Customers Bancorp Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

cubi-20200930

Table of Contents

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, 2020


☐			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 C, par value $1.00 per share

CUBI/PC

New York Stock Exchange

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

CUBI/PD

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. (Check one):

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 October 30, 2020, 31,601,311 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, 2020 and for the three and nine month periods ended September 30, 2020 and 2019 (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	84

Item 4.	Controls and Procedures	86

PART II

Item 1.	Legal Proceedings	87

Item 1A.	Risk Factors	87

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88

Item 3.	Defaults Upon Senior Securities	88

Item 4.	Mine Safety Disclosures	89

Item 5.	Other Information	89

Item 6.	Exhibits	90

SIGNATURES		92

Ex-31.1

Ex-31.2

Ex-32.1

Ex-32.2

Ex-101

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.


2004 Plan			2012 Amendment and Restatement of the Customers Bancorp, Inc. Amended and Restated 2004 Incentive Equity and Deferred Compensation Plan
2010 Plan			2010 Stock Option Plan
2019 Plan			2019 Stock Incentive Plan
ACL			Allowance for credit losses
ASC			Accounting Standards Codification
ALLL			Allowance for loan and lease losses
AOCI			Accumulated other comprehensive income
ASU			Accounting Standards Update
ATM			Automated teller machine
Bancorp			Customers Bancorp, Inc.
Bank			Customers Bank
BBB spread			BBB rated corporate bond spreads to U.S. Treasury securities
BHCA			Bank Holding Company Act of 1956, as amended
BMT			BankMobile Technologies, Inc.
BM Technologies			BM Technologies, Inc.
BOLI			Bank-owned life insurance
BRRP			Bonus Recognition and Retention Program
CARES Act			Coronavirus Aid, Relief and Economic Security Act
CCF			Customers Commercial Finance, LLC
CECL			Current expected credit loss
CEO			Chief Executive Officer
CFO			Chief Financial Officer
CFPB			Consumer Financial Protection Bureau
COSO			Committee of Sponsoring Organizations of the Treadway Commission
COVID-19			Coronavirus Disease 2019
CRA			Community Reinvestment Act
CPI			Consumer Price Index
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.
Department			Pennsylvania Department of Banking and Securities
DCF			Discounted cash flow
DIF			Deposit Insurance Fund
Dodd-Frank Act			Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
ED			United States Department of Education
EGRRCPA			The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018
EPS			Earnings per share
ESPP			Employee Stock Purchase Plan
EVE			Economic value of equity
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
FDICIA			Federal Deposit Insurance Corporation Improvement Act of 1991
Federal Reserve Board			Board of Governors of the Federal Reserve System
FERPA			Family Educational Rights and Privacy Act of 1975
FHA			Federal Housing Administration
FHLB			Federal Home Loan Bank

FPRD			Final Program Review Determination
FRB			Federal Reserve Bank of Philadelphia
FTC Act			Federal Trade Commission Act
GDP			Gross domestic product
GNMA			Government National Mortgage Association
GLBA			Gramm-Leach-Bliley Act of 1999
HECM			Home Equity Conversion Mortgage

Table of Contents


HTM			Held to maturity
Interest-only GNMA securities			Interest-only classes of Ginnie Mae guaranteed home equity conversation mortgage-backed securities
IRS			Internal Revenue Service
Legacy Loans			Total 2009 and prior loans
LIBOR			London Interbank Offered Rate
LIHTC			Low-Income Housing Tax Credit
LPO			Limited Purpose Office
MFAC			Megalith Financial Acquisition Corp.
MMDA			Money market deposit accounts
NIM			Net interest margin, tax equivalent
NM			Not meaningful
Non-QM			Non-qualified mortgage
NPA			Non-performing asset
NPL			Non-performing loan
NPRM			Notice of Proposed Rulemaking
NYSE			New York Stock Exchange
OCC			Office of the Comptroller of the Currency
OCI			Other comprehensive income
OFAC			Office of Foreign Assets Control
OIS			Overnight index swap
Order			Federal Deposit Insurance Act, as amended
OREO			Other real estate owned
OTTI			Other-than-temporary impairment
PATRIOT Act			Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
PCAOB			Public Accounting Oversight Board (United States)
PCD			Purchased with Credit Deterioration
PCI			Purchased Credit-Impaired
PPP			Paycheck Protection Program
PPPLF			FRB Paycheck Protection Program Liquidity Facility
ROU			Right-of-use
SAB			Staff Accounting Bulletin
SAG			Special Assets Group
Sales Agreement			At Market Issuance Sales Agreement between Customers Bancorp and FBR Capital Markets & Co., Keefe, Bruyette & Woods, Inc. and Maxim Group LLC
SBA			Small Business Administration
SBA loans			Loans originated pursuant to the rules and regulations of the SBA
SEC			U.S. Securities and Exchange Commission








TDR			Troubled debt restructuring
TRAC			Terminal Rental Adjustment Clause

U.S. GAAP			Accounting principles generally accepted in the United States of America
VA			United States Department of Veterans Affairs

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET — UNAUDITED

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


	September 30, 2020		December 31, 2019
ASSETS
Cash and due from banks	$	5,822	$	33,095
Interest earning deposits	325,594		179,410
Cash and cash equivalents	331,416		212,505
Investment securities, at fair value	1,133,831		595,876

Loans held for sale (includes $6,998 and $2,130, respectively, at fair value)	26,689		486,328
Loans receivable, mortgage warehouse, at fair value	3,913,593		2,245,758
Loans receivable, PPP	4,964,105		—
Loans and leases receivable	7,700,892		7,318,988
Allowance for credit losses on loans and leases	(155,561)		(56,379)
Total loans and leases receivable, net of allowance for credit losses on loans and leases	16,423,029		9,508,367
FHLB, Federal Reserve Bank, and other restricted stock	70,387		84,214
Accrued interest receivable	65,668		38,072

Bank premises and equipment, net	11,744		9,389
Bank-owned life insurance	277,826		272,546
Other real estate owned	131		173
Goodwill and other intangibles	14,437		15,195

Other assets	423,569		298,052
Total assets	$	18,778,727	$	11,520,717
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing	$	2,327,017	$	1,343,391
Interest bearing	8,512,060		7,305,545
Total deposits	10,839,077		8,648,936


Federal funds purchased	680,000		538,000
FHLB advances	850,000		850,000
Other borrowings	123,935		123,630
Subordinated debt	181,324		181,115
FRB PPP liquidity facility	4,811,009		—

Accrued interest payable and other liabilities	241,891		126,241
Total liabilities	17,727,236		10,467,922
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, 9,000,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019	217,471		217,471
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 32,835,743 and 32,617,410 shares issued as of September 30, 2020 and December 31, 2019; 31,555,124 and 31,336,791 shares outstanding as of September 30, 2020 and December 31, 2019	32,836		32,617
Additional paid in capital	452,965		444,218
Retained earnings	385,750		381,519
Accumulated other comprehensive loss, net	(15,751)		(1,250)
Treasury stock, at cost (1,280,619 shares as of September 30, 2020 and December 31, 2019)	(21,780)		(21,780)
Total shareholders’ equity	1,051,491		1,052,795
Total liabilities and shareholders’ equity	$	18,778,727	$	11,520,717

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,
	2020		2019		2020		2019
Interest income:
Loans and leases	$	132,107	$	118,444	$	366,634	$	315,126

Investment securities	6,297		5,867		17,429		18,589
Other	1,246		2,407		6,149		6,030
Total interest income	139,650		126,718		390,212		339,745
Interest expense:
Deposits	18,347		38,267		75,939		105,472
FHLB advances	5,762		7,563		15,889		20,463
Subordinated debt	2,689		1,684		8,066		5,053
FRB PPP liquidity facility, federal funds purchased and other borrowings	5,413		3,469		9,576		9,039
Total interest expense	32,211		50,983		109,470		140,027
Net interest income	107,439		75,735		280,742		199,718
Provision for credit losses on loans and leases	12,955		4,426		65,688		14,539
Net interest income after provision for credit losses on loans and leases	94,484		71,309		215,054		185,179
Non-interest income:


Interchange and card revenue	4,081		6,869		17,368		22,435

Deposit fees	3,439		3,642		10,221		9,199
Commercial lease income	4,510		3,080		13,286		8,212
Bank-owned life insurance	1,746		1,824		5,265		5,477
Mortgage warehouse transactional fees	3,320		2,150		7,854		5,145
Gain (loss) on sale of SBA and other loans	286		—		320		—
Mortgage banking income	1,013		283		1,347		701
Loss upon acquisition of interest-only GNMA securities	—		—		—		(7,476)

Gain (loss) on sale of investment securities	11,707		1,001		20,035		1,001
Unrealized gain (loss) on investment securities	238		1,333		60		988
Other	3,453		3,187		2,203		9,443
Total non-interest income	33,793		23,369		77,959		55,125
Non-interest expense:
Salaries and employee benefits	32,676		27,193		92,283		79,936
Technology, communication and bank operations	13,215		8,755		39,576		33,110
Professional services	7,253		8,348		19,476		18,639
Occupancy	3,632		3,661		9,689		9,628
Commercial lease depreciation	3,663		2,459

Price	21.12	EPS	2
Shares	32	P/E	10
MCap	668	P/FCF	19
Net Debt	-182	EBIT	272
TEV	486	TEV/EBIT	2
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-06
10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-11
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-08
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-03-01
10-Q	2018-09-30	Filed 2018-11-13
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-09
10-K	2017-12-31	Filed 2018-02-23
10-Q	2017-09-30	Filed 2017-11-03
10-Q	2017-06-30	Filed 2017-08-04
10-Q	2017-03-31	Filed 2017-05-10
10-K	2016-12-31	Filed 2017-03-08
10-Q	2016-09-30	Filed 2016-11-07
10-Q	2016-06-30	Filed 2016-08-05
10-Q	2016-03-31	Filed 2016-05-05
10-K	2015-12-31	Filed 2016-02-26
10-Q	2015-09-30	Filed 2015-11-04
10-Q	2015-06-30	Filed 2015-08-07
10-Q	2015-03-31	Filed 2015-05-08
10-K	2014-12-31	Filed 2015-02-27
10-Q	2014-09-30	Filed 2014-11-07
10-Q	2014-06-30	Filed 2014-08-08
10-Q	2014-03-31	Filed 2014-05-08
10-K	2013-12-31	Filed 2014-03-12
10-Q	2013-09-30	Filed 2013-11-07
10-Q	2013-06-30	Filed 2013-08-09
10-Q	2013-03-31	Filed 2013-05-09
10-K	2012-12-31	Filed 2013-03-18
10-Q	2012-09-30	Filed 2012-11-14
10-Q	2012-06-30	Filed 2012-08-14
10-Q	2012-03-31	Filed 2012-05-15
10-K	2011-12-31	Filed 2012-03-21
10-Q	2011-09-30	Filed 2011-11-14
10-Q	2011-06-30	Filed 2011-09-26

8-K	2021-01-27	Earnings, Regulation FD, Exhibits
8-K	2021-01-04	Enter Agreement, M&A, Exhibits
8-K	2021-01-04	Regulation FD, Exhibits
8-K	2020-12-21	Regulation FD, Exhibits
8-K	2020-12-11	Regulation FD, Exhibits
8-K	2020-12-09	Regulation FD, Exhibits
8-K	2020-11-10
8-K	2020-11-02
8-K	2020-08-06
8-K	2020-06-24
8-K	2020-05-27
8-K	2020-05-04
8-K	2020-04-20
8-K	2019-12-04
8-K	2019-10-23
8-K	2019-10-20
8-K	2019-09-23
8-K	2019-07-24
8-K	2019-06-28
8-K	2019-06-18
8-K	2019-05-30
8-K	2019-04-24
8-K	2019-03-04
8-K	2019-02-14
8-K	2019-01-24
8-K	2018-12-12
8-K	2018-12-10
8-K	2018-12-10
8-K	2018-11-27
8-K	2018-11-21
8-K	2018-11-12
8-K	2018-10-25
8-K	2018-10-18
8-K	2018-10-15
8-K	2018-07-25
8-K	2018-05-24
8-K	2018-04-30
8-K	2018-01-24
8-K	2018-01-02

EX-31.1	ex-31193020.htm
EX-31.2	ex-31293020.htm
EX-32.1	ex-32193020.htm
EX-32.2	ex-32293020.htm

CUBI 10Q Quarterly Report

Customers Bancorp Earnings 2020-09-30