Business Segments

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Business Segments

BUSINESS SEGMENTS

Customers has historically operated under one business segment, "Community Banking." However, beginning in third quarter 2016, Customers revised its segment financial reporting to reflect the manner in which its chief operating decision makers (our Chief Executive Officer and Board of Directors) have begun allocating resources and assessing performance subsequent to Customers' acquisition of the Disbursement business from Higher One and the combination of that business with the BankMobile technology platform late in second quarter 2016.

Management has determined that Customers' operations consist of two reportable segments - Community 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 Community Business Banking segment is delivered predominately to commercial customers in Southeastern Pennsylvania, New York, New Jersey, Massachusetts, Rhode Island and New Hampshire 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, and commercial mortgage companies. Revenues are generated primarily through net interest income (the difference between interest earned on loans, 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 bank owned life insurance.

The BankMobile segment provides state of the art high tech digital banking and disbursement services to consumers, students, and the "under banked" nationwide. BankMobile, as a division of Customers Bank, is a full service 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 interchange and card revenue, deposit and wire transfer fees and university fees. The majority of revenue and expenses for BankMobile are a result of the Disbursement business acquisition.

The following tables present the operating results for Customers' reportable business segments for the three months ended March 31, 2017 and 2016. Customers has presented the financial information and disclosures for prior periods to reflect the segment disclosures as if they had been in effect for the periods presented. The segment financial results include directly attributable revenues and expenses. Corporate overhead costs are assigned to the Community Business Banking segment as those expenses are expected to continue following the planned disposition of BankMobile. Similarly, the preferred stock dividends have been allocated in their entirety to the Community Business Banking segment. The tax benefit assigned to BankMobile was based on an estimated effective tax rate of 38%.

In third quarter 2016, Customers announced its intent to sell BankMobile. Customers anticipates a sale to close within one year. Because BankMobile met the criteria to be classified as held for sale at March 31, 2017, the assets and liabilities of BankMobile have been presented as "Assets held for sale," "Non-interest bearing deposits held for sale" and "Other liabilities held for sale" on the consolidated balance sheets at March 31, 2017 and December 31, 2016. BankMobile's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation. For more information on BankMobile discontinued operations, see NOTE 3 - DISCONTINUED OPERATIONS.

The BankMobile segment results presented below differ from the amounts reported as "Discontinued operations" on the consolidated financial statements primarily because of the internal funds transfer pricing methodology used by management to allocate interest income to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.

	Three Months Ended March 31, 2017
	Community Business Banking		BankMobile				Consolidated
Interest income	$	78,832	$	4,262	(1	)	$	83,094
Interest expense	20,656		20				20,676
Net interest income	58,176		4,242				62,418
Provision for loan losses	3,050		—				3,050
Non-interest income	5,427		17,327				22,754
Non-interest expense	30,147		19,219				49,366
Income before income tax expense	30,406		2,350				32,756
Income tax expense	6,116		893				7,009
Net income	24,290		1,457				25,747
Preferred stock dividends	3,615		—				3,615
Net income available to common shareholders	$	20,675	$	1,457			$	22,132
As of March 31, 2017
Goodwill and other intangibles	$	3,636	$	13,982			$	17,618
Total assets	$	9,833,721	$	72,915	(2	)	$	9,906,636
Total deposits	$	6,627,061	$	708,419			$	7,335,480

	Three Months Ended March 31, 2016
	Community Business Banking		BankMobile					Consolidated
Interest income	$	71,673	$	1,725		(1	)	$	73,398
Interest expense	15,764		7					15,771
Net interest income	55,909		1,718					57,627
Provision for loan losses	1,980		—					1,980
Non-interest income	5,267		227					5,494
Non-interest expense	31,871		2,035					33,906
Income (loss) before income tax expense (benefit)	27,325		(90		)			27,235
Income tax expense (benefit)	9,085		(34		)			9,051
Net income (loss)	18,240		(56		)			18,184
Preferred stock dividends	1,286		—					1,286
Net income (loss) available to common shareholders	$	16,954	$	(56	)			$	16,898
As of March 31, 2016
Goodwill and other intangibles	$	3,648	$	—				$	3,648
Total assets	$	9,036,212	$	2,661		(2	)	$	9,038,873
Total deposits	$	6,141,880	$	336,735				$	6,478,615

(1) - Amounts reported include funds transfer pricing of $4.3 million and $1.7 million, respectively, for the three months ended March 31, 2017 and 2016 credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.

(2) - Amounts reported exclude intra company receivables.