Customers Bancorp, Inc. [CUBI] Filings

10-Q 1 cubi-20240930.htm 10-Q cubi-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the quarterly period ended September 30, 2024


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the transition period from to .

001-35542

(Commission File number)

(Exact name of registrant as specified in its charter)


Customers Bancorp, Inc.

Pennsylvania

27-2290659

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

701 Reading Avenue

West Reading, PA 19611

(Address of principal executive offices)

(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbols

Name of Each Exchange on which Registered

Voting Common Stock, par value $1.00 per share

CUBI

New York Stock Exchange

Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series E, par value $1.00 per share

CUBI/PE

New York Stock Exchange

Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series F, par value $1.00 per share

CUBI/PF

New York Stock Exchange

5.375% Subordinated Notes due 2034

CUBB

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated Filer

☐

Non-accelerated filer

Smaller Reporting Company

☐

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No x

________________________________________

On November 7, 2024, 31,349,258 shares of Voting Common Stock were outstanding.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

Table of Contents


Part I

Item 1.	Customers Bancorp, Inc. Consolidated Financial Statements as of September 30, 2024 and for the three and nine month periods ended September 30, 2024 and 2023 (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	83

Item 4.	Controls and Procedures	84

PART II

Item 1.	Legal Proceedings	85

Item 1A.	Risk Factors	85

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85

Item 3.	Defaults Upon Senior Securities	86

Item 4.	Mine Safety Disclosures	86

Item 5.	Other Information	86

Item 6.	Exhibits	87

SIGNATURES		88

Table of Contents

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

The following list of abbreviations and acronyms may be used throughout this Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Unaudited Consolidated Financial Statements and the Notes to the Unaudited Consolidated Financial Statements.





2024 Share Repurchase Program			Share repurchase program authorized by the Board of Directors of Customers Bancorp in 2024
ACL			Allowance for credit losses
AFS			Available for sale

AOCI			Accumulated other comprehensive income (loss)
ASC			Accounting Standards Codification
ASU			Accounting Standards Update

B2B			Business-to-business
Bancorp			Customers Bancorp, Inc.
Bank			Customers Bank
BBB spread			BBB rated corporate bond spreads to U.S. Treasury securities


BM Technologies			BM Technologies, Inc.
BOLI			Bank-owned life insurance




CBITTM			Customers Bank Instant Token

CECL			Current expected credit losses
CODM			Chief operating decision maker
Commission			U.S. Securities and Exchange Commission
Company			Customers Bancorp, Inc. and subsidiaries




COVID-19			Coronavirus Disease 2019
CPI			Consumer Price Index
CRA			Community Reinvestment Act
CUBI			Symbol for Customers Bancorp, Inc. common stock traded on the NYSE
Customers			Customers Bancorp, Inc. and Customers Bank, collectively
Customers Bancorp			Customers Bancorp, Inc.
DCF			Discounted cash flow






EPS			Earnings per share


EVE			Economic value of equity
Exchange Act			Securities Exchange Act of 1934
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation

Fed Funds			Federal Reserve Board’s Effective Federal Funds Rate
Federal Reserve, Federal Reserve Board			Board of Governors of the Federal Reserve System


FHLB			Federal Home Loan Bank
FICO			Fair, Isaac and Company
Fintech			Third-Party Financial Technology
FMV			Fair Market Value

FRB			Federal Reserve Bank of Philadelphia

GDP			Gross domestic product


Higher One			Higher One Holdings, Inc.
HTM			Held to maturity


LIBOR			London Interbank Offered Rate
LPO			Limited Purpose Office

MMDA			Money market deposit accounts
NIM			Net interest margin, tax equivalent
NM			Not meaningful
NPA			Non-performing asset
NPL			Non-performing loan

NYSE			New York Stock Exchange

OCI			Other comprehensive income (loss)

OREO			Other real estate owned


PCD			Purchased Credit-Deteriorated

PPP			Paycheck Protection Program

PUT			Purchase Upon Termination

Table of Contents


Rate Shocks			Interest rates rising or falling immediately
ROU			Right-of-use


SBA			U.S. Small Business Administration
SBA loans			Loans originated pursuant to the rules and regulations of the SBA
SEC			U.S. Securities and Exchange Commission
Securities Act			Securities Act of 1933, as amended


Series E Preferred Stock			Fixed-to-floating rate non-cumulative perpetual preferred stock, series E
Series F Preferred Stock			Fixed-to-floating rate non-cumulative perpetual preferred stock, series F
SERP			Supplemental Executive Retirement Plan
Share Repurchase Program			Share repurchase program authorized by the Board of Directors of Customers Bancorp in 2021
SOFR			Secured Overnight Financing Rate


TRAC			Terminal Rental Adjustment Clause


U.S. GAAP			Accounting principles generally accepted in the United States of America
VIE			Variable interest entity

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET — UNAUDITED

(amounts in thousands, except share and per share data)


	September 30, 2024		December 31, 2023
ASSETS
Cash and due from banks	$	39,429	$	45,210
Interest earning deposits	3,048,593		3,801,136
Cash and cash equivalents	3,088,022		3,846,346
Investment securities, at fair value (includes allowance for credit losses of $4,639 and $3,952, respectively)	2,412,069		2,405,640

Investment securities held to maturity	1,064,437		1,103,170
Loans held for sale (includes $219,621 and $189,277, respectively, at fair value)	275,420		340,317


Loans and leases receivable	12,527,283		11,963,855
Loans receivable, mortgage finance, at fair value	1,250,413		897,912
Allowance for credit losses on loans and leases	(133,158)		(135,311)
Total loans and leases receivable, net of allowance for credit losses on loans and leases	13,644,538		12,726,456
FHLB, Federal Reserve Bank, and other restricted stock	95,035		109,548
Accrued interest receivable	115,588		114,766

Bank premises and equipment, net	6,730		7,371
Bank-owned life insurance	295,531		292,193

Goodwill and other intangibles	3,629		3,629
Other assets	455,083		366,829

Total assets	$	21,456,082	$	21,316,265
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing	$	4,670,809	$	4,422,494
Interest bearing	13,398,580		13,497,742
Total deposits	18,069,389		17,920,236



FHLB advances	1,117,229		1,203,207
Other borrowings	99,033		123,840
Subordinated debt	182,439		182,230

Accrued interest payable and other liabilities	186,812		248,358

Total liabilities	19,654,902		19,677,871
Commitments and contingencies (NOTE 15)
Shareholders’ equity:
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 5,700,000 shares issued and outstanding as of September 30, 2024 and December 31, 2023	137,794		137,794
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 35,734,517 and 35,459,342 shares issued as of September 30, 2024 and December 31, 2023; 31,342,107 and 31,440,906 shares outstanding as of September 30, 2024 and December 31, 2023	35,734		35,459
Additional paid in capital	571,609		564,538
Retained earnings	1,302,745		1,159,582
Accumulated other comprehensive income (loss), net	(106,082)		(136,569)
Treasury stock, at cost (4,392,410 and 4,018,436 shares as of September 30, 2024 and December 31, 2023)	(140,620)		(122,410)
Total shareholders’ equity	1,801,180		1,638,394
Total liabilities and shareholders’ equity	$	21,456,082	$	21,316,265

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) — UNAUDITED

(amounts in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Interest income:
Loans and leases	$	228,659	$	271,107	$	670,923	$	757,064
Investment securities	46,265		54,243		140,653		149,585
Interest earning deposits	44,372		43,800		142,695		81,819
Loans held for sale	10,907		4,664		36,626		27,514
Other	1,910		2,526		7,031		5,463
Total interest income	332,113		376,340		997,928		1,021,445
Interest expense:
Deposits	155,829		145,825		458,338		426,130
FHLB advances	12,590		26,485		39,512		61,140
FRB advances	—		—		—		6,286
Subordinated debt	3,537		2,689		8,960		8,067

Other borrowings	1,612		1,568		4,535		4,879
Total interest expense	173,568		176,567		511,345		506,502
Net interest income	158,545		199,773		486,583		514,943
Provision for credit losses	17,066		17,856		52,257		61,088
Net interest income after provision for credit losses	141,479		181,917		434,326		453,855
Non-interest income:


Commercial lease income	10,093		8,901		30,058		27,144
Loan fees	8,011		6,029		18,524		14,290
Bank-owned life insurance	2,049		1,973		7,317		9,617
Mortgage finance transactional fees	1,087		1,018		3,091		3,468




Net gain (loss) on sale of loans and leases	(14,548)		(348)		(14,776)		(1,109)


Loss on sale of capital call lines of credit	—		—		—		(5,037)

Net gain (loss) on sale of investment securities	—		(429)		(749)		(429)





Unrealized gain on equity method investments	—		—		11,041		—
Other	1,865		631		6,319		3,949
Total non-interest income	8,557		17,775		60,825		51,893
Non-interest expense:
Salaries and employee benefits	47,717		33,845		128,689		99,310
Technology, communication and bank operations	13,588		15,667		51,719		48,663
Commercial lease depreciation	7,811		7,338		23,610		22,541
Professional services	9,048		8,569		21,505		25,357
Loan servicing	3,778		3,858		11,325		13,296
Occupancy	2,987		2,471		8,454		7,750
FDIC assessments, non-income taxes and regulatory fees	7,902		8,551		31,607		21,059
Advertising and promotion	908		650		2,844		2,245




Legal settlement expense	—		4,096		—		4,096
Other	10,279		4,421		26,886		14,579
Total non-interest expense	104,018		89,466		306,639		258,896
Income before income tax expense (benefit)	46,018		110,226		188,512		246,852
Income tax expense (benefit)	(725)		23,470		33,958		58,801








Net income	46,743		86,756		154,554		188,051
Preferred stock dividends	3,806		3,803		11,391		10,826

Net income available to common shareholders	$	42,937	$	82,953	$	143,163	$	177,225


Basic earnings per common share	$	1.36	$	2.65	$	4.54	$	5.63

Diluted earnings per common share	1.31		2.58		4.37		5.53

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED

(amounts in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023


Net income	$	46,743	$	86,756	$	154,554	$	188,051
Unrealized gains (losses) on available for sale debt securities:
Unrealized gains (losses) arising during the period	32,810		23,666		36,439		14,535
Income tax effect	(8,432)		(6,011)		(9,351)		(3,692)
Reclassification adjustments for (gains) losses included in net income	—		(429)		749		(429)
Income tax effect	—		109		(193)		109
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity	1,209		1,379		3,821		3,700
Income tax effect	(311)		(350)		(978)		(939)
Net unrealized gains (losses) on available for sale debt securities	25,276		18,364		30,487		13,284






Other comprehensive income (loss), net of income tax effect	25,276		18,364		30,487		13,284
Comprehensive income (loss)	$	72,019	$	105,120	$	185,041	$	201,335

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED

(amounts in thousands, except shares outstanding data)


	Three Months Ended September 30, 2024
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, June 30, 2024	5,700,000	$	137,794	31,667,655	$	35,686	$	567,345	$	1,259,808	$	(131,358)	$	(122,410)	$	1,746,865


Net income	—	—		—	—		—		46,743		—		—		46,743

Other comprehensive income (loss)	—	—		—	—		—		—		25,276		—		25,276


Preferred stock dividends (1)	—	—		—	—		—		(3,806)		—		—		(3,806)





Share-based compensation expense	—	—		—	—		3,739		—		—		—		3,739

Issuance of common stock under share-based compensation arrangements	—	—		48,426	48		525		—		—		—		573
Repurchase of common shares	—	—		(373,974)	—		—		—		—		(18,210)		(18,210)
Balance, September 30, 2024	5,700,000	$	137,794	31,342,107	$	35,734	$	571,609	$	1,302,745	$	(106,082)	$	(140,620)	$	1,801,180

	Three Months Ended September 30, 2023
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, June 30, 2023	5,700,000	$	137,794	31,282,318	$	35,301	$	555,737	$	1,018,406	$	(168,176)	$	(122,410)	$	1,456,652

Net income	—	—		—	—		—		86,756		—		—		86,756

Other comprehensive income (loss)	—	—		—	—		—		—		18,364		—		18,364


Preferred stock dividends (1)	—	—		—	—		—		(3,803)		—		—		(3,803)





Share-based compensation expense	—	—		—	—		3,510		—		—		—		3,510

Issuance of common stock under share-based compensation arrangements	—	—		28,936	29		99		—		—		—		128

Balance, September 30, 2023	5,700,000	$	137,794	31,311,254	$	35,330	$	559,346	$	1,101,359	$	(149,812)	$	(122,410)	$	1,561,607

(1)Dividends per share of $0.678761 and $0.654873 were declared on Series E and F preferred stock, respectively, for the three months ended September 30, 2024. Dividends per share of $0.6831 and $0.658950 were declared on Series E and F preferred stock, respectively, for the three months ended September 30, 2023.

Table of Contents


	Nine Months Ended September 30, 2024
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, December 31, 2023	5,700,000	$	137,794	31,440,906	$	35,459	$	564,538	$	1,159,582	$	(136,569)	$	(122,410)	$	1,638,394



Net income	—	—		—	—		—		154,554		—		—		154,554

Other comprehensive income (loss)	—	—		—	—		—		—		30,487		—		30,487


Preferred stock dividends (1)	—	—		—	—		—		(11,391)		—		—		(11,391)





Share-based compensation expense	—	—		—	—		10,985		—		—		—		10,985

Issuance of common stock under share-based compensation arrangements	—	—		275,175	275		(3,914)		—		—		—		(3,639)
Repurchase of common shares	—	—		(373,974)	—		—		—		—		(18,210)		(18,210)
Balance, September 30, 2024	5,700,000	$	137,794	31,342,107	$	35,734	$	571,609	$	1,302,745	$	(106,082)	$	(140,620)	$	1,801,180

	Nine Months Ended September 30, 2023
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, December 31, 2022	5,700,000	$	137,794	32,373,697	$	35,012	$	551,721	$	924,134	$	(163,096)	$	(82,604)	$	1,402,961



Net income	—	—		—	—		—		188,051		—		—		188,051

Other comprehensive income (loss)	—	—		—	—		—		—		13,284		—		13,284


Preferred stock dividends (1)	—	—		—	—		—		(10,826)		—		—		(10,826)





Share-based compensation expense	—	—		—	—		9,979		—		—		—		9,979

Issuance of common stock under share-based compensation arrangements	—	—		317,440	318		(2,354)		—		—		—		(2,036)
Repurchase of common shares	—	—		(1,379,883)	—		—		—		—		(39,806)		(39,806)
Balance, September 30, 2023	5,700,000	$	137,794	31,311,254	$	35,330	$	559,346	$	1,101,359	$	(149,812)	$	(122,410)	$	1,561,607

(1)Dividends per share of $2.060879 and $1.988429 were declared on Series E and F preferred stock, respectively, for the nine months ended September 30, 2024. Dividends per share of $1.941704 and $1.869779 were declared on Series E and F preferred stock, respectively, for the nine months ended September 30, 2023.

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(amounts in thousands)


	Nine Months Ended September 30,
	2024		2023
Cash Flows from Operating Activities
Net income from continuing operations	$	154,554	$	188,051
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses	52,257		61,088
Depreciation and amortization	24,458		24,226

Share-based compensation expense	10,722		10,048
Deferred taxes	(697)		21,999
Net amortization (accretion) of investment securities premiums and discounts	(3,281)		(8,859)
Unrealized (gain) loss on investment securities	(324)		197
Net (gain) loss on sale of investment securities	749		429
Unrealized gain on equity method investments	(11,041)		—

Impairment loss on fixed assets and leases	—

Customers Bancorp, Inc. [CUBI] Filings
Customers Bancorp, Inc. [CUBB] Filings
Customers Bancorp, Inc. [CUBI-PE] Filings
Customers Bancorp, Inc. [CUBI-PF] Filings
10-Q	[2024-11]
10-Q	[2024-08]
10-Q	[2024-05-09]
10-K	[2024-02-29]
10-Q	[2023-11-09]
10-Q	[2023-08-09]
10-Q	[2023-05-09]
10-K	[2023-02-28]
10-Q	[2022-11-08]
10-Q	[2022-08-08]
10-Q	[2022-05-09]
10-K	[2022-02-28]
10-Q	[2021-11-08]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-03-02]
10-Q	[2020-11-06]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-03-02]
10-Q	[2019-11-07]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-03-01]
10-Q	[2018-11-13]
10-Q	[2018-08-09]
10-Q	[2018-05-09]
10-K	[2018-02-23]
10-Q	[2017-11-03]
10-Q	[2017-08-04]
10-Q	[2017-05-10]
10-K	[2017-03-08]
10-Q	[2016-11-07]
10-Q	[2016-08-05]
10-Q	[2016-05-05]
10-K	[2016-02-26]
10-Q	[2015-11-04]
10-Q	[2015-08-07]
10-Q	[2015-05-08]
10-K	[2015-02-27]
10-Q	[2014-11-07]
10-Q	[2014-08-08]
10-Q	[2014-05-08]
10-K	[2014-03-12]
10-Q	[2013-11-07]
10-Q	[2013-08-09]
10-Q	[2013-05-09]
10-K	[2013-03-18]
10-Q	[2012-11-14]
10-Q	[2012-08-14]
10-Q	[2012-05-15]
S-1	[2012-03-28]
10-K	[2012-03-21]

Customers Bancorp, Inc. [CUBI] Filings

Customers Bancorp, Inc. [CUBB] Filings

Customers Bancorp, Inc. [CUBI-PE] Filings

Customers Bancorp, Inc. [CUBI-PF] Filings