Customers Bancorp (NYSE: CUBI) reported Q1 EPS of $0.38, $0.01 worse than the analyst estimate of $0.39.

• Net interest margin, tax equivalent ("NIM") (a non-GAAP measure) was 2.59% in Q1 2019, an expansion of 2 basis points from fourth quarter 2018 ("Q4 2018"). Excluding prepayment fees, NIM expanded 3 basis points from Q4 2018.
• Total assets were $10.1 billion at March 31, 2019, compared to $9.8 billion at December 31, 2018 and $10.8 billion at March 31, 2018. Average interest earning assets for Q1 2019 were $9.3 billion, compared to $9.5 billion for Q4 2018 and $9.9 billion for Q1 2018.
• Total deposits increased year-over-year by $383 million, or 5.4%, from March 31, 2018, with demand deposits increasing $413 million, or 23%.
• Loan mix improved year-over-year, as commercial and industrial ("C&I") loans, excluding commercial loans to mortgage companies, increased $335 million, or 20%, and residential mortgages and other consumer loans increased $550 million, or 239%, from March 31, 2018. As planned, multi-family loans decreased $433 million and commercial real estate non-owner occupied loans decreased $88.6 million over this same period. Reflecting broader market trends, commercial loans to mortgage companies decreased $396 million from March 31, 2018.
• Reflecting this change in mix, the provision for loan losses was $4.8 million in Q1 2019, compared to $1.4 million in Q4 2018 and $2.1 million in Q1 2018.
• Asset quality remains strong. Non-performing loans improved slightly and were only 0.26% of total loans at March 31, 2019. Net charge-offs were only $1.1 million, or 5 basis points of average total loans on an annualized basis, during Q1 2019. Reserves to non-performing loans were 194% at March 31, 2019.
• The Q1 2019 BankMobile segment loss narrowed to $163 thousand, or less than a penny per diluted share, which reflected favorable seasonality in the first quarter and the addition of new monthly deposit fees which were initiated late in Q1 2019.
• In late November 2018, BankMobile\'s first White Label banking partnership went live in beta test phase, offering BankMobile\'s best in class banking products to the partner\'s broad customer base. At March 31, 2019, the partnership had generated over $11 million in total deposits during the beta test phase with no advertising. On April 18, 2019, T-Mobile "launched" the first phase of its national marketing plan, and in the first week new account openings have exceeded our expectations. We expect significant account openings and deposit growth through the remainder of 2019.
• Q1 2019 book value per common share was $24.44 and tangible book value per common share (a non-GAAP measure) was $23.92. Tangible book value per common share has increased at a compound annual growth rate of 10.2% over the past five years.
• Based on the April 18, 2019 closing price of $22.30, Customers Bancorp common equity is trading at 0.93x tangible book value of $23.92 (a non-GAAP measure) and 8.6x the 2020 consensus estimate of $2.60.

"We are on track to meet or exceed Street expectations for 2019, continue to further strengthen the quality of our balance sheet by improving capital while maintaining strong credit quality, and achieve a ROAA of 1.25% within 2-3 years. Looking ahead, we expect core EPS to be $3.00 per share or higher in 2020. We are also excited about the recent "launch" of BankMobile's T-Mobile partnership and expect to add significant new customers and deposits to our bank," stated Jay Sidhu, CEO and Chairman of Customers Bank.

GUIDANCE:

Customers Bancorp sees FY2019 EPS of $2.21, versus the consensus of $2.16.

Customers Bancorp sees FY2019 EPS of $3.00, versus the consensus of $2.53.

Customers' expects core earnings per share to be $3.00 or higher in 2020, an increase of over 35% from the January 2019 consensus estimate. Customers has previously indicated it is on track to earn at least $2.21 in core earnings per share for 2019. “We are off to a good start in 2019, with strong growth in higher margin C&I and consumer loans, supported by corresponding increases in core deposits. The planned commercial and consumer loan growth expected in 2019 would require appropriate provision expense in 2019. This provision expense caused a drag on Q1 2019 earnings and will also result in a temporary drag on Q2 2019 earnings; however, earnings should show acceleration starting in Q3 2019, with Customers projecting 2020 core EPS of at least $3.00," stated Sidhu.

Net interest margin is expected to increase to 2.75% or higher by Q4 2019, with full-year 2019 net interest margin above 2.70%. Average interest earning assets for 2019 are expected to be roughly equal to 2018 average interest earning assets. Core non-interest income is expected to grow approximately 10% - 20% from 2018 and the core efficiency ratio for full-year 2019 is expected to be in the mid-60%s. Continued growth in retained earnings is expected to provide flexibility to call preferred equity as it becomes callable beginning in 2020 and to consider common stock buybacks, subject to regulatory approval.

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