Customers Bancorp(US:CUBI)2024-11-12 21:51Credit Losses and Provisions - Customers Bancorp's Allowance for Credit Losses (ACL) as of September 30, 2024, was $138.8 million, with $133.2 million for loans and leases and $5.6 million for unfunded lending-related commitments[206]. - The provision for credit losses on loans and leases was $17.8 million for the three months and $51.6 million for the nine months ended September 30, 2024[206]. - The ACL decreased from $138.2 million as of December 31, 2023, primarily due to slight improvements in macroeconomic forecasts and lower consumer installment loan balances[206]. - Customers Bancorp's management utilized Moody's September 2024 Baseline forecast to estimate expected losses, reflecting slight improvements in macroeconomic conditions[207]. - Provision for credit losses decreased by $0.8 million (4.4%) for the three months ended September 30, 2024, reflecting a $0.7 million increase in provision for loans and leases[217]. - The provision for credit losses on loans and leases for the nine months ended September 30, 2024, was $51.570 million[312]. - Customers recognized a provision for credit losses on unfunded lending-related commitments of $0.6 million and $2.7 million during the three and nine months ended September 30, 2024, respectively[350]. - The allowance for credit losses (ACL) for loans and leases receivable was $133.2 million, or 1.06% of loans and leases receivable, as of September 30, 2024[309]. - Net charge-offs for the three months ended September 30, 2024, were $17.0 million, a decrease of $0.5 million compared to the same period in 2023[310]. - For the nine months ended September 30, 2024, net charge-offs increased to $53.7 million, up by $2.0 million compared to the same period in 2023[310]. Financial Performance - Net income available to common shareholders was $42.9 million for the three months ended September 30, 2024, a decrease of $40.0 million (48.2%) compared to $82.9 million for the same period in 2023[214]. - Net interest income decreased by $41.2 million (20.6%) for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to higher interest expense on deposits and a decrease in average interest-earning assets by $790.4 million[214]. - Non-interest income decreased by $9.2 million (51.9%) for the three months ended September 30, 2024, primarily due to a $14.2 million increase in net loss on sale of loans and leases[220]. - Total non-interest expense increased by $14.6 million (16.3%) for the three months ended September 30, 2024, driven by higher salaries and employee benefits[222]. - Income before income tax expense decreased by $64.2 million (58.3%) to $46.0 million for the three months ended September 30, 2024, compared to $110.2 million for the same period in 2023[271]. - The effective tax rate for the three months ended September 30, 2024, was (1.58)%, a decrease from 21.29% for the same period in 2023, attributed to $14.3 million in investment tax credits from commercial clean vehicles[225]. - The company reported net income of $154.6 million for the nine months ended September 30, 2024, down from $188.1 million in 2023[356][357]. Liquidity and Deposits - Customers Bancorp maintained approximately $5.2 billion in immediate available liquidity from the Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) as of September 30, 2024[198]. - The estimated FDIC insured deposits represented approximately 66% of total deposits, increasing to 75% when including collateralized and affiliate deposits as of September 30, 2024[198]. - Total deposits reached $18.1 billion at September 30, 2024, reflecting an increase of $149.2 million, or 0.8%, from $17.9 billion at December 31, 2023[334]. - Savings deposits, including MMDA, increased by $731.7 million, or 15.8%, to $5.4 billion at September 30, 2024[334]. - Non-interest bearing demand deposits rose by $248.3 million, or 5.6%, to $4.7 billion at September 30, 2024[334]. - Time deposits decreased by $856.8 million, or 26.1%, to $2.4 billion at September 30, 2024[334]. - The loan to deposit ratio was 78% at September 30, 2024, indicating a strong liquidity position[352]. Interest Income and Expenses - Net interest income decreased by $40.6 million to $158.5 million for the three months ended September 30, 2024, compared to $199.8 million for the same period in 2023[229]. - The average cost of total interest-bearing deposits was 4.64% for the three months ended September 30, 2024, compared to 4.29% for the same period in 2023[229]. - The net interest margin for the three months ended September 30, 2024, was 3.05%, down from 3.70% for the same period in 2023[229]. - The NIM decreased by 12 basis points to 3.16% for the nine months ended September 30, 2024, from 3.28% for the same period in 2023[237]. - Customers' total cost of funds, including non-interest bearing deposits, was 3.55% for the nine months ended September 30, 2024, compared to 3.42% for the same period in 2023[237]. Asset Management - Total assets as of September 30, 2024, were $21.23 billion, a decrease from $21.98 billion as of September 30, 2023[229]. - Total loans and leases amounted to $13.64 billion for the three months ended September 30, 2024, with interest income of $239.6 million[229]. - The total loan and lease portfolio was $14.1 billion at September 30, 2024, an increase from $13.2 billion at December 31, 2023[329]. - Non-performing loans and leases amounted to $47.3 million, or 0.34% of total loans and leases, at September 30, 2024, compared to $27.1 million, or 0.21%, at December 31, 2023[329]. - Total loans and leases receivable, net of allowance for credit losses, amounted to $13.6 billion as of September 30, 2024, compared to $12.7 billion at December 31, 2023[305]. Market and Economic Conditions - The Federal Reserve has begun lowering the federal funds rate, with expectations of a 0.25 percentage point reduction twice in 2024[207]. - The unemployment rate is projected to rise to 4.1% in 2024 and 2025, with the Consumer Price Index (CPI) expected to increase by 2.9% in 2024[207]. - Customers Bancorp continues to monitor the impact of macroeconomic uncertainties, including inflation and geopolitical conflicts, on its operations and financial results[198]. Shareholder Equity and Capital - Shareholders' equity increased by $162.8 million, or 9.9%, to $1.8 billion at September 30, 2024, compared to $1.6 billion at December 31, 2023, primarily due to a $143.2 million increase in retained earnings[343]. - The capital ratios for Customers Bancorp, Inc. as of September 30, 2024, included a common equity Tier 1 capital ratio of 12.463%[366]. - The total capital to risk-weighted assets ratio for Customers Bancorp, Inc. was 15.362% as of September 30, 2024, exceeding the minimum requirement[366]. - The company is in compliance with the Basel III capital requirements as of September 30, 2024[366]. Strategic Initiatives - The bank onboarded 10 experienced commercial and business banking teams in April 2024 to enhance deposit growth potential in key markets[332]. - The company is transitioning its consumer installment lending strategy from held for investment to held for sale to mitigate credit risk exposure[290].