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Business Segments

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Business Segments

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, 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 interest income on other consumer loans, interchange and card revenue, deposit and wire transfer fees and university fees. The majority of 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 partner.

The following tables present the operating results for Customers' reportable business segments for the three and nine months ended September 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 September 30, 2019
(amounts in thousands)			Customers Bank Business Banking						BankMobile						Consolidated
Interest income (1)			$	113,995					$	12,723					$	126,718
Interest expense			50,734						249						50,983
Net interest income			63,261						12,474						75,735
Provision for loan and lease losses			2,475						1,951						4,426
Non-interest income			11,757						11,612						23,369
Non-interest expense			38,347						21,245						59,592
Income (loss) before income tax expense (benefit)			34,196						890						35,086
Income tax expense (benefit)			7,814						206						8,020
Net income (loss)			26,382						684						27,066
Preferred stock dividends			3,615						—						3,615
Net income (loss) available to common shareholders			$	22,767					$	684					$	23,451

			Three Months Ended September 30, 2018
(amounts in thousands)			Customers Bank Business Banking						BankMobile						Consolidated
Interest income (1)			$	106,156					$	3,889					$	110,045
Interest expense			45,982						62						46,044
Net interest income			60,174						3,827						64,001
Provision for loan and lease losses			2,502						422						2,924
Non-interest income			(7,756)						9,840						2,084
Non-interest expense			36,115						20,989						57,104
Income (loss) before income tax expense (benefit)			13,801						(7,744)						6,057
Income tax expense (benefit)			1,930						(1,902)						28
Net income (loss)			11,871						(5,842)						6,029
Preferred stock dividends			3,615						—						3,615
Net income (loss) available to common shareholders			$	8,256					$	(5,842)					$	2,414

(1) Amounts reported include funds transfer pricing of $0.3 million and $3.9 million for the three months ended September 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.

			Nine Months Ended September 30, 2019
(amounts in thousands)			Customers Bank Business Banking						BankMobile						Consolidated
Interest income (1)			$	309,882					$	29,863					$	339,745
Interest expense			139,402						625						140,027
Net interest income			170,480						29,238						199,718
Provision for loan and lease losses			3,245						11,294						14,539
Non-interest income			20,304						34,821						55,125
Non-interest expense			111,840						61,320						173,160
Income (loss) before income tax expense (benefit)			75,699						(8,555)						67,144
Income tax expense (benefit)			17,324						(1,981)						15,343
Net income (loss)			58,375						(6,574)						51,801
Preferred stock dividends			10,844						—						10,844
Net income (loss) available to common shareholders			$	47,531					$	(6,574)					$	40,957
As of September 30, 2019
Goodwill and other intangibles			$	3,629					$	11,892					$	15,521
Total assets (2)			$	11,131,914					$	591,876					$	11,723,790
Total deposits			$	8,260,080					$	665,605					$	8,925,685
Total non-deposit liabilities (2)			$	1,747,846					$	31,109					$	1,778,955

			Nine Months Ended September 30, 2018
(amounts in thousands)			Customers Bank Business Banking						BankMobile						Consolidated
Interest income (1)			$	302,820					$	11,829					$	314,649
Interest expense			118,081						214						118,295
Net interest income			184,739						11,615						196,354
Provision for loan and lease losses			3,128						1,129						4,257
Non-interest income			8,147						30,973						39,120
Non-interest expense			108,168						54,966						163,134
Income (loss) before income tax expense (benefit)			81,590						(13,507)						68,083
Income tax expense (benefit)			17,567						(3,317)						14,250
Net income (loss)			64,023						(10,190)						53,833
Preferred stock dividends			10,844						—						10,844
Net income (loss) available to common shareholders			$	53,179					$	(10,190)					$	42,989
As of September 30, 2018
Goodwill and other intangibles			$	3,629					$	13,196					$	16,825
Total assets (2)			$	10,542,175					$	74,929					$	10,617,104
Total deposits			$	7,781,225					$	732,489					$	8,513,714
Total non-deposit liabilities (2)			$	1,134,251					$	14,327					$	1,148,578

(1) Amounts reported include funds transfer pricing of $8.1 million and $11.8 million, for the nine months ended September 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.

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- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-URI http://asc.fasb.org/topic&trid=2134510

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