Business Segments

3 Months Ended

Mar. 31, 2019

BUSINESS SEGMENTS

Customers' segment financial reporting reflects the manner in which its chief operating decision makers allocate resources and assess performance. Management has determined that Customers' operations consist of two reportable segments - Customers Bank Business Banking and BankMobile. Each segment generates revenues, manages risk, and offers distinct products and services to targeted customers through different delivery channels. The strategy, marketing, and analysis of these segments vary considerably.

The Customers Bank Business Banking segment is delivered predominately to commercial customers in Southeastern Pennsylvania, New York, New Jersey, Massachusetts, Rhode Island, New Hampshire, Washington D.C., and Illinois through a single-point-of-contact business model and provides liquidity to residential mortgage originators nationwide through commercial loans to mortgage companies. Lending and deposit gathering activities are focused primarily on privately held businesses, high-net-worth families, selected commercial real estate lending, commercial mortgage companies, and equipment finance. Revenues are generated primarily through net interest income (the difference between interest earned on loans and leases, investments, and other interest earning assets and interest paid on deposits and other borrowed funds) and other non-interest income, such as mortgage warehouse transactional fees and BOLI.

The BankMobile segment provides state-of-the-art high-tech digital banking and disbursement services to consumers, students, and the "under banked" nationwide, along with "Banking as a Service" offerings with white label partners. BankMobile is a full-service banking platform that is accessible to customers anywhere and anytime through the customer's smartphone or other web-enabled device. Revenues are currently being generated primarily through interchange and card revenue, deposit and wire transfer fees and university fees. The majority of revenue and expenses for BankMobile are related to the segment's operation of the ongoing business acquired through the Disbursement business acquisition and costs associated with the development of white label products for its partners.

The following tables present the operating results for Customers' reportable business segments for the three months ended March 31, 2019 and 2018. The segment financial results include directly attributable revenues and expenses. Consistent with the presentation of segment results to Customers' chief operating decision makers, overhead costs and preferred stock dividends are assigned to the Customers Bank Business Banking segment. The tax benefit assigned to BankMobile was based on an estimated effective tax rate of 23.15% for 2019 and 24.56% for 2018, respectively.



	Three Months Ended March 31, 2019
(amounts in thousands)	Customers Bank Business Banking		BankMobile			Consolidated
Interest income ⁽¹⁾	$	92,871	$	8,204		$	101,075
Interest expense	41,605		166			41,771
Net interest income	51,266		8,038			59,304
Provision for loan losses	2,976		1,791			4,767
Non-interest income	7,577		12,141			19,718
Non-interest expense	35,384		18,600			53,984
Income (loss) before income tax expense (benefit)	20,483		(212		)	20,271
Income tax expense (benefit)	4,880		(49		)	4,831
Net income (loss)	15,603		(163		)	15,440
Preferred stock dividends	3,615		—			3,615
Net income (loss) available to common shareholders	$	11,988	$	(163	)	$	11,825

As of March 31, 2019
Goodwill and other intangibles	$	3,629	$	12,544		$	16,173
Total assets	$	9,916,308	$	227,586		$	10,143,894
Total deposits	$	6,798,562	$	626,756		$	7,425,318
Total non-deposit liabilities	$	1,719,469	$	20,734		$	1,740,203

(1) Amounts reported include funds transfer pricing of $5.6 million for the three months ended March 31, 2019, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of low/no cost deposits.



	Three Months Ended March 31, 2018
(amounts in thousands)	Customers Bank Banking		BankMobile			Consolidated
Interest income ⁽²⁾	$	92,554	$	4,410		$	96,964
Interest expense	31,917		16			31,933
Net interest income	60,637		4,394			65,031
Provision for loan losses	1,874		243			2,117
Non-interest income	8,439		12,471			20,910
Non-interest expense	34,331		17,949			52,280
Income (loss) before income tax expense (benefit)	32,871		(1,327		)	31,544
Income tax expense (benefit)	7,728		(326		)	7,402
Net income (loss)	25,143		(1,001		)	24,142
Preferred stock dividends	3,615		—			3,615
Net income (loss) available to common shareholders	$	21,528	$	(1,001	)	$	20,527

As of March 31, 2018
Goodwill and other intangibles	$	3,630	$	13,847		$	17,477
Total assets	$	10,690,479	$	78,787		$	10,769,266
Total deposits	$	6,418,810	$	623,649		$	7,042,459
Total non-deposit liabilities	$	2,759,156	$	48,563		$	2,807,719

(2) Amounts reported include funds transfer pricing of $4.4 million for the three months ended March 31, 2018 credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of low/no cost deposits.