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Customers Bancorp Reports Results for Third Quarter 2024

October 31, 2024 4:31 PM

WEST READING, Pa.--(BUSINESS WIRE)-- Customers Bancorp, Inc. (NYSE: CUBI):

Third Quarter 2024 Highlights

*

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 are included at the end of this document.

1

Excludes pre-tax severance expense of $0.7 million, unrealized losses on loans held for sale of $0.6 million, gain on investment securities of $0.4 million and derivative credit valuation adjustment of $0.2 million.

2

Regulatory capital ratios as of September 30, 2024 are estimates.

3

Uninsured deposits (estimate) of $6.1 billion to be reported on the Bank’s call report, less deposits of $1.4 billion collateralized by standby letters of credit from the FHLB and from our affiliates of $136.5 million.

CEO Commentary

“Customers Bancorp continued to deliver on its strategic priorities to grow our franchise value through lower-cost and granular deposit inflows and diversified loan growth while we manage our operational risks,” said Customers Bancorp Chairman and CEO Jay Sidhu. “We have strong momentum as we pursue phase two of our deposit transformation strategy – remixing existing higher-cost business unit deposits*1 and brokered deposits into core lower-cost and granular deposits. We started the year with robust pipeline within our existing businesses which has been materially enhanced by the new commercial banking teams that joined Customers in April. In the quarter, we utilized deposit growth from commercial customers of $1.1 billion to paydown $0.7 billion of higher-cost commercial and consumer client deposits. In the third quarter, these inflows were, once again, broad-based with more than 25 different channels increasing balances and 70% of channels contributing $25 million or more. Our new deposit focused commercial banking teams have opened over 3,000 new deposit accounts since joining and gathered $536 million in deposits at an interest rate of approximately 2.9% with approximately 30% being non-interest bearing. Our deposit pipelines continue to grow with an extraordinary conversion ratio. We repurchased 373,974 shares of common stock under the previously authorized share repurchase program at an average price below Tangible Book Value per share*. Even with the share repurchase and balance sheet growth, our TCE / TA ratio* remained flat. Enhanced by the addition of our new banking teams, we believe we are extremely well-positioned to continue to strengthen our deposit franchise, improve our profitability, and maintain our already strong capital ratios,” stated Jay Sidhu.

“Our Q3 2024 GAAP earnings were $42.9 million, or $1.31 per diluted share, and core earnings* were $43.8 million, or $1.34 per diluted share. At September 30, 2024, our deposit base was well diversified, with approximately 75%2 of total deposits insured. We maintain a strong liquidity position, with $8.3 billion of liquidity immediately available, which covers approximately 183% of uninsured deposits2 and our loan to deposit ratio was 78%. We continue to focus loan production where we have a holistic and primary relationship. Total loans and leases held for investment grew by $520.8 million which represent a 16% annualized growth rate, driven by strong commercial loan growth of $539.5 million. Our loan pipeline continued to build during the third quarter, and we remain confident in achieving the 10% – 15% loan growth outlook previously provided. We continue to hold strong levels of liquidity and capital to support the needs of our customers. Asset quality remains strong, and a clear differentiator for us, with our NPA ratio at just 0.22% of total assets and reserve levels are robust at 281% of total non-performing loans at the end of Q3 2024. Total net charge-offs declined by $1.7 million and the combined level of special mention and substandard commercial loans declined by $44.0 million during the quarter. Our exposure to the higher risk commercial real estate office sector is minimal, representing approximately 1% of the loan portfolio. We will remain disciplined, but opportunistic, with our balance sheet capacity to manage risk and maintain robust capital levels. Tangible Book Value per share* grew to $52.96. We are excited and optimistic about the opportunities ahead which have been enhanced by the addition of the new banking teams,” Jay Sidhu continued.

*

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 are included at the end of this document.

1

Total deposits excluding wholesale CDs and BMTX student-related deposits.

2

Uninsured deposits (estimate) of $6.1 billion to be reported on the Bank’s call report, less deposits of $1.4 billion collateralized by standby letters of credit from the FHLB and from our affiliates of $136.5 million.

Financial Highlights

(Dollars in thousands, except per share data)

At or Three Months Ended

Increase (Decrease)

September 30,

2024

June 30,

2024

Profitability Metrics:

Net income available for common shareholders

$

42,937

$

54,300

$

(11,363

)

(20.9

)%

Diluted earnings per share

$

1.31

$

1.66

$

(0.35

)

(21.1

)%

Core earnings*

$

43,838

$

48,567

$

(4,729

)

(9.7

)%

Adjusted core earnings*

$

41,381

$

48,567

$

(7,186

)

(14.8

)%

Core earnings per share*

$

1.34

$

1.49

$

(0.15

)

(10.1

)%

Adjusted core earnings per share*

$

1.26

$

1.49

$

(0.23

)

(15.4

)%

Return on average assets (“ROAA”)

0.88

%

1.11

%

(0.23

)

Core ROAA*

0.89

%

1.00

%

(0.11

)

Adjusted core ROAA*

0.85

%

1.00

%

(0.15

)

Return on average common equity (“ROCE”)

10.44

%

13.85

%

(3.41

)

Core ROCE*

10.66

%

12.39

%

(1.73

)

Adjusted core ROCE*

10.06

%

12.39

%

(2.33

)

Core pre-tax pre-provision net income*

$

64,824

$

89,220

$

(24,396

)

(27.3

)%

Adjusted core pre-tax pre-provision net income*

$

61,827

$

89,220

$

(27,393

)

(30.7

)%

Net interest margin, tax equivalent

3.06

%

3.29

%

(0.23

)

Yield on loans (Loan yield)

6.99

%

7.17

%

(0.18

)

Cost of deposits

3.46

%

3.40

%

0.06

Efficiency ratio

62.40

%

51.87

%

10.53

Core efficiency ratio*

61.69

%

53.47

%

8.22

Adjusted core efficiency ratio*

63.48

%

53.47

%

10.01

Non-interest expense to average total assets

1.95

%

1.98

%

(0.03

)

Core non-interest expense to average total assets*

1.94

%

1.93

%

0.01

Adjusted core non-interest expense to average total assets*

1.99

%

1.93

%

0.06

Balance Sheet Trends:

Total assets

$

21,456,082

$

20,942,975

$

513,107

2.5

%

Total cash and investment securities

$

6,564,528

$

6,523,036

$

41,492

0.6

%

Total loans and leases

$

14,053,116

$

13,632,639

$

420,477

3.1

%

Non-interest bearing demand deposits

$

4,670,809

$

4,474,862

$

195,947

4.4

%

Total deposits

$

18,069,389

$

17,678,093

$

391,296

2.2

%

Capital Metrics:

Common Equity

$

1,663,386

$

1,609,071

$

54,315

3.4

%

Tangible Common Equity*

$

1,659,757

$

1,605,442

$

54,315

3.4

%

Common Equity to Total Assets

7.8

%

7.7

%

0.1

Tangible Common Equity to Tangible Assets*

7.7

%

7.7

%

—

Book Value per common share

$

53.07

$

50.81

$

2.26

4.4

%

Tangible Book Value per common share*

$

52.96

$

50.70

$

2.26

4.5

%

Common equity Tier 1 capital ratio (1)

12.5

%

12.8

%

(0.3

)

Total risk based capital ratio (1)

15.4

%

15.8

%

(0.4

)

(1) Regulatory capital ratios as of September 30, 2024 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 are included at the end of this document.

Financial Highlights

(Dollars in thousands, except per share data)

At or Three Months Ended

Increase (Decrease)

Nine Months Ended

Increase (Decrease)

September 30,

2024

September 30,

2023

September 30,

2024

September 30,

2023

Profitability Metrics:

Net income available for common shareholders

$

42,937

$

82,953

$

(40,016

)

(48.2

)%

$

143,163

$

177,225

$

(34,062

)

(19.2

)%

Diluted earnings per share

$

1.31

$

2.58

$

(1.27

)

(49.2

)%

$

4.37

$

5.53

$

(1.16

)

(21.0

)%

Core earnings*

$

43,838

$

83,294

$

(39,456

)

(47.4

)%

$

138,937

$

186,600

$

(47,663

)

(25.5

)%

Adjusted core earnings*

$

41,381

$

83,294

$

(41,913

)

(50.3

)%

$

145,085

$

186,600

$

(41,515

)

(22.2

)%

Core earnings per share*

$

1.34

$

2.59

$

(1.25

)

(48.3

)%

$

4.24

$

5.82

$

(1.58

)

(27.1

)%

Adjusted core earnings per share*

$

1.26

$

2.59

$

(1.33

)

(51.4

)%

$

4.43

$

5.82

$

(1.39

)

(23.9

)%

Return on average assets (“ROAA”)

0.88

%

1.57

%

(0.69

)

0.97

%

1.17

%

(0.20

)

Core ROAA*

0.89

%

1.57

%

(0.68

)

0.95

%

1.22

%

(0.27

)

Adjusted core ROAA*

0.85

%

1.57

%

(0.72

)

0.99

%

1.22

%

(0.23

)

Return on average common equity (“ROCE”)

10.44

%

23.97

%

(13.53

)

12.10

%

17.84

%

(5.74

)

Core ROCE*

10.66

%

24.06

%

(13.40

)

11.74

%

18.79

%

(7.05

)

Adjusted core ROCE*

10.06

%

24.06

%

(14.00

)

12.26

%

18.79

%

(6.53

)

Core pre-tax pre-provision net income*

$

64,824

$

128,564

$

(63,740

)

(49.6

)%

$

237,718

$

314,679

$

(76,961

)

(24.5

)%

Adjusted core pre-tax pre-provision net income*

$

61,827

$

128,564

$

(66,737

)

(51.9

)%

$

246,035

$

314,679

$

(68,644

)

(21.8

)%

Net interest margin, tax equivalent

3.06

%

3.70

%

(0.64

)

3.16

%

3.28

%

(0.12

)

Yield on loans (Loan yield)

6.99

%

7.87

%

(0.88

)

7.07

%

7.12

%

(0.05

)

Cost of deposits

3.46

%

3.24

%

0.22

3.44

%

3.23

%

0.21

Efficiency ratio

62.40

%

41.01

%

21.39

55.97

%

45.62

%

10.35

Core efficiency ratio*

61.69

%

41.04

%

20.65

56.29

%

45.03

%

11.26

Adjusted core efficiency ratio*

63.48

%

41.04

%

22.44

54.75

%

45.03

%

9.72

Non-interest expense to average total assets

1.95

%

1.62

%

0.33

1.93

%

1.61

%

0.32

Core non-interest expense to average total assets*

1.94

%

1.62

%

0.32

1.91

%

1.60

%

0.31

Adjusted core non-interest expense to average total assets*

1.99

%

1.62

%

0.37

1.86

%

1.60

%

0.26

(1) Regulatory capital ratios as of September 30, 2024 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 are included at the end of this document.

Financial Highlights

(Dollars in thousands, except per share data)

At or Three Months Ended

Increase (Decrease)

September 30,

2024

September 30,

2023

Balance Sheet Trends:

Total assets

$

21,456,082

$

21,857,152

$

(401,070

)

(1.8

)%

Total cash and investment securities

$

6,564,528

$

7,371,551

$

(807,023

)

(10.9

)%

Total loans and leases

$

14,053,116

$

13,713,482

$

339,634

2.5

%

Non-interest bearing demand deposits

$

4,670,809

$

4,758,682

$

(87,873

)

(1.8

)%

Total deposits

$

18,069,389

$

18,195,364

$

(125,975

)

(0.7

)%

Capital Metrics:

Common Equity

$

1,663,386

$

1,423,813

$

239,573

16.8

%

Tangible Common Equity*

$

1,659,757

$

1,420,184

$

239,573

16.9

%

Common Equity to Total Assets

7.8

%

6.5

%

1.3

Tangible Common Equity to Tangible Assets*

7.7

%

6.5

%

1.2

Book Value per common share

$

53.07

$

45.47

$

7.60

16.7

%

Tangible Book Value per common share*

$

52.96

$

45.36

$

7.60

16.8

%

Common equity Tier 1 capital ratio (1)

12.5

%

11.3

%

1.2

Total risk based capital ratio (1)

15.4

%

14.3

%

1.1

(1) Regulatory capital ratios as of September 30, 2024 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 are included at the end of this document.

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,

2024

% of

Total

June 30,

2024

% of

Total

September 30,

2023

% of

Total

Loans and Leases Held for Investment

Commercial:

Commercial & industrial:

Specialized lending

$

5,468,507

39.7

%

$

5,528,745

41.7

%

$

5,422,161

40.0

%

Other commercial & industrial (1)

1,087,222

7.9

1,092,146

8.2

1,252,427

9.2

Mortgage finance

1,367,617

9.9

1,122,812

8.5

1,042,549

7.7

Multifamily

2,115,978

15.4

2,067,332

15.6

2,130,213

15.7

Commercial real estate owner occupied

981,904

7.1

805,779

6.1

794,815

5.9

Commercial real estate non-owner occupied

1,326,591

9.6

1,202,606

9.1

1,178,203

8.7

Construction

174,509

1.3

163,409

1.2

252,588

1.8

Total commercial loans and leases

12,522,328

90.9

11,982,829

90.4

12,072,956

89.0

Consumer:

Residential

500,786

3.6

481,503

3.6

483,133

3.6

Manufactured housing

34,481

0.3

35,901

0.3

40,129

0.3

Installment:

Personal

453,739

3.3

474,481

3.6

629,843

4.6

Other

266,362

1.9

282,201

2.1

337,053

2.5

Total installment loans

720,101

5.2

756,682

5.7

966,896

7.1

Total consumer loans

1,255,368

9.1

1,274,086

9.6

1,490,158

11.0

Total loans and leases held for investment

$

13,777,696

100.0

%

$

13,256,915

100.0

%

$

13,563,114

100.0

%

Loans Held for Sale

Residential

$

2,523

0.9

%

$

2,684

0.7

%

$

1,005

0.7

%

Installment:

Personal

55,799

20.3

125,598

33.4

124,848

83.0

Other

217,098

78.8

247,442

65.9

24,515

16.3

Total installment loans

272,897

99.1

373,040

99.3

149,363

99.3

Total loans held for sale

$

275,420

100.0

%

$

375,724

100.0

%

$

150,368

100.0

%

Total loans and leases portfolio

$

14,053,116

$

13,632,639

$

13,713,482

(1) Includes PPP loans of $30.5 million, $38.3 million and $137.1 million as of September 30, 2024, June 30, 2024 and September 30, 2023, respectively.

Loans and Leases Held for Investment

Loans and leases held for investment were $13.8 billion at September 30, 2024, up $520.8 million, or 3.9%, from June 30, 2024. Mortgage finance loans increased by $244.8 million, or 21.8% quarter-over-quarter. Owner-occupied commercial real estate loans increased by $176.1 million, or 21.9% to $981.9 million. Non-owner occupied commercial real estate loans increased by $124.0 million, or 10.3% to $1.3 billion. Multifamily loans increased by $48.6 million, or 2.4% to $2.1 billion. Specialized lending decreased by $60.2 million, or 1.1% quarter-over-quarter, to $5.5 billion. Other commercial and industrial loans decreased by $4.9 million, or 0.5% quarter-over-quarter, to $1.1 billion. Consumer installment loans held for investment decreased by $36.6 million, or 4.8% quarter-over-quarter, to $720.1 million.

Loans and leases held for investment of $13.8 billion at September 30, 2024 were up $214.6 million, or 1.6%, year-over-year. Mortgage finance loans increased by $325.1 million, or 31.2% year-over-year due to higher mortgage activity from lower interest rates. Owner-occupied commercial real estate loans increased by $187.1 million. Non-owner occupied commercial real estate loans increased by $148.4 million. Specialized lending increased by $46.3 million. Consumer installment loans decreased by $246.8 million, or 25.5% year-over-year due to the continued build out of the held-for-sale strategy and de-risking of the held-for-investment loan portfolio. Other commercial and industrial loans decreased by $165.2 million, which included decreases in PPP loans primarily from guarantee payments. Construction loans decreased by $78.1 million.

Loans Held for Sale

Loans held for sale decreased $100.3 million quarter-over-quarter, and were $275.4 million at September 30, 2024 including the sale of consumer installment loans that were classified as held for sale with a carrying value of $200.8 million in Q3 2024. As part of these sales, Customers recognized a loss on sale of $0.3 million, which is presented within net gain (loss) on sale of loans and leases in the consolidated statement of income in Q3 2024.

Allowance for Credit Losses on Loans and Leases

The following table presents the allowance for credit losses on loans and leases as of the dates and for the periods presented:

At or Three Months Ended

Increase

(Decrease)

At or Three Months Ended

Increase

(Decrease)

(Dollars in thousands)

September 30,

2024

June 30,

2024

September 30,

2024

September 30,

2023

Allowance for credit losses on loans and leases

$

133,158

$

132,436

$

722

$

133,158

$

139,213

$

(6,055

)

Provision (benefit) for credit losses on loans and leases

$

17,766

$

17,851

$

(85

)

$

17,766

$

17,055

$

711

Net charge-offs from loans held for investment

$

17,044

$

18,711

$

(1,667

)

$

17,044

$

17,498

$

(454

)

Annualized net charge-offs to average loans and leases

0.50

%

0.56

%

0.50

%

0.50

%

Coverage of credit loss reserves for loans and leases held for investment

1.06

%

1.08

%

1.06

%

1.10

%

Net charge-offs decreased modestly with $17.0 million in Q3 2024, compared to $18.7 million in Q2 2024 and $17.5 million in Q3 2023.

Provision (benefit) for Credit Losses

Three Months Ended

Increase

(Decrease)

Three Months Ended

Increase

(Decrease)

(Dollars in thousands)

September 30,

2024

June 30,

2024

September 30,

2024

September 30,

2023

Provision (benefit) for credit losses on loans and leases

$

17,766

$

17,851

$

(85

)

$

17,766

$

17,055

$

711

Provision (benefit) for credit losses on available for sale debt securities

(700

)

270

(970

)

(700

)

801

(1,501

)

Provision for credit losses

17,066

18,121

(1,055

)

17,066

17,856

(790

)

Provision (benefit) for credit losses on unfunded commitments

642

1,594

(952

)

642

48

594

Total provision for credit losses

$

17,708

$

19,715

$

(2,007

)

$

17,708

$

17,904

$

(196

)

The provision for credit losses on loans and leases in Q3 2024 was $17.8 million, compared to $17.9 million in Q2 2024. The lower provision in Q3 2024 was primarily due to slight improvements in macroeconomic forecasts.

The provision for credit losses on available for sale investment securities in Q3 2024 was a benefit to provision of $0.7 million, compared to provision of $0.3 million in Q2 2024.

The provision for credit losses on loans and leases in Q3 2024 was $17.8 million, compared to $17.1 million in Q3 2023. The higher provision in Q3 2024 compared to the year ago period was primarily due to higher balances in commercial and industrial loan balances held for investment, partially offset by lower balances in consumer installment loans held for investment.

The provision for credit losses on available for sale investment securities in Q3 2024 was a benefit to provision of $0.7 million compared to provision of $0.8 million in Q3 2023.

Asset Quality

The following table presents asset quality metrics as of the dates indicated:

(Dollars in thousands)

September 30,

2024

June 30,

2024

Increase

(Decrease)

September 30,

2024

September 30,

2023

Increase

(Decrease)

Non-performing assets (“NPAs”):

Nonaccrual / non-performing loans (“NPLs”)

$

47,326

$

47,380

$

(54

)

$

47,326

$

29,867

$

17,459

Non-performing assets

$

47,326

$

47,444

$

(118

)

$

47,326

$

29,970

$

17,356

NPLs to total loans and leases

0.34

%

0.35

%

0.34

%

0.22

%

Reserves to NPLs

281.36

%

279.52

%

281.36

%

466.11

%

NPAs to total assets

0.22

%

0.23

%

0.22

%

0.14

%

Loans and leases (1) risk ratings:

Commercial loans and leases

Pass

$

10,844,500

$

10,500,922

$

343,578

$

10,844,500

$

10,503,731

$

340,769

Special Mention

178,026

170,014

8,012

178,026

189,329

(11,303

)

Substandard

218,921

270,898

(51,977

)

218,921

280,267

(61,346

)

Total commercial loans and leases

11,241,447

10,941,834

299,613

11,241,447

10,973,327

268,120

Consumer loans

Performing

1,240,581

1,256,816

(16,235

)

1,240,581

1,473,493

(232,912

)

Non-performing

14,787

17,270

(2,483

)

14,787

16,665

(1,878

)

Total consumer loans

1,255,368

1,274,086

(18,718

)

1,255,368

1,490,158

(234,790

)

Loans and leases receivable (1)

$

12,496,815

$

12,215,920

$

280,895

$

12,496,815

$

12,463,485

$

33,330

(1) Risk ratings are assigned to loans and leases held for investment, and excludes loans held for sale, loans receivable, mortgage finance, at fair value and eligible PPP loans that are fully guaranteed by the Small Business Administration.

Over the last decade, the Bank has developed a suite of commercial loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s commercial and industrial (“C&I”), mortgage finance, corporate and specialized lending lines of business, and multifamily loans for example, are characterized by conservative underwriting standards and historically low loss rates. Because of this emphasis, the Bank’s credit quality to date has been incredibly healthy despite an 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, management employs a bottom-up data driven approach to analyze the commercial portfolio.

Total consumer installment loans held for investment at September 30, 2024 were less than 4% of total assets and approximately 5% of total loans and leases held for investment, and were supported by an allowance for credit losses of $50.1 million. At September 30, 2024, the consumer installment portfolio had the following characteristics: average original FICO score of 746, average debt-to-income of 20% and average borrower income of $101 thousand.

Non-performing loans at September 30, 2024 decreased to 0.34% of total loans and leases, compared to 0.35% at June 30, 2024 and increased, compared to 0.22% at September 30, 2023.

Investment Securities

The investment securities portfolio, including debt securities classified as available for sale (“AFS”) and held to maturity (“HTM”) provides periodic cash flows through regular maturities and amortization, can be used as collateral to secure additional funding, and is an important component of the Bank’s liquidity position.

The following table presents the composition of the investment securities portfolio as of the dates indicated:

(Dollars in thousands)

September 30,

2024

June 30,

2024

September 30,

2023

Debt securities, available for sale

$

2,377,733

$

2,477,758

$

2,746,729

Equity securities

34,336

33,892

26,478

Investment securities, at fair value

2,412,069

2,511,650

2,773,207

Debt securities, held to maturity

1,064,437

962,799

1,178,370

Total investment securities portfolio

$

3,476,506

$

3,474,449

$

3,951,577

Customers’ securities portfolio is highly liquid, short in duration, and high in yield. At September 30, 2024, the AFS debt securities portfolio had a spot yield of 5.23%, an effective duration of approximately 2.0 years, and approximately 30% are variable rate. Additionally, 63% of the AFS securities portfolio was AAA rated at September 30, 2024.

At September 30, 2024, the HTM debt securities portfolio represented only 5.0% of total assets at September 30, 2024, had a spot yield of 4.31% and an effective duration of approximately 3.5 years. Additionally, at September 30, 2024, approximately 43% of the HTM securities were AAA rated and 51% were credit enhanced asset backed securities with no current expectation of credit losses.

As a part of the sales of consumer installment loans that were classified as held for sale, Customers provided financing to the purchaser for a portion of the sale price in the form of $160.0 million of asset-backed securities, collateralized by the sold loans, which mostly accounted for the increase in HTM debt securities at September 30, 2024 as compared to the prior quarter.

Deposits

The following table presents the composition of our deposit portfolio as of the dates indicated:

(Dollars in thousands)

September 30,

2024

% of

Total

June 30,

2024

% of

Total

September 30,

2023

% of

Total

Demand, non-interest bearing

$

4,670,809

25.9

%

$

4,474,862

25.3

%

$

4,758,682

26.2

%

Demand, interest bearing

5,606,500

31.0

5,894,056

33.4

5,824,410

32.0

Total demand deposits

10,277,309

56.9

10,368,918

58.7

10,583,092

58.2

Savings

1,399,968

7.7

1,573,661

8.9

1,118,353

6.1

Money market

3,961,028

21.9

3,539,815

20.0

2,499,593

13.7

Time deposits

2,431,084

13.5

2,195,699

12.4

3,994,326

22.0

Total deposits

$

18,069,389

100.0

%

$

17,678,093

100.0

%

$

18,195,364

100.0

%

Total deposits increased $391.3 million, or 2.2%, to $18.1 billion at September 30, 2024 as compared to the prior quarter. Non-interest bearing demand deposits increased $195.9 million, or 4.4%, to $4.7 billion. Money market deposits increased $421.2 million, or 11.9%, to $4.0 billion and time deposits increased $235.4 million, or 10.7%, to $2.4 billion. These increases were offset by decreases in interest bearing demand deposits of $287.6 million, or 4.9%, to $5.6 billion and savings deposits of $173.7 million, or 11.0%, to $1.4 billion. The total average cost of deposits increased by 6 basis points to 3.46% in Q3 2024 from 3.40% in the prior quarter. Total estimated uninsured deposits were $4.5 billion1, or 25% of total deposits (inclusive of accrued interest) at September 30, 2024. Customers is also highly focused on total deposits with contractual term to manage its liquidity profile and the funding of loans and securities.

“Our deposit costs increased in the quarter attributable to strong deposit growth in the interest bearing category. We’re extremely excited about the success we’re having in bringing new clients to the bank and the long-term franchise value it will drive outweighing any short-term impacts. With the remix efforts underway and in a declining rate environment we expect to have flexibility lowering interest bearing deposit costs going forward including as these newer relationships season,” stated Jay Sidhu.

Total deposits decreased $126.0 million, or 0.7%, to $18.1 billion at September 30, 2024 as compared to a year ago. Time deposits decreased $1.6 billion, or 39.1% to $2.4 billion, interest bearing demand deposits decreased $217.9 million, or 3.7%, to $5.6 billion and non-interest bearing demand deposits decreased $87.9 million, or 1.8%, to $4.7 billion. These decreases were offset by increases in money market deposits of $1.5 billion, or 58.5%, to $4.0 billion and savings deposits of $281.6 million, or 25.2%, to $1.4 billion. The total average cost of deposits increased by 22 basis points to 3.46% in Q3 2024 from 3.24% in the prior year primarily due to higher market interest rates.

Borrowings

The following table presents the composition of our borrowings as of the dates indicated:

(Dollars in thousands)

September 30,

2024

June 30,

2024

September 30,

2023

FHLB advances

$

1,117,229

$

1,018,349

$

1,529,839

Senior notes

99,033

123,970

123,775

Subordinated debt

182,439

182,370

182,161

Total borrowings

$

1,398,701

$

1,324,689

$

1,835,775

Total borrowings increased $74.0 million, or 5.6%, to $1.4 billion at September 30, 2024 as compared to the prior quarter. This increase primarily resulted from an increase of $80.0 million in FHLB advances, partially offset by repayment of $25.0 million in senior notes upon maturity. As of September 30, 2024, Customers’ immediately available borrowing capacity with the FRB and FHLB was approximately $7.7 billion, of which $1.1 billion of available capacity was utilized in borrowings and $1.5 billion was utilized to collateralize deposits.

Total borrowings decreased $437.1 million, or 23.8%, to $1.4 billion at September 30, 2024 as compared to a year ago. This decrease primarily resulted from net repayments of $435.0 million in FHLB advances and $25.0 million in senior notes upon maturity.

1

Uninsured deposits (estimate) of $6.1 billion to be reported on the Bank’s call report, less deposits of $1.4 billion collateralized by standby letters of credit from the FHLB and from our affiliates of $136.5 million.

Capital

The following table presents certain capital amounts and ratios as of the dates indicated:

(Dollars in thousands except per share data)

September 30,

2024

June 30,

2024

September 30,

2023

Customers Bancorp, Inc.

Common Equity

$

1,663,386

$

1,609,071

$

1,423,813

Tangible Common Equity*

$

1,659,757

$

1,605,442

$

1,420,184

Common Equity to Total Assets

7.8

%

7.7

%

6.5

%

Tangible Common Equity to Tangible Assets*

7.7

%

7.7

%

6.5

%

Book Value per common share

$

53.07

$

50.81

$

45.47

Tangible Book Value per common share*

$

52.96

$

50.70

$

45.36

Common equity Tier 1 (“CET 1”) capital ratio (1)

12.5

%

12.8

%

11.3

%

Total risk based capital ratio (1)

15.4

%

15.8

%

14.3

%

(1) Regulatory capital ratios as of September 30, 2024 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 are included at the end of this document.

Customers Bancorp’s common equity increased $54.3 million to $1.7 billion, and tangible common equity* increased $54.3 million to $1.7 billion, at September 30, 2024 compared to the prior quarter, respectively, primarily from earnings of $42.9 million and decreased unrealized losses on investment securities of $25.3 million (net of taxes) deferred in accumulated other comprehensive income (“AOCI”). These increases were offset in part by $18.2 million of common share repurchases in Q3 2024. Similarly, book value per common share increased to $53.07 from $50.81, and tangible book value per common share* increased to $52.96 from $50.70, at September 30, 2024 and June 30, 2024, respectively.

Customers Bancorp’s common equity increased $239.6 million to $1.7 billion, and tangible common equity* increased $239.6 million to $1.7 billion, at September 30, 2024 compared to a year ago, respectively, primarily from earnings of $201.4 million and decreased unrealized losses on investment securities in AOCI of $43.7 million (net of taxes), offset in part by $18.2 million of common share repurchases. Similarly, book value per common share increased to $53.07 from $45.47, and tangible book value per common share* increased to $52.96 from $45.36, at September 30, 2024 and September 30, 2023, respectively.

At the Customers Bancorp level, the CET 1 ratio (estimate), total risk based capital ratio (estimate), common equity to total assets ratio and tangible common equity to tangible assets ratio* (“TCE / TA ratio”) were 12.5%, 15.4%, 7.8%, and 7.7%, respectively, at September 30, 2024.

At the Customers Bank level, capital levels remained strong and well above regulatory minimums. At September 30, 2024, Tier 1 capital (estimate) and total risk based capital (estimate) were 13.6% and 15.1%, respectively.

Key Profitability Trends

Net Interest Income

Net interest income totaled $158.5 million in Q3 2024, a decrease of $9.1 million from Q2 2024. This decrease was due to lower interest income of $1.9 million primarily due to lower interest income from loans in specialized lending, lower consumer installment loans and higher interest expense of $7.2 million due to higher costs of deposits and other borrowings.

“Net interest income and net interest margin declined in the quarter impacted by higher discount accretion and prepayment income that were benefits in Q2 2024 and did not repeat at the same levels in Q3 2024, as well as initiatives that were proactive risk management strategies including the $200.8 million consumer installment loan sale in Q3 2024 resulting in lower average balances and the well-timed securities portfolio repositioning completed in Q2 2024. These factors accounted for over 80% of the decline in reported net interest margin. Robust loan growth and accretive deposit remix remain as positive drivers that we expect to help increase net interest income and net interest margin in 2025,” stated Customers Bancorp President Sam Sidhu. “These positive drivers are bolstered by the recent team additions. Our new commercial deposit-focused banking teams have substantial momentum and it is clear we have the bankers, products and balance sheet strength to deliver for our new and existing clients. We continue to believe the overwhelming majority of client prospects will become Customers Bank clients in the near future,” stated Sam Sidhu.

Net interest income totaled $158.5 million in Q3 2024, a decrease of $41.2 million from Q3 2023. This decrease was due to lower interest income in specialized lending primarily due to approximately $27.0 million of interest income attributable to outsized discount accretion recognized on the acquired loan portfolio in Q3 2023.

Non-Interest Income

The following table presents details of non-interest income for the periods indicated:

Three Months Ended

Increase

(Decrease)

Three Months Ended

Increase

(Decrease)

(Dollars in thousands)

September 30,

2024

June 30,

2024

September 30,

2024

September 30,

2023

Commercial lease income

$

10,093

$

10,282

$

(189

)

$

10,093

$

8,901

$

1,192

Loan fees

8,011

5,233

2,778

8,011

6,029

1,982

Bank-owned life insurance

2,049

2,007

42

2,049

1,973

76

Mortgage finance transactional fees

1,087

1,058

29

1,087

1,018

69

Net gain (loss) on sale of loans and leases

(14,548

)

(238

)

(14,310

)

(14,548

)

(348

)

(14,200

)

Net gain (loss) on sale of investment securities

—

(719

)

719

—

(429

)

429

Unrealized gain on equity method investments

—

11,041

(11,041

)

—

—

—

Other

1,865

2,373

(508

)

1,865

631

1,234

Total non-interest income

$

8,557

$

31,037

$

(22,480

)

$

8,557

$

17,775

$

(9,218

)

Reported non-interest income totaled $8.6 million for Q3 2024, a decrease of $22.5 million compared to Q2 2024. The decrease was primarily due to $11.0 million of unrealized gain on equity method investments purchased at a discount in Q2 2024 and $14.3 million of loss on leases of commercial clean vehicles that were accounted for as sales-type leases and included within net gain (loss) on sale of loans and leases. These commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense in Q3 2024. These decreases were partially offset by an increase of $2.8 million in loan fees primarily resulting from increased unused line of credit fees.

Non-interest income totaled $8.6 million for Q3 2024, a decrease of $9.2 million compared to Q3 2023. As stated above, the decrease was primarily due to $14.3 million of loss on leases of commercial clean vehicles that were accounted for as sales-type leases and included within net gain (loss) on sale of loans and leases. These commercial clean vehicle leases generated the same amount of investment tax credits that were included as a corresponding benefit to income tax expense in Q3 2024. This decrease was partially offset by increases in commercial lease income of $1.2 million and loan fees of $2.0 million primarily resulting from increased unused line of credit fees.

Non-Interest Expense

The following table presents details of non-interest expense for the periods indicated:

Three Months Ended

Increase

(Decrease)

Three Months Ended

Increase

(Decrease)

(Dollars in thousands)

September 30,

2024

June 30,

2024

September 30,

2024

September 30,

2023

Salaries and employee benefits

$

47,717

$

44,947

$

2,770

$

47,717

$

33,845

$

13,872

Technology, communication and bank operations

13,588

16,227

(2,639

)

13,588

15,667

(2,079

)

Commercial lease depreciation

7,811

7,829

(18

)

7,811

7,338

473

Professional services

9,048

6,104

2,944

9,048

8,569

479

Loan servicing

3,778

3,516

262

3,778

3,858

(80

)

Occupancy

2,987

3,120

(133

)

2,987

2,471

516

FDIC assessments, non-income taxes and regulatory fees

7,902

10,236

(2,334

)

7,902

8,551

(649

)

Advertising and promotion

908

1,254

(346

)

908

650

258

Legal settlement expense

—

—

—

—

4,096

(4,096

)

Other

10,279

10,219

60

10,279

4,421

5,858

Total non-interest expense

$

104,018

$

103,452

$

566

$

104,018

$

89,466

$

14,552

Non-interest expenses totaled $104.0 million in Q3 2024, an increase of $0.6 million compared to Q2 2024. The increase was primarily attributable to increases of $2.8 million in salaries and employee benefits driven by higher headcount including the full quarter impact of Q2 2024 hires, annual merit increases, incentives partially offset by lower severance and $2.9 million in professional fees, partially offset by lower non-income taxes, software expenditures and processing fees.

“In the quarter we incurred professional services expense of approximately $3.0 million as we made investments to enhance our risk management infrastructure. We expect to spend an additional $3.0-$5.0 million in each of the next two quarters as we seek to build a best-in-class risk management function which we believe can be a competitive advantage for the bank in the future,” stated Sam Sidhu.

Non-interest expenses totaled $104.0 million in Q3 2024, an increase of $14.6 million compared to Q3 2023. The increase was primarily attributable to increases of $13.9 million in salaries and employee benefits primarily due to higher headcount including the addition of new banking teams in Q2 2024, annual merit increases, incentives and severance, fees paid to a fintech company related to consumer installment loans originated and held for sale as a part of the Bank’s held for sale strategy, and provision for operating losses. These increases were partially offset by $4.1 million of expenses from a settlement with a third party PPP service provider in Q3 2023 and a decrease in deposit servicing fees.

Taxes

Income tax expense decreased by $19.8 million to a benefit of $0.7 million in Q3 2024 from a provision of $19.0 million in Q2 2024 primarily due to lower pre-tax income and higher estimated income tax credits for 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles in Q3 2024. These investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases.

Income tax expense decreased by $24.2 million to a benefit of $0.7 million in Q3 2024 from a provision of $23.5 million in Q3 2023 primarily due to lower pre-tax income and an increase in estimated income tax credits for 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles in Q3 2024. These investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases. The effective tax rate for Q3 2024 was (1.6)%.

Outlook

“Looking forward, our strategy remains unchanged. We are focused on strengthening our deposit franchise, improving our profitability and maintaining our strong capital ratios. Our deposit pipelines are expected to continue to improve the quality and mix of deposits, reducing higher cost business unit deposits*1 with lower cost deposits where we have a holistic and primary relationship. The addition of the new banking teams is accelerating and enhancing these efforts which were already well underway. We see attractive opportunities to execute franchise-enhancing loan growth and our pipeline continues to be strong. We remain confident in our ability to deliver 10% - 15% loan growth for the full year. While the interest earning asset repositioning and the hedging we executed impacts our short term margin and will be a headwind in 2024, they will positively impact profitability and earnings in 2025. We expect net interest margin in Q4 2024 to be roughly flattish with Q3 2024. The management of non-interest expenses remains a priority for us. We expect the investments made in recruiting the new commercial banking teams will produce significant benefits by increasing our net interest income and net interest margin as well as improving the overall quality of our deposit franchise. We believe the investments we are making to enhance our risk management infrastructure will pay dividends over the long-term. We previously noted an $8.0-$10.0 million quarterly investment in the new commercial banking teams in 2024 and now about $3.0-$5.0 million of quarterly professional service expense in enhancing our risk management infrastructure for a few quarters. Looking forward we expect the new teams to breakeven in Q1 2025 and payoff throughout 2025 as well as a sunsetting of the additional professional services costs. We would also note that we had an $11.0 million unrealized gain on equity method investments purchased at a discount in Q2 2024 which helped offset some of these investment related expenses. While our efficiency ratio will be elevated in the near term as we make these investments in our future, we remain fundamentally focused on positive operating leverage and working to enable the organization to operate at a mid-40’s efficiency ratio over the medium-term. We are adjusting our guidance on effective tax rate to 18% - 20% primarily as a result of higher estimated investment tax credits in 2024. We remain committed to maintaining CET 1 ratio and TCE / TA ratio* targets of 11.5% and 7.5%, respectively in 2024. We are highly focused on preserving superior credit quality, managing interest rate risk, maintaining robust liquidity, operating with higher capital ratios and generating positive operating leverage,” concluded Sam 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 are included at the end of this document.

1

Total deposits excluding wholesale CDs and BMTX student-related deposits.

Webcast

Date:

Friday, November 1, 2024

Time:

9:00 AM EDT

The live audio webcast, presentation slides, and earnings press release will be made available at https://www.customersbank.com and at the Customers Bancorp 3rd Quarter Earnings Webcast.

You may submit questions in advance of the live webcast by emailing our Head of Corporate Communications, Jordan Baucum at [email protected].

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 $21 billion in assets making it one of the 80 largest bank holding companies in the U.S. Customers Bank’s commercial and consumer clients benefit from a full suite of technology-enabled tailored product experiences delivered by best-in-class customer service distinguished by a Single Point of Contact approach. In addition to traditional lines such as C&I lending, commercial real estate lending and multifamily lending, Customers Bank also provides a number of national corporate banking services to specialized lending clients. Major accolades include:

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: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, such as the FDIC special assessments; the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to our reputation; effects of competition on deposit rates and growth, loan rates and growth and net interest margin; failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks; public health crises and pandemics and their effects on the economic and business environments in which we operate; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and military conflicts, including the war between Russia and Ukraine and escalating conflict in the Middle East, which could impact economic conditions in the United States; 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 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 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, 2023, 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.

Q3 2024 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended September 30, 2024 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,

2024

2024

2024

2023

2023

2024

2023

GAAP Profitability Metrics:

Net income available to common shareholders

$

42,937

$

54,300

$

45,926

$

58,223

$

82,953

$

143,163

$

177,225

Per share amounts:

Earnings per share - basic

$

1.36

$

1.72

$

1.46

$

1.86

$

2.65

$

4.54

$

5.63

Earnings per share - diluted

$

1.31

$

1.66

$

1.40

$

1.79

$

2.58

$

4.37

$

5.53

Book value per common share (1)

$

53.07

$

50.81

$

49.29

$

47.73

$

45.47

$

53.07

$

45.47

CUBI stock price (1)

$

46.45

$

47.98

$

53.06

$

57.62

$

34.45

$

46.45

$

34.45

CUBI stock price as % of book value (1)

88

%

94

%

108

%

121

%

76

%

88

%

76

%

Average shares outstanding - basic

31,567,797

31,649,715

31,473,424

31,385,043

31,290,581

31,563,660

31,452,700

Average shares outstanding - diluted

32,766,488

32,699,149

32,854,534

32,521,787

32,175,084

32,773,365

32,036,459

Shares outstanding (1)

31,342,107

31,667,655

31,521,931

31,440,906

31,311,254

31,342,107

31,311,254

Return on average assets (“ROAA”)

0.88

%

1.11

%

0.94

%

1.16

%

1.57

%

0.97

%

1.17

%

Return on average common equity (“ROCE”)

10.44

%

13.85

%

12.08

%

15.93

%

23.97

%

12.10

%

17.84

%

Net interest margin, tax equivalent

3.06

%

3.29

%

3.10

%

3.31

%

3.70

%

3.16

%

3.28

%

Efficiency ratio

62.40

%

51.87

%

54.58

%

49.08

%

41.01

%

55.97

%

45.62

%

Non-GAAP Profitability Metrics (2):

Core earnings

$

43,838

$

48,567

$

46,532

$

61,633

$

83,294

$

138,937

$

186,600

Core pre-tax pre-provision net income

$

64,824

$

89,220

$

83,674

$

101,884

$

128,564

$

237,718

$

314,679

Per share amounts:

Core earnings per share - diluted

$

1.34

$

1.49

$

1.42

$

1.90

$

2.59

$

4.24

$

5.82

Tangible book value per common share (1)

$

52.96

$

50.70

$

49.18

$

47.61

$

45.36

$

52.96

$

45.36

CUBI stock price as % of tangible book value (1)

88

%

95

%

108

%

121

%

76

%

88

%

76

%

Core ROAA

0.89

%

1.00

%

0.95

%

1.22

%

1.57

%

0.95

%

1.22

%

Core ROCE

10.66

%

12.39

%

12.24

%

16.87

%

24.06

%

11.74

%

18.79

%

Core pre-tax pre-provision ROAA

1.21

%

1.71

%

1.58

%

1.90

%

2.32

%

1.50

%

1.95

%

Core pre-tax pre-provision ROCE

14.84

%

21.79

%

21.01

%

26.82

%

36.04

%

19.12

%

30.59

%

Core efficiency ratio

61.69

%

53.47

%

54.24

%

46.70

%

41.04

%

56.29

%

45.03

%

Asset Quality:

Net charge-offs

$

17,044

$

18,711

$

17,968

$

17,322

$

17,498

$

53,723

$

51,713

Annualized net charge-offs to average total loans and leases

0.50

%

0.56

%

0.55

%

0.51

%

0.50

%

0.54

%

0.47

%

Non-performing loans (“NPLs”) to total loans and leases (1)

0.34

%

0.35

%

0.27

%

0.21

%

0.22

%

0.34

%

0.22

%

Reserves to NPLs (1)

281.36

%

279.52

%

373.86

%

499.12

%

466.11

%

281.36

%

466.11

%

Non-performing assets (“NPAs”) to total assets

0.22

%

0.23

%

0.17

%

0.13

%

0.14

%

0.22

%

0.14

%

Customers Bank Capital Ratios (3):

Common equity Tier 1 capital to risk-weighted assets

13.6

%

14.17

%

14.16

%

13.77

%

12.97

%

13.6

%

12.97

%

Tier 1 capital to risk-weighted assets

13.6

%

14.17

%

14.16

%

13.77

%

12.97

%

13.6

%

12.97

%

Total capital to risk-weighted assets

15.1

%

15.64

%

15.82

%

15.28

%

14.45

%

15.1

%

14.45

%

Tier 1 capital to average assets (leverage ratio)

9.1

%

9.16

%

8.82

%

8.71

%

8.25

%

9.1

%

8.25

%

(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 2024 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, 2024, our regulatory capital ratios reflected 25%, or $15.4 million, benefit associated with the CECL transition provisions.

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,

2024

2024

2024

2023

2023

2024

2023

Interest income:

Loans and leases

$

228,659

$

224,265

$

217,999

$

239,453

$

271,107

$

670,923

$

757,064

Investment securities

46,265

47,586

46,802

51,074

54,243

140,653

149,585

Interest earning deposits

44,372

45,506

52,817

44,104

43,800

142,695

81,819

Loans held for sale

10,907

13,671

12,048

8,707

4,664

36,626

27,514

Other

1,910

3,010

2,111

2,577

2,526

7,031

5,463

Total interest income

332,113

334,038

331,777

345,915

376,340

997,928

1,021,445

Interest expense:

Deposits

155,829

148,784

153,725

150,307

145,825

458,338

426,130

FHLB advances

12,590

13,437

13,485

18,868

26,485

39,512

61,140

FRB advances

—

—

—

—

—

—

6,286

Subordinated debt

3,537

2,734

2,689

2,688

2,689

8,960

8,067

Other borrowings

1,612

1,430

1,493

1,546

1,568

4,535

4,879

Total interest expense

173,568

166,385

171,392

173,409

176,567

511,345

506,502

Net interest income

158,545

167,653

160,385

172,506

199,773

486,583

514,943

Provision for credit losses

17,066

18,121

17,070

13,523

17,856

52,257

61,088

Net interest income after provision for credit losses

141,479

149,532

143,315

158,983

181,917

434,326

453,855

Non-interest income:

Commercial lease income

10,093

10,282

9,683

9,035

8,901

30,058

27,144

Loan fees

8,011

5,233

5,280

5,926

6,029

18,524

14,290

Bank-owned life insurance

2,049

2,007

3,261

2,160

1,973

7,317

9,617

Mortgage finance transactional fees

1,087

1,058

946

927

1,018

3,091

3,468

Net gain (loss) on sale of loans and leases

(14,548

)

(238

)

10

(91

)

(348

)

(14,776

)

(1,109

)

Loss on sale of capital call lines of credit

—

—

—

—

—

—

(5,037

)

Net gain (loss) on sale of investment securities

—

(719

)

(30

)

(145

)

(429

)

(749

)

(429

)

Unrealized gain on equity method investments

—

11,041

—

—

—

11,041

—

Other

1,865

2,373

2,081

860

631

6,319

3,949

Total non-interest income

8,557

31,037

21,231

18,672

17,775

60,825

51,893

Non-interest expense:

Salaries and employee benefits

47,717

44,947

36,025

33,965

33,845

128,689

99,310

Technology, communication and bank operations

13,588

16,227

21,904

16,887

15,667

51,719

48,663

Commercial lease depreciation

7,811

7,829

7,970

7,357

7,338

23,610

22,541

Professional services

9,048

6,104

6,353

9,820

8,569

21,505

25,357

Loan servicing

3,778

3,516

4,031

3,779

3,858

11,325

13,296

Occupancy

2,987

3,120

2,347

2,320

2,471

8,454

7,750

FDIC assessments, non-income taxes and regulatory fees

7,902

10,236

13,469

13,977

8,551

31,607

21,059

Advertising and promotion

908

1,254

682

850

650

2,844

2,245

Legal settlement expense

—

—

—

—

4,096

—

4,096

Other

10,279

10,219

6,388

4,812

4,421

26,886

14,579

Total non-interest expense

104,018

103,452

99,169

93,767

89,466

306,639

258,896

Income before income tax expense (benefit)

46,018

77,117

65,377

83,888

110,226

188,512

246,852

Income tax expense (benefit)

(725

)

19,032

15,651

21,796

23,470

33,958

58,801

Net income

46,743

58,085

49,726

62,092

86,756

154,554

188,051

Preferred stock dividends

3,806

3,785

3,800

3,869

3,803

11,391

10,826

Net income available to common shareholders

$

42,937

$

54,300

$

45,926

$

58,223

$

82,953

$

143,163

$

177,225

Basic earnings per common share

$

1.36

$

1.72

$

1.46

$

1.86

$

2.65

$

4.54

$

5.63

Diluted earnings per common share

1.31

1.66

1.40

1.79

2.58

4.37

5.53

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - UNAUDITED

(Dollars in thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2024

2024

2024

2023

2023

ASSETS

Cash and due from banks

$

39,429

$

45,045

$

51,974

$

45,210

$

68,288

Interest earning deposits

3,048,593

3,003,542

3,649,146

3,801,136

3,351,686

Cash and cash equivalents

3,088,022

3,048,587

3,701,120

3,846,346

3,419,974

Investment securities, at fair value

2,412,069

2,511,650

2,604,868

2,405,640

2,773,207

Investment securities held to maturity

1,064,437

962,799

1,032,037

1,103,170

1,178,370

Loans held for sale

275,420

375,724

357,640

340,317

150,368

Loans and leases receivable

12,527,283

12,254,204

11,936,621

11,963,855

12,600,548

Loans receivable, mortgage finance, at fair value

1,250,413

1,002,711

962,610

897,912

962,566

Allowance for credit losses on loans and leases

(133,158

)

(132,436

)

(133,296

)

(135,311

)

(139,213

)

Total loans and leases receivable, net of allowance for credit losses on loans and leases

13,644,538

13,124,479

12,765,935

12,726,456

13,423,901

FHLB, Federal Reserve Bank, and other restricted stock

95,035

92,276

100,067

109,548

126,098

Accrued interest receivable

115,588

112,788

120,123

114,766

123,984

Bank premises and equipment, net

6,730

7,019

7,253

7,371

7,789

Bank-owned life insurance

295,531

293,108

293,400

292,193

291,670

Goodwill and other intangibles

3,629

3,629

3,629

3,629

3,629

Other assets

455,083

410,916

361,295

366,829

358,162

Total assets

$

21,456,082

$

20,942,975

$

21,347,367

$

21,316,265

$

21,857,152

LIABILITIES AND SHAREHOLDERS’ EQUITY

Demand, non-interest bearing deposits

$

4,670,809

$

4,474,862

$

4,688,880

$

4,422,494

$

4,758,682

Interest bearing deposits

13,398,580

13,203,231

13,272,503

13,497,742

13,436,682

Total deposits

18,069,389

17,678,093

17,961,383

17,920,236

18,195,364

FHLB advances

1,117,229

1,018,349

1,195,088

1,203,207

1,529,839

Other borrowings

99,033

123,970

123,905

123,840

123,775

Subordinated debt

182,439

182,370

182,300

182,230

182,161

Accrued interest payable and other liabilities

186,812

193,328

193,074

248,358

264,406

Total liabilities

19,654,902

19,196,110

19,655,750

19,677,871

20,295,545

Preferred stock

137,794

137,794

137,794

137,794

137,794

Common stock

35,734

35,686

35,540

35,459

35,330

Additional paid in capital

571,609

567,345

567,490

564,538

559,346

Retained earnings

1,302,745

1,259,808

1,205,508

1,159,582

1,101,359

Accumulated other comprehensive income (loss), net

(106,082

)

(131,358

)

(132,305

)

(136,569

)

(149,812

)

Treasury stock, at cost

(140,620

)

(122,410

)

(122,410

)

(122,410

)

(122,410

)

Total shareholders’ equity

1,801,180

1,746,865

1,691,617

1,638,394

1,561,607

Total liabilities and shareholders’ equity

$

21,456,082

$

20,942,975

$

21,347,367

$

21,316,265

$

21,857,152

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED

(Dollars in thousands)

Three Months Ended

September 30, 2024

June 30, 2024

September 30, 2023

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

$

3,224,940

$

44,372

5.47%

$

3,325,771

$

45,506

5.50%

$

3,211,753

$

43,800

5.41%

Investment securities (1)

3,706,974

46,265

4.97%

3,732,565

47,586

5.13%

4,240,116

54,243

5.12%

Loans and leases:

Commercial & industrial:

Specialized lending loans and leases (2)

5,805,389

124,667

8.54%

5,446,882

120,977

8.93%

5,717,252

157,671

10.94%

Other commercial & industrial loans (2)(3)

1,533,057

24,654

6.40%

1,540,191

25,119

6.56%

1,779,778

28,616

6.38%

Mortgage finance loans

1,267,656

17,723

5.56%

1,151,407

15,087

5.27%

1,159,698

16,916

5.79%

Multifamily loans

2,071,340

21,147

4.06%

2,108,835

21,461

4.09%

2,141,384

21,292

3.94%

Non-owner occupied commercial real estate loans

1,411,533

21,065

5.94%

1,396,771

20,470

5.89%

1,425,831

21,208

5.90%

Residential mortgages

525,285

6,082

4.61%

520,791

5,955

4.60%

528,022

5,965

4.48%

Installment loans

1,029,812

24,228

9.36%

1,186,486

28,867

9.79%

1,147,069

24,103

8.34%

Total loans and leases (4)

13,644,072

239,566

6.99%

13,351,363

237,936

7.17%

13,899,034

275,771

7.87%

Other interest-earning assets

118,914

1,910

6.39%

110,585

3,010

10.95%

134,416

2,526

7.45%

Total interest-earning assets

20,694,900

332,113

6.39%

20,520,284

334,038

6.54%

21,485,319

376,340

6.96%

Non-interest-earning assets

535,504

464,919

492,691

Total assets

$

21,230,404

$

20,985,203

$

21,978,010

Liabilities

Interest checking accounts

$

5,787,026

$

65,554

4.51%

$

5,719,698

$

64,047

4.50%

$

5,758,215

$

58,637

4.04%

Money market deposit accounts

3,676,994

42,128

4.56%

3,346,718

38,167

4.59%

2,181,184

22,983

4.18%

Other savings accounts

1,563,970

18,426

4.69%

1,810,375

21,183

4.71%

1,077,298

11,582

4.27%

Certificates of deposit

2,339,937

29,721

5.05%

2,034,605

25,387

5.02%

4,466,522

52,623

4.67%

Total interest-bearing deposits (5)

13,367,927

155,829

4.64%

12,911,396

148,784

4.63%

13,483,219

145,825

4.29%

Borrowings

1,334,905

17,739

5.29%

1,454,010

17,601

4.87%

2,328,955

30,742

5.24%

Total interest-bearing liabilities

14,702,832

173,568

4.70%

14,365,406

166,385

4.66%

15,812,174

176,567

4.43%

Non-interest-bearing deposits (5)

4,557,815

4,701,695

4,347,977

Total deposits and borrowings

19,260,647

3.59%

19,067,101

3.51%

20,160,151

3.48%

Other non-interest-bearing liabilities

195,722

203,714

306,822

Total liabilities

19,456,369

19,270,815

20,466,973

Shareholders’ equity

1,774,035

1,714,388

1,511,037

Total liabilities and shareholders’ equity

$

21,230,404

$

20,985,203

$

21,978,010

Net interest income

158,545

167,653

199,773

Tax-equivalent adjustment

392

393

405

Net interest earnings

$

158,937

$

168,046

$

200,178

Interest spread

2.80%

3.03%

3.48%

Net interest margin

3.05%

3.28%

3.70%

Net interest margin tax equivalent (6)

3.06%

3.29%

3.70%

(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 PPP loans.

(4) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.

(5) Total costs of deposits (including interest bearing and non-interest bearing) were 3.46%, 3.40% and 3.24% for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively.

(6) Tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, presented to approximate interest income as a taxable asset.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED (CONTINUED)

(Dollars in thousands)

Nine Months Ended

September 30, 2024

September 30, 2023

Average

Balance

Interest

Income or

Expense

Average

Yield or

Cost (%)

Average

Balance

Interest

Income or

Expense

Average

Yield or

Cost (%)

Assets

Interest earning deposits

$

3,471,011

$

142,695

5.49%

$

2,100,435

$

81,819

5.21%

Investment securities (1)

3,736,770

140,653

5.03%

4,074,464

149,585

4.90%

Loans and leases:

Commercial & industrial:

Specialized lending loans and leases (2)

5,507,963

361,234

8.76%

5,748,053

383,138

8.91%

Other commercial & industrial loans (2)(3)

1,575,815

76,487

6.48%

2,081,688

105,398

6.77%

Mortgage finance loans

1,151,173

45,640

5.30%

1,240,403

53,934

5.81%

Multifamily loans

2,100,501

63,863

4.06%

2,176,294

62,857

3.86%

Non-owner occupied commercial real estate loans

1,385,685

61,714

5.95%

1,434,459

61,284

5.71%

Residential mortgages

522,876

17,745

4.53%

535,502

17,298

4.32%

Installment loans

1,131,633

80,866

9.55%

1,517,632

100,669

8.87%

Total loans and leases (4)

13,375,646

707,549

7.07%

14,734,031

784,578

7.12%

Other interest-earning assets

112,365

7,031

8.36%

119,187

5,463

6.13%

Total interest-earning assets

20,695,792

997,928

6.44%

21,028,117

1,021,445

6.49%

Non-interest-earning assets

487,991

537,160

Total assets

$

21,183,783

$

21,565,277

Liabilities

Interest checking accounts

$

5,682,240

$

191,132

4.49%

$

6,181,097

$

178,984

3.87%

Money market deposit accounts

3,419,880

117,106

4.57%

2,208,853

63,444

3.84%

Other savings accounts

1,708,625

61,008

4.77%

966,539

27,707

3.83%

Certificates of deposit

2,374,982

89,092

5.01%

4,663,548

155,995

4.47%

Total interest-bearing deposits (5)

13,185,727

458,338

4.64%

14,020,037

426,130

4.06%

Federal funds purchased

—

—

—%

5,055

188

4.97%

Borrowings

1,431,520

53,007

4.95%

2,160,332

80,184

4.96%

Total interest-bearing liabilities

14,617,247

511,345

4.67%

16,185,424

506,502

4.18%

Non-interest-bearing deposits (5)

4,626,580

3,642,832

Total deposits and borrowings

19,243,827

3.55%

19,828,256

3.42%

Other non-interest-bearing liabilities

221,278

271,387

Total liabilities

19,465,105

20,099,643

Shareholders’ equity

1,718,678

1,465,634

Total liabilities and shareholders’ equity

$

21,183,783

$

21,565,277

Net interest income

486,583

514,943

Tax-equivalent adjustment

1,179

1,170

Net interest earnings

$

487,762

$

516,113

Interest spread

2.89%

3.08%

Net interest margin

3.15%

3.27%

Net interest margin tax equivalent (6)

3.16%

3.28%

(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 PPP loans.

(4) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.

(5) Total costs of deposits (including interest bearing and non-interest bearing) were 3.44% and 3.23% for the nine months ended September 30, 2024 and 2023, respectively.

(6) Tax-equivalent basis, using an estimated marginal tax rate of 26% for the nine months ended September 30, 2024 and 2023, presented to approximate interest income as a taxable asset.

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,

2024

2024

2024

2023

2023

Loans and leases held for investment

Commercial:

Commercial & industrial:

Specialized lending

$

5,468,507

$

5,528,745

$

5,104,405

$

5,006,693

$

5,422,161

Other commercial & industrial (1)

1,087,222

1,092,146

1,113,517

1,162,317

1,252,427

Mortgage finance

1,367,617

1,122,812

1,071,146

1,014,742

1,042,549

Multifamily

2,115,978

2,067,332

2,123,675

2,138,622

2,130,213

Commercial real estate owner occupied

981,904

805,779

806,278

797,319

794,815

Commercial real estate non-owner occupied

1,326,591

1,202,606

1,182,084

1,177,650

1,178,203

Construction

174,509

163,409

185,601

166,393

252,588

Total commercial loans and leases

12,522,328

11,982,829

11,586,706

11,463,736

12,072,956

Consumer:

Residential

500,786

481,503

482,537

484,435

483,133

Manufactured housing

34,481

35,901

37,382

38,670

40,129

Installment:

Personal

453,739

474,481

492,892

555,533

629,843

Other

266,362

282,201

299,714

319,393

337,053

Total installment loans

720,101

756,682

792,606

874,926

966,896

Total consumer loans

1,255,368

1,274,086

1,312,525

1,398,031

1,490,158

Total loans and leases held for investment

$

13,777,696

$

13,256,915

$

12,899,231

$

12,861,767

$

13,563,114

Loans held for sale

Residential

$

2,523

$

2,684

$

870

$

1,215

$

1,005

Installment:

Personal

55,799

125,598

137,755

151,040

124,848

Other

217,098

247,442

219,015

188,062

24,515

Total installment loans

272,897

373,040

356,770

339,102

149,363

Total loans held for sale

$

275,420

$

375,724

$

357,640

$

340,317

$

150,368

Total loans and leases portfolio

$

14,053,116

$

13,632,639

$

13,256,871

$

13,202,084

$

13,713,482

(1) Includes PPP loans.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

PERIOD END DEPOSIT COMPOSITION - UNAUDITED

(Dollars in thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2024

2024

2024

2023

2023

Demand, non-interest bearing

$

4,670,809

$

4,474,862

$

4,688,880

$

4,422,494

$

4,758,682

Demand, interest bearing

5,606,500

5,894,056

5,661,775

5,580,527

5,824,410

Total demand deposits

10,277,309

10,368,918

10,350,655

10,003,021

10,583,092

Savings

1,399,968

1,573,661

2,080,374

1,402,941

1,118,353

Money market

3,961,028

3,539,815

3,347,843

3,226,395

2,499,593

Time deposits

2,431,084

2,195,699

2,182,511

3,287,879

3,994,326

Total deposits

$

18,069,389

$

17,678,093

$

17,961,383

$

17,920,236

$

18,195,364

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY - UNAUDITED

(Dollars in thousands)

As of September 30, 2024

As of June 30, 2024

As of September 30, 2023

Loan type

Total loans

Allowance

for credit

losses

Total

reserves to

total loans

Total loans

Allowance

for credit

losses

Total

reserves to

total loans

Total loans

Allowance

for credit

losses

Total

reserves to

total loans

Commercial:

Commercial & industrial, including specialized lending (1)

$

6,672,933

$

25,191

0.38

%

$

6,740,992

$

23,721

0.35

%

$

6,754,571

$

24,986

0.37

%

Multifamily

2,115,978

18,090

0.85

%

2,067,332

20,652

1.00

%

2,130,213

15,870

0.74

%

Commercial real estate owner occupied

981,904

10,913

1.11

%

805,779

8,431

1.05

%

794,815

10,363

1.30

%

Commercial real estate non-owner occupied

1,326,591

17,303

1.30

%

1,202,606

17,966

1.49

%

1,178,203

15,819

1.34

%

Construction

174,509

1,606

0.92

%

163,409

1,856

1.14

%

252,588

3,130

1.24

%

Total commercial loans and leases receivable

11,271,915

73,103

0.65

%

10,980,118

72,626

0.66

%

11,110,390

70,168

0.63

%

Consumer:

Residential

500,786

5,838

1.17

%

481,503

5,884

1.22

%

483,133

6,802

1.41

%

Manufactured housing

34,481

4,080

11.83

%

35,901

4,094

11.40

%

40,129

4,080

10.17

%

Installment

720,101

50,137

6.96

%

756,682

49,832

6.59

%

966,896

58,163

6.02

%

Total consumer loans receivable

1,255,368

60,055

4.78

%

1,274,086

59,810

4.69

%

1,490,158

69,045

4.63

%

Loans and leases receivable held for investment

12,527,283

133,158

1.06

%

12,254,204

132,436

1.08

%

12,600,548

139,213

1.10

%

Loans receivable, mortgage finance, at fair value

1,250,413

—

—

%

1,002,711

—

—

%

962,566

—

—

%

Loans held for sale

275,420

—

—

%

375,724

—

—

%

150,368

—

—

%

Total loans and leases portfolio

$

14,053,116

$

133,158

0.95

%

$

13,632,639

$

132,436

0.97

%

$

13,713,482

$

139,213

1.02

%

(1) Includes PPP loans.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY - UNAUDITED

(Dollars in thousands)

As of September 30, 2024

As of June 30, 2024

As of September 30, 2023

Loan type

Non accrual

/NPLs

Total NPLs

to total

loans

Total

reserves to

total NPLs

Non accrual

/NPLs

Total NPLs

to total

loans

Total

reserves to

total NPLs

Non accrual

/NPLs

Total NPLs

to total

loans

Total

reserves to

total NPLs

Commercial:

Commercial & industrial, including specialized lending (1)

$

4,615

0.07

%

545.85

%

$

5,488

0.08

%

432.23

%

$

5,767

0.09

%

433.26

%

Multifamily

11,834

0.56

%

152.86

%

14,002

0.68

%

147.49

%

—

—

%

—

%

Commercial real estate owner occupied

8,613

0.88

%

126.70

%

9,612

1.19

%

87.71

%

7,442

0.94

%

139.25

%

Commercial real estate non-owner occupied

763

0.06

%

2267.76

%

62

0.01

%

28977.42

%

—

—

%

—

%

Construction

—

—

%

—

%

—

—

%

—

%

—

—

%

—

%

Total commercial loans and leases receivable

25,825

0.23

%

283.07

%

29,164

0.27

%

249.03

%

13,209

0.12

%

531.21

%

Consumer:

Residential

7,997

1.60

%

73.00

%

8,179

1.70

%

71.94

%

6,559

1.36

%

103.70

%

Manufactured housing

1,869

5.42

%

218.30

%

2,047

5.70

%

200.00

%

2,582

6.43

%

158.02

%

Installment

6,328

0.88

%

792.30

%

5,614

0.74

%

887.64

%

7,299

0.75

%

796.86

%

Total consumer loans receivable

16,194

1.29

%

370.85

%

15,840

1.24

%

377.59

%

16,440

1.10

%

419.98

%

Loans and leases receivable

42,019

0.34

%

316.90

%

45,004

0.37

%

294.28

%

29,649

0.24

%

469.54

%

Loans receivable, mortgage finance, at fair value

—

—

%

—

%

—

—

%

—

%

—

—

%

—

%

Loans held for sale

5,307

1.93

%

—

%

2,376

0.63

%

—

%

218

0.14

%

—

%

Total loans and leases portfolio

$

47,326

0.34

%

281.36

%

$

47,380

0.35

%

279.52

%

$

29,867

0.22

%

466.11

%

(1) Includes PPP loans.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED

(Dollars in thousands)

Q3

Q2

Q1

Q4

Q3

Nine Months Ended

September 30,

2024

2024

2024

2023

2023

2024

2023

Loan type

Commercial & industrial, including specialized lending

$

5,056

$

5,665

$

3,672

$

5,282

$

2,974

$

14,393

$

3,161

Multifamily

2,167

1,433

473

127

1,999

4,073

3,447

Commercial real estate owner occupied

4

—

22

—

39

26

5

Commercial real estate non-owner occupied

—

—

—

(288

)

—

—

4,500

Construction

(3

)

(7

)

—

—

—

(10

)

(116

)

Residential

(21

)

(20

)

18

(1

)

13

(23

)

35

Installment

9,841

11,640

13,783

12,202

12,473

35,264

40,681

Total net charge-offs (recoveries) from loans held for investment

$

17,044

$

18,711

$

17,968

$

17,322

$

17,498

$

53,723

$

51,713

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 and Adjusted Core Earnings - Customers Bancorp

Nine Months Ended

September 30,

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

(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

$

42,937

$

1.31

$

54,300

$

1.66

$

45,926

$

1.40

$

58,223

$

1.79

$

82,953

$

2.58

$

143,163

$

4.37

$

177,225

$

5.53

Reconciling items (after tax):

Severance expense

540

0.02

1,928

0.06

—

—

473

0.01

—

—

2,468

0.08

778

0.02

Impairments on fixed assets and leases

—

—

—

—

—

—

—

—

—

—

—

—

98

0.00

Loss on sale of capital call lines of credit

—

—

—

—

—

—

—

—

—

—

—

—

3,914

0.12

(Gains) losses on investment securities

(322

)

(0.01

)

561

0.02

57

0.00

(85

)

0.00

492

0.02

296

0.01

492

0.02

Derivative credit valuation adjustment

185

0.01

(44

)

0.00

169

0.01

267

0.01

(151

)

0.00

310

0.01

(48

)

0.00

Tax on surrender of bank-owned life insurance policies

—

—

—

—

—

—

—

—

—

—

—

—

4,141

0.13

FDIC special assessment

—

—

138

0.00

380

0.01

2,755

0.08

—

—

518

0.02

—

—

Unrealized (gain) on equity method investments

—

—

(8,316

)

(0.25

)

—

—

—

—

—

—

(8,316

)

(0.25

)

—

—

Unrealized losses on loans held for sale

498

0.02

—

—

—

—

—

—

—

—

498

0.02

—

—

Core earnings

$

43,838

$

1.34

$

48,567

$

1.49

$

46,532

$

1.42

$

61,633

$

1.90

$

83,294

$

2.59

$

138,937

$

4.24

$

186,600

$

5.82

One-time non-interest expense items recorded in 2024 (after-tax):

Deposit servicing fees prior to 2024

—

—

—

—

5,405

0.16

—

—

—

—

5,405

0.16

—

—

FDIC premiums prior to 2024

—

—

—

—

3,200

0.10

—

—

—

—

3,200

0.10

—

—

Non-income taxes prior to 2024

(2,457

)

(0.07

)

—

—

—

—

—

—

—

—

(2,457

)

(0.07

)

—

—

Total one-time non-interest expense items

(2,457

)

(0.07

)

—

—

8,605

0.26

—

—

—

—

6,148

0.19

—

—

Adjusted core earnings (adjusted for one-time non-interest expense items)

$

41,381

$

1.26

$

48,567

$

1.49

$

55,137

$

1.68

$

61,633

$

1.90

$

83,294

$

2.59

$

145,085

$

4.43

$

186,600

$

5.82

Core Return on Average Assets and Adjusted Core Return on Average Assets - Customers Bancorp

Nine Months Ended

September 30,

(Dollars in thousands, except per share data)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

GAAP net income

$

46,743

$

58,085

$

49,726

$

62,092

$

86,756

$

154,554

$

188,051

Reconciling items (after tax):

Severance expense

540

1,928

—

473

—

2,468

778

Impairments on fixed assets and leases

—

—

—

—

—

—

98

Loss on sale of capital call lines of credit

—

—

—

—

—

—

3,914

(Gains) losses on investment securities

(322

)

561

57

(85

)

492

296

492

Derivative credit valuation adjustment

185

(44

)

169

267

(151

)

310

(48

)

Tax on surrender of bank-owned life insurance policies

—

—

—

—

—

—

4,141

FDIC special assessment

—

138

380

2,755

—

518

—

Unrealized (gain) on equity method investments

—

(8,316

)

—

—

—

(8,316

)

—

Unrealized losses on loans held for sale

498

—

—

—

—

498

—

Core net income

$

47,644

$

52,352

$

50,332

$

65,502

$

87,097

$

150,328

$

197,426

One-time non-interest expense items recorded in 2024 (after-tax):

Deposit servicing fees prior to 2024

—

—

5,405

—

—

5,405

—

FDIC premiums prior to 2024

—

—

3,200

—

—

3,200

—

Non-income taxes prior to 2024

(2,457

)

—

—

—

—

(2,457

)

—

Total one-time non-interest expense items

(2,457

)

—

8,605

—

—

6,148

—

Adjusted core net income (adjusted for one-time non-interest expense items)

$

45,187

$

52,352

$

58,937

$

65,502

$

87,097

$

156,476

$

197,426

Average total assets

$

21,230,404

$

20,985,203

$

21,335,229

$

21,252,273

$

21,978,010

$

21,183,783

$

21,565,277

Core return on average assets

0.89

%

1.00

%

0.95

%

1.22

%

1.57

%

0.95

%

1.22

%

Adjusted core return on average assets (adjusted for one-time non-interest expense items)

0.85

%

1.00

%

1.11

%

1.22

%

1.57

%

0.99

%

1.22

%

Core Pre-Tax Pre-Provision Net Income and ROAA and Adjusted Core Pre-Tax Pre-Provision Net Income and ROAA - Customers Bancorp

Nine Months Ended

September 30,

(Dollars in thousands, except per share data)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

GAAP net income

$

46,743

$

58,085

$

49,726

$

62,092

$

86,756

$

154,554

$

188,051

Reconciling items:

Income tax expense (benefit)

(725

)

19,032

15,651

21,796

23,470

33,958

58,801

Provision (benefit) for credit losses

17,066

18,121

17,070

13,523

17,856

52,257

61,088

Provision (benefit) for credit losses on unfunded commitments

642

1,594

430

(136

)

48

2,666

24

Severance expense

659

2,560

—

639

—

3,219

991

Impairments on fixed assets and leases

—

—

—

—

—

—

124

Loss on sale of capital call lines of credit

—

—

—

—

—

—

5,037

(Gains) losses on investment securities

(394

)

744

75

(114

)

626

425

626

Derivative credit valuation adjustment

226

(58

)

222

361

(192

)

390

(63

)

FDIC special assessment

—

183

500

3,723

—

683

—

Unrealized (gain) on equity method investments

—

(11,041

)

—

—

—

(11,041

)

—

Unrealized losses on loans held for sale

607

—

—

—

—

607

—

Core pre-tax pre-provision net income

$

64,824

$

89,220

$

83,674

$

101,884

$

128,564

$

237,718

$

314,679

One-time non-interest expense items recorded in 2024 (after-tax):

Deposit servicing fees prior to 2024

—

—

7,106

—

—

7,106

—

FDIC premiums prior to 2024

—

—

4,208

—

—

4,208

—

Non-income taxes prior to 2024

(2,997

)

—

—

—

—

(2,997

)

—

Total one-time non-interest expense items

(2,997

)

—

11,314

—

—

8,317

—

Adjusted core pre-tax pre-provision net income (adjusted for one-time non-interest expense items)

$

61,827

$

89,220

$

94,988

$

101,884

$

128,564

$

246,035

$

314,679

Average total assets

$

21,230,404

$

20,985,203

$

21,335,229

$

21,252,273

$

21,978,010

$

21,183,783

$

21,565,277

Core pre-tax pre-provision ROAA

1.21

%

1.71

%

1.58

%

1.90

%

2.32

%

1.50

%

1.95

%

Adjusted core pre-tax pre-provision ROAA (adjusted for one-time non-interest expense items)

1.16

%

1.71

%

1.79

%

1.90

%

2.32

%

1.55

%

1.95

%

Core Return on Average Common Equity and Adjusted Core Return on Average Common Equity - Customers Bancorp

Nine Months Ended

September 30,

(Dollars in thousands, except per share data)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

GAAP net income to common shareholders

$

42,937

$

54,300

$

45,926

$

58,223

$

82,953

$

143,163

$

177,225

Reconciling items (after tax):

Severance expense

540

1,928

—

473

—

2,468

778

Impairments on fixed assets and leases

—

—

—

—

—

—

98

Loss on sale of capital call lines of credit

—

—

—

—

—

—

3,914

(Gains) losses on investment securities

(322

)

561

57

(85

)

492

296

492

Derivative credit valuation adjustment

185

(44

)

169

267

(151

)

310

(48

)

Tax on surrender of bank-owned life insurance policies

—

—

—

—

—

—

4,141

FDIC special assessment

—

138

380

2,755

—

518

—

Unrealized (gain) on equity method investments

—

(8,316

)

—

—

—

(8,316

)

—

Unrealized losses on loans held for sale

498

—

—

—

—

498

—

Core earnings

$

43,838

$

48,567

$

46,532

$

61,633

$

83,294

$

138,937

$

186,600

One-time non-interest expense items recorded in 2024 (after-tax):

Deposit servicing fees prior to 2024

—

—

5,405

—

—

5,405

—

FDIC premiums prior to 2024

—

—

3,200

—

—

3,200

—

Non-income taxes prior to 2024

(2,457

)

—

—

—

—

(2,457

)

—

Total one-time non-interest expense items

(2,457

)

—

8,605

—

—

6,148

—

Adjusted core earnings (adjusted for one-time non-interest expense items)

$

41,381

$

48,567

$

55,137

$

61,633

$

83,294

$

145,085

$

186,600

Average total common shareholders’ equity

$

1,636,242

$

1,576,595

$

1,529,211

$

1,449,728

$

1,373,244

$

1,580,885

$

1,327,841

Core return on average common equity

10.66

%

12.39

%

12.24

%

16.87

%

24.06

%

11.74

%

18.79

%

Adjusted core return on average common equity (adjusted for one-time non-interest expense items)

10.06

%

12.39

%

14.50

%

16.87

%

24.06

%

12.26

%

18.79

%

Core Pre-Tax Pre-Provision ROCE and Adjusted Core Pre-Tax Pre-Provision ROCE - Customers Bancorp

Nine Months Ended

September 30,

(Dollars in thousands, except per share data)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

GAAP net income to common shareholders

$

42,937

$

54,300

$

45,926

$

58,223

$

82,953

$

143,163

$

177,225

Reconciling items:

Income tax expense (benefit)

(725

)

19,032

15,651

21,796

23,470

33,958

58,801

Provision (benefit) for credit losses

17,066

18,121

17,070

13,523

17,856

52,257

61,088

Provision (benefit) for credit losses on unfunded commitments

642

1,594

430

(136

)

48

2,666

24

Severance expense

659

2,560

—

639

—

3,219

991

Impairments on fixed assets and leases

—

—

—

—

—

—

124

Loss on sale of capital call lines of credit

—

—

—

—

—

—

5,037

(Gains) losses on investment securities

(394

)

744

75

(114

)

626

425

626

Derivative credit valuation adjustment

226

(58

)

222

361

(192

)

390

(63

)

FDIC special assessment

—

183

500

3,723

—

683

—

Unrealized (gain) on equity method investments

—

(11,041

)

—

—

—

(11,041

)

—

Unrealized losses on loans held for sale

607

—

—

—

—

607

—

Core pre-tax pre-provision net income available to common shareholders

$

61,018

$

85,435

$

79,874

$

98,015

$

124,761

$

226,327

$

303,853

One-time non-interest expense items recorded in 2024 (after-tax):

Deposit servicing fees prior to 2024

—

—

7,106

—

—

7,106

—

FDIC premiums prior to 2024

—

—

4,208

—

—

4,208

—

Non-income taxes prior to 2024

(2,997

)

—

—

—

—

(2,997

)

—

Total one-time non-interest expense items

(2,997

)

—

11,314

—

—

8,317

—

Adjusted core pre-tax pre-provision net income available to common shareholders

$

58,021

$

85,435

$

91,188

$

98,015

$

124,761

$

234,644

$

303,853

Average total common shareholders’ equity

$

1,636,242

$

1,576,595

$

1,529,211

$

1,449,728

$

1,373,244

$

1,580,885

$

1,327,841

Core pre-tax pre-provision ROCE

14.84

%

21.79

%

21.01

%

26.82

%

36.04

%

19.12

%

30.59

%

Adjusted core pre-tax pre-provision ROCE (adjusted for one-time non-interest expense items)

14.11

%

21.79

%

23.98

%

26.82

%

36.04

%

19.83

%

30.59

%

Core Efficiency Ratio and Adjusted Core Efficiency Ratio - Customers Bancorp

Nine Months Ended

September 30,

(Dollars in thousands, except per share data)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

GAAP net interest income

$

158,545

$

167,653

$

160,385

$

172,506

$

199,773

$

486,583

$

514,943

GAAP non-interest income

$

8,557

$

31,037

$

21,231

$

18,672

$

17,775

$

60,825

$

51,893

Loss on sale of capital call lines of credit

—

—

—

—

—

—

5,037

(Gains) losses on investment securities

(394

)

744

75

(114

)

626

425

626

Derivative credit valuation adjustment

226

(58

)

222

361

(192

)

390

(63

)

Unrealized (gain) on equity method investments

—

(11,041

)

—

—

—

(11,041

)

—

Unrealized losses on loans held for sale

607

—

—

—

—

607

—

Core non-interest income

8,996

20,682

21,528

18,919

18,209

51,206

57,493

Core revenue

$

167,541

$

188,335

$

181,913

$

191,425

$

217,982

$

537,789

$

572,436

GAAP non-interest expense

$

104,018

$

103,452

$

99,169

$

93,767

$

89,466

$

306,639

$

258,896

Severance expense

(659

)

(2,560

)

—

(639

)

—

(3,219

)

(991

)

Impairments on fixed assets and leases

—

—

—

—

—

—

(124

)

FDIC special assessment

—

(183

)

(500

)

(3,723

)

—

(683

)

—

Core non-interest expense

$

103,359

$

100,709

$

98,669

$

89,405

$

89,466

$

302,737

$

257,781

One-time non-interest expense items recorded in 2024:

Deposit servicing fees prior to 2024

—

—

(7,106

)

—

—

(7,106

)

—

FDIC premiums prior to 2024

—

—

(4,208

)

—

—

(4,208

)

—

Non-income taxes prior to 2024

2,997

—

—

—

—

2,997

—

Total one-time non-interest expense items

2,997

—

(11,314

)

—

—

(8,317

)

—

Adjusted core non-interest expense

$

106,356

$

100,709

$

87,355

$

89,405

$

89,466

$

294,420

$

257,781

Core efficiency ratio (1)

61.69

%

53.47

%

54.24

%

46.70

%

41.04

%

56.29

%

45.03

%

Adjusted core efficiency ratio (adjusted for one-time non-interest expense items) (2)

63.48

%

53.47

%

48.02

%

46.70

%

41.04

%

54.75

%

45.03

%

(1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.

(2) Adjusted core efficiency ratio calculated as adjusted core non-interest expense divided by core revenue.

Core Non-Interest Expense to Average Total Assets and Adjusted Core Non-Interest Expense to Average Total Assets- Customers Bancorp

Nine Months Ended

September 30,

(Dollars in thousands, except per share data)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

2024

2023

GAAP non-interest expense

$

104,018

$

103,452

$

99,169

$

93,767

$

89,466

$

306,639

$

258,896

Severance expense

(659

)

(2,560

)

—

(639

)

—

(3,219

)

(991

)

Impairments on fixed assets and leases

—

—

—

—

—

—

(124

)

FDIC special assessment

—

(183

)

(500

)

(3,723

)

—

(683

)

—

Core non-interest expense

$

103,359

$

100,709

$

98,669

$

89,405

$

89,466

$

302,737

$

257,781

One-time non-interest expense items recorded in 2024:

Deposit servicing fees prior to 2024

—

—

(7,106

)

—

—

(7,106

)

—

FDIC premiums prior to 2024

—

—

(4,208

)

—

—

(4,208

)

—

Non-income taxes prior to 2024

2,997

—

—

—

—

2,997

—

Total one-time non-interest expense items

2,997

—

(11,314

)

—

—

(8,317

)

—

Adjusted core non-interest expense

$

106,356

$

100,709

$

87,355

$

89,405

$

89,466

$

294,420

$

257,781

Average total assets

$

21,230,404

$

20,985,203

$

21,335,229

$

21,252,273

$

21,978,010

$

21,183,783

$

21,565,277

Core non-interest expense to average total assets

1.94

%

1.93

%

1.86

%

1.67

%

1.62

%

1.91

%

1.60

%

Adjusted core non-interest expense to average total assets (adjusted for one-time non-interest expense items)

1.99

%

1.93

%

1.65

%

1.67

%

1.62

%

1.86

%

1.60

%

Business Unit Deposits (formerly, Core Deposits, Total Deposits, excluding Wholesale CDs and BMTX student deposits) - Customers Bancorp

(Dollars in thousands, except per share data)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

Total deposits

$

18,069,389

$

17,678,093

$

17,961,383

$

17,920,236

$

18,195,364

Reconciling items:

Wholesale CDs

1,585,081

1,545,885

1,809,573

2,970,615

3,713,933

BMTX student deposits

—

—

850

1,157

636,951

Business Unit Deposits (formerly, Core Deposits, Total deposits, excluding wholesale CDs and BMTX student deposits)

$

16,484,308

$

16,132,208

$

16,150,960

$

14,948,464

$

13,844,480

Tangible Common Equity to Tangible Assets - Customers Bancorp

(Dollars in thousands, except per share data)

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

GAAP total shareholders’ equity

$

1,801,180

$

1,746,865

$

1,691,617

$

1,638,394

$

1,561,607

Reconciling items:

Preferred stock

(137,794

)

(137,794

)

(137,794

)

(137,794

)

(137,794

)

Goodwill and other intangibles

(3,629

)

(3,629

)

(3,629

)

(3,629

)

(3,629

)

Tangible common equity

$

1,659,757

$

1,605,442

$

1,550,194

$

1,496,971

$

1,420,184

GAAP total assets

$

21,456,082

$

20,942,975

$

21,347,367

$

21,316,265

$

21,857,152

Reconciling items:

Goodwill and other intangibles

(3,629

)

(3,629

)

(3,629

)

(3,629

)

(3,629

)

Tangible assets

$

21,452,453

$

20,939,346

$

21,343,738

$

21,312,636

$

21,853,523

Tangible common equity to tangible assets

7.7

%

7.7

%

7.3

%

7.0

%

6.5

%

Tangible Book Value per Common Share - Customers Bancorp

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

Q3 2024

Q2 2024

Q1 2024

Q4 2023

Q3 2023

GAAP total shareholders’ equity

$

1,801,180

$

1,746,865

$

1,691,617

$

1,638,394

$

1,561,607

Reconciling Items:

Preferred stock

(137,794

)

(137,794

)

(137,794

)

(137,794

)

(137,794

)

Goodwill and other intangibles

(3,629

)

(3,629

)

(3,629

)

(3,629

)

(3,629

)

Tangible common equity

$

1,659,757

$

1,605,442

$

1,550,194

$

1,496,971

$

1,420,184

Common shares outstanding

31,342,107

31,667,655

31,521,931

31,440,906

31,311,254

Tangible book value per common share

$

52.96

$

50.70

$

49.18

$

47.61

$

45.36

Jordan Baucum, Head of Corporate Communications 951-608-8314

Source: Customers Bancorp, Inc.

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