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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

/EINPresswire.com/ -- 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  
                                 

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


Richard Ehst
President & COO
610-917-3263

Investor Contact:
Robert Wahlman
CFO
610-743-8074

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