Over the last decade, Customers Bancorp and its principal
subsidiary, Customers Bank (the “Bank”), have developed a suite of
commercial and retail loan products with one particularly important
common denominator: relatively low credit risk assumption. The
Bank’s multifamily, mortgage warehouse, and specialty finance lines
of business, for example, are characterized by conservative
underwriting standards and low loss rates. As a consequence of this
emphasis, the Bank’s credit quality to-date has been healthy
despite a highly adverse economic environment. Nonperforming assets
increased slightly to $92.6 million at August 31, 2020 from $86.4
million at June 30, 2020 and are expected to fall below $80.0
million by quarter-end due to the anticipated sale of an investment
CRE loan.
Further, we are pleased to disclose a sharp decline in loan
deferrals since financial results for Q2 2020 were released.
Excluding PPP loans, active deferments decreased to $439.0 million
or 4.0% of total gross loans at August 31, 2020 from $750.5 million
or 7.3% of total gross loans at July 24, 2020. The improvement was
driven by the investment CRE, multifamily, and hotels categories.
Looking forward, we anticipate active deferments to decline to
approximately $271.2 million or 2.5% of total gross loans at the
close of Q3 2020 and fall steadily through year-end.
Customers Bancorp: Total Loan
& Lease Deferments
7/24/20
8/31/20
9/30/20E1
Principal Deferred
% of Portfolio
Principal Deferred
% of Portfolio
Principal Deferred
% of Portfolio2
C&I and Investment CRE:
$45.9
2.1%
$49.1
2.1%
$13.6
0.6%
C&I
$13.4
13.4%
$13.5
12.9%
$6.0
5.7%
SBA
$251.2
9.0%
$84.0
3.0%
$73.0
2.6%
Investment CRE & Multi Family
$301.5
72.9%
$241.8
58.6%
$126.4
30.6%
Hotels
Equipment Finance:
Motor Coach
$18.1
48.5%
$11.2
34.0%
$25.0
76.0%
Transportation
$29.8
29.0%
$0.0
0.0%
$0.0
0.0%
Franchise
$1.8
5.1%
$0.0
0.0%
$0.0
0.0%
Equipment Finance - Other
$29.2
9.3%
$0.0
0.0%
$0.0
0.0%
0.0%
Mortgage Warehouse:
Mortgage Warehouse
$0.0
0.0%
$0.0
0.0%
$0.0
0.0%
Consumer:
Consumer Installment
$22.6
1.8%
$13.5
1.1%
$13.4
1.1%
Home Mortgage
$34.9
10.9%
$24.6
7.7%
$12.5
4.0%
Manufactured Housing
$2.1
3.1%
$1.3
2.0%
$1.3
2.0%
Total Deferred3
$750.5
7.3%
$439.0
4.0%
$271.2
2.5%
1. Data as of 9/30/2020 is estimated.
Please see the "Safe Harbor" Statement included in this press
release.
2. The denominator in this ratio, the
portfolio balance in dollars, uses data as of August 31, 2020.
3. "% of Portfolio" data in this row
exclude PPP loans.
As the COVID-19 crisis continues, we believe we are well
positioned with respect to credit quality compared to similarly
sized U.S. banks. Loan exposure to at-risk industries as identified
by Customers totaled only $686 million or 6.5% of total gross loans
excluding the PPP balance at June 30, 2020, well below the median
at-risk percentage for our asset class. These industries include
hospitality ($413 million), energy and utilities ($79 million),
colleges and universities ($65 million), CRE retail sales ($54
million), franchise restaurants and dining ($51 million), and
entertainment-only businesses ($24 million), using data as of June
30, 2020. In addition, we would note that the Bank has only modest
exposure to construction and development loans (6/30/20: $129
million, 1.2% of loans), a business line that has fared poorly
across the banking industry in prior economic downturns.
Jay Sidhu, Chairman and CEO of Customers Bancorp, purchased
10,000 shares of the company’s stock at an average price of $12.75
on September 8, 2020.
In consideration of recent financial trends, we are offering the
following financial guidance (with full year 2020 guidance
unchanged):
- Excluding PPP Loans, the balance sheet at December 31, 2020 is
expected to be about the same or slightly higher relative to
December 31, 2019.
- Excluding PPP loans, the TCE-to-TA1 ratio is projected to be at
least 7.00% at December 31, 2020 and 7.50%-8.00% by March 31,
2021.
- The PPP program is expected to generate a total of
approximately $100 million in pre-tax origination revenues.
- Excluding PPP loans, the NIM is forecast to contract moderately
in Q3 2020 due to temporarily elevated excess liquidity and fall
between 2.90% and 3.00% for the full year 2020.
- Operating expenses are projected to remain flat over the next
few quarters.
- The effective tax rate is expected to be 22.0% - 23.0% for
2020.
- We forecast operating EPS near $3.00 for 2020 and target
operating EPS at $6.00 by 2026.
The pending merger of Megalith Financial Acquisition Corp. and
BankMobile Technologies, a subsidiary of Customers Bank, is on
track. Megalith Financial is expected to file a preliminary proxy
statement with the SEC shortly.
1. TCE-to-TA ratio is defined as tangible common equity divided
by tangible assets. This is a non-GAAP measure.
About Customers Bancorp, Inc.
Customers Bancorp, Inc. is a bank holding company located in
West Reading, PA that provides financial services through its
subsidiary, Customers Bank, a full-service super-community bank
with assets of $17.9 billion at June 30, 2020. A member of the
Federal Reserve System with deposits insured by the Federal Deposit
Insurance Corporation, Customers Bank is an equal opportunity
lender that provides a range of banking and lending services to
small and medium-sized businesses, professionals, individuals, and
families. Services and products are available wherever permitted by
law through mobile-first apps, online portals, and a network of
offices and branches. Customers Bancorp’s voting common shares are
listed on the New York Stock Exchange under the symbol CUBI.
Additional information can be found on the company’s website,
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,” 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: the adverse impact on the U.S. economy, including the
markets in which we operate, of the coronavirus outbreak, and the
impact of a slowing U.S. economy and increased unemployment 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 effect
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; the effects of changes in accounting
standards or policies, including Accounting Standards Update (ASU)
2016-13, Financial Instruments—Credit Losses (CECL); and, our
ability to divest BankMobile on terms and conditions acceptable to
us, in the timeframe we currently intend, and the possible effects
on our business and results of operations of a divestiture of
BankMobile or if we are unable to divest BankMobile for an extended
period of time. 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, 2019, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200915005443/en/
Jay Sidhu, Chairman & CEO 610-935-8693
Sam Sidhu, Head of Corporate Development 610-780-6021
Customers Bancorp (NYSE:CUBI)
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