Business Segments

12 Months Ended

Dec. 31, 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 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 years ended December 31, 2019, 2018 and 2017. 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 22.55%, 24.56% and 37.67% for the years ended December 31, 2019, 2018 and 2017, respectively.


	For the Year Ended December 31, 2019
(amounts in thousands)	Customers Bank Business Banking		BankMobile		Consolidated
Interest income ⁽¹⁾	$	422,094	$	41,645	$	463,739
Interest expense	185,513		916		186,429
Net interest income	236,581		40,729		277,310
Provision for loan and lease losses	10,091		14,136		24,227
Non-interest income	35,268		45,670		80,938
Non-interest expense	153,333		78,568		231,901
Income (loss) before income tax expense (benefit)	108,425		(6,305)		102,120
Income tax expense (benefit)	24,215		(1,422)		22,793
Net income (loss)	84,210		(4,883)		79,327
Preferred stock dividends	14,459		—		14,459
Net income (loss) available to common shareholders	$	69,751	$	(4,883)	$	64,868
As of December 31, 2019
Goodwill and other intangibles	$	3,629	$	11,566	$	15,195
Total assets ⁽²⁾	$	10,990,550	$	530,167	$	11,520,717
Total deposits	$	8,247,836	$	401,100	$	8,648,936
Total non-deposit liabilities ⁽²⁾	$	1,789,329	$	29,657	$	1,818,986


	For the Year Ended December 31, 2018
(amounts in thousands)	Customers Bank Business Banking		BankMobile		Consolidated
Interest income ⁽¹⁾	$	400,948	$	17,003	$	417,951
Interest expense	159,674		400		160,074
Net interest income	241,274		16,603		257,877
Provision for loan and lease losses	2,928		2,714		5,642
Non-interest income	17,499		41,499		58,998
Non-interest expense	146,946		73,233		220,179
Income (loss) before income tax expense (benefit)	108,899		(17,845)		91,054
Income tax expense (benefit)	23,742		(4,383)		19,359
Net income (loss)	85,157		(13,462)		71,695
Preferred stock dividends	14,459		—		14,459
Net income (loss) available to common shareholders	$	70,698	$	(13,462)	$	57,236
As of December 31, 2018
Goodwill and other intangibles	$	3,629	$	12,870	$	16,499
Total assets ⁽²⁾	$	9,688,146	$	145,279	$	9,833,425
Total deposits	$	6,766,378	$	375,858	$	7,142,236
Total non-deposit liabilities ⁽²⁾	$	1,719,225	$	15,148	$	1,734,373

(1)Amounts reported include funds transfer pricing of $8.8 million and $15.7 million for the years ended December 31, 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.


	For the Year Ended December 31, 2017
(amounts in thousands)	Customers Bank Business Banking		BankMobile		Consolidated
Interest income ⁽¹⁾	$	359,931	$	12,919	$	372,850
Interest expense	105,438		69		105,507
Net interest income	254,493		12,850		267,343
Provision for loan and lease losses	5,638		1,130		6,768
Non-interest income	24,788		54,122		78,910
Non-interest expense	128,604		87,002		215,606
Income (loss) before income tax expense (benefit)	145,039		(21,160)		123,879
Income tax expense (benefit)	53,013		(7,971)		45,042
Net income (loss)	92,026		(13,189)		78,837
Preferred stock dividends	14,459		—		14,459
Net income (loss) available to common shareholders	$	77,567	$	(13,189)	$	64,378
As of December 31, 2017
Goodwill and other intangibles	$	3,630	$	12,665	$	16,295
Total assets ⁽²⁾	$	9,769,996	$	69,559	$	9,839,555
Total deposits	$	6,400,310	$	399,832	$	6,800,142
Total non-deposit liabilities ⁽²⁾	$	2,106,919	$	11,530	$	2,118,449

(1)Amounts reported include funds transfer pricing of $12.9 million for the year ended December 31, 2017, 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.