Customers Bancorp (CUBI) Misses Q1 EPS by 17c

Customers Bancorp (NYSE: CUBI) reported Q1 EPS of $0.26, $0.17 worse than the analyst estimate of $0.43.

Adjusted Pre-tax Pre-provision Earnings of $38.6 million, up 53% over Q1 2019

Net Interest Margin Expands by 10 basis points over Q4 2019

• Q1 2020 GAAP earnings of $7.0 million, or $0.22 per diluted share, and core earnings of $8.1 million, or $0.26 per diluted share (non-GAAP measures).
• Q1 2020 results include the adoption of the Current Expected Credit Loss ("CECL") standard on January 1, 2020, resulting in a total build of credit reserves of $100.4 million and a charge to Q1 2020 earnings of $23 million. At March 31, 2020, the coverage of loss reserves to loans and leases held for investment was 2.1%, up from 0.8% at December 31, 2019.
• Adjusted pre-tax pre-provision net income for Q1 2020 was $38.6 million, an increase of 53% over Q1 2019 pre-tax pre-provision net income of $25.3 million (non-GAAP measures).
• Q1 2020 net interest margin expanded 10 basis points from Q4 2019 to 2.99%; our sixth consecutive quarter of net interest margin expansion. Q1 2020 net interest margin up 40 basis points over Q1 2019.
• Net interest income increased by $3.7 million, or 4.8%, over Q4 2019 and $22.0 million, or 37.1%, over Q1 2019.
• Total assets were $12.0 billion at March 31, 2020, compared to $10.1 billion at March 31, 2019 and $11.5 billion at December 31, 2019. Average assets were $11.6 billion for Q1 2020, compared to $9.8 billion for Q1 2019 and $11.3 billion for Q4 2019.
• Total loans and leases increased $1.6 billion, or 18% year-over-year, driven by strong growth in mortgage warehouse loans of $1.0 billion and commercial and industrial loans and leases of $0.6 billion. Run-off of multifamily loans was replaced with an equal amount of high FICO score personal, home improvement and student refinance loans.
• Total deposits increased $1.0 billion, or 13%, year-over-year, which included a $828 million, or 38%, increase in demand deposits.
• Asset quality remains strong. Non-performing assets were only 0.53% of total assets at March 31, 2020 and reserves equaled 242% of non-performing loans. Net charge-offs were $5.9 million, or 25 basis points of average total loans and leases on an annualized basis, during Q1 2020.
• Helped thousands of small businesses over the past few weeks by originating about $5 billion in SBA Payroll Protection Program loans directly or through fintech partnerships as of May 2, 2020, which is expected to add about $85 million in revenues.

“We are very pleased with our financial success,” said Customers Bancorp Chairman and CEO Jay Sidhu. “But foremost, I am so pleased and proud to partner with such talented and hard-working team members at a time like this. We did not miss a beat in delivering tremendous service to our clients. And, we overcame tremendous obstacles to give access to Paycheck Protection Program loans to thousands of small businesses and non-profits. Working nearly round the clock, team members from every department worked with clients to finish loan applications to save the jobs of tens of thousands of Americans. Customers Bank is poised for great things in the future.”

Looking Ahead to 2020 and Beyond

Mr. Sidhu stated, "Before COVID-19, Customers was projecting core earnings per share of $3.00 for 2020 with continued improvement expected in all profitability metrics. However, rapid recent changes in economic activity introduce uncertainty to our near-term profitability. We have pivoted our strategy in this environment to building a stronger balance sheet and assisting our customers, team members and community to effectively deal with this crisis. Our provision will be higher, most customer activity will slow, and there will be disruptions, but we are also seeing positive trends in deposits and opportunities to serve customers through the SBA Paycheck Protection Program as well as other U.S. Treasury and Federal stimulus programs.\" Mr. Sidhu continued, "Longer term, we remain confident in our ability to achieve a run rate of $6 per share in annual core earnings by the end of 2025 or 2026."

For earnings history and earnings-related data on Customers Bancorp (CUBI) click here.

You May Also Be Interested In

• Equifax (EFX) shares tumble on weak Q1 revenue, guidance miss
• Analysis-Wobbling US stocks could push volatility-linked funds to ramp up selling
• Analysis-Wobbling US stocks could push volatility-linked funds to ramp up selling