CUBI 8-K
Customers Bancorp, Inc. (CUBI)
8-K
2022-10-26
For: 2022-10-26
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Added on
April 09, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 26, 2022
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (Commission File number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices, including zip code)
(610 ) 933-2000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instructions A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(g) of the Act:
| Title of Each Class | Trading Symbols | Name of Each Exchange on which Registered | ||||||||||||
Preferred Stock, Series E, par value $1.00 per share | ||||||||||||||
Preferred Stock, Series F, par value $1.00 per share | ||||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On October 26, 2022 , Customers Bancorp, Inc. (the "Company") issued a press release announcing unaudited financial information for the quarter ended September 30, 2022, a copy of which is included as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.
Item 7.01 Regulation FD Disclosure
The Company has posted to its website a slide presentation which is attached hereto as Exhibit 99.2 to this Current Report on Form 8-K and incorporated into this Item 7.01 by reference.
The information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto and incorporated by reference into Item 2.02 and Item 7.01, respectively, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, such information, including the exhibits attached hereto, shall not be deemed incorporated by reference into any of the Company's reports or filings with the SEC, whether made before or after the date hereof, except as expressly set forth by specific reference in such report or filing. The information in this Current Report on Form 8-K, including the exhibits attached hereto, shall not be deemed an admission as to the materiality of any information in this Current Report on Form 8-K that is required to be disclosed solely to satisfy the requirements of Regulation FD.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
| Exhibit | Description | |||||||
| Press Release dated October 26, 2022 | ||||||||
| Slide presentation dated October 2022 | ||||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| CUSTOMERS BANCORP, INC. | |||||
By: /s/ Carla A. Leibold | |||||
| Name: Carla A. Leibold | |||||
| Title: Executive Vice President - Chief Financial Officer | |||||
Date: October 26, 2022
EXHIBIT INDEX
| Exhibit No. | Description | |||||||
| Press Release dated October 26, 2022 | ||||||||
| Slide presentation dated October 2022 | ||||||||
Exhibit 99.1
Customers Bancorp, Inc. (NYSE:CUBI)
701 Reading Avenue
West Reading, PA 19611
Contact:
David W. Patti, Communications Director 610-451-9452
David W. Patti, Communications Director 610-451-9452
Customers Bancorp Reports Results for Third Quarter 2022
Third Quarter 2022 Results | ||||||||||||||||||||
| Earnings | Earnings Per Share | Return on Assets | Return on Common Equity | |||||||||||||||||
$61.4 million | $1.85 | 1.24% | 19.33% | |||||||||||||||||
Net Income | Diluted Earnings Per Share | ROAA | ROCE | |||||||||||||||||
$82.3 million | $2.48 | 1.64% | 25.91% | |||||||||||||||||
Core Earnings* | Core Earnings Per Diluted Share* | Core ROAA* | Core ROCE* | |||||||||||||||||
$76.4 million | $2.30 | 1.95% | 31.01% | |||||||||||||||||
Core Earnings, excluding PPP* | Core Earnings Per Diluted Share, excluding PPP* | Pre-tax and Pre-provision Adjusted ROAA* | Pre-tax and Pre-provision Adjusted ROCE* | |||||||||||||||||
Third Quarter 2022 Highlights
•Q3 2022 net income available to common shareholders was $61.4 million, or $1.85 per diluted share; ROAA was 1.24% and ROCE was 19.33%.
•Q3 2022 core earnings* were $82.3 million, or $2.48 per diluted share; Core ROAA* was 1.64% and Core ROCE* was 25.91%.
•Q3 2022 core earnings excluding Paycheck Protection Program* ("PPP") were $76.4 million, or $2.30 per diluted share, up 134.9% over Q3 2021, and bringing year-to-date core earnings (excluding PPP)* to $5.15.
•Q3 2022 adjusted pre-tax pre-provision net income* was $101.0 million; ROAA* was 1.95%, ROCE* was 31.01%.
•Year-over-year loan growth (excluding loans to mortgage companies and PPP*) was $4.5 billion, or 57.3%, led by our low-risk variable rate specialty lending verticals.
*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 is included at the end of this document. | ||||||||||||||
1
•Year-over-year deposit growth was $551.4 million, up 3.2%. Total demand deposits increased $141.0 million, or 1.4% year-over-year. Time deposits increased $1.3 billion, or 220.0%. CBIT-related deposits had a balance of $1.9 billion at September 30, 2022, down $191.7 million from June 30, 2022.
•Q3 2022 net interest margin, tax equivalent* was 3.16%. Q3 2022 net interest margin, tax equivalent, excluding the impact of PPP loans* was 3.18%.
•Onboarded 111 new CBIT customers in Q3 2022, bringing total customers to 301.
•Total operating expenses were flat in Q3 2022 compared to Q2 2022 and down $3.8 million over Q3 2021.
•Q3 2022 benefit to provision for credit losses on loans and leases of $7.8 million was largely driven by the sale of $500.0 million of consumer installment loans, offset in part by the impact of loan growth and our recognition of weaker macroeconomic forecasts.
•Non-performing assets were $28.0 million, or 0.14% of total assets, at September 30, 2022 compared to $28.2 million, or 0.14% of total assets, at June 30, 2022 and $52.4 million, or 0.27% of total assets, at September 30, 2021. Allowance for credit losses on loans and leases equaled 466% of non-performing loans at September 30, 2022, compared to 558% at June 30, 2022 and 253% at September 30, 2021.
•Extended one-year common stock repurchase program an additional year, resulting in approximately 2.0 million shares available to be repurchased through September 2023.
•Tangible book value per share* grew year over year by $3.23, or 9.2%, despite increased AOCI losses of $157.6 million over the same time period. Tangible book value per share* has grown by 74.5% over the past 5 years.
CEO Commentary
West Reading, PA, October 26, 2022 - “We delivered another solid quarter and are extremely pleased with our third quarter results despite the challenging interest rate and economic environment,” remarked Customers Bancorp Chairman and CEO, Jay Sidhu. “We remain laser focused on our responsible organic growth strategy and have taken prudent risk management strategic actions over the past several quarters to ensure we are well positioned from a capital, credit, liquidity and earnings perspective. We are also pleased to report that we have already beat our 2022 core earnings per share, excluding PPP* target of $4.75 - $5.00. Core earnings per share, excluding PPP* for third quarter 2022 were $2.30, bringing year-to-date September 2022 core earnings per share, excluding PPP* to $5.15. In addition, core ROAA* was 1.64% and core ROCE* was 25.91% for the third quarter. Q3 2022 net interest income generated by the core bank was up 2% (~10% annualized) over Q2 2022 and 38% year-over-year. Core loan growth was led by increases in low-risk variable rate specialty lending verticals of $0.5 billion, which were largely offset by a decline in loans to mortgage companies of $0.3 billion and a sale of $0.5 billion of consumer installment loans executed as part of our balance sheet optimization initiatives. Asset quality remains exceptional and credit reserves are robust. Our loan and deposit pipelines remain strong and we are very focused on maintaining our margins, moderating our growth, improving our capital ratios, and controlling our expenses. We remain very optimistic about our future,” Mr. Jay Sidhu continued.
2
Financial Highlights
(Dollars in thousands, except per share data) | At or Three Months Ended | Increase (Decrease) | Nine Months Ended | Increase (Decrease) | ||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| Profitability Metrics: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income available for common shareholders | $ | 61,364 | $ | 110,241 | $ | (48,877) | (44.3) | % | $ | 192,779 | $ | 201,487 | $ | (8,708) | (4.3) | % | ||||||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 1.85 | $ | 3.25 | $ | (1.40) | (43.1) | % | $ | 5.72 | $ | 6.02 | $ | (0.30) | (5.0) | % | ||||||||||||||||||||||||||||||||||
| Core earnings* | $ | 82,270 | $ | 113,876 | $ | (31,606) | (27.8) | % | $ | 217,047 | $ | 243,487 | $ | (26,440) | (10.9) | % | ||||||||||||||||||||||||||||||||||
| Core earnings per share* | $ | 2.48 | $ | 3.36 | $ | (0.88) | (26.2) | % | $ | 6.44 | $ | 7.27 | $ | (0.83) | (11.4) | % | ||||||||||||||||||||||||||||||||||
| Core earnings, excluding PPP* | $ | 76,424 | $ | 32,539 | $ | 43,885 | 134.9 | % | $ | 173,422 | $ | 112,759 | $ | 60,663 | 53.8 | % | ||||||||||||||||||||||||||||||||||
| Core earnings per share, excluding PPP* | $ | 2.30 | $ | 0.96 | $ | 1.34 | 139.6 | % | $ | 5.15 | $ | 3.37 | $ | 1.78 | 52.8 | % | ||||||||||||||||||||||||||||||||||
| Return on average assets ("ROAA") | 1.24 | % | 2.33 | % | (1.09) | 1.34 | % | 1.49 | % | (0.15) | ||||||||||||||||||||||||||||||||||||||||
| Core ROAA* | 1.64 | % | 2.35 | % | (0.71) | 1.50 | % | 1.76 | % | (0.26) | ||||||||||||||||||||||||||||||||||||||||
| Return on average common equity ("ROCE") | 19.33 | % | 40.82 | % | (21.49) | 20.58 | % | 26.99 | % | (6.41) | ||||||||||||||||||||||||||||||||||||||||
| Core ROCE* | 25.91 | % | 42.16 | % | (16.25) | 23.17 | % | 32.61 | % | (9.44) | ||||||||||||||||||||||||||||||||||||||||
| Adjusted pre-tax pre-provision net income* | $ | 100,994 | $ | 167,215 | $ | (66,221) | (39.6) | % | $ | 319,335 | $ | 340,451 | $ | (21,116) | (6.2) | % | ||||||||||||||||||||||||||||||||||
| Net interest margin, tax equivalent* | 3.16 | % | 4.59 | % | (1.43) | 3.38 | % | 3.55 | % | (0.17) | ||||||||||||||||||||||||||||||||||||||||
| Net interest margin, tax equivalent, excluding PPP loans* | 3.18 | % | 3.24 | % | (0.06) | 3.27 | % | 3.17 | % | 0.10 | ||||||||||||||||||||||||||||||||||||||||
| Loan yield, excluding PPP* | 5.15 | % | 4.42 | % | 0.73 | 4.75 | % | 4.36 | % | 0.39 | ||||||||||||||||||||||||||||||||||||||||
| Cost of deposits | 1.48 | % | 0.42 | % | 1.06 | 0.80 | % | 0.47 | % | 0.33 | ||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio | 50.00 | % | 33.42 | % | 16.58 | 43.46 | % | 41.07 | % | 2.39 | ||||||||||||||||||||||||||||||||||||||||
| Core efficiency ratio* | 42.57 | % | 30.36 | % | 12.21 | 41.23 | % | 37.31 | % | 3.92 | ||||||||||||||||||||||||||||||||||||||||
| Balance Sheet Trends: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 20,367,621 | $ | 19,108,922 | $ | 1,258,699 | 6.6 | % | ||||||||||||||||||||||||||||||||||||||||||
| Total assets, excluding PPP* | $ | 19,212,989 | $ | 14,151,565 | $ | 5,061,424 | 35.8 | % | ||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 15,336,688 | $ | 15,515,537 | $ | (178,849) | (1.2) | % | ||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases, excluding PPP* | $ | 14,182,056 | $ | 10,558,180 | $ | 3,623,876 | 34.3 | % | ||||||||||||||||||||||||||||||||||||||||||
| Non-interest bearing demand deposits | $ | 2,993,793 | $ | 4,954,331 | $ | (1,960,538) | (39.6) | % | ||||||||||||||||||||||||||||||||||||||||||
| Total deposits | $ | 17,522,438 | $ | 16,971,025 | $ | 551,413 | 3.2 | % | ||||||||||||||||||||||||||||||||||||||||||
| Capital Metrics: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Equity | $ | 1,249,137 | $ | 1,146,505 | $ | 102,632 | 9.0 | % | ||||||||||||||||||||||||||||||||||||||||||
| Tangible Common Equity* | $ | 1,245,508 | $ | 1,142,711 | $ | 102,797 | 9.0 | % | ||||||||||||||||||||||||||||||||||||||||||
| Tangible Common Equity to Tangible Assets* | 6.12 | % | 5.98 | % | 0.14 | |||||||||||||||||||||||||||||||||||||||||||||
| Tangible Common Equity to Tangible Assets, excluding PPP* | 6.48 | % | 8.08 | % | (1.60) | |||||||||||||||||||||||||||||||||||||||||||||
| Tangible Book Value per common share* | $ | 38.35 | $ | 35.12 | $ | 3.23 | 9.2 | % | ||||||||||||||||||||||||||||||||||||||||||
Common equity Tier 1 capital ratio (1) | 10.1 | % | 10.4 | % | (0.3) | |||||||||||||||||||||||||||||||||||||||||||||
Total risk based capital ratio (1) | 12.8 | % | 13.6 | % | (0.8) | |||||||||||||||||||||||||||||||||||||||||||||
(1) Regulatory capital ratios as of September 30, 2022 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 is included at the end of this document. | ||||||||||||||||||||||||||||||||||||||||||||||||||
3
Customers Bank Instant Token (CBITTM)
"Despite significant market volatility that continues in the digital asset space, we are very pleased with our progress to date. In Q3 2022, we onboarded 111 new CBIT-related customers to the Digital Bank, once again beating our internal target, and bringing total customers to 301. Our digital asset-related deposits have stabilized and ended the third quarter at $1.9 billion. We continue to expect digital asset-related deposits to grow in fourth quarter 2022 as our pipelines remain strong, giving us an opportunity to further transform our deposits into a high quality, low-cost, stable and growing deposit franchise. We believe our technology, compliance and customer service and support systems remain among the best in the country," commented Mr. Sam Sidhu, President and CEO of Customers Bank.
Paycheck Protection Program (PPP)
We funded, either directly or indirectly, about 256,000 PPP loans totaling $5.2 billion in 2021, bringing total PPP loans funded to approximately 358,000 and $10.3 billion. We also earned close to $350 million of deferred origination fees from the SBA through the PPP loans, which is significantly accretive to our earnings and capital levels as these loans are forgiven by the government. In Q3 2022, we recognized $11 million of these fees in earnings, bringing total fees recognized to date to $318 million, resulting in approximately $30 million remaining to be recognized throughout 2022 and early 2023. "As we've stated previously, it is difficult to predict the timing of PPP forgiveness. We expect most of the fees to be recognized over the next two quarters," commented Customers Bancorp CFO, Carla Leibold.
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) | September 30, 2022 | % of Total | June 30, 2022 | % of Total | September 30, 2021 | % of Total | |||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||
| Specialty lending | $ | 5,103,974 | 33.3 | % | $ | 4,599,640 | 29.4 | % | $ | 1,736,966 | 11.2 | % | |||||||||||||||||||||||
| Other commercial & industrial | 1,064,332 | 7.0 | 1,037,443 | 6.6 | 867,401 | 5.6 | |||||||||||||||||||||||||||||
| Multi-family | 2,267,376 | 14.8 | 2,012,920 | 12.9 | 1,387,166 | 8.9 | |||||||||||||||||||||||||||||
| Loans to mortgage companies | 1,708,587 | 11.1 | 1,975,189 | 12.6 | 2,626,483 | 16.9 | |||||||||||||||||||||||||||||
| Commercial real estate owner occupied | 726,670 | 4.7 | 710,577 | 4.5 | 656,044 | 4.2 | |||||||||||||||||||||||||||||
| Loans receivable, PPP | 1,154,632 | 7.5 | 1,570,160 | 10.0 | 4,957,357 | 32.0 | |||||||||||||||||||||||||||||
| Commercial real estate non-owner occupied | 1,263,211 | 8.2 | 1,152,869 | 7.4 | 1,144,643 | 7.4 | |||||||||||||||||||||||||||||
| Construction | 136,133 | 0.9 | 195,687 | 1.2 | 198,607 | 1.3 | |||||||||||||||||||||||||||||
| Total commercial loans and leases | 13,424,915 | 87.5 | 13,254,485 | 84.6 | 13,574,667 | 87.5 | |||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||
| Residential | 466,888 | 3.0 | 460,228 | 2.9 | 260,820 | 1.7 | |||||||||||||||||||||||||||||
| Manufactured housing | 46,990 | 0.3 | 48,570 | 0.3 | 55,635 | 0.3 | |||||||||||||||||||||||||||||
| Personal | 1,079,267 | 7.0 | 1,641,748 | 10.5 | 1,342,650 | 8.7 | |||||||||||||||||||||||||||||
| Other | 318,628 | 2.2 | 259,322 | 1.7 | 281,765 | 1.8 | |||||||||||||||||||||||||||||
| Total consumer loans | 1,911,773 | 12.5 | 2,409,868 | 15.4 | 1,940,870 | 12.5 | |||||||||||||||||||||||||||||
| Total loans and leases | $ | 15,336,688 | 100.0 | % | $ | 15,664,353 | 100.0 | % | $ | 15,515,537 | 100.0 | % | |||||||||||||||||||||||
C&I loans and leases, including specialty lending, increased $3.6 billion, or 136.8% year-over-year, to $6.2 billion. Practically all of the increases in outstanding balances were in the low-risk variable rate secured categories of Fund Finance and Lender Finance. Multi-family loans increased $880.2 million, or 63.5%, to $2.3 billion, residential loans increased $206.1 million, or 79.0%, to $466.9 million, commercial real estate non-owner occupied loans increased $118.6 million, or 10.4% year-over-year to $1.3 billion and commercial real estate owner occupied loans increased $70.6 million, or 10.8%, to $726.7 million. These increases in loans and leases were partially offset by a decrease in total consumer installment loans of $226.5 million, or 13.9%, to $1.4 billion primarily due to the sale of a $500.0 million of consumer installment loans and a decrease in construction loans of $62.5 million, or 31.5%, to $136.1 million.
4
Allowance for Credit Losses on Loans and Leases
| At or Three Months Ended | Increase (Decrease) | At or Three Months Ended | Increase (Decrease) | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||
| Allowance for credit losses on loans and leases | $ | 130,197 | $ | 156,530 | $ | (26,333) | $ | 130,197 | $ | 131,496 | $ | (1,299) | |||||||||||||||||||||||
| Provision (benefit) for credit losses on loans and leases | (7,836) | 24,164 | (32,000) | (7,836) | 13,164 | (21,000) | |||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | 18,498 | 13,481 | 5,017 | 18,498 | 7,104 | 11,394 | |||||||||||||||||||||||||||||
| Annualized net charge-offs (recoveries) to average loans and leases | 0.47 | % | 0.36 | % | 0.47 | % | 0.17 | % | |||||||||||||||||||||||||||
| Coverage of credit loss reserves for loans and leases held for investment | 0.95 | % | 1.14 | % | 0.95 | % | 1.02 | % | |||||||||||||||||||||||||||
| Coverage of credit loss reserves for loans and leases held for investment, excluding PPP* | 1.03 | % | 1.28 | % | 1.03 | % | 1.65 | % | |||||||||||||||||||||||||||
*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 is included at the end of this document. | |||||||||||||||||||||||||||||||||||
The increase in net charge-offs in Q3 2022 compared to Q2 2022 was primarily due to a partial charge-off of $7.0 million for one performing commercial real estate collateral dependent loan that we felt prudent in exiting at this time. Our consumer net charge-offs were flat in Q3 2022 compared to Q2 2022.
Provision (Benefit) for Credit Losses
| Three Months Ended | Increase (Decrease) | |||||||||||||||||||
| (Dollars in thousands) | September 30, 2022 | June 30, 2022 | ||||||||||||||||||
| Provision (benefit) for credit losses on loans and leases | $ | (7,836) | $ | 24,164 | $ | (32,000) | ||||||||||||||
| Provision (benefit) for credit losses on unfunded commitments | 254 | 608 | (354) | |||||||||||||||||
| Provision (benefit) for credit losses on available for sale debt securities | (158) | (317) | 159 | |||||||||||||||||
| Total provision (benefit) for credit losses | $ | (7,740) | $ | 24,455 | $ | (32,195) | ||||||||||||||
The benefit to provision for credit losses on loans and leases in Q3 2022 was $7.8 million, compared to provision expense of $24.2 million in Q2 2022. The benefit to provision in Q3 2022 was primarily due to the sale of $500.0 million of unsecured consumer installment loans in connection with the Company's balance sheet optimization initiatives, partially offset by loan growth and our recognition of weaker macroeconomic forecasts. This sale transaction resulted in approximately $36.8 million of release in allowance for credit losses, which is included in core earnings*. The benefit to provision for credit losses on available for sale investment securities in Q3 2022 was $0.2 million compared to $0.3 million in Q2 2022.
5
Asset Quality
The following table presents asset quality metrics as of the dates indicated:
| (Dollars in thousands) | September 30, 2022 | June 30, 2022 | Increase (Decrease) | September 30, 2022 | September 30, 2021 | Increase (Decrease) | |||||||||||||||||||||||||||||
| Non-performing assets ("NPAs"): | |||||||||||||||||||||||||||||||||||
| Nonaccrual / non-performing loans ("NPLs") | $ | 27,919 | $ | 28,064 | $ | (145) | $ | 27,919 | $ | 52,041 | $ | (24,122) | |||||||||||||||||||||||
| Non-performing assets | 27,965 | 28,150 | (185) | 27,965 | 52,377 | (24,412) | |||||||||||||||||||||||||||||
NPLs to total loans and leases (1) | 0.18 | % | 0.18 | % | 0.18 | % | 0.34 | % | |||||||||||||||||||||||||||
Reserves to NPLs (1) | 466.34 | % | 557.76 | % | 466.34 | % | 252.68 | % | |||||||||||||||||||||||||||
| NPAs to total assets | 0.14 | % | 0.14 | % | 0.14 | % | 0.27 | % | |||||||||||||||||||||||||||
| Loans and leases risk ratings: | |||||||||||||||||||||||||||||||||||
Commercial loans and leases (1) | |||||||||||||||||||||||||||||||||||
| Pass | $ | 10,262,647 | $ | 9,355,846 | $ | 906,801 | $ | 10,262,647 | $ | 5,586,462 | $ | 4,676,185 | |||||||||||||||||||||||
| Special Mention | 104,560 | 106,566 | (2,006) | 104,560 | 195,663 | (91,103) | |||||||||||||||||||||||||||||
| Substandard | 329,878 | 343,175 | (13,297) | 329,878 | 260,271 | 69,607 | |||||||||||||||||||||||||||||
| Total commercial loans and leases | 10,697,085 | 9,805,587 | 891,498 | 10,697,085 | 6,042,396 | 4,654,689 | |||||||||||||||||||||||||||||
| Consumer loans | |||||||||||||||||||||||||||||||||||
| Performing | 1,893,977 | 2,392,852 | (498,875) | 1,893,977 | 1,912,393 | (18,416) | |||||||||||||||||||||||||||||
| Non-performing | 16,680 | 14,556 | 2,124 | 16,680 | 15,810 | 870 | |||||||||||||||||||||||||||||
| Total consumer loans | 1,910,657 | 2,407,408 | (496,751) | 1,910,657 | 1,928,203 | (17,546) | |||||||||||||||||||||||||||||
| Loans and leases receivable | $ | 12,607,742 | $ | 12,212,995 | $ | 394,747 | $ | 12,607,742 | $ | 7,970,599 | $ | 4,637,143 | |||||||||||||||||||||||
(1) Excludes loan receivable, PPP, as PPP loans are fully guaranteed by the Small Business Administration.
Over the last decade, we have developed a suite of commercial loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s C&I, loans to mortgage companies, corporate and specialty lending lines of business, and multi-family loans for example, are characterized by conservative underwriting standards and low loss rates. Because of this emphasis, the Bank’s credit quality to date has been incredibly healthy despite a highly adverse economic environment. Maintaining strong asset quality also requires a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, we employ a bottom-up data driven approach to analyze the commercial portfolio. Exposure to industry segments and CRE significantly impacted by COVID-19 initially is not substantial.
Total consumer installment loans were approximately 6.9% of total assets at September 30, 2022 and 9.9% of core loans* were supported by an allowance for credit losses of $71.7 million. At September 30, 2022, our consumer installment portfolio had the following characteristics: average original FICO score of 736, average debt-to-income of 17.9% and average borrower income of $106 thousand.
Non-performing loans at September 30, 2022 were essentially flat at 0.18% of total loans and leases, compared to 0.18% at June 30, 2022 and 0.34% at September 30, 2021.
Deposits
The following table presents the composition of our deposit portfolio as of the dates indicated:
| (Dollars in thousands) | September 30, 2022 | % of Total | June 30, 2022 | % of Total | September 30, 2021 | % of Total | |||||||||||||||||||||||||||||
| Demand, non-interest bearing | $ | 2,993,793 | 17.1 | % | $ | 4,683,030 | 27.6 | % | $ | 4,954,331 | 29.2 | % | |||||||||||||||||||||||
| Demand, interest bearing | 7,124,663 | 40.7 | 6,644,398 | 39.2 | 5,023,081 | 29.6 | |||||||||||||||||||||||||||||
| Total demand deposits | 10,118,456 | 57.8 | 11,327,428 | 66.8 | 9,977,412 | 58.8 | |||||||||||||||||||||||||||||
| Savings | 592,002 | 3.4 | 640,062 | 3.8 | 1,310,343 | 7.7 | |||||||||||||||||||||||||||||
| Money market | 4,913,967 | 28.0 | 4,254,205 | 25.1 | 5,090,121 | 30.0 | |||||||||||||||||||||||||||||
| Time deposits | 1,898,013 | 10.8 | 723,024 | 4.3 | 593,149 | 3.5 | |||||||||||||||||||||||||||||
| Total deposits | $ | 17,522,438 | 100.0 | % | $ | 16,944,719 | 100.0 | % | $ | 16,971,025 | 100.0 | % | |||||||||||||||||||||||
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Total deposits increased $551.4 million, or 3.2%, to $17.5 billion at September 30, 2022 as compared to a year ago. Time deposits increased $1.3 billion, or 220.0%, to $1.9 billion and total demand deposits increased $141.0 million, or 1.4%, to $10.1 billion. These increases were offset partially by decreases in savings deposits of $718.3 million, or 54.8%, to $592.0 million and money market deposits of $176.2 million, or 3.5%, to $4.9 billion. The total cost of deposits increased by 106 basis points to 1.48% in Q3 2022 from 0.42% in the prior year primarily due to higher market interest rates and a shift in deposit mix.
Capital
The following table presents certain capital amounts and ratios as of the dates indicated:
| (Dollars in thousands except per share data) | September 30, 2022 | June 30, 2022 | September 30, 2021 | ||||||||||||||
| Customers Bancorp, Inc. | |||||||||||||||||
| Common Equity | $ | 1,249,137 | $ | 1,215,596 | $ | 1,146,505 | |||||||||||
| Tangible Common Equity* | 1,245,508 | 1,211,967 | 1,142,711 | ||||||||||||||
| Tangible Common Equity to Tangible Assets* | 6.12 | % | 5.99 | % | 5.98 | % | |||||||||||
| Tangible Common Equity to Tangible Assets, excluding PPP* | 6.48 | % | 6.49 | % | 8.08 | % | |||||||||||
| Tangible Book Value per common share* | $ | 38.35 | $ | 37.35 | $ | 35.12 | |||||||||||
Common equity Tier 1 capital ratio (1) | 10.1 | % | 9.7 | % | 10.4 | % | |||||||||||
Total risk based capital ratio (1) | 12.8 | % | 12.6 | % | 13.6 | % | |||||||||||
(1) Regulatory capital ratios as of September 30, 2022 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 is included at the end of this document. | |||||||||||||||||
Customers Bancorp's tangible common equity* increased $102.8 million to $1.2 billion at September 30, 2022 compared to a year ago, as earnings of $291.4 million more than offset a negative impact to accumulated other comprehensive income ("AOCI") from increased unrealized losses on investment securities of $157.6 million (net of taxes). Similarly, tangible book value per common share* increased to $38.35 at September 30, 2022 from $35.12 at September 30, 2021. Customers remains well capitalized by all regulatory measures.
At the Customers Bancorp level, the total risk based capital ratio (estimate) and tangible common equity to tangible assets ratio ("TCE ratio"), excluding PPP loans*, were 12.8% and 6.48%, respectively, at September 30, 2022. "We expect our TCE ratio to be about 7.5% over the next 3 - 4 quarters, supported by growth in retained earnings and prudent balance sheet management," stated Mr. Sam Sidhu.
At the Customers Bank level, capital levels remained strong and well above regulatory minimums. At September 30, 2022, estimated Tier 1 capital and total risk-based capital were 11.7% and 13.0%, respectively.
Key Profitability Trends
Net Interest Income
Net interest income totaled $159.0 million in Q3 2022, a decrease of $5.8 million from Q2 2022, primarily due to lower PPP interest income of $5.9 million resulting from reduced recognition of deferred fees of $4.8 million driven by lower loan forgiveness in Q3 2022. This decrease was offset in part by increased net interest income earned by the core bank of $3.5 million, up 2% (~10% annualized) over Q2 2022, including increased interest income on investment securities and core loans* of $5.1 million and $37.4 million, respectively, mostly due to higher average balances. In addition, higher expenses paid on deposits, fed funds, FHLB advances and other borrowings of $45.4 million resulted mainly from a shift in deposit mix and higher interest rates during Q3 2022. Excluding PPP loans, average interest-earning assets increased $1.0 billion. Interest-earning asset growth was primarily driven by increases in C&I loans and leases, mostly in specialty lending, and some lower-yielding multi-family loans that didn't close until Q3 2022. Compared to Q2 2022, total loan yields increased 54 basis points to 5.08% primarily due to higher interest rates on variable rate loans in specialty lending. Excluding PPP loans, the Q3 2022 total loan yield was 59 basis points higher than Q2 2022 reflecting increased interest rates and the variable rate nature of the loan portfolio.
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Non-Interest Income
The following table presents details of non-interest income for the periods indicated:
| Three Months Ended | Increase (Decrease) | ||||||||||||||||
| (Dollars in thousands) | September 30, 2022 | June 30, 2022 | |||||||||||||||
| Interchange and card revenue | $ | 72 | $ | 24 | $ | 48 | |||||||||||
| Deposit fees | 989 | 964 | 25 | ||||||||||||||
| Commercial lease income | 7,097 | 6,592 | 505 | ||||||||||||||
| Bank-owned life insurance | 3,449 | 1,947 | 1,502 | ||||||||||||||
| Mortgage warehouse transactional fees | 1,545 | 1,883 | (338) | ||||||||||||||
| Gain (loss) on sale of SBA and other loans | 106 | 1,542 | (1,436) | ||||||||||||||
| Loss on sale of consumer installment loans | (23,465) | — | (23,465) | ||||||||||||||
| Loan fees | 3,008 | 2,618 | 390 | ||||||||||||||
| Mortgage banking income (loss) | 125 | 173 | (48) | ||||||||||||||
| Gain (loss) on sale of investment securities | (2,135) | (3,029) | 894 | ||||||||||||||
| Unrealized gain (loss) on investment securities | (259) | (203) | (56) | ||||||||||||||
| Unrealized gain (loss) on derivatives | 563 | 821 | (258) | ||||||||||||||
| Other | (112) | (586) | 474 | ||||||||||||||
| Total non-interest income | $ | (9,017) | $ | 12,746 | $ | (21,763) | |||||||||||
Non-interest income totaled $(9.0) million for Q3 2022, a decrease of $21.8 million compared to Q2 2022. The decrease was primarily due to $23.5 million of loss realized from the sale of $500 million of consumer installment loans as part of our balance sheet optimization initiatives, which included the write-off of deferred origination costs and other transaction-related expenses, and lower gains realized on sales of SBA loans in Q3 2022 compared to Q2 2022, partially offset by higher bank-owned life insurance income primarily due to death benefits, lower realized losses from the sale of investment securities and higher commercial lease income and loan fees from continued growth.
Non-Interest Expense
The following table presents details of non-interest expense for the periods indicated:
| Three Months Ended | Increase (Decrease) | ||||||||||||||||
| (Dollars in thousands) | September 30, 2022 | June 30, 2022 | |||||||||||||||
| Salaries and employee benefits | $ | 31,230 | $ | 25,334 | $ | 5,896 | |||||||||||
| Technology, communication and bank operations | 19,588 | 22,738 | (3,150) | ||||||||||||||
| Professional services | 6,269 | 7,415 | (1,146) | ||||||||||||||
| Occupancy | 2,605 | 4,279 | (1,674) | ||||||||||||||
| Commercial lease depreciation | 5,966 | 5,552 | 414 | ||||||||||||||
| FDIC assessments, non-income taxes and regulatory fees | 2,528 | 1,619 | 909 | ||||||||||||||
| Loan servicing | 3,851 | 4,341 | (490) | ||||||||||||||
| Loan workout | 217 | 179 | 38 | ||||||||||||||
| Advertising and promotion | 762 | 353 | 409 | ||||||||||||||
| Other | 3,182 | 4,395 | (1,213) | ||||||||||||||
| Total non-interest expense | $ | 76,198 | $ | 76,205 | $ | (7) | |||||||||||
The management of non-interest expenses remains a priority for us. However, this will not be at the expense of not making adequate investments with new technologies to support efficient and responsible growth.
Non-interest expenses totaled $76.2 million in Q3 2022, relatively unchanged from Q2 2022 and $3.8 million lower than Q3 2021. The offsetting items this quarter included a $3.2 million decrease in technology, processing and deposit servicing-related expenses mostly due to lower deposit servicing fees paid to BM Technologies, $1.7 million decrease in occupancy mostly due to $0.9 million of impairment charges for consolidation of five branches into other existing locations in Southeastern Pennsylvania recorded in Q2 2022 and $1.1 million decrease in professional fees primarily associated with the PPP loan forgiveness. These decreases were offset in part by higher salaries and employee benefits of $5.9 million primarily due to higher average headcount, incentives and $1.4 million in one-time severance expenses.
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Taxes
Income tax expense from continuing operations decreased by $1.0 million to $17.9 million in Q3 2022 from $18.9 million in Q2 2022 primarily due to higher investment tax credits and death benefits on bank owned life insurance policies. The effective tax rate from continuing operations for Q3 2022 and for the nine months ended September 30, 2022 was 22%. Customers expects the full-year 2022 effective tax rate from continuing operations to be approximately 21% to 23%.
Outlook
“Looking ahead, we envision moderate sustainable and responsible organic core growth, maintenance of our margins, improved capital ratios, and higher profitability and are very optimistic about the prospects of our company. We are focused on improving the quality of our balance sheet and deposit franchise and are not focused on growth just for the sake of growth. With about $500 million of loan growth expected in our low-risk specialty lending verticals in fourth quarter 2022, we will have mostly completed our portfolio remix into lower credit risk variable rate loans. As such, we believe that our margin will likely trough in 2022 and we expect margin expansion in 2023 or through the projected rate-hike cycle. Through a combination of revenue growth and prudent expense management, we expect our efficiency ratio to be in the low to mid 40's by early 2023. Customers Bancorp stock at the close of business on October 21, 2022 was trading at $31.17, only 0.8 times tangible book value* at September 30, 2022. Even after selling $500 million of higher yielding consumer installment loans, we continue to expect over $6.00 of core earnings in 2023, two to three years ahead of our previous guidance of $6.00 by 2025/2026,” concluded Mr. Jay 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 is included at the end of this document. | ||||||||||||||
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Webcast
Date: Thursday, October 27, 2022
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 3rd Quarter Earnings Webcast.
You may submit questions in advance of the live webcast by emailing our Communications Director, David Patti at [email protected]; questions may also be asked during the webcast through the webcast application.
The webcast will be archived for viewing on the Customers Bank Investor Relations page and available beginning approximately two hours after the conclusion of the live event.
Institutional Background
Customers Bancorp, Inc. (NYSE:CUBI) is one of the nation’s top-performing banking companies with over $20 billion in assets, making it one of the 100 largest bank holding companies in the US. Through its primary subsidiary, Customers Bank, commercial and consumer clients benefit from a full suite of technology-enabled tailored product experience delivered by best-in-class customer service. A pioneer in Banking-as-a-Service and digital banking products, Customers Bank is one of the very few banks that provides a blockchain-based 24/7/365 digital payment solution. In addition to traditional lines such as C&I lending, commercial real estate lending, and multi-family lending, Customers Bank also provides a number of national corporate banking services for Lender Finance, Fund Finance, Financial Institutions, Technology and Venture, and Healthcare clients. Major accolades include:
•#3 top-performing bank with over $10 billion in assets at year-end 2021 per S&P Global S&P Global Market Intelligence,
•#6 in top-performing banks with assets between $10 billion and 50 billion in 2021 per American Banker, and
•#21 out of the 100 largest publicly traded banks in 2022 per Forbes.
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: the impact of the ongoing pandemic 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
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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, 2021, 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.
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Q3 2022 Overview
The following table presents a summary of key earnings and performance metrics for the quarter ended September 30, 2022 and the preceding four quarters:
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||||||||
| EARNINGS SUMMARY - UNAUDITED | |||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data and stock price data) | Q3 | Q2 | Q1 | Q4 | Q3 | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||
| GAAP Profitability Metrics: | |||||||||||||||||||||||||||||||||||||||||||||||
Net income available to common shareholders (from continuing and discontinued operations) | $ | 61,364 | $ | 56,519 | $ | 74,896 | $ | 98,647 | $ | 110,241 | $ | 192,779 | $ | 201,487 | |||||||||||||||||||||||||||||||||
Per share amounts: | |||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share - basic | $ | 1.89 | $ | 1.73 | $ | 2.27 | $ | 3.02 | $ | 3.40 | $ | 5.89 | $ | 6.26 | |||||||||||||||||||||||||||||||||
| Earnings per share - diluted | $ | 1.85 | $ | 1.68 | $ | 2.18 | $ | 2.87 | $ | 3.25 | $ | 5.72 | $ | 6.02 | |||||||||||||||||||||||||||||||||
Book value per common share (1) | $ | 38.46 | $ | 37.46 | $ | 37.61 | $ | 37.32 | $ | 35.24 | $ | 38.46 | $ | 35.24 | |||||||||||||||||||||||||||||||||
CUBI stock price (1) | $ | 29.48 | $ | 33.90 | $ | 52.14 | $ | 65.37 | $ | 43.02 | $ | 29.48 | $ | 43.02 | |||||||||||||||||||||||||||||||||
CUBI stock price as % of book value (1) | 77 | % | 90 | % | 139 | % | 175 | % | 122 | % | 77 | % | 122 | % | |||||||||||||||||||||||||||||||||
| Average shares outstanding - basic | 32,455,814 | 32,712,616 | 32,957,033 | 32,625,960 | 32,449,853 | 32,706,652 | 32,206,547 | ||||||||||||||||||||||||||||||||||||||||
| Average shares outstanding - diluted | 33,226,607 | 33,579,013 | 34,327,065 | 34,320,327 | 33,868,553 | 33,706,864 | 33,487,672 | ||||||||||||||||||||||||||||||||||||||||
Shares outstanding (1) | 32,475,502 | 32,449,486 | 32,957,847 | 32,913,267 | 32,537,976 | 32,475,502 | 32,537,976 | ||||||||||||||||||||||||||||||||||||||||
| Return on average assets ("ROAA") | 1.24 | % | 1.17 | % | 1.63 | % | 2.08 | % | 2.33 | % | 1.34 | % | 1.49 | % | |||||||||||||||||||||||||||||||||
| Return on average common equity ("ROCE") | 19.33 | % | 18.21 | % | 24.26 | % | 33.18 | % | 40.82 | % | 20.58 | % | 26.99 | % | |||||||||||||||||||||||||||||||||
| Efficiency ratio | 50.00 | % | 42.14 | % | 39.42 | % | 38.70 | % | 33.42 | % | 43.46 | % | 41.07 | % | |||||||||||||||||||||||||||||||||
Non-GAAP Profitability Metrics (2): | |||||||||||||||||||||||||||||||||||||||||||||||
| Core earnings | $ | 82,270 | $ | 59,367 | $ | 75,410 | $ | 101,213 | $ | 113,876 | $ | 217,047 | $ | 243,487 | |||||||||||||||||||||||||||||||||
| Adjusted pre-tax pre-provision net income | $ | 100,994 | $ | 105,692 | $ | 112,649 | $ | 130,595 | $ | 167,215 | $ | 319,335 | $ | 340,451 | |||||||||||||||||||||||||||||||||
| Per share amounts: | |||||||||||||||||||||||||||||||||||||||||||||||
| Core earnings per share - diluted | $ | 2.48 | $ | 1.77 | $ | 2.20 | $ | 2.95 | $ | 3.36 | $ | 6.44 | $ | 7.27 | |||||||||||||||||||||||||||||||||
Tangible book value per common share (1) | $ | 38.35 | $ | 37.35 | $ | 37.50 | $ | 37.21 | $ | 35.12 | $ | 38.35 | $ | 35.12 | |||||||||||||||||||||||||||||||||
CUBI stock price as % of tangible book value (1) | 77 | % | 91 | % | 139 | % | 176 | % | 122 | % | 77 | % | 122 | % | |||||||||||||||||||||||||||||||||
| Core ROAA | 1.64 | % | 1.23 | % | 1.64 | % | 2.13 | % | 2.35 | % | 1.50 | % | 1.76 | % | |||||||||||||||||||||||||||||||||
| Core ROCE | 25.91 | % | 19.13 | % | 24.43 | % | 34.04 | % | 42.16 | % | 23.17 | % | 32.61 | % | |||||||||||||||||||||||||||||||||
| Adjusted ROAA - pre-tax and pre-provision | 1.95 | % | 2.11 | % | 2.39 | % | 2.70 | % | 3.36 | % | 2.14 | % | 2.37 | % | |||||||||||||||||||||||||||||||||
| Adjusted ROCE - pre-tax and pre-provision | 31.01 | % | 33.37 | % | 35.89 | % | 43.25 | % | 60.81 | % | 33.40 | % | 44.30 | % | |||||||||||||||||||||||||||||||||
| Net interest margin, tax equivalent | 3.16 | % | 3.39 | % | 3.60 | % | 4.14 | % | 4.59 | % | 3.38 | % | 3.55 | % | |||||||||||||||||||||||||||||||||
| Net interest margin, tax equivalent, excluding PPP loans | 3.18 | % | 3.32 | % | 3.32 | % | 3.12 | % | 3.24 | % | 3.27 | % | 3.17 | % | |||||||||||||||||||||||||||||||||
| Core efficiency ratio | 42.57 | % | 41.74 | % | 39.47 | % | 38.14 | % | 30.36 | % | 41.23 | % | 37.31 | % | |||||||||||||||||||||||||||||||||
| Asset Quality: | |||||||||||||||||||||||||||||||||||||||||||||||
| Net charge-offs | $ | 18,498 | $ | 13,481 | $ | 7,226 | $ | 7,582 | $ | 7,104 | $ | 39,205 | $ | 26,216 | |||||||||||||||||||||||||||||||||
| Annualized net charge-offs to average total loans and leases | 0.47 | % | 0.36 | % | 0.21 | % | 0.21 | % | 0.17 | % | 0.36 | % | 0.22 | % | |||||||||||||||||||||||||||||||||
Non-performing loans ("NPLs") to total loans and leases (1) | 0.18 | % | 0.18 | % | 0.31 | % | 0.34 | % | 0.34 | % | 0.18 | % | 0.34 | % | |||||||||||||||||||||||||||||||||
Reserves to NPLs (1) | 466.34 | % | 557.76 | % | 333.15 | % | 277.72 | % | 252.68 | % | 466.34 | % | 252.68 | % | |||||||||||||||||||||||||||||||||
| Non-performing assets ("NPAs") to total assets | 0.14 | % | 0.14 | % | 0.23 | % | 0.25 | % | 0.27 | % | 0.14 | % | 0.27 | % | |||||||||||||||||||||||||||||||||
Customers Bank Capital Ratios (3): | |||||||||||||||||||||||||||||||||||||||||||||||
| Common equity Tier 1 capital to risk-weighted assets | 11.73 | % | 11.46 | % | 11.60 | % | 11.83 | % | 12.77 | % | 11.73 | % | 12.77 | % | |||||||||||||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | 11.73 | % | 11.46 | % | 11.60 | % | 11.83 | % | 12.77 | % | 11.73 | % | 12.77 | % | |||||||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | 12.98 | % | 12.91 | % | 13.03 | % | 13.11 | % | 14.16 | % | 12.98 | % | 14.16 | % | |||||||||||||||||||||||||||||||||
| Tier 1 capital to average assets (leverage ratio) | 8.10 | % | 8.09 | % | 8.21 | % | 7.93 | % | 8.66 | % | 8.10 | % | 8.66 | % | |||||||||||||||||||||||||||||||||
| (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 Q3 2022 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 September 30, 2022, our regulatory capital ratios reflected 75%, or $46.2 million, benefit associated with the CECL transition provisions. | |||||||||||||||||||||||||||||||||||||||||||||||
12
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED | |||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands, except per share data) | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
| Q3 | Q2 | Q1 | Q4 | Q3 | September 30, | ||||||||||||||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||||||||||||||
| Loans and leases | $ | 200,457 | $ | 168,941 | $ | 157,175 | $ | 198,000 | $ | 233,097 | $ | 526,573 | $ | 538,822 | |||||||||||||||||||||||||||
| Investment securities | 30,546 | 25,442 | 20,295 | 15,202 | 8,905 | 76,283 | 25,211 | ||||||||||||||||||||||||||||||||||
| Other | 4,913 | 1,951 | 6,006 | 835 | 849 | 12,870 | 2,814 | ||||||||||||||||||||||||||||||||||
| Total interest income | 235,916 | 196,334 | 183,476 | 214,037 | 242,851 | 615,726 | 566,847 | ||||||||||||||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||||||||||||||||||
| Deposits | 65,380 | 22,781 | 13,712 | 15,415 | 15,915 | 101,873 | 47,226 | ||||||||||||||||||||||||||||||||||
| FHLB advances | 4,684 | 2,316 | — | 51 | 5 | 7,000 | 6,160 | ||||||||||||||||||||||||||||||||||
| Subordinated debt | 2,689 | 2,689 | 2,689 | 2,688 | 2,689 | 8,067 | 8,067 | ||||||||||||||||||||||||||||||||||
| FRB PPP liquidity facility, federal funds purchased and other borrowings | 4,131 | 3,696 | 2,376 | 2,189 | 4,350 | 10,203 | 14,014 | ||||||||||||||||||||||||||||||||||
| Total interest expense | 76,884 | 31,482 | 18,777 | 20,343 | 22,959 | 127,143 | 75,467 | ||||||||||||||||||||||||||||||||||
| Net interest income | 159,032 | 164,852 | 164,699 | 193,694 | 219,892 | 488,583 | 491,380 | ||||||||||||||||||||||||||||||||||
| Provision (benefit) for credit losses | (7,994) | 23,847 | 15,997 | 13,890 | 13,164 | 31,850 | 13,536 | ||||||||||||||||||||||||||||||||||
| Net interest income after provision (benefit) for credit losses | 167,026 | 141,005 | 148,702 | 179,804 | 206,728 | 456,733 | 477,844 | ||||||||||||||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||||||||||||||||||||
| Interchange and card revenue | 72 | 24 | 76 | 84 | 83 | 172 | 252 | ||||||||||||||||||||||||||||||||||
| Deposit fees | 989 | 964 | 940 | 1,026 | 994 | 2,893 | 2,748 | ||||||||||||||||||||||||||||||||||
| Commercial lease income | 7,097 | 6,592 | 5,895 | 5,378 | 5,213 | 19,584 | 15,729 | ||||||||||||||||||||||||||||||||||
| Bank-owned life insurance | 3,449 | 1,947 | 8,326 | 1,984 | 1,988 | 13,722 | 6,432 | ||||||||||||||||||||||||||||||||||
| Mortgage warehouse transactional fees | 1,545 | 1,883 | 2,015 | 2,262 | 3,100 | 5,443 | 10,612 | ||||||||||||||||||||||||||||||||||
| Gain (loss) on sale of SBA and other loans | 106 | 1,542 | 1,507 | 2,493 | 5,359 | 3,155 | 8,834 | ||||||||||||||||||||||||||||||||||
| Loss on sale of consumer installment loans | (23,465) | — | — | — | — | (23,465) | — | ||||||||||||||||||||||||||||||||||
| Loan fees | 3,008 | 2,618 | 2,545 | 2,513 | 1,909 | 8,171 | 5,015 | ||||||||||||||||||||||||||||||||||
| Mortgage banking income (loss) | 125 | 173 | 481 | 262 | 425 | 779 | 1,274 | ||||||||||||||||||||||||||||||||||
| Gain (loss) on sale of investment securities | (2,135) | (3,029) | (1,063) | (49) | 6,063 | (6,227) | 31,441 | ||||||||||||||||||||||||||||||||||
| Unrealized gain (loss) on investment securities | (259) | (203) | (276) | — | — | (738) | 2,720 | ||||||||||||||||||||||||||||||||||
| Loss on sale of foreign subsidiaries | — | — | — | — | — | — | (2,840) | ||||||||||||||||||||||||||||||||||
| Unrealized gain (loss) on derivatives | 563 | 821 | 964 | 586 | 524 | 2,348 | 2,622 | ||||||||||||||||||||||||||||||||||
| Loss on cash flow hedge derivative terminations | — | — | — | — | — | — | (24,467) | ||||||||||||||||||||||||||||||||||
| Other | (112) | (586) | (212) | 452 | (72) | (910) | 504 | ||||||||||||||||||||||||||||||||||
| Total non-interest income | (9,017) | 12,746 | 21,198 | 16,991 | 25,586 | 24,927 | 60,876 | ||||||||||||||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | 31,230 | 25,334 | 26,607 | 29,940 | 26,268 | 83,171 | 78,262 | ||||||||||||||||||||||||||||||||||
| Technology, communication and bank operations | 19,588 | 22,738 | 24,068 | 22,657 | 21,281 | 66,394 | 60,887 | ||||||||||||||||||||||||||||||||||
| Professional services | 6,269 | 7,415 | 6,956 | 7,058 | 6,871 | 20,640 | 19,630 | ||||||||||||||||||||||||||||||||||
| Occupancy | 2,605 | 4,279 | 3,050 | 4,336 | 2,704 | 9,934 | 7,807 | ||||||||||||||||||||||||||||||||||
| Commercial lease depreciation | 5,966 | 5,552 | 4,942 | 4,625 | 4,493 | 16,460 | 13,199 | ||||||||||||||||||||||||||||||||||
| FDIC assessments, non-income taxes and regulatory fees | 2,528 | 1,619 | 2,383 | 2,427 | 2,313 | 6,530 | 7,634 | ||||||||||||||||||||||||||||||||||
| Loan servicing | 3,851 | 4,341 | 2,371 | 4,361 | 4,265 | 10,563 | 6,402 | ||||||||||||||||||||||||||||||||||
| Merger and acquisition related expenses | — | — | — | — | — | — | 418 | ||||||||||||||||||||||||||||||||||
| Loan workout | 217 | 179 | (38) | 226 | 198 | 358 | 39 | ||||||||||||||||||||||||||||||||||
| Advertising and promotion | 762 | 353 | 315 | 344 | 302 | 1,430 | 1,176 | ||||||||||||||||||||||||||||||||||
| Deposit relationship adjustment fees | — | — | — | — | 6,216 | — | 6,216 | ||||||||||||||||||||||||||||||||||
| Other | 3,182 | 4,395 | 3,153 | 5,574 | 5,098 | 10,730 | 11,089 | ||||||||||||||||||||||||||||||||||
| Total non-interest expense | 76,198 | 76,205 | 73,807 | 81,548 | 80,009 | 226,210 | 212,759 | ||||||||||||||||||||||||||||||||||
| Income before income tax expense | 81,811 | 77,546 | 96,093 | 115,247 | 152,305 | 255,450 | 325,961 | ||||||||||||||||||||||||||||||||||
| Income tax expense | 17,899 | 18,896 | 19,332 | 12,993 | 36,263 | 56,127 | 73,947 | ||||||||||||||||||||||||||||||||||
| Net income from continuing operations | $ | 63,912 | $ | 58,650 | $ | 76,761 | $ | 102,254 | $ | 116,042 | $ | 199,323 | $ | 252,014 | |||||||||||||||||||||||||||
(continued) | |||||||||||||||||||||||||||||||||||||||||
13
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands, except per share data) | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
| Q3 | Q2 | Q1 | Q4 | Q3 | September 30, | ||||||||||||||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||
| Loss from discontinued operations before income taxes | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (20,354) | |||||||||||||||||||||||||||
| Income tax expense (benefit) from discontinued operations | — | — | — | 1,585 | — | — | 17,682 | ||||||||||||||||||||||||||||||||||
| Net loss from discontinued operations | — | — | — | (1,585) | — | — | (38,036) | ||||||||||||||||||||||||||||||||||
| Net income | 63,912 | 58,650 | 76,761 | 100,669 | 116,042 | 199,323 | 213,978 | ||||||||||||||||||||||||||||||||||
| Preferred stock dividends | 2,548 | 2,131 | 1,865 | 2,022 | 2,981 | 6,544 | 9,671 | ||||||||||||||||||||||||||||||||||
| Loss on redemption of preferred stock | — | — | — | — | 2,820 | — | 2,820 | ||||||||||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 61,364 | $ | 56,519 | $ | 74,896 | $ | 98,647 | $ | 110,241 | $ | 192,779 | $ | 201,487 | |||||||||||||||||||||||||||
| Basic earnings per common share from continuing operations | $ | 1.89 | $ | 1.73 | $ | 2.27 | $ | 3.07 | $ | 3.40 | $ | 5.89 | $ | 7.44 | |||||||||||||||||||||||||||
| Basic earnings per common share | 1.89 | 1.73 | 2.27 | 3.02 | 3.40 | 5.89 | 6.26 | ||||||||||||||||||||||||||||||||||
| Diluted earnings per common share from continuing operations | 1.85 | 1.68 | 2.18 | 2.92 | 3.25 | 5.72 | 7.15 | ||||||||||||||||||||||||||||||||||
| Diluted earnings per common share | 1.85 | 1.68 | 2.18 | 2.87 | 3.25 | 5.72 | 6.02 | ||||||||||||||||||||||||||||||||||
14
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
CONSOLIDATED BALANCE SHEET - UNAUDITED | |||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||
| Cash and due from banks | $ | 41,520 | $ | 66,703 | $ | 55,515 | $ | 35,238 | $ | 51,169 | |||||||||||||||||||
| Interest earning deposits | 362,945 | 178,475 | 219,085 | 482,794 | 1,000,885 | ||||||||||||||||||||||||
| Cash and cash equivalents | 404,465 | 245,178 | 274,600 | 518,032 | 1,052,054 | ||||||||||||||||||||||||
| Investment securities, at fair value | 2,943,694 | 3,144,882 | 4,169,853 | 3,817,150 | 1,866,697 | ||||||||||||||||||||||||
| Investment securities held to maturity | 886,294 | 495,039 | — | — | — | ||||||||||||||||||||||||
| Loans held for sale | 5,224 | 6,595 | 3,003 | 16,254 | 29,957 | ||||||||||||||||||||||||
| Loans receivable, mortgage warehouse, at fair value | 1,569,090 | 1,874,603 | 1,755,758 | 2,284,325 | 2,557,624 | ||||||||||||||||||||||||
| Loans receivable, PPP | 1,154,632 | 1,570,160 | 2,195,902 | 3,250,008 | 4,957,357 | ||||||||||||||||||||||||
| Loans and leases receivable | 12,607,742 | 12,212,995 | 10,118,855 | 9,018,298 | 7,970,599 | ||||||||||||||||||||||||
| Allowance for credit losses on loans and leases | (130,197) | (156,530) | (145,847) | (137,804) | (131,496) | ||||||||||||||||||||||||
| Total loans and leases receivable, net of allowance for credit losses on loans and leases | 15,201,267 | 15,501,228 | 13,924,668 | 14,414,827 | 15,354,084 | ||||||||||||||||||||||||
| FHLB, Federal Reserve Bank, and other restricted stock | 64,112 | 74,626 | 54,553 | 64,584 | 57,184 | ||||||||||||||||||||||||
| Accrued interest receivable | 107,621 | 98,727 | 94,669 | 92,239 | 93,514 | ||||||||||||||||||||||||
| Bank premises and equipment, net | 6,610 | 6,755 | 8,233 | 8,890 | 9,944 | ||||||||||||||||||||||||
| Bank-owned life insurance | 336,130 | 335,153 | 332,239 | 333,705 | 331,423 | ||||||||||||||||||||||||
| Goodwill and other intangibles | 3,629 | 3,629 | 3,678 | 3,736 | 3,794 | ||||||||||||||||||||||||
| Other assets | 408,575 | 340,184 | 298,212 | 305,611 | 310,271 | ||||||||||||||||||||||||
| Total assets | $ | 20,367,621 | $ | 20,251,996 | $ | 19,163,708 | $ | 19,575,028 | $ | 19,108,922 | |||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||||||||||||
| Demand, non-interest bearing deposits | $ | 2,993,793 | $ | 4,683,030 | $ | 4,594,428 | $ | 4,459,790 | $ | 4,954,331 | |||||||||||||||||||
| Interest bearing deposits | 14,528,645 | 12,261,689 | 11,821,132 | 12,318,134 | 12,016,694 | ||||||||||||||||||||||||
| Total deposits | 17,522,438 | 16,944,719 | 16,415,560 | 16,777,924 | 16,971,025 | ||||||||||||||||||||||||
| Federal funds purchased | 365,000 | 770,000 | 700,000 | 75,000 | — | ||||||||||||||||||||||||
| FHLB advances | 500,000 | 635,000 | — | 700,000 | — | ||||||||||||||||||||||||
| Other borrowings | 123,515 | 123,450 | 223,230 | 223,086 | 223,151 | ||||||||||||||||||||||||
| Subordinated debt | 181,882 | 181,812 | 181,742 | 181,673 | 181,603 | ||||||||||||||||||||||||
| Accrued interest payable and other liabilities | 287,855 | 243,625 | 265,770 | 251,128 | 448,844 | ||||||||||||||||||||||||
| Total liabilities | 18,980,690 | 18,898,606 | 17,786,302 | 18,208,811 | 17,824,623 | ||||||||||||||||||||||||
| Preferred stock | 137,794 | 137,794 | 137,794 | 137,794 | 137,794 | ||||||||||||||||||||||||
| Common stock | 34,948 | 34,922 | 34,882 | 34,722 | 33,818 | ||||||||||||||||||||||||
| Additional paid in capital | 549,066 | 545,670 | 542,402 | 542,391 | 525,894 | ||||||||||||||||||||||||
| Retained earnings | 898,511 | 837,147 | 780,628 | 705,732 | 607,085 | ||||||||||||||||||||||||
| Accumulated other comprehensive income (loss), net | (156,126) | (124,881) | (62,548) | (4,980) | 1,488 | ||||||||||||||||||||||||
| Treasury stock, at cost | (77,262) | (77,262) | (55,752) | (49,442) | (21,780) | ||||||||||||||||||||||||
| Total shareholders' equity | 1,386,931 | 1,353,390 | 1,377,406 | 1,366,217 | 1,284,299 | ||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 20,367,621 | $ | 20,251,996 | $ | 19,163,708 | $ | 19,575,028 | $ | 19,108,922 | |||||||||||||||||||
15
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | $ | 528,001 | $ | 2,949 | 2.22% | $ | 434,950 | $ | 919 | 0.85% | $ | 1,279,983 | $ | 490 | 0.15% | ||||||||||||||||||||||||||||||||||||||
Investment securities (1) | 3,770,922 | 30,546 | 3.24% | 4,104,463 | 25,442 | 2.48% | 1,511,319 | 8,905 | 2.36% | ||||||||||||||||||||||||||||||||||||||||||||
| Loans and leases: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial & industrial: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Specialty lending loans and leases (2) | 5,064,730 | 64,753 | 5.07% | 4,068,175 | 39,160 | 3.86% | 1,732,323 | 16,393 | 3.75% | ||||||||||||||||||||||||||||||||||||||||||||
Other commercial & industrial loans (2) | 1,585,136 | 18,794 | 4.70% | 1,509,655 | 14,706 | 3.91% | 1,292,297 | 12,259 | 3.76% | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial loans to mortgage companies | 1,623,624 | 17,092 | 4.18% | 1,898,554 | 15,615 | 3.30% | 2,658,020 | 21,065 | 3.14% | ||||||||||||||||||||||||||||||||||||||||||||
| Multi-family loans | 2,206,953 | 20,427 | 3.67% | 1,845,527 | 17,313 | 3.76% | 1,443,846 | 13,259 | 3.64% | ||||||||||||||||||||||||||||||||||||||||||||
| Loans receivable, PPP | 1,349,403 | 14,666 | 4.31% | 1,863,429 | 20,572 | 4.43% | 5,778,367 | 117,102 | 8.04% | ||||||||||||||||||||||||||||||||||||||||||||
| Non-owner occupied commercial real estate loans | 1,372,244 | 15,595 | 4.51% | 1,307,995 | 12,749 | 3.91% | 1,346,629 | 12,656 | 3.73% | ||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgages | 513,694 | 5,008 | 3.87% | 515,612 | 4,898 | 3.81% | 325,851 | 2,874 | 3.50% | ||||||||||||||||||||||||||||||||||||||||||||
| Installment loans | 1,938,199 | 44,122 | 9.03% | 1,909,551 | 43,928 | 9.23% | 1,615,411 | 37,489 | 9.21% | ||||||||||||||||||||||||||||||||||||||||||||
Total loans and leases (3) | 15,653,983 | 200,457 | 5.08% | 14,918,498 | 168,941 | 4.54% | 16,192,744 | 233,097 | 5.71% | ||||||||||||||||||||||||||||||||||||||||||||
| Other interest-earning assets | 68,549 | 1,964 | 11.37% | 68,025 | 1,032 | 6.09% | 49,780 | 359 | 2.86% | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 20,021,455 | 235,916 | 4.68% | 19,525,936 | 196,334 | 4.03% | 19,033,826 | 242,851 | 5.06% | ||||||||||||||||||||||||||||||||||||||||||||
| Non-interest-earning assets | 492,911 | 530,084 | 705,514 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 20,514,366 | $ | 20,056,020 | $ | 19,739,340 | |||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest checking accounts | 6,669,787 | 33,685 | 2.00% | 6,409,617 | 13,644 | 0.85% | 4,537,421 | 7,677 | 0.67% | ||||||||||||||||||||||||||||||||||||||||||||
| Money market deposit accounts | 5,789,991 | 24,348 | 1.67% | 4,704,767 | 7,523 | 0.64% | 5,131,433 | 5,569 | 0.43% | ||||||||||||||||||||||||||||||||||||||||||||
| Other savings accounts | 625,908 | 1,818 | 1.15% | 695,176 | 758 | 0.44% | 1,376,077 | 1,750 | 0.50% | ||||||||||||||||||||||||||||||||||||||||||||
| Certificates of deposit | 1,141,970 | 5,529 | 1.92% | 530,180 | 856 | 0.65% | 614,404 | 919 | 0.59% | ||||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing deposits (4) | 14,227,656 | 65,380 | 1.82% | 12,339,740 | 22,781 | 0.74% | 11,659,335 | 15,915 | 0.54% | ||||||||||||||||||||||||||||||||||||||||||||
| Federal funds purchased | 513,011 | 2,871 | 2.22% | 642,747 | 1,429 | 0.89% | — | — | —% | ||||||||||||||||||||||||||||||||||||||||||||
| FRB PPP liquidity facility | — | — | —% | — | — | —% | 2,788,897 | 2,460 | 0.35% | ||||||||||||||||||||||||||||||||||||||||||||
| Borrowings | 874,497 | 8,633 | 3.92% | 940,068 | 7,272 | 3.10% | 371,077 | 4,584 | 4.90% | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 15,615,164 | 76,884 | 1.95% | 13,922,555 | 31,482 | 0.91% | 14,819,309 | 22,959 | 0.62% | ||||||||||||||||||||||||||||||||||||||||||||
Non-interest-bearing deposits (4) | 3,245,963 | 4,491,574 | 3,335,198 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total deposits and borrowings | 18,861,127 | 1.62% | 18,414,129 | 0.69% | 18,154,507 | 0.50% | |||||||||||||||||||||||||||||||||||||||||||||||
| Other non-interest-bearing liabilities | 255,735 | 259,279 | 310,519 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | 19,116,862 | 18,673,408 | 18,465,026 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders' equity | 1,397,504 | 1,382,612 | 1,274,314 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 20,514,366 | $ | 20,056,020 | $ | 19,739,340 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | 159,032 | 164,852 | 219,892 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax-equivalent adjustment (5) | 334 | 270 | 290 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest earnings | $ | 159,366 | $ | 165,122 | $ | 220,182 | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest spread | 3.06% | 3.35% | 4.56% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 3.16% | 3.38% | 4.58% | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest margin tax equivalent (5) | 3.16% | 3.39% | 4.59% | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest margin tax equivalent excl. PPP (6) | 3.18% | 3.32% | 3.24% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (continued) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
16
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (2) Includes owner occupied commercial real estate loans. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(4) Total costs of deposits (including interest bearing and non-interest bearing) were 1.48%, 0.54% and 0.42% for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(6) Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
17
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||
| AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Nine Months Ended | |||||||||||||||||||||||||||||||||||
| September 30, 2022 | September 30, 2021 | ||||||||||||||||||||||||||||||||||
Average Balance | Interest Income or Expense | Average Yield or Cost (%) | Average Balance | Interest Income or Expense | Average Yield or Cost (%) | ||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Interest earning deposits | $ | 595,305 | $ | 4,197 | 0.94% | $ | 1,034,923 | $ | 980 | 0.13% | |||||||||||||||||||||||||
Investment securities (1) | 3,969,809 | 76,283 | 2.56% | 1,461,070 | 25,211 | 2.30% | |||||||||||||||||||||||||||||
| Loans and leases: | |||||||||||||||||||||||||||||||||||
| Commercial & industrial: | |||||||||||||||||||||||||||||||||||
Specialty lending loans and leases (2) | 3,963,180 | 127,304 | 4.29% | 1,560,615 | 43,658 | 3.74% | |||||||||||||||||||||||||||||
Other commercial & industrial loans (2) | 1,496,772 | 46,768 | 4.18% | 1,357,028 | 38,631 | 3.81% | |||||||||||||||||||||||||||||
| Commercial loans to mortgage companies | 1,785,495 | 46,713 | 3.50% | 2,837,549 | 65,925 | 3.11% | |||||||||||||||||||||||||||||
| Multi-family loans | 1,863,915 | 51,506 | 3.69% | 1,560,565 | 44,120 | 3.78% | |||||||||||||||||||||||||||||
| Loans receivable, PPP | 1,946,651 | 72,132 | 4.95% | 5,515,819 | 197,071 | 4.78% | |||||||||||||||||||||||||||||
| Non-owner occupied commercial real estate loans | 1,331,037 | 40,551 | 4.07% | 1,354,745 | 38,637 | 3.81% | |||||||||||||||||||||||||||||
| Residential mortgages | 482,263 | 13,586 | 3.77% | 348,369 | 9,486 | 3.64% | |||||||||||||||||||||||||||||
| Installment loans | 1,881,160 | 128,013 | 9.10% | 1,470,024 | 101,294 | 9.21% | |||||||||||||||||||||||||||||
Total loans and leases (3) | 14,750,473 | 526,573 | 4.77% | 16,004,714 | 538,822 | 4.50% | |||||||||||||||||||||||||||||
| Other interest-earning assets | 62,955 | 8,673 | NM (7) | 62,205 | 1,834 | 3.94% | |||||||||||||||||||||||||||||
| Total interest-earning assets | 19,378,542 | 615,726 | 4.25% | 18,562,912 | 566,847 | 4.08% | |||||||||||||||||||||||||||||
| Non-interest-earning assets | 526,437 | 632,202 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 19,904,979 | $ | 19,195,114 | |||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||
| Interest checking accounts | $ | 6,286,224 | $ | 55,059 | 1.17% | $ | 3,584,223 | $ | 19,929 | 0.74% | |||||||||||||||||||||||||
| Money market deposit accounts | 5,128,270 | 36,545 | 0.95% | 4,811,540 | 17,278 | 0.48% | |||||||||||||||||||||||||||||
| Other savings accounts | 732,801 | 3,359 | 0.61% | 1,415,595 | 6,227 | 0.59% | |||||||||||||||||||||||||||||
| Certificates of deposit | 710,130 | 6,910 | 1.30% | 646,257 | 3,792 | 0.78% | |||||||||||||||||||||||||||||
Total interest-bearing deposits (4) | 12,857,425 | 101,873 | 1.06% | 10,457,615 | 47,226 | 0.60% | |||||||||||||||||||||||||||||
| Federal funds purchased | 416,344 | 4,374 | 1.40% | 29,286 | 15 | 0.07% | |||||||||||||||||||||||||||||
| FRB PPP liquidity facility | — | — | —% | 3,525,560 | 9,229 | 0.35% | |||||||||||||||||||||||||||||
| Borrowings | 783,644 | 20,896 | 3.57% | 659,334 | 18,997 | 3.85% | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 14,057,413 | 127,143 | 1.21% | 14,671,795 | 75,467 | 0.69% | |||||||||||||||||||||||||||||
Non-interest-bearing deposits (4) | 4,206,778 | 3,016,837 | |||||||||||||||||||||||||||||||||
| Total deposits and borrowings | 18,264,191 | 0.93% | 17,688,632 | 0.57% | |||||||||||||||||||||||||||||||
| Other non-interest-bearing liabilities | 250,783 | 295,752 | |||||||||||||||||||||||||||||||||
| Total liabilities | 18,514,974 | 17,984,384 | |||||||||||||||||||||||||||||||||
| Shareholders' equity | 1,390,005 | 1,210,730 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 19,904,979 | $ | 19,195,114 | |||||||||||||||||||||||||||||||
| Net interest income | 488,583 | 491,380 | |||||||||||||||||||||||||||||||||
Tax-equivalent adjustment (5) | 843 | 871 | |||||||||||||||||||||||||||||||||
| Net interest earnings | $ | 489,426 | $ | 492,251 | |||||||||||||||||||||||||||||||
| Interest spread | 3.32% | 3.51% | |||||||||||||||||||||||||||||||||
| Net interest margin | 3.37% | 3.54% | |||||||||||||||||||||||||||||||||
Net interest margin tax equivalent (5) | 3.38% | 3.55% | |||||||||||||||||||||||||||||||||
Net interest margin tax equivalent excl. PPP (6) | 3.27% | 3.17% | |||||||||||||||||||||||||||||||||
(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts. | |||||||||||||||||||||||||||||||||||
| (2) Includes owner occupied commercial real estate loans. | |||||||||||||||||||||||||||||||||||
| (3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees. | |||||||||||||||||||||||||||||||||||
(4) Total costs of deposits (including interest bearing and non-interest bearing) were 0.80% and 0.47% for the nine months ended September 30, 2022 and 2021, respectively. | |||||||||||||||||||||||||||||||||||
| (continued) | |||||||||||||||||||||||||||||||||||
18
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||
| AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the nine months ended September 30, 2022 and 2021, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. | |||||||||||||||||||||||||||||||||||
(6) Non-GAAP tax-equivalent basis as described in note (5), for the nine months ended September 30, 2022 and 2021, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. | |||||||||||||||||||||||||||||||||||
| (7) Not meaningful. | |||||||||||||||||||||||||||||||||||
19
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED | |||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial & industrial: | |||||||||||||||||||||||||||||
| Specialty lending | $ | 5,103,974 | $ | 4,599,640 | $ | 2,973,544 | $ | 2,403,991 | $ | 1,736,966 | |||||||||||||||||||
| Other commercial & industrial | 1,064,332 | 1,037,443 | 947,895 | 942,679 | 867,401 | ||||||||||||||||||||||||
| Multi-family | 2,267,376 | 2,012,920 | 1,705,027 | 1,486,308 | 1,387,166 | ||||||||||||||||||||||||
| Loans to mortgage companies | 1,708,587 | 1,975,189 | 1,830,121 | 2,362,438 | 2,626,483 | ||||||||||||||||||||||||
| Commercial real estate owner occupied | 726,670 | 710,577 | 701,893 | 654,922 | 656,044 | ||||||||||||||||||||||||
| Loans receivable, PPP | 1,154,632 | 1,570,160 | 2,195,902 | 3,250,008 | 4,957,357 | ||||||||||||||||||||||||
| Commercial real estate non-owner occupied | 1,263,211 | 1,152,869 | 1,140,311 | 1,121,238 | 1,144,643 | ||||||||||||||||||||||||
| Construction | 136,133 | 195,687 | 161,024 | 198,981 | 198,607 | ||||||||||||||||||||||||
| Total commercial loans and leases | 13,424,915 | 13,254,485 | 11,655,717 | 12,420,565 | 13,574,667 | ||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| Residential | 466,888 | 460,228 | 469,426 | 350,984 | 260,820 | ||||||||||||||||||||||||
| Manufactured housing | 46,990 | 48,570 | 50,669 | 52,861 | 55,635 | ||||||||||||||||||||||||
| Installment: | |||||||||||||||||||||||||||||
| Personal | 1,079,267 | 1,641,748 | 1,618,096 | 1,433,538 | 1,342,650 | ||||||||||||||||||||||||
| Other | 318,628 | 259,322 | 279,610 | 310,937 | 281,765 | ||||||||||||||||||||||||
| Total consumer loans | 1,911,773 | 2,409,868 | 2,417,801 | 2,148,320 | 1,940,870 | ||||||||||||||||||||||||
| Total loans and leases | $ | 15,336,688 | $ | 15,664,353 | $ | 14,073,518 | $ | 14,568,885 | $ | 15,515,537 | |||||||||||||||||||
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| PERIOD END DEPOSIT COMPOSITION - UNAUDITED | |||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||||||||||||||||
| Demand, non-interest bearing | $ | 2,993,793 | $ | 4,683,030 | $ | 4,594,428 | $ | 4,459,790 | $ | 4,954,331 | |||||||||||||||||||
| Demand, interest bearing | 7,124,663 | 6,644,398 | 5,591,468 | 6,488,406 | 5,023,081 | ||||||||||||||||||||||||
| Total demand deposits | 10,118,456 | 11,327,428 | 10,185,896 | 10,948,196 | 9,977,412 | ||||||||||||||||||||||||
| Savings | 592,002 | 640,062 | 802,395 | 973,317 | 1,310,343 | ||||||||||||||||||||||||
| Money market | 4,913,967 | 4,254,205 | 4,981,077 | 4,349,073 | 5,090,121 | ||||||||||||||||||||||||
| Time deposits | 1,898,013 | 723,024 | 446,192 | 507,338 | 593,149 | ||||||||||||||||||||||||
| Total deposits | $ | 17,522,438 | $ | 16,944,719 | $ | 16,415,560 | $ | 16,777,924 | $ | 16,971,025 | |||||||||||||||||||
20
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ASSET QUALITY - UNAUDITED | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | As of September 30, 2022 | As of June 30, 2022 | As of September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 specialty lending (1) | $ | 6,307,803 | $ | 4,078 | $ | 15,131 | 0.06 | % | 371.04 | % | $ | 5,737,670 | $ | 4,061 | $ | 11,081 | 0.07 | % | 272.86 | % | $ | 2,673,226 | $ | 6,951 | $ | 10,860 | 0.26 | % | 156.24 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Multi-family | 2,263,268 | 1,158 | 14,244 | 0.05 | % | 1230.05 | % | 2,008,784 | 1,153 | 9,765 | 0.06 | % | 846.92 | % | 1,369,876 | 24,524 | 4,397 | 1.79 | % | 17.93 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate owner occupied | 726,670 | 2,198 | 6,220 | 0.30 | % | 282.98 | % | 710,577 | 2,913 | 4,745 | 0.41 | % | 162.89 | % | 656,044 | 2,412 | 3,617 | 0.37 | % | 149.96 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate non-owner occupied | 1,263,211 | — | 11,332 | — | % | — | % | 1,152,869 | — | 8,880 | — | % | — | % | 1,144,643 | 2,845 | 7,375 | 0.25 | % | 259.23 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction | 136,133 | — | 1,614 | — | % | — | % | 195,687 | — | 1,179 | — | % | — | % | 198,607 | — | 886 | — | % | — | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial loans and leases receivable | 10,697,085 | 7,434 | 48,541 | 0.07 | % | 652.96 | % | 9,805,587 | 8,127 | 35,650 | 0.08 | % | 438.66 | % | 6,042,396 | 36,732 | 27,135 | 0.61 | % | 73.87 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | 465,772 | 6,438 | 5,453 | 1.38 | % | 84.70 | % | 457,768 | 6,258 | 5,578 | 1.37 | % | 89.13 | % | 248,153 | 7,738 | 1,912 | 3.12 | % | 24.71 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Manufactured housing | 46,990 | 2,584 | 4,482 | 5.50 | % | 173.45 | % | 48,570 | 3,071 | 4,080 | 6.32 | % | 132.86 | % | 55,635 | 3,520 | 4,410 | 6.33 | % | 125.28 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Installment | 1,397,895 | 6,848 | 71,721 | 0.49 | % | 1047.33 | % | 1,901,070 | 5,965 | 111,222 | 0.31 | % | 1864.58 | % | 1,624,415 | 3,544 | 98,039 | 0.22 | % | 2766.34 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer loans receivable | 1,910,657 | 15,870 | 81,656 | 0.83 | % | 514.53 | % | 2,407,408 | 15,294 | 120,880 | 0.64 | % | 790.38 | % | 1,928,203 | 14,802 | 104,361 | 0.77 | % | 705.05 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans and leases receivable (1) | 12,607,742 | 23,304 | 130,197 | 0.18 | % | 558.69 | % | 12,212,995 | 23,421 | 156,530 | 0.19 | % | 668.33 | % | 7,970,599 | 51,534 | 131,496 | 0.65 | % | 255.16 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans receivable, PPP | 1,154,632 | — | — | — | % | — | % | 1,570,160 | — | — | — | % | — | % | 4,957,357 | — | — | — | % | — | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans receivable, mortgage warehouse, at fair value | 1,569,090 | — | — | — | % | — | % | 1,874,603 | — | — | — | % | — | % | 2,557,624 | — | — | — | % | — | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans held for sale | 5,224 | 4,615 | — | 88.34 | % | — | % | 6,595 | 4,643 | — | 70.40 | % | — | % | 29,957 | 507 | — | 1.69 | % | — | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total portfolio | $ | 15,336,688 | $ | 27,919 | $ | 130,197 | 0.18 | % | 466.34 | % | $ | 15,664,353 | $ | 28,064 | $ | 156,530 | 0.18 | % | 557.76 | % | $ | 15,515,537 | $ | 52,041 | $ | 131,496 | 0.34 | % | 252.68 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedules that follow this table.
21
| CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||
| NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED | |||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
| Q3 | Q2 | Q1 | Q4 | Q3 | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||
Loan type | |||||||||||||||||||||||||||||||||||||||||
| Commercial & industrial, including specialty lending | $ | 2,581 | $ | (416) | $ | (59) | $ | 240 | $ | 116 | $ | 2,106 | $ | 208 | |||||||||||||||||||||||||||
| Multi-family | — | 1,990 | (337) | — | — | 1,653 | 1,132 | ||||||||||||||||||||||||||||||||||
| Commercial real estate owner occupied | — | (42) | (7) | 66 | 50 | (49) | 183 | ||||||||||||||||||||||||||||||||||
| Commercial real estate non-owner occupied | 4,831 | 159 | (8) | (14) | 943 | 4,982 | 874 | ||||||||||||||||||||||||||||||||||
| Construction | (10) | (103) | (113) | (3) | (3) | (226) | (122) | ||||||||||||||||||||||||||||||||||
| Residential | (13) | (39) | (2) | (6) | 54 | (54) | 82 | ||||||||||||||||||||||||||||||||||
| Installment | 11,109 | 11,932 | 7,752 | 7,299 | 5,944 | 30,793 | 23,859 | ||||||||||||||||||||||||||||||||||
| Total net charge-offs (recoveries) from loans held for investment | $ | 18,498 | $ | 13,481 | $ | 7,226 | $ | 7,582 | $ | 7,104 | $ | 39,205 | $ | 26,216 | |||||||||||||||||||||||||||
22
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 - Customers Bancorp | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | USD | Per share | USD | Per share | USD | Per share | USD | Per share | USD | Per share | USD | Per share | USD | Per share | ||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP net income to common shareholders | $ | 61,364 | $ | 1.85 | $ | 56,519 | $ | 1.68 | $ | 74,896 | $ | 2.18 | $ | 98,647 | $ | 2.87 | $ | 110,241 | $ | 3.25 | $ | 192,779 | $ | 5.72 | $ | 201,487 | $ | 6.02 | ||||||||||||||||||||||||||||||||||
| Reconciling items (after tax): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss from discontinued operations | — | — | — | — | — | — | 1,585 | 0.05 | — | — | — | — | 38,036 | 1.14 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Severance expense | 1,058 | 0.03 | — | — | — | — | — | — | — | — | 1,058 | 0.03 | 1,517 | 0.05 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Impairments on fixed assets and leases | 126 | 0.00 | 705 | 0.02 | 220 | 0.01 | 1,118 | 0.03 | — | — | 1,051 | 0.03 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Merger and acquisition related expenses | — | — | — | — | — | — | — | — | — | — | — | — | 320 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on sale of consumer installment loans | 18,221 | 0.55 | — | — | — | — | — | — | — | — | 18,221 | 0.54 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Legal reserves | — | — | — | — | — | — | — | — | 897 | 0.03 | — | — | 897 | 0.03 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (Gains) losses on investment securities | 1,859 | 0.06 | 2,494 | 0.07 | 1,030 | 0.03 | 43 | 0.00 | (4,591) | (0.14) | 5,383 | 0.16 | (26,058) | (0.78) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on sale of foreign subsidiaries | — | — | — | — | — | — | — | — | — | — | — | — | 2,150 | 0.06 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on cash flow hedge derivative terminations | — | — | — | — | — | — | — | — | — | — | — | — | 18,716 | 0.56 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative credit valuation adjustment | (358) | (0.01) | (351) | (0.01) | (736) | (0.02) | (180) | (0.01) | (198) | (0.01) | (1,445) | (0.04) | (1,105) | (0.03) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Deposit relationship adjustment fees | — | — | — | — | — | — | — | — | 4,707 | 0.14 | — | — | 4,707 | 0.14 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on redemption of preferred stock | — | — | — | — | — | — | — | — | 2,820 | 0.08 | — | — | 2,820 | 0.08 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Core earnings | $ | 82,270 | $ | 2.48 | $ | 59,367 | $ | 1.77 | $ | 75,410 | $ | 2.20 | $ | 101,213 | $ | 2.95 | $ | 113,876 | $ | 3.36 | $ | 217,047 | $ | 6.44 | $ | 243,487 | $ | 7.27 | ||||||||||||||||||||||||||||||||||
23
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||||||||||
Core Earnings, excluding PPP - Customers Bancorp | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | USD | Per share | USD | Per share | USD | Per share | USD | Per share | USD | Per share | USD | Per share | USD | Per share | ||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP net income to common shareholders | $ | 61,364 | $ | 1.85 | $ | 56,519 | $ | 1.68 | $ | 74,896 | $ | 2.18 | $ | 98,647 | $ | 2.87 | $ | 110,241 | $ | 3.25 | $ | 192,779 | $ | 5.72 | $ | 201,487 | $ | 6.02 | ||||||||||||||||||||||||||||||||||
| Less: PPP net income (after tax) | 5,846 | 0.18 | 13,066 | 0.39 | 24,713 | 0.72 | 64,323 | 1.87 | 81,337 | 2.40 | 43,625 | 1.29 | 130,728 | 3.90 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income to common shareholders, excluding PPP | 55,518 | 1.67 | 43,453 | 1.29 | 50,183 | 1.46 | 34,324 | 1.00 | 28,904 | 0.85 | 149,154 | 4.43 | 70,759 | 2.11 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciling items (after tax): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss from discontinued operations | — | — | — | — | — | — | 1,585 | 0.05 | — | — | — | — | 38,036 | 1.14 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Severance expense | 1,058 | 0.03 | — | — | — | — | — | — | — | — | 1,058 | 0.03 | 1,517 | 0.05 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Impairments on fixed assets and leases | 126 | 0.00 | 705 | 0.02 | 220 | 0.01 | 1,118 | 0.03 | — | — | 1,051 | 0.03 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Merger and acquisition related expenses | — | — | — | — | — | — | — | — | — | — | — | — | 320 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on sale of consumer installment loans | 18,221 | 0.55 | — | — | — | — | — | — | — | — | 18,221 | 0.54 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Legal reserves | — | — | — | — | — | — | — | — | 897 | 0.03 | — | — | 897 | 0.03 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (Gains) losses on investment securities | 1,859 | 0.06 | 2,494 | 0.07 | 1,030 | 0.03 | 43 | 0.00 | (4,591) | (0.14) | 5,383 | 0.16 | (26,058) | (0.78) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on sale of foreign subsidiaries | — | — | — | — | — | — | — | — | — | — | — | — | 2,150 | 0.06 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on cash flow hedge derivative terminations | — | — | — | — | — | — | — | — | — | — | — | — | 18,716 | 0.56 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative credit valuation adjustment | (358) | (0.01) | (351) | (0.01) | (736) | (0.02) | (180) | (0.01) | (198) | (0.01) | (1,445) | (0.04) | (1,105) | (0.03) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Deposit relationship adjustment fees | — | — | — | — | — | — | — | — | 4,707 | 0.14 | — | — | 4,707 | 0.14 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on redemption of preferred stock | — | — | — | — | — | — | — | — | 2,820 | 0.08 | — | — | 2,820 | 0.08 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Core earnings, excluding PPP | $ | 76,424 | $ | 2.30 | $ | 46,301 | $ | 1.38 | $ | 50,697 | $ | 1.48 | $ | 36,890 | $ | 1.07 | $ | 32,539 | $ | 0.96 | $ | 173,422 | $ | 5.15 | $ | 112,759 | $ | 3.37 | ||||||||||||||||||||||||||||||||||
24
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||||||||||
| Core Return on Average Assets - Customers Bancorp | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| GAAP net income | $ | 63,912 | $ | 58,650 | $ | 76,761 | $ | 100,669 | $ | 116,042 | $ | 199,323 | $ | 213,978 | |||||||||||||||||||||||||||
| Reconciling items (after tax): | |||||||||||||||||||||||||||||||||||||||||
| Net loss from discontinued operations | — | — | — | 1,585 | — | — | 38,036 | ||||||||||||||||||||||||||||||||||
| Severance expense | 1,058 | — | — | — | — | 1,058 | 1,517 | ||||||||||||||||||||||||||||||||||
| Impairments on fixed assets and leases | 126 | 705 | 220 | 1,118 | — | 1,051 | — | ||||||||||||||||||||||||||||||||||
Merger and acquisition related expenses | — | — | — | — | — | — | 320 | ||||||||||||||||||||||||||||||||||
| Loss on sale of consumer installment loans | 18,221 | — | — | — | — | 18,221 | — | ||||||||||||||||||||||||||||||||||
| Legal reserves | — | — | — | — | 897 | — | 897 | ||||||||||||||||||||||||||||||||||
| (Gains) losses on investment securities | 1,859 | 2,494 | 1,030 | 43 | (4,591) | 5,383 | (26,058) | ||||||||||||||||||||||||||||||||||
| Loss on sale of foreign subsidiaries | — | — | — | — | — | — | 2,150 | ||||||||||||||||||||||||||||||||||
| Loss on cash flow hedge derivative terminations | — | — | — | — | — | — | 18,716 | ||||||||||||||||||||||||||||||||||
| Derivative credit valuation adjustment | (358) | (351) | (736) | (180) | (198) | (1,445) | (1,105) | ||||||||||||||||||||||||||||||||||
| Deposit relationship adjustment fees | — | — | — | — | 4,707 | — | 4,707 | ||||||||||||||||||||||||||||||||||
Core net income | $ | 84,818 | $ | 61,498 | $ | 77,275 | $ | 103,235 | $ | 116,857 | $ | 223,591 | $ | 253,158 | |||||||||||||||||||||||||||
Average total assets | $ | 20,514,366 | $ | 20,056,020 | $ | 19,129,330 | $ | 19,214,241 | $ | 19,739,340 | $ | 19,904,979 | $ | 19,195,114 | |||||||||||||||||||||||||||
| Core return on average assets | 1.64 | % | 1.23 | % | 1.64 | % | 2.13 | % | 2.35 | % | 1.50 | % | 1.76 | % | |||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| GAAP net income | $ | 63,912 | $ | 58,650 | $ | 76,761 | $ | 100,669 | $ | 116,042 | $ | 199,323 | $ | 213,978 | |||||||||||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||||||||||||||||||||
Income tax expense | 17,899 | 18,896 | 19,332 | 12,993 | 36,263 | 56,127 | 73,947 | ||||||||||||||||||||||||||||||||||
Provision (benefit) for credit losses | (7,994) | 23,847 | 15,997 | 13,890 | 13,164 | 31,850 | 13,536 | ||||||||||||||||||||||||||||||||||
| Provision (benefit) for credit losses on unfunded commitments | 254 | 608 | (109) | 352 | 669 | 753 | (572) | ||||||||||||||||||||||||||||||||||
| Severance expense | 1,363 | — | — | — | — | 1,363 | 2,004 | ||||||||||||||||||||||||||||||||||
| Net loss from discontinued operations | — | — | — | 1,585 | — | — | 38,036 | ||||||||||||||||||||||||||||||||||
| Impairments on fixed assets and leases | 162 | 914 | 286 | 1,260 | — | 1,362 | — | ||||||||||||||||||||||||||||||||||
Merger and acquisition related expenses | — | — | — | — | — | — | 418 | ||||||||||||||||||||||||||||||||||
| Loss on sale of consumer installment loans | 23,465 | — | — | — | — | 23,465 | — | ||||||||||||||||||||||||||||||||||
| Legal reserves | — | — | — | — | 1,185 | — | 1,185 | ||||||||||||||||||||||||||||||||||
| (Gains) losses on investment securities | 2,394 | 3,232 | 1,339 | 49 | (6,063) | 6,965 | (34,161) | ||||||||||||||||||||||||||||||||||
| Loss on sale of foreign subsidiaries | — | — | — | — | — | — | 2,840 | ||||||||||||||||||||||||||||||||||
| Loss on cash flow hedge derivative terminations | — | — | — | — | — | — | 24,467 | ||||||||||||||||||||||||||||||||||
| Derivative credit valuation adjustment | (461) | (455) | (957) | (203) | (261) | (1,873) | (1,443) | ||||||||||||||||||||||||||||||||||
| Deposit relationship adjustment fees | — | — | — | — | 6,216 | — | 6,216 | ||||||||||||||||||||||||||||||||||
Adjusted net income - pre-tax pre-provision | $ | 100,994 | $ | 105,692 | $ | 112,649 | $ | 130,595 | $ | 167,215 | $ | 319,335 | $ | 340,451 | |||||||||||||||||||||||||||
Average total assets | $ | 20,514,366 | $ | 20,056,020 | $ | 19,129,330 | $ | 19,214,241 | $ | 19,739,340 | $ | 19,904,979 | $ | 19,195,114 | |||||||||||||||||||||||||||
| Adjusted ROAA - pre-tax pre-provision | 1.95 | % | 2.11 | % | 2.39 | % | 2.70 | % | 3.36 | % | 2.14 | % | 2.37 | % | |||||||||||||||||||||||||||
25
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||||||||||
| Core Return on Average Common Equity - Customers Bancorp | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| GAAP net income to common shareholders | $ | 61,364 | $ | 56,519 | $ | 74,896 | $ | 98,647 | $ | 110,241 | $ | 192,779 | $ | 201,487 | |||||||||||||||||||||||||||
| Reconciling items (after tax): | |||||||||||||||||||||||||||||||||||||||||
| Net loss from discontinued operations | — | — | — | 1,585 | — | — | 38,036 | ||||||||||||||||||||||||||||||||||
| Severance expense | 1,058 | — | — | — | — | 1,058 | 1,517 | ||||||||||||||||||||||||||||||||||
| Impairments on fixed assets and leases | 126 | 705 | 220 | 1,118 | — | 1,051 | — | ||||||||||||||||||||||||||||||||||
| Merger and acquisition related expenses | — | — | — | — | — | — | 320 | ||||||||||||||||||||||||||||||||||
| Loss on sale of consumer installment loans | 18,221 | — | — | — | — | 18,221 | — | ||||||||||||||||||||||||||||||||||
| Legal reserves | — | — | — | — | 897 | — | 897 | ||||||||||||||||||||||||||||||||||
| (Gains) losses on investment securities | 1,859 | 2,494 | 1,030 | 43 | (4,591) | 5,383 | (26,058) | ||||||||||||||||||||||||||||||||||
| Loss on sale of foreign subsidiaries | — | — | — | — | — | — | 2,150 | ||||||||||||||||||||||||||||||||||
| Loss on cash flow hedge derivative terminations | — | — | — | — | — | — | 18,716 | ||||||||||||||||||||||||||||||||||
| Derivative credit valuation adjustment | (358) | (351) | (736) | (180) | (198) | (1,445) | (1,105) | ||||||||||||||||||||||||||||||||||
| Deposit relationship adjustment fees | — | — | — | — | 4,707 | — | 4,707 | ||||||||||||||||||||||||||||||||||
| Loss on redemption of preferred stock | — | — | — | — | 2,820 | — | 2,820 | ||||||||||||||||||||||||||||||||||
| Core earnings | $ | 82,270 | $ | 59,367 | $ | 75,410 | $ | 101,213 | $ | 113,876 | $ | 217,047 | $ | 243,487 | |||||||||||||||||||||||||||
| Average total common shareholders' equity | $ | 1,259,711 | $ | 1,244,819 | $ | 1,252,022 | $ | 1,179,478 | $ | 1,071,566 | $ | 1,252,212 | $ | 998,221 | |||||||||||||||||||||||||||
| Core return on average common equity | 25.91 | % | 19.13 | % | 24.43 | % | 34.04 | % | 42.16 | % | 23.17 | % | 32.61 | % | |||||||||||||||||||||||||||
| Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| GAAP net income to common shareholders | $ | 61,364 | $ | 56,519 | $ | 74,896 | $ | 98,647 | $ | 110,241 | $ | 192,779 | $ | 201,487 | |||||||||||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||||||||||||||||||||
Income tax expense | 17,899 | 18,896 | 19,332 | 12,993 | 36,263 | 56,127 | 73,947 | ||||||||||||||||||||||||||||||||||
Provision (benefit) for credit losses | (7,994) | 23,847 | 15,997 | 13,890 | 13,164 | 31,850 | 13,536 | ||||||||||||||||||||||||||||||||||
| Provision (benefit) for credit losses on unfunded commitments | 254 | 608 | (109) | 352 | 669 | 753 | (572) | ||||||||||||||||||||||||||||||||||
| Net loss from discontinued operations | — | — | — | 1,585 | — | — | 38,036 | ||||||||||||||||||||||||||||||||||
| Severance expense | 1,363 | — | — | — | — | 1,363 | 2,004 | ||||||||||||||||||||||||||||||||||
| Impairments on fixed assets and leases | 162 | 914 | 286 | 1,260 | — | 1,362 | — | ||||||||||||||||||||||||||||||||||
| Merger and acquisition related expenses | — | — | — | — | — | — | 418 | ||||||||||||||||||||||||||||||||||
| Loss on sale of consumer installment loans | 23,465 | — | — | — | — | 23,465 | — | ||||||||||||||||||||||||||||||||||
| Legal reserves | — | — | — | — | 1,185 | — | 1,185 | ||||||||||||||||||||||||||||||||||
| (Gains) losses on investment securities | 2,394 | 3,232 | 1,339 | 49 | (6,063) | 6,965 | (34,161) | ||||||||||||||||||||||||||||||||||
| Loss on sale of foreign subsidiaries | — | — | — | — | — | — | 2,840 | ||||||||||||||||||||||||||||||||||
| Loss on cash flow hedge derivative terminations | — | — | — | — | — | — | 24,467 | ||||||||||||||||||||||||||||||||||
| Derivative credit valuation adjustment | (461) | (455) | (957) | (203) | (261) | (1,873) | (1,443) | ||||||||||||||||||||||||||||||||||
| Deposit relationship adjustment fees | — | — | — | — | 6,216 | — | 6,216 | ||||||||||||||||||||||||||||||||||
| Loss on redemption of preferred stock | — | — | — | — | 2,820 | — | 2,820 | ||||||||||||||||||||||||||||||||||
| Pre-tax pre-provision adjusted net income available to common shareholders | $ | 98,446 | $ | 103,561 | $ | 110,784 | $ | 128,573 | $ | 164,234 | $ | 312,791 | $ | 330,780 | |||||||||||||||||||||||||||
| Average total common shareholders' equity | $ | 1,259,711 | $ | 1,244,819 | $ | 1,252,022 | $ | 1,179,478 | $ | 1,071,566 | $ | 1,252,212 | $ | 998,221 | |||||||||||||||||||||||||||
| Adjusted ROCE - pre-tax pre-provision | 31.01 | % | 33.37 | % | 35.89 | % | 43.25 | % | 60.81 | % | 33.40 | % | 44.30 | % | |||||||||||||||||||||||||||
26
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||||||||||
| Net Interest Margin, Tax Equivalent - Customers Bancorp | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| GAAP net interest income | $ | 159,032 | $ | 164,852 | $ | 164,699 | $ | 193,694 | $ | 219,892 | $ | 488,583 | $ | 491,380 | |||||||||||||||||||||||||||
| Tax-equivalent adjustment | 334 | 270 | 239 | 276 | 290 | 843 | 871 | ||||||||||||||||||||||||||||||||||
| Net interest income tax equivalent | $ | 159,366 | $ | 165,122 | $ | 164,938 | $ | 193,970 | $ | 220,182 | $ | 489,426 | $ | 492,251 | |||||||||||||||||||||||||||
| Average total interest earning assets | $ | 20,021,455 | $ | 19,525,936 | $ | 18,572,308 | $ | 18,576,433 | $ | 19,033,826 | $ | 19,378,542 | $ | 18,562,912 | |||||||||||||||||||||||||||
| Net interest margin, tax equivalent | 3.16 | % | 3.39 | % | 3.60 | % | 4.14 | % | 4.59 | % | 3.38 | % | 3.55 | % | |||||||||||||||||||||||||||
| Net Interest Margin, Tax Equivalent, excluding PPP - Customers Bancorp | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| GAAP net interest income | $ | 159,032 | $ | 164,852 | $ | 164,699 | $ | 193,694 | $ | 219,892 | $ | 488,583 | $ | 491,380 | |||||||||||||||||||||||||||
| PPP net interest income | (9,632) | (18,946) | (34,615) | (78,647) | (112,005) | (63,193) | (182,632) | ||||||||||||||||||||||||||||||||||
| Tax-equivalent adjustment | 334 | 270 | 239 | 276 | 290 | 843 | 871 | ||||||||||||||||||||||||||||||||||
| Net interest income, tax equivalent, excluding PPP | $ | 149,734 | $ | 146,176 | $ | 130,323 | $ | 115,323 | $ | 108,177 | $ | 426,233 | $ | 309,619 | |||||||||||||||||||||||||||
| GAAP average total interest earning assets | $ | 20,021,455 | $ | 19,525,936 | $ | 18,572,308 | $ | 18,576,433 | $ | 19,033,826 | $ | 19,378,542 | $ | 18,562,912 | |||||||||||||||||||||||||||
| Average PPP loans | (1,349,403) | (1,863,429) | (2,641,318) | (3,898,607) | (5,778,367) | (1,946,651) | (5,515,819) | ||||||||||||||||||||||||||||||||||
| Adjusted average total interest earning assets | $ | 18,672,052 | $ | 17,662,507 | $ | 15,930,990 | $ | 14,677,826 | $ | 13,255,459 | $ | 17,431,891 | $ | 13,047,093 | |||||||||||||||||||||||||||
| Net interest margin, tax equivalent, excluding PPP | 3.18 | % | 3.32 | % | 3.32 | % | 3.12 | % | 3.24 | % | 3.27 | % | 3.17 | % | |||||||||||||||||||||||||||
| Loan Yield, excluding PPP | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| Interest income on loans and leases | $ | 200,457 | $ | 168,941 | $ | 157,175 | $ | 198,000 | $ | 233,097 | $ | 526,573 | $ | 538,822 | |||||||||||||||||||||||||||
| PPP interest income | (14,666) | (20,572) | (36,894) | (82,086) | (117,102) | (72,132) | (197,071) | ||||||||||||||||||||||||||||||||||
| Interest income on core loans (Loans and leases, excluding PPP) | $ | 185,791 | $ | 148,369 | $ | 120,281 | $ | 115,914 | $ | 115,995 | $ | 454,441 | $ | 341,751 | |||||||||||||||||||||||||||
| Average total loans and leases | $ | 15,653,983 | $ | 14,918,498 | $ | 13,656,991 | $ | 14,335,370 | $ | 16,192,744 | $ | 14,750,473 | $ | 16,004,714 | |||||||||||||||||||||||||||
| Average PPP loans | (1,349,403) | (1,863,429) | (2,641,318) | (3,898,607) | (5,778,367) | (1,946,651) | (5,515,819) | ||||||||||||||||||||||||||||||||||
| Adjusted average total loans and leases | $ | 14,304,580 | $ | 13,055,069 | $ | 11,015,673 | $ | 10,436,763 | $ | 10,414,377 | $ | 12,803,822 | $ | 10,488,895 | |||||||||||||||||||||||||||
| Loan yield, excluding PPP | 5.15 | % | 4.56 | % | 4.43 | % | 4.41 | % | 4.42 | % | 4.75 | % | 4.36 | % | |||||||||||||||||||||||||||
27
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||||||||||
| Core Efficiency Ratio - Customers Bancorp | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| GAAP net interest income | $ | 159,032 | $ | 164,852 | $ | 164,699 | $ | 193,694 | $ | 219,892 | $ | 488,583 | $ | 491,380 | |||||||||||||||||||||||||||
| GAAP non-interest income | $ | (9,017) | $ | 12,746 | $ | 21,198 | $ | 16,991 | $ | 25,586 | $ | 24,927 | $ | 60,876 | |||||||||||||||||||||||||||
| Loss on sale of consumer installment loans | 23,465 | — | — | — | — | 23,465 | — | ||||||||||||||||||||||||||||||||||
| (Gains) losses on investment securities | 2,394 | 3,232 | 1,339 | 49 | (6,063) | 6,965 | (34,161) | ||||||||||||||||||||||||||||||||||
| Derivative credit valuation adjustment | (461) | (455) | (957) | (203) | (261) | (1,873) | (1,443) | ||||||||||||||||||||||||||||||||||
| Loss on cash flow hedge derivative terminations | — | — | — | — | — | — | 24,467 | ||||||||||||||||||||||||||||||||||
| Loss on sale of foreign subsidiaries | — | — | — | — | — | — | 2,840 | ||||||||||||||||||||||||||||||||||
| Core non-interest income | 16,381 | 15,523 | 21,580 | 16,837 | 19,262 | 53,484 | 52,579 | ||||||||||||||||||||||||||||||||||
| Core revenue | $ | 175,413 | $ | 180,375 | $ | 186,279 | $ | 210,531 | $ | 239,154 | $ | 542,067 | $ | 543,959 | |||||||||||||||||||||||||||
| GAAP non-interest expense | $ | 76,198 | $ | 76,205 | $ | 73,807 | $ | 81,548 | $ | 80,009 | $ | 226,210 | $ | 212,759 | |||||||||||||||||||||||||||
| Severance expense | (1,363) | — | — | — | — | (1,363) | (2,004) | ||||||||||||||||||||||||||||||||||
| Impairments on fixed assets and leases | (162) | (914) | (286) | (1,260) | — | (1,362) | — | ||||||||||||||||||||||||||||||||||
| Legal reserves | — | — | — | — | (1,185) | — | (1,185) | ||||||||||||||||||||||||||||||||||
| Merger and acquisition related expenses | — | — | — | — | — | — | (418) | ||||||||||||||||||||||||||||||||||
| Deposit relationship adjustment fees | — | — | — | — | (6,216) | — | (6,216) | ||||||||||||||||||||||||||||||||||
| Core non-interest expense | $ | 74,673 | $ | 75,291 | $ | 73,521 | $ | 80,288 | $ | 72,608 | $ | 223,485 | $ | 202,936 | |||||||||||||||||||||||||||
Core efficiency ratio (1) | 42.57 | % | 41.74 | % | 39.47 | % | 38.14 | % | 30.36 | % | 41.23 | % | 37.31 | % | |||||||||||||||||||||||||||
(1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.
| Tangible Common Equity to Tangible Assets - Customers Bancorp | |||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | ||||||||||||||||||||||||
| GAAP total shareholders' equity | $ | 1,386,931 | $ | 1,353,390 | $ | 1,377,406 | $ | 1,366,217 | $ | 1,284,299 | |||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||||||||
| Preferred stock | (137,794) | (137,794) | (137,794) | (137,794) | (137,794) | ||||||||||||||||||||||||
| Goodwill and other intangibles | (3,629) | (3,629) | (3,678) | (3,736) | (3,794) | ||||||||||||||||||||||||
| Tangible common equity | $ | 1,245,508 | $ | 1,211,967 | $ | 1,235,934 | $ | 1,224,687 | $ | 1,142,711 | |||||||||||||||||||
| GAAP total assets | $ | 20,367,621 | $ | 20,251,996 | $ | 19,163,708 | $ | 19,575,028 | $ | 19,108,922 | |||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||||||||
| Goodwill and other intangibles | (3,629) | (3,629) | (3,678) | (3,736) | (3,794) | ||||||||||||||||||||||||
| Tangible assets | $ | 20,363,992 | $ | 20,248,367 | $ | 19,160,030 | $ | 19,571,292 | $ | 19,105,128 | |||||||||||||||||||
| Tangible common equity to tangible assets | 6.12 | % | 5.99 | % | 6.45 | % | 6.26 | % | 5.98 | % | |||||||||||||||||||
28
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||||||||||
| Tangible Common Equity to Tangible Assets, excluding PPP - Customers Bancorp | |||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | ||||||||||||||||||||||||
| GAAP total shareholders' equity | $ | 1,386,931 | $ | 1,353,390 | $ | 1,377,406 | $ | 1,366,217 | $ | 1,284,299 | |||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||||||||
| Preferred stock | (137,794) | (137,794) | (137,794) | (137,794) | (137,794) | ||||||||||||||||||||||||
| Goodwill and other intangibles | (3,629) | (3,629) | (3,678) | (3,736) | (3,794) | ||||||||||||||||||||||||
| Tangible common equity | $ | 1,245,508 | $ | 1,211,967 | $ | 1,235,934 | $ | 1,224,687 | $ | 1,142,711 | |||||||||||||||||||
| GAAP total assets | $ | 20,367,621 | $ | 20,251,996 | $ | 19,163,708 | $ | 19,575,028 | $ | 19,108,922 | |||||||||||||||||||
| Loans receivable, PPP | (1,154,632) | (1,570,160) | (2,195,902) | (3,250,008) | (4,957,357) | ||||||||||||||||||||||||
| Total assets, excluding PPP | $ | 19,212,989 | $ | 18,681,836 | $ | 16,967,806 | $ | 16,325,020 | $ | 14,151,565 | |||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||||||||
| Goodwill and other intangibles | (3,629) | (3,629) | (3,678) | (3,736) | (3,794) | ||||||||||||||||||||||||
| Tangible assets, excluding PPP | $ | 19,209,360 | $ | 18,678,207 | $ | 16,964,128 | $ | 16,321,284 | $ | 14,147,771 | |||||||||||||||||||
| Tangible common equity to tangible assets, excluding PPP | 6.48 | % | 6.49 | % | 7.29 | % | 7.50 | % | 8.08 | % | |||||||||||||||||||
| Tangible Book Value per Common Share - Customers Bancorp | |||||||||||||||||||||||||||||
| (Dollars in thousands except share and per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | ||||||||||||||||||||||||
| GAAP total shareholders' equity | $ | 1,386,931 | $ | 1,353,390 | $ | 1,377,406 | $ | 1,366,217 | $ | 1,284,299 | |||||||||||||||||||
| Reconciling Items: | |||||||||||||||||||||||||||||
| Preferred stock | (137,794) | (137,794) | (137,794) | (137,794) | (137,794) | ||||||||||||||||||||||||
| Goodwill and other intangibles | (3,629) | (3,629) | (3,678) | (3,736) | (3,794) | ||||||||||||||||||||||||
| Tangible common equity | $ | 1,245,508 | $ | 1,211,967 | $ | 1,235,934 | $ | 1,224,687 | $ | 1,142,711 | |||||||||||||||||||
| Common shares outstanding | 32,475,502 | 32,449,486 | 32,957,847 | 32,913,267 | 32,537,976 | ||||||||||||||||||||||||
| Tangible book value per common share | $ | 38.35 | $ | 37.35 | $ | 37.50 | $ | 37.21 | $ | 35.12 | |||||||||||||||||||
| Core Loans (Total Loans and Leases, excluding PPP) | |||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | ||||||||||||||||||||||||
| Total loans and leases | $ | 15,336,688 | $ | 15,664,353 | $ | 14,073,518 | $ | 14,568,885 | $ | 15,515,537 | |||||||||||||||||||
| Loans receivable, PPP | (1,154,632) | (1,570,160) | (2,195,902) | (3,250,008) | (4,957,357) | ||||||||||||||||||||||||
| Core Loans (Loans and leases, excluding PPP) | $ | 14,182,056 | $ | 14,094,193 | $ | 11,877,616 | $ | 11,318,877 | $ | 10,558,180 | |||||||||||||||||||
| Total loans and leases, excluding loans to mortgage companies and PPP | |||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | ||||||||||||||||||||||||
| Total loans and leases | $ | 15,336,688 | $ | 15,664,353 | $ | 14,073,518 | $ | 14,568,885 | $ | 15,515,537 | |||||||||||||||||||
| Loans to mortgage companies | (1,708,587) | (1,975,189) | (1,830,121) | (2,362,438) | (2,626,483) | ||||||||||||||||||||||||
| Loans receivable, PPP | (1,154,632) | (1,570,160) | (2,195,902) | (3,250,008) | (4,957,357) | ||||||||||||||||||||||||
| Total loans and leases, excluding loans to mortgage companies and PPP | $ | 12,473,469 | $ | 12,119,004 | $ | 10,047,495 | $ | 8,956,439 | $ | 7,931,697 | |||||||||||||||||||
| Total Assets, excluding PPP | |||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | ||||||||||||||||||||||||
| Total assets | $ | 20,367,621 | $ | 20,251,996 | $ | 19,163,708 | $ | 19,575,028 | $ | 19,108,922 | |||||||||||||||||||
| Loans receivable, PPP | (1,154,632) | (1,570,160) | (2,195,902) | (3,250,008) | (4,957,357) | ||||||||||||||||||||||||
| Total assets, excluding PPP | $ | 19,212,989 | $ | 18,681,836 | $ | 16,967,806 | $ | 16,325,020 | $ | 14,151,565 | |||||||||||||||||||
29
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED (CONTINUED) | |||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||||||||||
| Coverage of credit loss reserves for loans and leases held for investment, excluding PPP | |||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | ||||||||||||||||||||||||
| Loans and leases receivable | $ | 13,762,374 | $ | 13,783,155 | $ | 12,314,757 | $ | 12,268,306 | $ | 12,927,956 | |||||||||||||||||||
| Loans receivable, PPP | (1,154,632) | (1,570,160) | (2,195,902) | (3,250,008) | (4,957,357) | ||||||||||||||||||||||||
| Loans and leases held for investment, excluding PPP | $ | 12,607,742 | $ | 12,212,995 | $ | 10,118,855 | $ | 9,018,298 | $ | 7,970,599 | |||||||||||||||||||
| Allowance for credit losses on loans and leases | $ | 130,197 | $ | 156,530 | $ | 145,847 | $ | 137,804 | $ | 131,496 | |||||||||||||||||||
| Coverage of credit loss reserves for loans and leases held for investment, excluding PPP | 1.03 | % | 1.28 | % | 1.44 | % | 1.53 | % | 1.65 | % | |||||||||||||||||||
30
“A Digital-Forward Super-Community Bank“ Investor Presentation: Q3 2022 Let’s take on tomorrow. October 2022
2 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED In addition to historical information, this presentation may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project”, or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: The impact of the ongoing pandemic on the U.S. economy and customer behavior, the impact that changes in economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding, the continued success and acceptance of our blockchain payments system; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that effect market interest rates and the money supply; the 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 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, 2021, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law. This does not constitute an offer to sell, or a solicitation of an offer to buy, any security in any state or jurisdiction in which such offer, solicitation or sale would be unlawful. Forward-Looking Statements
3 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Community Banking Corporate & Specialty Banking Digital Banking o C&I o CRE o Multi-Family o SBA o SMB Lending o Residential Mortgage o Lender Finance o Fund Finance o Financial Institutions Group o Real Estate Specialty Finance o Loans to Mortgage Companies o Equipment Finance o Tech and Venture Banking o Healthcare Lending Consumer o Checking & Savings o Personal Loan o Student Loan o Credit Card BaaS o MPL Program Commercial o Digital Asset Banking o SMB Bundle o Credit Card Transaction Banking o Treasury Services o Payments Customers Bancorp Snapshot Customers Bancorp, Inc. NYSE: CUBI Headquarters West Reading, PA Offices1 39 FTE Employees 672 Market Capitalization As of 10/21/2022 $1.0B Total Assets $20.4B Tangible Book Value2 $38.35 Share price As of 10/21/2022 $31.17 Data as of 09/30/2022, unless otherwise noted. (1) Offices includes branches, executive offices, Private Banking Offices and Loan Production Offices. (2) Non-GAAP Measure, refer to Appendix for reconciliation. Lines of Business A Digital-Forward Super-Community Bank
4 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Q3’22 (vs. Q3’21) Profitability Balance Sheet Credit 3.16% vs. 4.58% NIM $20.4B +7% Total Assets 0.14% -13 bps NPA Ratio3 1.24% vs. 2.33% ROAA $15.3B -1% Total Loans and Leases 0.95% -07 bps Reserve Coverage NA Adjusted PTPP ROAA2 $17.5B +3% Total Deposits3 466.3% vs. 252.7% Reserves to NPLs3 Highlights – GAAP 1. Net income to common shareholders 2. ROAA is the GAAP metric 3. GAAP metric Highlights Diluted EPS $1.85 Net Income1 $61.4M ROCE 19.3% Q3’22
5 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Q3’22 (vs. Q3’21) Profitability Balance Sheet Credit 3.18% vs. 3.24% NIM1,2 $19.2B +36% Core Assets1,2 0.14% -13 bps NPA Ratio 1.64% vs. 2.35% Core ROAA1 $14.2B +34% Total Loans and Leases1,2 1.03% -62 bps Reserve Coverage1,2 1.95% vs. 3.36% Adjusted PTPP ROAA1 $17.5B +3% Total Deposits 466.3% vs. 252.7% Reserves to NPLs Highlights – Adjusted/Core Highlights Core ROCE1 25.9% Q3’22 (vs. Q3’21) -26% 1. Non-GAAP Measure, refer to Appendix for reconciliation. 2. Ex PPP vs. 42.2% +140% $2.30$2.48 Core EPS1 Core EPS ex PPP1,2 -28% +135% $76.4 M$82.3M Core Earnings1 Core Earnings ex PPP1,2
6 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED o Growth focused in variable rate specialty lending1 verticals with extremely low credit risk. o Portfolio mix2 shift to low risk verticals YoY − Specialty Lending C&I1: 19% to 37% − Consumer installment portfolio: 15% to 10% o $2.7B of the $3.6B loan growth ex PPP YoY in specialty lending1 is from low to no loss verticals Lender Finance-$1.6B, Fund Finance-$1.0B and FIG -$0.1B o Enhanced loan level stress-testing activities and proprietary technology enabled portfolio monitoring to proactively manage and take action, if needed Strategic initiatives we have implemented to best position us for the current and future external environment CREDIT & PORTFOLIO MIX o Managing balance sheet size by slowing outsized total asset growth: ~0.1B,+1% QoQ and $1.3B,+7% YoY o Sale of $500 million of consumer installment loans resulting in lower portfolio credit risk and capital boost o Transfer of $500 million of AFS securities to HTM in Q2’22 avoided further potential material unrealized loss in AOCI o Earnings growth consistently benefitting capital despite AOCI headwinds CAPITAL o Loan portfolio remix expected to be complete in Q4 2022 supporting NIM expansion in 2023 o Disciplined risk-adjusted pricing with targeted 3%+ spread over projected funding cost o Strategic sales from lower yielding AFS book redeployed in higher beta earning assets o Declining proportion of lower yielding PPP loans from 26% to 6% YoY as percentage of total assets leaves additional room for NIM expansion MARGIN o Liquidity almost doubled YoY to ~$10B while proactively paying down $4.8B in PPPLF balances. o Significant core deposit opportunities by onboarding teams and new product development through transaction banking product and services o Significant Liquidity and strong deposit pipeline to fund future core loan growth and transition of the BMTX DSA o Deposit growth of $2.5B from FIG group since Q3’20 LIQUIDITY & FUNDING o Organizational and leadership changes streamlined our structure while enhancing our ability to achieve our strategic business priorities o Despite significant growth, operating expenses did not increase over the prior quarter and a year ago quarter o Realigned the scope and areas of responsibility to simplify the organization structure o Better positioned to serve our clients while maintaining industry leading efficiency ratio of ~43%3 o Onboarded 300+ CBIT customers to-date bringing in over $1.9 billion in deposits o Launch our initial MPL Banking-as-a-Service program pilot in Q4’22 and target $10M+ in annual revenue o Launched Transaction Banking platform to enable continued low cost deposit generation beginning in 2023 o Build out of proprietary front-end digital platform to service the SMB Vendor/Dealer Market to add to SMB bundle offering with expected launch by Q1’23 TECHNOLOGY ORGANIZATIONAL EFFICIENCY 1. Includes owner occupied CRE ($0.2B) for Q3’22 2. Excludes the impact of PPP forgiveness 3. Core efficiency ratio for Q3’22. Non-GAAP measure. Refer to appendix for reconciliation
7 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED We are reinventing banking through a cloud-based offering of 24/7 API enabled fully integrated Treasury, Payments and BaaS offerings Digital AssetsFund Finance Tech & Venture Banking Financial Institutions Group API-enabled Digital Solutions Digital Onboarding API Enabled FX CBIT & Crypto On/Off Ramps ERP Integrations Customer Facing API Library Tech-Enabled Banking: Commercial Treasury Services, Payments and BaaS CUBI’s proprietary tech-led product suite will drive: 1. Differentiated primary commercial banking relationships 2. Franchise value from sticky multi-product customer integrations 3. Low-cost deposit franchise of payments and reporting integrated operating accounts BaaS MPL Program API Enabled Wires and ACH BaaS Integrations
8 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED A Blockchain-based, instant payments platform to generate low- cost deposits Overview o API connected platform with customers o CBIT deposits stable at ~$1.9 billion over the last few quarters o Onboarded 111 new customers in Q3’22 bring total customers to 301 o Compliance-first, best-in-class onboarding process. o CBIT adoption central to our strategy. Digital banking team closely integrated with the business unit heads Customers Bank Instant Token (CBIT™) An Instant Payments Tool to Serve Diverse Potential Commercial Clients in 2022 and Beyond Freight and Shipping Large Corporate Clients Digital-Asset Related Businesses Healthcare and Payers Real Estate Financial Institutions $1.5 $1.9 $1.8 $2.1 $1.9 Q3’21 Q4’21 Q1’22 Q3’22Q2’22 Deposits $ bil l ions Number of CBIT customers 26 100 190 301 Q4’21Q3’21 Q1’22 Q3’22Q2’22
9 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Loans ex PPP1 $ bil l ions • Loan growth ex PPP1: +$0.1B QoQ, 1% QoQ, +$3.6B YoY • Specialty C&I: +$0.5B QoQ, 10% QoQ, +$3.3B YoY • Net growth of $0.1B this quarter driven by Specialty C&I ($0.5B), Multifamily ($0.3B) Community C&I ($0.1B) offset in part by consumer installment loan sale of ($0.5B) and loans to mortgage companies decline of ($0.3B) PPP loans Balance Sheet: Loan Growth and Loan yield $1.5 $2.3 $3.7 $2.4 $1.8 $2.0 $1.7 $0.7 $1.6 $1.6 $2.1 $2.4 $2.4 $1.9 $3.3 $2.4 $1.8 $1.5 $1.7 $2.0 $2.3 $1.2 $1.3 $1.4 $1.3 $1.3 $1.4 $1.4$0.7 $1.1 $1.6 $2.7 $3.2 $4.8 $5.3 $1.2 $1.3 $1.3 $1.3 $1.4 $1.5 $1.6 $11.3 20202019 $11.9 2018 2021 Q1’22 Q2’22 Q3’22 $8.5 $10.0 $11.3 $14.1 $14.2+14% Community C&I Consumer3Specialty C&I2 Multifamily Investment CRE Loans to Mortgage Companies 1. Non-GAAP Measure, refer to Appendix for reconciliation. 2. Includes owner occupied CRE ($0.2B) 3. Includes consumer installment ($1.4B), Mortgages ($0.5B) and Manufactured housing -- +10% -21% $1.2$4.6 $3.3 $2.2 $1.6 4.42% 5.15% 5.00% 4.00% 0.00% 1.00% 2.00% 3.00% 6.00% Q2’22Q3’21 Q4’21 Q1’22 Q3’22 Loan yield ex PPP1 percent • Loan yield increased by ~59 bps in Q3’22 driven by higher proportion of floating rate loans
10 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Balance Sheet: Deposit Growth & Deposit cost $6.0 $7.3 $9.0 $12.3 $11.8 $12.3 $1.3 $2.4 $4.5 $4.6 $4.7 $3.0 Q3’22Q2’222018 $1.1 2020 $14.5 2019 $16.8 2021 Q1’22 $7.1 $8.6 $11.3 $16.9$16.4 $17.5 +27% Non-interest bearing deposits Interest bearing deposits Deposits $ bil l ions • Total deposit growth: +$0.6B QoQ, 3% QoQ, +$0.6B YoY, 3% YoY • Proportion of DDAs has increased from 27% in 2018 to 58% in Q3’22 and is well above the pre-pandemic levels 58%DDA % 30% 42% 65% 62% 67%27% 0.42% 1.48% 0.00% 5.00% 3.00% 1.00% 2.00% 4.00% 6.00% Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Deposit cost percent
11 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Interest earning assets mix1 Q3’22, percent Interest Rate Sensitive Earning Asset Mix • ~62% of interest earning assets are market sensitive which is greater than the proportion of market sensitive liabilities 51% 8% 25% 13% 2% Fixed LoansFloating Loans Floating Securities Cash Fixed Securities 1. Floating rate loans and securities are defined as assets with resets less than one year and include fixed loans maturing within one year (including PPP loans). 2. Non-GAAP Measure, refer to Appendix for reconciliation. 3. Includes owner occupied CRE ($0.2B) 4. Includes consumer installment ($1.4B), Mortgages ($0.5B) and Manufactured housing 5. Includes Mortgages and Home Equity loans 11% 37% 10% 16% 13% 12% Loan mix ex PPP2 percent • Significant improvement in loan mix with greater proportion of lower credit risk verticals • Pipeline remains strong especially in C&I • Loan mix ex PPP2: Consumer installment (~10% declined from 15% YoY), Consumer mortgages5 (~4%) Community C&I Specialty C&I3 Investment CRE Multifamily Consumer4 Loans to Mortgage Companies As of Q3’22 86 % Commercial Loans
12 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Income Statement: Net interest income and margin 3.24% 3.18% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% Q3’22Q4’21Q3’21 3.00% Q1’22 Q2’22 NIM ex PPP2 percent • NIM excluding PPP consistently above 3.00% $107.9 $115.0 $130.1 $145.9 $149.4 Q3’22Q2’22Q4’21Q3’21 Q1’22 +38% NII ex PPP1 $ mill ions 1. Non-GAAP Measure, refer to Appendix for reconciliation 2. NIM excluding PPP, tax equivalent, refer to appendix for reconciliation • Strong NII growth: +2% QoQ, +38% YoY • NII growth driven by strong loan growth in C&I including specialty lending verticals
13 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED $3.5 $2.6 $1.8 $1.3 $1.0 $1.5 $0.7 $0.4 $0.2 Q3’21 Q2’22 Q3’22Q4’21 $0.2 Q1’22 $5.0 $3.3 $2.2 $1.6 $1.2 Rounds 1 & 2 Round 3 PPP loans1 $ bil l ions Fee income recognized from PPP1 $ mill ions • ~$350 million of origination fee income from the program • ~$30 million of remaining deferred origination fees to be recognized 1. As of 09/30/2022 includes all PPP loans facilitated by Customers Bank (originated and purchased). Paycheck Protection Program: Loans and Fees • Reduction of ~$0.4B of PPP loans balance in Q3’22 $102 $72 $30 $15 $11 Q3’22Q1’22Q4’21Q3’21 Q2’22
14 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED $1.1 $1.9 $0.3 $3.1 Q4’21Q3’21 $0.5 $3.8 $4.2 Q1’22 $0.2 $0.5 Q2’22 $0.4$3.9 $0.9 $2.9 Q3’22 $2.9 $4.3 $4.4 $4.2 Cash and Cash equivalents Investment securities HTM Investment securities AFS Liquidity $ bil l ions Investment Securities AFS Mix (~50% floating rate) As of Q3’ 2022, percent • Purchased $400 million of senior notes from a securitization collateralized by associated sale of consumer loans • Majority of investment securities are deployed in MBS & CMO and ABS1 • Ample liquidity to fund future loan growth • Portfolio characteristics (as of Q3’22) − Yield, net of hedges: ~3.7% − Effective Duration: ~1.7 years − Floating rate securities: ~50% Liquidity and Investment Securities Mix 46% 35% 18% MBS & CMO ABS1 Corporates Other 1. Includes CLOs
15 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED 13.6% 12.9% 12.9% 12.6% 12.8% Q2’22Q3’21 Q3’22E1Q4’21 Q1’22 Total risk-based capital percent 8.1% 7.5% 7.3% 6.5% Q2’22Q3’21 6.5% Q4’21 Q1’22 Q3’22 7.3% TCE/TA excl PPP2 percent $35.12 $37.21 $37.50 $37.35 $38.35 Q3’21 Q2’22Q4’21 Q1’22 Q3’22 $43.16 +9% Tangible book value3 per share o AOCI negatively impacted TCE/TA excl. PPP2 ~0.1% in Q3’22. Total cumulative impact of ~0.8% as of Q3’22 o Expect TBV per share of $40+ by Q4’22E o Expect TCE/TA excl PPP2 to be ~7.5% over the next 3-4 quarters 1. Capital ratios are estimated pending final regulatory report. 2. TCE/TA excl PPP negatively impacted by ~0..8% due to AOCI 3. Non-GAAP Measure, refer to Appendix for reconciliation. Capital: Strong Capital Position AOCI AOCI 0.8% $4.81 10.4% 10.0% 9.9% 9.7% 10.1% Q4’21Q3’21 Q2’22Q1’22 Q3’22E1 CET1 risk-based capital percent
16 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED $52 $50 $44 $28 $28 Q2’22Q3’21 Q4’21 Q3’22Q1’22 NPL $ mill ions NCO percent 0.27% 0.25% 0.23% 0.14% 0.14% Q4’21Q3’21 Q1’22 Q3’22Q2’22 NPA as percent of total assets percent o Credit quality remains excellent as evidenced by NPAs/Total Assets of only 0.14% at Q3’22 o Reserves/NPLs was 466.3% at Q3’22 o The Bank has also undertaken several steps to minimize loss risk given the current and forward-looking economic environment: − Loan growth in in low-risk business lines (Lender Finance, Funds Finance and Financial Institutions Group) − Continued to remain focused on limiting exposure to Investment CRE Office (~$132 million) , Investment CRE Retail (~$172 million) and Hospitality (~$452 million) − Enhanced loan level stress-testing activities to proactively take action on credits that could be impacted in stressed economic conditions Credit: Credit Quality and Reserves Remain Strong 0.03% 0.01% -0.02% 0.05% 0.22%0.17% 0.21% 0.21% 0.36% 0.47% Q1’22 Q2’22Q3’21 Q4’21 Q3’22 Commercial Total
17 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Industry leading core loan growth and deposit growth supported by best-in-class digital banking Moderating growth in this environment to maintain/expand margin, improve capital ratios while maintaining profitability. On track for $6.00 or higher Core EPS in 2023. Exceptional credit quality Customer centric culture built around service and experience Demonstrated industry leading proprietary technological capabilities as a high-tech, high- touch bank Attractive valuation - Trading at ~0.8X1 tangible book value and ~5X1 2023E consensus. We will consider buying back common stock at below tangible book Let’s take on tomorrow. Key Investment Highlights 1. Based on share price as of October 21, 2022 (~$31.17)
ANALYST COVERAGE D.A. Davidson Companies Peter Winter Hovde Group David Bishop Jefferies Group LLC Casey Haire Keefe, Bruyette & Woods Inc. Michael Perito Maxim Group Inc. Michael Diana Piper Sandler Companies Frank Schiraldi Stephens Inc. Matt Breese Wedbush Securities Inc. David Chiaverini B. Riley Financial, Inc.
19 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Appendix
20 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Seasoned teams led by SPOC RM’s Exceptional service through omnichannel expansion Full service Private Business Banking Instant B2B payments platform Digital bank with over 500K customers API integrations support customer growth Streamlined digital u/w & onboarding HIGH TOUCH HIGH TECH The customer is at the center of everything we do • Single Point of Contact for customers (SPOC) • Technology led customer experience • Customer retention & referrals at an all time high • Industry leading employee retention
21 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED ~$20B Assets ~$18B Deposits ~$15B Loans • A Digital-Forward Super- Community Bank • Growth story remains committed to maintaining best in class credit quality • Unique specialty lending strategy customizable to client needs • Technology enhanced products and processes enable scalable loan and deposit growth ~$0.3B ~$0.3B ~$0.2B Assets Deposits Loans WHERE WE STARTED 2009 Our vision for growth has remained a part of our story since the beginning WHERE WE ARE 2022 Q3 ~40% CAGR
22 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Let’s take on tomorrow. Environmental, Social & Governance Report Pennsylvania Housing Finance Agency (PHFA) recognized Customers Bank as a top-10 producing lending partner across the state in 2021 for completing 241 mortgages totaling ~$35 million Customers Bank in 2021 financed over $40 million of hydroelectric, solar and low emission domestic natural gas energy projects. Customers Bank’s SBA/Government Guaranteed Lending team ranked 36th in the nation in 2021 with ~$56 million in loans to qualifying small businesses. In total, Customers Bank contributed over $4 million in 2021 through CRA-eligible donations, charitable donations, community sponsorships, and tax credit programs. In addition to these contributions, Customers Bank made ~$50 million of CRA-qualified investments (mutual funds and small business investment companies) to support affordable housing and economic development within the bank’s footprint. Customers Bank ultimately participated in over 350,000 Paycheck Protection Program (PPP) loans worth more than $10 billion as an originator, funder, servicer, or lending partner. It is estimated that this work may have saved as many as 1 million jobs and tens of thousands of business establishments. The Board created the Environmental Social & Governance Committee charging the members to drive a positive impact within the communities we serve and through the people and organizations with whom we do business. Customers Bank was ranked as #1 “medium sized” employer in the Philadelphia region on the basis of its wellness program, culture and leadership commitment, foundational components, strategic planning, communication and marketing, programming and interventions, and reporting and analysis.
23 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Consumer loan sale transaction results in significant capital build and lowers the perceived risk of the portfolio s Credit Score1 729 714 736 Collateral Summary Q2’22 Pool Sold Q3’22 DTI (%)1 17.4 21.8 17.9 Total outstanding $1.9B $0.5B $1.4B Transaction Overview Key benefits Consumer installment loan sale of $500 million sold at 99.5% of par Whole loan exposure 100% risk weight Purchase of $400 million of securities collateralized by sold loans 5.5% yield 20% risk weight $100 million subordination Customers Bank Investor o Financial benefits: Capital build through reduction in RWA of ~$420 million and CECL release of ~$37 million. Total Q3’22 financial benefits of ~$13 million pre-tax, which included CECL reserve release net of loss on sale of ~$24 million, including deferred origination cost and other transaction related expenses o Lowers the perceived credit risk of the consumer installment portfolio: Sale of portfolio at 99.5% of par in the current environment validates the superior credit quality of CUBI’s consumer installment loan portfolio 1. DTI and FICO score at time of origination.
24 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED 1. DTI and FICO score at time of origination. Note: Data as of September 30, 2022 19% 47% 33% 1% FICO Score1 660-679 750+680-699 700-749 21% 33%23% 11% 5% 6% > 50% 20 – 29.99% 0-9.99% 10 – 19.99% 30 – 39.99% 40 – 49.99% Unknown Geog raphy Profession Deb t to Income ratio Borrower Income 16% 43% 41% $50K -$100K <$50K >$100K 20% 12% 19% 27% 22% West Southwest Midwest Southeast Northeast Consumer Installment Loans Purp ose 76% 13% 6%5% Personal Loan Specialty Home Improvement Student Loan 94% 4% 2% Non COVID-19 Impacted Segments Non-Professional Retail & Restaurants Average FICO Score1 ~736 Average DTI ~17.9% Average borrower income ~$106k Weighted average life of ~1.7 years
25 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED CUBI Consumer Loans – Portfolio Characteristics Portfolio borrower income trends • 84% of consumer loans with borrower income greater than 50k • 41% of consumer loans with borrower income greater than 100k 4% 1% 14% 19% 43% 47% 39% 33% 0% 30% 10% 20% 50% 40% 60% Q1’ 22 Q3’ 21 Q1’ 20 Q4’ 20 Q4’ 21 Q2’ 22 Q2’ 20 Q3’ 20 Q1’ 21 Q2’ 21 Q3’ 22 Portfolio FICO1 score trends 660-679 700-749 680-699 750+ • No consumer loans with FICO score < 660 • 80% of consumer loans with FICO score greater than 700 • Loans with FICO scores>750 increase from 25% in Q2’22 to 33% in Q3’22 14% 16% 41% 43%42% 41% 50% 0% 10% 20% 60% 30% 40% Q3’ 22 Q1’ 20 Q2’ 20 Q3’ 20 Q4’ 20 Q1’ 21 Q2’ 21 Q2’ 22 Q3’ 21 Q4’ 21 Q1’ 22 <50k 50k-99.99k >100k 1. FICO score at time of origination.
26 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Note: Customers Bancorp’s impairment percentages are considered 1 day+ delinquent or in forbearance. Industry chart is from DV01 Insights Performance Report-Consumer Credit Updated as of August 31, 2022 for Industry and 09/30/2022 for CUBI. September’22 Industry report yet to be released. Impairment of consumer installment loans Percent 09/1903/19 12/1906/19 15.0 03/20 06/20 09/20 12/20 09/2106/21 12/2103/21 06/2203/22 09/22 0.0 5.0 10.0 Industry CUBI CUBI Consumer installment loans impairment remains well below industry levels • CUBI portfolio impairment well below industry levels
27 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED (1) Utilized Moody’s September 2022 S1+S3 forecast with qualitative adjustments for Q2 2022 provision. (2) Excludes loans to mortgage companies reported at fair value, loans held for sale and PPP Loans. Credit: Allowance for Credit Losses for Loans and Leases September 30, 2022 ($ in thousands) Amortized Cost Allowance for Credit Losses Lifetime Loss Rate Loans and Leases Receivable: Commercial: Multi-Family 2,263,268 14,244 0.63% Commercial and Industrial 6,307,803 15,131 0.24% Commercial Real Estate Owner Occupied 726,670 6,220 0.86% Commercial Real Estate Non-Owner Occupied 1,263,211 11,332 0.90% Construction 136,133 1,614 1.19% Total Commercial Loans and Leases Receivable $ 10,697,085 $ 48,541 0.45% Consumer: Residential real estate $ 465,772 $ 5,453 1.17% Manufactured housing 46,990 4,482 9.54% Installment 1,397,895 71,721 5.13% Total Consumer Loans Receivable $ 1,910,657 $ 81,656 4.27% Total Loans and Leases $ 12,607,742 $ 130,197 1.03%
28 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Liquidity (1) Includes CLOs Liquidity Sources ($000's) 3Q 21 4Q 21 1Q 22 2Q 22 3Q 22 YOY Change Cash and Cash Equivalents $1,052,055 $518,032 $274,600 $245,178 $404,465 ($647,589) FHLB Available Borrowing Capacity $2,031,551 $1,798,374 $3,213,767 $2,924,637 $2,999,524 $967,973 FRB Available Borrowing Capacity $186,000 $191,000 $214,908 $244,802 $2,557,704 $2,371,704 Investments (MV AFS + HTM) US Gov't & Agency Debt $0 $0 $0 $0 $0 $0 Agency & Non-Agency MBS & CMO $871,191 $1,838,872 $2,194,349 $1,900,917 $1,844,043 $972,852 Municipals $8,655 $8,430 $7,950 $7,737 $7,351 ($1,304) Corporates $440,892 $580,046 $593,749 $546,336 $532,655 $91,763 ABS1 $540,959 $1,364,227 $1,347,981 $1,160,160 $1,421,075 $880,116 Other AFS $5,000 $25,575 $25,824 $24,771 $24,864 $19,864 Less: Pledged Securities HTM ($12,440) ($11,315) ($16,972) ($19,325) ($17,464) ($5,024) Net Unpledged Securities $1,854,257 $3,805,835 $4,152,881 $3,620,596 $3,812,525 $1,958,268 $5,123,863 $6,313,241 $7,856,156 $7,035,212 $9,774,219 $4,650,356
29 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in Customers' industry. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our ongoing financial results, which we believe enhance an overall understanding of our performance and increases comparability of our period to period results. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. The non-GAAP measures presented are not necessarily comparable to non-GAAP measures that may be presented by other financial institutions. Although non-GAAP financial measures are frequently used in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results of operations or financial condition as reported under GAAP. The following tables present reconciliations of GAAP to non-GAAP measures disclosed within this document. Reconciliation of Non-GAAP Measures - Unaudited
30 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Core Earnings - Customers Bancorp ($ in thousands, except per share data) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net income to common shareholders $ 61,364 $ 1.85 $ 56,519 $ 1.68 $ 74,896 $ 2.18 $ 98,647 $ 2.87 $ 110,241 $ 3.25 Reconciling items (after tax): Net loss from discontinued operations - - - - - - 1,585 0.05 - - Severance expense 1,058 0.03 - - - - - - - - Impairments on fixed assets and leases 126 0.00 705 0.02 220 0.01 1,118 0.03 - - Loss on sale of consumer installment loans 18,221 0.55 - - - - - - - - Legal reserves - - - - - - - - 897 0.03 (Gains) losses on investment securities 1,859 0.06 2,494 0.07 1,030 0.03 43 0.00 (4,591) (0.14) Derivative credit valuation adjustment (358) (0.01) (351) (0.01) (736) (0.02) (180) (0.01) (198) (0.01) Deposit relationship adjustment fees - - - - - - - - 4,707 0.14 Loss on redemption of preferred stock - - - - - - - - 2,820 0.08 Core earnings $ 82,270 $ 2.48 $ 59,367 $ 1.77 $ 75,410 $ 2.20 $ 101,213 $ 2.95 $ 113,876 $ 3.36 Reconciliation of Non-GAAP Measures – Unaudited (Contd.)
31 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Core Earnings, Excluding PPP - Customers Bancorp ($ in thousands, not including per share amounts) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net income to common shareholders $ 61,364 $ 1.85 $ 56,519 $ 1.68 $ 74,896 $ 2.18 $ 98,647 $ 2.87 $ 110,241 $ 3.25 Less: PPP net income (after tax) 5,846 0.25 13,066 0.39 24,713 0.72 64,323 1.87 81,337 2.40 Net income to common shareholders, excluding PPP 55,518 1.59 43,453 1.29 50,183 1.46 34,324 1.00 28,904 0.85 Reconciling items (after tax): Net loss from discontinued operations - - - - - - 1,585 0.05 - - Severance expense 1,058 0.03 - - - - - - - - Impairments on fixed assets and leases 126 0.00 705 0.02 220 0.01 1,118 0.03 - - Loss on sale of consumer installment loans 18,221 0.55 - - - - - - - - Legal reserves - - - - - - - - 897 0.03 (Gains) losses on investment securities 1,859 0.06 2,494 0.07 1,030 0.03 43 0.00 (4,591) (0.14) Derivative credit valuation adjustment (358) (0.01) (351) (0.01) (736) (0.02) (180) (0.01) (198) (0.01) Deposit relationship adjustment fees - - - - - - - - 4,707 0.14 Loss on redemption of preferred stock - - - - - - - - 2,820 0.08 Core earnings, excluding PPP $ 76,424 $ 2.30 $ 46,301 $ 1.38 $ 50,697 $ 1.48 $ 36,890 $ 1.07 $ 32,539 $ 0.96
32 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Core Return on Average Assets - Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP net income $ 63,912 $ 58,650 $ 76,761 $ 100,669 $ 116,042 Reconciling items (after tax): Net loss from discontinued operations - - - 1,585 - Severance expense 1,058 - - - - Impairments on fixed assets and leases 126 705 220 1,118 - Loss on sale of consumer installment loans 18,221 - - - - Legal reserves - - - - 897 (Gains) losses on investment securities 1,859 2,494 1,030 43 (4,591) Derivative credit valuation adjustment (358) (351) (736) (180) (198) Deposit relationship adjustment fees - - - - 4,707 Core net income $ 84,818 $ 61,498 $ 77,275 $ 103,235 $ 116,857 Average total assets $ 20,514,366 $ 20,056,020 $ 19,129,330 $ 19,214,241 $ 19,739,340 Core return on average assets 1.64% 1.23% 1.64% 2.13% 2.35% Reconciliation of Non-GAAP Measures – Unaudited (Contd.)
33 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP net income $ 63,912 $ 58,650 $ 76,761 $ 100,669 $ 116,042 Reconciling items: Income tax expense 17,899 18,896 19,332 12,993 36,263 Provision (benefit) for credit losses (7,994) 23,847 15,997 13,890 13,164 Provision (benefit) for credit losses on unfunded commitments 254 608 (109) 352 669 Severance expense 1,363 - - - - Net loss from discontinued operations - - - 1,585 - Impairments on fixed assets and leases 162 914 286 1,260 - Loss on sale of consumer installment loans 23,465 - - - - Legal reserves - - - - 1,185 (Gains) losses on investment securities 2,394 3,232 1,339 49 (6,063) Derivative credit valuation adjustment (461) (455) (957) (203) (261) Deposit relationship adjustment fees - - - - 6,216 Adjusted net income - pre-tax pre-provision $ 100,994 $ 105,692 $ 112,649 $ 130,595 $ 167,215 Average total assets $ 20,514,366 $ 20,056,020 $ 19,129,330 $ 19,214,241 $ 19,739,340 Adjusted ROAA - pre-tax pre-provision 1.95% 2.11% 2.39% 2.70% 3.36% Reconciliation of Non-GAAP Measures – Unaudited (Contd.)
34 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Core Return on Average Common Equity – Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP net income to common shareholders $ 61,364 $ 56,519 $ 74,896 $ 98,647 $ 110,241 Reconciling items (after tax): Net loss from discontinued operations - - - 1,585 - Severance expense 1,058 - - - - Impairments on fixed assets and leases 126 705 220 1,118 - Loss on sale of consumer installment loans 18,221 - - Legal reserves - - - - 897 (Gains) losses on investment securities 1,859 2,494 1,030 43 (4,591) Derivative credit valuation adjustment (358) (351) (736) (180) (198) Deposit relationship adjustment fees - - - - 4,707 Loss on redemption of preferred stock - - - - 2,820 Core earnings $ 82,270 $ 59,367 $ 75,410 $ 101,213 $ 113,876 Average total common shareholders' equity $ 1,259,711 $ 1,244,819 $ 1,252,022 $ 1,179,478 $ 1,071,566 Core return on average common equity 25.91% 19.13% 24.43% 34.04% 42.16% Reconciliation of Non-GAAP Measures – Unaudited (Contd.)
35 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Core Efficiency Ratio - Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP net interest income $ 159,032 $ 164,852 $ 164,699 $ 193,694 $ 219,892 GAAP non-interest income $ (9,017) $ 12,746 $ 21,198 $ 16,991 $ 25,586 Loss on sale of consumer installment loans 23,465 - - - - (Gains) losses on investment securities 2,394 3,232 1,339 49 (6,063) Derivative credit valuation adjustment (461) (455) (957) (203) (261) Core non-interest income $ 16,381 $ 15,523 $ 21,580 $ 16,837 $ 19,262 Core revenue $ 175,413 $ 180,375 $ 186,279 $ 210,531 $ 239,154 GAAP non-interest expense $ 76,198 $ 76,205 $ 73,807 $ 81,548 $ 80,009 Severance expense (1,363) - - - - Impairments on fixed assets and leases (162) (914) (286) (1,260) - Legal reserves - - - - (1,185) Deposit relationship adjustment fees - - - - (6,216) Core non-interest expense $ 74,673 $ 75,291 $ 73,521 $ 80,288 $ 72,608 Core efficiency ratio (1) 42.57% 41.74% 39.47% 38.14% 30.36% Reconciliation of Non-GAAP Measures – Unaudited (Contd.) (1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.
36 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Tangible Equity – Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP - Total shareholders' equity $ 1,386,931 $ 1,353,390 $ 1,377,406 $ 1,366,217 $ 1,284,299 Reconciling items: Goodwill and other intangibles (3,629) (3,629) (3,678) (3,736) (3,794) Tangible equity $ 1,383,302 $ 1,349,761 $ 1,373,728 $ 1,362,481 $ 1,280,505 Tangible Book Value per Common Share - Customers Bancorp ($ in thousands, except per share data) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP - Total shareholders' equity $ 1,386,931 $ 1,353,390 $ 1,377,406 $ 1,366,217 $ 1,284,299 Reconciling items: Preferred stock (137,794) (137,794) (137,794) (137,794) (137,794) Goodwill and other intangibles (3,629) (3,629) (3,678) (3,736) (3,794) Tangible common equity $ 1,245,508 $ 1,211,967 $ 1,235,934 $ 1,224,687 $ 1,142,711 Common shares outstanding 32,475,502 32,449,486 32,957,847 32,913,267 32,537,976 Tangible book value per common share $ 38.35 $ 37.35 $ 37.50 $ 37.21 $ 35.12
37 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Tangible Common Equity to Tangible Assets, Excluding PPP - Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP - Total shareholders' equity $ 1,386,931 $ 1,353,390 $ 1,377,406 $ 1,366,217 $ 1,284,299 Reconciling items: Preferred stock (137,794) (137,794) (137,794) (137,794) (137,794) Goodwill and other intangibles (3,629) (3,629) (3,678) (3,736) (3,794) Tangible common equity $ 1,245,508 $ 1,211,967 $ 1,235,934 $ 1,224,687 $ 1,142,711 GAAP total assets $ 20,367,621 $ 20,251,996 $ 19,163,708 $ 19,575,028 $ 19,108,922 Reconciling items: Goodwill and other intangibles (3,629) (3,629) (3,678) (3,736) (3,794) PPP Loans (1,154,632) (1,570,160) (2,195,902) (3,250,008) (4,957,357) Tangible assets $ 19,209,360 $ 18,678,207 $ 16,964,128 $ 16,321,284 $ 14,147,771 Tangible common equity to tangible assets, excluding PPP 6.48% 6.49% 7.29% 7.50% 8.08%
38 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Tangible Common Equity to Tangible Assets - Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP - Total shareholders' equity $ 1,386,931 $ 1,353,390 $ 1,377,406 $ 1,366,217 $ 1,284,299 Reconciling items: Preferred stock (137,794) (137,794) (137,794) (137,794) (137,794) Goodwill and other intangibles (3,629) (3,629) (3,678) (3,736) (3,794) Tangible common equity $ 1,245,508 $ 1,211,967 $ 1,235,934 $ 1,224,687 $ 1,142,711 GAAP - Total assets $ 20,367,621 $ 20,251,996 $ 19,163,708 $ 19,575,028 $ 19,108,922 Reconciling items: Goodwill and other intangibles (3,629) (3,629) (3,678) (3,736) (3,794) Tangible assets $ 20,363,992 $ 20,248,367 $ 19,160,030 $ 19,571,292 $ 19,105,128 Tangible common equity to tangible assets 6.12% 5.99% 6.45% 6.26% 5.98%
39 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Core Loans (Total loans and leases, excluding PPP) – Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Total loans and leases $ 15,336,688 $ 15,664,353 $ 14,073,518 $ 14,568,885 $ 15,515,537 PPP loans (1,154,632) (1,570,160) (2,195,902) (3,250,008) (4,957,357) Loans and leases, excluding PPP $ 14,182,056 $ 14,094,193 $ 11,877,616 $ 11,318,877 $ 10,558,180 Total loans and leases, excluding loans to mortgage companies and PPP – Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Total loans and leases $ 15,336,688 $ 15,664,353 $ 14,073,518 $ 14,568,885 $ 15,515,537 Loans to mortgage companies (1,708,587) (1,975,189) (1,830,121) (2,362,438) (2,626,483) PPP loans (1,154,632) (1,570,160) (2,195,902) (3,250,008) (4,957,357) Loans and leases, excluding loans to mortgage companies and PPP $ 12,473,469 $ 12,119,004 $ 10,047,495 $ 8,956,439 $ 7,931,697
40 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Coverage of credit loss reserves for loans and leases held for investment, excluding PPP – Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Loans and leases receivable $ 13,762,374 $ 13,783,155 $ 12,314,757 $ 12,268,306 $ 12,927,956 PPP loans (1,154,632) (1,570,160) (2,195,902) (3,250,008) (4,957,357) Loans and leases held for investment, excluding PPP $ 12,607,742 $ 12,212,995 $ 10,118,855 $ 9,018,298 $ 7,970,599 Allowance for credit losses on loans and leases $ 130,197 $ 156,530 $ 145,847 $ 137,804 $ 131,496 Coverage of credit loss reserves for loans and leases held for investment, excluding PPP 1.03% 1.28% 1.44% 1.53% 1.65% Tangible assets, excluding PPP – Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP - Total assets $ 20,367,621 $ 20,251,996 $ 19,163,708 $ 19,575,028 $ 19,108,922 Reconciling items: Goodwill and other intangibles (3,629) (3,629) (3,678) (3,736) (3,794) PPP loans (1,154,632) (1,570,160) (2,195,902) (3,250,008) (4,957,357) Tangible assets $ 19,209,360 $ 18,678,207 $ 16,964,128 $ 16,321,284 $ 14,147,771
41 © 2022 C USTO M ERS BAN K / ALL RIG H TS RESERVED Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Net Interest Margin, Tax Equivalent, Excluding PPP - Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP net interest income $ 159,032 $ 164,852 $ 164,699 $ 193,694 $ 219,892 PPP net interest income (9,632) (18,946) (34,615) (78,647) (112,005) Tax-equivalent adjustment 334 270 239 276 290 Net interest income, tax equivalent, excluding PPP $ 149,734 $ 146,176 $ 130,323 $ 115,323 $ 108,177 GAAP average total interest earning assets $ 20,021,455 $ 19,525,936 $ 18,572,308 $ 18,576,433 $ 19,033,826 Average PPP loans (1,349,403) (1,863,429) (2,641,318) (3,898,607) (5,778,367) Adjusted average total interest earning assets $ 18,672,052 $ 17,662,507 $ 15,930,990 $ 14,677,826 $ 13,255,459 Net interest margin, tax equivalent, excluding PPP 3.18% 3.32% 3.32% 3.12% 3.24% Loan Yield, excluding PPP – Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Total interest on loans and leases $ 200,457 $ 168,941 $ 157,175 $ 198,000 $ 233,097 Interest on PPP loans (14,666) (20,572) (36,894) (82,086) (117,102) Interest on loans and leases, excluding PPP $ 185,791 $ 148,369 $ 120,281 $ 115,914 $ 115,995 Average loans and leases $ 15,653,983 $ 14,918,498 $ 13,656,991 $ 14,335,370 $ 16,192,744 Average PPP loans (1,349,403) (1,863,429) (2,641,318) (3,898,607) (5,778,367) Adjusted average total interest earning assets $ 14,304,580 $ 13,055,069 $ 11,015,673 $ 10,436,763 $ 10,414,377 Loan yield, excluding PPP 5.15% 4.56% 4.43% 4.41% 4.42% Net Interest Income, Excluding PPP - Customers Bancorp ($ in thousands) Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 GAAP net interest income $ 159,032 $ 164,852 $ 164,699 $ 193,694 $ 219,892 PPP net interest income (9,632) (18,946) (34,615) (78,647) (112,005) Net interest income, excluding PPP $ 149,400 $ 145,906 $ 130,084 $ 115,047 $ 107,887