Customers Bancorp Announces Operating Results for Q3 2012 - Net income of $6.6 million for the third quarter of 2012 increased 183% over the third quarter of 2011.

- EPS increased 122% for the third quarter of 2012 as compared to the same quarter of 2011.

- ROA of 1.06% for the third quarter of 2012 versus 0.56% for the third quarter of 2011. ROE of 14.81% during Q3 2012 versus 6.40% during Q3 2011.

- Demand deposits grew 82% over Q3 2011 while total deposits grew 49% over Q3 2011.

- Total loans increased 87% over Q3 2011.

- The Bancorp raised approximately $100 million of common equity during the third quarter of 2012, increasing Tier 1 Leverage to 10.29% and Tier 1 Risk Based Capital to 12.17%.

WYOMISSING, Pa., Oct. 26, 2012 /PRNewswire/ -- Customers Bancorp, Inc., the parent company of Customers Bank, announced earnings and operating results for the third quarter of 2012.

"We are very pleased to report that our earnings, capital and profitability ratios improved dramatically," stated Jay Sidhu, Chairman and CEO of Customers Bancorp, Inc.  "The bank experienced strong loan demand which generated significant growth in revenue during the quarter and we remain hopeful that these trends will continue into the fourth quarter.  In addition, we announced a goal to raise $50 million of equity capital but upsized the offering to $100 million based upon strong investor demand."  James Hogan, Chief Financial Officer of Customers Bancorp, Inc. stated, "We are committed to maintaining a strong balance sheet so this offering made sense given the investor demand for our stock."

Estimates of cash flows from purchased credit-impaired ("PCI") loans were revised during the third quarter of 2012 due to conversion to a more sophisticated and precise loan valuation system. In accordance with the guidance in ASC 310-30, Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality (formerly SOP 03-3), interest income is based on an acquired loan's expected cash flows.  Complex models are needed to calculate loan-level and/or pool level expected cash flows in accordance with ASC 310-30.  The loan data analysis provided by the new software is a more precise quantification of future cash flows than the analysis that was previously conservatively calculated manually.  Conversion to the new system was completed in September 2012, and as a result the estimates of cash flows from PCI loans were revised.  These changes in estimates were calculated based on acquisition date loan balances and are accounted for prospectively as a change in accounting estimate.  In the third quarter of 2012, approximately $4.4 million was recognized in Other non-interest income related to this change.

Also during the third quarter of 2012, we performed an initial re-estimation of the cash flows for the PCI loans.  The re-estimation process updates existing loan data for current loan assumptions.  As a result of the initial re-estimation an increase of $4.5 million was recorded to Interest income.  As required by ASC 310-30, the recorded loan balance included accrued interest receivable.  Due to the higher loan balance, we evaluated the adequacy of the allowance for loan losses and determined that an additional provision for loan losses of $5.7 million was appropriate.

"In the future, we will re-estimate the cash flows on the PCI loans on a quarterly basis, and adjustments, if any, are not expected to have a material impact on future earnings," commented Hogan.

As a result of common stock private offerings during the quarter, Customers Bancorp issued twice the amount of shares that were anticipated, resulting in a reduction of diluted EPS of $0.03 for the quarter.

Despite this dilution due to holding excess capital on the balance sheet and excluding the impacts of the conversion to the new system and the initial re-estimation of the cash flows on the PCI loans, operating net income for the quarter was $4.6 million and diluted earnings per share were $0.35.  "These normalized results are consistent with the guidance provided by the Company in late August 2012," Hogan commented.

During the third quarter of 2012, we elected the fair value option for certain warehouse lending transactions originated after July 1, 2012.  We made this election in order to more accurately represent the short term nature of the transaction and its inherent credit risk.  This adoption is in accordance with the parameters established by ASC 825-10-25, Financial Instruments-Overall-Recognition: The Fair Value Option (formerly FASB Statement No. 159).  As a result of this election, the warehouse lending transactions were reclassified from "Loans receivable, net" to "Loans held for sale" on the balance sheet.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES





FINANCIAL SUMMARY - UNAUDITED





(Dollar amounts in thousands, except per share data)










Q3 2012

Q3 2011


% Change

 Net income available to common shareholders 

$      6,637

$      2,340


184%

 Diluted earnings per share 

$        0.51

$        0.23


122%

 Return on average assets 

1.06%

0.56%


89%

 Return on average equity 

14.81%

6.40%


131%

 Diluted shares 

12,890

10,094


28%


Third Quarter Results

Third quarter 2012 net income improved to $6.6 million or $0.51 cents per share, compared to $2.3 million or $0.23 cents per share for the third quarter of 2011.   This increase resulted from strong growth in revenues related to loan growth, the conversion to a more sophisticated and precise loan valuation system and the initial re-estimation of the cash flow's on the PCI loans. Offsetting this growth in revenue was the additional provision of $5.7 million needed to reflect the initial re-estimation of the cash flows for the PCI loans. 

For the nine months ended September 30, 2012, net income was $16.3 million or $1.35 per fully diluted share, compared to a net income of $0.8 million or $0.08 per share for the same period in 2011.

Net Interest Income

Net interest income was $22.6 million for the third quarter of 2012 compared to $9.7 million for the third quarter of 2011. Net interest margin increased 90 basis points to 3.81% in the third quarter of 2012 from 2.91% in the second quarter of 2012. Increases in net interest income and margin were related to growth in the loan portfolio and revenue related to the cash flow re-estimation process for the PCI loans, offset by lower investment portfolio revenue as a result of the sales of securities in the second quarter of 2012.  Funding mix between deposits and other borrowings is also contributing to the net interest margin improvement.

Loan Growth

Total loans increased by $1.1 billion to $2.3 billion in the third quarter of 2012 compared to $1.2 billion in the third quarter of 2011.  Total net loans increased by $332 million or 17% over second quarter 2012.  This was primarily driven by the growth in low risk mortgage loans held for sale of $112 million, multifamily loan growth of $90 million, consumer loan growth of $78 million and commercial loan growth of $61 million.

Deposit Growth

The average cost of deposits fell 54 basis points for the third quarter of 2012 as compared to the third quarter of 2011.  Total deposits grew by $766.6 million in the past 12 months to $2.3 billion at September 30, 2012. Non-interest bearing demand deposits at September 30, 2012 were $213.2 million up from $110.5 million at September 30, 2011.  Total deposits grew by $418.3 million in the third quarter of 2012 as the average cost of deposits dropped to 97 basis points.

Asset Quality

Total non-performing loans in the originated loan portfolio fell by $4.0 million to $20.9 million at September 30, 2012, compared to the same time last year.  Total non-performing loans in the covered portfolio increased by $2.4 million to $51.2 million at September 30, 2012.  Other real estate owned declined to $1.6 million at September 30, 2012 from $3.1 million at September 30, 2011.

Provision for loan loss in the third quarter of 2012 was $10.1 million, an increase of $9.2 million over the third quarter of 2011, of which $5.7 million is related to the cash flow re-estimation process for the PCI loans and $1.3 million is related to growth in the loan portfolios.

Non-Interest Income

Non-interest income for the third quarter of 2012 increased $6.5 million over the third quarter of 2011 to $9.8 million.  This increase was primarily from increased mortgage warehouse lending fees related to strong loan growth, increased FDIC indemnification accretion revenue and other fees related to the cash flow re-estimation process for the PCI.  The bank has no income from mortgage banking operations.

Non-Interest Expense

Non-interest expense for the third quarter of 2012 was up $3.3 million over the third quarter of 2011 to $12.0 million. Increased spending is related to building the staffing and technology infrastructure needed to support the strong loan growth along with absorbing costs related to the Berkshire acquisition late in the third quarter of 2011.

Equity

As a result of two common stock private offerings, total equity for the third quarter of 2012 increased by $102.8 million over the second quarter of 2012 to $261.5 million.  In the first private offering, which took place in July and August 2012, $15 million was raised.  In the second private offering $85 million was raised for a total of $100 million.  The proceeds of the private offerings will be used to support organic growth and other general corporate purposes. At September 30, 2012, the company had 18.5 million shares outstanding, up from 11.4 million shares at September 30, 2011.

About Customers Bancorp, Inc. and Customers Bank

Customers Bancorp, Inc. is a bank holding company for Customers Bank based in Wyomissing, Pennsylvania. Customers Bank is a state-chartered, full-service bank headquartered in Phoenixville, Pennsylvania.  Customers Bank is a member of the Federal Reserve System and is insured by the Federal Deposit Insurance Corporation ("FDIC").  With assets of approximately $2.7 billion at September 30, 2012, Customers Bank provides a full range of banking services to small and medium-sized businesses, professionals, individuals and families through branch locations in Pennsylvania, New York and New Jersey.  Customers Bancorp, Inc. has two pending acquisitions, CMS Bancorp, Inc. in White Plains, NY and Acacia Federal Savings Bank in Falls Church, VA.  Customers Bank is focused on serving its targeted markets with a growth strategy that includes strategically placed branches throughout its market area and continually expanding its portfolio of loans to small businesses, multi-family projects, mortgage companies and consumers.

"Safe Harbor" Statement

In addition to historical information, this press release may contain "forward-looking statements" which are made in good faith by Customers Bancorp, Inc., pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended.  These forward-looking statements include statements with respect to Customers Bancorp, Inc.'s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, and financial condition, 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," 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 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.  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 that 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, as well as any changes in risk factors that may be identified in its quarterly or other reports filed with the SEC.  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.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES








CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED








(Dollar amounts in thousands, except per share data)









 

Three Months Ended September 30, 


Nine Months Ended September 30, 


2012


2011


2012


2011

Total interest income

$                    27,962


$                    15,359


$                    66,298


$                    41,806

Total interest expense

5,407


5,696


16,181


17,041

Net interest income

22,555


9,663


50,117


24,765

Provision for loan losses

10,116


900


14,654


6,550

Net interest income after provision for loan losses

12,439


8,763


35,463


18,215









Total non-interest income

9,767


3,242


26,795


9,082

Total non-interest expense

11,995


8,730


37,255


26,187

Income before tax expense

10,211


3,275


25,003


1,110

Income tax expense

3,574


930


8,751


299

Net income

 

6,637


2,345


16,252


811

Dividends on preferred stock

-


5


-


5

Net income available to common shareholders

$                      6,637


$                      2,340


$                    16,252


$                          806









 Basic earnings per share 

$                        0.53


$                        0.24


$                        1.39


$                        0.08

 Diluted earnings per share 

$                        0.51


$                        0.23


$                        1.35


$                        0.08

















CUSTOMERS BANCORP, INC. AND SUBSIDIARIES









CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED









(Dollar amounts in thousands)










Three Months Ended September 30, 



Nine Months Ended September 30, 


2012


2011



2012


2011

Non-interest income:









Deposit fees

$                         125


$                          114



$                          357


$                        313

Mortgage warehouse transactional fees

3,346


1,366



8,829


3,754

Bank owned life insurance

359


264



948


1,128

Gain on sale of investment securities

-


1,413



9,006


1,413

Gain (loss) on sale of assets

(71)


-



268


-

Accretion of fdic loss sharing receivable

1,296


-



1,951


1,709

Other non-interest income

4,712


85



5,436


765

Total non-interest income

$                      9,767


$                      3,242



$                    26,795


$                      9,082










Non-interest expense:









Salaries and employee benefits

$                      5,978


$                      3,752



$                    17,073


$                    11,840

Occupancy

1,709


1,022



4,937


3,012

Technology, communication and bank operations

698


485



2,037


1,312

Advertising and promotion

270


206



846


639

Professional services

819


1,234



2,474


3,963

FDIC assessments, taxes, and regulatory fees

669


373



2,205


1,626

Other real estate owned

(287)


102



587


390

Loan workout 

617


370



1,519


1,014

Merger related expenses

-


530



28


530

Other non-interest expense

1,522


656



5,549


1,861

Total non-interest expense

$                    11,995


$                      8,730



$                    37,255


$                    26,187

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES











CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED











(Dollar amounts in thousands, except per share data)













3Q 12


2Q 12


1Q 12


4Q 11


3Q 11

Total interest income


$           27,962


$           19,700


$           18,636


$           19,440


$           15,359

Total interest expense


5,407


5,548


5,226


5,422


5,696

Net interest income


22,555


14,152


13,410


14,018


9,663

Provision for loan losses


10,116


2,738


1,800


2,900


900

Net interest income after provision for loan losses


12,439


11,414


11,610


11,118


8,763

 

Total non-interest income


9,767


12,637


3,732


4,345


3,242

Total non-interest expense


11,995


13,973


10,627


10,704


8,730

Income before tax expense


10,211


10,078


4,715


4,759


3,275

Income tax expense


3,574


3,574


1,603


1,535


930

Net income


$             6,637


$             6,504


$             3,112


$             3,224


$             2,345

Dividends on preferred stock


-


-


-


39


5

Net income available to common shareholders


$             6,637


$             6,504


$             3,112


$             3,185


$             2,340












Diluted earnings per share


$               0.51


$               0.56


$               0.27


$               0.27


$               0.23

Diluted shares


12,890


11,639


11,626


11,647


10,094

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES











SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED











(Dollar amounts in thousands, except share data)













3Q 12


2Q 12


1Q 12


4Q 11


3Q 11

Total assets


$      2,654,091


$      2,284,141


$      1,975,592


$      2,077,532


$      1,862,671

 

Total loans receivable, net


1,062,125


1,634,752


1,296,463


1,326,361


998,973

Loans held for sale (a)


1,187,885


283,535


175,868


174,999


205,027

Investment securities


130,705


134,757


309,368


398,684


517,227

Cash and cash equivalents


157,510


122,052


90,824


73,570


52,830

 

Demand deposits, non-interest bearing


213,229


155,009


133,916


114,044


110,543

Demand deposits, interest bearing


42,616


34,913


33,075


37,044


29,965

Money market and savings


989,828


862,409


778,872


719,341


631,853

Certificates of deposit


1,102,511


877,532


858,737


712,760


809,245

Total deposits


2,348,184


1,929,863


1,804,600


1,583,189


1,581,606

Borrowings


38,000


185,000


13,000


338,000


123,000

 

Total shareholders' equity


261,502


158,716


151,308


147,748


149,666












Shares


18,460


11,348


11,348


11,348


11,395

Book value


$             14.17


$             13.99


$             13.33


$             13.02


$             13.13

Tangible book value with OCI


$             13.64


$             13.28


$             12.69


$             12.40


$             12.21












(a) including $1.1 billion of mortgage warehouse loans at fair value at 9/30/2012









CUSTOMERS BANCORP, INC. AND SUBSIDIARIES











SUMMARY OF LOAN LOSS EXPERIENCE- UNAUDITED











(Dollar amounts in thousands)













3Q 12


2Q 12


1Q 12


4Q 11


3Q 11

Allowance for loan losses:











Beginning balance


$         (16,118)


$         (15,400)


$         (15,032)


$         (14,025)


$         (13,946)

Charge-offs


1,417


2,106


1,472


1,910


905

Recoveries


(157)


(86)


(40)


(17)


(84)

Net charge-offs


1,260


2,020


1,432


1,893


821

Provision for loan losses


(10,116)


(2,738)


(1,800)


(2,900)


(900)

Ending balance


$         (24,974)


$         (16,118)


$         (15,400)


$         (15,032)


$         (14,025)












Cash reserves


4,092


5,045


6,095


6,534


7,330

Non-accretable difference


9,073


14,341


19,899


23,532


24,541












Allowance to loans


2.30%


0.98%


1.17%


1.12%


1.38%

Net charge offs to average loans


0.05%


0.10%


0.08%


0.10%


0.05%












Originated non-performing assets:    











Non accr - total loans


$           20,960


$           21,156


$           22,301


$           28,717


$           24,913

Other real estate owned


1,624


943


1,924


3,459


3,054

Total


$           22,584


$           22,099


$           24,225


$           32,176


$           27,967












Originated NPA / average assets


0.91%


1.06%


1.27%


1.67%


1.69%












Restructured loans


$             1,702


$             1,726


$             1,604


$             3,632


$             3,203

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES







SELECTED RATIOS - UNAUDITED







(Dollar amounts in thousands)









3Q 12

2Q 12

1Q 12

4Q 11

3Q 11

Net interest margin


3.81%

2.91%

3.00%

3.05%

2.48%

Return on average assets


1.06%

1.26%

0.66%

0.66%

0.56%

Return on average equity


14.81%

16.78%

8.36%

8.47%

6.40%

Non-interest income to earning assets


1.65%

2.71%

0.83%

0.95%

0.83%

Efficiency ratio


37.11%

78.45%

62.76%

62.36%

75.47%

Non-interest expense to earning assets


2.03%

2.98%

2.37%

2.34%

2.25%















Tangible Common Equity with OCI to Tangible Assets

*

9.73%

6.80%

7.49%

6.95%

7.69%

Tier 1 Risk Based Capital 

*

12.17%

9.16%

10.82%

10.01%

13.12%

Total Risk Based Capital

*

13.41%

10.19%

12.01%

11.13%

14.48%

Tier 1 Leverage

*

10.29%

7.45%

7.71%

7.37%

8.72%

* 3Q 12 estimates pending final CALL report







 

 

SOURCE Customers Bancorp, Inc.



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