Customers Bancorp Reports Results for First Quarter
WEST READING, Pa., Apr. 25 /BusinessWire/ --
Customers Bancorp, Inc.(NYSE:CUBI):
First Quarter 2024 Highlights
Q1 2024 net income available to common shareholders was $45.9 million, or $1.40 per diluted share; ROAA was 0.94% and ROCE was 12.08%.
Q1 2024 core earnings* were $46.5 million, or $1.42 per diluted share; Core ROAA* was 0.95% and Core ROCE* was 12.24%.
Q1 2024 adjusted core earnings* excluding certain one-time items were $55.1 million, or $1.68 per diluted share; Adjusted Core ROAA* excluding certain one-time items was 1.11% and Adjusted Core ROCE* excluding certain one-time items was 14.50%.
CET 1 ratio of 12.5%1 at March 31, 2024, compared to 12.2% at December 31, 2023, above the approximately 11.5% target.
TCE / TA ratio* of 7.3% at March 31, 2024, compared to 7.0% at December 31, 2023, on track to achieve 7.5% target within one to two quarters.
Q1 2024 net interest margin, tax equivalent ("NIM") was 3.10%, compared to Q4 2023 NIM of 3.31%, due to higher cash balances and lower average loans during the quarter.
Total deposits increased by $41.1 million in Q1 2024 from Q4 2023 with a significant positive mix shift. Q1 2024 business unit deposit*2 growth of $1.2 billion funded the repayment of maturing wholesale CDs of $1.2 billion.
Non-interest bearing deposits increased by $266.4 million in Q1 2024 from Q4 2023 and represented 26% of total deposits.
Total estimated insured deposits were 78%3 of total deposits at March 31, 2024, with immediately available liquidity covering estimated uninsured deposits3 by approximately 224%.
Non-performing assets were $35.8 million, or 0.17% of total assets, at March 31, 2024 compared to 0.13% at December 31, 2023. Allowance for credit losses on loans and leases equaled 374% of non-performing loans at March 31, 2024, compared to 499% at December 31, 2023.
Q1 2024 provision for credit losses on loans and leases was $16.0 million compared to $13.4 million in Q4 2023 and the coverage of credit loss reserves for loans and leases held for investment was 1.12%. The coverage of credit loss reserves for loans and leases held for investment decreased modestly from 1.13% in Q4 2023 largely driven by lower consumer installment loans held for investment.
Q1 2024 book value per share and tangible book value per share* both grew by approximately $1.56, or 3.3% over Q4 2023, driven by strong quarterly earnings and a decrease in AOCI losses of $4.3 million over the same time period.
______________________________________________
*
Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.
1
Regulatory capital ratios as of March 31, 2024 are estimates.
2
Total deposits excluding wholesale CDs and BMTX student-related deposits.
3
Uninsured deposits (estimate) of $5.2 billion to be reported on the Bank's call report, less deposits of $1.1 billion collateralized by standby letters of credit from the FHLB and from our affiliates of $124.5 million.
CEO Commentary
"Following an exceptional year in 2023, we are pleased to share continued progress on the execution of our strategic priorities which we believe will grow our franchise value, our margins and net interest income in 2024 and beyond," said Customers Bancorp Chairman and CEO Jay Sidhu. "We are excited to announce that in April we welcomed 10 new, very experienced, banking teams to Customers Bank that are commercial focused deposit generators in the New York metropolitan area and in selected markets in California and Nevada. These commercial and business banking teams are highly experienced, have worked together for decades and have longstanding and deep client relationships. We expect the addition of these teams to accelerate the continued improvement of our deposit franchise with low cost, granular, primary relationship-based deposit accounts. We look forward to delivering exceptional service to their clients with our single point of contact, high-touch, technology-enabled banking capabilities. In the quarter, we once again demonstrated the momentum of our deposit franchise transformation by growing business unit deposits*2 by $1.2 billion which funded the repayment of maturing wholesale CDs in the amount of $1.2 billion. This was our fourth consecutive quarter of approximately $1 billion of business unit deposit*2 growth. The business unit deposit*2 growth was, once again, broad-based with more than 20 different channels increasing balances and roughly half contributing $25 million or more. Non-interest bearing deposits increased by $266.4 million during the quarter and represented 26 percent of total deposits. Our net interest margin moderated in the first quarter to 3.10% driven primarily by elevated cash balances resulting from strong business unit deposit*2 growth and the timing associated with replenishing higher yielding interest-earning assets that exited in the fourth quarter as we continue to remain focused on loan growth supporting holistic relationships. Capital levels continued to build as evidenced by a 24 basis point increase in our TCE / TA ratio* and an increase in our CET 1 ratio to 12.5%1. We are confident in our ability to achieve the 7.5% TCE / TA ratio* target that we disclosed last quarter. Enhanced by the addition of our new banking teams, we believe we are extremely well-positioned to continue to strengthen our deposit franchise, improve our profitability, and maintain our already strong capital ratios," stated Jay Sidhu.
"Our Q1 2024 GAAP earnings were $45.9 million, or $1.40 per diluted share, and core earnings* were $46.5 million, or $1.42 per diluted share. Excluding certain one-time items incurred during the quarter, our adjusted core earnings* were $55.1 million, or $1.68 per diluted share. At March 31, 2024, our deposit base was well diversified, with approximately 78%3 of total deposits insured. We maintain a strong liquidity position, with $8.9 billion of liquidity immediately available, which covers approximately 224% of uninsured deposits3 and our loan to deposit ratio was 74%. We continue to focus loan production where we have a holistic and primary relationship. Commercial loans grew by $123.0 million though gross loan balances remained relatively flat given targeted reductions in consumer installment loans in the quarter. Our loan pipeline grew meaningfully through the first quarter, and we remain confident in the 10% - 15% loan growth outlook previously provided. We have ample liquidity and capital to support the needs of our customers. At March 31, 2024, we had $3.7 billion of cash on hand, to fund strategic loan growth as well as prudent balance sheet and liquidity management. Asset quality remains strong with our NPA ratio at just 0.17% of total assets and reserve levels are robust at over 370% of total non-performing loans at the end of Q1 2024. Our exposure to the higher risk commercial real estate office sector is minimal, representing approximately 1% of the loan portfolio. Continued execution on our strategic priorities has positioned us favorably for success in 2024 from a capital, credit, liquidity, interest rate risk and earnings perspective. We will remain disciplined, but opportunistic, with our balance sheet capacity to manage risk and maintain robust capital levels. We are confident in our risk management capabilities and ability to provide excellent and differentiated service to our clients. We are excited and optimistic about the opportunities we had entering 2024, which will only be enhanced by the addition of the new banking teams," Jay Sidhu continued.
______________________________________________
*
Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.
1
Regulatory capital ratios as of March 31, 2024 are estimates.
2
Total deposits excluding wholesale CDs and BMTX student-related deposits.
3
Uninsured deposits (estimate) of $5.2 billion to be reported on the Bank's call report, less deposits of $1.1 billion collateralized by standby letters of credit from the FHLB and from our affiliates of $124.5 million.
Financial Highlights
(Dollars in thousands, except per share data)
At or Three Months Ended
Increase (Decrease)
March 31, 2024
December 31, 2023
Profitability Metrics:
Net income available for common shareholders
$
45,926
$
58,223
$
(12,297
)
(21.1
)%
Diluted earnings per share
$
1.40
$
1.79
$
(0.39
)
(21.8
)%
Core earnings*
$
46,532
$
61,633
$
(15,101
)
(24.5
)%
Adjusted core earnings*
$
55,137
$
61,633
$
(6,496
)
(10.5
)%
Core earnings per share*
$
1.42
$
1.90
$
(0.48
)
(25.3
)%
Adjusted core earnings per share*
$
1.68
$
1.90
$
(0.22
)
(11.6
)%
Return on average assets ("ROAA")
0.94
%
1.16
%
(0.22
)
Core ROAA*
0.95
%
1.22
%
(0.27
)
Adjusted core ROAA*
1.11
%
1.22
%
(0.11
)
Return on average common equity ("ROCE")
12.08
%
15.93
%
(3.85
)
Core ROCE*
12.24
%
16.87
%
(4.63
)
Adjusted core ROCE*
14.50
%
16.87
%
(2.37
)
Core pre-tax pre-provision net income*
$
83,674
$
101,884
$
(18,210
)
(17.9
)%
Adjusted core pre-tax pre-provision net income*
$
94,988
$
101,884
$
(6,896
)
(6.8
)%
Net interest margin, tax equivalent
3.10
%
3.31
%
(0.21
)
Yield on loans (Loan yield)
7.05
%
7.30
%
(0.25
)
Cost of deposits
3.45
%
3.39
%
0.06
Efficiency ratio
54.58
%
49.08
%
5.50
Core efficiency ratio*
54.24
%
46.70
%
7.54
Adjusted core efficiency ratio*
48.02
%
46.70
%
1.32
Non-interest expense to average total assets
1.87
%
1.75
%
0.12
Core non-interest expense to average total assets*
1.86
%
1.67
%
0.19
Adjusted core non-interest expense to average total assets*
1.65
%
1.67
%
(0.02
)
Balance Sheet Trends:
Total assets
$
21,347,367
$
21,316,265
$
31,102
0.1
%
Total cash and investment securities
$
7,338,025
$
7,355,156
$
(17,131
)
(0.2
)%
Total loans and leases
$
13,256,871
$
13,202,084
$
54,787
0.4
%
Non-interest bearing demand deposits
$
4,688,880
$
4,422,494
$
266,386
6.0
%
Total deposits
$
17,961,383
$
17,920,236
$
41,147
0.2
%
Capital Metrics:
Common Equity
$
1,553,823
$
1,500,600
$
53,223
3.5
%
Tangible Common Equity*
$
1,550,194
$
1,496,971
$
53,223
3.6
%
Common Equity to Total Assets
7.3
%
7.0
%
0.3
Tangible Common Equity to Tangible Assets*
7.3
%
7.0
%
0.3
Book Value per common share
$
49.29
$
47.73
$
1.56
3.3
%
Tangible Book Value per common share*
$
49.18
$
47.61
$
1.57
3.3
%
Common equity Tier 1 capital ratio (1)
12.5
%
12.2
%
0.3
Total risk based capital ratio (1)
15.6
%
15.3
%
0.3
(1) Regulatory capital ratios as of March 31, 2024 are estimates.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.
Financial Highlights
(Dollars in thousands, except per share data)
At or Three Months Ended
Increase (Decrease)
March 31, 2024
March 31, 2023
Profitability Metrics:
Net income available for common shareholders
$
45,926
$
50,265
$
(4,339
)
(8.6
)%
Diluted earnings per share
$
1.40
$
1.55
$
(0.15
)
(9.7
)%
Core earnings*
$
46,532
$
51,143
$
(4,611
)
(9.0
)%
Adjusted core earnings*
$
55,137
$
51,143
$
3,994
7.8
%
Core earnings per share*
$
1.42
$
1.58
$
(0.16
)
(10.1
)%
Adjusted core earnings per share*
$
1.68
$
1.58
$
0.10
6.3
%
Return on average assets ("ROAA")
0.94
%
1.03
%
(0.09
)
Core ROAA*
0.95
%
1.05
%
(0.10
)
Adjusted core ROAA*
1.11
%
1.05
%
0.06
Return on average common equity ("ROCE")
12.08
%
16.00
%
(3.92
)
Core ROCE*
12.24
%
16.28
%
(4.04
)
Adjusted core ROCE*
14.50
%
16.28
%
(1.78
)
Core pre-tax pre-provision net income*
$
83,674
$
89,282
$
(5,608
)
(6.3
)%
Adjusted core pre-tax pre-provision net income*
$
94,988
$
89,282
$
5,706
6.4
%
Net interest margin, tax equivalent
3.10
%
2.96
%
0.14
Yield on loans (Loan yield)
7.05
%
6.70
%
0.35
Cost of deposits
3.45
%
3.32
%
0.13
Efficiency ratio
54.58
%
47.71
%
6.87
Core efficiency ratio*
54.24
%
47.09
%
7.15
Adjusted core efficiency ratio*
48.02
%
47.09
%
0.93
Non-interest expense to average total assets
1.87
%
1.54
%
0.33
Core non-interest expense to average total assets*
1.86
%
1.53
%
0.33
Adjusted core non-interest expense to average total assets*
1.65
%
1.53
%
0.12
Balance Sheet Trends:
Total assets
$
21,347,367
$
21,751,614
$
(404,247
)
(1.9
)%
Total cash and investment securities
$
7,338,025
$
5,843,948
$
1,494,077
25.6
%
Total loans and leases
$
13,256,871
$
15,063,034
$
(1,806,163
)
(12.0
)%
Non-interest bearing demand deposits
$
4,688,880
$
3,487,517
$
1,201,363
34.4
%
Total deposits
$
17,961,383
$
17,723,617
$
237,766
1.3
%
Capital Metrics:
Common Equity
$
1,553,823
$
1,283,226
$
270,597
21.1
%
Tangible Common Equity*
$
1,550,194
$
1,279,597
$
270,597
21.1
%
Common Equity to Total Assets
7.3
%
5.9
%
1.4
Tangible Common Equity to Tangible Assets*
7.3
%
5.9
%
1.4
Book Value per common share
$
49.29
$
41.08
$
8.21
20.0
%
Tangible Book Value per common share*
$
49.18
$
40.96
$
8.22
20.1
%
Common equity Tier 1 capital ratio (1)
12.5
%
9.6
%
2.9
Total risk based capital ratio (1)
15.6
%
12.3
%
3.3
(1) Regulatory capital ratios as of March 31, 2024 are estimates.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.
Key Balance Sheet Trends
Loans and Leases
The following table presents the composition of total loans and leases as of the dates indicated:
(Dollars in thousands)
March 31, 2024
% of Total
December 31, 2023
% of Total
March 31, 2023
% of Total
Loans and Leases Held for Investment
Commercial:
Commercial & industrial:
Specialized lending
$
5,104,405
39.6
%
$
5,006,693
38.9
%
$
5,519,176
37.7
%
Other commercial & industrial (1)
1,113,517
8.6
1,162,317
9.0
1,414,419
9.7
Mortgage finance
1,071,146
8.3
1,014,742
7.9
1,374,894
9.4
Multifamily
2,123,675
16.5
2,138,622
16.6
2,195,211
15.0
Commercial real estate owner occupied
806,278
6.3
797,319
6.2
895,314
6.1
Commercial real estate non-owner occupied
1,182,084
9.2
1,177,650
9.2
1,245,248
8.5
Construction
185,601
1.3
166,393
1.3
188,123
1.3
Total commercial loans and leases
11,586,706
89.8
11,463,736
89.1
12,832,385
87.7
Consumer:
Residential
482,537
3.8
484,435
3.8
494,815
3.4
Manufactured housing
37,382
0.3
38,670
0.3
43,272
0.3
Installment:
Personal
492,892
3.8
555,533
4.3
849,420
5.8
Other
299,714
2.3
319,393
2.5
419,085
2.8
Total installment loans
792,606
6.1
874,926
6.8
1,268,505
8.6
Total consumer loans
1,312,525
10.2
1,398,031
10.9
1,806,592
12.3
Total loans and leases held for investment
$
12,899,231
100.0
%
$
12,861,767
100.0
%
$
14,638,977
100.0
%
Loans Held for Sale
Commercial:
Multifamily
$
-
-
%
$
-
-
%
$
4,051
1.0
%
Commercial real estate non-owner occupied
-
-
-
-
16,000
3.7
Total commercial loans and leases
-
-
-
-
20,051
4.7
Consumer:
Residential
870
0.2
1,215
0.3
821
0.2
Installment:
Personal
137,755
38.5
151,040
44.4
307,336
72.5
Other
219,015
61.3
188,062
55.3
95,849
22.6
Total installment loans
356,770
99.8
339,102
99.7
403,185
95.1
Total consumer loans
357,640
100.0
340,317
100.0
404,006
95.3
Total loans held for sale
$
357,640
100.0
%
$
340,317
100.0
%
$
424,057
100.0
%
Total loans and leases portfolio
$
13,256,871
$
13,202,084
$
15,063,034
(1) Includes PPP loans of $52.0 million, $74.7 million and $246.3 million as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively.
Loans and Leases Held for Investment
Loans and leases held for investment were $12.9 billion at March 31, 2024, up $37.5 million, or 0.3%, from December 31, 2023. Specialized lending increased $97.7 million, or 2.0% quarter-over-quarter, to $5.1 billion. Mortgage finance loans increased $56.4 million, or 5.6% quarter-over-quarter due to higher mortgage activity. Construction loans increased $19.2 million, or 11.5% quarter-over-quarter, to $185.6 million. Consumer installment loans held for investment decreased $82.3 million, or 9.4% quarter-over-quarter, to $792.6 million due to the continued build out of the held-for-sale strategy and de-risking of the held-for-investment loan portfolio. Other commercial and industrial loans decreased $48.8 million, or 4.2% quarter-over-quarter, to $1.1 billion, which included a decrease in PPP loans primarily from guarantee payments.
Loans and leases held for investment of $12.9 billion at March 31, 2024 was down $1.7 billion, or 11.9%, year-over-year, largely driven by reduced balances in consumer installment loans of $475.9 million, or 37.5% year-over-year, specialized lending of $414.8 million, mortgage finance loans of $303.7 million and other commercial and industrial loans of $300.9 million, which included a decrease in PPP loans primarily from guarantee payments.
Loans Held for Sale
Loans held for sale increased $17.3 million quarter-over-quarter, and were $357.6 million at March 31, 2024 due to the continued build out of the held-for-sale strategy in 2024.
Allowance for Credit Losses on Loans and Leases
The following table presents the allowance for credit losses on loans and leases as of the dates and for the periods presented:
At or Three Months Ended
Increase (Decrease)
At or Three Months Ended
Increase (Decrease)
(Dollars in thousands)
March 31, 2024
December 31, 2023
March 31, 2024
March 31, 2023
Allowance for credit losses on loans and leases
$
133,296
$
135,311
$
(2,015
)
$
133,296
$
130,281
$
3,015
Provision (benefit) for credit losses on loans and leases
$
15,953
$
13,420
$
2,533
$
15,953
$
18,008
$
(2,055
)
Net charge-offs from loans held for investment
$
17,968
$
17,322
$
646
$
17,968
$
18,651
$
(683
)
Annualized net charge-offs to average loans and leases
0.55
%
0.51
%
0.55
%
0.49
%
Coverage of credit loss reserves for loans and leases held for investment
1.12
%
1.13
%
1.12
%
0.97
%
Net charge-offs were relatively stable with $18.0 million in Q1 2024, compared to $17.3 million in Q4 2023 and $18.7 million in Q1 2023.
Provision (benefit) for Credit Losses
Three Months Ended
Increase (Decrease)
Three Months Ended
Increase (Decrease)
(Dollars in thousands)
March 31, 2024
December 31, 2023
March 31, 2024
March 31, 2023
Provision (benefit) for credit losses on loans and leases
$
15,953
$
13,420
$
2,533
$
15,953
$
18,008
$
(2,055
)
Provision (benefit) for credit losses on available for sale debt securities
1,117
103
1,014
1,117
1,595
(478
)
Provision for credit losses
17,070
13,523
3,547
17,070
19,603
(2,533
)
Provision (benefit) for credit losses on unfunded commitments
430
(136
)
566
430
280
150
Total provision for credit losses
$
17,500
$
13,387
$
4,113
$
17,500
$
19,883
$
(2,383
)
The provision for credit losses on loans and leases in Q1 2024 was $16.0 million, compared to $13.4 million in Q4 2023. The higher provision in Q1 2024 was primarily due to increased uncertainty and slightly weaker macroeconomic forecasts, partially offset by lower balances in consumer installment loans held for investment.
The provision for credit losses on available for sale investment securities in Q1 2024 was $1.1 million, compared to provision of $0.1 million in Q4 2023.
The provision for credit losses on loans and leases in Q1 2024 was $16.0 million, compared to $18.0 million in Q1 2023. The lower provision in Q1 2024 compared to the year ago period was primarily due to lower balances in loans held for investment.
The provision for credit losses on available for sale investment securities in Q1 2024 was $1.1 million compared to provision of $1.6 million in Q1 2023.
Asset Quality
The following table presents asset quality metrics as of the dates indicated:
(Dollars in thousands)
March 31, 2024
December 31, 2023
Increase (Decrease)
March 31, 2024
March 31, 2023
Increase (Decrease)
Non-performing assets ("NPAs"):
Nonaccrual / non-performing loans ("NPLs")
$
35,654
$
27,110
$
8,544
$
35,654
$
32,124
$
3,530
Non-performing assets
$
35,753
$
27,209
$
8,544
$
35,753
$
32,260
$
3,493
NPLs to total loans and leases
0.27
%
0.21
%
0.27
%
0.21
%
Reserves to NPLs
373.86
%
499.12
%
373.86
%
405.56
%
NPAs to total assets
0.17
%
0.13
%
0.17
%
0.15
%
Loans and leases (1) risk ratings:
Commercial loans and leases
Pass
$
10,095,611
$
9,955,243
$
140,368
$
10,095,611
$
10,928,620
$
(833,009
)
Special Mention
194,365
196,182
(1,817
)
194,365
136,986
57,379
Substandard
282,163
339,664
(57,501
)
282,163
273,154
9,009
Total commercial loans and leases
10,572,139
10,491,089
81,050
10,572,139
11,338,760
(766,621
)
Consumer loans
Performing
1,293,457
1,379,603
(86,146
)
1,293,457
1,787,123
(493,666
)
Non-performing
19,068
18,428
640
19,068
19,469
(401
)
Total consumer loans
1,312,525
1,398,031
(85,506
)
1,312,525
1,806,592
(494,067
)
Loans and leases receivable (1)
$
11,884,664
$
11,889,120
$
(4,456
)
$
11,884,664
$
13,145,352
$
(1,260,688
)
(1) Risk ratings are assigned to loans and leases held for investment, and excludes loans held for sale, loans receivable, mortgage finance, at fair value and eligible PPP loans that are fully guaranteed by the Small Business Administration.
Over the last decade, the Bank has developed a suite of commercial loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank's commercial and industrial ("C&I"), mortgage finance, corporate and specialized lending lines of business, and multifamily loans for example, are characterized by conservative underwriting standards and low loss rates. Because of this emphasis, the Bank's credit quality to date has been incredibly healthy despite an adverse economic environment. Maintaining strong asset quality also requires a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, management employs a bottom-up data driven approach to analyze the commercial portfolio.
Total consumer installment loans held for investment at March 31, 2024 were less than 4% of total assets and approximately 6% of total loans and leases held for investment, and were supported by an allowance for credit losses of $50.7 million. At March 31, 2024, the consumer installment portfolio had the following characteristics: average original FICO score of 737, average debt-to-income of 20% and average borrower income of $107 thousand.
Non-performing loans at March 31, 2024 increased to 0.27% of total loans and leases, compared to 0.21% at December 31, 2023 and 0.21% at March 31, 2023.
Investment Securities
The investment securities portfolio, including debt securities classified as available for sale ("AFS") and held to maturity ("HTM") provides periodic cash flows through regular maturities and amortization, can be used as collateral to secure additional funding, and is an important component of the Bank's liquidity position.
The following table presents the composition of the investment securities portfolio as of the dates indicated:
(Dollars in thousands)
March 31, 2024
December 31, 2023
March 31, 2023
Debt securities, available for sale
$
2,571,139
$
2,376,860
$
2,900,259
Equity securities
33,729
28,780
26,710
Investment securities, at fair value
2,604,868
2,405,640
2,926,969
Debt securities, held to maturity
1,032,037
1,103,170
870,294
Total investment securities portfolio
$
3,636,905
$
3,508,810
$
3,797,263
Critically important to performance during the recent banking crisis are the characteristics of a bank's securities portfolio. While there may be virtually no credit risk in some of these portfolios, holding longer term and lower yielding securities is creating challenges for many banks. Customers' securities portfolio is highly liquid, short in duration, and high in yield. At March 31, 2024, the AFS debt securities portfolio had a spot yield of 5.33%, an effective duration of approximately 1.7 years, and approximately 40% are variable rate. Additionally, 62% of the AFS securities portfolio was AAA rated at March 31, 2024.
At March 31, 2024, the HTM debt securities portfolio represented only 4.8% of total assets at March 31, 2024, had a spot yield of 4.26% and an effective duration of approximately 3.0 years. Additionally, at March 31, 2024, approximately 41% of the HTM securities were AAA rated and 49% were credit enhanced asset backed securities with no current expectation of credit losses.
Deposits
The following table presents the composition of our deposit portfolio as of the dates indicated:
(Dollars in thousands)
March 31, 2024
% of Total
December 31, 2023
% of Total
March 31, 2023
% of Total
Demand, non-interest bearing
$
4,688,880
26.1
%
$
4,422,494
24.7
%
$
3,487,517
19.7
%
Demand, interest bearing
5,661,775
31.5
5,580,527
31.1
5,791,302
32.7
Total demand deposits
10,350,655
57.6
10,003,021
55.8
9,278,819
52.4
Savings
2,080,374
11.6
1,402,941
7.8
924,359
5.2
Money market
3,347,843
18.6
3,226,395
18.0
2,019,633
11.4
Time deposits
2,182,511
12.2
3,287,879
18.4
5,500,806
31.0
Total deposits
$
17,961,383
100.0
%
$
17,920,236
100.0
%
$
17,723,617
100.0
%
Total deposits increased $41.1 million, or 0.2%, to $18.0 billion at March 31, 2024 as compared to the prior quarter. Non-interest bearing demand deposits increased $266.4 million, or 6.0%, to $4.7 billion, savings deposits increased $677.4 million, or 48.3%, to $2.1 billion, money market deposits increased $121.4 million, or 3.8%, to $3.3 billion and interest bearing demand deposits of $81.2 million, or 1.5%, to $5.7 billion. These increases were offset by a decrease in time deposits of $1.1 billion, or 33.6%, to $2.2 billion. The total average cost of deposits increased modestly by 6 basis points to 3.45% in Q1 2024 from 3.39% in the prior quarter largely driven by continued competitive dynamics in the deposit market that the industry continues to experience. Total estimated uninsured deposits were $4.0 billion1, or 22% of total deposits (inclusive of accrued interest) at March 31, 2024. Customers is also highly focused on total deposits with contractual term to manage its liquidity profile and the funding of loans and securities.
Total deposits increased $237.8 million, or 1.3%, to $18.0 billion at March 31, 2024 as compared to a year ago. Non-interest bearing demand deposits increased $1.2 billion, or 34.4%, to $4.7 billion, money market deposits increased $1.3 billion, or 65.8%, to $3.3 billion and savings deposits increased $1.2 billion, or 125.1%, to $2.1 billion. These increases were offset by decreases in time deposits of $3.3 billion, or 60.3% to $2.2 billion and interest bearing demand deposits of $129.5 million, or 2.2%, to $5.7 billion. The total average cost of deposits increased modestly by 13 basis points to 3.45% in Q1 2024 from 3.32% in the prior year primarily due to higher market interest rates, offsetting a positive shift in deposit mix.
______________________________________________
1
Uninsured deposits (estimate) of $5.2 billion to be reported on the Bank's call report, less deposits of $1.1 billion collateralized by standby letters of credit from the FHLB and from our affiliates of $124.5 million.
Borrowings
The following table presents the composition of our borrowings as of the dates indicated:
(Dollars in thousands)
March 31, 2024
December 31, 2023
March 31, 2023
FHLB advances
$
1,195,088
$
1,203,207
$
2,052,143
Senior notes
123,905
123,840
123,645
Subordinated debt
182,300
182,230
182,021
Total borrowings
$
1,501,293
$
1,509,277
$
2,357,809
Total borrowings decreased $8.0 million, or 0.5%, to $1.5 billion at March 31, 2024 as compared to the prior quarter. As of March 31, 2024, Customers' immediately available borrowing capacity with the FRB and FHLB was approximately $7.5 billion, of which $1.2 billion of available capacity was utilized in borrowings and $1.1 billion was utilized to collateralize deposits.
Total borrowings decreased $856.5 million, or 36.3%, to $1.5 billion at March 31, 2024 as compared to a year ago. This decrease primarily resulted from repayments of $340.0 million and $510.0 million in callable FHLB advances in Q4 2023 and Q3 2023, respectively.
Capital
The following table presents certain capital amounts and ratios as of the dates indicated:
(Dollars in thousands except per share data)
March 31, 2024
December 31, 2023
March 31, 2023
Customers Bancorp, Inc.
Common Equity
$
1,553,823
$
1,500,600
$
1,283,226
Tangible Common Equity*
$
1,550,194
$
1,496,971
$
1,279,597
Common Equity to Total Assets
7.3
%
7.0
%
5.9
%
Tangible Common Equity to Tangible Assets*
7.3
%
7.0
%
5.9
%
Book Value per common share
$
49.29
$
47.73
$
41.08
Tangible Book Value per common share*
$
49.18
$
47.61
$
40.96
Common equity Tier 1 ("CET 1") capital ratio (1)
12.5
%
12.2
%
9.6
%
Total risk based capital ratio (1)
15.6
%
15.3
%
12.3
%
(1) Regulatory capital ratios as of March 31, 2024 are estimates.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.
Customers Bancorp's common equity increased $53.2 million to $1.6 billion, and tangible common equity* increased $53.2 million to $1.6 billion, at March 31, 2024 compared to the prior quarter, respectively, primarily from earnings of $45.9 million and decreased unrealized losses on investment securities of $4.3 million (net of taxes) deferred in accumulated other comprehensive income ("AOCI"). Similarly, book value per common share increased to $49.29 from $47.73, and tangible book value per common share* increased to $49.18 from $47.61, at March 31, 2024 and December 31, 2023, respectively.
Customers Bancorp's common equity increased $270.6 million to $1.6 billion, and tangible common equity* increased $270.6 million to $1.6 billion, at March 31, 2024 compared to a year ago, respectively, primarily from earnings of $231.1 million and decreased unrealized losses on investment securities in AOCI of $24.0 million (net of taxes). Similarly, book value per common share increased to $49.29 from $41.08, and tangible book value per common share* increased to $49.18 from $40.96, at March 31, 2024 and March 31, 2023, respectively.
At the Customers Bancorp level, the CET 1 ratio (estimate), total risk based capital ratio (estimate), common equity to total assets ratio and tangible common equity to tangible assets ratio* ("TCE / TA ratio") were 12.5%, 15.6%, 7.3%, and 7.3%, respectively, at March 31, 2024.
At the Customers Bank level, capital levels remained strong and well above regulatory minimums. At March 31, 2024, Tier 1 capital (estimate) and total risk based capital (estimate) were 14.0% and 15.7%, respectively.
"Even though we remain well capitalized by all regulatory measures, we are committed to maintaining our CET 1 ratio around 11.5% and growing our TCE / TA ratio* to 7.5% in 2024," stated Jay Sidhu.
Key Profitability Trends
Net Interest Income
Net interest income totaled $160.4 million in Q1 2024, a decrease of $12.1 million from Q4 2023. This decrease was due to lower interest income of $14.1 million primarily due to the reduction of higher yielding loans and securities that exited the bank in the fourth quarter, and the measured pace of replenishing those interest-earning assets in the first quarter. Partially offsetting this decline was lower interest expense of $2.0 million due to the reduction of FHLB advances and positive remix of wholesale CDs with business unit deposits*2 that we executed in the fourth and first quarters.
"We experienced a modest decline in net interest income in the first quarter due to the selective reduction of higher yielding loans and securities in last quarter. This quarter we also reserved loan growth capacity in anticipation of the onboarding of the new teams. As we deploy excess liquidity, currently on the balance sheet in cash and securities, our net interest income is expected to grow and our net interest margin is expected to expand over the remainder of the year. Our loan pipeline grew meaningfully in the first quarter, which will benefit interest income and margin for the remainder of the year. For the second quarter in a row we reported lower interest expense compared to the prior quarter. The continued replacement of wholesale deposits and the remix of higher cost less strategic business unit deposits*2 is expected to continue to drive interest expense lower going forward. The combination of these efforts will benefit our net interest income throughout 2024 and beyond," stated Customers Bancorp President Sam Sidhu.
Net interest income totaled $160.4 million in Q1 2024, an increase of $10.5 million from Q1 2023. This increase was due to higher interest income of $16.8 million primarily due to variable rate lower credit risk specialized lending verticals and interest earning deposits from higher market interest rates, and lower interest expense from lower average balances of borrowings, offset in part by higher interest expense on deposits of $9.8 million primarily resulting from increased market interest rates. The decrease in interest-earning assets was primarily driven by decreases in specialized lending verticals, consumer installment loans, mortgage finance loans and PPP loans included in other C&I loans. Total consumer installment loans decreased in Q1 2024 as compared to Q1 2023, as installment loans held for investment decreased primarily for risk management purposes and the implementation of a held-for-sale strategy.
______________________________________________
2
Total deposits excluding wholesale CDs and BMTX student-related deposits.
Non-Interest Income
The following table presents details of non-interest income for the periods indicated:
Three Months Ended
Increase (Decrease)
Three Months Ended
Increase (Decrease)
(Dollars in thousands)
March 31, 2024
December 31, 2023
March 31, 2024
March 31, 2023
Commercial lease income
$
9,683
$
9,035
$
648
$
9,683
$
9,326
$
357
Loan fees
5,280
5,926
(646
)
5,280
3,990
1,290
Bank-owned life insurance
3,261
2,160
1,101
3,261
2,647
614
Mortgage finance transactional fees
946
927
19
946
1,074
(128
)
Gain (loss) on sale of loans
10
(91
)
101
10
-
10
Net gain (loss) on sale of investment securities
(30
)
(145
)
115
(30
)
-
(30
)
Other
2,081
860
1,221
2,081
1,084
997
Total non-interest income
$
21,231
$
18,672
$
2,559
$
21,231
$
18,121
$
3,110
Non-interest income totaled $21.2 million for Q1 2024, an increase of $2.6 million compared to Q4 2023. The increase was primarily due to increases in death benefits paid by insurance carriers under bank-owned life insurance policies, commercial lease income and other income.
Non-interest income totaled $21.2 million for Q1 2024, an increase of $3.1 million compared to Q1 2023. The increase was primarily due to increases in loan fees of $1.3 million resulting from increased servicing-related revenue and unused line of credit fees, death benefits paid by insurance carriers under bank-owned life insurance policies, commercial lease income and other income.
Non-Interest Expense
The following table presents details of non-interest expense for the periods indicated:
Three Months Ended
Increase (Decrease)
Three Months Ended
Increase (Decrease)
(Dollars in thousands)
March 31, 2024
December 31, 2023
March 31, 2024
March 31, 2023
Salaries and employee benefits
$
36,025
$
33,965
$
2,060
$
36,025
$
32,345
$
3,680
Technology, communication and bank operations
21,904
16,887
5,017
21,904
16,589
5,315
Commercial lease depreciation
7,970
7,357
613
7,970
7,875
95
Professional services
6,353
9,820
(3,467
)
6,353
7,596
(1,243
)
Loan servicing
4,031
3,779
252
4,031
4,661
(630
)
Occupancy
2,347
2,320
27
2,347
2,760
(413
)
FDIC assessments, non-income taxes and regulatory fees
13,469
13,977
(508
)
13,469
2,728
10,741
Advertising and promotion
682
850
(168
)
682
1,049
(367
)
Other
6,388
4,812
1,576
6,388
4,530
1,858
Total non-interest expense
$
99,169
$
93,767
$
5,402
$
99,169
$
80,133
$
19,036
Non-interest expenses totaled $99.2 million in Q1 2024, an increase of $5.4 million compared to Q4 2023. The increase was primarily attributable to certain one-time items which included deposit servicing-related fees of $7.1 million in technology, communications and bank operations and FDIC premiums of $4.2 million, both of which relate to periods prior to 2024. There was also an increase in the estimated industry-wide FDIC special assessment of $0.5 million in Q1 2024 from the $3.7 million FDIC special assessment fee recorded in Q4 2023. Excluding the impact of these amounts, total non-interest expenses were $87.4 million, which decreased $2.7 million in Q1 2024 compared to $90.0 million in Q4 2023. Other changes during the quarter include an increase of $2.1 million in salaries and employee benefits primarily due to higher incentives and stock awards and a decrease of $3.5 million in professional fees. Q1 2024 adjusted core non-interest expenses* were $87.4 million, a decrease of $2.1 million over Q4 2023.
Non-interest expenses totaled $99.2 million in Q1 2024, an increase of $19.0 million compared to Q1 2023. The increase was primarily attributable to increases of $10.7 million in FDIC assessments, non-income taxes and regulatory fees resulting primarily from higher FDIC assessments, one-time FDIC premiums of $4.2 million relating to periods prior to 2024 and an increase in the estimated industry-wide FDIC special assessment of $0.5 million, $5.3 million in technology, communications and bank operations which included the one-time deposit servicing-related fees and $3.7 million in salaries and employee benefits primarily due to higher headcount, annual merit increases and incentives. These increases were partially offset by a decrease of $1.2 million in professional fees.
Taxes
Income tax expense decreased by $6.1 million to $15.7 million in Q1 2024 from $21.8 million in Q4 2023 primarily due to lower pre-tax income.
Income tax expense increased by $1.1 million to $15.7 million in Q1 2024 from $14.6 million in Q1 2023 primarily due to a decrease in estimated income tax credits for 2024.
The effective tax rate for Q1 2024 was 24%. Customers expects the full-year 2024 effective tax rate to be approximately 22% to 24%.
Outlook
"Looking forward, our strategy and risk management principles remain unchanged. We are focused on managing risk, strengthening our deposit franchise, further improving our profitability and maintaining our strong capital ratios. Our deposits are expected to grow modestly with continued improvement in the quality of deposits, reducing higher cost business unit deposits*1 with lower cost deposits where we have a holistic and primary relationship. The addition of the new banking teams is expected to accelerate and enhance these efforts which were already well underway. We see attractive opportunities to deploy cash and securities cash flows into franchise-enhancing loan growth and our pipeline is strong. We remain confident in our ability to deliver 10% - 15% loan growth for the full year. The management of non-interest expenses remains a priority for us. Our adjusted core non-interest expense*, which excludes certain one-time items, declined from the core non-interest expense in the prior quarter. We expect the investments made in recruiting the new banking teams will produce significant benefits by increasing our net interest income and net interest margin primarily through lowering our interest expense costs as well as improving the overall quality of our deposit franchise. Operating efficiency has and will continue to be a differentiator of our business model, and we will continue to only make investments that generate long-term positive operating leverage and enable the organization to operate at a mid-40's efficiency ratio. The onboarding of our new banking teams will elevate our efficiency ratio temporarily, but we are confident in our ability to operate with a mid-40's efficiency ratio over the medium term. We remain committed to maintaining a CET 1 ratio around 11.5% in 2024, and growing our TCE / TA ratio* to 7.5%. We are highly focused on preserving superior credit quality, managing interest rate risk, maintaining robust liquidity, operating with higher capital ratios and generating positive operating leverage," concluded Sam Sidhu.
______________________________________________
*
Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.
1
Total deposits excluding wholesale CDs and BMTX student-related deposits.
Webcast
Date:
Friday, April 26, 2024
Time:
9:00 AM EDT
The live audio webcast, presentation slides, and earnings press release will be made available at https://www.customersbank.com/investor-relations/ and at the Customers Bancorp 1st Quarter Earnings Webcast.
You may submit questions in advance of the live webcast by emailing our Communications Director, David Patti at dpatti@customersbank.com.
The webcast will be archived for viewing on the Customers Bank Investor Relations page and available beginning approximately two hours after the conclusion of the live event.
Institutional Background
Customers Bancorp, Inc. (NYSE:CUBI) is one of the nation's top-performing banking companies with nearly $22 billion in assets making it one of the 80 largest bank holding companies in the U.S. Customers Bank's commercial and consumer clients benefit from a full suite of technology-enabled tailored product experiences delivered by best-in-class customer service distinguished by a Single Point of Contact approach. In addition to traditional lines such as C&I lending, commercial real estate lending and multifamily lending, Customers Bank also provides a number of national corporate banking services to specialized lending clients. Major accolades include:
No. 5 on American Banker 2023 list of top-performing banks with $10B to $50B in assets
No. 29 out of the 100 largest publicly traded banks in 2024 Forbes Best Banks list
No. 52 on Investor's Business Daily 100 Best Stocks for 2023
A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender. Learn more: www.customersbank.com.
"Safe Harbor" Statement
In addition to historical information, this press release may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.'s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words "may," "could," "should," "pro forma," "looking forward," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," "project," or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.'s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.'s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, such as the FDIC special assessments, the impact of COVID-19 and its variants on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, the demand for our products and services and the availability of sources of funding, the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply, actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships, higher inflation and its impacts, and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management's current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.'s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2023, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.
Q1 2024 Overview
The following table presents a summary of key earnings and performance metrics for the quarter ended March 31, 2024 and the preceding four quarters:
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
EARNINGS SUMMARY - UNAUDITED
(Dollars in thousands, except per share data and stock price data)
Q1
Q4
Q3
Q2
Q1
2024
2023
2023
2023
2023
GAAP Profitability Metrics:
Net income available to common shareholders
$
45,926
$
58,223
$
82,953
$
44,007
$
50,265
Per share amounts:
Earnings per share - basic
$
1.46
$
1.86
$
2.65
$
1.41
$
1.58
Earnings per share - diluted
$
1.40
$
1.79
$
2.58
$
1.39
$
1.55
Book value per common share (1)
$
49.29
$
47.73
$
45.47
$
42.16
$
41.08
CUBI stock price (1)
$
53.06
$
57.62
$
34.45
$
30.26
$
18.52
CUBI stock price as % of book value (1)
108
%
121
%
76
%
72
%
45
%
Average shares outstanding - basic
31,473,424
31,385,043
31,290,581
31,254,125
31,819,203
Average shares outstanding - diluted
32,854,534
32,521,787
32,175,084
31,591,142
32,345,017
Shares outstanding (1)
31,521,931
31,440,906
31,311,254
31,282,318
31,239,750
Return on average assets ("ROAA")
0.94
%
1.16
%
1.57
%
0.88
%
1.03
%
Return on average common equity ("ROCE")
12.08
%
15.93
%
23.97
%
13.22
%
16.00
%
Net interest margin, tax equivalent
3.10
%
3.31
%
3.70
%
3.15
%
2.96
%
Efficiency ratio
54.58
%
49.08
%
41.01
%
49.25
%
47.71
%
Non-GAAP Profitability Metrics (2):
Core earnings
$
46,532
$
61,633
$
83,294
$
52,163
$
51,143
Core pre-tax pre-provision net income
$
83,674
$
101,884
$
128,564
$
96,833
$
89,282
Per share amounts:
Core earnings per share - diluted
$
1.42
$
1.90
$
2.59
$
1.65
$
1.58
Tangible book value per common share (1)
$
49.18
$
47.61
$
45.36
$
42.04
$
40.96
CUBI stock price as % of tangible book value (1)
108
%
121
%
76
%
72
%
45
%
Core ROAA
0.95
%
1.22
%
1.57
%
1.03
%
1.05
%
Core ROCE
12.24
%
16.87
%
24.06
%
15.67
%
16.28
%
Core pre-tax pre-provision ROAA
1.58
%
1.90
%
2.32
%
1.79
%
1.72
%
Core pre-tax pre-provision ROCE
21.01
%
26.82
%
36.04
%
28.01
%
27.33
%
Core efficiency ratio
54.24
%
46.70
%
41.04
%
47.84
%
47.09
%
Asset Quality:
Net charge-offs
$
17,968
$
17,322
$
17,498
$
15,564
$
18,651
Annualized net charge-offs to average total loans and leases
0.55
%
0.51
%
0.50
%
0.42
%
0.49
%
Non-performing loans ("NPLs") to total loans and leases (1)
0.27
%
0.21
%
0.22
%
0.20
%
0.21
%
Reserves to NPLs (1)
373.86
%
499.12
%
466.11
%
494.46
%
405.56
%
Non-performing assets ("NPAs") to total assets
0.17
%
0.13
%
0.14
%
0.13
%
0.15
%
Customers Bank Capital Ratios (3):
Common equity Tier 1 capital to risk-weighted assets
14.0
%
13.77
%
12.97
%
11.96
%
11.31
%
Tier 1 capital to risk-weighted assets
14.0
%
13.77
%
12.97
%
11.96
%
11.31
%
Total capital to risk-weighted assets
15.7
%
15.28
%
14.45
%
13.38
%
12.64
%
Tier 1 capital to average assets (leverage ratio)
8.8
%
8.71
%
8.25
%
8.00
%
8.09
%
(1) Metric is a spot balance for the last day of each quarter presented.
(2) Customers' reasons for the use of these non-GAAP measures and a detailed reconciliation between the non-GAAP measures and the comparable GAAP amounts are included at the end of this document.
(3) Regulatory capital ratios are estimated for Q1 2024 and actual for the remaining periods. In accordance with regulatory capital rules, Customers elected to apply the CECL capital transition provisions which delayed the effects of CECL on regulatory capital for two years until January 1, 2022, followed by a three-year transition period. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of March 31, 2024, our regulatory capital ratios reflected 25%, or $15.4 million, benefit associated with the CECL transition provisions.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Dollars in thousands, except per share data)
Q1
Q4
Q3
Q2
Q1
2024
2023
2023
2023
2023
Interest income:
Loans and leases
$
217,999
$
239,453
$
271,107
$
241,745
$
244,212
Investment securities
46,802
51,074
54,243
48,026
47,316
Interest earning deposits
52,817
44,104
43,800
27,624
10,395
Loans held for sale
12,048
8,707
4,664
11,149
11,701
Other
2,111
2,577
2,526
1,616
1,321
Total interest income
331,777
345,915
376,340
330,160
314,945
Interest expense:
Deposits
153,725
150,307
145,825
136,375
143,930
FHLB advances
13,485
18,868
26,485
24,285
10,370
FRB advances
-
-
-
-
6,286
Subordinated debt
2,689
2,688
2,689
2,689
2,689
Other borrowings
1,493
1,546
1,568
1,540
1,771
Total interest expense
171,392
173,409
176,567
164,889
165,046
Net interest income
160,385
172,506
199,773
165,271
149,899
Provision for credit losses
17,070
13,523
17,856
23,629
19,603
Net interest income after provision for credit losses
143,315
158,983
181,917
141,642
130,296
Non-interest income:
Commercial lease income
9,683
9,035
8,901
8,917
9,326
Loan fees
5,280
5,926
6,029
4,271
3,990
Bank-owned life insurance
3,261
2,160
1,973
4,997
2,647
Mortgage finance transactional fees
946
927
1,018
1,376
1,074
Gain (loss) on sale of loans
10
(91
)
(348
)
(761
)
-
Loss on sale of capital call lines of credit
-
-
-
(5,037
)
-
Net gain (loss) on sale of investment securities
(30
)
(145
)
(429
)
-
-
Other
2,081
860
631
2,234
1,084
Total non-interest income
21,231
18,672
17,775
15,997
18,121
Non-interest expense:
Salaries and employee benefits
36,025
33,965
33,845
33,120
32,345
Technology, communication and bank operations
21,904
16,887
15,667
16,407
16,589
Commercial lease depreciation
7,970
7,357
7,338
7,328
7,875
Professional services
6,353
9,820
8,569
9,192
7,596
Loan servicing
4,031
3,779
3,858
4,777
4,661
Occupancy
2,347
2,320
2,471
2,519
2,760
FDIC assessments, non-income taxes and regulatory fees
13,469
13,977
8,551
9,780
2,728
Advertising and promotion
682
850
650
546
1,049
Legal settlement expense
-
-
4,096
-
-
Other
6,388
4,812
4,421
5,628
4,530
Total non-interest expense
99,169
93,767
89,466
89,297
80,133
Income before income tax expense
65,377
83,888
110,226
68,342
68,284
Income tax expense
15,651
21,796
23,470
20,768
14,563
Net income
49,726
62,092
86,756
47,574
53,721
Preferred stock dividends
3,800
3,869
3,803
3,567
3,456
Net income available to common shareholders
$
45,926
$
58,223
$
82,953
$
44,007
$
50,265
Basic earnings per common share
$
1.46
$
1.86
$
2.65
$
1.41
$
1.58
Diluted earnings per common share
1.40
1.79
2.58
1.39
1.55
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - UNAUDITED
(Dollars in thousands)
March 31,
December 31,
September 30,
June 30,
March 31,
2024
2023
2023
2023
2023
ASSETS
Cash and due from banks
$
51,974
$
45,210
$
68,288
$
54,127
$
77,251
Interest earning deposits
3,649,146
3,801,136
3,351,686
3,101,097
1,969,434
Cash and cash equivalents
3,701,120
3,846,346
3,419,974
3,155,224
2,046,685
Investment securities, at fair value
2,604,868
2,405,640
2,773,207
2,824,638
2,926,969
Investment securities held to maturity
1,032,037
1,103,170
1,178,370
1,258,560
870,294
Loans held for sale
357,640
340,317
150,368
78,108
424,057
Loans and leases receivable
11,936,621
11,963,855
12,600,548
12,826,531
13,391,610
Loans receivable, mortgage finance, at fair value
962,610
897,912
962,566
1,006,268
1,247,367
Allowance for credit losses on loans and leases
(133,296
)
(135,311
)
(139,213
)
(139,656
)
(130,281
)
Total loans and leases receivable, net of allowance for credit losses on loans and leases
12,765,935
12,726,456
13,423,901
13,693,143
14,508,696
FHLB, Federal Reserve Bank, and other restricted stock
100,067
109,548
126,098
126,240
124,733
Accrued interest receivable
120,123
114,766
123,984
119,501
123,754
Bank premises and equipment, net
7,253
7,371
7,789
8,031
8,581
Bank-owned life insurance
293,400
292,193
291,670
290,322
339,607
Goodwill and other intangibles
3,629
3,629
3,629
3,629
3,629
Other assets
361,295
366,829
358,162
471,169
374,609
Total assets
$
21,347,367
$
21,316,265
$
21,857,152
$
22,028,565
$
21,751,614
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand, non-interest bearing deposits
$
4,688,880
$
4,422,494
$
4,758,682
$
4,490,198
$
3,487,517
Interest bearing deposits
13,272,503
13,497,742
13,436,682
13,460,233
14,236,100
Total deposits
17,961,383
17,920,236
18,195,364
17,950,431
17,723,617
FHLB advances
1,195,088
1,203,207
1,529,839
2,046,142
2,052,143
Other borrowings
123,905
123,840
123,775
123,710
123,645
Subordinated debt
182,300
182,230
182,161
182,091
182,021
Accrued interest payable and other liabilities
193,074
248,358
264,406
269,539
249,168
Total liabilities
19,655,750
19,677,871
20,295,545
20,571,913
20,330,594
Preferred stock
137,794
137,794
137,794
137,794
137,794
Common stock
35,540
35,459
35,330
35,301
35,258
Additional paid in capital
567,490
564,538
559,346
555,737
552,255
Retained earnings
1,205,508
1,159,582
1,101,359
1,018,406
974,399
Accumulated other comprehensive income (loss), net
(132,305
)
(136,569
)
(149,812
)
(168,176
)
(156,276
)
Treasury stock, at cost
(122,410
)
(122,410
)
(122,410
)
(122,410
)
(122,410
)
Total shareholders' equity
1,691,617
1,638,394
1,561,607
1,456,652
1,421,020
Total liabilities and shareholders' equity
$
21,347,367
$
21,316,265
$
21,857,152
$
22,028,565
$
21,751,614
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED
(Dollars in thousands)
Three Months Ended
March 31, 2024
December 31, 2023
March 31, 2023
Average Balance
Interest Income or Expense
Average Yield or Cost (%)
Average Balance
Interest Income or Expense
Average Yield or Cost (%)
Average Balance
Interest Income or Expense
Average Yield or Cost (%)
Assets
Interest earning deposits
$
3,865,028
$
52,817
5.50
%
$
3,191,677
$
44,104
5.48
%
$
914,149
$
10,395
4.61
%
Investment securities (1)
3,771,097
46,802
4.99
%
4,007,418
51,074
5.10
%
4,031,247
47,316
4.69
%
Loans and leases:
Commercial & industrial:
Specialized lending loans and leases (2)
5,268,345
115,590
8.82
%
5,574,149
130,838
9.31
%
5,694,168
103,688
7.38
%
Other commercial & industrial loans (2)(3)
1,654,665
26,714
6.49
%
1,666,052
28,053
6.68
%
2,594,440
49,121
7.68
%
Mortgage finance loans
1,033,177
12,830
4.99
%
997,353
13,726
5.46
%
1,262,139
17,412
5.59
%
Multifamily loans
2,121,650
21,255
4.03
%
2,131,750
22,347
4.16
%
2,206,600
20,470
3.76
%
Non-owner occupied commercial real estate loans
1,348,468
20,179
6.02
%
1,392,684
20,686
5.89
%
1,449,722
20,199
5.65
%
Residential mortgages
522,528
5,708
4.39
%
526,422
5,942
4.48
%
542,909
5,598
4.18
%
Installment loans
1,179,721
27,771
9.47
%
1,198,043
26,568
8.80
%
1,727,995
39,425
9.25
%
Total loans and leases (4)
13,128,554
230,047
7.05
%
13,486,453
248,160
7.30
%
15,477,973
255,913
6.70
%
Other interest-earning assets
107,525
2,111
7.90
%
116,756
2,577
8.75
%
91,308
1,321
5.87
%
Total interest-earning assets
20,872,204
331,777
6.39
%
20,802,304
345,915
6.61
%
20,514,677
314,945
6.21
%
Non-interest-earning assets
463,025
449,969
538,243
Total assets
$
21,335,229
$
21,252,273
$
21,052,920
Liabilities
Interest checking accounts
$
5,538,846
$
61,531
4.47
%
$
5,656,212
$
62,041
4.35
%
$
7,494,379
$
70,485
3.81
%
Money market deposit accounts
3,233,103
36,811
4.58
%
2,802,309
29,990
4.25
%
2,470,004
20,783
3.41
%
Other savings accounts
1,753,118
21,399
4.91
%
1,218,118
13,849
4.51
%
822,312
6,286
3.10
%
Certificates of deposit
2,750,788
33,984
4.97
%
3,625,311
44,427
4.86
%
4,504,333
46,376
4.18
%
Total interest-bearing deposits (5)
13,275,855
153,725
4.66
%
13,301,950
150,307
4.48
%
15,291,028
143,930
3.82
%
Federal funds purchased
-
-
-
%
-
-
-
%
15,333
188
4.97
%
Borrowings
1,506,707
17,667
4.72
%
1,816,047
23,102
5.05
%
1,788,116
20,928
4.75
%
Total interest-bearing liabilities
14,782,562
171,392
4.66
%
15,117,997
173,409
4.55
%
17,094,477
165,046
3.91
%
Non-interest-bearing deposits (5)
4,620,986
4,270,557
2,299,295
Total deposits and borrowings
19,403,548
3.55
%
19,388,554
3.55
%
19,393,772
3.45
%
Other non-interest-bearing liabilities
264,677
276,198
247,575
Total liabilities
19,668,225
19,664,752
19,641,347
Shareholders' equity
1,667,004
1,587,521
1,411,573
Total liabilities and shareholders' equity
$
21,335,229
$
21,252,273
$
21,052,920
Net interest income
160,385
172,506
149,899
Tax-equivalent adjustment
394
398
375
Net interest earnings
$
160,779
$
172,904
$
150,274
Interest spread
2.84
%
3.06
%
2.76
%
Net interest margin
3.09
%
3.30
%
2.95
%
Net interest margin tax equivalent (6)
3.10
%
3.31
%
2.96
%
(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes owner occupied commercial real estate loans.
(3) Includes PPP loans.
(4) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.
(5) Total costs of deposits (including interest bearing and non-interest bearing) were 3.45%, 3.39% and 3.32% for the three months ended March 31, 2024, December 31, 2023 and March 31, 2023, respectively.
(6) Tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended March 31, 2024, December 31, 2023 and March 31, 2023, presented to approximate interest income as a taxable asset.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED
(Dollars in thousands)
March 31,
December 31,
September 30,
June 30,
March 31,
2024
2023
2023
2023
2023
Loans and leases held for investment
Commercial:
Commercial & industrial:
Specialized lending
$
5,104,405
$
5,006,693
$
5,422,161
$
5,534,832
$
5,519,176
Other commercial & industrial (1)
1,113,517
1,162,317
1,252,427
1,240,908
1,414,419
Mortgage finance
1,071,146
1,014,742
1,042,549
1,108,598
1,374,894
Multifamily
2,123,675
2,138,622
2,130,213
2,151,734
2,195,211
Commercial real estate owner occupied
806,278
797,319
794,815
842,042
895,314
Commercial real estate non-owner occupied
1,182,084
1,177,650
1,178,203
1,211,091
1,245,248
Construction
185,601
166,393
252,588
212,214
188,123
Total commercial loans and leases
11,586,706
11,463,736
12,072,956
12,301,419
12,832,385
Consumer:
Residential
482,537
484,435
483,133
487,199
494,815
Manufactured housing
37,382
38,670
40,129
41,664
43,272
Installment:
Personal
492,892
555,533
629,843
752,470
849,420
Other
299,714
319,393
337,053
250,047
419,085
Total installment loans
792,606
874,926
966,896
1,002,517
1,268,505
Total consumer loans
1,312,525
1,398,031
1,490,158
1,531,380
1,806,592
Total loans and leases held for investment
$
12,899,231
$
12,861,767
$
13,563,114
$
13,832,799
$
14,638,977
Loans held for sale
Commercial:
Multifamily
$
-
$
-
$
-
$
-
$
4,051
Commercial real estate non-owner occupied
-
-
-
-
16,000
Total commercial loans and leases
-
-
-
-
20,051
Consumer:
Residential
870
1,215
1,005
1,234
821
Installment:
Personal
137,755
151,040
124,848
76,874
307,336
Other
219,015
188,062
24,515
-
95,849
Total installment loans
356,770
339,102
149,363
76,874
403,185
Total consumer loans
357,640
340,317
150,368
78,108
404,006
Total loans held for sale
$
357,640
$
340,317
$
150,368
$
78,108
$
424,057
Total loans and leases portfolio
$
13,256,871
$
13,202,084
$
13,713,482
$
13,910,907
$
15,063,034
(1) Includes PPP loans.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END DEPOSIT COMPOSITION - UNAUDITED
(Dollars in thousands)
March 31,
December 31,
September 30,
June 30,
March 31,
2024
2023
2023
2023
2023
Demand, non-interest bearing
$
4,688,880
$
4,422,494
$
4,758,682
$
4,490,198
$
3,487,517
Demand, interest bearing
5,661,775
5,580,527
5,824,410
5,551,037
5,791,302
Total demand deposits
10,350,655
10,003,021
10,583,092
10,041,235
9,278,819
Savings
2,080,374
1,402,941
1,118,353
1,048,229
924,359
Money market
3,347,843
3,226,395
2,499,593
2,004,264
2,019,633
Time deposits
2,182,511
3,287,879
3,994,326
4,856,703
5,500,806
Total deposits
$
17,961,383
$
17,920,236
$
18,195,364
$
17,950,431
$
17,723,617
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY - UNAUDITED
(Dollars in thousands)
As of March 31, 2024
As of December 31, 2023
As of March 31, 2023
Total loans
Non accrual /NPLs
Allowance for credit losses
Total NPLs to total loans
Total reserves to total NPLs
Total loans
Non accrual /NPLs
Allowance for credit losses
Total NPLs to total loans
Total reserves to total NPLs
Total loans
Non accrual /NPLs
Allowance for credit losses
Total NPLs to total loans
Total reserves to total NPLs
Loan type
Commercial & industrial, including specialized lending (1)
$
6,326,458
$
3,608
$
23,003
0.06
%
637.56
%
$
6,285,840
$
4,436
$
23,503
0.07
%
529.82
%
$
7,061,122
$
3,886
$
20,050
0.06
%
515.95
%
Multifamily
2,123,675
5,161
18,307
0.24
%
354.72
%
2,138,622
-
16,343
-
%
-
%
2,195,211
881
15,084
0.04
%
1712.15
%
Commercial real estate owner occupied
806,278
8,920
10,201
1.11
%
114.36
%
797,319
5,869
9,882
0.74
%
168.38
%
895,314
3,621
8,472
0.40
%
233.97
%
Commercial real estate non-owner occupied
1,182,084
62
18,320
0.01
%
29548.39
%
1,177,650
-
16,859
-
%
-
%
1,245,248
-
11,032
-
%
-
%
Construction
185,601
-
1,866
-
%
-
%
166,393
-
1,482
-
%
-
%
188,123
-
2,336
-
%
-
%
Total commercial loans and leases receivable
10,624,096
17,751
71,697
0.17
%
403.90
%
10,565,824
10,305
68,069
0.10
%
660.54
%
11,585,018
8,388
56,974
0.07
%
679.23
%
Residential
482,537
8,089
6,707
1.68
%
82.92
%
484,435
6,802
6,586
1.40
%
96.82
%
494,815
6,473
6,853
1.31
%
105.87
%
Manufactured housing
37,382
2,268
4,160
6.07
%
183.42
%
38,670
2,331
4,239
6.03
%
181.85
%
43,272
2,568
4,339
5.93
%
168.96
%
Installment
792,606
6,958
50,732
0.88
%
729.12
%
874,926
7,211
56,417
0.82
%
782.37
%
1,268,505
8,720
62,115
0.69
%
712.33
%
Total consumer loans receivable
1,312,525
17,315
61,599
1.32
%
355.76
%
1,398,031
16,344
67,242
1.17
%
411.42
%
1,806,592
17,761
73,307
0.98
%
412.74
%
Loans and leases receivable
11,936,621
35,066
133,296
0.29
%
380.13
%
11,963,855
26,649
135,311
0.22
%
507.75
%
13,391,610
26,149
130,281
0.20
%
498.23
%
Loans receivable, mortgage finance, at fair value
962,610
-
-
-
%
-
%
897,912
-
-
-
%
-
%
1,247,367
-
-
-
%
-
%
Loans held for sale
357,640
588
-
0.16
%
-
%
340,317
461
-
0.14
%
-
%
424,057
5,975
-
1.41
%
-
%
Total portfolio
$
13,256,871
$
35,654
$
133,296
0.27
%
373.86
%
$
13,202,084
$
27,110
$
135,311
0.21
%
499.12
%
$
15,063,034
$
32,124
$
130,281
0.21
%
405.56
%
(1) Includes PPP loans.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED
(Dollars in thousands)
Q1
Q4
Q3
Q2
Q1
2024
2023
2023
2023 (1)
2023
Loan type
Commercial & industrial, including specialized lending
$
3,672
$
5,282
$
2,974
$
258
$
(71
)
Multifamily
473
127
1,999
1,448
-
Commercial real estate owner occupied
22
-
39
(34
)
-
Commercial real estate non-owner occupied
-
(288
)
-
266
4,234
Construction
-
-
-
-
(116
)
Residential
18
(1
)
13
24
(2
)
Installment
13,783
12,202
12,473
13,602
14,606
Total net charge-offs (recoveries) from loans held for investment
$
17,968
$
17,322
$
17,498
$
15,564
$
18,651
(1) Excludes $6.2 million of charge-offs for certain PCD loans acquired from the FDIC that were immediately applied against $8.7 million of allowance for credit losses on PCD loans recognized upon the acquisition of the loan portfolio on June 15, 2023. Subsequent recoveries and charge-offs of these PCD loans will be included in the period in which they occur.
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED
We believe that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our ongoing financial results, which we believe enhance an overall understanding of our performance and increases comparability of our period to period results. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. The non-GAAP measures presented are not necessarily comparable to non-GAAP measures that may be presented by other financial institutions. Although non-GAAP financial measures are frequently used in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results of operations or financial condition as reported under GAAP.
The following tables present reconciliations of GAAP to non-GAAP measures disclosed within this document.
Core Earnings and Adjusted Core Earnings - Customers Bancorp
Q1 2024
Q4 2023
Q3 2023
Q2 2023
Q1 2023
(Dollars in thousands, except per share data)
USD
Per share
USD
Per share
USD
Per share
USD
Per share
USD
Per share
GAAP net income to common shareholders
$
45,926
$
1.40
$
58,223
$
1.79
$
82,953
$
2.58
$
44,007
$
1.39
$
50,265
$
1.55
Reconciling items (after tax):
Severance expense
-
-
473
0.01
-
-
141
0.00
637
0.02
Impairments on fixed assets and leases
-
-
-
-
-
-
12
0.00
86
0.00
Loss on sale of capital call lines of credit
-
-
-
-
-
-
3,914
0.12
-
-
(Gains) losses on investment securities
57
0.00
(85
)
0.00
492
0.02
49
0.00
(49
)
0.00
Derivative credit valuation adjustment
169
0.01
267
0.01
(151
)
0.00
(101
)
0.00
204
0.01
Tax on surrender of bank-owned life insurance policies
-
-
-
-
-
-
4,141
0.13
-
-
FDIC special assessment
380
0.01
2,755
0.08
-
-
-
-
-
-
Core earnings
$
46,532
$
1.42
$
61,633
$
1.90
$
83,294
$
2.59
$
52,163
$
1.65
$
51,143
$
1.58
One-time non-interest expense items recorded during Q1 2024 (after-tax):
Deposit servicing fees prior to 2024
5,405
0.16
FDIC premiums prior to 2024
3,200
0.10
Total one-time non-interest expense items
8,605
0.26
Adjusted core earnings (adjusted for one-time non-interest expense items)
$
55,137
$
1.68
Core Return on Average Assets and Adjusted Core Return on Average Assets - Customers Bancorp
(Dollars in thousands, except per share data)
Q1 2024
Q4 2023
Q3 2023
Q2 2023
Q1 2023
GAAP net income
$
49,726
$
62,092
$
86,756
$
47,574
$
53,721
Reconciling items (after tax):
Severance expense
-
473
-
141
637
Impairments on fixed assets and leases
-
-
-
12
86
Loss on sale of capital call lines of credit
-
-
-
3,914
-
(Gains) losses on investment securities
57
(85
)
492
49
(49
)
Derivative credit valuation adjustment
169
267
(151
)
(101
)
204
Tax on surrender of bank-owned life insurance policies
-
-
-
4,141
-
FDIC special assessment
380
2,755
-
-
-
Core net income
$
50,332
$
65,502
$
87,097
$
55,730
$
54,599
One-time non-interest expense items recorded during Q1 2024 (after-tax):
Deposit servicing fees prior to 2024
5,405
FDIC premiums prior to 2024
3,200
Total one-time non-interest expense items
8,605
Adjusted core net income (adjusted for one-time non-interest expense items)
$
58,937
Average total assets
$
21,335,229
$
21,252,273
$
21,978,010
$
21,654,735
$
21,052,920
Core return on average assets
0.95
%
1.22
%
1.57
%
1.03
%
1.05
%
Adjusted core return on average assets (adjusted for one-time non-interest expense items)
1.11
%
Core Pre-Tax Pre-Provision Net Income and ROAA and Adjusted Core Pre-Tax Pre-Provision Net Income and ROAA - Customers Bancorp
(Dollars in thousands, except per share data)
Q1 2024
Q4 2023
Q3 2023
Q2 2023
Q1 2023
GAAP net income
$
49,726
$
62,092
$
86,756
$
47,574
$
53,721
Reconciling items:
Income tax expense
15,651
21,796
23,470
20,768
14,563
Provision (benefit) for credit losses
17,070
13,523
17,856
23,629
19,603
Provision (benefit) for credit losses on unfunded commitments
430
(136
)
48
(304
)
280
Severance expense
-
639
-
182
809
Impairments on fixed assets and leases
-
-
-
15
109
Loss on sale of capital call lines of credit
-
-
-
5,037
-
(Gains) losses on investment securities
75
(114
)
626
62
(62
)
Derivative credit valuation adjustment
222
361
(192
)
(130
)
259
FDIC special assessment
500
3,723
-
-
-
Core pre-tax pre-provision net income
$
83,674
$
101,884
$
128,564
$
96,833
$
89,282
One-time non-interest expense items recorded during Q1 2024:
Deposit servicing fees prior to 2024
7,106
FDIC premiums prior to 2024
4,208
Total one-time non-interest expense items
11,314
Adjusted core pre-tax pre-provision net income (adjusted for one-time non-interest expense items)
0.85
