 0.02 | | | — | | — | | | 1,058 | | 0.03 | | | — | | — | | | 778 | | 0.02 | | | — | | — | |
Impairments on fixed assets and leases | 12 | | 0.00 | | | 86 | | 0.00 | | | — | | — | | | 126 | | 0.00 | | | 705 | | 0.02 | | | 98 | | 0.00 | | | 925 | | 0.03 | |
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Loss on sale of consumer installment loans | — | | — | | | — | | — | | | — | | — | | | 18,221 | | 0.55 | | | — | | — | | | — | | — | | | — | | — | |
Loss on sale of capital call lines of credit | 3,914 | | 0.12 | | | — | | — | | | — | | — | | | — | | — | | | — | | — | | | 3,914 | | 0.12 | | | — | | — | |
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| | | | | | | | | | | | | | | | | | | | |
(Gains) losses on investment securities | 49 | | 0.00 | | | (49) | | 0.00 | | | 13,543 | | 0.41 | | | 1,859 | | 0.06 | | | 2,494 | | 0.07 | | | 0 | | 0.00 | | | 3,524 | | 0.10 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Derivative credit valuation adjustment | (101) | | 0.00 | | | 204 | | 0.01 | | | 202 | | 0.01 | | | (358) | | (0.01) | | | (351) | | (0.01) | | | 103 | | 0.00 | | | (1,087) | | (0.03) | |
Tax on surrender of bank-owned life insurance policies | 4,141 | | 0.13 | | | — | | — | | | — | | — | | | — | | — | | | — | | — | | | 4,141 | | 0.13 | | | — | | — | |
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Core earnings, excluding PPP | $ | 54,231 | | $ | 1.72 | | | $ | 41,537 | | $ | 1.28 | | | $ | 45,324 | | $ | 1.37 | | | $ | 76,424 | | $ | 2.30 | | | $ | 46,301 | | $ | 1.38 | | | $ | 95,768 | | $ | 2.99 | | | $ | 96,998 | | $ | 2.86 | |
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Core Return on Average Assets - Customers Bancorp | | | | | | | | | | | Six Months Ended June 30, |
(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
GAAP net income | $ | 47,574 | | | $ | 53,721 | | | $ | 28,711 | | | $ | 63,912 | | | $ | 58,650 | | | $ | 101,295 | | | $ | 135,411 | |
Reconciling items (after tax): | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Severance expense | 141 | | | 637 | | | — | | | 1,058 | | | — | | | 778 | | | — | |
Impairments on fixed assets and leases | 12 | | | 86 | | | — | | | 126 | | | 705 | | | 98 | | | 925 | |
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Loss on sale of consumer installment loans | — | | | — | | | — | | | 18,221 | | | — | | | — | | | — | |
Loss on sale of capital call lines of credit | 3,914 | | | — | | | — | | | — | | | — | | | 3,914 | | | — | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(Gains) losses on investment securities | 49 | | | (49) | | | 13,543 | | | 1,859 | | | 2,494 | | | 0 | | | 3,524 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Derivative credit valuation adjustment | (101) | | | 204 | | | 202 | | | (358) | | | (351) | | | 103 | | | (1,087) | |
Tax on surrender of bank-owned life insurance policies | 4,141 | | | — | | | — | | | — | | | — | | | 4,141 | | | — | |
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Core net income | $ | 55,730 | | | $ | 54,599 | | | $ | 42,456 | | | $ | 84,818 | | | $ | 61,498 | | | $ | 110,329 | | | $ | 138,773 | |
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Average total assets | $ | 21,654,735 | | | $ | 21,052,920 | | | $ | 20,717,362 | | | $ | 20,514,366 | | | $ | 20,056,020 | | | $ | 21,355,490 | | | $ | 19,595,236 | |
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Core return on average assets | 1.03 | % | | 1.05 | % | | 0.81 | % | | 1.64 | % | | 1.23 | % | | 1.04 | % | | 1.43 | % |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) |
| | | | | | | | | |
(Dollars in thousands, except per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Core Return on Average Assets, excluding PPP - Customers Bancorp | | | | | | | | | | | Six Months Ended June 30, |
(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
GAAP net income | $ | 47,574 | | | $ | 53,721 | | | $ | 28,711 | | | $ | 63,912 | | | $ | 58,650 | | | $ | 101,295 | | | $ | 135,411 | |
Less: PPP net income (loss) (after tax) | (2,068) | | | 9,606 | | | (5,956) | | | 5,846 | | | 13,066 | | | 7,538 | | | 37,779 | |
Net income, excluding PPP | 49,642 | | | 44,115 | | | 34,667 | | | 58,066 | | | 45,584 | | | 93,757 | | | 97,632 | |
Reconciling items (after tax): | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Severance expense | 141 | | | 637 | | | — | | | 1,058 | | | — | | | 778 | | | — | |
Impairments on fixed assets and leases | 12 | | | 86 | | | — | | | 126 | | | 705 | | | 98 | | | 925 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Loss on sale of consumer installment loans | — | | | — | | | — | | | 18,221 | | | — | | | — | | | — | |
Loss on sale of capital call lines of credit | 3,914 | | | — | | | — | | | — | | | — | | | 3,914 | | | — | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(Gains) losses on investment securities | 49 | | | (49) | | | 13,543 | | | 1,859 | | | 2,494 | | | 0 | | | 3,524 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Derivative credit valuation adjustment | (101) | | | 204 | | | 202 | | | (358) | | | (351) | | | 103 | | | (1,087) | |
Tax on surrender of bank-owned life insurance policies | 4,141 | | | — | | | — | | | — | | | — | | | 4,141 | | | — | |
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Core net income, excluding PPP | $ | 57,798 | | | $ | 44,993 | | | $ | 48,412 | | | $ | 78,972 | | | $ | 48,432 | | | $ | 102,791 | | | $ | 100,994 | |
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Average total assets | $ | 21,654,735 | | | $ | 21,052,920 | | | $ | 20,717,362 | | | $ | 20,514,366 | | | $ | 20,056,020 | | | $ | 21,355,490 | | | $ | 19,595,236 | |
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Core return on average assets, excluding PPP | 1.07 | % | | 0.87 | % | | 0.93 | % | | 1.53 | % | | 0.97 | % | | 0.97 | % | | 1.04 | % |
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Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp | | | | | | | | | | | Six Months Ended June 30, |
(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
GAAP net income | $ | 47,574 | | | $ | 53,721 | | | $ | 28,711 | | | $ | 63,912 | | | $ | 58,650 | | | $ | 101,295 | | | $ | 135,411 | |
Reconciling items: | | | | | | | | | | | | | |
Income tax expense | 20,768 | | | 14,563 | | | 7,136 | | | 17,899 | | | 18,896 | | | 35,331 | | | 38,228 | |
Provision (benefit) for credit losses | 23,629 | | | 19,603 | | | 28,216 | | | (7,994) | | | 23,847 | | | 43,232 | | | 39,844 | |
Provision (benefit) for credit losses on unfunded commitments | (304) | | | 280 | | | 153 | | | 254 | | | 608 | | | (24) | | | 499 | |
Severance expense | 182 | | | 809 | | | — | | | 1,363 | | | — | | | 991 | | | — | |
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Impairments on fixed assets and leases | 15 | | | 109 | | | — | | | 162 | | | 914 | | | 124 | | | 1,200 | |
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Loss on sale of consumer installment loans | — | | | — | | | — | | | 23,465 | | | — | | | — | | | — | |
Loss on sale of capital call lines of credit | 5,037 | | | — | | | — | | | — | | | — | | | 5,037 | | | — | |
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(Gains) losses on investment securities | 62 | | | (62) | | | 16,909 | | | 2,394 | | | 3,232 | | | 0 | | | 4,571 | |
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Derivative credit valuation adjustment | (130) | | | 259 | | | 252 | | | (461) | | | (455) | | | 129 | | | (1,412) | |
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Adjusted net income - pre-tax pre-provision | $ | 96,833 | | | $ | 89,282 | | | $ | 81,377 | | | $ | 100,994 | | | $ | 105,692 | | | $ | 186,115 | | | $ | 218,341 | |
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Average total assets | $ | 21,654,735 | | | $ | 21,052,920 | | | $ | 20,717,362 | | | $ | 20,514,366 | | | $ | 20,056,020 | | | $ | 21,355,490 | | | $ | 19,595,236 | |
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Adjusted ROAA - pre-tax pre-provision | 1.79 | % | | 1.72 | % | | 1.56 | % | | 1.95 | % | | 2.11 | % | | 1.76 | % | | 2.25 | % |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) |
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(Dollars in thousands, except per share data) |
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Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision, excluding PPP - Customers Bancorp | | | | | | | | | | | Six Months Ended June 30, |
(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
GAAP net income | $ | 47,574 | | | $ | 53,721 | | | $ | 28,711 | | | $ | 63,912 | | | $ | 58,650 | | | $ | 101,295 | | | $ | 135,411 | |
Less: PPP net income (loss) (after tax) | (2,068) | | | 9,606 | | | (5,956) | | | 5,846 | | | 13,066 | | | 7,538 | | | 37,779 | |
Net income, excluding PPP | 49,642 | | | 44,115 | | | 34,667 | | | 58,066 | | | 45,584 | | | 93,757 | | | 97,632 | |
Reconciling items: | | | | | | | | | | | | | |
Income tax expense | 20,768 | | | 14,563 | | | 7,136 | | | 17,899 | | | 18,896 | | | 35,331 | | | 38,228 | |
Provision (benefit) for credit losses | 23,629 | | | 19,603 | | | 28,216 | | | (7,994) | | | 23,847 | | | 43,232 | | | 39,844 | |
Provision (benefit) for credit losses on unfunded commitments | (304) | | | 280 | | | 153 | | | 254 | | | 608 | | | (24) | | | 499 | |
Severance expense | 182 | | | 809 | | | — | | | 1,363 | | | — | | | 991 | | | — | |
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Impairments on fixed assets and leases | 15 | | | 109 | | | — | | | 162 | | | 914 | | | 124 | | | 1,200 | |
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Loss on sale of consumer installment loans | — | | | — | | | — | | | 23,465 | | | — | | | — | | | — | |
Loss on sale of capital call lines of credit | 5,037 | | | — | | | — | | | — | | | — | | | 5,037 | | | — | |
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(Gains) losses on investment securities | 62 | | | (62) | | | 16,909 | | | 2,394 | | | 3,232 | | | 0 | | | 4,571 | |
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| | | | | | | | | | | | | |
Derivative credit valuation adjustment | (130) | | | 259 | | | 252 | | | (461) | | | (455) | | | 129 | | | (1,412) | |
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Adjusted net income - pre-tax pre-provision, excluding PPP | $ | 98,901 | | | $ | 79,676 | | | $ | 87,333 | | | $ | 95,148 | | | $ | 92,626 | | | $ | 178,577 | | | $ | 180,562 | |
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Average total assets | $ | 21,654,735 | | | $ | 21,052,920 | | | $ | 20,717,362 | | | $ | 20,514,366 | | | $ | 20,056,020 | | | $ | 21,355,490 | | | $ | 19,595,236 | |
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Adjusted ROAA - pre-tax pre-provision, excluding PPP | 1.83 | % | | 1.53 | % | | 1.67 | % | | 1.84 | % | | 1.85 | % | | 1.69 | % | | 1.86 | % |
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Core Return on Average Common Equity - Customers Bancorp | | | | | | | | | | | Six Months Ended June 30, |
(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
GAAP net income to common shareholders | $ | 44,007 | | | $ | 50,265 | | | $ | 25,623 | | | $ | 61,364 | | | $ | 56,519 | | | $ | 94,272 | | | $ | 131,415 | |
Reconciling items (after tax): | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Severance expense | 141 | | | 637 | | | — | | | 1,058 | | | — | | | 778 | | | — | |
Impairments on fixed assets and leases | 12 | | | 86 | | | — | | | 126 | | | 705 | | | 98 | | | 925 | |
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Loss on sale of consumer installment loans | — | | | — | | | — | | | 18,221 | | | — | | | — | | | — | |
Loss on sale of capital call lines of credit | 3,914 | | | — | | | — | | | — | | | — | | | 3,914 | | | — | |
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(Gains) losses on investment securities | 49 | | | (49) | | | 13,543 | | | 1,859 | | | 2,494 | | | 0 | | | 3,524 | |
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Derivative credit valuation adjustment | (101) | | | 204 | | | 202 | | | (358) | | | (351) | | | 103 | | | (1,087) | |
Tax on surrender of bank-owned life insurance policies | 4,141 | | | — | | | — | | | — | | | — | | | 4,141 | | | — | |
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Core earnings | $ | 52,163 | | | $ | 51,143 | | | $ | 39,368 | | | $ | 82,270 | | | $ | 59,367 | | | $ | 103,306 | | | $ | 134,777 | |
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Average total common shareholders' equity | $ | 1,335,408 | | | $ | 1,273,780 | | | $ | 1,263,190 | | | $ | 1,259,711 | | | $ | 1,244,819 | | | $ | 1,304,764 | | | $ | 1,248,400 | |
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Core return on average common equity | 15.67 | % | | 16.28 | % | | 12.36 | % | | 25.91 | % | | 19.13 | % | | 15.97 | % | | 21.77 | % |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) |
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(Dollars in thousands, except per share data) |
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Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp | | | | | | | | | | | Six Months Ended June 30, |
(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
GAAP net income to common shareholders | $ | 44,007 | | | $ | 50,265 | | | $ | 25,623 | | | $ | 61,364 | | | $ | 56,519 | | | $ | 94,272 | | | $ | 131,415 | |
Reconciling items: | | | | | | | | | | | | | |
Income tax expense | 20,768 | | | 14,563 | | | 7,136 | | | 17,899 | | | 18,896 | | | 35,331 | | | 38,228 | |
Provision (benefit) for credit losses | 23,629 | | | 19,603 | | | 28,216 | | | (7,994) | | | 23,847 | | | 43,232 | | | 39,844 | |
Provision (benefit) for credit losses on unfunded commitments | (304) | | | 280 | | | 153 | | | 254 | | | 608 | | | (24) | | | 499 | |
| | | | | | | | | | | | | |
Severance expense | 182 | | | 809 | | | — | | | 1,363 | | | — | | | 991 | | | — | |
Impairments on fixed assets and leases | 15 | | | 109 | | | — | | | 162 | | | 914 | | | 124 | | | 1,200 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Loss on sale of consumer installment loans | — | | | — | | | — | | | 23,465 | | | — | | | — | | | — | |
Loss on sale of capital call lines of credit | 5,037 | | | — | | | — | | | — | | | — | | | 5,037 | | | — | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(Gains) losses on investment securities | 62 | | | (62) | | | 16,909 | | | 2,394 | | | 3,232 | | | 0 | | | 4,571 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Derivative credit valuation adjustment | (130) | | | 259 | | | 252 | | | (461) | | | (455) | | | 129 | | | (1,412) | |
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Pre-tax pre-provision adjusted net income available to common shareholders | $ | 93,266 | | | $ | 85,826 | | | $ | 78,289 | | | $ | 98,446 | | | $ | 103,561 | | | $ | 179,092 | | | $ | 214,345 | |
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Average total common shareholders' equity | $ | 1,335,408 | | | $ | 1,273,780 | | | $ | 1,263,190 | | | $ | 1,259,711 | | | $ | 1,244,819 | | | $ | 1,304,764 | | | $ | 1,248,400 | |
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Adjusted ROCE - pre-tax pre-provision | 28.01 | % | | 27.33 | % | | 24.59 | % | | 31.01 | % | | 33.37 | % | | 27.68 | % | | 34.62 | % |
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Net Interest Margin, Tax Equivalent, excluding PPP - Customers Bancorp | | | | | | | | | | | Six Months Ended June 30, |
(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
GAAP net interest income | $ | 165,271 | | | $ | 149,899 | | | $ | 135,137 | | | $ | 159,032 | | | $ | 164,852 | | | $ | 315,170 | | | $ | 329,551 | |
PPP net interest (income) expense | 765 | | | (14,106) | | | 2,791 | | | (9,632) | | | (18,946) | | | (13,341) | | | (53,561) | |
Tax-equivalent adjustment | 390 | | | 375 | | | 342 | | | 334 | | | 270 | | | 765 | | | 509 | |
Net interest income, tax equivalent, excluding PPP | $ | 166,426 | | | $ | 136,168 | | | $ | 138,270 | | | $ | 149,734 | | | $ | 146,176 | | | $ | 302,594 | | | $ | 276,499 | |
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GAAP average total interest earning assets | $ | 21,073,680 | | | $ | 20,514,677 | | | $ | 20,211,028 | | | $ | 20,021,455 | | | $ | 19,525,936 | | | $ | 20,795,724 | | | $ | 19,051,757 | |
Average PPP loans | (207,127) | | | (889,235) | | | (1,065,919) | | | (1,349,403) | | | (1,863,429) | | | (546,297) | | | (2,250,224) | |
Adjusted average total interest earning assets, excluding PPP | $ | 20,866,553 | | | $ | 19,625,442 | | | $ | 19,145,109 | | | $ | 18,672,052 | | | $ | 17,662,507 | | | $ | 20,249,427 | | | $ | 16,801,533 | |
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Net interest margin, tax equivalent, excluding PPP | 3.20 | % | | 2.80 | % | | 2.87 | % | | 3.18 | % | | 3.32 | % | | 3.01 | % | | 3.32 | % |
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Loan Yield, excluding PPP | | | | | | | | | | | Six Months Ended June 30, |
(Dollars in thousands except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
Interest income on loans and leases | $ | 252,894 | | | $ | 255,913 | | | $ | 218,740 | | | $ | 200,457 | | | $ | 168,941 | | | $ | 508,807 | | | $ | 326,116 | |
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PPP interest income | (1,633) | | | (23,551) | | | (7,249) | | | (14,666) | | | (20,572) | | | (25,184) | | | (57,466) | |
Interest income on core loans (Loans and leases, excluding PPP) | $ | 251,261 | | | $ | 232,362 | | | $ | 211,491 | | | $ | 185,791 | | | $ | 148,369 | | | $ | 483,623 | | | $ | 268,650 | |
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Average total loans and leases | $ | 14,842,432 | | | $ | 15,477,973 | | | $ | 15,388,003 | | | $ | 15,653,983 | | | $ | 14,918,498 | | | $ | 15,158,447 | | | $ | 14,291,229 | |
Average PPP loans | (207,127) | | | (889,235) | | | (1,065,919) | | | (1,349,403) | | | (1,863,429) | | | (546,297) | | | (2,250,224) | |
Adjusted average total loans and leases | $ | 14,635,305 | | | $ | 14,588,738 | | | $ | 14,322,084 | | | $ | 14,304,580 | | | $ | 13,055,069 | | | $ | 14,612,150 | | | $ | 12,041,005 | |
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Loan yield, excluding PPP | 6.89 | % | | 6.46 | % | | 5.86 | % | | 5.15 | % | | 4.56 | % | | 6.67 | % | | 4.50 | % |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) |
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(Dollars in thousands, except per share data) |
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Core Efficiency Ratio - Customers Bancorp | | | | | | | | | | | Six Months Ended June 30, |
(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | 2023 | | 2022 |
GAAP net interest income | $ | 165,271 | | | $ | 149,899 | | | $ | 135,137 | | | $ | 159,032 | | | $ | 164,852 | | | $ | 315,170 | | | $ | 329,551 | |
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GAAP non-interest income | $ | 15,997 | | | $ | 18,121 | | | $ | 7,345 | | | $ | (9,017) | | | $ | 12,746 | | | $ | 34,118 | | | $ | 33,944 | |
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Loss on sale of consumer installment loans | — | | | — | | | — | | | 23,465 | | | — | | | — | | | — | |
Loss on sale of capital call lines of credit | 5,037 | | | — | | | — | | | — | | | — | | | 5,037 | | | — | |
(Gains) losses on investment securities | 62 | | | (62) | | | 16,909 | | | 2,394 | | | 3,232 | | | — | | | 4,571 | |
Derivative credit valuation adjustment | (130) | | | 259 | | | 252 | | | (461) | | | (455) | | | 129 | | | (1,412) | |
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Core non-interest income | 20,966 | | | 18,318 | | | 24,506 | | | 16,381 | | | 15,523 | | | 39,284 | | | 37,103 | |
Core revenue | $ | 186,237 | | | $ | 168,217 | | | $ | 159,643 | | | $ | 175,413 | | | $ | 180,375 | | | $ | 354,454 | | | $ | 366,654 | |
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GAAP non-interest expense | $ | 89,297 | | | $ | 80,133 | | | $ | 78,419 | | | $ | 76,198 | | | $ | 76,205 | | | $ | 169,430 | | | $ | 150,012 | |
Severance expense | (182) | | | (809) | | | — | | | (1,363) | | | — | | | (991) | | | — | |
Impairments on fixed assets and leases | (15) | | | (109) | | | — | | | (162) | | | (914) | | | (124) | | | (1,200) | |
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Core non-interest expense | $ | 89,100 | | | $ | 79,215 | | | $ | 78,419 | | | $ | 74,673 | | | $ | 75,291 | | | $ | 168,315 | | | $ | 148,812 | |
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Core efficiency ratio (1) | 47.84 | % | | 47.09 | % | | 49.12 | % | | 42.57 | % | | 41.74 | % | | 47.49 | % | | 40.59 | % |
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(1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.
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Tangible Common Equity to Tangible Assets - Customers Bancorp | | | | | | | | | |
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(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 |
GAAP total shareholders' equity | $ | 1,456,652 | | | $ | 1,421,020 | | | $ | 1,402,961 | | | $ | 1,386,931 | | | $ | 1,353,390 | |
Reconciling items: | | | | | | | | | |
Preferred stock | (137,794) | | | (137,794) | | | (137,794) | | | (137,794) | | | (137,794) | |
Goodwill and other intangibles | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | |
Tangible common equity | $ | 1,315,229 | | | $ | 1,279,597 | | | $ | 1,261,538 | | | $ | 1,245,508 | | | $ | 1,211,967 | |
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GAAP total assets | $ | 22,028,565 | | | $ | 21,751,614 | | | $ | 20,896,112 | | | $ | 20,367,621 | | | $ | 20,251,996 | |
Reconciling items: | | | | | | | | | |
Goodwill and other intangibles | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | |
Tangible assets | $ | 22,024,936 | | | $ | 21,747,985 | | | $ | 20,892,483 | | | $ | 20,363,992 | | | $ | 20,248,367 | |
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Tangible common equity to tangible assets | 6.0 | % | | 5.9 | % | | 6.0 | % | | 6.1 | % | | 6.0 | % |
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Tangible Common Equity to Tangible Assets, excluding PPP - Customers Bancorp | | | | | | | | | |
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(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 |
GAAP total shareholders' equity | $ | 1,456,652 | | | $ | 1,421,020 | | | $ | 1,402,961 | | | $ | 1,386,931 | | | $ | 1,353,390 | |
Reconciling items: | | | | | | | | | |
Preferred stock | (137,794) | | | (137,794) | | | (137,794) | | | (137,794) | | | (137,794) | |
Goodwill and other intangibles | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | |
Tangible common equity | $ | 1,315,229 | | | $ | 1,279,597 | | | $ | 1,261,538 | | | $ | 1,245,508 | | | $ | 1,211,967 | |
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GAAP total assets | $ | 22,028,565 | | | $ | 21,751,614 | | | $ | 20,896,112 | | | $ | 20,367,621 | | | $ | 20,251,996 | |
Loans receivable, PPP | (188,763) | | | (246,258) | | | (998,153) | | | (1,154,632) | | | (1,570,160) | |
Total assets, excluding PPP | $ | 21,839,802 | | | $ | 21,505,356 | | | $ | 19,897,959 | | | $ | 19,212,989 | | | $ | 18,681,836 | |
Reconciling items: | | | | | | | | | |
Goodwill and other intangibles | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | |
Tangible assets, excluding PPP | $ | 21,836,173 | | | $ | 21,501,727 | | | $ | 19,894,330 | | | $ | 19,209,360 | | | $ | 18,678,207 | |
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Tangible common equity to tangible assets, excluding PPP | 6.0 | % | | 6.0 | % | | 6.3 | % | | 6.5 | % | | 6.5 | % |
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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES |
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) |
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(Dollars in thousands, except per share data) |
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Tangible Book Value per Common Share - Customers Bancorp | | | | | | | | | | | |
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(Dollars in thousands, except share and per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 | | | | |
GAAP total shareholders' equity | $ | 1,456,652 | | | $ | 1,421,020 | | | $ | 1,402,961 | | | $ | 1,386,931 | | | $ | 1,353,390 | | | | | |
Reconciling Items: | | | | | | | | | | | | | |
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Preferred stock | (137,794) | | | (137,794) | | | (137,794) | | | (137,794) | | | (137,794) | | | | | |
Goodwill and other intangibles | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | | | (3,629) | | | | | |
Tangible common equity | $ | 1,315,229 | | | $ | 1,279,597 | | | $ | 1,261,538 | | | $ | 1,245,508 | | | $ | 1,211,967 | | | | | |
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Common shares outstanding | 31,282,318 | | | 31,239,750 | | | 32,373,697 | | | 32,475,502 | | | 32,449,486 | | | | | |
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Tangible book value per common share | $ | 42.04 | | | $ | 40.96 | | | $ | 38.97 | | | $ | 38.35 | | | $ | 37.35 | | | | | |
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Core Loans (Total Loans and Leases, excluding PPP) | | | | | | | | | |
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(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 |
Total loans and leases | $ | 13,910,907 | | | $ | 15,063,034 | | | $ | 15,794,671 | | | $ | 15,336,688 | | | $ | 15,664,353 | |
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Loans receivable, PPP | (188,763) | | | (246,258) | | | (998,153) | | | (1,154,632) | | | (1,570,160) | |
Core Loans (Total loans and leases, excluding PPP) | $ | 13,722,144 | | | $ | 14,816,776 | | | $ | 14,796,518 | | | $ | 14,182,056 | | | $ | 14,094,193 | |
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Core Loans Held for Investment (Total Loans and Leases Held for Investment, excluding PPP) | | | | | | | | | |
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(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 |
Total loans and leases, held for investment | $ | 13,832,799 | | | $ | 14,638,977 | | | $ | 15,466,359 | | | $ | 15,331,464 | | | $ | 15,657,758 | |
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Loans receivable, PPP | (188,763) | | | (246,258) | | | (998,153) | | | (1,154,632) | | | (1,570,160) | |
Core Loans Held for Investment (Total loans and leases held for investment, excluding PPP) | $ | 13,644,036 | | | $ | 14,392,719 | | | $ | 14,468,206 | | | $ | 14,176,832 | | | $ | 14,087,598 | |
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Total Assets, excluding PPP | | | | | | | | | |
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(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 |
Total assets | $ | 22,028,565 | | | $ | 21,751,614 | | | $ | 20,896,112 | | | $ | 20,367,621 | | | $ | 20,251,996 | |
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Loans receivable, PPP | (188,763) | | | (246,258) | | | (998,153) | | | (1,154,632) | | | (1,570,160) | |
Total assets, excluding PPP | $ | 21,839,802 | | | $ | 21,505,356 | | | $ | 19,897,959 | | | $ | 19,212,989 | | | $ | 18,681,836 | |
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Coverage of credit loss reserves for loans and leases held for investment, excluding PPP | | | | | | | | | |
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(Dollars in thousands, except per share data) | Q2 2023 | | Q1 2023 | | Q4 2022 | | Q3 2022 | | Q2 2022 |
Loans and leases receivable | $ | 12,826,531 | | | $ | 13,391,610 | | | $ | 14,143,047 | | | $ | 13,762,374 | | | $ | 13,783,155 | |
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Loans receivable, PPP | (188,763) | | | (246,258) | | | (998,153) | | | (1,154,632) | | | (1,570,160) | |
Loans and leases held for investment, excluding PPP | $ | 12,637,768 | | | $ | 13,145,352 | | | $ | 13,144,894 | | | $ | 12,607,742 | | | $ | 12,212,995 | |
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Allowance for credit losses on loans and leases | $ | 139,656 | | | $ | 130,281 | | | $ | 130,924 | | | $ | 130,197 | | | $ | 156,530 | |
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Coverage of credit loss reserves for loans and leases held for investment, excluding PPP | 1.11 | % | | 0.99 | % | | 1.00 | % | | 1.03 | % | | 1.28 | % |
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“A Forward-Thinking Bank with Strong Risk Management“ Let’s take on tomorrow. Investor Presentation: Q2 2023 July 2023
2 Let’s take on tomorrow. customers bancorp © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED In addition to historical information, this presentation 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,” “project”, 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: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, the impact of COVID- 19 and its variants on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, 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, higher inflation and its impacts, 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, 2022, 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. This does not constitute an offer to sell, or a solicitation of an offer to buy, any security in any state or jurisdiction in which such offer, solicitation or sale would be unlawful. Forward-Looking Statements
3 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Recurring earnings comfortably beat consensus estimates Significant net interest margin expansion to 3.15% in Q2’23 Q2’23 Strategic Transactions Strength of the Franchise Maintaining Superior Credit Quality Strong Liquidity and Capital Immediately available liquidity covers >200% of uninsured deposits1 ~70 bps increase in CET1 QoQ; on track to 11.0%+ CET1 by YE’23 Balance sheet growth remains on pause/moderated given uncertain environment Minimal exposure to higher-risk CRE asset classes (office and retail) Successful execution of de-risking strategies led by additional consumer installment loan sale Reduced average cost of deposits by 21 bps QoQ despite continued industry deposit pressures and increasing rate environment Significant increase in non-interest bearing operating deposits by ~$1 billion QoQ Venture Banking acquisition from FDIC further improves outlook for continued core deposit growth Exited non-core relationships to provide balance sheet capacity for purchase of Venture Banking portfolio from FDIC while improving capital ratios Management Outlook Significant progress on our strategic and financial priorities Optimistic about continued improvement in balance sheet, capital position and profitability; remain on target to achieve ~$6.00 core EPS in 2023 Q2’23 Earnings Review Let’s take on tomorrow. A Forward-Thinking Bank with Strong Risk Management 1. Adjusted to account for affiliate and collateralized deposits
4 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Our Priorities Remain Unchanged Moderate growth and tactically shrink our balance sheet away from non-strategic relationships Focus on further strengthening our balance sheet, improving liquidity, capital ratios and margins Not deviate from strong risk management principles: − Superior credit quality − Sound interest rate risk management − Maintain robust liquidity − Strong capital ratios − Positive operating leverage
5 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Q2’23 Profitability Balance Sheet Credit 3.15% NIM $22.0B Total Assets 0.13% NPA Ratio $13.9B Total Loans and Leases $28.2M NPLs 1.79% Core PTPP ROAA1,2 $18.0B Total Deposits 494% Reserves to NPLs Financial Highlights 1. Adjustment related to $4.1 million tax on BOLI surrender, $3.9 million after-tax loss on sale of capital call lines, and other items combined for $0.1 million after-tax; for details, refer to appendix for reconciliation 2. Non-GAAP measure, refer to appendix for reconciliation Highlights Q2’23 $1.65 Core EPS1,2 $52.2 M Core Earnings1,2 Core ROCE1,2 15.7% 1.0 Q2’23 EARNINGS REVIEW $1.39 Diluted EPS $44.0 M Net Income ROCE 13.2% ROAA 0.88% Core ROAA1,2 1.03%
6 Let’s take on tomorrow. customers bancorp © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Customers Bank Has Become a Leading Banking Partner for Venture Backed Companies 2.0 Q2’23 STRATEGIC TRANSACTIONS Venture Banking & Fund Finance Existing Locations Expansion Locations Denver Austin Bay Area Southern California Chicago Raleigh / Durham Boston Washington, D.C. New York $631 million in unpaid principal balances1 ~9.00% yield (100% floating rate loans) $1.3 billion in loan commitments1 with a ~50% utilization rate Transaction Overview • Acquisition of $631 million1 venture banking loan portfolio from the FDIC at approximately 85% of book value • Successfully recruited approximately 30 team members that originated and serviced the acquired loan portfolio • Transaction de-risked by $93 million purchase price discount Deposit Opportunity • Acquired portfolio customers expected to migrate $500+ million of deposits • Typical client deposit to loan ratio of 2:1 Financial Benefits • Immediately accretive to tangible book value (“TBV”) and earning per share (“EPS”) • Internal rate of return (“IRR”) >20% 1. As of May 12, 2023; subject to closing adjustments $528 (84%) Technology & Life Sciences Capital Call Lines customers bancorp $103 (16%)
7 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Exited Non-Core Relationships in the Quarter Providing Balance Sheet Capacity for FDIC Venture Banking Portfolio Rationale • Expedited exiting non-strategic loans without deposit relationship • Released balance sheet capacity for more strategic opportunities (including FDIC Venture Banking portfolio) • Proves out HFS strategy which generates fee and “fee-like” revenue • Continues de-risking of balance sheet and provides capacity for more strategic opportunities Benefits • Acquired Venture Banking relationships will be fully funded with deposits • Retained (and future) Fund Finance clients predominantly include strong deposit relationships • Balance sheet capacity creates opportunity for new HFS originations • Sets stage for future capital markets transactions Fund Finance Loan Sale ($670 million in commitments) Consumer Installment Loan Sale ($557 million in balances) Financial Impact • Combined loan sale transactions reduce risk-weighted assets by approximately $800 million • Weighted average coupon of ~13% on sold consumer installment portfolio and ~9% on acquired Venture Banking portfolio • With expected deposit relationships on Venture Banking acquisition, remixed portfolio will be significantly accretive to net interest margin, generate excess low-cost core deposits, and improve overall bank cost of funds 2.0 Q2’23 STRATEGIC TRANSACTIONS
8 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Total Deposits $ billions Successfully Executing on Deposit Remix and Reducing Cost of Deposits Despite Increase in Rates • Total deposits increased by ~$200 million QoQ with core deposit growth of ~$900 million • Non-interest bearing deposits increased by $1 billion QoQ (+29%) and account for 25% of total deposits • Average cost of deposits declined by 21 bps QoQ while spot cost of deposits declined by 1 bp $4.7 $6.6 $5.6 Q2’22 $3.0 $7.1 $7.4 Q3’22 $1.9 $8.5 $7.8 Q4’22 $3.5 (20%) $5.8 $8.4 Q1’23 $4.5 (25%) $5.6 $7.9 Q2’23 $16.9 $17.5 $18.2 $17.7 $18.0 Non-Interest Bearing DDA Interest Bearing DDA Non-DDA Average cost of deposits Insured Deposits1 / Total Deposits percent 88% 77% 66% Median 74% C UB I • CUBI’s insured deposits1 as a percentage of total deposits is 77% –among the higher end of regional bank peers2 CUBI (Q2’23) Regional Bank Peers2 (MRQ) Spot cost of deposits 1. Adjusted to account for affiliate and collateralized deposits; similar adjustment made to regional bank peers when publicly disclosed otherwise unadjusted reported figures used 2. Selected 2023 proxy peers as disclosed in appendix 3.08% 3.11% 3.09% 3.32% 3.0 STRENGH OF THE FRANCHISE
9 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Net Interest Margin Expanded Significantly in Q2’23 NIM percent 1. Excluding PPP; non-GAAP measure, refer to appendix for reconciliation • Margin expansion in the quarter driven by higher yield on earning assets and lower cost of liabilities 3.15% 2.00% 2.50% 3.00% 3.50% Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 $19 $138 $14 $166$146 $149 $136 Q2’22 $10 Q3’22 -$3 Q4’22 Q1’23 Q2’23 $165 $159 $135 $150 $165 -$1 Net Interest Income $ millions • Delivered record quarterly net interest income1 3.0 STRENGH OF THE FRANCHISE Net interest income1 PPP net interest income
10 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Continuing to Exit Non-Strategic Assets and Maintained Strong Liquidity Position Loans – HFI $ billions Loans – HFI / Deposits percent $1.9 $5.4 $6.8 Q2’22 $1.4 $5.8 $7.0 Q3’22 $1.4 $5.9 $7.2 Q4’22 $1.3 $5.9 $7.2 Q1’23 $1.0 $5.7 $7.0 Q2’23 $14.11 $14.21 $14.51 $14.41 $13.61 Consumer Installment HFI Community Banking Corporate & Specialized Banking • Loan to deposit ratio is 77%, 9 percentage points lower than peer median • Declined from 83% in Q1’23 as liquidity remains robust 1. Excluding PPP; non-GAAP measure, refer to appendix for reconciliation 2. Selected 2023 proxy peers as disclosed in appendix 66% 77% 104% C UB I Median 86% CUBI (Q2’23) Regional Bank Peers2 (MRQ) 6.83% Loan Yield • Reduction in HFI loans driven by exiting non-strategic relationships • Loan yields continue to increase given approximately 70% of loan portfolio is floating rate 3.0 STRENGH OF THE FRANCHISE $1.6 $1.2 $1.0 $0.2 $0.2PPP Loans
11 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Customers Operates a Highly Efficient Business Model $75 $75 $78 $79 $89 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Core Non-Interest Expense1 $ millions • Increase QoQ primarily related to higher FDIC expense • Increase QoQ also driven by higher incentive accruals including in connection with onboarding of Venture Banking team Core Non-Interest Expense1 / Average Assets percent • CUBI’s non-interest expense as percent of average assets is the second lowest among regional bank peers2 1.57% 1.65% 2.85% C UB I Median 2.10% CUBI (Q2’23) Regional Bank Peers2 (MRQ) 1. Non-GAAP measure, refer to appendix for reconciliation 2. Selected 2023 proxy peers as disclosed in appendix 3.0 STRENGH OF THE FRANCHISE
12 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Investment Securities – AFS Book yield and duration • Best-in-industry IRR/ALM and bond portfolio management • Securities portfolio generates the second highest average yield (spot yield 5.38%) with the shortest duration (1.5 years) among regional bank peers1 Securities Portfolio is Best-Positioned Among Regional Bank Peers AFS + HTM Unrealized Losses as % of TCE percent 11% 14% 51% C UB I Median 23% • CUBI’s AFS + HTM unrealized losses as % of TCE is one of the lowest among regional bank peers1 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Duration (years) Av er ag e bo ok y ie ld ( % ) CUBI CUBI (Q1’23) Regional Bank Peers¹ (Q1’23) 1. Selected 2023 proxy peers as disclosed in appendix Median Median 3.0 STRENGH OF THE FRANCHISE
13 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Robust Liquidity Position with More Than 200% Coverage of Uninsured Deposits Immediately Available Liquidity $ billions $0.5 $2.3 $2.5 Q4’22 $2.1 $0.9 $6.5 Q1’23 $3.2 $0.8 $5.1 Q2’23 $5.2 $9.4 $9.1 Cash FHLB Available Committed Capacity FRB Available Committed Capacity • Total overall liquidity of $11.2 billion as of Q2’23 Immediately Available Liquidity / Uninsured Deposits1 percent 250% 222% 50% C UB I Median 114% • CUBI’s ratio of immediately available liquidity to uninsured deposits1 of approximately 222% is the second highest among regional banks peers2 CUBI (Q2’23) Regional Bank Peers² (MRQ) 1. Adjusted to account for affiliate and collateralized deposits; similar adjustment made to regional bank peers when publicly disclosed otherwise unadjusted reported figures used 2. Selected 2023 proxy peers as disclosed in appendix 4.0 STRONG LIQUIDITY AND CAPITAL
14 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Tangible Book Value1 per share • TBV1 has increased 1.8x since Q4’18 compared to a median of 1.1x for regional bank peers3 • TBV1 increase achieved solely through organic capital generation • Over the last two quarters, TBV1 increased by 8% compared to a median of 6% for regional bank peers3 despite AOCI headwinds • Current valuation extremely attractive at 7x4 consensus earning estimates for 2023 Consistent Outsized Growth in Tangible Book Value 1. Non-GAAP measure, refer to appendix for reconciliation 2. CAGR from Q4’18 to Q2’23 3. Selected 2023 proxy peers as disclosed in appendix 4. Data as of June 30, 2023 for TBVPS and July 21, 2023 for price and earning estimates for 2023 full year AOCI $23.32 $26.17 $27.92 $37.21 $38.97 $42.04 Q4’18 Q4’19 Q4’20 Q4’21 Q4’22 Q2’23 +14%2 4.0 STRONG LIQUIDITY AND CAPITAL $5.29
15 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED 12.6% 12.5% 12.2% 12.3% Q2’22 Q3’22 Q4’22 Q1’23 Q2’231 13.1% Total Risk-Based Capital percent 6.0% 6.1% 6.0% 5.9% 6.0% Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 6.7% TCE/TA2,3 percent 1. Capital ratios are estimated pending final regulatory report 2. TCE/TA negatively impacted by 76 bps due to AOCI 3. Non-GAAP measure, refer to appendix for reconciliation 4. Compared to total cash balance of ~$400 million as of Q4’22 Increasing Capital Levels and on Track to Achieve our 2023 Year-End Target AOCI 9.7% 9.8% 9.6% 9.6% Q2’22 Q3’22 Q4’22 Q1’23 Q2’231 10.3% +0.7% CET1 Risk-Based Capital percent • Increase of approximately 70 bps in CET1 during Q2’23 even after the acquisition of Venture Banking loans • TCE/TA excluding increased balance sheet cash4 would have been 6.8% in Q2’23 • Balance sheet optimization from exiting non-strategic credit relationships − Capital call lines divested did not have a corresponding deposit relationship with Customers Bank CET1 Risk-Based Capital percent Q2’231 Organic Capital Generation Balance Sheet Optimization 0.5% 11.0% Q4’23E 10.3% ~0.6% 11.0-11.5% 4.0 STRONG LIQUIDITY AND CAPITAL
16 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED $28 $28 $31 $32 $28 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 NPLs $ millions Commercial NCOs percent 0.14% 0.14% 0.15% 0.15% 0.13% Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 NPAs as Percent of Total Assets percent Credit Quality Remains Strong and Reserves at ~500% of NPLs 0.05% 0.22% 0.12% Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 0.08%1,3 0.06%4 Strategically avoided office and retail sectors of commercial real estate 1. Excluding PPP related one-time charge-offs of ~$11.0 million in Q4’22 (prior to $7.5 million legal settlement gain and impact of contractual indemnities and recoveries we may receive in future periods) 2. Excludes $2.2 million charge-offs of overdrawn deposit accounts for consumer serviced deposits in Q2’22; excludes $0.7 million of overdrawn deposit accounts for consumer serviced deposits in Q1’23 3. Non-GAAP measure, refer to appendix for reconciliation 4. Excludes $6.2 million charge-offs against $8.7 million ACL on PCD loans upon FDIC loan pool acquisition 5. Excludes construction loans 6. As of Q2’23 for CUBI and MRQ for peers 7. Selected 2023 proxy peers as disclosed in appendix 1.80% 2.53% 2.46% Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 1.61%2,3 2.48%2,3 0.47% Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 0.30%2,3 0.42%1,3 0.47%2,3 0.42%4 Consumer NCOs percent Total NCOs percent CUBI6 Regional Bank Peers Median6,7 15% 29% CRE (ex MultiFamily)5 Loan mix, Q2’23 All loans are located in-market on the east coast 5.0 MAINTAINING SUPERIOR CREDIT QUALITY ~1% of loan book $164 million Office CRE Retail CRE Exposure Average size LTV DSCR $3.5 million 59% 1.64x ~1% of loan book $194 million $4.3 million 59% 1.54x
17 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED De-Risking Consumer Installment Portfolio While Generating Fee and “Fee-Like” Income through Held-for-Sale Strategy Average portfolio loan characteristics: • Duration: 1.3 years1 • DTI2: 19% • FICO score2: 733 (no consumer loans below 680 FICO) • Borrower income: $105k 47% decline in consumer installment HFI portfolio over the last 12 months Q2’22 Q1’23 Q2’23 $1.9 $1.3 $1.0 -47% Consumer Installment HFI Consumer Installment HFS Strategy Increase balance sheet velocity to create nimble portfolio and reduce credit risk Targeting subsets of consumer lending that have strong secular tailwinds Execution of successful consumer installment loan sale of approximately $557 million in Q2’23 Differentiated Origination Capabilities Flexible Balance Sheet Capacity Fee and “Fee- Like” Revenue Opportunity 9% 7%12% Balances $ billions % of Loans-HFI percent 5.0 MAINTAINING SUPERIOR CREDIT QUALITY 1. Excluding student loans 2. FICO scored and DTI as of time of origination
18 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Management Outlook 1. Non-GAAP measure, refer to appendix for reconciliation 2. Excluding PPP 6.0 MANAGEMENT OUTLOOK Metrics Prior Guidance – FY 2023 Loans1,2 NIM1,2 Core EPS1,2 Tax rate Tangible book value1 Core non-interest expense CET1 ratio Flat to some decline 5-7% growth ~$6.00 22-24% 11.0-11.5% 2.85-3.05% - Expanding margin throughout the year $45.00+ Core ROCE1,2 15.0%+ Deposits Flattish with focus on reducing high-cost deposits Current Outlook – FY 2023 15% growth (FDIC and Venture Banking) High end of the range
19 Let’s take on tomorrow. © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Core deposit growth of ~$900 million replaced wholesale deposits of ~$700 million; non-interest bearing deposits were 25% of total deposits Average cost of deposits declined by 21 bps (spot cost down 1 bp) despite interest rate increases Robust pipeline of greater than $2.0 billion to continue improving deposit franchise NIM Improvement Strategic Loan Portfolio Remix Strengthening Capital Base Improved CET1 by approximately 70 bps in single quarter Remain on track to achieve 11.0%+ CET1 by YE’23 Venture Banking acquisition and syndicated Fund Finance divestiture consistent with focus on holistic banking relationships Consumer loan sales further de-risked balance sheet Significant net interest margin expansion QoQ fueled primarily by deposit gathering success Loan and securities portfolio well-positioned for all macroeconomic environments given short duration and predominantly floating rate Improving Deposit Franchise Let’s take on tomorrow. Concluding Perspectives Maintaining Strong Risk Management Liquidity position is among the strongest relative to peers1 with coverage of >200% of uninsured deposits2 Diversified loan and deposit franchises built to perform across all macroeconomic environments 1. Selected 2023 proxy peers as disclosed in appendix 2. Adjusted to account for affiliate and collateralized deposits
ANALYST COVERAGE D.A. Davidson Companies Peter Winter Hovde Group David Bishop Jefferies Group LLC Casey Haire Keefe, Bruyette & Woods Inc. Michael Perito Maxim Group Inc. Michael Diana Piper Sandler Companies Frank Schiraldi Stephens Inc. Matt Breese Wedbush Securities Inc. David Chiaverini B. Riley Financial, Inc. Hal Goetsch
APPENDIX
22 Let’s take on tomorrow. customers bancorp © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Customers Bancorp, Inc. NYSE: CUBI Headquarters West Reading, PA Offices1 34 FTE Employees 691 Market Capitalization As of July 21, 2023 $1.3B Total Assets $22.0B Tangible Book Value2 $42.04 Share price As of July 21, 2023 $40.18 Data as of June 30, 2023, unless otherwise noted (1) Offices includes branches, executive offices, Private Banking Offices and Loan Production Offices (2) Non-GAAP measure, refer to appendix for reconciliation A Forward-Thinking Super-Community Bank Focused on Superior Customer Service Through High-Tech, High-Touch Model Digital Banking Consumer • Suite of loan and deposit products delivered digitally to clients • Generating fee and “fee-like” revenue with limited credit risk Commercial – Transaction banking (treasury and payment services) with associated deposits Community Banking Deep relationship-based community banking predominantly in the Northeast with thoughtful presence in the Carolinas, Florida and Texas Serving small and medium-sized businesses, and individuals, with a comprehensive suite of loan and deposit products Customers Bancorp Overview Corporate & Specialized Banking National corporate niche businesses where Customers has differentiated capabilities, often enhanced through technology, to create value for clients
23 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Investment Securities – AFS Percent, Q2’23 Securities Portfolio Generating Attractive Returns with Minimal Credit and Duration Risk • Spot yield: 5.38% • Effective duration: ~1.5 years • Floating rate securities: ~47% • Credit rating: 62% AAA with only 1% at BB and below 45% 34% 21% 1% MBS & CMO ABS Corporate Other Total: $2.8 billion Investment Securities – HTM Percent, Q2’23 • Spot yield: 4.41% • Effective duration: ~3.0 years • Floating rate securities: ~25% • Credit rating: 36% AAA with no rated securities non-investment grade • ABS: ~$0.7 billion of credit enhanced asset backed securities from sale of consumer installment loan portfolio in Q3’22 and Q2’23 57% 43% Credit Enhanced ABS MBS & CMO Total: $1.3 billion
24 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. 19% 49% 31% 0% FICO Score1 660-679 680-699 700-749 750+ 23% 35% 23% 11% 5% 4% 0-9.99% 10 – 19.99% 20 – 29.99% 30 – 39.99% 40 – 49.99% > 50% Unknown Geography Profession Debt to Income Ratio1 Borrower Income 8% 72% 20% <$50K $50K -$100K >$100K 21% 11% 20% 26% 23% West Southwest Midwest Southeast Northeast Consumer Installment Loans – Portfolio Credit Metrics Purpose 77% 6% 15% 3% Personal Loan Specialty Home Improvement Student Loan 94% 4% 2% Non COVID-19 Impacted Segments Non-Professional Retail & Restaurants Average FICO Score1 ~733 Average DTI 1~19% Average Borrower Income ~$105k Weighted average life of ~2.0 years Note: Data as of June 30, 2023; includes consumer installment HFS loans 1. DTI and FICO scores as of time of origination
25 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Selected 2023 Proxy Peers • Associated • Atlantic Union • BankUnited • Commerce • FB Financial • First Financial (OH) • First Merchants • F.N.B. • Fulton • Independent • Northwest • Old National • Pinnacle • Sandy Spring • United Community • WesBanco • WSFS Note: Excludes the following banks – Ameris, Axos, Community Bank System, Eastern, First Busey, Provident, Silvergate, Towne, United
26 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Robust Sources of Liquidity 1. Includes CLOs Liquidity Sources ($000's) 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 Cash and Cash Equivalents $3,155,224 $2,046,685 $455,807 $404,465 $245,178 FHLB Available Borrowing Capacity $835,464 $860,578 $2,265,499 $2,999,524 $2,924,637 FRB Available Borrowing Capacity $5,126,390 $6,516,922 $2,510,189 $2,557,704 $244,802 Investments (MV AFS + HTM) US Gov't & Agency Debt $0 $0 $0 $0 $0 Agency & Non-Agency MBS & CMO $1,799,406 $1,858,846 $1,811,633 $1,844,043 $1,900,917 Municipals $0 $0 $0 $7,351 $7,737 Corporates $579,753 $586,795 $595,253 $532,655 $546,336 ABS (1) $1,677,341 $1,324,912 $1,394,388 $1,421,075 $1,160,160 Other AFS $26,698 $26,710 $26,485 $24,864 $24,771 Less: Pledged Securities HTM & AFS ($1,972,713) ($2,019,311) ($16,749) ($17,464) ($19,325) Net Unpledged Securities $2,110,485 $1,777,952 $3,811,010 $3,812,525 $3,620,596 $11,227,562 $11,202,137 $9,042,505 $9,774,219 $7,035,212
27 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Note: 1. Utilized Moody’s June 2023 baseline and adverse forecast scenario with qualitative adjustments for Q2’23 provision 2. Excludes loans to mortgage companies reported at fair value, loans held for sale and PPP loans 3. Non-GAAP measure, refer to appendix for reconciliation 4. Includes $2.5 million of ACL on PCD loans acquired as part of FDIC loan pool Allowance for Credit Losses for Loans and Leases June 30, 2023 Amortized Cost2 Allowance for Credit Losses Lifetime Loss Rate1 ($ in thousands) Loans and Leases Receivable: Commercial: Commercial and Industrial, including Specialty Lending $ 6,689,307 $ 29,0924 0.43 % Multifamily 2,151,734 15,400 0.72 % Commercial Real Estate Owner Occupied 842,042 10,215 1.21 % Commercial Real Estate Non-Owner Occupied 1,211,091 13,495 1.11 % Construction 212,214 2,639 1.24 % Total Commercial Loans and Leases Receivable $ 11,106,388 $ 70,841 0.64 % Consumer: Residential Real Estate $ 487,199 $ 6,846 1.41 % Manufacturing Housing 41,664 4,338 10.41 % Installment 1,002,517 57,631 5.75 % Total Consumer Loans Receivable $ 1,531,380 $ 68,815 4.49 % Total Loans and Leases Receivable $ 12,637,768 $ 139,656 1.11 %3
28 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. 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. Reconciliation of Non-GAAP Measures - Unaudited
29 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Core Earnings - Customers Bancorp Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 ($ in thousands, except per share data) USD Per share USD Per share USD Per share USD Per share USD Per share GAAP net income to common shareholders $ 44,007 $ 1.39 $ 50,265 $ 1.55 $ 25,623 $ 0.77 $ 61,364 $ 1.85 $ 56,519 $ 1.68 Reconciling items (after tax): Severance expense 141 0.00 637 0.02 — — 1,058 0.03 — — Impairments on fixed assets and leases 12 0.00 86 0.00 — — 126 0.00 705 0.02 Loss on sale of consumer installment loans — — — — — — 18,221 0.55 — — Loss on sale of capital call lines of credit 3,914 0.12 — — — — — — — — (Gains) losses on investment securities 49 — (49) (0.00) 13,543 0.41 1,859 0.06 2,494 0.07 Derivative credit valuation adjustment (101) — 204 0.01 202 0.01 (358) (0.01) (351) (0.01) Tax on surrender of bank-owned life insurance policies 4,141 0.13 — — — — — — — — Core earnings $ 52,163 $ 1.65 $ 51,143 $ 1.58 $ 39,368 $ 1.19 $ 82,270 $ 2.48 $ 59,367 $ 1.77
30 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Core Earnings, excluding PPP - Customers Bancorp Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 ($ in thousands, except per share data) USD Per share USD Per share USD Per share USD Per share USD Per share GAAP net income available to shareholders $ 44,007 $ 1.39 $ 50,265 $ 1.55 $ 25,623 $ 0.77 $ 61,364 $ 1.85 $ 56,519 $ 1.68 Less: PPP net income (loss) (after tax) (2,068) (0.07) 9,606 0.30 (5,956) (0.18) 5,846 0.18 13,066 0.39 GAAP net income to common shareholders, excluding PPP 46,075 1.46 40,659 1.26 31,579 0.95 55,518 1.67 43,453 1.29 Reconciling items (after tax): Severance expense 141 0.00 637 0.02 — — 1,058 0.03 — — Impairments on fixed assets and leases 12 0.00 86 0.00 — — 126 0.00 705 0.02 Loss on sale of consumer installment loans — — — — — — 18,221 0.55 — — Loss on sale of capital call lines of credit 3,914 0.12 — — — — — — — — (Gains) losses on investment securities 49 — (49) (0.00) 13,543 0.41 1,859 0.06 2,494 0.07 Derivative credit valuation adjustment (101) — 204 0.01 202 0.01 (358) (0.01) (351) (0.01) Tax on surrender of bank-owned life insurance policies 4,141 0.13 — — — — — — — — Core earnings, excluding PPP $ 54,321 $ 1.72 $ 41,537 $ 1.28 $ 45,324 $ 1.37 $ 76,424 $ 2.30 $ 46,301 $ 1.38
31 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision, - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net income $ 47,574 $ 53,721 $ 28,711 $ 63,912 $ 58,650 Reconciling items: Income tax expense 20,768 14,563 7,136 17,899 18,896 Provision (benefit) for credit losses 23,629 19,603 28,216 (7,994) 23,847 Provision (benefit) for credit losses on unfunded commitments (304) 280 153 254 608 Severance expense 182 809 — 1,363 — Impairments on fixed assets and leases 15 109 — 162 914 Loss on sale of consumer installment loans — — — 23,465 — Loss on sale of capital call lines of credit 5,037 — — — — (Gains) losses on investment securities 62 (62) 16,909 2,394 3,232 Derivative credit valuation adjustment (130) 259 252 (461) (455) Adjusted net income - pre-tax pre-provision, excluding PPP $ 96,833 $ 89,282 $ 81,377 $ 100,994 $ 105,692 Average total assets $ 21,654,735 $ 21,052,920 $ 20,717,362 $ 20,514,366 $ 20,056,020 Adjusted ROAA - pre-tax pre-provision, excluding PPP 1.79 % 1.72 % 1.56 % 1.95 % 2.11 %
32 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision, excluding PPP - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net income $ 47,574 $ 53,721 $ 28,711 $ 63,912 $ 58,650 Less: PPP net income (loss) (after tax) (2,068) 9,606 (5,956) 5,846 13,066 Net income, excluding PPP $ 49,642 $ 44,115 $ 34,667 $ 58,066 $ 45,584 Reconciling items: Income tax expense 20,768 14,563 7,136 17,899 18,896 Provision (benefit) for credit losses 23,629 19,603 28,216 (7,994) 23,847 Provision (benefit) for credit losses on unfunded commitments (304) 280 153 254 608 Severance expense 182 809 — 1,363 — Impairments on fixed assets and leases 15 109 — 162 914 Loss on sale of consumer installment loans — — — 23,465 — Loss on sale of capital call lines of credit 5,037 — — — — (Gains) losses on investment securities 62 (62) 16,909 2,394 3,232 Derivative credit valuation adjustment (130) 259 252 (461) (455) Adjusted net income - pre-tax pre-provision, excluding PPP $ 98,901 $ 79,676 $ 87,333 $ 95,148 $ 92,626 Average total assets $ 21,654,735 $ 21,052,920 $ 20,717,362 $ 20,514,366 $ 20,056,020 Adjusted ROAA - pre-tax pre-provision, excluding PPP 1.83 % 1.53 % 1.67 % 1.84 % 1.85 %
33 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Core Return on Average Assets - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net income $ 47,574 $ 53,721 $ 28,711 $ 63,912 $ 58,650 Reconciling items (after tax): Severance expense 141 637 — 1,058 — Impairments on fixed assets and leases 12 86 — 126 705 Loss on sale of consumer installment loans — — — 18,221 — Loss on sale of capital call lines of credit 3,914 — — — — (Gains) losses on investment securities 49 (49) 13,543 1,859 2,494 Derivative credit valuation adjustment (101) 204 202 (358) (351) Tax on surrender of bank-owned life insurance policies 4,141 — — — — Core net income $ 55,730 $ 54,599 $ 42,456 $ 84,818 $ 61,498 Average total assets $ 21,654,735 $ 21,052,920 $ 20,717,362 $ 20,514,366 $ 20,056,020 Core return on average assets 1.03 % 1.05 % 0.81 % 1.64 % 1.23 %
34 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Core Return on Average Common Equity - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net income to common shareholders $ 44,007 $ 50,265 $ 25,623 $ 61,364 $ 56,519 Reconciling items (after tax): Severance expense 141 637 — 1,058 — Impairments on fixed assets and leases 12 86 — 126 705 Loss on sale of consumer installment loans — — — 18,221 — Loss on sale of capital call lines of credit 3,914 — — — — (Gains) losses on investment securities 49 (49) 13,543 1,859 2,494 Derivative credit valuation adjustment (101) 204 202 (358) (351) Tax on surrender of bank-owned life insurance policies 4,141 — — — — Core earnings $ 52,163 $ 51,143 $ 39,368 $ 82,270 $ 59,367 Average total common shareholders' equity $ 1,335,408 $ 1,273,780 $ 1,263,190 $ 1,259,711 $ 1,244,819 Core return on average common equity 15.67 % 16.28 % 12.36 % 25.91 % 19.13 %
35 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Adjusted Annualized Net Charge-Offs ($ in thousands, except percentages) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Average balance Net charge- offs/(recoveri es) Annualized NCO to average loans Average balance Net charge- offs/(recoveri es) Annualized NCO to average loans Average balance Net charge- offs/(recoveri es) Annualized NCO to average loans Average balance Net charge- offs/(recoveri es) Annualized NCO to average loans Average balance Net charge- offs/(recoveri es) Annualized NCO to average loans Total commercial loans and leases receivable $ 12,622,478 $ 1,9381 0.06 %1 $ 13,207,069 $ 4,047 0.12 % $ 13,308,551 $ 13,920 0.41 % $ 13,202,090 $ 7,402 0.22 % $ 12,493,335 $ 1,588 0.05 % One-time related PPP charge-off — — — — % — (11,044) — % — — — % — — — % Adjusted total commercial loans and leases receivable 12,622,478 1,938 0.06 % 13,207,069 4,047 0.12 % 13,308,551 2,876 0.08 % 13,202,090 7,402 0.22 % 12,493,335 1,588 0.05 % Total consumer loans 2,219,954 13,626 2.46 % 2,270,904 14,604 2.61 % 2,079,452 13,244 2.53 % 2,451,893 11,095 1.80 % 2,425,163 11,893 1.97 % One-time overdrawn charge-off — — — % — (712) — % — — — % — — — % — (2,162) — % Adjusted total consumer loans 2,219,954 13,626 2.46 % 2,270,904 13,892 2.48 % 2,079,452 13,244 2.53 % 2,451,893 11,095 1.80 % 2,425,163 9,731 1.61 % Total loans and leases 14,842,432 15,564 0.42 %1 15,477,973 18,651 0.49 % 15,388,003 27,164 0.70 % 15,653,983 18,497 0.47 % 14,918,498 13,481 0.36 % Adjusted total loans and leases $ 14,842,432 $ 15,564 0.42 %1 $ 15,477,973 $ 17,939 0.47 % $ 15,388,003 $ 16,120 0.42 % $ 15,653,983 $ 18,497 0.47 % $ 14,918,498 $ 11,319 0.30 % 1. Excludes $6.2 million charge-offs against $8.7 million ACL on PCD loans upon FDIC loan pool acquisition
36 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Core non-interest expense - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP non-interest expense $ 89,297 $ 80,133 $ 78,419 $ 76,198 $ 76,205 Severance expense (182) (809) — (1,363) — Impairments on fixed assets and leases (15) (109) — (162) (914) Core non-interest expense $ 89,100 $ 79,215 $ 78,419 $ 74,673 $ 75,291
37 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Tangible Book Value per Common Share - Customers Bancorp ($ in thousands except per share data) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP total shareholders' equity $ 1,456,652 $ 1,421,020 $ 1,402,961 $ 1,386,931 $ 1,353,390 Reconciling Items: Preferred stock (137,794) (137,794) (137,794) (137,794) (137,794) Goodwill and other intangibles (3,629) (3,629) (3,629) (3,629) (3,629) Tangible common equity $ 1,315,229 $ 1,279,597 $ 1,261,538 $ 1,245,508 $ 1,211,967 Common shares outstanding 31,282,318 31,239,750 32,373,697 32,475,502 32,449,486 Tangible book value per common share $ 42.04 $ 40.96 $ 38.97 $ 38.35 $ 37.35
38 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Tangible Common Equity to Tangible Assets, excluding PPP - Customers Bancorp ($ in thousands except per share data) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP total shareholders' equity $ 1,456,652 $ 1,421,020 $ 1,402,961 $ 1,386,931 $ 1,353,390 Reconciling items: Preferred stock (137,794) (137,794) (137,794) (137,794) (137,794) Goodwill and other intangibles (3,629) (3,629) (3,629) (3,629) (3,629) Tangible common equity $ 1,315,229 $ 1,279,597 $ 1,261,538 $ 1,245,508 $ 1,211,967 Total assets $ 22,028,565 $ 21,751,614 $ 20,896,112 $ 20,367,621 $ 20,251,996 Reconciling items: Goodwill and other intangibles (3,629) (3,629) (3,629) (3,629) (3,629) PPP loans (188,763) (246,258) (998,153) (1,154,632) (1,570,160) Tangible assets, excluding PPP $ 21,836,173 $ 21,501,727 $ 19,894,330 $ 19,209,360 $ 18,678,207 Tangible common equity to tangible assets, excluding PPP 6.0 % 6.0 % 6.3 % 6.5 % 6.5 %
39 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Total loans and leases, excluding PPP and Consumer HFS - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Total loans and leases $ 13,910,907 $ 15,063,034 $ 15,794,671 $ 15,664,353 $ 15,664,353 PPP loans (188,763) (246,258) (998,153) (1,154,632) (1,570,160) Consumer HFS (78,108) (404,006) (324,233) (1,116) (2,459) Total loans and leases, excluding PPP and Consumer HFS $ 13,644,036 $ 14,412,770 $ 14,472,285 $ 14,508,605 $ 14,091,734 Total interest earning assets, excluding PPP - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Interest earning deposits $ 3,101,097 $ 1,969,434 $ 397,781 $ 362,945 $ 178,475 Investment securities, at fair value 2,824,638 2,926,969 2,987,500 2,943,694 3,144,882 Investment securities held to maturity 1,258,560 870,294 840,259 886,294 495,039 Total investments $ 7,184,295 $ 5,766,697 $ 4,225,540 $ 4,192,933 $ 3,818,396 Total loans and leases receivable $ 13,910,907 $ 15,063,034 $ 15,794,671 $ 15,336,688 $ 15,664,353 PPP loans (188,763) (246,258) (998,153) (1,154,632) (1,570,160) Total loans and leases, excluding PPP $ 13,722,144 $ 14,816,776 $ 14,796,518 $ 14,509,721 $ 14,094,193 Total interest earning assets, excluding PPP $ 20,906,439 $ 20,583,473 $ 19,022,058 $ 18,702,654 $ 17,912,589
40 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Coverage of credit loss reserves for loans and leases HFI, excluding PPP - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Loans and leases receivable $ 12,826,531 $ 13,391,610 $ 14,143,047 $ 13,762,374 $ 13,783,155 PPP loans (188,763) (246,258) (998,153) (1,154,632) (1,570,160) Loans and leases held for investment, excluding PPP $ 12,637,768 $ 13,145,352 $ 13,144,894 $ 12,607,742 $ 12,212,995 Allowance for credit losses on loans and leases $ 139,656 $ 130,281 $ 130,924 $ 130,197 $ 156,530 Coverage of credit loss reserves for loans and leases held for investment, excluding PPP 1.11 % 0.99 % 1.00 % 1.03 % 1.28 %
41 © 2023 C USTO M ERS BANC O RP, INC . / ALL RIG HTS RESERVED Let’s take on tomorrow. Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Loan Yield, excluding PPP ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Interest income on loans and leases $ 252,894 $ 255,913 $ 218,740 $ 200,457 $ 168,941 PPP interest income (1,633) (23,551) (7,249) (14,666) (20,572) Interest income on core loans (Loans and leases, excluding PPP) $ 251,261 $ 232,362 $ 211,491 $ 185,791 $ 148,369 Average total loans and leases $ 14,842,432 $ 15,477,973 $ 15,388,003 $ 15,653,983 $ 14,918,498 Average PPP loans (207,127) (889,235) (1,065,919) (1,349,403) (1,863,429) Adjusted average total loans and leases $ 14,635,305 $ 14,588,738 $ 14,322,084 $ 14,304,580 $ 13,055,069 Loan yield, excluding PPP 6.89 % 6.46 % 5.86 % 5.15 % 4.56 % Net Interest Margin, Tax Equivalent, excluding PPP - Customers Bancorp (dollars in thousands except per share data) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net interest income $ 165,271 $ 149,899 $ 135,137 $ 159,032 $ 164,852 PPP net interest (income) expense 765 (14,106) 2,791 (9,632) (18,946) Tax-equivalent adjustment 390 375 342 334 270 Net interest income tax equivalent, excluding PPP $ 166,426 $ 136,168 $ 138,270 $ 149,734 $ 146,176 GAAP average total interest earning assets $ 21,073,680 $ 20,514,677 $ 20,211,028 $ 20,021,455 $ 19,525,936 Average PPP loans (207,127) (889,235) (1,065,919) (1,349,403) (1,863,429) Adjusted average total interest earning assets, excluding PPP $ 20,866,553 $ 19,625,442 $ 19,145,109 $ 18,672,052 $ 17,662,507 Net interest margin, tax equivalent, excluding PPP 3.20 % 2.80 % 2.87 % 3.18 % 3.32 % Net Interest Income, excluding PPP - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net interest income $ 165,271 $ 149,899 $ 135,137 $ 159,032 $ 164,852 PPP net interest (income) expense 765 (14,106) 2,791 (9,632) (18,946) Net interest income, excluding PPP $ 166,036 $ 135,793 $ 137,928 $ 149,400 $ 145,906
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Customers Bancorp (NYSE:CUBI-F)
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