CUBI: Balance Sheet Growth and Expected Margin Expansion Lead to Higher EPS Estimates; Maintaining Target Price; Reiterating Outperform Rating.
Customers Bancorp reported 2Q19 net income of $5.7 million, down 52.0% from the $11.8 million recorded in 1Q19. On a per share basis, 2Q19 results were $0.18 compared to $0.38 in 1Q19. Once again, there was an unusual or irregular item that drove down earnings for the period. In this case, it was a $7.5 million loss on GNMA securities acquired from a mortgage warehouse customer that shut down operations in May 2019. Excluding this and two smaller items, the $0.38 results posted for 2Q19 compares to adjusted 1Q19 EPS of $0.38. The adjusted 2Q19 per share results fell short of our $0.44 estimate by $0.06. The reported (unadjusted) EPS of $0.18 for the quarter fell $0.07 shy of the $0.25 median Street estimate, which largely included the GNMA loss following its announcement on July 1, 2019. The community bank segment posted 2Q19 segment EPS of $0.40 versus $0.38 in the prior quarter. The BankMobile segment posted segment EPS of $(0.22) versus $(0.01) in 1Q19. A higher-than expected loan loss provision, and higher non interest expenses, offset partially by higher net interest income, and higher non interest income (excluding the loss on securities) were the main drivers of the shortfall versus our projection. Some of the highlights from the quarter include: