Customers Bancorp Reports Results for First Quarter 2023

By: Customers Bancorp, Inc. via Business Wire

April 27, 2023 at 17:00 PM EDT

Customers Bancorp, Inc. (NYSE:CUBI)

First Quarter 2023 Highlights

Q1 2023 net income available to common shareholders was $50.3 million, or $1.55 per diluted share; ROAA was 1.03% and ROCE was 16.00%.
Q1 2023 core earnings* were $51.1 million, or $1.58 per diluted share; Core ROAA* was 1.05% and Core ROCE* was 16.28%.
Q1 2023 core earnings excluding Paycheck Protection Program* ("PPP") were $41.5 million, or $1.28 per diluted share.
Q1 2023 adjusted pre-tax pre-provision net income* was $89.3 million; adjusted pre-tax pre-provision ROAA* was 1.72%; and adjusted pre-tax pre-provision ROCE* was 27.33%.
PPP loans decreased $751.9 million over Q4 2022, with less than $250 million outstanding at March 31, 2023.
Q1 2023 core loans* were flat over Q4 2022, with loan yields (excluding PPP)* up 60 basis points in Q1 2023.
Q1 2023 non-interest bearing deposits grew by $1.6 billion, or 85%, over Q4 2022, leading to a March 31, 2023 spot cost of deposits decline of 14 basis points.
Total insured deposits were 81%¹ of total deposits at March 31, 2023, with immediately available liquidity covering uninsured deposits by 272%.
Q1 2023 net interest margin, tax equivalent was 2.96%. Q1 2023 net interest margin, tax equivalent, excluding the impact of PPP loans* was 2.80%. High levels of cash negatively impacted net interest margin by about 6 basis points² in Q1 2023.
Q1 2023 provision for credit losses on loans and leases of $18.0 million was largely driven by the recognition of weaker macroeconomic forecasts.
Non-performing assets were $32.3 million, or 0.15% of total assets, at March 31, 2023, relatively unchanged from December 31, 2022. Allowance for credit losses on loans and leases equaled 406% of non-performing loans at March 31, 2023, compared to 426% at December 31, 2022.
Q1 2023 book value per share and tangible book value per share* grew by $2.00 and $1.99, or 5.1%, respectively, with decreased AOCI losses of $6.8 million over the same time period.
Repurchased 1,379,883 common shares for $39.8 million in Q1 2023, approximately at 70% of tangible book value per share* at March 31, 2023, leaving 497,509 common shares available for repurchase under the existing authorization.
All capital ratios remained stable in Q1 2023. Goal to bring CET 1 ratio to 11.0% - 11.5% by year-end 2023.


* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.
¹Uninsured deposits of $3.9 billion less state and municipal deposits of $393.9 million collateralized by our line of credit from FHLB and from our affiliates of $54.9 million.
²Assuming cash balance of $0.5 billion.

CEO Commentary

“The first quarter brought unexpected turmoil in the banking industry and I would like to commend our leadership team and all our team members for their remarkable performance navigating these challenges,” said Customers Bancorp Chairman and CEO, Jay Sidhu. “Our first quarter performance is a testament to the strength of our risk management practices and our steadfast focus on strong core banking fundamentals which we refer to as critical success factors. Our Q1 2023 GAAP earnings were $50.3 million, or $1.55 per diluted share. Core earnings* were $51.1 million, or $1.58 per diluted share, and core earnings excluding PPP* were $41.5 million, or $1.28 per diluted share, well above consensus estimates. Importantly, our non-interest bearing deposits grew by $1.6 billion, an impressive 85% increase from year-end balances. This growth came from opening new operating accounts during the quarter, facilitated by our technology and service offerings, coupled with our decision not to pay up for volatile deposits. We also acquired several new relationships from failed banks. At March 31, 2023, our deposit base was well diversified, with approximately 81% of total deposits insured. We maintain a strong liquidity position, with $9.4 billion of liquidity immediately available, which covers approximately 272% of uninsured deposits and our loan to deposit ratio stayed at about 80%," stated Jay Sidhu.

"In 2022, we took proactive measures to moderate loan growth, focusing on floating rate, low-to-no credit risk verticals, to grow and diversify our low-to-no-cost deposit franchise, to prudently manage the duration and return in our securities portfolio, and to maintain strong liquidity. We continued to purposely moderate loan growth in the first quarter 2023 to further improve our capital ratios. At March 31, 2023, we had slightly over $2.0 billion of cash on hand, which negatively impacted net interest margin by roughly 6 basis points, but we believe was prudent given persisting levels of uncertainty. Asset quality remains exceptional and credit reserves are extremely robust at 406% of total non-performing loans at the end of Q1 2023. The prudent risk management strategic actions that we have taken over the past several quarters have us well positioned from a capital, credit, liquidity, interest rate risk, and earnings perspective as we continue through a highly uncertain 2023. With the looming recession, we believe it is prudent to moderate growth, or even shrink the balance sheet somewhat, and focus on further strengthening the balance sheet and improving capital ratios. We are committed to improving our CET 1 ratio to 11.0% - 11.5% by year-end 2023 by retained earnings and balance sheet optimization. We are confident in our ability to manage our credit, interest rate, and liquidity risks, and superbly service our clients in all operating environments. We remain very optimistic about our future,” Jay Sidhu continued.

Financial Highlights

(Dollars in thousands, except per share data)	At or Three Months Ended						Increase (Decrease)
(Dollars in thousands, except per share data)	March 31, 2023			December 31, 2022			Increase (Decrease)
Profitability Metrics:
Net income available for common shareholders	$	50,265		$	25,623		$	24,642		96.2	%
Diluted earnings per share	$	1.55		$	0.77		$	0.78		101.3	%
Core earnings*	$	51,143		$	39,368		$	11,775		29.9	%
Core earnings per share*	$	1.58		$	1.19		$	0.39		32.8	%
Core earnings, excluding PPP*	$	41,537		$	45,324		$	(3,787	)	(8.4	)%
Core earnings per share, excluding PPP*	$	1.28		$	1.37		$	(0.09	)	(6.6	)%
Return on average assets ("ROAA")		1.03	%		0.55	%		0.48
Core ROAA*		1.05	%		0.81	%		0.24
Core ROAA, excluding PPP*		0.87	%		0.93	%		(0.06	)
Return on average common equity ("ROCE")		16.00	%		8.05	%		7.95
Core ROCE*		16.28	%		12.36	%		3.92
Adjusted pre-tax pre-provision net income*	$	89,282		$	81,377		$	7,905		9.7	%
Adjusted pre-tax pre-provision net income ROAA, excluding PPP*		1.53	%		1.67	%		(0.14	)
Net interest margin, tax equivalent		2.96	%		2.67	%		0.29
Net interest margin, tax equivalent, excluding PPP*		2.80	%		2.87	%		(0.07	)
Loan yield		6.70	%		5.64	%		1.06
Loan yield, excluding PPP*		6.46	%		5.86	%		0.60
Cost of deposits		3.32	%		2.73	%		0.59
Efficiency ratio		47.71	%		49.20	%		(1.49	)
Core efficiency ratio*		47.09	%		49.12	%		(2.03	)
Balance Sheet Trends:
Total assets	$	21,751,614		$	20,896,112		$	855,502		4.1	%
Total loans and leases	$	15,063,034		$	15,794,671		$	(731,637	)	(4.6	)%
Total loans and leases, excluding PPP*	$	14,816,776		$	14,796,518		$	20,258		0.1	%
Non-interest bearing demand deposits	$	3,487,517		$	1,885,045		$	1,602,472		85.0	%
Total deposits	$	17,723,617		$	18,156,953		$	(433,336	)	(2.4	)%
Capital Metrics:
Common Equity	$	1,283,226		$	1,265,167		$	18,059		1.4	%
Tangible Common Equity*	$	1,279,597		$	1,261,538		$	18,059		1.4	%
Common Equity to Total Assets		5.9	%		6.1	%		(0.2	)
Tangible Common Equity to Tangible Assets*		5.9	%		6.0	%		(0.1	)
Tangible Common Equity to Tangible Assets, excluding PPP*		6.0	%		6.3	%		(0.3	)
Book Value per common share	$	41.08		$	39.08		$	2.00		5.1	%
Tangible Book Value per common share*	$	40.96		$	38.97		$	1.99		5.1	%
Common equity Tier 1 capital ratio ⁽¹⁾		9.6	%		9.6	%		—
Total risk based capital ratio ⁽¹⁾		12.3	%		12.2	%		0.1

(1) Regulatory capital ratios as of March 31, 2023 are estimates.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

Financial Highlights

(Dollars in thousands, except per share data)	At or Three Months Ended						Increase (Decrease)
(Dollars in thousands, except per share data)	March 31, 2023			March 31, 2022			Increase (Decrease)
Profitability Metrics:
Net income available for common shareholders	$	50,265		$	74,896		$	(24,631	)	(32.9	)%
Diluted earnings per share	$	1.55		$	2.18		$	(0.63	)	(28.9	)%
Core earnings*	$	51,143		$	75,410		$	(24,267	)	(32.2	)%
Core earnings per share*	$	1.58		$	2.20		$	(0.62	)	(28.2	)%
Core earnings, excluding PPP*	$	41,537		$	50,697		$	(9,160	)	(18.1	)%
Core earnings per share, excluding PPP*	$	1.28		$	1.48		$	(0.20	)	(13.5	)%
Return on average assets ("ROAA")		1.03	%		1.63	%		(0.60	)
Core ROAA*		1.05	%		1.64	%		(0.59	)
Core ROAA, excluding PPP*		0.87	%		1.11	%		(0.24	)
Return on average common equity ("ROCE")		16.00	%		24.26	%		(8.26	)
Core ROCE*		16.28	%		24.43	%		(8.15	)
Adjusted pre-tax pre-provision net income*	$	89,282		$	112,649		$	(23,367	)	(20.7	)%
Adjusted pre-tax pre-provision net income ROAA, excluding PPP*		1.53	%		1.86	%		(0.33	)
Net interest margin, tax equivalent		2.96	%		3.60	%		(0.64	)
Net interest margin, tax equivalent, excluding PPP*		2.80	%		3.32	%		(0.52	)
Loan yield		6.70	%		4.67	%		2.03
Loan yield, excluding PPP*		6.46	%		4.43	%		2.03
Cost of deposits		3.32	%		0.33	%		2.99
Efficiency ratio		47.71	%		39.42	%		8.29
Core efficiency ratio*		47.09	%		39.47	%		7.62
Balance Sheet Trends:
Total assets	$	21,751,614		$	19,163,708		$	2,587,906		13.5	%
Total loans and leases	$	15,063,034		$	14,073,518		$	989,516		7.0	%
Total loans and leases, excluding PPP*	$	14,816,776		$	11,877,616		$	2,939,160		24.7	%
Non-interest bearing demand deposits	$	3,487,517		$	4,594,428		$	(1,106,911	)	(24.1	)%
Total deposits	$	17,723,617		$	16,415,560		$	1,308,057		8.0	%
Capital Metrics:
Common Equity	$	1,283,226		$	1,239,612		$	43,614		3.5	%
Tangible Common Equity*	$	1,279,597		$	1,235,934		$	43,663		3.5	%
Common Equity to Total Assets		5.9	%		6.5	%		(0.6	)
Tangible Common Equity to Tangible Assets*		5.9	%		6.5	%		(0.6	)
Tangible Common Equity to Tangible Assets, excluding PPP*		6.0	%		7.3	%		(1.3	)
Book Value per common share	$	41.08		$	37.61		$	3.47		9.2	%
Tangible Book Value per common share*	$	40.96		$	37.50		$	3.46		9.2	%
Common equity Tier 1 capital ratio ⁽¹⁾		9.6	%		9.9	%		(0.3	)
Total risk based capital ratio ⁽¹⁾		12.3	%		12.9	%		(0.6	)

(1) Regulatory capital ratios as of March 31, 2023 are estimates.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

Paycheck Protection Program (PPP)

We funded, either directly or indirectly, about 358,000 loans totaling $10.3 billion. Through the program, we earned close to $350 million of deferred origination fees from the SBA, which was significantly accretive to our earnings and capital levels as these loans were forgiven or guaranteed by the government. In Q1 2023, we recognized $22 million of these fees in earnings, leaving only $3 million to be recognized in future periods. "In Q1 2023, $752 million of PPP loans were repaid, leaving less than $250 million on our balance sheet at March 31, 2023. As we near completion of this program, we are extremely proud of our success in the PPP program and the role we played in supporting small businesses across the country. This program has been a tremendous benefit to our franchise, going forward we will no longer report certain financial metrics excluding PPP," commented Customers Bancorp CFO, Carla Leibold.

Key Balance Sheet Trends

Loans and Leases

The following table presents the composition of total loans and leases as of the dates indicated:

(Dollars in thousands)	March 31, 2023		% of Total		December 31, 2022		% of Total		March 31, 2022		% of Total
Loans and Leases Held for Investment
Commercial:
Commercial & industrial:
Specialty lending	$	5,519,176	37.7	%	$	5,412,887	35.0	%	$	2,973,544	21.1	%
Other commercial & industrial		1,168,161	8.0			1,135,336	7.3			947,895	6.8
Multifamily		2,195,211	15.0			2,213,019	14.3			1,705,027	12.1
Loans to mortgage companies		1,374,894	9.4			1,447,919	9.4			1,830,121	13.0
Commercial real estate owner occupied		895,314	6.1			885,339	5.7			701,893	5.0
Loans receivable, PPP		246,258	1.7			998,153	6.5			2,195,902	15.6
Commercial real estate non-owner occupied		1,245,248	8.5			1,290,730	8.4			1,140,311	8.1
Construction		188,123	1.3			162,009	1.0			161,024	1.1
Total commercial loans and leases		12,832,385	87.7			13,545,392	87.6			11,655,717	82.8
Consumer:
Residential		494,815	3.4	%		497,952	3.2	%		466,423	3.3	%
Manufactured housing		43,272	0.3			45,076	0.3			50,669	0.4
Installment:
Personal		849,420	5.8			964,641	6.2			1,584,011	11.3
Other		419,085	2.8			413,298	2.7			313,695	2.2
Total installment loans		1,268,505	8.6			1,377,939	8.9			1,897,706	13.5
Total consumer loans		1,806,592	12.3			1,920,967	12.4			2,414,798	17.2
Total loans and leases held for investment	$	14,638,977	100.0	%	$	15,466,359	100.0	%	$	14,070,515	100.0	%

Loans Held for Sale
Commercial:
Multifamily	$	4,051	1.0	%	$	4,079	1.2	%	$	—	—	%
Commercial real estate non-owner occupied		16,000	3.7			—	—			—	—
Total commercial loans and leases		20,051	4.7			4,079	1.2			—	—
Consumer:
Residential		821	0.2			829	0.2			3,003	100.0
Installment:
Personal		307,336	72.5			133,801	40.8			—	—
Other		95,849	22.6			189,603	57.8			—	—
Total installment loans		403,185	95.1			323,404	98.6			—	—
Total consumer loans		404,006	95.3			324,233	98.8			3,003	100.0
Total loans held for sale	$	424,057	100.0	%	$	328,312	100.0	%	$	3,003	100.0	%
Total loans and leases portfolio	$	15,063,034			$	15,794,671			$	14,073,518

Loans and Leases Held for Investment

Loans and leases held for investment were $14.6 billion at March 31, 2023, down $827.4 million, or 5.3%, from December 31, 2022. Excluding PPP loans, core loans and leases held for investment* decreased $75.5 million to $14.4 billion at March 31, 2023.

Consumer installment loans held for investment decreased $109.4 million, or 7.9% quarter-over-quarter, to $1.3 billion and commercial real estate non-owner occupied loans decreased $45.5 million, or 3.5% quarter-over-quarter, to $1.2 billion as we continue to reduce risk by remixing our held-for-investment loan and lease portfolio. Loans to mortgage companies decreased $73.0 million, or 5.0% quarter-over-quarter. These decreases were offset in part by increases in commercial and industrial ("C&I") loans and leases of $139.1 million, or 2.1% quarter-over-quarter, to $6.7 billion, led by our variable rate low-to-no credit risk specialty lending verticals.

Loans Held for Sale

Loans held for sale increased $95.7 million quarter-over-quarter, and $421.1 million year-over-year, to $424.1 million at March 31, 2023 primarily due to increased consumer installment loans as we continue to build out our Banking-as-a-Service/Marketplace Lending (BaaS/MPL) strategy in 2023.

Allowance for Credit Losses on Loans and Leases

The following table presents the allowance for credit losses on loans and leases as of the dates and for the periods presented:

	At or Three Months Ended						Increase (Decrease)			At or Three Months Ended						Increase (Decrease)
(Dollars in thousands)	March 31, 2023			December 31, 2022			Increase (Decrease)			March 31, 2023			March 31, 2022			Increase (Decrease)
Allowance for credit losses on loans and leases	$	130,281		$	130,924		$	(643	)	$	130,281		$	145,847		$	(15,566	)
Provision for credit losses on loans and leases	$	18,008		$	27,891		$	(9,883	)	$	18,008		$	15,269		$	2,739
Net charge-offs from loans held for investment	$	18,651		$	27,164		$	(8,513	)	$	18,651		$	7,226		$	11,425
Annualized net charge-offs to average loans and leases		0.49	%		0.70	%					0.49	%		0.21	%
Coverage of credit loss reserves for loans and leases held for investment		0.97	%		0.93	%					0.97	%		1.18	%
Coverage of credit loss reserves for loans and leases held for investment, excluding PPP*		0.99	%		1.00	%					0.99	%		1.44	%

* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

The decrease in net charge-offs in Q1 2023 compared to Q4 2022 was primarily due to one-time charge-offs of $11.0 million for certain loans originated under the PPP program that were subsequently determined to be ineligible for SBA forgiveness and guarantee and ultimately deemed uncollectible in Q4 2022.

The increase in net charge-offs in Q1 2023 compared to Q1 2022 was primarily due to an increase in consumer installment net charge-offs in Q1 2023 compared to Q1 2022.

Provision for Credit Losses

	Three Months Ended				Increase (Decrease)			Three Months Ended					Increase (Decrease)
(Dollars in thousands)	March 31, 2023		December 31, 2022		Increase (Decrease)			March 31, 2023		March 31, 2022			Increase (Decrease)
Provision for credit losses on loans and leases	$	18,008	$	27,891	$	(9,883	)	$	18,008	$	15,269		$	2,739
Provision for credit losses on available for sale debt securities		1,595		325		1,270			1,595		728			867
Provision for credit losses		19,603		28,216		(8,613	)		19,603		15,997			3,606
Provision (benefit) for credit losses on unfunded commitments		280		153		127			280		(109	)		389
Total provision for credit losses	$	19,883	$	28,369	$	(8,486	)	$	19,883	$	15,888		$	3,995

The provision for credit losses on loans and leases in Q1 2023 was $18.0 million, compared to $27.9 million in Q4 2022. The provision in Q1 2023 was primarily due to our recognition of weaker macroeconomic forecasts, as compared to provision in Q4 2022, which was primarily due to one-time charge-offs of $11.0 million for certain loans originated under the PPP program that were subsequently determined to be ineligible for SBA forgiveness and guarantee and ultimately deemed uncollectible, as well as loan growth and our recognition of weaker macroeconomic forecasts. The provision for credit losses on available for sale investment securities in Q1 2023 was $1.6 million compared to provision of $0.3 million in Q4 2022.

The provision for credit losses on loans and leases in Q1 2023 was $18.0 million, compared to $15.3 million in Q1 2022. The provision in Q1 2023 was primarily due to our recognition of weaker macroeconomic forecasts, as compared to provision in Q1 2022, which was primarily due to loan growth. The provision for credit losses on available for sale investment securities in Q1 2023 was $1.6 million compared to $0.7 million in Q1 2022.

Asset Quality

The following table presents asset quality metrics as of the dates indicated:

(Dollars in thousands)	March 31, 2023			December 31, 2022			Increase (Decrease)			March 31, 2023			March 31, 2022			Increase (Decrease)
Non-performing assets ("NPAs"):
Nonaccrual / non-performing loans ("NPLs")	$	32,124		$	30,737		$	1,387		$	32,124		$	43,778		$	(11,654	)
Non-performing assets	$	32,260		$	30,783		$	1,477		$	32,260		$	43,864		$	(11,604	)
NPLs to total loans and leases		0.21	%		0.19	%					0.21	%		0.31	%
Reserves to NPLs		405.56	%		425.95	%					405.56	%		333.15	%
NPAs to total assets		0.15	%		0.15	%					0.15	%		0.23	%

Loans and leases ⁽¹⁾ risk ratings:
Commercial loans and leases ⁽²⁾
Pass	$	10,928,620		$	10,793,980		$	134,640		$	10,928,620		$	7,274,294		$	3,654,326
Special Mention		136,986			138,829			(1,843	)		136,986			128,622			8,364
Substandard		273,154			291,118			(17,964	)		273,154			301,141			(27,987	)
Total commercial loans and leases		11,338,760			11,223,927			114,833			11,338,760			7,704,057			3,634,703
Consumer loans
Performing		1,787,123			1,899,376			(112,253	)		1,787,123			2,399,860			(612,737	)
Non-performing		19,469			21,591			(2,122	)		19,469			14,938			4,531
Total consumer loans		1,806,592			1,920,967			(114,375	)		1,806,592			2,414,798			(608,206	)
Loans and leases receivable ⁽¹⁾	$	13,145,352		$	13,144,894		$	458		$	13,145,352		$	10,118,855		$	3,026,497

(1) Risk ratings are assigned to loans and leases held for investment, and excludes loans held for sale and loans receivable, mortgage warehouse, at fair value.
(2) Excludes loan receivable, PPP, as eligible PPP loans are fully guaranteed by the Small Business Administration.

Over the last decade, we have developed a suite of commercial loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s C&I, loans to mortgage companies, corporate and specialty lending lines of business, and multifamily loans for example, are characterized by conservative underwriting standards and low loss rates. Because of this emphasis, the Bank’s credit quality to date has been incredibly healthy despite an adverse economic environment. Maintaining strong asset quality also requires a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, we employ a bottom-up data driven approach to analyze the commercial portfolio.

Total consumer installment loans held for investment at March 31, 2023 were less than 6% of total assets, less than 9% of total loans and leases held for investment, and were supported by an allowance for credit losses of $62.1 million. At March 31, 2023, our consumer installment portfolio had the following characteristics: average original FICO score of 737, average debt-to-income of 20% and average borrower income of $106 thousand.

Non-performing loans at March 31, 2023 were essentially flat at 0.21% of total loans and leases, compared to 0.19% at December 31, 2022, and decreased from 0.31% at March 31, 2022.

Investment Securities

Our investment securities portfolio, including debt securities available for sale ("AFS") and held to maturity ("HTM") provides periodic cash flows through regular maturities and amortization, can be used as collateral to secure additional funding, and is an important component of our liquidity position.

The following table presents the composition of our investment securities portfolio as of the dates indicated:

(Dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Debt securities, available for sale	$	2,900,259	$	2,961,015	$	4,144,029
Equity securities		26,710		26,485		25,824
Investment securities, at fair value		2,926,969		2,987,500		4,169,853
Debt securities, held to maturity		870,294		840,259		—
Total investment securities portfolio	$	3,797,263	$	3,827,759	$	4,169,853

Critically important to performance during the recent banking crisis are the characteristics of a bank’s securities portfolio. While there may be virtually no credit risk in some of these portfolios, holding longer term and lower yielding securities is creating challenges for many banks. Our securities portfolio is highly liquid, short in duration, and high in yield. Our AFS debt securities portfolio has a spot yield of 4.91%, an effective duration of approximately 1.5 years, and approximately 47% are variable rate. Additionally, 62% of our AFS securities portfolio was AAA rated at March 31, 2023.

Our HTM debt securities portfolio represents only 4.0% of our total assets at March 31, 2023, and has a spot yield of 3.77% and an effective duration of approximately 4.0 years. Additionally, approximately 51% of our HTM securities are AAA rated and 37% are credit enhanced asset backed securities with no current expectation of credit losses.

Deposits

The following table presents the composition of our deposit portfolio as of the dates indicated:

(Dollars in thousands)	March 31, 2023		% of Total		December 31, 2022		% of Total		March 31, 2022		% of Total
Demand, non-interest bearing	$	3,487,517	19.7	%	$	1,885,045	10.4	%	$	4,594,428	28.0	%
Demand, interest bearing		5,791,302	32.7			8,476,027	46.7			5,591,468	34.1
Total demand deposits		9,278,819	52.4			10,361,072	57.1			10,185,896	62.1
Savings		924,359	5.2			811,798	4.5			802,395	4.9
Money market		2,019,633	11.4			2,734,217	15.1			4,981,077	30.3
Time deposits		5,500,806	31.0			4,249,866	23.3			446,192	2.7
Total deposits	$	17,723,617	100.0	%	$	18,156,953	100.0	%	$	16,415,560	100.0	%

Total deposits decreased $433.3 million, or 2.4%, to $17.7 billion at March 31, 2023 as compared to the prior quarter. Importantly, non-interest bearing demand deposits increased $1.6 billion, or 85.0%, to $3.5 billion. Time deposits increased $1.3 billion, or 29.4%, to $5.5 billion and savings deposits increased $112.6 million, or 13.9%, to $924.4 million. These increases were offset by decreases in interest bearing demand deposits of $2.7 billion, or 31.7%, to $5.8 billion and money market deposits of $714.6 million, or 26.1%, to $2.0 billion. The total average cost of deposits increased by 59 basis points to 3.32% in Q1 2023 from 2.73% in the prior quarter primarily due to higher market interest rates and a shift in deposit mix. Total estimated uninsured deposits was $3.5 billion¹, or 19% of total deposits (inclusive of accrued interest) at March 31, 2023. We are also highly focused on total deposits with contractual term to manage our liquidity profile and the funding of loans and securities.

Total deposits increased $1.3 billion, or 8.0%, to $17.7 billion at March 31, 2023 as compared to a year ago. Time deposits increased $5.1 billion to $5.5 billion. Interest bearing demand deposits increased $199.8 million, or 3.6%, to $5.8 billion. Savings deposits increased $122.0 million, or 15.2%, to $924.4 million. These increases were offset in part by decreases in money market deposits of $3.0 billion, or 59.5%, to $2.0 billion and non-interest bearing demand deposits of $1.1 billion, or 24.1%, to $3.5 billion. The total average cost of deposits increased by 299 basis points to 3.32% in Q1 2023 from 0.33% in the prior year primarily due to higher market interest rates and a shift in deposit mix.

__________________________________

¹ Uninsured deposits of $3.9 billion less state and municipal deposits of $393.9 million collateralized by our line of credit from FHLB and from our affiliates of $54.9 million.

Borrowings

The following table presents the composition of our borrowings as of the dates indicated:

(Dollars in thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Federal funds purchased	$	—	$	—	$	700,000
FHLB advances		2,052,143		800,000		—
Senior notes		123,645		123,580		223,230
Subordinated debt		182,021		181,952		181,742
Total borrowings	$	2,357,809	$	1,105,532	$	1,104,972

Total borrowings increased $1.3 billion, or 113.3%, to $2.4 billion at March 31, 2023 as compared to both the prior quarter and the year-ago quarter. This increase primarily resulted from increased FHLB borrowings to ensure ample cash on hand given the heightened liquidity risk in the banking system, particularly among regional banks in early March 2023. As of March 31, 2023, Customers' borrowing capacity with the FRB and FHLB was approximately $9.8 billion, of which $2.1 billion of available capacity was utilized in borrowings and $397.2 million was utilized to collateralize state and municipal deposits.

Capital

The following table presents certain capital amounts and ratios as of the dates indicated:

(Dollars in thousands except per share data)	March 31, 2023			December 31, 2022			March 31, 2022
Customers Bancorp, Inc.
Common Equity	$	1,283,226		$	1,265,167		$	1,239,612
Tangible Common Equity*	$	1,279,597		$	1,261,538		$	1,235,934
Common Equity to Total Assets		5.9	%		6.1	%		6.5	%
Tangible Common Equity to Tangible Assets*		5.9	%		6.0	%		6.5	%
Tangible Common Equity to Tangible Assets, excluding PPP*		6.0	%		6.3	%		7.3	%
Book Value per common share	$	41.08		$	39.08		$	37.61
Tangible Book Value per common share*	$	40.96		$	38.97		$	37.50
Common equity Tier 1 capital ratio ⁽¹⁾		9.6	%		9.6	%		9.9	%
Total risk based capital ratio ⁽¹⁾		12.3	%		12.2	%		12.9	%

(1) Regulatory capital ratios as of March 31, 2023 are estimates.
* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

Customers Bancorp's common equity increased $18.1 million to $1.3 billion, and tangible common equity* increased $18.1 million to $1.3 billion, at March 31, 2023 compared to the prior quarter, respectively, primarily due to earnings of $50.3 million, and reduced unrealized losses on investment securities of $6.8 million (net of taxes) deferred in accumulated other comprehensive income ("AOCI"). These increases were offset in part by $39.8 million of common share repurchases during Q1 2023. Similarly, book value per common share increased to $41.08 from $39.08, and tangible book value per common share* increased to $40.96 from $38.97, at March 31, 2023 and December 31, 2022, respectively.

Customers Bancorp's common equity increased $43.6 million to $1.3 billion, and tangible common equity* increased $43.7 million to $1.3 billion, at March 31, 2023 compared to a year ago, respectively, as earnings of $193.8 million more than offset a negative impact to AOCI from increased unrealized losses on investment securities of $93.7 million (net of taxes). Similarly, book value per common share increased to $41.08 from $37.61, and tangible book value per common share* increased to $40.96 from $37.50, at March 31, 2023 and March 31, 2022, respectively.

At the Customers Bancorp level, the total risk based capital ratio (estimate), common equity to total assets ratio and tangible common equity to tangible assets ratio ("TCE ratio"), excluding PPP loans*, were 12.3%, 5.9% and 6.0%, respectively, at March 31, 2023.

At the Customers Bank level, capital levels remained strong and well above regulatory minimums. At March 31, 2023, estimated Tier 1 capital and total risk-based capital were 11.3% and 12.6%, respectively.

Even though Customers remains well capitalized by all regulatory measures, its goal is to increase its CET 1 ratio at year-end 2023 to be between 11.0% - 11.5%, up about 150 basis points over current levels. "It is prudent to moderate or even shrink our balance sheet in this uncertain environment and have strong capital ratios," stated Jay Sidhu.

Key Profitability Trends

Net Interest Income

Net interest income totaled $149.9 million in Q1 2023, an increase of $14.8 million from Q4 2022, primarily due to higher PPP net interest income of $16.9 million resulting from increased recognition of deferred fees of $18.0 million mainly driven by higher loan forgiveness and guarantee payments by the SBA in Q1 2023. Net interest income earned by the core bank* decreased $2.1 million over Q4 2022, reflecting a shift in funding mix and two less days in Q1 2023. The increase in interest income on investment securities and core loans* of $4.4 million and $20.9 million, respectively, mostly due to higher interest rates on investment securities and variable loans in our commercial loan verticals, were offset by higher expenses paid on deposits and other borrowings of $30.5 million from a shift in funding mix and higher interest rates during Q1 2023. Excluding PPP loans, average interest-earning assets increased $480.3 million. Interest-earning asset growth was primarily driven by increases in interest earning deposits, specialty lending and consumer installment loans held for sale, partially offset by decreases in commercial loans to mortgage companies due to lower mortgage activity from rising interest rates. Compared to Q4 2022, total loan yields increased 106 basis points to 6.70% primarily due to higher interest rates on variable rate loans in commercial loans. Excluding PPP loans, the Q1 2023 total loan yield* was 60 basis points higher than Q4 2022 reflecting increased interest rates and the variable rate nature of the loan portfolio.

Net interest income totaled $149.9 million in Q1 2023, a decrease of $14.8 million from Q1 2022, primarily due to lower PPP net interest income of $20.5 million resulting from reduced recognition of deferred fees of $8.1 million driven by lower loan forgiveness in Q1 2023 and increased funding costs of $7.2 million, reflecting increases in funding rates. This decrease was offset in part by increased net interest income earned by the core bank* of $5.7 million, up 4.4% over Q1 2022, including increased interest income on investment securities and core loans* of $27.0 million and $112.1 million, respectively, mostly due to higher average balances and interest rates on variable loans in specialty lending. In addition, higher expenses paid on deposits and other borrowings of $146.3 million resulted mainly from a shift in funding mix and higher interest rates during Q1 2023. Excluding PPP loans, average interest-earning assets increased $3.7 billion. Interest-earning asset growth was primarily driven by increases in C&I loans and leases, mostly in the variable rate low-to-no credit risk specialty lending verticals and multifamily loans, offset in part by decreases in commercial loans to mortgage companies due to lower mortgage activity from rising interest rates. Total consumer installment loans decreased in Q1 2023 as compared to Q1 2022, as installment loans held for investment decreased primarily for risk management purposes. Compared to Q1 2022, total loan yields increased 203 basis points to 6.70% primarily due to higher interest rates on variable rate loans in specialty lending, partially offset by lower PPP yields driven by lower deferred fee recognition. Excluding PPP loans, the Q1 2023 total loan yield* was 203 basis points higher than Q1 2022 reflecting increased interest rates and the variable rate nature of the loan portfolio.

Non-Interest Income

The following table presents details of non-interest income for the periods indicated:

	Three Months Ended					Increase (Decrease)			Three Months Ended					Increase (Decrease)
(Dollars in thousands)	March 31, 2023		December 31, 2022			Increase (Decrease)			March 31, 2023		March 31, 2022			Increase (Decrease)
Commercial lease income	$	9,326	$	8,135		$	1,191		$	9,326	$	5,895		$	3,431
Loan fees		3,990		4,017			(27	)		3,990		2,545			1,445
Bank-owned life insurance		2,647		1,975			672			2,647		8,326			(5,679	)
Mortgage warehouse transactional fees		1,074		1,295			(221	)		1,074		2,015			(941	)
Gain (loss) on sale of SBA and other loans		—		—			—			—		1,507			(1,507	)
Net gain (loss) on sale of investment securities		—		(16,937	)		16,937			—		(1,063	)		1,063
Legal settlement gain		—		7,519			(7,519	)		—		—			—
Other		1,084		1,341			(257	)		1,084		1,973			(889	)
Total non-interest income	$	18,121	$	7,345		$	10,776		$	18,121	$	21,198		$	(3,077	)

Non-interest income totaled $18.1 million for Q1 2023, an increase of $10.8 million compared to Q4 2022. The increase was primarily due to losses realized from the sale of investment securities of $16.9 million to rebalance the investment portfolio with higher interest-earning securities in Q4 2022, higher commercial lease income of $1.2 million from continued growth and death benefits paid by insurance carriers under the bank-owned life insurance policies of $0.7 million. These increases were partially offset by a $7.5 million gain from a court-approved settlement with a third party PPP service provider in Q4 2022.

Non-interest income totaled $18.1 million for Q1 2023, a decrease of $3.1 million compared to Q1 2022. The decrease was primarily due to lower death benefits paid by insurance carriers under the bank-owned life insurance policies of $5.7 million, reduced mortgage warehouse transactional fees from lower housing activity due to rising interest rates of $0.9 million, and reduced gains realized from sales of SBA loans of $1.5 million as there were no such sales in Q1 2023. These decreases were offset partially by increases in commercial lease income of $3.4 million and loan fees of $1.4 million resulting from continued growth and reduced losses on securities sales of $1.1 million as there were no such sales in Q1 2023.

Non-Interest Expense

The following table presents details of non-interest expense for the periods indicated:

	Three Months Ended				Increase (Decrease)			Three Months Ended				Increase (Decrease)
(Dollars in thousands)	March 31, 2023		December 31, 2022		Increase (Decrease)			March 31, 2023		March 31, 2022		Increase (Decrease)
Salaries and employee benefits	$	32,345	$	29,194	$	3,151		$	32,345	$	26,607	$	5,738
Technology, communication and bank operations		16,589		18,604		(2,015	)		16,589		24,068		(7,479	)
Commercial lease depreciation		7,875		6,518		1,357			7,875		4,942		2,933
Professional services		7,596		6,825		771			7,596		6,956		640
Loan servicing		4,661		4,460		201			4,661		2,371		2,290
Occupancy		2,760		3,672		(912	)		2,760		3,050		(290	)
FDIC assessments, non-income taxes and regulatory fees		2,728		2,339		389			2,728		2,383		345
Advertising and promotion		1,049		1,111		(62	)		1,049		315		734
Other		4,530		5,696		(1,166	)		4,530		3,115		1,415
Total non-interest expense	$	80,133	$	78,419	$	1,714		$	80,133	$	73,807	$	6,326

The management of non-interest expenses remains a priority for us. However, this will not deter us from making investments in new technologies to support efficient and responsible growth in the future.

Non-interest expenses totaled $80.1 million in Q1 2023, an increase of $1.7 million compared to Q4 2022. The increase was primarily attributable to increased salaries and employee benefits of $3.2 million driven by higher payroll taxes, benefits and severance accruals and higher commercial lease depreciation of $1.4 million resulting from continued growth in our equipment finance business. These increases were offset in part by decreases of $2.0 million in deposit servicing-related expenses resulting from lower servicing fees and the discontinuation of interchange maintenance fees paid to BM Technologies offset in part by higher software-related expenses and reduced other expenses of $1.2 million primarily due to lower loan workout expenses.

Non-interest expenses totaled $80.1 million in Q1 2023, an increase of $6.3 million compared to Q1 2022. The increase was primarily attributable to increases of $5.7 million in salaries and employee benefits due to higher headcount, annual merit increases, severance accruals and SERP expenses, $2.9 million in commercial lease depreciation from continued growth, $2.3 million in loan servicing for portfolios serviced by third parties, $0.7 million in advertising and promotion mostly due to higher spending on media and advertising agencies for our deposit products and $1.4 million in other expenses mostly due to higher provision for credit losses on unfunded lending commitments and operating losses. These increases were offset in part by a decrease of $7.5 million in deposit servicing-related expenses mostly due to lower servicing fees and the discontinuation of interchange maintenance fees paid to BM Technologies, offset by higher software licenses, fees paid for software as a service and other technology-related expenses.

Taxes

Income tax expense increased by $7.4 million to $14.6 million in Q1 2023 from $7.1 million in Q4 2022 primarily due to higher pre-tax income.

Income tax expense decreased by $4.8 million to $14.6 million in Q1 2023 from $19.3 million in Q1 2022 primarily due to lower pre-tax income and increased income tax credits.

The effective tax rate for Q1 2023 was 21%. Customers expects the full-year 2023 effective tax rate to be approximately 22% to 24%.

Outlook

“Looking ahead, we will continue to moderate growth, or even reduce the size of the balance sheet, as we optimize the balance sheet and materially improve our capital ratios, maximize our efficiency ratio with prudent expense management, and continue to improve deposits and liquidity. We expect 2023 core loans to be essentially flat to down. Deposits are expected to remain relatively flat with a focus on improving our funding profile and reducing high cost deposits. We believe our net interest margin has troughed with expansion opportunities throughout the remainder of 2023. We expect net interest margin, excluding PPP* to increase throughout 2023 by about 20 basis points to 3.00% or higher. 2023 Core EPS (excluding PPP)* is still expected to be about $6.00 with a return on common equity of over 15%. Core non-interest expense* is expected to increase between 5% - 7% in 2023 and we are targeting a CET 1 ratio of approximately 11% - 11.5% by year-end 2023. We are focused on improving the quality of our balance sheet and deposit franchise, improving capital and liquidity, maintaining superior credit quality, expanding our net interest margin, and achieving our tangible book value guidance in excess of $45 by year-end 2023,” concluded Jay Sidhu.


* Non-GAAP measure. Customers' reasons for the use of the non-GAAP measure and a detailed reconciliation between the non-GAAP measure and the comparable GAAP amount are included at the end of this document.

Webcast

Date:							Friday, April 28, 2023
Time:							9:00 AM EDT

The live audio webcast, presentation slides, and earnings press release will be made available at https://www.customersbank.com/investor-relations/ and at the Customers Bancorp 1st Quarter Earnings Webcast.

You may submit questions in advance of the live webcast by emailing our Communications Director, David Patti at dpatti@customersbank.com; questions may also be asked during the webcast through the webcast application.

The webcast will be archived for viewing on the Customers Bank Investor Relations page and available beginning approximately two hours after the conclusion of the live event.

Institutional Background

Customers Bancorp, Inc. (NYSE:CUBI) is one of the nation’s top-performing banking companies with over $20 billion in assets, making it one of the 100 largest bank holding companies in the US. Through its primary subsidiary, Customers Bank, commercial and consumer clients benefit from a full suite of technology-enabled tailored product experience delivered by best-in-class customer service. A pioneer in Banking-as-a-Service and digital banking products, Customers Bank is one of the very few banks that provides a blockchain-based 24/7/365 digital payment solution. In addition to traditional lines such as C&I lending, commercial real estate lending, and multifamily lending, Customers Bank also provides a number of national corporate banking services to Specialty Lending clients. Major accolades include:

#34 out of the 100 largest publicly traded banks in 2023 per Forbes;
#64 on Fortune Magazine’s 2022 list of the 100 fastest growing companies in America;
#6 in top-performing banks with assets between $10 billion and $50 billion in 2021 per American Banker; and
#3 top-performing bank with over $10 billion in assets at year-end 2021 per S&P Global S&P Global Market Intelligence.

A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender. Learn more: 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,” “project,” 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 impact of the ongoing pandemic on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, 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 affect 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, higher inflation and its impacts, and the effects of any changes in accounting standards or policies. 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, 2022, 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.

Q1 2023 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended March 31, 2023 and the preceding four quarters:

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
EARNINGS SUMMARY - UNAUDITED

(Dollars in thousands, except per share data and stock price data)		Q1			Q4			Q3			Q2			Q1
			2023			2022			2022			2022			2022

GAAP Profitability Metrics:
Net income available to common shareholders		$	50,265		$	25,623		$	61,364		$	56,519		$	74,896
Per share amounts:
	Earnings per share - basic	$	1.58		$	0.79		$	1.89		$	1.73		$	2.27
	Earnings per share - diluted	$	1.55		$	0.77		$	1.85		$	1.68		$	2.18
	Book value per common share ⁽¹⁾	$	41.08		$	39.08		$	38.46		$	37.46		$	37.61
	CUBI stock price ⁽¹⁾	$	18.52		$	28.34		$	29.48		$	33.90		$	52.14
	CUBI stock price as % of book value ⁽¹⁾		45	%		73	%		77	%		90	%		139	%
Average shares outstanding - basic			31,819,203			32,413,459			32,455,814			32,712,616			32,957,033
Average shares outstanding - diluted			32,345,017			33,075,422			33,226,607			33,579,013			34,327,065
Shares outstanding ⁽¹⁾			31,239,750			32,373,697			32,475,502			32,449,486			32,957,847
Return on average assets ("ROAA")			1.03	%		0.55	%		1.24	%		1.17	%		1.63	%
Return on average common equity ("ROCE")			16.00	%		8.05	%		19.33	%		18.21	%		24.26	%
Net interest margin, tax equivalent			2.96	%		2.67	%		3.16	%		3.39	%		3.60	%
Efficiency ratio			47.71	%		49.20	%		50.00	%		42.14	%		39.42	%
Non-GAAP Profitability Metrics ⁽²⁾:
Core earnings		$	51,143		$	39,368		$	82,270		$	59,367		$	75,410
Adjusted pre-tax pre-provision net income		$	89,282		$	81,377		$	100,994		$	105,692		$	112,649
Per share amounts:
	Core earnings per share - diluted	$	1.58		$	1.19		$	2.48		$	1.77		$	2.20
	Tangible book value per common share ⁽¹⁾	$	40.96		$	38.97		$	38.35		$	37.35		$	37.50
	CUBI stock price as % of tangible book value ⁽¹⁾		45	%		73	%		77	%		91	%		139	%
Core ROAA			1.05	%		0.81	%		1.64	%		1.23	%		1.64	%
Core ROCE			16.28	%		12.36	%		25.91	%		19.13	%		24.43	%
Adjusted ROAA - pre-tax and pre-provision			1.72	%		1.56	%		1.95	%		2.11	%		2.39	%
Adjusted ROCE - pre-tax and pre-provision			27.33	%		24.59	%		31.01	%		33.37	%		35.89	%
Net interest margin, tax equivalent, excluding PPP loans			2.80	%		2.87	%		3.18	%		3.32	%		3.32	%
Core efficiency ratio			47.09	%		49.12	%		42.57	%		41.74	%		39.47	%
Asset Quality:
Net charge-offs		$	18,651		$	27,164		$	18,497		$	13,481		$	7,226
Annualized net charge-offs to average total loans and leases			0.49	%		0.70	%		0.47	%		0.36	%		0.21	%
Non-performing loans ("NPLs") to total loans and leases⁽¹⁾			0.21	%		0.19	%		0.18	%		0.18	%		0.31	%
Reserves to NPLs ⁽¹⁾			405.56	%		425.95	%		466.34	%		557.76	%		333.15	%
Non-performing assets ("NPAs") to total assets			0.15	%		0.15	%		0.14	%		0.14	%		0.23	%
Customers Bank Capital Ratios ⁽³⁾:
Common equity Tier 1 capital to risk-weighted assets			11.3	%		11.21	%		11.42	%		11.46	%		11.60	%
Tier 1 capital to risk-weighted assets			11.3	%		11.21	%		11.42	%		11.46	%		11.60	%
Total capital to risk-weighted assets			12.6	%		12.40	%		12.65	%		12.91	%		13.03	%
Tier 1 capital to average assets (leverage ratio)			8.1	%		8.15	%		8.10	%		8.09	%		8.21	%

(1) Metric is a spot balance for the last day of each quarter presented.
(2) Customers' reasons for the use of these non-GAAP measures and a detailed reconciliation between the non-GAAP measures and the comparable GAAP amounts are included at the end of this document.
(3) Regulatory capital ratios are estimated for Q1 2023 and actual for the remaining periods. In accordance with regulatory capital rules, Customers elected to apply the CECL capital transition provisions which delayed the effects of CECL on regulatory capital for two years until January 1, 2022, followed by a three-year transition period. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of March 31, 2023, our regulatory capital ratios reflected 50%, or $30.8 million, benefit associated with the CECL transition provisions.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Dollars in thousands, except per share data)
	Q1		Q4			Q3			Q2			Q1
	2023			2022			2022			2022			2022
Interest income:
Loans and leases	$	244,212	$	217,471		$	200,438		$	168,920		$	157,120
Investment securities		47,316		42,953			30,546			25,442			20,295
Loans held for sale		11,701		1,269			19			21			55
Interest earning deposits		10,395		6,754			2,949			919			330
Other		1,321		1,200			1,964			1,032			5,676
Total interest income		314,945		269,647			235,916			196,334			183,476

Interest expense:
Deposits		143,930		124,366			65,380			22,781			13,712
FHLB advances		10,370		4,464			4,684			2,316			—
FRB advances		6,286		—			—			—			—
Subordinated debt		2,689		2,688			2,689			2,689			2,689
Other borrowings		1,771		2,992			4,131			3,696			2,376
Total interest expense		165,046		134,510			76,884			31,482			18,777
Net interest income		149,899		135,137			159,032			164,852			164,699
Provision (benefit) for credit losses		19,603		28,216			(7,994	)		23,847			15,997
Net interest income after provision (benefit) for credit losses		130,296		106,921			167,026			141,005			148,702

Non-interest income:
Commercial lease income		9,326		8,135			7,097			6,592			5,895
Loan fees		3,990		4,017			3,008			2,618			2,545
Bank-owned life insurance		2,647		1,975			3,449			1,947			8,326
Mortgage warehouse transactional fees		1,074		1,295			1,545			1,883			2,015
Gain (loss) on sale of SBA and other loans		—		—			106			1,542			1,507
Gain (loss) on sale of consumer installment loans		—		—			(23,465	)		—			—
Net gain (loss) on sale of investment securities		—		(16,937	)		(2,135	)		(3,029	)		(1,063	)
Legal settlement gain		—		7,519			—			—			—
Other		1,084		1,341			1,378			1,193			1,973
Total non-interest income		18,121		7,345			(9,017	)		12,746			21,198

Non-interest expense:
Salaries and employee benefits		32,345		29,194			31,230			25,334			26,607
Technology, communication and bank operations		16,589		18,604			19,588			22,738			24,068
Commercial lease depreciation		7,875		6,518			5,966			5,552			4,942
Professional services		7,596		6,825			6,269			7,415			6,956
Loan servicing		4,661		4,460			3,851			4,341			2,371
Occupancy		2,760		3,672			2,605			4,279			3,050
FDIC assessments, non-income taxes and regulatory fees		2,728		2,339			2,528			1,619			2,383
Advertising and promotion		1,049		1,111			762			353			315
Other		4,530		5,696			3,399			4,574			3,115
Total non-interest expense		80,133		78,419			76,198			76,205			73,807
Income before income tax expense		68,284		35,847			81,811			77,546			96,093
Income tax expense		14,563		7,136			17,899			18,896			19,332
Net income		53,721		28,711			63,912			58,650			76,761
Preferred stock dividends		3,456		3,088			2,548			2,131			1,865
Net income available to common shareholders	$	50,265	$	25,623		$	61,364		$	56,519		$	74,896

Basic earnings per common share	$	1.58	$	0.79		$	1.89		$	1.73		$	2.27
Diluted earnings per common share		1.55		0.77			1.85			1.68			2.18

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - UNAUDITED
(Dollars in thousands)
	March 31,			December 31,			September 30,			June 30,			March 31,
		2023			2022			2022			2022			2022
ASSETS
Cash and due from banks	$	77,251		$	58,025		$	41,520		$	66,703		$	55,515
Interest earning deposits		1,969,434			397,781			362,945			178,475			219,085
Cash and cash equivalents		2,046,685			455,806			404,465			245,178			274,600
Investment securities, at fair value		2,926,969			2,987,500			2,943,694			3,144,882			4,169,853
Investment securities held to maturity		870,294			840,259			886,294			495,039			—
Loans held for sale		424,057			328,312			5,224			6,595			3,003
Loans receivable, mortgage warehouse, at fair value		1,247,367			1,323,312			1,569,090			1,874,603			1,755,758
Loans receivable, PPP		246,258			998,153			1,154,632			1,570,160			2,195,902
Loans and leases receivable		13,145,352			13,144,894			12,607,742			12,212,995			10,118,855
Allowance for credit losses on loans and leases		(130,281	)		(130,924	)		(130,197	)		(156,530	)		(145,847	)
Total loans and leases receivable, net of allowance for credit losses on loans and leases		14,508,696			15,335,435			15,201,267			15,501,228			13,924,668
FHLB, Federal Reserve Bank, and other restricted stock		124,733			74,196			64,112			74,626			54,553
Accrued interest receivable		123,754			123,374			107,621			98,727			94,669
Bank premises and equipment, net		8,581			9,025			6,610			6,755			8,233
Bank-owned life insurance		339,607			338,441			336,130			335,153			332,239
Goodwill and other intangibles		3,629			3,629			3,629			3,629			3,678
Other assets		374,609			400,135			408,575			340,184			298,212
Total assets	$	21,751,614		$	20,896,112		$	20,367,621		$	20,251,996		$	19,163,708

LIABILITIES AND SHAREHOLDERS' EQUITY
Demand, non-interest bearing deposits	$	3,487,517		$	1,885,045		$	2,993,793		$	4,683,030		$	4,594,428
Interest bearing deposits		14,236,100			16,271,908			14,528,645			12,261,689			11,821,132
Total deposits		17,723,617			18,156,953			17,522,438			16,944,719			16,415,560
Federal funds purchased		—			—			365,000			770,000			700,000
FHLB advances		2,052,143			800,000			500,000			635,000			—
Other borrowings		123,645			123,580			123,515			123,450			223,230
Subordinated debt		182,021			181,952			181,882			181,812			181,742
Accrued interest payable and other liabilities		249,168			230,666			287,855			243,625			265,770
Total liabilities		20,330,594			19,493,151			18,980,690			18,898,606			17,786,302

Preferred stock		137,794			137,794			137,794			137,794			137,794
Common stock		35,258			35,012			34,948			34,922			34,882
Additional paid in capital		552,255			551,721			549,066			545,670			542,402
Retained earnings		974,399			924,134			898,511			837,147			780,628
Accumulated other comprehensive income (loss), net		(156,276	)		(163,096	)		(156,126	)		(124,881	)		(62,548	)
Treasury stock, at cost		(122,410	)		(82,604	)		(77,262	)		(77,262	)		(55,752	)
Total shareholders' equity		1,421,020			1,402,961			1,386,931			1,353,390			1,377,406
Total liabilities and shareholders' equity	$	21,751,614		$	20,896,112		$	20,367,621		$	20,251,996		$	19,163,708

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET / NET INTEREST MARGIN - UNAUDITED
(Dollars in thousands)
	Three Months Ended
	March 31, 2023						December 31, 2022						March 31, 2022
	Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Average Balance		Interest Income or Expense		Average Yield or Cost (%)
Assets
Interest earning deposits	$	914,149	$	10,395	4.61	%	$	693,563	$	6,754	3.86	%	$	826,240	$	329	0.16	%
Investment securities ⁽¹⁾		4,031,247		47,316	4.69	%		4,061,555		42,953	4.23	%		4,036,966		20,295	2.01	%
Loans and leases:
Commercial & industrial:
Specialty lending loans and leases ⁽²⁾		5,694,168		103,688	7.38	%		5,529,567		90,885	6.52	%		2,730,990		23,391	3.47	%
Other commercial & industrial loans ⁽²⁾		1,705,205		25,570	6.08	%		1,670,000		22,796	5.42	%		1,393,418		13,268	3.86	%
Commercial loans to mortgage companies		1,262,139		17,412	5.59	%		1,376,760		17,701	5.10	%		1,836,647		14,006	3.09	%
Multifamily loans		2,206,600		20,470	3.76	%		2,235,885		22,481	3.99	%		1,531,846		13,766	3.64	%
Loans receivable, PPP		889,235		23,551	10.74	%		1,065,919		7,249	2.70	%		2,641,318		36,894	5.66	%
Non-owner occupied commercial real estate loans		1,449,722		20,199	5.65	%		1,430,420		18,536	5.14	%		1,312,210		12,207	3.77	%
Residential mortgages		542,909		5,598	4.18	%		524,344		5,462	4.13	%		416,417		3,680	3.58	%
Installment loans		1,727,995		39,425	9.25	%		1,555,108		33,630	8.58	%		1,794,145		39,963	9.03	%
Total loans and leases ⁽³⁾		15,477,973		255,913	6.70	%		15,388,003		218,740	5.64	%		13,656,991		157,175	4.67	%
Other interest-earning assets		91,308		1,321	5.87	%		67,907		1,200	7.01	%		52,111		5,677	NM⁽⁶⁾
Total interest-earning assets		20,514,677		314,945	6.21	%		20,211,028		269,647	5.30	%		18,572,308		183,476	4.00	%
Non-interest-earning assets		538,243						506,334						557,022
Total assets	$	21,052,920					$	20,717,362					$	19,129,330
Liabilities
Interest checking accounts	$	7,494,379	$	70,485	3.81	%	$	8,536,962	$	70,041	3.26	%	$	5,769,372	$	7,730	0.54	%
Money market deposit accounts		2,470,004		20,783	3.41	%		3,094,206		21,220	2.72	%		4,880,051		4,674	0.39	%
Other savings accounts		822,312		6,286	3.10	%		669,466		3,368	2.00	%		880,113		784	0.36	%
Certificates of deposit		4,504,333		46,376	4.18	%		3,259,801		29,737	3.62	%		450,644		524	0.47	%
Total interest-bearing deposits ⁽⁴⁾		15,291,028		143,930	3.82	%		15,560,435		124,366	3.17	%		11,980,180		13,712	0.46	%
Federal funds purchased		15,333		188	4.97	%		151,467		1,437	3.76	%		88,611		73	0.33	%
Borrowings		1,788,116		20,928	4.75	%		819,032		8,707	4.22	%		532,610		4,992	3.80	%
Total interest-bearing liabilities		17,094,477		165,046	3.91	%		16,530,934		134,510	3.23	%		12,601,401		18,777	0.60	%
Non-interest-bearing deposits ⁽⁴⁾		2,299,295						2,514,316						4,900,983
Total deposits and borrowings		19,393,772			3.45	%		19,045,250			2.80	%		17,502,384			0.43	%
Other non-interest-bearing liabilities		247,575						271,129						237,131
Total liabilities		19,641,347						19,316,379						17,739,515
Shareholders' equity		1,411,573						1,400,983						1,389,815
Total liabilities and shareholders' equity	$	21,052,920					$	20,717,362					$	19,129,330
Net interest income				149,899						135,137						164,699
Tax-equivalent adjustment				375						342						239
Net interest earnings			$	150,274					$	135,479					$	164,938
Interest spread					2.76	%					2.50	%					3.57	%
Net interest margin					2.95	%					2.66	%					3.59	%
Net interest margin tax equivalent					2.96	%					2.67	%					3.60	%
Net interest margin tax equivalent excl. PPP ⁽⁵⁾					2.80	%					2.87	%					3.32	%

(1) For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(2) Includes owner occupied commercial real estate loans.
(3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.
(4) Total costs of deposits (including interest bearing and non-interest bearing) were 3.32%, 2.73% and 0.33% for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, presented to approximate interest income as a taxable asset and excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
(6) Not meaningful.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END LOAN AND LEASE COMPOSITION - UNAUDITED
(Dollars in thousands)
	March 31,		December 31,		September 30,		June 30,		March 31,
	2023		2022		2022		2022		2022
Loans and leases held for investment
Commercial:
Commercial & industrial:
Specialty lending	$	5,519,176	$	5,412,887	$	5,103,974	$	4,599,640	$	2,973,544
Other commercial & industrial		1,168,161		1,135,336		1,064,332		1,037,444		947,895
Multifamily		2,195,211		2,213,019		2,263,268		2,008,784		1,705,027
Loans to mortgage companies		1,374,894		1,447,919		1,708,587		1,975,189		1,830,121
Commercial real estate owner occupied		895,314		885,339		726,670		710,577		701,893
Loans receivable, PPP		246,258		998,153		1,154,632		1,570,160		2,195,902
Commercial real estate non-owner occupied		1,245,248		1,290,730		1,263,211		1,152,869		1,140,311
Construction		188,123		162,009		136,133		195,687		161,024
Total commercial loans and leases		12,832,385		13,545,392		13,420,807		13,250,350		11,655,717
Consumer:
Residential		494,815		497,952		465,772		457,768		466,423
Manufactured housing		43,272		45,076		46,990		48,570		50,669
Installment:
Personal		849,420		964,641		1,056,432		1,613,628		1,584,011
Other		419,085		413,298		341,463		287,442		313,695
Total installment loans		1,268,505		1,377,939		1,397,895		1,901,070		1,897,706
Total consumer loans		1,806,592		1,920,967		1,910,657		2,407,408		2,414,798
Total loans and leases held for investment	$	14,638,977	$	15,466,359	$	15,331,464	$	15,657,758	$	14,070,515

Loans held for sale
Commercial:
Multifamily	$	4,051	$	4,079	$	4,108	$	4,136	$	—
Commercial real estate non-owner occupied		16,000		—		—		—		—
Total commercial loans and leases		20,051		4,079		4,108		4,136		—
Consumer:
Residential		821		829		1,116		2,459		3,003
Installment:
Personal		307,336		133,801		—		—		—
Other		95,849		189,603		—		—		—
Total installment loans		403,185		323,404		—		—		—
Total consumer loans		404,006		324,233		1,116		2,459		3,003
Total loans held for sale	$	424,057	$	328,312	$	5,224	$	6,595	$	3,003
Total loans and leases portfolio	$	15,063,034	$	15,794,671	$	15,336,688	$	15,664,353	$	14,073,518

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
PERIOD END DEPOSIT COMPOSITION - UNAUDITED
(Dollars in thousands)
	March 31,		December 31,		September 30,		June 30,		March 31,
	2023		2022		2022		2022		2022

Demand, non-interest bearing	$	3,487,517	$	1,885,045	$	2,993,793	$	4,683,030	$	4,594,428
Demand, interest bearing		5,791,302		8,476,027		7,124,663		6,644,398		5,591,468
Total demand deposits		9,278,819		10,361,072		10,118,456		11,327,428		10,185,896
Savings		924,359		811,798		592,002		640,062		802,395
Money market		2,019,633		2,734,217		4,913,967		4,254,205		4,981,077
Time deposits		5,500,806		4,249,866		1,898,013		723,024		446,192
Total deposits	$	17,723,617	$	18,156,953	$	17,522,438	$	16,944,719	$	16,415,560

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY - UNAUDITED
(Dollars in thousands)	As of March 31, 2023										As of December 31, 2022										As of March 31, 2022
	Total loans		Non accrual /NPLs		Allowance for credit losses		Total NPLs to total loans		Total reserves to total NPLs		Total loans		Non accrual /NPLs		Allowance for credit losses		Total NPLs to total loans		Total reserves to total NPLs		Total loans		Non accrual /NPLs		Allowance for credit losses		Total NPLs to total loans		Total reserves to total NPLs
	Total loans		Non accrual /NPLs		Allowance for credit losses		Total NPLs to total loans		Total reserves to total NPLs		Total loans		Non accrual /NPLs		Allowance for credit losses		Total NPLs to total loans		Total reserves to total NPLs		Total loans		Non accrual /NPLs		Allowance for credit losses		Total NPLs to total loans		Total reserves to total NPLs
Loan type
Commercial & industrial, including specialty lending ⁽¹⁾	$	6,814,864	$	3,886	$	20,050	0.06	%	515.95	%	$	6,672,830	$	1,761	$	17,582	0.03	%	998.41	%	$	3,995,802	$	5,490	$	10,765	0.14	%	196.08	%
Multifamily		2,195,211		881		15,084	0.04	%	1712.15	%		2,213,019		1,143		14,541	0.05	%	1272.18	%		1,705,027		17,869		7,437	1.05	%	41.62	%
Commercial real estate owner occupied		895,314		3,621		8,472	0.40	%	233.97	%		885,339		2,768		6,454	0.31	%	233.16	%		701,893		2,191		3,841	0.31	%	175.31	%
Commercial real estate non-owner occupied		1,245,248		—		11,032	—	%	—	%		1,290,730		—		11,219	—	%	—	%		1,140,311		1,302		5,955	0.11	%	457.37	%
Construction		188,123		—		2,336	—	%	—	%		162,009		—		1,913	—	%	—	%		161,024		—		939	—	%	—	%
*Total commercial loans and leases receivable*		11,338,760		8,388		56,974	0.07	%	679.23	%		11,223,927		5,672		51,709	0.05	%	911.65	%		7,704,057		26,852		28,937	0.35	%	107.76	%
Residential		494,815		6,473		6,853	1.31	%	105.87	%		497,952		6,922		6,094	1.39	%	88.04	%		466,423		8,124		4,685	1.74	%	57.67	%
Manufactured housing		43,272		2,568		4,339	5.93	%	168.96	%		45,076		2,410		4,430	5.35	%	183.82	%		50,669		3,430		4,342	6.77	%	126.59	%
Installment		1,268,505		8,720		62,115	0.69	%	712.33	%		1,377,939		9,527		68,691	0.69	%	721.01	%		1,897,706		4,865		107,883	0.26	%	2217.53	%
*Total consumer loans receivable*		1,806,592		17,761		73,307	0.98	%	412.74	%		1,920,967		18,859		79,215	0.98	%	420.04	%		2,414,798		16,419		116,910	0.68	%	712.04	%
*Loans and leases receivable ⁽¹⁾*		13,145,352		26,149		130,281	0.20	%	498.23	%		13,144,894		24,531		130,924	0.19	%	533.71	%		10,118,855		43,271		145,847	0.43	%	337.05	%
*Loans receivable, PPP*		246,258		—		—	—	%	—	%		998,153		—		—	—	%	—	%		2,195,902		—		—	—	%	—	%
*Loans receivable, mortgage warehouse, at fair value*		1,247,367		—		—	—	%	—	%		1,323,312		—		—	—	%	—	%		1,755,758		—		—	—	%	—	%
*Total loans held for sale*		424,057		5,975		—	1.41	%	—	%		328,312		6,206		—	1.89	%	—	%		3,003		507		—	16.88	%	—	%
*Total portfolio*	$	15,063,034	$	32,124	$	130,281	0.21	%	405.56	%	$	15,794,671	$	30,737	$	130,924	0.19	%	425.95	%	$	14,073,518	$	43,778	$	145,847	0.31	%	333.15	%

(1) Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedules that follow this table.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
NET CHARGE-OFFS/(RECOVERIES) - UNAUDITED
(Dollars in thousands)
	Q1			Q4			Q3			Q2			Q1
		2023			2022			2022			2022			2022
*Loan type*
Commercial & industrial, including specialty lending ⁽¹⁾	$	(71	)	$	12,960		$	2,581		$	(416	)	$	(59	)
Multifamily		—			—			—			1,990			(337	)
Commercial real estate owner occupied		—			(2	)		—			(42	)		(7	)
Commercial real estate non-owner occupied		4,234			972			4,831			159			(8	)
Construction		(116	)		(10	)		(10	)		(103	)		(113	)
Residential		(2	)		7			(13	)		(39	)		(2	)
Installment		14,606			13,237			11,108			11,932			7,752
Total net charge-offs (recoveries) from loans held for investment	$	18,651		$	27,164		$	18,497		$	13,481		$	7,226

(1) Includes $11.0 million of one-time charge-offs from certain loans originated under the PPP program that were subsequently determined to be ineligible for SBA forgiveness and guarantee and were deemed uncollectible during the three months ended December 31, 2022.

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES - UNAUDITED

We believe that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions. These non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. These non-GAAP financial measures exclude from corresponding GAAP measures the impact of certain elements that we do not believe are representative of our ongoing financial results, which we believe enhance an overall understanding of our performance and increases comparability of our period to period results. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. The non-GAAP measures presented are not necessarily comparable to non-GAAP measures that may be presented by other financial institutions. Although non-GAAP financial measures are frequently used in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results of operations or financial condition as reported under GAAP.

The following tables present reconciliations of GAAP to non-GAAP measures disclosed within this document.

*Core Earnings - Customers Bancorp*
*Core Earnings - Customers Bancorp*	Q1 2023					Q4 2022				Q3 2022						Q2 2022						Q1 2022
(Dollars in thousands except per share data)	USD			Per share		USD		Per share		USD			Per share			USD			Per share			USD			Per share
GAAP net income to common shareholders	$	50,265		$	1.55	$	25,623	$	0.77	$	61,364		$	1.85		$	56,519		$	1.68		$	74,896		$	2.18
Reconciling items (after tax):
Severance expense		637			0.02		—		—		1,058			0.03			—			—			—			—
Impairments on fixed assets and leases		86			0.00		—		—		126			0.00			705			0.02			220			0.01
Loss on sale of consumer installment loans		—			—		—		—		18,221			0.55			—			—			—			—
(Gains) losses on investment securities		(49	)		0.00		13,543		0.41		1,859			0.06			2,494			0.07			1,030			0.03
Derivative credit valuation adjustment		204			0.01		202		0.01		(358	)		(0.01	)		(351	)		(0.01	)		(736	)		(0.02	)
Core earnings	$	51,143		$	1.58	$	39,368	$	1.19	$	82,270		$	2.48		$	59,367		$	1.77		$	75,410		$	2.20

*Core Earnings, excluding PPP - Customers Bancorp*
*Core Earnings, excluding PPP - Customers Bancorp*	Q1 2023					Q4 2022						Q3 2022						Q2 2022						Q1 2022
(Dollars in thousands except per share data)	USD			Per share		USD			Per share			USD			Per share			USD			Per share			USD			Per share
GAAP net income to common shareholders	$	50,265		$	1.55	$	25,623		$	0.77		$	61,364		$	1.85		$	56,519		$	1.68		$	74,896		$	2.18
Less: PPP net income (loss) (after tax)		9,606			0.30		(5,956	)		(0.18	)		5,846			0.18			13,066			0.39			24,713			0.72
Net income to common shareholders, excluding PPP		40,659			1.26		31,579			0.95			55,518			1.67			43,453			1.29			50,183			1.46
Reconciling items (after tax):
Severance expense		637			0.02		—			—			1,058			0.03			—			—			—			—
Impairments on fixed assets and leases		86			0.00		—			—			126			0.00			705			0.02			220			0.01
Loss on sale of consumer installment loans		—			—		—			—			18,221			0.55			—			—			—			—
(Gains) losses on investment securities		(49	)		0.00		13,543			0.41			1,859			0.06			2,494			0.07			1,030			0.03
Derivative credit valuation adjustment		204			0.01		202			0.01			(358	)		(0.01	)		(351	)		(0.01	)		(736	)		(0.02	)
Core earnings, excluding PPP	$	41,537		$	1.28	$	45,324		$	1.37		$	76,424		$	2.30		$	46,301		$	1.38		$	50,697		$	1.48


*Core Return on Average Assets - Customers Bancorp*
(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP net income	$	53,721		$	28,711		$	63,912		$	58,650		$	76,761
Reconciling items (after tax):
Severance expense		637			—			1,058			—			—
Impairments on fixed assets and leases		86			—			126			705			220
Loss on sale of consumer installment loans		—			—			18,221			—			—
(Gains) losses on investment securities		(49	)		13,543			1,859			2,494			1,030
Derivative credit valuation adjustment		204			202			(358	)		(351	)		(736	)
Core net income	$	54,599		$	42,456		$	84,818		$	61,498		$	77,275

Average total assets	$	21,052,920		$	20,717,362		$	20,514,366		$	20,056,020		$	19,129,330

Core return on average assets		1.05	%		0.81	%		1.64	%		1.23	%		1.64	%


*Core Return on Average Assets, excluding PPP - Customers Bancorp*
(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP net income	$	53,721		$	28,711		$	63,912		$	58,650		$	76,761
Less: PPP net income (loss) (after tax)		9,606			(5,956	)		5,846			13,066			24,713
Net income, excluding PPP		44,115			34,667			58,066			45,584			52,048
Reconciling items (after tax):
Severance expense		637			—			1,058			—			—
Impairments on fixed assets and leases		86			—			126			705			220
Loss on sale of consumer installment loans		—			—			18,221			—			—
(Gains) losses on investment securities		(49	)		13,543			1,859			2,494			1,030
Derivative credit valuation adjustment		204			202			(358	)		(351	)		(736	)
Core net income, excluding PPP	$	44,993		$	48,412		$	78,972		$	48,432		$	52,562

Average total assets	$	21,052,920		$	20,717,362		$	20,514,366		$	20,056,020		$	19,129,330

Core return on average assets, excluding PPP		0.87	%		0.93	%		1.53	%		0.97	%		1.11	%


*Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp*
(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP net income	$	53,721		$	28,711		$	63,912		$	58,650		$	76,761
Reconciling items:
Income tax expense		14,563			7,136			17,899			18,896			19,332
Provision (benefit) for credit losses		19,603			28,216			(7,994	)		23,847			15,997
Provision (benefit) for credit losses on unfunded commitments		280			153			254			608			(109	)
Severance expense		809			—			1,363			—			—
Impairments on fixed assets and leases		109			—			162			914			286
Loss on sale of consumer installment loans		—			—			23,465			—			—
(Gains) losses on investment securities		(62	)		16,909			2,394			3,232			1,339
Derivative credit valuation adjustment		259			252			(461	)		(455	)		(957	)
Adjusted net income - pre-tax pre-provision	$	89,282		$	81,377		$	100,994		$	105,692		$	112,649

Average total assets	$	21,052,920		$	20,717,362		$	20,514,366		$	20,056,020		$	19,129,330

Adjusted ROAA - pre-tax pre-provision		1.72	%		1.56	%		1.95	%		2.11	%		2.39	%


*Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision, excluding PPP - Customers Bancorp*
(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP net income	$	53,721		$	28,711		$	63,912		$	58,650		$	76,761
Less: PPP net income (loss) (after tax)		9,606			(5,956	)		5,846			13,066			24,713
Net income, excluding PPP		44,115			34,667			58,066			45,584			52,048
Reconciling items:
Income tax expense		14,563			7,136			17,899			18,896			19,332
Provision (benefit) for credit losses		19,603			28,216			(7,994	)		23,847			15,997
Provision (benefit) for credit losses on unfunded commitments		280			153			254			608			(109	)
Severance expense		809			—			1,363			—			—
Impairments on fixed assets and leases		109			—			162			914			286
Loss on sale of consumer installment loans		—			—			23,465			—			—
(Gains) losses on investment securities		(62	)		16,909			2,394			3,232			1,339
Derivative credit valuation adjustment		259			252			(461	)		(455	)		(957	)
Adjusted net income - pre-tax pre-provision, excluding PPP	$	79,676		$	87,333		$	95,148		$	92,626		$	87,936

Average total assets	$	21,052,920		$	20,717,362		$	20,514,366		$	20,056,020		$	19,129,330

Adjusted ROAA - pre-tax pre-provision, excluding PPP		1.53	%		1.67	%		1.84	%		1.85	%		1.86	%


*Core Return on Average Common Equity - Customers Bancorp*
(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP net income to common shareholders	$	50,265		$	25,623		$	61,364		$	56,519		$	74,896
Reconciling items (after tax):
Severance expense		637			—			1,058			—			—
Impairments on fixed assets and leases		86			—			126			705			220
Loss on sale of consumer installment loans		—			—			18,221			—			—
(Gains) losses on investment securities		(49	)		13,543			1,859			2,494			1,030
Derivative credit valuation adjustment		204			202			(358	)		(351	)		(736	)
Core earnings	$	51,143		$	39,368		$	82,270		$	59,367		$	75,410

Average total common shareholders' equity	$	1,273,780		$	1,263,190		$	1,259,711		$	1,244,819		$	1,252,022

Core return on average common equity		16.28	%		12.36	%		25.91	%		19.13	%		24.43	%


*Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp*
(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP net income to common shareholders	$	50,265		$	25,623		$	61,364		$	56,519		$	74,896
Reconciling items:
Income tax expense		14,563			7,136			17,899			18,896			19,332
Provision (benefit) for credit losses		19,603			28,216			(7,994	)		23,847			15,997
Provision (benefit) for credit losses on unfunded commitments		280			153			254			608			(109	)
Severance expense		809			—			1,363			—			—
Impairments on fixed assets and leases		109			—			162			914			286
Loss on sale of consumer installment loans		—			—			23,465			—			—
(Gains) losses on investment securities		(62	)		16,909			2,394			3,232			1,339
Derivative credit valuation adjustment		259			252			(461	)		(455	)		(957	)
Pre-tax pre-provision adjusted net income available to common shareholders	$	85,826		$	78,289		$	98,446		$	103,561		$	110,784

Average total common shareholders' equity	$	1,273,780		$	1,263,190		$	1,259,711		$	1,244,819		$	1,252,022

Adjusted ROCE - pre-tax pre-provision		27.33	%		24.59	%		31.01	%		33.37	%		35.89	%


*Net Interest Margin, Tax Equivalent, excluding PPP - Customers Bancorp*
(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP net interest income	$	149,899		$	135,137		$	159,032		$	164,852		$	164,699
PPP net interest (income) expense		(14,106	)		2,791			(9,632	)		(18,946	)		(34,615	)
Tax-equivalent adjustment		375			342			334			270			239
Net interest income, tax equivalent, excluding PPP	$	136,168		$	138,270		$	149,734		$	146,176		$	130,323


GAAP average total interest earning assets	$	20,514,677		$	20,211,028		$	20,021,455		$	19,525,936		$	18,572,308
Average PPP loans		(889,235	)		(1,065,919	)		(1,349,403	)		(1,863,429	)		(2,641,318	)
Adjusted average total interest earning assets, excluding PPP	$	19,625,442		$	19,145,109		$	18,672,052		$	17,662,507		$	15,930,990

Net interest margin, tax equivalent, excluding PPP		2.80	%		2.87	%		3.18	%		3.32	%		3.32	%


*Loan Yield, excluding PPP*
(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
Interest income on loans and leases	$	255,913		$	218,740		$	200,457		$	168,941		$	157,175

PPP interest income		(23,551	)		(7,249	)		(14,666	)		(20,572	)		(36,894	)
Interest income on core loans (Loans and leases, excluding PPP)	$	232,362		$	211,491		$	185,791		$	148,369		$	120,281


Average total loans and leases	$	15,477,973		$	15,388,003		$	15,653,983		$	14,918,498		$	13,656,991
Average PPP loans		(889,235	)		(1,065,919	)		(1,349,403	)		(1,863,429	)		(2,641,318	)
Adjusted average total loans and leases	$	14,588,738		$	14,322,084		$	14,304,580		$	13,055,069		$	11,015,673

Loan yield, excluding PPP		6.46	%		5.86	%		5.15	%		4.56	%		4.43	%


*Core Efficiency Ratio - Customers Bancorp*
(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP net interest income	$	149,899		$	135,137		$	159,032		$	164,852		$	164,699

GAAP non-interest income	$	18,121		$	7,345		$	(9,017	)	$	12,746		$	21,198
Loss on sale of consumer installment loans		—			—			23,465			—			—
(Gains) losses on investment securities		(62	)		16,909			2,394			3,232			1,339
Derivative credit valuation adjustment		259			252			(461	)		(455	)		(957	)
Core non-interest income		18,318			24,506			16,381			15,523			21,580
Core revenue	$	168,217		$	159,643		$	175,413		$	180,375		$	186,279


GAAP non-interest expense	$	80,133		$	78,419		$	76,198		$	76,205		$	73,807
Severance expense		(809	)		—			(1,363	)		—			—
Impairments on fixed assets and leases		(109	)		—			(162	)		(914	)		(286	)
Core non-interest expense	$	79,215		$	78,419		$	74,673		$	75,291		$	73,521

Core efficiency ratio ⁽¹⁾		47.09	%		49.12	%		42.57	%		41.74	%		39.47	%

(1) Core efficiency ratio calculated as core non-interest expense divided by core revenue.

*Tangible Common Equity to Tangible Assets - Customers Bancorp*

(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP total shareholders' equity	$	1,421,020		$	1,402,961		$	1,386,931		$	1,353,390		$	1,377,406
Reconciling items:
Preferred stock		(137,794	)		(137,794	)		(137,794	)		(137,794	)		(137,794	)
Goodwill and other intangibles		(3,629	)		(3,629	)		(3,629	)		(3,629	)		(3,678	)
Tangible common equity	$	1,279,597		$	1,261,538		$	1,245,508		$	1,211,967		$	1,235,934

GAAP total assets	$	21,751,614		$	20,896,112		$	20,367,621		$	20,251,996		$	19,163,708
Reconciling items:
Goodwill and other intangibles		(3,629	)		(3,629	)		(3,629	)		(3,629	)		(3,678	)
Tangible assets	$	21,747,985		$	20,892,483		$	20,363,992		$	20,248,367		$	19,160,030

Tangible common equity to tangible assets		5.9	%		6.0	%		6.1	%		6.0	%		6.5	%


*Tangible Common Equity to Tangible Assets, excluding PPP - Customers Bancorp*

(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP total shareholders' equity	$	1,421,020		$	1,402,961		$	1,386,931		$	1,353,390		$	1,377,406
Reconciling items:
Preferred stock		(137,794	)		(137,794	)		(137,794	)		(137,794	)		(137,794	)
Goodwill and other intangibles		(3,629	)		(3,629	)		(3,629	)		(3,629	)		(3,678	)
Tangible common equity	$	1,279,597		$	1,261,538		$	1,245,508		$	1,211,967		$	1,235,934

GAAP total assets	$	21,751,614		$	20,896,112		$	20,367,621		$	20,251,996		$	19,163,708
Loans receivable, PPP		(246,258	)		(998,153	)		(1,154,632	)		(1,570,160	)		(2,195,902	)
Total assets, excluding PPP	$	21,505,356		$	19,897,959		$	19,212,989		$	18,681,836		$	16,967,806
Reconciling items:
Goodwill and other intangibles		(3,629	)		(3,629	)		(3,629	)		(3,629	)		(3,678	)
Tangible assets, excluding PPP	$	21,501,727		$	19,894,330		$	19,209,360		$	18,678,207		$	16,964,128

Tangible common equity to tangible assets, excluding PPP		6.0	%		6.3	%		6.5	%		6.5	%		7.3	%


*Tangible Book Value per Common Share - Customers Bancorp*

(Dollars in thousands except share and per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
GAAP total shareholders' equity	$	1,421,020		$	1,402,961		$	1,386,931		$	1,353,390		$	1,377,406
Reconciling Items:
Preferred stock		(137,794	)		(137,794	)		(137,794	)		(137,794	)		(137,794	)
Goodwill and other intangibles		(3,629	)		(3,629	)		(3,629	)		(3,629	)		(3,678	)
Tangible common equity	$	1,279,597		$	1,261,538		$	1,245,508		$	1,211,967		$	1,235,934

Common shares outstanding		31,239,750			32,373,697			32,475,502			32,449,486			32,957,847

Tangible book value per common share	$	40.96		$	38.97		$	38.35		$	37.35		$	37.50


*Core Loans (Total Loans and Leases, excluding PPP)*

(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
Total loans and leases	$	15,063,034		$	15,794,671		$	15,336,688		$	15,664,353		$	14,073,518

Loans receivable, PPP		(246,258	)		(998,153	)		(1,154,632	)		(1,570,160	)		(2,195,902	)
Core Loans (Total loans and leases, excluding PPP)	$	14,816,776		$	14,796,518		$	14,182,056		$	14,094,193		$	11,877,616


*Core Loans Held for Investment* *(Total Loans and Leases Held for Investment, excluding PPP)*

(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
Total loans and leases, held for investment	$	14,638,977		$	15,466,359		$	15,331,464		$	15,657,758		$	14,070,515

Loans receivable, PPP		(246,258	)		(998,153	)		(1,154,632	)		(1,570,160	)		(2,195,902	)
Core Loans Held for Investment (Total loans and leases held for investment, excluding PPP)	$	14,392,719		$	14,468,206		$	14,176,832		$	14,087,598		$	11,874,613


*Total Assets, excluding PPP*

(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
Total assets	$	21,751,614		$	20,896,112		$	20,367,621		$	20,251,996		$	19,163,708

Loans receivable, PPP		(246,258	)		(998,153	)		(1,154,632	)		(1,570,160	)		(2,195,902	)
Total assets, excluding PPP	$	21,505,356		$	19,897,959		$	19,212,989		$	18,681,836		$	16,967,806


*Coverage of credit loss reserves for loans and leases held for investment, excluding PPP*

(Dollars in thousands except per share data)	Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
Loans and leases receivable	$	13,391,610		$	14,143,047		$	13,762,374		$	13,783,155		$	12,314,757

Loans receivable, PPP		(246,258	)		(998,153	)		(1,154,632	)		(1,570,160	)		(2,195,902	)
Loans and leases held for investment, excluding PPP	$	13,145,352		$	13,144,894		$	12,607,742		$	12,212,995		$	10,118,855

Allowance for credit losses on loans and leases	$	130,281		$	130,924		$	130,197		$	156,530		$	145,847

Coverage of credit loss reserves for loans and leases held for investment, excluding PPP		0.99	%		1.00	%		1.03	%		1.28	%		1.44	%

View source version on businesswire.com: https://www.businesswire.com/news/home/20230426006065/en/

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