SOURCE: Customers Bancorp, Inc.

Customers Bancorp, Inc.

October 26, 2016 16:15 ET

Customers Bancorp Reports Record Earnings: Q3 2016 EPS up 28% Over Q3 2015, and First Nine Months of 2016 EPS up 32% Over First Nine Months of 2015

WYOMISSING, PA--(Marketwired - October 26, 2016) -

  • Record Q3 2016 Fully Diluted Earnings Per Share (EPS) of $0.64, Up 28.0% Over Q3 2015 Fully Diluted EPS
  • Record Q3 2016 Net Income to Common Shareholders of $18.6 Million, Up 30.3% Over Q3 2015, with Return on Average Assets of 0.9% and Return on Average Common Equity of 13.2%
  • Record Nine Months of 2016 Net Income to Common Shareholders of $52.4 Million, Up 33.3% Over Nine Months of 2015
  • Exceptional Asset Quality with NPLs only 0.16% of Total Loans; NPAs only 0.18% of Total Assets
  • Strong Reserves for Loan Losses With Total Reserves Equal to 288% of NPLs
  • Non-Interest Bearing Deposits Up Over $300 Million, or 39%, Over Q3 2015 to $1.1 Billion, And Total Deposits Up Over $1.6 Billion, or 28%, Over September 30, 2015 to $7.4 Billion
  • Non-Interest Income For Q3 2016 of $27.5 Million Was 30% of Q3 2016 Total Revenues (Net Interest Income Plus Non-Interest Income)
  • Shareholders' Equity Increased $109 Million During Q3 2016; Tier 1 Leverage Ratio Is Up Over 102 Basis Points at September 30, 2016 Over June 30, 2016, An Increase of 14.2%
  • September 30, 2016 Book Value of $20.78 Up From $17.95 as of September 30, 2015, a 15.8% Increase; September 30, 2016 Tangible Book Value (a non-GAAP measure) of $20.16 Up From $17.81 as of September 30, 2015, a 13.2% Increase

Customers Bancorp, Inc. (NYSE: CUBI), the parent company of Customers Bank (collectively "Customers"), reported net income to common shareholders of $18.6 million for the third quarter of 2016 ("Q3 2016") compared to net income to common shareholders of $14.3 million for the third quarter of 2015 ("Q3 2015"), an increase of $4.3 million, or 30.3%. Fully diluted earnings per share for Q3 2016 was $0.64 compared to $0.50 fully diluted earnings per share for Q3 2015, an increase of $0.14 per share, or 28.0%. Average fully diluted shares for Q3 2016 were 29.1 million compared to average fully diluted shares of 28.7 million for Q3 2015.

Customers also reported net income to common shareholders of $52.4 million for the first nine months of 2016 compared to net income to common shareholders of $39.3 million for the first nine months of 2015, an increase of $13.1 million, or 33.3%. Fully diluted earnings per share for the first nine months of 2016 was $1.81 compared to $1.37 for the first nine months of 2015, an increase of 32.1%.

Customers' Community Business Banking segment generated net income available to common shareholders of $19.8 million in Q3 2016, and Customers' BankMobile segment generated a Q3 2016 net loss of $1.2 million.

"Customers is pleased to report record earnings for the third quarter and first nine months of 2016. Our Community Business Banking segment delivered to our customers through a single point of contact has produced a very profitable banking model characterized by exceptional asset quality, balanced interest rate risk sensitivity and controlled operating costs. The new BankMobile segment which combined our previous BankMobile business with the Disbursements business we acquired from Higher One is off to a better than expected start performing above our high expectations. Since the acquisition of the Disbursements business, BankMobile has already opened over 200,000 new checking accounts, has migrated over 300,000 accounts at the student account holder's election from a prior business partner of Higher One, and has helped increase non-interest bearing deposit balances to over $1 billion as of September 30, 2016," stated Jay Sidhu, Chairman and CEO of Customers. "We are pleased by the Q3 2016 performance of BankMobile."

Other financial highlights for Q3 2016 compared to Q3 2015 include:

  • Q3 2016 net interest income of $64.6 million increased $14.7 million, or 29.3%, from net interest income for Q3 2015 as average loan and security balances increased $2.0 billion. Net interest margin expanded by 4 basis points to 2.83% from 2.79% in Q3 2015.
    • Commercial loan average balances increased $975 million, including commercial loans to mortgage companies, in Q3 2016 compared to Q3 2015.
    • Multi-family average loan balances increased $928 million in Q3 2016 compared to Q3 2015.
    • The net interest margin grew to 2.83% in Q3 2016 compared to Q3 2015 as the average yield on assets increased 13 basis points, while the cost of funding the portfolio increased 11 basis points.
  • Customers reported a $0.1 million provision for loan losses in Q3 2016 compared to a $2.1 million provision for loan losses in Q3 2015 as loan balances increased as planned only $3.0 million during Q3 2016 and asset quality remained exceptional.
  • Q3 2016 non-interest income of $27.5 million increased $21.3 million from Q3 2015 as a result of an increase of $11.4 million in interchange and card revenue, an increase of $4.0 million in deposit and wire transfer fees, an increase of $1.0 million in university fees, and a $2.2 million recovery of a previously recorded loss. The interchange and card revenue, deposit and wire transfer fee, and university fee increases totaled $16.4 million at BankMobile.
  • Non-interest expenses in Q3 2016 of $56.2 million increased $25.9 million, or 85.5%, from non-interest expenses in Q3 2015 as a result of increases in technology costs of $10.1 million, salaries and employee benefits of $7.7 million, and professional services of $4.3 million. These increases resulted largely from increased operating costs for BankMobile of $17.5 million and increases in resources and services necessary to support and operate a $9.6 billion bank. In addition, Q3 2016 non-interest expenses include a $3.9 million one-time expense for technology-related services.
  • Customers' Q3 2016 income tax expense of $14.6 million reflects an estimated effective tax rate of 40.8% compared to Q3 2015 tax expense of $8.4 million, with an effective tax rate of 35.5%. Customers' Q3 2016 results included an adjustment of $0.8 million that increased income tax expense as a result of a return to provision adjustment recorded upon filing Customers' 2015 tax return during Q3 2016.
  • Customers achieved a return on average assets of 0.89% in Q3 2016 compared to 0.82% in Q3 2015, and achieved a return on average common equity of 13.20% in Q3 2016 compared to 11.83% in Q3 2015. Pre-tax and pre-provision return on average assets (a non-GAAP measure) reached 1.51% in Q3 2016. Pre-tax and pre-provision return on average common equity (a non-GAAP measure) was 23.58% in Q3 2016.
  • Total loans, including commercial loans held for sale, increased $1.9 billion, or 29.6%, to $8.4 billion as of September 30, 2016 compared to total loans as of September 30, 2015 of $6.5 billion. Multi-family loan balances increased $0.7 billion to $3.2 billion and other commercial loans, including lines of credit to mortgage companies, increased $1.3 billion to $4.9 billion. Weighted-average yields on loans in Q3 2016 were 3.84% with warehouse lending loans yielding 3.53%, multi-family loans yielding 3.80% and other commercial loans yielding 4.07%.
  • Total deposits increased $1.6 billion, or 27.7%, to $7.4 billion as of September 30, 2016 compared to total deposits of $5.8 billion as of September 30, 2015. Non-interest bearing demand deposits were up by $303.5 million to $1.1 billion, a 39.0% increase. Money market account balances were up $607.1 million to $3.1 billion as of September 30, 2016 compared to September 30, 2015, a 24.0% increase, and certificates of deposit accounts were up $640.9 million to $2.9 billion as of September 30, 2016, a 28.0% increase.
  • BankMobile-related deposits totaled $533.2 million as of September 30, 2016, and were predominately non-interest bearing.
  • The Q3 2016 efficiency ratio was 61.06% compared to a 54.00% Q3 2015 efficiency ratio. Q3 2016 operating expenses included acquisition related expenses of $0.1 million and BankMobile operating expenses of $19.4 million. Non-interest income included $16.4 million of BankMobile non-interest income.
  • Customers Bancorp issued $85.0 million of non-cumulative perpetual preferred stock paying a 6% dividend on September 16, 2016. The proceeds from the capital raise were largely contributed to the subsidiary bank to support Customers Bank's balance sheet growth and other general corporate purposes. This capital raise combined with net income and no asset growth increased our regulatory capital ratios by 1.0% or more during Q3 2016.
  • Capital levels continue to exceed the "well-capitalized" threshold established by regulation at the bank and exceed the applicable Basel III regulatory thresholds for the holding company and the bank.
  • Customers raised common equity of $5.6 million during Q3 2016 through the issuance of 219,386 shares of Customers Bancorp common stock through an at-the-market ("ATM") offering launched in August 2016. The ATM remains active.
  • Total Tier 1 equity for Customers Bancorp increased $235.3 million from September 30, 2015 to September 30, 2016, an increase in capital of 43.8%.
  • The book value per common share continued to increase, reaching $20.78 at September 30, 2016, compared to $17.95 at September 30, 2015, an increase of 15.8% year-over-year. The tangible book value per common share (a non-GAAP measure) also continued to increase, reaching $20.16 at September 30, 2016, compared to $17.81 at September 30, 2015, an increase of 13.2% year-over-year.
  • Based on Customers Bancorp, Inc.'s September 30, 2016 stock price of $25.16, Customers is only trading at 1.2 times tangible book value per common share and 10.3 times mid-point of estimated 2016 earnings per share.

Q3 2016 compared to Q2 2016:
Customers' Q3 2016 net income to common shareholders increased $1.3 million, or 7.3%, to $18.6 million from net income to common shareholders of $17.4 million for the second quarter of 2016 ("Q2 2016"). The $1.3 million increase in Q3 2016 resulted primarily from increases in net interest income of $1.4 million to $64.6 million, a decrease in provisions for loan losses of $0.7 million to $0.1 million, an increase in non-interest income of $19.2 million to $27.5 million, partially offset by increased operating expenses of $18.0 million to $56.2 million, and a $1.6 million increase in income tax expense to $14.6 million. Examining these quarter-over-quarter changes further:

  • The $1.4 million increase in net interest income in Q3 2016 resulted from an increase in average loan balances in Q3 2016 of $0.1 billion.
  • The $0.7 million decrease in provision for loan losses in Q3 2016 resulted primarily from planned lower loan growth in Q3 2016 to help improve capital ratios, maintaining exceptional asset quality, and increased recoveries on previously charged-off loans and purchased credit-impaired loans.
  • The $19.2 million increase in non-interest income in Q3 2016 compared to Q2 2016 resulted primarily from a $14.0 million increase in BankMobile revenues due to the Disbursements business acquisition, a $2.2 million recovery on a previously recorded loss, and an increase of $0.9 million in gains on sales of loans in Q3 2016.
  • The increase in operating expenses of $18.0 million in Q3 2016 compared to Q2 2016 resulted largely from BankMobile-related expenses of $19.4 million in Q3 2016 compared to $6.0 million in Q2 2016 and a $3.9 million one-time expense for technology-related services.

The following table presents a summary of key earnings and performance metrics for the quarter ended September 30, 2016 and the preceding four quarters, respectively:

   
   
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES  
EARNINGS SUMMARY - UNAUDITED  
                  
(Dollars in thousands, except per-share data)                 
   Q3  Q2  Q1  Q4  Q3  
   2016  2016  2016  2015  2015  
                       
Net income available to common shareholders  $18,637  $17,368  $16,413  $16,780  $14,309  
Basic earnings per common share ("EPS")  $0.68  $0.64  $0.61  $0.62  $0.53  
Diluted EPS  $0.64  $0.60  $0.57  $0.58  $0.50  
Average common shares outstanding - basic   27,367,551   27,080,676   26,945,062   26,886,694   26,872,787  
Average common shares outstanding - diluted   29,149,734   28,971,040   28,783,101   28,912,644   28,741,129  
Shares outstanding period end   27,544,217   27,286,833   27,037,005   26,901,801   26,882,383  
                       
Return on average assets   0.89 % 0.84 % 0.85 % 0.91 % 0.82 %
Return on average common equity   13.20 % 13.03 % 12.85 % 13.46 % 11.83 %
Return on average assets - pre-tax and pre-provision (1)   1.51 % 1.44 % 1.40 % 1.60 % 1.39 %
Return on average common equity - pre-tax and pre-provision (2)   23.58 % 23.38 % 21.87 % 24.35 % 20.53 %
Net interest margin, tax equivalent   2.83 % 2.83 % 2.88 % 2.83 % 2.79 %
Efficiency ratio   61.06 % 53.47 % 53.74 % 50.11 % 54.00 %
Non-performing loans (NPLs) to total loans (including held-for-sale loans)   0.16 % 0.17 % 0.20 % 0.15 % 0.27 %
Reserves to non-performing loans   287.88 % 268.98 % 242.10 % 341.71 % 197.01 %
Net charge-offs (recoveries)  $288  $1,060  $(455 )$4,322  $5,657  
                       
Tier 1 equity to average tangible assets   8.19 % 7.17 % 7.15 % 7.16 % 7.27 %
Tangible common equity to average tangible assets (3)   5.89 % 5.71 % 6.17 % 6.37 % 6.49 %
Book value per common share  $20.78  $19.98  $19.22  $18.52  $17.95  
Tangible book value per common share (period end) (4)  $20.16  $19.35  $19.08  $18.39  $17.81  
Period end stock price  $25.16  $25.13  $23.63  $27.22  $25.70  
                 
(1) Non-GAAP measure calculated as GAAP net income, plus provision for loan losses and income tax expense divided by average total assets.
(2) Non-GAAP measure calculated as GAAP net income available to common shareholders, plus provision for loan losses and income tax expense divided by average common equity.
(3) Non-GAAP measure calculated as GAAP total shareholders' equity less preferred stock and goodwill and other intangibles divided by total average assets less average goodwill and other intangibles.
(4) Non-GAAP measure calculated as GAAP total shareholders' equity less preferred stock and goodwill and other intangibles divided by common shares outstanding at period end.
 

Capital

Customers recognizes the importance of not only being well capitalized in the current environment but to have adequate capital buffers to absorb any unexpected shocks. "Our capital ratios improved significantly during the quarter due to continued strong earnings, planned slow down in loan growth, a successful preferred stock offering, and launch of an at-the-market common equity offering," stated Mr. Sidhu. "We are targeting a Tier I capital ratio of 9.0% or higher and a total risk-based capital ratio of around 13.0% as we get ready to cross the $10 billion mark," Mr. Sidhu continued. At September 30, 2016, Customers is preliminarily calculating its Tier 1 leverage ratio at 8.2% and its total risk-based capital ratio at 11.7%. "By continuing to control our growth over the next few quarters, demonstrating strong earnings, and completing the sale of BankMobile at an anticipated substantial gain, we hope to reach these targeted levels in the next few quarters," concluded Mr. Sidhu.

BankMobile

The BankMobile division took a significant step during Q3 2016 with Customers Bank's integration of the Disbursements business acquired from Higher One late in Q2 2016. Together the new BankMobile division services over 1.5 million deposit accounts as of September 30, 2016. The combined businesses also have the potential to add about 450,000 to 500,000 new student accounts annually. Since the acquisition of the Disbursements business, BankMobile has added over 200,000 new accounts and converted over 300,000 accounts at the student account holder's election from a prior business partner of Higher One. "We are very focused on continuing to build out BankMobile's technology software platform, introducing the Vibe and Bold deposit accounts, integrating the Disbursements business with the BankMobile business, developing and beginning to execute plans to continue to attract between 450,000 to 500,000 new millennial customers to its customer base each year and improve their engagement as a banking customer so they stay a BankMobile customer for life. The acquisition of the Disbursements business provides us with a great opportunity, marking an inflection point in BankMobile's development. We are committed to making BankMobile the primary bank for all our student customers and moving with them as they evolve to young professionals," stated Mr. Sidhu. "We are also focused on attracting more deposit customers with the Vibe and Bold accounts, arguably among the best customer offerings and the best priced banking services available in the U.S. We believe that 2016 and 2017 will be very exciting years as we build BankMobile as a profitable business and create value for Customers Bancorp, Inc. shareholders," Mr. Sidhu continued.

Managing Commercial Real Estate Concentration Risks and Providing High Net Worth Families Loans for Their Multi-Family Holdings

Customers' loans collateralized by multi-family properties were approximately 37.7% of Customers' total loan portfolio and approximately 411% of Tier 1 capital at September 30, 2016. Recognizing the risks that accompany certain elements of commercial real estate ("CRE") lending, Customers has as part of its core strategies studiously sought to limit its risks and has concluded that it has appropriate risk management systems in place to manage this portfolio. Customers' total real estate construction and development exposure, arguably the riskiest area of CRE, was under $100 million as of September 30, 2016.

Our CRE exposures are focused principally on loans to high net worth families collateralized by multi-family properties that are of modest size and subject to what Customers believes are conservative underwriting standards. As of September 30, 2016, Customers had no non-performing multi-family loans. Customers believes it has a strong risk management process to manage the portfolio risks prospectively and that this portfolio will perform well even under a stressed scenario. Following are some unique characteristics of Customers' multi-family loan portfolio:

  • Principally concentrated in New York City and principally to high net worth families;
  • Average loan size is between $5 million - $7 million;
  • Annual debt service coverage ratio is 140%;
  • Median loan-to-value is 70%;
  • All loans are individually stressed with an increase of 1% and 2% to the cap rate and an increase of 1.5% and 3% in loan interest rates;
  • All properties are inspected prior to a loan being granted and monitored thereafter on an annual basis by dedicated portfolio managers;
  • Customers to date has never experienced more than a 30 day delinquency on any of the multi-family loans that it has originated; and
  • Credit approval process is independent of customer sales and portfolio management process.

Asset Quality and Interest Rate Risk

Risk management is a critical component of how Customers creates long-term shareholder value. Two of the most important risks of banking to be understood and managed in an uncertain economy are asset quality and interest rate risk.

Customers believes that asset quality risks must be diligently addressed during good economic times with prudent underwriting standards so that when the economy deteriorates the bank's capital is sufficient to absorb all losses without threatening its ability to operate and serve its community and other constituents. "Customers adopted prudent underwriting standards in 2010 when the current management team assumed responsibility for building the Bank and has not compromised those standards," stated Mr. Sidhu. "Customers' non-performing loans at September 30, 2016 were only 0.16% of total loans, compared to our peer group non-performing loans of approximately 0.90% of total loans, and industry average non-performing loans of 1.69% of total loans. Our expectation is superior asset quality performance in good times and in difficult years. We have no direct exposure to oil and gas or business investments in fracking," said Mr. Sidhu.

Interest rate risk is another critical element for banks to manage. An unexpected shift in interest rates can have a devastating effect on a bank's profitability for multiple years. Banks can position their assets and liabilities to speculate on future interest rate changes with the hope of gaining earnings by guessing the next movement in interest rates. "Customers' objective is to manage the estimated effect of future interest rate changes, up or down, to a neutral effect on net interest income, so not speculating on whether interest rates go up or down. At September 30, 2016, we were slightly asset sensitive, hoping to benefit somewhat from the anticipated higher short term rates," said Mr. Sidhu. "This allows our team members to focus on generating earnings from the business of banking, aggregating deposits and making loans to customers in the communities we serve," concluded Mr. Sidhu.

Diversified Loan Portfolio

Customers is a Business Bank that principally focuses on four lending activities; commercial and industrial loans to privately held businesses, multi-family loans principally to high net worth families, selected commercial real estate loans, and commercial loans and banking services to privately held mortgage companies. Commercial and industrial loans, including owner-occupied commercial real estate loans, and commercial loans to mortgage companies, were approximately $3.7 billion at September 30, 2016. Multi-family loans, or loans to high net worth families, were approximately $3.2 billion at September 30, 2016. Non-owner occupied commercial real estate loans were approximately $1.2 billion at September 30, 2016. Consumer and residential mortgage loans make up only about 4% of the loan portfolio.

Conference Call

Date: Wednesday, October 26, 2016

Time: 5:00 PM ET

US Dial-in: 877-913-0088

International Dial-in: 913-981-5538

Participant Code: 149764

Please dial in at least 10 minutes before the start of the call to ensure timely participation. Slides accompanying the presentation will be available on the Company's website at http://customersbank.com/investor_relations.php prior to the call. A playback of the call will be available beginning October 26, 2016 at 8:00 pm ET until 8:00 pm on November 25, 2016. To listen, call within the United States (888) 203-1112 or 719-457-0820 when calling internationally. Please use the replay pin number 5032669.

Institutional Background

Customers Bancorp, Inc. is a bank holding company located in Wyomissing, Pennsylvania engaged in banking and related business through its bank subsidiary, Customers Bank. Customers Bank is a community-based, full-service bank with assets of approximately $9.6 billion that was named one of Forbes magazine's 2016 100 Best Banks in America (there are over 6,200 banks in the United States). A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender that provides a range of banking services to small and medium-sized businesses, professionals, individuals and families through offices in Pennsylvania, New York, Rhode Island, New Hampshire, Massachusetts, and New Jersey. Committed to fostering customer loyalty, Customers Bank uses a High Tech/High Touch strategy that includes use of industry-leading technology to provide customers better access to their money, as well as Concierge Banking® by appointment at customers' homes or offices 12 hours a day, seven days a week. Customers Bank offers a continually expanding portfolio of loans to small businesses, multi-family projects, mortgage companies and consumers. BankMobile is a division of Customers Bank, offering state of the art high tech digital banking services with high level of personal customer service.

Customers Bancorp, Inc. voting common shares are listed on the New York Stock Exchange under the symbol CUBI. Additional information about Customers Bancorp, Inc. can be found on the Company's website, www.customersbank.com.

"Safe Harbor" Statement

In addition to historical information, this press release may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.'s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words "may," "could," "should," "pro forma," "looking forward," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.'s control). Numerous competitive, economic, regulatory, legal and technological factors, among others, could cause Customers Bancorp, Inc.'s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. In addition, important factors relating to the acquisition of the Disbursements business, the combination of Customers' BankMobile business with the acquired Disbursements business and the implementation of Customers Bancorp, Inc.'s strategy regarding BankMobile, including with respect to the possible disposition of the BankMobile business, depending upon market conditions and opportunities, also could cause Customers Bancorp's actual results to differ from those in the forward-looking statements. 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, 2015, subsequently filed quarterly reports on Form 10-Q, and current reports on Form 8-K that update or provide information in addition to the information included in the Form 10-K and 10-Q filings. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank.

  
  
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED - UNAUDITED  
(Dollars in thousands, except per share data)            
   Q3   Q2  Q3  
   2016   2016  2015  
Interest income:               
 Loans receivable, including fees  $60,362   $59,013  $46,291  
 Loans held for sale   18,737    17,429   14,006  
 Investment securities   3,528    3,638   2,283  
 Other   1,585    1,241   1,156  
    Total interest income   84,212    81,321   63,736  
                
Interest expense:               
 Deposits   13,009    11,142   9,022  
 Other borrowings   1,642    1,620   1,539  
 FHLB advances   3,291    3,716   1,556  
 Subordinated debt   1,685    1,685   1,685  
    Total interest expense   19,627    18,163   13,802  
     Net interest income   64,585    63,158   49,934  
 Provision for loan losses   88    786   2,094  
     Net interest income after provision for loan losses   64,497    62,372   47,840  
                
Non-interest income:               
 Interchange and card revenue   11,547    1,890   128  
 Deposit fees   4,218    787   265  
 Mortgage warehouse transactional fees   3,080    3,074   2,792  
 Bank-owned life insurance   1,386    1,120   1,177  
 Gain on sale of loans   1,206    285   1,131  
 Mortgage loans and banking income   287    285   167  
 (Loss) on sale of investment securities   (1 )  -   (16 )
 Other   5,763    816   527  
    Total non-interest income   27,486    8,257   6,171  
                
Non-interest expense:               
 Salaries and employee benefits   22,681    18,107   14,981  
 Technology, communication and bank operations   12,525    3,854   2,422  
 Professional services   7,006    3,636   2,673  
 FDIC assessments, taxes, and regulatory fees   2,726    4,435   3,222  
 Occupancy   2,450    2,473   2,169  
 Other real estate owned   1,192    183   1,722  
 Loan workout   592    487   285  
 Advertising and promotion   591    334   330  
 Acquisition related expenses   144    874   -  
 Other   6,311    3,800   2,503  
    Total non-interest expense   56,218    38,183   30,307  
 Income before income tax expense   35,765    32,446   23,704  
 Income tax expense   14,576    13,016   8,415  
     Net income   21,189    19,430   15,289  
     Preferred stock dividends   2,552    2,062   980  
     Net income available to common shareholders  $18,637   $17,368  $14,309  
                 
 Basic earnings per common share  $0.68   $0.64  $0.53  
 Diluted earnings per common share  $0.64   $0.60  $0.50  
            
   
   
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED - UNAUDITED  
(Dollars in thousands, except per share data)        
   September 30,  September 30,  
   2016  2015  
Interest income:          
 Loans receivable, including fees  $173,847  $132,185  
 Loans held for sale   50,272   38,428  
 Investment securities   10,875   6,899  
 Other   3,937   4,625  
    Total interest income   238,931   182,137  
           
Interest expense:          
 Deposits   34,365   24,693  
 Other borrowings   4,867   4,523  
 FHLB advances   9,274   5,044  
 Subordinated debt   5,055   5,055  
    Total interest expense   53,561   39,315  
     Net interest income   185,370   142,822  
 Provision for loan losses   2,854   14,393  
     Net interest income after provision for loan losses   182,516   128,429  
           
Non-interest income:          
 Interchange and card revenue   13,806   390  
 Mortgage warehouse transactional fees   8,702   7,864  
 Deposit fees   5,260   691  
 Bank-owned life insurance   3,629   3,407  
 Gain on sale of loans   2,135   3,189  
 Mortgage loans and banking income   737   605  
 Gain (loss) on sale of investment securities   25   (85 )
 Other   6,943   2,236  
    Total non-interest income   41,237   18,297  
           
Non-interest expense:          
 Salaries and employee benefits   58,051   43,381  
 Technology, communication and bank operations   19,021   7,791  
 Professional services   13,213   7,378  
 FDIC assessments, taxes, and regulatory fees   11,191   7,495  
 Occupancy   7,248   6,469  
 Other real estate owned   1,663   2,026  
 Loan workout   1,497   541  
 Acquisition related expenses   1,195   -  
 Advertising and promotion   1,178   1,106  
 Other   14,049   7,245  
    Total non-interest expense   128,306   83,432  
 Income before income tax expense   95,447   63,294  
 Income tax expense   37,129   22,497  
     Net income   58,318   40,797  
     Preferred stock dividends   5,900   1,487  
     Net income available to common shareholders  $52,418  $39,310  
            
 Basic earnings per common share  $1.93  $1.47  
 Diluted earnings per common share  $1.81  $1.37  
        
       
       
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEET - UNAUDITED  
(Dollars in thousands)      
   September 30,   December 31,   September 30,  
   2016   2015   2015  
ASSETS                
Cash and due from banks  $39,742   $53,550   $80,475  
Interest-earning deposits   225,846    211,043    302,924  
 Cash and cash equivalents   265,588    264,593    383,399  
Investment securities available for sale, at fair value   530,896    560,253    418,945  
Loans held for sale   2,402,708    1,797,064    1,730,002  
Loans receivable   6,016,995    5,453,479    4,769,102  
Allowance for loan losses   (37,897 )  (35,647 )  (33,823 )
 Total loans receivable, net of allowance for loan losses   5,979,098    5,417,832    4,735,279  
FHLB, Federal Reserve Bank, and other restricted stock   71,621    90,841    63,514  
Accrued interest receivable   22,100    19,939    16,512  
FDIC loss sharing receivable   -    -    202  
Bank premises and equipment, net   12,428    11,531    11,567  
Bank-owned life insurance   160,357    157,211    156,909  
Other real estate owned   3,897    5,057    8,433  
Goodwill and other intangibles   16,924    3,651    3,654  
Other assets   136,993    70,233    67,760  
  Total assets  $9,602,610   $8,398,205   $7,596,176  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Demand, non-interest bearing deposits  $1,080,970   $653,679   $777,478  
Interest-bearing deposits   6,308,000    5,255,822    5,007,716  
 Total deposits   7,388,970    5,909,501    5,785,194  
Federal funds purchased   52,000    70,000    50,000  
FHLB advances   1,036,700    1,625,300    985,900  
Other borrowings   86,957    86,457    86,290  
Subordinated debt   108,758    108,685    108,665  
Accrued interest payable and other liabilities   139,405    44,360    42,149  
  Total liabilities   8,812,790    7,844,303    7,058,198  
                 
Preferred stock   217,549    55,569    55,569  
Common stock   28,074    27,432    27,413  
Additional paid in capital   374,727    362,607    360,903  
Retained earnings   176,929    124,511    107,731  
Accumulated other comprehensive income (loss)   774    (7,984 )  (5,405 )
Treasury stock, at cost   (8,233 )  (8,233 )  (8,233 )
  Total shareholders' equity   789,820    553,902    537,978  
   Total liabilities & shareholders' equity  $9,602,610   $8,398,205   $7,596,176  
             
 
 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN (UNAUDITED)
(Dollars in thousands)            
   Three months ended
   September 30,  June 30,  September 30,
   2016  2016  2015
   Average Balance  Average yield or cost (%)  Average Balance  Average yield or cost (%)  Average Balance  Average yield or cost (%)
 Assets                     
Interest earning deposits  $237,753  0.55%  $213,509  0.51%  $312,286  0.26%
Investment securities   534,333  2.64%   550,130  2.65%   377,157  2.42%
Loans held for sale   2,124,097  3.51%   2,056,929  3.41%   1,720,863  3.23%
Loans receivable   6,117,367  3.93%   6,050,895  3.92%   4,648,986  3.95%
Other interest-earning assets   90,010  5.56%   102,599  3.79%   67,299  5.62%
Total interest earning assets   9,103,560  3.68%   8,974,062  3.64%   7,126,591  3.55%
Non-interest earning assets   336,013      285,138      257,220   
  Total assets  $9,439,573     $9,259,200     $7,383,811   
                      
 Liabilities                     
Total interest bearing deposits (1)  $6,150,265  0.84%  $5,773,445  0.78%  $4,938,317  0.72%
Borrowings   1,586,262  1.66%   2,014,452  1.40%   1,214,803  1.57%
Total interest bearing liabilities   7,736,527  1.01%   7,787,897  0.94%   6,153,120  0.89%
Non-interest bearing deposits (1)   863,435      759,373      675,455   
Total deposits & borrowings   8,599,962  0.91%   8,547,270  0.85%   6,828,575  0.80%
Other non-interest bearing liabilities   129,199      56,870      19,998   
  Total liabilities   8,729,161      8,604,140      6,848,573   
 Shareholders' equity   710,412      655,060      535,238   
  Total liabilities and shareholders' equity  $9,439,573     $9,259,200     $7,383,811   
                      
Net interest margin      2.82%      2.83%      2.78%
Net interest margin tax equivalent      2.83%      2.83%      2.79%
                
(1) Total costs of deposits (including interest bearing and non-interest bearing) were 0.74%, 0.68% and 0.64% for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, respectively.
 
 
 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN (UNAUDITED)
(Dollars in thousands)      
   Nine months ended
   September 30,  September 30,
   2016  2015
   Average Balance  Average yield or cost (%)  Average Balance  Average yield or cost (%)
 Assets              
Interest earning deposits  $211,971  0.53%  $295,485  0.26%
Investment securities   548,921  2.64%   389,253  2.36%
Loans held for sale   1,915,572  3.51%   1,594,942  3.22%
Loans receivable   5,949,829  3.90%   4,472,704  3.95%
Other interest-earning assets   90,911  4.54%   73,368  7.40%
Total interest earning assets   8,717,204  3.66%   6,825,752  3.57%
Non-interest earning assets   305,326      265,184   
  Total assets  $9,022,530     $7,090,936   
               
 Liabilities              
Total interest bearing deposits (1)  $5,801,231  0.79%  $4,489,241  0.74%
Borrowings   1,693,455  1.51%   1,395,863  1.40%
Total interest-bearing liabilities   7,494,686  0.95%   5,885,104  0.89%
Non-interest-bearing deposits (1)   800,358      684,466   
Total deposits & borrowings   8,295,044  0.86%   6,569,570  0.80%
Other non-interest bearing liabilities   76,774      26,025   
  Total liabilities   8,371,818      6,595,595   
 Shareholders' equity   650,712      495,341   
  Total liabilities and shareholders' equity  $9,022,530     $7,090,936   
               
Net interest margin      2.84%      2.80%
Net interest margin tax equivalent      2.84%      2.80%
 
(1) Total costs of deposits (including interest bearing and non-interest bearing) were 0.70% and 0.64% for the nine months ended September 30, 2016 and 2015, respectively.
 
 
 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END LOAN COMPOSITION (UNAUDITED)
          
(Dollars in thousands)  September 30,  December 31,  September 30,
   2016  2015  2015
             
Commercial:            
 Multi-Family  $3,175,561  $2,948,696  $2,455,392
 Mortgage warehouse   2,422,004   1,797,753   1,729,909
 Commercial & Industrial (1)   1,248,594   1,068,597   916,044
 Commercial Real Estate- Non-Owner Occupied   1,151,099   956,255   912,971
 Construction   83,835   87,240   89,616
  Total commercial loans   8,081,093   6,858,541   6,103,932
             
Consumer:            
 Residential   230,690   274,470   274,163
 Manufactured housing   104,404   113,490   116,742
 Other consumer   3,420   3,708   3,744
  Total consumer loans   338,514   391,668   394,649
  Deferred costs and unamortized premiums, net   96   334   523
   Total loans  $8,419,703  $7,250,543  $6,499,104
             
(1) Commercial & industrial loans, including owner occupied commercial real estate.
 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END DEPOSIT COMPOSITION (UNAUDITED)
          
(Dollars in thousands)  September 30,  December 31,  September 30,
   2016  2015  2015
             
   Demand, non-interest bearing  $1,080,970  $653,679  $777,478
   Demand, interest bearing   201,703   127,215   146,737
   Savings   37,120   41,600   39,739
   Money market   3,140,144   2,739,411   2,533,070
   Time deposits   2,929,033   2,347,596   2,288,170
   Total deposits  $7,388,970  $5,909,501  $5,785,194
             
          
          
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY - UNAUDITED
(Dollars in thousands)  As of September 30, 2016   As of December 31, 2015   As of September 30, 2015  
   Total Loans  Non Accrual /NPLs  Total Credit Reserves  NPLs / Total Loans   Total Reserves to Total NPLs   Total Loans  Non Accrual /NPLs  Total Credit Reserves  NPLs / Total Loans   Total Reserves to Total NPLs   Total Loans  Non Accrual /NPLs  Total Credit Reserves  NPLs / Total Loans   Total Reserves to Total NPLs  
Loan Type  
Originated Loans                                                             
Multi-Family  $3,146,121  $-  $11,673  - % - % $2,903,814  $-  $12,016  - % - % $2,399,387  $-  $9,206  - % - %
Commercial & Industrial (1)   1,192,720   6,326   12,129  0.53 % 191.73 %  990,621   2,760   8,864  0.28 % 321.16 %  844,814   6,283   10,187  0.74 % 162.14 %
Commercial Real Estate- Non-Owner Occupied   1,113,620   -   4,417  - % - %  906,544   788   3,706  0.09 % 470.30 %  860,225   3,947   3,521  0.46 % 89.21 %
Residential   118,167   32   2,232  0.03 % 6,975.00 %  113,858   32   1,992  0.03 % 6,225.00 %  110,270   8   1,881  0.01 % 23,512.50 %
Construction   83,835   -   1,049  - % - %  87,006   -   1,074  - % - %  89,382   -   1,106  - % - %
Other consumer   816   -   10  - % - %  712   -   9  - % - %  152   -   8  - % - %
Total Originated Loans   5,655,279   6,358   31,510  0.11 % 495.60 %  5,002,555   3,580   27,661  0.07 % 772.65 %  4,304,230   10,238   25,909  0.24 % 253.07 %
Loans Acquired                                                             
Bank Acquisitions   177,085   5,046   5,965  2.85 % 118.21 %  206,971   4,743   7,492  2.29 % 157.96 %  175,536   4,891   7,528  2.79 % 153.92 %
Loan Purchases   184,535   1,992   1,089  1.08 % 54.67 %  243,619   2,448   1,653  1.00 % 67.52 %  288,813   2,653   1,595  0.92 % 60.12 %
Total Acquired Loans   361,620   7,038   7,054  1.95 % 100.23 %  450,590   7,191   9,145  1.60 % 127.17 %  464,349   7,544   9,123  1.62 % 120.93 %
Deferred costs and unamortized premiums, net   96   -   -  - % - %  334   -   -  - % - %  523   -   -  - % - %
Total Loans Held for Investment   6,016,995   13,396   38,564  0.22 % 287.88 %  5,453,479   10,771   36,806  0.20 % 341.71 %  4,769,102   17,782   35,032  0.37 % 197.01 %
Total Loans Held for Sale   2,402,708   -   -  - % - %  1,797,064   -   -  - % - %  1,730,002   -   -  - % - %
Total Portfolio  $8,419,703  $13,396  $38,564  0.16 % 287.88 % $7,250,543  $10,771  $36,806  0.15 % 341.71 % $6,499,104  $17,782  $35,032  0.27 % 197.01 %
                                              
(1) Commercial & industrial loans, including owner occupied commercial real estate.
 
  
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES  
NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED  
             
   For the Quarter Ended  
   Q3   Q2  Q3  
(Dollars in thousands)  2016   2016  2015  
Originated Loans               
Commercial & Industrial (1)  $49   $41  $5.324  
Commercial Real Estate- Non-Owner Occupied   -    -   (13 )
Residential   43    -   -  
Other consumer   245    145   -  
Total Originated Loans   337    186   5,311  
Loans Acquired               
Bank Acquisitions   (49 )  874   258  
Loan Purchases   -    -   88  
Total Acquired Loans   (49 )  874   346  
Total Loans Held for Investment  $288   $1,060  $5,657  
 
(1) Commercial & industrial loans, including owner occupied commercial real estate.
 
 
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
SEGMENT REPORTING - UNAUDITED
(Dollars in thousands)
   Three months ended September 30, 2016
   Community Business Banking  BankMobile  Consolidated
Interest income (1)  $ 82,828    $ 1,384    $ 84,212
Interest expense   19,620     7     19,627
 Net interest income   63,208     1,377     64,585
Provision for loan losses   (162 )   250     88
Non-interest income   11,121     16,365     27,486
Non-interest expense   36,864     19,354     56,218
 Income (loss) before income tax expense   37,627     (1,862 )   35,765
Income tax expense/(benefit)   15,284     (708 )   14,576
 Net income (loss)   22,343     (1,154 )   21,189
 Preferred stock dividends   2,552          2,552
  Net income (loss) available to common shareholders  $ 19,791    $ (1,154 )  $ 18,637
 
(1) - Amounts reported include funds transfer pricing of $1.4 million for the three months ended September 30, 2016 credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.
 
    Nine months ended September 30, 2016
    Community Business Banking   BankMobile   Consolidated
Interest income (1)  $ 234,513  $ 4,418    $ 238,931
Interest expense   53,539   22     53,561
 Net interest income   180,974   4,396     185,370
Provision for loan losses   2,605   249     2,854
Non-interest income   22,241   18,996     41,237
Non-interest expense   101,053   27,253     128,306
 Income (loss) before income tax expense   99,557   (4,110 )   95,447
Income tax expense/(benefit)   38,691   (1,562 )   37,129
 Net income (loss)   60,866   (2,548 )   58,318
 Preferred stock dividends   5,900        5,900
  Net income (loss) available to common shareholders  $ 54,966  $ (2,548 )  $ 52,418
             
As of September 30, 2016            
Goodwill and other intangibles  $ 3,642  $ 13,282    $ 16,924
Total assets  $ 9,532,281  $ 70,329    $ 9,602,610
Total deposits  $ 6,855,788  $ 533,182    $ 7,388,970
 
 
(1) - Amounts reported include funds transfer pricing of $4.4 million for the nine months ended September 30, 2016 credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.
 

Please note that BankMobile operating results for 2015 were not material to Customers' 2015 consolidated financial results.

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

Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our financial results, which we believe enhance an overall understanding of our performance. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. Although non-GAAP financial measures are frequently used in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results of operations or financial condition as reported under GAAP.

The following tables present reconciliations of GAAP to Non-GAAP measures disclosed within this document.

  
Pre-tax Pre-provision Return on Average Assets  
   Q3 2016   Q2 2016   Q1 2016   Q4 2015   Q3 2015  
GAAP Net Income  $21,189   $19,430   $17,699   $17,786   $15,289  
Reconciling Items:                          
 Provision for loan losses   88    786    1,980    6,173    2,094  
 Income tax expense   14,576    13,016    9,537    7,415    8,415  
Pre-tax Pre-provision Net Income  $35,853   $33,232   $29,216   $31,374   $25,798  
                           
Average Total Assets  $9,439,573   $9,259,200   $8,364,233   $7,771,721   $7,383,811  
                           
Pre-tax Pre-provision Return on Average Assets   1.51 %  1.44 %  1.40 %  1.60 %  1.39 %
                     
   
Pre-tax Pre-provision Return on Average Common Equity  
   Q3 2016   Q2 2016   Q1 2016   Q4 2015   Q3 2015  
GAAP Net Income Available to Common Shareholders  $18,637   $17,368   $16,413   $16,780   $14,309  
Reconciling Items:                          
 Provision for loan losses   88    786    1,980    6,173    2,094  
 Income tax expense   14,576    13,016    9,537    7,415    8,415  
Pre-tax Pre-provision Net Income Available to Common Shareholders  $33,301   $31,170   $27,930   $30,368   $24,818  
                           
Average Total Shareholders' Equity  $710,412   $655,060   $586,009   $550,289   $535,238  
Reconciling Item:                          
 Average Preferred Stock   (148,690 )  (118,793 )  (72,285 )  (55,569 )  (55,569 )
Average Common Equity  $561,722   $536,267   $513,724   $494,720   $479,669  
                           
Pre-tax Pre-provision Return on Average Common Equity   23.58 %  23.38 %  21.87 %  24.35 %  20.53 %
                     
   
Tangible Common Equity to Average Tangible Assets  
   Q3 2016   Q2 2016   Q1 2016   Q4 2015   Q3 2015  
GAAP - Total Shareholders' Equity  $789,820   $680,562   $599,249   $553,902   $537,978  
Reconciling Items:                          
 Preferred Stock   (217,549 )  (135,270 )  (79,677 )  (55,569 )  (55,569 )
 Goodwill and Other Intangibles   (16,924 )  (17,197 )  (3,648 )  (3,651 )  (3,654 )
Tangible Common Equity  $555,347   $528,095   $515,924   $494,682   $478,755  
                           
Average Total Assets  $9,439,573   $9,259,200   $8,364,233   $7,771,721   $7,383,811  
Reconciling Items:                          
 Average Goodwill and Other Intangibles   (17,101 )  (6,037 )  (3,650 )  (3,653 )  (3,657 )
Average Tangible Assets  $9,422,472   $9,253,163   $8,360,583   $7,768,068   $7,380,154  
                           
Tangible Common Equity to Average Tangible Assets   5.89 %  5.71 %  6.17 %  6.37 %  6.49 %
                     
                  
Tangible Book Value per Common Share  
   Q3 2016  Q2 2016  Q1 2016  Q4 2015  Q3 2015  
Total Shareholders' Equity  $789,820  $680,562  $599,249  $553,902  $537,978  
Reconciling Items:                      
 Preferred Stock   (217,549 ) (135,270 ) (79,677 ) (55,569 ) (55,569 )
 Goodwill and Other Intangibles   (16,924 ) (17,197 ) (3,648 ) (3,651 ) (3,654 )
Tangible Common Equity  $555,347  $528,095  $515,924  $494,682  $478,755  
                       
Common shares outstanding   27,544,217   27,286,833   27,037,005   26,901,801   26,882,383  
                       
Tangible Book Value per Common Share  $20.16  $19.35  $19.08  $18.39  $17.81  
                       

Contact Information

  • Contacts:
    Jay Sidhu
    Chairman & CEO
    610-935-8693


    Richard Ehst
    President & COO
    610-917-3263

    Investor Contact:
    Robert Wahlman
    CFO
    610-743-8074