WEST READING, Pa.–(BUSINESS WIRE)–$CUBI #EPS–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.
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* 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. |
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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. |
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2 Assuming cash balance of $0.5 billion. |
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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) |
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|
March 31, 2023 |
|
December 31, 2022 |
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|
Profitability Metrics: |
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|
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 |
) |
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Loan yield |
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|
6.70 |
% |
|
|
5.64 |
% |
|
|
1.06 |
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Loan yield, excluding PPP* |
|
|
6.46 |
% |
|
|
5.86 |
% |
|
|
0.60 |
|
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|
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|
Cost of deposits |
|
|
3.32 |
% |
|
|
2.73 |
% |
|
|
0.59 |
|
|
|
|
|
Efficiency ratio |
|
|
47.71 |
% |
|
|
49.20 |
% |
|
|
(1.49 |
) |
|
|
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|
Core efficiency ratio* |
|
|
47.09 |
% |
|
|
49.12 |
% |
|
|
(2.03 |
) |
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Balance Sheet Trends: |
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Total assets |
|
$ |
21,751,614 |
|
|
$ |
20,896,112 |
|
|
$ |
855,502 |
|
|
4.1 |
% |
|
Total loans and leases |
|
$ |
15,063,034 |
|
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$ |
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 |
)% |
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Capital Metrics: |
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Common Equity |
|
$ |
1,283,226 |
|
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$ |
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 |
) |
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|
|
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 |
|
|
|
|
|
|
|
|
|
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(1) Regulatory capital ratios as of March 31, 2023 are estimates. |
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* 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. |
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Financial Highlights
|
(Dollars in thousands, except per share data) |
|
At or Three Months Ended |
|
Increase (Decrease) |
|||||||||||
|
|
March 31, 2023 |
|
March 31, 2022 |
|
|||||||||||
|
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: |
|
|
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|
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|
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|
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|
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: |
|
|
|
|
|
|
|
|
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|
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. |
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|
* 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. |
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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 |
|
|
March 31, 2023 |
|
March 31, 2022 |
|
||||||||||||||
|
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 |
|
|
March 31, 2023 |
|
March 31, 2022 |
|
||||||||||
|
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.
Contacts
David W. Patti, Communications Director 610-451-9452
