| Business Segments |
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 - 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, 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, 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 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 related to the segment's operation of the ongoing business acquired through the Disbursement business acquisition.
The following tables present the operating results for Customers' reportable business segments for the three and nine month periods ended September 30, 2018 and 2017. The segment financial results include directly attributable revenues and expenses. Corporate overhead costs were assigned to the Community Business Banking segment as those expenses were expected to continue following the planned spin-off 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 24.57% for 2018 and 37.25% for 2017, respectively.
Please refer to NOTE 13 - SUBSEQUENT EVENTS for more information on the spin-off of BankMobile.
| | | | | | | | | | | | | | Three Months Ended September 30, 2018 | (amounts in thousands) | Community Business Banking | | BankMobile | | Consolidated | Interest income (1) | $ | 106,156 |
| | $ | 3,889 |
|
| $ | 110,045 |
| Interest expense | 45,982 |
| | 62 |
|
| 46,044 |
| Net interest income | 60,174 |
| | 3,827 |
| | 64,001 |
| Provision for loan losses | 2,502 |
| | 422 |
| | 2,924 |
| Non-interest income | (7,756 | ) | | 9,840 |
| | 2,084 |
| Non-interest expense | 36,115 |
| | 20,989 |
|
| 57,104 |
| Income (loss) before income tax expense (benefit) | 13,801 |
| | (7,744 | ) | | 6,057 |
| Income tax expense (benefit) | 1,930 |
| | (1,902 | ) | | 28 |
| Net income (loss) | 11,871 |
| | (5,842 | ) | | 6,029 |
| Preferred stock dividends | 3,615 |
| | — |
| | 3,615 |
| Net income (loss) available to common shareholders | $ | 8,256 |
| | $ | (5,842 | ) | | $ | 2,414 |
| | | | | | |
| | | | | | | | | | | | | | Three Months Ended September 30, 2017 | (amounts in thousands) | Community Business Banking | | BankMobile | | Consolidated | Interest income (1) | $ | 95,585 |
| | $ | 2,700 |
| | $ | 98,285 |
| Interest expense | 30,250 |
| | 16 |
| | 30,266 |
| Net interest income | 65,335 |
| | 2,684 |
| | 68,019 |
| Provision for loan losses | 1,874 |
| | 478 |
| | 2,352 |
| Non-interest income | 4,190 |
| | 13,836 |
| | 18,026 |
| Non-interest expense | 33,990 |
| | 27,050 |
| | 61,040 |
| Income (loss) before income tax expense (benefit) | 33,661 |
| | (11,008 | ) | | 22,653 |
| Income tax expense (benefit) | 18,999 |
| | (4,100 | ) | | 14,899 |
| Net income (loss) | 14,662 |
| | (6,908 | ) | | 7,754 |
| Preferred stock dividends | 3,615 |
| | — |
| | 3,615 |
| Net income (loss) available to common shareholders | $ | 11,047 |
| | $ | (6,908 | ) | | $ | 4,139 |
| | | | | | |
| | | | | | | | | | | | | | Nine Months Ended September 30, 2018 | (amounts in thousands) | Community Business Banking | | BankMobile | | Consolidated | Interest income (2) | $ | 302,820 |
| | $ | 11,829 |
| | $ | 314,649 |
| Interest expense | 118,081 |
| | 214 |
| | 118,295 |
| Net interest income | 184,739 |
| | 11,615 |
| | 196,354 |
| Provision for loan losses | 3,128 |
| | 1,129 |
| | 4,257 |
| Non-interest income | 8,147 |
| | 30,973 |
| | 39,120 |
| Non-interest expense | 108,168 |
| | 54,966 |
| | 163,134 |
| Income (loss) before income tax expense (benefit) | 81,590 |
| | (13,507 | ) | | 68,083 |
| Income tax expense (benefit) | 17,567 |
| | (3,317 | ) | | 14,250 |
| Net income (loss) | 64,023 |
| | (10,190 | ) | | 53,833 |
| Preferred stock dividends | 10,844 |
| | — |
| | 10,844 |
| Net income (loss) available to common shareholders | $ | 53,179 |
| | $ | (10,190 | ) | | $ | 42,989 |
| | | | | | | As of September 30, 2018 | | | | | | Goodwill and other intangibles | $ | 3,629 |
| | $ | 13,196 |
| | $ | 16,825 |
| Total assets | $ | 10,542,175 |
| | $ | 74,929 |
| | $ | 10,617,104 |
| Total deposits | $ | 7,781,225 |
| | $ | 732,489 |
| | $ | 8,513,714 |
| Total non-deposit liabilities | $ | 1,134,251 |
| | $ | 14,327 |
| | $ | 1,148,578 |
| | | | | |
|
|
| | | | | | | | | | | | | | Nine Months Ended September 30, 2017 | (amounts in thousands) | Community Business Banking | | BankMobile | | Consolidated | Interest income (2) | $ | 265,524 |
| | $ | 9,708 |
| | $ | 275,232 |
| Interest expense | 76,134 |
| | 55 |
| | 76,189 |
| Net interest income | 189,390 |
| | 9,653 |
| | 199,043 |
| Provision for loan losses | 5,459 |
| | 478 |
| | 5,937 |
| Non-interest income | 16,587 |
| | 42,583 |
| | 59,170 |
| Non-interest expense | 94,704 |
| | 66,114 |
| | 160,818 |
| Income (loss) before income tax expense (benefit) | 105,814 |
| | (14,356 | ) | | 91,458 |
| Income tax expense (benefit) | 39,584 |
| | (5,348 | ) | | 34,236 |
| Net income (loss) | 66,230 |
| | (9,008 | ) | | 57,222 |
| Preferred stock dividends | 10,844 |
| | — |
| | 10,844 |
| Net income (loss) available to common shareholders | $ | 55,386 |
| | $ | (9,008 | ) | | $ | 46,378 |
| | | | | | | As of September 30, 2017 | | | | | | Goodwill and other intangibles | $ | 3,632 |
| | $ | 12,972 |
| | $ | 16,604 |
| Total assets | $ | 10,405,452 |
| | $ | 66,377 |
| | $ | 10,471,829 |
| Total deposits | $ | 6,815,994 |
| | $ | 781,082 |
| | $ | 7,597,076 |
| Total non-deposit liabilities | $ | 1,947,213 |
| | $ | 16,898 |
| | $ | 1,964,111 |
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