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Customers Bancorp Reports Record Net Income For Full Year 2013 And Q4 2013

WYOMISSING, Pa., Jan. 23, 2014 /PRNewswire/ -- Customers Bancorp, Inc. (NASDAQ: CUBI), the parent company of Customers Bank (collectively "Customers"), reported earnings of $32.7 million for the full year 2013 compared to earnings of $23.8 million for 2012, an increase of 37.3%.  Fully diluted earnings per share for 2013 was $1.43.  For the quarter ending December 31, 2013 ("Q4 2013") Customers reported earnings of $9.0 million compared to earnings of $7.6 million for the quarter ended December 31, 2012 ("Q4 2012"), an increase of 19.1%.  Q4 2013 fully diluted earnings per share was $0.36.  Total shares outstanding at December 31, 2013 were 24.2 million, up from 18.5 million at December 31, 2012. 

The financial highlights for full year 2013 included:

  • Net interest income was $103.2 million in 2013, up $31.4 million from $71.8 million in 2012, an increase of 43.8%.
  • Total revenues (net interest income plus non-interest income) after provisions for loan losses grew from $86.7 million in 2012 to $124.3 million in 2013, an increase of 43.3%.
  • Loans receivable (not covered by FDIC loss share) were $2.4 billion at December 31, 2013, up from $1.2 billion at December 31, 2012, and increase of $1.2 billion (100.0%).
  • Loans held for sale (principally mortgage warehouse loans) were $747.6 million at December 31, 2013, a decrease of $692.3 million (48.1%) from the $1.4 billion outstanding at December 31, 2012.
  • Non-performing loans not covered by FDIC loss share were $13.5 million at December 31, 2013, a decrease of $8.8 million (39.5%) from the December 31, 2012 non-performing non-covered amount of $22.3 million.
  • Demand deposits increased $258.4 million (117.6%) during 2013 to $478.1 million.  Total deposits increased $519.1 million (21.3%) during 2013 to $3.0 billion.
  • Tangible common equity was $382.9 million as of December 31, 2013, an increase of 44.1% ($117.1 million) from $265.8 million as of December 31, 2012.
  • Total assets at December 31, 2013 were $4.2 billion, up 29.7% from the December 31, 2012 balance of $3.2 billion.

The financial highlights for Q4 2013 included:

  • Net interest income was $27.7 million in Q4 2013, up $6.0 million from $21.7 million in Q4 2012, an increase of 27.8%.
  • Total revenues (net interest income plus non-interest income) after provisions for loan losses grew from $24.5 million in Q4 2012 to $36.1 million in Q4 2013, an increase of 47.2%.
  • Capital ratios1 remained strong and improved year over year, with Tier 1 Leverage of 10.11%, and Total Risk-Based Capital of 13.16%, at December 31, 2013 compared to Tier 1 Leverage of 9.30%, and Total Risk-Based Capital of 11.26%, at December 31, 2012.

"2013 was a year of great achievement for Customers as we successfully implemented key strategies on several fronts while enhancing our profitability," stated Jay Sidhu, Chairman and CEO of Customers Bancorp, Inc.  "We generated record earnings while for the first time listing Customers on a national exchange, increased capital by over $115 million, added banking teams in key markets of New York City, Boston, Philadelphia and Providence, adopted a client-centric single-point-of-contact business model, and generated double-digit loan and deposit growth.  We enter 2014 focused on continued organic growth of our businesses and building book value, and Customers' team members are excited about our prospects to further build our business and serve all of our communities in 2014.  I expect the Company to continue to outperform the industry through the organic growth of loans and deposits."

Robert Wahlman, Executive Vice President and CFO, stated, "During 2013 we overcame a $700 million decrease in mortgage warehouse balances to grow total assets by $952 million, and achieved record earnings of $32.7 million for the year and $9.0 million for the 4th quarter.  We also achieved the earnings per share expectations despite increasing our shares outstanding by nearly one-third during the year.  Our 2014 success results from the execution of our strategies to maintain very strong asset quality, grow our loan assets by focusing on our customers using a single-point-of-contact client service strategy, and control our expenses.  We have mapped our strategies to further improve performance in 2014, and our team members are already executing on those strategies."

1 Tier 1 Leverage and Total Risk-Based Capital at December 31, 2013 are estimated.

 

EARNINGS SUMMARY - UNAUDITED





(Dollars in thousands, except per-share data)





Q4

2013

Q3

2013

Q4

2012






Net income available to common shareholders

$              9,010

$              8,268

$              7,568

Diluted earnings per share

$                0.36

$                0.33

$                0.40

Average shares outstanding

24,527,087

24,678,317

18,459,502





Return on average assets

0.93%

0.90%

1.06%

Return on average common equity

9.10%

8.56%

11.32%

Equity to assets

9.31%

9.91%

8.42%

Net interest margin, tax equivalent

3.07%

3.14%

3.20%

Reserves to non performing loans (NPL's)

152.90%

157.60%

106.50%





Book value per common share (period end)

$              15.96

$              15.75

$              14.60

Period end stock price

$              20.46

$              16.10

$              14.50





Net Income, Earnings Per Share and Book Value

Q4 2013 net income of $9.0 million is up $0.7 million, or 9.0%, from Q3 2013, and up $1.4 million, or 19.1%, from Q4 2012.  Q4 2013 diluted earnings per share of $0.36 is up $0.03 cents (nearly 10%) from the Q3 2013 earnings per share of $0.33.  Customers' book value per share increased to $15.96 in Q4 2013 (up 1.4%) from $15.75 in Q3 2013, and $14.60 (up 10.0%) in Q4 2012.  The record net income for 2013 and Q4 2013 is primarily due to increased net interest income, fueled by net loan growth while maintaining asset quality and strong growth of low cost deposits through the year.  The increasing book value reflects Customers strategic commitment to consistently maintain and grow book value per share.

Net Interest Margin

The net interest margin decreased 7 basis points to 3.07% in Q4 2013 compared to Q3 2013, and decreased 12 basis points from Q4 2012.  The Q4 2013 net interest margin decrease from Q3 2013 is principally due to decreasing yields on the mortgage warehouse portfolio as competition heats up in this market, increased volume and marginally lower yields in the multi-family lending product as Customers aggressively grows this loan portfolio segment, and growing the investment securities portfolio which produces less than the average yield on loans.

Non-Interest Income

Q4 2013 non-interest income of $7.9 million was up $3.1 million compared to $4.9 million in Q3 2013, and up $3.4 million compared to $4.5 million in Q4 2012.  Q4 2013 non-interest income is higher than the past noted periods largely due to income recognized on mortgage loans of $1.1 million as Customers initiated its mortgage banking activities and a gain of $1.3 million on securities sold to strategically reduced interest rate risk in the investment portfolio, offset in part by reduced mortgage warehouse transaction fees as a result of decreased mortgage warehouse loan balances and activity as refinancing activity declined when long term market interest rates increased in Q3 2013.

Non-Interest Expense

Operating expenses in Q4 2013 of $22.3 million increased $4.0 million compared to Q3 2013 operating expenses of $18.3 million.  Q4 2013 operating expenses support significantly greater business activities as Customers is investing in its C&I lending and mortgage banking businesses, resulting in increased compensation, occupancy, technology, and other operating expenses.  The Q4 2013 expenses also include a $1.6 million increase over Q3 2013 for costs incurred in connection with the previously disclosed Department of Justice investigation to resolve certain alleged redlining violations, enhance technological barriers to cyber-fraud attempts, and pay other regulatory costs.

Provision for Loan Losses and Asset Quality

The Q4 2013 provision for loan losses was ($0.5) million, compared to a Q3 2013 provision of $0.8 million, and a Q4 2012 provision of $1.6 million.  Beginning in Q4 2013, the provision for loan losses is being reported net of the amount of estimated credit losses on covered loans to be recovered from the Federal Deposit Insurance Corporation (the "FDIC") pursuant to specific purchase and assumption, or loss sharing, agreements.  Prior period amounts have been reclassified to be consistent with the Q4 2013 presentation.  Previously the amount recoverable from the FDIC had been reported as a separate amount in non-interest income.  The Q4 2013 provision reflects a provision of $2.2 million for asset growth and a $1.1 million reduction of the FDIC indemnification asset as a result of collections on two loans covered by the FDIC purchase and assumption agreements, offset by reductions of the provision for loan losses for payoffs on loans with specific reserves of $1.4 million, better sustained performance of residential mortgage loans compared to previously estimated performance of $0.4 million, improved performance estimate of a purchased commercial loan pool of $1.0 million, and generally decreased delinquencies and improved performance of the loan portfolio of approximately $1.0 million.

Customers separates its loan portfolio into "covered" and "non-covered" loans for purposes of analyzing and managing asset quality.  Covered loans are those loans that are covered by an FDIC purchase and assumption, or loss sharing, agreements, and for which Customers is reimbursed 80% of allowable incurred losses.  Covered loans totaled $66.7 million as of December 31, 2013, and $107.5 million as of December 31, 2012.  Non-accrual covered loans totaled $5.6 million at December 31, 2013 compared to $10.5 million at December 31, 2012.  Covered real estate owned totaled $7.0 million as of December 31, 2013 compared to $4.1 million as of December 31, 2012. 

Non-covered loans are all loans not covered by the FDIC agreements.  Non-covered loans includes loans accounted for as held for sale as well as loans accounted for as held for investment.  Non-covered loans totaled $3.1 billion as of December 31, 2013, and $2.7 billion as of December 31, 2012.  Non-accrual non-covered loans totaled $13.5 million (0.43% of total non-covered loans) as of December 31, 2013 and $22.3 million (0.84%) as of December 31, 2012.  Non-covered loans 30 to 89 days delinquent at December 31, 2013 totaled $9.4 million, or 0.3% of non-covered loans.

Conference Call

Date:

January 23, 2014

Time:

2:00 pm ET

US Dial-in:

877-941-2068

International Dial-in:

480-629-9712

Conference ID:

4662763

Webcast:

http://public.viavid.com/index.php?id=107501

Institutional Background

Customers Bancorp, Inc. is a bank holding company located in Wyomissing, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank.  Customers Bank is a community-based, full-service bank with assets of approximately $4.2 billion.  A member of the Federal Reserve System and deposits insured by the Federal Deposit Insurance Corporation ("FDIC"), Customers Bank provides a range of banking services to small and medium-sized businesses, professionals, individuals and families through offices in Pennsylvania, New York, Rhode Island, Massachusetts, and New Jersey.  Committed to fostering customer loyalty, Customers Bank uses a High Tech/High Touch strategy that includes use of industry-leading technology to provide customers better access to their money, as well as a continually expanding portfolio of loans to small businesses, multifamily projects, mortgage companies and consumers.

Customers Bancorp, Inc. is listed on the NASDAQ exchange under the symbol CUBI.  Additional information about Customers Bancorp, Inc. 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" 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, 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 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 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, as updated by subsequently filed Forms 10-Q, 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.








CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(Dollars in thousands, except per share data)






Q4

Q3

Q4


Full Year

Full Year


2013

2013

2012


2013

2012

Interest income:







Loans held for sale

$                      6,604

$                      9,495

$                    11,837


$                    38,140

$                    15,950

Loans receivable, including fees

24,801

22,485

14,550


82,580

70,510

Investment securities

2,980

1,423

731


6,314

6,731

Other

112

148

127


482

352

Total interest income

34,497

33,551

27,245


127,516

93,543








Interest expense:







Deposits

5,279

5,470

5,389


21,020

21,076

Federal funds purchased

2

20

2


101

10

Other borrowings

1,522

1,057

189


3,180

675

Total interest expense

6,803

6,547

5,580


24,301

21,761

Net interest income

27,694

27,004

21,665


103,215

71,782

Provision for loan losses

(512)

750

1,567


2,236

14,270

Net interest income after provision for loan losses

28,206

26,254

20,098


100,979

57,512








Non-interest income:







Deposit fees

187

198

124


675

481

Mortgage warehouse transactional fees

2,335

3,090

3,461


12,962

12,289

Bank-owned life insurance income

824

615

385


2,482

1,332

Gain on sale of investment securities

1,274

-

12


1,274

9,017

Mortgage banking income

1,142

-

-


1,142

-

Gain/(loss) on sale of SBA loans

450

(6)

89


852

357

Other

1,703

958

365


3,956

5,753

Total non-interest income

7,915

4,855

4,436


23,343

29,229








Non-interest expense:







Salaries and employee benefits

10,625

8,963

6,773


35,493

23,846

Occupancy

2,520

2,289

1,879


8,829

6,816

Technology, communication and bank operations

1,307

1,121

769


4,330

2,805

Advertising and promotion

301

450

373


1,274

1,219

Professional services

2,399

1,191

995


5,548

3,468

FDIC assessments, taxes, and regulatory fees

2,058

1,105

832


5,568

3,037

Other real estate owned expense(income)

403

401

(624)


1,365

(85)

Loan workout expenses

570

928

723


2,245

2,243

Merger related expenses  

132

86

63


352

90

Stock offering expenses

-

-

-


-

1,437

Loss contingency

-

-

-


2,000

-

Other

1,986

1,813

1,662


7,020

5,775

Total non-interest expense

22,301

18,347

13,445


74,024

50,651

Income before tax expense

13,820

12,762

11,089


50,298

36,090

Income tax expense

4,810

4,494

3,521


17,604

12,272

Net income

$                      9,010

$                      8,268

$                      7,568


$                    32,694

$                    23,818








 Basic earnings per share 

$                        0.37

$                        0.34

$                        0.41


$                        1.47

$                        1.78

 Diluted earnings per share 

0.36

0.33

0.40


1.43

1.73

 





CONSOLIDATED BALANCE SHEET - UNAUDITED

(Dollars in thousands)






December 31,

September 30,

December 31,


2013

2013

2012

ASSETS




Cash and due from banks

$               59,339

$               88,332

$               12,908

Interest earning deposits

173,729

167,321

173,108

Cash and cash equivalents

233,068

255,653

186,016

Investment securities available for sale, at fair value

497,573

497,566

129,093

Loans held for sale

747,593

917,939

1,439,889

Loans receivable not covered by Loss Sharing Agreements with the FDIC

2,398,353

2,018,532

1,216,941

Loans receivable covered under Loss Sharing Agreements with the FDIC

66,725

81,255

107,526

Allowance for loan losses

(23,998)

(26,800)

(25,837)

Total loans receivable, net (excluding loans held for sale)

2,441,080

2,072,987

1,298,630

FHLB, Federal Reserve Bank, and other stock

42,424

19,113

30,163

Accrued interest receivable

8,362

7,866

5,790

FDIC loss sharing receivable

10,046

11,038

12,343

Bank premises and equipment, net

11,625

11,055

9,672

Bank-owned life insurance

104,433

85,991

56,191

Other real estate owned

12,265

13,601

8,114

Goodwill and other intangibles

3,676

3,680

3,689

Other assets

41,028

28,623

21,644

Total assets

$         4,153,173

$         3,925,112

$         3,201,234





LIABILITIES AND SHAREHOLDERS' EQUITY




Demand, non-interest bearing

$             478,103

$             671,211

$             219,687

Interest Bearing Deposits

2,481,819

2,572,101

2,221,131

Total deposits

2,959,922

3,243,312

2,440,818

Federal funds purchased

13,000

-

5,000

Other borrowings

771,750

237,250

473,000

Accrued interest payable and other liabilities

21,878

55,665

12,941

Total liabilities

3,766,550

3,536,227

2,931,759





Common stock

24,756

24,742

18,507

Additional paid in capital

307,231

306,183

212,090

Retained earnings

71,008

61,997

38,314

Accumulated other comprehensive (loss) income

(8,118)

(3,537)

1,064

Cost of treasury stock

(8,254)

(500)

(500)

Total shareholders' equity

386,623

388,885

269,475

Total liabilities & shareholders' equity

$         4,153,173

$         3,925,112

$         3,201,234







Average Balance Sheet / Net Interest Margin

(Dollars in thousands)



Three Months Ended December 31, 



2013



2012



Average Balance

Average yield or cost (%)


Average Balance

Average yield or cost (%)

Assets






Interest earning deposits  

$                        177,222

0.25%


$                        202,176

0.25%

Investment securities

479,511

2.49%


129,960

2.25%

Loans held for sale

706,899

3.71%


1,235,067

3.81%

Loans

2,255,932

4.36%


1,160,523

4.99%

Less: Allowance for loan losses

(26,630)



(25,617)


Total interest earning assets  

3,592,934

3.81%


2,702,109

4.01%

Non-interest earning assets

242,660



127,063


Total assets  

$                     3,835,594



$                     2,829,172








Liabilities






Interest checking  

$                           54,668

0.77%


$                           41,285

0.45%

Money market  

1,229,007

0.64%


979,648

0.69%

Other savings  

31,626

0.42%


22,372

0.50%

Certificates of deposit  

1,201,791

1.04%


1,162,063

1.24%

Total interest bearing deposits  

2,517,092

0.83%


2,205,368

0.97%

Other borrowings  

338,465

1.79%


105,799

0.72%

Total interest bearing liabilities  

2,855,557

0.95%


2,311,167

0.96%

Non-interest bearing deposits  

572,865



245,881


Total deposits & borrowings  

3,428,422

0.79%


2,557,048

0.87%

Other non-interest bearing liabilities

14,407



6,301


Total liabilities  

3,442,829



2,563,349


Shareholders' equity

392,765



265,823


Total liabilities and shareholders' equity

$                     3,835,594



$                     2,829,172








Net interest margin


3.06%



3.19%

Net interest margin tax equivalent


3.07%



3.20%


 












Asset Quality as of December 31, 2013

(Dollars in thousands)

Loan Type

Total Loans

Non Accrual

/NPL's

Other Real Estate Owned

Non Performing Assets (NPA's)

Allowance for loan losses

Credit

Mark

Cash

Reserve

Total

Credit

Reserves

NPA's/

Total Loans

Total

Reserves to 

Total NPA's


Pre September 2009 Originated Loans











Legacy

$      74,344

$         9,468

$         3,754

$       13,222

$     2,386

$         -

$         -

$      2,386

56

17.79%

18.05%

Troubled debt restructurings (TDR's)

1,692

714


714

56



42.20%

7.84%

Total Pre September 2009 Originated Loans

76,036

10,182

3,754

13,936

2,442

-

-

2,442

18.33%

17.52%












Originated Loans (Post 2009)











Warehouse

4,743

-

-

-

36



36

0.00%

0.00%

Manufactured Housing

4,179

-

-

-

84



84

0.00%

0.00%

Commercial

801,229

511

-

511

5,936



5,936

0.06%

1161.64%

MultiFamily

1,056,696

-

-

-

4,227



4,227

0.00%

0.00%

Consumer/ Mortgage

118,742

-

-

-

457



457

0.00%

0.00%

Total Originated Loans

1,985,589

511

-

511

10,740

-

-

10,740

0.03%

2101.76%












Acquired Loans











Berkshire

11,832

2,373

1,201

3,574

510



510

30.21%

14.27%

Total FDIC (covered and non covered)

42,265

5,649

6,953

12,602

924



924

29.82%

7.33%

Manufactured Housing

128,155

0

356

356

-


3,086

3,086

0.28%

868.04%

Flagstar (Commercial)

139,582

-

-

-

-



-

0.00%

0.00%

TDR's

2,929

447

-

447

135



135

15.26%

30.20%

Total Acquired Loans

324,763

8,469

8,510

16,979

1,569

-

3,086

4,655

5.23%

27.42%












Acquired Purchased Credit Impaired Loans











Berkshire

50,329

-

-

-

4,241

(2,161)


2,080

0.00%

0.00%

Total FDIC - Covered

24,475

-

-

-

4,476

(49)


4,427

0.00%

0.00%

Manufactured Housing 2011

5,478

-

-

-

530

4,423


4,953

0.00%

0.00%

Total Acquired Purchased Credit Impaired Loans

80,282

-

-

-

9,247

2,213

-

11,460

0.00%

0.00%

Unamortized fees/discounts

(1,592)








0.00%

0.00%

Total Loans Held for Investment

2,465,078

19,162

12,264

31,426

23,998

2,213

3,086

29,297

1.27%

93.23%

Total Loans Held for Sale

747,593

-

-

-

-

-

-

-

0.00%

0.00%

Total Portfolio

$ 3,212,671

$       19,162

$       12,264

$       31,426

$   23,998

$   2,213

$   3,086

$    29,297

0.98%

93.23%

 

SOURCE Customers Bancorp, Inc.

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