Business Segments

6 Months Ended

Jun. 30, 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 fintech 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 and six months ended June 30, 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 24.57% for 2018, respectively.



	Three Months Ended June 30, 2019
(amounts in thousands)	Customers Bank Business Banking			BankMobile			Consolidated
Interest income ⁽¹⁾	$	103,014		$	8,936		$	111,950
Interest expense	47,061			210			47,271
Net interest income	55,953			8,726			64,679
Provision for loan losses	(2,206		)	7,552			5,346
Non-interest income	970			11,066			12,036
Non-interest expense	38,107			21,475			59,582
Income (loss) before income tax expense (benefit)	21,022			(9,235		)	11,787
Income tax expense (benefit)	4,629			(2,138		)	2,491
Net income (loss)	16,393			(7,097		)	9,296
Preferred stock dividends	3,615			—			3,615
Net income (loss) available to common shareholders	$	12,778		$	(7,097	)	$	5,681



	Three Months Ended June 30, 2018
(amounts in thousands)	Customers Bank Business Banking			BankMobile			Consolidated
Interest income ⁽¹⁾	$	104,110		$	3,529		$	107,639
Interest expense	40,182			135			40,317
Net interest income	63,928			3,394			67,322
Provision for loan losses	(1,247		)	463			(784		)
Non-interest income	7,465			8,662			16,127
Non-interest expense	37,721			16,029			53,750
Income (loss) before income tax expense (benefit)	34,919			(4,436		)	30,483
Income tax expense (benefit)	7,910			(1,090		)	6,820
Net income (loss)	27,009			(3,346		)	23,663
Preferred stock dividends	3,615			—			3,615
Net income (loss) available to common shareholders	$	23,394		$	(3,346	)	$	20,048

(1) - Amounts reported include funds transfer pricing of $2.2 million and $3.5 million for the three months ended June 30, 2019 and 2018, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.



	Six Months Ended June 30, 2019
(amounts in thousands)	Customers Bank Business Banking		BankMobile			Consolidated
Interest income ⁽¹⁾	$	195,885	$	17,140		$	213,025
Interest expense	88,666		376			89,042
Net interest income	107,219		16,764			123,983
Provision for loan losses	770		9,343			10,113
Non-interest income	8,547		23,207			31,754
Non-interest expense	73,491		40,075			113,566
Income (loss) before income tax expense (benefit)	41,505		(9,447		)	32,058
Income tax expense (benefit)	9,510		(2,187		)	7,323
Net income (loss)	31,995		(7,260		)	24,735
Preferred stock dividends	7,229		—			7,229
Net income (loss) available to common shareholders	$	24,766	$	(7,260	)	$	17,506

As of June 30, 2019
Goodwill and other intangibles	$	3,629	$	12,218		$	15,847
Total assets ⁽²⁾	$	10,555,141	$	627,286		$	11,182,427
Total deposits	$	7,729,580	$	456,197		$	8,185,777
Total non-deposit liabilities ⁽²⁾	$	1,970,391	$	34,854		$	2,005,245



	Six Months Ended June 30, 2018
(amounts in thousands)	Customers Bank Business Banking		BankMobile			Consolidated
Interest income ⁽¹⁾	$	196,664	$	7,940		$	204,604
Interest expense	72,100		151			72,251
Net interest income	124,564		7,789			132,353
Provision for loan losses	627		706			1,333
Non-interest income	15,904		21,133			37,037
Non-interest expense	72,052		33,979			106,031
Income (loss) before income tax expense (benefit)	67,789		(5,763		)	62,026
Income tax expense (benefit)	15,638		(1,416		)	14,222
Net income (loss)	52,151		(4,347		)	47,804
Preferred stock dividends	7,229		—			7,229
Net income (loss) available to common shareholders	$	44,922	$	(4,347	)	$	40,575

As of June 30, 2018
Goodwill and other intangibles	$	3,629	$	13,521		$	17,150
Total assets ⁽²⁾	$	11,017,272	$	75,574		$	11,092,846
Total deposits	$	6,876,688	$	419,266		$	7,295,954
Total non-deposit liabilities ⁽²⁾	$	2,843,360	$	17,305		$	2,860,665

⁽¹⁾ Amounts reported include funds transfer pricing of $7.8 million and $7.9 million, for the six months ended June 30, 2019 and 2018, respectively, credited to BankMobile for the value provided to the Customers Bank Business Banking segment for the use of excess low/no cost deposits.

⁽²⁾ Amounts reported exclude inter-segment receivables/payables.