Customers Bancorp Reports Second Quarter 2021 Results

Customers Bancorp, Inc. (NYSE: CUBI), the parent company of Customers Bank (collectively "Customers" or "CUBI"), today reported second quarter 2021 ("Q2 2021") net income to common shareholders of $58.0 million, or $1.72 per diluted share, up from first quarter 2021 ("Q1 2021") net income to common shareholders of $33.2 million, or $1.01 per diluted share. Q1 2021 results included a net loss from discontinued operations of $38.0 million, which reduced GAAP earnings by $1.16 per diluted share, resulting from the divestiture of BankMobile Technologies, Inc. on January 4, 2021. Core earnings for Q2 2021 totaled $59.3 million, or $1.76 per diluted share compared to Q1 2021 core earnings of $70.3 million, or $2.14 per diluted share (non-GAAP measures). Adjusted pre-tax pre-provision net income was $86.5 million for Q2 2021 compared to $86.8 million for Q1 2021 (non-GAAP measures). Net interest margin, tax equivalent ("NIM") remained stable at 3% for Q2 2021 and Q1 2021. Excluding PPP loans, NIM expanded 31 basis points in Q2 2021 as compared to Q1 2021, largely benefiting from the balance sheet restructuring that occurred in Q1 2021, further reductions in deposit costs and disciplined pricing strategy (non-GAAP measures).

“As the Paycheck Protection Program ("PPP") comes to a close, we couldn't be happier with our overall execution and results in this program,” remarked Customers Bancorp Chairman and CEO, Jay Sidhu. “Not only have we supported hundreds of thousands of small businesses, not-for-profits, and the communities we serve, we leveraged our technology expertise to build valuable fintech partnerships, established hundreds of thousands of new customer accounts ripe for in-house analytics and cross-selling and significantly improved our capital position and tangible book value at the same time. All of this was achieved while decreasing the risk profile of Customers Bank. At June 30, 2021, we have strong capital and reserves, exceptional asset quality and expect to report the highest full year earnings in our company's history. This leaves us very well positioned to support future growth and to redeem a portion of our preferred stock later this year, an EPS enhancing action which was approved by our Board earlier today. We remain optimistic about our future.” Mr. Sidhu concluded.

Key Balance Sheet Trends

Total loans and leases increased $1.7 billion, or 11.0%, to $17.0 billion at June 30, 2021 compared to the year-ago period. PPP loans were $6.3 billion at June 30, 2021, an increase of $1.5 billion compared to the year-ago period, driven by $4.1 billion and $0.2 billion in originations from the new round and earlier rounds of PPP loans, respectively. This increase in PPP loans was offset by $2.8 billion in forgiveness from the earlier rounds of PPP loans. Additionally, the loan mix improved year-over-year as commercial and industrial loans and leases increased $233.2 million to $2.3 billion, commercial real estate owner occupied loans increased $108.9 million to $653.6 million, commercial loans to mortgage companies increased $90.1 million to $2.9 billion, and consumer installment loans increased $319.8 million to $1.6 billion. These increases in loans and leases were partially offset by decreases in multi-family loans of $526.1 million to $1.5 billion, commercial real estate non-owner occupied loans of $55.7 million to $1.2 billion and residential mortgages of $79.4 million to $273.5 million. “Looking ahead, we see continued growth in core C&I and consumer loans offsetting some of the expected decreases in loans to mortgage companies in the second half of this year," stated Sidhu.

Total deposits increased $2.9 billion, or 26.5%, to $13.9 billion at June 30, 2021 compared to the year-ago period. Total demand deposits increased $2.4 billion, or 51.9%, to $6.9 billion, money market deposits increased $1.5 billion, or 44.2%, to $4.9 billion, and savings deposits increased $287.0 million, or 25.1%, to $1.4 billion. These increases were offset, in part, by a decrease in time deposits of $1.2 billion, or 66.5%, to $627.2 million. The total cost of deposits declined by 44 basis points to 0.47% in Q2 2021 from 0.91% in the year-ago quarter. At July 15, 2021, the spot cost of deposits was 0.44%. "We expect our deposit costs to be at or below 40 basis points by September 30, 2021," stated Sidhu.

Very Strong Growth in Tangible Common Equity and Tangible Book Value Per Share

Customers experienced significant improvements in regulatory capital ratios in Q2 2021 as compared to a year ago. Customers Bancorp's tangible common equity (a non-GAAP measure) increased by $253.6 million to $1.0 billion at June 30, 2021 from $775.8 million at June 30, 2020, and the tangible book value per common share (a non-GAAP measure) increased to $31.82 at June 30, 2021 from $24.62 at June 30, 2020, an increase of 29.2%. Customers remains well capitalized by all regulatory measures, leaving us well positioned to redeem a portion of the preferred stock prior to year end subject to routine and customary regulatory approval. At the Customers Bancorp level, the total risk based capital ratio (estimate) and tangible common equity to tangible assets ratio ("TCE ratio"), excluding PPP loans (a non-GAAP measure), were 13.2% and 7.7%, respectively, at June 30, 2021. At March 31, 2021, Customers Bancorp's total risk based capital ratio and TCE ratio, excluding PPP loans (a non-GAAP measure), were 12.4% and 7.1%, respectively." As a consequence of PPP related income and a potential cyclical decline in mortgage warehouse loans, we expect our capital levels to increase sharply in the second half of 2021 with the TCE ratio excluding PPP loans to be close to 9% by December 31, 2021," commented Customers Bancorp CFO, Carla Leibold.

Loan Portfolio Management During the COVID-19 Crisis

Over the last decade, Customers has developed a suite of commercial and retail loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s C&I, mortgage warehouse, specialty finance lines of business, and multi-family loans for example, are characterized by conservative underwriting standards and low loss rates. Because of this emphasis, the Bank’s credit quality to-date has been healthy despite a highly adverse economic environment. Maintaining strong asset quality also requires a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, Customers employs a bottom-up data driven approach to analyze its commercial portfolio.

Strong commercial loan portfolio with very low concentration in COVID-19 impacted industries and CRE

  • Total commercial deferments declined to $89.8 million, or 0.8% of total loans and leases, excluding PPP loans (a non-GAAP measure), at June 30, 2021, down from $176.1 million, or 1.6% of total loans and leases, excluding PPP loans, at March 31, 2021. Customers' commercial deferments peaked at about $1.2 billion in July 2020.
  • Exposure to industry segments significantly impacted by COVID-19 is not substantial. At June 30, 2021, Customers had $82.8 million in energy and utilities exposure (with no deferments); $62.0 million in colleges and universities (with no deferments); $62.2 million in CRE retail sales exposure (mostly auto sales; with no deferments); $29.9 million in franchise restaurants and dining (with no deferments); and $26.1 million in entertainment only businesses (with no deferments).
  • At June 30, 2021, the hospitality portfolio was $399.3 million, or 3.8% of total loans and leases, excluding PPP loans, with $59.2 million in deferment. Approximately 79.5% ($317.4 million) represents “flagged” facilities, with the majority of the non-flagged being high-end destination hotels in Cape May (NJ), Avalon (NJ), and Long Island (NY). We believe the majority of the hotels have sufficient cash resources to get through the COVID-19 crisis.
  • At June 30, 2021, the healthcare portfolio was approximately $460 million, comprised predominantly of skilled nursing, which has been deemed an essential business and through a number of federal and state actions has been provided immunity from liability for COVID-19 related deaths. No deferments have been requested and there are no delinquencies.
  • The multi-family portfolio is highly seasoned, with a weighted average loan to value of 61.7% as of quarter-end. 55.77% of the portfolio was in New York City, of which 70.53% was in rent controlled/regulated properties. As of June 30, 2021, no deferments have been requested.
  • At June 30, 2021, investment CRE had a weighted average loan to value of 63.2%, with approximately 52% of the portfolio housed in New York, Philadelphia and surrounding markets. As of June 30, 2021, $4.4 million of the portfolio was on deferment, with minimal exposure to the office market.

Consumer installment, mortgage and home equity loan portfolios continue to perform well

  • Total consumer-related deferments declined to $8.4 million, or 0.1% of total loans and leases, excluding PPP loans (a non-GAAP measure), at June 30, 2021, down from $13.0 million at March 31, 2021.
  • The $1.6 billion consumer installment loan portfolio outperformed industry peers with deferments dropping to 0.31% and 30+ day delinquency at only 0.66%. Strong credit quality (avg. FICO at origination: 740), low concentration in at-risk job segments, and outstanding performance of CB Direct originations have resulted in solid results through the end of Q2 2021.
  • The consumer installment portfolio has been managed to moderate growth and strengthening credit quality, by replacing run-off with CB Direct originations with higher FICO scores.

Key Profitability Trends

Net Interest Income

Net interest income totaled $138.8 million in Q2 2021, an increase of $6.0 million from Q1 2021, primarily due to a $755.1 million net increase in average interest-earning assets and a decrease in the cost of interest-bearing liabilities. Interest-earning asset growth was driven by increases in consumer loans and the latest round of PPP loans, offset in part by PPP loan forgiveness from the first two rounds, which accelerated the recognition of net deferred loan origination fees, and decreases in commercial loans to mortgage companies and multi-family loans. Compared to Q1 2021, total loan yields decreased 28 basis points to 3.74%. The decrease is attributable to lower yields on commercial and industrial loans and leases, increased originations of PPP loans in the latest round and lower forgiveness of PPP loans from the first two rounds, offset in part by higher yields on consumer loans. Total borrowing costs decreased by 23 basis points to 0.77% primarily due to the balance sheet restructuring completed in Q1 2021 and lower utilization of the FRB PPP Liquidity Facility, costing 0.35%, due to the PPP loan forgiveness from the first two rounds and excess cash available to fund additional PPP round 3 originations. FHLB advances and federal funds purchased were also paid off during Q2 2021 due to sufficient liquidity. "It is difficult to predict net interest income in future periods because the timing of PPP forgiveness results in the accelerated recognition of net deferred fees and also affects the amount of net interest income expected to be earned while the PPP loans are held on our balance sheet," commented Mr. Sidhu.

Provision for Credit Losses

The provision for credit losses on loans and leases in Q2 2021 was $3.3 million, compared to a $2.9 million benefit (release) in Q1 2021. The provision in Q2 2021 primarily resulted from an increase in provision for consumer installment loans from continued growth, offset in part by the benefit (release) to the provision for commercial loans resulting from continuing improvement in forecasts of macroeconomic conditions since Q4 2020. The allowance for credit losses on loans and leases represented 1.6% of total loans and leases receivable, excluding PPP loans (a non-GAAP measure) at June 30, 2021, compared to 1.7% at March 31, 2021, and 2.2% at June 30, 2020. Customers' non-performing loans at June 30, 2021 were only 0.27% of total loans and leases, a significant improvement from 0.56% at June 30, 2020.

Non-Interest Income

Non-interest income totaled $16.8 million for Q2 2021, a decrease of $1.6 million compared to Q1 2021. The decrease in non-interest income primarily resulted from decreases of $21.8 million in gain on sale of investment securities and $3.0 million in unrealized gain on derivatives, offset in part by a $24.5 million decrease in loss on cash flow hedge derivative terminations recorded in Q1 2021. In Q2 2021, the change in the fair value of foreign equity securities and the sale of the foreign subsidiaries that held those securities resulted in a net loss of $1.1 million.

Non-Interest Expense

Non-interest expense totaled $70.8 million for Q2 2021, an increase of $8.9 million compared to Q1 2021. The increase was primarily due to approximately $2.5 million of compensation expense associated with an executive's retirement and other one-time benefits, $2.4 million of increased PPP-related costs primarily due to outside professional services used to support the PPP forgiveness process and our participation in the latest round of PPP, increased consumer installment servicing expense of $1.0 million, increased stock-based compensation of $0.9 million related to new awards, and a benefit (release) to credit losses for unfunded commitments of $1.3 million recorded in Q1 2021. "Looking ahead, we expect non-interest expenses to be lower in Q3 2021," stated Ms. Leibold.

Taxes

Income tax expense from continuing operations increased by $2.5 million to $20.1 million in Q2 2021 from $17.6 million in Q1 2021 primarily due to an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes, along with an increase in projected pre-tax income from continuing operations. Customers expects the full-year 2021 effective tax rate from continuing operations to be approximately 23% to 25%, which is comparable to previous years.

Net Loss From Discontinued Operations

The divestiture of BankMobile Technologies, Inc. was completed on January 4, 2021, and its historical financial results are presented as discontinued operations.

Outlook

“Looking ahead, we are very optimistic about the prospects of our company. The best in class tech agility of Customers Bancorp has allowed us to be a major participant in the third round of PPP and to incubate new lines of businesses that leverage our fintech relationships. We expect to launch a private real-time, blockchain-based B2B payments platform with integration of digital and legacy payment rails. The platform will deliver enhanced payments functionality for our business clients and is expected to generate additional deposit growth in targeted niches, such as real estate, monetary and currency exchanges and institutional investments. We also expect our tangible common equity and regulatory capital levels to achieve targeted levels within the next 12 months and our credit quality to remain in line with or better than peers. The financial benefits of PPP aside, we project our recurring earnings power to expand to at least the $4.00 level during 2021 and 2022 and expect to achieve $6.00 in core EPS in 2025 rather than 2026,” concluded Mr. Sidhu.

Our updated financial guidance is as follows:

  • Loan growth, excluding PPP and mortgage warehouse balances, is expected to average in the mid-to-high single digits over the next several quarters.
  • The balance of commercial loans to mortgage companies is expected to decline to $1.6 billion - $2.4 billion at December 31, 2021.
  • The Total Capital Ratio is expected to be about 14.0% by year-end 2021. The TCE ratio excluding PPP loans is expected to be close to 9.0% by year-end 2021.
  • We project the NIM, excluding PPP loans, to remain within the 3.25% - 3.50% range for the second half of 2021.
  • We project an effective tax rate from continuing operations for 2021 of 23.0% - 25.0%.
  • We now expect to earn at least $6.00 in core EPS in 2021 and 2022. Our core EPS guidance includes the net interest income expected to be earned on the PPP loans.
  • Excluding PPP loans, we expect to earn at least $4 in core EPS in 2021 and 2022 and expect to achieve $6 in core EPS by 2025 rather than 2026.

2021 NIM expansion is expected to be achieved by:

  • Remixing the loan portfolio away from commercial loans to mortgage companies toward other C&I categories and consumer installment loans.
  • Restructuring of the asset and liability side of the balance sheet that was completed in Q1 2021.
  • Bringing our total cost of deposits down to around 35 basis points by year-end 2021.

Webcast

Date:

Thursday, July 29, 2021

Time:

9:00 AM EDT

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

You may submit questions in advance of the live webcast by emailing Customers' Communications & Marketing Director, David Patti at dpatti@customersbank.com; questions may also be asked during the webcast through the webcast application.

The webcast will be archived for viewing on the Customers Bancorp Investor Relations page and available beginning approximately two hours after the conclusion of the live event.

Institutional Background

Customers Bancorp, Inc. (NYSE:CUBI) is a bank holding company located in West Reading, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank, a full-service bank with $19.6 billion in assets at June 30, 2021. A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender that provides a range of banking and lending services to small and medium-sized businesses, professionals, individuals and families. Services and products are available wherever permitted by law through mobile-first apps, online portals, and a network of offices and branches.

“Safe Harbor” Statement

In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: the adverse impact on the U.S. economy, including the markets in which we operate, of the coronavirus outbreak, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2020, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.

Q2 2021 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended June 30, 2021 and the preceding four quarters:

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

EARNINGS SUMMARY - UNAUDITED

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

Q2

Q1

Q4

Q3

Q2

Six Months Ended
June 30,

2021

2021

2020

2020

2020

2021

2020

GAAP Profitability Metrics:

Net income available to common shareholders

(from continuing and discontinued operations)

$

58,042

$

33,204

$

52,831

$

47,085

$

19,137

$

91,246

$

18,621

Per share amounts:

Earnings per share - basic

$

1.80

$

1.04

$

1.67

$

1.49

$

0.61

$

2.84

$

0.59

Earnings per share - diluted

$

1.72

$

1.01

$

1.65

$

1.48

$

0.61

$

2.74

$

0.59

Book value per common share (1)

$

31.94

$

30.13

$

28.37

$

26.43

$

25.08

$

31.94

$

25.08

CUBI stock price (1)

$

38.99

$

31.82

$

18.18

$

11.20

$

12.02

$

38.99

$

12.02

CUBI stock price as % of book value (1)

122

%

106

%

64

%

42

%

48

%

122

%

48

%

Average shares outstanding - basic

32,279,625

31,883,946

31,638,447

31,517,504

31,477,591

32,082,878

31,434,371

Average shares outstanding - diluted

33,741,468

32,841,711

31,959,100

31,736,311

31,625,771

33,294,075

31,625,669

Shares outstanding (1)

32,353,256

32,238,762

31,705,088

31,555,124

31,510,287

32,353,256

31,510,287

Return on average assets ("ROAA")

1.27

%

0.80

%

1.23

%

1.12

%

0.62

%

1.04

%

0.40

%

Return on average common equity ("ROCE")

23.22

%

14.66

%

24.26

%

23.05

%

9.97

%

19.15

%

4.74

%

Efficiency ratio

46.59

%

48.89

%

43.56

%

46.76

%

50.73

%

47.64

%

52.52

%

Non-GAAP Profitability Metrics (2):

Core earnings

$

59,303

$

70,308

$

54,588

$

38,439

$

21,413

$

129,611

$

26,499

Adjusted pre-tax pre-provision net income

$

86,467

$

86,769

$

77,896

$

64,146

$

53,931

$

173,236

$

98,154

Per share amounts:

Core earnings per share - diluted

$

1.76

$

2.14

$

1.71

$

1.21

$

0.68

$

3.89

$

0.84

Tangible book value per common share (1)

$

31.82

$

30.01

$

27.92

$

25.97

$

24.62

$

31.82

$

24.62

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

123

%

106

%

65

%

43

%

49

%

123

%

49

%

Core ROAA

1.30

%

1.61

%

1.26

%

0.93

%

0.68

%

1.45

%

0.52

%

Core ROCE

23.72

%

31.03

%

25.06

%

18.82

%

11.16

%

27.20

%

6.75

%

Adjusted ROAA - pre-tax and pre-provision

1.80

%

1.90

%

1.70

%

1.43

%

1.48

%

1.85

%

1.50

%

Adjusted ROCE - pre-tax and pre-provision

33.27

%

36.80

%

34.20

%

29.73

%

26.24

%

34.95

%

23.16

%

Net interest margin, tax equivalent

2.98

%

3.00

%

2.78

%

2.50

%

2.65

%

2.99

%

2.80

%

Net interest margin, tax equivalent, excluding PPP loans

3.30

%

2.99

%

3.04

%

2.86

%

2.97

%

3.14

%

2.98

%

Core efficiency ratio

44.33

%

41.13

%

42.89

%

46.10

%

47.84

%

42.76

%

50.25

%

Asset Quality:

Net charge-offs

$

6,591

$

12,521

$

8,472

$

17,299

$

10,325

$

19,112

$

29,035

Annualized net charge-offs to average total loans and leases

0.16

%

0.33

%

0.21

%

0.45

%

0.32

%

0.24

%

0.52

%

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

0.27

%

0.30

%

0.45

%

0.38

%

0.56

%

0.27

%

0.56

%

Reserves to NPLs (1)

269.96

%

264.21

%

204.48

%

244.70

%

185.36

%

269.96

%

185.36

%

Non-performing assets ("NPAs") to total assets

0.24

%

0.26

%

0.39

%

0.34

%

0.48

%

0.24

%

0.48

%

Customers Bank Capital Ratios (3):

Common equity Tier 1 capital to risk-weighted assets

12.35

%

11.75

%

10.62

%

10.12

%

10.64

%

12.35

%

10.64

%

Tier 1 capital to risk-weighted assets

12.35

%

11.75

%

10.62

%

10.12

%

10.64

%

12.35

%

10.64

%

Total capital to risk-weighted assets

13.72

%

13.11

%

12.06

%

11.62

%

12.30

%

13.72

%

12.30

%

Tier 1 capital to average assets (leverage ratio)

9.07

%

9.35

%

9.21

%

9.29

%

9.59

%

9.07

%

9.59

%

(1)

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

(2)

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

(3)

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

 
 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(Dollars in thousands, except per share data)

Six Months Ended

Q2

Q1

Q4

Q3

Q2

June 30,

2021

2021

2020

2020

2020

2021

2020

Interest income:

Loans and leases

$

153,608

$

152,117

$

145,414

$

132,107

$

118,447

$

305,725

$

234,527

Investment securities

8,327

7,979

6,777

6,297

6,155

16,306

11,132

Other

946

1,019

902

1,246

616

1,965

4,902

Total interest income

162,881

161,115

153,093

139,650

125,218

323,996

250,561

Interest expense:

Deposits

15,653

15,658

16,107

18,347

23,238

31,311

57,591

FHLB advances

963

5,192

5,749

5,762

4,736

6,155

10,127

Subordinated debt

2,689

2,689

2,688

2,689

2,689

5,378

5,378

FRB PPP liquidity facility, federal funds purchased and other borrowings

4,819

4,845

5,603

5,413

2,573

9,664

4,163

Total interest expense

24,124

28,384

30,147

32,211

33,236

52,508

77,259

Net interest income

138,757

132,731

122,946

107,439

91,982

271,488

173,302

Provision (benefit) for credit losses on loans and leases

3,291

(2,919)

(2,913)

12,955

20,946

372

52,732

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

135,466

135,650

125,859

94,484

71,036

271,116

120,570

Non-interest income:

Interchange and card revenue

84

85

91

92

193

169

463

Deposit fees

891

863

823

650

502

1,754

1,054

Commercial lease income

5,311

5,205

4,853

4,510

4,508

10,516

8,776

Bank-owned life insurance

2,765

1,679

1,744

1,746

1,757

4,444

3,519

Mortgage warehouse transactional fees

3,265

4,247

3,681

3,320

2,582

7,512

4,533

Gain (loss) on sale of SBA and other loans

1,900

1,575

1,689

286

23

3,475

34

Mortgage banking income (loss)

386

463

346

1,013

38

849

334

Gain (loss) on sale of investment securities

1,812

23,566

44

11,707

4,353

25,378

8,328

Unrealized gain (loss) on investment securities

1,746

974

1,387

238

1,200

2,720

(178)

Loss on sale of foreign subsidiaries

(2,840)

(2,840)

Unrealized gain (loss) on derivatives

(439)

2,537

804

549

(4,158)

2,098

(5,304)

Loss on cash flow hedge derivative terminations

(24,467)

(24,467)

Other

1,941

1,741

621

753

713

3,682

1,312

Total non-interest income

16,822

18,468

16,083

24,864

11,711

35,290

22,871

Non-interest expense:

Salaries and employee benefits

28,023

23,971

25,600

24,752

23,192

51,994

43,716

Technology, communication and bank operations

19,618

19,988

16,021

13,005

11,103

39,606

21,642

Professional services

8,234

6,289

5,449

4,421

2,974

14,523

6,519

Occupancy

2,482

2,621

2,742

3,368

2,639

5,103

5,252

Commercial lease depreciation

4,415

4,291

3,982

3,663

3,643

8,706

7,070

FDIC assessments, non-income taxes and regulatory fees

2,602

2,719

2,642

3,784

2,368

5,321

5,235

Merger and acquisition related expenses

418

709

658

418

Loan workout

102

(261)

123

846

1,808

(159)

2,175

Advertising and promotion

313

561

372

874

1,795

Other

5,034

1,330

2,665

1,788

1,692

6,364

5,354

Total non-interest expense

70,823

61,927

59,933

56,285

49,791

132,750

98,758

Income before income tax expense

81,465

92,191

82,009

63,063

32,956

173,656

44,683

Income tax expense

20,124

17,560

23,447

12,016

7,980

37,684

11,254

Net income from continuing operations

61,341

74,631

58,562

51,047

24,976

135,972

33,429

Loss from discontinued operations before income taxes

(20,354)

(3,539)

(347)

(3,190)

(20,354)

(9,911)

Income tax expense (benefit) from discontinued operations

17,682

(1,222)

185

(932)

17,682

(2,299)

Net loss from discontinued operations

(38,036)

(2,317)

(532)

(2,258)

(38,036)

(7,612)

Net income

61,341

36,595

56,245

50,515

22,718

97,936

25,817

Preferred stock dividends

3,299

3,391

3,414

3,430

3,581

6,690

7,196

Net income available to common shareholders

$

58,042

$

33,204

$

52,831

$

47,085

$

19,137

$

91,246

$

18,621

Basic earnings per common share from continuing operations

$

1.80

$

2.23

$

1.74

$

1.51

$

0.68

$

4.03

$

0.83

Basic earnings per common share

$

1.80

$

1.04

$

1.67

$

1.49

$

0.61

$

2.84

$

0.59

Diluted earnings per common share from continuing operations

$

1.72

$

2.17

$

1.73

$

1.50

$

0.68

$

3.88

$

0.83

Diluted earnings per common share

$

1.72

$

1.01

$

1.65

$

1.48

$

0.61

$

2.74

$

0.59

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - UNAUDITED

(Dollars in thousands)

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

ASSETS

Cash and due from banks

$

36,837

$

3,123

$

78,090

$

5,822

$

44,577

Interest earning deposits

393,663

512,241

615,264

325,594

1,022,753

Cash and cash equivalents

430,500

515,364

693,354

331,416

1,067,330

Investment securities, at fair value

1,526,792

1,441,904

1,210,285

1,133,831

681,382

Loans held for sale

34,540

46,106

79,086

26,689

464,164

Loans receivable, mortgage warehouse, at fair value

2,855,284

3,407,622

3,616,432

3,913,593

2,793,164

Loans receivable, PPP

6,305,056

5,178,089

4,561,365

4,964,105

4,760,427

Loans and leases receivable

7,772,142

7,536,489

7,575,368

7,700,892

7,272,447

Allowance for credit losses on loans and leases

(125,436)

(128,736)

(144,176)

(155,561)

(159,905)

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

16,807,046

15,993,464

15,608,989

16,423,029

14,666,133

FHLB, Federal Reserve Bank, and other restricted stock

39,895

69,420

71,368

70,387

91,023

Accrued interest receivable

90,009

83,186

80,412

65,668

49,911

Bank premises and equipment, net

10,391

10,943

11,225

11,308

7,879

Bank-owned life insurance

329,421

281,923

280,067

277,826

275,842

Goodwill and other intangibles

3,853

3,911

3,969

4,028

4,086

Other assets

362,661

371,439

338,438

354,010

512,209

Assets of discontinued operations

62,055

80,535

83,159

Total assets

$

19,635,108

$

18,817,660

$

18,439,248

$

18,778,727

$

17,903,118

LIABILITIES AND SHAREHOLDERS' EQUITY

Demand, non-interest bearing deposits

$

2,699,869

$

2,687,628

$

2,356,998

$

2,327,017

$

1,879,789

Interest bearing deposits

11,174,070

9,784,812

8,952,931

8,512,060

9,086,086

Total deposits

13,873,939

12,472,440

11,309,929

10,839,077

10,965,875

Federal funds purchased

365,000

250,000

680,000

FHLB advances

850,000

850,000

850,000

850,000

Other borrowings

124,240

124,138

124,037

123,935

123,833

Subordinated debt

181,534

181,464

181,394

181,324

181,255

FRB PPP liquidity facility

3,865,865

3,284,156

4,415,016

4,811,009

4,419,967

Accrued interest payable and other liabilities

338,801

351,741

152,082

185,927

296,192

Liabilities of discontinued operations

39,704

55,964

58,149

Total liabilities

18,384,379

17,628,939

17,322,162

17,727,236

16,895,271

Preferred stock

217,471

217,471

217,471

217,471

217,471

Common stock

33,634

33,519

32,986

32,836

32,791

Additional paid in capital

519,294

515,318

455,592

452,965

450,665

Retained earnings

496,844

438,802

438,581

385,750

338,665

Accumulated other comprehensive income (loss)

5,266

5,391

(5,764)

(15,751)

(9,965)

Treasury stock, at cost

(21,780)

(21,780)

(21,780)

(21,780)

(21,780)

Total shareholders' equity

1,250,729

1,188,721

1,117,086

1,051,491

1,007,847

Total liabilities & shareholders' equity

$

19,635,108

$

18,817,660

$

18,439,248

$

18,778,727

$

17,903,118

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

Three Months Ended

June 30, 2021

March 31, 2021

June 30, 2020

Average
Balance

Average
Yield or
Cost (%)

Average
Balance

Average
Yield or
Cost (%)

Average
Balance

Average
Yield or
Cost (%)

Assets

Interest earning deposits

$

646,342

0.12%

$

1,177,315

0.10%

$

384,622

0.12%

Investment securities (1)

1,512,644

2.20%

1,357,558

2.35%

705,389

3.49%

Loans and leases:

Commercial loans to mortgage companies

2,737,629

3.09%

3,122,098

3.09%

2,456,067

2.91%

Multi-family loans

1,551,370

3.88%

1,689,174

3.80%

2,009,847

3.87%

Commercial and industrial loans and leases (2)

2,878,045

3.59%

2,848,328

3.97%

2,460,060

4.05%

Loans receivable, PPP

6,133,184

2.69%

4,623,213

3.41%

2,754,920

1.71%

Non-owner occupied commercial real estate loans

1,368,695

3.86%

1,348,938

3.85%

1,392,131

3.81%

Residential mortgages

346,284

3.62%

373,497

3.78%

429,609

3.53%

Installment loans

1,467,595

9.37%

1,323,863

9.04%

1,288,999

8.72%

Total loans and leases (3)

16,482,802

3.74%

15,329,111

4.02%

12,791,633

3.72%

Other interest-earning assets

57,208

5.32%

79,960

3.64%

98,377

2.06%

Total interest-earning assets

18,698,996

3.49%

17,943,944

3.64%

13,980,021

3.60%

Non-interest-earning assets

607,952

581,777

616,683

Assets of discontinued operations

78,880

Total assets

$

19,306,948

$

18,525,721

$

14,675,584

Liabilities

Interest checking accounts

$

3,503,242

0.76%

$

2,691,723

0.84%

$

2,482,222

0.75%

Money market deposit accounts

4,859,614

0.47%

4,435,930

0.55%

3,034,457

0.85%

Other savings accounts

1,456,777

0.57%

1,414,350

0.69%

1,177,554

1.94%

Certificates of deposit

658,698

0.78%

666,239

0.97%

1,734,062

1.51%

Total interest-bearing deposits (4)

10,478,331

0.60%

9,208,242

0.69%

8,428,295

1.11%

FRB PPP liquidity facility

3,858,733

0.35%

3,941,718

0.35%

942,258

0.35%

Borrowings

531,757

3.85%

1,171,826

3.23%

2,282,761

1.62%

Total interest-bearing liabilities

14,868,821

0.65%

14,321,786

0.80%

11,653,314

1.15%

Non-interest-bearing deposits (4)

2,889,781

2,819,871

1,890,955

Total deposits and borrowings

17,758,602

0.54%

17,141,657

0.67%

13,544,269

0.99%

Other non-interest-bearing liabilities

328,251

247,798

88,913

Liabilities of discontinued operations

53,268

Total liabilities

18,086,853

17,389,455

13,686,450

Shareholders' equity

1,220,095

1,136,266

989,134

Total liabilities and shareholders' equity

$

19,306,948

$

18,525,721

$

14,675,584

Interest spread

2.95%

2.97%

2.61%

Net interest margin

2.98%

3.00%

2.65%

Net interest margin tax equivalent (5)

2.98%

3.00%

2.65%

Net interest margin tax equivalent excl. PPP (6)

3.30%

2.99%

2.97%

(1)

For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(2)

Includes owner occupied commercial real estate loans.

(3)

Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.

(4)

Total costs of deposits (including interest bearing and non-interest bearing) were 0.47%, 0.53% and 0.91% for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

(5)

Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

(6)

Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

Six Months Ended

June 30, 2021

June 30, 2020

Average
Balance

Average Yield
or Cost (%)

Average
Balance

Average Yield
or Cost (%)

Assets

Interest earning deposits

$

910,362

0.11%

$

578,435

1.03%

Investment securities (1)

1,435,529

2.27%

635,838

3.50%

Loans and leases:

Commercial loans to mortgage companies

2,928,802

3.09%

2,148,863

3.30%

Multi-family loans

1,619,891

3.84%

2,111,853

3.97%

Commercial and industrial loans and leases (2)

2,863,268

3.78%

2,460,435

4.37%

Loans receivable, PPP

5,382,370

3.00%

1,377,460

1.71%

Non-owner occupied commercial real estate loans

1,358,871

3.86%

1,363,795

4.07%

Residential mortgages

359,815

3.71%

437,782

3.75%

Installment loans

1,396,126

9.22%

1,274,024

8.93%

Total loans and leases (3)

15,909,143

3.88%

11,174,212

4.22%

Other interest-earning assets

68,521

4.34%

89,890

4.31%

Total interest-earning assets

18,323,555

3.56%

12,478,375

4.04%

Non-interest-earning assets

594,936

565,304

Assets of discontinued operations

80,816

Total assets

$

18,918,491

$

13,124,495

Liabilities

Interest checking accounts

$

3,099,725

0.80%

$

1,888,160

0.98%

Money market deposit accounts

4,648,942

0.51%

3,335,006

1.37%

Other savings accounts

1,435,681

0.63%

1,159,479

1.99%

Certificates of deposit

662,447

0.87%

1,629,416

1.76%

Total interest-bearing deposits (4)

9,846,795

0.64%

8,012,061

1.45%

FRB PPP liquidity facility

3,899,996

0.35%

471,129

0.35%

Borrowings

850,024

3.42%

1,756,080

2.16%

Total interest-bearing liabilities

14,596,815

0.72%

10,239,270

1.52%

Non-interest-bearing deposits (4)

2,855,019

1,732,163

Total deposits and borrowings

17,451,834

0.61%

11,971,433

1.30%

Other non-interest-bearing liabilities

288,246

92,218

Liabilities of discontinued operations

53,600

Total liabilities

17,740,080

12,117,251

Shareholders' equity

1,178,411

1,007,244

Total liabilities and shareholders' equity

$

18,918,491

$

13,124,495

Interest spread

2.96%

2.74%

Net interest margin

2.99%

2.79%

Net interest margin tax equivalent (5)

2.99%

2.80%

Net interest margin tax equivalent excl. PPP (6)

3.14%

2.98%

(1)

For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(2)

Includes owner occupied commercial real estate loans.

(3)

Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.

(4)

Total costs of deposits (including interest bearing and non-interest bearing) were 0.50% and 1.19% for the six months ended June 30, 2021 and 2020, respectively.

(5)

Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the six months ended June 30, 2021 and 2020, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

(6)

Non-GAAP tax-equivalent basis as described in note (5), for the six months ended June 30, 2021 and 2020, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED

(Dollars in thousands)

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

Commercial:

Multi-family

$

1,497,485

$

1,659,529

$

1,761,301

$

1,950,300

$

2,023,571

Loans to mortgage companies

2,922,217

3,463,490

3,657,350

3,947,828

2,832,112

Commercial & industrial

2,293,723

2,164,784

2,304,206

2,186,480

2,060,494

Commercial real estate owner occupied

653,649

590,093

572,338

557,595

544,772

Loans receivable, PPP

6,305,056

5,178,089

4,561,365

4,964,105

4,760,427

Commercial real estate non-owner occupied

1,206,646

1,194,832

1,213,815

1,233,882

1,262,373

Construction

179,198

156,837

140,905

122,963

128,834

Total commercial loans and leases

15,057,974

14,407,654

14,211,280

14,963,153

13,612,583

Consumer:

Residential

273,493

295,654

323,322

343,775

352,941

Manufactured housing

57,904

59,977

62,243

64,638

66,865

Installment

1,577,651

1,405,021

1,235,406

1,233,713

1,257,813

Total consumer loans

1,909,048

1,760,652

1,620,971

1,642,126

1,677,619

Total loans and leases

$

16,967,022

$

16,168,306

$

15,832,251

$

16,605,279

$

15,290,202

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END DEPOSIT COMPOSITION - UNAUDITED

(Dollars in thousands)

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

Demand, non-interest bearing

$

2,699,869

$

2,687,628

$

2,356,998

$

2,327,017

$

1,879,789

Demand, interest bearing

4,206,355

3,228,941

2,384,691

2,308,627

2,666,209

Total demand deposits

6,906,224

5,916,569

4,741,689

4,635,644

4,545,998

Savings

1,431,756

1,483,482

1,314,817

1,173,641

1,144,788

Money market

4,908,809

4,406,508

4,601,492

4,057,366

3,404,709

Time deposits

627,150

665,881

651,931

972,426

1,870,380

Total deposits

$

13,873,939

$

12,472,440

$

11,309,929

$

10,839,077

$

10,965,875

 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY - UNAUDITED

(Dollars in thousands)

As of June 30, 2021

As of March 31, 2021

As of June 30, 2020

Total loans

Non
accrual
/NPLs

Allowance
for credit
losses

Total NPLs
to total
loans

Total
reserves
to total NPLs

Total loans

Non
accrual
/NPLs

Allowance
for credit
losses

Total NPLs
to total
loans

Total
reserves to
total NPLs

Total loans

Non
accrual
/NPLs

Allowance
for credit
losses

Total NPLs
to total
loans

Total
reserves to
total NPLs

Loan type

Multi-family

$

1,497,485

$

21,595

$

5,028

1.44

%

23.28

%

$

1,640,278

$

20,530

$

8,026

1.25

%

39.09

%

$

1,581,839

$

7,013

$

14,697

0.44

%

209.57

%

Commercial & industrial(1)

2,360,656

6,717

8,127

0.28

%

120.99

%

2,220,652

7,544

7,503

0.34

%

99.46

%

2,099,442

9,974

12,302

0.48

%

123.34

%

Commercial real estate owner occupied

653,649

2,688

4,464

0.41

%

166.07

%

590,093

3,242

5,935

0.55

%

183.07

%

544,772

4,022

11,405

0.74

%

283.57

%

Commercial real estate non-owner occupied

1,206,646

7,374

%

%

1,194,832

2,356

11,621

0.20

%

493.25

%

1,244,773

30,257

26,493

2.43

%

87.56

%

Construction

179,198

2,643

%

%

156,837

4,103

%

%

128,834

5,297

%

%

Total commercial loans and leases receivable

5,897,634

31,000

27,636

0.53

%

89.15

%

5,802,692

33,672

37,188

0.58

%

110.44

%

5,599,660

51,266

70,194

0.92

%

136.92

%

Residential

266,911

8,991

2,299

3.37

%

25.57

%

293,805

9,353

3,209

3.18

%

34.31

%

348,109

7,857

4,550

2.26

%

57.91

%

Manufactured housing

57,904

3,239

4,372

5.59

%

134.98

%

59,977

2,871

4,799

4.79

%

167.15

%

66,865

3,331

6,014

4.98

%

180.55

%

Installment

1,549,693

2,728

91,129

0.18

%

3340.51

%

1,380,015

2,185

83,540

0.16

%

3823.34

%

1,257,813

4,887

79,147

0.39

%

1619.54

%

Total consumer loans receivable

1,874,508

14,958

97,800

0.80

%

653.83

%

1,733,797

14,409

91,548

0.83

%

635.35

%

1,672,787

16,075

89,711

0.96

%

558.08

%

Loans and leases receivable(1)

7,772,142

45,958

125,436

0.59

%

272.94

%

7,536,489

48,081

128,736

0.64

%

267.75

%

7,272,447

67,341

159,905

0.93

%

237.46

%

Loans receivable, PPP

6,305,056

%

%

5,178,089

%

%

4,760,427

%

%

Loans receivable, mortgage warehouse, at fair value

2,855,284

%

%

3,407,622

%

%

2,793,164

%

%

Total loans held for sale

34,540

507

1.47

%

%

46,106

643

1.39

%

%

464,164

18,925

4.08

%

%

Total portfolio

$

16,967,022

$

46,465

$

125,436

0.27

%

269.96

%

$

16,168,306

$

48,724

$

128,736

0.30

%

264.21

%

$

15,290,202

$

86,266

$

159,905

0.56

%

185.36

%

(1)

Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedules that follow this table.

 
 

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED

(Dollars in thousands)

Q2

Q1

Q4

Q3

Q2

Six Months Ended
June 30,

2021

2021

2020

2020

2020

2021

2020

Loan type

Multi-family

$

$

1,132

$

$

$

$

1,132

$

Commercial & industrial

(283)

375

155

(55)

(4)

92

39

Commercial real estate owner occupied

(1)

134

12

44

(2)

133

(5)

Commercial real estate non-owner occupied

(59)

(10)

(35)

8,923

2,801

(69)

15,598

Construction

(114)

(5)

(6)

(6)

(113)

(119)

(116)

Residential

(12)

40

46

(17)

(26)

28

(55)

Installment

7,060

10,855

8,300

8,410

7,669

17,915

13,575

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

$

6,591

$

12,521

$

8,472

$

17,299

$

10,325

$

19,112

$

29,036

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED

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

Core Earnings - Customers Bancorp

Six Months Ended
June 30,

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

2021

2020

(dollars in thousands except per share data)

USD

Per share

USD

Per share

USD

Per share

USD

Per share

USD

Per share

USD

Per share

USD

Per share

GAAP net income to common shareholders

$

58,042

$

1.72

$

33,204

$

1.01

$

52,831

$

1.65

$

47,085

$

1.48

$

19,137

$

0.61

$

91,246

$

2.74

$

18,621

$

0.59

Reconciling items (after tax):

Net loss from discontinued operations

38,036

1.16

2,317

0.07

532

0.02

2,258

0.07

38,036

1.14

7,612

0.24

Severance expense

1,517

0.04

1,517

0.05

Merger and acquisition related expenses

320

0.01

508

0.02

530

0.02

320

0.01

Legal reserves

258

0.01

(Gains) losses on investment securities

(2,694)

(0.08)

(18,773)

(0.57)

(1,419)

(0.04)

(9,662)

(0.30)

(4,543)

(0.14)

(21,467)

(0.64)

(6,331)

(0.20)

Loss on sale of foreign subsidiaries

2,150

0.06

2,150

0.06

Loss on cash flow hedge derivative terminations

18,716

0.57

18,716

0.56

Derivative credit valuation adjustment

288

0.01

(1,195)

(0.04)

(448)

(0.01)

(304)

(0.01)

4,527

0.14

(907)

(0.03)

6,563

0.21

Risk participation agreement mark-to-market adjustment

(1,080)

(0.03)

(1,080)

(0.03)

Unrealized losses on loans held for sale

799

0.03

1,114

0.04

1,114

0.04

Core earnings

$

59,303

$

1.76

$

70,308

$

2.14

$

54,588

$

1.71

$

38,439

$

1.21

$

21,413

$

0.68

$

129,611

$

3.89

$

26,499

$

0.84

 
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 - Customers Bancorp

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

2021

2020

GAAP net income

$

61,341

$

36,595

$

56,245

$

50,515

$

22,718

$

97,936

$

25,817

Reconciling items (after tax):

Net loss from discontinued operations

38,036

2,317

532

2,258

38,036

7,612

Severance expense

1,517

1,517

Merger and acquisition related expenses

320

508

530

320

Legal reserves

258

(Gains) losses on investment securities

(2,694)

(18,773)

(1,419)

(9,662)

(4,543)

(21,467)

(6,331)

Loss on sale of foreign subsidiaries

2,150

2,150

Loss on cash flow hedge derivative terminations

18,716

18,716

Derivative credit valuation adjustment

288

(1,195)

(448)

(304)

4,527

(907)

6,563

Risk participation agreement mark-to-market adjustment

(1,080)

(1,080)

Unrealized losses on loans held for sale

799

1,114

1,114

Core net income

$

62,602

$

73,699

$

58,002

$

41,869

$

24,994

$

136,301

$

33,695

Average total assets

$

19,306,948

$

18,525,721

$

18,250,719

$

17,865,574

$

14,675,584

$

18,918,491

$

13,124,495

Core return on average assets

1.30

%

1.61

%

1.26

%

0.93

%

0.68

%

1.45

%

0.52

%

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 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

2021

2020

GAAP net income

$

61,341

$

36,595

$

56,245

$

50,515

$

22,718

$

97,936

$

25,817

Reconciling items:

Income tax expense

20,124

17,560

23,447

12,016

7,980

37,684

11,254

Provision (benefit) for credit losses on loans and leases

3,291

(2,919)

(2,913)

12,955

20,946

372

52,732

Provision (benefit) for credit losses on unfunded commitments

45

(1,286)

(968)

(527)

(356)

(1,241)

395

Severance expense

2,004

2,004

Net loss from discontinued operations

38,036

2,317

532

2,258

38,036

7,612

Merger and acquisition related expenses

418

709

658

418

Legal reserves

320

(Gains) losses on investment securities

(3,558)

(24,540)

(1,431)

(11,945)

(5,553)

(28,098)

(8,150)

Loss on sale of foreign subsidiaries

2,840

2,840

Loss on cash flow hedge derivative terminations

24,467

24,467

Derivative credit valuation adjustment

380

(1,562)

(625)

(378)

5,895

(1,182)

8,451

Risk participation agreement mark-to-market adjustment

(1,407)

(1,407)

Unrealized losses on loans held for sale

1,115

1,450

1,450

Adjusted net income - pre-tax pre-provision

$

86,467

$

86,769

$

77,896

$

64,146

$

53,931

$

173,236

$

98,154

Average total assets

$

19,306,948

$

18,525,721

$

18,250,719

$

17,865,574

$

14,675,584

$

18,918,491

$

13,124,495

Adjusted ROAA - pre-tax pre-provision

1.80

%

1.90

%

1.70

%

1.43

%

1.48

%

1.85

%

1.50

%

 
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 Common Equity - Customers Bancorp

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

2021

2020

GAAP net income to common shareholders

$

58,042

$

33,204

$

52,831

$

47,085

$

19,137

$

91,246

$

18,621

Reconciling items (after tax):

Net loss from discontinued operations

38,036

2,317

532

2,258

38,036

7,612

Severance expense

1,517

1,517

Merger and acquisition related expenses

320

508

530

320

Legal reserves

258

(Gains) losses on investment securities

(2,694)

(18,773)

(1,419)

(9,662)

(4,543)

(21,467)

(6,331)

Loss on sale of foreign subsidiaries

2,150

2,150

Loss on cash flow hedge derivative terminations

18,716

18,716

Derivative credit valuation adjustment

288

(1,195)

(448)

(304)

4,527

(907)

6,563

Risk participation agreement mark-to-market adjustment

(1,080)

(1,080)

Unrealized losses on loans held for sale

799

1,114

1,114

Core earnings

$

59,303

$

70,308

$

54,588

$

38,439

$

21,413

$

129,611

$

26,499

Average total common shareholders' equity

$

1,002,624

$

918,795

$

866,411

$

812,577

$

771,663

$

960,940

$

789,774

Core return on average common equity

23.72

%

31.03

%

25.06

%

18.82

%

11.16

%

27.20

%

6.75

%

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

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

2021

2020

GAAP net income to common shareholders

$

58,042

$

33,204

$

52,831

$

47,085

$

19,137

$

91,246

$

18,621

Reconciling items:

Income tax expense

20,124

17,560

23,447

12,016

7,980

37,684

11,254

Provision (benefit) for credit losses on loan and leases

3,291

(2,919)

(2,913)

12,955

20,946

372

52,732

Provision (benefit) for credit losses on unfunded commitments

45

(1,286)

(968)

(527)

(356)

(1,241)

395

Net loss from discontinued operations

38,036

2,317

532

2,258

38,036

7,612

Severance expense

2,004

2,004

Merger and acquisition related expenses

418

709

658

418

Legal reserves

320

(Gains) losses on investment securities

(3,558)

(24,540)

(1,431)

(11,945)

(5,553)

(28,098)

(8,150)

Loss on sale of foreign subsidiaries

2,840

2,840

Loss on cash flow hedge derivative terminations

24,467

24,467

Derivative credit valuation adjustment

380

(1,562)

(625)

(378)

5,895

(1,182)

8,451

Risk participation agreement mark-to-market adjustment

(1,407)

(1,407)

Unrealized losses on loans held for sale

1,115

1,450

1,450

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

$

83,168

$

83,378

$

74,482

$

60,716

$

50,350

$

166,546

$

90,958

Average total common shareholders' equity

$

1,002,624

$

918,795

$

866,411

$

812,577

$

771,663

$

960,940

$

789,774

Adjusted ROCE - pre-tax pre-provision

33.27

%

36.80

%

34.20

%

29.73

%

26.24

%

34.95

%

23.16

%

 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
 

Net Interest Margin, Tax Equivalent - Customers Bancorp

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

2021

2020

GAAP net interest income

$

138,757

$

132,731

$

122,946

$

107,439

$

91,982

$

271,488

$

173,302

Tax-equivalent adjustment

289

292

219

225

225

581

430

Net interest income tax equivalent

$

139,046

$

133,023

$

123,165

$

107,664

$

92,207

$

272,069

$

173,732

Average total interest earning assets

$

18,698,996

$

17,943,944

$

17,601,999

$

17,121,145

$

13,980,021

$

18,323,555

$

12,478,375

Net interest margin, tax equivalent

2.98

%

3.00

%

2.78

%

2.50

%

2.65

%

2.99

%

2.80

%

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

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

2021

2020

GAAP net interest income

$

138,757

$

132,731

$

122,946

$

107,439

$

91,982

$

271,488

$

173,302

PPP net interest income

(35,785)

(34,842)

(25,257)

(20,018)

(9,308)

(70,627)

(9,308)

Tax-equivalent adjustment

289

292

219

225

225

581

430

Net interest income, tax equivalent, excluding PPP

$

103,261

$

98,181

$

97,908

$

87,646

$

82,899

$

201,442

$

164,424

GAAP average total interest earning assets

$

18,698,996

$

17,943,944

$

17,601,999

$

17,121,145

$

13,980,021

$

18,323,555

$

12,478,375

Average PPP loans

(6,133,184)

(4,623,213)

(4,782,606)

(4,909,197)

(2,754,920)

(5,382,370)

(1,377,460)

Adjusted average total interest earning assets

$

12,565,812

$

13,320,731

$

12,819,393

$

12,211,948

$

11,225,101

$

12,941,185

$

11,100,915

Net interest margin, tax equivalent, excluding PPP

3.30

%

2.99

%

3.04

%

2.86

%

2.97

%

3.14

%

2.98

%

Core Efficiency Ratio - Customers Bancorp

Six Months Ended
June 30,

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

2021

2020

GAAP net interest income

$

138,757

$

132,731

$

122,946

$

107,439

$

91,982

$

271,488

$

173,302

GAAP non-interest income

$

16,822

$

18,468

$

16,083

$

24,864

$

11,711

$

35,290

$

22,871

(Gains) losses on investment securities

(3,558)

(24,540)

(1,431)

(11,945)

(5,553)

(28,098)

(8,150)

Derivative credit valuation adjustment

380

(1,562)

(625)

(378)

5,895

(1,182)

8,451

Risk participation agreement mark-to-market adjustment

(1,407)

(1,407)

Unrealized losses on loans held for sale

1,115

1,450

1,450

Loss on cash flow hedge derivative terminations

24,467

24,467

Loss on sale of foreign subsidiaries

2,840

2,840

Core non-interest income

16,484

16,833

15,142

12,541

12,096

33,317

23,215

Core revenue

$

155,241

$

149,564

$

138,088

$

119,980

$

104,078

$

304,805

$

196,517

GAAP non-interest expense

$

70,823

$

61,927

$

59,933

$

56,285

$

49,791

$

132,750

$

98,758

Severance expense

(2,004)

(2,004)

Legal reserves

(320)

Merger and acquisition related expenses

(418)

(709)

(658)

(418)

Core non-interest expense

$

68,819

$

61,509

$

59,224

$

55,307

$

49,791

$

130,328

$

98,758

Core efficiency ratio (1)

44.33

%

41.13

%

42.89

%

46.10

%

47.84

%

42.76

%

50.25

%

(1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.

 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)

Tangible Common Equity to Tangible Assets - Customers Bancorp

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

GAAP total shareholders' equity

$

1,250,729

$

1,188,721

$

1,117,086

$

1,051,491

$

1,007,847

Reconciling items:

Preferred stock

(217,471)

(217,471)

(217,471)

(217,471)

(217,471)

Goodwill and other intangibles (1)

(3,853)

(3,911)

(14,298)

(14,437)

(14,575)

Tangible common equity

$

1,029,405

$

967,339

$

885,317

$

819,583

$

775,801

GAAP total assets

$

19,635,108

$

18,817,660

$

18,439,248

$

18,778,727

$

17,903,118

Reconciling items:

Goodwill and other intangibles (1)

(3,853)

(3,911)

(14,298)

(14,437)

(14,575)

Tangible assets

$

19,631,255

$

18,813,749

$

18,424,950

$

18,764,290

$

17,888,543

Tangible common equity to tangible assets

5.24

%

5.14

%

4.80

%

4.37

%

4.34

%

(1) Includes goodwill and other intangibles reported in assets of discontinued operations.

 
Tangible Book Value per Common Share - Customers Bancorp

(dollars in thousands except share and per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

GAAP total shareholders' equity

$

1,250,729

$

1,188,721

$

1,117,086

$

1,051,491

$

1,007,847

Reconciling Items:

Preferred stock

(217,471)

(217,471)

(217,471)

(217,471)

(217,471)

Goodwill and other intangibles (1)

(3,853)

(3,911)

(14,298)

(14,437)

(14,575)

Tangible common equity

$

1,029,405

$

967,339

$

885,317

$

819,583

$

775,801

Common shares outstanding

32,353,256

32,238,762

31,705,088

31,555,124

31,510,287

Tangible book value per common share

$

31.82

$

30.01

$

27.92

$

25.97

$

24.62

(1) Includes goodwill and other intangibles reported in assets of discontinued operations.

Total Loans and Leases, excluding PPP

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Total loans and leases

$

16,967,022

$

16,168,306

$

15,832,251

$

16,605,279

$

15,290,202

Loans receivable, PPP

(6,305,056)

(5,178,089)

(4,561,365)

(4,964,105)

(4,760,427)

Loans and leases, excluding PPP

$

10,661,966

$

10,990,217

$

11,270,886

$

11,641,174

$

10,529,775

Total Assets, excluding PPP

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Total assets

$

19,635,108

$

18,817,660

$

18,439,248

$

18,778,727

$

17,903,118

Loans receivable, PPP

(6,305,056)

(5,178,089)

(4,561,365)

(4,964,105)

(4,760,427)

Total assets, excluding PPP

$

13,330,052

$

13,639,571

$

13,877,883

$

13,814,622

$

13,142,691

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED)
(Dollars in thousands, except per share data)
 

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

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Loans and leases receivable

$

14,077,198

$

12,714,578

$

12,136,733

$

12,664,997

$

12,032,874

Loans receivable, PPP

(6,305,056)

(5,178,089)

(4,561,365)

(4,964,105)

(4,760,427)

Loans and leases held for investment, excluding PPP

$

7,772,142

$

7,536,489

$

7,575,368

$

7,700,892

$

7,272,447

Allowance for credit losses on loans and leases

$

125,436

$

128,736

$

144,176

$

155,561

$

159,905

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

1.61

%

1.71

%

1.90

%

2.02

%

2.20

%

 

Tangible Common Equity to Tangible Assets, excluding PPP - Customers Bancorp

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

GAAP total shareholders' equity

$

1,250,729

$

1,188,721

$

1,117,086

$

1,051,491

$

1,007,847

Reconciling items:

Preferred stock

(217,471)

(217,471)

(217,471)

(217,471)

(217,471)

Goodwill and other intangibles (1)

(3,853)

(3,911)

(14,298)

(14,437)

(14,575)

Tangible common equity

$

1,029,405

$

967,339

$

885,317

$

819,583

$

775,801

GAAP total assets

$

19,635,108

$

18,817,660

$

18,439,248

$

18,778,727

$

17,903,118

Loans receivable, PPP

(6,305,056)

(5,178,089)

(4,561,365)

(4,964,105)

(4,760,427)

Total assets, excluding PPP

$

13,330,052

$

13,639,571

$

13,877,883

$

13,814,622

$

13,142,691

Reconciling items:

Goodwill and other intangibles (1)

(3,853)

(3,911)

(14,298)

(14,437)

(14,575)

Tangible assets

$

13,326,199

$

13,635,660

$

13,863,585

$

13,800,185

$

13,128,116

Tangible common equity to tangible assets

7.72

%

7.09

%

6.39

%

5.94

%

5.91

%

(1) Includes goodwill and other intangibles reported in assets of discontinued operations.

 
 

Deferments to total loans and leases, excluding PPP

(dollars in thousands except per share data)

Q2 2021

Q1 2021

Q4 2020

Total loans and leases

$

16,967,022

$

16,168,306

$

15,832,251

Loans receivable, PPP

(6,305,056)

(5,178,089)

(4,561,365)

Total loans and leases, excluding PPP

$

10,661,966

$

10,990,217

$

11,270,886

Commercial deferments

$

89,800

$

176,100

$

202,100

Consumer deferments

8,400

13,000

16,400

Total deferments

$

98,200

$

189,100

$

218,500

Commercial deferments to total loans and leases, excluding PPP

0.8

%

1.6

%

1.8

%

Consumer deferments to total loans and leases, excluding PPP

0.1

0.1

0.1

Total deferments to total loans and leases, excluding PPP

0.9

%

1.7

%

1.9

%

Contacts:

Jay Sidhu, Chairman & CEO 610-935-8693
Sam Sidhu, President 484-744-8985
Carla Leibold, CFO 484-923-8802

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