Customers Bancorp(US:CUBI)2022-11-07 16:00Financial Performance - Customers Bancorp's net interest income is a key measure of success, derived from the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities [227]. - Net interest income decreased by $60.9 million, or 27.7%, for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to lower interest income from PPP loans [251]. - Net income available to common shareholders was $61.4 million for the three months ended September 30, 2022, a decrease of 44.3% compared to $110.2 million for the same period in 2021 [251]. - Total non-interest income decreased by $34.6 million, or 135.2%, for the three months ended September 30, 2022, compared to the same period in 2021 [251]. - Income before income tax expense decreased by $70.5 million (46.3%) to $81.8 million for the three months ended September 30, 2022, compared to $152.3 million for the same period in 2021 [341]. - Income tax expense decreased by $18.4 million (50.6%) to $17.9 million for the three months ended September 30, 2022, compared to $36.3 million for the same period in 2021 [341]. Credit Losses and Allowance - The Allowance for Credit Losses (ACL) as of September 30, 2022, was $133.1 million, reflecting a decrease from the previous estimate primarily due to the sale of $521.8 million in consumer installment loans [243]. - The provision for credit losses decreased by $21.2 million, or 160.7%, for the three months ended September 30, 2022, compared to the same period in 2021, reflecting the sale of consumer installment loans [255]. - The ACL may be materially affected by qualitative factors reflecting management's judgment of various events and risks not measured in statistical procedures [241]. - The provision for credit losses increased by $18.3 million for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to loan growth and deteriorating macroeconomic forecasts [256]. - The provision for credit losses for loans and leases for the nine months ended September 30, 2022, was $31.6 million, compared to $13.5 million for the same period in 2021 [289]. - The allowance for credit losses (ACL) for loans and leases receivable was $130.2 million, or 1.03% of loans and leases receivable, as of September 30, 2022, down from $137.8 million or 1.53% at December 31, 2021 [390][392]. Loan Portfolio and Asset Management - The company has shifted its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates in response to macroeconomic uncertainties [233]. - Total loans and leases amounted to $15.65 billion, with a net interest income of $200.46 million for the three months ended September 30, 2022 [277]. - Total loans and leases receivable amounted to $12,607,742, with a non-accrual/NPL of $23,304, representing 0.18% of total loans [406]. - The total loan and lease portfolio was $15.3 billion at September 30, 2022, an increase from $14.6 billion at December 31, 2021 [411]. - Customers had $1.2 billion in PPP loans outstanding as of September 30, 2022, down from $3.3 billion at December 31, 2021, indicating a reduction of approximately 63.6% [384]. - The consumer loan portfolio totaled $1.9 billion as of September 30, 2022, representing 12.5% of the total loan and lease portfolio, a decrease from $2.1 billion or 14.7% at December 31, 2021 [378]. Deposits and Funding - As of September 30, 2022, Customers Bank held $1.9 billion in low-cost deposits from customers participating in the CBIT instant payment platform [230]. - Total deposits increased by $744.5 million (4.4%) to $17.5 billion as of September 30, 2022, compared to $16.8 billion at December 31, 2021 [356]. - Demand, non-interest bearing deposits decreased by $1.5 billion, or 32.9%, to $3.0 billion at September 30, 2022, primarily due to a transfer by a customer participating in CBIT [415]. - Time deposits surged by $1.4 billion, or 274.1%, to $1.9 billion at September 30, 2022, compared to $507.3 million at December 31, 2021 [415]. - The total amount of estimated uninsured deposits was $12.5 billion at September 30, 2022, compared to $12.1 billion at December 31, 2021 [417]. Economic Conditions and Projections - The Federal Reserve Board is expected to raise the effective fed funds rate to 3.5% by the end of 2022, impacting economic conditions and credit loss provisions [245]. - The unemployment rate is projected to rise to 4.2% and 7.3% by the end of 2022 and 2023, respectively, under adverse economic scenarios [247]. - The company has maintained higher levels of liquidity and reserves for credit losses in response to ongoing economic uncertainties [233]. Non-Interest Income and Expenses - Total non-interest income for the three months ended September 30, 2022, was a loss of $9.0 million, a decrease of 135.2% from $25.6 million in the same period of 2021 [293]. - Non-interest expense decreased by $3.8 million for the three months ended September 30, 2022, primarily due to a reduction in deposit relationship adjustment fees [261]. - The increase in non-interest expense for the nine months ended September 30, 2022, was $13.5 million, primarily due to increases in technology and employee benefits [262]. - Salaries and employee benefits increased by $5.0 million (18.9%) for the three months ended September 30, 2022, primarily due to severance and merit increases [318].