KBRA Affirms Ratings for Customers Bancorp, Inc.

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.

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