KBRA Affirms Ratings for Customers Bancorp, Inc.

3 May 2024   |   New York


KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Customers Bancorp, Inc. (NYSE: CUBI or “the company”), a bank holding company headquartered in West Reading, PA. KBRA also affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for the bank subsidiary, Customers Bank. The Outlook for all long-term ratings is Stable.

The ratings continue to benefit from the steady and sustained growth in regulatory capital ratios, which are now above peer group averages. KBRA continues to expect that the CET1 ratio will be maintained at a level of at least 11.5%.

Bottom-line earnings performance (nominal and risk-adjusted), while uneven periodically measured over a longer time horizon, has also improved, most noticeably during the past two years (periods which generally excluded outsized PPP income and/or gain on sale revenue for CUBI and its competitors).

While management has demonstrated significant progress in diversifying the deposit funding base and reducing the level of net uninsured deposits ($4 billion as of 1Q24) and wholesale borrowings ($1.2 billion), the ratings remain constrained by the relatively higher cost and price sensitivity of deposits. Liquid assets and higher quality investments continue to more than cover total uninsured deposits. KBRA believes funding and liquidity management, including stress testing, are comprehensive and effective. Asset liquidity in the form of deposit balances at the Fed and unpledged investment securities amounted to $5.6 billion as of 1Q24. Contingent sources of funding at 1Q24 consisted of collateralized undrawn lines of credit at the FHLB totaling $1.1 billion and access to funding at the FRB of $4.1 billion.

To access rating and relevant documents, click here.

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Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1004134

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