CUBI +1.39 to 28.04, nice rally after yesterday's PR, although it now sounds like they might defer the BankMobile spinoff until 2019 .... I sure hope not -
WYOMISSING, Pa., Jan. 02, 2018 (GLOBE NEWSWIRE) -- Customers Bancorp, Inc. (NYSE:CUBI), the parent company of Customers Bank (collectively, “Customers”) today announced that as a result of the Tax Cuts and Jobs Act of 2017 (the “Act”), signed by President Donald Trump on December 22, 2017 and certain actions Customers has taken, it expects a fourth quarter of 2017 (“Q4 2017”) net impact to earnings and capital of less than $2 million, or $0.06 per share, which Customers expects will be quickly earned back through lower tax rates in 2018.
Based on its initial analysis of the Act and September 30, 2017 balances of deferred tax assets and liabilities, Customers expects to record a net valuation adjustment in Q4 2017 between $8.0 million and $9.0 million, subject to further adjustment based on Q4 2017 operating results. Other items mitigate this amount, most notably an approximate $6.0 million Q4 2017 tax benefit from the exercise of employee stock options, including all vested options held by Chairman and Chief Executive Officer Jay Sidhu, which should reduce the net impact to less than $2.0 million in Q4 2017.
Customers estimates that the 14% reduction in federal income tax rate to 21% from 35%, will boost net income by approximately 22% in 2018 and future years. The company currently estimates a 2018 effective tax rate between 23.0% and 24.0%.
Separately, Customers stated that it successfully reduced its year-end balance sheet to approximately $9.9 billion in total assets in order to qualify for the Durbin Amendment small issuer exemption for purposes of assessing interchange fees through June 30, 2019. The reduction in balance sheet size had the added benefit of increasing capital ratios; lower taxes in 2018 will also benefit capital ratios in 2018 through increased retained earnings.
“While the tax code changes will negatively affect Customers reported fourth quarter 2017 net income, we embrace the longer term benefits of a lower corporate tax rate and rationalization of the tax code,” stated Jay Sidhu, Chairman and Chief Executive Officer of Customers. “We are also pleased to report to our shareholders that the fourth quarter adverse effect on earnings of the new effective tax rates is largely offset by the gains realized by exercise of outstanding stock options by our employees and adoption of certain tax expense reducing strategies,” continued Mr. Sidhu. “And finishing 2017 with less than $10 billion in assets will give Customers until mid-year 2019 to divest BankMobile without losing interchange revenue,” concluded Mr. Sidhu.