CUBI: Asset Mix Shift Drives NIM Expansion; BankMobile Posts Profit; Raising EPS Estimates and Target Price; Reiterating Outperform Rating.
Customers Bancorp reported 3Q19 net income of $23.5 million, up 312.8% from the $5.7 million recorded in 2Q19. On a per share basis, 3Q19 results were $0.74 compared to $0.18 in 2Q19. Once again, there were some unusual or irregular items affected reported earnings for the period. In 3Q19, the Business Banking segment recorded a $1.0 million legal accrual and posted $2.3 million of securities gains that provided a net boost of $0.04 to EPS. The BankMobile segment recorded a $1.0 million legal reserve that reduced EPS by $0.02. In the prior quarter, the company posted a $7.5 million loss on GNMA securities. Excluding these items from both periods, adjusted 3Q19 EPS was $0.73 compared to 2Q19 adjusted EPS of $0.38. The adjusted 3Q19 per share results fell short of our $0.76 estimate by $0.03 and a penny shy of the $0.74 median Street estimate. The Business Banking segment posted 3Q19 adjusted segment EPS of $0.68 versus $0.61 in the prior quarter. The BankMobile segment posted adjusted segment EPS of $0.05 versus $(0.11) in 2Q19. A higher-than-expected loan loss provision, and higher noninterest expenses, offset partially by higher net interest income, and higher noninterest income were the main drivers of the shortfall versus our projection. Some of the highlights from the quarter include: