Customers Bancorp(CUBI) - 2024 Q4 - Annual Report

Financial Performance - As of December 31, 2024, Customers Bancorp had total assets of $22.3 billion, total loans and leases net of the allowance for credit losses (ACL) of$14.5 billion, total deposits of $18.8 billion, and shareholders' equity of$1.8 billion[26]. - Customers Bank funded $22.1 billion and$20.1 billion of mortgage loans to mortgage originators in 2024 and 2023, respectively[47]. - As of December 31, 2024, Customers Bank had $13.2 billion in commercial loans outstanding, representing approximately 90.1$4.0 billion and $2.9 billion of commercial and industrial loans in 2024 and 2023, respectively[50]. - The non-performing loans as of December 31, 2024, were only$43.3 million, or 0.30% of the total loan portfolio[40]. - Customers had $1.4 billion in consumer loans outstanding as of December 31, 2024, comprising 9.9$2.3 billion and $2.1 billion as of December 31, 2024 and 2023, respectively[49]. - Customers' commercial equipment financing group had$675.4 million and $547.0 million of equipment finance loans outstanding as of December 31, 2024 and 2023, respectively[48]. Growth Strategy - In 2023, Customers Bancorp expanded its venture banking client coverage by recruiting teams that originated a venture banking loan portfolio purchased from the FDIC, enhancing services in key markets such as Austin, the Bay Area, Boston, Southern California, Chicago, Denver, Raleigh/Durham, and Washington, D.C.[33]. - Customers Bancorp onboarded 10 experienced commercial and business banking teams in 2024 to accelerate deposit growth, enhancing its presence in New York City, Los Angeles, Orange County, and Reno and Las Vegas, Nevada[34]. - The Bank's strategy focuses on organic core loan and deposit growth, with a commitment to a high-tech/high-touch service model supported by state-of-the-art technology[35]. - Customers Bancorp has not acquired any banks since 2011 but continues to evaluate opportunistic acquisitions and team lift-outs to enhance its market presence[36]. - Customers Bancorp's target markets are characterized by attractive demographic, economic, and competitive dynamics, supporting its growth strategies[35]. Corporate Social Responsibility - Customers Bancorp's corporate social responsibility practices emphasize commitment to team members, customers, shareholders, and the communities it serves[27]. - The company distributed$70,000 among 14 team members' children through the Freedom Scholarship Program in 2024[84]. - More than one-third of team members participated in wellness initiatives during 2024, with 96 successfully maximizing their wellness points[80]. - Customers Bank's commitment to corporate social responsibility includes promoting sound governance and investing in team members[65]. - The company offers a variety of health, life, and disability insurance programs to support team members and their families[81]. Team and Management - The management team, led by CEO Jay Sidhu, has significant experience in building banking organizations and integrating mergers and acquisitions[29]. - The management team has extensive experience, having successfully integrated over 30 institutions and numerous asset acquisitions[40]. - Customers Bank's total team members increased from 714 in 2023 to 793 in 2024, with a voluntary turnover rate of 11.2%[67]. - In 2024, Customers Bank welcomed 247 new team members, focusing on deposit generation and risk compliance[69]. - The bank's succession planning focuses on developing internal talent for key executive positions, ensuring a sustainable leadership pipeline[86]. - The bank is actively identifying high-potential team members for succession, emphasizing technical abilities and leadership attributes[88]. Regulatory Compliance - Customers Bank has assets exceeding $10 billion, subjecting it to higher FDIC premium assessments and regulatory scrutiny from the CFPB[92]. - The minimum capital level requirements under Basel III include a common equity Tier 1 risk-based capital ratio of 4.5$61.6 million, with a phased-in benefit of $15.4 million expected by December 31, 2024[109]. - The final rules established a capital conservation buffer of 2.5% for 2019 and thereafter, impacting dividend payments and share repurchases if capital levels fall below minimum requirements[104]. - The prompt corrective action framework requires insured depository institutions to meet increased capital level requirements to qualify as "well capitalized"[107]. - Customers Bank has adopted a Code of Ethics and Business Conduct applicable to its directors and officers, ensuring compliance with governance standards[89]. - Federal banking laws regulate the scope of the bank's business, including mergers and acquisitions, which are subject to concentration limits[94]. - The Federal Reserve Board's leverage ratio rules require a minimum Tier 1 leverage ratio of 4% for banks not rated the highest in capital and asset quality[100]. - Customers Bank and the Bancorp met all capital adequacy requirements as of December 31, 2024 and 2023[111]. - The Dodd-Frank Act requires a common equity Tier 1 capital ratio of 6.5%, a Tier 1 risk-based capital ratio of 8%, and a total risk-based capital ratio of 10%[111]. Interest Rate Risk - The Bank's net interest income is significantly impacted by interest rate sensitivity, with management focused on optimizing income while minimizing interest rate risk[565]. - Estimated net interest income for the twelve months ending December 31, 2025 and 2024 is based on existing assets, liabilities, and off-balance sheet financial instruments[568]. - Under upward rate shocks, the projected net interest income increases by 8.4% for 2024 and 9.9% for 2023 with a 3% increase in rates[570]. - Under downward rate shocks, the projected net interest income decreases by 13.6% for 2024 and 11.2% for 2023 with a 3% decrease in rates[570]. - The estimated change in Economic Value of Equity (EVE) shows a decrease of 5.5% for 2024 and 6.2% for 2023 under a 3% upward rate shock[571]. - Under a 3% downward rate shock, the EVE decreases by 15.8% for 2024 and 23.1% for 2023[571]. - Management believes the assumptions used in evaluating interest rate risk are reasonable, but actual results may vary significantly[571]. - The modeling includes a parallel and sustained shift in interest rates for both upward and downward scenarios[569]. - The analysis considers customer preferences and general market conditions in addition to interest rate changes[568]. - The company uses income scenario modeling to measure interest rate sensitivity and manage interest rate risk[567]. - The estimated percentage changes in net interest income are critical for assessing the impact of interest rate fluctuations on financial performance[570].