WEST READING, Pa.–(BUSINESS WIRE)–$CUBI #FinTech–Customers Bancorp, Inc. (NYSE:CUBI):


Second Quarter 2024 Highlights

  • Q2 2024 net income available to common shareholders was $54.3 million, or $1.66 per diluted share; ROAA was 1.11% and ROCE was 13.85%.
  • Q2 2024 core earnings*1 were $48.6 million, or $1.49 per diluted share; Core ROAA* was 1.00% and Core ROCE* was 12.39%.
  • CET 1 ratio of 12.8%2 at June 30, 2024, compared to 12.6% at March 31, 2024, above the approximately 11.5% target.
  • TCE / TA ratio* of 7.7% at June 30, 2024, compared to 7.3% at March 31, 2024, above the approximately 7.5% target.
  • Total loans and leases grew by $375.8 million in Q2 2024 from Q1 2024 or 11% annualized.
  • Q2 2024 net interest margin, tax equivalent (“NIM”) was 3.29%, compared to Q1 2024 NIM of 3.10%, due to higher loan balances and lower cost of deposits.
  • Q2 2024 deposit inflows from commercial customers of $0.6 billion, along with excess cash, funded the paydown of $0.5 billion of higher-cost consumer deposits and $0.3 billion of maturing wholesale CDs. Total deposits decreased by $283.3 million in Q2 2024 from Q1 2024 with significant continued positive mix shift.
  • Total estimated insured deposits were 76%3 of total deposits at June 30, 2024, with immediately available liquidity covering estimated uninsured deposits3 by approximately 193%.
  • Total borrowings declined by $176.6 million in Q2 2024 from Q1 2024 or 11.8%
  • Non-performing assets were $47.4 million, or 0.23% of total assets, at June 30, 2024 compared to 0.17% at March 31, 2024. Allowance for credit losses on loans and leases equaled 280% of non-performing loans at June 30, 2024, compared to 374% at March 31, 2024.
  • Q2 2024 provision for credit losses on loans and leases was $17.9 million compared to $16.0 million in Q1 2024 and the coverage of credit loss reserves for loans and leases held for investment was 1.08%. The coverage of credit loss reserves for loans and leases held for investment decreased modestly from 1.12% in Q1 2024.
  • Q2 2024 book value per share and tangible book value per share* both grew by approximately $1.52, or 3.1% over Q1 2024, driven by strong quarterly earnings and a decrease in AOCI losses of $0.9 million over the same time period. Tangible book value per share* is $50.70 at June 30, 2024.
  • Adopted a one-year common stock repurchase program to repurchase up to 497,509 shares.

 

 

 

 

 

 

*

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.

1

Excludes pre-tax unrealized gain on equity method investments purchased at a discount in Q2 2024 of $11.0 million, severance expense of $2.6 million, loss on investment securities of $0.7 million, FDIC special assessment expense of $0.2 million and derivative credit valuation adjustment of $0.1 million.

2

Regulatory capital ratios as of June 30, 2024 are estimates.

3

Uninsured deposits (estimate) of $5.8 billion to be reported on the Bank’s call report, less deposits of $1.3 billion collateralized by standby letters of credit from the FHLB and from our affiliates of $143.6 million.

CEO Commentary

“Customers Bancorp delivered another strong performance in the second quarter of 2024, continuing to deliver on our strategic priorities to grow our franchise value, our margins and our loans and low-cost deposits,” said Customers Bancorp Chairman and CEO Jay Sidhu. “We are pleased to share that actions we took over the last six quarters have enabled us to exceed our 11.5% CET1 and 7.5% TCE / TA ratio* targets. We are now positioned for strategic, relationship-based loan and deposit growth as we demonstrated this quarter. We have strong momentum as we pursue phase two of our deposit transformation – remixing existing higher-cost business unit deposits*1 and brokered deposits into lower-cost and granular deposits. We had a robust pipeline within our existing businesses which has been materially enhanced by the 10 new banking teams that joined Customers in April. In the quarter, we utilized deposit growth from commercial customers of $0.6 billion and existing excess cash to runoff $0.5 billion of higher-cost consumer deposits and repay $0.3 billion in wholesale CDs. Business unit deposit*1 gross inflows were, once again, broad-based with more than 20 different channels increasing balances and roughly half contributing $25 million or more. Our 10 new deposit focused banking teams, with only two months of client activity, have opened more than 1,000 new deposit accounts for more than 700 customers in the quarter. Our deposit pipelines continue to grow with an extraordinary conversion ratio. Our net interest margin expanded by 19 basis points in the second quarter to 3.29% outpacing current industry trends. This expansion was a function of improvements in both the asset and liability components of the balance sheet. Capital levels continued to build as evidenced by a 40 basis point increase in our TCE / TA ratio*. In June, our Board of Directors authorized a share repurchase program providing an additional capital deployment tool that can be utilized. Enhanced by the addition of our new banking teams, we believe we are extremely well-positioned to continue to strengthen our deposit franchise, improve our profitability, and maintain our already strong capital ratios,” stated Jay Sidhu.

“Our Q2 2024 GAAP earnings were $54.3 million, or $1.66 per diluted share, and core earnings* were $48.6 million, or $1.49 per diluted share. At June 30, 2024, our deposit base was well diversified, with approximately 76%2 of total deposits insured. We maintain a strong liquidity position, with $8.3 billion of liquidity immediately available, which covers approximately 193% of uninsured deposits2 and our loan to deposit ratio was 77%. We continue to focus loan production where we have a holistic and primary relationship. Total loans and leases grew by $357.7 million driven by strong commercial loan growth of $396.1 million primarily in our Corporate and Specialized verticals. Our loan pipeline continued to build during the second quarter, and we remain confident in the 10% – 15% loan growth outlook previously provided. We continue to build liquidity and capital to support the needs of our customers. At June 30, 2024, we had $3.0 billion of cash on hand leading to prudent balance sheet and liquidity management. Asset quality remains strong with our NPA ratio at just 0.23% of total assets and reserve levels are robust at 280% of total non-performing loans at the end of Q2 2024. Our exposure to the higher risk commercial real estate office sector is minimal, representing approximately 1% of the loan portfolio. Continued execution on our strategic priorities has positioned us favorably for success in 2024 from a capital, credit, liquidity, interest rate risk and earnings perspective. We will remain disciplined, but opportunistic, with our balance sheet capacity to manage risk and maintain robust capital levels. Tangible Book Value per share* grew to $50.70. We are excited and optimistic about the opportunities we had in the first half of 2024, which have been enhanced by the addition of the new banking teams,” Jay Sidhu continued.

 

 

 

 

 

 

*

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.

1

Total deposits excluding wholesale CDs and BMTX student-related deposits.

2

Uninsured deposits (estimate) of $5.8 billion to be reported on the Bank’s call report, less deposits of $1.3 billion collateralized by standby letters of credit from the FHLB and from our affiliates of $143.6 million.

Financial Highlights

(Dollars in thousands, except per share data)

 

At or Three Months Ended

 

Increase (Decrease)

 

June 30, 2024

 

March 31, 2024

 

Profitability Metrics:

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

54,300

 

 

$

45,926

 

 

$

8,374

 

 

18.2

%

Diluted earnings per share

 

$

1.66

 

 

$

1.40

 

 

$

0.26

 

 

18.6

%

Core earnings*

 

$

48,567

 

 

$

46,532

 

 

$

2,035

 

 

4.4

%

Adjusted core earnings*

 

$

48,567

 

 

$

55,137

 

 

$

(6,570

)

 

(11.9

)%

Core earnings per share*

 

$

1.49

 

 

$

1.42

 

 

$

0.07

 

 

4.9

%

Adjusted core earnings per share*

 

$

1.49

 

 

$

1.68

 

 

$

(0.19

)

 

(11.3

)%

Return on average assets (“ROAA”)

 

 

1.11

%

 

 

0.94

%

 

 

0.17

 

 

 

Core ROAA*

 

 

1.00

%

 

 

0.95

%

 

 

0.05

 

 

 

Adjusted core ROAA*

 

 

1.00

%

 

 

1.11

%

 

 

(0.11

)

 

 

Return on average common equity (“ROCE”)

 

 

13.85

%

 

 

12.08

%

 

 

1.77

 

 

 

Core ROCE*

 

 

12.39

%

 

 

12.24

%

 

 

0.15

 

 

 

Adjusted core ROCE*

 

 

12.39

%

 

 

14.50

%

 

 

(2.11

)

 

 

Core pre-tax pre-provision net income*

 

$

89,220

 

 

$

83,674

 

 

$

5,546

 

 

6.6

%

Adjusted core pre-tax pre-provision net income*

 

$

89,220

 

 

$

94,988

 

 

$

(5,768

)

 

(6.1

)%

Net interest margin, tax equivalent

 

 

3.29

%

 

 

3.10

%

 

 

0.19

 

 

 

Yield on loans (Loan yield)

 

 

7.17

%

 

 

7.05

%

 

 

0.12

 

 

 

Cost of deposits

 

 

3.40

%

 

 

3.45

%

 

 

(0.05

)

 

 

Efficiency ratio

 

 

51.87

%

 

 

54.58

%

 

 

(2.71

)

 

 

Core efficiency ratio*

 

 

53.47

%

 

 

54.24

%

 

 

(0.77

)

 

 

Adjusted core efficiency ratio*

 

 

53.47

%

 

 

48.02

%

 

 

5.45

 

 

 

Non-interest expense to average total assets

 

 

1.98

%

 

 

1.87

%

 

 

0.11

 

 

 

Core non-interest expense to average total assets*

 

 

1.93

%

 

 

1.86

%

 

 

0.07

 

 

 

Adjusted core non-interest expense to average total assets*

 

 

1.93

%

 

 

1.65

%

 

 

0.28

 

 

 

Balance Sheet Trends:

 

 

 

 

 

 

 

 

Total assets

 

$

20,942,975

 

 

$

21,347,367

 

 

$

(404,392

)

 

(1.9

)%

Total cash and investment securities

 

$

6,523,036

 

 

$

7,338,025

 

 

$

(814,989

)

 

(11.1

)%

Total loans and leases

 

$

13,632,639

 

 

$

13,256,871

 

 

$

375,768

 

 

2.8

%

Non-interest bearing demand deposits

 

$

4,474,862

 

 

$

4,688,880

 

 

$

(214,018

)

 

(4.6

)%

Total deposits

 

$

17,678,093

 

 

$

17,961,383

 

 

$

(283,290

)

 

(1.6

)%

Capital Metrics:

 

 

 

 

 

 

 

 

Common Equity

 

$

1,609,071

 

 

$

1,553,823

 

 

$

55,248

 

 

3.6

%

Tangible Common Equity*

 

$

1,605,442

 

 

$

1,550,194

 

 

$

55,248

 

 

3.6

%

Common Equity to Total Assets

 

 

7.7

%

 

 

7.3

%

 

 

0.4

 

 

 

Tangible Common Equity to Tangible Assets*

 

 

7.7

%

 

 

7.3

%

 

 

0.4

 

 

 

Book Value per common share

 

$

50.81

 

 

$

49.29

 

 

$

1.52

 

 

3.1

%

Tangible Book Value per common share*

 

$

50.70

 

 

$

49.18

 

 

$

1.52

 

 

3.1

%

Common equity Tier 1 capital ratio (1)

 

 

12.8

%

 

 

12.6

%

 

 

0.2

 

 

 

Total risk based capital ratio (1)

 

 

15.8

%

 

 

15.9

%

 

 

(0.1

)

 

 

 

 

 

 

 

 

 

 

 

(1) Regulatory capital ratios as of June 30, 2024 are estimates.

* 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.

Financial Highlights

(Dollars in thousands, except per share data)

 

At or Three Months Ended

 

Increase (Decrease)

 

Six Months Ended

 

Increase (Decrease)

 

June 30, 2024

 

June 30, 2023

 

 

June 30, 2024

 

June 30, 2023

 

Profitability Metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

54,300

 

 

$

44,007

 

 

$

10,293

 

 

23.4

%

 

$

100,226

 

 

$

94,272

 

 

$

5,954

 

 

6.3

%

Diluted earnings per share

 

$

1.66

 

 

$

1.39

 

 

$

0.27

 

 

19.4

%

 

$

3.06

 

 

$

2.95

 

 

$

0.11

 

 

3.7

%

Core earnings*

 

$

48,567

 

 

$

52,163

 

 

$

(3,596

)

 

(6.9

)%

 

$

95,099

 

 

$

103,306

 

 

$

(8,207

)

 

(7.9

)%

Adjusted core earnings*

 

$

48,567

 

 

$

52,163

 

 

$

(3,596

)

 

(6.9

)%

 

$

103,704

 

 

$

103,306

 

 

$

398

 

 

0.4

%

Core earnings per share*

 

$

1.49

 

 

$

1.65

 

 

$

(0.16

)

 

(9.7

)%

 

$

2.90

 

 

$

3.22

 

 

$

(0.32

)

 

(9.9

)%

Adjusted core earnings per share*

 

$

1.49

 

 

$

1.65

 

 

$

(0.16

)

 

(9.7

)%

 

$

3.16

 

 

$

3.22

 

 

$

(0.06

)

 

(1.9

)%

Return on average assets (“ROAA”)

 

 

1.11

%

 

 

0.88

%

 

 

0.23

 

 

 

 

 

1.02

%

 

 

0.96

%

 

 

0.06

 

 

 

Core ROAA*

 

 

1.00

%

 

 

1.03

%

 

 

(0.03

)

 

 

 

 

0.98

%

 

 

1.04

%

 

 

(0.06

)

 

 

Adjusted core ROAA*

 

 

1.00

%

 

 

1.03

%

 

 

(0.03

)

 

 

 

 

1.06

%

 

 

1.04

%

 

 

0.02

 

 

 

Return on average common equity (“ROCE”)

 

 

13.85

%

 

 

13.22

%

 

 

0.63

 

 

 

 

 

12.98

%

 

 

14.57

%

 

 

(1.59

)

 

 

Core ROCE*

 

 

12.39

%

 

 

15.67

%

 

 

(3.28

)

 

 

 

 

12.32

%

 

 

15.97

%

 

 

(3.65

)

 

 

Adjusted core ROCE*

 

 

12.39

%

 

 

15.67

%

 

 

(3.28

)

 

 

 

 

13.43

%

 

 

15.97

%

 

 

(2.54

)

 

 

Core pre-tax pre-provision net income*

 

$

89,220

 

 

$

96,833

 

 

$

(7,613

)

 

(7.9

)%

 

$

172,894

 

 

$

186,115

 

 

$

(13,221

)

 

(7.1

)%

Adjusted core pre-tax pre-provision net income*

 

$

89,220

 

 

$

96,833

 

 

$

(7,613

)

 

(7.9

)%

 

$

184,208

 

 

$

186,115

 

 

$

(1,907

)

 

(1.0

)%

Net interest margin, tax equivalent

 

 

3.29

%

 

 

3.15

%

 

 

0.14

 

 

 

 

 

3.20

%

 

 

3.06

%

 

 

0.14

 

 

 

Yield on loans (Loan yield)

 

 

7.17

%

 

 

6.83

%

 

 

0.34

 

 

 

 

 

7.11

%

 

 

6.77

%

 

 

0.34

 

 

 

Cost of deposits

 

 

3.40

%

 

 

3.11

%

 

 

0.29

 

 

 

 

 

3.43

%

 

 

3.22

%

 

 

0.21

 

 

 

Efficiency ratio

 

 

51.87

%

 

 

49.25

%

 

 

2.62

 

 

 

 

 

53.16

%

 

 

48.51

%

 

 

4.65

 

 

 

Core efficiency ratio*

 

 

53.47

%

 

 

47.84

%

 

 

5.63

 

 

 

 

 

53.85

%

 

 

47.49

%

 

 

6.36

 

 

 

Adjusted core efficiency ratio*

 

 

53.47

%

 

 

47.84

%

 

 

5.63

 

 

 

 

 

50.79

%

 

 

47.49

%

 

 

3.30

 

 

 

Non-interest expense to average total assets

 

 

1.98

%

 

 

1.65

%

 

 

0.33

 

 

 

 

 

1.93

%

 

 

1.60

%

 

 

0.33

 

 

 

Core non-interest expense to average total assets*

 

 

1.93

%

 

 

1.65

%

 

 

0.28

 

 

 

 

 

1.89

%

 

 

1.59

%

 

 

0.30

 

 

 

Adjusted core non-interest expense to average total assets*

 

 

1.93

%

 

 

1.65

%

 

 

0.28

 

 

 

 

 

1.79

%

 

 

1.59

%

 

 

0.20

 

 

 

Balance Sheet Trends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

20,942,975

 

 

$

22,028,565

 

 

$

(1,085,590

)

 

(4.9

)%

 

 

 

 

 

 

 

 

Total cash and investment securities

 

$

6,523,036

 

 

$

7,238,422

 

 

$

(715,386

)

 

(9.9

)%

 

 

 

 

 

 

 

 

Total loans and leases

 

$

13,632,639

 

 

$

13,910,907

 

 

$

(278,268

)

 

(2.0

)%

 

 

 

 

 

 

 

 

Non-interest bearing demand deposits

 

$

4,474,862

 

 

$

4,490,198

 

 

$

(15,336

)

 

(0.3

)%

 

 

 

 

 

 

 

 

Total deposits

 

$

17,678,093

 

 

$

17,950,431

 

 

$

(272,338

)

 

(1.5

)%

 

 

 

 

 

 

 

 

Capital Metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity

 

$

1,609,071

 

 

$

1,318,858

 

 

$

290,213

 

 

22.0

%

 

 

 

 

 

 

 

 

Tangible Common Equity*

 

$

1,605,442

 

 

$

1,315,229

 

 

$

290,213

 

 

22.1

%

 

 

 

 

 

 

 

 

Common Equity to Total Assets

 

 

7.7

%

 

 

6.0

%

 

 

1.7

 

 

 

 

 

 

 

 

 

 

 

Tangible Common Equity to Tangible Assets*

 

 

7.7

%

 

 

6.0

%

 

 

1.7

 

 

 

 

 

 

 

 

 

 

 

Book Value per common share

 

$

50.81

 

 

$

42.16

 

 

$

8.65

 

 

20.5

%

 

 

 

 

 

 

 

 

Tangible Book Value per common share*

 

$

50.70

 

 

$

42.04

 

 

$

8.66

 

 

20.6

%

 

 

 

 

 

 

 

 

Common equity Tier 1 capital ratio (1)

 

 

12.8

%

 

 

10.3

%

 

 

2.5

 

 

 

 

 

 

 

 

 

 

 

Total risk based capital ratio (1)

 

 

15.8

%

 

 

13.2

%

 

 

2.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Regulatory capital ratios as of June 30, 2024 are estimates.

* 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.

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)

June 30, 2024

 

% of Total

 

March 31, 2024

 

% of Total

 

June 30, 2023

 

% of Total

Loans and Leases Held for Investment

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

Commercial & industrial:

 

 

 

 

 

 

 

 

 

 

 

Specialized lending

$

5,528,745

 

41.7

%

 

$

5,104,405

 

39.6

%

 

$

5,534,832

 

40.0

%

Other commercial & industrial (1)

 

1,092,146

 

8.2

 

 

 

1,113,517

 

8.6

 

 

 

1,240,908

 

9.0

 

Mortgage finance

 

1,122,812

 

8.5

 

 

 

1,071,146

 

8.3

 

 

 

1,108,598

 

8.0

 

Multifamily

 

2,067,332

 

15.6

 

 

 

2,123,675

 

16.5

 

 

 

2,151,734

 

15.6

 

Commercial real estate owner occupied

 

805,779

 

6.1

 

 

 

806,278

 

6.3

 

 

 

842,042

 

6.1

 

Commercial real estate non-owner occupied

 

1,202,606

 

9.1

 

 

 

1,182,084

 

9.2

 

 

 

1,211,091

 

8.8

 

Construction

 

163,409

 

1.2

 

 

 

185,601

 

1.3

 

 

 

212,214

 

1.5

 

Total commercial loans and leases

 

11,982,829

 

90.4

 

 

 

11,586,706

 

89.8

 

 

 

12,301,419

 

89.0

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

Residential

 

481,503

 

3.6

 

 

 

482,537

 

3.8

 

 

 

487,199

 

3.5

 

Manufactured housing

 

35,901

 

0.3

 

 

 

37,382

 

0.3

 

 

 

41,664

 

0.3

 

Installment:

 

 

 

 

 

 

 

 

 

 

 

Personal

 

474,481

 

3.6

 

 

 

492,892

 

3.8

 

 

 

752,470

 

5.4

 

Other

 

282,201

 

2.1

 

 

 

299,714

 

2.3

 

 

 

250,047

 

1.8

 

Total installment loans

 

756,682

 

5.7

 

 

 

792,606

 

6.1

 

 

 

1,002,517

 

7.2

 

Total consumer loans

 

1,274,086

 

9.6

 

 

 

1,312,525

 

10.2

 

 

 

1,531,380

 

11.0

 

Total loans and leases held for investment

$

13,256,915

 

100.0

%

 

$

12,899,231

 

100.0

%

 

$

13,832,799

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Loans Held for Sale

 

 

 

 

 

 

 

 

 

 

 

Residential

$

2,684

 

0.7

%

 

$

870

 

0.2

%

 

$

1,234

 

1.6

%

Installment:

 

 

 

 

 

 

 

 

 

 

 

Personal

 

125,598

 

33.4

 

 

 

137,755

 

38.5

 

 

 

76,874

 

98.4

 

Other

 

247,442

 

65.9

 

 

 

219,015

 

61.3

 

 

 

—

 

—

 

Total installment loans

 

373,040

 

99.3

 

 

 

356,770

 

99.8

 

 

 

76,874

 

98.4

 

Total loans held for sale

$

375,724

 

100.0

%

 

$

357,640

 

100.0

%

 

$

78,108

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases portfolio

$

13,632,639

 

 

 

$

13,256,871

 

 

 

$

13,910,907

 

 

(1) Includes PPP loans of $38.3 million, $52.0 million and $188.8 million as of June 30, 2024, March 31, 2024 and June 30, 2023, respectively.

Loans and Leases Held for Investment

Loans and leases held for investment were $13.3 billion at June 30, 2024, up $357.7 million, or 2.8%, from March 31, 2024. Specialized lending increased $424.3 million, or 8.3% quarter-over-quarter, to $5.5 billion. Mortgage finance loans increased $51.7 million, or 4.8% quarter-over-quarter due to higher seasonal mortgage activity. Non-owner occupied commercial real estate loans increased modestly by $20.5 million, or 1.7% to $1.2 billion. Multifamily loans decreased $56.3 million, or 2.7% to $2.1 billion. Construction loans decreased $22.2 million, or 12.0% to $163.4 million. Other commercial and industrial loans decreased $21.4 million, or 1.9% quarter-over-quarter, to $1.1 billion. Consumer installment loans held for investment decreased $35.9 million, or 4.5% quarter-over-quarter, to $756.7 million due to the continued build out of the held-for-sale strategy and de-risking of the held-for-investment loan portfolio.

Loans and leases held for investment of $13.3 billion at June 30, 2024 were down $575.9 million, or 4.2%, year-over-year, largely driven by reduced balances in consumer installment loans of $245.8 million, or 24.5% year-over-year, other commercial and industrial loans of $148.8 million, which included a decrease in PPP loans primarily from guarantee payments, multifamily loans of $84.4 million, construction loans of $48.8 million and owner-occupied commercial real estate loans of $36.3 million.

Loans Held for Sale

Loans held for sale increased $18.1 million quarter-over-quarter, and were $375.7 million at June 30, 2024 due to the continued build out of the held-for-sale strategy in 2024.

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)

June 30, 2024

 

March 31, 2024

 

 

June 30, 2024

 

June 30, 2023

 

Allowance for credit losses on loans and leases

$

132,436

 

 

$

133,296

 

 

$

(860

)

 

$

132,436

 

 

$

139,656

 

 

$

(7,220

)

Provision (benefit) for credit losses on loans and leases

$

17,851

 

 

$

15,953

 

 

$

1,898

 

 

$

17,851

 

 

$

22,363

 

 

$

(4,512

)

Net charge-offs from loans held for investment

$

18,711

 

 

$

17,968

 

 

$

743

 

 

$

18,711

 

 

$

15,564

 

 

$

3,147

 

Annualized net charge-offs to average loans and leases

 

0.56

%

 

 

0.55

%

 

 

 

 

0.56

%

 

 

0.42

%

 

 

Coverage of credit loss reserves for loans and leases held for investment

 

1.08

%

 

 

1.12

%

 

 

 

 

1.08

%

 

 

1.09

%

 

 

Net charge-offs increased modestly with $18.7 million in Q2 2024, compared to $18.0 million in Q1 2024 and $15.6 million in Q2 2023.

Provision (benefit) for Credit Losses

 

Three Months Ended

 

Increase (Decrease)

 

Three Months Ended

 

Increase (Decrease)

(Dollars in thousands)

June 30, 2024

 

March 31, 2024

 

 

June 30, 2024

 

June 30, 2023

 

Provision (benefit) for credit losses on loans and leases

$

17,851

 

$

15,953

 

$

1,898

 

 

$

17,851

 

$

22,363

 

 

$

(4,512

)

Provision (benefit) for credit losses on available for sale debt securities

 

270

 

 

1,117

 

 

(847

)

 

 

270

 

 

1,266

 

 

 

(996

)

Provision for credit losses

 

18,121

 

 

17,070

 

 

1,051

 

 

 

18,121

 

 

23,629

 

 

 

(5,508

)

Provision (benefit) for credit losses on unfunded commitments

 

1,594

 

 

430

 

 

1,164

 

 

 

1,594

 

 

(304

)

 

 

1,898

 

Total provision for credit losses

$

19,715

 

$

17,500

 

$

2,215

 

 

$

19,715

 

$

23,325

 

 

$

(3,610

)

The provision for credit losses on loans and leases in Q2 2024 was $17.9 million, compared to $16.0 million in Q1 2024. The higher provision in Q2 2024 was primarily due to an increase in commercial and industrial loan balances held for investment, partially offset by slight improvements in macroeconomic forecasts and by lower balances in consumer installment loans held for investment.

The provision for credit losses on available for sale investment securities in Q2 2024 was $0.3 million, compared to provision of $1.1 million in Q1 2024.

The provision for credit losses on loans and leases in Q2 2024 was $17.9 million, compared to $22.4 million in Q2 2023. The lower provision in Q2 2024 compared to the year ago period was primarily due to slight improvements in macroeconomic forecasts and by lower balances in consumer installment loans held for investment.

The provision for credit losses on available for sale investment securities in Q2 2024 was $0.3 million compared to provision of $1.3 million in Q2 2023.

Asset Quality

The following table presents asset quality metrics as of the dates indicated:

(Dollars in thousands)

June 30, 2024

 

March 31, 2024

 

Increase (Decrease)

 

June 30, 2024

 

June 30, 2023

 

Increase (Decrease)

Non-performing assets (“NPAs”):

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual / non-performing loans (“NPLs”)

$

47,380

 

 

$

35,654

 

 

$

11,726

 

 

$

47,380

 

 

$

28,244

 

 

$

19,136

 

Non-performing assets

$

47,444

 

 

$

35,753

 

 

$

11,691

 

 

$

47,444

 

 

$

28,380

 

 

$

19,064

 

NPLs to total loans and leases

 

0.35

%

 

 

0.27

%

 

 

 

 

0.35

%

 

 

0.20

%

 

 

Reserves to NPLs

 

279.52

%

 

 

373.86

%

 

 

 

 

279.52

%

 

 

494.46

%

 

 

NPAs to total assets

 

0.23

%

 

 

0.17

%

 

 

 

 

0.23

%

 

 

0.13

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases (1) risk ratings:

 

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases

 

 

 

 

 

 

 

 

 

 

 

Pass

$

10,500,922

 

 

$

10,095,611

 

 

$

405,311

 

 

$

10,500,922

 

 

$

10,667,619

 

 

$

(166,697

)

Special Mention

 

170,014

 

 

 

194,365

 

 

 

(24,351

)

 

 

170,014

 

 

 

166,468

 

 

 

3,546

 

Substandard

 

270,898

 

 

 

282,163

 

 

 

(11,265

)

 

 

270,898

 

 

 

272,301

 

 

 

(1,403

)

Total commercial loans and leases

 

10,941,834

 

 

 

10,572,139

 

 

 

369,695

 

 

 

10,941,834

 

 

 

11,106,388

 

 

 

(164,554

)

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

Performing

 

1,256,816

 

 

 

1,293,457

 

 

 

(36,641

)

 

 

1,256,816

 

 

 

1,508,208

 

 

 

(251,392

)

Non-performing

 

17,270

 

 

 

19,068

 

 

 

(1,798

)

 

 

17,270

 

 

 

23,172

 

 

 

(5,902

)

Total consumer loans

 

1,274,086

 

 

 

1,312,525

 

 

 

(38,439

)

 

 

1,274,086

 

 

 

1,531,380

 

 

 

(257,294

)

Loans and leases receivable (1)

$

12,215,920

 

 

$

11,884,664

 

 

$

331,256

 

 

$

12,215,920

 

 

$

12,637,768

 

 

$

(421,848

)
 

(1) Risk ratings are assigned to loans and leases held for investment, and excludes loans held for sale, loans receivable, mortgage finance, at fair value and eligible PPP loans that are fully guaranteed by the Small Business Administration.

Over the last decade, the Bank has developed a suite of commercial loan products with one particularly important common denominator: relatively low credit risk assumption. The Bank’s commercial and industrial (“C&I”), mortgage finance, corporate and specialized lending lines of business, and multifamily loans for example, are characterized by conservative underwriting standards and historically 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, management employs a bottom-up data driven approach to analyze the commercial portfolio.

Total consumer installment loans held for investment at June 30, 2024 were less than 4% of total assets and approximately 6% of total loans and leases held for investment, and were supported by an allowance for credit losses of $49.

Contacts

David W. Patti, Communications Director 610-451-9452

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