Business Segments

3 Months Ended

Mar. 31, 2020

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 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 months ended March 31, 2020 and 2019. 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 20.35% for 2020 and 23.15% for 2019, respectively.


	Three Months Ended March 31, 2020
(amounts in thousands)	Customers Bank Business Banking		BankMobile		Consolidated
Interest income ⁽¹⁾	$	112,717	$	12,626	$	125,343
Interest expense	43,678		344		44,022
Net interest income	69,039		12,282		81,321
Provision for credit losses on loans and leases	27,298		4,488		31,786
Non-interest income	11,136		10,794		21,930
Non-interest expense	43,860		22,599		66,459
Income (loss) before income tax expense (benefit)	9,017		(4,011)		5,006
Income tax expense (benefit)	2,722		(816)		1,906
Net income (loss)	6,295		(3,195)		3,100
Preferred stock dividends	3,615		—		3,615
Net income (loss) available to common shareholders	$	2,680	$	(3,195)	$	(515)

As of March 31, 2020
Goodwill and other intangibles	$	3,629	$	11,241	$	14,870
Total assets ⁽²⁾	$	11,418,000	$	600,799	$	12,018,799
Total deposits	$	7,803,878	$	609,765	$	8,413,643
Total non-deposit liabilities ⁽²⁾	$	2,611,684	$	28,836	$	2,640,520


	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 credit losses on loans and leases	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 ⁽²⁾	$	9,916,308	$	227,586	$	10,143,894
Total deposits	$	6,798,562	$	626,756	$	7,425,318
Total non-deposit liabilities ⁽²⁾	$	1,719,469	$	20,734	$	1,740,203

(1) Amounts reported include funds transfer pricing of $1.4 million and $5.6 million, for the three months ended March 31, 2020 and 2019, 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.