Financial Performance Overview

Customers Bancorp, a leading regional bank, has reported its financial results for the year ended December 31, 2024. The bank’s net income available to common shareholders was $166.4 million, down 29.3% from $235.4 million in the previous year. This decline was primarily driven by a decrease in net interest income and higher non-interest expenses, partially offset by a slight decrease in the provision for credit losses.

Net Interest Income and Margin

Net interest income, the bank’s primary source of earnings, decreased by 4.8% to $654.4 million in 2024 from $687.4 million in 2023. This was mainly due to lower interest income from specialized lending, other commercial and industrial loans and leases, and consumer installment loans, as well as higher interest expense on deposits. The bank’s net interest margin (NIM) decreased by 14 basis points to 3.15% in 2024, from 3.29% in 2023, primarily due to lower purchase discount accretion on the venture banking loan portfolio acquired in 2023, reduced recognition of net deferred loan origination fees from Paycheck Protection Program (PPP) loans, and higher market interest rates on deposits.

Provision for Credit Losses

The provision for credit losses on loans and leases decreased by $1.0 million to $69.8 million in 2024, compared to $70.8 million in 2023. This decrease was primarily due to the recognition of improvements in macroeconomic forecasts and a decrease in consumer installment loan balances held for investment, partially offset by an increase in commercial and industrial loan balances held for investment. The bank’s allowance for credit losses (ACL) on loans and leases represented 1.04% of total loans and leases receivable at the end of 2024, compared to 1.13% at the end of 2023.

Non-Interest Income

Non-interest income decreased by 14.4% to $60.4 million in 2024, compared to $70.6 million in 2023. This was primarily due to increases in net losses on the sale of investment securities and loans and leases, partially offset by an unrealized gain on equity method investments and increases in loan fees and other non-interest income.

Non-Interest Expense

Non-interest expense increased by 18.2% to $417.0 million in 2024, compared to $352.7 million in 2023. This was mainly driven by increases in salaries and employee benefits, FDIC assessments, non-income taxes, and regulatory fees, as well as higher commercial lease depreciation and other non-interest expenses.

Income Taxes

The bank’s effective tax rate decreased to 19.1% in 2024, from 24.4% in 2023, primarily due to an increase in investment tax credits, including those generated from commercial clean vehicle leases, and the absence of tax on the surrender of bank-owned life insurance policies that occurred in 2023.

Loans and Leases

Customers’ total loan and lease portfolio, including loans held for sale and loans receivable, mortgage finance, at fair value, increased by 9.7% to $14.7 billion at the end of 2024, from $13.2 billion at the end of 2023. This growth was primarily driven by increases in specialized lending, multifamily, owner-occupied, and non-owner-occupied commercial real estate loans, partially offset by a decrease in consumer installment loans as the bank continued its de-risking strategy and held-for-sale business model in this segment.

The bank’s non-performing loans and leases (NPLs) increased to $43.3 million, or 0.30% of the total loan and lease portfolio, at the end of 2024, compared to $27.1 million, or 0.21%, at the end of 2023. The ACL on loans and leases was $136.8 million, or 1.04% of total loans and leases receivable, at the end of 2024, compared to $135.3 million, or 1.13%, at the end of 2023.

Deposits

Total deposits increased by 5.2% to $18.8 billion at the end of 2024, from $17.9 billion at the end of 2023. This was primarily due to increases in non-interest-bearing demand deposits and savings, including money market deposit accounts, partially offset by a decrease in time deposits.

Outlook and Risks

Customers Bancorp continues to monitor the impact of the U.S. banking system weaknesses, military conflicts, inflation, and monetary and fiscal policy measures on the U.S. economy. If the pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required. The bank also faces risks related to the geopolitical instability, rising inflation, and potential worsening of the U.S. banking system, which could negatively impact its businesses, financial condition, liquidity, and results of operations.

Conclusion

Customers Bancorp reported a decline in net income available to common shareholders in 2024, primarily due to lower net interest income and higher non-interest expenses, partially offset by a slight decrease in the provision for credit losses. The bank’s asset quality metrics remained relatively strong, but it faces potential risks from the economic environment. Customers Bancorp continues to focus on disciplined loan growth, de-risking its consumer installment loan portfolio, and enhancing its deposit franchise to navigate the current challenges and position itself for future success.